Chairman's Statement
I am pleased to report that the Group made good progress in 2007, achieving both volume and rental revenue per day growth, benefiting from recent investments in both revenue management and web development. The full year effect of the recent restructuring programme and the continuing turnaround in Budget also helped to deliver improved results. Substantial actions were taken to optimise the structure of the Group’s network including the disposal and licensing of Greece, the licensing of the Canaries and the acquisition of a licensee in Germany. The net capital released from these transactions was approximately €200 million.
Results overview
Revenues from continuing operations grew 5.7% to €1,327 million, reflecting both volume growth and improved rental revenue per day.
Underlying profit before tax on continuing operations was €37.6 million (2006 – restated: €30.0 million). This increase reflects both the volume growth and improved rental revenue per day, the full year benefit of the restructuring programme and gains on disposal of properties, together with the continuing turnaround of Budget. However, these were partly offset by inflationary cost increases, the higher investment in revenue management and web development capabilities and higher interest charges. Earnings per share on the same basis were 2.9 euro cents (2006 – restated: 2.3 euro cents).
Profit before tax on continuing operations was €33.2 million (2006 – restated: €1.8 million). Earnings per share on the same basis were 1.6 euro cents (2006 – restated: loss per share 0.2 euro cents).
Profit before tax including the discontinued operation was €19.7 million (2006 – restated: €7.2 million). This is stated after a net exceptional charge before tax of €22.8 million and certain re-measurement items and economic hedging gains of €2.5 million. Exceptional items represent primarily the goodwill impairment and subsequent loss on the disposal of the operation in Greece and restructuring costs. Earnings per share on the same basis were 0.3 euro cents (2006 – restated: 0.2 euro cents).
As announced earlier in the year, the Group identified a malpractice in Portugal that resulted in a restatement of the prior year comparative results. As previously reported, the adjustment resulted in a reduction to the comparative underlying profit before tax of €3.5 million.
Dividends
In line with recent previous statements, and in view of the continued difficult trading environment, the Board has not recommended payment of a dividend for the year ended 31 December 2007. The Board’s intention is to recommence the payment of dividends when the financial and trading position of the Group allows.
Outlook
Looking ahead to 2008, we are now more cautious in view of the weakening economic environment. We expect to make continued progress with the turnaround of the Group. However, our planning assumptions, reflecting recent trading conditions, are for continued volume growth, but with rental rate per day now improving less than previously expected. We continue to maintain tight control of cost and plan to make continued improvements in key efficiency measures, particularly vehicle utilisation.
Strategic development
We continue to make good progress in improving the results of the business. An initial review of the strategy has been undertaken by Pascal Bazin, following his appointment as the new Group Chief Executive on 1 January 2008. Whilst the main elements of the strategy will remain unchanged, we will continue to evolve the strategy to deliver the turnaround in the Group’s results and will now be placing more emphasis on the areas outlined in the strategy section of the Business Review. In addition, we will be adopting a stronger operational approach, with more emphasis on delivery, accountability and implementation, as well as on accelerating benefits from recent investment in initiatives.
Employees and Directors
I would like to welcome Pascal Bazin, who was appointed as Group Chief Executive from 1 January 2008, replacing Murray Hennessy. After three and a half years Murray and the Board agreed that it was the right time to pass the leadership of the Group to someone who would take the business to the next stage of its development. On behalf of the Board, I would like to thank Murray for his significant contribution. He developed the Group’s recovery strategy and positioned the Group for a return to profitable growth despite a backdrop of difficult markets.
Pascal was previously President and Managing Director of Avis France and a member of the Group’s Executive Board, positions he held since 20 May 2005. He is a proven truly international operator, who has successfully led a number of consumer-facing businesses both through turnaround and development situations. He delivered a significant recovery at Avis France during his two and a half years with the company.
Finally, I would like to thank all our employees around the world for their continued hard work, enthusiasm, loyalty and professionalism. As always, it is their efforts on behalf of our customers that really make the difference and we have demonstrated further good progress in all our key customer satisfaction scores this year. We have continued to win a large number of industry awards including the SOCAP Award for Innovation at the National Customer Service Awards in London and four prestigious British Travel Awards 2007: Best Business Car Hire Company, Consumers Favourite Business Car Hire Company, Best Leisure Car Hire Company and Consumers Favourite Leisure Car Hire Company.
Alun Cathcart
Chairman
