Losses widen at Avis

By THIS IS MONEY
Updated:

 

CAR hire group Avis Europe today kept alive hopes for a 'considerably stronger' end to the year in the UK - despite fears of a potential blow to business caused by recent airline security alerts.

The Berkshire-based company reported widening half-year losses but said the effect so far from airline disruption had not been material.

It pointed out it was too early to determine if the events will have a medium-term impact on travel patterns in general and on the car hire industry.

Avis Europe expects a stronger performance in the UK and France in the second half, as the two markets continued to show signs of recovery after being the subject of restructuring initiatives in the past year.

In July - one of the company's key trading months - revenues remained strong, but pricing was weaker, reflecting continued competitive conditions in some markets.

The firm, which has struggled since September 11, said half-year pre-tax losses to June 30 widened to €11.9m (£8m), compared with €4.6m (£3.1m) last year. Revenues increased by 5.5% to €614m (£414m) thanks in part to a boost in car rentals during the World Cup in Germany and Winter Olympics in Turin. But operating profits dropped by €7.7m (£5.2m) to €25m (£16.8m) as running costs for the fleet - including maintenance and insurance - ballooned by €22.8m (£15.4m).

Avis was also stung by a €7.7m (£5.2m) rise in staff costs caused by salary, inflation and pension increases, while overheads were also up by 4.3 million euros (£2.9m).

Chief executive Murray Hennessy said: 'We have delivered good volume growth in the first half and, although the pricing environment remains challenging, we have achieved another good utilisation performance.

'The lower operating profit was as expected and driven mainly by anticipated higher fleet costs.'

Avis has been carrying out a cost-cutting programme over the last few months in a bid to revive the fortunes of the struggling business.

It is closing its Manchester call centre - with the loss of 200 jobs - and shifting operations to Barcelona, while its Bracknell headquarters is also seeing a 'substantial reduction' in staff.

But the company believes the knock-on effect of the changes could boost operating profits by €11m (£7.4m) - as opposed to the predicted €7m (£4.7m).

Despite the losses, Mr Hennessy believes there is room for optimism as changes to the company begin to kick into place. He said: 'Performance in the second half should improve with continued positive volume trends and the further benefits of our recovery strategy taking effect.

'The effect of the overhead restructuring programme will be higher than expected in the full year. However, we are choosing to invest in web development and revenue management which are both key to our margin improvement strategy.'

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