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Capital Appreciation side-steps COVID-19 impact in year-end results

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Bradley Sacks, joint-CEO of Capprec.
Bradley Sacks, joint-CEO of Capprec.

JSE-listed fintech group Capital Appreciation (Capprec) says the financial impact of the pandemic resulted in reduced business, as some customers adopted a “wait and see” approach, but it weathered those pressures, delivering value to shareholders for the year ended March.

Capprec also ended the year with healthy cash reserves as it held cash resources of R538.3 million compared to R505.1 million last year. This cash, the company says, represented 41c of the group’s closing share price of 100c on 31 March 2021.

A final dividend of 300cps has been declared, bringing the total dividend for the year to 550cps.

Capprec, which provides financial technology and payment solutions, says the success of Halo, an innovative “tap-to-phone”, contactless payment solution certified by Mastercard, Visa and American Express, was the key highlight during the year.

The company says Halo has also been certified for “pin-on-glass” for higher value transactions.

Capprec says: “A major SA bank has used Halo for the past year and negotiations are under way with others. We are working with partners to market and distribute Halo in the rest of Africa, Asia Pacific, and Central and Western Europe.”

Commenting on the overall group performance, Brad Sacks, joint-CEO of Capprec, says: “Under the circumstances of generally declining economic conditions, compounded by COVID-19, the company’s operations performed extremely well. We attracted new customers locally and abroad, gained strong traction in the rollout of our Android platforms, launched new products and accelerated our annuity income. This and stringent cost control resulted in healthy cash generation.

“The financial impact of the pandemic resulted in a reduced number of retail merchants serviced through our banking clients. Given the economic uncertainty, many of our institutional clients adopted a cautious ‘wait and see’ attitude towards infrastructure expansion and capital expenditure. Each of our divisions retained existing clients and attracted several new high-profile clients, notwithstanding the challenging environment. We have been pleased by the recovery in activity since the beginning of the 2021 calendar year.”

In the year, Capprec says its software division delivered “a pleasing performance, with revenue increasing by 13.9% to R222.1 million as services and consultancy fees grew 7.1%, and annuity income from licence and subscription fees rose 47.2% due to Halo and RegTech products.”

Operating expenses for the division were contained at R83.3 million, EBITDA increased 6.8% to R57.5 million and profit after tax by 2.8% to R37.9 million. Capprec says the business had a cash conversion rate of more than 100%.

However, the payments division generated revenue of R397.4 million, down 21.5%, and 13.2% lower EBITDA of R140.4 million, with profit after tax of R112.3 million declining 2.6%, mainly due to COVID-related impacts, says the company.

According to Capprec, Dashpay, which has been in a start-up and development phase since acquisition, has found its footing and is generating positive results.

“Despite a lower number of terminals being sold, payments grew market share, with customers increasing terminals held by 17% to over 217 000 units. Deployment of terminals improved in the second half of the year, with the total deployed estate growing by 30% to 175 000 units.

“Annuity service and maintenance income on deployed terminals grew 19.6%. Annualised gross transaction value within Dashpay grew by 14% to R6.4 billion, with the number of active users increasing by over 80%.”

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