The strong full year financial results of JSE-listed financial technology (fintech) special-purpose acquisition company Capital Appreciation (Capprec) confirm the value of the assets it acquired over the past few years and promises strong organic growth, said Capprec joint-CEO Bradley Sacks on Wednesday.
The company concluded four acquisitions during the year ended March 31, including African Resonance and Dashpay, which constitute its payments and payment infrastructure business segment, and Synthesis, which is the first business in its software and service business segment.
“Each of these subsidiaries has made excellent progress in their first period under the Capprec banner. They stand to benefit from expanding demand from institutional clients and the corporate sector, as well as demand created through government’s new focus, support and development for small and medium-sized enterprises, a rapidly emerging and welcome transformational sector in South Africa and on the continent,” noted Sacks.
Capprec’s revenue grew to R571.3-million, from R80.2-million in 2017, and profit after tax to R142.9-million, from R39.2-million in 2017. Headline earnings a share rose to 9.53c, and it declared a final dividend of 2c a share, which brings the maiden dividend for the year to 4c a share.
“The 2018 financial year was a transformative period for the company. Each of the acquisitions successfully fulfilled expectations as evidenced in this set of results, which reveal a solid trading performance and the appropriateness of the purchase price paid for the businesses acquired.
“Our organic growth potential is large and compelling and, despite the expectation of continued growth in our underlying businesses, the sector also presents several interesting acquisition opportunities. These also include opportunities for the expansion and technology transfer of our business models into new markets,” he said.
African Resonance is a payment infrastructure and related technology solutions provider to established financial institutions, emerging payment service providers, the hospitality industry and the retail sector.
Dashpay is positioned to provide transaction processing services, solutions and products focused on business-to-business commercial and payment activity. The Dashpay solution set is intended to complement payment services provided by Capprec’s established banking and institutional client base.
The payments and payment infrastructure business segment generated turnover of R415.1-million and a profit after tax of R111-million.
“For the past four years, the division has experienced a compound annual growth rate in operating profit of more than 241%, albeit off a low starting base. The current year’s performance has exceeded the due diligence review concluded at the time of the acquisitions,” said Sacks.
Synthesis is a highly specialised software and systems developer offering consulting, integration services and technology-based product solutions to banking and other financial institutions in South Africa and other emerging markets.
“Synthesis is investing considerable effort, through research and development, to deliver on the next phase of technological advancement, which includes machine learning, artificial intelligence and big data blockchain technology, beside others. Commercial exploration continues in these areas.”
Synthesis generated turnover of R93.1-million and a profit after tax of R23.8-million. Revenue was ahead of expectation, suggesting that Synthesis’ profit warranty threshold will be attained at the end of 2020. The division has consistently generated solid earnings, with a compound annual growth rate in operating profit of 28% a year for the past four years.
“Capprec generated cash of 116.8% of the 2018 profits after tax. This characteristic of the company’s operational enterprises is well reflected in its cash resources at the end of March of R513.2-million, after payment of the cash portion of the viable asset acquisitions, the payment of an interim dividend in December 2017 and the buy-back of 55.6-million Capprec shares at an average price of 74.4c, besides others.
Its cash resources will be applied to fund anticipated organic growth and, thereafter, to pursue or supplement the cost of new, complementary acquisition opportunities.