DWF hails “milestone” year with strong results – but IPO cost £12m

Leaitherland: Significant progress against strategy

DWF, the world’s largest listed law firm, revealed that going public cost the business £12.6m while also slowing down its acquisition activity.

The firm’s maiden results as a listed company showed its revenue for the year to 30 April 2019 grew 15% to £272m, which it said was “primarily organic… given the pause on our M&A programme required by the IPO process”.

The growth was driven by 20 new partner hires and a 9% rise in revenue per partner to £857,600 “as recent partner hires ramp up to full delivery”.

Much of the £12.6m was “driven by the complexity of the project, including the detailed regulatory work required in each jurisdiction in which we operate”, investors were told.

“Considerable restructuring work was undertaken immediately prior to the IPO to ensure the group structure was robust and further work was needed to transition our financial reporting, systems and controls away from an LLP model to a corporate one.”

This cost meant that reported profit before tax fell 42% to £12.3m, but the adjusted figure – taking that and share-based payment expenses out of account – was up 13% to £26.1m.

Commercial was the most successful of DWF’s four divisions, delivering a 6% increase in turnover to £109m, with a gross profit margin of 63%. The insurance division recorded of £91m, up 3%, and a profit margin of 51%.

The international division’s revenues jumped 79% to £54m, which the firm attributed to “prior year partner hires coming up to full productivity, an increase in demand from global clients and cross-selling between territories as our international presence matures”. The gross profit margin was 44%.

Revenue from the connected services division – made up of a variety of related services, such as claims management, adjusting, advocacy, forensic and costs – was up 23% to £18.5m, with a gross profit margin of 37%.

The firm-wide gross margin was up 0.3% to 53.4%.

The commentary released with the results highlighted the success of DWF’s innovative work with predictive analytics, saying that it “will continue to produce significant indemnity spend savings for insurers and should mean that the division is ideally placed to gain increased market share”.

This alongside planned internal efficiencies, “should offset any reduction” in high-volume, low-value work as a result of the Civil Liability Act reforms.

Group chief executive Andrew Leaitherland said the results marked the end of “a milestone year” for DWF.

“We have made significant progress against strategy, taking meaningful strides towards our medium-term targets, and expect our diversified and differentiated business model to continue driving long-term sustainable growth.

“We are committed to recruiting and retaining leading industry talent which is underpinning our broadened service offering and revenue growth.

“Following a period of reduced M&A activity due to preparation for the IPO, we are maintaining discipline in identifying value-add acquisitions and associations to add scale, build on our sector expertise and develop our international presence.”

DWF listed in March at 122p and has moved little since. At the time of writing, the results have had little effect, with the price down 1p to 120p.

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