News Item
01/05/2009 - Just Car Clinics - a top 3 share price "bounce back belter" for 2009
Just Car Clinics has been selected by Tom Bulford of "Red Hot Penny Shares" as one of his Top 3 Bounce Back Belters of 2009. Tom says they are giving out 5 classic tell-tale signals of success!Buy this half price "belter" NOW.
Your next "bounce-back belter" is one of the UK's leaders in a business that's not only recession resistant... but offers a tremendous opportunity for growth.
It could make you a tidy return too!
Signal 1: A business we cannot do without
Not many of us can live without a car. Not many of us will drive any less just because there is a recession.And let's face it... nobody drives for fun any more.
We don't get the car out of the garage on a Sunday and say "wouldn't it be nice to go for a drive?"
No we drive because we have to take our children to school... get to work.... or because the only place to buy a box of nails is five miles away on the edge of town!
Whether we like it or not the number of cars on the roads is going up inexorably.
As the population grows the number of cars per household increases too.
But the capacity of the road network barely changes!
The result? We drive too close to the car in front.... and the consequences are inevitable.
Accidents! Dents! Bumps and scrapes... that all must be repaired. It's a nuisance but at least it doesn't cost us much because the bills are paid by the insurance companies.
Now insurance companies are big beasts but they also know their customers could switch to a rival in an instant.
If a customer has an accident then he wants a replacement vehicle... and he wants his car repaired quickly and well.
If he isn't happy he will blame the insurance company and will look for another.
This means that in the event of an accident the insurance company wants to deal with an accident repairer that is efficient customer friendly and good value – and not with some oily-haired spanner- wielding bloke who works beneath the railway arches.
The insurance companies also prefer to work with a few car repairers and not several.
That's why the car repair industry is slowly consolidating into fewer hands.
The largest in the industry is Nationwide Accident Repair. But the one I like is the second in the industry
Just Car Clinics (JCR).Why?
Just Car Clinics was set up in 2003 and already it trades from 23 different locations. employs 620 staff. and repairs 45 000 vehicles a year.
I'll say more about its growth record in a moment.
First let me just answer one vital question: Can we do without it?
The answer is a resounding NO.
We need to drive. we must own a car. they will get damaged. and they must be repaired – recession or not!
Signal 2: More money comes in than goes out
So how much spare cash has Just Car Clinics got?
This is a moving picture and the trend is more important than the actual figure today.
Let me explain.
At the end of December 2008 when Just Car Clinics last drew up its balance sheet it had debts of £1.8m. That is a low figure anyway but what really matters is that Just Car clinics could easily pay off this debt. You see last year £1.24m more cash flowed into the business that flowed out. Even after paying £290 000 to the tax man that gave a very nice boost to Just Car Clinics' bank account.
But rather than simply letting this cash pile up in its bank account Just Car Clinics is keen to use the cash to expand its business. So last year it spent £350 000 buying new repair depots to add to its chain and these will add to its profits in the future.
Out of this cash flow it also pays a dividend. In 2008 this was worth 1.6p per share and I expect this to grow steadily.
So to use City jargon Just Car Clinics is a business that "generates cash".
This means more money comes into its bank account month to month than goes out in the form of wages and other costs.
So it can easily afford to run up a little debt – because it knows that if it wanted to it could easily pay it back.
Signal #3: A profitable straightforward business
Now one of the real attractions of investing in small companies is they are far easier to understand than large ones. They don't have a mass of overseas subsidiaries or complex financing arrangements.
With a small company you can trust the numbers. And in the case of Just Car Clinics they are very straightforward.
Here's how it works.
It charges its insurance company customers to repair the steady stream of vehicles they refer to it.
It pays its staff. And it pays for whatever is necessary in the way of facilities and tools.
And that's it!
All that matters is whether Just Car Clinics' revenue exceeds its costs.
And the answer is yes (as you've seen by the tidy amount of £1.2m in 2007).
One thing we do need to look out for in this type of business is "operational gearing". (This is another City term by the way – it has nothing to do with the gear-box of a vehicle!) It simply looks at the relationship between a company's costs and its revenues.The point is this...
Just Car Clinics must pay its staff each month and it must pay for its facilities whether they are being used or not. In this respect it's the same as a shop. But the difference between it and a shop is that in a recession people don't go shopping.. But they DO still drive and they DO still have accidents.
So the revenue of Just Car Clinics is unusually predictable and this underpins its profitability.
Signal 4: A growth record "to die for"
Just Car Clinics has a growth record "to die for".
The last five years has seen turnover grow steadily from £23.5m to £42.6m... the profit has increased from £0.37m to £1.3m... and a third important measure earnings per share has increased from 2.6p to 6.4p.
This is solid evidence that Just Car Clinics has a strategy that works and enables it to get bigger year after year.
How? There are two driving forces...
The first is the increasing influence of the insurance companies.
As I've said they want to deal with fewer repair specialists.
They only want to deal with those who can deliver a good experience to their customers – not only in terms of fixing the dents but also in terms of keeping the customer informed of progress and offering the customer a cup of coffee and a comfortable experience when he comes to pick up his car.
All of Just Car Clinics depots have a distinctive green livery. They are modern and – at least in so far as the parts seen by the customer concerned – they are clean and fresh.
Small independent repair shops cannot compete with this.
They cannot afford the necessary investment and many owners of single repair shops are in their fifties and are happy to struggle through to retirement before closing down the business or trying to sell it on.
This has given Just Car Clinics the chance to expand its chain of depots and gradually increase its geographical coverage away from its origins in the north-east.
Just Car Clinics is well positioned to grow for many years.
Signal 5: "Half price"
Before looking at the numbers in more detail let me make a simple observation...
19 months ago Just Car Clinics' share price hit 118p. Today thanks to the bear market it is just 49p.
And yet it's a BIGGER and MORE PROFITABLE business than it has ever been before!
Today we can buy this bigger and better business for less than half what it would have cost us in 2007.
That alone tells you that this should be a bargain.
But now consider this...
Just Car Clinics made a profit before tax in 2008 of £1.3m but today the price that the stock market puts on the whole company is around £7m.
By paying £7m for a business that delivers a profit of £1.3m you are securing yourself a return of 19% – and that's without making any assumptions about the growth of the business!
Of course this is a tremendous bargain and one only available to us thanks to the bear market.
When the wider trend changes the share price could experience one hell of a bounce back.
We have collision repair centres located throughout Yorkshire, Lincolnshire and Nottinghamshire. Locate your nearest Just Car Clinic and find out more information on each repair centre.
We have sites in Banbury, Bradford, Doncaster, Durham, Grantham, Grimsby, Hartlepool, Hinckley, Hull, Ilkeston, Keighley, Leeds, Lincoln, Mansfield, Nottingham, Redditch, Scunthorpe, Scarborough, Sheffield 1, Sheffield 2, Stourbridge, Swindon, Wakefield, York and the Training and Support Centre.
Just Bike Clinic locations Durham and Wakefield.
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