Jun

Cartrack reports solid year of growth

2016-06-02 11:01
Zak Calisto, global CEO of Cartrack Holdings Ltd, spells out a year of success for Cartrack.

If ever there was a time when the Zak Calisto, global CEO of Cartrack Holdings Ltd, would be justified in walking around singing opera, that time is now.

Why? Simply because Cartrack this week released a strong set of annual results which showed that the company recorded a 20% increase in revenue – reaching the milestone R1-billion mark – with operating profit improving by 19%, to R344.8-million.

Headline earnings increased by 27% to R241.9 million and the company declared a total dividend of 55 cents per share for FY16, representing a 20% increase from the prior year. EBITDA for the period of R463.1 million equates to an increase of 28% from 2015. EBITDA margins increased to 46% from 43% in 2015.

So why celebrate to the sounds of opera as opposed to the heavy beat of rock and roll? Simply because it goes with his name. La Calisto is the name of an opera composed by Francesco Cavalli which premiered to rousing applause on November 28, 1651 at the Teatro Sant ‘Apollinare in Venice. It just seems right that the same strains of music should accompany Cartrack’s milestone of reaching the R1-billion revenue mark. Yeah!

And just as that opera’s success continued into the future, so too does Calisto intend for Cartrack’s success to continue with the vision being to achieve global industry leadership in the Telematics industry.

“We’ve been working tirelessly to achieve this vision, not only through our increasingly extensive geographical expansion but also through further innovation of our proprietary technologies,” says Calisto.

International expansion

As part of its international expansion drive, Cartrack opened new operations in six countries in Asia and the Middle East at the end of 2015, using the established Singapore business as the central hub for the region. Revenue from international operations grew by 25% to R256.9 million, which represents 26% of global revenue. The global active subscriber base grew by 17% or some 72 000 units to 502 849.  “This,” says Calisto, “is in line with our expectations and now provides a good platform for significant global, scalable growth.”

Contract subscription revenue grew by 20% and continues to represent 84% of the company’s total revenue. Interesting is that the Fleet Management subscriber base grew by 60 580 units, now representing 56% (2015: 51%) of the Cartrack active contract base.

Despite the sharp decline in the South African Rand, the net effect of currency fluctuations on Cartrack’s global business over the past year has impacted positively on the consolidated profit before tax by an estimated R13 million.

“The South African segment still accounts for 74% of total revenue,” says Calisto. “Despite the economic slowdown evidenced by declining new vehicle sales and lower consumer confidence; this region achieved record annual unit sales and increased the subscriber base by 16% to 391 000 units, showing that our most recent investment in brand development and distribution channels is yielding results. We have achieved an audited vehicle recovery rate of 94% while experiencing a substantial increase in vehicle theft in southern Africa.”

Africa records higher debtor fault

Africa is being affected by the declining global demand and subdued commodity prices and was also impacted by the unexpected high and rapid depreciation of local currencies and inflation. These economic conditions resulted in higher debtor defaults, specifically in respect of subscribers who contracted for services at the lower end of the price spectrum.

While trading conditions were challenging, the subscriber base in Africa nevertheless grew by 10% after considerable churn and revenue increased by 22%. Operating profit increased 29% to R56.5 million. “This year, Africa tested our ability to do business in extreme environments,” says Calisto.

In Europe, Cartrack recorded a healthy growth of 23% in the subscriber base. Price pressures impacted substantially on revenue growth. However, management believes that prices have stabilised. Stringent cost management and the strengthening of the Euro against the Rand contributed to a higher operating profit margin. The net effect was an increase of 53% in operating profit.

The 2016 financial year was the first full year of operation for six of the Asian entities, with only Singapore being fully operative. This segment grew its subscriber base in line with expectations and lifted revenue 134% to R27.6 million. The well-established Singapore operation increased its profitability this year on the back of solid subscriber growth.

As expected, the other newly established entities recorded losses, as the overhead expenditure on the infrastructure build of each operation was increased to support the planned sales growth, culminating in operating losses of R12 million in 2016.

Despite the global economic and foreign exchange uncertainties, Cartrack expects to continue to see solid growth in keeping with its track record. The company is still actively pursuing opportunities and foresees excellent potential for growth in the USA. Suitable acquisitions will be considered on merit.

“The vehicle Telematics industry is experiencing tremendous growth and we are becoming intimate technology partners of our clients,” Calisto explains. “We are planning for Cartrack to continue to deliver growth and performance consistent with our track record.”

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