Net debt of listed DWF surges past £100m

The new owners of listed firm DWF will take over a business racking up debt and apparently struggling to convert work into cash, figures announced to the London Stock Exchange this morning suggest. 

Full-year results for the international firm, for the 12 months to 30 April, show net debt up by 30% to £101.7m. Gross lock-up days increased by 9.5% to 196 days. While revenue rose by 8.6% to £451.6m, profit before tax was down 23% to £17.2m.

Last month DWF's board announced it had reached agreement with Inflexion Private Equity Partners to sell the company, with shareholders receiving 100p per share in return for the entire issued share capital.

Introducing what are likely to be the final accounts of the plc, chief executive Sir Nigel Knowles referred to a ‘very challenging economic environment’. He added: ‘Like other legal businesses, we have seen salary and inflationary pressures, the impact of interest rate increases and variable demand particularly in transactional areas.

‘Despite these challenges, we have seen our organic growth strategy and integrated propositions continue to resonate with clients, and have also added quality businesses to the group via our acquisitions of Acumension and Whitelaw Twining,’ Knowles said. 

The group said the first three months of trading for 2023/24 had been in line with expectations, but so-called ‘lock-up stretch’ was affecting the balance sheet and incoming cash levels. Managers are ‘considering the achievability’ of the target of 170 lock-up days ‘given economic headwinds which are driving longer billing and payment cycles’.

DWF added: ‘With the current trends not expected to abate, the board is not expecting to undertake any material M&A in the short term on a stand-alone basis as it seeks to address the ongoing challenges presented by lock-up stretch, increasing interest costs and the balance sheet leverage.’

The report said that a cost efficiency programme had saved the company £15m which had offset salary pressures and interest rate increases. Even so, administrative expenses increased overall by 9% to £168m. The group has spent £10m in the year on office closures and scale-backs and £3.3m on ‘restructuring costs’.

Knowles admitted that without the Inflexion offer, the board would need to consider not offering any dividends for the year to shareholders. ‘We continue to be in turbulent times economically, and indeed the legal sector has seen pressures from both rising costs and volatility in demand particularly for transactional work,’ he added. ‘We have always viewed ourselves as having a defensive model but are not immune to the environment in which we operate.’

The Inflexion acquisition is expected to complete during the final quarter of this calendar year, subject to a general meeting on 12 September. Shares in DWF Group plc rose marginally to 97.2p on the results announcement.

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