17 May 2023

DSW CAPITAL PLC

("DSW Capital", "DSW" or the "Group")

(AIM: DSW)

Trading Update and Notice of Final Results

FY23 in line with current market expectations

DSW Capital, a profitable mid-market, challenger professional services licence network and owner of Dow Schofield Watts brand, announces the following trading update ahead of its final results for the year ended 31 March 2023 ("FY23" or the "Period"), which will be released on 13 July 2023.

Revenue and Adjusted Pre-Tax Profit¹ for FY23 are expected to be in line with current market expectations.

Network Revenue in FY23 is expected to be flat at £18.3m (FY22: £18.3m), as challenging market conditions persisted into the Group's historically weighted second half. Expected EBITDA is £1.5m (FY22: £2.2m), with the change reflecting a full year's plc costs and additional planned investment in central resource. Expected Adjusted Pre-Tax Profit¹ is £1.4m (FY22: £2.0m).

Average Revenue per Fee Earner in the Period was £193k (FY22: £237k²), reflecting the previously noted softening of the M&A market, and reduced utilisation in the second half of the Period. FY22 levels of Network Revenue have been maintained and the Group's existing licensees continue to prosper and hold strong market positions.

Fee earners increased from 88 to 97 in the Period, with five additions in the first half of FY23 and a further four in October 2022.  Existing licensees took a prudent approach to recruitment in the remaining part of the Period, given the uncertain economic outlook. The Board remains confident, however, that recruitment opportunities for partners should improve as FY24 progresses. A slowdown in activity often provides a catalyst for ambitious professionals to change firm, in order to take advantage of the pickup in activity following a lull. In addition, this environment creates push factors which will generate an increase in candidates open to a move.  DSW remains a desirable place to work for ambitious people who want to grow their own businesses.

With strong cash balances at the year-end of £4.6m (FY22: £4.7m), after paying dividends of £1.26m in the Period, the Group is significantly increasing its investment in recruitment and has a strong recruitment pipeline. Despite the short-term challenges facing the business, the Board remains confident in the long-term prospects for the business and intends to take advantage of the opportunity to recruit additional fee earners. As new fee earners settle into the business earnings are expected to return to growth.

James Dow, Chief Executive Officer of DSW Capital, said:

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

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

¹ Adjusted Pre-Tax Profit excludes share based payment charge.

² Prior year comparative calculated using average Fee Earners in the Period.

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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 operates licensing arrangements with 20 licensee businesses with 97 fee earners, across seven 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.