Wrap Text
Unaudited interim results for the period ended 31 August 2016
Cartrack Holdings Limited
(Incorporated in the Republic of South Africa)
(Registration number 2005/036316/06)
Share code: CTK ISIN: ZAE000198305
("Cartarck" or "the Group")
UNAUDITED INTERIM RESULTS FOR THE PERIOD ENDED 31 AUGUST 2016
SALIENT FEATURES
- Subscriber base of 551 391 up 19%
- Revenue of R554 million up 18%
- Operating profit of R168 million up 3%
- Operating profit margin of 30%
- EBITDA of R236 million up 12%
- EBITDA margin of 43%
- Profit after tax of R119 million up 1%
- EPS of 39 cents up 6%
- HEPS of 38 cents up 3%
- Cash generated from operating activities of R212 million
- Dividend per share of 20 cents (H1 2016: 20 cents)
COMMENTARY
Group profile
Cartrack is a leading global provider of fleet management ('Fleet'), stolen vehicle recovery ('SVR') and
insurance telematics services, with a focus on technology development to enhance customer experience.
Cartrack already has an extensive footprint in Africa, Europe, Asia and the Middle East. More recently, it
commenced operations in the United States of America ('USA') and New Zealand, expanding its presence
to 24 countries. With a base of more than 551 000 active subscribers, the Group ranks among the largest
telematics companies globally.
Cartrack is a service-centric organisation focusing on in-house design, development and installation of
telematics technology and data analytics. It provides fleet-, mobile asset- and workforce management
solutions, underpinned by real-time actionable business intelligence, delivered as Software-as-a-Service
('SaaS'), as well as the tracking and recovery of stolen vehicles.
Cartrack's technology is widely accepted by motor manufacturers and insurers. Its customer telematics
web interface provides a comprehensive set of features ensuring the optimisation of both fleet and human
resources. As an expansion of its integrated service offering, Cartrack also provides driver risk assessment
offerings in the insurance telematics field.
In addition, Cartrack specialises in vehicle tracking and recovery. An industry leading audited recovery
rate of 94% in South Africa (as at 29 February 2016) reflects the superior quality of its technology and
services. The technology and infrastructure required for the recovery of stolen vehicles is a key barrier to
entry for competitors looking to enter the telematics industry in any high crime region.
Cartrack's vision is to achieve global industry leadership in the telematics industry, including Fleet, SVR
and insurance telematics services, by ensuring that it is the technology of choice to manage both fleets
and workforces. Its mission is to provide its customers and partners with real-time actionable business
intelligence, based on advanced technology and reliable data.
Group performance
Cartrack operates in developed and emerging markets across five continents.
Economic and fiscal challenges have been particularly severe in Africa, compounded by a material weakening
in local currencies. The consequences thereof are reflected in the Africa-Other (Africa excluding South
Africa) segment which has impacted the Group. Despite these challenges, the Africa-Other segment remains
operationally sound, highly profitable and cash generative in local currency terms. However, significant
currency fluctuations have had a severe impact on consolidated results reported in Rand.
The Group continues to invest in operating capacity, aimed at future revenue growth. Sales margins do, however,
remain under slight pressure as competition grows for a share in the largely untapped telematics market.
If the Africa-Other segment is excluded from the consolidated figures, both subscriber growth and revenue
growth are over 21% while operating profit growth is at 10%. These interim results are in line with Cartrack's
investment strategy for growth. The order book is substantially stronger than in previous years.
Within this context the Group has nevertheless delivered strong subscriber and revenue growth, with a 6%
increase in EPS.
The Group's global subscriber base grew from more than 462 000 to over 551 000 contracts, representing
19% growth period on period. Fleet subscribers grew by 78 000 while SVR subscribers grew by 11 000. Most
Fleet subscribers in South Africa and the Africa-Other segment elect to include the SVR technology bundled
with the Cartrack Fleet services. The bundling of SVR and Fleet services is essential in high crime territories.
Subscriber growth was achieved in all segments in line with expectations, except in the Africa-Other segment
where growth was 4%. Historically subscribers remain on Cartrack's books for an average of 60 months.
The Group achieved revenue growth of 18% to R554 million (H1 2016 – R470 million), with all operating
segments contributing positively in local currency terms. The appreciation of the Rand since 1 March 2016
resulted in a decrease in consolidated revenue of R17 million. Average revenue per unit ('ARPU') has
decreased by less than 1% to R1 051 (H1 2016 – R1 052) period on period for the six months ended
31 August 2016.
Gross profit margin has decreased to 80% (H1 2016 – 82%). The primary causes of this margin decline
were the negative impact arising on the consolidation of international revenues at the recently appreciated
Rand exchange rate, compounded by the slight downward pricing pressures experienced in most of the
channels to market and the increased costs of hardware sales as a result of components being procured
early in the first half of the calendar year when the Rand was weak. In the context of continued investment
in operating capacity in emerging market subsidiaries and increased provisions for doubtful debts,
particularly in Africa, operating profit margin decreased to 30% (H1 2016 – 35%). The cash generating
ability of the Group is reflected in the EBITDA margin which remained high at 43% (H1 2016 – 45%).
The overall results emphasise the resilience of the recurring subscriber revenue model.
Operating expenses increased as Europe, the USA, Asia and the Middle East continued to build the
operational capacity required to generate the revenues projected for these regions. This investment has
already yielded positive results in Europe and Asia where the revenue pipeline is strengthening, resulting
in encouraging revenue growth. Over time their operating cost base will stabilise, while increased revenues
will contribute positively to operating margins.
Cartrack's telematics database continues to grow in volume and granularity. The value of this data to
markets is yet to be realised and represents a further revenue opportunity that is receiving continued
executive attention.
Overall, strong sales performance was offset by the consolidation impact of an appreciating Rand,
investment in operating capacity and an increase in provisions for doubtful debts, primarily in Africa.
Operating profit increased by 3% to R168 million (H1 2016 – R164 million), while headline earnings and
HEPS increased to R115 million (H1 2016 – R112 million) and 38c (H1 2016 – 37c), respectively.
Impact of foreign exchange rate changes on financial performance(1)
There has been considerable exchange rate volatility in Cartrack's operating currencies, and these
fluctuations have had a noteworthy impact on the consolidated Group results. Operating profit would
have been R19 million higher on the assumption of a constant currency basis consistent with H1 2016,
which would have resulted in period on period comparative growth in operating profit of 14%. The constant
currency HEPS would have increased to 43 cents, or by 15% period on period. The segment impact is
shown in the segment report included in the unaudited condensed interim financial statements.
(1)The purpose of this pro forma information is to provide insight into the impact of foreign exchange movements on the
statement of comprehensive income and related earnings information, and is for illustrative purposes only. Due to its nature,
it may not fairly present Cartrack's financial position, changes in equity, results of operations or cash flows.
This pro forma information is the responsibility of the directors of Cartrack.
The impact is computed as a combination of the following two calculations:
- Components included in cost of sales are largely procured in US Dollars. The impact of currency fluctuations on cost of sales
for the period to 31 August 2016 was recomputed by applying the average exchange rates applicable to the corresponding
31 August 2015 cost of sales, being those rates applicable at the dates of stock procurement. On this basis, the cost of sales
for the period to 31 August 2016 would have decreased by 26%; and
- All other actual 31 August 2016 line items were recalculated at the average exchange rates applied for the period ended
31 August 2015.
Segment performance
South Africa
The South African segment achieved robust results for the six months ended 31 August 2016. Revenue
grew by 16% period on period to R413 million, largely as a result of strong subscriber base growth. South
Africa has achieved record sales in three consecutive months, validating the investment in operating
capacity reported at 31 August 2015.
Sales margins are under slight pressure as competition intensifies for a share of the growing telematics
market. However, strong subscriber base growth and a largely fixed infrastructure cost base protect profit
margins. Subscribers are increasingly moving towards Fleet products combined with SVR, as opposed to
just SVR products, as their understanding of the benefits of diverse telematics data increases. The vast
volume of telematics data accumulated to date is an inherently valuable asset for analytical and marketing
purposes and represents a future revenue opportunity to be exploited.
South African consumers have been under strain for some time and continue to suffer the impact of
low economic growth, higher inflation and a series of interest rate hikes. As a result, Cartrack's arrears
debtors' book grew in the six months to 31 August 2016. For this reason, Cartrack recorded write-offs and
additional provisions for doubtful debts amounting to R4 million. This increased the debtors' coverage
ratio, ensuring that potential payment defaults remain adequately provided for. Nevertheless, operating
costs increased at a lower rate than revenue growth.
The gross profit margin and profit before tax margin have been maintained at 81% and 35% respectively,
despite the abovementioned pricing and cost pressures. Profit before tax grew by 14% to R145 million.
Africa-Other
Africa continues to experience significant economic headwinds. Severe currency devaluations and
poor economic performance have resulted in both corporates and individuals experiencing cash flow
constraints. As a result, despite increased revenues in local currency terms, segmental revenue decreased
by 7% to R57 million. Profit before tax decreased by 37% to R19 million. In light of these increasingly
difficult economic conditions, the quality of the debtors' book has again been thoroughly reviewed.
An additional R4 million has accordingly been provided for doubtful debts.
New sales in the first six months of this financial year were encouraging. This was partially offset by
cancellations as a result of cash flow constraints experienced by customers. Nevertheless, the subscriber
base grew by 4% and ARPU was up 3% in local currencies. Profitability was impacted by higher cost of sales
due to weaker local currencies, local inflationary impact on salaries, prudent bad debt provisions and the
investment in sales capacity. Cartrack is satisfied that the local operations have weathered these testing
times well.
Mozambique, in particular, has experienced severe economic and fiscal challenges. Many Mozambican
businesses have either closed or scaled down their operations. Market research and forecasts do, however,
indicate that the long-term outlook for a turnaround remains positive. Mozambique remains the largest
subsidiary in the Africa-Other segment, contributing more than 50% of revenues and profit for the
segment. Despite the challenging conditions, the subscriber base grew by 1% and Cartrack Mozambique
remains operationally sound, highly profitable in local currency terms and well positioned for an economic
turnaround. However, the significant deterioration in local currency severely impacted on consolidated
results reported in Rand.
The trading environment in the Africa-Other segment is likely to remain challenging in the medium term.
Under these conditions Cartrack will focus on maintaining strong local currency performance. This will be
achieved through robust sales efforts and customer retention practices, tougher debtors' management
and greater discipline regarding operating costs. At this time Cartrack is convinced that the operating
capacity exists within all of the subsidiaries to remain profitable in the foreseeable future.
Europe
Europe has performed well, bearing testament to Cartrack's telematics value proposition. Revenue has
increased by 41% to R55 million largely as a result of strong subscriber growth. Profit before tax has
decreased by 27% to R10 million due to a strategic investment in operating capacity which commenced in
the second half of the 2016 financial year. Cartrack is confident that the increased investment in capacity
will positively impact operating profit margins in the next financial year.
Asia-Pacific and Middle East
Cartrack's greenfield operations in Asia and the Middle East are growing in line with our investment case
for the region. Revenue has grown by 147% to R29 million period on period. This is largely due to a 203%
growth in subscriber base, as well as a full period of revenue for contracts initiated during the second half
of the 2016 financial year.
Singapore has performed particularly well. The subscriber base has grown by 163% period on period,
generating revenue of R23 million and profit before tax of R7 million for the Group. Singapore is also at the
forefront of Cartrack's technology developments as it services a technology driven and data dependant
society. Additionally, Singapore tests Cartrack's ability to operate in countries with exceptionally high
cost structures. Cartrack Singapore started operations in the 2015 financial year, supporting Cartrack's
view that most greenfield investments should turn a profit within three years, and that they should show a
positive return on investment within four years. Cartrack Singapore's strong operational presence and its
proximity to other subsidiaries in the region, lead us to believe that our other subsidiaries in this segment
should develop similarly over a similar timeframe.
The other subsidiaries in this segment have grown their revenues and subscribers in line with expectations
and continue to extend their operating capacities.
The loss before tax for the segment has decreased from R6 million to R4 million.
United States of America ('USA')
Cartrack has recently established an operational base in California and has incurred limited start-up
operational costs. An executive management team is in place, and operations are planned to commence
in November 2016. The focus of this operation will be primarily on Fleet, combining all the key metrics for
electronic driver logging devices required by law to be installed in long haul vehicles in the USA. Product
development for this market has largely been completed. The USA is a demanding market with healthy
competition. However, Cartrack is confident that its value proposition will greatly benefit US companies,
yielding tangible benefits from a compliance and profitability perspective.
Managing our balance sheet
Working capital management and cash generation are key business objectives for the Group and, as a
consequence of subdued global economic conditions, continue to receive particular attention.
Inventory management remains a key focus for the Group. Inventory days have improved from 173 days
to 144 days. Subsidiaries continue to carry buffer stock sufficient to satisfy sales forecasts and to provide
for adequate lead-times associated with global distribution and unforeseen component shortages or
obsolescence.
Both quick and current ratios have decreased to 1.0 (2016 – 1.4) and 0.7 (2016 – 0.9), respectively.
This is mainly as a result of the acquisition of the remaining minority interest in Cartrack North East (Pty)
Ltd, the deployment of expansionary capital in Europe, Asia and the Middle East as well as start-up costs
incurred in the USA.
Debtors' days (after provision for bad debts) have improved from 33 days to 31 days since 29 February
2016. A focus on credit management, improved collections processes and prudent provisioning practices
will continue to improve this key metric of operating effectiveness.
As a result, Cartrack continues to be highly cash generative with a strong and positive cash flow forecast
to year-end and beyond.
Acquisitions
In July 2016, the Group acquired the remaining 24.5% minority interest in Cartrack North East (Pty)
Ltd for a cash consideration of R7 million. This acquisition will further contribute to economies of scale,
standardisation, integration and operational simplification within the Group.
Outlook(2)
The telematics industry is growing strongly globally. Industry penetration is relatively low in all markets.
The application of telematics data continues to find traction in a broader range of asset classes and
industries.
Having commenced business as a specialist SVR service provider, Cartrack evolved to incorporate
the more data intensive and analytical fleet and insurance telematics technologies. Moving forward,
accelerated investment will be made in software and data analytical skills to extend and enhance our
service offerings to our customer. Cartrack will continue to position itself as a strong technology partner
for businesses requiring actionable data.
The focus on hardware and software design, functionality and application, as well as new market
development will position Cartrack for continued growth in the future.
For the South African segment, Cartrack expects continued strong performance based on customer
growth and expansion of its technological offerings.
Cartrack continues to closely monitor operations across Africa in order to improve penetration, collection
times and collection rates. Cartrack is confident that this segment is well positioned to weather the current
challenges it faces and to grow once trading conditions stabalise.
Cartrack has invested heavily in the operating capacity of its European operations. Cartrack expects this
region to show an improved return on that investment over the next 18 months, firstly in subscriber growth
followed by revenue growth and significant improvement in operating profit margins. A new in-house sales
workflow management system has been implemented in this segment on a pilot basis. The system will be
implemented globally once its benefits are confirmed.
Cartrack's subsidiaries in Asia and the Middle East will continue to show significant subscriber and revenue
growth while reducing operating losses over time. In line with the business case for this region, Cartrack
expects that subsidiaries will show a positive return on investment.
Cartrack USA will receive much support and investment in operating capacity over the next 18 months.
Subscriber growth is expected to be gradual as the brand is established in that market. However, Cartrack
is confident that its value proposition will be quickly accepted resulting in positive operating margin
contribution in the medium term.
Despite challenging and changing global economic conditions, and expected prolonged African
challenges, Cartrack is well positioned for organic growth and strong operating results. Under these
conditions Cartrack will, in addition to the outward growth initiatives, focus internally to optimise
profit margins.
Further consolidation within the global telematics industry is evident from the number of mergers and
acquisitions reported recently. Cartrack will remain vigilant to such industry developments. Opportunities
that may arise to provide economies of scale as well as improved subscriber value will be considered on
their merits.
Under the current prevailing economic circumstances and exchange rate levels in the regions in which
Cartrack operates, Cartrack is well positioned to deliver double digit normalised EPS for the year ending
28 February 2017.
In summary, the Group will invest heavily in research and development, data analytical skills and
distribution channels to expand and grow the subscriber base significantly. The increased sales are
expected to generate a greater number of rental contracts which will require funding. The Group will
continue to be highly cash generative going forward, but will require the retention of funding necessary
to enable Cartrack to invest for accelerated growth.
Consequently, management has re-evaluated the dividend policy, presently being a targeted cover of
between 1.25 and 1.55 times HEPS. The revised dividend policy provides for a cover of between 1.25
and 2.5 times HEPS, to be effective for FY17. Management's expectations are that the final dividend
cover for FY17 will be between 1.75 and 2.5 times HEPS.
(2)Any forecast information included in this section has not been reviewed or reported on by Cartrack's auditor in accordance
with 8.40(a) of the JSE Listings Requirements. The directors take sole responsibility for the statements.
Basis of accounting
The interim consolidated financial statements are prepared in accordance with the requirements of
the Listings Requirements of the JSE Limited for interim reports, and the requirements of the Companies
Act applicable to interim financial statements. The Listings Requirements require interim reports to be
prepared in accordance with the framework concepts and the measurement and recognition requirements
of International Financial Reporting Standards ('IFRS') and the SAICA Financial Reporting Guides as
issued by the Accounting Practices Committee and Financial Pronouncements as issued by the Financial
Reporting Standards Council and to also, as a minimum, contain the information required by IAS 34 Interim
Financial Reporting. The accounting policies applied in the preparation of the consolidated financial
statements from which the condensed financial statements were derived are in terms of IFRS and are
consistent with those accounting policies applied in the preparation of the previous consolidated annual
financial statements, apart from the improvements made to the accounting standards and interpretations.
Restatement
Group practice is to invoice subscriptions in advance and to defer recognising such subscriptions
in revenue to the subsequent reporting period(s) to which they relate. During the February 2016
year-end it was identified that this practice had not been correctly applied in all circumstances.
The 29 February 2016 results showed the impact of correcting this error for the 2014 and 2015 financial
year ends. The 31 August 2015 results have been restated for this same reason.
Dividend declaration
Ordinary shareholders are advised that the board of directors has declared an interim gross cash dividend
of 20 cents per ordinary share (17 cents net of dividend withholding tax) for the six months ended
31 August 2016 ('the cash dividend'). The cash dividend will be paid out of profits of the company.
Share code CTK
ISIN ZAE000198305
Company registration number 2005/036316/06
Company tax reference number 9108121162
Dividend number 5
Gross cash dividend per share 20 cents
Issued share capital as at declaration date 300 000 000
Declaration date Thursday, 27 October 2016
Last date to trade cum dividend Tuesday, 6 December 2016
Shares commence trading ex dividend Wednesday, 7 December 2016
Record date Friday, 9 December 2016
Dividend payment date Monday, 12 December 2016
Share certificates may not be dematerialised or rematerialised between Wednesday, 7 December 2016
and Friday, 9 December 2016, both days inclusive.
Tax implications
The cash dividend is likely to have tax implications for both resident and non-resident shareholders.
Shareholders are therefore encouraged to consult their professional tax advisers should they be in any
doubt as to the appropriate action to take.
In terms of the Income Tax Act, the cash dividend will, unless exempt, be subject to dividend withholding
tax ('DWT'). South African resident shareholders that are liable for DWT, will be subject to DWT at a
rate of 15% of the cash dividend and this amount will be withheld from the cash dividend. Non-resident
shareholders may be subject to DWT at a rate of less than 15% depending on their country of residence
and the applicability of any double tax treaty between South Africa and their country of residence.
On behalf of the board
David Brown Zak Calisto
Chairman Global Chief Executive Officer
Johannesburg
27 October 2016
Sponsor
Investec Bank Limited
UNAUDITED INTERIM CONSOLIDATED
STATEMENT OF FINANCIAL POSITION
as at 31 August 2016
Restated
Unaudited Audited unaudited
six months 12 months six months
ended ended ended
31 August 29 February 31 August
Figures in Rand thousand Note(s) 2016 2016 2015
ASSETS
Non-current assets
Property, plant and equipment 258 146 207 534 176 869
Goodwill 151 615 156 011 146 085
Deferred tax 43 287 34 517 25 693
453 048 398 062 348 647
Current assets
Inventories 86 705 88 318 91 932
Loans to related parties 1 823 1 624 5 347
Trade and other receivables 7 130 956 128 655 94 746
Current tax receivable 2 576 5 500 4 847
Cash and cash equivalents 56 615 45 181 67 044
278 675 269 278 263 916
Total assets 731 723 667 340 612 563
EQUITY AND LIABILITIES
Equity
Share capital 42 488 42 488 42 488
Reserves 8 145 26 314 37 385
Retained income 379 271 375 306 304 767
Equity attributable to equity holders
of parent 429 904 444 108 384 640
Non-controlling interest 17 945 16 387 20 215
447 849 460 495 404 855
Liabilities
Non-current liabilities
Finance lease obligation 11 645 7 789 6 392
Deferred tax 2 423 1 040 908
14 068 8 829 7 300
Current liabilities
Trade and other payables 174 680 159 085 156 044
Loans from related parties 1 228 1 478 1 113
Finance lease obligation 10 848 6 604 5 988
Current tax payable 44 321 26 652 36 712
Share-based payment liability 6 028 4 010 –
Bank overdraft 32 701 187 551
269 806 198 016 200 408
Total liabilities 283 874 206 845 207 708
Total equity and liabilities 731 723 667 340 612 563
UNAUDITED INTERIM CONSOLIDATED
STATEMENT OF PROFIT OR LOSS AND OTHER
COMPREHENSIVE INCOME
for the six months ended 31 August 2016
Restated
Unaudited Audited unaudited
six months 12 months six months
ended ended ended
31 August 29 February 31 August
Figures in Rand thousand Note(s) 2016 2016 2015
Revenue 8 554 148 1 005 481 469 751
Cost of sales (108 711) (186 749) (84 388)
Gross profit 445 437 818 732 385 363
Other income* 3 052 6 062 3 521
Operating expenses* 13 (280 398) (479 988) (224 962)
Operating profit 168 091 344 806 163 922
Investment revenue 2 095 6 256 4 638
Non-operating foreign exchange gains – 15 667 –
Finance costs (2 117) (4 463) (3 963)
Profit before taxation 168 069 362 266 164 597
Taxation 9 (48 704) (102 779) (46 732)
Profit for the six months 119 365 259 487 117 865
OTHER COMPREHENSIVE INCOME:
Items that may be reclassified to profit
or loss:
Exchange differences on translating
foreign operations (19 397) 3 399 3 913
Other comprehensive income for the
six months net of taxation (19 397) 3 399 3 913
Total comprehensive income for the
six months 99 968 262 886 121 778
Profit attributable to:
Owners of the parent 115 100 239 674 109 135
Non-controlling interest 4 265 19 813 8 730
119 365 259 487 117 865
Total comprehensive income
attributable to:
Owners of the parent 96 931 245 842 113 917
Non-controlling interest 3 037 17 044 7 861
99 968 262 886 121 778
EARNINGS PER SHARE
Basic earnings per share (cents) 10 39 80 36
* Bad debts recovered, previously included in other income, have been included in operating expenses
(August 2016: R3 079 530; February 2016: R6 029 026; August 2015: R2 421 005). This presentation fairly
presents the financial performance of the Group.
UNAUDITED INTERIM CONSOLIDATED
STATEMENT OF CHANGES IN EQUITY
for the six months ended 31 August 2016
Total
Foreign attributable
currency to equity Non-
Share translation Treasury Total Retained holders of controlling Total
Figures in Rand thousand capital reserve Shares reserves income the Group interest equity
Opening balance as previously reported 42 488 37 451 - 37 451 319 151 399 090 31 255 430 345
Adjustments
Prior period error - Note 2 - (66) - (66) (14 384) (14 450) (11 040) (25 490)
Balance at 1 September 2015 restated 42 488 37 385 - 37 385 304 767 384 640 20 215 404 855
Profit 1 September 2015 to 29 February 2016 - - - - 130 539 130 539 11 082 141 621
Other comprehensive income 1 September 2015 to
29 February 2016 - 1 034 - 1 034 - 1 034 (1 548) (514)
Total comprehensive income for six months - 1 034 - 1 034 130 539 131 573 9 534 141 107
Purchase of own treasury shares for Share Incentive - - (12 105) (12 105) - (12 105) - (12 105)
Scheme (Treasury shares)
Dividends - - - - (60 000) (60 000) (13 362) (73 362)
Total contributions by and distributions to owners
of company recognised directly in equity - - (12 105) (12 105) (60 000) (72 105) (13 362) (85 467)
Balance at 1 March 2016 42 488 38 419 (12 105) 26 314 375 306 444 108 16 387 460 495
Profit 1 March 2016 to 31 August 2016 - - - - 115 100 115 100 4 265 119 365
Other comprehensive income 1 March 2016
to 31 August 2016 - (18 169) - (18 169) - (18 169) (1 228) (19 397)
Total comprehensive income for the period - (18 169) - (18 169) 115 100 96 931 3 037 99 968
Dividends - - - - (105 000) (105 000) (614) (105 614)
Changes in ownership interest - control not lost - - - - (6 135) (6 135) (865) (7 000)
Total contributions by and distributions to owners
of company recognised directly in equity - - - - (111 135) (111 135) (1 479) (112 614)
Balance at 31 August 2016 42 488 20 250 (12 105) 8 145 379 271 429 904 17 945 447 849
UNAUDITED CONDENSED INTERIM
CONSOLIDATED STATEMENT OF CASH FLOWS
for the six months ended 31 August 2016
Restated
Unaudited Audited unaudited
six months 12 months six months
ended ended ended
31 August 29 February 31 August
Figures in Rand thousand Note(s) 2016 2016 2015
Cash flows from operating activities 211 569 261 386 115 330
Cash flows from investing activities (126 906) (154 308) (70 670)
Cash flows from financing activities (103 190) (173 867) (89 674)
Total cash movement for the period (18 527) (66 789) (45 014)
Cash at the beginning of the period 44 994 109 933 109 933
Effect of exchange rate movement on cash
balances (2 553) 1 850 1 574
Total cash at end of the period net of
bank overdraft 23 914 44 994 66 493
ACCOUNTING POLICIES
1. PRESENTATION OF GROUP FINANCIAL STATEMENTS
The interim unaudited condensed consolidated financial statements are prepared in accordance with
the requirements of the JSE Limited Listings Requirements for interim reports, and the requirements
of the Companies Act applicable to interim financial statements. The Listings Requirements require
interim reports to be prepared in accordance with the framework concepts and the measurement and
recognition requirements of International Financial Reporting Standards ('IFRS') and the SAICA Financial
Reporting Guides as issued by the Accounting Practices Committee and Financial Pronouncements as
issued by the Financial Reporting Standards Council and to also, as a minimum, contain the information
required by IAS 34 Interim Financial Reporting. The accounting policies applied in the preparation of
the consolidated financial statements from which the condensed financial statements were derived
are in terms of IFRS and are consistent with those accounting policies applied in the preparation of
the previous consolidated annual financial statements, apart from the improvements made to the
accounting standards and interpretations.
NOTES TO THE UNAUDITED CONDENSED INTERIM
CONSOLIDATED FINANCIAL STATEMENTS
2. CORRECTION OF ACCOUNTING ERROR
Group practice is to invoice subscriptions in advance and to defer recognising such subscriptions
in revenue to the subsequent reporting period(s) to which they relate. During the February 2016
year-end it was identified that this practice had not been correctly applied in all circumstances.
The 29 February 2016 results showed the impact of correcting this error for the 2014 and 2015
financial year ends. The 31 August 2015 results have been restated for this same reason.
The aggregate effect of the correction of accounting error on the consolidated interim financial
statements is as follows:
31 August
Figures in Rand thousand 2015
Consolidated Statement of Financial Position
Asset
Deferred tax asset net of liability
Previously stated 10 820
Adjustment 13 965
24 785
Trade and other receivables
Previously stated 79 843
Adjustment 14 903
94 746
Liabilities
Trade and other payables
Previously stated (106 545)
Adjustment (49 499)
(156 044)
Income tax asset net of liability
Previously stated (27 006)
Adjustment (4 859)
(31 865)
Retained earnings closing
Previously stated (319 151)
Adjustment 14 384
(304 767)
Foreign currency translation reserve
Previously stated (37 451)
Adjustment 66
(37 385)
Non-controlling interest
Previously stated (31 255)
Adjustment 11 040
(20 215)
2014 Opening retained earnings
Previously stated (204 587)
Adjustment 10 524
(194 063)
2014 Non-controlling interest
Previously stated (32 080)
Adjustment (6 110)
(38 190)
2014 Opening foreign currency translation reserve
Previously stated (11 452)
Adjustment (77)
(11 529)
Consolidated Statement of Comprehensive Income
31 August
Figures in Rand thousand 2015
Revenue
Previously stated 469 728
Adjustment 23
469 751
Taxation
Previously stated (46 757)
Adjustment 25
(46 732)
Profit attributable to:
Owners of the parent 109 135
Previously stated 108 737
Adjustment 398
Non-controlling interest 8 730
Previously stated 9 080
Adjustment (350)
117 865
Basic earnings per share (cents)
Previously stated 36.25
Adjustment 0.13
36.38
Headline earnings per share (cents)
Previously stated 37.25
Adjustment 0.13
37.38
3. SEGMENT REPORTING
The group is organised into geographical business units and has five reportable segments. The Group
monitors the operating results of its business units separately for the purpose of making decisions
about resource allocation and performance assessment. Segment information is evaluated based
on revenue and profit or loss and is measured consistently with consolidated financial statements.
Asia Pacific and
Segment report - South Africa Africa-Other Europe Middle East USA Total
31 August 2016
Revenue 413 154 56 972 55 063 28 959 - 554 148
Intersegment elimination of revenue 157 200 - 719 157 - 158 076
Revenue before segment elimination 570 354 56 972 55 782 29 116 - 712 224
Profit before taxation includes the following items 144 668 19 171 9 630 (4 183) (1 217) 168 069
Investment revenue 1 264 807 - 24 - 2 095
Finance costs (1 971) - (138) (8) - (2 117)
Net foreign exchange (loss)/gain** (501) (1 415) 47 (193) - (2 062)
Depreciation (48 792) (1 227) (14 500) (3 113) - (67 632)
Total tangible assets 368 032 80 562 82 958 46 825 1 731 580 108
Total liabilities (190 312) (41 825) (31 875) (19 617) (245) (283 874)
Goodwill 151 615
Equity 447 849
29 February 2016
Revenue 748 600 139 198 90 036 27 647 - 1 005 481
Intersegment elimination of revenue 195 551 271 841 1 899 - 198 562
Revenue before segment elimination 944 151 139 469 90 877 29 546 - 1 204 043
Profit before taxation includes the following items 274 711 60 110 23 477 3 968 - 362 266
Investment revenue 2 987 3 268 - 1 - 6 256
Finance costs (4 360) (10) (78) (15) - (4 463)
Net foreign exchange gain/(loss)** 2 830 3 891 298 19 780 - 26 799
Depreciation (79 692) (2 317) (18 657) (1 994) - (102 660)
Total tangible assets 188 102 79 049 83 273 160 905 - 511 329
Total liabilities (84 377) (54 544) (53 355) (14 569) - (206 845)
Goodwill 156 011
Equity 460 495
31 August 2015
Revenue 357 328 61 556 39 147 11 720 - 469 751
Intersegment elimination of revenue 19 507 - - - - 19 507
Revenue before segment elimination 376 835 61 556 39 147 11 720 - 489 258
Profit before taxation includes the following items 126 564 30 340 13 240 (5 547) - 164 597
Investment revenue 2 388 2 250 - - - 4 638
Finance costs (3 698) (240) (11) (14) - (3 963)
Net foreign exchange gains/(loss)** 465 1 996 (115) (18) - 2 328
Depreciation (37 298) (1 004) (7 466) (620) - (46 388)
Total tangible assets 307 653 90 242 45 181 23 402 - 466 478
Total liabilities (124 823) (55 824) (19 064) (7 997) - (207 708)
Goodwill 146 085
Equity 404 855
**This amount includes both operating and non-operating net foreign exchange (loss)/gain, as applicable.
Please refer to annexure 1 for a constant currency comparison of the financial performance of these segments.
4. COMMITMENTS
Mercantile Bank Limited has provided a facility of R40 million (February 2016: R40 million;
August 2015: R40 million) to Cartrack Manufacturing Proprietary Limited. Cartrack Proprietary Limited has
provided limited suretyship in favour of Mercantile Bank Limited for this facility. At the end of the
period, the amount utilised was R32 701 840 (February 2016: R NIL; August 2015: R NIL).
Nedbank Limited has provided a facility of R5 million (February 2016: R2.5 million;
August 2015: R2.5 million) to Plexique Proprietary Limited. Cartrack Proprietary Limited has provided a limited
guarantee for the facility in favour of Nedbank Limited. At the end of the period, the amount utilised
was R1 124 398 ( February 2016: R 1 124 398, August 2015:NIL).
The Private Security Industry Regulatory Authority ('PSIRA') requires the directors of Cartrack North
East Proprietary Limited ('the directors') to provide a suretyship for due payment of any amounts due
to the PSIRA pursuant to registration with PSIRA in terms of the Private Security Industry Regulation
Act, No 56 of 2001. Cartrack Proprietary Limited has provided an indemnity to the directors, limited
to an amount of R20 000 (February 2016: R20 000; August 2015: R NIL), which indemnity will be
reviewed on an annual basis.
Cartrack Investments UK Limited has provided Cartrack Espana, S.L with a loan in the amount of Euro
1 392 486 (February 2016: Euro 1 392 486; August 2015: Euro 1 392 486) ('the Loan'). Cartrack
Technologies Asia Pte. Ltd has provided Cartrack Investments UK Limited with a guarantee for
repayment of the loan.
Cartrack Manufacturing Proprietary Limited has forward exchange contracts in the amounts of
R26 440 155 which expires on 2 December 2016 and R44 214 000 which expires on 3 April 2017
(February 2016: R5 740 000; August 2015: R NIL).
5. BUSINESS COMBINATIONS
Business combinations occurring during the current six months
Immaterial business combinations occurring during the 31 August 2016 year end
In July 2016, the group acquired the full minority interest of 24.5% in Cartrack North East Proprietary
Limited for a cash consideration of R7 million. The new holding in Cartrack North East Proprietary
Limited is 100%. The group acquired this company in order to achieve economies of scale,
standardisation, integration and operational simplification.
Immaterial business combinations occurring during the February 2016 year end
On 1 March 2015, the group acquired 100% of the shares in Cartrack Manufacturing Proprietary
Limited (previously Onecell Manufacturing Proprietary Limited) from Onecell Holdings Proprietary
Limited for a cash consideration. The group acquired this company in order to manage and control
the procurement and manufacture of its products.
On 1 March 2015, the group acquired 100% of the shares in Cartrack Management Services
Proprietary Limited (previously Bonito Recruitment Services Proprietary Limited) from Onecell
Holdings Proprietary Limited for a cash consideration. The group acquired this dormant company in
order to account separately for group management services and related costs from within the group.
The acquisitions detailed above are immaterial in aggregate.
6. FINANCIAL INSTRUMENTS – FAIR VALUES AND RISK MANAGEMENT
Financial assets and liabilities are materially short term in nature and settled in the ordinary course
of business with the exception of finance lease agreements. The fair values of these short term
financial instruments approximate in all material respects the carrying amounts of the instruments
as disclosed in the statement of financial position. Finance lease agreements are variable rate
instruments which mature over a period of approximately 60 months. We estimate that the fair value
of these agreements materially approximate the carrying amounts of the instruments as disclosed in
the statement of financial position.
7. TRADE AND OTHER RECEIVABLES
Restated
Unaudited Audited Unaudited
six months 12 months six months
ended ended ended
31 August 29 February 31 August
Figures in Rand thousand 2016 2016 2015
Trade receivables 133 004 126 272 84 248
Provision for impairment of trade receivables (21 862) (19 509) (13 298)
111 142 106 763 70 950
Prepayments 11 553 12 031 11 547
Deposits 1 679 4 616 1 568
Sundry debtors 5 423 3 512 2 403
Vat receivable 1 159 1 733 8 278
130 956 128 655 94 746
The credit quality of trade and other receivables can be assessed by reference to historical information.
Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy, legal
handover, financial reorganisation and default or delinquency in payments (more than 30 days overdue)
are considered indicators that the trade receivable is impaired.
The creation and release of allowances for impaired receivables have been included in operating expenses.
8. REVENUE
Restated
Unaudited Audited Unaudited
six months 12 months six months
ended ended ended
31 August 29 February 31 August
Figures in Rand thousand 2016 2016 2015
Sale of hardware 76 881 147 360 69 313
Subscription revenue 467 292 842 095 394 200
Sundry sales 9 975 16 026 6 238
554 148 1 005 481 469 751
Restated
Unaudited Audited Unaudited
six months 12 months six months
ended ended ended
31 August 29 February 31 August
Figures in Rand thousand 2016 2016 2015
9. TAXATION
Major components of the tax expense
Current
Local income tax – current period 62 256 114 547 51 522
Local income tax – prior period – 1 434 –
62 256 115 981 51 522
Deferred
Deferred tax (13 552) (10 060) (4 790)
Deferred tax – prior period – (3 142) –
(13 552) (13 202) (4 790)
48 704 102 779 46 732
10. BASIC EARNINGS PER SHARE
Basic earnings per share (cents) 39 80 36
The calculation of basic earnings per share has
been based on the following profit attributable to
ordinary shareholders and the weighted average
number of ordinary shares in issue.
Weighted average number of ordinary shares
('000) at the beginning of the year 300 000 300 000 300 000
Effect of treasury shares (1 234) (51) –
298 766 299 949 300 000
Basic earnings 115 100 239 674 109 135
11. HEADLINE EARNINGS PER SHARE
Headline earnings per share (cents) 38 81 37
Reconciliation between basic earnings and
headline earnings
Basic earnings 115 100 239 674 109 135
Adjusted for:
Reversal of bargain purchase – 3 279 3 279
Gain on disposal of assets net of tax (231) (1 019) (266)
114 869 241 934 112 148
Restated
Unaudited Audited Unaudited
six months 12 months six months
ended ended ended
31 August 29 February 31 August
Figures in Rand thousand 2016 2016 2015
12. NORMALISED EARNINGS PER SHARE
Normalised earnings per share (cents) 38 75 37
Reconciliation between headline earnings and
normalised earnings
Headline earnings 114 869 241 934 112 148
Net non-operating foreign exchange gain on
intercompany financing arrangements – (15 667) –
114 869 226 267 112 148
13. OPERATING EXPENSE
Employee related expenses 142 536 272 912 129 812
Loss/(profit) on exchange differences 2 062 (11 332) (2 328)
Lease related expenses 10 460 23 068 11 818
Depreciation 67 632 102 660 46 388
Motor vehicle expenses 19 337 34 852 15 871
Other operating expenses 38 371 63 857 26 322
280 398 486 017 227 883
UNAUDITED CONSOLIDATED CONSTANT
CURRENCY SEGMENT REPORT(1)
Period: Six months to 31 August 2016
Asia
Pacific
and
(All amounts in South Africa – Middle HI 17 HI 16
R000's) Africa Other Europe East USA Total Total
Revenue 413 154 65 863 45 906 24 040 – 548 963 469 751
Cost of sales: (67 835) (11 064) (7 712) (4 481) – (91 092) (84 388)
Gross profit 345 319 54 799 38 194 19 559 – 457 871 385 863
Other income 2 238 213 63 509 – 3 023 3 521
Net operating foreign
exchange gain/(loss) (501) (1 514) 39 105 – (1 871) 610
Operating expenses (189 425) (29 880) (28 878) (22 407) (1 217) (271 807) (225 572)
Operating profit 157 631 23 618 9 418 (2 234) (1 217) 187 216 163 921
Financing cost (1 971) – (113) (7) – (2 091) (3 963)
Financing revenue 1 264 1 102 – 20 – 2 386 4 638
Net non-operating
foreign exchange gain – – – – – – –
Profit before taxation 156 924 24 720 9 305 (2 221) (1 217) 187 510 164 597
Taxation (42 289) (8 286) (257) 462 (50 370) 46 732
Net profit after
taxation 114 635 16 434 9 048 (1 759) (1 217) 137 140 117 865
Profitability ratios
Gross profit margin 84% 83% 83% 81% – 83% 82%
Operating profit
margin 38% 36% 21% (9%) – 34% 35%
Net profit margin
(before tax) 38% 38% 20% (9%) – 34% 35%
EBITDA (R'000) 206 423 24 845 21 600 302 (1 217) 251 953 210 327
EBITDA margin 50% 38% 47% 1% – 46% 45%
(1) This pro forma information is the responsibility of the directors of Cartrack.
The purpose of this pro forma information is to provide insight into the impact of foreign exchange movements on the
statement of comprehensive income and related earnings information, and is for illustrative purposes only. Due to its nature,
it may not fairly present Cartrack's financial position, changes in equity, results of operations or cash flows.
The impact is computed as a combination of the following two calculations:
1. Components included in cost of sales are largely procured in US Dollars. The impact of currency fluctuations on cost of sales
for the period to 31 August 2016 was recomputed by applying the average exchange rates applicable to the corresponding
31 August 2015 cost of sales, being those rates applicable at the dates of stock procurement. On this basis, the cost of sales
for period to 31 August 2016 would have decreased by 26%, and
2. All other actual 31 August 2016 line items were recalculated at the average exchange rates applied for the period ended
31 August 2015.
CORPORATE INFORMATION
Registered office
Cartrack Holdings Limited
11 Keyes Avenue
Rosebank
2196
(PO Box 4709, Rivonia, 2128)
Directors
Independent Non-executive Directors
David Brown (Independent Chairman)
Thebe Ikalafeng
Kim White
Executive Directors
Isaias Jose Calisto (Global Chief Executive Officer)
John Richard Edmeston (Global Chief Financial Officer)
Company Secretary
Anname de Villiers
Cartrack Corner
11 Keyes Road
Rosebank
Johannesburg
2196
(PO Box 4709, Rivonia, 2128)
Sponsor
Investec Bank Limited
2nd Floor
100 Grayston Drive
Sandown
Sandton
2196
(PO Box 785700, Sandton, 2146)
Transfer Secretary
Computershare Investor Services Proprietary Limited
70 Marshall Street
Johannesburg
2001
(PO Box 61051, Marshalltown, 2107)
www.cartrack.co.za
Date: 27/10/2016 07:05:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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