JSE-listed Net1 UEPS Technologies grew revenue in the last quarter of its financial year, but a goodwill write-off hampered net profit.
Revenue for the fourth quarter was $68.7 million, a year-on-year increase of 11% in US dollars, and 2% in constant currency, or the currency in which the company has operations.
However, the company made a net loss of $17 million during the quarter, compared with an $18.2 million gain in the previous quarter. Net1 says the loss includes a $37.4 million goodwill impairment charge related to its hardware, software and related technology sales segment.
As a result, the company has reported a loss per share of $0.37, compared with earnings per share of $0.33 a year ago.
For the full year, the company reported revenue of $280.4 million, a year-on-year increase of 14% in US dollars and a decline of 3% in constant currency, compared to the 2009 year. Earnings per share were $0.84, a decline from the $1.53 reported a year ago.
Net1 provides a universal electronic payment system, or UEPS, as an alternative payment system for the unbanked and under-banked populations of developing economies. Its system enables about four billion people who usually have no access to the formal banking system to enter into electronic transactions.
Revenue slows
Revenue is expected to slow next year because of a change of terms of a contract in SA. Net1 entered into an agreement with the South African Social Security Agency (SASSA) on 24 August. The deal replaces a previous contract and Net1 will provide its social welfare grants distribution service to SASSA in five of SA's nine provinces. While the new contract allows for a fee per transaction and a minimum amount of beneficiaries, the amount to be paid and guaranteed beneficiaries is less than in the previous contract.
As was the case with the previous contract with SASSA, the new contract contains a standard pricing formula for all provinces, based on a transaction fee per beneficiary paid, regardless of the number or amount of grants paid per beneficiary, calculated on a guaranteed minimum number of beneficiaries per month.
As a result, the terms of the new deal will “materially reduce its revenues, operating income, net income and cash flow for the year” to June 2011, Net1 says.
“This year has been difficult for us due primarily to the uncertainties pertaining to our SASSA contract,” says CEO and chairman Serge Belamant. “SA has been put under austerity measures that have led to the cancellation of many social benefits, which were found to have been granted without proper consideration or approval,” he says.
Belamant adds that there were reductions in fees that were mandated to all grant distributors to reduce the overall cost of grant administration. “We expect personnel and structural changes to be made within SASSA during 2011, which should lead to a more specific governmental direction and to which we can align ourselves in order to continue to play a significant role in this market segment.”
However, the company has had continuing success with its operations in Ghana and Iraq. It is also launching its virtual card initiative in the US. The company's shares closed at R97, a 52-week low. Its 52-week high, on 6 October last year, was R160.
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