Avis Europe plc Interim Results for the Six Months Ended June 30, 1999
9 September 1999
Avis Europe plc Interim Results for the Six Months Ended June 30, 1999
BRACKNELL, Berkshire, England--Sept. 8, 1999-- Avis Europe plc, the leading car rental company in Europe, Africa, the Middle East and Asia, today announced their trading results for the six months ended June 30, 1999. These results are reported in Euro as well as sterling.Highlights
-- Continued strong revenue growth up 20.4% to
(pound)303.5 million ($478.9(a)) (up 17.9% in Euro)
-- Like-for-like growth of 12.3% (up 10.0% in Euro), driven by a
combination of price and volume increases
-- Operating profit up 15.7% to(pound)56.7 million ($89.5)
(up 15.0% in Euro)
-- Operating margin 0.8% lower at 18.7%, with continuing
productivity gains largely offsetting expected higher fleet
costs
-- Pre-tax profit up 14.3% to(pound)41.2 million ($65.0)
(up 14.2% in Euro)
-- Earnings per share up 14.2% to 5.3p (8.4(cent)) (up 14.2% in
Euro)
-- Interim dividend of 1.8p per share
(a) US Dollar equivalents are provided for reader convenience at the
June 30, 1999 rate of $1.5778: (pound)1
Commenting on the results, Chairman Alun Cathcart said:
"Avis Europe has again delivered a strong set of results for the first half of the current financial year. We have reinforced our leadership position against a weaker economic background and operating margins remain healthy, despite predicted increases in fleet costs.
With European economies strengthening, the outlook for volume growth is improving, although we do not expect to see rate increases at the levels achieved over the last eighteen months. We have had a satisfactory start to the second half of the current financial year and view the balance of the year with confidence."
Chairman's Statement
Financial Results to June 30, 1999
I am pleased to announce Avis Europe's interim results, which reflect another successful trading period for the Group. During the six months to June 30, 1999, Group revenue grew by 20.4% versus prior year to (pound)303.5 million. Operating profit for the period at (pound)56.7 million was 15.7% above prior year. Net interest expense of (pound)15.8 million rose by (pound)2.8 million, reflecting the cost of funding recent acquisitions. Pre-tax profits were up 14.3% to (pound)41.2 million (1998: (pound)36.0 million), and earnings were 14.3% higher than prior year at (pound)30.9 million (1998: (pound)27.0 million).
Earnings per share increased by 14.2% to 5.3p. The Board is pleased to declare an interim dividend of 1.8p for the six month period ended June 30, 1999. The dividend will be paid on October 21, 1999 to shareholders on the register at the close of business on September 24 1999.
Overview of Trading
Revenue growth was 20.4% in sterling and 17.9% in Euro, with like-for-like growth, excluding the impact of acquiring Greece and 3 Arrows, being 12.3% and 10.0%, respectively. Revenue growth was achieved through a combination of volume and price increases, with underlying rental days 7.2% ahead and Euro revenue per day up 2.6%.
All areas of our business performed well. Good revenue growth was achieved through both airport and downtown channels, up 11.1% and 8.9%, respectively in, Euro. We have achieved particularly strong revenue increases in our principal southern European countries, notably Spain, up 15% and Italy, up 19%, as a result of development initiatives in the local markets, together with strongly focused sales activities in the major outbound markets.
The operating margin at 18.7% was 0.8% lower than prior year. Operating margins were impacted by the anticipated rise in fleet costs, as well as by the seasonality of Greece and the revenue mix at 3 Arrows, as these businesses were successfully integrated into the Group during the period. These factors were largely offset by further strong improvements in employee productivity, which was 5.5% ahead of last year.
We continued to make significant progress in all four areas of our strategic focus: pursuing balanced growth in our core market segments, reinforcing our leadership position, continuing investment in our network development and driving strong operating efficiencies.
Balanced Growth in Core Market Segments
Double-digit growth, excluding acquisitions, was achieved in the Group's five major geographical markets, with the exception of the UK. In the UK, revenues increased by 6%, following a rise of only 4% in the final quarter of 1998 when economic growth had slowed markedly.
We achieved good growth across all customer segments, in particular leisure, which grew by 12.9%. This growth was driven by strong intra-European travel, especially into Spain, as well as from transatlantic business, supported by a healthy US economy and increased airline capacity.
Leadership Position Reinforced
Our increase of 7.2% in total rental days was again ahead of the principal economic factors used to assess the relative performance of the Group, indicating a further increase in Avis' market share. Growth in airport rental days of 8.1% compares with estimated airline passenger growth of 4.9%.
Partnerships remain key in underpinning our leadership position. During the first half of the year we signed a global partnership with Iberia, extending benefits to customers outside Spain, as we seek to evolve such partnerships to include a wider range of value-added benefits. In line with our expansion into Asia, we also secured separate alliances in Asia with Cathay Pacific, Malaysian Airlines and Singapore Airlines.
We continue our investment in technology to maintain our competitive advantage and to support a number of key strategic initiatives, which are vital to our progress. In the first half of the year, our new pan-European customer database became fully operational. The database captures and analyses the reservation and rental behavior of 8.5 million customers in Avis' five core geographical markets renting in any one of 32 countries in the Avis network. We now have the ability to analyze individual customer behavior, giving us new opportunities to market our products more effectively and to increase cross-selling.
Investment in Network Development
3 Arrows, which was acquired in December 1998 to extend our presence in the replacement car segment, has now been successfully integrated into the Group. Revenues and profits were in line with expectations in the first half of the year. The fleet is now supplied by Avis UK and the network has been fully rationalized with cars now being delivered and collected through Avis UK's existing locations.
We have recently strengthened our market position in Germany through the acquisition of the businesses of our largest licensee. Their current network of 30 rental stations will increase annual Group revenue by approximately Euro 34 million. We shall be integrating these operations during the second half of the year.
We have also continued to pursue opportunities to build our network in Asia for longer-term growth. A licensee agreement was signed in June this year with Japaren, one of the leading operators in the Japanese market. Japaren is a 100% subsidiary of the Japan Energy Corporation and operates car rental in 212 locations in Japan with a fleet of over 15,000 cars. The business will be co-branded to feature both Avis and Japaren.
Operations have started in India, following the establishment of a joint venture agreement with the Oberoi Group and we are now represented in 10 major cities.
Strong Operating Efficiencies
We continue to focus on increasing operating efficiencies, including enhancing service delivery and customer satisfaction. In the first half of the year, we achieved a further 5.5% gain in employee productivity. Vehicle utilization was marginally below prior year at 59.0%. However, this was largely reflecting the build-up of the Smart car fleet, which is now operating in line with our normal utilization levels.
The first phase of Avis Europe's Internet reservation service (www.avisworld.com) is now operational, enabling customers to make car reservations over the Internet, 24 hours a day from anywhere in the world. The reservation facilities are supported by fleet information, rental location data and terms and conditions, all of which will bring efficiency gains for Avis and service enhancements for our customers. The second phase will involve the development of multi-lingual sites, as well as a variety of Internet-based services with our major corporate clients to exploit the customer servicing and cross-sales potential which this creates.
In Germany, autorent terminals, which have been piloted over the last year and provide a faster service to regular customers by enabling them to collect their rental car keys directly from an automated unit, will be rolled out to over 40 locations throughout Germany.
Year 2000
Compliance testing of business critical systems is substantially complete and we remain confident that we will be fully compliant before the year end. We are well advanced in preparing contingency plans to minimize the risk of disruption to operations, which could arise if there were a reduction in the normal levels of supply from utility and other service providers over the millennium period.
Summary and Outlook
Avis Europe has again delivered a strong set of results for the first half of the current financial year. We have reinforced our leadership position against a weaker economic background and operating margins remain healthy, despite predicted increases in fleet costs.
With European economies strengthening, the outlook for volume growth is improving, although we do not expect to see rate increases at the levels achieved over the last eighteen months. We have had a satisfactory start to the second half of the current financial year and view the balance of the year with confidence.
Avis Europe plc rents cars under the Avis brand name to customers in 112 countries. Avis Europe's ordinary shares trade on the London Stock Exchange. Prices may be accessed on Bloomberg under the symbol AVE LN and Reuter Equities 3000 Service under AVE.L. Additional information is available on Avis Europe's internet site: www.avis-europe.com
AVIS EUROPE PLC
CONSOLIDATED PROFIT AND LOSS ACCOUNT
Six months to Six months to Six months to
June 30, 1999 June 30, 1999 June 30, 1998
$'000(b) (pound)'000 (pound)'000
Revenue 478,858 303,497 252,050
Cost of sales (214,914) (136,211) (105,248)
------------------ ------------------ ---------------
Gross profit 263,944 167,286 146,802
Administration expenses (174,451) (110,566) (97,768)
----------------- ------------------ ----------------
Operating profit 89,493 56,720 49,034
Share of operating profit from
associated undertakings 405 257 28
Interest receivable 1,150 729 865
Interest payable (26,071) (16,524) (13,886)
------------------ ------------------ --------------
Profit on ordinary activities
before taxation 64,978 41,182 36,041
Taxation (16,243) (10,295) (9,012)
------------------ ------------------ --------------
Profit on ordinary activities
after taxation 48,735 30,887 27,029
Minority interests - equity (49) (31) (34)
------------------ ------------------
------------------ ------------------ --------------
Profit for the period 48,686 30,856 26,995
==============
Dividends (16,556) (10,493) (15,920)
------------------ ------------------ ---------------
Retained profit
for the period 32,130 20,363
================== ==================
Earnings per ordinary share
Basic 8.4(cent) 5.3p 4.6p
================== ================== ==============
Diluted 8.4(cent) 5.3p 4.6p
================== ================== ==============
Six months to Six months to
June 30, 1999 June 30, 1998
(E) '000 (E)'000(c)
Revenue 447,401 379,405
Cost of sales (200,225) (158,515)
------------------ ------------------
Gross profit 247,176 220,890
Administration expenses (162,396) (147,173)
Operating profit 84,780 73,717
Share of operating profit from
associated undertakings 390 42
Interest receivable 1,078 1,300 ================== ================== ================== ================== ==================
Interest payable (24,361) (20,888)
------------------ ------------------
Profit on ordinary activities
before taxation 61,887 54,171
Taxation (15,465) (13,545)
------------------ ------------------
Profit on ordinary activities
after taxation 46,422 40,626
Minority interests - equity (46) (51)
------------------ ------------------
Profit for the period 46,376 40,575
==================
Retained profit
for the period 30,456
==================
Earnings per ordinary share
Basic (E) 0.080 (E) 0.070
================== ==================
Diluted (E) 0.079 (E) 0.069
================== ==================
CONSOLIDATED STATEMENT OF TOTAL RECOGNIZED GAINS AND LOSSES
Six months to Six months to Six months to
June 30, 1999 June 30, 1999 June 30, 1998
$'000(b) (pound)'000 (pound)'000
Profit for the period 48,685 30,856 26,995
Exchange adjustments 8,246 5,226 5,698
------------------ ------------------ ------------
Total recognized
gains and losses 56,931 36,082 32,693
================== ================== ============
Six months to Six months to
June 30, 1999 June 30, 1998
(E)'000 (E)'000(b)
Profit for the period 46,376 40,575
Exchange adjustments 1,506 548
------------------ ------------------
Total recognized
gains and losses 47,882 41,123
================== ==================
(b) US Dollar equivalents are provided for reader convenience at the
June 30, 1999 rate of $1.5778: (pound)1.
(c) The ECU results for the six month period to June 30, 1998 have
been restated in Euros.
The conversion rate used was 1 ECU: 1 Euro.
AVIS EUROPE PLC
CONSOLIDATED BALANCE SHEET
At At At At At
June 30 June 30 June 30 June 30 June 30
1999 1999 1998 1999 1998
$'000(d) (pound) (pound) (E)'000 (E)'000(e)
'000 '000
Intangible assets
Goodwill 56,921 36,076 - 55,156 -
--------- -------- ------- -------- ---------
Fixed assets
Tangible assets
- vehicles 1,293,928 820,084 677,126 1,253,827 1,017,991
Tangible assets
- others 48,188 30,541 24,697 46,695 37,129
Investments 1,340 849 646 1,299 971
--------- -------- ------- --------- ---------
1,343,456 851,474 702,469 1,301,821 1,056,091
--------- -------- ------- --------- ---------
Current assets
Debtors 391,099 247,876 195,675 378,978 294,178
Investments 7,742 4,907 4,104 7,502 6,170
Cash at bank 31,239 19,799 19,044 30,271 28,630
--------- -------- ------- --------- ---------
430,080 272,582 218,823 416,751 328,978
--------- -------- ------- --------- ---------
Creditors falling due
within one year
Bank and other loans (427,207)(270,761)(200,948) (413,967)(302,105)
Other creditors (1,131,112)(716,892)(581,260)(1,096,057)(873,866)
--------- -------- ------- --------- ---------
(1,558,319)(987,653)(782,208)(1,510,024)(1,175,971)
--------- -------- ------- --------- ---------
Net current
liabilities (1,128,239)(715,071)(563,385)(1,093,273)(846,993)
--------- -------- ------- --------- ---------
Total assets less
current liabilities 272,138 172,479 139,084 263,704 209,098
Creditors falling due
after more than one year
Bank and other loans (222,142)(140,792)(154,647) (215,256)(232,496)
Other creditors (59,715) (37,847) (42,235) (57,865) (63,496)
--------- -------- -------- --------- ---------
(281,857)(178,639)(196,882) (273,121)(295,992)
Provisions for
liabilities and
charges (56,190) (35,613) (24,515) (54,449) (36,856)
--------- -------- -------- -------- --------
(65,909) (41,773) (82,313) (63,866)(123,750)
========= ======== ======== ======== ========
Capital and reserves
Called-up share capital 9,199 5,830 5,824 8,037 8,028
Share premium 994,320 630,194 629,431 868,712 867,585
Profit and loss
account (1,069,895)(678,093)(717,878) (941,068)(999,829)
--------- -------- -------- -------- --------
Total shareholders'
funds - equity (66,376) (42,069) (82,623) (64,319)(124,216)
Minority interests
- equity 467 296 310 453 466
--------- -------- -------- -------- --------
(65,909) (41,773) (82,313) (63,866)(123,750)
========= ======== ======== ======== ========
(d) US Dollar equivalents are provided for reader convenience at
the June 30, 1999 rate of $1.5778:(pound)1.
(e) The ECU results for the six month period to June 30, 1998 have
been restated in Euros. The conversion rate used was 1 ECU: 1
Euro.
AVIS EUROPE PLC
CONSOLIDATED CASH FLOW STATEMENT
Six Six Six Six Six
months to months to months to months to months to
June 30, June 30, June 30, June 30, June 30,
1999 1999 1998 1999 1998
$'000(f) (pound) (pound) (E)'000 (E)'000(g)
'000 '000
Net cash inflow from
operating activities 303,895 192,607 220,135 280,120 329,470
Dividends received from
associated undertakings 8 5 9 7 14
Returns on investments
and servicing of finance
Interest received 1,150 729 865 1,078 1,300
Interest paid (23,266) (14,746) (13,842) (21,748) (20,822)
Interest element
of finance lease
rental payments (7,021) (4,450) (2,349) (6,571) (3,536)
-------- -------- -------- --------- ----------
(29,137) (18,467) (15,326) (27,241) (23,058)
-------- -------- -------- --------- ----------
Taxation (11,097) (7,033) (6,937) (10,540) (10,420)
Capital expenditure
Purchase of tangible
fixed assets (897,311) (568,710) (566,680) (837,049) (852,919)
Sale of tangible
fixed assets 925,341 586,475 457,480 865,151 688,561
-------- -------- -------- --------- ----------
28,030 17,765 (109,200) 28,102 (164,358)
-------- -------- -------- --------- ----------
Acquisitions and
disposals
Purchase of licensees - - (763) - (1,096)
Equity dividends paid (27,572) (17,475) (14,559) (25,805) (22,027)
Management of
liquid resources (3,096) (1,962) (1,134) (3,067) (1,741)
Financing
Issue of ordinary
share capital 879 557 73 829 108
Repayment of capital
element of finance
leases (270,220) (171,264) (83,095) (250,844) (125,068)
Increase in short
term loans 35,814 22,699 15,021 33,517 23,693
Decrease in long
term loans (35,119) (22,258) (3,242) (32,405) (4,071)
-------- -------- -------- -------- ---------
(268,646) (170,266) (71,243) (248,903) (105,338)
-------- -------- -------- -------- ---------
(Decrease)/increase
in cash (7,615) (4,826) 982 (7,327) 1,446
======== ======== ======== ======== =========
(f) US Dollar equivalents are provided for reader convenience at
the June 30, 1999 rate of $1.5778:(pound)1.
(g) The ECU results for the six month period to June 30, 1998 have
been restated in Euros. The conversion rate used was 1 ECU: 1
Euro.
Notes to the Financial Statements
Basis of Preparation
The unaudited results for the six month period ended June 30, 1999 have been prepared in accordance with the accounting policies of Avis Europe plc.
The financial information in this statement does not constitute statutory accounts within the meaning of section 240 of the Companies Act 1985. The statutory accounts for the ten month period ended December 31, 1998, on which the auditors have given an unqualified audit report, have been filed with the Registrar of Companies.
The ECU results for the six month period ended June 30, 1998 have been restated in Euros. The conversion rate used was 1 ECU: 1 Euro.
Earnings per Share and Dividends
The basic earnings per share is based on the profit of Avis Europe plc for the financial period divided by the weighted average number of ordinary shares in issue during the period being 582,754,360 (six month period ended June 30, 1998: 582,291,047).
The diluted earnings per share is the basic earnings per share adjusted for dilutive potential ordinary shares. The Group has granted options to Directors and employees over ordinary shares of Avis Europe plc and such shares constitute the only category of dilutive potential ordinary shares of Avis Europe plc
The weighted average number of ordinary shares in issue for the purposes of calculating diluted earnings per share is 585,613,847 (six month period ended June 30, 1998: 584,690,635).
The Directors have declared an interim dividend of 1.8 pence per ordinary share. No dividends are disclosed for the six month period ended June 30, 1998 as this period did not represent a statutory accounting period.
Notes to the Consolidated Cash Flow Statement
Six Six Six Six
months to months to months to months to
June 30, June 30, June 30, June 30,
1999 1998 1999 1998
(pound) (pound) (E)'000 (E)'000
'000 '000
(i) Reconciliation of operating
profit to net cash inflow
from operating activities
Operating profit 56,720 49,034 84,780 73,717
Depreciation on tangible
fixed assets 86,390 66,890 127,569 100,721
Amortization of goodwill 935 - 1,381 -
Adjustments arising on
differences between sales
proceeds and depreciated
amounts (3,744) (5,237) (5,529) (7,882)
-------- -------- -------- ---------
83,581 61,653 123,421 92,839
Increase in debtors (10,186) (634) (18,699) (726)
Increase in creditors 62,492 110,082 90,618 163,640
======== ======== ======== =========
Net cash inflow from
operating activities 192,607 220,135 280,120 329,470
======== ======== ======== =========
(ii) Reconciliation to net debt
(Decrease)/increase in
cash in the period (4,826) 982 (7,327) 1,446
Cash flow from decrease in
debt and leasing finance 170,823 71,316 249,732 105,446
Cash flow from decrease in liquid
resources 1,962 1,134 3,067 1,741
-------- -------- -------- ---------
Movements in net debt
from cash flows 167,959 73,432 245,472 108,633
New finance leases (324,180) (136,497) (482,599) (205,445)
Effect of foreign
exchange movements 34,167 7,247 (4,936) 1,124
-------- -------- -------- ---------
Movements in net debt (122,054) (55,818) (242,063) (95,688)
Net debt at beginning
of the period (523,653) (436,430) (745,158) (576,508)
======== ======== ======== =========
Net debt at end of the period (645,707) (492,248) (987,221) (672,196)
======== ======== ======== =========
AVIS EUROPE PLC INDEPENDENT REVIEW REPORT BY THE AUDITORS TO THE BOARD OF DIRECTORS OF AVIS EUROPE PLC
Introduction
We have been instructed by the Company to review the financial information set out in the financial statements and notes to such statements shown therein and we have read the other information contained in the interim report for any apparent misstatements or material inconsistencies with the financial information.
Directors' Responsibilities
The interim report, including the financial information contained therein, is the responsibility of, and has been approved by the Directors. The Listing Rules of the London Stock Exchange require that the accounting policies and presentation applied to the interim figures should be consistent with those applied in preparing the preceding annual accounts except where any changes, and the reasons for them, are disclosed.
Review Work Performed
We conducted our review in accordance with guidance contained in Bulletin 1999/4 issued by the Auditing Practices Board. A review consists principally of making enquiries of Group management and applying analytical procedures to the financial information and underlying financial data and, based thereon, assessing whether the accounting policies and presentation have been consistently applied unless otherwise disclosed. A review excludes audit procedures such as tests of controls and verification of assets, liabilities and transactions. It is substantially less in scope than an audit performed in accordance with Auditing Standards and therefore provides a lower level of assurance than an audit. Accordingly we do not express an audit opinion on the financial information.
Review Conclusion
On the basis of our review we are not aware of any material modifications that should be made to the financial information as presented for the six months ended 30 June 1999.