Despite a series of self-help measures, Avis Europe continues to struggle with a competitive and rather depressed European car rental market, not to mention a hefty debt mountain.
Admittedly, the company has been making progress in reducing borrowings, as staff cuts, fleet reduction and tighter cash management within the business wiped almost €400m off its debts in the past 12 months, leaving it with a net debt of €912m at the end of June. This dwarfs its market capitalisation of £350m, but for now its financing facilities are in order and its bankers don't appear to be panicking.
So Avis's future as a going concern is not in jeopardy, but management's job looks pretty tough. A notoriously competitive market has been accentuated by the recession, which has hit demand from tourists and corporate customers alike, also making price increases difficult to push through. Trading in July and August is reported to have shown some improvement, but visibility remains 'limited'.
AVIS EUROPE (AVE) | ||||
|---|---|---|---|---|
| ORD PRICE: | 38p | MARKET VALUE: | £349m | |
| TOUCH: | 37.5-38.25p | 12-MONTH HIGH: | 44p | LOW: 2p |
| DIVIDEND YIELD: | nil | PE RATIO: | na | |
| NET ASSET VALUE: | 4.2¢* | NET DEBT: | €912m | |
| Half-year to 30 Jun | Turnover (€m) | Pre-tax profit (€m) | Earnings per share (€¢) | Dividend per share (€¢) |
|---|---|---|---|---|
| 2007 | 621 | -6.8 | -0.3 | nil |
| 2008 | 533 | -34.6 | -2.8 | nil |
| % change | - | - | - | - |
Ex-div: na Payment: na *Includes intangible assets of €16.3m, or 1.7¢ a share £1:€1.14 | ||||
Slashing fleet sizes improved utilisation by 4.7 per cent in the first half, but rental revenue per day across the group was 3.4 per cent lower and billed days fell by 10.5 per cent. Management action meant both fleet costs and cost of sales were reduced by 17 per cent, and the scrappage schemes in Germany and the UK should help stabilise the residual value of those cars Avis sells into the second hand markets.
