Companies: DRV   

Driver, which provides commercial and dispute resolution services to the construction industry, joined AIM in October via a placing priced at 73p. Under chief executive Steve Driver, the company motored home with a healthy rise in first half profits, despite investing in key people and offices for expansion.

On modest 5.5% turnover growth to £4.3m, pre-tax profits spiked up from £20,000 to £850,000 and Driver closed the half with £2m of net cash. Gross profits improved a creditable 15% to £2m, as the strategy to focus on higher margin work bore fruit. Historically, the bulk of commissions have been for UK-based projects, but in 2005 Driver opened offices in the United Arab Emirates to capitalise on the Middle Eastern construction boom.

Driver has continued to make good progress in the UK, with a successful focus on larger construction companies - a recently awarded contract from a major UK contractor has taken the number of top ten contracting clients to seven. The company has also successfully recruited key people from rival firms to head offices in Scotland, the North West of England and Bristol, and strengthened its presence in London and the South East. In Europe, Driver concentrates on higher margin work, where a number of new contracts with higher gross margins have improved its returns.

Forecast pre-tax profits for September ’06 have been pulled back from £1.84m to £1.6m on all this investment, giving earnings of 4.7p and an estimated 2.8p dividend. However, for 2007, investors might now expect £2.3m, upgraded from £2.16m, as investment spend comes through. We rate Driver a buy on its strong cash flow and yield attractions, upside from the booming Middle East market and undemanding ’06 rating of 15 times.

Driver Group	AIM	£18.07m	68.50p	2.00p
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