Transaction Capital aims to grow market share of its industry-disrupting WeBuyCars and leverage its customer engagement services technology in Nutun in the next 12 months.
The group yesterday reported strong results, with headline earnings a share higher by a robust 52.6% in the year to September 30.
This was according to Transaction Capital’s CEO, David Hurwitz, who was interviewed about the results that saw the total annual dividend raised 35% to 70 cents per share, this in spite of no growth in its taxi financing operations after the taxi industry faced considerable headwinds.
Hurwitz said these challenges included less activity through Covid-19, rising fuel prices, and last year’s floods in KwaZulu-Natal, which impacted Toyota SA, maker of the minibus taxi model of choice in this country.
“We feel good, we feel confident” about the group’s prospects, said Hurwitz.
Transaction Capital performed in line with historical growth rates in the past year, lifting core earnings from continuing operations by 24% to R1.25 billion, while core earnings per share increased 17% to 172.5c. A 35c final dividend was declared, after the strong financial results, healthy balance sheet and medium-term prospects were considered. Gearing was about 50%, said Hurwitz.
“Returns remain robust as earnings composition tilts towards capital-light revenues from WeBuyCars and Nutun,” the group said in its results.
Commuter activity was increasing in South Africa, but was not anticipated to reach pre-pandemic levels in the short-term, as macro-economic challenges were hurting minibus taxi operator profitability, causing finance and insurance instalment affordability constraints.
Hurwitz said in the past year, SA Taxi's earnings were below 2021 levels. A new initiative for SA Taxi involved leveraging skills from WeBuyCars to finance and sell older second-hand vehicles, a market banks had tended to avoid beyond a certain vehicle age.
He said WeBuyCars’ strategy was to grow market share, and to also grow the proportion of online transactions, which currently stood at around 30%.
WeBuyCars currently sells some 12 000 used vehicles per month, and about 12 000 are bought, with the average turnaround time per vehicle at 25 days.
AutoTrader, competitor to WeBuyCars, told Engineering News recently that despite the overall good demand for, and short supply of, used cars, there were some “worrying local and international signs” that suggested the used-car market may slow, with rising interest rates and inflation, and higher fuel prices likely to dent demand.
At Nutun, Transaction Capital’s biggest source of revenue, expansion into global CXM (customer experience management) services represented an opportunity to leverage off South Africa's popularity as an outsourced customer engagement services destination, to earn international revenue and to create sustainable employment locally.
In the new financial year, Nutun would focus on acquiring NPL (non performing loans) portfolios in South Africa. CXM services revenue growth was expected to outpace CE services (principal collections) revenue growth over the medium-term.
The share price traded at R39.75 yesterday morning, slightly below the R43.50 it traded at a year ago, but is nevertheless about 80% higher than the R21.80 it traded at three years ago.