Those who endure, conquer

REFLECTIONS FROM THE CHIEF EXECUTIVE OFFICER

Dear Stakeholder,

I am honoured to have the opportunity to address you once again and reflect on yet another turbulent year. I recall writing my address to you at the end of 2020 with relief and renewed hope for speedy economic recovery, as we were easing out of the first COVID wave, the harsh lockdown restrictions were slowly lifting, and the warm summer weather set off a sense of return to much craved normality.

As we faced the second and third noxious waves and the realisation that this pandemic is going to be with us much longer than we initially thought, I contemplate the very obscure silver lining of these extremely adverse conditions.

When written in Chinese, the word crisis is composed of two characters. One represents danger and the other – opportunity. Looking back, I am proud of how, in the face of the greatest humanitarian and economic crisis of our times, AYO rose to the challenge and maximised the opportunities to speed up and solidify technology adoption in critical industry sectors, enable South Africa’s transition to the “new normal” and ultimately create lasting value for all our citizens. We integrated fragmented patient care systems to facilitate communication between various private and public health care institutions.

We provided the equipment and tools to make the shift to remote working and learning possible, which in turn, aids economic and social inclusivity. We ensured our retail and banking industries were adequately prepared to face the heightened cyber security risks brought about by the multiplied volume of online transactions.

However, as a second financial year rolls by, marred by intermittently rising infection rates, human tragedy and economic devastation, we begin to understand that this is not just a test of short term resilience, but also one of endurance. These are times that prompt businesses the world over to revisit their strategies, as the actions that brought initial success are unlikely to be as impactful in the prevalent conditions. These are times to swiftly re-evaluate the layout of the proverbial business chess board and make confident, decisive moves. AYO once again rose to the challenge.

Our ability to survive and thrive in such volatile environment is dependent on the resources we have available and how skilfully we apply these capitals, where they are most needed. We are fortunate to have a formidable arsenal at our disposal:

• Strong portfolio of well-established subsidiaries and investments;
• Sound and ethical governance structure;
• Robust financial controls;
• Agile business operations, and
• Talented, engaged and driven team.

Above all, however, we value the freedom and prospects afforded to us by our well capitalised liquid balance sheet.

In precarious market conditions, such as these current ones, balance sheet strength is far more important to the business’ long term survival than income statement returns. Hence, we pivoted our short view strategic focus from resource-consuming acquisitive growth to cash preservation mode, implementing tight operating capital controls and prudent liquidity management.

Of course, we remain an investment company at our core and still consider acquisitions that meet our investment criteria, inter alia, reasonable price proposition, compelling investment case and strategic rationale, clearly definable synergies and ease of integration with our existing portfolio, however it will not be our immediate priority in 2022. We acknowledge our investors’ trust in us to manage their capital responsibly amidst the uncertain economic climate and will not be lured by discounted acquisition opportunities, unless they clearly demonstrate the value to our portfolio.

An apt illustration of such an acquisition in 2021 was the Kathea Communications transaction, which was finalised halfway through the reporting period. This new investment not only strengthens our position in the unified communications and remote working tools market, by complimenting Headset Solutions’ market reach, but also positions us for growth and value creation in another promising niche – the agile workspace environment – which has seen tremendous uptake in the past year.

We are also cognisant of the potential impact of the current subdued economy on some of our subsidiaries. While it is true that the technology sector, in general, has been somewhat sheltered by the COVID-induced financial knocks (on the contrary, demand for many technology-based product and services has been amplified by the pandemic), supply chain disruptions and cash-strapped client base, reluctant to renew maturing contracts, have taken a toll on the cash flow of several operating units. In this regard, it is disheartening that a minority of our shareholders did not fully appreciate the value AYO’s short term financial assistance could add to the operations and voted against a resolution allowing us to provide such backing at the Annual General Meeting. Nonetheless, we continue to engage with these shareholders in constructive dialogue and trust we will find a favourable solution. 

Another defining challenge that diminished our control over the business chess board was the termination of our banking relationship with FNB, which led to the withdrawal of transactional facilities for the Company. 

I am proud and grateful of the swift response and action of our Board and team in the face of this stumbling hurdle and rapid defence strategies that were developed and implemented to warrant our business continuity. We focused on strengthening compliance assurance, financial controls, operating expenses and internal audit, which not only facilitated the implementation of short term measures to continue operations, but also reaffirmed our integrity to regulatory bodies and business partners. Zealously and proactively, we engaged with stakeholders and partners (old and new). Our open and honest communication approach is what mitigated the threat of this predicament on our fragile brand reputation.

Finally, we established a multi-disciplinary business development unit, mandated to explore synergies amongst operating divisions and identify opportunities to create new streams of revenue, as we see intra-Group collaboration as a true lever for unlocking long term value.

While I am proud of our achievements and resilience as a business in the past financial year, I believe that to thrive in the long term, we need to operate in a growing economy. Thus, to honour the trust of our shareholders and maximise our value-creating potential, the responsible course of action for the AYO Group going forward is to think globally and diversify the markets we operate in. We have commenced looking at expanding operations into other SADC countries in 2022 and harbour aspirations of further expansion into rest of Africa and abroad in the medium term. Such growth cannot be achieved without the right people and thus, talent management and succession planning will also be a central focal point for us in the upcoming year. Lastly, we recognise the value of active, amicable relationships with our various stakeholders and will continue to build on the foundations already laid, strengthening ties with shareholders, business partners, regulators and peer industry organisations.

In closing, I would like to extend my sincere appreciation and gratitude to our Chairman, Dr Wallace Mgoqi, and the Board for their continued guidance and support as we navigated the challenges of 2021. I also recognise and acknowledge the dedication and resilience of the executive team, our subsidiaries, partners, associates, shareholders and above all, our people. Your tenacity, stoicism and grit are what makes AYO the dynamic, prosperous group that it is, and I thank you!

I am excited for the next chapter of our assiduous journey and I believe we will continue to create and add value to everything we do.

Howard Plaatjes
Chief Executive Officer
17 December 2021