Karooooo boss Zak Calisto is upbeat about SA’s economic prospects now that the outcome for the recently held general election is known and a government, for the next five years, is in place.
This, coupled with an expectation that borrowing costs will start coming down by the end of 2024 is fuelling optimism for the local economy.
The Reserve Bank’s monetary policy committee (MPC) kept the repo rate steady at 8.25% on Thursday and warned that “the battle against inflation is not yet won”. Four members of the committee preferred an unchanged stance, while two members wanted a reduction of 25 basis points.
“Lower interest rates is positive for both consumers and business,” Calisto told Business Day as the group reported
first-quarter earnings to May 2024.
“Businesses will be able to get cheaper money so they can grow their [operations] and consumers will have more affordability,” he said.
In the May election, after nearly 30 years of dominance, the ANC lost its majority, ushering in a new era of coalition politics represented by a government of national unity (GNU).
“What’s positive for us in SA, it appears to me, is we’re going to have a better political environment because people might become more accountable for what they do.
“Lower interest rates will help our middle class, which under strain.”
Despite having moved its headquarters to Singapore, SA continues to be Karooooo’s largest market, accounting for 75% of its subscribers.
Calisto’s positivity is echoed by others, including the SA Chamber of Commerce and Industry (Sacci), which recently said “the broader agreement by a GNU on the need to address economic challenges collaboratively has filtered through to the trade environment”.
The chamber’s trade conditions surveys for both May and June “therefore reflected a more positive tendency”, it said.
Karooooo reported a strong performance for the quarter, growing earnings per share (EPS) 41% to R7.17 and operating profit 34% to R300m. The company, which owns 100% of Cartrack, said subscribers increased by 17% to 2.05-million, with net subscriber additions increasing 88% to 75,910 quarter on quarter.
Cartrack delivered a record operating profit of R287m, up 24% from R232m in the prior comparable period. The gross profit margin expanded to 73% from 70% previously, while operating profit margin is now at 29% from 27%.
Karooooo Logistics saw an operating profit of R13m from R5m a year ago, as the business continues to scale. The company focuses on delivery-as-a-service through third-party drivers and logistics companies.
Guidance for 2025 remains unchanged, with Cartrack subscribers expected to rise to 2.2-million to 2.4-million. Cartrack’s subscription revenue is expected to be R3.9bn-R4.15bn and Karooooo’s earnings per share R27.50-R31.
“We remain confident that our track record of success, specifically our ability to generate healthy cash flows, is sustainable,” the company said.
“The group’s robust results and investment in growth, enhancements made to our cloud platform and the prospect of improved economic conditions in SA, give us confidence that we can continue to extend our long-standing track record of profitable growth at scale and robust cash generation.”
Karooooo has traditionally competed locally with firms such as Mix Telematics and Altron’s Netstar and is considering extending its mobility business using data analytics and artificial intelligence.
The group was founded by Calisto in 2004 and is listed on the JSE and Nasdaq.
Its share price gained 3.9% to R640 on Friday, giving it a market cap of R19.8bn.
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