A NON-CONTROLLING ACQUISITION - OF 49.9 % IN WEBUYCARS SEPTEMBER TRANSACTION CAPITAL
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T R A N S A C T I O N C A P I TA L
A NON- CONTROLLING ACQUISITION
OF 49.9 % IN WeBuyCars
2020
SEPTEMBERTRANSACTION CAPITAL SUBSCRIBES FOR A NON-CONTROLLING 49.9% IN WeBuyCars 2
A QUALITY BUSINESS WITH HIGH CASH CONVERSION RATES & STRONG ORGANIC GROWTH PROSPECTS
EARNINGS ACCRETIVE CASH DEPLOYMENT INTO A RELEVANT & SCALABLE BUSINESS WITH POTENTIAL TO GROW IN VALUE
Purchase consideration 3
¹ Cash (R1.12bn), FOUNDERS
Initial consideration
TC shares (R329m)
R1.80 billion
& vendor finance (R349m)2
60% 40%
Vendor finance (preference shares)2 Deferred consideration Cash (R20m) & WBC HOLDCO
R40 million TC shares (R20m)
49.9% Enterprise value 50.1%
R3.69 billion
INVESTMENT TERMS ACCESS TO LIQUIDITY FOR ORGANIC GROWTH
• Transaction Capital subscribes for a non-controlling 49.9% in WeBuyCars • Deferred consideration of R40 million • Additional capital of ~R680m, • Organic growth initiatives for SA Taxi & TCRS
• Enterprise value of R3.69 billion › R20m cash in the form of undrawn debt continue as planned
• Initial purchase consideration of R1.80 billion › R20m TC shares facilities, to be raised post › Accelerated acquisition of NPL Portfolios
› R1.12bn of cash • PE multiple ~10x the acquisition to be collected as principal in South Africa
• Put option4 to sell additional 10.0% to • Given protracted impact of & Europe in the near term
(~R900m of undeployed capital & ~R220m from existing debt facilities)
› R349m of vendor finance via issue of preference shares TC at end of year 1 COVID-19, it is prudent to › Capital deployment via TC Global Finance
• Call option5 to acquire up to 74.9% by enhance the group’s financial › R1.5bn new facilities concluded by SA Taxi
› R329m of new Transaction Capital equity
TC at end of year 3 flexibility & strategic agility since 1 April 2020 for new loan originations
(16.47m shares at R20 per share)
1. Simplified transaction structure. TC via Transaction Capital Motor Holdings, a 100% owned subsidiary of TC 4. Put option subject to regulatory approvals
2. TC issues R349m of preference shares 5. Call option subject to regulatory approvals (if required) & pre-determined criteria being met
3. Fledge Capital is an independent investment company that provides capital solutions to private companies across a wide range of industries.
Fledge Capital was founded in 2010 by Louis van der Watt & Konrad FleischhauerEVOLUTION OF WeBuyCars INTO A LEADING MARKET PARTICIPANT 4
ENTRPRENUERIAL CULTURE | INVESTMENT IN EXPANSIVE INFRASTRUCTURE | BUILDING A TRUSTED BRAND | UNIQUE E-COMMERCE TECHNOLOGY
2001 HIGHLIGHTS AS AT 31 MARCH 2020
2001 2001 - 2010
• WeBuyCars founded by van der Walt brothers • Located in Pretoria; Advertising in newspapers
Infrastructure R6.7bn
2010 2010 2011
2011 in all 9 provinces Revenue for FY2020
• 1st vehicle supermarket (branch) • Advertising expanded to billboards
built in Pretoria - capacity 100 vehicles
2012
2014 62.1% ~15x
2012 • Buyers appointed (Cape Town) ROE in FY2020 Inventory turns per year4
• 1st buyers appointed (Gauteng) 2014
2015
2016
• Capacity expanded - 700 vehicles 2.8m ~60 000
• Digital advertising commenced Website visits per month Vehicle supermarket visits
2016 2017
• Cape Town vehicle supermarket opened (~814 000 unique visitors) per month
2018
• Expanded offering to include finance & insurance¹
STRONG ORGANIC GROWTH
2017 2018 65 510
• March - Fledge Capital invests in WeBuyCars (40%) • Vehicle supermarkets: Cape Town (2nd); 2019 50 700
• Durban vehicle supermarket opened Johannesburg South 29 145
• Midstream vehicle supermarket opened – 1100 vehicles • Auctions to the public initiated 16 587 6 681
• Buying pods established at selected retail malls • Expanded offering to include warranty product 5 152
2020 2 922
1 580 1 004 1 028
2019
• Vehicle supermarkets: Durban (2nd), Port Elizabeth; 120 550
480
Silver Lakes relocated to larger premises 2020
• New vehicle supermarkets in Cape Town • Vehicle condition report on all vehicles (e.g. DEKRA Report) 2
• Artificial intelligence developed | IP to automate optimal vehicle pricing • Public e-commerce auctions launched ‘B2C’2 & ‘B2B’3 2001 2017 2018 20195 2020
• Expanded offering to include tracking services • A non-controlling 49.9% in WeBuyCars acquired by TC Number of units sold per year Revenue per year (R’m) Number of employees
1. WeBuyCars earns margin on trading vehicles (vehicle margin), 2. B2C | Business-to-consumer 5. 2019 reflects a 13 month financial period to 31 March 2019
with additional gross margin earned on finance, insurance based, 3. B2B | Business-to-business (vehicle dealers) This is due to a change in financial year end from
tracking & other allied products (product margin) 4. 2020 financial year: cost of sales/average inventory 28 February to 31 MarchWEBUYCARS 5
POSITIONING STATEMENT
Sellers receive a fair offer price,
Entrepreneurial, founder-led & proudly South African;
driven by proprietary market data (artificial intelligence) IS SOUTH AFRICA’S an innovator amongst numerous participants in the used
with immediate cash settlement.
vehicle segment, that is characterised by low levels of
Buyers have access to full disclosure
consumer trust. WeBuyCars’ consistently high satisfaction
via an independent vehicle condition report¹ TRUSTED levels have built a trusted brand
& high-resolution photos facilitating the buying decision
With no brand affiliation, WeBuyCars buys any TRADER OF A differentiated buyer & seller of used vehicles, serving
used vehicle type, & offers an unmatched & diverse range of clients through e-commerce & physical infrastructure
vehicles for sale within a market where one million including vehicle supermarkets & buying pods
used vehicles trade per year. This market is less sensitive USED VEHICLES to deliver a consistently high quality service
to exchange rate & vehicle price inflation
By leveraging 20 years of experience THROUGH ITS
in proprietary vehicle, price, consumer & other data Technology is transforming the way in which consumers
with artificial intelligence technology, WeBuyCars transact, which is no different in the vehicle industry.
adjust pricing according to the value & demand DATA & TECHNOLOGY-LED This improves the efficiency & reliability of service,
of a vehicle, preserving margins & high stock turn whilst overcoming geographic transactional barriers
Penetrating the used vehicle vertical enables WeBuyCars VERTICALLY INTEGRATED WeBuyCars has a prominent national footprint
to extend its offering beyond vehicle buying & selling with over 28 vehicle supermarkets & pods,
as a principal. Finance, insurance based, tracking including 147 national buyers to ensure maximum
& other allied products (F&I products) offered as an agent, PHYSICAL & E-COMMERCE client service. E-commerce activities include an established
with future opportunity to offer these as a principal B2B e-commerce offering with proven but nascent
B2C e-commerce activities commenced
INFRASTRUTUCRE
1. Independent DEKRA report, a vehicle inspection certification
providing information on the mechanical & technical status of the vehicleENTREPRENEURIAL MANAGEMENT TEAM WHO ARE CO-INVESTED 6
FOUNDERS ARE MATERIALLY INVESTED & ACTIVELY INVOLVED
EXPERIENCED MANAGEMENT TEAM ASSEMBLED OVER MANY YEARS BY THE FOUNDERS
FAAN VAN DER WALT DIRK VAN DER WALT CHRIS REIN KONRAD FLEISCHHAUER
Chief Executive Officer Chief Strategy Officer Chief Financial Officer Director | WeBuyCars & Fledge Capital
• Co-founder of WeBuyCars in 2001 • Co-founder of WeBuyCars in 2001 • CA (SA), B.Com Accounting (Hons) • B.Eng Industrial (Hons), MBA
• Majority shareholder in WeBuyCars • Majority shareholder in WeBuyCars • Appointed June 2017 • Appointed March 2017
• National Diploma in Higher Education • B.Com Marketing & Communication • Various senior positions at McCarthy Limited • Co-founder of Fledge Capital in July 2010
(University of Pretoria) (University of Pretoria) over an 8-year period
WYNAND BEUKES JOHN MILLS JANSON PONTING PAUL VILJOEN
Chief Digital Officer Chief Operating Officer Sales Director Director | Fledge Capital
• B.Com Informatica, Masters in IT • National Diploma in Higher Education • CA (SA), B.Com Accounting (Hons), MBA • CA (SA), B.Com Accounting (Hons),
• Appointed February 2018 • Appointed May 2012 • Appointed June 2019 M.Com in Computer Auditing
• Over 20 years of Information Technology • Over 8 years experience in the automotive • Over 16 years experience in the automotive • Appointed March 2017
experience with senior positions at BCX & Telkom industry as COO at WeBuyCars industry with senior positions at Imperial Group • 10 years commercial & investment banking
experience
LAURA SINCLAIR RIKUS BLOMERUS RICHARD WEBBER TERRY KIER
Head of New Business Head of Human Resources Buying Operations Manager Chief Executive Officer | SA Taxi
• CA (SA), B.Com Accounting (Hons) • B.Com Industrial Psychology & Labour Relations • CA (SA), B.Com Financial Accounting (Hons), • Transaction Capital Executive to oversee
• Appointed April 2019 Management, B.Com Labour Relations (Hons) Diploma in Advanced Project Management, MBA investment in WeBuyCars1
• Previously at VAT IT • Appointed December 2017 • Appointed January 2018 • Currently not a WeBuyCars executive
• Experience in automotive industry • Previously - senior HR position at Shoprite Group • Previously - Financial Accountant at WeBuyCars committee member
1. Terry Kier currently not a WeBuyCars executive committee memberFINANCIAL PERFORMANCE 7
A HIGH GROWTH BUSINESS
THE INVESTMENT IN WeBuyCars WILL ACCELERATE OPPORTUNITY FOR WeBuyCars TO ▲UNIT ECONOMICS PER ESTABLISHED INFRASTRUCTURE ROBUST
TRANSACTION CAPITAL’S GROWTH RATE VEHICLE SOLD FROM GREATER TAKE-UP RATE OF F&I PRODUCTS1 FACILITATING OPERATIONAL LEVERAGE BALANCE SHEET
CAGR 2017 to 2020 • Vehicle margin earned on ALL vehicles sold Fixed vs. variable cost • Minimal leverage
Revenue ▲ 62% • Currently F&I product margin earned on 15% of vehicles sold ~40% fixed • High cash conversion
EBITDA ▲ 65% • 1% ▲ in penetration = ▲ ~R9.3m in profit ~60% variable (~20% semi-variable) rates
Profit ▲ 58%
Stable margins despite strong growth
5 187 5 112 5 207
4 738
1 580
2 922
5 152
6 681
193
122
138
258
366
341
545
86
2017 2018 2019² 2020³
Profit (R'm) EBITDA (R'm) Revenue (R'm) Total profit after tax per vehicle (R)
1. WeBuyCars earns margin on trading vehicles (vehicle margin), with additional gross margin earned on finance, insurance based, tracking & other allied products (product margin)
2. 2019 reflects a 13 month financial period to 31 March 2019. This is due to a change in financial year end from 28 February to 31 March
3. Includes adoption of IFRS 16 LeasesOPERATIONAL PERFORMANCE 8
SIGNIFICANT GROWTH ACHIEVED
CAGR 2017 to 2020
Vehicles sold per year ▲ 58%
Vehicle supermarket visits per year1 ▲ 42%
Advertising expense per vehicle ▼ 11%
1 928 1 937 Robust stock turn atUSED VEHICLE MARKET CONTEXT & ENVIRONMENT 9
USED VEHICLE INDUSTRY IS RESILIENT, DEFENSIVE & GROWING DESPITE SOUTH AFRICA’S ECONOMIC CLIMATE
SOUTH AFRICA’S VEHICLE PARC¹
IN SOUTH AFRICA THERE ARE 10.8 MILLION VEHICLES1 VEHICLE PARC GROWING DESPITE NEW VEHICLE SALES ▼OVER LAST 10 YEARS
• Personal vehicles remain a necessity for many South Africans CAGR REPLENISHMENT RATE 8% 12
› Long travel distances • 9 year ▲5.6% INTO PARC 10
› 38% use personal vehicles; 21% walk; 40% use public transport; 6%
• 5 year ▲2.4% 372 000 vehicles 8
1% other modes
2020e new vehicles sales ▼31%3 4% 6
› Vehicle ownership is an aspiration rooted in South African culture
AVERAGE AGE2 ▲ EXCEEDS 4
• New vehicle sales are driven by • New vehicle sales trends 2%
~10 years
Millions
2
› Economic environment › Shift from new to used vehicles WRITE-OFF RATE
• Dec 2017 | 9.73 years 0% 0
› Prices sensitive to exchange rates › Average length of ownership ▲ OUT OF PARC
• Mar 2020 | 10.08 years 11 12 13 14 15 16 17 18 19 20
› Banks appetite to financing › Lower value vehicles purchased in 350 000 vehicles Write-off rate New vehicle replenishment rate Vehicle PARC
challenging economic environment Consistently at ~3% per year Vehicle PARC vs. replenishment rate & write off %
USED VEHICLE MARKET IS RESILLIENT & GROWING DESPITE DIFFICULT ECONOMIC ENVIRONMENT
USED VEHICLE SALES BY AGE OF PARC (YEARS)
~500 000 NEW VEHICLE SALES ▼ 8%
VEHICLE SALES PER YEAR4
NEW VEHICLES | 46% FINANCED4 › Economic environment
6%
› Price increases
2.4 times
USED-TO-NEW SALES RATIO
USED VEHICLE SALES ▲ 4%
› New vehicle sales ▼
~1.2 million5
2%
› Banks adding liquidity into used vehicle
USED VEHICLES | 32% FINANCED market as they grow their books 0%
1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20+
1. Lightstone - vehicle parc consists of passenger & light commercial vehicles; 3. 2020 estimated new vehicle sales https://www.moneyweb.co.za/news-fast-news/new-car-sales-to-drop-to-17-year-low-on-pandemic/
2. Lightstone Parc data 4. Consumers financed per the NCR in 2019, excluding business-to-business | WeBuyCars ~20% to ~30% of sales to customers (excluding dealerships) are financed
5. Estimate applying Transunion, E-natis (double counting eliminated) & Lightstone dataUSED VEHICLE MARKET CONTEXT & ENVIRONMENT 10
USED VEHICLE MARKET IS RESILIENT & GROWING DESPITE DIFFICULT ECONOMIC ENVIRONMENT
USED VEHICLE SALES PER YEAR ~1.2 MILLION (9 year CAGR ▲ 3.8% | 5 year CAGR ▲1.7%)
• USED VEHICLE SALES ARE DRIVEN BY:
NEW VS USED VEHICLE SALES CAGR
› Economic environment ▼ New vehicle sales
1 500 000 New vehicles Used vehicles
9 year ▲1.0% 9 year ▲3.8% › COVID-19 risks ▲ Used vehicle sales
5 year ▼ 3.4% 5 year ▲1.7% › New vehicle prices ▲ | driven by exchange rates
1 250 000
What is happening to used car prices right now?
1 000 000
“While new car sales remain sluggish, used cars are bolstering dealer profits
with some of the big groups reporting a record month in June... Consumer
750 000 demand for second or third cars for commuting purposes so they can
avoid using public transport and the increased risk of catching COVID-19”
CarDealer, July, 2020
500 000
250 000 New vehicle prices rise sharply above inflation despite
sales slump
0 “The financial impact of the pandemic, which has seen the unemployment rate
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 rising above 30% in South Africa, has resulted in consumers either forgoing
Used vehicle sales¹ New vehicle sales² New vehicle sales forecast vehicle purchases or looking to buy down from new to used vehicles”
Moneyweb, July 30, 2020
1.Source: eNATIS 2019
2. Source: https://www.moneyweb.co.za/news-fast-news/new-car-sales-to-drop-to-17-year-low-on-pandemic/USED VEHICLE MARKET CONTEXT & ENVIRONMENT 11
USED VEHICLE INDUSTRY IS LARGE & HIGHLY FRAGMENTED
LARGE & HIGHLY FRAGMENTED MARKET WITH
VARIOUS PARTICIPANTS & OPERATING MODELS
Rental companies/
Dealers
dealerships/banks
DEALERS | GROUPS VS INDEPENDENT Stockholder
Platform
• Stockholders with inventory on balance sheet BUYING &/or SELLING
• >3 000 dealers (~2 100 franchised) platform
Private customers Private customers • Sells to dealerships & private
• Dealership groups affiliated to OEMs
customers
› Limited brand optionality & pricing flexibility
• Offers online experience
• Independent dealership groups
& has physical presence
› Greater choice of brands, limited stock available,
(vehicle supermarkets & pods)
low levels of customer trust
• Buys & sells variety of vehicles
ONLINE PLATFORMS & MARKET PLACES
› Many brands & models
• Do not carry inventory
› Age | 1 year old to over 20 years
• Facilitate trades, earn commission &/or advertisement › Price | ~R40 000 to > R1 million
revenue
• Majority of vehicles sold
• Large volume of vehicles for viewing, no physical footprint › Age | Older than 5 years
& no test-drives
› Price | R40 000 to R160 000
• Private-to-private platforms are poorly regulated,
• Sellers receive fair price, driven
vehicles not backed by any guarantee, F&I products
by artificial intelligence with
not offered
immediate cash settlement
• Dealers-to-private platforms are strongly established
distribution channels
• Transaction is not always certain
GROWTH OPPORTUNITIES IN A LARGE FRAGMENTED & DISRUPTED SOUTH AFRICAN MARKETGLOBAL LISTED PEERS 12
A MIX OF MARKET PARTICIPANTS INCLUDING ONLINE PLATFORMS; MARKET PLACES; FRANCHISE DEALERS; E-COMMERCE WITH VEHICLE SUPERMARKETS
WeBuyCars BUSINESS MODEL UNIQUE IN SA WITH COMPARABLE INTERNATIONAL PEERS
1
Advertising
Europe Revenue Units sold cost as %
Advertising 2019 (US$) (‘000) of revenue
United States Revenue Units sold cost as %
2019 (US$) (‘000) of revenue P 514m² 721 31 Advertising
1 Asia / Pacific Revenue Units sold cost as % of
E 21bn 833 0.9 M 3bn² 231 4.5 2019 (US$) (‘000) revenue
E 4bn 178 5.2 F 12bn² 810 n/a (auto) F 335m n/a 7.1
E 1bn 52 4.2 M 467m³ 10 200 4.9
M 589m n/a 66.9
Advertising
South Africa Revenue Units sold cost as % of Advertising
2019 (US$) (‘000) revenue Australia Revenue Units sold cost as % of
P Online Platform
2019 (US$) (‘000) revenue
M Market Place E 389m⁴ 66 1.5
M 297m⁵ n/a n/a
F Franchise Dealer F 3.1bn⁴ n/a n/a
E E-Commerce with vehicle supermarkets
F 1.3bn⁴ n/a n/a
Source: Euromonitor e-commerce sales excluding sales taxes for FY 2019, Company data is sourced from company financials 4. Rand amounts converted at a ZAR/US FX rate of 17.403 as of 4 August 2020. Motus revenue reported above excludes non-SA
1. BCA Group was delisted in 2019, figures as of FY2018 operations & aftermarket parts operations
2. EUR amounts translated at a EUR/US FX rate of 0.84961 as of 4 August 2020 5. AUS amounts converted at a AUS/US FX rate of 1.404 as of 4 August 2020
3. GBP amounts translated at a GBP/USD FX rate of 0.76569 as of 4 August 2020WeBuyCars STACKS UP WELL AGAINST COMPARABLE INTERNATIONAL PEERS 13
PROFITABILITY SURPASSES COMPARABLE PEERS, SUPPORTED BY EFFICIENT INVENTORY MANAGEMENT & EFFECTIVE ADVERTISING SPEND
• Hybrid model including • Hybrid model including
• Hybrid model including • Fully online
e-commerce & physical infrastructure e-commerce & physical infrastructure
e-commerce & physical infrastructure • Finance & other products offered as an
BUSINESS MODEL • Vertically integrated • Vertically integrated
• F&I products offered as an agent agent
• On-balance sheet financing • On-balance sheet financing
• Stockholder • Stockholder
• Stockholder • Stockholder
UNITS SOLD
ON THE PLATFORM 65 510 52 160 177 549 832 640
• South Africa • United States • United States • United States
PHYSICAL
PRESENCE1 • 7 vehicle supermarkets; 19 buying pods • 1 vehicle supermarket • 19 branches • 216 branches
• No refurbishment activities • 1 refurbishment center (in-progress)² • 7 refurbishment centers • 96 refurbishment centers
VEHICLE GP MARGIN3 12.3% 4.9% 6.9% 11.6%
REVENUE
3-YEAR CAGR4 61.7% 39.3% 114.2% 8.6%
EBITDA MARGIN 8.2% (10.7%) (5.6%) 4.2%
ADVERTISING COST
AS % OF REVENUE 1.5% 4.2% 5.2% 0.9%
AVERAGE INVENTORY
DAYS TO SALE 29 68 62 52
MEASUREMENT
PERIOD 12 months ended 31 March 2020 12 months ended 31 December 2019 12 months ended 31 December 2019 12 month ended 29 February 2020
1. Company website & latest investor presentations 3. Margin on trading vehicles (vehicle margin), not additional gross margin earned on selling other products
2. Vroom's business model currently relies on outsourcing refurbishment centers 4. WeBuyCars revenue CAGR for the year ended 31 March 2017 to 31 March 2020,
through partnerships throughout the United States Carvana revenue CAGR for the year ended 31 December 2017 to 31 December 2019,
Vroom revenue CAGR for 2018 to 2019E-COMMERCE MARKET CONTEXT & ENVIRONMENT 14
E-COMMERCE PENETRATION IN SOUTH AFRICA IS DRIVING GROWTH
ESTIMATE THAT E-COMMERCE ADOPTION IN SOUTH AFRICA HAS LEAP-FROGGED 5 YEARS DUE TO COVID-19
SIGNIFICANT OPPORTUNITY FOR E-COMMERCE DISRUPTION IN SOUTH AFRICA WeBuyCars IS WELL POSITIONED TO GROW ITS E-COMMERCE ACTIVITIES
• South Africa reflecting an increasing trend of universal e-commerce adoption • 1st mover advantage in used vehicle e-commerce market
• Growing number of e-commerce participants in South Africa across various sectors & asset classes • Established B2B e-commerce platform including vehicle dealerships
• Early stage B2C e-commerce activities commenced
PEER COUNTRY E-COMMERCE PENETRATION¹ • ~30% of sales online
• Trusted brand facilitating peace of mind transacting, buyers have access to full disclosure
2019 South Africa² › Independent vehicle condition report (e.g. DEKRA)
7.3% › High resolution photos
5.0% E-COMMERCE PARTICIPANTS IN SOUTH AFRICA
4.7%
3.2%
1.6%
Cox Automotive: Car Buyer Journey
“Consumers are going through the shopping process faster through online platforms
with third party sites and social media platforms driving brand awareness, reducing the need
to consult at stores ahead of purchase. Digital retailing is poised to revolutionize
2017 2018 2019 2020 2021 2022 2023 2024 the buying process that a lot of customers feel has not changed over the years”
Cox Automotive, April, 2019
South Africa Chile Mexico India Malaysia
Source: Euromonitor e-commerce penetration data
1. Penetration rates are pre COVID-19
2. Peer countries have been rebased to South Africa’s 2019 level to reflect possible trajectory for South Africa from a base of 1.6% penetration as observed in peer countriesWEBUYCARS | MARKET POSITIONING 15
COMPETITIVE ADVANTAGES
2. ARTIFICIAL INTELLIGENCE (AI), ANALYTICS & LEAD GENERATION
• AI applied to
› Ensure vehicles bought & sold at a fair price
› Adjust pricing according to value & demand, preserving margins & high stock turn
• Lead generation to target high-quality online prospects
1. PROPRIETARY DATA 3. TECHNOLOGY
• Leveraging 20 years of vehicle, price, consumer & other data with AI • Online channel & e-commerce infrastructure enhances customer experience
• Continuously enriched with buying & selling transactional data • Improves efficiency & reliability of service
• Scalable technology led platform reducing costs per unit
5. WELL-KNOWN, REPUTABLE & TRUSTED BRAND
• In an industry where trust & customer satisfaction has been low 4. EXPANSIVE INFRASTRUCTURE
• Holding a large variety & quantum of stock
• Effective advertising campaigns (spend R100m per year) SCALABLE
• PHYSICAL INFRASTRUCTURE
• Consistently high satisfaction levels TECHNOLOGY LED › Nationwide presence
• Peace of mind transacting
PLATFORM › 7 vehicle supermarkets,
Buyers have access to full disclosure
19 buying pods, 148 national buyers
› Vehicle condition report (e.g. DEKRA)
• E-COMMERCE PLATFORM
› High resolution photos
› Peace of mind transacting via online auctions
Sellers receive a fair price
› Established B2B platform with vehicle dealerships
› on-line channel
› Early stage B2C activities commenced
› instant offer driven by AI, & not buyer sentiment
› immediate cash settlement
• Reputation, brand & trust enhances lead generationTRANSACTION CAPITAL’S INVESTMENT CRITERIA 17
CRITERIA APPLIED BY TRANSACTION CAPITAL WHEN CONSIDERING ITS NON-CONTROLLING INVESTMENT IN WeBuyCars
WeBuyCars is a well established, entrepreneurial,
BUSINESS MODEL owner-managed business with robust organic MARKET POSITION
✓ Scalable business model growth prospects, delivering predictable & quality ✓ Established platforms with robust
earnings, with high cash conversion rates, organic growth
✓ A proven track record
with the potential for its scale, competitiveness
✓ Focused business with potential ✓ Delivering predictable, quality earnings
& value to be developed
for high return on equity with high cash conversion rates
✓ Driven by systems, data & analytics ✓ Market participant within Transaction
Capital’s adjacent market segments
✓ Potential for consolidating market
position
CULTURE CAPABILITIES ✓ Strong acquisitive growth prospects
Transaction Capital
✓ Alignment with Transaction Capital’s ✓ Deep knowledge of its industry
has a proven track record
values & chosen market segments
of creating value through
identifying, pricing & investing ✓ Client- & solutions orientated ✓ Experienced & strong management
in businesses that have ✓ Entrepreneurial management team
the potential to achieve scale who are co-invested ✓ Business with potential for its
& leading positions ✓ Strong relationships with clients competitiveness & value to be
in their market segments developed & enhancedRATIONALE|HIGH QUALITY STANDALONE BUSINESS WITH STRONG ORGANIC GROWTH PROSPECTS 18
RATIONALE VALUE CREATION | WeBuyCars’s GROWTH OPPORTUNITES
• Favorable structural market conditions
• WeBuyCars
› Significant position in resilient SA used vehicle
market
› High quality business INCREASE VOLUMES ENHANCE UNIT ECONOMICS
› Well established • Expansion of nationwide infrastructure to meet demand requirements & MARGIN POTENTIAL
› Entrepreneurial › Additional vehicle supermarkets & buying pods in development • Optimising vehicle acquisition & stock turn
› Owner managed › Continued enhancement of brand awareness & trust • Offering finance to underserved segments
› Robust organic growth prospects › Medium-term target to trade 10 000 vehicles per month as principal
› Delivering predictable earnings (currently 6 000) • Enhance existing arrangements with
providers of F&I products
› High cash conversion rates
E-COMMERCE • Add relevant new allied products
› Scale & competitiveness can be enhanced
• Harness data, technology & e-commerce potential • Increase unit economics per vehicle sold
• Extend WeBuyCars e-commerce infrastructure via greater take-up rate of F&I products
› Establish B2B e-commerce activities including vehicle dealerships (currently 15% of vehicles sold)
› Develop B2C e-commerce activities • Offering insurance & allied products as
principalGROUP PORTFOLIO MIX 19
ILLUSTRATIVE EXAMPLE ASSUMING TRANSACTION CAPITAL OWNED A NON-CONTROLLING 49.9% OF WeBuyCars IN FY18 & FY19
COMPOSITION ACCRETIVE CASH DEPLOYMENT CONVERTING INTEREST INCOME
OF EARNINGS ON UNDEPLOYED CAPITAL INTO OPERATING EARNINGS
ACTUAL ACTUAL ADJUSTED FOR
INVESTMENT IN WeBuyCars FY19 FY18 Growth
39% 34% Headline earnings Rm % Rm % %
13% SA Taxi 446 48% 368 49% ▲21%
5% 5%
FY19 FY19
TCRS 313 34% 273 36% ▲15%
56% 48%
GEO 44 5% 41 6% ▲ 7%
TOTAL 803 87% 682 91% ▲18%
40% 36%
WeBuyCars 129¹ 13% 69 9% ▲87%
6% 9% 6%
FY18 FY18 TOTAL 932 100% 751 100% ▲24%
54% 49%
SA Taxi WeBuyCars TCRS GEO
THE INVESTMENT IN WeBuyCars IS ACCRETIVE TO TRANSACTION CAPITAL’S TRACK RECORD OF HIGH GROWTH
1. 2019: 13 month financial period to 31 March 2019. This is due to a change in financial year end from 28 February to 31 MarchTRANSACTION CAPITAL GROUP STRUCTURE | PRE-INVESTMENT IN WeBuyCars 20
GROWING EARNINGS BASE BY EXPANDING EXISTING TOTAL ADDRESSABLE MARKET & ENTERING ADJACENT MARKET SEGMENTS
TRANSACTION CAPITAL
SA TAXI TRANSACTION CAPITAL RISK SERVICES
SERVICES CAPITAL SOLUTIONS
Collection services (SA & Australia) Acquisition of NPL Portfolios
• Contingency Alternative Capital (SA, Australia & selected
• Fee-for-service asset classes management international markets)
• Assess, mitigate • Allocate permanent
& price risk equity
• Risk adjusted investment • Optimally leveraged
or service returns with appropriate debt
Value added services (SA)
• Subscription based Business platform Entrepreneurial
• Scalable, data-driven management teams
& technology led • Identify, develop
Transactional services (SA) • Well governed & partner owners,
• Fee per payment processed • Underpins capital founders & International specialised credit
appreciation managers
(collections & disbursements) & alternative assets
• Payroll management (SA & select international markets)TRANSACTION CAPITAL GROUP STRUCTURE | NEW GROWTH VECTOR 21
GROWING EARNINGS BASE BY EXPANDING EXISTING TOTAL ADDRESSABLE MARKET & ENTERING ADJACENT MARKET SEGMENTS
TRANSACTION CAPITAL
49.9% 73.9% 100%
WeBuyCars SA TAXI TRANSACTION CAPITAL RISK SERVICES
SERVICES CAPITAL SOLUTIONS
Collection services (SA & Australia) Acquisition of NPL Portfolios
• Contingency (SA, Australia & selected
• Fee-for-service international markets)
Alternative Capital
asset classes management
• Assess, mitigate • Allocate permanent
& price risk equity
• Risk adjusted investment • Optimally leveraged
Value added
or service returns with appropriate debt
services (SA)
• Subscription Business platform Entrepreneurial
based management teams
• Scalable, data-driven
& technology led • Identify, develop
• Well governed & partner owners,
• Underpins capital founders &
Transactional managers
appreciation
services (SA)
• Fee per payment processed International specialised
(collections & disbursements) credit & alternative assets
• Payroll management (SA & select international markets)BALANCE SHEET POSITION POST INVESTMENT IN WeBuyCars 22
BALANCE SHEET WeBuyCars ILLUSTRATIVE ILLUSTRATIVE BALANCE SHEET
HY20 BALANCE SHEET ADJUSTMENTS POST WeBuyCars INVESTMENT
ASSETS • R560m accelerated bookbuild in June 2020
R20.6 billion • (~R900m) undeployed capital deployed accretively
R22.1 billion
TOTAL ASSETS TOTAL ASSETS
• R1.84bn investment in WeBuyCars
(R800m undeployed capital)
› R1.80bn1 initial purchase consideration
› R40m deferred consideration
• R560m accelerated bookbuild in June 2020
EQUITY R5.5 billion › 30.75m shares at R18.20 per share
R6.4 billion
TOTAL EQUITY TOTAL EQUITY
• R329m1 of new equity issued to sellers
› 16.47m shares at R20 per share
DEBT
R15.1 billion • ~R220m of debt drawn from existing facilities R15.7 billion
TOTAL DEBT to settle initial purchase consideration TOTAL DEBT
(R13.0bn Senior & subordinated debt) • R349m1 of vendor finance via preference shares (R13.5bn Senior & subordinated debt)
• R40m deferred consideration (R40m contingent liability on balance sheet)
• Group liquidity position remains robust underpinned by a conservative capital strategy
› Well capitalised balance sheet (Equity ▲~R900 million)
BALANCE SHEET REMAINS › Strong access to liquidity facilities (Additional ~R680 million of new debt facilities to be raised post acquisition)
STRONG POST › R1.5bn new facilities concluded by SA Taxi since 1 April 2020
• Acquisitive growth initiatives to acquire NPL Portfolios in South Africa, Australia & Europe remain valid
WeBuyCars INVESTMENT • WeBuyCars | High quality asset introduced (assets ▲~R1 billion)
› WeBuyCars generates predictable earnings with high cash conversion rates
1. Initial purchase consideration of R1.80bn (R1.12bn cash, R329m of new TC equity & R349m of vendor finance)GLOSSARY 25
AUS Australia Fihrst Net1 Fihrst Holdings (Pty) Ltd, a 100% owned subsidiary of TCRS
ACCSYS Accsys, a 100% owned subsidiary of TCRS NPL Portfolios Non-performing consumer loan portfolios acquired by TCRS to be collected as principal
Additional gross margin earned on value-added products & allied services including finance, insurance, tracking &
B2B Business-to-business (vehicle dealerships) Product margin
other revenue
B2C Business-to-consumer Recoveries Corp Recoveries Corporation, an Australian 100% owned subsidiary of TCRS
CAGR Compound annual growth rate SA South Africa
COVID-19 The COVID-19 pandemic SANTACO South African National Taxi Council
A vehicle inspection certification providing information
DEKRA Report TC Transaction Capital
on the mechanical & technical status of the vehicle
F&I products Finance, insurance based, tracking & other allied products TCRS Transaction Capital Risk Services
FFS Fee-for-service Vehicle margin Margin earned on trading (buying & selling) vehicles
GEO Group executive office Vehicle supermarket Vehicle warehouse/showroomDISCLAIMER 26 This presentation may contain certain "forward-looking statements" regarding beliefs or expectations of the TC Group & any investments made by the TC Group, its directors & other members of its senior management about the TC Group’s &/or its investments’ financial condition, results of operations, cash flow, strategy & business & the transactions described in this presentation. Forward-looking statements include statements concerning plans, objectives, goals, strategies, future events or performance, & underlying assumptions & other statements, which are other than statements of historical facts. The words "believe", "expect", "anticipate", "intend", "estimate", "forecast", "project", "will", "may", "should“ & similar expressions identify forward-looking statements but are not the exclusive means of identifying such statements. Such forward-looking statements are not guarantees of future performance. Rather, they are based on current views & assumptions & involve known & unknown risks, uncertainties & other factors, many of which are outside the control of the TC Group & the entities in which the TC Group is invested & are difficult to predict, that may cause the actual results, performance, achievements or developments of the TC Group & its investments or the industries in which it operates to differ materially from any future results, performance, achievements or developments expressed by or implied from the forward-looking statements. Each member of the TC Group & every entity in which the TC Group may be invested expressly disclaims any obligation or undertaking to provide or disseminate any updates or revisions to any forward-looking statements contained in this announcement.
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