African Equity Empowerment Investments Limited Profits Soar by 88% as NAV Increases by 25%

4 November 2015
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Salient features:

  • Revenue increased by 8% from R621m to R672m
  • Operating profit increased by 88% from R99m to R186m
  • Total assets increased by 14% from R1 178m to R1 345m
  • Basic earnings increased by 58% from R97m to R153m
  • Headline earnings increased by 94% from R79m to R153m
  • Net Asset Value (NAV) per share increased by 25% from 115.81 cents to 144.93 cents – Dividends declared increased by 25% from 2 cents to 2.5 cents

African Equity Empowerment Investments Limited (AEEI), a diversified investment and empowerment company today announced an 88% increase in operating profits from R99 million to R186 million as it released its financial year end results to 31 August 2015.

With its emphasis on operating efficiencies, improving margins and growth in its operational investments paying off handsomely, the AEEI Group also announced today that its revenue had increased by 8% from R621m to R672m. This increase in revenue reflects the further organic growth experienced in its underlying operations and its expansion into new markets.

“At the end of 2014 we were confident that we would show growth despite the challenges the economy faced. I am delighted that we could deliver on our expectations to the market and our shareholders,” says Mr Khalid Abdulla, chief executive officer of AEEI as he announced the Group’s results today.

“This year we introduced and implemented our VISION 2020 VISION strategy of organic growth and continuous reinvestment as well as strategic acquisitions with the objective of further building a solid platform and a sustainable high-growth Company for the future. This is reflected in the Group’s financial results for the year,” Abdulla added.

The Group’s operating profit jumped by 88% from R99m to R186m, which was particularly pleasing for Abdulla, as the Company reaped the benefits of implementing its growth strategy and sound strategic and business management.

AEEI’s strategic intent to increase its asset base is evident in the Group’s total assets, which increased by 14% from R1,178 billion to R1,345 billion.

Basic earnings increased by 58% from R97m to R153m, while the headline earnings increased by 94% from R79m to R153m. Headline earnings per share increased from 16.03 cents to 31.06 cents.

The Net Asset Value (NAV), one of the most important measures of performance in an investment Company, increased by 25% from R569m to R712m. This shows a constant growth path of the Group’s financial position year on year. The NAV per share increased from 115.81 cents to 144.93 cents.

An Operational Cash profit of approximately R103 million was achieved for the year under review.

Dividends declared increased by 25% from 2.0 cents to 2.5 cents per share.

Non-executive chairman, Professor Vukile Mehana, is delighted by AEEI’s strong performance and is confident that the Group is accomplishing its goals by growing strategically in its operations and its diversified investment portfolio. He added that the new strategy introduced this year has already borne fruit.

Abdulla stressed that all of the Group’s operations, especially the food and fishing and IT divisions contributed to the excellent results by exceeding their targets set for the year.

In a tough operating environment and at a time when investment markets have largely been bearish, AEEI has not only grown its bottom line profits but has also increased its underlying investment value.

Premier Fishing SA, the largest black-owned and controlled fishing company in South Africa, this year surpassed expectations by increasing its sales volumes and achieving better pricing and good catch rates, efficient vessel scheduling and utilisation, specifically in its south and west coast rock lobster, pelagic, squid and abalone sectors. This is reflected in the division’s increase in turnover by 11% from R315m to R349m, while the operating profit increased by 33% from R51m to R68m due to further efficiencies.

Recently, the strategic investment in Pioneer Food Group Limited (Pioneer Food) has been re- classified under the food and fishing division as management structured all food-related operations under one segment.

The investment in Pioneer Food increased from R189m to R318m for AEEI’s 0,75% stake.

The Technology Solutions Group’s revenue increased by 17% from R185m to R216m on the back of the successful implementation of the Hospital Information and Laboratory Systems (HIS) project by Health Systems Technology (HST) in 230 pathology laboratories by the end of September 2015. HST will now move to a significant portion of annuity-based income after the successful implementation of its contracts.

HST is a leading provider of Hospital Information and Laboratory Information Systems for the South African and African public sector. HST also spread its wings into Africa during the year under review and recently completed a project in Tanzania for hospital laboratories systems; this is seen as a stepping stone for further prospects into Africa.

The Technology Solutions Group includes Saratoga Software (Pty) Ltd, a software development company primarily focused on the financial industry. Included in the Saratoga Software Group is Digital Matter (Pty) Ltd which provides mobile data solutions; World Wide Creative (Pty) Ltd, a digital marketing agency and Afrozaar Consulting (Pty) Ltd which focuses on digital media and content redistribution.

The Technology Solutions Group grew its earnings and achieved excellent growth with its operating profits of R33m compared to R20m for the prior year.

The AEEI Events and Tourism division has consistently generated good profits with espAfrika (Pty) Ltd improving year on year after the implementation of their growth strategy. During the year under review, AEEI Events and Tourism increased its operating profit from R6.8m to R8.9m.

AEEI Events and Tourism manages and owns the rights to the Cape Town International Jazz Festival, ranking in the top 5 jazz festivals in the world, creating about 2 800 jobs annually. The Events and Tourism division contributed R500m to the GDP and R900m to the national GDP.

AEEI initially acquired an effective 25.10% indirect shareholding in a radio station, Magic 828 (Pty) Ltd. During July 2015, AEEI obtained an additional 15% direct shareholding in the company, resulting in control over the Board of Magic 828 (Pty) Ltd and the radio station went ‘live’ successfully on the AM/MW frequency 828 kHz on 1 October 2015.

The Healthcare division, comprising Sekpharma (Pty) Ltd and Wynberg Pharmaceuticals (Pty) Ltd, focuses on the production of a diverse range of organic products in the agriculture and food sectors.

Genius Biotherapeutics (Genius), formerly known as Bioclones (Pty) Ltd, is South Africa and Africa’s largest medical biotechnology company, with strategic interests in biogenetics and novel compounds. Medical protocols are being established and we are on the cusp of commencing with human clinical trials. The partnership with UCT is progressing well.

British Telecom Communications Services South Africa (BTSA) and Saab South Africa (SAAB) and Pioneer Food Group form the strategic investment arm of AEEI. The investment in BTSA is well positioned to grow consistently over the next few years.

Saab is the South African operation of Swedish multi-national Saab AB, specialising in civil security and defence. AEEI is in the final stages of increasing its shareholding in Saab due to it being recognised as a value-adding partner of choice.

Pioneer Food continues to bear fruit with exceptional results for the year under review.

The company’s VISION 2020 VISION strategy introduced earlier this year is set to build the Group into reaching its growth objectives, with key performance indicators which include, amongst others, doubling of revenue, total assets, increasing operating profit sustainability, increasing operational cash flow and NAV.

The consistent year on year display of excellent financial performance and the steady growth of the Company’s share price should send strong signals to the market that AEEI, with its diversified portfolio, strong BBBEE credentials and potential local and international growth, is a Company worth investing in.

Abdulla concludes by saying, “Looking ahead, AEEI now has a solid balance sheet and our cash flow has improved. Our business model is on a firm growth path and we continue to add value for our shareholders”.

“I am confident that because we have again built on our growth trajectory of profitability, our investment portfolio, strong cash flows and starting to consistently pay dividends to shareholders, we are well-positioned to further grow the business over the medium to long term,” concludes Abdulla.