Johannesburg - Transaction Capital wanted to expand its business by adding metered taxis to its already existing SA Taxi unit, the JSE-listed financial services company said.
The company said the specialist unit would supply vehicles to metered taxi operators who may not have the credit history or sufficient capital to make the initial down payment required to qualify for conventional vehicle finance.
It said the move was in line with its expansion strategy, which would see the reconstitution of its portfolio into two divisions – SA Taxi and Transaction Capital Risk Services (TCRS).
“The challenging macroeconomic environment had to be navigated,” chief executive David Hurwitz said.
“Fortunately for Transaction Capital, our businesses are highly defensive businesses intentionally positioned to withstand South Africa’s challenging macro- and socio-economic context,” he added.
Increased earnings
SA Taxi increased headline earnings attributable to the group by 23 percent to R118 million for the six months to the end of March.
Gross loans and advances grew at 12 percent as credit granting criteria remained consistently conservative.
Hurwitz said the supply of new Toyota minibus taxis was constrained after Toyota closed its local assembly facility in Durban for five months last year to reconfigure it.
The net interest margin decreased to 11 percent as a result of a slightly higher cost of funding of 10.4 percent.
The credit loss ratio improved to 3.4 percent in line with improving recovery rates to 72 percent as a result of the loan, which can be enhanced through the Taximart refurbishment operation.
Hurwitz said SA Taxi loans increased to R6.688 billion with an advanced portfolio of 25 591 vehicles accounting for a third of financed minibus taxis nationally.
“While both SA Taxi and TCRS perform better in a positive economic environment, they are also highly defensive businesses intentionally positioned to withstand a challenging macro- and socio-economic context as currently experienced in South Africa.”
The company noted that the country’s economic growth remained constrained, exacerbated by various socio- and macroeconomic challenges.
“The already distressed consumer and the SME (small- and medium-sized enterprises) sector of the economy remain vulnerable,” Hurwitz said. “The level of social unrest and protest action continues mainly as a result of the stressed socio-economic environment.”
Higher cost
The group reported growth in headline earnings by 19 percent to R210m, up from R177m in the comparable period for the previous year.
Headline earnings per share also increased, gaining 20 percent to 37 cents.
Net interest income increased by 7 percent, driven by an 11 percent growth in gross loans and advances and increases in the prime interest rate, offset in part by a higher average cost of borrowing of 11 percent.
Non-interest revenue increased by 7 percent to R611m. The profit before tax increased by 24 percent to R274m, up from R221m in the comparable period in the previous year.
The board declared an interim gross cash dividend of 12c per share.
Transaction Capital’s shares dropped 3.17 percent on the JSE to close at R11.
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