Cartrack owner's record R422m quarter came with a R694m stockpile of trackers

Karooooo, the Singapore-headquartered owner of vehicle-tracking company Cartrack, reported a record operating profit of R422m for the three months to 31 August, up 19% on a year earlier. Much of the cash that profit produced went straight back into hardware. Purchases of property, plant and equipment rose to R517m in the quarter, and free cash flow came in at R41m.

The reason is in the results Karooooo published on 19 October and released on the JSE's news service on 20 October. Cartrack's stock of tracking devices held for future use almost doubled in six months as the company bought ahead of rising memory prices and longer supplier lead times.

Cartrack has more than 2.1 million South African subscribers, about three-quarters of its total. Its results also show how the global memory squeeze is feeding into the cost of running connected devices here.

A South African business with a Singapore address

Karooooo is listed on the Nasdaq and has a secondary listing on the JSE under the code KRO. It owns all of Cartrack and 91.5% of Karooooo Logistics, a delivery business.

Cartrack had 2,185,798 South African subscribers at the end of August, up 18% from 1,850,646 a year before. Its South African subscription revenue grew 25% in the quarter. The company did not give a rand figure for the South African segment in its release. Group-wide, Cartrack had 2,899,210 subscribers and added a record 94,516 net new ones in the quarter, against 70,740 a year earlier.

The company says it is selling more video and its Cartrack-Tag product to existing customers alongside new subscriptions. It also notes "some macro-economic stress in the South African economy" while describing the local market as a "compelling" opportunity.

Profit up, cash tied up

Group subscription revenue rose 20% to R1.42bn. In constant currency, Cartrack's subscription revenue grew 23%, up from 21% in the first quarter. The stronger rand reduced what other countries contributed once converted. Earnings per share rose 18% to R9.28, and adjusted earnings per share, which strips out last year's secondary-offering costs, rose 12%.

The cash picture is different. Net cash from operating activities was R558m in the quarter, more than double the R267m of a year earlier. But after R517m of equipment purchases, free cash flow was R41m (Q2 2026: R20m). For the six months, free cash flow fell to R100m from R358m as equipment spending rose to R995m.

The balance sheet shows where it went. Tracking devices held for future use rose 92% to R694m from R362m at the end of February. Karooooo put the build-up down to faster growth, longer lead times and "ongoing memory price increases". Devices already fitted in customers' vehicles rose 12% to R2.19bn. Prepayments for device components added another R57m to receivables.

Chief executive Zak Calisto said free cash flow was "temporarily impacted" by capital spending meant to support growth and to provide "a buffer against ongoing significant increases in RAM and memory prices".

Cash and cash equivalents fell to R649m from R1.15bn at the end of February. Karooooo said the fall was mainly due to R752m of dividends paid in July. Karooooo also said it had increased its short-term bank facilities and now has R900m of finance facilities with Capitec and Standard Bank. Bank overdrafts will now be reported as financing rather than cash management.

What has not changed

Karooooo kept its full-year guidance. It expects Cartrack's subscription revenue of R5.7bn to R6bn for the year to February 2027, an operating margin of 27% to 30%, and earnings per share of R38.50 to R40.00. Cartrack's operating margin was 28% in the quarter, down from 29%.

The smaller logistics unit grew delivery revenue 36% to R189m, but its operating profit slipped 4% to R11m because of driver and network costs.

What is still open

The company calls the cash dip temporary, and the first test comes when it reports the third quarter. Karooooo has not said how many months of devices the R694m stockpile covers, what it paid per unit compared with a year ago, or whether memory costs will eventually reach subscription prices. Its guidance assumes constant exchange rates, so the rand's strength remains a drag on reported growth. The company holds its cash reserves in US dollars.