Nationwide Accident Repair Services

STRONG BUY

28/09/2010 James Crux

Car crash repair and accident administration services provider Nationwide is a genuine growth stock offering exposure to progressive dividends.

Nationwide is the UK’s largest dedicated accident repair services provider, servicing the insurance industry in the main and offering a mobile as well as a fixed site capability, which CEO Michael Wilmshurst insists represents a unique proposition in the marketplace.

Results for the half to June marked the first six months of a new three-year growth plan. Although sales were lower year-on-year at £87.25m (2009: £90.94m), turnover was 9% ahead of last year's second half and pre-tax profits accelerated 26% higher to more than £3m, buoyed by margin expansion driven by operational efficiencies.

Key first half developments included the clinching of a major new insurance deal with Groupama, worth £8m per annum, which will benefit the second half financials, as well the acquisition of a bodyshop in Newcastle that has boosted capacity in the North East region.

More recently, in a highly significant move, Nationwide has launched an enhanced range of mobile repair services, which will not only support its activities in its core insurance market, but also spearhead its push into the allied fleet and retail repair markets.

Nationwide, with £8.15m net cash in its coffers, increased the interim dividend 6% to 1.8p and has the financial firepower to move speedily on complementary acquisitions. Upgraded full year forecasts point to pre-tax profits of £5.8m, ratcheted up from an earlier £5.3m and suggesting earnings of 9.6p and a likely 5.3p dividend.

The shares, 22% ahead of the 82p at which we strongly urged further buying in July, offer a 5.3% yield, still represent excellent long-term value and ought to motor higher still, given time.