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DigiCore expands presence

Nicola Mawson
By Nicola Mawson, Contributor.
Johannesburg, 28 Feb 2013

JSE-listed vehicle tracking company DigiCore, which expanded its geographic presence in the past 18 months and made some smaller acquisitions, will spend the next year bedding down its businesses.

The company yesterday released is results for the first half of the year and said revenue gained 12%, to R445.5 million, and total comprehensive income was up 23%, to R27.4 million. However, its gross margin declined to 66.7% from 69.5%, due to selling units for its deal with Discovery at reduced margins.

DigiCore signed a deal with the Discovery Group to exclusively provide it with telematics products for its short-term insurance entity Discovery Insure in 2011. The solution provides information on driver behaviour and the data can be used to influence premiums, with better drivers gaining a discount.

Although the partnership has not met full volume expectations, it "has comfortably" exceeded 30 000 Ctrack insurance telematics systems installed to date, says DigiCore.

DigiCore says, over the next 12 months, it will consolidate the businesses it has acquired to better manage working capital, cash flow and expenditure. The company bought 25% of UK-based MPS, for an undisclosed amount, in the middle of 2010. MPS was created by loss-making Minorplanet Systems and houses all of Minorplanet's UK business; some of its UK assets, including the customer base; and all of its intellectual property.

Moving ahead

DigiCore's engineering teams in SA, the UK and Australia have made progress in rolling out the new-generation hardware platform for Ctrack products and solutions globally. The older platform has been replaced, leading to production savings, and it has added 2G and 3G versions to compete in the low-cost insurance and stolen vehicle recovery markets.

"Cost of sales in production has benefited from the new designs, with an overall reduction of 20% to 30% expected over the next six months."

The European region had a difficult trading period, with growth in the UK offset by stagnating sales in other countries. A period of restructuring has resulted in some exceptional costs, but improved efficiencies, says DigiCore.

It notes that the newly-restructured management team has made progress, and investments in the retail insurance sector could "launch Ctrack into a high-growth new market in the near future". In mainland Europe, progress is being made in migrating customers onto the latest platforms and delivering new technologies, it says.

Expansion plans

DigiCore's African operations are growing rapidly and delivered the same net profit in the first six months of 2013 as it did for the full year 2012. The mining industry remains the key focus for the African market.

During the half-year, the year DigiCore launched new products in Australia and New Zealand, and added Singapore to its distribution network in Asia. Ctrack will start operations in Singapore from April 2013. Thailand will follow, completing the corridor.

The Ctrack Latin America operation is in its third year, with distribution points in Mexico, Chile, Peru and Colombia. It has focused exclusively on fleet management but will introduce the driver behaviour model in the insurance telematics sector in coming months.

DigiCore is cautiously optimistic of an improved trading performance in the year ahead. "With management and structural changes complete, and a new product set released, the group is well positioned to capitalise on opportunities in the fleet, mining, government and insurance telematics industries."

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