STOCK broking firm IH Securities expects Ecocash Holdings’ (EcoCash) earnings before interest, taxes, depreciation and amortisation (EBITDA) margins to be positive for the firm’s full year to February 2024, after the company fully paid off its debenture liabilities upon maturity. The debentures were issued to fund Econet Wireless’ development programme more than five years ago, prior to the demerger of EcoCash from Econet.
The debentures matured in April this year.
Following the demerger, EcoCash was listed on the Zimbabwe Stock Exchange in 2018 as a stand-alone entity.
With the underwriter contributing US$19,6 million and the company’s shareholders chipping in with 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 August 31, 2023.
EcoCash’s EBITDA rose 806,28 percent from $12,40 billion in the 2024 half-year to $112,34 billion.
On the other hand, the EBITDA margin surged from 45,54 percent to 68,85 percent thanks to a 1 175 percent rise in other income, which encompassed 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 the full year 2024,” 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 full-year 2024 given debentures were paid off.”
The company continues with 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 the 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 reach 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 half year 2024.