The possibility of rising crime levels and fluctuating fuel prices should keep DigiCore's fleet management and stolen vehicle recovery products ticking over despite tough economic times, says CEO Nick Vlok.
Vlok says the vehicle electronics company, which presented its interim results today for the period ended December, is cautiously optimistic about the future despite tough global economic conditions.
Garmin link
DigiCore is also preparing to launch products that would make its offerings more attractive to its target markets.
This week, at European electronics show Cebit, it will display its new fleet management system that will be integrated with the Garmin global positioning navigation system and a Web-based reporting system for vehicle use.
“Those products are aimed mainly at the services sector where they send out people on call to service clients. These include telecommunications, gas and water utilities,” Vlok explains.
He says the Garmin-linked system would allow a dispatcher to know what vehicle, with whom and with what tools is going where, and the Web-based system will allow for a detailed report on a vehicle's specific movements.
“The fluctuating fuel prices will keep the need to ensure cost remains tightly controlled,” he says.
Locally, the company has tested a contactless payment system with the Northwest Taxi Association, Nedbank, and credit card companies Visa and MasterCard. The system had been well received by the Department of Transport and the South African Reserve Bank and is now awaiting final approval.
Crime decline?
DigiCore says crime in SA, including vehicle theft, will probably not decline in the current economic and political situation.
“We are well placed to assist the public and insurance companies to retrieve their stolen vehicles due to our higher than 90% recovery rate. The launch of our new low-cost C-track Insure in October 2008 introduces a new product at a price affordable to all vehicle owners,” the company's financial statement notes.
Vlok says the fleet management contract it has with the SA Police Service is proceeding well. So far, about 27 000 units have been installed nationally, with a target of around 45 000 units expected to be installed.
“This system has become very important for the police, especially with the planned increase in the service with the run-up to the 2010 Soccer World Cup.”
Vlok says other fleet management business encompasses a number of government contracts, including the Department of Health and various local authorities.
Global droop
International business appeared to be the worst affected by the global economic conditions with the number of units exported declining by 60%.
“This reduction is mainly due to the unstable political and economic situation in Pakistan. However, these sales, mainly to the stolen vehicle recovery market, were at low margins and the decrease has, therefore, not affected our profitability in the same proportion,” the group says.
Fleet management unit sales to Europe and UK are also substantially lower than last year.
DigiCore's interim results show the group increased earnings per share by 12%, to 26.3c. Although turnover for the six months decreased by 7%, from R309 million to R288 million, for the period, the operating profit margin rose to 27% from 25%.
This two percentage point increase was attributed to the higher gross profit percentages achieved on the group's annuity-based income streams, which now constitute 40% of its total revenue, as opposed to 27% in the comparative period.
Vlok says the company will control its costs by not hiring new staff and current staff will be redeployed if necessary, with no lay-offs planned.
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