Despite delivering a year-on-year revenue increase of 20% to R4.45-billion, along with a group operating profit improvement of 25% to R803-million, mobility solutions group Zeda CEO Ramasela Ganda has said she is “cautiously optimistic” for the year ahead as the consumer environment is expected to remain challenging.

“The decisions taken during the height of the Covid-19 pandemic continue to pay off as our businesses benefit from our diversification strategy and proactive approach to fleet management,” she said on May 29 at the release of the company’s interim results for the half-year ended March 31.

The group, which owns car rental, leasing and sales businesses Avis and Budget, recently unbundled from Barloworld to list independently. So far, Zeda has repaid R721-million to Barloworld since the unbundling and separate listing and has said that it aims to settle the liability by the end of the year.

The group’s car rental arm reported revenue growth of 26% year-on-year to R3.3-billion, driven by strong demand from the corporate sector, as well as inbound and domestic travel. Inbound travel yielded a 138.7% revenue increase year-on-year, while business travel went up 69.5%.

However, Ganda noted that rentals were still below prepandemic levels.

Moreover, contracted business, through the insurance, subscription, public sector and corporate sectors contributed a significant part of revenue.

Zeda reported that the supply of fleet improved during the first quarter, which enabled the rental business to acquire more vehicles to take advantage of high business activity, especially given the return of inbound travel after Covid-19 and strong corporate travel figures.

Moreover, the application of improved fleet management principles and the ability to manage the entire value chain from acquisition, especially the out-of-service fleet, yielded positive results, with average use sitting at 75%, Ganda said.

Zeda’s leasing business came in stable despite what Ganda described as a challenging period for the sector, with revenue up 6% year-on-year driven by an effort to deliver on the company's strategy of growing its heavy commercial fleet and increasing penetration within the corporate sector and into Africa.

“This was achieved despite the winding down of major public sector contracts. We expect the leasing business to continue to grow, underpinned by a healthy order book, growth in targeted segments, and a proactive approach to fleet management,” she said.

Overall, the car rental and leasing business units generate more than 99% of the vehicles sold through the company's used cars retail footprint and online auction platform.

“The strong operational capabilities in vehicle procurement to optimise the entry price point, vehicle application management, utilisation, good maintenance history, the condition of the vehicles and rigorous residual value management all contributed towards the solid returns from used car sales,” Ganda said.

She noted that the margin held for the first quarter started to soften in the second quarter, as the supply of new vehicles continued to increase to prepandemic levels, noting that rising interest rates, inflation and fuel hikes have resulted in increased financial pressure on consumers. Moreover, vehicle prices are also expected to continue rising.

“While the operating environment has been challenging, the group leveraged pockets of opportunity in rental and leasing to grow into less capital-intensive business such as maintenance and other value-added assets,” Ganda explained.

She further announced that Zeda would be launching a new product before the end of the current financial year that was aimed at catering to customer mobility requirements, including the expansion of the company's subscription offering for a period beyond 12 months.

“We expect the leasing business to continue to grow, underpinned by a healthy order book and growth in targeted segments. Heavy commercial vehicles continue to be a key strategic focus area, which has started to yield new growth opportunities in differentiated sectors,” Ganda said.

She assured that the company would continue to review and optimise its balance sheet and capital structure through the undertaking of a portfolio review process, which has already identified underperforming operations and product/service lines.

“We are implementing various initiatives to turn these around over the next 18 to 24 months, optimising our businesses, capital allocation and balance sheet to realise cost saving while growing into promising new verticals,” Ganda said.

She explained that "deepening the usership economy" remained a key commitment for the group, where it was progressing on strategic partnerships to improve its value proposition.

“This is a key growth driver for the business, and we are in the process of enhancing our offerings, expanding on the subscription offerings, and targeting different market segments, utilising technology as a key enabler,” Ganda said.

Overall, the group reported a profit margin of 18%, with the earnings before interest, taxes, depreciation and amortisation margin having remained stable at 38%.