Welcome to Zeda's annual results presentation. My name is Babalwa George. I head up the investor relations portfolio. I'm the facilitator for today's session, and I will be taking you through the agenda. Today, we publish the FY 2023 annual results. 2023 was our first year of trading as a separately listed entity on the JSE. It is also a year where we navigated the impact of the unbundling. As we were mitigating the risk of the unbundling, we also successfully captured the opportunities.
To unpack this further, our Group CEO, Ramasela Ganda, will take us through the business overview. After the business overview, she will hand over to Thobeka Ntshiza, our Group FD, to unpack the financial performance. Thobeka then will hand back over to Ramasela to conclude the session by taking us through the trading update, by taking us through the strategy update and the outlook. I will come back and open the floor for questions. Without further ado, I would like to call on stage our Group CEO, Ramasela Ganda.
Thank you, Babalwa. Good morning, and thank you for joining us this morning, as we will be taking you through our maiden full year results for the year ended September 30 2023, after a successful listing in December 2023. A year it was indeed. It started with a lot of opportunities, with international travel coming back to our shores, especially Namibia and South Africa. New vehicle sales returning back to normality. That meant for us, our leasing customers will now have fleet, we can now manage back our residual value, mileages, and time. For the car rental, it equally meant that we can now buy the fleet that we want to procure, but not necessarily what is available, which was what was really the case in the last two years.
There was always going to be a downside to the vehicle recovery, and that was the decline of the used car margin. We've seen unprecedented margin increase during those periods, so we did enjoy the past two years. However, this was exacerbated by a high inflation environment, high interest rate impacting and putting more pressure on consumer disposable income. In addition to these macro factors, we had to navigate, as Babalwa has said, the impact of unbundling. Key was a potential loss of a Broad-Based Black Economic Empowerment rating level one from our previous shareholder; we're about to lose the black ownership. We had a very expensive unbundling debt, and that during the period where we were gearing ourself to take opportunity of an increasing demand in the car rental. And in addition, as we've indicated, our growth strategy in the leasing business.
In short, 2023 was a very tough trading environment. Despite that, the robustness of our integrated mobility strategy focusing on diversified portfolio, our capability that we have demonstrated coming out of COVID, the discipline of the team in executing on strategy and cost containment, has delivered the stellar financial performance. Our revenue, 12% up to ZAR 9.1 billion. This is ZAR 1 billion more than prior year. Driven by very strong car rental and leasing business. As we have previously indicated, with this diversified portfolio, we will be able to mitigate the risk of a decline in the used car margin. The decline in the used car margin was always anticipated, and our 2021 strategy has already foresaw that.
If you look at our business, and you look at the margin that we've delivered, revenue grew by 12% and EBITDA by 18%. We were deliberate in making sure that our growth are value accretive and not dilute margin. As you can see, EBITDA margin of 36% coming from a 35%. This is despite the decline of 5% in our used car margin. The quality of our earning continued to improve, with our operating margin of 17%, 100 basis point up compared to prior year. We continued to deliver sector-leading return on equity at 37%. This is 400 basis point higher than the prior year. The 2022 restructuring of Zeda has enabled this management to ensure a capital structure that is fit for our business.
In this high interest rate cycle, our weighted average cost of capital is at 12.8. And in my history in this topic, I continue to say, we've delivered return on invested capital of 18.7. That is just under 600 basis points above our WACC. We do execute with intent, and because Broad-Based Black Economic Empowerment was our risk, we made sure that we have a focus. And I'm glad to say we've attained B-BBEE level one on our trading and operating entity, which is a car rental entity and the leasing entity. This is our license to trade, and I'm really glad that taking into account all elements of procurement, of supply chain, we have managed to deliver. We've early settled the unbundling debt.
We further developed and presented to our board an ESG strategy with a vision to responsibly drive the way to a more sustainable future. As many of you may have seen on Friday, we're very excited when Moody's released the note that for the first time as a listed company, we've been credit rated. Not only that, we've achieved our investment grade. Our Group FD will unpack, because this is very important for our growth strategy. We continue to deliver our growth with all the other things we've done. Our growth strategy is still well positioned in making sure that we retain and grow our leasing customer. This is a base for our annuity business. Furthermore, key to drive our usership economy is the expansion of the subscription offering. As many of you may have heard, I hope, the introduction of a long-term leasing for individual.
I will unpack it later. We have corporatized the van rental business. What does that mean? Some of the van rental that we have corporatized, those were sub-licensees, and we were getting a fee. Now, we're bringing the entire business in. We're taking into consideration the synergy of bringing the business together and deliver with the same rigor and vigor that we have delivered in all our business. So we are well geared to make sure that we deliver even better margin out of this business. Solid performance, as I've indicated, about our ESG strategy.
Most of our brand ambassadors spend their time on the road with high level of accidents, and I'm truly grateful that in the year that we've just passed, the leadership and the brand ambassadors, they've taken heed to a culture of safety first, and we have improved our lost time injury frequency rate from 0.55 to 0.18 compared to prior year. This is, among other reasons, why we have partnered with Discovery Insure in order to fix the pothole to improve road safety. We're fixing 4,500 potholes a month. We continue to look after the security of our resident and international travel by deploying patrol vehicles in high-risk areas. I'm sure you'll be tired of this word when I finish presenting, but I can't help myself to say, I am still excited.
I'm very excited that we've delivered our first batch of 10 EV 4-ton trucks to our last mile customer. And not only that, our hybrid vehicle growth of 36%. Moving on to the segment. Rent a Car delivered a very strong performance, with revenue up 12%. The major contributor was the inbound, as I've indicated the excitement at the beginning of the year, inbound at 108%, and commercial at 28%, corporate at 28%.... A steady and sustainable growth that we've seen from our replacement business, public sector, and we continue to drive growth in our subscription segment. The discipline on managing out-of-service fleet and making sure that we've got our cars on the road, have yielded positive results, even with an increase of 17% on average fleet, with our utilization at 74%.
That is within our target range of 73%-75%. Moving to the leasing business. Exceptional performance from our leasing business, with revenue up 13% to ZAR 2.5 billion. This is really underpinned by a great performance. If you know that part of the fix was some of the Greater Africa, the superb performance that we've seen from Greater Africa was really pleasing, and heavy commercial surpassed expectation. But our focus on corporate leasing is yielding the results, with us continuing to deliver a solid growth out of this business. Leasing has got a strong EBITDA margin, with our EBITDA margin at 59%. That is 300 basis points higher than last year. When you look at this business, we have diversified even within the leasing business with asset-light business, the maintenance upfront, and that has positively still contributed to this margin increase.
The talk of the town of the year, car sale. A very resilient performance coming out of this team. Our business have generated ZAR 2.7 billion cash, which is 6% higher than prior year on a similar size of fleet, with mix slightly different. Our strategy of growing the retail business yielded positive results, with revenue from retail at 4.4%. Retail gives us the ability to generate more second growth profit, to sell more value added, and we believe that even during this tough period, when everybody was selling, that we sell deliberately at the right margin. Our capability, forward-looking, and a good product mitigated against what could have been a significant decline in the used car margin. At this point, I would like to hand over to our Group FD to take you through the finance overview.
Thank you, Ramasela, and good morning. It is a pleasure to be presenting to you our inaugural first financial result as a listed entity, financial year, September 2023. I would first like to start by unpacking our operating segments for you. What we have shown here are how we split our operating segments, being car rental and car leasing. Let's start by unpacking the average fleet. It is undeniable that we have seen a fleet size decline. If you look at 2023, our fleet size on average being 54,000, delivered by car rental, car leasing, and the disposal of used cars. In 2022, we were sitting with 51,000, so we have seen a growth of about 3,000 units.
But importantly, if you look at 2019, before COVID, we were sitting on average with a fleet size of 74,000, generating revenue of ZAR 10.2 billion. And yet, when you look at this picture of the fleet size, and you compare it to the earnings that this business has generated, operating profit at ZAR 1.552 billion, exceeding 2019 levels of just under ZAR 1.1 billion, and delivering almost ZAR 400 million more with a fleet size that is 20,000 less. This picture tells us that, yes, while indeed we have lost fleet size from a leasing business due to the natural attrition of some of the contracts, and yes, while the car rental business has not re-fleeted itself up back from the 2019 levels...
The vehicles that we have invested in today, the operating assets of today, are more profitable and more value accretive than the fleet mix that we had in 2019, 2020. In the next slide, I will be unpacking those revenue categories for you. We have been measured in how we are fleeting today, and how we are going to be re-fleeting into the future. We are going to be investing in businesses that continue to sustain margins, and we will not be chasing size or big fleet at the expense of not having a sustainable and a profitable business. On this slide, we unpack further our revenue categories, really split into four main areas of car sales, rental, leasing, commissions, and other. What this picture tells us, and is important for me to really unpack, is first, it speaks about the strength of our diversified revenue streams.
It has been a concern in the market that our business is heavily reliant on revenue from car sales, and that any impact or decline in car sales is going to significantly impact our revenue and the ability to sustain our margins into the future. If we look at the car sales, yes, we are 36% units sold down when you compare to 2019 and you look at 2023. This is a product of the fleet that we have on hand, which is a fleet that matches the demand from a revenue perspective. The car sales business is an extension of the fleet that comes out of the leasing and the rental business. As those units increase due to the revenue increase from the demand, we will see a correlation in more and more units being sold from the car sales business.
Yet, we are very pleased that notwithstanding the challenges of 2023 trading environment, the softening of the used cars market, this business has only seen a decline of -2% year-on-year. It is also pleasing to see that if you look at how the revenue categories stack up, you are starting to see a better, evenly split of revenue contribution coming from car sales, rental, and leasing. In 2021, we saw the highest contribution of car sales in our business at ZAR 3.9 billion out of the ZAR 7.6 billion that was generated. That was at the height, over 50%.
Since then, we have grown other revenue streams of leasing and car rental, that the contribution of the car sales business is at about 33%, and you are seeing the growth and the recovery coming from rental and leasing becoming more pronounced and providing a balanced portfolio of how we generate revenue. If we unpack the car rental business, seeing the single most biggest growth in our business at 29%. Ramasela has explained how we've seen some strong recoveries from inbound. But what is even more interesting is, if we unpack how many rentals we saw, 2023 compared to 2022, we had 129,000 more rentals, more customers coming to our branches, booking our vehicles online compared to 2022.
For us, that is important because it shows the activity levels, it shows that our value proposition to the market is accepted, and it resonates with the customers. That we are seeing a growth in the customer base, generating increased activity levels that has supported the growth in the car rental business. When we look at the stats, we've also seen that we have rented out a vehicle every minute of this financial year. Last year, we were sitting below one vehicle per minute. Today, it is 1.2 vehicles per minute. And again, I think this speaks about the growth in terms of the actual activities sitting in the car rental space, supported by our drive to entrench usership economy and the extension of the subscription model.
Our leasing business, this is the one area that did have a pronounced decline in terms of the fleet size, coming from the termination of some of the major public sector contract. And whilst having that background and context, we have seen this business generate revenue of ZAR 2.2 billion already exceeding 2019 levels with a lower fleet size. It does indicate that the work we've done to reposition our business for the future, introducing new customer segments, looking at how we close the gap that has been created by some of the challenges in terms of the distribution via the rail ports, and also the support of the last mile industry. Going into supporting those customer segments, introducing a different fleet mix into our leasing business, contributing to this growth.
It is on this basis that we say we are now really set for greater returns in terms of the additional products that we are going to be introducing, iLease being one of them. The finance cost was seriously one of the biggest areas of focus for our business. We understood that our business is debt financed, our assets are financed by debt, and we are going to have to make sure that our vehicles, as they generate earnings, profits, they are value accretive to be able to fund their own financing cost and also deliver returns to the shareholders.
While you look at this picture in isolation could be scary, I think when you look at how we have delivered on earnings against this backdrop, it does speak testament that our business principles and fundamentals do work, and ours is to continue to make sure that we use debt responsibly, and each debt is matched to an operating asset that generates returns for our business. We saw our financing cost go up by almost 70% year-on-year. Just in the 2023 financial year alone, we were impacted by a 200 basis point increase of the prime rate in our country, with our net financing cost closing at ZAR 576 million in 2023. Average financing cost of 11.4%. I have included how our net debt levels looked like over the same period.
You do see that we closed with net debt of ZAR 4.8 billion. Last year, we had a net debt of just under ZAR 4.2 billion. These three years on average, works out to an average net debt of ZAR 4.5 billion. And this picture is important for me because it says, "Yes, we are a business that uses debt to fund our operations. We are a business that has grown the fleet, but the growth in the net debt to support our investment in the operating asset had less a pronounced impact on our net financing cost than the changes in the prime rate of the country." And ours is to make sure that we continue to use debt responsibly to be able to support the financing cost that goes with that responsibility.
I've put on the table for you our effective tax rate reconciliation and a walk forward really from 2022 to 2023. We do have a effective tax rate of 21% for this financial year, coming off a high of 35.4% in 2022. Our 2023 financial year has had the benefit of a credit coming through from the overprovision of the previous year taxes, and they really arose from the previous, business segments that we are winding down, and final disposal entries as we now cleaning up our org structure for Zeda Limited into the future.
We will continue to have non-deductible expenses that impact our business, with the details of what impacts our non-deductible expenses provided, and we will continue to have withholding taxes in our effective tax rate reconciliation, and this is due to some of our presence in the Greater Africa regions, where we do have the impact of withholding taxes as we transact. We expect that our interest rate, our effective tax rate will normalize at about 28%-29%. If you take the non-deductible and the withholding taxes, that will be something going into the future. We have generated robust earnings, boasting an increase of 30.7% on our basic earnings per share to close at ZAR 3.87 for 2023 financial year, and headline earnings per share ZAR 3.81, 17.2% up on headline earnings per share.
This is a very impressive picture when you remember the picture from the net financing cost, having increased our interest cost by 70% and still be able to generate these earnings for our investors. We have established our weighted average cost of capital to be at 12.8% for Zeda Limited. This is already taking into account the existing funding packages that we've raised for Zeda as a standalone business. With those invested capital, we have generated a return of 18.7%, and we do say it's a record high for our business.
Sector leading return on equity at 36.7% really does speak to the, to the fact that we do use debt to be value accretive for Zeda and for our shareholders, and we will continue to make sure that in our capital allocation, we balance our capital structure to be able to then reward the shareholders and the financiers that support our business. Earlier, I spoke about demand-driven fleet growth, and this picture is a summary of that. Our operating assets, if you look at fleet assets rental, fleet assets leasing, our fleet investment has increased by ZAR 1.7 billion in 2023 to close just over ZAR 9 billion. And when you look at that investment and you compare it to the net debt level movements, it does indicate that we are an organization that generates cash well internally.
We do have equity embedded in each cycle that we plow back into the new cycle before we tap into debt levels to support our investment in the operating assets. When we went to market to raise funding for our business, we were also very deliberate to say, "How do we start matching the finance profile to the assets that are matching?" And this picture at the bottom, financing split, just gives you an indication of short-term debt financing in our total debt levels, making up 53%, and that is commensurate to our operating assets of the rental business, making up 55%. And that allows us to be able to make sure that as each unit is generating its revenue, its earnings, it is supporting its financing cost and its debt capital repayment, and the matching of that allows us to also continue to generate the strong cash.
We are also very pleased with the improvement we've seen in the receivables, where in a business period where we have increased revenue by ZAR 1 billion, our receivables have declined by about ZAR 200 million, and we continue to have a concerted effort in collection policies and procedures to make sure that we reduce the age of our debtors. From an inventory perspective, having increased to ZAR 545 million, this is really a function of higher average values per unit that are on stock in 2023 compared to 2022, and it's not a reflection of how well we didn't sell in 2023. I spoke earlier about our embedded equity in each operating cycle, and this picture, I hope it demonstrates that to everyone that is online and all our other stakeholders. We have improved our company leverage to 53%.
For every asset that we have invested in our business at ZAR 9 billion, it is supported by a lesser proportion of debt in 2023 compared to 2022 and 2021. And that just also confirms the position that I shared earlier, that in each cycle, in each vehicle, we've got embedded equity, that for us, the responsibility is to make sure that we indeed deliver on it, and it creates an additional equity pool for us to reinvest before we tap into debt to support and balance the additional required investments. If you look at our Net Debt to EBITDA having improved to 1.45, and this again is testament of the value accretion that sits in each of our investment.
The impact that we spoke about in terms of the net financing cost, it has been seen in a decline in our interest cover to 5.5x . And we do believe that at this level, having gone through a 12-month of the steepest increase in terms of our financing cost, our interest cover and our net debt to EBITDA times can only respond better and more positively going into the future.... I've been speaking about how we generate equity well at each reporting cycle, and that is seen in the equity closing for 2023, closing at ZAR 2.4 billion, having increased our shareholders' equity by over ZAR 700 million in the 2023 financial year. This has yielded a net debt to equity ratio of 33% equity: 67% net debt.
We have further generated an extra ZAR 536 million in cash and cash equivalents to close with cash of ZAR 842 million for the year, contributing to our net debt of ZAR 4.8 billion for the period. From a strong cash generation story continuing, I've just unpacked how we look at we allocate the cash in our business, having generated cash before working capital and decrease in working capital, that ZAR 3.5 billion mostly coming from the sale of the used car stock, with cash on those two buckets at about ZAR 6.8 billion. We have further then invested in our fleet for both businesses of about ZAR 6.5 billion, just in the 2023 financial year.
This 6.5 is what the shareholders, our stakeholders, should be looking to in terms of what returns it's going to generate for the business in the 2024 and 2025 financial year and going forward. I have said we've closed with a net debt of ZAR 4.8 billion, and that ZAR 4.8 billion is off the back of our operating assets, fleet value on balance sheet having increased by ZAR 1.7 billion. Ramasela has shared, and I would like to echo, echo her sentiments, that indeed, we are very proud and pleased that we now have our credit rating as Zeda Limited, being an investment grade at national scale and being credit rated by Moody's, with the release having come out last week, Friday. This really, for us, is also an independent confirmation that Zeda is indeed a business to invest in.
It is indeed a business that will be able to utilize debt to generate value for our shareholders, and we are going to be a business that is going to do so responsibly. 2023 was really the year that we continued with what we started in 2022 in terms of raising funding for Zeda Limited on a standalone basis, with total facilities closing at ZAR 9.5 billion for 2023, with the headroom to support our strategy into the future at ZAR 3.8 billion. We have been very fortunate with all our financiers, funders, really looking at how they will support the business. And really, the funding for us is a further testament of the belief that the investments in Zeda will be the investments that are going to generate the adequate returns for all involved stakeholders.
We will continue to look at how we diversify our funding, which we have started successfully in 2023, and that is for us to be able to say, as we look at all the maturity profiles across all the businesses, we balance the debt capital repayment appropriately over any cycle to make sure that there's no undue pressure into the business, while we still honor all our financial covenants and all the obligations. I think at this point, it is also important to confirm that we have met all our financial covenants, and we will continue to do so responsibly. Ramasela spoke about the unbundling debt.
We have generated enough cash to be able to settle this debt of ZAR 1.55 billion in the 2023 financial year, having paid ZAR 182 million ahead of schedule and completing the repayment profile two months ahead of schedule. We are also pleased that in the period of high interest rate in the 12-month cycle, we did have financiers that said, "We will step in to be able to support you with a better priced funding cost, and you will then work the journey with us to the end of the financial year." And that work was also really to say, how do we minimize and lessen the impact of the funding cost for Zeda Group as a whole, while we still make sure that we pay the full debt on time, if possible? And we now could see that it was indeed possible.
What would I, what would I like to leave our stakeholders with? That we will continue to be measured in how we fleet up. Our fleet growth is going to be demand driven, making sure that it is a fleet growth that is going to contribute to our profitable business and sustaining our margins.
Our cost management culture and our discipline is going to also be something that is important to make sure that we look and manage it, so that we do not have negative jaws that will erode any profit margins for our business. The team will continue to reposition our customer segments to really introduce how the customer segments are going to support our growth, and be able to respond to what we would like to do in terms of entrenching the usership economy. With that, I'd like to say thank you. I'd like to hand back to Ramasela.
Thank you, Thobeka. As I'll be taking you through what we have been entrusted with since 2021, and where we are today, and what is next for Zeda. If you cast your mind back to 2021, as we come out of COVID or still in the midst of COVID, one of the things that we did, we developed a strategy on integrated mobility, created the very first integrated mobility solution provider in Southern Africa. Key for us was to reposition car rental business from what was previously known as a generator of a used car, to be a sustainable business that is able to really look after everything and every aspect of that business. Profitable business was our key driver. Efficiency was what we were working towards, and thus, the outcome of it was here for everyone to see. We equally did the same for our leasing business.
We reviewed our business and look at deals that were not profit enhancing or low profit margin transaction, and we restructured that as well. We repositioned our corporate business. We knew, as Thobeka was saying, the decline in 2021. We knew that public sector was coming to an end even in 2021, and we geared our business, the leasing business, to be able to be a sustainable business even outside the public sector. One other thing that we did, you know, Thobeka saying for the first time this year, but just to help her memory, in 2021, she led the first diversification of our funding while we were still with our previous group. And for the first time, we had a floor plan in the car rental business. That was a small, in her mind, clearly, step to deliver the outcome that we are seeing today.
Fast-forward to 2022. Many may not be aware, but we had the shortest period to gear ourselves for unbundling and listing on a stock exchange. That didn't mean our strategy was to be left behind. We gear ourself, we look at the portfolio that needed to be fixed, we look at our driven service, especially the luxury business, and we focus on building our own capacity to gear us for the 2023. We moved to 2023, took our integrated mobility strategy, enhanced it with the aspiration to deepen the usership economy. A number of pillars that we focus on. You know, fixing Mozambique, fixing Botswana, and I'm very pleased that the outcome of these two regional countries are continue to be very positive. We had Ghana as well, and the operating activity in Ghana are really encouraging.
Yes, the micro challenges are a big factor, and Thobeka and the team are really working to make sure that we can mitigate for that. We've enhanced, again, as our aspiration on deepening usership in our region. We focus on long haul. We also focus on the last mile. Self-service was a key. But what was the outcome of all this since 2021? Is to double our earnings in three years from ZAR 365 million to ZAR 742 million. Diversifying portfolio became very critical even then, for these results to be here today. When Thobeka said, "If you look at the revenue in car sale, and you look at it today," that was the journey that we've been through. Our EBITDA margin was 29%, with high used car margin sitting at 36%. Granted, discretionary business at that time was very low.
However, interest rate in those days of COVID were not a reason to talk about at all. ROIC, we're at 7.5, with a WACC of 13.75 with a 10 group. Today, WACC 12.8 at 18.7, and this is the company that execute deliberately, but more than executing deliberately, that also plan ahead to make sure that we're able to look for potential risk and opportunity and utilize. If you've been somewhere where no one else know, you've have never listened to any radio, you've never traveled anywhere, you must have missed this. The next level mobility is here, and this next level mobility is really driven by us deepening our usership economy. And this is iLease, which is a long-term leasing for individual. So what is so special? What differentiate this product from the rest?
It's tailor-made for the user, for the user's mobility requirement. It is flexible. As Avis, as Zeda, we've got all kinds of cars, so we are brand agnostic. But key is that you've got the best total cost of usership, because we understand that the market think about total cost of ownership of a vehicle that we've never owned. And we have been in the game of residual value risk, and that's not different for us. And in addition, we continue to push our Avis where you are, where you can get a vehicle anywhere in the world, in the country. Okay, I can see. Our medium-term outlook, if you look at it, we're still going to focus on our customer experience, but we understand that we do not have customer experience without looking after our brand ambassador. So key is to improve our value proposition to ambassador.
I've already unpacked what we've done with our ESG strategy, so I will not spend time. Key is our growth pillar. Long haul, last mile, that's where we're going to continue to do. Corporate leasing is our focus business. As I've said, Greater Africa, we have fixed the fundamentals of our own business in those countries, and we are geared for growth. When you look at the short term, on demand is where we're driving our business to. Self-service, Cape Town International and O.R. Tambo are officially self-service businesses as I speak today. Driven service, don't think anybody hasn't seen a very proud brand ambassador chauffeur drive. Looking at inbound business, we're seeing a recovery. If I look at the forward reservations that are there, we're going to have a very exciting time.
Corporate business, equally the same, and we'll continue to expand on our subscription and digitizing our retail footprint to gain more revenue from it on a car sale. As I conclude, looking at our capital allocation and looking at where the future... Yes, the environmental macro risk, risk still exists. Interest rate will still be an issue. Disposable income will still be under pressure. If I look at new vehicle sales, i.e., our used car, after the 5% decline in the previous year, we still expect it to be still going down, and we've seen it. That's where the used car market is heading to. But despite all of that, with the corporatization of the rental, we will maintain our growth trajectory. I have no doubt that we have built a solid foundation to take advantage of all this opportunity.
We will sustain our margin, and we will manage our net debt to EBITDA. In our pre-listing statement, we've indicated that our dividend policy of 20%-35% of net profit after tax will start from 2024, and we are well geared and well positioned to get back into that and to deliver the sector-leading returns that we have been doing. Thank you.
Thank you, Ramasela. Ladies and gentlemen, I would like to give you an opportunity to ask questions. I know we are tight on time, but we will dedicate the next 10 to 15 minutes answering questions. If you may raise your hand, introduce yourself and the name of your company, then we'll take your questions. From time to time, I will read questions on the webcast and on the conference call. You can go ahead, sir.
... Good morning. Good morning, thank you for the opportunity. Shaun Chauke from Nedbank. I just have one question, regarding the new sort of long-term subscription increasing between 12 to 48 months. Is the thinking driven by the decline in terms of the used car margins? And also, if you could explain the thinking, because obviously the longer the cars are used, it means the lower your residual value, and as a result, you're realizing lower average selling prices. And obviously, it has an adverse impact further on margins. Or is the idea that the margins that you realize through the long-term leasing, it sort of offsets, the lower sales value you get in the future? Thank you.
Ramasela, do you want to take the question?
I will hand over this question to Tlhabi.
Thank you for that question, and good morning, everyone. So in terms of Avis iLease, I think we firstly would not create a product around, used vehicle landscape. I think the landscape is the landscape: it's got peaks, it's got troughs. What we are doing around the extended, subscription product is really responding to a consumer environment that is changing. I think Ramasela spoke quite extensively around deepening the usership economy. We believe that there is a shift from ownership towards usership. We've seen it with several industries, and we are seeing it coming quite strongly within the mobility space. We're responding to a consumer who says: "I want mobility. I don't necessarily want to own it." We've seen that with a lot of things, music industry, Airbnb, there's been such a big shift towards using.
So this is speaking to a consumer who says: "I want mobility that is flexible, that is tailored, and that is convenient for me, and I really want hassle-free." So the subscription model is really responding to that. I think in terms of the used vehicle environment, and the RVs that come out of a longer-term lease, we obviously price... We've been pricing leases for forever and a day, both for corporates as well as public sector. We price the vehicle upfront, that RV, based on the type of vehicle, as well as all of the history that we've built up, considering the used vehicle market as well. So we do take the conditions into consideration, but the product itself is not geared towards answering a used vehicle market question.
Thank you, Tlhab i. Operator, can I check if there's a question on the conference call?
There are no questions on the conference call.
Thank you. Shaun?
Once again, thank you. Shaun Chauke. Maybe if you, if you could please speak about the strategy on van rentals and obviously heavy commercial vehicles, in terms of what you mean in realizing a higher residual value at the end of life cycle. And I know you said it's a high-margin business, but I just want to get an understanding of what makes the economics of that business more economical versus your other fleets. Thank you.
Thank you.
Thank you, Shaun, for that question. It's not a comparison of better than the other fleet. It's a mix of portfolio. I think one of the things that we're really driving out is a diversified portfolio. So when you look at in our stock, we never had as good as new vans. So this is really providing a further diversification on that. The margins, you know, based on whatever residual value that we work on, I mean, the key to our business is understanding what we're buying and for what market. So that is really a drive. We never get into a business in order to, as Tlhab i said, either to augment or to... Every business must stand on its own, and it must make financial sense for us to take it, and we were not doing it in comparison.
But we know that when you look at the portfolio, there's a missing gap and the last mile element. We get last mile from the leasing business, but it comes after a longer period. This is really generating a newish type of a last mile stock, and our car sales will be, you know, benefiting from a mix of that. I guess the key issue here is the ability to manage the residual value, and this will be on the short-term rental, and our ability to manage the rental business is the biggest benefit to derive and generate and extract value out of these vehicles.
Thank you, Ramasela. Moving to the webcast, I'm gonna read two questions that talks to the dividend versus to share buyback and our capital, capital allocation. The first question is from Omri Thomas, from Abax: Congratulations on a great set of results. You have indicated that you will be paying dividends as from next year. Given where the share price is trading, can you please confirm your views on dividends versus to share buybacks? And I want to link that question to Hayden Smith's question.... It's a long one, but I'll read the question. Please, can you talk about capital allocation? Firstly, are you still on track to pay your first dividend as a listed company this year, FY 2024? Secondly, will you be paying dividends at interims and at year-end, or will you only be paying dividends at year-end?
Thirdly, we spoke at the interims about the hugely value-accretive nature of buybacks for shareholders when your after-tax yield is 25%. What is the preference between buying back shares and paying dividends? Buybacks would even be hugely accretive if you bought shares as opposed to paying down debt, and would also assist with share overhang from major shareholders who are selling down. That was a mouthful. Ramasela?
It is indeed. And I think one of the key issues that we've discussed even with our board on the capital allocation is, let's take where we're coming from with regard to our shareholders. That we do have shareholders that we're very much aware that there will be... You know, might even exit if you look at what-- how the share price normally trades. When you look at that, you know, the liquidity of our stock becomes a problem, and I know that when you look at buyback, it looks like this is something that we should be able to do now. But where the shares are and the segment and demographic of our shareholders, it makes it the timing not to be appropriate for us to execute on the buyback.
We believe that the buyback, it is appropriate at the right time, and that right time, we are hoping that the shareholders that did not want to be with Zeda will have exited. But there is still inhibiting of the liquidity of the share, that making it very difficult for them. You engage continuously, and you realize that you are just going to make even that concentration more difficult and the liquidity of the shares even more difficult. So that is why, as you know, the company, we consider that this period of settling our shares and, and the owners of our shares and in the business, we need to give ourselves that time. And dividends payout, indeed, as you said, and I've confirmed that in 2024, we have declared. In the pre-listing, we did not talk.
We said no interim dividend, but as, as we journey through and we engage with our board and we look at it, that cannot be discounted and that cannot be something that we say we will not do. But it's something that we will review at the interim and see where, where we're sitting. The key driver, honestly, in this year, was not driven by just bringing down debt. It was still driven by settling our share register and making sure that, you know, we get to a point where we have some liquidity in that.
Thank you, Ramasela. Any more questions from the room? Tumi?
Thanks, Babalwa. Morning, all. My name is Tumi from SBG Securities. I have a question on your strategy outlook. You mentioned that you intend to digitalise the car sales business with the intention of expanding your retail footprint. Does this mean we should expect costs to go up and margins to sort of come under pressure? Yeah, that's my question. Thanks.
Thanks, Tumi.
Thank you very much. I'll give it to the Car Sales Executive, Claudine.
Morning. Thank you for the question. So the intent is to expand our footprint online, which in essence means that we're going to transact online in addition to the 14 dealerships that we have nationwide. So as with all online businesses, there isn't an expectation of costs to increase. If anything, costs would reduce in that space. Does that answer your question? Thank you.
Thanks.
Thanks, Claudine. A question from James from Prescient. I'll read as follows: "Congratulations on strong results. Could I ask how the leasing business grew so strongly despite a fall in leasing volumes? Can you explain how you raised your B-BBEE level one rating, and is it sustainable? Lastly, can you split your ZAR 3.45 billion of used car sales between leasing and rental?
Thank you very much. You will take the two questions, executive Chief Sales Officer, the B-BBEE and the sustainability of it.
Thank you very much. I'm going to start with the B-BBEE. By way of context, as Ramasela and Thobeka alluded earlier on, we lost our ownership points that we used to get from our previous owner, because they arose out of sale of assets, which is Statement 102 of the B-BBEE, and that was a substantial chunk of our points. So what we did, we put countermeasures in place. The first thing we did was to look and maximize at all the other elements of the scorecard, because it's not just ownership.
Having maximized on all of them, we then looked at our ownership, and we used mandated investments, which are provided for in the codes, as well as direct ownership from black shareholders, including some of the management that are sitting in this room. Every decimal point counts, and then we topped it up with the YES program to make sure that we maintain level one. So that's what we did, we did. There is a detailed scorecard that is on our website for both car rental and leasing that shows you that. And then the leasing business, and Thabi maybe can come in here as well. So we explained to you that we have diversified revenue streams from both car rental and leasing.
The one distinguishing factor for the leasing business is that all the assets that we deploy to customers are revenue generating, so 100% of those, they generate revenue. More importantly, what we've done, we've looked at industries, growth industries in the corporate sector, and we follow those growth industries. Things like agri businesses, FMCG, and so on and so on. And we also follow projects, whether it's mining projects, infrastructure projects. On top of that, Greater Africa contributed as well. We support all our customers that operate in all the territories where we operate in Greater Africa, and that has given us a massive impetus in terms of the leasing business. So that's really the sum total of exactly what happened in the leasing business. Thanks.
Okay. Thobeka will take the split.
Thank you. The split of the ZAR 3.5 billion on car rental. Yes. So, James, if you look at the car sales revenue for the year, about 74% of that is coming from car sales, rental, fleet for RSA.
Thank you, Thobeka. I'll take the last question on the webcast from Warren. The Barloworld debt, which was paid off, was expensive. What is the interest cost saving from paying off and refinancing this debt? Thobeka?
So we were paying approximately ZAR 8 million in terms of financing cost a month. So in terms of the going forward picture, that's something that should be factored in on the financing costs that are not linked to the unbundling debt. And then in terms of the refinancing, we were able to get refinancing at prime less one and prime less 0.75 against the initial unbundling debt itself. That was a prime plus one. So we were seeing a saving of 1.75 and better from an interest funding cost. I think just to talk about the refinancing piece, it's just for me important to say that the portion that was refinanced itself is being fully paid down by end of this financial year by end of this month, November 2023. Thank you.
Thank you, Thobeka. Any questions in the room? One last question. Operator, can I check if we have a question on the conference call?
There are still no questions on the conference call.
Thank you. Ladies and gentlemen, we have now reached the end of the session. Thank you for making time for this session. We are looking forward in engaging with you over the next two weeks, as we will be on our investor roadshows. Please enjoy your day further. For our guests, lunch is served. Thank you. Goodbye.