FY17 - a transition year
FY17 - a transition yearEARNINGS/SALES RELEASES
FACT
Keyware reported its FY17 results, with revenues flat yoy to €18,730k. The drop in revenues from the Payment terminals division (-24% to €8,449k) was compensated by the increase in revenues from the Authorisations (+11.9% to €8,510k). Also, the recently-acquired companies, now part of the software activity, contributed revenues of €1,561k in FY17, whereas Magellan contributed only from H2 17.
The gross margin slightly decreased compared to the previous year (-4%) to €10,455k. The situation deteriorated even more strongly when looking at the operating profit which fell from €3,174k to €1,143k yoy. Net profit for the year reached €1,174k from €3,101k in FY16. Finally, EPS reached €0.05/share compared to €0.15/share the year before.
ANALYSIS
Continuing trend for the Payment terminals
The trend observed in the first nine months of 2017 tends to confirm the FY17 results which showed decreasing revenues for the Payment terminals activity. This is because of the fewer number of new contracts and an unfavourable product mix which leans towards cheaper terminals. This unfavourable mix, coupled with the underperformance of the recently-acquired German subsidiary due to market developments, and strong competition have strongly weighed on this activity’s operating profitability. The decision to reduce the Payment terminal activity in Germany sounds like a smart move considering the FY17 €362k revenue that it registered.
A smart transformation path
As we pointed out after the Q3 results, the Authorisations activity confirmed its solid performance for the rest of the year, with rising revenues and operating margin (23.3% from 22.6%). This activity has overtaken the Payment terminals activity in terms of revenues and confirms the transformation being carried out by Keyware.
Indeed, the transformation from a service company to a software developer is easily seen through the recent integration of Magellan and EasyOrder, which have started contributing to the FY17 results. Magellan’s high gross margin has already positively influenced the group’s gross margin. The activity was integrated from H2 17. Also, the revenues and operating margin of EasyOrder should be strongly boosted from FY18 as this new activity started to offer its services from Q4 17.
New Software as a Service (SaaS) contracts signed recently with large institutions also pave the way for recurring and strongly growing revenues, while the group expects the cruising speed to be reached by 2020 for these products and service contracts.
The transition year
FY17 definitely looks like a transition year for the group, for which profitability has also been affected by higher amortisation costs and lower financial income due to the recent acquisitions. We are pleased to see the transformation and believe that this should bear fruit quite quickly. The diversification will be a lever to boost profitability and will deliver its full potential when the Terminals’ recovery is further ahead in its cycle.
IMPACT
The impact on our expectations will be minor for the moment, but we will keep a close eye on developments at the recently-acquired activities which we believe should give the company a revenue and profitability growth boost.
Keyware Technologies NV. Keyware Technologies NV is a Belgium-based independent network service provider that offers electronic payment solutions. It is engaged in the: personalization, programming, installation, maintenance, rental and sale of fixed, portable and mobile payment terminals; implementation of payment transactions using Visa, MasterCard, Maestro, Amex, V-Pay, and JCB, among others; payment services for electronic-commerce and mobile-commerce; solutions for loyalty cards, as well as development and management of its payment transaction platform. The Company operates in two segments: Payment Terminals, engaged in the rental of terminals, the sale of payment terminals, installation of payment terminals, revenues related helpdesk and revenues relating to on-site interventions, as well as Payment Authorization, engaged in income related payment transactions and authorization services, transaction management for third parties, as well as loyalty processing and analysis services, among others.
AlphaValue Corporate Services capitalise on the research and credit analysis expertise deployed by AlphaValue with major institutional investors at European level over the past nine years. The proprietary tools and processes enabling AlphaValue Corporate Services to establish a valuation and/or a credit risk assessment are identical to those used by AlphaValue to the benefit of its institutional clients. The only difference is the recognition that a company evaluation cannot be dissociated from the fact that the latter is paying for the service (AlphaValue Corporate Services), as opposed to the investor footing the bill (AlphaValue). AlphaValue’s research tools are characterised by the transparency of the valuation methodologies, their responsiveness to market data and by nine years’ experience of a universe numbering more than 450 European companies. Through its coverage and sector exhaustiveness, AlphaValue ranks alongside the major research houses in Europe and constitutes the only new entrant to the European space in the past decade. This significant presence is reflected in an unrivalled distribution capability via platforms commonly adopted by investors to access research: Factset, Bloomberg, Capital IQ and the numerous websites. AlphaValue is one the largest research contributors to these platforms, to the benefit of AlphaValue Corporate Services issuer clients. The AlphaValue Corporate Services analysts are AlphaValue’s sector specialists. Their robust knowledge of the business models in their sectors enables the rapid generation of incisive, relevant research and advantageous interaction with the management teams.
Unfortunately, this report is not available for the investor type or country you selected.
Browse all ResearchPool reportsReport is subscription only.
Thank you, your report is ready.
Thank you, your report is ready.