Merchant division lifts fintech Lesaka in Q2 results

Samuel Mungadze
By Samuel Mungadze, Africa editor
Johannesburg, 08 Feb 2023

Lesaka Technologies’ merchant unit delivered bumped-up growth across all products, in the second quarter of 2023, particularly in the card acquiring and credit businesses.

The dual-listed fintech company, today reporting its financial performance for the period, cites the merchant division as one of the shining stars in the group.

Lesaka offers cash management solutions, growth capital, card acquiring, bill payment technologies and value-added services to formal and informal retail merchants, as well as banking, lending and insurance solutions across Southern Africa.

In the quarter, the merchant division’s revenue was $120.6 million (R2.1 billion), up 849% compared with second quarter (Q2) 2022, and up 12% compared to first quarter 2023 on a constant currency basis.

It says the segment revenue increased due to the contribution from Connect, as well as strong ad hoc hardware sales. Lesaka took control of one of SA’s biggest fintech firms, Connect Group, in November 2021 for R3.7 billion.

Today, it notified investors the increase in the merchant unit’s adjusted EBITDA is primarily due to the inclusion of Connect. It delivered segment adjusted EBITDA of $9.1 million (R159.7 million) in the second quarter of 2023.

“Growth and momentum are expected to continue, driven by secular trends underpinning financial inclusion, cash management and digitisation for micro, small and medium enterprises in Southern Africa,” says Lesaka.

In the period, Lesaka’s other key metrics were strong, reporting revenue of $136.1 million (R2.4 billion), compared to $31.1 million (R478.5 million) for the quarter ended December 2021 (Q2 2022).

This, the company says, exceeded “the upper end of guidance by 4%, driven predominantly by the strong outperformance in the merchant division”.

Lesaka reported group adjusted EBITDA of $7.4 million (R130.4 million), which it says exceeds the upper end guidance of R123 million in Q2 2023 by 6%.

This represents a substantial improvement compared to the prior quarter (Q1 2023: R71.9 million) and compared to Q2 2022, when Lesaka reported a group adjusted EBITDA loss of R83.6 million.

Lesaka Group CEO Chris Meyer comments: “We are proud of our performance in the second quarter of our financial year. We have made significant progress in our transformation strategy − a process that commenced in earnest at the beginning of fiscal 2022.

“The merchant division has delivered excellent growth across all products, particularly in our card acquiring and credit businesses, in particular Kazang Pay and Kazang Advance.

“This result was achieved despite a challenging operating environment, with increased load-shedding impacting our customers’ ability to operate.

“The integration of the Connect Group has expanded our merchant business significantly, and continues to create new opportunities for the growth of our ecosystem in Southern Africa.”

Lesaka Southern Africa CEO Lincoln Mali says the second quarter was “a watershed moment” for the company.

“In reflecting on the work of the last 18 months, where we were very clear on how we planned to return the consumer business to profitability, we view this set of results as testament to the successful implementation of a rigorous plan that was based on the complete transformation and optimisation of our branch and distribution footprint, coupled with a clear focus on delivering financial inclusion to our customers across Southern Africa.”