South African fintech company takes a hit 

Fintech company Capital Appreciation reported a dive in profit and earnings for the first half of its 2025 financial year as its software division came under pressure.

Capital Appreciation is a financial technology company that facilitates the provision of fintech platforms and delivers contemporary and innovative solutions to its clients.

The company released its interim results for the six months through September 2024 on Tuesday, which revealed a decline in performance.

Capital Appreciation reported a marked improvement in demand for its products and services after the elections, which resulted in a 10.4% increase in revenue.

However, its EBITDA decreased by 3.1%, while earnings per share declined by 8.3%. The company’s operating profit fell by nearly 14% to R90.7 million from R105.3 million the year prior.

Capital Appreciation has three subsidiary divisions – Payments, Software and International.

In the six-month period, the Payments division performed well, posting strong financial results for the first half of the financial year.

The division grew revenue by 18.5% to R314.3 million, with the main contributors being terminal rental income, which rose by 69.6%, and terminal sales, which increased by 26.4%. 

However, this strong performance was offset by struggles in the company’s Software division.

The company said this vision was challenged by the country’s economic and political environment.

“Customers continued to focus on cost-cutting and demonstrated a low commitment to new innovation projects, especially in the Financial Services sector,” the company said. 

“A significant three-year international contract executed from South Africa also came to an end and was not fully replaced in the period.”

The company explained that, consequently, the division’s skilled labour capacity was underutilised.

Therefore, the company made a strategic decision to retain highly skilled, specialist staff members in anticipation of improved trading conditions and to meet future demand. 

However, since payroll costs are the primary fixed-cost component of the software division, comprising over 80% of total costs, this investment decision placed enormous pressure on the division’s financial performance.

This is evident in the significant decline in the division’s gross profit and EBITDA, which resulted in an operating loss for the first time in the operating companies’ history.

While the division’s revenue increased by 2.4%, its EBITDA decreased by 81.0% to R7.6  million.

However, Capital Appreciation said things are looking up for this division post-election.

“Following the elections, Software observed a positive shift in business sentiment, leading us to believe that the market conditions of the past 12 months are transitory, with the worst likely behind us,” the company said. 

“Recently, the division has experienced improvements in its sales pipeline and activity levels.” 

“Although the conversion of leads into actual sales is gradual, the momentum is building and we expect this to result in future improved revenue performance.”

The company reported that, since period-end, it has seen monthly improvements in resource utilisation, which should lead to measured recovery in EBITDA and profitability in the second half of this financial year.

Capital Appreciation declared an interim dividend of 4.50 cents per share, up almost 6% from the previous year’s interim dividend.