Transaction Capital’s share price has tanked 38% this morning following a trading update revealing that its earnings per share from continuing operations will decrease by “no more than” 50%. Core earnings per share is set to decrease by not more than 20%.
WeBuyCars is the most significant shareholding of Transaction Capital, accounting for approximately 43% of core earnings last year. Business services firm Nutun accounted for 33% of group earnings.
Transaction Capital said that the WeBuyCarss experienced “some margin pressure” in the first quarter of the 2023 financial year. They expect earnings to decrease by no more than 20% for the half-year ending on 31 March 2023.
Despite this, they said the core business remains robust, and their “market position is unassailable”.
They had unusually high earnings from WeBuyCars for the half-year ended 2022 owing to higher used vehicle prices due to constrained vehicle supply and higher than normal consumer confidence owing to low fuel prices and interest rates.
These conditions have reversed. The supply of vehicles has returned to pre-pandemic levels, and high fuel prices, high-interest rates, and pervasive load-shedding have crushed consumer confidence.
Despite this, the update reported that WeBuyCars increased sales by 20% over the 12 months. They sell approximately 12,000 vehicles per month.
Transaction Capital said they still intend to increase their shareholding in WeBuyCars by a further 15%.
More clarity is expected when Transaction Capital’s interim results come out in May.