Final Results

RNS Number : 9772U

Driver Group plc

09 December 2013

 

DRV

9 December 2013

DRIVER GROUP PLC

("Driver" or "the Group")

Preliminary Results

For the Year to 30 September 2013

Driver provides specialist commercial & dispute resolution

Services to the construction and engineering industries

	2013 £000	2012 £000	Change
Revenue	37,235	26,258	10,977
Underlying* profit before tax	3,074	1,751	1,323
Exceptional items and share-based payment costs	(482)	(553)	71
Profit before tax	2,592	1,198	1,394
Profit after tax	2,205	961	1,244
Basic earnings per share	8.3p	3.3p	5.0p
Underlying* earnings per share	10.2p	5.5p	4.7p
Dividend per share***	1.5p	1.0p	0.5p
Net cash / (borrowings) at year end**	1,073	(964)	2,037
Total equity	10,051	7,497	2,554

* Underlying figures are stated before the share-based payment costs and exceptional items (note 4)

** Net cash / (borrowings) consists of cash and cash equivalents, bank loans and finance leases.

***0.5p paid as an interim dividend, remaining 1.0p proposed for payment after year end.

Key points

·      Record year for the Group

·      Revenue growth in every region:

-              Africa up 80%

-              America up 20%

-              Asia Pacific up 203%

-              Europe up 22%

-              Middle East up 65%

·      Cash generated from operations £2.2m

·      Opened new offices:

-              Australia (Brisbane)

-              Germany (Munich)

-              Hong Kong (from 1 October 2013)

-              UK (Aberdeen)

·      Strengthened oil and gas client base

·      Positioned as a global provider - 62% of revenue outside of UK

·      Q1 performance for 2013 / 2014 in line with expectation

-              Asia Pacific very pleasing

Alan McClue, Non-Executive Chairman of Driver, commenting on the results said:

"I am pleased to report on the Group's performance for the financial year 2012 / 2013; a year in which we materially outperformed market expectations and reached record levels in terms of revenue, profits and earnings per share.  Throughout the year we continued the positive trends seen in 2011 / 2012, and our strong cash generation took us to a net cash position at the end of the year. This strength in trading, cash generation and continued optimism across the business allows us to recommend an increase in the final dividend."

Enquiries:

Driver Group plc
David Webster, Chief Executive	Tel: [phone]
Damien McDonald, Group Finance Director
Alan McClue, Non-executive Chairman	Tel: [phone]
Charles Stanley Securities Nominated Adviser & Broker
Marc Milmo / Carl Holmes	Tel: [phone]

CHAIRMAN'S STATEMENT

Introduction

I am pleased to report on the Group's performance for the financial year 2012 / 2013; a year in which we materially outperformed market expectations and reached record levels in terms of revenue, profits and earnings per share.  Throughout the year we continued the positive trends seen in 2011 / 2012, and our strong cash generation took us to a net cash position at the end of the year. This strength in trading, cash generation and continued optimism across the business allows us to recommend an increase in the final dividend.

As previously stated, our medium term objectives are to continue the development of our Oil & Gas and Petrochemical offerings across the Middle East, America, South East Asia and the UK whilst also leveraging our client base and all service offerings across each of our global regions. In line with this strategic objective, we have invested in America locating a Managing Director and recruiting staff in our Houston based Project Services business and in Asia Pacific we have located a Managing Director and recruited staff in our advisory and disputes business whilst also opening an office in Australia (Brisbane, for the east coast gas market). In Europe we opened offices in the UK (Aberdeen, for the oil & gas market) and Germany (Munich, to serve heavy engineering and infrastructure clients) and in the Middle East we expanded our quantity surveying business from Oman into the UAE. Encouraging progress is being made in line with this strategy and we now have a solid platform in all regions from which to increase both market share and profitability. The investment should bring benefits in the short and medium term as we expect utilisation levels to increase and growth from America and Asia Pacific and further growth from the new offices opened in Aberdeen and Germany.

We continue to attract and retain talented staff who provide a service that is market leading; our employee and sub-consultant numbers have risen by 25% to 338 (2012: 271).  At all levels in the Group, our employees continue to adapt to the challenges our business has encountered through this continued period of growth and demanding environments. I would like to thank them all for their contribution and dedicated service.

Financial Results

Revenue for the 12 months to 30 September 2013 increased by 41% to £37.2m (2012: £26.3m) with growth being seen by the Group across all regions. Broadly half of the growth was as a result of a full year's contribution from Trett (acquired in May 2012) with the remaining half coming from the continued organic growth of the business in Africa, Middle East and the UK. 

Underlying* profit before taxation increased by 77% to £3.1m (2012: £1.75m).  After a cost of share options of £482,000 (2012: £135,000) and exceptional items at £nil (2012: £418,000) reported profit before taxation increased 116% to £2.6m (2012: £1.2m).

The Group's net cash position at the end of the year stood at £1.07m (2012: net borrowings £0.96m). Cash generated from operations was £2.2m.

Underlying* earnings per share was 10.2 pence (2012: 5.5 pence).  Reported earnings per share was 8.3 pence (2012: 3.3 pence). 

Dividend

In view of the sustained profits and the underlying cash inflow in the year, the Board proposes a final dividend for 2013 of 1.0p per share (2012: 0.7p) giving a full year dividend of 1.5p per share (2012: 1.0p).  The final dividend will be paid on 8 April 2014 to shareholders on the register at the close of business on 28 March 2014.

Trading Overview

The Group's performance, measured against all key parameters continues to progress well. Revenue is 41% higher, underlying pre-tax profit is 77% higher and the cash position has increased by £2.03m. This has been achieved whilst making key strategic investments for the future benefit for the Group, as mentioned in my introduction.

The Group is now positioned as a global provider with 62% of revenue earned on projects outside of the UK (2012: 56%).

Trading in Europe, which accounted for 53% of Group revenue, was up 22% on 2012 revenues largely as a result of a full year's trading from Trett but importantly growth also came from our newly opened office in Germany, our UK Civil & Infrastructure division and our UK Measurement services business. This organic growth of our existing businesses is an indicator that more projects are being procured. Utilisation levels continue to improve as the Trett staff are now fully integrated and their historic low levels of utilisation are being improved as this business benefits from being part of the Group. Overall utilisation in Europe was up 2 percentage points on 2012 at 77%. With the exception of the newly opened Germany office, every part of the business reported an increase in utilisation levels. This improvement is something we are particularly pleased with.

In the Middle East, trading accounted for 32% of Group revenue (2012: 27%) and was up 65% on 2012 revenues.  Around a third of this growth was from the full year's trading of Trett and the majority came from organic growth and increasing market share. As set out in trading updates through the year,  the region continued to significantly outperform management's expectations, with strong growth in Dubai, Oman and Qatar, primarily through the disputes and advisory service and expert witness work.  We have also expanded our quantity surveying offering into UAE during the year and have seen a pick up in the volume of live projects requiring this service.  Dubai grew substantially with revenue up 192% primarily in the dispute and expert witness market; Oman continues to perform well with Government projects providing much of the revenue from a healthy pipeline of projects with revenue up 52%.  Qatar continues to be relatively slow in the development of live project work due to delays in the release of projects but revenues did increase by 47% in the dispute and expert witness market. Utilisation levels were up 8 percentage points on 2012 at 84% and every business in the region made substantial profits (up 6 percentage points on 2012). During the year we also investigated opportunities in the wider region and will look to develop these during the forthcoming year.

Africa's revenue represents 10% of Group revenue (2012: 8%) and is up 80% on 2012. The business significantly out-performed our budgeted expectations in terms of profit levels.  During the year we made some senior appointments and latterly acquired the minority interest in the business bringing with it two further directors as of 1 October 2013. We now have a team capable of delivering all of the Group's services across sub-Saharan Africa. From a start up in 2011, the region became profitable in 2012 and increased profits by 48% in 2013. We exit the year with a strong senior management team in place and a good base of blue chip clients.

Americas (through the Houston office) and Asia Pacific (through offices in Kuala Lumpur and Singapore) were not performing well when they were acquired as part of Trett in May 2012 and this year has been one of investment in senior staff and marketing as well as the creation of a business in Hong Kong (which commenced trading after the year end on 1 October 2013). America revenues represent less than 2% of Group revenue and are up 20% on 2012 following a £0.3m investment in the region including a Managing Director part way through the year and the recruitment of a senior manager both of whom are starting to make in-roads into the Oil & Gas sector with our Project Services offering. In Asia Pacific, we invested £0.7m; we opened

an office in Australia (Brisbane) local to the gas market on the east coast and have invested in a Managing Director for the region as well as expert witness calibre staff. Revenue in Asia Pacific represents 4.5% of Group revenue and is up 203% on 2012. This investment in staff meant utilisation levels in America were only 43% down 20 percentage points on 2012 and in Asia Pacific were 44% down 5 percentage points on 2012.

Outlook

Our medium term objectives continue to be the development of our Oil & Gas and Petrochemical offerings across all regions whilst leveraging our client base and all service offerings across each of our global regions. We have a senior management team in place that can achieve this organically and will continue to deliver material growth. We are also aware that through targeted acquisitions we can accelerate our growth in to the service sectors where we are not currently as strong. The Board has a clear strategy that details how it is intended to grow the business both organically and through acquisition.

We see the coming year as one in which we will continue to grow and benefit from the investment made in 2013. This growth is likely to come from increasing utilisation levels and taking of market share in America and Asia Pacific in particular together with opportunities to further expand in the Middle East.

We are delighted, across the Group, by the way our current financial year has started and particularly in Asia Pacific which is showing early signs of benefitting from last year's investment.  Europe and the Middle East continue with the momentum experienced as we exited our last financial year. We have visibility of our first quarter performance and our secure work beyond the first quarter together with a strong pipeline of opportunities ahead which gives the Board a high level of confidence in the outlook for the remainder of the financial year.

W. Alan McClue

Non-Executive Chairman

*Underlying figures are stated before the share based payment costs and exceptional items (note 4).

CHIEF EXECUTIVE'S REPORT

Introduction

I am delighted to report on a record year for Driver Group with revenue, profit and earnings per share all at record levels.  Additionally, we ended the year with a very strong net cash positive position up £2.03m in the period resulting in a positive net cash balance of £1.07m.

This is the first full year of trading following the acquisition of Trett and while we have benefited from this in terms of increased revenue, it is particularly pleasing to report that around half of our growth has been generated organically by our business as a whole.

In my 2012 report, I stated that our preference in the year was for organic growth and that it was anticipated this would come from expansion within each of the regions with the exception of the UK where I was cautious for 2013 but more optimistic for 2014. I also said that over the medium term we would look to open offices in Asia Pacific, Canada and Mainland Europe.  Over the course of the year, the business has expanded in each of our regions, including the UK, and we have opened offices in Australia (Brisbane), Germany (Munich), the UK (Aberdeen) and, effective 1 October 2013, in Hong Kong. The main focus to achieve the growth was the medium term target to leverage all services across each region and to maximise our commitment to strategic global clients as well as growing our client base in the oil & gas sector. We are on track to achieve this integrated global approach.

The Group performed very well against all key metrics. Revenue increased by 41% to £37.2m (2012: £26.3m) and underlying* profit before taxation increased by 77% to £3.1m (2012: £1.75m). The Group's net cash position at the end of the year stood at £1.07m (2012: net borrowing of £0.96m). Utilisation levels increased by 2.5 percentage points to 76.7% (2012: 74.2%). Overall Gross Margin did reduce by 1.7 percentage points to 25.1% (2012: 26.8%) due to the investments made by the Group in America and Asia Pacific as it sought to build out its presence and offering in these regions. Staff and Sub Consultant numbers increased by 25% to 338 (2012: 271).

Africa

Africa continued its expansion in the year with revenue up 80% to £3.59m (2012: £1.99m) and it now contributes 10% of Group revenue (2012: 8%). Profits increased by 48% to £0.42m (2012: £0.28m). We continued to invest in the region wisely and timely which ensured the profitability of the region was ahead of expectations and also put in place a solid team for future growth. Effective 1 October 2013 we acquired the minority interest in Driver Group Africa Pty plus two key directors so we ended the year with a team capable of delivering each of our service offerings across the region. Work progressed well in the PPP market where revenue was strong and we ended the year with a solid pipeline of opportunities for the coming year. Our disputes and advisory business also performed very well working on some significant projects with a strong order book. With the new senior recruits we are now well placed to develop our Project Services business.

Americas

America currently represents less than 2% of Group revenue. As stated in my last report, we re-focused our efforts in Houston and invested in a Managing Director and senior recruit to create a Project Services offering, primarily to the Oil & Gas market. We are starting to see some progress with revenues up 20% to £0.6m (2012: £0.5m). The investment the Group has made into this region did mean that as anticipated there was a loss of £0.3m in the year (2012: breakeven). Utilisation levels were low at 43% (2012: 63%) as we recruited project services senior staff to market the service and ahead of secure workload. We have seen progress in this market and have an encouraging pipeline of opportunities ahead of us for work in America. The Houston based team will also seek to serve the US oil and gas companies when they carry out projects overseas, particularly in other regions served by the Group.

Asia Pacific

The Trett business that we acquired in this region had lost money over a sustained period prior to the acquisition in May 2012 and needed re-energising. During the year we invested in a Managing Director for the region, recruited expert witness calibre staff to increase our presence in Singapore, opened an office in Australia (Brisbane) and latterly created an office in Hong Kong (although trading only commenced on 1 October 2013, in the new financial year). The Group is already starting to see the benefits of the investment in this region.  Revenue is up 203% in the year at £1.67m (2012: £0.55m) and the region now contributes 4.5% of Group revenue. As a result, there was an anticipated loss of £0.74m (2012: loss of £0.15m). Utilisation levels were low at 44% (2012: 49%) as a result of forward recruitment. We exit the year with a considerable number of secured assignments and a strong pipeline of outstanding proposals and pipeline of opportunities across all offices particularly in the disputes and advisory and expert witness markets.

Europe

In my report last year I expressed caution about this region for 2013, not expecting any optimism to come through until 2014. However, in the year revenues increased by 22% to £19.6m (2012: £16.1m). Although the majority of this expansion was as a result of a full year trading from Trett, there was growth from our new office that was opened in Germany (Munich), the UK Civils & Infrastructure division and the UK Measurement services - which is an indicator that more projects are being procured. This region is the largest region in the Group with 53% of Group revenue (2012: 61%). Underlying profits were up 1 percentage point at 13% of revenue (2012: 12%) reflecting an increase in utilisation which was up 2 percentage points at 77% (2012: 75%).

The dispute and advisory business performed very well in both the Netherlands and UK. In particular the Netherlands utilisation levels and profit levels were very high at 91% and 19% respectively serving the oil and gas, heavy engineering and power sectors. In the UK profits increased 32% on those in 2012 based on a very high level of repeat business from core clients across a broad construction sector. The project services business also put in a strong performance particularly in the Civil & Infrastructure division which increased revenue by 35% through taking market share in London and the South East.

Middle East

This region continued the momentum seen in 2011 / 2012 and out-performed management's expectations again as highlighted in the announcements made during the course of the year. The Middle East now accounts for 32% of Group revenue (2012: 27%). Revenue increased by 65% in the year to £11.8m (2012: £7.1m). Around a third of the growth is the benefit of a full year trading of the Trett business and it is very pleasing to report that around two thirds of the growth was organic and by way of increasing market share across the region. Profits increased by 113% to £3.2m (2012: £1.5m).

Oman continues to be the largest office in the region and the administrative centre for all of our Middle East business. It continued to grow with revenues up 52% at £4.4m (2012: £2.9m) and profits were up 74%. This office continues to have a good balance of revenue across our different service offerings of project management, project quantity surveying services and dispute and advisory together with a solid client base working for the Government ministries / departments and blue chip construction companies. We continue to support the Ministry Of Transport and Communications on Muscat and Salalah airports and have successfully developed our oil & gas sector work with a major appointment to support Petroleum Development Oman (the foremost oil and gas exploration and production company in Oman).  Utilisation levels increased to 85% (2012: 79%).

The Dubai office continues to focus on the dispute market and the expert witness market and

performed beyond expectations working for mainstream construction companies.  Revenue had been static in 2011 and 2012 at £1.2m / £1.3m but in 2013 this increased 192% to £3.9m (2012: £1.3m) and profits increased 364%. Utilisation levels increased by 13

percentage points to 76% (2012: 63%).

The Abu Dhabi office, like Dubai, continues to focus on the dispute and expert witness market however we have developed our project quantity surveying services in to the UAE region during the year. Revenue was about the same as in 2012 at £1.6m and profits were up 5%. The pipeline being generated in the quantity surveying business in Q4 suggests that the office should start to benefit from this service as more live projects begin to be procured. Utilisation levels did drop off to 72% (2012: 77%) as we recruited for the quantity surveying business and added senior management in to the business.

In Qatar revenues increased by 47% to £1.9m (2012: £1.3m) and profits increased by 81% with the majority of work coming from our disputes & advisory and expert witness services. Utilisation levels continue to be over 100% in the office as we continue to look to recruit in Qatar.

Outlook

We now have a global platform from which to grow all Group service offerings and to serve current and future global clients. We have in place a strong senior management team that can organically grow our current service offerings and we have a clear strategy in place to do this. There are regions where, as a result of the investment we have made in people and new offices, the Group ought to be able to achieve further growth and improve its market share in the short and medium term (such as America and Asia Pacific). We continue to focus on further developing our business in the Oil & Gas sector across all regions and we are looking to expand our project management business. We are mindful that the right strategic acquisition would accelerate growth in regions and / or services where we currently have less of a presence and we will look to identify the right business.

At the end of 2013, and effective from 1 October, we acquired the assets of a business and opened an office in Hong Kong which we expect to develop in the coming year and beyond. We will also look to identify how our Chinese speaking staff in Hong Kong can develop business with the Chinese both in China and in our other regions where Chinese contractors operate (particularly Africa, Middle East and Europe). We also expect our new office in Australia to strengthen through the year.

In America we have recruited senior management from two competitors and expect these recruits to strengthen this business towards the end of the current financial year and to provide the Group with a solid platform for growth into 2015 and beyond. We will look principally to serve the local oil & gas sector but importantly we will seek to support clients outside of America from the Houston base and in conjunction with our global network of offices.

The Middle East market continues to look strong and we will continue to develop all of our services across the regions from the strong base and reputation we have generated in Oman for project management and quantity surveying services. These will supplement our dispute & advisory services that are very strong in the other Middle East offices. We will look to identify other countries in the region in which to establish the Group including Kuwait that has a very high level of oil & gas and infrastructure expenditure.

In Europe, we expect growth from the new offices in Aberdeen and Germany. Generally in the UK we benefitted from an increase in opportunities in the civils & infrastructure sector and we expect this to continue.

On a wider note we are looking to build relationships with other businesses where joint venture and partnership arrangements could be beneficial in securing opportunities that otherwise would not be within our reach.

Key to our performance is the quality, reputation and dedication of our staff. They continue to be flexible as we grow the business globally and support the developing regions with expertise and placements as we seek to recruit locally. We are the market leader in our established regions of Europe, Middle East and now Africa. We will look to become the market leader in Asia Pacific during this coming year and thereafter in America.

As we end Q1 of the new financial year I am very happy with the progress we are making across the Group in respect of our growth strategy and how the senior management are responding to the challenge of delivering that strategy. Particularly pleasing is the Asia Pacific region where we invested heavily in 2013. Africa, Europe and the Middle East continue where they left off in 2013 and in America I expect our targets for the year to be met.

Dave Webster

Chief Executive Officer

*Underlying figures are stated before the share based payment costs and exceptional items (note 4).

STRATEGIC REPORT

Principal Objectives, Strategy and Outlook

Driver Group delivers the full spectrum of engineering and construction consultancy services with specialists operating within the Group's five core brands:

DIALES is the Group's expert witness support service provider.  We supply world-class quantum, delay, and technical experts for litigation; alongside provision of internationally experienced adjudicators, arbitrators and mediators.

Driver Project Management provides the strategic and leadership disciplines necessary to develop and deliver a project.  We support clients in the strategic leadership and decision making necessary to define, evaluate, develop, finance, procure, and implement their investment projects.

Driver Project Services provides customer focused project controls solutions throughout a project lifecycle.  We deliver commercial management, quantity surveying, and planning services, offering clients long term support and commitment for the duration of their projects.

Driver Trett provides multi-disciplinary consultancy services to support effective delivery of our clients' projects.  Our specialities include commercial and contract management, planning, programming and scheduling, and dispute resolution support services.

Driver Corporate Services provides a range of specialised services based around our investigative and forensic skills.  Working with varied clients across the financial sector, our specialities include corporate restructuring and recovery, distressed property, funding and independent business reviews, and development monitoring.

The business is managed through the five regions in which we trade: Europe, Middle East, Africa, Asia Pacific and America.

Our medium term objectives continue to be the development of our Oil & Gas and Petrochemical offerings across all regions whilst leveraging our client base and all service offerings across each of our global regions.  We have a senior management team in place that can achieve this organically and will continue to deliver material growth.  We are also aware that through targeted acquisitions we can accelerate our growth in to the service sectors where we are not currently as strong.  The Board has a clear plan to achieve this strategy that details how it is intended to grow the business both organically and through acquisition.

We see the coming year as one in which we will continue to grow and benefit from the investment made in 2013.  This growth is likely to come from increasing utilisation levels and taking of market share in America and Asia Pacific in particular together with opportunities to further expand in the Middle East.

Overview for the Year

The key performance indicators for the Group are revenue, operating profit and utilisation.  We are pleased to report that 2013 has been a record year in both of revenue and operating profit and overall utilisation has improved 2.5 percentage points to 76.7% (2012: 74.2%).

Revenue increased by 41% to £37.2m (2012: £26.3m).  This included the annualised effect of external sales arising from Trett which was acquired on 11 May 2012. 

The underlying* operating profit for the year ended 30 September 2013 was £3.13m (2012: £1.79m). Reported operating profit was £2.65m (2012: £1.24m).

After a net interest charge of £0.06m (2012: £0.04m) the underlying* profit before tax was £3.07m (2012: £1.75m) and reported profit before tax was £2.59m (2012: £1.2m). 

The Group's results include a share based payment cost in the year of £0.48m (2012: £0.13m) in relation to the Group's share option scheme. In addition the Group's 2012 results include exceptional items (note 4) relating to severance costs of £0.06m and costs relating to the acquisition and integration of Trett of £0.36m.

The European business segment revenue grew by £3.5m to £19.6m and operating profit increased by £0.9m to £2.5m with the 2012 result including a £0.31m exceptional charge.  The Middle East segment revenue increased by £4.6m to £11.8m and operating profit increased by £1.7m to £3.2m. The Africa segment revenue grew by £1.6m to £3.6m and operating profit grew by £0.1m to £0.4m.  Within the new segments created in 2012, following the acquisition of Trett, America reported revenue of £0.6m (2012: £0.5m) and a loss of £0.3m (2012: £nil) and Asia Pacific reported revenue of £1.7m (2012: £0.55m) and reported a loss of £0.7m (2012: £0.15m).  Reflecting the growth in the business, underlying* unallocated corporate costs increased by £0.2m to £1.9m.  After a share option cost of £0.48m  (2012:£0.13m) and exceptional costs in 2012 of £0.11m the reported unallocated costs were £2.4m (2012: £2.0m).

Taxation

The Group had a tax charge of £0.4m (2012: £0.24m).  The effective tax rate was 15% (2012: 20%).  The tax charge includes the effect of a lower tax rate for Oman, the UAE and Qatar.

Earnings Per Share

Underlying* earnings per share was 10.2 pence (2012: 5.5 pence).  The basic earnings per share was 8.3 pence (2012: 3.3 pence) and diluted earnings per share was 7.3 pence (2012: 3.1 pence).

Cash Flow

Net cash inflow from operating activities was £2.2m (2012: £1.1m).  This included a favourable impact of an increase in creditors of £1.0m (2012: £1.5m) offset by a net outflow from an increase in debtors of £1.9m (2012: £1.7m). 

In 2012 the cash flow included the acquisition of Trett for gross consideration of £3m with cash of £0.8m being left within Trett on acquisition and therefore a net consideration of £2.2m.

Other major cash items are: proceeds from the sale of own shares of £0.5m (2012: £nil), net tax paid of £nil (2012: £0.3m), capital spend of £0.31m (2012: £0.18m) and repayment of borrowings of £0.7m (2012: increased borrowings of £2.3m).  Dividends paid were £0.3m (2012: £0.25m).

The Company had net cash at the end of the year of £1.07m compared to net borrowings of £0.96m at 30 September 2012.

Dividends

The Directors have proposed a final dividend in respect of the current financial year of 1.0p per share (2012: 0.7p) payable to all shareholders other than the Driver Group Employee Benefit Trust.  This has not been accounted for as it was not approved before the year end.  The total cost of this proposed dividend will be £253,000 (2012: £172,000).  The final dividend will be paid on 8 April 2014 to shareholders on the register at the close of business on 28 March 2014.

There were dividends of £295,000 (2012: £197,000) paid by the Company during the year, including an interim dividend of 0.5p (£123,000).

Principal Risks and Uncertainties

There are a variety of specific business risks which can affect international consultancy businesses like Driver.  The principal risks are outlined below, the principal uncertainties being the impact of the UK and global economy on the business.

Credit Risk

The Group's credit risk is primarily attributable to its trade receivables.  The risk increases as our business expands into new territories where payment of outstanding receivables can be slower.  Credit risk is managed by running credit checks on customers and by monitoring payments against contractual terms.

There is a clear internal process for elevating potential problems in recovering debts such that prompt action is taken to recover debts at the earliest possible point and legal action is taken where necessary.

Liquidity

The Group monitors cash flow as part of its day to day control procedures.  The Board reviews cash flow projections and ensures that appropriate facilities are

available to be drawn upon as necessary.  At the year end, the Group's undrawn borrowing facilities consisted of an overdraft facility of £0.75m renewable annually.  With cash of £2.67m the Group had access to £3.42m of available funds at 30 September 2013. The Group's facilities with the bank are secured by means of debentures over the Group's assets and a legal charge over the land and building at Haslingden.

Reputation Risk

The quality and experience of our people is fundamental to our success, and we are committed to the development and training of our staff.  All assignments are managed by a director who remains directly responsible until its conclusion and will regularly re-evaluate the client's requirements and issues.

Treasury Policies and Foreign Exchange Management

Treasury operations are managed centrally and operate so as to reduce financial risk, ensure sufficient liquidity is available for the Group's operations and to invest surplus cash.  Corporate Treasury does not operate as a profit centre and does not take speculative positions.  The Company regularly invoices in Euros for work performed in Europe as well as receiving foreign currency income in UAE Dirhams ("AED"), Omani Rials ("OMR") and Qatari Riyals ("QAR") from its Middle East businesses; South African Rand ("ZAR") from its African business; Malaysian Ringgit ("MYR"), Singapore Dollar ("SGD") and Australian Dollar ("AUD") from its Asia Pacific operations and US Dollar ("USD") generated in America.  The Group is therefore exposed to movements in these currencies relative to Sterling.  AED, OMR and QAR are currently linked to

the US Dollar.  Foreign currency balances in excess of forecast amounts required to fund projected outgoings are returned to the UK and have been converted to Sterling balances during the year at spot rate.  Euro exposure is managed through the use of a foreign currency overdraft facility, which is used to match up to 90% of the value of the Euro debtor balance against Euro borrowings.  The net value of AED, OMR and QAR exposure is managed using foreign currency hedge contracts to provide a targeted level of cover of between 50% and 75% of the net income statement exposure.  Other currencies are hedged where outstanding amounts become material. This policy is regularly reviewed by the Board. 

As a consequence of the earnings generated in the Middle East, America, Asia Pacific and South Africa as well as Euro earnings generated in the UK, the Group's net income and its equity is exposed to movements in the value of Sterling relative to the US Dollar, Malaysian Ringgit, Singapore Dollar, Australian Dollar, Euro, and South African Rand. 

Contingencies and Legal Proceedings

Risk Management

The Group monitors all material contingent liabilities, through a process of consultation and evaluation which includes senior management, internal and external advisors.  This process results in an evaluation of potential exposure and provisions are made or adjusted accordingly by reference to accounting principles.  No contingent liabilities have been recognised at the year end.

Health and Safety

Driver is committed to ensuring the health and safety of its employees in the workplace and where possible implementing health and safety policy improvements.  Driver continues to invest in the training and development of safe working practices.  The Group measures its health and safety policies through three metrics: lost time due to accidents, lost time days, and reportable accidents.  No time was lost as a result of a reported incident during the year.

On behalf of the Board

Damien McDonald

Finance Director

*Underlying figures are stated before the share based payment costs and exceptional items (note 4).

DRIVER GROUP PLC CONSOLIDATED INCOME STATEMENT FOR THE YEAR ENDED 30 SEPTEMBER 2013
	Notes	2013   £000	2012   £000
REVENUE		37,235	26,258
Cost of Sales		(27,888)	(19,209)
GROSS PROFIT		9,347	7,049
Administrative expenses		(6,867)	(5,966)
Other operating income		170	152
Operating profit before share-based payment charge and exceptional items		3,132	1,788
Exceptional items	4	-	(418)
Share-based payment charges and associated costs		(482)	(135)
OPERATING PROFIT		2,650	1,235
Finance income		14	9
Finance costs		(72)	(46)
PROFIT BEFORE TAXATION		2,592	1,198
Tax expense		(387)	(237)
PROFIT FOR THE YEAR		2,205	961
Profit attributable to non-controlling interests		104	152
Profit attributable to equity shareholders of the parent		2,101	809
		2,205	961
Basic earnings per share attributable to equity shareholders of the parent (pence)	2	8.3p	3.3p
Diluted earnings per share attributable to equity shareholders of the parent (pence)	2	7.3p	3.1p

The result for the current and the prior year arises from the Group's continuing operations.

DRIVER GROUP PLC

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED 30 SEPTEMBER 2013

	2013 £000	2012 £000
PROFIT FOR THE YEAR	2,205	961
Other comprehensive income:
Items that could subsequently be reclassified to the Income Statement:
Exchange differences on translating foreign operations	(112)	(69)
Deferred tax credit	-	23
OTHER COMPREHENSIVE INCOME FOR THE YEAR NET OF TAX	(112)	(46)
TOTAL COMPREHENSIVE INCOME FOR THE YEAR	2,093	915
Total comprehensive income attributable to:
Owners of the parent	1,989	763
Non-controlling interest	104	152
	2,093	915

DRIVER GROUP PLC

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

FOR THE YEAR ENDED 30 SEPTEMBER 2013

Company Number 3475146

	2013		2012
	£000	£000	£000	£000
NON-CURRENT ASSETS
Goodwill	3,407		3,407
Property, plant and equipment	2,273		2,147
Deferred tax asset	12		12
		5,692		5,566
CURRENT ASSETS
Trade and other receivables	10,696		8,835
Cash and cash equivalents	2,667		1,357
Current tax receivable	75		217
		13,438		10,409
TOTAL ASSETS		19,130		15,975
CURRENT LIABLITIES
Borrowings	(574)		(758)
Trade and other payables	(6,885)		(5,741)
Current tax payable	(292)		(97)
		(7,751)		(6,596)
NON-CURRENT LIABILITIES
Borrowings	(1,020)		(1,563)
Deferred tax liabilities	(308)		(319)
		(1,328)		(1,882)
TOTAL LIABILITIES		(9,079)		(8,478)
NET ASSETS		10,051		7,497
SHAREHOLDERS' EQUITY
Share capital		106		106
Share premium		2,649		2,649
Merger reserve		1,493		1,493
Translation reserve		(197)		(85)
Capital redemption reserve		18		18
Retained earnings		5,988		4,024
Own shares		(242)		(844)
TOTAL SHAREHOLDERS' EQUITY		9,815		7,361
NON-CONTROLLING INTEREST		236		136
TOTAL EQUITY		10,051		7,497

 DRIVER GROUP PLC

CONSOLIDATED CASHFLOW STATEMENT

FOR THE YEAR ENDED 30 SEPTEMBER 2013

	2013 £000		2012      £000
CASH FLOWS FROM OPERATING ACTIVITIES
Profit before taxation
-       Before share-based payment charge and exceptional items	3,074		1,751
-       Exceptional items	-		(418)
-       Share-based payment charges and associated costs	(482)		(135)
	2,592		1,198
Adjustments for:
Depreciation	181		208
Exchange adjustments	28		(2)
Loss on disposal of equipment	-		2
Finance income	(14)		(9)
Finance expense	72		46
Equity settled share-based payment charge	253		135
OPERATING CASH FLOW BEFORE CHANGES IN WORKING CAPITAL AND PROVISIONS	3,112		1,578
Increase in trade and other receivables	(1,861)		(1,688)
Increase in trade and other payables	979		1,496
CASH GENERATED FROM OPERATIONS	2,230		1,386
Tax paid	(8)		(285)
NET CASH INFLOW FROM OPERATING ACTIVITIES	2,222		1,101
CASH FLOWS FROM INVESTING ACTIVITIES
Interest received	14		9
Acquisition of property, plant and equipment	(307)		(184)
Acquisition of subsidiary, net of cash acquired	-		(2,165)
NET CASH OUTFLOW FROM INVESTING ACTIVITIES	(293)		(2,340)
CASH FLOWS FROM FINANCING ACTIVITIES
Interest paid	(72)		(46)
Repayment of borrowings	(727)		(203)
Proceeds of borrowings	-		2,500
Proceeds from sale of own shares	507		-
Dividends paid to equity shareholders of the parent	(295)		(197)
Payment of dividends to non controlling interests	(4)		(56)
NET CASH (OUTFLOW) / INFLOW FROM FINANCING ACTIVITIES	(591)		1,998
Net increase in cash and cash equivalents	1,338		759
Effect of foreign exchange on cash and cash equivalents	(28)		2
Cash and cash equivalents at start of period	1,357		596
CASH AND CASH EQUIVALENTS AT END OF PERIOD	2,667		1,357

DRIVER GROUP PLC

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 30 SEPTEMBER 2013

	Share capital £000	Share premium £000	Merger reserve £000	Other reserves(1) £000	Retained earnings £000	Own shares £000	Total* £000	Non-controlling interest £000	Total Equity £000
OPENING BALANCE AT 1 OCTOBER 2011	106	2,649	1,493	2	3,493	(1,083)	6,660	40	6,700
Dividends	-	-	-	-	(197)	-	(197)	(56)	(253)
Share-based payment	-	-	-	-	135	-	135	-	135
Transfer of reserves(2)	-	-	-	-	(239)	239	-	-	-
Profit for the year	-	-	-	-	809	-	809	152	961
Other comprehensive income for the year	-	-	-	(69)	23	-	(46)	-	(46)
CLOSING BALANCE AT 30 SEPTEMBER 2012	106	2,649	1,493	(67)	4,024	(844)	7,361	136	7,497
Dividends	-	-	-	-	(295)	-	(295)	(4)	(299)
Share-based payment	-	-	-	-	253	-	253	-	253
Transfer of reserves(2)	-	-	-	-	(95)	95	-	-	-
Proceeds from sale of own shares	-	-	-	-	-	507	507	-	507
Profit for the year	-	-	-	-	2,101	-	2,101	104	2,205
Other comprehensive income for the year	-	-	-	(112)	-	-	(112)	-	(112)
CLOSING BALANCE AT 30 SEPTEMBER 2013	106	2,649	1,493	(179)	5,988	(242)	9,815	236	10,051

*     Total equity attributable to the equity holders of the parent

⁽¹⁾         'Other reserves' combines the translation reserve, capital redemption reserve and other reserves. 

⁽²⁾         The shortfall in balance between the exercise price of share options granted and the outstanding loan to the EBT is transferred from own shares to retained earnings over the vesting period.

NOTES:

1.       The financial information set out in these Preliminary Results does not constitute the Company's statutory accounts for the year ended 30 September 2013 or the year ended 30 September 2012 but is derived from those accounts.

Group statutory accounts for the year ended 30 September 2012 have been delivered to the Registrar of Companies, and those for the year ended 30 September 2013 will be delivered following the Company's Annual General Meeting.  BDO LLP have reported on the 2013 and 2012 accounts.  Their reports were unqualified, did not include references to any matters to which the auditors drew attention by way of emphasis without qualifying their report, and did not contain statements under section 498(2) or 498(3) of the Companies Act 2006.

2.       Earnings per share

Underlying earnings per share before exceptional items and the charge for share-based payments is 10.2p (2012: 5.5p).

The calculation of adjusted earnings per share is based on a profit of £2,583,000 (2012:£1,362,000).  The profit attributable to equity shareholders, after deducting exceptional items and the share-based payment costs are £2,101,000 (2012:£809,000).  The basic weighted average number of shares in issue for the period was 25,254,416 (2012: 24,678,771).  The diluted weighted average number of shares in issue for the period was 28,704,083 (2012: 25,889,065).

3.       Segmental analysis

For management purposes, the Group is organised into five operating divisions: Europe, Middle East, Africa, Asia Pacific and America.  Asia Pacific and America were added following the acquisition of Trett Holdings Limited in May 2012.  These divisions are the basis on which the Group is structured and managed, based on its geographic structure.  In each of the divisions the key service provisions are: quantity surveying, planning / programming, quantum and planning experts, dispute avoidance / resolution, litigation support, contract administration, commercial advice / management and strategic project management.

Segment information about these reportable segments is presented below.

Year ended 30 September 2013

	Continuing Operations
	Europe £000	Middle East £000	Africa £000	Asia Pacific £000		Americas £000			Eliminations £000	Unallocated(1) £000		Consolidated £000
Total external revenue	19,625	11,755	3,591	1,669		595			-	-		37,235
Total inter-segment revenue	390	158	-	-		-			(548)	-		-
Total revenue	20,015	11,913	3,591	1,669		595			(548)	-		37,235
Segmental profit/(loss)	2,505	3,157	421	(742)		(299)			-	-		5,042
Unallocated corporate expenses(1)	-	-	-	-		-			-	(1,910)		(1,910)
Share-based payment charge	-	-	-	-		-			-	(482)		(482)
Exceptional items (note 4)	-	-	-	-		-			-	-		-
Operating profit/(loss)	2,505	3,157	421	(742)		(299)			-	(2,392)		2,650
Finance income	-	-	-	-		-			-	14		14
Finance expense	-	-	-	-		-			-	(72)		(72)
Profit/(loss) before taxation	2,505	3,157	421	(742)		(299)			-	(2,450)		2,592
Taxation	-	-	-	-		-			-	(387)		(387)
Profit/(loss) for the year	2,505	3,157	421	(742)		(299)			-	(2,837)		2,205
OTHER INFORMATION
Non current assets	3,837	130	38	9		18			-	1,660		5,692
Reportable segment assets	9,141	5,303	1,235	521		157			-	2,773		19,130
Capital additions(2)	153	96	45	4		9			-	-		307
Depreciation and amortisation	138	27	9	3		4			-	-		181
Inter-segment sales are charged at prevailing market rates.
(1)     Unallocated costs represent Directors' remuneration, administration staff, corporate head office costs and expenses associated with AIM. (2)   Capital additions comprise additions to property, plant and equipment including additions resulting from acquisitions through business combinations.
No client had revenue exceeding 10% of the Group's revenue in the year to 30 September 2013.

Year ended 30 September 2012

	Continuing Operations
	Europe £000	Middle East £000	Africa £000	Asia Pacific £000		Americas £000			Eliminations £000	Unallocated(1) £000		Consolidated £000
Total external revenue	16,085	7,134	1,990	551		498			-	-		26,258
Total inter-segment revenue	17	-	-	-		-			(17)	-		-
Total revenue	16,102	7,134	1,990	551		498			(17)	-		26,258
Segmental profit/(loss)	1,900	1,491	284	(149)		(4)			-	-		3,522
Unallocated corporate expenses(1)	-	-	-	-		-			-	(1,734)		(1,734)
Share-based payment charge	-	-	-	-		-			-	(135)		(135)
Exceptional items (note 4)	(311)	-	-	-		-			-	(107)		(418)
Operating profit/(loss)	1,589	1,491	284	(149)		(4)			-	(1,976)		1,235
Finance income	-	-	-	-		-			-	9		9
Finance expense	-	-	-	-		-			-	(46)		(46)
Profit/(loss) before taxation	1,589	1,491	284	(149)		(4)			-	(2,013)		1,198
Taxation	-	-	-	-		-			-	(237)		(237)
Profit/(loss) for the year	1,589	1,491	284	(149)		(4)			-	(2,250)		961
OTHER INFORMATION
Non current assets	3,822	61	2	8		13			-	1,660		5,566
Reportable segment assets	8,922	3,524	541	440		240			-	2,308		15,975
Capital additions(2)	147	52	2	14		8			-	-		223
Depreciation and amortisation	94	43	1	2		2			-	66		208
Inter-segment sales are charged at prevailing market rates.
(1)     Unallocated costs represent Directors' remuneration, administration staff, corporate head office costs and expenses associated with AIM. (2)   Capital additions comprise additions to property, plant and equipment including additions resulting from acquisitions through business combinations.
No client had revenue exceeding 10% of the Group's revenue in the year to 30 September 2012.

Geographical information:

	External revenue by location of customers
	2013 £000	2012 £000
UK	14,100	11,540
UAE	4,969	2,950
Oman	4,325	2,761
South Africa	3,856	2,363
Qatar	1,953	1,290
Netherlands	1,654	790
United States	816	1,367
Germany	803	787
Singapore	727	270
Other African countries	700	1,282
Switzerland	523	229
Saudi Arabia	503	-
Australia	468	83
Malaysia	451	162
Belgium	310	2
Other Countries	1,077	382
	37,235	26,258

4.       Exceptional Items

	2013 £000	2012 £000
Severance costs (1)	-	60
Acquisition and integration costs (2)	-	358
	-	418

⁽¹⁾         Severance costs include redundancy, ex-gratia, other discretionary payments and associated legal costs. 

⁽²⁾         Acquisition and integration costs include legal and professional fees and office restructuring costs.

5.       Copies of the Annual Report and Financial Statements

The Annual Report and Financial Statements will be sent to shareholders in due course.  Further copies will be available to the public, free of charge at the Company's office, 1 Norton Folgate, London, E1 6DB and on the Company's website, www.driver-group.com.

The Annual General Meeting will be held at Peter House, Oxford Street, Manchester, M1 5AN on Thursday 27 February 2014 commencing at 3:00pm. 

 

END

 

 

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