AEEI’s crisis management softened impact of Covid-19, says CFO Jowayne van Wyk

Jowayne says that cost and margin management minimised a more acute negative set of interim results.

African Equity Empowerment Investments (AEEI) has reported stable results for the six months to 28 February 2021 despite a tough economic environment with a deepening global economic recession and the Covid-19 pandemic directly overlapping the reporting period.

CFO Jowayne van Wyk says that operating any business in this climate is not without considerable challenges, and the group’s subsidiaries performed well, while others performed reasonably. He makes special note of AEEI’s fishing division, which has performed “exceptionally well” with a 31 percent increase in revenue and a 62 percent increase in tax: “Prospects for this division are looking decidedly promising as the demand for the well-known brand and resources remain strong.”

The company’s corporate division has been streamlined and is based on risk management, which demonstrates its strategy to minimise corporate costs and increase its shareholder value. The corporate division, which includes stakes in BT Communication Services SA and Sygnia, reported increased revenue and a decrease in total overhead costs, and continues to deliver growth in value.

A decrease in revenue and profit before tax was experienced by AEEI’s technology subsidiary AYO Technology, which is largely driven by the declining overall trading environment, non-renewal of contracts, and a decrease in interest income. However, the acquisition of Kathea Communications, which came into effect on 1 March, is expected to mitigate against a reduction in revenue over the next six months.

While there is a slight decrease in the import and distribution of AEEI’s cosmetics brands as well as the manufacturing, sales and marketing of the group’s natural products, the agricultural sector has seen an uptake of this division’s agri-biostimulants.

AEEI’s events and tourism division has been hardest hit by the ban on national and international travel and the prohibition of large gatherings, which was a global trend over the past year.

“Exceptional cost and margin management across the group minimised a more acute negative set of interim results and softened the impact that the pandemic has had on our balance sheet,” Jowayne says. “While our challenge continues, the management team is already working hard to grow the group’s operating results to pre-pandemic levels.”

AEEI’s revenue and headline earnings declined and net assets consequently decreased slightly by nine percent.

Despite the anticipated declines in revenue, headline earnings and net asset value, the company was still able to declare an ordinary dividend of 30 cents per share, up from 10 cents per share in the prior year, due to its strong cash balances.

Looking ahead
Jowayne says that they need to align the business with the “new normal” across the AEEI Group, “rethink how we do business going forward, while speedily ensuring the integration of the fourth industrial revolution across the entire group”.

Despite areas of resilience within the group, he anticipates that the rest of 2021 will be even more challenging as the real effects of Covid-19 become apparent. “Although only a small percentage of the South African population received the Covid-19 vaccination, the third wave has already hit our shores,” Jowayne says.

He explains that AEEI’s response to the uncertainty of the consequences thereof is to focus on protecting its core strengths and investments through strategic cost savings and efficiencies, while also investing for future growth and managing its working capital more optimally. “We also see economies around the globe opening, although we are not sure if this will persist or reverse.”

Future investments
While some companies are choosing to hold back with new investments in the volatile environment that the events of 2020 created, AEEI is not taking the same approach. “We will assess each investment as it presents itself to benefit and ultimately focus on our core business to create shareholder value,” Jowayne says.

Due to the ongoing fallout of the pandemic, AEEI is currently focusing on sustaining its core assets and continues to explore acquisitions to augment the group’s diversified portfolio. “The AEEI group is well positioned to make high-quality acquisitions which will benefit the group over the long-term,” Jowayne says. “Our policy is to thoroughly study potential target companies so as not to put our balance sheet at risk, with our due diligence leading to a slower acquisition rate.”

He adds that the group is currently implementing its’ developed resilience plan to support its stakeholders through the continued economic crisis.

Closing remarks
Jowayne extends a heartfelt thank you to everyone across the group, the board of directors, the executive management team, AEEI’s loyal customers, shareholders, and other stakeholders. “I wish to especially highlight and thank our dedicated employees for their excellent work ethic, which contributed to the delivery of our results.”

He also conveys his deepest sympathies to all who lost their loved ones to Covid-19. “I hope that the vaccination process will be sped up to bring normality to society and that while this is in progress, we adhere to the Covid-19 protocols to protect each other from this malicious virus,” Jowayne says. “I am very optimistic that the South African economy will pick up and operate businesses on all levels to add value to the economy.”