Fintech group Capital Appreciation (Capprec), which counts big four banks as clients as well some asset managers, has earmarked nearly R600m for acquisitions in technology and financial services, its executives told Business Day on Tuesday.
“We’re optimistic that in the near future, we will be making acquisitions,” said Alan Salomon, CFO of the company whose core business is to sell technology used by banks and other financial services companies, to add more features to their digital platforms.
“We are investigating, exploring and in the process of looking at a number of different businesses, aligned or synergistic to the businesses that we are currently in — technology, fintech, financial services, innovative products and the like.”
Salomon’s comments come as banks are looking beyond basic financial services for income, with lenders such as Standard Bank in the middle of a radical overhaul of its business mode, shifting it from a provider of basic financial services and products to a platform for other products and services that complement its own.
FirstRand is already selling mobile phones, gaming consoles and television sets on its digital platform while in 2020, Nedbank launched Avo, a super app aimed at providing users with access to multiple services from a single platform.
Salomon was speaking to Business Day shortly after the company, which also sells payment terminals such as point-of-sale devices to banks and retailers, issued its half-year results that showed it is sitting on R589m in cash.
As part of its growth effort, Capprec recently opened an office in Amsterdam.
“Amsterdam is one of the fintech hubs of Europe. We’re already seeing promise, even though we only opened that office in August,” Michael Pimstein, Capprec's joint CEO said.
He highlighted new “tap on phone” technology that allows people to make payments through a smartphone, instead of a bank card, as one of solution that was already receiving interest internationally. Dubbed “Halo Dot”, the platform is already being used locally by Nedbank and recently received certifications from Visa, Mastercard, and American Express.
Capprec — valued at just under R2bn — is no stranger to acquisitions.
The company listed as a special purpose acquisition company (SPAC) on the JSE and raised R1bn through a private placement of shares in late 2015. Since then, it has acquired 100% of African Resonance, Dashpay and Synthesis Software Technologies, as well as a 17.45% interest in Resonance Australia. It also has a 35% stake in government messaging platform, GovChat.
The fintech group reported that commercial spending on digital services accelerated in the six-month period, with the group selling more payment terminals during the period than it did in the prior year.
While Capprec has not been immune to Covid-19 pressure, with many major businesses holding back on capital expenditure, the group says there is still strong demand for its services, upping its interim dividend 50% to 3.75c — a payout of about R49m.
Group revenue rose 35.7% to R439.4m to end-September, while after-tax profit grew 69% to R91m, with the group saying there had been strong adoption of Android terminals, given “their attractive functionality, price, and quality”.
Capprec said its software division experienced a significant increase in cloud migration projects and demand for digital transformation support. Though corporates remain cautious on infrastructure spending, activity had picked up in its second quarter.
Shares in Capprec — up 31% so far in 2021 — rose more than a tenth on the strength of the earnings report. The company pared some of those gains to trade 7% higher in afternoon trade at R1.52.
Correction: December 1 2021
An earlier version of this article incorrectly said the Avo app allowed businesses to offer their services to Nedbank clients, when anyone may use it.
gavazam@businesslive.co.za and gernetzkyk@businesslive.co.za
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