Network International in buyback reward

The appreciation of the US dollar has helped to shield payment solutions provider Network International (NETW) from the full force of global inflation. The company operates across the Middle East and Africa, where some local currencies are pegged to the greenback, meaning they’ve proved relatively resilient in recent months.

Network International reconfirmed its guidance for this year (revenue growth of 27-29 per cent and “modest” Ebitda margin expansion) in its 11 August half-year results. Markets reacted positively to the update, with the shares rising 10 per cent by early afternoon on the day of the announcement. 

Investor sentiment was likely buoyed by the announcement of a share buyback programme of up to $100mn (£81.9mn). “The buyback programme will help to support maintenance of the company's target balance sheet position of between 1-2 times net debt to Ebitda, while retaining the existing flexibility to take advantage of additional growth investment opportunities which may arise,” Network said in a written statement.

In the six months to 30 June, the company reported generating $40mn in underlying free cashflow as it deleveraged to 0.9 times net debt to Ebitda. It also reported a record number of new merchant sign-ups to its payment services in the past 12 months.

Although business is now expanding, it’s perhaps too early to say whether Network can thrive in a recessionary environment. It was just two years ago that the company reported a 90 per cent crash in pre-tax profits after lockdowns hit consumer spending.

FactSet consensus puts Network’s full-year price/earnings multiple at an estimated 19 times, falling to 13.9 times in 2023. At present, the company appears to be heading in a positive direction, but its future performance remains uncertain. Hold.