South African fintech company Capital Appreciation (CAPPREC) has declared a 124% increase in profit after tax, to R60.1 million, for the six months ending 30 September.
This is the first reporting period since the acquisition of CAPPREC's subsidiary companies, which are all focused on the fintech sector, and includes earnings contributions from the newly-acquired trading operations for the five months from May (the date the acquisitions were effective).
The group says earnings per share (EPS) and headline earnings per share (HEPS) for the interim period totalled 4.02cps, an increase of 87% over the comparable EPS and HEPS in 2016 of 2.15cps.
CAPPREC is an investment holding company focused on investing in and developing financial technology (fintech) enterprises, their platforms, solutions, products and applications. In June, Capital Appreciation formally migrated from a JSE Special Purpose Acquisition Company, to the Software and Computer Services sector on the bourse's main board.
"South Africa's financial technology sector is experiencing unprecedented growth due to increasing market regulation, evolving consumer expectations and accelerating disruption to historic value chains," explains Bradley Sacks, joint-CEO of CAPPREC.
"Much of this change is attributable to inventive technologies and the innovative application of such technologies, not only in the financial services sector, but in all areas of the economy."
CAPPREC's gross revenue for the six months amounted to R223.4 million, 463% higher than the six months to 30 September 2016 of R39.7 million. The company reported a 129% increase in earnings before interest, tax, depreciation and amortisation (EBITDA) of R85.69 million. The group declared a maiden dividend of 2cps and its cash resources amounted to R463.1 million.
"This capital will be employed by CAPPREC to support its existing businesses, fund organic growth and pursue new acquisition opportunities in businesses complementary to the existing portfolio. There are opportunities in South Africa, Africa and elsewhere that are of interest to us," adds Sacks.
Divisional update
CAPPREC's payments and payment infrastructure division includes African Resonance and Dashpay. It says the division showed exceptional growth over the past three years, with a compounded annual growth rate in revenue of 66% and EBITDA of 102%.
"The performance of African Resonance over the course of the last five months has been extremely pleasing," says Sacks. "The company continued to expand its market reach through several new client contracts and increased its market share within its traditional banking and financial institutional client base."
CAPPREC says Dashpay's specialised payment platform, driven by advanced technology concepts, will be rolled out nationally in the coming months. The platform integrates into point-of-sale devices, as well as those supplied and managed by African Resonance, and the extant legacy banking and related systems of large financial and other institutions.
The software and solutions division comprises Synthesis Software Technologies, which was acquired for R132.1 million in May. It has shown compounded annual growth over the past three years of 23% in revenue and 33% in EBITDA.
Synthesis offers specialised software development, consulting and integration services and technology solutions to banking and other financial institutions in SA as well as in other emerging markets.
African expansion
CAPPREC says it is "engaging with several potential clients across Africa, to similarly provide payment solutions, systems and functional payment infrastructure".
"This aspect is an exciting work in progress, as the continent of Africa presents an extremely fertile opportunity for development and expansion," Sacks explains. "CAPPREC's business is well-suited to address the challenge of financial inclusion and delivering financial services to unserved markets."
"Technology is key to unlocking this opportunity and, given the growing demand for such service platforms and secure operating models in SA and elsewhere, it has become an increasingly interesting area for commercial assessment by CAPPREC. Our significant resources are available for further acquisitions and expansion within this exciting sector," Sacks adds.
CAPPREC says SA is currently challenged with both economic and political uncertainties.
These broad conditions are further exacerbated by high levels of unemployment, growing inflation, unstable foreign currency conversion rates and the risks of being additionally burdened with a non-investment grade sovereign rating.
"Notwithstanding these unpredictable and erratic circumstances, there is nevertheless a degree of positive expectation that the trend and performance posted during this interim period will continue into the second half of the financial year. This will hopefully be enhanced through a repeat of past patterns of organic growth, the successful closure of contracts in the course of negotiation," Sacks concludes.
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