Zeda surprises with 50 cents interim dividend amid earnings plunge

Zeda CEO Ramasela Ganda during the results presentation at the JSE yesterday. Photo: Supplied

Zeda CEO Ramasela Ganda during the results presentation at the JSE yesterday. Photo: Supplied

Published May 31, 2024


ZEDA Limited, the integrated mobility solutions provider, yesterday declared a 50 cents half year dividend despite a 12.5% decline in headline earnings per share (HEPS) for the year ended March 31 to 165.5 cents.

Thobeka Ntshiza, Zeda’s chief financial officer, said the JSE-listed operator of the globally recognised Avis and Budget brand had created as much as R1.1 billion in equity since unbundling from Barloworld, helping the company to an interim dividend for the period to end March 2024.

Shares in the company were, however, marginally lower by 0.34% at R11.90.

“Since unbundling from Barloworld on December 13, 2022, the company has created R1.1bn in equity. It is this strength that propelled the board to approve the interim dividend,” said Ntshiza.

Return on equity in the company currently stands at 28.5%.

During the interim period to end March, Zeda lifted revenues by 19% to R5.2bn, “underpinned by strategy execution” which saw the company attain growth in earnings before interest, tax, depreciation and amortisation of 7.5% to R1.8bn.

There was strong topline growth, helping it to a healthy financial position as it operated on strong cash generation, it said.

Zeda CEO Ramasela Ganda said, “This solid performance demonstrates solid execution of our integrated mobility strategy and a robust business model that enabled us to manage a challenging trading environment. Notwithstanding this robust topline growth, the returning to normality in the used car market impacted profitability when compared to the prior year as indicated by the end of super used car profits."

Despite this topline growth, the company was affected by tougher conditions - including stagnant economic growth, higher interest rates and elevated fuel costs - in the used car market during the period under review.

This had weighed on the profitability and earnings of the business, it explained.

“The performance of the short-term rental business was underpinned by increased demand in the domestic market and the inbound market,” Zeda said.

“While the leasing business revenue growth was driven by a concerted effort to deliver on the strategy of growing the heavy commercial fleet and increasing penetration within the Corporate Sector and the Greater Africa business.”

Despite the challenging trading conditions, Zeda managed to maintain a stronger Ebitda margin at 34% while its operating margin for the period remained strong at 15%.

This was underpinned by “a healthy and diversified mix of product offerings from both the rental and leasing” businesses.

Net debt for the period amounted to R5.1bn despite the growth of the fleet from the business which was supported by strong cash position of R958 million.

The company’s re-investment of capital “delivered solid returns, with a return on invested capital (ROIC) of 16.0%, coming in higher than its weighted average cost of capital (WACC) of 12.8%”.

Operationally, Zeda’s leasing business recorded revenue growth of 17% to R1.3bn, underpinned by its strategy of growing the heavy commercial fleet and increasing penetration within the corporate and the greater Africa business segments.

Revenue generated from Zeda’s car rental business grew by 19.6% to R3.9bn, solidified by the ongoing recovery of the industry and increased used car sales volumes.

“We saw strong growth in inbound and local segments compared to the prior year. Strong used car sales volumes were driven by our strong retail marketing focus which resulted in a further increase in retail contribution to 30.3% of used car volumes,” the company said.

However, profitability in the car rental category was lower compared to the same period last year “due to the general normalisation of the used car market reducing the margins and excess supply of new vehicles which led to heavy discounts” in the retail market.

This had exerted pressure on used car sales. The company had responded to this by introducing a higher mix of rental vehicles obtained on short-term operating leases.