Avis Europe Preliminary Results for the Year Ended Dec 31, 1999
24 February 2000
Avis Europe Plc Preliminary Results for the Year Ended December 31, 1999
BRACKNELL, Berkshire--Feb. 24, 2000--Avis Europe plc, the leading car rental company in Europe, Africa, the Middle East and Asia, today announced preliminary results for the year ended December 31, 1999.
Financial Highlights
-- Revenue up 18.4% to euro 1,011.2 million ($1,017.5 million) (up
16.4% to (pound)671.1 million)
-- Like-for-like euro revenue growth of 11.0% (up 9.2% in sterling)
driven by a combination of volume and price
-- Operating profit up 15.2% to euro 217.9 million ($219.2 million)
(up 12.6% to (pound)143.6 million)
-- Operating margin 21.5%, with continuing productivity gains
largely offsetting expected higher fleet costs
-- Pre-tax profits up 15.6% to euro 168.9 million ($170.0 million)
(up 12.6% to (pound)111.1 million)
-- Earnings per share up 15.4% to euro 0.217 ($0.219) (up 12.6% to
14.3 pence)
-- Proposed final dividend of 3.6 pence per share (1998: 3.0 pence)
Operating Highlights
-- Good growth from acquisitions
-- Leadership position reinforced with market share gains
-- Continued investment in technology to service existing and new
distribution channels
Commenting on the results Chairman Alun Cathcart said:
"1999 was a year of excellent progress for the Group. We achieved significant revenue growth and continued strong profit performance. With European economies strengthening and air passenger traffic continuing to grow, the outlook for car rental in our core European markets remains very positive. We have had a satisfactory start to the year and are confident of delivering further growth in the year ahead."
The annual report will be mailed to shareholders on March 23, 2000. The Chairman's Statement, the Operating and Financial Review, and extracts from the Audited Financial Statements are available on www.avis-europe.com from February 24, 2000.
As in previous years, the Financial Statements are presented in both euro and sterling. However, given the significance of Avis' continental European operations, with approximately 70% of revenue generated within euro countries, the main reporting currency is now the euro.
Another Year of Strong Revenue Growth
1999 saw strong revenue growth, despite a slower economic background, with increases of 18.4% and 16.4% in euro and sterling, respectively. Like-for-like euro revenue growth was 11.0%, which excludes the acquisitions of 3 Arrows and our licensee in Greece in 1998, as well as the largest German sub-licensee in 1999.
Revenue growth was again driven by a combination of volume and price. Total group volume (billed days) was ahead by 16.5% (1998: 14.8%) versus the previous year. Revenue per rental increased by 7.3% (1998: 6.4%), comprising an increase in rental length of 5.6% (1998: 3.9%) and a rate per day increase of 1.6% (1998: 2.4%). Rental length improved significantly following the acquisitions of 3 Arrows and Greece.
In like-for-like terms, volume (billed days) was ahead by 10.5% (1998: 9.7%) versus the previous year. Revenue per rental increased by 2.5% (1998: 5.6%), comprising an increase in rental length of 2.1% (1998: 0.8%) and a rate per day increase of 0.4% (1998: 4.8%).
Continued Growth in All Key Markets and Segments
Good growth was achieved in the major markets of France, Germany, Spain, Italy and the UK, which accounted for 84% of total Group revenue in 1999.
In France, revenue growth was 7%, reflecting lower revenue from sub-licensees and slightly lower pricing in some customer segments due to an extremely competitive market. Volume was ahead by 10%, with particularly strong growth in the Leisure segment, where local promotions proved highly successful.
In Germany, revenue grew by 24% (15% excluding the acquisition of our largest sub-licensee), with double-digit volume growth in all segments. Growth was particularly strong in the Corporate segment, following a number of sales initiatives and service enhancements, including the introduction of our Autorent service.
Excellent volume growth and stable prices in Italy resulted in revenue growth of 17%, supported by moves to develop our Corporate and Replacement segments, which continue to be successful.
In Spain, revenue growth of 14% resulted from a buoyant leisure market, supported by an increased marketing focus on key European outbound markets to Spain and strong transatlantic demand.
The UK continued to improve from its economic slowdown at the end of 1998. In 1999, revenue for the full year increased by 8%, accelerating to 12% in the last quarter. During the year the fastest growing segment was Leisure, with strong inbound US business and successful initiatives targeted at growing our share of the domestic leisure market.
We have achieved good revenue increases across the major customer segments. In like-for-like revenue, Leisure was up 15%, Corporate up 9%, Replacement up 10% and Premium up 9%. Leisure was particularly strong with Spain, Italy and Portugal benefiting from growth in intra-European travel and from investments made in sales activities in our principal outbound markets, notably Germany.
Good Growth from Acquisitions Contributes to Strong Revenue Performance
During the year, 3 Arrows and the Greek licensee acquired in 1998 were successfully integrated into the Group. 3 Arrows contributed revenue of euro 42.3 million ((pound)28.1 million) in 1999 and Greece contributed revenue of euro 36.1 million ((pound)23.9 million), an annualized increase of 30%. The sub-licensee acquired in Germany in August 1999 contributed euro 13.4 million ((pound)8.7 million) to Group revenue in 1999 and, since the year end, we have also acquired the remaining 66.7% of our joint venture in Holland, with annualized revenue of euro 25.5 million ((pound)15.9 million). In total, these acquisitions provide annualized incremental revenue of over euro 130 million ((pound)81 million).
Network Developments Provide Platform for Future Growth
We continue to invest in our network in Asia and following the signing of new licensee partnerships in Japan and India, we are now present in 19 countries in the region through such licensees. In total, these businesses generated revenues for our licensees of euro 140 million ((pound)94 million) in 1999. Our licensee partners are well placed to take advantage of the current economic recovery in the region, as well as the longer term potential of the developing rental market.
Leadership Position Reinforced with Market Share Gains
Our like-for-like volume increase of 10.5% was again ahead of estimated industry growth of 6.4%, as well as the principal economic indicators (GDP and airline passenger growth) used to assess the relative performance of the Group, indicating a further increase in Avis' market share.
Partnerships Underpin Leadership Position
In addition to the expansion of our partnership with Iberia and the establishment of separate alliances with Cathay Pacific, Malaysian Airlines and Singapore Airlines in the first six months of the year, major agreements were secured with Spanish Railways and Thomas Cook for implementation in 2000. As a result of the agreement with Spanish Railways, Avis will have additional rental locations in 17 principal stations across Spain. The new Thomas Cook partnership means we now have exclusive agreements within our countries for two of the UK's top three travel companies. We have also established a partnership with Oxford City Council to pilot an inner city Car Club concept, in line with our environmental policy to create meaningful alternatives to private car usage and to reduce traffic congestion.
We continue to invest in existing partnerships and have programs with over 75% of Europe's top 500 companies, relationships with over 70 of the world's airlines and the majority of Europe's major rail companies. The exclusive marketing partnership with Daimler-Chrysler for the Smart car is developing successfully and we now have over 1,300 Smart cars on the fleet in response to growing customer demand.
Strong Profit and Margin Performance Despite Higher Fleet Costs
Operating profit rose by 15.2% to euro 217.9 million (up 12.6% to (pound)143.6 million). Operating margins at 21.5% were 0.6 % points lower than prior year, reflecting higher fleet costs, largely mitigated by improved vehicle utilization, productivity gains and continuing benefits from economies of scale.
As expected, the cost of fleet continued to rise as a percentage of revenue, reflecting a combination of higher vehicle costs, as well as additional damage, vehicle taxation and insurance expenses. We seek to limit increases in fleet costs through a number of initiatives. Firstly, we continue to source vehicles from a large number of suppliers. Secondly, extensive use of guaranteed buy-back arrangements with manufacturers limits our exposure to the used car market. Thirdly, enhanced procedures are being introduced to recover damage caused by customers.
In 1999, over 80% of our European fleet was covered by buy-back arrangements. This is also the case in the UK and therefore we remain well covered against potential reductions in new car prices.
The rise in fleet costs was largely offset by a 5.6% increase in employee productivity and continued benefits from operating efficiencies and overhead cost control. Improvements in employee productivity have been achieved at the same time as increases in employee satisfaction. In addition, 79% of customers participating in our customer satisfaction tracking system continue to rate us in the `very satisfactory' category. Avis gained further recognition for both service quality and customer satisfaction, winning a significant number of major industry awards in 1999.
Constant Focus on Operating Efficiencies
Operating efficiencies will continue to be a significant driver of future profitability and our current investment in technology will realize further gains in the years ahead. These investments are designed to support important initiatives to increase revenue and enhance customer satisfaction.
The fastest growing channel for reservations is now telephone call centers, although we expect to see internet-based reservations, which across Europe currently still account for less than 1% of direct reservations, develop significantly in the next two to three years.
Call volumes have increased by 50% over the last three years and call centers now take almost 40% of all reservations. We are currently investing in two pan-European call centers, which will replace the nine individual country operations, to provide a platform for future growth and to achieve revenue and customer service benefits. The first center will open in Manchester in March 2000, followed by a second center in Barcelona by the fourth quarter of the year. The total investment in these call centers is expected to be euro 22 million over a five year period with a projected return of over 20%. They will also support the development of our business through e-channels.
E-commerce
We continue to invest in new distribution channels to meet changing customer needs. The current consumer internet site will be relaunched in April 2000 and we expect further significant migration to this form of reservation during the year. At the same time, we shall continue developing direct business-to-business links with our corporate customers to increase speed and efficiency, as well as to reduce costs. We have signed an initial agreement with Telewest Communications plc for interactive television in the UK and are progressing further links in both the UK and Germany. In addition, we have also identified opportunities to use internet technology to assist in the control and reduction of our fleet costs, including the processes used in the acquisition and disposal of vehicles. We have made a separate announcement today on a proposed joint venture with Navidec Inc. to sell used cars on-line.
Dividend
The Board is proposing a final dividend of 3.6 pence per share, which will be paid on May 9, 2000 to shareholders on the register at the close of business on March 10, 2000. This brings the total dividend for the year to 5.4 pence per share, compared with 4.5 pence for the previous accounting period.
Summary and Outlook
1999 was a year of excellent progress for the Group. We achieved significant revenue growth and continued strong profit performance. We remain focused on maintaining our leadership position and we continue to make significant progress in all areas of our strategic agenda. We are investing in a number of initiatives during the coming year including the establishment of two pan-European reservation centers, the development of further internet based services, as well as a number of fleet initiatives to optimize yield and assist in the control and reduction of fleet costs. We have had a satisfactory start to the year and we are confident of delivering further growth in the year ahead.
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.
(For tabular results please contact Taylor Raffery Associates)