TIDMDSW
RNS Number : 8572F
DSW Capital PLC
13 July 2023
13 July 2023
DSW CAPITAL PLC
("DSW Capital", "DSW" or the "Group")
(AIM: DSW)
Audited Final Results
Resilient performance in challenging market conditions
DSW Capital, a profitable, mid-market, challenger professional
services licence network and owner of the Dow Schofield Watts
brand, is pleased to announce its full year results for the year
ended 31 March 2023 ("FY23" or the "Period").
FY23 started well, with the Group delivering a strong half year
performance. This progress, however, was frustrated by the
significant shift in sentiment which followed the Autumn
Mini-Budget, affecting confidence and activity in the Group's
primary market, SME M&A.
Whilst these challenging market conditions have continued into
FY24, the Board's focus is firmly on Fee Earner recruitment and the
expansion of its Network portfolio into counter-cyclical services,
as demonstrated in the Bridgewood Financial Solutions
("Bridgewood") transaction, also announced today.
Financial highlights
-- Network Revenue of GBP18.3m (FY22: GBP18.3m) - FY22's record
performance matched despite challenging H2
-- Group revenue at GBP2.7m (FY22: GBP2.7m)
-- Total income from licensees GBP3.0m (FY22: GBP3.0m)
-- Adjusted Pre-Tax Profit of GBP1.4m (FY22: GBP2.0m), with
the decline in profitability reflecting a full year's plc
costs including investment in additional central resource
-- Statutory Profit before Tax increased to GBP0.7m (FY22:
Loss before Tax GBP0.03m)
-- Earnings per share 2.0 pence (FY22: loss per share (2.0)
pence)
-- Strong balance sheet:
* Cash balances at Period end GBP4.6m (FY22: GBP4.7m)
* Net Assets of GBP7.9m (FY22: GBP8.0m)
* Cash conversion for the period of 88% (FY22: 105%).
-- Proposed Final Dividend of 2.0 pence per share, giving
a total dividend per share for the year of 3.76p (FY22:
4.22p)*
Operational highlights
-- Fee Earners at Period end increased to 97 (FY22: 88), up
10.2%, demonstrating 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%)
-- Launch of our Future Leaders Programme, a programme produced
in conjunction with BecomingX, investing in the next generation
of DSW Leaders
-- Laid the foundations for our Recruitment Drive, to build
a pipeline of ambitious professionals to join the DSW Network,
partnering with Alexander Mann Solutions and bolstering
our Recruitment team
-- Named by Experian** as the 11(th) most active corporate
finance adviser in the UK in 2023, moving up the rankings
from 18(th) in the prior year
-- Continued to deliver progress against our ESG Strategy,
which was launched in April 2022, with the publication
of our second ESG report
Post year end highlights
-- The Group now has a healthy pipeline of candidates, following
launch of the Recruitment Drive, with two new licensed
businesses having signed heads of terms
-- Provided funding support for an MBO of Bridgewood, bringing
the business into the Network and acquiring ongoing licence
fee income for DSW
* Bridgewood is a corporate recovery team of fourteen
individuals based in Nottingham
* Strengthens DSW's counter-cyclical Network Revenues
* Adds a further geographical location, the Midlands,
to the Network, which will raise the DSW's profile in
that region, increasing the likelihood of further Fee
Earners joining the Network
-- First DSW Group Conference announced, which will take place
on 21 September 2023, bringing together our teams from
across the UK
Current trading and outlook
-- FY24 trading performance to date at similar levels to Q4
FY23, as macro-economic concerns continue to restrict M&A
activity
-- 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
-- Focus remains on broadening the range of service lines
in DSW's portfolio, to build resilience in the business
through economic cycles
-- Investment in recruitment and supporting our existing licensees
with improved central infrastructure to ensure that DSW
is well positioned for further growth
-- The Board remains cautious about its expectations for FY24
but intends to capitalise on the recruitment opportunities
that such challenging economic conditions often create
-- Whilst mindful of the pressure challenging trading conditions
place on less mature licensees, the Board remains confident
about the long-term prospects for the Group
* Full details of the dividend payments for FY22 are set out in
note 12 to the accounts.
** Experian Market IQ: 2023 Report
James Dow, Chief Executive Officer, 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.
"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."
Definitions
Network Revenue is defined as total revenue earned by licensees,
as opposed to total revenue reported by the Company
Adjusted Pre-Tax Profit is defined as profit before tax adjusted
to add back the items not considered part of underlying trading
including share-based payment expense and IPO costs. It is a
non-GAAP metric used by management and is not an IFRS
disclosure.
Cash conversion is calculated as cash generated by operations
divided by operating cash flows before movements in working
capital
Total income from licensees represents statutory revenue plus
share of results in associates
FY24 is the year ended 31 March 2024
Online investor presentation
An online investor presentation and Q&A will be hosted by
the management team on Monday 17 July at 11.45am. To participate,
please register with PI World at: https://bit.ly/DSW_FY23_webinar
.
Dividend and Record Pay Date
The record date for the Group's proposed dividend is 15
September 2023, and the dividend payment date is 29 September 2023.
The ex-dividend date is 14 September 2023.
Notice of AGM
The Group's annual general meeting ("AGM") will be held on 18
September 2023 at 10:00am at the Midland Hotel Manchester , 16
Peter St , Manchester M60 2DS. Notice of the AGM will be posted
with copies of the Group's report and accounts on 18 August
2023.
For further information please contact:
DSW Capital
James Dow, Chief Executive Officer Tel: +44 (0) 1928
Nicole Burstow, Chief Financial Officer 378 029
Tel: +44 (0) 1928
378 039
Shore Capital (Nominated Adviser & Broker) Tel: +44 (0)20
James Thomas / Mark Percy / Rachel Goldstein 7408 4090
Guy Wiehahn / Isobel Jones (Corporate Broking)
Belvedere Communications
Cat Valentine Tel: +44 (0) 7715
Keeley Clarke 769 078
Tel: +44 (0) 7967
816 525
dsw@belvederepr.com
About DSW Capital
DSW Capital, owner of the Dow Schofield Watts brand, is a
profitable, mid-market, challenger professional services network
with a cash generative business model and scalable platform for
growth. Originally established in 2002, by three KPMG alumni, DSW
is one of the first platform models disrupting the traditional
model of accounting professional services firms. DSW now operates
licensing arrangements with 23 licensee businesses with 107 fee
earners, across eight offices in England and two in Scotland. These
trade primarily under the Dow Schofield Watts brand.
DSW's vision is for the DSW Network to become the most
sought-after destination for ambitious, entrepreneurial
professionals to start and develop their own businesses. Through a
licensing model, DSW gives professionals the autonomy and
flexibility to fulfil their potential. Being part of the DSW
Network brings support benefits in recruitment, funding and
infrastructure. DSW's challenger model attracts experienced, senior
professionals, predominantly with a "Big 4" accounting firm
background, who want to launch their own businesses and recognise
the value of the Dow Schofield Watts brand and the synergies which
come from being part of the DSW Network.
DSW aims to scale its agile model through organic growth,
geographical expansion, additional service lines and investing in
"Break Outs" (existing teams in larger firms). The Directors are
targeting high margin, complementary, niche service lines with a
strong synergistic fit with the existing DSW Network.
Chair's Statement
On behalf of the Board, I would like to start by thanking all
colleagues across the business for their unwavering commitment and
support throughout the year. It gives me pleasure to announce DSW
Capital's results for the year ended 31 March 2023, and to welcome
Bridgewood, a corporate recovery and insolvency advisory business,
based in Nottingham. Despite a strong start to the year, the
Mini-Budget in the Autumn affected confidence and activity in our
primary market, SME M&A, which inevitably impacted Group
performance in H2.
Despite these frustrations, the DSW Network demonstrated the
resilience of the individual businesses, by delivering GBP18.3m of
Network Revenue, equal to the record level set in the prior year.
DSW continues to maintain a strong balance sheet and an excellent
capital base from which to grow the business, both organically and
through the strategic acquisition of talented individuals and teams
as opportunities arise.
The DSW Network, which comprises 2 3 licensee businesses, rose
up the ranks to be named by Experian as the 11(th) most active
corporate finance adviser (by number of deals) in the UK. As
anticipated, the heightened profile of DSW resulting from our IPO
led to increased recruitment activity in H1 with a high number of
talented individuals joining DSW. We now have 97 Fee Earners as of
31 March 2023, an increase of 10.2% on the prior year.
Long-term vision and strategy
DSW's long-term vision is to become the most sought-after
destination for ambitious, entrepreneurial professionals to start
and develop their own businesses. We aim to scale the business
through organic growth, the addition of new service lines and
geographic locations, strategic acquisition of licence fees, and
investing in "Break Outs" (existing teams in larger firms).
Being a professional services business, our focus is on the
recruitment of new partners and new teams and the recruitment of
additional Fee Earners to grow existing licensee businesses. At the
year-end, the number of Fee Earners, including partners, had grown
from 88 to 97, an increase of 10.2%, and the number of partners
rose from 39 to 41.
The current market conditions can be a catalyst for ambitious
professionals to seek alternatives to the traditional employment
models, as 'push' factors become more prominent due to inflationary
pressures and consequently internal politics, and remuneration
discussions can leave many disappointed. We see this as a great
opportunity for DSW to invest in our recruitment pipeline in FY24,
which we expect to benefit us in subsequent trading periods.
Addition of Bridgewood to the Network
We were delighted to announce, this morning, that, as part of
our strategy to add new services lines, DSW supported the
management buyout of Bridgewood, a corporate recovery business
based in Nottingham. The transaction with Bridgewood strengthens
our counter-cyclical offering and provides DSW with its first
office in the Midlands, which will raise DSW's profile in that
region, increasing the likelihood of further Fee Earners joining
the Network.
People and Diversity
Our colleagues remain central to everything we do and achieve.
Creating a positive dynamic culture, which is attractive to talent
and in which our people can thrive, remains our top priority.
Diversity is at the core of DSW's model and a cornerstone of our
ESG Strategy. We recognise that a broad range of perspectives
benefits the progression and success of our business. DSW's
commitment to diversity extends beyond gender to ethnicity, sexual
orientation, gender identity, social mobility, disability, and
other challenges which may lead to disadvantage in other
environments. DSW is committed to creating a diverse and inclusive
environment for its licensees and employees, and this continues to
be a core value, as new professionals and businesses are welcomed
to the Network.
Technology
We continue to invest in the right technologies to protect our
licensees and their clients, whilst also keeping pace with the
rapidly changing IT landscape, to embed efficiencies and enhance
the value and quality of service provided to our licensees. With
this investment, our licensees are able to continue to fully
embrace the flexibility and autonomy afforded to them by the DSW
model, choosing how and where their teams work to help maintain a
strong work life balance and increased collaboration.
We have also invested in an additional senior IT resource to
help shape and implement our IT Strategy and provide industry
leading expert advice to the Board. Our key focus areas include
continued investment in our Cyber Security, maintaining excellent
IT Service levels and providing a platform for future
innovation.
Board and Governance
The Board consists of five directors, two of whom are executive
directors and three non-executive directors. Two of the
non-executive directors, Jillian Jones and I, are considered
independent. Jon Schofield is not considered independent. The
current Board reflects a blend of different experience and
backgrounds and is considered appropriate for the scale of the
business.
The Board is supported by two committees, namely the Audit and
Risk Committee and the Remuneration and Nominations Committee, with
formally delegated duties and responsibilities.
I am happy to report that DSW has complied with the QCA
Corporate Governance Code throughout FY23, and you can find more
information on our governance arrangements in the Corporate
Governance Statement in the annual report.
Our approach to Risk
DSW takes a proactive approach to risk management, which starts
at a strategic level with the Board. Along with the other
directors, I continue to closely monitor and identify risks facing
the Group and have strong risk mitigation strategies in place.
DSW has a wealth of compliance and risk experience to support
all licensee businesses in related matters and provide them with
regulatory guidance. We invested in an external risk advisor to
support us in raising the bar on compliance and regulatory matters.
This included refreshing our Risk Management Framework, reviewing
all policies and standards, and a series of risk management
workshops with licenses businesses.
We introduced a clear and consistent format for identifying and
assessing risks, both for DSW Capital and those risks faced by our
licensees. This framework has been rolled out across the Network
and adopted by licensees as part of their own risk assessments.
We continue to invest in our compliance support, providing
relevant guidance and training to promote a pro-active approach to
risk management across the DSW Network.
For more detail, please refer to Risk Management section in the
annual report.
Environmental, Social and Governance ("ESG")
As a Board, we understand and welcome the increasing importance
of ESG to investors, employees, and clients. We are committed to
creating positive interactions with all stakeholders and intend to
demonstrate this over the long-term through our approach to ESG.
The Group's ESG cornerstones and priority areas remain high on the
Board's agenda. We are delighted to publish our second ESG report
within this year's Annual Report, which provides a review of our
progress to date and the meaningful action we are taking in areas
in which we can have the most impact. You can read more detail on
our progress in the Environmental, Social and Governance report in
the annual report.
The Board continues to make voluntary SECR disclosures, as it
recognises the important role all businesses must play to reduce
carbon emissions and increase energy efficiency. Please refer to
the Directors Report in the annual report.
Dividend
The Board is committed to its long-term dividend policy and is
today proposing a final ordinary dividend for the year ended 31
March 2023 of 2.0 pence, in line with its dividend policy to pay
out 70% of adjusted profit after tax. An interim dividend of 1.76
pence per share in respect of the six months to 30 September 2022
was paid on 11 January 2023.
If approved by shareholders, this will take total cumulative
dividends that will be paid out to shareholders post-IPO to 7.98
pence per share.
Outlook
While recognising that economic conditions remain volatile, I am
confident in the Group's ability to continue to deliver on its
growth strategy. As a Board, we firmly believe that DSW is an
attractive alternative to the Big 4 accounting firms, which enables
talented professionals to achieve their potential and provides a
bespoke, personalised service. Several of our competitors continue
to experience intense regulatory pressure and disruption, making
our unique model increasingly attractive to a large number of
professionals who are seeking to take greater control of their
careers.
The Board looks forward to FY24 with optimism and remains
excited about the long-term prospects for the Group.
Heather Lauder
Independent Non-Executive Chair
Chief Executive Officer's Review
I am pleased to report on the year ended 31 March 2023, which
was undoubtedly a game of two halves for DSW, with our progress
being frustrated by the significant shift in sentiment that
followed the fateful Autumn Mini-Budget. Despite this disruption,
we matched the record Network Revenue achieved in FY22 to deliver
GBP18.3m (FY22: GBP18.3m) and ended the year with a record number
of professionals.
The Group's admission to AIM created a strong "halo" effect,
which, combined with a resilient SME M&A market in the first
half of the year, powered strong growth right through to October
2022 with Fee Earners rising from 88 to 97.
The Mini-Budget in September softened the SME M&A market,
resulting in both lower levels of transactional activity and
reduced licensee confidence in recruitment, which meant no new Fee
Earners were added between October and the year end. Whilst the
political landscape settled, business sentiment and M&A
activity has remained cautious since then.
The change in economic conditions, whilst frustrating, brings
significant expansion opportunities for the Group, particularly in
terms of new partner recruitment.
Mixed trading results
Network revenue for the year was maintained at last year's
record level of GBP18.3m (FY22: GBP18.3m), as our licensees
continue to prosper and maintain their market positions. However,
average revenue per Fee Earner declined 15.1% to GBP193k (FY22:
GBP227k), reflecting the previously noted softening of the M&A
market, and reduced utilisation in the second half of the year.
Adjusted profit before tax decreased by 29.6% to GBP1.4m (FY22:
GBP2.0m), with the decline in profitability reflecting a full
year's plc costs, including additional central resource. Revenue
for the Group was GBP2.7m (FY22: GBP2.7m) and statutory profit for
the year was GBP485k (FY22: loss of GBP334k) after the deduction of
the share-based payment ("SBP") charge and IPO costs.
DSW received an average licence fee (including profit share
where applicable) of 16.6% (FY22: 16.9%), the slight reduction
reflecting reduced profit share contributions.
Balance sheet strength
With strong cash balances at the year-end of GBP4.6m (FY22:
GBP4.7m) after paying dividends of GBP1.26m, we remain
well-resourced to execute on our strategy.
DSW's strategy and delivery against it
Our strategic aim remains to have a more resilient and
diversified group of licensed businesses. At present, corporate
finance and due diligence represents the majority of our business
(68% vs. 70% in the previous year(1) ). As communicated at the time
of the AIM listing, DSW aims to scale its licence model through
organic growth of existing licensees, recruitment of new licensees,
investing in "Break Outs" (existing teams in larger firms) and the
acquisition of licence fees.
Our recruitment processes continue to improve. In March 2023, we
committed significant investment in additional central recruitment
capability and relaunched our break-out initiative with clearer
messaging that we are offering "golden hellos" to new teams.
Regarding acquisitions of licence fees, we remain in regular
contact with companies that we admire and continue to work hard to
convince them of our attractiveness, as a suitor offering the right
solution for all their stakeholders. The transaction with
Bridgewood, a corporate recovery business based in Nottingham,
announced this morning demonstrates that our ability to attract
quality businesses, which strengthen and diversify the Group.
Our focus remains on attracting further high margin,
complementary, niche service lines with a strong synergistic fit
with the existing DSW Network.
Continued organic growth
Being a professional services business, our focus is on the
recruitment of new partners and new teams and the recruitment of
additional Fee Earners to grow existing licensee businesses.
At the year-end, the number of Fee Earners, including partners,
had grown from 88 to 97, an increase of 10.2% (FY22: 14.3%) and the
number of partners rose from 39 to 41.
Since March 2013, the number of Fee Earners has increased from
30 to 97, which equates to a ten-year compound annual growth rate
("CAGR") of over 12%, and an increase of 15 (18.3%) since the
flotation.
The first half of the year was dominated by a scarcity of
available talent and our licensee partners led the way in
recruiting employees to their teams. The change in economic
conditions in the autumn, meant existing licensees took a more
prudent approach to recruitment and, generally, there was
significantly softer demand for talent.
Empowering professionals
Since launching the business in 2002 as a three-man start-up, we
have focussed on attracting others to our path, to build their own
mid-market challenger professional service businesses. We finished
the year with 21 licensed businesses in our network, adding a new
wealth advisory partner and a new M&A advisory business.
Our vision is to become the most sought-after destination for
ambitious, entrepreneurial professionals to start and develop their
own businesses. Our focus is on partners, rather than clients.
This focus on people is our super-power. Other professional
firms will profess the importance of people but position their
services and capabilities towards their clients. DSW's clients are
our partners. The strength of our business model is this clear
focus on helping people meet their aspirations.
Recruitment drive
When there is a buoyant demand for services, our ability to
recruit is more constrained as the push factors encouraging people
to seek new opportunities is significantly lower. A slowdown in
activity results in lower bonuses, disappointing salary awards and
postponed promotions, which increases push factors and the
propensity of candidates to consider a move.
We know that DSW remains a desirable place to work for ambitious
people, who cherish their autonomy and want to grow their own
business free from the internal politics of larger firms.
Recognising the significant shift in recruitment conditions
towards the end of the year, we significantly increased our
investment in recruitment which we will continue through FY24. It
is important that we are greedy whilst others are fearful. This
approach has served us well to date.
A growing brand and reputation
DSW must continue to demonstrate that it is a highly attractive
proposition for both clients and professionals who work within the
UK mid-market. The quality of DSW's clients and the quality of our
people is reflected in our significant average revenues per fee
earner of GBP193k (FY22: GBP227k). This is an important metric and,
while lower in FY23 than anticipated at the start of the year, this
still compares very favourably with other professional service
firms.
DSW's achievements and capabilities are most notable in its
original core service areas of corporate finance and due diligence.
Our prominence in M&A was highlighted by an Experian research
report for 2022, which marked DSW as the 11(th) most active adviser
(by number of deals) in the UK (18(th) position in 2021 and 25th
place in 2020(2) ).
In November, DSW ranked 48(th) in Accountancy Age's top 50
accountancy firms (based on revenue) to the year ended March 2022,
compared to the previous year's ranking of 49(th 3) .
International network
DSW has an established partnership network of global advisory
firms, called "Pandea Global M&A". Pandea Global M&A
comprises selected independent firms with a primary focus on the
origination and execution of middle market M&A activities. We
believe this network of 31 members is the 8(th) largest in the
world.
The Pandea network increases the DSW Network's access to
overseas buyers, investors, and valuable local knowledge, while
providing its UK-based clients with access to an enlarged pool of
acquisition targets.
The Pandea conference held in Rotterdam in May 2023, attracted
21 of the 31 member firms.
Central team
As a team, we remain committed to delivering the highest level
of service to our partners. It is the delivery of these services
which make it possible for our Fee Earners to focus on delivering
high quality work for their clients. The team is young, talented,
and extraordinary, and I thank all of them for their considerable
efforts in delivering increasing levels of support to our
licensees.
Our initiatives this year included the launch of our Future
Leaders Programme in conjunction with BecomingX. The programme is a
six-month personal development journey to prepare the next
generation of DSW leaders. The selected employees take part in
inspiring training sessions, receive individual executive coaching,
and collaborate with colleagues to design and deliver strategic
initiatives. Our first cohort of 12 employees and partners started
in January of this year.
These initiatives are right at the heart of supporting our
licensee partners and employees to be the best that they can be.
Their development reinforces the foundations of our licensee
businesses and therefore for DSW for the coming years.
Our partners and their teams are our greatest ambassadors. On
behalf of our shareholders, I would like to take this opportunity
to thank DSW partners for their continuing commitment to DSW and
all that it stands for.
Looking ahead
DSW is a resilient business with a long track record of growth
in Fee Earners but, with our roots in M&A advisory, we are
financially impacted by the current lower levels of deal activity
in M&A - particularly the SME segment.
The new financial year has started in line with our
expectations, with trading performance at similar levels to Q4
FY23. Consequently, we remain uncertain as to the speed of recovery
in SME M&A activity and cognisant of the macro
vulnerabilities.
Our focus, however, is firmly on recruitment, as these
short-term economic uncertainties 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. Accordingly, we have significantly
increased the resources committed to recruitment which has
strengthened our recruitment pipeline.
We remain very confident in the strength of our business model
to continue to attract Fee Earners, as demonstrated by the
transaction with Bridgewood announced today. We have a strong
balance sheet and are confident that our considerable efforts to
acquire licence fees and recruit teams will bear fruit.
James Dow
Chief Executive Officer
1. Calculation includes all licensing income including income
from associates
2.
https://dswcapital.com/dsw-ranks-11th-in-the-uks-deals-advisers-in-2022/
3.
https://dswcapital.com/dow-schofield-watts-rises-in-accountancy-top-50-50/
Chief Financial Officer's Review
Key Performance Indicators
The following KPIs are used by management to monitor the
financial performance of the Group:
2023 2022 2021
--------------------------------------- ------ ------ ------
Revenue (GBP'000) 2,714 2,681 2,354
Total income from licensees (GBP'000) 2,998 2,990 2,456
Adjusted EBITDA* (GBP'000) 1,536 2,233 1,824
Adjusted PBT (GBP'000) 1,409 2,002 1,592
Adjusted PBT margin (%) 51.9 74.6 67.6
Net Assets (GBP'000) 7,895 7,985 2,212
The Group also measures its performance using the following KPIs
which are derived from the performance of the DSW Network:
2023 2022 2021
---------------------------------------- ------- ------- -------
Total revenue of all Network licensees
(GBP'000) 18,263 18,285 15,342
Revenue per fee earner (GBP'000) 193 227 196
Revenue per partner (GBP,000) 445 446 432
Fee Earners (Number) 97 88 77
After a very strong first half of the year, the performance of
the Group in the second half was significantly disrupted by the
turbulent economic conditions that followed the Mini-Budget in the
Autumn.
We have a very talented network of partners and employees and
their hard work, commitment to their clients and resourcefulness
have enabled them to maintain the record level of billings achieved
in the prior year despite an overall decline in market activity. As
such, DSW has improved its market share now ranking the 11(th) most
active adviser (by number of deals) in the UK (18(th) position in
2021**).
The difficult economic conditions have, however, impeded both
organic and new partner recruitment, which in turn frustrated the
Group's ability to grow. Additionally, with a full year of IPO
costs to bear, this has further impacted on the Group's
profitability.
Our investment in central infrastructure, whilst having a
short-term impact on profit will position the Group well for the
future. Our current year initiatives have focused on increasing the
appeal of the model to new recruits whilst making it more "sticky"
for existing licensees; developing future talent; and increasing
collaboration across the Network.
Income Statement
Revenue and Network Revenue
Network revenue for the year was GBP18.3m, which remains flat on
the prior year. While many of our businesses have reported record
years, the reduced M&A activity has impacted Corporate Finance,
our most significant service line. This reduction has lowered
utilisation and revenue per fee earner by 15.1% to GBP193k. Our
average licence fee has been maintained at 16.6% (FY22: 16.9%)
resulting in consistent levels of licensing income of GBP3.0m
(2022: GBP3.1m). Referrals across the Network have increased to
14.2% of total Revenue (2022; 13.9%) demonstrating the collegiate
culture across the Group, even in difficult trading conditions.
Fee Earners
The number of Fee Earners is a key driver of growth and we have
seen a 10.2% increase on the prior year to 97, against the backdrop
of a challenging recruitment market. The growth in Fee Earners was
heavily weighted to the first half of the year with the uncertain
economic environment in the second half causing our licensees to
take a cautious approach to recruitment. These conditions have been
particularly frustrating following the boost to recruitment
experienced on the back of the IPO. Nevertheless, the downturn
creates greater push factors in the candidate pool which creates
greater opportunity. We are investing in our recruitment
capabilities so that we are well positioned to attack the
opportunity and are confident that this should generate significant
benefit in the latter part of FY24 and into FY25.
Despite a reduction in revenue per Fee Earner from GBP227k to
GBP193k, this KPI remains comparable to our larger listed peers
such as Knights, DWF, Gateley and Keystone Law as well as the Big
4. Many of our businesses have improved their market positions and
our talented teams continue to be award winning in their local
markets. The strength of the DSW brand continues to grow and we
remain a genuine alternative to the largest firms.
Central Costs
We are committed to maintaining a lean cost base whilst ensuring
we provide our licensees with the support they need to thrive and
fulfil their potential.
Central costs (excluding the share-based payment charge and IPO
costs) have increased by GBP0.55m, on the prior year. The majority
of the increase is due to the full year effect of plc costs and
investment in our central infrastructure.
We are largely insulated from wage inflation as licensee
employee costs are borne by the licensee businesses and partners
are remunerated based on the fees they bill. The fixed cost base
includes 10 people (excluding directors), 8.0 full time
equivalents. Similarly, the licensee businesses bear their own
property costs or work from home, therefore the Group's exposure to
inflationary pressures is limited to its one office premises.
We made two senior hires in the second half of FY22, a Talent
and Resource Manager and a Strategic Projects Director, with a full
year's cost being incurred in FY23. In the current year we have
invested in senior IT resource to develop our IT strategy and a
platform for future innovation. In addition, we recruited a
marketing executive and an office administrator. We have continued
to enhance the level of compliance support provided to licenses;
increased marketing activity to improve brand awareness; and
launched our Future Leaders training program, investing in high
potential employees across the Network to develop the next
generation of partners. In addition, we have launched several
initiatives to increase collaboration across the Network. Our
target is to grow the percentage of referrals as a proportion of
total income (2023: 14.2%) such that it exceeds the average licence
fee (2023: 16.6%), creating an even more compelling proposition to
new partners.
Our Adjusted Pre-tax Profit was GBP1.4m (2022: GBP2.0m) which is
a decrease of 29.6% on the prior year, reflecting the increased
cost base noted above.
Adjusted PBT and Exceptional Costs
Adjusted PBT is calculated as follows:
2023 2022
(GBP000's) (GBP000's)
------------------------ ------------- -------------
Profit / (Loss) before
tax 715 (31)
Share based payments 694 1,167
IPO costs - 866
Adjusted PBT 1,409 2,002
We have a share-based payment charge in the year of GBP0.7m
which reflects the accounting impact of the one-off issue of growth
shares to partners prior to the IPO. The growth shares were
converted to ordinary shares on IPO and there is no dilutive impact
on shareholders going forward. The charge is being spread over the
period from issue to 1-2 years post IPO depending on the individual
share conditionality. The expense is expected to reduce in future
periods and, from 16 December 2023, will represent a more
normalised basis, solely reflecting the executive LTIP scheme.
Taxation
The effective rate of tax (based on PBT excluding the
share-based payments charge which is non-deductible) is 16.3%,
slightly below the statutory rate due to an over-provision in the
prior year and the reversal of certain costs previously treated as
non-deductible. The prior year effective rate (26.7%) was higher
due to non-deductible IPO costs in the period.
Earnings Per Share
Earnings per share has been diluted year on year by the shares
issued and share re-organisation on IPO. Adjusted basic earnings
per share for the year is 6p (2022: 10p). Adjusted EPS removes the
impact of the share-based payment charge and IPO costs incurred in
the year (as shown above).
Balance Sheet
Cash
The Group's business model is highly cash generative as the
working capital requirement for the licensee businesses, which
includes employee and property costs, are borne by the individual
licensees. In addition, partners only get paid when their invoices
are paid so they are highly motivated to collect cash from clients.
The DSW Network lock up equivalent for the year was 27 days
(calculated as amounts owed to DSW Capital from licensees divided
by Network Revenue), compared to 30 days in the prior year. This
remains well below the listed peer group.
Cash generated from operations was GBP1.35m (2021: GBP1.44m).
Operating cash conversion in the year was 88% which is lower than
the prior year (2022: 105%) due to start-up funding provided to new
licensee businesses. Corporation tax payments were GBP0.2m (2022:
GBP0.5m).
Capital expenditure was minimal in the period (GBP0.04m) and
lease payments of GBP0.08m relate to the Head Office in Daresbury.
Interest income (GBP0.1m) has been earnt on licensee loans and the
Group's cash balances.
As a result, the closing cash and cash equivalents balance
before the payment of dividends was GBP5.85m (2022: GBP4.49m),
giving a net increase of GBP1.12m. The Group paid dividends of
GBP1.26m in the year (2022: GBP0.38m) leaving closing cash of
GBP4.58m (2022: GBP4.72m) and no debt.
Net Assets
The Group has a strong balance sheet with net assets of GBP7.9m
at the year-end (2022: GBP8.0m). In addition, the Group has
significant cash resources to take advantage of the current
recruitment and strategic acquisition opportunities.
Dividend
The Board is proposing to pay a final ordinary dividend of 2.0
pence for ended 31 March 2023 in line with its dividend policy to
pay out 70% of adjusted profit after tax. An interim dividend of
1.76 pence per share in respect of the six months to 30 September
2022 was paid on 11 January 2023.
The final dividend will be approved at the Company's AGM which
will be held on 18 September 2023 at The Midland Hotel, Manchester,
M60 2DS.
Since IPO in December 2021, the Group will have paid out 7.98
pence per share in dividends, following the approval of the FY23
Final Dividend of 2.0 pence.
Nicole Burstow
Chief Financial Officer
*Adjusted EBITDA is defined as Adjusted profit before tax
adjusted to add back impairment of loans due from associated
undertakings (GBP22k), finance costs (GBP24k), depreciation
(GBP139k), amortisation (GBP46k) and deduct finance income
(GBP104k).
**
https://dswcapital.com/dsw-ranks-11th-in-the-uks-dealsadvisers-in-2022/
Consolidated statement of comprehensive income
For the year ended 31 March 2023
2023 2022
Note GBP'000 GBP'000
Continuing operations
Revenue 4 2,714 2,681
Gross profit 2,714 2,681
Share of results of associates 16 284 309
Share of results of jointly
controlled entity 17 25 102
Administrative expenses (2,366) (3,018)
Operating profit 657 74
Adjusted operating profit* 1,351 2,107
Share based payments expense (694) (1,167)
IPO expenses - (866)
----------------------------------- ----- --------- --- ------------
Operating profit 657 74
Finance income 9 104 82
Impairment of loans due from
associated undertakings (22) (127)
Finance costs 10 (24) (60)
Profit / (loss) before tax 715 (31)
Income tax 11 (230) (303)
Profit / (loss) for the year 6 485 (334)
--------- ------------
Total comprehensive income /
(loss) for the year attributable
to owners of the Company 485 (334)
--------- ------------
Earnings per share
From continuing operations
Basic 13 GBP0.02 (GBP0.02)
--------- ------------
Diluted 13 GBP0.02 (GBP0.02)
--------- ------------ ----
* Adjusted Operating profit, which is defined as operating
profit adjusted for items not considered part of underlying trading
including IPO costs and share based payments, is a non GAAP metric
used by management and is not an IFRS disclosure.
Consolidated statement of financial position
As at 31 March 2023
2023 2022
Note GBP'000 GBP'000
Non-current assets
Intangible assets 14 748 794
Property, plant and equipment 15 440 525
Investments 18 922 922
Investments in associates 18 209 290
Interests in jointly controlled
entities 18 39 23
Prepayments and Accrued Income 19 166 175
Deferred tax asset 21 9 4
-------- --------
2,533 2,733
-------- --------
Current assets
Trade receivables 19 924 832
Prepayments and Accrued Income 19 350 362
Other receivables 19 567 369
Cash and bank balances 4,584 4,722
6,425 6,285
Total assets 8,958 9,018
-------- --------
Current liabilities
Trade payables 22 162 86
Other taxation 22 211 210
Other payables 22 76 54
Accruals and Deferred Income 22 133 163
Current tax liabilities 22 95 63
Lease liability 24 91 83
768 659
-------- --------
Net current assets 5,657 5,626
-------- --------
Lease liability 24 220 302
Dilapidation provision 22 75 72
295 374
-------- --------
Total liabilities 1,063 1,033
Net assets 7,895 7,985
Equity
Share capital 23 55 54
Share premium 5,271 5,280
Share-based payment reserve 25 1,868 1,174
Retained earnings 701 1,477
Total Equity attributable to
owners of the Company 7,895 7,985
Company statement of financial position
As at 31 March 2023
2023 2022
Note GBP'000 GBP'000
Non-current assets
Intangible assets 14 748 794
Property, plant and equipment 15 40 39
Investments 18 922 922
Investments in associates 18 209 290
Interests in jointly controlled
entities 18 39 23
Prepayments and accrued income 19 166 175
Deferred tax asset 21 9 4
-------- --------
2,133 2,247
-------- --------
Current assets
Trade receivables 19 869 801
Prepayments and Accrued Income 19 293 307
Other receivables 19 696 499
Cash and bank balances 4,563 4,714
6,421 6,321
Total assets 8.554 8,568
-------- --------
Current liabilities
Trade payables 22 32 29
Other taxation 22 210 177
Other payables 22 76 54
Accruals and Deferred Income 22 128 154
Current tax liabilities 22 95 63
541 477
-------- --------
Net current assets 5,880 5,844
-------- --------
Total liabilities 541 477
Net assets 8,013 8,091
Equity
Share capital 23 55 54
Share premium 5,271 5,280
Share-based payment reserve 25 1,868 1,174
Retained earnings 819 1,583
Total Equity attributable to
owners of the Company 8,013 8,091
The profit after tax for the Company was GBP497,000 (2022: loss
of GBP305,000). Under s408 of the Companies Act 2006, the company
is exempt from the requirement to present its own income
statement.
Consolidated statement of changes in equity
For the year ended 31 March 2023
Share Share premium Share-based Retained Total equity
capital payments earnings
reserve
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------- -------------- ------------ ---------- -------------
Balance at 31 March
2021 2 - 7 2,203 2,212
Loss for the year - - - (334) (334)
Dividends - - - (380) (380)
Share-based payments - - 1,167 - 1,167
Issue of shares
in year 52 5,280 - (12) 5,320
--------- -------------- ------------ ---------- -------------
Balance at 31 March
2022 54 5,280 1,174 1,477 7,985
Profit for the year - - - 485 485
Dividends - - - (1,261) (1,261)
Share-based payments - - 694 - 694
Issue of shares
in year 1 (9) - - (8)
Balance at 31 March
2023 55 5,271 1,868 701 7,895
--------- -------------- ------------ ---------- -------------
Company statement of changes in equity
For the year ended 31 March 2023
Share Share premium Share-based Retained Total equity
capital payments earnings
reserve
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------------- --------- -------------- ------------ ---------- -------------
Balance at 31 March
2021 2 - 7 2,280 2,289
Loss for the year - - - (305) (305)
Dividends - - - (380) (380)
Share-based payments - - 1,167 - 1,167
Issue of shares
in year 52 5,280 - (12) 5,320
---------------------- --------- -------------- ------------ ---------- -------------
Balance at 31 March
2022 54 5,280 1,174 1,583 8,091
Profit for the year - - - 497 497
Dividends - - - (1,261) (1,261)
Share-based payments - - 694 - 694
Issue of shares
in year 1 (9) - - (8)
----------------------
Balance at 31 March
2023 55 5,271 1,868 819 8,013
---------------------- --------- -------------- ------------ ---------- -------------
Consolidated cash flow statement
For the year ended 31 March 2023
2023 2022
Note GBP'000 GBP'000
Profit / (loss) for the year 485 (334)
Adjustments for:
Income tax expense 11 230 303
Net interest income (80) (22)
Depreciation of property, plant
and equipment 15 139 87
Amortisation of intangible assets 14 46 39
Share-based payment expense 25 694 1,167
Impairment of loans due from associated
undertakings 22 127
--------- ------------
Operating cash flows before movements
in working capital 1,536 1,367
(Increase)/decrease in trade and
other receivables (308) 192
Increase in trade and other payables 41 73
Decrease/(increase) in amounts
owed from associates in relation
to profit share 81 (196)
Cash generated by operations 1,350 1,436
Income taxes paid (203) (502)
--------- ------------
Net cash from operating activities 1,147 934
--------- ------------
Investing activities
Purchases of property, plant and
equipment 15 (43) (37)
Net cash used in investing activities (43) (37)
--------- ------------
Financing activities
Dividends paid 12 (1,261) (380)
Finance lease payments (77) (77)
Net interest received 104 45
Repayments of loans and borrowings - (992)
(Costs of) / proceeds from issue
of ordinary shares net of share
issue costs (8) 4,620
Net cash (used in) / from financing
activities (1,242) 3,216
Net (decrease) / increase in cash
and cash equivalents (138) 4,113
Cash and cash equivalents at beginning
of year 4,722 609
Cash and cash equivalents at end
of year 4,584 4,722
--------- ---------
Notes to the financial statements
1. General information
The Company was incorporated as DSW Capital Limited on 23 March
2010 under the Companies Act 2006 (Registration number: 07200401).
The Company was re-registered as DSW Capital plc on 26 October
2021. The Company is incorporated and domiciled in England and
Wales. The principal activity of the Company and its subsidiary,
DSW Services LLP, (together referred to as the 'Group') is the
licensing of the Dow Schofield Watts brand and associated brand
names for use in the professional services sector.
The address of the Company's registered office is:
7400 Daresbury Park
Daresbury
Warrington
WA4 4BS
The Financial Statements are presented in Pounds Sterling (GBP),
which is the currency of the economic environment in which the
Group operates. All amounts are rounded to the nearest GBP'000
except where noted.
2. Accounting policies
Basis of Preparation
The financial information set out in this preliminary
announcement does not constitute statutory accounts as defined by
section 434 of the Companies Act 2006.
The results for the year ended 31 March 2023 have been extracted
from the full accounts of the Group for that year which received an
unqualified auditor's report and which have not yet been delivered
to the Registrar of Companies. This preliminary financial
information has been prepared on the same basis as the accounting
policies adopted in those financial statements but does not include
all the disclosures required in financial statements prepared in
accordance with UK adopted International Accounting Standards and
accordingly does not itself comply with UK adopted International
Accounting Standards. The audited financial statements for the year
ended 31 March 2023 were approved by the Directors on 12 July
2023.
The financial information for the year ended 31 March 2022 is
derived from the statutory accounts for that year, which have been
delivered to the Registrar of Companies. The report of the auditor
on those filed accounts was unqualified.
The accounts for the year ended 31 March 2023 and 31 March 2022
did not contain a statement under s498 (1) to (4) of the Companies
Act 2006. The statutory accounts for the year ended 31 March 2023
will be distributed to shareholders on 18 August 2023, in advance
of the Annual General Meeting and made available on our website
(https://dswcapital.com/investors/) or on request by contacting the
Company Secretary at the Company's Registered Office.
Statement of Compliance
The Group financial statements have been properly prepared in
accordance with UK adopted international accounting standards; the
Parent Company financial statements have been properly prepared in
accordance with UK adopted international accounting standards and
has applied in accordance with the provisions of the Companies Act
2006.
The preparation of financial statements in compliance with
adopted UK IFRS requires the use of certain critical accounting
estimates. It also requires Group management to exercise judgment
in applying the Group's accounting policies. The areas where
significant judgments and estimates have been made in preparing the
financial statements and their effect are disclosed in Note 3.
Impact of the initial application of other new and amended IFRS
Standards that are effective for the current year
In the current year, the Group has applied a number of
amendments to IFRS accounting standards issued by the International
Accounting Standards Board (IASB) that are mandatorily effective
for an accounting period that begins on or after 1 January
2022.Their adoption has not had any material impact on the
disclosures or on the amounts reported in these financial
statements.
-- Amendments to IAS 16 - Property Plant and Equipment: Proceeds
before intended use
-- Amendments to IFRS 3 - Reference to Conceptual Framework
-- Annual improvements to IFRS Standards 2018-2020 Cycle
-- Amendments to IFRS 9 - Financial Instruments and IFRS 16
leases
New and revised IFRS Standards in issue but not yet
effective
In preparing these financial statements, the group has not
applied the following new and revised IFRS Standards that have been
issued but are not yet effective.
-- IFRS 17 - Insurance Contracts
-- Amendments to IFRS 10 and IAS 28 - Sale or Contribution
of Assets between an Investor and its Associate or Joint
Venture
-- Amendments to IAS 1 - Classification of Liabilities as current
or non-current
-- Amendments to IAS 1 and IFRS Practice Statement 2 - Disclosure
of Accounting Policies
-- Amendment to IAS 8 - Definition of Accounting Estimates
-- Amendments to IAS 12 - Deferred tax related Assets and Liabilities
arising from a Single Transaction
The directors do not expect the adoption of the Standards listed
above will have a material impact on the financial statements of
the Group in future periods.
Basis of accounting
The Financial Statements have been prepared on the historical
cost basis, except for the revaluation of financial instruments
that are measured at revalued amounts or fair values at the end of
each reporting period, as explained in the accounting policies
below. Historical cost is generally based on the fair value of the
consideration given in exchange for goods and services.
Fair value is the price that would be received to sell an asset
or paid to transfer a liability in an orderly transaction between
market participants at the measurement date, regardless of whether
that price is directly observable or estimated using another
valuation technique.
The principal accounting policies adopted are set out below.
Going concern
In considering the appropriateness of the going concern basis of
preparation, the Directors have considered the cash balance and the
forecasts for the next twelve months following the date of this
report, which includes detailed cash flow forecasts and working
capital availability. These forecasts show that sufficient
resources remain available to the business for the foreseeable
future. The Group has a significant cash balance of GBP4.6m, no
debt, has a model which is strongly cash generative and a limited
fixed cost base. At 31 March 2023, the Group has net assets of
GBP7.9m (2022: GBP8.0m) and net current assets of GBP5.7m (2022:
GBP5.6m) which reflects the strong financial position for the
Group. In addition, the Group is profitable with adjusted profit
after tax of GBP1.2m in the year ended 31 March 2023.
Scenario analysis has been performed on the underlying forecasts
and, given the Group's cash balance is over two times the size of
the forecast annual cost base, this demonstrates that the Company
and the Group have adequate resources to continue in operational
existence for the foreseeable future. As stated in note 28, the
Group completed a transaction with Bridgewood Financial Solutions
Limited on 12(th) July 2023 to acquire licence fee income and
provide funding to support a management buyout. The transaction
will be funded out of the Group's available cash resources and will
provide loans totaling GBP880,000 of cash, of which GBP100,000 will
be a working capital loan to Bridgewood. Following the completion
of the transaction, the Directors remain comfortable that the
Company and the Group have sufficient funds to comfortably cover
its cost base for at least 12 months from the date of signing the
accounts.
As such, the Group financial statements have been prepared on a
going concern basis as the Directors have a reasonable expectation
that the Group has adequate resources to continue in operational
existence for the foreseeable future.
Basis of consolidation
The consolidated Financial Statements incorporate the Financial
Statements of the Company and entities controlled by the Company
(its subsidiaries) made up to 31 March each year. Control is
achieved when the Company:
-- has the power over the investee;
-- is exposed, or has rights, to variable returns from its
involvement with the investee; and
-- has the ability to use its power to affects its returns.
The Company reassesses whether or not it controls an investee if
facts and circumstances indicate that there are changes to one or
more of the three elements of control listed above.
When the Company has less than a majority of the voting rights
of an investee, it considers that it has power over the investee
when the voting rights are sufficient to give it the practical
ability to direct the relevant activities of the investee
unilaterally. The Company considers all relevant facts and
circumstances in assessing whether or not the Company's voting
rights in an investee are sufficient to give it power,
including:
-- the size of the Company's holding of voting rights relative
to the size and dispersion of holdings of the other vote
holders;
-- potential voting rights held by the Company, other vote
holders or other parties;
-- rights arising from other contractual arrangements; and
-- any additional facts and circumstances that indicate that
the Company has, or does not have, the current ability to
direct the relevant activities at the time that decisions
need to be made.
All intragroup assets and liabilities, equity, income, expenses
and cash flows relating to transactions between the members of the
Group are eliminated on consolidation.
Investments in associates and jointly controlled entities
An associate is an entity over which the Group has significant
influence and that is neither a subsidiary nor an interest in a
jointly controlled entity. Significant influence is the power to
participate in the financial and operating policy decisions of the
investee but is not control or joint control over those
policies.
A jointly controlled entity is a joint arrangement whereby the
parties that have joint control of the arrangement have rights to
the net assets of the joint arrangement. Joint control is the
contractually agreed sharing of control of an arrangement, which
exists only when decisions about the relevant activities require
unanimous consent of the parties sharing control.
The results and assets and liabilities of associates or jointly
controlled entities are incorporated in these Financial Statements
using the equity method of accounting.
Under the equity method, an investment in an associate or a
jointly controlled entity is recognised initially in the
consolidated statement of financial position at cost and adjusted
thereafter to recognise the Group's share of the profit or loss and
other comprehensive income of the associate or jointly controlled
entity. The Group's share of the profit or loss is driven by the
contractual arrangements in place. The Group's share of the profit
or loss is defined by the economic interest in the associate or
jointly controlled entity as stipulated in the legal arrangements,
which differs from the percentage voting rights held.
The requirements of IAS 36 are applied to determine whether it
is necessary to recognise any impairment loss with respect to the
Group's investment in an associate or a jointly controlled entity.
When necessary, the entire carrying amount of the investment is
tested for impairment in accordance with IAS 36 as a single asset
by comparing its recoverable amount (higher of value in use and
fair value less costs of disposal) with its carrying amount.
The Group discontinues the use of the equity method from the
date when the investment ceases to be an associate or a jointly
controlled entity.
Other Investments
Where long-term loans are made to licensees, the Directors of
the Company have accounted for them as investments under IFRS 9.
These loans are accounted for using the amortised cost method. See
note 3 for associated critical judgements involved in determining
the appropriate classification of long-term loans to licensees.
Revenue recognition
Revenue comprises revenue recognised by the Group in respect of
services supplied during the year, exclusive of Value Added
Tax.
The Group recognises revenue from the following major
sources:
-- Licence fee income
-- Profit share income
Licence fee income is recognised at the point at which the
performance obligations, as defined by the contractual
arrangements, have been satisfied which is primarily when revenue
has been invoiced by the licensees over time. Profit share income
is only recognised at the point at which the risk of reversal is
deemed to be remote.
Leases
The Group applies IFRS 16 to account for leases. At inception of
a contract, the Group assesses whether a contract is, or contains,
a lease. A contract is, or contains, a lease if the contract
conveys the right to control the use of an identified asset for a
period of time in exchange for consideration.
The Group recognises a right-of-use asset and a lease liability
at the lease commencement date. The right-of-use asset is initially
measured at cost, which comprises the initial amount of the lease
liability adjusted for any lease payments made at or before the
commencement date, plus any initial direct costs incurred and an
estimate of costs to restore the underlying asset, less any lease
incentives received.
The right-of-use asset is subsequently depreciated using the
straight-line method from the commencement date to the earlier of
the end of the useful life of the right-of-use asset or the end of
the lease term. In addition, the right-of-use asset is periodically
reduced by impairment losses, if any, and adjusted for certain
remeasurements of the lease liabilities.
The lease liability is initially measured at the present value
of lease payments that were not paid at the commencement date,
discounted using the Group's incremental borrowing rate. The
incremental borrowing rate applied to lease liabilities during the
year is 5.55%.
The lease liability is measured at amortised cost using the
effective interest method. If there is a remeasurement of the lease
liability, a corresponding adjustment is made to the carrying
amount of the right-of-use asset or is recorded directly in profit
or loss if the carrying amount of the right-of-use asset is
zero.
Short-term leases and low value assets
The Group has elected not to recognise right-of-use assets and
lease liabilities for short-term leases that have a lease term of
12 months or less or leases of low value assets. These lease
payments are expensed on a straight-line basis over the lease
term.
Dilapidations provision
The Group recognises a provision for the future costs of
dilapidations on leased office space. The provision is an estimate
of the total cost to return applicable office space to its original
condition at the end of the lease term.
Operating profit
Operating profit is stated after charging the share of results
of associates and jointly controlled entities, but before finance
income and finance costs.
Retirement and termination benefit costs
Payments to defined contribution retirement benefit plans are
recognised as an expense in the consolidated statement of
comprehensive income in the periods during which services are
rendered by employees. Payments made to state-managed retirement
benefit plans are accounted for as payments to defined contribution
plans where the Group's obligations under the plans are equivalent
to those arising in a defined contribution retirement benefit
plan.
Short-term and other long-term employee benefits
Wages, salaries, paid annual leave and sick leave and bonuses
are accrued in the period in which the associated services are
rendered by employees of the Group.
Taxation
The income tax expense represents the sum of the tax currently
payable and deferred tax.
Current tax
The tax currently payable is based on taxable profit for the
year. Taxable profit differs from net profit as reported in the
consolidated statement of comprehensive income because it excludes
items of income or expense that are taxable or deductible in other
years and it further excludes items that are never taxable or
deductible. The Group's liability for current tax is calculated
using tax rates that have been enacted or substantively enacted by
the end of the reporting period.
Deferred tax
Deferred tax is recognised on temporary differences arising
between the tax bases of assets and liabilities and their carrying
amounts in the Financial Statements and on unused tax losses or tax
credits available to the Group. Deferred tax is determined using
tax rates and laws that have been enacted or substantively enacted
by the reporting date.
Property, plant and equipment
Property, plant and equipment is stated in the statement of
financial position at cost less accumulated depreciation and
accumulated impairment loss.
Depreciation is charged so as to write off the cost of assets
over their estimated useful lives, as follows:
Office equipment 33% straight line
Office fixtures & 20% straight line
fittings
The estimated useful lives, residual values and depreciation
method are reviewed at the end of each reporting period, with the
effect of any changes in estimate accounted for on a prospective
basis.
Intangible assets acquired separately
Intangible assets with finite useful lives that are acquired
separately are carried at cost less accumulated amortisation and
accumulated impairment losses. Amortisation is recognised on a
straight-line basis over their estimated useful lives which are
disclosed below. The estimated useful life and amortisation method
are reviewed at the end of each reporting period, with the effect
of any changes in estimate being accounted for on a prospective
basis. The estimated useful life of intangible assets is as
follows:
Intangible assets 10 - 25 years
The intangibles relate to intellectual property and trademarks
acquired.
Financial instruments
Financial assets and financial liabilities are recognised in the
Group's statement of financial position when the Group becomes a
party to the contractual provisions of the instrument.
Financial assets and financial liabilities are initially
measured at fair value, except for trade receivables that do not
have a significant financing component which are measured at
transaction price. Transaction costs that are directly attributable
to the acquisition or issue of financial assets and financial
liabilities (other than financial assets and financial liabilities
at fair value through profit or loss) are added to or deducted from
the fair value of the financial assets or financial liabilities, as
appropriate, on initial recognition. Transaction costs directly
attributable to the acquisition of financial assets or financial
liabilities at fair value through profit or loss are recognised
immediately in profit or loss.
Financial assets
The Group's financial assets include cash and cash equivalents
and trade and other receivables that arise from the business
operations and loans to licensees.
All financial assets are recognised and derecognised on a trade
date where the purchase or sale of a financial asset is under a
contract whose terms require delivery of the investment within the
timeframe established by the market concerned, and are initially
measured at fair value, plus transaction costs.
All recognised financial assets are measured subsequently in
their entirety at amortised cost.
Classification of financial assets
Amortised cost and effective interest method
(a) Trade and other receivables
Trade receivables are stated at their original invoiced
value. Trade receivables are reduced by appropriate allowances
for estimated irrecoverable amounts. See Note 3 for details
of the loss allowance.
(b) Loans owing from licensees
Loans are measured at amortised cost at their effective
interest rates. The amortised cost of a loan is the amount
at which the loan is measured at initial recognition minus
the principal repayments, plus the cumulative amortisation
using the effective interest method of any difference between
that initial amount and the maturity amount, adjusted for
any loss allowance. The gross carrying amount of a financial
asset is the amortised cost of a financial asset before
adjusting for any loss allowance.
(c) Cash and cash equivalents
Cash and cash equivalents comprise cash on hand and other
short-term highly liquid investments that are readily convertible
to a known amount of cash and are subject to insignificant
risk of changes in value.
Interest income is recognised in profit or loss and is included
in the "finance income" line item (Note 9).
Impairment of financial assets
The Group recognises a loss allowance for expected credit losses
on the Group's loans to licensees and trade receivables. The amount
of expected credit losses is updated at each reporting date to
reflect changes in credit risk since initial recognition of the
respective financial asset.
The expected loss rates for these financial assets are based on
the Group's historical credit losses experienced over the
three-year period prior to the period end. An additional portfolio
expected loss provision is calculated in which the historical loss
rates are then adjusted for current and forward-looking information
on macroeconomic factors affecting the Group's licensees. The Group
has identified the changing insolvency rates in the UK as the key
macroeconomic factor.
(i) Definition of default
The Group considers when a licensee business is terminated or
ceases to trade as default events.
(ii) Measurement and recognition of expected credit losses
The measurement of expected credit losses is a function of the
probability of default, loss given default (i.e., the magnitude of
the loss if there is a default), and the exposure at default. The
assessment of the probability of default and loss given default is
based on historical data adjusted by forward-looking information as
described above. As for the exposure at default, for financial
assets, this is represented by the assets' gross carrying amount at
the reporting date.
For financial assets, the expected credit loss is estimated as
the difference between all contractual cash flows that are due to
the Group in accordance with the contract and all the cash flows
that the Group expects to receive, discounted at the original
effective interest rate.
The Group recognises an impairment loss in the consolidated
statement of comprehensive income for all financial instruments
with a corresponding adjustment to their carrying amount through a
loss allowance account.
Financial liabilities and equity
Classification as debt or equity
Debt and equity instruments are classified as either financial
liabilities or as equity in accordance with the substance of the
contractual arrangements and the definitions of a financial
liability and an equity instrument.
Financial liabilities
All financial liabilities are measured subsequently at amortised
cost using the effective interest method.
Financial liabilities are included in the statement of financial
position as trade and other payables and borrowings.
(a) Trade and other payables
Trade payables are stated at their original invoiced value.
Accounts payable are classified as current liabilities
if the company does not have an unconditional right, at
the end of the reporting period, to defer settlement of
the creditor for at least twelve months after the reporting
date. If there is an unconditional right to defer settlement
for at least twelve months after the reporting date, they
are presented as non-current liabilities.
(b) Borrowings
All borrowings are initially recorded at the amount of
proceeds received, net of transaction costs. Borrowings
are subsequently carried at amortised cost and the interest
expense is recognised on the basis of the effective interest
method and is included in finance costs. Borrowings are
classified as current liabilities unless the Group has
an unconditional right to defer settlement of the liability
for at least 12 months after the reporting date.
Dividend Policy
The Board has adopted a progressive dividend policy to reflect
the expectation of future cash flow generation and long-term
earnings potential of the Group. The Board may, however, revise the
Group's dividend policy from time to time in line with the actual
results of the Group.
Dividends are recognised once they have been paid.
Related Party Transactions
Details of related party transactions entered into by members of
the Group are set out in Note 29.
Share-based payments
Equity-settled share-based payments to employees and others
providing similar services are measured at the fair value of the
equity instruments at the grant date. The fair value excludes the
effect of non-market-based vesting conditions. Details regarding
the determination of the fair value of equity-settled share-based
transactions are set out in Note 25.
The fair value determined at the grant date of the
equity-settled share-based payments is expensed on a straight-line
basis over the vesting period, based on the Group's estimate of the
number of equity instruments that will eventually vest. At each
reporting date, the Group revises its estimate of the number of
equity instruments expected to vest as a result of the effect of
non-market-based vesting conditions. The impact of the revision of
the original estimates, if any, is recognised in the consolidated
statement of comprehensive income such that the cumulative expense
reflects the revised estimate, with a corresponding adjustment to
reserves.
3. Critical accounting judgements and key sources of estimation
uncertainty
In applying the Group's accounting policies, which are described
in note 2, the Directors are required to make judgements (other
than those involving estimations) that have a significant impact on
the amounts recognised and to make estimates and assumptions about
the carrying amounts of assets and liabilities that are not readily
apparent from other sources. The estimates and associated
assumptions are based on historical experience and other factors
that are considered to be relevant. Actual results may differ from
these estimates.
The estimates and underlying assumptions are reviewed on an
ongoing basis.
Critical judgements in applying the Group's accounting
policies
The following are the critical judgements, apart from those
involving estimations (which are presented separately below), that
the Directors have made in the process of applying the Group's
accounting policies and that have the most significant effect on
the amounts recognised in the Financial Statements.
Consideration of control over a licensee
Where the Group holds voting rights in an underlying licensee,
an assessment of the ability to exert control over these entities
is made based on whether the Group has the practical ability to
direct the relevant activities of these entities unilaterally.
Investments in associates have been recognised for entities where
the Group holds between 20% and 50% of the voting rights and does
not have any unilateral powers other than protective ones. Where
the Group has more than 20% of the voting rights, it is deemed to
have significant influence over the licensees and thus they are
accounted for as investment in associates.
There is one entity in which the Group has 51% of the voting
rights and 16.7% of the economic rights. However, all significant
operational decisions require the unanimous consent of the parties.
As such this entity has been recognised as an investment in a
jointly controlled entity.
Classification of long-term loans to licensees
Where long-term loans are made to licensees, these are accounted
for as investments under IFRS 9 using the amortised cost method.
The long-term loan provided to a licensee has a 20-year term and is
only repayable at the end of the term and therefore in substance,
is more akin to an investment. The interest rate is 7.1%.
Share based payments
In the year ended 31 March 2023, the Group operated three equity
share based payment plans. Management have formed a judgement on
the vesting period over which the associated charge should be
spread. This has been formed with reference to the individual
conditionality associated with the different classes of share
awards and ranges between one to three years from the date of the
statement of financial position.
Key sources of estimation uncertainty
The key assumptions concerning the future, and other key sources
of estimation uncertainty at the reporting period that may have a
significant risk of causing a material adjustment to the carrying
amounts of assets and liabilities within the next financial year,
are discussed below.
Calculation of expected loss allowance for related party
loans
When measuring expected credit loss ("ECL"), the Group uses
reasonable and supportable forward-looking information, which is
based on assumptions for the future movement of different economic
drivers and how these drivers will affect each other.
Probability of default constitutes a key input in measuring ECL.
Probability of default is an estimate of the likelihood of default
over a given time horizon, the calculation of which includes
historical data, assumptions and expectations of future conditions
for the licensee business.
The Group assesses each licensee individually as to the
probability of default on their loans based on their cash balances
and their ability to pay the cash flows due.
Also, the Group has elected to calculate an additional portfolio
expected loss provision in which the historical loss rates are
adjusted for current and forward-looking information on
macroeconomic factors affecting the Group's licensees. The Group
has identified the changing insolvency rates in the UK as the key
macroeconomic factor as the failure of corporates is deemed to be a
reasonable macroeconomic predictor for the likely failure of a
licensee business on a portfolio basis.
4. Revenue
The disclosure of revenue by product line is consistent with the
revenue information that is disclosed for each reportable segment
under IFRS 8 (see Note 5).
Disaggregation of revenue
2023 2022
GBP'000 GBP'000
External revenue by product line
License Fee Income 2,549 2,531
Profit Share Income 165 150
Total 2,714 2,681
A further breakdown of revenue by reporting line is shown
below:
2023 2022
GBP'000 GBP'000
External revenue by reporting line
License fees attributable to Mergers
& Acquisition ('M&A') 1,817 1,889
License fees attributable to Other 732 642
Profit share attributable to M&A 165 150
Total Revenue 2,714 2,681
-------- --------
5. Operating segments
Products and services from which reportable segments derive
their revenues
Operating segments are reported in a manner consistent with the
internal reporting provided to the Chief Operating Decision Marker
(CODM). The CODM, who is responsible for allocating resources and
assessing performance of the operating segments, has been
identified as the Group's Chief Executive.
The Group has four reporting lines, identified above, which
divide license fees and profit share income between those
attributable to M&A and Other, but the Group only has one
operating segment due to the nature of services provided across the
whole Group being the same, being revenue derived from licensing of
the Dow Schofield Watts brand and associated brand names for use in
the professional services sector. The Group's revenues, costs,
assets, liabilities and cash flows are therefore totally
attributable to this reporting segment.
Internal management reports are reviewed by the Directors
monthly, including revenue information by licensee. Such revenue
information alone does not constitute sufficient information upon
which to base resource allocation decisions.
Performance of the segment is assessed based on revenue data
only.
As the Group only has one reportable segment, all segmented
information is provided by the consolidated statement of
comprehensive income, the consolidated statement of financial
position, the consolidated statement of changes in equity and the
consolidated statement of cash flows.
Geographical information
The Group has operations in one geographic location, the United
Kingdom, and therefore the Group only has one reporting geographic
operating segment. This is in line with internal reporting.
Information about major customers
Included in revenues arising from License fees attributable to
M&A are revenues of approximately GBP0.68m (2022: GBP0.96m)
which arose from license fee income from the Group's largest
licensee. No other single licensee contributed 10 per cent or more
to the Group's revenue in either 2023 or 2022.
6. Profit for the year
Profit for the year has been arrived at after
charging/(crediting):
2023 2022
GBP'000 GBP'000
Depreciation of property, plant
and equipment 139 87
Amortisation 46 39
Employee pension 14 36
IPO costs - 866
Expected credit loss - license
fees 130 (6)
Expected credit loss - outstanding
loans 22 127
Expected credit loss - profit share (84) 14
7. Auditors' remuneration
2023 2022
GBP'000 GBP'000
Audit of the Group financial statements 63 60
Fees payable to the Company's auditors
in respect of:
Interim financial reporting - 16
Reporting Accountants - 126
Total auditors' remuneration 63 202
-------- --------
Non-audit services relate to the appointment of BDO LLP as
reporting accountants during the IPO and the interim review of
financial information by the Company's auditors which was completed
as part of the IPO.
8. Staff costs
The average number of persons employed by the Group (including
Directors) during the year, analysed by category was as
follows:
2023 2022
Number Number
Central Heads 15 16
15 16
------- -------
Their aggregate remuneration comprised:
2023 2022
GBP'000 GBP'000
Wages and salaries 790 669
Social security costs 98 74
Other pension costs (see note 26) 14 36
--------
902 779
-------- --------
'Other pension costs' relate to the defined contribution plan
charge as detailed in Note 26.
Aggregate Directors' remuneration
2023 2022
GBP'000 GBP'000
Wages and salaries 455 393
Social security costs 63 49
Other pension costs (see note 26) 8 31
526 473
-------- --------
The highest paid Director's total emoluments in the year were
GBP213,500 (2022: GBP276,308) of which GBPnil (2022: GBP31,321)
related to pension costs.
Directors' transactions
Dividends totaling GBP1,260,953 were paid in the year in respect
of ordinary shares (2022: GBP379,995). Of the dividends, GBP324,682
(2022: GBP379,995) were paid to Directors of the Company who were
currently serving at the time of payment. See Note 12 for
details.
9. Finance income
2023 2022
GBP'000 GBP'000
Interest income:
Loan Interest 80 80
80 80
-------- --------
Other finance income 24 2
-------- --------
Total finance income 104 82
-------- --------
10. Finance costs
2023 2022
GBP'000 GBP'000
Interest on bank loans - (36)
Amortisation of debt issue costs - (11)
Interest costs on lease (19) (11)
Other finance costs (5) (2)
(24) (60)
-------- --------
11. Income Tax
2023 2022
GBP'000 GBP'000
Corporation income tax:
Current year 260 340
Adjustments in respect of prior years (25) (36)
235 304
-------- --------
Deferred tax (see note 21)
Origination and reversal of temporary
differences (5) (1)
-------- --------
230 303
-------- --------
The standard rate of corporation tax applied to reported profit
is 19 per cent (2022: 19 per cent).
The charge for the year can be reconciled to the profit before
tax as follows:
2023 2022
GBP'000 GBP'000
Profit / (loss) before tax on continuing
operations 715 (31)
Tax at the UK corporation tax rate
of 19 per cent (2022: 19 per cent) 136 (6)
Tax effect of expenses that are not
deductible in determining taxable
profit and reversal of prior year
expenses not deducted previously (14) 128
Depreciation in excess of capital
allowances 7 5
Other tax effects 4 3
Tax effect of adjustments in relation
to prior periods (25) (36)
Tax effect of income not taxable in
determining taxable profit (5) (12)
Movement in deferred tax assets/liabilities (5) (1)
Tax effect of share based payment
adjustment 132 222
-------- --------
Tax expense for the year 230 303
-------- --------
From 1 April 2023, there is no longer a single corporation tax
rate for non-ring-fenced profits. At the spring budget 2021, the
government announced that the corporation tax rate for
non-ring-fenced profits would increase to 25% for profits above
GBP250k. Companies with profits between GBP50,000 and GBP250,000
will pay tax at the main rate, reduced by a marginal relief.
12. Dividends
2023 2022
Amounts recognised as GBP'000 GBP'000
distributions
to equity holders in the
year:
Final dividend for the
year to 31 March
2022 consisting of:
Interim catch up dividend
for the year
to 31 March 2022 of
GBP0.0056 per share
(2021: GBPnil) 118 -
Final dividend for the
year ended 31
March 2022 of GBP0.0366
per share (2021:
GBP0.0667 per share) 772 127
Interim dividend for the
year ended
31 March 2023 of
GBP0.0176 per share
(2022: GBP0.133 per
share) 371 253
1,261 380
--------------------------- -----------------------------------------------------------
Proposed final dividend
for the year
ended 31 March 2023
consisting of:
Prior year interim catch
up dividend
for the year to 31 March
2022 of GBP0.0056
per share - 120
Final dividend for the
year to 31 March
2023 of GBP0.02 per share
(2022: GBP0.0366
per share) 439 786
439 906
--------------------------- -----------------------------------------------------------
The proposed final dividend is subject to approval by
shareholders at the Annual General Meeting and has not been
included as a liability in these financial statements. The proposed
dividend is payable to all shareholders on the Register of Members
on 14 September 2023.
13. Earnings per share
From continuing operations
The calculation of the basic and diluted earnings per share is
based on the following data:
2023 2022
Earnings GBP'000 GBP'000
Earnings for the purposes of basic
earnings per share being net profit
/ (loss) attributable to owners of
the Company 485 (334)
Effect of dilutive potential ordinary - -
shares:
Earnings for the purposes of diluted
earnings per share 485 (334)
2023 2022
Number of shares
Weighted average number of ordinary
shares for the purposes of basic
earnings per share 21,075,581 17,014,850
Effect of dilutive potential ordinary
shares:
Share Options 674,454 122,844
Weighted average number of ordinary
shares for the purposes of diluted
earnings per share 21,750,035 17,137,694
From continuing operations
2023 2022
Earnings GBP GBP
Basic earnings per share 0.02 (0.02)
------
Diluted earnings per share 0.02 (0.02)
---- ------
Adjusted earnings per share is included as an Alternative
Performance Measure ('APM') and is not presented in accordance with
IAS 33. It has been calculated using adjusted earnings calculated
as profit after tax but before:
-- Share-based payments expense;
-- IPO costs; and
-- The tax effect of the above items
The calculation of adjusted basic and adjusted diluted earnings
per share is based on:
2023 2022
GBP'000 GBP'000
Profit / (loss) after tax on continuing
operations 485 (334)
Adjusted for:
Share-based payment expense 694 1,167
IPO Costs - 866
Tax effect of adjustments above - (43)
Adjusted earnings for the purposes
of adjusted basic and adjusted diluted
earnings per share 1,179 1,656
2023 2022
Earnings GBP GBP
Adjusted basic earnings per share 0.06 0.10
Adjusted diluted earnings per share 0.05 0.10
----------- -----------
Tax adjustments of GBPnil (2021: GBP43,000) have been made in
arriving at the adjusted earnings per share. This is based on an
estimated full year equivalent tax rate, which is largely driven by
the UK corporation tax rate of 19% adjusted upwards to take into
account the effect of non-deductible expenses.
Shares held in trust are issued shares that are owned by the
Group's employee benefit trusts for future issue to employees as
part of share incentive schemes. The future exercise of the share
awards and options is the dilutive effect of share awards granted
to employees that have not yet vested.
Shares held in trust are deducted from the weighted average
number of shares for basic earnings per share. For its adjusted
basic measure, the group uses the weighted average number of
ordinary shares.
14. Intangible assets
Intellectual Property
& Trademarks
GBP'000
Cost
At 1 April 2021 747
Additions 160
At 31 March 2022 907
----------------------
Additions -
At 31 March 2023 907
----------------------
Amortisation
At 1 April 2021 74
Charge for the year 39
----------------------
At 31 March 2022 113
----------------------
Charge for the year 46
----------------------
At 31 March 2023 159
----------------------
Carrying amount
----------------------
At 31 March 2022 794
----------------------
At 31 March 2023 748
----------------------
All intangible assets relate to intellectual property on which
license fees are charged. GBP676k of the carrying amount as at 31
March 2023 (2022: GBP707k) relates to Camlee Group.
15. Property, plant and equipment - Group
Office Fixtures,
Right of Fittings
Use Asset & Equipment Total
GBP'000 GBP'000 GBP'000
Cost
At 1 April 2021 - 184 184
Additions 520 37 557
At 31 March 2022 520 221 741
Additions 11 43 54
At 31 March 2023 531 264 795
Accumulated depreciation
At 1 April 2021 - 129 129
Charge for the year 52 35 87
At 31 March 2022 52 164 216
Charge for the year 105 34 139
At 31 March 2023 157 198 355
Carrying amount
----------- ----------------- --------
At 31 March 2022 468 57 525
----------- ----------------- --------
At 31 March 2023 374 66 440
----------- ----------------- --------
Property, plant and equipment - Company
Office Fixtures, Fittings
& Equipment
GBP'000
Cost
At 1 April 2021 97
Additions 31
At 31 March 2022 128
Additions 28
At 31 March 2023 156
Accumulated depreciation
At 1 April 2021 62
Charge for the year 27
At 31 March 2022 89
Charge for the year 27
At 31 March 2023 116
Carrying amount
--------------------------
At 31 March 2022 39
--------------------------
At 31 March 2023 40
--------------------------
16. Associates
As none of the individual associates are deemed to be material
associates, they have been grouped together in aggregate below.
Aggregate information of associates that are not individually
material
2023 2022
GBP'000 GBP'000
The Group's share of profit from
continuing operations 284 309
-------- --------
The Group's share of profit and
total comprehensive income 284 309
-------- --------
Change in the Group's ownership interest in an associate
Where the Company is a member of a licensee's business, a profit
share arrangement is in place which entitles the Company to profits
over a contractual threshold which is stated within an LLP
agreement. The Group accounts for associates based on their
economic share as stated in the legal agreements, rather than based
on the Company's voting rights. Therefore, the accounting always
mirrors the economic arrangement. When there is a change in profit
share, this is not deemed to constitute a change in the Group's
ownership interest in an associate as this relates to a change in
economic interest only, hence there is no change to the equity
accounting basis. A change in the Group's ownership interest
therefore is only recognised where there is a change in the
Company's voting rights.
17. Jointly controlled entities
The jointly controlled entity is not deemed to be a material
jointly controlled entity.
Information of jointly controlled entity that is not
individually material
2023 2022
GBP'000 GBP'000
The Group's share of profit from
continuing operations 25 102
-------- --------
The Group's share of profit and
total comprehensive income 25 102
-------- --------
18. Investments - Group and Company
2023 2022
GBP'000 GBP'000
Financial assets measured under
the equity method
Investment in Associates 209 290
Investment in jointly controlled
entities 39 23
Financial assets measured at amortised
cost
Other investments 922 922
-------- --------
Total Investments 1,170 1,235
-------- --------
Where long-term loans are made to licensees, which are disclosed
within "Other investments" above, the Directors of the Company have
accounted for them as investments under IFRS 9. These loans are
accounted for using the amortised cost method.
The movement in Investment in Associates and Investment in
jointly controlled entities is included in the cashflow statement
as increase in amounts due from associates.
19. Trade and other receivables
Company Company Group Group
2023 2022 2023 2022
GBP'000 GBP'000 GBP'000 GBP'000
Trade receivables 910 879 965 910
Loss allowance (41) (78) (41) (78)
--------- -------- --------
869 801 924 832
Other receivables 804 686 805 686
Loss Allowance (238) (317) (238) (317)
--------- --------- -------- --------
566 369 567 369
Prepayments and
Accrued Income 471 574 528 629
Loss Allowance (12) (92) (12) (92)
--------- --------- -------- --------
459 482 516 537
--------- --------- -------- --------
1,894 1,652 2,007 1,738
--------- --------- -------- --------
Amounts due from
subsidiary undertakings 130 130 - -
--------- --------- -------- --------
2,024 1,782 2,007 1,738
--------- --------- -------- --------
Included in prepayments and accrued income for both the company
and the group are GBP166k (2022: GBP175k) due in greater than 1
year. Other receivables are made up from loans due from licensees
and prepayments and accrued income relates to profit share due from
licensees. Amounts due from subsidiary undertakings, in other
receivables on the consolidated statement of financial position,
are interest free and repayable on demand.
Trade receivables
The Group assessed each licensee individually as to their
probability of default based on previous credit loss history which
is adjusted for current and forward-looking information. It is not
appropriate to group the licensee trade receivable balances as
there are specific circumstances associated with each business,
notably, service line, sector, location and maturity of the
business.
Average Credit Period taken is 102 Days (2022: 84 days) and no
interest is charged on the receivables.
The ageing of trade receivables net of the loss allowance at the
reporting date was as followed;
2023 2022
GBP'000 GBP'000
Not past due 772 698
Past due 61 to 90 days 7 -
Past due 91 to 120 days 53 51
Past due over 120 days 92 83
--------
924 832
-------- --------
The provision for impairment of trade receivables is the
difference between the carrying value and the present value of the
expected proceeds. The Directors consider that the carrying value
of trade receivables approximates to fair value.
20. Borrowings
Analysis of changes in net debt
01 April 2021 Cash flow Amortisation Non-cash debt 31 March 2022
of debt issue items
costs
------------- --------- -------------- ------------- -------------------
Cash & bank
balances 609 4,113 - - 4,722
Bank Loans (942) 942 - - -
Debt issue
costs 41 - (41) - -
Convertible
Loan Notes (540) - - 540 -
New Loans (50) 50 - - -
Net Debt (882) 5,105 (41) 540 4,722
------------- --------- -------------- ------------- -------------------
Amortisation
of debt issue Non-cash debt
01 April 2022 Cash flow costs items 31 March 2023
------------- --------- -------------- ------------- -------------------
Cash & bank
balances 4,722 (138) - - 4,584
Net Debt 4,722 (138) - - 4,584
------------- --------- -------------- ------------- -------------------
Balances at 31 March 2023 comprise:
Current assets
GBP'000
------------------------ ---------------
Cash and bank balances 4,584
------------------------- ---------------
21. Deferred tax - Group and Company
The following are the major deferred tax liabilities and assets
recognised by the Group and movements thereon during the current
and prior reporting period.
2023 2022
GBP'000 GBP'000
At the beginning of the year asset 4 3
Credited in the year 5 1
-------- --------
At the end of the year asset 9 4
-------- --------
22. Trade and other payables
Company Company Group Group
2023 2022 2023 2022
GBP'000 GBP'000 GBP'000 GBP'000
Trade payables 32 29 162 86
Other taxation and
social security 210 177 211 210
Other payables 76 54 76 54
Accruals and Deferred
Income 128 154 133 163
Corporation Tax 95 63 95 63
-------- -------- --------
541 477 677 576
-------- -------- -------- --------
Trade payables and accruals principally comprise amounts
outstanding for trade purchases and ongoing costs. The Group has
financial risk management policies in place to ensure that all
payables are paid within the pre-agreed credit terms.
The Directors consider that the carrying amount of trade
payables approximates to their fair value.
Amounts falling due in greater than one year include:
2023 2022
GBP'000 GBP'000
Dilapidation provision 75 72
75 72
-------- --------
23. Share capital - Group and Company
2023 2022
Number GBP'000 Number GBP'000
Authorised, issued and fully
paid:
Ordinary shares 21,926,360 55 21,482,508 54
21,926,360 55 21,482,508 54
----------- -------- ----------- --------
2023
Number GBP'000
As at 31 March 2022 21,482,508 54
Share issue 443,852 1
As at 31 March 2023 21,926,360 55
----------- --------
On the 26(th) August 2022, the following transactions took place
in relation to the Company's share capital;
i. 417,185 ordinary shares were issued as part of the PSP award
scheme, further details of which can be found in Note 25.
ii. 26,667 ordinary shares were issued to James Dow in respect
of his FY22 performance bonus as disclosed in the FY22 Annual
Report.
24. Leases
DSW Services, a subsidiary of DSW Capital PLC, entered into a
formal lease arrangement for the Daresbury office, effective from 1
October 2021. Prior to this date, the lease had been recognised as
a short-term lease and therefore did not meet the criteria under
IFRS 16. Further detail on the lease accounting policy can be found
in note 2.
The consolidated statement of financial position and
consolidated statement of comprehensive income show the following
amounts relating to leases:
Right-of-use assets Total
GBP'000
Balance at 1 April 2021 -
Additions in the year 520
Depreciation (52)
--------
Balance at 31 March 2022 468
--------
Additions in the year 11
Depreciation (105)
--------
Balance at 31 March 2023 374
--------
Lease liabilities Total
GBP'000
Balance at 1 April 2021 -
New leases recognised in the year 451
Interest expense 11
Lease amounts invoiced and paid in the
year (77)
--------
Balance at 31 March 2022 385
--------
New leases recognised in year 11
Interest expense 19
Lease amounts invoiced and paid in the
year (77)
Lease amounts invoiced and included within
creditors at 31 March 2023 (27)
--------
Balance at 31 March 2023 311
--------
Income Statement 2023 2022
GBP'000 GBP'000
Interest expense (note 10) 19 11
Expense relating to leases of low-value
assets 10 7
Expense relating to short-term leases 63 61
---------------
At 31 March 2023 92 79
--------------- --------
As at the 31 March 2023, the Group recognised lease liabilities
in respect of outstanding commitments for future minimum lease
payments under non-cancellable lease contracts, which fall due as
follows;
2023 2022
GBP'000 GBP'000
Within one year 91 83
In one to two years 96 87
In two to three years 101 92
In three to four years 23 98
In over four years - 25
--------
311 385
-------- --------
The total cash outflow in the year paid in respect of leases was
GBP76,800 (2022: GBP76,800). Under the terms of the lease,
GBP105,472 per annum is charged until the first break date in
October 2026.
25. Share-based payments
In the year ended 31 March 2023 the Group operated three
equity-settled share-based payment plans as described below.
The Group recognised total expenses of GBP693,787 in respect of
equity-settled share-based payment transactions in the year ended
31 March 2023.
The charge to the income statement is set out below:
Share plans: 2023 2022
------------------- -------- ----------
Growth share plan 368,269 1,060,453
Legacy Awards 253,301 73,879
Performance bonus - 30,000
PSP Awards 72,217 2,761
------------------- -------- ----------
Total SBP expense 693,787 1,167,093
------------------- -------- ----------
Share-based payments movement for the year ended 31 March
2023:
SBP Expense (GBP) SBP Reserve (GBP)
------------------- ------------------ ------------------
Growth share plan 368,269 (368,269)
Legacy Awards 253,301 (253,301)
PSP Awards 72,217 (72,217)
------------------- ------------------ ------------------
Total movement 693,787 (693,787)
------------------- ------------------ ------------------
Share-based payments movement for the year ended 31 March
2022:
SBP Expense (GBP) SBP Reserve (GBP)
------------------- ------------------ ------------------
Growth share plan 1,060,453 (1,060,453)
Legacy Awards 73,879 (73,879)
Performance bonus 30,000 (30,000)
PSP Awards 2,761 (2,761)
------------------- ------------------ ------------------
Total movement 1,167,093 (1,167,093)
------------------- ------------------ ------------------
Details of Directors' share awards are set out in the Directors'
Remuneration report.
Growth Shares
DSW Capital implemented a Growth Share Plan in March 2021 for
key members of its management team and a number of individuals
within the licensees from which DSW receives licence fees.
Any value received for the Growth Shares was conditional on a
future Exit event taking place and certain individual
restrictions.
After the IPO, 214,308 C Growth Shares and 17,268 E Growth
shares were converted to 1,150,548 ordinary shares in issue. 45,479
D Growth Shares were converted to Deferred Shares which were
cancelled at the AGM in September 2022. The Group recognised total
expenses of GBP368,269 related to the Growth Share Plan in the year
ended 31 March 2023.
The Growth Shares have been valued using the Black-Scholes
pricing model. Management have formed a judgement on the vesting
period over which the associated charge should be spread. This has
been formed with reference to the individual conditionality
associated with the different classes of share awards and ranges
between one to three years from the balance sheet date.
Legacy Awards
Following the IPO in December 2021, a Legacy Award was awarded
to be held by the Chief Financial Officer entitling them to 1.53%
of the equity value in excess of GBP26m. The CFO Legacy Award was
subject to continuing employment until 31 March 2023, with such
awards vesting on 31 March 2023. Further, it was agreed that
certain employees of Dow Schofield Watts CF Leeds were entitled to
approximately 1.53% of equity value up to a maximum equity value of
GBP26m (the "Leeds Legacy Awards"). To fulfil these obligations,
those individuals will be granted options to acquire the interest
below a GBP26m equity value in the same 1.53% shareholding that the
CFO Legacy Award is granted over, similarly vesting on 31 March
2023. The Share price per award is GBP1.00 with an exercise price
per award of nil.
The Legacy Awards have been valued using the Black-Scholes
pricing model. The charge for the year is GBP253,301. The key
assumptions used in the calculation of the fair value of the
share-based payments are as follows:
Leeds Legacy Award CFO Award
Spot price 100p 100p
Strike price 0.025p 122p
Volatility 35% 35%
Risk Free Rate 0.02% 0.02%
Dividend Yield 0% 0%
Fair Value per share 9.1p 8.6p
------------------- ----------
Details of the share options outstanding during the year are as
follows:
2023 2022
------------- -------------
No. of share No. of share
options options
------------- -------------
Outstanding at beginning of year 328,000 -
Granted during the year - 328,000
Exercised during the year - -
Outstanding at the end of the
year 328,000 328,000
------------- -------------
Exercisable at the end of the - -
year
------------- -------------
There were no share options exercised, forfeited or expired
within the period.
The Legacy Awards vested on 31 March 2023. Following vesting,
the CFO will be entitled to exchange a proportion of her interest
in the shares with the Trustee's interest in shares so that each
party has a number of whole shares equivalent in value to their
respective interests. For a period of four years after vesting, the
Leeds participants will be entitled to exercise their options to
acquire the Legacy Shares beneath the hurdle.
PSP Awards
The Board recognises the importance of ensuring that members of
the Group are effectively and appropriately incentivised and their
interests aligned with those of DSW Capital. Similarly, the Board
believes that the ongoing success of the DSW Network depends to a
high degree on retaining and incentivising the performance of its
key people.
To that end, the Group has adopted the Performance Share Plan
("PSP"), to align the interests of Executive Directors and key
employees ("Participants") with those of the Shareholders. The PSP
will be a long-term incentive plan which will form the primary
long-term incentive arrangement for the Executive Directors. The
Remuneration and Nominations Committee will consider the granting
of PSP awards to the participants on an annual basis.
A summary of the structure of the rules of the Plan is set out
below:
-- Annual awards will be determined by reference to a number
of shares equal in value to a maximum of 200 per cent. of
base salary of participants;
-- Grants shall be subject to a three-year vesting period (subject
to the satisfaction of the performance conditions);
-- Following vesting, there will be a further 24 month holding
period before participants are able to sell any Shares;
and
-- Awards are subject to malus and clawback provisions.
Challenging performance conditions will be set for each award
under the PSP. For the first awards, the Remuneration and
Nominations Committee intends that the awards will vest based on
relative total shareholder return ("TSR") targets against an
applicable comparator group. The share price per award is GBP1.00
with an exercise price per award of nil.
Awards outstanding at 31 March 2023 are shown below:
2023 2022
------------- -------------
No. of share No. of share
options options
------------- -------------
Outstanding at beginning of year 95,000 -
Granted during the year 417,185 95,000
Outstanding at the end of the
year 512,185 95,000
------------- -------------
Exercisable at the end of the - -
year
------------- -------------
There were no awards forfeited, exercised or expired in the
period.
The Group used the Black Scholes Model to calculate the
anticipated value of the PSP awards. The charge for the year is
GBP72,217.
26. Retirement benefit plans
Defined contribution plans
The Group operates defined contribution retirement benefit plans
for all qualifying employees.
The Group is required to contribute a specified percentage of
payroll costs to the retirement benefit plan to fund the benefits.
The only obligation of the Group with respect to the retirement
benefit plan is to make the specified contributions.
The total expense recognised in profit or loss of GBP14,274
(2022: GBP35,679) represents contributions payable to these plans
by the Group at rates specified in the rules of the plans. As at 31
March 2023 there was GBP1,895 (2022: GBPnil) which had not been
paid over to the plans and is included within creditors due in less
than 1 year.
27. Financial Instruments
In common with other businesses, the Group is exposed to risks
that arise from its use of financial instruments. This note
describes the Group's objectives, policies and processes for
managing those risks and the methods used to measure them. Further
quantitative information in respect of these risks is presented
throughout these financial statements.
The significant accounting policies regarding financial
instruments are disclosed in Note 2. The principal financial
instruments used by the Group, from which financial instrument risk
arises, are as follows:
Financial assets
Held at amortised cost
Company 2023 Company 2022 Group 2023 Group 2022
------------- ------------- ----------- -----------
GBP'000 GBP'000 GBP'000 GBP'000
Cash and cash equivalents 4,563 4,714 4,584 4,722
Trade and other
receivables 1,565 1,300 1,491 1,201
------------- ------------- ----------- -----------
6,128 6,014 6,075 5,923
------------- ------------- ----------- -----------
Financial Liabilities
Held at amortised cost
Company 2023 Company 2022 Group 2023 Group 2022
------------- ------------- ----------- -----------
GBP'000 GBP'000 GBP'000 GBP'000
Trade and other
payables 236 237 371 303
Borrowings - - - -
------------- ------------- ----------- -----------
236 237 371 303
------------- ------------- ----------- -----------
There is no significant difference between the fair value and
carrying value of the financial instruments.
(a) Financial risk management objectives
The Board has overall responsibility for the oversight of the
Group's risk management framework. A formal process for reviewing
and managing risk in the business has been developed. A register of
strategic and operational risk is maintained and reviewed by the
Board, who also monitor the status of agreed actions to mitigate
key risks. The Board's objective in managing financial risks is to
ensure the long-term sustainability of the Group.
The overall objective of the Board is to set policies that seek
to reduce risk as far as possible without unduly affecting the
Group's competitiveness and flexibility. Further details regarding
these policies are set out below:
(b) Credit risk management
Credit risk refers to the risk that the counterparty will
default on its contractual obligations resulting in financial loss
to the Group. The Group's credit risk is primarily attributable to
its startup loans provided to licensees. The Group mitigates this
risk by encouraging ongoing engagement of senior management with
network members and monthly reporting which allows close monitoring
of emerging credit risks and facilitates early support and advice
to mitigate or remediate performance.
Credit risk with cash and cash equivalents is reduced by placing
funds with banks with high credit ratings.
(b)(i) Overview of the Group's exposure to credit risk
The Group recognises a loss allowance for expected credit losses
on the Group's loans to licensees and trade receivables.
The amount of expected credit losses is updated at each
reporting date to reflect changes in credit risk since initial
recognition of the respective financial asset. The expected loss
rates for these financial assets are based on the Group's
historical credit losses experienced over the three-year period
prior to the period end.
An additional portfolio expected loss provision is calculated in
which the historical loss rates are then adjusted for current and
forward-looking information on macroeconomic factors affecting the
Group's customers. The Group has identified the changing insolvency
rates in the UK as the key macroeconomic factor.
The Group applies the IFRS 9 simplified approach to measuring
expected credit losses which uses a lifetime expected loss
allowance for all trade receivables and contract assets.
(c) Liquidity risk management
Ultimate responsibility for liquidity risk management rests with
the Board of Directors, which has established an appropriate
liquidity risk management framework for management of the Group's
short, medium and long-term funding and liquidity management
requirements. The Group manages liquidity risk by maintaining
adequate reserves and banking facilities and by continuously
monitoring forecast and actual cash flows.
Network members in difficulty are asked to provide short-term
cash flow forecasts on a monthly basis to support risk monitoring
and potential funding requirements and Partners may be asked to
reduce drawings on a temporary basis.
(c)(i) Liquidity and interest risk
The bank loan was repaid in the year ended 31 March 2022. There
is no interest payable on trade payable balances and the operations
of the Group are not dependent on the finance income received.
(c)(ii) Financing facilities
The Group is using the cash inflows from the financial assets
and in the prior year previously available bank facilities to
manage liquidity.
(d) Capital risk management
The Group considers its capital to comprise its ordinary share
capital and retained profits as its equity capital. In managing its
capital, the Group's primary objective is to provide return for its
equity shareholders through capital growth and future dividend
income.
The Group's policy is to seek to maintain a gearing ratio that
balances risks and returns at an acceptable level and also to
maintain a sufficient funding base to enable the Group to meet its
working capital and strategic investment needs.
In making decisions to adjust its capital structure to achieve
these aims, either through new share issues or the issue of debt,
the Group considers not only its short-term position but also its
long-term operational and strategic objectives.
Details of the Group's capital are disclosed in the statement of
changes in equity and Note 23.
28. Events after the reporting period
Since the year end the Directors have recommended the payment of
a final ordinary dividend of GBP0.02 per share for the year ended
31 March 2023. Furthermore, on 12th July 2023, DSW Capital
completed a transaction with Bridgewood Financial Solutions Ltd, to
acquire licence fee income and provide funding to support a
management buyout. DSW Capital will licence the DSW trademark to
DSW Bridgewood and its subsidiary companies in return for licence
fee income.
29. Related party transactions
Balances and transactions between the Company and its
subsidiary, which are related parties, have been eliminated on
consolidation and are not disclosed in this note. Transactions
between the Group and its related parties are disclosed below.
Related parties are those licensees where the Company is a
member of the related LLP.
Revenue and Cost Recharges
Group entities entered into the following transactions with
related parties who are not members of the Group. All entities
other than DSW Investments 2 LLP are licensee businesses. DSW
Investments 2 LLP is an entity owned by current shareholders.
2023 2022
Revenue and Cost Revenue and Cost
Recharges Recharges
GBP'000 GBP'000
PHD Equity Partners - -
PHD Industrial Holdings 252 200
DSW Investments 2 LLP 104 99
Other investments 684 920
Totals 1,040 1,219
----------------- -----------------
Other investments relate to routine and similar transactions
which arose in the ordinary course of business, with DSW CF Leeds,
DSW Wealth Advisory, DSW TS Leeds and DSW Business Recovery.
Amounts due from/to related parties
Group entities had the following balances, including loans to
related parties, outstanding at year end with related parties who
are not members of the Group:
2023 2022
Amounts due from Amounts due from
related parties related parties
GBP'000 GBP'000
PHD Equity Partners - -
PHD Industrial Holdings - 1
DSW Investments 2 LLP 33 -
Other investments 277 497
Totals 310 498
----------------- -----------------
Salary and fees payable to James Dow and Jon Schofield are as
disclosed in the Remuneration and Nominations Committee Report.
Salary totalling GBP41,300 (2022: GBP18,761) has been paid to Susie
Dow in the year.
Remuneration of key management personnel
The remuneration of the Directors, who are the key management
personnel of the Group, is set out below in aggregate for each of
the categories specified in IAS.
2023 2022
GBP'000 GBP'000
Wages and salaries 540 431
Social security costs 74 54
Other pension costs (see
note 26) 9 32
--------
623 517
-------- --------
This includes amounts in respect of a previous director who
provided services and was remunerated by the Group in the year.
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END
FR BCGDRCBBDGXD
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July 13, 2023 02:00 ET (06:00 GMT)
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