| Mon 19 Jan 2004, 17:41 | | AVIS SOUTHERN AFRICA LIMITED - AVIS STAKEHOLDER LE |
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AVIS SOUTHERN AFRICA LIMITED - AVIS STAKEHOLDER LETTER
AVIS SOUTHERN AFRICA LIMITED
(Incorporated in the Republic of South Africa)
(Registration number: 1967/010320/06)
ISIN: ZAE000013371
JSE Share Code: AVS
AVIS STAKEHOLDER LETTER
Dear Avis stakeholder
FUNDAMENTALS CONTINUE TO FAVOUR SUSTAINABLE GROWTH
During the last quarter of 2003 Avis produced another pleasing performance, and
all the business fundamentals continue to point to sustainable growth in our
markets.
In Southern Africa, lower inflation and interest rates, as well as an exchange
rate that now better reflects the underlying strength of the economy, augur well
for further growth in economic activity for the foreseeable future. After the
exceptional increase in inbound tourism to South Africa over recent years, the
number of foreign visitors was some 15% lower during the past quarter than in
the comparable period in 2002, but long term South African tourism growth
remains on track.
In Europe, economic indicators also look positive on the back of the recovery in
the US economy and more stable international conditions.
OPERATIONAL REVIEW
Rent-A-Car Southern Africa grew its rental days for the quarter by 5% off an 11%
increase in rentals over the comparable quarter in 2002. Taking into account
the less buoyant inbound tourism market and a slight negative growth in regional
countries, this is a creditable result, which reflects a strong upsurge in the
corporate and domestic tourism sectors. Pricing in the South African market has
corrected with the average rate per rental day for the quarter showing a 9% year
on-year improvement, and a 15% improvement in the December month. It is
anticipated that further rate increases will be achieved in the current quarter.
Overall vehicle utilisation was impacted negatively by the lower-than-
anticipated level of inbound tourism but as the fleet is easily flexed to meet
demand, this situation is being promptly corrected. People productivity
improvement was on target with a 6% year-on-year increase. Interest rate
reductions stimulated demand in the used car market but stable new car prices
and attractive deals kept the lid on margins. After the disappointing overall
profit margins achieved by the division in the half-year to September, results
for the past quarter were in line with those of the previous year.
Rent-A-Car Norway and Sweden increased rental days by 11% off an 8% rise in
rentals. The Swedish operations grew in all their market sectors while the
Norwegian business was impacted by an overall industry contraction in the
corporate market but continued to develop the replacement market. Year-on-year,
the overall rate per rental day for the quarter was down 2.5% as a result of
continued growth in the longer-term replacement sector and some pricing pressure
in the corporate market. Utilisation levels were maintained while people
productivity grew by 2%. Although the winter season is traditionally a low-
activity period for these businesses, both achieved good improvements in local-
currency bottom-line performance.
Avis Fleet Services maintained its fleet under management at the previous
quarter"s levels. As anticipated, interest margins came under pressure as prime
linked lease charges decreased more rapidly than the cost of our borrowings.
Interest margins will, however, be restored before the end of this financial
year. This division"s used car operations produced another good set of results
and the opening of new flagship dealerships in Johannesburg and Cape Town will
further enhance their prospects. Overall, the division"s strong profitability
was sustained during the quarter.
MAJOR NEW OUTSOURCING CONTRACTS FOR AVIS FLEET SERVICES
Mutual & Federal has outsourced the management of its fleet to Avis Fleet
Services in a five-year 520-vehicle deal, and Metro Rail in KwaZulu Natal has
awarded the full maintenance lease contract for its vehicles to Vuswa Fleet
Services, a joint venture between Avis and Bohlabela Wheels.
ACCOLADES FOR AVIS
Avis Southern Africa has been awarded the best annual report for a Proudly South
African member company by the South African Institute of Chartered Secretaries
and Administrators. In the South African listed company Sustainable Growth
Awards for 2003, Avis was ranked in the top 13 companies. This award only
included our results up until 31 March 2002, and I am sure we will achieve an
even higher ranking in the 2004 awards. Our operations in South Africa were
ranked number 21 in The Best Company To Work For out of 118 entrants, again
reflecting the strong relationship between Avis and its Brand Ambassadors.
Avis Norway has just been voted the best car rental company in that country for
the ninth consecutive year. Avis Sweden has won its own country award for
eleven years running, and has entrenched its number one position at Sweden"s
four major airports by increasing its market share by 2.3% to 37.8% in 2003.
BARLOWORLD OFFER FOR AVIS
You will no doubt be aware that in November, our major shareholder Barloworld
made an offer for the 65.3% of our issued share capital which it does not
already own. At the time, the cash-and-shares offer amounted to 1 270 cents per
Avis share and valued the company at R2.175 billion. (These values have since
increased in line with an improvement in the Barloworld share price.)
The Barloworld offer reflects a 170% capital growth since Avis was listed seven
years ago. This increase is a tribute to the people of Avis and to the real
value they have created through their efforts over this period. As they
demonstrate every day, they are true ambassadors of the Avis brand, who actively
seek to make each customer interface an opportunity for exceeding expectations.
My sincere thanks to all of them, as well as to our chairman Glenn van Heerden
and the other non-executive directors for their sound judgment and sure guidance
during this process.
