Costs restrain Cuscal profit

Ian Rogers

Cuscal chair Elizabeth Proust

IPO candidate Cuscal Limited reported a 12 per cent rise in net profit over the year to June 2023 amid a blowout in costs.
 
Net profit was A$26.1 million, up from $23.4 million for FY2022.
 
“Cuscal’s underlying business continued to perform above expectations for the year ended June 2023 benefiting from a combination of continued transactional volume growth; uplifts in scheme incentive income; and an increased cash rate favouring the Treasury contribution,” Cuscal told its shareholders, which are overwhelmingly mutual banks and credit unions. 
 
“This was offset by an increase in industry driven support costs; ongoing investment in the resilience initiatives; and increased headcount as the NPP PayTo and Open Banking programs were operationalised.”
 
Cuscal is believed to be targeting an initial public offer and ASX listing in November or early next year.
 
“The Australian payments industry continues to be characterised by consolidation and diversification,” chair Elizabeth Proust and CEO Craig Kennedy wrote in the introduction to the annual report.
 
“Consolidation is seeking to accelerate growth, leverage scale and lower costs whilst diversification is about expanding relevance and the convergence of payments, data and digital identity. 
 
“The macro-economic environment is also driving a greater role for payments and related adjacencies with increased digitisation, growth in e-commerce, contactless and real time payments.
 
“This backdrop is directly relevant to Cuscal’s strategy; our continued investment in our core capabilities and reinforcing agencies; and why we need ongoing access to capital.”
 
It isn’t yet clear how much, if any, new capital the Cuscal board aims to raise via the IPO, with current shareholders expected to sell down into the IPO.
 
Cuscal said its “adjusted EBITDA” increased to $45.6 million in FY2023, up from $36 million in 2022.
 
Return on equity increased to 8.8 per cent from 7.4 per cent.
 
Operating expenses surged 36 per cent to $203 million thanks to wage inflation, higher headcount, IPO costs and “corporate activity” such as Cuscal’s takeover of Basiq.
 
Cuscal will pay a full year dividend of 7.5 cents per share, a payout ratio of 50 per cent. It said it is targeting the same “minimum dividend” in FY2024.