DWF reports annual loss after restructuring round

Sir Nigel Knowles
X The Business Desk

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DWF, the listed Manchester law firm, reported a 12% increase in revenues of £400.9m for the year to April 30, 2021, but also unveiled an annual pre-tax loss of £30.6m, compared with a pre-tax profit of £18.2m the previous year.

However, chief executive Sir Nigel Knowles hailed “strong results” in a “transformational year”.

During the reporting period the firm managed to generate £32.1m of free cash flow, versus an outflow of £6.6m in the prior year.

Net debt of £60.2m is £4.7m lower than 2019/20, despite deferred consideration and acquisition-related outflows of £17m, and assisted by around £11m of COVID-19 related VAT deferrals.

DWF said decisive action was taken throughout the year and a new operating structure from fiscal year 2022 provides a platform for sustainable, profitable growth.

It launched a new three division operating model, effective from May 1, 2021, and the group’s focus on a one-team culture and global mind-set is already leading to a greater sharing of clients across practice areas and borders, it said.

An increasing number of clients now receive services from two or more of Legal Advisory, Connected and Mindcrest, representing a significant growth opportunity.

Investment is also in line for the new Pune, India office to increase headcount capacity to around 1,000 from 500 to support the Mindcrest (Managed Services) build.

Recent key blue chip wins include Allianz and LV=.

Looking ahead, DWF said the trading performance throughout 2020/21 has been resilient, with minimal impact from ongoing COVID-19 restrictions. The first two months of trading for 2022 have been strong, showing continued organic net revenue growth and gross margin development.

As restrictions continue to ease, the group expects a favourable trading environment for fiscal year 2022 and for its approach to integrated legal management to continue to expand existing client relationships and secure new client wins.

While there is upward cost pressure due to competition for talent in a buoyant legal sector, the removal of material drag factors, ie closures and scale-backs in 2021, is expected to support continued growth in net profitability.

For 2020/21, as previously announced, the board has declared a final dividend of 3.0p per share, taking the total dividend for the year to 4.5p, reflecting a pay out ratio of 61% of adjusted profit after tax. This pay-out ratio is viewed as a meaningful step towards the target of up to 70%.

Sir Nigel Knowles said: “FY2020/21 was a transformational year for DWF and I am delighted that the tremendous resilience, dedication and excellence of our colleagues has been rewarded with these strong results.

“The results reflect a return to pre-COVID-19 activity levels, but they also evidence the importance of the decisive actions we took throughout the year as we focused on driving greater operational efficiency, profitability and strategic alignment.

“I am especially pleased to see revenue and gross profit margin growth in every division of the group. This demonstrates the strengths we have right across the business, the broad appeal of our offerings in their own right, and how these can be even more powerful when combined through our differentiated Integrated Legal Management approach.”

He added: “We have now implemented our new global operating structure to streamline the group into three global divisions of Legal Advisory, Mindcrest and Connected Services.

“We believe this is an important step forward in our strategy and will help us to fulfil our vision of becoming the leading global provider of integrated legal and business services.”