Araxi Limited (AXX) Earnings Call Transcript & Summary

Good afternoon, ladies and gentlemen. My name is [indiscernible] Motty Sacks. It is my pleasure and privilege to welcome you once again to our annual results presentation of Capital Appreciation, this time for the year ended 31st of March 2021. The highlight or perhaps the lowlight for this past year has been none other than the scourge of COVID-19. The effects of which have, in many respects, caused grave human tragedy, certainly much social confusion and considerable economic hardship and misfortune. There is no doubt that everyone has been affected by COVID. But in our case, it has fortunately triggered a new surge of interest in digitalization, legacy system migration and generally a demand for technology solutions by the financial sector, also commerce, industry, even including government. There is no doubt that electronic solutions and applications improve business management efficiencies, easier customer and citizen engagement. And this is recognized and consistent with similar transformative models around the world. So to tell us more about our operations over the past year, the sterling efforts of our group management, the reaction and interest of our growing portfolio of clients, including the financial results and positive trends likely going forward, it's my pleasure to call on Bradley Sacks, a joint Chief Executive Officer of Capital Appreciation, to continue with the detailed presentation. So Brad, over to you.

Thank you, Motty. And I would say that your summary introduction certainly sets the right scene for the lens through which we need to think about our results over the past year. In today's presentation, we'll follow a similar outline to that which we have done in the past. There are some introductory remarks. We will talk about the highlights for the period. I will give you some thoughts around how we see the opportunity, then talk about how we're actually executing against that opportunity and what our strategy is. Alan will provide us with the data around our financial performance over the past year. And I will then come back to talk about the prospects, whereafter we will open it up for questions. There is a questions capability on your screen, so please send those through, and we will aggregate those and try and respond to them at the end of the presentation. So in summary, this is a similar slide, which we have presented to you in the past. Our business is divided into 2 divisions primarily. We have a payments and payment infrastructure business and Software & Services business for [indiscernible] talk about Payments division and the Software division. We are a financial technology company, ultimately, and we seek to partner with large institutions and in an enterprise level way. We are not focused necessarily on consumer-related products directly, although there are lots of consumer applications and demands for our products, but we really are an enterprise-to-enterprise type business. We do have our third initiative, which is related to enterprise funding. And we have made an investment in advanced funds to GovChat, and we'll have a quick update on that as well through this discussion. And lastly, the part that's not here, is we do have a small corporate office, which provides shared services, but primarily, we run on a decentralized business model, but our financial accounts do reflect corporate separately. So Motty's introductory remarks sort of set the scene, and COVID has definitely been a catalyst for technology solutions. We spoke about that in our prior presentation. We've spoken about how Microsoft and many others have spoken themselves about technology being yanked forward by 3 to 5 years. We are not immune from COVID, even though there's been this great demand for our technology solutions. There have been some impacts on our business, and we will go through those. From an operational perspective first, and I think that's important, there has been minimal impact. And to this, we owe enormous gratitude to everybody on our team across the board. They have done an absolutely sterling job in ensuring that we put customers first from an operational perspective. And that we continued uninterrupted during the period. And as many of you know, that was no mean feat. Our priority is -- as management was health and safety, and I think we implemented all the right protocols very well and a huge thanks to our People's team who did a phenomenal job with a very high-touch model that we implemented to ensure that there was no -- that emotional wellness was high within the team. We have a great group of developers, and many of them, if not most of them, work remotely, and we need to make sure that they had everything that they needed. From a business impact, unfortunately, there was some, notwithstanding the demand for digitalization and the accelerating demand for digitization, no company was immune, and many of our clients in the financial services sector were suffering their own credit losses. They had to reassess their own activities. And it introduced some stringent cash flow measures that they implemented, which resulted in delayed capital expenditure programs and also green lighting of new initiatives. So from our perspective, we are delighted that all of the services and software activities that we're doing continued ultimately after review. We never lost or terminated any of those. And we did have a delay in the demand of some of our terminals, but we have seen a resurgence in that in the early part of this year, and we are quite buoyed by that. The last thing I will mention, which is important, everybody is aware of the global chip shortage that has affected some of our suppliers from Asia, and we will continue to work to manage that as best as we can, but it's not a unique problem to us. It is a general problem across the electronics industry. So from our perspective, we think that the impact of the pandemic was relatively well contained, except for the short hiatus, which is primarily in the second half of our financial year. We think it is relatively short-lived. We've seen a resurgence and return to business. And there is certainly huge increased interest in digitalization broadly. And the nature of the conversations we are having are of a very strategic nature. We think that in terms of the addressable market for payments, it has only increased the size of the addressable market for us materially and demonstrated why digital commerce is important. And from our payments perspective overall, the demand that we're seeing now in new orders for us is very encouraging. The return to retail, but for the third wave, which is currently affecting South Africa, I think is going to ultimately bode well for us. From a software perspective, we -- I mentioned we've had no canceled projects, we have fallen into a new cadence on sales, we are seeing some really great new demand, and more importantly, we are being able to expand internationally with the expertise that we've done here, and we'll talk more about that a little bit later. So I wanted to give you a sense as to what we've seen. This is -- there are lots of metrics that we use to measure activity within payments. This is showing activity within our handling areas. And you can see that in the early part of COVID, we had relatively low activity compared to the average of our second half of 2020, and we're starting to see a pickup again now in March and April. And that we think is something which is probably going to persist as an indicator of where things are going. So in general, coming out of COVID, we have demonstrated that our business is resilient. We have a really strong management team across the board. We understand how to work in challenging times. We have a great balance sheet to be able to allow us to focus on execution. We -- we're in a sector that is enjoying secular growth around digitalization. And we are primarily exposed to large institutions. We do have a small amount of exposure to what we've termed at risk businesses, which are small individual merchants. And even through this period of dislocation, we were able to manage that risk exceptionally well. So in terms of highlights, before we go into the highlights, I think there are 5 key items that are notable, which we want to bring to everybody's attention, which allows a fair period-on-period comparison. We've indicated before that the terminal sales, while predictable over the long-term are at times periodically lumpy. And we had a cut-off at the end of March, which is our accounting period. We had received an order, a large order prior to that, which we couldn't get delivered prior to March. So that has fallen into fiscal '22 year. And so you will see the impact on terminal sales. We have had 2 mark-to-market unrealized foreign exchange transactions which has a swing of about ZAR 15.8 million in aggregate. So that needs to be taken into account. We do sit on a large cash balance. So the drop in interest rates has actually worked against us. We have -- we carry no debt. And so the drop in interest rates had about a 280 basis point decline on our average income. And that is evident. I saw an article already this morning saying we benefited by drop in interest rates. It's the exact opposite. We obviously suffered as a result of that. We were able to put Dashpay on a really sound footing. And as a result of that, we recognized a ZAR 13.3 million (sic) [ ZAR 11.3 million ] deferred tax asset in the Dashpay accounts. And we need to adjust for an almost ZAR 7 million capital gains profit in our 2020 year that was associated with the sale of Resonance Australia. So when you take all that into account, you need to look at the results with some perspective. So we now have our summary results and our view is that those 5 items I just mentioned, really do mask. They're non-trading items primarily, and they really do mask the resilience of the underlying businesses. So our revenue was down across our payments division. Our software division business was up almost 14%, and obviously a very difficult market. Our EBITDA was down, reflective again of the decline in terminal sales. But importantly, if you look at the right-hand side, we calculate for ourselves an adjusted EBITDA. And the adjusted EBITDA in this difficult environment was down just 4.3%. And for us, that is a really important measure. We think of it internally as an important measure. And I think it demonstrates how resilient we were through a very difficult period. We have declared a second dividend for the fiscal year of ZAR 0.03, which takes us to ZAR 0.055 for the full financial year, which is 10% up on the last year. We're sitting with a very healthy cash balance of almost ZAR 600 million, which represents ZAR 0.41 a share in terms of assets. Our cash conversion was very high in excess of 100%. And when we look at these results, we're actually very pleased with how we performed in what were exceptionally challenging circumstances. In the past, we've spoken about distribution -- contribution across our divisions. You can see here that the revenue from our Payments division obviously declined as we've mentioned, but the EBITDA contribution has not declined by as much. And to me, that's a very important measure. We were able to implement good strict cost control measures within payments to ensure that we are able to sustain our profitability and cash flow, and both businesses performed very nicely from a cash generation perspective. So before I -- so what I wanted to do is deal with some of the highlights of each of our divisions because sometimes that gets lost. While we shipped less terminals than we had hoped for, there were a huge number of positives across the division. So our terminal estate grew by 17% year-on-year. And our annuity-based management fees grew by 20% year-on-year. We have done a really great job in bringing the Android solutions into the market, and that was well received by our customers, both large institutional customers and also individual retailers. We have launched the HaloDot offering. And when we get to that little bit later, you'll see it comes in a number of different flavors to help us address that market, which VISA determines is almost USD 1 trillion opportunity. And so we'll [indiscernible] little bit later. We've been able to expand our transaction solutions. We've upgraded our platform during this period. And within Dashpay, we have an 80% increase in our active users. And so all this is happening while the economy is shrinking, and so I think it is a true testament to a great effort by our team, and we have a strong pipeline for the year ahead. On the software side, we have also had a relatively positive experience this year. Against the very difficult backdrop, we've been able to expand our relationships with many of our existing clients. We've been able to bring on board new clients. We have continued to demonstrate our leadership across the cloud arena where we've further invested in our relationship with AWS. We have gone into new verticals. We've expanded into new markets. We are going to be off opening up an office in Europe to chase some of those opportunities. We have announced a relationship with Salesforce as a new relationship with software providers like we do with AWS. And we think that this team has done a spectacular effort during this period of time as well. GovChat, I'm going to just touch on briefly. We launched GovChat on the 1st of March. We have a 35% interest in GovChat, all the work for GovChat, all the development work for GovChat is done by Synthesis. It is an initiative which is in cooperation with COGTA, which is the Cooperative Governance and Traditional Affairs department within government. We did work for the Department of Health and Social Development, really showing the effectiveness of technology in difficult times. We have been able to process more than 300 million messages with 3.7 million unique users over the period of time. And Eldrid Jordaan, who is the CEO and founder of this business has a great vision for what this can be. And so we continue to support it and do the development around it. Then talking about the opportunities. I always like to give some perspective from people outside of our immediate bubble because I think it allows you to sort of gut check whether or not what we're doing makes sense and allows us to gut check what we're doing. So this is an article from Forbes earlier this year talking about the fintech trends for the 2021 calendar year. And if you have a look at the gray block, all of those items fit squarely within the areas of expertise and endeavor of the Capital Appreciation Group. We are not -- the only one where we are slightly off is digital-only banking because we do things other than digital-only, but we have a great digital channels initiative. And we are -- in all the other areas, we're invested and competent in space. And when they talk about the fintech sector, they talk about international expansion, which obviously is something we are doing. They talk about partnerships and partnerships, if you remember, is one of our core pillars of how we prosecute business. And we are very innovative, and we continue to look for new opportunities in the market. In terms of the cloud opportunity, give you an update on how that's going in the last quarter reported by Amazon, they recorded $13.5 billion of revenue associated with AWS, which is a 32% increase year-on-year. So the opportunity demonstrates the market is still growing and growing quite rapidly. Amazon doesn't break it out quite the same way, but they did indicate that the revenue was up 50%. They are much smaller than AWS, but a very formidable participant. And the South African market over a period of time is expected to grow to ZAR 22 billion at a compound growth of approximately 30%. So the question is, why do people turn to cloud? You've heard us speak about it. And there has been some work done as to the rationale. And what this really gets to is that the decision for cloud migration, cloud adoption, cloud enablement is not limited to an IT department. It is of strategic importance that is an essential element of the [ NEC suite ] discussion. And so you can see from the bottom right-hand corner, that 47% of the respondents think that the business ability is a reason for migrating to cloud. And I will demonstrate some of the initiatives that Synthesis has underway, which are exemplary of this type of thinking. The megatrends, which people are focused on are items, which, heretofore, have been, to some extent, things of science fiction. It is truly an adoption now for artificial intelligence and machine learning. You have access to huge amounts of real-time data. You have the ability to process that data, and you are able to start to discern pictures and patterns in ways that heretofore just not possible, at least cost effectively. Event data is what people are focused on because every single event and interaction we have gives a rise to data, all of that data can be analyzed and can lead to new decision-making protocols within an organization. And the most important is fast and actionable. The ability to do this sort of real-time and then convert that into an immediate action. And so I will also demonstrate something around the work that we're doing that takes advantage of these particular things. They're not just words to us, they are real -- they get translated into real products with clients. From a payments perspective, we have shown this before. We think that while COVID has had a deleterious effect on the traditional retail sector, long term, it has a very positive effect on our payments business. There is increasing awareness of contactless. All of our devices that we have in the market are contactless enabled. Merchants are increasingly looking for value-added services. Consumers are getting more comfortable, and people are ultimately moving away from cash. And in South Africa, that is a very important component. Trying to get a sense as to what this means. I'm sure many of you have looked at some of the reports that come out of research houses that talk about how frequently is a particular word or trend mentioned in earnings reports across companies. While Gartner did something around social media discussions on contactless payments, and you can see how that has increased over the period of time demonstrating how it is gaining mind share. And for us, it's really important as we talk about Halo products. McKinsey came out with a really interesting report where everybody thinks that traditional retail is dead and everything is going online. What they looked at was how many people shopped in an e-commerce enabled way, which are the yellow dots pre COVID to what they did during COVID, which are the light blue dots. But what they are finding in developed economies that are now starting to benefit from the vaccine is that there is a reversal towards a more physical interaction. And it's never going to go back to how it was pre COVID, but physical sales are an important component going forward. In South Africa, we've spoken about these transactions before, but it's important to realize in our context that 70% of transactions that occur in volume still remain in cash. And this is the area that we believe will help us grow the permit and pie in terms of our terminal distribution and Halo capabilities, and it's something that we are quite focused on. In terms of overall digital acceptance, we have shown this in the past as well, and it bears repeating because it shows you how we're thinking about our market opportunity and continuing to be able to introduce form factors and payment devices that address the smaller and micro businesses, the informal sector in ways that are cost effective. And so that for us is very important. So when -- I now turn to our strategy, you will see the first pillar is partner, which is consistent with what was identified as part of the Forbes Magazine. This has been a strategy that we implemented right at the very beginning of our investments in these businesses and hasn't really changed. We've, obviously, altered tactics, we've made some tweaks along the way. But the underlying core strategy of partnering with our clients innovating and then executing is something that has stood us in good stead, and we're going to continue to do. In terms of key stats for payments, just to give you a quick overview, the business has been around -- it's not Johnny come lately for over 19 years. Our growth has been quite impressive. We've increased our estate by sixfold in less than 5 years. We did a customer satisfaction survey, and we got a greater than 90% response in the positive, which was tremendous and a testament to our teams. And we have a large dedicated group of people focused on payments. Adjectives, which describe the business, are large extensive, innovative and passionate. And we think that our market opportunity continues to be large. We have a really great portfolio of intellectual property, which we continue to invest in, and we'll monetize and we innovate with passion. And I think those are all good characteristics for a business in a dynamic growing area. To show you the terminal estate growth, you can see we ended the year at 217,000 terminals in the hands of clients those that are owned by clients and at 207,000, which is also up 17%. Those in the market which are active, grew by 30% year-on-year to 175,000, and we continue to have a good number of devices waiting for deployment as weeks and months unfold. And as I mentioned, we've had some really good orders since February of this year. So now we get to Halo, and Halo is really important. Halo, while part of our payments division in terms of its presentation was developed by team at Synthesis and allows us to focus on that very small enterprise who heretofore couldn't afford the benefits of electronic payment. And we have been certified by VISA Mastercard and American Express and was rolled out in partnership with Nedbank last year. And the period of exclusivity we had with them has now expired, and we are in process of discussions about bringing it to market in different forms with different parties. And I think looking at this, you will recognize that this is no small feat. You could use any payment device no matter what the incarnation, whether it's a credit card, a mobile wallet or wearable in the form of a watch or Garmin device as the case may be. It allows you to accept Apple Pay, to accept Samsung Pay, all of those types of payment instruments are accepted across this platform. A truly -- a really great game changer for going after this small medium market. And as I mentioned, VISA has come out with an assessment where they think that -- where their view is that there are more than 4.5 billion customers that interact with these types of merchants on a daily basis, and that represents more than $6.5 trillion of commerce annually. And so when we talk about the market opportunity being huge, it's in that context because Halo is a globally applicable product that we are truly excited about. And while I've got the slide up may -- while it may be a little bit technical, it's important to demonstrate that when we started in 2020, we had the first Tap On Phone, which would just allow you to knock your credit card against a phone in a contactless way and register payment, but we didn't stop there. We've also moved to an ability to ensure that you can do PIN Entry and PIN Entry on the phone is really important because it reduces the transaction cost. It converts a card-not-present transaction to a card-present transaction and reduces the transaction cost. It also allows you to purchase goods and services that are in excess of a scheme-mandated base limit for contactless payment. It has applications -- Halo has applications beyond only payment. And most importantly, we've got it in different flavors. In the bottom corner, you can see we can make it available as a software development kit, we can present it as an app or we can offer it as payment-as-a-service. And I think that's critically important for us. And the team has done an absolutely marvelous job. The evolution of our payments services offering continues a pace against the backdrop of a very difficult trading environment. Gross transaction value on the basis that we measure is now at ZAR 6.4 billion, up 14% through September last year. We have continued to grow our reach. We've continued to introduce new services. And more importantly, the number of people who are actively on our platform and using it has increased during this period by more than 80%. So a very important milestone for our Dashpay services offering, and we are quite delighted by how they are performing. So we've spoken about focus on the enterprise. I want to give you an example of that. Everybody is familiar with Attacq. We've spoken about our relationship with Attacq probably 18 months ago. It took a bit of time to coordinate all of the components. But we are able to create an ecosystem for the Attacq group that brings in all of its malls, it's merchants, it's office parks, it's people in the residential estate, takes into account all of the foot traffic and allow for a community exchange of data and value and transactions and incentives. And this initiative was launched at the mall of Africa earlier this year. And the first -- and the product has been presented as an [indiscernible] shopping. It is available for download in the Android and Apple and iOS store, so go do it and try it out. Its first phase is to give some navigation to allow you to buy and send vouchers and earn loyalty points at participating merchants. There are a whole lot of them that are already on the platform, and there are some really exciting enhancements ahead, which we will be bringing to market together with the Attacq group, who have been a tremendous partner for us. And I think we and they are very pleased with how things have evolved. This was a collaboration between Dashpay and Synthesis, and is examples of how our teams are working exceptionally well together. We invested in a company called LayUp. So LayUp is a digital lay-by solution that also play -- that also is an angle on an area that many of you may be aware of, called buy-now-pay-later. You have seen this in the press. When we look at statistics across South Africa, there are a huge number of people who are defaulting on the repayment of loans. There are many people who are locked out of the economy, and with a higher unemployment rate, they don't have access to credit. So lay-by is a huge area, an area of focus in large retail stores, even in small retail stores, but administratively is very difficult to manage. Lay-by has addressed that opportunity by creating a digital capability. The capability is available on e-commerce sites, so on websites as well as through terminals at point of sale. Our decision to invest in this area was a result of a really industrious and energetic founder management team who are super passionate about this area. We have a great deal of confidence in what they can do. We provided them with a little bit of capital. We provided them with some development expertise around launching the capability on to payment devices, and we are very excited and supportive about what they can do. In terms of how it works, it's really quite simple. It's really easy, once the LayUp application is available as a payment channel, you just sign up, you choose -- and this is all instantaneous, you choose the periodicity over which you want to pay. And then at any period of time you want to make payments, it is recorded. You are prompted to know that your payments are due. And it creates great accountability both for the merchant and also the customer. So we're very pleased about our investment in LayUp and look forward to great things from the team. So our growth strategy is we're going to grow the market. We're going to continue to take market share, which we think we have been doing. We're supporting our existing clients. We are working with our clients across Africa. We want to continue to innovate and develop new solutions. We are very focused on the enterprise -- with our Halo solutions, we are going to target other geographies, and we will continue to do that. We think we have a great platform for that, and we'll -- and have high expectations of ourselves. The Synthesis business moving over to software, also very experienced, been in business for 24 years, has done great things from a revenue perspective, 4x over 5 years, the growth in international activity. We're currently active in over 10 countries. And we have some very good adjectives to describe them as well. I see that we are running a little bit late, I've been talking a lot, so I will move through these a little bit faster. We certainly understand the Software & Services segment. We've spoken about it in the past, I've put the CFO reference. But what's really important is we've spoken about leadership and thought leadership. We do lead with ideas. And here is a real-time example of the types of things that Synthesis has done over this period of time through lockdown to demonstrate its leadership. And you don't get this type of penetration and followership and patronage if what you're communicating is not well regarded. So the team has done a fantastic job in remaining front of mind and current and providing vital information to our customers and others. We have spoken about the different units within Synthesis in the past. I put these here for reference just to ground us again as we think about the different case studies because we try and choose one from various areas to be able to try and make the product and service offering more tangible. And so we will now go into some of those areas. In cloud we have continued to demonstrate our leadership. We have developed 2 new competencies over the course of the year. We have a Microsoft Workloads competency now. And we have also secured a security competency, which puts us, again, in a leadership position as it relates to implementing critical AWS workload infrastructure and innovation for clients in a sector where those skills are in high demand. An example around big data in real time, here is an example of using fast data to manage and respond to fraud. I'm sure all of you have been in a circumstance where your credit card is used to make a purchase that was not authorized by you. And the transaction ultimately doesn't get borne by you, so you don't carry the cost, but somebody does, whether it is the retailer or the credit card company. So understanding and being able to prevent fraud real-time is critically important. And so we have deployed a capability for a big bank in South Africa to help detect fraud real time. Previously, their systems relied on batch processing, which was done maybe once twice a day, and the fraud was only detected after the fact. With real-time cloud analytics, you can do this as it happens and you can prevent it at the moment. And so truly an important real value saving exercise. An example of international expansion. We have a client in Hong Kong. Their objectives were a little bit more modest. They were looking to optimize costs and to create some redundancy in infrastructure and ensure a more seamless interaction with the employees, we were able to help them with their deployment in their facilities in Hong Kong with an expansion into other geographies over time. A good example of some of our international capability. And we competed with many global customers -- competitors for this work. We have also spoken about our investment in IP. I want to, before we turn over to finance, just speak about one of those. We have a product that we have developed over time. We've never really mentioned, it's called Keystone. Keystone is a key component in how many banks distribute your PIN number or allow you to change your PIN number in a way that is secure as opposed to having you come into a branch or printing it on a piece of paper or ensuring it's delivered by secured courier, which still gives rights to the risk of fraud. And this has now gained real traction across a number of different institutions in South Africa. It has applications beyond only PIN and is a product that was developed by our payments and crypto team within Synthesis. In this instance, crypto is not bitcoin, this instance, crypto is cryptography. And you can see some of the customers that have adopted this product, and we are -- we have great expectations for its continued growth and penetration even beyond South Africa. So with that, I will turn you over to Alan, and thank you for giving me your time.

Good afternoon, ladies and gentlemen. Once again, thank you for your continued interest in Capital Appreciation. We are satisfied in such challenging times to be able to present what we believe is a good performance in the current challenging environment. The financial and especially operational performances of our businesses have been resilient and would have been materially better in a different normalized type of the economy. I'll now turn to the current results and the financial performance themselves. As Brad indicated earlier, when reviewing and analyzing the results, investors will refer to certain noteworthy events and accounting treatments that affect the comparability of this year's financial results to the prior year. To reiterate, customer capital investment in payment terminals has consistently, over the years, been unpredictable, uneven, periodic and time inconsistent and therefore does not follow financial years and cut off reporting periods. The scenario is further exacerbated when customers require bespoke terminals, which often extends the anticipated 3 months' lead time from suppliers. A sizable terminal order placed in the 2021 financial year was only delivered in quarter 1 of the 2022 financial year. And the revenue, profit and cash flow attributable to this transaction provides the payment division with an encouraging start to the 2022 financial year. Secondly, South African prime interest rate reduced by 300 basis points in the past 12 months, which had a significant ZAR 17.7 million negative impact on the interest earned on our cash balances. Thirdly, Capital Appreciation generated a small unrealized foreign exchange loss in the 2021 financial year, relative to an unrealized foreign exchange gain in the prior year with a combined negative ZAR 15.8 million pretax effect year-on-year. It is important to note that we are not currency speculators, and do not engage in any reckless risk related foreign exchange exposures. We conservatively apply a risk-free currency approach by taking out forward cover contracts for each large terminal order we've received from our customers. And our foreign exchange gains and losses arise from the unrealized mark-to-market movements of these foreign exchange fraud contracts at the end of each reporting period in terms of the IFRS codes. Fourthly, Dashpay has been in a startup and development phase since acquisition. Building, refining and upgrading its platform, systems and infrastructure. It is particularly pleasing to note that this business generated its maiden operating profit and became cash-generative in the current financial year, which resulted in the recognition of a deferred tax asset of ZAR 11.3 million, emanating from a pre-acquisition [indiscernible] loss of [ ZAR 40.5 ] million. Our share-based expense line increased due to the allocation of new long-term share awards during the year. Our conditional share plan incentive scheme was introduced towards the end of the prior year, which therefore resulted in a noncomparable expense year-on-year. Our share incentive scheme should provide the group with a competitive advantage in the technology-driven skills race. We sold the group's 17.45% interest in Resonance Australia in the prior year, and therefore, recognized a pretax capital profit of ZAR 8.7 million, which was not repeated in this current year. The economic slowdown during hard lockdown has given the group the opportunity to apply ourselves even more to innovation and give us the pipeline to expand our range of products and services, the benefits of which will accrue in future periods. New technology and products is part of our medium-term growth strategy, and several examples of that was apparent this year, of which Halo is probably the most prominent. We are extremely proud of the way our businesses have continued to service their customers with distinction, providing them with a reliable and uninterrupted service despite many COVID-19 related challenges. The challenges range from shortages of electronic components to delay deliveries to difficulties engaging with clients remotely. Despite this, they continue to innovate to build intellectual capital for future applications, to roll out Android platforms and to attract a range of additional customers. We salute the management teams at our subsidiaries for their commitment, resilience and achievement. I'll refer to Slide 47, which is a divisional performance, starting with payments. The payments division generated revenue of ZAR 397.4 million, down 21.5%, and EBITDA of ZAR 140 million, down 13.2%. The deferred tax benefit contributed towards profit after tax of ZAR 112.3 million, which was down 2.6 on the prior year. The single biggest contributor to division's performance was a reduction in the number of terminals sold, which was attributable to reduced demand for payment terminals, especially in the restaurant, hospitality and retail sectors during these periods of hard lockdown. Yet despite the lower sales, our payments business continued to grow market share in a low-growth market. Pleasingly, new terminal orders resume towards year-end as evident in the late order mentioned earlier and our strong pipeline. Payments demonstrated excellent expense management with a cost base declining on a comparable basis, mainly due to lower activity based costs. The business continues to be a strong, sustainable cash generator. I'll now refer you to revenue composition payments, the payments business has diversified revenue streams. Sale of terminals contribute the bulk of income with a steadily growing proportion of annuity income from maintenance and support fees. The payment division provides end-to-end terminal estate management services for its clients. This has enabled the company to build a growing long-term annuity revenue streamas a sizable and growing terminal base is being deployed. It also offers attractive value-added services, which have achieved healthy growth in the current year. Legacy terminal rental income has started in 2014 and 2015 declined as budgeted, as African [ residence ] rental contracts are reaching maturity are being replaced by terminal sales. Terminal maintenance and support fees showed a very pleasing 20% growth, in line with the increase in the deployed estate. Transaction-related income increased by our most pleasing 29% due to the growth in the Dashpay product offering and added value solutions uptake, as well as an 82% growth in the Dashpay stand-alone value-added services rental terminal estate. We remain very positive about the outlook for the payment division. Our accelerating order book and growing annuity income bodes well for the future performance. And the new venture into Android technology is showing excellent results and future promise. I'll now refer you to the financial performance of Software Services division. Synthesis continued to make progress in expanding both their client base and revenue streams. The business developed a solid set of financial results, increasing revenue by 13.9% to ZAR 21.1 million, and EBITDA by 3.3% to ZAR 55.6 million. Profit margins were maintained due to solid cost control with operating expenses remaining flat. Synthesis has made a further investment in infrastructure and intellectual property, which will continue to support revenue growth and profitability in the future. The business was particularly strong cash generator of this year, with cash conversion of more than 100%. Brad has already given you an overview of the operational progress that Synthesis made over the past year and the strong demand that the company is experiencing for its current and exciting new services. We believe the opportunities for this business is exceptional, and the planned investment in growth will continue. I now refer to the sources of revenue in the software division. Synthesis services and consultancy fees grew by 7.1%, in line with the growth in demand for cloud services and digital since this has also achieved a strong contribution from new areas, such as managed services, intelligent [ data ] payments and cryptography, albeit off a low base. Annuity income from license and subscription fees increased by an impressive 47.2% due to the rollout of Halo and Keystone products, both very exciting products that we expect to see in a substantial growth from -- in the coming years, as well as significant growth in the [ Finserv ] area with Synthesis' RegTech product. While we had the substantial step-up in license and subscription fees, we expect that this will continue going forward. There was also a focus on third-party subscriptions and reseller product, most of which is dollar denominated. The group is making pleasing progress in diversing the revenue base geographically for both divisions. They are gaining good traction in 10 countries and markets outside of South Africa, with revenue in other geographic regions growing by 93% to ZAR 41 million in the reporting year. This foreign revenue drives in its infancy and represents a modest proportion of our total revenue. But it has increased from 3% to 7% of total revenue in 2021. I'll now refer you to the statement of comprehensive income. In looking at the statement of comprehensive income, there are a couple of items to note. Revenue declined by 11.7% to ZAR 619.5 million, mainly due to lower terminal sales as discussed earlier and the opportunity cost on project delays. We are optimistic that we'll be able to show a much improved picture in the next financial year. Operating costs reduced by 12.7% to ZAR 125 million due to focus on cost savings as well as lower activity based costs. Net finance income reduced by 45.7% despite higher cash balances due to the 3% reduction in the South African prime overdraft and repo rates. Profit before tax on the 2020 comparative year included the [ one-off ] pre-tax capital gain on the sale of Resonance Australia of ZAR 8.7 million. This was part of the share repurchase and [ small related ] transaction we concluded in September 2019. Headline earnings decreased by 11.1% in rand terms to ZAR 126.4 million. As a result of the specific share repurchase and [ small related ] transaction 2020, the 245 million shares that were repurchased and canceled, reduced our total shares in issue by ZAR 15.8% to 1.310 billion shares. The weighted average number of shares in issues for the period reduced to 1.223 billion compared to 1.333 billion in the prior period. Headline earnings per share decreased by 3.1% to ZAR 0.1034 per share compared to ZAR 0.1067 per share in 2020. Capital Appreciation repurchased 1.2 million shares this year at a cost of ZAR 1.239 million. As of 31st of March 2021, Capprec had a total of 79.99 million treasury shares at an average cost of ZAR 0.70 per share. The company will continue to opportunistically repurchase shares in the market going forward. I now refer you to the statement of financial position. Capprec maintains an uncomplicated, easy to understand balance sheet with no contingent liabilities, no post-retirement obligations and no post year-end events. Brad has already mentioned our investment in LayUp technologies, which we believe has an interesting opportunity set. The key elements to highlight are that the company still has ZAR 538 million in cash and continually growing. In terms of its capital allocation of the group, remain 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 Capital Appreciation's capital and strategic capability can be successfully leveraged. Capprec's cash is invested with South Africa's top banks and interest risks are managed conservatively. And with a view to maximize yield through an appropriate interest rate cover particularly in a declining interest rate environment. The underlying business has generated robust operating cash flows necessary to take advantage of organic growth opportunities available in each of our business units. As a group participating in a high-growth sector of the economy, we continue to invest judiciously with the full understanding that for some of the costs incurred, we will only see the financial and earnings benefits in future timing periods. 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. Net asset value per share increased marginally from ZAR 1.09 per share to ZAR 1.12 per share, mainly due to higher cash balances. Cash available comprised 41% of our share price at the 31st of March. I'll now refer you to cash flow. The key feature slides on cash flow, reflecting the March 2021 and 2020 annual periods highlight the main cash flow items. Cash and cash equivalents at March 31, 2021 were ZAR 538 million compared to ZAR 505.1 million at the same time last year. The group's subsidiaries, our asset-light businesses remain strongly cash generative, generating ZAR 201 million in the 12-month period ending on the 31st of March 2021. I'll now refer you to cash for dividends. We continue to generate meaningful profits and cash flows in a challenging economic environment, and that is off to paying full tax and sustainable dividends to shareholders. We paid our maiden dividend in November 2018, after we evolved from being a special purpose's acquisition company or a SPAC into a fintech investment holding company. In the past 4 years, we have generated operating cash flows of ZAR 786 million and paid out ZAR 275 million in dividends where these dividends generally covered 2.9x by cash flow from operations. The group has increased its dividend [indiscernible] for the fourth consecutive year in a row. Our outlook is, to a large extent, dependent on the South African economy. We are well positioned as it opens up due to the vaccine rollout. If not, we will still be resilient. We are well entrenched with our existing customers, overseas principles and suppliers and have several exciting products to capitalize on in growing markets. The group has continued to implement vigorously the processes and procedures for building business continuity in a COVID-19 world, which will allow the group to maximize its performances and results after the world returns to normality. The group is not exposed to credit risk, no debt and no contingent issues or liabilities. We are in a very fortunate and strong position to benefit from the exciting opportunities in the growing markets we serve. Thank you. I hand you back to Brad. Thank you.

Thank you, Alan. So I am going to deal with prospects quickly. And then I see we've got a number of questions. I'm not sure we're going to have time to get to all of them, but we will answer at least some of them. So from our view, we think the prospects across the group continue to be very good. We have our obvious organic growth strategies that we have been funding and fueling. And I think the results are a testament to the wise investment around those, and we will continue to do so. And those occur, both in payments and in services. And we will continue to look for the right acquisition opportunities, should they present themselves. This past year, our team has done an enormous amount of diligence in quite a number of potential transactions. And you can imagine that given the unpredictability of the economic environment and the impact of COVID on some of these underlying businesses, we had differences in view as to the risk we were prepared to take in the circumstances under which we were prepared to invest. But it was not for a lack of trying or for diligently looking at opportunities that we think make sense, which we will continue to do. If we think about the group overall -- excuse me, as Alan has indicated, we have a very strong balance sheet. We have a great leadership position in an industry with good tailwinds and strong secular trends, which we are going to take advantage of. Our teams have a culture of innovation, which is a differentiating factor, particularly in emerging technologies. We, more importantly, also have a record of delivery, you can innovate. But if the actual product you deliver doesn't work or you don't do what you say, you are not going to be successful. So our track record of delivery is critically important and that leads us to being a trusted partner, as our institutional clients have talked about new initiatives. They have come to us as we have gone to them. And our fortunate financial position gives us the capacity and the luxury to be able to pursue those opportunities with diligence. And so from our perspective, we think we have a great foundation upon which to grow going forward. I do need to say a huge thank you to a number of people, most importantly, our team across the board in all our divisions for your untiring dedication and commitment. I know many of you have been affected by COVID, you have family who have been affected by COVID. Unfortunately some deaths within the greater family. But throughout this, you have been tremendous team participants and for that we are forever grateful, our clients are forever grateful, and we are pleased to have you on board. Our clients, obviously, if we're not -- if they don't like what we're doing, we're not going to be in business. So for your continued support and trust that you place in us, thank you. Our shareholders for your continued investment and support of us over this period of time, and hopefully, going forward. And then lastly, we want to thank the investment analyst society who afforded us an award for excellence in financial reporting and communications in the technology sector. We appreciate the acknowledgment. Alan and our finance team worked tirelessly towards the end of the year and half year to pull that all together and so your recognition means a lot. So thank you to all of you and to my colleagues and our Board members as well. So with that, I will turn to the questions, and I see a number of them have come in. Unfortunately, we all have hard stop. So let me deal with some of them. If we don't get to them, please feel free to reach out to us. We are happy to chat going forward.

So there are a number of questions about GovChat. I will just raise GovChat briefly. As you know, we sued -- we took WhatsApp to the Competition Tribunal in December of last year, and we won our first round with them. They were prevented from terminating our continued participation on the WhatsApp platform. The issue is now before the Competition Commission, and we are going to respect that process and allow it to unfold. We do, however, believe that WhatsApp and Facebook's conduct was unfair and prejudicial. It is consistent with the allegations made against them by 45 attorneys general across the United States and the Department of Justice, after months of investigation in the United States. And they have various schemes of buy or bury or provide access to it first and then withdraw access, second. And we think that's exemplary of that conduct as it relates to GovChat. The Synthesis team has done a great job in helping GovChat manage its way through this. The most important thing is GovChat's relationships with government, and we are very comforted by the ongoing relationships that GovChat has with them, and they have recognized the impact that GovChat has made on their activities, whether it's related to SRD grants or related to help desk or related to Early Childhood Development grants. And so I'm going to leave it there without going into any more detail as to GovChat. And we hope that they will continue to be able to demonstrate success over coming periods. We are committed as an organization to continue to help them through this process. Alan, there is a question as to what percentage of our revenue we would classify as annuity revenue. Would you just answer that?

Thanks, Brad, yes. Our revenue -- annuity revenue has grown very healthily over the past year and now represents 61% of our total revenue.

Great. There is also a question about how our terminals fit in the landscape between bank terminals, merchant banks and a question of Yoco. So I think it's really important to understand that a large number of the bank's terminals that are out there when you think of banks terminals are actually our terminals supplied to banks and managed on behalf of those banks. So our 217,000 terminals we talk about are terminals that we have supplied to financial institutions that we manage in the marketplace. We then also have a business that provides certain terminals to certain selected merchants, which we manage directly ourselves. And we have not historically competed with the merchants that Yoco targets, which are a much lower LSM sector. And Yoco, I think, is probably going to look to go upmarket. And we are continuing to go down market with 2 things: one is we have some very cost-effective, high form factor devices; and the second with our Halo initiative, which removes the need for hardware at all, target on the lower LSM market. So I hope that clarifies the positioning as it relates to that question. There is a question here about our treasury shares. And are we going to cancel them. We are not going to cancel our treasury shares. We did cancel a large buyback that we did 18 months ago, but the remaining treasury shares, we're going to retain in treasury and either use those in acquisitions that we make or to settle obligations under our share incentive plans that we have in place, which require the issuance of shares. And so we will always show you what the treasury shares number is, and you can do the calculation as to the net number of shares outstanding quite easily. So the last question that I'm going to deal with here is what is our plan for the cash [ pile ] that we have. And as we have indicated, there have been a number of acquisitions that we have looked at, a number of investment opportunities that we have looked at, items and transactions that we are currently engaged in reviewing in the payment sector and in the software sector. We are going to continue to look at those opportunities. And hopefully, we will be able to execute one in the not-too-distant future. We were close on some of them recently, but it never happened. So if it doesn't happen, it doesn't hit your scorecard. In addition, we will continue to look opportunistically at share buybacks and conduct ourselves on that basis. So with that, I am going to bring the Q&A to an end. I'd like to thank everybody for participating, and wish you all a very good day. If you have any questions or want to have follow-ups, you know where to reach out to us, and we would be glad to do that. Thank you, Alan and Motty, for your words. And good bye to everybody and wish you a good day.