Lesaka Technologies Reports First Profit Amid Merchant Division Restructuring
Restructuring comes as part of efforts to integrate multiple businesses within Lesaka.
The Full Story
Lesaka Technologies has announced its first full-year profit of $2.8 million for the fiscal year 2026, marking a significant turnaround from a loss of $91 million in the previous year. This positive development comes amidst challenging times for their merchant division, which has been historically the largest contributor to the group's overall revenue but is currently facing decline. The company, listed in both New York and Johannesburg, reported that the merchant division's revenue fell by 10% and adjusted earnings before interest, tax, depreciation, and amortization (EBITDA) dropped by 33% in the fourth quarter.
The restructuring involves consolidating four previously acquired businesses, specifically Adumo, GAAP, Connect, and Kazang, into a single unit. These changes are anticipated to lead to further job losses, affecting approximately 30 staff members, as the CEO Lincoln Mali indicated during a conversation with TechCentral. While he refrained from revealing the exact number of potential layoffs, he acknowledged that more cuts could be expected as the integration process continues.
Despite the setbacks in the merchant division, Lesaka reported overall positive trends across other segments. The company noted a 20% increase in net revenue and a remarkable 41% rise in adjusted EBITDA. With the active merchant base growing by 12%, there is still optimism for the future of Lesaka's business model, particularly through new avenues such as software solutions, which had achieved a 34% growth in revenue.
The financial pressure stems largely from a competitive environment where digital alternatives, like airtime and prepaid products, saw a significant decline due to changes in commission structures within mobile networks. Mali mentioned that Lesaka relies minimally on airtime sales, which constitute about 5% of the merchant division net revenue and less than 3% of the group's overall revenue. This diversification strategy is essential for sustaining growth amidst shifts in market dynamics.
Looking ahead, Lesaka Technologies aims to rebound by layering additional products and services to existing merchants, thereby increasing the value of each customer relationship. New operational changes are being implemented, including improved partnerships with wholesalers and distributors, cost reductions across the company, and incentivized sales strategies that focus on promoting multiple products to the same customers. Despite the current challenges in the merchant division, the overall profit signifies a turning point for Lesaka, suggesting that their restructuring efforts may yield positive results in the long run.
As they address issues with the merchant segment, success will hinge on effective integration and maximization of their product offerings. The upcoming financial quarters will be crucial as the company anticipates growth to return by the latter half of the current financial year. Investors and stakeholders will be closely watching for signs of recovery and profitability in the merchant division as Lesaka reallocates resources and reassesses strategies.
Why It Matters
Lesaka Technologies' first profit is significant as it reflects a turnaround strategy amidst restructuring challenges in its merchant division, essential for stakeholder confidence and market positioning going forward. Understanding these changes is crucial for investors and employees alike.
What's Next
Lesaka is expected to continue its restructuring over the coming months, focusing on the integration of its merchant division while monitoring market changes closely. Stakeholders will look for growth indicators in subsequent financial quarters as the company adapts its strategies.