Driver Group has issued a trading update earlier than normal, citing a weak Q3 (reflecting a combination of timing issues and the later Easter) as reasons. Nevertheless, Q4 has witnessed a return to more normal patterns of trading and coupled with the rationalisation programme yet to impact results and the pipeline of orders looking more encouraging, we think the medium-term outlook appears favourable. The further improvement in net cash levels provides the Board with opportunities, not least in its capital allocation policy, including the further return of cash to shareholders. The NAV remains above the current share price.
We expect the NAV to decline modestly during H2, reflecting the slight reduction in profitability. However, at c.£15.8m / 29p per share, which is 8% above the current share price, this provides healthy support for the shares. With the current share price now below levels of previous buybacks and net cash higher during H2, we remain positive over the medium-term.
Yet reflecting the timing issues witnessed during H2, we reduce our fair value / share from 49p to 40p.
