Araxi Limited · JSE:AXX
Araxi — Capital Appreciation — H1 FY2024 Earnings Presentation
53 slides from Araxi's earnings presentation, December 2023
Slide 1: Interim Results Presentation
Interim Results Presentation For the six months ended 30 September 2023
Slide 2: Outline
Outline 1 Overview 2 Highlights 3 Strategy & Execution 4 Financial Performance 5 Prospects 2
Slide 3: Overview
A Overview [A
Slide 4: International
We are a financial technology company that seeks to serve and partner with established and emerging financial enterprises and other large corporates International Payments Software 4
Slide 5: Investment Case
Capital Appreciation’s ✓ Strong Secular Growth Trends Investment ✓ Large Market Opportunity – Domestic and Case International ✓ Trusted Partner to Blue-Chip Clients ✓ Demonstrated Leadership and Track Record An extremely strong foundation on which to ✓ Deliberate focus on and investment in the grow
Slide 6: Satisfactory Performance in Challenging Conditions
Satisfactory Performance in Challenging Conditions ✓ Strong demand for Group’s products and services HEPS up 106%, DPS of 4.25 cents continues Excluding ECL, HEPS down 6% ✓ Terminal estate up 9% 9 ✓ Payments’ annuity revenue up 24% 8 ✓ Software revenue up 31% 7 ✓ International revenue up 21% ✓ Cents
Slide 7: Payments - Positive Momentum Across Multiple areas
Payments - Positive Momentum Across Multiple areas Terminal estate up 9% YoY Payments Annuity Revenue up 24% Payments revenue sources (now >59% of Payments’ revenue) 344 328 277 15% Sale of terminals R million 217 ‘000s 185 41% Terminals rental income 140 155.6 Maintenance and support 92 126.0 servi
Slide 8: Software - Strong Revenue Growth
Software - Strong Revenue Growth Software services and consultancy Software license and subscription fees International Revenue up 21% fees up 42% up 30% Asia Pacific R million R million R million UK Other 35.7 206.6 27.4 USA 145.2 Rest of Africa 96.1 6.5 Sept 21 Sept 22 Sept 23 Sept 21 Sept 22 Sept
Slide 9: Everything Digital . . .
Everything Digital . . . General Payments Software ✓ Increased interest in digitalisation ✓ Substantial demand for payment ✓ Increasing demand for Software terminals offerings ✓ Increased understanding of strategic importance and ✓ Strong demand for Android ✓ Demand across multiple industry competit
Slide 10: . . . Just Listen to the Banks
. . . Just Listen to the Banks MoneyWeb, 13 November 2023 Cash is king no more: The trend towards lighter pockets. Banks confirm a steady march towards a cashless society as more customers adopt digital payment methods. “ “Capitec has seen a substantial shift “ Absa spokesperson “We have seen rapid
Slide 11: Continued Growth of Capital Appreciation's SA Blue Chip Clients
Continued Growth of Capital Appreciation’s SA Blue Chip Clients In addition to the Financial Services leaders, CTA continues to penetrate new sectors. We deliver services in over 20 countries across the globe. Financial Retail Healthcare Telecoms Logistics Mining Hospitality Services 11
Slide 12: GovChat Update
GovChat ✓ Operations Terminated ✓ Update Costs limited to legal expenses ✓ Meta/Facebook/WhatsApp Litigation ✓ Competition Commission prosecuting Meta in front of Competition Tribunal Capital Appreciation raised ✓ Granted leave to Intervene by Competition expected credit loss provision Tribunal of R
Slide 13: ESG and B-BBEE
ESG and Group BEE Ratings B-BBEE 2017 2018 2019 2020 2021 2022 2023 Continued commitment to 1 improvement 2 2 2 3 3 3 3 4 4 4 4 6 7 7 African Resonance Dashpay Synthesis Capital Appreciation Dariel 13
Slide 14: Board & Succession Planning
Board & Succession Planning Structure Gender 60% 40% 70% 30% 0% 20% 40% 60% 80% 100% 0% 20% 40% 60% 80% 100% Non-executive Independent Executive Male Female Age Tenure 30% 40% 20% 10% 40% 60% 0% 20% 40% 60% 80% 100% 0% 20% 40% 60% 80% 100% 40-50 51-60 61-70 71+ 0-5 years 6-7 years Race 50% 50% Retir
Slide 15: Strategy & Execution
Strategy & Execution 15
Slide 16: Consistent Strategy & Execution
Consistent Strategy & Execution Strategy has delivered substantial growth and our objectives remain unchanged since initially formulated Partner Innovate Execute • Work with corporate clients • State of the art proprietary • Service excellence • Create ecosystems for technology • Alleviate pain poin
Slide 17: Digital Payments Expected to Grow in South Africa
Digital Payments Expected to Grow in South Africa The number of POS terminals is set to Card transactions growing rapidly grow further Number of POS terminals (000s) 900 6000 800 Transaction volume (millions) 5000 700 1 113 600 4000 500 858 3000 400 687 2000 3 835 300 2 841 200 1000 2 071 100 0 0 20
Slide 18: Global View of Terminal Demand
Global View of Shipments by Type of Device In Millions, with Market Shares (%) Terminal Traditional Unattended 89.8 1.5 Demand (66.1%) (1.1%) MPOS/Chip & Signature 1.6 136 Terminal Shipments 2021 (and change since 2020) (1.2%) million Geography Volume % Change QR Code Middle East / Africa 8.9 m 35.7
Slide 19: Payment Services Offered
Payment Services Offered Customers can select packages or selected services a la carte Devices Software Activations & Logistics Call Centre • Stand alone: counter-top and • Software development and testing • Asset management • Product support portable • New products and solutions • Key injection • P
Slide 20: Drivers of Terminal Demand
Drivers of ✓ Growing Market – Increase in terminal Terminal enabled retail footprint Demand ✓ Enhanced Technology ✓ Increased Functionality – Provide merchants enhanced services Anticipate good demand for ✓ Terminal Envy – Merchants want contemporary new terminals equipment ✓ Regulatory Compliance –
Slide 21: Growth Strategy
Organic growth opportunities are plentiful for a Payments business with an established base, immense Growth industry knowledge and deep technical expertise Strategy ✓ Grow market for devices ✓ Continue to take market share in established segments ✓ Support existing clients ✓ Refresh financial indust
Slide 22: Payment Software
Doubling Down Payment Software ✓ World leader in Real-Time Payment Solutions ✓ Provider of Postillion* switch ✓ Used by most banks in SA and many retailers ✓ Dashpay now an ACI development partner ✓ Maiden initiative is a Universal Retail solution to be jointly marketed ✓ Early days but global appli
Slide 23: Continued Product Evolution
Continued Product Evolution Full end-to-end solution available in components – branded or on white label basis A software development kit that A companion app that allows A feature rich application that allows integrators to embed a your existing app to process allows you to apply your brand to cont
Slide 24: Applicable Across Use Cases
Applicable Across Use Cases Relevant to existing and emerging providers of financial services, e.g., Telcos Events & Markets Queue busting DebiCheck Dashpay Glass a fully certified turn-key acquiring solution (PaaS) available to be white labeled by financial institutions, PSPs and others. Perfect fo
Slide 25: Driving Growth
Driving Growth Still early days . . .YoY comparison Select Merchant Clients Up 62% Up 246% Merchants Merchant Fund Holdings 98%-75% Up 246% Completion Rates User Sign-Ups 1in3 Up 86% Customers return Gross Revenue to use LayUp Accepting payments at more than Tender Types Accepted 275,000 locations c
Slide 26: Payments Focused Investor Day
Payments Focused Investor SAVE THE DATE Day Led by Payments executives Tuesday, 30 January 2024 Invitations to follow 26
Slide 27: Software Division
Software Division “Bringing business and technology together.” Highly specialised software development, consulting, product solutions, and integration services for over 25 years to Banking, Retail, Telco, and Logistics in South Africa, and other targeted markets. Business Inspired Technology “Design
Slide 28: Growth Strategy
Boundless opportunity for a business with Software an established track-record in thought- Growth leadership and innovation Strategy ✓ Leverage partnerships – New and existing - AWS, Confluent, GCP - to grow domestically and internationally ✓ Grow license revenue – from proprietary software solution
Slide 29: Cost Related Action Plan
Software Cost What we are doing ✓ Judicious hiring – against committed demand Related ✓ Resource balancing and optimisation across Action Plan the division (currently team of over 500) ✓ Internal use and training of bench resources ✓ Cost management initiatives including analysis of utilisation and
Slide 30: Focus Areas
Data Cloud Focus Areas Machine Learning Transformation for and AI Solutions the Enterprise Digital Payments Consulting RegTech Enterprise Software Compliance and CX and UX Change Compliance with Central Solutions for Digital Innovation in driven by our Agile Bank and Tax Authority Channels Payments
Slide 31: Designing delightful experiences for complex digital products
Designing delightful experiences for complex digital products A design thinking approach that focuses on research, strategy, User Experience (UX), and User Interface (UI) Usability testing to establish user-centricity to satisfy user needs and business goals
Slide 32: Active Clients
Active Clients Embrace engineering best practices, hire the brightest minds and nurture a culture of problem solving Our services are clustered around core capabilities in software development, integration/open API, technology consulting, digital transformation and Cloud technology solutions
Slide 33: Labs
Focus on emerging technology themes • Applied & Generative AI Labs • Web3 & Payments • Behavioural Optimisation Building prototypes & commercial product The disruptive • Tardis – Peer-to-peer Rapid Payments Platform • GalacticAI – AI Developer Experience (AI/DXaaS) launchpad of the • Serenity – Stre
Slide 34: Minority Investment
AssetPool A cloud-native B2B SaaS platform Minority focused on asset management, tracking, maintenance, compliance and verification Investment ✓ Developed in AWS ecosystem ✓ Highly scalable, globally ✓ Operative across Africa (30 countries), UK, US, Canada and Australia ✓ Simple to use, delivers val
Slide 35: Industries already adopted Illustrative Clients
Industries already adopted Illustrative Clients Construction Mining Logistics Fire Safety QA/QC Packaging & Food Healthcare Equipment Manufacturing Safety Rental Global users 10,300 Inspections per month: 60,500 Assets tracked: 382,000 35
Slide 36: Standard Bank
Standard Bank Synthesis Intelligent Data Division Fraud prevention is an unrelenting challenge for banks and many Combating fraudsters other industries. SA Banking Fraud statistics continuously increase, both in number and severity, with a 46% increase in digital banking crimes. Time spent preventin
Slide 37: Capitec Bank
Capitec Bank Optimizely’s platform, Capitec’s innovative technological outlook, and Responsive’s strategic guidance and expert implementation Leading the Digital have transformed the bank’s website into a world-class digital experience. Banking Experience Solution Revolution Responsive and Capitec s
Slide 38: Tap on Phone Payment Solution
Tap on Phone Payment transactions are made easy by Halo Dot. It provides an innovative solution for existing and new merchants that Payment Solution generates new revenue streams and reduces operational expenses since the merchant is using its own Android device. For Renowned Mobile Solution Operato
Slide 39: Financial Performance
A Financial Performance [A
Slide 40: Payments Performance
Payments R million Performance 318.3 314.0 350.0 265.3 300.0 250.0 200.0 • Terminal estate up 9% 126.3 119.5 117.5 • Growth in rentals and delay in sales order 150.0 volumes moderated terminal revenue growth 100.0 • Strong growth in annuity income 50.0 • Android continues to drive terminal activity
Slide 41: Payments Revenue Composition
Payments Revenue Composition Annuity income up 24%, now comprising 59% of total revenue Terminal Rental Income Maintenance and Support Service fees Transaction Related Income from doubled from terminals terminals up 35% up 10% 50 25 100 20 40 80 R million R million R million 15 30 60 22.7 92.9 20 40
Slide 42: Software Performance
Software R million Performance 350 288.4 300 219.8 250 • Strong demand results in several new customers • 8.6% like-for-like revenue growth and 31.2% including 200 Dariel 125.3 • Customer caution in committing to large projects 150 impacted profitability and operating margins 100 • EBITDA reduction
Slide 43: Software Revenue Composition
Software Revenue Composition Services and Consultancy Fees License and Subscription Fees up 42% up 30% • Excellent growth in 250 40 AWS. Extending cloud to 35 Google Cloud Platform 200 30 (GCP) and Azure R million R million 150 25 20 35.7 • Pleasing project wins in 100 206.6 15 26.5 27.4 SA and inte
Slide 44: International Performance
International Contribution to Group Revenue 18% Performance 15% R million 12% 9% 13.9% 6% 11.9% • Now 14% of Group revenue 3% 4.9% • Promising international opportunities 0% Sept 21 Sept 22 Sept 23 • Successful execution of a large multi-year project through remote model – now pursuing Revenue compo
Slide 45: Group Condensed Statement of Comprehensive Income
Group Condensed Statement of Comprehensive Income 30 September 30 September % increase / Revenue generation (R million) impacted by delayed 2023 2022 (decrease) Software projects and terminal orders Revenue 554.2 538.1 3.0% Gross Profit 273.0 255.6 6.8% Gross margin expanded due to scale and operati
Slide 46: Group Condensed Statement of Comprehensive Income (continued)
Group Condensed Statement of Comprehensive Income (continued) 30 September 30 September % increase / (R million) 2023 2022 (decrease) Profit after tax 80.5 38.7 107.9% Earnings per share (cents) 6.48 3.13 107.1 Headline earnings per share (cents) 6.50 3.16* 105.6 Normalised headline earnings per sha
Slide 47: Condensed Group Statement Of Financial Position
Condensed Group Statement Of Financial Position Re-classified 30 September (R million) 30 September 2023 2022 ASSETS Dariel acquisition on 3 July Goodwill 870.9 760.2 2023 - R110.7m Intangible assets 70.5 66.3 Property, plant and equipment 60.9 26.1 Largely growth in rental Other non-current assets
Slide 48: Cash Flow (Key Features)
Cash Flow (Key Features) Sustainable cash 30 September 30 September generator, H1’24 cash (R million) equivalent to 87% of total 2023 2022 cash generated for FY’23 Cash generated from operations 159.9 103.1 Higher interest rates Finance income received 20.3 13.8 Dividends paid (49.9) (46.1) Effectiv
Slide 49: Sustainable Cash Flow From Operations Supports Dividends
Sustainable Cash Flow From Operations Supports Dividends Cash generated in H1’24 up 55%, already 87% of FY’23 Cashflow and Cash Cover Dividends R million 212.7 Times (cents per share) 206.1 250 4 9 204.3 200.9 3.2 3.5 8 183.1 3.6 200 166.3 7 159.9 3.2 3 3.1 4.00 6 2.7 2.5 3.75 150 2.5 5 1.9 2 98.4 4
Slide 50: Prospects
A Prospects [A
Slide 51: General Prospects
General ✓ A broad range of organic and acquisitive growth opportunities available to Capital Appreciation Prospects ✓ Acquisition activity will depend on strategic fit as well as valuations ✓ Economic climate is impacting our clients and remains present in our planning Capital Appreciation is well ✓
Slide 52: Investment Case
Capital Appreciation Investment ✓ Leadership position in industry with strong secular growth trajectory Case ✓ Strong culture of innovation resulting in relevant client solutions ✓ Demonstrated track record of delivery An extremely strong foundation on which to grow ✓ Trusted partner to blue-chip cl
Slide 53: Q&A Thank you
KX Q&A Thank you [A
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