Cab Payments (LON: CABP) shares are down 70% this morning. This is, obviously enough, not quite what holders of CAPB shares were hoping for. The IPO was only back in the summer and here we are with the first major roadblock being faced by the company. It’s also possible to see - perhaps, of course - what is worrying people. How much of the business depends upon West Africa you say?
Not that people shouldn’t trade in West Africa - trade is what is going to make the place rich so we’d like that people do. But given the risks with trading in that environment any revenue to be gained from such trade will obviously be discounted against - be allocated a lower value - than trade with more stable places. And, let’s be honest about this, than places with a greater reputation for the rule of law and clean money flows.
Cab Payments share price from Google Finance
The announcement is: “In recent weeks, the Company has seen a number of changes to the market conditions in some of its key currency corridors, on top of the ongoing uncertainties surrounding the Naira, which are impacting both volumes and margins; most notably, the Central African franc (XAF) and West African franc (XOF). At the present time, these market conditions are compressing margins and reducing trading volume.” Well, OK, that is the sort of thing that happens. But perhaps what worries is: “Based on the revenue run rate to this point in Q4, the Company now expects Group revenue for 2023 to be at least 20% ahead of the prior year (2022: £109.4 million); this is around 17% below previously issued guidance.”
Wait a minute. If just a fall in volumes on West Africa trade alone leads to a 17% fall in projected revenues then how much of the dang business depends upon West Africa then? “CAB Payments Holdings, which is facing inclement conditions all of its own. It’s had to lower full-year expectations a little over three months after debuting on the London Stock Exchange. The cross-border payments firm specialized in emerging markets slashed its revenue forecast for 2023 by about 17%, citing changes to the market conditions in some of its key currency corridors.” Well, yes, emerging markets, but is it really concentrated in West Africa?
Well, yes, apparently so: “CAB Payments grew out of the colonial era Crown Agents Bank and spun out its money transfer arm after a private equity cash injection. Boss Bhairev Trivedi told City A.M. in June he was bullish on London as a listing venue.” Given those old Empire links the Naira business is obvious. But the West African francs? Hmm, perhaps a little too much geographical concentration there. Or even, look, revenues from that part of the world just are worth less.
