1 December 2022

DSW CAPITAL PLC

("DSW Capital", "DSW" or the "Group")

(AIM: DSW)

Half Year Results

Heightened profile following IPO helped to drive network growth

DSW Capital, a profitable, fast growing, mid-market, challenger professional services licence network and owner of the Dow Schofield Watts brand, is pleased to announce its half year results for the six-month period ended 30 September 2022 ("H1 23" or the "Period").

The Group has delivered a strong performance in the Period with network revenue rising to £9.8m, up 34.5% compared to the same period in the prior year (H1 22: £7.3m), and is currently on track to deliver results for the year ended 31 March 2023 ("FY23") in line with market expectations.

Financial highlights

Operational highlights

Current trading and outlook

* Experian Market IQ: H1 2022 Report

James Dow, Chief Executive Officer, said:

"Activity in the Network's primary market, the SME sector, has remained strong to date and resilient to the many economic challenges facing the UK. Whilst a downturn is likely to affect corporate finance and transaction services within the Network, we would expect some of that to be offset by an increase in the demand for insolvency, restructuring, and debt advisory services, for which we are already seeing strong demand as corporate distress levels rise.

We continue to seek to grow the Group through diversification with the addition and expansion of new service lines and to recruit professionals in other disciplines to reduce the M&A weighting of our licence fees."

Definitions

Network Revenue is defined as total revenue earned by licensees, as opposed to total revenue reported by the Company

Adjusted Pre-Tax Profit is defined as profit before tax adjusted to add back the items not considered part of underlying trading including share-based payment expense and IPO costs. It is a non-GAAP metric used by management and is not an IFRS disclosure.

Cash conversion is calculated as cash generated by operations divided by operating cash flows before movements in working capital

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

Online investor presentation

An online investor presentation and Q&A will be hosted by the management team today at 1pm. To participate, please register with PI World at: https://bit.ly/DSW_HY23.

Enquiries:

About DSW Capital

DSW Capital, owner of the Dow Schofield Watts brand, is a profitable, fast growing, mid-market, challenger professional services network with a cash generative business model and scalable platform for growth. Originally established in 2002, by three KPMG alumni, DSW is one of the first platform models disrupting the traditional model of accounting professional services firms. DSW operates licensing arrangements with 20 licensee businesses with 97 fee earners, across seven offices in England and three in Scotland. These trade primarily under the Dow Schofield Watts brand.

DSW's vision is for the DSW Network to become the most sought-after destination for ambitious, entrepreneurial professionals to start and develop their own businesses. Through a licensing model, DSW gives professionals the autonomy and flexibility to fulfil their potential. Being part of the DSW Network brings support benefits in recruitment, funding and infrastructure. DSW's challenger model attracts experienced, senior professionals, predominantly with a "Big 4" accounting firm background, who want to launch their own businesses and recognise the value of the Dow Schofield Watts brand and the synergies which come from being part of the DSW Network.

DSW aims to scale its agile model through organic growth, geographical expansion, additional service lines and investing in "Break Outs" (existing teams in larger firms). The Directors are targeting high margin, complementary, niche service lines with a strong synergistic fit with the existing DSW Network.

CHIEF EXECUTIVE OFFICER'S STATEMENT

I am pleased to report that the Group traded strongly in the Period under review to deliver a positive set of results, which were in line with the Board's expectations. The Board would like to thank all our network Partners and Employees for their hard work and commitment to the DSW brand.

Network Revenue rose to £9.8m, an increase of 34.5% compared to the same period in the prior year (H1 22: £7.3m), as the Group benefitted from its heightened profile following IPO. This generated a 40.4% increase in Total Income from Licensees in the Period of £1.6m (H1 22: £1.2m), more than covering the additional costs of the Group's AIM listing, with Adjusted Pre-Tax Profit rising by 12.5% to £0.9m (H1 22: £0.8m).

The largest increase in costs can be attributed to the costs of being listed, including professional fees, AIM Listing fees and PR. Further costs are a result of investment in central infrastructure and an increased share based-payment expense. We are generally protected from the impact of wage and cost inflation as our licensee partners bear most of these risks.

Vision and strategy

DSW Capital is the owner of the Dow Schofield Watts brand, which is the predominant brand it licences to licensee businesses. Our vision is to become the most sought-after destination for ambitious, entrepreneurial professionals to start and develop their own businesses. We aim to scale the business through organic growth, new service lines and geographic locations, and investing in "Break Outs" (existing teams in larger firms).

We further executed on our strategy in the Period.  Fee earners within our 20 licensed businesses rose by five in the Period to 93 at 30 September 2022, as the Group continued to benefit from its heightened profile following flotation (Fee earners at IPO: 82), and investment in a central recruitment resource. The growth in fee earners in the first half of the year was organic, underpinned by the continuous work of our existing partners, supported by our central team, to develop and build their own businesses through the recruitment of additional partners and fee earners.

As at 31 October 2022, the number of fee earners has increased to 97, bringing the increase in heads since IPO to 15, or 18.3%. Since the Period end, we have also seen the launch of our new Wealth Planning business, which will work with the existing network to further enhance our multi-disciplinary offering. 

The Group remains focused on attracting "breakout" teams to augment its organic growth and also the acquisition of licence fees. We are in constant dialogue to encourage teams to join DSW and are confident that our efforts will begin to bear fruit in the second half of the current financial year. Our geographical expansion in Scotland continued with the opening of a Glasgow and an Edinburgh office earlier in the period, strengthening our presence in the region and serving as a platform for further growth.

DSW's achievements and capabilities remain most noticeable in its original core service disciplines of corporate finance and due diligence. Our prominence and progression in M&A were highlighted, once again, by Experian, which marked DSW as the 10^th Most Active Corporate Finance Advisor in the UK in the first half of 2022* compared to 13^th for the first half of 2021.

Dividend

We maintain a robust cash position with strong cash generation and are pleased to declare an interim dividend of 1.76p per share.

Current trading and outlook

Activity in the network's primary market, the SME sector, has remained strong to date and resilient to the many economic challenges facing the UK. Whilst we continue to seek to grow the business through diversification with the addition and expansion of new service lines, corporate finance and due diligence currently comprise most of our network activity.  As such, we are not immune from a downturn in M&A activity, should this begin to impact the SME marketplace.

The Directors are mindful of the current economic uncertainty and the impact this may have on M&A activity. However, whilst a downturn might affect corporate finance and transaction services within the Network, we would expect some of that to be offset by an increase the demand for insolvency, restructuring, and debt advisory services, for which we are already seeing strong demand as corporate distress levels rise.

We remain confident in the strength and resilience of our business model and short-term macro challenges should give rise to long-term opportunities, as our candidate pool of new partners and employees is fuelled as much by personal dissatisfaction as it is by significant opportunity.

With trading remaining strong, the Board believes the Group is currently on track to deliver FY23 results in line with market expectations.

James Dow

Chief Executive Officer

30 November 2022

INTERIM CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

INTERIM CONSOLIDATED STATEMENT OF FINANCIAL POSITION

The interim statements were approved and authorised for issue by the Board of Directors on 30 November 2022 and were signed on its behalf by:

James Dow

Chief Executive Officer

INTERIM CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

INTERIM CONSOLIDATED STATEMENT OF CASH FLOWS

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL INFORMATION

1. General Information

The Company was incorporated as DSW Capital Limited on 23 March 2010 under the Companies Act 2006 (Registration number: 07200401). The Company was re-registered as DSW Capital plc on 26 October 2021. The Company is incorporated and domiciled in England and Wales. The principal activity of the Company and its subsidiary, DSW Services LLP, (together referred to as the 'Group') is the licensing of the Dow Schofield Watts brand and associated brand names for use in the professional services sector.

The address of the Company's registered office is:

7400 Daresbury Park

Daresbury

Warrington

WA4 4BS

2. Basis of preparation

This condensed consolidated interim financial information for the 6 months to 30 September 2022 has been prepared in accordance with IAS 34 'Interim financial reporting' and also in accordance with the measurement and recognition principles of UK adopted international accounting standards. It does not include all of the information required for full annual financial statements and should be read in conjunction with the Annual Report and Accounts for the year ended 31 March 2022. This condensed consolidated interim financial information does not comprise statutory accounts within the meaning of section 434 of the Companies Act 2006.  The Interim Report has not been audited or reviewed in accordance with the International Standard on Review Engagement 2410 issued by the Auditing Practices Board.

The interim condensed consolidated financial information is presented in the Group's functional currency of Pounds Sterling and all values are rounded to the nearest thousand (£'000) except when otherwise indicated.

Significant Accounting Policies

The accounting policies used in the preparation of the interim financial information for the six months ended 30 September 2022 are in accordance with the recognition and measurement criteria of UK Adopted International Accounting Standards and are consistent with those which were adopted in the annual statutory financial statements for the year ending 31 March 2022.

Use of estimates and judgements

There have been no material revisions to the nature of estimates and judgements of amounts reported in prior periods.

Going concern

The interim financial information has been prepared on a going concern basis as the Directors have reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. The Group has no debt, £4.6m cash at 30 September 2022, is strongly cash generative, and has a strong trading performance. The Group's forecasts and projections show that the Group has sufficient resources for both current and anticipated cash requirements.

Accounting Developments

There have been no new standards or interpretations, relevant to the Group's operations, applied in the interim financial information for the first time.

Adjusted PBT

Adjusted PBT is utilised as a key performance indication for the Group and is calculated as follows:

3. Earnings per share

From continuing operations

The calculation of the basic and diluted earnings per share is based on the following data:

From continuing operations

Adjusted earnings per share is included as an Alternative Performance Measure ('APM') and is not presented in accordance with IAS 33. It has been calculated using adjusted earnings calculated as profit after tax but before:

·    Share-based payments expense;

·    IPO costs; and

·    The tax effect of the above items

The calculation of adjusted basic and adjusted diluted earnings per share is based on:

Shares held in trust are issued shares that are owned by the Group's employee benefit trusts for future issue to employees as part of share incentive schemes. The future exercise of the share awards and options is the dilutive effect of share awards granted to employees that have not yet vested.

Shares held in trust are deducted from the weighted average number of shares for basic earnings per share. For its adjusted basic measure, the group uses the weighted average number of ordinary shares.

4. Profit for the year

Profit for the year has been arrived at after charging:

5. Revenue

The disclosure of revenue by product line is consistent with the revenue information that is disclosed for each reportable segment under IFRS 8.

Disaggregation of revenue

A further breakdown of revenue by reporting line is shown below:

6. Dividends

The final ordinary dividend for the year ended 31 March 2022 consisting of an interim catch up dividend of 0.56 pence per share and a final dividend of 3.66 pence per share as proposed in the 31 March 2022 financial statements and approved at the Group's AGM was paid on 30 September 2022.

In addition, since the end of the half-year the Directors have recommended the payment of an interim dividend of 1.76 pence per fully paid ordinary share. The dividend will be paid on 11 January 2023 to shareholders on the register on 16 December 2022 with the shares going ex-dividend on 15 December 2022. In accordance with IAS10 "Events after the Balance Sheet Date", these dividends have not been reflected in the Interim Report.

7. Trade and other receivables

Included in prepayments and accrued income are £170k (March 2022: £175k) due in greater than 1 year. Other receivables are made up from loans due from licensees and prepayments and accrued income relates to profit share due from licensees. Amounts due from subsidiary undertakings, in other receivables on the consolidated statement of financial position, are interest free and repayable on demand.

8. Related party transactions

Balances and transactions between the Company and its subsidiary, which are related parties, have been eliminated on consolidation and are not disclosed in this note.  Transactions between the Group and its related parties are disclosed below.

Related parties are those licensees where the Company is a member of the related LLP or has significant influence over an entity either via voting rights or shareholding.

Revenue and Cost Recharges

Group entities entered into the following transactions with related parties who are not members of the Group. All entities other than DSW Investments 2 LLP are licensee businesses. DSW Investments 2 LLP is an entity owned by current shareholders.

Other investments relate to routine and similar transactions which arose in the ordinary course of business, with DSW CF Leeds, DSW TS Leeds and DSW Business Recovery.

Amounts due from/to related parties

Group entities had the following balances, including loans to related parties, outstanding at year end with related parties who are not members of the Group: