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Net 1 UEPS Technologies, Inc. Reports Fourth Quarter and Full Year 2017 Results
Net 1 UEPS Technologies, Inc.
Registered in the state of Florida, USA
(IRS Employer Identification No. 98-0171860)
Nasdaq share code: UEPS
JSE share code: NT1
ISIN: US64107N2062
("Net1")
Net 1 UEPS Technologies, Inc. Reports Fourth Quarter and Full Year 2017 Results
JOHANNESBURG, August 25, 2017 – Net1 (Nasdaq: UEPS; JSE: NT1) today released results for the fourth quarter and
full-year fiscal 2017.
- Q4 2017 Revenue of $155 million, up 3% in USD but 10% lower in constant currency;
- Q4 2017 FEPS of $0.41, which reflects the adverse impact of a higher share count, taxes, and provisions
- Concluded investments in Cell C and DNI for an aggregate purchase price of ZAR 2.95 billion.
Summary Financial Metrics
Three months ended June 30,
% change % change
2017 2016 in USD in ZAR
(All figures in USD '000s except per share data)
Revenue 155,056 151,259 3% (10%)
GAAP net income 11,289 24,356 (54%) (59%)
Fundamental net income (1) 23,185 26,299 (12%) (23%)
GAAP earnings per share ($) 0.20 0.48 (59%) (64%)
Fundamental earnings per share ($) (1) 0.41 0.51 (20%) (31%)
Fully-diluted shares outstanding ('000's) 57,249 51,224 12%
Average period USD/ ZAR exchange rate 13.19 15.02 (12%)
Year ended June 30,
% change % change
2017 2016 in USD in ZAR
(All figures in USD '000s except per share data)
Revenue 610,066 590,749 3% (2%)
GAAP net income 72,954 82,454 (12%) (16%)
Fundamental net income (1) 94,721 92,113 3% (7%)
GAAP earnings per share ($) 1.34 1.72 (22%) (26%)
Fundamental earnings per share ($) (1) 1.74 1.92 (9%) (19%)
Fully-diluted shares outstanding ('000's) 54,648 48,105 14% 14%
Average period USD/ ZAR exchange rate 13.62 14.38 (5%)
(1) Fundamental net income and earnings per share are non-GAAP measures and are described below under "Use of Non-GAAP
Measures—Fundamental net income and fundamental earnings per share." See Attachment B for a reconciliation of GAAP net income to
fundamental net income and earnings per share.
Factors impacting comparability of our Q4 2017 and Q4 2016 results
- Earnings and FEPS dilution impact from issue of additional shares of common stock: Our Q4 2017 fundamental
earnings per share was impacted by the weighted average issuance of five million shares of our common stock in
February 2017 and 10 million shares in Q4 2016;
- Separation costs related to former chief executive officer: We paid our former chief executive officer $8 million in
cash related to his separation from our company in fiscal 2017. In addition, the vesting of 200,000 shares of
restricted stock granted to him in August 2016 was accelerated which resulted in an additional stock-based
compensation charge of approximately $1.6 million during fiscal 2017;
- Favorable impact from the weakening of the U.S. dollar against South African Rand: The U.S. dollar depreciated
by 12% against the ZAR during Q4 2017, which positively impacted our reported results;
- Growth in lending and insurance businesses: We continued to achieve volume growth and operating efficiencies in
our lending and insurance businesses during Q4 2017, which has resulted in an improved contribution to our
financial inclusion revenue and operating income;
- Ongoing contributions from EasyPay Everywhere: EPE revenue and operating income growth was driven
primarily by ongoing EPE adoption as we further expanded our customer base utilizing our ATM infrastructure;
- Masterpayment expansion costs and $3.8 million allowance for credit losses: Masterpayment has incurred
additional employment costs as it grows its staff complement to execute its expansion plan into new markets. We
have provided an allowance for credit losses of $3.8 million;
- Regulatory changes in South Korea governing fees on card transactions: Regulations governing the fees that may
be charged on card transactions have adversely impacted our revenues and operating income in South Korea;
- Lower prepaid sales resulting from improved security features to our Manje products: The introduction of our new
biometric-linking feature adversely impacted the number of transacting users purchasing prepaid products through
our mobile channel;
- Higher transaction-related costs and debt guarantee fee expenses in Q4 2017: We incurred $1.8 million in
transaction-related costs pertaining to various acquisition and investment initiatives pursued during 2017 as well as
debt guarantee fees that were expensed;
- Q4 2016 gain on change in accounting for Finbond: We recognized a gain of $1.6 million, net of tax, related to the
change to the equity method of accounting from available-for-sale method for Finbond.
"The past five months have been among the most eventful and turbulent in the Company's history, but despite the multiple
challenges, we have successfully steadied the ship and put in place the mechanisms and structure to optimize and consolidate
our existing businesses where applicable," said Herman Kotze, CEO of Net1. “We have identified the key opportunities to focus
on to create a, sustainable and diversified global financial inclusion solutions company. "In fiscal 2018, our focus will be on
successfully implementing the identified synergies with Cell C and DNI, expanding our financial inclusion businesses, optimizing
our international operations and focusing on key markets and solutions, while actively re-engaging with our shareholders.
We also remain fully committed to supporting the South African government to ensure uninterrupted social grant service delivery," he added.
"We expect the funding of our Cell C and DNI investments to be dilutive to our fiscal 2018 fundamental earnings, partially
offset by DNI's equity accounted earnings, but to be accretive on a combined basis from fiscal 2019. We therefore anticipate
our fundamental earnings per share for fiscal 2018 to be at least $1.61. Our guidance assumes that our contract with SASSA
remains in effect for the full year on the existing terms and conditions, an updated constant currency base of ZAR 13.62/$1, a
share count of 56.6 million shares, and a tax rate of between 34%-36%," he concluded.
Results of Operations by Segment and Liquidity
Our operating metrics will be updated and posted on our website (www.net1.com).
South African transaction processing
Segment revenue was $67.7 million in Q4 2017, up 26% compared with Q4 2016 in USD, and 11% higher on a constant
currency basis. In ZAR, the increase in segment revenue and operating income was primarily due to higher EPE transaction
revenue as a result of increased usage of our ATMs, more low-margin transaction fees generated from card holders using the
South African National Payment System, increased inter-segment transaction processing activities, and a modest increase in
the number of social welfare grants distributed. Our operating income margin for Q4 2017 and 2016 was 22%and 24%,
respectively, and was lower primarily due to annual salary increases granted to our South African employees, but partially
offset by and increase in ATM transactions and inter-segment processing.
International transaction processing
Segment revenue was $45.0 million in Q4 2017, down 5% compared with Q4 2016 in USD, and down 16% on a constant
currency basis. Segment revenue decreased primarily due to a lower contribution from KSNET due to the regulatory changes
implemented by South Korean Regulators which we expect to anniversary in the first quarter of fiscal 2018. This decrease in
revenue was partially offset by higher contribution from both Masterpayment and Transact24 compared with Q4 2016.
Operating income from this segment during Q4 2017 was lower due to the lower KSNET revenue at KSNET; losses incurred
by Masterpayment as it grows its staff complement to execute its expansion plan into new markets and an allowance for credit
losses of $3.8 million; and ongoing ZAZOO start-up costs in the UK and India, which was partially offset by a positive
contribution by T24. Operating income margin for Q4 2017 decreased to 4% compared to 17% for Q4 2016.
Financial inclusion and applied technologies
Segment revenue was $56.2 million in Q4 2017, down 9% compared with Q4 2016 in USD and down 20% on a constant
currency basis. In ZAR, Financial inclusion and applied technologies revenue decreased primarily due to fewer prepaid
airtime and other value added services sales, as well as fewer ad-hoc terminal sales, partially offset by increased volumes in
our lending and insurance businesses, and an increase in inter-segment revenues. Operating income margin for the Financial
inclusion and applied technologies segment was 26% and 22% during Q4 fiscal 2017 and 2016, respectively, and has
increased primarily due to improved revenues from our lending and insurance businesses and an increase in inter-segment
revenues and fewer low margin prepaid product sales, offset by fewer ad hoc terminal and annual salary increases granted to
our South African employees.
Corporate/eliminations
Corporate expenses increased primarily due to the costs associated with the separation of our former chief executive officer
from us which included an $8.0 million separation payment as well as an additional stock-based compensation charge of
approximately $1.6 million related to the accelerated vesting of restricted stock. We also incurred higher transaction-related
expenditures, higher amortization costs and a modest increase in U.S. dollar denominated goods and services purchased from
third parties and directors' fees. Our fiscal 2016 corporate expenses include the fair value gain on re-measurement of the
previously held interest related to the T24 acquisition and the gain resulting from the change in accounting for Finbond.
Cash flow and liquidity
At June 30, 2017, our cash balances were $258.5 million, which comprised U.S. dollar-denominated balances of $60.0
million, ZAR-denominated balances of ZAR 1.8 billion ($141.5 million), KRW-denominated balances of KRW 55.0 billion
($48.1 million) and other currency deposits, primarily euro, of $8.9 million. The increase in our cash balances from June 30,
2016, was primarily due to the sale of five million shares of our common stock and expansion of most of our core businesses,
which was partially offset by the repurchase of shares of our common stock; unscheduled repayments of our Korean debt;
payment of taxes; the investment in MobiKwik, Malta FS and Pros Software; a loan to Finbond and capital expenditures.
Excluding the impact of taxes, interest received and interest paid under our Korean debt, the decrease in cash from operating
activities relates primarily to the growth of Masterpayment's working capital finance offering and the separation payment
made to our former chief executive officer, offset by an increase in cash from operating activities resulted from improved
trading activity during fiscal 2017. Capital expenditures for Q4 2017 and 2016 were $2.7 million and $7.1 million,
respectively, and have decreased primarily due to the acquisition of fewer payment processing terminals in South Korea. We
paid $10.4 million to acquire an additional interest in MobiKwik, with our June 30, 2017, equity interest at 13.50%. We also
repurchased 1.32 million shares from our former chief executive officer for $11.5 million, net of the strike paid to exercise
certain options. We also made a scheduled $8.8 million Korean debt repayment and paid a $1.5 million dividend to our non-
controlling interest shareholders.
Use of Non-GAAP Measures
US securities laws require that when we publish any non-GAAP measures, we disclose the reason for using the non-GAAP
measure and provide reconciliation to the directly comparable GAAP measure. The presentation of fundamental net income
and fundamental earnings per share and headline earnings per share are non-GAAP measures.
Fundamental net income and fundamental earnings per share
Fundamental net income and earnings per share is GAAP net income and earnings per share adjusted for (1) the amortization
of acquisition-related intangible assets (net of deferred taxes), (2) stock-based compensation charges and (3) unusual non-
recurring items, including the amortization of KSNET debt facility fees, costs related to the IFC transaction and to
acquisitions consummated or ultimately not pursued, and U.S. government investigations-related and US lawsuit expenses.
Fiscal 2017 also includes separation costs (net of taxes) paid to our former chief executive officer, a refund (net of taxes)
related to Korean industry-wide litigation that has now been finalized and South African debt-related guarantee fees
expensed. Fiscal 2016 also includes a fair value gain resulting from the acquisition of Transact24, a gain resulting from the
change in accounting for Finbond. Management believes that the fundamental net income and earnings per share metric
enhances its own evaluation, as well as an investor's understanding, of our financial performance. Attachment B presents the
reconciliation between GAAP and fundamental net income and earnings per share.
Headline earnings per share ("HEPS")
The inclusion of HEPS in this press release is a requirement of our listing on the JSE. HEPS basic and diluted is calculated
using net income which has been determined based on GAAP. Accordingly, this may differ to the headline earnings per share
calculation of other companies listed on the JSE as these companies may report their financial results under a different
financial reporting framework, including but not limited to, International Financial Reporting Standards.
HEPS basic and diluted is calculated as GAAP net income adjusted for the (profit) loss on sale of property, plant and
equipment, and in fiscal 2016, a fair value gain resulting from the acquisition of Transact24 and a gain resulting from the
change in accounting for Finbond. Attachment C presents the reconciliation between our net income used to calculate
earnings per share basic and diluted and HEPS basic and diluted and the calculation of the denominator for headline diluted
earnings per share.
Conference Call
We will host a conference call to review Q4 and year end 2017 results on August 25, 2017, at 8:00 Eastern Time. To
participate in the call, dial 1-855-481-5362 (US and Canada), 0808-162-4061 (U.K. only) or 0-800-200-648 (South Africa
only) ten minutes prior to the start of the call. Callers should request "Net1 call" upon dial-in. The call will also be webcast
on the Net1 homepage, www.net1.com. Please click on the webcast link at least ten minutes prior to the call. A webcast of the
call will be available for replay on the Net1 website through September 17, 2017.
About Net1 (www.net1.com)
Net1 is a leading provider of alternative payment systems that leverage its Universal Electronic Payment System ("UEPS") or
utilize its proprietary mobile technologies. The Company operates market-leading payment processors in South Africa
and the Republic of Korea. Through Transact24, Net1 offers debit, credit and prepaid processing and issuing services for
Visa, MasterCard, ChinaUnionPay, Alipay and WeChat in China and other territories across Asia-Pacific, Europe and Africa,
and the United States. Through Masterpayment, Net1 provides payment processing and enables working capital financing in
Europe.
UEPS permits the Company to facilitate biometrically secure, real-time electronic transaction processing to unbanked and
under-banked populations of developing economies around the world in an online or offline environment. Net1's UEPS/EMV
solution is interoperable with global EMV standards that seamlessly enable access to all the UEPS functionality in a
traditional EMV environment. In addition to payments, UEPS can be used for banking, healthcare management, payroll,
remittances, voting and identification.
Net1's mobile technologies include its proprietary mobile payments solution - MVC, which offers secure mobile-based
payments, as well as mobile banking and prepaid value-added services in developed and emerging countries. The Company
intends to deploy its varied mobile solutions through its ZAZOO business unit, which is an aggregation of innovative
technology companies and is based in the United Kingdom.
Net1 has a primary listing on the NASDAQ and a secondary listing on the Johannesburg Stock Exchange.
Forward-Looking Statements
This announcement contains forward-looking statements that involve known and unknown risks and uncertainties. A
discussion of various factors that cause our actual results, levels of activity, performance or achievements to differ materially
from those expressed in such forward-looking statements are included in our filings with the Securities and Exchange
Commission. We undertake no obligation to revise any of these statements to reflect future events.
Investor Relations Contact:
Dhruv Chopra
Head of Investor Relations
Phone: +1 917-767-6722
Email: dchopra@net1.com
Condensed Consolidated Statements of Operations
Unaudited (A)
Three months ended Year ended
June 30, June 30,
2017 2016 2017 2016
(In thousands, except per share data) (In thousands, except per share data)
REVENUE $ 155,056 $ 151,259 $ 610,066 $ 590,749
EXPENSE
Cost of goods sold, IT processing, servicing
and support 73,173 70,785 292,383 290,101
Selling, general and administration 56,896 37,879 179,262 145,886
Depreciation and amortization 10,261 10,412 41,378 40,394
OPERATING INCOME 14,726 32,183 97,043 114,368
INTEREST INCOME 6,408 4,008 20,897 15,292
INTEREST EXPENSE 1,711 543 3,484 3,423
INCOME BEFORE INCOME TAX EXPENSE 19,423 35,648 114,456 126,237
INCOME TAX EXPENSE 10,152 10,774 42,472 42,080
NET INCOME BEFORE EARNINGS FROM
EQUITY-ACCOUNTED INVESTMENTS 9,271 24,874 71,984 84,157
EARNINGS FROM EQUITY-ACCOUNTED
INVESTMENTS 1,886 61 2,664 639
NET INCOME 11,157 24,935 74,648 84,796
LESS NET INCOME ATTRIBUTABLE TO
NON-CONTROLLING INTEREST (132) 579 1,694 2,342
NET INCOME ATTRIBUTABLE TO NET1 $ 11,289 $ 24,356 $ 72,954 $ 82,454
Net income per share, in United States dollars
Basic earnings attributable to Net1
shareholders $0.20 $0.48 $1.34 $1.72
Diluted earnings attributable to Net1
shareholders $0.20 $0.48 $1.33 $1.71
(A) – Derived from audited financial statements
Unaudited Condensed Consolidated Balance Sheets
(A) (A)
June 30, June 30,
2017 2016
(In thousands, except share data)
ASSETS
CURRENT ASSETS
Cash and cash equivalents $ 258,457 $ 223,644
Pre-funded social welfare grants receivable 2,322 1,580
Accounts receivable, net of allowances of – 2017: $1,255; 2016: $1,669 111,429 107,805
Finance loans receivable, net of allowances of – 2017: $7,469; 2016: $4,494 80,177 37,009
Inventory 8,020 10,004
Deferred income taxes 5,330 6,956
Total current assets before settlement assets 465,735 386,998
Settlement assets 640,455 536,725
Total current assets 1,106,190 923,723
PROPERTY, PLANT AND EQUIPMENT, net of accumulated depreciation of –
2017: $120,212; 2016: $99,969 39,411 54,977
EQUITY-ACCOUNTED INVESTMENTS 27,862 25,645
GOODWILL 188,833 179,478
INTANGIBLE ASSETS, net of accumulated amortization of – 2017: $108,907;
2016: $91,208 38,764 48,556
OTHER LONG-TERM ASSETS, including reinsurance assets 49,696 31,121
TOTAL ASSETS 1,450,756 1,263,500
LIABILITIES
CURRENT LIABILITIES
Short-term facilities 16,579 -
Accounts payable 15,136 14,097
Other payables 34,799 37,479
Current portion of long-term borrowings 8,738 8,675
Income taxes payable 5,607 5,235
Total current liabilities before settlement obligations 80,859 65,486
Settlement obligations 640,455 536,725
Total current liabilities 721,314 602,211
DEFERRED INCOME TAXES 11,139 12,559
LONG-TERM BORROWINGS 7,501 43,134
OTHER LONG-TERM LIABILITIES, including insurance policy liabilities 2,795 2,376
TOTAL LIABILITIES 742,749 660,280
COMMITMENTS AND CONTINGENCIES
EQUITY
COMMON STOCK
Authorized: 200,000,000 with $0.001 par value;
Issued and outstanding shares, net of treasury - 2017: 56,369,737; 2016:
55,271,954 80 74
PREFERRED STOCK
Authorized shares: 50,000,000 with $0.001 par value;
Issued and outstanding shares, net of treasury: 2017: -; 2016: - - -
ADDITIONAL PAID-IN-CAPITAL 273,733 223,978
TREASURY SHARES, AT COST: 2017: 24,891,292; 2016: 20,483,932 (286,951) (241,627)
ACCUMULATED OTHER COMPREHENSIVE LOSS (162,569) (189,700)
RETAINED EARNINGS 773,276 700,322
TOTAL NET1 EQUITY 597,569 493,047
REDEEMABLE COMMON STOCK 107,672 107,672
NON-CONTROLLING INTEREST 2,766 2,501
TOTAL EQUITY 708,007 603,220
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 1,450,756 $ 1,263,500
(A) – Derived from audited financial statements
Unaudited Condensed Consolidated Statements of Cash Flows
Unaudited (A)
Three months ended Year ended
June 30, June 30,
2017 2016 2017 2016
(In thousands) (In thousands)
Cash flows from operating activities
Net Income $ 11,157 $ 24,935 $ 74,648 $ 84,796
Depreciation and amortization 10,261 10,412 41,378 40,394
Earnings from equity-accounted investments (1,886) (61) (2,664) (639)
Fair value adjustment (239) (94) (300) 519
Interest payable (64) 132 20 1,829
Facility fee amortized 1,232 35 1,326 138
Gain on release from accumulated other
comprehensive income - (2,176) - (2,176)
Gain on fair value of Transact24 - - - (1,909)
Profit on disposal of property, plant and
equipment (68) (173) (639) (286)
Stock compensation charge, net of forfeitures 2,050 953 1,982 3,598
Dividends received from equity accounted
investments 817 1,187 -
(Increase) Decrease in accounts and finance
loans receivable, and pre-funded grants
receivable (13,506) 11,810 (15,767) (3,401)
Decrease (Increase) in inventory 2,717 1,496 3,025 1,001
(Decrease) Increase in accounts payable and
other payables (2,075) (9,403) (6,461) (7,840)
Increase in taxes payable (6,173) (2,681) (354) 763
Decrease in deferred taxes 1,532 21 (220) (235)
Net cash provided by operating activities 5,755 35,206 97,161 116,552
Cash flows from investing activities
Capital expenditures (2,697) (7,099) (11,195) (35,797)
Proceeds from disposal of property, plant and
equipment 238 596 1,592 1,349
Investment in MobiKwik (10,488) (25,835) -
Investment in equity and loans in equity-accounted
investments - (12,044) -
Acquisitions, net of cash acquired - (14,101) (4,651) (15,767)
Acquisition of available for sale securities - - - (8,900)
Other investing activities, net - - - (5)
Net change in settlement assets (116,755) (161,343) (61,938) 53,364
Net cash (used in) provided by investing activities (129,702) (181,947) (114,071) (5,756)
Cash flows from financing activities
Proceeds from issue of common stock 2,250 107,682 47,879 111,444
Acquisition of treasury stock (13,713) (2,725) (45,794) (26,637)
Repayment of long-term borrowings (8,825) (8,716) (37,318) (8,716)
Proceeds from bank overdraft 16,176 - 16,176 -
Dividends paid to non-controlling interest (1,454) - (2,067) -
Payment of guarantee fee - - (1,145) -
Long-term borrowings obtained 279 - 800 2,107
Acquisition of interests in non-controlling interests - (11,189) - (11,189)
Net change in settlement obligations 116,755 161,343 61,938 (53,364)
Net cash provided by financing activities 111,468 246,395 40,469 13,645
Effect of exchange rate changes on cash 3,229 721 11,254 (18,380)
Net increase in cash and cash equivalents (9,250) 100,375 34,813 106,061
Cash and cash equivalents – beginning of period 267,707 123,269 223,644 117,583
Cash and cash equivalents – end of period $ 258,457 $ 223,644 $ 258,457 $ 223,644
(A) – Derived from audited financial statements
Attachment A
Operating segment revenue, operating income and operating margin:
Three months ended June 30, 2017 and 2016 and March 31, 2017
Change – constant
Change - actual exchange rate(1)
Q4 '17 Q4 '17 Q4 '17 Q4 '17
vs vs vs vs
Key segmental data, in '000, except margins Q4 '17 Q4 '16 Q3 '17 Q4'16 Q3 '17 Q4'16 Q3 '17
Revenue:
South African transaction processing .......... $67,747 $53,577 $63,967 26% 6% 11% 6%
International transaction processing .......... 45,025 47,154 41,514 (5%) 8% (16%) 8%
Financial inclusion and applied
technologies .................................. 56,220 62,071 56,881 (9%) (1%) (20%) (1%)
Subtotal: Operating segments ............. 168,992 162,802 162,362 4% 4% (9%) 4%
Intersegment eliminations ................ (13,936) (11,543) (14,418) 21% (3%) 6% (4%)
Consolidated revenue ................. $155,056 $151,259 $147,944 3% 5% (10%) 5%
Operating income (loss):
South African transaction processing .......... $14,858 $12,662 $15,531 17% (4%) 3% (5%)
International transaction processing .......... 2,016 7,793 1,968 (74%) 2% (77%) 2%
Financial inclusion and applied
technologies .................................. 14,431 13,457 14,064 7% 3% (6%) 2%
Subtotal: Operating segments ............. 31,305 33,912 31,563 (8%) (1%) (19%) (1%)
Corporate/Eliminations ................... (16,579) (1,729) (7,016) 859% 136% 742% 136%
Consolidated operating income ... $14,726 $32,183 $24,547 (54%) (40%) (60%) (40%)
Operating income margin (%)
South African transaction processing .......... 22% 24% 24%
International transaction processing .......... 4% 17% 5%
Financial inclusion and applied
technologies .................................. 26% 22% 25%
Consolidated operating margin ............ 9% 21% 17%
(1) – This information shows what the change in these items would have been if the USD/ ZAR exchange rate that prevailed during
the Q4 2017 also prevailed during Q4 2016 and Q3 2017.
Year ended June 30, 2017 and 2016
Change –
constant
Change - exchange
actual rate(1)
F2017 F2017
vs vs
Key segmental data, in '000, except margins F2017 F2016 F2016 F2016
Revenue:
South African transaction processing ......................... $249,144 $212,574 17% 11%
International transaction processing ......................... 176,729 169,807 4% (1%)
Financial inclusion and applied technologies ................. 235,901 249,403 (5%) (10%)
Subtotal: Operating segments ............................ 661,774 631,784 5% (1%)
Intersegment eliminations ............................... (51,708) (41,035) 26% 19%
Consolidated revenue ................................ $610,066 $590,749 3% (2%)
Operating income:
South African transaction processing ......................... $59,309 $51,386 15% 9%
International transaction processing ......................... 13,705 23,389 (41%) (45%)
Financial inclusion and applied technologies ................. 57,785 54,999 5% (1%)
Subtotal: Operating segments ............................ 130,799 129,774 1% (5%)
Corporate/Eliminations .................................. (33,756) (15,406) 119% 107%
Consolidated operating income ....................... $97,043 $114,368 (15%) (20%)
Operating income margin (%)
South African transaction processing ......................... 24% 24%
International transaction processing ......................... 8% 14%
Financial inclusion and applied technologies ................. 24% 22%
Overall operating margin ................................ 16% 19%
(1) – This information shows what the change in these items would have been if the USD/ ZAR exchange rate that
prevailed during fiscal 2017 also prevailed during fiscal 2016.
Attachment B
Reconciliation of GAAP net income and earnings per share, basic, to fundamental net income and earnings per share,
basic:
Three months ended June 30, 2017 and 2016
EPS, EPS,
Net income basic Net income basic
(USD'000) (USD) (ZAR'000) (ZAR)
2017 2016 2017 2016 2017 2016 2017 2016
GAAP.................................. 11,289 24,356 0.20 0.48 148,879 365,778 2.60 7.16
Former CEO separation payment,
net of tax ....................... 5,200 - 68,578 -
Intangible asset amortization, net 2,776 2,213 36,620 33,229
Stock-based compensation charge 2,050 954 27,036 14,327
South African debt-related
guarantee fees expensed........... 1,210 - 15,960 -
Transaction costs ................ 586 473 7,728 7,104
US government investigations-
related and US lawsuit expenses .. 46 - 607 -
Facility fees for KSNET debt ..... 28 35 369 526
Accounting change for Finbond... - (1,732) - (26,011)
Fundamental ................ 23,185 26,299 0.41 0.51 305,777 394,953 5.35 7.73
Year ended June 30, 2017 and 2016
EPS, EPS,
Net income basic Net income basic
(USD'000) (USD) (ZAR'000) (ZAR)
2017 2016 2017 2016 2017 2016 2017 2016
GAAP.................................. 72,954 82,454 1.34 1.72 993,504 1,186,036 18.22 24.78
Intangible asset amortization, net 10,491 8,413 142,857 120,989
Former CEO separation payment,
net of tax ....................... 5,200 - 70,814 14,643
Transaction costs ................ 3,347 1,018 45,580 14,643
Stock-based compensation charge 1,982 3,598 26,991 51,754
South African debt-related
guarantee fees expensed........... 1,172 - 15,960 51,754
Refund related to litigation
finalized in Korea, net .......... (643) - (8,756) -
US government investigations-
related and US lawsuit expenses .. 122 138 1,661 1,985
Facility fees for KSNET debt ..... 96 133 1,307 1,913
Gain resulting from acquisition of
Transact24........................ - (1,909) - (27,459)
Accounting change for Finbond... - (1,732) - (24,913)
Fundamental ................ 94,721 92,113 1.74 1.92 1,289,918 1,391,345 23.65 29.07
Attachment C
Reconciliation of net income used to calculate earnings per share basic and diluted and headline earnings per share
basic and diluted:
Three months ended June 30, 2017 and 2016
2017 2016
Net income (USD'000)..................................................................... 11,289 24,356
Adjustments: ............................................................................
Accounting change for Finbond......................................................... - (1,732)
Profit on sale of property, plant and equipment ...................................... (68) (173)
Tax effects on above ................................................................. 19 48
Net income used to calculate headline earnings (USD'000) ................................ 11,240 22,499
Weighted average number of shares used to calculate net income per share basic earnings
and headline earnings per share basic earnings ('000) ................................... 57,196 51,118
Weighted average number of shares used to calculate net income per share diluted
earnings and headline earnings per share diluted earnings ('000) ........................ 57,249 51,224
Headline earnings per share:.............................................................
Basic, in USD ........................................................................ 0.20 0.44
Diluted, in USD ...................................................................... 0.20 0.44
Year ended June 30, 2017 and 2016
2017 2016
Net income (USD'000)..................................................................... 72,954 82,454
Adjustments: ............................................................................
Gain resulting from acquisition of Transact24......................................... - (1,909)
Accounting change for Finbond......................................................... - (2,176)
Profit on sale of property, plant and equipment ...................................... (639) (286)
Tax effects on above ................................................................. 179 524
Net income used to calculate headline earnings (USD'000) ................................ 72,494 78,607
Weighted average number of shares used to calculate net income per share basic earnings
and headline earnings per share basic earnings ('000) ................................... 54,539 47,863
Weighted average number of shares used to calculate net income per share diluted
earnings and headline earnings per share diluted earnings ('000) ........................ 54,648 48,105
Headline earnings per share:.............................................................
Basic, in USD ........................................................................ 1.33 1.64
Diluted, in USD ...................................................................... 1.33 1.63
Calculation of the denominator for headline diluted earnings per share
Q4 '17 Q4 '16 F2017 F2016
Basic weighted-average common shares outstanding and unvested
restricted shares expected to vest under GAAP .................... 57,196 51,118 54,539 47,863
Effect of dilutive securities under GAAP ..................... 53 106 109 242
Denominator for headline diluted earnings per share ........ 57,249 51,224 54,648 48,105
Weighted average number of shares used to calculate headline earnings per share diluted represent the denominator for basic
weighted-average common shares outstanding and unvested restricted shares expected to vest plus the effect of dilutive
securities under GAAP. We use this number of fully-diluted shares outstanding to calculate headline earnings per share
diluted because we do not use the two-class method to calculate headline earnings per share diluted.
Johannesburg
August 25, 2017
Sponsor:
Rand Merchant Bank, a division of FirstRand Bank Limited
Date: 25/08/2017 07:45:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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