Shares in Lesaka fall, despite 56% narrowing in December quarterly loss
SHARES in JSE-listed fintech company Lesaka Technologies – which announced the acquisition of Touchsides from Heineken this week – shed 4.5% yesterday after it announced that it remained in loss making during the quarter ended December.
Lesaka closed yesterday’s session at R65.86, a fall of about 4.51% on the JSE and a retreat from the 15.18% rally it garnered on Tuesday.
The company, which has a heavy presence across South Africa’s informal sector, said it had narrowed its quarterly loss by about 56% at R50.8 million for the period ended December 2023. In rand currency, Lesaka’s revenue for the period firmed up 13% to R2.7 billion compared with the same quarter period in 2022.
Its operating income for the period at R42.5m compares with an operating loss of R38.4m in the year earlier contrasting period.
It attributed this to “successful execution” of its strategy and “growth in the consumer and merchant” divisions.
Group adjusted earnings before interst, taxes, depreciation and amortisation of R180.5m, however, exceeded Lesaka’s upper end guidance for the period, springing up 38% in rand currency compared to R130.4m) a year ago.
“The economic environment in South Africa remains challenging for our consumers. We do not anticipate any major changes in the economic outlook for South Africa,” Lesaka group CEO, Chris Meyer, said during a presentation of the company’s results yesterday.
Support for the company is, however, likely to emanate from “supplier payments that continued excellent growth” in the December quarter as well as “continued adoption of cards payments”in the South African economy.
The credit business had negatively been “affected by high interest rates” resulting in fewer and smaller extensions.
The company closed December with cash and cash equivalents of $44.3m (R837m), comprised of US dollar denominated balances of $4.5m, rand balances of R688.5m and deposits in other currencies such as the Botswana pula amounting to $2.2m.
Lesaka has attributed the higher cash balances from June 30, 2023, “to a positive contribution” from its merchant and consumer operations and utilisation of borrowings facilities to fund certain some aspects of operations.
This was partially offset by the utilisation of cash reserves to fund scheduled and other repayments on the group’s borrowings, the purchase ATMs and vaults as well as investments into working capital.
The higher rand revenues for the period under review have been attributed to “an increase in low margin prepaid airtime sales and other value-added services, as well as higher transaction, insurance and lending” revenues.
The point-of-sale hardware distribution business was, however, sluggish, partially offsetting the rise in airtime purchases.
Lesaka incurred a higher net interest charge of R81.2m compared with R70m “primarily due to higher interest rates”, while a 7% weakness in the rand during the December quarter “adversely impacted” its US dollar reported results.
For the third quarter period to the end of March 2024, Lesaka expects revenues to be between R2.7bn and R2.8bn. Group adjusted Ebitda is projected between R170m and R190m.
“We reaffirm our outlook for FY2024, the year ending June 30, 2024. We expect revenue between R10.7bn and R11.7bn (with) group adjusted Ebitda between R680m and R740m.”
Lesaka’s acquisition of Touchsides, announced on Tuesday, is expected to “significantly” deepen Kazang’s footprint across South Africa’s taverns industry.
With an active user base of more than 10 000 point-of-sale terminals across South Africa’s informal licensed taverns, the platform processes more than 1.5 million transactions per day.
Touchsides provides platform-asa-service and software-as-a-service solutions to licensed tavern outlets, enabling the measurement of sales activity in real time, management of stock levels and informing commercial decisions, such as pricing and promotional offers.