‘Halo’ effect of IPO helps drive revenues at DSW Capital

DSW Capital, the Daresbury-based business advisory firm, reported better profits for the year to March 31, 2022, welcoming the ‘halo’ effect of its admission to AIM last December.

Turnover rose from £2.354m to £2.681m, although the previous year’s pre-tax profit of £1.585m was transformed into a pre-tax loss of £31,000 after the deduction of the Share Based Payment charge and IPO costs linked to last year’s flotation.

The adjusted pre-tax profit was £2m, a 25% increase on the previous year.

DSW said it has a strong balance sheet, with net assets of £8m, compared with £2.2m in 2021, and it has declared a maiden final dividend per ordinary share of 4.22p.

Fee Earners at year end increased to 88 – up 14.3%, which DSW said demonstrates the profile boost from IPO and licence model negating the wider difficult recruitment market.

Average revenue per Fee Earner was £227,000, compared with £196,000 the previous year.

Service lines expanded in line with strategic objectives, with the addition of DSW Asset Based Lending Risk Management in January 2022.

Corporate finance and due diligence, which represent 70% of the business, continued to grow successfully in line with the market.

The group said business recovery and debt advisory performed strongly in 2022 and, as a result, represent an increasing proportion of business.

DSW welcomed two new partners in Scotland post-year end, expanding the network’s presence to include Edinburgh and Glasgow.

The group said there is significant opportunity for organic and acquisition-driven growth, with capital to invest, going forward, aided by a predictable cost base with low operational gearing, insulated from inflationary pressures.

It said the new financial year has started well, in line with the board’s expectations, and the directors look forward to another year of sustainable organic growth.

Chief executive, James Dow, said: “Our admission to AIM has enhanced and strengthened the Dow Schofield Watts brand, as we had expected, and the IPO ‘halo’ effect is undoubtedly supporting our growth plans.

“The sector in which we operate is substantial and developing in a way that makes DSW’s business model increasingly attractive to ambitious entrepreneurial professionals and their clients.

“By empowering these individuals to create and build their own professional services businesses, while also helping them develop as leaders and be the best they can be, I am confident that we will deliver strong returns for all our stakeholders.

“Our confidence is built on the quality of our people within the network and their clients. This quality is reflected in the average revenue per Fee Earner achieved in the year of £227k (FY21: £196k) – an important metric, as we execute on our vision to become the most sought-after destination for ambitious professionals.”

He added: “DSW has a successful and profitable model, a strong balance sheet and an excellent capital base from which to scale the business. In a sector which is ripe with opportunity, we have every confidence in the future prospects for the group.”

Looking forward, he said: “We remain confident in the strength of our business model. We are generally protected from the impact of wage and cost inflation as our partners bear most of these risks of operational gearing.

“However, we are not immune from a downturn in M&A activity particularly if it is focused on the SME marketplace. But these short term challenges often give rise to the greatest long term opportunities, as our candidate pool of new partners and employees is as much fuelled by personal disappointment as it is by significant opportunity.”