Half Yearly Report

RNS Number : 2405T

Driver Group plc

03 June 2009

 



DRV

3 June 2009

DRIVER GROUP PLC

('Driver' or 'the Group')

Interim Results

for the six months ended 31 March 2009

Driver provides specialist commercial & dispute resolution services

to the construction and engineering industries.

Highlights

• Record half year revenue and profit 

• Revenues increased by 49% to £11.25m (2008: £7.53m), reflecting

  - benefit of contribution from CMC, acquired in February 2008

  - strong growth in international business, especially in Middle East

• Underlying* pre-tax profit increased by 41% to £1.30m (2008: £0.92m)

  Statutory pre-tax profit increased by 33% to £1.22m (2008: £0.92m)

• Underlying* earnings per share increased by 52% to 4.1p (2008: 2.7p) 

  Statutory earnings per share increased by 40% to 3.8p (2008: 2.7p)

• Interim dividend increased by 5% to 1.0p per share (2008: 0.95p)

• Positive cash generated from operations 

• Continued investment in the Middle East

• Outlook for continuing growth remains positive

* underlying figures are stated before the charge for share options of £81,000 (2008: nil)

Michael Davis, Chairman of Driver, commenting on the results, said,

'I am pleased to report on a successful first half for Driver Group. Despite the difficult economic backdrop, the business continues to grow, benefiting from its broad geographic spread of activities and ability to service many different sub-sectors of the construction and engineering industries. This is a direct result of the growth strategy we have applied over the last few years. The half year results also benefited from a full six months' contribution from CMC, which was acquired in February 2008.

As we look ahead, our focus remains on developing our expert witness and litigation support services, particularly in London, the United Arab Emirates and Oman, where there continue to be substantial opportunities. Our growth plans are underpinned by our ability to operate throughout all sub-sectors within the construction and engineering industries, from civil engineering, power, oil & gas and process. We therefore remain confident that the Group is well placed to achieve further growth.'

Enquiries:

Driver Group plc	Steve Driver, Chief Executive Dave Webster, Chief Operating Officer	T: 020 7448 1000 (today) T: 01706 223999
	Colin White, Finance Director
Zeus Capital Limited	Alex Clarkson	T: 0161 831 1512
(Nomad)	Nick Cowles
W H Ireland Limited	Gary Marshall	T: 0113 394 6600
(Broker)
Biddicks	Katie Tzouliadis	T: 020 7448 1000

CHAIRMAN'S STATEMENT

Introduction

I am pleased to report on a successful first half for Driver Group. Despite the difficult economic backdrop, the business continues to grow, benefiting from its broad geographic spread of activities and ability to service many different sub-sectors of the construction and engineering industries. This is a direct result of the growth strategy we have applied over the last few years. The half year results also benefited from a full six months' contribution from CMC, which was acquired in February 2008.

Of particular note in the period has been our substantial growth in the Middle East, which was supported by the opening of our office in Oman, in the summer last year. As expected, the reduction in the commercial construction market has impacted certain parts of the business, however, our London office, where we undertake the majority of our litigious support services and expert appointments has experienced further growth in demand. 

Financial Review

Revenue for the six months to 31 March 2009 grew strongly, increasing by 49% to £11.25m over the corresponding period last year (2008: £7.53m), with the year-on-year increase boosted by the contribution from CMC. Underlying pre-tax profits, before the charge for share options, rose by 41% to £1.30m (2008: £0.92m). 

After a charge for share options of £81,000 (2008: nil), pre-tax profits showed an increase of 33% at £1.22m (2008: £0.92m). The share option charge reflects the cost of new share options which have been issued over the last eighteen months. The profit was after having taken a charge of £0.2m in connection with bad and doubtful debts. The relative position of Sterling against the Group's major trading currencies (Euros, United Arab Emirate Dirhams and Omani Riyals) is now more of a factor on results given the increasing proportion of overseas revenues.

The reduction in the Group's effective tax rate to 25% (2008: 30%) reflects the benefit of a lower local tax rate in Oman. Underlying earnings per share, before the charge for share options, rose by 52% to 4.1p (2008: 2.7p) and, after the charge, the increase in reported earnings was 40% at 3.8p (2008: 2.7p). 

Debtors increased by £1.00m (2008: £0.82m) over the period. This reflected the increase in revenues and, in particular, the growth in revenues internationally, especially from the Middle East where credit terms are significantly longer than in the UK. Cash generated from operations in the period was just £125,000 lower than the prior period, at £225,000 (2008: £350,000). Net borrowings at the 31 March 2009 were £0.93m (31 March 2008: £1.04m). 

Dividend

The Board is pleased to declare an interim dividend of 1.0p per share (2008: 0.95p), representing a 5% increase over last year and reflecting the Group's good performance. The dividend will be paid on 7 August 2009 to shareholders on the register at the close of business on 19 June 2009.  

Trading performance

Driver's continued growth in revenue and profit in these more testing economic times reflects the benefits of the Group's strategy of developing its presence outside the UK, into the Middle East and internationally, and broadening the range of its consultancy services.   

Growth in the period has been driven by our expansion in the Middle East, which continues to be very strong. In the UK, as anticipated, results were impacted by the reduction in commercial building activity and the time required developing the business in other sectors, including energy and power. However, the London office generated a 66% increase in revenue and 65% improvement in profit, compared with the prior period. This is a result of a high proportion of the London office's income arising from dispute and litigation services as well as a reflection of the large number of infrastructure projects in the region. We are pleased with the progress of our international business outside the Middle East, in Europe, the Far East, and the Americas. This business is serviced from the UK and our growth in profits has been mainly the result of the expansion of our expert witness services. Results overall from Driver Consult UK, compared with the comparative period, showed some decline in revenue and profits to £6.0m and £1.2m respectively, against £6.4m and £1.4m in the prior year period.

Our overseas performance has been excellent. Results from the Middle East during the period reflect our hard work over recent years to develop our presence in the region. Revenue increased to £3.1m (2008: £0.9m) and profits increased to £0.7m (2008: £0.1m). The profit margin showed a substantial improvement, rising from 15% to 24%. This largely reflected our planned shift away from project services into dispute and litigious services and our ability to scale up efficiently from the existing cost base. We continue to invest in the Middle East, particularly in Oman, which represents a relatively new market for us. Over the period, we recruited additional fee-earners and, at the end of the half year, the average number of fee- earners in the Middle East stood at 37 (from 33 at 30 September 2008). A far greater proportion of them are involved in consultancy and dispute resolution work than was the case in 2008. 

We reported last year that staff utilisation had increased and was back at its optimum level following the previous recruitment drive. I am pleased to report that these levels were maintained over the first half.

Whilst the UK and Dubai commercial building sectors have declined, and our services to live projects in these sectors have reduced accordingly, the large infrastructure and energy projects for the UK, Abu Dhabi and Oman, which are either in the planning phase or in progress, continue to offer opportunities for our project consultancy services. It is also pleasing to report that the anticipated cross-referrals between Driver Consult and CMC, which started last year, continue to build and we are seeing referrals spread from the UK market into the Middle East. 

We continue to anticipate strong demand for both our specialist commercial services and our dispute resolution services over the next few years, particularly in London, the Middle East and the wider international market, and have a structure in place to accommodate this growth.

Outlook

As we look ahead, our focus remains on developing our expert witness and litigation support services, particularly in London, the United Arab Emirates and Oman, where there continue to be substantial opportunities. We also see opportunities to leverage our existing relationships to develop our presence in other geographic regions. We are initiating actions to position ourselves for the likely increase in work in the power and energy markets although we do not anticipate that this will benefit results in the current financial year. 

Our growth plans are underpinned by our ability to operate throughout all sub-sectors within the construction and engineering industries, from civil engineering, power, oil & gas and process. With the addition of CMC, we can now offer services throughout the full cycle of a construction or engineering project, from feasibility to closure. While the current economic environment presents more challenges to the Group, we remain confident that the business is well placed to continue to grow.  

Michael Davis

Chairman

CONSOLIDATED INCOME STATEMENT (UNAUDITED)

For the six months ended 31 March 2009

	6 months ended 31 March 2009 £'000	6 months  ended  31 March 2008 £'000	Year  ended  30 Sept  2008  £'000
REVENUE	11,253	7,533	18,149
Cost of Sales	(7,292)	(4,544)	(11,660)
GROSS PROFIT	3,961	2,989	6,489
Administrative expenses	(2,807)	(2,120)	(4,581)
Other operating income	77	64	120
OPERATING PROFIT
Before share-based payment	1,312	933	2,125
Share-based payment	(81)	-	(97)
	1,231	933	2,028
Finance income	9	4	14
Finance costs	(19)	(19)	(62)
PROFIT BEFORE TAXATION	1,221	918	1,980
Taxation	(300)	(275)	(571)
PROFIT FOR THE PERIOD	921	643	1,409
(Loss) / Profit attributable to minority interests	(11)	4	11
Profit attributable to equity shareholders	932	639	1,398
	921	643	1,409
Basic earnings per share (pence) (note 5)	3.8p	2.7p	5.8p
Diluted earnings per share (pence) (note 5)	3.8p	2.7p	5.8p

The profit for the period arises from the Group's continuing operations.

CONSOLIDATED BALANCE SHEET (UNAUDITED)

31 March 2009

	31 March 2009 £'000	31 March 2008 £'000	30 Sept 2008 £'000
NON-CURRENT ASSETS
Goodwill	2,356	2,356	2,356
Property, plant and equipment	3,194	3,083	3,059
Deferred tax asset	61	26	37
	5,611	5,465	5,452
CURRENT ASSETS
Trade and other receivables	5,886	4,768	4,823
Cash and cash equivalents	422	720	1,054
	6,308	5,488	5,877
TOTAL ASSETS	11,919	10,953	11,329
CURRENT LIABILITIES
Borrowings	(292)	(244)	(219)
Trade and other payables	(2,192)	(1,955)	(2,380)
Current tax payable	(447)	(495)	(361)
	(2,931)	(2,694)	(2,960)
NON-CURRENT LIABILITIES
Borrowings	(1,057)	(1,513)	(1,000)
Deferred tax liabilities	(297)	(335)	(309)
	(1,354)	(1,848)	(1,309)
TOTAL LIABILITIES	(4,285)	(4,542)	(4,269)
NET ASSETS	7,634	6,411	7,060
SHAREHOLDERS' EQUITY
Share capital	106	106	106
Share premium	2,649	2,649	2,649
Merger reserve	1,493	1,493	1,493
Currency translation reserve	66	6	-
Capital redemption reserve	18	18	18
Other reserves	268	90	187
Retained earnings	4,276	3,287	3,838
Own shares	(1,242)	(1,242)	(1,242)
TOTAL SHAREHOLDERS' EQUITY	7,634	6,407	7,049
MINORITY INTEREST IN EQUITY	-	4	11
TOTAL EQUITY	7,634	6,411	7,060

CONSOLIDATED CASH FLOW STATEMENT (UNAUDITED)

For the six months ended 31 March 2009

	6 months ended 31 March 2009 £'000	6 months ended 31 March 2008 £'000	Year Ended 30 Sept 2008 £'000
CASH FLOWS FROM OPERATING ACTIVIES
Profit before taxation	1,221	918	1,980
Adjustments for:
Depreciation	98	82	170
Exchange adjustments	-	-	(65)
Finance income	(9)	(4)	(14)
Finance costs	19	19	62
Share-based payment	81	-	97
OPERATING CASH FLOW BEFORE CHANGES IN WORKING CAPITAL AND PROVISIONS	1,410	1,015	2,230
Increase in trade and other receivables	(997)	(821)	(875)
(Decrease) / Increase in trade and other payables	(188)	156	602
CASH GENERATED FROM OPERATIONS	225	350	1,957
Tax paid	(250)	(96)	(563)
NET CASH (OUTFLOW) / INFLOW FROM OPERATING ACTIVITIES	(25)	254	1,394
CASH FLOWS FROM INVESTING ACTIVITIES
Interest received	9	4	14
Acquisition of subsidiary net of cash acquired	-	(1,003)	(1,003)
Acquisition of property, plant and equipment	(233)	(46)	(111)
NET CASH OUTFLOW FROM INVESTING ACTIVITIES	(224)	(1,045)	(1,100)
CASH FLOWS FROM FINANCING ACTIVITIES
Interest paid	(19)	(19)	(62)
Borrowings	130	1,129	590
Payment of equity dividends	(494)	(454)	(688)
NET CASH (OUTFLOW) / INFLOW  FROM FINANCING ACTIVITIES	(383)	656	(160)
Net (decrease) / increase in cash and cash equivalents	(632)	(135)	134
Effect of foreign exchange on cash and cash equivalents	-	-	65
Cash and cash equivalents at start of period	1,054	855	855
CASH AND CASH EQUIVALENTS AT END OF PERIOD	422	720	1,054

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY (UNAUDITED)

For the six months ended 31 March 2009

	Share Capital £'000	Share Premium £'000	Merger Reserve £'000	Other  reserves(1) £'000	Retained  earnings £'000	Own  shares £'000	Total £'000	Minority interest £'000	Total Equity £'000
Opening balance At 1 October 2008	106	2,649	1,493	205	3,838	(1,242)	7,049	11	7,060
Exchange adjustments	-	-	-	66	-	-	66	-	66
NET INCOME RECOGNISED DIRECTLY IN EQUITY	-	-	-	66	-	-	66	-	66
Profit for the period	-	-	-	-	932	-	932	(11)	921
TOTAL RECOGNISED  INCOME AND EXPENSE	-	-	-	66	932	-	998	(11)	987
Dividends	-	-	-	-	(494)	-	(494)	-	(494)
Share-based payment	-	-	-	81	-	-	81	-	81
CLOSING BALANCE  AT 31 MARCH 2009	106	2,649	1,493	352	4,276	(1,242)	7,634	-	7,634
For the six months ended 31 March 2008
	Share Capital £'000	Share Premium £'000	Merger Reserve £'000	Other  reserves(1) £'000	Retained  earnings £'000	Own  shares £'000	Total £'000	Minority interest £'000	Total Equity £'000
Opening balance 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 BALANCE  AT 31 MARCH 2008	106	2,649	1,493	114	3,287	(1,242)	6,407	4	6,411

For the year ended 30 September 2008

	Share Capital £'000	Share Premium £'000	Merger Reserve £'000	Other  reserves (1) £'000	Retained  earnings £'000	Own  shares £'000	Total £'000	Minority interest £'000	Total Equity £'000
Opening balance At 1 October 2007	99	2,649	-	112	3,086	(1,242)	4,704	16	4,720
Deferred tax credit on property revaluation	-	-	-	-	26	-	26	-	26
NET INCOME RECOGNISED DIRECTLY IN EQUITY	-	-	-	-	26	-	26	-	26
Profit for the period	-	-	-	-	1,398	-	1,398	11	1,409
TOTAL RECOGNISED  INCOME AND EXPENSE	-	-	-	-	1,424	-	1,424	11	1,435
Issue of new shares	7	-	1,493	-	-	-	1,500	-	1,500
Dividends	-	-	-	-	(672)	-	(672)	(16)	(688)
Share-based payment	-	-	-	93	-	-	93	-	93
CLOSING BALANCE  AT 30 SEPT 2008	106	2,649	1,493	205	3,838	(1,242)	7,049	11	7,060

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

NOTES TO THE INTERIM FINANCIAL STATEMENTS

1  BASIS OF PREPARATION

The financial information presented in this documentation has been prepared in accordance with the recognition and measurement criteria of International Financial Reporting Standards ('IFRS') and International Financial Reporting Interpretations Committee ('IFRIC') interpretations that are expected to be applicable for the year ending 30 September 2009. These are subject to ongoing review and endorsement by the European Commission, and possible amendment by the International Accounting Standards Board ('IASB'), and are therefore subject to possible change. 

The financial information in this statement relating to the six months ended 31 March 2009 and the six months ended 31 March 2008 has not been audited, but has been reviewed, pursuant to guidance issued by the Auditing Practices Board. The comparative figures for the year ended 30 September 2008 do not amount to full statutory accounts within the meaning of section 435 of the Companies Act 2006. Those accounts have been reported on by the Group's auditors and delivered to the Registrar of Companies. The audit report was unqualified, did not include references to matters to which the auditors drew attention by way of emphasis without qualifying their report and did not contain a statement under section 498(2) or (3) of the Companies Act 2006.

2    TAXATION

      The tax charge on the profit for the half-year ended 31 March 2009 is based on an estimated tax rate for

      the year ending 30 September 2009.

3   DIVIDEND

It is proposed that an interim dividend for the half-year ended 31 March 2009 of 1.00p per share amounting to £246,788 be paid on 7 August 2009 to all the shareholders on the register as at 19 June 2009 other than the Driver Group Employee Benefit Trust.  

4.  SUMMARY SEGMENTAL ANALYSIS 

Reportable segments

For management purposes, the Group is organised into three operating divisions - Driver Consult UK, Driver Consult Middle East and Commercial Management Consultants (CMC). These divisions are the basis on which the Group is structured and managed, based on its geographic structure and principal services offered.

Summary segment information about these reportable segments is presented below.

Six months ended 31 March 2009

		Continuing Operations
	Driver Consult UK £'000		Driver Consult Middle  East £'000	CMC £'000	Eliminations £'000	Unallocated £'000	Consolidated £'000
Total external revenue	5,903		3,044	2,306	-	-	11,253
Inter-segment revenue	124		56	-	(180)	-	-
	________		________	_______	________	________	________
Total revenue	6,027		3,100	2,306	(180)	-	11,253
Segmental profit	1,160		741	209	-	-	2,110
Unallocated corporate expenses						(798)	(798)
Share-based payment						(81)	(81)
	________		________	_______	_________	_________	_________
Operating profit	1,160		741	209	-	(879)	1,231
Investment income						9	9
Finance costs						(19)	(19)
	________		________	_______	_________	_________	_________
Profit before tax	1,160		741	209	-	(889)	1,221

Six months ended 31 March 2008

		Continuing Operations
	Driver Consult UK £'000	Driver Consult Middle  East £'000	CMC £'000	Eliminations £'000	Unallocated £'000	Consolidated £'000
Total external revenue	6,319	902	312	-	-	7,533
Inter-segment revenue	32	-	-	(32)	-	-
	______	________	_______	_________	_________	_________
Total revenue	6,351	902	312	(32)	-	7,533
Segmental profit	1,494	131	32	-	-	1,657
Unallocated corporate expenses	_______	_______	_______	_________	(724) _________	(724)             _________
Operating profit	1,494	131	32	-	(724)	933
Investment income					4	4
Finance costs					(19)	(19)
	_______	_______	_______	_________	_________	_________
Profit before tax	1,494	131	32	-	(739)	918

For the year ended 30 September 2008

		Continuing Operations
	Driver Consult UK £'000	Driver Consult Middle  East £'000	CMC £'000	Eliminations £'000	Unallocated £'000	Consolidated £'000
Total external revenue	12,628	3,096	2,425	-	-	18,149
Inter-segment revenue	305	12	99	(416)	-	-
	_______	_________	_____	_________	_________	_________
Total revenue	12,933	3,108	2,524	(416)	-	18,149
Segmental profit	2,984	537	354	-	-	3,875
Unallocated corporate expenses					(1,750)	(1,750)
Share-based payment					(97)	(97)
	________	_________	____	_________	_________	_________
Operating profit	2,984	537	354	-	(1,847)	2,028
Investment income					14	14
Finance costs					(62)	(62)
		_________	_____	_________	_________	_________
Profit before tax	2,984	537	354	-	(1,895)	1,980

Inter-segment sales are charged at prevailing market rates.

5    EARNINGS PER SHARE (UNAUDITED)

	6 months Ended 31 March 2009 £'000	6 months Ended 31 March 2008 £'000	Year Ended 30 Sept 2008 £'000
Profit for the financial period	932	639	1,398
Share-based payments after tax	81	-	122
Profit for the financial period before share-based payments	1,013	639	1,520
Weighted average number of shares:
Ordinary shares in issue	26,379,416	25,011,796	25,693,357
Shares held by EBT	(1,700,645)	(1,700,645)	(1,700,645)
Basic weighted average number of shares	24,678,771	23,311,151	23,992,712
Issuable on conversion of options	-	124,720	-
Issuable on conversion of warrants	-	99,457	3,276
Diluted weighted average number of shares	24,678,771	23,535,328	23,995,988
Basic earnings per share before exceptional items and share-based payments	4.1p	2.7p	6.3p
Basic earnings per share (pence)	3.8p	2.7p	5.8p
Diluted earnings per share (pence)	3.8p	2.7p	5.8p

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 2009 which comprises the Consolidated Income Statement, the Consolidated Statement of Changes in 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, including 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 2009 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

2 June 2009

 

END

 

 

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