Araxi (AXX) H1 2025 earnings summary

Executive summary

• Group revenue increased by 10.4% year-over-year to ZAR 611.5 million for the six months to September 30, 2024, driven by strong Payments division performance and resilient annuity income streams, despite a challenging economic environment and improved post-election demand.

• Payments division delivered robust growth with revenue up 18.5%, terminal sales up 26%, and rental income up 70%, while the Software division underperformed due to delayed project starts, international contract expiries, and underutilised resources.

• Group EBITDA declined by 3.1% to ZAR 113.8 million, with margin contracting to 18.6% due to Software division underperformance.

• Cash at hand was ZAR 419.7 million at November 30, 2024, supporting future growth and capital allocation.

• Dividend increased by 5.9% to ZAR 0.045 per share, marking eight consecutive years of increases and reflecting confidence in cash generation.

Financial highlights

• Payments revenue up 18.5%-19% year-over-year; terminal estate grew 13%, terminal sales up 26%, and rental income up 70%.

• Payments EBITDA margin remained robust at over 44%, with annuity income now 56% of payments revenue.

• Software division revenue grew 2.4%, with South African revenue up 9.7%-10% and international revenue down 18.6%-19% due to contract completions.

• Group gross margin contracted to 46.3% from 49.3% year-over-year; EBITDA margin at 18.6% versus 21.2%.

• Headline earnings decreased by 7.2% to ZAR 74.8 million; headline EPS and EPS both down 8.3% to 5.96 and 5.94 cents, respectively.

Outlook and guidance

• Strong H2 expected as unfulfilled terminal orders and new contracts in Payments division will be recognized, with regulatory-driven 4G/5G device upgrades and continued market expansion.

• Software division pipeline improving post-elections, with optimism for marked improvement in FY2026 and EBITDA recovery in H2'25.

• Both divisions have a growing project pipeline and management is cautiously optimistic for continued momentum despite macroeconomic challenges.

• Management remains focused on both organic and acquisitive growth, with acquisition activity dependent on strategic fit and valuations.

• Economic climate continues to impact clients, but positive sentiment and demand recovery are noted post-elections.