Avis Europe Plc Interim Results.

BRACKNELL, Berkshire--(BUSINESS WIRE)--Sept. 23, 1998--Avis Europe plc, the leading car rental company in Europe, Africa, the Middle East and Asia, today announced excellent interim results. The Group announced in April 1998 that it has changed accounting year end from February 28 to December 31, in line with other major car rental companies. For comparative purposes the results are presented for both the six months to June 30, 1998 and the six months to August 31, 1998. The highlights below are for the six months's to June 30, 1998. HIGHLIGHTS - Strong revenue growth up 8% to 252.1 million pounds (up 16% in

ECU), driven by a combination of price and volume - Operating profit up 25% to 49.0 million pounds (up 34% in ECU) - Operating margin up from 16.8% to 19.5% - Pre-tax profits up 62% to 36.0 million pounds (up 72% in ECU) - Earnings up 70% to 27.0 million pounds (up 81% in ECU) - Earnings per share up 43% to 4.6p (up 52% in ECU) - Acquisition of licensee operations in Greece strengthens

corporate presence in key Mediterranean leisure markets - Further margin improvements driven by pricing and manpower

productivity gains

Commenting on the results, Chairman and Chief Executive Alun Cathcart said:

"Avis Europe continued its excellent performance into the first half of the current financial year. Strong revenue growth was driven by healthy volume increases together with improvements in price in a number of countries and market segments. This buoyant performance together with continued efficiency gains delivered trading results ahead of expectations. We are greatly encouraged that the results to the end of August remain very strong and, despite recent uncertainties in world economies, we are very confident about our full year prospects." Chairman's Statement

I am pleased to announce Avis Europe's interim results which reflect another very successful period for the Group. In April 1998 Avis Europe announced a change in accounting year end from February 28 to December 31, in line with other major car rental companies. We are therefore presenting our interim results for both the six months ending June 30, 1998 and the six months ending August 31, 1998. Financial results to June 30, 1998

During the six months to June 30, 1998 the Group's ECU revenue grew by 16.4% versus prior year. This strong performance was experienced across all major countries and market segments and was driven by both volume and price. Rental days grew by 13.5% during the period, with ECU revenue per day increasing by 2.6%. Reported revenues at 252.1 million pounds (1997: 233.5 million pounds) were 7.9% ahead of prior year, reflecting the continued strength of sterling against the major European currencies.

Operating profit for the period was 25.1% above prior year at 49.0 million pounds (1997: 39.2 million pounds) and 34.0% ahead when expressed in ECU. Net interest expense of 13.0 million pounds (1997: 17.1 million pounds) benefited by 3 million pounds as a result of the year on year impact of the flotation proceeds received in April 1997. Pre-tax profits were ahead of expectations at 36.0 million pounds (1997: 22.3 million pounds), an increase of 61.9%, and earnings were 70.1% higher than the same period last year at 27.0 million pounds (1997: 15.9 million pounds). Earnings per share increased by 42.8% to 4.6p (1997: 3.2p). Overview of trading

Avis Europe's excellent revenue performance was driven by a combination of strong volume growth across the Group and price increases in a number of countries and market segments. These price increases were enhanced by the successful launch of innovative new products during the period.

The Group's success in achieving price increases in a strongly competitive marketplace contributed to an improvement in operating margin from 16.8% in the six months to June 30, 1997 to 19.5% in the six months to June 30, 1998. In addition another significant increase in manpower productivity also helped to drive margin performance. This margin improvement was achieved despite the fact that, as expected, fleet costs rose ahead of inflation. The recent pressure on residual values in the second-hand car market in the UK has been a contributing factor to this increase in fleet costs. However, due to the pan-European nature of Avis Europe's business and the fact that 88% of the UK fleet is purchased with buy-back agreements, this had only a limited impact on the Group's results, amounting to 1.1 million pounds in the six months to June 30, 1998. Partnership development

The Group continues to focus on developing partnerships within the transportation sector in order to enhance car rental leadership and create additional market opportunities. Business developed through the new global partnership with British Airways grew in line with initial expectations. The Group signed an exclusive marketing partnership with MCC (Micro Compact Car). This is the joint venture between Mercedes-Benz and the Swatch Group, which manufactures the innovative new 'smart' car due to be launched in October. As part of this marketing partnership Avis Europe and MCC have developed a unique scheme in continental Europe, 'smartmove and more', which is the first stage in the fuller development of the flexible usage of cars. This reinforces the importance of car rental as an essential element of any integrated transport network. Leading technology

Continuous development of information technology remains a priority for the Group in ensuring the delivery of leading edge service facilities for customers and increasing operating efficiencies. The Group continues to progress the development of new concepts in customer self-service facilities with trials in both Germany and the UK.

Following the successful launch of the Group's pioneering Virtual Learning Centre throughout its UK operations, this high quality, cost effective training technology is being introduced across Avis Europe's international operations. Continued investment in web-based technologies enabled the Group to extend both the coverage and functionality of its global systems capability to 27 of the smaller licensee countries.

Avis's global systems will be substantially year 2000 compliant by the end of 1998 and a comprehensive review of partner and supplier technology interfaces is well advanced. In readiness for the introduction of the euro next year the Group has identified major customer requirements and will have completed all required system enhancements by the end of this year. Network development

The Group continued to invest in the development of its network with the acquisition of its former licensee operations in Greece. This was effective from July 1, 1998 and is consolidated in the results to August 31, 1998. This acquisition strengthens the Group's corporate presence in the Mediterranean leisure markets. It is a key element of Avis Europe's strategy to invest in and develop its leisure business and to extract maximum advantage from future growth opportunities. Avis Greece operates both a short and long-term rental fleet and is expected to generate an estimated annual revenue of 18 million pounds.

The financial situation in the Asian economies continues to have a minor impact on the Group's license fee income. It has also affected the speed with which new partnership opportunities can be developed in the principal open markets of Japan, China and India. The Directors remain optimistic about the long-term potential in Asia and are committed to investing in a comprehensive network to exploit growth opportunities well into the next century. Financial results to August 31, 1998

During the six months to August 31, 1998, the Group's ECU revenue grew by 18.1% (16.5% excluding the year on year impact of the Greek acquisition). Comparable rental days increased by 10.6% with ECU revenue per day up by 5.4%. This strong revenue per day increase was impacted by business mix changes and underlying price is estimated to have increased by around 4%.

Operating profit for the period was 20.5% above prior year at 68.6 million pounds (1997: 56.9 million pounds) and 25.2% ahead when expressed in ECU. Net interest expense of 14.6 million pounds (1997: 16.0 million pounds) benefited by 1 million pounds as a result of the year on year impact of the flotation proceeds received in April 1997. Pre-tax profits were 54.0 million pounds (1997: 40.9 million pounds), an increase of 32.2%, and earnings were 33.0% higher than the same period last year at 40.5 million pounds (1997: 30.4 million pounds). Earnings per share increased by 23.6% to 6.9p (1997: 5.6p).

Dividend

The Board is pleased to declare an interim dividend of 1.5p per share, to be paid on November 25, 1998 to shareholders registered at close of business on October 9, 1998. This will be paid as a foreign income dividend. Summary and Prospects

Avis Europe continued its excellent performance into the first half of the current financial year. Strong revenue growth was driven by healthy volume increases together with improvements in price in a number of countries and market segments. This buoyant performance together with continued efficiency gains delivered trading results ahead of expectations. We are greatly encouraged that the results to the end of August remain very strong and, despite recent uncertainties in world economies, we are very confident about our full year prospects. Alun Cathcart Chairman & Chief Executive

Avis Europe plc rents cars under the Avis brand name to customers in 110 countries. Avis Europe's ordinary shares trade on the London Stock Exchange. Prices may be accessed on Bloomberg under the symbol AVE LN and Reuter Equities 3000 Service under AVE.L. Additional information is available on Avis Europe's internet site: www.avis-europe.com. For tabular results, contact Taylor Rafferty Associates at 212/889-4350.