Investment manager Miton has taken advantage of the share price fall following the recent profit warning to increase its stake in car crash repairs firm Nationwide Accident Repair Services to 14.3%.
The shares are held in three funds - Diverse Income Trust, CF Miton UK Multicap Income Fund and Miton Income Opportunities Trust.
Miton, which previously owned 11.2%, is attracted by Nationwide’s yield although there is no certainty that it will be maintained. The total dividend has been 5.5p a share for the past two years.
At 52.5p a share, Nationwide is valued at £22.7m. The historical yield is 10.5%. Net cash was £5.07m at the end of 2012. The net pension deficit is £17.5m. An unchanged dividend and continued payments into the pension fund mean that the cash will fall sharply by the end of 2013.
Nationwide is reassessing the dividend level although it will certainly pay an interim. Even if the dividend is cut sharply the yield is still likely to be attractive.
Site closures reduced revenues in 2012 but Nationwide managed to edge up its profit. Revenues fell from £173m to £156m, while underlying profit edged up from £5.44m to £5.5m. Management reckons that the insurance crash repairs market as a whole declined significantly last year and probably at a faster rate than the 9% fall in Nationwide’s revenues from this area. There are still growth areas for Nationwide, such as glass replacement and mobile repairs. Nationwide is also growing its fleet customer base. Margins are coming under pressure because, despite closures in the sector, there is still overcapacity.
Nationwide has acquired Exway Coachworks, which operates seven repair sites in the South West and has annualised sales of £6m.
First half revenues were £79m and pre-tax profit will be lower than originally forecast at £1.4m. The net cash position will still be around £5m. The full year profit will be much lower than the £5.2m originally forecast which suggests that the cash position will be lower even if the dividend is cut.
The interim figures will be published on 25 September.
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