| Wed 9 Apr 2003, 16:18 | | Avis - Trading Update |
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Avis - Trading Update
Avis Southern Africa Limited
Registration Number 1967/010320/06
ISIN: ZAE000013371
JSE Share code: AVS
9 April 2003
Dear Avis stakeholder
Trading Update
The robust trading performance we noted at the previous quarters has been
sustained, with the group enjoying its best quarter of the year in the three
months to March. The results for the full year will be released on 15 May and
are likely to exceed all our stakeholder expectations.
Avis Rent-A-Car Southern Africa
In South Africa, the boom in inbound tourism coincided with positive growth in
the domestic economy, with beneficial results for our Rent-A-Car business. The
summer tourism season was a bumper one, as anticipated, and rental days in the
March quarter were 23% up on the comparable quarter in 2002. In fact, during
the month of March we had a record one-day check-out for a single location, with
our operation at Cape Town International Airport notching up 738 rentals. (No,
it wasn"t the Cricket World Cup - it was the North Sea Jazz Festival!) Our
South African fleet also reached a record peak of more than 13 000 vehicles
during this quarter. The division posted 2.99 million rental days for the year
(an increase of 13%) off an 8% increase in rental transactions. Major
improvements in efficiencies were achieved, with people productivity increasing
by 16% and overall vehicle utilisation by more than 4% to 72%.
Avis Rent-A-Car Norway and Sweden
The general softening of the European economies was evident in our Scandinavian
markets, where there has been a downward trend in corporate rentals. Our
Norwegian and Swedish businesses have, however, successfully developed other
market sectors and again achieved double-digit growth, with a 13% increase in
rental days for the March quarter. The annual increase in rental days was 17%
to 1.15 million off a 10% increase in transactions. People productivity
improved by 4% and vehicle utilisation exceeded 70%.
Avis Fleet Services
Excellent productivity improvements, tight cost control and a buoyant used car
market contributed to an exceptional performance from this division, which
increased its fleet under management to over 60 000 vehicles during the year and
has continued to develop new value-added services and products such as
warranties and residual value assurance. The number of financed vehicles under
management increased after falling for a number of years.
The division has been successful in providing component services of its main
product offering, and user-financed vehicles under maintenance contracts grew by
40% to over 12 000 units. The Barloworld motor finance book has been
transferred to Wesbank from 1 April and Avis will play a key role in growing
this business through offering its full product range of value added services to
the customer base.
Accolades for Avis
Our constant drive to exceed customer expectations at every interface through
our people was reflected in last week"s Association of South African Travel
Agents awards, where Avis was voted the country"s best car rental company during
2002 for service excellence to the travel industry. Earlier, our Norwegian and
Swedish operations had won the comparable awards for their countries - Norway
for the eighth year in succession and Sweden for the eleventh. Each of these
operations remains, by a substantial margin, the market leader in its country.
Our human capital
The past year"s improvements in service, efficiencies and cost control are
largely attributable to our committed people and to the investment we continue
to make in training and motivating them through the Brand Ambassador Programme
and other initiatives. This strong focus on the development of our human
capital stems from our understanding that Avis"s main competitive advantage lies
in the quality of the experience our people provide at the customer interface.
This belief is encapsulated in what has become, after We Try Harder, our second
promise: People are more important than cars.
Empowerment initiatives
The South African government has recently published a policy document on black
economic empowerment (BEE), covering such issues as employment equity, skills
development spend, procurement policy, investment in new empowered enterprises,
executive management involvement and direct equity participation. Like most
South African companies, Avis faces challenges on the BEE front but we have made
significant progress on all the key issues. Performance gaps are being closed
and most targets should be achieved within the next year or according to a
timetable agreed with government.
Broadening our social responsibility scope
Similarly, Avis is currently extending its social responsibility programmes,
traditionally concentrated on nature conservation, to encompass the wider
current concerns of the societies in which we operate. In line with this new
approach, Avis has recently entered into a partnering agreement with the HIV
education organisation loveLife. In terms of this agreement, Avis will actively
support and co-operate with loveLife, while loveLife in turn will run
information sessions for all Avis employees. On the environmental front, we
aspire to making Avis a carbon-neutral business and have started developing the
appropriate processes and targets. Our Swedish operation already meets its
government"s strict criteria for eco-certification.
The new year
With our new financial year already under way, all the segments of the group are
positioned to take advantage of the positive prospects for further real growth.
Management targets for 2004 will be given when we announce the 2003 results next
month.
The war in Iraq is obviously causing considerable uncertainty and could affect
global travel patterns over the next three to six months. This may well have a
beneficial impact on tourism to Southern Africa and Scandinavia by adding
further safe-haven elements to the regions" other attractions. Thus far, the
war has had no discernible impact on our reservation patterns: in fact, in the
first week of April, reservations from all our business channels were well ahead
of the previous year"s. We are watching the situation closely, however, and
have plans in place to flex our operations immediately should there be any drop-
off in demand.
The continued strengthening of the rand has made South Africa less of a bargain
as a holiday destination but in our view, positive foreign tourist perceptions
will continue to sustain the growth in long-haul visitors to the country. The
advantage of a stronger rand to Avis is that it will help keep local fleet cost
escalations in line with the general South African inflation rate and so assist
in avoiding any margin squeeze.
Results presentation
As usual, we shall be making a presentation on the past year"s results - as well
as the prospects for the new year - to coincide with their publication. This
will be held in Johannesburg on 15 May and Cape Town on 16 May. You are very
welcome to attend either of these presentations: simply contact our investor
relations office at for an invitation.
Yours sincerely
Grenville Wilson
Chief Executive
Tel : +27 11 728 4701
Fax : +27 11 728 4195
Cell : (0)82 330 2034
e-mail : helenm@dpapr.com
Postal Address : PO Box 87386, Houghton, 2041, South Africa
Sponsor
Rand Merchant Bank
A Division of FirstRand Bank Limited
Corporate Finance
