Zeda sees double-digit earnings growth in FY25 as leasing and Africa expansion offset rental weakness

Key topics:Earnings surge: HEPS up 15.7%; operating profit rises 10.8% despite weak rental revenue.Leasing strength: Heavy commercial vehicles and Greater Africa drive 15.7% segment growth.Rising risks: Debt increases to R5.18bn; credit losses and cash outflow highlight FY26 challenges.Sign up for your early morning brew of the BizNews Insider to keep you up to speed with the content that matters. The newsletter will land in your inbox at 5:30am weekdays. Register here.Support South Africa’s bastion of independent journalism, offering balanced insights on investments, business, and the political economy, by joining BizNews Premium. Register here.If you prefer WhatsApp for updates, sign up to the BizNews channel here..BizNews Reporter.Zeda Limited (JSE: ZZD), the vehicle mobility group operating across South Africa and sub-Saharan Africa, has delivered a resilient performance for the year ended 30 September 2025, reporting strong double-digit earnings and operating profit growth despite a difficult economic climate. The results highlight the strength of Zeda’s diversified business model, which balanced softer conditions in traditional car rental with strong momentum in leasing and rapid expansion in Greater Africa.CEO Ramasela Ganda said the group benefitted from disciplined execution of its operating model—focused on strategic purchasing, prudent financing, optimal utilisation, and efficient fleet disposal—allowing Zeda to maintain healthy returns and margin expansion.Profitability outpaces revenue growthGroup revenue edged up 1.7% to R10.65 billion, but earnings grew far faster. Operating profit rose 10.8% to R1.62 billion, expanding the operating margin by 100 basis points to 15%. Gross profit increased 3.9% to R4.35 billion, supported by improved vehicle utilisation and cost containment.Shareholders saw robust returns: Headline EPS climbed 15.7% to 361c, while Basic EPS rose 12.5% to 360c. The group achieved a Return on Invested Capital of 14.7%, well above its weighted cost of capital (10.8%). A final dividend of 126c brought the total payout for FY25 to 181c—a 50% payout ratio in line with policy.Leasing delivers strong growth across regionsThe leasing division (Avis Fleet) was the standout performer, with revenue jumping 15.7% to R3.24 billion, driven by heavy commercial vehicle leasing (up 30%), strong corporate fleet demand, and geographic expansion. The Greater Africa business delivered particularly strong results, with revenue surging 37% in Zambia and 73% in Lesotho. Greater Africa now accounts for 23.5% of total leasing revenue.Leasing EBITDA rose 5.4% to R1.72 billion, and the segment maintained a strong operating margin of 23%, despite lower termination profits relative to last year.Car rental recovers utilisation but revenue fallsZeda’s Car Rental segment faced a tougher year, with revenue declining 3.4% to R7.41 billion, reflecting weaker replacement rental demand, aggressive competitor pricing, and customers shifting towards lower-cost models. Excluding fleet sales, pure rental revenue fell 2.6%.However, operational execution improved. Utilisation strengthened from 71% to 73%, while rental days increased 2.1%. Subscription products—led by short-term flexible leasing—grew sharply, with activity climbing 53% year-on-year. These factors helped operating profit rise 23.3% to R872 million, and margins expanded 300 basis points to 12%.Used car volumes fell 14.6% as Zeda extended vehicle lifespans in response to weaker resale prices caused by new competition from Asian manufacturers. This contributed to a 4.1% decline in used-car sales revenue.Funding diversification and credit risk risingZeda strengthened its funding structure through strategic capital market moves, including its inaugural bond issue and the signing of a Common Terms Agreement. These steps reduced refinancing risk and lowered its effective net interest rate by 101 basis points to 9.8%.The group also shifted its debt profile meaningfully: unsecured debt rose from 1% to 77%, and long-term debt increased from 37% to 60%. Zeda remains well within lending covenants, with Net Debt to EBITDA at 1.5× (limit 3.5×). Moody’s reaffirmed the group’s Ba3/A1.za rating with a stable outlook.However, overall net debt increased to R5.18 billion, driven by fleet expansion. Expected credit losses rose to R476.7 million, prompting the Audit Committee to flag the need for further model refinements.Cash flow weakness and economic headwindsCash flow deteriorated materially, swinging from a R224 million inflow in FY24 to a R351 million outflow in FY25, largely due to higher expansion capex supporting leasing growth.Regional dynamics were mixed. Political instability impeded progress in Mozambique, while Zambia, Namibia and Ghana saw continued momentum.Overall, Zeda’s integrated mobility strategy helped offset cyclicality in vehicle rental and resale markets. But management cautioned that balancing fleet expansion with rising debt levels and elevated credit risk will be central to sustaining performance into FY2026..Read the results in full by downloading the PDF below

Zeda sees double-digit earnings growth in FY25 as leasing and Africa expansion offset rental weakness

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