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Digitisation lifts Capital Appreciation’s interim results

Samuel Mungadze
By Samuel Mungadze, Africa editor
Johannesburg, 29 Nov 2022
Bradley Sacks, joint-CEO of Capital Appreciation.
Bradley Sacks, joint-CEO of Capital Appreciation.

Buoyed by strong demand for its products and services, fintech group Capital Appreciation today reported a revved-up performance for the six months ended September.

Capital Appreciation, which has a presence in payments and software, says in the period, the group attracted several new local and international clients, due to the positive momentum in the technology sectors in which it operates.

The fintech credited the accelerated pace of digital transformation − taking place in the banking, financial, retail, healthcare, telecommunications and logistics sectors − for its success.

Resultantly, the group says it increased gross revenue for the six months by 22.5% to R538.1 million. Headline earnings increased by 4.3% to R95.1 million and headline earnings per share by 4.4% to 7.76c per share.

An interim dividend of 4.25c has been declared, up 13.3%, and EBITDA was stable at R138 million.

Capital Appreciation joint-CEO Bradley Sacks credited the performance to increased demand for digitalisation, which is accelerating the adoption of electronic payments, software solutions and online applications.

He explains: “These trends support the demand for our products and services, notwithstanding the economic challenges being experienced both globally and in South Africa.

“Capital Appreciation continues to use its substantial cash resources to actively invest in skills, expand its product offerings, develop new business and expand internationally. This bodes well for the group going forward.

“While we are not immune to the consequences of the current economic challenges, the strong demand in all our businesses and positive trajectory in the sector continues to propel the group forward and presents opportunities for growth and expansion in the medium- and long-term.”

Building blocks

Turning to the performance of the group’s three units, Capital Appreciation says with the payments division, it generated “a resilient performance with a pleasing 23% growth in annuity-based maintenance and support fees and transaction-related income”.

The company details the division’s showing in the period, saying: “Terminal sales approached last year’s record sales, resulting in a 22% increase in the terminal estate to 315 000 terminals. Revenue generation in the payments division was steady, at R318.3 million, and EBITDA decreased modestly to R119.5 million.

“The adoption of Android devices with their higher functionality and better price points remained strong. Dashpay continued to invest in and launched Dashpay Glass, a tap-on-phone SoftPOS app for Android phones using Halo Dot as its core software engine.

“Dashpay Glass targets SMME merchant customers who want to rapidly and cost-effectively accept card payments. LayUp, a recent start-up and Africa’s first fully digital lay-by and recurring payments business, continued to make progress and was adjudicated the winner of the MTN Best Incubated Business App of the Year award.”

The group’s software division also came in strong, and delivered top-line revenue and profit growth, with significant increases in cloud, data and digital consulting services, as well as security hardware and third-party licence fees.

Revenue increased by 75.4% to R219.8 million and EBITDA increased by 57.1% to R45.6 million.

In the six months, Capital Appreciation says its investment in and focus on brand awareness and skills development continued to yield significant benefits, attracting new clients for its software division.

“These initiatives attracted more than R300 million of contracted sales in the prior year, as well as strong sales in the current period, for which the revenues continue to flow through this year and into subsequent years too.

“Demand for cloud and digital services continues to accelerate, as evident in the 51% growth in revenue in these areas. The strong design and user interface and user experience capabilities of new acquisition, Responsive, marry well with Synthesis’s Digital offering. Collaboration between Synthesis and Responsive is unfolding as expected and the teams are adding significant value to customers.”

Turning to the international division, which remains in the early stages of its development, the company says: “One of its key initiatives is to commercialise and sell the Halo Dot tap-on-phone product globally. Halo Dot continues to make good progress and is achieving notable interest locally and internationally. Halo Dot is already live for five clients, with more to launch imminently, including two in the United Kingdom.”