AlphaValue Corporate Services Fundamental Analysis FR
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AlphaValue Corporate Services
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Keyware

CR
Bloomberg   KEYW BB
Smart Cards-Security  /  Belgium  Web Site   |   Investors Relation
From hardware provider to fintech specialist
Earnings/sales releases13/11/2019

The challenge remains intact

The same old story: cash payments are dropping, pushing down the terminals and authorisations divisions, while the software activity is trying to offset these, mostly helped by EasyOrder and Magellan. Top and bottom lines have suffered from this for many quarters, but we finally see improvements during Q3.


Fact

9m FY19 Key financial highlights
  • Revenue down by 3.7% to €13,608k
  • EBITDA decreased by 8.9% to €1,525k
  • Profit before tax amounted to €665k (-9.7% yoy)
  • Net profit reached €363k (vs. €91k in 9m FY18)
  • Financial debt amounted to €4,710k (vs. €6,450k in 9m FY18)

Analysis

No major update since the company decided to become a fintech specialist rather than keep its position as a terminals provider. Decisions have been taken to offset the decreasing trend in this activity, and are well appreciated. The transition phase has continued, having once again negatively impacted the top and bottom lines. However, we have to note the improvements in Q3, which is highly reassuring.

9m results still impacted by the transition phase

Cash payments are dropping to the benefit of electronic transactions, but Keyware is slowed down by the market which is now saturated. This has led to fewer numbers of new contracts signed and this directly impacted the division’s revenue growth (-4.0% to €5,304k) by a substantial drop which follows the already poor results in FY18. The authorisations division finally bore the cost of the underperformance in terminals, reporting -6.4% sales growth to €6,224k due to fewer commissions.

While the traditional activities continue to be the company’s bread and butter, the software activity now represents 15.3% of total revenues. It is important to note that it is now the group’s only growth driver, showing +6.7% sales growth to €2,080k. This increase was mainly realised by EasyOrder, which now meets more and more clients.

As for the bottom-line, EBITDA decreased by 10.6% to €2,205k, in line with the previous quarter’s results. The reduction is, once again, attributed to an increase in personnel charges (expansion of the software division) and the launch of the activity in Luxembourg, which resulted in a net loss of €78k. Net profit came at €363k (vs. €91k). Apart from the higher profit before tax (€59k more), the increase was also attributed to the lower tax charges (€213k).

Q3 showed improvements

We continue to believe that it is only a matter of time before investments bear fruit at the bottom-line, and Q3 was particularly reassuring on this point.

Revenues were up by +2.1% during the quarter to €4,477k, surprisingly explained by +20.2% growth in the terminals division. This was due to the fact that, in Q3 FY18, the company faced delays in the preparative administrative process which delayed the installation cycle further so that many contracts could not be recognised in the third quarter. However, what is especially interesting is profitability, with Q3 EBITDA having grown by +32.3%. This was obviously mainly explained not only by the higher gross profit triggered by the terminals division, but also by lower general expenses, which have strongly offset the increase in personnel charges.


Impact

We will integrate the Q3 results, but we don’t see major changes in our estimates. Being still in the transition phase, we continue, however, to believe that the group is able to return to growth in profitability in the medium term.


Target
Upside 101%
Price (€) 1.00
Market Cap (€M) 22.4
Perf. 1W: 2.05%
Perf. 1M: -7.01%
Perf. 3M: 48.5%
Perf Ytd: 19.9%
10 day relative perf. to stoxx600: -1.41%
20 day relative perf. to stoxx600: -8.67%
Updates

16 Sep 20 Earnings/sales releases
A pivotal year for the Authorisations division

26 May 20 Earnings/sales releases
The right time to establish itself as a software pr...

18 Mar 20 Earnings/sales releases
Positioned to take advantage of increasing pow...

13 Nov 19 Earnings/sales releases
The challenge remains intact

30 Aug 19 Earnings/sales releases
Software continues to drive up the top-line

15 Mar 19 Earnings/sales releases
Still in transition

09 Nov 18 Earnings/sales releases
Still in transition, the group showed revenue gro...

16 Oct 18 Earnings/sales releases
Strong revenue growth, but profitability still imp...

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