Zeda Group CEO Ramasela Ganda
JSE-listed vehicle rental and leasing company Zeda, in its maiden results as a listed company, reported a 12.4% year-on-year increase in revenue to R9.14-billion for the financial year ended September 30.
Further, the company reported an 18% year-on-year increase in earnings before interest, taxes, depreciation and amortisation (Ebitda) to R3.32-billion.
Zeda posted a return on invested capital of 18.7%, which is above the group weighted average cost of capital of 12.8%. It also saw an improved return on equity of 36.7%, compared with 32.7% in the prior financial year.
Zeda Group CEO Ramasela Ganda, during the company's results presentation on November 27, said the trading environment had been tough, with high inflation and interest rates placing pressure on consumers.
However, the company continued to follow its integrated mobility strategy, which focuses on its diversified portfolio. The team had also been disciplined in executing the group strategy and in cost containment efforts, which delivered the stellar financial performance, she said.
"Revenue was driven by the very strong car rental and leasing businesses. Through our diversified portfolio, we were able to mitigate the decline in the used car margin, which we have been expecting since 2021.
"Looking at our margins, we increased our Ebitda margin to 36%, up from 35% in the prior financial year, despite a 5% decline in used car margins. We were deliberate about growth being value accretive and not diluting our margins," she said.
Zeda's quality of earnings continued to improve with its operating margin increasing to 17%, up 100 basis points from 16% in the preceding financial year, and its return on equity increasing to 37%, up 400 basis points on the prior financial year, Ganda said.
Basic earnings a share increased by 30.8% to 387c, up from 296c in the 2022 financial year, and headline earnings a share increased 17.3% to 381c, up from 325c in the prior financial year.
Meanwhile, the company had net debt of R4.8-billion at year-end and sustained a healthy net debt to Ebitda ratio of 1.5 times. The company also settled its unbundling debt of R1.55-billion two months ahead of schedule, she said.
"The growth strategy is yielding positive results, with both our rental and leasing businesses reporting double-digit growth, underpinned by growth in rental activity and from our heavy commercial strategy.
"Further, from a last-mile perspective, we have extended our rental groups by corporatising some of the van rental operations. This segment is largely backed by corporates. This strategic move provides us with an opportunity to realise integrated mobility and participate in future higher residual values at the end of the cycle, as this is a high margin business," she said.
As part of creating a sustainable business, Zeda increased the proportion of hybrid vehicles in its fleets to 16% and delivered its first batch of ten 4 t electric vehicle trucks to a last-mile customer.
The company also reduced its electricity consumption by 18%. Further, as part of its environmental, social and governance strategy, the company had partnered with Discovery Insure and was fixing 4 500 potholes each month, thereby helping to make roads safer, Ganda added.
Meanwhile, Zeda had an average fleet size of 54 000 vehicles during the financial year, up from 51 000 in the 2022 financial year. However, the group's operating profit has exceeded that achieved in 2019, and delivered almost R400-million more during the 2023 financial year despite its fleet size being 20 000 fewer than in 2019, said Zeda Group FD Thobeka Ntshiza.
"From a portfolio review perspective, the guardrails were set to ensure that all our operations are profitable at a certain threshold and deliver acceptable returns. During the year, Mozambique and Botswana’s performance improved significantly, with a clear growth trajectory going forward.
"We have seen an improvement in the operating activity of the Ghana operations, and we will continue to mitigate the risks of macro-economic factors in the country. The next step is to monitor the portfolio review implementation to ensure that portfolios attain desired profitability and returns over the next two years," she said.
Additionally, one of the focus areas for the company was balance sheet management to achieve an optimal capital structure and diversify its funding.
"During the year, we improved our capital structure from 71:29 to 67:33 debt-to-equity ratio and started attracting a diverse spectrum of financiers to fund our business," added Ntshiza.
Further, Zeda's strategy was underpinned by technology, and it would continue to focus on automation and digitalisation of its businesses, said Ganda.
"This will also allow us to innovate and drive greater adoption of the usership economy, respond to the ever-evolving needs of the customer and also enhance the customer experience," she said.
The company extended its subscription model and has launched a new mobility leasing product called iLease, which is a long-term subscription product for individuals for a period of between 12 and 48 months.
"Subscription is one of our key growth areas because it diversifies and strengthens our mobility offerings. With our heavy commercial and van rental, we are well positioned to capture long-haul and last-mile opportunities in the market, and we believe we will maintain the current growth trajectory," she noted.