The Investment ColumnMargins suffer in car salvage
After coming to the market at 149p in August 1995 the shares soared to a high of 286p last year although they have flagged since and yesterday closed 6.5p lower at 238.5p as the market focused on a potentially worrying decline in return on sales.
In the six months, if anything, Universal has been a victim of its own success with turnover increasing 24 per cent on the back of a 34 per cent increase in the volume of cars sold in the previous year to 40,600. A lack of storage space for those higher numbers of cars meant they had to be pushed through the auction halls quickly and prices fell as a result.
That hit margins in the half-year to October and profit before tax rose only 4.5 per cent to pounds 2.3m (pounds 2.2m) before charging pounds 700,000 in the previous period to cover the costs of coming to the market. A new auction and storage site at Sandwich in Kent has alleviated the problem and margins are expected to have bottomed out now. Another drag on Universal's return on sales, an increase in the proportion of cars sold in closed auctions to breakers' yards, has also stabilised, according to the company.
The key to growth at Universal, which already controls about 15 per cent of the 500,000 or so write-offs every year in the UK, is to acquire new contracts with insurance companies. With about three-quarters of sales relating to fewer than a dozen insurance companies, Universal is vulnerable to any one moving its business. A number of new contracts are thought to be imminent.
On the basis of house broker Charterhouse Tilney's forecast of pounds 5m profit before tax for 1997, the shares trade on a prospective price/earnings ratio of almost 20. That seems to more than discount any margin improvement and new deals. High enough.
- 1 Expert urges cat lovers to own just one animal each
- 3 The Simpsons death: Creator Al Jean would 'kill himself' before character like Homer or Lisa
- 4 British man raped while urinating in bushes at Oktoberfest beer festival in Germany
- 5 A teacher speaks out: 'I'm effectively being forced out of a career that I wanted to love'
Expert urges cat lovers to own just one animal each
Five-year-old Iris Grace is raising awareness of autism through her extraordinary paintings
Isis an hour away from Baghdad - with no sign of Iraq army being able to make a successful counter-attack
Car tax disc changes: Two days to go - and they affect you much more than just not displaying a piece of paper
British man raped while urinating in bushes at Oktoberfest beer festival in Germany
Isis, we are told, is a 'clear and dangerous threat to our way of life'. I’m sorry, but I just don’t buy it
Exclusive: 'Putin's Russia has been my biggest regret,' says Nato's outgoing Secretary General
'Women, walk wherever you want' posters taken down in Stamford Hill following 'unacceptable' signs separating men and women
There’s no excuse for Dave Lee Travis’s behaviour, but we need to keep a sense of proportion
Mark Reckless becomes second Tory MP to defect to Ukip in a month
Should gay sex be illegal? 16% of Britons think so
- < Previous
- Next >
iJobs Money & Business
NEGOTIABLE: Austen Lloyd: TRUST ACCOUNTANT - KENTIf you are a Chartered Accou...
£18000 - £20000 per annum + OTE £30000: SThree: SThree are a global FTSE 250 b...
Highly Competitive Salary: Austen Lloyd: CITY - Law Costs Draftsperson - NICHE...
£300 - £330 per day: Ashdown Group: SQL Developer (Stored Procedures) Watford...