Transaction Capital’s minibus taxi financing subsidiary SA Taxi’s woes worsened after it reported a R3.7 billion headline loss for the year to September 30, this after a R2.1bn loss was reported in the first half.
Notwithstanding this, SA Taxi's operational restructure, focused on stabilising the business through cost reductions and repositioning the business in the pre-owned minibus tax market, was on track for completion in March 2024, the group’s directors said in the annual results yesterday.
They said the headline loss was driven mainly by a R1.1bn increase in repossessed vehicle stock write-downs as further material changes were made to SA Taxi in the second half.
Subsequent to these once-off provisions, the net asset value of SA Taxi was R1.6bn, including a R2.2bn non-interest bearing shareholder loan to be capitalised.
With the strategic focus on the origination of pre-owned taxis at lower volumes, and the progress made in simplifying and downscaling SA Taxi's auto refurbishment and repair facilities, management had decided not to proceed with the sale of this business.
The auto refurbishment and repair business had been classified as a discontinued operation in the first half, and was now been reclassified in continuing operations.
SA Taxi's balance sheet restructure was critical to SA Taxi's viability and a resolution with SA Taxi's existing debt funders was targeted for completion by March 2024.
“The successful restructuring of SA Taxi is predicated on existing debt funders remaining committed. Transaction Capital remains supportive of SA Taxi, however no shareholder funding beyond March 2023 has been provided, nor is any envisaged going forward,” Transaction Capital’s directors said.
Meanwhile, Transaction Capital’s used car subsidiary WeBuyCars' earnings came to R658 million for the year, down 14% on the prior year. In the second half, earnings were only down 4% from the second half of 2022 as the business recovered momentum.
Volumes of vehicles sold grew by 13% to 141 851. The strong momentum had continued into the new year.
Group subsidiary Nutun's earnings grew 10% to R479m compared to the full 2022 financial year, driven by solid growth in customer experience management services.
Transaction Capital’s headline earnings per share from continuing operations decreased 144% to a loss per share of 99 cents from a profit of 224.4 cents in the 2022 financial year.
At the holding company level, Transaction Capital was well capitalised. WeBuyCars and Nutun combined adequately covered the net debt (R1.1bn) from both a dividend flow and asset cover perspective. Despite this, management was actively pursuing restructuring or reducing the debt.
Nutun and WeBuyCars' balance sheets remained conservatively geared and supported by high cash conversion rates.
The capital and funding structures of these businesses were isolated from the effects of SA Taxi's restructuring, as there were no cross-default clauses between Nutun, WeBuyCars and SA Taxi, directors said.
“Management notes an industry-wide structural shift (in the taxi industry) as a consequence of the changing economics impacting taxi operators. This has necessitated a move away from financing new minibus taxis to financing only pre-owned vehicles to create affordability in this market segment. Despite this decision requiring the additional write-down of repossessed vehicle stock, management believes this is crucial to successfully reposition SA Taxi as a financier of pre-owned minibus taxis.”
High fuel prices, high interest rates, increasing cost of parts and maintenance, record load shedding, lower commuter volumes as a result of depressed economic activity, and an inability to increase fares given already financially stretched consumers were among the factors leading to the structural shift in the industry.
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