MiX Telematics reports profit fall
The group says subscribers grew 9.1% in its year to end-March, but it faced a hefty tax charge on an inter-company loan
Car tracking company MiX Telematics, which operates in about 120 countries, expects full-year revenue to decline by about a fifth because it was unable to sign up new customers due to the lockdown.
Car dealerships were prohibited from operating during the lockdown aimed at curbing the rapid spread of the coronavirus.
The company’s revenues are also expected to be hit by customers discontinuing their contracts as cars were not operational.
CEO Stefan Joselowitz said the company has cut costs and reconfigured its operations to operate as if revenues will be cut by up to 20%. “As a management team, we’re operating under the assumption that subscription revenue could potentially decline by as much as 10% to 20%,” he said.
Given full-year revenue of $145.6m (R2.5bn), this would translate to a reduction of as much as $29.2m.
On Thursday, MiX Telematics reported that full-year profits to end March fell by 28% amid volatility in the oil price that put pressure on clients in the US oil and gas industry. The group reported a R63.1m deferred tax charge on an inter-company loan with a wholly owned subsidiary, up from R47.7m in the prior year.
The group said it also faced pressure in its fourth quarter amid a slump in oil prices, with the company offering services such as real-time behaviour monitoring for the US oil and gas sector. Oil prices slumped in March amid an oil price dispute between Russia and Saudi Arabia, even as Covid-19 hit supply chains and travel.
MiX, whose clients include DHL, Total and Eskom, said subscription revenue rose 8.7% to R482.6m, while subscribers grew 9.1% during the year.
Joselowitz said the company’s bus and coach sector was also hard hit with restrictions on movement meaning less travel and commuting, which has negatively affected their public-transport clients.
MiX has reduced subscription amounts for these clients as a form of relief but Joselowitz is confident that this segment will be one of the first to “bounce back” as lockdowns are lifted. Measures to cut costs include reduced business travel, a freeze on hiring, and reducing staff in some parts of the business, said CFO John Granara.
Granara said the group ended the year with about $16m in net cash and a strong balance sheet, which would help it get through this time of difficulty.
It’s not all doom and gloom, said Joselowitz, adding that the company has seen “notable signs of strength” in certain segments during the crisis. For example, MiX’s clients in the logistics business have seen increased demand for transporting goods due to lockdowns.
“Although the near-term demand environment is uncertain, with our continued investments in our strategic initiatives we strongly believe MiX is well positioned to meet our long-term subscription revenue growth and profitability targets as global economic conditions begin returning to normal,” said Joselowitz.
MiX Telematics closed 3.51% stronger at R5.90.
Update: May 28 2020
This article has been updated with comment and financial information throughout.
With Karl Gernetzky