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CARTRACK HOLDINGS LIMITED - Abridged Pre-listing statement

Release Date: 21/11/2014 15:15
Code(s): CTRE     PDF:  
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Abridged Pre-listing statement

Cartrack Holdings Limited
(Incorporated in the Republic South Africa)
(Registration number 2005/036316/06)
JSE share code: CTK
ISIN: ZAE000198305
(“Cartrack” or the “Company”)

The pre-listing statement of Cartrack dated 21 November 2014 (“Pre-listing Statement”) is not an invitation to the public to
subscribe for ordinary shares in the issued share capital of Cartrack (“Shares”).

The Pre-listing Statement is issued in compliance with the Listings Requirements of the JSE Limited (“Listings Requirements”) for
the purpose of providing information regarding the listing of Cartrack on the Main Board of the securities exchange of the JSE
Limited (“Listing”) and the private placement to eligible investors (“Eligible Investors”) by way of an offer for subscription (“Private
Placement” or “Offer”) for between 60,000,000 (representing 20% of Cartrack's issued share capital once issued) and 141,000,000
(representing 47% of Cartrack's issued share capital once issued) Shares (“Offer Shares”).

The proceeds received by Cartrack pursuant to the Private Placement will be applied for the full and final settlement of the
aggregate repurchase price owing by Cartrack to Onecell Holdings Proprietary Limited (“Onecell”) (being a company controlled by
the Company’s founder) pursuant to the buyback agreement entered into between Cartrack and Onecell on 24 October 2014 in
order to facilitate the Listing. Accordingly, no proceeds will remain with the Company.

For a single addressee acting as principal, applications can only be made at an aggregate acquisition cost of not less than
R1,000,000 (one million Rand).

This abridged Pre-listing Statement contains the salient features of the Company, the Listing and the Private Placement and as such
is not comprehensive. For a full appreciation of the Company, the Listing and the Private Placement, the Pre-listing Statement
should be read in its entirety.


1. INTRODUCTION

    The JSE has, subject to the shareholder spread obligations in terms of the Listings Requirements being obtained, granted
    Cartrack a listing of up to 300,000,000 Shares in the “Support Services” sector of the Main Board of the JSE under the
    abbreviated name “Cartrack” under share code: CTK and ISIN: ZAE000198305, with effect from the commencement of trading
    on Thursday, 11 December 2014.

    The financial year-end of the Company is 28 February each calendar year.


2. VISION AND MISSION

    Cartrack’s vision is to achieve global industry leadership in the telematics industry including fleet management (“FM”), stolen
    vehicle recovery (“SVR”) and insurance telematics (collectively, “Telematics”).

    Cartrack’s mission is to provide its clients and partners with real-time actionable business intelligence based on advanced
    technology, first rate information systems, leading service and reliability.


3. NATURE OF BUSINESS, OPERATING GEOGRAPHIES AND PROSPECTS

    3.1   Introduction

          Since being founded in South Africa in 2001, Cartrack has evolved into a leading provider of FM, SVR and insurance
          telematics. The business incorporates global asset tracking, monitoring and recovery services together with the provision
          of FM information systems from a platform of innovative Telematics technologies.

          Whilst its principal operations are situated in South Africa, Cartrack has embarked on an expansion drive into the rest of
          Africa, Europe and Asia.

          Initially, Cartrack focused on SVR services, which led to the Cartrack system being developed and implemented for the
          Sub-Saharan African market where vehicle theft was, and remains, amongst the highest in the world.

          In 2007, with the rapid development and convergence of telecommunication services, Cartrack expanded the scope of its
          offering to include full Telematics services, in particular FM. Data management information, such as fuel consumption and
          driver behavior, amongst others, is designed to maximise operational efficiencies to improve fuel economy, reduce labour
          costs, extend fleet vehicle life cycles and optimise customer service.

          As at 31 August 2014, Cartrack employed 1,197 permanent staff members globally.

3.2   Key investment highlights

      3.2.1       Proven track record of profitability and strong financial metrics

                  Cartrack has a proven track record since inception and in particular over the past 7 year period. The track
                  record is demonstrated by Cartrack having achieved an average compound annual growth rate for the 2012 to
                  2014 financial year reporting period in revenue and net profit after tax of 19% and 21%, respectively. Revenue
                  is generated through product sales and subscription fees from over 386,000 units worldwide of which
                  approximately 305,000 are currently in South Africa (as at 31 August 2014).

                  Cartrack achieves amongst the leading gross profit, earnings before interest, tax, depreciation and amortization
                  (“EBITDA”) and profit before tax (“PBT”) margins relative to its South African listed peers, being 81.4%, 33.7%
                  and 32.2%, respectively.

      3.2.2       Commitment by founding shareholder and depth and experience of management

                  Cartrack has a well-established and experienced senior management team led by the Company’s founder
                  (being Isaias J. Calisto, Company Global Chief Executive Officer). To augment the ongoing commitment to the
                  Company, Cartrack’s founder, through Onecell, has entered into a lock-up agreement to retain a controlling
                  interest in Cartrack post the Listing for a period of 2 years.

      3.2.3       History of strong cash flow generation and cash conversion with low financial leverage and strong
                  dividends

                  Cartrack’s EBITDA margins and PBT margins, coupled with low capital expenditure requirements, has ensured
                  high levels of cash conversion which has consistently been approximately 90% over the last 2 year period. The
                  strong cash flow generation and conversion, provides the Company with the requisite platform to fund
                  expansion, as well as the ability and flexibility to return cash to shareholders in the form of dividends.

                  In line with Cartrack’s strong levels of cash conversion, Cartrack intends to maintain a dividend payout ratio in
                  excess of 70% post the Listing.

      3.2.4       Platform for growth

                  Cartrack has a combination of well established businesses, both locally and internationally, and a growing
                  footprint in selected African, Asian and European countries. The Company is well-positioned to take advantage
                  of the vastly underdeveloped Telematics market in these territories, given Cartrack’s successful track record in
                  organic expansion.

      3.2.5       Favourable industry dynamics

                  Demand for Telematics services are driven by the size of the global vehicle fleets (including both commercial
                  and passenger vehicles). With the size of the global vehicle fleet currently estimated at 1.1 billion vehicles and
                  forecasted to grow to 2.3 billion vehicles by the year 2035, Cartrack is favorably positioned in a burgeoning
                  industry.

                  In addition, current global commercial telematics subscriptions are expected to treble by 2019 relative to current
                  levels.

3.3   Key strengths

      Cartrack believes that the following strengths contribute to its success and distinguish it from its competitors:

      -       Scalable approach

              Cartrack has positioned itself to cater for the mainstream Telematics market and does not intend to position itself in
              low volume niche markets. This approach has allowed Cartrack to achieve economies of scale across its business
              with a focus on growing its footprint without compromising on service delivery, reliability and margin generation.

      -       Audited 94% stolen vehicle recovery success rate and warranty

              In South Africa, Cartrack boasts an audited SVR success rate of 94%. Demonstrating its confidence in, and
              dedication to the functioning of its technology platform, Cartrack currently provides a warranty to SVR customers of
              up to R150,000.

      -       Low fixed infrastructure cost and maximum reach

              Cartrack maximises its geographical reach within each territory by utilising mobile certified installation teams,
              thereby creating a large footprint for Cartrack’s expansive branch network. Infrastructure requirements are
                minimised by utilising cloud-based computing services which are managed centrally by a team of technology
                specialists.

           -    Focus and investment in technology

                Cartrack’s research and development is a key element to its success and is a differentiator that allows the Company
                to successfully expand globally. Cartrack’s research and development activities are performed in-house which
                underpins the ability to rapidly adapt to market requirements while mitigating against any royalty or licensing
                constraints.

           -    International footprint and expansion

                Cartrack has an international business footprint with operations in Africa, Asia and Europe. This geographic
                diversification and expansion affords Cartrack with the ability to benefit from growth and income diversification.
                Cartrack currently has a presence in 18 countries and has further international growth plans with the Asian market
                as a prominent focus for the Company.

4. GROWTH STRATEGY AND PROSPECTS

  -       International Growth

          Globally, the awareness of the benefits of Telematics coupled with decreasing data and Telematics charges has facilitated
          increased usage of Telematics services. Cartrack plans to follow this global trend.

  -       Technological advancement

          The advancement of Telematics technology in terms of functionality, miniaturisation and power management allows
          Cartrack to introduce innovative new technologies and increase market penetration of existing Telematics services. In
          addition, cost reductions and increases in product features both drive and meet increased customer demand.

  -       Industry and organic growth

          The rapid convergence of mobile technology, and the benefits of real-time communication, provide numerous new market
          opportunities and expedite cost reductions which promote the adoption of Telematics offerings.

5. SIGNIFICANT FEATURES

  Significant features of Cartrack include:

  -       forecasted annual turnover of R848 million and profit before tax of R285 million for the year ending 28 February 2015
          (FY2015);
  -       audited annual turnover of R637 million and profit before tax of R240 million for the year ended 28 February 2014
          (FY2014);
  -       net profit margins of 26.4% for FY2014 and 24.0% forecasted for FY2015;
  -       74% of Cartrack’s turnover is recurring annuity revenue with a client base of 386,581 units (31 August 2014), with 429,529
          units forecasted for FY2015;
  -       24% of Cartrack’s turnover is earned in foreign currencies;
  -       ownership of an advanced technology platform and substantial research and development capabilities;
  -       all intellectual property relating to its mainstream products and services have been developed in-house with no associated
          royalties payable;
  -       presence in 18 countries with extensive global expansion plans; and
  -       audited recovery success rate of 94% for clients’ vehicles stolen in South Africa.

6. SALIENT FINANCIAL INFORMATION AND SUBSCRIBER BASE

  Cartrack’s revenue, EBITDA and net profit after tax for the years ended 28 February 2012, 2013, 2014 and forecasted for the
  year ending 28 February 2015 are set out below:

                                   Financial year      Financial year      Financial year           Reviewed
                                                                                                                           CAGR
                                      to February         to February         to February            Forecast
                                              2012               2013                2014                2015        2012 – 2014
                                               R’m                R’m                 R’m                 R’m                   %
      Revenue                                 448.4             495.8               637.0               847.7                 19.2
      EBITDA                                  169.3             193.5               247.8               323.2                 21.0
      Net profit after tax                    114.7             137.7               168.0               203.7                 21.0

  Cartrack’s historic and forecast subscription unit growth is illustrated below:


                                                                        Historic                                         Forecast

                                   Feb 2011          Feb 2012          Feb 2013        Feb 2014       Aug 2014           Feb 2015

    Total                           209,680          246,348            295,104         348,231           386,581         429,539
    SVR                             143,442          150,532            167,332         182,657           190,687         202,813
    FM                              66,238              95,816          127,772         165,574           195,894         226,716

7. DIRECTORS

  The names, ages, position and business addresses of the directors of Cartrack are set out in the table below:


    Full name (age)                 Position                     Nationality            Business address            Date Appointed
    Isaias Calisto (“Zak”) (48)     Global Chief                 South African          Cartrack Corner             1 July 2008
                                    Executive Officer                                   11 Keyes Road
                                                                                        Rosebank
                                                                                        Johannesburg
                                                                                        2196
    John Edmeston (60)              Global Chief Financial       South African          Cartrack Corner             2 July 2014
                                    Officer and Deputy                                  11 Keyes Road
                                    Global Chief                                        Rosebank
                                    Executive Officer                                   Johannesburg
                                                                                        2196
    David Brown (59)                Independent                  South African          Cartrack Corner             13 October 2014
                                    Chairman                                            11 Keyes Road
                                                                                        Rosebank
                                                                                        Johannesburg
                                                                                        2196
    Thebe Ikalafeng (48)            Independent non-             South African          Cartrack Corner             13 October 2014
                                    executive Director                                  11 Keyes Road
                                                                                        Rosebank
                                                                                        Johannesburg
                                                                                        2196
    Kim White (38)                  Independent non-             South African          Cartrack Corner             13 October 2014
                                    executive Director                                  11 Keyes Road
                                                                                        Rosebank
                                                                                        Johannesburg
                                                                                        2196

8. DETAILS OF THE PRIVATE PLACEMENT

  The Offer comprises an offer by the Company for the Private Placement by way of a subscription for the Offer Shares as
  follows:

    Offer price range per Share                                         R10.00 to R15.00
    Number of Shares to be offered                                      60,000,000 to 141,000,000

  The Offer is conditional on the minimum subscription that must be realised by the Company in order to enable it to ensure that
  the Company has, once the Offer is completed, such number and composition of shareholders as will enable it to meet the
  minimum free-float and shareholder spread requirements as prescribed by the Listings Requirements and acceptable to the JSE
  being realised and the Listing of all of the Shares on the JSE, failing which the Offer and any acceptance thereof shall not take
  effect and no person shall have any claim whatsoever against Cartrack, Investec Bank Limited or any other person as a result of
  the failure of any such condition.

9. IMPORTANT DATES AND TIMES

       Key action                                                                                                      Date

       Opening date of the Offer (09h00)                                                                        Monday, 24 November 2014

       Closing date of the Offer (12h00)                                                                        Friday, 5 December 2014

       Successful applicants advised of allocations by (12h00)                                                  Monday, 8 December 2014

       Offer Price and results of the Offer announced on SENS                                                   Monday, 8 December 2014
       Last date for Successful Applicants to make payment for their
                                                                                                                Wednesday, 10 December 2014
       allocated Shares (12h00)
       Shares listed on the JSE (09h00)                                                                         Thursday, 11 December 2014

       Accounts at CSDPs and brokers credited with the shares on                                                Thursday, 11 December 2014
       All dates and times shown in this Abridged Pre-Listing Statement are South African dates and times.

10. COPIES OF THE PRE-LISTING STATEMENT

   The Pre-listing Statement is only available in English and copies may be attained during normal business hours from 08:30 to
   17:00 for 14 days from the date of issue of the Pre-Listing Statement from Cartrack and Investec as follows:

   -         Cartrack, Cartrack Corner, 11 Keyes Road, Rosebank 2196, Johannesburg, South Africa;
   -         Computershare Investor Services Proprietary Limited, Ground Floor, 70 Marshall Street, Johannesburg, 2001, South
             Africa; and
   -         The Corporate Finance division of Investec Bank Limited, 2nd Floor, 100 Grayston Drive, Sandown, Sandton, 2196,
             South Africa.

   The Pre-listing Statement may also be obtained on Cartrack’s website (www.cartrack.co.za)


   21 November 2014
   Johannesburg

   Investment Bank, Bookrunner and Sponsor
   Investec Bank Limited 

   Legal Advisor
   ENSAfrica

   Communication Advisor
   Aprio

   Reporting Accountants and Auditors
   Grant Thornton

   Transfer Secretaries
   Computershare



DISCLAIMER:

This Abridged Pre-listing Statement does not constitute an offer of securities in any jurisdiction. The securities contemplated in
the Private Placement have not been, and will not be, registered under the US Securities Act of 1933, as amended (the “US
Securities Act”) or under the securities legislation of any state or territory or jurisdiction of the United States or any other
jurisdiction and may not be offered, sold, transferred or delivered, directly or indirectly, in or into the United States except
pursuant to an exemption from, or in a transaction not subject to, the registration requirements of the US Securities Act and in
compliance with any applicable securities laws of any states or other jurisdiction of the United States. There will be no public
offering in the United States. Cartrack is not registered and will not be registered under the US Investment Company Act of
1940, as amended, and related rules. This document does not constitute or form part of any offer or invitation to sell, or any
solicitation of any offer to purchase nor shall it (or any part of it) or the fact of its distribution, form the basis of, or be relied on in
connection with, any contract therefore. Any proposed listing and distribution of this document and other information in
connection with a potential listing may be restricted by law in certain jurisdictions, and persons into whose possession any
document or other information referred to herein comes should inform themselves about and observe any such restriction. Any
failure to comply with these restrictions may constitute a violation of the securities laws of any such jurisdiction.


This Abridged Pre-listing Statement does not constitute an offer of securities to the public in the United Kingdom. This
communication is directed only at (i) persons who are outside the United Kingdom to whom this communication may lawfully be
made or distributed; or (ii) persons who have professional experience in matters relating to investments falling within Article
19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the “Order”); or (iii) high net worth
entities falling within Article 49(2) of the Order; or (iv) other persons to whom it may lawfully be communicated (all such persons
together being referred to as “relevant persons”). Any investment activity to which this communication relates will only be
available to, and will only be engaged with, relevant persons. Any person who is not a relevant person should not act or rely on
this document or any of its contents.

Any offer of securities to the public that may be deemed to be made pursuant to this communication in any EEA Member State
that has implemented Directive 2003/71/EC (together with any applicable implementing measures in any Member State, the
“Prospectus Directive”) is only addressed to qualified investors (as contemplated in Article 2(1)(e) of the Prospectus Directive)
in that Member State within the meaning of the Prospectus Directive.

This Abridged Pre-listing Statement, and the information contained herein, is not being made available in, and may not (in whole
or in part) be released, published, distributed or sent, into the United States, Canada, Australia or Japan or in any other
jurisdiction where it is unlawful to do so.

This Abridged Pre-listing Statement is not a prospectus and the Offer referred to herein will not be open to the public. This
Abridged Pre-listing Statement and the Offer does not constitute an offer to the public for the sale of, or subscription for, or the
solicitation of an offer to buy or subscribe for, shares as defined in the Companies Act No. 71 of 2008 (the “Act”) or otherwise,
and will not be distributed to any person in South Africa in any manner which could be construed as an offer to the public in
terms of the Act.

This Abridged Pre-listing Statement may include statements that are, or may be deemed to be,“forward-looking statements”.
These forward-looking statements may be identified by the use offorward-looking terminology, including the terms “believes”,
“estimates”, “plans”, “projects”, “anticipates”, “expects”, “intends”, “may”, “will” or “should” or, in each case, their negative or
other variations or comparable terminology, or by discussions of strategy, plans, objectives, goals, future events or
intentions. Forward-looking statements may and often do differ materially from actual results. Any forward-looking statements
reflect the Company’s current view with respect to future events and are subject to risks relating to future events and other risks,
uncertainties and assumptions relating to the Company’s business, results of operations, financial position, liquidity, prospects,
growth and strategies. Forward-looking statements speak only as of the date they are made.

The Company, any other member of the Cartrack group, Investec, any of their respective affiliates and associated companies,
any of their respective directors, officers, employees, legal and other advisers or agents expressly disclaims any obligation or
undertaking to update, review or revise any forward looking statement contained in this Abridged Pre-listing Statement whether
as a result of new information, future developments or otherwise. In particular, no representation or warranty is given as to the
achievement or reasonableness of, and no reliance should be placed on, any projections, targets, estimates or forecasts
contained in this announcement and nothing in this announcement is or should be relied on as a promise or representation as to
the future.

Neither the Company nor any other member of the Cartrack group, Investec, nor any of their respective affiliates and associated
companies, nor any of their respective directors, officers, employees, legal and other advisers or agents nor any other person
accepts any responsibility or liability whatsoever for/or makes any representation or warranty, express or implied, as to the truth,
accuracy or completeness of the information in this Abridged Pre-listing Statement (or whether any information has been
omitted from the Abridged Pre-listing Statement) or any other information relating to the Company, its subsidiaries or associated
companies, whether written, oral or in a visual or electronic form, and howsoever transmitted or made available or for any loss
howsoever arising from any use of the Abridged Pre-listing Statement or its contents or otherwise arising in connection
therewith.
Investec is acting exclusively for Cartrack and no-one else in connection with the Offer. They will not regard any other person as
their respective clients in relation to the Offer and will not be responsible to anyone other than Cartrack for providing the
protections afforded to their respective clients, nor for providing advice in relation to the Offer, the contents of this Abridged Pre-
listing statement or any transaction, arrangement or other matter referred to herein.

In connection with the Offer, Investec and any of their respective affiliates, acting as investors for their own accounts, may
subscribe for or purchase shares and in that capacity may retain, purchase, sell, offer to sell or otherwise deal for their own
accounts in such shares and other securities of Cartrack or related investments in connection with the Offer or otherwise.
Accordingly, references in the Pre-listing Statement to the shares being issued, offered, subscribed, acquired, placed or
otherwise dealt in should be read as including any issue or offer to, or subscription, acquisition, placing or dealing by Investec
and any of their respective affiliates acting as investors for their own accounts.

Date: 21/11/2014 03:15:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE'). 
The JSE does not, whether expressly, tacitly or implicitly, represent, warrant or in any way guarantee the truth, accuracy or completeness of
 the information published on SENS. The JSE, their officers, employees and agents accept no liability for (or in respect of) any direct, 
indirect, incidental or consequential loss or damage of any kind or nature, howsoever arising, from the use of SENS or the use of, or reliance on,
 information disseminated through SENS.

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