Zeda receives muted reception to its JSE relisting

Integrated mobility solutions provider Zeda Limited, which was unbundled from Barloworld and operates the Avis and Budget brands in SA, received a muted reception when its shares opened for trading on the JSE on Tuesday.

Shares in Zeda opened at R18 per share on its return to the Africa’s largest bourse as a separately listed company and closed at R16.70 a share.

CEO Ramasela Ganda conceded that the company anticipated that its shares would list on the JSE at R23 per share.

“It’s lower than we expected but through engagements in the week it was clear that there is a lot we need to do to educate the market about Zeda, what our integrated mobility solutions provide, how we make our money and where we see our growth coming from,” she said.

Read: Zeda lists on the JSE, after being unbundled from Barloworld

The major shareholders in Zeda currently are:

• Zahid Tractor & Heavy Machinery (18.8%);

• Government Employees Pension Fund (17.11%); and

• Silchester International Investment Value Equity Trust (8.12%).

Ganda said Zeda had various fruitful engagements with all major shareholders prior to the listing to take them through the group’s business, strategy and future prospects. However, it did not engage them on whether they will be holding onto their shareholding post the listing.

She added that it is also “very difficult to predict” what shareholders plan to do.

Unbundling

The listing follows the Barloworld and Zeda boards of directors determining that the long-term prospects of Barloworld and Zeda would be enhanced by them being separately listed and approved the separation of Zeda from the Barloworld Group into a fit-for-purpose company in line with the unbundling.

Read:
Barloworld’s car-rental unit sees valuation of R4.5bn on listing
Barloworld profit up; announces Zeda unbundling
Barloworld to unbundle stake in Avis through separate JSE listing

The unbundling of Zeda from Barloworld follows the repositioning of the Barloworld Group as an industrial processing, distribution and services company focusing primarily on industrial equipment, services and consumer industries, with an opportunity to leverage its balance sheet towards acquisitive growth.

On Tuesday, Barloworld’s share price fell more than 17% to close at R89.30 apiece, reflecting the unbundling.

In terms of Zeda’s pre-listing statement, the unbundling and separate listing of the group, among other things, positions Zeda as a distinct sub-Saharan Africa focused integrated mobility solutions provider.

This would enable Zeda to pursue its own growth strategy and to access and deploy its capital in accordance with its ambitions without the competing capital requirements of the other entities within the Barloworld Group.

Read: Brait cans Premier’s JSE listing

Zeda last month published its maiden financial results for the year to end-September 2022 and reported a 6.6% increase in group revenue to R8.18 billion despite a reduced fleet size and lagging recovery in the inbound leisure market.

Operating profit grew by 52.8% to R1.26 billion, with the operating margin improving to 15.5% from 10.8% in the prior year.

Ganda said on Tuesday that tourism used to drive the car rental business, adding that in the past 60% of its business came from an airport-based business while this was now down to 54%.

She pointed out that the inbound tourism sector has not yet recovered and is at 40% of the volume compared to pre-Covid-19 levels in 2019 but domestic travel has provided a big boost to the tourism sector.

Ganda added that inbound tourism is now contributing 8% of the group’s total volume when it used to contribute 26% pre-Covid-19 but there has been an improvement in corporate business since the end of August this year.

“But our business still generates returns with a smaller fleet even without the high yield of local and inbound tourism. The kind of returns we are generating at 32% ROE [return on equity] and 16% operating margin are really good quality earnings,” she said.

Read: OUTsurance lists on the JSE after rebrand from RMI

Ganda said Zeda is the market share leader in the car rental and fleet management and leasing sector with about 28% market share.

“But the fundamental change is that we need to drive the quality of the earnings rather than being characterised by the industry and fighting over market share and losing out on the returns,” she said.

Ganda said the group had a fleet of about 28 000 vehicles pre-Covid-19 in 2019 and now the group’s fleet is sitting at about 17 000 vehicles.

“We are planning to get back to 28 000 vehicle but we are very carefully studying the demand and will upfleet based on good returns and the demands,” she said.

It all began in Bloem in 1967 …

The Zeda Group started its life as Zeda Car Rental and Tours (Pty) Ltd, which was established in Bloemfontein in 1967.

Federale Volksbeleggings Bpk, a division of Sanlam, acquired a majority shareholding in Zeda Car Rental and Tours shortly thereafter and entered into a joint venture with Avis-Rent-A-Car Systems Incorporated and adopted the Avis branding.

By the mid-1980s, the business had grown into the largest Avis licensee outside the US and began expanding beyond the borders of South Africa.

Federale Volksbeleggings changed its name to Servgro International Limited in 1992 and listed on the JSE in August of the same year.

Zeda Holdings’ name was changed to Avis Southern Africa 1997 when Servgro unbundled the group, which resulted in Avis Southern Africa being listed on the JSE and the Namibian and Botswana stock exchanges.

Barloworld acquired a minority stake in Avis Southern Africa in 2000 and subsequently acquired 100% in 2005, which resulted in Avis Southern Africa being delisted and becoming a subsidiary and division of Barloworld.

Listen to Zeda’s CEO speaking to Fifi Peters on SAfm Market Update about its JSE listing:

You can also listen to this podcast on iono.fm here.