Driver stems Middle East losses

Construction disputes and property services provider Driver Group (LON:DRV) has slimmed down its Middle East business and that should reduce annual costs by at least £3m. That should help profitability to recover sharply over the next couple of years.

Another business has taken on 25 former employees, leaving AIM-quoted Driver with nine fee earners in the region. This means that there were no redundancy costs. The other business will help to collect £3.5m of money owed for work and £2m has been paid to Driver in advance.

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In the six months to March 2022, revenues edged lower from £25m to £24.4m, while underlying pre-tax profit fell from £1.01m to £402,000. An interim dividend of 0.75p a share has been announced, even though it is not covered by earnings.

Net cash is £3.68m and payments relating to the shedding of the Middle East activities have further boosted the cash figure.

European trading remains strong, but this is masked by the losses in the Middle East and Asia. Just stemming those losses will boost the group profit. There is still uncertainty, and which is why there is no guidance for 2021-22 as yet.

The Europe and Americas division provides a strong base for the business and additional fee earners have been taken on. There are also prospects in Africa.

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Last December, AB Traction has increased its stake from 19.56% to 20.56%. The share price has fallen since then and at one point it was the lowest it has been since 2011, although it has recovered to 33p. The yield is 4.5%.

The £500,000 share buyback proposed by Driver could edge up the percentage stake owned by AB Traction. At the current share price nearly 3% of the share capital could be acquired for that amount of cash.

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