CAR RENTAL AND TOURISM

Osman Arbee  Moeketsi Mosola 
Osman Arbee,
Chief executive officer of car rental and chairman of the tourism operations. 		 Moeketsi Mosola,
Chief executive officer of the tourism operations. 
With car rental operations and complementary services covering the spectrum of travellers’ needs, Imperial is well placed to capitalise on the growing tourism market in Southern Africa.
                    
   2009  2008  Change  H2  H1  Change 
   Rm  Rm  %  Rm  Rm  % 
Revenue  2 618  2 712  (3,5) 1 281  1 337  (4,2)
Operating profit  336  365  (7,9) 173  163  6,1 
Operating margin (%) 12,8  13,5     13,5  12,2    

 


DIVISIONAL CONTRIBUTION

 

5%

 
Revenue  

14%

 
Operating profit 

14%

 
Profit before tax and exceptionals 
  
CAR RENTAL AND TOURISM 
        % 
   2009 2008  change 
Revenue  2 618 2 712  (3)
Operating profit  336 365  (8)
Net financing cost  (91) (70) 30 
Profit before tax and exceptional items  280 301  (7)
Operating assets  2 136 2 051  4 
Non-interest-bearing liabilities  358 356  1 
Capital expenditure  1 110 1 349  (18)
Operating margin (%) 12,8 13,5    
Employees  2 585 2 654  (3)

This division houses the car rental and tourism interests of Imperial. Vehicle rental operations span the domestic corporate and leisure sectors, insurance replacement market, as well as inbound tourists, with extensive support services available at over 136 locations across southern Africa. Imperial also has prime positions at all major airports, with contracts in place until 2014.

Following the conclusion of a longterm franchise agreement with Europcar International for the southern Africa region, the Imperial Car Rental and Europcar back offices were merged in 2008. In the second half of the review period, the “Imperial Car Rental is now Europcar” rebranding campaign was successfully implemented. The loss of goodwill associated with the old Imperial Car Rental brand was more than countered by the raised profile of the Europcar brand.

Imperial also has exclusive inbound/outbound referral agreements with National and Alamo, offering access to their respective global customer bases and global airline partnerships.

Tempest Car Hire, the pioneer of low-cost car rental in South Africa, is a trusted brand with an innovative business model that focuses on optimum use of assets. The positioning of this brand was strengthened during the year. A strong network of 37 branches is complemented by increasing use of the internet reservation system, and alliances with low-cost airlines.

Our car rental interests also include the Maui/ Britz franchise that rents out camper homes and 4x4 vehicles, and our recent acquisition, U-Drive, which specialises in renting of pickup vehicles and related fleet management.

Holidayautos is a car rental broker specialising in local and international leisure car rental market, while Gage Car Hire, recently acquired, is a car rental broker that specialises in the insurance vehicle replacement market.

Auto Pedigree is the largest used car dealer network in South Africa, with 68 branches. Imperial’s strategy is to dispose of the majority of vehicles from its car rental fleet into the retail market through this business. By offering affordable, low-mileage vehicles and related added-value services – such as online finance and insurance – Auto Pedigree has become a trusted consumer brand. The AA Autobay brand that facilitates private vehicle sales has also recently been added to its stable.

Imperial’s tourism businesses include Springbok Atlas, an inbound tour operator with 166 luxury coaches and smaller, more versatile vehicles, as well as Grosvenor Tours, an inbound tour operator that specialises in the North and South American markets. In addition, Imperial Chauffeur Drive provides a chauffeur drive service to the corporate and consumer markets through a fleet of 95 vehicles. Imperial Panelshops repairs the car rental vehicles and, to a lesser extent, services the rest of the group and other external customers.

Results

Revenue for the year was lower due to a sudden reduction in demand and cancellation of forward bookings that affected both the first and second halves of the financial year, especially from foreign inbound travellers.

There was also a significant decline in unit sales of used vehicles at Auto Pedigree. The sudden reduction in demand initially caused lower fleet utilisation which was normalised in the second half of the year. Operating income was 8% lower at R336 million, but the operating margin improved in the second half.

We are confident that the rebranded car rental operation, Europcar, will reap long-term benefits from the investment in promotion, signage and technology which was absorbed in the current and prior years. The low-cost positioning of Tempest is showing early signs of success.

The operating margin in the car rental business declined due to lower utilisation rates, increased vehicle holding costs, the cost of rebranding to Europcar and additional technology spend. The acquisition of U-Drive made a positive contribution to profits.

Despite a very difficult vehicle market, Auto Pedigree performed satisfactorily, although revenue and operating profit were lower than last year.

The contribution from the tourism businesses, which include Springbok Atlas, was unchanged as cancellations and subsequent lower inbound tourist numbers were partially offset by good demand during the IPL cricket tournament and the Lions rugby tour. The coach replacement programme was revised in anticipation of the FIFA World Cup next year and future tourism opportunities.

HIGHLIGHTS

  • Fewer inbound travellers and lower used car sales had slight impact on revenue but margins largely maintained
  • Successful Europcar rebranding offers material long-term benefits
  • Expanded footprint and capacity through prudent acquisitions
  • Tourism businesses benefited from sporting events