Good morning, ladies and gentlemen. Welcome to Zeda's annual results presentation. My name is Babalwa George. I am the Executive Responsible for Investor Relations and Strategy. I am facilitating today's program, and I will start by introducing you to the agenda. Our Group CEO, Ramasela Ganda, will take us through results overview and business overview. She will then hand over to our Group FD, Thobeka Ntshiza, who will take us through financial overview. Thobeka will hand back to Ramasela, who will conclude with Outlook. I will come back and give you an opportunity to ask questions. I would now like to call on stage our Group CEO, Ramasela Ganda.
Thank you, Babalwa. Good morning, and thank you for joining us. As Babalwa indicated, we'll be taking you through our 2024 annual results. What a year it has been. A year characterized by uncertainty and suspense throughout the world, and in our case in particular, most of the nations that we operate in went through their national elections, and we are pleased that Botswana's transition occurred peacefully, and we hope to see some economic improvement. South Africa also, we saw the formation of a Government of National Unity that happened peacefully, and we are truly grateful, and we're starting to see signs of optimism, as indicated in the economic data. However, we were not that fortunate in Mozambique, and we pray and hope that the people of Mozambique will experience peace and life will return to normal.
In addition, we've observed with keen interest the U.S. election, which is important to us because the U.S. market is very important and is the highest contributor to our tourism business. Ladies and gentlemen, that being said, we have operated in an elevated interest rate environment, with the first interest rate cut that took place just 11 days before the end of our financial year. Additionally, our regions have experienced high inflation and stagnant economic growth, which have impacted the market sentiment as well as disposable income. When you look at the used car market, the margin pressure remains unabated, caused by harsh economic conditions and a shift in economics. We've seen how aggressive new OEMs are in this industry, which increases pressure on well-established brands.
However, in our case, this was the year to phase out vehicles that are not traditional that we have acquired during the period of shortage. These vehicles don't hold residual value very well, and they've got a long lead time on repairs and high cost of parts. Looking at Greater Africa, the Ghana business, we've seen that the inflation was at its highest a couple of years in 2022 at about 54%, and that has since reduced, but it's still become a challenge for our business. That's our environment, and our responsibility is and has always been to navigate through these challenging terrains. We believe key to a successful integrated mobility is diversification, and how we look at it, it commences with funding. It is important for us that we diversify funding, starting from short to long-term debt, how we inject advances like maintenance and service plan into our business.
I'm happy that year on year, we grew our fund by 20%. We also look at how we fund our current business. The proportion between buy and lease is also very important. As we continue with our focus on diversification, diversifying fleet is of utmost importance because as you've got the right fleet, you're able to generate good returns during the life of the fleet and at the end of the fleet. So for us, as we go into a strategy of heavy commercial, we also drive hard light commercial vehicle, passenger vehicle. And in the car rental space, we also have diverse fleet. We've got new entrants to the market, and that is also our way of responding to the demand from both car rental and used car market. There's no better year of really indicating how diversification is important, like 2024.
That we've seen also in the markets, even with heavy commercial as a growth or even light commercial that was growing. It became very important as to which industry we invest in and which industry we slow down on. And that has really worked for us during this year. Technology and innovation remain the cornerstone of Zeda's strategy. We believe that while it may still take time for most of you and the market in general to understand the usership economy, we believe the future of mobility is usership. And we will continue to educate the market about total cost of ownership, and we believe that will bear fruit in the short to medium term. I am pleased to report that we have generated a record revenue of ZAR 10.5 billion, an increase of 14% from prior year. This growth is better than our last highest, which was in 2019.
That was achieved in 2019 with a fleet size that was much higher than current. The difference was about 26%. So we're operating at 26% lower than what we did in 2019. But I'll leave to Thobeka to unpack it for you. We've achieved an EBITDA of ZAR 3.3 billion. This is 1% higher than prior year. However, it is important to emphasize that this EBITDA was achieved despite a 522% increase in rent-a-car operating lease. We changed the buy-lease ratio. Last year, only 3% of our fleet was on lease. This year, an average of 23% is on lease. In addition, last year, we had superior margins, good profit that we've seen out of used car, which is significantly different from what we're seeing in the current year.
It is very clear, ladies and gentlemen, that our strategy of diversifying portfolio, expanding the leasing business effectively mitigated against all these changes. However, this strategy requires increased capital investment. Even with that increased capital investment, we saw an improvement on our net debt to EBITDA from 1.5 times in the prior year to 1.4 times in the current year. That is due to the strong cash that we continue to generate. Solid return for our shareholders. We are investing in a long-term business. We do a long game. With that said, our return on invested capital of 14.3% is higher than our weighted average cost of capital of 11.8%. Our return on equity at 23% is lower than where we started, and this is because of the equity that we continuously generate in the business. We're sitting with a very strong capital structure.
As reported in our interim results, we resume our dividend policy sooner than anticipated. I'm glad to report that the Board has approved a dividend, a final dividend of 50%, bringing a total dividend for the year of one Rand. The favorable market action that we have seen, as well as the dividend, have resulted in a total shareholder return of just under 25%. Safety is our number one priority. I'm truly grateful that we have not experienced any road or road injuries or fatalities, even though our business requires us and our presence on the road. However, when it comes to lost time injury frequency rate, we've regressed. Last year, we achieved 0.18. This year, we've achieved 0.22. This is of serious concern to us, and we're paying close attention to it.
Looking at the social impact, as a business that operates in regions that really need stimulus from small-medium enterprise, we have invested and granted 16 vehicles worth ZAR 20 million to Enterprise Supplier Development to assist them in growing their business. And we continue to invest in fixing and deteriorating road infrastructure through our participation in the pothole process. Turning to the environment, as a company with a large fleet, clean, high-quality, and reliable vehicles are part of our value proposition. We know that water is a scarce resource, and we operate in regions that are experiencing drought. But we continue to pursue opportunity to reduce and augment our fresh water consumption while we're maintaining the cleanliness of our vehicles. We've invested in water and energy smart meters. We've also, in our wash bay, have recycled facilities.
A combination of all this that we're doing has resulted in a 19% reduction in the use of municipal water. When you look at our carbon emission, we had a target of 3% saving. We continuously work on this, and I'm very pleased that we surpassed that and we achieved 5%. We are making great strides in implementing our ESG strategy. I'm pleased that our Board has approved our sustainability-linked financial framework, which has at its core to grow the business sustainably and responsibly. Let's move our focus into business overview. Our rental operation. Rental, there's revenue surge at 15.2% to ZAR 7.7 billion, which is propelled by increased volume in used car and discretionary car rental services. We've seen our corporate and inbound business growing 10% and 7.4%, respectively. There have definitely been challenges in the used car market in the rental business.
Our EBITDA is down 7.6%. As indicated, the primary reason for this EBITDA is an increase in our operating leases, as well as the decline of the super profit we've enjoyed in the previous year. But we are very much aware that our utilization of 71% is far from our target of 73% and 75%. And we know that to have an optimal business, we need to get back to the 73% and 75% utilization. And this shift has happened because our discretionary business is 4% higher than our contracted business. We've seen our operating profit down by 20% in this segment. And this is mainly due to the prudent nature and the view that we've taken on the asset with regard to the residual value with the changing in the market. Leasing operation.
We have delivered another outstanding result when it comes to leasing, with revenue up 12.7% to ZAR 2.8 billion from retaining and growing our corporate customers, driving our strategy on heavy commercial, corporatizing, and working on light vehicle. Activity in Greater Africa continues to exceed our expectation. Greater Africa now accounts for 20% of our group revenue. We've seen a 16% increase. However, I cannot talk about leasing business and leave iLease out of it. We've seen the launch of iLease during the first quarter of 2024. We saw a lot of interest indicating the market need, but the conversion rate was very low. We've declined many applications due to credit record and affordability.
As this is a new product with much curiosity and also some misunderstanding, we will expand our education drive. Our intent is to grow the iLease in a responsible manner. EBITDA. EBITDA increased to ZAR 1.6 billion.
This business generates a strong EBITDA margin of 58.3%. We've also managed to retain and maintain a very strong operating margin at 27%. I'll now hand over to Thobeka.
Thank you, Ramasela, and good morning. As Ramasela has said, what a year it has been. Yet, our journey as Zeda continues, a journey which started in 2021, a journey of a business that embodies agility, operational excellence, customer service, and innovation. Our revenue is ZAR 10.5 billion. We continue to maximize revenue, carefully selecting the opportunities to pursue, prudently timing our deflating and safeguarding our operating assets. If you look at the revenue that was generated in 2024, indeed record high. This revenue is generated on fleet which is 20,000 units lower than pre-COVID levels, lower than 2019.
If you look at our leasing business, on a flat total fleet size, we have generated revenue ZAR 300 million higher than prior year. Our car rental business is generating revenue ZAR 1 billion higher than prior year. This does speak to investing right, investing in the right opportunities, and making sure that every operating asset is giving the business the right yield. Ramasela has touched on what has impacted our EBITDA. We have seen a contraction of our EBITDA margin by 4 percentage points to 32%. Just to recap and summarize three big items that impacted our EBITDA. It is the decline of the used car margin. When you do look at our financials, you will see that our cost of sales growth outpaced the growth in revenue. That is due to the margin declines that we have seen in this business compared to prior year.
Our utilization at 71% is lower than our range of where we would like to be, which is between 73%-75%. And that did cause our business, particularly in the first half of the year, to have higher input costs. But we were swift and very agile in responding to the changing shifts we saw in demand and right-sized our fleet accordingly, closing with 71% utilization. Ramasela has also touched on the mix of operating leases, which has increased to 23% compared to 3% in prior year. This was an additional cost on our cost of sales line of ZAR 200 million. And I am pleased to say, with all those challenges that we faced, we looked at what were the opportunities within our control, our operational excellence, removing waste in our processes, and making sure that we continue to contain the cost and have a culture of cost containment.
We were able to defend and protect the EBITDA, closing at 1% up compared to prior year, ZAR 3.3 billion. When we move to the operating profit margins at 14%, we have seen an increase of ZAR 32 million on our unrealized forex losses coming from our operations in Ghana predominantly. And that has had an impact on our total operating profit. The second item was management's conservative view, looking at what we were seeing in the market in regards to the residual values we were fetching from a used car perspective and making sure that the depreciation of the active fleet starts to resemble what we are going to be seeing from the market in 2025 when we deflate and sell in the market.
We have closed with operating profit at ZAR 1.5 billion. All our revenue categories have increased. We see the most significant increase coming from car sales at 25.7%.
Notwithstanding the tough trading conditions, we were able to sell in this market an additional 3,000 units. If you also look at our 2024 car sales revenue, it is only ZAR 100 million lower compared to historic levels from 2019. And yet, we have also explained that this was on significantly reduced fleet size. So how did we achieve these revenues? Our market intelligence, we have a team of people that carefully scan the market, understanding seasonality, timely deflating and selling to the market, and what volumes in what quantity are appropriate throughout the 2024 financial year. This allowed us to sell responsibly and protect the margins in this environment. We continue to sell to the market high-quality, nearly new vehicles as a value proposition, which the customers continue to embrace. And that has helped us to fetch more units than prior year.
Even when the consumers are under constraint, we are that preferred supplier. And the third item is our strategy has been to start looking at how do we increase the retail mix at disposal compared to the trade. We do get better margins from a retail perspective, disposing through our 14 branches network. And that has now increased to a proportion of 30% retail, 70% wholesale. And the retail proportion also allowing us to sell well in these markets. When we look at the car rental business, this business has come from a period of high recovery in 2022, 2023, and we do see the revenue growth having softened in 2024, with growth at 4.6%.
Ramasela has touched on the fact that we have seen a shift in our customer segment mix, with an increased proportion of revenue coming from contracted business compared to the previous period where we had a high proportion coming from discretionary business. It is the other way around. Discretionary business has increased and contracted business has declined. And with the discretionary business having increased, it comes with a shorter length of rental. And that, plus our number of rentals having increased year on year, allowed us to retain a 4.6% and protecting the base that we grew in 2023. Our leasing business has increased by 12.3%. And yes, we started to look at the growth and the recovery of the Greater Africa region, and that strategy has borne well. We see the business continue to protect our corporate segment and growing in that space.
In addition, the heavy commercial investment and our strategy has gained traction in this financial year. Our net finance cost, these are up 12% compared to prior year. If you look at our average debt in 2023 compared to 2024, this has gone up by ZAR 700 million, contributing to the increase in the total finance cost to ZAR 645 million. However, management has continued to drive the cost of funding down, and those efforts are seen in our average cost of funding having come down by 20 basis points to 11.2%. When you look at the slide, I would like you to hold it because when we unpack the capital structure and the debt, you will also see that the debt has increased in the leasing business to support the increase in the leasing assets and the growth that we've seen in the income statement.
Our effective tax rate at 26.2%. We did understand that our 21% effective tax rate in the prior year was unusually low and abnormal, and from a sustainable effective tax rate, this business expects to settle at between 28% and 29%. Our lower effective tax rate is attributed to the income we've received on our joint venture, which is a 50/50 JV, which has come through in this financial year, thus pulling the effective tax rate slightly down to 26.2%. This effective tax rate, I will then subsequently unpack how it has had an effect in the year-on-year movement on our headline earnings per share. Our earnings, basic earnings per share, down 17.3%, and headline earnings per share down 18.1%.
The difference between BEPS and HEPS, you will see in our financials that we've got a capital item, which is a disposal of a property that has given us a profit in this financial year. We then also looked as management at if the 2023 financial year on a like-for-like basis had been on a 26.2% effective tax rate, what will the HEPS have looked like, which is ZAR 0.355 compared to ZAR 0.312 we have delivered in this financial year, which will have resulted in a 12% decline year on year. We have delivered a ROIC, which is higher than the weighted average cost of capital. But at face value, it may look like a significant decline between the 18.7% of the previous year to the 14.3% in this current financial year.
When you look at our invested capital, you do see that the investment has shifted from short-term operating assets to long-term operating assets. That investment has happened in 2024, and you will see that in the increase in the invested capital. We understand that the long-term assets earn their profits over a period. Thus the 14.3% is a factor of that investment, but the full impact of the profitability to be seen in the coming years. Our return on equity at 23.1%. We do remind our stakeholders that two years ago when we unbundled, we had an equity of ZAR 1.7 billion in our balance sheet.
We have increased that by an impressive ZAR 1.2 billion in the last two years of 2023 to 2024, changing our capital structure with equity now contributing 33% and on a gross debt level, gross debt at 67% compared to 70%-30% in the previous year. We were deliberate that we were going to increase and grow our equity base. The equity base we are growing to create sufficient headroom in our balance sheet to be able to raise debt to support our strategy from a growth perspective. And this equity has also been built up on the initial conservative dividend policy of a 20% to 30% payout ratio, which has subsequently been reviewed by the Board to 30% from between 30% and 50% payout starting in the 2025 financial year. Notwithstanding that, we continue to invest in the right places, generating good return at 23.1%.
As I've mentioned earlier, this slide really just does show at a glance how the investment shift has happened, with the fleet assets for the leasing business having increased by just over ZAR 500 million and the fleet assets for the rental business having decreased by over ZAR 1 billion, and that movement you will also see following suit in terms of the mix on your gross debt. I would like to pause a little on the slide just to really help unpack our cash flow statement and how this business generates cash. If you look at our cash flows, you will see that cash from operations, we have generated cash of ZAR 6.7 billion. We then spend just under ZAR 1 billion paying finance costs, taxes, and other.
That has left in the business an amount of ZAR 5.8 billion to then invest in replacement of fleet and then growth of fleet and shareholder rewards. We in this financial year have spent ZAR 4.7 billion in replacement CapEx, leaving one billion available for shareholder rewards and growth CapEx. We further invested growth CapEx of ZAR 770 million, and we paid an interim dividend of ZAR 95 million. This slide also speaks to the next slide where I have shared with you previously that in each replacement cycle, this business has got embedded equity that we will then generate and reinvest in the business for growth, and in the 2024 replacement cycle, we generated equity of one billion to then reinvest into the business.
This is what the summary of the investments look like. With operating assets invested at ZAR 8.5 billion, supported by a net debt of ZAR 4.6 billion.
If you look at our net debt to fleet value, it is at 55%, which further emphasizes that we have a 45% of equity that we have invested in these operating assets, and we use the debt to then supplement from an investment perspective. Ramasela has also shared that we have operated in a consistently high interest rate environment, and this business, the financial leverage was always a concern in terms of will it stand and be able to hold the operating model, will it work through the cycle, and in the 2024 financial year, where we operated for the full 12 months at consistently elevated interest rates, you will see that we still closed with the interest cover times of ZAR 4.9 billion, which is sufficient headroom from a financial covenant perspective. I've already shared earlier from a capital structure perspective that our equity has grown.
And from a net debt to equity perspective, you see that our equity is now at 38% and the net debt is at 62%. Also impressive that in this period, we did close with strong cash and cash equivalents of ZAR 1.2 billion. Funding is key to our business. It is our strategic imperative to have the right funding to support this business from a growth perspective. We have closed this financial year with total facilities at ZAR 9.3 billion. And what is even more impressive is in this period, we have been able to renegotiate with our financiers, our funding packages, and our facilities that the total average cost of funding has come down by 35 basis points compared to previous year.
We continue to focus on balance funding into 2025 and continue to lengthen our debt maturity profile, really moving away from short-term nature of debt, which requires frequent renewal and financing to a more longer debt profile, which also de-risks the business from a liquidity perspective. At this point, I'd also like to confirm that all financial covenants have been met for the period under reporting. From a funding outlook, we will be registering our ZAR 5 billion DMTN Programme by the end of the 2024 calendar year. I would like to also confirm that we have also maintained our credit rating, which is an A1(ZA) on a national scale.
Ramasela has also shared with you that our Board did approve our Sustainable Finance Fundraising Framework, which the DMTN Programme and the Sustainable Finance Fundraising Framework will underpin and provide the base for the business to be able to grow in the strategic areas of technology and really responding to the changing mobility trends. From an outlook perspective, we are expecting to be going to market on the second quarter of our financial year, which is around February-March of next year for our first issuance. Between now and our first issuance, management is continuing to look at mitigating factors of our current structural subordination, and we are looking at rebalancing our current funding, which is currently 100% secured, to move it to unsecured so that from a debt investor perspective to the facilities that sit in the business, there is no structural subordination and there is equal sitting.
We are also going to align our funding activities from a broader sustainability strategy. And with that, I'd like to hand back to Ramasela.
Thank you very much, Thobeka. Shoo, having gone through 2024, the commencement of 2025, however, for our financial year is marked by a decrease in inflation rate, a 500 basis point interest rate cut, a positive business sentiment bolstered by the GNU. And we're very excited that South Africa will be hosting G20 very soon, alongside with the changes in the U.S. car market. All this, they're very favorable for our business. And our focus is to concentrate on business expansion that we believe will yield positive returns. After our strategy review this year, our Board has approved this investment in Ghana. And that was done in line with our capital allocation framework and the strategic fit.
Ghana was one of the countries that we had long-term leasing business. And if you may recall, in the 2022 Capital Markets Day, we've indicated the portfolio review, and we did all possible to turn it around. But because of its strategic fit, we see it appropriate to disinvest. Looking at the future, our growth, car sales as a business that is very important in our value chain. And yes, with the changes that it has gone through, we still believe this is a growth pillar. With the Digital Dealership that we have just launched at the beginning of this month, we are geared to increase our car sales retail business. Growing the leasing book in both corporate, heavy commercial, passenger vehicle, different market, with a keen focus in this coming year on public sector.
We will continue to do a mix in all the business we enter into to ensure proper diversification. Subscription offering, both long-term in the form of iLease and short-term monthly subscription as part of our growth. It is important to note that the short-term subscription will enhance the technology around that, and we are starting to see significant change in that business. We're sitting with a very strong pipeline, which is coming from both South Africa and Greater Africa. And just looking at just one month, because our pipeline is just one month of just under ZAR 400 million. Technology and innovation, it is and shall remain the cornerstone of Zeda strategy. As we go out, a number of offering, all of them, no doubt that will have its base in technology. Zeda is a growing and is in its growing phase.
It's a very capital-intensive business that requires investment. I've just said technology and innovation is very important. I just want to emphasize that digital transformation is another element where our capital will be going to in order to drive and help us yield positive return. When you look at it and everything that we have done, given what Thobeka has mentioned about the equity that we have accumulated over just two years since our listing, the prospect within the mobility sector, we are very confident that our preparedness to capitalize on this expanding business mobility, both in South Africa and Greater Africa, that we are well poised for it. The one critical thing that we don't leave behind in our growth strategy in all countries that we operate in is our license to trade.
Broad-Based Black Economic Empowerment, it is our license to trade in South Africa, and it is very important for our growth. I'm very pleased that Zeda Limited, in its inception, looked like a Level 7, but we have moved from Level 3 last year to Level 2 in the current year. Both our operating entity in the car rental and the leasing business has maintained Level 1 B-BBEE. However, we are continuously encountering stringent requirements for black ownership. We are working with our Board to craft a solution to address this area. Generating value for our shareholders, it is very important. Thobeka has indicated how we perform with return on invested capital and WACC, as well as ROE and what we've done with it. Importantly, what we plan to do with the equity that we've generated over the period.
As I've indicated, that we are well poised to take advantage of opportunities that are value-created accretive. It is also important, and Thobeka also mentioned that, to be mindful that as we grow, it is important to return, to make return to our shareholders through buybacks or dividend. In this regard, I would like to report that our dividend has been adjusted to between 30% and 40%. It is important, however, again, to note that this range and the Board was very clear in approval of a range, taking into consideration where we are as a business, a business that is on its growth trajectory. That as we approve this, focus will still be made in projects that are value-accretive. Everything else that will be done will be to generate good return for our shareholders.
At this point, I would like to hand over to Babalwa and thank you all for coming and for your attention.
Thank you, Ramasela. Thank you, Thobeka. Ladies and gentlemen, at this point, I would like to open the floor for questions. I will start by taking questions from the room. Please raise your hand and introduce yourself. From time to time, I will take questions on the webcast and on the conference call. I see there's a hand there. There should be a roaming mic.
Yeah, good morning. Thank you for that. Shaun Chauke from Nedbank. I've got a couple of questions. I'll start with three for now. So maybe, can you please speak about how you are evolving the fleet mix within both leasing and the car rental business with the Chinese brands?
What you see as the knock-on effect on car sales and how you think about residual values there. So that's the first question. The second question is with regards to disposal channel and the introduction of digital dealerships. How much more do you expect, again, the mix to evolve between wholesale and retail? I'm assuming it's more retail channel, and I'm assuming it's better margin, but you can expand on that. That's the second question. The third question is around your car sales. So if you take the growth you saw in the value of your car sales, 25.2% volume growth, I think you stated in one of the slides, 17.8%. That implies price inflation of about 8.4%, which looks to be tracking higher than sort of the data we're seeing around used vehicle hyper price inflation.
So maybe if you can speak about the outlook between price and volume within car sales and also which brands are working in your favor. I would assume it's the likes of Suzukis. But let me pause there on my questions. Thanks.
Thank you, Shaun. I'll give that to Litha. Okay, so which one? Mic? Mic, please. Litha?
Thank you. Is it Shaun? Yes. Okay. Good morning, Shaun. My name is Litha. I'm the Chief Sales Officer of Zeda Limited. I just want to tackle the first question that you asked about the type of fleet that we have and how it impacts between rental and leasing and how it flows all the way to car sales. I'm going to start with the leasing one, and my colleagues here will help me. On the leasing side of our business, we honor the wishes of the customer.
We are agnostic to what type of fleet that a customer requires. We do give advice because of our extensive experience over the years on the application. If you are in a mine, there is a specific type of vehicle that you need. If you are a salesman driving up and down Johannesburg, there's a type of car that you require. And we give that advice, but in the end, and we show to the customer the total cost of ownership of that whole exercise, and the customer then selects the choice. And we give all the options on the table. So that's what we do on the leasing side. And then we then manage that fleet throughout its life in the leasing business, and we deflate it, and we sell it as a used car through our car sales business, whether it's wholesale or retail.
On the car rental side, a vehicle has to work in car rental. In other words, the customers have to want that car, and they have to want to pay for it. And when we deflate it, it has to work when we sell it as a deflated vehicle. And therefore, we are not married to specific brands. It depends on our data what is working for us. And we will not deny that there are Chinese models that are creeping in. I'm so afraid of mentioning names that I'm not going to mention names because Babalwa is watching me, and I don't know what to say and what not to say. But the principle is a car has to work in car rental. In other words, it works for the customer, it works for us.
When we deflate it, we make surplus from the residual value at the end of that period when we sell it as a used car. Can I ask it differently? Yeah, they're going to add, maybe it's going to be answered too.
Okay. Hi, Shaun. It's Claudine. Yeah, I'm responsible for the car sales disposal team. So just to recap on your question, you asked about the Chinese models on fleet and the possible impact on residual values. So I think just to go back to what Litha was saying, we are, for lack of better word, dipping our toes into that model on the rental fleet. I think Litha did cover what we're doing in the leasing space.
And I think it would be remiss of us not to enter into that space, considering that's the market that we play in in terms of vehicle sales. As regards residual values, we've already got two of the brands running on the rental fleet and what we see in certain models. And it's not related to particularly a Chinese brand impact on the model, but rather market conditions as an impact on the residual value. And I can tell you with confidence that a model in a Chinese brand is running well as was expected as we had forecasted when we put it into the fleet, if that answers your RV question.
Am I allowed to add to? Yes. Okay. So just on that, the model you put in, your residual value versus the traditional brands.
So, i.e., is it 10% less than your traditional brand, or is it 20% less, or it's the same model with your traditional brands? And then just as a follow-up to that on the second question, what proportion of your fleet mix is now Chinese brands within the car rental business?
Thanks. Okay. So if I had to compare a like for like, and you know in rental we work on vehicle groups, I would position the residual value in the same space in that car group, if that makes sense, Shaun. All right, in terms of the actual rental fleet, Rebone, would you be able to answer that? Less than 10% still. Okay, Rebone's just giving me confirmation, less than 10% still. Thank you, Shaun.
Thank you, Shaun. Thank you, Claudine. I'll take a question on the webcast from Richard. The question reads as follows.
This is for you, Thobeka. Congratulations for the resilient results in difficult operating environment. Can you give us an idea how much OpEx is associated with the car sales revenue stream? How have these costs evolved, grown over the last few years, and approximately how much of the car sales revenue comes from previously leasing vehicles versus to previous rental fleet?
So I'll start the question back to front. So from a leasing perspective, it is important to, if you look at the total fleet size, in each financial year, we expect about 30% of that fleet to terminate and be replaced. So if you look at where we have finished in this financial year, you will then expect an average of about 3,000-4,000 units that will have then been terminated and are available used car stock.
Out of our total revenue, it's still predominantly coming from the car rental business, and it is over 70% in total that you will see that it still comes from the car rental business because the timing on the leasing side is much more staggered. When we look at our two operating segments, we look at leasing, we look at the car rental, and car sales is an extension of those two operating segments. From an operating model and from how the business is structured, we have shared resource model, and the one element that you will attribute as a direct cost from a car sales perspective are the 14 retail branches that we would lease out that we will then use from a retail disposal perspective.
The direct cost will be much smaller, but the total operating expenses are shared from a group perspective, which is what allows us to reduce waste and have the operational excellence and be able to sustain our operating expenses year on year.
Thank you, Thobeka. If I can check with the operator if there's any question on the conference call. No question on the conference call. I have one more question from Rowan. What is your fleet size? What is your rental fleet size? And what are expectations for the December peak travel period? Can you also give some detail on the deflating process in FY 2024 and how it may be different in FY 2025 given the changes seen in used car prices and competitive pressures? Can we have a?
Good morning. Thanks, Rowan, for the question. My name is Rebone. I'm responsible for car rental operations.
I will take the first part of the question. From a fleet size point of view, unfortunately, detail that I cannot share. Suffice to say, the fleet size will naturally increase towards peak season, especially at our coastal region and in particular, larger vehicle mix, which would be required at this time of the year with both inbound and local leisure segment requiring such vehicle. Thanks.
Thanks, Rebone. We didn't answer Shaun Chauke's second question on the digital dealership. Sorry. Yes. So we forgot to answer.
Okay, so as I'm answering Rowan's question on what we are to do in the new year on deflating, am I correct? Yeah. And I will answer Shaun Chauke's question on digital dealership thereafter. Our model, our integrated model allows for the agility to assess what is happening in the market environment as well as rental demand.
So if we look at how we handled that in the last year without risking a flooding of vehicles that have different sales cycles into the environment, considering what was happening in new entrants and new vehicle prices, we planned our intake of vehicles, our deflate of vehicles over 2024, and we plan to continue that into 2025, coupled with the procurement of fleet either on short-term leases and risk buys. Thank you, Rowan, for the question. And then Shaun, on the Digital Dealership, as you had assumed correctly, that is 100% retail-focused. So it is not channeled towards the wholesale environment at all at this stage. And the reason for that is that we are expanding our retail footprint in the online space and therefore trying to find better margin in the sale of our vehicles.
The idea of Digital Dealership, and if I start now, I won't stop because I'm so excited about it, is that we have opened the door to an e-commerce market. It's something new in the used vehicle environment where we position our retail offering direct to the consumer from start to end, where you'll be able to select your vehicle, look at it in a 360-degree view display online. You'd be able to see the quality checks that are done on the vehicle by an OEM-approved dealership, full detail of the vehicle service and repair history through its life from start to finish, thereby warranting and guaranteeing its kilometer usage. And also, and I don't think you'd ever need it, but in case you do, there's a 30-day exchange plan on all our retail vehicles. So go and have a look. www.aviscarsales.co.za. Thank you, Claudine. Sorry to disturb you.
There's the third question that Shaun had that he said is unanswered around the price mix.
Just on the dynamic of car sales, given that your implied price inflation was 8.4%, the outlook between price volumes and which mix are working in your, sort of which brands are working in your favor on your car sales? Sorry, Shaun, can you just repeat the question again, the first part? I think I get the second part. Cool, no problem. So on car sales, if you take the growth in sales value, it was about 25.2%. I think you indicated in one of the slides volumes for used car sales was about 17.8%. So if you work that out, it implies a price inflation of about 8.4%, which is high considering sort of the vehicle used, sort of used vehicle inflation we've seen being lower than that.
I was just curious as to the outlook in terms of how you are thinking about price inflation. And then obviously the volume would be a function of the brands that are working in your favor because my assumption was most likely to be Suzuki within that space. But you can provide more color.
Thanks, Shaun. I think Thobeka in her presentation, she indicated that why is our car sale different from the market? And she said it is because of the quality of the vehicle that we dispose of, how we look after the vehicle because whether it is coming from a leasing business. So I think to be fair to the market, they are selling cars where it did not have one owner. The Avis cars and the Zeda car have got one owner. So that creates a superior value in the market from that.
When you look at it, about 70% of our vehicle goes into trade, which means they already have paid us some of those margins and when they go down. When you look at it, we are in an advantageous position because we are controlling the fleet and we're controlling which fleet we dispose of when. The one thing that Claudine and her team are very critical about is not dumping even any model. From where we come from, when we start saying a car is unfavorable, it's because we have done everything to protect. We don't have only the new Chinese model or the new model to be our favor. We still do have the old vehicle with good badge that are still fetching good margin. It's mostly how our vehicles get to be looked at.
I think that is our value proposition and advantageous position when you look at it. Trying to compare our inflation, the difference in that price with the market will be slightly difficult. One thing that I know that the team is working on now is as we go into the new cycle, hoping that the market now starts stabilizing with regard to inflation getting better, disposable income, all those factors do have a positive contribution to the used car market. We believe that certain model, I mean, we've got old badge vehicles that are still doing well, but we are very mindful that it is critical for us to fast track the mix so that the used car business can have both the old badges and the new entrants into the market.
It is a continuous process, which Thobeka also indicated about the agility of how we look at our business on a day-to-day basis, which then factor into our used car business.
Thank you, Ramasela. We have time for one more question, which we will take from Petronella. Morning, everyone, and congrats on the results this morning. Two questions from my side. How do you look at car rental margins going forward and what drove the increase in your JV profit? The JV profits. Okay. So Thobeka will take the JV profit. And the first question. Okay. Can we have a roaming mic? Car sales or car rental? Car rental margins going forward.
Oh, that's quite an interesting business, that one.
I think for us, the way we look at car rental, and when we say this year we saw a shift into discretionary business, our drive is to get back to contracted business. The beauty about contracted business, it gives us a very strong utilization level. And in that way, our holding costs become lesser, which then improves our operating margin. So our biggest drive is to get back to 73%. And we really are striving to say the margins we've reported, these are the margins that we want to strive to deliver in that period of a range of about 14% that we've delivered in the Zeda. That's where we are going to be. But we believe with every 1% utilization, we know every 1% utilization has got a very positive impact on your holding cost.
But where we are currently, we actually believe that we've taken the heat on the used cars. We've taken the focus away from discretionary to contracted, and we plan to maintain and sustain our margin going forward.
Thank you, Ramasela. Ladies and gentlemen, we have now reached JV. One last question, JV. So we have a JV that we own 50% into. The JV looks after the Isuzu maintenance plans, which has been in inception since 2015. And for this financial year, we did see a large drop-off of vehicles and profits that have built up over time. And there is no longer an obligation from servicing those vehicles into the future. So that was almost the first reward of that investment in the JV. And then we are going to continue to be in that partnership, and we will continue to see some of those profits coming through.
Thank you, Thobeka. Ladies and gentlemen, we have now reached the end of our session. We are looking forward to engaging with you over the next week or two. For our guests, refreshments are served outside. For everyone else, thank you for joining us and enjoy your day. Thank you.