Float hopeful Cuscal reveals revenue and cost growth ahead of roadshow

Cuscal has built payments infrastructure that is used by smaller banks, non-bank lenders and fintechs to accept and receive payments across various payment types, including cards and debit transfers. This allows its customers to provide payment services with cards, digital wallets, Bpay, and debit systems.

It has 87 customers, including Bendigo and Adelaide Bank, Rabobank, ING, Great Southern Bank and Regional Australia Bank; fintechs including Square, Monoova and Zepto; and other users of the payments system, including Australia Post’s Bank@Post, American Express and Armaguard.

The Australian Financial Review’s Street Talk column revealed in May that Cuscal was considering a float and had appointed Bank of America as sole lead manager. The column said last month Cuscal was planning to raise at least $300 million. It is expected to seek a 15- to 20-times profit valuation, which could see it list at a market cap of between $500 million and $600 million based on expectations for a higher bottom line this year.

Cuscal’s net operating income of $240.8 million was up 32 per cent over the year to June 30, while operating expenses grew by a larger amount: they were 36 per cent higher at $203.4 million. Cuscal said the higher costs were because of “one-time costs” supporting strategic investments and the “transformation” of its operating model, as it built capability to connect customers to the NPP’s new PayTo service and open banking, the new financial data sharing regime.

According to a non-deal roadshow presentation seen by the Financial Review, Cuscal – in the 12 months to the end of June 2022 – made 12 per cent of its revenue from “acquiring” services (enabling card payments to be accepted), 63 per cent from card “issuing” (allowing payments to be made), 19 per cent from processing non-card payments, and 5 per cent from services to help customers reduce fraud.

Potential investors will be told that Cuscal expects to grow on the back of higher payment volumes. From 2019 to 2022, as payments with cheques fell by 22 per cent and cash use was down 13 per cent, overall payment volumes were up 8 per cent as debit payments increased by 11 per cent, credit card payments lifted by 4 per cent and transactions over the NPP rose by 62 per cent, the presentation shows.

Cuscal is owned by a group of mutual banks which hold a combined 80 per cent stake. Bendigo and Mastercard hold the remaining 20 per cent. The float is expected to involve a sell-down. The fresh capital will provide growth options including additional M&A. In March, Cuscal bought a controlling interest in Basiq from major bank venture capital funds to help it provide open banking services. Cuscal built 86400, which was sold to National Australia Bank and whose technology now underpins its UBank brand.