It was another busy festive season for Sekunjalo Investment subsidiaries Ayo Technology Solutions and African Equity Empowerment Investments (AEEI). During December four important Sens announcements were issued by Ayo and three by AEEI. That’s in addition to a few results-related Sens statements from each of the listed entities.
December has been a special time of year for Ayo ever since it was listed on December 21 in 2017. That listing went largely unnoticed by the JSE community, either because they were caught up in festive distractions or because they were trying to calculate how much they had lost on their Steinhoff investments.
Over the next six years Ayo’s struggle to justify its initial valuation of R43 a share — underpinned by a R4.3bn injection from the Public Investment Corp (PIC) — became increasingly tough. The recently released results for the year to end-August 2023 highlight why even the current 50c share price might be difficult to justify. Losses of R644m and the depletion of its cash resources, which were down to just R190m in August 2023 from R1.1bn a year earlier, were part of the grim story.
The group referred to a variety of issues holding back its performance, including “continued negative publicity and ongoing banking challenges”. The auditors reviewing the results made the worrying remark that “a material uncertainty exists that may cast significant doubt on the company’s ability to continue as a going concern”.
Inevitably, things didn’t look much better at AEEI on the results front, given that until end-July 2023 it had held 49% of Ayo. But an upbeat outlook for AEEI was provided by the unbundling of Ayo and a strong-performing, wholly owned Premier Fishing. It helps that AEEI has resolved its long-running dispute with British Telecom with the sale of its 30% stake in British Telecom South Africa for a generous R290m.
So AEEI’s long-suffering minority shareholders might be a little disappointed about plans to buy them out and delist the company, particularly as the proposed buyout price is just R1.15 a share. That’s in line with the share price, but significantly below the approximate R900m one analyst estimates the company’s value to be.
But back to all those Sens statements. The most troubling one was the mid-December announcement of the JSE’s censure and fine imposed on former Ayo director Khalid Abdulla. The underlying matter was flagged some months ago but was put on hold when Abdulla appealed. The fine was reduced to R1.2m from R2m, but the censure that Abdulla failed to comply with JSE listing requirements was upheld.
The confirmed censure served to remind us all of the valuable performance management agreements cash-flush Ayo had put in place between December 2017 and February 2019 with little-known asset manager 3 Laws, in which Sekunjalo Investment Holdings (SIH) had an 85% stake. Given that Ayo’s ultimate controlling shareholder is SIH, the transactions were deemed to be between related parties and should have been disclosed to Ayo’s shareholders at the time.
Ayo has already been fined for the transgression of the listings requirements, but the JSE found that Abdulla, in his capacity as a director of Ayo, facilitated the payments to 3 Laws and deserved censure. And so the matter dragged on for several additional months while Abdulla challenged the finding.
Ayo now says it will take until end-June to finalise the [settlement] agreement
Days later another Sens statement reminded us that the settlement agreement between Ayo, the PIC and the Government Employees Pension Fund has not yet been finalised. This is the agreement that brought last year’s court battle to a dramatic halt. Ayo declared the terms of the agreement to be confidential until the JSE explained that it could not be held to be so and demanded the details of the potentially share-price-moving agreement be made public.
So far all that has been disclosed is the R620m payment made by Ayo to the PIC, which explains the considerable knock to Ayo’s cash resources during financial 2023. Still to be clarified are the details of changes to Ayo’s board and to its memorandum of incorporation. Ayo now says it will take until end-June to finalise the agreement.
On December 21 Ayo shareholders were reminded of the Competition Tribunal’s rejection of Sekunjalo’s anticompetitive charges against the banks that want to stop doing business with the group. Sekunjalo is waiting for the tribunal’s reasons to be given so that it can review the decision. Meanwhile the Competition Commission is — rather bizarrely given the tribunal’s and Competition Appeal Court’s decisions — continuing to investigate Sekunjalo’s initial complaint.
Perhaps the most worrying Sens announcement was kept for the new year. On the first business day of 2024 Ayo and AEEI shareholders were informed that the JSE will suspend the shares if the companies do not release their annual reports by January 31. Listed companies are required to release their reports within four months of the year-end; that deadline was December 31 for Ayo and AEEI, their year-end having been end-August.
Ironically, the suspension would complicate and probably delay AEEI’s plans to delist, so shareholders could expect some reasonably prompt action on that front. But perhaps not so much from Ayo, given its extremely delicate “going concern” status.
One thing is certain, December 2024 will be very different.
*The headline has been changed to reflect the fact that it is JSE-listed Ayo and AEEI, in which Sekunjalo has a stake, which have been put on notice. We apologise for any confusion this may have caused.
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