The share price of JSE-listed technology group EOH fell by more than 18% on Friday afternoon after it announced that it was considering strategic options to settle R750-million in debt and raise liquidity to pursue growth opportunities.
As part of the group's turnaround in recent years, revenue and cash generation have improved, onerous contracts have been closed out and noncore assets sold, resulting in a significantly improved liquidity position.
However, it has to repay a R1.5-billion bridge facility that matures in October this year.
About half of the facility would be repaid using the proceeds received or to be received from asset disposals. Among these was the sale of software company Sybrin – announced in June 2021 – which is expected to be concluded in February, generating about R280-million. EOH said the parties were awaiting final regulatory approval in one remaining African jurisdiction.
EOH said it would have to consider strategic options to settle the remaining R750-million, and it has appointed financial advisers to assist the group in evaluating its strategic options.
Having largely concluded the sale of noncore assets, these options primarily comprised an equity raise from existing and new investors, the introduction of mezzanine debt, a combination of both solutions or the further disposal of assets.
EOH said potential new investors could include those that may assist with increasing the group’s black economic empowerment ownership, as well as potential strategic partners.
Given the current high costs of debt funding, capital scarcity and arrangements with lenders, the optimisation of the balance sheet was a key priority for the group and it believed now was the time to engage with shareholders, lenders and the broader market to find a solution.
The company's share price fell to R5.15 a share on Friday, compared with Thursday's close of R6.32 a share.