Nationwide Accident Repair Services (LON:NARS) today warned investors that full year profits would fall below market expectations.
The firm has a number of contracts with motor insurance companies to provide repair vehicles that have been involved in accidents.
It blamed this morning’s profit warning on a decline in insurance claims during the second half of the year. It said that the recent milder weather underscored this trend.
On AIM the shares were down 17.5p, or 19.4 per cent, changing hands at 72.5p each.
Specifically NARS said that claims for smaller repairs, with higher margins, are declining at a faster rate than claims for more substantial repairs which typically have higher sales value but lower margins.
The firm said it was anticipating that the current economic climate is unlikely to improve significantly in the short term.
As a result it has begun a decisive programme to reduce the costs. This will potentially include closing non-core centres. Subsequently volumes from these centres will be transferred to other branches.
It says this programme will preserve the overall operational capacity and will continue to support a strategy to build the company's presence in the fleet and retail markets.
NARS said its balance sheet remains strong. It expects to end the year with £4.5 million.
And it expects that it can maintain a final dividend of 3.5p a share for the year, which will take the full year dividend to 5.4p.
In this morning’s statement the company said: “With a profitable business model, medium and long term prospects for Nationwide to capture market share in its core insurance marketplace remain very positive, helped by the Company's comprehensive offering, national reach and operating systems.
“Nationwide's drive into newer non-insurance markets is also developing well and results to date are encouraging.”