Introduction
The board is extremely proud to announce great performance for the fifth consecutive year. To achieve in excess of
57% growth in attributable earnings on top of the 80% on our previous year is a remarkable achievement from our
management and staff. This was achieved simultaneously with substantial startup costs being incurred while
establishing our new Ctrack Secure stolen vehicle recovery (SVR) division.
Financial results
Turnover grew by 28% from R253 million to R323 million. Unit sales increased by 52% over the year and assisted us
in increasing operating profit by 64% from R57 million in 2005 to R94 million for the current year.
Earnings per share increased by 53% to 32 cents per share from 21 cents per share in the previous year. Headline
earnings per share increased from 21 cents (2005) to 32 cents per share. These calculations are based on a total
weighted average of 198,572 million ordinary shares in issue. The difference between the total number of shares in
issue and the weighted average number of shares in issue relates to treasury shares held in the share trust.
Cash generated by operations grew from R29 million to R74 million. Cash on hand increased by R13 million to
R61 million. This is after the payment of dividends, reduction in foreign borrowings, investment in the United
Kingdom subsidiary and additional marketing spent of R9 million during this year. The group will continue to manage
its cash resources with prudence.
Trade receivables increased to R89 million due to exceptionally high sales in June 2006. This balance has
subsequently been reduced to R60 million with the payment of the trade receivables and cash in bank had increased
by a similar amount at the end of July 2006.
Inventory holding as a percentage of revenue is now at an acceptable level compared with high inventory holding
experienced at the end of the previous year end.
Our 51% European subsidiary has grown turnover and NPAT by 81% and 210% respectively, contributing
R6,5 million to our consolidated profit for the period, while at the same time reducing foreign loans. The total
European strategy is on track as per the original business plan and expectations.
During the year we have invested into our United Kingdom distributor by purchasing a 51% shareholding in the
business. This has enabled the business to be poised for rapid expansion and growth.
Operations
The ongoing building and maintaining of customer relationships and the bedding down of new technology in the
previous year is starting to show good results. Our technology, which allows customers to decrease their monthly
operating costs, helped grow turnover to R323 million.
This year has seen the full scale launch of our stolen vehicle recovery Ctrack Secure product. Since January 2006
we have deployed a full team to market and install this product in a separate division. Although we have not fully
reached all our goals, the division broke even in the last quarter and is set to contribute towards our profitability in
the future.
International
The international business has been growing through our well-established distribution channels. We have signed
distribution contracts with six new companies in Europe, UAE and Asia. The intensified operational cooperation
between DigiCore Europe BV and Ctrack Benelux BV has lead to sharing of expertise that greatly improved sales
and marketing into the other European countries.
The Pakistan operation has again met our expectations with good growth in unit sales and has strengthened its
number one position in the area.
Technology
The technology team has implemented an information “Gateway” or “Hub” making it possible to service our
customers better and cut their costs through the implementation of GPRS in transferring more data at a reduced
tariff from the cellular network providers. At the same time this increased our customer involvement thus creating
another annuity based revenue stream.
Optimising the hardware designs also assisted in reduced manufacturing costs, thus protecting our margins which
has resulted in not having to increase prices to our valued customers.
Black Economic Empowerment (BEE)
An innovative BEE transaction in our South Africa Fleet Management business was concluded. This deal will not only
give us the required equity credentials, but will add real value to this business in future with the expertise that our
partners bring. The Group also appointed our first black executive director in this newly formed subsidiary, working
full time to achieve our goals set for the coming years. Our BEE partners will in particular add value to our finance,
legal, human resources and sales and marketing divisions. The Group remains committed to grow all the other pillars
of Broad Based Black Economic Empowerment to ensure a truly South African business.
The future
A continuation in development of world class software and hardware will ensure we meet the basic needs of every vehicle owner on the Globe and will remain one of our major goals. We will continue to dominate the markets we
select to operate in through this world class technology.
Further accelerated International expansion will be part of our strategy going forward. It is our intention to
strengthen and grow this division to identify new markets and distributors, as well as to provide support to ensure
that they achieve success quicker than in the past.
We have embarked on entering the SVR market and will continue to build on the foundations laid during the
reporting period. Several agreements have been entered into and the required approvals received, to enable us to
make inroads into this market.
This will allow for the future growth and long term sustainability of the group.
Audit report
The group’s consolidated financial statements for the year ended 30 June 2006 have been audited by PKF (Pretoria)
Incorporated, registered auditors and accountants. The board has approved these annual financial statements that
have been abridged for purposes of this report. Their unqualified audit report is available for inspection at the
company’s registered address.
Corporate governance
The group endorses the Code of Corporate Practice and Conduct as set out in the King Committee Report on
Corporate Governance in South Africa (2002).
Post balance sheet events
Other than the implementation of the BEE transaction effective from 1 July 2006, there have been no other
significant events subsequent to year end and up to the date of this report, that would require adjustment.
Basis of preparation and implications of adopting IFRS
The group in accordance with the listing requirements of the JSE Limited, has adopted International Financial
Reporting Standards (IFRS) for the financial year ended 30 June 2006. The date of transition to IFRS is 1 July 2004,
which represents the earliest period of comparative information disclosed. Comparative figures have been restated
and no other adjustments to periods ending prior to June 2004 were needed. IFRS1, First Time Adoption of
International Financial Reporting Standards has been applied in preparing the audited consolidated financial results
in accordance with IAS34 – Financial Reporting. As at the financial year end, there were no changes to the
impairment evaluation. The group no longer provides for amortisation of goodwill and goodwill is subject to an
annual impairment test.
Implications of adopting IFRS2 - share based payments
The group grants share options to employees. In accordance with the requirements of IFRS2, the group now
recognizes an expense in the income statement with a corresponding credit to equity. The fair value at the date of
granting of options is charged to the income statement on a straight line basis over the relevant vesting periods,
which are adjusted to reflect actual and expected levels of vesting.
The prior reporting period adjustments are R111 000 after tax and the current period adjustment is R241 000.
Dividend announcement
In line with the company policy, the board has declared a final dividend of 6 cents (2005: 4 cents) per share. This is
after the company paid an interim dividend of 4 cents (2 cents) per share in April 2006.
Payment will be made on Monday, 9 October 2006 to all shareholders recorded in the register on Friday, 6 October
2006. The last day to trade to qualify for the dividend will be 29 September 2006 and the shares will be traded exdividend
from Monday, 2 October 2006.
Share certificates may not be dematerialised or rematerialised between Monday, 2 October 2006 and Friday,
6 October 2006, both days inclusive.
|
