Cartrack owner Karooooo is looking to continue its rapid growth path by crossing 2-million customers for the first time in the current financial year.
The firm, which is working to become a one-stop logistics and fleet management platform, wants to add at least another 10% of new subscribers to its base, the company said in its 2023 results.
SA is regarded as one of the carjackings capitals of the world, forcing many people to take car tracking solutions. According to data from the SA Police Service, in 2019, carjackings averaged around 49 vehicles hijacked every day. By the end of 2022, that number had escalated to 63 vehicles stolen a day.
The group founded by Zak Calisto back in 2004 has been registering consecutive quarters of growth for a number of years, even as Covid-19 induced lockdowns slowed activity in places like South East Asia, where Karooooo forecasts much profit to come from in the future.
In the year to end-February, the number of Cartrack subscribers increased by 12.5% year on year to 1.72-million, boosting subscription revenue, which accounts for more than 85% of all sales, by 17.2% to R3.01bn.
“Quite frankly the road has been difficult. It’s taken quite a long time to get to 2-million subscribers. We’ll probably get there this financial year. If we don’t get there, we’ll be close to 2-million,” Calisto told Business Day on Tuesday.
In the guidance for the year ahead, the company said it wanted to have 1.9-million to 2.1-million Cartrack subscribers by the end of the year. With its headquarters in Singapore, the group, valued at R13.3bn on the JSE, is positioning itself as a leading global mobility software-as-a-service platform providing real-time data analytics to the transport and logistics sectors.
“We’re only really starting our journey. We’ve now signed important deals with BMW and Mercedes for Europe. There’s a lot happening in Europe that we will capitalise on,” Calisto said.
He is betting on a new deal with Germany’s two largest carmakers to boost growth in that region, as well as moving to reduce the company’s reliance on hardware sales.
Under the deal, expected to come into effect from August, cars from the two vehicle makers “will be able to transmit data into our platform. In other words, if you’ve got a Mercedes, we don’t even need to put in a telematics device. The data will stream from the OEM [manufacturer] device. We don’t have to install anything. We just become a pure software play,” he said.
But the growth rate of Cartrack was a bit lower in SA, with the local base growing 10.9% and subscription revenue growing at 15% as the local economy remained hamstrung by power cuts.
However, net subscriber additions (connected vehicles and equipment on our platform) in the first quarter of 2023 “are in line with our expectations, with demand coming from both small and large enterprises,” the company said.
There was a higher growth rate in other regions, helped by some countries in Asia lifting Covid-19 restrictions over the past year, particularly in Southeast Asia, Karooooo’s second-largest contributor to group revenue.
Even then, Calisto anticipates much more room for expansion.
“I don’t think we’ve really tapped into where we can really start to scale our business. So 2-million is not really an achievement. I think an achievement is once we get to about 10-million subscribers,” said.
In terms of financials, gross profit, revenue minus the cost of sales, grew 24.6% to R2.27bn, and operating profit, generated from a company’s core operations, 26.2% to R881.9m. Profit for the year advanced 27.7% to R608.8m.
In terms of cash flow, total cash and cash equivalents rose by more than one-third to R965.8m and free cash flow 44.3% to R547m.
Karooooo continues to scale and bolster Carzuka and Karooooo Logistics by investing in building the brands and infrastructure.
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