Ayo Technology Solutions, the listed technology company indirectly controlled by businessman Iqbal Survé, has ramped up its interim dividend despite incurring losses for the six-months to end-February.
The company announced via a Sens statement on Tuesday that it will increase its interim dividend by 86% to 65c per share for the period, amounting to a gross dividend of R223.6m. The majority of the dividend (R111.5m) will accrue to entities such as Ayo’s parent company, African Equity Empowerment Investments (AEEI), that is also indirectly controlled by Survé.
This determination to increase the dividend comes despite revenue falling 36% during the period and Ayo swinging into a pre-tax loss of R66m that translates to a loss per share of 30.1c.
The high dividend payout relative to profits means that over the 18 months to end-February Ayo paid cumulative dividends of R390m against cumulative losses after tax of R54.5m. Cash generation was negative over that period.
After paying the dividend for the current period in June, Ayo will have a projected cash balance of R2.4bn.
The Public Investment Corporation (PIC), which owns 29% of the company, has instituted legal proceedings to recover the R4.3bn it invested at the company’s initial public offering (IPO) in December 2017. The PIC was the only institution to invest at the time of the IPO.
From an operational perspective, the revenue decline of nearly R500m was due largely to the loss of a large client, according to Ayo. “Additionally, there were significant contracts with major customers in the managed service division that came to the end of their term and were not renewed in the financial period under review,” the company said.
While operating expenses declined, the company received lower finance income as interest rates fell to multi-decade lows at the direction of the Reserve Bank. The company incurred an adverse R62.4m charge in relation to bad debts, which also contributed to the swing from profit after tax of R124m in the prior corresponding period to the current R87.2m after-tax loss.
Independent Media, a company partially owned by Survé’s investment holding company Sekunjalo, quoted Ayo CEO Howard Plaatjes on Wednesday as expecting “strong potential” for the company in the second half of the year.
“Cash-flow challenges will test our companies and our businesses, but we have plans in place to diminish any circumstances arising out of this,” Plaatjes was quoted as saying.
After the reporting period, Ayo reached an agreement to acquire the entire issued share capital of Kathea Communication Solutions for an upfront consideration of R59.8m and an earn-out of R30m. The company distributes a range of audiovisual and video-conferencing solutions.
Ayo’s share price remained unchanged on Wednesday at R5.50, valuing the company R1.9bn, a far cry from the implied value of nearly R15bn at the time of its listing.
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