Nationwide prepares to step up a gear Nationwide Accident Repair Services (NARS) provides vehicle repair management services to motor insurers, fleet owners and private customers. These services include repair sourcing and repair itself – both the vehicle and glass. In recent years the company has been diversifying from working exclusively for insurers into fleet and consumer work. Fleet work has grown substantially and now represents 25% of group revenues. Growing mobile repairs is another ambition of the company as it is frequently higher margin work. NARS has been successfully building on its leading position in the UK repair industry through recent acquisitions.
Further revenues were added by the acquisitions Against this, one has to balance an awkward balance sheet that is encumbered with a significant pension deficit, a lack of historic revenue growth and the strong possibility of a large share overhang. NARS trades well when there are more vehicles on the road and crash incidence is high. Obviously, the first factor can influence the second. The strength of the pound has helped reduce fuel costs: the September price for petrol was the lowest since February 2011. Growth in the UK economy bodes www.aimprospector.co.uk
well for the number of miles being put in by drivers, something that will be further encouraged by low fuel prices.
NARS would have to continue making payments for another nine years In the first half of its year, a significant contract with AXA was renewed. Further revenues were added by the acquisitions of Exway (August 2013) and Howard Basford (February 2014). Post-period end, Gladwins, a repair company operating eight bodyshops, was acquired. In aggregate, these three businesses made annual revenues of £35m prior to their acquisition. Given that NARS made £156m of revenues in the year prior to these additions starting, the new operations will have a significant effect on future revenues. The larger geographical footprint of the repair network should also bring margin improvements. The enhanced size of the group will make servicing the group’s pension deficit less onerous. For 2013, NARS had to pay £1.3m to service a liability that closed the year at £19m. At a discount rate of 4.4%, NARS would
have to continue making payments for another nine years. A flurry of RNS announcements was made earlier this year as Quindell plc built a 25.3% stake in NARS. I don’t expect Quindell to hold on to its stake in NARS much longer. While this may result in an unpleasant share overhang, such situations can present an opportunity for investors to acquire stock at a depressed price. The acquisitions are expected to help EPS reach 8.4p this year, with the dividend held at 2.9p. Given that half-year revenues were 14% higher and gross margins were 2% higher at 36.2%, a significant improvement for the full year seems nailed on. Nationwide Accident Repair Services (LON:NARS) FOR Industry positioned for upturn Margins set to improve AGAINST Possible share overhang Pension deficit will deter some Market cap Bid:offer P/E (forecast) Yield (forecast) 52week low:high
£34m 73p:76p 9.0 3.8% 61p:92p
Published on Nov 6, 2014
Published on Nov 6, 2014
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