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Car rental and tourism

Osman Arbee   Moeketsi Mosola
Osman Arbee
CEO of car rental division and
chairman of tourism, motor
dealership and automotive parts
distribution division
  Moeketsi Mosola
CEO of tourism division


Revenue up 15% in spite of tough market conditions
Europcar voted Africa’s leading car hire company at the 2011 World Travel Awards for the sixth consecutive year
Edusport, which contributed significantly to the division during its first full reporting year, secured the sale of packages for the 2014 FIFA World Cup
Europcar acts as lead sponsors of Green Office Week in South Africa
Successfully rebranded our commercial vehicle rental business to Europcar Van Rental
Opened Europcar Learning Centre which will host training of 1 100 employees

Divisional overview

The 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

Revenue 15   3 801   3 313  
Profit from operations 8   380   351  
Operating margin (%)     10,0   10,6  
Net operating assets (4)   2 429   2 522  
Revenue to net operating assets (times)     1,6   1,3  
Revenue relating to sales of goods to inventory (times)     4,5   3,0  
Weighted average invested capital 3   2 659   2 594  
Return on invested capital (%)     10,0   9,7  
Weighted average cost of capital (%)     8,7   8,7  
Net capital expenditure 65   601   365  
Number of new and used vehicles sold     7 885   8 646  
Number of vehicles for hire     16 599   17 026  
Number of employees     3 046   3 058  
Number of used car dealerships     56   66  

Operating units

The car rental division comprises three business units: car rental, used car sales and panel shops.

Car rental   Used car sales   Panel shops
The core car rental brands are Europcar and Tempest Car Hire. Europcar operates in South Africa, Botswana, Namibia, Swaziland and Lesotho, with a focus on delivering service excellence in line with global standards, while Tempest Car Hire covers the price-sensitive market, mainly offering compact and economy vehicles.

The car rental business also includes a number of niche rental brands. These include Europcar Van Rental; Europcar Chauffeur Drive; Maui/Britz, which focuses on camper homes and 4x4 vehicles; Holidayautos (associate), a broking business which specialises in local and international outbound leisure car rentals; and Gage Car Hire, a broking business which specialises in the insurance vehicle replacement market.

Imperial’s strategy is to dispose of the majority of its car rental fleet into the retail market by offering consumers affordable, low-mileage vehicles and a range of value-adding services including finance (via joint ventures and financial institutions) and insurance. This is done primarily through Auto Pedigree, the largest used car dealer network in South Africa with 68 branches. Complementary businesses in the used car sales entity include AA Autobay, which facilitates the private sale of vehicles between individuals online and through a branch network, and Imperial Auto Auctions which specialises in motor vehicle auctions.
Imperial’s panel shops include Imperial Auto Body, Imperial Proteam Autobody and Danmar Autobody, which collectively service the car rental fleet, other motor vehicle businesses within the Imperial group, the consumer market and leading insurance companies. Imperial Auto Body houses four major structural repair shops, four speed-repair shops, a salvage administration unit and an assessment centre, while Danmar Autobody has a well-established industry reputation and is the approved supplier for major motor vehicle manufacturers that include Mercedes-Benz, Land Rover, Jaguar, Toyota, Volkswagen, Hyundai, Kia, Ford, Mazda and Nissan, amongst others. Leveraging synergies with the car rental business, Danmar customers can drop off damaged vehicles for assessments at selected branches and collect a rental car from Europcar. The panel shops procure all their parts requirements from Imperial dealerships.

The tourism side of the business is divided into tour operations, transport and sports and events.

Tourism and tour operations   Transport   Sports and events
Tour operations
During the year, Springbok Atlas Tours, Eastgate Safaris’ and Grosvenor Tours’ inbound touring operations restructured and were consolidated to form the Springbok Atlas touring division. This division specialises in inbound leisure and incentive tours, providing services that include escorted coach tours, self-drive and tailormade tours, luxury tailormade and specialist business travel, and game drive and transport services.

Springbok Atlas Luxury Charter and Springbok Atlas Passenger Transport have a fleet of 88 vehicles in South Africa that range from microbuses to luxury coaches and large buses. It specialises in coach charter and contract passenger transport.
Edusport is a relatively new addition to the company, having been acquired in March 2011. The year under review represents its first full year of reporting. It specialises in inbound and outbound sports travel, school travel and corporate incentive travel. It has exclusive appointments to some of the world major sporting events.

Market conditions

The 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.


R million 2012   2011   Change
  H2 2012   H2 2011   Change
% on
H2 2011
  H1 2012   Change
% on
H2 2012
Revenue 3 801   3 313   14,7   1 862   1 646   13,1   1 939   (4,0)  
Operating profit 380   351   8,3   170   153   11,1   210   (19,0)  
Operating margin (%) 10,0   10,6       9,1   9,3       10,8      

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

Car rental
Weakness in local and international travel
Increasing revenue per day
Weak economic growth in southern Africa and Europe
Seek new revenue sources
Organised crime
Increasing fleet utilisation
Change in international distribution channel
Rental of commercial vehicles
Stronger online brokers
Chauffeur service
New public transport system
Leveraging off Europcar, National and Alamo networks
Low barriers to entry
Exploiting new source markets ie emerging markets
Increase in interest rates
Auto Pedigree
Weak economic growth in South Africa
Wholesale and auction market
Affordable new cars
Sale of value-added products and financial services
Increase in new car prices
Panel shops
Increased cost of labour
Cross-selling opportunities with group companies
Parts availability
Retaining and growing business from insurance companies
Fragmented industry
Growing market share
Exchange rate and interest rate fluctuations
Expansion into contract-based passenger transport market
Weak economic growth in South Africa
Targeting new tourism markets for southern Africa
Depressed economies in source markets affecting international travel eg Europe
Business tourism and conferencing
Organised crime
New revenue sources through value-added services
Low barriers of entry in tourism mark


Our 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.

Key macro and performance drivers
Macro drivers   Performance drivers
SA and international economic growth
New contract gains
Consumer spending
Price escalations and yield management
Exchange rates
Customer service
Interest rates
Cost control, fleet utilisation and efficiencies
Exchange rates
Maximising return on capital
New vehicle supply and pricing
Differential between new and used car pricing
Licensing and toll fees
Fuel price

Outlook and strategic objectives

In 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.

Strategic objectives  
Car rental
Continue to build on the global Europcar brand
Manage costs tightly and improve utilisation
Improve return on invested capital
Maximise positioning in commercial vehicle rental
Grow unit sales in Auto Pedigree’s target market
Improve contribution from panel shops to divisional results
Continuously look to enrich our tourism businesses
Grow international inbound and outbound channels through partnerships
Streamline the business to be competitive


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