Capital Appreciation takes profit hit as it invests for growth
Renegotiation of service and maintenance fees with a major client ‘in the interests of market consistency’ also dented bottom line
JSE-listed fintech group Capital Appreciation (Capprec) says profits fell in the year to end-March as it invested in the business to boost future growth.
Earnings declined because of product-development costs and “capacity-related expenditures incurred in anticipation of growth in commercial activity”, said Capprec joint-CEO Bradley Sacks.
Profits were also dented by the renegotiation of service and maintenance fees with a major client “in the interests of market consistency and in anticipation of future terminal growth”, Sacks said.
While revenue grew 19.6% to R607.7m, profit after tax declined 12.8% to R124.6m due to a sharp rise in sales costs and operating expenses.
Capprec’s shares were 8.9% down at 72c in early trade on Monday, giving the group a market capitalisation of R1.1bn.
The company said cash generated from operations increased 27.4% to R212.7m. It will use its cash pile of R611.2m to fund organic growth and acquisitions.
The group declared a final dividend of 2c a share, taking the total dividend for the year to 4.25c, an increase of 6.25%.
Capprec said it has concluded an agreement with 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 Neishlos.
“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.”
As part of the deal, Capprec will acquire 245-million Capital Appreciation shares owned by Neishlos and associates for R196m.
Capprec said the growth potential of its subsidiaries “continues to be substantial and compelling”.