Net1’s value plunges after court ruling
The company’s shares have fallen to their lowest level in six years
Net1 lost a quarter of its market value on Thursday after warning of a “significant loss” for the second quarter of financial year 2019.
This follows a ruling by the high court in Pretoria on Tuesday, in which the court “reversed a portion” of an interim order made in November 2018. At the time, the court had directed the SA Social Security Agency (Sassa) to continue paying grants into the EasyPay Everywhere (EPE) accounts of certain recipients.
These were recipients who had previously chosen to receive their grants in their Net1-provided EPE accounts but had not submitted the required form from Sassa.
On Tuesday, the high court ruled that Sassa is not required to pay grants into those accounts, and that the agency can continue migrating those grants to SA Post Office accounts.
“The company is currently evaluating the options available to it, including an appeal against the judgment,” Net1 said.
Because Sassa had not paid grants for December, January and February into those EPE accounts, “this has had a material adverse impact on our financial results, and we expect to report a significant loss for the second quarter of fiscal 2019”.
The loss arose mainly from Net1’s deployment of infrastructure to service customers during that time, and a “substantial increase” in its allowances for “doubtful finance loans receivable on loans extended to EPE account holders”.
Net1 CEO Herman Kotzé said: “Our near-term focus is to ensure that we right-size our South African operations and get them to a break-even level by the fourth-quarter of 2019.
“We remain in a net-cash position, and our non-EPE-related businesses remain meaningful positive contributors to the group,” he said.
Net1’s shares plunged 24.7% to R47.85 after Thursday’s announcement, the worst level in six years.
In November 2018, the company swung to a quarterly loss as its contract with Sassa drew to an end.
The Nasdaq- and JSE-listed company reported a net loss of $5.1m for the three months to end-September from a profit of $19.72m a year before.
Net1’s subsidiary, Cash Paymaster Services, reported an 87% revenue decline due to the loss of the Sassa contract.