Transaction Capital serves up a robust leap in its headline earnings
Share this article:
TRANSACTION Capital delivered a robust 27 percent increase in headline earnings in the year to September 30 after trading at its WeBuyCars and Transaction Capital Risk Services (TCRS) surpassed pre-Covid 2019 levels, chief executive David Hurwitz said yesterday.
Core headline earnings from continuing operations were up 264 percent to R1.01bn when compared with 2020. Dividend payments resumed supported by the strong financial performance and healthy balance sheet. During 2021, Transaction Capital increased its shareholding in WeBuyCars to 74.2 percent in August 2021.
Hurwitz said the results were driven by organic growth from existing divisions, SA Taxi and TCRS, and high earnings growth from the newly acquired division, WeBuyCars. Dividend payments resumed supported by the strong financial performance and healthy balance sheet.Hurwitz said SA Taxi had not yet reached pre-Covid levels of trading, but he expected it would in the new financial year.
He said what the pandemic had shown was that the taxi industry was indispensable to the economy - 73 percent of the public use public transport, 23 percent use personal vehicles and about 3-4 percent walk, with transport by minibus comprising 84 percent of all the people who use public transport.
However, although spending on taxi fares was non-discretionary, lower economic activity and high unemployment meant people were moving around less, and this part of Transaction Capital’s business was taking a little longer to recover to pre-Covid levels, he said.
On the other hand, retailers and banks realised they needed TCRS services to help them collect debts, he said.
Meanwhile, the controlling investment into WeBuyCars had taken Transaction Capital into a new adjacent market, diversifying earnings further and accelerating growth rates.
Hurwitz said WeBuyCars was able to sell second hand cars at relatively low margins, but it sold some 9000 per month, making it one of the biggest second-hand car dealers in the country.
He said WeBuyCars’ e-commerce and physical infrastructure was growing fast and the strong trading of the past year had been maintained two months into the new financial year, he said.
Further growth would come from extending its services to include offering vehicle finance as a principal, he said. WeBuyCars’ target to increase the volume of vehicles traded to 10 000 per month was on track to be released sooner than initially anticipated, with the group’s revised target for the medium-term now increased to 15 000 vehicle sales per month.
The group remained well capitalised, with adequate access to liquidity. In July 2021, it successfully completed an accelerated book-build, raising R1.17bn of equity capital that was used primarily to finance the acquisition of a controlling stake in WeBuyCars.
A final dividend of 33 cents per share was declared, following the interim payout of 19 cents.
Hurwitz said they believe the group could sustain “superior high-quality earnings growth in the medium term in line with, or exceeding, pre-Covid growth rates.”
BUSINESS REPORT ONLINE