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Cartrack continues to deliver strong growth and profitability

16 November 2015Zak Calisto, Cartrack
Zak Calisto, Global CEO of Cartrack.

Zak Calisto, Global CEO of Cartrack.

International expansion maintains a sharp pace.

Highlights for the 6 months ended 31 August 2015

• Revenue up 18% to R469.7 million
• Annuity (subscription) revenue up 18%, representing 84% of total revenue
• Subscriber base up 20% to 463 000 active contracts
• Non-South African operations generate 24% of revenue, 24% of profit before tax
• EBITDA margin maintained at 45%
• HEPS up 16% to 37.2 cents per share
• Strong cash flow generation with net cash from operating activities of R115.3 million
• Interim dividend per share up 25% to 20 cents per share
• Stolen Vehicle Recovery rate of 93% maintained

Leading fleet management, stolen vehicle recovery and insurance telematics group, Cartrack Holdings Limited, announced today that headline earnings increased by 16% to R 111.7 million. The company declared an interim dividend of 20 cents per share, representing a 25% increase over the prior year. EBITDA for the period of R210.3 million was 17% ahead of the prior year.

“We are pleased with the robust performance across all our regions,” says Zak Calisto, Global CEO of Cartrack. “Our considered pace of international expansion is supporting our margins despite weak economic conditions locally, while the strong subscriber growth is testament to our continuous emphasis on the Cartrack brand, effective distribution model and quality customer service.”

The Group increased revenue by 18% to R469.7 million and raised profit before tax by 14% to R164.6 million in the six months ended 31 August 2015. All regions contributed to this growth, apart from the new country start-ups in Asia and the Middle East that where initiated in the latter part of last year and which generally may take up to three years to become fully profitable. The global active subscriber base grew by 20% or some 76 000 contracts year-on-year.

Growth in subscription revenue, as well as generally higher contract pricing increased the profit contributions from operations outside South Africa and helped sustain the gross profit margin at 82%, despite downward price pressures in some regions. The profit before tax contribution from these non-South African operations increased to 24%, from 14% in the prior period.
Advance purchasing of components and procurement cost management have thus far managed to prevent the recent weakening of the Rand having a significant impact on product costs and the Group has strategies in place to minimise the impact going forward. EBITDA margins were maintained at 45%.

The South African segment, which continues to account for 76% of total revenue, performed well. Revenue grew by 18% to R356.2 million on the back of an equivalent increase in subscriber base. Particularly good sales growth has been generated in fleet management products. The market increasingly recognises the benefits, for both risk management and commercial operational efficiencies, from the numerous real-time monitoring features provided. Consequently, the rate of market adoption across a range of telematics products is intensifying.

The Group said that stolen vehicle recovery remains a very important component of its services and is being supported by worsening vehicle theft statistics as released by the South African Police Services in September 2015. Despite the increasing vehicle theft and hijack incidence rate being experienced, Cartrack has maintained its 93% recovery rate.

Revenue in the rest of Africa increased by 18% to R62.6 million, or 13% of Group revenue. This segment has increased its contribution to Group operating profit from 11% to 17%, through continuous improved performance and the benefits of increased scale. Some significant orders have recently been received in Nigeria which will start to contribute to profit improvement in the second half year. Additionally, sales forces in Kenya and Tanzania are being strengthened to drive sales to achieve the full potential that management perceives exists in these territories.

Revenue in Europe grew by 6% to R39.1 million, or 8% of Group revenue. However, on the back of increased efficiencies, operating profits increased by 105%, lifting this segment’s contribution to Group operating profit from 5% to 8%.

Revenue from Asia and the Middle East increased by 138%, albeit off a low base, with the active subscriber base more than doubling to 6 295 contracts. Operating losses for the segment increased from R1.6 million to R5.5 million, attributable to infrastructure development costs in the start-up phase at operations established in the latter part of last year in the Philippines, Malaysia, UAE, Thailand, Hong Kong and Indonesia.

The Group continued to generate strong positive cash flows and effective working capital control has resulted in trade receivables remaining well below a collection period of 30 days despite the difficult economic conditions faced globally.

Outlook

Cartrack anticipates further solid growth potential in all the regions it serves during the remainder of this year and beyond. This view is supported by global research reports that continue to predict significant telematics and related services growth.

Calisto said: “We expect a considerably higher rate of profit growth and cash flow despite the negative foreign exchange impact from imported product components and the operating losses still to be incurred in Asian and Middle Eastern countries given our recent expansion. Our business model, which is based on high contract subscription revenue, typically yields increased revenue and profitability in the second half of a year and we anticipate further good sales growth and economies of scale to contribute to this profitability.”

Cartrack also announced that it is planning to launch a start-up operation in the USA as part of its global expansion plan. The USA represents a potentially significant market for Cartrack’s fleet management offering.

 

 

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