Separation expenses of about $9.6m paid to its former CEO and costs related to US government investigations were among the factors hitting Net1’s results in the quarter to end-June. The Generally Accepted Accounting Principles (GAAP) net income — the measure used by US listed companies — slumped 59%, to $11.3m for the three months. For the full year to end-June, GAAP net income had fallen 12%, to $73m.
New CEO Herman Kotze told analysts on Friday the past five months had been among the most turbulent in Net1 history.
"But despite the multiple challenges, we have successfully steadied the ship and put in place the mechanisms and structure to optimise and consolidate our businesses."
The "eventful" five months included the completion of the R2bn acquisition of a 15% interest in Cell C.
Kotze would not take any questions on the South African Social Security Agency (Sassa) or Net1 subsidiary Cash Paymaster Services (CPS), although he did thank former CEO and founder Serge Belamant.
"I wish him all the best and a peaceful retirement," said Kotze.
He provided a brief update on the handover process being monitored by the Constitutional Court and said that in June, Sassa had indicated a preference for the South African Post Office to become its paymaster. Kotze also referred to an expert panel that had been appointed by the court. "We have made ourselves available to the panel," which is due to submit a second report to the court in September.
Although the group’s bottom-line performance was weak, operations in SA turned in relatively strong results.
Increased use of CPS’s own ATMs helped to lift EasyPay Everywhere (EPE) transaction revenue and underpin margins in the three months to end-June. There was also an increase in low-margin transaction fees from card holders using the National Payment System as well as a modestly higher number of social-welfare grants distributed. CPS receives R16.44 for each monthly grant distributed.
Operating margins in SA were squeezed to 22% from 24% primarily due to annual salary increases to local employees.
For financial 2018, Kotze is expecting single-digit growth in revenue on an increase in Sassa beneficiary numbers and continued roll-out of Net1’s ATMs.
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