Araxi Limited · JSE:AXX
Araxi — Capital Appreciation — FY2021 Earnings Presentation
59 slides from Araxi's earnings presentation, June 2021
Slide 1: Full Year Results Presentation
FULL YEAR RESULTS PRESENTATION For the year ended 31 March 2021 1
Slide 2: Outline
1 Introduction OUTLINE 2 Highlights for the period 3 The opportunity 4 Strategy execution 5 Financial performance 6 Prospects 2
Slide 3: Capital Appreciation
PAYMENTS & PAYMENT INFRASTRUCTURE CAPITAL (Payments Division) APPRECIATION We are a financial technology company that seeks to serve or partner with established and emerging financial institutions and other large corporates SOFTWARE & SERVICES (Software Division) CTA ENTERPRISE DEVELOPMENT FUND 3
Slide 4: Impact of COVID-19
OPERATIONAL IMPACT BUSINESS IMPACT Minimal – Clients continued to enjoy Long tail of COVID had a material impact IMPACT OF exceptional, uninterrupted service on customers’ businesses including: • Material credit losses COVID-19 • Retailer shutdowns • Reduced retail activity While COVID has been a ca
Slide 5: Negative impact contained and short lived
GENERAL PAYMENTS SOFTWARE Increased interest in Substantial terminal No projects were NEGATIVE IMPACT “Digitalisation” orders placed in cancelled CONTAINED & February and March but only delivered SHORT LIVED Addressable market for post year end New cadence to digital payment solutions sales cycle Wh
Slide 6: COVID impact on payment infrastructure
Terminal Handling 160.00% 140.00% 120.00% COVID IMPACT 100.00% 80.00% ON PAYMENT 60.00% 40.00% INFRASTRUCTURE 20.00% 0.00% ACTIVITY Ave H2'20 Apr-20 May-20 Jun-20 Jul-20 Aug-20 Sep-20 Oct-20 Nov-20 Dec-20 Jan-21 Feb-21 Mar-21 Capacity Utilisation – reflects reduced activity and delayed Repairs busin
Slide 7: Capital Appreciation's positioning remains strong
CAPITAL APPRECIATION’S Asset light business model with efficient working capital management POSITIONING Healthy balance sheet, enables management to focus on execution REMAINS STRONG Experienced management team While challenges exist and operating conditions are tough, CAPPREC’s Deep domain expertis
Slide 8: Highlights
HIGHLIGHTS 8
Slide 9: Notable items impacting on the financial results
Substantial terminal order placed in 2021, only delivered in 2022 generating substantial revenue, profit and cash in Q1 2022 NOTABLE ITEMS IMPACTING ON R1.2 million unrealised mark-to-market forex loss on forward cover in 2021 vs R14.6 million unrealised mark-to-market forex THE FINANCIAL gain in 20
Slide 10: Summary group financial results
Revenue Earnings & Dividends Revenue R 619.5 m 11.7% EPS 10.28 cents 8.5% SUMMARY Payments Division R 397.4 m 21.5% HEPS 10.34 cents 3.1% GROUP Software Division R 222.1 m 13.9% Dividends 5.50 cents 10.0% FINANCIAL Profit Adjusted For Notable Items RESULTS EBITDA R 172.9 m 15.5% Fiscal 2021, Adjuste
Slide 11: Divisional contribution
27.8% 35.8% REVENUE FY’21 FY’20 DIVISIONAL 64.2% CONTRIBUTION 72.2% Payments Software 29.0% 25.0% EBITDA FY’21 FY’20 71.0% 75.0% 11
Slide 12: Payments highlights
✓ More than 217,000 terminals in hands of clients, up 17% YoY PAYMENTS HIGHLIGHTS ✓ Annuity based estate management revenue up 20% While number of terminals shipped was ✓ Android solutions well received by customers less than planned for, there were many positives during the year ✓ Launched HaloDot
Slide 13: Software highlights
✓ Strengthened relationship with existing clients SOFTWARE ✓ New blue-chip client relationships established HIGHLIGHTS ✓ Secured additional AWS accreditation, further cementing leadership position A positive result against a tough economic backdrop ✓ Diversified revenue stream – New verticals and ge
Slide 14: GovChat a year later
GOVCHAT A citizen-government engagement platform in cooperation with COGTA A YEAR LATER Actively participated Platform development work done by Synthesis – recognised by AWS as in COVID response Sub-Saharan Africa Social Impact efforts Partner of the year Delivered millions of SRD and ECD grant appl
Slide 15: The Opportunity
THE OPPORTUNITY 15
Slide 16: Fintech trends for 2021
Digital-only banking Opportunities for the FinTech sector International expansion FINTECH TRENDS Artificial Intelligence AI/ML Partnerships FOR 2021 New opportunities in the market Forbes Fintech Trends to look out for in 2021 RegTech “2020 will go down in history as the Banking the unbanked year of
Slide 17: Market for cloud continues to grow
MARKET FOR $13.5bn AWS Revenue, grew 32% YoY (CY’21 Q1) CLOUD CONTINUES TO GROW . . . . . . SA MARKET EXPECTS 30% 4 YEAR CAGR Up 50% Estimated Microsoft Azure Revenue growth (CY’21 Q1) R22bn SA cloud market in 2023, expected to grow at c.30% over next 4 years Source: News reports, BMIT SA Cloud Comp
Slide 18: Cost savings is only a small reason for cloud adoption
8% 13% COST SAVINGS IS ONLY A COST SAVINGS OPERATIONAL RESILIENCE SMALL REASON Reduces the percentage of IT spend on infrastructure, freeing budget for reinvestment AWS availability and security enables customers to improve SLAs while reducing FOR CLOUD in other areas unplanned downtime and risk ADO
Slide 19: Megatrends
MEGATRENDS 01 02 03 Fast and Cloud is a Event data actionable data catalyst for is a are no longer adoption of AI gold mine buzzwords 19
Slide 20: COVID's longer-term impact on payments
Cash is increasingly unwelcome, limit spread of COVID-19 Increasing interest by merchants in digital payment solutions COVID’S LONGER-TERM Merchants increasingly interested in Value Added functionality IMPACT ON PAYMENTS Contactless payment – per Mastercard survey 46% of consumers change “Top Capita
Slide 21: Social media conversation about contactless payments
160 146 140 SOCIAL MEDIA 123 120 CONVERSATION 100 96 100 105 106 105 100 95 ABOUT 85 CONTACTLESS 80 PAYMENTS 60 40 From Q1 ‘18 to Q2 ‘20 – Indexed to 100 20 0 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 2018 2018 2018 2018 2019 2019 2019 2019 2020 2020 21
Slide 22: Digital adoption in Europe and US
1. Questions: Which of the following 4 industries have you used or visited 5 (remotely, online, or in person) in the past 6 DIGITAL 4 1 3 months? How have you interacted with these industries in the ADOPTION IN 6 5 6 2 past 6 months? Which of these services have EUROPE AND US 3 your started to use d
Slide 23: Payments in South Africa
Mix of consumer payments instruments (value and number of transactions) PAYMENTS IN >70% of transactions 100% Other Other are cash SOUTH AFRICA Direct Debit Direct Debit 90% Cash is big and continues to be a 60 billion+ cash primary source of opportunity for transactions p.a. Debit Card digitalisati
Slide 24: Digital acceptance
Breakdown of acceptance frontier by Standalone POS devices number of stores per business segment (No of terminals, thousands) (2017) DIGITAL 403 418 ACCEPTANCE Merchants in these sectors will be well within the current acceptance The conventional 394 frontier, and should all have Large & acceptance
Slide 25: Strategy Execution
STRATEGY EXECUTION 25
Slide 26: Consistent strategy execution
CONSISTENT STRATEGY EXECUTION PARTNER INNOVATE EXECUTE Strategy has delivered substantial growth and our objectives remain Work with financial institutions State of the art proprietary Service excellence unchanged since initially formulated technology Create ecosystems for Alleviate pain points coll
Slide 27: Payments key stats
19 LARGE Years in business & growing market opportunity (TAM) PAYMENTS KEY STATS >6X EXTENSIVE Size of terminal estate Portfolio of intellectual managed in 5 years property > 90% INNOVATIVE Client satisfaction metrics Partners that execute > 100 PASSIONATE Years of dedicated payment Attitude to paym
Slide 28: Substantial growth in terminal estate
217 185 TOTAL TERMINAL ESTATE 140 • Number of terminals in clients’ hands grew 17% YoY, 92 45% 4yr CAGR 49 • Includes terminals subject to rental agreements April '17 Mar '18 Mar '19 Mar '20 Mar '21 SUBSTANTIAL OWNED BY CLIENTS GROWTH IN 178 207 • Number of terminals delivered to clients grew by 17%
Slide 29: Tap on Phone contactless acceptance on Android
Enables Contactless Payment Acceptance On Any NFC-Enabled Android Device TAP ON PHONE BENEFITS Affordable – No additional hardware needs to be purchased Contactless cards and mobile Simple – No training or device maintenance required wallets such as Apple Pay Eco-friendly – No paper or consumables a
Slide 30: HaloDot continues to lead with innovation
PHASE 1 PHASE 2 PHASE 3 June 2020 Current Sept 2021 HALODOT (April – June ’21) CONTINUES • L2 Certification for • L2 Certification for • Halo SoftPOS as a TO LEAD Mastercard & Visa American Express Service (PaaS) WITH • Tap on Phone SDK • SDK support for PIN Entry on any device • SDK launch with new
Slide 31: Evolution in payment services offering
✓ Merchant terminal count continues to increase – >80% increase in active users GROSS Tx VALUE EVOLUTION IN ✓ Transaction related PAYMENT revenue continues to > 12.5x in 4 years 14% 14% R6.4bn SERVICES increase 69% R5.6bn OFFERING ✓ Focus on solving complex enterprise problems 57% 31% R4.9bn 180% Da
Slide 32: Dashpay in the enterprise
8 SHOPPING 2,500 OFFICE PARKS 3 RESIDENTIAL 4,000,000+ FOOT MALLS MERCHANTS INCLUDING ESTATES TRAFFIC PER PWC, etc. MONTH DASHPAY IN THE ENTERPRISE MALL OFFICE / MIXED RESIDENTIAL Attacq LANDLORD Attacq LANDLORD Attacq Merchant TENANT Corporate TENANT Renter / owner Consumer INDIVIDUAL Employee INDI
Slide 33: Launch functionality
INITIAL PHASE - THE APP Allows customers to: • Sign up • Navigate the malls • Buy & send vouchers • Access loyalty across merchants LAUNCH • View deals & offers FUNCTIONALITY EXCITING ENHANCEMENTS Launched in Mall of Africa with many AHEAD merchants already active Good collaboration among Dashpay an
Slide 34: We invested in LayUp
87% Of people are defaulting on repayments of loans WE INVESTED IN LAYUP + 20 Million People locked out LayUp is a digital lay-by of the economy solution that provides for periodic instalment payments + 40% Unemployment rate 34
Slide 35: LayUp in action
STEP 02 Activate your payment plan LAYUP IN with a small deposit and break down the total cost into ACTION more affordable monthly payments that fit your budget STEP 01 Tangible benefits to the merchant and free to the Simply choose what you consumer want and create a LayUp account. Select LayUp pay
Slide 36: Payments' growth strategy
✓ Grow market for devices ✓ PAYMENTS’ Continue to take market share in established segments GROWTH ✓ Support existing clients STRATEGY ✓ Grow SA client base Organic growth opportunities are plentiful for a business with ✓ Follow clients across Africa an established base, immense industrial knowledge
Slide 37: Synthesis key stats
24 LARGE Years in business Market opportunity (TAM) SYNTHESIS KEY STATS > 4X DELIGHTED Revenue growth in 5 years Client satisfaction measure 10 PASSIONATE Countries, and growing, Attitude to technology and our where solutions delivered clients’ success 160 RECOGNISED Amazon (APN) Social Impact Team
Slide 38: Software & services segment
SOFTWARE & SERVICES SEGMENT BLUE-CHIP CLIENTS CLIENT CENTRIC THOUGHT LEADERS Leading provider of technology products Absa, Afgri, Capitec, Investec, Delivering the highest business Acquiring and retaining the best Nedbank, Standard Bank, Woolworths value with a strong service ethic software developm
Slide 39: Synthesis leads with ideas
✓ Webinars: 13 SYNTHESIS LEADS WITH ✓ Attendees: > 3,000 IDEAS ✓ Podcasts: > 60 Synthesis was very active in building brand awareness and outreach over the ✓ Podcast reach: > 200,000 unique people last 15 months ✓ Google campaign: > 4.3 million impressions ✓ Website views: > 117,000 ✓ Published arti
Slide 40: Operating units within Synthesis
PLATFORM DIGITAL INTEGRATION CHANNELS CLOUD PRODUCTS (REG TECH) OPERATING Delivering exceptional end-user client experience, web and mobile touchpoints Cloud transformation to assist the Enterprise in becoming cloud-ready, execute mass Integration to enable regulatory reporting solutions for SARS (t
Slide 41: AWS leadership continues
AWS LEADERSHIP CONTINUES Synthesis’ partnership with Amazon Web Services, enables world-class solutions for our clients. 41
Slide 42: Fast data solves fraud detection
Real-time streaming of “ FAST DATA transactional data SOLVES FRAUD This is truly remarkable. I see this as a watershed moment in the way DETECTION we manage and access data. Many thanks to everyone Detected fraudulent involved!! Exceptional results like this are only possible if exceptional payment
Slide 43: Hong Kong based client drives employee connection with AWS cloud
Migrated core infrastructure to the cloud to save HONG KONG costs on datacentre hardware replacements BASED CLIENT DRIVES EMPLOYEE Reaping full cloud benefits of flexibility and cost savings CONNECTION WITH AWS CLOUD Full access to data and analytics, aids with payments to employees and allows great
Slide 44: Software IP portfolio continues to grow - Keystone
Keystone enables Card Issuers to provide PIN Management functions SELECTED such as View PIN or Change PIN to CUSTOMERS its card holders over Digital SOFTWARE IP Channels PORTFOLIO CONTINUES This allows card holders to view or change their PIN directly within an App or web browser, removing the TO GR
Slide 45: Financial Performance
FINANCIAL PERFORMANCE 45
Slide 46: Notable items impacting on the financial results
Substantial terminal order placed in 2021, only delivered in 2022 generating substantial revenue, profit and cash in Q1 2022 NOTABLE ITEMS IMPACTING ON R1.2 million unrealised mark-to-market forex loss on forward cover in 2021 vs R14.6 million unrealised mark-to-market forex THE FINANCIAL gain in 20
Slide 47: Divisional performance: Payments Division
R million terminal sales 600 506.2 Delayed 469.9 500 DIVISIONAL 415.1 397.4 PERFORMANCE 400 Payments Division 300 202.9 196.1 161.8 151.7 140.7 135.3 140.4 200 77.5 100 44.2 42.1 24.9 9.4 0 FY '14 FY '15 FY '16 FY '17 FY '18 FY '19 FY '20 FY '21 Revenue EBITDA Large order in FY 21 did not get Operat
Slide 48: Revenue composition: Payments Division
R million 350 REVENUE 300 COMPOSITION 250 Payments Division 20% 200 150 Annuity income increased by 11% 100 29% 50 - Terminal rental Maintenance and Sale of terminals Transaction related Sundry revenue income support service fees income from terminals from terminals 2020 2021 48
Slide 49: Divisional performance: Software Division
R million 222.1 250 195.0 DIVISIONAL 200 PERFORMANCE 137.8 150 Software Division 93.1 77.6 100 57.5 53.8 51.9 46.1 43.3 41.6 33.9 29.9 50 19.8 15.9 12.6 0 FY '14 FY '15 FY '16 FY '17 FY '18 FY '19 FY '20 FY '21 Gross Revenue EBITDA COVID-19 impacts: • Timing delays in projects and Revenue up 13.9% Y
Slide 50: Revenue composition: Software Division
R million 7% 180 REVENUE 160 COMPOSITION 140 Software Division 120 100 47% 80 Annuity income 60 increased by 14.8% 40 20 Helped non-SA Revenue to almost - double Services and consultancy fees Licence and subscription fees Hardware 2020 2021 50
Slide 51: Group summarised statement of comprehensive income
GROUP SUMMARISED STATEMENT OF COMPREHENSIVE INCOME % increase / Delayed terminal order (R million) 31 March 2021 31 March 2020 (decrease) Project delays Revenue 619.5 701.2 (11.7)% Other income/loss 0.2 17.1 (98.8)% Foreign exchange movements Operating expenses 125.0 143.2 (12.7)% EBITDA 172.9 204.7
Slide 52: Condensed group statement of financial position
CONDENSED GROUP STATEMENT OF FINANCIAL POSITION (R million) 31 March 2021 31 March 2020 ASSETS Uncomplicated Balance Sheet Goodwill 728.6 728.6 No contingent liabilities Intangible assets 61.2 61.8 No post-year-end events Investments in associates 6.0 - Asset-light business Other non-current assets
Slide 53: Cash flow (key features)
CASH FLOW (KEY FEATURES) (R million) 31 March 2021 31 March 2020 Cashflow from operations 200.9 206.1 Effective asset management Asset-light business Proceeds from disposal of associate 0.0 35.0 Changes in working capital 18.7 23.8 Finance income received 21.0 38.7 Weighted average interest rate dow
Slide 54: Robust cash from operations supports dividends
CASH COVER ROBUST CASH R million Times FROM 900 4.0 786.0 OPERATIONS 800 3.2 3.5 SUPPORTS 700 2.9 3.0 DIVIDENDS 600 2.7 2.8 2.8 2.5 500 2.0 400 275.2 DIVIDENDS 1.5 212.7 206.1 (cents per share) 300 200.9 166.3 6.0 5.50 5.00 1.0 5.0 200 4.25 4.00 74.9 72.1 66.1 62.2 4.0 100 0.5 3.0 2.0 0 - 1.0 2018 2
Slide 55: Prospects
PROSPECTS 55
Slide 56: General prospects
• A broad range of organic as well as acquisitive growth opportunities available to CAPPREC • Acquisition activity will depend on strategic fit as well as valuations GENERAL • Economic climate is impacting our clients and remains present in our PROSPECTS planning Capital Appreciation is well capital
Slide 57: Our investment case
✓ Leadership position in industry with strong secular OUR INVESTMENT growth trajectory CASE ✓ Strong culture of innovation resulting in relevant An extremely strong foundation on which to grow – organically and by client solutions acquisition ✓ Established track record of delivery ✓ A trusted partne
Slide 58: A huge thank you
A HUGE Our Team THANK YOU Our Clients Our Investment Analyst Shareholders Society for Excellence in Financial Reporting and Communications Award (Technology) 58
Slide 59: Glossary
AEDO Authenticated early debit order IT Information technology AI Artificial intelligence M Million ATM Automated teller machine MPoC Mobile payments on COTS AWS Amazon Web Services NA Not available B2B Business to business NAEDO Non-authenticated early debit order B2B2C Business to business to cons