Zeda ready to pounce on recovering car rental market

Zeda, which began a new journey in December as a stand-alone entity after unbundling from Barloworld, reported a 23% rise in its core profit in the three months to December and said it was positioned to capitalise on the recovering economic activity in both the car rental and leasing businesses.

The company, which owns the Avis and Budget brands, benefited from the pent-up demand in domestic and international travel over the December quarter compared to the same period a year earlier when the Omicron Covid-19 variant marred a the important season for the hospitality industry.

However, Zeda has been recalibrating its strategy away from relying too heavily on tourism-related activities towards what it calls subscription-based model individuals and companies that use their services more regularly and provide a predicable revenue stream over time based on the given contracts.

Its car rental business was a standout performer during the period, particularly in the SA market where revenue shot up 37% year on year and was 3% higher than pre-pandemic levels.

The company said on Thursday the gradual return to normality post-pandemic, the steady increase in domestic and inbound international travel and a marked improvement in vehicle supply from original equipment manufacturers all had a positive affect on rental activity and demand.

“Towards the end of 2022, the supply of vehicles started to ease up, and long outstanding orders were delivered outside the cycle to our car rental operations. The increase in the rental fleet enabled us to cater for the larger market in both domestic and inbound travel, which yielded higher billed days. This culminated in the strong top line growth that we are reporting today,” the company said.

The group’s ebitda or core profit was up 23% to R783m, off revenue of just more than R2bn, which was up 24% versus the same period a year ago.

“Our leasing business is stable, and continues to be a steady source of annuity income. Our key focus was on growing the corporate sector business, improving service and maintenance profits, in addition to growing the uptake of value-added products,” CEO Ramasela Ganda said.

Margins in used vehicle sales were stable during the quarter, the company said. 

Its share price ended 2.35% lower to R12.06 on the JSE. The shares have battled to gain headway since December 13 when the company listed at R18.

However, analysts have said the drop in the value of Zeda shares could be connected to big institutional investors having to offload their shares based on their investment mandate, which does not allow them to invest in smaller-cap companies.

This is not Avis’s first time on the exchange as Avis Southern Africa was listed on the Johannesburg, Namibian and Botswana stock exchanges until 2005 when Barloworld acquired and delisted it. The return to the bourse comes after Barloworld, which undertook the unbundling as part of its strategy to trim its sprawling portfolio to focus on its core earth-moving equipment and food procurement businesses.

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