Johannesburg - NET 1 UEPS Technologies, the technology firm that holds a R10 billion contract to distribute social grants nationally, says it is ready to execute its strategic plans, after completing the costly exercise of implementing the contract.
Rolling out infrastructure and registering the 21.7 million grant beneficiaries and recipients had resulted in implementation expenses of about $56.2 million (R575m) for staff, travel, temporary infrastructure hire, fixed premises hire for enrolment, and stationery costs, the company said on Friday as it published results for the year to June.
An expense of $10.3m for smart cards, which recipients will use to collect their grants, was not included in that sum. In comparison, implementation costs for last year, when the firm was awarded the contract, were $10.9m. No smart cards were expensed during financial 2012.
Since inception of the contract, the firm has incurred capital expenditure of $28.1m. “Our one-time implementation costs are now effectively behind us. We expect to demonstrate a marked improvement in profitability during fiscal 2014,” Herman Kotzé, the chief financial officer, said.
Chief executive Serge Belamant said the contract had contributed about 80 percent to group revenue, which jumped 16 percent to $452.1m and grew 31 percent in rand terms during the year.
The firm is hoping some 372 870 recipients who have not registered for the smart cards will come forward; if not, the government will suspend these grants next month. This would dent revenue for fiscal 2014, the company said, adding that new registrations might offset this revenue decline.
The company is also conducting a pilot study with a cellphone maker to integrate mobile wallet payment systems into the cellphones.
Net 1 is under scrutiny from the US Department of Justice and the Securities and Exchange Commission, which launched a probe late last year following allegations by rival Absa AllPay that there were irregularities in awarding the contract to Net 1, which is listed in the US.
On September 10, the Constitutional Court will hear an application by AllPay to appeal the Supreme Court of Appeal ruling in March that the Net 1 contract was valid and legal. Absa was winding down AllPay because of the loss of the contract, the bank said in July.
Net 1’s fundamental net income declined to $34.8m from $64m, and a 38 percent decline in rand terms, during the year. Fundamental earnings a share fell to 76 US cents from $1.42 a year earlier. The results were affected by the 14 percent dollar exchange rate appreciation against the rand in the quarter to June, contract implementation costs, and $1.2m of expenses incurred to comply with the US probe, including a fair value charge resulting from the issue of an equity instrument in anticipation of the firm’s black economic empowerment deal that had to be aborted because of Absa AllPay’s litigation over the contract.
Net 1’s South Korean subsidiary, KSNET, was the largest contributor to revenue outside South Africa and reported a 15 percent rise in revenue to $35.6m over the 12 months on an increase in transaction-based revenues in Korea.
Revenue from the group’s lending services jumped 16 percent to $2.1m in the quarter to June compared with the same quarter last year. Revenue from hardware and software sales rose 12 percent to $9.2m over the same quarter last year.
The stock soared 38 percent to R103 on the JSE on Friday. - Business Report