Transaction Capital said at an investor webinar on Thursday that was currently in talks with taxi association Santaco on restructuring its SA Taxi unit.
Last week the firm issued a trading statement and said it was going to restructure SA Taxi and warned that its earnings would be reduced. This led to the company’s shares falling drastically, wiping billions off its market valuation.
And in a trading update on Monday, the group, which controls the WeBuyCars used-vehicle operation, the SA Taxi vehicle-financing operation, and the international business outsourcing solutions group, Nutum, said that core earnings per share would be down 41%-46% in the six months to end March.
Shedding light on the company’s decision to restructure the taxi business on Thursday, the group said collections in its taxi-lending business, SA Taxi, had not seen a recovery to pre-Covid-19 levels. The collections formed part of its book, which was not performing well. It was in the marginal lower end of the credit market.
“The finance market or the credit market for taxis has contracted specifically on the lower end,” it said, adding that this had led to it making a few big decisions.
Transaction Capital plans to restructure SA Taxi and Gomo to a new mobility platform, to be branded Mobalyz.
The firm has previously said it was confident that the group’s swift response in rebasing this business would give it the operational, financial and strategic flexibility to recover and grow.
It said on Thursday it planned to recalibrate the taxi business and loan originations.
It explained that once the decision was made, there was a knock-on ripple impact into new originations and provisioning.
“It has implications for potential growth drivers. And obviously, it has implications for the cost base and how we make that efficient," the group said.
Transaction Capital said it was in talks with Santaco, on a previous deal, which was concluded in 2018. It was now in talks with the association and funders of the transaction on restructuring the deal.
Santaco owns 25% of SA Taxi, and SA Taxi contributed 70% of group revenue four years ago.
“Of course, nobody had anticipated that Covid would be a thing back then (2018). Many other macro challenges that have followed meant that the funding transaction that allowed the industry to purchase the shares is underwater," the group said.
Transaction Capital said this would also add additional strain to that funding transaction.
“So we are currently in discussions with the funders of that transaction, as well as Santaco to work out a restructuring of those arrangements because clearly, the existing structure will not work any longer. We did not have the outcome of that discussion. Those are live discussions,” the group said.
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