Karooooo is targeting a good fourth quarter financial performance even though that’s traditionally its toughest trading period because of the December holidays in South Africa, and the Chinese New Year which impacts business across Asia.
This is according to CEO and founder Zak Calisto, who was interviewed yesterday at the release of robust financial results for the third quarter to November 30.
He said the results were underpinned by an entrepreneurial, innovative, agile and customer-centric culture, with a prudent capital allocation strategy focused on growth.
Total revenue increased 16% to R1.08 billion. Adjusted earnings before interest, tax, depreciation and amortisation increased 28% to R427.83 million. Despite provisions for Carzuka’s reduced operations, earnings a share grew 35% to R6.34 for the third quarter.
Carzuka negatively impacted earnings a share by R0.75 and it was not expected to have a significant impact on our earnings a share going forward, he said.
“The results extend our track record of robust growth at scale, profitability and cash generation over more than a decade,” he said in the telephone interview.
Singapore head-quartered Karooooo owns 100% of the international Cartrack, 100% of South Africa-based used car company, Carzuka, and 70.1% of Karooooo Logistics.
Carzuka reported a R28 million operating loss compared with a R15m operating loss in the third quarter a year before, due to provisions, after a decision was made to cease buying second hand vehicles.
Calisto said this followed much interaction with motor dealerships and original equipment manufacturers, in conjunction with Carzuka’s expansion, as some motor dealerships felt that Carzuka’s interests conflicted with their business interests.
“We maintain the Carzuka business model has robust potential, but we do not want to risk long-standing relationships that Cartrack has forged with motor dealerships,” he said.
Cartrack gets about 10% of its new subscriptions in South Africa through these dealerships.
Calisto said there were many components in Carzuka’s platform that would continue to provide substantial value to Cartrack’s fleet platform and most Carzuka staff had been integrated into Cartrack.
“Carzuka will continue to add value to our remaining operations by managing the life cycle of Cartrack’s fleet, and we will continue to provide the platform to the dealerships as a software offering,” he said.
Karooooo Logistics - trading as Picup in South Africa - generated record revenue of R224m versus R123m in 2023, growth of 82%.
After the group paid a dividend of $26.3m (R500m) in July 2023 and allocated R184m to the new South African central office in Rosebank for the trailing 12 months, Karooooo reported net cash of R782m at November 30. There were also bank facilities for growth initiatives and other general corporate purposes of R925m.
He said they were confident of continuing to grow market share, based on their track record of customer retention and an ability to increase the value proposition.
A profitable business model, compelling competitive differentiators and a strong financial position gave the group multiple levers for growth, he said.
There were significant opportunities to drive growth including through the benefits that customers derived from the cloud platform, such as control and continuous improvement of operations, industry competitiveness, ESG reporting and compliance.
A unified, enterprise-grade platform collects and contextualizes more than 170 billion data points a month through system integrations, workforce tools and advanced telemetry, and video-based Internet of Things (IoT) devices.
This turns complex analytics into business intelligence, empowering customers with insights and providing practical and easy-to-use tools that simplify day-to-day decision-making.
“We have a 95% commercial customer retention across businesses of varying sizes in diverse geographical markets and industries that include logistics, field-service-maintenance, transport, finance, mining, agriculture, and emergency services,” he said.
Karooooo’s subscription revenue grew 17% to R904m in the third quarter. Similarly, Cartracks’s subscription revenue grew 17% to R900m.