Capital Appreciation eyes more acquisitions in payments market
Company CFO Alan Salomon says balance sheet could support a deal as big as R2bn
Fintech group Capital Appreciation (Capprec) is looking at investing specifically in payments businesses, with its executives saying it can comfortably make an acquisition worth R1bn to R2bn.
Capprec, which is valued at just more than R1.64bn, is no stranger to acquisitions.
The company listed as a special purpose acquisition company (Spac) on the JSE and raised R1bn through a private placement of shares in late 2015. Since then, it has acquired 100% of African Resonance, Dashpay and Synthesis Software Technologies, as well as a 17.45% interest in Resonance Australia. It also has a 35% stake in government messaging platform GovChat.
During the past financial year the company acquired 100% of Responsive Technology group and Responsive Digital, as well as 71% of Rethink Digital Solutions. Responsive designs and develops digital applications for clients across SA, the US, Europe and UK.
“One of the bigger attractions now for us is through the Synthesis software initiative. We developed the Halo tap-and-go concept, which is now gathering huge momentum ... and we want to do a lot more of that,” Michael Pimstein, joint CEO at Capprec, told Business Day on Tuesday.
“We want to find those niches and sweet spots that are easy to manage and are lucrative in the medium and long term. We’re very judicious in finding those opportunities.”
Company CFO Alan Salomon said Capprec’s balance sheet could support a deal as big as R2bn.
Capprec’s business includes selling payment terminals such as point-of-sale devices, including debit and credit card machines. It also provides the back-end systems that allow these devices to accept payments, and the technology that banks and other financial services companies use to add more features to their digital platforms, including loyalty programmes and prepaid vouchers. Capitec, Nedbank and Old Mutual are among its customers.
The group’s strategy update comes as it reported a 22.5% rise in revenue to R538.1m for the half-year to end-September. Almost two-thirds of Capprec’s revenue — R318.3m — was generated from the payments division, with the balance coming from its software unit.
The company sold 315,000 terminals, an increase of 22% year on year.
The group said it was able to attract several new local and international clients, adding to “its formidable client base in the banking, financial, retail, healthcare, telecommunications and logistics sectors”. It also expanded its international presence, growing international revenue by 195%, albeit off a low base. It now provides services in more than 20 countries.
“The continued diversification and developing of revenue streams create further growth opportunities for the group,” Capprec said.
While only a little higher by lunch time on Tuesday, the company’s share price crept up throughout the afternoon, ending the day up 9.76% at R1.35.