EOH has sold four businesses under its infamous public sector division for R417m, the technology group said on Friday, as it continues to scale down its business and work to reduce debt.
The group has been under pressure in recent years after uncovering dubious transactions related to public sector contracts that forced it to restate previous results. The errors occurred under the previous management, and CEO Stephen van Coller was appointed in 2018 in a bid to save the group.
EOH said in 2019 that a forensic probe by ENSafrica had found evidence “of a number of governance failings and wrongdoings”. These included unsubstantiated payments, tender irregularities and “other unethical business practices”, including bribery and theft, mainly within the public sector business operated by EOH Mthombo.
On Friday it said the Mthombo unit had entered into a share purchase agreement to dispose of 100% of Hoonar Tekwurks Consulting SA (HTCSA), Managed Integrity Evaluation (MIE), Xpert Decision Systems (XDS) and Zenaptix — collectively referred to as Information Services — to a buyer known as Bachique 842, backed by Lightrock, a global private equity firm.
Information Services provides credit checks, background screening and big data, analytics and technology in SA. EOH says the platform “provides access to a rich pool of data across its business units, allowing it to provide unique insights to clients”.
The audited profit after tax attributable to Information Services for the 12 months ended July 2021 was R79.1m, while earnings before interest, tax, depreciation and amortisation (ebitda) for the unit was R138.4m.
The group said proceeds from the Information Services sale will be used to pay down its R2bn debt pile, an issue that has weighed heavily on its turnaround prospects.
EOH, valued at R914m on the JSE, cut its debt by about R400m in its 2021 year but has said progress has not been as fast as it would like, and even hinted at a possible rights offer last month. The group has been fighting to regain credibility after revelations of a corruption scandal surfaced that contributed to a 96% fall in its shares over the past five years.
In November, the technology company posted its first full-year profit since the new management team took over in 2018.
It attributed its recent positive performance to its streamlining strategy, which has been focused on selling assets, trimming debt and reorganising the business that was once made up of more than 270 companies under three operating units.
EOH Mthombo, which is set to be shut down, is a technology provider for telecommunication, manufacturing, mining and retail customers in SA and the UK, and had accounted for about a fifth of the group’s revenue in recent years.
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