Driver benefits from international spread

Construction dispute and property services provider Driver Group (LON:DRV) maintained its profit in the second half of the year to September 2020 even though trading conditions were difficult. There was a mixed performance around the world, but costs are being adapted to the current levels of demand.

In the year to September 2020, underlying pre-tax profit declined from £3m to £2.5m on revenues 9% lower at £53.1m. Driver shed lower margin work as part of the strategy of new chief executive Mark Wheeler.

The higher margin Diales expert witness business continues to grow and there are additional personnel for this business located in the Middle East. Diales accounts for 24% of revenues.

The best performing region was Europe and the Americas. It increased from 51% to 59% of revenues and there was a small increase in profit from £3.9m to £4m.  

Asia Pacific returned to profit, while the Middle East contribution fell to just above breakeven.

The number of fee earners was reduced but consultant utilisation levels have fallen from 76.8% to 72%. Increasing this rate will improve profitability.

Expansion

Driver continues to open new offices. This is not vanity there is an important strategic reason for the offices in New York and Madrid. The former makes it more straightforward to win business in South America, while the Madrid office provides Spanish speaking employees that can be used in South America.

Stakebuilding

In November, Sweden-based AB Traction increased its stake in Driver to 17.32%. This company has a history of building up stakes prior to recovery in the business and a potential takeover bid.

The ability of Driver to maintain a significant level of profit is impressive and the cash generation enables a return to paying dividends. Net cash was £8.2m at the end of September 2020 and there are also spare bank facilities. The final dividend is 0.75p a share.

At 52.5p, the shares are trading on around 13 times historical earnings, while the yield is nearly 1.5%. It is difficult to assess profitability over the coming year, but there should be increasing demand for Driver’s services over the medium-term because of delays to construction projects.