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Nationwide Accident turns a corner

RESULTS: Nationwide Accident was tight lipped on Quindell's recent stake-building but with that buying support, an attractive valuation and earnings upside, the shares look attractive
April 16, 2014

Nationwide Accident’s (NARS) full-year results were not pretty, but the company is in much better shape than it was six months ago. The group is the UK’s largest dedicated accident repair firm, mainly fixing up cars for insurers and fleet operators. Unfortunately for the group, cars have got safer and that means fewer accidents and fewer repairs. That trend has been exacerbated by tough economic conditions and overcapacity in the car repair market.

IC TIP: Buy at 83p

Underlying operating profit sank by over a third to £4.2m, while £3m of one-off costs relating to reorganisation after July’s acquisition of Exway meant the reported figures slumped by much more. But the worst may be over. Underlying profitability in the second half was up by almost 30 per cent compared to the first half, reflecting actions to improve efficiency, and the economic backdrop is also brightening with a pick up in new car registrations.

One thing the results statement failed to mention was insurance outsourcer Quindell (QPP) who built a 25.3 per cent stake in Nationwide in September.

Broker Westhouse expects adjusted pre-tax profit £4.9m for 2014, giving EPS of 8.4p (2013: £3.1m, 5.1p).

NATIONWIDE ACCIDENT REPAIR SERVICES (NARS)

ORD PRICE:83pMARKET VALUE:£35.9m
TOUCH:82-84p12-MONTH HIGH:92pLOW: 47p
DIVIDEND YIELD:3.5%PE RATIO:na
NET ASSET VALUE:*NET CASH:£6.3m

Year to 31 DecTurnover (£m)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
20091715.108.45
20101726.0010.45.3
2011173-2.65-6.15.5
20121565.139.25.5
20131570.15-0.52.9
% change+1-97--47

Ex-div: 4 Jun

Payment: 2 Jul

*Negative equity shareholders' funds