Fintech group Capital Appreciation (Capprec) is bullish about its full-year prospects after a disappointing start that was marred by uncertainty, resulting in a drop in IT spend.
This, as the group — valued at R2.33bn — reported a slight decline in earnings at the halfway stage of the financial year, but noted an improvement in sentiment with a revitalised interest in the group’s products and services in the second quarter.
“That first quarter was particularly concerning,” outgoing CFO Alan Salomon told Business Day, explaining that this was driven by microeconomic factors. “Customers were very cautious. There was an elections taking place, like in SA, and there was a lot of uncertainty, leading to hesitancy on the part of customers to commit.”
With the election in SA and a number of countries now out of the way, the group saw an uptick in business from the second quarter.
“We saw new renewals of existing contracts that had reached maturity and new contracts. In fact, the software division, which had a disappointing performance, still managed to increase its revenue in SA by 9.7% [in the period].”
Salomon — one of the group’s founders, executive director and CFO — will retire at the end of December and Sjoerd Douwenga will be appointed CFO on the effective day of Salomon’s retirement, the group said.
Revenue for the six months ended September was 10.4% higher at R611.5m, but operating profit declined 13.9% to R90.7m.
Earnings before interest, tax, depreciation and amortisation (ebitda) was 3.1% lower at R113.8m with the group performing “satisfactorily” despite ongoing low business confidence and sluggish economic growth during the reporting period.
Headline earnings per share (HEPS) declined to 5.96c from 6.5c before. An interim dividend of 4.5c was declared, up from 4.25c a year ago.
The group’s two divisions attracted new clients and renewed long-term contracts, diversified their revenue sources and grew market share, it said.
The payments division grew revenue 18.5% benefiting from “robust” terminal sales and rental income as well as good traction in its revenue diversification efforts, particularly the payments software-as-a-service initiatives.
Terminal sales and rental income were up 26% and 70%, respectively.
The software division’s top line increased by 2.4%. Revenue growth in SA of 9.7% was offset by lower international revenue as a large contract resourced from SA reached maturity.
The division had been hurt by the loss of a big contract in Singapore, as the customer chose to continue building its platform internally, as opposed to outsourcing to the group’s Synthesis unit.
Even then, Salomon said they would continue deriving some value from this relationship.
“The resultant end of the contract in Singapore, we believe it still has legs because software doesn’t just stop at the end of a project. It has maintenance support, enhancements and refinements,” he said.
The cost cutting measures and ongoing deferral of projects implemented by clients caused bench over-capacity, which affected profitability.
“While we anticipate low economic growth for the remainder of the 2025 financial year, both divisions have experienced positive momentum in activity levels since the national elections. The payments and software divisions are well-positioned to take advantage of these improved conditions, and we are encouraged by the pipelines that have developed recently,” the group said.
At 12.43pm, Capprec shares were trading 3.83% lower at R1.76, dousing some of the momentum that has seen the stock rise more than 36% so far in 2024.
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