WeBuyCars off to a rocky start on the JSE

WeBuyCars is off to a rocky start to life on the JSE, with its first set of results revealing a R69.5 million loss for the six months to the end of March 2024. This was due to the cancellation of call options worth around R426 million.

The company was separately listed on the Main Board of the JSE on 11 April 2024, following the unbundling by Transaction Capital of all the shares that it owned in WeBuyCars. 

CEO Faan van der Walt said the company delivered a pleasing performance in a tough trading environment, characterised by higher interest rates, fuel costs inflation and lower levels of consumer confidence. 

He explained that during the six months, it had to respond to market changes quickly by re-aligning inventory profiles to lower-priced vehicles to match consumer demand.

WeBuyCars continued on its long-term earnings growth trajectory during the period, with core headline earnings at R402 million, growing 26.6% compared to the prior comparable six-month period. 

The key drivers of this growth in core earnings were higher volumes, higher average selling prices, improved margins, operational efficiencies, higher inventory turns, and cost efficiencies driven by economies of scale.

Group revenue at R11.4 billion increased by 15.9% when compared to the prior comparable six-month period. 

Buying and selling volumes at 81,785 and 80,538 increased by 13.7% and 13.4%, respectively. The number of vehicles bought and sold continued to grow, with sales volumes reaching an all-time monthly record for WeBuyCars of 14,285 in March 2024.

The net cash generated by operating activities at R267 million for the six months ended 31 March 2024 was up 96.6% on the prior comparable six-month period. 

However, the company posted a R69.5 million loss for the period due to once-off fees associated with listing on the JSE and losses on call options. 

Before the listing of WeBuyCars Holdings the JSE, the company held various call options which gave it the right to repurchase the 25.1% shareholding in the company from the minority shareholder. 

As set out in the shareholders’ agreement, 15% of the option was exercisable within 30 days from 30 September 2024, with the remaining 10.1% exercisable within 30 days from 30 September 2026. 

Upon the successful listing and the adoption of the new Memorandum of Incorporation, the current shareholders’ agreement was cancelled, which led to the cancellation of the call options. 

The call option derivative asset was consequently derecognised on 25 March 2024 for a loss of R426.4 million.

WeBuyCars does aim to pay a regular dividend to shareholders of between 25% and 33% of its headline earnings as a dividend as per its dividend policy, subject to working capital requirements and capital expenditure required for expansion and maintenance.

The declaration of a final dividend for the year ending 30 September 2024 will be tabled for consideration by the board and will be announced with the company’s full-year results. 

WeBuyCars anticipates the difficult market conditions in South Africa, with lower levels of consumer confidence, higher interest rates and lower levels of new vehicle sales volumes to continue. 

This, coupled with political uncertainty in the run-up to the 29 May 2024 general elections, may impact the vehicle market during the next six months. 

However, the company said it is well-positioned to weather this potential storm.