Wrap Text
Audited condensed group annual financial results
for the year ended 31 March 2019
Capital Appreciation Limited
(Incorporated in the Republic of South Africa)
(Registration number 2014/253277/06)
Share code: CTA ISIN: ZAE000208245
Audited Condensed Group Annual Financial Results
for the year ended 31 March 2019
ABOUT CAPPREC
Capital Appreciation owns, manages, invests
in, and promotes established and developing
financial technology ("FinTech") enterprises,
their platforms, solutions, products and
applications. The Group has two business
segments - Payments & Payment
Infrastructure ("Payments") and Software &
Services ("Services"). African Resonance and
Dashpay comprise the Payments segment
and Synthesis comprises the Services
segment.
Payments & Payment Infrastructure:
African Resonance is a leading provider
of payment infrastructure and related
technology solutions to established
financial institutions, emerging payment
service providers, the hospitality industry
and the entire retail sector, both directly
and indirectly. Dashpay is in the process of
implementing an exclusively licensed, multi-
product, multi-party universal transacting
platform, and is positioned to provide
innovative transaction processing services,
solutions and products focused on Business-
to-Business ("B2B") commercial and
payment activity. The Dashpay solution set is
intended to complement existing payment
services provided by the Group's established
banking and institutional client base.
Software & Services: Synthesis is a highly
specialised software and systems developer,
offering consulting, integration services
and technology-based product solutions,
to banking, financial services and other
institutions in South Africa and other
emerging markets. Synthesis is uniquely
positioned in Africa, having become the
first company on the continent to attain
Amazon Web Services' (AWS) Advanced
Consulting Partner Accreditation, with
specialist competencies in both Financial
Services and DevOps (Development
Operations).
International: Resonance Australia is an
associate company investment in which
CAPPREC owns 17.45%. Resonance Australia
is still in its early stages of development.
Further detail on the nature of these
business units is available on the Company's
website, at www.capitalappreciation.co.za.
SALIENT FEATURES
OPERATIONAL HIGHLIGHTS
Growth continues across all business units
Contracted with several new blue-chip clients
140 000 payment terminals in the hands of
clients, up 52%
Excellent earnings performance from Synthesis
African Resonance continued to grow its bank
terminal base strongly and gained market share
Synthesis achieved AWS Advanced Consulting
partner status with Financial Services and
DevOps specialties
Synthesis attracted clients in the retail
and telecoms sectors
African Resonance Level 2 B-BBEE
Synthesis Level 3 B-BBEE
Dashpay roll-out progressing well with annualised
Gross Transaction Value (GTV) exceeding R2.2 billion,
up 57% since the interim period
Post year-end agreement regarding intellectual property
ownership and share buy-back
FINANCIAL FEATURES
Revenue of R607.7 million
+19.6%
Strategic investment and expenditure incurred to
support future growth
EBITDA R159.5 million
-9.8%
Trading profit R173.2 million
-7.5%
Headline earnings R124.6 million
-13.1%
EPS and HEPS 8.33 cents per share
down 12.2% and 12.6% respectively
Normalised HEPS 9.01 cents
-11.0%
Significant cash generation,
up 27.4% to R212.7 million
Cash conversion rate 122.8%
of trading profit
Cash EPS of 10.9 cents
+49.8%
Final dividend per share 2.00 cents
bringing total dividend for the year
to 4.25 cents, an increase of 6.25%
R611.2 million cash available
for reinvestment
COMMENTARY
INTRODUCTION
The operating performance of each of the
business units within the Group has been
gratifying, with the results in each case,
largely consistent with expectations. This
performance is despite the challenging
economic environment in South Africa,
particularly in the retail sector and more
particularly in the second half of fiscal 2019.
The financial performance of the Group
however, has been affected in the first
instance, by the Group's continuing costs
incurred for the development of new
innovative product offerings and to build
capacity in anticipation of growth in
commercial activity, this being relevant
in both the Payments and the Services
segments.
Secondly, given African Resonance's terminal
growth and further blue-chip client gains,
certain service and maintenance fees
were renegotiated with a major client in
the interests of market consistency and in
anticipation of future terminal growth.
Technology's role as a key disruptor and
differentiator in the Banking and Financial
Services sector continues to accelerate
its impact and effect, not only because
of new competing digital related service
offerings, but it has caused major institutions
to focus on overall cost containment in
parallel with their own system revisions
and technology upgrades. This evolving
process of transformation within the sector,
creates further opportunity for CAPPREC,
hence the early consideration, negotiation
and revision of certain fee structures.
The Group's businesses have a long history of
innovation and a good track record of service
to the banking and financial services sector,
consistently providing practical operational
solutions and constructively responding
to the sector disruption, always seeking to
convert the resulting dislocations into viable
commercial opportunities.
The Group has an impressive and now more
diversified client base, that includes all major
banking institutions in South Africa, as well
as many niche banks, large financial services
institutions and other financial services
companies.
OPERATING ENVIRONMENT
Economic challenges and political
uncertainties facing South Africa have
prompted a cautious approach toward
infrastructure expansion, and other capital
expenditure initiatives by our clients and
have acted to constrain growth in both
divisions. CAPPREC's Payments business is
directly impacted by its clients' exposures
to the retail sector and by consumers'
propensity to spend.
In the Software & Services sector, in response
to increasing consumer demands, there
is a significant and growing movement
towards digitisation. The systems required to
accommodate this migration, as well as the
channels required to distribute the digital
banking products, have made the need
for technology-led initiatives more urgent,
which has increased demand for the Group's
services.
CAPPREC subsidiaries successfully managed
to expand the scope of each business
with existing clients and, given their well-
established reputations and track record
of innovation, quality and efficient service
delivery, have once again been able to
attract important new blue chip clients
in this period.
The management team of each business
is fully aligned to CAPPREC's strategic
imperatives. Each team is focused and is
making good progress in ensuring that
the Group's portfolio of products and
services is suitably positioned for current
and anticipated market conditions. While it
remains early in the Group's journey, there
is good momentum in delivering value to
our clients.
SUMMARISED FINANCIAL RESULTS
In assessing the financial results, it should
be noted that the comparative financial
information for the Payments and Services
segments represents trading for the
11 months ended 31 March 2018, as the
acquisitions became effective on 5 May 2017.
CAPPREC generated gross revenues for the
period of R607.7 million(2018: R508.2 million),
an increase of 19.6% and Earnings Before
Interest, Taxation, Depreciation and
Amortisation ("EBITDA") of R159.5 million
(2018: R176.8 million), a decrease of 9.8%.
Profit before taxation decreased by 13.1% to
R173.8 million (2018: R200.0 million), with
profit after taxation decreasing by 12.8%
being R124.6 million (2018: R142.9 million).
Headline earnings for the period decreased
by 13.1% to R124.6 million (2018: R143.4 million)
translating into EPS and HEPS for the period
of 8.33 cents per share, a decrease of 12.2%
relative to the EPS of 9.49 and a decrease of
12.6% relative to HEPS of 9.53 cents per share
in the comparable period.
CAPPREC also reports Normalised
Headline Earnings Per Share ("NHEPS"),
which together with EBITDA are the
primary measures used by management
to assess CAPPREC's underlying financial
performance. NHEPS comprises HEPS
adjusted for the after-tax amortisation of
intangible assets on the asset acquisitions
in May 2017. For the period under review,
the Group's NEPS totalled 9.01 cents
(2018: 10.12 cents), a decrease of 11.0% in
NHEPS. The Group also considers cash
earnings per share to be an appropriate
barometer of its performance and for the
period under review, cash earnings per share
was 10.93 cents (2018: 7.3 cents), an increase
of 49.8%.
A unifying characteristic of the underlying
businesses within the Group is that they are
all in a growth and developmental phase of
their respective lifecycles. Investment and
expenditure to support this anticipated
growth is designed to generate further
income-producing benefits in future
financial periods. In the Payments division,
the costs incurred relate to development,
marketing and capacity building expenditure
associated with the launch of the Dashpay
processing services. The Dashpay service
offering is evolving rapidly and, given the
potential transaction volumes, including
the need for system stability, is in the
process of being activated in a deliberately
measured and phased manner. In Services,
the added costs related to increased staffing
and training, substantially associated with
the AWS cloud initiatives being pursued
by Synthesis. There were also increased
costs incurred at Group level to strengthen
executive management, including
administrative overheads and head office
rental. The Group has invested both time and
resource in ensuring that the business units
have effective management succession plans
and that these management teams' interests
are aligned with the Group and shareholders.
During the period under review, the Group
again demonstrated its highly cash-
generative nature with cash-generation
of 122.8% of trading profit. The Group's
cash resources at 31 March 2019 were
R611.2 million (2018: R513.2 million). The
Group's growth in cash resources is after
the payment of R63.6 million in dividends,
the buy-back of 8.0 million CAPPREC shares
totalling R7.1 million, and several other
cash applications reflected elsewhere in
this announcement. As of 31 March 2019,
CAPPREC has repurchased a total of
63.6 million shares at an average price of
76 cents per share.
Based on the closing price of a CAPPREC
share on 31 March 2019 of 74 cents. 39 cents
of that share price is represented by cash.
The Group's cash resources will be applied,
in the first instance, to fund anticipated
organic growth and thereafter to pursue
or supplement the cost of new, but
complementary acquisition opportunities.
POST YEAR-END EVENTS
Capital Appreciation have concluded an
agreement with Dr Hanoch Neishlos, the
principal vendor of African Resonance, to
acquire the intellectual property, technology
and development platforms that were
previously licensed by African Resonance
from Uplink (an entity controlled by Dr
Neishlos). Upon completion, Capital
Appreciation will employ members of the
Uplink team focused on Group and customer
technology and development needs.
Dashpay will continue to enjoy its exclusive
licensing rights to the Stratagem platform for
South Africa, with the reconstituted Uplink
continuing to provide the necessary transition
support both for African Resonance and
Dashpay. This is an important milestone for
Capital Appreciation as the Group will have
absolute ownership over the vast majority of
the intellectual property used in the business.
The overall agreement also contemplates the
following:
- Capital Appreciation will acquire all
Capital Appreciation shares owned
by Dr Neishlos and related associates
(245 million shares) at 80 cents per share
for an aggregate amount of R196 million
and Dr Neishlos will settle various other
amounts owed to African Resonance from
the proceeds of the share sale;
- Capital Appreciation will dispose of its
17.45% interest in Resonance Australia and
its claim on loan account for an aggregate
amount of R40 million;
- the agreement further provides for the
dissolution of other related party contracts
and services which formed part of the
initial terms of acquisition.
As a result of the transaction Dr Neishlos will
resign as an executive of the Group and both
Dr Neishlos and Eitan Neishlos will resign
from the Board of Capital Appreciation.
The transaction remains subject to certain
conditions precedent, one of which is
the approval by Capital Appreciation
shareholders and the JSE Limited. Capital
Appreciation will be issuing a Circular to
shareholders in the due course.
Capital Appreciation wishes to thank
Dr Hanoch and Eitan Neishlos for their
valuable guidance and support over the
past two years and wish them well as they
focus on their other business interests. Both
African Resonance and Dashpay enjoy
continuing contractual arrangements and
have strong management teams in place
that are committed to the business and to
CAPPREC as its shareholder.
DIVISIONAL REVIEW
African Resonance and Dashpay comprise
the Payments division of the Group.
African Resonance has continued to
generate a sizeable number of terminal
sales with more than c.24 000 additional
terminals being sold during the past six
months, bringing the total sold for the year
to c.49 000. African Resonance today has
more than c.140 000 terminals in the hands
of customers (c.128 000 sold and c.12 000
rented), which should be viewed against
the Group's initial objective to have 100 000
terminals sold by the end of March 2019.
Dashpay's innovative transaction processing
services, solutions and products focused on
B2B and B2B2C commercial and payment
activity is being activated in a deliberately
measured and phased manner and the
response at this early stage is encouraging.
The value of transactions processed through
the Dashpay network, Gross Transaction
Value (GTV), for the month of April 2019
was the highest in the company's history,
is more than two and a half times the level
of activity achieved during any month
in the previous financial year and, when
annualised, approximates R2.2 billion, a 57%
increase compared to the annualised GTV of
R1.4 billion disclosed in the interim period.
This demonstrates the positive operating
momentum within the business. GTV is a
key operating metric used to measure of
the scale of the business and the degree
to which Dashpay has and will be able
to penetrate the market. As of the end of
April Dashpay had more than 2 100 actively
trading devices in its network and has a
large pipeline of deployments in conjunction
with its institutional customers and partner
banks. The Dashpay platform, ecosystem and
solution set are intended to complement the
traditional payment services provided by the
Group's established banking and institutional
client base, are device agnostic and integrate
seamlessly with existing legacy systems.
The Payments segment demonstrated
a resilient trading performance
notwithstanding continued macro-economic
headwinds, low consumer confidence
and reduced earnings arising from the
revised commercial terms with a major
client. The division generated revenue
of R469.9 million (2018: R415.1 million),
up 13.2%, EBITDA of R135.5 million (2018:
R152.0 million), down 10.9% and a profit after
tax of R98.2 million (2018: R111.0 million),
down 11.6%.
Synthesis comprises the Services business
that offers highly specialised software
development, consulting and integration
services and technology-based product
solutions to banking and other financial
institutions in South Africa and other
emerging markets. Synthesis' initiatives span
three main areas (i) Cloud, (ii) RegTech, and
(iii) Digital and Emerging tech. RegTech
provides regulatory reporting solutions to
financial institutions and has produced
steady growth in the period with healthy
margins. Digital and Emerging tech
continues to respond to increasing client
demands and provides secure mobile and
web digital channels for financial services
institutions to enhance their customers'
experience, as well as access to emerging
technologies which include machine
learning, artificial intelligence, big data
analytics and blockchain technology.
Cloud is the fastest growing segment and
Synthesis has a close strategic relationship
with Amazon Web Services (AWS), the cloud
computing division of Amazon. AWS is the
world's leading cloud platform provider
and recently announced the opening of an
infrastructure region in Cape Town in the
first half of 2020. The new region will be its
first on the African continent. As the first
AWS Consulting Partner to reach Advanced
Partner status in Africa and the Middle East,
and with more than 120 AWS certifications,
Synthesis is well positioned to capitalise
on the launch of the new AWS region for
South African businesses. Synthesis has
gained in-depth experience in setting up
advanced cloud architecture and managing
cloud computing migrations for blue-chip
financial services companies and other
enterprises in various sectors. Synthesis
assists customers in becoming cloud-ready,
executing mass migrations, harnessing the
benefits of innovation and big data analytics,
and extracting cost savings and regulatory
benefits.
Synthesis entered into several partnerships
in the period, which should yield exciting
and more comprehensive service offerings
related to real-time data streaming, cloud
infrastructure, cloud security, artificial
intelligence, machine learning and
personalisation in future. The company
also launched the Synthesis Academy to
provide training and thought leadership
education to the staff of its clients. Synthesis
Labs, its research and development division
continues to innovate and recently released
a new managed platforms solution that
provides clients with secure, standardised
and network optimised cloud infrastructure.
The Afgri joint venture that provides an
omni-channel digital platform to enhance
the way farmers administer and manage
their farming operations, is expected to
become more significant going forward.
More than 2 000 farmers now form part of
this ecosystem. Synthesis also experienced
success in marketing its services to the retail
and telecoms sector, and expects these
sectors to yield further business growth in the
future periods.
Synthesis generated revenue of R137.8 million
(2018: R93.1 million), up 48.0%, EBITDA of
R44.0 million (2018: R33.6 million), up 31.0%,
and a profit after tax of R32.7 million (2018:
R23.8 million), up 37.6%.
Resonance Australia remains in a start-
up phase and CAPPREC's share of its
development and administration costs of
R2.4 million is reflected as a separate item in
the statement of comprehensive income.
BROAD-BASED BLACK ECONOMIC EMPOWERMENT
During the period under review, both African
Resonance and Synthesis had their B-BBEE
status reviewed. We are delighted to report
that African Resonance received a Level 2
and Synthesis a Level 3 accreditation. This is a
remarkable achievement and consistent with
the Group's overall commitment to B-BBEE.
Dashpay remains in its early developmental
state and will begin to focus on its B-BBEE
rating once substantial commercial activity is
underway.
The Group's transformation spend on
B-BBEE initiatives increased to R10.8 million
(2018: R8.9 million), which represents 6.3%
(2018: 4.8%) of trading profit.
INVESTMENTS AND ACQUISITIONS
CAPPREC has strong operating cash flow
businesses and has cash resources of
R611.2 million, which it intends to utilise to
generate organic growth and to finance
acquisition opportunities.
The Group continues to pursue acquisition
opportunities, however, finding suitably
sized and mature companies has proven
challenging. Sellers' expectations and asset
valuations have not reflected the current
difficult economic climate and often do not
meet the Group's valuation criteria.
The Group still remains strongly focused
on acquiring companies that can expand
and generate scale within a reasonable
timeframe, can provide satisfactory organic
growth and returns to shareholders and
where CAPPREC's capital and strategic
capability can be successfully leveraged.
PROSPECTS AND CONCLUSIONS
The economic environment in South
Africa continues to be challenging, with all
sectors affected by low levels of consumer
confidence and muted commercial
activity. Against this backdrop, and while
the pressures of the economic climate
cannot be ignored, CAPPREC, with a level
of cautious confidence, believes that (i) the
growth potential of the Group's subsidiary
enterprises continues to be substantial and
compelling, and (ii) a reasonable rate of
continued organic growth is expected in
each of the business units.
Technology continues to have an
accelerating impact on the financial services
sector, thereby effecting business models,
revenue streams, consumer expectations,
products offered, services rendered,
operating cost structures and regulation.
Changes in each of these will precipitate
disruptions that will, in themselves, present
opportunities for innovative solutions.
CAPPREC's subsidiary enterprises each
have a long history of innovating in their
respective fields and being responsive to
clients' needs. Our standing as a trusted
partner positions CAPPREC well in the
rapidly evolving FinTech sector.
The sector in which CAPPREC operates and
invests also presents several interesting
investment opportunities in South Africa.
Opportunities also exist for the expansion
and technology transfer of our business
models into new markets and certain of
these are presently being researched.
DIVIDENDS
The Board has pleasure in announcing that
a final dividend of 2.00 cents per ordinary
share has been declared for the six months
ended 31 March 2019. The total dividend for
the year ended 31 March 2019 amounts to
4.25 cents per share (2018: 4.0 cents).
We note the following:
- Dividends are subject to dividends
withholding tax.
- The payment date for the dividend is
8 July 2019.
- Dividends have been declared out of
profits available for distribution.
- Local dividends withholding tax is 20%.
- Gross dividend amount is 2.00 cents per
ordinary share, which is 1.6000 cents net of
withholding tax.
- CAPPREC has 1 555 000 000 ordinary
shares in issue at the declaration date.
- CAPPREC's Income Tax Reference Number
is 9591281176.
The salient dates relating to the dividend are as follows:
- Last day of trade cum dividend Tuesday, 2 July 2019
- Shares commence trading ex-dividend Wednesday, 3 July 2019
- Dividend record date Friday, 5 July 2019
- Dividend payment date Monday, 8 July 2019
Share certificates for ordinary shares may
not be dematerialised or rematerialised
between Wednesday, 3 July 2019 and Friday,
5 July 2019, both days inclusive.
On behalf of the Board
Michael (Motty) Sacks
Non-Executive Chairman
Michael Pimstein and Bradley Sacks
Joint Chief Executive Officers
Alan Salomon
Chief Financial Officer
Sandton
7 June 2019
PREPARATION OF SUMMARISED FINANCIAL REPORTS
The financial results herein have been
prepared under the supervision of Mr Alan
Salomon CA(SA) in his capacity as the Group
Chief Financial Officer, and were approved
by the Board on 7 June 2019. For further
information hereto, please refer to the
section below captioned Accounting Policies
and Basis of Preparation.
ACCOUNTING POLICIES AND BASIS OF PREPARATION
These audited condensed group annual
financial results have been prepared in
accordance with the framework concepts
and the measurement and recognition
requirements of International Financial
Reporting Standards (IFRS), its interpretations
issued by the IFRS Interpretations
Committee, the Financial Reporting
Guides as issued by the Accounting Practices
Committee and Financial Pronouncements
as issued by the Financial Reporting
Standards Council, presentation and
disclosure as required by International
Accounting Standard (IAS) 34 'Interim
Financial Reporting', the JSE Limited Listings
Requirements and the requirements of the
Companies Act, No. 71 of 2008, of South
Africa. The accounting policies and methods
of computation used in the preparation
of these audited condensed group annual
financial results are in terms of IFRS and are
consistent in all material respects with those
applied in the most recent group audited
annual financial statements.
The fair value disclosures required by
IAS 34:16A (j) and (i) are not disclosed in
this announcement, but are included in
the consolidated interim group financial
statements which are available for inspection
at our offices.
FORWARD-LOOKING STATEMENTS
This announcement contains forward-looking
statements with respect to the economy and
the results of the operations of CAPPREC,
which by their nature, involve risk and
uncertainty on economic circumstances
that may or may not occur in the future. Any
forward-looking statements have not been
audited or reviewed by our external auditors.
CONDENSED GROUP STATEMENT OF COMPREHENSIVE INCOME
for the year ended 31 March 2019
%
Figures in Rand Notes 2019 Change 2018
Revenue 1 607 723 023 19.6 508 203 850
Cost of sales (309 255 706) (264 578 499)
Gross profit 298 467 317 22.5 243 625 351
Other income 2 677 709 23 625 187
Operating expenses (127 992 347) 59.9 (80 021 652)
Trading profit 173 152 679 (7.5) 187 228 886
Share-based payment expense (921 900) (250 500)
Depreciation (8 461 766) (2 743 109)
Amortisation of intangibles (13 983 722) (12 431 375)
Acquisition costs (415 451) (567 799)
Transformation costs (10 824 574) (8 940 291)
Operating profit 138 545 266 (14.6) 162 295 812
Finance income 38 280 325 39 437 269
Finance costs (601 735) (785 056)
Equity accounted loss in associate (2 428 181) (958 211)
Profit before taxation 173 795 675 (13.1) 199 989 814
Taxation (49 182 821) (57 053 903)
Profit after taxation 124 612 854 (12.8) 142 935 911
Other comprehensive income - -
Total comprehensive income for the year 124 612 854 142 935 911
Basic earnings per share (cents) 5 8.33 (12.2) 9.49
Diluted basic earnings per share (cents) 5 8.17 (12.4) 9.33
* The financial information for the Payments & Payment Infrastructure, and Software & Services divisions
represents trading for 11 months for the 2018 financial year, as the acquisitions became unconditional on
5 May 2017.
CONDENSED GROUP STATEMENT OF FINANCIAL POSITION
at 31 March 2019
Figures in Rand Notes 2019 2018
ASSETS
Property, plant and equipment 21 737 333 15 275 684
Goodwill 2 728 577 776 728 577 776
Intangible assets 62 258 622 71 452 462
Other financial assets 19 011 040 17 625 214
Investment in associates 3 26 360 129 28 788 310
Deferred tax 5 141 435 2 643 528
Non-current assets 863 086 335 864 362 974
Inventories 16 167 245 21 320 108
Trade and other receivables 44 367 518 68 034 527
Loan to associate 5 179 241 4 512 392
Taxation receivable 4 588 251 307 957
Cash and cash equivalents 611 227 490 513 169 862
Current assets 681 529 745 607 344 846
Total assets 1 544 616 080 1 471 707 820
EQUITY AND LIABILITIES
Capital and reserves
Share Capital 4 1 204 657 490 1 211 781 099
Share-based payment reserve 1 172 400 250 500
Contingent consideration reserve 24 900 000 24 900 000
Retained income 216 385 606 155 355 981
Total equity 1 447 115 496 1 392 287 580
Deferred revenue 9 154 167 7 066 667
Contingent consideration 9 271 591 8 689 618
Deferred tax 16 216 947 19 931 987
Non-current liabilities 34 642 705 35 688 272
Trade and other payables 53 356 931 33 091 148
Bank overdraft 2 434 271 -
Operating lease liability 1 182 800 -
Other financial liabilities - 2 989 613
Deferred revenue 1 850 000 1 325 000
Taxation payable 4 033 877 6 326 207
Current liabilities 62 857 879 43 731 968
Total equity and liabilities 1 544 616 080 1 471 707 820
CONDENSED GROUP STATEMENT OF CASH FLOWS
for the year ended 31 March 2019
Figures in Rand 2019 2018
Cash flow from operations 212 698 073 166 301 567
Finance income received 36 896 736 39 427 325
Finance costs paid (19 763) (248 493)
Dividends paid (63 583 229) (30 400 000)
Taxation refund received 309 425 -
Taxation paid (62 276 347) (61 154 563)
Net cash flow from operating activities 124 024 895 113 925 836
Cash flows from investing activities
Acquisition of property, plant and equipment (16 532 856) (4 872 247)
Proceeds on disposal of property, plant and equipment 1 467 511 405 074
Acquisition of intangible assets (910 259) (182 160)
Capitalisation of intangible assets (3 879 621) -
Acquisition of subsidiary net of cash acquired - (553 009 486)
Acquisition of associate - (30 206 520)
Loan to associate - (5 024 790)
Repayment of loans - 4 153 532
Net cash flow from investing activities (19 855 225) (588 736 597)
Cash flows from financing activities
Repayment of loans - (19 071 601)
Repayment of financial liabilities (2 989 613) -
Purchase of 8 022 000 treasury shares (2018: 55 620 000) (7 123 610) (41 371 401)
Net cash flow from financing activities (10 113 223) (60 443 002)
Net increase/(decrease) in cash and cash equivalents 94 056 447 (535 253 763)
Cash and cash equivalents at beginning of year 513 169 862 1 047 788 681
Net foreign exchange difference 1 566 910 634 944
Cash and cash equivalents at end of year 608 793 219 513 169 862
Bank balances, call and notice deposits 611 227 490 513 169 862
Bank overdraft (2 434 271) -
608 793 219 513 169 862
GROUP STATEMENT OF CHANGES IN EQUITY
for the year ended 31 March 2019
Ordinary Constituent Share-based Contingent
share ordinary share payment consideration Retained Total
Figures in Rand capital capital reserve reserve income equity
Balance at 1 April 2017 1 000 002 500 4 000 000 - - 38 820 070 1 042 822 570
Issue of ordinary share capital 253 150 000 - - - - 253 150 000
Repurchase of constituent ordinary share capital - (4 000 000) - - 4 000 000 -
Share-based payment reserve - - 250 500 - - 250 500
Contingent consideration reserve - - - 24 900 000 - 24 900 000
Purchase of treasury shares (41 371 401) - - - - (41 371 401)
Cash dividend paid - - - - (30 400 000) (30 400 000)
Total comprehensive income for the year ended 31 March 2018 - - - - 142 935 911 142 935 911
Balance at 31 March 2018 1 211 781 099 - 250 500 24 900 000 155 355 981 1 392 287 580
Share-based payment reserve - - 921 900 - - 921 900
Purchase of treasury shares (7 123 609) - - - - (7 123 609)
Cash dividend paid - - - - (63 583 229) (63 583 229)
Total comprehensive income for the year ended 31 March 2019 - - - - 124 612 854 124 612 854
Balance at 31 March 2019 1 204 657 490 - 1 172 400 24 900 000 216 385 606 1 447 115 496
CONSOLIDATED SEGMENT ANALYSIS
for the year ended 31 March 2019
Payments & Payment
Infrastructure Software & Services Corporate Group
Figures in Rand 2019 2018* 2019 2018* 2019 2018 2019 2018
Revenue** 469 894 711 415 105 927 137 828 312 93 097 923 - - 607 723 023 508 203 850
Trading profit/(loss) 143 146 336 158 439 411 47 160 530 36 122 238 (17 154 187) (7 332 763) 173 152 679 187 228 886
Depreciation (7 076 723) (2 231 340) (851 215) (423 576) (533 828) (88 193) (8 461 766) (2 743 109)
Amortisation of intangibles (297 278) - (418 444) (269 042) (13 268 000) (12 162 333) (13 983 722) (12 431 375)
Operating profit/(loss) 127 904 602 149 483 029 42 066 924 33 214 370 (31 426 260) (20 401 587) 138 545 266 162 295 812
Profit/(loss) after taxation 98 153 418 111 024 267 32 737 091 23 783 189 (6 277 655) 8 128 455 124 612 854 142 935 911
Total assets 184 766 329 120 872 337 63 137 764 34 890 492 1 296 711 987 1 315 944 991 1 544 616 080 1 471 707 820
Total liabilities 43 078 718 31 037 414 23 819 661 16 177 317 30 602 205 32 205 509 97 500 584 79 420 240
Net assets 141 687 611 89 834 923 39 318 103 18 713 175 1 266 109 782 1 283 739 482 1 447 115 496 1 392 287 580
* The financial information for the Payments & Payment Infrastructure, and Software and Services divisions represents trading for 11 months
for the 2018 financial year, as the acquisitions became unconditional on 5 May 2017.
** Refer to note 1 for a breakdown of the description of revenue.
The Payments business provides a variety of technology solutions, services and related
technical support services to financial institutions and others in the financial services sector.
The Software and Services business addresses the complex technology needs of major
financial and commercial institutions.
Figures in Rand 2019 2018
NOTE 1: REVENUE
Payments & payment infrastructure division
Rental income 79 289 046 82 385 242
Maintenance and support service fees 73 871 669 45 068 642
Sale of terminals 290 897 279 276 047 720
Merchant acquiring and set-up fees 15 059 982 11 604 323
Sundry revenue 10 776 735 -
469 894 711 415 105 927
Software and Services division
Services and consultancy fees 102 215 242 71 274 480
Licence and subscription fees 32 884 725 18 757 519
Hardware 2 728 345 3 065 924
137 828 312 93 097 923
Total revenue 607 723 023 508 203 850
Sundry revenue is subscriptions, software applications, project fees and terminal
repairs/replacement fees.
Sundry income and terminal recoveries which were considered other income in the prior year,
have been classified as revenue in the current year.
Disaggregation of revenue from contracts with customers
The Group disaggregates revenue from customers as follows:
Figures in Rand 2019 2018
Sale of goods
Sale of terminals 290 897 279 276 047 720
Hardware 2 728 345 3 065 924
293 625 624 279 113 644
Rendering of services
Services and consultancy fees 102 215 242 71 274 480
Licence and subscription fees 32 884 725 18 757 519
Rental income 79 289 046 82 385 242
Maintenance and support service fees 73 871 669 45 068 642
Merchant acquiring and set-up fees 15 059 982 11 604 323
Sundry revenue 10 776 735 -
314 097 399 229 090 206
Total revenue from contracts with customers 607 723 023 508 203 850
Revenue from the sale of terminals is recognised at the point in time when control of the asset
is transferred to the customer, generally on delivery of the terminals. The Group recognises
revenue from maintenance and support service fees over time, using an input method
to measure progress towards complete satisfaction of the service, because the customer
simultaneously receives and consumes the benefits provided by the Group. The practical
expedient related to contract modifications may be applied for all contract modifications
occurring before the beginning of the earliest period presented or modifications that occur
before the date of initial application.
Figures in Rand 2019 2018
NOTE 2: GOODWILL
Carrying amount 728 577 776 728 577 776
Movement in goodwill
Carrying value at the beginning of the year 728 577 776 -
Goodwill and intangible assets arising on acquisition of businesses - 811 925 776
Intangible asset allocation in compliance with IFRS 3 - (83 348 000)
Carrying value at the end of the year 728 577 776 728 577 776
NOTE 3: INVESTMENT IN ASSOCIATES
Resonance Australia Proprietary Limited
17 580 shares at cost 29 746 521 29 746 521
Share of loss of associate (3 386 392) (958 211)
26 360 129 28 788 310
Impairment of South African-based associate of Synthesis Software
Technologies Proprietary Limited - 459 999
NOTE 4: SHARE CAPITAL
Number Number
Reconciliation of issued ordinary shares
Number of issued ordinary shares at the beginning of the year 1 499 380 000 1 250 000 000
Number of ordinary shares issued during the year - 305 000 000
Number of issued ordinary shares at the end of the year 1 499 380 000 1 555 000 000
Number of ordinary shares repurchased during the year (8 022 000) (55 620 000)
Number of issued ordinary shares, net of treasury shares at the end of the year 1 491 358 000 1 499 380 000
During the year Group repurchased 8 022 000 ordinary shares (2018: 55 620 000) at an
average price of 88.9 cents per share (2018: 74.4) cents per share.
Figures in Rand 2019 2018
NOTE 5: RECONCILIATION OF HEADLINE EARNINGS
The following table reflects the information used in the basic, headline and
diluted earnings per share calculations:
Profit for the year attributable to ordinary shareholders (Rand) 124 612 854 142 935 911
Impairment on investment in associate - 459 999
Headline earnings 124 612 854 143 395 910
Basic earnings per share (cents) 8.33 9.49
Headline earnings per share (cents) 8.33 9.53
Diluted earnings per share (cents) 8.17 9.33
Diluted headline earnings per share (cents) 8.17 9.36
Number of ordinary shares in issue 1 555 000 000 1 555 000 000
Weighted average number of ordinary shares 1 495 475 231 1 505 442 013
Diluted weighted average number of ordinary shares 1 525 475 231 1 532 647 492
NOTE 6: DIVIDENDS
A dividend of 2.0 cents per ordinary share was declared on 15 May 2018 amounting to
R31.10 million. A dividend of 2.25 cents per ordinary share was declared on 8 November
2018 amounting to R34.99 million. The total dividends paid during the year amounted to
R66.09 million (2018: R31.10 million).
CORPORATE INFORMATION
Capital Appreciation Limited
(Incorporated in the Republic of South Africa)
(Registration number 2014/253277/06)
Share code: CTA ISIN: ZAE000208245
Registered office
61 Katherine Road, Sandton, 2196
Email: investor@capitalappreciation.co.za
Website: www.capitalappreciation.co.za
Directors
MI Sacks** (Chairman), MR Pimstein* (Joint Chief Executive), BJ Sacks* (Joint Chief Executive),
AC Salomon* (Chief Financial Officer), R Morar**, B Bulo**, JM Kahn**, Dr H Neishlos*,
VM Sekese**, CL Valkin**, DK Dlamini**, EM Kruger**, E Neishlos**
*Executive ** Non-Executive
Transfer Secretary
Computershare Investor Services Proprietary Limited
Rosebank Towers, 15 Biermann Avenue, Rosebank, 2196
(PO Box 61051, Marshalltown, 2107)
Company secretary
PKF Octagon
21 Scott Street, Waverley, Johannesburg, 2090 (Private Bag X02, Highlands North, 2037)
Sponsor
Investec Bank Limited
2nd Floor, 100 Grayston Drive, Sandown, Sandton, 2196 (PO Box 785700, Sandton, 2146)
Auditors
EY Inc
102 Rivonia Road, Sandton, 2196, Gauteng, South Africa
capitalappreciation.co.za
Date: 10/06/2019 08:20:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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