Transaction Capital, Owner of WeBuyCars, Plummets 30% Following R1.9bn Loss

Transaction Capital, South Africa’s largest taxi financier and owner of WeBuyCars, saw its shares fall nearly 30% by early afternoon on Wednesday. The company reported a nearly R1.9 billion loss for the six-month period ending March 31, 2023, compared to a profit of R615 million the previous year. This profit decline was worse than the up to 46% drop predicted by the company in March. Transaction Capital has chosen not to pay a dividend.

Core continuing earnings per share, the company’s preferred profit measure that excludes certain non-operational items, fell 48% in the first half of the year, worse than the previous guidance. Transaction Capital’s stock has now dropped by more than 83% in the last year.

Transaction Capital, which has a market capitalization of slightly more than R8 billion on the Johannesburg Stock Exchange, will be hard hit in 2023 as a result of the strain on its SA Taxi business. Operators have been battling high fuel costs and load shedding, which has reduced the number of trips. Furthermore, Transaction Capital admitted that it underestimated the sharp drop in used-car prices as global supply chains normalised. WeBuyCars is 70% owned by the corporation.

During an investor presentation on Wednesday, CEO David Hurwitz acknowledged the “cyclical deterioration” in the used vehicle markets. Despite the company’s expected weak full-year performance, Hurwitz stated that WeBuyCars was still gaining market share. Due to the increased pressure on taxi operators, Transaction Capital has decided to sell its SA Taxi Auto Repair business. This business has been reclassified as a “discontinued operation,” and the company has restated its prior period results to reflect this.

Transaction Capital also suffered an R1.9 billion restructuring hit in 2023. The company has decided to account for all one-time restructuring costs immediately, and it must account for lower levels of future revenue and profitability, which necessitates provision adjustments.

Finally, Transaction Capital, the owner of WeBuyCars, has seen a significant drop in share price as a result of the company’s poorer-than-expected half-year results. The strain on its SA Taxi business, combined with a miscalculation of the sharp drop in used-car prices, has contributed to the company’s financial difficulties. Due to the pressure on taxi operators, the company has taken steps to adjust its stock to match current trading conditions and has put its SA Taxi Auto Repair business up for sale. Transaction Capital has also suffered a restructuring hit, and the company’s prior period results have been restated to reflect the discontinuation of the auto repair business.