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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Dwf Group Plc | LSE:DWF | London | Ordinary Share | GB00BJMD6M39 | ORD 1P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 99.60 | 0.00 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| 0 | 0 | N/A | 0 |
From Apr 2019 to Apr 2024
TIDMDWF
RNS Number : 1498I
DWF Group PLC
10 December 2020
DWF Group plc
("DWF" or "the Company" or "Group")
LEI: 213800O9QREOHTOGQ266
10 December 2020
Half-year results for the period ended 31 October 2020
Strong revenue and profit performance despite macro environment
DWF, the global legal business, today announces its half-year results for the period ended 31 October 2020.
GROUP FINANCIAL SUMMARY
Hot Features
Premium
GBPm (unless otherwise stated) HY21 HY20 Change
Net revenue 167.6 145.2 15.4%
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Gross profit 83.1 73.2 13.5%
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Gross profit margin 49.6% 50.4% (0.8)ppts
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Cost to income ratio(1) 40.4% 41.7% (1.3)ppts
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Adjusted operating profit ('Adjusted
EBITDA')(2) 24.7 21.1 17.1%
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Reported operating (loss)/profit (8.9) 9.9
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Adjusted profit before tax ('Adjusted
PBT')(3) 13.4 10.9 23.0%
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Reported PBT (11.0) 8.0
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Adjusted diluted EPS (pence) 3.6 2.9 24.1%
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Reported diluted EPS (pence) (4.2) 2.0
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Gross lock-up days 196 201 (5) days
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Free cash flow 19.6 (9.2) 28.9
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Net debt (58.5) (49.5) (8.9)
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HY21 FINANCIAL HIGHLIGHTS
-- Group revenue growth of over 15% (3% organic) at a gross margin of just below 50%
o 3% growth in Insurance Services division, all organic
o 7% growth in Commercial Services (including Managed Services), with organic revenue flat as activity levels recovered through H1 from the sudden weakness experienced in March and April due to COVID-19
o 58% growth in International, with RCD acquisition in Spain adding GBP15.7m of revenue, alongside organic growth of 3%
o 19% growth in Connected Services, all organic
-- Adjusted PBT of GBP13.4m which is 23% higher than HY20 and close to the FY20 comparator of GBP15.2m
-- Reported PBT is a loss of GBP11.0m, which differs to Adjusted PBT due to significant, largely non-cash, acquisition related expenses treated as non-underlying items
-- GBP19.6m free cash flow generated in H1 versus an outflow of GBP9.2m in the prior year, assisted by cGBP14m of COVID-19 related deferrals
-- Net debt of GBP58.5m is GBP8.9m higher than HY20 and a reduction of GBP6.4m versus April 20 position despite GBP12.4m of acquisition related outflows in HY21
OPERATIONAL & STRATEGIC PERFORMANCE
-- A 5 day reduction in lock-up days versus HY20 and a 10 day reduction versus FY20 position due to improving operational processes and client engagement
-- Cost to income ratio improved by 1.3ppts versus HY20 to 40.4%, and by 1.0ppts from FY20, demonstrating the impact of cost control and efficiency measures
-- Revenue per partner increased by 0.4% to GBP446k (half year basis) despite H1 investment in new partners
-- 15 new partner hires in the period which are expected to support ongoing organic growth particularly in Insurance Services and International
-- Agreements in principle made to reduce office space and/or vary lease terms in several locations as a first stage of the Group's new property strategy, promoting greater flexible working and securing annualised cash savings of GBP0.6m
-- Investment in new Pune, India office to increase headcount capacity to c1,000 from c500 to support Managed Services build
OUTLOOK AND CURRENT TRADING
-- The Board is pleased with the Group's performance to date in FY21 and is increasingly confident in the outlook for the full year as the Group continues to see a strong sales pipeline and anticipates a more stable trading environment in 2021
-- The Group's focus on a one team culture and global mind-set is driving more connectivity both internally and with its clients, who are seeing the benefits of the Group's integrated legal and business services offering.
-- Managed Services is an important component of that and, having successfully integrated Mindcrest, it is generating both revenue and margin opportunities for the Group as it scales.
-- The Board has approved an interim dividend for FY21 of 1.50 pence per share which is payable on 5 March 2021 to shareholders on the register as at 29 January 2021. The Board has given careful consideration to the quantum of the interim dividend to ensure that it is progressive but retains flexibility whilst there remains a degree of uncertainty as to the trading environment for the remainder of the financial year
Sir Nigel Knowles, Chief Executive Officer, commented:
"Given the extreme impact of COVID-19 on the worldwide economy, we are pleased with the performance of the business in the first half of FY21 following the swift actions taken by the new management team. We are also encouraged that despite ongoing COVID related restrictions in a number of the markets in which we operate November activity levels were strong. We have achieved strong revenue growth in the period thanks to the contributions of RCD and Mindcrest and a pleasing return to organic growth. Operationally, the decisive cost actions taken at the beginning of this financial year and a continued focus on cash management has seen a reduction in both net debt and lock-up days. These factors have combined to help us deliver a good profit performance with adjusted PBT in the first half of FY21 close to that achieved for the full year in FY20.
"We expect the uncertain macro environment to continue into 2021, although the positive news in relation to potential vaccines for COVID-19 allows some optimism for a more settled economy as we progress through next year. We therefore are increasingly confident in the prospects for the Group as we look ahead to the rest of FY21 and recent client wins and panel appointments such as those for Serco and Zurich are testament to the strength of our differentiated offering."
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
Richard Crowley
About DWF
DWF is a global legal business providing integrated legal and business services operating from 31 key locations with more than 4,000 people. The Company became the first Main Market Premium Listed legal business on the London Stock Exchange in March 2019. For more information visit: dwfgroup.com
Forward looking statements
This announcement contains certain forward-looking statements with respect to the Company's current targets, expectations and projections about future performance, anticipated events or trends and other matters that are not historical facts. These forward-looking statements, which sometimes use words such as "aim", "anticipate", "believe", "intend", "plan", "estimate", "expect" and words of similar meaning, include all matters that are not historical facts and reflect the directors' beliefs and expectations and involve a number of risks, uncertainties and assumptions that could cause actual results and performance to differ materially from any expected future results or performance expressed or implied by the forward-looking statement.
(1) Cost to income ratio is defined in note 2
(2) Adjusted EBITDA is defined in note 2
(3) Adjusted PBT is defined in note 2
Adjusted diluted EPS is defined in note 8
Gross lock-up days is defined in note 21
Free cash flow is defined in note 21
Net debt is defined in note 17
Organic revenue growth removes the impact of acquisitions and discontinued operations
CHIEF EXECUTIVE OFFICER'S REPORT
STRENGTH AND RESILIENCE DELIVERS A STRONG START TO FY21
Given the extreme impact of COVID-19 on the worldwide economy, we are pleased with our performance in the first half of this financial year, following the swift actions taken by the new management team. Revenue increased by more than 15% to GBP167.6m for the half-year driven by our acquisitions of RCD and Mindcrest alongside organic growth of 3% across the Group. Adjusted profit before tax increased by 23% to GBP13.4m, close to the FY20 comparator.
Our insurance business demonstrated its resilience, generating 3% of organic growth. In particular, our Professional Indemnity and Commercial Insurance teams experienced significant activity levels due to their involvement advising clients in the FCA proceedings regarding COVID-19 policy coverage.
Despite the challenging environment, Commercial & Managed Services was broadly flat in organic revenue terms, with overall growth and an enhanced service proposition resulting from the Mindcrest acquisition. Corporate and Real Estate activity levels have steadily recovered through H1 following a material impact in Q4 of FY20, whilst as expected demand remains strong in Litigation.
International has grown strongly, with revenue increasing by 58% compared with the same period last year. Whilst this growth was driven by the acquisition of RCD in Spain, we also saw 3% organic growth in the division with France, Italy, Poland and Dubai all performing well. Connected Services continued its strong growth profile, with revenue up by 19% and gross profit increasing by 39% thanks to divisional operational improvements.
In addition to increasing revenues and improved profitability, we saw a reduction in our gross lock-up days and increased free cash flow, which have helped us to reduce our net debt by GBP6.4m since April, despite GBP12.4m of acquisition related outflows in the first half.
After experiencing a significant impact from COVID-19 in Q4 of FY20, the strength and resilience of our business model has enabled us to respond strongly.
As I set out in my statement at our full-year results in September, following my appointment in May we took a number of steps to improve operational performance and reduce cost. These included the closure of offices in Brussels and Singapore and a reduction in our presence in Dubai.
In addition to these cost saving measures, we have also made a number of targeted investments in the first half. We recruited 15 partners, with new arrivals in a number of locations including Australia, Germany and Poland. We made several appointments in Insurance Services and targeted recruitment in Commercial Services to strengthen our insolvency and restructuring capabilities leading to high profile appointments such as on the recent administration of clothing retailer, Bonmarché.
We have recruited a further five partners who will join us in the second half of this financial year. These include three partners joining our Insurance Services division to set up a new presence in Southampton.
We have also invested in our Connected Services capabilities, including through the recruitment of a Senior Loss Adjuster in Milan that enabled the launch of DWF Adjusting in Italy. We recruited a new head of DWF Advocacy in the UK and, in Australia, launched a new Connected Service, DWF Risk, to provide work health and safety and workplace relations services.
We also continue to invest in the build of our global Managed Services platform, including a new office space in Pune. This new office, that our teams will begin to occupy from early 2021 (COVID restrictions permitting) has space for 1,000 people which is around double the current workforce in Pune. We also signed a contract with Peppermint Technology for our Managed Services division to use its case management platform.
Our continued investment in, and commitment to, innovation helped us to achieve a new highest-ever position in the Financial Times' Innovative Lawyers ranking. Last year we achieved a ranking of 8(th) and this year we climbed one place to 7(th) . We were also ranked by the FT as one of seven legal businesses it defined as the 'pacesetters' when it comes to legal innovation.
Our innovative approach to the delivery of integrated legal and business services has helped us to secure appointment or reappointment to 28 legal panels, including Serco and Zurich.
The first half also saw the completion of our largest ever client listening exercise. We surveyed more than 400 clients from across all of our sectors to ask them to rate the service we provide and to give us their feedback on what we do well, but also on where we can improve.
Clients were asked to rate the experience of our service, applying a score of between 0 and 10 against how likely they are to recommend us. I'm really pleased to report that 56% of our clients rated us as a 9 or 10 - which means they are classed as 'Promoters' of DWF. Our Net Promoter Score is 47, which is also very positive and compares favourably to our industry peers.
We have continued to focus on ensuring DWF is an attractive place to work. One of our key initiatives in this half-year has been the launch of a new Group Bonus Plan which we believe fairly rewards our people and strengthens the alignment of interests with our shareholders. The plan is linked to the overall performance of the Group, along with divisional and personal performance conditions.
We have recently launched our latest Pulse Survey to track employee engagement and have announced internally the formation of a new 'Pulse Forum'. This Forum will comprise representatives from across our locations, offices and career levels and its purpose will be to consider the results of the Pulse Survey and to provide recommendations of further ways to improve our people proposition.
One of the key ingredients that drives engagement at DWF is the work of the DWF Foundation. The Foundation is an independent charity that was set up by DWF in 2015. It celebrated its 5(th) anniversary earlier this month and at the same time it reached GBP500,000 of charitable grants and donations. Through the fundraising activities of our people, it has been able to support around 250 charities around the world. Its work has never been more important and it is something we are incredibly proud to support.
Outlook and current trading
The Board is pleased with the Group's performance to date in FY21 and is increasingly confident in the outlook for the full year as the Group continues to see a strong sales pipeline and anticipates a more stable trading environment in 2021. The Group's focus on a one team culture and global mind-set is driving more connectivity both internally and with its clients, who are seeing the benefits of the Group's integrated legal and business services offering. Managed Services is an important component of that and, having successfully integrated Mindcrest, it is generating both revenue and margin opportunities for the Group as it scales.
Operating efficiency remains a priority, and the changes that the Group is beginning to make to its office estate are expected to deliver material and multi-year savings, whilst retaining agile environments which will enable even more flexible working in the future.
As is the case with other listed businesses, it remains difficult to give detailed guidance on key metrics. However, the current view of the sales pipeline, anticipated activity levels, and cost development, suggest a similar performance trend in H2 to that seen in the first half, with some additional benefit possible from the cost saving measures which have been implemented if activity levels are sustained at current levels.
FINANCIAL REVIEW
A STRONG RECOVERY FROM FY20 COVID-19 IMPACT
Financial overview
The performance for the first half of FY21 has shown a material improvement on FY20 Q4 which was impacted by COVID-19. The Board is pleased with the Group's response to the pandemic with the global move to fully agile working and swift action taken on costs delivering a strong revenue and profit performance for HY21.
All divisions have shown both revenue growth and gross profit improvement in HY21 compared to the equivalent period in the prior year with aggregate top line growth of 15.4% (2.7% organic) and a gross margin of 49.6% reflecting a positive H1 trajectory. This performance reflects the contribution of RCD and Mindcrest but also a gradual improvement in underlying activity to pre-COVID levels as the Group saw the benefits of its diversified offering. This top line performance, combined with measures taken to right-size direct costs, have improved gross profit contribution. Strict controls of overhead expenditure have also been implemented reducing the cost to income ratio from 41.7% in HY20 to 40.4%, which is also a 1.0ppts improvement on FY20. This has led to an improved Adjusted Profit before Tax for HY21, with further direct cost benefits expected in H2 as headcount reductions implemented in H1 take effect as notice periods expire.
Working capital performance has remained robust despite the challenging macro environment. Gross lock-up days have reduced on both comparator periods and free cash flow generation has significantly outperformed the equivalent period in the prior year. Whilst there has been some benefit from COVID-19 tax deferrals, the underlying free cash flow is nevertheless significantly better than the prior year.
Revenue
Group revenue increased 15% to GBP167.6m for HY21 (HY20: GBP145.2m). Despite the impact of COVID-19, the Group has delivered creditable organic growth across Insurance Services (3%) and Connected Services (19%). International showed some recovery (3% organic revenue growth) despite ongoing headwinds in a few key locations, particularly Australia and Germany. Commercial Services, which was the most impacted by COVID-19, delivered a flat organic performance year on year, with an improving trajectory.
Acquisitions further supplemented this divisional organic growth, with Commercial Services growing 7% (including Mindcrest) and International growing by 58%, (benefitting from a strong performance from RCD in Spain).
For the first time, Managed Services has been split out of Commercial Services. The figures in this report are presented on both a reported and like-for-like basis.
Direct costs
Direct costs were GBP84.4m, increasing 17% primarily due to the impact of acquisitions (HY20: GBP72.0m). On an organic basis direct costs have increased by 3%. Across the business, actions have been taken as part of the Group's previously announced GBP15m cost reduction programme to manage and reduce direct costs in order to align resource levels to activity, with savings arising as notice periods of leavers expire. Separately, selective investments have been made in 14 partner hires, with those investments targeted in Insurance Services and International to reflect areas where the Group believes there are revenue opportunities which justify the investment.
Gross profit
Gross profit grew 13.5% to GBP83.1m in the first half (HY20: GBP73.2m) but reflects a slight dilution in gross margin from 50.4% to 49.6%. This reported dilution is due to the change in margin mix as a result of acquisitions impact on direct costs. On an organic basis, gross profit has improved by GBP1.6m with gross profit margin of 50.6% being just 0.3ppts below HY20. Cost saving measures already taken in relation to headcount reductions will continue to improve profitability as notice periods expire.
Working capital
Working capital continues to be a key area of focus and opportunity across the business. Gross lock-up days comprise WIP days, the amount of time between starting work and invoicing clients, and debtor days, the length of time between invoicing and cash collection.
In the final quarter of FY20 gross lock-up days deteriorated which management believe reflected a temporary change in billing and payment behaviours due to COVID-19. This led to combined lock-up days of 206 in April 20. Over the course of HY21 significant operational efforts have gone into improving the working capital performance in order to deliver the October 2020 position of 196 days, an improvement of 10 days since April 20 and an improvement of 5 days compared to October 2019.
This improvement in lock-up days is reflected in the improved net debt position, reducing by GBP6.4m from 30 April 20 to GBP58.5m at 31 October 20. Whilst net debt is GBP8.9m higher than 31 October 19, the current year position reflects the impact of the acquisitions of RCD and Mindcrest where total cash consideration paid since the December 19 and February 20 acquisition dates is GBP19.7m.
Free cash flow generation for HY21 was GBP19.6m, which contrasts with a GBP9.2m outflow in HY20, and an outflow of GBP4.6m for FY20 full year. Whilst net debt has reduced in H1 from April 20, H2 outflows for deferred consideration and COVID-19 deferrals will offset operational cash generation such that net debt is expected to be broadly flat for the year. However, further improvement to gross lock-up days remains a key area of operational focus and represents an opportunity to reduce working capital.
Reducing leverage remains a priority for the Group and whilst net debt may not reduce materially in FY21, mainly due to the aforementioned deferred outflows, leverage will reduce as profitability improves.
Divisional Performance
The divisional performance figures that follow reflect a small number of changes to the alignment of some locations. From an operational perspective, Belfast and Dublin have been realigned to the Commercial Services and Insurance Services divisions. The divisional figures reflect these operational changes which were effected to improve alignment across UK and Ireland as a whole and to drive greater revenue and cost synergies than were possible by retaining these locations within the International division.
Insurance Services
Measure GBPm HY21 HY20 Variance Variance
Revenue 51.5 50.2 1.3 3%
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Direct cost (25.9) (25.6) (0.3) (1%)
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Reported gross profit 25.6 24.6 1.0 4%
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Reported gross margin
% 49.7% 49.0% 0.7ppts
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In an insurance market significantly impacted by COVID-19, including a lengthy lockdown at the start of the financial year followed by localised restrictions, the Group's Insurance Services division performed remarkably strongly finishing the half year with 3% growth (all organic) versus prior year and with a slightly improved gross profit margin of 49.7% (HY20 49.0%).
The Professional Indemnity and Commercial Insurance practice group has been the standout performer. The Group experienced significant activity levels in H1, as it advised some of our largest clients in relation to the highly publicised FCA declaratory proceedings on COVID-19 policy coverage.
As expected, the Motor and Fraud practice group was most impacted by the lockdown dramatically reducing the volume of claims which at one stage were down 75% compared to pre-lockdown levels. The reduction in instructions has been compounded by delays in the conclusion of cases due to court closures and a combination of other factors, which have led to more time being required on fixed fee cases plus a degree of working capital drag due to settlement delays. Despite this, most teams have now returned to near normal levels of activity. Cost savings have been effected to protect gross profit contribution. Some of these delays are easing but the effect of the current second wave measures on road traffic accident claims is being carefully monitored.
The Group expects that demand for insurance services will increase in the second half of the financial year due to a combination of factors including the expected large volume of COVID-19 disease and fatality claims which are already starting to come through from care homes and food processors amongst others. There should also be a strong flow of business interruption claims following the Supreme Court judgement on COVID-19 policy coverage, which will potentially be delivered before Christmas. Insurers are also revisiting their business models and the Group has already benefited from a permanent large outsourcing of claims from one of its biggest clients. Recent lateral hires together with the new Southampton team are also expected to make important contributions to the second half of the year.
Commercial and Managed Services
Measure GBPm HY21 HY20 Variance Variance
Revenue 63.0 58.7 4.3 7%
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Direct cost (27.4) (24.9) (2.6) (10%)
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Reported gross profit 35.6 33.9 1.7 5%
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Reported gross margin
% 56.5% 57.7% (1.2ppts)
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Organic revenue 58.1 58.1 0.0 0%
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Organic direct cost (25.1) (24.2) (0.9) (4%)
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Organic gross profit 33.0 33.9 (0.9) (3%)
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Organic gross margin
% 56.8% 58.3% (1.5ppts)
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Commercial & Managed Services (including Mindcrest) delivered revenue growth of 7% in HY21. Commercial Services experienced a material adverse impact in Q4 of FY20 as a result of COVID-19, however it has delivered flat organic revenues year on year in HY21 and has seen activity levels on an improving trajectory compared to H2 of FY20.
Whilst results are largely being driven by the Litigation practice group, where client demand remains particularly strong, transactional activity in both Corporate Services and Real Estate has also held up well despite macroeconomic uncertainty. The division invested in a number of lateral hires during FY20, several of whom arrived during Q4, and these investments are delivering new client wins contributing positively to the half year revenue position.
Although direct costs at the end of H1 were broadly in line with those incurred in the same period last year, actions have been taken through the course of the first half to right-size the division, removing excess capacity and cost and improving utilisation. It is expected that as notice periods expire the benefit of these savings will be delivered in the second half.
The division continues to make good progress with its key objectives, including transitioning work to Managed Services and working more closely with Connected Services, allowing more efficient operating practices and broadening client relationships.
Managed Services continues to attract client interest in the Group's integrated offering, with a number of large bids currently underway which could supplement the above internal work-transfer opportunities.
The outlook for H2 is improving, with all areas of the division currently showing strong pipelines which, alongside the cost reduction programme benefits, are expected to support gross profit margin.
International
Measure GBPm HY21 HY20 Variance Variance
Revenue 40.3 25.5 14.7 58%
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Direct cost (23.8) (14.7) (9.1) (62%)
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Reported gross profit 16.4 10.8 5.7 53%
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Reported gross margin
% 40.9% 42.2% (1.3ppts)
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Organic revenue 25.1 24.5 0.6 3%
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Organic direct cost (14.4) (13.7) (0.7) (5%)
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Organic gross profit 10.7 10.7 0.0 0%
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Organic gross profit
% 42.7% 43.8% (1.1ppts)
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The International division remains a key growth area for the Group, delivering revenue growth of 58% to GBP40.3m in HY21 (HY20: GBP25.5m) as a result of the acquisition of RCD, which has performed strongly. The organic performance in the division was 3% growth on prior year reflecting mixed results across different geographies.
France, Italy and Poland are all showing revenue growth as a result of investments in new partner hires and, as expected, there is a degree of short term margin dilution as a result. Germany, after the slimming down of Cologne, is building new capabilities in Dusseldorf and will have a diluted margin as the new hires develop their practices. The recently rationalised Dubai office is performing well and is now delivering a sustainable gross profit contribution. Australia is undergoing a degree of consolidation after a period of heavy investment, with the current year focus being on ensuring resource levels are appropriate for the work in hand and are reflective of the pipeline given the pandemic impacts in different locations.
Cost savings implemented in late FY20 and HY21 are gradually being reflected, however gross profit margin of 40.9% was slightly down (HY20: 42.2%). It is expected that as the cost savings already executed continue to be delivered the full year margin will further improve. The closures of Brussels and Singapore have also removed loss-making operations allowing a deeper management focus on the remaining key locations.
International continues to present opportunities for growth and carries latent capacity due to the level of partner and fee-earner investment made in recent periods. As and when the COVID-19 impacts around the world reduce as restrictions ease it is expected that the investments made to date will begin to generate an improving return.
Connected Services
Measure GBPm HY21 HY20 Variance Variance
Revenue 12.8 10.8 2.1 19%
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Direct cost (7.3) (6.8) (0.5) (8%)
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Reported gross profit 5.5 4.0 1.6 39%
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Reported gross margin
% 43.1% 36.9% 6.2ppts
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The Group's Connected Services division has had a strong first half of the year with revenue growth of 19% (to GBP12.8m) compared to prior year, all organic. Whilst the underlying gross margin development of the Connected Services businesses was delayed towards the end of the last financial year due to COVID-19, there has been a marked improvement in HY21 with gross profit margin increasing to 43%. This is a result of divisional operational improvements (including the closure of our DWF Resource business and a number of team restructures) together with increasing awareness of divisional capabilities driving more opportunities from new and existing clients and through internal referrals.
It has been a particularly strong start to the financial year for our businesses that have been providing clients with a unified approach to COVID-19 related business interruption claims. Our integrated solution to managing such claims has resulted in our Claims Management and Adjusting colleagues working closely with our Forensic Accountancy team (and legal colleagues) to support the quantification and challenge of business interruption losses in the UK. As a result, the UK Claims Management and Adjusting business, and the Forensic Accounting team, have had particularly strong performances. Overall, our Claims Management and Adjusting business (with presence in Australia, Canada, France, Ireland, Italy, UK and USA) has grown by 22%.
The Regulatory Consulting business, launched in FY20, has been successful in converting a strong FY20 year-end pipeline to client wins delivering H1 revenue in excess of GBP0.5m. Despite the unprecedented disruption to the court service, revenue in the Advocacy team (DWF's alternative solution to the external Bar and traditional chambers) has grown with increased efficiencies arising from the transition to virtual hearings. The demand for services within the DWF 360 software development business has improved (following a number of large projects being put on hold at the start of COVID-19) with revenue ahead of target at the end of H1.
Management are confident with the outlook for the second half of the year with strong pipeline activity across all businesses and a focus on exploring more innovative ways to meet client needs.
Administrative expenses
Reported administrative expenses increased from GBP63.4m in HY20 to GBP92.1m in HY21. However, as described in note 2, there are four factors impacting comparability:
-- The inclusion of GBP12.5m of non-underlying items in HY21, compared to just GBP1.1m in HY20. These predominantly relate to the acquisition accounting for RCD and Mindcrest.
-- An amortisation and impairment charge of GBP2.5m in HY21 (HY20 GBP0.2m) which also relates to recent acquisitions.
-- An increase in Share Based Payment expenses in FY21, with a charge of GBP9.5m versus GBP4.4m in the prior year. This increase primarily relates to the acquisition accounting for RCD.
-- A GBP2.8m gain on bargain purchase included as a credit in the FY20 figures relating to the acquisition in Poland.
The items above are excluded as they are all either one-off, non-cash or non-trading related expenses.
On an underlying basis, administrative expenses increased 11.7% to GBP67.6m (HY20: GBP60.5m). The majority of this increase relates to the administrative expenses of RCD and Mindcrest. On an organic basis, previously announced cost savings have prevented any underlying increase to overheads and the Group continues to see ongoing savings from actions already taken as well as a temporary benefit from COVID-19 affected expense categories such as travel and business development.
The Group has improved its cost to income ratio to 40.4% (HY20: 41.7%) reflecting the Group's stated strategy of delivering operational gearing by using its platform more effectively.
Interest
Interest expense comprises GBP1.0m of interest payable on leases (HY20 GBP1.0m) and net finance expense of GBP1.1m (HY20 GBP0.8m) which represents bank charges, loan interest and interest on the drawn element of the main Group GBP80m RCF facility. The increase in the net finance expense compared to HY20 is a result of a higher net debt position for HY21 as the business gradually deleverages after incurring the acquisition outflows for RCD and Mindcrest.
IFRS 16-related interest payable on leases of GBP1.0m is recognised separately on the face of the income statement to allow for greater understanding of the composition of finance costs by the Group.
Profit before tax
Reported profit before tax for HY21 is a loss of GBP11.0m compared to a profit of GBP8.0m in HY20. This reported position is impacted by the non-underlying items referenced in the Administrative Expenses section. Adjusted PBT is GBP13.4m compared to the prior year position of GBP10.9m, an increase of GBP2.5m or 23%. This improvement in adjusted profitability reflects the FY21 impact of acquisitions, the improving activity levels in the business and the control of costs at both direct cost and administrative cost level.
Taxation
The Group is subject to corporation tax and payments on account of GBP0.4m (HY20 GBP3.0m) have been made in the first half with a tax charge to the Income statement of GBP0.5m (HY20 GBP1.4m).
Dividend
The Group's capital allocation policy is to retain sufficient capital to fund ongoing operating requirements and to invest in the Group's long-term growth, while also paying attractive dividends. The Group has a target dividend pay-out ratio of up to 70% of DWF Group plc's Adjusted Profit After Tax.
The Group paid a final dividend in relation to FY20 of 0.75p per share, taking total dividend in relation to FY20 to 3.25p. The Board has approved an interim dividend for FY21 of 1.50 pence per share which is payable on 5 March 2021 to shareholders on the register as at 29 January 2021. The Board has given careful consideration to the quantum of the interim dividend to ensure that it is progressive but retains flexibility whilst there remains a degree of uncertainty as to the trading environment for the remainder of the financial year.
Capital expenditure
The Group has incurred cash outflows on tangible fixed assets of GBP2.9m in HY21 (HY20: GBP1.6m) with the majority of the increase due to the fit-out of the new office in Pune, India, to accommodate anticipated growth in Mindcrest (Managed Services).
In addition, the Group incurred GBP1.2m of expenditure on intangibles in HY21 (HY20: GBP0.9m) primarily relating to the ongoing build of the Managed Services platform.
Conclusion
The Group has delivered an improving performance in HY21 against the backdrop of an uncertain macro environment, with activity levels, revenue, cash generation and profitability all showing improvement. Demand for services, and capacity to deliver those services, has steadily improved over the course of H1. The Group has a strong pipeline of work coming into the second half of the financial year and expects increasingly to see the benefits from its previously announced GBP15m cost reduction programme as it continues to target improvement in its net profit margin in the medium term.
Statement of Directors' responsibilities
The Directors confirm to the best of their knowledge that the interim information has been prepared in accordance with International Accounting Standard 34 Interim Financial Reporting as adopted by the European Union. The Interim Management Report includes a fair review of the Interim Information and, as required by DTR 4.2 TR and DTR 4.2 8R, the following information:
-- an indication of important events that have occurred during the first six months of the financial year, and their impact on the condensed set of financial statements, and a description of the principal risks and uncertainties for the remaining six months of the financial year; and
-- disclosure of material related party transactions that have taken place in the first six months of the current financial year and of any material changes in the related party transactions described in the last Annual Report and Financial Statements.
This responsibility statement was approved by the board of Directors on 9 December 2020 and is signed on its behalf by:
Chris Stefani
Chief Financial Officer
OFFICERS
Directors:
Jonathan Bloomer
Chairman
Chris Sullivan
Deputy Chairman and Senior Independent Director
Sir Nigel Knowles
Chief Executive Officer
Chris Stefani
Chief Financial Officer
Matthew Doughty
Chief Operating Officer
Teresa Colaianni
Independent Non-Executive Director
Vinodka Murria OBE
Independent Non-Executive Director
Luke Savage
Independent Non-Executive Director
Samantha Tymms
Independent Non-Executive Director
Michele Cicchetti
Partner Director
Seema Bains
Partner Director
Company Secretary:
Mollie Stoker
Registered office:
20 Fenchurch Street
London
EC3M 3AG
United Kingdom
Tel: +44 333 320 2220
dwfgroup.com
Company registration number: 11561594
FINANCIAL STATEMENTS
Unaudited Consolidated Income Statement
Re-presented
(note 1.6)
Six months Six months
ended 31 ended 31 Year ended
October October 30 April
2020 2019 2020
Notes GBP'000 GBP'000 GBP'000
----------------------------------------- ------ --------------- ------------- -------------
Revenue 195,950 172,521 356,612
----------------------------------------- --------------- ------------- -------------
Recoverable expenses (28,387) (27,313) (59,381)
----------------------------------------- ------ --------------- ------------- -------------
Net revenue 3 167,563 145,208 297,231
----------------------------------------- --------------- ------------- -------------
Direct costs (84,441) (71,996) (154,997)
Gross profit 3 83,122 73,212 142,234
----------------------------------------- -------------
Administrative expenses (92,052) (63,358) (120,084)
----------------------------------------- ------ --------------- ------------- -------------
Operating (loss)/profit (8,930) 9,854 22,150
----------------------------------------- ------ --------------- ------------- -------------
Adjusted operating profit 24,669 21,069 36,915
----------------------------------------- --------------- ------------- -------------
Depreciation and amortisation,
impairment, gain on bargain
purchase, non-underlying items
and share-based payment expense 2,4 (33,599) (11,215) (14,765)
----------------------------------------- ------ --------------- ------------- -------------
Net finance expense 5 (1,132) (787) (1,905)
----------------------------------------- --------------- ------------- -------------
Interest payable on leases 5 (982) (1,030) (2,047)
----------------------------------------- ------ --------------- ------------- -------------
(Loss)/profit before tax (11,044) 8,037 18,198
----------------------------------------- ------ --------------- ------------- -------------
Taxation 6 (531) (1,362) (3,629)
----------------------------------------- ------ --------------- ------------- -------------
(Loss)/profit from continuing
operations (11,575) 6,675 14,569
----------------------------------------- ------ --------------- ------------- -------------
Loss from discontinued operations 10 - (924) (4,301)
----------------------------------------- ------ --------------- ------------- -------------
(Loss)/profit for the period (11,575) 5,751 10,268
----------------------------------------- ------ --------------- ------------- -------------
(Losses)/earnings from continuing
operations per share attributable
to the owners of the parent:
----------------------------------------- ------ --------------- ------------- -------------
Basic (p) 8 (4.3) 2.5 5.4
----------------------------------------- ------ --------------- ------------- -------------
Diluted (p) 8 (4.2) 2.4 5.3
----------------------------------------- ------ --------------- ------------- -------------
(Losses)/earnings from all operations
per share attributable to the
owners of the parent:
----------------------------------------- ------ --------------- ------------- -------------
Basic (p) 8 (4.3) 2.1 3.8
----------------------------------------- ------ --------------- ------------- -------------
Diluted (p) 8 (4.2) 2.0 3.7
----------------------------------------- ------ --------------- ------------- -------------
Notes 1 to 24 are an integral part of these consolidated financial statements.
Unaudited Consolidated Statement of Comprehensive Income
Re- presented
(note 1.6)
Six months Six months
ended 31 ended 31 Year ended
October October 30 April
2020 2019 2020
GBP'000 GBP'000 GBP'000
---------------------------------------------- ------------- ---------------- -------------
(Loss)/profit for the period (11,575) 5,751 10,268
---------------------------------------------- ------------- ---------------- -------------
Items that are or may be reclassified
subsequently to the income statement:
---------------------------------------------- ------------- ----------------
Foreign currency translation differences
- foreign operations 433 (129) (1,435)
---------------------------------------------- ------------- ---------------- -------------
Total other comprehensive income/(expense)
for the period, net of income tax 433 (129) (1,435)
---------------------------------------------- ------------- ---------------- -------------
Total comprehensive (expense)/income
for the period (11,142) 5,622 8,833
---------------------------------------------- ------------- ---------------- -------------
Items in the above statements are disclosed net of tax. Notes 1 to 24 are an integral part of these consolidated financial statements.
Unaudited Consolidated Statement of Financial Position
Re-presented
(note 1.6)
31 October 31 October 30 April
2020 2019 2020
Notes GBP'000 GBP'000 GBP'000
------------------------------------------ ------ ----------- --------------- -----------
Non-current assets
------------------------------------------ ------ --------------- -----------
Intangible assets and goodwill 11 48,632 7,831 50,654
------------------------------------------ ------ --------------- -----------
Property, plant and equipment 12 78,481 80,214 83,775
------------------------------------------ ------ --------------- -----------
Investments 277 254 254
------------------------------------------ ------ --------------- -----------
Trade and other receivables 13 7,841 152 11,329
------------------------------------------ ------ --------------- -----------
Deferred tax asset 3,659 1,197 3,294
------------------------------------------ ------ ----------- --------------- -----------
Total non-current assets 138,890 89,648 149,306
------------------------------------------ ------ ----------- --------------- -----------
Current assets
------------------------------------------ ------ --------------- -----------
Current tax asset - 976 228
------------------------------------------ ------ --------------- -----------
Trade and other receivables 13 203,543 169,954 207,707
------------------------------------------ ------ --------------- -----------
Cash at bank and in hand 14 32,355 19,805 31,212
------------------------------------------ ------ ----------- --------------- -----------
Total current assets 235,898 190,735 239,147
------------------------------------------ ------ ----------- --------------- -----------
Total assets 374,788 280,383 388,453
------------------------------------------ ------ ----------- --------------- -----------
Current liabilities
------------------------------------------ ------ --------------- -----------
Trade and other payables 15 81,763 43,967 79,833
------------------------------------------ ------ --------------- -----------
Current tax liabilities 3,119 - 2,139
------------------------------------------ ------ --------------- -----------
Deferred consideration 3,505 2,512 8,982
------------------------------------------ ------ --------------- -----------
Lease liabilities 16 12,648 9,655 12,981
------------------------------------------ ------ --------------- -----------
Other interest-bearing loans
and borrowings 17 3,062 3,687 7,259
------------------------------------------ ------ --------------- -----------
Provisions 1,252 1,252 1,252
------------------------------------------ ------ --------------- -----------
Amounts due to Members of partnerships
in the Group 22 41,453 35,729 35,852
------------------------------------------ ------ ----------- --------------- -----------
Total current liabilities 146,802 96,802 148,298
------------------------------------------ ------ ----------- --------------- -----------
Non-current liabilities
------------------------------------------ ------ --------------- -----------
Deferred tax liability 8,708 588 8,884
------------------------------------------ ------ --------------- -----------
Deferred consideration - 610 -
------------------------------------------ ------ --------------- -----------
Lease liabilities 16 65,768 72,487 71,697
------------------------------------------ ------ --------------- -----------
Other interest-bearing loans
and borrowings 17 87,747 65,667 88,815
------------------------------------------ ------ --------------- -----------
Provisions 1,825 1,446 1,562
------------------------------------------ ------ ----------- --------------- -----------
Total non-current liabilities 164,048 140,798 170,958
------------------------------------------ ------ ----------- --------------- -----------
Total liabilities 310,850 237,600 319,256
------------------------------------------ ------ ----------- --------------- -----------
Net assets 63,938 42,783 69,197
------------------------------------------ ------ ----------- --------------- -----------
Equity
------------------------------------------ ------ --------------- -----------
Share capital 19 3,246 3,000 3,246
------------------------------------------ ------ --------------- -----------
Share premium 19 88,610 63,167 88,610
------------------------------------------ ------ --------------- -----------
Treasury shares 19 (20) - (20)
------------------------------------------ ------ --------------- -----------
Other reserves 10,949 2,372 5,861
------------------------------------------ ------ --------------- -----------
Accumulated losses (38,847) (25,756) (28,500)
------------------------------------------ ------ ----------- --------------- -----------
Total equity 63,938 42,783 69,197
------------------------------------------ ------ ----------- --------------- -----------
Notes 1 to 24 are an integral part of these consolidated financial statements.
Unaudited Consolidated Statement of Changes in Equity
Share-
Treasury Merger based payments Translation Accumulated Total
Share capital Share premium shares reserve reserve reserve losses equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- ---------
At 1 May 2019 3,000 63,167 - (2,385) 1,053 9 (23,046) 41,798
---------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- ---------
Adjustment
from the
adoption
of IFRS 16 - - - - - - (5,715) (5,715)
---------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- ---------
Restated at 1
May 2019 3,000 63,167 - (2,385) 1,053 9 (28,761) 36,083
---------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- ---------
Profit for the
period - - - - - - 5,751 5,751
---------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- ---------
Exchange rate
differences - - - - - (129) - (129)
---------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- ---------
Total
comprehensive
income - - - - - (129) 5,751 5,622
---------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- ---------
Dividends paid - - - - - - (2,746) (2,746)
---------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- ---------
Share-based
payments - - - - 3,824 - - 3,824
---------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- ---------
At 31 October
2019 3,000 63,167 - (2,385) 4,877 (120) (25,756) 42,783
---------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- ---------
Profit for the
period - - - - - - 4,517 4,517
---------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- ---------
Exchange rate
differences - - - - - (1,306) - (1,306)
---------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- ---------
Total
comprehensive
income - - - - - (1,306) 4,517 3,211
---------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- ---------
Treasury
shares - - (20) - - - - (20)
---------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- ---------
Issue of share
capital 246 25,443 - - - - - 25,689
---------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- ---------
Dividends paid - - - - - - (7,065) (7,065)
---------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- ---------
Share-based
payments - - - - 4,795 - - 4,795
---------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- ---------
Tax on
share-based
payments - - - - - - (196) (196)
---------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- ---------
At 30 April
2020 3,246 88,610 (20) (2,385) 9,672 (1,426) (28,500) 69,197
---------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- ---------
Unaudited Consolidated Statement of Changes in Equity (continued)
Share-
Treasury Merger based payments Translation Accumulated Total
Share capital Share premium shares reserve reserve reserve losses equity
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- ------------- ----------
At 1 May 2020 3,246 88,610 (20) (2,385) 9,672 (1,426) (28,500) 69,197
---------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- ------------- ----------
Loss for the
period - - - - - - (11,575) (11,575)
---------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- ------------- ----------
Exchange rate
differences - - - - - 433 - 433
---------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- ------------- ----------
Total
comprehensive
expense - - - - - 433 (11,575) (11,142)
---------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- ------------- ----------
Share-based
payments - - - - 4,655 - 1,135 5,790
---------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- ------------- ----------
Tax on
share-based
payments - - - - - - 93 93
---------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- ------------- ----------
At 31 October
2020 3,246 88,610 (20) (2,385) 14,327 (993) (38,847) 63,938
---------------- -------------------- -------------------- -------------------- -------------------- -------------------- -------------------- ------------- ----------
Notes 1 to 24 are an integral part of these consolidated financial statements.
Unaudited Consolidated Statement of Cash Flows
Re-presented
(note 1.6)
Six months Six months
ended 31 ended 31 Year ended
October October 30 April
2020 2019 2020
Note GBP'000 GBP'000 GBP'000
--------------------------------------------- ----- ------------- --------------- -------------
Cash flows from operating activities
--------------------------------------------- ------------- --------------- -------------
Cash generated from operations
before adjusting items 21a 32,938 4,100 24,158
--------------------------------------------- ------------- --------------- -------------
Cash used to settle non-underlying
items (8,026) (1,614) (10,501)
--------------------------------------------- ----- ------------- --------------- -------------
Cash generated from operations 24,912 2,486 13,657
--------------------------------------------- ------------- --------------- -------------
Interest paid (2,241) (2,097) (4,192)
--------------------------------------------- ------------- --------------- -------------
Tax paid (417) (3,020) (4,309)
--------------------------------------------- ----- ------------- --------------- -------------
Net cash used in operating activities 22,254 (2,631) 5,156
--------------------------------------------- ----- ------------- --------------- -------------
Cash flows from investing activities
--------------------------------------------- ------------- --------------- -------------
Acquisition of subsidiary, net
of cash acquired - 323 (3,853)
--------------------------------------------- ------------- --------------- -------------
Acquisition of subsidiary, deferred
consideration (5,467) (799) (2,859)
--------------------------------------------- ------------- --------------- -------------
Purchase of property, plant and
equipment (2,872) (1,611) (3,520)
--------------------------------------------- ------------- --------------- -------------
Purchase of other intangible assets (1,158) (859) (4,116)
--------------------------------------------- ------------- --------------- -------------
Net cash flows used in investing
activities (9,497) (2,946) (14,348)
--------------------------------------------- ----- ------------- --------------- -------------
Cash flows from financing activities
--------------------------------------------- ------------- --------------- -------------
Issue of ordinary shares, net of
issue costs - - (57)
--------------------------------------------- ------------- --------------- -------------
Dividends paid - (2,746) (9,811)
--------------------------------------------- ------------- --------------- -------------
Loan arrangement fee (128) - -
--------------------------------------------- ------------- --------------- -------------
Proceeds from borrowings 4,173 39,000 73,535
--------------------------------------------- ------------- --------------- -------------
Repayment of borrowings (9,294) (16,483) (24,913)
--------------------------------------------- ------------- --------------- -------------
Repayment of lease liabilities (6,618) (6,060) (12,654)
--------------------------------------------- ------------- --------------- -------------
Movement in supplier payments facility (146) (1,821) (1,973)
--------------------------------------------- ------------- --------------- -------------
Interest received 127 310 456
--------------------------------------------- ------------- --------------- -------------
Capital contributions by Members 2,640 617 5,938
--------------------------------------------- ------------- --------------- -------------
Repayments to former Members (2,625) (808) (3,386)
--------------------------------------------- ----- ------------- --------------- -------------
Net cash flows from financing activities (11,871) 12,009 27,135
--------------------------------------------- ----- ------------- --------------- -------------
Net increase in cash and cash equivalents 886 6,432 17,943
--------------------------------------------- ----- ------------- --------------- -------------
Cash and cash equivalents at the
beginning of period 28,727 10,822 10,822
--------------------------------------------- ----- ------------- --------------- -------------
Effects of foreign exchange rate
changes on cash and cash equivalents 133 146 (38)
--------------------------------------------- ----- ------------- --------------- -------------
Cash and cash equivalents at the
end of period 14 29,746 17,400 28,727
--------------------------------------------- ----- ------------- --------------- -------------
Notes 1 to 24 are an integral part of these consolidated financial statements.
Notes to the Financial Statements
1 Accounting policies 1.1 General information
DWF Group plc (the 'Company'), is a public limited company incorporated on 10 September 2018, domiciled in the United Kingdom under the Companies Act 2006, and registered in England. The registered office is 20 Fenchurch Street, London, EC3M 3AG, United Kingdom.
The principal activities of the Company and its subsidiary undertakings (together referred to as the 'Group') and the nature of the Group's operations are set out in the latest Annual Report and Financial Statements for the year ended 30 April 2020. The entire issued share capital of the Company was admitted to the premium listing segment of the official list of the Financial Conduct Authority and to trading on the Main Market of the London Stock Exchange on 15 March 2019.
The functional currency of the Group is considered to be British pounds sterling which reflects the currency of the primary economic environment in which the Group operates. The Group financial statements are also presented in British pounds sterling.
1.2 Basis of preparation
This condensed consolidated interim financial information ('Interim Information') was approved for issue by the Board of Directors on 9 December 2020.
The Interim Information is neither reviewed nor audited and does not comprise statutory accounts within the meaning of Section 434 of the Companies Act 2006. Statutory accounts for the year ended 30 April 2020 were approved by the Board of Directors on 7 September 2020 and subsequently filed with the Registrar. The report of the auditor on those accounts was unqualified, did not contain an emphasis of matter paragraph and did not contain any statement under Section 498 of the Companies Act 2006.
This Interim Information for the six months ended 31 October 2020 is prepared in accordance with the Disclosure and Transparency Rules of the Financial Conduct Authority and in accordance with IAS 34: Interim Financial Reporting as adopted by the European Union ('IAS 34'). The accounting policies, methods of computation and presentation are consistent with those presented in the most recent Annual Report and Financial Statements. The Interim Information should be read in conjunction with the Annual Report and Financial Statements for the year ended 30 April 2020 which have been prepared in accordance with International Financial Reporting Standards as adopted by the European Union ('IFRS'), and are available on the Group's website: www.dwfgroup. com.
No changes have been made to the Group's accounting policies in the period ended 31 October 2020.
The Group's forecast and projections, taking account of reasonably possible changes in trading performance, show that the Group will be able to operate within the level of its current banking facilities. The Directors have therefore adopted a going concern basis in preparing the Interim Information.
1.3 Non-underlying items
Non-underlying items are non-trading, non-cash or one-off items disclosed separately in the Consolidated Income Statement where management consider the quantum, nature or volatility of such items would distort the view of the underlying performance of the Group. The following are included by the Group in its assessment of non-underlying items:
-- Transaction expenses associated with acquisitions; -- Purchase price relating to acquisitions treated as remuneration; -- Expenses directly associated with COVID-19; -- IPO-related expenses;
-- Expenses and impairment charges associated with office closures or scale-back of operations; and
-- Costs associated with the change of CEO. 1.4 New or amended International Financial Reporting Standards and Interpretations adopted
The following IFRS have been issued and adopted by the Group in these consolidated financial statements. Their adoption did not have a material effect on the financial information unless otherwise indicated:
-- Amendment to IFRS 3, Business combinations -- Amendments to IFRS 9, IAS 39 and IFRS 7 - Interest rate benchmark reform -- Amendments to IFRS 16 Leases Covid 19 - Related rent concessions 1.5 Accounting estimates and judgement
The preparation of the financial statements under IFRSs requires management to make judgements, estimates and assumptions which affect the financial information. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant and are reviewed on an ongoing basis.
The key areas of judgements, estimates and assumptions relate to the fair value of unbilled revenue, impairment of trade receivables, professional indemnity provisions and control over ABS and non-ABS Groups.
Critical judgements in applying the Group's accounting policies
Control over the ABS and non-ABS Groups
Regulations in certain jurisdictions in which the Group is represented allow Alternative Business Structures (ABS) where legal firms can be owned by non-lawyers. This is not the case in other jurisdictions (non-ABS). As a result, DWF LLP, the head of the non-ABS Group, is not directly owned by any entity within the ABS Group (which includes the ultimate parent DWF Group plc). Consolidation of DWF LLP and the other non-ABS entities depends on the assessment of whether a member of the ABS Group is exposed, or has rights, to variable returns from its involvement with such entity and has the ability to affect those returns through its power over such entity. DWF LLP and the other non-ABS entities are consolidated in these financial statements on the basis of the Governance Deed adopted by the Group.
Professional indemnity insurance claims
There is significant judgement in the recognition and quantification of the liability associated with claims and regulatory proceedings. Recognition is based on the assessed likelihood of an individual claim's success. When the outflow is both probable and can be estimated reliably, a liability is recognised for the best estimate of the gross liability with a separate asset recognised for any portion that the Group will recover from its insurers. Where the payment is not probable or cannot be estimated reliably no liability is recognised. Gross liability is recognised in other payables and the related asset is recognised in other receivables in the consolidated statement of financial position.
Key sources of estimation uncertainty
The key assumptions concerning the future, and other key sources of estimation uncertainty at the reporting period that may have a significant risk of causing material adjustment of the carrying amounts of assets and liabilities within the next financial year, are discussed below.
Unbilled revenue
The valuation of unbilled revenue is based on an estimate of the amount expected to be recoverable from clients on unbilled matters based on the time spent at a rate which is defined by factors including time spent, the expertise and skills provided, and expenses incurred. Provision is made for such factors as historical recoverability rates, contingencies, the outcomes of previous matters and agreements with clients. Respective amounts are provided in note 13.
1.5 Accounting estimates and judgement (continued)
Trade receivables provision
The valuation of amounts recoverable and not recoverable on trade receivables involves significant estimation. The estimation of provisions is established based on interactions between finance, the fee earner and clients, mindful of the specific circumstances of clients and individual matters and invoices and guided by calculation rules applied to the aged population of all trade receivables (excluding those already addressed by more specific provisions). Bad debt provision amounting to GBP16,030,000 was provided at 31 October 2020 (31 October 2019: GBP8,012,000; 30 April 2020: GBP11,871,000).
IFRS 9: Financial instruments requires the expected credit losses to be measured using an unbiased and probability-weighted amount that is determined by evaluating a range of possible outcomes, the time value of money and reasonable and supportable information that is available without undue cost or effort at the reporting date about past events, current conditions and forecasts of future economic conditions. IFRS 9 allows practical expedients to be used when measuring credit losses. The Group has elected to use a provision matrix based on the ageing profile of debts and the historical credit loss rates adjusted by a forward-looking estimate that includes the probability of a worsening global economic environment and specific conditions to a particular client over the coming quarters.
1.6 Representation of prior period
The prior period results have been represented as follows:
Acquisition of K&L Gates Jamka sp.k - Poland
The provisionally recognised fair values disclosed in the October 2019 Interim Report were subsequently amended and finalised in April 2020. The principal adjustment was to increase the acquired non-current intangible assets resulting in a corresponding increase to gain on bargain purchase. The comparative half-year period is represented to reflect the finalised fair values recorded in April 2020.
Discontinuation of Cologne
On 30 April 2020, the Group disposed of the business of the Cologne office in Germany and the results of that business were reported in the FY20 full year as a discontinued operation. The comparative half-year period is represented to reflect this disposal.
The impact on the half-year comparative Consolidated Income Statement and Balance Sheet is as follows:
As previously
reported Re-presented
six months six months
ended 31 Discontinue ended 31
October Poland Cologne October
2019 Amendment (note 10) 2019
GBP'000 GBP'000 GBP'000 GBP'000
------------------------------------ ---------------- ------------- -------------- ---------------
Net revenue 146,793 - (1,585) 145,208
------------------------------------ ---------------- ------------- -------------- ---------------
Direct costs (73,088) - 1,092 (71,996)
Gross profit 73,705 - (493) 73,212
Administrative expenses (67,194) 2,419 1,417 (63,358)
------------------------------------ ---------------- ------------- -------------- ---------------
Operating profit 6,511 2,419 924 9,854
------------------------------------ ---------------- ------------- -------------- ---------------
Interest payable on leases (1,030) - - (1,030)
------------------------------------ ---------------- ------------- -------------- ---------------
Net finance expense (787) - - (787)
------------------------------------ ---------------- ------------- -------------- ---------------
Profit before tax 4,694 2,419 924 8,037
------------------------------------ ---------------- ------------- -------------- ---------------
Taxation (1,362) - - (1,362)
------------------------------------ ---------------- ------------- -------------- ---------------
Profit after tax from continuing
operations 3,332 2,419 924 6,675
------------------------------------ ---------------- ------------- -------------- ---------------
Loss from the discontinued
operations - - (924) (924)
------------------------------------ ---------------- ------------- -------------- ---------------
Profit for the period 3,332 2,419 - 5,751
------------------------------------ ---------------- ------------- -------------- ---------------
1.6 Representation of prior period
As previously
reported Discontinue Re-presented
at 31 October Poland Cologne at 31 October
2019 Amendment (note 10) 2019
GBP'000 GBP'000 GBP'000 GBP'000
---------------------------------- ----------------- ------------- -------------- -----------------
Non-current assets
---------------------------------- ----------------- ------------- -------------- -----------------
Intangible assets and goodwill 4,892 2,939 - 7,831
---------------------------------- ------------- -------------- -----------------
Property, plant and equipment 80,214 - - 80,214
---------------------------------- ------------- -------------- -----------------
Investments 254 - - 254
---------------------------------- ------------- -------------- -----------------
Trade and other receivables 152 - - 152
---------------------------------- ------------- -------------- -----------------
Deferred tax asset 1,197 - - 1,197
---------------------------------- ----------------- ------------- -------------- -----------------
Total non-current assets 86,709 2,939 - 89,648
---------------------------------- ----------------- ------------- -------------- -----------------
Current assets
---------------------------------- ------------- -------------- -----------------
Current tax asset 976 - - 976
---------------------------------- ------------- -------------- -----------------
Trade and other receivables 170,025 (71) - 169,954
---------------------------------- ------------- -------------- -----------------
Cash at bank and in hand 19,805 - - 19,805
---------------------------------- ----------------- ------------- -------------- -----------------
Total current assets 190,806 (71) - 190,735
---------------------------------- ----------------- ------------- -------------- -----------------
Total assets 277,515 2,868 - 280,383
---------------------------------- ----------------- ------------- -------------- -----------------
Current liabilities
---------------------------------- ------------- -------------- -----------------
Trade and other payables 44,108 (141) - 43,967
---------------------------------- ------------- -------------- -----------------
Deferred consideration 2,512 - - 2,512
---------------------------------- ------------- -------------- -----------------
Lease liabilities 9,655 - - 9,655
---------------------------------- ------------- -------------- -----------------
Other interest-bearing loans
and borrowings 3,687 - - 3,687
---------------------------------- ------------- -------------- -----------------
Provisions 1,252 - - 1,252
---------------------------------- ------------- -------------- -----------------
Amounts due to Members of
partnerships in the Group 35,729 - - 35,729
---------------------------------- ----------------- ------------- -------------- -----------------
Total current liabilities 96,943 (141) - 96,802
---------------------------------- ----------------- ------------- -------------- -----------------
Non-current liabilities
---------------------------------- ------------- -------------- -----------------
Deferred tax liability - 588 - 588
---------------------------------- ------------- -------------- -----------------
Deferred consideration 608 2 - 610
---------------------------------- ------------- -------------- -----------------
Lease liabilities 72,487 - - 72,487
---------------------------------- ------------- -------------- -----------------
Other interest-bearing loans
and borrowings 65,667 - - 65,667
---------------------------------- ------------- -------------- -----------------
Provisions 1,446 - - 1,446
---------------------------------- ----------------- ------------- -------------- -----------------
Total non-current liabilities 140,208 590 - 140,798
---------------------------------- ----------------- ------------- -------------- -----------------
Total liabilities 237,151 449 - 237,600
---------------------------------- ----------------- ------------- -------------- -----------------
Net assets 40,364 2,419 - 42,783
---------------------------------- ----------------- ------------- -------------- -----------------
Equity
---------------------------------- ------------- -------------- -----------------
Share capital 3,000 - - 3,000
---------------------------------- ------------- -------------- -----------------
Share premium 63,167 - - 63,167
---------------------------------- ------------- -------------- -----------------
Other reserves 2,372 - - 2,372
---------------------------------- ------------- -------------- -----------------
Accumulated losses (28,175) 2,419 - (25,756)
---------------------------------- ----------------- ------------- -------------- -----------------
Total equity 40,364 2,419 - 42,783
---------------------------------- ----------------- ------------- -------------- -----------------
Representation of Reporting Segments disclosure
In the six months to October 2020, the Group made changes to the operating segments reported to the CODM. In accordance with IFRS 8 Operating Segments, prior-period segment disclosure is represented in this report. This is described further in note 3.
2 Alternative performance measures
Alternative performance measures ('APM') are not intended to supplant IFRS measures. In line with investor feedback and to provide readers of the financial statements with additional understanding of the trading performance of the Group, adjusted earnings before interest, tax, depreciation and amortisation ('EBITDA') is calculated as profit before tax after adding back:
-- impairment; -- amortisation of intangible assets - acquired; -- non-underlying items; -- share-based payments expense; -- gain on bargain purchase; -- interest payable on leases; -- net finance expense; and -- other depreciation and amortisation.
Adjusted profit before tax, adjusted EBITDA and underlying adjusted EBITDA reconcile to profit on continuing activities before tax as follows:
Re-presented
(note 1.6)
Six months Six months
ended 31 ended 31 Year ended
October October 30 April
2020 2019 2020
GBP'000 GBP'000 GBP'000
----------------------------------------- ------------- --------------- -------------
Profit before tax (11,044) 8,037 18,198
--------------- -------------
Amortisation of intangible assets
- acquired 2,101 156 1,510
--------------- -------------
Impairment 369 - 382
--------------- -------------
Gain on bargain purchase - (2,772) (25,084)
--------------- -------------
Non-underlying items 12,457 1,050 7,632
Share-based payments expense 9,482 4,392 12,570
----------------------------------------- ------------- --------------- -------------
Adjusted profit before tax ('Adjusted
PBT') 13,365 10,863 15,208
----------------------------------------- --------------- -------------
Depreciation of right-of-use asset 5,967 5,456 11,580
----------------------------------------- --------------- -------------
Other depreciation and amortisation 3,223 2,933 6,175
----------------------------------------- --------------- -------------
Interest payable on leases 982 1,030 2,047
----------------------------------------- --------------- -------------
Net finance expense 1,132 787 1,905
----------------------------------------- ------------- --------------- -------------
Adjusted operating profit ('Adjusted
EBITDA') 24,669 21,069 36,915
----------------------------------------- ------------- --------------- -------------
2 Alternative performance measures (continued)
The cost-to-income ratio is used to assess the levels of operational gearing in the Group. The cost-to-income ratio is defined as administrative expenses less non-underlying items, impairment, amortisation of acquired intangible assets, gain on bargain purchase, and share-based payment expense and divided by net revenue.
The cost-to-income ratio is calculated as follows:
Re-presented
(note 1.6)
Six months Six months
ended 31 ended 31 Year ended
October October 30 April
2020 2019 2020
GBP'000 GBP'000 GBP'000
------------------------------------- ------------- --------------- -------------
Net revenue 167,563 145,208 297,231
--------------- -------------
Administrative expenses 92,052 63,358 120,084
------------------------------------- --------------- -------------
Amortisation of intangible assets
- acquired (2,101) (156) (1,510)
------------------------------------- --------------- -------------
Impairment (369) - (382)
------------------------------------- --------------- -------------
Gain on bargain purchase - 2,772 25,084
------------------------------------- --------------- -------------
Non-underlying items (12,457) (1,050) (7,632)
------------------------------------- --------------- -------------
Share-based payment expenses (9,482) (4,392) (12,570)
------------------------------------- --------------- -------------
Adjusted administrative expenses 67,643 60,532 123,074
------------------------------------- ------------- --------------- -------------
Cost-to-income ratio 40.4% 41.7% 41.4%
------------------------------------- ------------- --------------- -------------
The cost-to-income ratio as reported in the October 2019 Interim Report was 43.0%. The comparative in this report is represented to remove the impact of Cologne in line with note 1.6. The impact of IFRS 16 is now fully reflected in all periods.
3 Reporting segments
In accordance with IFRS 8: Operating Segments ('IFRS 8'), the Group's operating segments are based on the operating results reviewed by the Board, who represent the chief operating decision maker ('CODM'). The Group has the following five strategic divisions, which are its reportable segments. These divisions offer different services and are reported separately because of different specialisms from the teams in the business Group.
3 Reporting segments (continued)
The following summary describes the operations of each reportable segment:
Reportable segment Operations
Commercial Services Provides commercial legal services, encompassing
our Corporate Services, Litigation and
Real Estate practice groups.
Insurance Services Provides insurance legal services, encompassing
our Professional Indemnity & Commercial,
Catastrophic Personal Injury & Occupational
Health, and Motor, Fraud & Claimant practice
groups.
International* A division focused on supporting clients
on a global scale, with a sector-focused
approach to grow a client-orientated
practice.
Connected Services Encompasses various independent businesses
that work alongside, support and deliver
products and services to our legal teams
and clients.
Managed Services** Delivers outsourcing and process led
transformation of legal portfolios providing
a fully integrated, end-to-end outsourced
solution.
*During May 2020, the Northern Ireland and Republic of Ireland practice groups were transferred from International to Commercial Services and Insurance Services. The prior-period comparators have been represented to reflect this.
**From FY21 onwards, Managed Services is being reported and monitored as a separate division. This division encompasses the Mindcrest acquisition revenues and an element of revenue transferred from Commercial Services.
The revenue and operating profit are attributable to the principal activities of the Group.
For period ended 31 October 2020 - Reported
Commercial Insurance Connected Managed
Services Services International Services Services Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
---------------- ------------ ----------- --------------- ----------- ----------- ----------
Segment net
revenue 55,799 51,470 40,251 12,840 7,203 167,563
---------------- ----------- --------------- ----------- ----------- ----------
Direct costs (24,347) (25,896) (23,808) (7,307) (3,083) (84,441)
---------------- ------------ ----------- --------------- ----------- ----------- ----------
Gross profit 31,452 25,574 16,443 5,533 4,120 83,122
---------------- ------------ ----------- --------------- ----------- ----------- ----------
Gross margin
% 56.4% 49.7% 40.9% 43.1% 57.2% 49.6%
---------------- ------------ ----------- --------------- ----------- ----------- ----------
Administrative expenses (92,052)
-------------------------------------------------------------------------------------- ----------
Operating profit (8,930)
-------------------------------------------------------------------------------------- ----------
Interest payable on leases (982)
-------------------------------------------------------------------------------------- ----------
Net finance expense (1,132)
-------------------------------------------------------------------------------------- ----------
Profit before tax (11,044)
-------------------------------------------------------------------------------------- ----------
Taxation (531)
-------------------------------------------------------------------------------------- ----------
Profit from continuing operations (11,575)
-------------------------------------------------------------------------------------- ----------
3 Reporting segments (continued)
For period ended 31 October 2019 - Represented (note 1.6)
Commercial Insurance Connected Managed
Services Services International Services Services Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------- ------------ ----------- --------------- ----------- ----------- ----------
Segment net
revenue 57,754 50,198 25,511 10,763 982 145,208
--------------- ----------- --------------- ----------- ----------- ----------
Direct costs (24,361) (25,598) (14,741) (6,796) (500) (71,996)
--------------- ------------ ----------- --------------- ----------- ----------- ----------
Gross profit 33,393 24,600 10,771 3,967 482 73,212
--------------- ------------ ----------- --------------- ----------- ----------- ----------
Gross margin
% 57.8% 49.0% 42.2% 36.9% 49.1% 50.4%
--------------- ------------ ----------- --------------- ----------- ----------- ----------
Administrative expenses (63,358)
------------------------------------------------------------------------------------- ----------
Operating profit 9,854
------------------------------------------------------------------------------------- ----------
Interest payable on leases (1,030)
------------------------------------------------------------------------------------- ----------
Net finance expense (787)
------------------------------------------------------------------------------------- ----------
Profit before tax 8,037
------------------------------------------------------------------------------------- ----------
Taxation (1,362)
------------------------------------------------------------------------------------- ----------
Profit from continuing operations 6,675
------------------------------------------------------------------------------------- ----------
For year ended 30 April 2020 - Represented (note 1.6)
Commercial Insurance Connected Managed
Services Services International Services Services Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------- ------------ ----------- --------------- ----------- ----------- -----------
Segment net
revenue 107,515 100,575 64,323 20,861 3,957 297,231
--------------- ----------- --------------- ----------- ----------- -----------
Direct costs (48,246) (52,345) (38,641) (14,123) (1,642) (154,997)
--------------- ------------ ----------- --------------- ----------- ----------- -----------
Gross profit 59,269 48,230 25,682 6,738 2,315 142,234
--------------- ------------ ----------- --------------- ----------- ----------- -----------
Gross margin
% 55.1% 48.0% 39.9% 32.3% 58.5% 47.9%
--------------- ------------ ----------- --------------- ----------- ----------- -----------
Administrative expenses (120,084)
------------------------------------------------------------------------------------- -----------
Operating profit 22,150
------------------------------------------------------------------------------------- -----------
Net finance expense (3,952)
------------------------------------------------------------------------------------- -----------
Profit before tax 18,198
------------------------------------------------------------------------------------- -----------
Taxation (3,629)
------------------------------------------------------------------------------------- -----------
Profit from continuing operations 14,569
------------------------------------------------------------------------------------- -----------
There are no intra-segmental revenues which are material for disclosure. Administrative expenses represent non direct costs that are not specifically allocated to segments.
3 Reporting segments (continued)
Revenue by Region
The UK is the Group's country of domicile and the Group generates the majority of its revenue from external clients in the UK, albeit this continues to reduce over time as the Group geographically expands. The geographical analysis of revenue is on the basis of the country of origin in which the client is invoiced:
Represented
(note 1.6)
Six months Six months
ended 31 ended 31 Year ended
October October 30 April
2020 2019 2020
GBP'000 GBP'000 GBP'000
------------------------------------- ------------- -------------- -------------
UK 114,772 112,928 218,562
------------------------------------- -------------- -------------
Europe and Middle East (excluding
UK) 35,965 19,741 52,607
------------------------------------- -------------- -------------
Rest of World 16,826 12,539 26,062
------------------------------------- ------------- -------------- -------------
Net revenue 167,563 145,208 297,231
------------------------------------- ------------- -------------- -------------
Total assets and liabilities for each reportable segment are not presented as this information is not provided to the CODM.
4 Non-underlying items
The following items have been charged to the Income Statement during the period but are considered to be non-underlying in nature (note 1.3) so are shown separately:
Represented
(note 1.6)
Six months Six months
ended 31 ended 31 Year ended
October October 30 April
2020 2019 2020
GBP'000 GBP'000 GBP'000
---------------------------------------- ----------- -------------- -------------
Acquisition-related advisory fees
- successful 31 1,050 2,639
---------------------------------------- ----------- -------------- -------------
Acquisition-related advisory fees
- aborted - - 1,542
---------------------------------------- ----------- -------------- -------------
Acquisition-related remuneration
expense 5,010 - 2,876
---------------------------------------- ----------- -------------- -------------
COVID-19-related costs 1,011 - 230
---------------------------------------- ----------- -------------- -------------
Closure and scale-back of operations 5,394 - -
---------------------------------------- ----------- -------------- -------------
Costs associated with the change 1,011 - -
of CEO
---------------------------------------- ----------- -------------- -------------
IPO-related advisory fees - - 345
---------------------------------------- ----------- -------------- -------------
Total non-underlying items 12,457 1,050 7,632
---------------------------------------- ----------- -------------- -------------
COVID-19 related costs include, inter-alia, specialist cleaning and additional IT support costs that are non-recurring.
Closure and scale-back of operations relate to the board decision in July 2020 to close the Singapore and Brussels offices and to scale-back the operations in Dubai. These costs comprise of people and supplier exit expenses and the impairment of assets that are deemed irrecoverable as a result of the decision taken. Management do not consider the underlying financial performance of Singapore or Brussels to constitute a major separate line of operations. This is due to their relative size by reference to revenue and gross profit of the Group and so neither meets the definition of a discontinued operation.
Legal advisory fees of GBP0.3m are included in costs associated with the change of CEO.
5 Net finance expense and interest payable on leases
Six months Six months
ended 31 ended 31 Year ended
October October 30 April
2020 2019 2020
GBP'000 GBP'000 GBP'000
--------------------------------------- ------------- ------------- -------------
Finance income
--------------------------------------- ------------- ------------- -------------
Interest receivable 127 310 456
--------------------------------------- ------------- ------------- -------------
127 310 456
--------------------------------------- ------------- ------------- -------------
Finance expense - other
--------------------------------------- ------------- ------------- -------------
Interest payable on bank borrowings 925 654 1,655
--------------------------------------- ------------- ------------- -------------
Other interest payable 25 159 165
--------------------------------------- ------------- ------------- -------------
Bank and other charges 309 284 541
--------------------------------------- ------------- ------------- -------------
1,259 1,097 2,361
--------------------------------------- ------------- ------------- -------------
Net finance expense 1,132 787 1,905
--------------------------------------- ------------- ------------- -------------
Finance expense - leases
--------------------------------------- ------------- ------------- -------------
Interest payable on leases 982 1,030 2,047
--------------------------------------- ------------- ------------- -------------
982 1,030 2,047
--------------------------------------- ------------- ------------- -------------
6 Taxation
Six months
Six months ended 31 Year ended
ended 31 October 30 April
October 2020 2019 2020
GBP'000 GBP'000 GBP'000
------------------------------------------- ---------------- ------------- -------------
UK corporation tax on profit 275 1,421 4,746
------------------------------------------- ------------- -------------
Foreign tax on profit 443 4 1,347
------------------------------------------- ------------- -------------
Adjustments in respect of prior periods - 201 97
------------------------------------------- ---------------- ------------- -------------
Current tax expense 718 1,626 6,190
------------------------------------------- ---------------- ------------- -------------
Deferred tax credit (187) (264) (2,587)
------------------------------------------- ------------- -------------
Adjustments in respect of prior periods - - 26
------------------------------------------- ---------------- ------------- -------------
Deferred tax credit (187) (264) (2,561)
------------------------------------------- ---------------- ------------- -------------
Taxation 531 1,362 3,629
------------------------------------------- ---------------- ------------- -------------
7 Dividends
Distributions to owners of the parent in the period:
Six months Six months
ended 31 ended 31 Year ended
October October 30 April
2020 2019 2020
pence per pence per pence per
share share share
------------------------------------------------- ------------- ------------- -------------
Final dividends recognised as distributions
in the year - 1.00 1.00
------------------------------------------------- ------------- ------------- -------------
Interim dividends recognised as distributions
in the year - - 1.25
------------------------------------------------- ------------- ------------- -------------
Interim dividends recognised as distributions
in the year - - 1.25
------------------------------------------------- ------------- ------------- -------------
Total dividends paid in the period - 1.00 3.50
------------------------------------------------- ------------- ------------- -------------
Interim and final dividend proposed 1.50 1.25 0.75
------------------------------------------------- ------------- ------------- -------------
Six months Six months
ended 31 ended 31 Year ended
October October 30 April
2020 2019 2020
GBP'000 GBP'000 GBP'000
------------------------------------------------- ------------- ------------- -------------
Final dividends recognised as distributions
in the year - 2,746 2,746
------------------------------------------------- ------------- ------------- -------------
Interim dividends recognised as distributions
in the year - - 3,428
------------------------------------------------- ------------- ------------- -------------
Interim dividends recognised as distributions
in the year - - 3,637
------------------------------------------------- ------------- ------------- -------------
Total dividends paid in the period - 2,746 9,811
------------------------------------------------- ------------- ------------- -------------
Interim and final dividend proposed 4,868 3,428 2,434
------------------------------------------------- ------------- ------------- -------------
On 7 September 2020, the Board approved a final dividend for the year ended 30 April 2020 of 0.75 pence per share. The dividend was paid on 5 November 2020 to all shareholders on the Register of Members on 25 September 2020. The payment of this dividend did not have any tax consequences for the Group. The difference between the amount proposed in September (GBP2,434,000) and the amount actually paid in November (GBP2,162,000) is due to dividends waived.
An interim dividend for the year ending 30 April 2021 of 1.50 pence was approved by the board on 9 December 2020. The dividend will be paid on 5 March 2021 to all shareholders on the Register of Members on 29 January 2021.
8 Earnings per share
The calculation of the basic and diluted earnings per share is based on the following data:
Six months Six months
ended 31 ended 31 Year ended
October October 30 April
2020 2019 2020
GBP'000 GBP'000 GBP'000
---------------------------------------------- -------------- -------------- --------------
Earnings from continuing operations
for the purpose of basic earnings
per share (11,575) 6,675 14,569
---------------------------------------------- -------------- -------------- --------------
Earnings from all operations for the
purpose of basic earnings per share (11,575) 5,751 10,268
---------------------------------------------- -------------- -------------- --------------
Number Number Number
---------------------------------------------- -------------- -------------- --------------
Weighted average number of ordinary
shares for the purposes of basic earnings
per share 268,916,483 269,309,091 271,406,294
---------------------------------------------- -------------- --------------
Effect of dilutive potential ordinary
shares:
Future exercise of share awards and
options 4,384,890 13,990,578 5,087,543
---------------------------------------------- -------------- -------------- --------------
Weighted average number of ordinary
shares for the purposes of diluted
earnings per share 273,301,373 283,299,669 276,493,837
---------------------------------------------- -------------- -------------- --------------
Earnings from continuing operations
per share attributable to the owners
of the parent:
---------------------------------------------- -------------- -------------- --------------
Basic earnings per share (p) (4.3) 2.5 5.4
---------------------------------------------- -------------- -------------- --------------
Diluted earnings per share (p) (4.2) 2.4 5.3
---------------------------------------------- -------------- -------------- --------------
Earnings from all operations per share
attributable to the owners of the
parent:
---------------------------------------------- -------------- -------------- --------------
Basic earnings per share (p) (4.3) 2.1 3.8
---------------------------------------------- -------------- -------------- --------------
Diluted earnings per share (p) (4.2) 2.0 3.7
---------------------------------------------- -------------- -------------- --------------
Adjusted earnings per share is included as an 'APM'. Adjusted earnings per share is not presented in accordance with IAS 33: Earnings per share. Adjusted earnings per share is calculated using adjusted earnings calculated as profit after taxation but before:
-- non-underlying items; -- share-based payments expense; -- gain on bargain purchase; -- amortisation of acquired intangible assets; -- impairment; and -- the tax effect of the above items. 8 Earnings per share (continued)
The calculation of adjusted basic and adjusted diluted earnings per share is based on:
Re-presented
(note 1.6)
Six months Six months
ended 31 ended 31 Year ended
October October 30 April
2020 2019 2020
GBP'000 GBP'000 GBP'000
----------------------------------------- -------------- --------------- --------------
Earnings from continuing operations
for the purpose of adjusted earnings
per share (11,575) 6,675 14,569
----------------------------------------- --------------- --------------
Add/(remove):
Impairment 369 - 382
---------------
Amortisation of intangible assets
- acquired 2,101 156 1,510
--------------- --------------
Gain on bargain purchase - (2,772) (25,084)
--------------- --------------
Non-underlying items 12,457 1,050 7,632
--------------- --------------
Share-based payments expense 9,482 4,392 12,570
--------------- --------------
Tax effect of adjustments above (1,851) (747) (2,394)
--------------- --------------
Adjusted earnings for the purposes
of adjusted earnings per share 10,983 8,754 9,185
----------------------------------------- -------------- --------------- --------------
Number Number Number
----------------------------------------- -------------- --------------- --------------
Weighted average number of ordinary
shares for the purposes of adjusted
earnings per share 268,916,483 269,309,091 271,406,294
----------------------------------------- --------------- --------------
Add:
--------------- --------------
Additional shares held in trust 34,592,625 16,700,331 31,400,161
----------------------------------------- -------------- --------------- --------------
Weighted average number of ordinary
shares for the purposes of adjusted
basic earnings per share 303,509,108 286,009,422 302,806,455
----------------------------------------- -------------- --------------- --------------
Effect of dilutive potential ordinary
shares:
Future exercise of share awards and
options 4,384,890 13,990,578 5,087,543
----------------------------------------- -------------- --------------- --------------
Weighted average number of ordinary
shares for the purposes of adjusted
diluted earnings per share 307,893,998 300,000,000 307,893,998
----------------------------------------- -------------- --------------- --------------
Adjusted basic earnings per share
(p) 3.6 3.1 3.0
----------------------------------------- -------------- --------------- --------------
Adjusted diluted earnings per share
(p) 3.6 2.9 3.0
----------------------------------------- -------------- --------------- --------------
Tax adjustments of GBP1,851,000 (31 October 2019: GBP747,000; 30 April 2020: GBP2,394,000) have been made in arriving at the adjusted earnings per share. The tax charge is largely driven by the UK corporation tax rate of 19% adjusted upwards to take into account the effect of non-deductible expenses and higher overseas tax rates in certain territories.
Shares held in trust are i) issued shares that are owned by the EBT and RST and are recognised, on consolidation, as treasury shares; less ii) the future exercise of share awards and options.
9 Acquisitions of subsidiaries
Acquisitions in the six months to 31 October 2020
There were no acquisitions during the period.
10 Discontinued operations
On 30 April 2020, the Group disposed of the business of the Cologne office in Germany and the results of that business were reported in the year ended 30 April 2020 as a discontinued operation. Financial information relating to the discontinued operations for the comparative periods is set out below.
Six months Six months
ended 31 ended 31 Year ended
October October 30 April
2020 2019 2020
Notes GBP'000 GBP'000 GBP'000
------------------------------------- ------- -------------- ------------- -------------
Net revenue - 1,585 3,171
---------------------------------------------- ------------- ------------- -------------
Direct costs - (1,092) (2,184)
---------------------------------------------- ------------- ------------- -------------
Gross profit - 493 987
---------------------------------------------- ------------- ------------- -------------
Administrative expenses - (1,417) (5,288)
---------------------------------------------- ------------- ------------- -------------
Operating loss - (924) (4,301)
---------------------------------------------- ------------- ------------- -------------
Interest payable on leases - - -
------------------------------------- -------------- ------------- -------------
Net finance expense - - -
------------------------------------- ------- -------------- ------------- -------------
Loss before tax - (924) (4,301)
---------------------------------------------- ------------- ------------- -------------
Taxation - - -
------------------------------------- ------- -------------- ------------- -------------
Loss from discontinued operations - (924) (4,301)
---------------------------------------------- ------------- ------------- -------------
11 Intangible assets and goodwill
Acquired
---------------------------
Capitalised
Customer Software development
Goodwill relationships Brand costs costs Total
Represented (note GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
1.6)
------------------------- ---------- ---------------- --------- ---------- -------------- ---------
Cost
------------------------- ---------- --------- ---------- -------------- ---------
At 1 May 2019 2,589 - - 1,580 3,260 7,429
------------------------- ---------- --------- ---------- -------------- ---------
Additions through
acquisitions - 3,095 - - - 3,095
------------------------- ---------- --------- ---------- -------------- ---------
Additions - internally
developed - - - - 729 729
------------------------- ---------- --------- ---------- -------------- ---------
Additions - externally
purchased - - - 130 - 130
------------------------- ---------- --------- ---------- -------------- ---------
Effect of movements
in foreign exchange (26) - - - - (26)
------------------------- ---------- ---------------- --------- ---------- -------------- ---------
At 31 October
2019 2,563 3,095 - 1,710 3,989 11,357
------------------------- ---------- ---------------- --------- ---------- -------------- ---------
Amortisation
and impairment
------------------------- ---------- --------- ---------- -------------- ---------
At 1 May 2019 319 - - 538 2,031 2,888
------------------------- ---------- --------- ---------- -------------- ---------
Amortisation
for the period - 156 - 222 261 639
------------------------- ---------- --------- ---------- -------------- ---------
Effect of movements
in foreign exchange (1) - - - - (1)
------------------------- ---------- --------- ---------- -------------- ---------
At 31 October
2019 318 156 - 760 2,292 3,526
------------------------- ---------- ---------------- --------- ---------- -------------- ---------
Net book value
------------------------- ---------- ---------------- --------- ---------- -------------- ---------
At 31 October
2019 2,245 2,939 - 950 1,697 7,831
------------------------- ---------- ---------------- --------- ---------- -------------- ---------
At 1 May 2019 2,270 - - 1,042 1,229 4,541
------------------------- ---------- ---------------- --------- ---------- -------------- ---------
11 Intangible assets and goodwill (continued)
Acquired
---------------------------
Capitalised
Customer Software development
Goodwill relationships Brand costs costs Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------- ---------- ---------------- --------- ---------- -------------- ---------
Cost
------------------------- ---------- --------- ---------- -------------- ---------
At 31 October
2019 2,563 3,095 - 1,710 3,989 11,357
------------------------- ---------- --------- ---------- -------------- ---------
Additions through
acquisitions 9,126 32,315 1,685 35 - 43,161
------------------------- ---------- --------- ---------- -------------- ---------
Additions - internally
developed - - - - 3,094 3,094
------------------------- ---------- --------- ---------- -------------- ---------
Additions - externally
purchased - - - 163 - 163
------------------------- ---------- --------- ---------- -------------- ---------
Effect of movements
in foreign exchange 2 (199) - 15 - (182)
------------------------- ---------- ---------------- --------- ---------- -------------- ---------
At 30 April 2020 11,691 35,211 1,685 1,923 7,083 57,593
------------------------- ---------- ---------------- --------- ---------- -------------- ---------
Amortisation
and impairment
------------------------- ---------- --------- ---------- -------------- ---------
At 31 October
2019 318 156 - 760 2,292 3,526
------------------------- ---------- --------- ---------- -------------- ---------
Amortisation
for the period - 1,195 159 247 774 2,375
------------------------- ---------- --------- ---------- -------------- ---------
Impairment 1,036 - - - - 1,036
------------------------- ---------- --------- ---------- -------------- ---------
Effect of movements
in foreign exchange 2 - - - - 2
------------------------- ---------- --------- ---------- -------------- ---------
At 30 April 2020 1,356 1,351 159 1,007 3,066 6,939
------------------------- ---------- ---------------- --------- ---------- -------------- ---------
Net book value
------------------------- ---------- ---------------- --------- ---------- -------------- ---------
At 30 April 2020 10,335 33,860 1,526 916 4,017 50,654
------------------------- ---------- ---------------- --------- ---------- -------------- ---------
At 31 October
2019 2,245 2,939 - 950 1,697 7,831
------------------------- ---------- ---------------- --------- ---------- -------------- ---------
Acquired
---------------------------
Capitalised
Customer Software development
Goodwill relationships Brand costs costs Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------------- ---------- ---------------- --------- ---------- -------------- ---------
Cost
------------------------- ---------- --------- ---------- -------------- ---------
At 1 May 2020 11,691 35,211 1,685 1,923 7,083 57,593
------------------------- ---------- --------- ---------- -------------- ---------
Additions - internally
developed - - - - 785 785
------------------------- ---------- --------- ---------- -------------- ---------
Additions - externally
purchased - - - 373 - 373
------------------------- ---------- --------- ---------- -------------- ---------
Effect of movements
in foreign exchange - - - (13) - (13)
------------------------- ---------- ---------------- --------- ---------- -------------- ---------
At 31 October
2020 11,691 35,211 1,685 2,283 7,868 58,738
------------------------- ---------- ---------------- --------- ---------- -------------- ---------
Amortisation
and impairment
------------------------- ---------- --------- ---------- -------------- ---------
At 1 May 2020 1,356 1,351 159 1,007 3,066 6,939
------------------------- ---------- --------- ---------- -------------- ---------
Amortisation
for the period - 1,784 317 281 779 3,161
------------------------- ---------- --------- ---------- -------------- ---------
Impairment - - - 2 - 2
------------------------- ---------- --------- ---------- -------------- ---------
Effect of movements
in foreign exchange - - - 4 - 4
------------------------- ---------- --------- ---------- -------------- ---------
At 31 October
2020 1,356 3,135 476 1,294 3,845 10,106
------------------------- ---------- ---------------- --------- ---------- -------------- ---------
Net book value
------------------------- ---------- ---------------- --------- ---------- -------------- ---------
At 31 October
2020 10,335 32,076 1,209 989 4,023 48,632
------------------------- ---------- ---------------- --------- ---------- -------------- ---------
At 1 May 2020 10,335 33,860 1,526 916 4,017 50,654
------------------------- ---------- ---------------- --------- ---------- -------------- ---------
12 Property, plant and equipment
Office
equipment
Right-of-use Leasehold and fixtures Computer
asset improvements and fittings equipment Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------------------- -------------- --------------- --------------- ------------ ---------
Cost
--------------------------------- --------------- --------------- ------------ ---------
At 1 May 2019 - 16,230 10,944 36,971 64,145
--------------------------------- --------------- --------------- ------------ ---------
Adjustment on transition
to IFRS 16 70,342 - - - 70,342
--------------------------------- --------------- --------------- ------------ ---------
Additions through acquisitions - - 300 1 301
--------------------------------- --------------- --------------- ------------ ---------
Additions 1,877 34 274 1,303 3,488
--------------------------------- --------------- --------------- ------------ ---------
Effect of movements in
foreign exchange (67) 18 15 - (34)
--------------------------------- -------------- --------------- --------------- ------------ ---------
At 31 October 2019 72,152 16,282 11,533 38,275 138,242
--------------------------------- -------------- --------------- --------------- ------------ ---------
Accumulated depreciation
--------------------------------- --------------- --------------- ------------ ---------
At 1 May 2019 - 11,665 6,051 32,397 50,113
--------------------------------- --------------- --------------- ------------ ---------
Charge for the period 5,456 529 613 1,308 7,906
--------------------------------- --------------- --------------- ------------ ---------
Effect of movements in
foreign exchange - 2 2 5 9
--------------------------------- -------------- --------------- --------------- ------------ ---------
At 31 October 2019 5,456 12,196 6,666 33,710 58,028
--------------------------------- -------------- --------------- --------------- ------------ ---------
Net book value
--------------------------------- -------------- --------------- --------------- ------------ ---------
At 31 October 2019 66,696 4,086 4,867 4,565 80,214
--------------------------------- -------------- --------------- --------------- ------------ ---------
At 1 May 2019 - 4,565 4,893 4,574 14,032
--------------------------------- -------------- --------------- --------------- ------------ ---------
Office
equipment
Right-of-use Leasehold and fixtures Computer
asset improvements and fittings equipment Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------------------- -------------- --------------- --------------- ------------ ---------
Cost
--------------------------------- --------------- --------------- ------------ ---------
At 31 October 2019 72,152 16,282 11,533 38,275 138,242
--------------------------------- --------------- --------------- ------------ ---------
Additions through acquisitions 6,246 324 292 232 7,094
--------------------------------- --------------- --------------- ------------ ---------
Additions 2,772 151 477 1,281 4,681
--------------------------------- --------------- --------------- ------------ ---------
Effect of movements in
foreign exchange 67 25 (20) 50 122
--------------------------------- -------------- --------------- --------------- ------------ ---------
At 30 April 2020 81,237 16,782 12,282 39,838 150,139
--------------------------------- -------------- --------------- --------------- ------------ ---------
Accumulated depreciation
--------------------------------- --------------- --------------- ------------ ---------
At 31 October 2019 5,456 12,196 6,666 33,710 58,028
--------------------------------- --------------- --------------- ------------ ---------
Charge for the period 6,124 542 524 1,155 8,345
--------------------------------- --------------- --------------- ------------ ---------
Effect of movements in
foreign exchange - (2) (2) (5) (9)
--------------------------------- -------------- --------------- --------------- ------------ ---------
At 30 April 2020 11,580 12,736 7,188 34,860 66,364
--------------------------------- -------------- --------------- --------------- ------------ ---------
Net book value
--------------------------------- -------------- --------------- --------------- ------------ ---------
At 30 April 2020 69,657 4,046 5,094 4,978 83,775
--------------------------------- -------------- --------------- --------------- ------------ ---------
At 31 October 2019 66,696 4,086 4,867 4,565 80,214
--------------------------------- -------------- --------------- --------------- ------------ ---------
12 Property, plant and equipment (continued)
Office
equipment
Right-of-use Leasehold and fixtures Computer
asset improvements and fittings equipment Total
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------------------- --------------- --------------- --------------- ------------ ---------
Cost
--------------------------- --------------- --------------- ------------ ---------
At 1 May 2020 81,237 16,782 12,282 39,838 150,139
--------------------------- --------------- --------------- ------------ ---------
Additions 13 1,621 144 1,094 2,872
--------------------------- --------------- --------------- ------------ ---------
Effect of movements in
foreign exchange 331 - - - 331
--------------------------- --------------- --------------- --------------- ------------ ---------
At 31 October 2020 81,581 18,403 12,426 40,932 153,342
--------------------------- --------------- --------------- --------------- ------------ ---------
Accumulated depreciation
--------------------------- --------------- --------------- ------------ ---------
At 1 May 2020 11,580 12,736 7,188 34,860 66,364
--------------------------- --------------- --------------- ------------ ---------
Charge for the period 5,967 518 460 1,185 8,130
--------------------------- --------------- --------------- ------------ ---------
Impairment - - 239 128 367
--------------------------- --------------- --------------- ------------ ---------
At 31 October 2020 17,547 13,254 7,887 36,173 74,861
--------------------------- --------------- --------------- --------------- ------------ ---------
Net book value
--------------------------- --------------- --------------- --------------- ------------ ---------
At 31 October 2020 64,034 5,149 4,539 4,759 78,481
--------------------------- --------------- --------------- --------------- ------------ ---------
At 1 May 2020 69,657 4,046 5,094 4,978 83,775
--------------------------- --------------- --------------- --------------- ------------ ---------
13 Trade and other receivables
31 October 31 October 30 April
2020 2019 2020
GBP'000 GBP'000 GBP'000
--------------------------------------- ----------- ------------- -----------
Trade receivables (net of allowance
for doubtful receivables) 93,334 80,013 108,727
--------------------------------------- ------------- -----------
Other receivables 2,741 3,645 4,950
--------------------------------------- ------------- -----------
Amounts recoverable from clients in
respect of unbilled revenue 76,301 69,706 64,379
--------------------------------------- ------------- -----------
Unbilled disbursements 9,077 6,273 8,501
--------------------------------------- ------------- -----------
Prepayments and accrued income 21,238 9,465 20,298
--------------------------------------- ------------- -----------
Reimbursement asset attributable to
the FOIL provision 852 852 852
--------------------------------------- ----------- ------------- -----------
203,543 169,954 207,707
--------------------------------------- ----------- ------------- -----------
Non-current
Other receivables 152 152 152
--------------------------------------- -------------
Prepayments and accrued income 7,689 - 11,177
--------------------------------------- ------------- -----------
7,841 152 11,329
--------------------------------------- ----------- ------------- -----------
Current prepayments and accrued income include GBP9,891,000 (31 October 2019: GBPnil; 30 April 2020: GBP10,293,000) and non-current prepayments and accrued income include GBP7,689,000 (31 October 2019: GBPnil; 30 April 2020: GBP11,177,000) both relating to acquisition-related remuneration expense.
14 Cash and cash equivalents
31 October 31 October 30 April
2020 2019 2020
GBP'000 GBP'000 GBP'000
------------------------------------------- ------------- -------------- -----------
Cash at bank and in hand 32,355 19,805 31,212
Bank overdrafts (note 17) (2,609) (2,405) (2,485)
------------------------------------------- ------------- -------------- -----------
Cash and cash equivalents per Statement
of Cash Flows 29,746 17,400 28,727
------------------------------------------- ------------- -------------- -----------
15 Trade and other payables
Re-presented
(note 1.6)
31 October 31 October 30 April
2020 2019 2020
GBP'000 GBP'000 GBP'000
--------------------------------------- ----------- --------------- -----------
Trade payables 26,514 22,988 26,779
--------------------------------------- ----------- --------------- -----------
Other taxation and social security 25,275 10,428 26,224
--------------------------------------- ----------- --------------- -----------
Accruals, deferred income and other
payables 29,974 10,551 26,830
--------------------------------------- ----------- --------------- -----------
81,763 43,967 79,833
--------------------------------------- ----------- --------------- -----------
Accruals and deferred income include GBP1,662,000 (31 October 2019: GBPnil; 30 April 2020: GBP1,758,000) relating to acquisition-related remuneration expense.
16 Lease liabilities
31 October 31 October 30 April
2020 2019 2020
GBP'000 GBP'000 GBP'000
------------------------------------------------- ------------- ------------- -----------
1 May 2020 84,678 86,389 87,302
------------------------------------------------- ------------- -----------
Additions 13 1,877 9,832
------------------------------------------------- ------------- -----------
Interest expense related to lease liabilities 982 1,030 2,047
Net foreign currency translation loss 343 (64) 198
Repayment of lease liabilities (including
interest) (7,600) (7,090) (14,701)
------------------------------------------------- ------------- ------------- -----------
31 October 2020 78,416 82,142 84,678
------------------------------------------------- ------------- ------------- -----------
Current lease liabilities 12,648 9,655 12,981
--------------------------------- --------- ---------
Non-current lease liabilities 65,768 72,487 71,697
--------------------------------- --------- --------- ---------
78,416 82,142 84,678
--------------------------------- --------- --------- ---------
16 Lease liabilities (continued)
The maturity of lease liabilities at 31 October 2020 were as follows:
31 October 31 October 30 April
2020 2019 2020
Lease payments GBP'000 GBP'000 GBP'000
Period to 30 April 2020 - 6,913 -
------------------------------------------ ------------- ------------- -----------
Period to 30 April 2021 7,396 12,593 14,842
------------------------------------------
Year to 30 April 2022 13,851 11,668 13,753
------------------------------------------
Year to 30 April 2023 13,086 10,945 13,004
------------------------------------------
Year to 30 April 2024 11,342 9,611 11,286
------------------------------------------
Year to 30 April 2025 9,884 - -
------------------------------------------
Later years 29,898 38,873 39,702
------------------------------------------ ------------- ------------- -----------
85,457 90,603 92,587
------------------------------------------ ------------- ------------- -----------
Effect of discounting (6,952) (8,479) (7,930)
Effect of movement in foreign currency
translation rates (89) 18 21
------------------------------------------ ------------- ------------- -----------
Closing lease liability 78,416 82,142 84,678
------------------------------------------ ------------- ------------- -----------
17 Other interest-bearing loans and borrowings
Obligations under interest-bearing loans and borrowings
31 October 31 October 30 April
2020 2019 2020
GBP'000 GBP'000 GBP'000
------------------------------------- ------------- -------------- -----------
Current liabilities
------------------------------------- -------------- -----------
Bank loans 289 820 4,464
------------------------------------- -------------- -----------
Supplier payments facility 164 462 310
-------------- -----------
Bank overdrafts 2,609 2,405 2,485
------------------------------------- ------------- -------------- -----------
3,062 3,687 7,259
------------------------------------- ------------- -------------- -----------
Non-current liabilities
------------------------------------- -------------- -----------
Bank loans 88,120 66,154 89,194
------------------------------------- ------------- -------------- -----------
Capitalised loan arrangement fees (373) (487) (379)
------------------------------------- ------------- -------------- -----------
87,747 65,667 88,815
------------------------------------- ------------- -------------- -----------
90,809 69,354 96,074
------------------------------------- ------------- -------------- -----------
17 Other interest-bearing loans and borrowings (continued)
Analysis of cash and cash equivalents and other interest-bearing loans and borrowings:
Exchange Non-cash 31 October
1 May 2020 Cash flow movement movement 2020
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------------------- ------------- ------------ ------------ ------------ -------------
Cash and cash equivalents 28,727 886 133 - 29,746
----------------------------- ------------ ------------ ------------ -------------
Bank loans (93,279) 5,249 - (6) (88,036)
----------------------------- ------------ ------------ ------------ -------------
Supplier payments
facility (310) 146 - - (164)
----------------------------- ------------- ------------ ------------ ------------ -------------
Total net debt (excluding
IFRS 16) (64,862) 6,281 133 (6) (58,454)
----------------------------- ------------- ------------ ------------ ------------ -------------
Exchange Non-cash 31 October
1 May 2019 Cash flow movement movement 2019
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------------------- ------------- ------------ ------------ ------------ -------------
Cash and cash equivalents 10,822 6,432 146 - 17,400
----------------------------- ------------ ------------ ------------ -------------
Bank loans (43,851) (22,517) (11) (108) (66,487)
----------------------------- ------------ ------------ ------------ -------------
Supplier payments
facility (2,283) 1,821 - - (462)
----------------------------- ------------- ------------ ------------ ------------ -------------
Total net debt (excluding
IFRS 16) (35,312) (14,264) 135 (108) (49,549)
----------------------------- ------------- ------------ ------------ ------------ -------------
Exchange Non-cash 30 April
1 May 2019 Cash flow movement movement 2020
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
----------------------------- ------------- ------------ ------------ ------------ -----------
Cash and cash equivalents 10,822 17,943 (38) - 28,727
----------------------------- ------------ ------------ ------------ -----------
Bank loans (43,851) (48,622) - (806) (93,279)
----------------------------- ------------ ------------ ------------ -----------
Supplier payments
facility (2,283) 1,973 - - (310)
----------------------------- ------------- ------------ ------------ ------------ -----------
Total net debt (excluding
IFRS 16) (35,312) (28,706) (38) (806) (64,862)
----------------------------- ------------- ------------ ------------ ------------ -----------
18 Financial instruments
Financial risk management
The Directors have overall responsibility for the oversight of the Group's risk management framework. Further explanation on management of risk factors is provided in the risk section of the Annual Report and Financial Statements for the year ended 30 April 2020.
The Group's principal financial instruments comprise trade and other receivables, unbilled revenue, cash and cash equivalents, trade and other payables, bank borrowings and capital contributions from members.
Credit risk
Credit risk is the risk of financial loss to the Group if a client or counterparty to a financial instrument fails to meet its contractual obligations and arises principally from the Group's receivables. Credit checks are performed for most new clients and ongoing monitoring takes place for existing clients.
Liquidity risk
Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group maintains sufficient cash or working capital facilities to meet the cash requirements of the Group in order to mitigate this risk.
18 Financial instruments (continued)
The Group is financed through a combination of partners' capital (repayable on retirement of the Member), undistributed profits, cash and bank borrowing facilities.
Banking facilities, which in addition to a contingency facility of GBP15m and various ancillary facilities, include a rolling credit facility of GBP80m that matures in January 2022 (with an additional one year extension available to the Company to January 2023) are considered to be sufficient for the Group's purposes based on current projections. It is assumed that these facilities will be renewed successfully in 2021. The Group expects to operate within the banking covenant parameters for the forecast period.
The directors consider going concern in the twice-yearly reporting cycle and short-term cash flows are monitored on a monthly basis. All results and forecasts confirm full covenant compliance and sufficient resources to settle liabilities as they fall due. Base case budget and forecast assumptions for FY21, and medium-term modelling assumptions for FY22 and beyond, reflect that the Group will operate in compliance with covenants and with sufficient cash and access to banking facilities to meet all obligations as they fall due.
The timing of the HY21 interim results announcement has given the Directors visibility of trading performance and cash flows for November and both profit and cash generation have continued to improve in this month alongside the trend in the half year.
The Directors are of the view that the strong trading performance in recent months and the availability of additional cash and cost mitigations in the event of further headwinds give confidence in the ongoing viability of the Group. Mitigations available to the Group include further cost cutting measures including bonus payments, deferral of certain outflows, and review of the dividend policy and reassessment of capital expenditure.
Market risk
Market risk is the risk that changes in market prices, such as foreign exchange rates and interest rates, will affect the Group's income. The Group's exposure to market risk predominantly relates to interest and currency risk.
Interest rate risk
The Group's bank borrowings incur both fixed and variable interest charges. The variable rates are linked to LIBOR or EURIBOR plus a margin.
Foreign currency risk
The Group has overseas operations in Europe, Middle East, Asia, Australia, Canada and North America and is therefore exposed to changes in the respective currencies in these territories. The Group maintains bank balances in local currency. Cash positions are monitored and any imbalances are dealt with by purchasing currency at the spot rate.
19 Share capital
Ordinary Treasury
Number shares Share premium shares Total
of 1p each GBP'000 GBP'000 GBP'000 GBP'000
----------------------------- -------------- ----------- ---------------- ------------- ----------
Issued and fully
paid ordinary shares
----------------------------- -------------- ----------- ---------------- ----------
At 31 October 2019 300,000,000 3,000 63,167 - 66,167
----------------------------- -------------- ----------- ---------------- ------------- ----------
Shares issued in
acquisition of Rousaud
Costas Duran S.L.P.U 19,525,927 195 19,037 (20) 19,212
----------------------------- -------------- ----------- ---------------- ----------
Shares issued in
acquisition of Mindcrest
Inc. 5,028,726 51 6,406 - 6,457
----------------------------- -------------- ----------- ---------------- ------------- ----------
At 30 April 2020 324,554,653 3,246 88,610 (20) 91,836
----------------------------- -------------- ----------- ---------------- ------------- ----------
At 31 October 2020 324,554,653 3,246 88,610 (20) 91,836
----------------------------- -------------- ----------- ---------------- ------------- ----------
20 Related parties and ultimate controlling party
By virtue of being on the Executive Boards of DWF Law LLP and DWF LLP, Jason Ford is a related party of the Company. In July 2017, July 2018, July 2019 and July 2020, loan agreements (the "July 2017 Loan Agreement", "July 2018 Loan Agreement", "July 2019 Loan Agreement" and "July 2020 Loan Agreement", respectively) were made between DWF LLP (in 2017 and 2018) and DWF Law LLP (in 2019 and 2020) and six former directors of Triton Global Limited, including Jason Ford (who at the time of the agreements was a member of DWF LLP (and DWF Law LLP from March 2019)) (together, the "Borrowers"). As at 31 October 2020, the total aggregate outstanding loan amount owed by the Borrowers to DWF LLP under the July 2017 Loan Agreement and July 2018 Loan Agreement and to DWF Law LLP under the July 2019 Loan Agreement and July 2020 Loan Agreement was GBP985,000 (31 October 2019: GBP692,000; 30 April 2020: GBP692,000). The Borrowers are jointly and severally liable under those loan agreements.
In March 2017, DWF LLP and Jason Ford entered into a loan agreement, pursuant to which DWF LLP provided a loan of GBP100,000 to Jason Ford, for the purpose of repayment by Jason Ford of a professional corporate investment loan made available by Barclays Bank plc to Jason Ford in December 2015 to fund a shareholder loan to Triton Global Limited. The outstanding loan amount owed by Jason Ford to DWF LLP as at 31 October 2020 was GBP100,000 (31 October 2019: GBP100,000; 30 April 2020: GBP100,000).
In September 2020, DWF Group plc granted a restricted share award of 1,903,928 ordinary shares (the "Growth Shares") to Jason Ford subject to a Restricted Share Agreement (31 October 2019: no shares; 30 April 2020: no shares). Pursuant to the restricted share agreement under which the award was granted, the Growth Shares will be held in trust until either the Group's share price hits a predetermined value or five years passes (whichever is sooner) at which point the shares will be sold to the market and used to settle Jason Ford's liabilities due to the Group.
In the opinion of the Directors, there is no controlling party of DWF Group plc.
21 Cash generated from operations
a) Cash used in operations before adjusting items
Re- presented
Six months Six months
ended 31 ended 31 Year ended
October October 30 April
2020 2019 2020
GBP'000 GBP'000 GBP'000
------------------------------------------ ------------- ---------------- -------------
Cash flows from operating activities
------------------------------------------ ---------------- -------------
(Loss)/profit before tax (11,044) 7,113 13,897
------------------------------------------ ---------------- -------------
Adjustments for:
------------------------------------------ ---------------- -------------
Impairment 369 - 1,036
------------------------------------------ ---------------- -------------
Amortisation of acquired intangible
assets 2,101 156 1,510
------------------------------------------ ---------------- -------------
Depreciation of right-of-use asset 5,967 5,456 11,580
------------------------------------------ ---------------- -------------
Other depreciation and amortisation 3,223 2,933 6,175
------------------------------------------ ---------------- -------------
Fair value gain on investment (23) - -
------------------------------------------ ---------------- -------------
Gain on bargain purchase - (2,772) (25,084)
------------------------------------------ ---------------- -------------
Non-underlying items 12,457 1,050 7,632
------------------------------------------ ---------------- -------------
Share-based payments expense 9,482 4,392 11,599
------------------------------------------ ---------------- -------------
Interest payable on leases 982 1,030 2,047
------------------------------------------ ---------------- -------------
Net finance expense 1,132 787 1,905
------------------------------------------ ------------- ---------------- -------------
Operating cash flows before movements
in working capital 24,646 20,145 32,297
------------------------------------------ ---------------- -------------
Decrease/(increase) in trade and other
receivables 3,390 (4,950) (18,726)
------------------------------------------ ---------------- -------------
(Decrease)/increase in trade and other
payables (1,356) (9,061) 15,125
------------------------------------------ ---------------- -------------
Increase in provisions 263 117 233
------------------------------------------ ---------------- -------------
Increase/(decrease) in amounts due
to Members of partnerships in the
Group 5,995 (2,151) (4,771)
------------------------------------------ ---------------- -------------
Cash generated by operations before
adjusting items 32,938 4,100 24,158
------------------------------------------ ------------- ---------------- -------------
21 Cash generated from operations (continued)
b) Free cash flows
Re-presented
Six months Six months
ended 31 ended 31 Year ended
October October 30 April
2020 2019 2020
GBP'000 GBP'000 GBP'000
--------------------------------------------- ------------- --------------- -------------
Free cash flows
--------------------------------------------- --------------- -------------
Operating cash flows before movements
in working capital 24,646 20,145 32,297
--------------------------------------------- --------------- -------------
Net working capital movement 2,297 (13,894) (3,368)
--------------------------------------------- --------------- -------------
Amounts due to Members of partnerships
in the Group 5,995 (2,151) (4,771)
--------------------------------------------- ------------- --------------- -------------
Cash generated from operations before
adjusting items 32,938 4,100 24,158
--------------------------------------------- ------------- --------------- -------------
Repayment of lease liabilities (6,618) (6,060) (12,654)
--------------------------------------------- --------------- -------------
Net interest paid (2,241) (1,787) (4,192)
--------------------------------------------- --------------- -------------
Tax paid (417) (3,020) (4,309)
--------------------------------------------- --------------- -------------
Purchase of property, plant and equipment (2,872) (1,611) (3,520)
--------------------------------------------- --------------- -------------
Purchase of other intangible assets (1,158) (859) (4,116)
--------------------------------------------- --------------- -------------
Free cash flows 19,632 (9,237) (4,633)
--------------------------------------------- ------------- --------------- -------------
21 Cash generated from operations (continued)
c) Working capital measures
31 October 31 October 30 April
2020 2019 2020
GBP'000 GBP'000 GBP'000
--------------------------------------- ------------- ------------- -----------
WIP days
------------- -----------
Amounts recoverable from clients in
respect of unbilled revenue 76,301 69,706 64,379
Unbilled disbursements 9,077 6,273 8,501
--------------------------------------- ------------- ------------- -----------
Total WIP 85,378 75,979 72,880
--------------------------------------- ------------- ------------- -----------
Annualised net revenue 337,277 289,736 330,340
--------------------------------------- ------------- ------------- -----------
WIP days 92 96 81
--------------------------------------- ------------- ------------- -----------
Debtor days
------------- -----------
Trade receivables (net of allowance
for doubtful receivables) 93,334 80,013 108,727
Other receivables 2,741 3,645 4,950
--------------------------------------- ------------- ------------- -----------
Total debtors 96,075 83,658 113,677
--------------------------------------- ------------- ------------- -----------
Annualised net revenue 337,277 289,736 330,340
--------------------------------------- ------------- ------------- -----------
Debtor days 104 105 125
--------------------------------------- ------------- ------------- -----------
Gross lock-up days
------------- -----------
Total WIP 85,378 75,979 72,880
Total debtors 96,075 83,659 113,677
--------------------------------------- ------------- ------------- -----------
Total gross lock-up 181,453 159,638 186,557
--------------------------------------- ------------- ------------- -----------
Annualised net revenue 337,277 289,736 330,340
--------------------------------------- ------------- ------------- -----------
Gross lock-up days 196 201 206
--------------------------------------- ------------- ------------- -----------
Annualised net revenue reflects the total net revenue for the previous 12-month period inclusive of pro-forma adjustments for acquisitions and discontinuations
22 Amounts due to Members of partnerships in the Group
Amounts due to Members of partnerships in the Group comprise unallocated reserves within equity, Members' capital and other amounts due to Members classified as liabilities as follows:
Total amounts
due to Members
Members' Other amounts of partnerships
capital due to Members in the Group
GBP'000 GBP'000 GBP'000
------------------------------------------- ---------- ----------------- ------------------
At 1 May 2020 13,231 22,621 35,852
------------------------------------------- ---------- ----------------- ------------------
Members' remuneration charged as an
expense - 20,727 20,727
------------------------------------------- ---------- ----------------- ------------------
Unrealised foreign exchange translation
differences (1) (408) (409)
------------------------------------------- ---------- ----------------- ------------------
Capital introduced by Members 2,640 - 2,640
------------------------------------------- ---------- ----------------- ------------------
Repayments of capital (2,625) - (2,625)
------------------------------------------- ---------- ----------------- ------------------
Drawings - (14,732) (14,732)
------------------------------------------- ---------- ----------------- ------------------
At 31 October 2020 13,245 28,208 41,453
------------------------------------------- ---------- ----------------- ------------------
Total amounts
due to Members
Members' Other amounts of partnerships
capital due to Members in the Group
GBP'000 GBP'000 GBP'000
--------------------------------------- ---------- ----------------- ------------------
At 1 May 2019 10,679 27,392 38,071
--------------------------------------- ---------- ----------------- ------------------
Members' remuneration charged as an
expense - 19,009 19,009
--------------------------------------- ---------- ----------------- ------------------
Capital introduced by Members 617 - 617
--------------------------------------- ---------- ----------------- ------------------
Repayments of capital (808) - (808)
--------------------------------------- ---------- ----------------- ------------------
Drawings - (21,160) (21,160)
--------------------------------------- ---------- ----------------- ------------------
At 31 October 2019 10,488 25,241 35,729
--------------------------------------- ---------- ----------------- ------------------
Total amounts
due to Members
Members' Other amounts of partnerships
capital due to Members in the Group
GBP'000 GBP'000 GBP'000
--------------------------------------- ---------- ----------------- ------------------
At 1 May 2019 10,679 27,392 38,071
--------------------------------------- ---------- ----------------- ------------------
Members' remuneration charged as an
expense - 38,808 38,808
--------------------------------------- ---------- ----------------- ------------------
Capital introduced by Members 5,938 - 5,938
--------------------------------------- ---------- ----------------- ------------------
Repayments of capital (3,386) - (3,386)
--------------------------------------- ---------- ----------------- ------------------
Drawings - (43,579) (43,579)
--------------------------------------- ---------- ----------------- ------------------
At 30 April 2020 13,231 22,621 35,852
--------------------------------------- ---------- ----------------- ------------------
22 Amounts due to Members of partnerships in the Group (continued)
The average number of Members during the period was as follows:
Re-presented
31 October 31 October 30 April
2020 2019 2020
Average number of Members of partnerships
held by the Group during the period 382 335 366
--------------------------------------------- ------------- --------------- -----------
23 Seasonality
Historically, the Group generates one to two percentage points more revenue in the second half of the year when compared to the first. This is due to the number of working days, the timing of annual leave, the timing of resource investments and new client wins.
24 Events after the reporting period
There have been no events after the reporting period.
Appendix 1 - Reconciliation of represented information
Reconciliation of six month period ended 31 October 2019
Realign Realign
As reported the Managed NI and Represented
in the Poland Cologne Services ROI practice total per
prior year amendments discontinuation division groups HY21 accounts
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------ ------------- ------------- ----------------- -------------- --------------- ----------------
Segment net
revenue
------------------ ------------- ----------------- -------------- --------------- ----------------
Commercial
Services 55,183 - - (982) 3,553 57,754
------------------ ------------- ----------------- -------------- --------------- ----------------
Insurance
Services 47,830 - - - 2,368 50,198
------------------ ------------- ----------------- -------------- --------------- ----------------
International 33,017 - (1,585) - (5,921) 25,511
------------------ ------------- ----------------- -------------- --------------- ----------------
Connected
Services 10,763 - - - - 10,763
------------------ ------------- ----------------- -------------- --------------- ----------------
Managed Services - - - 982 - 982
------------------ ------------- ------------- ----------------- -------------- --------------- ----------------
Net revenue 146,793 - (1,585) - - 145,208
------------------ ------------- ------------- ----------------- -------------- --------------- ----------------
Segment direct
cost
------------------ ------------- ----------------- -------------- --------------- ----------------
Commercial
Services (22,897) - - 500 (1,964) (24,361)
------------------ ------------- ----------------- -------------- --------------- ----------------
Insurance
Services (24,289) - - - (1,309) (25,598)
------------------ ------------- ----------------- -------------- --------------- ----------------
International (19,106) - 1,092 - 3,274 (14,741)
------------------ ------------- ----------------- -------------- --------------- ----------------
Connected
Services (6,796) - - - - (6,796)
------------------ ------------- ----------------- -------------- --------------- ----------------
Managed Services - - - (500) - (500)
------------------ ------------- ----------------- -------------- --------------- ----------------
Direct cost (73,088) - 1,092 - - (71,996)
------------------ ------------- ------------- ----------------- -------------- --------------- ----------------
Segment gross
profit
------------------ ------------- ----------------- -------------- --------------- ----------------
Commercial
Services 32,286 - - (482) 1,589 33,393
------------------ ------------- ----------------- -------------- --------------- ----------------
Insurance
Services 23,541 - - - 1,059 24,600
------------------ ------------- ----------------- -------------- --------------- ----------------
International 13,911 - (493) - (2,648) 10,771
------------------ ------------- ----------------- -------------- --------------- ----------------
Connected
Services 3,967 - - - - 3,967
------------------ ------------- ----------------- -------------- --------------- ----------------
Managed Services - - - 482 - 482
------------------ ------------- ----------------- -------------- --------------- ----------------
Gross profit 73,705 - (493) - - 73,212
------------------ ------------- ------------- ----------------- -------------- --------------- ----------------
Administrative
expenses (67,194) 2,419 1,417 - - (63,358)
------------------ ------------- ----------------- -------------- --------------- ----------------
Operating profit 6,511 2,419 924 - - 9,854
------------------ ------------- ------------- ----------------- -------------- --------------- ----------------
Net finance
expense (787) - - - - (787)
------------------ ------------- ----------------- -------------- --------------- ----------------
Interest payable
on leases (1,030) - - - - (1,030)
------------------ ------------- ----------------- -------------- --------------- ----------------
Profit before
tax 4,694 2,419 924 - - 8,037
------------------ ------------- ------------- ----------------- -------------- --------------- ----------------
Taxation (1,362) - - - - (1,362)
------------------ ------------- ----------------- -------------- --------------- ----------------
Profit after
tax 3,332 2,419 924 - - 6,675
------------------ ------------- ------------- ----------------- -------------- --------------- ----------------
Reconciliation of year ended 30 April 2020
Realign Realign
As reported the Managed NI and Represented
in the Poland Cologne Services ROI practice total per
prior year amendments discontinuation division groups HY21 accounts
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
------------------ ------------- ------------- ----------------- -------------- --------------- ----------------
Segment net
revenue
------------------ ------------- ----------------- -------------- --------------- ----------------
Commercial
Services 104,367 - - (3,957) 7,105 107,515
------------------ ------------- ----------------- -------------- --------------- ----------------
Insurance
Services 95,838 - - - 4,737 100,575
------------------ ------------- ----------------- -------------- --------------- ----------------
International 76,165 - - - (11,842) 64,323
------------------ ------------- ----------------- -------------- --------------- ----------------
Connected
Services 20,861 - - - - 20,861
------------------ ------------- ----------------- -------------- --------------- ----------------
Managed Services - - - 3,957 - 3,957
------------------ ------------- ------------- ----------------- -------------- --------------- ----------------
Net revenue 297,231 - - - - 297,231
------------------ ------------- ------------- ----------------- -------------- --------------- ----------------
Segment direct
cost
------------------ ------------- ----------------- -------------- --------------- ----------------
Commercial
Services (45,960) - - 1,642 (3,928) (48,246)
------------------ ------------- ----------------- -------------- --------------- ----------------
Insurance
Services (49,726) - - - (2,619) (52,345)
------------------ ------------- ----------------- -------------- --------------- ----------------
International (45,188) - - - 6,547 (38,641)
------------------ ------------- ----------------- -------------- --------------- ----------------
Connected
Services (14,123) - - - - (14,123)
------------------ ------------- ----------------- -------------- --------------- ----------------
Managed Services - - - (1,642) - (1,642)
------------------ ------------- ----------------- -------------- --------------- ----------------
Direct cost (154,997) - - - - (154,997)
------------------ ------------- ------------- ----------------- -------------- --------------- ----------------
Segment gross
profit
------------------ ------------- ----------------- -------------- --------------- ----------------
Commercial
Services 58,407 - - (2,315) 3,177 59,269
------------------ ------------- ----------------- -------------- --------------- ----------------
Insurance
Services 46,112 - - - 2,118 48,230
------------------ ------------- ----------------- -------------- --------------- ----------------
International 30,977 - - - (5,295) 25,682
------------------ ------------- ----------------- -------------- --------------- ----------------
Connected
Services 6,738 - - - - 6,738
------------------ ------------- ----------------- -------------- --------------- ----------------
Managed Services - - - 2,315 - 2,315
------------------ ------------- ----------------- -------------- --------------- ----------------
Gross profit 142,234 - - - - 142,234
------------------ ------------- ------------- ----------------- -------------- --------------- ----------------
Administrative
expenses (120,084) - - - - (120,084)
------------------ ------------- ----------------- -------------- --------------- ----------------
Operating profit 22,150 - - - - 22,150
------------------ ------------- ------------- ----------------- -------------- --------------- ----------------
Net finance
expense (1,905) - - - - (1,905)
------------------ ------------- ----------------- -------------- --------------- ----------------
Interest payable
on leases (2,047) - - - - (2,047)
------------------ ------------- ----------------- -------------- --------------- ----------------
Profit before
tax 18,198 - - - - 18,198
------------------ ------------- ------------- ----------------- -------------- --------------- ----------------
Taxation (3,629) - - - - (3,629)
------------------ ------------- ----------------- -------------- --------------- ----------------
Profit after
tax 14,569 - - - - 14,569
------------------ ------------- ------------- ----------------- -------------- --------------- ----------------
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