Transaction Capital’s share price slumped more than 20% on the JSE yesterday morning, a day during which long-serving CEO David Hurwitz sought to allay fears that his departure was not amicable.
On Monday, the financially ailing group surprised the market with the announcement of Hurwitz’s resignation, forecasts of lower than anticipated earnings and a shift in strategic direction at the group.
The group, which controls used-car sales company WeBuyCars, the SA Taxi vehicle financing business and business outsourcing solutions group Nutum, and which has seen its share price slump more than 80% over 12 months, said in a statement that Hurwitz, “after a remarkable tenure,” will step down from his position as group CEO and from the board, from December 31, 2023.
Hurwitz said in a pre-close investor presentation yesterday that his resignation was “well thought out, well-structured” and it had been an “amicable process”.
He said he would not be resigning with a bonus for the current year, or any “golden handcuffs”.
He said also they had been careful not to mention “a change in strategy” for the group, instead strategy would “shift” from the start of the 2024 financial year to focus on unlocking value to shareholders.
The reason provided for Hurwitz’s departure was that the founders wished to play a more active role again, because, considering the difficulties that the group had faced this year, its focus would shift towards unlocking value for shareholders from the existing portfolio, from being an investment and operating company.
“The founders have the skill set, experience and expertise to fulfil this strategy. Accordingly, it is appropriate that one of the founders lead the strategic direction of the group at this time,” the group said.
In the six months to March 31, Transaction Capital’s headline earnings a share from continuing operations fell 355% to a loss per share of 183.3 cents from headline earrings of 71.9 cents a year before. At that stage, second half earnings were expected to be higher than the first half.
On Monday, the group said Jonathan Jawno, one of Transaction Capital’s co-founders, would take over as CEO on December 31, 2023.
Hurwitz joined Transaction Capital in 2005 and held various leadership positions before being appointed as CEO in 2014.
“Under his guidance, Transaction Capital has achieved numerous milestones and solidified its position as an industry leader,” the board said in a statement.
It said Hurwitz would continue to lead the company until the end of the year and remain available to the group until December 2024 in an advisory capacity, for a seamless leadership transition.
According to recent reports, the founders, Jawno, Michael Mendelowitz and Roberto Rossi own about 109 million shares in the group and their investment company bought two additional tranches of 1.5 million shares each in March, after the share price had slumped.
The share price fell sharply in March after the group warned that core earnings per share, for the six months to March 31, were expected to decrease and after it refuted reports about alleged insider trading in December when Hurwitz sold shares to cover debt covenants in a trust.
The group is particularly struggling against macroeconomic challenges in South Africa’s minibus taxi industry since the onset of the Covid-19 pandemic, and a “right-sizing” of SA Taxi continues to negatively impact group earnings.
Consequently, the group said yesterday, core earnings per share and headline earnings per share were expected to be lower than the ranges forecasted in March 2023.
However, Hurwiz said much progress had been made restructuring SA Taxi’s operations and balance sheet and SA Taxi’s operations had stabilised.
Management changes, cost reductions, and a focus on higher quality credit risk had contributed to improved stability in SA Taxi.
Collection strategies had been enhanced with the appointment of Nutun as an outsourced partner.
Engagement with debt funders had been positive to date and there was sufficient existing funding until well into 2024, with work continuing to secure another $60 million of debt funding for the remainder of the year, Hurwiz said.
He said WeBuyCars and Nutun were holding their own despite the tough economic environment.
WeBuyCars had gained market share and improved its stock and trading mix towards cheaper vehicles, aligning with current consumer demand.
WeBuyCars was expected to report an about 20% decrease in earnings, with it performing better in the second half than in the first half, said Hurwitz.
He said the 2023 financial results of WeBuyCars were “incomparable” with those of 2022, because the prior year had benefited from strong post-Covid demand, less load shedding, and much better consumer confidence.
Nutun had seen strong growth in customer experience services revenue, primarily from UK-based clients but also from South Africa, Australia, and the US.
Nutun’s full year earnings were expected to grow relative to the prior year, but at a lower rate that previously communicated, said Hurwitz.
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