Araxi Limited · JSE:AXX
Araxi — Capital Appreciation — H1 FY2022 Earnings Presentation
54 slides from Araxi's earnings presentation, November 2021
Slide 1: Interim Results Presentation
Interim Results Presentation For the six months ended 30 September 2021
Slide 2: Outline
1 Introduction 2 Highlights for the period 3 The opportunity Outline 4 Strategy execution 5 Financial performance 6 Prospects 2
Slide 3: Capital Appreciation
Capital Payments Division Appreciation We are a financial technology company that seeks to serve or partner with established and Software Division emerging financial institutions and other large corporates International CTA Enterprise Development Funding 3
Slide 4: Covid impact contained and short-lived
Covid General Payments Software impact Increased interest in Substantial terminal No projects were contained & “Digitalisation” orders placed in 2021 cancelled calendar year short-lived Addressable market for digital payment solutions increased Strong demand for Android platform New cadence to sales
Slide 5: Long-standing and consistent approach to ESG
Sound governance, Long-standing R2.0 million training spend* aligned with King IV and consistent Diverse, representative Board of directors 38 learnerships A solid foundation of transparency, effective approach to control, accountability and responsibility R2.2 million CSI spend* ESG Low environment
Slide 6: Ongoing Commitment to B-BBEE
Ongoing Group Rating - Level 4 Shareholding Commitment Synthesis - Level 2 Directorships throughout the Group to B-BBEE Deliberate focus on advancing our profile with HR led initiatives Has been an area of focus for the Dashpay - Level 3 Executive appointments Group since initial listing with more t
Slide 7: Capital Appreciation's positioning remains strong
Capital • Healthy balance sheet, enables management to focus on execution Appreciation’s • Experienced executive and formidable skills pool positioning • Deep domain expertise and proprietary technologies in high demand (high priority) areas remains strong • Accelerating imperative for economy to di
Slide 8: Capital Appreciation's SA blue chip clients
Capital Appreciation’s SA blue chip clients Representative clients in the Financial Services sector in South Africa 8
Slide 9: Highlights
Highlights 9
Slide 10: Summary Group financial results
Revenue Earnings & Dividends Summary Revenue R 439.4 m 35.7% EPS 7.44 cents 67.2% Group Payments Division R 314.0 m 45.9% HEPS 7.43 cents 67.0% Software Division R 125.3 m 15.6% Dividends 3.75 cents 50.0% financial Profit results EBITDA EBITDA Margin R 138.7 m 31.6% 70.0% 640 pts A strong set of res
Slide 11: Consistent delivery over time
Consistent Revenue up 36% EBITDA up 70% 500 160 delivery 140 400 120 300 100 R million R million over time 80 200 439 139 60 324 282 40 82 100 68 20 0 0 Sep 19 Sep 20 Sep 21 Sep 19 Sep 20 Sep 21 Operating profit up 85% HEPS up 67%, DPS up 50% 140 8 120 7 100 6 R million 5 80 Cents 4 60 119 7.43 3 40
Slide 12: Continued operational expansion
Continued Terminal sales H1‘22 Terminal transaction exceeds FY’21 income up 56% operational 400 30 25 300 expansion 20 R million R million 200 232 15 84 25 10 100 210 15 16 5 99 125 0 0 2020 2021 2022 Sep 19 Sep 20 30-Sep-21 H1 H2 International income up 21% Employee headcount up 13% Rest of Africa
Slide 13: Payments highlights
Payments highlights Terminal sales increased by 67.9% to R210.4 million ✓ More than 259 000 terminals in hands of clients, up 28% YoY ✓ Android solutions well received by customers ✓ Launched Halo Dot offerings with 2 new customers announced, and more announcements imminent ✓ Expanded portfolio of t
Slide 14: Software highlights
Software highlights A positive result with strong ✓ Strengthened relationship with existing clients momentum going into H2 ✓ Significant increase in cloud migration projects ✓ 19 new blue-chip client relationships established ✓ Secured additional AWS accreditation, further cementing leadership posit
Slide 15: International highlights
International highlights ✓ Launched new offices in Amsterdam ✓ Focused effort to further diversify the customer base ✓ Will allow access to international opportunities ✓ Sponsorship of the Money20/20 FinTech event showcasing Halo Dot 15
Slide 16: GovChat positioned to enhance partnerships
GovChat positioned to A citizen-government engagement platform in cooperation with COGTA enhance partnerships Actively participated in Covid response efforts Platform development work done by Delivered more than Synthesis 12.5 million grant applications Recognised by AWS as Sub-Saharan digitally Afr
Slide 17: The Opportunity
The Opportunity 17
Slide 18: Cloud market continues to grow
Market for Cloud continues to grow… SA market expects 30% 4-year CAGR $14.8bn Up 51% R22bn AWS Revenue, grew 37% YoY Estimated Microsoft Azure SA cloud market in 2023, (CY’21 Q2) Revenue growth (CY’21 Q2) expected to grow at c.30% over next 4 years Source; New reports, BMIT SA Cloud Computing Overvi
Slide 19: Cost savings is only a small reason for cloud adoption
Cost savings 8% 13% is only a small reason Cost Savings Operational Resilience for cloud Reduces the percentage of IT spend on Cloud availability and security enables infrastructure, freeing budget for customers to improve SLAs while reinvestment in other areas reducing unplanned downtime and risk a
Slide 20: Covid's longer-term impact on payments
✓ Cash is increasingly unwelcome, limit Covid’s spread of Covid-19 longer-term ✓ Increasing interest by merchants in digital payment solutions impact on ✓ Merchants increasingly interested in Value Added functionality payments ✓ Contactless payment – per Mastercard survey 46% of consumers change “To
Slide 21: Digital payments expected to grow in South Africa
Digital 6000 2000 payments 1800 5000 1600 expected to 1113 559.7 1400 Transaction volume (millions) Transaction value (ZAR bn) 4000 1200 grow in 858 481.9 3000 1000 687 800 397.9 South Africa 2000 3835 600 1177.3 2841 400 860 1000 2071 576.1 200 0 0 2016 2020 2024 2016 2020 2024 Debit cards Credit &
Slide 22: SA's digital acceptance footprint increasing
SA’s digital The number of POS terminals is set to grow further 900 40 acceptance 800 35 footprint 700 30 Number of POS terminals (000s) 600 increasing Number of ATMs (000s) 25 500 20 400 Market opportunity of more than 300 15 800 000 payment acceptance 10 devices in South Africa alone . . . 200 100
Slide 23: Expanding SA's merchant profile
Expanding Breakdown of acceptance frontier by number of stores per business segment (2017) SA’s merchant profile Merchants in these sectors will be well within the current acceptance The conventional frontier, and should all have access Large & acceptance frontier is to a POS device corporate locate
Slide 24: Payments in South Africa
Payments in >70% of transactions Mix of consumer payments instruments South Africa (value and number of transactions) are cash Other Other 100% 60 billion+ cash Direct Debit transactions p.a. 90% Direct Debit Debit Card 80% Cash volumes are high Debit Card Credit Trans Cash is big and continues to b
Slide 25: Strategy Execution
Strategy Execution 25
Slide 26: Consistent strategy execution
Consistent Partner • • Work with financial institutions Create ecosystems for collaboration strategy • B2B • B2B2C • Deliver solutions to help clients realise their strategy execution • Focus on infrastructure • State of the art proprietary technology Strategy has delivered • Entrepreneurial culture
Slide 27: Payment terminal estate continues to grow
259 Payment 217 202 185 Total Terminal Estate terminal 154 140 118 • Number of terminals in clients’ hands grew 28% YoY, 51% 4yr CAGR estate 92 • Includes terminals subject to rental 50 agreements continues Sep 17 Mar 18 Sep 18 Mar 19 Sep 19 Mar 20 Sep 20 Mar 21 Sep 21 to grow 192 Active – in market
Slide 28: Halo Dot offerings
3 Offerings 3 Revenue 3 Announced Models Customers • SDK • Licence fee • App • User fee Enables contactless • Payment-as-a- • Usage fee payment acceptance on Service (turnkey white any NFC-enabled label solution) Android device . . . more to follow, soon 28
Slide 29: Halo Dot pursuing opportunities globally
Halo Dot pursuing opportunities globally Market opportunity is huge 29
Slide 30: Continued progress in payment services
Continued Merchant terminal count progress in Gross Tx Value continues to increase payment Transaction related revenue continues to increase > 12.5x 20% R6.7bn services 14% in 4 years R6.4bn 69% R5.6bn Focus on solving complex 31% offering R4.9bn enterprise problems 57% 180% Enhanced service offerin
Slide 31: Dashpay rebranding
Dashpay rebranding Dashpay’s progress continues, even in the face of Covid 31
Slide 32: Successful launch in Mall of Africa
Successful Initial phase – the App launch in Allows customers to: Mall of • Sign up • Navigate the malls Africa • Buy & send vouchers LAUNCH • Access loyalty across merchants View deals & offers FUNCTIONALITY • Additional rollout underway • Pay for parking Launched in Mall of Africa with many mercha
Slide 33: Experience CTA technology for yourself
Selected “Food” outlets to redeem Experience vouchers at Mall of Africa . . . Locations continue to expand CTA technology for yourself LAUNCH Those who provided mobile FUNCTIONALITY numbers when you registered, later today you will receive an Launched in SMS Mall ofwith Africadownload with many inst
Slide 34: Encouraged by LayUp's progress
Encouraged by LayUp’s progress LayUp is a digital lay-by solution that provides for periodic instalment payments 87% Of people are defaulting on repayments of loans + 40% Unemployment + 20 Million rate People locked out of the economy 34
Slide 35: Payments' growth strategy
✓ Grow market for devices Payments’ ✓ Continue to take market share in growth established segments ✓ Support existing clients strategy ✓ Grow SA client base Organic growth opportunities are ✓ Follow clients across Africa plentiful for a business with an ✓ Introduce new payment services established b
Slide 36: Operating units within Synthesis
Operating Digital Channels Cloud Platform Integration units within Delivering exceptional Cloud transformation to assist the Products (Reg Tech) end-user client experience, web Enterprise in becoming cloud- Integration to enable regulatory and mobile touchpoints for ready, execute mass migrations Sy
Slide 37: Synthesis leads with ideas
Partnered with experts across industries in 11 Synthesis leads • business and technology podcasts featuring with ideas Discovery, RMB, Sasfin and Nedbank • Hosted a podcast series, “Tapping into the Synthesis was very active in Possible”, with Nedbank, Luno and Mastercard building brand awareness an
Slide 38: AWS leadership continues
AWS leadership continues Synthesis’ partnership with Amazon Web Services, enables world-class solutions for our clients More than 200 AWS certifications 38
Slide 39: Trackmatic & Synthesis provision for the future
Trackmatic Solution & Synthesis • An AWS Landing Zone • Automated pipelines and provision for Infrastructure as Code (IaC) “[Synthesis] galvanised, the future supported and empowered us to go on this AWS Results journey with confidence • Overcame the constraints of knowing we had the best Challenge
Slide 40: Discovery Vitality Group sets a new pace
Discovery Solution Vitality Group • Agile contracting within a fixed budget sets a new • Access dedicated resources with key skill sets “Through this agile pace with agile • Remainder of budget used “on demand” for technical expertise arrangement, we were • Skills included microservices, allowed to
Slide 41: Investec Mauritius
Investec Solution Mauritius • Built a full-fledged online banking system with constant updates Challenge “We have grown with Synthesis. We have grown Cohesion with Investec brand Results together as partners, and it while meeting the specific • Client-centred digital solutions was a beautiful journe
Slide 42: Financial Performance
Financial Performance 42
Slide 43: Payments performance
R million Payments 600 506.2 performance 469.9 500 415.1 397.4 400 314.0 300 215.3 202.9 196.1 161.8 200 151.7 140.7 135.3 140.4 126.3 77.5 Significant pipeline of 66.5 100 44.2 42.1 terminal orders 24.9 9.4 0 Operating leverage from FY '14 FY '15 FY '16 FY '17 FY '18 FY '19 FY '20 FY '21 HY '21 HY
Slide 44: Payments revenue composition
Sale of terminals Maintenance and support Payments R million R million service fees from terminals revenue 250 70 200 65 150 composition 60 100 210 68 64 50 125 55 99 57 0 50 30-Sep-19 30-Sep-20 30-Sep-21 30-Sep-19 30-Sep-20 30-Sep-21 Strong demand for Terminal rental income Transaction related Andr
Slide 45: Software performance
R million Software 250 222.1 performance 195.0 200 137.8 150 125.3 108.4 93.1 100 77.6 57.5 53.8 51.9 46.1 43.3 41.6 50 After a slower start, a 33.9 29.9 29.0 28.0 strong Q2 19.8 15.9 12.6 0 Strong momentum going FY '14 FY '15 FY '16 FY '17 FY '18 FY '19 FY '20 FY '21 HY' 21 HY '22 into H2 – pipelin
Slide 46: Software revenue composition
Software Services and consultancy fees up 17% License and subscription fees revenue R million R million 30 120 100 28 composition 80 26 60 96 24 40 82 25 26 27 68 20 22 0 20 30-Sep-19 30-Sep-20 30-Sep-21 30-Sep-19 30-Sep-20 30-Sep-21 Positive trajectory Hardware International income up 21% across th
Slide 47: Condensed Group statement of comprehensive income
Condensed Group statement of comprehensive income 30 September 30 September % increase / Meaningful terminal orders (R million) 2021 2020 (decrease) Robust additional demand Revenue 439.4 323.7 35.7% Increased marketing and customer development Operating expenses (62.8) (55.3) 13.5% costs EBITDA 138
Slide 48: Condensed Group statement of financial position
Condensed Group statement of financial position 30 September 30 September 31 March (R million) Uncomplicated Balance 2021 2020 2021 Sheet ASSETS No contingent liabilities Goodwill 728.6 728.6 728.6 No post-year-end events Intangible assets 60.0 62.0 61.2 Asset-light businesses Investments in associa
Slide 49: Cash flow (Key features)
Cash flow (Key features) Business units remain 30 September 30 September highly cash generative (R million) 2021 2020 Cash flow from operations 9.0 65.7 Big increase in trade receivables from large terminal sales Changes in working capital (135.7) (18.6) Lower interest rate Finance income received 1
Slide 50: Dividend history
Cents Dividend 6.00 5.50 history 5.00 5.00 4.25 4.00 4.00 A track record of robust 3.00 3.75 2.75 cash from operations 2.00 supports consistent 3.00 2.00 growth in dividends 2.00 3.75 2.50 2.25 2.25 1.00 2.00 0.00 2018 2019 2020 2021 2022 Interim Final 50
Slide 51: Prospects
Prospects 51
Slide 52: General prospects
✓ A broad range of organic as well as acquisitive growth General opportunities available to Capital Appreciation prospects ✓ Acquisition activity will depend on strategic fit as well as valuations Capital Appreciation is well capitalised, with the ✓ Economic climate is impacting our clients and rema
Slide 53: Our investment case
Our ✓ Leadership position in industry with strong investment secular growth trajectory case ✓ Strong culture of innovation resulting in relevant client solutions An extremely strong foundation on which to grow – organically ✓ Established track record of delivery and by acquisition ✓ A trusted partne
Slide 54: Glossary
AI Artificial intelligence M Million AWS Amazon Web Services MPoC Mobile payments on COTS B2B Business to business NA Not available Glossary B2B2C Business to business to consumer NAV Net asset value B-BBEE Broad-Based Black Economic Empowerment NFC Near field communication Bn Billion NM Not meaning
Capital Appreciation — H1 FY2022 Earnings Presentation on 6ix