DSW Capital achieves profit despite flat sales, and expands into East Midlands

DSW Capital, the Daresbury-based mid-market, challenger professional services licence network, reported flat revenues for the year to March 31, 2023, but achieved a pre-tax profit, compared with a loss the previous year.

The business has also expanded into the Midlands for the first time with the addition of insolvency and restructuring specialist Bridgewood Financial Solutions, after backing a management buy-out of Bridgewood, which employs a team of 14 in Nottingham.

DSW posted group revenues of £2.714m, compared with £2.681m in the prior year, and a network revenue of £18.3m, the same as 2022. Total income from licensees was flat at £3m.

A pre-tax profit of £715,000 was an improvement on the previous year’s pre-tax loss of £31,000.

The group said it has a strong balance sheet, with cash balances at period end of £4.6m, compared with £4.7m the previous year, and net assets of £7.9m (FY22: £8m).

DSW is proposing a final dividend of 2p per share, giving a total dividend per share for the year of 3.76p (FY22: 4.22p).

Fee earners at period end increased to 97, up from 88 a year ago, a 10.2% increase which DSW said demonstrates the attractiveness of the licence model and the network’s heightened profile following IPO, with low levels of attrition at 8.4% (FY22: 16.1%).

The business said the current trading performance to date is at similar levels to Q4 FY23, as macro-economic concerns continue to restrict M&A activity.

But it adds the opportunity for organic and acquisitive growth remains significant and the directors are confident in the strength, resilience and appeal of the group’s business model.

The deal for Nottingham-based Bridgewood gives control of the firm to founder Robin Tarling and insolvency practitioners Andrew Smith and Tom Grummitt, while also providing an exit for its original investors. It will now operate as a member of the Dow Schofield Watts network under the name of DSW Bridgewood.

DSW has provided loans totalling £880,000, of which £100,000 will be a working capital loan, to support the MBO of Bridgewood.

James Dow, DSW Capital CEO, said: “The post-year end addition of Bridgewood to the DSW Network demonstrates our ambitions to re-balance the portfolio and expand the geographical presence of the group. We believe the increasing scrutiny and regulation facing some of our larger competitors, in combination with the current market conditions, will enable us to attract more quality fee earners to DSW, supporting our future growth and expansion.”

Robin Tarling, Bridgwood managing director, said: “The buy-out is an ideal scenario for all concerned. It enables our two other partners, Andrew Smith and Tom Grummitt, who are key members of the leadership team, to take a stake in the business and gives us the autonomy to pursue our growth plans going forward, while providing a return for our seed investors.

“Being part of the Dow Schofield Watt network will also give us access to a strong support team and bring opportunities to expand our services, including into other types of advisory work and commercial financial broking.

“It has been a smooth, timely and seamless process with DSW. They have been responsive, quick to understand our business model, and their emphasis on strong cultural synergies was critical in informing our decision to join the network.”

On the annual results, James Dow said: “While the outcome for FY23 was not what we expected, at the start of the financial year, we are pleased with the progress the group has made in other areas. Our investment in building a strong infrastructure to support our growth continued and we have significantly enhanced our recruitment capabilities, despite the tough market, remaining greedy whilst others are fearful.

“This approach has served us well to date and we are confident that we will benefit from this investment in subsequent trading periods.”

This morning DSW also announced the award of 293,796 nil cost options. Chief financial officer, Nicole Burstow, has been granted 228,102 of the PSP awards.