Araxi Limited (AXX) Earnings Call Transcript & Summary

Good afternoon, ladies and gentlemen. My name is Motty Sacks, and I'm the Chairman of Capital Appreciation Limited. I'm delighted to welcome you all to our interim results webcast today, which covers the 6-month period to 30th of September 2020. This is the period which fell squarely in the most severe and exacting months of South Africa's COVID-19 lockdown restrictions. The results for the period will no doubt speak for themselves, but they are in no small measure due to the extraordinary effort and -- of our management and staff who during the challenges experienced, willfully and unselfishly invested their best efforts in the interest of our clients and the group. And I say thank you to all of them. This afternoon's presentation will follow the usual pattern. Bradley Sacks will speak about the group, its achievements and progress. Alan Salomon will explain the numbers in accounting. And I guess Brad will close by positioning the group in the accelerating tech market, deal with prospects and have some time for questions. So Brad, it's over to you. Thank you.

Thanks, Motty, and good afternoon, everybody. Thank you for joining us today. As Motty indicated, we will follow a similar format to that which we have done in the past. The presentation is lengthy. I won't go through all of it in detail, but it does give some context for people who are new to the group to understand some of the issues that affect us and can serve as an aide-mémoire for further discussions and internal reviews. So to just highlight the group overall, we have 2 divisions. We have a Payments division, which comprises the African Resonance and Dashpay, and we have a Services division, which comprises our business, Synthesis. We have a very active enterprise development initiative, and we have a 35% interest in a business called GovChat. Fundamentally, we endeavor as an organization to deliver innovation and value to our clients and not only our clients but also our clients' customers. And that's our raison d'être as a business from an operational perspective. I'm not going to labor too much on what happened during the COVID-19 period. We have all in South Africa had to deal with this over the course of the last number of months. But I think what is fundamental is recognition that the services that we delivered were deemed essential, essential services and were operational all through Level 1 through Level 5 lockdown. And it speaks to the importance of the role that we play within the Payments and technology sectors for the end clients that we serve. Importantly, as an organization, all of our staff were fully remunerated and fully employed. We had the luxury of the financial flexibility and also operationally being very well prepared to deal with that. And we had no dislocation or dislocation in supply in payment of suppliers. We had spent an enormous amount of time on disaster recovery preparedness prior to COVID. There is an interesting book called Upstream, which effectively talks about preparedness for events that you don't anticipate or you don't know will occur. And then you wonder whether or not it's worth those efforts. I think our investment in all of those redundancies proved themselves in spades during the course of this pandemic. Look, the macro environment in South Africa is tough. There's no doubt about that, and every sector of the economy was affected. However, there are some silver linings, and the silver linings happen to coincide with the industrial sectors in which Capital Appreciation is invested. And so from our perspective, while things were particularly difficult, the economy was in a difficult state of affairs, we were able to trade very well through this period. And we think that the elements of COVID speak well to the secular trends that we will encounter going forward. So I wanted to give you a sense as to what that really means. This is some data that was taken out of Nedbank's investor presentation earlier this year, and it shows the impact on commercial activity, particularly around payments at retail points of sale. And you can see that every sector was affected. The dark blue lines reflect pre-COVID level of activity. The light blue lines then start to reflect what was happening during different periods of lockdown. And even -- and when you look at it on an aggregated basis, you can see April was 47% of its normal price level. Airlines, hotel, lodging, restaurants, et cetera, were close to 0. Luckily, we are not -- we were not very concentrated in the group that's at the bottom. Most of our activity was either traditional retail or fuel and other areas, so we were less affected. But I think this gives you a good picture of what was going on in the economy. Our business, Dashpay, our transaction services activity was affected by these elements, and we will reflect on that in a little while. I also want to give you a sense as to what it meant from our monthly and day-to-day activity. So we had to look at what and measure that we keep track of, which is our capacity and how our capacity was impacted during this period. Again, the dark blue line impact reflects our capacity prior to COVID, our average capacity over the second half of last year and then show you levels of activity in the months following. Now from a terminal handling perspective, you can see we only started to recover in the month of October. But the good news is we have recovered, and we are -- we have done very nicely in October, and our expectation is we'll continue to do well in the months ahead. From a repairs perspective, again, we were able to recover from July, and this for us is -- this reflects lost activity in our business and obviously, a reduction in the fees that we otherwise would have been able to generate. All these things notwithstanding, fundamentally, Capital Appreciation is in a very healthy position, and we are well positioned for what is happening in the economy presently and also going forward. We have a very strong balance sheet that allowed us to focus on elements of execution, dealing with clients and figuring out how to grow the business in these times. The team that is running this organization, not only Alan, Mike and myself, but also the leadership of each of our divisions are all very experienced. Our industry expertise in the areas that are in high demand is notable. Our reputation precedes us and our blue chip customers who deal with us recognize that by continuing to entrust us through this difficult period. There is no doubt that the economy is continuing to digitalize and the need for that is accelerating, which falls squarely within our activity space. We -- most of our customers are very established, more resilient businesses, and that was very good to us from a financial perspective. We did have some businesses that are -- that we would consider to be at risk. Those are smaller merchants, and that did have an effect on our transactional services capacity. And we have an asset-light model. All of those things sort of aggregate to the financial results. And I have to tell you, we are very pleased with how we performed during this very difficult time. Revenues across the group were up 15%. We had EBITDA, which was up at ZAR 81 million, which was up 20%. Our trading profit was up almost 24%. And from a headline earnings perspective, we were up almost 30%. We declared a dividend, which is up 11% from last year. And we have a very good level of cash resource to continue to grow and invest in our business. Our cash conversion is strong. It is notable that during this period, given our large cash balance, we were negatively impacted by the 3% reduction in SA prime rate and the lower cash balance compared to last year after our transaction, which we spent money on buying 245 million shares. But notwithstanding all of that, our results, I think, speak for themselves and my thanks go out to our entire team who are responsible for delivering these. I want to give you a quick sense of the composition between the 2 groups. What I think is evident from this slide is that the operating leverage that we are able to generate in our Payments business from high level of activity is evident from the growth that we were able to exhibit in revenue of being up 15%. Our Payments EBITDA was up 33%. In Services, although we were up from a revenue perspective of roughly 14%, we had a smaller increase in EBITDA, and that's a result of increased headcount. Normally, our headcount increases and flexes at the beginning of the year, and you can see that our headcount grew by almost 30 people. Most of those are in Synthesis. Most of those joined our group in early 2020 calendar year and were not fully deployed once COVID hit, and there was some delay in our clients in new projects and new initiatives. So the growth that we anticipated did slow, but we are well positioned going forward. So what I wanted to do was reflect some of the highlights that we have experienced and posted during this period from the Payments perspective. I think we are well positioned to continue to enjoy this type of success. The terminals that we sold during the period went up almost 20%. We increased the entire terminal base that we have in the hands of clients to over 200,000 devices, which is a 9% increase since March and 31% year-on-year. We have continued to gain market share, which is a result and testament to the success and efforts of our business model. We continue to have a good pipeline, and our portfolio of devices and services is a very complete one, which puts us in an excellent position. Very importantly, we transitioned our services activity away from Mercantile Bank, and we implemented an entire new platform during this period that went exceptionally well. And as Benjamin Powell, who runs that division for us says, it's like performing open heart surgery, and we did that through very difficult times. So that's a great success. Through this process, we have been able to expand the nature of the services that we offer and the solutions, and we've also enhanced the nature of the services that we previously provided. So from here on forward, the services activity will be firing on all cylinders. Very importantly, we did introduce, as you know, a set of Android solutions. Those were very well received by customers and clients, and we now have some of those in the hands of our clients already in the market, and I will show you some of that in a minute. And ultimately, all through this period, our operating -- our operational capacity did increase in anticipation of what we see going forward. From a Services perspective, talking about Synthesis, all of the trends that we have mentioned in the past are actually evidencing themselves daily. We have been able to increase our relationships with our existing clients. There have been numerous new contract wins. There was a delay in contracting activity at the onset of COVID, which started to work its way through the system once activity and people's psyche normalized. And that evidence itself, we were able to establish relationships with new clients as well. We have secured additional accreditation, and I'm pleased to announce that hot off the press as of this morning, Synthesis was also awarded the Security Competency Award from AWS, which, together with its other competencies, leaded in a very -- leave it in a very good position to continue to lead the AWS initiative in South Africa. We increased our -- we diversified our revenue streams. And as I mentioned, we did increase our capacity. We did put a freeze on hiring once COVID started, but we have retained all of our staff with no other reduction. Very importantly, of that which the group is exceptionally proud is the Social Impact Partner of the Year Award, which Synthesis won from AWS for the work that it did on GovChat, and that is a fantastic testament to the innovative cutting-edge work that they are able to do. So I wanted to just give people a sense of the opportunity as we think about it. There is a -- I participated in a Fintech conference last week here in New York, and I -- there were 2 themes that came out of it, one is the accelerating deployment of digitalization through financial services overall. And the general view is things are 3 to 5 years ahead of where people thought. And a comment by the Head of Consumer Banking at Citigroup, which I thought was interesting when asked about his perspective. He coined the phrase with "physical-light and digital-heavy" going forward. And everything that they're doing is investing in technology. That sort of echoes a second conference that I participated in where Forrester Research provided an overview of what was happening in the financial services sector. And ultimately, they said there are 4 perspectives and 4 themes. The perspectives are consumer bank and collaborators, fintech companies that work around and with banks and, ultimately, the regulators or the 4 perspectives. But the themes are what I wanted to reemphasize and they are invisibility, connectedness and insights and a sense of purpose. All of those elements are driven by the underlying capabilities of technology. We could spend hours talking about this slide, but I just wanted to point out that all of these themes are technology-driven, which plays very well to our secular areas of investment. They also presented another slide, which I thought was very interesting, and that is the impact of COVID on its spend. The third most important area of priority today is the acceleration of the shift into digital, and that previously didn't even rank in the top 10. Again, very important in terms of where we are spending our time. We have spoken previously about the size of the cloud market. I wanted to give you a sense as to how that is progressing. In the most recent quarter, amazon announced almost $12 billion of revenue that continues to represent about 40% of the cloud market space and importantly, still growing 29% year-on-year. The same is true in terms of size from Microsoft Azure with $6.3 billion in the most recent quarter comparable, up almost 50% year-on-year coming off a smaller base. But from South Africa's perspective, the opportunity, as we see it through 2023, as described by the MIT in their survey is a 30% compound growth over 4 years to a ZAR 22 billion market opportunity, which we are focused on participating in. From a Payments perspective, I have used this slide before to sort of identify what the trends are coming out of COVID and devices are contactless. To demonstrate the change in the use of cash, this is a slide that came out of a recent report from McKinsey showing the reduction in the level of cash activity across both emerging and developed markets, and you can see how that is evolving. Now reduction in cash is only good. So from a South African perspective, I want to just point out what some of those statistics are. On the very right-hand side, you can see that cash comprises over 70% of the volume of transactions that occur in retail, which is a huge opportunity. Part of that is a result of not having the infrastructure in which to receive digital payment, which is something that we're going to solve. But from an ability to transact, given the distribution of cards by [ SaaS ], so there are more than 50 million debit and credit cards in the South African market, which demonstrates that there is the capability to transact there. Just from a consumer perspective, there isn't necessarily always the opportunity to do so in a retail environment. And so wanting to give you a sense of what that looks like, the traditional focus of devices for digital acceptance has been on the upper tier of retailers. There is a huge opportunity in the small and medium enterprises and in the informal sector. And the importance about this is having the right form factors to address those markets at the right cost. And that is something that we have been speaking about last time, and we will talk a little bit more about today. But that leaves us with an opportunity and addressable market in South Africa alone of well over 800,000 devices. In terms of penetration of devices in South Africa, you can see the level of penetration is relatively low on a global basis. This comes out of the Bank for International Settlements. It is a little bit dated, but it is reflective of that theme. So from our perspective, we think the opportunity set is great for us. Ultimately, it is all about execution and the strategy that we've outlaid, this is a reflection of what we have done in the past. We are very focused on delivering innovation and delivering innovation excellently. That leads to good client relationships, recognized leadership and is something we are very proud of and we'll continue to focus on. Our focus is more on enterprise-related activity than consumer-related activity, and that has a host of benefits for us from an operational perspective as well. And our Payments division, as we've spoken about, starts with proprietary platforms and capabilities, which is something that we have invested in heavily. We continue to invest in that. And it is our key differentiator when we go to market. Clients are all highly recognized, highly regarded blue-chip enterprises who recognize the position that we have, our ability to give full end-to-end solutions and continue to elevate, does give us a really good set of credentials when we are talking about new opportunities. We have spoken about form factors. And in the past, we have indicated that we have relationships with both Ingenico and Newland. Both of these are organizations that are recognized for their leading position in devices and give us a technology leadership position in responding to opportunities. Last presentation, we spoke about the launch of Halo. Halo is a hugely exciting area for us. It is a technology that was developed by our Synthesis team in our Payments area. It was launched by Nedbank recently for allowing any Android device to accept payment from a consumer through a digital means. And here is an example of that. From our perspective, Halo is one of just a handful of capabilities like this that have applicability globally. And we have initiatives underway to expand well beyond the borders of South Africa. The exclusivity that we have with Nedbank for South Africa and is for South Africa only ends in April, and we will be launching other activities in the South African market with other clients in the not-too-distant future. For our revenue model, we have spoken about in the past, I wanted to highlight there are businesses here, which are well-established businesses, which are the foundation upon which we're growing. Those are the ones that are identified with the blue blocks underneath them, the areas of huge growth opportunity are the ones that are identified with the gray blocks underneath them. We have spoken about this in the past, but they continue to operate on that basis and puts us in a very good -- provides good foundation for our growth. We continue to reflect the growth in our terminals. And as you can see, this has been a steady, progressive increase over time. We think that this is the -- this is evidence of the differentiating capabilities that we have from both the hardware and a software and proprietary technology stack and is recognized by our clients. From a services perspective, as I mentioned, we went through some major internal restructuring around us by migrating from Mercantile Bank as our aggregator provider to both Absa and Nedbank, all of that was done during this period. It has enabled us to offer a whole host of new capabilities and enhance capabilities on the services that we previously offered. And even in this very difficult period of time, our activity through the estate grew by 15% or 15%. And so we are very pleased about how that period of transition unfolded. What we have done in the past, given that these services are look but amorphous and intangible is really trying to use, use cases to demonstrate the things that we are doing. So here is a use case, which is currently in pilot, expected to go live in production in Q1 of next year with MSD, which is an animal focused medical company. We have a suite of capabilities to drive consumer loyalty and provide payment capability for what is a relatively high-priced pet solution. Fincheck is effectively a consumer lending marketplace that does lead generation for consumer credit. You can see pictures on our right-hand side of the Android-based terminals where we now have point-of-sale devices giving rise to this lead generation capability, which falls into our transaction revenue silo. A very exciting area around consumer credit, and we think this has a lot of legs too behind it. Another example is a company that is in the insurance and benefit administration, a company called -- they have a product called -- RubiBlue is the name of the company. They have a product called easiPol, which is the solution sold primarily into the funeral sector. And they have deployed their solution of our Android devices. So from the Payments growth perspective, I think you can all read these at your leisure, but we think there is still good opportunity for us in the sector, particularly given the broad range of device form factors and services that we now offer. We are focused on expanding across Africa with our clients. And with some of our solutions, we think they have great applicability across Europe, Asia and Americas. And a lot of this is driven through our innovation, which we will continue to do and is an area where we invest heavily. From our Software & Services segment, the characteristics of Synthesis remain unchanged. We are a group who are continuing to lead in the area of cloud deployments. We have been focused historically on the financial services sector that has put us in very good stead for a whole host of reasons, some of which relate to discipline and security and transaction services and uptime, understanding what clients' needs are, and we continue to perform very nicely in that area. And some of the accolades that I spoke about are a testament to that. We have in the past spoken about the operating units within Synthesis. We have now also broken out the 3 at the bottom: intelligent data, managed services and with the deployment of Halo, we now have a new area that is focused on payment technology and crypto, which is very important and allies nicely with the Payments activity that we do in our other division. And there's lots of cross-pollination there. What I wanted to do was give you a sense of what intelligent data really means and what the growth opportunity is there. From an AI perspective and machine learning, the global marketplace is expected to grow at 44% CAGR between now and 2024. And in South Africa, while much smaller, you can see that it's expected to grow at a CAGR of 36%. AWS as a platform is recognized as a leader, if not the leader, in the AI area based on their cloud platforms. And given the work that and status that Synthesis has with AWS, we think we are exceptionally well positioned to be able to capitalize on that growth and assist clients in taking advantage of the commercial consequences of deploying this technology within their businesses. Because ultimately, that's what it's about, is deployment in a commercial context that generates incremental returns for our customers. When you think about the process by which these things unfold, there is obviously a consultative process. There's a migration into cloud. But thereafter, there is a need to manage that infrastructure, and that requires a certain capability and skill level. We have developed a managed services capability. That is expected to grow at about 18% over the course of the next few years. The managed services sector internationally is a much more mature market. And so we think the growth rate in South Africa is probably higher than that, and Synthesis is exceptionally well positioned to be able to get its fair share given the activities in the first 2 blocks that we have identified. So here is the recognition that we are very proud of in terms of Social Impact Partner of the Year Award. It was given to Synthesis for their work on GovChat, given the impact GovChat has had in South Africa and with government. Again, we speak about case studies, and we're going to do that again in the context of Synthesis. Here is an example of a deployment in our RegTech area with Al Baraka Bank. It is a bank out of Bahrain that is Shari'a-compliant. They needed solutions for reporting their South African operations into SAB and have used Synthesis to do that. We have spoken about our relationship with AFGRI in the past, and here is an example where we were able to migrate the entire account area onto the cloud from their own proprietary platforms, which went exceptionally well and has resulted in substantial cost savings to the group, giving them operational flexibility going forward. So hopefully, that's given you a quick overview. I know I've spoken fast, but I wanted to give Alan the opportunity to speak about our financial performance and leave us time for questions at the end. So Alan, I will turn it over to you.

Thanks very much, Brad. Good afternoon, ladies and gentlemen. Once again, thank you for your continued interest in Capital Appreciation. We are proud and gratified in such challenging and unusual times to be able to present an operational and financial performance of this caliber to you. The COVID-19 pandemic has undeniably demonstrated the maturity and mettle of our underlying businesses in the past 6 months. Their ability to service that customers with distinction, to continue to innovate and to attract a range of additional customers is a real feather in their cap, and we salute the management teams of our companies for their resilience and achievement. Our investment in capacitating our group and developing the right oversight structures, talent pools and skill sets as well as the technological platforms, from which to service and serve our clients has again culminated in a strong operational momentum and solid financial results. As a group participating in a high-growth sector of the economy, we continue to invest judiciously with a full understanding that for some of the costs incurred, we will only see the financial and earnings benefits in future planning periods. You will see some of the benefit and impact of this ongoing investment in previous periods in this set of results. The pandemic has, in many cases, accelerated and expanded the need for our products and services as well as our platforms and skills, and I have no doubt that we will continue to benefit from the investments made in recent years. In viewing the financial results, a few features should be kept in mind. The specific share repurchase and small related body transaction approved by shareholders and implemented during September 2019, which reduced available cash and interest income earned in this reporting period that had a positive impact on the number of shares in issue and the reduced weighted average number of shares in the calculation of headline earnings per share. The continuing development costs incurred by the group relating to new innovative payment product offerings and the building of capacity in anticipation of future growth and commercial activity, as I already mentioned earlier. And thirdly, the sale of the group's [ 17.45% ] interest in Resonance Australia, which generated an 8.7 million pretax capital profit in the prior period. I'll now refer to the divisional performance, Payments and Services, which is on Slide #45. The Payments division delivered strong results with revenue growth for the interim period of almost 16% to ZAR 215.3 million and EBITDA growth of 33% to ZAR 66.5 million. Payments demonstrated excellent expense management with the cost base remaining flat on the comparable period last year. This business continues to be a strong cash generator. We remain very positive about the outlook for this division. We have reported on for substantial growth in the terminal state in a prior slide, which in itself will lead to a greater and sustainable further annuity revenue streams from terminals deployed. The positive traction in the gross transaction value will further add to this annuity revenue stream of this division over time and the new venture into Android technology is showing excellent promise. I now move to Slide 46, which is divisional performance, Software & Services Division. Synthesis continued to make strong progress in expanding both their client base and revenue stream. The business delivered a solid set of financial results, increasing revenue by 13.8% to ZAR 108.4 million and EBITDA by 3.1% to ZAR 28 million. Synthesis has made a further investment in infrastructure and an increased workforce in the second half of the 2020 financial year in anticipation of meeting and servicing demand in this reporting period. However, COVID-19 pandemic generally caused our customers to review and to reprioritize their capital expenditure, and this process of evaluation has lengthened decision-making cycles and delayed the initiation of planned projects, which had a [ commensurate ] negative impact on the revenue in this period. Brad has already given you an overview of the progress that Synthesis has made over the past 6 months and the strong demand that the company is experiencing for its services. We believe the opportunities for this business is exceptional, and the planned investment in growth will continue. Synthesis made pleasing progress in diversifying their revenues based geographically with projects in Mauritius, the East African Islands and the Asia Pacific region. When we bought Synthesis in May 2017, the acquisition agreement included a 3-year profit warranty. We are delighted that Synthesis achieved the profit warranty at 31 March 2020. The vendors of Synthesis received [ 10 million ] in cash, an allotment from treasury shares of 30 million ordinary shares. The Synthesis business has done us and itself very proud. I now refer you to Slide 47 with summarized statement of comprehensive income. In looking at the statement of comprehensive income, there are a couple of items to note. Group revenue grew by 15% to ZAR 323.7 million on the back of solid top line performance by both of our divisions. Operating costs increased by 10% due to the continued development of new innovative products and building capacity. Net finance income reduced by 49% due to lower cash balances post the share repurchase transaction as well as a 3% reduction in South African prime overdraft at repo rates. Profit before tax in the 2019 comparative year includes the one-off capital gain of the sale of Resins Australia of ZAR 8.7 million. This is part of the share repurchase and small-related transaction we concluded in September 2019. Headline earnings increased by 7.8% to ZAR 54.2 million. As a result of the specific repurchase and small-related party transaction, the 245 million shares that we repurchased and canceled reduced our total shares in issue by 15.8% to 1.310 billion shares. The weighted average number of shares issued for the reporting period reduced to 1.219 billion compared to 1.468 billion in the prior period. Headline earnings per share increased by 29.7% to $0.0445 per share compared to $0.0343 per share in 2019. As of 30 September 2020, Capprec had a total of 78.8 million treasury shares at an average cost price of $0.70 per share. The company will continue to opportunistically repurchase shares in the market going forward. Please refer to Slide 48, which is the divisional revenue composition. In terms of the revenue generation within the Payments division, maintenance and support fees grew by 12.4%, very much in line with the growth in the deployed terminal estate. This will continue to grow as the division's fleet of terminals grow and are deployed with merchants. Terminal sales increased 6% on the back of a strong pipeline. As previously discussed, rental income in this business continues to decline as customers shift from maturing legacy rental contracts to purchase terminals. This decline was partially offset by Dashpay's current growth in terminal rentals, which will continue to grow going forward. Growth in transaction-related income was constrained by the reducibility to trade by merchants and the lockdown restrictions, but still reflected an 8.4% growth during the reporting period. Services and consultancy fees at Synthesis showed pleasing growth of some 20.1% from increased demand of digital services and cloud projects. As mentioned, Synthesis continued to enjoy growth in dollar-related revenues emanating from services provided outside of South Africa, growing some 37% off a modest base, this continues to be a key focus area going forward. Our operating divisions are also making pleasing progress in growing recurring revenue, with annuity type income increasing from 52% of total revenue to 56%, providing a strong underpin in terms of the visibility and sustainability of future income streams. I'll now refer to the statement of financial position. Capprec maintains an uncomplicated and easy-to-understand balance sheet. The key elements to highlight are that the company still has ZAR 488.4 million in cash post the share repurchase and small rated party transaction, general share repurchases and the payment of the final dividend. In terms of capital allocation, the group remains strongly focused on first and foremost, supporting the organic growth of our divisions and thereafter, acquiring companies that can expand and generate scale within a reasonable time frame. That can provide satisfactory organic growth and returns to shareholders and where CapEx, capital and strategic capability can be successfully leveraged. Capprec's cash is invested in South Africa's top banks and interest rates are managed very conservatively and with a view to maximizing yield through appropriate interest rate cover, particularly in a declining interest rate environment. Net asset value per share decreased marginally from ZAR 1.090 per share at year-end to ZAR 1.080 per share, mainly due to the lower cash balances. Cash available comprised $0.373 per share. I'll now refer to the key cash flow statement. The key features slide on cash flow reflect the September 2020 and 2019 6-month periods, highlights the main cash flow items. Cash and cash equivalents of September 2020 was ZAR 488.4 million compared to ZAR 415.9 million at the same time last year. The group subsidiaries remain strongly cash generative, generating ZAR 252 million in the 12-month period from 30 September 2019 to 30 September 2020. We continue to generate meaningful profits and cash flows in a challenging economic environment, and that is after paying full tax and sustainable dividends to shareholders. Capprec has declared an interim dividend of $0.025 per share, representing 11% increase of the dividend declared in September 2019. I will now hand you back to Brad. Thank you very much.

Thanks, Alan. So I'm going to wrap it up talking about our prospects, the way forward and then answer any questions that arise. In terms of our overall prospects and where we go to from here, we continue to believe that the underlying organic growth opportunities for the business are very good, as you can see from our results. All of this that Alan has spoken about is the result of organic activity. It's not complemented by acquisitions or the like, although we have been very active at looking at quite a number of them. We think that there are a number of opportunities that are interesting that we have spent time and effort researching and diligencing and may well be in a position to execute 1 or 2 of those over the course of the coming months. The economic climate is a factor, no doubt. It is affecting how our clients think about capital expenditures, how they think about project initiation, where they're spending their time, effort and resource. It was very pleasing to us that all of the projects and activities that our team at Synthesis were working on at the time of COVID, after having gone through a very diligent review by each of our clients, because every single one of them did a stock pause and assessed where they are, analysis were greenlit to continue being viewed as essential projects with having a fundamental business impact. So we think those are all important. But there is this overall economic weakness in South Africa that we can't ignore, which means we have to be diligent about how we prosecute the business, how we spend our money and where we invest and we think it may well have an impact on how things evolve. But given where we are and the solution set that we have, we think our prospects continue to be very good. Within our Payments business overall, there are a number of new initiatives that are in pilot stage at the moment, which I haven't spoken about, which we will be putting into production in the first quarter of next year, and we'll review with you in our next set of results. Some of those are exceptionally exciting and very positive, and will have a big impact on our group and also our clients. So we think those are very important in the SME space given the Halo project that was undertaken. It is no longer a project. It's now a product. It's -- I meant to mention previously, it's been branded [ Halo Dot ], and Halo Dot will be marketed across the world, not only as an SDK, which is a software development kit but also as products and solutions. So a very exciting area for us in Payments. In Services, the opportunity, I think, follows on the slides that I presented in terms of market growth areas, in terms of the natural migration to cloud and then the importance of using cloud to drive business imperatives because fundamentally, cloud is a technology, but it's only an enabling technology to use it properly. And with the benefits of connectivity and artificial intelligence, there are a whole host of benefits that arise and accrue to customers as a result of its deployment and implementation. And that, from our perspective, is going to continue to drive activity. So from that perspective, I think the group is exceptionally well positioned. Our investment case, I think, is relatively simple. We have a leadership position in an industry and sectors within an industry that are evidencing very strong growth. We expect that growth to continue. The difficulties that COVID presented to the economy overall do have a benefit for us, and we're going to continue to capitalize on that. As a group, we have a very strong culture of innovation. I think it's that innovation, which has allowed us to have a client base that is of the nature, stature and character of those that we have, and they recognize what we have delivered for them. And ultimately, it is about delivering value as opposed to just handing over a piece of technology. And so we are very focused on that. Our track record is one of delivery. And I think in this instance, success does beget success, and the teams are performing exceptionally well. Through that delivery, we obviously become a trusted partner. And when there are mission-critical issues that need solutions, we are a partner of choice. And as I mentioned, and Alan has highlighted, we do have a very healthy balance sheet. Our businesses are cash generative. We can focus all of our attention on business and growth and servicing clients as opposed to worrying about what we are going to do with respect to debt repayments or capital structure issues or anything of the like and how to ration capital in a way that is suboptimal. So from an overall perspective, I think our investment case is solid. We're very proud of what the group has achieved. I know we are joined today by many members of our team, both from -- both in leadership and also team members who do the hard work, and I want to personally thank them for everything that they have done. I know the Chairman made that comment at the beginning, but it truly is a pleasure being able to stand up here on the shoulders of all the guys that had -- and women who have done the hard yards on our behalf. So thank you for that. What I would like to do is ask [ Lydia ] to identify any questions that have been posed through the chat box on the left-hand side of your screen. So if anybody has questions and you haven't posted them yet, please feel free to do so, and I will do my best to answer that. So Lydia, I will turn it over to you.

Thanks, Brad. The first question came from [ Mike McLaren ]. He says this is a very, very good set of results in normal circumstances, but even more so given what has transpired this year. Congratulations to you and the team. The 2 questions are, how big was the impact of the delayed revenues that you reported at last year's interims, i.e., what was the knock-on effects in the delay in September on the rest of the year's revenues?

So Mike, thank you for the congratulations. The delayed sales of September last year reflected themselves in the March results that we released in June. They didn't really have an effect on this year's results. The terminals that were delayed in distribution were then deployed during the second half of last year and early part of this year. And annuity revenue that arises from those is now reflected in this year's results. Where we did have some delays that affected this year's results were obviously COVID related, where the level of activity in April, May, June was below the level of activity that we would normally see for new deployments and new terminal implementation. You saw that through our capacity slides, so that delay has affected these results slightly in terms of revenue generation. But as the economy picks up, we'll have to see whether or not there's a second lockdown, what the effects are. We would anticipate getting that annuity revenue coming through. There is an important point to recognize, is that many merchants didn't make it through COVID. And as a result, you will find that, that pool of traditional merchants has shrunk a little bit. And so we will see how rapidly that sort of recovers once businesses get back on their feet. But that's the effect of the delayed sales of last year.

Mike's second question was given Synthesis' impressive service offering, do you anticipate or foresee the Services division contributing an increasing percentage of group revenue and potentially overtaking the Payments division over time?

So we certainly have great aspirations and expectations of the Synthesis and Services business. The question is going to be the relative growth rates of the 2. And we have high expectations for continued growth in Payments as well. So exactly at what rate and what differential that you grow at is going to be hard to determine, what the balance looks like. But over time, we would expect that this payment Services business continues to grow at a relatively rapid rate. And we have high expectations for Synthesis, too. So we would not be unhappy with continued growth in Synthesis and them contributing more, but I put the challenge to our management teams and let them have a little bit of a contest as to who can grow faster. All is good for Capital Appreciation in that respect.

I've got a question from [ Zandile ] from [indiscernible] Wealth. He says, why has CapEx share price being muted since it came to the market despite higher than industry growth rates over the past 2 years? And do you think the dividend payout is sustainable going forward?

So Zandile, I can't answer the question on our share price. I'm not a prognosticator on that. We focus on the business and delivering results and hope that the share price will then start to reflect what we think is underlying value. I don't think -- it would be too presumptuous for me to say that we think Capital Appreciation is undervalued relative to its underlying performance. But ultimately, I can't control that, the market makes that determination. So hopefully, people realize that our track record is speaking for itself. We're going to focus on delivery and generating the results. And we hope shareholders will recognize that and respond accordingly. In terms of our dividend payout, the businesses are all cash generative. And so as long as we continue to generate cash, we will -- and have a healthy cash balance to be -- to allow us to be opportunistic in terms of investment items at across our suite, we will continue to distribute profits generated to shareholders by way of dividends. So as long as we continue to do what we do, we will continue to maintain this type of dividend.

Thank you. We've got a question from [ Emil ] from Protea Asset Management. He says you previously mentioned that the banks refresh their older payment terminals roughly every 5 years. What life cycle do you expect the newer Android solutions compared to the older Ingenico portfolio?

So our current expectation is that it's probably still on a 4- to 5-year refresh cycle. Part of the refreshing is a result of PCI compliance issues, so that the devices have the highest level of security at the time. And obviously, security is an important topic today. So it's not only an issue of wear and tear. So our view is that it's probably still on the same 4- to 5-year time horizon, but we will have to wait and see. These are new devices. They are new to the market. We have relatively limited experience, but our expectations at present are a similar 4- to 5-year time horizon.

A question from [ Cornelius ] at [ Meter Bridge ] who say, what has been the market take-up for Newland devices?

So we have had -- we have -- we've had relatively good market take-up of those. We're not going to disclose separate numbers for Ingenico and Newland states. They were going to just reflect them together in the aggregate, but it's new. And given that it's new, our view is that the delivery and response has been very positive. The decision on which form factor to choose is our clients' decision. We're offering them opportunities and options. And a lot of it is dependent on their specific use case. As you drive down market and you look to get into the lower LSM customer base, there, you have to worry and be very focused on cost, cost and value. And the Newland devices are at a better price point for those lower markets than the Ingenico devices, which have a great reputation for quality, but they are more expensive. So on balance, we're very pleased with the success that we've had to date and look for clients to continue to exercise their choice.

Right. We've had a couple of questions about the delays in decision-making and whether we've seen any improvement in October, November.

Decision-making in what, Lydia?

In terms of Synthesis' projects, for instance.

Oh, sure. So that delay really occurred at the heat of the crisis where people were taking a pause and figuring out how to do remote work and whether or not they could continue with the projects and determine which projects needed to continue to operate and which ones could be culled. And so we have seen -- we saw that probably take 6 to 8 weeks of time, maybe a little bit longer. But now I think we're back on a rhythm. All of us are much more accustomed to sitting in front of computer screens, sitting in front of video screens, doing things remotely, distance activity. And with lockdown being reduced and people back into offices, even on a more socially-distanced basis, there is a better canter and rhythm to that activity. So we have now been able to notch up a number of new contract wins. New decisions were made, projects implemented. And so I think we're back on to a more normalized level of cadence.

We have a couple of questions with regards to buying back of shares. So [ Nick Kris ] asked, can you remind us how management are aligned with shareholders and how do you deal with the conflict in buying back shares versus new investments?

So I don't think that there is a conflict in buying back shares and new investments. Our decision on capital allocation is to determine what -- how much cash we have, what our immediate needs are and determine whether or not we have excess cash and then determine where the share price is. During this half year, we didn't buy any shares back at all. We were exceptionally cautious with the use of our capital, not knowing what the overall impact of COVID was. Although our businesses were doing well, we are a relatively conservative and prudent team in how we think about these things. And so we did not buy any shares back during this half year at all. From an alignment perspective, management are all shareholders in our business overall. Mike, Alan and I are large shareholders, and so our interests are -- and we take modest salaries as you would have all seen through our disclosures. So our interests are completely aligned with shareholders. And so we are very focused on doing what's right by the shareholder group, because we are shareholders. So I don't view there being a conflict at all if what we're doing is driving shareholder value.

We've had another question from Kaplan Equity analysts who say, there's no commentary on further acquisitions. This -- we seem to recall that being mentioned, there's 1 or 2 being considered. What happened to those?

So there have been probably 8 or 10 that we have looked at diligently over the course of the 6-month period. Some we continue to consider and others, we conducted due diligence and elected to walk away. And others, we submitted proposals that we thought were at value and were not successful. So we continue to focus on that area, because there is a lot of opportunity around there. But from our perspective, they have to be the right acquisitions at the right price as opposed to just growing the group for the sake of chasing revenue. And so we continue to explore that. And as I mentioned in the prospects section, there are a number that we are in process with at the moment. And we may find ourselves fortunate to be able to conclude 1 or 2 of them over the course of the next few months.

We have a question from [ Peter Woodrow ]. He says congratulations on a great set of results. Could you provide some insights into Dashpay's performance post September? They are on an enviable growth trajectory before COVID, and I'm wondering if this has resumed as lockdown has eased.

Yes. So transaction and services area is doing very nicely. As I mentioned, there are a number of new initiatives that we have that are in pilot that will be put into production in the first quarter of next year. Our focus within the transaction services area is -- it is really looking at enterprise-level solutions, which means that you're dealing with large corporate counterparties who have large desires. And so we think that, that area of the business is well positioned to be a meaningful contributor going forward. I can't -- I don't -- I'm not in a position to disclose what those are at the moment, because they are still in pilot and have not yet been put into production. So I don't want to preempt that. But an example would be the example that I highlighted with -- for Bravecto with MSD. There, they had a national project that they wanted to focus on. It is focused on pet owners, it is focused on high-value product. They wanted both a point of sale and also a desktop solution, and it is a corporate-related enterprise solution. And so those are things that are not just ordinary course activities for regular payments. And so there's a level of sophistication to that, which we are well adept at responding to. And so we are quite pleased with the progress that Dashpay has made, particularly given the transition away from Mercantile, which, as you know, was aggregated with Capitec and have transitioned all of that activity now into Nedbank and Absa. And we put in place a new technology platform, which gives us greater flexibility to enhance the solutions that we had and also launch and deploy new solutions. So this has been a very traumatic period for the business from an operational perspective during the 6 months, exacerbated by the fact that a fair amount of this had to be done remotely without people in office, on-premise, but it was all done and executed well. So I think the foundation going forward is very good.

Thanks, Brad. There's a question from Jordan. He says well done on the results. He says, once the new Synthesis hires translate into value add, what kind of EBITDA margins and operating leverage are you expecting from Synthesis? And do you have any intentions to cross-pollinate in the different silos between Synthesis and Payments?

So I'll answer the second question first. We are currently cross-pollinating between Synthesis and our Payments business. And a good example of that is the Halo Dot initiative that was developed by Synthesis. It is going to be exploited in conjunction with our payments scheme, because there is great industrial knowledge in that area. And so that continues to evolve. There's lots of work that we're doing around intelligent data and machine learning, which will also filter into the Payments business on the back of knowledge and capability that Synthesis has. In terms of Synthesis growth, Synthesis does have a -- Synthesis' largest expense is human capital, and we will continue to have to employ people to grow that business. But not only is it related to those people, it is then related to offering the types of incremental services that we spoke about like managed services and intelligent data, which have good operating leverage supporting them. So we will continue to see some cyclicality in the Synthesis hiring profile, because Greg has come out of college in December, and they start new work in February. And so we'll always see this leads and lags effect within Synthesis. But our view is that the Synthesis business over time should continue to expand its operating margins from where we are as we bring in higher-margin activity and are able to leverage the IP that they have embedded within the business. But it's not going to sort of expand dramatically. It will be a generally progressive expansion over time that is going to be manageable but very positive. But yes, I do see that we're at 10 minutes past the hour, and we have some other commitments. So maybe we can take one more question, and then we can wrap it up.

Okay. We'll do that. And the last question from Zandile just to say, where do you see the Payments business in 5 years' time? Will the business still grow at double- digits then?

So Zandile, the question from -- the response from us is that we continue to have very high hopes for the Payments business. What we think will happen is that the relative contribution of the different elements in the Payments business will change. So where a lot of our activity today is on infrastructure, over time, we think that the amount of revenue and profits that come from Services will increase. And so the balance between infrastructure and services will shift. And as that happens, we see there being huge upside in the Services side of the business, which is tied to transaction activity. It's tied to innovation, it's tied to new products, it's tied to data activity. And so we think that the prospects in Payments continue to be very good, but the balance between what contributes to revenue today will shift more in favor of services and away from infrastructure. So on that note, I want to thank everybody for joining us. I want to thank our Board for their wisdom and guidance over the course of the year, our Chairman and the rest of my executive team, Alan and Mike, and all of the Capital Appreciation team members for their untiring efforts over what has been a very challenging period for South Africa, but a very positive period for the group. So thank you all for joining us and look forward to speaking to you again soon.