REG - DSW Capital PLC - Audited Final Results
02/07/2024 07:15
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RNS Number : 6952U DSW Capital PLC 02 July 2024
2 July 2024
DSW CAPITAL PLC
("DSW Capital", "DSW" or the "Group")
(AIM: DSW)
Audited Final Results
Record number of Fee Earners and Partners
DSW Capital, a profitable, mid-market, challenger professional services
licence network and owner of the Dow Schofield Watts brand, is pleased to
announce its full year results for the year ended 31 March 2024 ("FY24" or the
"Period").
Financial highlights
· Network revenue of £16.0m (FY23: £18.3m), down 12.5% against a subdued SME
M&A market backdrop
· Group revenue of £2.3m (FY23: £2.7m)
· Total income from licensees of £2.4m (FY23: £3.0m)
· Adjusted EBITDA of £0.6m (FY23: £1.5m)
· Adjusted pre-tax profit of £0.5m (FY23: £1.4m), reflecting lower levels of
activity and continuing investment for future growth and expansion
· Statutory profit before tax of £0.2m (FY23: £0.7m)
· Earnings per share of 0.4 pence (FY23: 2.0 pence)
· Strong balance sheet:
- cash balances at Period end of £2.6m (FY23: £4.6m) - following acquisitions
of Bridgewood and STS Europe, and investment in new start up licensees
- Cash conversion for the period of 14% (FY23: 88%) - adjusting for the cost of
investment in new start up licensees, cash conversion was 61%
- Net assets of £7.6m (FY23: £7.9m)
· Proposed final dividend of 0.75 pence per share, giving a total dividend per
share for the year of 2.00p (FY23: 3.76p) - reduced to reflect current
supressed earnings
· Total dividends paid to shareholders since IPO, including FY24 final dividend,
will be 9.98p
Operational highlights
· Fee Earners at Period end increased to a record level of 107 (FY23: 97), up
10.3%, demonstrating the attractiveness of the Group's licence model and the
continuing investment in recruitment
· Licensees increased from 21 to 25 across 11 service lines
· Continued to diversify and invest in non-M&A service lines with the
addition of Bridgewood Financial Solutions, an insolvency practice in
Nottingham
· Expanded UK tax offering, through supporting the acquisition of STS Europe
adding a specialist R&D tax expertise
· Expanded geographic footprint, with new offices in Leicester, Nottingham,
Cardiff and Burscough
· Re-located offices in London and Leeds, to prime city centre locations to
support future expansion in these regions
· Named by Experian* as the 19(th) most active corporate finance adviser in
the UK by number of deals in 2023
· Hosted an International Women's Day event, which celebrated the success of DSW
role models within the firm and wider network
· Launched ESG Committee made up of 10 volunteers from across the DSW Network to
drive initiatives
Current trading and outlook
· The Group enters the new financial year with 25 licensees and a record number
of Fee Earners and Partners, creating a strong platform for when market
conditions return
· The new financial year has started in line with expectations
· The focus remains firmly on recruitment, and we remain confident in the
strength of our business model to continue to attract Fee Earners
· With competitors continuing to experience intense regulatory pressure and
disruption, DSW's unique model is increasingly attractive to a large number of
professionals who are seeking to take greater control of their careers
· Investment in recruitment and supporting our existing licensees with improved
central infrastructure continues, ensuring that DSW is well positioned for
growth
* Experian Market IQ: 2023 Report
James Dow, Chief Executive Officer, said:
"Our strategic aim remains to have a more resilient and diversified group of
licensee businesses. At present, corporate finance and due diligence
represents the majority of our business (68%, flat vs. the previous year). As
communicated at the time of our IPO, DSW aims to scale its licence model
through organic growth of existing licensees, recruitment of new licensees,
investing in "Break Outs" (existing teams in larger firms) and the acquisition
of licence fees.
"We are confident in the strength of our business model to continue to attract
Fee Earners, and we have a strong balance sheet to support that. We remain
confident that our considerable efforts to both acquire licence fees and
recruit teams will continue to bear fruit."
Definitions
Network Revenue is defined as total revenue earned by licensees, as opposed to
total revenue reported by the Company
Adjusted Pre-Tax Profit is defined as profit before tax adjusted to add back
the items not considered part of underlying trading including share-based
payment expense. It is a non-GAAP metric used by management and is not an IFRS
disclosure.
Cash conversion is calculated as cash generated by operations divided by
operating cash flows before movements in working capital
Total income from licensees represents statutory revenue plus share of results
in associates
FY24 is the year ended 31 March 2024
Online investor presentation
An online investor presentation and Q&A will be hosted by the management
team today at 1.15pm. To participate, please register with PI World at:
https://bit.ly/DSW_FY24_results_webinar
(https://url.avanan.click/v2/___https:/bit.ly/DSW_FY24_results_webinar___.YXAxZTpzaG9yZWNhcDphOm86MjVmODdiM2RhNzQ4Mjg2ZWI3YjI1MTA5YWI1YTQ3NzU6Njo5ZmFmOjk4NWZjY2MzYTBiN2I2MDcxZGE3NzA1YzJmNzI3MDAzYjkwYTU2ZmM3ZjU0NmI1ODY0MTViYmFhMDQwODQzZWE6cDpUOk4)
Dividend and Record Pay Date
The record date for the Group's proposed dividend is 0.75 pence per share, and
the dividend payment date is 27 September 2024. The ex-dividend date is 12
September 2024.
Notice of AGM
The Group's annual general meeting ("AGM") will be held on 24 September
2024 at 10am at the Midland Hotel Manchester, 16 Peter St, Manchester M60
2DS. Notice of the AGM will be posted with copies of the Group's report and
accounts on 22 August 2024. Copies will also be available at this date on the
Group's website: Investors - Dow Schofield Watts (dswcapital.com)
(https://url.avanan.click/v2/___https:/dswcapital.com/investors/___.YXAxZTpzaG9yZWNhcDphOm86MjVmODdiM2RhNzQ4Mjg2ZWI3YjI1MTA5YWI1YTQ3NzU6NjoxNzNkOjFmZDgyYzM5YmQ2YTExM2ZkYmZjYzlmNGRiMTA4ZWYzMjkwMDQxMTNiYjgyMTFkZmI4MDNkYjNmOGQwMzQ3MzY6cDpUOk4)
Enquiries:
DSW Capital
James Dow, CEO Tel: +44 (0) 1928 378 029
Pete Fendall, COO & Interim CFO Tel: +44 (0) 1925 915 034
Shore Capital (Nominated Adviser and Broker) Tel: +44 (0)20 7408 4090
James Thomas / Mark Percy / Rachel Goldstein
Guy Wiehahn / Isobel Jones (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,
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 operates
licensing arrangements with 25 licensee businesses with 107 fee earners,
eleven offices across the UK. 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. Below are DSW Capital's results for the year ended 31 March 2024.
Throughout FY24, we have continued to experience frustrating economic
conditions that continue to impact confidence in the SME M&A market.
Despite this, the DSW licensee businesses have demonstrated their remarkable
resilience by delivering £16.0m of Network Revenue, only a 12.5% reduction on
the prior year. It was great to see that the DSW Network, which comprises 25
licensee businesses, was named by Experian as the 19(th) most active corporate
finance adviser (by number of deals) in the UK in 2023, having consistently
been ranked within the Top 20 Most Active Finance Advisers in the UK for the
last four years.
Our priority of recruiting new Partners and Fee Earners this year has meant
that we were able to grow the number of Fee Earners, including Partners, from
97 to a record number of 107, an increase of 10.3% (FY23: 10.2%), whilst the
number of partners rose from 42 to 50.
DSW continues to maintain 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.
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, the addition
of new service lines and geographic locations, strategic acquisition of
licence fees, and investing in "Break Outs" (existing teams in larger firms).
Our focus with these initiatives remains on attracting high margin,
complementary, niche service lines with a strong synergistic fit with the
existing DSW Network.
Partner recruitment is fundamental to long-term shareholder value, and we
believe our significant investment in recruitment in FY24 has delivered strong
results, with the number of partners rising by 19.0%. We anticipate the
benefits of our investment in FY24 will continue to be felt in FY25 and
beyond.
New Additions to the Network
During the year, we expanded our geographical footprint and welcomed two new
businesses, DSW CF Midlands and DSW CF Advisory (Cardiff) under the "Breakout
Initiative". We welcomed Bridgewood Financial Solutions, a corporate recovery
business based in Nottingham, to the DSW Network and supported our existing
Tax practice with the acquisition of STS Europe, a tax advisory business based
in the North-West.
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 and a cornerstone of our ESG Strategy.
We recognise that 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 continues to be a core value, as new professionals and
businesses are welcomed to the Network.
Technology
We continue to invest in the right technologies to protect our licensees and
their clients, whilst also keeping pace with the rapidly changing IT
landscape, to embed efficiencies and enhance the value and quality of service
provided to our licensees. With this investment, our licensees are able to
continue to fully embrace the flexibility and autonomy afforded to them by the
DSW model, choosing how and where their teams work to help maintain a strong
work life balance and increase collaboration.
During the Period, we invested in additional senior IT resource to help shape
and implement our IT Strategy and provide industry leading expert advice to
the Board. Our key focus areas include continued investment in our cyber
security, maintaining excellent IT service levels and providing a platform for
future innovation.
People
During the year, Nicole Burstow, Deputy CEO & CFO, tendered her
resignation. She stepped down from the Board and left DSW Capital on 17 May
2024. After a careful and diligent recruitment process, we are pleased to be
welcoming Shrutisha Morris, who will be appointed as Deputy CEO and join the
Board on 1 August 2024.
Furthermore, we were delighted to formally welcome Pete Fendall to the Board
as COO and Interim CFO. Pete joined the Board on 1 April 2024.
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, Jillian
Jones and I, are considered independent. The current Board reflects a blend of
different experience and backgrounds and is considered appropriate for the
scale of the business.
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 DSW has complied with the QCA Corporate Governance
Code throughout FY24, and you can find more information on our governance
arrangements in the Corporate Governance Statement of the annual report.
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 we 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.
During the current year, DSW introduced an assurance discipline to policy
compliance to ensure that defined requirements are being adhered to and the
existing policies are being complied with across the DSW Network.
We offer risk management workshops to all licensee businesses, to ensure that
the Network follow a clear and consistent format for identifying and assessing
risks.
We continue to invest in our compliance support, providing relevant guidance
and training to promote a pro-active approach to risk management across the
DSW Network.
Environmental, Social and Governance ("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. The Group's ESG cornerstones and
priority areas remain high on the Board's agenda. We are delighted to publish
our ESG report within this year's Annual Report, which provides a review of
our progress to date and the meaningful action we are taking in areas in which
we can have the most impact.
The Board continues 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 remains confident in the long-term prospects for DSW and continues
to add new Partners and new licensee businesses to fuel future growth. While
confidence in the long-term performance of the Group remains unchanged, the
Board acknowledges the suppressed earnings in FY24 and has taken the decision
to propose a reduced final ordinary dividend for the year ended 31 March 2024
of 0.75 pence per share, giving a total dividend for the year ended 31 March
2024 of 2.0 pence per share. The Board anticipates maintaining dividends at a
reduced level until market conditions improve and earnings return to growth.
An interim dividend of 1.25 pence per share in respect of the six months to 30
September 2023 was paid on 23 January 2024.
If approved by shareholders, this will take total cumulative dividends that
will be paid out to shareholders post-IPO to 9.98 pence per share.
Outlook
While recognising that economic conditions remain volatile, I am confident in
the Group's ability to continue to deliver on its growth strategy. As a Board,
we firmly believe that DSW is an attractive alternative to the Big 4
accounting firms, which enables talented professionals to achieve their
potential and provide a bespoke, personalised service. Several of our
competitors continue to experience intense regulatory pressure and disruption,
making our unique model increasingly attractive to a large number of
professionals who are seeking to take greater control of their careers. The
Board looks forward to FY25 with optimism and remains excited about the
long-term prospects for the Group.
Heather Lauder
Independent Non-Executive Chair
1 July 2024
Chief Executive Officer's Review
I am pleased to report on the year ended 31 March 2024, a year of significant
progress in terms of partner recruitment, which is fundamental to long-term
shareholder value, but at the same time a year of continued trading challenges
for our licensee partners as the SME M&A market remained subdued
throughout the year.
The SME M&A market continues to feel the impact of higher costs of capital
and consequently lower company valuations. The adjustment to lower valuations
results in both lower levels of transactional activity but also reduced
utilisation as transactions become more protracted.
The Network Revenue achieved in FY24 was down 12.5% to £16.0m (FY23: £18.3m)
reflecting a decline of 20.6% in average revenue per Fee Earner to £153k
(FY23: £193k). However, this was mitigated by a 10.3% increase in fee earners
to 107 (FY23: 97), driven by our investment in recruitment and acquisitions.
Resilient Profitability
Adjusted profit before tax decreased by 64% to £0.5m (FY23: £1.4m), with the
decline in profitability chiefly attributable to lower levels of licensee
activity but also increased investment in partner recruitment and reflecting
the Board's decision to increase provisions in FY24 against balances owed by
licensees, primarily a departing licensee.
Revenue for the Group was £2.3m (FY23: £2.7m) and statutory profit for the
year was £84k (FY23: £485k) after the deduction of the share-based payment
("SBP") charges.
DSW received an average effective licence fee (including profit share where
applicable) of 15.4% (FY23: 16.6%), the reduction reflecting reduced profit
share contributions.
With the decline in SME M&A activity since October 2022, our average
revenue per Fee Earner has declined 32.6% to £153k from FY22 levels of
£227k. Despite the relatively low levels of M&A activity, the business
remains resiliently profitable, and with significant potential when the
M&A market improves.
Balance sheet strength
The Group's balance sheet remains healthy, with cash balances at 31 March 2024
of £2.6m (FY23: £4.6m), after the acquisitions of Bridgewood and STS Europe
(£0.9m combined consideration), investment in new start-up licensees of
£0.5m and paying dividends of £0.7m in the Period.
We remain well-resourced to execute on our strategy but have adjusted our
dividend payout levels to reflect our current trading position and immediate
prospects.
DSW's strategy and delivery against it
Our strategic aim remains to have a more resilient and diversified group of
licensee businesses. At present, corporate finance and due diligence
represents the majority of our business (68% vs. 68% in the previous year*).
As communicated at the time of the AIM listing, DSW aims to scale its licence
model through organic growth of existing licensees, recruitment of new
licensees, investing in "Break Outs" (existing teams in larger firms) and the
acquisition of licence fees.
As we reported last year, we committed significant investment in FY24 in
additional central recruitment capability and relaunched our break-out
initiative with clearer messaging that we are offering "golden hellos" to new
teams. As a direct result of these initiatives, we expanded our geographic
footprint with new corporate finance teams being established in the Midlands
and Cardiff.
Regarding acquisitions of licence fees, we completed a transaction with
Bridgewood, a corporate recovery business based in Nottingham, and supported
the acquisition of STS Europe, a tax advisory business based in the
North-West. We remain in regular contact with many companies that we admire
and continue to work hard to convince them of our attractiveness, as a suitor
offering a different solution for stakeholders.
Our focus with these initiatives remains on attracting high margin,
complementary, niche service lines with a strong synergistic fit within the
existing DSW Network.
Professional headcount
Being a professional services business, our focus is on the recruitment of new
partners, new teams and the recruitment of additional Fee Earners to grow
existing licensee businesses. Partner recruitment is fundamental to
long-term shareholder value.
At the year-end, the number of Fee Earners, including partners, had grown from
97 to a new record number of 107, an increase of 10.3% (FY23: 10.2%), and the
number of partners rose from 42 to 50.
Our acquisitions increased our professional headcount by 13 and recruitment of
new licensee businesses added 10 professionals. However, headcount in existing
licensees declined by 13.
The decline in professionals in existing licensees was predominantly borne by
the departures of our Forensic and Aberdeen based businesses, but existing
licensees preferred to take a more prudent approach to recruitment choosing to
defer backfilling roles.
Since March 2013, the number of Fee Earners has increased from 30 to 107,
which equates to an 11-year compound annual growth rate ("CAGR") of over 12%,
and an increase of 25 (30.5%) since the admission to AIM in December 2021,
just over two years ago.
For most of FY24, the partner recruitment market has been favourable, with the
candidate pool strong in quality but the continued economic uncertainty has
increased caution in those seeking change.
Empowering professionals
Since launching the business in 2002 as a three-man start-up, we have focussed
on attracting others to our path, to build their own mid-market challenger
professional service businesses. We finished the year with a record 25
licensee businesses in our network (FY23: 21).
Our vision to become the most sought-after destination for ambitious,
entrepreneurial professionals to start and develop their own businesses is
underpinned by our focus is on partners, rather than clients.
This focus on people is our super-power. Other professional firms will profess
the importance of people but position their services and capabilities towards
their clients. DSW's clients are our partners. The strength of our business
model is our clear focus on helping people meet their aspirations.
Our partners and their teams are our greatest ambassadors. On behalf of our
shareholders, I would like to take this opportunity to thank DSW partners for
their continuing commitment to DSW and all that it stands for.
A growing brand and reputation
DSW must continue to demonstrate that it is a highly attractive proposition
for professionals and their clients who work within the UK "mid-market". The
quality of DSW's people and their clients is reflected in our average revenues
per fee earner of £153k (FY23: £193k). This remains an important metric, we
regard the significant reduction as being due to reduced M&A activity
levels.
We continue to focus on the quality of our partners as this is fundamental to
the strength of our proposition. At 31 March 2024, 47% of employees and
partners across the DSW Network previously worked at a Big 4 firm.
DSW's achievements and capabilities are most notable in its original core
service areas of corporate finance and due diligence. Our national prominence
in M&A was highlighted by an Experian research report for 2023, which
marked DSW as the 19(th) most active adviser (by number of deals) in the UK.
In November, DSW ranked 56(th) in Accountancy Age's top accountancy firms
(based on revenue) to the year ended March 2023, compared to the previous
year's ranking of 48(th)**. A decline reflecting the significant importance
of M&A activity to DSW.
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. We believe this network of 33 members, with 350 dealmaking
professionals in 65 offices across 31 countries, is the 8(th) largest in the
world.
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.
The Pandea conference held in Copenhagen in April 2024, attracted over 60
delegates from 25 of the 33 member firms.
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 make it possible for
our 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 increasing levels of support to our
licensees.
Our initiatives this year included the launch of our ESG committee with its
leadership covering diversity and inclusion, empowering our people, and social
and environmental impact. The committee is led by our Chief Operating Officer,
Pete Fendall, and supported by representatives from across our licensees.
In September, we held our first full employee conference - one of the
excellent initiatives to emerge from our Future Leaders Programme. The Future
Leaders Programme, in conjunction with BecomingX, welcomed its second cohort
of 12 employees and partners in January of this year.
These initiatives are right at the heart of supporting our licensee partners
and employees to be the best that they can be. These initiatives also increase
our connectivity, whilst operational autonomy is at the heart of our model, we
continue to reinforce that we are stronger together.
Looking ahead
DSW is a resilient business with a long track record of growth in Fee Earners,
but with our roots in M&A advisory we are financially impacted by the
current lower levels of deal activity in M&A - particularly in the SME
segment.
The Group has entered the new financial year with 25 licensee businesses
(FY23: 21) and 107 Fee Earners (FY23: 97), creating a stronger platform for
organic growth when market conditions for M&A become more favourable.
The new financial year has started in line with our expectations.
Our focus remains firmly on recruitment, and we remain very confident in the
strength of our business model to continue to attract Fee Earners. We have a
strong balance sheet and are confident that our considerable efforts to both
acquire licence fees and recruit teams will continue to bear fruit.
James Dow
Chief Executive Officer
1 July 2024
* Calculation includes all licencing income including income from associates.
**https://dswcapital.com/dow-schofield-watts-rises-in-accountancy-top-50-50/
Chief Financial Officer's Review
Key Performance Indicators
The following KPIs are used by management to monitor the financial performance
of the Group:
2024 2023 2022
Revenue (£'000) 2,311 2,714 2,681
Total income from licensees (£'000)(1) 2,431 2,998 2,990
Adjusted EBITDA (£'000)(2) 626 1,536 2,233
EBITDA (£'000) 326 841 200
Adjusted PBT (£'000)(3) 507 1,409 2,002
PBT (£'000) 207 715 (31)
Adjusted PBT margin (%) 21.9 51.9 74.6
PBT margin (%) 9.0 26.3 (1.2)
Net Assets (£'000) 7,588 7,895 7,985
The Group also measures its performance using the following KPIs which are
derived from the performance of the DSW Network:
2024 2023 2022
Total revenue of all Network licensees (£'000) 15,975 18,263 18,285
Revenue per fee earner (£'000) 153 193 227
Revenue per partner (£,000) 320 435 446
Fee Earners (Number) 107 97 88
Despite the economic headwinds posed by challenging market dynamics and
subdued SME M&A activity, our unwavering commitment to progress and
resilience has yielded remarkable results in recruitment, as we welcomed a
record number of new partners to the DSW Network.
FY24 has been a year of investment, doubling down on our recruitment strategy,
bolstering and enhancing our recruitment capabilities, whilst continuing to
invest in our central infrastructure to set us up for long-term success. We
are delighted with the progress to date, having increased our partner numbers
by 19% within the year, and added on six new businesses.
We have a talented network of partners and employees, who have demonstrated
their resilience and agility over the last twelve months, remaining committed
to delivering outstanding solutions and advice to their clients. Whilst
Network Revenue and Revenue per fee earner have both declined within the
current year, our business remains poised to bounce back once the SME M&A
market picks up again.
Our investment in recruitment and central infrastructure, whilst having a
short-term impact on profit will position the Group well for the future. FY24
has seen us substantially enhance our partner recruitment capabilities,
systems and processes as we have embedded the insights gained over the last
twelve months to set us up for further growth in FY25. Our current year
initiatives have focused on increasing the appeal of the model to new recruits
whilst enhancing the support and value provided to existing licensees,
developing future talent and increasing collaboration across the Network.
Income Statement
Revenue and Network Revenue
Network revenue for the year was £16.0m, which is a reduction of 12.5% on the
prior year. This is a direct result of the continued trading challenges our
licensees have experienced as a result of the SME M&A Market being subdued
throughout the year. Whilst we have continued to diversify from M&A within
the current year, with the notable additions of Bridgewood and STS Europe, we
have also launched two new corporate finance teams in the Midlands and
Cardiff, which is a testament to our strong brand recognition in the M&A
market. The subdued M&A activity has lowered utilisation and revenue per
fee earner by 20.6% to £153k, however revenue per fee earner is also impacted
by lower levels of contribution from new start-ups as they build up their
pipeline.
Our average effective licence fee has also reduced to 15.4% (FY23: 16.6%)
reflecting reduced profit share contributions from some of our licensees. As a
result of the contributing factors above, licencing income has fallen by 18.9%
to £2.4m.
Fee Earners
In FY24, we invested £0.2m in our partner recruitment capabilities,
recognising that the challenging economic conditions would undoubtedly create
greater push factors for prospective candidates to explore alternative
business models. We are delighted with the progress we have made, as over the
last twelve months we welcomed a record number of partners to the DSW Network.
Our partner numbers increased from 42 to 50, representing a 19% increase YoY
(FY23: 7.7%), and we are therefore entering into FY25 with an excellent
platform for growth.
Whilst the economic conditions have created an opportunity for us to
successfully boost our partner recruitment, these conditions also lead to
licensees to take a cautious approach with their own recruitment as they wait
for strong signs of the market picking back up again. We believe the
investment in partner recruitment in FY24 will deliver benefits in FY25 and
beyond. DSW remains a highly sought after destination for young professionals
looking to join ambitious teams, and we look forward to welcoming them once
organic recruitment picks up.
Despite a reduction in revenue per Fee Earner from £193k to £153k, this KPI
remains comparable to our larger listed peers such as Knights, DWF, Gateley
and Keystone Law as well as the Big 4, once adjusted for the impact of new
start-up businesses. Our businesses continue to prove their resilience, and to
be recognised as award winning experts in their local markets. The strength of
the DSW brand continues to grow and our business remains poised to prosper
when M&A activity improves, whilst we also remain to be a genuine
alternative to the largest firms.
Central Costs
We are committed to maintaining a lean cost base whilst ensuring we provide
our licensees with the support they need to thrive and fulfil their potential.
We recognise that for our Partners and Employees to be the best that they can
be, we need to invest in central initiatives that ensure we remain the best
that we can be and provide increased value to our licensees.
Central costs (excluding the share-based payment charge and IPO costs) have
increased by £0.39m, on the prior year. Most of the increase relates to our
investment in partner recruitment and investment in our central
infrastructure, including IT security and innovation.
We are 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 11 people (excluding directors),
8.4 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 one office premises.
In the year, we partnered with Alexander Mann Solutions, as part of our total
investment in Partner Recruitment of £0.24m, which yielded successful results
in FY24. With this investment, we were able to effectively refine and hone our
recruitment strategy, embedding knowledge, systems and processes which will
serve the team in future financial years. We also rolled out our IT strategy,
which included procurement process to identify a new managed service provider
to provide the bandwidth and support needed to enhance IT resilience and
enable us to pursue exciting IT Innovation projects. We continued to invest in
our marketing team and resources to strengthen the marketing offering we
provide to all our licensees, with the introduction of bespoke marketing
workshops for our licensees. Following the successful launch of our DSW Future
Leaders programme, this had significant benefits for the DSW Network and
inspired a lot of initiatives for the future. One such initiative was our
first group-wide DSW conference which saw over 80 professionals and support
staff come together at the Midland Hotel in Manchester, to share knowledge and
ideas whilst also strengthening relationships across the network.
Adjusted PBT and Exceptional Costs
Adjusted PBT is calculated as follows:
2024 2023
(£000's) (£000's)
Profit before tax 207 715
Share based payments 299 694
Adjusted PBT 506 1,409
Our Adjusted Pre-tax Profit was £0.5m (2023: £1.4m), which is a decrease of
64.0% on the prior year, reflecting the lower levels of licensee activities,
increased provisioning against licensee balances and increase investment in
central infrastructure noted above.
We have a share-based payment charge in the year of £0.3m which reflects the
accounting impact of the one-off issue of growth shares to partners prior to
the IPO and the senior management LTIP. The growth shares were converted to
ordinary shares on IPO and there is no dilutive impact on shareholders going
forward. The charge was spread over the period from issue to two years post
IPO and was fully expensed on 16(th) December 2023. The share-based payment
charge is expected to reduce to a more normalised basis going forward of £0.2
- £0.3m per annum; solely reflecting the executive LTIP scheme.
Taxation
The effective rate of tax (based on PBT excluding the share-based payments
charge which is non-deductible) was 24.3%, slightly below the statutory rate
primarily due to the reversal of the prior year over provision. The prior year
effective rate (16.3%) was lower due to the reversal of certain costs
previously treated as non-deductible.
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 2p (2023: 6p). Adjusted EPS removes the impact of the share-based payment
charge incurred in the year (as shown above).
Balance Sheet
Cash
The Group's business model is 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 28 days
(calculated as amounts owed to DSW Capital from licensees divided by Network
Revenue), compared to 27 days in the prior year. This remains well below the
listed peer group.
Cash generated from operations was £0.09m (2023: £1.35m). Operating cash
conversion in the year was 14% which is lower than the prior year (2023:
88%)(4) largely due to start-up funding provided to new licensee businesses.
Operating cash conversion adjusted for loans to new starts was 61% (2023:
101%). Corporation tax payments were £0.2m (2023: £0.2m).
Capital expenditure was minimal in the period (£0.05m) and lease payments of
£0.11m relate to the Head Office in Daresbury. Interest income (£0.2m) has
been earnt on licensee loans and the Group's cash balances.
The closing cash and cash equivalents balance remains healthy with cash
balances as at 31 March 2024 of £2.6m (2023: £4.6m). Cash balances have
reduced by £2.0m which is after the acquisitions of Bridgewood and STS Europe
(£0.9m combined consideration), investment in new start-up licensees of
£0.5m and paying dividends of £0.7m in the Period. The Group continues to
hold no debt facility.
Net Assets
The Group has a strong balance sheet with net assets of £7.6m at the year-end
(2023: £7.9m). We continue to retain healthy cash resources to enable us to
continue to take advantage of current recruitment and strategic acquisition
opportunities.
Dividend
While confidence in the long-term performance of the Group remains unchanged,
the Board acknowledges the suppressed earnings in FY24 and has taken the
decision to propose a reduced final ordinary dividend for the year ended 31
March 2024 of 0.75 pence per share, giving a total dividend for the year ended
31 March 2024 of 2.0 pence per share. The Board anticipates maintaining
dividends at a reduced level until market conditions improve and earnings
return to growth.
An interim dividend of 2.0 pence per share in respect of the six months to 30
September 2023 was paid on 23 January 2024.
The final dividend will be approved at the Company's AGM which will be held at
10:00 a.m. on 24 September 2024 at The Midland Hotel, Manchester, M60 2DS.
Since IPO in December 2021, the Group will have paid out 9.98 pence per share
in dividends, following the approval of the FY24 Final Dividend of 0.75 pence.
Pete Fendall
Chief Operating Officer & Interim Chief Financial Officer
1 July 2024
1 Total income from licensees represents statutory revenue plus share of
results in associates.
2 Adjusted EBITDA is defined as Adjusted profit before tax adjusted to add
back impairment of loans due from associated undertakings (£130k), finance
costs (£22k), depreciation (£144k), amortisation (£59k) and deduct finance
income (£236k).
3 Adjusted profit before tax is defined as profit before tax adjusted to add
back the items not considered part of underlying trading including share-based
payment expense. It is a non-GAAP metric used by management and is not an IFRS
disclosure.
4 Cash conversion is calculated as cash generated by operations divided by
Operating cash flows before movements in working capital.
Consolidated statement of comprehensive income
For the year ended 31 March 2024
2024 2023
Note £'000 £'000
Continuing operations
Revenue 4 2,311 2,714
Gross profit 2,311 2,714
Share of results of associates 16 120 284
Share of results of jointly controlled entity 17 56 25
Administrative expenses (2,364) (2,366)
Operating profit 123 657
Adjusted operating profit 422 1,351
Share based payments expense (299) (694)
Operating profit 123 657
Finance income 9 236 104
Impairment of loans due from associated undertakings (130) (22)
Finance costs 10 (22) (24)
Profit before tax 207 715
Income tax 11 (123) (230)
Profit for the year 6 84 485
Total comprehensive income for the year attributable to owners of the Company 84 485
Earnings per share
From continuing operations
Basic 13 £0.004 £0.02
Diluted 13 £0.004 £0.02
Consolidated statement of financial position
As at 31 March 2024
As restated (See Note 29)
2024 2023
Note £'000 £'000
Non-current assets
Intangible assets 14 696 748
Property, plant and equipment 15 363 440
Lease receivable 24 82 -
Investments 18 1,499 1,025
Investments in associates 18 145 209
Interests in jointly controlled entities 18 21 39
Prepayments and Accrued Income 19 800 69
Deferred tax asset 21 2 9
3,608 2,539
Current assets
Trade receivables 19 839 924
Prepayments and Accrued Income 19 452 344
Other receivables 19 978 567
Current tax asset 30 -
Lease receivable 24 49 -
Cash and bank balances 2,632 4,584
4,980 6,419
Total assets 8,588 8,958
Current liabilities
Trade payables 22 192 162
Other taxation 22 179 211
Other payables 22 84 76
Accruals and Deferred Income 22 94 133
Current tax liabilities 22 - 95
Lease liability 24 153 91
702 768
Net current assets 4,278 5,651
Lease liability 24 218 220
Dilapidation provision 22 80 75
298 295
Total liabilities 1,000 1,063
Net assets 7,588 7,895
Equity
Share capital 23 55 55
Share premium 5,268 5,271
Share-based payment reserve 25 498 1,868
Retained earnings 25 1,767 701
Total Equity attributable to owners of the Company 7,588 7,895
Company statement of financial position
As at 31 March 2024
As restated (See Note 29)
2024 2023
Note £'000 £'000
Non-current assets
Intangible assets 14 696 748
Property, plant and equipment 15 64 40
Lease receivable 24 82 -
Investments 18 1,499 1,025
Investments in associates 18 145 209
Interests in jointly controlled entities 18 21 39
Prepayments and Accrued Income 19 800 69
Other receivables 19 130 -
Deferred tax asset 21 2 9
3,439 2,139
Current assets
Trade receivables 19 818 869
Prepayments and Accrued Income 19 386 287
Other receivables 19 978 696
Current tax asset 30 -
Lease receivable 24 49 -
Cash and bank balances 2,615 4,563
4,876 6,415
Total assets 8,315 8,554
Current liabilities
Trade payables 22 81 32
Other taxation 22 166 210
Other payables 22 83 76
Accruals and Deferred Income 22 85 128
Current tax liabilities 22 - 95
Lease liability 24 54 -
469 541
Net current assets 4,407 5,874
Non-current liabilities
Lease liability 24 91 -
Dilapidation provision 1 -
92 -
Total liabilities 561 541
Net assets 7,754 8,013
Equity
Share capital 23 55 55
Share premium 5,268 5,271
Share-based payment reserve 25 498 1,868
Retained earnings 1,933 819
Total Equity attributable to owners of the Company
7,754 8,013
The profit after tax for the Company was £132,000 (2023: £497,000). Under
s408 of the Companies Act 2006, the company is exempt from the requirement to
present its own income statement.
Consolidated statement of changes in equity
For the year ended 31 March 2024
Share capital Share premium Share-based payments reserve Retained earnings Total equity
£'000 £'000 £'000 £'000 £'000
Balance at 31 March 2022 54 5,280 1,174 1,477 7,985
Profit for the year - - - 485 485
Dividends - - - (1,261) (1,261)
Share-based payments - - 694 - 694
Issue of shares in year 1 (9) - - (8)
Balance at 31 March 2023 55 5,271 1,868 701 7,895
Profit for the year - - - 84 84
Dividends - - - (687) (687)
Share-based payments - - 299 - 299
Issue of shares in year - (3) - - (3)
Reserves transfer (Note 25) - - (1,669) 1,669 -
Balance at 31 March 2024 55 5,268 498 1,767 7,588
Company statement of changes in equity
For the year ended 31 March 2024
Share capital Share premium Share-based payments reserve Retained earnings Total equity
£'000 £'000 £'000 £'000 £'000
Balance at 31 March 2022 54 5,280 1,174 1,583 8,091
Profit for the year - - - 497 497
Dividends - - - (1,261) (1,261)
Share-based payments - - 694 - 694
Issue of shares in year 1 (9) - - (8)
Balance at 31 March 2023 55 5,271 1,868 819 8,013
Profit for the year - - - 132 132
Dividends - - - (687) (687)
Share-based payments - - 299 - 299
Issue of shares in year - (3) - - (3)
Reserves transfer (Note 25) - - (1,669) 1,669 -
Balance at 31 March 2024 55 5,268 498 1,933 7,754
Consolidated cash flow statement
For the year ended 31 March 2024
2024 2023
Note £'000 £'000
Profit for the year 84 485
Adjustments for:
Income tax expense 11 123 230
Net interest income (214) (80)
Depreciation of property, plant and equipment 15 144 139
Amortisation of intangible assets 14 59 46
Share-based payment expense 25 299 694
Impairment of loans due from associated undertakings 130 22
Operating cash flows before movements in working capital 625 1,536
Increase in trade and other receivables (589) (308)
(Decrease) / Increase in trade and other payables (32) 41
Decrease in amounts owed from associates in relation to profit share 81 81
Cash generated by operations 85 1,350
Income taxes paid (241) (203)
Net cash (outflow) / inflow from operating activities (156) 1,147
Investing activities
Purchases of IP and trademarks 14 (7) -
Purchases of property, plant and equipment 15 (43) (43)
Investments made in the period 18 (1,180) -
Net cash used in investing activities (1,230) (43)
Financing activities
Dividends paid 12 (687) (1,261)
Lease payments 24 (113) (77)
Lease receivable amounts received 24 5 -
Interest received ( ) 233 104
Share issue costs (4) (8)
Net cash used in financing activities (566) (1,242)
Net decrease in cash and cash equivalents (1,952) (138)
Cash and cash equivalents at beginning of year 4,584 4,722
Cash and cash equivalents at end of year 2,632 4,584
Notes to the financial statements
1. General information
DSW Capital plc, registered as a public company in England and Wales, with
registered number: 07200401. The principal activity of the Company and its
subsidiaries, DSW Services LLP and DSW Operations Limited, (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 financial information set out in this preliminary announcement does not
constitute statutory accounts as defined by section 434 of the Companies Act
2006.
The results for the year ended 31 March 2024 have been extracted from the full
accounts of the Group for that year 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 2024 were approved by
the Directors on 1 July 2024.
The financial information for the year ended 31 March 2023 is derived from the
statutory accounts for that year, which have been delivered to the Registrar
of Companies. The report of the auditor on those filed accounts was
unqualified.
The accounts for the year ended 31 March 2024 and 31 March 2023 did not
contain a statement under s498 (1) to (4) of the Companies Act 2006. The
statutory accounts for the year ended 31 March 2024 will be distributed to
shareholders on 22 August 2024, in advance of the Annual General Meeting and
made available on our website (https://dswcapital.com/investors/) or on
request by contacting the Company Secretary at the Company's Registered
Office.
Statement of Compliance
The Group financial statements have been properly prepared in accordance with
UK adopted international accounting standards; the Parent Company financial
statements have been properly prepared in accordance with UK adopted
international accounting standards and has applied in accordance with the
provisions of the Companies Act 2006.
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 the current year, the Group has applied a number of amendments to IFRS
accounting standards issued by the International Accounting Standards Board
(IASB) that are mandatorily effective for an accounting period that begins on
or after 1 January 2023. Their adoption has not had any material impact on the
disclosures or on the amounts reported in these financial statements.
· IFRS 17 - Insurance Contracts
· Amendments to IAS 1 and IFRS Practice Statement 2 - Disclosure of Accounting
Policies
· Amendment to IAS 8 - Definition of Accounting Estimates
· Amendments to IAS 12 - Deferred Tax on Leases and Decommissioning Obligations
· Amendments to IAS 12 - Deferred Tax Assets and Liabilities related to Pillar
Two Income Taxes
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.
· IFRS S1 - General Requirements for Disclosure of Sustainability-related
Financial Information
· IFRS S2 - Climate-related Disclosures
· Amendments to IFRS 7 - Supplier Finance Arrangements and the Classification
and Measurement of Financial Instruments
· Amendments to IFRS 16 - Measurement of a Sale and Leaseback Transaction
· IFRS 18 - Presentation and Disclosures in Financial Statements
· IFRS 19 - Subsidiaries without Public Accountability: Disclosures
· Amendments to IAS 1 - Classification of Liabilities as current or non-current
· Amendments to IAS 1 - Classification of Debt with Covenants
· Amendments to IAS 7 - Supplier Finance Arrangements
The directors do not expect 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 the cash balance and the forecasts for the next
twelve months following the date of this 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. The Group has a significant cash balance of £2.6m, no debt, has a
model which is cash generative and a limited fixed cost base. At 31 March
2024, the Group has net assets of £7.6m (2023: £7.9 million) and net current
assets of £4.3m (2023: £5.7m) which reflects the strong financial position
for the Group. In addition, the Group is profitable with adjusted profit after
tax of £0.4m in the year ended 31 March 2024 (£1.2m year end 31 March 2023).
Scenario analysis has been performed on the underlying forecasts and, given
the Group's cash balance is over 20% greater than the size of the forecast
annual cost base, this demonstrates that the Company and the Group have
adequate resources to continue in operational existence for the foreseeable
future.
As such, the Group financial statements have been prepared on a going concern
basis as the Directors have a reasonable expectation that the Group has
adequate resources to continue in operational existence for the foreseeable
future.
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.
To determine the fair value of the long-term loans, the Directors of the
Company uses the discounted cashflow valuation technique. Differences may
arise between the transaction price of the loan at initial recognition and the
amount determined at initial recognition using the valuation technique. Any
such differences are capitalised in prepayments and accrued income where they
are held as Contract Assets and amortised over the loan term.
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
As a lessee
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 average incremental borrowing rate
applied to lease liabilities during the year is 7.80%.
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.
As a lessor
The Group applies IFRS 16 to account for leases. When the Group acts as a
lessor, it determines at lease inception whether each lease is a finance lease
or an operating lease. Whenever the terms of the lease transfer substantially
all the risks and rewards of ownership to the lessee, the contract is
classified as a finance lease. All other leases are classified as operating
leases.
When the group is an intermediate lessor, it accounts for the head lease and
the sub-lease as two separate contracts. The sub-lease is classified as a
finance or operating lease by reference to the right-of-use asset arising from
the head lease.
Amounts due from lessees under finance leases are recognised as receivables at
the amount of the group's net investment in the leases. Finance lease income
is allocated to accounting periods so as to reflect a constant periodic rate
of return on the group's net investment outstanding in respect of the leases.
Subsequent to initial recognition, the group regularly reviews the estimated
unguaranteed residual value and applies the impairment requirements of IFRS 9,
recognising an allowance for expected credit losses on the lease receivables.
Finance lease income is calculated with reference to the gross carrying amount
of the lease receivables, except for credit-impaired financial assets for
which interest income is calculated with reference to their amortised cost
(i.e. after a deduction of the loss allowance).
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.
Retirement and termination benefit costs
Payments to defined contribution retirement benefit plans are recognised as an
expense in the consolidated statement of comprehensive income 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 the consolidated statement of
comprehensive income 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 the consolidated statement of
comprehensive income 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 in the statement of financial position 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.
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 25.
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 the consolidated statement of
comprehensive income such that the cumulative expense reflects the revised
estimate, with a corresponding adjustment to reserves.
Finance Income
The Group's finance income includes interest income on long-term loans made to
licensees which is calculated using the effective interest method, and
interest received on cash and cash equivalents.
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. Where 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 loans
provided to licensees have 20-year terms and are only repayable at the end of
the term and therefore in substance, are more akin to investments. The average
interest rate is 6.1%.
Share based payments
In the years ended 31 March 2024 and 31 March 2023, 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 three years
from the date of the statement of financial position.
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
2024 2023
£'000 £'000
External revenue by product line
Licence Fee Income 2,183 2,549
Profit Share Income 128 165
Total 2,311 2,714
A further breakdown of revenue by reporting line is shown below:
2024 2023
£'000 £'000
External revenue by reporting line
Licence fees attributable to Mergers & Acquisition ('M&A') 1,475 1,817
Licence fees attributable to Other 708 732
Profit share attributable to M&A 119 165
Profit share attributable to Other 9 -
Total Revenue 2,311 2,714
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 licence
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 Licence fees attributable to M&A are
revenues of approximately £0.40m (2023: £0.68m) which arose from licence fee
income from the Group's largest licensee. Only one other single licensee
contributed 10 per cent or more to the Group's revenue in 2024 (none in 2023).
6.Profit for the year
Profit for the year has been arrived at after charging/(crediting):
2024 2023
£'000 £'000
Depreciation of property, plant and equipment 144 139
Amortisation 59 46
Employee pension 25 14
Expected credit loss - licence fees (7) 130
Expected credit loss - outstanding loans 130 22
Expected credit loss - profit share (3) (84)
7. Auditors' remuneration
2024 2023
£'000 £'000
Audit of the Group financial statements 66 63
Fees payable to the Company's auditors in respect of:
Accountancy services 2 -
Total auditors' remuneration 68 63
Non-audit services relate to iXBRL conversion work performed on the company's
financial statements for corporation tax purposes.
8. Staff costs
The average number of persons employed by the Group (including Directors)
during the year, analysed by category was as follows:
2024 2023
Number Number
Central Heads 15 15
15 15
Their aggregate remuneration comprised:
2024 2023
£'000 £'000
Wages and salaries 881 790
Social security costs 118 98
Other pension costs (see note 26) 25 14
1,024 902
'Other pension costs' relate to the defined contribution plan charge as
detailed in Note 26.
Aggregate Directors' remuneration
2024 2023
£'000 £'000
Wages and salaries 524 455
Social security costs 66 63
Other pension costs (see note 26) 18 8
608 526
The highest paid Director's total emoluments in the year were £225,500 (2023:
£213,500) of which £nil (2023: £nil) related to pension costs.
Directors' transactions
Dividends totalling £687,362 were paid in the year in respect of ordinary
shares (2023: £1,260,953). Of the dividends, £182,099 (2023: £324,682) were
paid to Directors of the Company who were currently serving at the time of
payment. See Note 12 for details.
9. Finance income
2024 2023
£'000 £'000
Interest income:
Loan Interest 124 80
124 80
Other finance income 112 24
Total finance income 236 104
10. Finance costs
2024 2023
£'000 £'000
Interest costs on lease (18) (19)
Other finance costs (4) (5)
(22) (24)
11. Income Tax
2024 2023
£'000 £'000
Corporation income tax:
Current year 135 260
Adjustments in respect of prior years (19) (25)
116 235
Deferred tax (see note 21)
Origination and reversal of temporary differences 7 (5)
123 230
The standard rate of corporation tax applied to reported profit is 25% (2023:
19%).
The charge for the year can be reconciled to the profit before tax as follows:
2024 2023
£'000 £'000
Profit before tax on continuing operations 207 715
Tax at the UK corporation tax rate of 25% (2023: 19%) 52 136
Tax effect of expenses that are not deductible in determining taxable profit 5 (14)
and reversal of prior year expenses not deducted previously
Depreciation in excess of capital allowances - 7
Other tax effects 12 4
Tax effect of adjustments in relation to prior periods (19) (25)
Tax effect of income not taxable in determining taxable profit (9) (5)
Movement in deferred tax assets/liabilities 7 (5)
Tax effect of share based payment adjustment 75 132
Tax expense for the year 123 230
From 1 April 2023, there is no longer a single corporation tax rate for
non-ring-fenced profits. At the spring budget 2021, the government announced
that the corporation tax rate for non-ring-fenced profits would increase to
25% for profits above £250k. Companies with profits between £50,000 and
£250,000 pay tax at the main rate, reduced by a marginal relief.
12. Dividends
2024 2023
Amounts recognised as distributions to equity holders in the year: £'000 £'000
Dividend for the year to 31 March 2023 consisting of:
Interim catch up dividend for the year to 31 March 2022 of £0.0056 per share - 118
Final dividend for the year to 31 March 2023 of £0.02 per share (2022: 421 772
£0.0366 per share)
Interim dividend for the year to 31 March 2024 of £0.0125 per share (2023: 266 371
£0.0176 per share)
687 1,261
Final dividend for the year to 31 March 2024 of £0.0075 per share (2023: 164 439
£0.02 per share)
164 439
The proposed final dividend is subject to approval by shareholders at the
Annual General Meeting and has not been included as a liability in these
financial statements. The dividend record date is 13 September 2024 and the
dividend payment date is 27 September 2024. The ex-dividend date is 12
September 2024.
13. Earnings per share
From continuing operations
The calculation of the basic and diluted earnings per share is based on the
following data:
2024 2023
Earnings £'000 £'000
Earnings for the purposes of basic earnings per share being net profit 84 485
attributable to owners of the Company
Effect of dilutive potential ordinary shares: - -
Earnings for the purposes of diluted earnings per share 84 485
2024 2023
Number of shares
Weighted average number of ordinary shares for the purposes of basic earnings 21,158,039 21,075,581
per share
Effect of dilutive potential ordinary shares:
Share Options 768,321 674,454
Weighted average number of ordinary shares for the purposes of diluted 21,926,360 21,750,035
earnings per share
From continuing operations
2024 2023
Earnings £ £
Basic earnings per share 0.004 0.02
Diluted earnings per share 0.004 0.02
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; and
· The tax effect of the above item
The calculation of adjusted basic and adjusted diluted earnings per share is
based on:
2024 2023
£'000 £'000
Profit after tax on continuing operations 84 485
Adjusted for:
Share-based payment expense 299 694
Adjusted earnings for the purposes of adjusted basic and adjusted diluted 383 1,179
earnings per share
2024 2023
Earnings £ £
Adjusted basic earnings per share 0.02 0.06
Adjusted diluted earnings per share 0.02 0.05
Tax adjustments of £nil (2023: £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
25% 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
Intellectual Property & Trademarks
Group & Company: £'000
Cost
At 1 April 2022 907
Additions -
At 31 March 2023 907
Additions 7
Disposals (49)
At 31 March 2024 865
Amortisation
At 1 April 2022 113
Charge for the year 46
At 31 March 2023 159
Charge for the year 59
Disposals (49)
At 31 March 2024 169
Carrying amount
At 31 March 2023 748
At 31 March 2024 696
All intangible assets relate to intellectual property on which licence fees
are charged. £645k of the carrying amount as at 31 March 2024 (2023: £676k)
relates to Camlee Group. Management have determined that the present value of
future cashflows to be derived from the respective licence fee income is
greater than the carrying amount and, as such, the intellectual property does
not need to be impaired.
15. Property, plant and equipment - Group
Right of Use Assets Office Fixtures, Fittings & Equipment Total
£'000 £'000 £'000
Cost
At 1 April 2022 520 221 741
Additions 11 43 54
At 31 March 2023 531 264 795
Additions 24 43 67
At 31 March 2024 555 307 862
Accumulated depreciation
At 1 April 2022 52 164 216
Charge for the year 105 34 139
At 31 March 2023 157 198 355
Charge for the year 109 35 144
At 31 March 2024 266 233 499
Carrying amount
At 31 March 2023 374 66 440
At 31 March 2024 289 74 363
Company
Office Fixtures, Fittings & Equipment Total
Right of Use Asset
£'000 £'000 £'000
Cost
At 1 April 2022 - 128 128
Additions - 28 28
At 31 March 2023 - 156 156
Additions 16 35 51
At 31 March 2024 16 191 207
Accumulated depreciation
At 1 April 2022 - 89 89
Charge for the year - 27 27
At 31 March 2023 - 116 116
Charge for the year 1 26 27
At 31 March 2024 1 142 143
Carrying amount
At 31 March 2023 - 40 40
At 31 March 2024 15 49 64
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
2024 2023
£'000 £'000
The Group's share of profit from continuing operations 120 284
The Group's share of profit and total comprehensive income 120 284
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
2024 2023
£'000 £'000
The Group's share of profit from continuing operations 56 25
The Group's share of profit and total comprehensive income 56 25
18. Investments - Group and Company
As restated
2024 2023
£'000 £'000
Financial assets measured under the equity method
Investment in Associates 145 209
Investment in jointly controlled entities 21 39
Financial assets measured at amortised cost
Other investments 1,499 1,025
Total Investments 1,665 1,273
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 prior year Investments balance has been restated in the current year due
to an error that occurred in the calculation of the loans' present value on
initial recognition resulting in a balance sheet reclassification. This has
been corrected in the current year. For full details of the prior period
adjustment please refer to Note 29.
The movement in Investment in Associates and Investment in jointly controlled
entities is included in the cashflow statement as increase in amounts due from
associates.
19. Trade and other receivables
As restated As restated
Company Company Group Group
2024 2023
2024 2023
£'000 £'000 £'000 £'000
Trade receivables 893 910 914 965
Loss allowance (75) (41) (75) (41)
818 869 839 924
Other receivables 1,346 804 1,346 805
Loss Allowance (368) (238) (368) (238)
978 566 978 567
Prepayments and Accrued Income 1,194 368 1,260 425
Loss Allowance (8) (12) (8) (12)
1,186 356 1,252 413
2,982 1,791 3,069 1,904
Amounts due from subsidiary undertakings 130 130 - -
3,112 1,921 3,069 1,904
Included in prepayments and accrued income for both the company and the group
are contract assets amounting to £800k (2023: £69k) due in greater than 1
year.
Other receivables are made up from loans due from licensees and prepayments
and accrued income relates to profit share due from licensees and contract
assets as detailed below. Amounts due from subsidiary undertakings, in other
receivables on the company statement of financial position, are interest free
and repayable on demand and have been classified as due in greater than one
year.
Contract Assets
Amounts relating to contract assets, which are disclosed within prepayments
and accrued income above, are balances that can be classified as incremental
costs of obtaining a revenue contract. These include the breakout incentives
which provide businesses with an initial free-cash injection, as well as the
below-market element of loans offered to licensee businesses.
Amortisation is recognised on a straight-line basis over the life of the
contract. The average remaining length of contract to which these assets
relate is 22 years. In the year ended 31 March 2024, amortisation amounting to
£14k was recognised within admin expenses (year ended 31 March 2023: £9k was
recognised in admin expenses).
As restated
2024 2023
£'000 £'000
Contract assets
Breakout Incentives 369 -
Below Market Element of Loans to Licensees 438 72
807 72
Current 24 3
Non-Current 783 69
Total Investments 807 72
As discussed in Note 2, the Group uses the discounted cashflow valuation
technique to measure the fair value of the contract assets that are not traded
in an active market. However, in accordance with IFRS 13 and IFRS 9, the fair
value of an instrument at inception is generally the transaction price. If the
transaction price differs from the amount determined at inception using the
valuation technique, that difference is capitalised in prepayments and accrued
income. The differences yet to be recognised in profit or loss are as follows:
As restated
2024 2023
£'000 £'000
Balance at the beginning of the year 72 184
New transactions 713 -
Restatement (Note 29) 28 (103)
Amounts recognised in P&L (6) (9)
Balance at the end of the year 807 72
For details of the prior period adjustment please refer to Note 29.
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 131 days (2023: 102 days) and no interest has
been charged on the receivables.
The ageing of trade receivables net of the loss allowance at the reporting
date was as follows:
2024 2023
£'000 £'000
Not past due 580 772
Past due 61 to 90 days 32 7
Past due 91 to 120 days 95 53
Past due over 120 days 132 92
839 924
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
Analysis of changes in net debt
01 April 2022 Cash flow Other non-cash changes 31 March 2023
Cash & bank balances 4,722 (215) - 4,584
Lease Liability (385) 77 (3) (311)
Net Debt 4,337 (138) (3) 4,273
01 April 2023 Cash flow Other non-cash changes 31 March 2024
Cash & bank balances 4,584 (1,952) - 2,632
Lease Liability (311) 113 (173) (371)
Net Debt 4,273 (1,839) (173) 2,261
Balances at 31 March 2024 comprise:
Current assets
£'000
Cash and bank balances 2,632
21. Deferred tax - Group and Company
The following are the major deferred tax liabilities and assets recognised by
the Group and movements thereon during the current and prior reporting period.
2024 2023
£'000 £'000
At the beginning of the year asset 9 4
Charged in the year (7) 5
At the end of the year asset 2 9
22. Trade and other payables
Company Company Group Group
2024 2023 2024 2023
£'000 £'000 £'000 £'000
Trade payables 81 32 192 162
Other taxation and social security 166 210 179 211
Other payables 83 76 84 76
Accruals and Deferred Income 85 128 94 133
Corporation Tax - 95 - 95
415 541 549 677
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:
Company Company 2024 2023
2024 2023 Group Group
£'000 £'000 £'000 £'000
Dilapidation provision 1 - 80 75
1 - 80 75
The dilapidation provision relates to the estimated cost of returning a leased
property to its original state at the end of the lease in accordance with the
lease terms. The average lease term remaining is 2.75 years.
23. Share capital - Group and Company
2024 2023
Number £'000 Number £'000
Authorised, issued and fully paid:
Ordinary shares 21,926,360 55 21,926,360 55
21,926,360 55 21,926,360 55
2023
Number £'000
As at 31 March 2023 21,926,360 55
Share issue - -
As at 31 March 2024 21,926,360 55
24. Leases
DSW Services, a subsidiary of DSW Capital PLC, entered into a formal lease
arrangement for the Daresbury office, effective from 1 October 2021. Further
detail on the lease accounting policy can be found in note 2.
During the current year, DSW Capital PLC entered into a lease agreement for a
London-based office space, effective from 8 February 2024. The majority of the
leased office space has been sub-let by DSW Capital PLC, with both the lease
and sub-lease due to expire after 3 years.
The consolidated statement of financial position and consolidated statement of
comprehensive income show the following amounts relating to leases:
Right-of-use assets Company Group
£'000 £'000
Balance at 1 April 2022 468
Additions in the year - 11
Depreciation - (105)
Balance at 31 March 2023 - 374
Additions in the year 16 24
Depreciation (1) (109)
Balance at 31 March 2024 15 289
Lease liabilities Company Group
£'000 £'000
Balance at 1 April 2022 - 385
New leases recognised in the year - 11
Interest expense - 19
Lease amounts invoiced and paid in the year - (77)
Lease amounts invoiced and included within creditors at 31 March 2023 - (27)
Balance at 31 March 2023 - 311
New leases recognised in year 147 155
Interest expense 2 18
Lease amounts invoiced and paid in the year (4) (113)
Lease amounts invoiced and included within creditors at 31 March 2024 - -
Balance at 31 March 2024 145 371
Income Statement Company Company Group Group 2023
2024 2023 2024
£'000 £'000 £'000 £'000
Interest expense (note 10) 2 - 18 19
Expense relating to leases of low-value assets 8 10 9 10
Expense relating to short-term leases 63 63 63 63
73 73 90 92
As at the 31 March 2024, 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:
Company Company Group Group
2024 2023 2024 2023
£'000 £'000 £'000 £'000
Within one year 54 - 153 91
In one to two years 55 - 160 96
In two to three years 36 - 59 101
In three to four years - - - 23
In over four years - - - -
145 - 371 311
The total cash outflow in the year paid in respect of leases was £113,000
(2023: £76,800). Under the terms of the lease, £108,636 per annum is charged
until the first break date in October 2026 on the Daresbury lease and £62,216
per annum is charged on the London office lease.
Leases as a lessor
During the current year, DSW Capital PLC entered into a lease agreement for a
London-based office space, effective from 8 February 2024. The majority of the
leased office space has been sub-let by DSW Capital PLC, with both the lease
and sub-lease due to expire after 3 years. The sub-lease is classified as a
finance sub-lease.
During the year, the Group recognised interest income on lease receivables of
£2k.
The total cash inflow in the year in respect of the sub lease was £5,000
(2023: £nil).
The group's finance lease arrangements do not include variable payments.
The following table sets out a maturity analysis of lease receivables, showing
the undiscounted lease payments to be received after the reporting date.
2024 2023
Amounts receivable under finance leases: £'000 £'000
Less than one year 59 -
In one to two years 56 -
In two to three years 35 -
Total undiscounted lease receivable 150 -
Unearned finance income (19) -
Net investment in the lease 131 -
Undiscounted lease payments analysed as:
Recoverable after 12 months 91 -
Recoverable within 12 months 59 -
150 -
Net investment in the lease analysed as:
Recoverable after 12 months 82 -
Recoverable within 12 months 49 -
131 -
25. Share-based payments
In the year ended 31 March 2024 the Group operated three equity-settled
share-based payment plans as described below.
The Group recognised total expenses of £299,412 in respect of equity-settled
share-based payment transactions in the year ended 31 March 2024.
The charge to the income statement is set out below:
Share plans: 2024 2023
Growth share plan 254,012 368,269
Legacy Awards - 253,301
PSP Awards 45,400 72,217
Total SBP expense 299,412 693,787
Share-based payments movement for the year ended 31 March 2024:
SBP Expense (£) SBP Reserve (£) Retained Earnings (£)
Growth share plan 254,012 (254,012)
Reserve transfer of growth shares 1,669,583 (1,669,583)
Legacy Awards - -
PSP Awards 45,400 (45,400)
Total movement 299,412 1,370,171 (1,669,583)
Share-based payments movement for the year ended 31 March 2023:
SBP Expense (£) SBP Reserve (£)
Growth share plan 368,269 (368,269)
Legacy Awards 253,301 (253,301)
PSP Awards 72,217 (72,217)
Total movement 693,787 (693,787)
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.
After the IPO, 214,308 C Growth Shares and 17,268 E Growth shares were
converted to 1,150,548 ordinary shares in issue. 45,479 D Growth Shares were
converted to Deferred Shares which were cancelled at the AGM in September
2022. The Group recognised total expenses of £254,012 related to the Growth
Share Plan in the year ended 31 March 2024.
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 three years from the balance sheet date.
During the year ended 31 March 2024, the Growth Shares vested, and the
remaining expense has been recognised.
Since the Growth Shares have vested, the total share-based payments charge
relating to the Growth Shares (£1,669k) has been reclassified from the
Share-Based Payment Reserve to Retained Earnings.
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 was 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 would 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.
Both the CFO Legacy Awards and the Leeds Legacy Awards vested on 31 March
2023. The Leeds Legacy Awards have subsequently been exercised in full whilst
the CFO Legacy Awards have now lapsed. No further charge has been recognised
in the year ended 31 March 2024.
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% 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 2024 are shown below:
2024 2023
No. of share options No. of share options
Outstanding at beginning of year 512,185 95,000
Granted during the year 293,796 417,185
Forfeited during the year (465,325) -
Outstanding at the end of the year 340,656 512,185
Exercisable at the end of the year - -
There were no awards exercised or expired in the period. During the period to
31 March 2024, it was announced that Nicole Burstow would be leaving DSW
Capital. As such, her PSP awards to date have been forfeited.
The Group used the Black Scholes Model to calculate the anticipated value of
the PSP awards. The charge for the year is £45,400.
26. 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 £24,929 (2023: £14,274)
represents contributions payable to these plans by the Group at rates
specified in the rules of the plans. As at 31 March 2024 there was £2,494
(2023: £1,895) which had not been paid over to the plans and is included
within creditors due in less than 1 year.
27. 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 2024 Company 2023 Group 2024 Group 2023
£'000 £'000 £'000 £'000
Cash and cash equivalents 2,615 4,563 2,632 4,584
Trade and other receivables 2,733 1,637 2,624 1,563
5,348 6,200 5,256 6,147
Financial Liabilities
Held at amortised cost
Company 2024 Company 2023 Group 2024 Group 2023
£'000 £'000 £'000 £'000
Trade and other payables 249 236 370 371
249 236 370 371
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
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 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 23.
28. Events after the reporting period
Since the year end the Directors have recommended the payment of a final
ordinary dividend of £0.0075 per share for the year ended 31 March 2024.
29. Prior period adjustment
During the year ended 31 March 2020, the company issued a loan to Newco
Limited amounting to £1,125k with a 20-year term as part of a management
buyout agreement with Camlee Group. The loan, issued at below-market interest
rate, was classified as an investment measured at amortised cost in the
financial statements. However, a classification error in calculating the fair
value of the loan on initial recognition led to the overstatement of the day
one loss in prepayments and accrued income by £104k and an understatement of
the investments balance by the same amount. Management have corrected this by
reclassifying the amount between the two restating the prior year comparatives
accordingly.
Due to the initial £104k overstatement, this also resulted in an
understatement of Interest Income by £7k and an overstatement of amortisation
by £21k. Management have evaluated that the total impact of this error on the
previous periods' profit and loss is £28k, which is immaterial.
Consequently, the retained earnings balance has not been restated, and the
full adjustment was recognised in the current year's profit and loss.
Since the only material restatement pertains to the reclassification between
investments and prepayments and accrued income balances, management has opted
to correct the error in year ended 31 March 2023. A third statement of
financial position, as at the beginning of the earliest comparative period
(year ended 31 March 2022), has not been presented as both the restatement of
£104k and the adjusted balances would be the same as the position as at 31
March 2023.
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
current shareholders.
2024 2023
Revenue and Cost Recharges Revenue and Cost Recharges
£'000 £'000
PHD Industrial Holdings 202 252
DSW Investments 2 LLP (107) (104)
Other investments 592 684
Totals 687 832
Other investments relate to routine and similar transactions which arose in
the ordinary course of business, with DSW CF Leeds, 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:
2024 2023
Amounts due from related parties Amounts due from related parties
£'000 £'000
DSW Investments 2 LLP (34) (33)
Other investments 237 277
Totals 203 244
Salary and fees payable to James Dow and Jon Schofield are as disclosed in the
Remuneration and Nominations Committee Report. Salary totalling £43,340
(2023: £41,300) has been paid to Susie Dow in the year.
Remuneration of key management personnel
The remuneration of the key management personnel of the Group, is set out
below in aggregate for each of the categories specified in IAS.
2024 2023
£'000 £'000
Wages and salaries 621 540
Social security costs 77 74
Other pension costs (see note 26) 20 9
718 623
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