EOH Holdings subsidiary EOH Abantu resolves outstanding dispute with tax office, outgoing CEO Stephen Van Coller says this resolves the last remaining “legacy issues” facing the JSE-listed IT services business. Stated.
The long-standing dispute involves the payment of PAE taxes to the South African Revenue Service (SARS), with the group agreeing to collect R112 million by Friday.
“This amount is in line with Avantu's year-end provisions and therefore has no impact on the group profit and loss statement,” EOH said in a statement to shareholders on Thursday.
Under the terms of the agreement, Avantu will also be stripped of R6.9 million in tax credits and a R34.5 million valuation loss.
EOH said that no tax credits are provided for and will not have a negative impact on the income statement or tax bill. Similarly, the company said that the disposal of the valuation loss will have no impact on the group's income statement or balance sheet as the deferred tax provision has not been increased to date.
To resolve its tax debt, EOH has reached an agreement with lender Standard Bank to “temporarily increase” the group's facilities to enable payments to be made by March 1.
“Due to the successful sale of non-core assets, additional capital requirements are limited to R63 million.”
The final “legacy problem”
However, the agreement to waive loan covenants for a period of 12 months to enable additional loan repayments will reduce the Group's EBITDA to total debt covenant ratio to below the required level of 2:1. (EBITDA refers to earnings before interest, taxes, depreciation, and amortization and is a measure of operating income.)
“At the end of the year, the group reported that it would raise at least R75 million in proceeds from the sale. The group is on track to deliver on this commitment,” it added.
In a statement, Van Coller called for a positive development in the tax settlement with Sars, saying EOH was “extremely excited to resolve the last important legacy issue.”
Read: What did Stephen van Coller really accomplish as EOH CEO?
“These negotiations have been frustrating at times from an EOH business perspective, but in resolving this highly technical and complex issue, senior SARS officials have worked extremely hard to ensure the best possible outcome for South Africa. I would like to assure South Africans that I was passionate about .
“This large-scale legacy issue was the final piece of a very complex puzzle that needed to be resolved in order for EOH Group to be able to operate as a normal business.”
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Following the disclosure, EOH shares were up 1.9% on the Johannesburg market on Thursday morning, trading at R1.08 per share. They have lost a quarter of their value since the beginning of the year. — © 2024 News Central Media
