Trading Update, Notice of Results and Presentation

DSW Capital, a profitable, mid-market, challenger professional services licence network and owner of the Dow Schofield Watts and DR Solicitors brands, announces the following positive trading update ahead of the Group's Half Year Results for the period ended 30 September 2024 ("H1 25" or the "Period"), which will be released on 25 November 2024.

The board is very pleased to announce that, after securing H1 25 results in line with management expectations, the Group delivered an outstanding performance in October 2024, driven by exceptionally strong levels of M&A activity and completions ahead of the Autumn Budget on 30 October 2024.

Following this exceptional month's trading and the transformative, earnings-enhancing acquisition of DR Solicitors announced on 4 November 2024, the board is providing updated guidance on the expected outcome for FY25.

Highlights

Trading Performance in H1 25

As noted in the FY24 results issued on 2 July 2024, the Group entered FY25 with a record number of Fee Earners and Partners, ensuring that it was well positioned to benefit from an uptick in market activity. The Group's licensees continued to show their resilience to achieve results in line with our expectations, despite lower levels of M&A activity which gradually started to improve across the Period before gaining momentum in September.

Network revenue in H1 FY25 was £7.8m (H1 FY24: £7.3m), resulting in total income from licensees1 in the Period of £1.1m (H1 FY24: £1.1m) and Adjusted Pre-Tax Profit2 of £0.1m (H1 FY24: £0.2m).

The momentum gained in September continued in October, generating exceptional levels of M&A activity as businesses looked to complete transactions ahead of the Autumn Budget on 30 October 2024. We are anticipating that deal volumes in November and December are likely to be subdued, as many transactions were brought forward. Activity levels in Q4 of FY25, however, are anticipated to be as expected at the start of the financial year, leading to a better-than-expected overall outcome for the full year.

Delivering our strategy

Our strategic aim remains to build a resilient and diversified group of licensee businesses illustrated by our recent acquisition of DR Solicitors. The acquisition is immediately and significantly earnings-enhancing, whilst also reducing our historic dependency on M&A. Furthermore, it provides an opportunity to expand into new, niche professional markets and reducing that dependency on M&A further.

The board is anticipating DR Solicitors will contribute c£1.5m to Network Revenue and statutory revenue and c£0.3m to Adjusted Pre-Tax Profit2. This reflects five months' contribution and interest costs, relating to the new revolving credit facility used to help fund the deal, of £0.1m. DR Solicitors also added a further 18 Fee Earners to the Group, taking the total to 133 as at 07 November 2024 (November 2023: 106).

Expected Outcome for FY25

The Group's results, which are typically weighted towards the second half of the financial year due to the recognition of profit share income, will benefit both from the contribution of DR Solicitors and the exceptional M&A performance in October 2024, which delivered increased deal volumes and deal values.

As a result, the board is expecting FY25 consolidated network revenue to be c.£23.0m (FY24: £16.0m), leading to total income of c.£4.7m (FY24: £2.4m) and Adjusted Pre-Tax Profit of c.£1.45m (FY24: £0.5m).

Cash at 30 September 2024 was in line with management expectation at £2.3m (30 September 2023: £2.8m), reflecting the dividend payment of £0.2m and breakout incentives paid to new partners of £0.3m.

The board remains committed to its progressive dividend policy.

James Dow, Chief Executive Officer, said:

"Firstly, on behalf of the board, I must congratulate and thank everyone for their contribution and resilience since October 2021 and for the truly outstanding performance they delivered in October 2024.

"We are delivering on our stated strategy to diversify, with the acquisition of DR Solicitors demonstrating our ability to attract new service lines to the Group, as well as reducing our reliance on M&A significantly (from 67% of revenue to about a third).

"While we are delighted to upgrade our guidance for FY25, and the board is confident in the mid to long term prospects for the Group, we are mindful of macro-economic and political uncertainties that may impact M&A activity.

"With increasing M&A activity, the recruitment market has tightened, but opportunities across DSW and DR remain strong, and we look forward to updating the market further, as the year progresses."

1 Total income from licensees represents statutory revenue plus share of results in associates

2 Adjusted Pre-Tax Profit excludes share based payment charge and transaction costs relating to the acquisition of DR Solicitors

Online Investor Presentation

The management team will host an online H1 25 Results presentation for investors on Tuesday, 26 November 2024 at 3.00pm. Anyone wishing to join the presentation should register at https://bit.ly/DSW_H125_results_webinar.