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Car rental and tourism
Highlights
Divisional overviewThe car rental side of the division rents vehicles to corporate, government, leisure, insurance, replacement and inbound tourism customers. The defleeted used cars are sold in the market by Autopedigree. Accident damaged vehicles are repaired by in-house panel shops. This model helps to optimise our position in the motor value chain and enhances our returns. The tourism side of the division services the local and international customers with business and leisure products, and sports tourism incentive packages. It has a fleet of 88 coaches. Key indicators
Operating unitsThe car rental division comprises three business units: car rental, used car sales and panel shops.
The tourism side of the business is divided into tour operations, transport and sports and events.
Market conditionsThe car rental market remains highly competitive. The pressure on rental rates, which was mainly created by the oversupply of vehicles subsequent to the 2010 FIFA World Cup, is however easing, as market capacity is better utilised due to improved demand in certain sectors. Rates in the international inbound and leisure rental markets are still depressed. The depressed international economic environment, especially in Europe continues to affect inbound tourism volumes. The used car market is sluggish due to the recent influx of a number of affordable entry-level vehicles into the market, which compete in a similar price-bracket with low-mileage used vehicles. This has placed the Auto Pedigree business under pressure during the year. Competition in the panel shop industry is high, and is exacerbated by the country’s low motor vehicle insurance penetration levels. The tour operating market is yet to recover from the economic downturn and low levels of inbound tourism that persists. In addition, the market saw an influx of touring buses for the 2010 FIFA World Cup and this has led to a sharp increase in competition, particularly from small, lowoverhead, owner managed operators who can compete aggressively on price. Results
The division performed well in the second half notwithstanding a sluggish used vehicle market. Trading conditions in the car rental business improved with utilisation at 71% and revenue per day increasing by 4%. The average rental fleet size was 8% up from last year, mainly due to higher demand. Both volumes of international inbound and local leisure remained subdued. Retail unit sales at Auto Pedigree were lower with operating margins also depressed. This had a negative impact on the overall divisional margins. The stock position at Auto Pedigree has improved significantly and organisational improvements in the business were necessary. The business performance is now expected to improve. The panel business performed below expectation, but its performance improved in the latter part of the year following management and structural changes. Low inbound tourism volumes persist and the inbound tour operator business has been restructured and consolidated to reduce costs. The coach charter fleet has also been reduced to improve utilisation in a market that is oversupplied. Edusport and Grosvenor Tours performed well with the former benefiting from arranging outbound tours to the Rugby World Cup in New Zealand. Risks and opportunities
SustainabilityOur people The car rental business invests in a learnership programme to bring young, historically disadvantaged recruits into the business. During the year 81 employees participated in learnership programmes, 43 of whom were female. During the year 41 learners completed the self-funded learnership programme and of these 20% were absorbed by the business into various positions. A new intake of 36 unemployed graduates were signed up for the programme during the year. We continue to invest extensively in training for panel shop artisans on an ongoing basis. During the year, 3 122 employees benefited from a range of training initiatives that focus on this area of the business. Transformation and employment equity continue to be a focus across all businesses, with Tempest Car Rental and Europcar achieving level 2 and level 3 B-BBEE accreditations respectively. Safety is an important issue for drivers and workshop employees in the touring operations and transport charter businesses. Ongoing training and strict maintenance systems and standards have contributed to an outstanding safety record and there were no significant accidents or safety related incidents in these businesses during the year. The division’s skills development spend increased by 49% during the year. Our impact on the environment The car rental and tourism industry’s key environmental impacts arise from fuel emissions and vehicle wash bays. Recognising the importance of managing this impact responsibly, businesses within this division have invested in a number of environmental programmes. In line with Imperial’s water conservation management and efficiency strategy to reduce fresh water consumption by improving water use efficiencies and water recycling, the car rental and tourism vehicle wash bays are increasingly using water recycling facilities. 100 million litres of water was saved at the Europcar and Tempest Car Hire facilities. The car rental divisions also reduce carbon emissions through the recycling of various waste streams including windshields, tyres, oil, paper and consumer waste that includes paper, tin, plastic and glass. Europcar cut their energy use significantly as part of their carbon emission reduction strategy. The company sponsored South Africa’s Green Office Week for the third consecutive year, matching every indigenous tree that was purchased or planted by participants. Springbok Atlas continued its partnership with Ezemvelo KZN Wildlife on the Conservation on Wheels programme, which promotes biodiversity education among rural communities and children. During the year 3 600 children benefited from the programme. Commitment to our customers The car rental and tourism division services a wide range of customers, from corporates and insurance companies, to travel agents and private individuals. The needs of these customers vary significantly across the various different businesses and customer service remains critical to all operations. In a highly competitive industry, it is a key point of differentiation and all businesses conduct ongoing customer service indexing to track service levels, identify areas for improvement for the training of staff.
Outlook and strategic objectivesIn a competitive car rental market, we are focused on improving brand awareness and yield management, while optimising our fleet size and managing costs even tighter. Used vehicle demand is expected to improve on the back of a weaker currency as the gap between the cost of new and used vehicles widens. Results from our tourism operations will continue to be affected by global economic conditions.
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