JOHANNESBURG – Cartrack CEO, Zak Calisto says he has been approached by various states in the USA – holding out tax breaks and other incentives – that are keen to welcome a Cartrack start-up into their jurisdiction.
Having initially thought to establish its head office in Orlando, Florida, Cartrack has as a result not finalised where it will be headquartered. “Once we’ve appointed a CEO we will be in a position to make that decision very quickly,” Calisto said. “We’ve shortlisted a few candidates but we’re not entirely happy, so we have a few more interviews,” he said, noting the CEO would definitely be local, as is Cartrack’s practice in all the countries where it operates.
Seeing potential for its fleet management business in the US, Cartrack plans to launch a business there in the first quarter of next year. “We’ll be very prudent in the way we approach America. It’s an expensive market to go into and we want to go in with the right staff and management,” Calisto stressed.
For the six months to August 31, Cartrack grew its subscriber base by 20% to 463 000 active contracts. In South Africa, subscriber numbers climbed 18%, with strong growth in stolen vehicle recovery.
“You’ll probably find that about 20% of South African vehicles have got a recovery product. This could go to 50% in the medium term,” Calisto said, noting that ours is one of the highest penetrated markets in the world and Cartrack continues to see growth in demand.
With around 480 000 subscribers to date, Calisto believes Cartrack will comfortably meet its target to have more than 500 000 subscribers by the end of this financial year.
On the stolen vehicle recovery side, Cartrack maintained its 93% recovery rate for the period, which excludes vehicles it recovers that have already been dismantled.
It paid subscribers R3.4 million over the six-month period as a result of its recovery warranty, which guarantees a R150 000 pay out when a subscriber’s vehicle is not recovered and there has been no fraud involved. For the 12 months to February 2015, Cartrack spent only R2 million on its recovery warranty. The spike is largely due to a 456% growth in the number of subscribers taking this warranty cover out, Calisto said.
The other major pillar of Cartrack’s business, fleet management, saw a 34% growth in subscriber numbers off the back of demand from corporates and SMEs.
Calisto said the business will drive sales of Cartrack Task – optimisation software that increases the productivity of fleets and enhances workforce management.
Focus on existing business
In the year ahead, Cartrack will focus on its existing markets, Calisto continued, including its businesses across Asia, the Middle East, Europe and Africa.
Its rest of Africa business grew revenue 18% to R62.6 million, contributing 13% to overall group revenue.
In a results statement, Cartrack said it had received significant orders in Nigeria and was strengthening sales forces in Kenya and Tanzania.
It continues to make losses in Asia and the Middle East, which widened to R5.5 million from R1.6 million in the prior period, “attributable to expenditure on infrastructure development costs in the start-up phase of operations established in the latter part of last year”, Cartrack said.
Higher procurement costs as a result of the weaker rand will have an estimated 1.5% impact on margins at current levels, Calisto said. He said the decline of the rand was a “massive concern going forward”, less so because of its impact on the cost of sales (it could have an additional 2.5% to 3% effect on margins) and more because of its impact on the South African consumer and companies.
For the interim period, Cartrack grew profit before tax by 14% to R164.6 million. Revenue climbed 18% to R470 million, with its South Africa business accounting for 76% of that.
An interim cash dividend of 20 cents was declared, a 25% increase on the prior period.
Cartrack’s shares were more than 6% stronger on Monday, closing at R12.25.