Group expects big demand for point of sales machines
Fintech group Capital Appreciation (Capprec) expects that its business of selling point-of-sale (POS) devices and card machines will keep growing for three to five years, helped by the growth of card payments in SA.
On Monday, the group’s payments division reported a 24% rise in annuity revenue in the six months to September 2023. Demand for payments-related software solutions rose in the period, resulting in a 35% rise in transaction-related income.
Payment terminal sales fell short of expectations, as customers chose to temporarily delay new terminal orders due to weak consumer confidence and unfavourable economic conditions. Some clients acquired new terminals through leasing, a trend with a favourable effect on letting terminals with income doubling. The total terminal estate grew 9%.
Capprec joint CEO Michael Pimstein told Business Day that higher rentals mean income will be spread over a rental term, 36 or 48 months for example, rather than one-off lump sums from a traditional sale.
Lower POS terminal sales resulted in payments division revenue falling 16.7% to R265.3m. Pimstein and his team express confidence that demand for POS terminals will continue in coming years. “Strategically, we believe that there is a very good runway for five years for the mobile payment device as we know it. That is both for the Linux range and Android. The Android terminal is an especially capable payments solution and is proving very popular.”
Capprec’s business includes selling payment terminals such as point-of-sale devices, including debit and credit card machines. It provides back-end systems that enable these devices to accept payments, and the technology that banks and other financial services firms use to add features to their digital platforms, including loyalty programmes and prepaid vouchers.
“And as we look to the African continent, we see the much stronger changeover of cash usage from people not ordinarily banked into digital transactions. We see a significant opportunity for terminal growth. We have seen the position of terminals growing all over the world, except in Europe, in recent years,” said Pimstein.
The group expects the move from old 2G and 3G technologies to 4G and 5G to boost sales. SA has many 2G and 3G terminals. “While there may be an extension to the government gazette to render these machines obsolete, our anticipation is that this will happen, and a huge number of terminals will be replaced anyway,” said Pimstein.
The cash-flush fintech group declared the same interim dividend of 4.25c a share as last year though operating profit fell.
Capprec reported gross revenue growth of 3% to R554.2m, while earnings before interest, tax, depreciation and amortisation dropped 8% to R126.9m.
Headline earnings — which strip the effects of one-off financial events — rose 108% to R80.6m, partly benefiting from a three-month contribution from recently acquired Dariel Solutions, higher finance income and a reduced expected credit loss raised, after tax, for GovChat of R9.4m. The group closed the period with cash from operations of R159.9m, up 55% on the prior year.
Capprec is no stranger to acquisitions since listing as a special-purpose acquisition company on the JSE and raising R1bn through a private placement of shares in late 2015.
Since then, it has acquired 100% of African Resonance, Dashpay and Synthesis Software Technologies, and a 17.45% interest in Resonance Australia. It also has a 35% stake in government messaging platform GovChat.
During its most recent financial year, the company acquired 100% of Responsive Technology group and Responsive Digital, and 71% of Rethink Digital Solutions. Responsive Digital designs and develops digital applications for clients in SA, the US, Europe and the UK.