CAB Payments anticipates growth in the second half, despite challenging conditions in the first half, in relation to a specific corridor.
CAB Payments Reports Resilient Performance in H1 2024 Amidst African Headwinds
CAB Payments, a leading pan-African payments infrastructure provider, has reported a resilient performance in the first half of 2024, despite facing headwinds in several African markets. The company's performance, however, fell short of expectations, with total transactional income decreasing by 32% to £37m.
The company's Wholesale FX growth would have been 24% and total transactional income would have risen 13%, had it not been for the challenges in Africa. Wholesale FX revenues declined by 39% year-on-year to £23m, while Payments FX revenues dropped by 30% to £7m.
The decline in transactional income can be attributed to a 5% drop in market-wide payment flows in the group's core Sub-Saharan Africa market and a 10% decrease globally. Central bank interventions in the Central African franc and the West African franc also impacted CAB Payments.
Despite the setbacks, CAB Payments anticipates double-digit growth in underlying transactions beyond its top three corridors for 2023. The top five currency corridors for CAB Payments account for 32% of gross revenue, down from 49% in H1 2023.
The Nigerian naira, a key currency for CAB Payments, experienced a lack of tailwinds. However, the company is diversifying its revenue sources to mitigate such risks. Excluding the impact of the affected currencies, underlying gross revenue growth would be 11%.
The company's gross revenue declined by 22% to £56m in H1 2024. Net interest income increased by 2% in the company's latest update, and now represents around 29% of the overall revenue, surpassing the Payments segment's 27%.
Growing investments in the company's EU and US offices led to a decrease in the Adjusted EBITDA margin. Adjusted EBITDA remained positive at £19m, creating a margin of 34%, but this is down compared to H1 2023 figures.
CAB Payments expects gross revenue to rise in H2 2024 due to seasonal uplifts in volume, expansion into new markets, and new products. No clear revenue outlook was given for the second half of 2024 in this update. The company's share price fell by as much as 23% on Thursday.
While the exact data on inbound payment volumes by market specific to CAB Payments was not provided in this update, general knowledge suggests that Kenya, Nigeria, South Africa, Ghana, and Uganda are among the African markets with the highest inbound payment flows for payment service providers like CAB Payments. These markets are known for their advanced mobile money ecosystems, large diaspora inflows, significant remittance volumes, and growing cross-border business payments.
For detailed data on inbound payment volumes by market specific to CAB Payments, their official reports or industry transaction data would be needed. The search results did not provide specific information on which African markets see the most inbound payment flows for CAB Payments. They mainly addressed broader topics like digital competition regulations, European payment systems, and private markets finance but did not mention CAB Payments or detailed African market payment flow data.
Business challenges in African markets impacted CAB Payments' finance, as evidenced by a decline in transactions and a decrease in total transactional income. However, the company is considering technological solutions to diversify its revenue sources and mitigate these risks.
Investments in technology may help CAB Payments compensate for the drop in transactional income, by expanding into new markets and offering new products, as they anticipate a growth in underlying transactions beyond their top three corridors.
