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Abridged audited consolidated annual financial statements 2017
CORPORATE INFORMATION
Cartrack Holdings Limited
(Incorporated in the Republic of South Africa)
(Registration number 2005/036316/06)
Share Code: CTK ISIN:ZAE000198305
(Cartrack or the group)
ABRIDGED AUDITED CONSOLIDATED ANNUAL FINANCIAL STATEMENTS 2017
Salient Features
- Subscriber growth of 19% to 600 610
- Subscriber revenue up 16%
- Total revenue up 13% to R1 141 million
- Continued strong investment in operating capacity
- EBITDA of R523 million, up 13%
- EBITDA margin of 46%
- Normalised EPS (NEPS)1 of 85 cents, up 12%
- Basic earnings per share (EPS) of 86 cents, up 8%
- Headline EPS (HEPS) of 85 cents, up 6%
- Return on equity of 55%
- Final dividend per share of 35 cents
- Cash generated from operating activities of R387 million, up 48%
- Currency fluctuations had a R27 million negative impact on 2017 operating profit
1The presentation of normalised earnings per share is not an IFRS or JSE requirement. Management presents this measure as a supplementary
performance measure. Normalised earnings represents headline earnings plus/(less) any other unusual non-recurring and non-operating items not already
taken into account in headline earnings. HEPS was adjusted by the net non-operating foreign exchange gain of R2.6 million (FY16: R15.7 million) in
determining NEPS.
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. During
the year ended 28 February 2017, offices were opened in the United States of America (USA) and New Zealand, expanding its presence to 24 countries. With
a base of more than 600 000 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 93% in South Africa (FY16: 94%) 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's operations across five continents have delivered strong NEPS results, particularly in the second half of FY17. Operating metrics remain
amongst the highest in the industry with a gross profit margin of 80% (FY16: 81%), operating profit margin of 32% (FY16: 34%) and EBITDA margin of 46%
(FY16: 46%).
These results were achieved despite a number of key influencing factors:
- Exchange rate fluctuations negatively impacted consolidated revenue and profit;
- Severe economic challenges within the Africa-Other segment contributed to a reduction in sales volumes and profitability in this segment;
- Significant investment in the distribution and operating capacity in all segments; and
- Planned start-up costs for establishing the USA operation.
The group's global subscriber base grew from 502 849 to 600 610 contracts, representing 19% growth year-on-year. Asia Pacific and Europe contributed
strongly with 225% and 26% subscriber growth respectively. The South African subscriber base increased by a robust 17%. However, with the challenging
economic environment encountered in the rest of Africa, the Africa-Other subscriber base decreased by 2% year-on-year.
The group achieved subscription revenue growth of 16%, taking annuity income up to 86% of total revenue (FY16: 84%). The current estimate of subscriber
lifecycle in the group is 64 months (FY16: 60 months). Total revenue grew by 13% to R1 141 million (FY16: R1 005 million), with all operating segments
contributing positively in local currency terms. Average revenue per unit (ARPU) decreased by 4% to R1 854 (FY16: R1 927) largely as a result of a
stronger rand resulting in lower consolidated revenue from non-South African operations. Had the exchange rates within the group remained unchanged, ARPU
would have decreased by only 2% to R1 896.
Gross profit was impacted by higher rand-based component cost year-on-year. Cartrack's procurement cycle precedes the production and sales cycles and, as
a result, components purchased in US dollars were concluded during a period of severe rand weakness. Had the exchange rate remained unchanged year-on-
year, cost of sales would have been R216 million or 5% lower.
Operating profit increased by 7% to R369 million. Operating costs in South Africa increased by only 8% versus the strong revenue increase of 15%, the
benefit of the increased investment in distribution channels in the prior year now coming to fruition. The severe economic headwinds experienced in the
Africa-Other countries necessitated a focus on sustaining the current infrastructure and distribution channels. However, strong investment in
distribution and operating capacity continued within Europe and, more particularly, within Asia Pacific. This, together with the initial operating costs
incurred in the USA, resulted in group operating expenses increasing by 12%. Cartrack is confident that these regional investments will deliver
meaningful revenue growth in the short-to-medium term with a commensurate increase in operating profit margins.
NEPS increased by 12% in line with management's expectation to 85 cents (FY16: 75 cents). EPS and HEPS increased by 8% and 6% to 86 cents
(FY16: 80 cents) and 85 cents (FY16: 81 cents) respectively. Return on equity of 55% (FY16: 62%) and return on assets of 35% (FY16: 42%) are also in line
with management's expectations.
Cartrack's telematics database continues to grow in volume and granularity. New revenue streams utilising this database are being researched. Together
with expansion into other vertically aligned revenue streams, including value added services, these additional opportunities will contribute to further
revenue and profit growth in the short- to medium term.
IMPACT OF FOREIGN EXCHANGE RATE CHANGES ON FINANCIAL PERFORMANCE2
The consolidated group results have been negatively impacted by considerable exchange rate fluctuations in Cartrack's operating currencies. On the
assumption of a constant currency basis, revenue would have been R25 million higher, while cost of sales would have been lower by R12 million than the
reported FY17 amounts. Operating profit would have increased by R27 million compared
to the reported FY17 amount. Year-on-year, revenue would have consequently increased by 16%, while operating profit would have increased by 15%. Adjusted
NEPS would have increased significantly to 92 cents, or by 22% year-on-year with HEPS growing by 15%. The segment impact is shown in the segment report
included in the audited abridged financial statements.
2This 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 year ended
28 February 2017 was recomputed by applying the average exchange rates applicable to the corresponding 28 February 2016 cost of sales, being those rates
applicable at the dates of stock procurement. On this basis, the cost of sales for the year ended 28 February 2017 would have decreased by 5%.
2. All other actual 28 February 2017 line items were recalculated at the average exchange rates applied for the period ended 28 February 2016.
An unmodified reasonable assurance report has been issued by the company's auditors, Grant Thornton, in terms of ISAE 3420, Assurance Reports on the
Process to Compile Pro Forma Financial Information Included in a Prospectus, and is available for inspection at the company's registered office. The pro
forma information has been compiled in terms of the JSE Listings Requirements, the Revised Guide on Pro Forma Information by SAICA and the accounting
policies of the group as at 28 February 2017.
SEGMENT PERFORMANCE
South Africa
The South African segment has continued to produce strong results. The investment in FY16 in distribution capacity has resulted in record sales for the
year and a consequent subscriber growth of 17%. The market for telematics and stolen vehicle recovery has shown both resilience and signs of increased
demand. Cartrack has been able to increase its penetration through certain channels to market and fully meet its sales growth expectations. Revenue grew
by 15% to R861 million, reflecting a 2% reduction in ARPU to R1 801 (FY16: R1 840). This marginally lower ARPU is attributable to an increased weighting
of sales through somewhat lower priced channels as well as the application of new business models for customer acquisition.
Profit margins remain largely protected by the growing subscriber base as well as strong annuity-based revenue, combined with a lower increase in
operating cost structures as predicted for the second half year.
Operating expenses were closely managed, whilst maintaining the requisite high service quality standards, resulting in an increase of only 8% year-on-
year. As a result, operating profit grew by 13%. Gross profit margin decreased by 2 basis points to 79%, but remains high largely as a result of the
vertically integrated business model which generates a margin by 'owning' the full cycle of operational activities from production through to fitment,
service and vehicle recovery. The operating profit margin for the segment was 36%, while EBITDA increased by 18%.
Cartrack continues to believe that there remains considerable untapped depth to the telematics market, particularly in the lower vehicle value SVR and
the small to medium enterprise (SME) Fleet markets and related services. A recently published research report (reference Berg Insight: Fleet Management
in South Africa) estimates that the market penetration on the population of non-privately owned fleet vehicles used by businesses was 24% in 2016. The
Fleet base now exceeds the pure vehicle recovery base by 34%. Subscribers continue to move towards Fleet products bundled with SVR, as opposed
to pure SVR products, as their understanding of the benefits of diverse telematics data increases. However, SVR remains a critical service given the
increasing incidence of theft evidenced on the Cartrack base over the past year. The vast telematics data accumulated to date is an inherently valuable
asset for analytical and marketing purposes, and represents a significant future revenue opportunity.
Africa-Other
The continent continues to experience significant economic challenges. Corporates and individuals are experiencing cash flow constraints as a result of
poor economic performance and severe currency devaluations, amongst other factors. The significant deterioration in local currencies severely impacted
the consolidated results reported in rand.
Whilst management planned conservatively against these headwinds, the reality has been an underperformance against expectations. Revenue decreased by 22%
mostly as a result of local currencies depreciating significantly against the South African rand. The subscriber base decreased by 2%, ascribed primarily
to economic hardship.
Operating profit has reduced by 30% year-on-year, substantially as a result of foreign exchange volatility and a flat subscriber base. Doubtful debt
provisions have been increased in the light of the trading difficulties currently experienced. However, operating profit margin at 37% (FY16: 41%, or 37%
excluding the operating foreign exchange gains realised) is currently the highest in the group. Despite the downturn, all subsidiaries within the segment
remain operationally sound, mostly highly profitable in local currency terms and well-positioned for an economic turnaround. Management focus remains
firmly placed on controlling costs, improving collection effectiveness and driving sales and customer retention.
The trading environment in the Africa-Other segment is likely to remain challenging in the medium-term. Market research and forecasts do, however,
indicate that the long-term outlook for a turnaround remains positive. At this time, Cartrack remains confident that the trading environment remains
conducive to maintaining a strong presence in this region, for all of the subsidiaries to remain profitable in the foreseeable future and to have a sound
infrastructure for the next economic growth cycle. The Africa-Other segment plays an important role in the high recovery rate of stolen vehicles in
South Africa and vice versa.
Europe
The European segment showed solid subscriber growth of 26% and revenue growth of 14% in rand terms. The region has tough competition and is experiencing
some market consolidation. These results bear testament to Cartrack's strong telematics value proposition and can be attributed largely to the investment
in distribution capacity in the region during this financial year.
Currency movements on consolidation, investment in operating- and distribution capacity, and deprecation of rental acquisition costs had a significant
impact on the segment results, causing a 19% decrease in operating profit. On an EBITDA basis, however, an increase of 21% year-on-year is reflected,
given that depreciation on the high level of capitalised rentals was a significant factor. Currently, the European operations sell primarily rental
contracts resulting in an increase in the capitalisation of hardware and acquisition cost, and the subsequent amortisation thereof over the contract
period.
The European market is becoming more discerning in its search for value from telematics, while embracing technological development. This, together with
ever increasing regulatory requirements, contributes positively to Cartrack's product development pipeline which also benefits countries outside of
Europe in a meaningful way.
Asia-Pacific and Middle East
This segment performed particularly well despite the negative impact of the strengthening rand in FY17. Revenue grew by 147% largely due to a 225% growth
in subscribers. ARPU for the region decreased by 8% to R3 032 (FY16: R3 309) primarily as a result of a more diversified service offering and customer
base.
Operating expenses increased by 44% as a result of the continued investment in distribution and operating capacity as the individual start-up entities
within this segment gain traction. This investment will continue across all entities in line with a structured and cautious development plan employed in
the region, where Singapore acts as a local executive and strategic office that drives and manages the operations based on group best practice.
Overall, this segment showed its first consolidated profit before tax. The profitability was largely driven by the Singapore operation which contributed
pre-consolidation profit before tax of R16 million in its third year of operation.
The results continue to be in line with the investment case for this region and proves again that greenfield operations require approximately three years
to become profitable.
Asia-Pacific also continues to be a key strategic segment from a product development perspective. For example, the rapid change from 2G towards 3G and 4G
data communication within the region has driven the development of our hardware to also benefit Europe and the USA. Despite natural demand for our
services, customers in this segment are also subject to continuing stringent regulatory development. This results in a particularly large and growing
market that presents many opportunities for strong revenue growth, which Cartrack aims to capitalise on.
United States of America (USA)
Cartrack established an operational base in California and, to date, it has incurred start-up and initial operating costs of R4 million. In-field testing
of the hardware and related software functionality on a new upgraded platform commenced in H2 17. Cartrack's strong product offering, combined with
competitive pricing and a developing distribution and operating infrastructure, will provide the platform for market penetration in FY18.
MANAGING OUR BALANCE SHEET
Working capital allocation and cash generation are key business objectives for the group.
Inventory balances, specifically components required for the FY18 production cycle, increased significantly year-on-year, mainly due to increasing of lead
times by suppliers. Production has been planned to meet growth targets, while ensuring that sufficient buffer stock remains available to provide for
adequate lead-times associated with global distribution and unforeseen component shortages or obsolescence. As a result, inventory days have increased
from 173 days to 197 days year-on-year.
Both current and quick ratios have decreased to 1.1 (FY16: 1.4) and 0.7 (FY16: 0.9) respectively. This is primarily as a result of a concerted and
continued investment in distribution capacity in Europe, Asia Pacific and the USA, as well as increased inventory balances.
Debtors' days (after provision for bad debts) have improved from 33 days to 31 days year-on-year. This is a key metric indicating operational
effectiveness and a strong focus on credit management, improved collections processes and prudent provisioning practices that will be maintained.
Notwithstanding the significant and continuing investment in distribution and operating capacity within the group which will require cash resources in
FY18, and despite minor short-term borrowings, Cartrack remains highly cash generative with a strong and positive cash flow forecast for the foreseeable
future.
OUTLOOK3
The coming of age of the digital era puts the Internet of Things (IoT) and SaaS firmly in the spotlight. As a result, the telematics industry is
experiencing an explosion of innovation - something that is at the heart of Cartrack's business and vital to the success thereof.
Current and future customers require ever-increasing information about their assets and people to more effectively achieve their goals. In this context,
Cartrack will become a more integral part of their lives, moving away from a service provider relationship to become business partners.
This will require a continued and significant investment in technology and intellectual property, and a further expansion of Cartrack's distribution and
operating capacity. Cartrack's current and expected internal cash flow generation will fund the majority of these investments, although inexpensive funding
opportunities are easily accessible.
The global telematics industry is showing signs of further consolidation. 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.
3In accordance with 8.40(b) of the JSE Listing Requirements, any forecast information included in this section has not been reviewed and reported on by
Cartrack's auditor. The directors take sole responsibility for the statements.
The South African market remains under-penetrated. Opportunities to enter the lower LSM market and to expand the product offering in the fleet-, asset-
and people tracking markets will increase sales and revenues. The order book in Europe is strong while new sales are being actively pursued. Asia Pacific
is now gaining operational mass as a region, with a strong sales pipeline and many cross-border opportunities which are ready to be exploited. The
Africa-Other operations will be closely monitored and managed in anticipation of a more favourable economic environment.
With all of this in mind, notwithstanding global economic and foreign exchange volatility, Cartrack expects to continue double digit subscriber- and
revenue growth in the foreseeable future.
BASIS OF ACCOUNTING
The auditors, Grant Thornton, have issued their opinion on the consolidated financial statements for the year ended 28 February 2017. The audit was
conducted in accordance with International Standards on Auditing (ISA). They have issued an unmodified audit opinion. The abridged consolidated financial
statements have been prepared under the supervision of John Edmeston (CA)SA. They represent a summary of the complete set of audited consolidated
financial statements of Cartrack as approved on 15 May 2017. The directors take full responsibility and confirm that this information has been correctly
extracted from the consolidated financial statements. The complete set of consolidated financial statements is available at www.cartrack.com and at
Cartrack's registered office for inspection. The abridged consolidated financial statements have been prepared in accordance with the requirements of the
JSE Listings Requirements for preliminary reports, and the requirements on the Companies Act, no 71 of 2008, applicable to summary financial statements.
The Listings Requirements require preliminary reports to be prepared in accordance with the framework concepts as a minimum and the measurement and
recognition requirements of IFRS, IAS 34: Interim Financial Reporting, the SAICA Financial Reporting Guides as issued by the Accounting Practices
Committee and Financial Pronouncements as issued by the Financial Reporting Standards Council. The accounting policies applied in the preparation of the
consolidated financial statements from which the abridged consolidated financial statements were derived are in terms of IFRS and are consistent, in all
material respects, with those detailed in Cartrack's prior year annual financial statements.
DIVIDEND DECLARATION
Ordinary shareholders are advised that the board of directors has declared a final gross cash dividend of 35 cents per ordinary share (28 cents net of
dividend withholding tax) for the year ended 28 February 2017 (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 6
Gross cash dividend per share 35 cents
Issued share capital as at declaration date 300 000 000
Declaration date Wednesday, 17 May 2017
Last date to trade cum dividend Tuesday, 4 July 2017
Shares commence trading ex dividend Wednesday, 5 July 2017
Record date Friday, 7 July 2017
Dividend payment date Monday, 10 July 2017
Share certificates may not be dematerialised or re-materialised between 5 July 2017 and 7 July 2017, both days inclusive.
The total dividend declared for the year ended 28 February 2017 amounted to 55 cents per share (FY16: 55 cents).
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 20% 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 20% 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
17 May 2017
Sponsor
Investec Bank Limited
Abridged audited consolidated statement of Financial Position
as at 28 February 2017
Figures in rand thousand Notes 2017 2016
ASSETS
Non-current assets
Property, plant and equipment 3 309 255 207 534
Goodwill 102 045 156 011
Deferred taxation 41 641 34 517
452 941 398 062
Current assets
Inventories 123 140 88 318
Loans to related parties 4 588 1 624
Trade and other receivables 4 151 438 128 655
Current taxation receivable 1 639 5 500
Cash and cash equivalents 70 078 45 181
350 883 269 278
Total assets 803 824 667 340
EQUITY AND LIABILITIES
Equity
Share capital 42 488 42 488
Reserves (56 656) 26 314
Retained income 461 745 375 306
Equity attributable to equity holders of parent 447 577 444 108
Non-controlling interest 14 200 16 387
461 777 460 495
Liabilities
Non-current liabilities
Finance lease obligation 18 123 7 789
Deferred taxation 2 066 1 040
20 189 8 829
Current liabilities
Trade and other payables* 173 951 153 585
Loans from related parties 3 778 1 478
Finance lease obligation 12 461 6 604
Current taxation payable 47 209 26 652
Provisions for warranties* 6 124 5 500
Share-based payment liability 6 030 4 010
Bank overdraft 72 305 187
321 858 198 016
Total liabilities 342 047 206 845
Total equity and liabilities 803 824 667 340
* Provisions for warranties, previously included in trade and other payables, have been disclosed separately on the face of the statement of
financial position (February 2017: R 6 124 000; February 2016: R 5 500 000). This presentation fairly presents the financial position of the group.
Abridged audited consolidated Statement of Profit or Loss and Other Comprehensive Income
for the year ended 28 February 2017
Figures in rand thousand Notes 2017 2016
Revenue 5 1 140 989 1 005 481
Cost of sales (228 598) (186 749)
Gross profit 912 391 818 732
Other income* 6 796 6 062
Operating expenses* 6 (550 356) (479 988)
Operating profit 368 831 344 806
Investment revenue 3 962 6 256
Finance costs (5 775) (4 463)
Net non-operating foreign exchange gain 2 607 15 667
Profit before taxation 369 625 362 266
Taxation (105 451) (102 779)
Profit for the year 264 174 259 487
OTHER COMPREHENSIVE INCOME:
Items that may be reclassified to profit or loss in future periods:
Exchange differences on translating foreign operations (85 716) 3 399
Other comprehensive income for the year net of taxation (85 716) 3 399
Total comprehensive income for the year 178 458 262 886
Profit attributable to:
Owners of the parent 256 895 239 674
Non-controlling interest 7 279 19 813
264 174 259 487
Total comprehensive income attributable to:
Owners of the parent 173 925 245 842
Non-controlling interest 4 533 17 044
178 458 262 886
EARNINGS PER SHARE
Per share information
Basic earnings per share (cents) 8.1 86 80
* Bad debts recovered, previously included in other income, have been included in operating expenses
(February 2017: R 5 949 179; February 2016: R 6 029 026). This presentation fairly presents the financial performance of the group.
Abridged audited consolidated Statement of Changes in Equity
for the year ended 28 February 2017
Figures in rand thousand Share Foreign Treasury Total Retained Total Non- Total
capital currency shares reserves income attributable controlling equity
translation to equity interest
reserve holders of
the group
Balance at 01 March 2015 42 488 32 251 - 32 251 285 632 360 371 13 391 373 762
Profit for the year - - - - 239 674 239 674 19 813 259 487
Other comprehensive income - 6 168 - 6 168 - 6 168 (2 769) 3 399
Total comprehensive income for the year - 6 168 - 6 168 239 674 245 842 17 044 262 886
Treasury shares acquired for Share Incentive Scheme - - (12 105) (12 105) - (12 105) - (12 105)
Dividends - - - - (150 000) (150 000) (14 048) (164 048)
Total contributions by and distributions to owners of
company recognised directly in equity - - (12 105) (12 105) (150 000) (162 105) (14 048) (176 153)
Balance at 01 March 2016 42 488 38 419 (12 105) 26 314 375 306 444 108 16 387 460 495
Profit for the year - - - - 256 895 256 895 7 279 264 174
Other comprehensive income - (82 970) - (82 970) - (82 970) (2 746) (85 716)
Total comprehensive income for the year - (82 970) - (82 970) 256 895 173 925 4 533 178 458
Dividends - - - - (164 321) (164 321) (5 446) (169 767)
Increase in holding of subsidiary - Cartrack North East Pty Ltd - - - - (6 135) (6 135) (865) (7 000)
Reduction due to capital distribution in Cartrack Polska.SP.ZO.O - - - - - - (409) (409)
Total contributions by and distributions to owners of
company recognised directly in equity - - - - (170 456) (170 456) (6 720) (177 176)
Balance at 28 February 2017 42 488 (44 551) (12 105) (56 656) 461 745 447 577 14 200 461 777
Abridged audited consolidated statement of CASH FLOWS
for the year ended 28 February 2017
Figures in rand thousand Notes 2017 2016
Cash flows from operating activities
Cash generated from operations 473 685 391 752
Interest income 3 962 6 256
Finance costs (3 865) (3 502)
Taxation paid (87 131) (133 120)
Net cash from operating activities 386 651 261 386
Cash flows from investing activities
Purchase of property, plant and equipment 3 (266 542) (158 216)
Sale of property, plant and equipment 4 155 3 923
Acquisition of subsidiaries, net of cash acquired - (15)
Net cash from investing activities (262 387) (154 308)
Cash flows from financing activities
Increase in loans from related parties 2 300 243
(Increase)/decrease in loans to related parties (2 964) 3 639
Finance lease receipts/(payments) 14 281 (1 596)
Purchase of shares for Share Incentive Scheme (Treasury shares) - (12 105)
Dividends paid (169 767) (164 048)
Increase in holding of subsidiary - Cartrack North East Pty Ltd (7 000) -
Reduction due to capital distribution in Cartrack Polska.SP.ZO.O (409) -
Net cash from financing activities (163 559) (173 867)
Total cash movement for the year (39 295) (66 789)
Cash at the beginning of the period 44 994 109 933
Effect of exchange rate movement on cash balances (7 926) 1 850
Total cash at end of the year (2 227) 44 994
Accounting policies
1. Presentation of group financial statements
Reporting entity
Cartrack Holdings Ltd is a company domiciled in the Republic of South Africa. These abridged audited consolidated annual financial statements are for the
year ended 28 February 2017 comprise the company and its subsidiaries (collectively the "group" and individually "group companies"). The group is
primarily involved in the design, development and installation of telematics technology, data collection and analysis and the delivery of fleet and
mobile asset management solutions delivered as Software-as-a-service ('SaaS') and the tracking and recovery of vehicles.
Statement of compliance
The abridged audited consolidated annual financial statements are prepared in compliance with the JSE Listings Requirements, International Financial
Reporting Standards (IFRS) and Interpretations of those standards, as issued by the International Accounting Standards Board (IASB), the financial
reporting pronouncements as issued by the Financial Reporting Standards Council (FRSC) that are relevant to its operations and have been effective for
the annual reporting period ending 28 February 2017, and the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee and the
South African Companies Act 71 of 2008, as amended. The annual financial statements were approved for issue by the board of directors on 16 May 2017
and are subject to approval by the annual general meeting of shareholders, on 20 July 2017.
Basis of measurement
The abridged audited consolidated annual financial statements have been prepared on the historical-cost basis.
Functional and presentation currency
These abridged audited consolidated annual financial statements are presented in South African rand (ZAR), which is the company's functional currency.
All financial information presented has been rounded off to the nearest thousand ZAR, unless otherwise indicated.
Going concern
The abridged audited consolidated annual financial statements are prepared on the going-concern basis as the directors believe that funds will be
available to finance future operations and that the realisation of assets and settlement of liabilities, contingent obligations and commitments will
occur in the ordinary course of business.
2. 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 annual financial statements.
Segment report - 28 February 2017 South Africa Africa -Other Europe Asia Pacific and USA Total
Middle East
Revenue 861 455 108 610 102 745 68 167 12 1 140 989
Cost of sales (182 112) (15 288) (18 152) (13 046) - (228 598)
Gross profit 679 343 93 322 84 593 55 121 12 912 391
Other income 2 846 516 2 827 607 - 6 796
Net operating foreign exchange (loss)/gain* (4 003) 603 1 689 76 - (1 635)
Operating expenses* (364 913) (54 697) (69 510) (55 341) (4 260) (548 721)
Operating profit 313 273 39 744 19 599 463 (4 248) 368 831
Financing cost (5 462) (67) (230) (16) - (5 775)
Financing revenue 1 804 2 157 - 1 - 3 962
Net non-operating foreign exchange gain 2 607 - - - - 2 607
Profit before taxation 312 222 41 834 19 369 448 (4 248) 369 625
Total tangible assets 435 808 75 485 88 998 97 255 4 233 701 779
Total liabilities (231 325) (44 922) (38 274) (26 288) (1 238) (342 047)
Goodwill 102 045
Equity 461 777
Segment report - 29 February 2016 South Africa Africa-Other Europe Asia Pacific and Total
Middle East
Revenue 748 600 139 197 90 037 27 647 1 005 481
Cost of sales (142 150) (24 050) (16 476) (4 073) (186 749)
Gross profit 606 450 115 147 73 561 23 574 818 732
Other income 3 822 122 1 673 445 6 062
Net operating foreign exchange gain* 3 133 5 217 498 2 485 11 333
Operating expenses* (337 321) (63 966) (51 529) (38 505) (491 321)
Operating profit 276 084 56 520 24 203 (12 001) 344 806
Financing cost (4 360) (10) (78) (15) (4 463)
Financing revenue 2 987 3 268 - 1 6 256
Net non-operating foreign exchange gain/(loss) - 332 (648) 15 983 15 667
Profit before taxation 274 711 60 110 23 477 3 968 362 266
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
* Net operating foreign exchange gain/(loss) is disclosed as part of operating expenses in note 6.
2017 2016
Cost Accumulated Carrying Cost Accumulated Carrying
depreciation value depreciation value
3. Property, plant and equipment
Buildings 5 468 (1 234) 4 234 5 234 (942) 4 292
Capital rental units 470 210 (212 133) 258 077 310 267 (144 173) 166 094
Computer software 3 003 (960) 2 043 1 533 (749) 784
Furniture and fixtures 6 326 (3 614) 2 712 6 310 (2 785) 3 525
IT equipment 24 305 (16 618) 7 687 22 218 (13 730) 8 488
Leasehold improvements 4 659 (4 356) 303 5 331 (5 331) -
Motor vehicles 58 535 (25 626) 32 909 47 318 (24 652) 22 666
Office equipment 3 277 (3 045) 232 3 942 (3 227) 715
Plant and machinery 2 044 (1 291) 753 2 101 (1 211) 890
Security equipment 707 (402) 305 452 (372) 80
578 534 (269 279) 309 255 404 706 (197 172) 207 534
Figures in rand thousand 2017 2016
4. Trade and other receivables
Trade receivables 157 284 126 272
Allowance for impairment of trade receivables (33 898) (19 509)
123 386 106 763
Prepayments 16 131 12 031
Deposits 2 033 4 616
Sundry debtors 5 846 3 512
Value added taxation receivable 4 042 1 733
151 438 128 655
Credit quality of trade and other receivables
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 90
days overdue) are considered indicators that the trade receivable is impaired.
Figures in rand thousand 2017 2016
Trade and other receivables (continued)
Trade receivables not provided for
The ageing of amounts not provided for is as follows:
Not past due 73 036 58 991
1 month past due 17 746 15 719
2 months past due 14 563 11 412
3 months past due 18 041 20 641
123 386 106 763
Reconciliation of allowance for impairment of trade and other receivables
Opening balance (19 509) (6 649)
Increase in allowance for impairment (45 728) (39 071)
Amounts utilised 31 339 26 211
(33 898) (19 509)
5. Revenue
Sale of hardware 144 008 147 360
Subscription revenue 980 017 842 095
Sundry sales 16 964 16 026
1 140 989 1 005 481
6. Operating expenses
Depreciation in operating expenses 71 794 48 286
Employee costs 270 312 254 639
Lease rentals on operating lease 25 504 23 068
Motor vehicle expenses 34 995 34 251
Net operating foreign exchange loss/(gain) 1 635 (11 332)
Other operating expenses 66 190 93 290
Research and development 79 926 37 786
550 356 479 988
7. 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.
Figures in rand thousand 2017 2016
8.Basic earnings per share
8.1. Basic earnings per share
Basic earnings per share
Basic earnings per share (cents) 86 80
Weighted average number of ordinary shares (basic)
Issued at the beginning of the year 300 000 300 000
Effect of treasury shares held (1 234) (51)
298 766 299 949
Basic earnings
Profit attributable to ordinary shareholders 256 895 239 674
8.2. Headline earnings per share
Headline earnings per share (cents) 85 81
Reconciliation between basic earnings and headline earnings
Basic earnings 256 895 239 674
Adjusted for:
Reversal of bargain purchase - 3 279
Gain on disposal of assets net of tax (1 610) (1 019)
255 285 241 934
8.3. Normalised earnings per share
Normalised earnings per share (cents) 85 75
Reconciliation between headline earnings and normalised earnings
Headline earnings 255 285 241 934
Net non-operating foreign exchange gain (2 607) (15 667)
252 678 226 267
Figures in rand thousand South Africa- Europe Asia USA Total Total
Africa Other Pacific 2017 2016
and Middle
East
9. Supplementary information
Constant currency segment report1
Revenue 861 455 140 699 98 975 64 650 12 1 165 790 1 005 481
Cost of sales (173 222) (10 480) (17 843) (14 561) - (216 106) (186 749)
Gross profit 688 233 130 219 81 132 50 089 12 949 685 818 732
Other income 2 846 579 2 716 576 - 6 717 6 062
Net operating foreign exchange gain/(loss) (4 003) 405 1 601 73 - (1 924) 11 333
Operating expenses (364 913) (68 580) (67 152) (53 330) (4 260) (558 235) (491 321)
Operating profit 322 163 62 623 18 297 (2 592) (4 248) 396 243 344 806
Financing cost (5 462) (67) (220) (16) - (5 765) (4 463)
Financing revenue 1 804 3 322 - 1 - 5 128 6 256
Net non-operating foreign exchange gain 2 607 - - - - 2 607 15 667
Profit before taxation 321 112 65 878 18 077 (2 607) (4 248) 398 212 362 266
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, and results of operations or cash flows.
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
28 February 2017 was recomputed by applying the average exchange rates applicable to the corresponding 29 February 2016 cost of sales, being those rates
applicable at the dates of stock procurement. On this basis, the cost of sales for period to 28 February 2017 would have decreased by 25%, and
- All other actual 31 August 2016 line items were recalculated at the average exchange rates applied for the period ended 29 February 2016.
CORPORATE INFORMATION
Cartrack Holdings Limited
(Incorporated in the Republic of South Africa)
(Registration number 2005/036316/06)
Share Code: CTK ISIN:ZAE000198305
(Cartrack or the group)
Registered office
Cartrack Corner
11 Keyes Road
Rosebank
Johannesburg
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
The Corporate Finance division of Investec Bank Limited
2nd Floor
100 Grayston Drive
Sandown
Sandton
2196
(PO Box 785700, Sandton, 2146)
Transfer Secretary
Computershare Investor Services Proprietary Limited
Rosebank Towers
15 Biermann Avenue
Rosebank
Johannesburg
2001
(PO Box 61051, Marshalltown, 2107)
Date: 17/05/2017 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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