Transaction Capital, the South African financial-services firm that surprised with a profit warning in March, plunged the most in almost two months after reporting a record loss.
The company posted a loss of R1.39 billion in the six months through March, compared with a R518 million profit a year ago, it said in a statement on Wednesday.
Transaction Capital is restructuring its SA Taxi unit, the main source of the firm’s rising impairments, and said it’s comfortable that its balance sheet “remains sufficiently capitalised and debt covenant levels remain intact.”
“Although highly disappointing, these adjustments are necessary to set a solid base for SA Taxi to resume future growth,” Chief Executive Officer David Hurwitz said in the statement. The company expects the SA Taxi business “should settle into sustainable and predictable profitability during the 2024 financial year.”
Transaction Capital has plunged 68% this year, making it the worst-performing stock in the benchmark FTSE/JSE Africa All Share index. The stock dropped as much as 10.3% by 9:28 a.m. in Johannesburg, the biggest intraday fall since March 16.
The lender started out as a buyer of distressed loans before branching out into financing South Africa’s ubiquitous minibus taxis.
SA Taxi posted a loss of R2.14 billion in the first half. The unit was decimated during the pandemic and has since been hit by rising interest rates and fuel costs, lower commuter volumes and fleet owners’ inability to increase fares for cash-strapped commuters.
“While we understand that this has come at a cost to our half-year results and will weigh on the full-year outlook to September 2023, we are confident that the group’s response in rebasing this business will give it the operational, financial and strategic flexibility to recover and grow,” Hurwitz said.
Bloomberg
