Driver Grp Regulatory News (DRV)

21 May 2013

DRIVER GROUP PLC

("Driver" or "the Group")

Half Yearly Report

For the six months ended 31 March 2013

*Underlying figures are stated before the share-based payment charge and, in 2012 only, exceptional items (note 6).

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

W Alan McClue, Chairman of Driver Group, said:

"Results in the period continued the positive trends seen in the second half of our last financial year and was a further period in which we achieved all of our financial objectives including growth in revenues, gross margin, utilisation levels, profits and a return to a net cash position following the funding of the Trett acquisition."

INTRODUCTION

I am delighted to report on the Group's continuing satisfactory performance for the first half of financial year 2012/2013. Results in the period continued the positive trends seen in the second half of our last financial year and was a further period in which we achieved all of our financial objectives including growth in revenues, gross margin, utilisation levels, profits and a return to a net cash position following the funding of the Trett acquisition. The strength of our trading, strong cash generation and our continued optimism for the business allows us to increase the interim dividend payment.

In my statement in the Annual Report & Accounts for 2011/2012, I said that we would continue to grow and develop our service offerings in the five regions where we have established offices and commence a planned programme leading to an increase in our activity in the Oil & Gas sector throughout America, the Middle East and South East Asia. I stated that our growth plans would develop at different pace within each region and sector and I am pleased to report that progress is as anticipated and that the Middle East business performed ahead of expectations and contributed to us issuing a positive trading update in April.

FINANCIAL RESULTS

Revenue of £18.5m for the first six months of 2013 has grown by 74% compared to the first half of 2012 (£10.6m) and profit before tax has increased by 92% from £0.7m to £1.4m. This substantial growth is largely the result of the benefits of the acquisition of Trett in May 2012 and it is therefore more appropriate to comment on the Financial Results using the second half of 2012 as the comparator as that period reflects both the increased revenues and costs of the Trett acquisition.

Based against the second half of 2012, revenue for the six months ended 31 March 2013 increased by 19% compared with £15.6m for the six months in the second half of 2012.

The principal increases in revenue were in the Middle East where revenue grew by 36% to £5.7m (second half of 2012: £4.2m), Europe where revenue increased 7% to £9.9m (second half of 2012: £9.3m) and Africa where revenue increased by 57% to £1.7m compared to £1.1m in the second half of 2012.

Group underlying pre-tax profit, for the first half, before the charge for share options is £1.45m. This compared with an underlying pre-tax profit of £1.1m in the second half of last year before exceptional items and the charge for share options. After a charge for share options of £50,000 (second half of 2012: £67,000) the pre-tax profit for the six months ended 31 March 2013 was £1.4m compared with a pre-tax profit of £0.5m after the share option charge and exceptional items of £418,000 for the second half of 2013.

The Group's effective tax rate has reduced to 17% (2012: full year 20%) reflecting improved profits from overseas operations which benefit from lower tax rates. Underlying earnings per share, before the share option charge was 4.8p (second half of 2012: 2.9p before the share option charge and exceptional items). After the share option charge the earnings per share was 4.6p (second half of 2012: 1.0p after share options and exceptional items).

As a result of the continued revenue growth, trade and other receivables increased by £1.0m over the first half to £9.8m (30 September 2012: £8.8m) and trade and other payables increased by £0.6m to £6.3m (30 September 2012: £5.7m).

Net cash inflow from operations of £1.2m compares with £0.6m in the second half of 2012 reflecting increasing profitability.

The Group had net cash at 31 March 2013 of £0.1m compared to net borrowings at 30 September 2012 of £1m.

DIVIDEND

In view of the first half trading results, the Board are declaring an interim dividend for 2013 of 0.5 pence per share (2012: 0.3p) which will be paid on 2 August 2013 to shareholders on the register at the close of business on 5 July 2013.

TRADING PERFORMANCE

This excellent performance has been achieved in a trading environment that continues to be challenging with significant macro-economic uncertainty across the world and continued volatility in construction markets. This is a consequence of the quality of our personnel, our brand and our continued focus on staff utilisation.

Our European business is performing towards the higher end of our expectations. Revenues have increased by 7% on the second half of 2012 and in the DriverTrett business utilisation levels have increased by 7 percentage points. Utilisation levels in Driver Project Services fell by 3 percentage points in the same period due to the conclusion of a large commission and the time taken to place staff on new schemes. Overall underlying* profits in Europe increased by 35% driven by overall increases in utilisation levels, re- aligning of fee rates and cost savings flowing into this period from the integration of Trett.

As set out in the April trading update, the Middle East region has outperformed our expectation. Revenues are up 36% on the second half of 2012 and profits are up 59% on the same period. Utilisation levels have increased by 15 percentage points following the integration of Trett and the growing dispute market in the region allowed this level of utilisation to be achieved through the increase in revenues.

Africa continues to develop well. Revenue is up 57% on the second half of last year but profit is down by £74,000; the main reasons being due to delays by the client in the implementation of 3 hospital projects impacting utilisation levels in the strategic project management business.

These three regions; Europe, Middle East and Africa represent those developed prior to the acquisition of Trett in May 2012 and account for 93% of Group revenue. The America and Asia Pacific Regions are two areas acquired in conjunction with the Trett acquisition that represent areas of investment for recovery and growth over the short to medium term. As a result it was anticipated in the Group's plan that both regions would lose money in the current financial year.

America has been restructured and refocused to concentrate on the provision of project services to the Oil & Gas industry primarily out of Houston and investment has been made in the transfer of the Group's UK Project Services Managing Director to the region and the recruitment of senior personnel to support the development of this strategy. I am pleased with the progress made and the pipeline of opportunities that are starting to be generated. Revenues were down 19% on those in the second half of 2012 as a result of a major project and its team transferring as planned to Australia in the second quarter and therefore benefitting Asia Pacific.

Asia Pacific revenues increased 51% compared to the second half of 2012 reflecting the opening of an office in Australia and the early benefits seen in Malaysia and Singapore of the recruitment plans implemented in the second quarter. The losses in the region reflect the investment made in a regional Managing Director and recruitment of expert witness staff; however I am very pleased with the opportunities developed in the region in the dispute market.

OUTLOOK

The business commenced the year in very good shape and at the pre close in April issued a positive trading update.

The potential to leverage our four key service offerings across our client base and global network of offices continues to provide the potential for significant growth over the medium to longer term and the positive results of this first six month period, post the integration of the Trett acquisition, has evidenced that continued progress is being made.

A key objective is the continued development of our oil, gas and petrochemical expertise across the network of oil and gas hubs in Americas, Middle East, South East Asia and UK (Aberdeen). Whilst plans are in place and early progress is being made we are currently in the investment stage and anticipate the benefits to begin to come through towards the end of this financial year and gather momentum in the following financial year.

In respect of the current financial year secured revenues and revenue expected to be secured and to be delivered in the remainder of the year give the Board a high level of confidence in the outlook for this financial year.

Notwithstanding the economic backdrop and the continued challenges we face as we operate in this environment, I continue to be very confident and excited by the opportunities that exist for the Group and firmly believe that the plans we have in place to leverage our service offerings and global network of offices will deliver significant shareholder value in the medium term.

W. Alan McClue

Non-Executive Chairman

20 May 2013

For the six months ended 31 March 2013:

For the year ended 30 September 2012:

\* Total equity attributable to the equity shareholders of the parent

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

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

1 BASIS OF PREPARATION

The condensed consolidated interim financial information has been prepared in accordance with the accounting policies that are expected to be adopted in the Group's full financial statements for the year ending 30 September 2013 which are not expected to be significantly different to those set out in Note 1 of the Group's audited financial statements for the year ended 30 September 2012. These are based on the recognition and measurement principles of IFRS in issue as adopted by the European Union (EU) and are effective at 30 September 2013 or are expected to be adopted and effective at 30 September 2013. The financial information has not been prepared (and is not required to be prepared) in accordance with IAS 34. The accounting policies have been applied consistently throughout the Group for the purposes of preparation of this financial information. The financial information for the half years ended 31 March 2013 and 31 March 2012 does not constitute statutory accounts within the meaning of Section 434(3) of the Companies Act 2006 and is unaudited.

The annual financial statements of Driver Group plc are prepared in accordance with

IFRSs as adopted by the European Union. The comparative financial information for the year ended 30 September 2012 included within this report does not constitute the full statutory accounts for that period. The statutory Annual Report and Financial Statements for 2012 have been filed with the Registrar of Companies. The Independent Auditor's Report on that Annual Report and Financial Statements for 2012 was unqualified, did not draw attention to any matters by way of emphasis, and did not contain a statement under 498(2) or 498(3) of the Companies Act 2006.

After making enquiries, the directors have a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. Accordingly, they continue to adopt the going concern basis in preparing the half-yearly condensed consolidated financial statements.

2 TAXATION

The tax expense on the profit for the half-year ended 31 March 2013 is based on the estimated tax rates in the jurisdictions in which the Group operates, for the year ending 30 September 2013.

3 DIVIDEND

The directors propose an interim dividend for the half-year ended 31 March 2013 of 0.5p per share (2012: 0.3p).

4 SUMMARY SEGMENTAL ANALYSIS

REPORTABLE SEGMENTS

For management purposes, the Group is organised into five operating divisions: Europe, Middle East, Africa, Asia Pacific and America. Asia Pacific and America were added following the acquisition of Trett Holdings Limited (Note 7). These divisions are the basis on which the Group is structured and managed, based on its geographic structure. In each of the divisions the key service provisions are: quantity surveying, planning / programming, quantum and planning experts, dispute avoidance / resolution, litigation support, contract administration, commercial advice / management and strategic project management.

Segment information about these reportable segments is presented below.

Six months ended 31 March 2013

Six months ended 31 March 2012

(1) Unallocated costs represent Directors' remuneration, administrative staff, corporate head office costs and expenses associated with AIM.

(2) Inter-segment revenue is charged at prevailing market rates.

(1)

4 SUMMARY SEGMENTAL ANALYSIS - continued

Year ended 30 September 2012

(1) Unallocated costs represent Directors' remuneration, administrative staff, corporate head office costs and expenses associated with AIM.

(2) Inter-segment revenue is charged at prevailing market rates.

5 EARNINGS PER SHARE 

Potential ordinary shares relating to 625,000 share options (31 March 2012: 1,925,000; 30 September 2012: 1,950,000) have not been included in the calculation of diluted earnings per share as their value has no dilutive effect.

6 EXCEPTIONAL ITEMS

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

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

7 BUSINESS COMBINATION

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

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

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

Other costs relating to the acquisition of £109,000 of the subsidiaries have not been included in the consideration and have been recognised as an expense. This expense is included within exceptional items in the year ended 30 September 2012 (note 6).

Book and fair value of assets and liabilities acquired: