CAB Payments confident despite tough market conditions

(Sharecast News) - CAB Payments said in an update on Thursday that despite facing challenging market conditions, it achieved a 4% increase in total volume levels to £17.6bn in the first half, compared to £16.9bn in the first six months of 2023. The London-listed company said the performance contrasted with an approximate 5% decline in market-wide payment flows in its core sub-Saharan Africa market and a 10% global decline.

It reported 11% growth in underlying gross income, excluding the impacts of dislocations in the Nigerian naira (NGN) and central bank interventions in the central African franc (XAF) and west African franc (XOF).

However, on a reported basis, gross income declined 22% to £56m, from £72m in the first half of 2023 due to those disruptions.

The company said it saw a robust performance across a range of emerging and developed market corridors, with resilient client activity among non-bank financial institutions (NBFI), emerging market financial institutions (EMFI), and central banks.

It said the International Development Organisation (IDO) segment experienced below-trend volumes due to political changes among major donor governments.

CAB Payments successfully diversified its gross income, with the top five currency corridors contributing 32% of gross income in the first half of 2024, down from 49% in the first half of 2023.

Net interest income increased 2%, reflecting growth in client balances and steady interest rate curves.

The company expanded its liquidity and trade finance products to key customers, bolstering its strong balance sheet.

Despite ongoing investments in the group's EU and US offices, a new central London headquarters, an expanded salesforce, and network development, adjusted EBITDA stood at around £19m, down from £40m in the first six months of 2023.

The adjusted EBITDA margin decreased to 34% from 56%.

Looking ahead, CAB Payments said it expected a more balanced trajectory for 2024, anticipating a marginal decline in total gross income compared to 2023.

However, the company foresaw continued double-digit growth in its underlying transactions business beyond the top three corridors of 2023.

Gross income was expected to rise in the second half of the year, driven by seasonal volume increases, new products, and network and geographical expansion, leading to higher operating leverage in the second half.

"Our first-half performance was resilient, despite lacking tailwinds from the Nigerian Naira, while also continuing to suffer from the headwinds in XAF and XOF from the end of last year," said chief executive officer Neeraj Kapur.

"Market-wide global payment flows have shrunk approximately 10% year-on-year and we do not expect to benefit from any positive market dislocations in 2024.

"However, with the strategic initiatives that we have implemented in the second quarter, we anticipate a stronger second half and expect our overall full-year Gross Income performance to be marginally down on last year."

Kapur said the company's fundamental business model was robust, adding that he believed in the company's purpose and the global market demand for its services.

"At the interim results, I will outline the initiatives and actions we are taking to build a more sustainable, diversified, and growing business over the medium term."

The group said it would issue its interim report and investor presentation on 4 September.

At 1006 BST, shares in CAB Payments Holdings were down 13.14% at 88.8p.

Reporting by Josh White for Sharecast.com.