Delays in the delivery of payment terminals negatively impacted the results of fintech company Capital Appreciation (Capprec), which this morning released its interim financial results for the six months ended 30 September.
For the interim period, Capprec generated gross revenue of R281.6 million, down 10.7%, and profit after taxation down 8.6% to R57.9 million.
Headline earnings for the period decreased by 20.5% to R50.3 million, translating into headline earnings of 3.43c per share, down 19%.
Capprec declared an interim dividend of 2.25c per ordinary share.
However, the company says it made substantial progress in the period in attracting new blue-chip clients, concluding strategic relationships for both transaction processing and the distribution of payment terminals (the terminal estate grew 31% year-on-year).
In addition, it says the escalating demand for Synthesis’ skills base and digital and cloud-based services increased earnings in this division by 31%.
Capprec explains this operational progress is not fully reflected in the current financial results, mainly due to a late delivery of a sizable number of imported terminals.
These delayed terminals could not be distributed and transferred to customers prior to the cut-off period of 30 September, affecting the interim results.
It says these terminal orders have since been fulfilled, and significant revenue and cash generation took place in October related to this inventory and strong collection from receivables.
Capprec is a financial technology firm with proprietary and licensed platforms, solutions, products and applications targeted at the B2B market.
“Innovative technologies and applications are accelerating at a rapid rate and are demanding the review of traditional business models, revenue streams, consumer expectations, products offered, services rendered, including operating cost structures and regulation,” says Bradley Sacks, joint-CEO of Capprec.
“Managing this rapid and evolving change requires appropriate skills and experience and a track record of creativity and innovation. Each of Capprec’s subsidiaries has a proven, well-established reputation in such technology matters and this positively positions the company to be regarded as a trusted partner to participate in this evolution.”
During the period, Capprec concluded and successfully executed an agreement with the principal vendor of African Resonance and associates, to acquire the intellectual property, technology and development platforms that were previously licensed by African Resonance from Uplink (an entity controlled by the vendor).
It also employed those members of the Uplink team focused on Capprec customer technology and their development needs.
According to the company, the agreement included the share repurchase by Capital Appreciation of 245 million shares from the vendor and his associates, and the disposal of Capprec’s 17.45% interest and claims in Resonance Australia.
It says this was an important milestone for Capprec, as it now has absolute ownership over all core intellectual property used in the businesses.
The benefits of the transaction are already evident in the enhanced cooperation between the technical teams of all Capprec business units, it notes.
Bringing the technology skills and resources of Synthesis together with African Resonance and Dashpay not only maximises the contributions from each division, but stimulates further innovation and elicits better coordination and operational efficiency, the company adds.
Capprec had cash resources at the end of the period of R415.9 million, post the cash outflow effects of the share repurchase transaction.
It continues to be highly cash-generative, as evidenced by the generation of an additional R66 million of net cash inflow in October, it says.
Cash resources at the end of October amounted to R482 million. Based on the closing price of a Capprec share on 30 September of 77c – 32c of that share price is represented by cash.
Its cash resources will be applied, in the first instance, to fund anticipated organic growth and thereafter to pursue or supplement the cost of new, but complementary acquisition opportunities.
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