A two minute monologue.

What it does: vehicle transportation

Autologic transports vehicles for car manufacturers, hire companies, dealers, and importers, mostly in the UK but also in Belgium, Holland and the Czech Republic. It provides services like storage, inspection and technical work.

Category: turnaround

The business seems to be stabilising. In September it reported an improved half-year net profit, it’s investing in its fleet, and diversified. During the last decade losses eroded away the company’s assets, but slowly its adding value again.

What needs to happen:

The company needs to achieve it’s plan. It’s saving money by servicing its own vehicles and it’s bringing in new revenues from commercial vehicle fitment, de-fleeting services, and used car refurbishment. It remains to be seen how significant these new services are, but they use the equipment and skills Autologic already has and may reduce the sensitivity of profits to new car registrations.

What could go wrong:

competition
Autologic was partly undone by competition when it lost a large contract with Ford in 2007 suggesting big vehicle manufacturers are in a strong position negotiating contracts. On the other hand rivals are finding it tough too, which could be an opportunity. Autologic bought Autocarriers out of administration in 2010, and recently took advantage of low prices to buy used transporters.

oil prices
Fuel is a significant, and uncontrollable, cost, although since prices stabilise when the economy is subdued, the impact may be more a break on growth than a hastener of contraction.

management
I’m in two minds about management. CEO Avril Palmer-Baunack and finance director Andrew Somerville were credited with turning Universal Salvage around in similar circumstances. They have experience, but investors are paying a price.

Palmer Baunack’s total remuneration in 2010 was ''761,000 and she hasn’t invested in Autologic. Neither has Somerville, who earned ''475,000. Do they believe the turnaround story?

company finances
Equity is 43% of total assets meaning the company is funded by a substantial amount of debt. The overall level of bank borrowings rose at the half-year as the company invested in transporters.

valuation
The share price has been sliding for some time, possibly the result of major shareholder Guinness Peat liquidating its holding rather than fundamental problems at Autologic. Guinness Peat is liquidating its investment portfolio.

At 14p, the market values Autologic at 0.9 times interim (Sept 2011) tangible book value, which is an appropriate measure considering its unreliable earnings record.

That’s cheap, but I’m not adding more shares to the Nifty Thrifty. If the company pays off debt from profit, and/or the directors buy shares, I probably will at prices around tangible book per share (15p). I hope to eject them at around 50p (book value per share).

More on Autologic.