DSW Capital to embark on recruitment drive, despite poor market conditions

DSW Capital, the Daresbury-based mid-market, challenger professional services licence network, said unfavourable economic conditions have taken their toll on operations during the year to March 31, 2023, but revealed it is embarking on a recruitment drive.

The group, which owns the Dow Schofield Watts brand, will publish its figures on July 13, but in a trading update ahead of the release said revenue and adjusted pre-tax profit are expected to be in line with current market expectations.

Network revenue is expected to be flat at £18.3m (FY22: £18.3m), as challenging market conditions persisted into the group’s historically weighted second half.

Expected EBITDA is £1.5m (FY22: £2.2m), with the change reflecting a full year’s plc costs and additional planned investment in central resource. Expected adjusted pre-tax profit is £1.4m, compared with £2m the previous year.

Average revenue per fee earner in the period was £193,000 (FY22: £237,000), reflecting the previously noted softening of the M&A market, and reduced utilisation in the second half of the period. The group said fiscal year 2022 levels of network eevenue have been maintained and the group’s existing licensees continue to prosper and hold strong market positions.

Fee earners increased from 88 to 97 in the period, with five additions in the first half of the current financial year and a further four in October 2022.

Existing licensees took a prudent approach to recruitment in the remaining part of the period, given the uncertain economic outlook. The board remains confident, however, that recruitment opportunities for partners should improve as FY24 progresses.

It said a slowdown in activity often provides a catalyst for ambitious professionals to change firm to take advantage of the pickup in activity following a lull. In addition, this environment creates push factors which will generate an increase in candidates open to a move. DSW said it remains a desirable place to work for ambitious people who want to grow their own businesses.

With strong cash balances at the year-end of £4.6m (FY22: £4.7m), after paying dividends of £1.26m in the period, the group said it is significantly increasing its investment in recruitment and has a strong recruitment pipeline.

Despite the short term challenges facing the business, the board remains confident in the long term prospects for the business and intends to take advantage of the opportunity to recruit additional fee earners. As new fee earners settle into the business earnings are expected to return to growth.

DSW Capital chief executive, James Dow, said: “While recent economic conditions have, undoubtedly, been frustrating for both the group and its stakeholders, we remain highly motivated and excited by the opportunities our business model creates. Autonomy and flexibility are true differentiators in our marketplace, and we believe that DSW will attract increasing numbers of high quality professionals, as they seek both change and financial opportunity.

“We will be investing significantly in recruitment in FY24, despite the tough markets, remaining ‘greedy whilst others are fearful’. This approach has served us well to date and we believe we will benefit from this investment in subsequent trading periods.”

The firm also announced today that it has entered into an updated Trademark Licence Agreement with one of its licensees, PHD Industrial Holdings Limited.

Under the new agreement PHD IH, will continue to pay a fixed licence fee of £144,000 pa. There is also a service contract in place where central costs are recharged on a per head basis (c.£48,000 pa), known as a ‘desk charge’, that will continue to be paid.

The agreement will expire on December 31, 2024, and PHD IH will have the right to acquire the trademark ‘PHD Industrial Holdings’ from the group for £1 after the expiration of the agreement.