Driver on road to recovery

Driver's plan is to double down on markets in Asia, the Middle East and Africa. Its multinational construction and engineering clients in these regions are expected to experience significant growth over coming years. Indeed, much of the compound annual 6 per cent growth in global infrastructure spending forecast by Oxford Economics and PwC between now and 2025 is expected to derive from these markets. And according to the research, chief executives in the above regions are more concerned about supply chain disruptions, bribery and corruption issues than the rest of the world, which should boost demand for Driver's services.

But in the short term, scaling up its presence in high-growth regions has dragged on Driver's profits. The company increased its headcount by 30 per cent to 461 in the first half, which included 41 new fee earners and six new support staff in Africa, Asia and the Middle East. This hiring spree pushed the region to a £500,000 first-half loss compared with a £1.3m profit in 2014, and the group as a whole reported an underlying loss before tax of £490,000 compared with a £1.4m profit. But not only should Driver start benefiting from its recent investment in the second half, but a restructuring of the group's operations in its growth markets - aimed at improving its ability to capitalise on opportunities - has reduced central overheads by nearly a tenth. Brokers expect this to help lift adjusted EPS to 8.8p next year followed by 11.3p in 2017 - equivalent to a forward PE of eight falling to six.

Importantly, while Driver may be small, it has stature in its end markets. The group was founded in 1978 and has established strong relationships with the largest construction companies wherever its 20 international and 10 UK offices are found.

Negative market sentiment towards Driver was heightened by a profit warning early this year. These problems seem to have been resolved, and most of the delayed contracts that caused the warning had actually been commenced by the time the update was issued. The warning does reflect the lack of visibility that is typical of this business, but the group is erring on the side of caution with its expectations for the year due to the timing of Ramadan and the August holiday period. The shares' illiquidity is another risk shareholders need to be aware of, as reflected in the wide bid-to-offer spread.