Avis blames slow recovery and Iraq war for big dividend cut

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Avis Europe, the car rental group, yesterday announced a near halving of its interim dividend despite claims that business was returning to pre-Iraq war levels.

A spokesman for Avis said that the dividend cut was "due to the corporate sector's slow recovery rate - especially long-haul transatlantic business".

Mark McCafferty, chief executive of Avis, said: "Corporate-related business continues to be below prior years, impacted by the economic conditions in Europe and compounded by the Iraq conflict."

The group said it expected to declare a dividend of 1.3p a share, down from 2p.

Business through intra-European leisure reservations for the summer are up 10 per cent on last year, but an overall lack of demand has created a tougher pricing environment.

Avis said that it now anticipates half-year revenues to be around 7 per cent less than the same period last year, although there will be no change in earnings expectations for the full year due to improvements in fleet utilisation and staff productivity.

The integration of Budget Car Rental, which was acquired in March, is on schedule and the business was performing in line with expectations, Avis said.

The shares, which have been as high as 125p during the past 12 months, yesterday closed at 94p, up 1p.