JSE-listed DigiCore expects exports to outstrip sales of local units in the short-term, as countries in Europe and the Middle East slowly shake off the effects of a global recession.
The company, which has a presence in several countries outside of SA, saw exports dip as a result of the recession, which led to several casualties, including US banking giant Lehman Brothers at the end of 2008.
CEO Nick Vlok says the firm is segmenting the globe into five target areas. He explains that the stolen vehicle recovery and fleet-management business typically has a long lead time, with investments into new areas only paying off up to three years down the line.
Vlok says DigiCore expects the volume of exported units to surpass the number of those sold in SA, and its export business should make good returns “within the next year or two”.
In the six months to December, the latest available figures, as the company has yet to report its June year-end results, it said revenue decreased from R288 million to R249 million. Net profit dropped 59%, from R56.7 million to R22.8 million.
Export sales decreased to 40% of total units produced, from the usual level of more than 50%. DigiCore attributed this to a slowdown in units sold in the UK, European and Pakistan businesses, which traditionally comprise the bulk of its export sales.
Key areas
Vlok says the fleet-management company sees growth potential in the Asia Pacific region, an area DigiCore has been present in for some time. Vlok says the growth is starting to come through from the region now.
In addition, it is targeting growth from the Middle East region. Its United Arab Emirates business was affected by the global slowdown that hit the world in 2008, but is now showing good growth potential.
In Europe, where the company recently made an acquisition, Vlok is confident of potential in the small and medium enterprise market. This is a new area for DigiCore, which traditionally provided services to larger organisations and utilities.
DigiCore bought a quarter share of UK-based MPS 2010, for an undisclosed amount, in May. Loss-making Minorplanet Systems recently created MPS. The new subsidiary now owns all of Minorplanet's UK business, some of its UK assets, including the customer base, and all of its intellectual property.
Vlok says Minorplanet “just never managed to make money”. However, DigiCore is now actively cleaning up the cost structure, and expects MPS to be profitable within the next three to four months, he notes.
North of SA's borders, DigiCore sees Africa as an obvious market in which to expand. At the moment, its efforts are concentrated in the northern parts of the continent, and it has a presence in countries such as Tunisia and Morocco. Vlok says the company is starting to expand in the region.
South and Central America is another focus area. Vlok explains the business has a presence in some countries in the region on the back of its relationship with BHP Billiton, and will expand further on the continent.
Research investment
Vlok says the company invests heavily in order to stay ahead of the competition. Its typical research and development investment is about 8% of revenue each year, he adds.
Most of the money invested goes into coding and travelling to world expositions to view the latest available technology. Vlok says DigiCore attends about three shows a year.
DigiCore imports its PC boards from Asia, and then assembles and adds firmware at its local operation. Vlok explains that this allows the group to quickly scale production up or down.
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