Keyware Technologies NV — Earnings Release 2010

Mar 10, 2011

REGULATED INFORMATION

PRESS RELEASE 10 March 2011

Keyware profitable

Profit of 446 kEUR for 2010. Included in the BEL Small Index as from 21 March 2011

Brussels, Belgium - 10 March 2011 – Keyware (EURONEXT Brussels: KEYW) a leading supplier of electronic-payment solutions, loyalty systems, identity applications and related transaction management, today announced its financial results for the financial year 2010, which closed on 31 December 2010. Keyware realised a profit of 446 kEUR compared to a loss of (794) kEUR for 2009. Keyware's net cash flow rose to 1,013 kEUR, which represents an increase of 86.90% compared to the previous year.

The past year has been an excellent year for Keyware. Keyware realised a positive result during three consecutive quarters. A profit of 172 KEUR was realised in the first six months, which increased further in the second half of the year to a profit of 274 kEUR.

Keyware attributes these positive results to the revenues from authorisation activities and the strong turnover growth as a result of the expansion of the product and services range and the success of new payment solutions for mobile applications such as GPRS (via satellite) and Internet.

Stéphane Vandervelde, CEO: "The biggest challenge for 2010 was realising a substantial positive net result. This objective was exceeded. The market has reacted enthusiastically to our new payment services and Keyware has generated a substantial profit over the whole financial year. For 2011, we continue to focus on profitable growth with a significant added value creation for all stakeholders. With regard to the financial markets, we would like to draw attention to the fact that Keyware will be included in the BEL Small-Index on NYSE Euronext Brussels as from 21 March."

Strategic choices

Guido Van der Schueren, Chairman of the Board of Directors: "The investors and the management of Keyware have successfully transformed the company in recent years into a profitable and respected player on the Belgian market for electronic payments. We expect that this profitable growth will continue in 2011. The confirmation of our results during the first six months of 2011 could contribute considerably to the development of our talks with various industrial partners in connection with a possible acquisition. Keyware expects to be able to make its strategic choices known in this regard during the third quarter of 2011."

The figures

For the fiscal year 2010:

• the Group realised a turnover of 5,806 kEUR in comparison to 5,683 kEUR for the same period in 2009, which represents an increase in turnover of 2.16%;
• the operating cash flow (EBITDA) for the fiscal year 2010 came to 1,050 kEUR, versus 595 kEUR for the fiscal year 2009, which represents an increase of 76.47%;
• the net profit for the period amounted to 446 kEUR, compared to a net loss of (794) kEUR as at 31 December 2009;
• the net cash flow amounted to 1,013 kEUR, compared to 542 kEUR as at 31 December 2009, representing an increase of 86,90%;
• the gross profit margin declined from 80.96% to 80.42%.

	Fiscal year per
Key figures for the period	31.12.2010	31.12.2009
ending on December 31	kEUR	kEUR
	(audited) (audited)
Turnover	5,806	5,683
Profit/(loss) for the period	446	(794)
EBITDA	1,050	595
Net cash flow	1,013	542

Management report on the results for 2010

The key figures for the fiscal year can be summarised as follows.

• The turnover and the gross margin can be specified as follows:

		Fiscal year per
Gross Margin	31.12.2010	31.12.2009	Change
	kEUR	kEUR
Turnover	5,806	5,683	2.16%
Raw materials and consumables	(1,137)	(1,082)	5.08%
Gross Margin	4,669	4,601	1.48%
Gross margin in percentages	80.42%	80.96%

• The consolidated turnover for the fiscal year 2010 amounts to 5,806 kEUR compared to 5,683 kEUR for the same period in 2009, which represents an increase of 2.16%. The increase in turnover was manifest in the payment terminals division as a result of the expansion of the payment terminals product range. During the fiscal year 2010, the group has concluded contracts for leasing GPRS devices. In 2009, the first contracts for GPRS devices were not concluded until September.

Moreover, the retention policy implemented by Keyware has contributed to more than 90% of the existing customers opting for a contract renewal at the end of their contract period.

The turnover in the authorisation division decreased by 25 kEUR.

• Personnel costs rose by 1.44%.
• The net impairment of current assets rose from 720 kEUR to 746 kEUR. This concerns impairments booked on receivables from financial leasing. These impairments or write-offs are the consequence of bankruptcies, termination of the activities by the customer or termination of the contract by the customer.
• Other expenses rose by 11.63 %, due to higher communication costs and payments to consultants in connection with fees and the allocation of the warrants.
• Net profit for the fiscal year amounts to 446 kEUR in comparison to a net loss of (794) kEUR as at 31 December 2009. The higher result was due to a higher gross margin and the realisation of one-off other operating income, which was partially compensated by higher costs, whereby other expenses and impairment losses on current assets both rose.
• Net cash flow amounts to 1,013 kEUR in comparison to 542 kEUR as at 31 December 2009.

The higher net cash flow is mainly due to an improvement of the net result, from a net loss of (794) kEUR as at 31 December 2009 to a positive net profit of 446 kEUR as at 31 December 2010.

IMPORTANT EVENTS IN 2010:

CAPITAL INCREASE

During the Extraordinary General Shareholders' Meeting of 29 November 2010, the decision was taken to convert amounts owed to lenders of in total 1,511,117.81 EUR into 927,634 new shares. In addition, the decision was taken to convert amounts owed to suppliers of in total 552,673.19 EUR into 339,266 new shares.

As a result of these debt conversions, the capital was increased to 2,064,791 EUR and the total number of shares was increased to 16,703,279.

PARFIP

In 2010, the Group was also able to make use of the credit line provided by Parfip Benelux, in the form of a cession of contracts. For the fiscal year 2010, more than 2.9 million EUR in contracts had been ceded to Parfip Benelux NV.

ISSUE OF WARRANTS

The Extraordinary General Meeting of 17 March 2010 has approved the issue of the Warrant Plan 2010.

At this Extraordinary General Meeting of Keyware Technologies NV on 17 March 2010, it was resolved to:

(i) allocate and subscribe to three hundred ninety thousand (390,000) 2010 warrants by Parana Management BVBA, Big Friend NV, Pardel SA, Federal Invest NV, Luc Pintens, JH Consulting BVBA, Iquess BVBA, Checkpoint X BVBA, Arn Clemhout and MV Services BVBA ("the Certain Persons"), in the proportions set out in the special report of the Board of Directors, and

(ii) that the Board of Directors of the Company make an offer to the personnel of the company and its subsidiaries, within a period of three months after the date of the Extraordinary General Meeting, regarding the remainder of the 2010 warrants, and resolved an allocation and definitive issue thereof (by notarial deed) to the personnel who have accepted said offer.

EXERCISE OF WARRANTS

In the course of the first nine months of 2010, a number of warrant holders confirmed their confidence in the Group and proceeded to exercise their outstanding warrants:

• following the exercising of 187,500 Warrants 2008, the capital was increased for an amount of 235 kEUR and 187,500 new shares were issued via a notarial deed executed on 30 April 2010.
• following the exercising of 160,000 Warrants 2008, the capital was increased for an amount of 200 kEUR and 160,000 new shares were issued via a notarial deed executed on 17 September 2010.

ALTERNATIVE FOR BANCONTACT/MISTERCASH

On 11 May 2010, Keyware announced that as of this date it was able to offer a fully-fledged alternative for Bancontact/MisterCash.

Via Maestro, a technology that is available on each debit card, Keyware offers a direct and economical alternative for Bancontact/MisterCash (BC/MC) to retailers, cities, municipalities and self-employed professionals. A fixed amount is charged for each debit transaction, whereby a subscription is no longer necessary. This paves the way to definitely putting an end to the long-standing monopoly of BC/MC.

This development did not come completely unexpected as Maestro International is the largest service provider in the field of debit transactions. In the meantime, Keyware has concluded over 1,250 new contracts for Maestro with retailers and is currently carrying out negotiations with several public entities and city councils.

ROYAL BANK OF SCOTLAND

In June 2009, the Royal Bank of Scotland announced that it would terminate its acquisition activities at the end of 2009. As a result, the Group had to find a different solution for its existing customers, on the one hand, and an alternative solution for the planned EMV project with RBS, on the other hand.

In July 2009, Keyware gave Royal Bank of Scotland a notice of default whereby compensation was demanded for the unilateral termination of the collaboration agreement. Following the notice of default, both parties commenced negotiations in order to arrive at an out-of-court settlement. At the beginning of August 2010, both parties reached an agreement on the amount of this out-of-court settlement, being 450,000 EUR. This amount has been accounted for under other operating income.

SETTLEMENT AGREEMENT

In March 2010, the Board of Directors approved the mutual agreement that was concluded in connection with a legal dispute with a trading partner. As a result, Keyware is entitled to a compensation of 1 million euros.

During the fourth quarter of 2010, the first devices of this supplier were marketed. In connection with the settlement agreement, this supplier will pay an amount of 1 million euros to Keyware in the form of discounts on future orders. This concerns a discount of 50% on all software and 25% on all hardware purchased from this supplier.

As at 31 December 2009, this out-of-court settlement was not taken into account in the financial statements and was regarded as a "contingent asset". As of 31 December 2010, an amount of 559 kEUR was taken into account under other operating income based on already realised contracts on the one hand and the budgeted contracts for the coming three years on the other hand.

Auditor's Report

"The auditor of Keyware Technologies NV, BDO Bedrijfsrevisoren Burg. Ven. CVBA, represented by Koen de Brabander, has confirmed that its audit , which have been completed , have not revealed any significant corrections that should have been made to the abbreviated consolidated income statement, balance sheet, cash flow statement and statement of changes in the equity of the group over 2010, included in this press release."

About Keyware

Keyware (EURONEXT Brussels: KEYW) is a leading supplier of electronic-payment solutions, loyalty systems, identity applications and related transaction management. Keyware is based in Zaventem, Belgium. More information is available on www.keyware.com.

For additional information, please contact:

Mr Stéphane Vandervelde President & CEO Keyware Technologies Tel: +32 (0)2 346.25.23 ir@keyware.com www.keyware.com

CONSOLIDATED INCOME STATEMENT

The consolidated income statement can be summarised as follows:

Consolidated income statement for the period	Fiscal year per
ending on	31.12.2010	31.12.2009
	kEUR	kEUR
	(audited)	(audited)
Continued operations
Turnover	5,806	5,683
Other profits and losses	1,366	225
Raw materials and consumables	(1,137)	(1,082)
Staff remuneration	(1,552)	(1,530)
Depreciation	(253)	(243)
Net impairment losses of current assets	(746)	(720)
Other expenses	(3,206)	(2,872)
Operating profit/(operating loss)	278	(539)
Financial income	685	580
Financial expenses	(752)	(663)
Result before taxes	211	(622)
Taxes on the result	235	(172)
Profit/(loss) for the period from continued operations	446	(794)
Profit/(loss) for the period from discontinued operations	-	-
Profit/(loss) for the period	446	(794)
Weighted average number of issued ordinary shares	15,408,986	14,802,968
Weighted average number of shares for the diluted result
per share	17,214,849	16,639,368
Profit/(loss) per share from the continued and discontinued operations
Profit/(loss) per share	0.0289	(0.0536)
Profit/(loss) per diluted share	0.0259	(0.0536)

CONSOLIDATED BALANCE SHEET

	31.12.2010	31.12.2009
Consolidated balance sheet on	kEUR	kEUR
	(audited)	(audited)
Assets
Consolidation differences	5,248	5,248
Intangible, tangible and financial fixed assets	548	691
Deferred tax assets	1,685	1,450
Receivables from financial leasing	9,049	7,791
Current assets	2,778	2,597
Total assets	19,308	17,777
Liabilities and shareholders' equity Equity capital that can be allocated to the holders of
equity instruments of the parent company	11,324	8,212
Long-term liabilities	4,475	5,160
Current liabilities	3,509	4,405
Total liabilities and shareholders' equity	19,308	17,777

CONSOLIDATED CASH FLOW STATEMENT

Consolidated cash flow statement for the period	Fiscal year per
ending on	31.12.2010	31.12.2009
	kEUR	kEUR
	(audited)	(audited)
Cash flows from operating activities
Result of the period	446	(794)
Depreciation and write-offs	253	243
Impairment on financial lease receivables	503	585
Impairments	-	135
Share-based payments	198	30
Depreciation of capitalised commissions	48	171
Deferred tax assets and liabilities	(235)	172
Operating cash flow before changes in the working capital	1,213	542
Decrease/(Increase) of inventories	(101)	(200)
Decrease/(increase) of financial lease receivables	(1,438)	(3,320)
Decrease/(increase) of trade and other receivables	(484)	82
Decrease/(Increase) of prepaids	117	(155)
Increase/(decrease) of trade payables	(768)	2,051
Increase/(decrease) of other liabilities	(92)	(19)
Changes in the working capital	(2,766)	(1,561)
Cash flows from operating activities	(1,553)	(1,019)
Cash flows from investing activities
Additions to property, plant and equipment	(164)	(38)
Disposals of intangible and tangible fixed assets	-	113
(Increase)/decrease of issued warranties	54	-
Cash flows from investing activities	(110)	75
Cash flows from financial activities
Capital increase	2,498	445
(Repayments)/proceeds long-term and short-term borrowings	(186)	552
(Repayments)/proceeds long-term and short-term leasing liabilities	(535)	(312)
Cash flows from financial activities	1,777	685
Net (decrease)/ increase in cash and cash equivalents	114	(259)
Cash and cash equivalents at the beginning of the period	34	293
Cash and cash equivalents assets at the end of the period	148	34

CONSOLIDATED STATEMENT OF CHANGES IN THE CONSOLIDATED SHAREHOLDERS' EQUITY

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