The Never-Ending Debt Crisis: EOH’s Search for a Fig Leaf
In a desperate bid to turn the corner, EOH Holdings, a JSE-listed IT services group, is counting on a theatrical performance of cost-cutting and financial wizardry to wipe out its massive debt burden. The company’s new senior leadership team, led by interim CEO Marius de la Rey and CFO Ashona Kooblall, claims they can conjure up a healthy balance sheet without selling off any of its prized assets, but the skeptics are already piling up.
The group’s latest results, released this week, highlight the magnitude of the task at hand. EOH’s revenue has plummeted to a paltry R6 billion, down from R12 billion just a few years ago, as it struggled to secure new business in a tough economic environment. Debts have piled up, with interest-bearing bank loans totaling R644 million as of the 2024 year-end, although the company has managed to reduce these by R41 million in the past year.
But Kooblall’s solution is not a ordeals and divestitures, but rather a more audacious approach: get efficiencies to flow directly into free cash flow by shedding R160 million to R200 million in costs from the business. The cost-cutting drive targets the bloated head office, which was built to support a R12 billion company, but now only needs to serve a R6 billion entity.
"We’re not going to sacrifice our people, because we’re a services business," Kooblall assured, as if to quell any doubts about the company’s commitment to its employees. "We will be repaying our debts in the normal course of business."
Of course, there’s a catch: EOH may not be able to muster up the dough to start paying dividends anytime soon. But don’t worry, the company’s going to play a trick, courtesy of its sharp accounting skills: it might just buy back its own shares to prop up the price and boost the value of its treasury, rather than sharing it with the faithful shareholders.
And as for the ghost of state capture, the corporate crooks, and the so-called "expensive paper" deals that nearly destroyed the company, Kooblall assures us that EOH has fully distanced itself from those dark days. A "strong risk background" and experience working with US financial regulators have equipped her to keep a hawk’s eye on the company’s governance, she claims. Ethics, schmethics – but hey, at least the company’s not corrupt anymore, right?
