Fintech group Capital Appreciation (Capprec) intends to use its hefty cash pile for growth and acquisitions as demand for online transactions and digital services accelerates.
About half of management’s time is spent considering acquisitions, joint-CEO Michael Pimstein told Business Day, with the group upbeat as it seeks to tap into an SA market where about two thirds of transactions under R700 are still made in cash.
Capprec’s business includes providing technology that banks and other financial services companies use to add more features to their digital platforms. These include integrating loyalty programmes and the sale of pre-paid vouchers.
The group, valued at R1.2bn on the JSE, also sells payment terminals such as point-of-sale devices to banks and retailers and provides the back-end systems that allow these devices to accept payments. Covid-19 has also put pressure on this business, disrupting deliveries and hitting demand, particularly from the restaurant, hospitality and retail sectors.
Group revenue fell 11.7% to R619.5m in the group’s year to end-March and headline earnings 11.6% to R126.4m. Revenue from the group’s payments division fell 21.5% to R397.4m, with terminal sales down more than a third.
New terminal orders resumed towards the end of the financial year, said Pimstein, with major orders received in 2021 only delivered after the financial year-end, stemming from a global chip shortage that has hit multiple industries, including the automotive sector.
The company is optimistic about a surge in new sales orders.
A number of banks have recently noted a pick-up in consumer spending, with SA’s biggest bank by market cap, FirstRand, saying earlier in June that spending had returned to pre-Covid-19 levels.
“The minute you see consumer spending increase, we see activity from banks,” he said, with Capprec noting that Covid-19 had simply pushed back timing on most major projects, rather than derailing the industry’s drive towards digitalisation.
The group was looking at acquisitions across its software and payments businesses, said Pimstein, but also that offering small and medium-sized businesses additional payment options and financial services was “high up on the agenda”.
In January, Capprec had picked up a 26.52% stake in start-up LayUp Technologies, which allows for digital lay-buy — or the purchase of goods via a down payment and monthly instalments.
The group is also upbeat about the prospects for Halo, developed by its Synthesis unit, which is a “tap-to-phone” contactless payment product for use on Android devices.
Halo has been in operation with Nedbank for the past year and negotiations are under way with other banks, the group said.
Halo has also received certification from Visa, MasterCard and American Express for “pin-on glass” — which allows merchants to accept payments on smartphones and tablets through the customer entering a pin. This enables higher-value transactions.
Capprec benefited from lower finance costs and cost controls, however, and had cash resources of R538.3m at the end of March, up 6.6% year on year.
This cash pile at the end of March equated to about 41% of the group’s market value, with CFO Alan Salomon saying the group had preserved cash in areas such as travel, but also slowed down on staff growth as Capprec joined its customers in adopting a wait-and-see approach.
Capprec declared a 3c final dividend, up from 2.75c previously, and representing a payout of about R39.3m.
Along with upping its dividend, Capprec said it might also buy back shares, although it had a net asset value per share of 119.9c at the end of March — a level its share has exceeded often in 2021.
In afternoon trade on Tuesday, the group's shares were trading 5.17% lower at R1.10, having risen 39% since the beginning of 2020.
Update: June 22 2021
This article has been updated with additional information and industry comment.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.