Transaction Capital sees share price moving towards support following results release
Core earnings per share from continuing operations fell considerably from the prior year’s comparative.
Key Takeaways
Successful Unbundling of WeBuyCars: Transaction Capital successfully unbundled and listed WeBuyCars on the JSE, returning R5.2 billion to shareholders and raising R1.0 billion through the placement.
Decreased Losses per Share: The company reported a decrease in basic loss per share from continuing operations by 20.7% to 178.3 cents, however, core earnings per share from continuing operations fell significantly.
Impact of SA Taxi and Mobalyz: Mobalyz, driven by changes in SA Taxi's insurance business, experienced a core loss of R1.8 billion. This included a once-off net loss of R966 million due to the reduction of the absconsion, violation, and credit shortfall cover.
Board and Operational Restructuring: Transaction Capital has streamlined its board and executive roles, reducing the number of directors from 14 to 10 and consolidating board committees from 6 to 3.
Nutun Divestments and Restructuring: Nutun Australia has been sold, and Nutun Transact is in the process of being sold, to strengthen the balance sheet and liquidity.
Debt reduction and improved Cash Flow
Transaction Capital Limited reported its unaudited interim results for the half year ended 31 March 2024, marking a period of notable financial movements and strategic decisions. One of the key highlights was the successful placement and separate listing of WeBuyCars on the JSE, enabling the company to return R5.2 billion to shareholders through the distribution of 256.3 million WeBuyCars shares. This strategic move helped the group significantly pay down its debt, transitioning to a net cash position at the holding company level. Additionally, the group raised R1.0 billion via the placement, further enhancing its financial stability.
Financial Metrics and Performance Indicators
While the group addressed the consolidation of losses from SA Taxi and its funding entities, it is essential to assess the progress made toward its strategic goals. Basic loss per share from continuing operations decreased by 20.7% to 178.3 cents, compared to 224.9 cents in H1 2023. Headline loss per share also improved, decreasing by 26.6% to 164.9 cents. Despite these improvements, core earnings per share from continuing operations fell to a loss of 186.9 cents, a significant drop from 0.1 cents in H1 2023. These figures reflect the impact of the restructuring efforts and the strategic decisions aimed at creating a sustainable business model.
Strategic Restructuring and Future Plans
Mobalyz experienced a core loss from continuing operations of R1.8 billion, primarily driven by changes in SA Taxi's insurance business, resulting in a once-off net loss of R966 million. However, the restructuring and rightsizing efforts have made significant progress. A detailed business plan proposed for the SA Taxi balance sheet restructure has been well-received, which, if accepted by funders, will allow origination to continue and reduce losses on the existing loan portfolio.
Transaction Capital has rationalized its board and head office structures to improve operational efficiencies, reducing the board from 14 directors to 10 and merging key roles. Furthermore, Nutun Australia has been sold and Nutun Transact is in a sales process to strengthen balance sheets and liquidity. By streamlining Nutun into two distinct businesses—capital-enabled services and global business process outsourcing—Transaction Capital aims to unlock shareholder value in the medium term.
As a result of these corporate activities, Transaction Capital now stands as an unencumbered investment holding company comprising 100% of Nutun, 75% of Mobalyz, and net cash of approximately R120 million, positioning it well for future growth and value creation.
Transaction Capital – technical view
Since the unbundling of WeBuyCars, the share price of Transaction Capital has moved into a range bound trading environment between levels 236.60 (support) and 330.45 (resistance).
Traders will either be looking to trade between the levels of this range or waiting for a breakout of this range.
Long entry might be considered on a bullish price reversal closer to the 236.60 support level, or on an upside break of the 330.45 resistance level (confirmed with a close above).
Short entry might be considered on either a bearish price reversal off the 330.45 resistance level, or a downside break (confirmed with a close below) of the 236.60 support level.
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