REG - DSW Capital PLC - Half Year Results
01/12/2022 07:00
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RNS Number : 1688I DSW Capital PLC 01 December 2022
1 December 2022
DSW CAPITAL PLC
("DSW Capital", "DSW" or the "Group")
(AIM: DSW)
Half Year Results
Heightened profile following IPO helped to drive network growth
DSW Capital, a profitable, fast growing, mid-market, challenger professional
services licence network and owner of the Dow Schofield Watts brand, is
pleased to announce its half year results for the six-month period ended 30
September 2022 ("H1 23" or the "Period").
The Group has delivered a strong performance in the Period with network
revenue rising to £9.8m, up 34.5% compared to the same period in the prior
year (H1 22: £7.3m), and is currently on track to deliver results for the
year ended 31 March 2023 ("FY23") in line with market expectations.
Financial highlights
· Network Revenue up 34.5% at £9.8m (H1 22: £7.3m)
· Total income from licensees up 40.4% at £1.6m (H1 22: £1.2m)
· Adjusted Pre-Tax Profit £0.9m (H1 22: £0.8m)
· Statutory Profit before tax £0.6m (H1 22: £0.7m)
· Strong operating cash conversion of 85.1% with £4.6m cash at period end
· Strong balance sheet with Net Assets of £7.8m (H1 22: £2.7m)
· Interim dividend of 1.76p per share
Operational highlights
· Fee Earners at the Period end increased to 93 (HY 22: 81), up 14.8% YoY,
demonstrating the attractiveness of the licence model and the network's
heightened profile following IPO, which are negating wider challenges in the
recruitment market
· Presence in Scotland expanded with two new offices, Edinburgh and Glasgow, and
three new partners
· Additional partner welcomed to the Wealth Planning service line post Period
end in October 2022
· The Group has also entered into a commercial support arrangement with
Freelands Finance Ltd, an Investor Relations Advisory business. Working in
collaboration with this business is expected to provide a source of referral
opportunities to the DSW Network
· Named by Experian* as the 10(th) most active corporate finance adviser in the
UK in the first half of 2022, compared to 13(th) in the first half of 2021
· Shortlisted for a number of awards, including 'Best Newcomer Award' at the AIM
Awards 2022 and 'Flotation of the Year' at the Insider North West Dealmakers
Awards 2022
Current trading and outlook
· Demand for the DSW Network's services, which are primarily SME focused,
remains strong and the Business Recovery team is continuing to see an increase
in activity
· Fee Earners at 31 October 2022 increased to 97, as teams continue to recruit
high calibre candidates
· Opportunity for organic and acquisition driven growth remains significant and
the Directors remain confident in the strength and resilience of the Group's
business model
· Currently on track to meet market expectations for FY23
* Experian Market IQ: H1 2022 Report
James Dow, Chief Executive Officer, said:
"Activity in the Network's primary market, the SME sector, has remained strong
to date and resilient to the many economic challenges facing the UK. Whilst a
downturn is likely to affect corporate finance and transaction services within
the Network, we would expect some of that to be offset by an increase in the
demand for insolvency, restructuring, and debt advisory services, for which we
are already seeing strong demand as corporate distress levels rise.
We continue to seek to grow the Group through diversification with the
addition and expansion of new service lines and to recruit professionals in
other disciplines to reduce the M&A weighting of our licence fees."
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 and IPO costs. 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
Online investor presentation
An online investor presentation and Q&A will be hosted by the management
team today at 1pm. To participate, please register with PI World at:
https://bit.ly/DSW_HY23 (https://bit.ly/DSW_HY23) .
Enquiries:
DSW Capital
James Dow, Chief Executive Officer Tel: +44 (0) 1928 378 029
Nicole Burstow, Chief Financial Officer Tel: +44 (0) 1928 378 039
Shore Capital (Nominated Adviser & Broker) Tel: +44 (0) 20 7408 4090
James Thomas / John More / Mark Percy
Guy Wiehahn (Corporate Broking)
Belvedere Communications dsw@belvederepr.com (mailto:dsw@belvederepr.com)
Cat Valentine Tel: +44 (0) 7715 769 078
Keeley Clarke Tel: +44 (0) 7967 816 525
About DSW Capital
DSW Capital, owner of the Dow Schofield Watts brand, is a profitable, fast
growing, mid-market, challenger professional services network with a cash
generative business model and scalable platform for growth. Originally
established in 2002, by three KPMG alumni, DSW is one of the first platform
models disrupting the traditional model of accounting professional services
firms. DSW operates licensing arrangements with 20 licensee businesses with 97
fee earners, across seven offices in England and three in Scotland. These
trade primarily under the Dow Schofield Watts brand.
DSW's vision is for the DSW Network to become the most sought-after
destination for ambitious, entrepreneurial professionals to start and develop
their own businesses. Through a licensing model, DSW gives professionals the
autonomy and flexibility to fulfil their potential. Being part of the DSW
Network brings support benefits in recruitment, funding and infrastructure.
DSW's challenger model attracts experienced, senior professionals,
predominantly with a "Big 4" accounting firm background, who want to launch
their own businesses and recognise the value of the Dow Schofield Watts brand
and the synergies which come from being part of the DSW Network.
DSW aims to scale its agile model through organic growth, geographical
expansion, additional service lines and investing in "Break Outs" (existing
teams in larger firms). The Directors are targeting high margin,
complementary, niche service lines with a strong synergistic fit with the
existing DSW Network.
CHIEF EXECUTIVE OFFICER'S STATEMENT
I am pleased to report that the Group traded strongly in the Period under
review to deliver a positive set of results, which were in line with the
Board's expectations. The Board would like to thank all our network Partners
and Employees for their hard work and commitment to the DSW brand.
Network Revenue rose to £9.8m, an increase of 34.5% compared to the same
period in the prior year (H1 22: £7.3m), as the Group benefitted from its
heightened profile following IPO. This generated a 40.4% increase in Total
Income from Licensees in the Period of £1.6m (H1 22: £1.2m), more than
covering the additional costs of the Group's AIM listing, with Adjusted
Pre-Tax Profit rising by 12.5% to £0.9m (H1 22: £0.8m).
The largest increase in costs can be attributed to the costs of being listed,
including professional fees, AIM Listing fees and PR. Further costs are a
result of investment in central infrastructure and an increased share
based-payment expense. We are generally protected from the impact of wage and
cost inflation as our licensee partners bear most of these risks.
Vision and strategy
DSW Capital is the owner of the Dow Schofield Watts brand, which is the
predominant brand it licences to licensee businesses. Our vision is to become
the most sought-after destination for ambitious, entrepreneurial professionals
to start and develop their own businesses. We aim to scale the business
through organic growth, new service lines and geographic locations, and
investing in "Break Outs" (existing teams in larger firms).
We further executed on our strategy in the Period. Fee earners within our 20
licensed businesses rose by five in the Period to 93 at 30 September 2022, as
the Group continued to benefit from its heightened profile following flotation
(Fee earners at IPO: 82), and investment in a central recruitment resource.
The growth in fee earners in the first half of the year was organic,
underpinned by the continuous work of our existing partners, supported by our
central team, to develop and build their own businesses through the
recruitment of additional partners and fee earners.
As at 31 October 2022, the number of fee earners has increased to 97, bringing
the increase in heads since IPO to 15, or 18.3%. Since the Period end, we have
also seen the launch of our new Wealth Planning business, which will work with
the existing network to further enhance our multi-disciplinary offering.
The Group remains focused on attracting "breakout" teams to augment its
organic growth and also the acquisition of licence fees. We are in constant
dialogue to encourage teams to join DSW and are confident that our efforts
will begin to bear fruit in the second half of the current financial year. Our
geographical expansion in Scotland continued with the opening of a Glasgow and
an Edinburgh office earlier in the period, strengthening our presence in the
region and serving as a platform for further growth.
DSW's achievements and capabilities remain most noticeable in its original
core service disciplines of corporate finance and due diligence. Our
prominence and progression in M&A were highlighted, once again, by
Experian, which marked DSW as the 10(th) Most Active Corporate Finance Advisor
in the UK in the first half of 2022* compared to 13(th) for the first half of
2021.
Dividend
We maintain a robust cash position with strong cash generation and are pleased
to declare an interim dividend of 1.76p per share.
Current trading and outlook
Activity in the network's primary market, the SME sector, has remained strong
to date and resilient to the many economic challenges facing the UK. Whilst we
continue to seek to grow the business through diversification with the
addition and expansion of new service lines, corporate finance and due
diligence currently comprise most of our network activity. As such, we are
not immune from a downturn in M&A activity, should this begin to impact
the SME marketplace.
The Directors are mindful of the current economic uncertainty and the impact
this may have on M&A activity. However, whilst a downturn might affect
corporate finance and transaction services within the Network, we would expect
some of that to be offset by an increase the demand for insolvency,
restructuring, and debt advisory services, for which we are already seeing
strong demand as corporate distress levels rise.
We remain confident in the strength and resilience of our business model and
short-term macro challenges should give rise to long-term opportunities, as
our candidate pool of new partners and employees is fuelled as much by
personal dissatisfaction as it is by significant opportunity.
With trading remaining strong, the Board believes the Group is currently on
track to deliver FY23 results in line with market expectations.
James Dow
Chief Executive Officer
30 November 2022
INTERIM CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
Six months ended 30 Sept 2022 Six months ended 30 Sept 2021
Note £'000 £'000
Continuing operations
Revenue 5 1,509 1,119
Gross profit 1,509 1,119
Share of results of associates 124 44
Share of results of jointly controlled entity - 17
Administrative expenses (1,075) (525)
Operating profit 558 655
Adjusted operating profit(1) 872 850
IPO Expenses - (92)
Share based payments expense (314) (103)
Operating profit 558 655
Finance income 43 42
Impairment of loans due from associated undertakings - -
Finance costs (13) (46)
Profit before tax 588 651
Income tax (170) (135)
Profit for the half-year 418 516
Total comprehensive income for the half-year attributable to owners of the 418 516
Company
Earnings per share
From continuing operations
Basic 3 £0.02 £0.27
Diluted 3 £0.02 £0.27
(1) Adjusted operating profit, which is defined as operating profit adjusted for
items not considered part of underlying trading, including IPO costs and share
based payments, is a non GAAP metric used by management and is not an IFRS
disclosure
INTERIM CONSOLIDATED STATEMENT OF FINANCIAL POSITION
Note As at 30 Sept 2022 As at 31 March 2022
£'000 £'000
Non-current assets
Intangible assets 770 794
Property, plant and equipment 470 525
Investments 922 922
Investments in associates 187 290
Interests in jointly controlled entities 31 23
Prepayments and Accrued Income 7 170 175
Deferred Tax asset 4 4
2,554 2,733
Current assets
Trade receivables 7 895 832
Prepayments and Accrued Income 7 393 362
Other receivables 7 451 369
Cash and bank balances 4,567 4,722
6,306 6,285
Total assets 8,860 9,018
Current liabilities
Trade payables 86 86
Other taxation 228 210
Other payables 61 54
Accruals and Deferred Income 70 163
Current tax liabilities 170 63
Lease liability 85 83
700 659
Net current assets 5,606 5,626
Lease liability 259 302
Dilapidation provision 73 72
332 374
Total liabilities 1,032 1,033
Net assets 7,828 7,985
Equity
Share capital 55 54
Share premium 5,280 5,280
Share-based payment reserve 1,488 1,174
Retained earnings 1,005 1,477
Total Equity attributable to owners of the Company 7,828 7,985
The interim statements were approved and authorised for issue by the Board of
Directors on 30 November 2022 and were signed on its behalf by:
James Dow
Chief Executive Officer
INTERIM CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Share capital Share premium Share-based payments reserve Retained earnings Total equity
£'000 £'000 £'000 £'000 £'000
Balance at 01 April 2021 2 - 7 2,203 2,212
Profit for the half-year - - - 604 604
Dividends - - - (127) (127)
Share-based payments - - 103 - 103
Balance at 30 Sept 2021 2 - 110 2,680 2,792
Loss for the half-year - - - (938) (938)
Dividends - - - (253) (253)
Share-based payments - - 1,064 - 1,064
Issue of shares in period 52 5,280 - (12) 5,320
Balance at 1 April 2022 54 5,280 1,174 1,477 7,985
Profit for the half-year - - - 418 418
Dividends - - - (890) (890)
Share-based payments(1) - - 314 - 314
Issue of shares in period 1 - - - 1
Balance at 30 Sept 2022 55 5,280 1,488 1,005 7,828
(1) SBP issued within six month period from 01 April 2022 - 30 September 2022
INTERIM CONSOLIDATED STATEMENT OF CASH FLOWS
Six months ended 30 Sept 2022 Six months ended 30 Sept 2021
Note £'000 £'000
Profit for the half-year 418 516
Adjustments for:
Income tax expense 170 135
Net interest (income)/expense (30) 4
Depreciation of property, plant and equipment 69 18
Amortisation of intangible assets 23 19
Bonus shares / LTIP awards 1 -
Share-based payment expense 314 103
Operating cash flows before movements in working capital 965 795
(Increase)/decrease in trade and other receivables (171) 450
Increase/(decrease) in trade and other payables (68) (63)
(Increase)/decrease in amounts owed from associates in relation to profit 95 (44)
share
Cash generated by operations 821 1,138
Income taxes paid (63) (257)
Net cash from operating activities 758 881
Investing activities
Purchases of property, plant and equipment (14) (15)
Net cash used in investing activities (14) (15)
Financing activities
Dividends paid 6 (890) (127)
Finance lease payments (51) -
Interest received 42 16
Repayments of loans and borrowings - (195)
Proceeds from loans and borrowings - -
Proceeds from issue of ordinary shares net of share issue costs - -
Net cash used in financing activities (899) (306)
Net increase/(decrease) in cash and cash equivalents (155) 560
Cash and cash equivalents at beginning of half-year 4,722 609
Cash and cash equivalents at end of half-year 4,567 1,169
NOTES TO THE INTERIM CONSOLIDATED FINANCIAL INFORMATION
1. General Information
The Company was incorporated as DSW Capital Limited on 23 March 2010 under the
Companies Act 2006 (Registration number: 07200401). The Company was
re-registered as DSW Capital plc on 26 October 2021. The Company is
incorporated and domiciled in England and Wales. The principal activity of the
Company and its subsidiary, DSW Services LLP, (together referred to as the
'Group') is the licensing of the Dow Schofield Watts brand and associated
brand names for use in the professional services sector.
The address of the Company's registered office is:
7400 Daresbury Park
Daresbury
Warrington
WA4 4BS
2. Basis of preparation
This condensed consolidated interim financial information for the 6 months to
30 September 2022 has been prepared in accordance with IAS 34 'Interim
financial reporting' and also in accordance with the measurement and
recognition principles of UK adopted international accounting standards. It
does not include all of the information required for full annual financial
statements and should be read in conjunction with the Annual Report and
Accounts for the year ended 31 March 2022. This condensed consolidated interim
financial information does not comprise statutory accounts within the meaning
of section 434 of the Companies Act 2006. The Interim Report has not been
audited or reviewed in accordance with the International Standard on Review
Engagement 2410 issued by the Auditing Practices Board.
The interim condensed consolidated financial information is presented in the
Group's functional currency of Pounds Sterling and all values are rounded to
the nearest thousand (£'000) except when otherwise indicated.
Significant Accounting Policies
The accounting policies used in the preparation of the interim financial
information for the six months ended 30 September 2022 are in accordance with
the recognition and measurement criteria of UK Adopted International
Accounting Standards and are consistent with those which were adopted in the
annual statutory financial statements for the year ending 31 March 2022.
Use of estimates and judgements
There have been no material revisions to the nature of estimates and
judgements of amounts reported in prior periods.
Going concern
The interim financial information has been prepared on a going concern basis
as the Directors have reasonable expectation that the Group has adequate
resources to continue in operational existence for the foreseeable future. The
Group has no debt, £4.6m cash at 30 September 2022, is strongly cash
generative, and has a strong trading performance. The Group's forecasts and
projections show that the Group has sufficient resources for both current and
anticipated cash requirements.
Accounting Developments
There have been no new standards or interpretations, relevant to the Group's
operations, applied in the interim financial information for the first time.
Adjusted PBT
Adjusted PBT is utilised as a key performance indication for the Group and is
calculated as follows:
Six months ended Six months ended
30 September 2022 30 September 2021
£'000 £'000
Profit before tax 588 651
Share based payments 314 103
IPO costs - 92
Adjusted PBT 902 846
3. Earnings per share
From continuing operations
The calculation of the basic and diluted earnings per share is based on the
following data:
Six months ended 30 September 2022 Six months ended 30 September 2021
Earnings £'000 £'000
Earnings for the purposes of basic earnings per share being net profit 418 516
attributable to owners of the Company
Effect of dilutive potential ordinary shares: - -
Earnings for the purposes of diluted earnings per share 418 516
Six months ended 30 September 2022 Six months ended 30 September 2021
Number of shares
Weighted average number of ordinary shares for the purposes of basic earnings 21,065,045 1,900,000
per share
Effect of dilutive potential ordinary shares:
Share Options 509,629 -
Weighted average number of ordinary shares for the purposes of diluted 21,574,674 1,900,000
earnings per share
From continuing operations
Six months ended 30 September 2022 Six months ended 30 September 2021
Earnings £ £
Basic earnings per share 0.02 0.27
Diluted earnings per share 0.02 0.27
Adjusted earnings per share is included as an Alternative Performance Measure
('APM') and is not presented in accordance with IAS 33. It has been calculated
using adjusted earnings calculated as profit after tax but before:
· Share-based payments expense;
· IPO costs; and
· The tax effect of the above items
The calculation of adjusted basic and adjusted diluted earnings per share is
based on:
Six months ended 30 September 2022 Six months ended 30 September 2021
£'000 £'000
Profit after tax on continuing operations 418 516
Adjusted for:
Share-based payment expense 314 103
IPO Costs 92
Tax effect of adjustments above - -
Adjusted earnings for the purposes of adjusted basic and adjusted diluted 732 711
earnings per share
Six months ended 30 September 2022 Six months ended 30 September 2021
Earnings £ £
Adjusted basic earnings per share 0.03 0.37
Adjusted diluted earnings per share 0.03 0.37
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.
4. Profit for the year
Profit for the year has been arrived at after charging:
Six months ended 30 September 2022 Six months ended 30 September 2021
£'000 £'000
Depreciation of property, plant and equipment 69 18
Amortisation 23 19
Employee pension 3 1
IPO costs - 92
5. Revenue
The disclosure of revenue by product line is consistent with the revenue
information that is disclosed for each reportable segment under IFRS 8.
Disaggregation of revenue
Six months ended 30 September 2022 Six months ended 30 September 2021
£'000 £'000
External revenue by product line
License Fee Income 1,491 1,094
Profit Share Income 18 25
Total 1,509 1,119
A further breakdown of revenue by reporting line is shown below:
Six months ended 30 September 2022 Six months ended 30 September 2021
£'000 £'000
External revenue by reporting line
License fees attributable to Mergers & Acquisitions (M&A) 1,142 769
License fees attributable to Other 349 325
Profit share attributable to M&A 18 23
Profit share attributable to Other - 2
Total Revenue by reporting line 1,509 1,119
Other income - -
Total Revenue 1,509 1,119
6. Dividends
The final ordinary dividend for the year ended 31 March 2022 consisting of an
interim catch up dividend of 0.56 pence per share and a final dividend of 3.66
pence per share as proposed in the 31 March 2022 financial statements and
approved at the Group's AGM was paid on 30 September 2022.
In addition, since the end of the half-year the Directors have recommended the
payment of an interim dividend of 1.76 pence per fully paid ordinary share.
The dividend will be paid on 11 January 2023 to shareholders on the register
on 16 December 2022 with the shares going ex-dividend on 15 December 2022. In
accordance with IAS10 "Events after the Balance Sheet Date", these dividends
have not been reflected in the Interim Report.
7. Trade and other receivables
Group Group
As at 30 September 2022 As at 31 March 2022
£'000 £'000
Trade receivables 973 910
Loss allowance (78) (78)
895 832
Other receivables 753 686
Loss Allowance (302) (317)
451 369
Prepayments and Accrued Income 655 629
Loss Allowance (92) (92)
563 537
1,909 1,738
Included in prepayments and accrued income are £170k (March 2022: £175k) 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. Amounts due from subsidiary undertakings, in other receivables on
the consolidated statement of financial position, are interest free and
repayable on demand.
8. 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 or has significant influence over an entity either via voting
rights or shareholding.
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.
Six months ended 30 September 2022 Six months ended 30 September 2021
Revenue and Cost Recharges Revenue and Cost Recharges
£'000 £'000
PHD Equity Partners - 5
PHD Industrial Holdings 137 83
DSW Investments 2 LLP 51 43
Other investments 320 300
Totals 508 431
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:
As at 30 September 2022 As at 30 September 2021
Amounts due from/(to) related parties Amounts due from/(to) related parties
£'000 £'000
PHD Equity Partners - 3
PHD Industrial Holdings 24 28
DSW Investments 2 LLP (32) -
Other investments 290 259
Totals 282 290
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