INTERIM REPORT JANUARY – SEPTEMBER 2011

(The figures in brackets refer to the same period of 2010 unless otherwise specified.)

JANUARY – SEPTEMBER 2011 IN SUMMARY

• The transaction volume for the first nine months of the year was SEK 3,099,166 thousand (3,054,860), an increase of 1.4 per cent compared to the same period of last year.
• Transaction-based revenue for the nine-month period was SEK 22,826 thousand (22,653), up by 0.7 per cent compared to the same period of 2010.
• Profit before amortization/depreciation improved by SEK 675 thousand compared to the same period of last year and amounted to SEK 2,557 thousand (1,882).
• Profit/loss after tax was SEK -2,913 thousand (-3,178), an increase of SEK 265 thousand compared to the same period of 2010.
• Earnings per share were SEK -0.03 (-0.04)

JU LY-SEPTEMBER 2011 IN SUMMARY

• The transaction volume for the third quarter of 2011 was SEK 1,064,305 thousand (997,189), an increase of 6.7 per cent compared to the third quarter of last year.
• Transaction-based revenue for the third quarter was SEK 7,829 thousand (7 385), up by 6.0 percent compared to the same quarter of 2010.
• Profit before amortization/depreciation for the third quarter was SEK 1,604 thousand (1,155), an increase of SEK 449 thousand compared to the same quarter of last year.
• Profit/loss after tax was SEK -209 thousand (-695), an improvement of SEK 486 compared to the third quarter of 2010.
• Earnings per share were SEK -0.00 (-0.01).

SIGNIFICANT EVENTS DURING THE PERIOD

• Paynova has obtained permission from the Swedish Financial Supervisory Authority to provide payment services in accordance with the Payment Services Act.
• In the yearly certification process, Paynova has been given renewed approval for the PCI Data Security Standard.

SIGNIFICANT EVENTS AFTER THE END OF THE THIRD QUARTER

• On 1 November Jan Benjaminson took over as Acting CFO after Maria Ängarp.
• Paynova’s Board of Directors has decided to accept a bid for Paynova’s holding in Chinova Asia Development Ltd. The buyer is Great Union Investment Ltd. and the purchase price amounts to a total of SEK 15 million. The transaction will be carried out through a purchase option that must be utilized by 15 December 2011 at the latest.

COMMENTS FROM THE CEO

The third quarter of the year showed an increase in the transaction volume and an improvement in earnings compared to the same period of last year as a result of higher sales and greater efficiency in Paynova’s services. Cash flow remains positive, with a rising trend. The increase in sales is attributable partly to new customers and partly to add-on sales to existing customers. Furthermore, we now have a higher share of fixed revenue from our customers, compared to earlier when all of Paynova’s revenue came from variable compensation. Our efficiency has improved thanks to greater automation of technical processes and renegotiation of supplier agreements on the financial side, which has given Paynova noticeably lower overall operating expenses compared to the same period of 2o1o.
The partnerships with Payzone and Retain 24 have both been deepened and there is now a high level of activity in sales projects with prospective customers, mainly in the retail and events industries. Efforts to develop our service packaging are continuing and this winter we will work jointly to create a customized package for the hotel and travel industry, where the conditions for taking payment changed dramatically with the introduction of the new and stricter PCI rules. The rules impose security requirements for transactions such as handling of call center payments – a challenge for which Paynova’s payment platform contains a finished solution.

Demand for the complete service solutions we develop in collaboration with our partners is now being confirmed by Nordic merchants in several industries.

At the same time, we are also adapting to increased demand among Paynova’s existing merchants for more international payment methods, among other things for sales to the consumer markets in Japan, Germany and the Netherlands. By adding new payment methods, Paynova is able to generate add-on sales in the existing customer base.

As a result of positive growth in Chinova’s transaction volumes, Paynova is now also receiving transaction revenue from this source. The third quarter saw a rapid increase in Chinova’s transaction volumes, primarily from the CUP eMall. As previously described, Paynova has the right to direct development fees based on Chinova’s transaction volumes, a fact that is now having a tangible impact on Paynova’s profit and loss account. In October Paynova’s Board of Directors accepted a bid for all of Paynova’s shares in Chinova. The transaction will be carried out through a purchase option that must be utilized by 15 December 2011 at the latest. The buyer is Great Union Investment Ltd, a consortium with considerable experience of online commerce both within China and cross-border trade to and from China, and last but not least extensive experience of raising capital for projects of other types. As a first step, Great Union Investment will provide Chinova with SEK 5 million in operating capital to secure the rapid development that Chinova is currently undergoing. The transaction is positive for Paynova, for which the sale of Chinova shares will provide a substantial capital contribution and a significant strengthening of the balance sheet. Chinova’s transaction volumes will also give Paynova an inflow of direct development fees even after the change of ownership. Bolstered by the above and with a steadily rising number or e-merchant agreements, we are laying a solid foundation for coming periods. We are strongly focused on entering into partnerships with large and ambitious e-merchants and this winter look forward to completing the first installations of our new and strategically important complete solution for handling of payments – e-commerce, physical commerce, call center payments, mobile payments and gift cards. Parallel to this, and in line with the established strategy, we are also working to attract small and midsize e-merchants to maintain a high tempo in signing of agreements and contribute to building our monthly revenue mass.

Simon Thaning

CEO, Paynova AB

(For full report, see attached file)