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Annual Results for Fintech Company- Capital Appreciation

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Vusi Melane
Vusi Melane
Staff Writer

FinTech group Capital Appreciation Limited announced today that its businesses performed well despite weak business confidence. In a lackluster economy, the Group continued to attract new customers and grow its market share. Capital Appreciation also diversified its revenue mix with the introduction of new products and services across multiple sectors and regions. This creates significant growth opportunities for the Group moving forward.

FINANCIAL FEATURES


    March

2024

March

2023

%

change

Revenue (R’million) 1 182.0 995.1 19
EBITDA (R’million) 252.8 164.9 53
EBITDA margin (%) 21.4 16.6 480bps
Operating profit (R’million) 215.8 193.0 12
Cash generated from operations (R’million) 319.7 183.2 75
Headline earnings (R’million) 171.0 91.5 87
EPS (cents) 13.59 7.39 84
HEPS (cents) 13.61 7.44 83
Annual dividend per share (cents) 10.00 8.25 21
Net asset value (cents) 125.7 121.1 4

 

Improved operational performance

The Group grew gross revenues by 19% to R1.2 billion and 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). EPS and HEPS increased by 84% and 83% to 13.59 cents and 13.61 cents per share, respectively. The Group has maintained its unbroken, year-on-year growth in dividends for the seventh consecutive year, declaring a total dividend of 10.00 cents per share for the year, an increase of 21% on the prior year.

Positioned business units

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, the business units are well-positioned to meet future demand, and the prospects for the year ahead are very promising.

Capital Appreciation’s 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.

POS terminal increase

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. Point of sale (POS) terminals in customers’ hands increased by 9% to 357,000. Notably, the size of the leased terminal estate doubled from the prior year.

Excellent expense management and operational performance grew EBITDA by 20% to R248.0 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.

Delayed clients projects result to negative impact

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, acquiring new customers, and receiving numerous accolades, 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 license 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.

The Dariel Group was seamlessly integrated into the Software division this year

Remedial plans were implemented in the latter part of the year to reduce costs and improve financial performance. We anticipate that this improvement will be reflected in FY25 financial year. Synthesis this year was recognised by MyBroadband as “The Preferred Software Development Company in South Africa for Large Business Projects”, based on a survey of over 1,500 IT executives. The company also claimed the “Intelligent Software Partner”-award at the Intelligent ICT Awards Africa. Synthesis is recognised as the industry expert on Generative AI capabilities in South Africa.

The Payments and Software divisions are experiencing robust demand, with their business units strategically positioned for the promising year ahead.

CEO for Capital Appreciation, Bradley Sacks, says “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. 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 very significant positive impact on the performance of this division and the Group during the 2025 financial reporting year and beyond.”

He concludes by saying, “Capital Appreciation focuses on sustainable value creation for its shareholders. We are particularly proud of our unbroken dividend record over the past seven years, returning R603 million, or 44.5 cents per share to shareholders in the form of dividends.”

Source: Capital Appreciation Limited

 

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