FULL YEAR RESULTS for the period ended 31 March 2019 - Capital Appreciation
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FULL YEAR RESULTS for the period ended 31 March 2019
CAPPREC overview
OUTLINE 1
2 Highlights for the period
3 The opportunity
4 About our investments
5 Financial performance
6 Prospects
7 Annexure
2
ABOUT CAPITAL APPRECIATION
We own, manage, invest in, and promote enterprises that innovate and seek to serve or
partner with established and emerging financial institutions
CAPPREC
100% 100% 17.45%
PAYMENTS & PAYMENT SOFTWARE & CTA ENTERPRISE
INTERNATIONAL *
INFRASTRUCTURE SERVICES DEVELOPMENT FUND
AUSTRALIA
CTA 35%
3
HIGHLIGHTS
4
COMPARING 2019 TO 2018
COMPARISON VS. The acquisition of subsidiaries became effective 5 May 2017. The 2018 financial
PRIOR YEAR results include performance of the acquired businesses for 11 months only.
INVESTMENT IN Subsidiaries are generating substantial topline growth and an investment in
OPERATING capacity to accommodate future growth was expensed during the year. This
INFRASTRUCTURE investment is in anticipation of future increased activity.
CONTRACT WITH In the interests of gaining increased volume and further market share gains,
MAJOR CLIENT African Resonance renegotiated certain terms of its relationship with a major
client.
5
OPERATIONAL ACCOMPLISHMENTS
Proud to now be associated with all major SA banks and also many other banks and financial institutions
Expanded and enhanced client relationships in both the Payments Established new Synthesis office in Cape Town
and Software divisions • Expanded reach with retailers
• New blue-chip clients
Additional Amazon Web Services (AWS) accreditation received
52% increase in number of terminals in the hands of clients • Financial Services
• More than 140 000 terminals (92 000 last year) • DevOps
• Good pipeline
• Scale operator with market share gains Recruited additional accomplished team members
• Increased talent pool by 12% (27 new employees) and
21 new learnerships
Concluded “ISO Agreement” with Nedbank to complement
“Aggregator Agreement” with Mercantile Bank Executive recruitment
• Progressing very well • Hired key experienced executives
• Management continuity
Improved B-BBEE rating
Successful soft launch of Dashpay with annualised gross
• African Resonance – Level 2 contributor
transaction value (GTV) of more than R2.2 billion*, an
• Synthesis – Level 3 contributor
increase of c.57% since interim results
* Based on GTV through the Dashpay network in April 2019 annualised 6
GROUP FINANCIAL METRICS
Solid results against backdrop of political uncertainty and economic difficulty
Revenue Earnings & Dividends
Revenue R 607.7 million 19.6%
HEPS 8.33 cents (12.6%)
Payments R 469.9 million 13.2% NHEPS 9.01 cents (11.0%)
Services R 137.8 million 48.0%
Cash EPS 10.93 cents 49.8%
Full year dividends 4.25 cents 6.3%
Profit
EBITDA R 159.5 million (9.8%)
Trading profit R 173.2 million (7.5%)
Capitalisation & Cash resources
Profit after tax R 124.6 million (12.8%)
Equity R 1.447 billion 3.9%
Normalised profit after tax R 134.7 million (11.6%)
NAV per share 93 cents 3.9%
Cash flow Available cash per share 19.1%
39 cents
Cash flow from operations R 212.7 million 27.4% Cash available for 19.1%
R 611.2 million
investment
Cash conversion 122.8% 5.2%
(% of trading profit)
7
DIVISIONAL PERFORMANCE
REVENUE Payments Software EBITDA Payments Software
13.2% 48.0% (10.9%) 31.0%
22.7% 24.5%
(DECREASE) / INCREASE
18.4% INCREASE VS. PRIOR 17.6%
VS. PRIOR
FY19 FY18 Software & Services
FY19 FY18 Software & Services
Payments & Payment Payments & Payment
81.6 82.4
Infrastructure Infrastructure
% %
77.3% 75.5%
PAYMENTS & PAYMENT INFRASTRUCTURE SOFTWARE & SERVICES
HIGHLIGHTS
• Strengthened relationship with existing clients • Strengthened relationship with existing clients
• New blue-chip client relationships established • New blue-chip client relationships established
• Strong pipeline • Secured additional AWS accreditation
• Continued to increase the number of devices supplied to market • Continued to cement AWS leadership
• Continued investment in and development of innovative platforms and • Diversified revenue stream
products • New office opened in Cape Town
• Successful soft launch of new Dashpay platform • Increased operational capacity
• Continuing with deliberate, progressive roll-out of Dashpay services
• Increased operational capacity • AWS announced SA based regional data centre to open in early 2020
8
POST YEAR-END TRANSACTIONS
CTA acquires all IP underlying CTA will acquire 245 million
African Resonance from Uplink shares held by Dr. Neishlos Dr. Neishlos will resign from
and related parties at 80 cents Executive role within Group
per share
Revised licence agreement
between Uplink and Dashpay
re transaction processing
CTA will sell its interest in Dr. Neishlos and Eitan
platform
Resonance Australia to a party Neishlos will resign from Board
• Access to source code
nominated by Dr. Neishlos of CTA
• Allow for independent
development
CTA will employ large Various outstanding obligations Transaction remains
compliment of Uplink among the parties will be dependent on shareholder and
development team settled JSE approval
9
ENTERPRISE DEVELOPMENT
CAPPREC’s subsidiaries established a not-for-profit fund to coordinate its enterprise development spend
SA startup GovChat announces it’s secured
investment facility of up to R20m
Capital Appreciation has also
acquired a minority interest in
black-controlled GovChat.
Motty Sacks appointed as
Chairman of GovChat.
Eldrid Jordaan, Founder & CEO of GovChat with Motty Sacks, Chariman of Capital
Appreciation
WhatsApp: 060 078 6613
Pretoria-based citizen engagement platform GovChat has secured an
investment facility from The Enterprise Development Fund of JSE-listed firm
Capital Appreciation.
10B-BBEE COMMITMENT: ENTERPRISE DEVELOPMENT
CAPPREC’s subsidiaries established a not-for-profit fund to coordinate its enterprise development spend
THE OPPORTUNITY
SA startup GovChat announces it’s secured
investment facility of up to R20m
Capital Appreciation has also
acquired a minority interest in
black-controlled GovChat
Motty Sacks appointed as
Chairman of GovChat
Eldrid Jordaan, Founder & CEO of GovChat with Motty Sacks, Chairman of
Capital Appreciation
Pretoria-based citizen engagement platform GovChat has secured an
investment facility from The Enterprise Development Fund of JSE-listed firm
Capital Appreciation.
11TECH-ENABLED NEW ENTRANTS IN SOUTH AFRICA
c. 11 million clients Vitality success demonstrates Reportedly 4 minutes to South Africa’s newest bank,
Sought to be low-cost the power of user experience, on-board a client aiming to launch this year
provider product bundling and data
analytics
Cost of delivery Pain points
Profitable, narrow
Focus on cost
market segment
Customer User experience
experience User experience
Bespoke offering
Simplicity of offering
Focused strategy and value Innovation
User experience
proposition
12CHARACTERISTICS OF FUTURE PAYMENTS GLOBALLY
Innovations will make payments more cashless and invisible, also enabling data driven engagement platforms for clients
LESS CASH INVISIBLE PAYMENTS PAYMENTS AS A MEANS
OF ENGAGMENT
THE VALUE OF DATA LOANS MADE EASIER TRANSACTION COSTS
DECLINING RAPIDLY
SOURCE: DERIVED FROM WORLD ECONOMIC FORUM REPORT 13ELECTRONIC PAYMENTS CONTINUE TO GROW AND MUTATE IN RESPONSE
TO CONSUMER BEHAVIOUR
DIGITAL CURRENCY MIDDLE CLASS REGULATION BIG DATA
• Increasing adoption and • Growing middle-class • Regulation and security • Consumer comfort with data sharing
comfort with card-based and in emerging economies driving installation and leads to integration with payments
digital currency: across Africa acceptance of devices • New products
• Mobile • Digital awareness and • Forcing accountability • New credit tools
• Govt. payment distribution engagement increasing • Encouraging digitization • Payment linked to and with content
(SASSA)
• Formalization (India)
• Proliferation of payment
methods (incl. wearables)
PAYMENTS
REG TECH
DIGITAL CHANNELS
PLATFORMS
14MOVE TO ELECTRONIC PAYMENTS CONTINUES
South Africa
RTC RTC
CLC 0% In 2016, card-based
2% CLC 1%
payments represented 56%
0%
NAEDO of transaction volume
5% NAEDO ATM
4%
RETAIL PAYMENTS
ATM 11%
EFT DEBIT 14% EFT DEBIT
15% AEDO 10%
AEDO
1%
0%
VOLUMES EFT VOLUMES
CREDIT
EFT 2010 13% 2017
CREDIT CARD CARD
19%
45% 60%
Combined Card Volumes Combined Card Values
CARD ACTIVITY
CAGR CAGR
MILLIONS (TRANSACTIONS)
MILLIONS (RANDS)
SOURCE: PASA ANNUAL REPORT 2017 15CLOUD OPPORTUNITY IS MASSIVE
• According to IDC, spending on public cloud
services in South Africa will nearly triple over
five years from R4.3-billion in 2017 to R11.5- OTHERS
billion in 2022 48%
• The adoption of cloud services will generate
112 000 net new jobs in South Africa by the
end of 2022
• The new AWS “infrastructure region” will be CLOUD
MARKET AWS
launched in the first half of 2020 SHARE 33%
• African organisations already moving to AWS
• Enterprises such as Absa, Investec,
MedScheme, MiX Telematics, Old AZURE
Mutual, Pick n Pay, Standard Bank, 13%
Travelstart, and Vodacom already use AWS GOOGLE
6%
• Microsoft Azure opened its data centres in
Cape Town and Johannesburg in March 2019
16CLOUD PLATFORMS INDESPENSIBLE
…AWS is the world leader
“ For Standard Bank Group to remain a leader in African financial services, we recognize we need
to adopt a cloud-first approach to our business,” said Group CEO Sim Tshabalala. "AWS Cloud
technology will create a springboard for Standard Bank Group, helping us to rapidly roll out our
digitization and data strategy to better cater to customers whose needs are constantly
evolving."
He says the move will allow the bank to "build Africa’s financial services organization of the Sim Tshabalala,
future and to be positioned as more than a bank” using AWS’s agility and security combined Group CEO of
with Standard Bank’s "customer obsession. Standard Bank
”
“ Vodacom is starting to move its services to the AWS cloud already but a lot of services,
especially where there are latency issues, will be functional early next year once the AWS
region is fully operational in South Africa.
”
Shameel Joosub
CEO of Vodacom
17ABOUT OUR INVESTMENTS
18CONSISTENT EXECUTION STRATEGY
Strategy has delivered substantial growth over last 18 months and our objectives remain unchanged since initially formulated
PARTNER INNOVATE EXECUTE
State of the art proprietary technology
Work with financial institutions Service excellence
platforms for services
Create ecosystems for
Entrepreneurial culture Alleviate pain points
collaboration
B2B Hardware agnostic User experience
B2B2C Add value Create ecosystem
Deliver solutions to help clients Integrate seamlessly with legacy Act as an innovation
realise their strategy systems catalyst for clients
Focus on infrastructure Grow market Engender trust
19PAYMENTS & PAYMENT INFRASTRUCTURE SEGMENT
Enables banks and corporates to extract additional value and differentiate at the point of acquiring
PROPRIETARY BLUE CHIP END-TO-END COMPREHENSIVE UNIVERSAL
PLATFORM CLIENTS SOLUTIONS OFFERINGS ACQUIRING
Unique, proprietary technology Provide and operate Design, develop, implement and Available on a turn-key all- Pioneer of “Universal
platform enabling rapid payment and processing manage innovative, end-to-end inclusive basis or Acquiring” by supporting
development and implementation solutions for leading brands solutions thereby enhancing and à la carte one uniform infrastructure
of customised corporate solutions and International Banks strengthening the relationships for financial and
across a diverse range of sectors between banks, corporates and non‐financial transactions
their clients
Manages POS terminal estates at scale
20PAYMENTS REVENUE MODEL
POS DEVICES MAINTENANCE POS ESTATE TRANSACTIONS LICENSING &
& REPAIRS MANAGEMENT SOLUTIONS
• Terminal sales • Generates monthly • Generates monthly • Variable based on • Generates monthly
generate gross profit recurring revenue recurring revenue transaction type and recurring revenue
• Rentals generate depending on level depending on level value of transaction dependent on
monthly recurring and scope of services and scope of services solution
revenue contracted contracted • Flat fee
• Relationship with • Commission
major clients subject
to long-term master
supply agreements
Predictable but Recurring revenue Recurring revenue Unlimited, subject Unlimited
lumpy and predictable tied to the size of to established
the estate economic models
21EXTENSIVE RANGE OF DEVICES…
Devices range in functionality, price and margin
…AND MORE TO COME
22DASHPAY – INNOVATION IN PROCESSING
Creating new value opportunities through platform ecosystem
Traditional
processing
New economic model – Platform economics
Challenged • Introduces brutal efficiency to transaction processing
economic
model • Universal processing - processes all transaction types on a
single platform
BASE 24 • Platform economics drives boundary, frictional and
transactional costs lower
• Multi-party environment leads to multi-product opportunity
EVOLUTION
TANDEM • Opportunity for new B2B applications – those that don’t
exist and those that benefit from digitisation
• Opportunity to integrate multiple disparate products on
POSTILLION single platform
• Traditional acquiring is possible but not the focus
• To be done in cooperation with banking clients
DASHPAY
PROCESSING
23DASHPAY’S EVOLUTION
Material progress has been made in readying Dashpay for mass deployment
BANK RELATIONSHIPS TARGET MARKET OPPORTUNITIES PRODUCT OFFERING
THEN* NOW^ THEN* NOW^ THEN* NOW^
Small independent Small independent Traditional Multiple products and
merchants merchants Merchant services
Larger merchants Acquiring only Acquiring is now only
ancilliary
Enterprise customers for
Others in negotiation
B2B and B2B2C
deployment
* MAY 2017 (FIRST ACQUISITION MONTH) // ^ APRIL 2019 (LATEST TRADING MONTH) // ANNUALISED 24DASHPAY OPERATIONAL UPDATE
Transaction (Tx) Data
Gross Tx Value Gross Tx Volume
340% 250%
R2.2bn 5.7m
57% 39%
4.1m
R1.4bn
180% 156%
R500m 1.6m
THEN* NOV ‘18 NOW^ THEN* NOV ‘18 NOW^
18 months 6 months 18 months 6 months
* MAY 2017 (FIRST ACQUISITION MONTH) // ^ APRIL 2019 (LATEST TRADING MONTH) // ANNUALISED 25DASHPAY
Expanding client and brand penetration
26SOFTWARE & SERVICES SEGMENT – SYNTHESIS
Leading provider of technology products and solutions within the financial services industry
BLUE-CHIP CLIENTS CLIENT CENTRIC THOUGHT LEADERS
Absa, Investec, Standard Bank, HSBC, Delivering the highest business Acquiring and retaining the best
Nedbank CIB, Citibank, RMB, Capitec, value with a strong service ethic software development skills
Afgri and others
EXPERIENCED FOCUSED STRATEGIC RELATIONSHIPS
Highly innovative team with track Focus in the financial Key partnerships with Amazon’s
record of only successful delivery services sector AWS, the top rated provider of cloud
services globally
27OPERATING UNITS WITHIN SYNTHESIS
CLOUD DIGITAL PLATFORM INTEGRATION
CONSULTING CHANNELS PRODUCTS
Cloud transformation to assist the Delivering exceptional end-user client Integration to enable regulatory
Enterprise in becoming cloud ready, experience web and mobile touch points reporting solutions for SARS (tax) and
execute mass migrations and harness for financial services institutions while SARB (balance of payments), payment
the benefits of public cloud platform maintaining information security and processing and exchange connectivity
First AWS Advanced Consulting transactional integrity
partner in MEA
SYNTHESIS LABS
Artificial intelligence, blockchain, machine learning
SYNTHESIS ACADEMY
Technical and cloud training tailored to organisational objectives
28SYNTHESIS ACADEMY
Technical and cloud training tailored to organisational objectives
“ “Synthesis is a learning organisation
with deep technical and business
skills. We are well positioned to
• Outcomes-driven onsite or e-Learning LMS
based training
• Practical Labs to move from theory to
application
provide both these practical and
theoretical skills to our customers. By
providing scaled learning we can
address the vast technical skills
shortage in the South African • 120+ Amazon Web Services (AWS)
technology sector “ certifications
”
• Tap into real insight and experience to fast-
track projects
Darren Bak, Head Synthesis Academy
29GLOBAL STABILITY – DISCOVERY VITALITY USE CASE
Synthesis delivers
advanced support and
global scalability to
Discovery Vitality Group
VITALITY STATS
Discovery Vitality Group has built a
massively flexible and scalable platform on 140m 4m 15
AWS Cloud for its global Vitality program
using a microservices architecture
Synthesis provides a managed service
offering to meet the objectives of security,
standardisation, stability and performance on Insurance customers Worldwide members Countries
this platform
30REG TECH – REPORTING & COMPLIANCE
Synthesis helped one of
SA’s biggest banks to
upgrade their Balance of
Payments (BoP)
Reporting system
One of the largest
The new software is
authorised Forex dealers
replicable and scalable,
Use of the Synthesis in the country, benefits
offering opportunities for
RegTech product allows from an improvement to
the bank to roll it out into
dealers in foreign speed, accuracy and
other SADC markets in
currency to easily ensure stability of reporting, and
which it operates, with
regulatory compliance ability to quickly and
support for multiple
easily respond to future
regulators
regulatory changes
31FINANCIAL PERFORMANCE
32FINANCIAL PERFORMANCE
Payments & Payment Infrastructure Division
469.9
500 GROWTH
Revenue 13.2%
415.1
450
EBITDA (10.9%)
Operating profit (14.4%)
400
350
CAGR
Revenue 60%
300
EBITDA 71%
250
202.9
196.1
200
151.7
149.5
140.7
135.5
127.9
150
77.5
100
60.9
44.2
42.1
24.9
22.7
50
10.6
9.4
1.1
0
FY '14 FY '15 FY '16 FY '17 FY '18 FY '19
Revenue EBITDA Operating Profit
33TERMINAL ESTATE ANALYSIS
Terminals at period end
140000
128000
118000
103000 95000
92000
77000
76000
40000 41000
60000 38000
53000
49000 48000 40000
32000 22000
32000
16000
April '17 Sep '17 Mar '18 Sep '18 Mar '19 April '17 Sep '17 Mar '18 Sep '18 Mar '19 April '17 Sep '17 Mar '18 Sep '18 Mar '19 April '17 Sep '17 Mar '18 Sep '18 Mar '19
TOTAL TERMINAL ESTATE OWNED BY CLIENTS ACTIVE – IN MARKET AWAITING DEPLOYMENT
• Number of terminals in clients’ • Number of terminals delivered to • Number of terminals in use grew • New terminals, once imported,
hands grew 18% in the last 6 clients grew by 24% in last 6 by 23% in last 6 months and 78% are prepared for client and
months and 52% during the year months and 68% during the year during the year readied for deployment
• Includes terminals subject to • Paid for at time of delivery • Includes terminals subject to • Represents prospective recurring
rental agreements rental contracts revenue once activated
• Start to generate recurring
revenue once activated • Rentals may be renewed upon • Includes ”rotating stock” for
expiry or replaced with owned backup and replacement
terminals
34FINANCIAL PERFORMANCE
Software & Services Division
160
PERIOD GROWTH
137.8
Revenue 48.0%
140
EBITDA 31.0%
Operating profit 26.7%
120
93.1
100 CAGR
Revenue 27%
77.6
EBITDA 28%
80
51.9
60
46.1
EBITDA and Operating Profit is
44.0
42.1
41.6
after expensing additional
33.9
ramp-up costs related to AWS
33.2
29.9
29.4
40 Cloud Migration projects, the
benefits of which will accrue in
19.4
19.8
15.6
subsequent periods
15.9
12.4
12.6
20 The benefit of last year’s
expenditures is visible in this
year’s growth
0
FY '14 FY '15 FY '16 FY '17 FY '18 FY '19
Gross Revenue EBITDA Operating Profit
35GROUP SUMMARISED STATEMENT OF COMPREHENSIVE INCOME
% increase / Strong growth from all
(R million) 31 March 2019 31 March 2018 divisions
(decrease)
Revenue 607.7 508.2 19.6% Development of new
innovative products and
Operating expenses 128.0 80.0 59.9% building of operating
capacity
EBITDA 159.5 176.8 (9.8%)
Trading profit 173.2 187.2 (7.5%) Includes c.R19m of
incremental capacity and
support-related
Net finance income 37.7 38.7 (2.5%)
expenditure
Profit before taxation 173.8 200.0 (13.1%)
Includes R2.4m loss, after
Profit after tax 124.6 142.9 (12.8%) tax, attributable to
Resonance Australia
Normalised profit after tax 134.7 152.3 (11.6%)
Headline earnings per share (cents) 8.33 9.53 (12.6%) After reversal of
amortisation of intangibles
Normalised headline earnings per share (cents) 9.01 10.12 (11.0%) arising from acquisitions
Cash earnings per share (cents) 10.93 7.30 49.8%
Effective asset
Number of shares in issue (millions) 1 555.0 1 555.0 management
Weighted average number of shares in issue
1495.5 1505.4
(millions) Purchased 8.02m treasury
Number of shares in issue, net of treasury shares shares
1 491.4 1499.4
(millions) Total number of treasury
shares is 63.6m
36DIVISIONAL REVENUE COMPOSITION
(R million) 31 March 2019 31 March 2018 Growth
Payments & Payment Infrastructure division
Rental income 79.3 82.4 (3.8%)
Maintenance and support service fees 73.9 45.1 63.9%
Sale of terminals 290.9 276.0 5.4%
Transaction fees 15.1 11.6 30.2%
Other revenue * 10.7 - -
Total 469.9 415.1 13.2%
Software & Services division
Services and consultancy fees 102.2 71.3 43.3%
Licence and subscription fees 32.9 18.8 75.0%
Hardware 2.7 3.0 (10.0%)
Other turnover - - -
Total 137.8 93.1 48.0%
Total revenue 607.7 508.2 19.6%
Geographic region
South Africa 593.6 496.3 19.6%
Rest of Africa and Indian Ocean Islands 14.1 11.9 18.5%
Total revenue 607.7 508.2 19.6
Recurring income represents approximately 47.4% of total revenue in 2019 (2018: 42.8%)
* IN FY2018 REFLECTED AS OTHER INCOME 37CONDENSED GROUP STATEMENT OF FINANCIAL POSITION AT 30 SEPTEMBER 2018
(R million) 31 March 2019 31 Mar 2018
ASSETS
Goodwill 728.6 728.6
Intangible assets 62.3 71.5
Other non-current assets 72.2 64.3
Non-current assets 863.1 864.4
Available for investment
Cash and cash equivalents 611.2 513.2 in organic growth and
acquisition opportunities
Other current assets 70.3 94.1
Total assets 1544.6 1 471.7
EQUITY AND LIABILITIES
Equity 1447.1 1 392.3
Non-current liabilities 34.6 35.7
Current liabilities 62.9 43.7
Total equity and liabilities 1544.6 1 471.7
NAV per share (cents) 93.1 89.5
Cash available per share (cents) 39.3 34.2
38CASHFLOW (KEY FEATURES)
(R million) 31 March 2019 31 March 2018
Cashflow from operations 212.7 166.3
Cash conversion ratio of
112.8% of Trading Profit
Changes in working capital 51.7 (12.6)
Acquisition of property, plant and equipment (16.5) (4.8)
Effective asset
management
Acquisition of subsidiaries net of cash acquired - (553.0)
Acquisition of associate - (30.2) Total of 63.6 million
shares at an average price
of 76 cents per share
Purchase of 8.0 million treasury shares (2018: 55.6 million) (7.1) (41.4)
Repayment of loans (3.0) (14.9)
Dividends paid (63.6) (30.4)
Cash & cash equivalents at period end 611.2 513.2
39PROSPECTS
40PROSPECTS
Capital Appreciation is well capitalised, with the management skills and
technology to drive it’s growth strategy
• A broad range of organic as well as acquisitive growth opportunities available to CAPPREC
• Acquisition activity will depend on strategic fit as well as valuations
• Political environment and economic climate are impacting our clients and remain present in our planning
GROWTH OPPORTUNITIES
PAYMENTS & PAYMENT INFRASTRUCTURE SOFTWARE & SERVICES
▪ Accelerated growth in POS device estate as ▪ Strong and growing adoption of cloud-based
penetration increases in banking as well as solutions
SME sector ▪ Regulatory compliance requirements
▪ Introduction of new platforms will generate ▪ Further international expansion, especially
new growth African hub
▪ New product pipeline ▪ Significant opportunity in new technologies
41OUR INVESTMENT CASE
• Well-positioned in an industry with healthy organic growth prospects
• A trusted partner to a strong network of large financial institutions
• Clients are well capitalised and established
• Clients already have a presence in Africa – providing the potential ability for CAPPREC to expand regionally with them
• Founders with a very strong network of relationships on which to build future business
• Well-established FinTech subsidiaries with strong track records
• Innovation
• Quality execution
• Financial performance
• Subsidiaries have strong organic growth prospects and acquisition opportunities
• Strong Group balance sheet with adequate headroom for organic and acquisitive growth
• Subsidiaries are highly cash generative with cash conversion exceeding 100%
• Our products and services are targeted at mission-critical applications
42T H A N K Y O U
43ANNEXURE
44COMPARABLE INTERNATIONAL COMPANIES
Illustrative of breadth and depth of international “Payments” marketplace
POS / CASH
NETWORKS MERCHANT ACQUIRORS EMERGING PAYMENTS
DISBURSEMENT
$264 043 // 25.9x $4 672 // 8.5x $2 201 // 12.3x $305 // NA $7 964 // 13.4x $1 423 // 7.6x
$370 290 // 23.1x $26 048 // 13.2x $24 917 // 18.0x $133 501 // 27. 5x $20 680 // NM $273 // 13.8x
$203 // NA $22 684 // 18.1x $1 086 // 3.8x $865 // 14.2x $5 288 // 10.9x
$8 857 // 13.9x $38 792 // 21.6x $30 226 // 72.4x $20 680 // 24.2x $913 // 10.4x
$2 503 // 19.5x $651 // 19.5x $4 225 // NM
MARKET CAPITALISATION (IN US $ MILLIONS) // CY19E EV/EBITDA AS OF JUNE 6 2019 45PAYMENTS & PAYMENT INFRASTRUCTURE
Historical performance
(R million) 2014 2015 2016 2017 2018 2019 CAGR
’14 – ‘19
Revenue 44.2 140.7 196.1 202.9 415.1 469.9 60%
EBITDA 9.4 24.9 42.1 77.5 151.7 135.5 71%
Margin
EBITDA 21.3% 17.7% 21.5% 38.2% 36.5% 28.8%
Growth
Revenue 218.3% 39.4% 3.5% 104.6% 13.2%
EBITDA 164.9% 69.1% 84.1% 96.1% (10.9%)
46SOFTWARE & SERVICES
Historical performance
(R million) 2014 2015 2016 2017 2018 2019 CAGR
‘14 – ‘19
Revenue 41.6 46.1 51.9 77.6 93.1 137.8 27%
EBITDA 12.6 15.9 19.8 29.9 33.9 44.0 28%
Margin
EBITDA 30.3% 34.5% 38.2% 38.5% 36.4% 31.9%
Growth
Revenue 10.8% 12.6% 49.5% 20.0% 48.0%
EBITDA 26.2% 24.5% 51.0% 12.4% 31.%
47PERIOD ON PERIOD SECTOR PERFORMANCE
Financial performance
INFRASTRUCTURE
(R million) H1 ‘18 H2 ‘18 H1 ‘19 H2 ‘19
PAYMENTS &
PAYMENT
Revenue 173.8 241.3 253.6 216.3
EBITDA 57.3 94.7 70.9 64.6
Margin
EBITDA 33% 39% 28% 30%
(R million) H1 ‘18 H2 ‘18 H1 ‘19 H2 ‘19
SOFTWARE &
SERVICES
Revenue 37.6 55.5 61.8 76.0
EBITDA 10.8 22.8 19.3 24.7
Margin
EBITDA 29% 41% 31% 33%
48GLOSSARY
AEDO Authenticated early debit order ISO Independent sale organisation
AI Artificial intelligence IT Information technology
ATM Automated teller machine M Million
AWS Amazon Web Services NA Not available
B2B Business to business NAEDO Non-authenticated early debit order
B2B2C Business to business to consumer NAV Net asset value
B-BBEE Broad-Based Black Economic Empowerment NFC Near field communication
Bn Billion NHEPS Normalised headline earnings per share
CAGR Compound annual growth rate NM Not meaningful
CAPPREC Capital Appreciation Limited POS Point of sale
Cash EPS Cash flow from operations, less taxation paid, divided by weighted R Rand
average number of shares in issue
R&D Research and development
CLC Code line clearing
REIT Real Estate Investment Trust
CRM Customer relationship management
RTC Request to credit
EBIT Earnings before interest and tax
SA South Africa
EBITDA Earnings before interest, tax, depreciation and amortisation
SARB South African Reserve Bank
EFT Electronic fund transfer
SARS South African Revenue Services
EMV Europay, Mastercard, Visa
SME Small and medium enterprise
EPS Earnings per share
Tx Transaction
FinTech Financial technology
US$ United States Dollar
FY Fiscal year
ZAR South African Rands
GTV Gross transaction value
HEPS Headline earnings per share
49IMPORTANT NOTICE, DISCLAIMER AND BASIS OF PRESENTATION
For the purposes of this notice, this presentation (the “Presentation”) shall mean This Presentation does not constitute or form part of, and should not be This Presentation contains forward-looking statements, including in relation to
and include the pages and slides that follow, its contents including the construed as, an advertisement, invitation, solicitation and/or offer to sell, issue, the prospects of CAPPREC, which include all statements other than statements
information forming part thereof or referred to in the Presentation, the oral purchase or subscribe for, any shares and/or securities in any jurisdiction, or an of historical facts, including, without limitation, any statements preceded by,
presentation of the pages and slides by Capital Appreciation Limited inducement to enter into investment activity. This Presentation does not followed by or including the words “targets”, “believes”, “expects”, “aims”,
("CAPPREC") its officers, directors, employees and/or advisers, any question- constitute an offer to the public for the sale of or subscription for, or an “intends”, “may”, “anticipates”, “would”, “could” or similar expressions or the
and-answer session that follows that oral presentation, hard copies of this advertisement or the solicitation of an offer to buy and/or subscribe for, securities negative thereof. Forward-looking statements by their nature involve known and
document and any materials and/or information (in whatever form) distributed at, as defined in the Companies Act, 71 of 2008 ("the Act") or otherwise and will not unknown risks, uncertainties, assumptions and other important factors because
or in connection with, that oral presentation. By attending the meeting at which be distributed to any person in South Africa in any manner which could be they relate to events and depend on circumstances that might occur in the future
the Presentation is made, or by reading the Presentation slides, you will be construed as an offer to the public in terms of the Act. Furthermore, this whether or not outside the control of CAPPREC.
deemed to have (i) agreed to all of the following restrictions and made the Presentation does not constitute an advertisement or a prospectus registered
following undertakings; and (ii) acknowledged that you understand the legal and and/or issued under the Act. Such factors may cause actual results, performance or achievements to be
regulatory sanctions attached to the misuse, disclosure or improper circulation of materially different from future results, performance, developments or
the Presentation. The information contained herein has been prepared using information available achievements expressed or implied by such forward-looking statements. Such
to CAPPREC at the time of preparation of this Presentation. External or other forward-looking statements are based on numerous assumptions regarding
This Presentation is provided to you solely for information purposes and does factors may have impacted on the business of CAPPREC and the content of this present and future business strategies, prospects and the relevant operating
not constitute, and may not be relied on in any manner as, legal, tax or Presentation, since its preparation. In addition all relevant information about environment in the future.
investment advice and/or an investment recommendation. CAPPREC may not be included in this Presentation.
Accordingly, no assurance is given that any such forward-looking statements will
This Presentation is not directed to, or intended for distribution to or use by, any The information in this Presentation has not been independently verified. No prove to have been correct. These forward-looking statements speak only as at
person or entity that is a citizen or resident of, or located in, any locality, state, representation or warranty, expressed or implied, is made as to the accuracy, the date of this Presentation. CAPPREC expressly disclaims any obligation or
country or other jurisdiction where such distribution or use would be contrary to completeness or reliability of the information contained herein and no reliance undertaking to disseminate any updates or revisions to any forward-looking
law or regulation or which would require any action (including registration or should be placed on such information. statements contained herein to reflect any change in its expectations with regard
licensing) within such jurisdiction for such purpose. thereto or any change in events, conditions or circumstances on which any of
Neither CAPPREC, its officers, directors, employees nor any of its advisers, such statements are based.
This Presentation is not, and should not be construed so as to constitute, an connected persons or any other person accepts any
offer of securities for sale or acquisition in any jurisdiction, including in the liability for any loss howsoever arising, directly or indirectly, from this
United States, Canada, Australia or Japan. Presentation or its contents.
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