Driver Group plc Results for the six months to March 2019 Driver - - PowerPoint PPT Presentation

Driver Group plc Results for the six months to March 2019

Driver Group plc

Driver Group plc

Business Profile

Driver Trett & Project Services

• Driver Trett provides specialist dispute avoidance and dispute resolution services to our clients from the
• utset of a project to its completion, and beyond.
• We offer strategic commercial improvement and contract management services; live planning and

programming; assistance and forensic delay analysis; dispute avoidance and dispute resolution support and expertise; and training and seminars tailored to our clients’ needs.

• Driver Project Services provides site-based commercial management, project management and planning

and programming services to our clients in the UK and Middle East. Our staff work seamlessly with our clients’ teams, offering additional project support at the point of need or for the duration of the project.

Driver is a global dispute resolution provider to a blue chip client base 2

Driver Group plc

Business Profile

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Diales

• Expert Witness and expert advisory services provider.
• Our world-class quantum, delay, and technical experts assist in litigation, arbitration, and adjudication,

as well as in negotiation, mediation, and other dispute resolution forums.

• Diales also provides highly experienced adjudicators, arbitrators, and mediators, as well as offering third

party neutral evaluation and determination.

• The number of experts has increased from 13 when the brand was launched in 2012 to 48 in 2019 with

all experts having a minimum of 15 years’ industry experience and 50% of their workload is expert work.

• Diales accounts for 21% of Group Revenue for the period at £6.3m.

Premium branded service (shares Driver Trett resource)

Driver Group plc

Diales 21% Project Services 11% Driver Trett 68%

2019 REVENUE

Sectors & Services

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£29.7m

Diales 25% Project Services 9% Driver Trett 66%

2018 REVENUE

£31.7m

Driver Group plc

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Global Footprint

EuAm 50% ME 35% APAC 15%

2019 REVENUE REGIONAL BREAKDOWN £29.7m

Driver Group plc

Half year update

• The completion of several large commissions combined with delays in new

commissions commencing, particularly in ME and APAC regions, has adversely impacted overall earnings

• The slowdown in ME and APAC markets has resulted in a disappointing performance
• revenues down 14% in ME and 17% in APAC
• Appropriate measures have been instituted to manage down the cost base in an
• rderly way
• Despite the slowdown in client conversion, the number of business enquiries

received is up significantly on the same period last year

• Revenues are 4% up in EuAm and there has been a strong overall performance
• Cash conversion is at 140% and remains consistently strong
• Share buyback programme launched in March 2019
• Progressive restoration of dividend payments – Interim dividend of 0.5p per share

matches full year payment in FY18 6

Driver Group plc

Financial update

• Revenue down by 6% to £29.7m (H1 2018: £31.7m)
• Gross profit margin of 23.0% (H1 2018: 28%) at £6.7m (H1 2018: £8.9m)
• Underlying* Profit of £0.8m (H1 2018: £2.1m) resulting in an underlying* Profit margin of 2.6%

(H1 2018: 6.6%)

• Underlying* EBITDA of £1.0m (H1 2018: £2.5m)
• Net cash at 31 March 2019 of £5.0m (September 2018: £6.9m)

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*Underlying profit stated before the share based payment costs and exceptional items ** Each of the above graphs are scaled individually and are not directly comparable

£1.03m £2.11m £0.76m

Underlying* Profit

(£3.50m) £0.84m £5.01m

Net cash/(borrowings)

2017 2018 2019 £1.48m £2.49m £1.04m

Underlying* EBITDA

Driver Group plc

Delivering a more resilient business

Measures have already been taken to:

• Lower overall business break-even revenue point by £0.2m per month providing

enhanced resilience against fluctuations in revenue

• Restructure the ME business and reduce its cost base
• Reduce direct & indirect costs in the APAC business
• Reduce discretionary spend on marketing & training

Ongoing initiatives are in place to deliver:

• Selective recruitment in growing markets
• Improved commission management process

Objective:

• Full benefits of the above actions expected to accrue during H2 2019 with a full

year’s impact in FY 2020 8

Driver Group plc

Segmental revenue split by period

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EuAm, £14.3m, 45% ME, £12.0m, 38% APAC, £5.4m, 17%

2018 REVENUE

EuAm ME APAC

£31.7m

EuAm, £14.9m, 50% ME, £10.3m, 35% APAC, £4.5m, 15%

2019 REVENUE

EuAm ME APAC

£29.7m

Driver Group plc

Revenue by Sector

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Building, 31.3% Energy, 19.2% Infrastructure, 27.5% Marine, 2.9% Mining, 5.0% Oil & Gas, 11.6% Process, 2.3% Other, 0.2%

Sector Split 2018

£31.7m

Building, 38.3% Energy, 17.5% Infrastructure, 25.6% Marine, 2.7% Mining, 1.8% Oil & Gas, 10.0% Process, 3.3% Other, 0.8%

Sector Split 2019

£29.7m

Driver Group plc

Regional Highlights

• Fee earner headcount reduced by 23 to 355 since September 2018 with reductions coming from

the Middle East (ME) and Asia Pacific (APAC) regions. Global utilisation rates down 5.5% points to 76.1% compared to March 2018

• Europe & Americas (EuAm) reported underlying* Profit for the period of £2.0m, up 45% with

utilisation rates at 70.3%

• Middle East (ME) reported underlying* Profit for the period of £0.4m, down from £1.3m with

utilisation rates at 80.9%

• Asia Pacific (APAC) reported an underlying* loss for the period of £0.6m, down from £0.6m profit

with utilisation rates at 76.1%

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*Underlying profit stated before the share based payment costs

Driver Group plc

Business review - Europe & Americas

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Operational

• Good performance across the whole
• f the UK market for both claims and

project services with strong profitability and revenue

• Revenue from Diales technical brand

in UK increased by 51% to £2.11m compared to H1 2018

• Mainland Europe delivered a strong

performance with profit increasing from £69k to £476k compared to H1 2018

• Small increase in profits for Canada
• Further recruitment of Diales experts

in line with Group strategy Financial

• Revenue up 4% vs H1 2018 to £14.85m
• Segmental profit £1.98m vs H1 2018 £1.37m
• Headcount 195 vs H1 2018 194
• Utilisation 70.3% vs H1 2018 73.6%

£14.85m £1.98m 195 70.3% £14.26m £1.37m 194 73.6%

Revenue Profit Headcount Utilisation 2019 2018

Driver Group plc

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Operational

• UAE revenue and profit down due to

difficult market conditions with headcount reduced to reflect lower revenues

• Changes in the Kuwait business have

impacted revenues with a number of larger commissions coming to an end

• Qatar

continues strong performance from previous years

• Oman profit increased to £247k

Financial

• Revenue down 14% vs H1 2018 to £10.32m
• Segmental profit £0.36m vs H1 2018 £1.29m
• Headcount 139 vs H1 2018 155
• Utilisation 80.9% vs H1 2018 83.5%

Business review - Middle East

£10.32m £0.36m 139 80.9% £11.99m £1.29m 171 83.5%

Revenue Profit Headcount Utilisation 2019 2018

Driver Group plc

14 Operational

• Singapore

and Malaysia revenues impacted due to the completion of major commissions and delays in the start of new commissions

• APAC Regional MD removed incurring
• ne off £0.2m costs in H1
• Headcount

re-aligned to match reduced revenues

• Improved

performance since the start of March

Financial

• Revenue down 17% vs H1 2018 to £4.54m
• Segmental loss £0.58m vs H1 2018 £0.64m

profit

• Headcount 76 vs H1 2018 78
• Utilisation 76.1% vs H1 2018 91.6%

Business review - Asia Pacific

£4.54m £(0.58)m 76 76.1% £5.44m £0.64m 78 91.6%

Revenue Profit Headcount Utilisation

2019 2018

Driver Group plc

Financials - Income Statement 15

Six months ended 31 March / year ended 30 September H1 2019 H1 2018 Full Year 2018 £’000 £’000 £’000 Revenue 29,711 31,694 62,615 Cost of Sales (23,016) (22,807) (46,338) Gross profit 6,695 8,887 16,277 Gross profit % 22.5% 28.0% 26.0% Underlying* profit before tax 762 2,105 3,839 2.6% 6.6% 6.1% Share based payment credit /(charge) and associated costs 243 (379) (1,100) Profit before tax 1,005 1,726 2,739 Tax charge (170) (297) (597) Reported profit after tax 835 1,429 2,172 Basic earnings per share 1.5p 2.7p 4.0p * before share-based payment costs

Driver Group plc

Profit bridge

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* before share-based payment costs

Driver Group plc

Cashflow bridge

*before share-based payment costs, depreciation and tax

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Driver Group plc

Impact of IFRS 9, IFRS 15 & IFRS 16

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IFRS 9

The Group transitioned to IFRS 9 on 1 October 2018. The Group has adopted a simplified model of recognising lifetime expected credit losses to trade receivables resulting in a one off increase of £0.95m to the provision which has been adjusted under transition relief via the opening retained earnings.

IFRS 15

The Group transitioned to IFRS 15 on 1 October 2018. This change in standard has not affected the revenue recognition by the Group.

IFRS 16

The Group will transition on 1 October 2019.

Driver Group plc

Summary

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• Disappointing performance in ME and APAC has been offset by a strong performance in

EuAm in H1

• Despite high levels of enquiries delays in commissions starting in APAC & ME
• UAE market has seen a significant slowdown
• Action taken in underperforming businesses to reduce cost base in Middle East and APAC

with benefits to be seen in H2 2019

• Lowered breakeven making the business less susceptible to market fluctuations
• Growth of Diales brand still a key strategy with the appointment of a new Head of Diales in

the Middle East and new experts in the UK

• 14% of clients have awarded multiple commissions in 2019 (812 commissions for 586

clients)

• Top 100 clients = 71% revenue covering 211 commissions
• Business is now well positioned for future success following decisive actions taken in H1
• A detailed review of the Group’s cost base is ongoing

Appendices

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Driver Group plc

Management Team

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David Kilgour, CFO

• David is a Chartered Accountant with
• ver 25 years' experience in the

engineering, infrastructure and utilities sectors.

• He was formerly Managing Director

for Amec plc of a renewables developer and consultancy business and previously Finance Director for United Utilities plc of international and non-regulated operations.

• David has extensive financial and
• perational experience of managing

international businesses. Gordon Wilkinson, CEO

• Gordon is responsible for all aspects
• f the Group business and strategy.
• Gordon’s initial consultancy

experience was gained with KPMG from 1989 to 2000 where he progressed to become a full equity partner, responsible for a number of business units in their Consulting Division.

• More recently he was a Director at

AECOM where he was Head of the Global Consulting and Cost Management Businesses.

• Prior to AECOM he was a Director at

Arup and a member of Arup’s UKMEA Board with responsibility for the UKMEA Consulting division. Mark Wheeler, COO

• Mark is an engineer and surveyor

with over 25 years’ experience within the construction industry, including major civil engineering, building and power projects.

• He is an expert in the provision of

quantum and technical reports for construction dispute resolution through litigation, adjudication, arbitration or mediation.

• Mark also has experience in working

with a wide range of contracts, including JCT, FIDIC and the NEC3

• form. He regularly advises on the

practical application and use of NEC3.

Driver Group plc

Management Structure

Gordon Wilkinson† CEO Mark Wheeler*† Chief Operating Officer David Kilgour† Chief Financial Officer Tom Comerford* Managing Director, UK Helen Bentley MD, SW and Midlands Keith Strutt MD, SE and London Mike Noteyoung MD, DPS & North East Ali Fard Director, Canada Mark Castell MD, Regional Hugo-Frans Bol* Director, Germany and the Netherlands Frédéric Berjot Director, Europe John Lancaster* Global Head of Delay Analysis Russ Shaw* Finance Director, EuAm Denis d’Souza Finance Director, ME Dennis Anderton Group IT Manager Norma Zebrowski Human Resources Manager Steve Norris – Chairman† Peter Collini - NED† Key †Main Board Director *Global Management Board

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Matt Wills* Managing Director, Asia Pacific Phil Duggan Head of Diales, Middle East Peter Banathy* Deputy Chief Operating Officer

Driver Group plc

Financials - Statement of Financial Position 22

31 March 31 March 30 September 2019 2018 2018 £’000 £’000 £’000 Non-current assets Goodwill 2,969 2,969 2,969 Property, plant and equipment 636 810 765 Deferred tax asset 98 64 69 Total non-current assets 3,703 3,843 3,803 Current assets Trade and other receivables Derivative financial asset Held for sale 18,956 29

• 20,976

390 1,614 20,445 42

• Cash and cash equivalents

7,394 5,814 10,007 Total current assets 26,379 28,794 30,494 Total assets 30,082 32,637 34,297 Current liabilities Borrowings (2,382) (662) (646) Trade and other payables (9,076) (9,223) (10,623) Derivative financial liability (101)

• (639)

Current tax payable (116) (354) (456) Total current liabilities (11,675) (10,239) (12,364) Non-current liabilities Borrowings

• (4,314)

(2,460) Deferred tax liabilities

• (127)
• (4,441)

(2,460) Total liabilities (11,675) (14,680) (14,824) Net assets 18,407 17,957 19,473

Driver Group plc

Financials - Statement of Financial Position (Continued)

31 March 31 March 30 September Year ended 30 September 2019 2018 2018 £’000 £’000 £’000 Shareholders’ Equity Share Capital 215 215 215 Share Premium 11,497 11,475 11,475 Merger Reserve 1,055 1,055 1,055 Currency Reserve (371) (447) (400) Capital Redemption Reserve 18 18 18 Treasury Shares (486)

• Retained Earnings

6,473 5,745 7,107 Own Shares (3) (107) (3) Total Shareholders’ Equity 18,398 17,954 19,467 Non-Controlling Interest 9 3 6 Total Equity 18,407 17,957 19,473 Net cash 5,011 838 6,901

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Driver Group plc

Cashflow Statement 24

140% 130% 145%

Cash Conversion % H1 2019 H1 2018 YE 2018

17.7% 19.4% 14.6%

Net Working Capital % H1 2019 H1 2018 YE 2018

Six months ended 31 March / year ended 30 September H1 2019 H1 2018 Full Year 2018 £’000 £’000 £’000 Operating cash flow before changes in working capital and provisions 1,066 2,518 4,423 Debtors (increase) / decrease 549 (2,051) (1,291) Creditors increase / (decrease) (2,415) 862 2,939 Tax paid (450) (115) (385) Net interest paid (50) (84) (131) Capital spend (98) (156) (350) Disposal of subsidiary net of cash disposed of

• 75

195 Net proceeds from issue of shares 22

• Repurchase of share options
• (17)

Purchase of Treasury shares (486)

• Proceeds from sale of head office
• 1,650

Net repayment of borrowings (724) (134) (2,004) Net increase/(decrease) in cash & cash equivalents (2,586) 915 5,029 Effect of FX on cash and cash equivalents (27) (33) 46 Cash and cash equivalents Opening 10,007 4,932 4,932 Closing 7,394 5,814 10,007

Driver Group plc

Significant Shareholders

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*% according to share register analysis report at 10/05/19

Sanford DeLand Asset Mgt (Manchester), 16.00% Gresham House (London), 14.81% Mr Adrian J Williams (Regional (England)), 7.28% Ruffer (London), 6.57% Allianz Global Investors (London), 6.40% River & Mercantile Asset Mgt (London), 5.75% Soros Fund Mgt (New York), 4.39% Mr John P Mullen (Northampton), 3.92% The Ramsey Partnership Fund Ltd (Douglas), 3.85% Close Asset Mgt (London), 3.24% Unicorn Asset Mgt (London), 3.06%

Driver Group plc

Disclaimer

Nothing in this presentation (the “Presentation)”)

• r in any accompanying management discussion of the

Presentation constitutes, nor is it intended to constitute: (i) any recommendation or advice to invest in or otherwise deal in any shares or other securities in Driver Group plc (the “Company”); or (ii) any offer for the sale, purchase or subscription of any shares or other securities in the Company. The information contained in the Presentation has not been independently verified and no representation or warranty, express or implied, is made as to, and no reliance should be placed on, the fairness, accuracy, completeness or correctness of the information or opinions contained herein. None of the Company, its directors or shareholders nor any

• f their respective affiliates, advisers or representatives shall

have any liability whatsoever for any loss arising from any use of the Presentation or its contents or otherwise arising in connection with the Presentation. The Presentation and accompanying management discussion

• f the Presentation may contain certain forward-looking

statements with respect to the financial condition, results

• f operations and business of the Company. These forward-

looking statements represent the Company’s current expectations or beliefs concerning future events and involve known and unknown risks and uncertainty that could cause actual results, performance or events to differ materially from those implied or expressed in such forward- looking statements. Other than in accordance with the Company’s obligations under applicable law and regulation, the Company undertakes no obligation to update or revise publicly any forward-looking statement in the Presentation, to reflect any change in the Company’s expectations with regard thereto or any change in any events, conditions or circumstances on which such forward-looking statements are based. The information in this Presentation is confidential and may constitute inside information and you should be aware of the relevant obligations and restrictions under the Market Abuse Regulation (EU 596/2014) relating to insider dealing and market abuse. This Presentation may not be copied, reproduced or distributed, in whole or in part, to others at any time without the prior written consent of the Company.

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