Araxi Limited · JSE:AXX
Araxi — Capital Appreciation — FY2019 Earnings Presentation
49 slides from Araxi's earnings presentation, June 2019
Slide 1: Full Year Results for the period ended 31 March 2019
FULL YEAR RESULTS for the period ended 31 March 2019
Slide 2: Outline
CAPPREC overview OUTLINE 1 2 Highlights for the period 3 The opportunity 4 About our investments 5 Financial performance 6 Prospects 7 Annexure 2
Slide 3: About Capital Appreciation
ABOUT CAPITAL APPRECIATION We own, manage, invest in, and promote enterprises that innovate and seek to serve or partner with established and emerging financial institutions CAPPREC 100% 100% 17.45% PAYMENTS & PAYMENT SOFTWARE & CTA ENTERPRISE INTERNATIONAL * INFRASTRUCTURE SERVICES DEVELOPMENT FUND
Slide 4: Highlights
HIGHLIGHTS 4
Slide 5: Comparing 2019 to 2018
COMPARING 2019 TO 2018 COMPARISON VS. The acquisition of subsidiaries became effective 5 May 2017. The 2018 financial PRIOR YEAR results include performance of the acquired businesses for 11 months only. INVESTMENT IN Subsidiaries are generating substantial topline growth and an investment in OPERAT
Slide 6: Operational Accomplishments
OPERATIONAL ACCOMPLISHMENTS Proud to now be associated with all major SA banks and also many other banks and financial institutions Expanded and enhanced client relationships in both the Payments Established new Synthesis office in Cape Town and Software divisions • Expanded reach with retailers • N
Slide 7: Group Financial Metrics
GROUP FINANCIAL METRICS Solid results against backdrop of political uncertainty and economic difficulty Revenue Earnings & Dividends Revenue R 607.7 million 19.6% HEPS 8.33 cents (12.6%) Payments R 469.9 million 13.2% NHEPS 9.01 cents (11.0%) Services R 137.8 million 48.0% Cash EPS 10.93 cents 49.8%
Slide 8: Divisional Performance
DIVISIONAL PERFORMANCE REVENUE Payments Software EBITDA Payments Software 13.2% 48.0% (10.9%) 31.0% 22.7% 24.5% (DECREASE) / INCREASE 18.4% INCREASE VS. PRIOR 17.6% VS. PRIOR FY19 FY18 Software & Services FY19 FY18 Software & Services Payments & Payment Payments & Payment 81.6 82.4 Infrastructure In
Slide 9: Post Year-End Transactions
POST YEAR-END TRANSACTIONS CTA acquires all IP underlying CTA will acquire 245 million African Resonance from Uplink shares held by Dr. Neishlos Dr. Neishlos will resign from and related parties at 80 cents Executive role within Group per share Revised licence agreement between Uplink and Dashpay re
Slide 10: The Opportunity: B-BBEE Commitment: Enterprise Development
B-BBEE COMMITMENT: ENTERPRISE DEVELOPMENT CAPPREC’s subsidiaries established a not-for-profit fund to coordinate its enterprise development spend THE OPPORTUNITY SA startup GovChat announces it’s secured investment facility of up to R20m Capital Appreciation has also acquired a minority interest in
Slide 11: Tech-Enabled New Entrants in South Africa
TECH-ENABLED NEW ENTRANTS IN SOUTH AFRICA c. 11 million clients Vitality success demonstrates Reportedly 4 minutes to South Africa’s newest bank, Sought to be low-cost the power of user experience, on-board a client aiming to launch this year provider product bundling and data analytics Cost of deli
Slide 12: Characteristics of Future Payments Globally
CHARACTERISTICS OF FUTURE PAYMENTS GLOBALLY Innovations will make payments more cashless and invisible, also enabling data driven engagement platforms for clients LESS CASH INVISIBLE PAYMENTS PAYMENTS AS A MEANS OF ENGAGMENT THE VALUE OF DATA LOANS MADE EASIER TRANSACTION COSTS DECLINING RAPIDLY SOU
Slide 13: Electronic Payments Continue to Grow and Mutate
ELECTRONIC PAYMENTS CONTINUE TO GROW AND MUTATE IN RESPONSE TO CONSUMER BEHAVIOUR DIGITAL CURRENCY MIDDLE CLASS REGULATION BIG DATA • Increasing adoption and • Growing middle-class • Regulation and security • Consumer comfort with data sharing comfort with card-based and in emerging economies drivin
Slide 14: Move to Electronic Payments Continues
MOVE TO ELECTRONIC PAYMENTS CONTINUES South Africa RTC RTC CLC 0% In 2016, card-based 2% CLC 1% payments represented 56% 0% NAEDO of transaction volume 5% NAEDO ATM 4% RETAIL PAYMENTS ATM 11% EFT DEBIT 14% EFT DEBIT 15% AEDO 10% AEDO 1% 0% VOLUMES EFT VOLUMES CREDIT EFT 2010 13% 2017 CREDIT CARD CAR
Slide 15: Cloud Opportunity is Massive
CLOUD OPPORTUNITY IS MASSIVE • According to IDC, spending on public cloud services in South Africa will nearly triple over five years from R4.3-billion in 2017 to R11.5- OTHERS billion in 2022 48% • The adoption of cloud services will generate 112 000 net new jobs in South Africa by the end of 2022
Slide 16: Cloud Platforms Indispensable
CLOUD PLATFORMS INDESPENSIBLE …AWS is the world leader “ For Standard Bank Group to remain a leader in African financial services, we recognize we need to adopt a cloud-first approach to our business,” said Group CEO Sim Tshabalala. "AWS Cloud technology will create a springboard for Standard Bank G
Slide 17: About Our Investments
ABOUT OUR INVESTMENTS 17
Slide 18: Consistent Execution Strategy
CONSISTENT EXECUTION STRATEGY Strategy has delivered substantial growth over last 18 months and our objectives remain unchanged since initially formulated PARTNER INNOVATE EXECUTE State of the art proprietary technology Work with financial institutions Service excellence platforms for services Creat
Slide 19: Payments & Payment Infrastructure Segment
PAYMENTS & PAYMENT INFRASTRUCTURE SEGMENT 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 technology Provide and operate De
Slide 20: Payments Revenue Model
PAYMENTS REVENUE MODEL POS DEVICES MAINTENANCE POS ESTATE TRANSACTIONS LICENSING & & REPAIRS MANAGEMENT SOLUTIONS • Terminal sales • Generates monthly • Generates monthly • Variable based on • Generates monthly generate gross profit recurring revenue recurring revenue transaction type and recurring
Slide 21: Extensive Range of Devices… and More to Come
EXTENSIVE RANGE OF DEVICES… Devices range in functionality, price and margin …AND MORE TO COME 21
Slide 22: Dashpay – Innovation in Processing
DASHPAY – INNOVATION IN PROCESSING Creating new value opportunities through platform ecosystem Traditional processing New economic model – Platform economics Challenged • Introduces brutal efficiency to transaction processing economic model • Universal processing - processes all transaction types on
Slide 23: Dashpay's Evolution
DASHPAY’S EVOLUTION Material progress has been made in readying Dashpay for mass deployment BANK RELATIONSHIPS TARGET MARKET OPPORTUNITIES PRODUCT OFFERING THEN* NOW^ THEN* NOW^ THEN* NOW^ Small independent Small independent Traditional Multiple products and merchants merchants Merchant services Lar
Slide 24: Dashpay Operational Update
DASHPAY OPERATIONAL UPDATE Transaction (Tx) Data Gross Tx Value Gross Tx Volume 340% 250% R2.2bn 5.7m 57% 39% 4.1m R1.4bn 180% 156% R500m 1.6m THEN* NOV ‘18 NOW^ THEN* NOV ‘18 NOW^ 18 months 6 months 18 months 6 months * MAY 2017 (FIRST ACQUISITION MONTH) // ^ APRIL 2019 (LATEST TRADING MONTH) // AN
Slide 25: Dashpay
DASHPAY Expanding client and brand penetration 25
Slide 26: Software & Services Segment – Synthesis
SOFTWARE & SERVICES SEGMENT – SYNTHESIS Leading provider of technology products and solutions within the financial services industry BLUE-CHIP CLIENTS CLIENT CENTRIC THOUGHT LEADERS Absa, Investec, Standard Bank, HSBC, Delivering the highest business Acquiring and retaining the best Nedbank CIB, Cit
Slide 27: Operating Units within Synthesis
OPERATING UNITS WITHIN SYNTHESIS CLOUD DIGITAL PLATFORM INTEGRATION CONSULTING CHANNELS PRODUCTS Cloud transformation to assist the Delivering exceptional end-user client Integration to enable regulatory Enterprise in becoming cloud ready, experience web and mobile touch points reporting solutions f
Slide 28: Synthesis Academy
SYNTHESIS ACADEMY Technical and cloud training tailored to organisational objectives “ “Synthesis is a learning organisation with deep technical and business skills. We are well positioned to • Outcomes-driven onsite or e-Learning LMS based training • Practical Labs to move from theory to applicatio
Slide 29: Global Stability – Discovery Vitality Use Case
GLOBAL STABILITY – DISCOVERY VITALITY USE CASE Synthesis delivers advanced support and global scalability to Discovery Vitality Group VITALITY STATS Discovery Vitality Group has built a massively flexible and scalable platform on 140m 4m 15 AWS Cloud for its global Vitality program using a microserv
Slide 30: Reg Tech – Reporting & Compliance
REG TECH – REPORTING & COMPLIANCE Synthesis helped one of SA’s biggest banks to upgrade their Balance of Payments (BoP) Reporting system One of the largest The new software is authorised Forex dealers replicable and scalable, Use of the Synthesis in the country, benefits offering opportunities for R
Slide 31: Financial Performance
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Slide 32: Financial Performance: Payments & Payment Infrastructure Division
FINANCIAL PERFORMANCE Payments & Payment Infrastructure Division 469.9 500 GROWTH Revenue 13.2% 415.1 450 EBITDA (10.9%) Operating profit (14.4%) 400 350 CAGR Revenue 60% 300 EBITDA 71% 250 202.9 196.1 200 151.7 149.5 140.7 135.5 127.9 150 77.5 100 60.9 44.2 42.1 24.9 22.7 50 10.6 9.4 1.1 0 FY '14 F
Slide 33: Terminal Estate Analysis
TERMINAL ESTATE ANALYSIS Terminals at period end 140000 128000 118000 103000 95000 92000 77000 76000 40000 41000 60000 38000 53000 49000 48000 40000 32000 22000 32000 16000 April '17 Sep '17 Mar '18 Sep '18 Mar '19 April '17 Sep '17 Mar '18 Sep '18 Mar '19 April '17 Sep '17 Mar '18 Sep '18 Mar '19 A
Slide 34: Financial Performance: Software & Services Division
FINANCIAL PERFORMANCE Software & Services Division 160 PERIOD GROWTH 137.8 Revenue 48.0% 140 EBITDA 31.0% Operating profit 26.7% 120 93.1 100 CAGR Revenue 27% 77.6 EBITDA 28% 80 51.9 60 46.1 EBITDA and Operating Profit is 44.0 42.1 41.6 after expensing additional 33.9 ramp-up costs related to AWS 33
Slide 35: Group Summarised Statement of Comprehensive Income
GROUP SUMMARISED STATEMENT OF COMPREHENSIVE INCOME % increase / Strong growth from all (R million) 31 March 2019 31 March 2018 divisions (decrease) Revenue 607.7 508.2 19.6% Development of new innovative products and Operating expenses 128.0 80.0 59.9% building of operating capacity EBITDA 159.5 176
Slide 36: Divisional Revenue Composition
DIVISIONAL REVENUE COMPOSITION (R million) 31 March 2019 31 March 2018 Growth Payments & Payment Infrastructure division Rental income 79.3 82.4 (3.8%) Maintenance and support service fees 73.9 45.1 63.9% Sale of terminals 290.9 276.0 5.4% Transaction fees 15.1 11.6 30.2% Other revenue * 10.7 - - To
Slide 37: Condensed Group Statement of Financial Position
CONDENSED GROUP STATEMENT OF FINANCIAL POSITION AT 30 SEPTEMBER 2018 (R million) 31 March 2019 31 Mar 2018 ASSETS Goodwill 728.6 728.6 Intangible assets 62.3 71.5 Other non-current assets 72.2 64.3 Non-current assets 863.1 864.4 Available for investment Cash and cash equivalents 611.2 513.2 in organ
Slide 38: Cashflow (Key Features)
CASHFLOW (KEY FEATURES) (R million) 31 March 2019 31 March 2018 Cashflow from operations 212.7 166.3 Cash conversion ratio of 112.8% of Trading Profit Changes in working capital 51.7 (12.6) Acquisition of property, plant and equipment (16.5) (4.8) Effective asset management Acquisition of subsidiari
Slide 39: Prospects
PROSPECTS 39
Slide 40: Growth Opportunities
PROSPECTS Capital Appreciation is well capitalised, with the management skills and technology to drive it’s growth strategy • 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 • Politica
Slide 41: Our Investment Case
OUR INVESTMENT CASE • Well-positioned in an industry with healthy organic growth prospects • A trusted partner to a strong network of large financial institutions • Clients are well capitalised and established • Clients already have a presence in Africa – providing the potential ability for CAPPREC
Slide 42: Thank You
{A CAPITAL APPRECIATION THAN K Y Oo U 42
Slide 43: Annexure
ANNEXURE 43
Slide 44: Comparable International Companies
COMPARABLE INTERNATIONAL COMPANIES Illustrative of breadth and depth of international “Payments” marketplace POS / CASH NETWORKS MERCHANT ACQUIRORS EMERGING PAYMENTS DISBURSEMENT $264 043 // 25.9x $4 672 // 8.5x $2 201 // 12.3x $305 // NA $7 964 // 13.4x $1 423 // 7.6x $370 290 // 23.1x $26 048 // 1
Slide 45: Payments & Payment Infrastructure Historical Performance
PAYMENTS & PAYMENT INFRASTRUCTURE Historical performance (R million) 2014 2015 2016 2017 2018 2019 CAGR ’14 – ‘19 Revenue 44.2 140.7 196.1 202.9 415.1 469.9 60% EBITDA 9.4 24.9 42.1 77.5 151.7 135.5 71% Margin EBITDA 21.3% 17.7% 21.5% 38.2% 36.5% 28.8% Growth Revenue 218.3% 39.4% 3.5% 104.6% 13.2% E
Slide 46: Software & Services Historical Performance
SOFTWARE & SERVICES Historical performance (R million) 2014 2015 2016 2017 2018 2019 CAGR ‘14 – ‘19 Revenue 41.6 46.1 51.9 77.6 93.1 137.8 27% EBITDA 12.6 15.9 19.8 29.9 33.9 44.0 28% Margin EBITDA 30.3% 34.5% 38.2% 38.5% 36.4% 31.9% Growth Revenue 10.8% 12.6% 49.5% 20.0% 48.0% EBITDA 26.2% 24.5% 51
Slide 47: Period on Period Sector Performance
PERIOD ON PERIOD SECTOR PERFORMANCE Financial performance INFRASTRUCTURE (R million) H1 ‘18 H2 ‘18 H1 ‘19 H2 ‘19 PAYMENTS & PAYMENT Revenue 173.8 241.3 253.6 216.3 EBITDA 57.3 94.7 70.9 64.6 Margin EBITDA 33% 39% 28% 30% (R million) H1 ‘18 H2 ‘18 H1 ‘19 H2 ‘19 SOFTWARE & SERVICES Revenue 37.6 55.5 6
Slide 48: Glossary
GLOSSARY AEDO Authenticated early debit order ISO Independent sale organisation AI Artificial intelligence IT Information technology ATM Automated teller machine M Million AWS Amazon Web Services NA Not available B2B Business to business NAEDO Non-authenticated early debit order B2B2C Business to bu
Slide 49: Important Notice, Disclaimer and Basis of Presentation
IMPORTANT NOTICE, DISCLAIMER AND BASIS OF PRESENTATION For the purposes of this notice, this presentation (the “Presentation”) shall mean This Presentation does not constitute or form part of, and should not be This Presentation contains forward-looking statements, including in relation to and inclu