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Higher fleet costs, price pressure and a late Easter holiday helped to push Avis Budget Group to a larger-than-expected quarterly loss, sending the rental-car company’s shares down in after-hours trading even as it announced a new cooperation agreement with its largest shareholder.
US-based Avis — which operates car rental brands including Avis, Budget, Apex, Payless and Zipcar — said that revenue for the three months ending March 31 was $1.84bn, just under the $1.88bn that analysts surveyed by Bloomberg had expected and a 2 per cent decline from the same period a year ago.
Its net loss was $107m for the quarter, for a diluted loss of $1.25 per share, steeper than the $51.7m loss, or 60 cents per share, that Wall Street had looked for.
Larry De Shon, the company’s chief executive, said that its results were pressured by lower pricing and higher per-unit fleet costs in its key Americas market. Its first-quarter comparison also suffered from a late Easter, meaning that travellers hit the road in April — which falls during the second quarter — rather than March as they did last year. Mr De Shon added:
“We have taken meaningful actions to reduce costs by more than $50 million to mitigate the effects of weak vehicle residual values. We are optimistic that our results will be stronger over the balance of the year as used-car values began to improve near the end of the quarter and our strategic initiatives continue to gain momentum.”
Ahead of the results, Avis also announced that it had entered into a new agreement with its largest shareholder, hedge fund SRS International Management, that will see SRS agree to standstill and voting commitments until January 2018. During that time, the fund will vote all of its shares in favour of Avis’ nominees and other proposals. SRS’s representative Brian Choi, as well as a mutually agreed-upon independent director, will keep their seats on Avis’ board.
The deal will allow Avis to pull the plug on a short-term shareholder rights plan it announced in January, after it failed to reach a deal with SRS to extend previous standstill commitments set to expire that month.
Avis said at the time that it had entered the plan in order to keep buying back shares without facing the possible risk of a takeover. Avis executive chairman Ronald Nelson said in a statement earlier that the board was “pleased to have put in place a new cooperation agreement with SRS, with whom we have had a constructive relationship for many years.”
After the results, Avis shares fell more than 7 per cent in after-hours trading, although by pixel time they had trimmed those losses to nearly 5 per cent.
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