Law firm returns to interim profit with £22m turnround at pre-tax level
Manchester law firm DWF returned to half year profits and boosted revenues, in the six months to October 31, it announced today.
Turnover in the six month period was £203.5m, compared with £196m, and an £11m pre-tax loss was transformed into a pre-tax profit of £11m this time round.
Net revenue per partner increased by nine per cent to £488,000 (HY21: £446,000).
Net debt, however, grew from £58.5m previously to £77.2m this year, due to the repayment of COVID deferrals, settlement of deferred consideration and a one-off outflow for the restructuring of its Australia business.
The revenue increase comprised two per cent reported growth in Legal Advisory, with like-for-like growth of seven per cent, 14% growth in Connected Services (seven per cent organic), and eight per cent growth in Mindcrest (all organic).
DWF explained the return to profit is due to a much lower level of adjusting items of £7.6m comprising mainly of share-based payment charges from the partner-funded EBT.
Free cash flows for the reporting period of £4.2m are after the repayment of £5.4m of COVID deferrals (VAT deferred under the UK Government scheme). The free cash flow comparator last year of £19.5m benefitted from £10.4m of COVID deferrals (deferral of VAT and other taxes).
Looking ahead, DWF said the strong trading in HY22 is expected to continue in the second half of FY22 as the legal sector enjoys sustained demand for services, with the second half also expected to benefit from the normal marginally higher weighting of revenues.
The group said it remains on track to deliver in line with medium term guidance.
The board has approved an interim dividend of 1.5p per share.
Chief executive, Sir Nigel Knowles, said: “We are delighted with our performance for the first half of FY22. We have continued to see strong revenue growth on a like-for-like basis, after the decisive action taken in the prior year to exit or slim down a number of businesses.
“We have seen an improvement in our gross margin and a reduction in our overheads relative to revenue. This has led to a compelling step-change in profitability with our adjusted pre-tax profit increasing by 40%. Our client proposition of providing integrated legal and business services is gaining traction and leading to a strong pipeline of instructions.”
He added: “I am also pleased that today we have announced our group ESG strategy, which aligns with our purpose to deliver positive outcomes with our colleagues, clients and communities.
“The strategy includes new and stretched targets focused on climate action and further improving our diversity and inclusion performance. We want to build on our established programmes to become the market leader in ESG and we believe that the strategy announced today creates a firm foundation to help us achieve our targets.”
