Dividend payment remains on track at Cartrack
Despite the growth rate having plummeted, the company still had a strong balance sheet
Listed vehicle-tracking company Cartrack is unlikely to see growth in subscriber numbers for the next half year.
SA’s seven-week lockdown aimed at curbing the spread of the coronavirus has halted economic activities, including car sales. The company has managed to add more than 14,000 subscribers since February. Subscriber growth declined 35% in March and April, compared to the same period in 2019.
But CEO Zak Calisto said the company is unlikely to see any growth in the coming quarter, at least, because of lockdowns around the world.
“We plan for no growth in subscription revenue compared to Q4 (quarter four) of the prior year. We also plan for weaker new-subscriber additions for the first half of the year,” he said.
However, if lockdowns are lifted according to plans in SA and other countries where Cartrack operates, then the company is likely to start growing again in the second half of the year, Calisto said. Any delays on that front will extend the timeline.
Though in SA new- and used-car dealers were due to open their doors as from Wednesday, with manufacturers such as BMW SA resuming production this week, there may be fewer cars being bought as consumers and companies tighten their belts because of the uncertainties brought by Covid-19.
On Wednesday, Cartrack said the number of total subscribers increased 17% to 1,126,515, lifted by growth from Asia-Pacific and the Middle East, where subscriber numbers surged 30%. Rapid subscriber growth, especially outside SA, helped underpin a 26.4% increase in profit to R456m, while the group has more than doubled its full-year dividend for the year to end-February 2020.
When the year began, SA’s GDP had been forecast at just under 1% for 2020. Before Covid-19 took hold, Calisto said Cartrack saw most of its growth coming from Europe and Asia. These regions have turned out to be a good hedge against a depressed macroeconomic environment in SA, he said.
Non-SA revenue accounted for just 6% of the company’s inflows in 2014 when it first listed on the JSE, but it now accounts for more than a quarter of the pie, at 27% of total income. Of this, Asia has been the largest contributor, with a 28% rise from the 2019 financial year. However, Cartrack, worth almost R7bn, still receives the majority of its revenue from SA.
Chris Logan of Opportune Investments said this was another excellent set of results “demonstrating the quality of the founder-led team”. Covid-19 has caused a marked slowdown in new subscriber growth for the company, but he believes that once the pandemic ends “strong growth in SA, Europe and Asia should resume”.
Calisto is confident the company will weather the Covid-19 storm, saying Cartrack “has a clean balance sheet, generates strong cash flows and operates with industry-leading margins, giving us a level of operating safety”.
Cartrack, which will pay a final dividend of about R160m, says it is comfortable with its balance sheet after profits rose by more than 25%.
The company has more than 50,000 vehicles for banks and finance houses on its platform, as well as providing about 6,000 devices for vehicle manufacturer MAN Truck and Bus.
“Since listing in 2014, we have consistently delivered double-digit subscription revenue growth, which now makes up 97% of total revenue,” Calisto said. The group declared a final dividend of 54c a share, bringing the full-year dividend to 74c a share. This compares with a final dividend of 12c a share and a full-year dividend of 30c a share in its 2019 financial year.
Logan said Cartrack is exceptionally well-run, benefiting from scalable platforms, a low-cost and innovative culture, and is reaping the benefit of being ideally positioned in an increasingly digitally enabled future.
Shares in the company, which provides fleet-management and stolen-vehicle recovery services, rose as much as 9% on Wednesday to R24.49 on the news, before paring those gains to R23.24 at the end of trading, up 5.64%.
With Karl Gernetzky