Avis warns of tough times ahead

Car hire group Avis Europe today posted a sharp fall in full-year profits as it was hit by lower rental prices, increased fleet costs and restructuring charges.

Total pre-tax profits slumped to €10.7m in 2006, down from €20.1m in the previous year.

Chief executive Murray Hennessy also warned that market conditions in the industry remained difficult, adding that while his expectations for 2007 remained unchanged he expected the future environment to be more difficult than predicted two years ago.

The English-based firm, which has struggled to revive its business in the wake of September 11, made savings of €11m in the year to December 31 and said it planned to cut costs by a further €14m in 2007.

Total restructuring costs came in at €26m in the year, with a further €10m of costs expected in 2007.

Mr Hennessy said: “The external environment has been, and is expected to continue to be, more difficult than we assumed two years ago and no longer supports the guidance we gave in 2005 regarding margin improvement.”

The company said it had been hit by increasing fleet costs, which had risen above the rate of inflation, and increased staffing costs despite significant staff reductions.

In its corporate-rental division, revenues per billed day fell by 1.4%, although average rental length was up by 5.9%.

At its individual customer arm, the group said increased business resulting from the World Cup and Winter Olympics was offset by travel disruption at Heathrow amid tighter security controls.