Interim Report: Half-year ended 31 March 2024

DRIVER GROUP PLC

Interim Report

For the six months ended 31 March 2024

Financial Highlights - for the six months ended 31 March 2024

*Underlying figures are stated before share-based payment costs

**Restated to exclude discontinued operations

Financial Summary

· Revenue from continuing operations of £22.5m (2023: £22.7m).

· Gross profit margin at 27% (2023: 27%), with gross profit of £6.1m (2023: 6.2m).

· Underlying* profit before tax £0.6m (2023: £0.7m), a margin of 3% (2023: 3%).

· Profit before tax £0.5m (2023: £0.5m).

· Net cash of £3.6m (2023: £5.3m), a year on year decrease of £1.7m mainly due to dividend and tax payments and the timing of the planned cessation of a JV agreement in Canada and the Middle East.

· Net cash as at 31 May 2024 of £4.2m

· Dividend maintained in the period at 0.75p (2023: 0.75p)

Operational Highlights

· Overall utilisation rates improved to 79.6% (2023: 79.2%)

· Europe & Americas (EuAm) reported underlying* profit before tax for the period of £2.3m (2023: £2.9m)

· Middle East (ME) returned to profit with reported underlying* profit before tax for the period of £0.1m (2023: loss £0.1m)

· Asia Pacific (APAC) returned to profit with reported underlying* profit before tax for the period of £0.1m (2023: loss £0.1m)

Capital Allocation

· As part of its capital allocation policy, the Group will today commence an initial ordinary share buyback programme of £250k, while the Board evaluates potential acquisition opportunities. Having identified at least £1m of surplus cash, as highlighted in December 2023, a further amount of up to £750k will be allocated to the buyback programme, depending on progress with potential acquisitions, in line with the transformation strategy and to achieve the best return for shareholders.

IT Security

· The Group was recently the target of a cyber incident, which sought to encrypt the company's data. Following significant investment over the last 3 years, including cyber essentials accreditation and thanks to the diligence of the internal IT team, this incident was firmly defended and has caused limited disruption to the business. External IT experts have been appointed and their investigation is continuing.

Outlook

· Utilisation continuing at 2023 levels

· Q3 revenue and utilisation improving with an encouraging pipeline of new enquiries underpinning our confidence for H2 FY24

· Cost reduction programme completed

· Real time management information tool being tested

· Group's transformation strategy progressing

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

'I am pleased to report that H1 FY 24 was profitable. The strategic actions that management took last year have progressed well and are starting to produce valuable and meaningful results, and I look forward to reporting further on this progress in due course. There is also considerable excitement in the business about the brand transition to Diales, which will take effect from 1 July 2024. We have started H2 FY24 strongly, and we expect the business to generate further significant momentum as the benefits of our transformation strategy flow through to our clients and shareholders.'

Results presentation

Management will host a hybrid presentation for analysts at 10:00am on 12 June 2024, at Singer Capital Markets' offices, 1 Bartholomew Lane, London, EC2N 2AX, and virtually. Analysts who would like to attend the presentation should register their interest with Acuitas Communications at [email protected] or on 020 3745 0293.

The Group will also host a presentation for investors on 12 June, at 12:00pm. 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/drivergroup-investor-presentation-12june2024.

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

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

ENDS 

Enquiries:

INTRODUCTION

During the period, Driver Group has continued to trade profitably, and has focused on driving improvements in utilisation in the face of what has continued to be challenging trading conditions across global markets. We are pleased to report positive progress in H1 FY24 and that this momentum has continued into Q3 FY24.

The Group's underlying* profit before tax remained broadly constant at £0.6m (£0.7m in the corresponding FY23 period) on revenue which has remained stable. We have maintained the performance of FY23, and this has, in turn, laid solid foundations for further improvements in Group performance that are expected to drive the Group's future profitability.

The Group continues to make good progress on the delivery of its transformation strategy, announced in December 2023, in line with the four-year timeframe. It is expected that many of the key actions arising from the transformation strategy are likely to begin to have effect during H2 FY24. The Board looks forward to reporting further on this in due course.

The Group has taken steps to ensure a smooth transition to Diales, its premium professional services brand, which will take effect from 1 July 2024. This brand transition will consolidate the Group's services globally, allowing a unified approach to its global clients for the first time in the Group's history. Moving forward the Board expects this branding platform to increase leverage between regions.

The Group has further implemented its hub and spoke model across our global business to ensure overseas offices continue to focus on and benefit from work winning which is fed back to the central hub in Europe. This has necessitated a review of our Business Development and Marketing functions. As a result, Business Development is now represented on the Executive Board which will further strengthen our work winning efforts.

As announced in our transformation strategy, we continue to review the shape and structure of our global footprint in order to ensure that it performs optimally, and we expect to be able to provide further updates on this pillar of the transformation strategy in due course.

The promised benefits of our IT investment are now feeding through, with ERP now fully operational and already supporting improvements to the Group's performance. The migration from manual processes to automated production of financial information has been challenging but is now helping us deliver closer to real time consolidated financial reporting. Our team in Europe are currently trialling a real time management information tool, enabling more efficient reporting on utilisation and we anticipate a wider roll-out of this system across the global business in due course with accompanying efficiency gains and improved management reporting.

Following the implementation of the new ERP system, we changed to a more accurate method of calculating utilisation and the comparative figures are shown using the same methodology.

The resolution of legacy issues, particularly in relation to the Middle East, has moved into its final phase, with a significant proportion of aged cash now collected. The structuring of the Group's office locations and staffing levels had been adjusted to reflect the evolving needs of the business, promoting operational responsiveness and efficiency, and enhancing client experience.

We are pleased to report that the Middle East region has returned to an operational profit, following completion of the restructuring announced in November 2022. This region is now contributing work to the Group's central hub in Europe, and we do not anticipate any further issues relating to cash collection going forward.  

The EuAm region, our central business hub, has continued to perform well overall, in spite of exceptional short-term staffing issues in North America which materially affected H1 FY24 performance for the region. Challenges arising from phasing of work, with a number of significant commissions concluding coterminously, have been resolved and we do not expect this operational issue to recur.

APAC has also returned to an operational profit during H1 FY24 and we have seen an improvement in trading performance as a result of actions taken following the strategic review. Following a successful office launch in Seoul in March last year, the Group remains well positioned to expand its work with our South Korean clients. The Group does not expect any further substantial non-recurring costs to arise from the establishment of this new office and it is now meeting budget expectations. APAC continues to source high value expert and claims work for fulfilment across the Group, under our one business model.

The overheads review and cost saving measures, previously announced, have now completed. As expected, owing to the initial overlap period of leases in London and related moving costs, the full benefit of these savings will be realised during H2 FY24. The Board continues to monitor its global operations to identify opportunities to unlock further cost savings and efficiency gains.

PEOPLE

Driver Group continues to be a business focused on and driven by exceptionally talented and highly skilled staff and the recruitment, development, and retention of best-in-class team members remains our key priority.

The Group has made good progress on hiring key work winners and halo experts, in line with the ambitions set out in its transformation strategy. Targeted market analysis has yielded a pipeline of complementary acquisition opportunities within the engineering and technical expert disciplines which the business is actively considering.

TRADING PERFORMANCE

Group revenue for the six months to 31 March 2024 remained stable at £22.5m, compared to the same period in 2023 (£22.7m). Overall, the Group reported underlying* profit before tax of £0.6m (2023: £0.7m).

Revenues in the EuAm region decreased to £18.5m (2023: £19.1m) with revenues in the Middle East unchanged at £2.2m (2023: £2.2m) and revenues in APAC increased to £1.8m (2023: £1.4m).

The EuAm region delivered an underlying* profit before tax of £2.3m (2023: £2.9m) while the Middle East region reported an underlying* profit before tax of £0.1m (2023: loss £0.1m) and the APAC region reported an underlying* profit before tax of £0.1m (2023: loss £0.1m).

Underlying* basic earnings per share from continuing operations were 0.9p (2023: 1.0p).

The Group's net cash balance was £3.6m on 31 March 2024 (2023: £5.3m), reflecting dividend and tax payments and the timing of the planned cessation of a long-standing Joint Venture agreement in Canada and the Middle East. The cash as at 31 March 2024 includes March's UK payroll expenses which were omitted at the time of the April trading update. As at 31 May 2024 the cash balance was £4.2m.

DIVIDEND

The final dividend announced at the time of the results for the year to 30 September 2023 (0.75p per share) in December was paid in April 2024. 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 2024 (2023: 0.75p per share). The interim dividend will be paid on 25 October 2024 to shareholders who are on the register of members at the close of business on 20 September 2024, with an ex-dividend date of 19 September 2024.

CAPITAL ALLOCATION

As part of the Group's transformation strategy, announced on 14 December 2023, the Board will allocate its own generated cash to achieve the best returns for shareholders. The Group has been actively considering a number of acquisition prospects, and accordingly the Board has kept the timing of its capital allocation plans under constant review to ensure sufficient cash headroom remains available for an acquisition. This process remains ongoing. However the Group will today commence an initial ordinary share buyback programme of £250k. Having identified surplus cash of £1m, a further amount of up to £750k will be allocated to the programme, dependent on progress with potential acquisition targets, in line with the transformation strategy.

OUTLOOK

Driver Group's business has made an encouraging start to H2 FY24 with the UK, Middle East and, in particular, APAC, all performing strongly. The cost-savings strategies we implemented in FY23 have now been completed and we expect the benefits to be felt during the remainder of H2 FY24. Post-restructure, the Middle East and APAC are now contributing profitably, with APAC being well positioned to contribute further during FY24 as a consequence of work flowing from South Korea.

The Group saw strong trading in April this year, supported by increased utilisation, and is well placed for H2 FY24 and beyond.

Consolidated Income Statement

Interim report for the six months ended 31 March 2024

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

**Presentation of results restated to reflect separate disclosure of net losses from operations discontinued in the 2023 financial year.

Consolidated Statement of Comprehensive Income

Interim report for the six months ended 31 March 2024

Consolidated Statement of Financial Position

Interim report for the six months ended 31 March 2024

Consolidated Cash flow Statement

Interim report for the six months ended 31 March 2024

Consolidated Statement of Changes of Equity

Interim Report for the six months ended 31 March 2024

For the six months ended 31 March 2024 (Unaudited):

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

Consolidated Statement of Changes of Equity (continued)

Interim Report for the six months ended 31 March 2024

For the year ended 30 September 2023 (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 2023 and that are expected to be adopted in the Group's full financial statements for the year ending 30 September 2024. 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 2024 and 31 March 2023 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 2023 included within this report does not constitute the full statutory accounts for that period. The statutory Annual Report and Financial Statements for 2023 have been filed with the Registrar of Companies. The Independent Auditor's Report on that Annual Report and Financial Statements for 2023 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 taking in to account the potential cost of the proposed initial share buyback programme and the cash and financing facilities available to the Group. At 31 March 2024 the Group had cash reserves of £3.6m. Cash decreased by £2.3m from that reported at 30 September 2023 mainly due to dividend and tax payments and the timing of the planned cessation of a JV agreement in Canada and the Middle East. 

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 2024 is based on the estimated tax rates in the jurisdictions in which the Group operates, for the year ending 30 September 2024.

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 2024 (2023: 0.75p per share).

During the period, the Group paid an interim dividend for 2024 of 0.75p per share (2023: 0.75p per share) and approved a final dividend for 2023 of 0.75p per share which was paid in April 2024.

4 POST BALANCE SHEET EVENT

There have been no significant events requiring disclosure since 31 March 2024.

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

(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

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

 6 EARNINGS PER SHARE

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