Avis Europe is slashing its workforce by 200 primarily at its European headquarters and at its UK and German corporate operations. Avis Europe advised at the time of its rights issue in June 2005 that it would be undertaking a review of the effectiveness and efficiency of the organisation, in line with the key objectives of its corporate recovery strategy.
In its pre-close trading update on 15 December 2005 Avis confirmed in particular that it was seeking to accelerate the benefits resulting from the transfer of back-office activities to the shared service centre in Budapest and to generate further efficiencies from a focus on support services in general.
Avis confirms that it has now commenced a re-structuring within the roles of its European headquarters, corporate operations and shared service centres to create an organisation that is both more effective and more efficient. The scope of this project and its associated benefits exceed original estimates.
The project comprises the following main elements:
” a substantial reduction in staff and running costs at the European headquarters;
” acceleration of the transfer of back-office activities into the shared service centre in Budapest;
” consolidation of all call centre activities into the existing Barcelona facility and closure of the Manchester call centre; and
” a number of personnel and overhead cost initiatives within corporate operations.
The project will also involve investment in two key areas of the recovery strategy - web-services and yield management.
Subject to the employee consultation process, the net headcount reduction is expected to be approximately 200 positions, primarily in the European headquarters and the UK and German corporate operations.
It is expected that some 180 positions will be transferring from Manchester to the Barcelona call centre and there will be further transfers of roles to the Budapest shared service centre. Redundancies will be phased over the next 18 months.
Non-staff related overhead costs will be reduced through a number of initiatives, including the re-negotiation and exit of certain non-fleet supplier contracts in the areas of telecoms, systems, transportation and professional services.
In addition to €6 million of exceptional costs taken in 2005, the exceptional costs of the project are expected to amount to some €40 million in 2006 and €7 million in 2007. The project will generate anticipated savings of around €7 million in 2006, €25 million in 2007 and €30 million per annum thereafter.
Murray Hennessy, Chief Executive, Avis Europe plc, said “We are working closely with our staff to achieve these essential changes. This has been a difficult decision, but necessary to ensure that we deliver on the goals set out in our recovery strategy and put Avis on the right track for the future.”
Avis now expects that underlying profit before taxation for the year-ended 31 December 2005, which will be announced on 3 March 2006, will be ahead of the market’s previous expectations. This is principally due to stronger than expected trading in the last month of the year. Trading expectations for 2006, however, remain unchanged.