Net 1 UEPS Technologies, Inc. Reports 2012 Fourth Quarter and Full Year Results

JOHANNESBURG, Aug. 23, 2012

Summary Financial Metrics
	Three months ended June 30,
	2012	2011	% change in USD ARIVA.DE Börsen-Geflüster Kurse Net 1 Ueps Technologies 4,33 $ +3,10%	% change in ZAR
(All figures in USD '000s except per share data)
Revenue	107,616	97,368	11%	30%
GAAP net (loss) income	(7,977)	6,832	(217%)	(238%)
Fundamental net income (1)	12,208	17,607	(31%)	(20%)
GAAP (loss) earnings per share ($)	(0.17)	0.15	(216%)	(237%)
Fundamental earnings per share ($) (1)	0.27	0.39	(31%)	(21%)
Fully-diluted shares outstanding ('000's)	45,568	45,181	1%
Average period USD/ ZAR exchange rate	8.03	6.81	18%

Factors impacting comparability of our Q4 2012 and Q4 2011 results

• Unfavorable impact from the strengthening of the US dollar: The US dollar appreciated by 18% against the ZAR during the fourth quarter of fiscal 2012 which negatively impacted our reported results;
• Higher revenues and implementation costs paid as a result of our new contract with SASSA: We commenced generating fees under our new SASSA contract during Q4 2012 and incurred additional implementation and staff costs of $9.1 million;
• Fair value charge resulting from issue of equity instrument pursuant to BBBEE transaction: We recorded a fair value charge of $14.2 million related to our BBBEE transaction which negatively impacted our reported results during Q4 2012; and
• Capital gain paid related to intercompany transaction: We incurred a non-recurring capital gains tax of $1.5 million resulting from an intercompany capital transaction in South Africa.

Comments and Outlook

"I am delighted with our overall performance this quarter as it should demonstrate that the Company is now firmly on its way to rekindling its previous appeal, as we overcome the challenges we have faced over the last few years," said Dr. Serge Belamant, Chairman and Chief Executive Officer of Net1. "All our business units, specifically those that can have meaningful impact, including CPS, KSNET, VCC, MediKredit and NUETS have a robust pipeline of new and existing opportunities, which in turn should begin to deliver improving financial contributions in the short-to-medium term. Our technology is well placed to advance our business in many markets such as welfare systems, mobile-based payments, claims adjudication, financial inclusion and UEPS/EMV card issuing. I am bullish on the future prospects of our Company and believe we have all the tools required to create long-term value for our shareholders," he concluded.

"We expect our quarterly performance in fiscal 2013 to improve sequentially as we progress through the year, although quarterly results may still be lumpy given the timing and quantum of investments and start up costs to be incurred to ensure the implementation of our SASSA contract," said Herman Kotze, Chief Financial Officer of Net1. "For fiscal year 2013, we expect fundamental earnings per share to be at least $1.49, assuming the constant currency base of ZAR 7.72/$1 and using our fiscal 2012 share count of 45 million shares. As always, fundamental earnings exclude amortization of intangibles, stock-based charges and unusual non-recurring items," he concluded.

Second phase of our new SASSA contract implementation

We successfully initiated the national grant payment process for approximately 9.2 million beneficiaries on April 2, 2012 having commenced implementation during Q3 2012. The implementation will be conducted in two phases. The first phase involved issuing approximately 2.5 million MasterCard-branded debit cards to beneficiaries that we did not serve under our previous contract, in order to establish the payment process to pay all social grants in the country. The second phase commenced in early July 2012 and requires the re-registration of all 9.2 million grant recipients.

During Q4 2012 we incurred direct implementation expenses of approximately $9.1 million including staff, travel, premises hire for enrollment, stationery, delivery and advertising costs. We also incurred implementation related capital expenditures of approximately $13.4 million during Q4 2012. We continue to anticipate cumulative capital expenditures of $45 - $50 million tied to the implementation for our new national contract.

Results of Operations by Segment and Liquidity

Our frequently asked questions and operating metrics will be updated and posted on our website (www.net1.com).

South African transaction-based activities

Segment revenue was $58.4 million in Q4 2012, up 16% compared with Q4 2011 in USD and up 37% on a constant currency basis. In ZAR, the increase in segment revenue was largely due to higher SASSA-related fees resulting from the payment of grants nationwide, more prepaid airtime sales resulting primarily from the Eason acquisition and increased transaction volumes in FIHRST. Segment operating income margin was 9% and 41%, respectively, and declined primarily due to implementation costs and the inclusion of increased low-margin prepaid airtime sales as well as Eason intangible asset amortization. Excluding amortization of acquisition-related intangibles, Q4 2012 segment operating income margin was 12%, compared to 44% during Q4 2011.

International transaction-based activities

KSNET continues to contribute the majority of our revenues in this operating segment. Segment revenue was $31.0 million in Q4 2012, up 11% compared with Q4 2011 in USD and 31% on a constant currency basis. Operating margin for the segment is lower than most of our South African transaction-based businesses and was negatively impacted by start-up expenditures related to our XeoHealth launch in the United States, MVC activities at Net1 UTA and on-going losses at Net1 Virtual Card, but these expenses were partially offset by revenue contributions from KSNET, and to a lesser extent from XeoHealth and NUETS' initiative in Iraq. Excluding the amortization of intangibles but including the start-up costs referenced above, Q4 2012 operating income margin was 10% compared to 13% during Q4 2011.

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