Capital Appreciation posts steady results

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

Fintech group Capital Appreciation (Capprec) has declared revenue growth of 19.6% and steady operational performance for the year ended 31 March.

The Johannesburg Stock Exchange-listed company says its gross revenue reached R607.7 million, up 19.6%, while its trading profit reached R173.2 million, down 7.5% from the previous year.

It further reported earnings before interest, tax, depreciation and amortisation of R159.5 million, a decrease of 9.8%, while profit after taxation decreased by 12.8% to R124.6 million.

The group says earnings per share and headline earnings per share totalled 8.33 cents per share, down 12.2% and 12.6% respectively.

Capprec is an investment holding company focused on investing in and developing financial technology enterprises, their platforms, solutions, products and applications. Its portfolio includes card payment solutions firm African Resonance, financial services company Dashpay, software firm Synthesis, and it recently invested R20 million in GovChat, SA’s citizen engagement platform.

The fintech group says in the past year, it invested significantly to take advantage of the escalating demand for digital and cloud services, which saw it attract further blue-chip clients and grow its payment terminals estate (sold and leased to clients) by 52%.

Headline earnings were impacted by the cost of these investments, as well as by a negative earnings adjustment arising from renegotiated terms with a major client in African Resonance and reduced by 13.1% to R124.6 million.

The group declared a final dividend per share of 2.00 cents, bringing the total dividend for the year to 4.25 cents, up 6.25%.

“Technology’s role as a key disruptor and differentiator in the banking and financial services sector continues to accelerate, creating further opportunity for Capprec as evident from the momentum built up in the underlying businesses, the solid trading performances and in our strong pipeline,” notes Bradley Sacks, joint-CEO of Capprec.

“The marginal decrease in earnings, however, is attributable to two items: firstly, product development costs, as well as capacity-related expenditures incurred in anticipation of growth in commercial activity; and secondly, the renegotiation of certain service and maintenance fees with a major client in the interests of market consistency and in anticipation of future terminal growth.

Capprec’s client base includes all major banking institutions in South Africa, as well as niche banks, large financial services institutions and other financial services companies.

Segmental performance

The group says the operating performance of each of the business units has been gratifying despite the challenging economic environment, which has prompted a cautious approach toward capital expenditure by clients and has acted to constrain growth in both divisions.

“The payments segment demonstrated a resilient trading performance, notwithstanding continued macro-economic headwinds, low consumer confidence and reduced earnings arising from the revised commercial terms with a major client. The division generated revenue of R469.9 million, up 13.2%, and a profit after tax of R98.2 million, down 11.6%,” notes Capprec.

African Resonance sold more than 49 000 additional payment terminals during this year, bringing the total terminals in the hands of customers to more than 140 000. The group’s initial objective was to have 100 000 terminals sold by the end of March.

Dashpay’s transaction processing services, solutions and products focused on B2B and B2B2C commercial and payment activity is being activated in a deliberately measured and phased manner. As of the end of April, Dashpay had over 2 100 actively trading devices in its network and has a large pipeline of deployments in conjunction with its institutional customers and partner banks.

Synthesis generated revenue of R137.8 million, up 48% and a profit after tax of R32.7 million, up 37.6%. Its initiatives span three main areas: cloud, regtech, and digital and emerging tech.

Cloud was the fastest growing segment, pushed by a close strategic relationship with Amazon Web Services, it notes.

“Going forward, Capital Appreciation has concluded an agreement with Dr Hanoch Neishlos, the principal vendor of African Resonance, to acquire the intellectual property, technology and development platforms that were previously licensed by African Resonance from Uplink (an entity controlled by Dr Neishlos),” notes the company.

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