JOHANNESBURG – The board of JSE-listed AYO Technology Solutions has said although it was not pleased with the outcome of the JSE investigation resulting in public censure and a fine, it remained fully committed to adhering to the JSE’s listings requirements to promote investor confidence in the marketplace.
AYO is one of several listed companies that have been slapped with a fine and public censure by the JSE. However, and importantly in the tech firm's case, no fraud was perpetrated. The fine and censure were to do with the firm's results not complying with the International Financial Reporting Standards (IFRS).
“AYO accepts the JSE’s findings that the financial results did not comply with IFRS and that AYO failed to observe the highest standards of care in the dissemination of the financial information into the marketplace.
"These aforementioned items have in fact been remedied and AYO has fully co-operated with both the auditors and the JSE throughout this process.
“AYO’s board of directors understands that there is much room for improvement, and remains committed to putting additional procedures and processes in place going forward in order to disseminate financial information that is accurate and complete.
“Insofar as the unaudited 2018, 2019 interim results, and 2019 prelims containing errors and omissions are concerned, none of these errors were deliberate, fraudulent, or intentional,” the board said.
The JSE suggested that the financial team at AYO did not possess the requisite skills to produce financial information that would provide a fair presentation of AYO’s results to the market since its listing on the JSE in 2017. These comments referred specifically to the 2018 interim results and 2019 interim results.
Notably, interim results are generally unaudited and the JSE’s call to have AYO’s (and only AYO’s) interims audited, is unprecedented.
Among other companies that have received public censure and a fine from the JSE is EOH, which was slapped with the maximum fine of R7.5 million for failing to comply with listing requirements.
However, the JSE said that given EOH’s full co-operation and assistance in the JSE’s investigation, the current tough economic climate and the remedial actions undertaken by the board and in the interests of shareholders, it would suspend R2.5m of the fine for five years, on condition that the company was not found to be in breach of any other requirement.
EOH had admitted to about R1bn in fraudulent transactions with government departments, including overbilling and ghost contracts.
Tongaat Hulett was also slapped with a R7.5m fine and public censure by the JSE. Its financial information between 2011 and 2018, did not comply with IFRS and was incorrect, false and misleading in material aspects.
Tongaat, which temporally suspended trading in its shares in 2019, publicly admitted that its 2018 financial results were wrong, and overstated its assets by up to R4.5bn.
Tongaat’s admission that its 2018 financial results could not be trusted was reminiscent of the 2017 Steinhoff International mess, where the company lost 90 percent of its share price value after it emerged that it had inflated its books.
An independent report found that Steinhoff had overstated profits over several years in a $7.4 billion (R124bn according to current exchange rates) accounting fraud involving a small group of top executives and outsiders.
After former Steinhoff chief executive Markus Jooste resigned on December 5 and Steinhoff admitted to “accounting irregularities”, Steinhoff’s stock tumbled more than 90 percent – a loss of more than R200bn.
The JSE’s investigation into AYO, however, found that no fraud was perpetrated.
The AYO board said it had taken significant remedial steps to prevent a recurrence of any potential governance errors in its financial reporting.
The current board also admitted that it had been challenging being subjected to three simultaneous audits, an unprecedented move by the JSE.
AYO recently announced that it had grown its asset base to more than R6bn, despite the difficult environment the group had to operate in over the last 18 months.
The company’s latest financial statement, which got a clean audit after one of the most detailed and thorough investigations corporate South Africa has seen to date, also revealed that cash on hand was now close to R4bn and the company’s investments exceeded the R1bn mark.
The company has paid more than R200m in dividends over the past couple of years, continuing to deliver value to its shareholders, which includes the Public Investment Corporation. A maiden interim dividend of 35 cents per share, amounting to R120m, was paid to shareholders during the year under review.