Philip Michaux CEO of Car Rental

Operating units

Car Rental		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; Holidayautos (associate), which specialises in local and international outbound leisure car rentals; and Gage Car Hire, which specialises in the insurance vehicle replacement market.
Used Car Sales		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 with financial institutions) and insurance. This is done primarily through Auto Pedigree, the largest used car dealer network in South Africa with 62 branches. Complementary businesses in the used car sales entity include Imperial Auto Auctions which specialises in motor vehicle auctions.
Panel shops		Imperial’s panel shops include Imperial Auto Body 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 and Nissan, among others. Leveraging synergies with the car rental business, Danmar customers can drop damaged vehicles off for assessments at selected branches and collect a rental car from Europcar. The panelshops procures the majority of their parts requirements from Imperial dealerships.

Risks, opportunities and performance drivers
Risks		Opportunities		Performance drivers
Low barriers to entry		Growth of international tourists to South Africa		Cost control, fleet utilisation and efficiencies
Increased competition		Grow new source markets		Return on invested capital
Improved public transport		Leverage of Europcar international network		New contract gains
Weakness in local and international travel		Rental of commercial vehicles		Revenue per day
Weakening currency/increased costs		Take advantage of our scale in the market		Volume growth
Deteriorating accident rates

Overview

The car rental brands are Europcar, Europcar Van Rental, Tempest Car Hire and a number of niche offerings, including Europcar Chauffeur Drive and two car rental broking businesses – Gage Car Hire, which specialises in insurance replacement market, and an associated company Holidayautos, which services the local leisure and outbound car rental markets.

Imperial disposes of the majority of its car rental fleet into the wholesale and retail market through Auto Pedigree and Imperial Auto Auctions. It also offers a range of value-adding services including finance (via joint ventures with financial institutions) and insurance.

The panel repair centres include Imperial Auto Body 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.

This model helps to optimise our position in the motor value chain and enhances our returns.

Results

R million	2013			2012		Change %		H2 2013			H2 2012		Change % on H2 2013		H1 2013		Change % on H1 2013
Revenue	3 608			3 282		9,9		1 902			1 658		14,7		1 706		11,5
Operating profit	405			383		5,7		214			185		15,7		191		12,0
Operating margin (%)	11,2			11,7				11,3			11,2				11,2

	2013			2012
Return on invested capital (%)	12,6			10,2
WACC	8,2			8,6

The tourism businesses were disposed of after the reporting period and are reported on page 77. The above table does not include the tourism results.

The business had a very good second half and achieved a satisfactory result for the year despite tough trading conditions in the car rental industry. Revenue growth was encouraging in the car rental business as revenue days and revenue per day increased by 3% and 1% respectively. The revenue per day was impacted by the change in mix due to the growth in the replacement business. Revenue per day grew by 3% if the replacement business is excluded.

Utilisation improved from the first half and was in line with the prior year at 70%. This was achieved despite the increase in the number of vehicles at the panelshops following the damage caused by hail storms during the year. The average rental fleet size was 3% higher than the prior year.

Operating margin showed a slight improvement in the second half of the year but was still lower than the prior year as costs increased ahead of revenue. Accident costs were significantly higher in the car rental business when compared to the prior year.

Auto Pedigree had an excellent year as retail unit sales were higher and the business improved its performance significantly from the prior year.

The panel business improved its performance from the prior year but further corrective actions are being taken by management to strengthen the business.