Investment: Quicks geared up to recover

QUICKS, the car dealer and parts distributor, may reasonably consider itself to have been unfairly treated by the market. The shares were marked down nearly 10 per cent to 115.5p yesterday after Michael Moore, the chairman, sounded a pessimistic note when he said economic prospects for the sector may be weaker in the second half of the year.

The shares have now lost 40 per cent of their value from a 1998 high of 164.5p, dented by recent profits warning from Arriva, a rival dealer, and Car Group, the car supermarket operator. Is this a fair assessment - or just a further sign of the City's disaffection with smaller-cap stocks?

Quicks nearly doubled turnover in the first half of the year. It geared up to buy new Ford franchises from Tayford Motors in Dundee and Knutsford Motors in Northwich, and the motor arm of Caverdale. It has already succeeded in reducing its gearing from over 80 per cent to 75 per cent, and is still to receive the proceeds from some disposals already arranged.

Sales of new cars in the first half rose by 29 per cent, against 8 per cent for the rest of the market. Quicks also managed to keep up its margins on used cars in spite of a slump in demand and falling prices.

A cautious forecast of pounds 10m for the full year gives earnings per share for 1998 of 18p. On yesterday's close of 115.5p the shares trade on a forward multiple of 6.5, lower than most of its peers. Given the strength of its management, that looks like good value.