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AYO ready for more acquisitions despite a tough 2021 financial year

Ayo Technology Solutions CEO Howard Plaatjes said the pandemic triggered reductions in IT spend, leading to a loss of some customers and non-renewal of maturing contracts, which affected the bottom line. Picture: Ian Landsberg/ African News Agency (ANA).

Ayo Technology Solutions CEO Howard Plaatjes said the pandemic triggered reductions in IT spend, leading to a loss of some customers and non-renewal of maturing contracts, which affected the bottom line. Picture: Ian Landsberg/ African News Agency (ANA).

Published Dec 1, 2021

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MUTED RESULTS

ICT technology investment group Ayo Technology Solutions posted muted results for the year to August 31 after facing many challenges, including to its reputation, and the effects of Covid-19 on the economy.

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Notwithstanding this, a final dividend of 30 cents per share was declared, which brought the total dividend for 2021 only marginally lower to 95c from 100c in 2020.

CEO Howard Plaatjes said the pandemic triggered reductions in IT spend, leading to a loss of some customers and non-renewal of maturing contracts, which affected the bottom line.

This was exacerbated by the material adverse impact of unwarranted media attention and hangover from the Mpati commission on the group’s reputation.

However, he said they had maintained a positive attitude, the balance sheet was strong and several subsidiaries with successful business track records of over 20 years or more continued to deliver on their mandates.

“To mitigate the challenges, including pressures of an interrupted supply chain, AYO has deployed an agile approach to its business. The challenges around operating in a Covid-19 epoch mean business as usual principles can no longer apply,” Plaatjes said.

“We have focused on making progress in the right direction and pivoting for success as each new situation arises. This will have short and long-term benefits as the ICT market continues to mature and influence every aspect of life,” he said.

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Revenue fell 41 percent to R1.7 billion, mainly due to the early termination of an ICT Master Service Agreement with a significant customer - this agreement had earned the group R418 million in revenue in the prior year.

The managed services division that generated some R700m in revenue in the prior year also lost several contracts either fully or in part, which further impacted revenue.

Revenue of R93m and pre-tax profits of R8m were consolidated from recently acquired Kathea Communications for the six months to August 31 2021. The acquisition contributed to a 109 percent increase in the group’s divisional revenue in the period.

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Kathea Communications distributes voice, audio visual, video conferencing and workspace management products solutions and services.

The tracking solutions division posted a 29 percent rise in revenue as it delivered on a significant continental contract.

The group received R60m compensation in the prior year for the cancellation of the MSA contract, which was recognised to that year’s profitability.

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Pre-tax profit fell from a profit of R104m to a pre-tax loss of R201m. Headline earnings per share swung into a loss of 64.37c per share from 8.02c.

The Covid-19 pandemic and the poor economic environment had harmed the forecast financial performance of some of the group’s investments, which led to increased expected credit loss allowance on loans advanced to some investee companies and trade debtors.

The total credit loss allowances recognised amounted to R84m compared to R60m in the prior year.

The group held cash of R2.2bn by financial year-end, this after the cash balance reduced to fund investment and working capital purposes.

The decrease in the cash balance resulted in interest income decreasing by 32 percent to R165m.

The decrease in revenue, interest income and increase in credit loss allowances resulted in the pre-tax loss.

Plaatjes said there had been delays in the supply chain and an increase in the prices for technological equipment due to disruption from the pandemic.

Government departments had reduced ICT spend as their focus was currently more on healthcare and public safety. Additionally, private sector companies had also reduced ICT spend as a way to reduce costs.

However, he said that as the economy started to recover from the impact of Covid-19, customer spend on ICT spend was also likely to increase.

In line with its go-to-market strategy, the group would continue to look for opportunities to acquire or partner with companies in disruptive technologies.

He said AYO was ready to make acquisitions and the group had several targets in mind. It would also continue to seek commercial engagement with one of its significant shareholders, the Public Investment Corporation, to ensure continued support for AYO’s vision, he said.

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