Pre Close Trading Update

RNS Number : 2966B

Driver Group plc

06 October 2015

 

6 October 2015

Driver Group plc

("Driver Group" or "the Company")

Pre Close Trading Update

Driver Group plc (AIM: DRV.L), the global management and advisory consultancy to construction and engineering industries is pleased to make the following trading update ahead of the announcement of its results for the year ended 30 September 2015.

Trading in the second half of the year has seen revenues at record levels across the Group, achieved through organic growth of 20% and the addition of a full six months of revenue from Initiate Consulting ("Initiate"), which was acquired in December 2014.

Revenue in Africa/Middle East/Asia (AMEA Region) is up 30% compared to that in the second half of the prior year. The investment in the AMEA Region in the first half of the year did not start to deliver the expected results until June, but record revenues were achieved in that month and were subsequently bettered in each of the succeeding months of July, August and September resulting in a strong Q4. This growth has been driven from the United Arab Emirates, South Africa and our recently established regional Oil & Gas offering based out of Singapore. The nature of our work is such that we maintain strict confidentiality policies, but we can report that we have secured some quality commissions, particularly on major infrastructure and oil & gas projects and have been appointed by clients that include leading global law firms, multinational organisations and government bodies.

Construction and infrastructure spend in the Middle East remains strong and numerous reports predict this to spread across the AMEA Region over the next decade to become 60% of global spend. Following the investment made in H1, the Company is well positioned to capitalise on this opportunity. Oil and gas prices are starting to impact plans on future construction and infrastructure spending to some extent, however in the short to medium term we do not anticipate that this will adversely affect our disputes business which generates the majority of revenues in this sector.

In Americas & Europe (exclusive of Initiate) revenues are also strong, with organic growth of around 9% compared to the second half of the prior year. We expect revenue growth to continue at current levels as we seek to strengthen and build on our client base in mainland Europe through the recently opened office in France and the relatively new German office; where we offer local access to our global platform.

Initiate continues to trade broadly as expected in the UK, although revenues have been marginally impacted in Q4 on the Network Rail account due to the effect of changes in the procurement of services in that organisation. Initiate's project delivery and project management services to the infrastructure sector will continue to be developed with existing clients such as Transport for London, Network Rail and Heathrow Airport. There are also new opportunities through High Speed 2 and Highways England and we have recently been appointed on the Department for Transport Framework for Programme and Project Management for rail related work. In the Middle East the Initiate offering will be delivered through the Driver brand and we will continue to focus on the rail and aviation sector which is buoyant across the region.  Whilst we have not secured any work in the current financial year, we have commenced business development activity in the region and anticipate to secure commissions in the coming year.

At 30 September 2015 we expect our cash position to be marginally better than market expectations. The deferred payments relating to the Initiate acquisition and the increase in working capital required to support our growth initiatives in the AMEA region will mean an increase in debt during the coming year before cash generative profits return Driver Group to a positive cash position in the medium term.

Underlying operating profits for the year ended 30 September 2015 are in line with market expectations, but will be impacted by approximately £0.45 million as outlined below.

The well-publicised problems at the Redcar plant of Sahaviriya Steel Industries UK (SSI UK) culminated in the announcement on Friday 2 October that SSI UK had been placed in liquidation. Our UK business had a small team engaged by SSI UK and in early September all our consultants were disengaged. There is no adverse impact on our operations going forward, but our UK business has receivables due from SSI UK of approximately £0.2 million which will be provided for in full in in the year ended 30 September 2015.

In the second half of the year our AMEA business has been unusually impacted by adverse FX movements of approximately £0.25 million due to the strong pound against the Middle East and South Africa currencies.  Management forecasts are provided 'FX neutral' as currency movements cannot be accurately predicted over any meaningful period and our natural and commercial hedges through the year usually cancel out any material risk.

Looking ahead to 2015-16, given the revenue growth and profits in H2 of 2014-15, the strong performance in Q4 and the opportunities developing in our pipeline we are confident of maintaining double digit revenue growth and in meeting market forecasts for 2015-16.

Enquiries:

Driver Group plc

David Webster, Chief Executive                       Tel [phone]

Damien McDonald, Group Finance Director  Tel [phone]

Panmure Gordon (UK) Ltd

Nominated Advisor

Mark Taylor / James Greenwood                    Tel [phone]

 

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