Araxi Limited · JSE:AXX
Araxi — Capital Appreciation — FY2020 Earnings Presentation
52 slides from Araxi's earnings presentation, June 2020
Slide 1: Full Year Results Presentation
FULL YEAR RESULTS PRESENTATION For the year ended 31 March 2020 1
Slide 2: Outline
1 Introduction OUTLINE 2 Highlights for the period 3 The opportunity 4 About our investments 5 Financial performance 6 Prospects 2
Slide 3: Capital Appreciation
PAYMENTS & PAYMENT INFRASTRUCTURE CAPITAL 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 CTA ENTERPRISE DEVELOPMENT FUND 3
Slide 4: Response to COVID-19
ORGANISATIONAL RESPONSE OPERATIONAL RESPONSE Our team’s health was our first priority Client service was our priority RESPONSE TO COVID-19 Remote work of all non-essential staff Prior disaster preparedness and infrastructure investment paid dividends Group companies were classified as Essential staf
Slide 5: Impact of COVID-19
MACRO ENVIRONMENT SILVER LINING AND OPPORTUNITY All sectors of economy impacted Technology solutions exist to address IMPACT OF many key issues that have arisen - Social distancing COVID-19 Consumer confidence shattered - Remote work - Remote customer engagement Long-term implications are still - Re
Slide 6: Capital Appreciation's Positioning
CAPITAL CAPPREC well capitalised APPRECIATION’S POSITIONING Experienced management team While challenges will undoubtedly exist Client exposure mostly larger, more resilient businesses and operating conditions will be tough, CAPPREC’s business is resilient Manageable exposure to “at risk” businesses
Slide 7: Highlights
HIGHLIGHTS 7
Slide 8: Operational Accomplishments
Growth continues across all business Synthesis expands into new units with expanded and enhanced verticals client relationships Additional Amazon Web OPERATIONAL Services (AWS) certifications Expanded international service offerings across the Group ACCOMPLISHMENTS and accreditations Synthesis a key
Slide 9: Group Financial Highlights
Revenue Earnings & Dividends Revenue R 701.2 m 15.4% EPS 11.24 cents 34.9% Payments Division R 506.2 m 7.7% HEPS 10.67 cents 28.1% GROUP Services Division R 195.0 m 41.5% Dividends 5.00 cents 17.6% FINANCIAL HIGHLIGHTS Profit Capitalisation & Cash resources EBITDA R 204.7m 29.1% Equity R 1 309.0 m F
Slide 10: Divisional Contribution
REVENUE EBITDA Group Up 15.4% Group Up 29.1% DIVISIONAL + 24.1% + 41.5% 25.0% 27.8% CONTRIBUTION Services 19.6% Services 20.8% Headcount grew by 68 people across the group, up 25% + 19.6% + 7.7% Payments 80.4% 72.2% Payments 79.2% 75.0% FY19 FY20 FY19 FY20 10
Slide 11: Payments Highlights
✓ More than 185 000 terminals in hands of clients, up 32% PAYMENTS ✓ Continued to gain market share HIGHLIGHTS ✓ Annuity based Estate Management fees up 56% ✓ Strong pipeline ✓ Expanded portfolio of transaction solutions ✓ Enhanced capability of solutions ✓ Android solutions warmly received ✓ Increa
Slide 12: Services Highlights
✓ Strengthened relationship with existing clients ✓ New blue-chip client relationships established SERVICES ✓ Secured additional AWS accreditation HIGHLIGHTS ✓ Continued to cement AWS leadership ✓ Diversified revenue stream – New verticals and geographies – Academy – Data Science ✓ Increased operati
Slide 13: GovChat Platform Launched
GOVCHAT Available online, through FB Messenger, PLATFORM WhatsApp and USSD LAUNCHED Effective 1 March 2020 A citizen-government engagement platform > 80 million in cooperation with messages transmitted COGTA Platform development being > 2.5 million done by Synthesis unique users 13
Slide 14: GovChat Response to COVID-19: Social Development
Department of Social Development GOVCHAT RESPONSE TO COVID-19 “Use case” specific Screens applicants and onboards functionality potential “Social Relief of Distress” developed and (SRD) grant applicants, arguably one of tested on existing the largest digitalisation initiatives in platform within a g
Slide 15: GovChat Response to COVID-19: Department of Health
Department of Health GOVCHAT RESPONSE TO COVID-19 Screening tools, symptom tracking, testing facility referrals, test result notification, recent contact identification and notification, Diverted resources to open Platform to health form onboarding address Government’s urgent needs in fighting the p
Slide 16: The Opportunity
THE OPPORTUNITY 16
Slide 17: Compelling Sector Opportunities
We have an opportunity to disrupt the business banking market and improve the way in which businesses bank in South Africa. We will continue to make use of technology to understand our clients better and further improve credit quality and client experience. COMPELLING - Capitec 2020 SECTOR OPPORTUNI
Slide 18: AWS Cape Town Region Now Live
AWS CAPE TOWN REGION – NOW 23rd AWS region in the world and the first in 50+ AWS services LIVE! Africa, comprising 3 readily available Availability Zones Synthesis and GovChat were Key “Launch Partners” Enables compliance with the Protection of Personal Info Act (POPI) Support for low latency worklo
Slide 19: Public Cloud Market
PUBLIC CLOUD MARKET Market share of global providers AWS is clear market leader generating $10.2 billion in revenue in Q1 ’20, up 33% on prior year Source: Gartner, Goldman Sachs, Insider Inc. 19
Slide 20: Cloud Adoption in South Africa
SA CLOUD COMPUTING CLOUD ADOPTION CLOUD ADOPTION MARKET SIZING ESTIMATE R millions IN SOUTH AFRICA IDC predicts cloud services will generate more than 100 000 net new jobs by 2022 Source: BMIT SA Cloud Computing Overview & Market Sizing 2019 20
Slide 21: COVID Impact: Global Planned Cloud Usage
Total 2% 8% 31% 26% COVID IMPACT: GLOBAL PLANNED CLOUD USAGE Enterprise 2% 9% 29% 30% More than 50% of respondents state that cloud usage will be higher than initially planned SMB 2% 4% 37% 13% Note, excludes responses where no change stated; SMB is small or medium businesses Source: Flexera 2020 St
Slide 22: COVID Impact: SA Tech Spending Priorities
Digital employee experience: digital workspaces, collaboration… Telecom services: fixed and mobile data packages Devices (laptops, smartphones, tablets, etc…) COVID IMPACT: Security: architecture, governance, skills SA TECH SPENDING Public Cloud Software-as-a-service (SaaS) Mobile apps, mobile devic
Slide 23: COVID Impact: SA IT Spend by Vertical
Big $2.1B Finance $1.6B Government COVID IMPACT: $1.5B Communications SA IT SPEND BY $1.1B Manufacturing 2019 IT Spending Size VERTICAL $790M Professional & Personal Services Size Retail & Wholesale $744M $705M Resource Industries $494M Utilities $482M Healthcare Transportation $357M Small $228M Edu
Slide 24: COVID Impact on Payments
Cash is increasingly unwelcome, limit spread of COVID-19 Increasing interest by merchants in digital payment COVID IMPACT ON PAYMENTS Merchants increasingly interested in Value Added functionality Contactless payment – promoted by WHO Mobile payment QR Code payment eCommerce Technology is solution t
Slide 25: About Our Investments
ABOUT OUR INVESTMENTS 25
Slide 26: Consistent Execution Strategy
CONSISTENT EXECUTION STRATEGY PARTNER INNOVATE EXECUTE Strategy has delivered substantial growth and our objectives remain unchanged Work with financial institutions State of the art proprietary Service excellence since initially formulated technology Create ecosystems for Alleviate pain points coll
Slide 27: Payments & Payment Infrastructure
PROPRIETARY PLATFORM Unique, proprietary technology platform enabling rapid development and implementation of customised corporate solutions across a diverse range of sectors PAYMENTS & PAYMENT BLUE CHIP CLIENTS Provide and operate payment and processing solutions for leading brands and INFRASTRUCTU
Slide 28: Substantial Growth in Terminal Estate
185 154 140 TOTAL TERMINAL ESTATE 118 92 • Number of terminals in clients’ hands grew 32% YoY, 49 60 56% 3yr CAGR • Includes terminals subject to rental agreements April Sep Mar Sep Mar Sep Mar '17 '17 '18 '18 '19 '19 '20 SUBSTANTIAL 178 OWNED BY CLIENTS GROWTH IN 128 146 • Number of terminals deliv
Slide 29: Expanded Device Portfolio
EXPANDED DEVICE PORTFOLIO Diverse range, multiple platforms, varied price points and comprehensive use cases Proprietary – Tertra/Telium World leaders in payment devices and technology 29
Slide 30: Welcome Halo Smart Payments
Halo is a software application that enables contactless payment acceptance on any NFC-enabled Android device. Supports contactless cards and mobile wallets such as Samsung Pay. Available as an SDK for App integration. WELCOME HALO SMART TAP ON PHONE BENEFITS PAYMENTS Affordable – No additional hardw
Slide 31: African Resonance Investment in Capacity
AFRICAN 7 300 RESONANCE 5 900 INVESTMENT IN CAPACITY 3 900 Surge capacity exceeded 10 500 units 1 600 CY 2017 CY 2018 CY 2019 Last 6 months AVERAGE MONTHLY TERMINALS DISPATCHED 31
Slide 32: African Resonance Operational Metrics
CALL CENTRE - AVERAGE DURATION OF CALLS (in minutes) 10:00 08:00 AFRICAN 06:00 RESONANCE 04:00 02:00 OPERATIONAL 00:00 METRICS Nov 19 Dec 19 Jan 20 Feb 20 Mar 20 Apr 20 CALLS RESULTING IN TERMINAL SWAP OUT Increased capacity requried to (average across clients) maintain high levels of availibility a
Slide 33: Evolution in Payment Services Offering
✓ Merchant terminal count increased by 58% ✓ Transaction related EVOLUTION IN revenue increased by GROSS Tx VALUE PAYMENT 40% SERVICES ✓ ISO and Aggregator ~ 10x in 3 years 69% OFFERING relationships concluded with Nedbank and Absa 31% R4.9bn Dashpay’s progress continues 57% ✓ Enhanced service offer
Slide 34: 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 35: Operating Units within Synthesis
OPERATING DIGITAL CLOUD PLATFORM INTEGRATION UNITS WITHIN CHANNELS PRODUCTS SYNTHESIS Delivering exceptional end-user client experience, web and mobile touchpoints Cloud transformation to assist the Enterprise in becoming cloud-ready, execute mass migrations and harness Integration to enable regulat
Slide 36: Cape Town Region Launch Initiative
CAPE TOWN REGION LAUNCH INITIATIVE Financial Services Competency Synthesis develops suite of “Launch Products” DevOps Competency Well Architected Framework Competency Channel Partner SaaS Partner 36
Slide 37: Prior Case Studies
Use of AI and PRIOR CASE machine learning in brand management STUDIES 24/7/365 cloud managed infrastructure services globally RegTech & SYNTHESIS ACADEMY Customer Engagement Outcomes-driven e-Learning LMS-based training to client Financial services in organisations agricultural sector RegTech Platfo
Slide 38: Cracking Machine Learning to Speed Up Client Services
CRACKING MACHINE ‘What struck me is that LEARNING TO Synthesis used design thinking to truly understand SPEED UP CLIENT what the problem was. In a very short time they created SERVICES a prototype, tested it with users and then adapted it. Machine Learning and Robotics The solution they created addr
Slide 39: Unathi – GovChat's Natural Language Chatbot
Rate over 60 000 Backend Dashboards Government spaces and services provided Issue Reporting “UNATHI” – Hospitals, Police Stations, Post Office branches, Home Affairs, Early GOVCHAT’S Childhood Centres… NATURAL Report on Municipal services LANGUAGE Water, refuse, potholes… CHATBOT SRD Grant Applicati
Slide 40: GovChat's Hyper-Scale Dynamic Cost Effective Infrastructure
SRD Use Case Platform Activity Fully “serverless” architecture • No servers…at all! • Cloud native architecture, fully managed by AWS • Easily replicated for other GOVCHAT’S geographies and use cases HYPER-SCALE Dynamic scalability DYNAMIC • Scales up to meet user demand, COST EFFECTIVE and back dow
Slide 41: Financial Performance
FINANCIAL PERFORMANCE 41
Slide 42: Financial Performance: Payments & Payment Infrastructure
R million 600 506.2 469.9 500 FINANCIAL 415.1 PERFORMANCE 400 Payments & Payment Infrastructure 300 Division 202.9 196.1 161.8 151.7 140.7 135.3 200 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 Revenue EBITDA Revenue Growth – 8% YoY EBITDA Growth – 20% YoY 6 Yr CAGR
Slide 43: Financial Performance: Software & Services
R million 250 195.0 FINANCIAL 200 PERFORMANCE 137.8 150 Software & Services Division 93.1 77.6 100 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 Gross Revenue EBITDA EBITDA is after expensing The benefit of last Revenue Growth EBITDA Growth –
Slide 44: Group Summarised Statement of Comprehensive Income
GROUP SUMMARISED STATEMENT OF COMPREHENSIVE INCOME % increase / Strong growth from all (R million) 31 March 2020 31 March 2019 divisions (decrease) Revenue 701.2 607.7 15.4% Includes development of new innovative products Operating expenses 143.2 128.0 11.9% and building of operating capacity EBITDA
Slide 45: Divisional Revenue Composition
DIVISIONAL REVENUE COMPOSITION (R million) 31 March 2020 31 March 2019 Growth AR rental contracts reaching maturity replaced by terminal sales Payments & Payment Infrastructure division Terminal rental income 32.5 79.3 (59.0%) Aligned to growth of Maintenance and support service fees from terminals
Slide 46: Condensed Group Statement of Financial Position
CONDENSED GROUP STATEMENT OF FINANCIAL POSITION (R million) 31 March 2020 31 March 2019 ASSETS Uncomplicated Balance Sheet Goodwill 728.6 728.6 Intangible assets 61.8 62.3 Other non-current assets 60.7 72.2 Non-current assets 851.1 863.1 Available for investment Cash and cash equivalents 505.1 611.2
Slide 47: Cash Flow (Key Features)
CASH FLOW (KEY FEATURES) (R million) 31 March 2020 31 March 2019 Cashflow from operations 206.1 212.7 Effective asset management Proceeds from disposal of associate 35.0 - Changes in working capital 23.8 51.7 Finance income 38.7 38.3 Increased even with lower cash balances Acquisition of property, p
Slide 48: Prospects
PROSPECTS 48
Slide 49: 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 • Economic climate is impacting our clients and remain present in our planning GENERAL PROSPECTS Capital Appreciation is well capitali
Slide 50: Our Investment Case – A Strong Foundation on Which to Grow
✓ Seasoned management team – been through prior tough business cycles ✓ Well-positioned in an industry with healthy organic growth prospects ✓ A trusted partner to a strong network of large financial institutions OUR INVESTMENT CASE – A STRONG ✓ Clients are well capitalised and established ✓ Diversi
Slide 51: Thank You
CAPITAL APPRECIATION THAN K Y Oo U 51
Slide 52: 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 GLOSSARY B2B2C B-BBEE Busines