Slide in Avis Europe's corporate business deepens

Shares in Avis Europe, the car rental group, lost nearly a third of their value yesterday after the company revealed an unexpected further slump in corporate business.

The company had suffered a drop in demand from corporate clients in the wake of 11 September, and in April Avis had said this was not improving. Yesterday however, the group shocked the market by saying that, towards the end of the second quarter of the calendar year, corporate business had suddenly taken a further dive. Mark McCafferty, chief executive, said: "Companies have become even tighter in their travel and entertainment spend. They are being more careful."

Sales to corporate customers account for some 40 per cent of group revenues. There was a fall of some 9 per cent after 11 September that had got a little worse but stabilised. The last few weeks saw a further decline of several percentage points. Avis said that this meant that its previous assumption that conditions would improve by the fourth quarter now appeared "too aggressive". As a result of not being able to count on this upturn later this year, the company said the market should expect 2002 profits to come in 15 per cent below current expectations. Mr McCaffery said: "We were assuming an economic recovery, especially in continental Europe, which would have provided us with an uplift. We now think there'll be no recovery this year."

Avis shares closed down 31 per cent at 118.5p. Dresdner Kleinwort Wasserstein, Avis' house broker, placed 15 million shares in the company following the profit warning. A Dresdner spokesman said the shares were placed at 123p a share with a number of institutions. The placing, of 2.5 per cent of Avis's 585 million shares in issue, was thought to be on behalf of a single institution.

Andrew Darke, analyst at Williams de Broe, said: "The deterioration in the corporate sector is somewhat of a surprise, as is the caution on the second half."

Leisure rent business was still in negative territory, Avis said, but it was improving steadily – except from transatlantic customers. Avis has taken some 8,000 cars out of its fleet, which now stands at 120,000 vehicles. It has also not hired about 500 casual workers that it would typically recruit for the summer months.