Lesaka Technologies, Inc. · NASDAQ:LSAK
Lesaka Technologies — Net 1 U.E.P.S. Technologies — Investor Presentation (March 2007)
48 slides from Lesaka Technologies's investor presentation, March 2007
Slide 1: . KEPT SECRET
. KEPT SECRET »O401L030 OLOL01
Slide 2: Disclaimer
DISCLAIMER This document will contain statements about the Company's future results call. These statements constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Any forward-looking statements represent only the Company's views as of today,
Slide 3: Mission Statement
MISSION STATEMENT “To provide a secure, universal and affordable transacting system for all, utilizing existing infrastructures, that will enable the majority of people unqualified access to previously inaccessible goods and services, resulting in the upliftment of their lifestyles, whilst opening u
Slide 4: The World
THE WORLD HAVE NOTS + 2.000.000 People + 4.000.000 People < $1 500 PN Pe ee N Purchasing Power Parity In USS Page 3 ( ‘NET1 Net 1 U.E.P.S Technologies, Inc
Slide 5: The Unbanked & Underbanked
THE UNBANKED & UNDERBANKED Page 4
Slide 6: Accessing the Bottom of the Pyramid (BOP)
ACCESSING THE BOTTOM OF THE PYRAMID (BOP) Page 5
Slide 7: South Africa: The Unbanked & Underbanked by LSM, 2001
SOUTH AFRICA THE UNBANKED & UNDERBANKED BY LSM, 2001 Page 6
Slide 8: South Africa - The Unbanked
SOUTH AFRICA - THE UNBANKED • Food • Food • Food • Food • Food • Clothing • Clothing • Clothing • Clothing • Insurance (Burial) • Transport (Taxis) • Transport (Taxis & Fuel) • Loans (Micro) • Insurance (Burial) • Insurance (Burial & Short-term) • Utilities • Loans (6-12 months) • Accommodation • Ut
Slide 9: South Africa - The Banked
SOUTH AFRICA - THE BANKED • Food • Food • Clothing • Clothing • Insurance (Burial) • Home Loan • Loans (Micro) • Transport (Car / Fuel) • Utilities (Water & Electricity) • Insurance (Short-term + Life) • Savings • Loans (Bank) • Furniture • Utilities (Water & Electricity) • Savings • Furniture • Ent
Slide 10: South Africa: The Unbanked & Underbanked by LSM, 2001
SOUTH AFRICA THE UNBANKED & UNDERBANKED BY LSM, 2001 Living Standard Living Standard Measure (6) Living Standard Measure (6) Living Standard 18% Measure (7) Work full time 11% Measure (7) 79% Work full time 2.01 m 1.24 m 13.97 m 1.95 m 4.02 m 4.06 m Work part-time 1.77 m Work part-time 11% Living St
Slide 11: U.E.P.S. vs Traditional Bank Accounts
U.E.P.S. VS TRADITIONAL BANK ACCOUNTS U.E.P.S Traditional Bank Account 1) Zero cost to social grant beneficiaries. 1) Current cost to run a bank account is +/- R40 – R50 per month. 2) R8.00 per month to all other card holders for the use of a secure, portable wallet. 2) Current cost to run Mzanzi ac
Slide 12: U.E.P.S. vs Traditional Bank Accounts (continued)
U.E.P.S. VS TRADITIONAL BANK ACCOUNTS (continued) (continued) U.E.P.S. Traditional Bank Account • Convenience benefit – Card holders can load their • Wages are paid into a bank account resulting in wages onto the smart card with ONLINE, OFFLINE card holder queuing at ATMs. ATM charges apply for Auto
Slide 13: Marketing Approach
MARKETING APPROACH MODERATE PASSIVE LOW RISK NO RISK | * Sale of the UEPS Technology | + JV (up to 50%) ; - * Business development in the hands | * Introduction of the UEPS Technology | | . . of shareholders + Business development driven by wa _ __ + Net 1 is the majority shareholder Sete o financia
Slide 14: The Second Step
THE SECOND STEP CONTRACT SIGNED & DISCUSSION FINAL CONTRACT SIGNED & CONTRACT PHASE NEGOTIATIONS SIGNED ACTIVITIES COMMENCED ACTIVITIES COMMENCED UEPS VTU UEPS VTU VTU VTU MTN VTU MTN • South Africa • CIS Republic • Colombia • Iraq • Indonesia • Vietnam • South Africa • Rwanda • United Arab • Mozamb
Slide 15: U.E.P.S. Products - S2S Pension & Welfare
U.E.P.S. PRODUCTS – S2S PENSION & WELFARE S2S Pension & Welfare Facts and Assumptions Main Economic Drivers • Government – R 25.56 per social grant beneficiary per month (Changes dependent on agreement with Government) • Social grant beneficiary – ZERO charge per month for use of card account Financ
Slide 16: U.E.P.S. Products - S2S Pension & Welfare
U.E.P.S. PRODUCTS – S2S PENSION & WELFARE Estimated number of grants per grant type - Year ended June 2006 60,000 50,000 grants ‘000 40,000 Number of '000 30,000 20,000 10,000 0 Dependency Old Age Support Veterans Disability Unclaimed Foster Care Combination Institutional Grant Child Benefits Grant
Slide 17: U.E.P.S. Products - S2S Pension & Welfare
U.E.P.S. PRODUCTS – S2S PENSION & WELFARE Estimated number of grants per Service Provider - Year ended June 2006 50,000 45,000 40,000 Number of grants 35,000 30,000 25,000 20,000 15,000 10,000 5,000 0 Banks SAPO Institutional Allpay CPS (NET 1) Empilweni Estimated value of grants per Service Provide
Slide 18: U.E.P.S. Products - S2S Pension & Welfare
U.E.P.S. PRODUCTS – S2S PENSION & WELFARE Potential increase in value of grants per grant type 4,500 4,000 3,500 3,000 Value in $'000 2,500 Current value of grants Potential increase - year 1 2,000 Potential increase - year 2 1,500 1,000 500 0 Foster Care Grant Combination Child Support Grant Care-D
Slide 19: U.E.P.S. Products - S2S Pension & Welfare
U.E.P.S. PRODUCTS – S2S PENSION & WELFARE CPS (NET 1) number of grants per grant type - Year ended June 2006 25,000 20,000 Number of grants '000 15,000 10,000 5,000 0 Dependancy Support Veterans Unclaimed Combination Old Age Disability Foster Care Grant Child benefits War Care CPS (NET 1) value of g
Slide 20: U.E.P.S. Products - S2S Pension & Welfare
U.E.P.S. PRODUCTS – S2S PENSION & WELFARE Pension and Welfare Revenue - Year ended June 2006 4% 23% 73% Transaction-based activities Smart card accounts UEPS based lending Pension and Welfare Operating Income - Year ended June 2006 6% 20% 74% Transaction-based activities Smart card accounts UEPS bas
Slide 21: U.E.P.S. Products - S2S Pension & Welfare
U.E.P.S. PRODUCTS – S2S PENSION & WELFARE Estimated revenue - no increase in market share Estimated operating income - no increase in market 100% 100% share 90% 90% 80% 80% 70% 70% 60% 60% 50% 50% 40% 40% 30% 30% 20% 20% 10% 10% 0% 0% Transaction-based Smart card accounts UEPS based lending Transact
Slide 22: U.E.P.S. Products - S2S Pension & Welfare
U.E.P.S. PRODUCTS – S2S PENSION & WELFARE Estimated revenue - increase in market share Estimated operating income - increase in market share 100% 100% 90% 90% 80% 80% 70% 70% 60% 60% 50% 50% 40% 40% 30% 30% 20% 20% 10% 10% 0% 0% Transaction-based Smart card accounts UEPS based lending Transaction-ba
Slide 23: U.E.P.S. Products - S2S Wage
U.E.P.S. PRODUCTS – S2S WAGE S2S Wage Payment System Facts and Assumptions Main Economic Drivers • Employers – R 5,00 per wage per month (Changes dependent on frequency of payments) • Employee – R 8,00 per month for use of card account • Financial Services (Direct or Indirect) PRODUCTS DESCRIPTION M
Slide 24: U.E.P.S. Products - S2S Wage
U.E.P.S. PRODUCTS – S2S WAGE S2S Wage Payment System (continued) Anticipated Growth and Revenue Market Penetration Existing Base Growth Customer Base Revenue Year 1 0 500,000 500,000 103,125,000 Year 2 500,000 750,000 1,250,000 360,937,500 Year 3 1,250,000 500,000 1,750,000 618,750,000 Year 4 1,750,
Slide 25: U.E.P.S. Products - S2S Virtual Top Up System (VTU)
U.E.P.S. PRODUCTS S2S VIRTUAL TOP UP SYSTEM (VTU) S2S Virtual Top Up System Facts and Assumptions Main Economic Drivers • Approximately 90% of the market in South Africa is prepaid. • Potential to grow subscriber base by 5 million to 35 million over the next two to three years Number of pre-paid sub
Slide 26: U.E.P.S. Products - S2S Virtual Top Up System (VTU)
U.E.P.S. PRODUCTS S2S VIRTUAL TOP UP SYSTEM (VTU) S2S Virtual Top Up System (continued) COLOMBIA • Commercial agreements concluded & signed. • Customisation, systems integration and testing for first Colombian mobile operator completed • Installation & commissioning scheduled for mid January. Pilot
Slide 27: Products - EasyPay
PRODUCTS - EASYPAY EasyPay Facts and Assumptions Main Economic Drivers Total number of transactions per month 40,0 million Total value of transactions per month R8,6 billion Key merchants Pick ‘n Pay Shoprite Checkers Edcon Caltex BP Total HIFI Corporation ABSA NuPay Recipients of bill payments 200
Slide 28: U.E.P.S. Products - S2S Insurance System
U.E.P.S. PRODUCTS – S2S INSURANCE SYSTEM S2S Insurance System Facts and Assumptions Main Economic Drivers • Insurance Underwriter/Broker – Transaction Processing Fee of R 1,50 per insurance policy per month (External Insurance Merchant) – Collection Fee of R 2,00 per debit order instruction per mont
Slide 29: U.E.P.S. Products - S2S Insurance System
U.E.P.S. PRODUCTS – S2S INSURANCE SYSTEM S2S Insurance System (continued) Anticipated Growth and Revenue Market Penetration Existing Base Growth Customer Base Revenue Year 1 0 100,000 100,000 5,400,000 Year 2 100,000 150,000 250,000 13,500,000 Year 3 250,000 200,000 450,000 24,300,000 Year 4 450,000
Slide 30: Current U.E.P.S. Business Opportunities: Namibia
CURRENT U.E.P.S. BUSINESS OPPORTUNITIES NAMIBIA NEW APPROVALS 1) 27th Oct 2006 – Approval From Bank of Namibia approving NAMPOST smart card as a payment instrument in Namibia. 2) SLA signed with PAYZONE – Pre-paid ESC and airtime Pilot rollout in December 2006 Thereafter national rollout – anticipat
Slide 31: Current U.E.P.S. Business Opportunities: Botswana
CURRENT U.E.P.S. BUSINESS OPPORTUNITIES BOTSWANA APPROVALS 1) 17th May 2006 – Approval from Bank Of Botswana to perform clearing and settlement via Bank Gaborone. 2) SLA signed between Government & our Union Partners LITS 12th Dec 2006 SLA signed between SmartSwitch and LITS (Union) – product wages
Slide 32: Current U.E.P.S. Business Opportunities: Nigeria
CURRENT U.E.P.S. BUSINESS OPPORTUNITIES NIGERIA 1) Final stages with the Central Bank of Nigeria for SmartSwitch to operate the scheme in Nigeria. Clearing & settlement will be managed via Diamond Bank 2) Negotiations to participate as a customer of the Switch with :- • Ecobank • Uba • Skye • Oceani
Slide 33: Current U.E.P.S. Business Opportunities: Nigeria (continued)
CURRENT U.E.P.S. BUSINESS OPPORTUNITIES NIGERIA (continued) Phase 2 Student card Pension contribution & distribution Transportation TENDERS Nigerian Government Multi-Purpose Card Finalists: 1) CHAMS Consortium (bidding with the Net 1 solution) 2) SONDA S.A./ Interswitch (could use the Net 1 solution
Slide 34: Current U.E.P.S. Business Opportunities: Iraq, Ghana
CURRENT U.E.P.S. BUSINESS OPPORTUNITIES IRAQ 1) Finalising numbers for Business Model with partners FUBI LLC 2) Presentations and negotiations in place with potential equity partners • Al Rafideen Bank • Al Rashid Bank • Post Office • Government Pension Department INITIAL PRODUCTS Banking Retail Gov
Slide 35: Current U.E.P.S. Business Opportunities: Indonesia, Mozambique
CURRENT U.E.P.S. BUSINESS OPPORTUNITIES INDONESIA STATUS – IN ADVANCED DISCUSSIONS Partners Identified : ALITA (Infocom Network Solution) BRI (Indonesian People Bank) Telkomsel Finnet – 40% owned by Central Bank Business model in final stages Request for pilot system – to be negotiated MOZAMBIQUE ST
Slide 36: Current U.E.P.S. Business Opportunities: Tanzania, Kenya
CURRENT U.E.P.S. BUSINESS OPPORTUNITIES TANZANIA STATUS 1) Tanzania Postal Bank - Awaiting board decision (in current discussions with Government) anticipated card volumes +-500,000 2) Advanced stages with Reserve Bank of Tanzania 3) Advanced stages with PRIDE Tanzania to acquire UEPS transactions v
Slide 37: U.E.P.S Products - South Africa
U.E.P.S PRODUCTS – SOUTH AFRICA Page 36
Slide 38: Roadmap
ROADMAP NAMIBIA BOTSWANA NIGERIA MALAWI SOUTH AFRICA General Banking √ √ √ √ Retail √ √ √ √ √ Wholesale to Retail Distribution √ Wage √ √ √ √ √ Third Party Collections/Deductions √ √ √ √ Money Transfers √ √ √ √ Third Party Bill Payments √ √ √ √ Cash Advances √ Financial Services √ √ Micro-Finance Lo
Slide 39: The Smart Card Project: Secure Mobile Payments & Banking
THE SMART CARD PROJECT SECURE MOBILE PAYMENTS & BANKING Page 38
Slide 40: The Smart Card Project
THE SMART CARD PROJECT USING THE U.E.P.S. MOBILE SYSTEM TO SECURISE EXISTING DEBIT & CREDIT CARD PAYMENTS PAYMENT CHANNELS (NO MODIFICATIONS ARE REQUIRED TO THESE SYSTEMS) Internet Credit Cards Internet Debit Cards (New) Merchant Stores (POS Terminals) Phone Payments Phone Pre-Authorizations NO MODI
Slide 41: Financial History
FINANCIAL HISTORY • One external factor has a profound impact on the reported numbers: – The ZAR : US$ exchange rate For the six months ended For the year ended December December June June June 2006 2005 2006 2005 2004 ZAR : US$ average exchange rate 7.2532 6.5396 6.4283 6.2219 6.9001 Highest ZAR :
Slide 42: Financial History (continued)
FINANCIAL HISTORY (continued) (continued) US $: ZAR Exchange Rates 8.5 8 7.5 7 US $: ZAR 6.5 6 5.5 5 1st Quarter 2nd Quarter 3rd Quarter 4th Quarter 4.5 Jun 30 Jul 31 Aug 31 Sep 30 Oct 31 Nov 30 Dec 31 Jan 31 Feb 29 Mar 31 Apr 30 May 31 Jun 30 Fiscal 2004 Fiscal 2005 Fiscal 2006 Fiscal 2007 Page 41
Slide 43: Financial History (continued)
FINANCIAL HISTORY (continued) (continued) As reported (US$ ‘000) YTD Q2 2006 2005 2004 Revenue…………………………………….…… 102,497 196,098 176,290 131,098 Cost of goods sold, IT processing, servicing and support……………………………………….. 24,245 50,619 50,682 39,134 General and administrative charges....................
Slide 44: Financial History (continued)
FINANCIAL HISTORY (continued) (continued) Indexed at $1: ZAR7 YTD Q2 2006 2005 2004 Revenue…………………………………….…… 106,204 180,082 156,694 129,227 Cost of goods sold, IT processing, servicing and support……………………………………….. 25,122 46,485 45,048 38,576 General and administrative charges..................... 3
Slide 45: Financial History (continued)
FINANCIAL HISTORY (continued) (continued) Revenue comparison 250,000 200,000 150,000 US$ '000 Reported Indexed 100,000 (US$1=ZAR7) 50,000 - 2002 2003 2004 2005 2006 Year Page 44
Slide 46: Financial History (continued)
FINANCIAL HISTORY (continued) (continued) Operating income comparison 100,000 90,000 80,000 70,000 60,000 US$ '000 Reported 50,000 Indexed 40,000 (US$1=ZAR7) 30,000 20,000 10,000 0 2002 2003 2004 2005 2006 Year Page 45
Slide 47: Financial History (continued)
FINANCIAL HISTORY (continued) (continued) Net income comparison 70,000 60,000 50,000 US$ '000 40,000 Reported 30,000 Indexed (US$1=ZAR7) 20,000 10,000 0 2002 2003 2004 2005 2006 Year Page 46
Slide 48: Cash Flow
CASH FLOW US$ ‘000 Q2 2007 Q2 2006 2006 2005 2004 Cash provided by operating activities 14,982 42,224 75,777 38,142 41,895 Cash used in investing activities (83,887) (2,655) (5,505) (3,397) (5,721) Cash provided by (used in) financing activities 2,874 32,219 29,723 (19) (24,060) Forex effect on cash
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