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01/11 17:18
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call reveals strong year-on-year premium growth and promising growth opportunities in both Consumer and Enterprise divisions. The Q&A section highlights strategic initiatives such as the Bank Zero transaction, which is expected to be close to profitability, and positive regulatory engagements. While there are some risks and uncertainties, the overall sentiment is optimistic with a focus on market expansion and innovation. Despite a goodwill impairment, the company's differentiation and strategic positioning suggest a positive outlook for stock price movement.
Net Revenue ZAR 5.3 billion for FY 2025, up from ZAR 3.6 billion last year, driven by acquisitions and organic growth.
EBITDA ZAR 922 million for FY 2025, up from ZAR 657 million last year, reflecting operational efficiencies and acquisitions.
Adjusted Earnings ZAR 186 million for FY 2025, up from ZAR 51 million last year, due to improved profitability and operational performance.
Adjusted Earnings Per Share ZAR 2.29 for FY 2025, up from ZAR 0.80 last year, reflecting strong earnings growth.
Net Debt to Group Adjusted EBITDA Ratio Increased to 2.9x from 2.5x last year, due to debt raised for acquisitions.
Merchant Business Net Revenue ZAR 3 billion for FY 2025, up 46% year-on-year, driven by acquisitions and organic growth.
Merchant Business EBITDA ZAR 657 million for FY 2025, up 20% year-on-year, reflecting integration and operational improvements.
Consumer Business Net Revenue ZAR 1.7 billion for FY 2025, up 35% year-on-year, driven by customer base growth and cross-sell initiatives.
Consumer Business EBITDA ZAR 435 million for FY 2025, up 83% year-on-year, due to increased scale and product success.
Enterprise Business Net Revenue ZAR 651 million for FY 2025, down 9% year-on-year, due to restructuring and closure of noncore units.
Enterprise Business EBITDA ZAR 24 million for FY 2025, down from ZAR 55 million last year, impacted by reorganization costs.
Q4 Net Revenue ZAR 1.5 billion, up 47% year-on-year, driven by acquisitions and Consumer division performance.
Q4 Group Adjusted EBITDA ZAR 306 million, up 61% year-on-year, reflecting strong divisional contributions.
Adjusted Earnings Per Share for Q4 ZAR 0.99, up from ZAR 0.32 last year, representing over 200% growth.
Operating Cash Flow ZAR 370 million for Q4, up ZAR 101 million quarter-on-quarter, reflecting strong cash generation.
Loan Book ZAR 996 million at year-end, up 82% year-on-year, driven by new lending products and campaigns.
Insurance Gross Premiums Increased 38% year-on-year, reflecting strong customer adoption.
Bank Zero acquisition: Lesaka announced the ZAR 1.1 billion acquisition of Bank Zero, pending regulatory approval. This acquisition is expected to enhance Lesaka's product offerings, reduce third-party dependencies, and lower costs. It will also enable Lesaka to offer banking services to merchants and enterprise customers, and support cross-border opportunities with an FX license application.
New lending product: Lesaka introduced a revised loan product with increased maximum loan amounts and extended repayment terms, contributing to an 82% growth in the lending book to ZAR 996 million.
Smart Safe product rollout: Continued rollout of the new Smart Safe product as part of capital expenditure.
Expansion into licensed tavern market: Lesaka integrated the tavern base into its micro-merchant business, focusing on merchant acquiring, supplier payments, and credit opportunities. This segment showed encouraging results.
Consumer market share growth: Lesaka increased its market share in the grant beneficiary market from 9.1% to 13.6% over two years, primarily at the expense of Post Bank.
Merchant acquiring footprint: Expanded to 84,541 points of presence, up from 51,880 a year ago, including devices from the Adumo acquisition.
Integration and optimization: Lesaka is consolidating its brands under a single identity and streamlining operations to reduce complexity and improve efficiency, particularly in the Merchant division.
Balance sheet optimization: Refinanced debt facilities, increased banking relationships, and reduced funding costs by 75 basis points. Net debt to adjusted EBITDA ratio improved to 2.2x when annualized.
Consumer division investments: Invested in distribution capabilities, including opening 50 new branches and 50 branded service points in FY 2026, and enhanced digital platforms like USSD.
Strategic acquisitions: Completed acquisitions of Adumo (ZAR 1.7 billion) and Recharger (ZAR 507 million), and sold MobiKwik stake for ZAR 290 million. These moves aim to strengthen Lesaka's fintech platform.
Brand and office consolidation: Plans to reduce office locations from 41 to less than 20 and consolidate multiple brands under a refreshed umbrella brand.
Focus on unit economics: Short-term focus on improving unit economics and extracting efficiencies in the Merchant division to drive organic growth.
Debt Levels: Gross debt increased to ZAR 4 billion, with a net debt to group adjusted EBITDA ratio of 2.9x, above the target of 2x. This could strain financial flexibility and increase interest expenses.
Acquisition Integration: The integration of recent acquisitions (Adumo, Recharger, Bank Zero) is ongoing, with duplication across product sets, management structures, and distribution channels. This could delay synergies and increase costs.
Enterprise Division Performance: Net revenue in the Enterprise division declined by 9% year-on-year, and EBITDA dropped significantly due to restructuring and closure of non-core business units. This division is not yet a meaningful EBITDA contributor.
Amortization and Impairment Charges: The company incurred ZAR 46 million in accelerated amortization charges and ZAR 335 million in goodwill impairments, which negatively impacted net income.
Regulatory Approval for Bank Zero: The acquisition of Bank Zero is pending regulatory approval, which could delay strategic plans and synergies associated with the acquisition.
Consumer Lending Risks: The company increased maximum loan sizes and repayment terms, which could lead to higher credit risk, especially in a challenging macroeconomic environment.
Supply Chain and Inventory Management: The company invested ZAR 34 million in inventory for bulk discounts, which could lead to cash flow challenges if inventory turnover is slower than expected.
Reorganization Costs: One-off reorganization costs of ZAR 17 million were incurred in the Enterprise division, impacting short-term profitability.
Economic and Market Conditions: Macroeconomic challenges, including declining cash usage in some sectors and changing consumer behaviors, could impact revenue streams, particularly in the Merchant and Consumer divisions.
Competition: The company faces competitive pressures from banks, retailers, and MNOs in the merchant engagement space, which could impact market share and margins.
FY 2026 Guidance: Reaffirmed net revenue, group adjusted EBITDA, and positive net income guidance for FY '26. Adjusted earnings per share guidance introduced for the first time, with a projection of more than ZAR 4.60 per share, an increase of over 100% year-on-year.
Bank Zero Acquisition: Expected completion of the Bank Zero transaction, which will augment capabilities and team. This acquisition will enable Lesaka to offer banking services to its merchant base and enterprise customers, reduce gross debt by about ZAR 1 billion, and expand the range of products offered, including cross-border opportunities pending FX license approval.
Capital Expenditure for FY 2026: Annual capital expenditure expected to remain below ZAR 400 million, consistent with FY 2025, despite continued growth in group adjusted EBITDA.
Merchant Division Outlook: Focus on bolstering unit economics, extracting efficiencies, and delivering a bundled merchant offering. Anticipates stronger throughput growth in the micro-merchant offering and mid-teens growth in Kazang Pay devices.
Consumer Division Outlook: Plans to open 50 new branches and add 50 branded service points in FY 2026. Sustained momentum expected in attracting Post Bank customers, with a focus on cross-sell opportunities in lending and insurance. New lending product targeting larger loans for a longer term, with a modest increase in loan loss ratio expected.
Enterprise Division Outlook: Enterprise division expected to contribute over 10% to total segment adjusted EBITDA in FY 2026, becoming a meaningful part of the business. Strategic focus on core product offerings and migration of merchant acquiring volumes to proprietary solutions.
Office and Brand Consolidation: Plans to reduce office locations from 41 to less than 20 and consolidate multiple brands under a refreshed umbrella brand, particularly impacting the merchant business.
The selected topic was not discussed during the call.
The earnings call summary indicates strong financial performance with significant year-over-year increases in revenue and adjusted EBITDA across divisions. The Bank Zero acquisition and strategic focus on core products and brand consolidation are positive catalysts. Despite some concerns about nonrecurring costs and lack of specific data on cost savings, guidance remains strong with expectations of continued EBITDA growth. The market response is likely positive, given the record revenue growth and optimistic outlook, although lack of market cap data limits precision in impact assessment.
The earnings call summary and Q&A session highlight several positive aspects: strategic wins with ADNOC, sustained demand for rentals, and a strong pipeline despite macroeconomic challenges. While management is cautious, they express optimism about future growth, particularly in the Middle East. The company is also focusing on optimizing margins and working capital. Despite some uncertainties, the overall sentiment is positive, suggesting a potential stock price increase of 2% to 8% over the next two weeks.
The earnings call reveals strong year-on-year premium growth and promising growth opportunities in both Consumer and Enterprise divisions. The Q&A section highlights strategic initiatives such as the Bank Zero transaction, which is expected to be close to profitability, and positive regulatory engagements. While there are some risks and uncertainties, the overall sentiment is optimistic with a focus on market expansion and innovation. Despite a goodwill impairment, the company's differentiation and strategic positioning suggest a positive outlook for stock price movement.
The earnings call reveals strong financial growth, particularly in net revenue and EBITDA, driven by the Adumo acquisition. Despite a decline in group revenue, optimistic guidance for FY2025 and FY2026, along with strategic investments, suggest positive future prospects. The Q&A section clarifies debt management and highlights sustainable growth in consumer and merchant divisions, although concerns about regulatory impacts remain. The absence of a share buyback or dividend program is a neutral factor. Overall, the company's growth strategy and financial outlook indicate a positive stock movement over the next two weeks.
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