Shares tumble 10% as investors price in placing
Companies: Diales Group PLC
Shares in Driver Group tumbled 10% on Friday as the firm put out two regulatory news updates outlining its preliminary results and proposals for a £8m placing to reduce debt.
In its first RNS, the firm released prelims for the year to 30 September showing revenue and profits in line with guidance, but with operating profit swinging to a loss and reported pre-tax loss more than doubling.
In a second RNS, the firm announced plans to raise up to £8m (up to 22,857,143 placing shares) in order to normalise the capital structure of the business.
Prelims
Revenue is up 21% to £58.3m, with revenue growth slowing in H2 at just 13% to £30.4m. This resulted in an underlying operating loss of £0.2m (from a £1.2m profit in the previous period), and underlying loss before tax of £0.4m (from £1.1m profit). On a reported basis loss before tax hit £5.3m, more than double the £1.9m loss it reported last year.
There was a considerable increase in net borrowings, with debt increasing from £2.5m in 2015 to £9.9m at 30 September.
There has been solid progress in the AMEA (APAC, Middle East & Africa) region, with new teams established in Singapore, and H2 revenue up 26% Yoy. However, growth in Europe and the Americas has been considerably slower, just 6% ahead of the previous year.
Steven Norris, Driver's Chairman, said the loss declared at H2 was "clearly unacceptable", and stressed that significant change was needed to improve the prospects of the Group:
"...action needed to be taken decisively and effectively. While much remains to be done the changes implemented saw a new management team under Gordon Wilkinson take charge and introduce a radical overhaul of every part of our business resulting in a second half which demonstrated a marked improvement.”
Recruiters were busy at Driver Group last year, with the firm appointing a new CEO in March, a new Non-Exec Director in June, and a new CFO in September. With this new team, Driver Group said its strategy had been refreshed and clearly articulated:
"...focusing on the Group's traditional and proven areas of expertise, claims and dispute resolution and expert witness support services."
The new Board has found overhead and admin savings of £1.3m on an annualised basis, which were implemented in H2.
£8m Placing
The AIM-listed group has proposed a £8m placing (71% of the share capital) to reduce outstanding debt. Net borrowings at the year end had increased to £9.9m, up from to £2.5m. This was due to losses, the acquisition of Initiate Consulting Ltd, and an increase in working capital requirements.
CEO Gordon Wilkinson said about the placing:
"Further to the release of our preliminary results for FY16 this morning detailing our improved financial performance, the board is pleased to announce the proposed terms of the fundraising, having already received pleasing levels of indicated support from new and existing investors."
He goes on to say that the fundraise is intended to provide the necessary level of refinancing to normalise the capital structure of the business and provide a platform on which to effect the remainder of the board's recovery plan.
Solid start to 2017
Driver Group has had a pretty solid start to 2017, with the first 4 months "comfortably ahead" of the prior year and ahead of internal forecasts. Today's equity fundraising is intended to reduce the Group's debt and provide flexibility to support the business as it continues to rebuild.
