REG - Driver Group plc - PRELIMINARY RESULTS AND DIVIDEND DECLARATION
23/02/2023 07:15
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RNS Number : 7743Q Driver Group plc 23 February 2023
23 February 2023
DRIVER GROUP PLC
("Driver" or "the Group")
Preliminary Results and Dividend Declaration
Driver Group PLC (AIM: DRV), the global professional services consultancy to
construction and engineering industries, is pleased to announce the dividend
for the full year and its results for the financial year ended 30 September
2022.
The final dividend for the full year of 0.75 pence per share will be paid on
13 April 2023 to shareholders who are on the register of members at the close
of business on 3 March 2023, with an ex-dividend date of 2 March 2023 subject
to approval at the forthcoming AGM.
Operational Highlights
· De-risked Middle East business - Including reduced headcount -30
· De-risked Asia Pacific business - Including reduced headcount -11
· Successful focus on global office collaboration, impacting
utilisation
· Increased Diales headcount to 53 from 47
· Improving pipeline of new enquires
· Strengthened Board through the appointment of Charlotte Parsons
as CFO and appointment of Shaun Smith as non-executive Chair (effective at the
AGM)
Financial Summary
· Revenue decreased by 4% to £46.9m (2021: £48.8m)
· Underlying* loss before tax of £1.0m (2021: profit £2.0m)
· Net cash** of £4.9m (2021: £6.5m)
· Utilisation*** of 67.5% (2021: 72.4%)
Post period end: Financial Summary Q1
· Q1 revenue increased by 5% to £11.8m
· Operating profit of £0.25m
· Net cash of £4.7m as at 31 January 2023
· Utilisation increased to 70% (2022: 67.5%)
· Interim Dividend approved
· Overhead reduction implemented, with further savings in progress
· The Board expects to return to profitability for FY23
* Underlying figures are stated before the share-based payment costs and one
off severance costs
** 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
Mark Wheeler, Chief Executive Officer of Driver Group plc, commented:
The FY22 trading year encompassed some unpredicted challenges for the Group,
in particular in the Middle East and APAC markets. We reduced headcount and
cost very significantly in these regions in a very short space of time.
Management took steps to minimise the impact of the exit of these people while
at the same time taking the opportunity to de-risk these historic problem
areas for the strategic aims of the Group. Our UK and European businesses
continued to perform creditably. Trading in the first quarter has begun
profitably and we are sharply focussed on delivering cost savings and
delivering a return to profitability in the current financial year.
THE INFORMATION CONTAINED WITHIN THIS ANNOUNCEMENT IS DEEMED TO CONSTITUTE
INSIDE INFORMATION FOR THE PURPOSES OF ARTICLE 7 OF THE MARKET ABUSE
REGULATION (EU) NO. 596/2014. UPON THE PUBLICATION OF THIS ANNOUNCEMENT, THIS
INSIDE INFORMATION IS NOW CONSIDERED TO BE IN THE PUBLIC DOMAIN.
* Underlying figures are stated before the share-based payment costs and one
off severance costs
** 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
Enquiries
Driver Group plc 020 7377 0005
Mark Wheeler (CEO)
Charlotte Parsons (CFO)
Singer Capital Markets (Nomad & Broker) 020 7496 3000
Sandy Fraser
Jen Boorer
Alex Emslie
Acuitas Communications 020 3745 0293 / 07799 767676
Simon Nayyar simon.nayyar@acuitascomms.com
Arthur Dingemans arthur.dingemans@acuitascomms.com
CHAIRMAN'S STATEMENT
OVERVIEW
As I reported in our 2022 interim results, Driver Group's key focus this year
has been to take significant early action to address underperforming areas in
our global business, mitigate commercial risk, improve operational resilience,
and implement systems to enhance profitability and margin performance.
The year was defined by the long-tail legacy effects of the COVID-19 pandemic
across the markets in which Driver operates. These post-pandemic issues have
been conflated by global energy and supply chain uncertainties, rising
interest rates, and the inflationary pressures caused by the conflict in
Ukraine. I believe that we have managed these external challenges well for our
shareholders and clients, whilst executing our reorganisation strategy in a
decisive and effective way. In spite of this difficult global trading
environment the measures we have taken have put the business on a strong and
sustainable footing which leaves the business well placed to capitalise on
future opportunities.
Europe and the Americas continue to be our best performing regions and are a
central focus of our growth plans in 2023. The Driver Project Services team
based in the UK and our Driver Trett team both made a significant contribution
to the results, and our US team continues to develop organically into a
valuable asset, building out our bridgehead into the highly profitable markets
of Central and South America.
A major strategic aim this year has been a policy of risk-reduction across the
whole business. We have tackled major legacy issues in the Middle East,
streamlining our presence and disposing of loss-making operations and
assets. Although reducing our operations in the region has crystallised a
charge in the 2022-23 financial year, we are confident that as a result of
this reorganisation our presence in the UAE, KSA, Qatar and Oman will now
deliver more consistent profitability within the region.
I am pleased to report that we have also executed significant internal
administrative changes to improve our performance this coming financial year
and beyond. We expect the successful implementation of our new accounting
software at the start of the second half of FY22 to have a positive impact on
future periods performance, improving visibility over utilisation levels,
supporting the collection of outstanding debts, and providing us with cutting
edge tools to maximise control over our cashflow. Taken together these
measures are expected to have a positive impact on future business efficiency
and productivity levels.
TRADING PERFORMANCE
While these changes leave us well-placed for growth, our mission to de-risk
and improve the efficiency of our business continues. It is in the nature of a
professional services business such as ours that predicting revenue beyond a
rolling six-week window has always been difficult. We continue our focus on
controlling overhead costs and delivering client servicing more efficiently to
enhance our ability to be consistently profitable.
The cost of implementing these risk reduction strategies has been significant
but we have ended the year with a healthy cash balance of £4.9m and no debt,
reflecting our careful and prudent stewardship.
DIVIDEND
I am pleased to confirm that in spite of a challenging year the Directors have
recommended a final dividend of 0.75p (2021: 0.75p per share) in addition to
the interim dividend declared at the half year, demonstrating the Directors
confidence in the business.
BOARD CHANGES
The financial year has seen several changes at board level. Our CEO Mark
Wheeler continues to guide our strategy and has been greatly assisted by our
CFO Charlotte Parsons who has done a first class job since joining us
permanently in July 2022. She will continue to provide insightful
stewardship over the coming year. Finally, I want to express my thanks to Tom
Comerford who has stepped up to the COO role in order to support Mark. These
changes have already significantly enhanced our ability to improve our
business in the face of global pressures.
On a personal note, having served as your Chairman for over eight years, I
will be handing the stewardship of the Group to Shaun Smith who will join the
Board and become the Group's new Non-Executive Chair following my retirement
at the conclusion of the forthcoming AGM on 23rd March 2023. It has been an
enormous privilege to lead Driver Group over this period and I am confident
that Shaun will continue to drive the business forward.
OUTLOOK
The 2022 financial year has been a period of dynamic change and transition for
us all and, for Driver Group, it has been no different. As the world has
adjusted to the post-Covid settlement, one characterised by supply chain
pressures and rapidly rising inflation across many of our key markets, Driver
Group has taken a considered and commercial view about how to get the business
on the front foot and ready to take advantage of the opportunities ahead of
us.
It is no coincidence that over the last many years Driver Group has sustained
a global reputation for competitive performance and professionalism. We have
done so directly as a consequence of the loyalty, ingenuity and teamwork of
our brilliant staff around the world. I would like to take this opportunity to
send every one of them my thanks and best wishes.
I want to express my gratitude to Mark and the executive team and to my
non-executive board colleagues for making my role such a rewarding one to
fulfil. I am confident that Driver Group will go from strength to strength
under my successor and trust he will find his time at the helm as satisfying
as I have.
The Board expects to deliver a return to profitability for FY23 and I shall
continue to watch Driver Group's fortunes with great affection and interest.
Steve Norris
Non-Executive Chairman
CHIEF EXECUTIVE OFFICER'S REVIEW
INTRODUCTION
FY22 has been a period of dynamic change and transition for us all and, for
Driver Group, it has been no different. As the world has adjusted to the
post-Covid settlement, one characterised by supply chain pressures and rapidly
rising inflation across many of our key markets, Driver Group has taken a
considered and commercial view about how to get the business on the front foot
and ready to take advantage of the opportunities that we can already see ahead
of us.
Accordingly, we have implemented a raft of measures designed to improve the
resilience and competitiveness of our business going forward: in particular, a
focus on risk reduction in the Middle East and Asia Pacific regions has
brought Driver the early advantages of significantly stronger long-term
positioning.
As we emerged from the pandemic, workload began to increase in line with
expectations, and in the second quarter of the year we took steps to
restructure our presence in the Middle East. Management has executed a
strategy designed to reduce our exposure in this region whilst ensuring
seamless continuity of client servicing, which has involved balancing the
staff profile with workload and the levels of income that could be generated.
Elsewhere, our businesses in Europe and the UK have delivered strong
performance and the growth of our organically generated business in the United
States has progressed significantly and successfully, tapping into
opportunities in fast growing Latin American markets.
As with many businesses, the ongoing conflict in Ukraine has caused disruption
in relation to, a number of our markets for arbitration and major project
disputes, for clients working in Russia. Although travel restrictions remain
in place, and sanctions are preventing multiple disputes and hearings
progressing until the conflict ends, we expect to reengage in these disputes
once the situation normalises.
During the current financial year, our management teams will continue to
realign our cost base with the revised requirements for business support
across our global operations. They will be extracting efficiency gains
wherever we deem this appropriate and ensuring the business is exceptionally
well positioned for the future development that we anticipate in FY23.
Our key staff have returned to extensive travel post-pandemic to reinforce
global relationships and their delivery upon key commissions provides
encouragement as we look ahead. We have moved away from regional silos and now
operate fluidly around the globe, which will improve our utilisation over the
next 12 months.
I would like personally to thank our outgoing Chairman Steven Norris for his
service to Driver Group and for his insights and experience which I and my
colleagues around the business have benefited from enormously over the last 8
years. I would also like to thank our new CFO, Charlotte Parsons, who has
proved to be a great asset to the business; and our new COO, Tom Comerford,
for his support over recent months and indeed over 20 years service to date. I
also look forward to welcoming Shaun Smith to the Board at our AGM and look
forward to working together.
We remain one of the world's largest and most respected practitioners in the
specialist fields of Construction, Expert Witness, and Dispute Resolution. Our
staff continue to be our greatest asset and enable us to retain and recruit
business in a way that promises enhanced levels of profitability in the year
ahead.
STRATEGY
Our strategy for developing the business has seen us focused on our staff, our
margin, and growth in the areas we have identified. Our business culture and
ethos will prioritise the maximal utilisation and profitability of our staff,
while our management team remains committed to ensuring these areas receive
the attention they deserve and that the benefits flow through to the bottom
line in a timely and efficient way.
As a people-led business, we see staff retention as a key area of focus and
have made significant progress to ensure that, in a marketplace where
disruption from private equity-backed organisations has proved a challenge,
our staff benefit to the full from Driver's exceptionally positive working
environment and collegiate and inclusive culture. We have taken steps to
support our staff around the world during the cost of living crisis,
introducing new and innovative staff benefit schemes to ensure our people are
best placed to weather the current economic storm. Coupled with the updated
staff retention programmes, we are confident this will help the business both
secure its existing talent and be well placed to hire additional staff of the
appropriately high calibre to work in our business.
Our marketing team have performed extremely effectively in recent years and
are now fully integrated with business development to bring in the larger
international commissions which have a major positive impact on our
utilisation levels. The number of leads in this pipeline of major commissions
has significantly increased over the last quarter and we hope to see these
early signs of success develop well into 2023 and beyond.
We have now completed the installation of our ERP IT system and expect this to
contribute significant new efficiencies over the next 6 to 12 months. I would
like to pay particular thanks to our finance team who have worked tirelessly
alongside our new CFO to ensure this system runs effectively. The provision of
real time management data will be an enormous asset to the business moving
forward.
Running a global business in an environmentally responsible and sustainable
way, and one that is imbued with high standards of governance and ethics is
vital to all of us at Driver Group. The importance that, like our clients, we
attach to high standards of ESG performance has been reflected by a migration
within the business towards e-communications with our investors and staff,
which promises greater time-efficiency, effectiveness and a reduced
environmental footprint. The Board remains deeply committed to living our ESG
values.
REGIONAL BREAKDOWN
EUROPE AND AMERICAS
The business had another good year in Europe with a significant recovery in
the Paris office following a reorganisation of our operations there in the
preceding year. We are also delighted to see the addition of a new testifying
expert in that office, further developing this aspect of our business and
reflecting our desire to compete even more vigorously in this market in the
future.
The business in Germany continued to grow consistently and organically in
alignment with our strategic outlook, and our longstanding business in the
Netherlands also performed well during this period. We are delighted to see
the business in Madrid going from strength to strength following a start-up
during the pandemic, enhancing our ability to service the important global
Spanish-speaking market.
Within the UK business, we supported some staff members through challenging
periods of ill health. Despite these challenges, the business achieved similar
levels of revenue and profit compared to the preceding year, and is expected
to return to its trend growth rate in the current financial year - a level of
performance which has been achieved, year over year, for the previous 10
years.
I would like particularly to mention our Driver Project Services business in
the North East of England, which has enjoyed a year of exceptional and highly
commendable growth. DPS has grown the number of its clients and the number of
staff placed on projects significantly during the year, whilst assisting with
the challenges of clients in the manufacturing, pharmaceutical and
petrochemical industries. It has helped our clients re-engage following the
pandemic and then manage the challenging impact of the energy and cost of
living crises.
Our business in Canada unfortunately also suffered from some ill-health in its
leadership and we have restructured to take that team forward in 2022 and
beyond. I would particularly like to thank Kevin O'Neil our former Country
Manager, for his unstinting support over the last few years.
Having launched our presence in the US during the pandemic, I am pleased to
report that major project work has been secured; the team has doubled every
six months since its inception; and we now have a well-established platform
ensuring that we are positioned for sustainable future growth. This is a
tribute to the team on the ground.
ASIA PACIFIC
In view of the need to resolve decisively an especially large contract and
management changes, the business in the Asia Pacific region has seen the
creation of a new leadership team in order to capitalise on our business
potential there. As part of this restructuring, we no longer operate from
within Hong Kong or Malaysia but continue to service clients in those markets
from our operations in Singapore and Australia, delivered in a more flexible,
efficient and client-focused way.
Our leadership team in this region has been with us for a considerable length
of time and has a great track record of success. I am very confident that we
can see the return to profit that has taken place in Asia Pacific not only
stabilise, but grow, in the next 2 to 3 years, to make a positive contribution
to the Group.
I would like particularly to praise our team in Australia who have run a
positive and profitable business throughout both the closing phase of the
pandemic and some of the global challenges of 2022.
MIDDLE EAST
Staff turnover in this region confirmed our strategy to de-risk without
placing undue pressure on debtor balances. The careful implementation of this
strategy has equipped us with a more resilient business which is able to
respond to client demand across this region and allows us to continue to
provide a world-class service.
Thanks to the disposal of loss-making assets in the region, our business in
the UAE has returned to profit and has started to contribute to other
operations by securing work for Europe or Asia Pacific to deliver. Our
business in Qatar has also returned to profit and we look forward to working
with enquiries over the legacy of World Cup 2022 projects, which we expect to
take this business forward profitably and sustainably over the next couple of
years.
The Company no longer operates from Kuwait, although we will continue
seamlessly to service clients there from our operations in UAE or Qatar. As in
Asia Pacific, this means an identical or even better level of client servicing
delivered from a more efficient and effective service platform.
I would like particularly to thank our staff in our office in Oman, who have
been admirably resilient and have helped us to secure a very significant
reduction in the aging debt relating to this office over the last 12 months:
£650,000 was recovered at the end of the financial year, and a further £1.2m
was received in October. They have worked tirelessly to return that business
to profit and I commend their contribution.
CURRENT TRADING AND OUTLOOK
The year has been one of reviewing, restructuring and resetting. It has been
informed by the Board's proactive and prudent approach to servicing our
clients in the most efficient and responsible manner, and our desire to return
value to shareholders whenever and wherever possible.
The benefits of the steps we took last year are now starting to feed through.
We are trading profitably and are now well positioned in FY23 to benefit from
that earlier action and I am, therefore, very positive about our ability to
meet our strategic aims of driving sustainable value creation for the benefit
of our shareholders in the short term, and of delivering an expanding range of
opportunities and incentives for our wider stakeholders.
This positive outlook is further encouraged and endorsed by the welcome
progress I am pleased to report that we have made in Q1 of FY23. Profitable
performance in the first quarter serves only to confirm that the tough
decisions we took in the last financial year in order to position ourselves
better for the future are already beginning to pay off. Where challenges have
emerged, we have dealt with them in a thoughtful, diligent and decisive way,
recognising the positive impact on our current cost base and competitiveness
and with a keen awareness of the strength such action brings to Driver Group
during the current financial year and in future ones.
The collection of £1.85m of aged debts from Oman at the end of the financial
year serves as powerful testimony to our staff's patience determination and
resourcefulness in helping us deal with legacy issues effectively and to reset
our presence in the region where we will in the future pursue a more flexible
and dynamic approach.
Going forward, we will be even more focused on ensuring we meet client needs
in the most efficient and seamless way, which may mean delivering service from
wherever in the world the business's most relevant talents and expertise sit.
We will do this in a disciplined and resourceful way that delivers even better
value to our clients and, in the process, improves the utilisation of our
bench of professional talents and skills. Over the coming year, we expect to
see further benefits arising from this enhanced operational focus.
The performance of our operations in Europe and the Americas demonstrates
clearly the value Driver Group creates for its shareholders and clients. We
ended the year with total revenue exceeding £36.2m and our operations here
are a model for us to replicate elsewhere across our global business.
Elsewhere, our footprint has been more closely aligned with client need and,
again, this is a trend which we expect will continue over the coming period in
order to maximise benefits to the Group and its shareholders.
Our healthy cash balance of £4.9m at the end of the year stands us in good
stead as we have evolved further our approach and method of client servicing.
The financial results for FY22 reflect our strategy of risk and cost reduction
and their benefits have, as I have already indicated, been confirmed by our
return to profit in the first quarter of the new financial year. I am,
therefore, confident that the way in which we have dealt with past challenges
leaves us operationally and competitively well positioned for the future.
SUMMARY AND CONCLUSIONS
Despite the success of our strategy to remain focused on higher margins and to
increase our profile within expert witness services, 2022 has certainly
presented challenges. We have maintained a steady pipeline of work and
opportunities whilst effectively securing our long-term prospects through the
restructuring of our business in the Middle East this year.
We no longer see COVID restrictions having a significant impact upon the
business except in relation to Chinese entities although, at the time of
writing, those restrictions appear to be lessening significantly: this holds
out the prospect of significant opportunities and progress in the near term in
this jurisdiction.
The challenges created by the conflict in Ukraine are still present, but that
pipeline of work has not gone away but been deferred pending the resolution of
that conflict.
Whilst the increases in the cost of living and fuel prices have undoubtedly
posed a number of challenges for our clients and our staff, we have met those
challenges with targeted measures designed to support our team through this
period. We note that clients experiencing challenges on projects where prices
are rising significantly represents a strong stream of work for the Group. In
the face of these global challenges, our experts in construction cost and
planning and technical matters are exceptionally well placed to help clients
deal with finding the right strategy for their projects to cope with rising
costs, and I anticipate that further work will result from the current
macro-economic and trading environment.
The renewed scope for international travel, to an extent not seen since early
2020, at long last, allows us to return to other important business
development activities. These will undoubtedly secure some valuable additional
revenue but, above all, the Group's key asset is - as it has always been - its
people.
Trading in the first quarter has begun profitably. We have an incredibly
talented and committed pool of staff around the globe who I am confident will
help the Board steer the business to a return to a profitable trading
performance this year and beyond. Taken together with the strategic steps that
we have taken to right-size our operations around the world and to make our
client servicing more targeted, efficient and cost-effective, the
opportunities going forward are, I believe, very significant.
Mark Wheeler
Chief Executive Officer
CHIEF FINANCIAL OFFICER'S REVIEW
INCOME STATEMENT 2022 £m 2021 £m
Revenue 46.90 48.77
Cost of sales (37.10) (36.35)
Impairment movement (0.19) (0.19)
Gross Profit 9.61 12.23
Recurring operating expenses (9.90) (10.11)
Net finance costs (0.10) (0.11)
Operational (loss)/profit before tax (0.39) 2.01
One off non-recurring expenses (0.57) -
Underlying* (loss)/profit before tax (0.96) 2.01
Exceptional costs (1.00) -
Share-based payments charge (0.47) (0.15)
(Loss)/profit before Tax (2.43) 1.86
Tax expense (0.46) (0.75)
(Loss)/profit for the year (2.89) 1.11
During the first quarter of the financial year to 30 September 2022, as we
emerged from the pandemic, workload increased in line with budget. The results
in the second quarter were impacted by a combination of a loss-making contract
in the APAC region and a drop in revenues in the Middle East region. The
Middle East region was also further impacted in Q3 due to the management team
transferring to a counterparty from 1 June 2022, along with 25 employees.
The EuAm region had another good year with revenues continuing to increase,
but, across all regions there was an operational loss before tax of £0.39m
for the financial year to 30 September 2022, before one-off APAC and Middle
East regions reorganisation costs of £0.57m and an onerous lease provision of
£1.0m. The key financial metrics are as follows:
KEY METRICS 2022 2021
Revenue £46.90m £48.77m
Gross Margin % 20.5% 25.1%
(Loss)/profit for the year £(2.89)m £1.11m
Utilisation Rates** 67.5% 72.4%
Basic (loss)/earnings per share (5.5)p 2.1p
Total revenue decreased by 3.8% to £46.90m (2021: £48.77m) and gross profit
decreased by 21.4% to £9.61m (2021: £12.23m). The reduction in gross profit
was a result of the loss-making contract in the APAC region and decreased
revenue in the ME region, the impact of which has been offset by a reduction
in costs. This resulted in an underlying* loss for the year of £0.96m,
in-line with our expectations, compared to an underlying profit before tax of
£2.01m in 2021. The net cash** at the year-end was £4.93m (2021: £6.47m),
after funding a dividend payment of £0.78m (2021: £0.39m) and a share
buyback programme of £0.50m (2021:Nil).
The EuAm region increased revenue by 3.8% to £35.01m (2021: £33.73m) with a
decrease in segmental profit of 20.8% to £3.92m (2021: £4.95m). This strong
performance was driven by good revenues in the UK of £24.88m (2021: £25.25m)
an increase in revenues in mainland Europe of 12.6% to £7.35m (2021: £6.53m)
and an increase in revenues in North America of 45.9% to £2.86m (2021:
£1.96m).
The ME region saw revenues decrease during the year by 26.2% to £8.06m (2021:
£10.92m) primarily as a result of the management team responsible for the
APAC and Middle East regions transferring to a counterparty from 1 June 2022,
along with 25 employees. The segmental result for the region was a loss of
£1.81m (2021: segmental loss £0.74m).
The APAC region saw revenues reduce by 9.0% to £3.75m (2021: £4.12m). The
revenues in Australia increased by 12.4% to £1.63m (2021: £1.45m), which
helped to offset the reduction in the remainder of the region. The segmental
result for the year was a loss of £0.54m (2021: segmental loss £0.41m) which
reflects the impact of the loss-making contract in the region. Increasing
utilisation will continue to be a key focus for the Group going forward.
The utilisation*** rate of chargeable staff across the business as a whole for
the year fell to 67.5% (2021: 72.4%). Across the regions this was 71.9% in
EuAm, 68.1% in APAC and 52.6% in the Middle East, reflecting the challenges
highlighted above in APAC and the Middle East.
After a net interest charge of £0.10m (2021: £0.11m) the operational loss
before tax was £0.39m (2021: £2.01m) and the reported loss before tax was
£2.43m post one-off Middle East reorganisation costs of £0.57m and an
onerous lease provision of £1.00m (2021: £1.86m). The current year profit
before tax includes a charge for share-based payments of £0.47m
(2021:£0.15m).
NET WORKING CAPITAL
Net cash** remained healthy, closing the year at £4.93m (2021: £6.47m) with
a reduction in net working capital following an increase in outstanding
debtors and an increase in creditors.
TAXATION
The Group incurred a tax charge of £0.46m (2021: £0.75m). The tax charge
includes the effects of expenses not deductible for tax purposes and is
calculated at the prevailing rates for the jurisdictions in which the Group
operates and, consequently, the effective tax rate for the year was 18.9%
(2021: 40.3%). The decrease in the effective rate is mainly due to the onerous
lease provision offset by losses or reduced profits made in jurisdictions with
either nil or lower tax rates which results in no relief for tax losses.
EARNINGS PER SHARE
The basic loss per share was 5.5 pence (2021: profit 2.1 pence). Underlying*
continuing basic loss per share was 2.7p pence (2021: profit 2.4 pence).
CASH FLOW
There was a net cash outflow from operating activities before changes in
working capital of £1.26m (2021: £3.36m), including the current year benefit
of £0.96m (2021: £0.97m) from the amortisation of right of use assets under
IFRS16. The movement also reflects the reported loss for the year of £2.89m
(2021: profit £1.11m) after depreciation of £0.24m (2021: £0.26m). There
was an increase of £1.33m in trade and other receivables (2021: increase of
£0.88m) reflecting the more difficult market conditions during the year, and
an increase in trade and other payables of £4.00m (2021: decrease £1.47m)
resulting in a net cash inflow from operating activities of £0.87m (2021:
£0.25m). Net tax paid in the year was £0.54m (2021: £0.76m).
There was a net cash outflow from investing activities of £0.57m (2021:
£0.52m) which is a result of increased capital expenditure, including IT
spend.
Net cash flow from financing activities was an outflow of £2.20m (2021:
£4.43m) with the current year reflecting the dividends paid of £0.78m (2021:
£0.39m), share buyback programme £0.50m and lease repayments under IFRS 16
of £0.82m (2021: £0.93m).
cash flow £m
Net cash** at 30 September 2021 6.47
Operating cash flow before changes (1.26)
in working capital
Increase in Trade and other receivables (1.33)
Increase in Trade and other payables 4.00
Tax paid (0.54)
Net interest paid (0.10)
Net Capital spend (0.57)
Dividends paid (0.78)
Purchase of Treasury shares (0.50)
Repayment of leases (0.82)
Effects of Foreign Exchange 0.36
Net cash** at 30 September 2022 4.93
LIQUIDITY AND GOING CONCERN
The Group is in a strong financial position. At the year end the Group had net
cash balances of £4.93m (2021: £6.47m). The net cash position is appropriate
for the Group's operating requirements going forward but the current borrowing
facilities are no longer suitable and will be replaced by a more flexible
working capital arrangement.
The Directors have completed a review of the Group's financial forecasts for a
period of more than twelve months from the date of approving these financial
statements. This review has included sensitivity analysis and stress tests
which took account of reasonable and foreseeable scenarios including any
continuing impact of the COVID-19 pandemic and related risks. Under all
scenarios modelled the Directors anticipate that any funding needs required
would be sufficiently covered by the existing cash reserves. As such the
Directors have a reasonable expectation that the Group has sufficient
resources and hence these financial statements include information prepared on
a going concern basis.
DIVIDENDS
The Directors propose a final dividend for 2022 of 0.75p per share (2021:
0.75p per share) in addition to the interim dividend paid in October 2022 of
0.75p per share (2021: 0.75p) This will be paid on 13 April 2023 to
shareholders who are on the register of members at the close of business on 3
March 2023, with an ex-dividend date of 2 March 2023, subject to approval at
the Group's forthcoming Annual General Meeting.
CHARLOTTE PARSONS
CHIEF FINANCIAL OFFICER
* Underlying figures are stated before the share-based payment costs and
exceptional costs
**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
CONSOLIDATED INCOME STATEMENT
For the year ended 30 September 2022
2022 2021
£000 £000
REVENUE 46,897 48,772
Cost of sales (37,095) (36,350)
Impairment movement (188) (187)
GROSS PROFIT 9,614 12,235
Administrative expenses (12,107) (10,459)
Other operating income 167 194
Underlying* operating (loss)/profit (861) 2,119
Exceptional costs (1,000) -
Share-based payment charges and associated costs (465) (149)
OPERATING (LOSS)/PROFIT (2,326) 1,970
Finance income - -
Finance costs (100) (110)
(LOSS)/PROFIT BEFORE TAXATION (2,426) 1,860
Tax expense (460) (746)
(LOSS)/PROFIT FOR THE YEAR (2,886) 1,114
Loss attributable to non-controlling interest (2) -
(Loss)/Profit attributable to equity shareholders of the Parent (2,884) 1,114
(2,886) 1,114
Basic (loss)/earnings per share attributable to equity shareholders of the (5.5)p 2.1p
Parent (pence)
Diluted (loss)/earnings per share attributable to equity shareholders of the (5.3)p 2.1p
Parent (pence)
* Underlying figures are stated before the share-based payment costs and
exceptional costs
Consolidated Statement of Comprehensive Income
For the year ended 30 September 2022
2022 2021
£000 £000
(LOSS)/PROFIT FOR THE YEAR (2,886) 1,114
Other comprehensive income:
Items that could subsequently be reclassified to the Income Statement:
Exchange differences on translating foreign operations (970) 38
OTHER COMPREHENSIVE (LOSS)/PROFIT FOR THE YEAR NET OF TAX (970) 38
TOTAL COMPREHENSIVE (LOSS)/INCOME FOR THE YEAR (3,856) 1,152
Total comprehensive income attributable to:
Owners of the Parent (3,854) 1,152
Non-controlling interest (2) -
(3,856) 1,152
Consolidated Statement of Financial Position
For the year ended 30(th) September 2022
2022 2021
£000 £000 £000 £000
NON-CURRENT ASSETS
Goodwill 2,969 2,969
Property, plant and equipment 384 405
Intangible asset 798 516
Right of use asset 1,375 1,854
Deferred tax asset 192 272
5,718 6,016
CURRENT ASSETS
Trade and other receivables 20,281 18,865
Derivative financial asset - 57
Current tax receivable 470 -
Cash and cash equivalents 4,931 6,474
25,682 25,396
TOTAL ASSETS 31,400 31,412
CURRENT LIABILITIES
Lease creditor (754) (778)
Trade and other payables (11,296) (8,009)
Derivative financial liability (1,938) (169)
Current tax payable (251) (165)
(14,239) (9,121)
NON-CURRENT LIABILITIES
Lease creditor (634) (1,023)
Deferred tax liabilities (169) -
(803) (1,023)
TOTAL LIABILITIES (15,042) (10,144)
NET ASSETS 16,358 21,268
SHAREHOLDERS' EQUITY
Share capital 216 216
Share premium 11,496 11,496
Merger reserve 1,055 1,055
Currency reserve (1,381) (411)
Capital redemption reserve 18 18
Treasury shares (1,525) (1,025)
Retained earnings 6,478 9,916
Own shares (3) (3)
TOTAL SHAREHOLDERS' EQUITY 16,354 21,262
NON-CONTROLLING INTEREST 4 6
TOTAL EQUITY 16,358 21,268
CONSOLIDATED CASHFLOW STATEMENT
For the Year Ended 30 September 2022
2022 2021
£000 £000
CASH FLOWS FROM OPERATING ACTIVITIES
(Loss)/profit for the year (2,886) 1,114
Adjustments for:
Depreciation 239 261
Exchange adjustments (361) 38
Amortisation of right of use asset 917 969
Amortisation of intangible asset 40 -
Finance expense 100 110
Tax expense 460 746
Equity settled share-based payment charge 229 118
OPERATING CASH FLOW BEFORE CHANGES IN WORKING CAPITAL AND PROVISIONS (1,262) 3,356
Increase in trade and other receivables (1,330) (881)
Increase/(decrease) in trade and other payables 4,000 (1,465)
CASH GENERATED IN OPERATIONS 1,408 1,010
Tax paid (539) (763)
NET CASH INFLOW FROM OPERATING ACTIVITIES 869 247
CASH FLOWS FROM INVESTING ACTIVITIES
Interest received - -
Acquisition of property, plant and equipment (398) (187)
Proceeds from the disposal of property, plant and equipment 150 -
Acquisition of intangible assets (321) (334)
NET CASH OUTFLOW FROM INVESTING ACTIVITIES (569) (521)
CASH FLOWS FROM FINANCING ACTIVITIES
Interest paid (100) (110)
Repayment of borrowings (1,000) (3,250)
Proceeds of borrowings 1,000 250
Repayment of lease liabilities (821) (928)
Purchase of Treasury shares (500) -
Dividends paid to equity shareholders of the Parent (783) (391)
NET CASH OUTFLOW FROM FINANCING ACTIVITIES (2,204) (4,429)
Net (decrease)/increase in cash and cash equivalents (1,904) (4,703)
Effect of foreign exchange on cash and cash equivalents 361 (38)
Cash and cash equivalents at start of period 6,474 11,215
CASH AND CASH EQUIVALENTS AT END OF PERIOD 4,931 6,474
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
For the Year ended 30 September 2022
Share capital Share premium Treasury shares Merger reserve Other reserves((2)) Retained earnings Own shares((3)) Non- Total Equity
Total((1)) controlling interest
£000 £000 £000 £000 £000 £000 £000 £000 £000 £000
OPENING BALANCE AT 1 OCTOBER 2020 216 11,496 (1,025) 1,055 (431) 9,075 (3) 20,383 6 20,389
Profit for the year - - - - - 1,114 - 1,114 - 1,114
Other comprehensive income for the year - - - - 38 - - 38 - 38
Total comprehensive income for the year - - - - 38 1,114 - 1,152 - 1,152
Dividends - - - - - (391) - (391) - (391)
Share-based payment(4) - - - - - 118 - 118 - 118
Purchase of Treasury shares - - - - - - - - - -
CLOSING BALANCE AT 30 SEPTEMBER 2021 216 11,496 (1,025) 1,055 (393) 9,916 (3) 21,262 6 21,268
OPENING BALANCE AT 1 OCTOBER 2021 216 11,496 (1,025) 1,055 (393) 9,916 (3) 21,262 6 21,268
Loss for the year - - - - - (2,884) - (2,884) (2) (2,886)
Other comprehensive loss for the year - - - - (970) - - (970) - (970)
Total comprehensive loss for the year - - - - (970) (2,884) - (3,854) (2) (3,856)
Dividends - - - - - (783) - (783) - (783)
Share-based payment(4) - - - - - 229 - 229 - 229
Purchase of Treasury shares - - (500) - - - - (500) - (500)
CLOSING BALANCE AT 30 SEPTEMBER 2022 216 11,496 (1,525) 1,055 (1,363) 6,478 (3) 16,354 4 16,358
(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.
(3) The shortfall in the market value of the shares held by the EBT and the
outstanding loan is transferred from own shares to retained earnings.
(4) The amount stated reflects only the share-based payment charge and does
not include the associated costs that are included within the amount stated on
the consolidated Income Statement.
BASIS OF PREPARATION
The Financial Statements have been prepared under the historical cost
convention, as modified by the revaluation of certain assets, and in
accordance with Applicable Accounting Standards.
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, the cash and financing facilities
available to the Group. At 30 September 2022 the Group had cash reserves of
£4.9m with an undrawn amount of £5.0m from a revolving credit facility of
£5.0m. However, post period end this £5.0m revolving credit facility was
cancelled. The strong cash position was after a year of change and restructure
within the Group, particularly for the Middle East and Asia Pacific regions
during the year which meant the Group incurred one off losses.
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.
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). This has remained unchanged from the previous year. 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.
Year ended 30 September 2022 Europe & Americas Middle East Asia Pacific Eliminations Unallocated Consolidated
£000
£000
£000
£000
£000
£000
Total external revenue 35,089 8,063 3,745 - - 46,897
Total inter-segment revenue 1,093 754 551 (2,398) - -
Total revenue 36,182 8,817 4,296 (2,398) - 46,897
Segmental profit/(loss) 3,923 (1,814) (544) - - 1,565
Unallocated corporate expenses((1)) - - - - (2,426) (2,426)
Share-based payments charge and associated costs - - - - (465) (465)
Exceptional costs - - - - (1,000) (1,000)
Operating profit/(loss) 3,923 (1,814) (544) - (3,891) (2,326)
Finance income - - - - - -
Finance expense - - - - (100) (100)
Profit/(loss) before taxation 3,923 (1,814) (544) - (3,991) (2,426)
Taxation - - - - (460) (460)
Profit/(loss) for the period 3,923 (1,814) (544) - (4,451) (2,886)
OTHER INFORMATION
Non current assets 3,241 245 48 - 2,184 5,718
Reportable segment assets 17.780 9,617 2,148 - 1,855 31,400
Capital additions((2)) 138 249 6 - 326 719
Depreciation and amortisation 566 214 157 - 259 1,196
(1) Unallocated costs represent Directors' remuneration, administration staff,
corporate head office costs and expenses associated with AIM.
(2) Capital additions comprise additions to property, plant and equipment and
intangible assets. No client had revenue exceeding 10% of the Group's revenue
in the year to 30 September 2022.
Year ended 30 September 2021 Europe & Americas Middle East Asia Pacific Eliminations Unallocated Consolidated
£000
£000
£000
£000
£000
£000
Total external revenue 33,734 10,919 4,119 - - 48,772
Total inter-segment revenue 468 798 220 (1,486) - -
Total revenue 34,202 11,717 4,339 (1,486) - 48,772
Segmental profit/(loss) 4,947 (737) (408) - - 3,802
Unallocated corporate expenses((1)) - - - - (1,683) (1,683)
Share-based payments charge and associated costs - - - - (149) (149)
Exceptional costs - - - - - -
Operating profit/(loss) 4,947 (737) (408) - (1,832) 1,970
Finance income - - - - - -
Finance expense - - - - (110) (110)
Profit/(loss) before taxation 4,947 (737) (408) - (1,942) 1,860
Taxation - - - - (746) (746)
Profit/(loss) for the period 4,947 (737) (408) - (2,688) 1,114
OTHER INFORMATION
Non current assets 3,224 249 74 - 2,449 6,016
Reportable segment assets 14,865 10,051 2,401 - 4,095 31,412
Capital additions((2)) 88 71 12 - 350 521
Depreciation and amortisation 602 240 157 - 231 1,230
(1) Unallocated costs represent Directors' remuneration, administration staff,
corporate head office costs and expenses associated with AIM.
(2) Capital additions comprise additions to property, plant and equipment and
intangible assets. No client had revenue exceeding 10% of the Group's revenue
in the year to 30 September 2021.
Geographical information
External revenue by location of customers 2022 2021
£000 £000
United Kingdom 21,624 18,892
Netherlands 3,241 3,186
Germany 3,154 1,856
United Arab Emirates 2,074 3,474
Australia 2,041 1,462
South Korea 1,372 437
Qatar 1,357 2,581
Oman 1,327 3,065
Singapore 1,156 1,266
Saudi Arabia 1,150 3,137
France 1,107 1,030
Canada 1,059 1,146
Spain 975 955
United States 876 932
Italy 707 502
Hong Kong 626 74
Ireland 403 1,151
Kuwait 341 845
Peru 328 16
Belgium 279 224
Serbia 233 -
Norway 198 43
Russia 192 391
Malaysia 170 473
South Africa 149 209
Philippines 107 -
Chile 105 -
Indonesia 99 255
Other countries 447 1,170
46,897 48,772
Geographical information of Non current assets
2022 2021
£000 £000
UK 5,094 5,347
Oman 140 123
UAE 63 125
Singapore 121 25
Qatar 42 41
Malaysia 34 58
Kuwait - 8
Hong Kong - 9
Netherlands 148 211
France 11 21
Australia 9 10
Canada 3 5
USA 8 8
Spain 6 25
Germany 39 -
5,718 6,016
Analysis of the tax charge
The tax charge on the profit for the year is as follows:
2022 2021
£000 £000
Current tax:
UK corporation tax on profit for the year 71 540
Non-UK corporation tax 140 173
Adjustments to the prior period estimates - (3)
211 710
Deferred tax:
Origination and reversal of temporary differences 249 36
Tax charge for the year 460 746
FACTORS AFFECTING THE TAX CHARGE
The tax assessed for the year varies from the standard rate of corporation tax
in the UK. The difference is explained below:
2022 2021
£000 £000
(Loss)/profit before tax (2,426) 1,860
Expected tax charge based on the standard average rate of corporation tax in (461) 353
the UK of 19% (2021: 19%)
Effects of:
Expenses not deductible 237 20
Deferred tax - other differences 249 36
Share options exercised (99) -
Foreign tax rate differences 554 375
Adjustment to prior period estimates - (3)
Utilisation of losses (32) (24)
Unprovided losses 12 (11)
Tax charge for the year 460 746
Factors that may affect future tax charges
Following Royal Assent of the Finance Bill 2021 an increase to the main rate
of UK corporation tax has been announced, increasing this to 25% from 1 April
2023.
earnings per share
2022 2021
£000 £000
(Loss)/profit for the financial year attributable to equity shareholders (2,884) 1,114
Exceptional costs 1,000 -
Share-based payment charges and associated costs 465 149
Underlying (loss)/profit for the year before share-based payments and (1,419) 1,263
exceptional costs
Weighted average number of shares:
Ordinary shares in issue 53,962,868 53,962,868
Shares held by EBT (3,677) (3,677)
Treasury shares (1,405,839) (1,787,811)
Basic weighted average number of shares 52,553,352 52,171,380
Effect of Employee share options 2,309,028 2,125,958
Diluted weighted average number of shares 54,862,380 54,297,338
Basic (loss)/earnings per share (5.5)p 2.1p
Diluted (loss)/earnings per share (5.3)p 2.1p
Underlying basic earnings per share before share-based payments and (2.7)p 2.4p
exceptional costs
CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS
Some asset and liability amounts reported in the Consolidated Financial
Statements contain a degree of management estimation and assumptions. There is
therefore a risk of significant changes to the carrying amounts for these
assets and liabilities within the next financial year. The estimates and
assumptions are made on the basis of information and conditions that exist at
the time of the valuation.
The following are considered to be key accounting estimates:
Impairment reviews
Determining whether goodwill is impaired requires an estimation of the value
in use of the cash generating units to which goodwill has been allocated. The
value in use calculation requires an entity to estimate the future cash flows
expected to arise from the cash generating unit and a suitable discount rate
in order to calculate present value. An impairment review test has been
performed at the reporting date and no impairment is required.
Receivables impairment provisions
The amounts presented in the Consolidated Statement of Financial Position are
net of allowances for doubtful receivables, estimated by the Group's
management based on the expected credit loss within IFRS 9. This is calculated
using a simplified model of recognising lifetime expected losses based on the
geographical location of the Group's entities and considers historical default
rates, projecting these forward taking into account any specific debtors and
forecasts relating to local economies. At the Statement of Financial Position
date a £3,159,000 (2021: £2,561,000) provision was required. If management's
estimates changed in relation to the recoverability of specific trade
receivables the provision could increase or decrease. Any future increase to
the provision would lead to a corresponding increase in reported losses and a
reduction in reported total assets.
Revenue recognition on fixed fee projects
Where the Group enters into a formal fixed fee arrangement revenue is
recognised by reference to the stage of completion of the project. The stage
of completion will be estimated by the Group's management based on the Project
Manager's assessment of the contract terms, the time incurred, and the
performance obligations achieved and remaining.
POST BALANCE SHEET EVENTS
There have been no significant events requiring disclosure since 30 September
2022.
END
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