Driver Group’s year end update highlights an expected full year PBT outturn of £2.5m (£1.3m/£1.2m H1/H2) after adjusting for costs relating to the departure of Gordon Wilkinson. Whilst this represents a slight decrease on the prior year, given the impact of COVID-19, this is an impressive result. Geographic diversity continues to benefit the Group, with a strong performance in the UK and Europe offsetting a weaker result in the Middle East and APAC regions in FY20. Forecast guidance remains suspended given the uncertain near term outlook, but the Group continues to generate profit and cash. Strategic progress is also being made, with the Group taking opportunities to both hire new staff and further expand its geographic presence, not least opening a new office in New York and forming a strategic partnership in Africa. Management has also delivered a restructuring of the Middle East and APAC regions, in order to drive a more profitable business and provide a platform for younger talent to progress. The balance sheet remains robust, with net cash of £8.2m at the year end.
Companies: Driver Group Plc
Driver Group has announced a strategic partnership with Africa’s leading claims and dispute resolution consultancy, EVRA Consulting (click here), which is headquartered in Johannesburg. The partnership combines Driver’s higher margin Diales services with EVRA’s relationships and network to bring the benefits of Expert commissions to clients across the African continent. The joint offering will give Driver access to 54 national markets across Africa. Additionally, the Group has strengthened its Middle East team, with the appointment of David Merritt, a well-known Quantum Expert with over 35 years’ experience in the construction and engineering sectors. Today’s announcement is in line with the Group’s strategy to expand its high margin Diales services, alongside diversifying into new geographies. Management guidance continues to be suspended and our forecasts therefore remain withdrawn.
Driver has today announced the opening of its new US office in New York. This is in line with the Group’s strategy to diversify and grow into new markets, the US representing one of the largest markets for the Group’s services. The opening is supported by the appointment of two leading experts, Simon Braithwaite and Robert Otruba. Simon is a Quantity Surveyor and testifying Quantum, Delay and Damages expert. He has been based in the US for over 20 years. Robert is an experienced Forensic Delay Analyst with a strong record of testifying experience. The new office opening enhances Driver’s ability to serve its clients in North America, working closely with its existing network of offices in Canada and providing improved access to important South American markets.
The H1 results were well flagged in the 15th April update. H1 PBT is significantly ahead of last year at £1.3m (H1’19: £0.8m). Driver traded profitably through April to June. Whilst guidance is suspended, with the pipeline maintained, we believe the Group will continue to trade profitably through H2. As flagged in the H1 update, there is no interim dividend, with management seeking to preserve cash. The balance sheet is strong, with net cash of £3.3m at 31st March (improved to c.£5.5m post period end). We believe the medium term outlook is positive, with new CEO Mark Wheeler focused on improving profitability and growing the business. Delays in construction projects as a result of COVID-19 should support near term levels of dispute work, whilst an expected increase in infrastructure spending supports the medium term outlook.
Driver Group has announced that its Group CEO, Gordon Wilkinson, has left the Company with effect from 31st May 2020 by mutual agreement and with the good wishes of the Board and senior executive team. Gordon will be succeeded as by Mark Wheeler, currently Group COO. Mark has spent 14 years with Driver Group, the last four as Group COO and has an unrivalled knowledge and understanding of the Company’s global operations. John Mullen, a leading Quantum expert, will also be appointed to the Group Board with immediate effect as a NED. John has been with Driver Group for over 30 years and is in the Board’s view one of the most respected quantum experts in the world.
Today’s trading update highlights that H1 PBT is expected to be broadly in line with management expectations and significantly ahead of H1’19. Whilst the pipeline for April/May is encouraging, there is an expectation that COVID-19 will in the near future impact customer behaviour and therefore activity levels, perhaps materially so. Guidance is therefore withdrawn. Driver is seeking to preserve cash. It will therefore not pay an interim dividend, all non-essential capex and discretionary spend has been postponed, the Board’s salaries are reduced by 20%, and it has drawn down in full its £3.0m RCF. The balance sheet is strong, with net cash of £3.3m at 31st March. We believe Driver is therefore well placed to navigate these short term challenges, with total headroom of £6.3m. The medium term outlook is more positive, supported by a significant expected increase in construction disputes as a result of project delays due to the Coronavirus lock down. We discussed some of the sensitivities for Driver around the Coronavirus in our recent note
Driver delivered PBT of £3.0m in FY19 (FY18: £3.8m). Whilst this is a decrease on the prior year, the Group delivered a strong improvement in half on half earnings, with PBT of £2.2m in H2 vs. £0.8m in H1. This improvement was primarily a result of cost savings throughout the second half which should benefit FY20. Importantly, the positive momentum in H2 has continued into the new financial year, with two months of strong trading already achieved. We maintain our FY20 PBT forecast at £3.7m and we would expect a more even H1/H2 weighting. We also introduce an FY21 forecast, which implies continued earnings growth. The balance sheet remains strong (net cash of £5.4m) and, with a promising business pipeline, we expect a return to growth in FY20.
Registration document approved for Helios Towers. The Group provides essential network services, flexible infrastructure solutions and reliable power supply to mobile network operators in five African growth economies. Revenue increased 7 per cent. year-on-year to US$191m (H1 2018: US$178m), with Adjusted EBITDA up 15 per cent. year-on-year at US$99m (H1 2018: US$86m) for the six months ended 30 June 2019. Pricing rumoured at 115p to 145p implying valuation of up to $1.8bn. Expected Oct 2019.
Companies: SAR ANIC ORPH CCS SAG NTOG DRV FIPP MUR GAN
ReAssure Group plc - The Group is a leading closed book life insurance consolidator in the United Kingdom with 4.3m policies, £68.7 billion of assets under administration on a Post-L&G Illustrative Basis. It is considering a premium listing segment of the main market.
Voyager AIR The Company will focus on the acquisition, leasing and management of primarily widebody aircraft, with asset management services to be provided by Amedeo Limited he IPO will comprise a Placing and Offer for Subscription of Shares to raise up to approximately US$200m·
IMC Exploration Group (NEX: IMCP), focused on acquiring and exploring prospecting licence areas which have high potential for natural resource, is looking to admit its shares to the standard list and will withdraw for the NEX Exchange. TBC
Uniphar, a diversified healthcare services business with a workforce of over 2,000, is looking to join AIM. Raise TBC, expected mid-July 2019
Companies: SRT CHH VELA CREO ASH ECO AQX ARCM DRV MIRA
As indicated in the 11th March trading update, H1 was a challenging period for the Group. Whilst the EuAm region continued to trade strongly, the ME and APAC regions experienced lower levels of activity and resulting cost inefficiencies. Overall, the Group delivered PBT of £0.8m in H1 (H1’18: £2.1m). We modestly reduce our EPS forecasts by 7%/2% in FY19/20. Whilst there is still work to do in H2, current business enquiry levels are supportive of a step up in activity and a realignment of the cost base in the underperforming regions should support improved profitability.
Despite the new business enquiry pipeline being at an historically high level (c.20% above last year), trading in H1 has been weaker than expected due to both slower conversion of clients in South-East Asia and a lower level of activity in the Middle East. A number of Expert Witness/Dispute projects that were expected to convert in H1 have been temporarily delayed or deferred. Whilst there are significant opportunities for the Group in H2 and management remains confident of converting these leads, PBT in the current year is now expected to be around £3.5m vs. our previous forecast of £4.4m. Whilst this is a disappointment, we expect earnings to return to growth next year, supported by a strong business pipeline and cost saving initiatives.
The UK legal service sector looks intrinsically attractive to investors, with its inherent high added-value, resilient growth through all but the very worst of economic times and fragmented nature. Five companies representing about 1% of the huge UK legal sector are all we have seen so far on the UK stock market and this is clearly going to grow, as listed law firms drive home their advantages and expand. Their UK domestic focus has brought share prices under pressure which looks wrong given the outlook, offering a good buying opportunity. We take this opportunity to initiate coverage of Gateley (Corporate) which has achieved great success since IPO but paradoxically trades at an anomalous discount to its peers.
Companies: GTLY BUR DRV MUR INCE KEYS RBGP
Driver Group is a leading global professional services consultancy specialising in dispute resolution, servicing the construction and engineering industries across Europe, the Americas, Asia Pacific and the Middle East. Driver is a high quality business with a first rate management team. It has delivered its turnaround plan over the last two years, built a track record of earnings upgrades and recently resumed dividend payments. We have a high degree of confidence in our forecasts and we see opportunities for outperformance as management executes its strategy. We believe earnings momentum will continue to drive a higher share price.
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Driver’s FY18 results were well flagged in the October trading update (EPS upgrades of 9%/12% in FY18/19 at the time). Today’s results are in line with expectations, highlighting a year of significant profit growth. Adj. PBT increased by 54% to £3.8m, driven by higher utilisation rates (80% in FY18 vs. 76% in FY17) and a focus on higher margin work (e.g. growth in services provided by Diales). The turnaround has been delivered and management’s focus is now on growing revenue, profit and cash generation. The outlook statement is positive and a return to dividend payments (0.5p final dividend recommended) is a statement of management’s confidence in the outlook for the Group. We believe earnings momentum will continue to drive the share price higher and we expect a positive reaction to today’s results.
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Oxford University and AstraZeneca announced the first interim analysis from the Phase III study of its COVID-19 vaccine candidate, which was found to be 70% effective in preventing COVID-19. This follows similar announcements from Moderna, and Pfizer/BioNTech in the previous two weeks, and the caveats we mentioned at the time remain the same. While all of these results have been highly encouraging, we reiterate that they do not diminish the urgent need for COVID-19 treatments and testing, which will be required for years to come. We consider Synairgen, Avacta, genedrive, Omega Diagnostics and Open Orphan to offer good buying opportunities.
Companies: AVCT ODX SNG GDR ORPH
Appreciate is the UK's leading voucher, gift card, and e-code provider, working with brands from Iceland to Halfords to Boots. It sells its pre-paid products to corporates as well as directly to consumers. It also runs the UK's largest Christmas Savings scheme, having helped some 2.7m families put money aside for Christmas expenses over the years.
In Appreciate, we see a business that's undergone significant change and modernisation since 2018. Under its highly competent and dynamic management team it has transformed from a Christmas savings business that physically produced hampers, to a pure play financial services business with material growth prospects in the longer term.
Companies: Appreciate Group plc
Gateley’s H1 update is highly impressive, confirming a year on year improvement in activity levels in September and October and a strong sense of optimism at the beginning of H2. The Platforms continue to drive new business, whilst operating margins have benefited from cost actions taken in response to the pandemic (H1 PBT will show growth year on year). In light of the confident tenor of the statement, we reintroduce headline forecasts this morning, assuming stable revenue this year - which would be a considerable achievement - with profits returning to pre-pandemic levels by FY23.
Companies: Gateley (Holdings) Plc
Braemar’s associate AqualisBraemar (AQUA-OSL) announced an acquisition and equity raise yesterday that was very well received by investors. The AQUA share price finished the day up +25%, meaning Braemar’s stake (which is on the balance sheet at £7m) is now worth £13.4m. This provides increased support to Braemar’s valuation and a significant potential source of funds if the stake were to be realised in the future. In the meantime, it provides a useful and increasing source of dividend income (prior to yesterday’s deal, we had forecast £0.6m dividend income p.a.) and we continue to highlight the strategic progress the new management team at Braemar is making and the very significant valuation gap to closest peer Clarkson (December 2021 P/E 22x).
Companies: Braemar Shipping Services plc
In its trading update, management confirmed that adjusted FY20e PBT is expected to be c €52m, a 27% increase y-o-y and 12.7% ahead of our prior estimate, with revenues of €367m, 0.5% ahead of our prior estimate. FY20e margins of 14.2% vs 12.5% in FY19 are driven by improved operational leverage and tight cost control, together with COVID-19 related cost reduction (eg marketing, travel). Having pared back our forecasts at the start of the COVID-19 pandemic, we now upgrade our FY20 estimates for a second time to reflect the significantly stronger margins in H220e, raising our FY21 estimates and introducing our FY22 estimates. We have also incorporated the US$32m acquisition of the LA-based marketing services business, gnet. With substantial financial resources following its £100m placing in May, management remains focused on its M&A agenda.
Companies: Keywords Studios plc
In an encouraging H1 update, Gateley has detailed that the Group’s activity levels and revenue generation continue to follow an improving trend with monthly activity during September and October being in excess of prior year. Sales in H1 2021E are expected to be not less than £50.0m (-3.5% on H1 2020) but adj. PBT is expected to be not less than £7.0m, up from £6.6m as cost-reduction initiatives benefited. Net cash was £9.6m at October 2020. We have reinstated forecasts, assuming H2 sees some increase in costs as salaries normalise and a bonus is accrued before more normal growth rates resume. Similarly, we assume dividends resume with a final in FY 2021E. We reiterate our view that Gateley’s proven model provides good growth prospects, supported by the addition of high-quality staff and acquisitions, strengthening the range of services offered.
President Trump likes to project himself as a highly successful businessman, but surprisingly little is known about his true financial position. Various articles, including a 2016 in-depth analysis by The Wall Street Journal, have speculated about his income and asset base. All sorts of claims and counter-claims have been made about his wealth – by Trump himself, pitching his fortune at some $9bn, and by journalist Timothy O'Brien, suggesting that it is as “low” as $150m-$250m. It is doubtful whether we shall ever know the truth, but we can use Trump’s UK corporate filings to gain an insight into his businesses in Scotland.
Companies: AVO ARBB ARIX CLIG DNL FLTA ICGT PCA PIN PHP RECI STX SCE TRX SHED VTA YEW
Thruvision has reported results for the six months to end-September 2020, showing a steady financial performance, with cost control enabling EBITDA break-even to be achieved in the half year, despite the challenges presented by the COVID-19 pandemic. H1 FY21 revenues were steady year-on-year at £4.7m, with gross margin being held at 48%. Net cash has increased from £5.0m at 30 September 2020 to £7.8m at 20 November, following payment from US Customs and Border Protection (CBP), which made a substantial £2.9m follow-on order in the half year. Near-term uncertainty means management are not in a position to provide full-year guidance for FY21, but they report a strengthening sales pipeline and their growing confidence in medium-term prospects is evidenced by investment in sales and pre-sales resource in both the US and Europe to support increased demand.
Companies: Thruvision Group PLC
Strong trading has continued through October and we raise FY21 revs forecasts by 6% to £56m. With much of the upside from lower margin SMS, we leave profits forecasts unchanged. H2FY20 revenue growth was impacted by the pandemic and dropped to 9% after 2.5 years of 15% growth. Our new FY21 forecast imply a return to c. 18% growth as dotdigital makes a strong recovery and benefits from the shift to omnichannel online marketing driven by booming e-commerce. FY20 growth was strongly assisted by International revenues up 19% and Functionality up 16% and yet there is still plenty of room for growth here with the former just 31%/revs and the latter just 30%. We see a significant and extended growth runway leading to consistent progress for the company over the foreseeable future.
Companies: dotDigital Group plc
Today's news & views, plus announcements from Compass Group, CRH, Carnival, AO World, Pets at Home, Appreciate Group*, ImmuPharma and IG Design.
*We have also initiated coverage on Appreciate Group, with the note linked in this edition.
RBG Holdings has updated on significant transactions completed in the Group’s Convex and LionFish divisions since its last market update in mid-September. With the Group’s legal division – RBL – continuing to trade well, management now have considerably improved visibility on financial performance, and so reinstate guidance with an expected FY20E revenue range of £24m-£26m (FY19A: £23.7m). For FY21E we anticipate revenue in the range of £26m-£29m We take this opportunity to reinstate our forecasts for both FY20E and FY21E; revenues of £24.6m / £26.9m, adj EBITDA £6.8m / £8.9m, adj EPS 5.0p / 6.8p respectively. Our forecasts are cautiously positioned towards the bottom end of guidance, with scope for upgrades when discretionary litigation asset sales or Convex transactions complete. On our FY21E forecast of 6.8p adj EPS, a mid-teens multiple of 15x PER implies the shares could be worth 100p.
Companies: RBG Holdings Plc
Last year, Venture Capital Trusts raised the second-highest amount since their launch in 1995, according to the Association of Investment Companies. This is good news for smaller companies seeking growth finance. Changes to pension regulations mean that VCTs are expected to continue to attract investors. Individual qualifying companies can receive up to £10m from VCT investors.
Companies: KEYS NBI MPM PTY BOO W7L
WSG reported H120 financials results with another period of double-digit revenue growth as well as positive EBITDA and EPS for the first time.
Companies: Westminster Group plc
The COVID-19 crisis is likely to persist for longer, although TUI sees early signs of enthusiasm for leisure in next summer. The second stabilisation package of €1.2bn has been granted to support TUI’s wait until holidaymakers show up again.
Companies: TUI AG
Keywords Studios has again showed the resilience of its model in H120, delivering 8% l-f-l revenue growth, 19% adjusted EBITDA growth and 17% adjusted EPS growth despite the impact of COVID-19. Adjusted EBITDA margins of 17.8% have held up better than we expected. Looking ahead, we see sustained industry growth, led by the console transition in Q420, with publishers increasingly recognising the resilience Keywords adds to their development processes. Following its third acquisition of the year, we see management once more focusing on M&A with net cash of €101m. Keywords’ strategy, which has delivered a five-year EPS CAGR of 42%, appears sustainable, with dividend payments to be resumed in FY21. As such, we believe that the shares remain set for continued appreciation.