Araxi delivers resilient financial performance in software and payments

Araxi Limited (previously Capital Appreciation) attracted new clients, secured long term contracts, diversified revenue sources and increased market share in the six months to September 30.The JSE-listed company delivered a resilient performance amid ongoing low business confidence and sluggish economic growth.CEO Bradley Sacks said a "very healthy underlying performance" was masked by prior-period restatements, that increased prior-year headline earnings per share (HEPS) by 29%.

Current year profitability, with HEPS at 7.82 cents, nevertheless kept pace, and exceeded this growth, he said in an interview. The interim dividend was held steady at 4.5 cents a share.

This strong performance was evidenced by normalised EPS, which removes the largest once-off restatement, as well as one-time restructuring costs in Software, and indicates underlying EPS and HEPS increased by 59% and 58%, respectively. Asked about the second half outlook, Sacks said they were "very happy about the way the business is operating at present."

The Payments division delivered strong financial and operational results, benefiting from healthy terminal sales, substantial growth in terminal license fees and related services and expense management.

While terminal sales is becoming a hotly contested market in South Africa, the group was also benefiting from providing the software for the terminal hardware to other companies, said Sacks.

The division grew revenue by 23% to R387.2 million, while strong operating leverage supported earnings before interest tax depreciation and amortisation (EBITDA) growth of 33% to R184.3m.

Annuity income in the Payments division grew by 22%. Point of sale terminals in the hands of customers increased by 15% to 446 000.There is growing interest among Bank clients in serving merchants in lower-tier markets. Payments introduced an Android device designed specifically for this segment, which has been well-received.

In the Software Division, customers showed low commitment to new projects, but the underlying operating performance remained resilient, supported by cost discipline and operational streamlining.

Revenue and EBITDA were impacted by the full recognition of a substantial multi-year software license fee in the prior year and restructuring costs in the current year. Revenue fell by 20% to R256.7m and EBITDA by 83% to R6.9m.

The sales pipeline and contracted sales strengthened markedly towards the end of the half-year, signaling a potential return to growth in the second half.

Software achieved over R190m in contracted sales, including multi-year agreements that will contribute annuity revenue. The restructuring is anticipated to yield annualised cost saving of R35m to R40m, but would begin showing in the second half, said Sacks.

The financial result comparisons of the software division were impacted by large multi-year fee in prior year of R32m pre-tax - a change in auditor saw a change in the recognition of the fee - and R10m restructuring costs. Underlying EBITDA, excluding these items, rose to R16.9m from R7.6m as remedial plans began to take hold.

"Economic activity and demand for digital transformation continues to accelerate. Araxi remains cautiously optimistic the positive momentum observed in recent months will persist for the remainder of the financial year and beyond," said Sacks.

Both payment and software divisions were well positioned to take advantage of improved conditions, "and we are encouraged by the pipelines that have developed recently."

Araxi maintains a robust, debt-free balance sheet, with more than R300m in cash available to support organic growth, pursue acquisition opportunities, make investments and conduct additional share repurchases. "Watch this space," said Sacks in response to a questions whether there were any acquisitions in the pipeline.

Sacks said Halo Dot was showing good potential and was making good traction in terms of early stage sales in many other countries. Halo Dot is a Apple-Approved Gateway Service Provider (GSP). A GSP enables Payment Service Providers such as acquiring banks and other merchant acquirers to launch Tap to Pay on iPhone solutions securely, with reduced time to market and with less onerous compliance requirement.

The company changed its name from Capital Appreciation on 3 September 2025. Araxi is inspired by the ancient Greek word for "river", representing continuous forward motion — adapting, carving new paths, and moving with purpose.

BUSINESS REPORT