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Investment > Private equity > Europcar
Europcar    | http://www.europcar.com
France: €663 million(3), 85.1%(4)
(3) Amount invested directly and via Eurazeo Partners.
(4) After syndication to Eurazeo Partners.

Europcar
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Viewpoints - Philippe Guillemot, Gilbert Saada

Regards croisés

What do you think of Eurazeo’s support?
Ph. G. : The arrival of Eurazeo in Europcar’s capital has been synonymous with both the expansion and structuring of our group. Expansion, as Eurazeo has provided us with support, assistance and expertise to successfully carry out a number of acquisitions. Structuring, as Eurazeo also contributed its expertise to the optimization of our balance sheet structure and the accurate monitoring of our cash usage. In terms of the management team, we have carried out the recruitment and made the adjustments needed to strengthen our leadership. From the operational standpoint, with Eurazeo’s support we worked to implement appropriate measures to optimize our business. Our initial culture was to focus on sales and customers without always incorporating the fleet constraint. The gradual introduction of yield management is another example. The optimization of average revenue per day is gradually becoming a priority, as is identifying the best use of our capital, especially as concerns the vehicle fleet.

What do you discuss with Europcar?
G. S. : Our priority in investing in Europcar was to rightsize the financing and secure the appropriate flexibility to meet the changing needs of the company’s vehicle fleet. Our expertise in the area led us to initiate a securitization with Europcar, but the project had to be put on hold temporarily due to economic conditions. The decision to set in place a financing extendible to five years was a good one. Generally speaking, we gave Europcar’s management our full support in its efforts to diversify the sources of financing of its fleet (leasing in certain countries, in local currencies to provide a natural hedge). In the year just ended, and in light of the lack of visibility over demand, fleet purchasing decisions were reviewed every month in order to follow market developments as closely as possible.

Europcar – European leader in rental of passenger cars and light commercial vehicles

Europe’s leading car rental company, Europcar serves business and recreational customers in approximately 150 countries. Through their strategic business alliance, Europcar and the leading U.S. company Enterprise Holdings form the largest worldwide network of rental vehicles in the world, with a combined total of 13,000 agencies.

image europcar
2009 business review

Revenues fell along with demand: the group responded with swift and massive measures to reduce both its cost structure and its debt.

Europcar had consolidated revenues of €1,851.4 million in 2009, down 11.5% on a reported basis and 10.8% on a comparable basis, reflecting the decline in demand worldwide, which resulted in a 13.1% decrease in the number of rental days.

Average revenue per rental day (RPD) continued to improve all year long, and was up 3.4% compared to the previous year at constant exchange rates. This significant increase reflects the discipline of the Group’s pricing policy, the success of the strategy to improve its customer mix that the group adopted early in the year, and its rapid adjustment of the size of its fleet to fit demand. Combined with the stabilization of the decline in activity (expressed in rental days) during the fourth quarter compared to the pre-crisis, these measures helped limit the decline in Europcar’s consolidated revenues during the fourth quarter to 7.4%, at constant exchange rates. Simultaneously, the fleet utilization rate was significantly higher (+4.0 points), bringing the improvement for the full twelve months of 2009 to 2.1 points. At the first signs of weakening demand late in the summer of 2008, the group initiated a comprehensive “Winning in Downturn” program to reduce costs, adapt structures and improve productivity in an unprecedented manner.

Implementation of this program helped mitigate the impact of the slowdown on operating income. The program, which is nearing completion, generated pre-tax savings of €35 million in 2009, and savings for the full twelve months of 2010 are expected to reach €80 million (versus the 2008 cost base).

Continuous attention was paid to purchasing and fleet management and, in 2009, Europcar reduced the proportion of its bankruptcy risk exposure to those of its fleet providers most at risk, although none have actually initiated bankruptcy proceedings.

Europcar also continued its efforts to reduce debt. Net debt at year end and annual average net debt were significantly reduced, by €455 million and €451 million respectively at constant exchange rates. Excluding its high yield bonds, Europcar reduced its average and year-end net debt by 16% and 18%, respectively. Europcar has sufficient lines of credit to ensure its day-to-day financing needs, and the entire organization has been mobilized to maintain sufficient cash holdings.




Outlook for 2010

In 2010, the group will continue in the same direction it has been following for four years, enhancing Europcar’s status as a leading player in the car rental industry in Europe and around the globe.

Europcar expects that 2010 will remain challenging, with no signs of increased demand before the second half. The turnaround in demand for rental vehicles will follow the economic recovery. Accordingly, the Group has planned its resources for fiscal 2010 based on conservative volume assumptions.

In 2010, Europcar will continue to apply the measures that it initiated in 2008 and 2009 to prevent and manage risk related to the worsening of the economy, while improving the quality of service it provides to its customers.

The group remains convinced that the fundamentals of the rental vehicle industry remain attractive. The last few quarters have shown that the actions taken to weather the recession without cutting into the group’s lifeblood are appropriate, and will enable it to benefit from the recovery as soon as it starts.

Sustainable development

In 2009, Europcar’s Environmental Charter was successfully audited and its progress has been marked by new developments:
> Sharp increase in the share of “green” vehicles in Europcar Group fleet purchases;
> Signing of agreements with Nissan and Renault to offer electric vehicles on the rental market starting at the end of 2010;
> Complete information on CO2 emissions and creation of a line of “eco-citizen” vehicles;
> Europcar Group and its subsidiaries in France, Spain, Italy and Germany have all obtained ISO 14001 certification.

Two important initiatives during 2009 bear mentioning:
> The agreements signed with Nissan and Renault are designed to accelerate the implementation of shared, innovative electrical vehicles rental solutions by the end of 2010. These partnerships between the Europcar Group and Nissan are unique in the short-term car rental market, and fit Europcar’s commitment to reducing its fleet emissions and heightening customer sensitivity to environmental issues. Europcar will deploy this new fleet of electric vehicles and the infrastructure needed to recharge the batteries in the rental locations. These vehicles will initially be available for rent in those countries in which Europcar operates directly. The partnership is expected be extended to other countries.

> Europcar has undertaken many initiatives to help improve transparency over CO2 emissions and meet the expectations of its individual and corporate customers.
The average CO2 emissions by category of vehicle are now posted on the group’s websites, which also highlight its fleet of eco-citizen vehicles. This initiative notably meets the needs of companies committed to sustainable development policies. The precise calculation of the rate of CO2 emitted per rental is available in eight of the nine countries in which Europcar operates directly. More specifically, the eco-citizen fleet proposed is made up of cars that emit fewer than 140 grams of CO2 per kilometer.
By also indicating on its invoices the amount of CO2 emitted for each rental, Europcar is the first in its market to provide data calculated on the basis of the model of vehicle rented and the distance traveled.

2009 annual accounts

Key operational figures

  2008 proforma 2009
Rental days (in millions)
 59.2 51.4
Number of rentals (in millions)
 10.8 9.5
Utilization rate 71.6 % 73.7%
Average fleet (in thousands) 226 191


Summary income statement

(In millions of euros) 2008 proforma at constant exchange rates(1) 2009 Consolidated
Total revenues 2,075 1,851
Change in total revenues   - 10.8 %
Adjusted EBIT(2)
248 213
EBIT margin 12.0 % 11.5 %
(1) Includes 12 months of activity in Australia.
(2) Includes adjustment of interest expense on operating leases for the fleet.



Consolidated balance sheet as of December 31, 2009

(In millions of euros) ASSETS   LIABILITIES AND EQUITY
Goodwill 521 Issued capital stock 778
Intangible assets 795 Reserves and retained losses (282)
Property, plant and equipment 115 Total equity 497
Other non-current assets 29 Financial debt 795
Total non-current assets 1,459 Other non-current liabilities 365
Inventories 15 Provisions 0
Receivables 371 Total non-current liabilities 1,161
Other receivables and financial assets 55 Financial debt 1,450
Cash 266 Trade accounts payable 669
Assets under operating and finance leases 2,155 Other current liabilities 372
    Other provisions 173
Current assets 2,862 Total current liabilities 2,663
Total assets 4,321 Total liabilities and equity 4,321

europcar
2009 Revenues
€1,851 million, - 10.8 %(1)
(1) At constant consolidation scope and exchange rates.
€213 million in EBIT, - 14.2 %

12,8 % reduction in average net debt during the year (2)
on a comparable basis
(2) Including the notional value of the debt on operating leases for the fleet.
Highlights of 2009
• Strong improvement of operational and financial performance indicators during the year, reflecting the effectiveness of actions taken by the group to adapt to lower demand.

• 16% reduction of average net debt excluding high yield bonds, and increased liquidity.
Economic conditions
Since the end of the summer of 2008, the Group has felt the impact of the worsening economy on demand. Volumes continued to decline in the first quarter of 2009, before stabilizing at roughly the same levels as before the crisis. Underlying demand improved slightly during the third quarter, however, thanks to recreational demand, which is traditionally stronger during the summer.

Moreover, the difficulties the automobile industry is having presented a twofold challenge for Europcar, which is exposed to counterparty risk on receivables for contractual repurchases of vehicles by manufacturers and subject to restrictive conditions regarding full access to its dedicated lines of financing for the fleet, in the event of a severe deterioration of the manufacturers’ financial position.