Car rentals are cruising in South Africa

 ·29 May 2023

Avis operator Zeda reported revenue growth of 26% from its car rental business as demand in tourism and corporate travel continue their return following the Covid-19 pandemic in South Africa.

Zeda is headquartered in Johannesburg, South Africa, with operations in 10 countries across Africa. Zeda operates the widely recognised Avis and Budget global brands under a long-term licence agreement with the Avis Budget Group.

The Avis car rental business has over 1,100 employees and over 18,000 vehicles in its fleet in southern Africa. The rent-a-car business operates under the brand name Avis Budget and focuses exclusively on rentals that do not exceed 12 months.

In its interim results for the six months ended 31 March 2023, Zeda reported that its car rentals yielded a strong revenue of R3.3 billion, representing a 26% growth year-on-year.

“The execution of the diversification strategy balancing discretionary services (inbound and domestic travel) and contracted services (insurance business, public and corporate travel, and monthly subscriptions) continues to bear fruit, with the contracted services contributing more than half of the revenue mix,” said the company.

Zeda added that this is because the business experienced an exponential increase in inbound travel and corporate business travel, with revenue in both segments surging by 138.7% and 69.5%, respectively, compared to the prior period.

This resulted in robust revenue growth for the rental business and cost management, which saw a record EBITDA of R1.016 billion – increasing by 39% compared to the prior period – and the EBITDA margin expanding from 28% to 31%.

Operating profit grew by 33% to R540 million, and the operating margin expanded from 15% to 16%.

This performance contributed to Zeda’s strong results overall, which are listed below:

  • Revenue increased by 20% to R4.450 billion;
  • EBITDA is up by 19% to R1.671 billion, with the EBITDA margin maintained at 38%;
  • Operating profit is up 25% to R803 million with an operating margin of 18%;
  • Earnings per share increased by 27%;
  • Return on Equity improved by 5.9ppts to 28.3%; and
  • Net debt to EBITDA improved by 0.6ppts to 1.6 times.

Looking forward, Zeda noted that an expected increase in international airlines’ activities utilising chauffeur-driven vehicles presents Avis with an opportunity to continue to grow the business
further in absolute terms.

The growth in the rental business will also be supported by the contracted business (insurance business, subscription, and Corporate segment), added Zeda.

“While interest rates are expected to continue with a rising trajectory, putting consumers under further pressure, we are looking at various product offerings to cater for consumers who are under pressure,” it said.

“After the successful introduction of the subscription product, we will be expanding our subscription offering by increasing the length from 12 months to a longer period.

“This will offer consumers alternative ways of catering to their mobility requirements without long-term inflexible conditions,” said Zeda.

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