Faan van der Walt on WeBuyCars’ 21% growth, R40M listing costs, and future ambitions
In a recent interview on BizNews, Alec Hogg spoke with Faan van der Walt, CEO and co-founder of Webuycars, about the company's impressive growth, challenges of going public, and its future outlook. Webuycars, now listed on the JSE, has experienced strong top-line growth of over 20%, though it faced a dip in headline earnings per share due to non-recurring costs associated with the listing. Faan discussed how major institutional investors, including Coronation and Aylett & Co., have backed the company, and he expressed optimism about reaching the ambitious goal of selling 25,000 vehicles per month in the near future.
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BizNews Reporter ___STEADY_PAYWALL___
In a recent interview on BizNews, Alec Hogg spoke with Faan van der Walt, CEO and co-founder of Webuycars, a leading vehicle trading company in South Africa. The conversation delved into Webuycars' market performance, its listing on the Johannesburg Stock Exchange (JSE), the company's strategy, and its future outlook. With notable support from investors like Walter Aylett, who backed the company before its public listing, Webuycars has become a company to watch in the local market.
The Journey from Private to Public
Webuycars was listed on the JSE following its separation from Transaction Capital, a process that Faan describes as both rewarding and challenging. Despite the natural focus on share prices by investors, Faan emphasizes that Webuycars is not primarily concerned with influencing share price movements but rather delivering solid business results.
Faan acknowledges the attention around Webuycars' share price, which initially traded at around R20 and surged to R35. However, he remains grounded, asserting that price fluctuations are often driven by supply and demand dynamics rather than fundamental changes in the company's operations. He highlights that despite occasional dips or spikes, the company's core focus remains on providing value to customers and investors through sound business practices.
"Sometimes you see it's down 10%, and then it's up, and nothing has changed in the company. And you wonder why," Faan says, noting that the real value of a listed entity is what shareholders are willing to pay for it. This underscores the volatility inherent in public markets, where external factors often influence stock prices.
Trading Performance and Growth
In the interview, Alec points out that Webuycars released a trading statement showing strong top-line growth of over 20%, but with headline earnings per share (HEPS) going down by two-thirds. Alec presses Faan to explain this disparity, given the company's strong financial performance in other areas.
Faan explains that the company's financial year ends in September, and while they are finalizing their results for publication on November 18, a JSE regulation requires companies to notify shareholders if they anticipate significant changes in their earnings. Webuycars' trading statement flagged a positive outlook overall, despite the drop in HEPS.
This decrease in HEPS is attributed to two major non-cash, non-recurring expenses related to the company's listing on the stock exchange. The first was a financial provision of R426 million due to a call option derivative connected to the company's ownership structure when Faan and his brother Dirk were shareholders along with Transaction Capital. This provision was necessary for accounting purposes but does not reflect the ongoing operational costs of the business. The second significant cost was a R40 million listing fee, which Faan notes is part of the broader expense of going public.
Despite these one-off costs, Faan emphasizes that the core headline earnings—the figure that excludes such anomalies—paint a much clearer picture of the company's performance. Webuycars posted an impressive R800 million in core headline earnings, up 21%, signaling strong underlying business growth.
The Costs of Going Public
Alec raises the point that the listing costs for Webuycars, particularly the R40 million expense, seemed exorbitant, especially for a company like Webuycars that is focused on selling used cars. Faan admits that while the costs were significant, cutting corners during the listing process could have led to long-term issues. He attributes the success of the listing to their experienced advisors, Peleus Capital and PSG Capital, who guided the process and helped build relationships with potential investors.
Faan reflects on the balance of hiring the right professionals to ensure a successful listing, even though it came at a high cost. He states, "It's always a bit painful when you employ the right people and the professionals because you have to pay for that, but I think the results speak for themselves."
Shareholder Structure and Future Outlook
One of the key investors in Webuycars' journey to public listing was Coronation Fund Managers, which acquired 42 million shares. Faan reveals that negotiations with Coronation began in the last quarter of 2023 as part of the listing process. Their early investment played a crucial role in making the listing possible.
Besides Coronation, another cornerstone investor is Walter Aylett of Aylett & Co., who has been a vocal supporter of Webuycars. Additionally, the Public Investment Corporation (PIC), which manages pension funds, has also invested in the company. These institutional investors represent a broad range of stakeholders who believe in Webuycars' long-term potential.
Looking ahead, Faan is optimistic about the company's growth prospects. He notes that Webuycars is currently selling around 15,000 vehicles per month, a significant figure in the South African market, which sees around 140,000 to 150,000 used vehicle transactions monthly. Despite this, Faan believes there is still ample room for growth, with the company's ambition set at reaching 25,000 vehicle sales per month.
With strong top-line growth, an eye on long-term expansion, and the backing of major institutional investors, Webuycars is well-positioned to continue its upward trajectory in the South African market.
As the company prepares to release its financial results in November, investors and industry observers alike will be keen to see how Webuycars sustains its impressive growth and tackles the challenges of the public market. With a focus on operational excellence and a clear growth strategy, Faan and his team remain optimistic about the future.
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