EOH warns of big loss – and that’s before fraud costs

ICT group EOH [JSE:EOH] has warned of a loss from continuing operations in the year to end-July of at least 2 700c per share. In the same period last year, the JSE-listed company reported a profit of 202c per share.

By Wednesday morning, its share price was down more than 4% at R12.09. EOH shares have lost more than 90% of their value since the start of 2017, when they were trading at R158 a share. 

In a trading statement on Wednesday EOH said its results were impacted by write-offs, and the accounting classification of certain businesses as either continuing or discontinued operations, including assets held for sale. The write-offs and the accounting classification are both "subject of ongoing discussions with the group’s external auditors". 

EOH said the figures do not include the potential impact of the findings of an ENSafrica forensic investigation. Earlier this year, the group said the investigation by the law firm had found evidence of up to R1.2bn in "suspicious transactions".

"The exact nature of each of these transactions has not as yet been verified and may relate to legitimate transactions, theft or bribery and corruption payments," EOH said at the time.

Earlier this year, EOH was barred from reselling Microsoft software licences amid reports that a whistleblower filed a complaint with the US Securities & Exchange Commission about alleged EOH corruption in a department of defence software deal.  Three top executives have since announced their resignations.