Good day everyone. I'm Faan van der Walt, CEO of We Buy Cars. Thank you for taking the time to join us today as we delve into We Buy Cars' performance for the first half of the 2024 financial year. Joining me is our CFO, Chris Rein, and Willem Klopper, our Chief Strategy Officer. We're delighted to share with you a set of results that demonstrate We Buy Cars' resilience and capacity for growth. I will start with the salient features, then move to where We Buy Cars finds itself today. We'll talk about the South African vehicle car park, as well as We Buy Cars' market position therein. Thereafter, Chris will cover our financial overview, followed by Willem Klopper, who will discuss our prospects and strategic focus. Please feel free to submit your questions at any point during the presentation.
There is a Questions tab on the left-hand side of your screen. Let me now jump into the salient features. Revenue for the six months to 31 March at ZAR 11.4 billion is up 15.9% on the prior period. This is driven by volume growth, higher margins, and increased average selling prices. Despite a difficult trading environment with new vehicle sales being down year-over-year, high interest rates, and inflation, We Buy Cars has delivered strong volume growth. Through our increased national footprint, units bought for the six months 81,785 is up 13.7% on the prior six months. Our 15 national supermarkets and growth in online participation led to units sold for the six months 80,538, being up 13.4%. EBITDA, adjusted for once-off non-recurring items, is up 21% at ZAR 664.7 million. Core headline earnings increased by 26.6% to ZAR 402 million.
Core headline earnings per share is up by 26.1% from ZAR 0.951 per share to ZAR 1.199 per share in the current period. Net cash generated from operating activities for the six months at ZAR 267 million is 96% up on the prior period. With our strong cash generation, net debt has reduced 19.5% to ZAR 1.2 billion, as we have managed to pay down debt during this period. The last two measures, being core return on invested capital and core return on equity, will be elaborated on by Chris. Now, let's delve into We Buy Cars' current position. By examining our landscape, it's evident that we strategically target areas of high demand and fish where the fish are. With over 23 years of consistent growth, our network now stretches extensively across South Africa. One of our key strengths and competitive edges lies in our nationwide buying network.
This is further reinforced by a comprehensive network of buying pods and vehicle supermarkets, facilitating both buying and selling transactions. Presently, our operations involve the acquisition and sale of approximately 14,000 vehicles per month, supported by a workforce of nearly 3,000 employees. Shifting focus to the market dynamics, the size of the South African vehicle pool has expanded significantly, escalating from approximately 8.2 million vehicles in 2011 to around 11.2 million vehicles by 2023. This growth is influenced by factors such as the influx of new vehicles and the removal of vehicles due to aging, write-offs, and exports. Analyzing the graph, it's apparent that the South African vehicle pool is on a trajectory of expansion. Looking at used vehicle registrations, we can observe a relatively stable trend, only with notable downturns occurring during the pandemic year and the resurgence of new vehicle sales in 2022.
Concurrently, the annual count of new vehicle registrations has experienced a decline, as indicated by the negative compound annual growth rate. These insights collectively indicate a growing pre-owned vehicle market in South Africa, for which We Buy Cars is well positioned. This concludes my update for now. Next, Chris will provide an overview of our financial performance.
Thank you, Faan. Good morning to you all, and thank you for taking the time to participate in our 31 March 2024 interim results presentation. This is indeed a pleasing maiden set of results for We Buy Cars. The business was separately listed on the main board of the JSE on 11 April 2024, following the unbundling by Transaction Capital of all of the shares that it owned in We Buy Cars. This marked the commencement of an exciting new chapter in the We Buy Cars growth story. Faan has taken you through these salient features, including the 26.6% increase in core headline earnings. The business has delivered on all the metrics and targets set for the six months ended 31 March.
We recorded an all-time record number of units bought in February 2024 at 14,300 motor vehicles and an all-time record number of units sold, which was in March 2024 at 14,285 motor cars. The We Buy Cars website is also averaging 6.4 million monthly visits, with 2 million unique visitors. The next slide sets out a summary of our statement of profit and loss. We recorded a 13.4% increase in units sold, a 15.9% increase in revenue, and a 21% increase in adjusted EBITDA. The adjusted EBITDA excludes the ZAR 45 million JSE listing fees, which I will explain on the next slide. The business delivered a 26.6% increase in core headline earnings. We saw an improved net insurance result. Our insurance cell captive delivered ZAR 41 million in the current half year, compared to ZAR 22 million in the prior year.
Other key features included higher average selling prices, improved margins, operational efficiencies, higher inventory turns, cost efficiencies driven by economies of scale, and a positive contribution from our leisure and commercial vehicle channels. On the back of the We Buy Cars agile business model and quick inventory turns, supported by our robust technology platform, management took a decision about 10 months ago to realign the vehicle buying and capital allocation to the ZAR 150,000 to 300,000 price bracket to align specifically with consumer demand. This has been a key driver of the superior performance in the six-month period under review. Moving to headline earnings and core earnings, we have two adjustments to the headline earnings to get to the core earnings for the six months.
The first one, 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 is as set out in the We Buy Cars pre-listing statement, and that is the company held various call options, which gave it the right to purchase the 25.1% shareholding in the company from RVDW Holdings, for which a call option derivative was raised in prior periods. Upon adoption of the new memorandum of incorporation on the 25th of March this year, the shareholders' agreement was cancelled, which led to the cancellation of these call options. The call option derivative asset of ZAR 426.5 million, as at 30 September 2023, was consequently de-recognized on the 25th of March of this year.
This fair value loss on the derecognition of the call option derivative is once-off in nature, non-core, and has no cash flow impact. I can confirm that there are no other Transaction Capital legacy issues on the balance sheet of We Buy Cars. Core headline earnings at ZAR 402 million are 26.6% up on the prior period, and the core headline earnings per share at ZAR 1.199 are 26.1% up on the prior period. On the next slide, core operating profit is up 23.7% on the prior period, finance income is up 49.3%, and finance costs were up 15.8% or ZAR 11.1 million. Our average interest rates were 0.5% higher in 2024 when compared to 2023. We realized interest savings from December 2023 on the refinancing of the property portfolio. We also wrote off ZAR 2.7 million worth of historic bond-raising fees on the property refinance.
One of our new developments, the Richmond Park Supermarket in Cape Town, commenced trading in November 2022. We had capitalized the borrowing costs up until the date of completion of this property development and only expensed the interest on this development from February 2023. This had an impact on the finance cost in the corresponding six-month periods. The effective taxation rate was lower than the company tax rate of 27% due to exempt dividend income and the higher net insurance result, which is accounted for in line with IFRS 17 in the 2024 financial period. On the next slide, we see that adjusted EBITDA at ZAR 665 million is 20.9% up on the prior period. Core operating profit at ZAR 610 million is up 23.7% on the prior period, and the core headline earnings, as explained previously, at ZAR 402 million is up 26.6% on the prior period.
All three of these metrics represent all-time records for We Buy Cars. The lower graph shows the high cash conversion in H1 of F2024. The first half of 2022 and 2023 were impacted by new supermarket openings and specifically impacted by the working capital required to fund inventory. This positive cash flow generation was flagged in the Transaction Capital trading statements on We Buy Cars for the January and February accounting periods, and this has given us the capacity and ability to pay down on debt in the six-month period under review. The next slide sets out the sales channel analysis for the current six-month period. Units sold were up 13.4%. Sales to dealers, which is the B2B category, recovered in the six-month period.
It is not a coincidence that our dealers were also looking for vehicles in the ZAR 150,000 to 300,000 price brackets, and demand from dealers was higher in the current six-month period. Financed transactions at 15,238 transactions were only up 1.2% on the prior period. This indicates the lower consumer confidence in the market and consumers' propensity to take on debt. The private cash channel, the B2C channel, or the quasi-cash channel, as we sometimes refer to it, showed the biggest increase in the period under review, and we believe there's a big opportunity here for innovative funding solutions to assist these consumers with the purchase of vehicles. From a balance sheet summary perspective, it is evident that inventory is at similar levels to the prior comparative period on a 6.7% higher unit stock inventory holding.
This indicates a lower average cost per unit and lines up with our strategy to stock the lower-priced units to meet the current customer demand. Trade and other receivables were higher due to the record sales volumes recorded in March 2024 and were also a function of the timing of the Easter weekend at the end of March. Interest-bearing borrowings are 14.6% down on the prior comparative, and included in the total liabilities was a ZAR 1.7 billion dividend payable, ZAR 1.5 billion of this dividend relating to the pre-listing capital raise, as set out in the We Buy Cars pre-listing statement. A company's debt levels and high debt levels are always of interest to investors. We Buy Cars is a cash-generative business and is conservatively geared. The net debt at ZAR 1.176 billion was 19.5% down on the prior comparative period.
This debt comprises property mortgage loans of ZAR 726.2 million to fund properties with a net book value at historic cost of ZAR 992 million, and a revolving credit facility of ZAR 450 million to fund inventory with a carrying value of ZAR 2.1 billion. From a cash flow perspective, the cash generated from operations is up 43.2% period on period, and the cash generated from operating activities is up 96.6%.
This indicates the high cash conversion rates, and the surplus cash has been primarily used to pay down debt. From a dividend perspective, the company declared dividends totaling ZAR 3.4 billion during the six months ended 31 March 2024 to the shareholders recorded in the share register prior to the pre-listing capital raise. ZAR 3.1 billion of these dividends were pursuant to the Transaction Capital unbundling and were paid to Transaction Capital and RVDW Holdings in April 2024, as set out in the pre-listing statement.
Going forward, the company aims to declare and pay dividends between 25% to 33% of its headline earnings as per the company's dividend policy. This will be subject to working capital requirements and capital expenditure required for expansion and maintenance. The declaration of a final dividend for the year ending 30 September 2024 will be tabled for consideration by the board and will be announced with the results for the year ending 30 September 2024. Looking forward, our main objectives for the remainder of the financial year will be to roll out the planned new growth opportunities effectively and timelessly, to continue to realize efficiencies and economies of scale in all areas of the business, and to manage our procurement and costs effectively. I'll now hand over to Willem, who will talk you through the prospects and strategic focus areas. Thank you for your time.
Thank you, Chris.
Looking forward, it's fair to assume that there will be uncertainties around the upcoming general election, which might impact customer decision-making around large acquisitions like buying or selling their vehicles. This, coupled with continuous high interest rates and already low consumer confidence, could result in further challenging trading conditions as we head into the winter months. Despite this, We Buy Cars does not want to lose its positive momentum, and we want to continue with our ambition to grow our monthly volumes, gain market share, and expand our geographical reach. We have the team that has proven that it can deliver on strong growth and will endeavor to continue on this growth path. In line with this strategy, we are excited to share we have already identified three new sites, being firstly East London. A lease has been signed at the Hemingways Mall.
This strategic site will allow us to display up to 300 vehicles with operations set to kick off before the end of June 2024. Secondly, Rustenburg, where we have secured land. Once developed, it will have a parking bay capacity of approximately 300 vehicles. These two opportunities solidify our presence in cities where we currently have no supermarkets or retail presence. Thirdly, in Cape Town, we've secured five hectares of land in the Southern Suburbs of Cape Town. We're investigating the cost to develop a new supermarket in this node. The Cape Town area continues to show strong growth and demand for our vehicles and services. We're excited to increase our retail offering in this area and strengthen our presence in the Cape.
From a Buying Pods perspective, we will also continue our Buying Pods rollout strategy across the country by placing pods strategically where we see suitable demand for our services. These Buying Pods are typically situated in dominant shopping malls as parking areas and provide another alternative for vehicle owners to have their vehicles evaluated and sold at these facilities. Most recently, we've opened up pods in Upington and Heidelberg, and we plan to add pods in Newcastle, Rustenburg, Hermanus, Jeffreys Bay, and Uitenhage by the end of the financial year. The plan is to have close to 90 of these pods by the end of the calendar year. From an operational and processes point of view on the next slide, we'll be doing more of the same.
For our team, it's important that we stay true to our knitting and continue what we are doing just better with marginal gains across the business in all its operations. From an existing facilities point of view, there's further enhancement where we can increase the amount of sales bays we have available to display our vehicles. Most notably, at the Dome Supermarket in Gauteng, the commercial area will be relocated to a new dedicated area. This will free up space, allowing us to add more sales bays for vehicles at the Dome Supermarket. In Gqeberha and George, we will also add additional bays in this financial year. From an inventory point of view, the team is aiming to improve the presentation of our inventory to the public and our dealers. We want to have a faster, smoother process to get our stock ready for our supermarkets.
Like I touched on commercial vehicles, we want to add additional space at the Dome and a designated area for commercial as a new channel. This includes trucks and passenger vehicles, and we want to strengthen our team and have more people dedicated to improve the profitability of this channel. It has been less than two years of We Buy Cars having a dedicated focus in this channel, and we're seeing healthy demands and strong margins in this space. From a buying perspective, we wish to improve the accuracy of our vehicle evaluations and data capturing to have an increase on the reliability of all our datasets. This data ultimately informs all our pricing algorithms and our ability to purchase and price our inventory better.
We also want to implement new digital tools to facilitate client engagement, which will help us prioritize leads and make sure our teams focus on the right vehicles and the right customers in the right priority. From a sales perspective, our sales and IT team are focused on upgrading the technology for all our sales staff. This is fully integrated with our existing buying and inventory management system. We're also hoping to streamline the reconditioning and repair process. There's unnecessary friction in this process currently, and we will try and reduce this substantially in the coming months. There's a continued focus on broadening our finance options and making it easier for all our clients across the various LSMs to simplify their loan application processes, be that in the form of vehicle asset finance or by means of unsecured loans.
In all of these, the main focus is to improve the client experience with simplicity, reliability, and make it easier for them to engage with us digitally across our various platforms. Thank you very much, and we'll now welcome any questions. Moving straight into questions, the first question is for Faan. What role will electric vehicles play in We Buy Cars, and how will it impact our buying strategy?
Oh, great question. Electric vehicles are here to stay. There's certainly going to be a progressive adoption of electric vehicles. Globally, we've seen the adoption rate far greater than in South Africa. In South Africa, there's various reasons why electric vehicles aren't taking off as we expected. I would say the main one would be import duties. There are no incentives for consumers to buy electric vehicles because they are actually more expensive than their counterparts.
However, we've seen that they also lose a lot of money. The depreciation curve on electric vehicles is quite high, and insurance is also quite high on electric vehicles, so people shy away from them. But when it comes to hybrid vehicles, I think in South Africa we will definitely see in the years to come that more and more vehicles are hybrid vehicles. And so that's how the transformation to electric is happening. And hopefully, the legislation will also change. But with We Buy Cars, we approach that from a supply and demand point of view. So if the demand is there, definitely we will trade in those vehicles, and we have done so successfully. Thank you, Faan.
Chris, the next question is to you. It's regarding the transaction and the structure around it.
Could you indicate what facilities were used to settle the ZAR 1.7 billion round in dividends post-period end and the funding on these facilities?
Yes, thank you, Willem. So I think all of that is well set out in the pre-listing statement. None of our facilities were touched to settle those dividends as the money flowed in on the one hand on a new subscription and on the other hand on the book build and then just flowed out as a dividend. So we didn't have to touch on additional facilities to fund any of that pre-listing transaction.
Okay. Faan, here's a question for you regarding the buying pod strategy and the rollout. Just if you can elaborate, how We Buy Cars sees the strategy in the next 12 months.
Yeah, the buying pods is quite an interesting one.
Our very first buying pod, we placed in Ellisras, or now known as Lephalale, in the Limpopo province. The reason we did that was we wanted to put up a billboard there, and then we came up with the idea of putting down this little office in a shopping mall right next to one of the main roads. It served as a billboard as well as an office. From there, we realized that this is definitely something there's a need for. It serves various purposes from an advertising perspective and awareness perspective. That's how we started rolling out these buying pods. Slowly but surely, we saw a change in the behavior of the consumer who's gotten to know what it's all about.
It just creates that third way of buying a vehicle where historically, We Buy Cars used to either come to your home or come to your workplace to view your vehicle, which for some consumers is inconvenient or uncomfortable. They don't want to be disrupted at work, or they want their privacy to be respected, and they feel somewhat obliged to do business with you if you go through the effort of visiting them. And therefore, the pod is such a great new channel for us because the consumer can visit us whenever it's convenient, and we evaluate the vehicle. There's no charge, and they know what their vehicle is worth. So yeah, we've seen a real uptick in that. We now buy close to 20% of all our vehicles from buying pods.
So we have a strategy to roll out more and more pods across South Africa in places where we see fit.
Thank you, Faan. Chris, here's a question that I'm going to merge two questions here. It's regarding the CapEx needed to fund our growth strategy. Could you quantify what you expect the working capital investment to be over the next 12 months with your growth plans? It sort of also touches on the other question of how much is the cost of purchasing the land in the various new locations we've identified.
Yes, thank you, Willem. So in Willem's section of the presentation, he spoke about three new growth opportunities that we're pursuing. The first one is in East London, and in East London, we've signed a lease.
Right now, we're incurring ZAR 11 million worth of leasehold improvement, and we'll be ready to trade from that facility very soon after the 1 June this year. Willem, you also spoke about the Rustenburg opportunity. The land in Rustenburg, we purchased for ZAR 11.5 million, and we're in the process of finalising with our professionals exactly what we're going to do on that site. So I don't have a number yet from a CapEx perspective in Rustenburg. I can tell you that on the 5 hectares of land we've purchased in Cape Town, the land costs ZAR 80 million, and the rough QS sort of calculation on the development of a new supermarket there is currently sitting at ZAR 170 million. Thanks, Chris.
Faan, here's a question for you about the oversupply of new vehicles currently and how this has affected the used car market and have used car prices stabilised.
Yeah, this is a question I get quite often. We've been through all these ebbs and flows where there's an oversupply or an undersupply of new vehicles. It's no secret that currently the market circumstances are not ideal for business: high interest rates, low consumer confidence, uncertainty around elections. Therefore, we've seen that the new vehicle sales were on decline compared to previous periods, not as severely, but they are certainly under pressure, which on the one hand is good for us because people are focusing on slightly older vehicles, and that's where all the action is. But we also definitely need new vehicles to enter the car park for us to trade in future.
So yeah, it's a bit of a balancing act. But I'm sure once interest rates start going down again, we will certainly see an uptick in new vehicle sales. And for a consumer, now is a really great time to go and buy a brand new car because there's such great specials out there: cashback, money on the bonnet, things like that. So yeah, there's a lot of effort being put in to stimulate the market, especially on the new sales side.
Thanks, Faan. Chris, regarding the cell captive, a question came in. You have a net insurance result. You also reflect commissions from finance and insurance. Please, can you clarify the difference here? What lines of cover are held in the cell captive? Is the finance commission an upfront commission on placement of business, or is there an ongoing income stream?
Willem, so that question will require quite a lot of explaining. Let me try and keep it a little bit more at the high level. So we don't do comprehensive motor vehicle cover in the cell captive. The lines that we do cover in the cell captive would be warranties, extended warranties, scratch and dent, tire and rim, CPP, and the like. Those sort of products are in the cell captive. The business does earn a commission on the sale of an insurance policy, which is recorded in We Buy Cars on the F&I income line. But the underwriting profit on those policies sits in the cell captive, and we earn a dividend out of the cell captive only sort of at the expiration of the 24-month period of the majority of these policies.
Thank you, Chris. Faan, a question for you.
I think you've sort of touched on it, but specifically on Chinese brands. As the group realigns buying towards lower-priced vehicles, how should we think about the operating margins outlook in light of the increased competition from more affordable Chinese brands?
Yeah, it's a Faantastic question, and I think a lot of people were caught off guard in the motor industry with the entry of very low-priced brands coming into the market, especially from China. Now, we're lucky in the sense that we are brand agnostic. We are age agnostic. We serve the whole car park. So if the owner of a motor vehicle wishes to sell their vehicle, We Buy Cars is able and willing, and we have all the right data to be able to price those vehicles accurately and sell them on again.
So for us, it's great that there is this type of activity in the market serving the motorists in a way that maybe they were underserved before with affordable new vehicles. And with our experience with these brands so far, very, very positive, reliable vehicles. We haven't had any issues whatsoever. Some of these brands have come and gone, but I think that the few main ones from China are here to stay, and they are growing. So I'm very happy. And what's happening is they are taking market share from some of the previously very dominant players in the market. We've seen the market share of some of these German brands halve in a number of years. So yeah, to them, that is definitely a great threat for us. We're happy to welcome them to the market.
Thanks, Faan.
There are actually quite a few questions around the Chinese and Indian imports. The one question is, what age of vehicles do you anticipate focusing on? I'm not sure if that really changes your answer at all, but if you can maybe elaborate on that.
Yeah, when you think about it, there's about 11 million vehicles on the roads in South Africa. And that journey starts with a brand new vehicle. We're one of a few countries in Africa that doesn't allow grey imports or used vehicle imports. So this car pool has only grown with new vehicles entering the vehicle market. Now, in the first, second, and third year, not a lot of those vehicles get traded because people hang onto their cars for a while before they sell them on. But from that point onwards, more trades happen.
And therefore, with us serving the whole car market, the average age of what we buy sits at around nine years, and that's where most of the action happens. But that does not mean we're only focusing on that. We are focusing on every single vehicle and chase just as hard after them as any other vehicle. That's just where most of the action happens, and therefore, that's how our bell curve looks. And yeah, but we are very wary of price changes when it comes to new vehicles because sometimes there are such great specials on new cars that it might impact your inventory, especially your one-year-old inventory. Now, with us, that does not impact us severely, but with other players in the market, it could have quite a significant impact when prices drop.
Thanks, Faan.
Chris, it continues the conversation on where you left off on the cell captive and the insurance line. The question is, can you please clarify? Excuse me. If you earn an upfront commission on financing of a vehicle, do you participate in the funding result over the period of finance?
Thanks, Willem. We don't participate on the result taking place in the finance company. We do earn, like all other dealers in South Africa, an upfront commission on the placement of the finance.
Thanks, Chris. I think that doesn't look like there's any further questions. There's one or two that I think we've partially answered. If you've got any further questions, please send investors at webuycars.co.za. there's one or two that have come in, and I think we've half answered, like I said, and I'll respond to them accordingly. Thank you, Faan. Thank you, Chris. That concludes the presentation.
So great.