REPORT 2019
Operational overviews of companies in the Group
Puleng Technologies has enjoyed another outstanding year. In its 15th year of
operation, the company has continued on its growth path despite the tough economic environment. Data security remain one of the top priorities for organisational clients and Puleng has managed to capture the confidence of business executives in terms of addressing associated requirements. Puleng specialises in complex projects that address enterprise data and user security risks. Besides providing the appropriate solutions, delivery of these projects is of equal importance to customers and Puleng’ hands-on involvement in delivering such projects has been the underlying factor behind the company’s performance.
Additionally, the traditional Infrastructure side of the business continues to thrive in a market that is turbulent and volatile. Puleng’s focus on niche, complex solutions where the provision of infrastructure is dependent upon its successful implementation, sees the company continuing to win business.
The net of these priorities sees Puleng continue to thrive as a financially successful company. During this particular year, in a climate where the business growth opportunity is scant, Puleng saw its profitability grow more than 30%. This is an achievement unequalled by any competitor in the sector.
Additionally, building on its reputation as a solutions provider and implementor, Puleng has become a de-facto brand in terms of affording thought leadership to its customers. Clients’ confidence in delivery and the team’s continually developing competency are particularly valuable in this time where ICT security needs evolve at a rapid pace. Puleng continues to enhance its solution portfolio, keeping current with threats their enterprise clients face daily, resulting in consultative engagements and valuable growth business opportunities.
Muhammed Bayet
Chief Executive Officer
Puleng Technologies
Health System Technologies (“HST”) had a positive year and managed to meet
its budgeted revenue targets with an 11% increase in revenue over 2018 in spite of an incredibly tough economic landscape. Our Nigerian operations gained some momentum during the period generating a small-scale influx of revenue and positive outlook for the short and medium-term.
A key achievement of the unit was the delivery of successful proof of concept on a Health Information Exchange for South Africa in June 2019. The exchange is a first of its kind technological advancement for the sector and will undoubtedly fuel our growth locally in the coming year. Together with several other innovations, it established impetus in our IP refresh cycle, which will stand HST in good stead going forward as we develop “proudly South African health IT products”.
Unfortunately, the negative publicity around the AYO Group has culminated in a hostile environment for HST to do business in. We had one direct casualty as an unequivocal consequence of the reputational damage, as HST lost the bid for the Health Information Exchange, despite our successful proof of concept delivery. Retention of existing customers is also becoming a challenge.
While these events are outside our control, they strongly affect our short and medium-term performance outlook. We seek growth opportunities outside South African borders to mitigate their effect with a focus in 2020 on our Nigerian operations as well as expansion into other African countries.
Gerrit Henning
Chief Executive Officer
Health System Technologies
Sizwe Africa IT Group had a superlative financial year despite challenges
including uncertain and subdued economic environment and the severe impact of AYO’s negative media sentiment. We recorded revenue growth of over 40%, 9% increase in gross profit and 32% growth in operating profit. Profit before tax ended strongly with an 11% increase year on year and 27.5% ahead of target.
The impact of AYO’s media exposure in the period has been severe, however, affecting our ability to extend and renew clients’ contracts as well as our ability to retain skilled resources. We recognise that this will continue to impact on our relationships and performance in the near future and are proactively seeking ways to mitigate the after effects.
The pipeline for the 2020 financial year is one of medium opportunities with a focus on renewing and extending current contracts. We are also in the final planning phase of our SOC and cloud solutions offering, which will be a crucial driver of growth and value creation in the short and medium-term.
Aggressive client acquisition and extending the service contracts of our current business partners will be our main priority going forward, as well as diversification of our portfolio through new product and services offering. We will continue to concentrate on maintaining our level 1 B-BBEE status and client partner certifications as critical enablers of growth for the Group.
Hanno Van Dyk
Chief Executive Officer
Sizwe Africa IT Group
2019 was a challenging year for Headset Solutions with revenues falling 7%
below target to R71.8 million vs expected R77 million. The underperformance is a direct consequence of the reputational damage suffered by the AYO Group during the reporting period. We lost our preferred supplier status with three large clients during the year and expect to continue feeling these adverse effects in the short-term.
However, we managed to successfully onboard two new product ranges, PolyCom Audio and Video and Jabra Audio and Video, in June/July 2019, which are expected to drive our performance in 2020. While we have only represented the brands for 2 months during this reporting period, we have recorded significant revenue increases with them already and hold an optimistic outlook.
Advancing our B-BBEE score will be one of Headset Solutions’ top priorities in the upcoming year as this will improve our client value proposition and grow business and revenues. We recognise black ownership and the associated procurement points as a major factor driving supplier purchase decisions within our target market and have identified potential changes within our ownership and management structure to address the issue.
With our two new ranges, stockholding has more than doubled during the reporting period from an average of R8 million to R18 million. This higher inventory levels have affected our gross profit margin in the short term but enabled us to better compete in the marketplace. We have managed to reduce inventory to R15.7 million at the end of August 2019 and will continue to drive our stockholding to an optimal level going forward.
Headset Solutions’ outlook for 2020 is cautiously optimistic, despite the challenges faced in the past financial year. Geographic expansion to the Middle East and India as well as a new go-to-market strategy and management programme are expected to drive significant revenue growth.
Tony Brown
Chief Executive Officer
Headset Solutions
Since joining the AYO Group in February 2019, SGT Solutions has been able to
contribute excellent profitability and cash generation for the Group. During the period the main operating divisions have been able to contain cost increases and improve project efficiencies, which has resulted in stellar financial results. The company contributed more than R260 million to the Group’s revenue and R23.5 million to operating profit. We are expecting to exceed our budgeted profit and cash flow for the period ending December 2019.
For the year ahead, the company has identified the following key focus areas with strongly positive prospects:
- Expansion of microwave technology services into preventative monitoring and specialised engineering services;
- Addition of microwave product screening and refurbishment capabilities to reduce customer expenses for new equipment;
- Provision of microwave installation kits;
- Technology upgrade in network monitoring equipment and network synchronisation equipment for existing customers in preparation for 5G networks;
- Introduction of cloud-based RAN solutions in the local market; and
- Expansion of SGT’s customer base for vandal-proof security containers for the protection of batteries and other equipment at cellular base stations.
Our overall outlook for 2020 is quite positive, despite very competitive and turbulent market conditions.
Dr Vincent Scholtz
Chief Executive Officer
SGT Solutions
In 2019 Afrozaar experienced revenue growth that was primarily driven by low
margin cloud services contacts. A subsidiary, Acacia Cloud Solutions, was disposed of, resulting in a gain on sale of R1.2 million and impacting our results positively.
Overall performance, excluding the sale of Acacia, was well ahead of budget and expectations due to the introduction of Amazon Web Services as a new service offering. Amazon Web Services has a gross profit of over R1 million and adds an explicit boost to the company’s profitability.
Cost of sales and operating costs were also kept in line with budget and contributed to the good financial results. Stability of staff costs and low staff turnover were recognised as significant factors in achieving the positive outcomes of 2019 and the company will continue to emphasise these in the next financial year.
The traditional publishing industry, where Afrozaar’s client base operates, is facing its challenges currently, which can potentially affect our performance in the short term. Thus, we are looking at funding and marketing partners to expand our publishing platform into the UK and other offshore markets. We are also cognisant of competitive risks within the industry locally and continue to invest in and further develop Publisher’s Toolbox to remain relevant and competitive.
Richard Cheary
Chief Executive Officer
Afrozaar
Digital Matter’s performance in the last financial year was in line with
budget and expectation. All main revenue streams continued to perform, despite a tough and competitive operating environment. Revenue was slightly under budget with income from new projects in the Inspection One space the main contributor. Spending at one of our largest mining, oil & gas clients was cut back significantly in the second half of the year due to internal cost-cutting, which negatively impacted our financial performance.
Despite these challenges, we managed to deliver profit before tax on budget, by aggressively managing costs across the board and further managing the cost of sales and operating expenses running under budget.
As per our strategic plan and budget, the first quarter of the new financial year will see us focus on:
- building resource capacity through our outsource agreement with Saratoga;
- re-contracting with a large mining, oil & gas client on their rail tracking project;
- closing new tracking opportunities; and
- managing operating costs.
Clients’ CAPEX cost-cutting, a volatile political environment and international economic uncertainty are expected to continue impacting Digital Matter’s performance in the short-term, but management is committed to delivering on our objectives despite these challenges.
Jeremy Williams
Managing Director
Digital Matter
In 2017 Global Command & Control Technologies (GCCT) adopted and
implemented a strategic market diversification strategy to reduce revenue dependence on local defence contracts. The strategy is bearing fruit with several export contracts secured, resulting in 76% of revenue being derived from defence exports and non-defence contracts currently. This revenue mix allows the company to fulfil its strategic and sovereign capability mandate while being able to grow into new market segments with existing products and services.
Major defence budget cuts have been affecting GCCT’s revenues and financial performance for the past two years and the diversified go-to market approach has been instrumental in turning this adverse trend around. The unit’s negative profitability of -R8.8 million for the second half of the year is a significant improvement on the R50 million loss experienced in the previous financial year and is indicative of reaching a break-even point or positive profit margin in the near future.
In the six months since its establishment as a self-standing business entity and joining the AYO Group, GCCT has been focusing on establishing its business environment and implementation of SAP Business 1 Management System and other business processes to allow the company to operate seamlessly. These implementations have now been fully or partially finalised and normal operations are established. Executions of ongoing contracts were a top priority during this transition period, and GCCT achieved over 90% customer deliveries across all contracts. However, continued defence budget volatility and liquidity problems at SOE clients resulted in a large debtors’ book, placing pressure on cash flow and profitability.
The new financial year will see GCCT spend further efforts on market diversification and pursuing more export opportunities. These are expected to bring the company to positive profitability and cash flow in 2020. The business is rapidly expanding into the African market and will see strong revenue growth going forward. Our close alignment with the South African government is also opening doors to additional government departments and the planned Border Management Agency. We have been successful in entering non defence market sectors including banking and civil aviation to date and will continue to drive expansion into segments such as mining and public health through partnerships and public-private initiatives.
Ratilal Rowji
Chief Executive Officer
Global Command & Control Technologies
