Embargoed 1 September 2003
AVIS EUROPE PLC
INTERIM RESULTS FOR SIX MONTHS ENDED 30 JUNE 2003
Avis Europe plc, the leading car rental group in Europe, Africa, the Middle
East and Asia, announces its results for the six months ended 30 June 2003.
Operating headlines
* As previously announced, profit for first half significantly impacted by
Iraq conflict and weaker pricing environment.
* Continued strong control of fleet and staff costs.
* Improved demand in second quarter and summer trading met expectations
* Budget integration progressing well and expansion strategy developed.
Financial headlines
* Group revenue 5.5% lower at Euro527 million, including Euro13 million from
acquisitions.
* Billed days 1.7% up, however, average rate per day 6.7% lower (5.2% at
constant currency), reduced operating margin* to 8.7%.
* Profit before tax* at Euro14.0 million, after the loss as anticipated from
Budget of Euro2.8 million.
* EPS of 1.8 euro cents (1.4 pence).
* Interim dividend reduced to 1.3 pence per share as previously advised.
*before goodwill amortisation and exceptional items.
Sir Bob Reid, Chairman said:
"The Iraq conflict inevitably had a significant effect on the first half,
however we again demonstrated the flexibility of our operating model by
adjusting our capacity. As a result, fleet utilisation and staff productivity
were both ahead of prior year.
"We have taken advantage of future growth opportunities despite the difficult
trading environment, with the acquisition of Budget and a major Avis licensee
in France, as well as our entry into China.
"Market demand showed signs of recovery from the second quarter, with the
exception of long haul travel, although prices were still weaker than prior
year. Summer trading has met expectations, with some improvement in the monthly
trend of leisure prices. Whilst the corporate market has stabilised, we are not
yet assuming any near-term marked recovery in demand or pricing in this
segment.
"Overall, we expect full year revenues, excluding Budget, to be 4% to 7% lower
than 2002, in line with our trading update in June. We have not changed our
expectations for full year earnings."
Enquiries:
Mark McCafferty, Chief Executive
Martyn Smith, Group Finance Director 01344 426644
Ben Foster, Financial Dynamics 020 7269 7247
The interim report will be posted to shareholders on 10 September 2003. The
financial statements are available on www.avis-europe.com from today.
Photodesk: Latest pictures available from www.avis-europe.com
RESULTS OVERVIEW
First half results were significantly affected by the Iraq conflict and
continuing weak economic conditions in Europe. Despite this, billed days were
1.7% ahead of prior year as travel demand in the second quarter improved and
the benefits flowed from the acquisition of a French licensee earlier in the
year. However, revenues were impacted by lower pricing in a weaker market and
by adverse currency movements.
At the operating level, the normal seasonal build-up of fleet and staff was
reduced in anticipation of the effect of the conflict on travel. As a result,
fleet utilisation and staff productivity improved over prior year.
The integration of the Budget acquisition is progressing well and plans for
expansion into the growing budget-conscious market are being advanced.
Group revenue was 5.5% lower at Euro527.3 million and included Euro7.4 million in
respect of the Budget business and some Euro6 million from the French licensee
acquisition. The difficult yield environment and the anticipated Euro2.8 million
Budget loss reduced profit before tax, goodwill amortisation and exceptional
items to Euro14.0 million (2002: Euro51.5 million). Adjusted earnings per share on
the same basis was 1.8 euro cents; 1.4 pence (2002: 6.9 euro cents; 4.3 pence).
An exceptional net credit of Euro3.8 million comprised Euro2.3 million costs from
previously announced restructuring programmes and Euro1.1 million from Budget
integration, offset by income of Euro7.2 million from a VAT repayment in respect
of prior periods, which included interest of Euro3.6 million.
Profit before tax after goodwill amortisation and exceptional items was Euro15.3
million and earnings per share on the same basis was 1.8 euro cents (1.4
pence).
Dividend
As announced in June, the Board has decided it is prudent to re-base the
dividend with the intention to rebuild cover to more normal levels during the
next two to three years. The interim dividend for the six months to 30 June
2003 will be 1.3 pence per share and will be paid on 7 October 2003 to
shareholders on the register at close of business on 12 September 2003.
REVENUE OVERVIEW
In the first half of 2003, revenue was Euro527.3 million, including Euro7.4 million
from Budget and some Euro6 million from the French licensee acquisition. As a
result of the strength of the euro, currency translation reduced reported
revenues by Euro8.8 million. The underlying reduction at constant exchange rates
and excluding acquisitions was 6.4%. In order to show underlying business
trends, all revenue comparisons that follow are on the basis of constant
exchange rates and excludes Budget.
Overall billed days were 1.7% ahead of prior year, with the impact of the Iraq
conflict on inbound business largely offset by growth in intra-European and
domestic Leisure.
First quarter billed days were up 1.3%, while the second quarter showed growth
of 2.1%. Excluding the benefit from the acquisition in France, billed days were
0.5% higher than prior year in the first half.
However, yield has been weak during the period, with changes in Leisure mix and
actions to remain competitively priced in the intra-European and domestic
Leisure segments, contributing to a reduction in revenue per day of 5.2% versus
prior year.
The strategy to develop more internet business has enabled us to successfully
increase the proportion of customers booking online to 12% in June, growing 65%
year on year.
Domestic and intra-European Leisure volumes recovering
Leisure business represented 35% of total revenue in the first half. Although
we achieved an increase in billed days despite the disruptions to the travel
market, overall revenue in a difficult pricing environment was only 2% lower
than prior year.
Intra-European Leisure revenue (42% of the segment) was up 3% with strong
volume increases in all markets, particularly Spain and Italy. However,
promotional pricing in the market around the Iraq conflict period, contributed
to a lower rate per day.
Domestic Leisure revenue (32% of the segment) was 5% improved, with strong
volume increases in France, Germany and Spain.
International Leisure revenue (26% of the segment) was 17% lower, with
significant volume decline attributable to the continuing weakness in the long
haul travel market. Whilst pricing gains were made in this segment, these were
offset by the weakness of the US dollar.
Corporate business remains constrained by economic conditions
Corporate business represented 22% of revenues in the first half of 2003.
Demand in this segment continued to be constrained by economic conditions,
resulting in greater competitive pressure on prices. Revenues were 8% lower
than prior year with both volume and rate per day reduced, reversing strong
price increases in the prior year. Germany remained weak, although it showed an
improvement in the second quarter and the UK was affected by the withdrawal
from certain lower yielding accounts.
Replacement
Replacement accounted for 24% of revenue. Revenue was at the same level as
prior year, supported by successes in the important German market and continued
growth in the long term rental business in Greece.
Premium
The Premium segment represented 19% of revenue in the first half. Revenue was
only 1% lower than prior year benefiting from some recovery in European air
traffic in the second quarter and continuing emphasis on our rail partnerships.
Growth in Spain was particularly strong as we continue to develop our
partnership with RENFE, the national rail operator.
Major markets
The major markets of Spain, France, Italy, Germany and the UK generated 80% of
Avis' revenue.
We have continued to invest in those markets showing stronger opportunities and
less affected by external market conditions.
Spain, where revenue grew by 10%, remains our strongest market with volume
increases in all segments. Corporate and Replacement volumes were particularly
strong as we continued to focus on development of domestic business to reduce
dependence on peak leisure periods. Our mainstream Leisure market in Spain has
also increased, with volumes benefiting in particular from several new tour
operator partnerships.
France grew revenue by 2%, benefiting from the acquisition of a major licensee
in January. Excluding this acquisition revenue reduced by 4%. Volumes increased
in domestic business with a double-digit increase in Leisure, but were offset
by a tough pricing environment.
Italy's revenue was 7% lower as a result of a decline in US inbound business
and weaker Corporate demand, partially offset by a significant increase in
intra-European Leisure volume where the market has been strong.
Germany continues to be affected by the weak economy and the depressed
transatlantic inbound market, with revenue down 10%. However, while still below
prior year, the trend in Corporate volumes improved in the second quarter, as
did the Replacement business, which benefited from new sales initiatives
launched at the end of 2002.
UK revenue was 19% lower, being impacted earlier than in the rest of Europe, as
customers anticipated the conflict in Iraq. Business was also affected by our
withdrawal from certain lower-yielding domestic accounts. Lower revenue has
been mitigated by strong cost control, with fleet cost per unit below prior
year.
Partnership development
Through several marketing initiatives, we have succeeded in increasing the
rentals achieved through our airline partnerships, particularly British
Airways, Lufthansa and Iberia. We have agreed exclusive supply arrangements
with Virgin Travelstore and have been appointed the preferred car rental
provider for Advantage, the independent travel agent consortium.
In addition, our new partnership with Expedia and the development of our
relationship with Flybe. supported the substantial growth in our internet
volumes.
Centrus
Centrus, the non-fault accident business, has experienced slow claims
collection, however, this is progressing steadily in conjunction with insurance
companies. New operating procedures have been implemented and when these are
more firmly established, the growth strategy will be resumed.
PROFIT OVERVIEW
Fleet and staffing adjusted to lower demand
The flexibility of our operating cost base enabled us to adjust the seasonal
build-up of fleet and staff in anticipation of the conflict in Iraq. These
actions resulted in our key efficiency measures being ahead of prior year, with
fleet utilisation up 1.5% and staff productivity 2.3% improved.
Average fleet was in line with prior year, contrasting to the 1.7% increase in
billed days. Staff numbers were 1.1% lower despite rentals being 1.1% higher
than prior year, benefiting from the restructuring programme announced in
September. Other operating costs, including overheads, were lower due to an
intensive focus on cost control.
Currency translation at the operating profit level was broadly immaterial due
to natural hedges within the business, hence the adverse translation impact on
revenue was offset by a favourable translation effect on costs.
Operating profit
Primarily as a result of the 6.7% lower average rate per day (5.2% at constant
currency), operating profit, before goodwill amortisation and exceptional items
was Euro46.1 million (2002: Euro82.0 million), including Euro2.4 million operating loss
from Budget.
Balance sheet and debt
Fleet assets of Euro1,641 million were Euro66 million higher than prior year, partly
due to the licensee acquisition in France and Budget corporately-owned
business.
Net debt of Euro1,250 million at 30 June 2003 was Euro170 million higher than 31
December 2002, largely driven by the seasonal increase in fleet. In addition,
non-fleet capital expenditure was higher, mainly due to the development of a
property in Madrid and IT investment together with the acquisitions.
Average net debt in the period of Euro1,079 million compares to Euro1,093 million in
the first half of 2002. Interest cost of Euro31.6 million increased by Euro1.8
million, excluding an exceptional item, principally due to the greater use of
bond financing since prior year.
Taxation
The effective rate of taxation on profit before goodwill amortisation and
exceptional items was 23.5%, compared with 22% for the full year 2002. The tax
charge in respect of exceptional items amounted to Euro1.6 million.
STRATEGIC DEVELOPMENT
While the external pressures of global events have had an effect on the
business, we have continued to invest in the strategic future of the Group.
In March, we completed the acquisition of certain assets of Budget, including
the rights to use the trademark and name in Europe, the Middle East and Africa.
As well as acquiring the royalty streams from an existing licensee network, the
acquisition provides the opportunity to develop a leading presence in the
growing budget-conscious travel market.
Since the acquisition, we have focused on integrating the business and
establishing services to support the development of the existing licensee
network in 65 countries. As part of the transition, the Budget headquarters
will relocate to the Group facility in Bracknell in November.
In addition to supporting our developing licensee network, we are planning to
expand the Budget brand to capitalise on the continuing expansion of low cost
air travel and the growth of internet sales.
We intend to commence development in the fourth quarter of 2003, with an
initial target of establishing a corporate European network of approximately
100 stations over the next five years, with an overall ambition for this to
represent around 10% of Group revenue.
In January, we launched our joint venture in China and plan to open around 70
rental stations by the time of the Beijing Olympics in 2008.
Finance and IT process restructuring
We have progressed previously announced initiatives to reduce the cost of our
financial and IT processes. This includes replacing existing multiple financial
systems with a single platform and consolidating high volume transactional and
administrative tasks in Budapest. We will be piloting these changes in Germany
and Belgium in the first quarter of 2004 and expect to include our other
corporate operations over a two year period. Additionally, we shall standardise
our IT processes and increase the use of business partners to reduce support
costs. These initiatives will generate medium term margin improvement and
create a strong platform for the future growth and development of the Group.
Summary and Outlook
The Iraq conflict inevitably had a significant effect on the first half,
however we again demonstrated the flexibility of our operating model by
adjusting our capacity. As a result, fleet utilisation and staff productivity
were both ahead of prior year.
We have taken advantage of future growth opportunities, despite the difficult
trading environment, with the acquisition of Budget and a major Avis licensee
in France, as well as our entry into China.
Market demand showed signs of recovery from the second quarter, with the
exception of long haul travel, although prices were still weaker than prior
year. Summer trading has met expectations, with some improvement in the monthly
trend of leisure prices. Whilst the corporate market has stabilised, we are not
yet assuming any near-term marked recovery in demand or pricing in this
segment.
Overall, we expect full year revenues, excluding Budget, to be 4% to 7% lower
than 2002, in line with our trading update in June. We have not changed our
expectations for full year earnings.
Consolidated Profit and Loss Account
Six Six Six Six
months to months to months to months to
30 June 30 June 30 June 30 June
2003 2002 2003 2002
Notes Euro000 Euro000 �000 �000
Revenue 527,300 558,275 358,182 345,175
Cost of sales (278,041) (274,594) (188,514) (169,716)
Gross profit 249,259 283,681 169,668 175,459
Administrative expenses (2003: (205,402) (203,682) (138,794) (125,739)
including exceptional items)
Operating profit before goodwill 46,138 82,019 32,337 50,968
amortisation and exceptional
items
Amortisation of goodwill (2,417) (2,020) (1,634) (1,248)
Net exceptional items 3 136 - 171 -
Operating profit 43,857 79,999 30,874 49,720
Share of operating loss from (579) (714) (390) (440)
joint ventures
Net interest payable (2003: 3 (27,947) (29,796) (18,776) (18,413)
including exceptional items)
Profit on ordinary activities
before taxation,
goodwill amortisation and 14,002 51,509 10,592 32,115
exceptional items
Amortisation of goodwill (2,438) (2,020) (1,648) (1,248)
Net exceptional items 3 3,767 - 2,764 -
Profit on ordinary activities 15,331 49,489 11,708 30,867
before taxation
Taxation 4 (4,703) (10,889) (3,525) (6,791)
Profit on ordinary activities 10,628 38,600 8,183 24,076
after taxation
Minority interests - equity (24) (66) (17) (41)
Profit for the period before
goodwill
amortisation and exceptional 10,686 40,554 8,118 25,283
items
Amortisation of goodwill (2,299) (2,020) (1,554) (1,248)
Net exceptional items 2,217 - 1,602 -
Profit for the period 10,604 38,534 8,166 24,035
Dividends 5 (10,662) (18,558) (7,615) (11,723)
Retained (loss)/profit for the (58) 19,976 551 12,312
period
Earnings per share (euro cents/
sterling pence per share)
Basic and diluted 6 1.8 6.6 1.4 4.1
Adjusted 6 1.8 6.9 1.4 4.3
Consolidated Statement of Total Six Six Six Six
Recognised Gains months to months to months to months to
and Losses 30 June 30 June 30 June 30 June
2003 2002 2003 2002
Euro000 Euro000 �000 �000
Profit for the period 10,604 38,534 8,166 24,035
Exchange movements (12,841) (6,117) (3,172) (1,694)
Taxation on exchange movements 5,502 2,372 3,613 1,462
Total recognised gains and losses 3,265 34,789 8,607 23,803
Consolidated Balance Sheet
At 30 June At 30 June At 30 June At 30 June
2003 2002 2003 2002
Euro000 Euro000 �000 �000
Intangible fixed assets
Goodwill 91,202 66,783 63,805 42,683
Tangible fixed assets
- vehicles 1,640,877 1,575,119* 1,147,965 1,006,708*
- other 102,274 74,659 71,551 47,718
1,743,151 1,649,778 1,219,516 1,054,426
Investments 14,361 4,781 10,047 3,056
1,757,512 1,654,559 1,229,563 1,057,482
Total fixed assets 1,848,714 1,721,342 1,293,368 1,100,165
Current assets
Debtors 547,387 616,031* 382,954 393,727*
Investments 72,793 95,210 50,926 60,852
Cash at bank and in hand 22,440 18,987 15,699 12,135
642,620 730,228 449,579 466,714
Creditors amounts falling
due within one
year
Bank and other loans (275,260) (667,908) (192,574) (426,882)
Other creditors (1,227,369) (1,240,479) (858,671) (792,831)
(1,502,629) (1,908,387) (1,051,245) (1,219,713)
Net current liabilities (860,009) (1,178,159) (601,666) (752,999)
Total assets less current 988,705 543,183 691,702 347,166
liabilities
Creditors amounts falling
due after
more than one year
Bank and other loans (769,255) (321,913) (538,174) (205,745)
Other creditors (33,709) (35,266) (23,583) (22,540)
(802,964) (357,179) (561,757) (228,285)
Provisions for liabilities (83,017) (83,197) (58,079) (53,174)
and charges
102,724 102,807 71,866 65,707
Capital and reserves
Called-up share capital 8,083 8,083 5,858 5,858
Share premium 875,984 875,945 634,757 634,732
Profit and loss account (781,953) (781,745) (569,176) (575,218)
Total shareholders' funds - 102,114 102,283 71,439 65,372
equity
Minority interests - equity 610 524 427 335
102,724 102,807 71,866 65,707
* Comparatives restated, see Note 1.
Consolidated Cash Flow Statement
Six months Six months Six Six
to to months to months to
30 June 30 June 30 June 30 June
2003 2002 2003 2002
Notes Euro000 Euro000 �000 �000
Net cash inflow from operating 7i 112,711 147,087 * 76,874 91,642 *
activities
Returns on investments and
servicing of finance
Interest received 7ii 5,403 1,500 3,798 928
Interest paid (27,900) (24,950) (18,989) (15,429)
Interest element of finance (4,584) (5,774) (3,102) (3,569)
lease rental payments
Dividend paid to minority - (200) - (126)
interests
(27,081) (29,424) (18,293) (18,196)
Taxation (22,878) 4,704 (15,255) 2,843
Capital expenditure and
financial investment
Purchase of tangible fixed (796,895) (825,547)* (544,641) (511,379)
assets *
Sale of tangible fixed assets 1,010,411 1,060,289 681,254 653,861 *
*
213,516 234,742 136,613 142,482
Acquisitions and disposals
Purchase of Group undertakings (43,877) - (29,340) -
Cash balances acquired with 626 - 423 -
subsidiary undertakings
(43,251) - (28,917) -
Equity dividends paid (32,403) (36,261) (22,268) (22,231)
Management of liquid resources
Sale/(purchase) of current asset 39,232 (95,948) 26,242 (59,658)
investments
Financing
Issue of ordinary share capital - 1,517 - 937
Repayment of capital element of (371,986) (380,749) (251,454) (235,204)
finance leases
Increase in short term loans 54,596 237,899 30,265 156,024
Increase/(decrease) in long term 60,546 (86,772) 54,751 (60,701)
loans
(256,844) (228,105) (166,438) (138,944)
Decrease in cash 7iii (16,998) (3,205) (11,442) (2,062)
* Comparatives restated, see Note 7i.
Notes to the Financial Statements
1. Basis of preparation
The interim financial statements are unaudited and do not constitute statutory
accounts within the meaning of section 240 of the Companies Act 1985. They have
been prepared on the basis of the accounting policies set out in the Group's
2002 Annual Report and Accounts.
As described in the Group's 2002 Annual Report and Accounts, a change of
accounting policy was made to reclassify prepaid but as yet not registered
vehicles from prepayments to fixed assets. As a consequence of this change,
other prepayments at 30 June 2002 have reduced by Euro41,422,000; �26,473,000 and
vehicle fixed assets have increased by an equal and opposite amount.
The statutory accounts for the year ended 31 December 2002 have been delivered
to the Registrar of Companies and include an audit report which was unqualified
and did not contain a statement under either Section 237(2) or 237(3) of the
Companies Act 1985.
2. Exchange rates
The majority of the Group's operations are located outside of the UK and
operate in currencies other than sterling. Monthly profit and loss and other
period statements of the Group's overseas operations are translated at the
relevant rate of exchange for that month. Therefore, each line item in these
period statements represents a weighted average rate. Assets and liabilities
denominated in foreign currencies are translated at the rates of exchange
ruling at the period end.
The rates of exchange to sterling for the currencies which principally affect
the Group's results were as follows:
Six months Year ended Six months
to to
30 June 31 December 30 June
2003 2002 2002
Weighted average reported rates Euro 1.471 1.590 1.617
for revenue
Swiss 2.189 2.340 2.377
franc
Weighted average reported rates Euro 1.242 1.574 1.595
for operating profit*
Swiss franc 2.139 2.334 2.371
Period end rates Euro 1.429 1.555 1.565
Swiss franc 2.205 2.282 2.311
* Before goodwill amortisation and exceptional items
3. Net exceptional items
Exceptional administrative income in the period comprised the following items:
Following the acquisition of the Budget business in the current period (see
Note 8), the Group has entered into a programme of integration and
reorganisation. Restructuring costs of Euro1,136,000; �805,000 have been incurred
in the period with the integration programme being due for completion later in
the current year.
The Group continued an action plan started in 2002 to reduce a number of
management and support positions. Severance costs of Euro1,421,000; �974,000 have
been incurred in the period and this redundancy programme is now largely
complete.
The Group commenced a project to re-engineer finance and information technology
back office activities. Restructuring costs of Euro882,000; �603,000 have been
incurred in the period and the programme is scheduled to complete in 2005.
The Group received a repayment of VAT in respect of earlier years which, due to
the size (Euro3,575,000; �2,553,000) and nature of this one off receipt, it has
been treated as exceptional income. In addition, the Group received interest of
Euro3,631,000; �2,593,000 on the VAT repayment which has been treated as
exceptional interest income.
There were no exceptional items in the comparative period.
Six months Six months Six months Six months
to to to to
30 June 30 June 30 June 30 June
2003 2002 2003 2002
4. Taxation Euro000 Euro000 �000 �000
Current tax:
UK corporation tax on profits 747 9,550 560 5,956
for the year before exceptional
items
Tax on exceptional items 1,793 - 1,344 -
2,540 9,550 1,904 5,956
Foreign tax:
Corporation tax on profits for 1,955 (1,467) 1,465 (915)
the year before exceptional
items
Tax on exceptional items (243) - (182) -
Adjustments in respect of prior (650) - (487) -
years
1,062 (1,467) 796 (915)
Total current tax 3,602 8,083 2,700 5,041
Deferred tax:
Origination and reversal of 1,101 2,806 825 1,750
timing differences
Tax on profit on ordinary 4,703 10,889 3,525 6,791
activities
Six months Six months Six months Six months
to to to to
30 June 30 June 30 June 30 June
2003 2002 2003 2002
5. Dividends Euro000 Euro000 �000 �000
Dividend per ordinary share:
Interim dividend of 1.3p; 1.8c 10,662 18,558 7,615 11,723
(2002: 2.0p; 3.2c)
6. Earnings per share
Basic earnings per share is based on the profit for the period which has also
been used to calculate the diluted earnings per share. Adjusted earnings per
share is calculated after adjusting for exceptional items and goodwill
amortisation to highlight the ongoing trading performance of the Group.
Six Six Six Six
months to months to months to months to
30 June 30 June 30 June 30 June
2003 2002 2003 2002
Euro000 Euro000 �000 �000
Profit 10,604 38,534 8,166 24,035
Amortisation of goodwill 2,438 2,020 1,648 1,248
Net exceptional items (3,767) - (2,764) -
Taxation on adjusting items 1,411 - 1,068 -
Adjusted profit pre goodwill and 10,686 40,554 8,118 25,283
exceptional items
Six Six Six Six
months to months to months to months to
30 June 30 June 30 June 30 June
2003 2002 2003 2002
Euro Euro Pence Pence
cents cents
Basic earnings per share 1.8 6.6 1.4 4.1
Diluted earnings per share 1.8 6.6 1.4 4.1
Basic earnings per share 1.8 6.6 1.4 4.1
Amortisation of goodwill 0.4 0.3 0.3 0.2
Net exceptional items (0.6) - (0.4) -
Taxation on adjusting items 0.2 - 0.1 -
Adjusted earnings per share 1.8 6.9 1.4 4.3
The weighted average number of shares in issue for the period was 584,913,616
(2002: 584,334,424). The Group has granted options to certain Directors and
employees over ordinary shares of Avis Europe plc. Such shares constitute the
only category of potentially dilutive ordinary shares and these would have
increased the weighted average number of shares in issue by nil in 2003 (2002:
1,001,944). These options had no impact on profit in either period.
Six months Six months
to to
30 June 30 June
2003 2002
Before and
Before after
Exceptional Exceptional exceptional
Items Items items
7. Notes to the consolidated cash Euro000 Euro000 Euro000 Euro000
flow statement
(i) Reconciliation of operating
profit to operating cash flow
Operating profit 43,721 136 43,857 79,999
Depreciation on tangible fixed assets 149,478 - 149,478 151,400
Amortisation of goodwill 2,438 - 2,438 2,020
Adjustments arising on differences
between sales proceeds and (5,450) - (5,450) (7,134)
depreciated amounts
146,466 - 146,466 146,286
Increase in debtors (60,210) - (60,210) (113,031)*
(Decrease)/increase in creditors (15,443) (1,959) (17,402) 33,833 *
Net cash inflow from operating 114,534 (1,823) 112,711 147,087
activities
Six months Six months
to to
30 June 30 June
2003 2002
Before and
Before After
exceptional Exceptional Exceptional
items items Items
�000 �000 �000 �000
Operating profit 30,703 171 30,874 49,720
Depreciation on tangible fixed assets 101,367 - 101,367 93,603
Amortisation of goodwill 1,648 - 1,648 1,248
Adjustments arising on differences
Between sales proceeds and (3,709) - (3,709) (4,417)
depreciated amounts
99,306 - 99,306 90,434
Increase in debtors (41,067) - (41,067) (69,064)*
(Decrease)/increase in creditors (11,233) (1,006) (12,239) 20,552 *
Net cash inflow from operating 77,709 (835) 76,874 91,642
activities
* Working capital movements in respect of the purchase and sale of tangible
fixed assets were previously included within net operating cash inflow. This
practice was changed in the year ended 31 December 2002 to reflect these
working capital movements within capital expenditure cash flows. Accordingly,
the comparatives have been restated for the combined effect of this together
with the adjustment referred to in Note 1. Reported comparative cash flows for
purchase of tangible fixed assets has consequently decreased by Euro105,809,000; �
63,957,000 and the sale of tangible fixed assets has increased by Euro85,694,000;
�51,804,000. For both of these adjustments, a compensating entry has been made
within net operating cash inflow.
(ii) Interest received
Interest received in 2003 of Euro5,403,000; �3,798,000 includes Euro3,361,000; �
2,593,000 of exceptional interest income, as described in Note 3 to the
financial statements. There was no exceptional income in the comparative
period.
Six months Six months Six Six
to to months to months to
30 June 30 June 30 June 30 June
(iii) Reconciliation of net cash flow 2003 2002 2003 2002
to movement
in net debt Euro000 Euro000 �000 �000
Decrease in cash in the period (16,998) (3,205) (11,442) (2,062)
Cash flow from decrease in debt and 256,844 229,622 166,438 139,881
leasing finance
Cash flow from decrease/(increase) in (39,232) 95,948 (26,242) 59,658
liquid resources
Movement in net debt resulting from 200,614 322,365 128,754 197,477
cash flows
Loans and finance leases on (18,943) - (12,800) -
acquisition of subsidiaries
New finance leases (350,516) (465,519) (236,817) (287,571)
Exchange movements (545) 249 (58,482) (23,629)
Movement in net debt (169,390) (142,905) (179,345) (113,723)
Net debt at beginning of the period (1,080,228) (1,130,279) (694,894) (700,011)
Net debt at end of the period (1,249,618) (1,273,184) (874,239) (813,734)
8. Acquisitions
On 28 January 2003, the Group acquired a 50% interest in Anji Car Rental and
Leasing Company Limited ("Anji"). Anji operates in China providing vehicle
rental and leasing services under the Avis brand. The consideration was Euro
10,432,000; �7,049,000 which is payable in cash instalments, with an initial
investment of Euro6,327,000; �4,275,000 and further instalments payable within 30
months. Acquisition costs are estimated at Euro959,000; �648,000. The total Avis
share of net assets acquired is estimated at Euro10,395,000; �7,024,000 and
goodwill arising on the acquisition of the joint venture is estimated to be Euro
1,001,000; �673,000.
On 29 January 2003, the Group purchased a 100% interest in S.A. Holding Garage
des Ar�nes and its wholly owned subsidiary, S.A. Garages des Ar�nes ("the
Ar�nes Group"). The Ar�nes Group operates in France providing vehicle rental
services under the Avis brand. At the date of acquisition, the Ar�nes Group had
estimated net assets of Euro2,598,000; �1,761,000. Cash consideration was Euro
5,896,000; �3,984,000, of which Euro441,000; �298,000 is deferred until later in
the year. The goodwill arising on the acquisition is estimated to be Euro
3,298,000; �2,223,000.
On 12 March 2003, the Group acquired certain assets of Budget Group Inc.,
including the rights to use the trademark and name, together with the existing
Budget licensee agreements and royalty streams throughout Europe, the Middle
East and Africa. The estimated net assets acquired totalled Euro684,000; �464,000.
Cash consideration was Euro26,768,000; �18,102,000, of which Euro917,000; �642,000 is
deferred until later in the year. Acquisition costs are estimated at Euro
5,529,000; �3,736,000. The goodwill arising on the acquisition is estimated to
be Euro31,613,000; �21,374,000.
For each acquisition goodwill arising is being amortised on a straight line
basis over the expected economic lives of 20 years.
END