NETW.L Share News (NETW)

(Sharecast News) - Network International Holdings updated the market in light of the Covid-19 coronavirus pandemic on Thursday, reporting a "strong" balance sheet, ending the 2019 financial year with a leverage ratio of 1.6x net debt-to-underlying EBITDA.
The FTSE 250 company said it had successfully refinanced its syndicated lending facility, as previously indicated at the time of its full-year results.

It said the syndicate, which consisted of 16 banks, was "considerably" oversubscribed, with around half of the facility funded by banks who were new to the syndicate.

"This is testament to our strong business fundamentals in the current challenging credit environment," the board said in its statement.

It explained that the purpose of the facility was for general corporate use, and in the mid to longer term, to fund growth accelerator projects.

The facility is for $525m, and replaces its $350m financing facility, which had a drawn down balance of $289m on 31 December.

Network International said the new facility carried interest rates at similar levels to the previous facility, explaining that at current leverage, there was an interest rate of LIBOR plus 2.2% on the dollar tranche and EIBOR plus 1.95% on the Emirati dirham tranche.

Financial covenants remained the same as the previous facility, at 3.5x net debt-to-underlying EBITDA.

The facility had a tenure of six years, with repayments starting in 2022.

Capitalised fees associated with the previous facility would be reflected as an impairment charge to the income statement, of around $7m, in 2020.

"We have continued to assess the impact of Covid-19 in recent weeks, and actioned plans to protect the safety and wellbeing of our colleagues and customers," the board explained.

"We made an early and phased implementation of working from home across the business, which has enabled a seamless transition in working practices.

"With the investments we have made in our technology platforms over recent years and the dedication of our teams, our business operations, processing and payments activities continue to operate as normal."

The company said it was also committed to supporting its customers, particularly small to medium enterprises, offering reduced merchant fees, support in transitioning online, and $1m in cash to 1000 small merchants who had been particularly impacted.

"As previously announced, Covid-19 is affecting global travel and spending patterns.

"In recent days, social distancing and lockdown measures have been implemented in a number of our markets, similar to those that have been put in place internationally.

"As a result, our merchant acquiring volumes in a number of segments have been significantly impacted."

The company said it expected its issuer solutions business to be more resilient, with a proportion of fixed revenue contracts that would cushion the impact from lower volumes.

Given the uncertainty surrounding the length of the impact of the pandemic, the firm said it was currently taking actions to reduce operational expenses across the business without reducing headcount.

"We are committed to supporting our people and believe they are the core driver behind our successful business.

"We will also be selective about the choices we make and the timing of capital expenditure, as a sensible and precautionary approach to managing cash flows."

In addition to the mitigating steps, the board said it was prudent to defer the payment of a dividend for the 2019 financial year, until it had greater clarity on the operating environment.

Alongside the actions it was taking to protect the business in the current environment, Network International said it had stress tested its business outlook, explaining that even in a prolonged pandemic scenario, it would retain "significant" liquidity with its currently available facilities.

"We are a diversified payments business operating across the acquiring and issuing value chain, as an essential partner to over 70,000 merchants and 200 financial institutions, throughout the Middle East and Africa.

"The business has a highly successful track record, having operated for twenty five years in the region, with consistent high growth in volumes.

"We remain confident in our ability to navigate through this period and the long term fundamentals remain strong, supported by secular tailwinds of cash to digital payments conversion across our regions."

Network International said it planned to release a first quarter trading statement on 30 April.

At 0903 BST, shares in Network International Holdings were up 0.62% at 358.01p.