Karooooo Ltd. — Form 20-F summary
Filing and period: Annual report filed June 13, 2024, covering the financial year ended February 29, 2024 (FY2024), with FY2023 as the principal comparison. The filing also includes unaudited quarterly data; it is not a standalone Q4 report. Financial statements are prepared under IFRS and presented in South African rand (ZAR), unless stated otherwise.
Business context
Karooooo provides mobility data analytics and fleet-management software-as-a-service through Cartrack, alongside vehicle marketplace operations through Carzuka and delivery services through Karooooo Logistics. It operated in 25 countries and had 1,971,532 subscribers and more than 121,000 commercial customers at year-end. South Africa remained its largest market, contributing 75% of revenue, versus 78% in FY2023.
Financial and operating performance
| Metric | FY2024 | FY2023 | Change |
|---|---|---|---|
| Total revenue | ZAR 4,205.5 million | ZAR 3,507.1 million | +20% |
| Subscription revenue | ZAR 3,535.8 million | ZAR 3,010.1 million | +17% |
| Gross profit / margin | ZAR 2,690.8 million / 64% | ZAR 2,272.4 million / 65% | Profit +18% |
| Operating profit / margin | ZAR 1,042.5 million / 25% | ZAR 881.9 million / 25% | +18% |
| Profit for the year | ZAR 754.2 million | ZAR 608.8 million | +24% |
| Profit attributable to parent shareholders | ZAR 738.2 million | ZAR 597.2 million | +24% |
| Basic and diluted EPS | ZAR 23.85 | ZAR 19.29 | +24% |
| Adjusted EBITDA (non-IFRS) / margin | ZAR 1,690.6 million / 40% | ZAR 1,426.8 million / 41% | +19% |
| Operating cash flow | ZAR 955.0 million | ZAR 1,126.7 million | -15% |
| Free cash flow (non-IFRS) | ZAR 78.7 million | ZAR 547.0 million | -86% |
Subscriber numbers increased 15% to 1,971,532, with net additions of 254,455. SaaS annualized recurring revenue (non-IFRS) rose 17% to ZAR 3,769.4 million; reported average revenue per subscriber increased 3% to ZAR 160, which management attributed to adverse currency movements.
Fourth-quarter unaudited revenue was ZAR 1,088.4 million, including subscription revenue of ZAR 935.2 million. Subscribers grew by 63,340 during the quarter to 1,971,532.
Liquidity, debt and capital allocation
At February 29, 2024, cash and cash equivalents were ZAR 459.5 million, current assets ZAR 1,460.2 million and current liabilities ZAR 940.4 million. Current assets included ZAR 485.7 million of bank fixed deposits, classified as other receivables and maturing in June and July 2024. The current ratio was approximately 1.55.
Term loans were ZAR 48.2 million and bank overdraft borrowings were ZAR 23.4 million. The ZAR 925 million Standard Bank facility was terminated on February 26, 2024; a ZAR 275 million Capitec overdraft facility remained available, with ZAR 23.4 million drawn at year-end. Lease liabilities were ZAR 194.3 million. Management said available cash and operating cash generation were expected to cover working capital and capital expenditure for at least 12 months.
Capital expenditure was ZAR 876.4 million, up from ZAR 579.7 million. The reported free-cash-flow decline reflected higher investment and cash-flow timing: ZAR 486.0 million was placed in fixed deposits and classified as other receivables. Management stated that free cash flow would have been ZAR 549.7 million had those deposits remained in the current account. Investing cash outflow was ZAR 932.2 million; financing cash outflow was ZAR 593.0 million, including ZAR 499.5 million of dividends paid.
Material changes, outlook and unusual items
- Cartrack subscription growth and regional expansion supported results. Revenue grew 12% in South Africa, 35% in Europe and 40% in Asia-Pacific, Middle East and the U.S.; the latter region’s subscribers rose 24%.
- Karooooo Logistics revenue increased 77% to ZAR 317.0 million and segment operating profit was ZAR 26.1 million. Management described the model as scalable with promising growth potential and said it was investing to build the business.
- Carzuka revenue was ZAR 274.8 million, but it recorded an operating loss of ZAR 52.9 million. In Q3 FY2024, the company decided to stop buying second-hand vehicles in South Africa to protect dealership relationships, and integrated Carzuka into Cartrack’s broader operations.
- Management emphasized continued investment in customer acquisition, brand building, technology and geographic expansion. It identified Asia-Pacific and the Middle East as attractive medium- to long-term growth regions. The filing provides no specific quantified earnings or revenue guidance.
- The company paid an interim dividend of US$0.85 per share in July 2023. It repurchased 51,106 shares during the financial year for ZAR 23.8 million; these shares were subsequently cancelled in May 2024. The board’s future dividend decisions remain discretionary.
- Other notable items include a ZAR 396.0 million estimated cost for the South African head-office redevelopment, with ZAR 151.7 million of capital commitments at year-end, and acquisition of 76% of Cartrack Swaziland in March 2023. The Standard Bank facility termination and the completed repayment of the Portugal euro loan reduced borrowing facilities or debt during the year.
Principal risks and contingencies
Key risks include customer and subscriber retention, competition and embedded OEM telematics, technology and cellular-network dependence, component supply, cybersecurity and data privacy, and the ability to manage international expansion. The company is also exposed to foreign-exchange volatility, inflation, interest rates, South African infrastructure and power disruptions, emerging-market and regulatory risks, and customer credit losses. South Africa generated 75% of revenue, and the company does not hedge its foreign-currency exposure.
The company reported no legal proceedings known to it that would have a material adverse effect on financial condition, results or liquidity. It provides asset-recovery warranty coverage of up to ZAR 1.0 million on certain contracts; the filing notes potential exposure to claims and states that no liability reserve has been established under these warranties. Management concluded internal control over financial reporting was effective, but the independent auditor did not attest to its effectiveness because the company remained an emerging growth company. The auditor issued an unqualified opinion on the IFRS financial statements.
Important facts for investors to verify
- Reconcile the reported ZAR 78.7 million free cash flow with the ZAR 486.0 million fixed deposit classification and the stated ZAR 549.7 million alternative calculation.
- Track collection of receivables and credit losses: the expected-credit-loss allowance was ZAR 165.2 million against gross trade receivables of ZAR 554.1 million.
- Assess whether subscriber growth and ARPU gains translate into sustained subscription revenue and margin performance, particularly outside South Africa.
- Monitor Carzuka’s post-pivot losses, Karooooo Logistics’ profitability and cash needs, and delivery of the South African office redevelopment within its cost and commitment estimates.
- Confirm the status of the Capitec overdraft and other borrowing arrangements, fixed-deposit maturities, dividend policy, and subsequent share cancellations.
- Consider the company’s IFRS and non-IFRS measures separately, including the definitions and reconciliations for Adjusted EBITDA, ARR, ARPU and free cash flow.