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Capital Appreciation maintains year-on-year dividend growth

Admire Moyo
By Admire Moyo, ITWeb's news editor.
Johannesburg, 05 Jun 2024
Capital Appreciation CEO Bradley Sacks.
Capital Appreciation CEO Bradley Sacks.

Fintech group Capital Appreciation has returned R603 million, or 44.5c per share, to shareholders in the form of dividends over the last seven years.

This was revealed today by Capital Appreciation CEO Bradley Sacks, when the JSE-listed company announced its annual financial results for the year ended 31 March.

The fintech firm says it has maintained its year-on-year growth in dividends for the seventh consecutive year, declaring a total dividend of 10c per share for the year − an increase of 21% on the prior year.

“Capital Appreciation focuses on sustainable value creation for its shareholders,” says Sacks.

It has three business segments: payments, software and a newly-formed international division in the Netherlands.

According to the company, the units performed well despite weak business confidence, and in a lacklustre economy, the group continued to attract new customers and grow its market share.

Capital Appreciation also evolved its revenue mix with the introduction of new products and services, spread across more sectors and regions, it notes, adding that this creates significant growth opportunities going forward.

The group grew gross revenue by 19% to R1.2 billion and earnings before interest, taxes, depreciation and amortisation (EBITDA) by 53% to R252.8 million.

The financial results benefited from improved operational performance, higher finance income, a significantly reduced expected credit loss raised for GovChat and the first-time contribution of the Dariel Group (acquired July 2023), it says.

Earnings per share and headline earnings per share increased by 84% and 83% to 13.59c and 13.61c per share, respectively.

Future expansion

Capital Appreciation continued to invest extensively in future growth, with R123 million spent in the past year on acquisitions, rental assets, intellectual property development, new software solutions and further funding of its associates.

As a result, it says the business units are well-positioned to meet future demand and the prospects for the year ahead are promising.

Its divisions are asset-light and highly cash-generative, with cash generated from operations this year increasing by 75% to R319.7 million and resulting in available cash resources of R467.4 million. This will be employed to fund organic growth, acquisition opportunities, investments, as well as further share repurchases, it states.

The payments division increased revenue by 7% to R562.8 million and annuity income by 28%. Annuity income now comprises 61% of total income in the payments division, boding well for increased resilience and less cyclicality from terminal sales in the future, says the company.

It notes that point-of-sale terminals in customers’ hands increased by 9% to 357 000. Notably, it adds, the size of the leased terminal estate doubled from the prior year.

According to Capital Appreciation, excellent expense management and operational performance grew EBITDA by 20% to R248 million and boosted margins from 39% to 44%.

Payments were successful in several meaningful tenders that were awarded post-year-end. These new contracts extend over a three- to five-year period. In addition to new terminal sales and growth in the rental fleet, these tenders will increase estate management fees, maintenance and support services fees and transaction-related income from terminals over that period, it states.

Software division glitch

According to the company, the software division encountered unexpected challenges this year due to bench overcapacity when the commencement of some large client projects was delayed. Despite delivering several successful software projects and acquiring new customers, the division’s financial performance did not meet expectations.

Revenue increased by 31% to R618.8 million. Services and consultancy fees accelerated by 44% due to the increased demand for cloud and digital projects, while licence and subscription fees increased by 20%. EBITDA decreased by 11% to R77.8 million, as the higher staff costs caused a significant rise in operating expenses.

It notes the Dariel Group was successfully integrated into the software division during the year.

“The group has a strong balance sheet and large cash resources, supported by healthy operating cash flow. With significant financial strength, we are well-positioned to pursue organic growth opportunities and consider additional complementary acquisitions,” says Sacks.

“Our divisions’ healthy pipelines and diversified revenue streams present significant growth opportunities. In addition, the various tenders and other orders for terminal sales, rentals and support services that the payments division have secured since year-end, will have a significant positive impact on the performance of this division and the group during the 2025 financial reporting year and beyond.”