10q10k10q10k.net

What changed in LESAKA TECHNOLOGIES INC's 10-K — 2023 vs 2024

vs

Paragraph-level year-over-year comparison of LESAKA TECHNOLOGIES INC's 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+366 added−327 removedSource: 10-K (2024-09-11) vs 10-K (2023-09-12)

Top changes in LESAKA TECHNOLOGIES INC's 2024 10-K

366 paragraphs added · 327 removed · 212 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

33 edited+22 added−20 removed11 unchanged
Biggest changeOur vision is to build and operate the leading full-service fintech platform in Southern Africa, offering cash management and digitization, card acquiring and payment processing, Value Added Services (“VAS”), and growth capital to micro, small and medium enterprises (“MSME”) merchants and financial services to underserved consumers.
Biggest changeITEM 1. BUSINESS Overview Lesaka is a South African Fintech company that utilizes its proprietary banking and payment technologies to deliver financial services solutions and software to consumers and merchants in Southern Africa. Our vision is to build and operate the leading full-service fintech platform in Southern Africa.
Our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports, as well as our proxy statements, are available free of charge through the “SEC filings” portion of our website, as soon as reasonably practicable after they are filed with the SEC.
Our Annual Report, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and amendments to those reports, as well as our proxy statements, are available free of charge through the “SEC filings” portion of our website, as soon as reasonably practicable after they are filed with the SEC.
This leadership group is deeply committed to building a high-performance culture that is based on our core values and a commitment to the care and development of our people. Lesaka’s Core Values: • Entrepreneurial spirit; • Integrity; • Collective wisdom; and • A bias to action.
This leadership group is deeply committed to building a high-performance culture that is based on our core values and a commitment to the care and development of our people. Lesaka’s Core Values: • Entrepreneurial spirit; • Integrity; • Collective wisdom; • Ownership; and • A bias to action.
Heilbron has two decades of financial services experience, having spent 19 years working for Investec in South Africa and the UK, where he served as Global Head of Private Banking and Joint Chief Executive Officer of Investec. He led a private consortium that acquired Cash Connect Management Solutions (Pty) Ltd (“CCMS”) in 2013. Mr.
Mr. Heilbron has two decades of financial services experience, having spent 19 years working for Investec in South Africa and the UK, where he served as Global Head of Private Banking and Joint Chief Executive Officer of Investec Bank plc. He led a private consortium that acquired Cash Connect Management Solutions (Pty) Ltd (“CCMS”) in 2013. Mr.
Mali has been our Chief Executive Officer: Southern Africa since May 1, 2021. Mr. Mali is a financial services executive with over 25 years in the industry. Until April 2021, he was the Head of Group Card and Payments at Standard Bank Group, and previously served in many different roles within that organization since 2001. Mr.
Mali has been our Chief Executive Officer: Southern Africa since May 1, 2021. Mr. Mali is a financial services executive with over 25 years in the industry. Until April 2021, he was the Head of Group Card and Payments at Standard Bank Group, having served in many different roles within that organization since 2001. Mr.
Kola has held progressively senior finance roles in Dubai, most notably as Chief Financial Officer of the Emerging Markets Payments Group (“EMP”), a high-growth fintech business that grew materially and successfully concluded and integrated five acquisitions during his six-year tenure as Chief Financial Officer. Prior to becoming Chief Financial Officer, Mr.
Kola has progressively held senior finance roles in Dubai, most notably as Chief Financial Officer of the Emerging Markets Payments Group (“EMP”), a high-growth fintech business that grew materially and successfully concluded and integrated five acquisitions during Mr. Kola’s six-year tenure as Chief Financial Officer. Prior to becoming Chief Financial Officer, Mr.
We have no female named executive officers. We continue to strive to build a more inclusive workforce and to enhance our pay structures by taking measures to eliminate potential remuneration discrimination and to help close gender pay gaps to progress towards gender equality at work.
We have no female named executive officer. We continue to strive to build a more inclusive workforce and to enhance our pay structures by taking measures to eliminate potential remuneration discrimination and to help close gender pay gaps to progress towards gender equality at work.
The information contained on, or accessible through, our website is not incorporated into this Annual Report on Form 10-K. The SEC maintains a website at www.sec.gov that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. 9
The information contained on, or accessible through, our website is not incorporated into this Annual Report. The SEC maintains a website at www.sec.gov that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. 10
Annual increases and incentive compensation are based on merit, which is communicated to employees at onboarding and documented as part of our annual performance review process.
Annual increases and incentive compensation are based on merit, which is communicated to employees at onboarding and documented as part of our annual remuneration review process.
We have taken positive strides towards a rewards philosophy that rewards high performance, is externally benchmarked and focuses on equal people for equal work. Employee compensation programs We are committed to ensuring that all our employees are paid fair and competitive remuneration.
We have taken positive strides towards a rewards philosophy that rewards high performance, is externally benchmarked and focuses on equal pay for work of equal value. Employee compensation programs We are committed to ensuring that all our employees are paid fair and competitive remuneration.
We achieve this through our ability to efficiently digitize the last mile of financial inclusion, providing a full-service fintech platform serving both cash and digital, and facilitating the secular shift from cash to digital that is currently taking place.
We achieve this through our ability to efficiently digitalize the last mile of financial inclusion, providing a full-service fintech platform offering both cash and digital, and facilitating the secular shift from cash to digital that is currently taking place.
Merchant includes one executive officer for each of fiscal 2023 and 2022 and none for fiscal 2021. Group includes two executive officers for fiscal 2023 and three for each of fiscal 2022 and 2021.
Merchant includes one executive officer for each of fiscal 2024, 2023 and 2022. Group includes two executive officers for fiscal 2024 and 2023 and three for fiscal 2022.
To that end, we offer the following to our employees: • Access to a comprehensive medical, dental, and vision plan that our employees have the option to join; • Access to a defined contribution retirement plan that our employees have the option to join; • Paid sick, study, annual and family responsibility leave; • Maternity benefits; • Life and disability insurance coverage; • Employee assistance programs; and • Product discounts.
To that end, we offer the following to our employees: • Access to a comprehensive medical, dental, and vision plan that our employees have the option to join; • Access to a defined contribution retirement plan that our employees have the option to join; • Paid sick, study, annual and family responsibility leave; • Maternity benefits; • Life and disability insurance coverage; • Financial aid to fund tertiary education for children of employees; • Employee assistance programs; and • Product discounts.
This commitment extends to all levels of our organization, including within senior management and our board of directors. 6 As of June 30, 2023, the composition of our workforce was: • 55% female and 45% male; • 35% between 18 and 34 years old, 60% between 35 and 54 years old, and 5% over 55 years old; and • 67% Black, 11% two or more races, 7% Indian and 15% White.
This commitment extends to all levels of our organization, including within senior management and our board of directors. 7 As of June 30, 2024, the composition of our workforce was: • 55% female and 45% male; • 40% between 18 and 34 years old, 55% between 35 and 54 years old, and 5% over 55 years old; and • 69% Black, 11% two or more races, 8% Indian and 12% White.
In 2005, Lesaka completed an initial public offering and listed on the NASDAQ Stock Market. In 2008, Lesaka listed on the JSE in a secondary listing, which enabled the former Aplitec shareholders (as well as South African residents generally) to hold Lesaka common stock directly. Available information We maintain a website at www.lesakatech.com.
In 2008, Lesaka listed on the JSE in a secondary listing, which enabled the former Aplitec shareholders (as well as South African residents generally) to hold Lesaka common stock directly. Available information We maintain a website at www. lesakatech.com.
Our number of employees allocated on a segmental and group basis as of the years ended June 30, 2023, 2022 and 2021, is presented in the table below: Number of employees 2023 2022 2021 Consumer (1) 1,306 1,826 2,920 Merchant (1) 990 824 155 Total segments 2,296 2,650 3,075 Group (1) 7 7 4 Total 2,303 2,657 3,079 (1) Consumer includes one executive officer for each of fiscal 2023, 2022 and 2021.
Our number of employees allocated on a segmental and group basis as of the years ended June 30, 2024, 2023 and 2022, is presented in the table below: Number of employees 2024 2023 2022 Consumer (1) 1,333 1,306 1,826 Merchant (1) 1,189 990 824 Total segments 2,522 2,296 2,650 Group (1) 9 7 7 Total 2,531 2,303 2,657 (1) Consumer includes one executive officer for each of fiscal 2024, 2023 and 2022.
There are competitors for individual products and services, although few with an end-to-end offering, particularly at the lower socioeconomic end of the consumer market and the informal merchant market, where we have a significant footprint and penetration. In our Consumer Division, there are a number of traditional and digital providers of low-cost transactional bank accounts and micro financial services.
While there are competitors for specific products and services, few offer end-to-end solutions, particularly in the lower-income consumer market and the informal merchant market, where we have a significant footprint and strong penetration. In our Consumer Division, there are a number of traditional and digital providers of low-cost transactional bank accounts and micro financial services.
On a functional basis, four of our employees are our named executive officers, 332 were employed in sales and marketing, 253 were employed in finance and administration, 221 were employed in information technology and 1,493 were employed in operations.
On a functional basis, four of our employees are our named executive officers, 1,350 were employed in sales and marketing, 500 were employed in finance and administration, 266 were employed in information technology and 411 were employed in operations.
Heilbron has presided over significant organic growth in the rebranded Connect, as well as spearheading the successful acquisition and integration of Kazang and EFTpos acquired from the Paycorp Group in February 2020.
Heilbron has presided over significant organic growth in the rebranded Connect Group, as well as spearheading the successful acquisition and integration of Kazang and EFTpos acquired from the Paycorp Group in February 2020. He is a member of the South African Institute of Chartered Accountants.
We have implemented and regularly update human capital-related policies that are designed to ensure compliance with applicable South African laws and regulations. 7 Our Executive Officers The table below presents our executive officers, their ages and their titles: Name Age Title Chris Meyer 52 Group Chief Executive Officer and Director Naeem E.
We have implemented and regularly update human capital-related policies that are designed to ensure compliance with applicable South African laws and regulations. 8 Our Executive Officers The table below presents our executive officers, their ages and their titles: Name Age Title Ali Mazanderani 42 Executive Chairman and Director Naeem E. Kola 51 Group Chief Financial Officer and Director Lincoln C.
Revenues based on the geographic location from which the sale originated and geographic location where long-lived assets are held for the years ended June 30, are presented in the table below: Revenue (1) Long lived assets 2023 2022 2021 2023 2022 2021 $'000 $'000 $'000 $'000 $'000 $'000 South Africa 505,558 215,046 127,468 300,104 359,725 50,754 India (MobiKwik) - - - 76,297 76,297 76,297 Rest of the world 22,413 7,563 3,318 2,197 2,811 6,962 Total 527,971 222,609 130,786 378,598 438,833 134,013 (1) Refer to Note 16 to our audited consolidated financial statements included in this annual report which contains detailed financial information about our revenue for fiscal 2023, 2022 and 2021.
Revenues based on the geographic location from which the sale originated and geographic location where long-lived assets are held for the years ended June 30, are presented in the table below: Revenue (1) Long lived assets 2024 2023 2022 2024 2023 2022 $'000 $'000 $'000 $'000 $'000 $'000 South Africa 537,594 505,558 215,046 286,700 300,104 359,725 India (MobiKwik) - - - 76,297 76,297 76,297 Rest of the world 26,628 22,413 7,563 2,548 2,197 2,811 Total 564,222 527,971 222,609 365,545 378,598 438,833 (1) Refer to Note 16 to our audited consolidated financial statements included in this Annual Report which contains detailed financial information about our revenue for fiscal 2024, 2023 and 2022. 9 Corporate history Lesaka was incorporated in Florida in May 1997 as Net 1 UEPS Technologies, Inc. and changed its name to Lesaka Technologies, Inc. on May 12, 2022.
He is a member of the South African Institute of Chartered Accountants. 8 Financial Information about Geographical Areas and Operating Segments Refer to Note 21 to our audited consolidated financial statements included in this annual report contains detailed financial information about our operating segments for fiscal 2023, 2022 and 2021.
Financial Information about Geographical Areas and Operating Segments Refer to Note 21 to our audited consolidated financial statements included in this Annual Report contains detailed financial information about our operating segments for fiscal 2024, 2023 and 2022.
These include South African banks such as FNB, Standard Bank, Absa, Nedbank, African Bank and Capitec, the South African Post Bank, and digital banks such as, Tyme Bank and Bank Zero.
These include South African banks such as FNB, Standard Bank, Absa, Nedbank, African Bank and Capitec, the South African Post Bank, and digital banks such as, Tyme Bank and Bank Zero. In the South African ATM network market, we compete against the South African banks, ATM Solutions and Spark ATM Systems.
Mali holds Bachelor of Arts (BA) and Bachelor of Laws (LLB) degrees from Rhodes University, an MBA from Henley Management College, various diplomas and attended an Advanced Management Program at Harvard Business School. Steven J.
Mali holds Bachelor of Arts (BA) and Bachelor of Laws (LLB) degrees from Rhodes University, an MBA from Henley Management College, various diplomas and attended an Advanced Management Program at Harvard Business School. Steven J. Heilbron has been the Chief Executive Officer of the Connect Group since 2013 and joined us following the acquisition of Connect in the same capacity.
To the larger enterprise level merchants, we offer bill and supplier payments and VAS products through our proprietary financial switch, as well as Ingenico point of sale device and maintenance, bank and SIM card production and other specialized technology products. 4 Market Opportunity There are real challenges to delivering financial inclusion and digitization in the South African market.
To larger enterprise customers (B2B), we offer bill and supplier payments and VAS products through our proprietary financial switch, as well as point of sale device and maintenance, bank and SIM card production and other specialized technology products.
This increases loyalty, which will in turn contribute to employee retention. We offer the following development programs to enhance employee performance and skills: • unemployed and employed learnerships; • internships; • leadership development programs; • training programs; • other in-house and cross-functional training to aid with career advancement; and • succession planning – training interventions.
We offer the following development programs to enhance employee performance and skills: • unemployed and employed learnerships; • internships; • leadership development programs; • training programs; • financial assistance to pursue further studies and obtain formal qualifications; • other in-house and cross-functional training to aid with career advancement; and • succession planning – training interventions to address scarce and critical skills.
The informal sector merchants are generally smaller and operate in rural areas or in informal urban areas and do not have access to traditional banking products. The formal merchants are generally in urban areas, have larger turnovers and have access to multiple service providers. We operate separate brands in these two sectors of the economy.
Micro-merchants, or informal sector merchants, are often sole proprietors, usually with lower revenues, that operate in rural areas or in informal urban areas and do not always have access to a full-suite of traditional banking products. Merchants, or formal sector merchants, are generally in urban areas, have higher revenues and have access to multiple service providers.
In the formal merchant sector there is significantly more competition, with banks and non-bank fintech companies targeting these merchants.
In the informal merchant sector, there are no competitors which offer a comprehensive product set of cash, card, payment, VAS and capital solutions, such as ours. In the formal merchant sector there is significantly more competition, with banks and non-bank fintech companies targeting these merchants.
Our products are designed for consumers at the lower socioeconomic end of the market within Living Standards Measures (“LSMs”) 1 to 6, which comprises approximately 26 million people. We currently have approximately 1.3 million active consumers. In our B2B Merchant Division we focus on MSME operating in the informal and formal sectors of the South African economy.
Our products are designed for consumers at the lower socioeconomic end of the market within Living Standards Measures (“LSMs”) 1 to 6, which comprises approximately 26 million people as of 2023 (according to a report by Genesis Analytics). As of the date of this Annual Report, we have approximately 1.5 million active consumer customers.
Meyer is a member of the South African Institute of Chartered Accountants, holds an MSc Finance from the London Business School and a Post Graduate Diploma in Accounting from the University of Cape Town. Naeem E. Kol a has been our Group Chief Financial Officer, Treasurer and Secretary since March 1, 2022. Mr.
He holds postgraduate degrees in Economics from the University of Pretoria, Oxford University and the London School of Economics, an MBA from INSEAD and a Masters in Business Law from the University of St Gallen. Naeem E. Kol a has been our Group Chief Financial Officer since March 1, 2022. Mr.
Corporate history Lesaka was incorporated in Florida in May 1997 as Net 1 UEPS Technologies, Inc. and changed its name to Lesaka Technologies, Inc. on May 12, 2022. In 2004, Lesaka acquired Net1 Applied Technology Holdings Limited (“Aplitec”), a public company listed on the Johannesburg Stock Exchange (“JSE”).
In 2004, Lesaka acquired Net1 Applied Technology Holdings Limited (“Aplitec”), a public company listed on the Johannesburg Stock Exchange (“JSE”). In 2005, Lesaka completed an initial public offering and listed on the NASDAQ Stock Market.
ITEM 1. BUSINESS Overview At Lesaka, our core purpose is to improve people’s lives by bringing financial inclusion to South Africa’s underserved consumers and merchants.
Our core purpose is to provide financial services to Southern Africa’s underserviced consumers and merchants, improving people’s lives and increasing financial inclusion in the markets in which we operate.
In our Merchant Division, to informal and formal MSME customers, we offer cash management and digitization through our proprietary vault technology, card acquiring, innovative growth capital, bill and supplier payment solutions, and a wide range of VAS products for our merchants to sell.
Products To micro-merchant and merchant customers (B2B), we offer cash management and digitalization solutions through our proprietary vault technology, card acceptance, supplier payments, software services, lending, prepaid accounts and bill payments to empower merchants to grow their businesses and transact more efficiently.
Removed
Lesaka uses its proprietary banking and payment technologies to distribute low-cost financial and value-added services to small businesses, primarily in the informal sector, and to consumers, the majority of whom are grant beneficiaries, both largely excluded from financial services.
Added
We offer a wide range of solutions including transactional accounts (banking), lending, insurance, cash management solutions, card acceptance, supplier payments, software services and bill payments. By providing a full-service fintech platform in our connected ecosystem, we facilitate the digitization of commerce in our markets.
Removed
Our dual-sided financial ecosystem has two overlapping divisions: Merchants and Consumers. 3 Customers — In our B2C Consumer Division we focus specifically on South Africa’s social grant beneficiaries, who have historically been excluded from traditional financial services.
Added
In May 2024 we announced the acquisition of Adumo RF (Pty) Ltd (“Adumo”), an acquisition subject to satisfaction of customary closing conditions, expected to close in October 2024. The acquisition continues Lesaka’s consolidation in the Southern African fintech sector and enhances Lesaka's strengths in both the consumer and merchant markets.
Removed
The informal market consists of approximately 1.4 million merchants and the formal market approximately 700,000 merchants. Our Merchant Division currently has over 82,000 customers using our solutions. Products —We offer a comprehensive set of products and services to our consumer and merchant customers.
Added
Reportable Segments We operate through two divisions: Our B2C Consumer Division (“Consumer”) and our B2B Merchant Division (“Merchant”). Within these two divisions, Lesaka has four broad customer types: consumers, micro-merchants, merchants, and enterprise clients. While there are mutually reinforcing dynamics and overlap between our verticals, within each vertical, we offer distinct brands with unique value propositions.
Removed
In our Consumer Division, our products include transactional banking, short-term loans, a digital wallet as well as insurance and various VAS to underserved consumers in South Africa, aligning with our purpose of improving people’s lives and increasing financial inclusion. Our value proposition and products are designed to be simple, relevant and cost effective for our target market.
Added
Our platform addresses a wide range of customers that are not generally serviced by our competitors, an advantage that we use to benefit from economies of scale. We believe that we deliver high quality products that provide excellent value to our customers.
Removed
One of these major challenges is the deep distrust and a lack of understanding of cash alternatives, which is driven by low levels of financial literacy. Adding to this challenge are the relatively high connectivity costs and the low smartphone penetration in South Africa, where many South Africans still use older style feature phones.
Added
While we operate in competed markets, we believe that we are unique in offering a comprehensive product portfolio, serving both formal and informal consumers and merchants with omnichannel financial services through physical and digital touchpoints. 3 Consumer (B2C) Customers Through Consumer we focus on individuals who have historically been excluded from traditional financial services.
Removed
Together, this means that although almost 90% of South Africans have a bank account, a significant majority treat them as post boxes and withdraw all their money in one transaction. This has real implications for both merchants and consumers.
Added
Products We offer consumers transactional accounts (banking), insurance, lending (short-term loans), payments solutions (digital wallet) and various value-added services to underserved consumers in South Africa.
Removed
For merchants this means less than 8% have access to formal credit and less than 4% of informal merchants are able to accept digital payments.
Added
Our value proposition and products are designed to be simple, relevant and cost effective for our target market. 4 Merchant (B2B) Customers Through Merchant, we focus on micro-merchants, merchants and enterprises operating in the informal and formal sectors of the Southern African economy.
Removed
For consumers, only an estimated 20% of the approximately 26 million South African consumers in LSM 1-6 have access to credit and savings, and a significant majority of the 12 million permanent social grant recipients require immediate cash withdrawals of their grant.
Added
Enterprises are large-scale corporate and government organizations, including but not limited to banks, mobile network operators (“MNOs”) and municipalities. Including micro-merchants and merchants, there are more than 2.7 million merchants in South Africa, of which more than 890,000 merchants are immediately serviceable merchants for Lesaka.
Removed
These sources of friction and challenges present a significant market opportunity for Lesaka to provide innovative solutions to both merchants and consumers, and more importantly, to facilitate wider financial inclusion and digitization. Lesaka has for a long time been at the forefront of providing financial inclusion and digitization for consumers and merchants in this space.
Added
Merchant currently has over 96,600 customers in Southern Africa, of which more than 87,000 are in South Africa (this excludes the impact of the Adumo acquisition, not effective at June 30, 2024 and expected to close in October 2024).
Removed
Consumer financial services for the unbanked: Our focus is on the LSM 1 to 6 population in South Africa, which represents approximately 26 million adults in the country. Within that, we estimate there to be approximately 12 million people reliant on permanent grants. South Africa is primarily a cash-based economy, with approximately 60% of transactions still conducted in cash.
Added
Market Opportunity Our primary market is currently South Africa with its approximately 62 million population and $381 billion economy (GDP, according to IMF World Economic Outlook Database as of October 2023).
Removed
In the Consumer Division, we currently have 1.3 million active account holders which represents approximately 4% share of our total addressable market. Our focus is on South African government social grant recipients the majority of whom are being inadequately served by the current system.
Added
With the acquisition of Adumo (an acquisition subject to regulatory approvals and satisfaction of customary closing conditions, expected to close in October 2024) we augment our presence in South Africa, Namibia, Botswana and Zambia and expand into Kenya.
Removed
Lesaka is well placed to address the needs of these consumers with its large informal market distribution and affordable financial services.
Added
Together this represents a 140 million population addressable market, larger than that of Mexico or Japan (GDP according to IMF World Economic Outlook Database as of October 2023). 5 Over the past decade, both financial inclusion and smartphone penetration throughout the region have grown significantly.
Removed
Merchant payment solutions and financial services for MSMEs: There are approximately 2.1 million MSMEs in South Africa, of which around 1.4 million operate in the informal market, and it is estimated that only 4% of these can accept digital payments.
Added
According to a report by Genesis Analytics, between 2015 and 2023, the proportion of low-income workers in South Africa that had used a debit card to transact rose from 17% to 50%.
Removed
Lesaka has a comprehensive product suite of cash and digital solutions which provide a significant opportunity to assist these businesses to grow, reduce cash related operating risks and become more efficient.
Added
According to the same report, between 2015 and 2021, the proportion of South Africans accessing online banking services increased from 31% to 55%, and between 2018 and 2024, smartphone penetration increased from 55% to 76%.
Removed
This is an underserved market and increasing our penetration is more about providing solutions that encourage the adoption of more formalized and non-cash transacting than about taking market share from competitors.
Added
These favorable tailwinds have helped position Africa as the fastest-growing Fintech market globally, according to a report by Boston Consulting Group that projects growth in the African Fintech revenue pool to grow by 13 times between 2021 and 2030.
Removed
While the informal market presents a major growth opportunity, Lesaka also has a comprehensive offering to the formal MSME and enterprise market. 5 Competition With our comprehensive offering to consumers and merchants we compete with a wide range of service providers.
Added
Given the significant challenges in delivering financial services in Southern Africa; however, many service providers in our markets continue to rely on expensive and unreliable legacy systems and focus on narrow customer segments with mono-line (single- line) products.
Removed
In the South African ATM network market, we compete against the South African banks, ATM Solutions and Spark ATM Systems, which collectively have a market share in excess of 90%. In the informal merchant sector, there are no competitors which offer a comprehensive product set of cash, card, payment, VAS and capital solutions, such as ours.
Added
We believe that this presents a significant opportunity for Lesaka to build and operate the leading full-service Fintech platform in Southern Africa, empowering underserviced consumers and merchants by delivering innovative financial services focused on their specific needs. 6 Competition With our comprehensive offerings to both consumers and merchants, we compete with a wide range of service providers.
Removed
Kola 50 Group Chief Financial Officer, Treasurer, Secretary, and Director Lincoln C. Mali 55 Chief Executive Officer: Southern Africa, and Director Steven J. Heilbron 58 Executive, and Director Christopher Meyer has been our Group Chief Executive Officer since July 1, 2021. Prior to joining Lesaka, Mr.
Added
This increases loyalty, which will in turn contribute to employee retention.
Removed
Meyer was the Head of Corporate & Investment Banking and Joint Managing Director at Investec Bank Plc (“Investec”), an LSE-listed specialist bank and wealth manager, having served in many different roles within the Investec Group since 2001. He was also an executive director for various international and regional subsidiaries of Investec Bank Plc. Mr.
Added
Mali 56 Chief Executive Officer: Southern Africa and Director Steven J. Heilbron 59 Executive and Director Ali Mazanderani has been our Executive Chairman since February 1, 2024. He is a fintech investor and entrepreneur. He is the co-founder and chairman of Teya, a pan-European fintech.
Removed
Heilbron has been the Chief Executive Officer of the Connect Group since 2013 and joined us following the acquisition of Connect in April 2022 in the same capacity. Mr.
Added
He is also a non-executive director on the board of several companies including Thunes (Singapore based private fintech), Kushki (Latin American payments company) and is the president of The European Digital Payments Industry Alliance (EDPIA).
Added
He was previously on the board of several other leading payments companies globally including StoneCo (Nasdaq: STNE) in Brazil and Network International Holdings Plc (LSE:NETW) in the Middle East. He was formerly a Partner at Actis, a London-based emerging market private equity firm, where he led multiple landmark fintech investments globally. Prior to his career at Actis, Mr.
Added
Mazanderani advised private equity and corporate clients for OC&C Strategy Consultants in London and served as lead strategy consultant for First National Bank based in Johannesburg.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

56 edited+26 added−28 removed154 unchanged
Biggest changeThe retaliatory measures that have been taken, and could be taken in the future, by the U.S., NATO, and other countries have created global security concerns that could result in broader European military and political conflicts and otherwise have a substantial impact on regional and global economies, any or all of which could adversely affect our business. 11 While the broader consequences are uncertain at this time, the continuation and/or escalation of the Russian and Ukraine conflict, along with any expansion of the conflict to surrounding areas, create a number of risks that could adversely impact our business, including: • increased inflation and significant volatility in the macroeconomic environment; • disruptions to our technology infrastructure, including through cyberattacks, ransom attacks or cyber-intrusion; • adverse changes in international trade policies and relations; • disruptions in global supply chains; and • constraints, volatility or disruption in the credit and capital markets.
Biggest changeWhile the broader consequences are uncertain at this time, the continuation and/or escalation of the Russian and Ukraine and Israel- Hamas conflicts, along with any expansion of the conflict to surrounding areas, create a number of risks that could adversely impact our business, including: • increased inflation and significant volatility in the macroeconomic environment; • disruptions to our technology infrastructure, including through cyberattacks, ransom attacks or cyber-intrusion; • adverse changes in international trade policies and relations; • disruptions in global supply chains; and • constraints, volatility or disruption in the credit and capital markets.
In particular, we may be held liable for the actions that our local, strategic or joint venture partners take inside or outside of the United States, even though our partners may not be subject to these laws. Such a violation, even if our policies prohibit it, could materially and adversely affect our reputation, business, results of operations and financial condition.
In particular, we may be held liable for the actions that our local, strategic or joint venture partners take inside or outside of the United States, even though our partners may not be subject to these laws. Such a violation, even if our policies prohibit it, could materially and adversely affect our reputation, business, results of operations and financial condition.
If this were to occur, we might not be able to obtain waivers of default or to refinance the debt with another lender and as a result, our business and financial condition would suffer. 12 We may not be able to extend the terms of these debt facilities or refinance them, in each case, on commercially reasonable terms or at all.
If this were to occur, we might not be able to obtain waivers of default or to refinance the debt with another lender and as a result, our business and financial condition would suffer. We may not be able to extend the terms of these debt facilities or refinance them, in each case, on commercially reasonable terms or at all.
We cannot guarantee that we will enter into hedging transactions in the future or, if we do, that these transactions will successfully protect us against currency fluctuations. 17 South Africa’s high levels of poverty, unemployment and crime may increase our costs and impair our ability to maintain a qualified workforce While South Africa has a highly developed financial and legal infrastructure, it also has high levels of crime and unemployment, relative to peer countries in Africa and other emerging economies, and there are significant differences in the level of economic and social development among its people, with large parts of the population, particularly in rural areas, having limited access to adequate education, healthcare, housing and other basic services, including water and electricity.
We cannot guarantee that we will enter into hedging transactions in the future or, if we do, that these transactions will successfully protect us against currency fluctuations. 18 South Africa’s high levels of poverty, unemployment and crime may increase our costs and impair our ability to maintain a qualified workforce While South Africa has a highly developed financial and legal infrastructure, it also has high levels of crime and unemployment, relative to peer countries in Africa and other emerging economies, and there are significant differences in the level of economic and social development among its people, with large parts of the population, particularly in rural areas, having limited access to adequate education, healthcare, housing and other basic services, including water and electricity.
While we focus our business primarily on emerging markets because that is where we perceive the greatest opportunities to market our products and services successfully, the political, economic and market conditions these markets present risks that could make it more difficult to operate our business successfully.
While we focus our business primarily on emerging markets because that is where we perceive the greatest opportunities to market our products and services successfully, the political, economic and market conditions in these markets present risks that could make it more difficult to operate our business successfully.
A supply interruption, such as the current global shortage of semiconductors, or an increase in demand beyond current suppliers’ capabilities could harm our ability to distribute our equipment and thus to acquire new customers who use our technology.
A supply interruption, such as the recent global shortage of semiconductors, or an increase in demand beyond current suppliers’ capabilities could harm our ability to distribute our equipment and thus to acquire new customers who use our technology.
We may need to record a write-down of the carrying value of our investment in MobiKwik in the future (i) if it is unable to successfully complete its contemplated initial public offering, (ii) due to fluctuations in its market price upon listing, including during the lock up period after its initial public offering, or (iii) if it has not listed, there is an observable transaction indicating a fair value per share which is lower than our June 30, 2023 price per share.
We may need to record a write-down of the carrying value of our investment in MobiKwik in the future (i) if it is unable to successfully complete its contemplated initial public offering, (ii) due to fluctuations in its market price upon listing, including during the lock up period after its initial public offering, or (iii) if it has not listed, there is an observable transaction indicating a fair value per share which is lower than our June 30, 2024 price per share.
This facility contains customary covenants that require the borrowing parties to collectively maintain a specified capital adequacy ratio, restrict the ability of the entities to make certain distributions with respect to their capital stock, encumber their assets, incur additional indebtedness, make investments, engage in certain business combinations and engage in other corporate activities. 10 These security arrangements and covenants may reduce our operating flexibility or our ability to engage in other transactions that may be beneficial to us.
This facility contains customary covenants that require the borrowing parties to collectively maintain a specified capital adequacy ratio, restrict the ability of the entities to make certain distributions with respect to their capital stock, encumber their assets, incur additional indebtedness, make investments, engage in certain business combinations and engage in other corporate activities. 11 These security arrangements and covenants may reduce our operating flexibility or our ability to engage in other transactions that may be beneficial to us.
Compliance with the requirements under the various regulatory regimes may cause us to incur significant additional costs and failure to comply with such requirements could result in the shutdown of the non-complying facility, the imposition of liens, fines and/or civil or criminal liability. 18 We are required to comply with anti-corruption laws and regulations, including the FCPA and UK Bribery Act, in the jurisdictions in which we operate our business, which could adversely impact our future growth.
Compliance with the requirements under the various regulatory regimes may cause us to incur significant additional costs and failure to comply with such requirements could result in the shutdown of the non-complying facility, the imposition of liens, fines and/or civil or criminal liability. 19 We are required to comply with anti-corruption laws and regulations, including the FCPA and UK Bribery Act, in the jurisdictions in which we operate our business, which could adversely impact our future growth.
If SASSA or another third party were to seek and ultimately succeed in obtaining a judgment against us in respect of CPS’ liabilities, any such judgment would have a material adverse effect on our financial condition, results of operations and cash flows. 14 Defending our intellectual property rights or defending ourselves in infringement suits that may be brought against us is expensive and time-consuming and may not be successful.
If SASSA or another third party were to seek and ultimately succeed in obtaining a judgment against us in respect of CPS’ liabilities, any such judgment would have a material adverse effect on our financial condition, results of operations and cash flows. 15 Defending our intellectual property rights or defending ourselves in infringement suits that may be brought against us is expensive and time-consuming and may not be successful.
Many of our competitors are well-established, represented nationally and market similar products and we therefore may not be able to effectively penetrate the South African insurance market. 15 Risks Relating to Operating in South Africa and Other Foreign Markets Operating in Southern Africa, an emerging market, subjects us to greater risks than those we would face if we operated in more developed markets.
Many of our competitors are well-established, represented nationally and market similar products and we therefore may not be able to effectively penetrate the South African insurance market. 16 Risks Relating to Operating in South Africa and Other Foreign Markets Operating in Southern Africa, an emerging market, subjects us to greater risks than those we would face if we operated in more developed markets.
Annexure EEA9 to the Employment Equity Regulations sets out the various occupational levels which are determined in accordance with the relevant grading systems applied by the measured entity and referred to in said Annexure. 16 We have taken a number of actions as a company to increase empowerment of Black (as defined under applicable regulations) South Africans.
Annexure EEA9 to the Employment Equity Regulations sets out the various occupational levels which are determined in accordance with the relevant grading systems applied by the measured entity and referred to in said Annexure. 17 We have taken a number of actions as a company to increase empowerment of Black (as defined under applicable regulations) South Africans.
Furthermore, we expect that it will take us, and other financial services providers, some time to fully understand, interpret and implement this new legislation in our lending processes and practices. Non-compliance with the provisions of this new legislation may result in financial loss and penalties, reputational loss or other administrative punishment.
Furthermore, we expect that it will take us, and other credit providers, some time to fully understand, interpret and implement this new legislation in our lending processes and practices. Non-compliance with the provisions of this new legislation may result in financial loss and penalties, reputational loss or other administrative punishment.
The award of punitive damages is governed by the relevant South African legislation, the Conventional Penalties Act 15 of 1962 (as amended). 22 Whether a judgment was contrary to public policy depends on the facts of each case. Exorbitant, unconscionable, or excessive awards will generally be contrary to public policy.
The award of punitive damages is governed by the relevant South African legislation, the Conventional Penalties Act 15 of 1962 (as amended). 23 Whether a judgment was contrary to public policy depends on the facts of each case. Exorbitant, unconscionable, or excessive awards will generally be contrary to public policy.
Furthermore, the Rules of the High Court of South Africa require that documents executed outside South Africa must be authenticated for the purpose of use in South African courts. In reaching the foregoing conclusions in respect of South Africa, we consulted with our South African legal counsel, Werksmans Inc. 23 ITEM 1B. UNRESOLVED STAFF COMMENTS None.
Furthermore, the Rules of the High Court of South Africa require that documents executed outside South Africa must be authenticated for the purpose of use in South African courts. In reaching the foregoing conclusions in respect of South Africa, we consulted with our South African legal counsel, Werksmans Inc. 24 ITEM 1B. UNRESOLVED STAFF COMMENTS None.
This BEE verification process must be conducted on an annual basis, and the resultant BEE verification certificate is only valid for a period of 12 months from the date of issue of the verification certificate. We currently have a level 5 BEE rating for our South African business.
This BEE verification process must be conducted on an annual basis, and the resultant BEE verification certificate is only valid for a period of 12 months from the date of issue of the verification certificate. We currently have a level 4 BEE rating for our South African business.
The value of our investment in MobiKwik as of June 30, 2023 and 2022, was $76.3 million and was determined based on a share issuance concluded by MobiKwik in June 2021, implying a fair value per equity share of $12.275.
The value of our investment in MobiKwik as of June 30, 2024 and 2023, was $76.3 million and was determined based on a share issuance concluded by MobiKwik in June 2021, implying a fair value per equity share of $12.275.
All of these risks could materially and adversely affect our business and results of operations. We are continuing to monitor the situation in Ukraine and globally and assessing the potential impact on our business. A prolonged economic slowdown or lengthy or severe recession in South Africa or elsewhere could harm our operations.
All of these risks could materially and adversely affect our business and results of operations. We are continuing to monitor the situation in Ukraine and the Middle East and globally and assessing the potential impact on our business. 13 A prolonged economic slowdown or lengthy or severe recession in South Africa or elsewhere could harm our operations.
Our response to any such offer could also be complicated, delayed or otherwise influenced by the existence of the put right. Approximately 37% of our outstanding common stock is owned by two shareholders. The interests of these shareholders may conflict with those of our other shareholders.
Our response to any such offer could also be complicated, delayed or otherwise influenced by the existence of the put right. 21 Approximately 35% of our outstanding common stock is owned by two shareholders. The interests of these shareholders may conflict with those of our other shareholders.
The requirement to evaluate and report on our internal controls also applies to companies that we acquire. Some of these companies may not be required to comply with Sarbanes prior to the time we acquire them.
The requirement to evaluate and report on our internal controls also applies to companies that we acquire. Some of these companies, such as Adumo, may not be required to comply with Sarbanes prior to the time we acquire them.
Our Smart Life business exposes us to risks typically experienced by life assurance companies. Smart Life is a life insurance company and exposes us to risks typically experienced by life assurance companies.
Our EasyPay Insurance business exposes us to risks typically experienced by life assurance companies. EasyPay Insurance is a life insurance company and exposes us to risks typically experienced by life assurance companies.
Within our merchant lending operations, we have borrowing arrangements through Cash Connect Capital (Pty) Limited (“CCC”). CCC has a ZAR 300 million revolving credit facility agreement. We have utilized approximately ZAR 222.3 million as of June 30, 2023.
Within our merchant lending operations, we have borrowing arrangements through Cash Connect Capital (Pty) Limited (“CCC”). CCC has a ZAR 300 million revolving credit facility agreement . We have utilized approximately ZAR 215.3 million as of June 30, 2024.
There is a concentration of ownership of our outstanding common stock because approximately 37% of our outstanding common stock is owned by two shareholders.
There is a concentration of ownership of our outstanding common stock because approximately 35% of our outstanding common stock is owned by two shareholders.
Based on their most recent SEC filings disclosing ownership of our shares, Value Capital Partners (Pty) Ltd, or VCP, and IFC Investors, beneficially own approximately 25% and 12% of our outstanding common stock as of June 30, 2023, respectively. The interests of VCP and the IFC Investors may be different from or conflict with the interests of our other shareholders.
Based on their most recent SEC filings disclosing ownership of our shares, Value Capital Partners (Pty) Ltd, or VCP, and IFC Investors, beneficially own approximately 24% and 11% of our outstanding common stock as of June 30, 2024, respectively. The interests of VCP and the IFC Investors may be different from or conflict with the interests of our other shareholders.
If we are unable to comply with these covenants, we could default on this debt, which would have a material adverse effect on our business and financial condition. As of June 30, 2023, we had aggregate long-term borrowing outstanding of ZAR 2.5 billion ($133.1 million translated at exchange rates as of June 30, 2023).
If we are unable to comply with these covenants, we could default on this debt, which would have a material adverse effect on our business and financial condition. As of June 30, 2024, we had aggregate long-term borrowing outstanding of ZAR 2.6 billion ($143.2 million translated at exchange rates as of June 30, 2024).
Under Section 404 of the Sarbanes-Oxley Act of 2002, or Sarbanes, we are required to furnish a management certification and auditor attestation regarding the effectiveness of our internal control over financial reporting.
Under Section 404 of Sarbanes, we are required to furnish a management certification and auditor attestation regarding the effectiveness of our internal control over financial reporting.
We expect that the trading price of our common stock may continue to be volatile as a result of a number of factors, including, but not limited to the following: • any adverse developments in litigation or regulatory actions in which we are involved; • fluctuations in currency exchange rates, particularly the U.S. dollar/ZAR exchange rate; • announcement of additional BEE transactions, especially one involving the issuance or potential issuance of equity securities or dilution or sale of our existing business in South Africa; • quarterly variations in our operating results; • significant fair value adjustments or impairment in respect of investments or intangible assets; • announcements of acquisitions or disposals; • the timing of, or delays in the commencement, implementation or completion of major projects; • large purchases or sales of our common stock; and • general conditions in the markets in which we operate. 20 Additionally, shares of our common stock can be expected to be subject to volatility resulting from purely market forces over which we have no control.
We expect that the trading price of our common stock may continue to be volatile as a result of a number of factors, including, but not limited to the following: • any adverse developments in litigation or regulatory actions in which we are involved; • fluctuations in currency exchange rates, particularly the U.S. dollar/ZAR exchange rate; • announcement of additional BEE transactions, especially one involving the issuance or potential issuance of equity securities or dilution or sale of our existing business in South Africa; • quarterly variations in our operating results; • significant fair value adjustments or impairment in respect of investments or intangible assets; • announcements of acquisitions or disposals; • the timing of, or delays in the commencement, implementation or completion of major projects; • large purchases or sales of our common stock; and • general conditions in the markets in which we operate.
Security vulnerabilities could jeopardize the security of information transmitted using our solutions. If the security of our solutions is compromised, our reputation and marketplace acceptance of our solutions may be adversely affected, which would cause our business to suffer, and we may become subject to damage claims. We have not yet experienced any significant security breaches affecting our business.
If the security of our solutions is compromised, our reputation and marketplace acceptance of our solutions may be adversely affected, which would cause our business to suffer, and we may become subject to damage claims. We have not yet experienced any significant security breaches affecting our business.
While we believe that our financial services offerings are convenient and cost-effective, the success of our strategy will depend on the extent to which we successfully market our offering to grow the customer base.
Our strategy involves significantly expanding this base over the coming years. While we believe that our financial services offerings are convenient and cost-effective, the success of our strategy will depend on the extent to which we successfully market our offering to grow the customer base.
These factors may allow them to offer better pricing terms or incentives to customers, which could result in a loss of our potential or current customers and/or force us to lower our prices.
These factors may allow them to offer better pricing terms or incentives to customers, which could result in a loss of our potential or current customers and/or force us to lower our prices. Either of these actions could have a significant effect on our revenues and earnings.
If our actual claims experience is higher than our estimates, as we have seen during the recent COVID-19 pandemic, our financial position, results of operations and cash flows could be adversely affected. Finally, the South African insurance industry is highly competitive.
If our actual claims experience is higher than our estimates, our financial position, results of operations and cash flows could be adversely affected. Finally, the South African insurance industry is highly competitive.
Connect’s credit facilities include (i) an overdraft facility (general banking facility) of ZAR 205.0 million (of which ZAR 170.0 million has been utilized); (ii) Facility A of ZAR 700.0 million; (iii) Facility B of ZAR 550.0 million (both fully utilized); and (iv) an asset-backed facility of ZAR 200.0 million (of which ZAR 149.1 million has been utilized).
Connect’s credit facilities include (i) an overdraft facility (general banking facility) of ZAR 205.0 million (of which ZAR 170.0 million has been utilized); (ii) Facility A of ZAR 705.5 million; (iii) Facility B of ZAR 550.0 million (both fully utilized and ZAR 512.5 million outstanding after scheduled repayments); and (iv) an asset-backed facility of ZAR 200.0 million (of which ZAR 152.3 million has been utilized).
MobiKwik filed its draft red herring prospectus in July 2021, with the original intention of completing its initial public offering in November 2021. However, MobiKwik decided to delay its initial public offering given prevailing market conditions at the time and has indicated its intention to pursue an initial public listing in calendar 2024.
However, MobiKwik delayed its initial public offering given prevailing market conditions at the time and has indicated its intention to pursue an initial public listing in calendar 2024. MobiKwik filed its draft red herring prospectus in January 2024.
We believe our management team has the right experience and skills to execute on our strategy. However, in order to succeed in our product development and marketing efforts, we may need to identify and attract new qualified technical and sales personne l, as well as motivate and retain our existing employees.
However, in order to succeed in our product development and marketing efforts, we may need to identify and attract new qualified technical and sales personne l, as well as motivate and retain our existing employees.
We incorporate security features, including encryption software, biometric identification and secure hardware, into our solutions to protect against fraud in electronic transactions and to provide for the privacy and integrity of cardholder data. Our solutions may be vulnerable to breaches in security due to defects in the security mechanisms, the operating system and applications or the hardware platform.
We incorporate security features, including encryption software, biometric identification and secure hardware, into our solutions to protect against fraud in electronic transactions and to provide for the privacy and integrity of cardholder data.
Furthermore, we have to comply with the strict anti-money laundering and customer identification regulations of the South African Reserve Bank (“SARB”), when we open new bank accounts for our customers and when they transact. Failure to effectively implement and monitor responses to these regulations may result in significant fines or prosecution of Grindrod Bank and ourselves.
Furthermore, we have to comply with the South African Financial Intelligence Centre Act, 2001 and money laundering and terrorist financing control regulations, when we open new bank accounts for our customers and when they transact. Failure to effectively implement and monitor responses to the legislation and regulations may result in significant fines or prosecution of Grindrod Bank and ourselves.
We may face competition from other companies that offer innovative payment technologies and payment processing, which could result in the loss of our existing business and adversely impact our ability to successfully market additional products and services.
A significant amount of judgment is required to assess the ultimate recoverability of these microfinance loan receivables. 14 We may face competition from other companies that offer innovative payment technologies and payment processing, which could result in the loss of our existing business and adversely impact our ability to successfully market additional products and services.
The put right we granted to the IFC Investors on the occurrence of certain triggering events may have adverse impacts on us. In May 2016, we issued an aggregate of 9,984,311 shares of our common stock to the IFC Investors, of which, as of June 30, 2023, the IFC Investors held 7,366,866 shares.
In May 2016, we issued an aggregate of 9,984,311 shares of our common stock to the IFC Investors, of which, as of June 30, 2024, the IFC Investors held 7,366,866 shares.
Geopolitical conflicts, including the conflict between Russia and Ukraine, may adversely affect our business and results of operations. The current conflict between Russia and Ukraine is creating substantial uncertainty about the future of the global economy. Countries across the globe are instituting sanctions and other penalties against Russia.
The current conflict between Russia and Ukraine and between Israel and Hamas are creating substantial uncertainty about the future of the global economy. Countries across the globe are instituting sanctions and other penalties against Russia.
Eskom has implemented a number of short- and long- term mitigation plans to correct these issues but supply disruptions continue to occur regularly and with no predictability.
Eskom has implemented a number of short- and long- term mitigation plans to correct these issues but supply disruptions continued to occur regularly and with no predictability in recent years, although consistency of electricity supply has improved significantly since April 2024.
However, additional allowances may be required should the ability of our customers to make payments when due deteriorate in the future. A significant amount of judgment is required to assess the ultimate recoverability of these microfinance loan receivables.
However, additional allowances may be required should the ability of our customers to make payments when due deteriorate in the future.
Smart Life was granted an Authorized Financial Service Provider, or FSP, license on June 9, 2015, and EasyPay Financial Services (Pty) Ltd and Net1 Mobile Solutions (Pty) Ltd were each granted FSP licenses on July 11, 2017.
EasyPay Insurance was granted a Financial Service Provider, or FSP, license on June 9, 2015, and EasyPay Financial Services (Pty) Ltd was granted a FSP license on July 11, 2017.
Either of these actions could have a significant effect on our revenues and earnings. 13 Our future success will depend in part on our ability to attract, integrate, retain and incentivize key personnel and a sufficient number of skilled employees, particularly in the technical, sales and senior management areas.
Our future success will depend in part on our ability to attract, integrate, retain and incentivize key personnel and a sufficient number of skilled employees, particularly in the technical, sales and senior management areas. We believe our management team has the right experience and skills to execute on our strategy.
If our FSP licenses are cancelled, we may be stopped from continuing our financial services businesses in South Africa unless we are able to enter into a representative arrangement with a third party FSP. Furthermore, the proposed Conduct of Financial Institutions Bill will make significant changes to the current licensing regime.
If our FSP licenses are withdrawn or suspended, we may be stopped from continuing our financial services businesses in South Africa unless we are able to enter into a representative arrangement with a third party FSP.
However, we may not be able to locate suitable acquisition candidates at prices that we consider appropriate. If we do identify an appropriate acquisition candidate, we may not be able to successfully negotiate the terms of the transaction, finance it or, if the transaction occurs, integrate the new business into our existing business.
If we do identify an appropriate acquisition candidate, we may not be able to successfully negotiate the terms of the transaction, finance it or, if the transaction occurs, integrate the new business into our existing business. These transactions may require debt financing or additional equity financing, resulting in additional leverage or dilution of ownership.
We may undertake acquisitions that could increase our costs or liabilities or be disruptive to our business. Acquisitions are an integral part of our new growth strategy as we seek to expand our business and deploy our technologies in new markets in Southern Africa.
Acquisitions are an integral part of our new growth strategy as we seek to expand our business and deploy our technologies in new markets in Southern Africa. However, we may not be able to locate suitable acquisition candidates at prices that we consider appropriate.
Following the conclusion of our contract with SASSA, we refocused our resources and technology on the provision of financial inclusion services to our target market and currently have an established base of approximately 1.3 million customers of which approximately 1.1 million are permanent grant recipients. Our strategy involves significantly expanding this base over the coming years.
We need to significantly grow our consumer operations in order to ensure their profitability and long- term sustainability. Following the conclusion of our contract with SASSA, we refocused our resources and technology on the provision of financial inclusion services to our target market and currently have an established base of approximately 1.5 million customers.
However, it is possible that these actions may not be sufficient to enable us to achieve the applicable BEE objectives set out for specific financial years.
Our donations to this fund included food, blankets, and replacements for personal belongings and household goods, helping community members recover and regain economic stability. However, it is possible that these and other actions may not be sufficient to enable us to achieve the applicable BEE objectives set out for specific financial years.
These transactions may require debt financing or additional equity financing, resulting in additional leverage or dilution of ownership. Acquisitions of businesses or other material operations and the integration of these acquisitions or their businesses will require significant attention from members of our senior management team, which may divert their attention from our day-to-day business.
Acquisitions of businesses or other material operations and the integration of these acquisitions or their businesses will require significant attention from members of our senior management team, which may divert their attention from our day-to-day business. The difficulties of integration may be increased by the necessity of integrating personnel with disparate business backgrounds and combining different corporate cultures.
The difficulties of integration may be increased by the necessity of integrating personnel with disparate business backgrounds and combining different corporate cultures. We also may not be able to retain key employees or customers of an acquired business or realize cost efficiencies or synergies or other benefits that we anticipated when selecting our acquisition candidates.
We also may not be able to retain key employees or customers of an acquired business or realize cost efficiencies or synergies or other benefits that we anticipated when selecting our acquisition candidates. Acquisition candidates may have liabilities or adverse operating issues that we fail to discover through due diligence prior to the acquisition.
We did not identify any observable price changes during either of fiscal 2023 and 2022 and therefore did not adjust the value of our investment during the years ended June 30, 2023 and 2022. We recorded a non-cash fair value adjustment of $49.3 million during the year ended June 30, 2021, which increased the fair value to $76.3 million.
We did not identify any observable price changes during either of fiscal 2024, 2023 and 2022 and therefore did not adjust the value of our investment during the years ended June 30, 2024, 2023 and 2022, respectively. MobiKwik originally intended to complete its initial public offering in November 2021.
Failure to recover the carrying value of this inventory may have a material adverse effect on our results of operations or financial condition. Our consumer microlending loan book and merchant lending book expose us to credit risk and our allowance for doubtful finance loans receivable may not be sufficient to absorb future write-offs.
We may also suffer reputational damage if our service levels are negatively impacted due to the unavailability of cash. Our consumer microlending loan book and merchant lending book expose us to credit risk and our allowance for doubtful finance loans receivable may not be sufficient to absorb future write-offs.
The issuance of additional shares could dilute the equity ownership of our current shareholders and any such additional shares would likely be freely tradable, which could adversely affect the trading price of our common stock. 21 Failure to maintain effective internal control over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act, especially over companies that we may acquire, could have a material adverse effect on our business and stock price.
The issuance of additional shares could dilute the equity ownership of our current shareholders and any such additional shares would likely be freely tradable, which could adversely affect the trading price of our common stock.
The second draft of the Conduct of Financial Institutions Bill was published for public comment on 29 September 2020.
The second draft of the Conduct of Financial Institutions Bill was published for public comment on September 29, 2020. 20 We may be subject to regulations regarding privacy, data use and/or security, which could adversely affect our business.
During the 2023 fiscal year, our stock price ranged from a low of $3.02 to a high of $5.97.
Risks Relating to our Common Stock Our stock price has been and may continue to be volatile. Our stock price has periodically experienced significant volatility. During the 2024 fiscal year, our stock price ranged from a low of $3.00 to a high of $5.33.
Acquisition candidates may have liabilities or adverse operating issues that we fail to discover through due diligence prior to the acquisition. We may need to record write-downs from future impairments of goodwill or other intangible assets, which could reduce our future reported earnings.
We may need to record write-downs from future impairments of goodwill or other intangible assets, which could reduce our future reported earnings. Geopolitical conflicts, including the conflict between Russia and Ukraine and between Israel and Hamas, may adversely affect our business and results of operations.
Removed
We need to significantly grow our consumer operations in order to ensure their profitability and long- term sustainability.
Added
Failure to complete, or delays in completing, the Adumo acquisition, could materially and adversely affect our results of operations and stock price. The completion of the Adumo acquisition is subject to a number of conditions precedent, including receipt of regulatory approvals and certain third-party consents. Some of these conditions are outside our control.
Removed
We may also suffer reputational damage if our service levels are negatively impacted due to the unavailability of cash. We have purchased a significant amount of prepaid airtime voucher inventory which exposes us to market risk for this inventory as well as losses if the mobile network operators are unable to perform.
Added
To complete the acquisition, we must make certain filings with and obtain certain consents and approvals from various governmental and regulatory authorities.
Removed
Historically, we have purchased a significant amount of prepaid airtime inventory vouchers in order to take advantage of discounted pricing for this inventory. As of June 30, 2023, the carrying value of this inventory is $4.0 million (ZAR 74.7 million translated at exchange rates applicable as of June 30, 2023).
Added
The regulatory approval processes may take a lengthy period of time to complete, and there can be no assurance as to the outcome of the approval processes, including the undertakings and conditions that may be required for approval, or whether the regulatory approvals will be obtained at all.
Removed
We expect to sell this inventory over the next three months which exposes us to market risk for this inventory. The underlying service related to these airtime vouchers is provided by South Africa’s four largest mobile network operators operating in South Africa and therefore we are also exposed to performance risk by these operators.
Added
In addition, the completion of the acquisition is conditional on, among other things, no action or circumstance occurring that would result in a material adverse effect on the Adumo’s business operations or financial results. We cannot provide any assurance regarding if or when all conditions precedent to the acquisition will be satisfied or waived.
Removed
We would be unable to sell these prepaid airtime vouchers if the mobile network operators were unable to provide their services and we would need to write this inventory off. Failure to recover the carrying value of this inventory may have a material adverse effect on our results of operations or financial condition.
Added
If, for any reason, the acquisition is not completed, or its completion is materially delayed and/or the transaction agreement is terminated, the market price of our common stock may be materially and adversely affected.
Removed
We may be unable to recover the carrying value of certain Cell C airtime that we own. We own a substantial amount of Cell C airtime inventory ($8.6 million translated at exchange rates applicable as of June 30, 2023).
Added
In addition, if the acquisition is not completed for any reason, there are risks that (i) the announcement of the acquisition and (ii) the dedication of management’s attention and other of our resources to the completion thereof, could have a negative impact on our relationships with our stakeholders and could have a material adverse effect on our current and future operations, financial condition and prospects.
Removed
In support of Cell C’s liquidity position and pursuant to Cell C’s recapitalization process, we limited the resale of this airtime through our distribution channels.
Added
We may not realize some or all of the anticipated benefits from the Adumo acquisition. Even if we complete the Adumo acquisition, we may experience unforeseen events, changes or circumstances that may adversely affect us.
Removed
On September 30, 2022, Cell C concluded its recapitalization process and we entered into an agreement with Cell C under which Cell C agreed to repurchase, from October 2023, up to ZAR 10 million of Cell C inventory from us per month.
Added
For example, we may incur unexpected costs, charges or expenses resulting from the transaction, including charges to future earnings if Adumo’s business does not perform as expected. Our expectations regarding Adumo’s business and prospects may not be realized, including as a result of changes in the financial condition of the markets that Adumo serves.
Removed
The amount to be repurchased by Cell C will be calculated as ZAR 10 million less the face value of any sales made by the Company during that month. The Company continued to sell a minimum amount of Cell C airtime through its internal channels in late fiscal 2022/ early fiscal 2023 in support of Cell C’s liquidity position.
Added
In addition, there are risks associated with Adumo’s product and service offerings or results of operations, including the risk of failing to comply with certain regulatory rules required to operate its business. 12 Further, there are numerous challenges, risks and costs involved with integrating the operations of Adumo with ours.
Removed
However, our ability to sell this airtime has improved significantly since the acquisition of Connect because Connect is a significant reseller of Cell C airtime.
Added
For example, integrating Adumo into our company will require significant attention from our senior management which may divert their attention from our day-to-day business. The difficulties of integration may also be increased by cultural differences between our two organizations and the necessity of retaining and integrating personnel, including Adumo’s key employees.
Removed
As a result, we sold higher volumes of airtime through this channel than we did prior to the Cell C recapitalization, however, continued sales at these volumes is dependent on prevailing conditions continuing in the airtime market.
Added
Our Sarbanes-Oxley Act of 2002 (“Sarbanes”) management certification and auditor attestation regarding the effectiveness of our internal control over financial reporting as of June 30, 2024, excludes the operations of Adumo, as we only expect to close the transaction in fiscal 2025. The requirement to evaluate and report on our internal controls also applies to companies that we acquire.
Removed
If we are able to sell at least ZAR 10 million a month through this channel from October 1, 2023, then Cell C would not be required to repurchase any airtime from us during any specific month.
Added
As a group of South African private companies, Adumo is not required to comply with Sarbanes prior to the time we acquire it. The integration of Adumo into our internal control over financial reporting would be expected to require significant time and resources from our management and other personnel and is expected to increase our compliance costs.

… 30 more changes not shown on this page.

Item 2. Properties

Properties — owned and leased real estate

2 edited+0 added−0 removed0 unchanged
Biggest changeITEM 2. PROPERTIES We lease our corporate headquarters facility which consists of approximately 87,000 square feet in Johannesburg, South Africa. We also lease properties throughout South Africa, including an approximately 36,000 square foot manufacturing facility in Lazer Park, Johannesburg, 194 financial services branches, 26 financial service express stores and 22 satellite branches.
Biggest changeITEM 2. PROPERTIES We lease our corporate headquarters facility which consists of approximately 81,000 square feet in Johannesburg, South Africa. We also lease properties throughout South Africa, including an approximately 10,000 square foot manufacturing facility in Lazer Park, Johannesburg, 194 financial services branches, 14 financial service express stores and 14 satellite branches.
We also lease additional office space in Johannesburg, Cape Town and Durban, South Africa; and Gaborone, Botswana. These leases expire at various dates through 2028, assuming the exercise of options to extend. We believe that we have adequate facilities for our current business operations.
We also lease additional office space in Johannesburg, Cape Town and Durban, South Africa; and Gaborone, Botswana. These leases expire at various dates through 2029, assuming the exercise of options to extend. We believe that we have adequate facilities for our current business operations.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

4 edited+0 added−0 removed4 unchanged
Biggest changeThe table below presents information relating to purchases of shares of our common stock during the fourth quarter of fiscal 2023: Period (a) Total number of shares purchased (b) Average price paid per share ($) (c) Total number of shares purchased as part of publicly announced plans or programs (d) Maximum dollar value of shares that may yet be purchased under the plans or programs ($) April 2023 0 - - 100,000,000 May 2023 (1) 246,606 3.26 - 100,000,000 June 2023 (1) 2,881 3.96 - 100,000,000 Total 249,487 - (1) Relates to the delivery of shares of our common stock to us by certain of our employees to settle their income tax liabilities.
Biggest changeThe table below presents information relating to purchases of shares of our common stock during the fourth quarter of fiscal 2024: Period (a) Total number of shares purchased (b) Average price paid per share ($) (c) Total number of shares purchased as part of publicly announced plans or programs (d) Maximum dollar value of shares that may yet be purchased under the plans or programs ($) April 2024 0 - - 100,000,000 May 2024 (1) 262,468 4.84 - 100,000,000 June 2024 (1) 3,568 4.58 - 100,000,000 Total 266,036 - (1) Relates to the delivery of shares of our common stock to us by certain of our employees to settle their income tax liabilities.
These shares do not reduce the repurchase authority under the share repurchase program. 25 Share performance graph The chart below compares the five-year cumulative return, assuming the reinvestment of dividends, where applicable, on our common stock with that of the S&P 500 Index and the NASDAQ Industrial Index.
These shares do not reduce the repurchase authority under the share repurchase program. 27 Share performance graph The chart below compares the five-year cumulative return, assuming the reinvestment of dividends, where applicable, on our common stock with that of the S&P 500 Index and the NASDAQ Industrial Index.
This graph assumes $100 was invested on June 30, 2018, in each of our common stock, the companies in the S&P 500 Index, and the companies in the NASDAQ Industrial Index. 26 ITEM 6. [RESERVED] 27
This graph assumes $100 was invested on June 30, 2019, in each of our common stock, the companies in the S&P 500 Index, and the companies in the NASDAQ Industrial Index. ITEM 6. [RESERVED] 28
Our transfer agent in the United States is Computershare Shareowner Services LLC, 480 Washington Blvd, Jersey City, New Jersey, 07310. According to the records of our transfer agent, as of August 31, 2023, there were 8 shareholders of record of our common stock.
Our transfer agent in the United States is Computershare Shareowner Services LLC, 480 Washington Blvd, Jersey City, New Jersey, 07310. According to the records of our transfer agent, as of August 30, 2024, there were 7 shareholders of record of our common stock.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

108 edited+105 added−66 removed71 unchanged
Biggest changeLease adjustments reflect lease charges and once-off items represents non-recurring expense items, including costs related to acquisitions and transactions consummated or ultimately not pursued. 45 The table below presents the reconciliation between GAAP net loss attributable to Lesaka to Group Adjusted EBITDA: Table 13 Years ended June 30, 2023 2022 2021 $ ’000 $ ’000 $ ’000 Loss attributable to Lesaka - GAAP (35,074) (43,876) (38,057) Loss from equity accounted investments 5,117 3,649 24,878 Net loss before loss from equity-accounted investments (29,957) (40,227) (13,179) Income tax (benefit) expense (2,309) 327 7,560 Loss before income tax expense (32,266) (39,900) (5,619) Interest expense 18,567 5,829 2,982 Interest income (1,853) (2,089) (2,416) Gain on disposal of equity securities - (720) - Net loss on disposal of equity-accounted investment 205 376 13 Loss on sale of Bank Frick - - 472 Gain related to fair value adjustment to currency options - (3,691) - Change in fair value of equity securities - - (49,304) Operating loss (15,347) (40,195) (53,872) Impairment loss 7,039 - - PPA amortization (amortization of acquired intangible assets) 15,149 3,826 360 Depreciation 8,536 3,749 3,987 Stock-based compensation charges 7,309 2,962 344 Lease adjustments 2,906 3,955 4,148 Once-off items (1) 1,922 8,088 6,618 Unrealized Loss FV for currency adjustments 222 - - Group Adjusted EBITDA - Non-GAAP 27,736 (17,615) (38,415) (1) The table below presents the components of once-off items for the periods presented: Table 14 Years ended June 30, 2023 2022 2021 $ ’000 $ ’000 $ ’000 Non-recurring revenue not allocated to segments (1,469) - - Employee misappropriation of company funds 1,202 - - Transaction costs 850 6,460 1,879 Expenses incurred related to closure of legacy businesses 639 - - Indirect taxes provision 438 - - Separation of employee expense 262 - - Legacy processing adjustments - 1,628 - Allowance for doubtful EMI loans receivable - - 4,739 Total once-off items 1,922 8,088 6,618 Once-off items are non-recurring in nature, however, certain items may be reported in multiple quarters.
Biggest changeThe table below presents the reconciliation between GAAP net loss attributable to Lesaka to Group Adjusted EBITDA: Table 13 Years ended June 30, 2024 2023 2022 $ ’000 $ ’000 $ ’000 Loss attributable to Lesaka - GAAP (17,440) (35,074) (43,876) Loss from equity accounted investments 1,279 5,117 3,649 Net loss before loss from equity-accounted investments (16,161) (29,957) (40,227) Income tax expense (benefit) 3,363 (2,309) 327 Loss before income tax expense (12,798) (32,266) (39,900) Interest expense 18,932 18,567 5,829 Interest income (2,294) (1,853) (2,089) Reversal of allowance for doubtful EMI loan receivable (250) - - Gain on disposal of equity securities - - (720) Net loss on disposal of equity-accounted investment - 205 376 Gain related to fair value adjustment to currency options - - (3,691) Operating loss 3,590 (15,347) (40,195) Impairment loss - 7,039 - PPA amortization (amortization of acquired intangible assets) 14,419 15,149 3,826 Depreciation 9,246 8,536 3,749 Stock-based compensation charges 7,911 7,309 2,962 Once-off items (1) 1,853 1,922 8,088 Unrealized Loss FV for currency adjustments (83) 222 - Group Adjusted EBITDA - Non-GAAP (A) 36,936 24,830 (21,570) (A) As noted in footnote (3) to table 11 and 12, Lease expenses which were previously excluded from the calculation of Group Adjusted EBITDA have now been included in the calculation.
Non-GAAP Measures Group Adjusted EBITDA is earnings before interest, tax, depreciation and amortization (“EBITDA”), adjusted for non- operational transactions (including loss on disposal of equity-accounted investments, gain related to fair value adjustments to currency options), (earnings) loss from equity-accounted investments, stock-based compensation charges, lease adjustments and once-off items.
Non-GAAP Measures Group Adjusted EBITDA is earnings before interest, tax, depreciation and amortization (“EBITDA”), adjusted for non- operational transactions (including loss on disposal of equity-accounted investments, gain related to fair value adjustments to currency options), (earnings) loss from equity-accounted investments, stock-based compensation charges and once-off items.
In determining the fair value of reporting units for fiscal 2023 and 2022, we considered entity-specific growth rates, future expected cash flows to be used in our discounted cash flow model, and the weighted-average cost of capital applicable to peer and industry comparables of the reporting units.
In determining the fair value of reporting units for fiscal 2023, we considered entity-specific growth rates, future expected cash flows to be used in our discounted cash flow model, and the weighted-average cost of capital applicable to peer and industry comparables of the reporting units.
Sources of Revenue We generate our revenues by charging transaction fees to merchants, financial service providers, utility providers, bill issuers and consumers; by selling pinned airtime to merchants; by providing loans to merchants and consumers, and insurance products to consumers and by selling hardware, licensing software and providing related technology services to merchants.
Sources of Revenue We generate our revenues by charging transaction fees to merchants, financial service providers, utility providers, bill issuers and consumers; by selling airtime to merchants; by providing loans to merchants and consumers, and insurance products to consumers and by selling hardware, licensing software and providing related technology services to merchants.
A reconciliation between total operating segment revenue and revenue, as well as the reconciliation because our segment performance measure and net loss before tax (benefits) expense, is presented in our audited consolidated financial statements in Note 21 to those statements.
A reconciliation between total operating segment revenue and revenue, as well as the reconciliation between our segment performance measure and net loss before tax (benefits) expense, is presented in our audited consolidated financial statements in Note 21 to those statements.
Our policy is to regularly review the ageing of outstanding amounts due from these merchants and an allowance is created for the full amount outstanding if the customer is in arrears for more than 15 days.
Our policy was to regularly review the ageing of outstanding amounts due from these merchants and an allowance is created for the full amount outstanding if the customer was in arrears for more than 15 days.
When we are an agent in a transaction, such as when we distribute VAS on behalf of our customers, and do not control the good or service to be provided, revenue is recognized based on the amount that we are contractually entitled to receive for performing the distribution service on behalf of our customers using our platform. 31 Valuation of investment in Cell C We have elected to measure our investment in Cell C, an unlisted equity security, at fair value using the fair value option.
When we are an agent in a transaction, such as when we distribute VAS on behalf of our customers, and do not control the good or service to be provided, revenue is recognized based on the amount that we are contractually entitled to receive for performing the distribution service on behalf of our customers using our platform. 35 Valuation of investment in Cell C We have elected to measure our investment in Cell C, an unlisted equity security, at fair value using the fair value option.
The Company did not identify any observable transactions during either of the years ended June 30, 2023 and 2022, and therefore there was no change in the fair value of MobiKwik during the year.
The Company did not identify any observable transactions during either of the years ended June 30, 2024, 2023 and 2022, and therefore there was no change in the fair value of MobiKwik during the year.
Our effective tax rate for fiscal 2023 was impacted by a reduction in the enacted South African corporate income tax rate from 28% to 27% from January 2023 (but backdated to July 1, 2022), the tax expense recorded by our profitable South African operations, a deferred tax benefit related to acquisition-related intangible asset amortization, non-deductible expenses, a deferred tax benefit related to an expense paid by Connect before we acquired the business and which subsequently has been determined to be deductible for tax purposes, the on-going losses incurred by certain of our South African businesses and the associated valuation allowances created related to the deferred tax assets recognized regarding net operating losses incurred by these entities.
Our effective tax rate for fiscal 2023 was impacted by a reduction in the enacted South African corporate income tax rate from 28% to 27% from January 2023 (but backdated to July 1, 2022), the tax expense recorded by our profitable South African operations, a deferred tax benefit related to acquisition-related intangible asset amortization, non-deductible expenses, a deferred tax benefit related to an expense paid by Connect before we acquired the business and which subsequently has been determined to be deductible for tax purposes, the on-going losses incurred by certain of our South African businesses and the associated valuation allowances created related to the deferred tax assets recognized regarding net operating losses incurred by these entities. 47 Our effective tax rate for fiscal 2022 was impacted by the tax expense recorded by our profitable South African operations, a deferred tax benefit related to acquisition-related intangible asset amortization, non-deductible expenses (including transaction expenses related to the acquisition of Connect), the on-going losses incurred by certain of our South African businesses and the associated valuation allowances created related to the deferred tax assets recognized regarding net operating losses incurred by these entities.
Refer to the sensitivity analysis included in Note 6 to our audited consolidated financial statements related to our valuation of Cell C as of June 30, 2023. Recoverability of equity securities and equity-accounted investments We review our equity securities and equity-accounted investments for impairment whenever events or circumstances indicate that the carrying amount of the investment may not be recoverable.
Refer to the sensitivity analysis included in Note 6 to our audited consolidated financial statements related to our valuation of Cell C as of June 30, 2024. Recoverability of equity securities and equity-accounted investments We review our equity securities and equity-accounted investments for impairment whenever events or circumstances indicate that the carrying amount of the investment may not be recoverable.
The presentation of Group Adjusted EBITDA is a non-GAAP measure. We provide this non-GAAP measure to enhance our evaluation and understanding of our financial performance.
The presentation of Group Adjusted EBITDA is a non-GAAP measure. We provide this non-GAAP measure to enhance our evaluation and understanding of our financial performance and trends.
(2) Group Adjusted EBITDA is a non-GAAP measure, refer to reconciliation below at “—Results of Operations—Use of Non- GAAP Measures”. Merchant Segment revenue increased due to the contribution from Connect for the full fiscal year compared with only two and a half months in fiscal 2022.
(3) Group Adjusted EBITDA is a non-GAAP measure, refer to reconciliation below at “—Results of Operations—Use of Non- GAAP Measures”. Merchant Segment revenue increased due to the contribution from Connect for the full fiscal year compared with only two and a half months in fiscal 2022.
In contemplation of the Connect transaction, Connect obtained total facilities of approximately ZAR 1.3 billion, which were utilized to repay its existing borrowings, to fund a portion of its capital expenditures and to settle obligations under the transaction documents, and which has subsequently been upsized for its operational requirements and has an outstanding balance as of June 30, 2023, of ZAR 1.2 billion, We also have a revolving credit facility, of ZAR 300.0 million which is utilized to fund a portion of our merchant finance loans receivable book.
In contemplation of the Connect transaction, Connect obtained total facilities of ZAR 1.3 billion, which were utilized to repay its existing borrowings, to fund a portion of its capital expenditures and to settle obligations under the transaction documents, and which has subsequently been upsized for its operational requirements and has an outstanding balance as of June 30, 2024, of ZAR 1.2 billion, We also have a revolving credit facility, of ZAR 300.0 million which is utilized to fund a portion of our merchant finance loans receivable book.
(B) – Long-term borrowings principal repayments for the 3-5 year period includes all unamortized fees as of June 30, 2023. Interest payments based on applicable interest rates as of June 30, 2023, and expected outstanding long-term borrowings over the period. All amounts converted from ZAR to USD using the June 30, 2023, USD/ ZAR exchange rate.
(B) – Long-term borrowings principal repayments for the 3-5 year period includes all unamortized fees as of June 30, 2024. Interest payments based on applicable interest rates as of June 30, 2024, and expected outstanding long-term borrowings over the period. All amounts converted from ZAR to USD using the June 30, 2024, USD/ ZAR exchange rate.
The results of our impairment tests during fiscal 2023 indicated that the fair value of our reporting units exceeded their carrying values, with the exception of the $7.0 million of goodwill impaired during fiscal 2023, as discussed in Note 10 to our audited consolidated financial statements.
The results of our impairment tests during fiscal 2023 indicated that the fair value of our reporting units exceeded their carrying values, with the exception of the $7.0 million of goodwill impaired during fiscal 202 3, as discussed in Note 10 to our audited consolidated financial statements.
If we identify an impairment indicator related to these equity securities, we are required to assess the carrying value of these equity securities against their fair value. We did not identify any impairment indicators during each of fiscal 2023, 2022 and 2021, and therefore did not recognize any impairment losses related to these equity securities during those years.
If we identify an impairment indicator related to these equity securities, we are required to assess the carrying value of these equity securities against their fair value. We did not identify any impairment indicators during each of fiscal 2024, 2023 and 2022, and therefore did not recognize any impairment losses related to these equity securities during those years.
(2) translated from ZAR to U.S. dollars at exchange rates applicable as of June 30, 2022. We believe the Cell C business plan is reasonable based on the current performance and the expected changes in the business model.
(2) translated from ZAR to U.S. dollars at exchange rates applicable as of June 30, 2023. We believe the Cell C business plan is reasonable based on the current performance and the expected changes in the business model.
We do not allocate once-off items (as defined below), stock-based compensation charges, depreciation and amortization, impairment of goodwill or other intangible assets, certain lease charges (“Lease adjustments”), other items (including gains or losses on disposal of investments, fair value adjustments to equity securities, fair value adjustments to currency options), interest income, interest expense, income tax expense or loss from equity-accounted investments to our reportable segments.
We do not allocate once-off items (as defined below), stock-based compensation charges, depreciation and amortization, impairment of goodwill or other intangible assets, certain lease expenses (“Lease expenses”), other items (including gains or losses on disposal of investments, fair value adjustments to equity securities, fair value adjustments to currency options), interest income, interest expense, income tax expense or loss from equity-accounted investments to our reportable segments.
The table below presents the relative loss from our equity accounted investments: Table 5 Year ended June 30, 2023 2022 $ % $ ’000 $ ’000 change Finbond (5,206) (3,665) 42% Share of net (loss) income (4,096) (3,665) 12% Impairment (1,110) - nm Other 89 16 456% Share of net income (loss) 89 16 456% Total loss from equity-accounted investment (5,117) (3,649) 40% Results of operations by operating segment The composition of revenue and the contributions of our business activities to operating (loss) income are illustrated below: Table 6 In U.S.
The table below presents the relative loss from our equity accounted investments: Table 10 Year ended June 30, 2023 2022 $ ’000 $ ’000 $ % change Finbond (5,206) (3,665) 42% Share of net (loss) income (4,096) (3,665) 12% Impairment (1,110) - nm Other 89 16 456% Share of net loss 89 16 456% Total loss from equity-accounted investments (5,117) (3,649) 40% Results of operations by operating segment The composition of revenue and the contributions of our business activities to operating (loss) income are illustrated below: Table 11 In U.S.
Our policy is to regularly review the ageing of outstanding amounts due from borrowers and adjust the provision based on management’s estimate of the recoverability of finance loans receivable. We write off microlending loans and related service fees if a borrower is in arrears with repayments for more than three months or dies.
Our policy was to regularly review the ageing of outstanding amounts due from borrowers and adjust the provision based on management’s estimate of the recoverability of finance loans receivable. We wrote off microlending loans and related service fees if a borrower is in arrears with repayments for more than three months or dies.
Dollars Year ended June 30, 2023 2022 $ % $ ’000 $ ’000 change Revenue 527,971 222,609 137% Cost of goods sold, IT processing, servicing and support 417,544 168,317 148% Selling, general and administration 95,050 74,993 27% Depreciation and amortization 23,685 7,575 213% Impairment loss 7,039 - nm Reorganization costs - 5,894 nm Transaction costs related to Connect acquisition - 6,025 nm Operating loss (15,347) (40,195) (62%) Gain related to fair value adjustment to currency options - 3,691 nm Loss on disposal of equity-accounted investment 205 376 (45%) Gain on disposal of equity securities - 720 nm Interest income 1,853 2,089 (11%) Interest expense 18,567 5,829 219% Loss before income tax (benefit) expense (32,266) (39,900) (19%) Income tax (benefit) expense (2,309) 327 nm Net loss before loss from equity-accounted investments (29,957) (40,227) (26%) Loss from equity-accounted investments (5,117) (3,649) 40% Net loss attributable to us (35,074) (43,876) (20%) Table 4 In South African Rand Year ended June 30, 2023 2022 ZAR % ZAR ’000 ZAR ’000 change Revenue 9,471,800 3,383,166 180% Cost of goods sold, IT processing, servicing and support 7,490,739 2,558,047 193% Selling, general and administration 1,705,196 1,139,728 50% Depreciation and amortization 424,909 115,123 269% Impairment loss 126,280 - nm Reorganization costs - 89,576 nm Transaction costs related to Connect acquisition - 91,567 nm Operating loss (275,324) (610,875) (55%) Gain related to fair value adjustment to currency options - 56,095 nm Loss on disposal of equity-accounted investment 3,678 5,714 (36%) Gain on disposal of equity securities - 10,942 nm Interest income 33,243 31,748 5% Interest expense 333,092 88,587 276% Loss before income tax (benefit) expense (578,851) (606,391) (5%) Income tax (benefit) expense (41,423) 4,970 nm Net loss before loss from equity-accounted investments (537,428) (611,361) (12%) Loss from equity-accounted investments (91,799) (55,457) 66% Net loss attributable to us (629,227) (666,818) (6%) Revenue increased by $305.4 million (ZAR 6.1 billion), or 137.2% (in ZAR, 180.0%), primarily due to the inclusion of Connect for the entire fiscal year, which has substantial low margin prepaid airtime sales in addition to its core processing revenue and an increase in account fees and insurance revenues.
Dollars Year ended June 30, 2023 2022 $ % $ ’000 $ ’000 change Revenue 527,971 222,609 137% Cost of goods sold, IT processing, servicing and support 417,544 168,317 148% Selling, general and administration 95,050 74,993 27% Depreciation and amortization 23,685 7,575 213% Impairment loss 7,039 - nm Reorganization costs - 5,894 nm Transaction costs related to Connect acquisition - 6,025 nm Operating loss (15,347) (40,195) (62%) Gain related to fair value adjustment to currency options - 3,691 nm Loss on disposal of equity-accounted investment 205 376 (45%) Gain on disposal of equity securities - 720 nm Interest income 1,853 2,089 (11%) Interest expense 18,567 5,829 219% Loss before income tax (benefit) expense (32,266) (39,900) (19%) Income tax (benefit) expense (2,309) 327 nm Net loss before loss from equity-accounted investments (29,957) (40,227) (26%) Loss from equity-accounted investments (5,117) (3,649) 40% Net loss attributable to us (35,074) (43,876) (20%) Table 9 In South African Rand (US GAAP) Year ended June 30, 2023 2022 ZAR % ZAR ’000 ZAR ’000 change Revenue 9,471,800 3,383,166 180% Cost of goods sold, IT processing, servicing and support 7,490,739 2,558,047 193% Selling, general and administration 1,705,196 1,139,728 50% Depreciation and amortization 424,909 115,123 269% Impairment loss 126,280 - nm Reorganization costs - 89,576 nm Transaction costs related to Connect acquisition - 91,567 nm Operating loss (275,324) (610,875) (55%) Gain related to fair value adjustment to currency options - 56,095 nm Loss on disposal of equity-accounted investment 3,678 5,714 (36%) Gain on disposal of equity securities - 10,942 nm Interest income 33,243 31,748 5% Interest expense 333,092 88,587 276% Loss before income tax (benefit) expense (578,851) (606,391) (5%) Income tax (benefit) expense (41,423) 4,970 nm Net loss before loss from equity-accounted investments (537,428) (611,361) (12%) Loss from equity-accounted investments (91,799) (55,457) 66% Net loss attributable to us (629,227) (666,818) (6%) Revenue increased by $305.4 million (ZAR 6.1 billion), or 137.2% (in ZAR, 180.0%), primarily due to the inclusion of Connect for the entire fiscal year, which has substantial low margin prepaid airtime sales in addition to its core processing revenue and an increase in account fees and insurance revenues. 46 Cost of goods sold, IT processing, servicing and support increased by $249.2 million (ZAR 4.9 billion), or 148.1% (in ZAR, 192.8%), primarily due to the inclusion of Connect, which were partially offset by the benefits of various cost reduction initiatives in Consumer and lower insurance-related claims.
We used a discounted cash flow model to determine the fair value of our investment in Cell C as of June 30, 2023 and 2022, and valued Cell C at $0.0 (zero) as of each of June 30, 2023 and 2022.
We used a discounted cash flow model to determine the fair value of our investment in Cell C as of June 30, 2024 and 2023, and valued Cell C at $0.0 (zero) as of each of June 30, 2024 and 2023.
During fiscal 2022, we also made our second provisional South African tax payments of $0.7 million (ZAR 10.9 million related to our 2022 tax year and made an additional tax payment of $0.0 million (ZAR 0.0 million) related to our 2021 tax year.
During fiscal 2022, we also made our second provisional South African tax payments of $0.7 million (ZAR 10.9 million related to our 2022 tax year and made an additional tax payment of $0.001 million (ZAR 0.02 million) related to our 2021 tax year.
Management believes that the following accounting policies are critical due to the degree of estimation required and the impact of these policies on the understandi ng of the results of our operations and financial condition. Business Combinations and the Recoverability of Goodwill A significant component of our growth strategy is to acquire and integrate businesses that complement our existing operations.
Management believes that the following accounting policies are critical due to the degree of estimation required and the impact of these policies on the understanding of the results of our operations and financial condition. Business Combinations and the Recoverability of Goodwill A significant component of our growth strategy is to acquire and integrate businesses that complement our existing operations.
Thus, the average rates used to translate this data for the years ended June 30, 2023, 2022 and 2021, vary slightly from the averages shown in the table above.
Thus, the average rates used to translate this data for the years ended June 30, 2024, 2023 and 2022, vary slightly from the averages shown in the table above.
Cash flows from operating activities Net cash provided by operating activities during fiscal 2023 was $0.4 million (ZAR 7.4 million) compared to net cash utilized by operating activities of $37.2 million (ZAR 565.3 million) during fiscal 2022.
Net cash provided by operating activities during fiscal 2023 was $0.4 million (ZAR 7.4 million) compared to net cash utilized by operating activities of $37.2 million (ZAR 565.3 million) during fiscal 2022.
Cash flows from investing activities Cash used in investing activities for fiscal 2023 included capital expenditures of $16.2 million (ZAR 289.8 million), primarily due to the acquisition of ATMs .
Cash used in investing activities for fiscal 2023 included capital expenditures of $16.2 million (ZAR 289.8 million), primarily due to the acquisition of ATMs .
In addition to these capital expenditures, we expect that capital spending for fiscal 2024 will include acquisition of POS devices, safe assets, vehicles, computer and office equipment, as well as for our ATM infrastructure and branch network in South Africa. These assets will be funded through the use of internally-generated funds and our asset-backed borrowing arrangement. 50
In addition to these capital expenditures, we expect that capital spending for fiscal 2025 will include acquisition of POS devices, safe assets, vehicles, computer and office equipment, as well as for our ATM infrastructure and branch network in South Africa. These assets will be funded through the use of internally-generated funds and our asset-backed borrowing arrangement. 55
(2) Group Adjusted EBITDA is a non-GAAP measure, refer to reconciliation below at “—Results of Operations—Use of Non- GAAP Measures”.
(3) Group Adjusted EBITDA is a non-GAAP measure, refer to reconciliation below at “—Results of Operations—Use of Non- GAAP Measures”.
Our effective tax rate for fiscal 2022 was impacted by the tax expense recorded by our profitable South African operations, a deferred tax benefit related to acquisition-related intangible asset amortization, non-deductible expenses (including transaction expenses related to the acquisition of Connect), the on-going losses incurred by certain of our South African businesses and the associated valuation allowances created related to the deferred tax assets recognized regarding net operating losses incurred by these entities.
Our effective tax rate for fiscal 2024 was impacted by the tax expense recorded by our profitable South African operations, a deferred tax benefit related to acquisition-related intangible asset amortization, non-deductible expenses, the on-going losses incurred by certain of our South African businesses and the associated valuation allowances created related to the deferred tax assets recognized regarding net operating losses incurred by these entities.
We also generate fees from debit and credit card transaction processing and interest revenue from qualifying merchant customers who are able to access short-term loans. The revenue and costs associated with these services and sales are included in our merchant operating segment.
We also generate fees from debit and credit card transaction processing and interest revenue from qualifying merchant customers who are able to access short-term loans. The revenue and costs associated with these services and sales are included in our merchant operating segment. We also generate fees from consumers utilizing our ATM network.
For instance, transaction costs include costs incurred related to acquisitions and transactions consummated or ultimately not pursued. The transactions can span multiple quarters, for instance in fiscal 2022 we incurred significant transaction costs related to the acquisition Connect over a number of quarters, and the transactions are generally non-recurring.
For instance, transaction costs include costs incurred related to acquisitions and transactions consummated or ultimately not pursued. The transactions can span multiple quarters, for instance in fiscal 2024 we incurred significant transaction costs related to the acquisition of Adumo over a number of quarters, and the transactions are generally non-recurring.
For instance, through the acquisition of Connect, we now provide cash management and payment services to merchant customers through a digital vault (safe asset) which is located at the customer’s premises and generate processing revenue from the provision of these services.
For instance, through Connect, we provide cash management and payment services to merchant customers through a digital vault which is located at the customer’s premises and generate processing revenue from the provision of these services.
Depreciation and amortization expense increased by $16.1 million (ZAR 0.3 billion), or 212.7% (in ZAR, 269.1%), due to the inclusion of acquisition-related intangible asset amortization related to intangible assets identified pursuant to the Connect acquisition, as well as the inclusion of depreciation expense related to Connect’s property, plant and equipment.
Depreciation and amortization expense increased by $16.1 million (ZAR 309.8 million), or 212.7% (in ZAR, 269.1%), due to the inclusion of acquisition-related intangible asset amortization related to intangible assets identified pursuant to the Connect acquisition, as well as the inclusion of depreciation expense related to Connect’s property, plant and equipment.
We utilized the latest approved business plan provided by Cell C management for the period ended December 31, 2025, for the June 30, 2023 and 2022 valuations, and the following key valuation inputs were used: Weighted Average Cost of Capital: Between 20% and 31% over the period of the forecast Long-term growth rate: 4.5% (3% as of June 30, 2022) Marketability discount: 20% (10% as of June 30, 2022) Minority discount: 24% (15% as of June 30, 2022) Net adjusted external debt - June 30, 2023: (1) ZAR 8.1 billion ($0.4 billion), no lease liabilities included Net adjusted external debt - June 30, 2022: (2) ZAR 13.5 billion ($0.8 billion), no lease liabilities included (1) translated from ZAR to U.S. dollars at exchange rates applicable as of June 30, 2023.
We utilized the latest business plan provided by Cell C management for the period ended December 31, 2027, for the June 30, 2024 and 2023 valuations, and the following key valuation inputs were used: Weighted Average Cost of Capital: Between 21% and 26% over the period of the forecast Long-term growth rate: 4.5% (4.5% as of June 30, 2023) Marketability discount: 21% (20% as of June 30, 2023) Minority discount: 24% (24% as of June 30, 2023) Net adjusted external debt - June 30, 2024: (1) ZAR 8 billion ($0.4 billion), no lease liabilities included Net adjusted external debt - June 30, 2023: (2) ZAR 8.1 billion ($0.4 billion), no lease liabilities included (1) translated from ZAR to U.S. dollars at exchange rates applicable as of June 30, 2024.
Recent accounting pronouncements not yet adopted as of June 30, 2023 Refer to Note 2 of our audited consolidated financial statements for a full description of recent accounting pronouncements not yet adopted as of June 30, 2023, including the expected dates of adoption and effects on financial condition, results of operations and cash flows. 34 Currency Exchange Rate Information Actual exchange rates The actual exchange rates for and at the end of the periods presented were as follows: Table 1 June 30, 2023 2022 2021 ZAR : $ average exchange rate 17.7641 15.2154 15.4146 Highest ZAR : $ rate during period 19.7558 16.2968 17.6866 Lowest ZAR : $ rate during period 16.2034 14.1630 13.4327 Rate at end of period 18.8376 16.2903 14.3010 Translation Exchange Rates We are required to translate our results of operations from ZAR to U.S. dollars on a monthly basis.
Recent accounting pronouncements not yet adopted as of June 30, 2024 Refer to Note 2 of our audited consolidated financial statements for a full description of recent accounting pronouncements not yet adopted as of June 30, 2024, including the expected dates of adoption and effects on financial condition, results of operations and cash flows. 38 Currency Exchange Rate Information Actual exchange rates The actual exchange rates for and at the end of the periods presented were as follows: Table 1 June 30, 2024 2023 2022 ZAR : $ average exchange rate 18.7070 17.7641 15.2154 Highest ZAR : $ rate during period 19.4568 19.7558 16.2968 Lowest ZAR : $ rate during period 17.6278 16.2034 14.1630 Rate at end of period 18.1808 18.8376 16.2903 Translation Exchange Rates We are required to translate our results of operations from ZAR to U.S. dollars on a monthly basis.
(C) – Refer to Note 8 to our audited consolidated financial statements. (D) – Includes policyholder liabilities of $1.8 million related to our insurance business. All amounts are translated at exchange rates applicable as of June 30, 2023.
(C) – Refer to Note 8 to our audited consolidated financial statements. (D) – Includes policyholder liabilities of $2.6 million related to our insurance business. All amounts are translated at exchange rates applicable as of June 30, 2024.
Restricted cash We have credit facilities with RMB in order to access cash to fund our ATMs in South Africa. Our cash, cash equivalents and restricted cash presented in our consolidated statement of cash flows as of June 30, 2023, includes restricted cash of approximately $23.0 million related to cash withdrawn from our debt facility to fund ATMs.
Restricted cash We have credit facilities with RMB in order to access cash to fund our ATMs in South Africa. Our cash, cash equivalents and restricted cash presented in our consolidated statement of cash flows as of June 30, 2024, includes restricted cash of approximately $6.7 million related to cash withdrawn from our debt facility to fund ATMs.
(E) – We have excluded cross-guarantees in the aggregate amount of $0.1 million issued as of June 30, 2023, to RMB and Nedbank to secure guarantees it has issued to third parties on our behalf as the amounts that will be settled in cash are not known and the timing of any payments is uncertain.
(E) – We have excluded cross-guarantees in the aggregate amount of $0.1 million issued as of June 30, 2024, to RMB and Nedbank to secure guarantees it has issued to third parties on our behalf as the amounts that will be settled in cash are not known and the timing of any payments is uncertain. 54 Off-Balance Sheet Arrangements We have no off -balance sheet arrangements.
During fiscal 2023 and 2022, respectively we recorded a net decrease of $8.0 million and $1.7 million, to our valuation allowance, and during fiscal 2021 we recorded a net increase of $1.5 million. As of June 30, 2023 and 2022, the valuation allowance related to deferred tax assets was $109.1 million and $117.1 million, respectively.
During fiscal 2024, 2023, and 2022, respectively we recorded a net decrease of $5.6 million, $8.0 million and $1.7 million, to our valuation allowance. As of June 30, 2024 and 2023, the valuation allowance related to deferred tax assets was $114.7 million and $109.1 million, respectively.
Fiscal 2023 Compared to Fiscal 2022 The following factors had a significant influence on our results of operations during fiscal 2023 as compared with the same period in the prior year: ● Higher revenue: Our revenues increased by 180.0% in ZAR, primarily due to the contribution from Connect in Merchant and an increase in account fees and insurance revenues in Consumer; ● Lower operating losses: Operating losses decreased, delivering an improvement of 55% in ZAR compared with the prior period primarily due to the contribution from Connect, strong hardware sales, and the implementation of various cost reduction initiatives in Consumer, which was partially offset by an increase in acquisition related intangible asset amortization; ● Higher net interest charge: The net interest charge increased to ZAR 299.9 million from ZAR 56.8 million due to the additional borrowings incurred in order to fund the acquisition of Connect as well as the debt acquired within the Connect business itself; ● Significant transaction costs: We expensed $6.0 million of transaction costs related to the Connect acquisition in fiscal 2022; and ● Foreign exchange movements: The U.S. dollar was 18.0% stronger against the ZAR during fiscal 2023, which impacted our reported results. 36 Consolidated overall results of operations This discussion is based on the amounts prepared in accordance with U.S.
Fiscal 2023 Compared to Fiscal 2022 The following factors had a significant influence on our results of operations during fiscal 2023 as compared with the same period in the prior year: ● Higher revenue: Our revenues increased by 180.0% in ZAR, primarily due to the contribution from Connect in Merchant and an increase in account fees and insurance revenues in Consumer; ● Lower operating losses: Operating losses decreased, delivering an improvement of 55% in ZAR compared with the prior period primarily due to the contribution from Connect, strong hardware sales, and the implementation of various cost reduction initiatives in Consumer, which was partially offset by an increase in acquisition related intangible asset amortization; ● Higher net interest charge: The net interest charge increased to ZAR 299.9 million from ZAR 56.9 million due to the additional borrowings incurred in order to fund the acquisition of Connect as well as the debt acquired within the Connect business itself; ● Significant transaction costs: We expensed $6.0 million of transaction costs related to the Connect acquisition in fiscal 2022; and ● Foreign exchange movements: The U.S. dollar was 18.0% stronger against the ZAR during fiscal 2023, which impacted our reported results. 45 The following tables show the changes in the items comprising our statements of operations, both in U.S. dollars and in ZAR: Table 8 In U.S.
We had outstanding capital commitments as of June 30, 2023, of $0.1 million. We expect to fund these expenditures through internally-generated funds.
We had outstanding capital commitments as of June 30, 2024, of $0.3 million. We expect to fund these expenditures through internally-generated funds.
Group costs Our group costs increased primarily due to higher employee costs, an increase in audit fees and directors’ and officers’ insurance premiums. Use of Non-GAAP Measures U.S. securities laws require that when we publish any non-GAAP measures, we disclose the reason for using these non-GAAP measures and provide reconciliations to the most directly comparable GAAP measures.
Group costs Our group costs for fiscal 2023 increased compared with the prior period due to higher employee costs and an increase in directors’ and officers’ insurance premiums. 49 Use of Non-GAAP Measures U.S. securities laws require that when we publish any non-GAAP measures, we disclose the reason for using these non-GAAP measures and provide reconciliations to the most directly comparable GAAP measures.
Capital Expenditures Capital expenditures for the years ended June 30, 2023, 2022 and 2021 were as follows: Table 18 2023 2022 2021 2023 2022 2021 $ $ $ ZAR ZAR ZAR ‘000 ‘000 ‘000 ‘000 ‘000 ‘000 Consumer 3,170 1,712 3,433 56,870 26,019 52,174 Merchant 12,986 2,846 852 232,969 43,253 12,949 Total 16,156 4,558 4,285 289,839 69,272 65,123 Our capital expenditures for fiscal 2023, 2022 and 2021, are discussed under “—Liquidity and Capital Resources—Cash flows from investing activities.” All of our capital expenditures for the past three fiscal years were funded through internally-generated funds, except for certain capital expenditures of POS devices and safe assets, made by Connect which were funded through the utilization of asset-backed borrowings.
Capital Expenditures Capital expenditures for the years ended June 30, 2024, 2023 and 2022 were as follows: Table 18 2024 2023 2022 2024 2023 2022 $ $ $ ZAR ZAR ZAR ‘000 ‘000 ‘000 ‘000 ‘000 ‘000 Consumer 1,317 3,170 1,712 24,607 56,870 26,019 Merchant 11,348 12,986 2,846 212,030 232,969 43,253 Total 12,665 16,156 4,558 236,637 289,839 69,272 Our capital expenditures for fiscal 2024, 2023 and 2022, are discussed under “—Liquidity and Capital Resources—Cash flows from investing activities.” All of our capital expenditures for the past three fiscal years were funded through internally-generated funds, except for certain capital expenditures of POS devices and safe assets, made by Connect which were funded through the utilization of asset-backed borrowings.
We recorded impairment losses related to our investment in Finbond in fiscal 2023 following on-going losses reported by Finbond and its lower listed share price. Refer to Note 9 to our consolidated financial statements for additional information regarding the impairments.
We also recorded an impairment loss in fiscal 202 3 following on-going losses reported by Finbond and its lower listed share price. Refer to Note 9 to our consolidated financial statements for additional information regarding the impairments.
(2) Group Adjusted EBITDA is a non-GAAP measure, refer to reconciliation below at “—Results of Operations—Use of Non- GAAP Measures”. 39 Table 7 In South African Rand Year ended June 30, 2023 % of 2022 % of % Operating Segment ZAR ’000 total ZAR ’000 total change Consolidated revenue: Merchant 8,318,796 88% 2,381,323 70% 249% Consumer 1,126,650 12% 1,002,021 30% 12% Subtotal: Operating segments 9,445,446 100% 3,383,344 100% 179% Not allocated to operating segments 26,354 - - - nm Corporate/Eliminations - - (178) - nm Total consolidated revenue 9,471,800 100% 3,383,166 100% 180% Group Adjusted EBITDA: Merchant 601,546 121% 192,197 (72%) 213% Consumer (1) 59,453 12% (329,403) 123% nm Group costs (163,415) (33%) (130,503) 49% 25% Group Adjusted EBITDA (non-GAAP) (2) 497,584 100% (267,709) 100% nm (1) Consumer Segment Adjustment EBITDA for fiscal 2022 includes reorganization cost of ZAR 89.6 million.
(3) Group Adjusted EBITDA is a non-GAAP measure, refer to reconciliation below at “—Results of Operations—Use of Non- GAAP Measures”. 48 Table 12 In South African Rand Year ended June 30, 2023 % of 2022 % of % Operating Segment ZAR ’000 total ZAR ’000 total change Consolidated revenue: Merchant 8,318,796 88% 2,381,323 70% 249% Consumer 1,126,650 12% 1,002,021 30% 12% Subtotal: Operating segments 9,445,446 100% 3,383,344 100% 179% Not allocated to operating segments 26,354 - - - nm Corporate/Eliminations - - (178) - nm Total consolidated revenue 9,471,800 100% 3,383,166 100% 180% Group Adjusted EBITDA: Merchant 601,546 135% 192,197 (59%) 213% Consumer (1) 59,453 13% (329,403) 100% nm Lease expenses (2) (52,134) (11%) (60,107) 19% (13%) Group costs (163,415) (37%) (130,503) 40% 25% Group Adjusted EBITDA (non-GAAP) (3) 445,450 100% (327,816) 100% nm (1) Consumer Segment Adjustment EBITDA for fiscal 2022 includes reorganization cost of ZAR 89.6 million.
Dollars Year ended June 30, 2023 % of 2022 % of % Operating Segment $ ’000 total $ ’000 total change Consolidated revenue: Merchant 463,701 88% 156,689 70% 196% Consumer 62,801 12% 65,932 30% (5%) Subtotal: Operating segments 526,502 100% 222,621 100% 137% Not allocated to operating segments 1,469 - - - nm Corporate/Eliminations - - (12) - nm Total consolidated revenue 527,971 100% 222,609 100% 137% Group Adjusted EBITDA: Merchant 33,531 121% 12,646 (72%) 165% Consumer (1) 3,314 12% (21,674) 123% nm Group costs (9,109) (33%) (8,587) 49% 6% Group Adjusted EBITDA (non-GAAP) (2) 27,736 100% (17,615) 100% nm (1) Consumer Segment Adjustment EBITDA for fiscal 2022 includes reorganization cost of $5.9 million.
Dollars Year ended June 30, 2023 % of 2022 % of % Operating Segment $ ’000 total $ ’000 total change Consolidated revenue: Merchant 463,701 88% 156,689 70% 196% Consumer 62,801 12% 65,932 30% (5%) Subtotal: Operating segments 526,502 100% 222,621 100% 137% Not allocated to operating segments 1,469 - - - nm Corporate/Eliminations - - (12) - nm Total consolidated revenue 527,971 100% 222,609 100% 137% Group Adjusted EBITDA: Merchant 33,531 135% 12,646 (59%) 165% Consumer (1) 3,314 13% (21,674) 100% nm Lease expenses (2) (2,906) (11%) (3,955) 19% (27%) Group costs (9,109) (37%) (8,587) 40% 6% Group Adjusted EBITDA (non-GAAP) (3) 24,830 100% (21,570) 100% nm (1) Consumer Segment Adjustment EBITDA for fiscal 2022 includes reorganization cost of $5.9 million.
Refer to Note 9 to our consolidated financial statements for additional information regarding this gain. We recorded a loss of $0.4 million related to the disposal of a minor portion of our investment in Finbond during fiscal 2022. Refer to Note 9 to our consolidated financial statements for additional information regarding these disposals.
We recorded a net loss of $0.2 million comprising a loss of $0.4 million related to the disposal of a minor portion of our investment in Finbond and a $0.25 million gain related to the disposal of our entire interest in Carbon during fiscal 2023. Refer to Note 9 to our consolidated financial statements for additional information regarding these disposals.
Cost of goods sold, IT processing, servicing and support increased by $249.2 million (ZAR 4.9 billion), or 148.1% (in ZAR, 192.8%), primarily due to the inclusion of Connect, which were partially offset by the benefits of various cost reduction initiatives in Consumer and lower insurance-related claims. 37 Selling, general and administration expenses increased by $20.1 million (ZAR 0.6 billion), or 26.7% (in ZAR, 49.6%), primarily due to higher employee-related expenses related to the expansion of our senior management team, the year-over-year impact of inflationary increases on employee-related expenses and the inclusion of expenses related to Connect’s operations, which were partially offset by the benefits of various cost reduction initiatives in Consumer.
Selling, general and administration expenses increased by $20.1 million (ZAR 0.6 billion), or 26.7% (in ZAR, 49.6%), primarily due to higher employee-related expenses related to the expansion of our senior management team, the year-over-year impact of inflationary increases on employee-related expenses and the inclusion of expenses related to Connect’s operations, which were partially offset by the benefits of various cost reduction initiatives in Consumer.
We provide consumers with bank accounts from which we generate a monthly fee and also charge fees on an ad valorem basis for goods and services purchased. Usage of our bank accounts also provides our customers with access to short-term loans and life insurance products. We also generate fees from consumers utilizing our ATM network.
We provide consumers with bank accounts from which we generate a monthly fee and also charge fees on an ad valorem basis for goods and services purchased. Usage of our bank accounts also provides our customers with access to short-term loans and life insurance products. The revenue and costs associated with this approach are reflected in our consumer operating segment.
We use these platforms to (a) sell prepaid airtime and (b) distribute VAS, including prepaid airtime, prepaid electricity, gaming voucher, and other services, to users of our platforms.
We use these platforms to (a) sell prepaid airtime vouchers which was held as inventory and (b) distribute VAS, including prepaid airtime vouchers (which we do not hold as inventory), prepaid electricity, gaming voucher, and other services, to users of our platforms.
The Lease adjustments reflect lease charges and the Stock-based compensation adjustments reflect stock-based compensation expense and are both excluded from the calculation of Segment Adjusted EBITDA and are therefore reported as reconciling items to reconcile the reportable segments’ Segment Adjusted EBITDA to our loss before income tax expense. Group Adjusted EBITDA represents Segment Adjusted EBITDA after deducting group costs.
The Lease expenses reflect lease expenses (refer to Note 8 to our audited consolidated financial statements) and the Stock- based compensation adjustments reflect stock-based compensation expense and are both excluded from the calculation of Segment Adjusted EBITDA and are therefore reported as reconciling items to reconcile the reportable segments’ Segment Adjusted EBITDA to our loss before income tax expense.
For instance, a 5% increase (to 55%) or decrease (to 45%) in the expected volatility used (of 50%) to value stock options granted in February 2022, would result in a charge that was 9% higher (if 55% were used) or 9% lower (if 45% were used).
For instance, a 5% increase (to 53%) or 5% decrease (to 43%) in the expected volatility used (of 48%) to value stock options granted in June 2024, would result in a charge that was 11% higher (if 53% were used) or 11% lower (if 43% were used).
Our chief operating decision maker is our Group Chief Executive Officer and he evaluates segment performance based on segment earnings before interest, tax, depreciation and amortization (“EBITDA”), adjusted for items mentioned in the next sentence (“Segment Adjusted EBITDA”) for each operating segment.
Our chief operating decision maker was our Group Chief Executive Officer until February 29, 2024 and has been our Executive Chairman since March 1, 2024, and our Group Chief Executive Officer evaluated and our Executive Chairman evaluates, respectively, segment performance based on segment earnings before interest, tax, depreciation and amortization (“EBITDA”), adjusted for items mentioned in the next sentence (“Segment Adjusted EBITDA”) for each operating segment.
Our effective tax rate for fiscal 2022 was impacted by the tax expense recorded by our profitable South African operations, a deferred tax benefit related to acquisition-related intangible asset amortization, non-deductible expenses (including transaction expenses related to the acquisition of Connect), the on-going losses incurred by certain of our South African businesses and the associated valuation allowances created related to the deferred tax assets recognized regarding net operating losses incurred by these entities. 38 Finbond is listed on the Johannesburg Stock Exchange and reports its six-month results during our first half and its annual results during our fourth quarter.
Our effective tax rate for fiscal 2024 was impacted by a reduction in the enacted South African corporate income tax rate from 28% to 27% from January 2023 (but backdated to July 1, 2022), the tax expense recorded by our profitable South African operations, a deferred tax benefit related to acquisition-related intangible asset amortization, non-deductible expenses, a deferred tax benefit related to an expense paid by Connect before we acquired the business and which subsequently has been determined to be deductible for tax purposes, the on-going losses incurred by certain of our South African businesses and the associated valuation allowances created related to the deferred tax assets recognized regarding net operating losses incurred by these entities. 42 Finbond is listed on the Johannesburg Stock Exchange and reports its six-month results during our first half and its annual results during our fourth quarter.
During fiscal 2023, we received proceeds of $0.25 million related to the first tranche (of two) from the disposal of our entire equity interest in Carbon and $0.4 million related to the sale of minor positions in Finbond.
During fiscal 2024, we received proceeds of $3.5 million related to the sale of remaining interest in Finbond and $0.25 million related to the second (and final) tranche from the disposal of our entire equity interest in Carbon.
We also paid taxes totaling $4.3 million in other tax jurisdictions, primarily in the U.S. 48 Taxes paid during fiscal 2023, 2022 and 2021 were as follows: Table 16 Year ended June 30, 2023 2022 2021 2023 2022 2021 $ $ $ ZAR ZAR ZAR ‘000 ‘000 ‘000 ‘000 ‘000 ‘000 First provisional payments 2,955 585 825 50,798 9,142 11,934 Second provisional payments 4,079 691 470 76,089 10,929 8,038 Taxation paid related to prior years 15 1 782 273 19 11,620 Tax refund received (210) (300) (1,339) (3,756) (4,542) (19,245) Total South African taxes paid 6,839 977 738 123,404 15,548 12,347 Foreign taxes paid 361 161 4,263 6,482 2,482 62,302 Total tax paid 7,200 1,138 5,001 129,886 18,030 74,649 We expect to make additional provisional income tax payments in South Africa related to our 2023 tax year in the first quarter of fiscal 2024, however, the amount was not quantifiable as of the date of the filing of this Annual Report on Form 10-K.
Taxes paid during fiscal 2024, 2023 and 2022 were as follows: Table 16 Year ended June 30, 2024 2023 2022 2024 2023 2022 $ $ $ ZAR ZAR ZAR ‘000 ‘000 ‘000 ‘000 ‘000 ‘000 First provisional payments 2,663 2,955 585 49,534 50,798 9,142 Second provisional payments 2,861 4,079 691 52,721 76,089 10,929 Taxation paid related to prior years 641 15 1 12,187 273 19 Tax refund received (38) (210) (300) (768) (3,756) (4,542) Total South African taxes paid 6,127 6,839 977 113,674 123,404 15,548 Foreign taxes paid 379 361 161 7,063 6,482 2,482 Total tax paid 6,506 7,200 1,138 120,737 129,886 18,030 We expect to make additional provisional income tax payments in South Africa related to our 2024 tax year in the first quarter of fiscal 2025, however, the amount was not quantifiable as of the date of the filing of this Annual Report.
Non-recurring revenue not allocated to segments includes once off revenue recognized that we believe does not relate to either our Merchant or Consumer divisions. Employee misappropriation of company funds represents a once-off loss incurred.
Non-recurring revenue not allocated to segments includes once off revenue recognized that we believe does not relate to either our Merchant or Consumer divisions. Employee misappropriation of company funds represents a once-off loss incurred. Indirect tax provision includes non-recurring indirect taxes which have been provided related to prior periods following an on-going investigation from a tax authority.
Following the acquisition of Connect, we now utilize a combination of short and long-term facilities to fund our operating activities and a long-term asset-backed facility to fund the acquisition of POS devices and safe assets. Refer to Note 12 to our consolidated financial statements for the year ended June 30, 2023, for additional information related to our borrowings.
Following the acquisition of Connect, we now utilize a combination of short and long-term facilities to fund our operating activities and a long-term asset-backed facility to fund the acquisition of POS devices and safe assets.
During fiscal 2023, we made significant progress in terms of improving our empowerment credentials and are pleased to report that our independently verified B-BBEE rating has improved to a level 5 rating from a level 8 rating.
During fiscal 2023, we made significant progress in terms of improving our empowerment credentials and in September 2023 we reported that our independently verified B-BBEE rating improved to a level 5 rating from a level 8 rating, simultaneously setting out our aim to achieve a level 4 rating by the end of fiscal year 2024.
For these reasons, among others, the actual cash flows may vary from forecasts of future cash flows. To the extent actual cash flows vary, revisions to the useful life or impairment of intangible assets may be necessary.
No assurance can be given, however, that the underlying assumptions or events associated with such assets will occur as projected. For these reasons, among others, the actual cash flows may vary from forecasts of future cash flows. To the extent actual cash flows vary, revisions to the useful life or impairment of intangible assets may be necessary.
We reported a net loss attributable to us of $35.1 million (ZAR 629.2 million) during fiscal 2023 compared with a net loss of $43.9 million (ZAR 666.8 million) during fiscal 2022.
We reported a net loss attributable to the company of $17.4 million (ZAR 326.1 million) during fiscal 2024 compared with a net loss of $35.1 million (ZAR 629.2 million) during fiscal 2023.
We completed the acquisition of Connect during fiscal 2022 where we identified and recognized intangible assets. We used the relief from royalty method to value identified brands and the multi-period excess earnings method to value the integrated platform and identified customer relationships.
We used the relief from royalty method to value identified brands and the multi-period excess earnings method to value the integrated platform and identified customer relationships. We have used the relief from royalty method, the multi-period excess earnings method, the income approach and the cost approach to value other historic acquisition-related intangible assets.
The results of our impairment tests during fiscal 2022 indicated that the fair value of our reporting units exceeded their carrying values and so did not require impairment. Intangible Assets Acquired Through Acquisitions The fair values of the identifiable intangible assets acquired through acquisitions were determined by management using the purchase method of accounting.
The results of our impairment tests during fiscal 2024 indicated that the fair value of our reporting units exceeded their carrying values and so did not require impairment.
We did not identify any impairment indicators during fiscal 2022 and therefore did not recognize any impairment losses related to our equity-accounted investments during that year. We performed impairment assessments during fiscal 2023 and 2021, for our investment in Finbond Group Limited “(Finbond”) following the identification of certain impairment indicators.
We performed impairment assessments during fiscal 2024 and 2023, for our investment in Finbond Group Limited “(Finbond”) following the identification of certain impairment indicators. The results of our impairment tests during fiscal 2024 and 2023, resulted in impairments of $1.2 million and $1.1 million, respectively, related to our equity-accounted investments.
These impairments are discussed in Note 9 to our audited consolidated financial statements. 32 For fiscal 2023, in determining the fair value of Finbond, as it is listed on the Johannesburg Stock Exchange, its market price as of the impairment assessment dates, adjusted for a liquidity discount of 25%.
For fiscal 2023, in determining the fair value of Finbond, as it is listed on the Johannesburg Stock Exchange, its market price as of the impairment assessment dates, adjusted for a liquidity discount of 25%. We based our estimates on assumptions we believe to be reasonable but that are unpredictable and inherently uncertain.
We base our estimates on assumptions we believe to be reasonable but that are unpredictable and inherently uncertain. The fair value of our investment in Finbond is sensitive to movements in its market price, which is quoted in ZAR, because we use the market price as the basis of our valuation.
The fair value of our investment in Finbond was sensitive to movements in its market price, which is quoted in ZAR, because we used the market price as the basis of our valuation.
We analyze our business and operations in terms of two inter-related but independent operating segments: (1) Merchant Division and (2) Consumer Division. In addition, corporate activities that are impracticable to allocate directly to the operating segments, as well as any inter-segment eliminations, are included in Group costs. Inter-segment revenue eliminations are included in Corporate/ Eliminations.
In addition, corporate activities that are impracticable to allocate directly to the operating segments, as well as any inter-segment eliminations, are included in Group costs. Inter-segment revenue eliminations are included in Eliminations.
During fiscal 2021, we made our first provisional South African tax payments of $0.8 million (ZAR 11.9 million) related to our 2021 tax year.
During fiscal 2024, we paid our first provisional South African tax payments of $2.7 million (ZAR 49.5 million) related to our 2024 tax year. During fiscal 2024, we also made our second provisional South African tax payments of $2.9 million (ZAR 52.7 million related to our 2024 tax year and received tax refunds of $0.04 million (ZAR 0.8 million).
These reductions were partially offset by the inclusion of expenses related to Connect’s operations, higher employee-related expenses related to the expansion of our senior management team, and the year-over-year impact of inflationary increases on employee-related expenses.
In ZAR, the modest increase was primarily due to higher employee -related expenses related to the expansion of our senior management team and the year-over-year impact of inflationary increases on employee-related expenses, which were partially offset by the benefits of various cost reduction initiatives in Consumer .
In fiscal 2022, we absorbed $5 million into working capital compared to a $4.7 million release from working capital in fiscal 2021. During fiscal 2023, we paid our first provisional South African tax payments of $3.0 million (ZAR 50.8 million) related to our 2023 tax year.
We also paid taxes totaling $0.4 million in other tax jurisdictions, primarily in the Botswana. During fiscal 2023, we paid our first provisional South African tax payments of $3.0 million (ZAR 50.8 million) related to our 2023 tax year.
We also extended loan funding of $1.0 million to V2 and $0.2 million to Revix. Cash flows from financing activities During fiscal 2023, we utilized approximately $520.1 million from our South African overdraft facilities to fund our ATMs and our cash management business through Connect and repaid $547.3 million of these facilities.
We also paid $1.5 million to repurchase shares from employees in order for the employees to settle taxes due related to the vesting of shares of restricted stock. During fiscal 2023, we utilized approximately $520.1 million from our South African overdraft facilities to fund our ATMs and our cash management business through Connect and repaid $547.3 million of these facilities.
Cash Connect is a provider of robust cash vaults in the formal sector, and is building a presence in the informal sector. Cash Connect enables our merchant customer base to significantly mitigate their operational risks pertaining to cash management and security.
We provide robust cash vaults in the SME sector (Cash Connect) and are building a presence in the micro-merchant sector (Kazang Vaults), which enables our merchant customer base to significantly mitigate their operational risks pertaining to cash management and security. o Whilst there is trend towards digital payments, cash remains as the most significant portion of retail transactions especially in informal markets.
(2) Indirect and derivative facilities may only be used for guarantees, letters of credit and forward exchange contracts to support guarantees issued by RMB and Nedbank to various third parties on our behalf. 47 Long-term borrowings We have aggregate long-term borrowing outstanding of ZAR 2.5 billion ($133.1 million translated at exchange rates as of June 30, 2023) as described in Note 12.
(2) Indirect and derivative facilities may only be used for guarantees, letters of credit and forward exchange contracts to support guarantees issued by RMB and Nedbank to various third parties on our behalf.
The decrease in our unrestricted cash balances from June 30, 2022, was primarily due to the utilization of cash reserves to fund certain scheduled repayments of our borrowings, fully settle our revolving credit facility, purchase ATMs and safe assets, and to make an investment in working capital in our Consumer and Merchant operation, which was partially offset by the utilization of our available borrowings and a positive contribution from Connect and certain of our Consumer operations.
The increase in our unrestricted cash balances from June 30, 2023, was primarily due to a positive contribution from our Merchant and Consumer operations, the sale of certain Cell C prepaid inventory held, higher year end clearing accounts and vendor wallet balances, and utilization of our borrowings facilities to fund certain components of our operations, which was partially offset by the utilization of cash reserves to fund certain scheduled and other repayments of our borrowings, pay transaction related expenses, purchase ATMs and vaults, and to make an investment in working capital.
Available short-term borrowings Summarized below are our short-term facilities available and utilized as of June 30, 2023: Table 15 RMB Facility E RMB Indirect RMB Connect Nedbank $ ’000 ZAR ’000 $ ’000 ZAR ’000 $ ’000 ZAR ’000 $ ’000 ZAR ’000 Total short-term facilities available, comprising: Overdraft - - - - 10,882 205,000 - - Overdraft restricted as to use (1) 74,319 1,400,000 - - - - - - Total overdraft 74,319 1,400,000 - - 10,882 205,000 - - Indirect and derivative facilities (2) - - 7,167 135,000 - - 8,311 156,556 Total short-term facilities available 74,319 1,400,000 7,167 135,000 10,882 205,000 8,311 156,556 Utilized short-term facilities: Overdraft - - - - 9,025 170,000 - - Overdraft restricted as to use (1) 23,021 433,654 - - - - - - Indirect and derivative facilities (2) - - 1,757 33,100 - - 112 2,110 Total short-term facilities available 23,021 433,654 1,757 33,100 9,025 170,000 112 2,110 Interest rate, based on South African prime rate 11.75% 11.65% (1) Overdraft may only be used to fund ATMs and upon utilization is considered restricted cash.
Refer to Note 12 to our consolidated financial statements for the year ended June 30, 2024, for additional information related to our borrowings. 51 Available short-term borrowings Summarized below are our short-term facilities available and utilized as of June 30, 2024: Table 15 RMB Facility E RMB Indirect RMB Connect Nedbank $ ’000 ZAR ’000 $ ’000 ZAR ’000 $ ’000 ZAR ’000 $ ’000 ZAR ’000 Total short-term facilities available, comprising: Overdraft - - - - 11,276 205,014 - - Overdraft restricted as to use (1) 49,503 899,996 - - - - - - Total overdraft 49,503 899,996 - - 11,276 205,014 - - Indirect and derivative facilities (2) - - 7,425 134,991 - - 8,611 156,553 Total short-term facilities available 49,503 899,996 7,425 134,991 11,276 205,014 8,611 156,553 Utilized short-term facilities: Overdraft - - - - 9,351 170,011 - - Overdraft restricted as to use (1) 6,737 122,480 - - - - - - Indirect and derivative facilities (2) - - 1,821 33,106 - - 116 2,105 Total short-term facilities available 6,737 122,480 1,821 33,106 9,351 170,011 116 2,105 Interest rate, based on South African prime rate 11.75% 11.65% (1) Overdraft may only be used to fund ATMs and upon utilization is considered restricted cash.
The allowance for doubtful EMI loans receivable relates to provision created in fiscal 2021 related to loan provided to certain of our then equity- accounted investments. 46 Liquidity and Capital Resources At June 30, 2023, our unrestricted cash and cash equivalents were $35.5 million and comprised of ZAR-denominated balances of ZAR 0.6 million ($29.2 million), U.S. dollar-denominated balances of $4.5 million, and other currency deposits, primarily Botswana pula, of $1.8 million, all amounts translated at exchange rates applicable as of June 30, 2023.
Liquidity and Capital Resources At June 30, 2024, our unrestricted cash and cash equivalents were $59.1 million and comprised of ZAR-denominated balances of ZAR 961.6 million ($52.9 million), U.S. dollar-denominated balances of $4.5 million, and other currency deposits, primarily Botswana pula, of $1.7 million, all amounts translated at exchange rates applicable as of June 30, 2024.
Transaction costs related to Connect acquisition includes fees paid to external service providers associated with the contract drafting and negotiations; corporate finance advisory services; legal, financial and tax due diligence activities performed; warranty and indemnity insurance related to the transaction; and other advisory services procured; as well as our portion of the fees paid to competition authorities related to the regulatory filings made in various jurisdictions .
Transaction costs related to Adumo acquisition includes fees paid to external service providers associated with legal, commercial, financial and tax due diligence activities performed, fees paid to legal advisors to draft the purchase agreement as well as other legal and advisory services procured related to the transaction.
Refer also “Results of Operations—Use of Non-GAAP Measures” below. Fiscal 2023 includes Connect for the entire fiscal year and fiscal 2022 includes consolidation of Connect from April 14, 2022. Refer also to Note 3 to the audited consolidated financial statements for additional information regarding this transaction.
Group Adjusted EBITDA represents Segment Adjusted EBITDA after deducting Lease expenses and group costs. Refer also “Results of Operations—Use of Non-GAAP Measures” below. Fiscal 2024 and 2023 includes Connect for the entire fiscal year and fiscal 2022 includes consolidation of Connect from April 14, 2022.
We considered each of these transactions to be an observable price change in an orderly transaction for similar or identical equity securities issued by MobiKwik. Accordingly, the carrying value of our investment in MobiKwik increased from $27.0 million as of June 30, 2020, to $76.3 million as of June 30, 2021.
Specifically, our current valuation is based on an observable price change in an orderly transaction for similar or identical equity securities issued by MobiKwik in a capital raise concluded in June 2021, of $245.50 per share. The carrying value of our investment in MobiKwik is $76.3 million as of June 30, 2024.

… 199 more changes not shown on this page.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

9 edited+1 added−1 removed12 unchanged
Biggest changeInterest rates in South Africa are trending upwards and we expect higher interest rates in the foreseeable future which will increase our cost of borrowing. We periodically evaluate the cost and effectiveness of interest rate hedging strategies to manage this risk. We generally maintain investments in cash equivalents and held to maturity investments and have occasionally invested in marketable securities.
Biggest changeInterest rates in South Africa have been trending upwards in recent quarters but have, as of the date of this Annual Report, stabilized and are expected to remain at current levels, or perhaps even decline moderately towards the last quarter of calendar 2024. We periodically evaluate the cost and effectiveness of interest rate hedging strategies to manage this risk.
With respect to credit risk on financial instruments, we maintain a policy of entering into such transactions only with South African and European financial institutions that have a credit rating of “B” (or its equivalent) or better, as determined by credit rating agencies such as Standard & Poor’s, Moody’s and Fitch Ratings. 51 Consumer microlending credit risk We are exposed to credit risk in our Consumer microlending activities, which provides unsecured short-term loans to qualifying customers.
With respect to credit risk on financial instruments, we maintain a policy of entering into such transactions only with South African and European financial institutions that have a credit rating of “B” (or its equivalent) or better, as determined by credit rating agencies such as Standard & Poor’s, Moody’s and Fitch Ratings. 56 Consumer microlending credit risk We are exposed to credit risk in our Consumer microlending activities, which provides unsecured short-term loans to qualifying customers.
We have used forward contracts in order to limit our exposure in these transactions to fluctuations in exchange rates between the South African rand (“ZAR”), on the one hand, and the U.S. dollar and the euro, on the other hand. We had no outstanding foreign exchange contracts as of June 30, 2023 and 2022.
We have used forward contracts in order to limit our exposure in these transactions to fluctuations in exchange rates between the South African rand (“ZAR”), on the one hand, and the U.S. dollar and the euro, on the other hand. We had no outstanding foreign exchange contracts as of June 30, 2024 and 2023.
The effect of a hypothetical 1% (i.e. 100 basis points) increase and a 1% decrease in the interest rates applicable to the borrowings as of June 30, 2023, are shown. The selected 1% hypothetical change does not reflect what could be considered the best- or worst-case scenarios.
The effect of a hypothetical 1% (i.e. 100 basis points) increase and a 1% decrease in the interest rates applicable to the borrowings as of June 30, 2024, are shown. The selected 1% hypothetical change does not reflect what could be considered the best- or worst-case scenarios.
The following table illustrates the effect on our annual expected interest charge, translated at exchange rates applicable as of June 30, 2023, as a result of changes in the South African prime and 3-month JIBAR interest rates, using our outstanding short and long-term borrowings as of June 30, 2023.
The following table illustrates the effect on our annual expected interest charge, translated at exchange rates applicable as of June 30, 2024, as a result of changes in the South African prime and 3-month JIBAR interest rates, using our outstanding short and long-term borrowings as of June 30, 2024.
Equity Securities Price Risk Equity price risk relates to the risk of loss that we would incur as a result of the volatility in the exchange -traded price of equity securities that we hold. As of June 30, 2023, we did not have any equity securities that were exchange-traded and held as available for sale.
Equity Securities Price Risk Equity price risk relates to the risk of loss that we would incur as a result of the volatility in the exchange -traded price of equity securities that we hold. As of June 30, 2024, we did not have any equity securities that were exchange-traded and held as available for sale.
Currency Exchange Risk We are subject to currency exchange risk because we purchase components for safe assets, that we assemble, and inventories that we are required to settle in other currencies, primarily the euro, renminbi, and U.S. dollar.
Currency Exchange Risk We are subject to currency exchange risk because we purchase components for vaults, that we assemble, and inventories that we are required to settle in other currencies, primarily the euro, renminbi, and U.S. dollar.
We have short and long-term borrowings in South Africa as described in Note 12 to our consolidated financial statements which attract interest at rates that fluctuate based on changes in the South African prime and 3-month JIBAR interest rates.
We generally maintain investments in cash equivalents and held to maturity investments and have occasionally invested in marketable securities. We have short and long-term borrowings in South Africa as described in Note 12 to our consolidated financial statements which attract interest at rates that fluctuate based on changes in the South African prime and 3-month JIBAR interest rates.
Table 19 As of June 30, 2023 Annual expected interest charge ($ ’000) Hypothetical change in interest rates Impact of hypothetical change in interest rates ($ ’000) Estimated annual expected interest charge after hypothetical change in interest rates ($ ’000) Interest on South Africa borrowings 21,111 1% 1,663 22,774 (1%) (1,660) 19,451 Credit Risk Credit risk relates to the risk of loss that we would incur as a result of non-performance by counterparties.
Table 19 As of June 30, 2024 Annual expected interest charge ($ ’000) Hypothetical change in interest rates Impact of hypothetical change in interest rates ($ ’000) Estimated annual expected interest charge after hypothetical change in interest rates ($ ’000) Interest on South Africa borrowings 19,930 1% 1,599 21,529 (1%) (1,598) 18,332 Credit Risk Credit risk relates to the risk of loss that we would incur as a result of non-performance by counterparties.
Removed
We hold approximately 27.8% of the issued share capital of Finbond which are exchange-traded equity securities, however, from April 1, 2016, we have accounted for them using the equity method. The fair value of these securities of $4.6 million as of June 30, 2023, represented approximately 0.8% of our total assets, including these securities. 52
Added
As of June 30, 2024, we did not own any exchange-traded equity securities. 57

Other LSAK 10-K year-over-year comparisons