Net1 operations in SA stable in first quarter
But revenue from this country contracts
TRANSACTION processing company Net 1 UEPS Technologies (Net1) said on Friday that its South Africa operations were stable in the first quarter to end-September, even though revenue from South Africa had contracted.
Adjusted group earnings before interest, tax, depreciation and amortisation (Ebitda) were $2.8 million (R41.53m) and the operating loss was $27m. The fundamental loss per share was $0.02. An option was exercised to acquire an additional 35 percent of Bank Frick, accelerating an ability to provide a vertically integrated fintech solution in Europe.
“We made meaningful progress towards the monetisation of some of our assets, accomplished several objectives towards commercial launch of various new products, and positioned our South African operations for growth as liquidity becomes available,” chief executive Herman Kotzé said on Friday.
In the short term, multiple corporate actions would be pursued to improve liquidity, reduce liabilities and reinvest in growth businesses.
The guidance of adjusted Ebitda of at least $16m for the full year was maintained, driven by growth in South Korea and in South Africa, and reduced losses from the IPG business, said chief financial officer Alex Smith.
The South African segment’s revenue was $19.4m in the first quarter, down 49 percent on a constant currency basis over the same time a year before, but up from $18.9m in the fourth quarter of 2019. This was primarily due to the termination of the South African Social Security Agency contract at the end of the first quarter of 2019. Decreases in revenue and operating income were partially offset by higher transaction revenue as a result of increased use of group ATMs.
The international transaction processing segment’s revenue was $34m, down 14 percent compared with the first quarter of 2019 and down from $36.4m in the fourth quarter of 2019.
Segment revenue was lower due to a contraction in IPG transactions processed, specifically meaningfully lower crypto-exchange and China processing activity, modestly lower KSNET revenue, and the impact of a weaker exchange rate on reported KSNET revenue. Revenue fell primarily due to the deconsolidation of DNI, lower lending revenue, and a decrease in inter-segment revenues.
Net1 shares closed unchanged at R40 on the JSE on Friday.
SOUTH African gold producer Gold Fields’ 2019 production guidance remained unchanged despite undershooting output in the September quarter. But Gold Fields chief executive Nick Holland said on Friday that he was bullish about 2019 production and the group expected output to be at the upper end of the previously announced range of 2.13 million to 2.18 million ounces.
Holland said the group expected its all-in sustaining costs to be $980 (R14 565) an ounce based on an exchange rate of R14.50 to the dollar.
“Gold Fields expects to end this year on a strong footing, and we expect to achieve previous production and all-in cost guidance for the year. This provides us with a solid base to grow production and reduce all-in costs into 2020, enabling the group to generate strong free cash flow,” said Holland.
Gold Fields said output had declined 2 percent year-on-year and was 3 percent lower quarter-on-quarter to 523 000 ounces.
The group attributed the decrease in production to lower grade mined at Damang in Ghana and Cerro Corona in Peru, and an unusually high lock-up of gold in the circuit at two of its Australian operations.
Production at South Deep, its sole South African mine, increased 6 percent quarter-on-quarter to 61 000 ounces, up 23 percent year-on-year.
South Deep was expected to exceed its production guidance for the year by between 5 and 10 percent. The AIC guidance is expected to be achieved.
Holland said the group had moved to cut net debt by $97 million in the quarter under review, and announced it would not undertake any other hedging activity for next year and beyond. The group, which has operations at South Deep in South Africa, Damang in Ghana and Salares Norte in Chile, said net debt stood at $1.4 billion (R20.76bn) from $1.49bn at June 30 this year.
Holland said Gold Fields had entered into select tactical hedges for 2020 during the first half of 2019.
“The hedges were entered into to underwrite real net debt reduction of $300m to $400m by the end of 2020. We do not plan to undertake any other hedging activity for 2020 or beyond,” Holland said.
However, in line with the company’s hedging policy, Gold Fields could look at hedging production at Salares Norte to underwrite the payback for the project, he said.
Salares Norte is a high-grade, open pit, gold-silver project in Chile discovered by Gold Fields in 2011.
Gold Fields fell 6.31 percent to R76.45 a share on Friday in line with its gold producing peers on the JSE due to the the gold price dipping 0.7 percent to $1 458 an ounce. Seleho Tsatsi, an investment analyst at Anchor Capital, said the gold sector as a whole was down on Friday due to the softer gold price.
“Gold Fields has obviously benefited from the run-up in the gold price this year. About 9 percent of Gold Fields’ production comes from South Africa, so they have not really benefited from the year’s rand weakness.”