Net1 boosted by Sassa transactions

Net1 UEPS Technologies has on Friday (23 August) reported a 22% rise in revenue to $118 million in constant currency for the quarter ended June 2013.

It said that the bulk enrollment in relation to its R10 billion contract with the SA Social Security Agency (Sassa) was substantially completed during the reporting period, with 22 million registrations and 9.5 million cards issued as of June 30, 2013.

Net1 reported fundamental earnings per share of $0.28, up 22% in constant currency, which also included $9 million of implementation and smart card costs.

Net1 is a provider of alternative payment systems that leverage its universal electronic payment system, or UEPS. The group has a primary listing on the Nasdaq and a secondary listing on the JSE.

Net1 said its contract to distribute social welfare grants to ten million South Africans every month, for a period of five years, remains in full force and effect, through its subsidiary Cash Paymaster Services (CPS).

The group has been in a long running dispute with rival firm AllPay, after the latter Absa company voiced its concerns about the tender process.

However, at the end of March 2013, Net1 said that a full bench of the South African Supreme Court of Appeal unanimously ruled that the tender process followed by Sassa in awarding a contract to CPS was valid and legal.

“I am very pleased to report that we have completed our bulk enrollment on time despite higher than anticipated volumes,” said Dr. Serge Belamant, chairman and CEO of Net1.

“Net1 is now ready to execute on its strategic plans and has commenced with the deployment of both our financial and mobile services, and the early results look extremely impressive,” Belamant said.

Herman Kotzé, CFO of Net1 said: “Our one-time implementation costs are now effectively behind us and we therefore expect to demonstrate a marked improvement in profitability during fiscal 2014.”

“For fiscal 2014, we expect fundamental earnings per share of at least $1.50, assuming a constant currency base of ZAR 8.71/$1 and a share count of approximately 45.7 million shares.”

He pointed out that the group’s guidance also assumed the lost revenue and operating income from the roughly 370,000 beneficiaries on Sassa’s database who have not re-registered and whose grants will likely be cancelled in September 2013.

Net1 noted that, having substantially concluded bulk enrollment in fiscal 2013, its temporary employee headcount, which peaked at approximately 5,500 employees for most of fiscal 2013, has since declined to 1,392 at June 30, 2013.

During fiscal 2013, Net1 said it incurred direct implementation expenses of approximately $56.2 million (ZAR 488.3 million), including staff, travel, temporary infrastructure hire, fixed premises hire for enrollment and stationery costs.

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Net1 boosted by Sassa transactions