- Capital Appreciation released a positive set of results for the six months ended 30 September 2022, reflecting the growing success of its burgeoning fintech operations.
- The group business operations include digital payments, software, cloud and other digital products, with global expansion gaining momentum off a small base.
- Revenue increased by 22.50% to R538.1 million on the back of a 22% rise in payment terminals to 315,000 units. Software segment revenue jumped 75%; however, substantial investments were undertaken to drive the company’s growth resulting in trading profit only being up by 2%. EBIDTA was flat for the period.
- Investments included a new software business, international operations based in Amsterdam, and an additional 81 personnel to service the growth in the software division. The EBITDA margin decreased 600 basis points to 26.6% as the staff headcount rose.
- Strong cash generation was a positive aspect of the groups’ results. This was despite margin pressures due to a slowdown in global growth as reflected in lower sales of new payment terminals.
- Growth was particularly strong in the software business operations, which grew EBIDTA by 57%, enabling Capital Appreciation to increase the interim dividend by 13.3%.
- The groups innovative and capital light business model, and entrepreneurial management team should stand the company in good stead.
- Capital Appreciation is cautiously optimistic in its outlook and this is a stock that could turn out to be a gem in the sector. I am a buyer of this share especially with management having large stakes in the company. Capital Appreciation has a good track record of capital allocation, despite a recent once-off impairment related to a public sector business unit.
By Ron Klipin
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