Preliminary Results

RNS Number : 0376K

Driver Group plc

11 December 2018

 

11 December 2018

DRIVER GROUP PLC

("Driver" or "the Group")

Preliminary Results

Driver Group PLC (AIM: DRV), the global professional services consultancy to construction and engineering industries, is pleased to announce its results for the financial year ended 30 September 2018.

Financial Highlights

Significant improvement on all fronts

·	Revenue increased 4% to £62.6m (2017: £60.2m) with continued focus on core claims and disputes
·	Gross profit increased to £16.3m (2017: £14.8m) resulting in a gross margin % increased to 26.0% (2017: 24.6%)
·	Underlying*profit before taxation increase of 54% to £3.8m (2017: £2.5m)
·	Profit for the year £2.2m (2017: £0.3m)
·	Net Cash** £6.9m (2017: borrowings £0.2m)
·	Earnings per share increased to 4.0p (2017: 0.7p)
·	Utilisation increased to 80.0% (2017: 76.2%) contributing to the increased gross margin %

Positive start to the new financial year in line with management expectations

Operational Highlights

·	Completed strategic actions the Board committed to implementing in February 2017 at the time of the equity raise and refinancing
·	Strong and sustained focus on the Group's existing expertise of Claims and Dispute Resolution and Expert Witness Support Services
·	Positive performance by both the Diales and Driver Trett brands, notably in the UK, Singapore, Qatar and Kuwait
·	Awarded Large Company Turnaround of the Year at the national 2018 Institute for Turnaround Awards
·	Plans in place to broaden the offering into new sectors and have a wider geographical spread

Gordon Wilkinson, Chief Executive Officer of Driver Group plc, commented: "The transformative turnaround in Driver Group's fortunes reflects a job carefully judged and executed by its management team and staff. The result of this has been to return significant value to our shareholders and to deliver expert, sustainable and truly world-class professional service to our clients."

* Underlying figures are stated before the share-based payment costs, exceptional items and amortisation of intangible assets

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

*** Utilisation % is calculated by dividing the total hours billed by the total working hours available for chargeable staff

Enquiries:
Driver Group plc	020 7377 0005
Gordon Wilkinson (CEO)
David Kilgour (CFO)
N+1 Singer (Nomad & Broker)	0207 496 3000
Sandy Fraser
Acuitas Communications	020 3687 0868
Simon Nayyar
Fraser Schurer-Lewis	[e-mail]

Chairman's Statement

INTRODUCTION

I am pleased to report that our performance this year has built on the good progress achieved last year and the Group has produced an excellent result ahead of original market expectations. We have seen during the period that demand for our services continues to be strong across the globe and we have broadened our offering into new sectors. Last year was a period of significant change during which we carried out an equity raise, disposed of underperforming businesses and streamlined our operations. Following this transformation, the shape of the Group is now largely as our strategy requires and we have been able to progress and significantly improve performance across the business with all regions contributing to the overall excellent result.

FINANCIAL RESULTS

The Group's revenue for the year was £62.6m (2017: £60.2m) and the underlying* profit before tax was £3.8m (2017: £2.5m), which we believe more accurately reflects the underlying, operating performance of the Group. The underlying* continuing earnings per share was 6.1p (2017: 5.8p). The reported profit was £2.2m (2017: £0.3m) which includes a share-based payment charge of £1.1m (2017: £0.2m). In the prior year, there were also exceptional costs associated with the restructuring of the business of £1.1m, which I am pleased to report were £nil in the current year.

During the year all regions performed well. Revenue in Europe and Americas 'EuAm' grew by 10% to £28.8m, with a 27% improvement in segmental profitability to £3.0m (2017: £2.3m). Growth in the Asia Pacific region 'APAC', was particularly pleasing at 32% to £11.0m and the region's segmental profitability improved significantly recording a profit of £1.0m against a profit of £0.5m in the prior year. The Middle East 'ME' region saw especially strong performances from Kuwait and Qatar and although there was a reduction in regional revenues to £22.9m (2017: £25.2m) partly as a result of a large commission completing early and not being replaced in the year, segmental profitability improved by 11% to £2.1m (2017 £1.9m) through careful cost management.

Net cash** at the close of the year was an improvement on expectations, standing at £6.9m (2017: net borrowings £0.2m), reflecting significant progress made during the year in cash collections and the continued focus on working capital management generally.

DIVIDEND

I am pleased to report the Directors propose a return to dividends with the payment of a dividend for 2018 of 0.5p per share (2017: £nil) reflecting our confidence in the transformation of the Group. Looking forward, the Board intends to pursue a progressive dividend policy which will seek to maximise shareholder value, while retaining balance sheet flexibility to fund ongoing operating requirements.

STRATEGY

The Group's strategy remains to focus on those areas of expertise where we have a particularly strong position, in claims and dispute resolution and in expert witness work, and to consolidate the Group's position as one of the pre-eminent firms in its areas of expertise. Concentration on this clearly articulated aim has so far demonstrably delivered improved revenue growth and increased profitability leading to the generation of more attractive returns for shareholders. In support of this strategy we also keep under review broadening our sector, geographic and service offerings. We see no reason at this stage to amend our objective or strategy, although of course they remain under continual review.

BOARD

Following the appointment of David Kilgour as Group Chief Financial Officer on 12th December 2017, the composition of the Board has remained unchanged for the remainder of the year. During the year, the Board elected to adopt the QCA Corporate Governance Code which was published on 25 April 2018 as its corporate governance code. The Board believes that this provides an appropriate and suitable framework for a group of our size and complexity.

OUTLOOK

The start of the current financial year has shown a continuation of the positive trading and improvements that we enjoyed during last year. I have always stressed that in a professional services business like ours, it is notoriously difficult to predict activity levels, but your Board will continue to monitor costs and margins to ensure that the Company deals appropriately with the fluctuations in activity that are an inevitable feature of our business. Nonetheless, your Board is confident that we can continue to build on the exceptional progress we have made so far. There is no question that in every significant respect the Company is in a far better position than it has been for several years.

I would particularly like to take this opportunity to thank all of the staff of Driver Group in every part of our business for the loyalty, hard work and support that they have shown during this and previous years. Under the leadership of the Executive Board they have all contributed to delivering an excellent result for the Group and my Board colleagues join me in thanking them most sincerely. As a mark of how far the company has come in recent times on the 22^nd of November Gordon Wilkinson and David Kilgour on behalf of the whole Board collected the Large Company Turnaround of the Year award from the Institute for Turnarounds.  It is a remarkable achievement to which everyone in the business contributed.

Finally, I should also like to thank again both our longstanding and new shareholders for their continued support throughout the year. Your Board will continue to do all it can to reward the confidence you have shown in us.

Steven Norris

Non-Executive Chairman

11 December 2018

* Underlying figures are stated before the share-based payment costs, exceptional items and amortisation of intangible assets

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

*** Utilisation % is calculated by dividing the total hours billed by the total working hours available for chargeable staff

Chief Executive Officer's Review  

INTRODUCTION

I am pleased to report on what has been a year of substantial and sustainable improvement in Driver Group's performance. We have made very significant progress with implementing the strategy to address and resolve the challenges that the business faced some years ago, and to put those issues firmly in the past.

I am delighted to report that the headwinds that had affected the business 36 months ago are now a thing of the past. We have turned in a strong performance, and one that the business can be justly proud of, and results are well ahead of original market expectations. We have done this as a consequence of the resilience and determination of our dedicated people to turn around the fortunes of our business. This has meant a relentless and energetic focus on new business pipeline building, developing and growing existing client relationships, strengthening the Group's global market presence and a continuous drive on cash collections.

We enjoyed a remarkably strong start to the year with high levels of activity and a healthy pipeline of assignments for short to medium term conversion. In April 2018 the Board successfully completed the sale and leaseback of the Group's registered office in Haslingden, Lancashire; this represented the final strategic action we had committed to at the time of the equity raise and re-financing in February 2017. This contributed to a significant improvement in the Group's overall net cash** position by £7.1m to £6.9m (2017: net borrowings £0.2m).

We undertook a major overhaul of our online presence in the first half of 2018, with a structural review of our website, to improve its performance and effectiveness with prospective clients and existing and prospective investors. Feedback on the new global website platform has been resoundingly positive. Taken together with the exceptional progress and pick-up that our Diales app has achieved, which enables clients and introducers to source our expert witness services in whichever market they are required, I am confident that our digital performance has significantly improved, and there is more we will do.

Through successful new business acquisition across our key markets - particularly in Europe and Americas and in Asia Pacific - and as a consequence of careful management of cash flow and debtors, our underlying* operating profit has seen a dramatic recovery, up 45% on 2017 and profit for the year increased by 736% on the prior year.

I am also happy to report a further incremental improvement in utilisation*** rates by 3.8 percentage points to 80%, a significant key performance indicator for any global professional services business such as ours.

Driver Group is now uniquely well positioned to consolidate our leading competitive positions in the key markets in which we operate.

Driver Group can look forward to a future filled with significant commercial potential. I am confident that, now we have a more resilient, more focused and better managed operating platform, we shall be able to make the most of those opportunities in the future.

I would like to take this opportunity on behalf of your Board to thank all the team at Driver Group for their tremendous efforts and unstinting loyalty. It is their dedication and tireless work ethic that has enabled us to manage the turnaround in the business over the last 18 months so efficiently and effectively.

Financial Performance HIGHLIGHTS

Revenue is up 4% on 2017 at £62.6m (2017: £60.2m). Underlying* operating profit is up 45% on 2017 at £4.0m (2017: £2.7m). Reported profit increased significantly to £2.2m from £0.3m in 2017.

REGIONAL BREAKDOWN

In this, the fortieth anniversary year since the foundation of Driver Group and its antecedents, I am delighted to report a strong surge back to profitability across our key global markets. This is eloquent testimony to the commitment and professionalism of our team.

ASIA PACIFIC

I am pleased to report that the Asia Pacific region has experienced a positive regional revenue performance increasing by 32% (£2.7m) to £11.0m. The Singapore market has continued to grow significantly, with revenue up 47% (£2.6m), and remains the central hub for the business in the region. Malaysia also demonstrated further sustainable growth. In Australia, after a challenging year in 2016-17, we have seen steady improvements and look forward with confidence to growth potential in this market.

Although Hong Kong's performance was slightly below our expectations, the ground work has been laid to ensure the business is well positioned for future growth as evidenced by significant improvement in staff utilisation rates*** (up 22% points) to 82%. As a result we are well placed to exploit the strategic opportunities for growth in mainland China.

MIDDLE EAST

The Middle East was the only region which was unable to meet its performance targets this year with strong performances in Qatar and Kuwait countered by our performance in UAE. As a region, revenue was down 9% (£2.3m) to £22.9m. UAE revenue was down 22% (£2.9m), but this was partially offset by UAE staff being deployed to support the delivery of projects in Qatar and Kuwait where revenue was up by a very encouraging 35% and 29%, respectively.

The importance that Driver Group continues to attach to this region is reflected in the fact that in April 2018 we were delighted to open our own office in Kuwait City, which opened to considerable regional acclaim. We have also refreshed and enhanced our strategic referral network relationships in the region, and held a very successful marketing initiative in UAE in April 2018. Over the coming year, we will be seeking to pursue a range of large projects. This is in addition to ongoing work from the delivery of power projects that are already in their build phase, as well as scope for expansion of our high value Diales expert witness work.

EUROPE AND AMERICAS

Across the Europe and Americas region, revenue rose by an encouraging 10% (£2.7m) to £28.8m. In particular, Driver Trett UK revenue was up £1.9m, a very commendable performance - and, in fact, a new record for the business and region.

Canada, which experienced challenging trading conditions and a change of management in the preceding year, returned a modest profit. The business is well positioned for growth in the coming financial year.

OUTLOOK

After a very successful 12 month period for your business, and a positive trading performance in the early part of the new financial year, we have a realistic expectation that it can make significant further progress in growing its global offering, achieving even more competitive local market positions, and adding further to our extensive blue chip client base. As a global business with operations worldwide, we do not, at present, foresee a significant impact on the Group as a result of the UK leaving the EU. Our strategy has delivered outstanding performance over the past year. I believe we are, therefore, exceptionally well placed to build on that performance in the year ahead.

Gordon Wilkinson

Chief Executive Officer

11 December 2018

* Underlying figures are stated before the share-based payment costs, exceptional items and amortisation of intangible assets

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

*** Utilisation % is calculated by dividing the total hours billed by the total working hours available for chargeable staff

Chief Financial Officer's Review  

SUMMARY INCOME STATEMENT	2018 £m	2017 £m
Revenue	62.62	60.23
Cost of sales	(46.34)	(45.39)
Gross Profit	16.28	14.84
Recurring operating expenses	(12.31)	(12.09)
Net finance cost	(0.13)	(0.26)
Underlying* profit before tax	3.84	2.49
Exceptional items	-	(1.08)
Share based payments charge	(1.10)	(0.17)
Profit before Tax	2.74	1.23
Tax (expense)/credit	(0.57)	0.04
Profit from continuing operations	2.17	1.27
Loss on discontinued operation, net of tax	-	(0.98)
Profit for the year	2.17	0.30

In 2018 Driver Group delivered an excellent performance with the Group's Income Statement, Cashflow and Balance Sheet all strengthened as progress continued during the year. Over the past year, the following key financial metrics have improved:

KEY METRICS	2018	2017
Revenue	£62.62m	£60.23m
Gross Margin %	26.0%	24.6%
Underlying* Net Margin %	6.1%	4.1%
Utilisation Rates	80.0%	76.2%
NWC%	14.6%	18.3%
Cash Conversion %	136%	85%

Revenue increased by 4.0% to £62.62m (2017: £60.23m) and gross margin increased by 9.7% to £16.28m (2017: £14.84m). This improvement in gross margin along with our careful management of overheads (excluding share-based payments) following the restructuring in 2017, has resulted in an improved underlying* profit before tax margin of 6.1% (2017: 4.1%). The net cash** at the year end was £6.90m compared to net borrowings of £0.18m in 2017, which is a result of excellent cash management during the financial year as evidenced by a cash conversion rate of 136%.

The Europe and Americas 'EuAm' region increased revenue by 10.3% to £28.75m (2017: £26.05m) and generated an increase in segmental profit of 27.3% to £2.97m (2017: £2.33m). This increase was predominantly driven by an excellent performance in the UK delivering an increase in revenues of 12.8% to £21.52m (2017: £19.08m) due to a combination of significant growth in the Diales technical business complemented by a strong performance from the Driver Project Services business. Contributions from the Netherlands and Germany helped contribute to the overall performance in the EuAm region.

The Middle East 'ME' region saw revenues drop during the year by 9.1% to £22.91m (2017: £25.19m) largely due to a major commission completing early in the year in the UAE and scaling back of the business in Oman. Partially offsetting this, significant growth was seen during the year in Qatar and Kuwait with an increase in revenues of 35.3% to £3.36m (2017: £2.48m) and 28.9% to £2.96m (2017: £2.30m) respectively. Segmental profit for the region increased to £2.14m (2017: £1.93m).

The Asia Pacific region 'APAC' saw revenues increase by 32.2% to £10.96m (2017: £8.29m). The majority of the significant growth in the year was in Singapore, with an increase in revenues of 47% to £8.07m (2017: £5.48m) and is now well established as a regional claims and dispute hub. Both Malaysia and Australia had a small and encouraging increase in revenue offset by a decrease in Hong Kong. Segmental profit for the region increased to £0.95m (2017: £0.53m) an increase of 80.0%. The APAC region continues to be a target for further growth opportunity.

The utilisation*** rate of chargeable staff across the business as a whole for the year stood at 80.0%, an increase from 76.2% in the prior year, with a degree of variability throughout the year ranging from a low of 69.9% to a high of 89.7%. This overall increase in utilisation is clearly a significant factor in the improved results for 2018 and is one of the businesses' key performance indicators.

After a net interest charge of £0.13m (2017: £0.26m) the underlying* profit before tax was £3.84m (2017: £2.49m) and the reported profit before tax was £2.74m (2017: £1.23m) after deduction of £1.10m for share-based payments (2017: £0.17m). The increase in the share-based payment charge has been due to the issue of new options in the year and the strong performance of the Group. Details of the outstanding options can found in the Report of the Directors.

NET WORKING CAPITAL

At the end of the year, net cash** stood at £6.90m which compares very favourably to the net borrowings of £0.18m at the end of last year. This was a result of continued focus on working capital management as evidenced by the Net Working Capital percentage (NWC%¹) of 14.6% (2017: 18.3%) and Cash Conversion² of 136% achieved during the year (2017: 85%).

TAXATION

The Group showed a tax charge of £0.57m (2017: credit £0.04m). The tax charge includes the effects of expenses not deductible for tax purposes and is calculated at the prevailing rates for the jurisdictions the Group operates, consequently, the effective tax rate for the year was 21% (2017: negative 3%). Adjusting for the share-based payments charge the effective tax rate reduces to 15% (2017: negative 3%).

EARNINGS PER SHARE

Underlying* continuing basic earnings per share was 6.1 pence (2017: 5.8 pence). The basic earnings per share was 4.0 pence (2017: 0.7 pence).

CASH FLOW

There was a net cash inflow from operating activities of £5.69m (2017: £2.18m), reflecting the reported profit for the year of £2.17m (2017: £0.30m) after depreciation and amortisation of £0.55m (2017: £1.22m) and the share-based payment charge of £1.10m (2017: £0.17m). Within that, there was an increase of £1.29m in trade and other receivables (2017: decrease of £0.83m), which was more than offset by the increase in trade and other payables of £2.94m (2017: decrease of £1.38m). Net tax paid in the year was £0.39m (2017: £0.03m).

There was a net cash inflow from investing activities of £1.50m (2017: outflow £0.25m) principally due to the sale of the head office building in May 2018 at £1.65m offset by capital expenditure of £0.35m (2017: £0.26m).

Net cashflow from financing activities was an outflow of £2.17m (2017: inflow of £5.73m) with the current year reflecting the repayment of borrowings of £2.00m largely due to the proceeds received from the sale of the head office building and the sale of initiate and scheduled term loan repayments. The prior year inflow was hugely influenced by the net proceeds of £8.11m due to the equity raise in February/March of 2017.

SUMMARY CASHFLOW	£m
Net borrowings** at 30 September 2017	(0.18)
Operating cash flow before changes in working capital	4.42
Increase in Trade and other receivables	(1.29)
Increase in Trade and other payables	2.94
Tax paid	(0.39)
Net interest paid	(0.13)
Capital spend	(0.35)
Repurchase of shares	(0.02)
Disposal of subsidiary, net of cash disposed of	0.20
Proceeds from the disposal of property, plant and equipment	1.65
Effects of Foreign Exchange	0.05
Net cash** at 30 September 2018	6.90

DIVIDENDS

The Directors propose a dividend for 2018 of 0.5p per share (2017: £nil).

David Kilgour

Chief Financial Officer

11 December 2018

⁽¹⁾ Net Working Capital is calculated by taking the net sum of trade receivables, trade payables and financial derivatives and dividing by the sum of revenue and other operating income.

⁽²⁾ Cash conversion is calculated by taking underlying* EBITDA divided by Cash generated from operations.

* Underlying figures are stated before the share-based payment costs, exceptional items and amortisation of intangible assets

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

*** Utilisation % is calculated by dividing the total hours billed by the total working hours available for chargeable staff

Consolidated Income Statement

For the year ended 30 September 2018

		2018 £000	2017 £000
REVENUE		62,615	60,227
Cost of sales		(46,338)	(45,391)
GROSS PROFIT		16,277	14,836
Administrative expenses		(13,546)	(13,485)
Other operating income		139	143
Underlying* operating profit		3,970	2,747
Exceptional items		-	(1,083)
Share-based payment charges and associated costs		(1,100)	(170)
Amortisation of intangible assets		-	-
OPERATING PROFIT		2,870	1,494
Finance income		17	1
Finance costs		(148)	(262)
PROFIT BEFORE TAXATION		2,739	1,233
Tax (expense)/credit		(567)	38
PROFIT FROM CONTINUING OPERATIONS		2,172	1,271
Loss on discontinued operation, net of tax		-	(976)
PROFIT FOR THE YEAR		2,172	295
Profit attributable to non-controlling interests from continuing operations		3	4
Profit attributable to non-controlling interests from discontinued operations		-	-
Profit attributable to equity shareholders of the Parent from continuing operations		2,169	1,267
Loss attributable to equity shareholders of the Parent from discontinued operations		-	(976)
		2,172	295
Basic earnings per share attributable to equity shareholders of the Parent (pence)		4.0p	0.7p
Diluted earnings per share attributable to equity shareholders of the Parent (pence)		3.8p	0.6p
Basic earnings per share attributable to equity shareholders of the Parent (pence) from continuing operations		4.0p	2.9p
Diluted earnings per share attributable to equity shareholders of the Parent (pence) from continuing operations		3.8p	2.8p

* Underlying figures are stated before the share-based payment costs, exceptional items and amortisation of intangible assets 

Consolidated Statement of Comprehensive Income

For the year ended 30 September 2018

	2018 £000	2017 £000
PROFIT FOR THE YEAR	2,172	295
Other comprehensive income:
Items that could subsequently be reclassified to the Income Statement:
Exchange differences on translating foreign operations	59	(18)
OTHER COMPREHENSIVE INCOME/(LOSS) FOR THE YEAR NET OF TAX	59	(18)
TOTAL COMPREHENSIVE INCOME FOR THE YEAR	2,231	277
Total comprehensive income attributable to:
Owners of the Parent	2,228	273
Non-controlling interest	3	4
	2,231	277

Consolidated Statement of Financial Position

For the year ended 30 September 2018

		2018		2017
		£000	£000	£000	£000
NON-CURRENT ASSETS
Goodwill		2,969		2,969
Property, plant and equipment		765		950
Intangible assets		-		-
Deferred tax asset		69		58
			3,803		3,977
CURRENT ASSETS
Trade and other receivables		20,445		18,859
Derivative financial asset		42		531
Cash and cash equivalents		10,007		4,932
Asset held for sale		-		1,614
			30,494		25,936
TOTAL ASSETS			34,297		29,913
CURRENT LIABLITIES
Borrowings		(646)		(527)
Trade and other payables		(10,623)		(8,352)
Derivative financial liability		(639)		(12)
Current tax payable		(456)		(175)
			(12,364)		(9,066)
NON-CURRENT LIABILITIES
Borrowings		(2,460)		(4,583)
Deferred tax liabilities		-		(127)
			(2,460)		(4,710)
TOTAL LIABILITIES			(14,824)		(13,776)
NET ASSETS			19,473		16,137
SHAREHOLDERS' EQUITY
Share capital			215		215
Share premium			11,475		11,475
Merger reserve			1,055		1,055
Currency reserve			(400)		(459)
Capital redemption reserve			18		18
Retained earnings			7,107		3,937
Own shares			(3)		(107)
TOTAL SHAREHOLDERS' EQUITY			19,467		16,134
NON-CONTROLLING INTEREST			6		3
TOTAL EQUITY			19,473		16,137

Consolidated Cashflow Statement

For the year ended 30 September 2018

		2018 £000	2017      £000
CASH FLOWS FROM OPERATING ACTIVITIES
Profit for the year		2,172	295
Adjustments for:
Depreciation		551	601
Amortisation		-	621
Exchange adjustments		(46)	51
Loss on disposal of subsidiary		-	796
Profit on disposal of property, plant & equipment		(52)	-
Finance income		(17)	(1)
Finance expense		148	262
Tax expense/(credit)		567	(38)
Equity settled share-based payment charge		1,100	170
OPERATING CASH FLOW BEFORE CHANGES IN WORKING CAPITAL AND PROVISIONS		4,423	2,757
(Increase)/decrease in trade and other receivables		(1,291)	833
Increase/(decrease) in trade and other payables		2,939	(1,378)
CASH GENERATED IN OPERATIONS		6,071	2,212
Tax paid		(385)	(29)
NET CASH INFLOW FROM OPERATING ACTIVITIES		5,686	2,183
CASH FLOWS FROM INVESTING ACTIVITIES
Interest received		17	1
Acquisition of property, plant and equipment		(350)	(264)
Proceeds on sale and operating leaseback of property, plant and equipment		1,650	-
Disposal of subsidiary net of cash acquired		195	12
NET CASH INFLOW/(OUTFLOW) FROM INVESTING ACTIVITIES		1,512	(251)
CASH FLOWS FROM FINANCING ACTIVITIES
Interest paid		(148)	(262)
Repayment of borrowings		(2,004)	(7,123)
Proceeds of borrowings		-	5,000
Repurchase of share options		(17)	-
Proceeds from issue of new shares		-	8,560
Costs directly attributable to the issue of new shares		-	(450)
NET CASH (OUTFLOW)/INFLOW FROM FINANCING ACTIVITIES		(2,169)	5,725
Net increase in cash and cash equivalents		5,029	7,657
Effect of foreign exchange on cash and cash equivalents		46	(51)
Cash and cash equivalents at start of period		4,932	(2,674)
CASH AND CASH EQUIVALENTS AT END OF PERIOD		10,007	4,932

Consolidated Statement of Changes in Equity

For the year ended 30 September 2018

	Share capital £000	Share premium £000	Merger reserve £000	Other reserves(2) £000	Retained earnings £000	Own shares £000	Total(1) £000	Non-controlling interest £000	Total Equity £000
OPENING BALANCE AT 1 OCTOBER 2016	127	3,453	1,702	(423)	2,829	(107)	7,581	(1)	7,580
Profit for the year	-	-	-	-	291	-	291	4	295
Other comprehensive income for the year	-	-	-	(18)	-	-	(18)	-	(18)
Total comprehensive income for the year	-	-	-	(18)	291	-	273	4	277
Transfer on disposal of Initiate	-	-	(647)	-	647	-	-	-	-
Share-based payment	-	-	-	-	170	-	170	-	170
Issue of share capital	88	8,472	-	-	-	-	8,560	-	8,560
Costs directly attributable to the issue of new shares	-	(450)	-	-	-	-	(450)	-	(450)
CLOSING BALANCE AT 30 SEPTEMBER 2017	215	11,475	1,055	(441)	3,937	(107)	16,134	3	16,137
Profit for the year	-	-	-	-	2,169	-	2,169	3	2,172
Other comprehensive income for the year	-	-	-	59	-	-	59	-	59
Total comprehensive income for the year	-	-	-	59	2,169	-	2,228	3	2,231
Transfer of reserves(3)	-	-	-	-	(82)	82	-	-	-
Share-based payment	-	-	-	-	1,100	-	1,100	-	1,100
Proceeds from sale of own shares	-	-	-	-	-	22	22	-	22
Repurchase of share options	-	-	-	-	(17)	-	(17)	-	(17)
CLOSING BALANCE AT 30 SEPTEMBER 2018	215	11,475	1,055	(382)	7,107	(3)	19,467	6	19,473

⁽¹⁾     Total equity attributable to the equity holders of the Parent

⁽²⁾         'Other reserves' combines the currency reserve and capital redemption reserve.  The movement in the current and prior year relates to the translation of foreign currency equity balances and foreign currency non-monetary items.

⁽³⁾         The shortfall in the market value of the shares held by the EBT and the outstanding loan is transferred from own shares to retained earnings

Notes

1     BASIS OF PREPARATION AND STATUS OF FINANCIAL INFORMATION

The Financial information set out above has been prepared in accordance with the recognition and measurement criteria of International Financial Reporting Standards as adopted by the EU (Adopted IFRSs).

The financial information set out above does not constitute the Group's statutory accounts for the years ended 30 September 2018 or 2017. Statutory accounts for 2017 have been delivered to the Registrar of Companies, and those for 2018 will be delivered in due course. The auditor has reported on those accounts; their reports were (i) unqualified, (ii) did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying their report (iii) did not contain a statement under section 498 (2) or (3) of the Companies Act 2006.

These results were approved by the Board of Directors on 10 December 2018.

2     SEGMENTAL ANALYSIS

REPORTABLE SEGMENTS

For management purposes, the Group is organised into three operating divisions: Europe & Americas (EuAm), Middle East (ME) and Asia Pacific (APAC).  This has changed from the previous operating divisions of Europe & Americas (EuAm) and Africa, Middle East and Asia Pacific (AMEA), due to the disposal of the African subsidiary in May 2017 and the dismantling of the AMEA central management team in late 2016. These divisions are now the basis on which the Group is structured and managed, based on its geographic structure.  The following key service provisions are provided across all three operating divisions: quantity surveying, planning / programming, quantum and planning experts, dispute avoidance / resolution, litigation support, contract administration and commercial advice / management.

Segment information about these reportable segments is presented below.

Year ended 30 September 2018

		Continuing operations
		Europe & Americas	Middle East	Asia Pacific	Africa	Eliminations	Unallocated	Consolidated	Discontinued Initiate
		£000	£000	£000	£000	£000	£000	£000	£000
Total external revenue		28,749	22,910	10,956	-	-	-	62,615	-
Total inter-segment revenue		55	26	2	-	(83)	-	-	-
Total revenue		28,804	22,936	10,958	-	(83)	-	62,615	-
Segmental profit		2,968	2,139	952	-	-	-	6,059	-
Unallocated corporate expenses(1)		-	-	-	-	-	(2,089)	(2,089)	-
Share-based payment charge		13	-	-	-	-	(1,113)	(1,100)	-
Exceptional items		-	-	-	-	-	-	-	-
Amortisation of intangible assets		-	-	-	-	-	-	-	-
Operating profit/(loss)		2,981	2,139	952	-	-	(3,202)	2,870	-
Finance income		-	-	-	-	-	17	17	-
Finance expense		-	-	-	-	-	(148)	(148)	-
Profit/(loss) before taxation		2,981	2,139	952	-	-	(3,333)	2,739	-
Taxation		-	-	-	-	-	(567)	(567)	-
Profit/(loss) for the period		2,981	2,139	952	-	-	(3,900)	2,172	-
OTHER INFORMATION
Non current assets		3,202	300	151	-	-	150	3,803	-
Reportable segment assets		13,636	10,510	4,302	-	-	5,849	34,297	-
Capital additions(2)		68	251	-	-	-	31	350	-
Depreciation and amortisation		108	245	114	-	-	84	551	-
	(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 2018

Year ended 30 September 2017

	Europe & Americas	Middle East	Asia Pacific	Africa	Eliminations	Unallocated	Consolidated	Discontinued Initiate
	£000	£000	£000	£000	£000	£000	£000	£000
Total external revenue	26,049	25,190	8,289	699	-	-	60,227	3,229
Total inter-segment revenue	601	4	125	200	(961)	-	(31)	31
Total revenue	26,650	25,194	8,414	899	(961)	-	60,196	3,260
Segmental profit/(loss)	2,331	1,931	529	(299)	-	-	4,492	2
Unallocated corporate expenses(1)	-	-	-	-	-	(1,745)	(1,745)	-
Share-based payment charge	-	-	-	-	-	(170)	(170)	-
Exceptional items	-	-	-	(449)	-	(634)	(1,083)	(475)
Amortisation of intangible assets	-	-	-	-	-	-	-	(621)
Operating profit/(loss)	2,331	1,931	529	(748)	-	(2,549)	1,494	(1,094)
Finance income	-	-	-	-	-	1	1	-
Finance expense	-	-	-	-	-	(262)	(262)	-
Profit/(loss) before taxation	2,331	1,931	529	(748)	-	(2,810)	1,233	(1,094)
Taxation	-	-	-	-	-	38	38	118
Profit/(loss) for the period	2,331	1,931	529	(748)	-	(2,772)	1,271	(976)
OTHER INFORMATION
Non current assets	3,241	404	137	-	-	195	3,977	-
Reportable segment assets	14,745	9,620	3,498	-	-	2,050	29,913	-
Capital additions(2)	39	59	91	-	-	78	267	-
Depreciation and amortisation	110	289	64	8	-	130	601	621

⁽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 2017.

Geographical information:

	External revenue by location of customers
	2018 £000	2017 £000
UK	18,553	20,517
UAE	9,974	11,723
Singapore	6,212	3,864
Oman	5,836	6,778
Qatar	3,841	3,378
Germany	3,093	2,111
France	1,947	1,806
Netherlands	1,873	2,630
Kuwait	1,843	1,783
Malaysia	1,752	1,487
Australia	1,609	930
Canada	982	707
Italy	753	401
Spain	707	33
Saudi Arabia	560	1,233
United States	466	19
Belgium	465	837
Vietnam	324	209
Hong Kong	316	810
Algeria	211	107
Poland	163	157
India	156	67
South Korea	151	29
South Africa	21	643
China	-	486
Other countries	807	711
	62,615	63,456

Reconciliation to total Group revenue

	2018 £000	2017 £000
Total external revenue from continuing operations	62,615	60,227
Total external revenue from discontinued operation	-	3,229
	62,615	63,456

Geographical information of Non current assets

	2018 £000	2017 £000
UK	3,329	3,408
Oman	112	204
UAE	129	164
Singapore	76	99
Qatar	37	20
Malaysia	42	19
Kuwait	22	16
Hong Kong	19	11
Netherlands	13	12
France	6	10
Australia	14	8
Canada	4	6
	3,803	3,977

3          EXCEPTIONAL ITEMS

	2018 £000	2017 £000
Restructuring costs (1)	-	634
Disposal of subsidiary (2)	-	449
	-	1,083

⁽¹⁾     Restructuring costs include bank charges and legal and professional fees in relation to the refinancing in the prior year.

⁽²⁾     Disposal of subsidiary in the prior year includes the loss on the disposal of Driver Trett South Africa (pty) Ltd and the associated legal and professional fees for the disposal.

4     TAXATION

Analysis of the tax charge/(credit)

The tax charge/(credit) on the profit for the year is as follows:

	2018 £000	2017 £000
Current tax:
UK corporation tax on profit for the year	-	-
Non-UK corporation tax	636	126
Adjustments to the prior period estimates	69	(71)
	705	55
Deferred tax:
Origination and reversal of temporary difference	(138)	(211)
Tax charge/(credit) for the year	567	(156)

	2018 £000	2017 £000
Current tax:
From continuing operations	705	55
From discontinued operations	-	-
	705	55
Deferred tax:
From continuing operations	(138)	(93)
From discontinued operations	-	(118)
	(138)	(211)
Tax charge/(credit) for the year	567	(156)

Factors affecting the tax charge

The tax assessed for the year varies from the standard rate of corporation tax in the UK. The difference is explained below:

	2018 £000	2017 £000
Profit from continuing operations	2,739	1,233
Loss from discontinued operations	-	(1,094)
Profit before tax	2,739	139
Expected tax credit based on the standard average rate of corporation tax in the UK of 19% (2017: 19%)	521	26
Effects of:
Expenses not deductible	322	477
Deferred tax - other differences	(138)	(211)
Foreign tax rate difference	(66)	(288)
Adjustment to prior period estimates	69	(71)
Utilisation of losses	(60)	(313)
Share options exercised	(17)	(32)
Unprovided losses	(64)	256
Tax charge/(credit) for the year	567	(156)

Factors that may affect future tax charges

As enacted in the Finance Act 2016, from 1 April 2020 there will be a reduction in the main rate of corporation tax to 17%. This will affect future tax charges accordingly.

5     EARNINGS PER SHARE

	2018 £000	2017 £000
Profit for the financial year attributable to equity shareholders	2,169	291
Share-based payment charges and associated costs	1,100	170
Exceptional items	-	1,083
Loss from discontinued operations	-	976
Profit for the year from continuing operations before share-based payments, amortisation of intangible assets and exceptional items	3,269	2,520
Weighted average number of shares:
-     Ordinary shares in issue	53,862,868	43,775,690
-     Shares held by EBT	(108,052)	(267,760)
Basic weighted average number of shares	53,754,816	43,507,930
Effect of Employee share options	2,762,696	1,972,870
Diluted weighted average number of shares	56,517,512	45,480,800
Basic earnings per share	4.0p	0.7p
Diluted earnings per share	3.8p	0.6p
Adjusted continuing basic earnings per share before share-based payments, amortisation of intangible assets and exceptional items	6.1p	5.8p
Basic earnings per share attributable to equity shareholders of the Parent from continuing operations	4.0p	2.9p
Diluted earnings per share attributable to equity shareholders of the Parent from continuing operations	3.8p	2.8p

6     DISCONTINUED OPERATION - prior year

In line with the Group's strategy to focus on claims, disputes and expert witness assignments the Directors made the decision to dispose the Group's 100% share of initiate Consulting Limited ('Initiate') on 30 September 2017. As a result of this disposal Initiate has been classed as a discontinued operation and is the only operation presented as discontinued in these financial statements.

At the date of disposal Initiate had net assets of £0.1m. The consideration received for the disposal was £0.2m. The loss on disposal is due to a goodwill write-off of £0.5m.

Loss on disposal

	2018 £000	2017 £000
Net assets at disposal date	-	113
Goodwill write-off	-	487
Anticipated proceeds	-	(188)
Loss on disposal	-	412

Results of discontinued operations

	2018 £000	2017 £000
Revenue	-	3,229
Expenses	-	(3,290)
Finance costs	-	-
Tax	-	118
Amortisation of intangible asset	-	(621)
Loss on disposal	-	(412)
Loss for the year	-	(976)

Earnings per share from discontinued operations

	2018 £000	2017 £000
Basic loss per share	-	(2.2)p

Results of discontinued operations

The statement of cash flows includes the following amounts relating to discontinued operations

	2018 £000	2017 £000
Operating activities	-	(1,244)
Investing activities	-	-
Financing activities	-	-
Loss for the year	-	(1,244)

Disposal of Driver Trett South Africa (pty) Ltd

The Directors also took the decision in the prior year to dispose of Driver Trett South Africa (pty) Ltd ('DTSA') in South Africa to the local management team on 12 May 2017. This decision was made due to specific market constraints imposed by the government upon ownership which prevented effective bidding for most of the key projects.

At the date of disposal DTSA had net assets of £0.54m. The consideration paid was £0.15m in cash. A loss on disposal of £0.39m was recognised in the financial statements. As DTSA formed part of the Africa, Middle East and Asia Pacific operating segment it has not be disclosed separately as a discontinued operation.

During the prior year the DTSA contribution to revenue was £0.70m and a loss before tax of £0.30m.

7     ASSET HELD FOR SALE

At 30 September 2017 the Directors took the decision to reclassify the Group's head office at St Crispin Way from land and buildings to an asset held for sale. During the year the head office was disposed for proceeds of £1.65m less costs to sell of £0.04m in a sale and leaseback arrangement. At the date of disposal and at 30 September 2017 the land and buildings had a carrying value of £1.61m and was derecognised from the Group's assets at disposal. The subsequent lease is classified as an operating lease.

8     CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS

Some asset and liability amounts reported in the Consolidated Financial Statements contain a degree of management estimation and assumptions.  There is therefore a risk of significant changes to the carrying amounts for these assets and liabilities within the next financial year.  The estimates and assumptions are made on the basis of information and conditions that exist at the time of the valuation.

The following are considered to be key accounting estimates.

Impairment reviews

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 test has been performed at the reporting date and no impairment is required.

Receivables impairment provisions

The amounts presented in the Consolidated Statement of Financial Position are net of allowances for doubtful receivables, estimated by the Group's management based on prior experience and their assessment of the present value of estimated future cash flows.  At the Statement of Financial Position date a £2,046,000 (2017: £2,109,000) provision was required.  If managements estimates changed in relation to the recoverability of specific trade receivables the provision could increase or decrease. Any future increase to the provision would lead to a corresponding increase in reported losses and a reduction in reported total assets.

Revenue recognition on fixed fee projects

Where the Group enters into a formal fixed fee arrangement revenue is recognised by reference to the stage of completion of the project.  The stage of completion will be estimated by the Group's management based on the Project Manager's assessment of the contract terms, the time incurred and the performance obligations achieved and remaining.

 

END

 

 

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