Interim Report: Half-year ended 31 March 2021

INTRODUCTION

During the COVID-19 affected first half of the 2021 financial year the Group has performed in line with the second half of the 2020 financial year. This resilient performance is creditable during the first half of the financial year with underlying* profit before tax (stated before share based payment charges) being slightly below the result for the same period last year, which was largely unaffected by COVID-19. Whilst the performance during the period has been adversely impacted by various lockdowns in key territories and the loss of senior staff and associated team members to a competitor in the APAC region, we have made meaningful progress in implementing the five year strategic plan which was announced in December 2020.  We have successfully established and grown a presence in the United States and Spain which has resulted in developing opportunities in these markets and in South America. Additionally, we have achieved the following strategic objectives:

•        Grown the number of testifying Diales experts to 50

•        Focused recruitment to further enhance our technical and geographic service offering

•        Implemented a new long term incentive plan to aid the retention of key staff

•        Won a long term contract with a major South Korean contractor based in Seoul which will help to further grow this sector

•        Reduced the Group's cost base by approximately 13% year-on-year by bearing down selectively on operating costs whilst maintaining the Group's fee-earning capacity at maximum utilisation at pre-COVID levels

In addition, it is our intention to establish a forensic accounting service offering under the Diales brand. This new service line represents an excellent and complementary fit alongside our core construction-related quantum, delay and technical expert services. Implementation of these actions is consistent with the Group's stated strategic ambition to generate increased shareholder value through growing the proportion of revenues derived from higher margin expert assignments.

TRADING PERFORMANCE

Group revenue for the six months to 31 March 2021 was £25.0m, a decrease of 10.7% on the same period in 2020 (£28.0m), however the latter period was mainly unaffected by COVID-19.  Overall, the Group reported an underlying* profit before tax of £1.0m (2020: £1.3m).  Revenues in the EuAm region of £17.2m increased by 11.8% which was offset by decreases of 28.4% in ME and 55.7% in APAC respectively £5.7m and £2.1m. The EuAm region delivered operating profits of £2.5m (2020: £1.7m) whilst the ME region recorded an operating loss of £0.4m (2020: breakeven) and APAC region an operating loss of £0.3m (2020: operating profit £0.6m). The strong performance in EuAm was delivered across the region increasing the operating margin to 14.7% (2020: 11.2%) whilst the poor performances in ME and APAC regions reflect a combination of COVID-19 affected markets and the loss of key staff in Singapore to a competitor. Decisive action has been taken with a view to improving operating performance in both the ME and APAC regions, with both regions under the common leadership of a very experienced operational business leader, who joined the Group from a major competitor in September 2020.

The Group's effective tax rate is 34% (2020: 24%) reflecting a shift in the geographic split of overall Group profits with taxable profits generated in the EuAm region and losses in low tax regime in the ME region. Profit per share was 1.1p (2020: 1.8p).

The Group continues to maintain strict discipline over the management of its net working capital position and the Group's net cash** balance stood at £7.2m at 31 March 2021 compared to £8.2m at the traditionally seasonally higher financial year end position at 30 September 2020 and £3.3m at 31 March 2020.

Net cash inflow from operations was £0.3m (2020: £0.5m outflow) during the first six months, including a net inflow from a decrease in trade and other receivables of £0.1m (2020: £2.1m cash outflow) and a net cash outflow from a decrease in trade and other payables of £1.5m (2020: £0.4m). Tax paid totalled £0.2m (2020: £0.3m) and the acquisition of fixed assets absorbed £0.2m (2020: £0.1m). A further cash outflow during the period was the payment of dividends of £0.4m (2020: £0.7m).

DIVIDEND

The final dividend announced at the time of the results for the year to 30 September 2020 (0.75p per share) in December was paid in March 2021. Reflecting our confidence in the medium term prospects for the Group and the inherently cash generative nature of our business along with the strong balance sheet position the Board recommends the payment of an interim dividend of 0.75p per share for 2021 (2020: nil p per share).

OUTLOOK

Activity levels during April and May were broadly unchanged from those witnessed during the first half and while the pipeline of opportunities continues to build, the COVID impact on pipeline conversion timelines suggests that the prospects of a meaningful uptick during the remainder of the current financial year are now limited. Construction-related claims activity is a lagging indicator of broader trends in infrastructure spend and the Board's belief is that Driver's current activity levels are reflective of the wider market. Looking beyond the current financial year, recognising that Driver typically operates with limited forward revenue visibility, our expectation is that the very significant constraints on routine business development which have existed throughout the last twelve months will start to abate. The building blocks which underpin our five year plan are in place and the Board is confident that the actions already implemented to reposition the business with growth focussed on higher margin expert service lines and, including the significant reduction in the cost base and hence monthly revenue break-even level noted above, together ensure that the Group is well placed to take advantage of the widely anticipated improvement in our key markets as infrastructure spend recovers and the sector confronts the reality of a COVID-induced backlog of claims and disputes.

I would like to pay particular tribute to our CEO Mark Wheeler and CFO David Kilgour for the way they have managed the business during the COVID-19 affected times and in tandem have still made significant progress in implementing the objectives of the five year strategic plan.  I also thank my Board colleagues, Peter Collini, Elizabeth Filkin and John Mullen 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.

Steven Norris

Non-Executive Chairman

8 June 2021

* 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

Consolidated Income Statement

Interim report for the six months ended 31 March 2021

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