Shares in legal and business services group DWF (DWF) jumped 6% to a 12-month post-pandemic high of 101p after the firm posted forecast-beating full year earnings and reinstated its final dividend.


Thanks to ‘strong activity’ in the second half to April, which lifted revenues by 8% on a like-for-like basis and 13% on an overall basis to £338 million, full year profits were 15% ahead of market expectations at £34 million, an increase of more than 120%.

DWF, the only main-market quoted legal services firm and the only one with a large international presence, said gross profit margins were higher in every division while lock-up days and the cost-to-income ratio were lower.

Despite acquisition-related expenses of £17 million and one-off payments for deferred consideration, net debt was slightly lower, which combined with strong free cash flow generation means the board expects to recommend a final dividend of 3p per share, taking the full-year pay-out to 4.5p per share.

‘This is the first step towards normalising the dividend towards the target pay-out ratio of up to 70% of the group's profit after tax’, the firm said. ‘The Group will provide an update on its capital management strategy with the release of its full results in July.’


Consistent with its strategy of making bolt-on acquisitions, the company announced it had bought a specialist provider of compliance training – with a scalable product which can be cross-sold to existing clients – and had agreed the purchase of a well-established Canadian insurance claim and loss adjusting business. The acquisitions are expected to contribute to earnings as well as revenues this year.

Chief executive Sir Nigel Knowles, former global co-chairman of DLA Piper and DWF chairman since 2017, described himself as ‘delighted with (the firm’s) results which show significant improvement on the prior year and a strong performance in their own right.  We have grown the business, transformed our profitability, improved our operational efficiency and strengthened our balance sheet notwithstanding the impact of COVID-19 during the year.’

Analysts at Shore Capital have sharpened their pencils in order to revise up their earnings forecasts, and observe that given the firm’s ‘impressive performance’ together with the ‘significant discount’ to its listed peers, the shares have further upside.


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Issue Date: 25 May 2021