Pick of AIM by James Crux

The downturn may have dented investment prospects in the automotive space, but there is value to be had by backing companies involved in car crash repair and logistics.

‘Safe, dependable, nice yield’ – qualities that spring to mind when assessing Nationwide Accident Repair Services (NARS), the largest dedicated accident repair services provider in the UK.

Doing the bulk of its business with insurers, ‘NARS’ runs a network of bodyshops and operates an exciting accident management services division that deploys repairs across the group’s network, ensuring volume stays within the business.

Ambitious CEO Michael Wilmshurst insists that besides NARS’s robustness  – ‘we have proved reliable over the cycle’ – the business boasts ‘considerable’ growth prospects in a £5.1 billion industry.

Not only does NARS have strong relationships with insurers, keen to consolidate suppliers, it has national capability and state-of-the-art IT systems, enabling it to operate with market-leading efficiency. Entry barriers, already high, are only heightening.

Now, 2009 profits did come in lower at £5.1 million. But NARS should motor in with £5.3 million pre-tax this year on £180 million sales (2009: £170.4 million), generating 8.7p of earnings and a maintained 5p dividend.

Strongly cash generative – NARS ended 2009 with £8.3 million in net cash – Nationwide’s shares have reversed from a 102.5p 52-week high to 91.5p, where they sell for ten times forward earnings and offer a yield approaching 5.5 per cent. If not already buckled up, you should get on board for income and growth.

Just Car won’t hit the skids
Though lacking the scale and appeal of NARS, I still have a liking for collision repair counter Just Car Clinics, whose shares, at 55.5p, have accelerated from 45p at the start of the year, though remain depressed versus 2007’s 120p peaks.

2009 was a tough year for Just Car, bossed by CEO Barry Whittles, but the business still grew its top line, churned out cash and pared gearing levels.

For 2010, profits should return to growth at £1.27 million, giving 6.3p of earnings and another increased dividend of 1.75p.

Just Car shares are swapping hands for a modest 8.8 times earnings and offer a yield of more than 3 per cent. As such, the current £8 million market cap could prove miserly, so long as the accident repair market improves.

Avril’s logical investment
Investors looking for a turnaround punt might back proven company doctor Avril Palmer-Baunack, now weaving her magic at AutoLogic, the vehicle logistics venture servicing the UK and European car industry.

AutoLogic, whose services range from car transport to fleet management and port technical services, as well as vehicle storage and handling and used car refurbishment and remarketing, faced tough trading conditions last year, with UK car registrations and production dropping markedly.

Yet Palmer-Baunack, who took over the CEO hot seat in 2007, steered the business to better-than-expected profits of £2.1 million, on lower ongoing revenue of £134.5 million (2008: £171 million). ‘Downsized’ and running far more efficiently as a result, AutoLogic delivered strong cash flow, closing the year with net debt of £2.2 million, down from £4 million at the end of 2008.

Given lower volumes and market overcapacity, pricing pressure is an issue, yet Palmer-Baunack has resisted signing up to low margin work, while delivering new business and renewed core contracts with the likes of BMW, Nissan and Fiat.

Though the cessation of scrappage schemes across Europe means car market fortunes are uncertain, AutoLogic should be able to ride out tough times, drawing strength from its scale and breadth of services.

At 31.5p, up from a 52-week low of 22p, the shares are trading on 14 times forecast earnings of 2.3p, having sped higher following the results. Nevertheless, they value the business at a modest £19.6 million – below net assets of £29.4 million – and offer good upside potential, with analysts having set a 45p price target.