CARTRACK HOLDINGS LIMITED - Audited Condensed Financial Results 2018

Release Date: 24/04/2018 07:05
Code(s): CTK
 
Wrap Text
Audited Condensed Financial Results 2018

Cartrack Holdings Limited
(Incorporated in the Republic of South Africa)
(Registration number 2005/036316/06)
Share Code: CTK ISIN:ZAE000198305
("Cartrack" or "the group")

AUDITED CONDENSED FINANCIAL RESULTS
2018

Salient features

Robust subscriber growth of 25% to 751 380
Subscription revenue up 19% to R1 166 million
Subscription revenue is 88% of the total revenue
Total revenue up 16% to R1 324 million
EBITDA of R652 million, up 25%
EBITDA margin of 49% up from 46%
Operating profit margin of 33% up from 32% despite continued investment for growth
Basic earnings per share (EPS) of 100,5 cents, up 17%
Headline EPS (HEPS) of 100,0 cents, up 17%
Normalised EPS (NEPS)1 of 100,0 cents, up 18%
Return on equity of 58%
Final dividend per share of 28 cents
Cash generated from operating activities of R467 million, up 21%
Currency fluctuations had an insignificant positive impact on operating profit of R0,5 million

1The presentation of NEPS is not an IFRS or JSE requirement. Management presents this measure as a supplementary performance measure. Normalised earnings
represent headline earnings plus/(less) any other unusual non-recurring and non-operating items not already taken into account in headline earnings. In FY18 there
were no such adjustments and therefore NEPS equalled HEPS.

Commentary

GROUP PROFILE
Cartrack is a leading global provider of solutions for mobile asset management, asset recovery, workforce optimisation and data analytics based on a proven
telematics platform. Fleet management (Fleet), Stolen Vehicle Recovery (SVR) and Insurance Telematics services remain its primary offerings. It continues to develop
innovative, first-to-market solutions aimed at further enhancing its customers' experience. Cartrack has an extensive footprint in 24 countries across Africa,
Europe, North America, Asia-Pacific and the Middle East. With a base of more than 750 000 active subscribers, the group ranks among the largest telematics companies
globally.

Cartrack is a service-centric organisation focusing on in-house design, development, production and installation of telematics technology and data analytics
products. 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 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 91% as at 28 February 2018 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 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 has geared itself for growth while delivering a robust set of annual results with EPS growth of 17%. This was achieved as a result of strong subscriber and
revenue growth while maintaining industry-leading operating profit and EBITDA margins of 33% (FY17: 32%) and 49% (FY17: 46%) respectively. These figures are
indicative of the strong performance of the annuity-based revenue model in a growth environment, and have been achieved despite strong investment in operational,
distribution and service capacity, as well as accelerated investment in research and development. The decision for ongoing investment in pursuit of sensible growth,
and the realisation of economies of scale across businesses and segments, will continue to generate robust results in the future.

The group achieved subscriber growth of 25%, increasing from 600 610 to 751 380 subscribers. South Africa, Europe and Asia-Pacific all contributed positively to
the growth, while the Africa segment showed a decrease in subscribers of 2% as a result of the challenging economic conditions across this segment. The group
continues to maintain a strong order book while focusing efforts on channel and market development.

Revenue increased by 16% from R1 141 million to R1 324 million. Annuity revenue increased by 19% and represents 88% of total revenue. The increase in revenue can
primarily be attributed to strong subscriber growth. Revenue was negatively impacted on consolidation by the strengthening rand. Had exchange rates remained
unchanged, revenue would have increased by 18% to R1 343 million.

The group continued to invest in operational, distribution and service capacity, while also accelerating its investment in research and development. This resulted
in operating expense growth of 21%. Operating profit increased by 18% from R369 million to R434 million. EBITDA increased by 25% from R523 million to R652 million,
largely as a result of the increased depreciation charge related to increased rental sales.

EPS increased by 17% to 100,5 cents (FY17: 86,0 cents). HEPS and NEPS increased by 17% and 18% to 100,0 cents (FY17: 85,4 cents) and 100,0 cents (FY17: 84,6 cents)
respectively. Return on equity of 58% (FY17: 55%) and return on assets of 33% (FY17: 35%) remain indicative of the efficient application of capital across the
group.

Lucrative growth opportunities are evident across all channels to market and in each operating region as the demand for telematics data continues to increase.
Opportunities to develop further vertically aligned revenue streams remain at the forefront of management's short and medium-term strategy.

Segment overview

South Africa
The South Africa segment delivered particularly strong results. Subscription revenue increased by 18% year on year while subscribers grew 26% over the same period.
The realisation of a strong sales pipeline, investment in operating capacity and an effective distribution strategy, are the primary contributors to this organic
growth.

In line with expectations, the sales mix changed to include significantly more rental than cash sales in FY18. As a result, hardware revenue decreased 7% year on
year, resulting in total revenue growth of 14%.

Operating expenses increased by 16% largely as a result of the investment in distribution. The investment in operating and distribution capacity will continue to
exploit the growth opportunities in the South African market to the extent that operating profit margins can be maintained at target levels.

The South African market, particularly in the lower vehicle value segment, remains underpenetrated. To this end, Cartrack launched a first-to-market innovative
insurance offering for vehicle theft that targets the previously uninsured market in South Africa. According to the Automobile Association of South Africa, as much
as 70% of the more than 12 million registered vehicles in South Africa are uninsured. Leveraging its 91% recovery rate, wealth of Insurance Telematics data and
investment in research and development, Cartrack is able to offer theft-only car insurance at R9,99 per month, subject to terms and conditions, if a Cartrack
telematics device is installed.

Insurance Telematics is fast becoming a critical component in risk management. The launch of the R9,99 theft-only insurance product coincides with the significant
value that Insurance Telematics is bringing to the insurance industry. It also places Cartrack in the unique position to offer customers of this theft-only
insurance product the best comprehensive insurance premiums by providing insurance companies with the necessary driver analytics, thereby enabling them to offer the
optimal insurance quote. In this way, Cartrack will continue to become a more integral part of its current and future customers' lives.

As the subscriber base continues to grow, Cartrack continues to identify and exploit opportunities to realise economies of scale and operating efficiencies.

Africa
The Africa segment delivered a resilient performance, notwithstanding sluggish regional economic performance. The subscriber base decreased by 2%. Revenue decreased
by 4% from R109 million to R105 million primarily as a result of a stronger rand. Had exchange rates remained unchanged, revenue would have increased by 2%.
Financial hardship, experienced by consumers, private and commercial customers alike, is the major factor contributing to the lacklustre sales levels. However, all
subsidiaries in this segment remain profitable in local currency terms and continue to generate positive cash flows.

Operating costs in this segment have increased by 9%. Careful cost management and optimisation of collection processes have been and remain key focus areas for
management while the economic activity in the segment recovers from the challenges faced over the past two years.

Operating profit decreased by 20% from R40 million to R32 million. The negative impact of the stronger rand combined with a significant increase in corporate
management costs were the primary reasons for the decrease in operating profit. Cartrack expects this investment in strategic resources to positively impact this
segment and group results over the next 18 months.

This segment continues to play a critical role in ensuring a high cross-border stolen vehicle recovery rate.

Europe
The segment delivered strong subscriber growth of 26% largely as a result of the investment in distribution and operating capacity over the past two years. The
consolidated segment revenue increased by 13% from R103 million to R116 million. The strengthening rand negatively impacted consolidated revenue. Had exchange rates
remained unchanged, revenue would have increased by 15% to R118 million.

Operating costs in this segment have increased by 24%. The segment operating profit margin will increase once the investment in operating and distribution capacity
stabilises. Operating profit decreased by 3%. EBITDA for this segment increased by 26% while maintaining a healthy 56% EBITDA margin.

The investment in distribution and operating capacity will continue as new channels to market are established. In particular, the insurance telematics and
individual retail markets, particularly driver safety and security elements, remain underpenetrated. These markets present lucrative growth opportunities to provide
telematics offerings and related value-added services.

Asia Pacific
Asia Pacific is now the second largest segment in the group based on revenue contribution, with total revenue up 73% from R68 million to R118 million and
subscription revenue up 80%. On a constant currency basis, subscription revenue would have increased by 93% to R113 million and total revenue would have increased
by 87% to R127 million. This is the result of subscribers increasing by 59%. The continued strong subscriber growth remains in line with management's expectation.
Despite incurring start-up costs within the region, operating profit and EBITDA margins of 13% (FY17: 1%)and 30% (FY17: 15%) respectively were achieved. The segment
contributed R15 million (FY17: R0,5 million) to group operating profit.

The market in this segment remains considerably underpenetrated due to fragmented market participants delivering entry-level telematics offerings, enabling Cartrack
to exploit its more sophisticated, reliable products and customer-centric services. Cartrack remains poised to exploit new opportunities while expanding cross-
border relationships as it drives its robust and proven offerings to SVR and Fleet customers in this segment.

USA
Cartrack's investment in the USA has yielded many key insights that have positively contributed to the improvement of its platform, software and distribution
approach across the group. The investment to date has largely been in research and development, which has been expensed in terms of the group policy. This
investment continues to be strategic in nature.

MANAGING OUR BALANCE SHEET
Capital allocation and cash management are particularly important in a high growth phase with accelerated investment in operating and distribution capacity. Prudent
management in this regard remains a key focus area, which is monitored and managed on an ongoing basis.

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. Inventory balances, specifically components required for the FY18/19 production cycle, increased
significantly since 28 February 2017 as a result of increasing lead times by suppliers. Bulk discounts have also been considered in the strategic management of
inventory levels. This has resulted in inventory days increasing to 271 days (FY17: 197 days). Management expects the inventory days to improve in FY19 as the sales
pipeline is realised.

The higher levels of rental sales and the corresponding increase in capitalised rental assets, planned and continued investment in distribution and operating
capacity of the group, as well as the increase in inventory levels to ensure uninterrupted realisation of the sales pipeline, have resulted in the reinvestment of
cash flows generated from operating activities. The current and quick ratios of 0,9 (FY17: 1,1) and 0,5 (FY17: 0,7) respectively, reflect this reinvestment.

Debtors' days (after provision for bad debts) have improved to 29 days (FY17: 31 days). This is a key metric indicating the quality of sales, 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 customer acquisition, Cartrack remains highly cash generative with a strong cash flow forecast for the
foreseeable future.

OUTLOOK 2
SaaS, within the context of the Internet of Things (IoT), continues to rapidly expand as the digital civilisation comes of age. Cartrack remains at the forefront of
the related telematics expansion and continues to drive innovation and application through its interaction with customers and strategic research and development
activities.

Cartrack has started experimenting with smart-mobility in partnership with two of the worlds' leading companies in pay-as-a-service transportation. This reconfirms
the value of an eco-system platform for connected vehicles regardless of the vehicle brand. Cartrack sees this as a strengthening of the value proposition of
telematics companies and particularly those with stable, proven and dynamic platforms. This will in the future leverage both OEM and third-party telematics devices
to provide decision-useful information.

Customers are ever more demanding and reliant on the telematics market to optimise business intelligence relating to assets and people on a global scale. Cartrack
will continue to become a more integral part of its current and future customers' lives. This will require a continued and deliberate investment in technology,
information management, human resources as well as distribution and operating capacity in current and new markets. Under certain circumstances, this may be achieved
through market consolidation to the extent that operational efficiencies can be realised while customer service deepens.

The South African market remains underpenetrated with many opportunities to provide customer-centric solutions to individuals and fleets alike. Further
opportunities to provide customer-centric solutions that put Cartrack customers in control will be exploited.

The new management structure, management teams and refreshed distribution and operating capacity strategies for the Africa segment, are expected to positively
impact group results over the next 18 months.

The order book in Europe remains strong while new sales are being actively pursued. While subscriber growth and customer service remain the primary focus, cost
rationalisation strategies will be implemented to leverage subscriber growth to increase operating profit and margin.

Asia-Pacific continues to gain operational mass as a region, with a strong sales pipeline and many opportunities which are being exploited.

Notwithstanding global economic and foreign exchange volatility, Cartrack expects to continue double-digit subscriber and revenue growth in the foreseeable future.

2 Any forecast information included in this section has not been reviewed and 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.

AUDIT OPINION AND BASIS OF ACCOUNTING
The auditors, Grant Thornton, have issued an unmodified opinion on the consolidated financial statements for the year ended 28 February 2018. The audit was
conducted in accordance with the International Standards on Auditing. Copies of their audit report on the consolidated financial statements are available for
inspection at Cartrack's registered office. The auditors' report does not necessarily report on all of the information contained in these condensed financial
results. Shareholders are therefore advised that in order to obtain a full understanding of the nature of the auditor's engagement they should obtain a copy of the
auditors' report together with the accompanying financial information from Cartrack's registered office. Any reference to future financial performance or prospects
included in this announcement has not been audited or reported on by Cartrack's auditors.

The abridged consolidated financial statements were prepared under the supervision of John Edmeston (CA)SA and present a summary of the complete set of audited
consolidated financial statements of Cartrack as approved on 23 April 2018. These abridged consolidated financial statements are extracted from audited information,
but are not themselves audited. The complete set of consolidated financial statements is available at www.cartrack.com and at Cartrack's registered office for
inspection. The directors take full responsibility and confirm that the abridged information has been correctly extracted from the consolidated financial
statements. The abridged consolidated financial statements were prepared in accordance with the requirements of the JSE Limited Listings Requirements for financial
reports, and the requirements of the Companies Act, 71 of 2008, applicable to financial statements. The Listings Requirements require financial 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 abridged consolidated 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.

DIVIDEND DECLARATION
Ordinary shareholders are advised that the board of directors has declared a final gross cash dividend of 28 cents per ordinary share (22,4 cents net of dividend
withholding tax as applicable) for the year ended 28 February 2018 (the cash dividend). The cash dividend will be paid out of profits of the company.

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 growth.

Consequently, management has re-evaluated the dividend policy, presently being a targeted cover of between 1,25 and 2,5 times HEPS. The revised dividend policy
provides for a target cover of between two and four times HEPS, to be effective for FY19.

Share code                                                      CTK
ISIN                                                   ZAE000198305
Company registration number                          2005/036316/06
Company tax reference number                             9108121162
Dividend number                                                   8
Gross cash dividend per share                              28 cents
Issued share capital as at declaration date             300 000 000
Declaration date                             Tuesday, 24 April 2018
Last date to trade cum dividend                Tuesday, 3 July 2018
Shares commence trading ex dividend          Wednesday, 4 July 2018
Record date                                     Friday, 6 July 2018
Dividend payment date                           Monday, 9 July 2018

Share certificates may not be dematerialised or rematerialised between Wednesday, 4 July 2018 and Friday, 6 July 2018, 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 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

24 April 2018

Sponsor
The Standard Bank of South Africa Limited

Consolidated statement of financial position
As at 28 February 2018

Figures in rand thousand                         Notes       2018      2017
Assets
Non-current assets
Property, plant and equipment                        3    516 045   309 255
Goodwill                                                  107 597   102 045
Deferred taxation                                          49 488    41 641
                                                          673 130   452 941
Current assets
Inventories                                               173 680   123 140
Loans to related parties                                    2 272     4 588
Trade and other receivables                          4    154 952   151 438
Current taxation receivable                                 4 143     1 639
Cash and cash equivalents                                  69 573    70 078
                                                          404 620   350 883
Total assets                                            1 077 750   803 824
Equity and Liabilities
Equity
Share capital                                              42 488    42 488
Reserves                                                  (53 416)  (56 656)
Retained income                                           601 224   461 745
Equity attributable to equity holders of parent           590 296   447 577
Non-controlling interest                                   10 125    14 200
                                                          600 421   461 777
Liabilities
Non-current liabilities
Instalment sale obligation                                 28 635    18 123
Amounts received in advance*                                5 253         -
Deferred taxation                                           2 316     2 066
                                                           36 204    20 189
Current liabilities
Trade and other payables                                  111 722    94 676
Amounts received in advance*                               68 860    79 275
Loans from related parties                                  5 486     3 778
Provision for warranties                                    6 482     6 124
Share-based payment liability                                   -     6 030
Instalment sale obligation                                 27 637    12 461
Current taxation payable                                   55 911    47 209
Bank overdraft                                            165 027    72 305
                                                          441 125   321 858
Total liabilities                                         477 329   342 047
Total equity and liabilities                            1 077 750   803 824

* Amounts received in advance, previously included in trade and other payables, have been disclosed separately on the face of the statement of financial
  position February 2018 (R74 113 097 February 2017: 79 275 220).

Consolidated statement of profit or loss and other comprehensive income
For the year ended 28 February 2018

Figures in rand thousand                                              Notes       2018       2017
Revenue                                                                   5  1 324 245  1 140 989
Cost of sales                                                                 (233 949)  (228 598)
Gross profit                                                                 1 090 296    912 391
Other income                                                                     9 091      6 796
Operating expenses                                                        6   (665 091)  (550 356)
Operating profit                                                               434 296    368 831
Investment revenue                                                               3 641      3 962
Finance costs                                                                  (15 729)    (5 775)
Net non-operating foreign exchange gain                                              -      2 607
Profit before taxation                                                         422 208    369 625
Taxation                                                                      (111 726)  (105 451)
Profit for the year                                                            310 482    264 174
Other comprehensive loss:
Items that may be reclassified to profit or loss in future periods:
Exchange differences on translating foreign operations                          (2 795)   (85 716)
Other comprehensive loss for the year net of taxation                           (2 795)   (85 716)
Total comprehensive income for the year                                        307 687    178 458
Profit attributable to:
Owners of the parent                                                           300 146    256 895
Non-controlling interest                                                        10 336      7 279
                                                                               310 482    264 174
Total comprehensive income attributable to:
Owners of the parent                                                           303 386    173 925
Non-controlling interest                                                         4 301      4 533
                                                                               307 687    178 458
Earnings per share
Per share information
Basic and diluted earnings per share (cents)                            8.1        101         86

Consolidated statement of changes in equity
For the year ended 28 February 2018

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 1 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 Proprietary Limited                         -            -         -           -     (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
Profit for the year                                                                                 -            -         -           -    300 146       300 146       10 336    310 482
Other comprehensive loss                                                                            -        3 240         -       3 240          -         3 240       (6 035)    (2 795)
Total comprehensive income for the year                                                             -        3 240         -       3 240    300 146       303 386        4 301    307 687
Dividends                                                                                           -            -         -           -   (158 345)     (158 345)      (7 696)  (166 041)
Increase in holding of subsidiaries1                                                                -            -         -           -     (2 322)       (2 322)       1 496       (826)
Acquisition of subsidiary of NCI portion - Cartrack New Zealand Limited                             -            -         -           -          -             -       (2 176)    (2 176)
Total contributions by and distributions to owners of company recognised directly in equity         -            -         -           -   (160 667)     (160 667)      (8 376)  (169 043)
Balance at 28 February 2018                                                                    42 488      (41 311)  (12 105)    (53 416)   601 224       590 296       10 125    600 421

Notes

1 Cartrack Technologies Asia Pte. Limited acquired full control of Cartrack Technologies (China) Limited and PT. Cartrack Technologies Indonesia.


Consolidated statement of cash flows
For the year ended 28 February 2018

Figures in rand thousand                                           Notes       2018       2017
Cash flows from operating activities
Cash generated from operations                                              589 073    473 685
Interest income                                                               3 641      3 962
Finance costs                                                               (11 819)    (3 865)
Taxation paid                                                              (113 082)   (87 131)
Net cash from operating activities                                          467 813    386 651
Cash flows from investing activities
Purchase of property, plant and equipment                              3   (420 067)  (266 542)
Sale of property, plant and equipment                                         3 432      4 155
Acquisition of subsidiaries, net of cash acquired                            (2 176)         -
Net cash from investing activities                                         (418 811)  (262 387)
Cash flows from financing activities
Increase in loans from related parties                                        2 011      2 300
Increase in loans to related parties                                          2 354     (2 964)
Net finance lease receipts                                                   21 779     14 281
Dividends paid                                                             (166 041)  (169 767)
Reduction due to capital distribution in Cartrack Polska SP.Z0.0                  -       (409)
Increase in holding of subsidiaries                                            (826)    (7 000)
Net cash from financing activities                                         (140 723)  (163 559)
Total cash movement for the year                                            (91 721)   (39 295)
Cash at the beginning of the period                                          (2 227)    44 994
Effect of exchange rate movement on cash balances                            (1 506)    (7 926)
Total cash at the end of the year                                           (95 454)    (2 227)

Accounting policies
1. Presentation of Group financial statements

Reporting entity
Cartrack Holdings Limited is a company domiciled in the Republic of South Africa. These consolidated annual financial statements for the year ended 28 February 2018
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 consolidated annual financial statements are prepared in compliance with JSE Listings Requirements, 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 2018, 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 23 April 2018 and are subject to approval by the annual general meeting of shareholders, on 17 July 2018.

These accounting policies are consistent with the previous period.

Basis of measurement
The consolidated annual financial statements have been prepared on the historical cost basis.

Functional and presentation currency
These 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 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 financial statements.

Figures in rand thousand                                                                             Asia-Pacific           
                                                                                                              and
                                                   South Africa  Africa-Other                Europe   Middle East           USA      Total
    Segment report - 28 February 2018
    Revenue                                             983 690       104 643               116 263       118 257         1 392  1 324 245
    Cost of sales                                      (187 107)      (13 531)              (13 619)      (19 174)         (518)  (233 949)
    Cost of sales - depreciation                        (82 311)         (849)              (16 122)      (11 073)          (41)  (110 396)
    Cost of sales - other                              (104 796)      (12 682)                2 503        (8 101)         (477)  (123 553)

    Gross profit                                        796 583        91 112               102 644        99 083           874  1 090 296
    Other income                                          5 747           206                 1 894         1 244             -      9 091
    Net operating foreign exchange (loss)/gain           (3 605)          293                   834           504             -     (1 974)
    Operating expenses*                                (422 570)      (59 803)              (86 428)      (85 530)       (8 786)  (663 117)
    Operating expense - depreciation                    (64 884)       (2 014)              (29 461)       (9 565)         (184)  (106 108)
    Operating expenses - other                         (357 686)      (57 789)              (56 967)      (75 965)       (8 602)  (557 009)

    Operating profit                                    376 155        31 808                18 944        15 301        (7 912)   434 296
    Financing cost                                      (11 627)         (686)               (1 161)       (2 255)            -    (15 729)
    Financing revenue                                       270         3 354                    17             -             -      3 641
    Profit before taxation                              364 798        34 476                17 800        13 046        (7 912)   422 208
    Total tangible assets                               625 891        82 745               150 491       101 617         9 409    970 153
    Total liabilities                                  (346 091)      (37 812)              (52 089)      (39 482)       (1 855)  (477 329)
    Goodwill                                                                                                                       107 597
    Equity                                                                                                                         600 421

Figures in rand thousand                                                                             Asia-Pacific           
                                                                                                              and
                                                   South Africa  Africa-Other                Europe   Middle East           USA      Total
 
    Segment report - 28 February 2017
    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
    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

                                                                         2018                                              2017
Figures in rand thousands                                         Accumulated   Carrying                            Accumulated   Carrying
                                                         Cost    depreciation      value                    Cost   depreciation      value
3.  Property, plant and equipment
    Buildings                                             6 592        (2 305)     4 287                   5 468         (1 234)     4 234
    Capital rental units                                761 803      (334 430)   427 373                 470 210       (212 133)   258 077
    Computer software                                     5 939        (1 419)     4 520                   3 003           (960)     2 043
    Furniture and fixtures                                7 314        (4 381)     2 933                   6 326         (3 614)     2 712
    IT equipment                                         35 865       (22 413)    13 452                  24 305        (16 618)     7 687 
    Leasehold improvements                                5 333        (4 208)     1 125                   4 659         (4 356)       303
    Motor vehicles                                       91 964       (31 103)    60 861                  58 535        (25 626)    32 909
    Office equipment                                      3 667        (3 169)       498                   3 277         (3 045)       232
    Plant and machinery                                   2 166        (1 469)       697                   2 044         (1 291)       753
    Security equipment                                      805          (506)       299                     707           (402)       305
                                                        921 448      (405 403)   516 045                 578 534       (269 279)   309 255
                                                                    
Figures in rand thousands                              2018      2017
4.  Trade and other receivables
    Trade receivables                               151 959   157 284
    Allowance for impairment of trade receivables   (30 382)  (33 898)
                                                    121 577   123 386
    Prepayments                                      20 233    16 131
    Deposits                                          2 912     2 033
    Sundry debtors                                    8 984     5 846
    Value added taxation receivable                   1 246     4 042
                                                    154 952   151 438
Loans and receivables
Appropriate allowances for estimated irrecoverable amounts are recognised in profit or loss when there is objective evidence that the asset is impaired.
Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy or financial reorganisation, and default or delinquency in
payments (based on prevailing and historical country specific information) are considered indicators that the trade receivable is impaired.

The allowance for doubtful debt recognised is measured as the difference between the carrying amount and the aggregated expected cash flows that the entity expects
to recover. The effects of time value of money are not considered to be material for trade receivables. Therefore, these instruments are not discounted as their
face values approximate their amortised cost.

The determination of the allowance for doubtful debt is specific to every jurisdiction and requires significant judgement. Management considers internal and
external variable collection costs, refundable sales and other taxes as well as the value realisable through the sale of debt to third-party collection agencies in
determining the allowance for doubtful debt.

Figures in rand thousands                     2018       2017
5. Revenue
    Sale of hardware                       138 639    144 008
    Subscription revenue                 1 165 532    980 017
    Sundry sales                            20 074     16 964
                                         1 324 245  1 140 989
6.  Operating expenses
    Depreciation                           106 970     71 794
    Employee costs                         340 429    270 312
    Operating lease rentals                 30 676     25 504
    Motor vehicle expenses                  52 548     34 995
    Net operating foreign exchange loss      1 974      1 635
    Other operating expenses*               78 021    111 696
    Research and development*               54 473     34 420
                                           665 091    550 356

* Expense items have been reallocated to more accurately represent the nature of their cost.

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. Instalment sale agreements are variable rate instruments which mature over a period of approximately 36 months. It is estimated
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 thousands                                                    2018     2017
8.  Basic earnings per share
8.1 Basic earnings per share
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.
    Basic earnings per share
    Basic earnings per share (cents)                                          101       86
    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)  (1 234)
                                                                          298 766  298 766
    Basic earnings
    Profit attributable to ordinary shareholders                          300 146  256 895
8.2 Headline earnings per share
    Headline earnings per share (cents)                                       100       85
    Reconciliation between basic earnings and headline earnings
    Basic earnings                                                        300 146  256 895
    Adjusted for:
    Gain on disposal of assets net of tax                                    (929)  (1 610)
                                                                          299 217  255 285
8.3 Normalised earnings per share
    Normalised earnings per share (cents)                                     100       85
    Reconciliation between headline earnings and normalised earnings
    Headline earnings                                                     299 217  255 285
    Net non-operating foreign exchange gain                                     -   (2 607)
                                                                          299 217  252 678


Figures in rand thousands                                                    2018     2017
9.  Commitments
    Operating leases
    Minimum lease payments due
    - within one year                                                      19 124   18 586
    - in second to fifth year inclusive                                    13 056   29 115
                                                                           32 180   47 701

Operating lease payments represent rentals payable by the group for certain of its office properties. Leases are negotiated for an average term of three to five
years. No contingent rent is payable.

Mercantile Bank Limited has provided a facility of R70 million to Cartrack Proprietary Limited. At 28 February 2018 that facility was fully utilised.

Mercantile Bank Limited has provided a facility of R80 million (2017: R80 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 year, the amount was fully utilised (2017: R72 million).

Nedbank Limited has provided a facility of R5 million(2017: R5 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 year, the amount utilised was R2 million (2017: R2,5 million).

Cartrack Investments UK Limited has provided Cartrack Espana, S.L with a loan in the amount of euro 1,4 million (2017: euro 1,4 million) (the Loan). Cartrack
Technologies Asia Pte. Limited has provided Cartrack Investments UK Limited with a guarantee for repayment of the loan.

The group has signed subordination agreements with all insolvent subsidiaries.

At 28 February 2018, Cartrack Manufacturing Proprietary Limited has no outstanding forward exchange contracts. Cartrack Manufacturing Proprietary Limited had
forward exchange contracts in February 2017 of R2,7 million which expired on 3 April 2017.

Figures in rand                      2018     2017
Guarantees
Accelerate Property Fund Limited        -   76 500
FPG Holdings Proprietary Limited  250 000  250 000
Janco Property Investments CC      32 729   32 729
SA Post Office Limited             30 000   30 000
Vodacom Service Provider Company        -  450 000


10. Acquisition of additional interest
Acquisitions occurring during the year ended 28 February 2018
Cartrack New Zealand Limited
In April 2017, the group acquired 51% interest in Cartrack New Zealand Limited for a cash consideration of 510 New Zealand dollars from Johan De Wet. The group
acquired this company in order to achieve economies of scale, standardisation, integration and operational simplification in order to stimulate future growth.

Cartrack Technologies (China) Limited
In July 2017, the group acquired the full minority interest in Cartrack Technologies (China) Limited for a cash consideration of 20 000 Singapore dollars (R191
644) from YC Lee. The group acquired this company in order to achieve economies of scale, standardisation, integration and operational simplification in order to
stimulate future growth.

PT. Cartrack Technologies Indonesia
In November 2017, the group acquired the full minority interest in PT. Cartrack Technologies Indonesia for a cash consideration of 46 405 US dollars (R634 588)
from minority shareholder. The group acquired this company in order to achieve economies of scale, standardisation, integration and operational simplification in
order to stimulate future growth.

Acquisitions occurring during the year ended 28 February 2017
Cartrack North East (Pty) Ltd
In July 2016, the group acquired the full minority interest of 24,5% in Cartrack North East (Pty) Ltd for a cash consideration of R7 million from the Phillip
Oosthuysen Trust. The new shareholding in Cartrack North East (Pty) Ltd is 100%. The group acquired this company in order to achieve economies of scale
standardisation, integration and operational simplification in order to stimulate future growth.

Constant currency segment report

Figures in rand thousand                                                      Asia-      
                                                                            Pacific                 
                                                                                and                
                                                South    Africa-             Middle                Total      Total
                                               Africa     Other   Europe       East       USA       2018       2017
Constant currency segment report1
Revenue                                       983 690   111 361   118 756   127 260     2 247  1 343 314  1 140 989
Cost of sales                                (189 072)  (14 905)  (14 185)  (21 381)     (562)  (240 105)  (228 598)
Gross profit                                  794 618    96 456   104 571   105 879     1 685  1 103 209    912 391
Other income                                    5 748       231     1 928     1 312         -      9 219      6 796
Net operating foreign exchange gain/(loss)     (3 605)      296       834       508         -     (1 967)    (1 635)
Operating expenses                           (422 570)  (63 557)  (88 032)  (91 074)  (10 469)  (675 702)  (548 721)
Operating profit                              374 191    33 426    19 301    16 625    (8 784)   434 759    368 831
Financing cost                                (11 627)     (707)   (1 170)   (2 365)        -    (15 869)    (5 775)
Financing revenue                                 269     3 480         -        17         -      3 766      3 962
Net non-operating foreign exchange gain             -         -         -         -         -          -      2 607
Net profit before tax                         362 833    36 199    18 131    14 277    (8 784)   422 656    369 625

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
  2018 was recomputed by applying the average exchange rates applicable to the corresponding 28 February 2017 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 2018 would have decreased by 5%, and
- All other actual 28 February 2018 line items were recalculated at the average exchange rates applied for the period ended 28 February 2017.

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 Standard Bank of South Africa Limited
30 Baker Street
Rosebank
2109
(PO Box 61344, Marshalltown, 2107)

Transfer Secretary
Computershare Investor Services Proprietary Limited
Rosebank Towers
15 Biermann Street
Rosebank
2001
(PO Box 61051, Marshalltown, 2107)


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