Resilience and persistence pays off
There is no delicate way to put this, but it has been a largely grim year. In the spirit of transparency (a hallmark of this Company and of my leadership style), I must confess that the business has taken some strain with unique challenges that have come our way. Many of these challenges – COVID-19 aside – we could not have foreseen. One of the largest obstacles facing the business is the prospect of having our transactional banking facilities withdrawn. Further to the unpredictability of the situation is the perplexity of it, given the complete lack of any transgression by AEEI.
It is now a matter of public record that AEEI has cojoined legal action with other affected entities to prevent South Africa’s banks from terminating its bank accounts. We believe in the fairness and reasonableness of our Courts in finding the truth and upholding the company’s Constitutional freedoms.
Evidence of this can be seen in the outcome of the Western Cape Equality Court’s interim interdict application, in which the Court held that the banks have, indeed, treated our Group differently. Further, the Court rejected Nedbank’s appeal against the order to re-open any closed bank accounts for the same reason. The main case will only be heard in 2023.
Due to the threat of the imminent closure of these vital trading mechanisms, our share price has been negatively affected and several mergers and acquisitions have been stymied. This has also been exacerbated by the vast amount of ongoing (and unwarranted) negative media attention toward AEEI and certain of its investments. Several pipeline deals have been postponed as it has now been the Group’s experience that, upon being acquired by the AEEI Group, these companies’ bank accounts have also been terminated.
For instance, we recently tried to acquire Italian Summer (as announced via the Stock Exchange News Service) but stopped short of concluding the deal as we could not risk Italian Summer and its operating subsidiary, Engineering Data Systems, losing their bank accounts. Such a move would devalue both of these companies on day one and would jeopardise hundreds of jobs. This is the reality of the situation we, as a Group, experience.
Despite the unconscionable hardships that the Company has endured, the unwavering support of our stakeholders, partners, suppliers, and especially our loyal employees, has been a highlight and a boon. Their trust and support are not misplaced, as AEEI has built a strong asset foundation over the years and has more than delivered on its promise, and will do so again in the years to come.
I am confident in making this statement because of the key asset that the Company has in its executives, who are endowed with the expertise, resilience, and flexibility to adapt and put in place the measures to mitigate obstacles and navigate these choppy waters. Supported by a strong Board and a loyal and encouraging employee base, we have put mechanisms in place to ensure the sustainability and stability of the Group.
The year in review
Our Group revenue of R2.33bn represents a marginal decrease of 0.24% compared to the prior year. Revenue improvement of 6% from the IT division counteracted the 17% reduction in revenue from the fishing division, which saw a revenue decline mainly due to the scarcity of squid supply. Overall, the revenue result is encouraging and affirms our strategy to hold a diversified portfolio.
As a result of the marginal decrease in revenue, pressure on gross margins and operating costs, the Group ended up with a basic loss per share which is 73% higher than the prior year. However, the Group has a strong balance sheet despite taking impairments on some investments. We believe this balance sheet stands us in good stead for future growth.
Technology
AYO Technology Solutions Ltd (AYO) strives to become a leading Africa-based technology group by pioneering smart living and working throughout the continent and beyond. AYO has developed a diverse investment portfolio that touches on all aspects of technology, from connectivity and communications to software development and cloud-based services. AYO believes that it has made good investments in companies that are involved in the telecommunications sector and network solutions sector (managed services division), as well as companies that are involved in the workplace connectivity sector (unified communications division).
Although there are ample positive opportunities in this division’s outlook, AYO has not escaped the impact of the pandemic, banking challenges and brand damage. Despite this, AYO managed to increase revenue by 4% from R1.7bn to R1.76bn. In the medium to long term, AYO expects a revival of demand for its products and services, which demand had been subdued due to clients spending less in the face of COVID-19 and the general harsh trading environment.
AYO remains committed to achieving its vision of being the leading empowered digital and technology service provider for business partners across the African continent. AYO has a desirable balance sheet, competent and highly-skilled employees, and a passionate and strong leadership team to deliver on its mission.
AYO continues to steadfastly keep the channels of participatory communication open with South Africa’s Public Investment Corporation (PIC), which holds shares in AYO.
Fishing and brands
Premier Fishing and Brands Ltd (Premier) performed relatively well once again, despite the scarcity of the squid resource. Revenue from squid declined by 50% compared to 2021. This resulted in overall revenue for Premier declining by 17%.
Sustainability in the fishing sector is of vital importance and speaking directly to this is Premier’s abalone farm, that not only farms abalone sustainably but has also created much-needed employment in the Gansbaai area. To date, the farm has already increased its production to well over 200 tons since the expansion started. The Fishing Rights Allocation Process (FRAP 2021) was a major success, which saw Premier being awarded 15-year fishing quotas. Export sales prices and demand are currently on an upward trend and management confidently hopes that this continues in the next financial year. The fishing and brands division is sound, and we are confident that the proposed delisting will ensure that AEEI will continue to secure maximum value from this investment.
AEEI in concert with other group companies holding shares in Premier Fishing and Brands Ltd (PFB), has embarked on a process to buy out the remaining shareholders in PFB and ultimately delist the company from the JSE. The need for compliance with JSE float requirements and the cost vs benefit of remaining listed have necessitated this development.
Events and Tourism
The events and tourism division has been particularly badly impacted by the fallout from the local and international COVID-19 restrictions.
It is anticipated that, with the removal of lockdown regulations, ‘Africa’s Grandest Gathering’ hosted by espAfrika, will take place in 2023 (again dependent on prevailing COVID-19 conditions).
Efforts to stage an event in 2022 were not fruitful due to the COVID-19 restrictions still being in place, and the time required to organise and raise sponsorships for an event of the magnitude of the Cape Town International Jazz Festival.
The lifting of COVID regulations and the ensuing increased travel and tourism, coupled with the right sizing of Tripos Travel, led to the business being slightly profitable in the current year up from a loss in the prior year. Provided that no further lockdowns occur, we anticipate that the business will continue on a positive trajectory.
The Group’s radio station investment, Magic828 (Pty) Ltd, continued to struggle to gain new revenue and a decision was made to curb further investment into the business by disposing of the business during the current financial year.
Research and development
No progress has been seen this year as the funding was not available to continue the research. We are actively engaging with potential partners to complete the Phase I/IIa human trial project to establish the safety and efficacy of the solution.
Genius has continued to register the intellectual property (IP) which can be referred to as a generation 3 dendritic cell vaccine in the international regions, including the USA, South America, China, Japan and Europe, which will be in effect at least till 2038 depending on the registration date. This protects the IP so that when the research is complete, we can enter the respective markets with the technology or at least protect it if similar IP is registered.
We are hopeful of gaining an international partner to complete this research project so that we can expand it to incorporate other cancers as well which is part of the medium-term plan.
Gratitude
The trials and tribulations of the last few years have, in fact, made us stronger and more determined to overcome the challenges that have befallen us. COVID-19 tested our mettle as well as the economic repercussions that continue to reverberate around the world, but it also taught us the value of digging deep, combining strengths, and building trust with one another through simple, open, and honest communication.
I am tremendously blessed and privileged to work with an array of exceptionally talented, professional, and caring human beings, from whom I learn every day, and who continue to surprise me with their dedication to performance and upholding the values of AEEI.
A simple thank you, therefore, seems too trite to express the enormous appreciation I have for every person with whom I have engaged with this year. Nevertheless, my sincere and humble gratitude must go to my Board, executives, colleagues, shareholders, our partners, mentors, and supporters.
Thank you.
VALENTINE DZVOVA
Chief executive officer
