It gives me great pleasure to present the AEEI Group’s financial results and performance for the year ending 31 August 2019. It is an honour to announce that not only did we achieve our strategic objectives but we also exceeded our growth targets for the financial year, which means we continue to create value for all our stakeholders. Initiatives throughout the Group have resulted in a set of excellent results and year-on-year growth, despite the trying market conditions.

South Africa’s Investor Rating, which is teetering on the edge of Ba1 (Non-Investment Grade as per Moody’s), opportunities and threats presented by the Fourth Industrial Revolution (4IR), anomalous weather conditions, lack of dependable basic services (electricity, transport, housing and water), significant increases in fuel and other consumables, and an upsurge in local social unrest have affected most companies, and AEEI is no exception.

Over the next few decades, most of the challenges mentioned above will be overcome and should transform the world into a more prosperous one for some. The combination of challenges together with political change and economic stability will create unprecedented challenges but also opportunities that we can only imagine and explore at the appropriate time.

Fortunately for AEEI, we recognised that these challenges may increasingly impact our business, hence we have been proactive by implementing mitigating plans to manage a sustainable business, create shareholder value and provide for additional employment-creating opportunities, while remaining mindful of our primary goals of transformation, sustainability and value creation for all stakeholders.

 

BY THE NUMBERS

Despite the challenges we faced during the 2019 financial year, AEEI has produced an admirable set of results:

Embracing “change” (which is defined as an act or process through which something becomes different and may cause transformation) is what makes AEEI such a resilient powerhouse. This year was an unduly turbulent year for AEEI and its subsidiaries, shareholders and stakeholders.

This financial year has seen excellent performances from our operational subsidiaries, all of which, in their own way, have contributed positively to our year-end results. We continue to build on our objectives as set out in our Vision 2020 Vision growth strategy, and I am proud to announce that with a few more months to go to the 2020 financial year-end, 99% of our strategy has already been met and in most instances exceeded.

PROGRESS ON VISION 2020 VISION

In 2015, we set out a growth strategy called Vision 2020 Vision, whereby we set out a roadmap to achieve financial and non-financial targets. The following objectives encompassed the Vision 2020 Vision:

• Double revenue: Revenue increased substantially by 257% over five years from R672m in 2015 to R2.4bn in 2019
• Increase normalised profit before tax: Increased substantially by 197% from R78.4m in 2015 to R233m in 2019
• Increase operational cash flow: Significantly increased by 180% from R51m in 2015 to R143m in 2019
• Increase NAV: Significantly increased by 696% from 163.75c in 2015 to 1 304.15c in 2019
• Double total assets: Total assets increased by 455% from R1.3bn in 2015 to R7.5bn in 2019
• Separate listing of the technology and food and fishing businesses: AEEI successfully listed both AYO Technology Solutions Ltd and Premier Fishing and Brands Ltd during 2017
• Regular payment of dividends to shareholders: Since 2015, regular interim and final dividends were paid to shareholders, amounting to over R230m since 2015
• Create employment: We increased our employee headcount from 618 in 2015 to more than 6 000 (direct and indirect employees) in 2019

WELCOME

On behalf of AEEI, I would like to congratulate all our new Board members on their appointments and especially our new non-executive chairperson, Mrs Aziza Amod, as we start to build momentum for our next growth phase.

On behalf of AEEI, I would also like to thank Reverend Dr Mehana for his astute custodianship as chairperson of the Board during the time he held this position and for the many years of guidance and service he provided to AEEI. We truly appreciated his input and guidance. We wish him success in his future endeavours.

WHAT SETS US APART

In the context of our business, we cannot afford to become complacent and at AEEI there is no room for mediocrity. We need to maintain our competitive market advantages and build on what sets us apart:

We have neared completion of our Vision 2020 Vision strategy and implementation plan defining clear short, – medium – and long-term business strategies.

We have a diversified business portfolio built on solid empowerment credentials and return on investment including:

• Level 1 B-BBEE accreditation with 73.55% black ownership and 39.39% black female ownership
• We are a B-BBEE partner of choice, with solid empowerment credentials and return on investment
• We have sustainable and organic growth while containing costs and driving efficiencies
• We have a strong brand, credentials and proven delivery with a successful track record and excellent business reputation
• We have a strong management team and experienced executives leading our business units with a hands-on approach in our business development strategy
• We have a strong risk-based management of investments, associates and a strategic investment portfolio with low debt and gearing ratios
• We have been rated as one of the JSE’s most transformed companies with a proven track record of financial performance, transformation, culture and results
• In 2019, AEEI was awarded the winner of the Top Most Empowerment Companies in the Generic and Financial Services Sectors as well as an award for Top Most Empowered Management.

SUSTAINABILITY

AEEI is aware of and appreciates the evolution of governance and that the Group’s core purpose, robust business model, performance, risks, opportunities and sustainable development are inseparable elements of the value-creation process.

At AEEI, we do not consider the 4IR to be the panacea to Africa’s problems. The 4IR is being heralded as the answer to the continent’s socio-economic woes, but understanding just what the 4IR is and what the positive and negative impacts the 4IR could have on the future have not yet been fully considered nor disclosed. Although the 4IR promises exciting potential for the continent, this potential should be seen through a responsible lens.

In my opinion, I see that technology, when conscientiously applied, can alleviate a broad range of our current, everyday problems. Indeed, the 4IR does not have the power and potential to raise global income levels and improve the quality of life for everyone, but how could it translate into business opportunities for AEEI and other companies actively participating in the 4IR, which would then filter down to employment creation and poverty alleviation – this is the imperative.

Like every responsible forward-thinking leader, I know that now is the time to further invest in people, skills development, innovative ideas and idea generators to provide AEEI with the best long-term returns.

It is quite an exhilarating time to be in business right now. The prospect for technology to change people’s lives for the better is extraordinary. Equally so, for doing better business.

The Earth’s natural resources are said to be running low. In a few years, our world as we know it will be different. This is a world where corporate responsibility is not just a nice-to-have but it is a business imperative. It is characterised by a strong social conscience, a sense of environmental responsibility, a focus on diversity and human rights and a recognition that business has an impact that goes well beyond the financial.

Refer to our online Sustainability Report

REVIEW OF OUR OPERATIONAL INVESTMENTS

FISHING AND BRANDS DIVISION

Premier Fishing and Brands Ltd (Premier or the Premier Group) performed well this year, with total revenue increasing by 17% from R491m to R574m. Cash generated from operations increased from R91m to R124m and property, plant and equipment increased by 31% from R310m to R408m. Premier increased its abalone stock holding to 161 tons from 144 tons in the prior year and continued to produce spat at an average monthly production of 200 000 animals per month. They continued to extract synergies from their acquisition of Talhado Fishing Enterprises (Pty) Ltd since the prior year which is reflected in their results.

This year, Premier achieved a Level 1 B-BBEE accreditation, ensuring that we remain focused on and committed to promoting B-BBEE.

Premier’s achievements:

• A proud Level 1 B-BBEE contributor
• The Board comprises 100% historically disadvantaged individuals
• Voting rights of black people is 74.16%
• Woman represent 35.41% of the Premier Board and executive management.

Another key area for this division is its intensified focus on sustainable fishing, with an awareness of the over-exploitation and depletion of fish stocks and the heightened increase in poaching of rare fish species.

For Premier to make an impact on biologically sustainable fishing, they are encouraging local and international collaboration, which is a tall ask. Sustainable fishing is vital for the survival of fish species as well as a source of food for all beings.

Premier is well positioned for growth over the next two years to further unlock shareholder value by exploring innovative fishing and production techniques, increasing their partnerships with outside quota holders, diversifying their product range and increasing production capacity at the abalone farm.

Read more about our fishing and brands division on the Abridged Integrated Report and also on the Responsible Investments Report.

TECHNOLOGY DIVISION

AYO Technology Solutions Ltd (AYO) delivered excellent organic and acquisitive revenue and profit because of the strong contributions from all the underlying operations and investments under its control.

AYO’s revenue increased to R1.6bn and profit before tax increased to R123m.

The AYO Group leverages its group-wide capabilities and strategic partnerships to deliver end-to-end digital and technology solutions to multiple industries in both the public and private sectors in South Africa as well as in Africa.

AYO continues to drive its planned acquisition strategy and has set its sights on obtaining new contracts with other multinational companies as it builds on its platforms driven by its “Go to Market” strategy. The AYO Group achieved noteworthy organic growth during the year as a result of a contract with a multinational company.

AYO continues to focus on its acquisition strategy in order to complement and augment its current businesses. Upon completion of certain acquisitions, AYO will be strongly positioned to win significant market share in its industry and to challenge and disrupt the ICT landscape

Read more about our technology division on the Abridged Integrated Report and also on the Responsible Investments Report.

EVENTS AND TOURISM DIVISION

espAfrika (Pty) Ltd (espAfrika), the owners of The Cape Town International Jazz Festival, hosted a successful 20th Jazz Festival, and the company contributed positively to all its stakeholders. The company continues to broaden its own portfolio, with the objective of increasing stakeholder value, thereby ensuring sustainability.

It has been a challenging year for the SA tourism industry which affected Tripos Travel (Pty) Ltd (Tripos), with a resulting impact on its revenue for the year. Tripos plans to mitigate this by acquiring small to medium-sized clientele and investing more resources into the growth of their leisure and inbound tourism departments.

Magic 828 (Pty) Ltd (Magic), the only radio station that has built and is communicating via its own broadcasting mast, is built on an advertising revenue model, split between agencies and direct advertising, which is driven primarily by listenership. This relationship of listenership versus advertising revenue is evident, with both increasing by more than 40%.

Read more about our Events and Tourism division on the Abridged Integrated Report and also on the Responsible Investments Report.

HEALTH AND BEAUTY DIVISION

The vision of Orleans Cosmetics (Pty) Ltd (Orleans) is to be a leading player in the prestige and masstige cosmetics industry in both the retail industry and in beauty salons. It intends to acquire another skincare range as well as further fragrance lines to complement its current skincare ranges.

AfriNat (Pty) Ltd (AfriNat) experienced a reduction in sales as a result of international tariff increases and local protests at ports. Strategic objectives in post-harvest and hygiene and sanitation have been put in place to address the underperformance. These are starting to show results while the company continues to engage with manufacturers to bolster its market presence and hopes to see the results in the new financial year.

Read more about our Health and Beauty division on the Abridged Integrated Report and also on the Responsible Investments Report.

RESEARCH AND DEVELOPMENT DIVISION

Genius Biotherapeutics (Genius) has made great strides with its research and development activities as it completed the construction of a clean-room facility. The research and development division is in the regulatory preparation and process validation phase to produce erythropoietin (EPO), a biosimilar drug used to treat anaemia caused by kidney disease. It is also completing developmental work on the dendritic cell vaccine (DCV) for cancer immunotherapy and communicable diseases such as extreme drug-resistant tuberculosis.

Further developmental activities are taking place at the Ribotech facility for a second biosimilar drug called Recogen, a granulocyte-colony stimulating factor (G-CSF) used for the treatment of neutropenia as well as the production of protein-based reagents used mainly in research laboratories and industrial applications.

Read more about our Research and Development division on the Abridged Integrated Report and also on the Responsible Investments Report.

REVIEW OF OUR STRATEGIC INVESTMENTS

The Group’s strategic investments consist of minority equity stakes in SAAB Grintek Defence (Pty) Ltd (25%+1) BT Communication Services South Africa (Pty) Ltd (30%) and Sygnia Ltd. AEEI is one of the largest external shareholders in Sygnia with 1.735% equity. During 2019, AEEI disposed of its 0.75% equity stake in Pioneer Foods Ltd.

These investments performed well with regular dividends being received annually.

Read more about our Strategic Investments division on the Abridged Integrated Report and also on the Responsible Investment Report.

OUR AWARDS

AEEI was awarded the following Empowerdex Awards in 2019:

• Winner: Most Empowered Company: Generic Codes
• Winner: Most Empowered Company: Management Control
• Second Runner – Up: Most Empowered Company: Women Ownership

Despite South Africa as well as global markets having faced a precipitous economic downturn, AEEI has remained positive and focused on delivering sustainable and positive shareholder value with steadfast determination. This has been achieved through a combination of sound strategic decisions and prudent control of working capital and capital allocation, without compromising long-term benefits while also investing in training and development, safety and risk management, all of which are non-negotiables.

We are satisfied that our Vision 2020 Vision strategy, underpinned by our resilient business model, high-performance culture and steadfast focus on the fundamentals of our businesses and business model, has created a steady platform for AEEI to continue its growth and value creation for all stakeholders.

SPECIAL THANKS

A special thank you goes to our more than 6 000 (direct and indirect) employees – team AEEI did their best to ensure the sustainability of our business with very little distraction from outside forces and remained focused.

During this challenging time for AEEI and its subsidiaries, it is our team, associates, partners and stakeholders that we graciously thank for their unwavering loyalty and support during one of the most turbulent years of late.

WE ARE READY FOR 2020

Enthusiastic about the next exciting phase of our growth, we are already considering our Vision 2025 Vision strategy, which will be robust yet flexible. This will surely build onto the existing solid business platform built to date.

The year 2020 is expected to be another challenging year; perhaps challenges of a different nature will face us – but whatever comes our way, I am confident that AEEI and the team are prepared and ready.

I look forward to the next phase of AEEI’s growth trajectory, and I am excited about developing and implementing our next five-year strategy to 2025.

Thank you.

Khalid Abdulla

Group chief executive officer