[TOP STORY] Karooooo nine-month results to end-September

You can also listen to this podcast on iono.fm here.

SIMON BROWN: I’m chatting now with Zak Calisto, CEO of Karooooo. Results out for nine months for the quarter ending September. Zak, I appreciate the early morning. Good growth in subscribers: really good growth. A record number of subscribers for the business, and the majority of that growth in the results [is] actually coming from business.

ZAK CALISTO: Yes, thank you very much, Simon. We had a very good third quarter in terms of subscriber growth and the amount of business customers that we acquired.

SIMON BROWN: Is it that business is expanding? Is it that you are picking up market share, or is it maybe a bit of a combination and even, I’m just thinking, businesses that perhaps previously simply weren’t using [or] aware of the benefits.

ZAK CALISTO: In actual fact, in this third quarter for the first time we saw a lot of customers, specifically in South Africa, switching to us from the existing service providers. So we saw quite a lot of that….

But [having] said that, in most of the other markets it’s customers that have had no service provider, and they’ve now opted to get a service provider.

SIMON BROWN: In the consumer space are we seeing vehicle sales pick up? We have chatted with you before. One of the issues has been chip shortages, which meant fewer vehicles being produced, which meant simply fewer vehicles coming onto the roads. Are you seeing that sort of starting to normalise?

ZAK CALISTO: I haven’t got a deep vision and visibility into the production line, but there are certainly more vehicles being sold now than in the last two years. So that is starting to pick up. I’m not sure if it’s normalised yet, and I’m not certain when it would normalise either.

SIMON BROWN: In terms of, again, the consumer, you mentioned that in South Africa people are switching across to Cartrack in the business space. In the consumer space do we see consumers sort of hanging on to their tracking device? It’s a security device, it’s often an insurance. Perhaps [they are] a little more price-sensitive, but [they’re] certainly not taking a Tracker out.

ZAK CALISTO: In the first quarter of this year we saw we had very weak demand from consumers as we started to see inflation [rise]. But I think also what’s happened is unfortunately the crime rate has gone up significantly in South Africa, and that’s also driving demand.

SIMON BROWN: You are operating in a couple of European countries already – Poland, Portugal and Spain among them. Have you plans for moving into new markets, or are you still focusing your time on those new entrants?

ZAK CALISTO: I think in the countries we are in there’s a huge untapped opportunity. And what we’ve done in the last two quarters is to increase sales and marketing staff to try and get stronger momentum in those markets.

But I think by FY24 we will be moving into new markets.

SIMON BROWN: The new markets – how do you pick them? I’m imagining there are existing players already in those markets. Do you look for ones with lower penetration, perhaps? Is it a price issue or is it that you come in with your service – and I’m thinking particularly in the corporate space with your software as a service?

ZAK CALISTO: I think, first of all, Europe still remains with low penetration rates. So in terms of our value proposition I think it’s quite strong in the markets we are in, in Europe, we certainly are winning. And I believe in the markets that we’ll enter, we should be able to do well once we have been there for two, three years building our brand. But we have quite a strong brand in Europe, and a lot of the customers in new markets are existing customers that we currently have, [and] we’ll just service them. They’re multinationals that operate throughout Europe.

SIMON BROWN: Got you, I’ve got you. So you almost move into a country [where] you’ve already, in a sense, got some customers. You’ve got to sign them [up] and the like. I imagine a lot of Europe is more about that data, more about that software as a service, and perhaps less about [what it is for] in South Africa [where] the local Tracker is very much about tracking post a theft.

ZAK CALISTO: Well, outside South Africa our whole market is commercial. For all intents and purposes we can actually say we’ve no consumers as customers. It’s all business, whereas in South Africa our market is split – 50% is consumers and 50% is businesses.

SIMON BROWN: We’ll leave that there. Zak Calista is group CEO at Karooooo. [We’ve been] talking numbers for the quarter ending September. Zak, I appreciate the early morning insights.