Driver Group looking to profitability after tough year

Construction and engineering consultancy Driver Group said in an update on Friday that it expected to report an underlying loss before tax of £0.3m for the year ended 30 September.

The AIM-traded firm said that loss was before one-off Middle East reorganisation costs of £0.6m, due to the Middle East and Asia-Pacific issues it described in an update on 23 May.

It said it had implemented plans to scale costs back further, to account for the lower revenue expected as a result of the Middle East and Asia-Pacific reorganisation.

The group said it had a “healthy” net cash position at year-end of £4.8m, which reflected significantly improved collections in the year, particularly from the long-term debts in the Middle East which were now markedly reduced.

Driver also reported in its May update that trading in the Middle East and Asia-Pacific regions had been loss-making to the half-year, and that the management team responsible for the regions had transferred to a counterparty, along with 25 staff.

“The counterparty and Driver entered into an agreement which involved prepayment by the counterparty of approximately £2m against book debts for regional collection,” the board explained on Friday.

“As a result of these departures and the reduction of the group's Middle East and Asia-Pacific footprint, which included the closure of an office and the completion of commissions that required re-work and additional restructuring, the Middle East region made an operating loss of £2.3m, including one-off costs of £0.5m as a consequence of this reorganisation, in the year and the Asia-Pacific region incurred an operating loss of £0.4m, including £0.1m one-off costs.”

The group said its UK, European and North American offices had “another strong and profitable year” within management expectations, delivering an operating profit of £4.2m, with group central costs coming in at £2.4m.

It said its UK team had grown with a series of expert hires, and the expansion of the team in mainland Europe had contributed to the delivery of regional profits.

The group also said it was starting to benefit from its investment in a new enterprise software system which, following a commissioning process interrupted by the pandemic, was implemented at the half-year.

It said it was now performing satisfactorily, and was on course to support the realisation of further efficiency gains.

Driver Group said it would also recognise an “onerous lease provision” of about £1m at its former Haslingden head office in Lancashire in its results for the year.

The management team said it expected to see the business return to profit in the first quarter of the new financial year, and to realise further performance enhancements in the second quarter, based on the “prudent steps” it had taken to identify and implement additional improvements.

It said it had “replaced and strengthened” its Middle East and Asia-Pacific management teams, and “further optimised” its global footprint to enhance returns and minimise risk.

As a result, larger project work that would formerly have been undertaken solely in the Middle East region would now be distributed among, and delivered by, the group's business units worldwide, supporting that region and its clients in a more efficient and cost-effective way.

The directors also noted that the share buyback programme, announced on 14 June, was successfully completed on 6 September.

“This has been a particularly challenging year for the business,” said chief executive officer Mark Wheeler.

“We have faced head-on the legacy challenges in the Middle East and Asia-Pacific that have damaged the group's overall performance in recent years, masking the excellent contribution made by our business units in the UK, Europe and Americas.

“We have dramatically reduced our exposure to risk in the Middle East and Asia-Pacific, which will now make a positive contribution to the group.”

At 1144 GMT, shares in Driver Group were down 4.72% at 27.63p.

Reporting by Josh White for Sharecast.com.