2019
Integrated report
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for the year ended 31 July 2019
The directors present their report for the year ended 31 July 2019.
EOH Holdings Limited ('EOH' or the 'Company') is a holding company domiciled in South Africa that is listed on the JSE Limited under the category Technology: Software and Computer Services sector. EOH is one of the largest Information and Communications Technology ('ICT') services providers in Africa and is committed to providing the technology, knowledge, skills and organisational ability critical to the development and growth of the markets it serves.
The consolidated Annual Financial Statements of EOH, as at 31 July 2019 and for the year ended 31 July 2019, comprise the Company and its subsidiaries (together referred to as 'the Group') and the Group's investments in associates and joint ventures.
The Group's results and financial position are reflected in the Consolidated Statement of Profit or Loss and Other Comprehensive Income.
Commentary on the financial performance of the Group is provided in the Chief Financial Officer’s Report.
During the current year, management identified a number of transactions that had been processed incorrectly in both current and prior periods; the impact of these transactions spanned various accounting topics, including revenue recognition, asset capitalisation and subsequent recovery, and timing of recognition of liabilities and other provisions for impairment.
In assessing whether the identified adjustments should be processed as prior period errors or recognised in the current period, management considered whether the facts that gave rise to the adjustments existed in prior years, or whether those events only arose due to information that came to light in the current year. The 2018 consolidated financial statements and the consolidated statement of financial position as at 1 August 2017 have been restated to correct the prior period errors. As a result of the extent and complexity of the restatements required to correct these errors, management has grouped the restatements according to the nature of these errors.
Details of the restatement have been set out in note 3.
Authorised
Ordinary shares: 500 000 000 no par value shares (2018: 500 000 000).
Issued
Ordinary shares: 176 544 961 no par value shares (2018: 152 797 293).
The list of directors for the financial year is as follows:
Directorate
Non-executive
Dr Xolani Mkhwanazi (Chairman) (appointed effective 5 June 2019)
Pumeza Bam (resigned 12 July 2019)
Dr Anushka Bogdanov (appointed effective 20 June 2019)
Jesmane Boggenpoel
Asher Bohbot (resigned as Chairman effective 28 February 2019)
Mike Bosman (appointed effective 20 June 2019)
Ismail Mamoojee
Tshilidzi Marwala (resigned effective 28 February 2019)
Dr Moretlo Molefi
Andrew Mthembu (appointed effective 20 June 2019)
Rob Sporen* (resigned as lead independent non-executive director effective 28 February 2019)
* Dutch
Executive
Stephen van Coller (appointed as director and Group Chief Executive Officer effective 1 September 2018)
Megan Pydigadu (appointed as director and Group Chief Financial Officer effective 15 January 2019)
Fatima Newman (appointed as director and Group Chief Risk Officer effective 1 August 2019)
Zunaid Mayet (resigned effective 12 July 2019)
John King (resigned as Group Financial Director effective 30 November 2018)
Tebogo Maenetja (resigned effective 31 March 2019)
The directors' interest in shares is set out in note 39.
The emoluments of directors of the Group are set out in note 40.
During the course of the year, no director had a material interest in any contract of significance with the Group or any of its subsidiaries that could have given rise to a conflict of interest.
Transactions, defined as related-party transactions in terms of the International Financial Reporting Standards, between the Group or its subsidiaries and the directors or their associates are disclosed in note 42.
The directors are responsible for preparing the consolidated Annual Financial Statements and other information presented in the 2019 Integrated Annual Report, in a manner that fairly presents the financial position and the results of the operations of the Group for the year ended 31 July 2019.
The external auditors are responsible for carrying out an independent examination of the consolidated Annual Financial Statements in accordance with International Standards on Auditing and in the manner required by the Companies Act of South Africa and for reporting their findings thereon. The auditors' report is set out in the Independent Auditor’s Report To the shareholders of EOH Holdings Limited.
The consolidated Annual Financial Statements set out in the Consolidated Statements have been prepared in accordance with International Financial Reporting Standards and its interpretations adopted by the International Accounting Standards Board, Financial Reporting Pronouncements as issued by the Financial Reporting Standards Council, the requirements of the Companies Act No. 71 of 2008 of South Africa and the JSE Limited Listings requirements and are based on appropriate accounting policies and methods of computation, which have been consistently applied in all material respects, except for the adoption of IFRS 9, IFRS 15 and updated IFRS 7 during the year ended 31 July 2019 and are supported by reasonable and prudent estimates where appropriate. Adequate accounting records have been maintained throughout the period under review.
The following reportable irregularities ('RIs') in terms of section 45 of the Auditing Profession Act were raised by the independent auditors during the current financial year:
The above would indicate that past directors and management failed to act in the best interests of the Group and in the public interest.
EOH allegedly supplied IT equipment to an entity it was not specifically intended for with the intention of garnering favour with respect to future contracts. The invoice indicated that the equipment was sold to a related entity, though it was intended elsewhere.
Monies were paid to an entity where the allegations are that this was used as a vehicle to donate funds to a political party.
A donation was made, assisting in the payment of various expenditures, to an entity responsible for the awarding of tenders, in the same month as the awarding of the tender.
The above RIs have been closed.
The Board is accountable for the system of internal controls for the Group.
The Board acknowledged that all the principles in the King IV Report on Corporate Governance for South Africa (King IV report) have not yet been implemented effectively, and that the recent lapses in governance were of concern to the shareholders, investors and the public. Embedding ethical leadership and building a culture of compliance are important enablers to ensure that governance is restored to credible levels.
Several steps have already been taken to improve governance and ethics. The Board, through its subcommittees, is committed to ensuring that there is an overall improvement in the effectiveness of the implementation of the King IV report during the coming year.
Refer to the Integrated Annual Report on page 52 for more information.
The directors have reviewed the Group's cash flow forecast for the subsequent year and, in light of this review and the current financial position, they are satisfied that the Group has access to adequate resources to continue in operational existence for the foreseeable future. Details are reflected in note 45 – Going concern.
The Group and its subsidiaries are involved in various litigation matters arising in the ordinary course of business. Although at this stage it is not possible to predict what the outcome of the various matters will be, nor what portion of any costs will be attributable to the Group, or whether all or any portion of such costs will be covered by insurance or will be recoverable from other sources, management has no reason to believe that the disposition of these matters will have a materially adverse effect on the consolidated financial position of the Group.
Details of the Group's investments in subsidiaries and the Group's investments in associates and joint ventures are set out in notes:
note 7 – Equity accounted investments and note 43 – Schedule of investments in subsidiaries.
The Group recently refined its operational structure into three distinct operating units to allow for leaner and more agile core businesses. Opportunities are being explored for the sale of certain non-core assets and as a result there are a number of businesses that were approved for sale and for which the sale is expected to be completed within 12 months from the reporting date. These businesses are classified as disposal groups held for sale and the assets and liabilities of these disposal groups have been presented as held for sale at 31 July 2019. The businesses that were already sold during the current and previous reporting periods and business held for sale at 31 July 2019 that have met the requirements to be presented as discontinued operations have been presented as discontinued operations in the Group's statement of profit or loss. Details are reflected in note 15 and note 16.
On 20 August 2018, shareholders approved the following special resolutions at a general meeting:
On 20 February 2019, shareholders approved the following special resolutions at the AGM:
The consolidated Annual Financial Statements do not contain any material modification to the provisional reviewed condensed consolidated results that were published on 15 October 2019.
