At the root of the troubled tech firm EOH misery in the past few years has been a flawed strategy around corporate governance.
EOH’s new management team under its boss Stephen van Coller initiated a probe led by law firm ENSafrica (ENS) to review all its large, historical licensing contracts with the state.
The probe uncovered suspicious transactions worth R1.2 billion. EOH had issued reports to regulators and is pressing criminal charges as well as civil claims to recover stolen funds.
“This has been a difficult time for the EOH business but we will continue the process of meaningful engagement with all our stakeholders,” Van Coller stated in the company’s recent annual report.
“The new EOH, which is transparent, rich in dialogue and an ethical environment where employees can innovate and grow, has begun to take shape.”
The boss of EOH added that he is looking forward to the 2020 year where “we can build and grow strategically.
“The new EOH has no room for unethical business practices and each person who works here or does business with us will be held accountable for good governance.”
Van Coller’s plan to rebuild confidence and return value to all stakeholders is promising
Van Coller and the executive team have completed a more detailed strategic review and testing new operating model to rebuild the company.
“We have spent extensive time focusing on cleaning up the business, both from a governance and financial perspective as well as understanding the group’s strategic capabilities,” said Van Coller.
In the short term, he is planning to focus on continuing to deleverage EOH’s balance
sheet while implementing governance changes.
“Over the longer term, we remain steadfast in a vision of a more synergised and focused offering that is well-positioned to take advantage of the next wave of change in the ICT industry,” Van Coller explained.
“We will invest heavily in the sales and advisory function of the business to protect the client base and continue to build on our strengths in providing a one-stop shop for all clients’ needs.”
He added that the company will invest in the core businesses of the development of the solution which provide the foundation for the future in the group’s key businesses lines of
App Development, Data, Cloud and Security.
“Our traditional Technology business in iOCO will continue to leverage its legacy products and services.”
Following a deep dive of NEXTEC business there are questions on the scalability of these businesses as well as the capital structure requirements which may not be able to be accommodated given our current financial situation, he warned.
“Most of these businesses are undergoing a reassessment to determine next steps.”
Work on the NEXTEC strategy continues, including how iOCO, NEXTEC and the IP businesses will work together to optimise value for EOH shareholders, with umbrella
shared services being provided by EOH.
Furthermore, Van Coller said EOH will continue to refine its portfolio of assets, create liquidity events, and exit non-core businesses.
“We will pursue strategic sales to scale and grow businesses in partnership with the right investment partners as in the CCS transaction where we entered into a partnership with German firm, RIB.”
Van Coller and his team have the support of the board led by Dr Xolani Mkhwanazi, who believes the company has “some of the best minds and solutions in the technology industry, with exceptional potential to drive progress and service delivery across the African continent.”
Mkhwanazi was appointed as chairman of EOH board in June this year.
“I found a new executive team, under the leadership of Van Coller, which was committed to fixing the past and was putting in place the building blocks of the EOH of the future. This included the daunting task of leading an investigation in the midst of high stakeholder scrutiny,” he explained.
“From the very beginning, I was drawn to its uncompromising commitment to transparency and zero tolerance for corruption as a Board and Executive Committee. I believe that this
will be one of the defining factors in rebuilding our reputation as Africa’s leading technology business.
“There is no doubt that this past year will stand out as one of the most transformative in the history of EOH.”
The market is warming up to Van Coller’s strategy to rebuild the company and is rewarding his efforts. The share price of EOH has gained more than 9% in the past 30 days pushing its market cap to R2.5 billion.
That said, Allied Electronics Corporation (Altron) is currently benefiting from EOH’s woes.
Altron has snapped up the multi-million-rand contract the battered tech firm lost from US multinational technology giant Microsoft.
“As one of the largest technology businesses on the continent, there is significant value in the EOH business and we must not let these headwinds discourage or taint our potential,” said Van Coller.