DSW Capital FY adjusted pre-tax profits fall

Professional services business DSW Capital said on Wednesday that adjusted pre-tax profits had contracted in the year ended 31 March but said network revenues and total income from licensees were expected to be in line with current expectations.

DSW said network revenues were pegged to be £16.0m, down from £18.3m in the prior year, reflecting subdued mergers and acquisition activity that has persisted since late 2021. Adjusted pre-tax profits were expected to have fallen by £900,000 to £500,000, below the bottom end of guidance provided in its February trading update and due to its decision to increase provisions against balances owed by licensees.

M&A activity represented 68% of network revenues, with average revenue per fee earner falling from £193,000 to £153,000. Fee earners increased from 97 to 107, while the number of partners grew from 42 to 50.

DSW said it remains confident in its long-term prospects but acknowledged "the suppressed earnings" in the period by proposing a reduced final dividend of 0.75p, giving a total dividend for FY24 of 2.0p. It anticipates maintaining dividends at a reduced level until market conditions improve and earnings return to growth.

Chief executive James Dow said: "We remain frustrated that economic conditions continue to impact confidence in the SME M&A marketplace. However, our licensee businesses have shown remarkable resilience and entrepreneurship and, as a result, we have only seen a 10% reduction in network revenue.

"The group remains well positioned to continue growing its network and to capitalise on future upturns in SME and M&A activity."

As of 1100 BST, DSW shares were up 1.50% at 50.75p.

Reporting by Iain Gilbert at Sharecast.com