AYO managed to deliver robust performance and deliver on our commitment to creating value for all our stakeholders, despite the negative media sentiment we faced in this financial year.

Financial Performance

A major contract with large multi-national corporation commenced in July 2018, producing significant organic growth and increase in revenues. The acquisition of Sizwe and SGT Solutions in December 2018 and February 2019 respectively, also contributed strongly to the improved financial performance of the Group. Revenues from all our existing subsidiaries apart from Puleng, which had a significant once-off contract in the prior financial year, showed slight improvement despite the adverse economic conditions in the market place.

The multi-national corporate managed services contract has gross margins which are lower than the historical margins of 31%. As a result, the gross profit margin decreased from 31% to 28.5%. However, even with the lower margins, this contract generates substantially more revenues than we have seen in the past and thus, begets a significant increase in net profit. The inclusion of Sizwe in the Group’s financials further contributed to the drop in gross profit margin.

In the prior year there was a once off equity-settled share-based payment expense of R12 million, goodwill impairment of R5 million, listing costs of R7 million and a loss from the disposal of a subsidiary of R5 million resulting in other operating losses of R31 million. In the current year AYO incurred net fair value losses of R54 million from its investments, a fair value gain of R11 million from written NCI put options and a R5 million fair value loss on contingent consideration liabilities result in other operating losses of R45 million. The net fair value losses on investments are expected to be once off and we are expecting a decrease in other operating losses in the next financial year.

Operating expenses significantly increased in the current year mainly as a result of the inclusion of the operating expenses Sizwe, SGT Solutions and GCCT. Total operating expenses of R233 million have been included in respect of Sizwe, SGT Solutions and GCCT. In the current year the Group incurred once-off expenses of R3 million related to the acquisitions of subsidiaries, R7.8 million related to the interim audits for February 2018 and February 2019 and R11 million on legal costs.

Net finance income for the year has also increased mainly as a result of the interest on the R4.2 billion cash which was raised by AYO when listing on the JSE in December 2017.

The Group incurred an effective tax rate of 32% for the 2019 financial year. The Group takes its tax responsibilities seriously and is committed to continuously comply with all applicable tax regulations.

Financial Position

The financial position of the Group displays substantial improvement compared to last year with the incorporation of Sizwe and SGT Solutions.

Property, plant and equipment, goodwill and intangible assets increased by R254 million to R314 million as a result of the acquisition of Sizwe and SGT Solutions.

AYO acquired a 32% shareholding in Bambelela. Bambelela holds a 50% shareholding in Vunani Limited a diversified financial services group a 9.3% shareholding in 4 Plus a company with interests in digital media, artificial intelligence, software development and telecommunications. These investments have been disclosed at fair value of R25 million.

Current assets increased by R506 million to R796 million as a result of additional inventory balances and trade receivables balances from Sizwe and SGT Solutions.

Non-current liabilities are comprised of contingent liabilities which arose from the acquisition of Sizwe and SGT Solutions. The contingent consideration arrangements require AYO to pay the former owners of Sizwe and SGT Solutions for achieving specific earn-out targets for the 2020 and 2021 financial years.

Current liabilities increased by R392 million to R593 million as a result of additional trade payable balances and finance lease payable balances from Sizwe and SGT Solutions.

Cash Flow Overview

Total cash generated from operations before working capital changes increased to R41 million from R4 million in the prior year as a result of the strong operational performance and acquisitions as outlined above.

The tax paid increased to R118 million as a result of the increase in profitability of the Group.

Interest income is from interest earned from cash at bank.

Net capital expenditure was R36 million in the current year, which is mainly comprised of expenditure incurred in the development of the Group’s intangible assets and acquisition of property, plant and equipment.

There was a R112 million net spend on business combinations in line with the Group’s growth strategy.

The Group paid a maiden interim dividend of 35 cents per share in the year under review. The Board of AYO has approved a final dividend of 16 cents per share for the year ended 31 August 2019.