25 May 2012

Nationwide slams in reverse

22/11/2011 Miles Nolan

The UK's leading crash repair firm Nationwide Accident Repair Services (NARS) has warned on profits due to lower than hoped insurance volumes.

Nationwide expects sales to be broadly flat, but the change in mix has led to house broker Arbuthnot slashing its full-year pre-tax profits from £7 million to £5.5 million (EPS of 8.7p). Insurance claims volumes held up well in the first half, but claims for smaller repairs (which provide higher margins) are falling quicker than bigger jobs.

Oxford based Nationwide also blames the mild weather as a further reason for a soft market in repairs. With little sign of a short-term improvement in the economic climate the AIM listed company has initiated a cost reduction exercise, which could lead to the possible closure of non-core repair centres.

The move should not impact its overall capacity so should allow it to continue its efforts to boost its exposure in the fleet and retail markets. Nationwide expects the costs of its restructuring to hit £7.7 million, of this £1.6 million will be a cash cost this year - but the overall effect will be an annual saving of £1.9 million.

Reassuringly, the balance sheet is strong with net cash at £4.5 million, shareholders are also to receive a maintained full-year dividend of 3.5p a share. Nationwide have been quick to make decisive action in realigning the cost base, but the shares have reversed 22 per cent to 70.5p this morning. Though clearly a blow, we are of the view that the shares are a hold at current levels.

Tags: AIM market, Arbuthnot Securities, Insurance claims, Profit warning

Sector: Support Services

Companies: Nationwide Accident Repair Services

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