Driver Group (AIM: DRV) shares recovered to 50.5p (Mkt Cap £26m) after today’s brief news that the auditors have complete the finals for Y/E September which were due on 14th of December and will be reported on Monday 24th .
Driver Group is a global professional multi-disciplinary consultancy services for engineering and construction projects from ‘soup- to-nuts’, including claims, expert witness, and dispute resolution services it was founded in in 1978 and floated in 2005. There is a wide of sectors including transportation, Energy, Infrastructure building and marine. A new forensic accounting service is established, which compliments the construction-related, delay and technical expert services. It’s part of new strategy of focusing on higher margin business and upselling to existing clients and traction was being made in UK and Europe with weaker trading in the Middle East and Asia Pacific regions.
At the Covid infected Interims the Revenue was down 11% with an unchanged GP margin at 26% and an underlaying profit of £1,013k which is 19% lower, but the Interim Dividend was increased to 0.75p. The business development plans is to increase the proportion of sales represented by higher margin expert assignments, consequently, reducing the share of revenue derived from lower margin project services. The cost base was reduced by approximately 13% whilst maintaining the fee-earning capacity. DRV are inherently cash generative with a healthy net cash position of around £6.5m although growth has largely been organic. It was looking good as a recovery play.
Then came the shock announcement of an audit delay due to DRV’s principals in Oman investigating projections from a significant customer. Sales momentum had been building although 2021 is profitable with a maintained dividend it is not a growth year. Due to these delayed finals expectations for the September 2022 year-end could be reset from the existing forecast of £3m for an EPS of 4.7p with a 1.75p dividend, which would be a prospective P/E 12.8x with a 2% yield. Intriguingly supporting the recovery is AB Traction a Swedish Company which increased its stake last week from 19.56% to 20.5% and there are 41% of the shares in public hands…… if 2022 expectations are crashed Driver could be open to being taken-over. The finals are now due on Monday but let’s wait and watch for a less risk buying opportunity.