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Johannesburg - JSE- and Nasdaq-listed technology company Net1 has been hit by negative factors, but management remains confident and is set on achieving growth.
Net1's universal electronic payment system (UEPS) is used by government to deliver wages and government grants.
The company provides smart card technologies and systems that allow for transactions between the formal business sector and areas with limited or no traditional banking facilities. Net1 also owns the EasyPay electronic bill payment and prepaid electricity service.
On Thursday the company announced an 11% decrease in revenue to $55.8m for the quarter to end-March 2009. Operating profit declined 27% to $20.8m, while net income plummeted 47% to $14.3m. In line with the net income, earnings per share decreased 45% to 26c (US cents).
The 34% depreciation against the rand hit the results. The rand is Net1's functional currency, while the dollar is its reporting currency.
On a constant-currency basis, Net1's revenue increased 19% to R89.2m and fundamental net income rose 9% to R16.1m.
An increase in stock-based compensation also negatively affected results, with the company's compensation charge increasing by 18% to $1.3m.
Seasonal losses
Tax increases also brought profit down. The company's fully distributed tax rate became effective in the third quarter of 2008, which decreased earnings in comparison to previous periods.
In August 2008, Net1 bought BGS, an Austrian private company which provides smart card-based payment systems to banks, enterprises and government authorities in Russia, Ukraine, Uzbekistan, Mongolia, Vietnam, India and Oman.
It recorded a loss for the period. Net1 said BGS' operations are highly seasonal, with its second and fourth quarters typically being its most profitable and the first and third quarters generally the weakest.
Along with this seasonal loss, Net1 also had to account for intangible asset amortisation, which further decreased profits.
Although these factors brought company profits down, Net1 chairperson and CEO Serge Belamant remains optimistic about the future, saying: "We have met our expectations for another quarter and we are delighted to have signed a new contract with the South African Social Security Agency."
Net1 has entered into another one-year contract for the payment of social welfare grants in the five provinces where it provides a grant payment service, starting on April 1.
"We are now positioned to continue our expansion in the number of people who use our technology and in the breadth of services that we provide, not only on South African soil but also in numerous world markets.
"I remain confident that we will continue to deliver sustainable growth for all of our stakeholders," said Belamant.
At 13:00 on Friday, Net1 shares had fallen 16.1% to trade at R120.
- Fin24.com
