Araxi Limited · JSE:AXX
Araxi — Capital Appreciation — H1 FY2019 Earnings Presentation
48 slides from Araxi's earnings presentation, November 2018
Slide 1: Interim Results for the 6 months ended 30 September 2018
CAPITAL APPRECIATION LIMITED INTERIM RESULTS for the 6 months ended 30 September 2018 1 1
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 & INTERNATIONAL * INFRASTRUCTURE SERVICES AUSTRALIA 3
Slide 4: 30 September 2018 Highlights
30 SEPTEMBER 2018 HIGHLIGHTS 4
Slide 5: 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 all sectors – Established new Synthesis office in Cape Town Payments and Software divisions • New blue-chip clients 36% in
Slide 6: Comparing 2018 to 2017
COMPARING 2018 TO 2017 COMPARISON VS. The acquisition of subsidiaries became effective 5 May 2017. The 2017 financial results PRIOR YEAR include performance of the acquired businesses for 5 months only. AMORTISATION The allocation of intangibles arising from the acquisition of the new subsidiaries w
Slide 7: Financial Group Highlights
FINANCIAL GROUP HIGHLIGHTS Solid results against backdrop of political uncertainty and economic difficulty Revenue Earnings & Dividends Revenue R 315.4 million 56% HEPS 4.23 cents 13% NHEPS 4.55 cents 13% Profit Cash EPS 4.60 cents 277% EBITDA R 81.4 million 24% Dividends 2.25 cents 12.5% Trading pr
Slide 8: Divisional Performance Highlights
DIVISIONAL PERFORMANCE REVENUE EBITDA Software & Software & Services Services 19.6% 20.8% 80.4% 79.2% Payments & Payments & Payments Software Payments Software Payment Payment Infrastructure Infrastructure 54.5% 64.4% 27.8% 70.3% INCREASE VS. PRIOR INCREASE VS. PRIOR PAYMENTS & PAYMENT SOFTWARE & IN
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 LESS CASH INVISIBLE PAYMENTS PAYMENTS AS A MEANS OF ENGAGMENT THE VALUE OF DATA LOANS MADE EASIER TRANSACTION COSTS DECLINING RAPIDLY SOU
Slide 11: Retail Payments: 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 12: Growth Strategy Remains Unchanged
GROWTH STRATEGY REMAINS UNCHANGED Notwithstanding the difficult economic environment and the political challenges in South Africa, Capital Appreciation is well capitalised, with the management skills and technology to drive its growth strategy PAYMENTS & PAYMENT INFRASTRUCTURE SOFTWARE & SERVICES •
Slide 13: About Our Investments
ABOUT OUR INVESTMENTS 13
Slide 14: 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 15: 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 techn
Slide 16: Payments Revenue Model
PAYMENTS REVENUE MODEL POS DEVICES POS ESTATE MAINTENANCE TRANSACTIONS LICENSING & MANAGEMENT & REPAIRS SOLUTIONS • Terminal sales • Generates monthly • Generates monthly • Variable based on • Generates monthly generate gross profit recurring revenue recurring revenue transaction type and recurring
Slide 17: 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 18: Stratagem Implementation
STRATAGEMTM IMPLEMENTATION Resonance Australia has a certified deployment of Stratagem SPONSORING BANK CERTIFICATIONS RECEIVED CERTIFICATIONS PENDING Pilot merchant site deployments underway 18
Slide 19: Dashpay Complements Bank Acquiring Services
DASHPAY COMPLEMENTS BANK ACQUIRING SERVICES A positive impact on the market MARKET PRESSURE Acquiring market and Merchants’ needs Merchants are cost margins under are evolving conscious and view pressure acquiring fees as a grudge purchase EXISTING BANKS PARTNERS WITH Dashpay delivers value- Assists
Slide 20: Dashpay's Evolution
DASHPAY’S EVOLUTION Material progress has been made in readying Dashpay for mass deployment BANK RELATIONSHIPS PRODUCT OFFERING THEN* NOW^ THEN* NOW^ Traditional Multiple products and Merchant services Acquiring only Acquiring is now only ancilliary Others in negotiation TARGET MARKET OPPORTUNITIES
Slide 21: Dashpay in the Enterprise – Attacq Use Case
DASHPAY IN THE ENTERPRISE – ATTACQ USE CASE Attacq is a REIT with a substantial portfolio of premium assets RETAIL COMMERCIAL OTHER 10 RETAIL MALLS 22 OFFICE & MIXED- 11 INDUSTRIAL, HOTEL USE DEVELOPMENTS & HOUSING Mall of Africa DEVELOPMENTS Waterfall Corner PwC Tower Waterfall Lifestyle Cell C Cam
Slide 22: Dashpay in the Enterprise – Attacq Ecosystem
DASHPAY IN THE ENTERPRISE – ATTACQ USE CASE Attacq agreed to Dashpay StratagemTM deployment throughout its estate MALL OFFICE / MIXED RESIDENTIAL Attacq Attacq Attacq ECOSYSTEM LANDLORD LANDLORD Attacq sought to establish a large Merchant Corporate Renter / owner ecosystem from TENANT TENANT its dis
Slide 23: Digital Stamp – Use Case
DIGITAL STAMP – USE CASE Stampz is a proprietary platform to enable merchants to operate a turnkey Digital Stamp Card solution supported by a content rich mobile application Data science meets HARLEY-DAVIDSON consumer engagement ILLY • Robust, simple and easy to use • Rapid development and deploymen
Slide 24: Legacy Lifestyle – Use Case
LEGACY LIFESTYLE – USE CASE Dashpay provides the Legacy Hotels Group with the platform to operate their “Legacy Lifestyle Rewards Programme” across multiple sectors, regions and channels PLATFORM PROVIDES KEY STATS Member enrolment & Over 270 Brand management Partners Accrual and 4 hotel groups rede
Slide 25: 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 26: Operating Units within Synthesis
OPERATING UNITS WITHIN SYNTHESIS CLOUD DIGITAL PLATFORM CONSULTING CHANNELS INTEGRATION PRODUCTS Cloud transformation to assist the Delivering exceptional end-user client Enterprise in becoming cloud ready, experience web and mobile touch points Integration to enable regulatory execute mass migratio
Slide 27: Artificial Intelligence and Machine Learning – Absa Use Case
ARTIFICIAL INTELLIGENCE AND MACHINE LEARNING – ABSA USE CASE When Barclays Africa announced its withdrawal, Absa Group needed an innovative solution to identify and remove 40 000 Barclays Africa artefacts from all of its documents, marketing and contracts KEY METRICS 40 000 8 5 000 Barclays Africa W
Slide 28: Artificial Intelligence and Machine Learning – Absa Use Case
ARTIFICIAL INTELLIGENCE AND MACHINE LEARNING – ABSA USE CASE “ In June 2017, we were given 12 months to remove all Barclays brand and logo references in South Africa. It was a massive project. By the end of 2017, we had identified 40 000 artefacts that needed to change across 300 systems. The Synthe
Slide 29: Revolutionising Farming – AFGRI Use Case
REVOLUTIONISING FARMING – AFGRI USE CASE SINGLE DIGITAL LOAN DASHBOARD BANKING APPLICATION SECURE, EASY-TO-USE BANKING AND MANAGEMENT PLATFORM Synthesis built an omni- channel digital platform for AFGRI, a leading agricultural services REAL-TIME INSURANCE company, to enhance the MONITORING way farme
Slide 30: Financial Performance
FINANCIAL PERFORMANCE 30
Slide 31: Financial Performance: Payments & Payment Infrastructure Division
FINANCIAL PERFORMANCE Payments & Payment Infrastructure Division 450 415.1 PERIOD GROWTH 400 Revenue 54% EBITDA 28% Operating profit 29% 350 300 253.6 CAGR Revenue 63% 250 202.9 EBITDA 72% 196.1 164.2 200 151.7 149.5 140.7 150 77.5 70.0 100 66.8 60.9 54.8 51.7 44.2 42.1 24.9 22.7 50 10.6 9.4 1.1 0 F
Slide 32: Terminal Estate Analysis
TERMINAL ESTATE ANALYSIS Terminals at period end 103 000 76 000 77 000 53 000 48 000 40 000 38 000 40 000 32 000 32 000 22 000 16 000 Apr 17 Sep 17 Mar 18 Sep 18 Apr 17 Sep 17 Mar 18 Sep 18 Apr 17 Sep 17 Mar 18 Sep 18 OWNED BY CLIENTS ACTIVE – IN MARKET AWAITING DEPLOYMENT • Number of terminals deli
Slide 33: Financial Performance: Software & Services Division
FINANCIAL PERFORMANCE Software & Services Division 100 93.1 PERIOD GROWTH 90 Revenue 64% 77.6 EBITDA 70% 80 Operating profit 71% 70 61.8 CAGR 60 51.9 Revenue 24% 46.1 EBITDA 24% 50 41.6 37.6 33.9 33.2 40 29.9 29.4 EBITDA and Operating Profit is after expensing additional 30 19.4 ramp-up costs relate
Slide 34: Group Summarised Statement of Comprehensive Income
GROUP SUMMARISED STATEMENT OF COMPREHENSIVE INCOME Includes c.R20m of (R million) 30 Sep 2018 30 Sep 2017 % increase incremental capacity and support-related Revenue 315.4 201.8 56% expenditure, of which R13m is labour-related EBITDA 81.4 65.5 24% Lower interest income Trading profit 82.8 66.0 25% g
Slide 35: Divisional Revenue Composition
DIVISIONAL REVENUE COMPOSITION (R million) 30 Sep ‘18 30 Sep ‘17 Growth Payments & Payment Infrastructure division Rental income 44.8 44.3 1.1% Maintenance and support service fees 28.6 20.1 42.1% Sale of terminals 165.7 88.6 87.0% Transaction fees 7.4 5.1 45.1% Other revenue 7.1 6.1 16.4% Total 253
Slide 36: Condensed Group Statement of Financial Position at 30 September 2018
CONDENSED GROUP STATEMENT OF FINANCIAL POSITION AT 30 SEPTEMBER 2018 (R million) 30 Sep 2018 30 Sep 2017 31 Mar 2018 ASSETS Goodwill 728.6 728.6 728.6 Intangible assets 66.7 78.2 71.5 Other non-current assets 71.0 72.1 64.3 Non-current assets 866.3 878.9 864.4 Held for investment in interest-bearing
Slide 37: Cashflow (Key Features)
CASHFLOW (KEY FEATURES) (R million) 30 Sep ‘18 30 Sep ‘17 Cashflow from operations 92.4 40.6 Cash conversion ratio of 112% of Trading Profit Changes in working capital 9.8 (25.4) Acquisition of property, plant and equipment (8.3) (5.1) Acquisition of subsidiaries net of cash acquired - (553.0) Acqui
Slide 38: Prospects
PROSPECTS 38
Slide 39: 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 • Politica
Slide 40: 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 41: Thank You
T H A N K Y O U 41
Slide 42: Annexure
ANNEXURE 42
Slide 43: Comparable International Companies
COMPARABLE INTERNATIONAL COMPANIES Illustrative of breadth and depth of international “Payments” marketplace POS / CASH NETWORKS MERCHANT ACQUIRORS EMERGING PAYMENTS DISBURSEMENT $220 139 // 24.5x $7 996 // 7.8x $2 145 // 12.5x $372 // 40.2x $6 113 // 13.4x $1 687 // 8.9x $324 696 // 22.8x $18 812 /
Slide 44: Payments & Payment Infrastructure Historical Performance
PAYMENTS & PAYMENT INFRASTRUCTURE Historical performance (R million) 2014 2015 2016 2017 2018 30 SEP ‘17 30 SEP ‘18 CAGR ’14 – ‘19 Revenue 44.2 140.7 196.1 202.9 415.1 164.2 253.6 63% EBITDA 9.4 24.9 42.1 77.5 151.7 54.8 70.0 72% Margin EBITDA 21.3% 17.7% 21.5% 38.2% 36.5% 33.3% 27.6% Growth Revenue
Slide 45: Software & Services Historical Performance
SOFTWARE & SERVICES Historical performance (R million) 2014 2015 2016 2017 2018 30 SEP ‘17 30 SEP ‘18 CAGR ‘14 – ‘19 Revenue 41.6 46.1 51.9 77.6 93.1 37.6 61.8 24% EBITDA 12.6 15.9 19.8 29.9 33.9 10.8 18.4 24% Margin EBITDA 30.3% 34.5% 38.2% 38.5% 36.4% 28.7% 29.7% Growth Revenue 10.8% 12.6% 49.5% 2
Slide 46: 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 47: 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 48: 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
Capital Appreciation — H1 FY2019 Earnings Presentation on 6ix