Transaction Capital on track to resume growth and dividends
Transaction Capital, one of the largest suppliers of finance to the taxi industry, says that the group expects to reinstate payment of dividends this year and has reaffirmed its commitment to return to the growth trajectory it enjoyed before the arrival of the pandemic last year.
In a letter to shareholders before its annual general meeting on Friday, Transaction Capital CEO David Hurwitz said the group “performed largely in line” with expectations for the first four months of the 2021 year to end-January, and remains on track to resume its strong organic growth trend this year.
“Headline earnings per share should exceed [financial year 2019] levels at rates in line with prepandemic growth rates, with the group resuming dividend payments this year,” wrote Hurwitz.
The group, which owns SA Taxi Finance and Transaction Capital Risk Services and recently acquired a large stake in WeBuyCars, one of the country’s largest second-hand car dealers, grew earnings at a compound annual rate of more than 20% from 2014 to 2019. Dividends rose more than 31% in the same period, before the trend was derailed by large credit provisions due to the pandemic.
Hurwitz’s letter says the restrictions appear to be over and “no further operational adjustments” are required to adapt the business to lockdown restrictions. This has freed up the group’s divisional management teams to focus fully on their strategic growth initiatives.
Even during the risk-adjusted level 3 lockdown in December and January, all vehicles monitored by SA Taxi Finance were operational and had covered 94% of the distances achieved before the pandemic.
Hurwitz said the unit grew gross loans and advances in the low to mid-teens for the first four months of the year, despite more selective loan criteria targeting better quality, experienced minibus taxi operators that has increased the decline rate.
Transaction Capital Risk Services has already spent R290m in the current financial year to acquire non-performing loan portfolios and says that given the current consumer credit environment “there may be unprecedented opportunity to accelerate capital deployment” into these initiatives.
The group said WeBuyCars has reached “new heights” in the first quarter of the calendar year including revenue and total units bought and sold.
“WeBuyCars’ medium-term target to increase the volume of vehicles traded to 10,000 vehicles per month to capture growing demand, remains on track,” wrote Hurwitz. All resolutions were passed comfortably at the annual meeting.
The group’s share price closed marginally higher on Friday at R27.85 per share.