Network International swings to first half loss as revenue declines amid pandemic

The company said in April it is halting capital expenditure in order to conserve cash as business slows

Network International's Dubai HQ. The company on Tuesday swung to first-half loss as its revenue declined. Image courtesy of Network International

Payments processor Network International swung to a first-half loss as a double-digit drop in revenue due to the Covid-19 pandemic dented profitability.

The Dubai-based company's net loss from continuing operations for the six months ending June 30 fell to $150,000 (Dh550,500), compared to a profit of $15.8m in the same period last year. Revenue for the reporting period dropped 12 per cent to $134.2 million, it said in a statement on Tuesday.

Network International’s Middle East revenue slumped 15.3 per cent year-on-year, while its Africa revenue dropped 10.5 per cent. The company attributed the drop in earnings to Covid-19-related movement restrictions, and the associated reductions in domestic and tourism-related consumer spending throughout its primary markets.

Underlying earnings before interest, taxes, depreciation and amortisation (Ebitda) at the end of June declined 31 per cent to $52.7m from a year earlier. Its underlying Ebitda margin – excluding share of an associate – came in at 36.2 per cent, which reflects revenue reduction and largely fixed cost base, the company said.

Although the pandemic has and will continue to “impact financial performance in the short term, we have a strong balance sheet with significant liquidity”, Simon Haslam, chief executive of Network International, said.

“We are very pleased with the recent improvement in trading momentum during July, although it is still early in the second half and seasonally this is always a lower revenue month, so our overall outlook for 2020 remains unchanged.”

In April, the company said it is halting capital expenditure in order to conserve cash amid the pandemic. It paused $40m of expenditure earmarked for the separation of shared services with Emirates NBD, and its entry to the Saudi Arabian market.

The company has also taken “prudent measure to protect” its cash flows. While around two-thirds of the company’s operational expenditure is fixed, it is enforcing a hiring freeze and cutting discretionary spending among other measures, it said in a statement at the time.

Companies across the globe are cutting costs to offset the impact of the coronavirus-induced economic slowdown. From global banks to airlines and oil and gas firms, major corporations have suspended expansion plans as they look to bolster cash reserves during the crisis.

Network International, however, said it has seen a significant growth in online payments during the first six months of the year. E-commerce volumes - excluding government and airlines sectors - climbed 45 per cent on annual basis in the second quarter of the year, with growth rates in July touching 61 per cent, it said on Tuesday.

The London-listed company in July said it has signed an agreement to acquire DPO Group, an online commerce platform in Africa, for approximately $288m.

“Our strategic approach remains consistent and we have ensured we remain focused on pursuing the numerous opportunities presented by our markets,” Mr Haslam said on Tuesday.

The proposed acquisition of DPO will widen the company’s capabilities across online and mobile money payments as it brings direct merchant relationships to the business, he said.

“We also have numerous opportunities remaining to pursue, whether that be our market entry to Saudi Arabia, our strategic partnership with Mastercard or discussions with banks around substantial outsourcing contracts,” Mr Haslam added.