In a remarkable turnaround, EOH Holdings Limited has stunned investors with a 65% increase in its share price over the past four months. This sharp rise is particularly surprising given the company’s ongoing struggles, including a prolonged decline in its share price and a series of management and operational challenges.
To understand this unexpected growth, we need to revisit EOH’s recent history. Back in September 2018, Stephen van Coller was appointed CEO with the mandate to address severe issues plaguing the IT service provider. The company was grappling with escalating debt, allegations of corruption, mismanagement, and poor corporate governance. At that time, EOH’s share price was languishing around R40, a significant drop from its previous highs of over R100.
Van Coller was tasked with reversing this downward trend. Despite his efforts, the company’s difficulties proved more severe than anticipated. Van Coller had to sell off several business units to alleviate debt, and by the end of his tenure on 31 March 2024, EOH had significantly shrunk compared to his start.
In a bid to manage its debt, EOH raised R600 million in February 2023 through a combination of a R500 million rights issue and a R100 million BBBEE deal. Shareholders hoped this would spark a turnaround with improved revenue and earnings. However, the anticipated revival did not materialize. For the six months ending January 2024, EOH reported a widened loss and declining revenue. Revenue from continuing operations fell by 2% to R3.15 billion, while the company’s loss grew from R5.33 million to R91.38 million. The loss per share deepened significantly, highlighting ongoing financial struggles.
The company has also seen substantial leadership changes. In June 2024, Andrew Mthembu resigned as director, executive chairman, and interim CEO. This was followed by the resignation of CFO Marialet Greeff after just four months. Fatima Newman stepped down from her role as executive director but continues as CEO of EasyHQ. EOH’s board saw new appointments, including Marius de la Rey as executive chairman and interim CEO, and three new independent non-executive directors.
Adding to the shake-up, EOH replaced its external auditor, PricewaterhouseCoopers, with Moore Johannesburg Inc., a move aimed at reducing audit costs. Despite these turbulent changes, EOH’s share price experienced a surprising rally. After hitting a low of R1.05 per share on 23 April 2024, it surged 66% to R1.74 by 27 August, making it one of the Johannesburg Stock Exchange’s top performers over the last six months.
Despite this impressive rebound, industry experts remain cautious. Zwelakhe Mnguni from Benguela Global Fund Managers acknowledges the company’s potential for significant returns if it can successfully navigate its current issues. However, he also warns that EOH still faces substantial risks and must prove it can deliver solid returns on its contracts.
EOH’s recent performance underscores the unpredictability of the market and highlights the complex interplay between management changes, financial restructuring, and investor sentiment. The company’s future remains uncertain, but its recent share price surge is a testament to the potential for recovery even in challenging circumstances.
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