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Embargoed for 07.00 - 27 August 2009

AVIS EUROPE PLC

Interim results for six months ended 30 June 2009

Avis Europe plc, a leading car rental company in Europe, Africa, the Middle East and Asia, announces interim results for the six months ended 30 June 2009.

Operating Performance 

• Like-for-like1 reduction in volumes limited to 9.4%, supported by brand leadership, service differentiation and geographic diversification

• Selected pricing gains achieved, mitigating impact of mix and increased rental length

• Very strong fleet discipline led to a 4.7% point step-change improvement in utilisation 

• Rigorous cost reduction of €82 million (gross margin improved by 2% points; staff numbers down by 10%) mitigated impact of €87 million lower revenues

• Substantial fleet reduction and cash management focus drove significant cash inflow reducing net debt by €392 million versus H1 2008

• Management full year expectations remain overall unchanged

Financial Performance 

• Revenues 14.1% lower at €533.2 million, 12.5% lower on a constant currency2 basis

• Loss before tax on continuing operations of €34.6 million (2008: loss of €6.8 million) included a net exceptional charge of €15.4 million (2008: €1.7 million), and loss on re-measurement items of €5.3 million (2008: gain of €3.9 million)

• Underlying3 loss before tax on continuing operations4 of €13.9 million (2008: loss of €9.0 million)

• Loss per share of 2.8 euro cents (2008: loss of 0.3 euro cents). Underlying3 loss per share on continuing operations of 0.8 euro cents (2008: loss of 0.7 euro cents)

• Loss after taxation on continuing operations of €25.8 million (2008: loss of €4.0 million)

• Closing net debt of €912.3 million (2008: €1,304.2 million)

• Return on capital employed ahead by 0.5% points to 8.7%

Pascal Bazin, Chief Executive, said:

'We have delivered a resilient first half performance as our strategic positioning and the rigorous execution of our plan for recession mitigated weaker market conditions. Brand leadership, service differentiation and geographic diversification supported volumes and proactive actions improved rental revenue per day by 1.0%, excluding the impact of mix and increased rental length. Very strong fleet discipline led to a 4.7% point step-change in utilisation. We fully flexed variable costs in line with lower revenues, and together with a structural reduction in fixed costs, these actions led to a limited increase in the underlying seasonal first-half loss. At the same time the substantial fleet reduction and strong cash management drove a significant reduction in net debt.

 

Recent trading during July and August to date has shown some improvement in overall revenue trends, with an improvement in rental revenue per day and a lower level of volume decline. However, visibility remains limited and we anticipate continued pressure on consumer sentiment and travel demand in the second half. In this uncertain trading environment, we will maintain our rigorous operational discipline to further improve our cost position and business model flexibility, in addition to continuing our strong commercial focus to protect profitable revenue, invest in future profitable growth and in our customers to position the Group well to take full advantage when markets stabilise.

 Our full year expectations remain overall unchanged, including positive free cash flow.'

• Like-for-like measures comprise only those corporately-owned and agency rental stations that were in operation throughout all of the current and comparative period.

• Constant currency revenue data is calculated whereby both current and prior period non-euro denominated revenue is translated into euro at the exchange rate prevailing in the equivalent month in the prior period.

• Underlying excludes exceptional charges, certain net re-measurement and economic hedging items (see Basis of Preparation). Underlying is not a defined term under IFRS, and is not intended to be a substitute for, or superior to, IFRS measures.

• These profit measures exclude exceptional charges of €15.4 million (2008: €1.7 million) and certain net re-measurement and economic hedging items totalling €5.3 million (2008: €(3.9) million).

Enquiries:
Avis Europe plc
Pascal Bazin, Chief Executive	01344 426644
Martyn Smith, Finance Director	01344 426644
Hilary White, Investor Relations	01344 426644

Hogarth Partnership
Andrew Jaques, Barnaby Fry, Simon Hockridge	020 7357 9477

  RESULTS OVERVIEW

We have delivered a resilient first half performance as our strategic positioning and the rigorous execution of our plan for recession mitigated weaker market conditions.

Corporately-owned operations

Our geographic diversification, brand leadership and service differentiation supported volumes, with the like-for-like reduction being only 9.4%. Whilst demand softened in France, Germany and Italy during the first half of the year, we delivered a comparatively resilient performance in the UK, despite market conditions, winning several major new contracts during the period. The environment in Spain remained particularly tough, although with some early signs of stabilisation.

Avis Licensee and Budget Licensee

Our licensees also benefitted from this diversification, helping to mitigate the weaker global economic conditions.

Total Group

Our strong customer balance was reinforced with the relatively stronger performances in the Corporate and Insurance/Replacement customer groups, in particular with the latter being off-airport and less seasonal. In addition, we launched 'Avis Flex' as a versatile monthly rental product to satisfy increasing demand for greater flexibility from our Corporate customers. We also strengthened a number of key partnerships, further protecting our profitable revenue, and are now the fully exclusive partner for British Airways. In order to improve our utilisation further, we have introduced a 'non-cancellation' fee, which applies to customers who do not give advance notification of their intent to cancel a reservation. Despite the global recession, we have continued to invest in longer-term growth markets, with the opening of a new licensee operation in Vietnam, a further increase in the number of locations in China and expansion of our car-sharing operation OKIGO in Paris.

We have kept a very tight control over fleet capacity, continuing to increase prices where practicable and improving yields through revenue management actions. We have achieved selected gains in our Individual direct customer group and successfully implemented price increases to our Insurance/Replacement customers, as well as many Corporate customers.  Rental revenue per day, 1.4% lower at constant currency2 and 3.4% lower on a reported basis, was impacted by the mix effect from the relatively stronger volume performance of the Insurance/Replacement customer group and longer rental length, particularly by Corporate customers. Excluding the impact of mix and longer rental length, rental revenue per day on a constant currency basis was ahead by 1.0%.

Vehicle purchases have been managed on a conservative basis, allowing us to flex proactively the size of our fleet relative to actual demand conditions. Together with operational efficiencies and the extension of some holding periods, this resulted in a step-change improvement in utilisation of 4.7% points. These actions also combined to deliver a strong positive cash flow, reducing closing debt by €221 million from the previous year end. Closing debt of €912 million was 30% lower than June 2008.

  We took swift and substantial cost actions to mitigate the impact of recessionary conditions on our profitability. Total underlying costs were €82.3 million lower, also benefitting in part from the positive translation effect due to weaker sterling. Variable costs were flexed to mitigate lower volumes, which together with improvements in utilisation and more stable fleet market conditions, led to a 2% point improvement in the gross margin. Staff costs were substantially lower, as staff numbers were reduced by 662 to 5,490 and salaries were frozen for 2009. Fixed overheads were held flat year-on-year despite cost pressures, leaving the operating margin at 3.7% (2008: 4.0%).

The combination of the above cost reductions, together with fleet and utilisation actions reducing average capital employed, increased underlying return on capital employed for the 12 months to June 2009 by 0.5% points to 8.7%.

OUTLOOK

Recent trading during July and August to date has shown some improvement in overall revenue trends, with an improvement in pricing and a lower level of volume decline. However, visibility remains limited and we anticipate continued pressure on consumer sentiment and travel demand in the second half. 

Our geographic spread and diversified customer portfolio are helping to mitigate the impact of this challenging trading environment. We continue to respond by adapting our business model and maximising opportunities for price increases, while continuing to focus on the customer experience. We will maintain a very strong operational focus to preserve cost efficiencies going forward, as well as retaining our tight control of capital.

As a result, our full year expectations remain overall unchanged, including positive free cash flow.

KEY PERFORMANCE INDICATORS 

The key measures that the Board monitors to measure the Group's performance are set out in the table below: 

Performance indicators

	Six months	Year	Six months
	to 30 June 2009	to 31 December 2008 (restated)	to 30  June 2008 (restated)
Corporately-owned business
Rental revenue per day1 - reported currency (% change)	(3.4)	(1.3)	0.1
Rental revenue per day1 - constant currency2 (% change)	(1.4)	0.7	2.1
Billed days3 (% change)	(10.5)	0.1	2.5
Utilisation - average4 (%pts. change)	4.7	0.2	(0.5)
Total Group:
Underlying operating margin (%)	3.7	8.6	4.0
Underlying return on capital employed5 (%)	8.7	8.5	8.2

Footnotes and detailed definitions are described at the end of the Financial Review.

  Comparative data has been restated following both the integration of the Avis and Budget corporately-owned operations and the application of IFRS 8, Operating segments.  

FINANCIAL REVIEW

Total revenue from continuing operations was 14.1% lower at €533.2 million with an underlying loss before tax of €13.9 million (2008: €9.0 million). Overall loss before tax was €34.6 million (2008: €6.8 million). 

Lower volumes and the marginal fall in reported rental revenue per day were largely mitigated by early and substantial cost actions, the substantial improvement in utilisation, together with a positive cost effect from translation due to weaker sterling. We incurred exceptional charges primarily relating to restructuring the cost base, in addition to fair value losses on the re-measurement of derivatives.

The underlying loss per share on continuing operations was 0.8 euro cents (2008: loss of 0.7 euro cents) and the total loss per share on continuing operations was 2.8 euro cents (2008: loss of 0.4 euro cents).

Currency effects

Exchange rate movements, in particular the sterling/euro exchange rate, affected results for the first six months of 2009 compared with the prior year period. The average sterling/euro rate for operating profit for the first six months of 2009 was 1.151 compared to 1.229 in the comparative period. The strength of the euro adversely impacted customers travelling into mainland Europe, particularly business from the US and UK, whilst having a beneficial effect on the translation of the net cost of our UK activities, including the cost of the Group Headquarters.

 

Change in basis of segmental reporting

At the end of the period, we took the decision to combine the corporately-owned operations of Budget with the respective Avis businesses. Consequently, the corporately-owned operations of both the Avis and Budget branded businesses are now disclosed as a single segment. Comparative data has been restated accordingly.

Revenue overview

€ million	2009	2008 (restated)	% change
Corporately-owned operations:
Rental revenue*	463.0	530.3	(12.7)
Other non-rental revenue	49.5	67.1	(26.2)
	512.5	597.4	(14.2)
Licensees:
Avis	15.7	17.4	(9.8)
Budget	5.0	5.9	(15.3)
	20.7	23.3	(11.2)
Group Revenue	533.2	620.7	(14.1)

*Excluding inter-segment sales

  Corporately-owned operations 

Revenue from the corporately-owned business segment was 14.2% below the comparative period at €512.5 million at reported currency and 12.5% lower on a constant currency basis.  

Overall billed days were 10.5% lower and 9.4% lower on a like-for-like6 basis excluding the impact of closing 46 very low contribution stations and the licensing of 21 locations, primarily in Germany, Holland and Austria. A reduction in billed days primarily reflected a lower number of rentals and was partially offset by an improvement in rental length, which we actively managed through revenue management initiatives.  

Pricing improvements from proactive actions and revenue management were offset by the mix effect from the relatively stronger volume performance of the Insurance/Replacement customer group, car mix and longer rental length. Reported rental revenue per day was 1.4% lower at constant currency and 3.4% lower on a reported basis. With a very tight control over fleet capacity, we continue to increase prices where practicable, achieving selected gains to our Individual direct customers and implementing successfully price increases to our Insurance/Replacement customers, as well as many Corporate customers.  

The analysis of rental revenue by customer type follows: 

Individual
These customers are individual travellers booking directly or through intermediary travel companies or tour operators, partnership arrangements and brokers.

The weaker economic conditions particularly affected rental revenue from this customer group. With regard to direct business, the strength of the euro adversely impacted business from the UK into mainland Europe but European domestic business was relatively more resilient. We continue to control tightly the volume of business through the broker intermediary channel. Overall rental revenue per day was broadly flat.

Corporate
Corporate customers book via negotiated arrangements with their employers and through replacement companies.

Volumes from this customer group were below the comparative period but more resilient than Individual customers. Price increases were successfully implemented to many Corporate customers, although pricing remained competitive as many companies seek to control travel expenditure. Reflecting this pressure and an increase in rental length, reported rental revenue per day was below the prior year period.

Insurance/Replacement
These customers come through insurance and replacement companies, dealerships and repair shops with which we have a direct contractual relationship.

Volumes from this customer group proved more resilient, being less cyclical, and rental revenue per day was improved.

  Avis Licensee 

Revenue from Avis Licensee countries was 5.7% lower on a constant currency basis and 9.8% lower on a reported basis with reductions in most regions reflecting the weaker global economic conditions.

Budget Licensee 

Budget Licensee revenue was marginally ahead on a constant currency basis as continued growth of the diverse network offset difficult trading conditions. On a reported basis, revenues were 15.3% lower.

Operating profit overview

€ million	2009	2008
Underlying operating profit - continuing operations	19.9	25.1
Operating profit - discontinued operation (excluded from underlying)	-	1.3
Amounts excluded from underlying: - Net exceptional charges - Certain re-measurement items and economic hedges	(15.4) (2.0)	(1.7) 1.0
Operating profit including discontinued operation and amounts excluded from underlying	2.5	25.7

The analysis of underlying operating profit from continuing operations follows:

Corporately-owned operations

€ million	2009	2008 (restated)
Revenue	512.5	597.4
Cost of sales	(303.1)	(367.0)
Administrative expenses	(205.8)	(223.4)
Underlying operating profit - continuing	3.6	7.0

Underlying operating profit of our corporately-owned operations was only €3.4 million lower than the comparative period, despite revenue being €84.9 million or 14% lower, reflecting the flexibility of the variable cost base and structural reductions in fixed costs.

Cost of sales of €303.1 million was €63.9 million or 17.4% lower than the comparative period with fleet costs €39.8 million or 17.6% lower. This lower fleet cost reflected the reduction in fleet capacity to match lower demand, combined with our drive to improve significantly utilisation. In the comparative period, fleet costs were negatively impacted by residual values on non-repurchase vehicles in Spain and the UK. In the current period, residual values have been more stable with second hand markets supported by scrappage laws in Germany and the UK. The cost of new vehicle purchases has been held broadly flat. Other cost of sales was €24.1 million or 16.9% lower, being fully flexed in line with the reduction in rental revenues and gas revenues as appropriate.

 

Administrative expenses of €205.8 million, were €17.6 million or 7.9% lower than the comparative period. Staff costs were €15.6 million or 10.7% lower following substantial 2008 redundancies, a recruitment freeze since 2008, the implementation of a salary freeze for 2009 and a further 5% reduction in Group Headquarter staff in the first half of 2009. In the UK business, staff numbers have marginally increased to support several large corporate contract wins. Fixed overheads were flat. Benefits from the translation of the sterling-based overheads into euro and property rental savings from restructuring actions were offset by increases in local taxation charges and more conservative receivable provisions given the prevailing economic climate.

Avis Licensee

€ million	2009	2008 (restated)
Revenue	15.7	17.4
Cost of sales and administrative expenses	(1.0)	(0.5)
Underlying operating profit	14.7	16.9

Avis Licensee underlying operating profit at €14.7 million was reduced by €2.2 million primarily reflecting lower volumes, the comparative benefitting from a one-off credit.

Budget Licensee

€ million	2009	2008 (restated)
Revenue	5.0	5.9
Cost of sales and administrative expenses	(3.4)	(4.7)
Underlying operating profit	1.6	1.2

Budget Licensee underlying operating profit at €1.6 million improved by €0.4 million due to tight cost control and foreign exchange benefits from the translation of the sterling cost base.

Operating margin - continuing

Underlying operating margin on continuing operations was 3.7%, being 0.3% points lower than the comparative period. Whilst operating costs were largely flexed in line with revenue, the benefit of certain structural actions to reduce the fixed cost base crystallised only towards the end of the period.

The operating margin on continuing operations after net exceptional items, certain re-measurement items and economic hedges reduced from 3.9% to 0.5%, primarily due to higher net exceptional charges in the current period.

  

Underlying net finance costs

€ million	2009	2008
Finance costs
Net finance costs (excluding payable on deferred consideration)	33.1	33.4
Interest payable on deferred consideration	0.9	1.1
Underlying net finance costs1	34.0	34.5
Average net debt	967	1,060

1   Excludes certain re-measurement items and economic hedges, totalling a loss of €3.3 million (2008: gain of €2.9 million).

The underlying net finance costs were broadly flat despite lower average net debt, as higher average gross cash deposits were held throughout most of the period. The Group also continued to be substantially hedged in the short-term, therefore limiting the effect of lower market borrowing rates. The resultant effective underlying finance rate was 7.0% (2008: 6.5%).

The decrease in average net debt from €1,060 million to €967 million was due to the reduction in the size of the average owned fleet of 17,339 units to 84,313, offset by movements in associated fleet working capital.  

Net exceptional charges

Net exceptional charges before taxation of €15.4 million were incurred in the period, which are analysed as follows:

€ million	2009	2008
Restructuring costs	8.4	1.9
Securitisation preparation costs	7.1	-
Centrus receivables	(0.1)	(0.2)
Net exceptional charges - continuing operations Discontinued operation	15.4 -	1.7 (1.3)
Net exceptional charges including discontinued operation	15.4	0.4

Restructuring costs of €8.4 million were recognised, reflecting the rationalisation of operations, which commenced in the prior year. This rationalisation includes headquarter redundancies, the closure of certain low margin rental locations, and vacant property provisions following the relocation of the headquarters of the UK business into the Group head office. In the prior period, restructuring costs of €1.9 million were incurred in respect of a redundancy programme that commenced in December 2007.

During the period, we commenced the preparation of a structure for potential securitisation of our fleet.  Advisory, legal and other costs totalling €7.1 million were expensed in developing corporate and operational structures. We could however benefit from this work, if and when the market re-opens and the economics are attractive.

  The activities associated with the closure of the Centrus credit hire business continue to be more successful than previously anticipated. We therefore partially reversed provisions recognised as exceptional items in prior years, resulting in a further credit of €0.1 million (2008: €0.2 million).

In 2007, we disposed of our former subsidiary in Greece and in 2008 recognised an exceptional credit of €1.3 million to reflect the final settlement of a warranty provision.

The net cash cost of exceptional items, including the settlement of costs recognised in previous periods, was €18.6 million (2008: €4.4 million).

Certain re-measurement items and economic hedges

The following items have been recognised in the period and are excluded from underlying loss before tax:

€ million	Operating Profit	Net Finance Costs	Loss Before Tax
Re-measurement losses on derivative financial instruments	3.2	1.5	4.7
Economic hedge adjustments	(1.2)	(2.4)	(3.6)
Foreign exchange loss on borrowings	-	4.2	4.2
	2.0	3.3	5.3

Re-measurement losses on derivative financial instruments arise from the recognition in the Income Statement of movements in the fair value of foreign exchange options used to hedge net US dollar income, and interest rate swaps and caps used to limit the Group's floating interest rate exposures, partially offset by an increase in the fair value of an embedded derivative. The foreign exchange on borrowings primarily arises from translation of sterling debt exposures. 

Fleet

The majority of vehicles continue to be subject to manufacturer repurchase arrangements, which guarantee a disposal value at the end of the holding period, thereby reducing the Group's residual value exposure. The split between the closing non-repurchase and repurchase vehicles on the Balance Sheet is set out below:

	30 June2009		31 December 2008		30 June2008
	€million	%	€million	%	€million	%
Non-repurchase vehicles on fleet Non-repurchase vehicles held for resale	436.6 4.5	33 -	441.0 10.3	34 1	504.0 12.8	28 1
Manufacturer repurchase vehicles	893.8	67	841.2	65	1,267.7	71
	1,334.9	100	1,292.5	100	1,784.5	100

The average number of fleet units operated under short-term hire operating leases during the period was 24.4% lower at 9,865, with an Income Statement charge of €26.8 million (2008: €31.8 million).

  The average number of fleet units, including operating lease vehicles, operated during the period decreased by 15.8% to 94,178 vehicles reflecting lower rental volumes and the step-change improvement in utilisation.

Return on capital employed

Underlying return on capital employed increased from 8.2% for the 12 months to June 2008 to 8.7% for the 12 months to June 2009, largely as a result of a reduction in average capital employed from the fleet and utilisation actions taken during the first half of 2009.

Cash flow/net debt movement

€ million		2009	2008
Net cash generated from/(used in) operating activities Net cash used in investing activities		412.2 (44.6)	(59.2) (91.5)
Net cash (used in)/generated from financing activities		(356.5)	146.9
Net movement in cash and cash equivalents before exchange rate changes Other movements in net debt resulting from cash flows New finance leases Other non-cash movements, including the effects of exchange rate changes		11.1 319.4 (104.8) (4.8)	(3.8) (187.5) (144.3) 12.3
Movement in net debt		220.9	(323.3)
Net debt brought forward		(1,133.2)	(980.9)
Net debt carried forward		(912.3)	(1,304.2)

During the period, the Group was free cash flow positive resulting in a reduction in net debt of €220.9 million (2008: increase of €323.3 million).

The substantial increase in cash generated from operating activities was mainly attributable to lower vehicle purchases and improvements in non-fleet working capital cash flows. The seasonal net cash outflow on investing activities was substantially lower than the comparative period also due to lower vehicle purchases and limited non-fleet capital expenditure. Net cash used in financing activities reflected the resultant repayment of borrowings, as opposed to net new borrowings in the comparative period.

Net debt

	2009		2008
Closing net debt	€ million	%	€ million	%
Interest bearing assets  Debt due within one year Debt due after one year Finance leases due within one year Derivative debt instruments	58.8 (33.2) (548.9) (312.8) (76.2)	(6) 4 60 34 8	66.3 (57.2) (868.9) (395.9) (48.5)	(5) 4 67 30 4
Net debt	(912.3)	100	(1,304.2)	100

There have been no significant changes in the composition of net debt during the period. The fair value of derivative debt instruments increased reflecting the lower market interest rates.

  Pensions

The deficit on pension schemes increased by €31.7 million in the period, primarily in the main UK defined benefit scheme, reflecting an actuarial loss of €24.4 million, following a decrease in the real discount rate assumption (as corporate bond market margins reduced and long-run inflation expectations increased), and the impact of translation into euro.

Principal risks and uncertainties 

Risk mitigation is a key element of the management of Avis and the Group has a well-developed process to identify, manage and limit exposure to areas, which may have a negative impact on the business.

There have been no major changes to the principal risks and uncertainties identified and disclosed in the Business Review included in the Group's 2008 Annual Report. These are summarised as: 

-    International operations

-    Demand 

-    Pricing and competitive pressures

-    Fleet 

-    Relationship with Avis Budget Group, Inc. 

-    Insurance 

-    Funding

-    Interest and foreign currency

-    Pensions 

However, as would be expected, the relative importance of certain risks has changed since the year end. As a result, management have taken actions to respond, particularly by addressing further the Group's cost base and reducing capital employed substantially. Management will continue to monitor and respond to the changing climate, particularly the effect of economic uncertainty on demand and residual values in used car markets, and including the potential impact of swine flu.

Going concern

The Group is subject to a number of key business risks as summarised above. The nature of the car rental business model means that the Group has an ability to readily flex its fleet size and hence largely its funding requirements if required. As an example, due to relatively short holding periods, we are able to flex vehicle fleet levels relatively quickly to meet both fluctuations in demand or funding constraints. Also a relatively large number of temporary staff are employed for the seasonal peak: again, this helps provide flexibility in managing costs. Furthermore, we can choose whether to franchise or corporately own operations. We also benefit from significant diversification, in terms of customers and suppliers, geographic spread and sources of funding. Consequently, the Directors believe that the Group is well placed to manage its business risks successfully despite the continuing highly uncertain economic outlook.

As part of our normal business practice, we regularly prepare both annual and longer-term plans. These plans include an estimate of the financing required over the respective period. Current forecasts indicate that we expect the Group to operate within its committed facilities over the next 12 months together with sufficient operating lease lines. Furthermore, these forecasts also indicate that the Group is expected to be able to operate within its lenders' financial covenants over the same period.  

Specifically regarding sources of liquidity, the Group has €33.2 million of borrowings due within one year, which primarily consist of uncommitted overdraft facilities and commercial paper. Whilst we will seek the ongoing renewal of these facilities, we currently maintain sufficient headroom within our committed facilities should any of the uncommitted facilities not be renewed.

Included in net debt at 30 June 2009 are finance leases of €312.8 million of which €81.5 million relates to drawings on facilities maturing in June 2011. These facilities are provided by local banks and drawings are secured on the related fleet. At the period end, the Group had committed finance lease facilities of €480.0 million, which have varying maturities extending through to June 2011.

Regarding term-debt, the first repayment in respect of committed borrowing facilities is €51.6 million of US$ private placement notes (and an associated derivative contract) due in late August 2010. Thereafter the next borrowing repayment matures in February 2011, being the Group's €580 million revolving credit facility. The Group therefore has no committed borrowings due for repayment within one year of the signing of these Interim Financial Statements.

With regard to the longer term, the Group has commenced discussions with various financial institutions with respect to a variety of potential forms of future medium-term funding.

Therefore, whilst any consideration of future matters involves making a judgment at a particular point in time about future events that are inherently uncertain, the Directors, after making appropriate enquiries, as indicated above, have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. For this reason, the Directors continue to adopt the going concern basis in preparing the Financial Statements.

Forward-looking statements

Certain statements in this Interim Report are forward-looking. Although the Group believes that the expectations reflected in these forward-looking statements are reasonable, the Group can give no assurance that these expectations will prove to have been correct. As these statements involve risks and uncertainties, actual results may differ materially from those expressed or implied by those forward-looking statements.

Footnotes and detailed definitions

1  Rental revenue per day is calculated as rental revenues divided by billed days. 

2  Constant currency revenue data is calculated whereby both current and prior period non-euro denominated revenue is translated into euro at the exchange rate prevailing in the equivalent month in the prior period.

3  Billed days include any day or period less than a day for which a vehicle rental is invoiced to a customer.

4  Utilisation is calculated as the average period of time during which operational vehicles are on rent as a percentage of their holding period.

5  Return on capital employed is the ratio of underlying operating profit for the past 12 months, including the operating profit of the joint ventures and associate, to capital employed. Capital employed is an average of current and previous two period end closing balances, comprising shareholders' funds plus net debt and other liabilities.

6  Like-for-like measures comprise only those corporately-owned and agency rental stations that were in operation throughout all of the current and comparative period.

Avis Europe plc

Condensed Consolidated Income Statement for the six month period to 30 June

			2009				2008
		Underlying1	Amounts excluded from underlying	Total		Underlying1		Amounts excluded from underlying	Total
	Notes	€m	€m	€m		€m		€m	€m
Continuing operations
Revenue	3,4	533.2	-	533.2		620.7		-	620.7
Cost of sales		(303.8)	-	(303.8)		(368.4)		-	(368.4)
Gross profit		229.4	-	229.4		252.3		-	252.3
Administrative expenses		(209.5)	(17.4)	(226.9)		(227.2)		(0.7)	(227.9)
Operating profit/(loss)	4,5	19.9	(17.4)	2.5		25.1		(0.7)	24.4
Finance income	7	0.7	1.6	2.3		1.2		4.6	5.8
Finance costs	7	(34.7)	(4.9)	(39.6)		(35.7)		(1.7)	(37.4)
Share of profit of joint ventures and associate		0.2	-	0.2		0.4		-	0.4
(Loss)/profit before taxation		(13.9)	(20.7)	(34.6)		(9.0)		2.2	(6.8)
Taxation	8	6.1	2.7	8.8		3.0		(0.2)	2.8
(Loss)/profit after taxation		(7.8)	(18.0)	(25.8)		(6.0)		2.0	(4.0)
Discontinued operation - Greece
Profit after taxation		-	-	-		-		1.3	1.3
(Loss)/profit for the six month period attributable to equity holders of the Company	15	(7.8)	(18.0)	(25.8)		(6.0)		3.3	(2.7)
Loss per share
(euro cents)
Basic and diluted	10			(2.8)					(0.3)
Basic and diluted - continuing	10			(2.8)					(0.4)

1 Underlying excludes net exceptional items, certain re-measurement items and economic hedges - see Basis of Preparation.

The accompanying Notes form an integral part of these Interim Financial Statements.

Condensed Consolidated Statement of Comprehensive Income for the six month period to 30 June

				2009					2008
			Underlying1	Amounts  excluded  from  underlying	Total	Underlying1			Amounts  excluded  from  underlying	Total
		Notes	€m	€m	€m	€m			€m	€m
(Loss)/profit for the six month period attributable to equity holders of the Company			(7.8)	(18.0)	(25.8)	(6.0)			3.3	(2.7)
Actuarial (losses)/gains on retirement benefit obligations			-	(24.4)	(24.4)	-			2.7	2.7
Cash flow hedges:
- net fair value (losses)/gains			-	(1.7)	(1.7)	-			1.7	1.7
- transferred to Income Statement			-	1.1	1.1	-			0.9	0.9
Exchange differences on translation of foreign operations			-	12.1	12.1	-			(5.0)	(5.0)
Tax on net items taken to equity			-	7.5	7.5	-			0.9	0.9
Other comprehensive (expense)/income for the six month period, net of taxation		15	-	(5.4)	(5.4)	-			1.2	1.2
Total comprehensive (expense)/income for the six month period attributable to equity holders of the Company			(7.8)	(23.4)	(31.2)	(6.0)			4.5	(1.5)
1 Underlying excludes net exceptional items, certain re-measurement items and economic hedges - see Basis of Preparation.
The accompanying Notes form an integral part of these Interim Financial Statements.

Condensed Consolidated Balance Sheet
			As at 30  June  2009	As at 30  June 2008	As at 31  December 2008
		Notes	€m	€m	€m
Goodwill			0.2	1.4	0.2
Other intangible assets		11	16.1	14.5	14.7
Property, plant and equipment:
- vehicles		11,12	436.6	504.0	441.0
- other property, plant and equipment		11	69.4	76.8	71.7
Investments accounted for using the equity method			12.6	11.1	12.2
Other financial assets:
- investments held for sale			0.4	0.6	0.4
- derivative financial instruments			2.2	10.9	0.7
Deferred tax assets			45.0	51.0	31.7
Non-current assets			582.5	670.3	572.6
Non-current assets held for sale		11,12	4.5	12.8	10.3
Inventories			6.7	10.6	6.9
Trade and other receivables			1,250.5	1,710.2	1,351.7
Current tax assets			2.0	1.8	2.0
Other financial assets:
- held for trading			0.7	-	-
- derivative financial instruments			2.3	5.9	9.2
Cash and short-term deposits			58.1	66.3	52.1
Current assets			1,320.3	1,794.8	1,421.9
Total assets			1,907.3	2,477.9	2,004.8
Trade and other payables			665.5	754.3	539.2
Current tax liabilities			25.1	31.9	24.4
Obligations under finance leases			312.8	395.5	232.7
Other financial liabilities:
- borrowings			33.2	57.2	45.1
- deferred consideration			0.3	0.3	0.2
- derivative financial instruments			17.8	0.5	21.4
Provisions			27.6	36.9	33.8
Current liabilities			1,082.3	1,276.6	896.8
Deferred tax liabilities			19.1	28.9	26.1
Provisions			29.3	28.8	25.6
Retirement benefit obligations			102.6	88.0	70.9
Obligations under finance leases			-	0.4	-
Other financial liabilities:
- borrowings			548.9	868.9	841.3
- deferred consideration			25.2	27.1	22.5
- derivative financial instruments			61.4	63.2	51.5
Non-current liabilities			786.5	1,105.3	1,037.9
Total liabilities			1,868.8	2,381.9	1,934.7
Net assets			38.5	96.0	70.1
Equity
Called-up share capital		13	13.1	13.1	13.1
Share premium			381.5	381.5	381.5
Own shares held		14	(1.1)	(0.5)	(0.4)
Retained deficit			(326.9)	(282.6)	(283.9)
Translation reserve			(18.1)	(14.6)	(30.8)
Hedging reserve			(10.7)	(1.7)	(10.2)
Shareholders' equity		15	37.8	95.2	69.3
Minority interest			0.7	0.8	0.8
Total equity			38.5	96.0	70.1

The accompanying Notes form an integral part of these Interim Financial Statements.

The Interim Financial Statements, including accompanying Notes, were approved by the Board on 27 August 2009 and were signed on its behalf by:

Pascal Bazin	Martyn Smith
Chief Executive	Finance Director

Condensed Consolidated Statement of Changes in Equity
		Attributable to equity holders of the Company
		Share capital	Share premium	Own shares held	Retained deficit	Translation reserve	Hedging reserve	Total	Minority interest	Total equity
		(Note 13)		(Note 14)
	Notes	€m	€m	€m	€m	€m	€m	€m	€m	€m
At 1 January 2008		13.1	381.5	(3.3)	(280.2)	(11.5)	(3.4)	96.2	0.8	97.0
Loss for the period attributable to equity holders of the Company	15	-	-	-	(2.7)	-	-	(2.7)	-	(2.7)
Net actuarial gains on retirement benefit obligations		-	-	-	2.7	-	-	2.7	-	2.7
Cash flow hedges:
- net fair value gains		-	-	-	-	-	1.7	1.7	-	1.7
- transfers to Income Statement		-	-	-	-	-	0.9	0.9	-	0.9
Taxation		-	-	-	(0.1)	1.9	(0.9)	0.9	-	0.9
Exchange differences on translation of foreign operations		-	-	-	-	(5.0)	-	(5.0)	-	(5.0)
Total comprehensive (expense)/income for the six month period		-	-	-	(0.1)	(3.1)	1.7	(1.5)	-	(1.5)
Increase in equity reserve arising from charge to income for share options in the period	15	-	-	-	0.1	-	-	0.1	-	0.1
Decrease in equity reserve arising from exercise of share options	15	-	-	-	(2.4)	-	-	(2.4)	-	(2.4)
Own shares released on vesting of share awards	15	-	-	2.6	-	-	-	2.6	-	2.6
Other exchange movements	15	-	-	0.2	-	-	-	0.2	-	0.2
At 30 June 2008		13.1	381.5	(0.5)	(282.6)	(14.6)	(1.7)	95.2	0.8	96.0
At 1 January 2009		13.1	381.5	(0.4)	(283.9)	(30.8)	(10.2)	69.3	0.8	70.1
Loss for the period attributable to equity holders of the Company	15	-	-	-	(25.8)	-	-	(25.8)	-	(25.8)
Net actuarial losses on retirement benefit obligations		-	-	-	(24.4)	-	-	(24.4)	-	(24.4)
Cash flow hedges:
- net fair value losses		-	-	-	-	-	(1.7)	(1.7)	-	(1.7)
- transfers to Income Statement		-	-	-	-	-	1.1	1.1	-	1.1
Taxation		-	-	-	6.8	0.6	0.1	7.5	-	7.5
Exchange differences on translation of foreign operations		-	-	-	-	12.1	-	12.1	-	12.1
Total comprehensive (expense)/income for the six month period		-	-	-	(43.4)	12.7	(0.5)	(31.2)	-	(31.2)
Increase in equity reserve arising from charge to income for share options in the period	15	-	-	-	0.4	-	-	0.4	-	0.4
Purchase of own shares	15	-	-	(0.6)	-	-	-	(0.6)	-	(0.6)
Other exchange movements	15	-	-	(0.1)	-	-	-	(0.1)	(0.1)	(0.2)
At 30 June 2009		13.1	381.5	(1.1)	(326.9)	(18.1)	(10.7)	37.8	0.7	38.5
The accompanying Notes form an integral part of these Interim Financial Statements.

Condensed Consolidated Cash Flow Statement for the six month period to 30 June

			2009	2008
	Notes		€m	€m
Operating profit - continuing operations			2.5	24.4
Discontinued operation - Greece			-	1.3
Operating profit - all operations			2.5	25.7
Reverse amortisation of other intangible assets	5		2.1	1.7
Reverse depreciation on property, plant and equipment	5		59.4	64.9
Reverse adjustments arising on differences between sales proceeds and depreciated amounts	5		1.2	2.1
Reverse non-cash operating lease charge on manufacturer repurchase contracts			66.2	85.5
Payments in respect of manufacturer repurchase contracts			(400.0)	(865.7)
Receipts in respect of manufacturer repurchase contracts			580.9	600.3
Reverse share-based payment charges			0.4	0.1
Decrease/(increase) in inventories			0.4	(2.9)
Decrease in receivables			56.5	19.7
Increase in payables			43.6	17.3
Decrease in provisions			(4.2)	(0.8)
Increase/(decrease) in retirement benefit obligations			2.1	(1.1)
Reversal of re-measurement items and economic hedging adjustments			2.0	(1.0)
Cash inflow on derivative financial instruments - non-debt			0.5	0.1
Net cash generated from/(used in) operating activities before taxation			413.6	(54.1)
Tax paid			(1.4)	(5.1)
Net cash generated from/(used in) operating activities			412.2	(59.2)
Investing activities
Purchase of other intangible assets			(1.8)	(5.4)
Purchase of vehicles			(149.2)	(257.6)
Proceeds on disposal of vehicles			99.8	146.9
Purchase of other property, plant and equipment			(4.6)	(8.9)
Proceeds on disposal of other property, plant and equipment			0.4	-
Proceeds on disposal of non-current assets held for sale			11.5	29.3
(Purchase)/disposal of financial assets held for trading	16a)		(0.7)	5.4
Acquisition of licensee businesses			-	(1.2)
Net cash used in investing activities			(44.6)	(91.5)
Financing activities
Finance revenue received			0.7	1.2
Finance costs paid			(32.0)	(27.5)
Finance cost element of finance lease payments			(5.9)	(8.9)
Net capital element of finance lease payments	16a)		(28.6)	(14.3)
Purchase of own shares			(0.6)	-
Cash flow on derivative financial instruments - debt	16a)		(2.5)	(1.1)
(Repayment of)/proceeds from bank and other loans	16a)		(287.6)	197.5
Net cash (used in)/generated from financing activities			(356.5)	146.9
Increase/(decrease) in cash and cash equivalents (excluding exchange rate changes)			11.1	(3.8)
Effects of exchange rate changes	16a)		0.6	0.4
Net increase/(decrease) in cash and cash equivalents			11.7	(3.4)
Cash and cash equivalents at 1 January	16a)		24.7	52.1
Cash and cash equivalents at 30 June			36.4	48.7
The accompanying Notes form an integral part of these Interim Financial Statements.

Notes to the Condensed Consolidated Financial Statements for the six month period ended 30 June

1 General information

The Company is a public limited company with a primary listing on the London Stock Exchange. The address of its registered office is Avis House, Park Road, Bracknell, Berkshire, RG12 2EW. The Company's ultimate majority shareholder is s.a. D'Ieteren n.v. which is incorporated in Belgium. The ultimate controlling party of s.a. D'Ieteren n.v. is the D'Ieteren family.

This set of condensed Consolidated Interim Financial Statements was approved for issue on 27 August 2009 and has been reviewed, not audited.

2  Basis of preparation and accounting policies

These condensed Consolidated Interim Financial Statements have been prepared using accounting policies consistent with International Financial Reporting Standards (IFRS) as adopted by the European Union, and in accordance with IAS 34, Interim Financial Reporting, and with the Disclosure and Transparency Rules of the Financial Services Authority.

These condensed Consolidated Interim Financial Statements, including the information for the year ended 31 December 2008, do not constitute statutory accounts as defined in section 240 of the Companies Act 1985. A copy of the statutory accounts for that year has been delivered to the Registrar of Companies. The auditors' report on those accounts was not qualified, did not draw attention to any matters by way of emphasis and did not contain statements under section 237(2) or 237(3) of the Companies Act 1985.

Underlying measures

In addition to total performance measures, the Group discloses alternative performance measures, including underlying profit and underlying earnings per share. The Group believes that these underlying performance measures provide additional useful information on underlying trends to shareholders. The term 'underlying' is not defined under IFRS, and may therefore not be comparable with similarly titled profit measurements reported by other companies. It is not intended to be a substitute for, or superior to, IFRS measures.

Underlying measures are calculated based on reported profit before net exceptional items, certain re-measurement items and adjustments to reflect the realised gains and losses on foreign exchange forward contracts and accrued interest cash flows on any financial instruments (economic hedge adjustments). Underlying amounts recognised in the Statement of Comprehensive Income are calculated based on recognised income and expense before actuarial gains and losses arising on retirement benefit obligations.

New standards, interpretations and amendments to published standards - effective in six month period ending 30 June 2009

Except as described below, the accounting policies, presentation and methods of computation applied are consistent with those adopted in the Group's latest annual audited Consolidated Financial Statements. The following new standards, amendments to standards or interpretations are mandatory for the first time for the financial year beginning 1 January 2009.

New standards, interpretations and amendments having either no impact or no significant impact on the Consolidated Financial Statements

IFRIC 13, Customer loyalty programmes (effective from 1 July 2008) provides guidance on the treatment of customer loyalty programmes. An entity shall account for award credits which are granted as part of customer loyalty programmes as separately identifiable components of a sales transaction. The fair value of the consideration received or receivable in respect of the initial sale shall be allocated between the award credits and other components of the sale.

IFRIC 15, Agreements for the construction of real estate (effective from 1 January 2009) addresses the accounting for revenue and associated expenses by entities that undertake the construction of real estate and is deemed not relevant to the Group's operations.

IFRIC 16, Hedges of a net investment in a foreign operation (effective from 1 October 2008) provides guidance on net investment hedging, including: 

• which foreign currency risks qualify for hedge accounting and the amount that may be designated;

• where within the Group the hedging instrument may be held; and

• the amount which is reclassified to the Income Statement upon disposal of the hedged foreign operation.

IAS 1 (Revised), Presentation of financial statements (effective from 1 January 2009) is mandatory for accounting periods commencing on or after 1 January 2009. The Income Statement and Statement of Recognised Income and Expense have been replaced by a 'Statement of Comprehensive Income'. IAS 1 permits the components of the income statement to continue to be presented in a separate income statement, and the Group has taken this option. Additionally, IAS 1 now requires the presentation of changes in equity within a separate primary statement.

IAS 19 (Amendment), Employee benefits (effective from 1 January 2009) clarifies that a plan amendment that results in a change in the extent to which benefit promises are affected by future salary increases is a curtailment, while an amendment that changes benefits attributable to past service gives rise to a negative past service cost if it results in a reduction in the present value of the defined benefit obligation. The definition of return on plan assets has been amended to state that plan administration costs are deducted in the calculation of return on plan assets only to the extent that such costs have been excluded from measurement of the defined benefit obligation. The distinction between short-term and long-term employee benefits is based on whether benefits are due to be settled within or after 12 months of employee service being rendered. IAS 19 has also been amended to be consistent with IAS 37, Provisions, contingent liabilities and contingent assets, which requires contingent liabilities to be disclosed, but not recognised.

IAS 23 (Revised), Borrowing costs (effective from 1 January 2009) removes the option of immediately recognising as an expense those borrowing costs which relate to assets that take a substantial period of time to prepare for their intended use.

IAS 32 (Amendment), Financial instruments: Presentation, and IAS 1 (Amendment), Presentation of financial statements - Puttable financial instruments and obligations arising on liquidation (effective from 1 January 2009) require certain instruments to be classified as equity puttable financial instruments.

IAS 38 (Amendment), Intangible assets (effective from 1 January 2009), does not preclude an entity from recognising a prepayment in the event that payment has been made in advance of obtaining right of access to goods or receipt of services.

IAS 39 (Amendment), Eligible hedged items (effective from 1 January 2009) has been amended to be consistent with IFRS 8, Operating segments, which requires disclosure for segments to be based on information reported to the chief operating decision-maker.

IFRS 1 (Amendment), First-time adoption of International Financial Reporting Standards (effective 1 January 2009) and IAS 27 (Revised), Consolidated and separate financial statements (effective from 1 July 2009) allow first-time adopters to use a deemed cost of either fair value or the carrying amount under previous accounting practice to measure the initial cost of investments in subsidiaries, jointly controlled entities and associates in the separate financial statements. The amendment also removes the definition of the cost method from IAS 27 and replaces it with a requirement to present dividends as income in the separate financial statements of the investor. 

The revised standard also specifies the accounting where there is no change in control or control is lost. Where there is a change in control, the effects of all transactions with non-controlling interests are recorded in equity and these transactions will no longer result in goodwill or gains and losses. Any remaining interest in the entity is re-measured to fair value and a gain or loss is recognised in profit or loss. The Group will apply this prospectively to any such transactions with non-controlling interests from 1 January 2010.

IFRS 2, Share-based payment (effective from 1 January 2009) deals with vesting conditions and cancellations. It clarifies that vesting conditions are either service or performance conditions only. Other features of a share-based payment would need to be included in the grant date fair value calculation for transactions with employees and others providing similar services; they would not impact the number of awards expected to vest or valuation thereof subsequent to grant date. All cancellations, whether by the entity or by other parties, should receive the same accounting treatment.

New standards, interpretations and amendments having an impact on the Consolidated Financial Statements

IFRS 8, Operating segments (effective from 1 January 2009) requires an entity to adopt a 'management approach' to segment reporting such that segmental information is in the form which management uses internally for assessing segment performance and deciding how to allocate resources to operating segments. This information may be different from that used to prepare the Income Statement and Balance Sheet. The introduction of IFRS 8, in conjunction with the reorganisation of the Group's Budget branded operations, has resulted in a change in the Group's reportable segments. Previously, the Avis corporately-owned, Budget corporately-owned and Group Headquarter results were separately disclosed. Consistent with the revised presentation in the management accounts, these results have now been combined within total corporately-owned activities. Comparative segmentation data has been restated accordingly.

New standards, interpretations and amendments to published standards - effective after 30 June 2009

IFRS 3 (revised 2008), Business combinations (effective from 1 July 2009) requires that all payments to purchase a business are recorded at fair value at the acquisition date, with contingent payments classified as debt subsequently re-measured through the Income Statement. There is a choice on an acquisition-by-acquisition basis to measure the non-controlling interest in the acquiree either at fair value or at the non-controlling interest's proportionate share of the acquiree's net assets. All acquisition-related costs should be expensed. The Group will apply this from 1 January 2010.

IFRS 5 (Amendment), Non-current assets held-for-sale and discontinued operations, and consequential amendment to IFRS 1, First-time adoption of International Financial Reporting Standards (effective from 1 July 2009), clarifies that all of a subsidiary's assets and liabilities are classified as held for sale if a partial disposal sale plan results in loss of control. Relevant disclosure should be made for this subsidiary if the definition of a discontinued operation is met. The Group will apply this prospectively to all partial disposals of subsidiaries from 1 January 2010.

IFRIC 17, Distributions of non-cash assets to owners (effective from 1 July 2009), applies when non-cash assets are distributed to owners or when the owner is given a choice of taking cash in lieu of the non-cash assets. In particular, a dividend payable should be recognised when the dividend is appropriately authorised and is no longer at the discretion of the entity and should be measured at the fair value of the net assets to be distributed. It applies to the entity making the distribution, not to the recipient. The Group will apply this prospectively from 1 January 2010.

IFRIC 18, Transfers of assets from customers (effective from 1 July 2009) clarifies the requirements for agreements in which an entity receives from a customer an item of property, plant, and equipment that the entity must then use either to connect the customer to a network or to provide the customer with ongoing access to a supply of goods or services. When the item of property, plant and equipment transferred from a customer meets the definition of an asset under the IASB Framework from the perspective of the recipient, the recipient must recognise the asset in its financial statements. The Group will apply this prospectively from 1 January 2010.

3 Revenue

The Group provides international vehicle rental services. Revenue, as disclosed on the face of the condensed Consolidated Income Statement, is derived entirely from continuing activities. The Group experiences a natural increase in demand from leisure customers over the European summer holiday months which generally results in lower revenue generated in the first half of the year as compared to the second half.

4 Segment information

IFRS 8, Operating segments, has been applied from 1 January 2009 (see Note 2). Segment information is presented below on the same basis as that which is used for internal reporting purposes by the chief operating decision maker.

During the period, the Group commenced the reorganisation of the Budget branded corporately-owned business, combining these operations with the equivalent Avis operations in the individual countries. Comparative segmentation data has been restated accordingly.

Business segments
										2009												2008
				External						Inter-segment1				Total					External (as restated)			Inter-segment1(as restated)			Total (as restated)
Revenue				€m						€m				€m					€m			€m			€m
Corporately-owned
Rental revenue				463.0						1.8				464.8					530.3			1.5			531.8
Other non-rental revenue2				49.5						-				49.5					67.1			-			67.1
				512.5						1.8				514.3					597.4			1.5			598.9
Licensees:
Avis				15.7						-				15.7					17.4			-			17.4
Budget				5.0						-				5.0					5.9			-			5.9
				20.7						-				20.7					23.3			-			23.3
Elimination of inter-segment				-						(1.8)				(1.8)					-			(1.5)			(1.5)
Revenue				533.2						-				533.2					620.7			-			620.7
1  Inter-segment revenues are charged at prevailing market prices.
2  Other non-rental revenue includes income from the sale of fuel, sub-licensee income, the provision of foreign exchange services to rental customers and other incidental operating income.
									2009								2008
					Underlying1							Amounts  excluded  from underlying			Total		Underlying1 (as restated)			Amounts  excluded  from  underlying  (as restated)				Total (as restated)
Operating profit/(loss)					€m							€m			€m		€m			€m				€m
Corporately-owned							3.6				(17.7)				(14.1)		7.0			(0.7)				6.3
Licensees:
Avis								14.7			-				14.7		16.9			-				16.9
Budget								1.6			0.3				1.9		1.2			-				1.2
								16.3			0.3				16.6		18.1			-				18.1
Operating profit/(loss) - continuing								19.9			(17.4)				2.5		25.1			(0.7)				24.4
Discontinued operation (see Note 6)						-					-				-		-			1.3				1.3
Operating profit/(loss) including discontinued operation								19.9			(17.4)				2.5		25.1			0.6				25.7

1 See Basis of Preparation

No adjustment is made between segments to recharge the value of Avis/Budget goodwill, brand, licence rights, or to allocate the value of goodwill written off to reserves in previous periods. Avis goodwill of €1,080.4 million arising before 1 March 1998 was fully written off to reserves, and Budget goodwill of €33.9 million arising on 12 March 2003 has been fully impaired and charged to the Income Statement in previous periods. Had the value of goodwill, brand or licence rights been charged to the segments, the individual segment results would be materially affected. 

5  Operating profit/(loss)
													2009		2008
													€m		€m
Operating profit/(loss) is stated after charging/(crediting):
Net charge on hire of plant, equipment and motor vehicles													93.6		118.0
Depreciation on property, plant and equipment (see Note 11)													59.4		64.9
Adjustments arising on differences between sales proceeds and depreciated amounts													1.2		2.1
Amortisation of other intangible assets (see Note 11)													2.1		1.7
Exchange movements													(0.2)		(0.5)
Contingent operating lease rentals2													23.6		25.5
Other operating lease rentals													28.2		27.7
Net amounts excluded from underlying1 :
Total net exceptional items - continuing (see Note 6)													15.4		1.7
Re-measurement gains on non-debt related derivative financial instruments3													(0.8)		(2.9)
Re-measurement losses on non-debt related derivative financial instruments3													4.0		1.7
													3.2		(1.2)
Economic hedging adjustment on foreign exchange													(1.2)		0.2
Total net exceptional items - continuing, certain re-measurement items and economic hedge adjustments													17.4		0.7

1 See Basis of Preparation.

2 Contingent operating lease rentals primarily arise with respect to airport rental desk concessions, and are primarily based on the level of revenue generated by the individual concession.

3 Net re-measurement losses on non-debt related derivative financial instruments of €3.2 million (2008: gains of €1.2 million), comprises realised gains of €0.6 million (2008: gains of €0.3 million) and unrealised losses of €3.8 million (2008: gains of €0.9 million).

6  Net exceptional items
												2009		2008
												€m		€m
Exceptional administrative expenses:
a) Restructuring costs									8.4					1.9
b) Securitisation preparation costs									7.1					-
c) Centrus receivables									(0.1)					(0.2)
Net exceptional items before tax - continuing operations									15.4					1.7
d) Discontinued operation									-					(1.3)
Net exceptional items before tax including discontinued operation								15.4						0.4
Tax on exceptional items										(1.3)				(0.7)
Net exceptional items after tax including discontinued operation												14.1		(0.3)

a)    Restructuring costs of €8.4 million were recognised, reflecting the rationalisation of operations which commenced in the prior year. This rationalisation includes headquarter redundancies, the closure of certain low margin rental locations, and vacant property provisions following the relocation of the headquarters of the UK business into the Group head office. In the prior period, restructuring costs of €1.9 million were incurred in respect of a redundancy programme that commenced in December 2007.

b)    During the period, the Group developed and prepared a structure for a potential securitisation of its fleet. Advisory, legal and other costs were incurred in the development of corporate and operational structures.

c)    The activities associated with the closure of the Centrus credit hire business continue to be more successful than previously anticipated. The Group therefore partially reversed provisions recognised as exceptional items in prior years, resulting in a further credit of €0.1 million (2008: €0.2 million).

d)    In 2007, the Group disposed of its former subsidiary in Greece and in 2008 recognised an exceptional credit of €1.3 million to reflect the final settlement of a warranty provision.

7	Finance income, finance costs and foreign exchange on net debt
						2009			2008
						Underlying1	Amounts excluded  from underlying	Total	Underlying1	Amounts excluded from underlying	Total
						€m	€m	€m	€m	€m	€m
Finance income
Interest receivable						0.7	-	0.7	1.2	-	1.2
Re-measurement gains on debt-related derivative financial instruments2						-	1.6	1.6	-	4.6	4.6
						0.7	1.6	2.3	1.2	4.6	5.8
Finance costs
Interest payable under finance lease obligations						(5.9)	-	(5.9)	(8.9)	-	(8.9)
Interest payable on bank loans, overdrafts and loan notes3						(25.5)	-	(25.5)	(25.5)	-	(25.5)
Interest payable on deferred consideration						(0.9)	-	(0.9)	(1.1)	-	(1.1)
Re-measurement losses on debt-related derivative financial instruments2						-	(3.1)	(3.1)	-	(2.4)	(2.4)
Economic hedge adjustment on interest payable3						(2.4)	2.4	-	(0.2)	0.2	-
Foreign exchange (loss)/gain on net debt						-	(4.2)	(4.2)	-	0.5	0.5
						(34.7)	(4.9)	(39.6)	(35.7)	(1.7)	(37.4)
Net finance costs						(34.0)	(3.3)	(37.3)	(34.5)	2.9	(31.6)

1 See Basis of Preparation.

2  Net re-measurement losses on debt-related derivative financial instruments of €1.5 million (2008: gains of €2.2 million) comprise realised losses of €2.5 million (2008: gains of €0.9 million) and unrealised gains of €1.0 million (2008: gains of €1.3 million).

3 Economic hedging arrangements have been entered into for which the Group is unable to apply hedge accounting under IAS 39. To the extent that IAS 39 does not permit hedge accounting, interest payable on bank loans and overdrafts reflects actual interest rates applicable to debt, regardless of any accrued cash flow paid at contracted rates within hedging derivatives.

8    Taxation

The underlying tax credit for the six month period ending 30 June 2009 has been calculated on the basis of an estimated annual effective rate of 43% for the year ended 31 December 2009 (2008: 33%). The change in the rate is as a consequence of results arising in different jurisdictions. The effective tax rate on exceptional items, certain re-measurement items and economic hedges, including discontinued operations, is 13% (2008: (6)%).

9    Dividends

The Directors do not propose the payment of an interim dividend for the six month period ended 30 June 2009 (2008: nil). There was no final dividend for the year ended 31 December 2008 (2007: nil). Accordingly, no amounts have been recognised as distributions to equity holders in both the current and prior period.

10    Earnings per share

a)    Basic and diluted 

Basic and diluted loss per share are based on the loss for the six month period attributable to equity holders of the Company, and the weighted average number of shares in issue for the six month period attributable to equity holders of the Company. 

Basic and diluted loss per share from continuing operations is as follows:
Continuing operations
						2009										2008						2009	2008
Loss from continuing operations						€m										€m						£m	£m
Loss for the six month period from continuing operations attributable to equity holders of the Company											(25.8)					(4.0)						(23.5)	(3.1)
									2009								2008					2009	2008
Loss per share from continuing operations									Euro cents								Euro cents					Sterling pence	Sterling pence
Basic and diluted loss per share from continuing operations															(2.8)	(0.4)						(2.6)	(0.3)
Basic and diluted including discontinued operation
													2009					2008				2009	2008
Loss													€m					€m				£m	£m
Loss for the six month period attributable to equity holders of the Company														(25.8)					(2.7)			(23.5)	(2.1)
												2009								2008		2009	2008
Loss per share												Euro cents								Euro cents		Sterling pence	Sterling pence
Basic and diluted loss per share														(2.8)							(0.3)	(2.6)	(0.2)

After adjusting for own shares held, the weighted average number of shares in issue for the six month period was 919,703,391 (2008: 918,112,828).

Options have been granted to certain Directors and employees over ordinary shares of the Company and constitute the only category of potentially dilutive ordinary shares. These options did not increase the weighted average number of shares in either 2008 or 2009, as either the option exercise prices were in excess of the prevailing market share price, or exercise of the options is subject to performance conditions which had not been fully satisfied by the period end.

b)    Underlying

Underlying loss per share is based on the underlying loss for the six month period and the weighted average number of shares in issue for the six month period attributable to equity holders of the Company. 

Underlying loss per share from continuing operations is as follows:

						2009	2008	2009	2008
Loss from continuing operations						€m	€m	£m	£m
Underlying loss for the six month period from continuing operations attributable to equity holders of the Company						(7.8)	(6.0)	(7.1)	(4.6)
						2009	2008	2009	2008
Loss per share from continuing operations						Euro cents	Euro cents	Sterling pence	Sterling pence
Basic and diluted underlying loss per share from continuing operations						(0.8)	(0.7)	(0.8)	(0.5)

11  Fleet and non-fleet fixed assets

									Other intangible assets	Vehicles	Other property, plant and equipment	Non-current assets held for sale1
									€m	€m	€m	€m
Cost
At 1 January 2008									24.7	525.8	143.6	8.3
Additions									5.4	375.1	8.9	-
Disposals									(0.1)	(288.2)	-	(35.9)
Transfers									-	(25.6)	-	41.3
Acquisitions									-	-	0.1	-
Exchange movements									(2.1)	(5.2)	(5.1)	(0.2)
At 30 June 2008									27.9	581.9	147.5	13.5
At 1 January 2009									28.1	526.5	144.9	11.5
Additions									1.8	177.2	4.6	-
Disposals									-	(173.2)	(4.5)	(12.5)
Transfers									-	10.6	-	6.0
Exchange movements									2.9	4.9	5.6	-
At 30 June 2009									32.8	546.0	150.6	5.0
Depreciation, amortisation and impairment
At 1 January 2008									12.8	77.1	65.6	1.2
Charges for the six month period									1.7	56.3	8.6	-
Disposals									(0.1)	(46.7)	-	(6.7)
Transfers									-	(6.8)	-	6.4
Exchange movements									(1.0)	(2.0)	(3.5)	(0.2)
At 30 June 2008									13.4	77.9	70.7	0.7
At 1 January 2009									13.4	85.5	73.2	1.2
Charges for the six month period									2.1	51.6	7.8	-
Disposals									-	(35.4)	(4.2)	(1.1)
Transfers									-	5.6	-	0.4
Exchange movements									1.2	2.1	4.4	-
At 30 June 2009									16.7	109.4	81.2	0.5
Net book amount
At 30 June 2009									16.1	436.6	69.4	4.5
At 30 June 2008									14.5	504.0	76.8	12.8

At 30 June 2009, the Group had capital commitments for fixed assets contracted, but not provided for, amounting to vehicles €40.3 million (2008: €96.7 million) and other property, plant and equipment €1.6 million (2008: €3.0 million).

1  Non-current assets held for sale comprise ex-rental vehicles formerly used in the corporately owned segment, where management are committed to the disposal of the vehicle. Disposals are ordinarily completed within one month of the transfer of the vehicle from the rental fleet.

12  Fleet
											2009	2008
Net book amount											€m	€m
Vehicles											436.6	504.0
Non-current assets held for sale											4.5	12.8
Repurchase agreement receivables (during vehicle holding period)1											837.8	1,162.4
Prepaid repurchase vehicle operating lease charges (during vehicle holding period)1											56.0	105.3
											1,334.9	1,784.5

1 Repurchase vehicles are recognised within 'trade and other receivables' in the condensed Consolidated Balance Sheet.

13  Called-up share capital
								2009			2008
								Number	€m		Number				€m
Authorised
Ordinary shares of 1p each						940,000,000					940,000,000
Issued and fully paid share capital
At 1 January and 30 June						920,524,047			13.1		920,524,047				13.1

14 Own shares held

Own shares are held by the Avis Europe Employee Share Trust, a discretionary trust, to partially satisfy options and awards granted under a number of the Group's share schemes. The Company's own shares have a nominal value of 1 pence per share.

At 30 June 2009, the Trust held 3,287,735 shares (2008: 637,735 shares), which have been recognised as a reduction in shareholders' funds. The market value of the shares as at 30 June 2009 was 21.8 pence per share (2008: 21.5 pence per share). None of the shares held at the period end are under option to employees, nor have they been conditionally gifted to them. The Avis Europe Employee Share Trust has not waived its right to any dividends on these shares.

15	Reconciliation of movements in shareholders' equity
													2009		2008
													€m		€m
Loss after taxation attributable to the equity holders of the Company													(25.8)		(2.7)
Net (expense)/income recognised directly in equity (see Statement of Comprehensive Income)													(5.4)		1.2
Total comprehensive expense attributable to equity holders of the Company													(31.2)		(1.5)
Increase in equity reserve arising from charge to income for share options in the period													0.4		0.1
Decrease in equity reserve arising from exercise of share options													-		(2.4)
Purchase of own shares													(0.6)		-
Own shares released on vesting of share awards													-		2.6
Exchange movements on own shares													(0.1)		0.2
Net decrease in shareholders' equity													(31.5)		(1.0)
At 1 January													69.3		96.2
At 30 June													37.8		95.2
Goodwill of €1,080.4 million arising before 1 March 1998 is fully written off to reserves.

16  Notes to the condensed consolidated cash flow statement
a)   Analysis of changes in net debt
			At 1 January 2009	Cash flow	Non-cash movements		Exchange movements		At 30 June 2009
			€m	€m	€m		€m		€m
Cash and short-term deposits			52.1	5.4	-		0.6		58.1
Bank overdrafts			(27.4)	5.7	-		-		(21.7)
Cash and cash equivalents			24.7	11.1	-		0.6		36.4
Current assets - held for trading			-	0.7	-		-		0.7
Obligations under finance leases			(232.7)	28.6	(104.8)		(3.9)		(312.8)
Borrowings (excluding overdrafts)			(859.0)	287.6	12.8		(1.8)		(560.4)
Derivative debt instruments			(66.2)	2.5	(12.5)		-		(76.2)
Net debt			(1,133.2)	330.5	(104.5)		(5.1)		(912.3)

Non-cash movements represent the net effect of the inception and cessation of finance leases during the period and recognition of changes in the fair value of derivatives and hedged items.

b)	Reconciliation of net increase/(decrease) in cash and cash equivalents to movement in net debt
								2009		2008
								€m		€m
Movement in net debt resulting from cash flows								330.5		(191.3)
New finance leases								(104.8)		(144.3)
Re-measurement adjustments on borrowings and derivative debt instruments								0.3		4.9
Exchange movements								(5.1)		7.4
Total movement in net debt								220.9		(323.3)
Net debt at 1 January								(1,133.2)		(980.9)
Net debt at 30 June								(912.3)		(1,304.2)
Analysed as:
Current net debt								(304.2)		(382.6)
Non-current net debt								(608.1)		(921.6)
								(912.3)		(1,304.2)

Included in current net debt at 30 June 2009 are drawings of €81.5 million under a new long-term committed €120 million revolving facility, which permits the inception of finance leases at any time up to the end of June 2011.

17  Contingent liabilities

The Company and certain subsidiaries have provided unsecured guarantees to certain third parties within the normal course of business, the majority of which were in favour of certain lenders in respect of some of the Group's loan notes and borrowing facilities, together with guarantees provided to certain vehicle suppliers and property lessors. As at 30 June 2009, these guarantees totalled €828.9 million (2008: €1,110.7 million).

Certain Group companies are defendants in a number of claims and legal proceedings incidental to their operations. The Directors do not expect that any of these contingencies will have a material negative impact on the results or financial position of the Group.

Save as disclosed herein and excluding intra-group indebtedness and guarantees, no member of the Group had at the close of business on 30 June 2009 any outstanding loan capital (including loan capital created but unissued), term loans or any other borrowings or indebtedness in the nature of borrowings, including bank overdrafts, liabilities under acceptances (other than normal trade bills) or acceptance credits, hire purchase commitments, obligations under finance leases, guarantees or other contingent liabilities.

18 Related party transactions
	2009	2008
	€m	€m
Sales to joint ventures	0.7	0.2
Net current amounts owing from joint ventures	0.1	0.1
Purchases from majority shareholder	13.3	23.9
Sales to majority shareholder	43.5	33.9
Purchases from a subsidiary of majority shareholder	0.9	0.8
Interest payable to a subsidiary of majority shareholder	0.2	0.3
Current amounts owing to majority shareholder	8.8	13.3
Current amounts owing from majority shareholder	8.7	15.2
Current amounts owing to a subsidiary of majority shareholder	0.2	0.2
Loans owing to a subsidiary of majority shareholder	-	10.0

The remuneration of the Directors, and other key management personnel of the Group, is set out below in aggregate for each of the categories specified in IAS 24, Related Party Disclosures. Salaries and short-term employee benefits include wages, salaries and social security costs.

		2009			2008
	Directors	Key management	Total	Directors	Key management	Total
	€m	€m	€m	€m	€m	€m
Salaries and short-term employee benefits	1.1	1.6	2.7	1.3	1.4	2.7
Post-employment benefits	-	0.1	0.1	0.1	0.4	0.5
Termination amounts	-	-	-	-	2.1	2.1
Share-based payments	0.1	0.3	0.4	0.1	-	0.1
	1.2	2.0	3.2	1.5	3.9	5.4

19  Exchange rates

Monthly income statements and other period statements of overseas operations are translated at the relevant rate of exchange for that month. Except for the Balance Sheet which is translated at the closing rate, each line item in these condensed Consolidated Financial Statements represents a weighted average rate.

			Euro to Sterling				Sterling to Euro
			Six month period ended				Six month period ended
			30 June				30 June
			2009		2008		2009		2008
Weighted average reported rate for revenue			1.099		1.297		0.910		0.674
Weighted average reported rate for operating profit			1.151		1.229		0.869		0.682
Period end rate			1.184		1.260		0.845		0.676

Statement of Directors' Responsibilities

The Directors confirm that this condensed consolidated interim financial information has been prepared in accordance with IAS 34 Interim Financial Reporting as adopted by the European Union and that the Interim Management Report includes a fair review of the information required by DTR 4.2.7 and DTR 4.2.8, namely:

• an indication of important events that have occurred during the first six months and their impact on the condensed set of Financial Statements, and a description of the principal risks and uncertainties for the remaining six months of the financial year; and

• material related-party transactions in the first six months and any material changes in the related-party transactions described in the last Annual Report.

By order of the Board

Pascal Bazin	Martyn Smith
Chief Executive	Finance Director
27 August 2009	27 August 2009

Independent Review Report by the Auditors to the Board of Directors of Avis Europe plc

Introduction

We have been engaged by the Company to review the condensed set of Financial Statements in the half-yearly financial report for the six months ended 30 June 2009, which comprises the condensed Consolidated Income Statement, condensed Consolidated Statement of Comprehensive Income, condensed Consolidated Balance Sheet, condensed Consolidated Statement of Changes in Equity, condensed Consolidated Cash Flow Statement and related notes. We have read the other information contained in the half-yearly financial report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.

Directors' responsibilities

The half-yearly financial report is the responsibility of, and has been approved by, the Directors. The Directors are responsible for preparing the half-yearly financial report in accordance with the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.

As disclosed in Note 2, the annual Financial Statements of the Group are prepared in accordance with IFRSs as adopted by the European Union. The condensed set of Financial Statements included in this half-yearly financial report has been prepared in accordance with International Accounting Standard 34, 'Interim Financial Reporting', as adopted by the European Union.

Our responsibility

Our responsibility is to express to the Company a conclusion on the condensed set of Financial Statements in the half-yearly financial report based on our review. This report, including the conclusion, has been prepared for and only for the Company for the purpose of the Disclosure and Transparency Rules of the Financial Services Authority and for no other purpose. We do not, in producing this report, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.

Scope of review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity' issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of Financial Statements in the half-yearly financial report for the six months ended 30 June 2009 is not prepared, in all material respects, in accordance with International Accounting Standard 34 as adopted by the European Union and the Disclosure and Transparency Rules of the United Kingdom's Financial Services Authority.

PricewaterhouseCoopers LLP

Chartered Accountants and Registered Auditors

Uxbridge

27 August 2009

Notes:

a) The maintenance and integrity of the Avis Europe plc website is the responsibility of the directors; the work carried out by the auditors does not involve consideration of these matters and, accordingly, the auditors accept no responsibility for any changes that may have occurred to the financial statements since they were initially presented on the website.

b) Legislation in the United Kingdom governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

ENDIR SEIFWMSUSEDA