HALF YEAR RESULTS Resilient performance with momentum building in M&A, leading to guidance upgrades

DSW Capital, a profitable, mid-market, challenger professional services licence network and owner of the Dow Schofield Watts and DR Solicitors brands, is pleased to announce its half year results for the six-month period ended 30 September 2024 (“H1 25” or the “Period”), which demonstrate the Group’s resilience and were in line with management expectations.

Post Period end and as announced in the Trading Update issued on 7 November, 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. This outstanding performance, combined with the transformational and earnings-enhancing acquisition of DR Solicitors Limited, announced on 4 November 2024, led to the board updating its guidance on the expected outcome for FY25.

The Group entered H2 25 in better shape than it has ever been, with a more diversified and resilient business and significantly reduced dependency on M&A activity. While always mindful of macro-economic and political uncertainties, the board is confident in the Group’s growth strategy and continues to invest in the long-term future of the business.

Financial highlights
• Network Revenue was 6.8% higher at £7.8m (H1 24: £7.3m), as M&A activity gradually improved across the Period and gained momentum in September 2024
• Total income from licensees was £1.1m (H1 24: £1.1m)
• Adjusted Pre-Tax Profit at £0.2m (H1 24: £0.2m)
• Statutory profit before tax of £0.1m (H1 24: loss of £0.1m), due to a lower share based payment expense in the Period
• Cash of £2.3m (FY24: £2.6m), reflecting the lower level of profitability whilst the M&A markets were subdued, and a dividend payment of £0.2m in September 2024
• Net cash used by operations of £0.2m, comprising start up loans and working capital support provided to new licensees who joined in FY24
• Maintained a strong balance sheet with Net Assets of £7.5m (FY24: £7.6m)
• Intention to maintain progressive dividend policy – interim dividend of 1.0p per share declared, representing one third of the intended total dividend for FY25 (FY24: 2.0p)

Operational highlights
• Fee Earners increased to 112 at the Period end (H1 24: 104), up 7.7% YoY, supporting future revenue growth with 49 Partners across 24 licensee businesses
• 67% weighted towards M&A in H1 25 (H1 24: 73%)
• New Corporate Finance teams in the Midlands and Cardiff, celebrated a successful first year which saw their combined headcount grow from 5 to 11

Post period end acquisition of DR Solicitors Limited (“DR” or “DR Solicitors”)
• Significantly earnings-enhancing and transformational acquisition of award winning, nationallyrecognised law firm, which provides services to GPs, consultants and other primary care providers in the UK.
• Total consideration £6.1m funded from cash and a new revolving credit facility (“RCF”)
• Achieved organic revenue growth of 11% to generate revenue of £3.1 million and profit before tax of £1.2 million
• Brings a highly scalable, cash generative, and profitable Legal Platform to the Group
• Materially reduces the Group’s reliance on the cyclical SME M&A market from 67% of revenue to around a third
Trading update issued 7 November 2024 – upgraded financial guidance for FY25
• FY25 consolidated network revenue is expected to be c.£23.0m (FY24: £16.0m) – a 43.8% increase on prior year
• Adjusted Pre-Tax Profit in FY25 is expected to be c.£1.45m (FY24: £0.5m) – a 190% increase on prior year
Current trading and outlook
• Momentum gained in September 2024 continued in October, generating exceptional levels of M&A activity as businesses looked to complete transactions ahead of the Autumn Budget
• Deal volumes in November and December are likely to be subdued, as many transactions were brought forward ahead of the Budget, before returning to normal levels in Q4 25
• FY25 results expected to benefit from usual H2 weighting with recognition of profit share income, five months’ contribution from DR, and an exceptional M&A performance in October 2024, which delivered increased deal volumes and values
• Entering H2 25 with a more diversified and resilient business, with a significantly reduced dependency on M&A activity
• The Board is confident in the Group’s growth strategy and continues to invest in the long-term future of the business

James Dow, Chief Executive Officer, said:
“The Group is stronger than it has ever been. We are delivering on our stated strategy to diversify, with the previously announced acquisition of DR Solicitors demonstrating our ability to attract earningsenhancing niche service lines to the Group, as well as significantly reducing our historic reliance on M&A.
“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 remain mindful of macro-economic and political uncertainties that may yet impact M&A activity. “While the recruitment market has tightened, due to the improving M&A market, the opportunities for DSW and DR remain strong and we look forward to updating the market further, as the year progresses.”

Online Investor Presentation
The management team will host an online H1 25 Results presentation for investors tomorrow, Tuesday, 26 November 2024, at 3.00pm. Anyone wishing to join the presentation should register 

Definitions:
Adjusted Pre-Tax Profit – Adjusted pre-tax profit, which is defined as profit before tax adjusted for items not considered part of underlying trading, which in the current and prior period represents share based payments, is a non GAAP metric used by management and is not an IFRS disclosure.
Network Revenue – Network Revenue is defined as total revenue earned by licensees and DR Solicitors,
as opposed to total revenue reported by the Company
Total income from licensees – Total income from licensees represents statutory revenue plus share of
results in associates