Analysts have expressed concern that a full financial audit into Ayo Technologies will raise even more red flags about the business. 

Preliminary findings in a JSE-mandated audit by financial services group BDO have already resulted in Ayo announcing adjustments to its profits this week and commentators are concerned a deeper probe into its financial statements could raise even more questions.

Ayo said this week it had to deduct R7.8m from its posttax profit for the six months to end-February 2018, after the JSE asked it to look into past interim results.

Anthony Clark, independent analyst at Small Talk Daily said on Tuesday “the announcement from Ayo just raises more questions as to the underlying credibility of the accounts and a full-depth investigation and a full analysis should now be undertaken to prove to the market what is going on in the company.”

In December 2017, the PIC controversially invested R4.3bn in Ayo, acquiring a 29% stake at R43 a share. Some analysts and former executives say this implied a far higher valuation than Ayo was worth.

“There are so many red flags about this business,” Casparus Treurnicht, portfolio manager at Gryphon Asset Management, said.

“When the JSE goes so far as to ask a company to revise its financials statements, it doesn’t send a good message to the market,” Treurnicht said.

In April, the JSE asked that Ayo engage with its external auditors to obtain an audit opinion for its unaudited interim results for the six months to February 2018 and for the same period in 2019. This came after former executives claimed that Ayo had inflated numbers in its interim results.

Andre Visser, GM of issuer regulation at the JSE, said it is the first time that the JSE has asked for interim financial statements to be audited based on evidence given at the PIC inquiry.

“As part of the JSE’s ongoing monitoring of companies’ financial statements, it annually publishes statistics of companies which it has requested to revise/reinstate financial statements,” Visser said. 

Ayo said on Tuesday its board has reviewed the findings of the report by BDO, and has “identified certain corrections which arose as a result of incorrect application of judgment and estimates”.

The net effect of the “corrections” on profit attributable to shareholders was that profit increased from R47.4m to R48.2m.

While no change was made to revenue, Ayo adjusted certain costs higher, including the costs associated with its listing. However, this was offset by a R25.1m increase in investment revenue. 

But its taxation expense was raised by R7.9m. Profit after tax was consequently adjusted from R65.9m to R58.2m.

Ayo said in a statement late on Monday a full audit of its interim accounts “will provide more comfort to the JSE and the public”. It has therefore asked BDO to begin an audit of its 2018 interim results.

“Ayo is confident that all material discrepancies between the published accounts and this restated version of the interim accounts will ensure a more than satisfactory level of accuracy of the financial position of Ayo as at 28 February 2018,” it said.

Clark said it is a concern that BDO discovered “so many changes … at this early stage”.

He is concerned about what may be uncovered once a proper investigation of all the accounts has been done, bearing in mind the testimony at the PIC commission by previous CEOs, CFOs and the COO about members of Sekunjalo and AEEI tinkering with the numbers.

The corrections identified in the BDO report has not made the company’s audited financial statements as of end-August 2018 inaccurate, Ayo said.