But the prelisting financial statement, reflecting four different reporting periods, makes it hard to decipher what’s going on in the group. From Moneyweb.
Transaction Capital’s (TC) share price has regained some dignity after bottoming at around 4 00c last year with the upcoming listing of subsidiary WeBuyCars (WBC) in April.
This week, it traded above R10 for a period in anticipation of the unbundling of WBC, which is expected to have a market cap of between R8.7 billion and R10 billion when listed on 11 April. The share price is still well below its peak of above R50 in May 2022.
The investment holding company’s share price was hammered by dwindling fortunes in its SA Taxi division, which last year posted a R3.7 billion loss from continuing operations.
WeBuyCars’s prelisting statement provides a snapshot of its financial performance over four different periods, none of which are directly comparable. This makes it hard to read what’s going on with the group.
Read/listen: Transaction Capital AGM: ‘22 minutes of very little’
The prelisting statement explains the two shorter reporting periods above: it reports the seven months to 21 March 2021 because the company was only incorporated on 17 August 2020; and the six months to 30 September 2022 is shown because of a change in financial yearend to 30 September.
Then, we are presented with two 12-month reporting periods, which are also not directly comparable. The jumble of reporting periods does not provide much insight into what is happening to revenue.
We get a better (though abridged) picture from a February trading update covering the four months to January 2024.
Here we can see revenue and earnings up 16% and 20% respectively for the four-month period.
Read: Transaction Capital surges on WeBuyCars separate listing plan
The spike in interest rates in 2022 prompted WBC to shift focus to lower-priced second-hand vehicles, in line with consumer demand.
WBC seems agile enough to sense these shifting economic winds and adjust its business model accordingly.
Transaction Capital hopes to raise between R900 million and R1.25 billion from the sale of WBC shares to pay down debt of about R1.6 billion, most of this in the form of a revolving credit facility.
This will reduce TC’s shareholding in WBC from the current 74.9% to anywhere between 57.5% and 67.5%. TC shareholders will receive a minimum of 0.30241 WBC shares for every one TC share held.
Read: Has Transaction Capital’s WeBuyCars run out of growth?
WBC intends to boost sales from about 14 000 to 23 000 vehicles a month over the next four to five years, mainly through the opening of vehicle supermarkets in new locations and expanding the number of buying pods. WBC buys and sells vehicles from 15 supermarkets, has 74 buying pods and more than 340 buyers nationwide.
The used car market is still relatively untapped, particularly in areas where WBC is not currently represented. While the new car market is taking pain in a market beset by high interest rates and car price inflation, WBC sees affordability being one of its best allies in driving buyers to the used car market.
Read: ‘Sum of the parts’ explained – and used on Transaction Capital
There is little to suggest that the affordability issue will not remain a key business driver in the years ahead. The trick for WBC is to expand its buying pods and vehicle supermarkets to give it better national coverage and maintain or even improve margins while increasing the number of vehicles sold per month.
The WBC balance sheet is conservatively geared, supported by high cash conversion rates. Net debt of about R1 billion consists primarily of mortgage loans (R734 million) on several vehicle supermarkets and working capital facilities (R300 million) to fund inventory.
Read the Sens here.
