Earlier this week, we mentioned technology investment group Capital Appreciation on our podcast. The company has now released financial results for the year ended 31 March 2019 and we take a look at some of the key metrics.
Previously listed as a SPAC, Capital Appreciation has focused on securing investment stakes in high-growth technology businesses.
Over the past 12 months, the company share price has dropped 25% and at the close of trade yesterday, Capital Appreciation was trading at 74c/share. It is down 26% since listing in October 2015.
The company is broken into two operating segments namely:
- Payments and Payment Infrastructure
- Software Services
Payments and Payment Infrastructure
This segment comprises technology groups Dashpay and African Resonance.
Software Services
This unit is made up of the Synthesis business. 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.
Key financial metrics:
The group delivered revenue of R607m with a profit of before tax of R159m (down 9.8% on the previous year).
At a headline level, the company delivered R124.6m in earnings or 8.3c/share. This puts the company on an earnings multiple of around 8.9 times earnings.
Capital Appreciation also retains a healthy cash balance of R611m at the end of the financial year.
Dividend positive
Since listing, the management at Capital Appreciation have indicated that they favour a dividend policy. Unlike many technology businesses who consistently reinvest their profits, Capital Appreciation has aimed to ensure shareholders receive regular dividends.
This trend was continued with a final dividend of 2c/share being declared. This brings the full year dividend to 4.25c/share, an increase of 6.25%.
This represents a dividend yield of 5.7% at the current levels.
Outlook
The South African listed technology sector continues to offer limited opportunities for investors. Capital Appreciation is arguably one of the more interesting businesses on the JSE as it offers investors access to the high-growth FinTech sector.
With consumer and investor sentiment continuing to remain low, it is hard to identify a catalyst for the Capital Appreciation share price. However, if the consumer market turns, Capital Appreciation and its payment sector businesses could enjoy a nice uptick.
Below we have posted the Business Day TV interview with CEO Bradley Sacks.
