Nationwide Accident Repair Services (NARS:AIM) is in reverse today, with shares crashing 12.7% to 58.5p as investors fret over a full-year profits warning and news the £29 million cap is to reassess its dividend payout ratio.
Floated on Aim back in 2006, Nationwide provides car crash repair and accident administration services to insurers including Aviva (AV.) and Zurich, as well as fleet operators and retail customers. The Oxfordshire-based business runs a network of accident repair centres in addition to dedicated mobile fleets which repair light damage and automotive glass.
In a trading update today, the firm says it expects to generate £79 million sales for the first half to June, bang in line with expectations. However, Nationwide warns next month's (25 Sep) interim figures will show taxable profits of £1.4 million, well below forecasts.
The shortfall reflects margin pressure in a tough insurance funded market for car repairs as well as 'an adverse workflow mix.'
Amid austere economic climes, vehicle claims frequency is declining while overcapacity in the UK car repair market has yet to be balanced by demand.
Whilst Nationwide flags a cash position which remains strong at £5 million, reflecting improved working capital management, investors are also responding negatively to news the dividend payout ratio will be reassessed.
Management cites the tough trading backdrop as well as potential to act upon 'the strategic growth opportunities that have been identified' for re-examining the level of dividends, which are important to its investors.
While the industry backdrop remains testing, Nationwide continues to build market share.
This is demonstrated by today's acquisition of Exway Coachworks, a repair specialist with £6 million of annual sales which boosts the group's presence in the insurance, fleet and retail markets.
Following the profits alert, Kevin Fogarty at house broker Westhouse Securities downgrades his full-year taxable profits forecast from £5.2 million to £3 million, his earnings per share (EPS) estimate from 9p to 5.3p and his dividend forecast from 5.5p to 2.7p.
For 2014, profit and EPS estimates are pegged back from £5.3 million to £4.4 million and from 9.2p to 7.5p respectively, while the forecast for the shareholder reward falls from 5.5p to 3.8p.
Though the Westhouse scribe sticks with his 'buy' rating on Nationwide, he downgrades his price target from 95p to 80p.