Shares in taxi financier and second-hand car dealer Transaction Capital dropped as much as 12% on Monday morning after its latest update, after a week in which it plunged about 70% before recovering a little on Friday.
The company’s share price plummeted last week after it admitted in a trading statement that problems in the taxi lending business were structural, meaning they are likely to be more permanent in nature.
It is also seeing lower profits in second-hand dealer WeBuyCars and warned a week ago that core earnings would be down by 20%-50%.
It said on Monday its headline earnings for the six months to end-March will decline 370%-375% to a loss of between 199.5c and 196.1c compared with headline earnings of 72.5c in the prior period.
It is buying a further 15% stake in WeBuyCars and terms of the deal had been to issue shares to the sellers. Given the weakness of its share price, it said it will not be issuing further shares.
Initially, the proposed terms of purchase required that 30% of the price would be paid to the sellers in Transaction Capital shares. Instead, it will be paying cash in two equal tranches — in September this year and September 2024.
It said core earnings per share will be down by 41%-46% in the six months to end-March.
However, it predicts core earnings to recover to a lower drop of 19%-24% to between 131.1c and 139.3c for the full-year to end-September.
It forecasts a slight recovery in the second half of the year in its WeBuyCars business that had lower profit margins as consumers come under pressure.
Its SA Taxi division provides vehicle finance and insurance to taxi owners who are unable to get credit from major banks due to their perceived high risk.
Taxi owners who borrow money for vehicles are facing lower consumer demand, rising petrol prices and higher vehicle prices, making it harder to service their debt.
Its taxi business is undergoing restructuring.
CEO David Hurwitz sold 30% of his shares in December for R50m, forcing the company to issue a Sens announcement to defend the transaction.
Hurwitz said he had put shares up as collateral for debt and was required to sell some by lenders in December. Shares owed to him became available in November, requiring him to pay large amounts of tax.
The company’s shares closed down 7.4% at R10.65 on Monday.
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