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TRANSACTION CAPITAL LIMITED - Voluntary Trading Update In Respect Of WeBuyCars For The Four Months Ended 31 January 2024

Release Date: 13/02/2024 12:14
Code(s): TCP TC002 TC001     PDF:  
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Transaction Capital Limited TransCapital Investments Limited (Incorporated in the Republic of South Africa) (Incorporated in the Republic of South Africa) Registration number: 2002/031730/06 Registration number: 2016/130129/06 JSE share code: TCP Bond company code: TCII ISIN: ZAE000167391 LEI: 378900AA31160C6B8195 ("Transaction Capital" or "the company" or "the group")
Shareholders are referred to the announcement released by Transaction Capital on SENS on Tuesday, 13 February 2024 regarding the unlocking of value for shareholders of Transaction Capital, comprising: the firm intention to unbundle WeBuyCars and its separate listing on the Main Board of the JSE, the WeBuyCars share issue of R760 million, 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 ("Firm Intention Announcement").
The purpose of this announcement is to provide shareholders with a business trading update for WeBuyCars in the light of the release of the Firm Intention Announcement. The information contained in this announcement has not been reviewed or reported on by the group's external auditors and is the responsibility of Transaction Capital's board of directors. TRADING UPDATE
In the 2023 financial year ("FY2023"), WeBuyCars delivered on key performance metrics including increased volumes and growth in market share. Although earnings were down in the first half of FY2023, the business saw a strong recovery in the second half. This positive momentum has continued into 2024, notwithstanding the adverse market conditions.
For the 4 months ended 31 January 2024 2023 2022 Movement 2024 vs 2023 Financial performance
Revenue Rm 7 636 6 574 5 246 16% Core earnings Rm 267 223 275 20% Core cost-to-income ratio % 61.5 60.4 48.7 Debt-to-equity ratio % 32.4 47.5 45.2 Cash generated from operating activities Rm 402 256 193 57% Net interest-bearing liabilities
Rm 1 034 1 392 1 058 (26%) (excl IFRS 16) Operational performance
Vehicles purchased Number 53 855 48 346 37 826 11% Vehicles sold Number 53 144 47 056 37 259 13% Stock days Number 29 30 23 Inventory Rm 1 975 1 945 1 093 2%
Inventory units Number 12 352 12 487 7 380 (1%) F&I penetration on units sold % 19.4 21.6 16.7 F&I units Number 10 300 10 155 6 205 1% Vehicle parking bays Number 10 444 9 885 6 985 6% Buying pods Number 74 59 24 25% Total e-commerce sales Number 13 951 9 846 11 274 42% Total e-commerce sales % 26.3 20.9 30.3 Financial performance
In line with expectations, WeBuyCars has resumed its earnings growth trajectory with core earnings growing 20% in the first four months of the 2024 financial year ("FY2024"), compared to the same four month period in FY2023. WeBuyCars' earnings performance in FY2023 was impacted by the change in market dynamics, as the factors that had contributed to unusually high used car demand and price inflation in 2022 reversed. The business' agile operating model and quick stock turn enabled it to respond quickly to these market changes. 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.
WeBuyCars has continued to invest in its proprietary digital business platform, data, and analytics capabilities which optimise the vehicle buying and selling process. This proprietary technology platform has proven to be a key differentiator for the business.
WeBuyCars' balance sheet is conservatively geared, supported by high cash conversion rates. Net debt of R1 034 million consists primarily of mortgage loans (R734 million) on several vehicle supermarkets, and working capital facilities (R300 million) to fund inventory. In the current high interest rate environment, management has repaid debt during the period under review, which has resulted in interest savings. Operational performance
In the first four months of FY2024, WeBuyCars bought 53 855 vehicles and sold 53 144 vehicles, up 11% and 13% respectively. The number of vehicles bought and sold continues to grow, with the number of vehicles sold reaching a record of 14 000 in January 2024.
In 2022, WeBuyCars made significant investments in its infrastructure, increasing total capacity to 8 580 parking bays. During the sixteen months to 31 January 2024, a further 1 864 bays were added to the national footprint, bringing the national capacity to 10 444 parking bays. Given the focus on leveraging existing strategic infrastructure investments, only one new branch was opened in the last nine months, resulting in inventory levels remaining consistent with the prior period. The physical footprint will be expanded further in 2024 and 2025 to meet the business' growth aspirations.
As the business has scaled, it has consistently invested in marketing spend to enhance the WeBuyCars brand. Investment in its website and its consumer app has allowed for increased online engagement with consumers, making vehicle purchasing more convenient. WeBuyCars' website is currently averaging 5.7 million monthly visits with 1.8 million unique visitors, presenting a unique and growing buy-and-sell ecosystem. OPERATING CONTEXT
The structural elements supporting the medium and long-term outlook for the second-hand vehicle market in South Africa remain positive. In the current macroeconomic environment characterised by high unemployment and elevated interest rates, affordability is a big challenge for consumers, driving demand for more affordable used vehicles. In addition, the increasing prices of new vehicles, fuelled by inflationary pressures and a depreciating Rand, also boosts demand in the pre-owned vehicle market.
WeBuyCars has proven to have been well-positioned in the current environment and will continue to deliver on its value offering to consumers as it expands. Sandton 13 February 2024 Transaction Advisor and Sponsor PSG Capital Legal Advisor as to South African law ENSafrica Legal Advisor as to US and UK law Goodwin Tax Advisor Werksmans Attorneys Investor Relations
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Date: 13-02-2024 12:14:00
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