Capital Appreciation’s payments division showed strong growth in the year ended 31 March 2025, leading to overall growth for the group despite challenges in its software division.

According to JSE-listed Capital Appreciation’s annual results on Tuesday, terminal sales grew 41% year on year, with payments-related income up 19% compared to the previous year, driving group revenue up 7.6% year on year to R1.25-billion.

“Capital Appreciation’s largest division, payments, delivered a strong performance for the financial year, with prior-period investments in infrastructure, customer relationships and development resources paying dividends,” the company said in commentary alongside the results.

“The software division’s financial performance was hindered by bench overcapacity; however, remediation plans are starting to take effect, improving cost management, efficiency and financial performance.”

The payments division delivered 21% year-on-year revenue growth, from R567-million in 2024 to R689-million in the latest reporting period. Payments Ebitda – earnings before interest, tax, depreciation and amortisation – grew 25% year on year to R298-million. The group described the merchant acquisition space as increasingly competitive, with more and more non-bank players entering the market.

Banks have responded by focusing on cost optimisation, giving bespoke solutions providers like Capital Appreciation the opportunity to gain market share through payments software as a service, estate management and terminal repair services. “Against this background, bespoke solutions provide important differentiation and enhance market positioning,” said the group.

Counterbalanced

The good performance by the payments division was counterbalanced by regression in the group’s software business, where revenue dropped by almost 8% year on year to R549-million and software Ebitda declined 31% to R61-million.

Capital Appreciation attributed the poor performance of the software business to a tough trading environment, “buffeted by the cost and capital expenditure concerns of major clients and continued delays in new project starts”. Limited project flow meant the software division remained over-capacitated for most of the reporting period, placing downward pressure on profits.

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“The division’s initiatives to regain its growth trajectory and earnings momentum are ongoing, aimed at aligning costs more closely with revenue. These plans include enhancing sales activities, reducing headcount, realigning internal structures and enforcing strict cost controls,” it said.

Still, the performance of the larger payments business led to a 23% year-on-year increase in group Ebitda to R334-million. Stringent cost-control measures limited operating expense growth to just 4%.

“Capital Appreciation’s operating companies remain mostly asset-light, consistently producing substantial cash flow. The group maintains a robust and unencumbered balance sheet, with R402.3-million in cash available at the end of the financial year,” it said.

Headline earnings per share rose 25% to 17c and an annual dividend of 12c/share was declared. Capital Appreciation shares were trading sharply higher on Tuesday on the back of the financial results. They were last changing hands at R1.78, up 7.2% compared to Monday’s closing price. – © 2025 NewsCentral Media

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