African mobility services provider Zeda achieved record revenue of R10.5-billion for the financial year ended September 30 – a 14.5% year-on-year increase – and based off a smaller fleet than pre-Covid-19 levels, CEO Ramasela Ganda said on November 26.

Zeda declared a final dividend of 50c, taking the total yearly dividend to R1.

Ganda highlighted the positive impact of the group executing its integrated mobility strategy, showcased in some good results for the year despite challenging trading conditions.

The year was characterised by high interest rates, inflation, fuel hikes, a challenging competitive landscape and the end of super profits in the used car market.

Despite this, Ganda said the fundamentals of the business remained strong and this was showcased in the results with double-digit top-line growth, a healthy financial position and solid returns from the capital deployed in the business, albeit with reduced profitability.

The strategy to drive integrated mobility, which is centred around diversified mobility solutions, mitigated against the changing market conditions.

The increase in revenue was driven by a strong performance in the leasing business and the quality of vehicles and market intelligent in car sales to drive the volumes. The long-term leasing business delivered double-digit revenue growth of 12.3%.

This was in line with the strategic focus on growing the corporate sector, heavy commercial and Greater Africa.

Ganda noted that the adoption of iLease in its first year of operation was rather slow, but it continues to be a key growth element. She said that initiatives, including market education, would be undertaken to improve this.

The short-term rental business reported a 15.2% growth in revenue driven by double-digit growth in used-car sales across the retail and wholesale channels.

The rental business revenue increased by 4% driven by growth in the corporate business, inbound and local businesses. This was, however, negatively impacted by the replacement market, which is indicated to be highly price-sensitive.

The subscription business is down 5.6%. Customer feedback on the system challenges when subscribing to the offering has been taken into consideration, with an increase in volume and revenue seen as these challenges are addressed towards the end of the financial year.

Despite the strong top-line performance, the challenging used car market, driven by big discounts on new vehicles and declining consumer disposable income, continued to put pressure on used car sales.

This environment constrained profitability, with the group’s earnings before interest, taxes, depreciation and amortisation margin reducing to 32% from 36.3% the previous year and the operating profit margin declining to 14%.

Zeda views full-year 2025 as a year of rebasing used-car margins across the industry, signalling the end of the very good profits seen since the pandemic. To address this shift, it would remain agile in the size of outright acquisitions and the make range model.

Efficiency measures, such as the launch of a digital dealership in November, are being implemented to enhance market reach.

Earnings were further impacted by the normalisation of the effective tax rate to 26.2% compared to last year’s significantly lower rate of 21%, coupled with sustained high interest rates.

Additionally, the impact of foreign exchange fluctuations related to the significant depreciation of the Ghanaian cedi also affected group earnings.

Basic earnings a share and headline earnings a share declined by 17.3% and 18.1%, respectively.

Capital deployed to the business generated solid returns, achieving a return on equity of 23.1% for the year.

During the year, the board approved the registration of a domestic medium-term note programme (DMTN) for up to R5-billion with the JSE and the development of sustainability finance fundraising framework for Zeda, in line with its strategy to diversify funding.

OUTLOOK
Zeda says the fundamentals of this business remain strong, despite the challenging trading environment.

Following the approval of the five-year strategy, Zeda developed the sustainability finance fundraising framework to support its environmental, social and governance strategy and commitment to sustainability, while pursuing an integrated mobility solutions strategy.

The DMTN programme and sustainable finance framework is said to provide cost and execution-efficient access to the debt capital markets.

These initiatives are expected to enable Zeda to access various funding sources, lengthen its debt maturity profile and bring about cost-of-funding savings to meet the group’s funding requirements.

The first issuance in the debt capital markets is planned for the first half of full-year 2025.

Zeda says its key strategic pillars for growth remain intact, with these to be elevated by investments in technology.

With the growth in equity and the capital allocation framework, the business is indicated to be well-positioned to seize value-accretive opportunities in the market.

Zeda is seeing an improved performance in short-term subscriptions as a result of enhanced customer experiences.

Growth in the leasing book is expected to be driven by heavy commercial and last mile, in Corporate South Africa and Greater Africa.

Zeda expects to launch in Zimbabwe through corporatising a short-term rental business and launching a leasing business.

It also expects the used-car market to normalise after years of elevated profits while economic growth is expected to remain subdued.