DWF Group plc (LON:DWF), the global legal business, has announced its half-year results for the period ended 31 October 2020.
GROUP FINANCIAL SUMMARY
| £m (unless otherwise stated) | HY21 | HY20 | Change |
| Net revenue | 167.6 | 145.2 | 15.4% |
| Gross profit | 83.1 | 73.2 | 13.5% |
| Gross profit margin | 49.6% | 50.4% | (0.8)ppts |
| Cost to income ratio¹ | 40.4% | 41.7% | (1.3)ppts |
| Adjusted operating profit (‘Adjusted EBITDA’)² | 24.7 | 21.1 | 17.1% |
| Reported operating (loss)/profit | (8.9) | 9.9 | |
| Adjusted profit before tax (‘Adjusted PBT’)³ | 13.4 | 10.9 | 23.0% |
| Reported PBT | (11.0) | 8.0 | |
| Adjusted diluted EPS (pence)⁴ | 3.6 | 2.9 | 24.1% |
| Reported diluted EPS (pence) | (4.2) | 2.0 | |
| Gross lock-up days⁵ | 196 | 201 | (5) days |
| Free cash flow⁶ | 19.6 | (9.2) | 28.9 |
| Net debt⁷ | (58.5) | (49.5) | (8.9) |
HY21 FINANCIAL HIGHLIGHTS
· Group revenue growth of over 15% (3% organic)⁸ at a gross margin of just below 50%
o 3% growth in Insurance Services division, all organic
o 7% growth in Commercial Services (including Managed Services), with organic revenue flat as activity levels recovered through H1 from the sudden weakness experienced in March and April due to COVID-19
o 58% growth in International, with RCD acquisition in Spain adding £15.7m of revenue, alongside organic growth of 3%
o 19% growth in Connected Services, all organic
· Adjusted PBT of £13.4m which is 23% higher than HY20 and close to the FY20 comparator of £15.2m
· Reported PBT is a loss of £11.0m, which differs to Adjusted PBT due to significant, largely non-cash, acquisition related expenses treated as non-underlying items
· £19.6m free cash flow generated in H1 versus an outflow of £9.2m in the prior year, assisted by c£14m of COVID-19 related deferrals
· Net debt of £58.5m is £8.9m higher than HY20 and a reduction of £6.4m versus April 20 position despite £12.4m of acquisition related outflows in HY21
OPERATIONAL & STRATEGIC PERFORMANCE
· A 5 day reduction in lock-up days versus HY20 and a 10 day reduction versus FY20 position due to improving operational processes and client engagement
· Cost to income ratio improved by 1.3ppts versus HY20 to 40.4%, and by 1.0ppts from FY20, demonstrating the impact of cost control and efficiency measures
· Revenue per partner increased by 0.4% to £446k (half year basis) despite H1 investment in new partners
· 15 new partner hires in the period which are expected to support ongoing organic growth particularly in Insurance Services and International
· Agreements in principle made to reduce office space and/or vary lease terms in several locations as a first stage of the Group’s new property strategy, promoting greater flexible working and securing annualised cash savings of £0.6m
· Investment in new Pune, India office to increase headcount capacity to c1,000 from c500 to support Managed Services build
OUTLOOK AND CURRENT TRADING
· The Board is pleased with the Group’s performance to date in FY21 and is increasingly confident in the outlook for the full year as the Group continues to see a strong sales pipeline and anticipates a more stable trading environment in 2021
· The Group’s focus on a one team culture and global mind-set is driving more connectivity both internally and with its clients, who are seeing the benefits of the Group’s integrated legal and business services offering.
· Managed Services is an important component of that and, having successfully integrated Mindcrest, it is generating both revenue and margin opportunities for the Group as it scales.
· The Board has approved an interim dividend for FY21 of 1.50 pence per share which is payable on 5 March 2021 to shareholders on the register as at 29 January 2021. The Board has given careful consideration to the quantum of the interim dividend to ensure that it is progressive but retains flexibility whilst there remains a degree of uncertainty as to the trading environment for the remainder of the financial year
Sir Nigel Knowles, Chief Executive Officer, commented:
“Given the extreme impact of COVID-19 on the worldwide economy, we are pleased with the performance of the business in the first half of FY21 following the swift actions taken by the new management team. We are also encouraged that despite ongoing COVID related restrictions in a number of the markets in which we operate November activity levels were strong. We have achieved strong revenue growth in the period thanks to the contributions of RCD and Mindcrest and a pleasing return to organic growth. Operationally, the decisive cost actions taken at the beginning of this financial year and a continued focus on cash management has seen a reduction in both net debt and lock-up days. These factors have combined to help us deliver a good profit performance with adjusted PBT in the first half of FY21 close to that achieved for the full year in FY20.
“We expect the uncertain macro environment to continue into 2021, although the positive news in relation to potential vaccines for COVID-19 allows some optimism for a more settled economy as we progress through next year. We therefore are increasingly confident in the prospects for the Group as we look ahead to the rest of FY21 and recent client wins and panel appointments such as those for Serco and Zurich are testament to the strength of our differentiated offering.”
