Slide 1: Reviewed Provisional Results 2018
CAPITAL APPRECIATION LIMITED REVIEWED PROVISIONAL RESULTS ‘18 for the year ended 31 March 2018 1 1
Slide 2: Outline
Introduction to CAPPREC 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 PAYMENTS & PAYMENT SOFTWARE & INTERNATIONAL * INFRASTRUCTURE SERVICES AUSTRALIA * 17.5% interest 3
Slide 4: Highlights
2018 HIGHLIGHTS 4
Slide 5: Operational Accomplishments
OPERATIONAL ACCOMPLISHMENTS Completed and bedded down three Transferred from a SPAC to the acquisitions and one international “Software and Computer Services” investment sector on the Main Board of the JSE Expanded client relationships in all sectors Recruited accomplished talent • Increased talent
Slide 6: Financial Highlights
FINANCIAL HIGHLIGHTS Revenue R 571 million Earnings EBITDA R 177 million HEPS 9.53 cents Profit after tax R 143 million Normalised profit R 152 million NHEPS 10.12 cents after tax Equity R 1.392 billion NAV per share 90 cents Cash flow from R 167 million operations Cash conversion 117% Dividends (%
Slide 7: Divisional Performance
DIVISIONAL PERFORMANCE TURNOVER Software & EBITDA Software & Services Services 18.4% 17.6% Payments & 81.6% Payments & 82.4% Payment Payment Infrastructure Infrastructure PAYMENTS & PAYMENT SOFTWARE & INFRASTRUCTURE SERVICES HIGHLIGHTS • Expanded client base • Expanded client base • Strong pipeline
Slide 8: Changes to the Board of Directors
CHANGES TO THE BOARD OF DIRECTORS INDEPENDENT NON-INDEPENDENT Kuseni Dlamini (May 2018) Mathukana Mokoka (May 2018) Replaces Dr Dan Matjila • Chairman, Massmart • Chairman, Aspen • Director, Contract Services Pharmacare Group • Former CEO, Old Mutual • Director, Sanlam SA • Director, Palabora Mining
Slide 9: The Opportunity
THE OPPORTUNITY 9
Slide 10: 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 CASHLESS // BACK OF MIND // ENGAGEMENT // More cash will be displaced by electronic As more transactions become virtual and As payments an
Slide 11: Retail Payments: Move to Electronic Payments Continues
MOVE TO ELECTRONIC PAYMENTS CONTINUES South Africa RETAIL PAYMENTS CARD ACTIVITY SOURCE: PASA ANNUAL REPORT 2016 11
Slide 12: 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 SOUTH AFRICA’S PENETRATION IS ONLY 4.5 GERMANY MEXICO Significant opportunity to increase penetration as costs decline and value increases CHINA RUSSIA INDIA 5 10 15
Slide 13: Capital Appreciation Growth Strategy
CAPITAL APPRECIATION GROWTH STRATEGY Capital Appreciation is well capitalised, with the management skills and technology to drive it’s growth strategy PAYMENTS & PAYMENT SOFTWARE & INFRASTRUCTURE SERVICES • Continue to grow POS device estate • Licensing of software applications for regulatory compli
Slide 14: About Our Investments
ABOUT OUR INVESTMENTS 14
Slide 15: Capital Appreciation Execution Strategy
CAPITAL APPRECIATION EXECUTION STRATEGY PARTNER INNOVATE EXECUTE State of the art proprietary Work with financial institutions Service excellence technology platforms for services Create ecosystems for Entrepreneurial culture Alleviate pain points collaboration B2B Hardware agnostic User experience
Slide 16: Payments & Payment Infrastructure Segment
PAYMENTS & PAYMENT INFRASTRUCTURE SEGMENT 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 Provi
Slide 17: Payments Revenue Model
PAYMENTS REVENUE MODEL POS DEVICES POS ESTATE MAINTENANCE TRANSACTIONS LICENSING & MANAGEMENT & REPAIRS SOLUTIONS • Sales generate gross • Generates monthly • Generates monthly • Variable based on • Generates monthly profit recurring annuity recurring annuity transaction type and recurring annuity •
Slide 18: 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 19: Dashpay Complements Bank Acquiring Services
DASHPAY COMPLEMENTS BANK ACQUIRING SERVICES A positive impact on the market Acquiring market and Merchants needs are Merchants are cost Dashpay delivers value Assists banks to retain margins under pressure evolving conscious and view to the merchant merchants, reduce acquiring fees as a churn and re
Slide 20: Illustrative Dashpay Implementations
ILLUSTRATIVE DASHPAY IMPLEMENTATIONS A soft launch of Dashpay services with various partner banks PARTNER NUMBER OF BANK * PRODUCTS Retailer A Retailer B Retailer C Food Healthcare * Different colours represent different banks 20
Slide 21: 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 value Acquiring and retaining the best Nedbank CI
Slide 22: Operating Units within Synthesis
OPERATING UNITS WITHIN SYNTHESIS CLOUD DIGITAL PLATFORM CONSULTING CHANNELS INTEGRATION PRODUCTS Cloud transformation to assist the Delivering exceptional end-user Enterprise in becoming cloud ready, client experience web and Integration to enable regulatory execute mass migrations and to harness mo
Slide 23: Financial Performance
FINANCIAL PERFORMANCE 23
Slide 24: Financial Performance: Payments & Payment Infrastructure
FINANCIAL PERFORMANCE Payments & Payment Infrastructure Division FY 2018 CONTRIBUTION 415.1 450 H1 5 months annualised vs. H2 H1 H2 400 Revenue 44% 56% 350 EBITDA 41% 59% 300 250 202.9 CAGR(a) 196.1 Revenue 75% 200 EBITDA 100% 151.7 149.5 140.7 150 TERMINALS AT PERIOD END 100 77.5 80 000 60.9 75 000
Slide 25: Financial Performance: Software & Services
FINANCIAL PERFORMANCE Software & Services Division FY 2018 CONTRIBUTION H1 5 months annualised vs. H2 100 93.1 H1 H2 90 Revenue 45% 55% 77.6 80 EBITDA 38% 62% 70 60 51.9 46.1 50 CAGR(a) 41.6 Revenue 22% 33.9 33.2 40 EBITDA 28% 29.9 29.4 30 19.4 19.8 15.6 15.9 12.4 20 12.6 FY’18 operating profit 10 a
Slide 26: Group Summarised Statement of Comprehensive Income
GROUP SUMMARISED STATEMENT OF COMPREHENSIVE INCOME (R million) FY 18 FY 17 % increase Acquisitions completed 5 May 2017 and FY’18 Revenue 571.3 80.2 results reflect only eleven months trading for acquired businesses Trading profit (loss) 178.3 (5.0) Net finance income 38.7 80.2 Cash utilised for Pro
Slide 27: Summarised Statement of Financial Position
SUMMARISED STATEMENT OF FINANCIAL POSITION (R million) 31 Mar 2018 31 Mar 2017 Total assets 1 471.7 1 048.8 Arising on acquisition: • Goodwill of R728.6 Non-current assets 864.4 0.2 million • Identifiable intangibles of R83.3 Cash and cash equivalents 513.2 1047.8 million, less amortisation of R12.2
Slide 28: Cashflow (Key Features)
CASHFLOW (KEY FEATURES) (R million) FY 18 FY 17 Cashflow (outflow) from operations 166.9 (18.8) Cash conversion – 117% of PAT Acquisition of subsidiaries net of cash (553.0) - acquired Purchase of an associate (30.2) - Repurchase of 55 620 000 ordinary (41.4) - shares (treasury shares) Average price
Slide 29: Prospects
PROSPECTS 29
Slide 30: Prospects: 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 • Acquisitive activity will depend on strategic fit as well as valuations • Robust o
Slide 31: Our Investment Case
OUR INVESTMENT CASE • 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 to expand regionally with them • Founders with a very strong network of
Slide 32: Thank You
T H A N K Y O U 32
Slide 33: Annexure
ANNEXURE 33
Slide 34: Payments & Payment Infrastructure
PAYMENTS & PAYMENT INFRASTRUCTURE Illustrative pro-forma historical performance a (R million) 2014 2015 2016 2017 2018 CAGR ’14 – ‘18 Revenue 44.2 140.7 196.1 202.9 415.1 75% EBITDA 9.4 24.9 42.1 77.5 151.7 100% Margin EBITDA 21.3% 17.7% 21.5% 38.2% 36.5% Growth EBITDA 164.9% 69.1% 84.1% 96.1% Infor
Slide 35: Software & Services
SOFTWARE & SERVICES Historical performance a (R million) 2014 2015 2016 2017 2018 CAGR ‘14 – ‘18 Revenue 41.6 46.1 51.9 77.6 93.1 22% EBITDA 12.6 15.9 19.8 29.9 33.9 28% Margin EBITDA 30.3% 34.5% 38.2% 38.5% 36.4% Growth EBITDA 26.2% 24.5% 51.0% 12.4% FY’18 operating profit annualised amounts to R36
Slide 36: Comparable International Companies
COMPARABLE INTERNATIONAL COMPANIES Illustrative of breadth and depth of international “Payments” marketplace POS / CASH NETWORKS MERCHANT ACQUIRORS EMERGING PAYMENTS DISBURSEMENT $205,856 // 22.9x $13,836 // 10.5x $1,626 // 11.6x $730 // NM $7,822 // 18.1x $1,479 // 8.9x $297,010 // 20.6x $19,248 //
Slide 37: A Broad Range of Growth Drivers Globally
A BROAD RANGE OF GROWTH DRIVERS 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 flows of data from m
Slide 38: International Trends
INTERNATIONAL TRENDS A leading indicator for South African banks – industry in flux COMPETITION TECHNOLOGY FOCUS REGULATION CLIENTS • Increasing from new • Empowering new • Sector expertise and • Requires expenditure on • Increasingly more entrants entrants not constrained focus driving costs diverg
Slide 39: Electronic Payments Continue to Grow and Mutate
ELECTRONIC PAYMENTS CONTINUE TO GROW AND MUTATE IN RESPONSE TO CONSUMER BEHAVIOUR Transactions mutating to be indistinguishable from day-to-day activity, further driving to “Universal Acquiring” DIGITAL CURRENCY MIDDLE CLASS REGULATION BIG DATA • Increasing adoption and • Growing middle-class in • R
Slide 40: 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 41: 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 client application pa
Slide 42: Payments Solutions Range Across Industry and Functional Area
PAYMENTS 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
Slide 43: Payments Services Offered
PAYMENTS SERVICES OFFERED Clients 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 & LOG
Slide 44: Payments Strengths
PAYMENTS 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 EXPERTISE / UNIVERSAL
Slide 45: Important Notice, Disclaimer and Basis of Presentation
IMPORTANT NOTICE, DISCLAIMER AND BASIS OF PRESENTATION For the purposes of this notice, this presentation (the “Presentation”) This Presentation does not constitute or form part of, and should not This Presentation contains forward-looking statements, including in shall mean and include the pages an