Araxi Limited (AXX) Earnings Call Transcript & Summary

Good afternoon, ladies and gentlemen. My name is Motty Sacks, and I am the Non-Executive Chairman of Capital Appreciation. It is my pleasure to welcome you all to our 2020 annual results presentation through this new and novel Zoom engagement process. Zoom is an example of a great solution through the new age of technology. And I guess this is probably the new normal in corporate communication going forward. It is also another discernible symbol of the changes taking place in many of our conventional lifestyle traditions and application. Capital Appreciation's subsidiaries and associates, are deeply immersed in such technology development. But more recently, given the economic and COVID-19 circumstances and not unexpectedly, there is a marked increase in client demand for new, efficient cost saving functionality in adapting to the compelling high-tech progression of our changing world. Our Joint Chief Executive, Bradley Sacks, I guess, is ready to tell you what we do, what we have done. Thereafter, our Chief Financial Officer, Alan Salomon, will then translate our activities into numbers, and Brad will give some further indication of how we see the company and the sector going forward. So -- Brad will also take questions thereafter. So thank you very much once again for participating. And Brad, it's over to you.

Thank you, Motty. Welcome, everybody, and thank you for joining us this afternoon to hear about Capital Appreciation and our results for the last financial year. Fundamentally, there are 3 periods that we will talk about: BC, which is before corona; is DC, which is during corona; and there is AC, which is after corona. And I think it's important to think about that as we go through this presentation. There is lots of information that we have included with respect to sector issues. There are a number of events, which have occurred over the course of the last number of weeks, which will change the way we conduct our lives going forward. And what we have tried to do is give a sense as to where we are positioned relative to those opportunities and challenges in our sector and in the economy more broadly. So there -- I won't spend a lot of time on each of the pages, but I will spend some of the time trying to give you some context. As all of you know, we have 3 -- 2 divisions within our organization. And last year, we announced the establishment of the Capital Appreciation Enterprise Development Fund. And our first transaction in it through that vehicle was GovChat, and we have some really exciting information about GovChat and its accomplishments over the course of the last year reflected in the stock. To start off with COVID, obviously, it has affected all companies and all individuals across the world. I'm going to focus on it as it relates to our activities. Our first priority was to ensure that all of our team was healthy, and we're able to continue to operate and live in a normal way. The first thing we did was we ensured that we were able to put in place a remote work environment for all of our essential staff. We were then able to ensure that staff that were required to be on premise, were able to have the protective gear that they needed. So that they were able to operate and ensure that business continued uninterrupted. We were deemed to be an essential service during the Level 5 Lockdown and have continued to operate uninterrupted during this period. We've had no instance of an infection amongst our staff and I would tell you that all of the activities that we undertook were not easy. And my hat is off to our team who put this in place in a seamless way. We've retained all staff fully employed, and all of our suppliers have been paid on time. From an operational perspective, our client service was our first priority. And in that regard, I am glad to say that all services continued uninterrupted. Our team was fully functional across all of our business units, and we have not had any problems at all. From a contribution to the country perspective, through GovChat, we decided to divert some of our resources and figure out how we could assist the government in some of the activities that they needed to undertake. And I'm very excited to present some of the undertakings through GovChat. If we move over to the macro environment. I'm not going to belabor these points. I think everybody has had enough and ample opportunity to read the popular press and understand how it's devastated the economy. It has shattered consumer confidence. We've got real problems regarding unemployment going forward. And the likelihood of the recovery is going to be a relatively long and protracted one, and many businesses may not reopen. This obviously has an effect on consumer spending. It has an effect on economic activity. And many of our activities, particularly on the retail side, have -- will be affected by this. However, there are a number of silver linings and opportunities that result from this crisis. Technology has evidenced itself to be a key differentiator in trying to address many of the issues that we confront. The notion of social distancing is going to affect every walk of life and every activity that we undertake, how we shop, how we dine, how we entertain ourselves, how we seek health care. It is also going to affect many of the nature of the relationship that consumers engage with the retailer, the way that we develop relationships with our customers, the way that we service customers in many of the corporate environments, the channels that we engage with customers. As a result of this, the technologies that we have and the technologies that we develop are exceptionally well suited to helping remedy that situation and try and enhance the interaction between consumers and corporates that are trying to enhance the relationship between payers and payees in the payment environment. The era of digitization has literally been yanked forward at a rate that nobody anticipated when we were sitting here in November or even in January or February of this year and the need to implement digital solutions has become that much more paramount and it's our view that this is going to continue to accelerate. It's going to accelerate in every mode of life than those companies that are capitalized to be able to achieve that are going to going to accelerate that deployment. And we believe that Capital Appreciation is very well suited. The -- from a payment perspective, the World Health Organization has even tried to indicate that the use of cash should be reduced. We think that is a very good secular trend for us. And the importance of financial inclusion is another area that we believe technology is going to play an important role. So from an overall perspective, as we think about the effect of COVID on the economy as a whole, it is a tragedy. I think is the best way of describing it. But from our perspective at Capital Appreciation, I think we are pretty well positioned to be able to help companies, organizations and the country get onto a path to improve the experiences of everyday people, of our customers and their customers. Capital Appreciation is well capitalized. We have over ZAR 500 million on our balance sheet and no debt. We have a very experienced management team that has been through a number of business cycles in the past. We have a client base that is mostly larger and relatively resilient to these business cycles. And I say relatively as opposed to absolutely resilient. We think that the exposure of our at-risk businesses that we have are quite manageable. And in that respect, I'm talking about smaller merchants that are out in the marketplace, we have a high demand for the expertise that we carry and that we deliver. We think the need to digitize is increasing. And from a capital perspective, we are a very efficient working capital business. These secular trends, I think, are going to continue, and we are relatively well positioned to be able to use those trends to our commercial benefit. So with that backdrop, I'm going to spend a little bit of time reflecting on before corona as to how the business has performed over the course of this last year, talk about some of our operational accomplishments, and then I will go into some of the longer-term growth and sector-related opportunities that are important as we think about the world after corona. During this last year, we've been able to post growth across all of our businesses. I'm sure by now, all of you had an opportunity to review the financial results. And you will be able to see that across both of our payments businesses and in our services business, we have performed very nicely. When we look at the relationship with AWS for our cloud-related business, Synthesis has continued to improve its position. In payments, we've had a 32% increase in the number of terminals and devices that we have out in the market with over 185,000 that are now deployed or that are now in the hands of customers. We have a strong pipeline, and this compares to the roughly 40-odd thousand that we started in 2017 -- that we started with in 2017. So phenomenal growth over the 3-year period that we've controlled these businesses. From the Dashpay perspective, we continue to improve our transacting capability, concluding agreements with Absa to complement those we have with Nedbank. We have continued to expand into new verticals. We have started to grow our international experience, and I'm pleased to say that we're now operational in 10 countries outside of South Africa. The GovChat initiative, which I'm going to go through is a source of real pride for us. It has assisted the government, both in responding to some of the health concerns and also facilitating the distribution of the Social Relief of Distress grants in facilitating the applications and BE continues to be an important factor for us as an organization, and we were able to maintain our ratings through the period. From a financial perspective, I've mentioned revenue being up. Well, you can see in our payments division, we were up 7.7% and services up 41%, which is a tremendous accomplishment, I think in -- by any measure. EPS was up 35%. HEPS was up 28%. And we have declared a final dividend of ZAR 0.0275, which brings us to a ZAR 0.05 dividend for the year, which is a 17% increase. When we look at some of the other metrics, I think all of them speak for themselves, a very solid performance in terms of our operating profit. It's noteworthy, I think, to point out that our cash conversion was 100% of trading profit, and our cash balance of ZAR 505 million is after paying out or using capital over the period of ZAR 225 million for things that were not in the ordinary course, the special share buyback that we announced last year, which we implemented and some other share buyback transactions, which we undertook during the course of the year. So I am going to move on to talking about the performance and the contribution. From this graph, you're able to see how the services business continues to become an increasingly important component of our business overall. While revenue was up 15%, the services component of our business now constitutes about 28% of our overall revenue for 2020. And a little bit less than that in terms of EBITDA contribution at 25%. We are very pleased with that performance overall, and my compliments go out to our entire Synthesis team for their performance. Headcount over the period grew by 25%. So this accomplishment is in a growing business where we continue to make great strides overall. Moving over to some general highlights of the payments business. I've already spoken about our terminals, but what's important is we continue to gain market share. Our annuity-based estate management fees, which is managing these devices on behalf of our clients is up 56%, which commensurate with the growth in the deployed terminal estate. We continue to have a strong pipeline of terminals that are on order. We have, during this period, continued to invest in the underlying capabilities of our business. And we've expanded the portfolio of transaction solutions that we have developed. And beyond just developing new ones, we've also enhanced the capabilities of products that we had previously in market by bringing out new and enhanced generations of those solutions. We've spoken in the past about our relationship with Newland. We have developed a full suite of Android capabilities, which we are currently in the market with. And we've increased our operational capacity, which I will -- have spoken to in the past, and I've got some statistics that will help you put that in context. From our services business, we have continued to enhance what we do. We have new clients. We've had some very nice client wins. We've continued to expand the revenue streams. We've spoken in the past about academy and data science, but I'm pleased to say that those are starting to bear fruit. We have gone into new verticals and have had quite a bit of success there, both in retail and more recently in health care. We continue to explore others. And in terms of our geographic footprint, we're expanding that as well. What is a tremendous event for us as a business is that the AWS data region went live in April of this year. And we think that has some marked benefits for our business overall as cloud becomes a more important component of most enterprises and small businesses. And I think the events of COVID demonstrate yet again the importance of having a secure and technologically advanced infrastructure. GovChat was something that we mentioned in the past, we spoke about its premises launch. Well, on the 1st of March of this year, the technology platform itself went live. It was intended to address some of the needs of local government that was accomplished, and it went live in a number of different provinces and municipalities and then COVID hit. So that initiative continues and continues to operate. But we diverted resources to try and address some of the needs of government in relation to dealing with the COVID crisis. And we are delighted to present some of that. However, what is notable is that since March, we've had more than 80 million messages transmitted through the platform, which is a tremendous result over a relatively short period of time, and the number of registered users exceeds 2.5 million. I will tell you that as of this morning, the 80 million number has gone up since Friday to today to 90 -- excuse me, over 90 million. And that's a result of some of the activity over the weekend regarding the social relief from distress process, which I will talk about in a moment. This platform is alive on both WhatsApp, Messenger and USSD and available online as well. So in terms of the Social Relief of Distress statistics, this is a process by which anybody who needed to apply for an SRD grant was able to use a number of different electronic channels to make an application. We do not adjudicate the application. We do not distribute the funds. We are merely a channel for applications to be delivered to SASSA. We had more than 1.9 million applications come in and we have been able to submit to SASSA just under 1 million applications. The difference between that is a function of poor infrastructure across the country in terms of people's access to data. It is a real-life challenge that we have in South Africa and something that will need to be remedied. But if you think about the ability to submit 1 million applications in a period of 2 weeks, but for technology, if that had to all be done in person and in analog form on paper, it would have been a complete impossibility. The organization of SASSA is working through those and will facilitate the distribution. I'm also pleased to announce that as of Friday, GovChat is the sole channel through which an SRD recipient is able to determine the status of their SRD application, and that is what accounted for the material increase in messages over the course of the weekend. In terms of helping the Department of Health, there is a whole raft of functionality and tools that we have developed, all of which is available through the GovChat number. Regarding symptom tracking, screening tools, test facility referrals, and we've also developed the capability of providing government with data stream on what is going on. And as you can see the graph on the lower right-hand side, is a heat map of incidents related to health reports or symptoms across the country. And so this is an example, but there are a whole host of others that are provided to the Department of Health and the NICD. And so that is a very important component of what we do. Within GovChat, the important thing is this platform is flexible. It will morph and evolve and will be responsible -- responsive to the needs of both government and its citizens. So if I now move on to the sector issues, which are -- which affect the setting, which Capital Appreciation operates, this is a slide that many of you will recall, I presented in November, but for the quote up at the top, I included this. This is from Capitec's results, which were released in February -- in April, sorry, for the year ended February where they talk about the importance of technology in driving their business, both in changing the way they do credit and the way they're going to go after the business banking sector. I use that by way of example for illustrative purposes. But the fundamental issues haven't changed. The secular trends that are affecting the financial services sector call for a huge amount of technology to be developed and deployed. It deals with the issues around cost to serve, the ability to provide the service that is necessary for the consumers, the nature of the service that is offered to the consumers and their customers and how that service is accessed. The effects of COVID, I suspect, have changed dramatically and probably for the long term, the way all of us will consume financial services, the importance of being able to access it through nontraditional channels, probably the reduction of the importance of the branch network and the greater importance of digital and digitalized solutions. And so all of those issues that I had mentioned in the past, prior to COVID, I think, are amplified in light of the events that we have all been through and continue to manage our way through. I mentioned that the Cape Town -- the Cape Town region went live. It is the 23rd AWS region around the world. We have more than 50 services that are currently available through that data center. And it will eliminate 2 of the important factors that were constraining South African companies. One related to data sovereignty as to whether or not South African information could be housed in an offshore data center. We did not think that, that was a problem and the reserve bank provided some guidance on that previously, but it takes that issue off the table completely. And it also removes any concerns that people may have had regarding latency regarding workloads that required very, very low latency period. Synthesis is very well positioned to be able to capitalize on this as they are one of the leading providers of AWS services across the African continent. And we think that this bodes very well for the continued success of that business. And just to put this all in context to understand the marked effect that this has, I had demonstrated in the past, the market share regarding some of the top providers of cloud services around the world. It's notable that in Q1 of this year, Amazon indicated that the revenue that they generated out of their cloud business was in excess of $10 billion, which is up 33% on prior years. And in a market that is so large, it is notable to recognize that 33% growth is still a -- is a hugely material number and it shows you that this is not tapering off, probably only going to accelerate. I had showed in the past as well a graph indicating the extent to which cloud has penetrated in South Africa, cloud adoption, which is on the left-hand side indicates that there's only about 20% of large corporates who are consumers of these services are penetrated and consider themselves advanced users. 80% of companies in South Africa consider themselves not advanced. So huge opportunity in terms of unserved markets. And the data also suggests that from a high of about ZAR 8.5 billion of spend in 2019, it is probably going to double in 3 years and maybe go up by as much as 3x over a 4-year period. Those statistics haven't changed in the world post COVID because there have been a number of studies done. This is on a global basis. And on a global basis, the question is, what is your cloud spend going to be going forward? And you can see from this graph that more than 50% of the respondents have indicated that they're either going to increase or retain the level of cloud spending that they have budgeted in the past. And so that is a tremendous metric for purposes of trying to understand market opportunity. When we turn to South Africa specifically, to determine what that is going to be, the blue on the right-hand side indicates increased spending over a period of pre COVID versus post COVID. The dark blue on the left-hand side indicates a reduction in spending on various items. On the top half of this chart are items that are very cloud-centric and so you can see that, in many instances, the anticipated spend on cloud over the period of time going forward post COVID is going to generally increase. Now that is not universal across all sectors. Various sectors have been and will continue to be relatively hard hit by COVID. I don't know how many of us are that excited about getting on an aeroplane anytime soon and staying in hotels. Those types of industries are relatively hard hit. Across the board other than health care, you can see there has been a general reduction in the planned spending. But what has been happening is there's going to be a re-prioritization of items on which these companies spend money. And cloud continues to be -- cloud digitization continues to be an area that is going to attract a lot of capital. Payments. So we have all -- we all understand we can spend money with cash in our wallet. We have credit cards and debit cards in our wallet as well, and there has been an interest in reducing the number of touch points that we engage with. Well, across the board, we have, for a long time, already made contactless payment an element of what we do. The example, the pictures that we have on the right-hand side of this page, reflect the devices that we had with Standard Bank, FNB and Absa so they had been in the market for a number of years. All of those devices provide for contactless payment, all of those devices, except for the very old ones, provide for QR Code payment. We are finding that merchants are increasingly interested in digital payment solutions in figuring out how to engage with their customers because face-to-face engagement is going to be minimized. E-commerce is an important component for which we are finalizing our solution and we think that we were at the forefront of providing these solutions in the past. The estate that we manage is well suited to any type of payment a merchant would like to facilitate, and we will continue to stay at the forefront of payments as the market continues to evolve, and we have a very exciting announcement to make, which will come up in a little while. So about our investments, for context, this is the same slide that we have given in the past regarding our strategy. I think our strategy has served us well to date. We partner, we innovate and we execute. The results today demonstrate that over the 3-year period since we've owned these businesses, the businesses have performed well. All of the businesses are now well in their stride. We have continued to invest and enhance those businesses, and we will continue to do so to stay at the forefront of each of those initiatives. From a payment and payment infrastructure perspective, again, I will present a slide that we've used in the past to give context to the full solution of services that we provide. It is an end-to-end solution that is based on proprietary technology, we have blue-chip clients, the offers are comprehensive and our services span a large range of capability and functionality. All of that has translated into some operational metrics that we can point to, which are quantifiable. The growth in our terminal estate now stands at 185,000 terminals that are in the hands of clients, 178,000 of those are owned by clients, in market that are active currently are 135,000 and you can see the material growth that each of those metrics has been able to post over both a year-on-year basis, 32% growth in terms of the estate size. And over a 3-year period, a CAGR of 56%. I think those are notable and demonstrate that we are gaining relatively good market share. We continue to think that this will evolve, and we are looking for continued growth across all of these metrics. In terms of the device portfolio that we offer, we -- everybody knows about our relationship with Ingenico, which is a long-standing one. Last year, we announced the introduction of a relationship with Newland, which is the second largest manufacturer of devices to complement Ingenico, which is the largest and our focus there is on new innovative technologies that we think are well suited to an emerging market. Newland offers us with a very compelling Android platform and a very good price value proposition. And we've had much success in introducing that into the South African market. So this is the announcement that I wanted to -- that I wanted to reference. I am pleased to announce that today through the development of our Synthesis team, which deserves a tremendous amount of credit we are announcing our Halo product. The Halo product allows any Android device in the market today to be able to effectively become a payment acceptance device. Both in terms of credit, any type of contactless mechanism or incarnation of payment, be it a contactless card, a mobile wallet or some other wearable gadget. This is well suited to emerging markets. It's well suited to small businesses that are proprietary and owned. This is a tech capability, of which there are only a very, very few in the world. The Synthesis team has received certification from both VISA and Mastercard. And we're delighted that we are partnering with Nedbank to introduce this capability, which is euphemistically known as tap on phone into South Africa in the not-too-distant future. So please watch out for Nedbank's announcement. In terms of our investments, we have spoken in the past about the investments that we have made in capacity. I wanted to try and demonstrate some metrics around that. This is an indication of the number of terminals on average that we dispatch through our facilities on a monthly basis. In calendar year 2017, you can see it was approximately 1,600 devices that were dispatched through our facilities. In the last 6 months, we have dispatched in excess of 7,300. So -- and we have surge capacity to where we have in the past been able to process more than 10,500 devices through our facilities on a monthly basis. In terms of other operational metrics, we have spoken in the past about our ability to remediate problems that are occurring with merchant devices in the field within 15 minutes or less. Here are some metrics to demonstrate this. Through our call center, we look at the average duration of our calls. We're also looking at the number of devices that require the return of the device to us for repair or review. And you can see over the course of the last 6 months, we've just done this since November. The number of devices that need to be recalled is less than 15%. So we -- and you would obviously recognize that the size of the estate has increased dramatically, and to be able to facilitate this type of quality of service, you need the capacity to do that. So when we talk about investment capacity, these are some of the things that we have been doing. When we turn to our payments business, our payment services business, this is a view of what is happening within Dashpay. Number of merchants that we service directly has increased by 58%. Our transaction-related revenue has gone up by 40%. The gross transaction value that we process through the estate on an annualized basis as of the end of March was just under ZAR 5 billion, which is nearly a 70% increase compared to the data, which we presented in November. This business was affected by COVID and the lockdown, quite dramatically, in fact, in the month of April. The gross transaction value through our estate declined by about 60%, and we're now seeing that to recover. This is a lot less than many others have experienced, given that a large number of our merchants are deemed to be central. And so we were less badly affected than many others. We've enhanced the nature of the offerings that we -- and solutions that we provide, and we have been able to enhance our transaction platform. In terms of the transaction that we did last year, where we bought back our shares from [indiscernible]. We also took over all of the IP. This business is the business that has been most positively affected by the integration of other development teams with our core businesses. And I think you can see the effects of that coming through. So overall, we are quite pleased with how this business has evolved over the last 6-month period. And we think it is well positioned to be able to continue to provide solutions in the post-COVID world going forward. Synthesis is our next topic. And when we turn to this -- this page, again, is one that we have demonstrated in the past, it is the foundation upon which the business operates. It is the driving principles, and those remain unchanged over, I think the life of Synthesis. And certainly, over the 3 years in which Synthesis has been part of our team. The ethos, the esprit de corps of this group of people has evidenced itself hand over fist during this lockdown period. The entire team was operational remotely, I think they were probably even more productive from their homes as opposed to from the office. The contributions that they made to some of our activities around GovChat is notable, and we need to thank all of them for their efforts. The operating units within Synthesis, we've spoken about in the past, we have a digital channels offering. We have a platform integration product, which is RegTech related initiatives. And we have our cloud division. We have spoken about the Academy, which is the educational learning initiative that we have underway. But there are a number of cloud sub initiatives that I wanted to highlight. Data and analytics is a growing area for us. The team have done a super job in bringing that to the front, to the fore and generating real client interest in doing some marked projects in that area. We think it is a critically important activity for businesses to continue to invest in particularly as they determine how best to engage with their customers in a post COVID world and managed services relate to the efficiency with which companies manage their infrastructure and that offering continues to grow for us with some very marquee clients. The launch of the Cape Town region is an opportunity for us that we decided to capitalize on by introducing some new products. And these products fall into 2 categories: cloud economics training, which you see on the top right and the Synthesis JetPack, our educational and academy related products. To be able to enhance the learning and understanding of our clients on what cloud is able to do and how best to extract the economics from it. But the other 4 are programmatized ways of us being able to transfer our knowledge and best practices in byte-sized packages and product offerings that will allow us to leverage the expertise that we have, expand the market of the customers that we go after and enhance the operational leverage metrics that we have. The competency that Synthesis has as an AWS partner, I think, are unparalleled in the South African market. And we stand in very good stead to be able to do this. For example, the 20/20 Vision product is being able to move 20 separate workloads over 20 days into the cloud. And each of these are more fully described on the Synthesis website, and I would suggest if you have any interest, please go and have a look at them. To try and give you more of a tactile sense as to what some of the Synthesis activity means we have given case studies. Today, I'm going to give a case study on Nedbank. Here we demonstrate where we were able to use technology to enhance the speed with which Nedbank is able to deliver services to its customers by up to 11x, and you can see a quote from Nedbank as to the success and appreciation for what Synthesis did. The last 2 relate to some of the GovChat work. I'm not going to spend too much time on this, but it's important to understand that GovChat is not just a front end communication tool, it is a reporting mechanism. And so I have demonstrated here some of the reports, the back-end reports that are available to government. The top graph on the right-hand side are the issues that are reported, be it potholes, water outages, electricity outages, a whole host of different metrics. Those are reported to government and municipalities on a regular basis. The graph on the bottom right-hand side is an indication of the distribution of applications for the Social Relief of Distress brands across the different provinces, each province being a different color, and this was over an 8-hour period. What truly is amazing about what Synthesis did for GovChat is the ability to process transactions and develop the platform. This platform is completely server less. GovChat has no data center. GovChat has none of its own infrastructure. Everything here is built in the cloud. It is a cloud-native application. The phenomenal capability here is that is what we call dynamic scalability. In this instance, you have the capacity to transact and engage as and when you need it. If you don't have any activity, you have 0 overhead costs. So it is a state of the art capability to facilitate transactions. We are delighted to report that this facility had over 170,000 -- 170 transactions messages per second. And was able to facilitate that level of activity over the course of the launch of the SRD program, which is truly great accomplishment. I would like to now turn over to Alan, who will give us a review of the financial performance over the course of the year. Alan, over to you.

Good afternoon, ladies and gentlemen. Thank you for your continued interest in Capital Appreciation. We are very proud of the financial and operational performance of our underlying businesses in the past year. Since acquisition some 3 years ago, we have concentrated on developing our staff and building infrastructure, refining our structures, operating procedures and governance processes. And incurring the necessary budgeted expenditure and capital investment to allow our subsidiaries to prosper. Our investment in capacitating our businesses and developing the right oversight structures, talent pools and skill sets as well as the technological platforms from which to serve our clients have culminated in a strong operational momentum and solid financial results. And we salute the management teams of our companies for their energy, dedication and drive. For some of the costs incurred in the 2020 financial year, we will only see the financial benefits in future timing periods. At the same time though, we have, throughout the past 3 years, generated meaningful profits and cash flows, and that is after paying full tax a total of ZAR 0.1325 of dividends per share to shareholders over the 3-year period. This amounts to a gross payment outflow over the 3 years of dividends to shareholders of ZAR 194 million. In doing these financial results, a few key factors should be kept in mind. The specific share repurchase and small-related party transaction approved by shareholders and implemented through September 2019, had a positive impact on the weighted average number of shares in issue and also had a net cash flow impact of ZAR 158 million. The continuing development costs incurred by the group, relating to new innovative payment products and software offerings. Costs were incurred to build capacity in anticipation of growth in commercial activity, as I mentioned earlier. The sale of the group's 17.45% interest in Resonance Australia, which generated an ZAR 8.7 million pretax capital profit. And finally, an open forward cover foreign exchange contract for terminals, ordered in fiscal 2020 to be delivered in fiscal 2021, which generated a onetime unrealized mark-to-market pretax profit of ZAR 14.6 million. CAPPREC has adopted IFRS 16 in the current period, which has had a small nonmaterial positive impact on profit after tax. I'll now move to financial performance, payments and payment infrastructure. Please refer to Slide 42. The payments segment demonstrated a resilient trading performance with revenue growth of 8% to ZAR 506 million, an EBITDA growth of 20% to ZAR 162 million for the 2020 financial year. African Resonance is a solid, well-run business that continues to produce sustainable profits and healthy cash flow. And this is evidenced in its robust 6-year compound growth ratio of 50% per annum for revenue and 61% for EBITDA. We have already mentioned the substantial growth in the terminal estate in a prior slide, which in itself will lead to greater and sustainable further annuity revenue. This is demonstrated by the 56% growth in annuity income from maintenance and support services from terminals in the current year. Dashpay continued to establish its business model despite operating under difficult economic conditions. We are seeing positive traction in the gross transactional value, as Brad mentioned earlier. On Slide 43, financial performance, the Software & Services Division. Synthesis produced another outstanding performance, increasing revenue by 41% to ZAR 195 million and generating an EBITDA of ZAR 54 million, which was up 24%. The sustained 6-year compounded growth rates of 29% in revenue and 27% in EBITDA again proves that this business is in a growth sector with significant upside potential. When we bought Synthesis in May 2017, the acquisition agreement included a 3-year profit warranty. We are delighted that Synthesis has exceeded its obligations in terms of this warranty. And the contingent consideration of shares and cash, which have already been accounted for under contingent consideration reserves in the 2018, 2019 and 2020 annual financial statements will be implemented soon after the release of these results. The business has done us and itself exceptionally proud. As discussed earlier, it should be noted that the proportionately greater increase in operating costs, mainly in Synthesis relate to increased staffing and training and reflect the increasing demand for cloud services. And the ongoing investment to address that demand as well as greater future demand. We believe the opportunities for this business is exceptional, and the investment in growth will continue. If you refer now to Slide 44, a statement of comprehensive income. In looking at the statement of comprehensive income, there are a couple of items to note. Firstly, revenue grew by 15.4% to ZAR 701 million on the back of solid top line performance by all of our businesses. Operating expenses increased by 11.9% due to the ongoing investment as discussed earlier. Finance income increased, notwithstanding lower cash balances post the share repurchase transaction and purchase of treasury shares. Profit before tax includes 2 one-off items, a capital pretax gain on the sale of Resonance Australia of ZAR 8.7 million. This was part of the share repurchase and small related party transaction we concluded in September 2019. An unrealized profit of ZAR 14.6 million related to an open forward cover foreign exchange contract for terminals, which were ordered in fiscal 2020 that will only be delivered in the next financial year. Profit after tax increased by 20.2% to ZAR 149.8 million, and we have also shown the normalized profit after tax, which takes into account the elimination of the amortization of intangibles arising from acquisition of businesses as well as the one-off items mentioned earlier. As a result of the specific share repurchase and small related party transaction, the 245 million shares that we repurchased were canceled reducing our total shares in issue by 15.8% to 1.310 billion compared to 2019, 1.555 billion shares. Given that the transaction occurred midway through the year, the weighted average number of shares in issue for the year was 1.33 billion compared to 1.495 billion for fiscal 2019. Capital Appreciation also repurchased 45.1 million shares during the year under a general share repurchase program. As at March 31, 2020, CAPPREC had repurchased a total of 108.8 million treasury shares at an average price of ZAR 0.76 per share. These shares are held as treasury shares, which will be used to settle the allotment of 13 million ordinary shares to the vendors of Synthesis. The company will continue to repurchase shares in the market going forward. Headline profit for the period increased by 14.2% to ZAR 142.3 million. Basic earnings per share increased by 35% to ZAR 0.1124 per share and headline earnings per share increased by 28.1% to ZAR 0.1067 per share, benefiting from the good trading results and the lower weighted average number of shares in the issue. Please refer to Slide 45, divisional revenue composition. Terminal rental income has declined as budgeted as rental contracts reach maturity, and customers have shifted away from a rental model to outright purchase of terminals. This was partly offset by Dashpay's healthy growth in terminal rentals in the niche markets it serves. Annuity-based maintenance and support service fees from terminals have shown excellent growth of 56%, in line with the growth in the deployed estate. This will continue to grow as the division's fleet of terminals grow and are deployed with merchants. The 40.4% growth in transaction-related income from terminals stems from the growth in transactional activity as well as the value-added services offered by Dashpay. Service and consulting fees at Synthesis showed strong growth of some 49.8% from increased demand of digital and other related services. Synthesis has continued to enjoy growth in U.S. dollar related revenue, emanating from services provided outside of South Africa. In addition to its businesses in South Africa, the business is currently providing services to 10 countries outside South Africa. Revenue from countries outside South Africa grew by an encouraging 58%. The group's recurring income continues to increase and contributes approximately 48% of total income. Please refer to Slide 46, statement of financial position. CAPPREC maintains an uncomplicated, easy to understand balance sheet. The key elements to highlight are that at year-end, the company still had ZAR 505 million in cash, post the share repurchase and small related party transaction and treasury share repurchases, which had a ZAR 225 million cash outflow impact. The group remains strongly focused on acquisitions. That can expand and generate scale within a reasonable time frame, can provide satisfactory organic growth and returns to shareholders, and where CapEx capable and strategic capabilities can be successfully leveraged. Cash is invested with the top banks in South Africa, and interest rate risks are managed very conservatively and with a view to maximizing yield to appropriate low-risk interest rate structured investments. During the period, CAPPREC benefited from investment in interest rate structured notes that fixed the rate from December 2019 to May 2020, which protected the group against the recent large interest rate cuts by the reserve bank. Equity reduced due to the repurchase and cancellation of 245 million shares amounting to ZAR 192.7 million. Net asset value per share increased by 14.4% to ZAR 1.09 per share, which includes cash available per share of ZAR 0.39. Please refer to Slide 47, cash flow. The group subsidiaries remain strongly cash generative, generating ZAR 206.1 million in the past year, with a 100% conversion of trading profit to cash. Changes in working capital declined considerably due to effective asset management. The group's businesses are asset light and, therefore, have low working capital needs. The group paid an interim dividend of ZAR 0.0225 per ordinary share. The final dividend declared was ZAR 0.0275 per share, bringing the total dividend for the year to ZAR 0.05 per share compared to ZAR 0.0425 last year, an increase of 17.6% year-on-year. I am pleased to finish my presentation on a very positive note. The group believes COVID-19 is a non-adjusting event and that circumstances arising from COVID-19 have had a little negative impact on the results at 31st of March 2020. The group has successfully implemented the processes and procedures for business continuity in the COVID-19 trading environment as required by regulation. The group has not experienced any material operating and servicing disruptions or any material deterioration in trading performance for the period from the financial year-end dated March 31, 2020, the date of this results presentation. The group has an extremely strong balance sheet, has no debt, is currently not exposed to credit risk from our blue-chip customer base. And has no significant uncovered foreign exchange exposure. This provides the group with a healthy foundation to meet the challenges and opportunities that lie ahead. I'll now hand you back to Brad. Thank you.

Thanks, Alan. So I'm going to deal with the prospects in wrapping this up. And I think that from our perspective, the secular trends that we have seen over the course of the last few years as it relates to the industrial verticals in which we operate continue. In many instances, those trends have accelerated. I mentioned in the past that the period of digitalization of the economy has been yanked forward. We think that is absolutely true. It is of paramount importance in the financial services sector, and we are well positioned to be able to continue to service our clients in those initiatives. The organic growth opportunities that we think are available to our businesses -- we -- are tremendous. We will continue to pursue all of those diligently, building on the expertise and the relationships and the reputation that we have developed for ourselves over the course of the many years in which these businesses have been in operation. We will continue to look for acquisitions, as we had indicated in the past, we will look for acquisitions that we believe are additive to the portfolio. We have a strong balance sheet, and we'll continue to use that to our advantage and think that some of the dislocation that is occurring in the market will make acquisition opportunities more affordable for us and will inure to the benefit of our shareholders. In terms of our overall investment case, we continue to believe that as a management team we are in a position to be able to manage this business well. We've been through a number of cycles. We have an industry that is growing very well. We are a trusted partner. Our clients themselves are well capitalized as are we. We have a diversified customer base, and we're continuing to diversify that, having elected to go into some new verticals, retail and health care, among them, telecommunications as well. The growth of our business outside of South Africa continues, and we will put energy behind that, too. Although I don't think any economy in the world is immune from some of the issues around in COVID. Our capabilities and credentials really revolve around our core operating principles. We innovate, we execute and we perform and we will continue to build on that. Our businesses are cash generative and in many instances, the services that we deliver are mission critical. So we think we are very well positioned to be able to manage this very difficult period. We are not at all immune to the notion that this is a very difficult operating environment. The economy is going through some serious challenges. Those challenges are going to continue to exist and maybe even get worse. And we will be diligent in how we prosecute our business and look after the interests of our shareholders, customers and staff. So with that, I just want to thank our entire team for bringing us to a point where we could release the results. Alan and his team did a tremendous job in working with our auditors. Everybody has been in lockdown since the end of our financial year. This was all done remotely and virtually. I want to thank all of our team members across all of the businesses for their tremendous efforts in keeping our staff safe and healthy, in keeping our customers front of mind, and continuing to deliver the excellent service for which they are well known. So to all of you from all of us. Thank you very much. And with that, I will turn it over to [ Lydia, ] who will lead us through some Q&A.

Thanks, Brad. We've received quite a few questions. I think some of them the most important would be to talk about the payments business. It says that the payments business has got some very impressive growth in its metrics, but the revenue growth has decelerated somewhat. Can we give some comment on that? And what do we consider to be the most significant revenue growth opportunities for the payments division in the short to medium term.

So the growth in payments relate -- the growth in the operating performance of the payments business is a function of some of the operating leverage that we have been talking about coming. And we have spent an enormous amount of effort on our infrastructure, and you are seeing that come through in its earnings. In terms of the top line, the periodicity on the terminal sales will continue on the trajectory that we have seen. There is a possibility of some lumpiness in that as we've experienced, but the long-term trend is consistent with what we've experienced. In terms of revenue growth, we are looking for a substantial growth to continue in our payment services business. You have seen the Dashpay numbers that we speak about at 40% growth. We continue to believe that that's an area where we will continue to build on the foundations that we've been putting in place, the purchase of all of the IP and the bringing on board of the development teams to work for us directly has put us in a really good position, and we are quite excited about that. We're also quite excited about the introduction of the Newland devices into the market which broadens the market opportunity because it reduces the price point at which a device in the hands of a retailer becomes viable, so expand the permit and by expanding the permit you grow the market. And we think that those devices have the capabilities to deliver multiple business functionality to the merchant above and beyond just payment. And so we're quite excited about the deployment of Androids into the South African market.

The next question says, Dashpay has been growing gross transaction value very nicely. Please clarify if we now earn revenue in Dashpay, and if not, when do you expect to start seeing its contribution to the revenue streams?

Dashpay definitely earns revenue, has always been earning revenue, and we are hopeful that, that revenue will continue to grow over the coming period.

Another question that says, we expect bank hall slow down CapEx in the COVID environment. Have we -- you started seeing this in your business? And what are your plans to counter when it happens?

So we are very conscious of bank's IT spending and are engaged with our clients on a regular basis. I'm delighted to let everybody know that over the course of this COVID lockdowns, we have won a number of new assignments and contracts with banks. What we are seeing is that there is a reprioritization of where they are electing to spend money. And it looks like that, that reprioritization is playing to our strengths and capabilities as opposed to other areas where we were less prevalent. And so we will continue to stay on top of our relationships and help clients prioritize their spending. Some of the slides that I presented earlier on in the presentation, also talk to that and the need to digitize, the need to engage with customers, the need to optimize the customer journey are all areas where banks continue to spend, financial institutions continue to spend, not only banks, and where we play a major role.

Thank you. The next question says, will GovChat be monetized in future? What is the relationship between GovChat and SASSA? And is there a connection with CPS and Net1

So let me deal with the Net1 CPS relationship because there has been some publicity in social media and also on FIN24, there was an article. In unequivocal terms, there is no relationship whatsoever between Capital Appreciation and GovChat on the one hand and CPS and Net1 on the other. We have tried to communicate this in the past. The only connection that ever existed was the Chairman of Capital Appreciation , Motty Sacks, was also the Chairman of Net1 at its formation in 1996 through 2000. In 2000, he retired. In 2000, Net1 also acquired CPS. But at that stage, SASSA as an organization, as an institution, did not exist, there was no SASSA. SASSA only came into being in 2005. And the contract, which is in litigation between SASSA and CPS is a contract that was signed in 2012. Between 2000 and 2005 on the one hand and 2000 and to date on the other, there has been absolutely no interaction between anybody within the Capital Appreciation Group and Net1 or CPS. And so it is really unfortunate that work which was done by GovChat as a social responsibility initiative that was done without remuneration or compensation for SASSA, some really important work for our country, was manipulated in a way to suggest that there is some untoward connection between the 2 organizations. There is none and we are very proud of the work that GovChat has done on behalf of SASSA and for our country. GovChat's relationship is a long-dated one with COGTA and it is through that relationship and that engagement that GovChat was welcomed by SASSA to assist them at a time of the urgent need. And so I want to just unequivocally refute any suggestion that there was a connection or is a connection between CPS, Net1 on the 1 hand, Capital Appreciation, GovChat on the other. In terms of GovChat's monetization strategy, that is a strategy, which is evolving. And you can see by the user data that the GovChat platform is generating and the nature of the report that it is able to deliver to government to hold municipalities and municipal organizations accountable for their quality of service, that there is a tremendous opportunity to be able to derive value and deliver value. And we are very excited about the GovChat platform and the work that they are doing and the technology that Synthesis has built all in.

Thank you. The next question says, Synthesis performance has obviously been very impressive. Does Synthesis have an exclusive partnership deal with AWS.

So Synthesis' work is truly impressive. And the work that they have done is fantastic and a great source of pride for us. The relationship that they have is not exclusive. It is not exclusive in terms of we are the only partner to AWS, we're not. And we are not only bound to deliver AWS services. We have done that to date because we have been of the belief that the AWS platform is a premier platform with really unique capabilities. And we have done that because we think that commercially, the AWS platform makes a lot of sense for deployment, but it is not exclusive in either direction.

And then I think in the interest of time, just 1 last question. Does your expansion into 10 new African countries represent an opportunity to significantly accelerate revenue growth.

We certainly hope so. So we are -- our expansion is done in a very deliberate way. It it's not only African countries. There are other countries as well where we are operational. And our plan is to follow-on the co-tales of some of our larger corporate clients. And enter new markets in a very risk-mitigated way. So for instance, in the payments sector, we have gone with one of our bank clients into Botswana. And we are doing something similar with Synthesis in many of the other jurisdictions in which our large corporate South African clients operate. We do have a few clients in other jurisdictions who have approached us, and we are working closely with them on a more of a greenfield spaces, but it is also all done out of South Africa without having to set up very material local operations. Is that the end of the questions for the moment, [ Lydia ]?

Yes, yes.

Okay. So on that basis, I would like to thank everybody for joining us. I know we've run a little bit late today. We've had a lot of ground to cover. It is a little bit more challenging doing this virtually through this type of medium than standing in front of you. But hopefully, it's been informative, and thank you for all your time.