Novatti Group Sells Interest in International Bank of Australia for $2.87 Million
NOV (NOV) Share Update July 2024 Wednesday 24th
Novatti Group Announces Sale of Interest in International Bank of Australia
Novatti Group Limited (ASX: NOV) has announced the sale of its entire interest in International Bank of Australia (IBOA) to Eurus Capital Pty Ltd for $2.87 million, as part of its ongoing strategic review.
Instant Summary:
- Novatti sells 100% of its shares in IBOA for $2.87 million.
- Strategic review finds IBOA unlikely to meet Novatti's long-term financial goals.
- IBOA required significant additional capital to obtain a full ADI licence.
- Novatti aims for positive operating cashflow by the end of H1 FY25.
- Sale follows other cost reduction and revenue enhancement initiatives.
Sale Details
Novatti Group Limited (ASX: NOV), a leading fintech company, has entered into a binding agreement with Eurus Capital Pty Ltd for the sale of its entire interest in IBOA Group Holdings Pty Ltd (IBOA) for $2.87 million. This decision comes as part of Novatti's ongoing strategic review of all business units and subsidiaries.
The strategic review concluded that IBOA would need significant additional capital and support to satisfy the Australian Prudential Regulatory Authority (APRA) requirements for a full authorised deposit-taking (ADI) licence. IBOA is currently operating under a restricted authorised deposit-taking (RADI) licence and faces a critical deadline to either obtain a full ADI licence or cease its banking business by 2 November 2024.
Strategic Review and Financial Goals
Novatti's review found that its interest in IBOA was unlikely to contribute to the company's long-term financial goals, especially its target of achieving positive operating cashflow. Novatti CEO, Mark Healy, highlighted the high barriers to entry for new banks in Australia and the challenges IBOA faced, including delays caused by the pause in issuing new banking licences announced in March 2020.
Healy stated, 'IBOA will require significant additional capital to meet the upcoming regulatory deadline. After reviewing alternative options, the Novatti board decided not to provide the additional capital needed for IBOA to obtain a full ADI licence.'
Transaction Details
To facilitate the sale, Novatti and Eurus have entered into a sell-down facilitation deed. Eurus must procure purchasers for all of Novatti's 36,363,637 shares in IBOA for an aggregate purchase price of $2.87 million. The purchase price will be held by an independent escrow agent pending completion, scheduled for no later than 30 July 2024.
Prior to completion, Eurus must provide Novatti with a list of the purchasers and ensure compliance with the Financial Sector (Shareholding) Act 1998 (Cth), particularly that no purchaser will have a 'stake' of more than 20%.
Other Initiatives
This sale follows other initiatives aimed at turning around Novatti and achieving positive operating cashflow by the end of H1 FY25. These initiatives include a 24% decrease in quarterly expenses in Q3 FY24, a $4 million annualised cost reduction program, and the sale of Novatti's interest in Reckon Limited for $8.9 million.
In Q3 FY24, Novatti recorded a new quarterly revenue record of $12.4 million and announced $1.5 million in commercial wins in April 2024. The company also plans to onboard over 500 new merchants by the end of H1 FY25.
The strategic review of other business units and investments within Novatti's portfolio is ongoing, with further opportunities for optimisation and divestment expected to support growth in Novatti's core Payments AU/NZ business and long-term financial goals.
The sale of Novatti's interest in IBOA is likely to have a positive impact on the company's financial health by reducing the need for additional capital investment and aligning with its goal of achieving positive operating cashflow. This move may also boost investor confidence as it demonstrates Novatti's commitment to its long-term financial targets.
Investor Reaction:
Analysts have noted that the sale is a strategic move to focus on core business areas and achieve financial stability. Investor reactions have been generally positive, with some expressing optimism about Novatti's future prospects.
Conclusion:
Investors should monitor Novatti's ongoing strategic review and its impact on the company's financial performance. The sale of IBOA is a significant step towards achieving positive operating cashflow and long-term financial goals. Investors are encouraged to stay informed about further developments and potential opportunities for optimisation and divestment.