JOHANNESBURG, South Africa, May 9 /PRNewswire-FirstCall/ -- Net 1
UEPS Technologies, Inc. ("Net1" or the "Company") (NASDAQ:UEPS)
today announced results for the three and nine months ended March
31, 2006. Results The Company reported an increase in net income of
39% to $16.6 million for the three months ended March 31, 2006,
from $12.0 million for the three months ended March 31, 2005.
Earnings per common share and linked unit increased 34% to $0.292
for the three months ended March 31, 2006, compared to $0.218 for
the three months ended March 31, 2005. Revenue increased 20% from
$45.7 million for the third quarter of 2005 to $54.6 million for
the third quarter of 2006. The Company reported an increase in net
income of 27% to $43.7 million for the nine months ended March 31,
2006, from $34.4 million for the nine months ended March 31, 2005.
Earnings per common share and linked unit increased 23% to $0.774
for the nine months ended March 31, 2006, compared to $0.629 for
the nine months ended March 31, 2005. Revenue increased 10% from
$134.9 million for the first nine months of fiscal 2005 to $147.9
million for the first nine months of fiscal 2006. Since the
Company's reporting currency is the U.S. dollar ("USD") but its
functional currency is the South African rand ("ZAR"), and due to
the significant impact of currency fluctuations between the USD and
the ZAR on the Company's results of operations, the Company also
analyzes its results of operations in ZAR to assist investors in
understanding the changes in the underlying trends of its business.
During the three and nine months ended March 31, 2006, the ZAR was
weaker against the USD than during the same periods in the prior
year. The impact of these changes on results of operations is shown
under the column "Change" in the table of key metrics included at
the end of this press release. In ZAR, the Company reported an
increase in net income of 42% to ZAR102.3 million for the three
months ended March 31, 2006, from ZAR71.9 million for the three
months ended March 31, 2005. Earnings per common share and linked
unit increased 38% to ZAR1.802 for the three months ended March 31,
2006, compared to ZAR1.310 for the three months ended March 31,
2005. Revenue increased 23% from ZAR274.5 million for the third
quarter of 2005 to ZAR336.8 million for the third quarter of 2006.
In ZAR, the Company reported an increase in net income of 32% to
ZAR279.7 million for the nine months ended March 31, 2006, from
ZAR211.5 million for the nine months ended March 31, 2005. Earnings
per common share and linked unit increased 28% to ZAR4.954 for the
nine months ended March 31, 2006, compared to ZAR3.862 for the nine
months ended March 31, 2005. Revenue increased 14% from ZAR828.6
million for the first nine months of fiscal 2005 to ZAR946.9
million for the first nine months of fiscal 2006. Third Quarter
Highlights * $187.8 million in transactions were processed through
our merchant acquiring system in the third quarter of fiscal 2006,
compared to $45.5 million in the third quarter of fiscal 2005.
During the three months ended March 2006, 2,518,296 grants were
paid through the Company's terminal base, compared to 631,252
during the three months ended March 31, 2005; * 3,905 terminals
were in use at 2,352 participating UEPS retail locations as of
March 31, 2006, compared with 2,406 terminals in use at 1,441
locations as of March 31, 2005. These numbers were comparable to
December 31, 2005 while the number of transactions processed per
terminal increased from 379 during the three months ended December
31, 2005, to 643 during the three months ended March 31, 2006 due
to the improvement in the productivity of the installed base; *
UEPS transaction-based activities effected 10.7 million payments
during the third quarter of fiscal 2006, a 7% increase over the
number of payments effected during the third quarter of fiscal
2005; * A total of 3,601,076 UEPS smart card-based accounts were
active at March 31, 2006, compared to 3,321,368 active accounts at
March 31, 2005; * Hardware ordered in January 2006 totaling $4.4
million was delivered to Nedbank Limited with the remaining
deliveries related to this order expected to be completed during
the fourth quarter of fiscal 2006; * Launch of SmartSwitch Namibia
(Pty) Ltd in February; * Customization and hardware totaling
approximately $1.2 million was sold to SmartSwitch Namibia (Pty)
Ltd during the three months ended March 31, 2006; * Formation of
SmartSwitch Botswana (Proprietary) Limited with Capricorn
Investment Holdings (Botswana) (Proprietary) Limited; and, * Offer
for the entire issued and outstanding ordinary shares of Prism
Holdings Limited, a South African company listed on the JSE
Limited, for ZAR1.16 per share, or approximately ZAR720 million
($115.2 million at the March 31, 2006 USD/ZAR exchange rate).
Comment and Outlook Serge Belamant, Net1's Chairman and Chief
Executive Officer, stated, "I am very pleased with our strong
quarter from both an operational and strategic perspective. During
the third quarter more than 2.5 million grants with a value of
$187.8 million were distributed through secure and convenient UEPS-
enabled merchant locations, a 59% increase over last quarter. We
also benefited from the shipment of products and services to
SmartSwitch Namibia, which launched in February, and an
acceleration in the delivery of equipment to Nedbank under their
latest order. "During the quarter we signed a new joint venture in
Botswana," Dr. Belamant continued, "which along with South Africa
and Namibia creates an emerging bloc of countries using our UEPS
technology. Additionally, we announced our planned acquisition of
Prism, which I believe will make Net1 an even more dynamic company
as we explore opportunities on the African continent and around the
world. "Based on our performance over the first nine months of
fiscal 2006, we reaffirm our guidance on earnings per share of
$0.98 to $1.02 for the full year, assuming an exchange rate of
ZAR6.50 to USD1.00," Dr. Belamant concluded. Conference call Net1
will host a conference call to review third quarter results on May
10, 2006 at 9:30 a.m. EST. To participate in the call, dial
1-800-860-2442 (U.S. only), 1-866-519-5086 (Canada only),
0-800-917-7042 (U.K. only) or 0-800-200-648 (South Africa only)
five minutes prior to the start of the call. The passcode is
"Net1". The call will also be webcast on the Net1 homepage,
http://www.net1ueps.com/. Please click on the webcast link at least
10 minutes prior to the call. A replay of the call may be accessed
through the Net1 website through May 23, 2006. About Net1
(http://www.net1ueps.com/) Net1 provides its universal electronic
payment system, or UEPS, as an alternative payment system for the
unbanked and under-banked populations of developing economies. The
Company believes that it is the first company worldwide to
implement a system that can enable the estimated four billion
people who generally have limited or no access to a bank account to
enter affordably into electronic transactions with each other,
government agencies, employers, merchants and other financial
service providers. To accomplish this, the Company has developed
and deployed the UEPS. This system uses secure smart cards that
operate in real-time but offline, unlike traditional payment
systems offered by major banking institutions that require
immediate access through a communications network to a centralized
computer. This offline capability means that users of Net1's system
can enter into transactions at any time with other card holders in
even the most remote areas so long as a portable offline smart card
reader is available. In addition to payments and purchases, Net1's
system can be used for banking, health care management,
international money transfers, voting and identification. This
announcement may contain forward-looking statements pursuant to the
"safe-harbor" provisions of the Private Securities Litigation
Reform Act of 1995. These forward looking statements involve known
and unknown risks, uncertainties and other factors that may cause
the company's actual results, levels of activity, performance or
achievements to be materially different from any future results,
levels of activity, performance or achievements expressed, implied
or inferred by these forward-looking statements, such as product
demand, market and customer acceptance, the effect of economic
conditions, competition, pricing, development difficulties, foreign
currency risks, costs of capital, the ability to consummate and
integrate acquisitions, and other risks detailed in the Company's
SEC filings. The Company undertakes no obligation to revise any of
these statements to reflect future circumstances or the occurrence
of unanticipated events. NET 1 UEPS TECHNOLOGIES, INC. Unaudited
Condensed Consolidated Statements of Operations Three months ended
Nine months ended March 31, March 31, 2006 2005 2006 2005 (In
thousands, (In thousands, except per share except per share data)
data) REVENUE $ 54,584 $ 45,667 $ 147,900 $ 134,885 EXPENSE Cost of
goods sold, IT processing, servicing and support 14,469 12,428
39,196 41,207 General and administration (1) 13,620 11,436 36,232
33,804 Depreciation and amortization 1,428 1,668 4,331 4,897 Costs
related to public offering and Nasdaq listing 25 - 1,529 -
OPERATING INCOME 25,042 20,135 66,612 54,977 INTEREST INCOME, net
1,535 294 3,781 1,497 INCOME BEFORE INCOME TAXES 26,577 20,429
70,393 56,474 INCOME TAX EXPENSE 10,074 8,619 27,062 22,534 NET
INCOME FROM CONTINUING OPERATIONS BEFORE EARNINGS FROM EQUITY
ACCOUNTED INVESTMENTS 16,503 11,810 43,331 33,940 EARNINGS FROM
EQUITY ACCOUNTED INVESTMENTS, net 73 147 356 480 NET INCOME $
16,576 $ 11,957 $ 43,687 $ 34,420 Net income per share Basic
earnings, in cents - common stock and linked units 29.2 21.8 77.4
62.9 Diluted earnings, in cents - common stock and linked units
28.8 21.4 76.2 61.8 The following weighted average number of shares
was used to calculate: Basic earnings - common stock and linked
units 56,670,580 54,700,393 56,442,066 54,700,393 Diluted earnings
- common stock and linked units 57,592,554 55,870,344 57,343,816
55,707,240 (1) General and administration expense includes a stock
compensation charge of $124,199 for the three and nine months ended
March 31, 2006. NET 1 UEPS TECHNOLOGIES, INC. Condensed
Consolidated Balance Sheets Unaudited (A) March 31, June 30, 2006
2005 (In thousands, except share data) ASSETS CURRENT ASSETS Cash
and cash equivalents $ 193,897 $ 107,749 Pre-funded social welfare
grants receivable 15,961 11,567 Accounts receivable, net of
allowances of - March $160; June: $0 24,000 15,293 Finance loans
receivable, net of allowances of - March: $3,652; June: $3,636
8,492 7,760 Deferred expenditure on smart cards 1,202 3,014
Inventory 2,930 1,927 Deferred income taxes 3,290 3,354 Total
current assets 249,772 150,664 LONG TERM RECEIVABLE 1,108 969
PROPERTY, PLANT AND EQUIPMENT, NET OF ACCUMULATED DEPRECIATION OF -
March: $24,353; June: $20,624 4,969 6,216 EQUITY ACCOUNTED
INVESTMENTS 4,397 1,325 GOODWILL 15,242 14,636 INTANGIBLE ASSETS,
NET OF ACCUMULATED AMORTIZATION OF - March: $6,840; June: $4,919
6,587 7,944 TOTAL ASSETS 282,075 181,754 LIABILITIES CURRENT
LIABILITIES Accounts payable 32,327 20,315 Income taxes payable
9,925 14,038 Total current liabilities 42,252 34,353 DEFERRED
INCOME TAXES 17,738 10,399 TOTAL LIABILITIES 59,990 44,752
SHAREHOLDERS' EQUITY COMMON STOCK Authorized: 83,333,333 with
$0.001 par value; Issued and outstanding shares - March:
48,009,788; June: 28,548,269 48 29 SPECIAL CONVERTIBLE PREFERRED
STOCK Authorized: 50,000,000 with $0.001 par value; Issued and
outstanding shares - March: 8,660,792; June: 26,733,521 9 27 B
CLASS PREFERENCE SHARES Authorized: 330,000,000 with $0.001 par
value; Issued and outstanding shares (net of shares held by the
Company) - March: 63,816,383; June: 196,983,841 10 31 ADDITIONAL
PAID-IN-CAPITAL 104,323 71,960 ACCUMULATED OTHER COMPREHENSIVE
INCOME 16,367 7,314 RETAINED EARNINGS 101,328 57,641 TOTAL
SHAREHOLDERS' EQUITY 222,085 137,002 TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY $ 282,075 $ 181,754 (A) -- amounts derived
from audited financial statements NET 1 UEPS TECHNOLOGIES, INC.
Unaudited Condensed Consolidated Statements of Cash Flows Three
months Nine months ended ended March 31, March 31, 2006 2005 2006
2005 (In thousands) (In thousands) Cash flows from operating
activities Cash received from customers $ 25,724 $ 18,941 $ 135,763
$ 127,910 Cash paid to suppliers and employees (11,905) (21,365)
(63,889) (81,864) Cash generated by operations 13,819 (2,424)
71,874 46,046 Interest received 3,805 3,815 10,128 11,645 Finance
costs paid (2,377) (3,517) (6,456) (10,131) Income taxes paid
(6,234) - (24,309) (31,984) Net cash provided by (used in)
operating activities (refer to note 10) 9,013 (2,126) 51,237 15,576
Cash flows from investing activities Capital expenditures (315)
(1,260) (1,203) (2,982) Proceeds from disposal of property, plant
and equipment 16 8 100 29 Cash inflow from disposal of business 10
- 10 - Acquisition of equity interest in and advance of loans to
equity accounted investment (761) - (2,612) - Net cash used in
investing activities (1,050) (1,252) (3,705) (2,953) Cash flows
from financing activities Proceeds from issue of share capital, net
of share issue expenses - - 32,219 - Repayment of credit facilities
- - - (19) Net cash provided by (used in) financing activities - -
32,219 (19) Effect of exchange rate changes on cash 2,032 (9,226)
6,397 (174) Net increase in cash and cash equivalents 9,995
(12,604) 86,148 12,430 Cash and cash equivalents - beginning of
period 183,902 105,316 107,749 80,282 Cash and cash equivalents -
end of period $ 193,897 $ 92,712 $ 193,897 $ 92,712 Net 1 UEPS
Technologies, Inc. Attachment A Key metrics and statistics at and
for the three and nine months ended March 31, 2006 and 2005: Three
months ended March 31, 2006 and 2005 Three months Three months
ended Year ended December ended March 31, Change 31, June 30,
Constant 2006 2005 Exchange 2005 2005 US$ US$ Actual Rate(1) US$
US$ Key statement of operations data, in '000, except EPS Revenue
$54,584 $45,667 20% 23% $47,429 $176,290 Stock compensation charge
124 - - n/m - - Operating income 25,042 20,135 24% 28% 21,173
71,303 Income tax expense 10,074 8,619 17% 20% 8,577 29,666 Net
income $16,576 $11,957 39% 42% $13,932 $44,562 Earnings per share,
in cents Basic 29.2 21.8 34% 37% 24.6 81.4 Diluted 28.8 21.4 35%
38% 24.2 79.6 Key segmental data, in '000, except margins Revenue:
Transaction-based activities $31,767 $26,683 19% 22% $27,255
$103,653 Smart card accounts 9,570 9,157 5% 7% 8,744 34,931
Financial services 4,200 5,322 (21)% (19)% 3,982 20,215 Hardware,
software and related technology sales 9,047 4,505 101% 106% 7,448
17,491 Total consolidated revenue $54,584 $45,667 20% 23% $47,429
$176,290 Consolidated operating income (loss): Transaction-based
activities $16,428 $11,622 41% 45% $13,517 $44,233 Smart card
accounts 4,351 4,163 5% 7% 3,974 15,878 Financial services 1,782
2,836 (37)% (35)% 1,828 9,316 Hardware, software and related
technology sales 5,449 1,533 255% 265% 3,874 5,689 Corporate/
Eliminations (2,968) (19) n/m n/m (2,020) (3,813) Total operating
income (loss) $25,042 $20,135 24% 28% $21,173 $71,303 Operating
income margin (%) Transaction-based activities 52% 44% 50% 43%
Smart card accounts 45% 45% 45% 45% Financial services 42% 53% 46%
46% Hardware, software and related technology sales 60% 34% 52% 33%
Overall operating margin 46% 44% 45% 40% Mar. June 31, 30, 2006
2005 Key balance sheet data, in '000 Cash and cash equivalents
$193,897 $107,749 80% Total current assets 249,772 150,664 66%
Total assets 282,075 181,754 55% Total current liabilities 42,252
34,353 23% Total shareholders' equity $222,085 $137,002 62% (1) --
This information shows what the change in these items would have
been if the USD/ZAR exchange rate that prevailed during the third
quarter of fiscal 2006 also prevailed during the third quarter of
fiscal 2005. Three months ended March 31, 2006 and 2005 (continued)
Three months ended Three months ended Change December Year ended
March 31, 31, June 30, 2006 2005 2005 2005 Additional information:
Transaction-based activities: Total number of grants paid:
KwaZulu-Natal 4,606,938 4,283,526 8% 4,444,129 16,774,940 Limpopo
2,832,121 2,693,793 5% 2,753,537 10,635,232 North West 801,524
789,504 2% 787,009 3,153,868 Northern Cape 401,712 361,818 11%
396,750 1,459,264 Eastern Cape 2,088,799 1,884,626 11% 2,034,904
7,410,272 10,731,094 10,013,267 7% 10,416,329 39,433,576 Average
revenue per grant paid: ZAR ZAR ZAR ZAR KwaZulu-Natal 20.19 17.07
18% 20.67 17.85 Limpopo 15.42 15.57 (1)% 15.59 15.34 North West
17.23 16.34 5% 17.21 16.43 Northern Cape 18.84 19.43 (3)% 18.89
19.41 Eastern Cape 11.98 12.35 (3)% 12.07 12.35 UEPS merchant
acquiring system: Terminals installed at period end 3,905 2,406 62%
3,929 3,235 Number of participating retail locations at period end
2,352 1,441 63% 2,366 1,880 Value of transactions processed through
POS devices during the quarter (in $ '000) 187,841 45,529 n/m
118,396 87,643 Value of transactions processed through POS devices
during the completed pay cycles for the quarter (in $ '000) 171,022
44,433 n/m 127,765 85,408 Average number of grants processed per
terminal during the quarter 643 344 n/m 379 406 Average number of
grants processed per terminal during the completed pay cycles for
the quarter 584 349 n/m 470 464 Smart card accounts: Total number
of smart card accounts 3,601,076 3,321,368 8% 3,497,664 3,353,603
Hardware, software and related technology sales: Ad hoc significant
hardware sales (US$ '000) Nedbank POS's, pin pads, smart cards and
other hardware 4,400 2,700 63% 3,400 10,400 Smartswitch Namibia
hardware and software (before consolidation adjustments) 1,200 -
n/m 1,500 - Financial services: (US$ '000) Traditional
microlending: Finance loans receivable - gross 8,289 11,143 (26)%
8,318 7,212 Allowance for doubtful finance loans receivable (3,652)
(7,059) (48)% (3,672) (3,636) Finance loans receivable - net 4,637
4,084 14% 4,646 3,576 UEPS-based lending: Finance loans receivable
-net and gross (i.e., no provisions) 3,855 4,746 (19)% 5,732 4,184
nm - Statistic not meaningful Nine months ended March 31, 2006 and
2005 Nine months ended Year ended March 31, Change June 30,
Constant 2006 2005 Exchange 2005 US$ US$ Actual Rate (1) US$ Key
statement of operations data, in '000, except EPS Revenue $147,900
$134,885 10% 14% $176,290 Stock compensation charge 124 - n/m n/m -
Operating income 66,612 54,977 21% 26% 71,303 Income tax expense
27,062 22,534 20% 25% 29,666 Net income $43,687 $34,420 27% 32%
$44,562 Earnings per share, in cents Basic 77.4 62.9 23% 28% 81.4
Diluted 76.2 61.8 23% 29% 79.6 Key segmental data, in '000, except
margins Revenue: Transaction-based activities $86,840 $77,538 12%
17% $103,653 Smart card accounts 26,866 26,362 2% 6% 34,931
Financial services 12,456 15,642 (20)% (17)% 20,215 Hardware,
software and related technology sales 21,738 15,343 42% 48% 17,491
Total consolidated revenue $147,900 $134,885 10% 14% $176,290
Consolidated operating income (loss): Transaction-based activities
$44,077 $31,629 39% 45% $44,233 Smart card accounts 12,212 11,983
2% 6% 15,878 Financial services 5,454 7,579 (28)% (25)% 9,316
Hardware, software and related technology sales 13,390 5,803 131%
140% 5,689 Corporate/ Eliminations (8,521) (2,017) 322% 340%
(3,813) Total operating income (loss) $66,612 $54,977 21% 26%
$71,303 Operating income margin (%) Transaction-based activities
51% 41% 43% Smart card accounts 45% 45% 45% Financial services 44%
48% 46% Hardware, software and related technology sales 62% 38% 33%
Overall operating margin 45% 41% 40% Mar. 31, June 30, 2006 2005
Key balance sheet data, in '000 Cash and cash equivalents $193,897
$107,749 80% Total current assets 249,772 150,664 66% Total assets
282,075 181,754 55% Total current liabilities 42,252 34,353 23%
Total shareholders' equity $222,085 $137,002 62% (1) - This
information shows what the change in these items would have been if
the USD/ZAR exchange rate that prevailed during the nine months
ended March 31, 2006 also prevailed during the nine months ended
March 31, 2005. Nine months ended March 31, 2006 and 2005
(continued) Nine months ended Year ended March 31, Change June 30,
2006 2005 2005 Additional information: Transaction-based
activities: Total number of grants paid: KwaZulu-Natal 13,359,432
12,494,917 7% 16,774,940 Limpopo 8,279,826 8,012,425 3% 10,635,232
North West 2,365,496 2,366,301 (1)% 3,153,868 Northern Cape
1,188,037 1,081,419 10% 1,459,264 Eastern Cape 6,093,874 5,480,916
11% 7,410,272 31,286,665 29,435,978 6% 39,433,576 Average revenue
per grant paid: ZAR ZAR ZAR KwaZulu-Natal 20.04 18.11 11% 17.85
Limpopo 15.38 15.25 1% 15.34 North West 17.01 16.48 3% 16.43
Northern Cape 18.92 19.47 (3)% 19.41 Eastern Cape 12.08 12.37 (2)%
12.35 UEPS merchant acquiring system: Terminals installed at period
end 3,905 2,406 62% 3,235 Number of participating retail locations
at period end 2,352 1,441 63% 1,880 Value of transactions processed
through POS devices during the quarter (in $ '000) 187,841 45,529
n/m 87,643 Value of transactions processed through POS devices
during the completed pay cycles for the quarter (in $ '000) 171,022
44,433 n/m 85,408 Average number of grants processed per terminal
during the quarter 643 344 n/m 406 Average number of grants
processed per terminal during the completed pay cycles for the
quarter 584 349 n/m 464 Smart card accounts: Total number of smart
card accounts 3,601,076 3,321,368 8% 3,353,603 Hardware, software
and related technology sales: Ad hoc significant hardware sales
(US$ '000) Nedbank POS's, pin pads, smart cards and other hardware
10,900 10,400 5% 10,400 Smartswitch Namibia hardware and software
(before consolidation adjustments) 3,900 - n/m - Financial
services: (US$ '000) Traditional microlending: Finance loans
receivable - gross 8,289 11,143 (26)% 7,212 Allowance for doubtful
finance loans receivable (3,652) (7,059) (48)% (3,636) Finance
loans receivable - net 4,637 4,084 14% 3,576 UEPS-based lending:
Finance loans receivable - net and gross (i.e., no provisions)
3,855 4,746 (19)% 4,184 nm - Statistic not meaningful DATASOURCE:
Net 1 UEPS Technologies, Inc. CONTACT: William Espley, Investor
Relations of Net 1 UEPS Technologies, Inc., +1-604-484-8750, or
Toll Free: +1-866-412-NET1 (6381) Web site:
http://www.net1ueps.com/
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