In a move that underscores shareholder activism and urgency for investors’ returns, EOH has had a dramatic boardroom coup.
The shake-up, announced at the weekend, is a direct response to mounting shareholder impatience with one of the biggest names in SA’s IT sector’s operational and stock market underperformance.
EOH’s share price plunged almost 80% in the past five years, underperforming the JSE all-share index, the broadest measure of SA’s stock market performance, which picked up almost one-third. Operationally, the company has been showing flickers of hope, returning to profitability on an operational level but it has struggled to grow its revenue, which has shrunk by more than 10%.
Disillusioned with the erosion of value at this once-thriving tech firm, shareholders initiated a plan aimed at revitalising it. The strategy includes expanding the iOCO and international unit, cutting unnecessary costs and changing leadership if they have to.
The latest development saw Jabu Moleketi, a director at Lebashe, a strategic investor in EOH since 2018, become chair after Andrew Mthembu resigned as a director, executive chair and interim CEO.
At the same time, Fatima Newman stepped down as an executive director but will remain CEO of EOH’s EasyHQ unit. Bharti Harie has resigned as an independent non-executive director. The sweeping changes in the governance of the technology firm, once a beacon of innovation and growth in SA, suggest that big investors in the company were no longer content to sit on the sidelines injecting R600m into the veins of the company that had been grappling with a lopsided capital structure.
“Our main aim is to actually turn this place around. Obviously there’s a lot of sensitivities, but we want the share price to actually be where we believe it should be, because at the moment the share price is horribly undervalued,” Dennis Venter, an EOH shareholder and one of the group’s new board members, told Business Day.
EOH’s management has been working hard to salvage the company’s tarnished reputation, which took a knock in 2018 when allegations of malpractice and tender irregularities emerged.
Share price
While much of this work, together with lowering debt and slimming down the group’s operation, was the focus of former CEO Stephen van Coller, the shareholders’ gaze is now fixed firmly on the share price, which they believe is unjustifiably low. The company, once a darling of the JSE with its share price peaking at R111, closed the trading session on Friday at a paltry 151c.
“As shareholders, we don’t see a plan. We’ve come year after year [hearing] that there are plans but absolutely nothing actually happens. Out of frustration, we’ve taken control of the board and we are going to embark on a turnaround strategy, which will involve restructuring and cutting unnecessary costs,” said Venter. “And we’re not scared of changing people if we have to.”
The new cast of directors includes Marius de la Rey as interim CEO; Veronica Motloutsi as independent nonexecutive director; Dennis Venter as non-independent non-executive director; and Rhys Summerton as a nonindependent nonexecutive director.
In early 2023, EOH generated R500m from shareholders via a rights offer and another R100m from Lebashe, of which the proceeds were used to cut debt levels by R678m and its spending on interest.
Moving forward, Summerton said “there is now the opportunity to utilise the technological skills of Marius and his team, coupled with capital allocation expertise of the new additions to the board of directors to take EOH to the next stage of its recovery and beyond.”
Summerton, a Citigroup MD and founder of Milkwood Capital in the UK, who also holds a stake in EOH, emphasised the need for “a highly focused team” to carry out three key priorities: immediate cost-cutting, harnessing the group’s free cash flow to pay down debt, and strategic capital allocation for future investments.
Venter and Summerton have decided not to take any board fees, saying their remuneration will come through the appreciation of EOH’s share price. “We see our growth out of share value, not out of fancy fees,” said Venter, highlighting the shareholder-driven approach to the company’s revival.
With Tiisetso Motsoeneng
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