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Fintech Capital Appreciation reveals R500m war chest

By , Africa editor
South Africa , 05 Dec 2023
Bradley Sacks Chief Executive Capital Appreciation.
Bradley Sacks Chief Executive Capital Appreciation.

Fintech group Capital Appreciation (CTA) has announced yesteday that, thanks to its debt-free balance sheet, it has R500 million available to fund organic growth, acquisition prospects, investments, and additional share repurchases.

The group said it will continue to invest in growth-related initiatives, such as hiring more experienced workers, developing innovative technology solutions, producing proprietary owned software intellectual assets, and expanding the international division.

When ITWeb Africa asked a company representative about use of the R500 million for acquisitions, we were told: “In the current reporting period, the businesses generated sufficient cash to pay dividends and tax, invest in working capital and general organic growth, fund the cash component of its last acquisition (Dariel) and bought back shares. This implies that most, if not all, of the R500 million would be available for acquisitions. The business is also debt free and can raise additional funding for larger acquisitions, should this be required.”

CTA added that digital transformation, as well as an acceleration in demand for electronic payments, cloud services, and related innovations, are creating various opportunities for the group. Further, it said that these will continue to support good growth prospects, in the medium term.

The news comes as the group revealed its results from the six months ended September 30, 2023.

“The Group remains optimistic in its outlook for both the Payments and Software divisions for the remainder of the 2024 financial year,” reads company statement.

Commenting on its international division, CTA said 14% of group revenue generated in foreign currency, from global customers. This is a growth from 12% in 2022.

According to the company, revenue earned outside of South Africa increased 21% year on year to R77.3 million (up from R64.1 million in 2022).

“The international division remains in the early stages of its development and incurs relatively modest development costs. The division remains a small and focused team in the Netherlands, with the majority of development costs managed, transacted and executed directly from South Africa,” said the company.

It adds that the software division has proven it can deliver on large multiyear projects using a remote delivery model, and there will be a focus on ‘pursuing initiatives in international jurisdictions’. As a result, the group is ‘committing funds to business development and marketing efforts to realise these opportunities’.

Capital Appreciation is a financial technology company that seeks to serve and partner with established and emerging financial institutions and other clients.

Looking ahead, CTA says a key international initiative is to further commercialise and sell the Halo Dot product globally. During this period, a large South African telecommunications carrier unveiled its mobile merchant acquiring solution, which used the Halo Dot solution. However, CTA cautioned that Halo Dot’s sales activities are taking ‘longer than anticipated to onboard new customers’.

According to the company: “Focused efforts are underway to accelerate business growth and customer acquisition activities. Additional revenue streams have emerged, such as Hardware Security Module sales and services, which have benefited the Software Division as a result of the skills developed in this niche space. The Group will continue to judiciously fund this and other innovation projects to foster revenue and profit growth.”

In the period, other key metrics include continued strong demand for Capital Appreciation's products and services, revenue growth of three percent and further diversification of revenue streams, payments annuity income growth of 24%, physical terminal estate exceeding 344 000, up 9% year on year; rental terminal estate growth of 158%.

However, software margins are being harmed by the market's hesitation to commit to significant new undertakings, say the company.

CTA also claims to have maintained significant cash generation from operations.

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