Araxi Limited · JSE:AXX
Araxi — Capital Appreciation — H1 FY2020 Earnings Presentation
45 slides from Araxi's earnings presentation, November 2019
Slide 1: Unaudited Results
Unaudited Results For the six months ending 30 September 2019
Slide 2: Outline
1 CAPPREC overview 2 Highlights for the period 3 The opportunity OUTLINE 4 About our investments 5 Financial performance 6 Prospects 2
Slide 3: About Capital Appreciation
ABOUT CAPITAL APPRECIATION We are a financial technology company that seeks to serve or partner with established and emerging financial institutions and other large corporates Payments & Payment Software CTA Enterprise Infrastructure & Services Development Fund CTA 35% 3
Slide 4: Highlights
HIGHLIGHTS 4
Slide 5: Introductory Considerations – H1 FY'20
INTRODUCTORY CONSIDERATIONS – H1 FY’20 INVESTMENT IN Subsidiaries are generating substantial top-line growth and investment in OPERATING capacity to accommodate future growth is incorporated in this period’s results. INFRASTRUCTURE This investment is in anticipation of future increased activity. Pro
Slide 6: Transactions Announced in June Completed September 2019
TRANSACTIONS ANNOUNCED IN JUNE COMPLETED 17 SEPTEMBER 2019 CTA acquired all IP underlying African Resonance CTA acquired 245 million shares held by Dr. Neishlos and related parties at Absolute alignment of 80 cents per share development teams and Licence agreement re Dashpay’s business units transac
Slide 7: Operational Accomplishments
OPERATIONAL ACCOMPLISHMENTS Proud to be associated with all major SA banks and also many other banks and financial institutions Expanded and enhanced client relationships in both the Payments Synthesis Cape Town making great strides in the retail sector and Software divisions 31% increase in number
Slide 8: Group Financial Metrics
GROUP FINANCIAL METRICS Six months ended 30 September 2019 Revenue Earnings & Dividends Revenue R 281.6 million (10.7%) HEPS 3.43 cents (19.0%) Absent terminal delivery delay, Payments Division R 186.3 million (26.5%) Payments NHEPS 3.81 cents (16.3%) Division revenue Services Division R 95.3 millio
Slide 9: Divisional Performance
DIVISIONAL PERFORMANCE REVENUE Payments Services EBITDA Payments Services 33.8% 35.5% (26.5%) 54.0% (29.6%) 47.8% (DECREASE) / INCREASE (DECREASE) / INCREASE 19.6% 20.8% VS. PRIOR VS. PRIOR FY19 FY18 Services FY19 FY18 Services Payments Payments 80.4 79.2 % % 66.2% 64.5% PAYMENTS & PAYMENT INFRASTRU
Slide 10: Representative Clients
REPRESENTATIVE CLIENTS Payments Services OTHER RETAILERS 10
Slide 11: GovChat - Official Launch
GOVCHAT - OFFICIAL LAUNCH ELDRID JORDAAN DEPUTY MINISTER OF COMMUNICATIONS, CEO & FOUNDER HON. PINKY KEKANA A citizen-government engagement platform in cooperation with COGTA Platform development being done by Synthesis PRESIDENCY’S DEPUTY DG, “4IR” #LETSTALK – ABSA, SYNTHESIS, HON. MATSIETSI MOKHOL
Slide 12: The Opportunity
THE OPPORTUNITY 12
Slide 13: Compelling Sector Opportunities
COMPELLING SECTOR OPPORTUNITIES New entrant banks and Incumbent banks and emerging financial established financial Cost to serve clients services companies service providers Availability of service Nature of service Telecom and other Retailers consumer-facing Inclusive service services companies Con
Slide 14: Public Cloud Market
PUBLIC CLOUD MARKET AWS is clear market leader generating $9 billion in revenue in Q3 ‘19 vs. $7 billion in prior year Source: Gartner, Goldman Sachs, Insider Inc. 14
Slide 15: Cloud Adoption in South Africa
CLOUD ADOPTION IN SOUTH AFRICA IDC predicts cloud services will generate more than 100 000 net new jobs by 2022 CLOUD ADOPTION SA CLOUD COMPUTING MARKET SIZING ESTIMATE R millions Source: BMIT SA Cloud Computing Overview & Market Sizing 2019 15
Slide 16: AWS Cape Town Data Centre Launch H1 '20
AWS CAPE TOWN DATA CENTRE LAUNCH H1 ‘20 Removes “latency” Material investment Marketing of cloud and “data by Amazon for Africa offering in advance of sovereignty” region launch concerns Synthesis well positioned to benefit from this launch 16
Slide 17: Cloud Platforms Indispensible
CLOUD PLATFORMS INDISPENSIBLE “ 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 Group, helping us to rapid
Slide 18: About Our Investments
ABOUT OUR INVESTMENTS 18
Slide 19: Consistent Execution Strategy
CONSISTENT EXECUTION STRATEGY Strategy has delivered substantial growth 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 Create ecosystems for Ent
Slide 20: 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 21: Payments Revenue Model
PAYMENTS REVENUE MODEL POS DEVICES MAINTENANCE POS ESTATE TRANSACTIONS LICENSING & & SERVICES 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 22: Existing Relationship with Leading Terminal Supplier
EXISTING RELATIONSHIP WITH LEADING TERMINAL SUPPLIER Extensive range of terminals 22
Slide 23: New Terminal Distribution Agreement
NEW TERMINAL DISTRIBUTION AGREEMENT Agreement for distribution and use of Newland Payment Technology terminals PT, world’s second largest manufacturer of payment terminals In response to client demand for additional options and price points 23
Slide 24: Substantial Growth in Terminal Estate
SUBSTANTIAL GROWTH IN TERMINAL ESTATE Terminals at period end, in thousands 164 At end of period Delivered in October 140 154 156 118 146 128 120 92 103 95 117 40 41 42 76 77 38 60 49 33 48 53 40 22 32 32 16 April Sep Mar Sep Mar Sep April Sep Mar Sep Mar Sep April Sep Mar Sep Mar Sep April Sep Mar
Slide 25: Evolution in Payment Services Offering
EVOLUTION IN PAYMENT SERVICES OFFERING Continuing but delayed progress 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 merchants merchants Mercha
Slide 26: Dashpay Operational Update
DASHPAY OPERATIONAL UPDATE Transaction (Tx) Data GROSS Tx VALUE GROSS Tx VOLUME R2.9bn 7.1m 480% 31% 340% 25% R2.2bn 5.7m 57% 39% R1.4bn 4.1m 180% 156% R500m 1.6m MAY ‘17 NOV ‘18 APR‘19 OCT ‘19^ MAY ‘17 NOV ‘18 APR ‘19 OCT ‘19^ * MAY 2017 (FIRST ACQUISITION MONTH) // ^ OCTOBER 2019 (LATEST TRADING M
Slide 27: Sasol – AA Loyalty
SASOL – AA LOYALTY Dashpay developed and operates the AA Fuel Loyalty solution at Sasol stations nationwide Sites The platform provides an > 200 immediate plug-and-play solution Terminals > 360 THE SOLUTION ENABLES ▪ Enrolment Potential members ▪ Card linking > 500 000 ▪ Earning ▪ Redemption ▪ Recon
Slide 28: 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, Afgri, Capitec, Investec, Delivering the highest business Acquiring and retaining the best Nedbank, Standard Ban
Slide 29: Operating Units within Synthesis
OPERATING UNITS WITHIN SYNTHESIS DIGITAL CLOUD PLATFORM INTEGRATION CHANNELS PRODUCTS Delivering exceptional end-user client Cloud transformation to assist the Integration to enable regulatory experience, web and mobile touchpoints Enterprise in becoming cloud-ready, reporting solutions for SARS (ta
Slide 30: Prior Case Studies
PRIOR CASE STUDIES Use of AI and machine learning in 24/7/365 cloud managed brand management infrastructure services globally SYNTHESIS ACADEMY Outcomes-driven e-Learning LMS-based training to client Financial services in organisations RegTech agricultural sector 30
Slide 31: Contextually Relevant & Timely Customer Engagement
CONTEXTUALLY RELEVANT & TIMELY CUSTOMER ENGAGEMENT THE PROBLEM PRESENTED Contextually relevant At the Through the conversations right time preferred channel THE SOLUTION THE RESULT Synthesis worked with Standard Bank IT to build a hyperscale capability through AWS that enables the demands of the bus
Slide 32: Sasfin Integrates Synthesis Finsurv Reporting into Calypso Suite
SASFIN INTEGRATES SYNTHESIS FINSURV REPORTING INTO ITS NEW CALYPSO SUITE THE PROBLEM PRESENTED Upgrade from disparate legacy trading systems to a new Calypso suite while ensuring compliance with SARB reporting THE SOLUTION THE RESULT Synthesis worked with Sasfin The Synthesis tXstream Finsurv soluti
Slide 33: Cloud Powers Large Retailer's Loyalty Rewards
CLOUD POWERS LARGE RETAILER’S LOYALTY REWARDS THE PROBLEM PRESENTED THE CHALLENGE THE SOLUTION THE RESULT Over one million customers registered The platform would via multiple channels Synthesis applied its need to scale reliably, for rewards within two cloud and digital SA Retail giant be cost effe
Slide 34: Financial Performance
FINANCIAL PERFORMANCE 34
Slide 35: Financial Performance: Payments & Payment Infrastructure Division
FINANCIAL PERFORMANCE Payments & Payment Infrastructure Division R million 469.9 500 Results in period 415.1 impacted by delay in 450 terminal deliveries 400 350 Absent delay, revenue would have exceeded 253.6 300 prior year 202.9 250 196.1 186.3 151.7 200 140.7 135.5 Revenue and income 150 recognis
Slide 36: Financial Performance: Software & Services Division
FINANCIAL PERFORMANCE Software & Services Division R million 160 Exceptional performance 137.8 in the period 140 120 Effectively, revenue has doubled in 18 months 95.3 93.1 100 77.6 EBITDA is after 80 expensing additional 61.8 ramp-up costs related to 51.9 AWS Cloud Migration 60 46.1 projects, the b
Slide 37: Condensed Group Statement of Comprehensive Income
CONDENSED GROUP STATEMENT OF COMPREHENSIVE INCOME (R million) 30 Sep 2019 30 Sep 2018 % increase/(decrease) Absent the terminal supplier delay, revenue would have exceeded Revenue 281.6 315.4 (10.7%) R348m, up 10% EBITDA 67.9 81.4 (16.8%) Higher cash balances, Trading profit 68.2 82.8 (17.6%) improv
Slide 38: Divisional Revenue Composition
DIVISIONAL REVENUE COMPOSITION % increase / (R million) 30 Sep ‘19 30 Sep ‘18 (decrease) Rental contracts expiring and shifting Payments & Payment Infrastructure division from rental to sold Rental income 15.8 44.8 (64.7%) terminals Maintenance and support service fees 57.0 28.6 99.3% Sale of termin
Slide 39: Condensed Group Statement of Financial Position
CONDENSED GROUP STATEMENT OF FINANCIAL POSITION (R million) 30 Sep 2019 30 Sep 2018 31 Mar 2019 ASSETS Goodwill 728.6 728.6 728.6 As at end of October Intangible assets 65.6 66.7 62.3 2019, cash balance is R482m Other non-current assets 60.1 71.0 72.2 Non-current assets 854.3 866.3 863.1 Cash and ca
Slide 40: Cash Flow (Key Features)
CASH FLOW (KEY FEATURES) (R million) 30 Sep ‘19 30 Sep ‘18 30 Mar ‘19 Changes in working capital (45.5) 9.8 51.7 Reflects terminals in Cash flow from operations 20.1 92.4 212.7 transit and debtors for transactions in September Acquisition of property, plant and equipment (9.8) (8.3) (16.5) Positive
Slide 41: Prospects
PROSPECTS 41
Slide 42: General Prospects and Growth Opportunities
GENERAL 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 ▪
Slide 43: Our Investment Case – Strong Foundation on Which to Grow
OUR INVESTMENT CASE – STRONG FOUNDATION ON WHICH TO GROW ✓ 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 – providi
Slide 44: Thank You
{A CAPITAL APPRECIATION THAN K Y Oo U 44
Slide 45: 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
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