Cuscal Beats FY25 Forecasts, Eyes 25% EPS Boost Post-Indue Deal
Cuscal Limited has reported a strong FY25 performance exceeding its Prospectus forecasts and announced a $75 million cash acquisition of Indue Limited, aiming to create a more resilient and competitive payments business.
- FY25 NPAT exceeds Prospectus forecast
- Acquisition of Indue for $75 million cash
- Expected $15-$20 million post-tax annual cost synergies by FY29
- Run rate EPS accretion of 25%+ anticipated post-synergies
- Integration to focus on client migration with no forced redundancies for 12 months
Strong FY25 Performance Sets Stage for Growth
Cuscal Limited, a key player in the Australian payments sector, has delivered a solid financial performance for FY25, surpassing its Prospectus forecasts following its successful IPO in November 2024. The company reported a pro forma net profit after tax (NPAT) of $38.4 million, exceeding the forecast of $36.6 million, alongside a 6% increase in adjusted net operating income and an 8% growth in transaction volumes. This robust performance was underpinned by earnings growth across all core capabilities, including issuing, acquiring, and payments services.
Strategic Acquisition of Indue to Enhance Market Position
Synergies and Financial Impact of the Acquisition
The acquisition is projected to generate substantial cost synergies, estimated at $15-$20 million post-tax annually by FY29, representing 8-10% of combined operating expenses before synergies. These savings will primarily come from reduced duplication in operations, compliance, and corporate overheads. Cuscal expects a run rate earnings per share (EPS) accretion of over 25% once synergies are fully realised, alongside a return on invested capital exceeding 20%. However, the transaction will be earnings dilutive on a statutory basis in FY26 and FY27 due to integration costs estimated between $25-$30 million post-tax over three years.
Integration Focus and Client Commitment
Cuscal has committed to a smooth integration process, establishing an Integration Advisory Committee with representatives from both companies to oversee the transition. Notably, there will be no forced redundancies for Indue’s non-executive personnel for at least 12 months post-completion, reflecting a focus on retaining talent and corporate knowledge. The integration will largely revolve around client migrations, an area where Cuscal has extensive experience, aiming to deliver operational efficiencies and enhanced product offerings without disrupting existing client relationships.
Outlook and Market Positioning
Looking ahead, Cuscal maintains a positive outlook for FY26, anticipating mid-to-high single digit growth in transaction volumes and low double-digit underlying NPAT growth, excluding timing impacts from the Indue acquisition. The combined entity is expected to maintain a strong capital position, with a Common Equity Tier 1 ratio projected between 18% and 19%, comfortably above regulatory minimums. Cuscal’s diversified revenue model, strong balance sheet, and enhanced capabilities position it well to navigate evolving regulatory landscapes and competitive pressures in the Australian payments industry.
Bottom Line?
Cuscal’s acquisition of Indue marks a pivotal step in scaling its payments business, but execution risks and regulatory approvals will be key to watch.
Questions in the middle?
- How will Cuscal manage integration risks to realise projected synergies on schedule?
- What impact will the acquisition have on Cuscal’s competitive positioning against larger banks and fintechs?
- How might regulatory scrutiny from ACCC and APRA influence the timing or terms of the acquisition?
