Driver Grp Regulatory News (DRV)

AIM: DRV

22 June 2010

DRIVER GROUP PLC

("Driver" or "the Group")

Half Yearly Report

 for the six months ended 31 March 2010

Key Points

·; Results show full impact of global economic downturn, especially in the UK

- trading trend shows a stabilisation in revenues between H1 2010 and H2 2009

- encouraging progress with international expansion initiatives

·; Revenue of £8.84m (2009: £11.25m)

- principally reflecting UK recession

- international business helped offset UK performance

- encouraging growth across all international markets since H2 2009

·; Underlying¹ loss before tax of £0.26m (2009: profit of £1.30m)

Loss before tax of £0.45m (2009: profit of £1.22m)

·; Underlying¹ loss per share of 0.6p (2009: earnings per share 4.1p)

Basic loss per share of 1.4p (2009: earnings per share 3.8p)

·; Net funds² available to Group at 31 March 2010 of £2.65m (2009: £1.95m)

·; c£1.0m of revenue investment being made this financial year to support Group's three year growth plan to:

- develop overseas activities: Africa, Qatar, UAE

- widen service offering: industrial, power & energy sectors

·; Cost base realigned - significant savings achieved

·; Board views current financial year as year of strategic investment to support business re-positioning to benefit FY2011 and beyond

·; Board encouraged by progress to date with growth initiatives - new income streams building

 ¹ Underlying figures are stated before the share-based payment charge and before impairment provision charge in 2010

² 'Net funds' includes UK & overseas cash balances & unutilised borrowing facilities as at 31 March 2010

Steve Driver, Chairman of Driver Group, said,

"Results for the first half of the financial year show the full impact of the economic downturn on trading, especially within the UK although our actions to reduce headcount earlier in the year have partially mitigated the effect. Encouragingly, the revenue trend when compared with the second half of last financial year points to a stabilisation.

While we continue to expect trading conditions in the UK in the near term to remain challenging, as we look ahead, our focus remains on delivering our three year plan to expand internationally, broaden our service offering through strategic project management services, develop project services into the industrial, power and energy sectors and strengthen our expert witness services.

The current financial year is one of strategic investment. We are encouraged with progress to date and expect the benefits to become increasingly evident in the next financial year and beyond."

Chairman's Statement

INTRODUCTION

In my Chairman's Statement in the 2009 Annual Report, I reported that the Board implemented significant operational changes in the final quarter of the financial year and that we are re-positioning the Group in order to drive the international growth opportunities we see available to us, particularly in the Middle East, Africa and Europe.

The current financial year represents the first year of our three year expansion plan both to develop Driver's overseas activities and to widen the Group's service offering. As previously reported, we are making some £1 million of revenue investment in the current financial year in order to support these plans and I expect the benefits to come through in the next financial year and beyond.

I am pleased to report that the execution of our plans is progressing well. In line with our strategy, we have made the following initiatives: appointed two senior directors to open up new markets; commenced work on a number of major projects in Africa; completed the acquisition of a small consultancy practice in Dubai; and further strengthened our operations in the Middle East, by opening a new office in Qatar which has already secured new contracts.

Results for the first half of the financial year are in line with our management and market expectations. They show both the full impact of the economic downturn on trading within the UK as well as significant progress internationally. Encouragingly, the revenue trend, when compared with the second half of last financial year, points to a stabilisation.

FINANCIAL RESULTS

Reflecting the much more difficult trading environment, especially prevailing in the UK, total revenue for the six months to 31 March 2010 reduced by 21% to £8.84m against £11.26m for the same period in 2009.

Compared to the second half revenue for 2009 of £9.29m, total revenue was marginally down, showing a 5% contraction. Driver Consult and CMC contributed revenues of £4.44m (2009: £6.03m) and £1.89m (2009: £2.31m) respectively to the overall result, and revenues from the Middle East totalled £2.69m (2009: £3.10m).

In line with expectations, the underlying pre-tax loss, before the charge for share options and before an impairment provision on a freehold property, was £259,000 (2009: profit of £1.30m). This compared with an underlying pre-tax loss of £191,000 in the second half of last year. After a charge for share options of £66,000 (2009: £81,000) and a provision for an impairment of £122,000 (2009: nil) in the value of the Edinburgh office, the pre-tax loss for the six months was £447,000 (2009: profit of £1.22m). The Edinburgh office was sold in May 2010 without any profit or loss on the disposal.

The reduction in the Group's effective tax rate to 24% (2009: full year 26%) reflects the benefit of a lower local tax rate in Oman. The underlying loss per share, before the charge for share options and the impairment, was 0.6p (2009: earnings per share of 4.1p). After both the share options and the impairment, the loss per share was 1.4p (2009: earnings per share of 3.8p).

Trade and other receivables reduced by £1.22m compared to the same period last year (2009: increased by £1.12m), due partly to the fall in revenue as well as due to a reduction in debtor days of 4 days compared to 31 March 2009 and by 2 days compared to 30 September 2009. Cash generated from operations in the period was £0.83m lower than in the first half of 2009, with a net outflow of £0.60m. Net borrowings at 31 March 2010 were £1.17m (31 March 2009: £0.93m). Net funds available to the Group (including borrowing facilities) at 31 March 2010 were £2.65m (31 March 2009: £1.95m).

DIVIDEND

In view of the first half trading loss and investment in the expansion of the business, the Board will not be declaring an interim dividend for 2010 (2009: 1.0p per share).

TRADING PERFORMANCE

As predicted, the trading environment in the UK construction market in the first half continued to be challenging, however, the increasing contribution from our international businesses has helped to mitigate the effect of the UK recession on the Group's performance.

Within the Driver Consult business, UK revenue fell by 32% year on year to £3.37m (2009: £4.94m) and by 18% compared with the second half of 2009. However, international revenue (excluding the Middle East), which currently includes business generated in mainland Europe, Africa and the Americas, showed an improved performance over the second half of 2009, with revenue growth of 57% to £1.07m and profit growth of 52%. This reflects the continued expansion of expert witness services internationally and new assignments in Africa. One of the senior level appointments we made was to develop our presence in Africa and also to introduce a new service stream, strategic project management. As a result of this appointment, we are now working on a number of projects in Africa and plans are now in place to open an office in South Africa. It is envisaged that our South African operations will help to develop opportunities in the region and provide a competitive, flexible local workforce to serve the region. Our decision to offer strategic project management services was taken in recognition of demand in the international market and it is pleasing to see that we have secured work in this sector in the first half. We also have proposals in place to provide these services on some of the largest projects in the world.

CMC segmental revenues were down 18% year on year to £1.89m (2009: £2.30m), and by 8% compared to the second half of 2009, a consequence of the weaker UK construction market. Our second senior level appointment was made to broaden our project services offering into the industrial, power and energy sectors, but restrictive covenants were in place until 31 March ensuring new clients could not be secured in this period. We have subsequently won a number of industrial, power and energy projects in the UK and have also submitted a number of bid proposals which are currently being considered.

Revenue in the Middle East shows a 13% reduction year on year to £2.69m (2009: £3.10m). Against the second half of last year, revenue is marginally ahead by 2%. This reflects the normal fluctuations due to the timing of high margin expert appointments and project services revenue in the region being impacted by the large number of Dubai projects that have been either suspended or cancelled. However, the claims and expert services business has grown significantly in Dubai, benefiting from the added marketing and from the business we acquired in November 2009. We opened our new office in Qatar in January 2010, which is establishing its presence and has already secured work in the region.

As expected, utilisation levels in the UK show a year on year reduction of 4 percentage points. Utilisation levels in the Middle East have remained at similar levels to last year. During the first half, we have focused on realigning the business to reflect both the more difficult trading conditions and our strategic growth plans, and have consequently reduced the number of staff. As a result, fee earner numbers have decreased in the UK by 15 to 92 heads, and in the Middle East have reduced by 3 to 35 heads by comparison with the position at 30 September 2009. We will continue to keep our cost base closely monitored.

OUTLOOK

While we continue to expect trading conditions in the UK in the near term to remain challenging, as we look ahead, our focus remains on delivering our three year plan to expand internationally, broaden our service offering through strategic project management services, develop project services into the industrial, power and energy sectors and strengthen our expert witness services.

As I said in the Annual Report & Accounts, the current financial year is one of strategic investment. We are encouraged with progress to date and expect the benefits to become increasingly evident in the next financial year and beyond. In the Group's AGM Statement in February 2010, I indicated that we expected to reverse the first half loss over the second half and to make a full year profit.

Looking ahead over the remainder of the current financial year, we now anticipate that the Group is likely to make a small underlying loss in the second half. This is a consequence of continued weakness in the underlying UK construction market and a longer than anticipated lead time for some of the new initiatives to generate a contribution. With a strong balance sheet and with our growth initiatives in place and positive indications that they are beginning to bear fruit, we believe that the Group is positioned to deliver a strengthening performance over the medium term.

Stephen Driver

Chairman

21 June 2010

Condensed Consolidated Income Statement (Unaudited)

Half yearly report for the six months ended 31 March 2010

All amounts relate to the Group's continuing operations.

Condensed Consolidated Statement of Comprehensive Income (Unaudited)

Half yearly report for the six months ended 31 March 2010

Condensed Consolidated Statement of Financial Position (Unaudited)

Half yearly report for the six months ended 31 March 2010

Condensed Consolidated Cash Flow Statement (Unaudited)

Half yearly report for the six months ended 31 March 2010

Condensed Consolidated Statement of Changes in Equity (Unaudited)

Half yearly report for the six months ended 31 March 2010

For the six months ended 31 March 2010:

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

(1) 'Other reserves' combine the translation reserve and the capital redemption reserve.

Condensed Consolidated Statement of Changes in Equity (Unaudited) continued

Half yearly report for the six months ended 31 March 2010

For the year ended 30 September 2009:

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

(1) 'Other reserves' combine the translation reserve and the capital redemption reserve.

(2) The opening balance on the share-based payment reserve, originally included in other reserves, has been credited to retained earnings.

Notes to the Interim Financial Statements

1 BASIS OF PREPARATION

The financial information presented in this documentation has been prepared in accordance with the recognition and measurement criteria of International Financial Reporting Standards ("IFRS") and International Financial Reporting Interpretations Committee ("IFRIC") interpretations that are expected to be applicable for the year ending 30 September 2010. These are subject to ongoing review and endorsement by the European Commission, and possible amendment by the International Accounting Standards Board ("IASB"), and are therefore subject to possible change. The accounting policies used are consistent with those in the most recent annual financial statements at 30 September 2009.

The financial information in this statement relating to the six months ended 31 March 2010 and the six months ended 31 March 2009 has not been audited, but has been reviewed, pursuant to guidance issued by the Auditing Practices Board. The comparative figures for the year ended 30 September 2009 do not amount to full statutory accounts within the meaning of section 435 of the Companies Act 2006. Those accounts have been reported on by the Group's auditors and delivered to the Registrar of Companies. The audit report was unqualified, did not include references to matters to which the auditors drew attention by way of emphasis without qualifying their report and did not contain a statement under section 498(2) or (3) of the Companies Act 2006.

2 TAXATION

The tax credit on the loss for the half-year ended 31 March 2010 is based on the estimated tax rates in the jurisdictions in which the Group operates, for the year ending 30 September 2010.

3 DIVIDEND

The directors do not propose an interim dividend for the half-year ended 31 March 2010 (2009: 1.0p per share).

4 SUMMARY SEGMENTAL ANALYSIS

Reportable segments

For management purposes, the Group is organised into three operating divisions - Driver Consult UK, Driver Consult Middle East and Commercial Management Consultants (CMC). These divisions are the basis on which the Group is structured and managed, based on its geographic structure and principal services offered.

Summary segment information about these reportable segments is presented below.

(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 (UNAUDITED)

Potential ordinary shares relating to 2,235,000 share options (31 March 2009: 2,085,000; 30 September 2009: 1,935,000) have not been included in the calculation of diluted earnings per share as their value has no dilutive effect. Therefore, dilutive and basic (loss) / earnings per ordinary share are identical.

6 IMPAIRMENT REVIEW

During the period the Directors have carried out an impairment review in accordance with IAS 36 as a result of specific changes in the cash generating unit. This review identified an impairment charge amounting to £122,000 relating to the Group's Edinburgh freehold property. This has been recognised in the Consolidated Statement of Comprehensive Income for the six month period. Subsequent to the date of these condensed financial statements the property has been sold for net disposal proceeds of £600,000. No further loss on disposal arose at the date of the disposal transaction. The directors have identified no further evidence of impairment in relation to group assets.