DigiCore diluted earnings up 10%

Johannesburg - Fleet management and vehicle tracking company DigiCore Holdings [JSE:DGC] on Tuesday reported a 10% rise in diluted headline earnings per share to 22.2 cents for the year ended June 2011 from a restated 20.2 cents a year ago.

A final dividend of three cents per share was declared, for a total dividend of 6 cents per share for the year, unchanged from a year ago.

Revenue was up 34% to R712m and profit before tax grew 15% to R78m. Group Ebitda increased by 23% to R131m.

The company said the disparity between sales growth and profit growth reflects its continued international expansion costs, research and development costs growing by over 27% in financial year 2011, Minorplanet integration costs, continued upfront investment in projects such as integrated fare collection, the Discovery Insure launch and increased provisions for doubtful debt and slow-moving stock.

In addition, the group has revitalised its branding and marketing to improve the brand presence of Ctrack worldwide.

During the period the group reaped the benefits of its ongoing focus on strategic areas as local and international markets showed signs of marginal economic recovery.

Distribution entities in local markets increased revenue by 26%, mainly due to the recovery of the fleet management business. Foreign distribution increased revenues 60% off a lower base, bolstered by the acquired customer base of Minorplanet in the United Kingdom, Ireland and Europe. Increased volumes and higher demand from other exports contributed to the manufacturing entity growing revenues by 33%.

In line with the group's strategy, annuity revenue rose by 16% and now constitutes 47% of total revenues.

As a result of competitive pressures, gross margins in local markets declined marginally, while international margins were maintained.

Operating expenses across the group rose 24%, although some R48m of this was due to Minorplanet entities.

Excluding the impact of Minorplanet costs, operating expenses increased by a more sustainable 9%. The Minorplanet entities have now been fully integrated into group operations and have turned profitable on a month-to-month basis. Initial losses and restructuring costs during the integration process exceeded R10m, affecting the group's earnings.

As a large portion of the group's improved performance stems from the fleet management business in South Africa, which has a 30% minority BEE shareholding, profit for the year attributable to owners of the parent company increased by only 7%. Cash generated from operations was R109.7m.

Looking ahead, DigiCore is cautiously optimistic that improved financial results can be expected for the 2012 financial year.

"We anticipate organic growth in our existing markets and good growth from fledgling operations as well as from some small strategic acquisitions and joint ventures in selected markets. Our proprietary driver-behaviour offering to the insurance industry holds exciting potential in South Africa and will be launched in specific international markets in the year ahead," the company said.