02 December 2020
Digital payments uplift Capital Appreciation in half-year

Samuel Mungadze

Buoyed by double-digit profit, fintech group Capital Appreciation (Capprec) says it weathered the impact of the COVID-19 pandemic during the first half of the year ended 30 September, fortified by increased demand for digital payment solutions and contactless payments. Capprec says it also attracted further blue-chip clients across several lines of business, making progress in extending its payments segment into the Android space. In addition, it says the escalating demand for digital and cloud-based services generated rapid growth in consulting income and a strong pipeline. Capprec’s latest set of financial results comes on the back of a recent study by Accenture, which predicts $7 trillion in consumer spending will shift from cash to cards and digital payments by 2023. According to the study, the rapid move to digital payments has put additional pressure on banks, with three-quarters (75%) of surveyed bank executives saying the pandemic has increased the urgency of their plans to modernise payment systems. Capprec’s client base includes all major banking institutions in South Africa, as well as many niche banks, such as Patrice Motsepe-controlled TymeBank and Discovery.

In recent times, the company says it has successfully diversified into the retail, telecoms and healthcare sectors. “The ongoing acceleration in digital transformation, electronic payments and related advances has received further impetus during the pandemic,” notes Bradley Sacks, joint-CEO of Capprec. “Capprec is ideally positioned to benefit from this evolution, with the appropriate skills, experience and track record of innovation to assist our clients to implement and benefit from these technological advancements.” In the six months ended 30 September, the fintech group grew revenue by 15% to R323.7 million and EBITDA by 20.2% to R81.6 million. Headline earnings increased by 7.8% to R54.2 million. At the end of the period, Capprec held cash resources of R488.4 million. Capprec’s payments division, which provides end-to-end terminal estate management and payment services, grew division revenue by 15.6% to R215.3 million and increased EBITDA by 33% to R66.5 million and profit after tax by 54.4% to R47.3 million.

The company also declared an interim dividend of 2.50c per ordinary share. It continues to invest in additional capacity, including the development of new innovative product offerings in anticipation of growth in commercial activity in both its payments and services operations, Capprec notes. However, the company cautions that significant uncertainty prevails as to the duration and impact of COVID-19, as well as the rate of economic recovery post the pandemic. “Against this background, we expect that clients will adopt a judicious, less-expansionary approach in capital allocation and expenditure. Given that the COVID-19 pandemic continues unabated, and notwithstanding the group’s best efforts, the prospects at this stage of matching the robust second half 2020 results would be speculative.” Nevertheless, it says it is “excited about the appetite for, and opportunities presented by new payment platforms like Android, and the higher adoption of new technologies and ways of transacting by our clients.

Our payments division boasts a strong sales pipeline for the next six months.” Furthermore, it says the themes of cloud services, emerging digital technology, and evolving forms of payments are accelerating and its company, Synthesis, is well-positioned to deliver products and value propositions to support its clients’ journeys to becoming more digitally enabled. “Synthesis is experiencing a growing demand for its services and similarly has a pleasing pipeline of projects lined up. This provides a sense of cautious confidence as to the continued organic growth prospects of the group’s business units,” says Capprec.

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