Transaction Capital says it aims for double-digit second-half growth in its earnings

TRANSACTION Capital grew earnings at rates higher than pre-pandemic levels in the six months to March 31, but reduced commuter activity and the impact of floods at Toyota SA would impact second-half growth.

Core headline earnings increased 38 percent to R603 million, and core headline earnings per share grew by 28 percent to 83.7 cents in the interim period.

However, the post-lockdown economic recovery that started in 2021 was likely to be subdued in 2022 due to power outages, high unemployment, rising fuel and energy prices, inflationary pressures, and other global economic shocks, chief executive David Hurwitz said in a telephone interview yesterday.

These factors had resulted in reduced commuter activity, he said.

Retail prices for minibus taxis had risen 6.6 percent since September 2021 to April 2022, with the recommended retail price of a Toyota HiAce diesel vehicle at R528 800.

In addition, Toyota SA makes the HiAce, the vehicle used by most taxi operators, and the floods in KwaZuluNatal meant that the group’s SA Taxi subsidiary might only be able to source new vehicles in two to four months’ time.

However, despite these challenges, SA Taxi’s operational, credit and financial performance remained on track, said Hurwitz.

He said they expected that commuter activity would return to normal levels in time, and taxi operators had indicated they would raise fares after they had remained unchanged during the 2020 Covid pandemic year.

However, these fare increases were not enough to counter the rising costs facing taxi operators. With the industry’s profitability under strain, taxi operators are under pressure to afford their loan instalments and insurance premiums, he said.

He said SA Taxi was adapting to the new environment by doing better collections, it had adjusted its loans to slightly longer periods to make them more affordable, vehicles were being sold to operators with better credit quality, and the company was refurbishing repossessed vehicles and selling these to operators at more affordable prices.

Hurwitz said WeBuyCars and Transaction Capital Risk Services continued to perform above expectations with earnings growing at rates higher than historic levels.

An interim dividend of 33c per share was declared.

He said WeBuyCars continued to disrupt used vehicle ownership and trade in South Africa, through a combination of vehicle trading via its e-commerce and physical infrastructure, together with finance, insurance and other ancillary products.

WeBuyCars launched its principal vehicle finance product in the first half, which combined SA Taxi’s competencies in assessing credit risk and providing vehicle finance, and WeBuyCars’ ability to efficiently underwrite and recover on the value of used vehicles.

WeBuyCars’ business-to-consumer e-commerce capabilities, introduced in 2021, now accounted for about 18 percent of online sales, up from 8 percent at the end of the 2021 financial year.

This sales strategy and expansion of WeBuyCars’ physical footprint had enabled the business to reach its 10 000 vehicle sales per month target sooner than expected, he said.

WeBuyCars grew headline earnings by 58 percent to R406m in the 2022 half year, with the group’s attributable portion increasing 122 percent to R251m.

Transaction Capital increased its shareholding in WeBuyCars in August 2021 to 74.2 percent.