Recent recovery in Eurodollar shares was curtailed yesterday by a profit warning on current trading. Shares in the UK's second-largest car rental group stooped below last July's flotation price of 220p with a 20p fall to 212p.
Besides the effect of the profit warning, shares were depressed by news that one or possibly all four of the company's original venture capital backers would soon place some stock. Some 15 per cent of the company is owned by Prudential, Electra, Morgan Grenfell and Charterhouse.
Ian Mosley, chief executive, said he had no idea how many shares would be sold. The disposal of shares is being handled by SG Warburg, stockbroker to the company.
A director, who has not yet been named, will also sell a small number of shares. Directors and staff own more than 20 per cent of Eurodollar.
On trading, Mr Mosley said Eurodollar was feeling the effects of intense competition that had seen car-hire rates cut by at least 5 per cent.
The warning took the gloss off yesterday's results announcement for the year to 31 March, showing a rise in pro-forma profits before tax from pounds 12.55m to pounds 14.57m. There is a inaugural final dividend of 6.2p.
"We may not be looking good going forward, but the problem is not something like a cost hole. It is last year's aggressive pricing, and we need to change it," Mr Mosley said.
Eurodollar defended itself against the competition and matched the price cuts. Prices since the year-end, however, have been raised between 5 and 10 per cent.
A large part of Eurodollar's business is corporate car rental, and Mr Mosley does not envisage problems in making price rises stick. "Customers never like a price increase, but they know the industry needs it," he said.
Eurodollar's turnover rose 18 per cent to pounds 85.88m. Advances on the sales front, though, have been more than consumed by rising costs, particularly for accident repairs, insurance and road fund tax.
"In normal market conditions, these increases would have been fully recovered by price increases. However, the first six months of the year are likely to show a reduction compared with the corresponding period last year," Mr Mosley said. Profits rose 16 per cent to pounds 8.15m in the half-year to last September. Looking ahead, the company is confident that volume sales across the industry will continue to grow as economic activity continues to recover.