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Trading Statement July 2020

08 July 2020
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DWF, the global legal business, today provides an update on current trading and the implementation of its strategic change programme.

Operational highlights

  • Strong trading in the first two months of the financial year with revenues and EBITDA ahead of budget and prior year
  • Organic revenue growth of c.6% yoy and total revenue growth of c.21% reflecting the contribution from the acquisitions of RCD in Spain and Mindcrest
  • Swift management action taken with total cost savings of £15m expected in FY21
  • Further strong cash collection, reduction in both lock-up days and net debt position, with positive free cash flow of £7m over the first two months of FY21
  • Cash balance as at 30 June 2020 is £17.9m with total available facilities (gross) of £122m
  • Commitment to the Complex, Managed and Connected strategy together with actions taken to close or scale back certain underperforming offices with minimal disruption expected

Sir Nigel Knowles, Group CEO, commented:

"Despite the headwinds facing the global economy, I am pleased with the positive momentum that DWF has generated during the first two months of the year, with revenue and EBITDA ahead of prior year, and activity levels increasing. 

"We have taken decisive action focused on consolidating our existing operations to increase profitability, deliver cost efficiencies and improve lock-up and cash generation. Measures to scale-up Managed Services and optimise the International division will position DWF well for FY21 and beyond. Having had the opportunity to talk personally with many stakeholders, including both internal and external shareholders, I am very pleased that our new direction has such strong support."
Strategic actions and cost saving programme

The Group remains committed to its Complex, Managed and Connected delivery model and believes this to be a true differentiator in the legal services sector. Management’s focus is on organic revenue opportunities, operating efficiencies and cash generation.  While M&A opportunities are on pause in the short term, this remains an important part of the Company’s strategy through the medium to longer term, where targeted acquisitions add synergistic value to the Group.  
The new management team has been reviewing options to take further cost efficiencies across the Group and now anticipates total cost savings of £15m in FY21. This comprises of £10m of savings previously announced in March 2020 and an additional £5m of cost savings identified through a further review of the Group's cost base.  This will result in £18.5m of savings in FY22 at a full annualised run rate. Given the investment in FY20 was back end weighted and there are selected investment plans in growth areas in FY21, approximately half of this £15m may be reinvested into the Group. In addition, the Group is closing its Brussels and Singapore offices and reducing its presence in Dubai and Cologne as part of a review of underperforming business units. DWF Resource in the Connected Services division is also being discontinued. 

Current trading

After encountering some headwinds from COVID-19 in Q4 of FY20, the Group is cautiously optimistic about FY21 performance albeit it is too early to make any firm predictions given the pandemic is ongoing and the economic impact remains unpredictable. Nevertheless, the Group has seen strong trading in the first two months of the financial year with revenue and EBITDA ahead of budget and prior year. Over this period, the Group has delivered organic revenue growth of c.6% yoy and total revenue growth of c.21% yoy reflecting the contribution from the acquisitions of RCD in Spain and Mindcrest.  

EBITDA is ahead of prior year by c. £3m in total in the first two months.  This improvement is driven by the stronger revenue performance on a consistent gross margin, the impact of RCD and Mindcrest and a reduction in the cost to income ratio from 47% to c.41% yoy.  

The Group’s Commercial Division has seen a recovery in activity levels compared to April, with revenues ahead yoy. Insurance Services has continued to deliver a strong performance, with a mid-single digit revenue increase yoy, supporting management’s belief that prospects for this division remain resilient given the annuity type nature of these services. 

Management remains committed to maintaining and growing the Group's International division. Whilst there have been some short-term impacts from COVID-19, the partner hires previously made are expected to deliver organic growth and the selected office closures will protect profitability. 

The Group’s Connected Division is delivering substantial growth, with revenues ahead by over 35% yoy, aided by increasing internal referrals and continued growth of its external profile. The Group’s Managed Services offering will continue to build during the year, with appropriate workflows already being transitioned internally to this division and serviced more efficiently, which are expected to deliver margin benefits in FY22 and beyond. 

The Group also expects to see a positive impact from the conversion of a number of prospective partner hires from a strong pipeline across its divisions.

Balance sheet and working capital

The Group has continued to focus on balance sheet management, reducing lock-up and improving cash generation through prompt billing and efficient cash collection. Cash collections in April, May and June remained strong with collections averaging over £40m per month. The Group has successfully reduced lockup days from 208 days at 30 April 2020, which in part reflected the impact of COVID-19, down to 197 days in June. This reflects an encouraging step towards the Group’s target to permanently reduce lockup days. As at 30 June, the Company’s net debt position had reduced to £64m despite outflows of £6m of deferred consideration during this period, primarily relating to the recent strategic acquisitions of RCD in Spain and Mindcrest. The Group therefore generated free cash flow of £7m over the first two months of the year.  The cash balance as at 30 June 2020 is £17.9m with total available facilities (gross) of £122m.

FY20 performance and timing of FY20 results

The Group's unaudited results announced in the RNS issued on 29th May are repeated below.




FY19 (Restated)




Net revenue




Underlying adjusted EBITDA (post IFRS 16)




Underlying adjusted EBITDA (pre IFRS 16)




Net debt




Net revenue includes the impact of acquisitions and excludes discontinued operations (restated for FY19). Underlying adjusted EBITDA (post IFRS 16) includes the impact of acquisitions, excludes discontinued operations (restated for FY19), is stated post-IFRS 16 Lease adjustment and post-Internally reported partner remuneration pro-forma adjustment. Underlying adjusted EBITDA (pre-IFRS 16) is defined as Underlying adjusted EBITDA less the benefit from the IFRS 16 Lease adjustment.

Following FRC and FCA joint guidance on issuing annual audited accounts, and DWF’s desire to provide greater clarity around the impact of COVID-19 on FY21 financial year performance in terms of income and cash generation, the Company expects to announce its results on 8th September. The Company understands that dividend income is important to its internal and external shareholders and this enhanced visibility of trading will also assist the Board's decision regarding the final dividend.  

Partner and staff engagement during FY21

During June, there has been extensive engagement by the new management team with the Group's people globally.  At the same time a pulse survey of all partners and employees indicates a high level of engagement and improvements on almost all metrics since the last survey in November 2019.  This survey included questions specific to the Group's response to COVID-19, the responses to which indicate a high level of satisfaction with the support the Group's people are receiving for their wellbeing and remote working.  Management believes that there is a greater level of cohesion within the business as the partners and employees pull together in these unprecedented times.


Whilst the current uncertain macro-economic conditions limit forward visibility, management and the Board are pleased with the progress the Group has made during the first 2 months of the new financial year.  The Group is successfully integrating its recent acquisitions of RCD and Mindcrest and will benefit from a full year revenue and profit contribution from these businesses in FY21. While certain business sectors may face headwinds in the near term, the Group should benefit from the partner and team hire activity made towards the end of FY20, as these contribute organic revenue and profits.  Finally the impact of the cost saving measures and discontinued loss making operations should further underpin near term profitability, in line with the Group’s target of delivering profitable, cash backed growth. The discontinued operations represented c.1.5% of Group revenues and generated a £4.5m EBITDA loss in FY20. The Group’s cost saving programmes are expected to reduce the FY20 cost base by £15 million, however approximately 50% of this may be reinvested into the business in key growth sectors.

Management are therefore cautiously optimistic that FY21 will benefit from a number of positive drivers despite potentially challenging economic conditions.  Further guidance will be provided at the full year results announcement at which point there will be greater visibility of current year trading and the impact of lockdown easing will be better understood.

For further information

 DWF Group plc

James Igoe – Head of Communications +44 (0)7971 783533

Finsbury (PR advisers to DWF)

Ed Simpkins +44 (0)20 7251 3801
Charles O'Brien

Further Reading