Final Results

RNS Number : 3028T

Driver Group plc

12 December 2012

 



12 December 2012

DRIVER GROUP PLC

("Driver" or "the Group")

Preliminary Results

For the Year to 30 September 2012

Driver provides specialist commercial & dispute resolution

Services to the construction and engineering industries

	2012 £000	2011 £000	Change
Revenue	26,258	17,365	8,893
Gross profit %	26.8%	26.8%	0.0pp
Underlying* profit before tax	1,751	548	1,203
Exceptional items and share-based payment charge	(553)	(199)	(354)
Profit before tax	1,198	349	849
Profit after tax	961	268	693
Basic earnings per share	3.3p	0.9p	2.4p
Underlying* earnings per share	5.5p	1.7p	3.8p
Dividend per share***	1.0p	0.5p	0.5p
Net (borrowings) / cash at year end**	(964)	572	(1,536)
Total equity	7,497	6,700	797

Key points

·      Revenue up 51%

·      Underlying Pre Tax Profit up 220%*

·      Cash generated from operations £1.4m

·      Successful acquisition and integration of Trett Holdings Ltd (Trett)

·      Trett returned to profit

·      Established global operations

·      Middle East revenues up 58%

·      Qatar revenues up 175%

·      Africa Revenues up 143%

·      UK Power & Process Revenues up 147%

·      Q1 performance of 2012 / 2013 very strong

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

"I am pleased to report on the Group's performance for the financial year 2011 / 2012; a year in which we both materially outperformed market expectations and made a significant acquisition which has given the Group a presence in 5 global regions.  We achieved all of our key objectives including further growth in revenues, profits and cash position (after accounting for the funds utilised in the acquisition of Trett).

We are delighted by the way our current financial year has started, particularly in Africa and the Middle East which continue to outperform as the momentum in our last financial year in these regions has continued into the current year.  The Board therefore has a high level of confidence in the outlook for the remainder of the current financial year."

Enquiries:

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

* Underlying figures are stated before the share-based payment charge and exceptional items (note 5)

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

***0.3p paid as an interim dividend, remaining 0.7p proposed for payment after year end.

CHAIRMAN'S STATEMENT

Introduction

I am pleased to report on the Group's performance for the financial year 2011 / 2012; a year in which we both materially outperformed market expectations and made a significant acquisition which has given the Group a presence in 5 global regions.  Throughout the year we continued the positive trends seen in the second half of 2010 / 2011 and the first half of 2011 / 2012.

We achieved all of our key objectives including further growth in revenues, profits and cash position (after accounting for the funds utilised in the acquisition of Trett).  This strength in trading, cash generation and continued optimism across the business allows us to recommend an enhanced final dividend.

12 months ago we stated that the Group would continue to strive for growth in terms of revenue and sustainable profit and that it would maintain a healthy cash position.  We identified areas where the Group's operations could be developed (being primarily Africa, Qatar and UK Power & Process sector) and said we were structured to maintain a stable environment in all other areas of the Group.  I am pleased to report that not only was the Group successful in developing and growing these targeted areas but it was also able to significantly outperform in the Middle East.

Following the Trett acquisition and the underlying growth in our business, our employee and sub-consultant numbers have risen to 271 (2011: 175).  At all levels in the Group, our employees have adapted to the challenges our business has encountered through this continued period of growth and have adopted a flexibility appropriate to Driver's developing global business.  This commitment to the Group's future performance has resulted in the Group being in a position where it is creating exciting opportunities for our staff across the globe and in an increased number of service sectors.

I am particularly pleased, as the Group Chief Executive states in his statement, to report that the integration of the Trett business acquired in May 2012 has been successfully achieved and the staff that joined Driver are making a full contribution to the Group.

Financial Results

Revenue for the 12 months to 30 September 2012 increased by 51% to £26.3m (2011: £17.4m) largely as a result of our improving position in Africa, the Middle East, the UK Power & Process sector and with the final 5 months benefitting from the acquisition of Trett.

Underlying* profit before taxation increased by 220% to £1.75m (2011: £0.55m).  After a charge for share options of £135,000 (2011: £74,000) and exceptional items (being the costs related to the acquisition and integration of Trett and severance payments) of £418,000 (2011: £125,000) reported profit before taxation increased 243% to £1.2m (2011: £0.35m).

The Group's net borrowing position at the end of the year stood at £0.96m after the acquisition of Trett (2011: net cash £0.57m). Cash generated from operations was £1.4m.

Underlying* earnings per share was 5.5 pence (2011: 1.7 pence).  Reported earnings per share was 3.3 pence (2011: 0.9 pence). 

(* Underlying figures are stated before the share-based payment charge and exceptional items (note 5))

Dividend

In view of the sustained profits and the underlying cash inflow in the year, the Board proposes a final dividend for 2012 of 0.7p per share (2011: 0.5p) giving a full year dividend of 1.0p per share (2011: 0.5p).  The final dividend will be paid on 9 April 2013 to shareholders on the register at the close of business on 2 April 2013.

Trading Overview

The Group's performance continues to progress against all key parameters.  Revenue is 51% higher, underlying pre-tax profit is 220% higher and the underlying cash position has increased by £0.6m when account is taken of the Trett acquisition net cost of £2.2m.

This has been achieved whilst integrating Trett into the business and returning the Trett business to profit from a sustained period of losses at the time of acquisition.

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

Trading in Europe, which accounted for 61% of Group revenue, was up 34% on 2011 revenues as a result of the 5 month benefit of the Trett business together with continued growth in the Power & Process sector, where we recruited additional management in 2011 in our efforts to increase our presence in this sector.  In addition, we have started to see areas of growth in our UK Civil & Infrastructure sector as well as Off-Shore Wind projects.  Notwithstanding the increase in revenues, profit in Europe was down due to losses in the Trett business in the early months following acquisition.  As we exited the year, utilisation levels of the Trett staff had improved materially ensuring their final months of the year were profitable in their European operations.

In the Middle East, trading accounted for 27% of Group revenue and was up 58% on 2011 revenues.  The region out-performed expectations as set out in the previous trading updates, prior to the Trett acquisition which added a 5 month benefit, with growth in each of our 4 offices, primarily through the disputes and advisory service and expert witness work.  Whilst we anticipated the construction market in the UAE to stay at much reduced levels, we have benefitted from an increasing level of disputes and arbitrations in the region taking revenue up 17% and returning the region to profit.  Oman continues to perform well with Government projects providing much of the revenue from a healthy pipeline of projects with revenue up 27% and profit up 8 percentage points.  Qatar continues to be relatively slow in development due to delays in release of projects but nonetheless increased revenues by 175% in the year and returned to profit.  This increase in overall performance has seen the region transform from a loss position in 2011 to healthy profits in 2012.

Africa's revenue represents 8% of Group revenue and is up 143% on 2011 and significantly out-performed our internal expectations.  We now have work across all service streams - in the PPP sector, expert witness appointments, claims and advisory services, strategic project management and project services.  The region has transformed from a small loss in 2011 to good levels of profit in 2012.

The acquisition of Trett has allowed the Group to penetrate markets in two additional regions, the Americas (through the Houston office) and Asia Pacific (through offices in Kuala Lumpur and Singapore). These regions were not performing well at the time of the acquisition and had been losing money for a sustained period of time but management action, and integration in to the wider Driver Group during the 5 months since acquisition, has turned America to a break even position.  The markets in oil & gas, shipping and marine services provided opportunities for this recovery.

Outlook

Last year I said we would develop our operations in Africa, the UK Power & Process sector and Qatar whilst maintaining a stable environment in the remaining parts of our business and evidence the sustainability of the Group profits.  This has been achieved whilst also out performing in the Middle East, a region where we have grown the business quicker than anticipated following the re-structuring, due to increased volume of work in the dispute market.

In addition, we have completed a significant acquisition that now ensures we have a global footprint.  We have successfully integrated the businesses and have returned the Trett business to profitability.

Our Medium Term Plan is to establish all our key service provisions (Project Services, Dispute & Advisory, Strategic Project Management and Expert Witness & Litigation Support) across all of the regions - Africa, Americas, Asia Pacific, Mainland Europe, Middle East and UK.  In large part this can be achieved organically but we are receptive to the possibilities that targeted acquisitions may be beneficial in some regions and service sectors. We will be looking to open offices in key areas of Canada, Mainland Europe and Asia Pacific.  An important element of this plan is to leverage our service offerings across all markets.  This provides the possibility for material growth particularly given that Trett has not previously provided project services or strategic project management services to their clients.

We see the coming year as one in which we will continue to grow and develop our service offerings across all of our regions.  Of course different regions will develop at different paces and in varying markets. The oil and gas market is an area where we see opportunity to impact in 3 regions; and an important objective is to increase our activity across the network of hubs in Houston, UAE and Kuala Lumpur / Singapore.  In June, we launched our Diales brand through which we promote our high end expert witness offering to clients involved in international arbitrations and this will continue to be an area of focused development.

We are delighted by the way our current financial year has started, particularly in Africa and the Middle East which continue to outperform as the momentum in our last financial year in these regions has continued into the current year.  Across the Group, our secured revenues and revenues expected to be secured and delivered in the remainder of the year are very encouraging.  We have visibility of our first quarter performance and secured work beyond this period, which indicates that we have had a particularly strong start to the current year.  This gives the Board a high level of confidence in the outlook for the remainder of the financial year.

W. Alan McClue

Non-Executive Chairman

CHIEF EXECUTIVE'S REPORT

Introduction

In my 2011 report I stated that the environment within which we would operate in 2012 would be much the same as in 2011 and that growth would come from Africa, Qatar and the UK Power & Process sector within Driver Project Services. I anticipated stability rather than growth in the rest of the UK market and was cautious about the Middle East notwithstanding our strong start to the year in that region. I am very pleased with our performance against these expectations as highlighted in our trading updates and profit upgrades during the course of the year. Africa increased its revenues by 143% and returned to profit, Qatar by 175% and returned to profit and the Power & Process sector of Driver Project Services increased revenue and profits by 147%. The Middle East maintained its strong start to the year increasing revenues by 58%, additionally the region benefitted from 5 months contribution from the acquisition of Trett and returned to a healthy level of profit from a break even position in the previous year.

In May 2012, we announced the acquisition of Trett. Prior to the acquisition, Trett had experienced a prolonged period of losses but we did anticipate that we would turn this around before the end of the year. I am delighted to report the integration has gone well, with the Trett business making profits in each month of the final quarter.  The Trett name is long established and well regarded within the market place in which we operate and in certain parts of the world we will continue to use the name of Trett through "DriverTrett".

The Group performed very well against all key metrics. The Driver business, excluding the benefit of Trett, increased revenue by 26% and gross margin improved by 1 percentage point to 28%. As a whole the Group increased revenue by 51% to £26.3m (2011: £17.4m) and gross margin was maintained at 27% (2011: 27%) - due to a reduced gross margin of 23% in the Trett business. Underlying* profit before taxation increased by 220% to £1.75m (2011: £0.55m). The Group's net borrowing position at the end of the year stood at £0.96m (2011: net cash £0.57m) after the net £2.2m acquisition of Trett with other net cash inflow of £0.6m.

The acquisition of Trett added headcount of 75 employees, of which 65 are fee earners taking our staff levels (including sub consultants) to 271 and it gives us established offices in 3 additional regions of the world - Americas (Houston), Asia Pacific (Kuala Lumpur and Singapore) and Mainland Europe (Netherlands), providing a true global footprint for all of our service offerings. I am very pleased to report that the integration of the Trett offices have been successfully completed and we ended the year with all staff operating within the Driver management systems and policies. We now have a business managed through the five regions in which we trade: Africa, Americas, Asia Pacific, Europe and the Middle East and as a global business 56% of revenue is generated on overseas projects.

(*Underlying figures are stated before the share based payment charge and exceptional items (note 5))

Africa

Africa has this past year developed into a material region for the Group with 8% of Group revenue coming through this office. Trading increased by 143% to £1.99m (2011: £0.8m) with healthy gross margins returning the region to good profits.  In my last statement, I said I expected some of the good quality outstanding proposals to be secured in 2012 and they were - for example the strategic project management appointment announced in July 2012. Our key markets continue to be PPP, disputes and project management / supervision and the pipeline of opportunities for 2013 is again solid.

Americas

We now have an office in Houston as a result of the Trett acquisition. This office primarily serves the oil & gas market as the vast majority of these projects are initiated and managed from here. The focus has been on providing dispute and expert witness services and, in the 5 months since the acquisition, we have eliminated the losses and closed the year with a break even position. We have plans in place to develop the broader service offering of the Driver Group in this region, particularly Project Services which are in demand and were not previously offered by Trett.

Asia Pacific

Trett have two offices in this region - Kuala Lumpur and Singapore and, as was the Trett model, they focused on the dispute and expert witness market. The business lost money over a sustained period prior to acquisition and although this has recovered to some extent in the five months since acquisition, it was still loss making at the close of the year. We have provided added focus and impetus in the region and will also be developing the wider Group services within Driver - primarily Project Services to the oil & gas and petrochemical markets in the region. 

Europe

This region is the largest region in the Group with 61% of Group revenue. Revenue has increased by £4m or 34% to £16.1m (2011: £12m) in the year as a result of the anticipated growth in our UK Power & Process sector (up £1.9m) and the benefit of 5 months of Trett trading. Underlying profits were down 5 percentage points at 12% of revenue (2011: 17%) reflecting the lower level of utilisation and gross margin of the Trett business particularly in the early months following the acquisition.  Due to this, utilisation levels for Driver Trett Europe averaged across both businesses were down 7 percentage points on 2011 at 69% - an area where I believe increased profits can be generated in 2013.

We continue to benefit from our client base in the civil engineering & infrastructure sectors as well as off shore wind, and the Driver UK business outside of Power & Process and Trett maintained 2011 revenues. In Mainland Europe our revenues and client base have increased materially through the addition of the Trett office in the Netherlands which brings with it clients in the marine and shipbuilding sectors as well as a broader oil & gas and energy client base. I remain of the view that we are increasing market share in the UK and Mainland Europe due to our growing reputation, the quality of our staff and the marketing focus of the senior management.

Middle East

This region continued the turnaround experienced in the second half of 2010 / 2011 following the restructuring and now accounts for 27% of Group revenue. Revenue increased by £2.6m or 58% in the year to £7.1m (2011: £4.5m) some of which is the benefit of the Trett business in the final 5 months of the year. The region made a substantial profit in 2012 overturning the previous year's losses of £0.09m with every office in the region growing and returning profits.

Oman is the largest office in the region and the administrative centre for all of our Middle East business. It continued to grow as highlighted by the announcements made during the course of the year confirming appointments to provide consulting and project management services for the Public Authority for Electricity and Water, consultancy services on Muscat and Salalah Airports and project management of a major road scheme. The office also works for several other Government Ministries. Oman increased revenues by 27% to £2.8m (2011: £2.2m) and returned a very healthy profit up 7 percentage points on 2011.  I have previously stated that Government work on live projects provides a stable foundation for the higher margin disputes business and in 2012 we benefitted from this. There was an upturn in dispute work with higher gross margins leading to the increased profits even though the nature of this work did cause utilisation levels to drop - down 9 percentage points at 79% (2011: 88%). Oman did not benefit directly from the acquisition of Trett as they did not have an office in this region.

The Dubai office continues to focus on the dispute market and the expert witness market following the restructure and refocusing of the business in 2011.  Revenue, before a small benefit from the acquisition of Trett, was maintained at £1.2m (2011: £1.2m). However, the small loss in 2011 was overturned and a healthy profit margin was delivered as a result of continually managing the cost base of the business to reflect anticipated revenues and better utilisation of staff across the region. Utilisation levels did increase by 7 percentage points but were still low at 63% - providing an area for increased profits in 2013.

The Abu Dhabi office benefitted the most in the region from the acquisition of Trett with revenues increasing 173% and provided the healthiest gross margin and profit levels in the region - overturning the small loss in 2011. As with Dubai, the focus remains on the dispute and expert witness market. High utilisation levels were a contributory factor to these gross margin and profit levels.

In Qatar, the frustration experienced in 2011 due to delays in the release of the major infrastructure projects by government was reduced as the office increased revenues by 175% and again the marginal loss was overturned and replaced with a healthy profit.  This was a reflection of continuing the work with our key clients from 2011 and converting the good opportunities that I said we had in my last statement. With utilisation levels at 100% recruitment plans are in place for the coming year.

Outlook

The acquisition of Trett provided a key moment for consideration of our next medium term plan. We now have a global business with opportunities to leverage all Group service offerings across all these regions. This opportunity is enhanced by the fact that Trett did not provide Project Services or Strategic Project Management Services to their clients and so the Group can now offer these services to new clients in new parts of the world; particularly the oil & gas hubs of Houston, Kuala Lumpur and Singapore together with our existing offices in the Middle East. Our Medium Term Plan is to achieve this and we will consider opening further offices in Asia Pacific, Canada and Mainland Europe as part of this plan. Our preferred means of growth is organic but we acknowledge that in certain regions and service sectors it may be appropriate to consider strategic acquisitions and we will certainly be receptive to this prospect.

On a more basic note, it is evident that utilisation levels and gross margins in the old Trett businesses can be bettered and are starting to improve as the staff relationships with each other and the Driver management systems develop; this provides the opportunity through sensible management to increase profitability.

The Africa region again has a strong pipeline of proposals and opportunities in the PPP sector and for project management / planning services and is a target area for continued growth.

I have made a new appointment in Americas - Martin Woodall as Managing Director of the Region. Martin was the Managing Director of Driver Project Services in the UK and was brought in specifically to establish the Power & Process division. This has been successful and the succession plan in that business has allowed Martin to relocate to Houston in the New Year to establish both Driver Project Services and DriverTrett in the Region - initially in the oil & gas sector where Trett have clients and Martin is well connected. I anticipate growth to come from this region as a result of this appointment and the additional offerings Driver Group now brings to the market.

Asia Pacific is now headed by the ex Trett Managing Director - Alastair Farr as Managing Director for the region. With his knowledge of the staff and the region together with reducing his responsibilities to now focus only on this region we should start to see some positive results and a return to profitability. Plans are in place to open an office in Queensland, Australia on the back of the large LNG project we announced our appointment to in May 2012.

The construction market in the UK and Europe continues to be challenging and is unlikely to grow in 2013, however, there are some industry commentators who suggest 2013 may be the bottom of the cycle. Our own experience is that outside of our Power & Process initiatives the rest of the UK construction market was flat in 2012 but it was the first year since recession that our revenues did not decline. There are Government initiatives such as the National Infrastructure Plan and the new PFI framework which ought to see 2014 benefit in terms of construction and engineering spend. There is also a large market in Off Shore Wind where we are picking up live project appointments. In Europe we therefore look to 2013 with caution but given our performance in 2012 and the pressure on Government to spend on infrastructure and PFI schemes we have a degree of optimism thereafter.

In the Middle East we will continue to seek to develop our full service offering where appropriate. The live construction market in Qatar is now starting to kick in and should provide opportunities for our Project Services offering but we continue to believe that in the UAE our focus should remain in the dispute and expert witness market.

At the end of the first quarter for 2013 we have an encouraging level of budgeted revenue allocated on secured assignments and a strong pipeline of outstanding proposals.  I have visibility of Q1 performance and am very pleased with the levels of revenue and profit this indicates. Areas with particularly strong secured assignments and pipelines are Africa and the Middle East as their workload continues the momentum from the second half of 2012.

Key to our performance is the quality, reputation and dedication of our staff. I have seen that the Trett staff, like Driver staff, are of a high quality and held in high regard across the construction and engineering industry. I am delighted with the attitude of all our staff in the way they have embraced the acquisition of Trett and whole-heatedly worked to integrate in to one group of people and business. It is because of the quality and attitude of our people, working as one across our group of businesses, that I am excited

about the coming year and look forward to delivering continued profitable growth for our shareholders.

Dave Webster

Chief Executive Officer

FINANCIAL DIRECTOR'S REVIEW

Results

Revenue increased by 51% to £26.3m (2011: £17.4m).  This included £4.3m of external sales arising from Trett which was acquired on 11 May 2012.  The Chief Executive's report describes the business segmental performance in more detail.

The underlying* operating profit for the year ended 30 September 2012 was £1.79m (2011: £0.56m). Reported operating profit was £1.24m (2011: £0.36m).

After a net interest charge of £0.04m (2011: £0.01m) the underlying* profit before tax was £1.75m (2011: £0.55m) and reported profit before tax was £1.2m (2011: £0.35m). 

The Group's results include exceptional items (note 5) relating to severance costs of £0.06m (2011: £0.13m) and costs relating to the acquisition and integration of Trett of £0.36m.  In addition the Group recorded a share based payment charge of £0.13m (2011: £0.07m) in relation to the Group's share option scheme.

The European business segment revenue grew by £4.0m to £16.1m although operating profit reduced by £0.5m to £1.6m including the cost of a £0.31m exceptional charge.  The Middle East segment revenue increased by £2.6m to £7.1m and reported a profit of £1.5m compared with a loss of £0.09m in 2011. The Africa segment revenue grew by £1.2m to £2.0m and reported a profit of £0.3m compared with a loss of £0.1m in 2011.  New segments have been created arising from the acquisition of Trett with America reporting revenue of £0.5m and being roughly break even and Asia Pacific reporting revenue of £0.55m and reporting a loss of £0.15m.  Reflecting the growth in the business underlying* unallocated corporate costs increased by £0.3m to £1.7m.  After a share option charge of £0.13m (2011:£0.07m) and exceptional costs of £0.1m (2011: £0.05m) the reported unallocated costs were £2.0m (2011: £1.52m).

Taxation

The Group had a tax charge of £0.24m (2011: tax charge of £0.08m).  The effective tax rate was 20% (2011: 23%).  The tax charge includes the effect of a lower tax rate for Oman, the UAE and Qatar.

Earnings Per Share

Underlying* earnings per share was 5.5 pence (2011: 1.7 pence).  The basic earnings per share was 3.3 pence (2011: 0.9 pence) and diluted earnings per share was 3.1 pence (2011: 0.9 pence).

Cash Flow

Trett was acquired in the year for gross consideration of £3m with cash of £0.8m being left within Trett on acquisition and therefore a net consideration of £2.2m. Net cash inflow from operating activities was £1.1m (2011: £1.08m).  This included a favourable impact of an increase in creditors of £1.5m (2011: £1.05m) offset by a net outflow from an increase in debtors of £1.7m (2011: £0.83m). 

Other major cash items are tax paid of £0.3m (2011: tax received £0.2m), capital spend of £0.18m (2011: £0.05m) and increased borrowings of £2.3m (2011: repayment of borrowings £1.24m).  Dividends paid were £0.25m (2011: nil).

The Company had net borrowings at the end of the year of £0.96m compared to net cash of £0.57m at 30 September 2011.

Trett Acquisition

The Trett acquisition was funded via bank finance as described further below.  The gross cost of the acquisition was £3.0m.  Advisors costs in relation to the acquisition were

£0.1m and we have recorded an exceptional onerous lease provision of £0.2m in relation to the closure of the London Trett office where staff are now working together within the Driver office.

Goodwill acquired with the business totalled £1.1m.  Goodwill represents the value of the synergies arising from the economies of scale achievable in the enlarged group.  These synergistic benefits were the primary reason for entering into the business combination.

Principal Risks And Uncertainties

There are a variety of specific business risks which can affect international consultancy businesses like Driver.  The principal risks are outlined below, the principal uncertainties being the impact of the downturn in the UK and global economy on the business is considered in the Chairman's and the Chief Executive's reports.

Credit Risk

The Group's credit risk is primarily attributable to its trade receivables.  The risk increases as our business expands into new territories where payment of outstanding receivables can be slower.  Credit risk is managed by running credit checks on customers and by monitoring payments against contractual terms. There is a clear internal process for elevating potential problems in recovering debts such that prompt action is taken to recover debts at the earliest possible point and legal action taken where necessary. 

Liquidity

The Group monitors cash flow as part of its day to day control procedures. The Board reviews cash flow projections and ensures that appropriate facilities are available to be drawn upon as necessary. During the year the Group secured a term loan of £1.5m repayable quarterly over two years in addition to an existing term loan of £1.0m repayable in February 2015.  These loans together funded the acquisition of Trett.  At the year end, the Group's undrawn borrowing facilities consisted of an overdraft facility of £0.75m renewable annually.  With cash of £1.36m the Group had access to £2.11m of available funds at 30 September 2012. The Group's facilities with the bank are secured by means of debentures over the Group's assets and a legal charge over the land and building at Haslingden.

Reputation Risk

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

Treasury Policies and Foreign Exchange Management

Treasury operations are managed centrally and operate so as to reduce financial risk, ensure sufficient liquidity is available for the Group's operations and to invest surplus cash.  Corporate Treasury does not operate as a profit centre and does not take speculative positions.  The Company regularly invoices in Euros for work performed in Europe as well as receiving foreign currency income in UAE Dirhams ("AED"), Omani Rials ("OMR") and Qatari Riyals ("QAR") from its Middle East businesses, South African Rand ("ZAR") from its African business and Malaysian Ringgit ("MYR") and Singapore Dollar ("SGD") from its Asia Pacific operations and US Dollar ("USD") generated in America.  The Group is therefore exposed to movements in these currencies relative to Sterling.  AED, OMR and QAR are currently linked to the US Dollar.  Foreign currency balances in excess of forecast amounts required to fund projected outgoings have been converted to Sterling balances during the year at spot rate.  Euro exposure is managed through the use of a foreign currency overdraft facility, which is used to match up to 90% of the value of the Euro debtor balance against Euro borrowings.  The net value of AED, OMR and QAR exposure is managed using foreign currency hedge contracts to provide a targeted level of cover of between 50% and 75% of the net exposure.  Other currencies are hedged where outstanding amounts become material. This policy is regularly reviewed by the Board. 

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

Contingencies and Legal Proceedings Risk Management

The Group monitors all material contingent liabilities, through a process of consultation and evaluation which includes senior management, internal and external advisors.  This process results in an evaluation of potential exposure and provisions are made or

adjusted accordingly by reference to accounting principles.  No contingent liabilities have been recognised at the year end.

Health and Safety

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

Damien McDonald

Finance Director

CONSOLIDATED INCOME STATEMENT

FOR THE YEAR ENDED 30 SEPTEMBER 2012

	Notes	2012 £000	2011 £000
REVENUE		26,258	17,365
Cost of Sales		(19,209)	(12,704)
GROSS PROFIT		7,049	4,661
Administrative expenses		(5,966)	(4,424)
Other operating income		152	123
Operating profit before share-based payment charge and exceptional items		1,788	559
Exceptional items	5	(418)	(125)
Share-based payment charge		(135)	(74)
OPERATING PROFIT		1,235	360
Finance income		9	2
Finance costs		(46)	(13)
PROFIT BEFORE TAXATION		1,198	349
Tax expense		(237)	(81)
PROFIT FOR THE YEAR		961	268
Profit attributable to non-controlling interests		152	40
Profit attributable to equity shareholders of the parent		809	228
		961	268
Basic earnings per share attributable to equity shareholders of the parent (pence)	2	3.3p	0.9p
Diluted earnings per share attributable to equity shareholders of the parent (pence)	2	3.1p	0.9p

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

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED 30 SEPTEMBER 2012

	2012 £000	2011 £000
PROFIT FOR THE YEAR	961	268
Other comprehensive income:
Exchange differences on translating foreign operations	(69)	23
Deferred tax credit	23	30
OTHER COMPREHENSIVE INCOME FOR THE YEAR NET OF TAX	(46)	53
TOTAL COMPREHENSIVE INCOME FOR THE YEAR	915	321
Total comprehensive income attributable to:
Owners of the parent	763	281
Non-controlling interest	152	40
	915	321

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

FOR THE YEAR ENDED 30 SEPTEMBER 2012

Company Number 3475146

	2012		2011
	£000	£000	£000	£000
NON-CURRENT ASSETS
Goodwill	3,407		2,356
Property, plant and equipment	2,147		2,134
Deferred tax asset	12		67
		5,566		4,557
CURRENT ASSETS
Trade and other receivables	8,835		4,839
Cash and cash equivalents	1,357		596
Current tax receivable	217		-
		10,409		5,435
TOTAL ASSETS		15,975		9,992
CURRENT LIABLITIES
Borrowings	(758)		(12)
Trade and other payables	(5,741)		(2,915)
Current tax payable	(97)		(131)
		(6,596)		(3,058)
NON-CURRENT LIABILITIES
Borrowings	(1,563)		(12)
Deferred tax liabilities	(319)		(222)
		(1,882)		(234)
TOTAL LIABILITIES		(8,478)		(3,292)
NET ASSETS		7,497		6,700
SHAREHOLDERS' EQUITY
Share capital		106		106
Share premium		2,649		2,649
Merger reserve		1,493		1,493
Translation reserve		(85)		(16)
Capital redemption reserve		18		18
Retained earnings		4,024		3,493
Own shares		(844)		(1,083)
TOTAL SHAREHOLDERS' EQUITY		7,361		6,660
NON-CONTROLLING INTEREST		136		40
TOTAL EQUITY		7,497		6,700

CONSOLIDATED CASHFLOW STATEMENT 

FOR THE YEAR ENDED 30 SEPTEMBER 2012

	2012 £000		2011      £000
CASH FLOWS FROM OPERATING ACTIVITIES
Profit before taxation
-       Before share-based payment charge and exceptional items	1,751		548
-       Exceptional items	(418)		(125)
-       Share-based payment charge	(135)		(74)
	1,198		349
Adjustments for:
Depreciation	208		236
Exchange adjustments	(2)		(10)
Loss on disposal of equipment	2		2
Finance income	(9)		(2)
Finance expense	46		13
Equity settled share-based payment charge	135		74
OPERATING CASH FLOW BEFORE CHANGES IN WORKING CAPITAL AND PROVISIONS	1,578		662
Increase in trade and other receivables	(1,688)		(825)
Increase in trade and other payables	1,496		1,049
CASH GENERATED FROM OPERATIONS	1,386		886
Tax (paid) / received	(285)		197
NET CASH INFLOW FROM OPERATING ACTIVITIES	1,101		1,083
CASH FLOWS FROM INVESTING ACTIVITIES
Interest received	9		2
Acquisition of property, plant and equipment	(184)		(49)
Acquisition of subsidiary, net of cash acquired	(2,165)		-
NET CASH OUTFLOW FROM INVESTING ACTIVITIES	(2,340)		(47)
CASH FLOWS FROM FINANCING ACTIVITIES
Interest paid	(46)		(13)
Repayment of borrowings	(203)		(1,239)
Proceeds of borrowings	2,500		-
Dividends paid to equity shareholders of the parent	(197)		-
Payment of dividends to non controlling interests	(56)		(4)
NET CASH INFLOW /  (OUTFLOW) FROM FINANCING ACTIVITIES	1,998		(1,256)
Net increase / (decrease) in cash and cash equivalents	759		(220)
Effect of foreign exchange on cash and cash equivalents	2		12
Cash and cash equivalents at start of period	596		804
CASH AND CASH EQUIVALENTS AT END OF PERIOD	1,357		596

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY 

FOR THE YEAR ENDED 30 SEPTEMBER 2012

	Share capital £000	Share premium £000	Merger reserve £000	Other reserves(1) £000	Retained earnings £000	Own shares £000	Total* £000	Non-controlling interest £000	Total Equity £000
OPENING BALANCE AT 1 OCTOBER 2010	106	2,649	1,493	(21)	3,320	(1,242)	6,305	4	6,309
Dividends	-	-	-	-	-	-	-	(4)	(4)
Share-based payment	-	-	-	-	74	-	74	-	74
Transfer of reserves(2)	-	-	-	-	(159)	159	-	-	-
Profit for the year	-	-	-	-	228	-	228	40	268
Other comprehensive income for the year	-	-	-	23	30	-	53	-	53
CLOSING BALANCE AT 30 SEPTEMBER 2011	106	2,649	1,493	2	3,493	(1,083)	6,660	40	6,700
Dividends	-	-	-	-	(197)	-	(197)	(56)	(253)
Share-based payment	-	-	-	-	135	-	135	-	135
Transfer of reserves(2)	-	-	-	-	(239)	239	-	-	-
Profit for the year	-	-	-	-	809	-	809	152	961
Other comprehensive income for the year	-	-	-	(69)	23	-	(46)	-	(46)
CLOSING BALANCE AT 30 SEPTEMBER 2012	106	2,649	1,493	(67)	4,024	(844)	7,361	136	7,497

*     Total equity attributable to the equity holders of the parent

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

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

NOTES:

1.     The financial information set out in these Preliminary Results does not constitute the Company's statutory accounts for the year ended 30 September 2012 or the year ended 30 September 2011 but is derived from those accounts.

Statutory accounts for the year ended 30 September 2011 have been delivered to the Registrar of Companies, and those for the year ended 30 September 2012 will be delivered to following the Company's Annual General Meeting.  BDO LLP have reported on the 2012 and 2011 accounts.  Their reports were unqualified, did not include references to any matters to which the auditors drew attention by way of emphasis without qualifying their report, and did not contain statements under section 498(2) or 498(3) of the Companies Act 2006.

2.   Earnings per share

Underlying earnings per share before exceptional items and the charge for share-based payments is 5.5p (2011: 1.7p).

The calculation of adjusted earnings per share is based on a profit of £1,362,000 (2011: £427,000).  The profit attributable to equity shareholders, after deducting exceptional items and the share-based payment charge is £809,000 (2011: £228,000).  The basic weighted average number of shares in issue for the period was 24,678,771 (2011: 24,678,771). The diluted weighted average number of shares in issue for the period was 25,683,628 (2011: 24,678,771).

3.   Segmental analysis

For management purposes, the Group is organised into five operating divisions: Europe, Middle East, Africa, Asia Pacific and America.  Asia Pacific and America were added following the acquisition of Trett Holdings Limited (note 6).  These divisions are the basis on which the Group is structured and managed, based on its geographic structure.  In each of the divisions the key service provisions are: quantity surveying, planning / programming, quantum and planning experts, dispute avoidance / resolution, litigation support, contract administration, commercial advice / management and strategic project management.

Segment information about these reportable segments is presented below:

Year ended 30 September 2012

							Continuing Operations
	Europe £000	Middle East £000	Africa £000		Asia Pacific £000			Americas £000	Eliminations £000	Unallocated(1) £000	Consolidated £000
Total external revenue	16,085	7,134	1,990		551			498	-	-	26,258
Total inter-segment revenue	17	-	-		-			-	(17)	-	-
Total revenue	16,102	7,134	1,990		551			498	(17)	-	26,258
Segmental profit/(loss)	1,900	1,491	284		(149)			(4)	-	-	3,522
Unallocated corporate expenses(1)	-	-	-		-			-	-	(1,734)	(1,734)
Share-based payment charge	-	-	-		-			-	-	(135)	(135)
Exceptional items (note 5)	(311)	-	-		-			-	-	(107)	(418)
Operating profit/(loss)	1,589	1,491	284		(149)			(4)	-	(1,976)	1,235
Finance income	-	-	-		-			-	-	9	9
Finance expense	-	-	-		-			-	-	(46)	(46)
Profit/(loss) before taxation	1,589	1,491	284		(149)			(4)	-	(2,013)	1,198
Taxation	-	-	-		-			-	-	(237)	(237)
Profit/(loss) for the year	1,589	1,491	284		(149)			(4)	-	(2,250)	961

Year ended 30 September 2011

						Continuing Operations
	Europe £000	Middle East £000	Africa £000	Asia Pacific £000			Americas £000	Eliminations £000	Unallocated(1) £000	Consolidated £000
Total external revenue	12,044	4,503	818	-			-	-	-	17,365
Total inter-segment revenue	11	-	-	-			-	(11)	-	-
Total revenue	12,055	4,503	818	-			-	(11)	-	17,365
Segmental profit/(loss)	2,067	(15)	(98)	-			-	-	-	1,954
Unallocated corporate expenses(1)	-	-	-	-			-	-	(1,395)	(1,395)
Share-based payment charge	-	-	-	-			-	-	(74)	(74)
Exceptional items (note 5)	-	(71)	-	-			-	-	(54)	(125)
Operating profit/(loss)	2,067	(86)	(98)	-			-	-	(1,523)	360
Finance income	-	-	-	-			-	-	2	2
Finance expense	-	-	-	-			-	-	(13)	(13)
Profit/(loss) before taxation	2,067	(86)	(98)	-			-	-	(1,534)	349
Taxation	-	-	-	-			-	-	(81)	(81)
Profit/(loss) for the year	2,067	(86)	(98)	-			-	-	(1,615)	268

Inter-segment sales are charged at prevailing market rates.
(1)     Unallocated costs represent Directors' remuneration, administration staff, corporate head office costs and expenses associated with AIM.
No client had revenue exceeding 10% of the Group's revenue in the year to 30 September 2012 and the year to 30 September 2011.

4.   Geographical information:

	External revenue by location of customers
	2012 £000	2011 £000
UK	11,540	8,330
UAE	2,950	1,794
Oman	2,761	2,325
South Africa	2,363	1,778
United States	1,367	1,036
Qatar	1,290	490
Trinidad and Tobago	-	666
Other African countries	1,282	421
Germany	787	353
Netherlands	790	-
Singapore	270	-
Switzerland	229	-
Other Countries	629	172
	26,258	17,365

5.    Exceptional items

	2012 £000	2011 £000
Severance costs (1)	60	125
Acquisition and integration costs (2)	358	-
	418	125

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

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

6.    Acquisition of Trett Consulting Limited

On 11 May 2012 the Company acquired 100% of the share capital in Trett Holdings Limited.  The company was acquired in order to bring in an experienced and high quality team of individuals to complement the Group's existing skill set and also to provide the group with access to a wide range of end markets (including marine and shipbuilding, petrochemical and nuclear engineering) and to bring greater geographical penetration.

Goodwill represents the value of the synergies arising from the economies of scale achievable in the enlarged group and the presence of certain intangible assets, such as the assembled workforce of the acquired entity, which do not qualify for separate recognition.  The synergistic benefits were the primary reason for entering into the business combination.  The total amount of goodwill arising from the acquisition was £1,051,000.  This is non-deductable for tax purposes.

The fair value of cash consideration paid amounted to £2,934,000 with cash paid at the point of acquisition of £3,000,000.

Other costs relating to the acquisition of £109,000 of the subsidiaries have not been included in the consideration and have been recognised as an expense.  This expense is included within exceptional items (note 5).

Book and provisional fair value of assets and liabilities acquired:

			Book and Provisional Fair Value £000
Cash and cash equivalents			835
Trade and other receivables			2,311
Plant and equipment			39
Trade and other payables			(1,330)
Deferred tax liability			(112)
Tax Asset			140
NET ASSETS ACQUIRED			1,883

The contribution to net profit of the Group was £185,000.  Group revenue includes £4,333,368 from the operations of Trett.

Since the acquisition Trett has contributed £4,333,368 Group revenues and £185,000 to Group profit.  If the acquisition had been made on 1 October 2011 then Group revenue would have been £31,949,000.  It is impracticable to calculate Group profit had the acquisition taken place on 1 October 2011 due to the group charges in the business pre acquisition.

7.   Copies of the Annual Report and Financial Statements

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

      The Annual General Meeting will be held at Peter House, Oxford Street, Manchester, M1 5AN on Thursday 28 February 2013 commencing at 3:00pm. 

 

END

 

 

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