Diversified investment group African equity Empowerment Investments’ (AEEI) revenue increased by 21% to R2.8 billion in the year to August 31 mainly due to revenue improvement in the IT division and a robust 20% revenue increase from its fishing division.
However, a pre-tax loss of R1.7bn arose mostly because of losses from other sectors under the IT division, accounting adjustments for the reduction in the fair value of the investment in British Telecommunication Services South Africa, and a loss from the unbundling of its IT division – AYO Technology Solutions (AYO).
AEEI, however, continued to maintain a strong balance sheet, despite AYO’s unbundling, which represented about 65% of the group’s assets. Only 11 months of revenue from this division was included in AEEI’s results, as the unbundling took effect on July 31, 2023.
AEEI CEO Valentine Dzvova said it had been another year of challenges, some foreseen and others unexpected, but the group managed to increase revenue, which indicated a pleasing demand for their subsidiaries’ products.
It had also been a year where some tough decisions were made by AEEI’s board about how the group was positioned going forward.
“I am confident that with the backing and support of our board and shareholders, there will be a return to the kind of profits and outcomes that AEEI has been synonymous with over its many years in operation,” said Dzvova.
AYO’s unbundling and its new management’s rigorous interrogation of AYO’s results led to a delay in AEEI posting its annual results – the first time in its 22 years as a listed entity.
AEEI said it wished to dispel any “mischievous and somewhat malicious” contentions posted by some media that delays in posting AYO or AEEI’s results were due to anything other than the companies’ collective desire to get things 100% accurate before releasing.
As AEEI and AYO had posted their results before January 31, 2024, the JSE had lifted any threat of suspension.
AEEI maintained high liquidity levels over the past financial year by efficiently managing working capital, maximising operating efficiency, and delaying capital investments until the economy stabilises.
AEEI’s year was also marked by other major strategic decisions, such as the delisting of its subsidiary Premier Fishing and Brands (Premier) from the JSE.
Premier increased revenue by 20% from R475 million to R568m and pre-tax profit by 344% to R80m.
The acquisition of an additional 30% in Talhado Fishing Enterprises boosted the bottom line and saw Premier become the biggest squid operator in the country.
Also, Global Command and Control Technologies (GC2T), historically a subsidiary of AYO, transitioned under the control of AEEI. Consequently, GC2T continued to be categorised within the technology division.
GC2T marked its inaugural profitability with R2m pre-tax profit (2022: loss of R22m), from revenue of R96m (R45m) – year-on-year revenue grew by 113%.
Another key strategic decision in the past financial year included AEEI divesting its shares in British Telecommunication Services South Africa (BTSA) as the company concluded a settlement agreement with AEEI.
This agreement resulted in the repurchase of Kilomix’s 30% share in BTSA, and the transaction was completed on December 28, 2023. The agreement brought closure to the arbitration process between AEEI and BTSA.
Following the unbundling of AYO, AEEI also adopted an equity accounting approach for its investment in SGT Solutions (SGT), wherein AEEI holds a 60% ownership interest.
SGT maintained revenue at R346m year-on-year. However, there was a slight 4.3% reduction in pre-tax profit to R22m (R23m).
AEEI’s Health and Beauty division led by Orleans Cosmetics managed to increase revenue by 12% to R38m.
Securing the distribution rights for locally produced beauty products contributed significantly to this revenue increase. Orleans’ pre-tax loss improved to R0.8m from a R1.1m loss a year before.
AEEI subsidiary Afrinat, which specialises in organic and sustainable mainly fertiliser products, had a solid year.
EspAfrika, under AEEI’s Events and Tourism division, was unable to stage the Cape Town International Jazz Festival in 2023, but did secure other events that generated some revenue, an increase on the previous year. Plans were being finalised for a staging in 2024.
AEEI’s research and development – biotherapeutics division secured its IP in critical markets until 2038, but saw a standstill during this financial year as it awaited the conclusion of funding for human trials on its Generation 3 Dendritic Cell Vaccine.
The most significant strategic decision, however, was AEEI’s decision to delist, which was announced to the market late in 2023.
“Delisting will help mitigate excessive listing costs and allow AEEI to resolve current issues with greater expediency, a challenge that is difficult to surmount while adhering to JSE listing requirements,” said Dzvova.
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