Integrated Annual Report
2020

Introducing WeBuyCars

Transaction Capital’s investment in a non-controlling 49.9% share of WeBuyCars on 11 September 2020 represents an earnings- and value-accretive deployment of cash into a relevant and scalable business with potential to grow in value.

WeBuyCars is a uniquely positioned, highly competitive and entrepreneurial founder-led business, with an impressive 20-year track record. As a highly experienced buyer and seller of used vehicles, it trades through its vertically integrated, data- and technology-led e-commerce and physical infrastructure, supported by a national footprint that includes seven vehicle supermarkets and 19 buying pods.

As a well-known and reputable brand, WeBuyCars provides a reliable, affordable and convenient alternative to selling or buying a vehicle. With vehicle valuations determined by AI and not individual buyer sentiment, sellers can be certain of a fair price and immediate cash settlement on acceptance of the offer. With no affiliation to any particular make of vehicle, WeBuyCars offers an extensive range of popular vehicle brands and a simple, seamless buying experience. Buyers are given independent vehicle condition reports and high-resolution photos to facilitate their purchase decisions.

1. Simplified transaction structure: Transaction Capital via Transaction Capital Motor Holdings, a 100% owned subsidiary of Transaction Capital. | 2. Transaction Capital issued R349 million of preference shares. | 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 and Konrad Fleischhauer. | 4. Put option subject to regulatory approvals. | 5. Call option subject to regulatory approvals (if required) and predetermined criteria being met.

Market context

South Africa’s vehicle parc has grown steadily despite new vehicle sales declining over the last 10 years.

10.8 million
Vehicles6 in South Africa.

CAGR
Nine years: 5.6%
Five years: 2.4%

~10 years
Average length of
ownership8 is increasing.
December 2017: 9.73 years.
March 2020: 10.08 years.

372 000 vehicles
New vehicle sales into parc.

2020 estimate of new
vehicles sales down 34%7.

350 000 vehicles
Write-off rate out of parc.
Consistently at ~3% per year.

VEHICLE PARC VERSUS REPLENISHMENT RATE AND WRITE-OFFS %

The used vehicle market is resilient, defensive and growing, despite South Africa’s economic climate

A strong recovery in used vehicle sales is already evident, having returned to pre-COVID-19 levels.

VEHICLE SALES IN SOUTH AFRICA

~500 000
New vehicles, with
46% financed9.

2.4 times
Used-to-new sales
ratio increasing.

~1.2 million
Used vehicles sold,
with 32% financed10.

Shift from new to used vehicles

  • New vehicle sales declining, driven by:
    • Challenging economic environment.
    • Price increases, driven by exchange rates (as ~70% of new vehicles are imported).
    • Banks’ appetiteorinancing.
  • Used vehicle sales increasing, driven by:
    • Being a more affordable option to a new vehicle.
    • Stressed disposable income, exacerbated by COVID-19.
    • Declining new vehicle sales.
  • Banks adding liquidity into used vehicle market as they seek growth.

CAGR

NEW VEHICLES
Nine years: 1.0%
Five years: 3.4%

USED VEHICLES
Nine years:3.8%
Five years:1.7%

WEBUYCARS’ BUSINESS MODEL IS EVEN MORE RELEVANT IN A POST-COVID-19 ENVIRONMENT
  • More consumers are opting to trade down from new to used vehicles.
  • New vehicle sales per year declining, a trend further amplified by
    COVID-19:
    • Consumers’ disposable income is under strain.
    • The weakening rand is driving new vehicle prices higher.
  • COVID-19 has heightened consumers’ preference for online channels.
    • E-commerce adoption has accelerated in South Africa.
SOURCE: National Land Transport Strategic Framework 2015. | National Household Travel Survey 2013. | Census data 2011.
6. Lightstone – vehicle parc consists of passenger and light commercial vehicles.
7. 2020 estimated new vehicle sales, https://www.dailymaverick.co.za/article/2020-08-19-sa-motoring-industry-negotiates-the-rocky-road-to-recovery/
8. Lightstone parc data.
9. Consumers financed per the NCR in 2019, excluding B2B.
10. Estimate applying TransUnion, eNatis (double counting eliminated) and Lightstone data.
Market positioning

WeBuyCars’s scalable, agile and robust business model.

1
PROPRIETARY DATA
  • Leveraging 20 years of vehicle, price, consumer and other data with AI.
  • Continuously enriched with buying and selling transactional data.
2
AI, ANALYTICS AND LEAD GENERATION
  • AI applied to:
    • Ensure vehicles are bought and sold at a fair price.
    • Adjust pricing according to value and demand, preserving margins and high stock turn.
  • Lead generation to target high-quality online prospects.
3
TECHNOLOGY
  • Online channel and e-commerce infrastructure enhance the experience for customers.
    • First-mover advantage in the used vehicle e-commerce market.
    • >35% of sales done online:
      – Improves efficiency and reliability of service.
      – Scalable technology-led platform reducing the costs per unit.
4
EXPANSIVE INFRASTRUCTURE
  • Holding a large variety and quantum of stock.
  • Large physical infrastructure with a:
    • Nationwide presence.
    • Seven vehicle supermarkets, 19 buying pods and over 150 national buyers.
  • E-commerce platform provides:
    • Peace of mind in transacting in online auctions through a trusted brand.
    • Established B2B platform with vehicle dealerships.
    • Early stage B2C activities commenced.
5
WELL-KNOWN, REPUTABLE AND TRUSTED BRAND
  • In an industry where trust and customer satisfaction have been low.
  • Effective advertising campaigns (spend >R100 million per year).
  • Consistently high satisfaction levels.
  • Peace of mind transacting:
    • Buyers have access to full disclosure.
    • Vehicle condition report (e.g. DEKRA).
    • High-resolution photos.
    • Sellers receive a fair price.
    • Online channel.
    • Instant offer driven by AI, not buyer sentiment.
    • Immediate cash settlement.
  • Reputation, brand and trust enhance lead generation.
Strategic growth initiatives

WeBuyCars is well placed to build on its long-term track record of growth, due to favourable structural market conditions and its relevant business model.

MEDIUM TERM TARGET TO INCREASE THE VOLUME OF VEHICLES TRADED TO 10 000 PER MONTH
  • Expanding the physical nationwide infrastructure to meet demand requirements.
    • Additional vehicle supermarkets and buying pods are in development. 
  • Enhancing its e-commerce platform to:
    • Fully realise the potential of data, technology and e-commerce.
    • Extend WeBuyCars e-commerce capability in:
      – Established B2B e-commerce activities, including vehicle dealerships.
      – Expanding B2C e-commerce activities.
  • Continue enhancing brand awareness and trust.
  • COVID-19 has increased the opportunity to acquire more vehicles as:
    • Banks increase repossessions as payment relief expires.
    • Car rental companies are forced to de-fleet.
ENHANCE UNIT ECONOMICS AND MARGIN POTENTIAL
  • Optimising vehicle acquisition and stock turn.
  • Increasing unit economics per vehicle sold by increasing the take-up rate of F&I products (which is currently at 15% of vehicles sold).
  • Enhancing existing arrangements with providers of F&I products.
  • Adding relevant new allied products.
  • Offering finance to under-served segments as principal.
  • Offering insurance and allied products as principal.

WeBuyCars stacks up well against comparable international peers

Its profitability surpasses that of its peer group, supported by efficient inventory management and effective advertising spend.

BUSINESS MODEL
  •  Hybrid model including
    e-commerce and physical infrastructure.
  • F&I products offered as an agent.
  • Stockholder.
  • Hybrid model including 
    e-commerce and physical infrastructure.
  • Finance and other products offered as an agent.
  • Stockholder.
  • Hybrid model including
    e-commerce and physical infrastructure.
  • Vertically integrated.
  • On-balance sheet financing.
  • Stockholder.
  • Hybrid model including
    e-commerce and physical infrastructure.
  • Vertically integrated.
  • On-balance sheet financing.
  • Stockholder.
UNITS SOLD ON
THE PLATFORM
65 510 52 160
177 549 832 640
PHYSICAL
PRESENCE1

SOUTH AFRICA:

  • Seven vehicle supermarkets and 19 buying pods.
  • No refurbishment activities.

UNITED STATES:

  • One vehicle supermarket.
  • One refurbishment centre (in progress)².

UNITED STATES:

  • 19 branches
  • Seven refurbishment centres.

UNITED STATES:

  • 216 branches.
  • 96 refurbishment centres.
REVENUE
(THREE-YEAR
CAGR3)
61.7% 39.3% 114.2% 8.6%
RETURN ON SALES4 5.1% (12.0%) (9.3%) 4.4%
ADVERTISING COST
AS % OF REVENUE
1.5% 4.2% 5.2% 0.9%
AVERAGE
INVENTORY DAYS
TO SALE
25 68 62 52
MEASUREMENT
PERIOD
12 months ended
31 March 2020
12 months ended
31 December 2019
12 months ended
31 December 2019
12 months ended
29 February 2020

1. Company website and latest investor presentations. I 2. Vroom's business model currently relies on outsourced refurbishment centres through partnerships throughout the United States. I 3. WeBuyCars revenue CAGR for the year ended 31 March 2017 to 31 March 2020; Carvana revenue CAGR for the year ended 31 December 2017 to 31 December 2019; Vroom revenue CAGR for 2018 to 2019. I 4. Return on sales calculated as profit after tax divided by revenue.

WeBuyCars’s global listed peers have varied business models, with a mix of online platforms, marketplaces, franchise dealers,
e-commerce and vehicle supermarkets. The WeBuyCars business model is unique in South Africa.

P
Online platform
M
Marketplace
F
Franchise dealer
E
E-commerce with vehicle supermarkets
UNITED STATES
2019
REVENUE
(USD)
UNITS
SOLD
(‘000)
ADVERTISING
COST AS %
OF REVENUE
E
21 billion 833 0.9
E
4 billion 178 5.2
E
1 billion 52 4.2
M
589 million n/a 66.9
EUROPE
2019
REVENUE
(USD)
UNITS
SOLD
(‘000)
ADVERTISING
COST AS %
OF REVENUE
P
514 million2 721 31
M
3 billion2 231 4.5
F
12 billion2 810 n/a
M
467 million3 10 200 4.9
ASIA/PACIFIC
2019
REVENUE
(USD)
UNITS
SOLD
(‘000)
ADVERTISING
COST AS %
OF REVENUE
F
335 million n/a 7.1
SOUTH AFRICA
2019
REVENUE
(USD)
UNITS
SOLD
(‘000)
ADVERTISING
COST AS %
OF REVENUE
E
389 million4 66 1.5
F
3.1 billion4 n/a n/a
F
1.3 billion4 n/a n/a
AUSTRALIA
2019
REVENUE
(USD)
UNITS
SOLD
(‘000)
ADVERTISING
COST AS %
OF REVENUE
M
297 million6 n/a n/a

Source: Euromonitor e-commerce sales excluding sales taxes for 2019. Company data is sourced from respective company financial reports.

1. BCA Group was delisted in 2019; figures as of 2018. | 2. EUR amounts translated at a EUR/USD FX rate of 0.84961 on 4 August 2020. | 3. GBP amounts translated at a GBP/USD FX rate of 0.76569 on 4 August 2020. | 4. Rand amounts converted at a ZAR/USD FX rate of 17.403 on 4 August 2020. | 5. Motus revenue reported above excludes non-South African operations and aftermarket parts operations. | 6. AUS amounts converted at an AUS/USD FX rate of 1.404 on 4 August 2020.