Our opinion on the current state of AYO

AYO is a black-owned technology company that was spun out of AEEI, which still holds 49.4% of the company. There were suspicious circumstances surrounding a massive R4.3bn investment by the Public Investment Corporation (PIC), which has been the subject of a court action by the PIC. This was finally settled on 31st March 2023, with AYO paying the PIC R619m. In effect, PIC pensioners appear to have been fleeced out of billions of rands. Ayo shares listed at R43, fell to as low as 105c, and are now around 305c after their latest results. Volumes traded are very thin, with many days where it does not trade at all. The company has 1,400 employees. What income it received appeared to be from interest on the remainder of the PIC loan.

Assessing this share is difficult, and it is considered potentially dangerous, especially after testimony from the former financial director, Siphiwe Nodwele, before the Mpati Commission, that the company is probably only worth R700m. Additionally, Naahied Gamieldien, previously the CFO, testified that she had to "...adjust margins to increase the company's profit," resulting in the profit doubling. In October 2019, the Financial Sector Conduct Authority (FSCA) conducted a raid on Surve's offices as part of an ongoing investigation. FNB has closed Ayo's bank accounts at Ayo Technology Solutions, citing reputational risk. Ayo is opposing this in a court action and, in an announcement on 30th April 2021, claims to have put in place "alternative third-party solutions" to enable the company to continue trading.

Investors are advised to stay well clear of this share until the uncertainties surrounding the Mpati Commission can be resolved. On 1st June 2021, British Telecom (BT) announced that it was severing ties with Sekunjalo due to "misrepresentation of facts" before the standing committee on finance in parliament. On 10th February 2022, the JSE announced that two Ayo directors had been barred from being directors of a listed company for five years because of failing to carry out their oversight duties, leading to incorrect, false, or misleading financial statements. On 22nd December 2022, the JSE published a censure of Ayo because of their involvement in related-party transactions without complying with the JSE rules on such transactions.

On 24th March 2023, the company announced that it had reached an undisclosed out-of-court settlement with the PIC, but it seems unlikely that the PIC will recover the R4.3bn it advanced to Ayo. In its results for the year to 31st August 2023, the company reported revenue up 28% and a headline loss per share of 176.46c compared with a loss of 60.25c in the previous year. The company said, "The Group’s gross profit percentage decreased from 22% in the prior year to 16% in the current year due to lower margins achieved in the managed services divisions as a result of fewer service contracts and more procurement of equipment distribution contracts in the public sector."

In a trading statement for six months to 29th February 2024, the company estimated that it would make a headline loss of between 25.21c and 41.03c compared with a loss of 79.13c in the previous period. On 6th September 2023, the JSE publicly censured a director of Ayo, Khalid Abdulla, for breaching the listing requirements and failing to exercise his fiduciary duties. He was fined R2m, and Ayo was fined R6.5m.

Given these circumstances, we cannot recommend this share to private investors due to concerns about the company's financial reporting and the overall uncertainty surrounding its operations and governance.