9 November 2023

DSW CAPITAL PLC

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

(AIM: DSW)

Trading update and Notice of Results

DSW Capital, a profitable, mid-market, challenger professional services licence network and owner of the Dow Schofield Watts brand, announces the following trading update ahead of the Group's Half Year Results for the period ended 30 September 2023 ("H1 24" or the "Period"), which are expected to be released on 27 November 2023.

As noted in our FY23 results on 13 July 2023, FY24 started under challenging market conditions, with trading remaining subdued in spring and early summer. We are pleased to report that our licensees have since seen more normalised levels of M&A activity in the three months to 31 October, suggesting that we may have passed the low point in the cycle. Our results, which are typically weighted towards the second half of the financial year due to the recognition of profit share income, will benefit from the contribution from Bridgewood, which joined the Network in July 2023, and expected increased levels of M&A activity.

Network revenue in H1 FY24 was £7.3m (H1 FY23: £9.8m), resulting in total income from licensees¹ in the Period of £1.1m (H1 FY23: £1.6m) and Adjusted Pre-Tax Profit² of £0.2m (H1 FY23: £0.9m).

We have continued to invest significantly in our recruitment capabilities in the Period, to capitalise on the more attractive recruitment conditions.

Whilst activity levels are improving in M&A, this market represents a sizeable percentage of Group revenues (FY23: c.72%) and the expected timing of transactions can change. As such, the Board is anticipating that Adjusted Pre-Tax Profit in FY24 is now likely to be between £1.1m to £1.4m. The higher end of the range remains achievable but is subject to certain M&A deals currently scheduled to complete before the year end.

The Group's cash at the half year end was in line with management expectation at £2.8m (30 September 2022: £4.6m), reflecting the investment of £0.9m in Bridgewood, the dividend payment of £0.4m and breakout incentives paid to new partners of £0.2m.

James Dow, Chief Executive Officer, said:

"We were cautious at the start of the year and remain vigilant to macro uncertainties but believe the medium-term outlook for the Group remains positive. We continue to execute on our recruitment strategy with significant investment in our capabilities, which, coupled with favourable recruitment market conditions, have delivered new offices in Cardiff and Leicester. Our strategy to acquire licence fee income has also borne fruit with the addition of Bridgewood (Corporate Recovery) and STS Europe (Tax Advisory). At 30 September, our fee earners totalled 104 of which 48 were partners (30 September 2022: 93 fee earners of which 40 were partners), with the growth in partners being a lead indicator for future organic fee earner growth."

¹ Total income from licensees represents statutory revenue plus share of results in associates

² Adjusted Pre-Tax Profit excludes and share based payment charge

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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 now operates licensing arrangements with 25 licensee businesses with 106 fee earners, from 11 offices across the UK. 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.