Transaction Capital narrows losses

Financier Transaction Capital has reported a narrowing of its losses at the halfway stage, primarily reflecting the consolidation of the losses incurred at SA Taxi, its subsidiaries and funding entities.

Headline loss per share from continuing operations attributable to the group narrowed to 164.9c in the six months to end-March from a loss of 224.6c a year ago, it said in a statement on Tuesday.

Total headline loss per share, including from discontinued operations, narrowed to 172.5c from a 222.1c loss before.

Revenue fell to R981m from R1.3bn a year ago. Its loss for the period for continuing operations after tax narrowed to R1.69bn from R2.1bn a year ago.

In April, Transaction Capital successfully unbundled WeBuyCars on the main board of the JSE, enabling it to return R5.2bn to shareholders through the distribution of 256.3-million shares in the new listing.

Transaction Capital raised R1bn through the placement, which allowed it to materially pay down debt and move to a net cash position at a holding company level.

However, its taxi business remains in a battle to restructure, with Mobalyz — the newly established mobility platform resulting from Transaction Capital’s restructuring of its SA Taxi and Gomo businesses — reporting a one-off net loss of R966m. In the first half, Mobalyz made a core loss from continuing operations of R1.8bn, driven primarily by the reduction of the absconsion, violation and credit shortfall (AVCS) cover in SA Taxi’s insurance business.

“Despite the adverse impact that the decision to reduce the AVCS cover has had on the period’s earnings, it is necessary to create a sustainable insurance business, which has now been achieved,” said the company.

Reduce losses

It said that Mobalyz’s management team, under Sean Doherty, had been overhauled and strengthened, and significant progress had been made in developing Mobalyz’s service offering as well as the restructuring and rightsizing of SA Taxi’s operations.

The company has proposed a detailed business plan on the SA Taxi balance sheet restructure to the funders that, if accepted, will allow originations to continue uninterrupted. It will also significantly reduce the losses on the existing loan portfolio as well as support the operating businesses within Mobalyz, which will in turn create further equity value.

“This has, in principle, been well received. Though nothing has been concluded, we continue to engage with funders to establish the terms under which this proposal could be supported.”

As SA Taxi has not yet achieved a balance sheet restructure, the business is being managed with a priority on preserving and generating cash rather than optimising profit.

“Management believes this is the appropriate strategy for where the business finds itself and expects that this will continue to weigh on the full-year earnings outlook to September 2024,” it said.

In March, Transaction Capital sold the Australian division of its debt collector and call centre operator, Nutun, enabling the division to focus on what the group describes as the “capital light” parts of its business. 

The group sold Nutun Australian Holdings to a subsidiary of private equity investor Allegro Funds for A$58.3m. Nutun will still provide its call centre and customer relations support to the Australian business from SA, acting as a service provider.

“Within Nutun, we have taken bold steps over the last six months to remove costs and streamline the operations into two distinct businesses. This has come at a short-term operating cost. Despite this, we are confident that this strategy is correct and will unlock shareholder value in the medium term,” it said.

IG senior market analyst Shaun Murison said the group had covered a lot of ground in steadying the ship.

“While the group addressed the consolidation of losses from SA Taxi and its funding entities, it is essential to assess the progress made towards its strategic goals. Basic loss per share from continuing operations decreased by 20.7% to 178.3c, compared with 224.9c in the first half of 2023,” said Murison.

“Headline loss per share also improved, decreasing by 26.6% to 164.9c. Despite these improvements, core earnings per share from continuing operations fell to a loss of 186.9c, a significant drop from 0.1c in the first half of 2023. These figures reflect the impact of the restructuring efforts and the strategic decisions aimed at creating a sustainable business model.”

Updated: May 21 2024
The story has been updated with an analysts comment. 

With Michelle Gumede and Kabelo Khumalo

mackenziej@arena.africa