Creditable results and research initiation

In the context of ongoing lockdowns and the comparative period showing little sign of being affected by the pandemic, we think results for the six months to March 2021 are highly creditable. The Europe and Americas division continues to perform at new heights, with a new Head of the combined Middle East and APAC regions expected to improve the performance from those regions in the medium-term. Optimism for the outlook resulted in a return of an interim dividend, with net cash available to fund working capital once recovery begins to feed through and potentially, bolt-on acquisition(s).

On valuation, we think that its current share price could leave DRV in a vulnerable position within a consolidating sector. Although we are not producing financial projections at this stage, we have postulated what the implications of the five-year strategy review implemented in H2 20 could mean for profitability in FY25. We think that there is real scope for optimism on this topic, which we believe the share price fails to acknowledge. Similarly, our peer group valuation model suggests a significant potential upside for the fair value of DRV’s shares.