Final Results

RNS Number:0444I
Avis Europe PLC
27 February 2003

EMBARGOED FOR 0700 HOURS 27TH FEBRUARY 2003


                                AVIS EUROPE PLC

                AUDITED RESULTS FOR YEAR ENDED 31 DECEMBER 2002

Avis Europe plc, the leading car rental company in Europe, Africa, the Middle
East and Asia, announces audited results for the year ended 31 December 2002.

Operating Headlines

  * Full year results consistent with guidance provided in June 2002
  * Leisure actions help counter reduction in business demand
  * Continued strong cost management
  * New facilities strengthen funding position
  * Proposed acquisition of the Budget vehicle rental business in Europe,
    Middle East and Africa

Financial Headlines

  * Revenue 5.3% lower at Euro1,189.2 million (#747.5 million)
  * Profit before tax* 15.2% lower at Euro122.3 million (#77.3 million)
  * Exceptional charge before tax of Euro16.4 million (#10.4 million)
  * EPS* 15.5% lower at 16.4 euro cents (10.4p); unadjusted EPS 13.8 euro
    cents (8.7p)
  * Proposed final dividend of 3.8p per share, full year dividend maintained
    at 5.8p

*before goodwill amortisation and exceptional items

Commenting on the results, Chairman Sir Bob Reid said:

"During 2002, weakening economies across Europe impacted corporate travel spend
and against this background we focussed our sales and promotional activities in
revenue segments which provided better short-term opportunities for recovery,
notably Leisure. At the same time, we continued to manage actively our
operational cost base and capacity by significantly adjusting fleet and staffing
levels to mitigate the impact of lower customer demand levels.

With no expectation of significant recovery in the European economies in 2003
and the likelihood of continuing geo-political tension, the short-term outlook
for our business is uncertain. In this environment, we shall maintain very tight
control on fleet and staff levels, as well as developing other cost
efficiencies. We continue to update our contingency plans to mitigate the impact
which would inevitably arise from any escalation towards conflict.

In the first few weeks of 2003 Leisure business has continued to grow, partially
offsetting the continuing lower level of corporate travel.

We continue to invest in our business to improve the potential for future growth
and profitability, with the proposed acquisition of the Budget business, the
purchase of a major Avis licensee in France, and the opening of our Avis branded
joint venture in China."

Enquiries:

Mark McCafferty, Chief Executive          01344 426644

Martyn Smith, Group Finance Director      01344 426644

Ben Foster, Financial Dynamics            020 7269 7247

RESULTS OVERVIEW

2002 was a difficult year for the travel industry, which continued to be
affected both by weakening economies and geo-political uncertainties.

We have taken actions to adjust our business and to focus revenue development
activity on markets and customer segments less affected by current events.
Revenue was 5.3% lower at Euro1,189.2 million. Profit before tax, goodwill
amortisation and exceptional items was 15.2% lower at Euro122.3 million, as a
result of the lower revenue and the impact of the fixed element of our cost
base, principally associated with the rental station network. Adjusted earnings
per share on the same basis were 13.3% lower at 10.4 pence.

Exceptional costs of Euro16.4 million, comprises a Euro6.9 million provision for
Centrus credit hire receivables, a Euro6.2 million severance cost from the
restructuring of management and support positions across the Group announced in
September, and a Euro3.3 million provision for re-insurance receivables.

Profit before tax after goodwill amortisation and exceptional items was Euro101.8
million (2001: Euro136.3 million) and earnings per share on the same basis were 8.7
pence (2001: 11.3 pence)

Dividend maintained

With the underlying strength of the Group, the Directors are recommending a
final dividend of 3.8 pence per share, maintaining the full year dividend at 5.8
pence per share. The dividend will be paid on 7 May 2003 to shareholders on the
register at close of business on 7 March 2003.

REVENUE OVERVIEW

Our balanced geographic and segmental portfolio provides some protection in
times such as these, by enabling us to focus revenue development activity in
less affected areas. In 2002 overall Group revenues were 5.3% lower at Euro1,189.2
million.

Although volume declined by 5.6%, primarily due to cutbacks in corporate-related
spend, we continued to create yield gains with revenue per rental up 1.7% versus
prior year.

Leisure recovered steadily

The major segment for the Group in 2002 was Leisure, accounting for 39% of
revenue. Leisure activity continued to recover, returning to growth in the
second half and achieving full year revenue in line with 2001.

Intra-European Leisure revenue, which is 40% of the Leisure segment, was only
marginally lower than 2001. A reduction in tour operator referred business was
offset by targeted investments to increase the number of customers booking
direct through the internet, our call centres and travel agents. This change in
mix contributed to an increase in revenue per rental of 2.8%.

Domestic Leisure revenue, which is 29% of the segment was up 2% versus prior
year, with particularly strong performances in France and the UK from
promotional activities.

International Leisure revenue, which is 31% of the segment, recovered gradually
during the year, supported by new products and sales investment in the US retail
market. Full year revenue was 2% below prior year.

Corporate customers reduce travel expenditure


Corporate business accounted for 22% of revenue in 2002. This segment was
impacted from the second quarter onwards when companies further reduced their
discretionary expenditure. Full year revenue was 14% lower than prior year, with
only marginal improvement in the second half even with the benefit of the weak
comparative of the fourth quarter of 2001.

The market was particularly difficult in Northern Europe although we again
achieved yield gains in this segment. Investment in sales and marketing activity
enabled us to grow elements of the Corporate segment in certain markets, for
example Spain, by increasing sales efforts in the small and medium sized
enterprise market.

Replacement impacted by reduced corporate spend

Replacement represented 20% of revenue in 2002 and includes business originating
from three sources - corporate longer-term, which was 45% of revenue,
leasing-related 26% and insurance-related 29%.

Overall Replacement revenue was 7% lower than 2002 with corporate longer-term
down 14% in line with the overall trend in the Corporate segment.

Premium in line with overall revenue trends

The Premium sector accounted for the remaining 19% of revenue and includes
customers who do not pre-book their car rental and business from some
partnerships. Revenue in this segment was 4.9% lower than 2001, broadly in line
with the overall Group.

Revenue development in major markets

The major markets of France, Germany, Italy, Spain and the UK generated 81% of
Group revenues during 2002. Full year revenue in Germany and the UK was down 14%
and 11% respectively as these markets were significantly impacted from the
second quarter onwards by cut backs in corporate travel spend. This also
impacted Italy and France to a lesser extent where total revenue was 7% and 5%
lower respectively. Targeted revenue activities were developed in each market to
help mitigate this reduction in corporate-related travel and to underpin revenue
development for the future.

Spain, which grew by 7%, was the strongest of the country markets, not only in
its core Leisure business but also in the successful development of more than
fifty new domestic corporate accounts in the small and medium enterprise
segment. Development of corporate activity reduces dependence on peak leisure
periods and eases fleet planning. A number of important agreements were renewed
during 2002, including the three-year partnerships with Iberia and the Sol Melia
hotel group. We also secured our position across all key Spanish airports for
the next five years.

In Germany, where trading conditions remained particularly difficult, we
continued to operate a yield strategy, with revenue per rental increases in
Corporate and transatlantic business. New initiatives were launched at the end
of the year to develop the insurance-related element of Replacement segment. Our
Lufthansa partnership was successfully renewed and extended to include joint
marketing activities to develop both domestic and international business.

In addition to the economic downturn, Corporate revenue in the UK was impacted
by the withdrawal from certain Government contracts. Initiatives focused on
stimulating domestic Leisure activity underpinned a year on year increase in
Leisure revenues. Despite the difficulties of the airline market and reductions
in passenger capacity, we marginally increased the number of rentals from
British Airways customers through marketing and database promotions.

In France, domestic promotional activity generated a 5% growth in Leisure.
During 2002 we launched Caraway, an internet-based prepaid rental product, to
develop future domestic and outbound leisure business.

Italy successfully implemented new loyalty programmes and stimulated
double-digit rental growth in the premium segment. A number of new UK inbound
tour operator contracts were secured in the latter part of 2002 to generate
leisure business in 2003.


Partnership developments

During 2002 we renewed some key partnerships and secured new arrangements with a
number of airlines, travel companies and international rail companies. Renewed
arrangements were completed with Iberia, Lufthansa, Olympic Airways, JAL and All
Nippon and a new 3 year exclusive partnership was secured with FlyBE, Europe's
leading independent regional carrier.

New pan-European arrangements were secured with Thomas Cook and new partnerships
with two of Europe's largest internet-based travel companies, e-bookers and
Expedia, commenced during the year.

Our penetration of the high-speed rail customer base was further enhanced with a
new exclusive partnership with Eurostar and new marketing programmes with SNCF
in France and RENFE in Spain.


Centrus implements new operating guidelines

Centrus is the UK's second largest car replacement service to non-fault accident
insurance claimants providing claim management services and generating rental
volume for the Avis UK business. In 2002 revenues were down 2.3% to Euro34.6
million with completed hires of some 21,000.

Although industry guidelines for reimbursement of claims were previously agreed
with the Association of British Insurers, we have continued to experience
difficulties with the settlement process, resulting in an exceptional charge of
Euro6.9 million.

To ensure more timely settlement of claims we are working with insurers to
introduce new processes for more effective data capture and exchange and we have
significantly strengthened our claims collection team.

As a result of these actions we expect improvements to the speed of settlement
during 2003, which should then provide a base for expansion of the business in
2004.



PROFIT OVERVIEW

Operating profit before exceptional items and goodwill amortisation was Euro186.5
million, down 13.5% on prior year. Operating margin of 15.7% was 1.5% points
lower than prior year largely resulting from the impact of lower revenue on
fixed costs which mainly relate to the short-term inflexibility of support staff
levels across the Group and the rent and depreciation of our rental station
network.

Operating margin analysis   2002 % revenue  2001 % revenue    Margin movement
Selling costs                          6.8             6.6              (0.2)
Revenue related                        8.2             8.2                 -
Rental related                         2.1             2.1                 -
Fleet costs                           33.2            33.1              (0.1)
Staff costs                           21.1            20.5              (0.6)
Overheads                             12.9            12.3              (0.6)
Operating margin                      15.7            17.2              (1.5)



Rapid adjustment of fleet and staff to lower demand

The relative flexibility of our operating cost base allows us to minimise the
impact of reduced revenues on margin.

Average fleet was 5% (some 6,000 units) lower than 2001, resulting in our key
fleet efficiency measure of vehicle utilisation being 68.1% (2001: 68.5%). Our
other key operational efficiency measure is staff productivity, which was just
1.7% lower, compared to the reduction in rentals of 7%. Operational and call
centre staffing levels were reduced in line with demand, sales teams were
tactically increased for business development and a process of restructuring to
adjust management and support positions across the Group, resulted in a
reduction of 100 positions in the last quarter of 2002.

Continued success with fleet strategies

Fleet costs as a percentage of revenue were very similar to prior year,
reflecting the success of key initiatives in vehicle sourcing, damage recovery
and our used car re-marketing programmes.

During the second half of the year a new hand-held vehicle check - out and check
- in device was piloted at selected airports in Germany and the UK. In addition
to improving customer service, this initiative is designed to substantially
improve damage management and increase delivery and collection efficiencies.
With positive consumer acceptance and the process efficiency results achieved in
the pilot, we are investing in a two-year Euro16 million roll out programme of the
new device to all major rental locations across the Group.

Overhead expenditure lower

Overhead cost of Euro153.2 million included Euro73.0 million of non-property costs,
which were reduced by 9% through intensive cost management actions. Property
costs of Euro80.2 million increased by Euro5.8 million as we continued to invest in
improving our network facilities. As a result overheads increased by 0.6% points
of revenue.

New facilities strengthen funding position

Interest payable was reduced due to the lower level of average net debt required
to fund lower fleet levels. Average interest rates have increased from 5.2% to
5.3% as the Group increased financing through longer-term facilities and a
greater proportion of fixed rate debt.

A new multi-currency facility was secured with a syndicate of banks comprising a
Euro385 million five-year tranche and a Euro165 million 364-day tranche, with a
one-year term out option. In addition medium term notes totalling Euro171.8 million
and maturing between 2007 and 2012 were issued.

Net debt reduced by Euro50 million
                                                      2002             2001
                                                 Euro million        Euro million
Net cash inflow from operating activities            518.6            528.1
Fleet capital expenditure                           (323.7)          (271.6)
Non fleet capex                                      (25.3)           (17.3)
Taxation                                              (2.0)           (25.0)
Interest and dividends                              (119.2)          (126.7)
Acquisitions and other                                 1.7             12.8
Reduction in net debt                                 50.1            100.3



The level of net debt reduced during the year by Euro50.1 million largely due to
cash generated from operations despite the lower level of rental activity. Fleet
capital expenditure was Euro52.1 million higher due to working capital movements.
In addition, the Group has benefited from reduced tax payments, because of the
changed timing of payments related to current year tax and repayments received
relating to prior years.

Tax rate maintained

The effective tax rate for 2002 pre-exceptional items was 22.0% and
post-exceptional items, 20.5%. The tax rate continues to be less than the rate
of UK corporation tax largely because of the utilisation of UK tax losses
brought forward and adjustments in respect of prior years.

Pensions

The group has a number of pension schemes of a defined benefit and defined
contribution nature. The material defined benefit pension schemes in the Group
are in the UK, which is a funded scheme and Germany, which is unfunded, in line
with local practice.

On an SSAP 24, Accounting for pension costs, basis there was a deficit at 31
December 2002 in respect of the UK scheme of Euro14.5 million. On a FRS 17,
Retirement benefits, basis the deficit between the market value of the assets in
the UK scheme and the actuarial value of its liabilities was Euro37.2 million.

The charge in the profit and loss account for the Group's defined benefit
schemes is

Euro10.9 million, based on the requirements of SSAP 24. The Group has chosen not to
adopt FRS 17 early, but had it done so, the profit and loss account charge for
the same schemes would have been Euro10.0 million.

Following the actuarial valuation of the Avis UK Pension Plan at 30 June 2002 it
was decided to introduce a new defined benefit scheme for UK employees who join
the company from 1 July 2003. This is a contributory scheme, which provides a
defined capital sum at retirement based on an annual accrual plus interest. This
is used to provide a pension based upon open market rates. The company retains
responsibility for the investment but not the annuity risk.

STRATEGIC DEVELOPMENT

We have continued to invest in the medium term development of the Group with the
proposed acquisition of the Budget business in Europe, Middle East and Africa
and the purchase of a major Avis licensee in France, as well as the opening of
the Avis branded joint venture in China.

Budget acquisition will provide further opportunities for growth

In February 2003 we reached a binding acquisition agreement, for certain assets
of the Budget Group, including the royalty-free rights to the Budget brand
throughout Europe, Middle East and Africa. Completion of the acquisition is
subject to certain closing conditions, which we expect to complete during March.

The purchase consideration is approximately Euro30 million, plus Euro8 million of
assumed debt relating to fleet assets. We expect the acquisition to be
marginally earnings dilutive in the first full year following completion.

Budget is at present predominantly a franchised business with a limited number
of corporate owned operations in France, Switzerland and Austria. It currently
operates in over 60 countries through 1,000 locations and generates licence fee
income of some Euro11 million per annum.


This year we will focus on the integration and stabilisation of the business
prior to more significant investment towards the end of 2003. The brand has very
limited presence in some key territories such as Spain, Italy and Scandinavia.
This provides the opportunity to deploy our operational experience and resources
to regenerate the brand. In addition there will be cost efficiencies from
simplifying existing systems infrastructure as well as developing joint service
and support functions.

Avis France extends corporate network

In January 2003 we acquired the rental network of a major Avis licensee in
France for Euro17.8 million including assumed debt relating to fleet assets of
approximately Euro11.6 million. This is the leading car rental company in the South
East and has been part of the Avis licensee network for over 30 years. The
business generated Euro18.5 million of revenue in 2002 and is expected to be
earnings enhancing in 2003.

Avis branded joint venture in China commences trading

In addition to investing in our core European markets we continue to develop our
presence in Asia which we see as a key long-term growth region for the Group.
Our joint venture in China with Shanghai Automotive Industry Corporation
received regulatory approval and started trading in January 2003 with 1,000 cars
operating from nine locations. We plan to extend the network to 70 locations in
26 cities over the next five years, leading up to the Beijing Olympics in 2008.

SUMMARY AND OUTLOOK

During 2002, weakening economies across Europe impacted corporate travel spend
and against this background we focused our sales and promotional activities in
revenue segments which provided better short-term opportunities for recovery,
notably Leisure. At the same time, we continued to manage actively our
operational cost base and capacity by significantly adjusting fleet and staffing
levels to mitigate the impact of lower customer demand levels.

With no expectation of significant recovery in the European economies in 2003
and the likelihood of continuing geo-political tension, the short-term outlook
for our business is uncertain. In this environment, we shall maintain very tight
control on fleet and staff levels, as well as developing other cost
efficiencies. We continue to update our contingency plans to mitigate the
impact, which would inevitably arise from any escalation towards conflict.

In the first few weeks of 2003 Leisure business has continued to grow, partially
offsetting the continuing lower level of corporate travel.

We continue to invest in our business to improve the potential for future growth
and profitability, with the proposed acquisition of the Budget business, the
purchase of a major Avis licensee in France, and the opening of our Avis branded
joint venture in China.

Consolidated Profit and Loss Account
for the year ended 31 December           2002        2001       2002      2001
                             Notes      Euro'000       Euro'000      #'000     #'000

Revenue                             1,189,202   1,255,392    747,501    782,513
Cost of sales                        (598,875)   (628,252)  (376,510)  (391,710)

Gross profit                          590,327     627,140    370,991    390,803
Administrative expenses
(2002: including 
exceptional items)                   (424,249)   (415,543)  (266,266)  (259,276)

Operating profit 
before goodwill
amortisation and 
exceptional items                     186,541     215,594    117,686    134,018
Amortisation of goodwill               (4,029)     (3,997)    (2,527)    (2,491)
Exceptional items                2    (16,434)          -    (10,434)         -

Operating profit                      166,078     211,597    104,725    131,527
Share of operating loss from 
joint ventures (2001:                  (1,132)     (4,268)      (708)    (2,644)
including exceptional item)
Share of operating loss from 
associated                             
undertaking                               (72)        (48)       (46)       (30)
Net interest payable                  (63,067)    (70,962)   (39,618)   (44,271)

Profit on ordinary activities 
before taxation,
goodwill amortisation and 
exceptional items                     122,270     144,243     77,314     89,504
Amortisation of goodwill               (4,029)     (3,997)    (2,527)    (2,491)
Exceptional items                2    (16,434)     (3,927)   (10,434)    (2,431)

Profit on ordinary activities 
before taxation                       101,807     136,319     64,353     84,582
Taxation                              (20,841)    (29,990)   (13,147)   (18,608)

Profit on ordinary 
activities after taxation              80,966     106,329     51,206     65,974
Minority interests - equity              (129)       (233)       (81)      (144)

Profit for the year before 
goodwill
amortisation and 
exceptional items                      96,105     113,158     60,787     70,217
Amortisation of goodwill               (4,029)     (3,997)    (2,527)    (2,491)
Exceptional items                     (11,239)     (3,065)    (7,135)    (1,896)

Profit for the year                    80,837     106,096     51,125     65,830
Dividends                        3    (53,547)    (54,736)   (33,991)   (33,928)

Retained profit for the year           27,290      51,360     17,134     31,902

Earnings per share 
(euro cents/sterling 
pence per
share)
Basic                            4       13.8        18.2        8.7       11.3

Diluted                          4       13.8        18.1        8.7       11.3

Adjusted                         4       16.4        19.4       10.4       12.0


Consolidated Statement of Total Recognised Gains
and Losses
for the year ended 31 December           2002        2001       2002       2001
                                        Euro'000       Euro'000      #'000      #'000

Profit for the year                    80,837     106,096     51,125     65,830
Exchange movements                     (6,688)     (2,779)    (1,741)    (1,444)
Taxation on exchange movements          2,818         423      1,737        174
Total recognised gains and losses      76,967     103,740     51,121     64,560

Consolidated Balance Sheet
at 31 December                           2002        2001       2002       2001
                                        Euro'000       Euro'000      #'000      #'000

Intangible fixed assets
Goodwill                               64,405      70,646     41,431     43,753

Tangible fixed assets
- vehicles                          1,312,421   1,328,503*   844,260    822,775*
- other                                79,688      71,280     51,263     44,146
                                    1,392,109   1,399,783    895,523    866,921
Investments                             4,253       5,629      2,736      3,486

                                    1,396,362   1,405,412    898,259    870,407

Total fixed assets                  1,460,767   1,476,058    939,690    914,160

Current assets
Debtors                               528,395     567,560*   339,909    351,504*
Investments                           113,138         488     72,780        302
Cash at bank and in hand               41,506      21,528     26,700     13,333

                                      683,039     589,576    439,389    365,139
Creditors amounts falling due
within one year
Bank and other loans                 (181,675)   (264,092)  (116,868)  (163,559)
Other creditors                      (993,829) (1,026,987)  (639,317)  (636,038)

                                   (1,175,504) (1,291,079)  (756,185)  (799,597)

Net current liabilities              (492,465)   (701,503)  (316,796)  (434,458)

Total assets less current 
liabilities                           968,302     774,555    622,894    479,702

Creditors amounts falling 
due after
more than one year
Bank and other loans                 (742,646)   (572,637)  (477,733)  (354,649)
Other creditors                       (35,039)    (36,608)   (22,540)   (22,672)

                                     (777,685)   (609,245)  (500,273)  (377,321)

Provisions for liabilities 
and charges                           (80,520)    (80,118)   (51,797)   (49,619)

                                      110,097      85,192     70,824     52,762

Capital and reserves
Called-up share capital                 8,083       8,071      5,858      5,850
Share premium                         875,984     874,018    634,757    633,541
Profit and loss account              (774,556)   (797,554)  (570,168)  (587,036)

Total shareholders' 
funds - equity                        109,511      84,535     70,447     52,355
Minority interests - equity               586         657        377        407

                                      110,097      85,192     70,824     52,762

*Comparatives restated, see Note 6.

Consolidated Cash Flow Statement
for the year ended 31 December        2002        2001         2002       2001
                          Notes      Euro'000       Euro'000        #'000      #'000


Net cash inflow from 
operating activities         5i    518,617     528,116*     328,227    326,435*

Returns on investments 
and servicing of finance
Interest received                    5,013       2,915        3,167      1,817
Interest paid                      (57,308)    (60,976)     (36,080)   (37,933)
Interest element of finance 
lease rental payments              (11,934)    (14,134)      (7,497)    (8,825)
Dividend paid to minority 
interests                             (200)       (141)        (126)       (88)

                                   (64,429)    (72,336)     (40,536)   (45,029)

Taxation                            (2,006)    (25,035)      (1,436)   (15,344)

Capital expenditure and 
financial investment
Purchase of tangible 
fixed assets                    (1,676,345) (1,991,527)* (1,053,267)(1,240,011)*
Sale of tangible fixed assets    2,207,543   2,430,953 *  1,383,133  1,518,695 *
Sale of fixed asset investments          -          51            -         31

                                   531,198     439,477      329,866    278,715

Acquisitions and disposals
Purchase of subsidiary 
undertakings                             -      (2,253)           -     (1,421)
Cash balances acquired 
with subsidiary                          -           3            -          2
undertakings

                                         -      (2,250)           -     (1,419)
                                                          
Equity dividends paid              (54,817)    (54,341)     (33,954)   (33,917)

Management of liquid resources
(Purchase)/sale of current 
asset investments                 (112,671)      9,579      (70,666)     5,934

Financing
Issue of ordinary share capital      1,556         527          962        327
Repayment of capital element 
of finance leases                 (882,717)   (764,947)    (553,740)  (476,954)
(Decrease)/increase in 
short term loans                  (216,070)     36,044     (133,215)    21,943
(Increase)/decrease in long 
term loans                         302,535    (102,041)     187,697    (64,569)

                                  (794,696)   (830,417)    (498,296)  (519,253)

Increase/(decrease) in cash 5ii     21,196      (7,207)      13,205     (3,878)

*Comparatives restated, see Note 6. The accompanying Notes form an integral part
of these Financial Statements.

Notes to the Financial Statements for the year ended 31 December

 1. Basis of accounting and preparation

    The Financial Statements have been prepared under the historical cost
    convention and in accordance with applicable accounting standards. They have
    been prepared on the basis of the accounting policies set out in the Group's
    2001 Annual Report and Accounts, all of which have been applied consistently
    throughout the year and preceding year, except for changes to deferred
    taxation and unregistered cars. During the year, the Group adopted FRS 19,
    Deferred tax, and there was no material impact on the Financial Statements.
    The Group has also changed the classification of unregistered cars from
    prepayments to fixed assets to ensure a consistent treatment with cars in
    use by the business. The impact of this change on the comparative balances
    is set out in note 6.

    The financial information included in this statement does not constitute
    statutory accounts within the meaning of section 240 of the Companies Act
    1985. The statutory accounts of the Company for the year ended 31 December
    2002, on which the auditors have given an unqualified opinion, will be filed
    with the Registrar of Companies in due course. The statutory accounts of the
    Company for the year ended 31 December 2001, on which the auditors have
    given an unqualified opinion, have been filed with the Registrar of
    Companies.

    As a significant proportion of the Group's revenues, costs and funding arise
    in euros, the Directors consider that the Group's functional currency is the
    euro and accordingly, the Group's Financial Statements present the results
    both in euro and sterling currencies. The Company's statutory accounts
    continue to be reported in sterling.

 2. Exceptional items

    Exceptional administrative expenses in the year were as follows:

    As a result of business conditions following the unfortunate events of 11
    September 2001, action has been taken to reduce a number of management and
    support positions across Europe, incurring severance costs of Euro6,240,000;
    #3,946,000.

    A charge of Euro6,921,000; #4,405,000 has been made to further reduce Centrus
    credit hire receivables to their recoverable amount. This reflects
    experience in collections to date, particularly due to the transition to an
    industry-wide protocol following certain landmark legal cases affecting the
    industry. The charge is stated net of amounts recovered from the Group's
    previous advisers.

    A dispute has arisen as to the recoverability of certain prior year
    re-insured amounts from the Group's former principal re-insurer which is now
    in run off under the supervision of the Financial Services Authority.
    Accordingly, a charge of Euro3,273,000; #2,083,000 has been made based upon
    legal advice as to the outcome of the dispute.

    The exceptional item in the prior year related to losses incurred as part of
    the restructuring of the Group's interest in its former joint venture,
    yourautochoice.com.

 3. Dividends                                          
                                        2002        2001        2002       2001
                                       Euro'000       Euro'000       #'000      #'000

    Dividend per ordinary share
    Interim dividend of 2.0p; 
    3.2c (2001: 2.0p; 3.2c)           18,558      18,890      11,723     11,697
    Proposed final dividend of 
    3.8p; 6.0c (2001: 3.8p; 6.1c)     34,989      35,846      22,268     22,231
                                      53,547      54,736      33,991     33,928
 4. Earnings per share

    Basic earnings per share is based on the profit for the year which has also
    been used to calculate the diluted earnings per share. Adjusted earnings per
    share is calculated after adjusting for exceptional items and goodwill
    amortisation to highlight the ongoing trading performance of the Group.

                                        2002        2001        2002       2001
                                       Euro'000       Euro'000       #'000      #'000

    Profit                            80,837     106,096      51,125     65,830
    Amortisation of goodwill           4,029       3,997       2,527      2,491
    Exceptional items                 16,434       3,927      10,434      2,431
    Taxation on exceptional items     (5,195)       (862)     (3,299)      (535)

    Adjusted profit pre goodwill 
    and exceptional items             96,105     113,158      60,787     70,217

                                        2002        2001        2002       2001
                                       Cents       Cents       Pence      Pence

    Basic earnings per share            13.8        18.2         8.7       11.3
    Adjustment re potentially 
    dilutive share options                 -        (0.1)          -          -

    Diluted earnings per share          13.8        18.1         8.7       11.3

    Basic earnings per share            13.8        18.2         8.7       11.3
    Amortisation of goodwill             0.7         0.7         0.4        0.4
    Exceptional items                    2.8         0.6         1.9        0.4
    Taxation on exceptional items       (0.9)       (0.1)       (0.6)      (0.1)

    Adjusted earnings per share         16.4        19.4        10.4       12.0



    The weighted average number of shares in issue for the year was 584,561,717
    (2001: 583,876,743). The Group has granted options to certain Directors and
    employees over ordinary shares. Such shares constitute the only category of
    potentially dilutive ordinary shares of Avis Europe plc and these would have
    increased the weighted average number of shares in issue by 423,069 in 2002
    (2001: 769,728). These options had no impact on profit in either year.

 5. Notes to the consolidated cash flow statement
                                                                                                                    

                                                                        
                                                                   
                            Before                                            
    (i) Reconciliation      except
        of operating         ional   Exceptional
        profit to operating  items         items          2002            2001
        cash flow            Euro'000         Euro'000         Euro'000           Euro'000
    

    Operating profit       182,512       (16,434)      166,078         211,597

    Depreciation on 
    tangible fixed assets  321,654             -       321,654         332,332
    Amortisation of 
    goodwill                 4,029             -         4,029           3,997
    Adjustments arising on 
    differences between 
    sales proceeds
    and depreciated 
    amounts                (20,553)            -       (20,553)        (17,149)
                           305,130             -       305,130         319,180

    Increase in debtors     (8,014)        6,711        (1,303)        (35,391)*
    Increase in creditors   40,902         7,810        48,712          32,730*
    Net cash inflow from 
    operating activities   520,530        (1,913)      518,617         528,116

                                                                                                                        
                            Before
                       exceptional   Exceptional
                             items         items          2002            2001
                             #'000         #'000         #'000           #'000

    Operating profit       115,159       (10,434)      104,725         131,527

    Depreciation on 
    tangible fixed assets  202,142             -       202,142         207,176
    Amortisation of 
    goodwill                 2,527             -         2,527           2,491
    Adjustments arising on 
    differences between 
    sales proceeds
    and depreciated 
    amounts                (12,941)            -       (12,941)        (10,676)
                           191,728             -       191,728         198,991

    Decrease/(increase) 
    in debtors              (3,371)        4,318           947         (22,126)*
    Increase in creditors   25,804         5,023        30,827          18,043*
    Net cash inflow from 
    operating activities   329,320        (1,093)      328,227         326,435

    * As restated, see Note 6.

    (ii) Reconciliation of 
         net cash flow to 
         movement in net 
         debt                 2002          2001          2002           2001
                             Euro'000         Euro'000         #'000          #'000

    Increase/(decrease) in 
    cash in the year        21,196        (7,207)       13,205         (3,878)
    Cash flow from decrease 
    in debt and leasing 
    finance                796,252       830,944       499,258        519,580
    Cash flow from 
    increase/(decrease) 
    in liquid resources    112,671        (9,579)       70,666         (5,934)
    Movement in net debt 
    resulting from cash 
    flows                  930,119       814,158       583,129        509,768
    Loans and finance 
    leases on acquisition 
    of subsidiaries              -          (428)            -           (270)
    Loan notes cancelled         -        12,863             -          8,000
    New finance leases    (880,170)     (728,226)     (552,142)      (454,752)
    Exchange movements         102         1,897       (25,870)       (10,596)
    Movement in net debt    50,051       100,264         5,117         52,150

    Net debt at 
    beginning of the 
    year                (1,130,279)   (1,230,543)     (700,011)      (752,161)
    Net debt at end 
    of the year         (1,080,228)   (1,130,279)     (694,894)      (700,011)

 6. Restatement of prior year balances

    The comparative other prepayments have been restated so that amounts
    included for prepaid but as yet not registered vehicles are now classified
    as fixed assets. This adjustment amounted to Euro63,947,000; #39,604,000 with
    an equal and opposite amount being reflected in vehicle fixed assets. Note
    that for cash flow purposes, the balance at 31 December 2000 has been
    reduced by Euro27,995,000; #17,112,000.

    Working capital movements in respect of the purchase and sale of tangible
    fixed assets were previously included within net operating cash inflow. As a
    result of a change in practice, the comparatives have been restated for the
    combined effect of this together with the adjustment referred to above.
    Reported purchase of tangible fixed assets has consequently decreased by
    Euro22,480,000; #17,137,000 and the sale of tangible fixed assets has increased
    by Euro11,920,000; #7,673,000. For both of these adjustments, a compensating
    entry has been made within net operating cash inflow.

 7. Subsequent events

On 28 January 2003, the Group acquired a 50% interest in Anji Car Rental and
Leasing Company Limited ("Anji") for a total consideration of US$11,000,000.
This consideration is payable in instalments, with an initial investment of
US$6,000,000 and four further instalments payable within 30 months bringing the
total investment to US$11,000,000. Anji operates in China providing vehicle
rental and leasing services under the Avis brand. At the date of acquisition,
Anji had estimated net assets of US$17,000,000.

On 29 January 2003, the Group completed the purchase of a 100% interest in S.A.
Holding Garage des Arenes and its wholly owned subsidiary ("the Arenes Group"),
for a total cash consideration of approximately Euro6,170,000. The Arenes Group
operates in France providing vehicle rental services under the Avis brand. At
the date of acquisition, the Arenes Group had estimated net assets of
Euro2,847,000.

                      This information is provided by RNS
            The company news service from the London Stock Exchange
END

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