- Spain acquisition pushes up top-line
- Tax deferral pushes up free cash flow
Not so long ago, DWF (DWF) aspired to be the first £1bn listed law firm. Hard-bargaining investors cut that valuation to £366m in a 2019 IPO, before a wavering start to public life and Covid-19 sliced it to a July low of £160m.
May’s promotion of industry veteran Sir Nigel Knowles to CEO has either coincided with or led to signs of a rebound. In the half-year to October, most top-line growth stemmed from the 2019 acquisition of RCD in Spain. A swing to free cash flow generation of £19.6m was largely due to tax deferrals. Changes to office leases promise savings, but appear fuelled by the pandemic.
Given ongoing investments – including 500 new staff in a managed services outpost in India – cash management is unsurprisingly “a key area of operational focus”. Falling lock-up days offer some encouragement here.
Then again, big debts, and insurance activity yet to reflect executives’ initial hopes, suggest a tough path ahead. Hold.
Last IC View: Hold, 67p, 9 Sep 2020
| DWF (DWF) | ||||
| ORD PRICE: | 84.7p | MARKET VALUE: | £275m | |
| TOUCH: | 82.2-84.8p | 12-MONTH HIGH: | 143p | LOW: 45p |
| DIVIDEND YIELD: | 4.2% | PE RATIO: | NA | |
| NET ASSET VALUE: | 19.7p* | NET DEBT: | 214% | |
| Half-year to 31 Oct | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2019 | 173 | 8.0 | 2.5 | 1.3 |
| 2020 | 196 | -11.0 | -4.3 | 1.5 |
| % change | +14 | - | - | +20 |
| Ex-div: | 28 Jan | |||
| Payment: | 05 Mar | |||
| *Includes intangible assets of £48.6m, or 15p a share. | ||||
