Net1 expects more losses as it reinvests


Net1 expects more losses as it reinvests

Published Date: 2020-02-10 | Source: Stephen Gunnion | Author: Stephen Gunnion

Net1 expects more losses as it reinvests

The fintech and payments group will spend some of the proceeds from the sale of its Korean business to grow its SA and European operations.

Net 1 UEPS Technologies plans to step up investment in SA by mid-year and will also scale up its European business, with the aim of returning to profitability next year.

The fintech and payments business says it will reinvest some of the proceeds from the recent sale of Korean payments procession KSNET into its SA operations to drive growth in new accounts and financial services after losing the contract to run the social grant payment system to the SA Post Office.

Last month it sold Korean payments processor KSNET for $237 million (R3.42 billion) to Stonebridge Capital and Payletter. While KSNET was profitable and cash generative, Net1 said it operated autonomously and in a more developed economy and there was limited overlap with its other activities. It also didn't believe the company's intrinsic value was reflected in Net1's overall valuation. The disposal followed the sale of payroll transaction business FIHRST for $11.7 million.

Second-quarter revenue declined 4.3% to $74.1 million and it reported a reduced operating loss of $6.9 million, while adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) came in at negative $0.7 million. EBITDA is a measure of a company's overall financial performance and is used as an alternative to net income. Its loss per share shrank to 10c from 90c.

The group expects to report a full-year EBITDA loss of around $3 million, down from its previous guidance of $16 million. The decrease was primarily due to an $11 million reduction related to foregone contributions as a result of the sale of KSNET and FIHRST, as well as an $8 million negative impact related to the delayed liquidity injection in South Africa due to the timing of asset sales.

It expects to invest the capital in its SA operations during the fourth quarter of the year and will also start scaling up its new initiatives in Europe. Chief financial officer Alex Smith said the group expected to return to positive EBITDA in its 2021 financial year.

Its shares fell 2.5% to R63.84 in light trade on Friday.

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