Avis Europe sales drive pays off as punters pile in; The Investment Column

Investors hoping for a piece of the pounds 237m Avis Europe offer for sale have until Friday to get their applications in, but judging by demand to date they may be lucky to get a decent-sized allocation. The institutional and international placing of the car rental group is looking well covered even before the retail offer gets into its stride. With registrations for the prospectus from small investors running above 100,000, it looks inevitable that applications will be scaled down.

The only consolation for investors is that even if the pounds 1,000 minimum allocation is scaled back, they will still gain access to the Founders' Club, giving them up to four days' free car rental worth pounds 85 if they hold onto their shares until 3 July. With some contortion of the usual rules of investment, advisers argue that the perks raise the notional yield on the shares from 3.2 per cent to 11.5 per cent, assuming the price is fixed at the 117p mid-price of the indicated range.

The big question is whether Avis is worth all the fuss, even if it is Europe's biggest rental group. The few in the City not involved in the sale have questioned why it requires five investment banks led by Merrill Lynch and NatWest Securities and an international marketing effort to get such a relatively small offer away. Presumably Avis is keen not to repeat its previous experience of the stock market: when it floated in 1986, two-thirds of the offer was left with the underwriters and the price went to an immediate discount in first dealings.

There is no doubt the business has its risks. Operating profits halved to under pounds 40m in 1993/94 after Avis got hit by a triple whammy. The recession came late to the car rental industry and in that year all the European economies turned down at once.

Then the group was hammered by an interruption of car supplies from "a long-term partner" in Germany, and lastly a little-known side-effect of the collapse of the Berlin Wall was a huge upsurge in car theft in the West, resulting in the mainly uninsured Avis losing around 1,000 cars a year at one stage.

There is no doubt this is a strong business, generating compound annual profits growth of over 12 per cent over the past 16 years. But within that, there can be big swings linked to economic growth rates, while the industry is highly competitive, with Hertz also coming to the market and Europcar rumoured to be on the way. The lessons of three years ago also highlight the importance of special sales deals on cars to the equation.

Even so, based on SBC Warburg's forecast of profits rising from a pro forma pounds 68m to pounds 77m in the current year, the shares at 117p would trade on a lowly forward multiple of 12. Attractive.

Suggested Topics
Start your day with The Independent, sign up for daily news emails
Arts and Entertainment
Buttoned up: Ryan Reynolds with Helen Mirren in ‘Woman in Gold’
filmFor every box-office smash in his Hollywood career, there's always been a misconceived let-down. Now he says it's time for a reboot
News
people
News
Actress Julianne Moore wins the Best Actress in a Leading Role Award for 'Still Alice' during the 87th Annual Academy Awards in Hollywood, California
people
Sport
Ross Barkley
footballPaul Scholes says it's time for the Everton playmaker to step up and seize the England No 10 shirt
News
'We will fix it': mice in the 1970s children’s programme Bagpuss
science
Life and Style
2 Karl Lagerfeld and Choupette
fashion
ebooks
ebooksA special investigation by Andy McSmith
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

SThree: Graduate Recruitment Resourcer

£20000 per annum + commission: SThree: Sthree have an exciting opportunity for...

Recruitment Genius: Telesales Executive - OTE £32,000+

£18000 - £32000 per annum: Recruitment Genius: A Telesales Executive is requir...

Ashdown Group: Marketing Manager - B2B, Corporate - City, London

£45000 - £50000 per annum + benefits : Ashdown Group: A highly successful, glo...

Neil Pavier: Commercial Analyst

£50,000 - £55,000: Neil Pavier: Are you a professionally qualified commercial ...

Day In a Page

War with Isis: Iraq declares victory in the battle for Tikrit - but militants make make ominous advances in neighbouring Syria's capital

War with Isis

Iraq declares victory in the battle for Tikrit - but militants make make ominous advances in neighbouring Syria
Scientists develop mechanical spring-loaded leg brace to improve walking

A spring in your step?

Scientists develop mechanical leg brace to help take a load off
Peter Ackroyd on Alfred Hitchcock: How London shaped the director's art and obsessions

Peter Ackroyd on Alfred Hitchcock

Ackroyd has devoted his literary career to chronicling the capital and its characters. He tells John Walsh why he chose the master of suspense as his latest subject
Ryan Reynolds interview: The actor is branching out with Nazi art-theft drama Woman in Gold

Ryan Reynolds branches out in Woman in Gold

For every box-office smash in Ryan Reynolds' Hollywood career, there's always been a misconceived let-down. It's time for a rethink and a reboot, the actor tells James Mottram
Why Robin Williams safeguarded himself against a morbid trend in advertising

Stars safeguard against morbid advertising

As film-makers and advertisers make increasing posthumous use of celebrities' images, some stars are finding new ways of ensuring that they rest in peace
The UK horticulture industry is facing a skills crisis - but Great Dixter aims to change all that

UK horticulture industry facing skills crisis

Great Dixter manor house in East Sussex is encouraging people to work in the industry by offering three scholarships a year to students, as well as generous placements
Hack Circus aims to turn the rule-abiding approach of TED talks on its head

Hack Circus: Technology, art and learning

Hack Circus aims to turn the rule-abiding approach of TED talks on its head. Rhodri Marsden meets mistress of ceremonies Leila Johnston
Sevenoaks is split over much-delayed decision on controversial grammar school annexe

Sevenoaks split over grammar school annexe

If Weald of Kent Grammar School is given the go-ahead for an annexe in leafy Sevenoaks, it will be the first selective state school to open in 50 years
10 best compact cameras

A look through the lens: 10 best compact cameras

If your smartphone won’t quite cut it, it’s time to invest in a new portable gadget
Paul Scholes column: Ross Barkley played well against Italy but he must build on that. His time to step up and seize that England No 10 shirt is now

Paul Scholes column

Ross Barkley played well against Italy but he must build on that. His time to step up and seize that England No 10 shirt is now
Why Michael Carrick is still proving an enigma for England

Why Carrick is still proving an enigma for England

Manchester United's talented midfielder has played international football for almost 14 years yet, frustratingly, has won only 32 caps, says Sam Wallace
Tracey Neville: The netball coach who is just as busy as her brothers, Gary and Phil

Tracey Neville is just as busy as her brothers, Gary and Phil

The former player on how she is finding time to coach both Manchester Thunder in the Superleague and England in this year's World Cup
General Election 2015: The masterminds behind the scenes

The masterminds behind the election

How do you get your party leader to embrace a message and then stick to it? By employing these people
Machine Gun America: The amusement park where teenagers go to shoot a huge range of automatic weapons

Machine Gun America

The amusement park where teenagers go to shoot a huge range of automatic weapons
The ethics of pet food: Why are we are so selective in how we show animals our love?

The ethics of pet food

Why are we are so selective in how we show animals our love?