Zeda Limited Accelerates to Financial Heights: Double-Digit Growth, Sustainability Triumph, and Tech-Infused Strategy Signal Market Dominanc

  • Financial Triumph: Zeda Limited achieved a stellar 12.4% revenue growth, settling a significant debt ahead of schedule.
  • ESG Commitment: Zeda embraced sustainability with an 18% reduction in electricity consumption, growth in hybrid and electric vehicles.
  • Strategic Foresight: The company's refined strategy focuses on technology-driven growth, innovative products, and a balanced capital allocation framework.
By Lethabo Ntsoane

Zeda Limited has released its annual results for the year ended September 30, 2023, showcasing robust financial performance, strategic achievements, and a commitment to sustainability. The company’s integrated mobility strategy, coupled with a focus on environmental, social, and governance (ESG) initiatives, has contributed to double-digit growth across key financial indicators.

Positive Financial Performance

Revenue Soars to New Heights: Zeda Limited reported a noteworthy 12.4% growth in revenue, reaching a staggering R9,145 million in the fiscal year 2023. This growth was underpinned by successful strategies implemented across its diverse portfolio of businesses.

Financial Indicator2023 (R’million)2022 (R’million)Growth (%)
Revenue9,1458,13312.4
EBITDA3,3212,81418.0
EBITDA Margin (%)36354.9
Operating Profit1,5521,26422.8
Operating Margin (%)17169.7
Basic Earnings per Share38729630.8
Headline Earnings per Share38132517.3

Debt Settlement and Capital Structure Optimization: Zeda achieved a significant milestone by settling the unbundling debt of R1.55 billion two months ahead of schedule. The strategic move contributed to closing the financial year with a net debt of R4.8 billion, showcasing the company’s commitment to effective balance sheet management.

Financial Position (R’million)20232022
Total Non-Current Assets4,8364,198
Total Current Assets7,9776,363
Total Assets12,81310,561
Equity Attributable to Equity Holders2,3551,632
Non-Controlling Interest4842
Total Equity2,4031,674
Total Non-Current Liabilities3,0523,039
Total Current Liabilities7,3585,848
Total Liabilities10,4108,887

Credit Rating and Stakeholder Confidence:

Zeda’s commitment to diversifying funding sources led to securing its first credit rating of A1.za from Moody’s on a national scale and Ba3 on a global scale. This achievement reflects strong fundamentals and sustained management performance, fostering improved confidence in the company.

Strategic Initiatives

Grow – Expanding Rental and Leasing Businesses

Rental Business: Zeda’s focus on last-mile operations and corporatization of van rental operations has resulted in a 12% growth in rental business revenue, reaching R6,656 million. The utilization rate closed at an impressive 74%, even with a 17% increase in the average rental fleet.

Rental Business Metrics2023 (R’million)2022 (R’million)Growth (%)
Revenue6,6565,94912
EBITDA1,8541,58417
EBITDA Margin (%)2827
Operating Profit88577215
Operating Margin (%)1313

Leasing Business (Avis Fleet): The leasing business experienced a 13% growth in total revenue, amounting to R2,488 million. The focus on heavy commercial vehicles and cost efficiencies contributed to an expansion of EBITDA margin from 56% to 59%.

Leasing Business Metrics2023 (R’million)2022 (R’million)Growth (%)
Total Revenue2,4882,20213
EBITDA1,4671,23519
EBITDA Margin (%)5956
Operating Margin (%)2721

ESG – Commitment to Sustainability

Zeda’s ESG strategy has seen notable achievements, with an 18% reduction in electricity consumption to decrease Scope 2 carbon emissions. The company grew its hybrid vehicle fleet by 16% and delivered its first batch of electric vehicles (EV) trucks, aligning with global trends toward sustainable transportation.

Social Responsibility and Safety Culture

Safety Culture Improvement: Zeda’s commitment to safety culture improvement is evident in the reduction of Lost Time Injury Frequency Rate (LTIFR) from 0.55 to 0.18. The company maintained zero fatalities for the year and impacted 122 young people through the Youth Employment Services program.

Financial Performance and Returns

Return on Investment and Equity: Zeda demonstrated impressive financial returns, with a Return on Equity (ROE) of 36.7% and a Return on Invested Capital (ROIC) of 18.7%, surpassing the Group Weighted Average Cost of Capital (WACC) of 12.8%.

Free Cash Flow Management: Despite challenges such as expensive debt and rising interest rates, the company effectively managed free cash flow. Operating cash flows before working capital reached R3,341 million, and strategic balance sheet management led to a net debt to EBITDA ratio of 1.5x.

Free Cash Flow (R’million)20232022
Operating Cash Flows Before Working Capital3,3412,901
Working Capital Movements3,5075,043
Net Investment in Rental Fleet Assets(6,518)(5,280)
Net Tax Paid(284)(250)
Net Interest and FX Losses(598)(376)
Cash Generated from Operations Before Dividends(552)2,038
Free Cash Flow Before Dividends(546)2,040
Dividends Paid (Including Minorities)(4)(1,160)
Free Cash (Outflow)/Inflow(550)880

Future Outlook

Technology-Driven Growth: Zeda’s strategy for the future remains unchanged but refined to focus on technology, automation, and digitization. The company aims to innovate, drive greater adoption of the usership economy, and respond to evolving customer needs.

New Products and Sustainability Integration: The company has launched a next-level mobility leasing product (iLease) and extended its subscription model. There is a continued focus on integrating ESG initiatives for sustainable growth.

Capital Allocation Framework: Zeda’s capital allocation framework prioritizes reinvestment in the business, balance sheet management, and rewarding shareholders. The adoption of a dividend policy with a payout ratio of 20-30% of net profit after tax from the 2024 financial year reflects the company’s commitment to shareholder value.

Conclusion

Zeda Limited’s annual results for 2023 reflect a year of significant achievements and sustained growth. The company’s commitment to innovation, sustainability, and sound financial management positions it for continued success in the dynamic mobility solutions industry. As Zeda navigates the future, it remains dedicated to delivering value to stakeholders while addressing the challenges and opportunities in the rapidly evolving market.

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Lethabo Ntsoane

Lethabo Ntsoane holds a Bachelors Degree in Accounting from the University of South Africa. He is a Financial Product commentator at Rateweb. He is an expect financial product analyst with years of experience in reviewing products and offering commentary. Lethabo majors in financial news, reviews and financial tips. He can be contacted: Email: lethabo@rateweb.co.za Twitter: @NtsoaneLethabo