Loss of Sassa contract takes toll on Net 1’s SA operation

DURBAN – NET1 UEPS Technologies faced headwinds in South Africa during the second quarter to end December, negatively impacted by the loss of the South African Social Security Agency (Sassa) contract and a further loss from Cell C fair value adjustment.

Net1UEPS distributed social grants to more than 9million beneficiaries through its subsidiary, Cash Paymaster Services, but the contract expired at the end of September last year.

The group also had to contend with pre-tax fair value adjustment loss related to Cell C of $15.8million (R214.55m) due to lower industry comparable valuations.

Net1 UEPS acquired a 15 percent stake in Cell C for R2billion in 2017.

Chief executive Herman Kotzé said on Friday that this was a very difficult quarter for the company.

“Our loss for the quarter is primarily attributable to our rural South African businesses.

“Our other transaction-driven businesses continue to operate profitably and provide a meaningful source of earnings before interest, tax, depreciation and amortisation and free cash flow,” Kotzé said.

However, he maintained that Net1UEPS was satisfied with the performance of KSNET, DNI and their EasyPay financial switch and transaction processing business in South Africa.

“Our equity investments continued to perform in-line with expectations,” he said.

However, its South African transaction processing segment revenue was $21.9m in the second quarter, down by 66percent compared with the second quarter of last year, and was 64percent lower on a constant currency basis.

Looking ahead, the company is confident about its operations.

Currently, Kotzé said their primary focus was to immediately stem the losses in the South African financial inclusion operations, rightsize the businesses and get them to a break-even level by the end of this fiscal year.

“The board and management are squarely focused on reviewing all options available for the business in SA, and will provide updates when there are tangible actions to report,” he said. Net1UEPS shares closed flat at R45.49 on the JSE on Friday.


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