Investment: Kwik-Fit drives into Europe

KWIK-FIT is enjoying life in the fast lane. The exhaust and tyres fitter is becoming a sort of Marks & Spencer of car repairs, using its brand name and well-oiled formula to branch out into other businesses and other countries.

The latest example of Kwik-Fit's expansion plans came yesterday with the pounds 105m cash purchase of Speedy Europe, a car parts fitter with 568 branches across continental Europe. The deal could prove vital for ensuring Kwik-Fit's long-term growth. For a start, it almost quadruples the number of fitting centres it has across Europe, giving Kwik-Fit a valuable outlet at a time when its traditional UK market is reaching saturation.

Moreover, Speedy offers Sir Tom Farmer, Kwik-Fit's resourceful chairman, a chance to launch some of the company's wackier ideas, such as Kwik-branded motor insurance and a breakdown service, on the Continent.

That said, Kwik-Fit will have to work hard at bringing Speedy's margins, now a measly 5 per cent, into line with the company's 10 per cent average. Sir Tom will also have to be careful about overstretching at a time when the European economic outlook is uncertain.

At home, Kwik-Fit continues to motor ahead in spite of some slippery markets. Yesterday it reported a 31 per cent increase in interim profits to pounds 33m on turnover up 5 per cent to pounds 251.7m. A glut of cheaper tyres imported from the Continent, courtesy of the strong pound, did little to dent profitability. Kwik-Fit actually managed to increase tyre profits despite a 5 per cent fall in prices.

The shares rose 19.5p to 467.5p yesterday and have now more than trebled in value over the last five years. On around 18 times 1998 forecast earnings of pounds 63m, they are a solid hold in uncertain times.

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