Wrap Text
Unaudited Interim Results for the Six Months Ended 28 February 2019 and Dividend Declaration
AYO Technology Solutions Limited
(Incorporated in the Republic of South Africa)
Registration number 1996/014461/06
JSE share code: AYO
ISIN ZAE000252441
(“AYO” or the “Group” or the “Company”)
UNAUDITED INTERIM RESULTS FOR THE SIX MONTHS ENDED 28 FEBRUARY 2019 AND DIVIDEND DECLARATION
Highlights compared to the prior year interim period
- Revenue increased by 93% from R349 million to R675 million
- Profit before tax increased by 226% from R82 million to R267 million
- Earnings per share increased by 220% from 17.68 cents to 56.65 cents
- Headline earnings per share increased by 226% from 17.36 cents to 56.67 cents
- Assets grew by 16% from R4.5 billion to R5.2 billion
- Successfully completed the acquisition of a 55% shareholding in Sizwe Africa Proprietary Limited (“Sizwe”)
- Interim dividend of 35.00 cents per share
Company profile
AYO is one of the largest Broad-Based Black Economic Empowerment (“B-BBEE”) information and communications technology (“ICT”) company in South
Africa. AYO which has been in existence for more than 20 years was created from a desire to effect real change in South Africa and beyond its
borders and through a belief that the future will be shaped by technological solutions. We deliver end-to-end ICT solutions to multiple
industries in South Africa’s public and private sectors through strategic partnerships. These partnerships enable us to service customers across
the African continent, North America, Europe and Mauritius. AYO believes that real change and growth lies in empowering partnerships and through
empowered partnerships. These partnerships are born from acquisitions and forged through employees, partners and clients working together to gain
the competitive advantage that successful digital transformation can bring.
At 28 February 2019, the Group employed 1 400 people which grew from 250 people in 28 February 2018 and has over 500 clients, with operations located
in South Africa, Mauritius, East Africa and United Kingdom.
Group performance
The Group delivered a strong performance for the period with revenue increasing by 93% and profit before tax increasing by 226% from the prior
interim period.
The Group achieved significant organic growth during the interim period as a result of a contract with a multi-national company that commenced
in July 2018. Work on the contract is progressing very well, with positive feedback from the client and AYO expects to obtain new contracts with
other multi-national companies as it builds on its platforms driven by the “Go to Market” strategy.
Headline earnings per share ("HEPS") increased by 226% from 17.36 cents to 56.67 cents per share as a result of the strong trading performance
of the Group.
Acquisitions
Since listing, AYO has shown progress in delivering on the strategy presented in its Pre-listing Statement ("PLS"). AYO completed the acquisition
of a 55% shareholding in Zaloserve on 19 December 2018 for a consideration of R165 million after obtaining approval from the Competition
Commission. Zaloserve is an investment holding company that holds a 100% shareholding in Opiwize Proprietary Limited, which in turn holds a 100%
shareholding in Sizwe Africa IT Proprietary Limited (“Sizwe”). Sizwe offers various ICT services to its customers, including a focused spectrum
of physical infrastructure, metro and long-distance optic fibre, facility management, continuous energy supply, networking and security to hosting,
storage server processing, mobility, data centre, end-user computing and associated consumables. Sizwe has annual revenues in excess of R1 billion,
generates positive cash from operations in excess of R75 million and earnings before interest, tax, depreciation and amortisation (“EBITDA”) in
excess of R70 million.
On 9 February 2019, AYO concluded the acquisition of a 40% equity interest in SAAB Grintek Technologies Proprietary Limited, now known as SGT
Solutions Proprietary Limited (“SGT Solutions”) via a special purpose vehicle Mainstreet 1653 Proprietary Limited that in turn holds the entire
equity interest in SGT Solutions Proprietary Limited.
SGT Solutions is a turnkey solutions integrator specialising in the design, supply, deployment, commissioning and maintenance of multi - technology
telecommunication systems for mobile broadband and converged solutions, through partnerships with its customers and technology providers. SGT
Solutions specialises in integrated, leading-edge and comprehensive solutions across the entire spectrum of telecommunications. SGT Solutions has
been operating in South Africa for the past 14 years. SGT earned annual revenues in excess of R400 million in the past year and generates EBITDA
in excess of R40 million annually.
On 16 September 2018, AYO concluded the acquisition of a 32% shareholding in Bambelela Capital Proprietary Limited (“Bambelela”) (previously
Vunani Group Proprietary Limited). Bambelela holds a 50% shareholding in Vunani Limited a diversified financial services group. Bambelela generates
profits in excess of R40 million. On 28 September 2018, AYO subscribed for 261 343 070 cumulative, redeemable, non-participating, convertible
Class C preference shares of no par value in Bambelela for a consideration of R145 million.
AYO is in the process of finalising certain key projects and transactions and will make further announcements in due course.
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Notes Unaudited Unaudited Audited
six months ended six months ended year ended
28 February 2019 28 February 2018 31 August 2018
R’000 R’000 R’000
Revenue 674 509 348 672 638 893
Cost of sales (469 153) (223 859) (440 935)
Gross profit 205 356 124 813 197 958
Other income 1 007 3 452 3 293
Other operating gains (losses) 324 - (7 321)
Other operating expenses (145 546) (64 936) (195 297)
Equity-settled share-based payment expense - (11 809) (11 809)
Warranty expense - - (4 239)
Goodwill impairment - - (4 957)
Listing costs expensed - (6 831) (6 831)
Fair value gains 18 217 - -
Income from equity accounted investments 33 578 - -
Finance income 6 154 866 38 220 226 954
Finance costs (1 091) (1 324) (1 754)
Profit before taxation 266 711 81 585 195 997
Taxation (52 931) (15 646) (48 040)
Profit after taxation 213 780 65 939 147 957
Other comprehensive income
Items that may be reclassified subsequently to profit or loss:
Exchange differences on foreign operations (24) (5) (28)
Total comprehensive income for the year 213 756 65 934 147 929
Profit after taxation attributable to:
Shareholders of AYO Technology Solutions Limited 194 959 47 436 144 286
Non-controlling interests 18 821 18 503 3 671
Total profit after taxation 213 780 65 939 147 957
Total comprehensive income attributable to:
Shareholders of AYO Technology Solutions Limited 194 968 47 431 144 258
Non-controlling interests 18 821 18 503 3 671
Total comprehensive income 213 789 65 934 147 929
Earnings per share (cents)
- Basic 56.65 17.68 47.20
- Diluted 56.65 17.68 47.20
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Unaudited at Unaudited at Audited at
28 February 2019 28 February 2018 31 August 2018
R’000 R’000 R’000
Assets
Non-current assets 551 655 70 346 72 782
Property, plant and equipment 1 95 225 6 729 7 169
Goodwill 2 91 235 43 411 35 248
Intangible assets 2 78 047 13 276 17 743
Investments in joint venture 33 33 33
Investments 3 155 750 - -
Investments in associates 4 37 178 - -
Loans to Group companies 2 107 4 780 1 989
Loans receivable 5 82 000 - -
Other financial assets 3 098 747 6 890
Finance lease receivables 2 039 - -
Operating lease asset - 12 -
Deferred tax 4 943 1 358 3 710
Current assets 4 666 195 4 512 711 4 598 350
Inventories 92 478 37 546 12 378
Loans receivable 5 17 002 - -
Trade and other receivables 525 190 160 756 183 222
Other financial assets 32 634 71 449 93 390
Finance lease receivables 418 - -
Current tax receivable 1 408 680 662
Investments 3 418 169 - -
Cash and cash equivalents 3 578 896 4 242 280 4 308 698
Total assets 5 217 850 4 583 057 4 671 132
Equity and liabilities
Equity
Stated capital 4 444 410 4 444 410 4 444 410
Reserves 11 785 11 805 11 777
Retained income 84 220 (104 352) (7 501)
Attributable to shareholders of AYO 4 540 415 4 351 863 4 448 686
Non-controlling interests 139 228 40 658 20 294
Total equity 4 679 643 4 392 521 4 468 980
Liabilities
Non-current liabilities 29 249 31 738 575
Loans from Group companies - 29 748 -
Other financial liabilities - 38 -
Finance lease liabilities 9 419 1 952 575
Deferred income 19 830 - -
Current liabilities 508 958 158 798 201 577
Trade and other payables 363 538 128 710 132 925
Loans from shareholder 884 5 069 5 001
Other financial liabilities 146 8 268 1 133
Finance lease liabilities 13 406 - 389
Operating lease liabilities 56 356 47
Deferred income 10 009 1 213 -
Current tax payable 65 670 3 827 41 636
Provisions 38 368 8 166 15 390
Dividends payable 13 551 - -
Bank overdraft 3 330 3 189 5 056
Total liabilities 538 207 190 536 202 152
Total equity and liabilities 5 217 850 4 583 057 4 671 132
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Unaudited Unaudited Audited
six months ended six months ended year ended
28 February 2019 28 February 2018 31 August 2018
R’000 R’000 R’000
Balance at the beginning of the period 4 468 980 67 091 67 091
Total comprehensive income attributable to shareholders of AYO 194 968 47 431 144 258
Total comprehensive income attributable to non-controlling interests 18 821 18 503 3 671
Issue of shares - 4 260 280 4 260 280
Equity-settled share-based payment - 11 809 11 809
Dividends paid to non-controlling interests - (12 593) (17 646)
Movement in non-controlling interest- disposal of subsidiary - - (483)
Dividends paid to shareholders of AYO (103 237) - -
Non-controlling interests arising out of acquisition 100 114 - -
Balance at the end of the period 4 679 646 4 392 521 4 468 980
Comprising of
Stated capital 4 444 410 4 444 410 4 444 410
Reserves 11 785 11 805 11 777
Retained income 84 223 (104 352) (7 501)
Non-controlling interests 139 228 40 658 20 294
Total equity 4 679 646 4 397 521 4 468 980
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
Unaudited Unaudited Audited
six months ended six months ended year ended
28 February 2019 28 February 2018 31 August 2018
R’000 R’000 R’000
Cash generated from operations before working capital changes 276 704 35 493 3 521
Working capital changes (184 689) (29 393) (62 451)
Cash generated from operations (92 015) (6 100) (58 930)
Finance income 141 875 38 220 215 243
Finance costs (1 034) (1 324) (2 220)
Tax paid (27 217) (12 152) (16 735)
Net cash from operating activities 21 609 18 644 137 358
Cash flows from investing activities
Net additions to property, plant and equipment (5 374) (1 119) (4 578)
Proceeds from sale of assets held for sale - - 827
Net additions to intangible assets (5 099) (1 148) (6 053)
Business combination (67 371) - -
Net cash outflow on disposal of subsidiary - - (314)
Net outflow from purchases and disposals of financial assets (546 636) (51 274) (63 832)
Net advances or repayments from loans from Group companies (4 010) - 3 029
Net cash to investing activities (628 490) (53 541) (70 921)
Cash flows from financing activities
Net proceeds on share issue - 4 260 280 4 260 280
Net proceeds or repayment of other financial liabilities and finance leases 1 702 1 208 (5 967)
Net repayments or proceeds from loans from shareholder (9 702) 5 057 6 950
Net repayment of loans from/ to group companies and staff loans (23 509) (51 084) (77 532)
Dividends paid (89 686) (12 593) (17 646)
Net cash (to) from financing activities (121 195) 4 202 868 4 166 085
Total cash movement for the year (728 076) 4 167 971 4 232 522
Cash at the beginning of the period 4 303 642 71 120 71 120
Total cash at the end of the year 3 575 566 4 239 091 4 303 642
NOTES TO THE UNAUDITED INTERIM FINANCIAL STATEMENTS
Accounting policies and basis of preparation
The unaudited summarised consolidated financial statements for the six months ended 28 February 2019 have been prepared in accordance with the JSE
Limited Listings Requirements (“Listings Requirements”) for summary financial statements and the requirements of the Companies Act of South Africa,
2008 as amended, (“Companies Act”). The Listings Requirements require financial reports to be prepared in accordance with the framework concepts,
the measurement and recognition requirements of International Financial Reporting Standards (“IFRS”), the SAICA Financial Reporting Guides as issued
by the Accounting Practices Committee and Financial Reporting Pronouncements as issued by the Financial Reporting Standards Council and also that
they, as a minimum, contain the information required by IAS 34 ‘Interim Financial Reporting’. The accounting policies applied in the preparation of
the summarised consolidated financial statements are in terms of IFRS and are consistent with the accounting policies applied in the preparation of
the previous audited consolidated annual financial statements, except for the following accounting policies adopted during the current period.
The Group adopted the following new accounting policies during the current period:
IFRS 15 Revenue from Contracts with Customers (“IFRS 15”)
IFRS 15 replaces the previous revenue standard IAS 18 which was applied previously by the Group. All contracts within the Group have been assessed
against the new revenue standard and the application of IFRS 15 did not have a significant impact on the Group’s results or financial position.
IFRS 9 - Financial Instruments (“IFRS 9”)
IFRS 9 replaces the previous financial instrument recognition and measurement standard IAS 39 Financial Instruments: Recognition and Measurement.
The Group applied the standard retrospectively, however the Group has used the exemption not to restate comparative information for prior periods,
therefore the comparative information continues to be reported under IAS 39. The Group has made use of the practical expedients in the standard,
in particular the use of the provision matrix, which helps in measuring the loss allowance for short-term trade receivables.
On adoption date, the expected credit loss model did not result in a change in the IAS 39 allowances for trade receivables because of their
short-term nature. The expected credit loss model also did not result in an impairment for other financial assets. Therefore, there was no need to
adjust the retained earnings, financial assets and liabilities on 1 September 2018.
The application of IFRS 9 has not resulted in the reclassification of any of the Group’s financial assets and liabilities.
The unaudited interim financial results were prepared under the supervision of the chief financial officer, Isaiah Tatenda Bundo and were not
reviewed or audited by the Groups external auditors, BDO Cape Incorporated.
Reporting entity
The consolidated interim financial statements for the six months ended 28 February 2019 comprises of the Company,its subsidiaries, associates
and joint venture.
Use of judgments and estimates
In preparing these summarised interim financial statements, management has made judgments, estimates and assumptions that affect the application of
the accounting policies and the reported amounts of assets and liabilities, income and expenses. Actual results may differ from these estimates.
The significant judgments made by management in applying the Group’s accounting policies and the key sources of estimation uncertainty are
consistent with those applied to the audited consolidated financial statements for the year ended 31 August 2018.
Measurement of fair values
The Group has an established control framework with respect to the measurement of fair values, the fair valuation calculations are performed by the
Group’s finance department and operational team on an annual basis. The Group’s finance department reports to the chief financial officer.
The valuation reports are approved by the investment committee in accordance with the Group’s reporting policies.
1. BUSINESS COMBINATIONS
AYO acquired the brand, customer list, workforce and related assets of Zaloserve for a total consideration of R165 million to enhance AYO’s product
basket and client offering as part of AYO’s “Go to Market” strategy. The purchase agreement had an effective date of acquisition of 1 November 2018,
however, in terms of IFRS 3 Business Combinations, the date of acquisition has been determined as 19 December 2018. The fair value of the acquired
brand, customer lists, workforce and assets are provisional upon the fair value determination of the brand, customer list and workforce. The
provisional fair values of the identifiable assets and liabilities are shown below:
Fair value of assets acquired, and liabilities assumed:
R’000
Property, plant and equipment 88 169
Intangible assets 56 582
Other financial assets 6 018
Finance lease receivables 8 155
Inventories 92 702
Trade and other receivables 166 888
Cash and cash equivalents 81 129
Deferred tax 4 570
Finance lease liabilities (24 826)
Deferred income (26 439)
Trade and other payables (239 933)
Current tax payable (414)
Provisions (6 266)
Total identifiable net assets 206 335
Non-controlling interests (100 114)
Goodwill 55 622
Total purchase consideration 161 843
Consideration paid
Cash 148 500
Contingent consideration 13 343
Total 161 843
Non-controlling interest
Non-controlling interest, which is a present ownership interest, and entitles their holders to a proportionate share of the entity’s net assets in
the event of liquidation, is measured at the present ownership interests proportionate share of the acquiree’s identifiable net assets.
Contingent consideration
AYO is required to pay the previous shareholders of Zaloserve a cash amount of R5.5 million per year for the next 3 years provided that certain
profit after tax targets are met by Zaloserve.
The fair value of the contingent consideration arrangement was determined at acquisition date and included in the consideration. The target is
based on net profit after tax meeting certain thresholds. The payments are discounted at a rate of 15.78%.
R’000
Net cash outflow on acquisition date
Cash consideration paid 148 500
Cash acquired (81 129)
Net cash paid 67 371
Goodwill
Goodwill recognised on acquisition relates to the expected growth and cost synergies which cannot be separately recognised as an intangible asset.
Revenue and profit or loss of Zaloserve and its subsidiaries
Revenue of R212 million and profit of R11 million of Zaloserve and its subsidiaries for two months and twelve days has been included in the Group’s
results since the date of acquisition.
2. GOODWILL AND INTANGIBLES
Reconciliation of Goodwill balance
Unaudited Unaudited Audited
six months ended six months ended year ended
28 February 2019 28 February 2018 31 August 2018
Carrying amount at beginning of period 35 248 43 411 43 411
Disposal of subsidiary - - (3 206)
Acquisition of subsidiary 55 987 - -
Impairment - - (4 957)
Carrying amount at the end of period 91 235 43 411 35 248
Goodwill acquired through business combinations has been allocated to individual cash-generating units for impairment testing as follows:
Comprising:
Investment in Health System Technologies Proprietary Limited 2 157 2 157 2 157
Investment in Software Tech Holdings Group Proprietary Limited - 3 784 -
Investment in Software Tech Holdings Subsidiaries 2 352 6 731 2 352
Investment in Puleng Technologies Proprietary Limited 22 274 22 274 22 274
Investment in Kalula Communications Proprietary Limited 8 465 8 465 8 465
Investment in Zaloserve Proprietary Limited 55 987 - -
91 235 43 411 35 248
The recoverable amount of goodwill has been determined based on a value-in-use calculation using cash flow projections from financial forecasts
approved by senior management covering a five-year period for each of the cash-generating units shown above. Cash flow projections take into
account past experience and external sources of information. The valuation method used is consistent with the prior year. There have been no
accumulated impairment losses recognised to date.
Intangibles
Included in intangibles is the fair value of the acquired brand, customer list and workforce recognised at the acquisition of Zaloserve as disclosed
in note 1.
3. INVESTMENTS
Investments comprises of:
Unaudited Unaudited Audited
at 28 February 2019 at 28 February 2018 at 31 August 2018
R’000 R’000 R’000
Cumulative preference shares in Bambelela Proprietary Limited 149 576 - -
Funds placed in 3 Laws Capital Proprietary Limited - - 88 827
Funds placed in Oasis 418 169 - -
Cadiz Life Investment Enterprise Development Fund 6 174 - 6 890
Total 573 919 95 717
Non-current assets 155 750 - 6 890
Current assets 418 169 - 88 827
Total 573 919 - 95 717
Bambelela Capital Proprietary Limited (“Bambelela”)
On 28 September 2018, AYO subscribed for 261 343 070 cumulative, redeemable, non-participating, convertible Class C preference shares of no par
value in Bambelela for a consideration of R145 million. Dividend income amounting to R4.5 million has been accrued for in the interim period.
3 Laws Capital Proprietary Limited Investment (“3 Laws”)
AYO placed an amount of R70 million with 3 Laws for during the 2018 financial year and a further R400 million for 3 months of the current reporting
period. AYO withdrew the funds placed with 3 Laws at the end of the reporting period. AYO earned a return of R8,4 million on the portfolio during
the current reporting period.
Oasis balanced Fund & Bond Fund (“Oasis”)
In line with AYO’s strategy to diversify its investments, it invested R100 million in the Oasis Bond Fund and R300 million in the Oasis Balanced
Fund on 21 December 2018. During the reporting period, the portfolio yielded a return of R18 million.
4. INVESTMENTS IN ASSOCIATES
Bambelela Capital Proprietary Limited (“Bambelela”)
On 28 September 2018, AYO purchased 32% of the issued shares in Bambelela. The 32% shareholding represents significant influence over the entity. The
investment has been accounted for as an investment in associate in line with IAS 28.
Mainstreet 1653 Proprietary Limited (“Mainstreet”)
On 9 February 2019, AYO purchased 40% of the issued shares in Mainstreet which holds 100% of the issued share of Saab Grintek Technologies
Proprietary Limited (“SGT”). The 40% shareholding represents significant influence over the entity. The investment in Mainstreet has been accounted for
as an investment in associate in line with IAS 28.
Income from associates:
The Group’s share of the profits from the above investments since acquisition amounted to R33.7 million.
5. LOANS RECEIVABLE
Comprises of:
Unaudited Unaudited Audited
at 28 February 2019 at 28 February 2018 at 31 August 2018
R’000 R’000 R’000
Mainstreet 1653 Proprietary Limited 60 000 - -
Global Command and Control Technologies Proprietary Limited 11 400 - -
Cortex Logic Proprietary Limited 8 460 - -
Chaaday Holdings Proprietary Limited 3 501 - -
Independent Digital Lab Proprietary Limited 10 847 - -
Headsetsolutions Africa Proprietary Limited 4 794 - -
Total 99 002 - -
Non-current assets 82 000 - -
Current assets 17 002 - -
Total 99 002 - -
The loans with Mainstreet 1653 Proprietary Limited and Global Command and Control Technologies Proprietary Limited bear interest at prime +2% per
annum and are repayable on 1 March 2024.
The loans with Cortex Logic Proprietary Limited and Chaaday Holdings Proprietary Limited bear interest at prime +2% per annum and are
repayable on demand.
The loan with Independent Digital Lab Proprietary Limited bears interest at prime +2% per annum. 50% of the loan balance is repayable on 1 January
2020, with remaining balance payable on 1 January 2024.
6. INVESTMENT REVENUE
Unaudited Unaudited Audited
six months ended six months ended for the year ended
28 February 2019 28 February 2018 31 August 2018
Bank 150 197 38 220 226 488
Group loans 94 - 466
Preference shares 4 575 - -
154 866 38 220 226 954
7. HEADLINE EARNINGS
Determination of headline earnings
Unaudited Unaudited Audited
six months ended six months ended year ended
28 February 2019 28 February 2018 31 August 2018
R’000 R’000 R’000
Earnings attributable to ordinary equity holders 194 959 47 436 144 286
Adjusted for:
Loss/(profit) on sale of property and equipment 72 (4) (9)
Loss on disposal of a subsidiary - - 1 429
Impairment loss - - 3 084
Profit on sale of associate - (852) (1 074)
Headline earnings 195 031 46 580 147 716
Weighted average number of shares 344 123 944 268 269 657 305 700 253
Headline earnings per share (cent)
Basic 56,67 17,36 48,32
Diluted 56,67 17,36 48,32
8. CONDENSED SEGMENTAL ANALYSIS
Segmental revenue Segmental profit
Unaudited Unaudited Audited Unaudited Unaudited Audited
six months ended six months ended year ended six months ended six months ended year ended
28 February 2019 28 February 2018 31 August 2018 28 February 2018 28 February 2018 31 August 2018
R’000 R’000 R’000 R’000 R’000 R’000
Software and consulting 32 574 36 848 73 739 12 942 16 725 24 514
Security 143 522 223 156 335 352 54 463 66 818 106 734
Unified communications 37 989 40 081 75 552 13 635 14 382 20 360
Health care 53 134 49 717 100 975 19 219 19 330 37 260
Managed services 410 363 - 82 794 108 169 12 423 38 285
Total 677 582 349 802 668 412 208 428 129 678 227 153
Less intersegmental sales (3 073) (1 130) (29 519) - - -
Administration and support services - - - (147 287) (73 180) (245 351)
Equity settled share-based payment expense - - - - (11 809) (11 809)
Warranty expense - - - - - (4 239)
Impairments - - - - - (4 957)
Fair value gains - - - 18 217 - -
Finance income - - - 154 866 38 220 226 954
Finance costs - - - (1 091) (1 324) (1 754)
Income from Equity accounted investments 33 578 - -
Total revenue and profit before taxation 674 509 348 672 638 893 266 711 81 585 195 997
Segment profit represents the profit before tax earned by each segment without the allocation of central administration costs, fair value adjustments,
interest income and finance costs. This is the measure that is reported to the chief operating decision-maker for the purposes of assessing the
segment performance and resource allocation. The accounting policies of the reportable segments are the same as the Group's accounting policies.
Unaudited Unaudited Audited
at 28 February 2019 at 28 February 2018 at 31 August 2018
Segmental assets R’000 R’000 R’000
Software and consulting 24 049 14 177 20 719
Security 62 324 159 108 73 793
Unified communications 24 996 33 116 22 304
Health care 77 142 68 083 63 860
Managed services 461 385 - 107 746
Head office 4 563 011 4 307 215 4 379 000
Total segmental assets 5 212 907 4 581 699 4 667 442
Unallocated* 4 943 1 358 3 710
Total consolidated assets 5 217 850 4 583 057 4 671 132
Segmental liabilities
Software and consulting 8 014 19 504 8 715
Security 39 268 96 461 58 059
Unified communications 14 269 16 618 16 937
Health care 26 287 23 291 16 898
Managed services 72 940 - 53 520
Head office 377 879 34 662 48 023
Total consolidated liabilities 538 207 190 536 202 152
*For the purposes of monitoring segment performances and resource allocations between segments all assets and liabilities are allocated to
reportable segments other than deferred tax assets and liabilities.
Included in segmental results is:
Depreciation and amortisation Additions to property, plant, equipment
and intangible assets
Unaudited Unaudited Audited Unaudited Unaudited Audited
six months ended six months ended year ended at at at
28 February 2019 28 February 2018 31 August 2018 28 February 2019 28 February 2018 31 August 2018
R’000 R’000 R’000 R’000 R’000 R’000
Software and consulting 399 489 985 197 272 328
Security 270 315 465 181 246 296
Unified communications 216 230 685 16 21 163
Health care 601 853 1 377 5 473 533 4 730
Managed services 4 098 - - 145 671 - -
Head office* 2 038 7 389 3 839 44 5 173
Total 7 622 1 894 3 901 155 377 1 116 10 690
*The head office performs an administrative function for all the segments in the Group.
Software and consulting
The software and consulting division focusses mostly on digital consulting engagements and transformation projects. Revenue for the division
decreased by 11%, from R37 million to R33 million as a result of reduced consulting work obtained in the current period. However, operating margins
remained consistent with those of the prior period.
Security solutions
The security solutions division is focused on offering security solutions to enterprises, with the key focus mainly on Identity and Access
Governance Management. Revenue decreased by 35% from R223 million to R144 million as a result of a contract that had reached its expiry date in the
current period. Operating profit decreased by 24% from R67 million to R54 million as a result of the decrease in revenue.
The software and consulting and security solutions divisions are focused on the financial services sector and the divisions are pursuing a larger pool of
clients as a result of their improved empowerment credentials.
Unified Communications
The unified communications division is a reseller of telecommunications and gaming equipment of globally recognised brands. Revenue decreased by 5%
from R40 million to R38 million as a result of reduced sales volumes of telecommunications equipment in the months of December and January. Operating
profit margins for the division remained constant even though there was a decrease in revenue due to improved cost controls.
Health care
The health care division provides software and support in the health care industry with clients ranging from the private sector to government. Revenue
for the division increased by 6% from R50 million to R53 million, with operating margins remaining consistent with those of the prior period.
Managed services
The managed services division provides network infrastructure and support services to enterprises. The division obtained a large contract with a
multi-national that commenced in July 2018 which resulted in significant revenue for the division in the current period. The Group also successfully
acquired Zaloserve as detailed above and the consolidation of Zaloserve resulted in significant additional revenues for the division.
9. FAIR VALUE INFORMATION
Fair value hierarchy
Financial assets and financial liabilities measured at fair value in the Statement of Financial Position are grouped into three levels of fair value
hierarchy. The three levels are defined based on the observability of significant inputs to the measurement as follows:
Level 1: Quoted unadjusted prices in active markets for identical assets and liabilities.
Level 2: Other techniques for all inputs which have a significant effect on the recorded fair value and are observable, either directly or indirectly
for the asset or liability.
Level 3: Techniques which use inputs which have a significant effect on the recorded fair value that are not based on observable market data. As at
28 February 2019, the Group held the following instruments measured at fair value:
2019
Financial instruments
Level 2 Level 3 Total
R'000s R'000s R'000s
Cumulative Preference Shares - 149 576 149 576
Unlisted investments 418 161 6 937 425 098
2018
Level 2 Level 3 Total
R'000s R'000s R'000s
Unlisted investments - 6 890 6 890
Reconciliation of assets and liabilities measured at level 2 and level 3
2019
Opening balance Investment Changes in Fair Closing balance
value
R'000s R'000s R'000s R'000s
Level 2
Unlisted investments - 400 000 18 161 418 161
Level 3
Unlisted investments 6 890 - 56 6 946
2018
Opening balance Investment Changes in Fair Closing balance
value
R'000s R'000s R'000s R'000s
Level 3
Unlisted investments 749 6 141 - 6 890
Changes in fair value are recognised in profit or loss. Refer to fair value gains in the Groups Statement of Comprehensive income.
Events after reporting period
On 1 March 2019 AYO acquired a 24% equity interest in Global Command and Control Technologies Proprietary Limited (“GCCT”) for a consideration
of R3.6 million. GCCT supplies microwave and related services to telecommunication network operators (public & private) in South Africa. The company
offers full local radio frequency network planning, deployment, product support, field maintenance and logistic services. GCCT generates annual
revenues in excess of R150 million and profit before interest and tax in excess of R6 million annually.
On 19 March 2019, AYO signed an agreement with Bambelela and Vunani Capital Proprietary Limited (“Vunani Capital”) in which, AYO will be a 50%
shareholder, Bambelela a 30% shareholder and Vunani Capital a 20% shareholder in a special purpose vehicle which has been formed to invest in
disruptive financial services technology as part of its “Go to Market” strategy. AYO will provide a loan of up to R100 million to the special
purpose vehicle.
Prospects
The Group had annual historical revenues of R280 million which have since grown to about R675 million during the current six month period.
AYO continues to focus on its acquisition strategy in order to complement and augment the current businesses and enhance its vertical industry
“Go to Market” strategy.
AYO is currently pursing targets in three key focus areas, being disruptive IT platform services, digital transformation and specific industry
vertical expertise. AYO’s Digital Ecosystem will focus on these areas through, AYO Platforms, AYO Digital Intelligence and AYO Industries, including
expansion in the short term to AYO fintech.
AYO Platforms is focused on attracting disruptive platform businesses which will give customers the ability to source various data, network,
communications and security services through various consumption models including on-premise, hybrid and cloud.
AYO Digital Intelligence is building distinct areas of expertise including Internet of Things (IOT) Platforms, Big Data Analytics, Artificial
Intelligence (AI) and Business Process Innovation and Transformation skills. AYO is in advanced discussions with target companies who are
recognised leaders in this field.
AYO Industries is focused on attracting companies that have leading offerings and significant contracts in particular vertical industries. In the
short term, the company will be looking to add to its already comprehensive intellectual property in the health, mining, oil and gas industries with
additional competencies in financial services, service provider and public sector verticals.
On successful completion of certain acquisitions, AYO will be strongly positioned to win significant market share in its industry and to challenge
and disrupt the ICT landscape that has been dominated by the same brands.
Through the above strategies, AYO’s product and service portfolio and Digital Ecosystem, it should be able to service a substantial customer base
and capture 5-8% of the South African market by 2022. The exciting growth prospects that these target businesses will enjoy within the AYO Digital
Ecosystem will have a compounding effect on the company’s organic growth.
Changes in the Board of directors (“Board”) and company secretary
Mr. Howard Plaatjes, Mrs. Vanessa Govender and Mr. Takudzwa Tanyaradzwa Hove were appointed as directors of the Company with effect from 20 December 2018.
Mr. Salim Young and Ms. Cherie Felicity Hendricks did not make themselves available for re-election to the board of directors at the Company’s annual
general meeting on 22 January 2019 and therefore resigned as directors of the Company with effect from 22 January 2019.
Ms. Naahied Gamieldien resigned as the acting Chief Executive Officer and the Chief Financial Officer of the Company with effect from 22 January 2019.
Mr. Howard Plaatjes was appointed as the Chief Executive Officer, Mr. Isaiah Tatenda Bundo was appointed as Director and Chief Financial Officer and
Mr. Abdul Malick Salie was appointed as Director and Chief Investment Officer of the company with effect from 22 January 2019.
The company secretary Ms. Rodanchia Nock resigned with effect from 21 December 2018 and Mr. Wazeer Moosa was appointed with effect from 1 January 2019
as the company secretary.
Dividends
DECLARATION OF CASH DIVIDEND
Notice is hereby given that an interim gross dividend of 35 cents(2018:0 cents) per share has been declared out of income reserves in respect of
ordinary shares of no par value for the six months ended 28 February 2019.
A dividend withholding tax of 20% or 7 cents per share will be applicable, resulting in a net dividend of 28 cents per share, unless the shareholder
concerned is exempt from paying dividend withholding tax or is entitled to a reduced rate in terms of an applicable double-tax agreement.
The issue share capital at the declaration date is 344 125 194 ordinary shares.
The income tax number of the Company is 9389007031.
Dates of importance:
Last day to trade in order to participate in the dividend Tuesday, 23 April 2019
Shares trade ex dividend Wednesday, 24 April 2019
Record date Friday, 26 April 2019
Payment date Monday, 29 April 2019
Share certificates may not dematerialised or rematerialiased between Wednesday, 24 April 2019, and Friday, 26 April 2019, both days inclusive.
Appreciation
We wish to thank our employees, Group executives, management, our Board as well as our strategic partners, stakeholders and business
partners for their loyalty and dedication in contributing to the success of the Group.
Dr Wallace Mgoqi Mr Howard Plaatjes
Independent Non-Executive Chairman Chief Executive Officer
Cape Town
1 April 2019
Directors
W Mgoqi (Chairman) *#; H Plaatjes (Chief Executive Officer); IT Bundo (Chief Financial Officer); AM Salie (Chief Investment Officer); V Govender
(Corporate Affairs Director); R Mosia*#; T T Hove*; A B Amod*#; S Rasethaba*#; D George*#; Advocate N A Ramatlhodi*# ; I Amod*#;
* Non-Executive
# Independent
Company secretary: Wazeer Moosa
Registered address: Quay 7, East Pier, V&A Waterfront, Cape Town 8001,
Email: Wazeer.moosa@ayotsl.com
Transfer secretaries: Link Market Services South Africa Proprietary Limited
13th Floor, 19 Ameshoff Street, Braamfontein, 2001
Auditors: BDO Cape Incorporated
6th Floor, 123 Hertzog Boulevard, Cape Town, 8001
(PO Box 2275, Cape Town, 8000)
Joint Sponsors: Vunani Proprietary Limited
151 Katherine Street, Vunani Office Park, Vunani House Sandown
Merchantec Capital
2nd Floor, North Block, Hyde Park Office Tower, Cnr 6th Rd & Jan Smuts Ave, Hyde Park
Date: 01/04/2019 04:30:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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