Nationwide Accident Repair Services

Nationwide, the country’s largest dedicated car crash repair services specialist, says its calendar 2009 results (set for release in March) will meet forecasts.

Encouragingly, in spite of the effects of the downturn on its market, gross margins improved in the second half, buoyed by earlier cost cutting. Moreover, the company remains cash generative and boasts a formidable balance sheet, unfettered by borrowings and expected to show year-end net cash of £8m, significantly up from the £5.4m cash in the coffers at the end of 2008. Given this healthy cash cushion, the board will propose a 3.3p final dividend, maintaining the full year payout at 5p per share.

Nationwide has felt its share of recessionary pain, experiencing a drop in higher margin smaller repair volumes, as motorists deferred non-essential repairs, which contributed to a profits drop from £3.9m to £2.4m in the first half of 2009. However, though its market is likely to remain tough, Nationwide believes the recent renewal of its tie-up with RSA Insurance will underpin performance ‘in the new financial year and beyond’.

On previously downgraded forecast profits and earnings of £5.4m and 8.9p for 2009, Nationwide shares, originally backed by Growth Company Investor at 132.5p in 2008 and now lower at 91.5p, sell for an undemanding ten and a bit times earnings and offer an attractive yield of 5.5%. With management noting some significant organic development opportunities presenting themselves and a return to good growth likely long-term, existing investors would do well to buckle up, ahead of a price re-bound. Firm hold.