Third warning at Eurodollar

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Deputy City Editor

Eurodollar, the car rental group which came to the market in July 1994, saw its shares plunge yesterday after warning that second-half profits would be lower than a disastrous first-half result which saw a plunge from pounds 8.2m to pounds 2.4m.

The company blamed a sharp fall in car resale values and higher insurance premiums and said it would take " a considerable period of time to restore margins and profitability".

The shares, which were valued at 220p when Eurodollar came to the market, plunged 39p to 68p on the news, a 36 per cent decline. Yesterday's warning was its third in the past six months. When it last warned on profits in September, the company promised to maintain its annual dividend at 9.35p and it lived up to the first half of that pledge yesterday with a maintained 3.12p interim payout. There was a warning, however, that it would "review the level of dividend payable, if any, at the year-end".

Ian Mosley, chief executive, said: "The depreciation burden is expected to increase further as a result of increased vehicle holding costs. Until very recently, we believe the effect would be one-off in nature and contained to the disposals of our 1995 M-registered vehicles. However, the further substantial drop in value in November was far in excess of even our worst expectations."

The sharp fall in profits in the first half to September reflected a jump in cost of sales from pounds 12.2m to pounds 21.0m. This blew a hole in sales, which actually increased from pounds 43m to pounds 48.7m, benefiting from an active corporate market where volumes and prices both increased.

That made up for a very weak domestic personal market, hit by low consumer confidence. Earnings per share of 3.63p (10.95p) just covered the interim dividend payout.