Revenue at vehicle tracking DigiCore Holdings decreased by 16% in the year to June, which translated into a 45% drop in operating profit.
The company says turnover dropped from R685 million to R576 million, and operating profit reduced from R204 million to R113 million. Earnings per share were down 47%, from 68.7c to 36.1c.
Usually, a marginal increase in sales has a “substantial impact” on operating profit. However, in the past year, the company saw sales declining, which badly affected operating profit, it says.
DigiCore says the first six months of the year delivered strong performance. However, its “expectations of a performance in line with the previous financial year in the last six months of the review period simply did not materialise as business in our UK, European and South African markets recorded a severe slowdown”.
The tracking company attributes this to external factors such as the strengthening of the rand, the tender process in SA coming to a halt before and after the elections, and the banks' severe tightening of credit supply, especially in the small and medium enterprises sector.
C-track holds up
DigiCore's annuity income stream from its South African operations made up 61% of revenue, and it is seeking to grow this line of income. C-track SA, which is involved in the stolen vehicle recovery business, delivered a “pleasing” performance, with sales up 22% and net profit up 359%.
Although the economic climate was difficult, the company maintained its gross margin. The operating profit margin, excluding both foreign exchange revaluations and the profit made on disposal of fixed assets, declined by 6.6%, from 27.3% in 2008, to 20.7% this year.
The company says the volatile rand resulted in an unrealised foreign exchange profit in the first six months of R4.8 million and an unrealised foreign exchange loss for the second six months of R9.8 million, taking the full-year loss to R5 million.
Despite the economic woes, the company has increased its research and development base and rolled out two more C-track fitment centres.
It continued with its expansion strategy internationally and expanded its reach in France, Germany and Belgium, to create a bigger self-owned distribution network in Europe.
Chris Gilmour, Absa Investment analyst, says DigiCore is a “fundamentally good business”.
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