Net 1 UEPS Technologies was hard hit by the strengthening of the US dollar against its primary functional currencies during the third quarter of the current financial year.
Net 1's Q3 revenue of $134.7 million was a constant currency increase of 20%, but in true terms was an 11% drop on the third quarter of 2015. This as the US dollar appreciated by 35% against the South African rand and 9% against the South Korean won during Q3, which negatively impacted the results.
The South African operations contributed $50.6 million in revenue to the business. This was down 13% compared to the third quarter of 2015 in USD terms, but 18% higher on a constant currency basis.
The Nasdaq- and JSE-listed company says the increase in segment revenue and operating income was primarily due to higher EasyPay Everywhere transaction revenue as a result of increased usage at its ATMs. It was also impacted by more low-margin transaction fees generated from card holders using the South African National Payment System, increased inter-segment transaction processing activities, and a modest increase in the number of social welfare grants distributed.
In US dollar terms, earnings per share for the quarter were down 24% to 40c per share. Headline earnings per share were almost 31% lower year-on-year, at $0.36.
"We have made measurable strides on our international expansion initiatives over the past few months, given new Zazoo project launches in the UK and India, becoming a certified third-party processor in Europe, conclusion of our strategic investment by the IFC, and acquisitions that will allow us to own a larger share of the value chain as we pursue opportunities globally," says Serge Belamant, chairman and CEO of Net 1.
"Meanwhile, in SA, our core new offerings such as EasyPay Everywhere, financial services and Zazoo continue to scale. Given the building blocks we have put in place and partnerships with multinationals like IFC and MasterCard, we are confident fiscal 2017 will be a watershed year for Net 1 as it relates to building a sizeable and sustainable international business," he says.
The International Finance Corporation, which is a member of the World Bank Group, recently agreed to buy 18% of Net 1 UEPS Technologies for $107.7 million (R1.6 billion). The transaction is expected to close on 11 May. During the quarter, the company also repurchased over 1.3 million shares of its common stock for $12.7 million.
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