Transaction Capital’s latest trading update revealed WeBuyCars experienced margin pressure in the first quarter of the 2023 financial year.
It expects WeBuyCars’ earnings to decrease by no more than 20% for the half-year ending on 31 March 2023.
Transaction Capital urged investors to consider the decline against an extremely high comparator base in the first half of the 2022 financial year.
It added that WeBuyCars’ core business remains robust with an unassailable market position and they are confident the business will grow earnings for the full year.
WeBuyCars is the most significant shareholding of Transaction Capital, accounting for approximately 43% of core earnings last year.
To shed more light on Transaction Capital’s comments, Daily Investor looked at WeBuyCars’ performance over the last four years.
Since Transaction Capital acquired its first stake in WeBuyCars, it has seen incredible growth.
It increased the number of vehicles sold from 58,343 in 2019 to 125,812 in 2022. This translates to an impressive compounded annual rate of growth in car sales of 21.2%.
In the 2022 financial year, WeBuyCars sold 10,484 vehicles per month, up from 7,356 per month the year before. eCommerce sales volumes increased 27% from 26,810 cars to 34,300 cars year-on-year.
The company translated the increases in vehicle sales to profitability, seeing a compounded annual growth rate in earnings of 25%.
WeBuyCars’ earnings increased from R311 million in 2019 to R762 million in 2022, which is why it became the feather in Transaction Capital’s cap.
In a presentation in November 2022, Transaction Capital said WeBuyCars plans to grow its market share further through
- Physical expansion through additional supermarkets in South Africa.
- International expansion, including organic growth in Morocco and other selected international markets.
The company is also using data and technology to drive eCommerce penetration and optimise vehicle acquisition and stock turn.
The medium-term target is to trade 15,000 vehicles per month and maintain margin percentages despite the higher volumes.
WeBuyCars is also looking to enhance insurance and allied products offering and add relevant new allied products.