Avis Europe hit by restructure costs

Profits at Avis Europe fell by almost two thirds per cent in the first half as the car rental group was hit by restructuring charges and the cost of a share issue.

Murray Hennessy, chief executive, said there were “very initial signs” that the recovery program, which began in December and is aimed at increasing margins and revenue, was taking effect.

Vehicle utilisation, internet bookings, and customer satisfaction had improved, he said, but added: “we’re really in that awkward moment when we’re waiting to see more of it kick in in the second half”.

The group’s pre-tax profit after exceptionals and revaluations was €3.2m for the six months to June 30, compared with €9m for the same period in 2004. Avis booked a €7.9m restructuring charge, and earnings per share were €0.04, down from €0.12. Mr Hennessy said the recovery program was progressing as planned and the full-year outlook was unchanged. The company confirmed in May there would be no full-year dividend for the second consecutive year.

Trade for the six months to June 30 was lacklustre, with revenues falling 0.6 per cent to €582m from 2004, despite a 1.4 per cent increase in billed days. Small rises in the leisure and budget corporate segments were offset by declines in the premium and corporate markets.

A rights issue in July was expected to net €166m for the group after expenses. D’Ieteren, the Belgian car distributor that holds a 60 per cent stake in Avis Europe, bought its full entitlement of the shares.

Avis Europe has issued a series of profit warnings and has seen its share price lose three-quarters of its value over the past five years. Margins have been squeezed by pricing pressure from internet bookings and smaller competitors, and revenues suffered from dips in demand due to terrorism and sluggish economies in Western Europe.

Marc Leemans, an analyst at Degroof, said the recovery program was progressing but trading conditions were the main challenge.

“I do have the impression they’re doing a good job, but in terms of a better bottom line, it’s going to take some time,” he said. “They’re going to need a pick up of the market to see a real improvement.”

The shares had risen 6.5 per cent to 53p by late afternoon.

D’Ieteren will announce its first-half results on Friday.

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