REG - DSW Capital PLC - Audited Final Results
14/07/2022 07:00
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RNS Number : 4137S DSW Capital PLC 14 July 2022
14 July 2022
DSW CAPITAL PLC
("DSW Capital", "DSW" or the "Group")
(AIM:DSW)
Audited Final Results
Strong results ahead of market expectations set at IPO and new financial year
started well
DSW Capital, a fast growing, mid-market, challenger professional services
licence network and owner of the Dow Schofield Watts brand, is pleased to
announce its audited results for the year ended 31 March 2022 (the "Period" or
"FY22").
The Group has delivered a strong trading performance with revenue and Adjusted
Pre-Tax Profit(1) for FY22 ahead of market expectations set at IPO.
Pleasingly, Network Revenue(2) grew significantly ahead of market
expectations.
Financial highlights
· Network Revenue(2) of £18.3m (FY21: £15.3m) - up 19.6%
· Group revenue of £2.7m (FY21: £2.4m) - up 12.5%
· Adjusted Pre-Tax Profit(1) of £2.0m (FY21: £1.6m) - up 25%
· Loss before tax, after the deduction of the Share Based Payment charge and IPO
costs, of £0.03m (FY21: Profit before tax of £1.59m)
· Strong cash conversion(3) of 105% with £4.7m cash
· Strong balance sheet with Net Assets of £8.0m (FY21: £2.2m)
· Maiden final dividend per ordinary share of 4.22 pence
Operational highlights
· Fee Earners at year end increased to 88 (31 March 2021: 77) - up 14.3%
demonstrating the profile boost from IPO and licence model negating the wider
difficult recruitment market
· Average revenue per Fee Earner(4) of £227k (FY21: £196k) - up 15.8%
· Service lines expanded in line with strategic objectives, with the addition of
DSW Asset Based Lending Risk Management LLP in January 2022
· Corporate finance and due diligence, which represent 70% of the business,
continued to grow successfully in line with the market (FY21: 81%)(5)
· Named by Experian as one of the top 20 most active corporate finance advisers
in the UK in 2021
· Business recovery and debt advisory performed strongly in FY22 and, as a
result, represent an increasing proportion of business
· Two new partners welcomed in Scotland post year end, expanding the Network's
presence to include Edinburgh and Glasgow - total number of licensees now 20
across 11 service lines
Outlook
· Significant opportunity for organic and acquisition driven growth with capital
to invest
· Predictable cost base with low operational gearing, insulated from
inflationary pressures
· New financial year has started well, in line with the Board's expectations,
and the Directors look forward to another year of sustainable organic growth
James Dow, Chief Executive Officer, said:
"Our admission to AIM has enhanced and strengthened the Dow Schofield Watts
brand, as we had expected, and the IPO "halo" effect is undoubtedly supporting
our growth plans.
"The sector in which we operate is substantial and developing in a way that
makes DSW's business model increasingly attractive to ambitious
entrepreneurial professionals and their clients. By empowering these
individuals to create and build their own professional services businesses,
while also helping them develop as leaders and be the best they can be, I am
confident that we will deliver strong returns for all our stakeholders.
"Our confidence is built on the quality of our people within the Network and
their clients. This quality is reflected in the average revenue per Fee
Earner achieved in the year of £227k (FY21: £196k) - an important metric, as
we execute on our vision to become the most sought-after destination for
ambitious professionals.
"DSW has a successful and profitable model, a strong balance sheet and an
excellent capital base from which to scale the business. In a sector which is
ripe with opportunity, we have every confidence in the future prospects for
the Group."
1. Adjusted Pre-Tax Profit is defined as (loss)/profit before tax adjusted to add
back the items not considered part of underlying trading including share-based
payment expense and IPO costs. It is a non-GAAP metric used by management and
is not an IFRS disclosure. Reconciliation can be found in the CFO
2. Network Revenue is defined as total revenue earned by licensees, as opposed to
total revenue reported by the Company
3. Cash conversion is calculated as cash generated by operations divided by
Operating cash flows before movements in working capital
4. Prior year comparatives calculated using average Fee Earners in the Period
which will be basis for the KPI calculation going forward.
5. Calculation includes all licensing income including income from associates
Online investor presentation
An online investor presentation and Q&A will be hosted by the management
team today at 1pm. To participate, please register with PI World at:
https://bit.ly/DSW_FY22_webinar (https://bit.ly/DSW_FY22_webinar) .
The investor presentation deck will be published on the Company's website
today.
Enquiries:
DSW Capital
James Dow, Chief Executive Officer Tel: +44 (0) 1928 378 029
Nicole Burstow, Chief Financial Officer Tel: +44 (0) 1928 378 039
Shore Capital (Nominated Adviser & Broker) Tel: +44 (0)20 7408 4090
James Thomas / John More / Mark Percy
Guy Wiehahn (Corporate Broking)
Belvedere Communications
Cat Valentine Tel: +44 (0) 7715 769 078
Keeley Clarke Tel: +44 (0) 7967 816 525
dsw@belvederepr.com (mailto:dsw@belvederepr.com)
Notes to Editors
About DSW Capital
DSW Capital, owner of the Dow Schofield Watts brand, is a profitable, fast
growing, mid-market, challenger professional services network with a cash
generative business model and scalable platform for growth. Originally
established in 2002, by three KPMG alumni, DSW is one of the first platform
models disrupting the traditional model of accounting professional services
firms. DSW now operates licensing arrangements with 20 licensee businesses
with 88 fee earners ("FEs"), across seven offices in England and three in
Scotland. These trade primarily under the Dow Schofield Watts brand.
DSW's vision is for the DSW Network to become the most sought-after
destination for ambitious, entrepreneurial professionals to start and develop
their own businesses. Through a licensing model, DSW gives professionals the
autonomy and flexibility to fulfil their potential. Being part of the DSW
Network brings support benefits in recruitment, funding and infrastructure.
DSW's challenger model attracts experienced, senior professionals,
predominantly with a "Big 4" accounting firm background, who want to launch
their own businesses and recognise the value of the Dow Schofield Watts brand
and the synergies which come from being part of the DSW Network.
DSW aims to scale its agile model through organic growth, geographical
expansion, additional service lines and investing in "Break Outs" (existing
teams in larger firms). The Directors are targeting high margin,
complementary, niche service lines with a strong synergistic fit with the
existing DSW Network.
Chair's Statement
On behalf of the Board, I would like to start by thanking all colleagues
across the business for their unwavering commitment and support throughout the
year. It gives me pleasure to announce DSW Capital's inaugural results as a
quoted company for the year ended 31 March 2022. The Group has continued to
perform strongly this year with a 19.6% increase in network revenue to £18.3m
(FY21: £15.3m) and an increase in Adjusted Pre-Tax Profit of 25% to £2.0m
(FY21: £1.6m). Average Revenue per Fee Earner has also increased by 15.8% in
FY22 to £227k (FY21: £196k) and Revenue for the Group was £2.7m (FY21:
£2.4m). Statutory loss before tax for FY22 was £31k (FY21: Profit before tax
of £1.59m) after the deduction of the Share Based Payment charge and IPO
costs.
Summary of the year
DSW's admission to AIM was a significant step in the development of the
business. We are delighted to have the support from so many sophisticated
investors and are confident that DSW is well placed to exploit the market
opportunity that exists within the professional services sector.
The fundraising from the IPO, coupled with a robust trading performance, has
ensured that the Group has a strong balance sheet and an excellent capital
base from which to grow the business, both organically and through the
strategic acquisition of talented individuals and teams as opportunities
arise.
We are delighted with our results for FY22, which show significant growth
against the prior year. The DSW Network generated revenues of £18.3m in FY22,
up by 19.6% from the previous year. This growth was enabled by a combination
of existing and new licensee businesses and the continued hard work of the
whole of the DSW team.
The DSW Network, which comprises 20 licensee businesses, benefited from high
levels of demand in the professional services sector throughout the Period
and, in February 2022, DSW was named by Experian as one of the top 20 most
active corporate finance advisers in the UK in 2021. As anticipated, the
heightened profile of DSW resulting from the IPO has resulted in increased
recruitment activity with a high number of talented individuals joining or
about to join DSW. We now have 88 Fee Earners as of 31 March 2022, an increase
of 14.3% on the prior year.
Long-term vision and strategy
DSW's long-term vision is to become the most sought-after destination for
ambitious, entrepreneurial professionals to start and develop their own
businesses. We aim to scale the business through organic growth, new service
lines and geographic locations, and investing in "Break Outs" (existing teams
in larger firms).
DSW has successfully executed on its strategy to expand its service lines,
since IPO, with the addition of DSW Asset Based Lending Risk Management LLP in
January 2022. This brought the total number of licensees to 20 across 11
service lines. Since the end of FY22, the Group has welcomed two new partners
in Scotland, expanding both the service offering and presence to include
Edinburgh and Glasgow.
People and diversity
Our colleagues remain central to everything we do and achieve. Creating a
positive dynamic culture, which is attractive to talent and in which our
people can thrive, remains our top priority.
Diversity is at the core of DSW's model, as a broad range of perspectives
benefits the progression and success of our business. DSW's commitment to
diversity extends beyond gender to ethnicity, sexual orientation, gender
identity, social mobility, disability and other challenges, which may lead to
disadvantage in other environments. DSW is committed to creating a diverse and
inclusive environment for its licensees and employees, and this will continue
to be a core value, as new professionals and businesses are welcomed to the
Network.
Technology
With the increased prevalence of hybrid working, the Group has invested in the
right technology to ensure its licensees and employees have the flexibility to
choose where they work most effectively, helping maintain a strong work life
balance.
As part of the IT strategy to improve the cyber security of our systems
further, the Group is in the process of obtaining the Cyber Essentials
accreditation, as we adopt best practice.
Board and governance
The Board consists of five directors, two of whom are executive directors and
three non-executive directors. Two of the non-executive directors, myself and
Jillian Jones, are considered independent. The current Board reflects a blend
of different experience and backgrounds.
The Board is supported by two committees, namely the Audit and Risk Committee
and the Remuneration and Nominations Committee with formally delegated duties
and responsibilities.
I am happy to report that, since the Company's IPO on 16 December 2021, DSW
has complied with the QCA Corporate Governance Code.
Our approach to risk
DSW takes a proactive approach to risk management, which starts at a strategic
level with the Board. Along with the other Directors, I continue to closely
monitor and identify risks facing the Group and have strong risk mitigation
strategies in place.
DSW has a wealth of compliance and risk experience to support all licensee
businesses in related matters and provide them with regulatory guidance.
ESG
As a Board, we understand and welcome the increasing importance of ESG to
investors, employees and clients. We are committed to creating positive
interactions with all stakeholders and intend to demonstrate this over the
long-term through our approach to ESG. For the first time, we have included an
ESG report in this year's Annual Report, setting out our priorities and
related activities.
The Board has also elected to make voluntary SECR disclosures, as it
recognises the important role all businesses must play to reduce carbon
emissions and increase energy efficiency.
Dividend
The Board is committed to a long-term progressive dividend policy.
As indicated at the time of the float, the Board is proposing to pay a
dividend in respect of the current financial year. The Board is proposing to
pay a final ordinary dividend for the year ended 31 March 2022, consisting of
an interim catch up dividend of 0.56 pence per share and a final dividend of
3.66 pence per share, to align with its dividend policy going forward.
Ukraine
In response to the Russian invasion of Ukraine, the Group immediately reviewed
all its relationships to ascertain if it was acting for any individual or
corporate client that did not comply with the UK's sanction regime. We are not
aware of any exposure through our licensees.
Outlook
I am pleased to report that the new financial year has started well, despite
the well documented macro challenges.
This is an exciting time for the business. The market opportunity is
substantial and the business is well structured with a clear growth strategy
to build on the strong business performance demonstrated in the FY22 results.
While acknowledging that economic conditions continue to be volatile, we are
confident in the Group's ability to continue to deliver on its organic growth
strategy. We firmly believe that we are an attractive alternative to the Big 4
accounting firms, both as an "employer" of talented professionals and as a
service provider providing a bespoke, personalised service. The Board looks
forward to the year ahead with optimism and is excited about the long-term
prospects for the Group.
Heather Lauder
Chair
13 July 2022
Chief Executive Officer's Review
The year under review has been a momentous one for the Group. The IPO and
admission to AIM, in December 2021, was a significant milestone for DSW,
which, combined with the strong financial performance achieved in FY22, has
created a strong foundation for the Group as we look ahead.
Our balance sheet ensures that we are well placed to execute on our strategy
to capitalise on the substantial growth opportunities presented in the rapidly
changing UK accounting market.
Empowering professionals
Since launching the business in 2002, as a three-man start-up along with Jon
Schofield and Mark Watts, DSW has developed steadily over time to become, in
recent years, a fast-growing, mid-market challenger professional services
network.
Our vision is to become the most sought-after destination for ambitious,
entrepreneurial professionals to start and develop their own businesses.
This is the essence of our success: we empower professionals, we help them
build their businesses, develop as leaders and be the best they can be.
Strong organic growth
Being a professional services business, recruitment of Fee Earners is one of
the principal sources of organic growth for DSW. This includes the recruitment
of new partners and Fee Earners to set up new teams and the recruitment of
additional Fee Earners to grow existing licensee businesses.
At the year-end, the number of Fee Earners, including partners, had grown from
77 to 88, an increase of 14.3%, and the number of partners rose from 34 to 39.
Our organic growth included the addition of one new specialism, DSW ABL Risk
Management, bringing in two new partners, and a new location in Reading with
the recruitment of three new partners. We now have a total of 11 specialisms
and seven locations.
This has been a very welcome acceleration, as the COVID-19 pandemic presented
particular challenges to our recruitment primarily by restricting "face to
face" meetings.
Since March 2013, the number of Fee Earners has increased from 30 to 88, which
equates to a nine-year CAGR of over 12%.
Strong trading results
This has been another successful year of profitable growth for DSW.
Corporate finance and due diligence still represent the majority of our
business (70% vs. 81% in the previous year) and have continued to grow
successfully in line with the market. Other service lines such as business
recovery and debt advisory grew significantly faster, with the number of
licensees increasing from 18 to 20, and as a result are now an increasing
proportion of our business.
As a result of this supportive market for specialist professional services,
the DSW Network Revenue grew 19.6% to £18.3m (FY21: £15.3m). The three-year
historical DSW Network Revenue CAGR to FY22 was 28.2%.
Our Adjusted Pre-Tax Profit was up 25% to £2.0m (FY21 £1.6m) and DSW
received an average licence fee (including profit share where applicable) of
16.9% (FY21:16.1%).
A growing brand and reputation
DSW must continue to demonstrate that it is an extremely attractive
proposition for both clients and professionals who work within the UK
"mid-market". The quality of our clients and the quality of our people is
reflected in our significant average revenues per fee earner of £227k (FY21
£196k). This is an important metric in our positioning towards being the most
sought-after destination for ambitious professionals.
DSW's achievements and capabilities are most notable in its original core
service areas of corporate finance and due diligence. Our prominence in
M&A was highlighted by an Experian research report for Q1 of 2022, which
marked DSW as the 6(th) most active adviser (by number of deals) in the UK.
More representative was the 18(th) position of DSW for 2021 as a whole up from
25(th) place in 2020.
An IPO "halo"
Our admission to the AIM market of the London Stock Exchange in December 2021
was extremely successful and endorsed our confidence in the strength and
potential of the DSW platform model and our market opportunity.
We considered that admission was an important step in our development,
providing access to capital to fund licence fee acquisitions, to increase
brand awareness and recognition, and add further credibility to the DSW
offering amongst potential new licensees and clients of the Network, thereby
enhancing the Network's future growth potential.
Listing on AIM was a significant undertaking, and our success was made
possible by an amazing internal team and external advisers, who managed the
process so expertly and enthusiastically. I would like to thank everyone who
contributed to this outstanding achievement and significant milestone for our
firm.
The overall strength of the DSW brand is crucial in attracting and retaining
both clients and professionals. I passionately believe that our admission to
AIM has enhanced and strengthened that brand and that the IPO "halo" effect is
supporting our growth plans.
DSW's strategy and delivery against it
Growth strategy
As communicated at the time of the AIM listing, DSW aims to scale its licence
model through organic growth of existing licensees, geographical expansion,
additional service lines, recruitment of new licensees and investing in "Break
Outs" (existing teams in larger firms) and the acquisition of licence fees.
We have had a productive year on Fee Earner recruitment, with year-end Fee
Earners of 88, up a net 11 (having been at 82 at the time of listing in
December). This growth rate is in line with our projections. Our recruitment
processes continue to improve and our investment in additional central
recruitment capability has resulted in a significant uplift in new applicants.
In terms of "break-outs" and acquisitions of licence fees, our significant
efforts are ongoing. In March 2022, we launched a DSW Entrepreneurship Grant
scheme on social media offering significant financial incentives to encourage
teams to join DSW and we would expect this to bear fruit in the current year.
With regard to acquisitions of licence fees, we remain in regular contact with
companies we admire and continue to work hard to convince them of our
attractiveness as a suitor, offering the right solution for all their
stakeholders.
Our focus remains on high margin, complementary, niche service lines with a
strong synergistic fit with the existing DSW Network.
International network
DSW has an established partnership network of global advisory firms, called
"Pandea Global M&A". Pandea Global M&A comprises selected independent
firms with a primary focus on the origination and execution of middle market
M&A activities. The Pandea network increases the DSW Network's access to
overseas buyers, investors, and valuable local knowledge, while providing its
UK-based clients with access to an enlarged pool of acquisition targets.
Central team
As a team, we remain committed to delivering the highest level of service to
our partners. It is the delivery of these services which makes it possible for
the Fee Earners to focus on delivering high quality work for their clients.
The team is young, talented, and extraordinary and I thank all of them for
their considerable efforts in delivering the flotation and supporting the
licensees to achieve another successful year.
During this year, we have expanded the team to assist with the recruitment and
the growth of our licensees. These appointments include:
· an additional recruitment manager for the recruitment pipeline of newly
established licensee businesses and for growing existing licensee businesses.
This additional resource also provides us with people development support and
conducts new partner assessments and team assessments; and
· a strategic projects director to drive licensee development, licensee cross
referrals and provide us with a class leading ESG framework and strategy.
These investments are right at the heart of empowering our licensees to build
their own businesses and we are looking to extend our central capabilities to
further that support to help our partners and their employees to be "the best
that you can be".
This focus on developing our battalions of licensees will make sure that they
continue to represent DSW successfully and their development reinforces the
foundations of the licensee business and therefore for DSW for the coming
years.
Our partners and their teams are our greatest ambassadors. I would like to
take this opportunity to thank DSW partners across the Network for their
continuing commitment to DSW and all that it stands for.
Looking ahead
This is a truly exciting time for DSW. The market sector in which we operate
is substantial and developing in a way that makes DSW's business model
increasingly attractive to ambitious entrepreneurial professionals and their
clients. As accounting and tax specialists continue to demand flexible and
mobile working solutions, DSW's first mover advantage puts us in an excellent
position to benefit from the significant cultural changes now taking place
within the Big 4.
We remain confident in the strength of our business model. We are generally
protected from the impact of wage and cost inflation as our partners bear most
of these risks of operational gearing. However, we are not immune from a
downturn in M&A activity particularly if it is focused on the SME
marketplace. But these short-term challenges often give rise to the greatest
long-term opportunities, as our candidate pool of new partners and employees
is as much fuelled by personal disappointment as it is by significant
opportunity.
The new financial year has started well, in line with the Board's
expectations, and we look forward to another year of sustainable organic
growth.
James Dow
Chief Executive Officer
13 July 2022
Chief Financial Officer's Review
Key Performance Indicators
The following KPIs are used by management to monitor the financial performance
of the Group:
2022 2021 2020
Revenue (£,000) 2,681 2,354 1,689
Total income from Licensees* (£,000) 2,990 2,456 1,754
Adjusted EBITDA** (£,000) 2,233 1,824 1,136
Adjusted PBT (£,000) 2,002 1,592 996
Adjusted PBT margin (%) 74.6 67.6 59.0
Net Assets 7,985 2,212 1,327
* Total income from licensees represents statutory revenue plus share of results
in associates
** Adjusted EBITDA is defined as Adjusted profit before tax adjusted to add back
impairment of loans due from associated undertakings (£127k), finance costs
(£60k), depreciation (£87k), amortisation (£39k) and deduct finance income
(£82k)
The Group also measures its performance using the following KPIs which are
derived from the performance of the DSW Network:
2022 2021 2020
Total revenue of all Network licensees (£,000) 18,285 15,342 12,362
Revenue per fee earner (£,000) 227 196 166
Revenue per partner (£,000) 446 432 388
Fee Earners (Number) 88 77 83
Income Statement
Revenue and Network Revenue
I am delighted to report our maiden set of results as a listed business. We
have an extremely talented network of partners and employees and their hard
work and relentless commitment to exceptional client service has driven a very
strong performance.
Network revenue for the year was £18.3m, an increase of 19.6% on the prior
year. The buoyancy in the M&A market was unabated in the Period and we
have continued to work with our licensee partners to grow their businesses and
teams. Meanwhile, the high quality of work delivered, represented by a 15.8%
growth in revenue per Fee Earner, has further enhanced top line growth. This
has translated into total income from licensees of £2.99m for DSW Capital, an
increase of 21.7% on the prior year representing an average licence fee of
16.9%.
Fee Earners
The number of Fee Earners is a key driver of growth and we have seen a 14.3%
increase on the prior year, against the backdrop of a challenging recruitment
market. This has been particularly notable post IPO, where we have seen an
uptick in recruitment from the enhanced profile of being a plc, further
assisted by investment in central recruitment resources and marketing.
With 88 Fee Earners, DSW's Network is smaller than other listed professional
services firms; however, the revenue per fee earner of £227k is comparable
with larger listed peers such as Knights, DWF, Gateley and Keystone Law.
Furthermore, we believe our average revenue per fee earner for the year is
comparable to all of the Big 4 based on their latest available financial
results.
Central Costs
The Group has a lean platform model, which is largely insulated from wage
inflation as licensee employee costs are borne by the licensee businesses and
partners are remunerated based on the fees they bill. The fixed cost base
includes only 10 people (excluding directors), 6.5 full time equivalents.
Similarly, the licensee businesses bear their own property costs or work from
home, therefore the Group's exposure to inflationary pressures is limited to
its one office premises.
Central costs (excluding the share-based payment charge and IPO costs) have
increased by £0.17m, 37% on the prior year. The majority of the increase is
due to the full year impact of non-executive remuneration and the alignment of
executive and non-executive remuneration to market commensurate rates. In
addition, we have bolstered our central infrastructure in the year with the
addition of a Talent and Resource Manager and a Strategic Projects Director to
support the growth of the Network. We are committed to maintaining a lean
central cost base whilst ensuring we provide our licensees with the support
they need to thrive and fulfil their potential. This has resulted in an
Adjusted Pre-tax Profit of £2.0m, an increase of 25% on the prior year.
Adjusted PBT and Exceptional Costs
Adjusted PBT is calculated as follows:
2022 2021
(£000's) (£000's)
(Loss) / Profit before tax (31) 1,585
Share based payments 1,167 7
IPO costs 866 -
Adjusted PBT 2,002 1,592
We have a significant exceptional share-based payment charge in the year of
£1.2m which reflects the accounting impact of the one-off issue of growth
shares to partners and employees prior to the IPO. The growth shares were
converted to ordinary shares on IPO and there is no dilutive impact on
shareholders going forward. The charge is being spread over the period from
issue to 1-2 years post IPO depending on the individual share conditionality.
The expense is expected to reduce in future periods and from 16 December 2023
will represent a more normalised basis, reflecting the effect of the executive
LTIP scheme only.
Total IPO costs incurred were £1.27m, of which £0.40m has been recognised in
equity and the remaining £0.87m in the Income Statement.
Taxation
The effective rate of tax (based on PBT excluding the share-based payments
charge which is non-deductible) is 26.7%. This is higher than the statutory
tax rate and the prior year (20.5%) due to non-deductible IPO costs in the
Period.
Earnings Per Share
Earnings per share has been diluted year on year by the shares issued and
share re-organisation on IPO. Adjusted basic earnings per share for the year
is 10p (2021: 66p). Adjusted EPS removes the impact of the share-based payment
charge and IPO costs incurred in the year (as shown above).
Balance Sheet
Cash
The cash balance has benefitted from the net funds of the IPO of £3.8m (after
IPO costs). The bank loan was repaid out of the proceeds with a total of
£0.99m repayments against borrowings in the year.
The Group's business model is strongly cash generative as the working capital
requirement for the licensee businesses which includes employee and property
costs are borne by the individual licensees. In addition, partners only get
paid when their invoices are paid so they are highly motivated to collect cash
from clients. The DSW Network lock up equivalent for the year was 30 days
(calculated as amounts owed to DSW Capital from licensees divided by Network
Revenue), well below the listed peer group.
Cash generated from operations was £1.44m (2021: £1.01m). Operating cash
conversion in the year was 105% which is higher than the prior year (2021:
56%) due to very strong billings in the final quarter and the associated
licence fees being paid on a quarterly basis in Q1 of 2022. This has also
driven the year-on-year swing in working capital. Corporation tax payments
were £0.5m (2021: £0.2m), whilst we had a net receipt in respect of loans to
licensees due to repayments made as businesses mature.
Capital expenditure was minimal in the Period (£0.04m) and lease payments of
£0.08m relate to the Head Office in Daresbury where a formal lease
arrangement was entered into in October 2021.
As a result, the net increase in cash and cash equivalents before the payment
of dividends was £4.49m (2021: net increase £0.65m). The Group paid
dividends of £0.38m in the year (2021: £0.38m) leaving closing cash of
£4.72m (2021: £0.61m) and no debt.
Net Assets
The net assets of the Group have increased from £2.2m to £8.0m in the year,
recognising the capital raised on IPO and profit for the year and a robust
financial performance. This leaves the business with a strong balance sheet
and the excellent capital base to grow the business, both organically and
through strategic acquisition opportunities.
Dividend
The Board is proposing to pay a final ordinary dividend for the year ended 31
March 2022 consisting of an interim catch up dividend of 0.56 pence per share
and a final dividend of 3.66 pence per share, to align with its dividend
policy going forward. An interim dividend of £0.25m in respect of the six
months to 30 Sept 2021 was paid on 13 October 2021.
Both the interim catch up dividend and the final dividend will be approved at
the Company's AGM, which will be held in September 2022.
Nicole Burstow
Chief Financial Officer
13 July 2022
Consolidated statement of comprehensive income
For the year ended 31 March 2022
Year ended Year ended
31 March
31 March
2022
2021
(Restated)
Note £'000 £'000
Continuing operations
Revenue 4 2,681 2,354
Gross profit 2,681 2,354
Share of results of associates 16 309 102
Share of results of jointly controlled entity 17 102 15
Administrative expenses (3,018) (728)
Operating profit 74 1,743
Adjusted operating profit(1) 2,107 1,750
Share based payments expense (1,167) (7)
IPO Expenses (866) -
Operating profit 74 1,743
Finance income 9 82 84
Impairment of loans due from associated undertakings (127) (139)
Finance costs 10 (60) (103)
(Loss) / Profit before tax (31) 1,585
Income tax 11 (303) (327)
(Loss) / Profit for the year 6 (334) 1,258
Total comprehensive (loss) / income for the year attributable to owners of the (334) 1,258
Company
Earnings per share
From continuing operations
Basic 13 (£0.02) £0.66
Diluted 13 (£0.02) £0.66
1. Adjusted Operating profit, which is defined as operating profit adjusted
for items not considered part of underlying trading including IPO costs and
share based payments, is a non-GAAP metric used by management and is not an
IFRS disclosure.
Consolidated statement of financial position
As at 31 March 2022
As at As at
31 March 2022
31 March
2021
(Restated)
Note £'000 £'000
Non-current assets
Intangible assets 14 794 673
Property, plant and equipment 15 525 56
Investments 18 922 922
Investments in associates 18 290 97
Interests in jointly controlled entities 18 23 19
Prepayments and Accrued Income 19 175 184
Deferred tax asset 22 4 3
2,733 1,954
Current assets
Trade receivables 19 832 1,352
Prepayments and Accrued Income 19 362 255
Other receivables 19 369 266
Cash and bank balances 4,722 609
6,285 2,482
Total assets 9,018 4,436
Current liabilities
Trade payables 23 86 81
Other taxation 23 210 278
Other payables 23 54 24
Accruals and Deferred Income 23 163 88
Current tax liabilities 23 63 262
Borrowings 20 - 326
Lease liability 25 83 -
659 1,059
Net current assets 5,626 1,423
Borrowings 20 - 625
Convertible loan notes 21 - 540
Lease liability 25 302 -
Dilapidation provision 23 72 -
374 1,165
Total liabilities 1,033 2,224
Net assets 7,985 2,212
Equity
Share capital 24 54 2
Share premium 5,280 -
Share-based payment reserve 26 1,174 7
Retained earnings 1,477 2,203
Total Equity attributable to owners of the Company
7,985 2,212
Company statement of financial position
As at 31 March 2022
As at As at
31 March
31 March
2022
2021
(Restated)
Note £'000 £'000
Non-current assets
Intangible assets 14 794 673
Property, plant and equipment 15 39 35
Investments 18 922 922
Investments in associates 18 290 97
Interests in jointly controlled entities 18 23 19
Prepayments and accrued income 19 175 184
Deferred tax asset 22 4 3
2,247 1,933
Current assets
Trade receivables 19 801 1,316
Prepayments and Accrued Income 19 307 190
Other receivables 19 499 366
Cash and bank balances 4,714 584
6,321 2,456
Total assets 8,568 4,389
Current liabilities
Trade payables 23 29 10
Other taxation 23 177 276
Other payables 23 54 24
Accruals and Deferred Income 23 154 87
Current tax liabilities 23 63 262
Borrowings 20 - 276
477 935
Net current assets 5,844 1,521
Borrowings 20 - 625
Convertible loan notes 21 - 540
- 1,165
Total liabilities 477 2,100
Net assets 8,091 2,289
Equity
Share capital 24 54 2
Share premium 5,280 -
Share-based payment reserve 26 1,174 7
Retained earnings 1,583 2,280
Total Equity attributable to owners of the Company
8,091 2,289
The loss after tax for the Company was £305,819 (2021: profit of
£1,274,699).
Consolidated statement of changes in equity
For the year ended 31 March 2022
Share capital Share premium Share-based payments reserve Retained earnings Total equity
£'000 £'000 £'000 £'000 £'000
Balance at 31 March 2020 (restated) 2 - - 1,325 1,327
Profit for the year - - - 1,258 1,258
Dividends - - - (380) (380)
Share-based payments - - 7 - 7
Balance at 31 March 2021 (restated) 2 - 7 2,203 2,212
Loss for the year - - - (334) (334)
Dividends - - - (380) (380)
Share-based payments - - 1,167 - 1,167
Issue of shares in year 52 5,280 - (12) 5,320
Balance at 31 March 2022 54 5,280 1,174 1,477 7,985
Company statement of changes in equity
For the year ended 31 March 2022
Share capital Share premium Share-based payments reserve Retained earnings Total equity
£'000 £'000 £'000 £'000 £'000
Balance at 31 March 2020 (restated) 2 - - 1,386 1,388
Profit for the year - - - 1,274 1,274
Dividends - - - (380) (380)
Share-based payments - - 7 - 7
Balance at 31 March 2021 (restated) 2 - 7 2,280 2,289
Loss for the year - - - (305) (305)
Dividends - - - (380) (380)
Share-based payments - - 1,167 - 1,167
Issue of shares in year 52 5,280 - (12) 5,320
Balance at 31 March 2022 54 5,280 1,174 1,583 8,091
Consolidated cash flow statement
For the year ended 31 March 2022
Year ended Year ended
31 March
31 March
2022
2021
Note £'000 £'000
(Loss) / profit for the year (334) 1,258
Adjustments for:
Income tax expense 11 303 327
Net interest (income)/expense (22) 19
Depreciation of property, plant and equipment 15 87 36
Amortisation of intangible assets 14 39 37
Share-based payment expense 26 1,167 7
Impairment of loans due from associated undertakings 127 139
Operating cash flows before movements in working capital 1,367 1,823
Decrease/(increase) in trade and other receivables 192 (1,266)
Increase in trade and other payables 73 367
(Increase)/decrease in amounts owed from associates in relation to profit (196) 89
share
Cash generated by operations 1,436 1,013
Income taxes paid (502) (203)
Net cash from operating activities 934 810
Investing activities
Purchases of property, plant and equipment 15 (37) (16)
Net cash used in investing activities (37) (16)
Financing activities
Dividends paid 12 (380) (380)
Finance lease payments (77) -
Interest received/(paid) 45 19
Repayments of loans and borrowings (992) (217)
Proceeds from loans and borrowings - 50
Proceeds from issue of ordinary shares net of issue costs 4,620 -
Net cash from / (used in) financing activities 3,216 (528)
Net increase in cash and cash equivalents 4,113 266
Cash and cash equivalents at beginning of year 609 343
Cash and cash equivalents at end of year 4,722 609
NOTES TO THE FINANCIAL STATEMENTS
1. General information
The Company was incorporated as DSW Capital Limited on 23 March 2010 under the
Companies Act 2006 (Registration number: 07200401). The Company was
re-registered as DSW Capital plc on 26 October 2021. The Company is
incorporated and domiciled in England and Wales. The principal activity of the
Company and its subsidiary, DSW Services LLP, (together referred to as the
'Group') is the licensing of the Dow Schofield Watts brand and associated
brand names for use in the professional services sector.
The address of the Company's registered office is:
7400 Daresbury Park
Daresbury
Warrington
WA4 4BS
The Financial Statements are presented in Pounds Sterling (£), which is the
currency of the economic environment in which the Group operates. All
amounts are rounded to the nearest £'000 except where noted.
2. Accounting policies
Basis of Preparation
The preliminary announcement does not constitute full financial statements for
the years ended 31 March 2022 or 2021 within the meaning of section 434 of the
Companies Act 2006.
The results for the year ended 31 March 2022 have been extracted from the
annual audited financial statements of the Group for the year ended 31 March
2022 prepared in accordance with UK adopted International Accounting Standards
which received an unqualified auditor's report and which have not yet been
delivered to the Registrar of Companies. This preliminary financial
information has been prepared on the same basis as the accounting policies
adopted in those financial statements but does not include all the disclosures
required in financial statements prepared in accordance with UK adopted
International Accounting Standards and accordingly does not itself comply with
UK adopted International Accounting Standards. The audited financial
statements for the year ended 31 March 2022 were approved by the Directors on
13 July 2022.
The financial information for the year ended 31 March 2021 has been derived
from the financial statements of the Company for that year which were prepared
under section 1A of Financial Reporting Standard 102, which have been
delivered to the Registrar of Companies. The auditor's report on those
financial statements was unqualified. The financial statements for the year
ended 31 March 2022 and 31 March 2021 did not include a statement under
Section 498(1) to (4) of the Companies Act 2006.
The 2022 annual report will be distributed to shareholders and included within
the investor relations section of our website in due course and will be
considered at the Annual General Meeting to be held in September 2022.
Statement of Compliance
These Financial Statements have been prepared in accordance with International
Financial Reporting Standards and International Accounting Standards as issued
by the International Accounting Standards Board (IASB) and Interpretations
(collectively IFRSs).
The Group has historically prepared company only accounts under UK Generally
Accepted Accounting Practices (FRS 102). As such, consolidated financial
information has been prepared under IFRS for the first time for the purpose of
presentation in these financial statements. Details of the transition and
prior year adjustments have been disclosed in note 31.
The preparation of financial statements in compliance with adopted UK IFRS
requires the use of certain critical accounting estimates. It also requires
Group management to exercise judgment in applying the Group's accounting
policies. The areas where significant judgments and estimates have been made
in preparing the financial statements and their effect are disclosed in note
3.
Impact of the initial application of other new and amended IFRS Standards that are effective for the current year
In preparing the Financial Statements the Group has applied the below
amendments to IFRS Standards and Interpretations that are effective for an
annual period that begins on or after 1 January 2021. Their adoption has not
had any material impact on the disclosures or on the amounts reported in these
Financial Statements:
· COVID-19-Related Rent Concessions beyond 30 June 2021 (Amendments
to IFRS 16)
· Interest Rate Benchmark Reform - IBOR 'phase 2' (Amendments to IFRS
9, IAS 39, IFRS 7, IFRS 4 and IFRS 16)
New and revised IFRS Standards in issue but not yet effective
In preparing these Financial Statements, the Group has not applied the
following new and revised IFRS Standards that have been issued but are not yet
effective.
Amendments to IAS 16 Property, Plant and Equipment: Proceeds before Intended Use
Amendments to IFRS 3 Reference to the Conceptual Framework
Annual Improvements to IFRS Standards 2018-2020 Cycle Amendments to IFRS 1 First-time Adoption of International Financial Reporting
Standards, IFRS 9 Financial Instruments, IFRS 16 Leases, and IAS 41
Agriculture
The Directors do not expect that the adoption of the Standards listed above
will have a material impact on the Financial Statements of the Group in future
periods.
Basis of accounting
The Financial Statements have been prepared on the historical cost basis,
except for the revaluation of financial instruments that are measured at
revalued amounts or fair values at the end of each reporting period, as
explained in the accounting policies below. Historical cost is generally based
on the fair value of the consideration given in exchange for goods and
services.
Fair value is the price that would be received to sell an asset or paid to
transfer a liability in an orderly transaction between market participants at
the measurement date, regardless of whether that price is directly observable
or estimated using another valuation technique
The principal accounting policies adopted are set out below.
Going concern
In considering the appropriateness of the going concern basis of preparation,
the Directors have considered forecasts for the next twelve months following
the date of this Annual Report, which includes detailed cash flow forecasts
and working capital availability. These forecasts show that sufficient
resources remain available to the business for the foreseeable future,
allowing the Group to meet its liabilities as they fall due.
At 31 March 2022, the Group has net assets of £8.0 million (2021: £2.2m) and
net current assets of £5.6m (2021: £1.4m) which reflects the strong
financial position for both the Group and the Company. In addition, the Group
remains profitable with adjusted profit after tax of £1.7m in the year ended
31 March 2022 continuing the trend of increased profitability seen in the
previous two financial periods.
Over the last two years the COVID-19 pandemic has created an unprecedented and
constantly changing challenge to all businesses. The Group has been resilient
throughout the pandemic with minimal disruption and even signs of increased
productivity across the network, as demonstrated by the strong results
reported for the year ended 31 March 2022. In light of the government's
"Living with Covid" policy, management do not anticipate further disruptions
from COVID-19 and consider it to be a reasonable expectation that the
forecasts will not be materially impacted by future COVID-19 outbreaks.
The process of monitoring the fast-evolving situation in Eastern Europe,
recessionary threats and current inflationary pressures on the Group's
financial performance and liquidity is ongoing. Whilst the Group does not have
operations in Russia or Ukraine, the far-reaching impact on energy prices and
the cost of living have been considered as part of our going concern
assessment. Each licensee business bears its own working capital requirement
including employee and property costs. Furthermore licensee partners are only
remunerated out of licensee profits, insulating the group from the impact of
wage inflation. Given our low operational gearing, diversified revenue streams
and lean cost base the Directors believe that DSW Capital is resistant to
macro-economic uncertainty.
Scenario analysis has been performed on the underlying forecasts and, given
the Group's current cash balance is over 4 times the size of the overheads,
the forecasts demonstrate that the Company and the Group have adequate
resources to continue in operational existence for the foreseeable future. The
payment of a dividend has been approved totalling £888k which will reduce the
group's cash balance by this amount at the time of payment.
After making enquiries, the Directors have formed a judgement, at the date of
the Annual Report, that there is a reasonable expectation that the Group and
the Company have adequate resources to continue in operational existence for
the foreseeable future. Thus, the Directors continue to adopt the going
concern basis of accounting in preparing the financial statements for the year
ended 31 March 2022.
Basis of consolidation
The consolidated Financial Statements incorporate the Financial Statements of
the Company and entities controlled by the Company (its subsidiaries) made up
to 31 March each year. Control is achieved when the Company:
· has the power over the investee;
· is exposed, or has rights, to variable returns from its involvement
with the investee; and
· has the ability to use its power to affects its returns.
The Company reassesses whether or not it controls an investee if facts and
circumstances indicate that there are changes to one or more of the three
elements of control listed above.
When the Company has less than a majority of the voting rights of an investee,
it considers that it has power over the investee when the voting rights are
sufficient to give it the practical ability to direct the relevant activities
of the investee unilaterally. The Company considers all relevant facts and
circumstances in assessing whether or not the Company's voting rights in an
investee are sufficient to give it power, including:
· the size of the Company's holding of voting rights relative to the
size and dispersion of holdings of the other vote holders;
· potential voting rights held by the Company, other vote holders or
other parties;
· rights arising from other contractual arrangements; and
· any additional facts and circumstances that indicate that the
Company has, or does not have, the current ability to direct the relevant
activities at the time that decisions need to be made.
All intragroup assets and liabilities, equity, income, expenses and cash flows
relating to transactions between the members of the Group are eliminated on
consolidation.
Investments in associates and jointly controlled entities
An associate is an entity over which the Group has significant influence and
that is neither a subsidiary nor an interest in a jointly controlled entity.
Significant influence is the power to participate in the financial and
operating policy decisions of the investee but is not control or joint control
over those policies.
A jointly controlled entity is a joint arrangement whereby the parties that
have joint control of the arrangement have rights to the net assets of the
joint arrangement. Joint control is the contractually agreed sharing of
control of an arrangement, which exists only when decisions about the relevant
activities require unanimous consent of the parties sharing control.
The results and assets and liabilities of associates or jointly controlled
entities are incorporated in these Financial Statements using the equity
method of accounting.
Under the equity method, an investment in an associate or a jointly controlled
entity is recognised initially in the consolidated statement of financial
position at cost and adjusted thereafter to recognise the Group's share of the
profit or loss and other comprehensive income of the associate or jointly
controlled entity. The Group's share of the profit or loss is driven by the
contractual arrangements in place. The Group's share of the profit or loss is
defined by the economic interest in the associate or jointly controlled entity
as stipulated in the legal arrangements, which differs from the percentage
voting rights held.
The requirements of IAS 36 are applied to determine whether it is necessary to
recognise any impairment loss with respect to the Group's investment in an
associate or a jointly controlled entity. When necessary, the entire carrying
amount of the investment is tested for impairment in accordance with IAS 36 as
a single asset by comparing its recoverable amount (higher of value in use and
fair value less costs of disposal) with its carrying amount.
The Group discontinues the use of the equity method from the date when the
investment ceases to be an associate or a jointly controlled entity.
Other Investments
Where long-term loans are made to licensees, the Directors of the Company have
accounted for them as investments under IFRS 9. These loans are accounted for
using the amortised cost method. See note 3 for associated critical judgements
involved in determining the appropriate classification of long-term loans to
licensees.
Revenue recognition
Revenue comprises revenue recognised by the Group in respect of services
supplied during the year, exclusive of Value Added Tax.
The Group recognises revenue from the following major sources:
· Licence fee income
· Profit share income
Licence fee income is recognised at the point at which the performance
obligations as defined by the contractual arrangements have been satisfied,
which is primarily when revenue has been invoiced by the licensees over time.
Profit share income is only recognised at the point at which the risk of
reversal is deemed to be remote.
Leases
The Group applies IFRS 16 to account for leases. At inception of a contract,
the Group assesses whether a contract is, or contains, a lease. A contract is,
or contains, a lease if the contract conveys the right to control the use of
an identified asset for a period of time in exchange for consideration.
The Group recognises a right-of-use asset and a lease liability at the lease
commencement date. The right-of-use asset is initially measured at cost, which
comprises the initial amount of the lease liability adjusted for any lease
payments made at or before the commencement date, plus any initial direct
costs incurred and an estimate of costs to restore the underlying asset, less
any lease incentives received.
The right-of-use asset is subsequently depreciated using the straight-line
method from the commencement date to the earlier of the end of the useful life
of the right-of-use asset or the end of the lease term. In addition, the
right-of-use asset is periodically reduced by impairment losses, if any, and
adjusted for certain remeasurements of the lease liabilities.
The lease liability is initially measured at the present value of lease
payments that were not paid at the commencement date, discounted using the
Group's incremental borrowing rate. The incremental borrowing rate applied to
lease liabilities during the year is 5.55%.
The lease liability is measured at amortised cost using the effective interest
method. If there is a remeasurement of the lease liability, a corresponding
adjustment is made to the carrying amount of the right-of-use asset or is
recorded directly in profit or loss if the carrying amount of the right-of-use
asset is zero.
Short-term leases and low value assets
The Group has elected not to recognise right-of-use assets and lease
liabilities for short-term leases that have a lease term of 12 months or less
or leases of low value assets. These lease payments are expensed on a
straight-line basis over the lease term.
Dilapidations provision
The Group recognises a provision for the future costs of dilapidations on
leased office space. The provision is an estimate of the total cost to return
applicable office space to its original condition at the end of the lease
term.
Operating profit
Operating profit is stated after charging the share of results of associates
and jointly controlled entities, but before finance income and finance costs.
Government Grants
Government grants are not recognised until there is reasonable assurance that
the Group will comply with the conditions attaching to them and that the
grants will be received. Government grants are then recognised in the
consolidated income statement on a systematic basis over the periods in which
the Group recognises as expenses the related costs for which the grants are
intended to compensate.
The Group has elected to net grant income off against the related costs as
permitted under IAS 20. In 2022, no government grants were received. In the
prior year, government grants of £13,614 were received as part of the
Coronavirus Job Retention Scheme ("JRS"). There are no future related costs in
respect of these grants which were received solely as compensation for costs
incurred in the year.
Retirement and termination benefit costs
Payments to defined contribution retirement benefit plans are recognised as an
expense in the income statement in the periods during which services are
rendered by employees. Payments made to state-managed retirement benefit plans
are accounted for as payments to defined contribution plans where the Group's
obligations under the plans are equivalent to those arising in a defined
contribution retirement benefit plan.
Short-term and other long-term employee benefits
Wages, salaries, paid annual leave and sick leave and bonuses are accrued in
the period in which the associated services are rendered by employees of the
Group.
Taxation
The income tax expense represents the sum of the tax currently payable and
deferred tax.
Current tax
The tax currently payable is based on taxable profit for the year. Taxable
profit differs from net profit as reported in profit or loss because it
excludes items of income or expense that are taxable or deductible in other
years and it further excludes items that are never taxable or deductible. The
Group's liability for current tax is calculated using tax rates that have been
enacted or substantively enacted by the end of the reporting period.
Deferred tax
Deferred tax is recognised on temporary differences arising between the tax
bases of assets and liabilities and their carrying amounts in the Financial
Statements and on unused tax losses or tax credits available to the Group.
Deferred tax is determined using tax rates and laws that have been enacted or
substantively enacted by the reporting date.
Property, plant and equipment
Property, plant and equipment is stated in the statement of financial position
at cost less accumulated depreciation and accumulated impairment loss.
Depreciation is charged so as to write off the cost of assets over their
estimated useful lives, as follows:
Office equipment 33% straight line
Office fixtures & fittings 20% straight line
The estimated useful lives, residual values and depreciation method are
reviewed at the end of each reporting period, with the effect of any changes
in estimate accounted for on a prospective basis.
Intangible assets acquired separately
Intangible assets with finite useful lives that are acquired separately are
carried at cost less accumulated amortisation and accumulated impairment
losses. Amortisation is recognised on a straight-line basis over their
estimated useful lives which are disclosed below. The estimated useful life
and amortisation method are reviewed at the end of each reporting period, with
the effect of any changes in estimate being accounted for on a prospective
basis. The estimated useful life of intangible assets is as follows:
Intangible assets 10 - 25 years
The intangibles relate to intellectual property and trademarks acquired.
Financial instruments
Financial assets and financial liabilities are recognised in the Group's
statement of financial position when the Group becomes a party to the
contractual provisions of the instrument.
Financial assets and financial liabilities are initially measured at fair
value, except for trade receivables that do not have a significant financing
component which are measured at transaction price. Transaction costs that are
directly attributable to the acquisition or issue of financial assets and
financial liabilities (other than financial assets and financial liabilities
at fair value through profit or loss) are added to or deducted from the fair
value of the financial assets or financial liabilities, as appropriate, on
initial recognition. Transaction costs directly attributable to the
acquisition of financial assets or financial liabilities at fair value through
profit or loss are recognised immediately in profit or loss.
Financial assets
The Group's financial assets include cash and cash equivalents and trade and
other receivables that arise from the business operations and loans to
licensees.
All financial assets are recognised and derecognised on a trade date where the
purchase or sale of a financial asset is under a contract whose terms require
delivery of the investment within the timeframe established by the market
concerned, and are initially measured at fair value, plus transaction costs.
All recognised financial assets are measured subsequently in their entirety at
amortised cost.
Classification of financial assets
Amortised cost and effective interest method
(a) Trade and other receivables
Trade receivables are stated at their original invoiced value. Trade
receivables are reduced by appropriate allowances for estimated irrecoverable
amounts. See Note 3 for details of the loss allowance.
(b) Loans owing from licensees
Loans are measured at amortised cost at their effective interest rates. The
amortised cost of a loan is the amount at which the loan is measured at
initial recognition minus the principal repayments, plus the cumulative
amortisation using the effective interest method of any difference between
that initial amount and the maturity amount, adjusted for any loss allowance.
The gross carrying amount of a financial asset is the amortised cost of a
financial asset before adjusting for any loss allowance.
(c) Cash and cash equivalents
Cash and cash equivalents comprise cash on hand and other short-term highly
liquid investments that are readily convertible to a known amount of cash and
are subject to insignificant risk of changes in value.
Interest income is recognised in profit or loss and is included in the
"finance income" line item (note 9).
Impairment of financial assets
The Group recognises a loss allowance for expected credit losses on the
Group's loans to licensees and trade receivables. The amount of expected
credit losses is updated at each reporting date to reflect changes in credit
risk since initial recognition of the respective financial asset.
The expected loss rates for these financial assets are based on the Group's
historical credit losses experienced over the three-year period prior to the
period end. An additional portfolio expected loss provision is calculated in
which the historical loss rates are then adjusted for current and
forward-looking information on macroeconomic factors affecting the Group's
licensees. The Group has identified the changing insolvency rates in the UK as
the key macroeconomic factor.
(i) Definition of default
The Group considers when a licensee business is terminated or ceases to trade
as default events.
(ii) Measurement and recognition of expected credit losses
The measurement of expected credit losses is a function of the probability of
default, loss given default (i.e., the magnitude of the loss if there is a
default), and the exposure at default. The assessment of the probability of
default and loss given default is based on historical data adjusted by
forward-looking information as described above. As for the exposure at
default, for financial assets, this is represented by the assets' gross
carrying amount at the reporting date.
For financial assets, the expected credit loss is estimated as the difference
between all contractual cash flows that are due to the Group in accordance
with the contract and all the cash flows that the Group expects to receive,
discounted at the original effective interest rate.
The Group recognises an impairment loss in profit or loss for all financial
instruments with a corresponding adjustment to their carrying amount through a
loss allowance account.
Financial liabilities and equity
Classification as debt or equity
Debt and equity instruments are classified as either financial liabilities or
as equity in accordance with the substance of the contractual arrangements and
the definitions of a financial liability and an equity instrument.
Financial liabilities
All financial liabilities are measured subsequently at amortised cost using
the effective interest method.
Financial liabilities are included on the balance sheet as trade and other
payables and borrowings.
(a) Trade and other payables
Trade payables are stated at their original invoiced value. Accounts payable
are classified as current liabilities if the company does not have an
unconditional right, at the end of the reporting period, to defer settlement
of the creditor for at least twelve months after the reporting date. If there
is an unconditional right to defer settlement for at least twelve months after
the reporting date, they are presented as non-current liabilities.
(b) Borrowings
All borrowings are initially recorded at the amount of proceeds received, net
of transaction costs. Borrowings are subsequently carried at amortised cost
and the interest expense is recognised on the basis of the effective interest
method and is included in finance costs. Borrowings are classified as current
liabilities unless the Group has an unconditional right to defer settlement of
the liability for at least 12 months after the reporting date.
Convertible Loan Note - Measurement
Upon IPO the convertible loan notes converted into 700,000 ordinary shares.
See Note 21 for further details.
Dividend Policy
The Board has adopted a progressive dividend policy to reflect the expectation
of future cash flow generation and long-term earnings potential of the Group.
The Board may, however, revise the Group's dividend policy from time to time
in line with the actual results of the Group.
Dividends are recognised once they have been paid.
Related Party Transactions
Details of related party transactions entered into by members of the Group are
set out in Note 30.
Share-based payments
Equity-settled share-based payments to employees and others providing similar
services are measured at the fair value of the equity instruments at the grant
date. The fair value excludes the effect of non-market-based vesting
conditions. Details regarding the determination of the fair value of
equity-settled share-based transactions are set out in note 26.
The fair value determined at the grant date of the equity-settled share-based
payments is expensed on a straight-line basis over the vesting period, based
on the Group's estimate of the number of equity instruments that will
eventually vest. At each reporting date, the Group revises its estimate of the
number of equity instruments expected to vest as a result of the effect of
non-market-based vesting conditions. The impact of the revision of the
original estimates, if any, is recognised in profit or loss such that the
cumulative expense reflects the revised estimate, with a corresponding
adjustment to reserves.
3. Critical accounting judgements and key sources of estimation uncertainty
In applying the Group's accounting policies, which are described in note 2,
the Directors are required to make judgements (other than those involving
estimations) that have a significant impact on the amounts recognised and to
make estimates and assumptions about the carrying amounts of assets and
liabilities that are not readily apparent from other sources. The estimates
and associated assumptions are based on historical experience and other
factors that are considered to be relevant. Actual results may differ from
these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis.
Critical judgements in applying the Group's accounting policies
The following are the critical judgements, apart from those involving
estimations (which are presented separately below), that the Directors have
made in the process of applying the Group's accounting policies and that have
the most significant effect on the amounts recognised in the Financial
Statements.
Consideration of control over a licensee
Where the Group holds voting rights in an underlying licensee, an assessment
of the ability to exert control over these entities is made based on whether
the Group has the practical ability to direct the relevant activities of these
entities unilaterally. Investments in associates have been recognised for
entities where the Group holds between 20% and 50% of the voting rights and
does not have any unilateral powers other than protective ones. As the Group
has more than 20% of the voting rights, it is deemed to have significant
influence over the licensees and thus they are accounted for as investment in
associates.
There is one entity in which the Group has 51% of the voting rights and 16.7%
of the economic rights. However, all significant operational decisions require
the unanimous consent of the parties. As such this entity has been
recognised as an investment in a jointly controlled entity.
Classification of long-term loans to licensees
Where long-term loans are made to licensees, these are accounted for as
investments under IFRS 9 using the amortised cost method. The long-term loan
provided to a licensee has a 20-year term and is only repayable at the end of
the term and therefore in substance, is more akin to an investment. The
interest rate is 7.1%.
Share based payments
In the year ended 31 March 2022, the Group operated three equity share based
payment plans. Management have formed a judgement on the vesting period over
which the associated charge should be spread. This has been formed with
reference to the individual conditionality associated with the different
classes of share awards and ranges between one to four years from the balance
sheet date.
Key sources of estimation uncertainty
The key assumptions concerning the future, and other key sources of estimation
uncertainty at the reporting period that may have a significant risk of
causing a material adjustment to the carrying amounts of assets and
liabilities within the next financial year, are discussed below.
Calculation of expected loss allowance for related party loans
When measuring expected credit loss ("ECL"), the Group uses reasonable and
supportable forward-looking information, which is based on assumptions for the
future movement of different economic drivers and how these drivers will
affect each other.
Probability of default constitutes a key input in measuring ECL. Probability
of default is an estimate of the likelihood of default over a given time
horizon, the calculation of which includes historical data, assumptions and
expectations of future conditions for the licensee business.
The Group assesses each licensee individually as to the probability of default
on their loans based on their cash balances and their ability to pay the cash
flows due.
Also, the Group has elected to calculate an additional portfolio expected loss
provision in which the historical loss rates are adjusted for current and
forward-looking information on macroeconomic factors affecting the Group's
licensees. The Group has identified the changing insolvency rates in the UK as
the key macroeconomic factor as the failure of corporates is deemed to be a
reasonable macroeconomic predictor for the likely failure of a licensee
business on a portfolio basis.
4. Revenue
The disclosure of revenue by product line is consistent with the revenue
information that is disclosed for each reportable segment under IFRS 8 (see
note 5).
Disaggregation of revenue
2022 2021
£'000 £'000
External revenue by product line
License Fee Income 2,531 2,243
Profit Share Income 150 101
Other Income - 10
Total 2,681 2,354
A further breakdown of revenue by reporting line is shown below:
2022 2021
£'000 £'000
External revenue by reporting line
License fees attributable to Mergers & Acquisition ('M&A') 1,889 1,864
License fees attributable to Other 642 379
Profit share attributable to M&A 150 101
Profit share attributable to Other - -
Total Revenue by reporting line 2,681 2,344
Other income - 10
Total Revenue 2,681 2,354
5. Operating segments
Products and services from which reportable segments derive their revenues
Operating segments are reported in a manner consistent with the internal
reporting provided to the Chief Operating Decision Marker (CODM). The CODM,
who is responsible for allocating resources and assessing performance of the
operating segments, has been identified as the Group's Chief Executive.
The Group has four reporting lines, identified above, which divide license
fees and profit share income between those attributable to M&A and Other,
but the Group only has one operating segment due to the nature of services
provided across the whole Group being the same, being revenue derived from
licensing of the Dow Schofield Watts brand and associated brand names for use
in the professional services sector. The Group's revenues, costs, assets,
liabilities and cash flows are therefore totally attributable to this
reporting segment.
Internal management reports are reviewed by the Directors monthly, including
revenue information by licensee. Such revenue information alone does not
constitute sufficient information upon which to base resource allocation
decisions.
Performance of the segment is assessed based on revenue data only.
As the Group only has one reportable segment, all segmented information is
provided by the consolidated statement of comprehensive income, the
consolidated statement of financial position, the consolidated statement of
changes in equity and the consolidated statement of cash flows.
Geographical information
The Group has operations in one geographic location, the United Kingdom, and
therefore the Group only has one reporting geographic operating segment. This
is in line with internal reporting.
Information about major customers
Included in revenues arising from License fees attributable to M&A are
revenues of approximately £0.96m (2021: £1.17m) which arose from license fee
income from the Group's largest licensee. No other single licensee contributed
10 per cent or more to the Group's revenue in either 2022 or 2021.
6.(Loss) / Profit for the year
Profit for the year has been arrived at after charging/(crediting):
2022 2021
£'000 £'000
Government grant for the purpose of immediate financial support - (14)
Depreciation of property, plant and equipment 87 36
Amortisation 39 37
Employee pension 36 2
IPO costs 866 -
Expected credit loss - license fees (6) 29
Expected credit loss - outstanding loans 127 139
Expected credit loss - profit share 14 -
In 2022 no government grants were received. In the prior year, government
grants of £13,614 were received as part of the Coronavirus Job Retention
Scheme ("JRS"). There are no future related costs in respect of these grants
which were received solely as compensation for costs incurred in the year.
7. Auditors' remuneration
2022 2021
£'000 £'000
Audit of the Group financial statements 60 50
Fees payable to the Company's auditors in respect of:
Interim financial reporting 16 -
Reporting Accountants 126 -
Total auditors' remuneration 202 50
Non-audit services relate to the appointment of BDO LLP as reporting
accountants during the IPO and the interim review of financial information by
the Company's auditors which was completed as part of the IPO.
8. Staff costs
The average number of persons employed by the Group (including Directors)
during the year, analysed by category was as follows:
2022 2021
Number Number
Central Heads 16 13
16 13
Their aggregate remuneration comprised:
2022 2021
Year ended Year ended
31 March 2022 31 March 2021
£'000 £'000
Wages and salaries 669 340
Social security costs 74 31
Other pension costs (see note 27) 36 2
779 373
'Other pension costs' relate to the defined contribution plan charge as
detailed in Note 27.
Aggregate Directors' remuneration
2022 2021
£'000 £'000
Wages and salaries 393 259
Social security costs 49 28
Other pension costs (see note 27) 31 1
473 288
The highest paid Director's total emoluments in the year were £276,308 (2021:
£127,313) of which £31,321 (2021: £1,313) related to pension costs.
Directors' transactions
Dividends totaling £379,995 were paid in the year in respect of ordinary
shares (2021: £380,000). The dividends were all paid to Directors of the
Company who were currently serving at the time of payment. See Note 12 for
details.
9. Finance income
2022 2021
£'000 £'000
Interest income:
Loan Interest 80 80
80 80
Other finance income 2 4
Total finance income 82 84
10. Finance costs
2022 2021
£'000 £'000
Interest on bank loans (36) (64)
Amortisation of debt issue costs (11) (14)
Interest costs on lease (11) -
Other finance costs (2) (25)
(60) (103)
11. Income Tax
2022 2021
£'000 £'000
Corporation income tax:
Current year 340 329
Adjustments in respect of prior years (36) 12
304 341
Deferred tax (see note 22)
Origination and reversal of temporary differences (1) (14)
303 327
The standard rate of corporation tax applied to reported profit is 19 per cent
(2021: 19 per cent).
The charge for the year can be reconciled to the profit before tax as follows:
2022 2021
£'000 £'000
(Loss) / Profit before tax on continuing operations (31) 1,585
Tax at the UK corporation tax rate of 19 per cent (2021: 19 per cent) (6) 301
Tax effect of expenses that are not deductible in determining taxable profit 128 11
Depreciation in excess of capital allowances 5 11
Other tax effects 3 6
Tax effect of adjustments in relation to prior periods (36) 12
Tax effect of income not taxable in determining taxable profit (12) -
Movement in deferred tax assets/liabilities (1) (14)
Tax effect of share based payment adjustment 222 -
Tax expense for the year 303 327
On 26 October 2015, the UK corporation tax rate was reduced to 19% for the
years beginning 1 April 2020 and 1 April 2021. As a result of the March 2021
Budget, the UK corporation tax rate will increase to 25% for the financial
year beginning 1 April 2023. All deferred tax has been assessed including at
25% rate beyond FY23.
12. Dividends
2022 2021
£'000 £'000
Amounts recognised as distributions to equity holders in the year:
Final dividend for the year ended 31 March 2021 of £0.0667 (2020: £nil per 127 -
share)
Interim dividend for the year ended 31 March 2022 of £0.133 per share (2021: 253 370
£390 per share)
Special dividend for the year £nil (2021: £0.005 per share) - 10
380 380
Proposed final dividend for the year ended 31 March 2022 consisting of:
Interim catch up dividend for the year to 31 March 2022 of £0.0056 per share 120 -
(2021: £nil)
Final dividend for the year to 31 March 2022 of £0.0366 per share (2021: 786 127
£0.0667 per share)
906 127
13. Earnings per share
From continuing operations
The calculation of the basic and diluted earnings per share is based on the
following data:
2022 2021
Earnings £'000 £'000
Earnings for the purposes of basic earnings per share being net profit (334) 1,258
attributable to owners of the Company
Effect of dilutive potential ordinary shares: - -
Earnings for the purposes of diluted earnings per share (334) 1,258
2022 2021
Number of shares
Weighted average number of ordinary shares for the purposes of basic earnings 17,014,850 1,900,000
per share
Effect of dilutive potential ordinary shares:
Share Options 122,844 -
Weighted average number of ordinary shares for the purposes of diluted 17,137,694 1,900,000
earnings per share
From continuing operations
2022 2021
Earnings £ £
Basic earnings per share (0.02) 0.66
Diluted earnings per share (0.02) 0.66
Adjusted earnings per share is included as an Alternative Performance Measure
('APM') and is not presented in accordance with IAS 33. It has been calculated
using adjusted earnings calculated as profit after tax but before;
· Share-based payments expense;
· IPO costs
· The tax effect of the above items
The calculation of adjusted basic and adjusted diluted earnings per share is
based on;
2022 2021
£'000 £'000
(Loss) / Profit after tax on continuing operations (334) 1,258
Adjusted for:
Share-based payment expense 1,167 -
IPO Costs 866 -
Tax effect of adjustments above (43) -
Adjusted earnings for the purposes of adjusted basic and adjusted diluted 1,656 1,258
earnings per share
2022 2021
Earnings £ £
Adjusted basic earnings per share 0.10 0.66
Adjusted diluted earnings per share 0.10 0.66
Tax adjustments of £43,000 (2021: £ nil) have been made in arriving at the
adjusted earnings per share. This is based on an estimated full year
equivalent tax rate, which is largely driven by the UK corporation tax rate of
19% adjusted upwards to take into account the effect of non-deductible
expenses.
Shares held in trust are issued shares that are owned by the Group's employee
benefit trusts for future issue to employees as part of share incentive
schemes. The future exercise of the share awards and options is the dilutive
effect of share awards granted to employees that have not yet vested.
Shares held in trust are deducted from the weighted average number of shares
for basic earnings per share. For its adjusted basic measure, the group uses
the weighted average number of ordinary shares.
14. Intangible assets
Total
£'000
Cost
At 1 April 2020 707
Additions 40
At 31 March 2021 747
Additions 160
At 31 March 2022 907
Amortisation
At 1 April 2020 37
Charge for the year 37
At 31 March 2021 74
Charge for the year 39
At 31 March 2022 113
Carrying amount
At 31 March 2021 673
At 31 March 2022 794
All intangible assets relate to intellectual property on which license fees are charged. £707k of the carrying amount as at 31 March 22 (2021: £531k) relates to Camlee Group.
15. Property, plant and equipment - Group
Right of Use Asset Office Fixtures, Fittings & Equipment Total
£'000 £'000 £'000
Cost
At 1 April 2020 - 168 168
Additions - 16 16
At 31 March 2021 - 184 184
Additions 520 37 557
At 31 March 2022 520 221 741
Accumulated depreciation
At 1 April 2020 - 93 93
Charge for the year - 36 36
At 31 March 2021 - 129 129
Charge for the year 52 35 87
At 31 March 2022 52 164 216
Carrying amount
At 31 March 2021 - 56 56
At 31 March 2022 468 57 525
Property, plant and equipment - Company
Office Fixtures, Fittings & Equipment
£'000
Cost
At 1 April 2020 87
Additions 10
At 31 March 2021 97
Additions 31
At 31 March 2022 128
Accumulated depreciation
At 1 April 2020 33
Charge for the year 29
At 31 March 2021 62
Charge for the year 27
At 31 March 2022 89
Carrying amount
At 31 March 2021 35
At 31 March 2022 39
16. Associates
As none of the individual associates are deemed to be material associates,
they have been grouped together in aggregate below.
Aggregate information of associates that are not individually material
2022 2021
£'000 £'000
The Group's share of profit from continuing operations 309 102
The Group's share of profit and total comprehensive income 309 102
Change in the Group's ownership interest in an associate
Where the Company is a member of a licensee's business, a profit share
arrangement is in place which entitles the Company to profits over a
contractual threshold which is stated within an LLP agreement. The Group
accounts for associates based on their economic share as stated in the legal
agreements, rather than based on the Company's voting rights. Therefore, the
accounting always mirrors the economic arrangement. When there is a change in
profit share, this is not deemed to constitute a change in the Group's
ownership interest in an associate as this relates to a change in economic
interest only, hence there is no change to the equity accounting basis. A
change in the Group's ownership interest therefore is only recognised where
there is a change in the Company's voting rights.
17. Jointly controlled entities
The jointly controlled entity is not deemed to be a material jointly
controlled entity.
Information of jointly controlled entity that is not individually material
2022 2021
£'000 £'000
The Group's share of profit from continuing operations 102 15
The Group's share of profit and total comprehensive income 102 15
18. Investments - Group and Company
2022 2021
£'000 £'000
Financial assets measured under the equity method
Investment in Associates 290 97
Investment in jointly controlled entities 23 19
Financial assets measured at amortised cost
Other investments 922 922
Total Investments 1,235 1,038
Where long-term loans are made to licensees, which are disclosed within "Other
investments" above, the Directors of the Company have accounted for them as
investments under IFRS 9. These loans are accounted for using the amortised
cost method. The movement in these investments is included in the cash flow
statement as increase in amounts due from associates.
19. Trade and other receivables
Company Company Group Group
2022 2021 2022 2021
£'000 £'000 £'000 £'000
Trade receivables 879 1,404 910 1,440
Loss allowance (78) (88) (78) (88)
801 1,316 832 1,352
Other receivables 686 538 686 538
Loss Allowance (317) (272) (317) (272)
369 266 369 266
Prepayments and Accrued Income 574 452 629 517
Loss Allowance (92) (78) (92) (78)
482 374 537 439
1,652 1,956 1,738 2,057
Amounts due from subsidiary undertakings 130 100 - -
1,782 2,056 1,738 2,057
Included in prepayments and accrued income for both the company and the group
are £175k (2021: £184k) due in greater than 1 year. Other receivables are
made up from loans due from licensees and prepayments and accrued income
relates to prepayments and profit share due from licensees. Amounts due from
subsidiary undertakings, in other receivables on the balance sheet, are
interest free and repayable on demand.
Trade receivables
The Group assessed each licensee individually as to their probability of
default based on previous credit loss history which is adjusted for current
and forward-looking information. It is not appropriate to group the licensee
trade receivable balances as there are specific circumstances associated with
each business, notably, service line, sector, location and maturity of the
business.
Average Credit Period taken is 84 Days (2021: 64 days) and no interest is
charged on the receivables.
The ageing of trade receivables net of the loss allowance at the reporting
date was as followed;
2022 2021
£'000 £'000
Not past due 698 1,263
Past due 61 to 90 days - 9
Past due 91 to 120 days 51 20
Past due over 120 days 83 60
832 1,352
The provision for impairment of trade receivables is the difference between
the carrying value and the present value of the expected proceeds. The
Directors consider that the carrying value of trade receivables approximates
to fair value.
20. Borrowings
2022 2021
£'000 £'000
Secured borrowing at amortised cost
Bank loans - 942
Debt issue costs - (41)
Other loan - 50
Total borrowings - 951
Non-current - 625
Current - 326
The other principal features of the Group's borrowings are as follows.
(a) A loan of £1.16m was taken out by the Company on 10 February 2020.
The loan was secured by a debenture from each Obligor over all its assets and
a security from the Shareholders over the entire issued share capital of the
Company. The rate of interest on the loan was the aggregate of the 5.25%
Margin and 3 month LIBOR (subject to a LIBOR floor of 0.75%). Capital
repayments of £72k were paid quarterly in January, April, July, October.
£11k of capitalised debt issue costs were amortised to finance charges in
2022 (2021: £14k). This loan was repaid with proceeds from the share issue in
December 2021.
(b) A Bounce Back loan of £50,000 was taken out in October 2020 to
enable DSW Services to access finance more quickly during the coronavirus
outbreak. This loan was repaid in full in October 2021 and no interest was
paid.
All borrowings were held in the Company and Group other than the £50,000
bounce back loan.
The weighted average interest rates paid during the year were as follows:
2022 2021
% %
Bank loans 6.0 6.2
Analysis of changes in net debt
01 April 2020 Cash flow Amortisation of debt issue costs Non-cash debt items 31 March 2021
Cash & bank balances 342 267 - 609
Bank Loans (1,159) 217 - (952)
Debt issue costs 55 - (14) 41
Convertible Loan Notes (396) (144) (540)
New Loans - (50) - (50)
Net Debt (1,158) 434 (14) (144) (882)
01 April 2021 Cash flow Amortisation of debt issue costs Non-cash debt items 31 March 2022
Cash & bank balances 609 4,113 4,722
Bank Loans (942) 942 - - -
Debt issue costs 41 - (41) - -
Convertible Loan Notes (540) - - 540 -
BB Loan (50) 50 - - -
Net Debt (882) 5,105 (41) 540 4,722
Balances at 31 March 2022 comprise:
Current assets
£'000
Cash and bank balances 4,722
21. Convertible loan notes - Group and Company
The Group issued £500k of convertible loan notes to the founders of a
licensee which were convertible to equity in DSW Capital on IPO. As the float
happened within 4 years, the value of the loan notes was uplifted to £700k.
Given that the uplift value was fixed, it was in effect a 'known' outcome
which was only contingent upon an event and therefore a provision was
recognised. It was deemed appropriate to recognise a provision of £40k in the
prior year due to the Group's estimation that there was a 20% chance of the
float occurring as at 31 March 2021. On 16(th) December 2021, DSW Capital
floated on AIM and the value of the loan notes was uplifted to £700k before
being immediately converted to Ordinary Share Capital of DSW Capital plc.
22. Deferred tax - Company and Group
The following are the major deferred tax liabilities and assets recognised by
the Group and movements thereon during the current and prior reporting period.
2022 2021
£'000 £'000
At the beginning of the year asset/(liability) 3 (11)
Charge in the year - -
Released in the year - 11
Credited in the year 1 3
At the end of the year asset 4 3
23. Trade and other payables
2022 2021 2022 2021
£'000 £'000 £'000 £'000
Trade payables 29 10 86 81
Other taxation and social security 177 276 210 278
Other payables 54 24 54 24
Accruals and Deferred Income 154 87 163 88
Corporation Tax 63 262 63 262
477 659 576 733
Trade payables and accruals principally comprise amounts outstanding for trade
purchases and ongoing costs. The Group has financial risk management policies
in place to ensure that all payables are paid within the pre-agreed credit
terms.
The Directors consider that the carrying amount of trade payables approximates
to their fair value.
Amounts falling due in greater than one year include:
2022 2021
£'000 £'000
Dilapidation provision 72 -
72 -
24. Share capital - Group and Company
2022 2021
Number £'000 Number £'000
Authorised, issued and fully paid:
Ordinary shares 21,482,508 54 - -
Ordinary A shares - - 950,000 1
Ordinary B shares - - 950,000 1
At 31 March 21,482,508 54 1,900,000 2
Authorised, issued and nil paid:
Ordinary C shares - - 218,541 -
Ordinary D Shares - - 45,479 -
At 31 March - - 264,020 -
Total 21,482,508 54 2,164,020 2
Ordinary A Shares B Shares C Shares D Shares E Shares
As at 31 March 2021 - 950,000 950,000 218,541 45,479 -
Share issue 6,123,000 - - - - 17,268
Cancelled shares - - - (4,233) - -
Bonus issue - 7,579,480 7,579,480 6,046,745 - 430,051
Consolidated - (1,425,000) (1,425,000) (5,143,392) - (414,432)
Converted to Ordinary 15,359,508 (7,104,480) (7,104,480) (1,117,661) - (32,887)
Converted to Deferred - - - - (45,479) -
As at 31 March 2022 21,482,508 - - - - -
On the 26th October, the following transactions took place in relation to the
company's share capital;
i. 4,233 Ordinary C Shares were fully paid up, bought back by the company
and subsequently cancelled.
ii. 17,268 Ordinary E Shares were issued which were nil paid and have no
voting rights. These shares were issued as part of the Growth Share Plan
discussed in note 26. These were subsequently fully paid at their subscription
price of £0.9614 per share prior to the re-capitalisation which took place on
16(th) December 2021.
iii. 50,000 Redeemable preference shares with a nominal value of £1.00
were issued and were quarter paid. These shares have no voting rights.
iv. On the 26(th) October 2021, the Company formally re-registered as a
public company under the name of DSW Capital plc.
On the 16(th) December 2021, the following transactions took place in relation
to the company's share capital;
v. The company undertook a bonus issue and consolidation of shares such
that the nominal values of the A, B, C and E shares equalled £0.0025. The D
Shares were unaffected.
vi. A further bonus issue then occurred, immediately following which the A,
B, C and E shares were redesignated as one class of Ordinary Shares. The D
Shares were redesignated into deferred shares which continue to have a nominal
value of £0.0001. These shares have no rights to vote or income and are
expected to be cancelled at the AGM in September 2022.
vii. 328,000 ordinary shares were issued in respect of the share awards set
out in the Admission document and 700,000 ordinary shares were issued to the
Camlee Noteholders in respect of the conversion of the Camlee Loan Notes,
further details of which can be found in note 21.
viii. 5,000,000 ordinary shares were issued as part of DSW Capital's admission
to AIM.
ix. 95,000 ordinary shares were issued as part of the PSP award scheme
further details of which can be found in note 26.
On the 17(th) December, the 50,000 redeemable preference shares were repaid in
full.
25. Leases
DSW Services, a subsidiary of DSW Capital PLC, entered into a formal lease
arrangement for the Daresbury office, effective from 1 October 2021. Prior to
this date, the lease had been recognised as a short-term lease and therefore
did not meet the criteria under IFRS 16. Further detail on the lease
accounting policy can be found in note 2.
The consolidated statement of financial position and consolidated statement of
comprehensive income show the following amounts relating to leases:
Right-of-use assets Total
£'000
Balance at 1 April 2021 -
New leases recognised in the year 520
Depreciation (52)
Balance at 31 March 2022 468
Lease liabilities Total
£'000
Balance at 1 April 2021 -
New leases recognised in the year 451
Interest expense 11
Lease payments (77)
Balance at 31 March 2022 385
Income Statement 2022
£'000
Interest expense (note 10) 11
Expense relating to leases of low-value assets 7
Expense relating to short-term leases 61
At 31 March 2022 79
As at the 31 March 2022, the Group recognised lease liabilities in respect of
outstanding commitments for future minimum lease payments under
non-cancellable lease contracts, which fall due as follows;
Total
£'000
Within one year 83
In one to two years 87
In two to three years 92
In three to four years 98
In over four years 25
Balance at 31 March 2022 385
The total cash outflow in the year paid in respect of leases was £76,800.
Under the terms of the lease, £102,400 per annum is due for 5 years until the
first break date.
26. Share-based payments
In the year ended 31 March 2022 the Group operated three equity-settled
share-based payment plans as described below.
The Group recognised total expenses of £1,167,093 in respect of
equity-settled share-based payment transactions in the year ended 31 March
2022.
The charge to the income statement is set out below:
Share plans: 2022 2021
Growth share plan 1,060,453 6,850
Legacy Awards 73,879 -
FY22 performance bonus 30,000 -
PSP Awards 2,761 -
Total SBP expense 1,167,093 6,850
Share-based payments movement for the year ended 31 March 2022:
SBP Expense (£) SBP Reserve (£)
Growth share plan 1,060,453 (1,060,453)
Legacy Awards 73,879 (73,879)
FY22 performance bonus 30,000 (30,000)
PSP Awards 2,761 (2,761)
Total movement 1,167,093 (1,167,093)
Share-based payments movement for the year ended 31 March 2021:
SBP Expense (£) SBP Reserve (£)
Growth share plan 6,850 (6,850)
Total movement 6,850 (6,850)
Details of Directors' share awards are set out in the Directors' Remuneration
Report.
Growth Shares
DSW Capital implemented a Growth Share Plan in March 2021 for key members of
its management team and a number of individuals within the licensees from
which DSW receives licence fees.
Any value received for the Growth Shares was conditional on a future Exit
event taking place and certain individual restrictions.
As at 31 March 2022, 214,308 C Growth Shares and 17,268 E Growth shares have
converted to 1,150,548 ordinary shares in issue. 45,479 D Growth Shares have
converted to Deferred Shares which are expected to be cancelled at the AGM in
September 2022. The Group recognised total expenses of £1,040,453 related to
the Growth Share Plan in the year ended 31 March 2022.
The Growth Shares have been valued using the Black-Scholes pricing model.
Management have formed a judgement on the vesting period over which the
associated charge should be spread. This has been formed with reference to
the individual conditionality associated with the different classes of share
awards and ranges between one to four years from the balance sheet date.
Legacy Awards
Following the IPO in December 2021, a Legacy Award was awarded to be held by
the Chief Financial Officer entitling them to 1.53% of the equity value in
excess of £26m. The CFO Legacy Award is subject to continuing employment
until 31 March 2023, with such awards vesting on 31 March 2023. Further, it
was agreed that certain employees of Dow Schofield Watts CF Leeds were
entitled to approximately 1.53% of equity value up to a maximum equity value
of £26m (the "Leeds Legacy Awards"). To fulfil these obligations, those
individuals will be granted options to acquire the interest below a £26m
equity value in the same 1.53% shareholding that the CFO Legacy Award is
granted over, similarly vesting on 31 March 2023. The share price per award is
£1.00 with an exercise price per award of nil.
The Legacy Awards have been valued using the Black-Scholes pricing model. The
charge for the year is £73,879. The key assumptions used in the calculation
of the fair value of the share-based payments are as follows:
Leeds Legacy Award CFO Award
Spot price 100p 100p
Strike price 0.025p 122p
Volatility 35% 35%
Risk Free Rate 0.02% 0.02%
Dividend Yield 0% 0%
Fair Value per share 9.1p 8.6p
Details of the share options outstanding during the year are as follows:
2022 2021
No. of share options No. of share options
Outstanding at beginning of year - -
Granted during the year 328,000 -
Outstanding at the end of the year 328,000 -
Exercisable at the end of the year - -
There were no share options exercised, forfeited or expired within the period.
FY22 performance bonus
The Remuneration and Nominations Committee have awarded James Dow, Chief
Executive Officer, a performance bonus for FY22 with a value of £30,000. It
has been agreed that the performance bonus will be settled in shares.
PSP Awards
The Board recognises the importance of ensuring that members of the Group are
effectively and appropriately incentivised and their interests aligned with
those of DSW Capital. Similarly, the Board believes that the ongoing success
of the DSW Network depends to a high degree on retaining and incentivising the
performance of its key people.
To that end, the Group has adopted the Performance Share Plan ("PSP"), to
align the interests of Executive Directors and key employees ("Participants")
with those of the Shareholders. The PSP will be a long-term incentive plan
which will form the primary long-term incentive arrangement for the Executive
Directors. The Remuneration and Nominations Committee will consider the
granting of PSP awards to the participants on an annual basis.
A summary of the structure of the rules of the Plan is set out below:
· Annual awards will be determined by reference to a number of shares
equal in value to a maximum of 200 per cent. of base salary of participants;
· Grants shall be subject to a three-year vesting period (subject to
the satisfaction of the performance conditions
· Following vesting, there will be a further 24 month holding period
before participants are able to sell any shares; and
· Awards are subject to malus and clawback provisions.
Challenging performance conditions will be set for each award under the PSP.
For the first awards, the Remuneration and Nominations Committee intends that
the awards will vest based on relative total shareholder return ("TSR")
targets against an applicable comparator group. The share price per award is
£1.00 with an exercise price per award of nil.
Awards outstanding at 31 March 2022 are shown below:
2022 2021
No. of share options No. of share options
Outstanding at beginning of year - -
Granted during the year 95,000 -
Outstanding at the end of the year 95,000 -
Exercisable at the end of the year - -
There were no awards forfeited, exercised or expired in the period.
The Group used the Expected Value method to calculate the anticipated value of
the PSP awards. The charge for the year is £2,761.
27. Retirement benefit plans
Defined contribution plans
The Group operates defined contribution retirement benefit plans for all
qualifying employees.
The Group is required to contribute a specified percentage of payroll costs to
the retirement benefit plan to fund the benefits. The only obligation of the
Group with respect to the retirement benefit plan is to make the specified
contributions.
The total expense recognised in profit or loss of £35,679 (2021: £1,710)
represents contributions payable to these plans by the Group at rates
specified in the rules of the plans. As at 31 March 2022 and 31 March 2021,
there were no contributions due in respect of the current reporting period
which had not been paid over to the plans.
28. Financial Instruments
In common with other businesses, the Group is exposed to risks that arise from
its use of financial instruments. This note describes the Group's objectives,
policies and processes for managing those risks and the methods used to
measure them. Further quantitative information in respect of these risks is
presented throughout these financial statements.
The significant accounting policies regarding financial instruments are
disclosed in Note 2. The principal financial instruments used by the Group,
from which financial instrument risk arises, are as follows:
Financial assets
Held at amortised cost
Company Company Group Group
2022 2021 2022 2021
(Restated)
£'000 £'000 £'000 £'000
Cash and cash equivalents 4,714 584 4,722 609
Trade and other receivables 1,300 1,682 1,201 1,618
6,014 2,266 5,923 2,227
Financial Liabilities
Held at amortised cost
Company Company Group Group
2022 2021 2022 2021
£'000 £'000 £'000 £'000
Trade and other payables 237 121 303 193
Borrowings - 901 - 951
237 1,022 303 1,144
There is no significant difference between the fair value and carrying value
of the financial instruments.
(a) Financial risk management objectives
The Board has overall responsibility for the oversight of the Group's risk
management framework. A formal process for reviewing and managing risk in the
business has been developed. A register of strategic and operational risk is
maintained and reviewed by the Board, who also monitor the status of agreed
actions to mitigate key risks. The Board's objective in managing financial
risks is to ensure the long-term sustainability of the Group.
The overall objective of the Board is to set policies that seek to reduce risk
as far as possible without unduly affecting the Group's competitiveness and
flexibility. Further details regarding these policies are set out below:
(b) Credit risk management
Credit risk refers to the risk that the counterparty will default on its
contractual obligations resulting in financial loss to the Group. The Group's
credit risk is primarily attributable to its startup loans provided to
licensees. The Group mitigates this risk by encouraging ongoing engagement of
senior management with network members and monthly reporting which allows
close monitoring of emerging credit risks and facilitates early support and
advice to mitigate or remediate performance.
Credit risk with cash and cash equivalents is reduced by placing funds with
banks with high credit ratings.
(b)(i) Overview of the Group's exposure to credit risk
The Group recognises a loss allowance for expected credit losses on the
Group's loans to licensees and trade receivables.
The amount of expected credit losses is updated at each reporting date to
reflect changes in credit risk since initial recognition of the respective
financial asset. The expected loss rates for these financial assets are based
on the Group's historical credit losses experienced over the three-year period
prior to the period end.
An additional portfolio expected loss provision is calculated in which the
historical loss rates are then adjusted for current and forward-looking
information on macroeconomic factors affecting the Group's customers. The
Group has identified the changing insolvency rates in the UK as the key
macroeconomic factor.
The Group applies the IFRS 9 simplified approach to measuring expected credit
losses which uses a lifetime expected loss allowance for all trade receivables
and contract assets.
(c) Liquidity risk management
Ultimate responsibility for liquidity risk management rests with the board of
Directors, which has established an appropriate liquidity risk management
framework for management of the Group's short, medium and long-term funding
and liquidity management requirements. The Group manages liquidity risk by
maintaining adequate reserves and banking facilities and by continuously
monitoring forecast and actual cash flows.
Network members in difficulty are asked to provide short-term cash flow
forecasts on a monthly basis to support risk monitoring and potential funding
requirements and Partners may be asked to reduce drawings on a temporary
basis.
(c)(i) Liquidity and interest risk
The bank loan was repaid in the year. There is no interest payable on trade
payable balances and the operations of the Group are not dependent on the
finance income received.
(c)(ii) Financing facilities
The Group is using the cash inflows from the financial assets and in the prior
year previously available bank facilities to manage liquidity.
(d) Capital risk management
The Group considers its capital to comprise its ordinary share capital and
retained profits as its equity capital. In managing its capital, the Group's
primary objective is to provide return for its equity shareholders through
capital growth and future dividend income.
The Group's policy is to seek to maintain a gearing ratio that balances risks
and returns at an acceptable level and also to maintain a sufficient funding
base to enable the Group to meet its working capital and strategic investment
needs.
In making decisions to adjust its capital structure to achieve these aims,
either through new share issues or the issue of debt, the Group considers not
only its short-term position but also its long-term operational and strategic
objectives.
Details of the Group's capital are disclosed in the statement of changes in
equity and Note 24.
29. Events after the reporting period
Since the end of the year the directors have recommended the payment of a top
up to the interim dividend for the year to 31 March 2022 of 0.56 pence per
share totaling £120k and a final dividend of 3.66 pence per share totaling
£786k as detailed in Note 12.
The partner of DSW Wealth Advisory LLP has made the Directors aware of his
intention to leave the partnership with effect from 22 July 2022. The
Directors believe that this will not have a material impact on the results of
the Group.
30. Related party transactions
Balances and transactions between the Company and its subsidiary, which are
related parties, have been eliminated on consolidation and are not disclosed
in this note. Transactions between the Group and its related parties are
disclosed below. Related parties are those licensees where the Company is a
member of the related LLP.
Revenue and Cost Recharges
Group entities entered into the following transactions with related parties
who are not members of the Group. All entities other than DSW Investments 2
LLP are licensee businesses. DSW Investments 2 LLP is an entity owned by
certain directors of the company.
2022 2021
Revenue and Cost Recharges Revenue and Cost Recharges
£'000 £'000
PHD Equity Partners - 127
PHD Industrial Holdings 200 12
DSW Investments 2 LLP 99 65
Other investments 920 485
Totals 1,219 689
Other investments relate to routine and similar transactions which arose in
the ordinary course of business, with DSW CF Leeds, DSW Wealth Advisory, DSW
TS Leeds and DSW Business Recovery.
Amounts due from/to related parties
Group entities had the following balances, including loans to related parties,
outstanding at year end with related parties who are not members of the Group:
2022 2021
Amounts due from/(to) related parties Amounts due from/(to) related parties
£'000 £'000
PHD Equity Partners - 19
PHD Industrial Holdings 1 14
DSW Investments 2 LLP - 26
Other investments 497 213
Totals 498 272
Salary and fees payable to James Dow and Jon Schofield are as disclosed in the
Remuneration and Nominations Committee Report. Salary totalling £18,761
(2021: nil) has been paid to Susie Dow in the year.
Remuneration of key management personnel
The remuneration of the Directors, who are the key management personnel of the
Group, is set out below in aggregate for each of the categories specified in
IAS.
Year ended Year ended
31 March 2022 31 March 2021
£'000 £'000
Wages and salaries 431 259
Social security costs 54 28
Other pension costs (see note 27) 32 1
517 288
This includes amounts in respect of a previous director who provided services
and was remunerated by the group in the year.
31. Prior year adjustments
The Group has historically prepared company only accounts under UK Generally
Accepted Accounting Practices (FRS 102). As such, financial information has
been prepared under IFRS for the first time for the purpose of presentation in
this document. The prior year comparatives have been restated resulting from
this first time adoption as detailed below:
Originally stated Adjustment Restated
£'000 £'000 £'000
Company statement of financial position
Trade debtors 1,380 (64) 1,316
Prepayments and accrued income 490 (116) 374
Other debtors 405 (39) 366
Investment in associates - 97 97
Investment in jointly controlled entities - 19 19
Retained earnings 2,383 (103) 2,280
In the company financial statements these adjustments arise principally from
the requirements of IFRS 9 with an expected credit loss provision recognised
along with the reclassification of trade and other receivables in line with
the requirements of IFRS 10 to better reflect the nature of the assets within
investments.
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