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Driver Group plc (DRV)

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Tuesday 15 December, 2020

Driver Group plc

Preliminary Results

RNS Number : 6243I
Driver Group plc
15 December 2020
 

15 December 2020

 

DRIVER GROUP PLC

 

("Driver" or "the Group")

 

Preliminary Results and Dividend Declaration

 

Driver Group PLC (AIM: DRV), the global professional services consultancy to construction and engineering industries, is pleased to announce the dividend for the full year and its results for the financial year ended 30 September 2020.

 

The final dividend for the full year of 0.75 pence per share will be paid on 23 March 2021 to shareholders who are on the register of members at the close of business on 19 February 2021, with an ex-dividend date of 18 February 2021 subject to approval at the AGM.

 

Financial & Operational Highlights

 

· Revenue decreased by 9% to £ 53.1m (2019: £ 58.5m)

· Underlying* profit before tax decreased by 17% to £ 2.5m (2019: £ 3.0m)

· Profit for the year decreased to £ 1.3m (2019: £ 2.7m)

· Net cash** increased to £ 8.2m (2019: £ 5.4m)

· Utilisation*** decreased to 72.0% (2019: 76.8%)

· Earnings per share decreased to 2.6p (2019: 5.2p)

Mark Wheeler, Chief Executive Officer of Driver Group plc, commented: " In spite of a challenging year, the business has produced a good result, which is testimony to the work of all the team. Activity levels in the early weeks of the new financial year are encouraging and with a strong net cash position and the availability of increased debt facilities, we believe that the Group is well positioned for the coming year. "

 

* Underlying figures are stated before the share-based payment costs and one off severance costs

** Net cash consists of cash and cash equivalents and bank loans

*** 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

Mark Wheeler (CEO)


David Kilgour (CFO




N+1 Singer (Nomad & Broker)

020 7496 3000

Sandy Fraser


Jen Boorer




Acuitas Communications

020 3687 0868

Simon Nayyar

[email protected]

Fraser Schurer-Lewis

[email protected]







 

 

 

 

CHAIRMAN'S STATEMENT

 

IMPACT OF COVID-19

 

As I reported at the time of the interim results we have been managing the effects and impact of the COVID-19 pandemic across our global business since January 2020. We took action at an early stage to protect both the business and our staff by implementing a clear business continuity strategy which has enabled our clients across key global regions and offices to be serviced effectively, sustainably and without business interruption. As the pandemic spread across the world with varying levels of impact we responded to the requirements of the local governments and regulatory authorities in the relevant jurisdictions and in some circumstances in advance. We moved to a flexible home working model in every region and office worldwide to protect the health and safety of our staff. As local restrictions have been relaxed in some regions we have moved to a hybrid working solution facilitating both a safe work environment for our staff and ensuring our ability to fully service the requirements of our clients. 

 

As a consequence of our prompt response and continuing approach to managing the impact of COVID-19 we have remained profitable and cash generative throughout the financial year. In my report on the interim results in June, I advised that although the impact of COVID-19 on the Company had been limited to date the Board had decided on a course of action which in the interests of prudence, resilience, and long term strategic competitive positioning was designed to maximise liquidity, preserve cash and enhance operational flexibility. I am pleased to report that these prompt actions and strong executive management, supported by more frequent board meetings, have delivered a decent result for the year given all the unprecedented and unavoidable circumstances and have minimised the impact of the pandemic.

 

Following the appointment of Mark Wheeler as Group Chief Executive Officer on 1st June 2020 a strategic review of the business was commenced.  The review is now complete and the Board's agreed objective is to develop Driver Group into a higher margin business on a steady growth curve by focussing on growth in expert and arbitration services and reducing the share of Group revenue derived from lower margin project services. Mark expands further on the new strategy in his report.

 

THE BUSINESS TRADING PERFORMANCE

 

It is pleasing to note that whilst COVID-19 has created economic uncertainty across the world which has resulted in lower economic activity we have continued to be profitable and cash generative throughout the financial year and ended the financial year with £8.2m of net cash. The market uncertainty has led to delayed or postponed client decisions which has resulted in lower market activity and consequently Group revenue reduced by 9%. However, as a result of strong management by the executive team we have produced a profitable result allied just as importantly to strong cash generation.

 

DIVIDEND

 

One of the decisions made by the Board at the time of the interim results in the early stages of the pandemic was to cancel the interim dividend for the year in order to conserve cash. Given the uncertainty about the effects of the pandemic and the various responses to it by governments around the world including lockdowns of varying severity I am confident this was the right decision.  But, given the strength of our operating performance and the strength of the Group balance sheet the Directors now believe that it is appropriate to recommend a final dividend of 0.75p (2019: 0.75p per share).

 

BOARD

 

During the financial year the Board appointed Elizabeth Filkin CBE on 1st October 2019 and John Mullen on 1st June 2020 as Non-executive Directors.  Both bring substantial valuable experience to our deliberations. Elizabeth is an acknowledged expert on governance with great experience in both the public and private sectors and John is not only one of the world's most highly regarded quantum experts but knows the business intimately.  We are delighted that they have both joined us. On 31st May Gordon Wilkinson left the business with our good wishes, having during his tenure led the business through some extremely challenging times. I am delighted to report that Mark Wheeler has shown excellent leadership since he took over as Chief Executive.  His unrivalled understanding not only of our business but of this industry worldwide allied to his personal relationship with so many of our staff has meant that the Group is continuing to meet the challenges of the pandemic while also working on a better, more productive future for the business.

 

FORWARD GUIDANCE

 

In view of the continuing global uncertainty as a result of the ongoing pandemic we are not in a position to reinstate forward guidance at this point. We will review the position at the time of our half year results.

 

OUTLOOK

 

Although the 2020 financial year has been challenging as a result of the pandemic, I believe the financial results demonstrate that the executive team have managed the business well in maintaining profits and strong cash generation throughout the year. The Group continues to maintain strict discipline over the management of its net working capital position and I am pleased to report that the Group's net cash balance at the year end was £8.2m. In more normal times, Driver is conditioned to operating with relatively low forward revenue visibility and that has been made even more difficult because the pandemic has resulted in so much global uncertainty. However, activity levels in the early weeks of the new financial year are encouraging and with a strong net cash position and the availability of increased debt facilities, the Directors believe that the Group is well placed to trade through this current uncertain market environment, and to take advantage of the opportunities afforded as a consequence of the disruption of COVID-19 in the Group's target markets.

 

I would like to pay particular tribute to our CEO Mark Wheeler and CFO David Kilgour for the way they have managed the business through the last year. I thank my Board colleagues, Peter Collini, Elizabeth Filkin and John Mullen for their unstinting support and most of all, I thank every one of our staff wherever they are in the world for their continued diligence and loyalty. I am of course also grateful for the confidence our shareholders have consistently demonstrated and I assure them that the Group will continue to do its utmost to repay that confidence.

 

 

Steven Norris

Non-Executive Chairman

15 December 2020

 

 

*Underlying figures are stated before the share-based payment costs and one off severance costs

**Net cash consists of cash and cash equivalents, bank loans.

***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 present my first CEO report in what has been a very challenging but successful year. The COVID-19 pandemic has caused significant market disruption globally which has seen a reduction in activity as the economic uncertainty has resulted in delays in claims and disputes proceeding. In response, we have actively managed the business and our cost base to ensure we have maintained profitability throughout the year.

 

It is especially pleasing that during the pandemic we have achieved a strong cash performance increasing the net cash balance from £3.3m at 31 March 2020 to £8.2m at 30 September 2020.

 

The Group's global operating footprint has proven to be a source of significant operational strength and diversified risk with a strong result in the Europe & Americas (EuAm) region offsetting weaker performance in the Middle East (ME) and Asia Pacific (APAC) regions following a greater early impact in these markets from the pandemic. The market disruption has resulted in challenging trading conditions during the year. However, we believe that based on our track record of prudent business planning and management, our exceptional team of world-class professional services experts and our specialist understanding of sectors, markets and disciplines we will be able to continue to perform well. Driver is well positioned to benefit from the expected increase in dispute resolution activity in the future as globally we move beyond the pandemic to a market which will have seen significant numbers of contracts having faced some form of disruption as a consequence of COVID-19, and hence, requiring our services.

 

Our utilisation rates, which are, as ever, a key performance indicator for a global professional services business such as Driver, reduced to 72%, which considering the level of market disruption demonstrates our ability to minimise the impact of the pandemic over the past year.

 

Following my appointment as Group Chief Executive Officer on 1 June 2020 I have led a strategic review of the business which has established a five year strategic plan. The key themes of the plan are to focus growth on expert and dispute resolution services as we seek both to grow revenue and improve our margin towards a double digit operating profit margin over the life of the plan. To achieve this target we will seek to grow both the geographic and sectoral spread of our offering by recruiting and retaining our most valuable asset, technically expert and suitably qualified people. 

 

STRATEGY

 

The Board believes that the execution of this strategy will enhance shareholder value through:

 

· Focus on growth on higher margin Diales revenue

· Sustainable financial performance

· Maintaining financial strength

· Measured organic growth through enhanced and expanded geographic presence

 

sTAFF:

· Retention and development of existing key staff

· Focussed recruitment strategy

· Culture

· Move to risk and reward sharing

 

mARGIN:

· Focus on higher margin work

· Improve cost effectiveness of geographic presence

· Risk based approach

· Extract value from downtime

 

 

gROWTH:

· Invest in technology and processes to enhance working practices and improve services to clients

· Edge growth around expertise

· True global coverage

 

Over the last six months our confidence in our performance has allowed us to take advantage of market opportunities when they have arisen. We have strengthened our expert offering in the Middle East, opened an office in New York (to both service our North American clients and improve access to the important South American markets), set up a strategic partnership in South Africa and recently opened an office in Madrid. These low risk actions have significantly improved our geographic and sectoral offering in both Africa and the Americas which we expect to be an important source of future measured growth towards our planned objectives. Moving forward we will continue to review further potential opportunities to broaden the geographic and sectoral coverage of our business and with our strong balance sheet, Driver is in a good position to take advantage of opportunities to achieve these aims in a controlled and progressive manner.

 

I would like to take this opportunity on behalf of your Board to thank all the team at Driver Group for their hard work and commitment to the business during what has been a challenging period, and to our loyal clients around the world. We are appreciative of the support of all of them while we continue to position the business for further growth and an even better advisory offering as we begin the next decade.

 

Financial Performance HIGHLIGHTS

 

As noted, the economic uncertainty created by the pandemic has resulted in a lower revenue during the year of £53.1m (2019: £58.5m). The underlying* profit before tax was £2.5m (2019: £3.0m) which is a margin of 4.7% (2019: 5.1%). The underlying profit before tax is stated before the one-off severance cost of £0.8m in 2020 following the exit of our previous Chief Executive Officer and a credit for share-based payments in 2019 of £0.2m. The reported profit for the year after tax is £1.3m (2019: £2.7m).

 

REGIONAL BREAKDOWN

 

EUROPE AND AMERICAS

 

Across the EuAm region, there has again been a strong trading performance, resulting in an overall increase in revenue of 4% to £31.0m. The UK's revenue was £23.2m, (delivering a profit of £3.1m) with a good performance across the whole of the UK market for both claims and project services. Our European businesses continued to perform well with a small drop in revenue to £6.6m but an increase in profit of 37.5% to £0.9m, reflecting the strength of our proposition. Our Technical Services team in London has continued to grow, increasing revenues from £4.2m in 2019 to £4.6m in 2020. The team offers forensic architecture and engineering globally from the UK, a service which is showing demand worldwide.

 

The newly opened office in New York, supported by two leading resident experts, contributed £0.1m of revenue in the first month of operation and alongside our Canadian business the pipeline of opportunities is growing well.

 

ASIA PACIFIC

 

Whilst APAC started the year strongly, challenges in the second half meant it was unable to meet its performance targets. The results reflect a slowdown caused by the pandemic and downward pressure on fees; but they are, nonetheless, disappointing for the Group. Revenue was down across the region with the largest reduction being in Singapore and Malaysia which were a combined 20% below the 2019 position. This was mainly as a consequence of the closure of a low margin project services business. Profitability was improved in the region following the actions taken to reduce the cost base and the closure of the project services business. Additionally, following the recent departure of two senior members of staff we have further streamlined the business and as a result we move forward with a more cost efficient business in 2020/21 as the region manages the impact of the pandemic, and we are well placed to exploit future opportunities.

 

Middle East

 

ME has seen a significant contraction in market activity across the whole region over the last couple of years. Additionally, this year the region suffered market disruption from the COVID-19 pandemic and the various local and national governmental restrictions imposed. As a result regional revenue reduced by 27% from the 2019 level to £14.4m. Apart from a small increase in revenue in Kuwait the decrease in revenue was felt across the region. The drop in regional profit from £1.4m in 2019 to £0.1m this year has been mitigated by actively managing our cost base and ensuring we are in the appropriate position to take advantage of the expected increase in opportunities after the pandemic.  The region is now under new leadership and this, combined with the recent increase in the Diales presence in the region, leaves us well positioned.

 

outlook

 

In spite of a challenging year, the business has produced a good result, which is testimony to the work of all the team. Whilst the pandemic continues to disrupt activity with various lockdowns affecting our business globally the pipeline of opportunities has been maintained into the new financial year.

 

We believe that we are, therefore, well positioned for the coming year, and that we can build sustainable value for all our stakeholders over the life of the strategic plan.

 

Mark Wheeler

Chief Executive Officer

15 December 2020

 

 

*Underlying figures are stated before the share-based payment costs and one off severance costs

**Net cash consists of cash and cash equivalents, bank loans.

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

 

 

 

 

CHIEF FINANCIAL OFFICER'S REVIEW

 

Income Statement

2020 £m

2019 £m

Revenue

53.07

58.49

Cost of sales

(39.16)

(44.95)

Impairment movement

(0.78)

0.40

Gross Profit

13.13

13.94

Recurring operating expenses

(10.52)

(10.85)

Net finance costs

(0.11)

(0.09)

Underlying*profit before tax

2.50

3.00

One off severance costs

(0.76)

-

Share-based payments credit

-

0.25

Profit before Tax

1.74

3.25

Tax expense

(0.40)

(0.50)

Profit for the year

1.34

2.75

 

In 2020 Driver Group managed the impact of the COVID-19 pandemic and although the EuAm region performed well there was a slowdown in activity levels in the ME and APAC regions. Overall, this resulted in lower revenues and underlying* profit before tax than 2019. We also absorbed the impact of the severance cost for our outgoing Chief Executive Officer of £0.8m. The key financial metrics are as follows:

 

Key Metrics

2020

2019

Revenue

£53.07m

£58.49m

Gross Margin %

24.7%

23.8%

Profit for the year

£1.34m

£2.75m

Utilisation Rates

72.0%

76.8%

Basic earnings per share

2.6p

5.2p

 

Total revenue decreased by 9% to £53.07m (2019: £58.49m) and gross profit decreased by 6% to £13.13m (2019: £13.94m). The reduction in gross margin was as a result of the lower revenues in the APAC and ME regions, the impact of which has been offset by a rationalisation of the cost base. Before the impact of impairment provisions the operating gross profit has actually increased during the year to £13.91m (2019: £13.54m). The profit for the year has decreased by 51% to £1.34m (2019: £2.75m) as it is stated after the inclusion of the one off severance cost for the outgoing CEO of £0.77m in the year. The net cash** at the year end was £8.2m (2019: £5.4m), after funding a dividend payment of £0.65m.

 

The EuAm region increased revenue by 4.2% to £31.03m (2019: £29.77m) and generated an increase in segmental profit of 2% to £3.99m (2019: £3.91m). This strong performance was driven by good revenues in the UK of £23.23m (2019: £21.41m) with a small drop in revenues in mainland Europe of 4.6% to £6.61m (2019: £6.93m) and a drop in revenues in Canada of 26% to £1.06m (2019: £1.44m) following a change in leadership.

 

The ME region saw revenues drop during the year by 26.8% to £14.37m (2019: £19.65m) due to a reduction in market activity in the region and the impact of COVID-19. Revenues in Kuwait showed a small increase at £0.97m (2019: £0.76m) otherwise revenues were down across the region. Segmental profit for the region decreased to £0.11m (2019: £1.45m).

 

The APAC region saw revenues drop by 15.5% to £7.67m (2019: £9.07m). The reduction was mainly as a consequence of the decision to close a low margin project services business in the region resulting in a reduction in revenue of £1.58m. The segmental result for the year was a profit of £0.51m (2019: segmental loss £0.36m) which shows the benefit of the restructuring last year and the business closure this year. 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 72.0%, a decrease from 76.8% in the prior year reflecting the impact of a weaker market in the ME and APAC regions and the impact of the pandemic on market activity. The variation in utilisation during the year ranged from a low of 65% in the holiday month of August to a high of 77% in October, June and July. The overall decrease in utilisation is clearly impacted by the COVID-19 pandemic and has held up well during the year when considering the level of market disruption.

 

After a net interest charge of £0.11m (2019: £0.09m) the underlying* profit before tax was £2.50m (2019: £3.00m) and the reported profit before tax was £1.74m (2019: £3.25m). The current year profit before tax includes one off severance costs for the outgoing Chief Executive Officer of £0.77m while the previous year includes a credit of £0.24m for share-based payments due to the criteria for vesting of options not being met for that year. Details of outstanding options can be found in the Report of the Directors and Directors' Remuneration Report.

 

NET WORKING CAPITAL

 

Net cash** showed a strong improvement during the year to £8.2m (2019: £5.4m) with net working capital decreasing as there was a significant reduction in outstanding debtors and a small increase in creditors.

 

TAXATION

 

The Group showed a tax charge of £0.40m (2019: £0.50m). The tax charge includes the effects of expenses not deductible for tax purposes and is calculated at the prevailing rates for the jurisdictions in which the Group operates and, consequently, the effective tax rate for the year was 23% (2019: 15%). The increase in the effective rate is due to lower profits from jurisdictions with lower tax rates.

 

EARNINGS PER SHARE

 

The basic earnings per share was 2.6 pence (2019: 5.2 pence).  Underlying* continuing basic earnings per share was 4.0 pence (2019: 4.7 pence).

 

CASH FLOW

 

There was a net cash inflow from operating activities before changes in working capital of £3.28m (2019: £3.44m), however the current year does benefit by £1.05m from the amortisation of right of use assets following the transition to IFRS 16 during the year. The movement also reflects the reported profit for the year of £1.34m (2019: £2.75m) after depreciation of £0.32m (2019: £0.42m) and the one off severance charge of £0.77m (2019: £nil). The prior year saw a benefit of £0.24m for the share-based payment credit which was £nil in the current year. There was a decrease of £2.06m in trade and other receivables (2019: increase of £0.66m) reflecting improved cash collections during the year, and a small increase in trade and other payables of £0.24m (2019: decrease of £2.05m) resulting in a net cash inflow from operating activities of £5.06m (2019: £0.1m). Net tax paid in the year was £0.52m (2019: £0.62m).

 

There was a net cash outflow from investing activities of £0.34m (2019: £0.29m) principally capital expenditure, including IT spend, of £0.35m offset by interest received.

 

Net cash flow from financing activities was an outflow of £0.98m (2019: £2.36m) with the current year reflecting the dividends paid of £0.65m (2019: £0.27m) and repayment of borrowings of £3.19m (2019: £0.98m) which includes scheduled term loan repayments of £2.12m and lease repayments under IFRS 16 of £1.07m. Offsetting this is a drawdown of the £3m revolving credit facility on 1st April 2020 to allow for unforeseen circumstances as a consequence of the potential impact of the pandemic but, this facility was not required and hence was repaid on 1st October 2020.

 

 

cash flow

£m

Net cash** at 30 September 2019

5.40

Operating cash flow before changes in working capital

3.28

Decrease in Trade and other receivables

2.06

Increase in Trade and other payables

0.24

Tax paid

(0.52)

Net interest paid

(0.09)

Capital spend

(0.35)

Repurchase of shares

(0.02)

Dividends paid

(0.65)

Repayment of leases

(1.07)

Effects of Foreign Exchange

(0.06)

Net cash** at 30 September 2020

8.22

 

 

LIQUIDITY AND GOING CONCERN

 

The Group is in a strong financial position. At the year end the Group had net cash balances of £8.2m (2019: £5.4m) together with committed borrowing facilities of £7.0m (2019: £3.0m) of which £4.0m were undrawn at 30 September 2020. At the start of the COVID-19 pandemic £3.0m of the revolving credit facility was drawn to meet any unforeseen contingencies. This was repaid on 1st October 2020. The net cash and available facilities provide significant liquidity entering into the new financial year.

 

In the interest of prudence, resilience and long term strategic competitive positioning the Board, at the beginning of the pandemic, took the following measures in order to enhance operational flexibility and maximise liquidity:

 

· The interim dividend was cancelled

· Non-essential capital expenditure and discretionary operational expenditure were postponed

· The Board members' salaries were deferred by 20%

· Targeted reductions in pay for under utilised staff

· The £3m revolving working capital facility was drawn for any unforeseen circumstances as a consequence of the pandemic

· Additional financing facilities along with a relaxation of covenants were agreed with HSBC

 

In carrying out their duties in respect of going concern the Directors have completed a review of the Group's financial forecasts for a period of more than twelve months from the date of approving these financial statements. This review has included sensitivity analysis and stress tests which took account of reasonable and foreseeable scenarios including the impact of the COVID-19 pandemic and related risks. Under all scenarios modelled the Directors believe that any funding needs required will be sufficiently covered by the existing cash reserves and the Group's undrawn borrowing facilities. As such the Directors have a reasonable expectation that the Group has sufficient resources and hence these financial statements include information prepared on a going concern basis.

 

 

 

DIVIDENDS

 

The Directors propose a dividend for 2020 of 0.75p per share (2019: 0.75p per share). This will be paid on 23rd March 2021 to shareholders who are on the register of members at the close of business on 19th February 2021.

 

 

David Kilgour

Chief Financial Officer

15 December 2020

 

 

*Underlying figures are stated before the share-based payment costs and one off severance costs

**Net cash consists of cash and cash equivalents, bank loans.

***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 2020

 


2020

£000

2019

£000

REVENUE

53,074

58,486

Cost of sales

(39,162)

(44,950)

Impairment movement

(778)

401

GROSS PROFIT

13,134

13,937

Administrative expenses

(11,413)

(10,760)

Other operating income

130

155




Underlying* operating profit

2,618

3,089

One off severance costs

(767)

-

Share-based payment charges and associated costs

-

243

OPERATING PROFIT

1,851

3,332

Finance income

14

44

Finance costs

(128)

(131)

PROFIT BEFORE TAXATION

1,737

3,245

Tax expense

(399)

(497)

PROFIT FOR THE YEAR

1,338

2,748

(Loss)/profit attributable to non-controlling interest

(1)

1

Profit attributable to equity shareholders of the Parent

1,339

2,747


1,338

2,748

Basic earnings per share attributable to equity shareholders of the Parent (pence)

2.6p

5.2p

Diluted earnings per share attributable to equity shareholders of the Parent (pence)

2.5p

4.8p

 

 

 

 

* Underlying figures are stated before the share-based payment costs and one off severance costs

 

 

 

 

Consolidated Statement of Comprehensive Income

For the year ended 30 September 2020

 


2020

£000

2019

£000

PROFIT FOR THE YEAR

1,338

2,748

Other comprehensive income:



Items that could subsequently be reclassified to the Income Statement:



Exchange differences on translating foreign operations

(24)

(25)

OTHER COMPREHENSIVE LOSS FOR THE YEAR NET OF TAX

(24)

(25)

TOTAL COMPREHENSIVE INCOME FOR THE YEAR

1,314

2,723

Total comprehensive income attributable to:



Owners of the Parent

1,315

2,722

Non-controlling interest

(1)

1


1,314

2,723

 

 

 

 

 

 

 

 

 

 

 

 

Consolidated Statement of Financial Position

For the year ended 30 September 2020

 


2020

2019

£000

£000

£000

£000





Goodwill

2,969


2,969


Property, plant and equipment

501


685


Intangible asset

182


-


Right of use asset

1,831


-


Deferred tax asset

308


268



5,791


3,922

CURRENT ASSETS





Trade and other receivables

17,819


20,189


Derivative financial asset

171


2


Cash and cash equivalents

11,215


7,526




29,205


27,717

TOTAL ASSETS


34,996


31,639





Borrowings

(3,000)


(2,125)


Lease creditor

(679)


-


Trade and other payables

(9,446)


(9,197)


Derivative financial liability

(178)


(398)


Current tax payable

(264)


(428)




(13,567)


(12,148)





Lease creditor

(1,040)


-




(1,040)


-

TOTAL LIABILITIES


(14,607)


(12,148)

NET ASSETS


20,389


19,491





Share capital


216


216

Share premium


11,496


11,496

Merger reserve


1,055


1,055

Currency reserve


(449)


(425)

Capital redemption reserve


18


18

Treasury shares


(1,025)


(1,000)

Retained earnings


9,075


8,127

Own shares


(3)


(3)

TOTAL SHAREHOLDERS' EQUITY


20,383


19,484

NON-CONTROLLING INTEREST


6


7

TOTAL EQUITY


20,389


19,491

 

Consolidated Cash Flow Statement

For the year ended 30 September 2020

 


2020

£000

2019

£000

CASH FLOWS FROM OPERATING ACTIVITIES



Profit for the year

1,338

2,748

Adjustments for:



Depreciation

321

418

Exchange adjustments

55

(69)

Amortisation of right of use asset

1,051

-

Finance income

(14)

(44)

Finance expense

128

131

Tax expense

399

497

Equity settled share-based payment charge/(credit)

-

(243)

OPERATING CASH FLOW BEFORE CHANGES IN WORKING CAPITAL AND PROVISIONS

3,278

3,438

Decrease/(increase) in trade and other receivables

2,056

(658)

Increase/(decrease) in trade and other payables

240

(2,053)

CASH GENERATED IN OPERATIONS

5,574

727

Tax paid

(519)

(623)

NET CASH INFLOW FROM OPERATING ACTIVITIES

5,055

104

CASH FLOWS FROM INVESTING ACTIVITIES



Interest received

14

44

Acquisition of property, plant and equipment

(167)

(338)

Acquisition of intangible assets

(182)

-

NET CASH OUTFLOW FROM INVESTING ACTIVITIES

(335)

(294)

CASH FLOWS FROM FINANCING ACTIVITIES



Interest paid

(107)

(131)

Repayment of borrowings

(3,191)

(981)

Proceeds of borrowings

3,000

-

Proceeds from issue of new shares

-

22

Purchase of Treasury shares

(25)

(1,000)

Dividends paid to equity shareholders of the Parent

(653)

(270)

NET CASH OUTFLOW FROM FINANCING ACTIVITIES

(976)

(2,360)

Net increase/(decrease) in cash and cash equivalents

3,744

(2,550)

Effect of foreign exchange on cash and cash equivalents

(55)

69

Cash and cash equivalents at start of period

7,526

10,007

CASH AND CASH EQUIVALENTS AT END OF PERIOD

11,215

7,526

 

 

Consolidated Statement of Changes in Equity

For the year ended 30 September 2020

 


Share capital

£000

Share
premium
£000

Treasury shares £000

Merger
reserve
£000

Other
reserves(2)
£000

Retained earnings
£000

Own
shares(3)
£000

Total(1)
£000

Non-
controlling interest
£000

Total
Equity
£000

CLOSING BALANCE AT 1 OCTOBER 2018

215

11,475

-

1,055

(382)

6,154

(3)

18,514

6

18,520

Profit for the year

-

-

-

-

-

2,747

-

2,747

1

2,748

Other comprehensive income for the year

-

-

-

-

(25)

-

-

(25)

-

(25)

Total comprehensive income for the year

-

-

-

-

(25)

2,747

-

2,722

1

2,723

Dividends

-

-

-

-

-

(531)

-

(531)

-

(531)

Share-based payment

-

-

-

-

-

(243)

-

(243)

-

(243)

Purchase of Treasury shares

-

-

(1,000)

-

-

-

-

(1,000)

-

(1,000)

Issue of new shares

1

21

-

-

-

-

-

22

-

22

CLOSING BALANCE AT 30 SEPTEMBER 2019

216

11,496

(1,000)

1,055

(407)

8,127

(3)

19,484

7

19,491












OPENING BALANCE AT 1 OCTOBER 2019

216

11,496

(1,000)

1,055

(407)

8,127

(3)

19,484

7

19,491

Profit for the year

-

-

-

-

-

1,339

-

1,339

(1)

1,338

Other comprehensive income for the year

-

-

-

-

(24)

-

-

(24)

-

(24)

Total comprehensive income for the year

-

-

-

-

(24)

1,339

-

1,315

(1)

1,314

Dividends

-

-

-

-

-

(391)

-

(391)

-

(391)

Share-based payment

-

-

-

-

-

-

-

-

-

-

Purchase of Treasury shares

-

-

(25)

-

-

-

-

(25)

-

(25)

Issue of new shares

-

-

-

-

-

-

-

-

-

-

CLOSING BALANCE AT 30 SEPTEMBER 2020

216

11,496

(1,025)

1,055

(431)

9,075

(3)

20,383

6

20,389

 

 

(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

 

The financial information has been prepared under the historical cost convention, as modified by the revaluation of certain assets, and in accordance with Applicable Accounting Standards.

 

The financial information set out above does not constitute the Group's statutory accounts for the years ended 30 September 2020 or 2019. Statutory accounts for 2019 have been delivered to the Registrar of Companies, and those for 2020 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.

 

The Financial Statements have been prepared on a going concern basis. In reaching their assessment, the Directors have considered a period extending at least twelve months from the date of approval of this financial report.

 

The Directors continue to monitor developments across the markets the Group operate in and the potential impact of COVID-19 in the short and medium term and is in particular focussed on the key risks of: delays by clients in contracting for claims advice; projects being suspended or planned projects not proceeding which could potentially result in a reduction in staff utilisation levels; and the impact of the current situation on the financial stability of clients causing delays to payments.

 

As Driver's business is geographically well spread across the world the Directors have been managing the impact of COVID-19 since January 2020 when the Singapore and Hong Kong offices started working remotely. As COVID-19 has spread, remote working has been successfully adopted at varying times in the Middle East offices and across Europe including the UK with minimal disruption of service to our clients. The Directors have been closely monitoring the impact on the business ensuring the welfare of the staff and the clients.

 

The Directors have prepared cash flow forecasts and a reverse stress test covering a period of more than 12 months from the date of releasing these financial statements. This assessment has included consideration of the forecast performance of the business for the foreseeable future, the cash and financing facilities available to the Group and the mitigating actions undertaken to reduce the impact of COVID-19. In preparing these forecasts, the Directors have considered sensitivities incorporating the potential impact of COVID-19 such as a reduction in both revenues and debtor receipts. The forecasts show that the Group could incur a further reduction in revenues of up to approximately 15% compared to existing depressed COVID-19 levels if combined with a minimal change to the cost base and a reduction of cash collections by up to 33% compared to current levels and still have sufficient headroom to operate. In all scenarios, the Group remained in a cash positive position with headroom throughout and as such there were no concerns with the banking covenants associated with the Group's facilities.

 

At 30 September 2020 the Group had cash reserves of £11.2m with an undrawn amount of £2.0m from a revolving credit facility of £5.0m (£3.0m drawn down) and an undrawn £2.0m Coronavirus Large Business Interruption Loan Scheme Facility. In addition to the above, the Group has also agreed a relaxation of its banking covenants until 30 September 2021.

 

Based on the cash flow forecasts prepared including appropriate stress testing, the Directors are confident that any funding needs required by the business will be sufficiently covered by the existing cash reserves and the undrawn additional credit facility. As such these Financial Statements have been prepared on a going concern basis.

 

 

 

 

 

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 remained unchanged from the previous year. These divisions are 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 2020

Europe & Americas
£000

Middle East
£000

Asia Pacific
£000

Eliminations
£000

Unallocated
£000

Consolidated
£000

Total external revenue

31,033

14,373

7,668

-

-

53,074

Total inter-segment revenue

53

576

24

(653)

-

-

Total revenue

31,086

14,949

7,692

(653)

-

53,074

Segmental profit

3,988

111

511

-

-

4,610

Unallocated corporate expenses(1)

-

-

-

-

(1,992)

(1,992)

One off severance costs

-

-

-

-

(767)

(767)

Operating profit

3,988

111

511

-

(2,759)

1,851

Finance income

-

-

-

-

14

14

Finance expense

-

-

-

-

(128)

(128)

Profit before taxation

3,988

111

511

-

(2,873)

1,737

Taxation

-

-

-

-

(399)

(399)

Profit for the period

3,988

111

511

-

(3,272)

(1,338)








OTHER INFORMATION







Non current assets

3,192

270

87

-

2,242

5,791

Reportable segment assets

16,061

8,796

2,117

-

8,022

34,996

Capital additions(2)

82

37

18

-

212

349

Depreciation and amortisation

543

327

247

-

255

1,372

 

(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 and intangible assets. No client had revenue exceeding 10% of the Group's revenue in the year to 30 September 2020.

 

 

 

 

 

 

Year ended 30 September 2019

Europe & Americas
£000

Middle East
£000

Asia Pacific
£000

Eliminations
£000

Unallocated
£000

Consolidated
£000

Total external revenue

29,771

19,645

9,070

-

-

58,486

Total inter-segment revenue

47

121

20

(188)

-

-

Total revenue

29,818

19,766

9,090

(188)

-

58,486

Segmental profit/(loss)

3,908

1,446

(363)

-

-

4,991

Unallocated corporate expenses(1)

-

-

-

-

(1,902)

(1,902)

Share-based payment charge

-

-

-

-

243

243

Operating profit/(loss)

3,908

1,446

(363)

-

(1,659)

3,332

Finance income

-

-

-

-

44

44

Finance expense

-

-

-

-

(131)

(131)

Profit/(loss) before taxation

3,908

1,446

(363)

-

(1,746)

3,245

Taxation

-

-

-

-

(497)

(497)

Profit/(loss) for the period

3,908

1,446

(363)

-

(2,243)

2,748








OTHER INFORMATION







Non current assets

3,200

379

129

-

214

3,922

Reportable segment assets

11,707

9,609

3,832

-

6,491

31,639

Capital additions(2)

43

190

77

-

28

338

Depreciation and amortisation

99

145

100

-

74

418

 

(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 and intangible assets. No client had revenue exceeding 10% of the Group's revenue in the year to 30 September 2019. 

 

 

 

 

 

Geographical information

 

External revenue by location of customers

2020
£000

2019
£000

UK

17,622

16,709

UAE

5,757

9,124

Oman

5,043

6,004

Saudi Arabia

2,589

806

Singapore

2,413

3,608

Netherlands

2,230

2,294

Germany

2,193

2,461

France

1,953

2,149

Qatar

1,877

3,582

Ireland

1,599

533

Australia

1,393

1,559

Canada

1,027

1,298

Indonesia

1,006

-

Spain

955

1,246

Malaysia

949

1,812

United States

943

771

Italy

506

514

Denmark

390

161

Belgium

365

570

Russia

353

365

Poland

327

485

Kuwait

286

430

South Korea

210

42

Hong Kong

193

288

Croatia

192

70

Vietnam

127

84

India

30

518

Luxembourg

5

114

Kazakhstan

-

122

Other countries

541

767


53,074

58,486

 

 

 

 

 

 

 

 

 

 

Geographical information of Non current assets

 


2020
£000

2019
£000

UK

4,927

3,396

UAE

275

184

Netherlands

144

10

Oman

123

129

Malaysia

75

43

Hong Kong

68

21

Qatar

53

38

Singapore

46

54

France

33

3

Australia

19

11

Kuwait

12

28

Canada

8

5

USA

8

-


5,791

3,922

 

 

 

 

3  TAXATION

 

Analysis of the tax charge

The tax charge on the profit for the year is as follows:

 


2020
£000

2019
£000

Current tax:



UK corporation tax on profit for the year

88

165

Non-UK corporation tax

388

568

Adjustments to the prior period estimates

(37)

(37)


439

696

Deferred tax:



Origination and reversal of temporary difference

(40)

(199)

Tax charge for the year

399

497

 

 

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:

 


2020
£000

2019
£000

Profit before tax

1,737

3,245

Expected tax charge based on the standard average rate of corporation tax in the UK of 19% (2019: 19%)

330

617

 

Effects of:



Expenses not deductible

8

(24)

Deferred tax - other differences

(40)

(199)

Foreign tax rate differences

124

206

Adjustment to prior period estimates

(37)

(37)

Utilisation of losses

(47)

(168)

Share options exercised

-

(11)

Unprovided losses

61

113

Tax charge for the year

399

497

 

Factors that may affect future tax charges

 

As at the balance sheet date there are no known reasons that will affect future tax charges.

 

 

 

4  EARNINGS PER SHARE 

 


2020
£000

2019
£000

Profit for the financial year attributable to equity shareholders

1,339

2,747

Compensation for loss of office

767

-

Share-based payment charges and associated costs

-

(243)

Underlying profit for the year before share-based payments and compensation for loss of office

2,106

2,504

Weighted average number of shares:



Ordinary shares in issue

53,962,868

53,942,035

Shares held by EBT

(3,677)

(3,677)

Treasury shares

(1,786,937)

(619,223)

Basic weighted average number of shares

52,172,254

53,319,135

Effect of Employee share options

2,558,796

3,462,087

Diluted weighted average number of shares

54,731,050

56,781,222

Basic earnings per share

2.6p

5.2p

Diluted earnings per share

2.5p

4.8p

Underlying basic earnings per share before share-based payments and compensation for loss of office

4.0p

4.7p

 

 

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 the expected credit loss within IFRS 9. This is calculated using a simplified model of recognising lifetime expected losses based on the geographical location of the Group's entities and considers historical default rates, projecting these forward taking into account any specific debtors and forecasts relating to local economies. At the Statement of Financial Position date a £2,559,000 (2019: £2,384,000) provision was required. If management's 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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