Preliminary Results

Driver Group plc 11 December 2007 DRV.L DRIVER GROUP PLC ('Driver Group' or 'the Group') Preliminary Results for the Year to 30 September 2007 Driver Group provides specialist commercial and dispute resolution services to the construction industry. Highlights • Year of significant progress - major recruitment drive to scale business for growth - fee earners increased by 35% to 96 (2006: 71) • Turnover increased by 39% to £12.68m (2006 : £9.12m) • Operating profit rose by 14% to £1.68m (2006: £1.47m) before exceptional costs and share based payments • Full and final settlement of pension scheme liability for £485,000 • Basic earnings per share of 4.9p (2006: 4.6p), before exceptional costs and share based payments • Proposed final dividend of 1.9p per share (2006: 1.9p), making total for the year of 2.85p (2006: 2.85p) • All UK offices performed well - with London office outperforming at year end • Strong growth in Middle East, with revenues almost doubling • Prospects remain very encouraging Michael Davis, Chairman of Driver Group, commenting on the results, said, 'Over the last fifteen months or so, the business has undergone a significant transformation. We have opened and integrated new offices in the UK, which have expanded our presence regionally and established Driver in the Middle East where the construction sector is expanding rapidly. Following our recruitment initiative, the business is now substantially stronger and our increased consulting resource puts the Group in a better position to capitalise on the good growth opportunities in the UK and internationally. We therefore view prospects for the business positively.' Enquiries: Driver Group plc Steve Driver, Chief Executive T: 020 7448 1000 (today) Colin White, Finance Director T: 0870 873 7878 Zeus Capital Alex Clarkson T: 0161 831 1512 Limited Nick Cowles Biddicks Katie Tzouliadis T: 020 7448 1000 CHAIRMAN'S STATEMENT Introduction This is our second year as an AIM quoted company and I am delighted to announce that the business continues to make very good progress. Results for the year to 30 September 2007 show record levels of turnover and profits. Key to the ongoing development of the business is the necessity to ensure that we attract and retain high calibre staff at all levels, and a major focus over the year has been to increase the number of our fee-earning consultants. The recruitment programme has gone well and at the financial year end, the number of fee earners within the Company had risen by 35% to 96 from 71 at the same time last year. As the substantial growth in Driver's turnover shows, we are now seeing the benefits of this increase in resource coming through, in the performance of both our UK and international businesses. I am pleased to report too that our newer areas of operations in London, Bristol and Edinburgh all showed good growth, and revenues from the United Arab Emirates almost doubled over the year to £1.45m. Our relationships within the industry, both with existing and potential clients, are vital for future growth and I am pleased to report that we have successfully negotiated four new framework agreements with clients. These further strengthen our relationship with these customers and reflect Driver's increasing reputation and profile in the market. Over the last fifteen months or so, the business has undergone a significant transformation. We have opened and integrated new offices in the UK, which have expanded our presence regionally and established Driver in the Middle East where the construction sector is expanding rapidly. Following our recruitment initiative, the business is now substantially stronger and our increased consulting resource puts the Group in a better position to capitalise on the good growth opportunities in the UK and internationally. We therefore view prospects for the business positively. Financial Results Turnover rose by 39% to £12.68m from £9.12m last year and underlying operating profits rose by 14% to £1.68m from £1.47m last year. This is before the charge of £485,000 for settling the pension liability, which is treated as exceptional and the FRS20 charge for share options, which totalled £73,000 (2006: £11,000). After deducting the exceptional charge and FRS20 charge for share options, reported profit before tax was £1.11m (2006: £1.49m) Earnings per share, before exceptional items and share option charges, was 4.9p (2006: 4.6p). After deducting the share option charge and exceptional item, earnings per share was 3.2p (2006: 4.6p). At the year end, the Group's net cash stood at £0.23m (30 September 2006: £0.69m) and net assets, after deducting the employee benefit trust shares in the Group (which had a book value of £1.24m at 30 September 2007) from shareholders' equity stood at £5.42m (30 September 2006: £4.64m). Dividend The Board is pleased to recommend the payment of a final dividend for the year ended 30 September 2007 of 1.90 pence per share (2006: 1.90 pence). This makes a total dividend for the year of 2.85 pence (2006: 2.85 pence) per share. The final dividend will be paid on 19 March 2008 to shareholders on the register at the close of business on 22 February 2008. Trading Overview Market conditions in both the UK and internationally remained very healthy over the year and looking forward, we continue to see excellent growth opportunities. A major objective, which was achieved during the period, was to scale the business for growth by attracting new fee earners. As a consequence total staff numbers (including sub-contract staff) increased by 30% to 120 at 30 September 2007 compared to 92 staff at 30 September 2006. In my interim statement, I noted the growth in business at our new Bristol and Edinburgh locations as well as at our more established UK offices but also reported that the profitability at the London office has been disappointing. Some six months on, I am pleased to report that we are continuing to make very good progress in developing our presence in Bristol and Edinburgh and that we have recorded a significant improvement in the performance of our London office. Over the second half, our London team secured several new clients, improved charge-out rates and enhanced staff utilisation rates, as well as adding new fee-earning consultants. As a result, in the last month of the financial year, the London office became our most profitable centre in the UK. Internationally, we continue to make significant progress. In particular, our business in the United Arab Emirates ('UAE') has seen extremely strong growth, with sales increasing by 91% to £1.45m from £0.76m last year. We are continuing to secure new appointments in this region, where the construction sector continues to expand strongly. We are building on this success by setting up new operating entities for both our dispute resolution and project services businesses in this region. Board Changes On 1 October 2007, we were pleased to welcome Colin White to the Board as Group Finance Director. He took over the position from Peter Cove, who stepped down from the Board on 30 September. Colin is a chartered accountant with over 20 years' experience in financial roles. He was previously Group Finance Director of Scapa Group plc, the AIM quoted global supplier of technical tapes and cable compounds. I would like to thank Peter for his significant contribution to the business, particularly during the time of the flotation, and I am pleased that he remains with the Group as finance director of the Group's principal trading subsidiary, Driver Consult Ltd. On 1 October 2006, Keith Kirkwood joined the Board as a non-executive director. Keith is a chartered quantity surveyor with over 30 years' experience in both the general construction industry and in the specialist area of dispute resolution. Until recently he was Group Chief Executive of Schofield Lothian Group, the construction, engineering and infrastructure management consultancy which he founded in 1986. Under his leadership, the business was successfully developed into an international operation. Staff On behalf of the Board, I would like to thank all of our staff for their commitment and hard work over the last twelve months. This year's results reflect their skill and efforts. Outlook It has been a year of investment for the Group as we focused on scaling the business for growth. We are now seeing the benefits of our recruitment drive to increase our fee-earning capability coming through in our top-line growth and saw record sales in the final quarter of 2006/07. We have clear growth objectives for the current financial year and as well as developing the Group organically, we are actively considering acquisitions which complement our existing business. With construction activity in our key domestic and overseas markets remaining very strong, we continue to regard prospects for the Group very positively. Michael Davis, Chairman CHIEF EXECUTIVE'S REPORT Once again, I am delighted to deliver my report on a successful financial year. During the year, the Group has continued to invest heavily in the recruitment of fee-earning personnel. This took our staff count (including sub-contractor staff) to 120 at 30 September 2007 from 92 at the end of the last financial year. By the end of the financial year, all staff were fully integrated and delivering high levels of utilisation. The Group's principal trading company, Driver Consult Ltd, comprises three business streams and my review of the Group's performance has therefore been set out on that basis. UK Consultancy Services Our UK Consultancy Services, based predominantly around the provision of dispute avoidance and resolution services, are provided through our network of seven regional offices located in Northern and Southern England and in Scotland. Relationships with key clients have strengthened during the year, reflected in the negotiation of four framework agreements and I am pleased to report that others are under negotiation. All seven offices operated profitably in the year with significant improvements in turnover and profit over the final quarter. Over the year as a whole, turnover increased to £9.33m from £7.15m, an increase of 30%. The measures taken at the end of the first half to improve the productivity of our London office have been very successful and resulted in a significant rise in the office's contribution to the business in the final quarter. During the year, we also relocated our London office to larger premises which provide us with ample scope for future expansion. We expect the major construction projects planned in the South of England for the next five years to offer us excellent growth opportunities. International Consultancy Services International Consultancy Services provides services to construction clients throughout Europe, Eastern Europe, the Americas and the Middle East. The services provided are substantially the same as those we provide in the UK with concentration on high profile expert witness and arbitrator appointments. Turnover in the year increased to £1.60m from £1.21m, an increase of 32%. The division has operated very profitably in the year concentrating on quantum and planning expert assignments. We are currently in the process of opening an office in Oman which is intended to capitalise on our existing relationships in the region and opportunities arising from the country's extensive construction programme. International Project Services Our International Project Services business is based in the UAE and there are potential opportunities to develop elsewhere in the world. The services provided by our International Project Services unit complement our other business areas in that it provides commercial, planning and project controls services to property development companies involved in the construction of multi-million dollar and sometimes multi-billion dollar, mixed-use developments incorporating houses, apartments, offices, schools, hospitals and roads. Our role often begins with the inception of a property development and lasts until its completion as we monitor budget, cost and timetables in all phases of development. Our operations in the UAE have continued to expand during the financial year with an increase in turnover to £1.45m in 2007 from £0.76m in 2006. Staff numbers in the region increased from 10 to 18. Most pleasing of all, we start the new financial year with eleven projects compared with three projects in the previous year and we are also pursuing several additional opportunities. Outlook The Group has been considerably enlarged since we joined AIM. We have strengthened the management team, opened new offices and aggressively increased the number of fee earners within the Group. Looking forward, Driver is now well positioned to capitalise on growth opportunities both in the UK and in the Middle East and we intend to continue to invest in developing the business, particularly in the Middle East, where the construction market is extremely strong. We are also actively engaged in seeking acquisitions, which fit our criteria. With all our markets remaining buoyant, we expect to deliver a stronger performance in the coming year and remain confident about future prospects. Steve Driver, Chief Executive Officer DRIVER GROUP PLC CONSOLIDATED PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 30 SEPTEMBER 2007 2007 2007 2007 2006 Pre-exceptional Exceptional Total Restated /share-based /share-based (note 3) payment payment (notes 2 & 3) £'000 £'000 £'000 £'000 TURNOVER (note 5) 12,684 - 12,684 9,124 Cost of sales (8,218) - (8,218) (5,394) ________ _______ _______ _______ GROSS PROFIT 4,466 - 4,466 3,730 Administrative expenses - other (2,896) (73) (2,969) (2,345) - exceptional (note 2) - (485) (485) - Other operating income 109 - 109 79 ________ _______ _______ _______ OPERATING PROFIT 1,679 (558) 1,121 1,464 Interest receivable and similar income 32 - 32 70 Interest payable and similar charges (39) - (39) (44) ________ _______ _______ _______ PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION 1,672 (558) 1,114 1,490 Tax on profit on ordinary activities (536) 167 (369) (451) ________ _______ _______ _______ PROFIT ON ORDINARY ACTIVITIES AFTER TAXATION 1,136 (391) 745 1,039 Minority interests - equity (16) - (16) 7 ________ _______ _______ _______ PROFIT FOR THE FINANCIAL YEAR 1,120 (391) 729 1,046 ________ _______ _______ _______ Basic earnings per share (pence) (note 4) 3.2 4.6 ======= ======= Diluted earnings per share (pence) (note 4) 3.1 4.5 ======= ======= The operating profit for the year arises from the Group's continuing operations. DRIVER GROUP PLC CONSOLIDATED STATEMENT OF TOTAL RECOGNISED GAINS AND LOSSES FOR THE YEAR ENDED 30 SEPTEMBER 2007 2007 2007 Restated - note 3 £'000 £'000 Profit for the financial year 729 1,046 Fixed asset revaluation 615 - _______ _______ Total recognised gains and losses relating to the year 1,344 1,046 Prior year adjustment (net of tax) (note 3) (8) - _______ _______ Total recognised gains and losses since last annual report 1,336 1,046 ======= ======= DRIVER GROUP PLC CONSOLIDATED BALANCE SHEET 30 SEPTEMBER 2007 2007 2006 Restated - notes 3&6 £'000 £'000 £'000 £'000 FIXED ASSETS Tangible assets 3,421 2,620 CURRENT ASSETS Debtors 3,227 2,750 Cash at bank and in hand 855 1,317 _______ _______ 4,082 4,067 CREDITORS Amounts falling due within one year 1,884 1,669 _______ _______ NET CURRENT ASSETS 2,198 2,398 _______ _______ TOTAL ASSETS LESS CURRENT LIABILITIES 5,619 5,018 CREDITORS Amounts falling due after more than one year (179) (371) PROVISIONS FOR LIABILITIES (19) (3) _______ _______ NET ASSETS 5,421 4,644 CAPITAL AND RESERVES Called up share capital 99 99 Share premium 2,649 2,649 Revaluation reserve 1,338 723 Capital redemption reserve 18 18 Other reserve 84 11 Profit and loss account 2,476 2,403 Own shares (note 6) (1,242) (1,242) _______ _______ EQUITY SHAREHOLDERS' FUNDS (note 7) 5,422 4,661 MINORITY INTERESTS (1) (17) _______ _______ 5,421 4,644 ======= ======= DRIVER GROUP PLC CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED 30 SEPTEMBER 2007 2007 2006 £'000 £'000 Net cash inflow from operating activities before exceptional item (note 8) 1,520 761 Cash outflow relating to exceptional item (485) - _______ _______ Net cash inflow from operating activities after exceptional item 1,035 761 Returns on investments and servicing of finance (7) 26 Taxation (593) 53 Capital expenditure and financial investment (245) (2,221) Equity dividends paid (656) (219) _______ _______ Net cash outflow before financing (466) (1,600) Financing (179) 2,475 _______ _______ (Decrease)/increase in cash in the year (645) 875 ======= ======= RECONCILIATION OF NET CASH FLOW TO MOVEMENT IN NET FUNDS 2007 2006 £'000 £'000 £'000 £'000 (Decrease)/increase in cash in the year (645) 875 Cash outflow from decrease in debt 179 191 _______ _______ Change in net debt resulting from cash flows (466) 1,066 _______ _______ Movement in net funds in the year (466) 1,066 Net funds/(debt) at 1 October 692 (374) _______ _______ Net funds at 30 September 226 692 ======= ======= NOTES 1 The financial information set out above does not constitute statutory accounts as defined in s.240 of the Companies Act 1985. The auditors have issued an unqualified opinion on the statutory financial statements for 2007 under UK GAAP for the year ended 30 September 2007 which will be delivered to the Registrar of Companies following the Company's Annual General Meeting. 2 Exceptional items As referred to in the Group's Admission Document and the Annual Report and Accounts for the year ended 30 September 2006, Driver Group plc and Driver Consult Limited participated in the Baker Wilkins & Smith Retirement Benefits Scheme ('the Scheme'), a final salary pension scheme which is in the process of being wound up. As a member of the Scheme, the Group was required to pay a debt to the Scheme under pension legislation which provides that if the Scheme's assets are exceeded by its liabilities, the shortfall should be treated as a debt due from the participating employers. On 19 July 2007, the Group entered into an agreement with the Trustees of the Scheme under which they agreed to pay £450,230 in full and final settlement. This amount and related legal costs of £34,321 have been disclosed as an exceptional item. The amounts charged reduce tax payable by £145,365. In order to assist in understanding the Group's results for the year in comparison to the prior year, and in view of the unusual materiality of the exceptional item, the directors believe that it is appropriate to show separately the operating profit of the Group before exceptional items on the face of the profit and loss account as additional information. 3 Prior year adjustments Share-based payments The Group adopted Financial Reporting Standard 20 (FRS 20 - Share-based Payment) for the first time in the interim report for the half year ended 31 March 2007. In accordance with the standard, the cost of share options awarded to employees measured by reference to their fair value at the date of grant is recognised over the vesting period of the options based on the number of options which in the opinion of the Directors will ultimately vest. The cost of the share options is charged to the Group profit and loss account and transferred to other reserves. As the share options are granted by the parent company to subsidiary employees the cost is included in the cost of its investment in shares in Group undertakings. Comparative figures for the year ended 30 September 2006 have been restated to apply the provisions of FRS 20, increasing staff costs and consequently reducing profit for that year by £10,943 before tax and £7,660 net of tax. The current year charge amounts to £73,082 before tax and £51,157 net of tax. Investment in own shares In prior years, assets and liabilities of the Driver Group Employee Benefit Trust were recognised on the Company's balance sheet in accordance with UITF abstract 32. Any shares in the Company purchased by the Trust were included in fixed asset investments. International Financial Reporting Standards require a company's holding in its own shares to be accounted for as a deduction from equity rather than recognised as an asset. This accounting treatment also now applies in the UK, for instance under FRS25, in relation to the acquisition of own shares, referred to as treasury shares. The Company has therefore revised its accounting policy and deducted the cost of the Trust's investment in its own shares of £1,242,206 from equity. Reclassification of comparative income and cost Comparative figures have also been adjusted to reflect a reclassification from administrative expenses to cost of sales of £465,548 to include in the calculation of gross profit the total cost of direct staff including non-chargeable time. Rent receivable of £79,550 has also been reclassified from turnover to other operating income. 4 Earnings per share The calculation of earnings per share before exceptional items and share based payments is based on earnings of £1,120,000 (2006: £1,054,000). Earnings after deducting these charges are £729,000 (2006: £1,046,000). The basic and diluted weighted average number of shares in issue for the period were 23,032,229 and 23,626,631 respectively (2006:22,932,498 and 23,090,900 respectively). 5 Segmental analysis The table below sets out turnover for each geographic area of operation by origin. 2007 2006 Restated note 3 £'000 £'000 United Kingdom 11,079 7,977 Overseas 1,605 1,147 ________ _______ 12,684 9,124 ======== ======= Turnover by geographical destination is significantly different from turnover by origin and is as follows: 2007 2006 Restated note 3 £'000 £'000 United Kingdom 9,714 6,322 Overseas 2,970 2,802 ________ _______ 12,684 9,124 ======== ======= 6 Own shares £000 At 1 October 2006 as previously reported - Prior year adjustment (note 3) 1,242 _________ At 1 October 2006 as restated and 30 September 2007 1,242 ========= In prior years, assets and liabilities of the Driver Group Employee Benefit Trust were recognised on the Company's balance sheet in accordance with UITF abstract 32. Any shares in the Company purchased by the Trust were included in fixed asset investments. As explained in note 3 the Company has revised its accounting policy and deducted the cost of the Trust's investment in its own shares from equity. 7 Reconciliation of movement in shareholders' funds 2007 2006 As restated (note 3) £000 £000 Profit for the financial year 729 1,046 Dividends (656) (219) Proceeds from issue of shares - 2,666 Share-based payments 73 11 Investment in own shares - (1,242) Revaluation in year 615 - _________ _________ Net addition to shareholders' funds 761 2,262 Opening shareholders' funds - equity 4,661 2,399 _________ _________ Closing shareholders' funds - equity 5,422 4,661 ========= ========= 8 Consolidated cash flow statement 2007 2007 2007 2006 Pre-exceptional Exceptional Total Restated - note 3 £000 £000 £000 £000 Operating profit 1,606 (485) 1,121 1,464 Share-based payments 73 - 73 11 Depreciation charges 36 - 36 93 Loss on sale of tangible fixed assets 23 - 23 - Increase in debtors (518) - (518) (806) Increase/(decrease) in creditors 300 - 300 (1) ________ _________ ________ _________ Net cash inflow from operating activities 1,520 (485) 1,035 761 ======== ========= ======== ========= 9 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 registered office, Driver House, 4 St Crispin Way, Rossendale, Lancashire, BB4 4PW. The Annual General Meeting will be held at IoD Hub, 1st Floor, Peter House, Oxford Street, Manchester, M1 5AN on Thursday 7th February 2008 commencing at 3.00pm. This information is provided by RNS The company news service from the London Stock Exchange

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