Net1 slows on earnings

Dual-listed Net1 UEPS Technologies reported higher revenue for the year to June, but says earnings per share were lower than a year ago.

The company on Friday released its fourth quarter and year-end results. Revenue for the year was $343.4 million, a year-on-year increase of 22% in US dollars and 13% in constant currency.

However, net income was $2.6 million, compared with bottom line earnings of $39 million a year ago. Earnings per share declined from $0.84 to $0.06, says Net1.

Net1, which operates in SA, Republic of Korea, Ghana and Iraq, provides a universal electronic payment system, or UEPS, as an alternative payment system for the unbanked and under-banked populations of developing economies.

CEO and chairman Serge Belamant says although the year was challenging, it was also “transformational with the acquisition of KSNet and the commercialisation of some of our newer technologies”.

Net1 bought 98.7% of KSNet, a payment processing company in the Republic of Korea, for about R1.7 billion, last September. CFO Herman Kotze says the company expects KSNet and local payment processing company EasyPay to grow in the new financial year.

Belamant adds the company remains committed to its South African Social Security Agency (SASSA) contract, which was recently extended after the agency was unable to wrap up its latest procurement process in time to start a new contract in September.

For the fourth quarter, revenue was $97.4 million, an increase of 42% in US dollars and 28% in constant currency, compared with the same period a year ago. Earnings improved to a net gain of $6.8 million, compared with a net loss of $17 million in the same quarter last year.

Net1 says several factors impacted the comparability of the year-on-year final quarter results, including lower revenue and operating profit from its local SASSA contract, a favourable impact from the weaker dollar, improved revenue from is KSNet operation, although at lower margins, and goodwill impairment during the fourth quarter of 2010.

“We remain committed to SASSA and look forward to the outcome of the current tender process,” says Belamant. “In the meantime, we will focus on driving incremental long-term growth by building on our existing capabilities at KSNet and EasyPay, and scaling up our newer initiatives and technologies.”

Kotze adds, assuming the company wins the SASSA deal and its other prospects come to fruition, fundamental earnings per share should come in higher than $1.55 on a constant currency basis for 2012. For 2011, fundamental earnings per share were $1.53, compared with $2.01 a year ago.