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Shares of SA's biggest taxi financier Transaction Capital, which also owns a majority stake in vehicle trader WeBuyCars, crashed 40% on Tuesday morning, a day after it warned shareholders that it expected interim earnings to fall by more than a fifth.
Shares in the company, valued at more than R21 billion at market open, had fallen 40.17% to R16.83 as of 11:00, taking them to levels last seen in late 2020.
Click here for details on Transaction's shares as well as other info.
Transaction said after markets closed on Monday that it expects core earnings per share from continuing operations to fall by more than 20% in its half-year to end-March, but by no more than 50%. It also said it would need to "reset" financier SA Taxi.
The company warned it believes that the cyclical headwinds facing SA Taxi’s business model have now become more structural in nature, and the business is unlikely to recover to pre-Covid-19 levels in the short to medium term.
"The industry’s profitability remains stressed due to stubbornly elevated fuel prices, vehicle price increases, sharp interest rate hikes, persistently low commuter volumes and the lack of corresponding fare increases. Record levels of load shedding are adversely impacting economic activity, with a further negative knock-on effect on commuter activity," it said.
"We are proud of our track record of delivering consistently high growth for stakeholders and believe that Transaction Capital will continue to deliver this into the medium term," CEO David Hurwitz said in the update.
"In the short term, we believe it is prudent to acknowledge and decisively tackle the issues facing SA Taxi, and to reset this business for future growth. While we understand that this does come at a cost to our upcoming half year results, and will weigh on the full year outlook to September 2023, we are confident that the group’s swift response in rebasing this business will give it the operational, financial and strategic flexibility to recover and grow," he said.
The company also warned of some margin pressure at WeBuyCars, though it said this came off an abnormally high base, and it continued to gain market share.
Transaction Capital’s almighty fall is frightening & concerning. It’s a company that analysts spoke highly of, even though the share price was showing signs of strain. We Buy Cars was considered a growth-shifting acquisition that would underpin profits into the future. Oh boy!!
— David Shapiro (@davidshapiro61) March 14, 2023
"Although the number of used vehicles traded continues to exceed that of new, the South African market has shifted significantly when compared to the first four months of full year 2022," it said.
"A year ago, the used vehicle market was supported by constrained new vehicle supply due to chip shortages, and higher consumer confidence supported by lower fuel prices and interest rates." The company said it expected earnings at WeBuyCars to decline by no more than 20% in its first half.
