Transaction Capital is looking at growth in the booming call centre industry as it looks to revive its ailing operations after the unbundling of its pre-owned vehicle business WeBuyCars in April. The company is repositioning its operations after being hit hard by losses at its struggling SA Taxi business.
The group has restructured its businesses by selling noncore assets and also renegotiating debt repayments with lenders to save the business. After the unbundling and listing of WeBuyCars, Transaction Capital is left with Nutun, a company that runs call centres to collect debt and also provide customer services to blue chip clients in South Africa, the US, UK and Australia, and 75% of heavily indebted Mobalyz, formerly known as Gomo, which provides insurance and credit to SA Taxi clients to purchase taxis.
Call centres are part of the business process outsourcing (BPO) industry, which is one of the industries the government is focusing on to create jobs.
Transaction Capital CEO Jonathan Jawno said despite the economic downturn in South Africa, the BPO industry is “really one of the true growth industries. It’s one of the industries where growth equals employment”. Jawno said internationally Nutun is new in the BPO space; however, the growth prospects are strong given the attractiveness of South Africa as a preferred destination by international companies.
“We have been running call centres and doing collections for years. And we really have become world-class at what we do. It is the growth opportunity for Transaction Capital going forward. The beauty of this business is that growth potential is far bigger internationally because you are not limited by the South African economy that has not been growing over the last few years.”
Nutun’s operations include BPO and a capital-enabled business which buys non-performing-loan books. Book-buying has slowed down in the current reporting period as Nutun was more cautious in its pricing approach.
We have been running call centres and doing collections for years. And we really have become world-class at what we do
— Transaction Capital CEO Jonathan Jawno
CFO Mark Herskovits said: “There is currently a mismatch between sellers and buyers of books when it comes to agreeing on a fair price, a temporary phenomenon which the business has seen before in times of difficult economic conditions. So the slowdown that you saw in the acquisition of portfolios in the last six months is mostly attributed to pricing and not because of a lack of access to funding.”
Transaction Capital recently sold Nutun Australia with the proceeds to be reinvested back in the remaining Nutun call centre businesses. It is also in the process of selling Nutun Transaction, with Jawno expecting the sale to be completed by the end of Transaction Capital financial year in September.
Jan Meintjes, portfolio manager at Denker Capital, said though Nutun’s balance sheet has been shored up with the sale of Nutun Australia, “it is difficult to get a good handle on the prospects for the business. The buying of books has slowed down dramatically and it seems there have been delays in bringing new clients on board for the BPO business. I think it will take a good few months to see at what level these activities settle and also what the new normalised cost base will be for the restructured business.”
Through the unbundling of WeBuyCars, Transaction Capital raised R1bn which was used to pay debt at the holding company, leaving the business with R120m in cash at holding level.
“It is a positive that the holding company is now debt-free and sitting on a bit of cash, but the valuation of Nutun has become more uncertain with a poor operational performance during this very difficult period for the business. There is obviously no equity value in SATaxi and we cannot see the profitability (if any) in the rest of Mobalyz,” said Meintjes.
Mobalyz made a core loss from continuing operations of R1.8bn, driven primarily by the reduction of the absconsion, violation and credit shortfall cover in SA Taxi’s insurance business, which has resulted in a one-off net loss of R966m.
A debt-restructuring plan for the business has been proposed to the lenders. The company’s woes were attributed to a number of factors, including high fuel prices, sharp interest rate hikes, as well as load-shedding, which increases traffic density, causing longer commute times and thus fewer trips completed by taxi operators.
“We are very much in the hands of the funders. We have made a proposal that we believe will form the basis of a successful restructure. This has, in principle, been well received and we continue to engage with funders on the terms under which it could be supported It’s a five-year business plan that will see the business recover steadily. It’s not a quick fix, but it’s very important for us and for the broader industry, that the business can first stabilise and then slowly start to build and grow because there is nobody else that can fill the gap,” said Jawno.
The company is now selling about 100 taxis a month, which is “literally a trickle really ... Just in order to keep the business alive until we can get this new business plan approved,” said Jawno.
Transaction Capital is in a “very difficult transition phase”, said Meintjes.
“They did a good job to de-gear the holding company and simplify the structures, but it has come at a cost. The restructuring of debt at SA Taxi is very complex and it has taken a lot of management effort, and it is not done yet.”
Transaction Capital has supported SA Taxi by capitalising loan accounts but so far they have not been able to convince the lenders of SA Taxi to restructure their debt.
“It is also clear that there has been reputational damage impacting the funding of Nutun. There is less funding available to Nutun and it has most likely become more expensive. All the restructuring efforts are also affecting execution at Nutun where it seems the cost of capacity building ran out of kilter with revenues,” Meintjes said.
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