Market not convinced by AEEI profit announcement
Company says revenue for period to February increased 31% to R792m and taxed profit 246% to R546m
African Equity Empowerment Investments (AEEI) on Thursday posted a strong set of results, but the market is not convinced.
Revenue for the period to February 2019 reportedly increased 31%, from R604m to R792m and taxed profit rose 246%, from R158m to R546m. AEEI, part of businessman Iqbal Survé group of companies, said net asset value rose 8%, from R4.9bn to R5.3bn.
But Anthony Clark, independent analyst at Small Talk Daily Research, said “the results seem like pure fantasy”.
AEEI delayed publication of its results after former Ayo executives testified at commission of inquiry into Public Investment Corporation (PIC) governance issues that the technology company had misrepresented its earnings.
Former Ayo CEO Kevin Hardy testified that the company’s CFO was instructed to tamper with its financials.
In December 2017, the PIC controversially invested R4.3bn in Ayo for a 29% stake, allegedly at an inflated valuation.
Analysts had been curious about the valuation AEEI would place on its 49,4% stake in Ayo Technology Solutions in the light of the recent controversy, but the entity has been reported as a subsidiary, meaning AEEI is not obliged to disclose these numbers.
“If one had been living on the moon, one could easily accept the accounting conventions being used as standard for a company of this nature. However, anybody living in SA, having been aware of the PIC investigation and the underlying concerns regarding Ayo, will find these results astonishing in their bravado,” Clark said.
AEEI CEO Khalid Abdulla said “regarding the value of Ayo used, this is the consolidated figure”.
Clark said the market should put aside these results until the conclusion of the PIC investigation.
Ayo’s share price has fallen 75% from its high of R45 in December 2017.
In March, AEEI sold its entire stake in Pioneer Foods and plans to sell out of Quantum Food as well.
Of this, Abdulla said “the seven-year BEE locked-in period had expired, and we were made an offer for the Quantum shares, which was very amenable to AEEI”.
With Nick Hedley