Despite the delay, the results for the year to September were in-line with expectations at the adj. PBT level, with the level of dividend doubling y-o-y. The latter highlights the Board’s confidence in improved trading in H2 2022 and the levels of net cash. Q4 ‘21 enjoyed a pick-up in activity levels, which continued into the first two months of the new year, albeit disrupted briefly by Covid in December. With costs at a multi-year low, a rising number of fee earners operating in the added-value areas and on an international basis, we expect utilisation rates and gross margins to rise with them. As recent Covid restrictions ease, we expect the pipeline of opportunities to convert into higher activity levels.
We have reduced estimates to reflect the disruption caused by a slowdown in December on the back of Covid related restrictions and, as a result, lowered our fair value estimate to 62p / share (22% above the current share price).
With a lot of cost rationalisation behind them, we believe that Driver is well placed to benefit from improved activity levels, likely from H2 ’22 onwards. The operationally geared model suggests that this should rapidly translate into higher profitability levels and, in turn, a progressive dividend policy.
