UEPS Net 1 Ueps Technologies Inc

JOHANNESBURG, South Africa, Aug. 29 /PRNewswire-FirstCall/ -- Net 1 UEPS Technologies, Inc. ("Net1" or the "Company") (NASDAQ:UEPS) today announced results for the fourth quarter and year ended June 30, 2006. Results The Company reported an increase in net income of 53% to $15.5 million for the three months ended June 30, 2006, from $10.1 million for the three months ended June 30, 2005. Earnings per common share and linked unit increased 42% to $0.27 for the three months ended June 30, 2006, compared to $0.19 for the three months ended June 30, 2005. Revenue increased 16% from $41.4 million for the fourth quarter of 2005 to $48.2 million for the fourth quarter of 2006. The Company reported an increase in net income of 33% to $59.2 million for the year ended June 30, 2006, from $44.6 million for the year ended June 30, 2005. Earnings per common share and linked unit increased 30% to $1.05 for the year ended June 30, 2006, compared to $0.81 for the year ended June 30, 2005. Revenue increased 11% from $176.3 million for fiscal 2005 to $196.1 million for 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 months and year ended June 30, 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 54% to ZAR 100.1 million for the three months ended June 30, 2006, from ZAR 65.0 million for the three months ended June 30, 2005. Earnings per common share and linked unit increased 43% to ZAR 1.74 for the three months ended June 30, 2006, compared to ZAR 1.22 for the three months ended June 30, 2005. Revenue increased 17% from ZAR 265.4 million for the fourth quarter of 2005 to ZAR 310.5 million for the fourth quarter of 2006. In ZAR, the Company reported an increase in net income of 37% to ZAR 379.8 million for the year ended June 30, 2006, from ZAR 276.7 million for the year ended June 30, 2005. Earnings per common share and linked unit increased 33% to ZAR 6.73 for the year ended June 30, 2006, compared to ZAR 5.03 for the year ended June 30, 2005. Revenue increased 15% from ZAR 1,094.7 million for fiscal 2005 to ZAR 1,257.5 million for fiscal 2006. Fourth Quarter Highlights * $189.6 million in transactions were processed through our merchant acquiring system in the fourth quarter of fiscal 2006, compared to $87.6 million in the fourth quarter of fiscal 2005. During the three months ended June 30, 2006, 2,554,616 grants were paid through the Company's terminal base, compared to 1,143,937 during the three months ended June 30, 2005; * 4,038 terminals were in use at 2,381 participating UEPS retail locations as of June 30, 2006, compared with 3,235 terminals in use at 1,880 locations as of June 30, 2005. These numbers were comparable to March 31, 2006. The number of transactions processed per terminal of 643 during the three months ended June 30, 2006 was consistent with that during the three months ended March 31, 2006; * UEPS transaction-based activities effected 11.0 million payments during the fourth quarter of fiscal 2006, a 10% increase over the number of payments effected during the fourth quarter of fiscal 2005; * A total of 3,653,696 UEPS smart card-based accounts were active at June 30, 2006, compared to 3,353,603 active accounts at June 30, 2005; * Hardware ordered in January 2006 totalling $2.4 million was delivered to Nedbank Limited; and * Formation of SmartSwitch Nigeria (Proprietary) Limited with Diamond Bank Plc and Innovative Capital & Investments Limited. Comments and Guidance "I am delighted with our strong financial performance in fiscal 2006," said Dr. Serge Belamant, Chairman and Chief Executive Officer. "With the acquisition of Prism now finalized, we look forward to integrating Prism's activities and expanding our product and service offering in fiscal 2007. We have identified a number of potential synergies and new revenue opportunities that we expect to realize from the Prism acquisition, and we are in the process of quantifying them, as well as our anticipated timeframe to realize the benefits. We intend to provide more detail around these opportunities before the end of the second quarter of fiscal 2007," he added. "On a stand-alone basis, without considering the accounting impact of or potential synergies from the Prism acquisition, we expect Net1 to grow its Rand earnings from its current activities by 20% to 25% in fiscal 2007. We anticipate Prism, on a stand-alone basis, to grow its Rand earnings by 25% to 30% in fiscal 2007. The effects of any fluctuations between the United States dollar and South African Rand will have an impact on our reported results," he concluded. "The financial effect of the Prism acquisition on our GAAP earnings for fiscal 2007 will be influenced by a number of factors," said Herman Kotze, Net1's Chief Financial Officer. "While we expect our GAAP earnings to increase through the inclusion of Prism's fiscal 2007 results and the potential synergies and cost savings we expect to realize from the acquisition, our GAAP earnings will also be diluted by the amortization of the intangible assets acquired, the stock based compensation charge for the options granted to Prism employees, the loss of Net1 interest income on the cash consideration paid for Prism shares and the costs associated with the integration of Prism's activities into our own. We expect to incur the majority of the costs associated with the integration of Prism's activities in the first and second quarters of fiscal 2007. We will illustrate the pro-forma financial effects of the Prism acquisition for fiscal 2006 on an amended Form 8-K during the next three weeks," he concluded. Stock options granted to Prism employees In connection with the acquisition of Prism, the company has granted Prism employees options to purchase 904,674 shares of Net1's common stock at an exercise price of $22.51 per share, which was the average of the high and low sales prices on the Nasdaq on the date of grant. Conference call Net1 will host a conference call to review fourth quarter and annual results on August 30, 2006 at 9:30 a.m. EDT. 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 September 19, 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. Net1's recently acquired subsidiary, Prism, is a company focused on the development and provision of secure transaction technology, solutions and services. Prism's core competencies around secure online transaction processing, cryptography and integrated circuit card (chip/smart card) technologies are principally applied to electronic commerce transactions in the telecommunications, banking, retail, petroleum and utilities market sectors. These technologies form the cornerstones of the "trusted transactions" environment and provide us with the building blocks for developing secure end-to-end payment solutions. 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. CONSOLIDATED STATEMENTS OF OPERATIONS for the years ended June 30, 2006, 2005 and 2004 2006 2005 2004 (In thousands, except per share data) REVENUE $ 196,098 $ 176,290 $ 131,098 EXPENSE Cost of goods sold, IT processing, servicing and support 50,619 50,682 39,134 General and administration 48,627 45,897 39,677 Depreciation and amortization 5,710 6,591 5,676 Costs related to public 1,529 1,817 - offering and Nasdaq listing Reorganization charges - - 11,133 OPERATING INCOME 89,613 71,303 35,478 INTEREST INCOME, net 5,889 2,389 3,640 INCOME BEFORE INCOME TAXES 95,502 73,692 39,118 INCOME TAX EXPENSE 36,653 29,666 25,927 INCOME FROM CONTINUING OPERATIONS BEFORE EARNINGS FROM EQUITY- ACCOUNTED INVESTMENTS 58,849 44,026 13,191 EARNINGS FROM EQUITY-ACCOUNTED INVESTMENTS 383 536 87 NET INCOME 59,232 44,562 13,278 Net income per share Basic earnings - common stock and linked units 1.05 0.81 0.40 Diluted earnings - common stock and linked units 1.03 0.80 0.38 NET 1 UEPS TECHNOLOGIES, INC. CONSOLIDATED BALANCE SHEETS as of June 30, 2006 and 2005 2006 2005 (In thousands, except share data) ASSETS CURRENT ASSETS Cash and cash equivalents $ 189,735 $ 107,749 Pre-funded social welfare grants receivable 17,223 11,567 Accounts receivable, net 21,219 15,293 Finance loans receivable, net 6,713 7,760 Deferred expenditure on smart cards 656 3,014 Inventory 1,935 1,927 Deferred income taxes 3,237 3,354 Total current assets 240,718 150,664 LONG-TERM RECEIVABLE 946 969 PROPERTY, PLANT AND EQUIPMENT, net 3,757 6,216 EQUITY-ACCOUNTED INVESTMENTS 4,986 1,325 GOODWILL 13,923 14,636 INTANGIBLE ASSETS, net 5,649 7,944 TOTAL ASSETS 269,979 181,754 LIABILITIES CURRENT LIABILITIES Bank overdraft 20 - Accounts payable 2,073 2,315 Other payables 28,575 18,000 Income taxes payable 12,455 14,038 Total current liabilities 43,123 34,353 DEFERRED INCOME TAXES 17,846 10,399 TOTAL LIABILITIES 60,969 44,752 SHAREHOLDERS' EQUITY COMMON STOCK, net of treasury shares Authorized shares: 83,333,333 with $0.001 par value; Issued and outstanding shares: 2006: 49,596,879; 2005: 28,548,269 50 29 SPECIAL CONVERTIBLE PREFERRED STOCK Authorized shares: 50,000,000 with $0.001 par value; Issued and outstanding shares: 2006: 7,315,099; 2005: 26,733,521 7 27 B CLASS PREFERENCE SHARES Authorized shares: 330,000,000 with $0.001 par value; Issued and outstanding shares (net of shares held by the Company): 2006: 53,900,752; 2005: 196,983,841 9 31 ADDITIONAL PAID-IN CAPITAL 105,792 71,960 TREASURY SHARES ISSUED: 2006: 147,973; 2005: 0 (3,958) - ACCUMULATED OTHER COMPREHENSIVE (LOSS) INCOME (9,763) 7,314 RETAINED EARNINGS 116,873 57,641 TOTAL SHAREHOLDERS' EQUITY 209,010 137,002 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 269,979 $ 181,754 NET 1 UEPS TECHNOLOGIES, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS for the years ended June 30, 2006, 2005 and 2004 2006 2005 2004 In thousands Cash flows from operating activities Cash received from customers $ 181,313 $ 174,704 $ 123,177 Cash paid to suppliers and employees (83,434) (101,024) (72,825) Cash generated by operations 97,879 73,680 50,352 Interest received 14,496 16,308 15,362 Finance costs paid (8,741) (13,974) (11,698) Income taxes paid (27,857) (37,872) (12,121) Net cash provided by operating activities 75,777 38,142 41,895 Cash flows from investing activities Capital expenditures (1,821) (3,436) (2,802) Proceeds from disposal of property, plant and equipment 336 39 62 Proceeds from disposal of business 10 - - Long-term receivable granted - - (937) Acquisition of and advance of loans to equity-accounted investments (4,030) - (707) Acquisition of intangibles - - (1,345) Cash received on acquisition of Net 1 UEPS Technologies, Inc. - - 8 Net cash used in investing activities (5,505) (3,397) (5,721) Cash flows from financing activities Proceeds from issue of common stock 33,661 - 52,831 Proceeds from issue of special convertible preferred stock - - 847 Acquisition of treasury stock (3,958) - - Proceeds from bank overdraft 20 - 17 Repayment of bank overdraft - (19) - Cash distributions to shareholders - - (37,002) Dividends paid - - (40,753) Net cash provided by (used in) financing activities 29,723 (19) (24,060) Effect of exchange rate changes on cash (18,009) (7,259) 13,855 Net increase in cash and cash equivalents 81,986 27,467 25,969 Cash and cash equivalents - beginning of period 107,749 80,282 54,313 Cash and cash equivalents at end of period $ 189,735 $ 107,749 $ 80,282 Net 1 UEPS Technologies, Inc. Attachment A Key metrics and statistics at and for the three months and year ended June 30, 2006 and 2005: Three months ended June 30, 2006 and 2005 Three months Year Three months ended ended ended June 30, Change March 31 June 30 Constant 2006 2005 Exchange 2006 2005 US$ US$ Actual Rate(1) US$ US$ Key statement of operations data, in '000, except EPS Revenue $48,198 $41,405 16 % 17 % $54,584 $176,290 Operating income 23,001 16,326 41 % 42 % 25,042 71,303 Income tax expense 9,591 7,132 34 % 35 % 10,074 29,666 Net income $15,545 $10,142 53 % 54 % $16,576 $44,562 Earnings per share, Basic 0.27 0.19 42 % 43 % 0.29 0.81 Diluted 0.27 0.18 50 % 51 % 0.29 0.80 Key segmental data, in '000, except margins Revenue: Transaction- based activities $30,346 $26,115 16 % 17 % $31,767 $103,653 Smart card accounts 9,354 8,569 9 % 10 % 9,570 34,931 Financial services 3,673 4,573 (20)% (19)% 4,200 20,215 Hardware, software and related technology sales 4,825 2,148 125 % 126 % 9,047 17,491 Total consolidated revenue $48,198 $41,405 16 % 17 % $54,584 $176,290 Consolidated operating income (loss): Transaction- based activities $16,576 $12,604 32 % 32 % $16,428 $44,233 Smart card accounts 4,252 3,895 9 % 10 % 4,351 15,878 Financial services 1,475 1,737 (15)% (15)% 1,782 9,316 Hardware, software and related technology sales 3,331 (114) nm nm 5,449 5,689 Corporate/ Eliminations (2,633) (1,796) 47 % 47 % (2,968) (3,813) Total operating income $23,001 $16,326 41 % 42 % $25,042 $71,303 Operating income margin (%) Transaction- based activities 55 % 48 % 52 % 43 % Smart card accounts 45 % 45 % 45 % 45 % Financial services 40 % 38 % 42 % 46 % Hardware, software and related technology sales 69 % n/m 60 % 33 % Overall operating margin 48 % 39 % 46 % 40 % June 30, June 30, 2006 2005 Key balance sheet data, in '000 Cash and cash equivalents $189,735 $107,749 76 % Total current assets 240,718 150,664 60 % Total assets 269,979 181,754 49 % Total current liabilities 43,123 34,353 26 % Total shareholders' equity $209,010 $137,002 53 % (1) - This information shows what the change in these items would have been if the USD/ ZAR exchange rate that prevailed during the fourth quarter of fiscal 2006 also prevailed during the fourth quarter of fiscal 2005. Three months ended June 30, 2006 and 2005 (continued) Three months Year Three months ended ended ended June 30, Change March 31 June 30 2006 2005 2006 2005 Additional information: Transaction-based activities: Total number of grants paid: KwaZulu-Natal 4,758,244 4,280,023 11 % 4,606,938 16,774,940 Limpopo 2,874,214 2,622,807 10 % 2,832,121 10,635,232 North West 815,746 787,567 4 % 801,524 3,153,868 Northern Cape 397,809 377,845 5 % 401,712 1,459,264 Eastern Cape 2,111,103 1,929,356 9 % 2,088,799 7,410,272 10,957,116 9,997,598 10 % 10,731,094 39,433,576 Average revenue per grant paid: ZAR ZAR ZAR ZAR KwaZulu-Natal 20.45 18.09 13 % 20.19 17.85 Limpopo 16.21 15.62 4 % 15.42 15.34 North West 18.08 16.29 11 % 17.23 16.43 Northern Cape 20.46 19.18 7 % 18.84 19.41 Eastern Cape 11.95 12.30 (3)% 11.98 12.35 UEPS merchant acquiring system: Terminals installed at period end 4,038 3,235 25 % 3,905 3,235 Number of participating retail locations at period end 2,381 1,880 27 % 2,352 1,880 Value of transactions processed through POS devices during the quarter (in $'000) 189,649 87,643 116 % 187,841 87,643 Value of transactions processed through POS devices during the completed pay cycles for the quarter (in $'000) 187,769 85,408 120 % 171,022 85,408 Average number of grants processed per terminal during the quarter 643 406 58 % 643 406 Average number of grants processed per terminal during the completed pay cycles for the quarter 639 464 38 % 584 464 Smart card accounts: Total number of smart card accounts 3,653,696 3,353,603 9 % 3,601,076 3,353,603 Hardware, software and related technology sales: Ad hoc significant hardware sales (US$ '000) Nedbank POS's, pin pads, smart cards and other hardware 2,400 - nm 4,400 10,400 Smartswitch Namibia hardware and software (before consolidation adjustments) - - 1,200 - Financial services: (US$ '000) Traditional microlending: Finance loans receivable - gross 7,169 7,212 (1)% 8,289 7,212 Allowance for doubtful finance loans receivable (3,448) (3,636) (5)% (3,652) (3,636) Finance loans receivable - net 3,721 3,576 4 % 4,637 3,576 UEPS-based lending: Finance loans receivable -net and gross (i.e., no provisions) 2,992 4,184 (28)% 3,855 4,184 nm - Statistic not meaningful Year ended June 30, 2006 and 2005 Year ended June 30, Change Constant 2006 2005 Exchange US$ US$ Actual Rate (1) Key statement of operations data, in '000, except EPS Revenue $196,098 $176,290 11 % 15 % Operating income 89,613 71,303 26 % 30 % Income tax expense 36,653 29,666 24 % 28 % Net income $59,232 $44,562 33 % 37 % Earnings per share, Basic 1.05 0.81 30 % 34 % Diluted 1.03 0.80 29 % 33 % Key segmental data, in '000, except margins Revenue: Transaction-based activities $117,186 $103,653 13 % 17 % Smart card accounts 36,220 34,931 4 % 7 % Financial services 16,129 20,215 (20)% (18)% Hardware, software and related technology sales 26,563 17,491 52 % 57 % Total consolidated revenue $196,098 $176,290 11 % 15 % Consolidated operating income (loss): Transaction-based activities 60,653 44,233 37 % 42 % Smart card accounts 16,464 15,878 4 % 7 % Financial services 6,929 9,316 (26)% (23)% Hardware, software and related technology sales 16,721 5,689 194 % 204 % Corporate/ Eliminations (11,154) (3,813) 193 % 202 % Total operating income $89,613 $71,303 26 % 30 % Operating income margin (%) Transaction-based activities 52 % 43 % Smart card accounts 45 % 45 % Financial services 43 % 46 % Hardware, software and related technology sales 63 % 33 % Overall operating margin 46 % 40 % June 30, June 30, 2006 2005 Key balance sheet data, in '000 Cash and cash equivalents $189,735 $107,749 76 % Total current assets 240,718 150,664 60 % Total assets 269,979 181,754 49 % Total current liabilities 43,123 34,353 26 % Total shareholders' equity $209,010 $137,002 53 % (1) - This information shows what the change in these items would have been if the USD/ ZAR exchange rate that prevailed during the fourth quarter of fiscal 2006 also prevailed during the fourth quarter of fiscal 2005. Year ended June 30, 2006 and 2005 (continued) Year ended June 30, Change 2006 2005 Additional information: Transaction-based activities: Total number of grants paid: KwaZulu-Natal 18,117,676 16,774,940 8 % Limpopo 11,154,040 10,635,232 5 % North West 3,181,242 3,153,868 1 % Northern Cape 1,585,846 1,459,264 9 % Eastern Cape 8,204,977 7,410,272 11 % 42,243,781 39,433,576 7 % Average revenue per ZAR ZAR grant paid: KwaZulu-Natal 20.14 17.85 13 % Limpopo 15.59 15.34 2 % North West 18.10 16.43 10 % Northern Cape 19.30 19.41 (1)% Eastern Cape 12.04 12.35 (3)% UEPS merchant acquiring system: Terminals installed at period end 4,038 3,235 25 % Number of participating retail locations at period end 2,381 1,880 27 % Value of transactions processed through POS devices during the quarter (in $ '000) 189,649 87,643 116 % Value of transactions processed through POS devices during the completed pay cycles for the quarter (in $ '000) 187,769 85,408 120 % Average number of grants processed per terminal during the quarter 643 406 58 % Average number of grants processed per terminal during the completed pay cycles for the quarter 639 464 38 % Smart card accounts: Total number of smart card accounts 3,653,696 3,353,603 9 % Hardware, software and related technology sales: Ad hoc significant hardware sales (US$ '000) Nedbank POS's, pin pads, smart cards and other hardware 13,300 10,400 28 % Smartswitch Namibia hardware and software (before consolidation adjustments) 3,900 - nm Financial services: (US$ '000) Traditional microlending: Finance loans receivable - gross 7,169 7,212 (1)% Allowance for doubtful finance loans receivable (3,448) (3,636) (5)% Finance loans receivable - net 3,721 3,576 4 % UEPS-based lending: Finance loans receivable -net and gross (i.e., no provisions) 2,992 4,184 (28)% 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/

Copyright