Net1 UEPS Technologies is investing more in blockchain technology, upping its stake in Liechtenstein-based Bank Frick, which recently launched a blockchain development group.
Net1 says it is buying an additional 5% interest in Bank Frick, which will up the group's ownership to 35%. Net1 has an option, exercisable until 2 October 2019, to acquire an additional 35% interest in Bank Frick.
Net1 acquired the 5% interest from the Kuno Frick Family Foundation at a premium, and this premium will be reinvested in the bank in order to establish and accelerate the expansion of a dedicated team focused on the development and various applications of blockchain technology.
"Bank Frick is progressive and has developed a range of exciting business models and products in the areas of payment, crypto-currency trading and blockchain applications, and its pipeline of new products and services is growing," says Herman Kotze, CEO of Net1.
"With blockchain in particular, we see interesting opportunities to make attractive products available for people in countries with a low concentration of banks," he adds.
Net1 says Bank Frick was the first bank in the Swiss Franc area to offer a crypto-currency certificate in the summer of 2017, allowing professional investors to add crypto-currencies to their portfolios. Bank Frick also supports and assists a large number of companies with their initial coin offerings.
"As part of our agreed digital strategy, we are striving to combine the reliability of the classic banking system with the new opportunities offered by digitisation and blockchain technology," explains Edi Wogerer, CEO of Bank Frick.
Kotze says the establishment of Bank Frick's blockchain department accelerates Net1's ability to reposition its core Universal Electronic Payment System solution at the forefront of offline and biometric blockchain technology.
"Meanwhile, our financial inclusion initiatives in South Africa are starting to bear fruit with an acceleration of our EPE offering, continuing realisation of certain synergies with Cell C and DNI, and the beta development of our new mobile banking product," Kotze adds.
Q2 slowdown
Net1 also this morning put out its results for the second quarter of the 2018 fiscal year, showing a 2% drop in revenue year-on-year, to $148 million.
Net1 has its primary listing on the Nasdaq in the United States and a secondary listing on the Johannesburg Stock Exchange, which means it reports its results in US dollars.
Fundamental earnings per share fell 9%, to $0.39 per share, for the three months ended 31 December 2017.
South African segment revenue was $64.1 million in the quarter, up 7% compared to the previous year. Net1 says the increase was primarily due to higher EPE transaction revenue as a result of increased usage of its ATMs, increased inter-segment transaction processing activities and a modest increase in the number of social welfare grants distributed.
The group gave no breakdown of the earnings of subsidiary Cash Paymaster Services (CPS), which distributes social grants on behalf of the South African Social Security Agency (SASSA).
CPS' contract to distribute social grants is up at the end of March but this week SASSA asked the Constitutional Court (ConCourt) to extend the social grants contract for another six months.
SASSA confirmed in a statement yesterday that it has filed an affidavit with the ConCourt to request the extension of the suspension of invalidity of the CPS contract to allow it time to phase out CPS and phase in a new service provider.
Net1 last year bought a 15% stake in mobile operator Cell C for R2 billion. In May 2017, Net1 announced it would acquire 49.6% of DNI-4PL Contracts (DNI), which distributes mobile subscriber starter packs for Cell C and prepaid airtime through a network of field operatives and agents.
Kotze expects the funding of both investments "to be dilutive" to Net1's full year fundamental earnings.
Meanwhile, international transaction processing revenue of $44.2 million was flat year-on-year for the quarter ended 31 December. International revenue from Masterpayment and Transact24 grew 37% year-on-year in USD. Financial inclusion and applied technologies also saw segment revenue drop by 9%, to $54.1 million in the quarter.
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