Poor roads, bad weather and weak used-car market dent Zeda’s profit

30th May 2024 By: Irma Venter - Creamer Media Senior Deputy Editor

Poor roads, bad weather and weak used-car market dent Zeda’s profit

Ramasela Ganda

Poor road conditions, hail storms, a shortage of car parts and a deteriorating used-car market all managed to dent Zeda’s operating profit for the six months ended March 31.

The integrated mobility solutions provider, active in the leasing, car rental and fleet management sectors, on Thursday reported a 19% jump in revenue, to R5.3-billion.

Operating profit, however, dropped by 1.7%, to R789-million.

Net debt stood at R5.2-billion.

The Zeda board declared a gross interim dividend of 50c a share.

Zeda CEO Ramasela Ganda said the company had faced strong headwinds, which included stagnant economic growth, as well as high interest rates and fuel costs.

Despite some strong topline growth – increasing to R3.9-billlion from R3.3-billion – the profitability of Zeda’s rental operations weakened compared with the prior year, with operating profit declining from R540-million to R439-million.

This was owing to the normalisation of the used-car market, which led to heavy discounts in the retail market, noted Ganda.

There was also a high rate of out-of-service vehicles, owing to long lead times for vehicle parts as a result of logistical challenges with certain vehicle models.

In addition, the business saw higher damage costs brought on by deteriorating road infrastructure and inclement weather, which included eight hail storms in Gauteng alone in the period under review.

These trends impacted fleet availability, and resulted in a decline in the utilisation rate to 72%

Zeda’s leasing business’ revenue was driven by an effort to deliver on the strategy of growing the heavy commercial fleet and increasing penetration within the corporate sector and the greater Africa business.

Revenue for this business increased from R1.1-billion to R1.3-billion. Operating profit grew from R263-million to R350-million.

Looking ahead, Ganda said greater Africa remained one of the business’ growth pillars.

The group’s strategy is underpinned by technology, with a new subscription product, iLease, seeing demand from customers.

However, the conversion rate has been lower owing to a hesitancy to move from vehicle ownership to usership.

To accelerate the adoption of this product, Zeda has introduced iLease on the dealership floor and the company expects the conversion rate to improve.

The goal is also to launch a digital dealership by the end of the financial year.

Zeda also aims to keep on expanding its presence in the last-mile-delivery market through its van rental business.

During the period under review, Zed relaunched Key Locker.

Key Locker is a self-service kiosk that promises to enhance vehicle rental check-out efficiency at its Avis and Budget vehicle rental branches.