Capital Appreciation started life as a special purpose vehicle — cash raised to build an amorphous fund — which explains its rather nondescript name.
It has evolved into a leading fintech business. It has three divisions. The largest is payments — with revenues of R689m, 55.3% of payments revenue is in the form of steady annuity income. It increased by 9.2% to R381m last year.
The second pillar of the business is the software division with revenue of R549m, which was down 7.6%. In particular, services and consultancy fees were down 13.8% to R373.9m, but at least licence and subscription fees were up 58.6% to R118.5m. Nonetheless, divisional earnings before interest, tax, depreciation and amortisation (ebitda) fell by almost a third to R61.3m.
The third pillar is the nascent international unit. There is huge runway internationally, not least because of the group’s rand-based cost structure.
International revenue sales fell 38% last year to R84.6m after a multiyear contract with the port of Singapore ended, but there was an increase in sales to Europe.
At the recent results presentation for the year to March 2025, CEO Brad Sacks argued that the group has a solid foundation from which to grow further, organically and by acquisition. There are strong secular growth trends and a large market opportunity, both domestic and international.
He says fintech describes innovative and transformative technologies which disrupt traditional banking and financial services.
“These changes are evident in the payment sector, affecting relationships between financial institutions and their consumer clients, financial institutions and their corporate retailer clients, retailers and their consumer customers, and among consumers themselves.”
He points out that there are also increasing requirements for financial institutions to enhance regulatory compliance while simultaneously reducing their costs of delivery.
Traditional financial and banking institutions are rapidly embracing the idea of fintech, recognising that it presents an opportunity to improve efficiency, reduce cost, enhance customer experience and drive revenue, he says.
“Their businesses are vulnerable as the digital economy changes customer behaviour.”
Capital Appreciation has built relationships with several blue-chip clients, including most of the major banks.
We aim to assist new and existing customers to grow their businesses and set them up for success
— Brad Sacks
Its largest software business, Synthesis, has achieved premier-tier status with Amazon Web Services, one of the dominant global cloud computer businesses. It also won an important award from another of the major cloud operators, Google Cloud’s Gen AI Hackathon.
And the group is highly cash generative with substantial annuity income, says Sacks. It has a debt-free balance sheet; in fact, it has a large cash arsenal of R402m to pursue growth.
Group cash from operations in financial 2025 was R207.9m. The ebitda margin increased by 340 basis points to 26.7%. Sacks says that even in a stagnant economy, group revenue was up 7.6% to R1.3bn. Its estate (fleet) of hand-held payment terminals has increased by a substantial 18.8%.
There is ample scope for more sales and rentals of devices as 2G and 3G are phased out in South Africa in favour of 4G, 5G and even more advanced platforms. Sacks expects card payment values in South Africa to increase from just below R3-trillion annually now to almost R4-trillion in 2029.
Card payments are still well ahead of other major African markets at 118 uses per year, compared with 51 in Nigeria and 24 in Egypt. “We will follow our clients as they expand in the rest of Africa,” says Sacks. Capital Appreciation also has medium-term ambitions to expand into Europe, Asia and the Americas.
The software division has had a tougher time, and revenue contracted as there was lower service income. The main operating businesses are Synthesis, Responsive, Rethink and Dariel.
The division has decided that it needs to sharpen up its sales effort, through judicious hiring. But it has also had to reduce headcount, letting 34 staff go. It now has a team of 461.
“We aim to assist new and existing customers to grow their businesses and set them up for success,” says Sacks.
The group plans to grow licence and other kinds of recurring revenue from its proprietary software and its services. It is also investing in AI and emerging tech to meet customer demand and become a leader in generative AI.
Dividends per share increased by 20% to 12c. It was a mere 4c a share in 2018. Sacks says that over eight years, operating cash flow has been R1.7bn and the total dividend payout R765.9m, or 56.5c per share.
A name change has been proposed at the upcoming AGM, which has not been disclosed yet. Capital Appreciation is an illiquid share but worth looking at. It has a unique place on the JSE as a focused fintech business. It is a supplier to the financial services industry but is not subject to the credit risk that makes banks and other lenders poor-quality investments in the eyes of many investors.
It also has a moat through its bench of software specialists and its long-established relationships with the banks and other blue-chip clients.
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