Net1 reduces the red ink in its third quarter
Contribution of the group’s SA business affected by the rand’s 24% decline since the start of the year
Financial services and technology group Net1 UEPS’s recent disposals have boosted its cash position to just above its R3.4bn market capitalisation.
The group announced in January it had agreed to sell South Korean payment processor KSNET for $237m.
Net1, which is optimistic about weathering the Covid-19 pandemic, said it had cash of $209m at the end of its third quarter to end-March.
However, it is facing costs related to the pandemic because it is unable to charge some banking fees in SA. Net1, which has its primary listing on the US’s Nasdaq and a secondary listing on the JSE, said it is prohibited from charging certain banking-related fees in SA, estimating it had forgone cash withdrawal fees of about R8.2m in March.
The group expects this to cost it R18m-R20m per month until it is allowed to charge customers for withdrawing cash from its ATM network.
The company improved its fundamental loss per share to US11c compared with a US62c loss for the same quarter in 2019. The contribution of the group’s SA business had been affected by a weakening rand, which has lost about 24% of its value since the start of the year.
On a call with investors on Wednesday, CEO Herman Kotzé said their cash position has recently been affected, partly by having to pay a $17.5m cancellation fee after deciding not to increase its stake in Liechtenstein-based Bank Frick in an effort to maintain its cash reserves during the Covid-19 crisis and focus on its African operations.
Net1 holds 35% of Bank Frick and said in October it would pay $46.4m to exercise its option to acquire an additional 35% stake in an effort to expand its fintech services.
Kotzé said the group intends to return some funds to shareholders through dividends once it has the resources to do so.
There are no plans for large mergers or acquisitions, Kotzé said, though the company is considering some small bolt-on deals.
“We completed a number of corporate disposals over the past few months, which leaves the company in a very strong and liquid position,” he said. “We also believe that there will be significant demand for our products once the operating restrictions are lifted.”
As the company aims to leave behind the legacy of its controversial Cash Paymaster Services subsidiary, now in business rescue, Kotzé recently told Business Day that the focus was growing its fintech business across Africa.
This month Net1 named Jabu Mabuza — one of SA’s business leaders, who started out as a taxi owner — as the chair in a board shake-up that includes Antony Ball, co-founder and chair of activist investor Value Capital Partners, as a board member; with Ali Mazanderani.
Value Capital is now the second-largest shareholder in the company with a nearly 13% stake.
Shares in Net1 remained unchanged in trading on Wednesday at R60.73.