34 <strong>AVIS</strong> <strong>EUROPE</strong>D’IETEREN ANNUAL REPORT 2010Further improvementin utilisation andcontinued momentumof growing marginsand returnsTight cost and capitaldisciplineAvis Europe has increased utilisationby a further 100 basis points to 73.9%,in addition to the 390 basis pointsstep-change improvement achievedin the prior year. This is despite theoperational challenges arising fromthe ash cloud and a progressive rebalancingof holding periods for thenon-repurchase vehicles. Introductionof a non-cancellation fee is also helpingimprove utilisation, as Avis Europenow receives more advance notice ofcustomers’ changed travel plans.As a result of the above actions, underlyingoperating margin further improvedby 10 basis points to 9.0%. Netfinance costs substantially reducedas a result of both lower debt levels(reduced by the Rights Issue and continuedcapital discipline) and reducedinterest rates. As a consequence, underlyingpre-tax margin was stronglyincreased by 120 basis points to 4.2%.Underlying return on capital employedwas ahead by 250 basis pointsto 12.4% driven by both the improvementin operating margin and the focuson capital employed.Following the substantial reductionof the fi xed cost base in 2009, AvisEurope continued to focus on maintainingdiscipline over all cost lines.The average number of staff was reducedby a further 2.9% and AvisEurope extended the salary freezeof the previous year through the firstquarter of 2010.Avis Europe has also driven further efficienciesin business processes. Thecompany extended the implementationof an improved systems interfacefor rental station staff, thereby reducingtraining needs and improving thecustomer experience. The strong focuson fleet costs remains and AvisEurope is presently rolling out a newsystem to help minimise vehicle holdingcosts by further optimising the rotationof vehicles in the rental fleet.During the year, Avis Europe increasedthe operational integration ofthe corporately-owned Budget rentallocations with Avis to now includeGermany and Holland, further maximisingsynergies by fully combiningfleet and back offi ce functions.
<strong>AVIS</strong> <strong>EUROPE</strong>35D’IETEREN ANNUAL REPORT 2010Strategic developmentIn addition to the continued focus onthe traditional markets in WesternEurope, Avis Europe continues to investin its international operations.This includes continued licensee networkdevelopment (for example, therecent opening in Vietnam) and rapidlyexpanding the joint venture in China.In addition to the long-term growth potentialin these markets, Avis Europe isOutlookAvis Europe’s dual-brand strategy andglobal reach are well placed to drivegrowth and benefit from the improvingeconomic climate in most of itsmain markets. While visibility remainslimited, particularly in Spain, the companyexpects overall volumes to furtherimprove and will continue to seekto enhance pricing.already beginning to benefit from thevery strong growth rates in outboundinternational travel of these customersinto the traditional markets.Furthermore, Avis Europe has identifiedgrowth opportunities as consumersand businesses begin to seekto move away from existing vehicleownership patterns, recognising thatthe company is well placed to helpshape the evolution of environmentallycompatible mobility. Current investmentand development activity insuch mobility offers includes the acquisitionof Vinci Park’s interest in theParis car sharing operation, now beingre-launched as “Avis on Demand”; thelaunch of home delivery and collectionin the UK and the developmentin France of an alternative short-termsolution for leasing customers of aFrench make.Costs and capital discipline also remainkey and Avis Europe continuesto focus on improving utilisation.Furthermore, net fi nance costs willreduce year-on-year, benefiting fromcash fl ow performance and the fullyear effect of the Rights Issue. AvisEurope therefore expects a further increasein its underlying pre-tax marginduring 2011.In addition to the focus on the traditionalcore markets, benefiting fromthe Avis and Budget brands strengthsand close attention to quality of service,Avis Europe will also continueto invest in future profitable growthopportunities, particularly its ongoingexpansion in China and otherfast growing markets, and innovatethrough the introduction of furthernew mobility customer offers. TheBoard of Avis Europe remains confidentof further progress in the yearahead.2010 resultsat a glanceRental income was 3.3% higher at1,200 million EUR, primarily reflectingthe improved pricing performancein the corporately-ownedbusiness and the resumption ofgrowth from the Avis licensees segment.Rental income from the corporately-ownedbusiness segmentwas 3.1% higher at 1,153.4 millionEUR in reported currency and 2.3%higher on a constant currency basis.Billed days were 0.1% lower overalland 0.8% ahead on a like-for-like basis.Avis Europe has seen an improvingtrend in the majority of countriesthroughout the year, with billed dayswell ahead in the second half, offsettinga softer first half.Avis Europe guaranteesits “Avis Preferred”customers their keysand rental agreementwithin three minutesof entering the rentalstation.Avis Europe increased rental revenueper day by 2.4% on a reportedbasis and 1.6% on a constantcurrency basis with a particularlystrong performance in the first half,which included a circa 1% pt benefitfrom one-way rentals during the ashcloud period. Avis Europe successfullyyielded the business across thesummer, but since August reportedrental revenue per day was lower,due to the longer rental length offeredby the success of “Avis Flex”and customers extending rentalsduring adverse weather conditions.Underlying operating profit was4.8 million EUR higher than the comparativeperiod reflecting operatingprofit flow from the improvementsin rental rate per day, and continuedtight control of costs. The underlyingnet finance costs of 59.5 million EURwere 8.8 million EUR lower, reflectingthe reduction in the underlyingaverage net debt for the year andthe benefit of lower interest rates,as existing hedging expired, partlyoffset by lower deposit rates on thehigher average gross cash depositsheld. The effective borrowing ratewas 6.5% (2009: 6.7%) and depositrate was 0.5% (2009: 1.2%).
Change language