Avis shares slump after revenues warning

Troubled car rental firm Avis Europe saw its shares fall 7% today as it warned difficult trading conditions had continued into its new financial year.

The group, which owns the Budget and Avis brands, said revenues at all of its business divisions were lower than last year during the four months to the end of April.

A weak performance by its leisure hire arm and its business providing replacement vehicles after breakdowns were largely to blame, offsetting “modest” volume growth in its premium and corporate divisions.

Avis had already warned in February that it expected tough trading conditions to continue throughout 2005. The firm has been hit by the recent economic downturn, as well as the growing trend for people to hire cars online.

It told its annual meeting today that it was now forecasting lower revenue growth for the full year, although cost savings meant it was not changing its profits expectations.

The corporate division, which provides company car fleets, recorded higher sales volumes but this was offset by pressure on prices, especially in France.

The earlier timing of Easter this year contributed to lower volumes at its European leisure arm.

There was no recovery in the number of travellers hiring vehicles after arriving in Europe from the United States.

As part of the first phase of a recovery drive, Avis has been increasing the proportion of its bookings that are done online and improving customer service. The benefits of these initiatives were expected to improve volumes in the second half of the current financial year.

Plans for the second phase of the overhaul – which will look at the structure of the wider business – were “well underway”, although no more details were provided.

The company found itself at the centre of takeover speculation earlier this year. However, a bid for Avis would require the backing of Brussels-backed car distributor D’Ieteren, which owns 60% of the firm.

In its last financial year, Avis saw profits before tax and exceptional items fall to €54.2m against €59.4m previously.

Shares in London's stock exchange were 4.75p lower at 66.5p today.