AYO Technology Solutions' half-year results show progress despite challenges

JSE-listed black-owned ICT company AYO Technology Solutions, which has received an offer from Sekunjalo Investments to acquire all its shares, said Friday its full-year results are expected to show a meaningful reduction in losses compared to the loss reported for the first half.

AYO’s results for the six months to February 28 showed a resilient performance under difficult conditions, and the company was on track with a clear path toward significantly reducing losses compared to the prior full year, its directors said Friday evening.

Revenue fell by 23% mainly due to the absence of one-time contracts from the previous year, as well as the unwinding of certain contracts that had contributed to prior-year revenue, but were not repeated.

On a positive note, the cost of sales fell 24%, in line with lower revenue. Improved inventory management and pricing strategies led to a 1.5% increase in gross profit margin, rising from 16.5% to 18%.

Operating expenses were reduced by 2%, reflecting a disciplined approach to cost control. This reduction would have been even greater if not for certain non-recurring expenses emanating from a VAT write-off of R6 million and impairment of some receivables of R13m.

Excluding these one-off costs, operating expenses showed a more substantial decline of 11%. When adjusting for these exceptional items, the operating loss improved significantly, demonstrating progress in underlying profitability. The interim dividend was passed.

Finance income decreased to R37m from R58m in the prior year, as cash reserves were utilised to support operations. The loss before tax, however, widened by 36%, largely due to higher credit losses on loans receivable and weaker performance from equity-accounted investments in the first half of the year compared to the same period last year.

“Despite these challenges, the focus on cost management and operational efficiency has positioned it for a stronger second half,” the directors said.

Revenue decreased by 23% to R78m from R1.02 billion in the prior corresponding financial period. The loss per share increased by 37% to 45.09 cents per share from 32.92 cents per share in the prior corresponding financial period.

The software and consulting services division, which focuses on providing scalable digital solutions to retailers, media groups and brand agencies in Africa and Europe, grew revenue by 21%, driven primarily by new customer acquisitions in Digital Matter.

While the division’s gross profit margin saw a slight decrease from 30% to 26%, it remains strong and at a sustainable level, directors said.

The Unified Communications division, which specializes in reselling services for a range of communication technologies, including telecommunications solutions, audio and video conferencing systems, and gaming equipment from leading international brands, reported an 18% decline in revenue to R245m, with a decline in the margin due to new products being introduced into the market, as well as the increased competition created by vendors.

The division serves as a distribution partner for renowned brands such as HP Poly, Jabra, Logitech, Yealink, and Konftel, among others.

The Healthcare division, which provides ICT solutions for the healthcare industry, increased revenue by 7% to R35m. The gross profit margin decreased slightly by 4%, but the margin remained healthy.

“Maintaining a strong revenue base through our core income streams and upholding excellent service levels remain essential strategies for ongoing growth and future expansion opportunities,” AYO directors said.

The Managed Services division, which delivers network infrastructure, support services, and integrated solutions, reported revenue falling to R477.78m from R665m, mostly due to a decline in Zaloserv revenue after several one-off contracts with government departments had not yet been replaced by similar-value agreements.

The Managed Services division pre-tax profit came to R6.38m, well up from the R16.82m loss reported on August 31, 2024, at the end of the previous financial year.

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