Short-Term Car Rental Avis Europe plc - D'Ieteren

KEY FACTS> Results ahead of expectations -difficult pricing environment offsetby improved volume and goodutilisation.> Sales revenue up 1.9% toEUR 1,276.4 million - goodsummer performance,particularly in leisure.> Current operating result 12.1%lower at EUR 100.4 million.> Current result before tax,group’s share, 27.0% lowerat EUR 22.7 million.> Restructuring costs and rightsissue expenses impacted resultfor the period.> Recovery strategy on track;- Phase I benefits beginningto flow through;- Phase II implementationprogressing with initial focuson overhead reduction.> Strengthened capital basewith successful completionof the rights issue.FINANCIAL HIGHLIGHTS (in EUR million)2005 2004 % CHANGEExternal sales 1,276.4 1,252.8 +1.9%Current operating result 100.4 114.2 -12.1%Current operating margin 7.9% 9.1% -Current net finance costs -62.1 -62.0 +0.2%Current result before tax 38.3 52.2 -26.6%Unusual items & re-measurements,before tax -35.5 -98.2 -Current result before tax,group’s share 22.7 31.1 -27.0%AVIS SALES BY CUSTOMER SEGMENTAVIS SALES BY GEOGRAPHIC MARKET2005 % CHANGELeisure 37% +5%Corporate 22% -Replacement 22% -4%Premium 19% -2005 % CHANGEFrance 21% +2%Spain 17% +2%Germany 15% +1%Italy 15% -1%UK 14% -2%Other 18% -D’IETEREN TOOK UPITS FULL RIGHTS INAVIS EUROPE EQUITYINCREASEIn July 2005, Avis Europe plc raised approximately£ 110.5 million, net of expenses,through the issue of 334.7 million new sharesat a price of 35 pence per new share byway of a rights issue to qualifying shareholdersproviding Avis Europe with a strengthenedcapital base and funds for its recoverystrategy. D’Ieteren subscribed its share ofthe equity increase, i.e. EUR 105 million.Subsequently, D’Ieteren’s shareholding inAvis Europe remains unchanged at 59.6%.ACTIVITIES AND RESULTSExtracts from the annual report 2005 of Avis Europe plc“Total sales revenue was up 1.9% at EUR1,276 million. Avis corporate revenue was1% ahead of prior year at EUR 1,209 million.Volume, in terms of billed days, was up 2.8%,with all customer groups other than replacementahead of prior year and a particularlystrong performance in leisure. Although thepricing environment remained difficult withrevenue per day 1.5% lower, there was someeasing in the second half, largely resultingfrom a reduction in longer rental lengthreplacement business. Budget corporaterevenue of EUR 34 million was up 26%.Underlying operating profit was EUR 99.9million (2004: EUR 114.2 million), includinga EUR 6.9 million loss from Budget (2004:loss EUR 8.1 million). Underlying Avis operatingprofit amounted to EUR 153.9 millioncompared to EUR 174.8 million in the prioryear. This when combined with a reductionin unallocated costs of EUR 5.4 million, toEUR 47.1 million, resulted in an underlyingoperating profit of EUR 106.8 million,compared to EUR 122.3 million in the prioryear. Avis underlying operating margin afterdeducting unallocated costs at 8.7% was1.3% lower as anticipated. The weakerpricing environment, together with theinvestment in recovery strategy initiativeswas partially mitigated by volume growthand a good utilisation performance.Net exceptional charges before taxation ofEUR 13.2 million have been incurred in theyear, of which restructuring costs of EUR 2.0million in connection with the transfer ofback-office functions to the shared servicecentre in Budapest, a further EUR 6.4 millionincurred in relation to a re-structuring projectcommenced in late 2005 covering the rolesof the group’s European headquarters,corporate operations, shared service centreand call centres. Following the group’s decisionin 2004 to terminate the agreementwith the principal contractor on the IT backofficeproject, additional termination costs ofEUR 3.6 million have been recognised in2005, primarily arising from the mitigatingaction being taken against the terminationcosts, which may lead to a net credit infuture accounting periods. During the year,the collection of credit hire receivablebalances in the Centrus business was moresuccessful than previously anticipated.Exceptional income of EUR 3.2 million hasbeen recognised reflecting a partial reversalof the receivable write-off and reorganisationprovisions made in previous periods.Additionally, various professional, legal andconsultancy costs have been incurred in theperiod in conjunction with the company’scapital restructuring and the rights issue.Where such costs are not directly attributableto the issue of new shares, or thedrawing down of new debt facilities, theyhave been recognised as exceptional items.Underlying net finance costs increasedmarginally year-on-year due to the full yearimpact from the higher cost of the loan notes36 D’Ieteren - Annual Report 2005