Transaction Capital share bloodbath is continuing after its warning of lower interim core earnings

TRANSACTION Capital’s share price continued to dive on Monday, falling to an intraday low of 12%, after it said core earnings per share (eps) from continuing operations might drop by up to 46% for the half year ending March 31, this year.

On Monday, the shares traded at a low of R10.10 closing the day 7.39% lower at R10.65. and have decreased by 69.04% in the past six months, with the market capitalisation now down to R8.7 billion. Transaction Capital’s share price started dropping last week, wiping billions off its value, following the company releasing a trading statement highlighting problems in the taxi-lending business, SA Taxi.

At the time, it warned core earnings per share for the six months to March 31 were expected to fall by more than 20%, but no more than 50%, compared to last year’s first half.

Last week, the group also refuted speculation in the press and among some shareholders about CEO David Hurwitz’s sale of his shares in the company to cover debt covenants in a trust.

Hurwitz’s family trust, in December last year, sold off a 40% stake in the firm in three tranches, for R51 million.

This led to the company issuing a Sens announcement to defend the transaction and saying the shares were sold in line with procedure, and that Hurwitz had sold no other shares.

On Monday, the group, which controls the WeBuyCars used-vehicle operation, the SA Taxi vehicle-financing operation and the international business outsourcing solutions group, Nutum, released a trading statement warning that core earnings per share will be down 41% to 46% in the six months to end March. However, it predicts core earnings to recover to between 19% to 24% to between 131.1 cents and 139.3c for the full year to end-September, below the prior corresponding period, based upon an anticipated stronger second half.

The group expects its headline earnings for the six months to end-March will decline 350% to 375% to a loss of between 199.5c and 196.1c, compared with headline earnings of 72.5c in the prior period.

Transaction Capital reported lower profits in second-hand dealer WeBuyCars and warned a week ago that core earnings would be down 20%-50%. Despite this, it intended to increase its shareholding in WeBuyCars by a further 15%.

“The acquisition of the additional 15% stake in WeBuyCars will be effected in accordance with the existing put and call arrangements. This enables the purchase of this 15% stake in two equal tranches, in September 2023 and September 2024,” it said.

According to Transaction Capital, the founders of the company, Jonathan Jawno, Michael Mendelowitz and Roberto Rossi, are indirect beneficial holders of 109 million Transaction Capital shares through Pilatucom Holdings Limited.