We Buy Cars Holdings Limited (WBC) Earnings Call Transcript & Summary

Hello, everyone. My name is Faan van Der Walt, I'm the CEO of We Buy Cars. It's my privilege to present the inaugural Annual Results for We Buy Cars as a listed company on the JSE. This year has been monumental for We Buy Cars, and I'm pleased to report that we achieved our most profitable year ever, with core earnings growing by 23.4% for the financial year. I will share our key highlights before handing over to Chris Rein, our CFO, who will provide a comprehensive overview of our financial performance. Following Chris, Willem Klopper, our CSO, will address the key ESG topics, update us on our strategic progress and share our outlook for the upcoming year. After Willem's presentation, we'll have time for questions, so please submit your inquiries through the link provided. Now let's move on to our financial highlights. Core headline earnings, our key internal metric increased by 23.4% to ZAR 815.4 million, up from ZAR 661 million in the prior year. Headline earnings have been adjusted for the once-off costs related to the listing and noncash adjustments concerning the core option derivative accounted for during the financial year. This adjustment pertains to transactions prior to the unbundling, as communicated in our half year results and detailed in the pre-listing statement. Core headline earnings per share rose by 9.9% from ZAR 1.979 per share in the prior year to ZAR 2.174 per share. The dilution was due to the issuance of new shares as part of the listing process, which Chris will elaborate on shortly. Revenue for the year reached ZAR 23.3 billion, representing a 16.5% increase from ZAR 20 billion in the prior year. This growth was driven by increased sales volumes and higher average selling prices. Despite a challenging trading environment within the automotive industry, we achieved substantial growth. The sector experienced subdued new vehicle sales, with sales volumes declining year-on-year. Contributing factors include higher interest rates, inflation, political shifts, both locally and globally. Nonetheless, WeBuyCars demonstrated resilience showcasing the agility of our business model to achieve significant growth in a challenging environment. We purchased a total of 168,000 units for the year, a 17.8% increase on the previous period. Our 16 national supermarkets, prominent online presence and increased sales base enabled us to sell a record 165,000 units, up 16.4% on the prior year. EBITDA for the 12 months was ZAR 1.3 billion, reflecting a 15.1% increase from ZAR 1.15 billion in the prior year. Core operating profit for the financial year stood at ZAR 1.2 billion, an 18.6% increase over the prior period. At the end of September 2024, our net debt decreased to ZAR 1.1 billion, an 8.5% reduction from ZAR 1.2 billion, allowing us to pay down debt during the period. This result is particularly positive as we can grow both volumes and profits, while maintaining similar or lower debt levels compared to FY 2023. Consequently, we are pleased to declare a dividend of ZAR 0.25 per share. Now let's examine WeBuyCars at 30 September. During the year, we opened 1 new supermarket and made significant commitments towards expansion in FY 2025. Additionally, we increased number of bays at our existing supermarkets, which Willem will discuss in more detail a bit later. The rollout of our buying pods have been very successful, supporting our collective buying efforts. These pods also assists logistics around vehicle collection and document distribution. Furthermore, they serve as effective advertising billboards across South Africa. At 30 September, we operated from 16 supermarkets and 83 pods nationwide with our 17 supermarket in Rustenburg commencing operations in October. In total, we increased our parking bay capacity from 10,339 to 11,236, representing an [ 8% to 7% ] increase from the prior year. To support this growth, we have expanded our workforce and now have 3,140 employees. As we invest in our digital presence, our website visits and WeBuyCars app downloads continue to grow. Over the past few months, our website traffic has risen to approximately 7 million visits per month, of which 2.3 million are unique monthly visits. We're proud also to report that we now self generate 20.6% of our electricity usage through the solar panels we have installed across our property portfolio. Furthermore, we are a Level 6 BEE contributor, which underscores our commitment to responsible business practices. All these factors have contributed to an increase in our market share, and we remain confident in our target of selling 23,000 vehicles per month by 2028. Next, examining the South African vehicle park, the total vehicle pool, we see significant expansion from 2011 to 2024, with a number of vehicles on the road, increasing from approximately 8.2 million to around 11.4 million vehicles. This growth has been driven by new vehicle sales, which have been positively influenced by the influx of new entrants into the market, particularly from Chinese brands. The vehicle write-off rate has also slightly tapered off in 2024, as economic pressure motivate consumers to retain their vehicles longer. A growing car park is positive for WeBuyCars as it expands the used vehicle market, resulting in more buying and selling opportunities in the preowned space. Looking more specifically at the used vehicle market, we observed a steady increase in total used vehicle registrations, albeit somewhat subdued in 2023 when the overall vehicle market was softer. The compound annual growth rate for used vehicles over the past 7 years is a positive 1.1%. Conversely, new vehicle registrations has faced pressure with a 7-year compound annual growth rate of negative 0.8%. The ratio of used to new vehicles continue to rise as the pre-owned market grows relative to the new vehicle market, which bodes well for WeBuyCars. Our strategy of not restricting ourselves to specific vehicle ages and gathering data on the total vehicle car park enables us to compete effectively across all transactions as the vehicle pool changes and adjust over time. As we look to the future, we are strategically poised for growth and dedicated to enhancing our digital capabilities. We will continue to optimize operations, expand our physical footprint and further develop our ancillary services. Our commitment to investing in our team and refining our processes will drive innovation and ensure we maintain operational excellence. I'll now hand over to Chris for a detailed overview of our financial performance.

Thank you, Faan. Good morning to you all, and thank you for taking the time to participate in our 30 September 2024 annual results presentation. The separate listing of WeBuyCars on the main board of the JSE on 11 April 2024 marked the commencement of an exciting new chapter in the WeBuyCars growth story. The WeBuyCars Group delivered exceptional results for the full year to 30 September 2024. In a challenging environment, characterized by low GDP growth, pressure on consumer affordability, high interest rates and low levels of consumer confidence. Faan has taken you through the salient features at a high level. Highlights from my perspective include a 23.4% increase in core headline earnings, a 9.9% increase in core headline earnings per share, the operating leverage, evidenced by a 16.5% increase in revenue and an 18.6% increase in core operating profit, and improved cost-to-income ratio, a higher core return on invested capital at 26.2% and a higher core return on equity at 38.8%. A 1.6% improvement in net cash generated from operating activities and net interest-bearing liabilities of ZAR 1.1 billion or 8.5% down on the interest-bearing liabilities at 30 September 2023. As you have heard from Faan, volumes bought and sold at 167 741 and 165 185 was 17.8% and 16.4% up on the prior year. We recorded an all-time record number of units bought at 14 787 in September 2024 and an all-time record number of units sold at 14 594 in July 2024. The next slide sets out a summary of our consolidated statement of profit and loss. We recorded a 16.4% increase in units sold, the 16.5% increase in revenue at ZAR 23.3 billion, a 15.1% increase in EBITDA and an 18.6% increase in core operating profit. The business delivered a 23.4% increase in core headline earnings, which was favorably impacted by higher average selling prices, operational efficiencies, quicker inventory turns, cost efficiencies driven by economies of scale and a positive contribution from our leisure and commercial vehicle channels. Gross margins were maintained at similar levels to those recorded in the prior year, despite the difficult trading environment. Another key driver of the growth in headline -- in core headline earnings was an improved net insurance result. Our insurance cell captive delivered a profit of ZAR 84.4 million in the current year compared to ZAR 65.3 million in the prior year. Both years were accounted for in line with the requirements of IFRS 17, the accounting standard for insurance contracts. On the back of the WeBuyCars agile business model, supported by quick inventory turns and a robust technology platform, management took a decision about 18 months ago to realign the vehicle buying and capital allocation to the ZAR 150,000 to ZAR 300,000 price bracket, to align with current consumer demand. This has been a key driver of the superior performance, together with ongoing improvements to the technology platform. Moving to earnings, headline earnings and core earnings. We have 2 adjustments to the headline earnings to get to the core earnings for the 12 months to 30 September 2024. These are the same adjustments that we communicated with our first set of interim results for the 6 months to 31 March 2024. Firstly, pursuant to the successful listing on the main board of the JSE, the company incurred once-off professional, legal and JSE listing fees, of just over ZAR 45 million. The second adjustment as set out in the WeBuyCars prelisting statement relates to various core options held by the company, which gave it the right to purchase the 25.1% shareholding in the company from I VDW Holdings for which a call option derivative was raised in prior periods. Upon adoption of the new memorandum of incorporation on 25 March this year, the shareholders' agreement was canceled, which led to the cancellation of these call options. The call option derivative asset of ZAR 426.5 million as of 30 September 2023, was consequently derecognized during March 2024. This fair value loss on derecognition of the call option derivative is once-off in nature, noncore and there's no cash flow impact. Core headline earnings at ZAR 815.4 million or 23.4%, up on the prior year, and the core headline earnings per share at ZAR 217.4 is 9.9% up on the prior year. The core headline earnings per share was unfavorably impacted by the February and March '24 new share issues implemented as part of the unbundling steps and the prelisting capital raise initiatives. A total of circa 83 million new shares were issued in this regard. On the next slide, core operating profit is up 18.6% on the prior year. Finance income is up 72.9%, but more importantly, finance costs were down 0.2% year-on-year. The average prime interest rate in South Africa was 0.75% higher in the '24 financial year when compared to the 2023 financial year. On the finance costs, we managed debt levels proactively, and we're able to pay down our debt during periods of high cash generation. Despite the higher prime interest rates during the financial year, and the inventory buildup of approximately ZAR 278 million over the year, we were able to keep the finance costs flat year-on-year. As explained in our half year results presentation in May 2024, this was aided by the interest savings from December 2023 on the refinancing of the property portfolio with [ RMB ]. In recent months, we've also been successful in negotiating more favorable interest rates on our revolving credit facilities, and these are used to finance inventories. The effective taxation rate was lower than the company tax rate of 27% due to the higher net insurance results discussed earlier. This income is taxed in the Guardrisk insurance cell captive and is accounted for accordingly. On the next slide, EBITDA at ZAR 1.32 billion is 15.1%, up on the prior year. Core operating profit at ZAR 1.22 billion is up 18.6% on the prior year. And the core headline earnings, as explained previously, at ZAR 815.4 million or up 23.4% on the prior year. All 3 of these income statement metrics are all-time records for WeBuyCars. The lower graph shows the cash conversion in 2024 when compared to the 2023 and the 2022 financial years. The 2022 financial year was impacted by 6 new supermarket openings, specifically the working capital required to fund inventory. In the current year, we generated net cash from operating activities of ZAR 591.4 million, and this is up 1.6% on the prior year. The cash conversion at 73%, was unfavorably impacted by 12.7% or ZAR 278 million inventory build in the current year. This inventory investment will support our growth plans and has WeBuyCars well placed for the higher volume months of October, November and December. The next slide sets out the sales channel analysis for the 12 months under review. Units sold were up 16.4%. Sales to dealers, which is the B2B category, recovered in the current year. Sales volumes to dealers were 21.3%, up year-on-year at 36,194 units and returned to levels last seen in the 2022 financial year. Demand from our dealers was higher in the current year. We also worked closely with our higher volume dealers to improve the value proposition. Finance transactions at 30,928 were up 4.2% on the prior year. It was a difficult year for the finance channel with higher interest rates, lower levels of consumer confidence and consumers displayed a lower propensity to take on new debt. Despite the low percentage increase in finance deals, we managed to grow our finance and insurance commission income by 15.4% to ZAR 472.5 million. The private cash channel showed a 19.1% increase to 98 -- just over 98,000 units. We remain convinced that there is an opportunity here for innovative funding solutions to assist these consumers with the purchase of affordable vehicles. From a balance sheet perspective, inventory rands are up 12.7% and inventory volumes are up 14.9%, indicative of a lower per unit inventory profile. This lines up with our strategy to stock the lower-priced units to meet current customer demand. The inventory growth is in line with the growth in volumes traded and the higher inventory volumes were required to stock up the East London supermarkets, which we opened on the 10th of June 2024, and the Rustenburg supermarket, which opened on 1 October this year. Trade and other receivables were higher due to higher volumes traded and due to the higher percentage sold to dealers in the current year. Total interest-bearing borrowings were 4% down on the prior year, and I will elaborate more on this on the next slide. A company's debt levels, and higher debt levels are always of interest to investors. WeBuyCars as a cash-generative business and is conservatively geared. The net interest-bearing liabilities at ZAR 1.1 billion are down 8.5% on the prior comparative year-end. This debt comprises property mortgage loans of ZAR 715.3 million, to fund properties with a net book value of ZAR 954.2 million, and it consists of revolving credit facilities of ZAR 404.3 million, to fund inventory with a carrying value of ZAR 2.465 billion. The loan to inventory value for the revolving credit facility loans have dropped significantly from 23.9% in the prior year to 16.4% at 30 September '24. As a consequence of this prudent management of borrowing levels, WeBuyCars has comfortably met all loan covenants during the financial year. From a cash flow perspective, the cash generated by operations is down 7.5% year-on-year and the cash generated from operating activities is up 1.6%. This indicates the high cash conversion rates, and the surplus cash has been primarily used to pay down debt. On the topic of dividends, my final slide before I hand over to Willem, sets out some history and our rationale going forward on the subject of dividends. As set out in the WeBuyCars pre-listing statement, the company's normal dividend policy as a higher-level benchmark is to declare between 25% and 33% of its headline earnings as a dividend, subject to working capital requirements and capital expenditure required for expansion and maintenance. WeBuyCars is a growth company and intends to responsibly grow its footprint across South Africa. We believe that there are opportunities to capitalize on in the short to medium term, some of which Willem will speak to next. The pursuit and efficient execution of these opportunities should add value to shareholders. In this morning's SENS announcement, the Board of WeBuyCars notified shareholders that a gross final cash ordinary dividend of ZAR 0.25 per ordinary share has been declared as of today's date. The dividend has been calculated at 25% of the core headline earnings of WeBuyCars for the second half of the financial year to 30 September 24. This is the company's maiden dividend as a listed company, and the new dividend policy is not comparable to the dividend policy in the prior year when WeBuyCars was a transaction capital subsidiary. At this point of the presentation, let me hand over to Willem Klopper, who will take you through a summary of our ESG initiatives. And will take you through some detail on the outlook and strategic focus areas for WeBuyCars.

Thank you, Chris. Over the past 12 months, we have made positive strides in our environmental, social and governance initiatives, reflecting our commitment to responsible corporate citizenship. We have appointed 1,130 new employees this year with 69.6% of these individuals being under the age of 35. Additionally, we've promoted 525 employees from African, colored and Indian background to various new or replacement positions during the period. Our commitment to employee development has been further strengthened through a range of learning and development programs, including apprenticeships, leaderships, leadership programs and bursaries. By investing in our people, we do not only enhance their skills, but it supports our culture of promoting employees internally, a principle we wish to continue as we grow in the future. Operating within a circular economy framework, we emphasize reuse by facilitating transactions in the preowned vehicle space. This approach prolongs vehicle usability, reducing the need for new car production and associated environmental impacts, such as resource extraction and carbon emissions. We take pride in our own efforts of repairing vehicles in some cases and providing transparent conditions report to our dealers and private clients. This also helps them understand their responsibilities and obligations in extending the life span of vehicles. We also facilitate insurance and value-added products through our sales processes. These efforts help protect our customers and contribute to having safer, longer-lasting vehicles on our national roads. Our environmental commitment is demonstrated through the various initiatives aimed at reducing our carbon footprint and conserving resources. We continue our efforts of rainwater harvesting, and we installed solar panels and LED lighting at all our supermarkets that we own. Thanks to our solar assets, we reduced our reliance on the national electricity grid. Solar generated power makes up 20.6% of our total electricity usage. Additionally, we've invested in water harvesting and storage tanks at 9 supermarkets, primarily for vehicle washing purposes. Flow meters have been fitted to our backup water tanks to monitor rainwater usage and assess overall water savings. Our ESG journey is still in its infancy, and we hope to continue on the building blocks our team has put in place. We remain committed to these ESG principles, and we'll continue to consider viable alternatives to look after the economy, our environment and our social responsibility as a good corporate citizen within the communities that we serve. We wish to provide a progress update on our key goals we previously shared with the market in May 2024. Our goal of selling 23,000 vehicles per month by 2028. Over the past 6 months, we've made significant advancement in our property expansion efforts to achieve this target. During our half year presentation for the period ending 31 March 2024, we highlighted our plans to open new facilities in East London and Rustenburg and shared with the market that we recently concluded a property sale agreement for 5 hectares of land in the Lansdowne area in Cape Town. We're excited to share that we've commenced trading ahead of schedule with East London Supermarket opening on the 10th of June and that we've opened Rustenburg on the 1st of October. Both these supermarkets have 300 parking bays. Planning for the Lansdowne site development is continuing with construction expected to be completed before the end of the 2025 calendar year, barring any material delays or unforeseen postponements in the regulatory approvals. Current estimates that we would be able to display 1,150 vehicles at the supermarket. At our existing sites, we've also added additional bays in an effort to keep sweating our assets. Most notably has been The Dome, where we've relocated the commercial vehicle display area to across the road, and we've also added 400 parking bays adjacent to the main building. The other 2 topics that we highlighted as focus areas where our buying pod and our commercial vehicle divisions expansion. We added 14 more pods during the year and have 83 pods across the nation by year-end. This is a 20.3% increase in the number of destinations. From a commercial vehicle perspective, this division has shown steady growth over the financial year, with our unit sales increasing by approximately 40% from a low base in FY 2023. We've expanded the team focusing on this business unit, increased the display area for commercial vehicles and are actively enhancing our marketing efforts to grow leads in this space. We are encouraging this team to ramp up transactions and volumes in the coming year. Furthermore, and coming back to the topic of property, we have secured additional sites to the 3 properties mentioned in May 2024 and continue to increase our footprint at both new sites and our adding bays at existing facilities in FY 2025. In August, WeBuyCar signed a property sale agreement to purchase land in Montana Pretoria, which we plan to develop and complete by the end of 2025. We expect to display around 1,000 vehicles at the site. In September, we signed a lease agreement for a larger, more prominently located branch in the Pietermaritzburg area. We will relocate from the existing supermarket to a new location in December, which has the capacity to display approximately 350 vehicles. Following our year-end, we acquired an existing vehicle dealership facility in Vereeniging, where we plan to commence trading in May 2025. Conservatively, we think we can house 400 sales bays at the supermarket. In the 2025 financial here, we also want to expand parking bays at our George, Polokwane and Mbombela supermarkets. In October, we already added 150 bays in George and plan to add another 150 bays at Polokwane by January 2025. At the Mbombela supermarket, we utilized additional land for employee parking, and post-sale operations to free up further retail space to sell vehicles. From a buying pod perspective, we plan to roll out another 14 pods before the end of 2025, targeting larger metro areas and bigger provincial towns across South Africa, where we have seen demand for our offering. This will bring the total to around 97 pods by the end of 2025. The average number of vehicles bought per pod is also increasing. Our numbers show a 20% growth year-on-year in the average number of vehicles bought at each pod. This illustrates that consumers are also getting more accustomed to this channel. From a digitization and innovation perspective, we have made notable improvements to our vehicle buying platform. We continue to focus on obtaining accurate and reliable vehicle evaluation data to enhance our purchasing decisions. Better data and an increase in the number of vehicles assessed have enriched our data sets, enabling our machine learning tools and pricing algorithms to inform our rising decision-making more effectively. In terms of sales, we have been developing technology that allows our sales team to manage the increased volume of leads more efficiently, ultimately enhancing the client experience. Additionally, improvements to our vehicle loan application processes will enable our finance and insurance representatives to better assist clients requiring bank financing. While our services in this area has been effective, we want to better serve these clients with smarter software solutions. We have developed a third-party sales solution, enabling us to sell units on behalf of other parties. WeBuyCars also recently launched its own virtual assistant, Orange, assisting clients with queries about vehicles and our digital platforms. These initiatives lay the groundwork for strengthening and broadening our service offerings, particularly in the sales channel. Further prospects on these topics are continuous focus on our dealer channel. We foster these partnerships and want to increase the number of dealers that actively buy from us. We have established a team of finance and insurance representatives that conversely assist clients in their loan application processes by providing online support during the busy periods and enhancing services at smaller supermarkets with fewer staff members. This is both a cost saving and an improvement in the client service. In addition to this, we want to see an improvement in our processes with Capitec. Capitec primarily provides unsecured loans to our client base. We already have 9 small Capitec branches within our larger supermarkets. By streamlining this process, we believe we can offer more favorable interest rates and further grow this channel. Improving the purpose of an unsecured loan, in our case, the purpose of buying a vehicle, Capitec could offer more favorable interest rates to certain clients. This channel has already shown tremendous growth over the last 12 months, but we still see room for improvements in this channel. Continued development of our internal large language model tools and learning alongside our new colleague, Orange, mentioned previously, maybe just at a slower pace. We want to increase the use of chatbots and electronic communication on platforms like WhatsApp to enhance our client engagement. This approach has complemented our human engagement and has already shown marked improvement with higher hit rates, particularly on the buying side. Building out further functionality of our internally developed refund platform to manage finance applications more effectively. In conclusion, we also want to further enhance our lead generation, assignment of leads and management of processes for buying and selling vehicles. The objective is to prioritize the right leads to the right people and try and limit wasting of time where we can. And as always, we want to remain focused on the continuous improvement in vehicle evaluations to support our pricing strategies. This commitment keeps us true to our mission and concentrated on what we believe we do best, providing excellent service to our clients when buying and selling vehicles at fair prices. We will now take a quick break and get ready for the Q&A session of this webcast.

Thank you, and thank you for those persons who have submitted questions on the link provided. I'm going to jump straight in. The first question is to Faan around inventory. What is your strategy with cars, which do not sell? How long do they typically stand on the floor? And do they attract price drops before they sell? And again, what is the average time those vehicles stand on the floor and what do we do with vehicles that don't sell? Do we write them all?

Thank you, Willem. Yes, it's a very interesting topic that we spend a lot of time on making sure the inventory turns are healthy and that we don't sit with stock for way too long. So it's quite a science to get prices right, and we're getting better at that all the time. On average, vehicles take 29 days on average to sell, but what's quite interesting is that we sell about 25% of our inventory within 2 days. And we sold close to 50% of our inventory within 7 days from first initial pricing. So to elaborate a bit on that, yes, there is a science, and you don't keep on asking the same asking price indefinitely on a vehicle. There are many factors that comes into play here, for instance, how often does people look at the vehicle on the website. So we count the number of clicks and engagements we have online on that specific vehicle. We also take into account how many times the vehicle has been open for a client. The keys have been collected and someone viewed the vehicle. We look at how many test drives a vehicle had because that also informs whether the vehicle is priced right. So if the vehicle had 10 test drives, but no sale, it tells you a story. If the vehicle has got very little interest online, it tells you something. So we use all these bits of data to inform our pricing. And the market is quite dynamic in that regard. Prices change, these new entrants in the market. There's above-average volumes of certain makes and models available in the market from time to time, and then there's oversupply, and therefore, the demand is not that great. So we take all those factors into account. And we make sure that we don't sit for stock, indefinite -- we have stock indefinitely because it ties up money, it times up space. So we proactively manage our aging inventory. I hope that answers the question.

Yes. Thank you, Faan. And, Chris, this is sort of a merger of 2 or 3 questions. It's regarding the balance sheet and how it will change with our -- the growth and the new build that we've mentioned in the presentation. So the question is basically how does the WeBuyCars balance sheet look by the end of 30 September 2025? And if you can touch on covenants, debt levels and how we plan to fund that.

Thank you, Willem. Yes. So I think there was some very exciting sort of new developments discussed earlier, most of which Willem spoke to. We are working sort of hard on all of those. We anticipate a ZAR 700 million spend on land and buildings, which will fund 90% of through mortgage loans. And when we do open the new sites that Willem spoke to earlier, we anticipate a ZAR 415 million increased working capital. We will fund the working capital out of operating cash flows and [ RCS ] where necessary. And with that new debt primarily in the property portfolio introduced to the balance sheet, we will be comfortably within covenants and within the guard rails that have been set by our board.

The only thing I'll add to that is our property portfolio has carried at historic cost. So our loan-to-value. If that was marked up, it's even more conservatively geared. That's the only other comment I have there. Faan, a question for you regarding to impact the Chinese vehicles, especially in the new market and the impact it's had on WeBuyCars and the activity that we've seen around Chinese vehicles entering our market?

Yes, it's quite a hot topic nowadays. The new entrants, especially from China entering the market and there's a whole number of new entrants, some are still on their way and some are well established. But they're certainly making an impact on the market. For some of the OEMs, it's not good news because they are highly competitive, and the quality has significantly improved over the years. So we embrace it. Already, we can see that we buy our fair share of those Chinese vehicles very successfully. They show to be very reliable. And they come in at a price point new, where one would expect them to depreciate severely because they are unknown and unproven in the market. But what we've seen is they keep their values actually fairly well. And therefore, we love training them and -- yes, the market is dynamic. It comes at the cost of other brands that lose market share, but we've seen the Chinese makes nearly double in the last 2 years in market share, and we expect that to continue. So for the OEMs, not great news, the established OEMs, but for the used vehicle market, I think, very positive.

Thank you, Faan. And the next question, I'll try and answer the question is around Capitec. It was mentioned in the presentation that WeBuyCars is partnered with Capitec. Can you please elaborate on these type of loans? Okay, I'll answer that. WeBuyCars as for a few years now, engaged with Capitec. Capitec is a very big part of that market. So what they've done in the WeBuyCars space is still unsecured loans. But for Capitec, it's also beneficial if they can prove the purpose of a loan. And we've integrated with Capitec on our website, and we've also had a stronger, better, more streamlined working relationship with Capitec branches that are outside our supermarkets. We've opened 9 mini Capitec branches within our supermarket. So it's really to improve the engagement with clients and the whole application process for their loans. So like I mentioned, it's still unsecured. It's a benefit from many customers who prefer owning their vehicle. And there should be some benefit in the interest rate if the client can prove that it's obviously for a vehicle, and that's the reason for our integration with Capitec so that they can pay us directly. It's grown nicely over the last 12 months, but there's really still a big room for area to improve that process. I hope that answers the question. The next question is for Faan. You mentioned third-party sales. Can you please elaborate?

Yes. Third-party sales means selling vehicles that we don't own. And up to now, we haven't really done that. All the inventory that we sell or vehicles that we've proactively purchased from sellers, predominantly private individuals and small companies. And that's been our motto all along. But we've had increasing inquiries from third parties, fleet owners, banks, vehicle dealers, who want to use WeBuyCars to sell vehicles on behalf of themselves. Now with our travels overseas, we've seen many companies doing this, particularly British Car auctioneers in the U.K. as well as Manheim in the U.S., who is doing that very, very successfully. Now the reason we haven't done that yet is simply because we felt that it would cannibalize our own market when you start selling on behalf of third parties. But with our size and volume right now, we believe that we can start doing this without cannibalizing our own market. If we consider that we're selling around 15,000-plus vehicles per month. If we start selling 500 on behalf of third parties, banks, et cetera, it would not have a negative impact on our selling, but it will also enables us to expand and we have a competitive advantage in that regard where we have a national footprint with space, where we can do this. So we have now started experimenting with this quite successfully. So this is something that we will develop over time. And -- yes, watch the space, it could become something big.

Thank you, Faan. Chris, the next question is for you. I'm again going to try and merge 2 questions. What is the realistic cost-to-income ratio that you can maintain? Is this likely to improve over time? And also on the GP margin, is there room for improvement there, Faan, we can maybe but in there on that question. And I think that will cover for now. Chris?

So I think we've set out in the presentation in the last 2 years cost-to-income ratio. And one would notice that the cost-to-income ratio has improved in financial '24. We anticipate that to continue improving as we realize further the benefits of economies of scale. From a margin perspective, from my perspective, we are always working on the IT stack and the technology platform. And the small refinements and enhancements that we do almost every day and should influence the margin favorably. I don't know, Faan, if you want to add some more to that?

Yes. I think there's always a balance that needs to be struck between margin and volume. If you're trading at a very high margin, it opens up the door for competitors to compete quite easily with you. So I think a healthy margin is where we're currently sitting at. Would I love for it to improve slightly? Yes, of course, but would I'd rather just keep it the same and reach 23,000 and 25,000 units a month sooner. Absolutely. So yes, the margin is always a contentious issue. I think it can be improved. But right now, I think we're sitting at a very, very healthy sweet spot.

Chris, I'm going to add to that question. On new supermarkets, what is the typical J-curve of a new supermarket? Specifically, how long after opening does it turn profitable?

So I've probably got 2 comments to make in that regard. The first one is we've never opened a supermarket before and not being profitable in month 1. And in some cases, that month 1 is only half a month. So sort of there's no reason to believe that won't sort of continue. We do sort of also speak internally about a sort of 6- to 9-month period to become a known destination, particularly in a province we've not been in before, in a geography we've not been in before. So I think there is a period where the marketing sort of has to get out there, and there's probably a 6- to 9-month period to become a known sort of destination.

And the only other comment I have there is, typically, in a new place like opening of Rustenburg and East London. After you open, we've seen historically that there's usually a big ramp-up in the amount of vehicles that we purchased from the warehouse in that node as well historically. Then Faan, there's a few questions on the commercial vehicles. What type of commercial vehicles are we targeting? And is the inventory turn similar to vehicles? And then there is a question on that, have you seen an increase in demand in commercial vehicles?

Yes. Just before I get to that question to add to Chris' previous answer he's given regarding our facilities and how soon they turn profitable. I think it's noteworthy to mention that our most important bit of real estate is actually our domain and our website because that's where we have the most visits. So it's worth far more than the real estate -- the physical real estate we have. As far as commercial vehicles are concerned, we have commenced in all seriousness trading in commercial vehicles over the last 18 months. We never really took that seriously because we had the constraint of space. We couldn't accommodate commercial vehicles in our warehouses. But with the purchase of The Dome, where there's lot of adjacent space available. We have now started trading in trucks fairly successfully. This is also highly dependent on a proper team that we have established who knows trucks and are dealing well with them. And we are not very particular about brands there or ages or types. But there's definitely just like with motor vehicles, ebbs and flows in that space where certain types of commercial vehicles are in higher demand at certain periods, whilst others might have an oversupply. We've recently actually seen that with the cold trucks, the side tippers where there's a big oversupply, and therefore, they become very difficult to sell. But we keep our finger on the pulse, and we make sure that what we buy so quickly. The question also was how soon do they sell and how quickly they turn. And it's a -- it is fair to say that similar with normal vehicles, the more expensive they become or the higher the price is on a vehicle, the longer it takes to sell. And it's exactly the same with commercial vehicles, especially considering that they are predominantly bought by businesses with internal processes, and they're not bought by individuals. And that takes longer to get finance in place takes longer. So yes, the inventory, the turn whilst with vehicles, we're looking at 29 days. This is quite a bit higher, but still also highly profitable.

Thank you, Faan. And Chris, analyst here asked -- I'm sorry, I probably missed the detail somewhere, but can you maybe elaborate on the source of the ZAR 115 million dividend received?

ZAR 115 million?

ZAR 115 million. Yes.

Yes. So you'll see that ZAR 115 million dividend in the cash flow statement. It's the majority of it is from the Guardrisk insurance cell captive. So it's accounted for on the income statement in line with IFRS 17 and on the balance sheet. And in the cash flow, it comes through as a cash inflow of ZAR 115 million and the majority of it is from the Guardrisk cell captive.

Thank you, Chris. Next question that I'll try and answer. Have you seen an increase in the overseas investors on your shareholder register?

Yes. Maybe just a high-level comment. We've got quite a few investments that own large stakes in the company. Coronation still just under 30% at the founder vehicle [ Derek ] and Faan. They own 10% of the ordinary shares. And you would have seen in the news over the last month or so on SENS that stock tile is just under 5%, and the PIC is gone kind of over 10%. And there's another fund manager around 5% as well. So between 55% and 60% are held quite closely. But it's been very promising to see quite a number of overseas investors, who have been contacting our Investor Relations team. There are quite a few investors from the U.S., a few Singaporean fund managers and a few sovereign wealth funds, sort of Scandinavian focused and European-focused -- or European-based investors that have also been reaching out to our team and engaging with our management quite actively.

The next question -- just give me a second here. Faan, maybe you and Chris can comment on this. Have you seen an incremental pickup in demand or transaction volumes posted 2-part implementation?

We speak about this a lot. It's very hard to sort of quantify, obviously -- for obvious reasons. We definitely have seen some buoyancy to pod, but could also be linked closely to the positivity around South Africa and the government of national unity. One would logically believe that sort of that ZAR 30,000 or ZAR 20,000 that you managed to get out of the 2-pod system could form the basis of your vehicle deposit. But very hard for us to put a finger point on it. Suffice to say, I think it's had a positive impact across corporate South Africa. I don't know, Faan, if you have anything.

I mean if you look at the new vehicle sales statistics of October, we've had our best month on new vehicle sales in South Africa for a long time because it has been subdued, significantly depressing even. So the fact is that causes this. I would say, are multiple factors. It's interest rates, its fuel prices, its political stability, a positive outlook for more interest rate hikes and the 2-pod system. So it's not only one factor, but we can certainly sense some positivity in the market right now.

Thank you, Faan. Yes, I think the other comment is the Capitec or the unsecured loan activity has picked up. And I think that's definitely a beneficiary of the 2-pod system. And like you say, helping clients with their deposits in particular. Faan, a question to you. How do you ensure that the smaller dealers are not dumping high-mileage vehicles to WeBuyCars?

Yes, I think that's an easy question to answer. We do not really buy vehicles from dealers. We buy from the owners of vehicles who are the individuals who drove the vehicle for the last few years. And we buy all sorts of vehicles, all sorts of mileages, and we check these vehicles thoroughly. They go through an inspection process, and we endeavor to be as transparent as possible on the condition of the vehicle. But we try and serve the whole car park. So if you're the owner of a vehicle in South Africa, whether that vehicle is 1 year old or 15 years old, we have the capability to determine a fair value on the vehicle and offer the service of inspecting and buying that vehicle countrywide, wherever you are. So yes, we -- we'll probably start looking at buying from dealers in the future with our third-party sales coming into play. But right now, that is not on the radar for us.

Thank you, Faan. And Chris, a question for you. It's 2 questions. Could you comment on the senior management, STIs and LTIs? And then can you add to that inventory turns as you expand into Tier 2 cities with lower density?

So the first one was, can you comment on STIs and LTIs? Let's start with the LTIs because that's maybe little easier. So Faan, sort of senior management team were -- when we were a transaction capital subsidiary were incentivized under the transaction capital conditional share plan arrangement. And on listing or shortly after listing, those sort of conditional rights were transferred on a fair and equitable basis to the newly formed WeBuyCars conditional share plan with its own set of rules. In principle, very similar to the rules of the transaction capital scheme and the Boards of both companies had a responsibility to ensure that there was an equitable transfer. And then from an STI perspective, not exactly sure what the question would be -- but well within guardrails and approved by their [indiscernible] noncommittee for this financial year.

I can maybe just add to that. I think on the LTI, it's also performance conditions on the senior team is obviously healthy core headline earnings per share growth. And also, I guess, sound balance sheet management in the form of ROIC hurdles and to make sure that the capital allocation is done in a sound manner and on the STIs, similar to that, it's due to gain healthy market share with sort of normalized or at the same inventory turns. And again, core headline earnings per share growth is the sort of fundamental to that. Willem, maybe just to add, I should have added when I was speaking about the LTI. So performance conditions moved across from 2 different schemes and the vesting periods remain exactly the same. Thank you.

Thank you. Okay. Faan, it's a high-level question on sales. Is there any legal risk to you for comebacks from a person who buys a vehicle, and the car doesn't perform mechanically properly as it should?

Great question. So WeBuyCars, as any other motor dealer in South Africa must comply with the Consumer Protection Act, where the consumers' rights are protected. So selling 15,000 vehicles a month, you do get comebacks. And therefore, we have customer care center that deals with all these inquiries and manage them proactively all the time. So it is something that we pay careful attention to that we watch that we monitor and make sure that we are compliant in all respects.

Thank you, Faan. I think we've covered most of the questions. Let me just give a second for it to refresh. Yes, I think that would conclude the question-and-answer section of this presentation. Thank you for everyone who submitted their questions. If there's any further questions, please send an e-mail to [email protected]. A copy of this presentation will be available on our website under the Presentation tab in our Investors tab on the website. And thank you, everyone, for listening. Thank you, Faan. Thank you, Chris.

Thank you.