Investment committee report

“The underlying principles of sound investment should not alter from decade to decade, but the application of these principles must be adapted to significant changes in the financial mechanisms and climate”

Benjamin Graham

ROLE OF THE INVESTMENT COMMITTEE

The committee has an independent role, operating as an overseer and makes recommendations to the Board for its consideration and final approval. The committee does not assume the functions of management, which remain the responsibility of the executive directors, officers and other members of senior management.

The role of the committee is to assist the Board:

  • in considering and recommending investment opportunities in respect of acquisitions, listed securities and other corporate action in terms of the organisations risk appetite in a transparent manner and that sufficient evaluation has been afforded to such opportunities; and
  • to approve acquisitions and disposals in line with the limits of authority delegated to it and in line with the strategy determined by the Board.

The committee must perform all the functions as is necessary to fulfil its role as stated above including the following:

  • Review the investment strategy of the organisation
  • Set criteria and targets for investment in terms of the organisations risk appetite
  • Approve proposals for acquisition and sale of companies
  • Periodically review due diligence processes for acquisitions
  • Approve equity and other strategic investments
  • Regularly review the performance of the organisations investment portfolio
  • Report regularly and make recommendations to the Board for approval
  • Monitor and evaluate investment service providers
  • Perform other responsibilities regarding the organisations investment activities as the Board may from time to time assign to it

REPORT OF THE INVESTMENT COMMITTEE

AEEI’s investment decisions, across its entire portfolio are driven by the overall objective of creating and growing stakeholder value in a sustainable manner. This is achieved by ensuring all investments, acquisitions, organic growth projects or investment funding are subjected to review by the investment committee. The committee is well balanced, has legal, financial and strategic expertise.

Investments are adjudicated to ensure it has both a strategic fit with synergistic benefits to the current portfolio and that the investment provides an acceptable level of return with a reasonable payback period (based on the specific industry). Strategic road maps per sector invested have been developed within a five-year plan (Vision 2020 Vision) and each investment is adjudicated in line with its contribution to the growth plan mandated by the Board.

Strategic Investments

AEEI has become the partner of choice for multinationals seeking a B-BBEE partner who brings value through active participation in its businesses. Through AEEI’s non-controlling strategic investments, the Company was able to add value and influence the business process to create wealth and achieve transformation.

AEEI has a track record of being an empowerment partner of choice. AEEI invests in companies with the following characteristics:

  • Strong investment partners that are aligned with our strategic objectives
  • Leading brand
  • Defined growth strategy
  • Successful track record
  • Management expertise
  • High-growth sector

Through its investment portfolio AEEI continues to:

  • hold a portfolio of investments in businesses that are diversified;
  • acquire control of the majority of its operational investments;
  • acquire and maintain non-controlling equity in strategic investments;
  • add value, influence business processes, provide management expertise and synergies with existing investments;
  • provide capital investment to grow the business;
  • ensure above-market shareholder returns;
  • provide and maintain high-quality infrastructures and assets;
  • create sustainable wealth for all our stakeholders;
  • maintain sound corporate governance, business and ethical practices;
  • stimulate economic growth by assisting and adding value to SMMEs;
  • promote an entrepreneurial culture; and
  • be open and transparent in its reporting.

For the year under review, the committee concluded the following investments:

  • The acquisition of additional shares in Sygnia Ltd
  • 51% of Kalula Communications (Pty) Ltd
  • 57% of Puleng Technologies (Pty) Ltd
  • 90% of Orleans Cosmetics (Pty) Ltd

(King IVTM – Principles 4, 11, 12 and 16)

The following post-balance sheet investments were concluded:

  • The Group through its subsidiary Premier Fishing SA (Pty) Ltd entered into a binding Heads of Agreement with Talhado Fishing Enterprises (Pty) Ltd (Talhado) to acquire a 50.01% stake in their business. The effective date of the transaction is 30 November 2017 subject to certain conditions precedent. Talhado is the largest squid player in the South African market and this acquisition fits in line with the Group’s strategy to diversify through expanding organically and through acquisitions.
  • The Board of AEEI approved the proposed listing of its technology division on the main board of the JSE subject to various regulatory approvals in the short-term and subject to market conditions.
  • On 3 November 2017, AEEI acquired an additional 24.5% shares in espAfrika (Pty) Ltd from an existing shareholder by exercising its pre-emptive rights.

The committee is currently in negotiations around new opportunities with a significant increase in deal flow, that still have to be adjudicated and concluded if the investment criteria is satisfied. Prior to the conclusion of any new opportunities the investment committee ensures that negotiations:

  • are transparent;
  • indicative proposals are in line with the AEEI Group’s policy;
  • risks and risk appetite are evaluated;
  • a formal due diligence is conducted in terms of legal, technical and financial aspects;
  • agreements are reviewed by the legal team; and
  • the Board is appraised of any developments prior to conclusion.

For the year under review, the committee is satisfied that is has fulfilled all its statutory duties assigned by the Board. The chairman of the investment committee reports to the Board on the activities of the committee at Board meetings.