DWF’s (DWF) shares plunged over a quarter on Friday 27 March after the law firm revealed that the coronavirus would hit activity in its final quarter, traditionally its most important. Spanning four continents, the group has global vulnerability – the ‘international’ segment accounted for over a fifth of turnover in the first half of the year. Revenue growth for the year ending 30 April is guided to fall short of management’s expectations, at 15-20 per cent.
The 28 net new partners added will now take longer to reach full revenue capacity, hampering cash generation. With fee collection set to slow, Jefferies projects that net debt will breach the banking covenant of being no more than 1.5 times cash profits (Ebitda). The group is seeking additional borrowing facilities and a “relaxation of certain covenants”.