SIMON BROWN: I’m chatting to Zak Calisto, CEO of Karooooo. We chatted a few weeks ago when they relisted back onto the JSE. The company yesterday had their full year and fourth-quarter results out for end-February. Revenue up 18%, subscriptions up 17%.
Zak, good morning. I appreciate the early morning time. The results very much showed a full year. It’s got that lockdown of last year. And of course, you’re operating beyond just South Africa. You’re in Europe, you’re in Asia. How much are your operations back to normal in terms of the ability to serve customers and sign up new customers?
ZAK CALISTO: Pre-Covid we were growing at around 22% year on year. Clearly, during Covid, we only grew by 16%. If we take our last two quarters, the last half-year of FY 21, we … already … annualised that growth growing at 23%, which is actually faster than pre-Covid. But, having said that, we certainly employed a tremendous amount more people; we’re scaling our business for future growth and we are certainly not operating normally. We still have a tremendous amount of restrictions to operate in all our geographies, and perhaps the geography that you’ve got the least restrictions at this point in time is probably in South Africa.
SIMON BROWN: You’re in Asia, operating out of Singapore, where your head office is. You’re in Europe. I was on your webcast yesterday, and you’re saying there are still challenges there.
Part of that growth – I think a lot of folks, myself included, would think of Cartrack as tracking a stolen vehicle. It’s actually a lot more than that. You’ve got, when I say, gigabytes of data, probably literally generating tons of data. Is that part of the growth trajectory, which is we’ve got this data, how can we help our customers use it?
ZAK CALISTO: Our part in terms of vehicle recovery is still an important part of our business. But today it’s not the pillar of our business. I think that stopped being the pillar of our business approximately 10 years ago. Today it’s all about the data and what we do with the data and how we add value to our customers using that data. That’s certainly the future. And we invest a lot into our data science department. We’ve increased EL R&D teams by, I think, at this point in time, just to give you an idea, in the last financial year the R&D spend was about 3% of total revenue. It’s already now at 5% and we will continue to increase our R&D capabilities.
Given our ability to take all the data that we’ve collected over the years, plus all the functionality that we brought onto our platform, this will drive value for all our customers.
SIMON BROWN: And then in a sense suggest that, as you say, the private customer, myself, who has a tracker in my car, remains important. How much of your customer base these days is commercial, to whom I’m imagining this big data is way more valuable than a private client driving around, say, Rosebank?
ZAK CALISTO: Well, at this point in time about 65% of our customers are enterprise customers, about 35% are consumers and sole proprietors. We are adding quite a lot of functionality onto the platform, where we already are driving value far beyond just recovering a consumer’s vehicle. We’ve got facilities to detect whether the customer has been an accident, and then they can send an ambulance, for instance. We’ve got data to be able to make sure that the customers get the best insurance service. We’re now bringing cars …, we can make sure that all our customers get the best value for their vehicles because we’ve got the total history of the vehicle – how it’s been driven, where it’s been driven.
That’s going to be of huge value to our customers to make sure that when they do sell their vehicles they get the most value for their vehicles because sometimes vehicles can be unfairly priced because typically one isn’t able to prove where you’ve been driving the vehicle – have you had your vehicle in Durban, or have you had it in Johannesburg. There’s a huge difference in terms of the wear and tear of the metal, because of the corrosion from the weather, for instance.
So all these factors will allow our customers to get there when they do sell their vehicles. And also over time, we will bring value to our customers, for them to be able to buy new cars or used vehicles for the best prices. So we are definitely using all the data and developing our platform, investing a lot in technology. And we certainly believe that the platform that we are building is for the future. So we are allocating a lot of capital to R&D.
SIMON BROWN: A quick last question – lots of talk around global chip shortages, I imagine. How much is that impacting you? How much have you been impacted by supply-chain issues that are still prevalent on the planet?
ZAK CALISTO: We’re not an island. Clearly, all these things impact us. But we are quite fortunate because we ordered components well in advance, and we believe we have sufficient inventory to carry us through this financial year. In 12 months or in 18 months’ time things will normalise. But what we have seen over the years is the lead times for components is getting longer and longer, and this is not just a Covid thing. I think it’s been happening for 15 years. It just keeps on getting longer. And I think obviously Covid has just made matters worse.
SIMON BROWN: We can see that in your inventory holdings you’ve got the stock sitting there.
Zak Calisto, CEO of Karooooo, I appreciate the early morning.
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