Avis downbeat on corporate business

Car rental group Avis Europe today warned it saw no strong near-term recovery in corporate business despite seeing trading recover from the impact of the Iraq war.

Reporting figures for the six months to June 30, the company said profits had been “significantly impacted” by the war and the weaker pricing environment.

Avis has adjusted its capacity to cope with the strain of fewer customers and said demand had shown signs of recovery in the second quarter.

But long-haul travel continued to be depressed, forcing Avis to stick to its forecast that full year revenues will be between 4% and 7% lower than previously expected.

Chairman Bob Reid said: “The Iraq conflict inevitably had a significant effect on the first half, however we again demonstrated the flexibility of our operating model by adjusting our capacity.”

The company, based in Bracknell, Berkshire, had previously warned the flagging business market would batter the first half and had predicted some recovery for the peak summer months.

For the first half, group revenues were 5.5% lower at €527m, including €13m from acquisitions.

Pre-tax profits were €14m after the anticipated loss from the Budget car rental acquisition of €2.8m.

Avis said corporate business remained constrained by economic conditions which also served to push down prices.

The number of billed days rose 1.7% but the average rate charged per day fell by 6.7%, reducing Avis’ operating margin to 8.7%.

UK revenue was 19% lower for the period, being hit earlier than the rest of Europe as customers anticipated the conflict in Iraq.

Avis said business had also been affected by its withdrawal from some lower-yielding domestic accounts, while lower revenues were offset by strong cost controls.

A major back office restructuring programme is on track, the company said, with a new shared service centre to be opened in Budapest.

The integration of the Budget car rental firm, which Avis acquired in March, was also on schedule and performing in line with expectations.

Avis cut its dividend to 1.3p a share as suggested in its pre-close trading update, and down from 2p a share for the first half of 2002.

The company also announced that chief executive Mark McCafferty would be leaving early next year to pursue other opportunities, including in the private equity market.