In among all the ‘drek’ news that has bombarded South Africa of late comes the good news that Cartrack, a leading global provider of fleet management, stolen vehicle recovery and insurance telematics services, has grown its subscriber base by a robust 19% to over 600 000 subscribers in the year-ending February 2017. The company declared a final gross cash dividend of 35 cents per ordinary share, bringing the total dividend for the year to 55 cents.
Global Chief Executive Officer, Zak Calisto, commented: “Our improved results were achieved despite a number of factors that have had a negative influence. In particular, external factors such as exchange rate volatility and the severe economic challenges within the Africa-Other segment have negatively impacted our consolidated revenue and profit.
“We also significantly increased our investment in distribution and operating capacity across all segments and the start-up costs for establishing our USA operation were incurred with minimal revenue generated to date, as formal trading has not commenced”.
The Group’s global subscriber base grew from 502 849 to 600 610, representing a 19% growth. Asia Pacific and Europe contributed strongly with 225% and 26% subscriber growth, respectively. The South African subscriber base grew by a healthy 17%. However, with the challenging economic environment encountered in the rest of Africa, the Africa-Other subscriber base decreased by 2%.
The Group achieved subscription revenue growth of 16%, taking annuity income up to 86% of total revenue (FY16: 84%). The current estimate of subscriber lifecycle in the Group is 64 months (FY16: 60 months). Total revenue grew by 13% to R1.1 billion (FY16: R1.0 billion).
Strong investment in distribution and operating capacity continued within Europe and more particularly, within Asia Pacific. This, together with the initial operating costs incurred in the USA, resulted in Group operating expenses increasing by 12%.
“We remain confident that our continued investment in technology development and customer-centric infrastructure across various regions will deliver meaningful revenue growth in the short-to-medium term with a commensurate increase in operating profit margins,” Calisto noted.
Cartrack’s telematics database continues to grow in volume and granularity. New revenue streams utilising this database are being researched. Together with expansion into other vertically aligned revenue streams, including value-added services, these additional opportunities will contribute to further revenue and profit growth in the short-to-medium term.
Notwithstanding the significant and continuing investment in distribution and operating capacity within the Group and the internally funded growth in rental sales, which will require further cash resources in FY18, Cartrack remains highly cash generative with a strong positive cash flow forecast for the foreseeable future. Over the last year, cash generation from operating activities, which remains a key business objective, rose 48% to R387 million.
Future Outlook
The telematics industry is experiencing robust global growth amidst a significant rise in innovation, which remains a focused imperative at Cartrack and vital to its continued success.
“Current and future customers require ever-increasing information about their assets and people to more effectively achieve their goals. Our ambition is to become a more integral part of their lives, and shift from a service provider relationship to becoming business partners. This requires a continued and significant investment in technology and intellectual property, and a further expansion of our distribution and operating capacity, all of which we are currently implementing or considering for the future,” said Calisto.
The global telematics industry is showing signs of further consolidation. Cartrack will remain vigilant to such industry developments. Opportunities that may arise to provide economies of scale as well as improved subscriber value will be considered on their merits.
The South African market remains under-penetrated. Opportunities to enter the lower LSM market and to expand the product offering in the fleet-, asset- and people-tracking markets will increase sales and revenues. The order book in Europe is strong while new sales are being actively pursued.
Asia Pacific is now gaining operational mass as a region, with a strong sales pipeline and many cross-border opportunities which are ready to be exploited. The Africa-Other operations will be closely monitored and managed in anticipation of a more favourable economic environment.
With all of this in mind, and notwithstanding global economic and foreign exchange volatility, Cartrack expects to continue double-digit subscriber and revenue growth in the foreseeable future.
