Transaction Capital – SA’s biggest taxi financier – has flagged an up to 46% fall in its core profit measure for its half-year to end-March, with the recent crash in its share price also delaying its plans to bulk up its stake in vehicle dealer WeBuyCars.
Core earnings per share, the group’s preferred profit measure which excludes certain non-operational times, is expected to fall in a range of 41% to 46% for continuing operations, the company said in an update, while total headline earnings per share could fall by as much as 375%.
The company has said it plans to dispose of its refurbishment and repairs business, which means accounting for discontinued operations, while also adjusting vehicle levels at WeBuyCars.
Transaction Capital has been in the spotlight after an update last week prompted a crash in its shares back to 2015 levels, with the company flagging a profit fall of at least a fifth for its preferred measure, with margins at WeBuyCars under some pressure, while financier SA Taxi was feeling the strain from a weak economy, among other things.
The profit crash also put a spotlight on the company’s management deal, given a trust linked with CEO David Hurwitz had sold a large chunk in December.
READ | As WeBuyCars owner crashes almost 70%, company defends CEO’s R50m share sale in Dec
Transaction Capital’s shares were down 6.09% to R10.81 in late morning trade on Monday, and have lost more than 60% of their value since their last update on 13 March.
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The company said on Monday it was proceeding with plans to acquire an addition 15% stake in WeBuyCars, though given a crash in its share price, the company has resolved not to issue shares at this time.
The acquisition of the additional 15% stake in WeBuyCars will be effected in accordance with the existing put and call arrangements, which would enable the purchase of this 15% stake in two equal tranches, in September 2023 and September 2024, it said. Under the deal, 30% of the purchase consideration is set to be settled in shares.
Transaction had bought a 49.9% stake in WeBuyCars in 2020 and increased it to 74.9% in 2021, while it has said previously it had hoped the acquisition of the stake could be completed by April 2023. WeBuyCars is now Transaction’s largest business, making up approximately 43% of core earnings attributable to the group in its 2022 year, while only three years before, SA Taxi made up 70% of the group’s core earnings.
READ | Transaction Capital now wants 90% of WeBuyCars as it keeps beating targets
Transaction Capital also said on Monday that the founders of the company, Jonathan Jawno, Michael Mendelowitz and Roberto Rossi are indirect beneficial holders of 109 million shares (about 14%) through Pilatucom Holdings.
While these shares have been pledged as security against a general finance facility, “the founders have further advised the board that there are no circumstances under which a reduction of the Transaction Capital share price will trigger a forced sale of shares based on unrelated security pledged in respect of the facility”.
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