Despite Covid-19 arriving in its final quarter, legal services business DWF (DWF) still generated a record level of sales in the year to 30 April. This reflects revenue growth across three out of its four divisions – insurance, connected services and international – offsetting weakness in the more cyclical commercial services segment.
Already weighed down by Brexit and general election uncertainty, the pandemic spurred a decline in corporate transactions in commercial services, as well as the deferral of larger client projects. Commercial revenue dropped by 4 per cent to £104m and the underlying gross margin contracted by 3.4 percentage points following investment in new hires.
This margin pressure translated to overall adjusted pre-tax profit collapsing by over two-fifths to £15m. On a statutory basis, pre-tax profit actually increased thanks to gains recorded on acquisitions.
Activity levels have improved in the first quarter of the new financial year. Alongside the contributions of the Mindcrest and RCD acquisitions, this pushed revenue up a fifth year-on-year in the three months to 31 July, to £84m. Cost savings mean underlying adjusted cash profits have more than doubled to £9.7m.
With ‘lock up days’ – the time taken to be paid for completed work – coming down from 206 at the end of April to 200, net debt (excluding lease liabilities) has fallen from £65m at the year-end to £55m. However, this is still higher than the £35m seen in 2019.
Panmure Gordon anticipates adjusted pre-tax profit will rise to £34m in the year to April 2021.
| DWF (DWF) | ||||
| ORD PRICE: | 67p | MARKET VALUE: | £199m | |
| TOUCH: | 64-67p | 12-MONTH HIGH: | 143p | LOW: 45p |
| DIVIDEND YIELD: | 4.9% | PE RATIO: | 12 | |
| NET ASSET VALUE: | 23p* | NET DEBT: | £150m | |
| Year to 30 Apr | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2018** | 236 | 21.2 | 7.8 | nil |
| 2019 (restated) | 317 | 13.0 | 4.8 | 1.0^ |
| 2020 | 357 | 18.2 | 5.4 | 3.3 |
| % change | +12 | +40 | +13 | +225 |
| Ex-div: | 24 Sep | |||
| Payment: | 05 Nov | |||
| Includes £51m in intangible assets or 17p a share, **Pre-IPO, listed in March 2019, ^Final dividend only | ||||
