Transaction Capital’s WeBuyCars gears up for a separate listing on JSE

It’s the logical fix to undo the damage wrought by SA Taxi on Transaction Capital: offloading shares and listing WeBuyCars (WBC) separately on the JSE.

Investment holding company, Transaction Capital has announced it will be “unlocking of value” for shareholders of Transaction Capital, by unbundling its cash-cow WeBuyCars and listing it separately on the JSE’s main board.

It hopes to raise up to R1.25-billion in the sale through the private placement of WBC shares of R500-million, a proposed pre-listing capital raise of up to R750-million and withdrawal of the cautionary announcement.

In March 2023, Transaction Capital announced the aggressive restructuring of SA Taxi, in response to a slump in the local minibus taxi industry as operators are unable to afford new taxis. It was forced to move away from financing new minibus taxis to financing only pre-owned vehicles and discontinued SA Taxi’s refurbishment and repair facilities.

SA Taxi, which is 75% owned by Transaction Capital, is a drain on the holding company and heavily indebted, owing lenders close on R17-billion.

In December, Transaction Capital’s results revealed that SA Taxi had recorded a headline loss of R3.7 billion for the year, up from the R2.1-billion loss reported in H1 2023. Most of this was driven by a R1.1-billion increase in repossessed vehicle stock write-downs it said.

Taxis in Zonnebloem on 24 March 2022 in Cape Town, South Africa. (Photo: Gallo Images / ER Lombard)

SA Taxi’s operational restructure, focused on stabilising the business and repositioning the business in the pre-owned minibus taxi sector, is expected to be completed by next month.

In a Sens update, Transaction Capital said WBC enjoyed increased volumes and growth in market share during the 2023 financial year. Earnings were down in the H1, but H2 saw a strong recovery, despite a tough trading environment.

For the four months ending 31 January, revenue was up 16% compared to the same four-month period in FY2023, with core earnings up 20%.

WBC’s earnings performance in FY2023 was affected by a change in market dynamics, as the unusually high demand for used cars and price inflation of 2022 was reversed. The group said WBC’s agile operating model and quick stock turnover helped it respond quickly to these market dynamics.

“At the start of 2023 WeBuyCars swiftly adjusted its vehicle buying strategy to focus on lower-priced second-hand vehicles, in line with consumer demand. In H2 2023 margins stabilised and operational efficiencies improved, driving the return to earnings growth in FY2024.

“Revenue continues to grow in line with the growth in number of vehicles sold as the existing branch network matures. WeBuyCars is consistently expanding its market share in a highly fragmented market.”

WBC is also investing in its proprietary digital business platform, data, and analytics capabilities to optimise its vehicle buying and selling process, which it said is a key differentiator for the business.

WBC’s balance sheet shows a net debt of R1.03-billion — primarily comprising mortgage loans (R734-million) and working capital facilities (R300-million) to fund inventory. It’s also repaid debt over this period, to save on interest payments.

In the first four months of FY2024, WBC bought 53,855 vehicles and sold 53,144, which is up 11% and 13% respectively. In January this year, it reached record sales of 14,000.

It has also invested heavily in its infrastructure, by adding capacity to 8,580 parking bays. In March 2022, the group bought the Northgate Dome, allowing it to house over 1,000 more cars, motorbikes and trailers.

In the 16 months to 31 January 2024, it added a further 1,864 bays nationally, bringing its total capacity to 10,444 parking bays.

It’s planning to expand its footprint further this year.

Online search has also driven engagement with consumers: the WBC website has a monthly average of 5.7 million visits, with 1.8 million unique visitors.

The outlook for the second-hand vehicle market in South Africa is positive, it says, as the cost of living crisis is driving consumers towards more affordable used vehicles. DM