CAR rental company Avis Europe saw pre-tax profits fall last year as the effect of residual value falls and rows over credit hire bills hit the firm. Pre-tax profits fell from £111 million to £85 million last year, on turnover which increased from £671.1 million to £747.7 million.

Key factors in the fall were exceptional costs for 3 Arrows of about £20 million to cover the cost of writing off credit hire bills to end a row with insurers over paying for vehicles provided to the victims of non-fault accidents. A further £2 million was spent on the start-up of yourautochoice.com, the online nearly-new car sales venture. Fuel tax protests also had an impact in a number of countries throughout Europe in September and October, reducing general demand for rental cars and costing about £2 million.

The fall in residual values both in the UK and Germany also had an impact, although Avis Europe has about 80% of its cars on buy-back agreements. The firm has also achieved efficiencies through transition from nine individual reservation centres to two call centres in Barcelona and Manchester. Chairman Alan Cathcart said: 'Operating margins remained strong but were lower than last year due to fleet costs, our investment programme and the one-off impact of the fuel tax protests. We expect fleet cost pressures to continue in 2001 and against the background of slower growth in the European economies, we anticipate somewhat lower volume growth in the year ahead.'