Dual-listed Net1 UEPS Technologies saw revenue and net income drop in the three months to March, due to the dollar gaining ground against the rand and higher costs due to a social security tender.
The company says its revenue gained 10%, to $90.7 million, but fundamental earnings per share declined 18%, to $0.28. For the full year, Net1 expects fundamental earnings per share of $1.40.
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.
The listed group won a five-year bid, worth about R10 billion, to distribute social grants across SA's nine provinces. The company will provide the solution for payment of about 15 million grants to 10 million South Africans.
However, the win is being challenged by AllPay, a subsidiary of big four bank Absa, which is taking the South African Social Security Agency (SASSA) and Net1 UEPS Technologies unit Cash Paymaster Services to court later this month. AllPay argues the deal was not properly awarded and does not comply with the necessary regulations and laws.
Higher spending
Net1 says its third quarter results were impacted by the dollar gaining 12% against the rand, as well as SASSA implementation costs and cash bonuses paid as a result of its tender award.
“We commenced implementing our new SASSA contract during the third quarter of fiscal 2012 and incurred additional implementation and staff costs, of $6.8 million, which includes cash bonuses of $5.4 million to key executives and employees involved in the successful tender award,” it says in a statement.
CEO and chairman Serge Belamant says the company is pleased with the rollout and it started paying grants on 2 April. “The first phase of our implementation process involved issuing 2.5 million temporary MasterCard-branded debit cards to grant recipients and establishing the payment infrastructure to pay all beneficiaries that we did not pay under our old contract.”
Net1 previously had a contract to distribute grants in five of SA's nine provinces. The second phase of the contract will start in June and require all 9.2 million beneficiaries being reregistered, the company says.
During the third quarter of the year, Net1 incurred implementation-related capital expenditure of about $7 million, which mostly went on payment vehicles. Total capital expenditure is expected to come in at between $45 million and $50 million.
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