Covid-19 has served as an accelerator for markets AYO operates in
AYO CFO Tatenda Bundo: Some of the group’s operating divisions have achieved exceptional growth.
AYO Technology Solutions has released its financial results for the year ended 31 August 2020, reporting a significant increase of 47.44 percent in revenue to R2.89 billion.
“I am very pleased that, despite all the disruptions and operating challenges we faced, both Covid-19 and non-Covid-19 related, we managed to achieve remarkable revenue growth,” says AYO CFO Tatenda Bundo. “Our team adapted rapidly to the sudden shift in working arrangements and communications and did an amazing job at ensuring business continuity.”
He says that some of the group’s operating divisions have achieved exceptional growth during the last year, particularly its unified communications, whose major challenge was getting sufficient stock to service their customers in a period where the entire world switched to remote working simultaneously. “The increased number of e-commerce transactions also led to higher demand for our cybersecurity services.”
Tatenda explains that the pandemic has served as an accelerator for market trends. For example, recent reports suggest that e-commerce is experiencing a 100 percent year-on-year growth in South Africa. “I think that technology-driven or based businesses are the ones that will drive the country’s economic recovery going forward and our results are a testimony to the significant growth in demand we can look forward to in the technology sector in the short and medium term.”
The negative impact of Covid-19
The group’s operating profits have been adversely affected by the constrained and volatile operating environment due to Covid-19 and lockdown. It also reported a decline in the prime lending rate, which had a “detrimental” effect on the interest income earned by the group on its cash holdings.
According to the results statement, AYO retains a strong cash balance and net asset value despite the devastating effects of the pandemic.
“Covid-19 has certainly impacted the way we work and the overall performance of the business in 2020 and we acknowledge both the favourable and the unfavourable effects on the group,” Tatenda says.
He adds that the group is proud of its positive cash balance: “We believe it is important for our ability to support and scale our subsidiaries and ensure long-term growth.”
However, this year, AYO’s interest income suffered a big blow. “Similarly, the devaluation of the rand since the start of the pandemic has put some pressure on the profitability of our divisions, which need to purchase goods from dollar-based economies and re-sell locally,” Tatenda says.
AYO’s underlying investments are rooted in sectors which have shown significant growth during the Covid-19 era, although global supply chains have interrupted much of 2020 and will continue to put pressure on operating efficiencies in the foreseeable future.
In the statement, the group said that it has set its sights on a number of significant transactions, among them, acquiring 100 percent of the issued share capital and outstanding shareholder claims in Kathea Communication Solutions, as well as a binding offer to acquire 60 percent of the issued share capital and outstanding shareholder claims in Disruptive Vision (trading as Kathea Energy).
“The latest macro-economic developments in South Africa have encouraged us to be even more aggressive in pursuing our investment strategy and focus on strategic acquisitions that can diversify and grow our portfolio, rather than keep cash in the bank, which has become relatively ‘expensive’,” Tatenda concludes.