DRIVER GROUP PLC

DRV
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Driver : Interim Report 2020

06/30/2020 | 05:09am

INTERIM REPORT 2020

Driver Group plc is a specialist provider of consultancy, advisory, and project management services to the engineering and construction industries and its shares are quoted on AIM, the London Stock Exchange's specialist market for growing companies.

CONTENTS

Chairman's Statement 4

Consolidated Statement of Changes in Equity 12

Consolidated Income Statement 8

Notes to the Interim Financial Statements 14

Consolidated Statement of Comprehensive Income 9

Independent Review Report 18

Consolidated Statement of Financial Position 10

Company Secretary and Advisers 19

Consolidated Cashow Statement 11

KEY POINTS

Key Points

For the six months ended 31 March 2020

6 months

6 months

ended

ended

31 March

31 March

2020

2019

£000

£000

Change

Unaudited

Unaudited

£000

Revenue

28,042

29,711

(1,669)

Gross Profit

7,175

6,695

480

Gross Profit %

26%

23%

3%

Profit before tax

1,252

1,005

247

Less: Share-based payment credit

-

(243)

243

Underlying* profit before tax

1,252

762

490

Underlying* profit before tax %

4%

3%

1%

Underlying* earnings per share

1.8p

1.1p

0.7p

Net cash**

3,301

5,011

(1,710)

 Revenue down by 6% to £28.0m (2019: £29.7m) as a result of a slowdown in the Middle East market.

 Gross profit at 26% a £0.5m increase to £7.2m (2019: £6.7m) due to the continued focus on higher margin work.

 Underlying* profit before tax at £1.3m (2019: £0.8m) resulting in an underlying* profit before tax margin of 4% (2019: 3%).

 Profit before tax at £1.3m (2019: £1.0m).

 Net cash decrease year on year of £1.7m to £3.3m (2019: £5.0m).

 Fee earner headcount decreased by 26 to 329 with decreases in both APAC and Middle East.

 Overall utilisation rates of 73.1% (2019: 76.1%).

 Europe & Americas (EuAm) reported underlying* profit before tax for the period of £1.7m (2019: £2.0m) with utilisation rates at 71.6% (2019: 70.3%).

 Middle East (ME) reported underlying* profit before tax for the period of £0.03m (2019: £0.4m) with utilisation rates at 72.3% (2019: 80.9%).

 Asia Pacific (APAC) reported underlying* profit before tax for the period of £0.6m (2019: loss £0.6m) with utilisation rates at 77.1% (2019: 76.1%).

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

  • ** Net cash consists of cash and cash equivalents and bank loans

  • *** Utilisation % is calculated by dividing the total hours billed by the total working hours available for chargeable staff

CHAIRMAN'S STATEMENT

Chairman's statement

IMPACT OF COVID-19

Driver has continuously monitored the development of the Covid-19 pandemic since January 2020, in view of the Company's global footprint. Driver took early action to protect the business and the employees by implementing a clear business continuity strategy which has enabled its clients across key global regions and offices to be serviced effectively and sustainably, without business interruption. In accordance with the requirements of local government and regulatoryauthorities in the relevant jurisdictions and in some circumstances in advance, Driver moved quickly to a flexible home working model in every region and office worldwide to protect the health and safety of its staff.

Although the impact on Driver of Covid-19 has been limited to date, in the interests of prudence, resilience, and long term strategic competitive positioning the directors acted promptly and implemented the following measures in order to maximise liquidity, preserve cash and enhance operational flexibility:

•The Board will not pay an interim dividend in respect of the current financial year and will revisit the Group's dividend policy only when there is sufficient clarity as to the actual impact of the Covid-19 pandemic on its trading and financial position.

•It has indefinitely postponed all non-essential capex and discretionary operational expenditure.

•It has drawn down in full its £3.0m revolving credit facility and will hold the resulting funds in order to meet any currently unforeseen contingencies •All Board members' salaries are reduced by 20%, effective from 1 April 2020, for the foreseeable future. •Targeted reductions in pay for under-utilised staff have been implemented.

•A small number of personnel have been furloughed. •Where appropriate the Group have taken local government Covid-19 related financial support schemes.

•To protect the Group from unforeseen Covid-19 related impact on the business, a package of additional debt facilities in the amount of £4m and a relaxation of bank covenants have been agreed with HSBC.

The directors have prepared stress-tested cashflow forecasts covering a period of more than twelve months from the date of releasing these interim financial statements and based on the package of cash and financing facilities available to Driver, including the agreed relaxation of bank covenants, the directors are confident in preparing the financial statements on a going concern basis.

THE BUSINESS

Driver have had a good first half year to 31 March 2020 with only limited impact on performance from Covid-19 related issues. There were strong results in the Europe & Americas (EuAm) and Asia Pacific (APAC) regions offset by a weaker performance in the Middle East (ME) region. On 31st May Gordon Wilkinson left the Group having during his tenure of four years led the business through a challenging period to a consistently profitable and financially stable position today. Mark Wheeler succeeds Gordon as the Group Chief Executive Officer and with an unrivalled wealth of industry knowledge is well placed to lead the group on its next phase of development. Additionally, John Mullen, a leading quantum expert, has been appointed as a non-executive director providing substantial additional industry expertise to the composition of the board.

TRADING PERFORMANCE

Group revenue for the six months to 31 March 2020 was £28.0m a decrease of 5.6% on the same period in 2019 (£29.7m). Overall, the Group reported a profit before tax of £1.3m (2019 £1.0m). Revenues in EuAm £15.4m and APAC £4.7m regions increased by 3.5% and 4.0% respectively which was offset by a decrease in ME region of 23% to £8.0m. The EuAm and APAC regions delivered operating profits of £1.7m (2019: £2.0m) and £0.6m (2019: loss of £0.6m) respectively with the ME region producing a disappointing breakeven result (2019: profit of £0.4m). The good performance in EuAm was across the region and in APAC was mainly from increased activity in Singapore. The weak performance in the ME region mainly resulted from a slowdown in the regional economy and steps were taken in January to reduce costs in light of the lower activity levels in the region. The significantly improved result from the APAC region was as a result of improved staff utilisation levels and the closure of the low margin project services business in the region.

The Group's effective tax rate is 24% (2019: 17%) reflecting a shift in the geographic split of overall Group profits. Earnings per share was 1.8p (2019: 1.5p).

The Group was in a net cash* position of £3.3m at 31

March 2020 compared to £5.4m at 30 September 2019 and 5.0m at 31 March 2019.

Net cash outflow from operations was £0.5m (2019: £0.8m) during the first six months, including a net outflow from an increase in trade and other receivables of £2.1m (2019: £0.5m cash inflow) and a net cash outflow from a decrease in trade and other payables of £0.4m (2019: £2.4m). Tax paid totalled £0.3m (2019: £0.5m) and the acquisition of fixed assets absorbed £0.1m (2019: £0.1m). A

further cash outflow during the period was the payment of dividends of £0.7m (2019: £nil).

DIVIDEND

The directors announced in the trading update that Driver will not pay an interim dividend in respect of the current financial year and will revisit the Group's dividend policy only when there is sufficient clarity as to the actual impact of the Covid-19 pandemic on its trading and financial position (2019: 0.5p per share).

OUTLOOK

Although the first half of 2020 has seen lower activity than expected in the Middle East, we took swift action to re-align the regional cost base and the first half profits of the Group are significantly ahead of the same period last year. The Group continues to maintain strict discipline over the management of its net working capital position and I am pleased to report that the Group's current net cash balance stands at £5.5m.

In more normal times, Driver is conditioned to operating with relatively low forward revenue visibilityand, as a consequence of the Covid-19 pandemic there is heightened uncertainty over client behaviours and their impact on our business. However, with current trading holding up well and with recently increased debt facilities, the directors believe that the Group is well placed to trade through this current uncertain market environment, and to take advantage of the opportunities afforded as a consequence of the disruption of Covid-19 in the Group's target market.

I would like to pay particular tribute to our CEO Mark Wheeler and CFO David Kilgour for the way they have managed the business through the last difficult months. I thank my Board colleagues, Peter Collini and Elizabeth Filkin for their unstinting support and most of all, I thank every one of our staff wherever they are in the world for their continued diligence and loyalty. I am grateful for the confidence our shareholders have consistently demonstrated and I assure them that the Group will continue to do its utmost to repay that confidence.

*Net cash consists of cash and cash equivalents and bank loans

Disclaimer

Driver Group plc published this content on 30 June 2020 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 30 June 2020 09:08:06 UTC

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