Investment: Economic gloom fails to dent Avis car rentals
Your support helps us to tell the story
From reproductive rights to climate change to Big Tech, The Independent is on the ground when the story is developing. Whether it's investigating the financials of Elon Musk's pro-Trump PAC or producing our latest documentary, 'The A Word', which shines a light on the American women fighting for reproductive rights, we know how important it is to parse out the facts from the messaging.
At such a critical moment in US history, we need reporters on the ground. Your donation allows us to keep sending journalists to speak to both sides of the story.
The Independent is trusted by Americans across the entire political spectrum. And unlike many other quality news outlets, we choose not to lock Americans out of our reporting and analysis with paywalls. We believe quality journalism should be available to everyone, paid for by those who can afford it.
Your support makes all the difference.IF PREVIOUS economic cycles are anything to go by, the car rental industry should be getting ready to slam on the brakes.
Renting out Ford Mondeos to travelling executives is a cyclical business. Given the general economic slowdown - not to mention the problem of plunging used car values - it's no surprise shares in Avis Europe have dropped by a third since the beginning of June.
But hang on. Interim figures from the group, released yesterday, show little evidence of a slowdown. In the half year to the end of June (Avis is in the process of switching its financial year end) revenues rose 8 per cent to pounds 252m while operating profits were up by a quarter.
Avis pushed through its first price increase in three years while increasing volumes by a tenth. Improved productivity lifted margins by almost three percentage points to 19.5 per cent.
On resale values, Avis doesn't worry because it sells over 80 per cent of its cars back to the manufacturer at an agreed price.
It looks as if, true to its corporate slogan, Avis is trying harder.
Longer-term trends are also working in its favour. Helped by its geographical spread, the company is doing exclusive deals with travel groups such as Airtours to provide rental cars for holidaymakers. It is also supplying replacement cars to people who suffer a roadside breakdown.
Meanwhile, chief executive Alun Cathcart thinks city dwellers will increasingly turn to renting cars rather than bothering with the expense of buying one.
On upgraded full-year profit forecasts of pounds 94m the shares, up 22p to 223.5p yesterday, trade on a forward earnings multiple of 18.
Avis looks capable of yearly profit growth of 10 per cent for the foreseeable future. The recent weakness in the share price is an opportunity. Buy.
Subscribe to Independent Premium to bookmark this article
Want to bookmark your favourite articles and stories to read or reference later? Start your Independent Premium subscription today.
Join our commenting forum
Join thought-provoking conversations, follow other Independent readers and see their replies
Comments