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AYO TECHNOLOGY SOLUTIONS LIMITED - Unaudited Interim Results for the Six Months Ended 28 February 2019 and Dividend Declaration

Release Date: 01/04/2019 16:30
Code(s): AYO     PDF:  
 
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Unaudited Interim Results for the Six Months Ended 28 February 2019 and Dividend Declaration

AYO Technology Solutions Limited
(Incorporated in the Republic of South Africa)
Registration number 1996/014461/06
JSE share code: AYO
ISIN ZAE000252441
(“AYO” or the “Group” or the “Company”)

UNAUDITED INTERIM RESULTS FOR THE SIX MONTHS ENDED 28 FEBRUARY 2019 AND DIVIDEND DECLARATION

Highlights compared to the prior year interim period
- Revenue increased by 93% from R349 million to R675 million
- Profit before tax increased by 226% from R82 million to R267 million
- Earnings per share increased by 220% from 17.68 cents to 56.65 cents
- Headline earnings per share increased by 226% from 17.36 cents to 56.67 cents
- Assets grew by 16% from R4.5 billion to R5.2 billion
- Successfully completed the acquisition of a 55% shareholding in Sizwe Africa Proprietary Limited (“Sizwe”)
- Interim dividend of 35.00 cents per share

Company profile

AYO is one of the largest Broad-Based Black Economic Empowerment (“B-BBEE”) information and communications technology (“ICT”) company in South
Africa. AYO which has been in existence for more than 20 years was created from a desire to effect real change in South Africa and beyond its
borders and through a belief that the future will be shaped by technological solutions. We deliver end-to-end ICT solutions to multiple
industries in South Africa’s public and private sectors through strategic partnerships. These partnerships enable us to service customers across
the African continent, North America, Europe and Mauritius. AYO believes that real change and growth lies in empowering partnerships and through
empowered partnerships. These partnerships are born from acquisitions and forged through employees, partners and clients working together to gain
the competitive advantage that successful digital transformation can bring.

At 28 February 2019, the Group employed 1 400 people which grew from 250 people in 28 February 2018 and has over 500 clients, with operations located
in South Africa, Mauritius, East Africa and United Kingdom.

Group performance

The Group delivered a strong performance for the period with revenue increasing by 93% and profit before tax increasing by 226% from the prior
interim period.

The Group achieved significant organic growth during the interim period as a result of a contract with a multi-national company that commenced
in July 2018. Work on the contract is progressing very well, with positive feedback from the client and AYO expects to obtain new contracts with
other multi-national companies as it builds on its platforms driven by the “Go to Market” strategy.

Headline earnings per share ("HEPS") increased by 226% from 17.36 cents to 56.67 cents per share as a result of the strong trading performance
of the Group.


Acquisitions

Since listing, AYO has shown progress in delivering on the strategy presented in its Pre-listing Statement ("PLS"). AYO completed the acquisition
of a 55% shareholding in Zaloserve on 19 December 2018 for a consideration of R165 million after obtaining approval from the Competition
Commission. Zaloserve is an investment holding company that holds a 100% shareholding in Opiwize Proprietary Limited, which in turn holds a 100%
shareholding in Sizwe Africa IT Proprietary Limited (“Sizwe”). Sizwe offers various ICT services to its customers, including a focused spectrum
of physical infrastructure, metro and long-distance optic fibre, facility management, continuous energy supply, networking and security to hosting,
storage server processing, mobility, data centre, end-user computing and associated consumables. Sizwe has annual revenues in excess of R1 billion,
generates positive cash from operations in excess of R75 million and earnings before interest, tax, depreciation and amortisation (“EBITDA”) in
excess of R70 million.

On 9 February 2019, AYO concluded the acquisition of a 40% equity interest in SAAB Grintek Technologies Proprietary Limited, now known as SGT
Solutions Proprietary Limited (“SGT Solutions”) via a special purpose vehicle Mainstreet 1653 Proprietary Limited that in turn holds the entire
equity interest in SGT Solutions Proprietary Limited.

SGT Solutions is a turnkey solutions integrator specialising in the design, supply, deployment, commissioning and maintenance of multi - technology
telecommunication systems for mobile broadband and converged solutions, through partnerships with its customers and technology providers. SGT
Solutions specialises in integrated, leading-edge and comprehensive solutions across the entire spectrum of telecommunications. SGT Solutions has
been operating in South Africa for the past 14 years. SGT earned annual revenues in excess of R400 million in the past year and generates EBITDA
in excess of R40 million annually.

On 16 September 2018, AYO concluded the acquisition of a 32% shareholding in Bambelela Capital Proprietary Limited (“Bambelela”) (previously
Vunani Group Proprietary Limited). Bambelela holds a 50% shareholding in Vunani Limited a diversified financial services group. Bambelela generates
profits in excess of R40 million. On 28 September 2018, AYO subscribed for 261 343 070 cumulative, redeemable, non-participating, convertible
Class C preference shares of no par value in Bambelela for a consideration of R145 million.

AYO is in the process of finalising certain key projects and transactions and will make further announcements in due course.


CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
                                                                  Notes                  Unaudited                Unaudited                 Audited
                                                                                  six months ended         six months ended              year ended
                                                                                  28 February 2019         28 February 2018          31 August 2018
                                                                                             R’000                    R’000                   R’000
Revenue                                                                                    674 509                  348 672                 638 893
Cost of sales                                                                            (469 153)                (223 859)               (440 935)
Gross profit                                                                               205 356                  124 813                 197 958
Other income                                                                                 1 007                    3 452                   3 293
Other operating gains (losses)                                                                 324                        -                 (7 321)
Other operating expenses                                                                 (145 546)                 (64 936)               (195 297)
Equity-settled share-based payment expense                                                       -                 (11 809)                (11 809)
Warranty expense                                                                                 -                        -                 (4 239)
Goodwill impairment                                                                              -                        -                 (4 957)
Listing costs expensed                                                                           -                  (6 831)                 (6 831)
Fair value gains                                                                            18 217                        -                       -
Income from equity accounted investments                                                    33 578                        -                       -
Finance income                                                       6                     154 866                   38 220                 226 954
Finance costs                                                                              (1 091)                  (1 324)                 (1 754)
Profit before taxation                                                                     266 711                   81 585                 195 997
Taxation                                                                                  (52 931)                 (15 646)                (48 040)
Profit after taxation                                                                      213 780                   65 939                 147 957

Other comprehensive income
Items that may be reclassified subsequently to profit or loss:
Exchange differences on foreign operations                                                    (24)                      (5)                     (28)
Total comprehensive income for the year                                                    213 756                   65 934                  147 929

Profit after taxation attributable to:
Shareholders of AYO Technology Solutions Limited                                           194 959                   47 436                  144 286
Non-controlling interests                                                                   18 821                   18 503                    3 671
Total profit after taxation                                                                213 780                   65 939                  147 957

Total comprehensive income attributable to:
Shareholders of AYO Technology Solutions Limited                                           194 968                   47 431                  144 258
Non-controlling interests                                                                   18 821                   18 503                    3 671
Total comprehensive income                                                                 213 789                   65 934                  147 929

Earnings per share (cents)
- Basic                                                                                        56.65                  17.68                       47.20
- Diluted                                                                                      56.65                  17.68                       47.20



CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

                                                                                      Unaudited at             Unaudited at               Audited at
                                                                                  28 February 2019         28 February 2018           31 August 2018
                                                                                             R’000                    R’000                    R’000
Assets
Non-current assets                                                                         551     655               70 346                      72 782
Property, plant and equipment                                            1                  95     225                6 729                       7 169
Goodwill                                                                 2                  91     235               43 411                      35 248
Intangible assets                                                        2                  78     047               13 276                      17 743
Investments in joint venture                                                                        33                   33                          33
Investments                                                              3                 155     750                    -                           -
Investments in associates                                                4                  37     178                    -                           -
Loans to Group companies                                                                     2     107                4 780                       1 989
Loans receivable                                                         5                  82     000                    -                           -
Other financial assets                                                                       3     098                  747                       6 890
Finance lease receivables                                                                    2     039                    -                           -
Operating lease asset                                                                                -                   12                           -
Deferred tax                                                                                   4   943                1 358                       3 710

Current assets                                                                           4 666 195                4 512 711                4 598 350
Inventories                                                                                 92 478                   37 546                   12 378
Loans receivable                                                             5              17 002                        -                        -
Trade and other receivables                                                                525 190                  160 756                  183 222
Other financial assets                                                                      32 634                   71 449                   93 390
Finance lease receivables                                                                      418                        -                        -
Current tax receivable                                                                       1 408                      680                      662
Investments                                                                  3             418 169                        -                        -
Cash and cash equivalents                                                                3 578 896                4 242 280                4 308 698
Total assets                                                                                5 217 850             4 583 057                4 671 132

Equity and liabilities
Equity
Stated capital                                                                              4 444   410           4 444 410                4 444 410
Reserves                                                                                       11   785              11 805                   11 777
Retained income                                                                                84   220           (104 352)                  (7 501)
Attributable to shareholders of AYO                                                         4 540   415           4 351 863                4 448 686
Non-controlling interests                                                                     139   228              40 658                   20 294
Total equity                                                                                4 679   643           4 392 521                4 468 980

Liabilities
Non-current liabilities                                                                        29 249                31 738                           575
Loans from Group companies                                                                          -                29 748                             -
Other financial liabilities                                                                         -                    38                             -
Finance lease liabilities                                                                       9 419                 1 952                           575
Deferred income                                                                                19 830                     -                             -

Current liabilities                                                                           508 958                158   798                  201 577
Trade and other payables                                                                      363 538                128   710                  132 925
Loans from shareholder                                                                            884                  5   069                    5 001
Other financial liabilities                                                                       146                  8   268                    1 133
Finance lease liabilities                                                                      13 406                       -                       389
Operating lease liabilities                                                                        56                      356                       47
Deferred income                                                                                10 009                  1   213                        -
Current tax payable                                                                            65 670                  3   827                   41 636
Provisions                                                                                     38 368                  8   166                   15 390
Dividends payable                                                                              13 551                         -                       -
Bank overdraft                                                                                  3 330                  3   189                    5 056

Total liabilities                                                                             538 207                190 536                 202 152
Total equity and liabilities                                                                5 217 850              4 583 057               4 671 132



CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

                                                                                            Unaudited              Unaudited                 Audited
                                                                                     six months ended       six months ended              year ended
                                                                                     28 February 2019       28 February 2018          31 August 2018
                                                                                                R’000                  R’000                   R’000
Balance at the beginning of the period                                                      4 468 980                 67 091                  67 091
Total comprehensive income attributable to shareholders of AYO                                194 968                 47 431                 144 258
Total comprehensive income attributable to non-controlling interests                           18 821                 18 503                   3 671
Issue of shares                                                                                     -              4 260 280               4 260 280
Equity-settled share-based payment                                                                  -                 11 809                  11 809
Dividends paid to non-controlling interests                                                         -               (12 593)                (17 646)
Movement in non-controlling interest- disposal of subsidiary                                        -                      -                   (483)
Dividends paid to shareholders of AYO                                                       (103 237)                      -                       -
Non-controlling interests arising out of acquisition                                          100 114                      -                       -
Balance at the end of the period                                                            4 679 646              4 392 521               4 468 980

Comprising of
Stated capital                                                                              4 444   410            4 444 410               4 444 410
Reserves                                                                                       11   785               11 805                  11 777
Retained income                                                                                84   223            (104 352)                 (7 501)
Non-controlling interests                                                                     139   228               40 658                  20 294
Total equity                                                                                4 679   646            4 397 521               4 468 980


CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS


                                                                                            Unaudited              Unaudited                 Audited
                                                                                     six months ended       six months ended              year ended
                                                                                     28 February 2019       28 February 2018          31 August 2018
                                                                                                R’000                  R’000                   R’000

Cash generated from operations before working capital changes                                 276 704                 35 493                   3 521
Working capital changes                                                                     (184 689)               (29 393)                (62 451)
Cash generated from operations                                                               (92 015)                (6 100)                (58 930)
Finance income                                                                                141 875                 38 220                 215 243
Finance costs                                                                                 (1 034)                (1 324)                 (2 220)
Tax paid                                                                                     (27 217)               (12 152)                (16 735)
Net cash from operating activities                                                             21 609                 18 644                 137 358

Cash flows from investing activities
Net additions to property, plant and equipment                                                (5 374)                (1 119)                 (4 578)
Proceeds from sale of assets held for sale                                                          -                      -                     827
Net additions to intangible assets                                                            (5 099)                (1 148)                 (6 053)
Business combination                                                                         (67 371)                      -                       -
Net cash outflow on disposal of subsidiary                                                          -                      -                   (314)
Net outflow from purchases and disposals of financial assets                                (546 636)               (51 274)                (63 832)
Net advances or repayments from loans from Group companies                                    (4 010)                      -                   3 029
Net cash to investing activities                                                            (628 490)               (53 541)                (70 921)

Cash flows from financing activities
Net proceeds on share issue                                                                         -              4 260 280               4 260 280
Net proceeds or repayment of other financial liabilities and finance leases                     1 702                  1 208                 (5 967)
Net repayments or proceeds from loans from shareholder                                        (9 702)                  5 057                   6 950
Net repayment of loans from/ to group companies and staff loans                              (23 509)               (51 084)                (77 532)
Dividends paid                                                                               (89 686)               (12 593)                (17 646)
Net cash (to) from financing activities                                                     (121 195)              4 202 868               4 166 085

Total cash movement for the year                                                            (728 076)              4 167 971               4 232 522
Cash at the beginning of the period                                                         4 303 642                 71 120                  71 120
Total cash at the end of the year                                                           3 575 566              4 239 091               4 303 642



NOTES TO THE UNAUDITED INTERIM FINANCIAL STATEMENTS

Accounting policies and basis of preparation

The unaudited summarised consolidated financial statements for the six months ended 28 February 2019 have been prepared in accordance with the JSE
Limited Listings Requirements (“Listings Requirements”) for summary financial statements and the requirements of the Companies Act of South Africa,
2008 as amended, (“Companies Act”). The Listings Requirements require financial reports to be prepared in accordance with the framework concepts,
the measurement and recognition requirements of International Financial Reporting Standards (“IFRS”), the SAICA Financial Reporting Guides as issued
by the Accounting Practices Committee and Financial Reporting Pronouncements as issued by the Financial Reporting Standards Council and also that
they, as a minimum, contain the information required by IAS 34 ‘Interim Financial Reporting’. The accounting policies applied in the preparation of
the summarised consolidated financial statements are in terms of IFRS and are consistent with the accounting policies applied in the preparation of
the previous audited consolidated annual financial statements, except for the following accounting policies adopted during the current period.

The Group adopted the following new accounting policies during the current period:

IFRS 15 Revenue from Contracts with Customers (“IFRS 15”)

IFRS 15 replaces the previous revenue standard IAS 18 which was applied previously by the Group. All contracts within the Group have been assessed
against the new revenue standard and the application of IFRS 15 did not have a significant impact on the Group’s results or financial position.

IFRS 9 - Financial Instruments (“IFRS 9”)

IFRS 9 replaces the previous financial instrument recognition and measurement standard IAS 39 Financial Instruments: Recognition and Measurement.

The Group applied the standard retrospectively, however the Group has used the exemption not to restate comparative information for prior periods,
therefore the comparative information continues to be reported under IAS 39. The Group has made use of the practical expedients in the standard,
in particular the use of the provision matrix, which helps in measuring the loss allowance for short-term trade receivables.

On adoption date, the expected credit loss model did not result in a change in the IAS 39 allowances for trade receivables because of their
short-term nature. The expected credit loss model also did not result in an impairment for other financial assets. Therefore, there was no need to
adjust the retained earnings, financial assets and liabilities on 1 September 2018.

The application of IFRS 9 has not resulted in the reclassification of any of the Group’s financial assets and liabilities.

The unaudited interim financial results were prepared under the supervision of the chief financial officer, Isaiah Tatenda Bundo and were not
reviewed or audited by the Groups external auditors, BDO Cape Incorporated.


Reporting entity

The consolidated interim financial statements for the six months ended 28 February 2019 comprises of the Company,its subsidiaries, associates
and joint venture.

Use of judgments and estimates
In preparing these summarised interim financial statements, management has made judgments, estimates and assumptions that affect the application of
the accounting policies and the reported amounts of assets and liabilities, income and expenses. Actual results may differ from these estimates.

The significant judgments made by management in applying the Group’s accounting policies and the key sources of estimation uncertainty are
consistent with those applied to the audited consolidated financial statements for the year ended 31 August 2018.

Measurement of fair values

The Group has an established control framework with respect to the measurement of fair values, the fair valuation calculations are performed by the
Group’s finance department and operational team on an annual basis. The Group’s finance department reports to the chief financial officer.

The valuation reports are approved by the investment committee in accordance with the Group’s reporting policies.

1. BUSINESS COMBINATIONS

AYO acquired the brand, customer list, workforce and related assets of Zaloserve for a total consideration of R165 million to enhance AYO’s product
basket and client offering as part of AYO’s “Go to Market” strategy. The purchase agreement had an effective date of acquisition of 1 November 2018,
however, in terms of IFRS 3 Business Combinations, the date of acquisition has been determined as 19 December 2018. The fair value of the acquired
brand, customer lists, workforce and assets are provisional upon the fair value determination of the brand, customer list and workforce. The
provisional fair values of the identifiable assets and liabilities are shown below:


Fair value of assets acquired, and liabilities assumed:

                                                                                              R’000

Property, plant and equipment                                                                88 169
Intangible assets                                                                            56 582
Other financial assets                                                                        6 018
Finance lease receivables                                                                     8 155
Inventories                                                                                  92 702
Trade and other receivables                                                                 166 888
Cash and cash equivalents                                                                    81 129
Deferred tax                                                                                  4 570
Finance lease liabilities                                                                  (24 826)
Deferred income                                                                            (26 439)
Trade and other payables                                                                  (239 933)
Current tax payable                                                                           (414)
Provisions                                                                                  (6 266)
Total identifiable net assets                                                               206 335
Non-controlling interests                                                                 (100 114)
Goodwill                                                                                     55 622
Total purchase consideration                                                                161 843

Consideration paid
Cash                                                                                        148 500
Contingent consideration                                                                     13 343
Total                                                                                       161 843


Non-controlling interest
Non-controlling interest, which is a present ownership interest, and entitles their holders to a proportionate share of the entity’s net assets in
the event of liquidation, is measured at the present ownership interests proportionate share of the acquiree’s identifiable net assets.

Contingent consideration
AYO is required to pay the previous shareholders of Zaloserve a cash amount of R5.5 million per year for the next 3 years provided that certain
profit after tax targets are met by Zaloserve.
The fair value of the contingent consideration arrangement was determined at acquisition date and included in the consideration. The target is
based on net profit after tax meeting certain thresholds. The payments are discounted at a rate of 15.78%.


                                                                                              R’000
Net cash outflow on acquisition date
Cash consideration paid                                                                     148 500
Cash acquired                                                                              (81 129)
Net cash paid                                                                                67 371



Goodwill
Goodwill recognised on acquisition relates to the expected growth and cost synergies which cannot be separately recognised as an intangible asset.

Revenue and profit or loss of Zaloserve and its subsidiaries

Revenue of R212 million and profit of R11 million of Zaloserve and its subsidiaries for two months and twelve days has been included in the Group’s
results since the date of acquisition.

2. GOODWILL AND INTANGIBLES

Reconciliation of Goodwill balance
                                                                                          Unaudited               Unaudited                  Audited
                                                                                   six months ended        six months ended               year ended
                                                                                   28 February 2019        28 February 2018           31 August 2018


Carrying amount at beginning of period                                                       35 248                  43 411                   43 411
Disposal of subsidiary                                                                             -                      -                  (3 206)
Acquisition of subsidiary                                                                    55 987                       -                        -
Impairment                                                                                       -                        -                  (4 957)
Carrying amount at the end of period                                                         91 235                  43 411                   35 248

Goodwill acquired through business combinations has been allocated to individual cash-generating units for impairment testing as follows:

Comprising:
Investment in    Health System Technologies Proprietary Limited                               2 157                    2 157                   2 157
Investment in    Software Tech Holdings Group Proprietary Limited                                 -                    3 784                       -
Investment in    Software Tech Holdings Subsidiaries                                          2 352                    6 731                   2 352
Investment in    Puleng Technologies Proprietary Limited                                     22 274                   22 274                  22 274
Investment in    Kalula Communications Proprietary Limited                                    8 465                    8 465                   8 465
Investment in    Zaloserve Proprietary Limited                                               55 987                        -                       -
                                                                                             91 235                   43 411                  35 248

The recoverable amount of goodwill has been determined based on a value-in-use calculation using cash flow projections from financial forecasts
approved by senior management covering a five-year period for each of the cash-generating units shown above. Cash flow projections take into
account past experience and external sources of information. The valuation method used is consistent with the prior year. There have been no
accumulated impairment losses recognised to date.

Intangibles
Included in intangibles is the fair value of the acquired brand, customer list and workforce recognised at the acquisition of Zaloserve as disclosed
in note 1.



3. INVESTMENTS

Investments comprises of:
                                                                                          Unaudited                Unaudited                 Audited
                                                                                at 28 February 2019      at 28 February 2018       at 31 August 2018
                                                                                              R’000                    R’000                   R’000

Cumulative preference shares in Bambelela Proprietary Limited                               149 576                           -                    -
Funds placed in 3 Laws Capital Proprietary Limited                                                -                           -               88 827
Funds placed in Oasis                                                                       418 169                           -                    -
Cadiz Life Investment Enterprise Development Fund                                             6 174                           -                6 890
Total                                                                                       573 919                                           95 717

Non-current assets                                                                          155 750                           -                6 890
Current assets                                                                              418 169                           -               88 827
Total                                                                                       573 919                           -               95 717

Bambelela Capital Proprietary Limited (“Bambelela”)
On 28 September 2018, AYO subscribed for 261 343 070 cumulative, redeemable, non-participating, convertible Class C preference shares of no par
value in Bambelela for a consideration of R145 million. Dividend income amounting to R4.5 million has been accrued for in the interim period.

3 Laws Capital Proprietary Limited Investment (“3 Laws”)
AYO placed an amount of R70 million with 3 Laws for during the 2018 financial year and a further R400 million for 3 months of the current reporting
period. AYO withdrew the funds placed with 3 Laws at the end of the reporting period. AYO earned a return of R8,4 million on the portfolio during
the current reporting period.

Oasis balanced Fund & Bond Fund (“Oasis”)
In line with AYO’s strategy to diversify its investments, it invested R100 million in the Oasis Bond Fund and R300 million in the Oasis Balanced
Fund on 21 December 2018. During the reporting period, the portfolio yielded a return of R18 million.



4. INVESTMENTS IN ASSOCIATES
Bambelela Capital Proprietary Limited (“Bambelela”)
On 28 September 2018, AYO purchased 32% of the issued shares in Bambelela. The 32% shareholding represents significant influence over the entity. The
investment has been accounted for as an investment in associate in line with IAS 28.

Mainstreet 1653 Proprietary Limited (“Mainstreet”)
On 9 February 2019, AYO purchased 40% of the issued shares in Mainstreet which holds 100% of the issued share of Saab Grintek Technologies
Proprietary Limited (“SGT”). The 40% shareholding represents significant influence over the entity. The investment in Mainstreet has been accounted for
as an investment in associate in line with IAS 28.


Income from associates:
The Group’s share of the profits from the above investments since acquisition amounted to R33.7 million.



5. LOANS RECEIVABLE

Comprises of:
                                                                                             Unaudited                         Unaudited                                Audited
                                                                                   at 28 February 2019               at 28 February 2018                      at 31 August 2018
                                                                                                 R’000                             R’000                                  R’000

Mainstreet 1653 Proprietary Limited                                                                60    000                                     -                                -
Global Command and Control Technologies Proprietary Limited                                        11    400                                     -                                -
Cortex Logic Proprietary Limited                                                                    8    460                                     -                                -
Chaaday Holdings Proprietary Limited                                                                3    501                                     -                                -
Independent Digital Lab Proprietary Limited                                                        10    847                                     -                                -
Headsetsolutions Africa Proprietary Limited                                                         4    794                                     -                                -
Total                                                                                              99    002                                     -                                -

Non-current assets                                                                                 82 000                                        -                                -
Current assets                                                                                     17 002                                        -                                -
Total                                                                                              99 002                                        -                                -


The loans with Mainstreet 1653 Proprietary Limited and Global Command and Control Technologies Proprietary Limited bear interest at prime +2% per
annum and are repayable on 1 March 2024.

The loans with Cortex Logic Proprietary Limited and Chaaday Holdings Proprietary Limited bear interest at prime +2% per annum and are
repayable on demand.

The loan with Independent Digital Lab Proprietary Limited bears interest at prime +2% per annum. 50% of the loan balance is repayable on 1 January
2020, with remaining balance payable on 1 January 2024.



6. INVESTMENT REVENUE
                                                                                             Unaudited                        Unaudited                                 Audited
                                                                                      six months ended                 six months ended                      for the year ended
                                                                                      28 February 2019                 28 February 2018                          31 August 2018

Bank                                                                                              150 197                             38 220                             226 488
Group loans                                                                                            94                                  -                                 466
Preference shares                                                                                   4 575                                  -                                   -
                                                                                                  154 866                             38 220                             226 954



7. HEADLINE EARNINGS

Determination of headline earnings
                                                                                            Unaudited                         Unaudited                                  Audited
                                                                                      six months ended                 six months ended                               year ended
                                                                                      28 February 2019                 28 February 2018                           31 August 2018
                                                                                                 R’000                            R’000                                    R’000

Earnings attributable to ordinary equity holders                                                  194 959                             47 436                             144 286
Adjusted for:
       Loss/(profit) on sale of property and equipment                                                 72                                (4)                                 (9)
       Loss on disposal of a subsidiary                                                                 -                                  -                               1 429
       Impairment loss                                                                                  -                                  -                               3 084
       Profit on sale of associate                                                                      -                              (852)                             (1 074)
Headline earnings                                                                                 195 031                             46 580                             147 716

Weighted average number of shares                                                          344 123 944                        268 269 657                            305 700 253

Headline earnings per share (cent)
       Basic                                                                                        56,67                              17,36                               48,32
       Diluted                                                                                      56,67                              17,36                               48,32



8. CONDENSED SEGMENTAL ANALYSIS


                                                                  Segmental revenue                                                 Segmental profit
                                                    Unaudited          Unaudited        Audited                       Unaudited              Unaudited                    Audited
                                             six months ended   six months ended     year ended                six months ended       six months ended                 year ended
                                             28 February 2019   28 February 2018 31 August 2018                28 February 2018       28 February 2018             31 August 2018
                                                        R’000              R’000          R’000                           R’000                 R’000                       R’000

Software and consulting                                32 574            36 848          73 739                          12   942                      16   725            24    514
Security                                              143 522           223 156         335 352                          54   463                      66   818           106    734
Unified communications                                 37 989            40 081          75 552                          13   635                      14   382            20    360
Health care                                            53 134            49 717         100 975                          19   219                      19   330            37    260
Managed services                                      410 363                 -          82 794                         108   169                      12   423            38    285
Total                                                 677 582           349 802         668 412                         208   428                     129   678           227    153
Less intersegmental sales                             (3 073)           (1 130)        (29 519)                                 -                             -                    -

Administration and support services                         -                 -               -                       (147 287)                      (73 180)           (245 351)
Equity settled share-based payment expense                  -                 -               -                               -                      (11 809)            (11 809)
Warranty expense                                            -                 -               -                               -                             -             (4 239)
Impairments                                                 -                 -               -                               -                             -             (4 957)
Fair value gains                                            -                 -               -                          18 217                             -                   -
Finance income                                              -                 -               -                         154 866                        38 220             226 954
Finance costs                                               -                 -               -                         (1 091)                       (1 324)             (1 754)
Income from Equity accounted investments                                                                                 33 578                             -                   -

Total revenue and profit before taxation              674 509           348 672         638 893                         266 711                        81 585             195 997


Segment profit represents the profit before tax earned by each segment without the allocation of central administration costs, fair value adjustments,
interest income and finance costs. This is the measure that is reported to the chief operating decision-maker for the purposes of assessing the
segment performance and resource allocation. The accounting policies of the reportable segments are the same as the Group's accounting policies.




                                                                                            Unaudited                         Unaudited                                 Audited
                                                                                  at 28 February 2019               at 28 February 2018                       at 31 August 2018
Segmental assets                                                                                R’000                             R’000                                   R’000

Software and consulting                                                                        24       049                           14   177                            20    719
Security                                                                                       62       324                          159   108                            73    793
Unified communications                                                                         24       996                           33   116                            22    304
Health care                                                                                    77       142                           68   083                            63    860
Managed services                                                                              461       385                                  -                           107    746
Head office                                                                                 4 563       011                     4 307      215                         4 379    000
Total segmental assets                                                                      5 212       907                     4 581      699                         4 667    442
Unallocated*                                                                                    4       943                         1      358                             3    710
Total consolidated assets                                                                   5 217       850                     4 583      057                         4 671    132

Segmental liabilities
Software and consulting                                                                         8       014                           19 504                               8    715
Security                                                                                       39       268                           96 461                              58    059
Unified communications                                                                         14       269                           16 618                              16    937
Health care                                                                                    26       287                           23 291                              16    898
Managed services                                                                               72       940                                -                              53    520
Head office                                                                                   377       879                           34 662                              48    023
Total consolidated liabilities                                                                538       207                          190 536                             202    152

*For the purposes of monitoring segment performances and resource allocations between segments all assets and liabilities are allocated to
reportable segments other than deferred tax assets and liabilities.
Included in segmental results is:


                                                     Depreciation and amortisation                              Additions to property, plant, equipment
                                                                                                                          and intangible assets
                                                  Unaudited            Unaudited                 Audited                 Unaudited         Unaudited           Audited
                                           six months ended     six months ended              year ended                        at                 at               at
                                           28 February 2019     28 February 2018          31 August 2018          28 February 2019 28 February 2018     31 August 2018
                                                      R’000                R’000                   R’000                     R’000              R’000            R’000
Software and consulting                                 399                  489                     985                       197                272              328
Security                                                270                  315                     465                       181                246              296
Unified communications                                  216                  230                     685                        16                 21              163
Health care                                             601                  853                   1 377                     5 473                533            4 730
Managed services                                      4 098                    -                       -                   145 671                  -                -
Head office*                                          2 038                    7                     389                     3 839                 44            5 173
Total                                                 7 622                1 894                   3 901                   155 377              1 116           10 690

*The head office performs an administrative function for all the segments in the Group.



Software and consulting

The software and consulting division focusses mostly on digital consulting engagements and transformation projects. Revenue for the division
decreased by 11%, from R37 million to R33 million as a result of reduced consulting work obtained in the current period. However, operating margins
remained consistent with those of the prior period.

Security solutions

The security solutions division is focused on offering security solutions to enterprises, with the key focus mainly on Identity and Access
Governance Management. Revenue decreased by 35% from R223 million to R144 million as a result of a contract that had reached its expiry date in the
current period. Operating profit decreased by 24% from R67 million to R54 million as a result of the decrease in revenue.

The software and consulting and security solutions divisions are focused on the financial services sector and the divisions are pursuing a larger pool of
clients as a result of their improved empowerment credentials.

Unified Communications

The unified communications division is a reseller of telecommunications and gaming equipment of globally recognised brands. Revenue decreased by 5%
from R40 million to R38 million as a result of reduced sales volumes of telecommunications equipment in the months of December and January. Operating
profit margins for the division remained constant even though there was a decrease in revenue due to improved cost controls.

Health care

The health care division provides software and support in the health care industry with clients ranging from the private sector to government. Revenue
for the division increased by 6% from R50 million to R53 million, with operating margins remaining consistent with those of the prior period.

Managed services

The managed services division provides network infrastructure and support services to enterprises. The division obtained a large contract with a
multi-national that commenced in July 2018 which resulted in significant revenue for the division in the current period. The Group also successfully
acquired Zaloserve as detailed above and the consolidation of Zaloserve resulted in significant additional revenues for the division.



9. FAIR VALUE INFORMATION

Fair value hierarchy

Financial assets and financial liabilities measured at fair value in the Statement of Financial Position are grouped into three levels of fair value
hierarchy. The three levels are defined based on the observability of significant inputs to the measurement as follows:

Level 1: Quoted unadjusted prices in active markets for identical assets and liabilities.

Level 2: Other techniques for all inputs which have a significant effect on the recorded fair value and are observable, either directly or indirectly
for the asset or liability.

Level 3: Techniques which use inputs which have a significant effect on the recorded fair value that are not based on observable market data. As at
28 February 2019, the Group held the following instruments measured at fair value:

2019
Financial instruments
                                                    Level 2               Level 3                       Total
                                                     R'000s                R'000s                      R'000s
Cumulative Preference Shares                              -               149 576                     149 576
Unlisted investments                                418 161                 6 937                     425 098

2018
                                                    Level 2               Level 3                       Total
                                                     R'000s                R'000s                      R'000s
Unlisted investments                                      -                 6 890                       6 890

Reconciliation of assets and liabilities measured at level 2 and level 3
2019
                                            Opening balance          Investment              Changes in Fair           Closing balance
                                                                                                       value
                                                     R'000s              R'000s                       R'000s                    R'000s
Level 2
Unlisted investments                                      -             400 000                       18 161                   418 161

Level 3
Unlisted investments                                  6 890                   -                            56                    6 946

2018
                                            Opening balance          Investment              Changes in Fair           Closing balance
                                                                                                       value
                                                     R'000s              R'000s                       R'000s                    R'000s
Level 3
Unlisted investments                                    749               6 141                             -                    6 890


Changes in fair value are recognised in profit or loss. Refer to fair value gains in the Groups Statement of Comprehensive income.



Events after reporting period

On 1 March 2019 AYO acquired a 24% equity interest in Global Command and Control Technologies Proprietary Limited (“GCCT”) for a consideration
of R3.6 million. GCCT supplies microwave and related services to telecommunication network operators (public & private) in South Africa. The company
offers full local radio frequency network planning, deployment, product support, field maintenance and logistic services. GCCT generates annual
revenues in excess of R150 million and profit before interest and tax in excess of R6 million annually.

On 19 March 2019, AYO signed an agreement with Bambelela and Vunani Capital Proprietary Limited (“Vunani Capital”) in which, AYO will be a 50%
shareholder, Bambelela a 30% shareholder and Vunani Capital a 20% shareholder in a special purpose vehicle which has been formed to invest in
disruptive financial services technology as part of its “Go to Market” strategy. AYO will provide a loan of up to R100 million to the special
purpose vehicle.



Prospects

The Group had annual historical revenues of R280 million which have since grown to about R675 million during the current six month period.

AYO continues to focus on its acquisition strategy in order to complement and augment the current businesses and enhance its vertical industry
“Go to Market” strategy.

AYO is currently pursing targets in three key focus areas, being disruptive IT platform services, digital transformation and specific industry
vertical expertise. AYO’s Digital Ecosystem will focus on these areas through, AYO Platforms, AYO Digital Intelligence and AYO Industries, including
expansion in the short term to AYO fintech.

AYO Platforms is focused on attracting disruptive platform businesses which will give customers the ability to source various data, network,
communications and security services through various consumption models including on-premise, hybrid and cloud.

AYO Digital Intelligence is building distinct areas of expertise including Internet of Things (IOT) Platforms, Big Data Analytics, Artificial
Intelligence (AI) and Business Process Innovation and Transformation skills. AYO is in advanced discussions with target companies who are
recognised leaders in this field.

AYO Industries is focused on attracting companies that have leading offerings and significant contracts in particular vertical industries. In the
short term, the company will be looking to add to its already comprehensive intellectual property in the health, mining, oil and gas industries with
additional competencies in financial services, service provider and public sector verticals.

On successful 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 that has been dominated by the same brands.
Through the above strategies, AYO’s product and service portfolio and Digital Ecosystem, it should be able to service a substantial customer base
and capture 5-8% of the South African market by 2022. The exciting growth prospects that these target businesses will enjoy within the AYO Digital
Ecosystem will have a compounding effect on the company’s organic growth.


Changes in the Board of directors (“Board”) and company secretary
Mr. Howard Plaatjes, Mrs. Vanessa Govender and Mr. Takudzwa Tanyaradzwa Hove were appointed as directors of the Company with effect from 20 December 2018.

Mr. Salim Young and Ms. Cherie Felicity Hendricks did not make themselves available for re-election to the board of directors at the Company’s annual
general meeting on 22 January 2019 and therefore resigned as directors of the Company with effect from 22 January 2019.
Ms. Naahied Gamieldien resigned as the acting Chief Executive Officer and the Chief Financial Officer of the Company with effect from 22 January 2019.
Mr. Howard Plaatjes was appointed as the Chief Executive Officer, Mr. Isaiah Tatenda Bundo was appointed as Director and Chief Financial Officer and
Mr. Abdul Malick Salie was appointed as Director and Chief Investment Officer of the company with effect from 22 January 2019.


The company secretary Ms. Rodanchia Nock resigned with effect from 21 December 2018 and Mr. Wazeer Moosa was appointed with effect from 1 January 2019
as the company secretary.

Dividends

DECLARATION OF CASH DIVIDEND
Notice is hereby given that an interim gross dividend of 35 cents(2018:0 cents) per share has been declared out of income reserves in respect of
ordinary shares of no par value for the six months ended 28 February 2019.

A dividend withholding tax of 20% or 7 cents per share will be applicable, resulting in a net dividend of 28 cents per share, unless the shareholder
concerned is exempt from paying dividend withholding tax or is entitled to a reduced rate in terms of an applicable double-tax agreement.

The issue share capital at the declaration date is 344 125 194 ordinary shares.

The income tax number of the Company is 9389007031.

Dates of importance:

Last day to trade in order to participate in the dividend                  Tuesday,   23   April   2019
Shares trade ex dividend                                                 Wednesday,   24   April   2019
Record date                                                                 Friday,   26   April   2019
Payment date                                                                Monday,   29   April   2019

Share certificates may not dematerialised or rematerialiased between Wednesday, 24 April 2019, and Friday, 26 April 2019, both days inclusive.

Appreciation

We wish to thank our employees, Group executives, management, our Board as well as our strategic partners, stakeholders and business
partners for their loyalty and dedication in contributing to the success of the Group.

Dr Wallace Mgoqi                                                                                   Mr Howard Plaatjes
Independent Non-Executive Chairman                                                                 Chief Executive Officer

Cape Town
1 April 2019

Directors
W Mgoqi (Chairman) *#; H Plaatjes (Chief Executive Officer); IT Bundo (Chief Financial Officer); AM Salie (Chief Investment Officer); V Govender
(Corporate Affairs Director); R Mosia*#; T T Hove*; A B Amod*#; S Rasethaba*#; D George*#; Advocate N A Ramatlhodi*# ; I Amod*#;
* Non-Executive
# Independent

Company secretary:          Wazeer Moosa

Registered address:         Quay 7, East Pier, V&A Waterfront, Cape Town 8001,

Email:                      Wazeer.moosa@ayotsl.com

Transfer secretaries:       Link Market Services South Africa Proprietary Limited
                            13th Floor, 19 Ameshoff Street, Braamfontein, 2001

Auditors:                   BDO Cape Incorporated
                            6th Floor, 123 Hertzog Boulevard, Cape Town, 8001
                            (PO Box 2275, Cape Town, 8000)



Joint Sponsors:             Vunani Proprietary Limited
                            151 Katherine Street, Vunani Office Park, Vunani House Sandown
                            Merchantec Capital
                            2nd Floor, North Block, Hyde Park Office Tower, Cnr 6th Rd & Jan Smuts Ave, Hyde Park

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