Driver Group plc

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

[email protected]



 

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 22nd 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


2,747

Exceptional items


-

(1,083)

Share-based payment charges and associated costs


(1,100)

(170)

Amortisation of intangible assets


-

-

OPERATING PROFIT

 


1,494

Finance income


17

1

Finance costs


(148)

(262)

 

PROFIT BEFORE TAXATION


 

1,233

Tax (expense)/credit


(567)

38

 

PROFIT FROM CONTINUING OPERATIONS


 

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


 

 

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.

 

 

 

 

 

 

 

 

 

 

 


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END
 
 
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