Araxi Limited · JSE:AXX
Araxi — Capital Appreciation — H1 FY2018 Earnings Presentation
44 slides from Araxi's earnings presentation, November 2017
Slide 1: Interim Results for the Six Months Ending 30 September 2017
NOVEMBER 2017 INTERIM RESULTS FOR THE SIX MONTHS ENDING 30 SEPTEMBER 2017 1
Slide 2: Outline
OUTLINE 1 Introduction to CAPPREC 2 Highlights for the period 3 Fintech sector opportunity 4 About our investments 5 Financial performance 6 Prospects 7 Annexure 2
Slide 3: About Capital Appreciation
ABOUT CAPITAL APPRECIATION LISTING STATED INVESTMENT OBJECTIVE ▪ October 2015 ▪ Focus on companies in the Services sector ▪ Raised R1 billion that would provide a platform for growth ▪ R390 million from Founders and international expansion capability EXPERIENCED LEADERSHIP FOUR ACQUISITIONS CONCLUDE
Slide 4: Capital Appreciation Snapshot
CAPITAL APPRECIATION SNAPSHOT OWNERSHIP CAPITAL APPRECIATION ▪ Directors and Management c. 33% ▪ Together with the Founders, ownership increases to c. 60% 100% 100% 17.5% 100% ▪ BEE ownership certified at 39% (Voting Interest) CASH BALANCE AFRICAN RESONANCE SYNTHESIS DASHPAY RESONANCE AUSTRALIA ▪ R4
Slide 5: Highlights for the Period
H I G H L I G H T S F O R T H E P E R I O D 5
Slide 6: Operational Accomplishments
OPERATIONAL ACCOMPLISHMENTS Completed and bedded down three Transferred from a SPAC to the acquisitions and one investment “Software and Computer Services” sector on the Main Board of the JSE Expanded customer base and solidified Solid B-BBEE rating pipeline through FY2019 Good growth in the demand
Slide 7: Financial Results
FINANCIAL RESULTS EBITDA R 85,6 m 129% • Robust financial results Profit before tax • Maiden dividend declared 124% R 83,7 m • Strong cash flow from operations, with cash conversion of 100% of PAT Headline earnings • Good expense management R 60,1 m 124% • Positioned for growth with a strong net cas
Slide 8: Divisional Performance
DIVISIONAL PERFORMANCE PAYMENT AND PAYMENT INFRASTRUCTURE SOFTWARE & SERVICES INTERNATIONAL AUSTRALIA ▪ Extremely pleasing ▪ Specialised payment and ▪ Posted solid growth ▪ In development to performance billing platform almost provide similar services ▪ Contract wins and ready for national roll out
Slide 9: Fintech Sector Opportunity
F I N T E C H S E C T O R O P P O R T U N I T Y 9
Slide 10: Disruptive Forces Impacting Financial Institutions Globally
DISRUPTIVE FORCES IMPACTING FINANCIAL INSTITUTIONS GLOBALLY 1 COST COMMODITISATION 5 DATA MONETISATION Financial institutions will accelerate the Data will become increasingly important for differentiation, but static data commoditisation of their cost bases, removing them sets will be enriched by f
Slide 11: Tech-Enabled New Entrants
TECH-ENABLED NEW ENTRANTS (TYME) c. 9 million clients Vitality success demonstrates the Reportedly 4 minutes to Sought to be low-cost provider power of user experience, product on-board a client bundling and data analytics Cost of delivery Pain points Profitable, narrow market segment Customer User
Slide 12: Characteristics of Future Payments
CHARACTERISTICS OF FUTURE PAYMENTS Innovations will make payments more cashless and invisible in the future, while enabling data driven engagement platforms for customers CASHLESS // BACK OF MIND // ENGAGEMENT // More cash will be displaced by electronic As more transactions become virtual and As pa
Slide 13: Innovation in Financial Technologies
INNOVATION IN FINANCIAL TECHNOLOGIES M A C . . . all have an impact on H Financial AR T I F I C IAL I N T E L LI G E N C E A Institutions . . . N S E B S . . . many already part of Capital I I Appreciation’s C L T S existing L DISTRIBUTED LEDGER C T platforms and future road O A A O ECOSYSTEMS map .
Slide 14: Financial Inclusion
FINANCIAL INCLUSION The IFC believes this represents a market opportunity exceeding US $2 trillion Financial Inclusion is the process of ensuring access to appropriate financial products and services needed by vulnerable groups at an affordable cost in a fair and transparent manner ▪ Transacting ▪ S
Slide 15: Retail Payments
MOVE TO ELECTRONIC PAYMENTS CONTINUES SOUTH AFRICA RETAIL PAYMENTS 18% 19% CARD ACTIVITY year-on-year year-on-year SOURCE: PASA ANNUAL REPORT 2016 15
Slide 16: POS Device Penetration
POS DEVICE PENETRATION POS installed devices per 1 000 people AUSTRALIA TURKEY SPAIN FRANCE UK ITALY U.S. CANADA BRAZIL SOUTH AMERICA GERMANY MEXICO SOUTH AFRICA’S PENETRATION IS ONLY 4.5 CHINA RUSSIA INDIA 5 10 15 5 25 30 35 SOURCE: BANK OF INTERNATIONAL SETTLEMENTS 16
Slide 17: Capital Appreciation Strategy
CAPITAL APPRECIATION STRATEGY PARTNER INNOVATE EXECUTE Piggy back on established brands . . . State of the art proprietary technology Service Excellence Big Four have brand value Entrepreneurial culture Alleviate pain points exceeding R 70 billion1 B2B2C Hardware agnostic User experience Enable othe
Slide 18: About Our Investments
A B O U T O U R I N V E S T M E N T S
Slide 19: Payments & Payment Infrastructure Division
PAYMENTS & PAYMENT INFRASTRUCTURE DIVISION AFRICAN RESONANCE & DASHPAY Enables banks and corporates to extract additional value and differentiate at the point of acquiring PROPRIETARY BLUE CHIP END-TO-END COMPREHENSIVE UNIVERSAL PLATFORM CLIENTS SOLUTIONS OFFERINGS ACQUIRING Unique, proprietary Prov
Slide 20: CAPPREC Delivers an End-to-End Solution
CAPPREC DELIVERS AN END-TO-END SOLUTION ANATOMY OF MERCHANT ACQUIRING - Legacy systems are inflexible, costly and time consuming to adapt - Innovation is key to unlocking value PROVIDE ACCEPTANCE TRANSACTION POST-TRANSACTION PROCESSING SERVICES RECRUITMENT UNDERWRITE TRANSACTION AUTHORISATION CLEARI
Slide 21: Platform for Delivering Value-Added Services
PLATFORM FOR DELIVERING VALUE-ADDED SERVICES “Universal Acquiring” expands the range of services and delivers greater value to the merchant SELECTED VALUE ADDED SERVICE CARD ACQUIRING OFFERINGS NON-TRADITIONAL SERVICES TRADITIONAL SERVICES 21
Slide 22: Payments Revenue Model
PAYMENTS REVENUE MODEL POS DEVICES POS ESTATE MAINTENANCE TRANSACTIONS LICENSING & MANAGEMENT & REPAIRS SOLUTIONS ▪ Sales of terminals ▪ Generates monthly ▪ Generates monthly ▪ Variable based on ▪ Generates monthly generates gross profit recurring annuity recurring annuity transaction type and recur
Slide 23: Software & Services Division
SOFTWARE & SERVICES DIVISION SYNTHESIS Leading provider of technology products and solutions within the Financial Services industry BLUE CHIP CUSTOMER THOUGHT EXPERIENCED FOCUSED CLIENTS CENTRIC LEADERS Absa, Investec, Delivering the highest Acquiring and retaining Highly innovative team Exclusive f
Slide 24: Divisions
DIVISIONS SYNTHESIS CLOUD DIGITAL PLATFORM CONSULTING CHANNELS INTEGRATION PRODUCTS Cloud transformation to assist the Delivering exceptional end-user Enterprise in becoming cloud ready, customer experience web and Integration to enable regulatory execute mass migrations and to harness mobile touch
Slide 25: Financial Performance
F I N A N C I A L P E R F O R M A N C E 25
Slide 26: Financial Performance: Payments & Payment Infrastructure
FINANCIAL PERFORMANCE PAYMENTS & PAYMENT INFRASTRUCTURE DIVISION // YEAR-END 28 FEB H1 6 MONTHS AS A PERCENTAGE OF FY’17 102% 120% 250 97% 85% 100% 202.9 80% 197.0 196.1 60% 200 40% 164.2 20% 140.7 0% 150 Gross Revenue EBITDA Operating Profit CAGR(a) 100 77.5 Revenue 66% 65.7 EBITDA 102% 62.1 60.9 5
Slide 27: Financial Performance: Software & Services
FINANCIAL PERFORMANCE SOFTWARE & SERVICES DIVISION // YEAR-END 28 FEB H1 6 MONTHS AS A PERCENTAGE OF FY’17 90 58% 70% 60% 77.6 43% 43% 80 50% 40% 30% 70 20% 10% 60 0% 51.9 Gross EBITDA Operating Revenue Profit 46.1 45.1 50 41.6 37.6 40 CAGR(a) 29.9 29.4 Revenue 23% 30 EBITDA 33% 19.8 19.4 15.9 15.6
Slide 28: Group Summarised Statement of Comprehensive Income
GROUP SUMMARISED STATEMENT OF COMPREHENSIVE INCOME *Acquisitions were completed post 2017 year-end (5 May 2017) R'm H1 18 H1 17 % increase FY 17 (unaudited) (unaudited) (audited) Annuity income comprises 52% of Revenue 223.4 39.7 - 80.2 turnover, and growing EBITDA 85.6 37.4 129% 75.1 Under long-ter
Slide 29: Summarised Statement of Financial Position
SUMMARISED STATEMENT OF FINANCIAL POSITION R'm 30 Sep 2017 30 Sep 2016 31 Mar 2017 (unaudited) (unaudited) (audited) Total assets 1 388.1 1 037.8 1 048.8 Non-current assets 825.7 0.2 0.2 Current assets 562.4 1 037.6 1 048.6 Cash and cash equivalents R463.1 million Equity 1 337.3 1 030.5 1 042.8 Liab
Slide 30: Cash Flow
CASH FLOW R'm H1 18 H1 17 FY 17 (unaudited) (unaudited) (audited) Cash flow from operations and 60.2 33.6 61.4 investment income Purchase of investments* (569.9) - - Purchase of an associate (29.7) Repurchase of 25 million ordinary (18.8) shares (treasury shares) Cash and cash equivalents at 463.1 1
Slide 31: Prospects
P R O S P E C T S 31
Slide 32: Prospects
PROSPECTS Capital Appreciation is well capitalised, with the management skills and technology to drive it’s growth strategy PAYMENTS & PAYMENT SOFTWARE & SERVICES INTERNATIONAL INFRASTRUCTURE ▪ Continued and ▪ Licensing of software ▪ Look forward to accelerated growth in applications for Australian
Slide 33: Thank You
T H A N K Y O U 33
Slide 34: Annexure
A N N E X U R E 34
Slide 35: International Trends
INTERNATIONAL TRENDS A LEADING INDICATOR FOR SOUTH AFRICAN BANKS – INDUSTRY IN FLUX ▪ Increasingly more ▪ Increasing from new ▪ Sector expertise and focus demanding of innovative entrants driving costs down solutions that require non- ▪ New payment types ▪ Consolidation and exit of legacy technology
Slide 36: Electronic Payments Continue to Grow and Mutate
ELECTRONIC PAYMENTS CONTINUE TO GROW AND MUTATE IN RESPONSE TO CONSUMER BEHAVIOUR BIG DATA ▪ Consumer comfort with data sharing leads to integration with payments ▪ New products REGULATION ▪ New credit tools ▪ Regulation and security driving ▪ Payment linked to and installation and acceptance of wit
Slide 37: African Resonance – Exclusive Rights to Proprietary Technology
AFRICAN RESONANCE – EXCLUSIVE RIGHTS TO PROPRIETARY TECHNOLOGY Resolink technology provides a single, integrated platform to deploy and manage acquirers’ terminal fleet PAYMENT OPERATOR PRODUCT PROMOTER Handles the acquiring Sophisticated real-time Rapid development and Manages customer application
Slide 38: Solutions Range Across Industry and Functional Area
SOLUTIONS RANGE ACROSS INDUSTRY AND FUNCTIONAL AREA FINANCIAL MARKETING RETAIL CORPORATE PUBLIC ▪ Bank acquiring ▪ Consumer profiling ▪ Retail management ▪ Customised payment ▪ Social grants ▪ Close payment ▪ Consumer database ▪ Store-in-a-store solutions ▪ Health benefit systems management solution
Slide 39: Services Offered
SERVICES OFFERED Customers can select packages or selected services a la carte DEVICES SOFTWARE ▪ Stand alone: counter-top and portable ▪ Software development and testing ▪ Integrated PED ▪ R&D ▪ Mobile ▪ Version and update management ▪ Remote version updates of the terminal ACTIVATIONS & LOGISTICS
Slide 40: African Resonance / Dashpay Strengths
AFRICAN RESONANCE / DASHPAY STRENGTHS CLIENTS TECHNOLOGY Blue chip client base Unique technologies SUPPLIERS SPEED Blue chip supplier base Speed of deployment and ability to respond to market needs INNOVATION INTERFACE History of innovation Single interface with integrated device and CRM records EXP
Slide 41: Payments & Payment Infrastructure Pro-Forma Historical Performance
PAYMENTS & PAYMENT INFRASTRUCTURE ILLUSTRATIVE PRO-FORMA HISTORICAL PERFORMANCE YEAR-END 28 FEB H1 FY’18 H1 FY’18 CAGR 2014 2015 2016 2017 5 MONTHS 6 MONTHS ACTUAL EQUIVALENT '14 - ‘17 Revenue 44.2 140.7 196.1 202.9 164.2 197.0 66.0% EBITDA 9.4 24.9 42.1 77.5 54.8 65.7 102.0% Margin EBITDA 21.3% 17.
Slide 42: Software & Services Historical Performance
SOFTWARE & SERVICES HISTORICAL PERFORMANCE YEAR-END 28 FEB H1 FY’18 H1 FY’18 CAGR 2014 2015 2016 2017 5 MONTHS 6 MONTHS ACTUAL EQUIVALENT '14 - ‘17 Revenue 41.6 46.1 51.9 77.6 37.6 45.1 23% EBITDA 12.6 15.9 19.8 29.9 10.8 13.0 33% Margin EBITDA 30.3% 34.5% 38.2% 38.5% 28.7% Growth EBITDA 26.2% 24.5%
Slide 43: Comparable International Companies
COMPARABLE INTERNATIONAL COMPANIES Illustrative of breadth and depth of international “Payments” marketplace POS / CASH NETWORKS MERCHANT ACQUIRORS EMERGING PAYMENTS DISBURSEMENT $257,105 // 18.1x $16,223 // 11.4x $6,418 // 13.7x $91,942 // 21.5x $1,054 // 6.6x $5,738 // 9.2x $158,227 // 18.8x $16,0
Slide 44: Important Notice, Disclaimer and Basis of Presentation
IMPORTANT NOTICE, DISCLAIMER AND BASIS OF PRESENTATION For the purposes of this notice, this presentation (the This Presentation does not constitute or form part of, and should This Presentation contains forward-looking statements, including in “Presentation”) shall mean and include the pages and sl
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