The man who steered DWF onto the public markets as the first law firm to be listed on the main London Stock Exchange has suddenly stepped down in the face of the firm’s Covid-19 difficulties.
Andrew Leaitherland, group chief executive and managing partner of DWF LLP, has been replaced by chairman Sir Nigel Knowles.
Chris Sullivan, the senior independent non-executive director and a former senior banker, has been appointed as interim chairman while a permanent replacement is recruited.
The news had sent the firm’s share price diving 15% at the time of writing.
Mr Leaitherland has spent over 20 years at DWF, the last 14 of which were at the helm, during which time it grew from two offices in the UK to 33 offices across four continents.
In a trading update, DWF said the disruption caused by the coronavirus was greater than it had anticipated in late March, when it said the impact of the pandemic would mean revenue growth of between 15% to 20% for the financial year, which ended on 30 April.
“As a result revenues grew by c.11% over the financial year. The impact and timing of Covid-19 gave little opportunity for remedial action in this financial year, further reducing the group’s profit expectations for FY20.”
However, the firm said it has seen activity levels strengthen in May, “with a number of new client wins, including panel appointments, and with a good pipeline of bid activity”.
April was also the group’s strongest ever in terms of billings and cash collection, “driven by a concerted action from the partners”, with over £40m of billings and over £45m of cash collected, a trend it said continued this month.
“As a result, period end net debt was better than expected at £64.9m, well within the group’s total available facilities of £122m. The group operates and expects to continue to operate within the banking covenants agreed with its lenders under the terms of the [revolving credit facility].”
DWF recruited 25 partners during the financial year, but “the Q4 weakness has meant that new hire productivity levels have not increased as originally expected”.
Breaking performance down by division, the commercial division was the main underperformer, with a 6% fall in revenues driven by the impact of Covid-19 – corporate and transaction work was the main cause of this, and as a result “the group is planning further actions to protect margin”.
The insurance services business delivered “revenue growth in the mid single digits”, while the international division’s turnover rose by 50%.
“However, certain geographies such as the Middle East materially underperformed. In addition, European offices in Spain, Italy and France were particularly impacted in April, but activity levels have since recovered somewhat with the prospect of lockdowns easing.
“The group continues to recognise the substantial growth potential of this division, but has taken swift action to reduce some of the partner and new hire investment to ensure a focus on margin optimisation.”
The 14% growth in the connected services division was below target, “due to a particular underperformance in the DWF360 business which experienced low demand and has since been restructured”. DWF360 is the firm’s technology arm, providing risk and cost-reduction software.
The update said: “While disappointed with this performance, the group has a substantial number of opportunities in order to improve cash backed margins.”
It said the previously announced cost reduction plan has been implemented, delivering £10m of savings in the current financial year and £13.5m in the following 12 months, which “further incremental cost savings that can be achieved through remedial action”.
“While the macroeconomic environment remains challenging, the group believes there is substantial opportunity to make the business more efficient, with a focus on delivering cash backed profit.”
Mr Sullivan said the firm owed Mr Leaitherland “a great deal and wish him every success in his future endeavours”.
He added: “In these unprecedented times the Board believes that Sir Nigel’s extensive experience in building and leading a global legal business will be invaluable as group chief executive officer in ensuring that our strategy delivers sustainable growth and attractive returns for all our stakeholders.”
Mr Leaitherland said: “It has been a privilege to be group CEO of DWF for nearly 14 years and I am incredibly proud of the progress we have made in that time. It is a fantastic business with great people committed to delivering the best possible service to our clients. I wish Sir Nigel every success in taking the business forward.”
Sir Nigel said: “Andrew helped build a great business for which we are very grateful and we wish him the very best.
“Whilst today’s trading update shows there are near term challenges to be overcome, there is a significant opportunity to deliver attractive returns for our shareholders by consolidating the growth achieved to date and building an even stronger global platform centred around DWF’s complex, managed and connected delivery model.”