Avis and Pace slump after profits warnings

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The Independent Online

Shares in Avis Europe and Pace Micro Technology plunged yesterday after the two companies issued warnings about their outlook.

Shares in Avis Europe and Pace Micro Technology plunged yesterday after the two companies issued warnings about their outlook.

Avis, Europe's biggest car rental company, said revenue growth had been lower than expected and margins would remain under pressure next year amid tough competition. It also said it would not pay a final dividend for 2004, sending its shares 9 per cent lower.

Meanwhile, Pace Micro, Europe's largest maker of digital TV set-top boxes, warned that full-year results would be lower than expected. Its shares plummeted by 23 per cent. The company always thought that revenues in the second half would be lower than in the first but it now expects sales for the whole year to undershoot market expectations by £25m.

Avis said that group revenue per day in the second half was below the year-earlier period and pressure to cut prices continued in several of its markets, particularly France. The company said: "We expect little upward movement in pricing and therefore continued downward pressure on margins."

Avis, which operates under its own and the Budget brand in Europe, Africa, the Middle East and Asia, is struggling as the car rental market has become more competitive, with a number of small rivals selling through the internet.

Having made some cost savings as well as interest savings from lower debt, Avis still expects to meet analysts' forecasts for 2004 pre-tax profit. The company is forecast to produce profits of about £39.7m. A significant impairment in the value of investments in its European subsidiaries will prevent the payment of a dividend.

On the bright side, Pace Micro said it had more than doubled shipments to 2.1 million set-top boxes in the past six months, setting a new record. It also boosted sales to non-UK customers.

Avis shares closed down 4.75p at 50.25p yesterday while Pace Micro fell 13.5p to 44.5p.

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