15 February 2024

DSW CAPITAL PLC

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

(AIM: DSW)

Trading update

DSW Capital, a profitable, mid-market, challenger professional services licence network and owner of the Dow Schofield Watts brand, announces the following trading update for the year ending 31 March 2024 ("FY 24" or the "Period").

Having seen five consecutive months of improving trading performance through to the end of December, with licensees reporting a return to more normalised levels of M&A activity, it is disappointing to report that Network revenue for January was substantially below our expectations. More significantly, in February, we have been advised of both slippage to some previously anticipated deal revenue and, to a lesser extent, deal aborts, which will impact the Group's FY 24 performance. 

As a result of these changes, and given the Group's H2 weighting, we now anticipate FY 24 adjusted pre-tax profit to be in the range of £0.6m to £0.7m. Given the return to more uncertainty in the broader M&A market, the Board is now more cautious for the FY 25 outturn.

The Group remains profitable, despite the challenging market conditions, and maintains a healthy cash balance of £2.7m at 31 January 2024, following the £0.2m dividend payment in that month. 

James Dow, Chief Executive Officer said:

"Whilst it is very disappointing that the improving trend we saw in the M&A market has stalled, our confidence in the medium-term outlook for the Group is unwavering, and we remain well positioned for when the M&A market returns.

"In the meantime, we continue to invest in recruitment and to grow the Network. Diversification into new service lines not reliant on M&A remains a focus. The business recovery and tax advisory licensees, which were acquired during the year, have performed well, and we are seeing record numbers of enquiries from potential new partners and licensees."

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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 24 licensee businesses with 106 fee earners, twelve 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.