Keyware Technologies NV — Earnings Release 2013

Mar 13, 2014

PRESS RELEASE 13 March 2014

Keyware doubles its net profit in 2013

Brussels, Belgium ‐ 13 March 2014 – Keyware (EURONEXT Brussels: KEYW) a leading supplier of electronic‐payment solutions and related transaction management, today announced its financial results for the financial year 2013, which closed on 31 December 2013.

Keyware's turnover and net result increase by 5.66% and 107.84% to 8,749 kEUR and 1,029 kEUR respectively. In addition to the improved operating result, the increase of the net result is mainly triggered by an improved financial result due to decreased long term commitments (being leases and trade debts).

Keyware offers today the biggest product range in payment terminals to be found on the Belgian market comprising specific terminals from well‐known suppliers such as Ingenico and Verifone. Both producers have installed in 2013 several millions of terminals throughout the various continents. To complete its offering, Keyware concluded in July 2013 an agreement with Worldline as a result of which the known Yomani, Yoximo and Xengo payment terminals are also supplied to the market by Keyware. This puts Keyware in a unique position on its home market where it becomes a single‐ point‐of‐contact in almost every market segment.

With respect to the rendering of services to its customers results have been achieved that are above management and market expectations. Targets with respect to contract processing, installations and after sales service indicate our focus on a qualitative service. The continuous growth of the active customers base confirms the direct impact triggered by rendering such a qualitative service. Our customers choose a 5‐year commitment, both for new contracts as for the extension of the terminating lease‐agreements. In this respect Q Team VP Lambrecht VDK renewed its lease of 72 terminals for a 6‐year term.

With respect to 2014 Keyware expects a further increase of its market share in the less cyclically sensitive market segments. In order to achieve the highest profitability in the management of payment terminals and to offer a competitive supply to the market, Keyware took a 50% stake in the joint venture PAYITEASY. Current customers are offered the possibility to switch to another type of terminal within Keyware's product range without any cost, so that their payment service can evolve with their business or with their customers' needs. As a result, Keyware positions itself clearly as a strategic long term partner for both the small and the large enterprise, merchant or retailer.

New campaigns are launched aimed at starting merchants across various market segments. Keyware seeks to take the lead in the development of a cashless society, with proven pay‐offs for merchants, banks, the state and the consumer. The product and service range has been diversified in this respect by a series of flexible and quite affordable proposals.

The figures

For the fiscal year 2013:

• after a significant growth in 2012 of 43.15 %, the Group has been able to consolidate this level by further increasing its turnover to 8,749 kEUR in comparison to 8,280 kEUR for the same period in 2012, which represents an increase in turnover of 5.66%;
• the operating cash flow (EBITDA) for the fiscal year 2013 amounts to 1,895 kEUR compared to 1,408 kEUR for the fiscal year 2012, which represents an increase of 487 kEUR or 34.59%;
• the net profit for the period amounts to 1,029 kEUR compared to a net profit of 510 kEUR as at 31 December 2012, which represents an increase of 519 kEUR or 101.76%;
• the net cash flow amounts to 2,476 kEUR compared to 1,532 kEUR as at 31 December 2012, representing an increase of 944 kEUR or 61.62%;

	Fiscal year per
Key figures for the period	31.12.2013	31.12.2012
ending on December 31	kEUR	kEUR
	(audited)	(audited)
Turnover	8,749	8,280
Profit/(loss) for the period	1,029	510
EBITDA	1,895	1.408
Net cash flow	2,476	1.532

• the gross profit margin records a small increase from 77.09% to 78.25%.

Management report on the results for 2013

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	31.12.2013	31.12.2012	Change
	kEUR	kEUR
Turnover	8,749	8,280	5.66 %
Raw materials and consumables	(1,903)	(1.897)	0.32 %
Gross Margin	6,846	6,383	7.25 %
Gross margin in percentages	78.25%	77.09%

• The consolidated turnover for the fiscal year 2013 amounts to 8,749 kEUR compared to 8,280 kEUR for the same period in 2012, which represents an increase of 5.66%.

The increase in turnover occurred in both the payment terminals division and the authorisation division. Notwithstanding a lower number of new contracts concluded the turnover of the payment terminals division increased. Preserving the existing customer base,

by exchanging older terminals for newer ones for these customers, as well as the signing of a significant contract, trigger this trend. A satisfying purchase policy accounts for the small increase in purchases of goods for resale compared to the increase of turnover.

• Personnel expenses increase by 10.71% as a result of a higher average work force throughout 2013. The other operating expenses decrease by 4.73% compared to 2012. In 2012 the caption included the charge of the valuation of warrants (250 kEUR) so that other operating expenses, when excluding it, rather represent an increase of 2.98% in 2013.
• The net impairment of current assets increase by 686 kEUR from 1,177 kEUR to 1,863 kEUR. This relates to impairments recorded on receivables from financial lease and to a smaller extent allowances recorded on inventories. The impairments on receivables from financial lease result from bankruptcies, termination of the activities by the customer or termination of the contract by the customer. Compared to 2012 the Group had to cope with a higher number of bankruptcies and terminations in 2013.
• Net profit for the fiscal year amounts to 1,029 kEUR compared to a net profit of 510 kEUR as at 31 December 2012. The doubling of the net result is explained by a significantly better financial result and an improved operating result.
• Net cash flow amounts to 2,476 kEUR compared to 1,532 kEUR as at 31 December 2012. This increase is explained by the above.

IMPORTANT EVENTS IN 2013

ATOS WORLDLINE

In 2013 Keyware has concluded a twofold partnership with Atos Worldline for the Benelux. It comprises an independent sales agreement for the sale and the rental of payment terminals as well as an agency agreement with respect to acquiring contracts facilitating payments by Bancontact/MisterCash, Visa, MasterCard, V Pay and Maestro. This partnership started during the second half of 2013.

PAYITEASY

During 2013 a 50%‐50% joint venture "PayItEasy" BVBA has been established with the partner J4S in order to further expand the rendering of payment services to third parties. The activities of this joint venture took off during the second half of 2013. The company goes through a start up phase which accounts for the incurred loss of 62 kEUR, wherein Keyware's share amounts to 31 kEUR.

PARFIP

Since May 2012 no new contracts are assigned to PARFIP. As a result the commitments towards PARFIP are continuously decreasing and are expected to end by 2017. This gradual decrease is reflected in the financial results.

CAPITAL INCREASE

In 2013 no new warrant schemes have been granted but nonetheless several capital increases have occurred. In every case this related to the exercise of warrants granted by the Warrant Schemes of 2008 and 2012. On aggregate 1.380.000 warrants have been exercised at 0,70 EUR. The cash inflow of 966 kEUR is reflected by an increase of capital and share premium of 779 kEUR and 187 kEUR respectively. At year‐end, capital amounts to 8.479 kEUR and is represented by 20.413.793 shares.

FINANCING

In addition to the above mentioned cash inflow of 966 kEUR, several parties have also financed the Group in 2013.

Belfius Bank has increased the straight loan in the course of 2013 from 250 kEUR to 1.190 kEUR, which represents an additional amount of 940 kEUR.

The bank institution has further granted 2 loans of 265 kEUR and 40 kEUR respectively in view of the financing of the fleet and the holiday pay.

Lastly, the Group has concluded 2 loan agreements during the fourth quarter of 2013 with Big Friend NV for an aggregate amount of 300 kEUR. It relates to a loan of 200 kEUR which is repayable over 24 months (November 2013 through October 2015) and to a loan of 100 kEUR which is repayable in one month.

SUBSEQUENT EVENTS

FINANCING

In the course of February 2014 the Group has concluded a lease agreement with ING with respect to the financing of an extension of its fleet. This lease agreement represents 114 kEUR and is repayable in 4 years.

Except for what has been mentioned the Groep does not have any significant subsequent events post balance sheet date to report, which would have an impact on the presentation of the financials.

Auditor's Report

"The auditor of Keyware Technologies NV, BDO Bedrijfsrevisoren Burg. Ven. CVBA, has confirmed that the audit procedures, which have been merely 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 2013, 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 NV 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	31.12.2013	31.12.2012
	kEUR	kEUR
	(audited)	(audited)
Continued operations
Turnover	8,749	8,280
Other profits and losses	335	171
Raw materials and consumables	(1,903)	(1,897)
Salaries and employee benefits	(1,405)	(1,269)
Depreciation	(84)	(196)
Net impairment losses of current assets	(1,863)	(1,177)
Other operating expenses	(3,351)	(3,504)
Operating profit/(operating loss)	478	408
Financial income	875	812
Financial expenses	(293)	(710)
Result before taxes	1,060	510
Taxes on the result	‐	‐
Results from participations in joint‐ventures	(31)	‐
Profit/(loss) for the period from continued operations	1,029	510
Profit/(loss) for the period from discontinued operations	‐	‐
Profit/(loss) for the period	1,029	510
Weighted average number of issued ordinary shares	19,755,327	17,850,917
Weighted average number of shares for the diluted result
per share	21,956,293	20,052,028
Profit/(loss) per share from the continued and discontinued
operations
Profit/ (loss) per share	0.0521	0.0286
Profit/ (loss) per diluted share	0.0469	0.0254

CONSOLIDATED BALANCE SHEET

	31.12.2013	31.12.2012
Consolidated balance sheet	kEUR	kEUR
	(audited)	(audited)
Assets
Goodwill	5,248	5,248
Intangible fixed assets	28	42
Tangible fixed assets	479	277
Deferred tax assets	1,685	1,685
Long term lease receivables	12,834	11,017
Other assets	75	71
Non current assets	20,349	18,340
Inventories	386	361
Trade and other receivables	679	785
Lease receivables	2,610	2,568
Deferred expenses and accrued income	53	185
Cash and cash equivalents	97	115
Current assets	3,825	4,014
Total assets	24,174	22,354
Liabilities and shareholder's equity
Share capital Share premium	8,479 4,709	7,700 4,522
Other reserves	537	537
Results carried forward	2,068	1,039
Equity attributable to the owners of the parent company	15,793	13,798
Provisions	28	‐
Loans	1,743	2,305
Trade debts	385	1,306
Total liabilities due after one year	2,128	3,611
Trade and other debts	3,511	3,187
Financial debts	2,323	1,105
Lease debts	17	360
Miscellaneous debts	37	80
Deferred income and accrued expenses	337	213
Total liabilities due within one year	6,225	4,945
Total liabilities	8,353	8,556
Total liabilities and shareholder's equity	24,174	22,354

CONSOLIDATED CASH FLOW STATEMENT

Consolidated cash flow statement for the period	Fiscal year per
ending on	31,12,2013	31,12,2012
	kEUR	kEUR
	(audited)	(audited)
Cash flows from operating activities
Result of the period	1,029	510
Financial income	(875)	(812)
Financial expenses	293	710
Depreciation	84	196
Impairment on financial lease receivables	1,284	554
Impairment on inventories	49	250
Share‐based payments	‐	272
Operating cash flow before changes in the working capital
components	1,864	1,680
Decrease/(Increase) of inventories	(74)	(70)
Decrease/(increase) of financial lease receivables	(3,143)	(2,789)
Decrease/(increase) of trade and other receivables	106	259
Decrease/(Increase) of pre‐paids	132	(25)
Increase/(decrease) of trade and other payables	(537)	(966)
Increase/(decrease) of other liabilities	21	(1,056)
Changes in the working capital components	(3,495)	(4,647)
Interest paid	(246)	(467)
Interest received	828	569
Cash flows from operating activities	(1,049)	(2,865)
Cash flows from investing activities
Additions to intangible and tangible fixed assets	(271)	(197)
Disposals of intangible and tangible fixed assets	‐	1
Investments in and result in joint‐ventures	27	‐
(Increase)/decrease guarantees	(4)	(4)
Cash flows from investing activities	(248)	(200)
Cash flows from financial activities
Capital increase	966	1,500
(Repayments)/proceeds borrowings (current & non‐current)	656	2,106
(Repayments)/proceeds leasing (current & non‐current)	(343)	(544)
Cash flows from financial activities	1,279	3,062
Net (decrease) / increase in liquid assets	(18)	(3)
Cash and cash equivalents at the beginning of the period	115	118
Cash and cash equivalents at the end of the period	97	115

CONSOLIDATED STATEMENT OF CHANGES INTHE CONSOLIDATED SHAREHOLDERS' EQUITY

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