🔒 Stephen van Coller on his plans for fixing up EOH, driving 4IR

JOHANNESBURG — Financial services veteran Stephen van Coller left a top job at MTN to join EOH Holdings in September this year. As EOH’s new group CEO, a lot is riding on van Coller to turn around the IT company, which has faced several scandals, a falling share price and financial performance challenges in the last 18 months. But van Coller – a former ABSA CIB CEO and local Deutsche Bank exec – comes highly regarded and respected. In this interview, van Coller explains why he joined EOH, how he’s dealing with challenges at the company and what his big plans are. – Gareth van Zyl

Stephen van Coller, the Group CEO of EOH, joins me on the podcast from Johannesburg. Stephen, before we get into your plans for EOH, a lot of people will want to know what motivated you to leave a top job at MTN to join EOH?
___STEADY_PAYWALL___

It’s interesting and, thanks, it’s great to be chatting to you. A lot of people have asked me that question. I think in simple terms, the management obviously went through a difficult time. They made quite a big decision to fundamentally change their ‘go-to-market’ strategy and the way they were working. So, really what they’ve done is that they’ve created effectively three businesses. There’s an IP business, there’s an industrial technologies business next to it, and then there is the old ICT business called EOH Technology. There’s an international overlay on that but we don’t have to get into that. What was interesting was that if I have a look at my skills, they’re exactly the skills that EOH didn’t have around creating a corporate structure, creating proper capital structures, doing proper governance, getting a process and procedures in place to allow the other businesses to grow etc.

I was very impressed with the decisions they took because some of these decisions were a personal detriment to themselves, like with Zunaid Mayet who was actually the Group’s CEO. He realised that in this new world this wasn’t part of his competencies. He would much rather go and run the next tech business where – having come out of a Siemens background – it was much better [suited for him]. He was happy to go and look for someone with my skills to come and compliment the existing management team. I was very impressed with that. In terms of what EOH are doing, I call it the ‘Bidvest of Tech’ in terms of what they’re creating. And that plays into my skills.

The second thing that was interesting for me was that they are at the heart of the Fourth Industrial Revolution (4IR). They’ve got all the bits and pieces and all the toys you need to deliver into 4IR but their biggest change is going from being product-centric to client-centric and interestingly there was no difference when I was in the financial services world. We were trying to do that with our corporate customers. It’s no different to what we were trying to do in the telco space at MTN in terms of being far more customer-focused rather than product-focused. I felt I’d been doing that for the last six years, and I could bring something to the table.

But more importantly is that they’ve got all the bits to put together. My analogy is that, at the moment, they’re selling iPhones with ‘here’s your screen, here’s your battery, here’s your memory and here are some apps, go and put it together yourself.’ Whereas, what we need to do is put it all together and sell the iPhone as a structure, and they’ve already started some of that thinking and they’re executing on it. So, I thought, what a great place to be in, in the middle of 4IR with the toys to capitalise on it.

The last thing that was also very dear to my heart is that I’ve been involved with the World Economic Forum (WEF) and the Financial Inclusion Initiative. I’ve also been involved with #Internet4All …. When I have a look at EOH with their Youth Development Program, what they’ve been doing with SITA, what they’ve been doing with the whole employment initiative – which was really a meaningful thing that I’ve got some passion for and I could come and actually get involved in. So, there were a number of things that just played into the right space at the right time.

What is your relationship like with EOH founder Asher Bohbot? He obviously left the business and then came back last year. What are the latest developments with him as well, in terms of his relationship with EOH?

He’s currently the non-executive chairman. He went out and looked for someone like me because he was obviously helping Zunaid quite closely. He’s, I suppose, a more executive than non-executive. Since I’ve come in, he is obviously doing less and less. What I’ve asked him to do – given his 20-years DNA in the business – is just to help me over the next 6-9 months with the strategy and the changes with how the bits fit together, because he’s got a very core understanding of this tech offering. He’s probably in for 2 or 3 days a week in the office, not all day, but he comes in. We’ve got some specific things that he’s tasked with that he’s helping me and Zunaid once a week. We spend a few hours just saying, ‘Okay, this is what happened, what do we think?’ It’s nice to have a sounding board. He’s very passionate about the business. He’s very passionate about the people and I think he feels some responsibility for the bad share price. But he’s actually a very interesting guy to have around. He’s obviously different to me, but the two of us are quite complimentary in that regard.

And obviously, you came in, I think as ‘Mr Fix-It’ for EOH because they’ve experienced a whole range of issues in the last 18 months. We at BizNews and even at Daily Maverick reported on the Keith Keating saga for example. Mr Keating was, of course, previously part of EOH but not there anymore. But he was accused of corrupt dealings with the police. So, what has EOH learnt from that particular saga?

Interestingly, we got ENSafrica very involved, with the lawyers, having a look at everything to make sure that there weren’t any decaying holes that we had to sort out. But what really came out of it was just the business had grown too fast and some of the processes weren’t up to scratch in terms of delivering. Especially where we’re doing large contracts, you get a lot of sub-contractors in, and you need to do a lot of due diligence around them. So, they’ve really helped us get our procedures and policies up to scratch for our listed company, and we’re busy with that.

We’re actually, implementing the ISO 37001 standard, which is the latest ISO standard on governance out of the UK. You can have a look, I’ve actually put a page in my presentation. And just given what’s going on in the country at the moment with State Capture and everything, we’ve kept them [ENSafrica] for all our large and our public sector bids. They actually review the bid documents, the bid process, and the submission to make sure that we’ve done everything properly, that we’ve contracted properly, etc. They’re doing a lot of work with that.

Do you think that there’s a big risk these days in doing government business? We’ve seen what’s happened to Nhlanhla Nene this week, for example. It seems like there’s a greater level of accountability coming into SA public life, but do you think that businesses are becoming wary of taking on tenders and public contracts?

There are two parts to that answer, and I’ll answer them both. But the first part involves just digitisation, access to data, social media, emails – all of these things are creating greater transparency in the world. This is not just a government thing. It’s not just technology – this is going to be the new standard for doing business across the world – this is fact. The problem is that I’m not sure that everyone has accepted it and is changing the way they do business to account for this massive transparency. We’ve seen it with the whole State Capture situation – there were something like 300 000 emails that suddenly popped out.

This is real. So, we have to change our business, the way we run it, and it needs to be a business enablement process and I think some of those processes haven’t been put in place. Even with the whole Nhlanhla Nene issue: he went and did things (I’m sure fairly innocently) in terms of trying to be a helpful finance minister to his boss. But because there was no procedure and policies, he made some decisions that turned out to be bad ones. If you put in proper process and policies people can use that as a method of doing business, and we have to get far more used to that. So, we’re going to do that. What I would love to do is that if we do it so well, we can the do ‘governance as a service’, and we can actually sell it back to companies such as ourselves.

Read also: Stephen van Coller: Meet the world’s disruptors – blockchain and management

To answer the second part of your question [in terms of dealing with] government in SA and the politics thereof is that you’re getting lots of change. There are some budget constraints. There are changes of personnel in the government, and with a lot of our projects, you need stability to execute because it’s not a one-day purchase – it’s a multi-month purchase. If you contract with someone who’s the brains behind what they want, and then they leave, you then sort of start again. So, that’s the first thing.  

The second thing is that it’s been quite difficult to contract proper payment terms with the government because they pay you when they’ve got money. The problem with this is that if you think about a business like ours if we make R100 revenue, there’s R90 of cost because there are license fees, and hardware fees and everything. We then only make R10 at the bottom. If someone doesn’t pay you the R100 for a year, at 10%, my profit margin is gone. So, this leveraging, you have to be very careful how you contract, who you contract to, the possible delays, any change orders – it’s all got to be documented. We’re sitting with an issue where one of our public sector clients don’t want to pay us because they’re saying that the project was delayed, but the issue was that they didn’t procure the hardware in time for the delivery of the project. But nowhere is that documented. We know it, and they know it, but at the time that the delay happened; it wasn’t documented and it wasn’t sorted out. The handshake was something else. So, these are the issues that are going on at the moment, and I think this is when one has to be on top of your game when contracting in these unstable environments.

Yes, I think even in previous EOH financial results that came out that was an issue that has been alluded to with regard to income receivable and not getting all the revenue in on time. So, that’s an experience that your business has had first-hand.

That’s exactly right, and to give you a broad figure, which is not perfectly correct, but this year 15% of our revenue came from the public sector. But nearly just shy of about 30% of our debtors are public sector. So, there’s a cashflow matched to that. The public sector ends up funding it because you charge them interest and that’s also not a good thing for the public sector because, in the end, it looks like the projects are delayed, are too expensive, they go over budget etc. But actually, it’s just tardy management.

Something else that happened at EOH last year was that two executives there, the (now former) CFO John King and Jehan Mackay were blamed, essentially, for triggering a slide in EOH’s share price when they had a ‘forced sale’ activated on their shares. It seemed to catch EOH’s management off-guard at the time and the market didn’t particularly like it. Is EOH able to prevent something like that going forward?

There are two things here that one needs to be mindful of. The first is just a director’s policy. They didn’t have one in place, so people did whatever they did. Clearly, that’s not possible any more because that’s part of the policy, and I even want to tighten it up a little bit further. I’ve got the University of Stellenbosch Business School and the Centre of Corporate Governance helping me work through what is best of breed on this because that can’t happen. The thing that’s really the issue here is the fact that EOH only trades about 300 000 shares a day. So, about R10m a day.

The EOH share price is up 20% on the appointment of MTN's Stephen van Coller as its new group CEO

— Duncan McLeod (@mcleodd) July 19, 2018

We went on a roadshow that was a profit warning that said 35% down, and 500 000 shares traded, and the share price went up 8%. You get this big volatility on very small volumes so, one of the things we’re going to have to work on, which takes a while, is getting a broader spread of shareholders so that there’s more trading in the business, so that when you do have events and someone wants to offload shares or buy shares, you don’t have this massive volatility going on. There was a bit of a dual effect there and that wasn’t helpful.

Finally, just looking at the last set of results from EOH. It’s been a tough year for the business, it reported a full-year loss of R104m, down from a profit of R1.2bn in 2017. What do you hope to achieve in your first year, especially amid all the changes that you’re already implementing, the structural changes?

The first thing we have to do is settle down with these three business units, EOH Technology, EOH NexTec and the IT business and see how international fits in across that. But we need to create clean balance sheets, a baseline of earnings, a capital allocation against them so that we can have proper metrics for each of the businesses around profit, around cash flow generation, and around some kind of return metric – whether it’s’ return on equity or return on investing capital – whatever we decide so that we can actually get that right at the moment. It’s all in one, big vegetable soup, and it’s very difficult to really manage and incentivise management in each of the different businesses separately for the type of business because they’re three separate businesses. So, we need to get a normalised view for each of the businesses out there so that people can start doing proper valuations on the business, and so that we can start doing proper incentivisation and metrics – that’s the first thing.

The second thing is that I want to rehash the whole governance structure into something that’s more akin to the 4IR. We’re a digital company. I want to do everything digitally and maybe even create ‘governance as a service’. If we can do it properly for ourselves, maybe we can fill that digital experience for other people and the 4IR mantra is, ‘You want to do ten times the governance at a tenth of the effort and the cost.’ Whether you get there, is another story, but those are the two big things I really want to do.

The third thing is just getting the whole people management process policies in place, because if we don’t hire the best people, and we don’t keep them. You can’t really do a right-first-time customer for life strategy because you don’t have the best people delivering. So, those are my three big outcomes for the year.

Stephen Van Coller, it’s been a pleasure talking to you and I wish you the best of luck at EOH.

Thank you very much and I appreciate the interview.