JSE-listed Karooooo group grows subscribers by 111% in the six months to August
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Karooooo, the Nasdaq and JSE listed group that owns 100 percent of Cartrack Holdings, grew net subscriber additions by 102 609, or 111 percent in the six months to August 31.
This was due to increased investment in sales and marketing, which takes about six months to translate into new customers.
Subscription revenue increased 16 percent to R1.23bn, and by 20 percent on a constant currency basis.
Operating profit fell 6 percent, to R346 million, because while much boosted sales and marketing investment had materialised in part, management expected to see the benefits via customer acquisition only by the end of the fourth quarter of 2022.
Founder and chief executive Zak Callisto said in a telephone interview they had increased marketing spend by 51 percent, and there had been a substantial increase in sales and marketing staff, who were not yet producing efficiently.
He said the increased investment was because last year this time, the group had reduced marketing, and “protecting what we got by tightening our seatbelts” due to the uncertain outlook created by the global Covid-19 pandemic environment.
“We are in a very different psyche now when it comes to growing the company,” he said. Research and development expenses, in the second quarter, as a percentage of subscription revenue, increased to 5.8 percent, compared to 5 percent in the second quarter of 2021.
“In our view all vehicles will be connected and data will drive all aspects of mobility in future,” the group said in the results.
Calisto said the new customer additions and growth in subscribers was despite the disruption in sales caused by the social unrest experienced last July 2021 in South Africa – which resulted in a number of branches closing for a short period – and the diminishing global effects of the pandemic.
He said that despite a decline in half-year earnings per share, the group was on target to meet its annual forecasts, which included lifting subscription revenue to between R2.5-R2.7 billion from R2.21bn in 2021, and increasing the number of subscribers to between 1.5-1.6 million from 1.31m in 2021.
Profit fell 12 percent to R231m in the half-year period. Excluding the impact of once-off initial public offering (IPO) costs expensed in the first quarter, adjusted profit fell 8 percent to R241m. This was due to investments for future growth and a higher effective tax rate of 31 percent, compared with 29 percent in 2021, mainly due to IPO costs that were not tax deductible.
Karooooo’s number of shares in issue increased to 28.1m from 20.3m, due to April Nasdaq listing, which also impacted headline earnings per share (HEPS). Earnings were also impacted by keeping cash in dollars, he said.
Headline earnings per share fell 13 percent to R7.35, and excluding the impact of once-off IPO costs expensed in the first quarter of 2022, adjusted headline earnings per share, a non-IFRS measure, decreased by 8 percent to R7.72.
IPO costs came to R85m, of which R36m was expensed (R26m in the fourth quarter of 2021 and R10m in the first quarter of 2022) and R49m was set off against share capital.
When asked if the expense of the listing was worth it, Calisto said while it would “be better to ask me this in five years time”, the Nasdaq listing for example allowed the group to tap into global capital markets, while the more relaxed immigration policies of Singapore, where Karooooo is registered, allowed the group to access talent from all over the world.