Patrice Motsepe
Patrice Motsepe

Fintech group Capital Appreciation (Capprec) says despite the 20% nosedive in its earnings in the first half, it expects to end its 2020 financial year on a high note.

The investment holding company in which Patrice Motsepe’s African Rainbow Capital (ARC) owns a minority stake, reported a 10.7% decline in revenue in the six months to September but blamed this solely on delays in getting some of its imported payment terminals, adding that it was a reflection of dwindling demand.

Joint-CEO Bradley Sacks said if customers ordered more machines than they did in the first half of 2019 and had all the orders arrived on time, the group’s revenue would have increased by 10%.

“Demand is certainly there. There’s increasing demand for cloud services and the payments sector despite the state of the South African economy,” Sacks said, adding that the group was “cautiously” optimistic about its prospects as more banks required its services to beef up their digital platforms.

Capprec which has two divisions — the payments business and services business — provides technology that banks and other financial services companies use to add more services to their digital platforms, such as integrating loyalty programmes and the sale of prepaid vouchers. Its blue-chip clients include the big five banks, Discovery Vitality, TymeBank and a number of asset managers.

It also sells payment terminals such as point-of-sale devices to banks and major retailers and then provides the back-end systems that allow these devices to accept payments. It was the delay in the delivery of these terminals that caused the company to generate less revenue in the period under review.

“Our primary supplier for our devices had gone through a production process restructuring. They were moving some of their stuff to a new manufacturing facility so we are late in getting orders from Singapore. They arrived after September,” said Sacks.

Payment terminal sales, which accounted for 50% of the payments division’s revenue in the six months to September, open another business opportunity for Capprec — that of maintaining the machines and providing related support, allowing the company to earn recurring income on top of the one-off sales revenue. In the period under review, this recurring revenue increased 99.3% compared with the first half of 2019.

The services business, Synthesis, is capitalising on the growth of digital banking and apart from that it also provides cloud services and regulatory compliance technology to big firms. Sacks said the escalating demand for Synthesis’s offering saw the division increase its earnings by 31% to R17.6m in the period under review.

Given the demand for its technologies and cloud services, Capprec — which sat with R482m in cash resources at the end of October — said it will be ploughing more money into Synthesis. Sacks said the business was developing more new technologies. He said there was a “well-developed pipeline of compelling organic and acquisitive growth opportunities” that have been presented to the company.