JOHANNESBURG, South Africa, May 9 /PRNewswire-FirstCall/ -- Net 1 UEPS Technologies, Inc. ("Net1" or the "Company") 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
