Driver Grp Regulatory News (DRV)

DRIVER GROUP PLC

("Driver" or "the Group")

Preliminary Results

For the Year to 30 September 2015

Driver provides specialist commercial & dispute resolution

services to the construction and engineering industries

Financial Highlights

· Revenue and profits in line with guidance given in pre close trading update of 6 October

· Revenue up 23% to £48m (2014: £39.1m)

o Half 2 revenue up 38% to £26.8m (2014: £19.4m)

· Underlying* operating profit of £1.2m (2014: £3.5m)

o Half 2 underlying* operating profit of £1.6m (2014: £2.1m)

· Underlying* profit before taxation of £1.1m (2014: Profit £3.5m) and reported loss before taxation of £1.9m (2014: Profit £3.1m)

· Underlying* Earnings Per Share* 3.2p (2014: 11.2p)

· Dividend maintained at 1.65p per share (2014: 1.65p)

Operational Highlights

· 1 year in to 4 Year Strategic Plan

o platform for delivery in place; progressing well

· Group Board changes

o Steve Norris appointed as Non-Executive Chairman in February 2015

o Bob Laslett appointed as Non-Executive Director in June 2015

· Acquisition of initiate Consulting Limited ('Initiate') in December 2014

o programme and project management services to infrastructure clients

· Headcount up 41% to 518 (2014: 368) and on track for 2018 target of over 700

o organic headcount growth 26% to 463 (2014: 368)

o Staff speak 33 different languages

· Asia Pacific, Middle East & Africa ('AMEA')

o reorganised to support significant growth opportunities

o regional oil & gas disputes team established in Singapore

o created critical mass - headcount increased by 56% to 234 (2014: 150)

o benefits of investments materialising in second half performance

§ strengthened multinational client base

§ H2 revenue up 34% on prior year period led by organic growth in UAE and Africa

§ record revenues in each of the months of June to September

· Europe & Americas ('EuAm')

o offices opened in Canada and France

o H2 revenue up 11% on prior year period led by organic growth across the regions disputes services

Start to new financial year

· New £10m banking facility agreed with HSBC to support working capital requirements in Strategic Growth Plan through to December 2018

· Q1 predicted to be in line with expectations for double digit revenue growth in 2015-16

* Underlying figures are from continuing operations and are stated before the share-based payment costs, exceptional items and amortisation of intangible assets

Dave Webster, Chief Executive of Driver Group said:

"The focus this year has been to create the platform that will support the Strategic Plan and Growth Targets through to 2018. The timely delivery of this Plan is determined to a large extent by our ability to put this platform in place quickly and effectively. We set out to strengthen our brand and increase the profile of Driver, create a global critical mass to serve our clients anywhere in the world and have support structures in place to operate efficiently across all regions. I am delighted that we got much of this investment in place in the first half of the year and started to see some benefits coming through in the second half. We made strategic changes to the Group Board aimed at increasing our profile in the industry and across a wider market place; acquired Initiate to provide the Group with a credible programme and project management service to the infrastructure sector; created critical mass in AMEA with the recruitment of 84 new people and established a business support unit in each of our operating regions to manage our global and interactive proposition. We now have a world class commercial and dispute resolution business and a credible programme and project management offering with a focus on the global infrastructure market where spend is at unprecedented levels. This gives me a lot of confidence in our future growth prospects."

Enquiries:

Driver Group plc

David Webster, Chief Executive Tel +44 (0) 1706223999

Damien McDonald, Group Finance Director Tel +44 (0) 1706223999

Panmure Gordon (UK) Ltd

Nominated Advisor

Mark Taylor / James Greenwood Tel +44 (0) 2078862500

CHAIRMAN'S STATEMENT

Introduction

It has been a year of change and transition for Driver Group as the business put in place from top to bottom the platform necessary to take it to the next stage of its development. I joined Driver in December 2014 as part of the acquisition of Initiate and was appointed Chairman in February 2015. I came to the Group part way through the process of change at what was a challenging time and with difficulties in terms of forecasting when the benefits of these changes would accrue to revenue and profits. However, the latter part of the year saw the business begin to deliver these benefits and regain to some extent the key metrics of prior year performance.

I have met many staff across the two regions of our operations and, as would be expected, within Initiate and I have also attended corporate events where I met some of our clients. I am very encouraged by what I have found. Driver Group has very good people and excellent clients and has made significant progress in the year while gaining market share in key industries and geographies.

The results in the UK and Europe demonstrate good progress with our most established businesses continuing to perform strongly, particularly the UK disputes business. AMEA did place a stress on the Group in the first half whilst implementing the investment and change, but second half results show significant growth coming through with utilisation levels and gross margins getting closer to prior years. AMEA had a strong end to the year with revenue in each of the months June through September hitting record levels.

Financial Results

Revenue for the year was £48.0m (2014: £39.1m) and Underlying* operating profit was £1.2m (2014: £3.5m). The underlying earnings per share was 3.2p (2014: 11.2p). After exceptional costs relating to severance payments of £0.5m and acquisition and integration costs of £1.6m (including a cost of £1.5m of deferred consideration dependent on future employment), share based payment charge of £0.5m and amortisation of intangible assets of £0.2m the operating loss before taxation was £1.9m (2014: Profit £3.1m).

Net borrowings** at the year-end was slightly better than expected at £2.5m (2014: net borrowings of £0.2m). The cash outflow was as a result of increases in working capital requirements due to the growth in revenues, the acquisition of Initiate, the additional costs of fee earners recruited to create the critical mass in AMEA ahead of their deployment, the costs of restructuring the AMEA region, putting in place the business support units and the payment of staff bonuses.

Dividend

The Board, having considered the strong finish to the year and with confidence taken from this and trading in Q1 and visibility in the current financial year, proposes to maintain the dividend at the same level as 2014. The proposed final dividend for 2015 is 1.05p (2014: 1.05p) giving a full year dividend of 1.65p (2014: 1.65p) to be paid on 8 April 2016 to shareholders on the register at the close of business on 29 March 2016.

Strategy

In late 2014, the Board under its previous Chairman, undertook a review of the business and the medium term landscape. The main output of this review was to transition the company from the recovery model that it had adopted in the wake of the global economic crisis to an aggressive development and growth model to capitalise on the increasing global infrastructure spend and the significant opportunities in AMEA. The acquisition of Initiate, creation of an Executive Board, recruitment of a Chief Operating Officer for AMEA and the invitation for me to Chair the Group was a part of the outcome of this review. With these key events and one year in to the Plan we are making good progress; further details on this can be found in the CEO's Review.

Board

During the year there were a number of changes to the Board, reflective of the Group's new approach and to help drive forward the new strategy. In December 2014 I joined the Board and was subsequently appointed Chairman in February 2015 following Alan McClue's retirement from the Board. In June 2015 we were delighted to appoint Bob Laslett to the Board as Non-Executive Director.

Outlook

We had a relatively strong second half to the year and Q1 of 2015-16 looks to be continuing in this vein. There are opportunities for growth across the three operating areas of the Group and we are well positioned to capitalise on these. However, the Group will continue to be cautious in its forecasting due to the inherent short term visibility of secured work in our core disputes business.

We have excellent and committed staff, a high quality client base and a clear focus on business development, staff utilisation, margins and cash generation, therefore the Board looks to the future with confidence.

Steven Norris

Non-Executive Chairman

* Underlying figures are from continuing operations and are stated before the share-based payment costs, exceptional items and amortisation of intangible assets

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

CHIEF EXECUTIVE'S REPORT

Introduction

Financial year 2014-15 was the first year of the Four Year Growth Targets & Strategic Plan (the "Plan"), which aims to double revenue and increase profit percentage. The year was one of investment and restructuring, particularly in the first 8 months through to May 2015, when we put in place the foundations of the Plan. There are four main areas where we see future growth and we have now positioned the Group to capitalise on these:

· Become the global market leader in the provision of commercial and dispute resolution services to all industries. To achieve this we need to provide critical mass across AMEA with technical staff prepared to travel around the region in order to serve the multinational construction and engineering organisations whilst optimising utilisation levels. This year we have recruited a Chief Operating Officer, put in place a business support unit and reorganised the region to give us the capability to do this. We have increased our headcount by 56% to 234 with the recruitment of 84 people. In mainland Europe, again we need to serve our multinational clients wherever they operate in the world and have sufficient local presence to work with them in their own country; so we opened an office in France to add to those in Germany, Netherlands and UK. We now have over 500 people of various nationalities speaking 33 languages across our 27 offices.

· Become the global market leader in the provision of quantum, planning and technical expert witnesses. We are achieving this through DIALES providing over 40 internationally renowned experts who can use the support of the global footprint of offices, staff, cultures and languages to provide their expertise locally.

Provide a credible programme and project management offering in the infrastructure sector that can serve as the medium to longer term growth opportunity for the Group. Driver serves governments in Africa and Oman and the acquisition of Initiate in December 2014 provides this expertise in the UK. We will now use this capability to develop the offering across the Group's global footprint starting at first in the Middle East.

· Leverage our commercial, dispute, expert, programme and project management skills to provide a complete cradle to grave service to clients and stakeholders with capital spend programmes across all industries.

As part of the Plan I proposed changes to the Group Board to include more experience, knowledge and connections in the markets where the Group sees its growth coming from. Consequently Steve Norris was invited to become Chairman and Bob Laslett was appointed as an additional non-executive Board member.

The reported loss for the year before taxation was £1.9m (2014: Profit £3.1m) but this largely reflected the acquisition of Initiate and other exceptional items. This year has in fact been a story of two halves. The first half saw significant investment and restructuring of the business which resulted in a loss for the period but in the second half, particularly in the final four months from June to September, we started to see some of the benefits of that restructuring coming through. June was a record month for revenues, prior to the inclusion of the additional revenue from Initiate, and in AMEA revenue records were bettered in each of the final four months of the year. This performance plus Initiate resulted in second half revenue increasing 38% compared to the prior year period, with growth of 34% in AMEA and 11% in Europe & Americas.

We have increased our headcount by 150 (41%) to 518. Of this, 95 (26%) were recruited and 55 (15%) are within the acquired Initiate business. We spent over £0.5m on the costs of recruitment and during the year put in place our in-house recruitment team with the aim of saving costs and having a more efficient recruitment solution for the future. We are on course for our target of over 700 people by 2018.

Our people have achieved an awful lot through the course of the year. They are a highly motivated and dedicated group of people with very high technical capabilities. On behalf of the Board I would like to thank them for all of their efforts and loyalty.

Financial Performance

Revenue was up 23% at £48.0m (2014: £39.1m) as a result of the acquisition of Initiate (£5.4m), organic growth in AMEA (£2m) and Europe & Americas (£1.5m). Underlying* operating profit reduced to £1.2m (2014: £3.5m) largely down to the increased investment in the first 8 months in AMEA, some £0.35m of bad debt provisions in Europe and £0.25m adverse FX impact in the second half of the year. Virtually all of the revenue growth came through in the second half with revenue in this period up 38% at £26.8m (2014: £19.4m). This was also reflected in the profits, with second half underlying* operating profit of £1.6m (2014: £2.1m), a significant improvement on the first half.

AMEA had a slow start to the year where some commissions completed early coinciding with others having delayed starts, there was significant investment in putting in place the COO and a business support unit necessary for our longer term growth plans and we recruited 84 fee earners to create critical mass ahead of the ability to deploy them.

AMEA posted revenue up 11% at £20.3m (2014: £18.3m). The region had a strong second half performance and revenue increased by 55% on that in the first half and 34% compared to the second half of 2014 at £12.4m (2014: £9.2m). Profits reflected the investments made in the region with full year underlying* operating profit of £0.8m (2014: £2.9m) due to first half losses of £0.5m (2014: profit of £1.3m). Second half underlying* operating profit was £1.3m after the impact of adverse FX movements of £0.25m (2014: £1.6m). Had it not been for this FX movement second half profits would have been broadly the same as 2014.

Europe & Americas revenue was £22.2m, up 7% (2014: £20.8m) and underlying* operating profit of £2.1m after bad debt provisions of £0.35m (2014: £2.4m).

Initiate was acquired in December 2014 and delivered revenue of £5.4m and underlying* operating profit of £0.4m.

Key Performance Indicators

We measure financial and operational KPIs. It is particularly relevant this year to see the transition of some headline KPIs from H1 to H2 as the impact of our investment and then the start of the benefits coming through can be seen. The solid second half performance is reflected in the increase in utilisation levels from 73% in the first half to 79% in the second half (2014: 79%) and average fee rates increased by 5% in the year. These in turn resulted in gross margin increasing from 19% in the first half of the year to 25% in the second half (2014: 26%) and underlying* operating profit percentage increasing from -2% in the first half to 6% in the second half (2014: 9%)

There has been an increase in overhead across the Group which has come from two areas, the first being a reallocation of overhead from what in prior years was allocated in cost of sales - and the second being the increase to support the Plan through to 2018. Total overhead in the second half was 18% (2014: 16%). We ought to see the overhead percentage reduce through this period as revenues increase.

Trading: AMEA

Revenues in the first half of the year were 12% down on those in 2014 as a result of delayed projects in Oman and Singapore and the early conclusion of a large commission in Qatar. The investment in establishing critical mass, recruitment of a COO, putting in place the business support unit and increasing the profile of the business across the region started to yield benefits in June, with record revenues in the month subsequently bettered in each of the succeeding months of July, August and September resulting in a strong Q4 trading performance. This growth has been driven from the United Arab Emirates, South Africa and our regional Oil & Gas offering based out of Singapore. We have secured some quality commissions, particularly on major infrastructure and oil & gas projects and have been appointed by clients that include leading global law firms, multinational organisations and government bodies. As a result second half revenues were up 55% on those in the first half and up 34% on the same period in 2014.

Gross margin for the year was low for the reasons previously mentioned, at 22% but in the second half of the year was up 28% on the same period for 2014 and was broadly at the same percentage level at 26% (2014: 27%). Utilisation levels were again low as we worked to deploy the additional staff and ran at 74% for the year (2014: 81%) with low levels in the first half and 76% in the second half. We were able to increase fee rates across the region with the exception of Qatar

where pricing is coming under pressure as competition seeks to establish itself in the market. Underlying* operating profit margin was low at 4% for the year for reasons previously mentioned but in the second improved to 10%.

Construction and infrastructure spend in the Middle East remains strong and is expected to spread across the AMEA Region over the next decade at unprecedented levels reaching 60% of global spend. With our platform now in place to support our growth plans the Company is now well positioned to capitalise on this opportunity. Oil and gas prices have impacted future construction and infrastructure spending to some extent, however we have not experienced any adverse impact on our disputes business which generates the majority of revenues in this sector and we anticipate this will remain the case in the short to medium term.

Trading: Europe & Americas

The region as a whole performed broadly as expected with revenue up 7% as did the new offices in Canada (opened at the start of the year with our Joint Venture partner MHPM) and France (opened in April 2015) with the Canada office reporting an underlying* operating profit and France a small loss as we build momentum. The French office will serve us very well in support of the multinational French construction and engineering firms as we can work alongside them in their local headquarters and serve them globally through our international footprint; we are already seeing this work and the team have fitted in very well with the wider Group. Along with our German and Dutch offices we expect this model to provide growth for us in the coming years. The UK disputes business is well established as the market leader and delivered a very strong performance both in the domestic market and from international work secured from the UK.

Our project services business in London and the South East has not performed as well as expected with revenue and utilisation levels dropping. This has been highlighted in previous updates where we stated our intention to recruit a leader in this area. We have recently made this appointment and expect the business to recover during Q2 and Q3 of the new financial year.

Gross margin over the year was 24% which is up two points on 2014 mainly due to the UK disputes business. Utilisation across the region remained the same as 2014 at 77% with increases in the disputes business offsetting reductions in the project services business.

We are experiencing slight pressure on our rates in the project services business but across the disputes business there is no such pressure and we have been able to increase these rates in the UK. Our euro denominated fees have been adversely affected by strong sterling.

Profits were adversely affected by bad debt on a small number of accounts, the most notable being a c.£0.2m receivable due from Sahaviriya Steel Industries UK who were put in to liquidation shortly after close of our financial year. We have provided in full for all of these receivables in the sum of approximately £0.35m. Underlying* operating profit margin reduced to 9% (2014: 11%) as a result of this and the project services business in London and the South East but offset by a very strong performance in the UK's disputes business. Had it not been for the bad debt provision profits in the region would have been in line with prior year, but this serves as a cautionary note particularly for our project services business in the oil & gas and associated industries.

Trading: Initiate

Initiate traded broadly as expected, although revenues were marginally impacted in Q4 on the Network Rail account due to the effect of changes in the procurement of services in that organisation.

Gross margin was as expected at 18% and underlying* operating profit margin was 7%. Utilisation levels were strong at 88%. We are looking to improve gross margins as we develop the service in the Middle East and leverage the more profitable elements of the business across the UK. This may come at the expense of an increased overhead in the short term as we are currently considering how best to strengthen the leadership team to maximise the opportunities we see available to us over the medium term.

Initiate's project delivery and project management services to the infrastructure sector will continue to be developed with existing clients such as Transport for London, Network Rail and Heathrow Airport. There are also new opportunities through High Speed 2 and Highways England and we have been appointed on the Department for Transport Framework for Programme and Project Management for rail related work. In the Middle East the Initiate offering will be delivered

through the Driver brand and we will continue to focus on the rail and aviation sector which is buoyant across the region. Whilst we did not secure any work in the current financial year, we have commenced business development activity in the region and anticipate to secure commissions in the coming year.

Outlook

Looking ahead to 2015-16, given the revenue growth and profits in H2 of 2014-15, the strong performance in Q4 and the opportunities developing in our pipeline I am confident of maintaining double digit revenue growth in 2015-16.

Dave Webster

Chief Executive Officer

STRATEGIC REPORT - DESCRIPTION OF THE BUSINESS

Driver Group has been providing consultancy services to the engineering and construction industries since 1978. The company has grown to over 400 members of staff, with offices across Africa, Asia Pacific, Canada, Europe and the Middle East. The range of services offered across the Group provides support to the engineering and construction industries it serves, from 'cradle to grave'.

DIALES

DIALES is the Group's expert witness support service provider. We supply world-class quantum, delay, and technical experts for litigation; alongside provision of internationally experienced adjudicators, arbitrators, and mediators.

DRIVER PROJECT MANAGEMENT

Driver Project Management provides the strategic and leadership disciplines necessary to develop and deliver a project. We support clients in the strategic leadership and decision making necessary to define, evaluate, develop, finance, procure, and implement their investment projects. 

DRIVER PROJECT SERVICES

Driver Project Services provides customer focused project controls solutions throughout a project lifecycle. We deliver commercial management, quantity surveying, and planning services, offering clients long term support and commitment for the duration of their projects.

DRIVER TRETT

Driver Trett provides multi-disciplinary consultancy services to support effective delivery of our clients' projects. Our specialisms include commercial and contract management, planning, programming and scheduling, and dispute resolution support services.

INITIATE

Initiate are capital investment consultants providing development, project and construction management services to the infrastructure market in the UK and overseas.

PRINCIPAL RISKS AND UNCERTAINTIES

There are a variety of specific business risks which can affect international consultancy businesses like Driver. The principal risks are outlined below, the principal uncertainties being the impact of the UK and global economy on the business.

CREDIT RISK

The Group's credit risk is primarily attributable to its trade receivables. The risk increases as our business expands into new territories where payment of outstanding receivables can be slower. Credit risk is managed by running credit checks on customers and by monitoring payments against contractual terms.

There is a clear internal process for elevating potential problems in recovering debts such that prompt action is taken to recover debts at the earliest possible point and legal action is taken where necessary.

LIQUIDITY

The Group monitors cash flow as part of its day to day control procedures. The Board reviews cash flow projections and ensures that appropriate facilities are available to be drawn upon as necessary. At the year end, the Group's borrowing facilities consisted of an overdraft facility of £3.0m renewable annually and a term loan of £3.0m repayable on 15 December 2017. With an overdraft availability of £0.63m and cash balances of £1.11m the Group had access to £1.74m of available funds at 30 September 2015. The Group's facilities with the bank are secured by means of debentures over the Group's assets and a legal charge over the land and building at Haslingden.

On 1 December 2015 the Group signed new banking facilities with HSBC Bank plc in replacement of the facilities with The Royal Bank of Scotland plc. The new facilities consisted of a £7m term loan repayable on 30 November 2018 and a £3m overdraft facility. 

REPUTATION RISK

The quality and experience of our people is fundamental to our success, and we are committed to the development and training of our staff. All assignments are managed by a director who remains

directly responsible until its conclusion and will regularly re-evaluate the client's requirements and issues.

UTILISATION RISK

Utilisation risk is attributable to the number of hours billed by staff and sub consultants generating revenue against the costs of their services. The Group manages the risk by monitoring expected revenue across the Group and employing flexible mobile staff and managing peak workloads through the use of sub consultants.

TREASURY POLICIES AND FOREIGN EXCHANGE MANAGEMENT

Treasury operations are managed centrally and operate so as to reduce financial risk, ensure sufficient liquidity is available for the Group's operations and to invest surplus cash. Corporate Treasury does not operate as a profit centre and does not take speculative positions. The Company regularly invoices in Euros for work performed in Europe as well as receiving foreign currency income in UAE Dirhams ("AED"), Omani Rials ("OMR"), Kuwaiti Dinar ("KWD") and Qatari Riyals ("QAR") from its Middle East businesses; South African Rand ("ZAR") from its African business; Malaysian Ringgit ("MYR"), Singapore Dollar ("SGD"), Hong Kong Dollar ("HKD") and Australian Dollar ("AUD") from its Asia Pacific operations and Canadian Dollar ("CAD") generated in Canada. The Group is therefore exposed to movements in these currencies relative to Sterling. AED, OMR and QAR are currently linked to the US Dollar. Foreign currency balances in excess of forecast amounts required to fund projected outgoings are returned to the UK and have been converted to Sterling balances during the year at spot rate. Euro exposure is managed through the use of a foreign currency overdraft facility, which is used to match up to 90% of the value of the Euro debtor balance against Euro borrowings. The net value of AED, OMR, QAR, SGD, AUD and HKD exposure is managed using foreign currency hedge contracts to provide a targeted level of cover of between 50% and 75% of the net income statement exposure. Other currencies are hedged where outstanding amounts become material. This policy is regularly reviewed by the Board.

As a consequence of the earnings generated in the Middle East, Canada, Asia Pacific and South Africa as well as Euro earnings generated in the UK, the Group's net income and its equity is exposed to movements in the value of Sterling relative to the Canadian Dollar, Malaysian Ringgit, Singapore Dollar, Hong Kong Dollar, Australian Dollar, Euro, and South African Rand. As non-Sterling earnings increase, the exposure of the Group's Income Statement and Equity to movements in Sterling will increase as well.

CONTINGENCIES AND LEGAL PROCEEDINGS

Risk Management

The Group monitors all material contingent liabilities, through a process of consultation and evaluation which includes senior management, internal and external advisors. This process results in an evaluation of potential exposure and provisions are made or adjusted accordingly by reference to accounting principles. No contingent liabilities have been recognised at the year end.

Health and Safety

Driver is committed to ensuring the health and safety of its employees in the workplace and where possible implementing health and safety policy improvements. Driver continues to invest in the training and development of safe working practices. The Group measures its health and safety policies through three metrics: lost time due to accidents, lost time days, and reportable accidents. No time was lost as a result of a reported incident during the year.

STRATEGIC REPORT - FINANCE DIRECTOR'S REVIEW

Overview for the Year

The key performance indicators for the Group are revenue, operating profit, profit before tax and utilisation. We also monitor underlying* operating profit and underlying* profit before tax as we believe these measures better reflect the underlying results of the Group. The first half of 2015 was a period of investment with the acquisition of Initiate and the restructuring of the business under three new Chief Operating Officers leading Asia Pacific, Middle East & Africa, Europe & Americas and Initiate, consequently the first half of 2015 reported a loss for the period. We are therefore pleased to report that despite the first half loss the full year result for 2015 was an underlying* operating profit and another record year in terms of revenue. As a result of the investments made in the first half of the year overall utilisation reduced by 2.8 points to 76.0% (2014: 78.8%).

Revenue increased by 23% to £48.0m (2014: £39.1m) which included revenue from Initiate of £5.4m and underlying* operating profit for the year ended 30 September 2015 was £1.2m (2014: £3.5m). Reported operating loss was £1.8m (2014: profit £3.1m).

After a net interest charge of £0.1m (2014: £0.1m) the underlying* profit before tax was £1.1m (2014: £3.5m) and reported loss before tax was £1.9m (2014: profit £3.1m).

The Group's results include a share based payment cost in the year of £0.5m (2014: £0.3m) in relation to the Group's share option scheme and an amortisation cost for intangible assets of £0.2m (2014: £0.1m) arising from the acquisition of Initiate in December 2014 and of contracts in Hong Kong during the prior year. Exceptional costs of £2.2m related to severance costs of £0.5m and acquisition and integration costs of £1.6m, including a cost of £1.5m in respect of deferred consideration dependent on future employment.

In the prior year the Board took the decision to close the Houston office, which lost money throughout the prior year and consequently the Americas segment has been presented as a discontinued operation in the 2014 accounts with a loss on discontinued operation, net of tax of £0.3m in 2014.

The Europe & Americas business segment revenue grew by £1.5m to £22.2m although underlying* operating profit reduced by £0.4m to £2.1m, after exceptional items of £0.1m (2014: nil) operating profit reduced by £0.4m to £2.0m. The Asia Pacific / Middle East / Africa segment revenue increased by £2.0m to £20.3m although underlying* operating profit reduced by £2.1m to £0.8m as a result of the investment in the growth of this region. After exceptional items of £0.5m (2014: nil) and amortisation of intangible assets of £0.1m (2014: £0.1m) operating profit reduced by £2.5m to £0.2m. Initiate, which was acquired in December 2014, reported revenue of £5.4m and an underlying* profit of £0.4m. After exceptional items of £1.6m (including a cost of £1.5m in respect of deferred consideration dependant on future employment) and amortisation of goodwill of £0.2m operating loss was £1.4m. Reflecting the growth of the business, underlying* unallocated corporate costs increased by £0.3m to £2.1m. After a share option cost of £0.5m (2014:£0.3m) the reported unallocated costs were £2.6m (2014: £2.1m). These segmental results for the year are disclosed in note 2.

Taxation

The Group had a tax charge of £0.1m (2014: £0.4m). The tax charge includes the effects of expenses not deductible for tax purposes and losses made in countries where the effective tax rate is nil, consequently, the effective tax rate for the year was negative 5% (2014: 14%).

Earnings per Share

Underlying* earnings per share was 3.2 pence (2014: 11.2 pence). The basic loss per share was 6.5 pence (2014: profit per share 8.6 pence) and diluted earnings per share was 6.1 pence (2014: profit per share 7.8 pence).

Cash Flow

There was a cash outflow from operations before changes in Working Capital of £0.7m (2014: inflow of £3.3m). This reflected the reported operating loss of £1.8m (2014: profit of £3.1m) before depreciation and amortisation of £0.6m (2014: £0.3m) and the share based payment charge of £0.5m (2014: £0.3m). The outflow from increased receivables of £3.0m (2014: £2.1m)

resulting from the growth in revenue in the second half of the year was offset by an inflow from increased payables of £2.9m (2014: outflow of £1.1m). Net tax paid in the year was £0.5m (2014: £0.2m).

There was a net cash outflow from investing activities of £0.8m (2014: £0.8m) principally consisting of net capital spend of £0.5m (2014: £0.4m) and acquisition of subsidiary £0.3m (2014: acquisition of non-controlling interest £0.2m).

Net cashflow from financing activities was an inflow of £1.7m (2014: outflow of £0.6m). This included dividend paid of £0.5m (2014: £0.4m), proceeds from sale of shares £0.4m (2014: £0.2m), interest paid of £0.1m (2014: £0.1m) and net proceeds from borrowings of £1.9m (2014: £0.3m).

The Company had net borrowings at the end of the year of £2.5m compared to £0.2m at 30 September 2014.

Dividends

The Directors have proposed a final dividend in respect of the current financial year of 1.05p per share (2014: 1.05p) payable to all shareholders other than the Driver Group Employee Benefit Trust. This has not been accounted for as it was not approved before the year end. The total cost of this proposed dividend will be £320,000 (2014: £320,000). The final dividend will be paid on 8 April 2016 to shareholders on the register at the close of business on 29 March 2016.

There were dividends of £505,000 (2014: £420,000) paid by the Company during the year, including an interim dividend of 0.6p (£183,000).

On behalf of the Board

Damien McDonald

Finance Director

* Underlying figures are from continuing operations and are stated before the share-based payment costs and amortisation of intangible assets

CONSOLIDATED INCOME STATEMENT FOR THE YEAR ENDED 30 SEPTEMBER 2015

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 30 SEPTEMBER 2015

CONSOLIDATED STATEMENT OF FINANCIAL POSITION FOR THE YEAR ENDED 30 SEPTEMBER 2015

CONSOLIDATED CASHFLOW STATEMENT FOR THE YEAR ENDED 30 SEPTEMBER 2015

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 30 SEPTEMBER 2015

* Total equity attributable to the equity holders of the parent

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

NOTES

1. These Preliminary Results have been prepared in accordance with the recognition and measurement principles of International Financial Reporting Standards ("IFRS") and the IFRS Interpretation Committee (IFRIC) interpretations as endorsed by the European Union. The financial information set out in these Preliminary Results does not constitute the Company's statutory accounts for the year ended 30 September 2015 or the year ended 30 September 2014 but is derived from those accounts.

Group statutory accounts for the year ended 30 September 2014 have been delivered to the Registrar of Companies, and those for the year ended 30 September 2015 will be delivered following the Company's Annual General Meeting. BDO LLP have reported on the 2015 and 2014 accounts. Their reports were unqualified, did not include references to any matters to which the auditors drew attention by way of emphasis without qualifying their report, and did not contain statements under section 498(2) or 498(3) of the Companies Act 2006.

2. Earnings per share

3. Segmental analysis

During the period there has been a change in the reportable segments. This is due to a change in how the Group is structured and how information is presented to the chief operating decision maker. Comparative segmental analysis has been restated to reflect this change.

For management purposes, the Group is organised into three operating divisions: Europe & Americas (EuAm), APAC, Middle East & Africa (AMEA) and initiate. These divisions are the basis on which the Group is structured and managed, based on its geographic structure. In EuAm and AMEA the key service provisions are: quantity surveying, planning / programming, quantum and planning experts, dispute avoidance / resolution, litigation support, contract administration and commercial advice / management. In initiate the key service provisions are capital investment consultancy providing development, project and contracting management services to the infrastructure market in the UK. In September 2014 the Group closed its USA operations based in Houston and the Americas division, represented then only by the US, was consequently disclosed as discontinued.

Segment information about these reportable segments is presented below.

Year ended 30 September 2015

Year ended 30 September 2014 - restated

Geographical information:

4. ACQUISITIONS

On 08 December 2014 the Group acquired initiate Consulting Limited ("Initiate"). Initiate are capital investment consultants providing development, project and construction management services to the infrastructure market in the UK. The consideration for the acquisition is being satisfied by way of an initial cash payment of £1.5m, which is being satisfied out of the Company's existing financial resources, and by the issue of 1,594,274 new ordinary shares in the Group (the "Consideration Shares") with a fair value of £1.6m. The purchase agreement also included a two year earn-out payable to the sellers as contingent consideration if they remain with the Group for a two year period post acquisition. The Group has recognised £1.5m in the income statement, being the present value of the consideration payable having made a probability based assessment of the amount payable. The terms of the purchase agreement state that the total amount payable is £2.185m. The contingent consideration payable is linked to post combination employment cost and therefore has been charged to the income statement.

The acquisition enables the Group to immediately provide development and project management services on significant aviation, highway and rail projects across the UK and creates the opportunity to leverage existing project and dispute & advisory services in to this sector and to Initiate's client base. This is an excellent strategic fit for the Group, in a sector experiencing significant growth, for example through the Government's

£375bn National Infrastructure Plan. Over the medium term, Driver Group will look to develop the service to other regions where infrastructure-spend is at significant levels, such as across the Middle East and Africa.

For the year ended 30 April 2014, Initiate reported turnover of £7.48m and operating profit of £0.73m. Given the complementary nature of the two businesses, the acquisition provides the Group with synergistic benefits. It fits perfectly with the Group's stated strategy of developing complementary service offerings that allow for leverage of the existing business and is expected to provide strong growth opportunities for the Company.

Book and provisional fair value of assets and liabilities acquired: 

Fair value of consideration paid

Acquisition costs of £0.143m arose as a result of the transaction. These have been recognised as exceptional costs in the Income Statement. The main factor leading to the recognition of goodwill is: the presence of certain intangible assets, such as the assembled workforce of the acquired entity, which does not qualify for separate recognition. The goodwill recognised will not be deductible for tax purposes.

The contribution to net profit of the Group was an underlying* profit of £0.399m. After exceptional items (note 5) and amortisation of intangible assets of £0.163m the contribution was a net loss of £1.381m. Group revenue includes £5.37m from the operations of Initiate.

Had Initiate been acquired for the whole financial year the contribution to revenue would have been approximately £6.57m. The contribution to underlying* operating profit would have been approximately £0.51m. After exceptional items and amortisation of intangible assets the contribution to net loss would have been approximately £1.63m.

Acquisitions - prior year

On 1 May 2014 the Group acquired certain contracts and goodwill of Ivan Cheung through Driver Trett (Hong Kong) Limited. This contract had certain conditions which were met during the prior year. Deferred consideration of HK$0.5m (£0.04m) was paid on successful transfer of the contracts.

5. EXCEPTIONALS

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

(2) Acquisition and integration costs include contingent consideration being a cost of £1.5m in respect of deferred consideration dependent on future employment, legal and professional fees associated with the acquisition of Initiate and office restructuring costs.

6. Copies of the Annual Report and Financial Statements

Copies of the Annual Report and Financial Statements will be available on the Group's website (www.driver-group.com) and will be sent to the shareholders in due course. Further copies will be available to the public, free of charge, at the Group's office, Driver House, 4 St Crispin Way, Haslingden, Lancashire, BB4 4PW.

The Annual General Meeting will be held at 110 Cannon Street, London, EC4N 6EU on Wednesday 2 March 2016 commencing at 3:00pm.