Financial services firm IH Securities expects Ecocash Holdings’ (EcoCash) earnings before interest, taxes, depreciation and amortisation (EBITDA) margins to be positive at five percent in the full year ending 31 August 2024 (FY24) underpinned by the repayment of debentures.
The debentures were issued to fund Econet’s development aspirations more than five years ago, prior to the demerger of EcoCash from Econet, and they matured in April this year.
Following that, EcoCash was listed on the Zimbabwe Stock Exchange in 2018 as a distinct corporation.
With the underwriter contributing US$19,6 million and the company’s shareholders contributing US$10,7 million, EcoCash was able to raise US$30,3 million.
“This is expected to eliminate exchange losses arising from debenture-related liabilities, which will have a positive impact on the bottom line,” IH stated in its US dollar earnings update for the half year ended 31 August 2023 (HY24).
EcoCash’s EBITDA rose 806,28 percent from $12,40 billion in HY24 to $112,34 billion.
On the other hand, EBITDA margin surged from 45,54 percent to 68,85 percent thanks to a 1,175.46 percent rise in other income, which encompasses sundry income and fair value adjustments totalling $137,42 billion.
“We therefore factor these out from EBITDA to arrive at an adjusted EBITDA of US$4 million for FY24,” IH said.
“We expect EBITDA margins to come in positive at five percent as we anticipate foreign exchange losses to subside in the second half of FY24 given debentures were paid off.”
Unfavourable economic conditions, according to IH, will provide EcoCash with substantial challenges.
This comes as the company continues with its efforts to enhance financial inclusion by investing in digital transformation and utilising smart technology.
“The group’s continued innovation and introduction of new products and services indicates potential to grow its revenue.
“However, in the mobile money segment, transaction volumes at the national level have maintained a downward trend, going from 50,03 million in March to 42,65 million in August, pointing to likely sustained pressure on operations within the group’s FinTech unit,” reads the report.
EcoCash full year topline is forecast to be at US$80,6 million impacted by the depreciation in local currency.
“With expected constrained consumer liquidity due to the negative impact of the El Nino phenomenon on the agricultural sector, this trajectory will likely sustain,” IH said.
“We expect that increased competition in the USD mobile transfer space will exert pressure on the business’ strategy to diversify earnings.”
Ecocash recovered from a loss position of $1,68 billion in the comparative period to post an inflation adjusted profit of $130,20 million in HY 24.