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SIMON BROWN: I’m chatting with Bradley Sacks. He’s CEO of Araxi. The year ending March saw revenue 6.8% down and Heps [headline earnings per share] down 18.2%, but dividend unchanged at 12 cents.
Brad, appreciate the time. You make the point that the year-on- year comparison may be not fair, negatively impacted by a delayed delivery of a fairly chunky terminal order. Of course, you had a fairly big contract that came in during the prior year. If we take those two out, how was your year operationally otherwise?
BRADLEY SACKS: Operationally, we’re very pleased with how the year went across metrics that are easily comparable. We had licence revenue up in our Terminal business, up 31%.
We exited the period with Ebitda [earnings before interest, tax, depreciation and amortisation] growth in our software business up 77%.
We had Terminal sales up by – sorry, the estate grew by 5%. We’re verging on 500 000 terminals in the not too distant future.
So we are very pleased with how the business is operating.
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As you noted, there are some accounting issues that make the comparison a little challenging. But once we normalise for those things, Heps were up 10%, which we think in this climate is pretty good, given the investments that we’re making.
And with the acquisition of Pay@ – the pro forma effect of Pay@ – which is the transaction we announced earlier in the year, our earnings would have been up 20%. So we think we are on a really good footing going into FY 2027.
SIMON BROWN: And Pay@ from May – about a billion rand for 80%. What does it give you? Is this tech you didn’t have or is it more leapfrogging you ahead with that acquisition?
BRADLEY SACKS: It gives us a lot of things that we didn’t have. The part that’s the most difficult to replicate is the network of points of presence and capabilities that exist. They are in hundreds of retailers.
They have 150 000 mobile points of presence, and they are embedded in the software apps of many of their clients – which include banks and fintechs and others.
That means that we’re in millions of downloads on people’s phones already.
What this really does is it drives for financial inclusion and allows you to meet the customer wherever they are, and allow them to pay in whatever tender type and instrument they would like. So it starts a whole new pillar of our business.
Although it’s payments related, it’s not duplicative with anything that we do, but we can certainly enhance what they’re doing with the portfolio of capabilities that we have within Araxi.
SIMON BROWN: How did you fund it? I ask because your dividend remains flat at 12 cents. I have to say, I thought you might take it out of the dividend, but apparently not.
BRADLEY SACKS: So it was your question – how did we find it?
SIMON BROWN: Fund it, fund it. How did you fund it?
BRADLEY SACKS: We funded it through R200 million of cash that we had. We had over R325 million. So we used R200 of our own resources and we borrowed R800 million from Investec.
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SIMON BROWN: And you’re still very, very cash generative. This is a very strong cash business. Cash from operations up 25%, almost R260 million.
BRADLEY SACKS: Exactly. And so on a pro forma basis, the Ebitda at Pay@ is R150 million. Most of that will convert into cash. We think that will be close to R400 million in cash generation on a pro forma basis.
SIMON BROWN: You mentioned at the top a delay in a substantial terminal order. You also mentioned the worldwide shortage of microchips, and that’s delaying timely delivery of terminals. This microchip – is this the demand from AI? Is this the Strait of Hormuz? What’s the problem with microchips?
BRADLEY SACKS: I think across the entire semiconductor industry all electronics use microchips. You’ve seen a diversion of capacity into higher GPUs [Graphics Processing Units] as opposed to CPUs [Central Processing Units] and I think the effect that we felt was somewhat momentary, because we haven’t encountered a similar effect or consequence in additional orders.
We have seen an increase in pricing on semiconductors, and that is being felt by everybody and is affecting people from handset manufacturers for phones, televisions, cars – it’s across all areas.
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SIMON BROWN: Yes. I look across my desk – just everything has microchips, except maybe my pen, but everything else has.
A last question. Your Halo Dot enabled Apple’s Tap to Pay iPhone launch in South Africa. Maybe I’m missing it, but I think that’s a fairly big deal.
BRADLEY SACKS: It is a big deal. So it’s not a fairly big deal, It’s a big deal. We are particularly proud of that. We think it’s tremendous. You have to be a gateway service provider to do that, licensed by Apple. There are only a handful that have deserved that qualification. It allows us to do these launches globally.
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We showed a slide today in a presentation of all the implementations that we have around the world. So we have things under way in Brazil, in Mexico, in the United States, in the Middle East, in Turkey, in Europe, in the UK, in Singapore, and in countries across Africa.
So we are really starting to see some traction in the Halo Dot offering, and we think it is a testament to the basis upon which the platform was developed.
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SIMON BROWN: Yes. We’ll leave it there. Bradley Sacks, CEO of Araxi, appreciate the time.
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