Karooooo meets one year forecasts made at Nasdaq listing

KAROOOOO CEO and founder Zak Callisto says the firm has met all forecasts made at the Nasdaq listing in April 2021. | Supplied.

KAROOOOO CEO and founder Zak Callisto says the firm has met all forecasts made at the Nasdaq listing in April 2021. | Supplied.

Published Apr 29, 2022

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KAROOOOO, which provides on-ground data analytics and business intelligence reports for businesses, in its first year as a Nasdaq listed company, lifted revenue 20 percent, the result mainly of 16 percent subscription revenue growth.

The group, which owns 100 percent of Cartrack, 100 percent of Carzuka and 70.1 percent of Picup, said yesterday that the number of subscribers was up 17 percent to 1 525 972, bolstered by the revenue from Carzuka (R67m) and Picup (R42m). A 60 US cents dividend was declared.

“Our decade-plus track record of growth, sustained profitability and a highly cash-generative business model, coupled with consistent innovation and strong customer acquisition, continues. At the end of 2022 we had more than 88 000 commercial customers (75 000),” CEO and founder Zak Callisto said yesterday in a telephone interview.

He said they had met all forecasts made at the Nasdaq listing in April 2021.

Earnings per share fell 3 percent to R15.24 in 2022, impacted negatively by R0.52 per share attributable to a once-off exceptional item. Excluding this, earnings per share increased 1 percent to R15.76.

Cartrack delivered R715m operating profit, down slightly from R727m in 2021 – the figure was up one percent excluding the once-off exceptional item. Picup and Carzuka incurred operating losses of R3m and R13m respectively in 2022.

Callisto said Carzuka and Picup were start-ups and were actively being scaled up, and consequently he did not expect they would make profits for two to three years.

Cartrack’s adjusted earnings before interest, tax, depreciation and amortisation increased 9 percent to R1.23bn, in line with management’s guidance range for 2022.

The rand strengthened 9 percent on average against the basket of currencies in which Karooooo operates.

During the quarter Cartrack management uncovered collusion between a few insurance brokers and certain staff members, following a tip-off through the company’s whistle-blower policy.

This resulted in a once- off write-off of capitalised commission assets of R15m. The write-off was recognised as an exceptional item in the fourth quarter.

Callisto said the fraud, a first for the group, had resulted in a number of additional security measures being put in place, including a 7-member anti-fraud team.

On a constant currency basis, revenue grew 23 percent and subscription revenue by 19 percent. New customer additions contributed to the net increase of 219 972 in subscribers in 2022, 23 percent higher than higher than the increase of 179 485 subscribers in 2021.

Revenue growth was negatively impacted by a 24 percent increase in cost of sales as a result of economic headwinds and the higher-than-normal churn given the termination of customers that had not been able to economically survive the pandemic.

“With most of the write-offs now accounted for, in our view, gross profit margin expansion in the 2023 financial year is probable,” said Callisto.

Cartrack’s sales and marketing operating expenses increased 35 percent compared to 2021 with a significant recruitment drive focused mainly on sales and customer experience.

Picup and Carzuka incurred operating expenses of R14m and R21m respectively in 2022 as Karooooo was investing for the future in building Carzuka and Picup for scale.

Free cash flow of R379m was generated in 2022 compared to R460m in 2021.

Karooooo had net cash and cash equivalents of R718m at the end of 2022 (R76m), which Callisto said had already risen to about R900m after raising R349m when Karooooo listed on the Nasdaq in April 2021 and paying R70m to acquire Picup in September 2021.

There was also about R1 billion in bank facilities available, with potentially more available from Singapore banks.

“Plenty of runway exists to remain profitable should we accelerate our revenue growth rate in excess of our average historical growth rate,” said Callisto.

“Although the Covid-19 endemic remains unpredictable, we believe the lagging effects of Covid-19 will soon normalise, with minimal impact expected by the third quarter of the 2023 financial year,” he said.

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BUSINESS REPORT ONLINE

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