Karooooo spends big to win clients
• Group grows subscribers by 21% in its first quarter and says Covid-19 has not thrown its growth off track
Karooooo, the new holding company for vehicle recovery and fleet management group Cartrack, is beefing up sales and marketing, having spent over 70% more in the first quarter as it seeks to build up its customer base in key markets across Southeast Asia and SA. In the three months to endMay, its first quarter, the group increased spending on sales and marketing to R89m, up from R52m previously.
Karooooo, the new holding company for vehicle recovery and fleet management group Cartrack, is beefing up sales and marketing, having spent over 70% more in the first quarter, as it seeks to build up its customer base in key markets across Southeast Asia and SA.
With Covid-19 having done little to stop Cartrack’s continued growth — a trajectory that has seen the group moving its primary listing to the New York Stock Exchange and its headquarters to Singapore — the firm has committed its expenditure to growing its subscriber base.
Despite growth in revenues and subscribers, the company says its investment in growth had been curtailed by the pandemic. Since November, the plan looks to be back on track.
In the three months to endMay, its first quarter, the group increased spending on sales and marketing by 71% to R89m, up from R52m previously. The majority of this — mostly made up of salaries and marketing — was used in SA, Cartrack’s largest market.
“We’re really allocating a lot of money for growth and we believe we’re going to get the fruits,” Zak Calisto, CEO of Karooooo, told Business Day in an interview. “We might grow it a little more but I think in the next six months our aim is about making that investment more productive.”
Karooooo, headquartered in Singapore, is positioning itself as a leading global mobility software-as-a-service (SaaS) platform that provides real-time data analytics to the transportation and logistics sectors.
The group, which employs about 3,300 people globally, said subscribers grew 21% to 1.366million in the first quarter, with revenue rising 17% to R626m.
It has kept its guidance for its year to end-February 2022 unchanged, and has a target of 1.5-million-1.6-million subscribers, which represents growth of up to 22.5%.
The company has attributed its performance through the pandemic to increased demand for its platform as fleet owners look to reduce costs and increase the value they get from telematics services.
“Customers seek to reduce operating costs, optimise the use of resources, improve the efficiency of fragmented work flows and enhance safety, risk management and eco compliance,” the company said in a statement.
Outside its expanding user base, the company has benefited from its listing on the Nasdaq in April, which opens up Karooooo — Calisto’s investment vehicle — to larger pools of capital on offer in the US market. On listing, the group raised $33.8m (R482m).
Karooooo also grew its research & development budget by 41% during the quarter.
“Once this investment gains traction and Covid-19 restrictions become less severe, its possible subscriber growth could breach the 30% level, which would be exciting,” said Chris Logan of Opportune Investments.
“Karooooo appears to be making commendable progress in their mission of building the leading mobility SaaS platform that maximises the value of data.
“This is a remarkable and inspirational feat for a company whose foundation is SA,” he said.
Though SA still makes up more than 70% of business, Calisto says the real growth will be in Southeast Asia. “The minute we see Asia opening up, that’s where we really want to allocate a lot of capital to.”
At the end of the first quarter of 2022, SA had 1.06-million subscribers, up 23% compared to the first quarter of 2021. The group said based on its estimates, it is the largest and fastest growing enterprise mobility SaaS provider for commercial fleets in SA.
Before Covid-19, Cartrack achieved compound annual growth in its subscriber base of 22% a year for the five years ending February 2020. It grew subscribers 16% in its year to end-February, with Covid-19 restrictions weighing on new car sales in the year.