Karooooo group grows subscribers by a massive 111%
KAROOOOO, the Nasdaq and JSE-listed group that owns 100 percent of Cartrack Holdings, grew net subscriber additions by 102 609, or 111 percent, in the six months to August 31 due to increased investment in sales and marketing, which takes about six months to translate into new customers.
Subscription revenue increased 16 percent to R1.23 billion, and by 20 percent on a constant currency basis.
Operating profit fell 6 percent to R346 million, because, while much boosted sales and marketing investment had materialised in part, management expected to see the benefits via customer acquisition only by the end of the fourth quarter of 2022.
Founder and chief executive Zak Calisto said in a telephone interview they had increased marketing spend by 51 percent, and there had been a substantial increase in sales and marketing staff, who were not yet producing efficiently. He said the increased investment was because last year this time, the group had reduced marketing, and “protecting what we got by tightening our seatbelts,” due to the uncertain outlook created by the global Covid-19 pandemic environment.
“We are in a very different psyche now when it comes to growing the company,” he said. Research and development expenses, in the second quarter, as a percentage of subscription revenue, increased to 5.8 percent compared to 5 percent in the second quarter of 2021. In our view all vehicles will be connected and data will drive all aspects of mobility in future,” the group said in the results.
Calisto said the new customer additions and growth in subscribers was despite the disruption in sales caused by the social unrest experienced in July this year in South Africa, which resulted in a number of branches closing for a short period, and the diminishing global effects of the pandemic.
He said despite a decline in half-year earnings per share, the group was on target to meet its annual forecasts, which included lifting subscription revenue to between R2.5 and R2.7bn from R2.21bn in 2021, and increasing the number of subscribers to between 1.5 and 1.6 million from 1.31 million in 2021.
Profit fell 12 percent to R231m in the half-year period. Excluding the impact of once-off initial public offering (IPO) costs expensed in the first quarter, adjusted profit fell 8 percent to R241m due to investments for future growth and a higher effective tax rate of 31 percent compared with 29 percent in 2021, mainly due to IPO costs that were not tax deductible.
Karooooo's number of shares in issue increased to 28.1 million from 20.3 million, due to April's Nasdaq listing.