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Shares in CAB Payments plunged as much as 74 per cent on Tuesday after the fintech warned on profits just months after a London listing that was hailed as a rare bright spot for the struggling UK market.
The company, which says it specialises in helping businesses make payments to “hard-to-reach markets” and has more than 490 customers, slashed its forecast for revenues this year by 17 per cent.
Changes to market conditions in African currencies, notably the Nigerian naira, the central African franc and the west African franc, have hit profit margins and volumes, said CAB. It added that its revenue projections for next year would be in peril if the picture failed to improve.
Analysts at Canaccord Genuity said it now “appears difficult to forecast future revenues with any degree of certainty”, helping to trigger the brutal sell-off.
Shares in CAB tumbled as much as 74 per cent to 55.6p, reducing the group’s market capitalisation to £160mn — down from the £851mn valuation it secured at its July flotation.
The warning from CAB comes six weeks after the group reported third-quarter revenues up 10 per cent. Canaccord analysts put the rapid deterioration since then to central banks tightening liquidity in the central African franc and making it harder for the likes of CAB to trade the west African franc.
CAB’s chief executive Bhairav Trivedi told the Financial Times that the intervention by central banks was “outside management’s control” and could not have been foreseen.
Coming a month after soda ash producer WE Soda pulled its proposed $7.5bn IPO, CAB’s listing was welcomed by a market that has been hit particularly hard by the global dearth of IPOs. Excluding those for blank-cheque vehicles, CAB’s IPO was London’s largest this year.
One banker said the collapse in CAB’s shares was “an absolute disaster” for a London market trying to sharpen its appeal to companies and wrestle more IPOs from New York.
Trivedi said he had no regrets over the London listing, adding that “it was the right thing to do”. He declined to comment on the share price and said he had not considered resigning.
Africa-focused private equity group Helios Investment Partners is CAB’s largest shareholder with a 45 per cent stake, down from 72 per cent before it sold shares in the IPO. According to Bloomberg data, Fidelity Management and Research and BlackRock are the second- and third-largest shareholders, with 7.5 per cent and 6.4 per cent stakes respectively.
Helios declined to comment.
Faced with a sharp deterioration in its business, CAB said on Tuesday it would implement “cost-reduction measures and efficiencies” to cushion the impact on profits.
Gautam Pillai, analyst at Peel Hunt, described the warning as “significant” and said it was putting its estimates and recommendation on the shares under review. The broker had previously rated the company a “buy” and had a target share price of 475p.
CAB said it expected revenue in 2023 to be “at least 20 per cent” ahead of 2022 levels, but that forecast was 17 per cent below its previous guidance. Trivedi insisted the company still had a “robust sales pipeline” but said the tough market conditions were “going to last weeks, some months and some might last a while longer”.
With additional reporting by Ivan Levingston in London
