Covid-19 dents Transaction Capital growth record

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Covid-19 dents Transaction Capital growth record

Published Date: 2020-09-16 | Source: Stephen Gunnion | Author: Stephen Gunnion

Covid-19 dents Transaction Capital growth record

The company will report a decline in earnings but says the taxi industry has rebounded and it expects benefits from WeBuyCars.

Transaction Capital will break its five-year record of 20% compound annual growth due to the impact of Covid-19 on its operations. As with most business the world over, the company says Covid-19 disrupted its operations and interrupted its long-term growth trend.

The company provides finance, insurance and repairs to the taxi industry through its SA Taxi business, while Transaction Capital Risk Services (TCRS) buys and manages non-performing loan portfolios. Earlier this month, it bought a 49.9% non-controlling interest in online used vehicles business WeBuyCars.

Due to the impact of Covid-19 and the resultant lockdown, the company increased credit provision for SA Taxi and impaired the non-performing consumer loan portfolios of TCRS. It said the non-cash adjustments, which were also applied to its half-year results, reflected its conservative approach in accounting for the anticipated fallout on future cash flows.

In a pre-close update for the year to end-September, it said it expected earnings, headline earnings and core headline earnings from continuing operations all to be 60% to 70% down from last year. Earnings from total operations were likely to fall by 70% to 80%. Total earnings include Transaction Capital Business Solutions, Company Unique Finance and Principa Decisions, which have been accounted for as discontinued operations.

Despite operational disruptions caused by the lockdown in the second half of its financial year, the group expected its core pre-provision profit from continuing operations to increase by more than 7% - before impairment provisions at SA taxi, and the amortisation of TCRS's carrying value of purchased book debts.

Transaction Capital said the taxi industry had recovered quickly and transitioned smoothly to near-normalised operational activity as lockdown restrictions were eased and the economy re-opened. And as consumers' disposable income came under pressure and the weaker rand pushed up the price of new vehicles, it said it expected faster growth in used vehicles. With e-commerce accelerating due to Covid-19, it expected WeBuyCars to benefit.

The company's shares fell 0.8% to R20.70 yesterday.





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