Transaction Capital considering listing of WeBuyCars as part of restructuring

WeBuyCars earnings attributable to the group increased 14% to R488 million last year. Photo: Supplied

WeBuyCars earnings attributable to the group increased 14% to R488 million last year. Photo: Supplied

Published Jan 31, 2024


Transaction Capital, after last year’s dismal financial performance, is exploring the listing of its fast growing used vehicle business WeBuyCars, as part of a broader restructuring to bring the group back into profitability.

“The board has in principle resolved to pursue the unbundling…the construct of the unbundling is yet to be finalised,” the group said yesterday evening in a JSE announcement.

Newly appointed CEO Jonathan Jawno wrote in the annual report yesterday that the group would be driven back to profitability through an entrepreneurial, results-oriented, no-nonsense approach with complexities being simplified, business fundamentals brought back into focus, and a back-to-basics ethos.

The group is facing significant change and reviews of its businesses. Acquisitive growth had been halted in favour of “fortifying the balance sheet through strategic asset sales and streamlining the group operations to focus on core operations.”

“Our short term priorities are leveraging existing infrastructure to drive growth and extracting cost efficiencies. Transaction Capital will migrate from an operation group to an active investment holding company with its subsidiaries operating on a fully decentralised basis,” management said.

The head office had been “significantly reduced”. At an individual company level in the group, options being explored included a restructuring and stabilisation of SA Taxi with a view to introducing an equity partner, once restructuring was completed.

Another option being considered was the unbundling of Transaction Capital’s shareholding in WeBuyCars and its subsequent listing on the JSE. WeBuyCars earnings attributable to the group increased 14% to R488 million last year.

“WeBuyCars has cultivated expertise and established a leading and unique position in South Africa’s second-hand vehicle market. Although the shift in market dynamics impacted our performance year-on-year, we adjusted quickly to deliver a solid result in the second half of FY2023,” WeBuyCars executive director Faan van der Walt said in the report.

Meanwhile Nutun, the business services and processes subsidiary, was reviewing its operations to establish whether certain non-core operations could be disposed of, or repositioned. Nutun lifted core attributable earnings by 7% to R436m last year.

Management was also exploring options to raise traditional and new alternative methods of funding

“While SA Taxi requires a reset to reposition for growth, Nutun and WeBuyCars remain strong leaders within their respective markets,” the group’s management said.

“Despite the challenges facing the group, I feel optimistic that with the committed management teams across our business and the support of the board and the funders, we will be successful in restoring credibility and unlocking much of the value that has been destroyed.”

In the past financial year Transaction Capital subsidiary SA Taxi’s attributable earnings fell to a loss of R472 million compared with a profit of R304m a year before, due to problems in the South Africa’s minibus taxi industry.

Issues in the sector included reduced commuter mobility and shifting travel patterns, initially due to the Covid-19 lockdown measures and later compounded by job losses, depressed economic activity and load shedding; high fuel prices; interest rate increases; rising vehicle costs and the difficulties in raising fares.

At SA Taxi, the focus would be on reducing debt and creating a self-sustaining business over the next three years.

Measures included significantly reduced loan origination levels, shifting focus to only pre-owned minibus taxis, management changes, an aggressive cost reduction and restructuring which was almost complete and result in savings of about R480m per year, and a focus on higher quality credit risk on a lower quantum of loans originated.

“For the short to medium-term, Transaction Capital’s imperative is on realising the value inherent in each of the businesses in its existing portfolio,” Jawno said.