Interim Results

RNS Number : 4251W

Driver Group plc

11 June 2008

 



DRV

DRIVER GROUP PLC

('Driver Group' or 'the Group')

Interim Results for the six months ended 31 March 2008

Driver Group provides specialist commercial and dispute resolution services to the construction industry.

KEY POINTS 

Trading / Operational: 

• Expanding rapidly with benefits from last year's recruitment drive coming through

• Completed acquisition of Commercial Management Consultants Limited ('CMC'), in February, for £2.975m
  - Strategic move into site-based project services in the UK
  - CMC's Managing Director, Bob Parfitt, joined the board as Executive Director

• Growth in sales and profit of UK Business
  -  London office profits increased dramatically following initiatives to improve productivity 

• Continuing to expand international operations, particularly within the UAE
  -  UAE operations secured five new contracts
  -  Number of fee-earners in the Middle East increased from 18 at end September 2007 to 34 at end
     March 2008

Financial:

• Strong 27% growth in revenue to £7.5m (2007: £5.9m)

• Pre-tax profit up 36% to £918,000 (2007: £675,000)

• CMC's one month contribution added £312,000 of sales and £32,000 of pre-tax profit

• Gross margin improved by 3 percentage points to 40%, reflecting higher charge-out rates

• Interim dividend of 0.95p per share (2007: 0.95p) recommended

• Positive prospects for the future

Steve Driver, Chief Executive Officer, commented, 

'We are very pleased with these results, which reflect the benefits of last year's drive to increase our fee-earning capability. We are now in possession of a stronger and broader structure for future growth, and thus in a better position to take advantage of the substantial opportunities available to us, within the UK and abroad. We are also delighted to report the completed acquisition of CMC, which represents an important strategic move for Driver, enabling us to provide expertise at all points in the life-cycle of a construction project.

Given the substantial opportunities identified in the South of England, UAE and Oman, and the new opportunities to develop complementary business streams with CMC, we remain positive about the prospects for the future.'

Enquiries:

Driver Group plc	Steve Driver, Chief Executive  Colin White, Finance Director	T: 020 7448 1000 (today) T: 01706 244 172
Zeus Capital (NOMAD)	Alex Clarkson Nick Cowles	T: 0161 831 1512
Panmure Gordon (UK) Limited	Mark Lander Aubrey Powell	T: 020 7459 3600
Biddicks	Katie Tzouliadis Sophie Lane	T: 020 7448 1000

CHAIRMAN'S STATEMENT

Introduction

I am pleased to report on a successful six month period for Driver Group. The business has grown strongly and, as our results show, we are now seeing the continuing benefits of our recruitment drive last year to expand the number of fee-earners within the Group.  

In the first half of the financial year, the principal areas of growth have been in the Southern Region of the UK and in the United Arab Emirates ('UAE'), where we are continuing to expand significantly given the substantial opportunities available to us. Towards the end of the second quarter, we were delighted to announce the acquisition of Commercial Management Consultants Limited ('CMC'), the site-based project services consultancy. 

Financial Review

Revenue for the six months to 31 March 2008 grew strongly, increasing by 27% to £7.5m over the corresponding period (2007: £5.9m). The Group's gross margin improved by 3 percentage points to 40% reflecting higher charge-out rates. Pre-tax profit rose by 36% over the year to £918,000 (2007: £675,000). Our acquisition, CMC, made a one month contribution to the Company's first half performance, adding £312,000 of sales and £32,000 to pre-tax profit. Basic earnings per share for the half year rose by 35% to 2.7p (2006: 2.0p). 

Cash generation remained strong with cash generated from operations of £350,000 (2007: £315,000). Net cash (before borrowings) at the 31 March 2008 was £720,000 (£855,000 as at 30 September 2007). The Group borrowed £1.475m to fund the cash element of the purchase price for CMC. Consequently the Group had net borrowings, after deducting this loan and the pre-existing mortgage loan, of £1.037m (30 September 2007: net cash of £226,000).

The financial accounts for the half year have been prepared for the first time under International Financial Reporting Standards ('IFRS') and accordingly, the Company's results for the prior year have been restated. The effect of restating prior period results under IFRS has reduced reported profit before tax for the six months to 31 March 2007 by £76,000, and by £79,000 for the year ended 30 September 2007. Details of the adjustments, including reconciliations of the balance sheets as at 1 October 2006, 31 March 2007 and 30 September 2007, are provided in the attached notes to the Interim accounts. In summary, the changes related primarily to: property valuations and depreciation of buildings; accruing for employee benefits; and deferred tax.

Dividend

The Board is pleased to declare an interim dividend of 0.95p per share (2007: 0.95p) which will be paid on 24 July 2008 to shareholders on the register on 20 June 2008.  

CMC acquisition

On 29 February 2008, we successfully completed the acquisition of CMC for £2.975m payable in cash and shares.  

Established in 1979 and with four offices in the UK, CMC provides site-based project services, including quantity surveying and planning, to construction and engineering firms throughout the UK. In particular, it has a well-established presence in the rail, utilities, highways, building, water, airports and marine sectors. The addition of CMC to the Group is strategically advantageous, enabling us to provide a broader range of pre and post contract services and so offer increased expertise at all points in the life-cycle of a construction project. The business brings with it 45 fee earners.

I am pleased to report that the integration of CMC is proceeding well and we believe that the combination of our respective skills, market experience and strength as well as customer contacts, will benefit both businesses significantly.  

At the completion of the acquisition, we were delighted to welcome CMC's Managing Director, Bob Parfitt, to the board of Driver as an Executive Director.

Trading performance

The UK business performed very well in the first half, with half year on half year sales growth of 18%. In particular, our London office saw a significant increase in sales on last year, following the initiatives taken to improve productivity in the second half of last year. Consequently profits from our London office increased dramatically. We are also very pleased with the continuing expansion of our international operations, particularly within the UAE, which saw sales more than double over the same period last year. Having invested in fee-earning staff in both the UK and UAE over the course of the last financial year, I am pleased to report that staff utilisation levels over the period were high and we have been able to implement increases in charge out rates for consulting work in a number of sectors.  

Within the UK, the growth in sales and profit has demonstrated both the continuing demand for the Group's expertise and the recognition by our clients of the professional service they receive from our people.  An increasing client base and developing relationships, reputation and latterly cross referrals between Driver and CMC have all contributed to the continued growth in the first half of the financial year. The work we are involved with in the UK remains broadly spread across a wide range of sectors including: nuclear, utilities, public sector services, energy, transport and civil engineering.

We anticipate continuing strong demand for both our specialist commercial services and our dispute resolution services, over the next few years. In addition, our move to larger premises in London last year has provided us with the capacity to accommodate and build on the growth we are experiencing in London and the South East. 

The main focus of our international business is within the UAE and it is testimony to the reputation we have worked hard to develop since entering this market in 2005 that we are now involved with some of the largest and most high profile projects in this region. Over the first half, we secured another five contracts, and we also expanded the number of fee-earners in the region from 18 at the financial year end in September 2007 to 34 at the end of the first half in March 2008. We are looking to increase our headcount further still in the second half.  

The acquisition of CMC saw the expansion of the Group's business into site-based project services in the UK and has already resulted in substantial opportunities for the Group. Some of the benefits of acquiring CMC will be reflected in the second half of this year, with the full benefits expected to become more apparent in the following financial year.  

Outlook

As we look ahead to the remainder of the year, our focus remains to develop our business in the South of England and in the UAE and Oman, where there are continuing and substantial opportunities. Our growth plans are underpinned by our ability to operate throughout all sub-sectors within the construction and engineering industries, from building to nuclear, oil & gas and IT. Additionally, the acquisition of CMC brings with it new opportunities for us to develop complementary business streams.  

With the acquisition of CMC and the progress made in securing significant and sustained growth we remain positive about prospects for the future.

Consolidated Income Statement (Unaudited)

For the six months ended 31 March 2008

	6 months ended 31 March 2008	6 months  ended 31 March 2007	Year  ended 30 September 2007
	£'000	£'000	£'000
REVENUE	7,533	5,937	12,684
Cost of sales	(4,544)	(3,747)	(8,218)
GROSS PROFIT	2,989	2,190	4,466
Other operating income	64	53	109
Administrative expenses	(2,120)	(1,573)	(3,533)
OPERATING PROFIT
Before pension settlement and share-based  payment	933	706	1,600
Pension settlement cost	-	-	(485)
Share-based payment	-	(36)	(73)
	933	670	1,042
Finance income	4	23	32
Finance costs	(19)	(18)	(39)
PROFIT BEFORE TAX	918	675	1,035
Taxation	(275)	(212)	(365)
PROFIT FOR THE PERIOD	643	463	670
Profit attributable to minority interests	4	2	16
Profit attributable to equity shareholders	639	461	654
	643	463	670
Basic earnings per share (pence)   (note 4)	2.7p	2.0p	2.8p
Diluted earnings per share (pence)  (note 4)	2.7p	2.0p	2.8p

Consolidated Statement of Changes in Shareholders' Equity (Unaudited)

For the six months ended 31 March 2008

	Share capital	Share premium	Merger reserve	Other reserves	Retained earnings	Own shares	Total	Minority interest	Total Equity
	£’000	£’000	£’000	£’000	£’000	£’000	£’000	£’000	£’000
Opening shareholders’ funds at 1 October 2007	99	2,649	-	112	3,086	(1,242)	4,704	16	4,720
Exchange adjustments	-	-	-	5	-	-	5	-	5
NET INCOME RECOGNISED DIRECTLY IN EQUITY	-	-	-	5	-	-	5	-	5
Profit for the period	-	-	-	-	639	-	639	4	643
TOTAL RECOGNISED INCOME AND EXPENSE	-	-	-	5	639	-	644	4	648
Issue of new shares	7	-	1,493	-	-	-	1,500	-	1,500
Dividends	-	-	-	-	(438)	-	(438)	(16)	(454)
Share-based payment	-	-	-	(3)	-	-	(3)	-	(3)
CLOSING SHAREHOLDERS’ FUNDS AT 31 MARCH 2008	106	2,649	1,493	114	3,287	(1,242)	6,407	4	6,411

Consolidated Statement of Changes in Shareholders' Equity (Unaudited)

For the six months ended 31 March 2007

	Share capital	Share premium	Other reserves	Retained earnings	Own shares	Total	Minority interest	Total Equity
	£’000	£’000	£’000	£’000	£’000	£’000	£’000	£’000
Opening shareholders’ funds at 1 October 2006	99	2,649	29	3,088	(1,242)	4,623	-	4,623
Profit for the period	-	-	-	461	-	461	2	463
TOTAL RECOGNISED INCOME AND EXPENSE	-	-	-	461	-	461	2	463
Dividends	-	-	-	(438)	-	(438)	-	(438)
Share–based payment	-	-	52	-	-	52	-	52
CLOSING SHAREHOLDERS’ FUNDS AT 31 MARCH 2007	99	2,649	81	3,111	(1,242)	4,698	2	4,700

	Share capital	Share premium	Other reserves	Retained earnings	Own shares	Total	Minority interest	Total Equity
	£’000	£’000	£’000	£’000	£’000	£’000	£’000	£’000
Opening shareholders’ funds at 1 October 2006	99	2,649	29	3,088	(1,242)	4,623	-	4,623
Exchange adjustments	-	-	1	-	-	1	-	1
NET INCOME RECOGNISED DIRECTLY IN EQUITY	-	-	1	-	-	1	-	1
Profit for the period	-	-	-	654	-	654	16	670
TOTAL RECOGNISED INCOME AND EXPENSE	-	-	1	654	-	655	16	671
Dividends	-	-	-	(656)	-	(656)	-	(656)
Share–based payment	-	-	82	-	-	82	-	82
CLOSING SHAREHOLDERS’ FUNDS AT 30 SEPTEMBER 2007	99	2,649	112	3,086	(1,242)	4,704	16	4,720

Consolidated Balance Sheet (Unaudited)

31 March 2008

	31 March 2008	31 March 2007	30 September 2007
	£'000	£'000	£'000
NON-CURRENT ASSETS
Goodwill	2,356	-	-
Property, plant and equipment	3,083	3,042	3,104
Deferred tax asset	26	32	29
	5,465	3,074	3,133
CURRENT ASSETS
Trade and other receivables	4,768	3,359	3,227
Cash and cash equivalents	720	929	855
	5,488	4,288	4,082
TOTAL ASSETS	10,953	7,362	7,215
CURRENT LIABILITIES
Borrowings	(244)	(213)	(450)
Trade and other payables	(1,955)	(1,191)	(1,353)
Current tax payable	(495)	(675)	(172)
	(2,694)	(2,079)	(1,975)
NON-CURRENT LIABILITIES
Borrowings	(1,513)	(266)	(179)
Deferred tax liabilities	(335)	(317)	(341)
	(1,848)	(583)	(520)
TOTAL LIABILITIES	(4,542)	(2,662)	(2,495)
NET ASSETS	6,411	4,700	4,720
SHAREHOLDERS' EQUITY
Share capital	106	99	99
Share premium	2,649	2,649	2,649
Merger reserve	1,493	-	-
Currency translation reserve	6	-	1
Capital redemption reserve	18	18	18
Other reserves	90	63	93
Retained earnings	3,287	3,111	3,086
Own shares	(1,242)	(1,242)	(1,242)
TOTAL SHAREHOLDERS' EQUITY	6,407	4,698	4,704
MINORITY INTEREST IN EQUITY	4	2	16
TOTAL EQUITY	6,411	4,700	4,720

Consolidated Cash Flow Statement (Unaudited)

For the six months ended 31 March 2008

	6 months ended 31 March 2008	6 months ended  31 March 2007	Year ended 30 September 2007
	£'000	£'000	£'000
CASH FLOWS FROM OPERATING ACTIVITIES
Profit before taxation
Before pension settlement and share-based payments	918	711	1,593
Pension settlement cost	-	-	(485)
Share-based payments	-	(36)	(73)
	918	675	1,035
Adjustments for:
Depreciation	82	87	84
Loss on sale of property, plant and equipment	-	2	23
Finance income	(4)	(23)	(32)
Finance costs	19	18	39
Equity settled share-based payment expenses	-	36	73
OPERATING CASH FLOW BEFORE CHANGES IN WORKING CAPITAL AND PROVISIONS	1,015	795	1,222
Increase in trade and other receivables	(821)	(650)	(518)
Increase in trade and other payables	156	170	332
CASH GENERATED FROM OPERATIONS	350	315	1,036
Tax received/(paid)	(96)	41	(594)
NET CASH INFLOW FROM OPERATING ACTIVITIES	254	356	442
CASH FLOWS FROM INVESTING ACTIVITIES
Interest received	4	23	32
Acquisition of subsidiary net of cash acquired	(1,003)	-	-
Acquisition of property, plant and equipment	(46)	(167)	(245)
NET CASH OUTFLOW FROM INVESTING ACTIVITIES	(1,045)	(144)	(213)
CASH FLOWS FROM FINANCING ACTIVITIES
Interest paid	(19)	(18)	(39)
Borrowings	1,129	(144)	4
Payment of equity dividends	(454)	(438)	(656)
NET CASH INFLOW/(OUTFLOW)  FROM FINANCING ACTIVITIES	656	(600)	(691)
Net decrease in cash and cash equivalents	(135)	(388)	(462)
Cash and cash equivalents at start of period	855	1,317	1,317
CASH AND CASH EQUIVALENT AT END OF PERIOD	720	929	855

Notes to the Interim Financial Statements

 

1    BASIS OF PREPARATION

 

      The interim financial statements of Driver Group Plc for the period ended 31 March 2008 are unaudited and do not comprise statutory accounts within the meaning of Section 240 of the Companies Act 1985.

 

      Under the AIM rules, the Company is required to prepare its next set of consolidated financial statements in accordance with adopted International Financial Reporting Standards (IFRS) as adopted by the European Union (‘adopted IFRS). Reconciliations and descriptions of the effect of the transition from UK GAAP to adopted IFRS on the Group’s balance sheet and its income statement are provided at the back of this Interim Report.

 

      These interim financial statements have been prepared on the basis of the recognition and measurement requirements of adopted IFRS as at 31 March 2008 that are effective (or available for early adoption) at 30 September 2008, the Group’s first annual reporting date at which it is required to apply adopted IFRS. Based on these adopted IFRS, the directors have applied the accounting policies set out in the restatement report, included in this document, which they expect to apply when the first annual financial statements are prepared in accordance with adopted IFRS for the year ending 30 September 2008.

 

      However the adopted IFRS that will be effective (or available for early adoption) in the annual financial statements for the year ending 30 September 2008 are still subject to change and to additional interpretations and therefore cannot be determined with certainty. Accordingly, the accounting policies for that annual period will be determined finally only when the annual financial statements are prepared for the year ending 30 September 2008.

 

      The comparative figures for the financial year ended 30 September 2007 are not the Company’s statutory accounts for that financial year. Those statutory accounts, which were prepared under UK GAAP, have been reported on by the Company’s auditors and delivered to the Registrar of Companies. The report of the auditors was (i) unqualified, (ii) did not include a reference to any matters to which the auditors drew attention by way of emphasis without qualifying their report, and (iii) did not contain a statement under section 237(2) or (3) of the Companies Act 1985.

 

 

2    TAXATION

 

      The tax charge on the profit for the half-year ended 31 March 2008 is based on an estimated tax rate for the year ending 30 September 2008.

 

 

3    DIVIDEND

 

      It is proposed that an interim dividend for the half-year ended 31 March 2008 of 0.95pper share amounting to £234,448 be paid to all the shareholders on the register as at 20 June 2008 other than the Driver Group Employee Benefit Trust.  

 

 

4    EARNINGS PER SHARE (UNAUDITED)

	6 months ended 31 March 2008	6 months ended 31 March 2007	Year  ended 30 September 2007
	£'000	£'000	£'000
Profit for the financial period	639	461	654
Pension settlement cost after tax	-	-	339
Share-based payments after tax	-	26	52
Profit for the financial period before pension settlement and share-based payments	639	487	1,045
Weighted average number of shares:
Ordinary shares in issue	25,011,796	24,732,874	24,732,874
Shares held by EBT	(1,700,645)	(1,700,645)	(1,700,645)
Basic weighted average number of shares	23,311,151	23,032,229	23,032,229
Issuable on conversion of options	124,720	335,505	332,746
Issuable on conversion of warrants	99,457	259,640	261,656
Diluted weighted average number of shares	23,535,328	23,627,374	23,626,631
Basic earnings per share before exceptional items and share-based payments	2.7p	2.1p	4.5p
Basic earnings per share (pence)	2.7p	2.0p	2.8p
Diluted earnings per share (pence)	2.7p	2.0p	2.8p

 

5    ACQUISITION DURING THE PERIOD (UNAUDITED)

 

      Commercial Management Consultants Limited

      On 29 February 2008 the company acquired the entire issued share capital of Commercial Management Consultants Limited ('CMC'). The consideration was £2.975m satisfied on completion by £1.5m in shares and £1.475m in cash. A further £0.12m was incurred as costs of acquisition. 

 

The following table sets out the provisional fair value of identifiable assets and liabilities acquired:

	Provisional fair value to the group             £’000
Assets
Property, plant and equipment	14
Trade and other receivables	721
Cash and cash equivalents	592
Liabilities
Trade and other payables	(584)
Deferred tax liabilities	(4)
Net assets	739
Goodwill	2,356
Cost of acquisition	(120)
	2,975
Consideration satisfied by
Shares issued	1,500
Cash	1,475
	2,975

 

                                                                                                                                        

The goodwill is attributable primarily to the intangible benefits arising from the expert fee earners acquired with CMC and their collective relationships with a blue chip customer base, which will be applied in generating cross company leads. Goodwill also arises from other earnings enhancing synergies which are expected to arise from the integration of CMC with that of the Group.

 

      IFRS3 does not permit people based intangibles nor intangibles arising from synergy benefits created by the acquirer to be separately accounted for. No intangibles other than goodwill have been separately identified.

 

Independent Review Report to Driver Group plc

Introduction

We have been engaged by the company to review the condensed set of financial statements in the interim report for the six months ended 31 March 2008 which comprises the Consolidated Income Statement, the Consolidated Statement of Changes in Shareholders' Equity, the Consolidated Balance Sheet, the Consolidated Cash Flow Statement, and the related explanatory notes. We have read the other information contained in the interim report and considered whether it contains any apparent misstatements or material inconsistencies with the information in the condensed set of financial statements.  

Directors' responsibilities

The interim report, included the financial information contained therein, is the responsibility of and has been approved by the directors. The directors are responsible for preparing the interim report in accordance with the rules of the London Stock Exchange for companies trading securities on the Alternative Investment Market which require that the half-yearly report be presented and prepared in a form consistent with that which will be adopted in the company's annual accounts having regard to the accounting standards applicable to such annual accounts.  

Our responsibility

Our responsibility is to express to the company a conclusion on the condensed set of financial statements in the interim report based on our review.  

Our report has been prepared in accordance with the terms of our engagement to assist the company in meeting the requirements of the rules of the London Stock Exchange for companies trading securities on the Alternative Investment Market and for no other purpose. No person is entitled to rely on this report unless such a person is a person entitled to rely upon this report by virtue of and for the purpose of our terms of engagement or has been expressly authorised to do so by our prior written consent. Save as above, we do not accept responsibility for this report to any other person or for any other purpose and we hereby expressly disclaim any and all such liability.  

Scope of review

We conducted our review in accordance with International Standard on Review Engagements (UK and Ireland) 2410, 'Review of Interim Financial Information Performed by the Independent Auditor of the Entity,' issued by the Auditing Practices Board for use in the United Kingdom. A review of interim financial information consists of making enquiries, primarily of persons responsible for financial and accounting matters, and applying analytical and other review procedures. A review is substantially less in scope than an audit conducted in accordance with International Standards on Auditing (UK and Ireland) and consequently does not enable us to obtain assurance that we would become aware of all significant matters that might be identified in an audit. Accordingly, we do not express an audit opinion.  

Conclusion

Based on our review, nothing has come to our attention that causes us to believe that the condensed set of financial statements in the interim report for the six months ended 31 March 2008 is not prepared, in all material respects, in accordance with the rules of the London Stock Exchange for companies trading securities on the Alternative Investment Market.  

BDO Stoy Hayward LLP

Chartered Accountants and Registered Auditors

Manchester

10 June 2008

IFRS Restatement Report (Unaudited)

Driver Group plc transition to IFRS

From 1 October 2007 Driver Group plc ('the Group') is required to prepare its consolidated accounts under International Accounting Standards and International Financial Reporting Standards (collectively referred to as 'adopted IFRS' throughout this document) as adopted by the European Union ('EU') having previously prepared its accounts under UK Generally Accepted Accounting Principles ('UK GAAP'). The transition date for the Group is 1 October 2006 and set out in the following tables is the UK GAAP to adopted IFRS reconciliation for profit for the six month period ended 31 March 2007 and for the year ended 30 September 2007 and a reconciliation of total equity as at 1 October 2006, 31 March 2007 and 30 September 2007.  

Transitional arrangements - Application of IFRS 1

The Group's financial statements for the year ending 30 September 2008 will be the Group's first annual financial statements in compliance with adopted IFRS.  

On transition to adopted IFRS an entity is generally required to apply adopted IFRS retrospectively, except where an exemption is available under IFRS 1 'First-time Adoption of International Financial Reporting Standards'.

The following are the key elections from IFRS 1 that were made by the Group:

• The Group has elected to adopt the IFRS 1 exemption in relation to the valuation of property by taking the fair value as at the transition date as deemed cost.  

• The Group has elected to adopt the IFRS 1 option to reset foreign currency cumulative translation reserves to zero on transition to adopted IFRS.  

International Financial Reporting Standards - Changes in accounting policies

The interim results for the period ended 31 March 2008 have been prepared in accordance with accounting policies under adopted IFRS. A summary of the Group's revised accounting policies under IFRS are included in note 2 to this restatement report.  

Reconciliation of balance sheet and income statement

The adjustment to the income statement and balance sheet from UK GAAP to adopted IFRS is explained in detail in note 1 to the restatement report.  

With the exception of reclassifications, there were no material differences between cash flows presented under adopted IFRS and the cash flows presented under UK GAAP for the six months ended 31 March 2007 and for the year ended 30 September 2007 as a result of the conversion to adopted IFRS.  

Reconciliation of income statement from UK GAAP to adopted IFRS (unaudited)

Extract from income statement

	UK GAAP 6 months ended  31 March 2007*	Adopted IFRS Adj. (note 1)	IFRS 6 months ended 31 March 2007	UK GAAP year ended 30 September 2007	Adopted IFRS Adj. (note 1)	IFRS year ended 30 September 2007
	£’000	£’000	£’000	£’000	£’000	£’000
REVENUE	5,937	-	5,937	12,684	-	12,684
OPERATING PROFIT	746	(76)	670	1,121	(79)	1,042
PROFIT BEFORE TAX	751	(76)	675	1,114	(79)	1,035
TAX	(225)	13	(212)	(369)	4	(365)
PROFIT FOR THE PERIOD	526	(63)	463	745	(75)	670

*      Rent receivable of £52,518 has been reclassified from turnover to other operating income in the reported UK GAAP figures for the six months ended 31 March 2007 in line with the reclassification as detailed in the financial results for the year ended 30 September 2007 and is consistent with the treatment for the current period. 

Reconciliation of balance sheet from UK GAAP to adopted IFRS (unaudited)

	UK GAAP 31 March 2007	Adopted IFRS Adj. (note 1)	IFRS 31 March 2007	UK GAAP 30 September 2007	Adopted IFRS Adj. (note 1)	IFRS 30 September 2007	UKGAAP 1 October 2006	Adopted IFRS Adj. (note 1)	IFRS 1 October 2006
	£’000	£’000	£’000	£’000	£’000	£’000	£’000	£’000	£’000
NON-CURRENT ASSETS
Property, plant and equipment	2,721	321	3,042	3,421	(317)	3,104	2,620	345	2,965
Deferred tax asset	-	32	32	-	29	29	-	10	10
	2,721	353	3,074	3,421	(288)	3,133	2,620	355	2,975
CURRENT ASSETS
Trade and other receivables	3,359	-	3,359	3,227	-	3,227	2,709	-	2,709
Current tax receivable	-	-	-	-	-	-	41	-	41
Cash and cash equivalents	929	-	929	855	-	855	1,317	-	1,317
	4,288	-	4,288	4,082	-	4,082	4,067	-	4,067
TOTAL ASSETS	7,009	353	7,362	7,503	(288)	7,215	6,687	355	7,042
CURRENT LIABILITIES
Borrowings	(213)	-	(213)	(450)	-	(450)	(254)	-	(254)
Trade and other payables	(1,080)	(111)	(1,191)	(1,262)	(91)	(1,353)	(962)	(59)	(1,021)
Current tax payable	(675)	-	(675)	(172)	-	(172)	(453)	-	(453)
	(1,968)	(111)	(2,079)	(1,884)	(91)	(1,975)	(1,669)	(59)	(1,728)
NON-CURRENT LIABILITIES
Borrowings	(266)	-	(266)	(179)	-	(179)	(371)	-	(371)
Deferred tax liabilities	(6)	(311)	(317)	(19)	(322)	(341)	(3)	(317)	(320)
	(272)	(311)	(583)	(198)	(322)	(520)	(374)	(317)	(691)
TOTAL LIABILITIES	(2,240)	(422)	(2,662)	(2,082)	(413)	(2,495)	(2,043)	(376)	(2,419)
NET ASSETS	4,769	(69)	4,700	5,421	(701)	4,720	4,644	(21)	4,623

Reconciliation of balance sheet from UK GAAP to adopted IFRS (unaudited)

	UK GAAP 31 March 2007	Adopted IFRS Adj. (note 1)	IFRS 31 March 2007	UK GAAP 30 September 2007	Adopted IFRS Adj. (note 1)	IFRS 30 September 2007	UK GAAP 1 October 2006	Adopted IFRS Adj. (note 1)	IFRS 1 October 2006
	£’000	£’000	£’000	£’000	£’000	£’000	£’000	£’000	£’000
SHAREHOLDERS’ EQUITY
Share capital	99	-	99	99	-	99	99	-	99
Share premium	2,649	-	2,649	2,649	-	2,649	2,649	-	2,649
Currency translation reserve	-	-	-	-	1	1	-	-	-
Revaluation reserve	723	(723)	-	1,338	(1,338)	-	723	(723)	-
Capital redemption reserve	18	-	18	18	-	18	18	-	18
Other reserve	47	16	63	84	9	93	11	-	11
Retained earnings	2,490	621	3,111	2,476	610	3,086	2,403	685	3,088
Own shares*	(1,242)	-	(1,242)	(1,242)	-	(1,242)	(1,242)	-	(1,242)
TOTAL SHAREHOLDERS’ EQUITY	4,784	(86)	4,698	5,422	(718)	4,704	4,661	(38)	4,623
MINORITY INTEREST IN EQUITY	(15)	17	2	(1)	17	16	(17)	17	-
TOTAL EQUITY	4,769	(69)	4,700	5,421	(701)	4,720	4,644	(21)	4,623

 

*      The balance sheet treatment of own shares has been restated in a manner consistent with that reported in the financial statements for the year ended 30 September 2007 to deduct the cost of the Driver Group Employee Benefit Trust’s investment in its own shares of £1,242,206 from equity. 

Notes to the IFRS Restatement Report

 

1             IFRS adjustments

 

            IAS 1 ‘Valuation of property’

            Following the adoption of the IFRS 1 exemption in relation to the valuation of property by taking the fair value as at the date of transition as deemed cost, property has been increased by £345,000 at 1 October 2006, decreased by £317,000 at 30 September 2007 and increased by £321,000 at 31 March 2007 after charging depreciation on the deemed cost at 2% per annum amounting to £47,000 for the year ended 30 September 2007 inclusive of £24,000 for the six months ended 31 March 2007.

 

            IAS 12 ‘Deferred tax’

            IAS 12 requires deferred tax to be recognised in respect of all temporary differences at the balance sheet date between the tax bases of assets and liabilities and their carrying value for financial reporting purposes. This includes those arising from a revaluation of property which is at variance from FRS19. The impact on Driver Group plc is to recognise a deferred tax liability of £314,000 at 1 October 2006, £297,000 at 30 September 2007 and £308,000 at 31 March 2007, with a corresponding adjustment to reserves. 

 

            IAS 12 requires the deferred tax on temporary differences relating to share-based payments to be recognised in proportion to the vesting period to match the IFRS accounting treatment. This approach is different from that adopted under FRS 19. The impact on Driver Group plc is to recognise an additional deferred tax asset of £7,000 at 1 October 2006, £4,000 at 30 September 2007 and £29,000 at 31 March 2007, with a corresponding adjustment to reserves. The excess of the deferred tax over the cumulative Income Statement charge at the tax rate is recognised in equity. 

 

            In addition deferred tax assets previously netted from deferred tax liabilities have been separately disclosed in the restated IFRS financial statements. Adjustments have been made at 1 October 2006 of £3,000, at 30 September 2007 of £25,000 and at 31 March 2007 of £3,000.

 

                IAS19 ‘Employee Benefits: Employee benefit accruals and provisions’

            IAS19 requires that when employees provide a service to a company, the estimated amount that will be paid in exchange for those services should be recognised. 

 

            On transition to IFRS, the Group has recognised employee benefit accruals and provisions in respect of holiday pay. The adjustment on transition reflects a cumulative adjustment for the services provided by employees up to the date of transition. Following transition, the movement on these accruals and provisions reflects the current period service cost. 

 

            Arising from the recognition of these accruals and provisions net assets have decreased by £59,000 at 1 October 2006, £91,000 at 30 September 2007 and £111,000 at 31 March 2007. 

 

                IAS 27 ‘Consolidated financial statements’

            IAS 27 requires that any excess losses applicable to a minority over the minority’s interest in the subsidiary’s equity is allocated to the majority unless there is a binding obligation for the minority to make good the loss. An adjustment has been made to minority interest and retained earnings of £17,000 at 1 October 2006, 30 September 2007 and 31 March 2007.

 

2          Accounting policies

 

            The following accounting policies represent a summary of the Group’s revised policies under IFRS which will be adopted by the Group in its financial statements for the year ending 30 September 2008. 

 

           

Basis of consolidation

            Where the company has the power, either directly or indirectly, to govern the financial and operating policies of another entity or business so as to obtain benefits from its activities, it is classified as a subsidiary. The consolidated financial statements present the results of the company and its subsidiaries (“the Group”) as if they formed a single entity. Intercompany transactions and balances between Group companies are therefore eliminated in full.

 

            The Group balance sheet incorporates the shares held by the Driver Group Employee Benefit Trust which have not vested by the balance sheet date. These are shown as a deduction from shareholders’ equity until such a time as they vest unconditionally with the employee. 

 

Accounting policies are consistently applied throughout the Group. Intercompany balances and transactions have been eliminated. Material profits from intercompany sales, to the extent that they are not yet realised outside the Group, have also been eliminated. 

 

            Business combinations

            The consolidated financial statements incorporate the results of business combinations using the purchase method. In the consolidated balance sheet, the acquiree’s identifiable assets, liabilities and contingent liabilities are initially recognised at their fair values at the acquisition date. The results of acquired operations are included in the consolidated income statement from the date on which control is obtained.

 

            Determining the fair value of intangibles acquired in business combinations requires estimation of the value of the cash flows related to the identified intangibles and a suitable discount rate in order to calculate the present value.

 

            In arriving at the cost of acquisition, the fair value of the shares issued by the Company is taken to be the mid-market price of those shares at the date of issue. Where this figure exceeds the nominal value of the shares, the excess amount is treated as an addition to reserves. The Group has credited the excess amount to the merger reserve since, under Section 131 of the Companies Act, such excess amount arising where the Company acquires more than a 90% interest in another entity is not treated as an addition to share premium account. 

 

                Goodwill

Goodwill represents the excess of the cost of a business combination over the interest in the fair value of identifiable assets, liabilities and contingent liabilities acquired. Cost comprises the fair values of assets given, liabilities assumed and equity instruments issued, plus any direct costs of acquisition.

 

Goodwill is capitalised as an intangible asset with any impairment in carrying value being charged to the consolidated income statement. Where the fair value of identifiable assets, liabilities and contingent liabilities exceed the fair value of consideration paid, the excess is credited in full to the consolidated income statement on the acquisition date.

             

On disposal of a subsidiary, the attributable amount of goodwill is included in the determination of the profit or loss on disposal.

 

Foreign Currency Translation

In preparing the financial statements of the individual entities, transactions in foreign currencies are recorded at the rates of exchange prevailing on the dates of the transactions. At each balance sheet date, monetary items denominated in foreign currencies are retranslated at the rates prevailing on the balance sheet date. Non-monetary items carried at fair value that are denominated in foreign currencies are retranslated at the rates prevailing on the date when the fair value was determined. Non-monetary items that are measured in terms of historical cost in a foreign currency are not retranslated. Exchange differences arising on the settlement of monetary items, and on the retranslation of monetary items, are included in profit or loss for the period. Exchange difference arising on the retranslation of non-monetary items carried at fair value are included in profit or loss for the period except for differences arising on the retranslation of non-monetary items in respect of which gains and losses are recognised directly in equity. For such non-monetary items, any exchange component of that gain or loss is also recognised directly in equity.

 

For the purpose of presenting consolidated financial statements, the assets and liabilities of the Group’s foreign operations (including comparatives) are expressed in sterling using exchange rates prevailing on the balance sheet date.  Income and expense items (including comparatives) are translated at the actual exchange rates. Exchange differences arising, if any, are recognised in equity in the Group’s translation reserve. Cumulative translation differences are recognised in profit or loss in the period in which the foreign operation is disposed of.

 

Revenue

Revenue represents the amount earned from the provision of services provided to customers outside of the Group and is recognised when the services are delivered in line with the contractual arrangements.

 

Expenses

Operating lease payments

Payments made under operating leases are recognised in the income statement on a straight-line basis over the term of the lease. Lease incentives received are recognised in the income statement as an integral part of the total lease expense over the term of the lease.

 

Financing costs

Interest income and interest payable is recognised in profit or loss as it accrues, using the effective interest method.

 

Dividends

Interim dividends are recognised when they are paid. Final dividends are recorded in the financial statements in the period in which they are approved by the Group’s shareholders.

 

Employee Benefits

Defined contribution plan

The Group operates a defined contribution pension scheme for employees. The assets of the scheme are held separately from those of the company. The annual contributions payable are charged to the income statement.

 

Share-based payments

The cost of share options awarded to employees measured by reference to their fair value at the date of grant is recognised over the vesting period of the options based on the number of options which in the opinion of the Directors will ultimately vest. The fair value of the options granted is measured using an option valuation model, taking into account the terms and conditions upon which the options were granted. The cost of the share options is recognised as an employee expense with a corresponding increase in equity.

 

Taxation

Tax on the profit or loss for the period comprises current and deferred tax. Tax is recognised in the income statement except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity.

 

Current tax is the expected tax payable on the taxable income for the period, using tax rates enacted or substantively enacted at the balance sheet date, and any adjustment to tax payable in respect of previous years. Deferred tax is provided on temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation purposes. The following temporary differences are not provided for: differences relating to investments in subsidiaries to the extent that they will probably not reverse in the foreseeable future. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying value amount of assets and liabilities, using tax rates enacted or substantively enacted at the balance sheet date.

 

A deferred tax asset is recognised only to the extent that it is probable that future taxable profits will be available against which the asset can be utilised.

 

            Impairment of assets

            Impairment tests on goodwill and other intangible assets with indefinite useful economic lives are undertaken annually at the financial year end. Other non-financial assets are subject to impairment tests whenever events or changes in circumstances indicate that their carrying amount may not be recoverable. Where the carrying value of an asset exceeds its recoverable amount (ie the higher of value in use and fair value less costs to sell), the asset is written down accordingly.

 

            Where it is not possible to estimate the recoverable amount of an individual asset, the impairment test is carried out on the asset’s cash-generating unit (ie the lowest group of assets in which the asset belongs for which there are separately identifiable cash flows). Goodwill is allocated on initial recognition to each of the group’s cash-generating units that are expected to benefit from the synergies of the combination giving rise to the goodwill.

 

Determining whether goodwill is impaired requires an estimation of the value in use of the cash generating units to which goodwill has been allocated. The value in use calculation requires an entity to estimate the future cash flows expected to arise from the cash generating unit and a suitable discount rate in order to calculate present value. An impairment review has been performed at the adoption date and no impairment has been identified. Any change in estimates could result in an adjustment to recorded amounts.

 

            Impairment charges are included in the administrative expenses line item in the consolidated income statement, except to the extent they reverse gains previously recognised in the consolidated statement of recognised income and expense. An impairment loss recognised for goodwill is not reversed.

 

The recoverable amount of the Group’s receivables carried at amortised cost is calculated as the present value of estimated future cash flows, discounted at the original effective interest rate (i.e. the effective interest rate computed at initial recognition of these financial assets). Receivables with a short duration are not discounted.

 

The recoverable amount of other assets is the greater of their net selling price and value in use. In assessing value in use, the estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset. 

 

For an asset that does not generate largely independent cash inflows, the recoverable amount is determined for the cash generation unit to which the asset belongs.

 

Cash and Cash Equivalents

Cash and cash equivalents comprise cash in hand, deposits held at call with banks and short-term highly liquid investments.

 

Property, Plant and Equipment

Property, plant and equipment are stated at cost less accumulated depreciation and any provision for impairment.

 

Where parts of an item of property, plant and equipment have different useful lives, they are accounted for as separate items of property, plant and equipment.

 

Land is not depreciated. Depreciation is charged to the income statement to write off the cost less the estimated residual value of each part of an item of property, plant and equipment on a straight-line basis over the estimated useful lives at the following annual rates:

 

      Buildings                   -    2%

      Fixtures and fittings    -    10%

      Technical library         -    10%

      Computer equipment   -    20%

 

 

 

 

END

 

 

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