Car­track in the fast lane

EARN­INGS AND SUB­SCRIBERS JUMP While it’s still small, an­a­lysts be­lieve this is one to watch.

The Citizen (KZN) - - BUSINESS - War­ren Thomp­son Money­web

Ve­hi­cle re­cov­ery and telem­at­ics com­pany Car­track an­nounced in­terim re­sults for the six months to Au­gust on Wed­nes­day that saw earn­ings grow­ing hand­somely on the back of a jump in sub­scriber num­bers.

The com­pany’s pri­mary busi­ness is the track­ing and re­cov­ery of ve­hi­cles for which it charges sub­scrip­tion fees. The num­ber of sub­scribers in­creased by 21% to 666 422 across the 24 coun­tries its ser­vices are of­fered in. Growth was spread geo­graph­i­cally, with in­creases in SA of 19%, in Europe of 24% and Asia Pa­cific of 122%. The only blot was in the rest of Africa, which saw sub­scriber num­bers stay con­stant but rev­enue fall.

This saw sub­scriber rev­enue jump by 19% ver­sus the same pe­riod in 2016. It con­trib­uted to the 14% in­crease in to­tal rev­enue of R629 million.

What was par­tic­u­larly im­pres­sive was the com­pany’s abil­ity to in­crease mar­gins. Its Ebitda rose faster than rev­enue, ad­vanc­ing 26% to R297 million, and in­creased in ab­so­lute terms from the same time last year, mov­ing from 43% to an eye-pop­ping 47% dur­ing the cur­rent pe­riod.

This al­lowed head­line earn­ings per share to in­crease by 20% to 46 cents. Car­track de­liv­ered an in­terim div­i­dend of 18 cents per share. The share price quickly bumped its way up to R15/share in re­sponse to the re­sults be­fore set­tling on R14.47, nearly 3% higher than the pre­vi­ous day.

At the cur­rent val­u­a­tion, a dou­bling of the com­pany’s half-year earn­ings would place it on a price-earn­ings ra­tio of a mod­er­ate 15.7 times. This hardly looks ex­pen­sive for a com­pany that has grown sub­scribers and rev­enue at a com­pound rate of 20% over the past five years, and which presents in­vestors with in­creas­ing mar­gins.

The other power in Car­track’s in­vest­ment propo­si­tion is the highly cash gen­er­a­tive na­ture of its busi­ness. Eighty-eight per­cent of its to­tal rev­enue is an­nu­ity in­come as a re­sult of the large sub­scriber base. And of the rev­enue gen­er­ated, 91% re­sults in op­er­at­ing cash flow (and div­i­dends).

Wayne McCur­rie, se­nior port­fo­lio man­ager at Ash­bur­ton In­vest­ments, thinks the com­pany has not been fully recog­nised for its growth. “It has been on a strong tra­jec­tory for a long time now. It’s still a rel­a­tively small com­pany but a lot more peo­ple are go­ing to start look­ing at it post this re­sult. The growth in its sub­scriber base, which will ob­vi­ously pay off in the next year, was phe­nom­e­nal.”

The growth in its sub­scriber base, which will ob­vi­ously pay off in the next year, was phe­nom­e­nal. Wayne McCur­rie Se­nior port­fo­lio man­ager at Ash­bur­ton In­vest­ments

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