Net 1 UEPS says the rand's 16% value decline against the US dollar adversely affected its second quarter results.
However, stripping out foreign exchange movements, revenue gained 43%, to $137 million, while fundamental earnings per share leapt 163%, to $0.40, in the three months to December, it notes. Allowing for the currency effect, revenue only improved 23%.
Net 1 adds its revenue gain was thanks to growth in its Umoya Manje prepaid airtime offering, although this is at lower margins than the rest of its South African businesses. The group has also continued rolling out its financial services offering nationally, which led to higher revenue from its lending segment.
Chairman and CEO Serge Belamant says the past 15 months have been challenging for the company and its staff. This, he says, is "not because of our abilities, potential or execution, but rather because of the negative press coverage we have received for no justifiable reason".
While Belamant did not elaborate on the negative coverage, the group has been in the spotlight over its R10 billion contract with the South African Social Security Agency (SASSA), which was last year ruled invalid by the Constitutional Court, although that declaration was suspended "pending determination of a just and equitable remedy".
A hearing will kick off tomorrow to find a remedy. The deal, to handle the system for payments for about 15 million South Africans, is also under investigation by the US Securities and Exchange Commission and Department of Justice's Criminal Division to determine whether bribery was involved.
In its results commentary for the second quarter, Net 1 says it has now completed the SASSA implementation at a cost of around $21 million - or around R232 million - in the second quarter.
Belamant says he is "delighted that Net1 is once again demonstrating that it is a growth business". He says he wanted Net 1 to respond to the adverse publicity through its achievements and financial performance.
Net 1, which is listed on the Nasdaq and the JSE, also wrapped up two empowerment deals in December, issuing 4.4 million shares at R60 each. The group had previously been hindered from increasing its empowerment stake as its controversial social security deal negatively affected its share price.
The court battle came after losing bidder AllPay, a unit of big four bank Absa, turned to the Constitutional Court in yet another attempt to have the multibillion-rand tender process declared invalid. The tender was awarded to Net 1 unit Cash Paymaster Services (CPS). Both CPS and SASSA opposed AllPay's application.
AllPay argued the five-year deal was not awarded lawfully. AllPay's action followed its loss in the Supreme Court of Appeal, which is where the matter was heard after the North Gauteng High Court ruled that, while the deal was illegal and invalid, it would remain in place so that payments could continue.
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