Avis Europe sales drive pays off as punters pile in; The Investment Column
Tuesday 18 March 1997
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.
peopleContenders for Time magazine's Person of the Year are a mixture of the good, the bad and the holy
newsAs the world remembers Mandela the hero, the prison where he spent 27 years seems all the more brutal
tvSteven Moffat reveals the actor was dying to take on the role of the Time Lord and says he is excited to see what he will do with the character
sportBayern Munich 2 Manchester City 3: City come from two down to beat reigning European Champions
arts + ents... and a chance to paint Booker Prize winning author Hilary Mantel
danceUnder Tamara Rojo's inspired direction, it seems possible that it could challenge the dominance of the Royal Ballet. We meet some established names and rising stars
travelDiscover Uruguay's jet-set beach resort, an Atlantic enclave with plenty of art and culture to explore on the side
The ten coldest places on Earth
Sir Ian McKellen hits back at Damian Lewis' 'fruity actor' claims
Uruguay becomes first country to legalise marijuana trade
Kenyan politician Mike Sonko left red-faced after photoshopping himself next to Nelson Mandela
Nelson Mandela memorial: Cheers, jeers and a masterclass from Barack Obama that stole the show
- 1 Mountain goats' miraculous escape from avalanche captured in dramatic video footage
- 2 It’s shameful that our universities have accepted gender segregation under pressure from the most oppressive religious fanatics
- 3 Sir Ian McKellen hits back at Damian Lewis' 'fruity actor' claims
- 4 Kenyan politician Mike Sonko left red-faced after photoshopping himself next to Nelson Mandela
- 5 Selfie at funeral: Cameron squeezes in on Obama snap at Mandela memorial
- < Previous
- Next >
iJobs Money & Business
£45000 - £55000 per annum + Training and Benefits : Harrington Starr: A leadin...
£59999 - £80001 per annum + Benefits: Pro-Recruitment Group: Senior Manager in...
attractive: Citifocus: Highly prestigious Investment Management house based in...
£70000 - £90000 per annum + benefits + bonus: Pro-Recruitment Group: Our leadi...