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Press Releases
Annual Press Conference on March 3rd, 2003 in Paris
Statement of Mr. Salvatore Catania, Chief Executive Officer of Europcar Group
Ladies and gentlemen,
it is my privilege to welcome you for the first time here in Paris to the international press conference of Europcar International S.A. I am pleased that you have managed to find your way to the French capital. For all foreign visitors and for me, Paris is still a destination of preference. Of course, I would also like to give a special welcome to the journalists directly from Paris. Thank you for coming.After exactly 62 days in which I have borne the responsibility for Europcar International as its CEO, I would like to present an overview of business progress during the financial year 2002 and look at the prospects for the year 2003.
Ladies and gentlemen,
to start with, please allow me to make the following comment. 27 years of experience within Europcar, with a central focus on Italy over many years, form the fertile soil for my management activities at the top of the international car rental company. This experience has taught me to absorb and implement the creativity of the Italian mentality, the "bonnes manières" of the French attitude, and the characteristic thoroughness of the German approach to strategic considerations and their realisation – our shareholder has of course been the distinctive influence for this last attribute.
The valuable experience, corporate spirit and shared objectives of our company and those of our shareholder will yield pioneering decisions that will secure our lasting position in the markets and strengthen the relationship we enjoy with our clients, partners and employees.
Ladies and gentlemen,
let me now turn to the events of the recent past.
When my predecessor reported on the progress of Europcar in March of last year, the assumption was that the economic preconditions for the financial year 2002 would be negative, or at least restrained. Subsequent events have shown that 2002 was not a good year – neither for the economy as a whole nor for the car rental branch in particular. The general consumer reluctance to buy has had an impact on the entire service sector. The effects have been primarily felt in a drastic decline in bookings within both the business and holiday travel segments.
Nevertheless – and I would like to stress this point - the Europcar Group can still draw a very positive balance overall despite the trend at the international level. The company can also report an outstanding operating result over the year. With an increase in the profit before tax of 100 percent compared to 2001, the earnings of the Europcar Group lie exactly as ambitiously forecast. This shows that we have pursued the right path with our strategy, and that the measures we have taken to counteract macroeconomic downturns were appropriate. We will stay on this course in the future.
Before I consider the expansion strategy and the goals of the Europcar Group for 2003, and before I present you with my assessment of further developments in the branch and at Europcar, I would like to outline the wider economic context and the key figures of the business year 2002.
Macroeconomic conditions during the financial year 2002
The year 2002 was a difficult year for business. The economy in the industrial nations slowed down during the course of the year considerably, even to the point of recession – a tendency that was further reinforced towards the end of the year by the persisting uncertainty over a possible war in Iraq. It should also be borne in mind that we had already suffered a markedly weak economic period during the course of 2001.
The repercussions of the threat of a possible war in Iraq have hit the travel sector in particular, and therefore Europcar as well, harder than was initially anticipated. However, the consequences were less palpable for Europcar than for the car rental branch in general, which has depended and continues to depend to a greater extent on reservations made in the USA.
Allow me to be a little more specific. As already mentioned, the latest political developments suggest that this dependency could have negative consequences. For although the branch as a whole conducts up to 35 percent of its business volume with travellers from the USA, this proportion is around 10 percent at the Europcar Group. However, I would also like to emphasise that Europcar would be prepared for a different development scenario and would participate in any economic upswing that might occur. This applies especially to the corporate and leisure segments coming from the USA.
Moreover, Europcar can fall back on an appropriately diversified line-up in the respective national markets, ranging from its dense network of stations to the products and services it offers. As a result, segment-related losses incurred in difficult, even persistently difficult, economic periods, during which individual regions are particularly hard hit, can be compensated by other activities.
For instance, we have reacted to the altered situation with a series of new, tailored products and an aggressive sales programme.
A further aspect that impacted the climate of business was the currency conversion to the euro. Our forecast that the euro would have no major negative effects has been confirmed. In this context, let me also assure you that the Europcar Group is not affected by the declining exchange rate for the dollar.
The partial cleansing of the national markets, which has been caused by the numerous insolvencies of local and national rental firms, has led to discernible customer take-overs on our part, chiefly spread over a wider area, thanks to the prompt action we took. In this respect, we were able to exploit the strength of our long-term network strategy in a successful and profitable way. At the same time, we were also successful in increasing our share of the national markets as planned.
With the introduction of a new mobility product, the "Europcar Chauffeur Service" on the international level, Europcar has opened up a completely new business field. The "Car with Driver" offer targets international and national firms. The declared aim is to establish the Europcar Corporate Chauffeur Service as a supplementary service under the Europcar quality brand. The new service continued Europcar's successful strategy for products and services in 2002.
In addition, the systematic expansion of the network in Central and Latin America as well as in Eastern Europe has mainly served to absorb slow-downs in the tourism sector and has had an overall positive effect on the business figures.
Key figures for 2002
Ladies and gentlemen,
before I give the floor to Gerhard Noack, the CFO of Europcar International, who will present the business results for 2002, let me add the following by way of introduction.
The Europcar Group achieved a growth over and above the average for the industry in 2002, Moreover, an increase in turnover could be reached by significantly improving our profitability in spite of the difficult economic context.
I now surrender the microphone to Gerhard Noack for a report on the business development of the Europcar Group in 2002.
Statement of Mr. Gerhard Noack, Chief Financial Officer of Europcar Group
Ladies and gentlemen,
As Salvatore Catania has just reported, we have achieved remarkable progress in 2002, despite the highly unfavourable economic climate.
The Europcar Group increased its total revenue to 1.087 billion euros, which represents a growth rate of 2.7 percent or 29 million euros compared to 2001.
Corporate revenue suffered from the overall lack of growth in the economy, with the result that we were forced to concentrate more on the leisure segment.
We revised our business structure and could therefore significantly improve the quality of our yield management.
Thanks to a cost reduction programme and yield management measures, we increased our profitability to such an extent that we can present an Earnings Before Tax figure of 51.6 million euros, which represents almost double the previous year’s figure of 26.2 million euros.
Within the circumstances that prevailed, this performance is fully in line with our planning and confirms the effectiveness of the strategy implemented by Europcar.
Let me now go into further detail to explain the strategy behind our rental activities.
The almost 3 percent growth in Group revenues has chiefly resulted from the performance in our so-called Corporate Countries, comprising Germany, France, Italy, UK, Spain, Portugal and Belgium.
Two of our subsidiaries were able to record revenue increases: Italy gained 18 percent and Spain 12 percent. The other countries suffered losses in revenue, yet were able to do better than the market average.
In this respect, business development has proved satisfactory and underlines our standing as a competitive and reliable partner in the European market.
Franchise operations
The Europcar franchise operations have shown a markedly positive development during the last financial year. As a result, income could be increased by 16 percent.
The franchise network has meanwhile been extended to cover 116 countries. Together with the seven corporate countries (Germany, France, Italy, UK, Spain, Portugal and Belgium), they represent the "Global Network" of Europcar.
The turnover for the entire global network amounts to 1.6 billion euros, of which 550 million euros derive from the franchisees . We see the strategy of expansion we have implemented over the last three years as confirmed.
The increases in revenues and earnings within the Group during 2002 are even more remarkable – as I mentioned at the outset – in that the last quarter, with its looming threat of war in Iraq, put a considerable dampener on spirits throughout the branch.
Let me now explain in more detail how we achieved our improved result in the year under review.
Europcar managed to optimize profit margins by reviewing its customer portfolios under the criterion of contribution: customers making a lower contribution had to accept higher prices or the contracts were not renewed. New customers with greater contribution to make were acquired. This enabled Europcar to attain an increase in Revenue Per Day (RPD) of 4 percent despite the negative market trend.
As far as costs are concerned, we were able to economise through the continued implementation of various cost-cutting and optimisation programmes started in 2001.
An important element here involves the fleet holding costs, i.e. fixed costs such as depreciation, automobile taxes and all expenses relating to the buying and selling of vehicles. The fleet maintenance costs increased by 2.8 percent even though the average fleet of 120,200 vehicles was 1.6 percent less than the previous year. The reason for the cost increase lies in the low prices on the used car market. This is the case in Italy, for example, where the government has eased conditions for the purchase of new cars. That is also the reason why we were unable to achieve the same results in selling used cars as we did during the previous year. On the other hand, we managed to improve fleet utilisation to 67.8 percent, which served to limit the negative impact on results caused by price-cutting in the used car market. In relation to revenues, these costs are in line with the previous year.
Operating costs, such as accident damage, repairs, insurance, commissions and reservation costs, decreased slightly.
Personnel costs and network costs increased due to inflation and the addition of several new stations: the corporate network has increased by 27 outlets and now amounts to 1518 stations. These increases were in line with our growth in revenue, and in proportion to revenues these costs have remained stable.
As Europcar is financing a large part of its business on a short-term basis, we could benefit from the low interest rate in the European market. This led to an improvement of the result in percent of revenue by 1 percent point.
A successful combination of yield and cost management has helped Europcar achieve its profit of 52 million euros.
Let me now come to our balance sheet:
The year-end balance amounts to 2.319 billion euros, 220 million euros more than at the end of 2001. Rental fleet assets and receivables have caused this increase, especially before the closing of annual accounts. Regarding liability, the financing has increased according to asset needs. The equity increased to 153 million euros, which is 6.6 percent compared to the 3 percent a year before.
I would like to add a few words on the financial strategy of the Europcar Group.
Europcar is mainly financed by short-term facilities from banks (60 percent) and by Volkswagen Group intercompany loans (40 percent). We have bought hedging instruments with a volume of 400 million euros to cover interest-rate risks and will be securing further amounts in the coming months. This will mainly be done through caps in coordination with the financial department of the Volkswagen Group.
Ladies and gentlemen,
I thank you for your attention and hand over the stage to Salvatore Catania, who will present a few strategic outlines and a view of prospects during the rest of the financial year 2003.
Statement of Mr. Salvatore Catania, Chief Executive Officer of Europcar Group (Part 2)
Situation in the year 2003
Ladies and gentlemen,
having discussed the results of 2002, let us turn our attention to the year 2003. A great deal of belly-aching about the state of the economy can be heard within the European business community at the moment. It is apparent that we will have to expect a general buying restraint on the part of consumers during the course of this year as well.
This means that, under the prevailing macroeconomic circumstances, no natural upswings can be expected.
Europcar, however, will not join in this general chorus of woe. Even though the competition in the car rental business is becoming stiffer, the costs are rising further, and the overall economic climate hardly offers the best conditions for thriving growth, we are still looking confidently over the year ahead.
Europcar has been constantly developing into a mobility service provider. The basis is formed by the company's international competence in the car rental and chauffeur field, by partnerships with airlines, rail operators, hotel groups, automobile clubs and emergency services.
The numerous attractive Frequent Flyer partnerships with airline companies are being expanded. Further partnerships exist with tour operators, travel agencies and automobile manufacturers. The signature placed under the exclusive partnership contract underlines the high satisfaction felt by the world's largest tour operator (TUI) with the quality of Europcar service.
I would like to stress at this point that we have accomplished a major step forward for the future: we have recently been able to win over new corporate customers from the B2B segment, the service sector and the consumer products industry.
As regards the automobile manufacturers, we have managed to establish a balanced purchasing relationship. The Europcar Group has been able to play its part in launching the new Volkswagen models onto the market. On the other side of the equation, we have been able to satisfy customer wishes with a balanced supply of automobiles.
Ladies and gentlemen, let me stress that the Europcar Group will remain a multi-brand company despite its close relationship with the parent concern. The share of products from the Volkswagen Group in the total fleet of the Europcar Group currently amounts to about 30 percent. This percentage corresponds to the present demand from the majority of our customers for attractive Volkswagen Group vehicles.
Expansion of the Europcar network
Our target is a growth strategy that responds flexibly to market conditions. Europcar is currently represented in seven corporate countries, which are supplemented by 116 franchise nations. Both these groups are equivalent pillars of the enterprise. The franchise system plays a decisive role in increasing market share and enhancing profits. As already mentioned, in 2002 the income of Europcar from its franchisees showed a plus of 16 percent over the previous year.
Forecast for the year 2003
Our business objective, and therefore our forecast, for 2003 rests on three central goals:
- the constant increase of revenue,
- the gaining of market leadership in Europe, and
- the continuous improvement of our profitability.
We intend to generate new potential and open up further revenues through the introduction of innovative products and even better services. We will continue to streamline our cost management and will further improve the figures in our core business area through additional optimisation in customer management. The Europcar Group expects to maintain further revenue growth and a result improvement in the two-figure range in spite of the highly unfavourable economic climate.
Ladies and gentlemen,
The Europcar Group will continue on its road to the top. It will pursue this route with innovative solutions, new products and enhanced services. We will be pleased to inform you about these in the near future.
Thank you very much for your attention!
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