Investment manager Miton has swapped its stake in Nationwide Accident Repair Services for shares in Quindell Portfolio just a few weeks after it was adding to its stake in the car crash repairs business.
Earlier this year, Miton owned 11.2% of Nationwide and in recent times, following a profit warning, it has increased the stake to 14.5%. Along with 8% shareholder Octopus, Miton is swapping one Nationwide share for 5.17 Quindell shares. Quindell owns 22.5% of Nationwide.
One of the attractions of the share swap is that it will flatter the portfolios of the fund managers. Quindell shares closed the day at 17p and that valued each Nationwide share at 87.9p, which is higher than house broker Westhouse’s target price of 80p a share. The Nationwide share price subsequently jumped 12.5p to 62p – still well below the value of the share swap. Nationwide is capitalised at £26.5m.
At the beginning of 2012, Quindell had just over 2bn shares in issue. The latest share issue means that there are 4.28bn shares in issue. Quindell plans to move to the Main Market early next year and it promises its maiden dividend with its 2013 figures. That is good news for Miton, which held the Nationwide shares in three income funds - Diverse Income Trust, CF Miton UK Multicap Income Fund and Miton Income Opportunities Trust.
Nationwide is the obvious way for Quindell, which likes to gorge itself on acquisitions, to gain an investment in repair services. Through its previous acquisition of Ai Claims Solutions Quindell is already a customer of Nationwide.
Nationwide’s interim figures were in line with the previous profit warning. Revenues fell from £80.7m to £79.1m due to weak insurance revenues. Repair revenues from fleet and retail customers improved. The network services and Motorglass business both increased revenues.
Underlying profit slumped from £3m to £1.4m. There was still £5m in the bank at the end of June 2013 but this figure is likely to fall over the next few years as additional pension payments will consume any spare cash generated from operations. The net pension liability is £17m.
Nationwide has cut its interim dividend from to 1p a share. The full year dividend is expected to be cut from 5.5p a share to 2.7p a share – a dividend cover of around two. That still represents a yield of 4.4%.
Westhouse forecasts a decline in full year profit from £5.5m to £3m. The shares are trading on less than 12 times prospective 2013 earnings and the share swap is equivalent to nearly 17 times earnings.
Profit is expected to rebound to £4.4m in 2014. This recovery will be helped by the integration of last month’s acquisition of Exway. This strengthens Nationwide’s position in south west England and there will be scope to rationalise the sites in the region.
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