While buoyed by a solid performance in the leasing market, JSE-listed Zeda saw its profit for the six months ended March 31 dip as a lukewarm domestic economy, global headwinds and changing new-car market weighed on its rental business.

Zeda said on Tuesday that its revenue for the first half of the financial year increased by 3.2%, to R5.5-billion, while operating profit was down 0.6%, to R841-million.

Zeda’s Leasing business saw 7.5% growth in revenue compared with the same six months in the previous financial year, to R1.7-billion, while its operating profit was up 5.1%.

Greater Africa contributed 21.3% of Leasing’s revenue.

In contrast to this, Zeda’s Car Rental business reported a 2.7% drop in revenue to R1.8-billion.

Operating profit declined by 5.5%, to R428-million, with the operating margin dipping from 12% to 11.2% as prices were impacted by a declining car-sales margin.

Total car sales revenue, however, increased by 5.5%, to R2-billion.

The Car Rental business’s utilisation rate dropped to 71%, compared with 75% in the previous period.

Zeda CEO Ramasela Ganda said the influx of cheaper Chinese vehicles into the South African new-vehicle market at the R300 000–plus mark had resulted in a drop in used-car sales and used-car prices in the local market, which impacted the group as it disposed of its older rental cars.

Looking ahead, Zeda expected the second half of the financial year to remain challenging, owing to rising fuel prices on the back of the Iran conflict.

Inflation and interest rates were also expected to rise, with the rental market to remain highly price-sensitive.

Flight disruptions on the back of the Iran conflict, which affected South African tourist arrivals, could also continue.

New-car deflation was also expected to continue as the number and scale of Chinese competitors in the market grew.

The momentum achieved in the Leasing business, including in the public sector, was, however, expected to be sustained in the second half of the year.

Following approval of its Africa strategy, Zeda said it had retained Ghana as a strategic anchor from which to serve the West Africa region under the Avis Budget Group’s broadened licence framework.

The company had started mapping opportunities in West Africa where it could follow its customers and “expand in a disciplined manner”.

The approach remained asset-light and customer-led, said the company, with capital deployed only where there were secured customer contracts, embedded demand and appropriate risk-adjusted returns.

Market selection would see the group prioritise jurisdictions where it could repatriate cash, manage currency volatility and access adequate funding liquidity.