Driver Group - Interim Report: Half-year ended 31 March 2023

DRIVER GROUP PLC

Interim Report

For the six months ended 31 March 2023

Key Points - for the six months ended 31 March 2023

§  Underlying* profit before tax at £0.7m (2022: £0.4m) resulting in an underlying* profit before tax margin of 3% (2022: 2%).

§  Profit before tax at £0.5m (2022: £0.1m).

§  Net cash** increase year on year of £1.6m to £5.3m (2022: £3.7m).

§  Revenue slightly down to £24.2m (2022: £24.4m) which is attributable to the restructured Middle East and Asia Pacific regions.

§  Gross profit margin at 26% (2022: 24%), a £0.5m increase to £6.3m (2022: £5.9m).

§  Middle East returned to operational profit pre provisioning.

§  Fee earner headcount decreased to 238 (2022: 294) predominantly attributable to Middle East and Asia Pacific regions.

§  Overall utilisation rates*** improved to 75.6% (2022: 69.6%).

§  Europe & Americas (EuAm) reported underlying* profit before tax for the period of £2.9m (2022: £2.4m) with utilisation rates*** at 76.1% (2022: 72.7%).

§  Middle East (ME) reported underlying* loss before tax for the period of £0.1m (2022: loss £0.3m) with utilisation rates*** at 72.3% (2022: 60.9%).

§  Asia Pacific (APAC) reported underlying* loss before tax for the period of £0.1m (2022: loss £0.5m) with utilisation rates*** at 66.1% (2022: 71.3%).

Mark Wheeler, Chief Executive Officer of Driver Group, said:

'It is a pleasure to see the benefits of last year's restructuring starting to come through in the first half. With all regions currently benefiting from a steady flow of enquiries, the Group is ideally placed to capitalise on global opportunities where and when they arise.

While we continue to have only short-term visibility in terms of fee forecasting, given the nature of our service offering, the Board expects a profitable year with strategic changes to form a solid foundation for future growth.'

Shaun Smith, Non-Executive Chair, said:

'I was delighted to join the Board of Driver Group in March this year as Chair and have been impressed by the enthusiasm and commitment of everyone that I have met since joining and have been encouraged by the performance in the first half. I very much look forward to working with Mark and his team across the business, both in the UK and internationally, as we continue to focus on improving the performance of the Group and delivering enhanced shareholder value.'

Results presentation

Driver Group's leadership team will be hosting a presentation for analysts at 09:30 BST on 13 June 2023. Analysts have already been invited to participate in a Q&A during the presentation, but any eligible person not having received details should contact the Company's PR advisers, Acuitas Communications, at [email protected] or on 020 3745 0293.

The Group will also host a presentation for investors on 15 June, at 10:00 BST. Questions can be submitted before and during the online event.

To register for the webinar, please visit this link:

https://www.equitydevelopment.co.uk/news-and-events/driver-group-results-presentation-15june2023

A recording of the presentation will be available shortly afterwards here:

https://www.equitydevelopment.co.uk/research/tag/driver-group

Enquiries:

INTRODUCTION

Driver Group is focussed on delivering a return to profitability in the current financial year after the challenges encountered during the FY22 financial year.  The Group saw positive progress in Quarter 1 and that momentum continued and strengthened in Quarter 2.

We are pleased to report an increase in the Group's underlying* profit before tax to £0.7m from £0.4m in the comparative period, in line with the Group's Trading update of 27 April 2023 on revenue which, following the Middle East restructuring, has remained stable. We believe this has been a creditable performance, laying strong foundations for continued improvements to deliver the Group's future profitability.

In common with many of our industry peers and professional services firms more widely, the Group has inevitably been exposed to the effects of the recent global economic headwinds, and the impact that the war in Ukraine has had on some of our clients and their own counterparties, in relation to both work in hand and the deferral of some existing projects in the pipeline.

The EuAm region has continued to perform well and is now established as our central business hub, continuing our focus on global office collaboration, maximising utilisation, improving efficiencies, and delivering cost effectiveness; expert services play a large part in this, and we continue our efforts to increase our number of experts worldwide.

The Middle East region has returned to an operational profit, as a result of the implementation of the realignment of strategy and servicing in the region announced in November 2022 while also significantly reducing the trading risk in the region. We continue to closely monitor performance in the region.

We have seen an improvement in trading performance in APAC, a result of actions taken following the strategic review, and the Group remains well positioned to expand its work with South Korean clients after a very successful office launch in Seoul in March this year.

The overheads review and cost saving measures, previously announced, are ongoing with some savings already realised and with significant further savings anticipated to take effect from Quarter 4 of FY23 and beyond.

PEOPLE

Driver is a people business and the recruitment and retention of the best people in our sector is a key priority. The Board is pleased to see that the revised Executive board is effectively supporting the CEO and CFO to deliver the Group's strategy which continues to have a positive impact upon the business.

The restructuring of the Middle East and APAC led to a short-term reduction in the number of senior testifying experts in the business, and it is pleasing that the business has already backfilled these positions in other regions, allowing revenue retention for Diales expert work, which is expected to transition to continued growth in these services.

TRADING PERFORMANCE

Group revenue for the six months to 31 March 2023 remained stable at £24.2m, compared to the same period in 2022 (£24.4m). Overall, the Group reported an increase in underlying profit before tax of £0.7m (2022: £0.4m).

Revenues in the EuAm region increased to £19.1m (2022: £17.4m) with revenues in the Middle East down to £3.7m (2022: £5.4m) and revenues in APAC down to £1.4m (2022: £1.7m). This is in line with our strategy of EuAm being our central business hub.

The EuAm region delivered an underlying profit of £2.9m (2022: £2.4m) while the Middle East region recorded an operational profit of £0.1m (2022: loss £0.2m), underlying loss of £0.1m (2022: underlying loss £0.3m), and the APAC region recorded an underlying loss of £0.1m (2022: underlying loss £0.5m).

Underlying*basic earnings per share were 1.0p (2022: 0.2p), and the basic earnings per share was 0.6p (2022: loss 0.3p).

The Group's net cash balance in the period continued to improve totalling £5.3m on 31 March 2023 (2022: £3.7m).

DIVIDEND

The final dividend announced at the time of the results for the year to 30 September 2022 (0.75p per share) in February was paid in April 2023. Reflecting our confidence in the medium-term prospects for the Group and with the strong balance sheet position the Board recommends the payment of an interim dividend of 0.75p per share for 2023 (2022: 0.75p per share). The interim dividend will be paid on 27 October 2023 to shareholders who are on the register of members at the close of business on 22 September 2023, with an ex-dividend date of 21 September 2023.

OUTLOOK

Driver Group's business in Europe and the Americas continues to trade very profitably. Performance has strengthened with the implementation of our cost-saving strategies, a limited number of which are already taking effect, and the balance will flow through to the bottom line in the next trading year. Post-restructure, the Middle East are expected to contribute a profit for the current financial year with APAC being well placed to improve further during FY24 as a consequence of work coming out of Korea.

While the second half of the year for Driver has been shown historically to be strong. April was slower than expected owing to the timing of the Easter weekend and a succession of public holidays, which affected utilisation. The Board is currently considering its policy on forward guidance, which will reflect the short-term revenue visibility.

* Underlying figures are stated before the share-based payment costs and exceptional costs

Consolidated Income Statement

Interim report for the six months ended 31 March 2023

*Underlying figures are stated before the share-based payment costs (this is not a GAAP measure)

Consolidated Statement of Comprehensive Income

Interim report for the six months ended 31 March 2023

Consolidated Statement of Financial Position

Interim report for the six months ended 31 March 2023

Consolidated Cash flow Statement

Interim report for the six months ended 31 March 2023

Consolidated Statement of Changes of Equity

Interim Report for the six months ended 31 March 2023

For the six months ended 31 March 2023 (Unaudited):

For the six months ended 31 March 2022 (Unaudited):

Consolidated Statement of Changes of Equity (continued)

Interim Report for the six months ended 31 March 2023

For the year ended 30 September 2022 (Audited):

(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.

1      BASIS OF PREPARATION

The consolidated interim financial information has been prepared using accounting policies which are consistent with those applied at the prior year end 30 September 2022 and that are expected to be adopted in the Group's full financial statements for the year ending 30 September 2023. The financial information in this interim report is in compliance with the recognition and measurement principles of international accounting standards but does not include all disclosures that would be required under IFRSs and are not IAS 34 compliant. 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 2023 and 31 March 2022 does not constitute statutory accounts within the meaning of Section 434(3) of the Companies Act 2006 and is unaudited but has been reviewed by our auditors.

The comparative financial information for the year ended 30 September 2022 included within this report does not constitute the full statutory accounts for that period. The statutory Annual Report and Financial Statements for 2022 have been filed with the Registrar of Companies. The Independent Auditor's Report on that Annual Report and Financial Statements for 2022 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.

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 have prepared cash flow forecasts 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 and the cash and financing facilities available to the Group. At 31 March 2023 the Group had cash reserves of £5.3m. The strong trading performance and cash collections in the period resulted in a cash increase of £0.4m from that reported at 30 September 2022.

The Directors have also prepared a stress case scenario that demonstrates the Group's ability to continue as a going concern even with a significant drop in revenues and limited mitigating cost reduction to re-align with the revenue drop.

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. As such these Financial Statements have been prepared on a going concern basis.

2      TAXATION

The tax charge for the half-year ended 31 March 2023 is based on the estimated tax rates in the jurisdictions in which the Group operates, for the year ending 30 September 2023.

3      DIVIDEND

In view of the medium-term prospects for the Group along with the strong balance sheet position, the Board recommends the payment of an interim dividend of 0.75p per share for 2023 (2022: 0.75p per share).

During the period, the Group paid an interim dividend for 2022 of 0.75p per share (2022: 0.75p per share) and approved a final dividend for 2022 of 0.75p per share which was paid in April 2023.

4      POST BALANCE SHEET EVENT

There have been no significant events requiring disclosure since 31 March 2023.

5      SUMMARY 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).  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.

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

(2) Unallocated corporate expenses are stated before the central recharge. Historically a recharge was recognised monthly. The prior year comparative figure below of £1.1m is net of a cross charge amount totalling £0.6m.

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

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

6      EARNINGS PER SHARE