REG - DSW Capital PLC - Trading Update

DSW CapitalAnnouncement

20/01/2023 07:00

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RNS Number : 3337N  DSW Capital PLC  20 January 2023

 

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be in the public domain.

 

20 January 2023

DSW CAPITAL PLC

("DSW Capital", "DSW" or the "Group")

(AIM: DSW)

 

Trading Update

 

DSW Capital, a profitable, mid-market, challenger professional services
licence network and owner of the Dow Schofield Watts brand, announces the
following trading update.

 

Following a very strong first half performance, the historically weighted
second half to 31 March 2023 is being impacted by the wider macro-economic
conditions and uncertainties, which the Board believes will result in the
Group not achieving current market expectations.

 

The Group's stated strategy is to diversify its service lines, so that it is
less dependent on revenue from M&A activity. This remains work in
progress, as it seeks to build more counter-cyclical services into the
network. Corporate finance and due diligence, however, currently comprise most
of its current network activity.

 

Several deal completions in these categories paused, during the well-reported
turmoil following the mini budget in September. The Board had expected
activity to normalise, as the political landscape settled and the Group saw
some recovery in the network's performance in November's results. December is
traditionally an important month for the Group, as the natural month for deal
completions ahead of the seasonal holiday break. Continued deal slippage and
caution in the market, however, led to the Group's performance in this
important month to be significantly lower than anticipated, as deals were not
executed as expected.

 

Other Group service lines continue to perform well in this period and in line
with the Board's expectations.

 

In addition, uncertainty arising from the economic outlook has impacted, and
continues to impact, recruitment. No further fee earners have joined the
network since the start of October with fee earners remaining at 97. The Group
is in active discussions with a number of potential new fee earners and
acquisitions, but caution in the wider market is currently impacting progress
in this area.

 

Timing on transactions in the Group's M&A focused service lines, which
comprise 70% of its services, will largely dictate the full year outturn. The
quality of the opportunities pipeline is good but the completion timelines are
longer than previously anticipated. There is currently uncertainty as to the
speed of the recovery in this sector. This leads the Board to revise its
financial guidance for the year ending 31 March 2023 ("FY23"), with network
activity levels in FY23 expected to be broadly similar to FY22, revenue
expected to be between £2.8 million and £3.1 million (FY22: £3.0 million)
and EBITDA expected to be between £1.4 million and £1.7 million (FY22: £2.2
million).

 

At 31 December 2022, the Group held cash balances of £4.8m from which it paid
a dividend to shareholders of £0.4m on 11 January 2023. There is, therefore,
significant capital to deploy, and the Board is continuing to evaluate
opportunities to grow the business through diversification with the addition
and expansion of new service lines.

 

James Dow, Chief Executive Offer of DSW said:

 

"Following a very strong first half of the year, the Board is extremely
frustrated by this recent confluence of events which has stuttered the
previous excellent growth experienced by the Group since our flotation. Whilst
there is now a broad range of possible outcomes for FY23, we have confidence
in the robustness of our business model, strength of the balance sheet and the
ability of our partners to adapt."

 

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

 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,
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.

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