Jarred Houston

Jarred Houston, along with Preshendran, asked about Lesaka's position on the potential Cell C IPO, their willingness to exit their stake, and the strategic rationale behind the option structure in place. He also separately inquired about the recent ramp-up in fintech interest in South Africa, including examples like ICOCA and Optasia, and the involvement of traditional financial players.

Answer

Executive Chairman Ali Mazanderani expressed support for the Cell C IPO and confirmed the rationale to exit, aligning with Lesaka's strategy to simplify operations and reallocate capital to core purposes. Group CFO Dan Smith clarified that Lesaka holds a 5% stake, which will be diluted during Cell C's restructuring, and that the option secures a minimum value of $50 million for their stake with potential upside upon listing. Regarding fintech interest, Ali Mazanderani viewed it as an endorsement of Lesaka's strategy, noting that the South African fintech ecosystem is still underweight globally and that increased innovation benefits both Lesaka and society.

Jarred Houston of All Weather Capital asked about the group's debt levels, specifically whether the improvement in the net debt to EBITDA ratio would be driven by EBITDA growth or actual debt reduction, and the expected future direction of the leverage ratio.

Answer

Executive Ali Zaynalabidin Mazanderani initiated the response by confirming the company's intent to manage the business at a 2x net debt to EBITDA ratio. Executive Naeem Kola elaborated, citing the reduction of Cell C stock holdings and a significant leverage ratio improvement in FY24. He stated that post-Adumo, achieving guidance and restructuring the consumer loan book should bring the leverage ratio below the 2x target.

Inquired about the company's strategy for managing its debt levels and the expected trajectory of the net debt to EBITDA leverage ratio.

Answer

The company aims to reduce its net debt to EBITDA ratio to below 2x. This improvement will be driven primarily by strong EBITDA growth and benefits from debt restructuring, rather than significant principal debt reduction. The leverage ratio has already improved from 4.5x to 2.5x in the past year.