Q1 2022 Net 1 UEPS Technologies Inc Earnings Call
Okay.
[music].
Good day, ladies and gentlemen, and welcome to the NATO and U E. P. S Technologies, Inc. First quarter 2022 earnings call.
All participants will be in listen only mode and there will be an opportunity to ask questions later during the conference.
Should you need assistance during the call. Please pick one operator, but pacing star <unk> zeal.
All right.
Please also note that does it mean is being recorded.
I would now like to turn the conference over to Mr. <unk>. Please go ahead.
Thank you operator, welcome to our first quarter 2022 earnings.
Especially today are Chris Meyer.
Thank you Ali South Africa.
Alex Smith, our press release and supplemental insert it supplementary investor presentation are available on our Investor Relations website.
One dot com as a reminder, during this call you'll be making forward looking statements and I ask you to look at the cautionary language in our Form 10-Q.
Regarding the risks and uncertainties.
Part of it.
Also we have discussed already.
We're just not yet.
As a result.
In our press release.
Investors understand underlying trends.
As you know the cause of it yourself.
Significantly.
I have a crazy fluctuation.
S dollar and South African Rand.
Chris will start the call today with an update on strategy and Lincoln will provide an update on that.
Sure.
The South African operations, and finally, Alex will go through the results of the first quarter.
Yeah.
During the call over to Chris.
Thank you Darla and good morning, good afternoon, and thank you to all for joining us for our first quarter earnings call today.
So this earnings call marks my first full quota and in essence I suppose my 100 days in the role as group CEO and I couldn't be more pleased with the progress and focused execution of the management team and all of the committed niche one team members in advancing our strategic priorities.
As this is my second earnings call as groups, Yes, I thought it would be worth repeating what I've stated, it's about the vision and mission of niche one and our intense focus on repositioning the business for growth.
Our vision is to build and operate the leading South African full service Fintech platform offering payment processing and financial services to underserved merchants and consumers.
Laundry that vision is our core purpose to improve People's lives.
Financial inclusion to the underserved in South Africa.
This is a tremendous growth opportunity in the southern African market, which is primarily a cash based economy with approximately 60% of transactions still conducted in cash.
We've also previously explained that our mission leads us to a total addressable market.
Wondered and 50 billion Rand comprising more than 26 million adults and N. It seems one to six as well as approximately 700000 and formal and 1.4 million informal micro small and medium enterprises or M. S Amy's across South Africa.
We plan to address this growth opportunity, both organically and through acquisitions, such as the transformative acquisition of the connect group that was announced last week.
Now, let's turn to the connect group acquisition marks the start of a transformative opportunity to unlock the next phase of net ones Greg.
And the combined entity provides all stakeholders with the opportunity to be a part of building the leading financial technology platform in Southern Africa focused on financial inclusion.
I think that it is important to point out that none of this would have been possible without the dedication of our exceptional team members across our group and I wanted to thank them all for their commitment to our customers our communities and to our grass ambition.
As a reminder, the connect group transaction is subject to regulatory approvals and other customary closing conditions and as such we expect the transaction to close in the quarter ending March 2022 and the focus of this presentation and will therefore be on our existing net one business.
While the economy in South Africa remains challenging.
I'm encouraged by the continued progress being made in the turnaround of our consumer financial services business and in particular the amendment. The momentum we are seeing in the rates of new account openings and the ability of our team to take action in improving our financial performance.
However, I want to remind everyone that we are still early in our transformative journey and there's still a lot of work to be done.
As mentioned on the last earnings call. We have started to address legacy organizational dynamics in an effort to provide the necessary foundation for the company to execute on its growth ambition and vision.
We believe that will not have the right team culture and strategic priorities to take the company to the next level dredging, a competitively stronger company that can unlock value for all of our stakeholders.
Yeah.
A key strategic imperative is to return the consumer financial service business to break even and then into profitability as soon as possible. This is a business comprising easy pay everywhere E. P E money lawn and smart life. It is a scale business that requires operational leverage with our products and <unk>.
Infrastructure was built originally to serve as a base of over 10 million clients.
No the offering now has a million clients and he has lost lossmaking.
Our objective is to achieve a monthly breakeven run rate in this business by June 2022, our strategy for achieving this is three key leave us firstly crashed in active E. P E count numbers.
Second we will drive increased our pud.
Food cost optimization.
In terms of EPA Congress, we have invested in a new sales capability and are in the process of realigning our distribution model to best serve our customers.
We are seeing good momentum and are now consistently signing up around 50000, New E. P. E accounts. Each month. This has meant that our contracting rate has jumped from around 2% of active accounts in may this year to currently around 5% of active accounts.
Our contact diversion rates are a key focus for us.
This means receiving a grant payments into the new E. P. E account such that these account all does become revenue and customers for us we.
We are seeing cumulative activation rates of 45% to 50% within three months of an account being which is broadly in line with expectations at this time.
This means that we expect to see growth in active accounts of 20 to 25000 consistently per month from November 2021.
And this is a pleasing trend from the past calendar three yes, we're active accounts with consistently declining.
The second lever is to improve our average revenues per customer.
To achieve this we are focused on providing access to a broader suite of products in particular smart loss and moneyline. Our sales teams are being supported and assisted with training and we are building a more integrated cross product its approach to customer solutions.
The third lever is cost.
And this is a lever we as management have full control.
And here I can report significant progress to date.
We have managed to reduce the break even active E. P. E account number from approximately 1.65 million accounts in June 21, 215, 5 million accounts to direct cost actions taken during the quarter.
It's important to note that we previously indicated our break even level.
Of a bit between one four and $1 5 million of costs and I wanted to clarify that this was for the SA business alone and excluded our group costs. The numbers I'm not disclosing will be the breakeven point for knit one U P. S at a group level.
In order to achieve these things we have closed over 3000 mobile it was all of them not about payment points across the country.
And replace them with 114, New express and satellite branches, providing similar reach and access for our targeted client base.
Changing our points of presence strategy when combined with other cost actions taken in this quarter will translate into approximately 185 million round of cost savings over the remainder of the fiscal year.
Which in turn translates into an 18% reduction in fixed costs within the consumer financial services business. This year.
Ultimately our aim is to further reduce the breakeven active E. P account numbers to close to a million accounts through further cost optimization strategies, we are exploring.
We will report in more detail on the specific of these specifics of these strategies and the implement mentation thereof at our next quarterly results presentation.
Taken together once completed these three leave is mean, we are targeting for future growth in our E. P. Our cost base to translate into.
<unk> contribution to profitability.
In summary, I'm pleased with the significant minute management actions taken this quarter, which will have a positive impact on our financial results going forward and I'm positive about our long term prospects, which will be aided by the acquisition of connect groups as we move closer to our longer term vision to be the leading financial technology platform in southern.
Africa focus on financial inclusion.
As part of this we are also reviewing our branding and we look to have something new to announce on that front in the coming months.
And with that I'd now like to hand over to my colleague Lincoln Molly for a full update on the turnaround of the South African operations Lincoln.
Thank you Chris and thank you for your passion. Thank you for your drive and leadership during the last few months.
I'd like to go into much more detail on how we plan to address some of the issues that have been highlighted by Chris in his comments.
Our plan will focus on three primary objectives, one building a sales culture to improving our performance and three launching new products.
First let me begin by the focus on building a sales culture.
We have embarked on an ambitious and necessary journey to change the mindset service orientation corporate culture and skill set of our distribution network from a cash logistics to a client focused sales driven culture.
This mindset is largely based on four important pillars.
One, creating a culture of communication engagement transparency and empowerment, among our staff to give them pride and dignity about working for NAFTA, one to develop a focused on individual customer experience.
This is about treating our customers with respect and dignity and ensure that we have meaningful conversations about their financial needs.
Building, our sense of accountability about individual team and company performance and lastly train and ensure that our teams align their daily activities and focus areas with our vision and purpose.
We've been humbled by the positive response to this new culture by our teams at all levels of the organization.
This is evident in the increased visibility of our staff and communities as well as the re emergence of our brand in the competitive market.
I'm humbled by the feedback from our frontline leaders, who are daily driving this change on an ongoing basis.
Our training program has already been implemented for over 90% of our team and we believe that these ongoing efforts and better visibility of metrics and performance should assist us in increasing revenue per customer.
I now want to get to the issue of our focus on improving our account performance.
As Chris has mentioned to date, approximately 45% to 50% of the gross customer additions become active within three months of account opening and commenced transaction on the outcomes.
This number is in line with historic expectations. However, we are still putting on more focus in it.
In improving overall activation rates how are we doing so one by regular engagement with them. It sounds like colleagues at a provincial and local level two by encouraging our customers to approach SASSA offices. After accounts are opened in order to activate those.
That comes.
Three by monitoring activation rates on a regular basis and through increased visibility of activating metrics and lastly, engaging SASSA on their plans to digitize the onboarding process long term beyond the S. G Graham.
Net one is committed to be part of creating solutions to the system and process related challenges.
This is an imperative for our business about how we embark on board and.
A grand disciplined and make sure that the account is active.
I want to shift now to the third area of focus which is launching of new products in.
In line with our vision and purpose, we are focusing on financial inclusion for the under banked and Unbanked consumers beyond social grant recipients, we've been working hard to understand customer needs and are proud to have launched the E. P. E. P E P light and smart one singular plane.
Aimed to the market as of the first of November 2021.
If I start with E P E alike.
The E. P light proposition is competitively placed in the market and respond to the market requirements for our basics on textile lot count that is affordable secure and does not include field capabilities that the consumer may not require.
This account is aimed at a younger customer base between the ages of aging and city.
The customer base may include students young koranda sapiens and any other customer who has six or lower cost transactional account.
Now I want to come to the next account, which is smart one in addition to the EP light transaction account. We've also successfully launched and enhancing the plane called smart one.
Smart one as a standalone federal plane that can be purchased by a net one network and is offered under the smart life insurance license in.
In keeping with the financial inclusion ethos of net one smart one offer affordable several plans cover for the primary beneficiary as well as the extended families with additional support benefits that are required by our customers in the times of need the target market our customers between the.
Ages of 18 and 79.
It can be customized uniquely to include a spouse or up to six children.
We are very proud of these new offerings and we believe that they will do well in the market in response to customer needs.
In order to further broaden our reach into our chosen customer base beyond crammed recipients were also engaging with prospective strategic partners to jointly develop and deliver Kayla banking lending and insurance solutions. We expect these new propositions in addition to.
Our existing and process perspective offerings to answer to the needs of our customers and to accelerate the growth of the financial services business.
I want to now talk about our a T M business another focus area for customer expansion and revenue growth is our ATM channel optimization plan.
Transaction volumes in our ATM business went down by 12% on the previous quarter and by 10% on the pre on the prior year, but this was largely due to the impact of the social unrest.
Volumes have now largely recovered in September 'twenty 'twenty. One this is part of our business that was affected by the social unrest with over 10% of our Atms destroyed.
While we now have a smaller ATM fleet, our focus is on improving transaction volumes to compensate for this with a focus on expanding the presence of our Atms in various reaching this.
During the last three months, we have reviewed net one branches with multiple Atms to evaluate the rationale of the placement and the machines that are there have been relocated in those environments, where those machines are not performing we're also focusing on play.
More machines in retail outlets, where there is a high foot traffic for the full duration of the month and the ATM is accessible to customers seven days a week.
It is our belief that all focus optimization should not only resolved and higher transaction volume, but also improve our bottom line performance over time.
At this time I think it's important for us to give you a sense about how we're rebuilding and establishing relationships with key stakeholders that we work with as part of our growth strategy.
We have had several very constructive engagement with SASSA after having challenging relationships over the last few years, Let me share. One example of this newly renewed relationship SASSA has recently issued an RFP to the banking Association of South Africa Boston members.
To respond to a tender covering specifics you'll start grant payments for a period of time ending in March 2023.
Expectation is for more than one bank to be appointed to administer their payments under this tender.
Green Dot bank will partner with NAFTA wanted to make a joined beat understand.
S. Net one we've seen received this joint submission as a positive step in our continued relationship with kindred and confirms the growing strength of our relationship with them.
Secondly in addition.
We established net one representation at the banking Association of South Africa through a partnership with Korean rock fill.
Thirdly, we also now have a direct membership to the South African Bank risk information center known as subject to ensure that we are part of all efforts to deal with security cyber crime and all other related crime matter.
Four I'm pleased to update you about the longstanding legal matter between net one and the NASA credit regulator NCR that originated in our Moneyline financial services business in September 2014.
Legal matter has now been settled to the mutual satisfaction of both parties and there's no set a positive tone for the relationship with the national credit regulator going forward.
Taken together, we believe our approach Tuesday, Golar management is showing good result, and we will continue to grow these relationships going forward.
In summary.
The work that has been done in the last six months by the leadership and management teams.
As well as all of our staff in net one lays the foundation and moves us in the direction required to transform the consumer financial services business into a fourth service profitable and leading Fintech company, serving South Africa.
I'd like to Echo the sentiments of my colleague, Chris I'd like to thank the net one team for their resilience and their performance. During these difficult times. We are determined to succeed I will now hand over to my colleague Alex to talk about our quarters is it allows Alex.
Thank you Duncan and good morning, everybody.
Now, let's turn to the financial metrics for the quarter. That's what are some brief comments on our connect group acquisition.
Total revenue for the quarter was $34 $5 million, which was a 2% decrease year over year in U S. Dollar terms and a 14% decrease in Rand terms.
This was primarily due to fewer prepaid airtime and hardware sales and lower account revenues.
The U S dollar was 13% weaker against the Rand during the first quarter of 2022 can painted compared to the same period in the prior year, which also impacted our reported results.
We reported an adjusted EBITDA loss of $10 $1 million, which was 4% west and $9 $7 million EBITDA loss reported for the first quarter of 'twenty, 'twenty, one or 10% better in constant currency.
This was mainly as a result of the closure of IPG.
Which incurred a loss of $2 $8 million in the prior period.
The core South African operations, so EBITDA losses for the quarter of $8 $6 million.
Compared to the $4 $3 million in the prior period.
Primarily due to the lower revenue levels as well as weaker profitability in our financial services segment linked to increased insurance claims related to the Covid pandemic.
Otherwise the cost base remains stable and we have significant available capacity.
Transaction volumes through our easy pay switch were up 11% compared to the prior quarter, while transaction values also increased by around 4%.
This was in line with expectations as this is a higher volume period from a seasonality perspective.
Within this portfolio there was an encouraging sustained growth in bill payment volumes over the previous year.
In our financial services business. The loan book finished September 30th 2021 at 346 million Rand.
This is $384 million on 30 September 2020, and 336 million at June 2021.
The other significant contributor in this segment is our insurance business, which saw its number of active policies increased to 251000 from 235000 a year ago.
However, a marked increase in claims which were 42% higher.
In quarter, one 'twenty two than in quarter, one 'twenty one due to the pandemic meant that this was the main driver of the increased loss in financial services.
During the quarter, we recognized our share of fin one's losses for the six months ended August 31, 2021.
They report their interim results during this reporting cycle.
The losses in the period had reduced from the prior period.
Which had been adversely affected by the pandemic, but they continue to incur losses due to various challenges.
Our share of the losses amounted to $1 $2 million.
Which reduced our effective carrying value of inbound to $7 $6 million, which is substantially lower than the current share price.
Turning to our various investments.
Firstly, we have might be quick.
We continue to hold our investment in might be quick to $76 million in.
In line with the valuation achieved in the most recent investor fund raising round.
We only adjust our carrying value in the event of observable transactions.
And there were none occurring during this quarter.
We also continue to hold our investment in cell C at zero at no value.
We noted the renewal of the cautionary by Blue label Telecoms in respect of the recapitalization and are optimistic about their prospects of achieving this.
I would again like to highlight that we continue to hold around 233 million Rand or $15 $4 million of cell C airtime within our inventory balances.
Which we expect to recover once the recapitalization is complete.
In August 2021, we increased our short term credit facilities for a fixed Atms from $1 2 billion Rand to $1 4 billion Rand in order to access the necessary cash to stock our Atms.
These facilities are already available for use in respect of our Atms.
We believe our currently sufficient to optimally operate our ATM business.
At September 30th 'twenty, 'twenty, one we had unrestricted cash of $188 $5 million and effectively no debt.
U S dollar denominated balances were $162 $5 million out of that title.
This represents $3 49 per share in cash and about 58% of our current net asset value.
Yeah.
Our operational cash burn for the quarter amounted to $8 million.
This did include a $2 million release from working capital.
As Chris highlighted we announced the definitive agreement to acquire 100% of the connect groups last week for a consideration of approximately $3 7 billion Rand.
We expect to finance the transaction using cash on hand, our existing credit facility and issuance of net one common stock.
The acquisition is expected to close in the quarter ended March 31, 2022 is it is subject to regulatory approval and satisfaction of customary closing conditions.
Having signed the definitive agreements last week, we were now commenced the process in connection in conjunction with connect group management a premiere of preparing connect group accounts under U S. GAAP. So that we can prepare pro forma results to share with the market after closing and under applicable regulatory.
Requirements.
With that operator, we'd like to turn the call back over to you for the Q&A portion of our cool.
Thank you.
Thank you very much Sir ladies.
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Our first question is from Raj Sharma of B Riley. Please go ahead.
Hi, Good morning, guys. Thank you for laying out a definitive plan could.
Could you talk a little bit about the cost base.
That you are referring to currently and where that goes to by June.
There was an 18% to 20% reduction if you could talk a little bit about that and then what do you expect.
In June.
The level of accounts to be any P E.
Sure Raj.
So just to clarify on the cost reduction so we've identified about $195 million of course, we won't be able to take out this fiscal year.
And that's predominantly coming out of the fixed cost base.
And when we break down and obviously very focused on financial services, because that's where we're looking to to achieve that profitability.
So when we break down our cost base between fixed and variable.
We estimate that the most of these of the $195 million is coming out of the of the fixed cost base and that's about an 18% reduction in the in the fixed cost base that we will achieve this year.
Right and and that would be.
Indicative of about $1 5 million.
The accounts by June of <unk>.
By the end of the fiscal year.
Is that the way to look at it.
So.
We're targeting a little bit less than that in terms of.
Of of achieving breakeven at the SA level.
But we estimate that we need to be at 1.55 million to achieve break even at the group.
The U E P S group level so.
I think in the past, we've always indicated a breakeven so they I say he group level. We're now trying to give some guidance around including the cost that we held at the group level with them.
Alright, that's what lifts the breakeven point up to the 1.55 million account level.
If I could add Raj, it's Chris I think the consumer I'm sorry go ahead.
No go ahead. Please yes, so I think just to summarize them.
The actions taken in this quarter.
We'll have moved our breakeven point down by 100000 accounts and that's that's what is equates to and an 18% for a reduction in the fixed cost base of our financial services business and I think I think the other point to add is.
We are we have a number of others.
It is under under review.
And we're working very hard on the on the on the cost basis within the financial services business, the consumer financial services business and our aim is to bring that breakeven point, Don as I was saying earlier is close to our existing account.
Account base as possible that's it that's what we're trying to do so I think the important message we tried to live that is.
I think historically it was purely one lever being focused on which was the lever of grow account numbers. What we're saying is there are three there are three leavers yeah. Neither one is let's let's grab account numbers, but but more importantly, we believe we can optimize the cost base in this business, but as importantly, we believe we can optimize the cost basis.
Cost base in this business and we are.
Focus on bringing down the breakeven point to as close as possible to our current.
E. P account active EPA account base as possible. So that's very important and then the third point to add is you.
I had to pick up on some of them with Lincoln was saying earlier, we want to where we were putting a real focus on the average revenue per client.
And that's through.
Reining in focusing.
Our staff across the country in terms of the broader product set moneyline AR smart glasses, and therefore, you know offering a great product offering to our client base and improving that overall revenue per client.
Alright, so if I understand it correctly the hundred thousand.
Accounts that is gonna be lowered by by the end of the fiscal year goes from 1551 for five and a one point is that right one point in time.
Five.
Six five to 155.
Got it and then by that time, you were saying that the overall group level that youre going to achieve breakeven so wouldn't it would at that level.
Consumer group B Brae.
Breakeven it wouldn't be no no we're not saying that so are we saying those are identified costs that we've already action and have managed to reduce the breakeven point to 155.
That's the first one and secondly, I aim our intention is to get this business to a break even point to a run rate breakeven in June 2022 through further actions within those three levers that I've just discussed describe to you.
And does the does the art and I know that the Lincoln talked about you guys talked about ARPA increase does that change the letter.
Eric significantly you know from.
$2 50, an account a month.
Hum.
In financing in financial and processing does that change that I think the expectation was to go to three.
And I'm talking about dollars in terms of dollars per account per month has that is that also you're expecting to change.
Because you're bringing on some some light products the E light and the smart one would that lower your our Cleveland business.
Sorry, Raj just could you just repeat that last section.
Just last section was you know you're going to introduce to you or you have introduced E. P. Lighten the smart one yeah. My question is does the overall <unk> go down as a result of you have the growth.
In the accounts and you have the growth in the overall.
New levels, but it does the RP level will go down because of offering these.
Light products.
So the the EP liked might dilute a slightly but one.
It sounded like you to have a significant effect the smart one product is more of a rebranding and repositioning them and actually.
You know it may enhance our all pretty slightly well kind of what kind of an answer quite significantly he actually because we feel that the penetration of insurance products into the base is quite low.
And also if I can come in and I think the the light product. The EP lot is intended to broaden our.
Oh offering beyond the social grant recipient market. So the numbers we're talking about.
This would be in addition to that in a sense.
Yeah, if I could also add Raj if you think about the smart one also goes beyond.
The social grant pace.
This is again people understand alone we're looking for a funeral policy and again it breaks the mold that our focus is not only on social grant recipients, but any other person who's looking for a product of that of that nature. So.
Collectively these should be more positive than negative.
Got it.
<unk>.
Thank you.
So on the account growth youre, saying that youre doing about 50000.
New accounts.
A month.
Did I catch that correctly, yes that is our current run rate we've seen that for the last few months two months ago.
Right and that's what gets you to the breakeven level of one 5 million.
No. The 1.55 at the end of the fiscal year.
Sorry, again Raj. So the 155 is what we would see as a breakeven based on our cost based on our assumptions on revenues.
Yes, its okay and we are.
We are saying that our aim is to get to breakeven by June 2022 run rate breakeven in June 2022 through the combination of three liters, which would be a growing our account base.
You know as we currently sit at secondly, increasing the revenue per client thirdly, and probably most material of the three at this point is the cost levers that we are focused on.
Yeah.
Got it and then just a count growth are you I know the Lincoln was talking about.
The.
The initiatives with SASSA.
And the joint bid are you are you in any of this account growth is there any number that you were assuming for growth of the SASSA accounts the Grand accounts the grant recipients.
No. We are we have been affected in the tender.
In our projections.
The issues hours talking about was that in our day to day interactions. We have seen more collaboration with SASSA. There are for example environments, where SASSA has invited us to be in their offices to help capture.
The accounts and that will drive activation to be better. We have also been invited by SASSA in some of the provinces to go with them in their outreach programs. So that we can open new accounts in those environments, but for the tender itself, we have not factored that in into the <unk>.
Members, because we want to get a better sense. If we are fortunate to be one of the banks that when this and then obviously we will be in a better situation to kind of assess what the revenue implications of that win and we have not factored that in in the prediction.
Jackson's of account growth.
Lincoln that's very helpful. Yeah are there any.
Is there any sort of expectation of a certain number of accounts that you could.
Gain over the next year or two years or is that is that too early to tell.
Yeah, It's it's too early to tell right because the biggest thing is.
All of the work of changing the culture all of the work of training the staff all of the work of changing the mindset from a logistics company to a financial services all of the work of improving our relationship with <unk> with SASSA and all of the.
Work of being in the market competing and launching new products. All of those are it's early days to be making.
Give definitive AR projections, what we can see now.
These three months, where the growth of 50000 accounts. That's that's the earliest stage of what we can see if we want to know whether when we speak to you in a quarters time is there a much more discernible pattern.
That's emerging so it is quite early days to be able to put a higher projections.
Which then did not come to pass, which then reinforces again.
Chris's point that said of the three leave us. The one that is so immediately in our control and doesn't depend on a number of other variables.
Is the cost that we see.
That outsized versus the opportunity and those costs are costs that we will look at and do something about those costs, while simultaneously with the other things off of improving our op too and improving our account growth.
That's very helpful. And then just the last the last bit is on on if your if you can talk about any synergies related to the connect group are you assuming any increase in customer accounts.
From the acquisition of connect group.
So any access to consumer accounts through the merchants to those merchants.
So at this point Raj.
Havent factored in any any synergistic benefits into our into our Congress or revenue growth.
Our full costs at all you know we've looked at this purely on a standalone basis.
That said there are some synergies that we believe do exist between the two businesses.
You know and we all we are very focused on and you know once the transaction assuming the transaction gets the approval of the competition Commission and the other.
The requirements out of the way it will be very focused on delivering it to give you a flavor. We you know the things we see.
In terms of synergies firstly are there is there the opportunity of a payment switch integration between easy pay and <unk>, It's a real opportunity secondly, theres an opportunity in terms of the cost of cash processing between.
Within the combined group the connect creep is a generator of cash and as a commodity through the smart safe business, whereas the knit one a T M.
It requires cash and then thirdly. This is this is.
You know two two to your point Zhang has a footprint of over 35000 in formal merchants.
Around the country.
And we believe there's an opportunity to to align and partner better between at one end and because then in in terms of accessing consumers that would Tien tsin formal mission such and the fourth one is.
You know we have a very strong presence in places like the eastern Cape and Kwazulu Natal, whereas.
You know like Kazan, traditionally stronger than the western Cape Ann and her team. So we feel there's an opportunity to help rapid growth in in those markets.
There are those opportunities they're not built into these numbers are we've tried to remain conservative I think just to emphasize the other point I think Lincoln made very eloquently, which as you know this is early days for US Raj a week, we had a new management team want to give you clarity with with as much certainty as possible around where we're going.
You know the trends are starting to become clear in terms of the Congress and activation and so forth and but it's a developing picture. So we've got a balance you know trying to give you. His earlier view on what we're seeing with the confidence that what we're seeing is you know deliverables that we feel we're moving in that direction and we're very excited about it.
But we are just asking hopefully we've given you a lot more than we gave you three months ago, we wouldn't want to give you more in another three months.
Yeah, absolutely. Thank you so much for the detailed and thank you for.
The added color by Lincoln on on the operations as well.
I'll I'll take it offline. Thank you.
Thank you. The next question is from Kimberly Donnie of standard Bank. Please go ahead.
Thank you.
Sure.
Thanks, Lincoln and painful.
Patients thus far.
I know, it's quite early but have you seen any impact from the likes of afford to pay on an easy pay in the <unk>.
Members.
And what's your expectation with mobile money providers looking to get into into this space.
Yeah.
Yeah. This is an exciting environment, it's a very competitive environment. We are rebuilding a team there we have.
Hired a very seasoned executive and Andrew will not who is repositioning our business are in order for it to be able to compete it's been early days to see what sort of.
Ah you know vote of pay has been able to do but we've got a competitively strong position to maintain in that environment.
And if you combine what we've got with what is possible with our connect groups the talent and the leadership in both teams.
I think we will be a formidable competitor ourselves and who will be able to compete in that space quite quite adequately. So we're watching that space. You know quite closely are some of the people that are behind whether it be people off suddenly worked with I know, they're very smart guys very committed guy so weird.
And the estimating what's out there, but again our focus is we want to make a real difference in underserved merchants, particularly in the informal space and that combination of what we've got and what cause lung pay brings to the party.
I think that that's going to be an amazing combination and we look forward to be able to compete on that basis.
Does that answer your questions Colby.
Yes. It does thank you very much thank.
Thank you very much.
So it is indeed, something that I have no further questions in the queue and Atlanta turn the conference back to Mr. Myers for some closing remarks.
Thank you.
You very much operator, and just to conclude thank you very much everybody for joining us on the call. Thank.
Thank you for the questions and thank you for the interest in our business.
Hopefully you've had the excitement that we feel around our transformation tuning around the consumer financial services business through the customer acquisition reduce costs and focus on building the leading south African Fintech platform for underserved consumers and merchants were all very very committed to this and we look forward to sharing more on the journey in future calls.
Thank you very much for joining us thank you.
Thank you very much sir.
Ladies and gentlemen, thank computes this conference and you may now disconnect.
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