TIDMDSW
RNS Number : 4137S
DSW Capital PLC
14 July 2022
14 July 2022
DSW CAPITAL PLC
("DSW Capital", "DSW" or the "Group")
(AIM:DSW)
Audited Final Results
Strong results ahead of market expectations set at IPO and new
financial year started well
DSW Capital, a fast growing, mid-market, challenger professional
services licence network and owner of the Dow Schofield Watts
brand, is pleased to announce its audited results for the year
ended 31 March 2022 (the "Period" or "FY22").
The Group has delivered a strong trading performance with
revenue and Adjusted Pre-Tax Profit(1) for FY22 ahead of market
expectations set at IPO. Pleasingly, Network Revenue(2) grew
significantly ahead of market expectations.
Financial highlights
-- Network Revenue(2) of GBP18.3m (FY21: GBP15.3m) - up 19.6%
-- Group revenue of GBP2.7m (FY21: GBP2.4m) - up 12.5%
-- Adjusted Pre-Tax Profit(1) of GBP2.0m (FY21: GBP1.6m)
- up 25%
-- Loss before tax, after the deduction of the Share Based
Payment charge and IPO costs, of GBP0.03m (FY21: Profit
before tax of GBP1.59m)
-- Strong cash conversion(3) of 105% with GBP4.7m cash
-- Strong balance sheet with Net Assets of GBP8.0m (FY21:
GBP2.2m)
-- Maiden final dividend per ordinary share of 4.22 pence
Operational highlights
-- Fee Earners at year end increased to 88 (31 March 2021:
77) - up 14.3% demonstrating the profile boost from IPO
and licence model negating the wider difficult recruitment
market
-- Average revenue per Fee Earner(4) of GBP227k (FY21: GBP196k)
- up 15.8%
-- Service lines expanded in line with strategic objectives,
with the addition of DSW Asset Based Lending Risk Management
LLP in January 2022
-- Corporate finance and due diligence, which represent 70%
of the business, continued to grow successfully in line
with the market (FY21: 81%)(5)
-- Named by Experian as one of the top 20 most active corporate
finance advisers in the UK in 2021
-- Business recovery and debt advisory performed strongly
in FY22 and, as a result, represent an increasing proportion
of business
-- Two new partners welcomed in Scotland post year end, expanding
the Network's presence to include Edinburgh and Glasgow
- total number of licensees now 20 across 11 service lines
Outlook
-- Significant opportunity for organic and acquisition driven
growth with capital to invest
-- Predictable cost base with low operational gearing, insulated
from inflationary pressures
-- New financial year has started well, in line with the
Board's expectations, and the Directors look forward to
another year of sustainable organic growth
James Dow, Chief Executive Officer, said:
"Our admission to AIM has enhanced and strengthened the Dow
Schofield Watts brand, as we had expected, and the IPO "halo"
effect is undoubtedly supporting our growth plans.
"The sector in which we operate is substantial and developing in
a way that makes DSW's business model increasingly attractive to
ambitious entrepreneurial professionals and their clients. By
empowering these individuals to create and build their own
professional services businesses, while also helping them develop
as leaders and be the best they can be, I am confident that we will
deliver strong returns for all our stakeholders.
"Our confidence is built on the quality of our people within the
Network and their clients. This quality is reflected in the average
revenue per Fee Earner achieved in the year of GBP227k (FY21:
GBP196k) - an important metric, as we execute on our vision to
become the most sought-after destination for ambitious
professionals.
"DSW has a successful and profitable model, a strong balance
sheet and an excellent capital base from which to scale the
business. In a sector which is ripe with opportunity, we have every
confidence in the future prospects for the Group."
Adjusted Pre-Tax Profit is defined as (loss)/profit before
1. tax adjusted to add back the items not considered part
of underlying trading including share-based payment expense
and IPO costs. It is a non-GAAP metric used by management
and is not an IFRS disclosure. Reconciliation can be found
in the CFO
Network Revenue is defined as total revenue earned by
2. licensees, as opposed to total revenue reported by the
Company
Cash conversion is calculated as cash generated by operations
3. divided by Operating cash flows before movements in working
capital
Prior year comparatives calculated using average Fee Earners
4. in the Period which will be basis for the KPI calculation
going forward.
Calculation includes all licensing income including income
5. from associates
Online investor presentation
An online investor presentation and Q&A will be hosted by
the management team today at 1pm. To participate, please register
with PI World at: https://bit.ly/DSW_FY22_webinar .
The investor presentation deck will be published on the
Company's website today.
Enquiries:
DSW Capital
James Dow, Chief Executive Officer Tel: +44 (0) 1928
Nicole Burstow, Chief Financial Officer 378 029
Tel: +44 (0) 1928
378 039
Shore Capital (Nominated Adviser & Broker) Tel: +44 (0)20 7408
James Thomas / John More / Mark Percy 4090
Guy Wiehahn (Corporate Broking)
Belvedere Communications
Cat Valentine Tel: +44 (0) 7715
Keeley Clarke 769 078
Tel: +44 (0) 7967
816 525
dsw@belvederepr.com
Notes to Editors
About DSW Capital
DSW Capital, owner of the Dow Schofield Watts brand, is a
profitable, fast growing, mid-market, challenger professional
services network with a cash generative business model and scalable
platform for growth. Originally established in 2002, by three KPMG
alumni, DSW is one of the first platform models disrupting the
traditional model of accounting professional services firms. DSW
now operates licensing arrangements with 20 licensee businesses
with 88 fee earners ("FEs"), across seven offices in England and
three in Scotland. These trade primarily under the Dow Schofield
Watts brand.
DSW's vision is for the DSW Network to become the most
sought-after destination for ambitious, entrepreneurial
professionals to start and develop their own businesses. Through a
licensing model, DSW gives professionals the autonomy and
flexibility to fulfil their potential. Being part of the DSW
Network brings support benefits in recruitment, funding and
infrastructure. DSW's challenger model attracts experienced, senior
professionals, predominantly with a "Big 4" accounting firm
background, who want to launch their own businesses and recognise
the value of the Dow Schofield Watts brand and the synergies which
come from being part of the DSW Network.
DSW aims to scale its agile model through organic growth,
geographical expansion, additional service lines and investing in
"Break Outs" (existing teams in larger firms). The Directors are
targeting high margin, complementary, niche service lines with a
strong synergistic fit with the existing DSW Network.
Chair's Statement
On behalf of the Board, I would like to start by thanking all
colleagues across the business for their unwavering commitment and
support throughout the year. It gives me pleasure to announce DSW
Capital's inaugural results as a quoted company for the year ended
31 March 2022. The Group has continued to perform strongly this
year with a 19.6% increase in network revenue to GBP18.3m (FY21:
GBP15.3m) and an increase in Adjusted Pre-Tax Profit of 25% to
GBP2.0m (FY21: GBP1.6m). Average Revenue per Fee Earner has also
increased by 15.8% in FY22 to GBP227k (FY21: GBP196k) and Revenue
for the Group was GBP2.7m (FY21: GBP2.4m). Statutory loss before
tax for FY22 was GBP31k (FY21: Profit before tax of GBP1.59m) after
the deduction of the Share Based Payment charge and IPO costs.
Summary of the year
DSW's admission to AIM was a significant step in the development
of the business. We are delighted to have the support from so many
sophisticated investors and are confident that DSW is well placed
to exploit the market opportunity that exists within the
professional services sector.
The fundraising from the IPO, coupled with a robust trading
performance, has ensured that the Group has a strong balance sheet
and an excellent capital base from which to grow the business, both
organically and through the strategic acquisition of talented
individuals and teams as opportunities arise.
We are delighted with our results for FY22, which show
significant growth against the prior year. The DSW Network
generated revenues of GBP18.3m in FY22, up by 19.6% from the
previous year. This growth was enabled by a combination of existing
and new licensee businesses and the continued hard work of the
whole of the DSW team.
The DSW Network, which comprises 20 licensee businesses,
benefited from high levels of demand in the professional services
sector throughout the Period and, in February 2022, DSW was named
by Experian as one of the top 20 most active corporate finance
advisers in the UK in 2021. As anticipated, the heightened profile
of DSW resulting from the IPO has resulted in increased recruitment
activity with a high number of talented individuals joining or
about to join DSW. We now have 88 Fee Earners as of 31 March 2022,
an increase of 14.3% on the prior year.
Long-term vision and strategy
DSW's long-term vision is to become the most sought-after
destination for ambitious, entrepreneurial professionals to start
and develop their own businesses. We aim to scale the business
through organic growth, new service lines and geographic locations,
and investing in "Break Outs" (existing teams in larger firms).
DSW has successfully executed on its strategy to expand its
service lines, since IPO, with the addition of DSW Asset Based
Lending Risk Management LLP in January 2022. This brought the total
number of licensees to 20 across 11 service lines. Since the end of
FY22, the Group has welcomed two new partners in Scotland,
expanding both the service offering and presence to include
Edinburgh and Glasgow.
People and diversity
Our colleagues remain central to everything we do and achieve.
Creating a positive dynamic culture, which is attractive to talent
and in which our people can thrive, remains our top priority.
Diversity is at the core of DSW's model, as a broad range of
perspectives benefits the progression and success of our business.
DSW's commitment to diversity extends beyond gender to ethnicity,
sexual orientation, gender identity, social mobility, disability
and other challenges, which may lead to disadvantage in other
environments. DSW is committed to creating a diverse and inclusive
environment for its licensees and employees, and this will continue
to be a core value, as new professionals and businesses are
welcomed to the Network.
Technology
With the increased prevalence of hybrid working, the Group has
invested in the right technology to ensure its licensees and
employees have the flexibility to choose where they work most
effectively, helping maintain a strong work life balance.
As part of the IT strategy to improve the cyber security of our
systems further, the Group is in the process of obtaining the Cyber
Essentials accreditation, as we adopt best practice.
Board and governance
The Board consists of five directors, two of whom are executive
directors and three non-executive directors. Two of the
non-executive directors, myself and Jillian Jones, are considered
independent. The current Board reflects a blend of different
experience and backgrounds.
The Board is supported by two committees, namely the Audit and
Risk Committee and the Remuneration and Nominations Committee with
formally delegated duties and responsibilities.
I am happy to report that, since the Company's IPO on 16
December 2021, DSW has complied with the QCA Corporate Governance
Code.
Our approach to risk
DSW takes a proactive approach to risk management, which starts
at a strategic level with the Board. Along with the other
Directors, I continue to closely monitor and identify risks facing
the Group and have strong risk mitigation strategies in place.
DSW has a wealth of compliance and risk experience to support
all licensee businesses in related matters and provide them with
regulatory guidance.
ESG
As a Board, we understand and welcome the increasing importance
of ESG to investors, employees and clients. We are committed to
creating positive interactions with all stakeholders and intend to
demonstrate this over the long-term through our approach to ESG.
For the first time, we have included an ESG report in this year's
Annual Report, setting out our priorities and related
activities.
The Board has also elected to make voluntary SECR disclosures,
as it recognises the important role all businesses must play to
reduce carbon emissions and increase energy efficiency.
Dividend
The Board is committed to a long-term progressive dividend
policy.
As indicated at the time of the float, the Board is proposing to
pay a dividend in respect of the current financial year. The Board
is proposing to pay a final ordinary dividend for the year ended 31
March 2022, consisting of an interim catch up dividend of 0.56
pence per share and a final dividend of 3.66 pence per share, to
align with its dividend policy going forward.
Ukraine
In response to the Russian invasion of Ukraine, the Group
immediately reviewed all its relationships to ascertain if it was
acting for any individual or corporate client that did not comply
with the UK's sanction regime. We are not aware of any exposure
through our licensees.
Outlook
I am pleased to report that the new financial year has started
well, despite the well documented macro challenges.
This is an exciting time for the business. The market
opportunity is substantial and the business is well structured with
a clear growth strategy to build on the strong business performance
demonstrated in the FY22 results.
While acknowledging that economic conditions continue to be
volatile, we are confident in the Group's ability to continue to
deliver on its organic growth strategy. We firmly believe that we
are an attractive alternative to the Big 4 accounting firms, both
as an "employer" of talented professionals and as a service
provider providing a bespoke, personalised service. The Board looks
forward to the year ahead with optimism and is excited about the
long-term prospects for the Group.
Heather Lauder
Chair
13 July 2022
Chief Executive Officer's Review
The year under review has been a momentous one for the Group.
The IPO and admission to AIM, in December 2021, was a significant
milestone for DSW, which, combined with the strong financial
performance achieved in FY22, has created a strong foundation for
the Group as we look ahead.
Our balance sheet ensures that we are well placed to execute on
our strategy to capitalise on the substantial growth opportunities
presented in the rapidly changing UK accounting market.
Empowering professionals
Since launching the business in 2002, as a three-man start-up
along with Jon Schofield and Mark Watts, DSW has developed steadily
over time to become, in recent years, a fast-growing, mid-market
challenger professional services network.
Our vision is to become the most sought-after destination for
ambitious, entrepreneurial professionals to start and develop their
own businesses.
This is the essence of our success: we empower professionals, we
help them build their businesses, develop as leaders and be the
best they can be.
Strong organic growth
Being a professional services business, recruitment of Fee
Earners is one of the principal sources of organic growth for DSW.
This includes the recruitment of new partners and Fee Earners to
set up new teams and the recruitment of additional Fee Earners to
grow existing licensee businesses.
At the year-end, the number of Fee Earners, including partners,
had grown from 77 to 88, an increase of 14.3%, and the number of
partners rose from 34 to 39.
Our organic growth included the addition of one new specialism,
DSW ABL Risk Management, bringing in two new partners, and a new
location in Reading with the recruitment of three new partners. We
now have a total of 11 specialisms and seven locations.
This has been a very welcome acceleration, as the COVID-19
pandemic presented particular challenges to our recruitment
primarily by restricting "face to face" meetings.
Since March 2013, the number of Fee Earners has increased from
30 to 88, which equates to a nine-year CAGR of over 12%.
Strong trading results
This has been another successful year of profitable growth for
DSW.
Corporate finance and due diligence still represent the majority
of our business (70% vs. 81% in the previous year) and have
continued to grow successfully in line with the market. Other
service lines such as business recovery and debt advisory grew
significantly faster, with the number of licensees increasing from
18 to 20, and as a result are now an increasing proportion of our
business.
As a result of this supportive market for specialist
professional services, the DSW Network Revenue grew 19.6% to
GBP18.3m (FY21: GBP15.3m). The three-year historical DSW Network
Revenue CAGR to FY22 was 28.2%.
Our Adjusted Pre-Tax Profit was up 25% to GBP2.0m (FY21 GBP1.6m)
and DSW received an average licence fee (including profit share
where applicable) of 16.9% (FY21:16.1%).
A growing brand and reputation
DSW must continue to demonstrate that it is an extremely
attractive proposition for both clients and professionals who work
within the UK "mid-market". The quality of our clients and the
quality of our people is reflected in our significant average
revenues per fee earner of GBP227k (FY21 GBP196k). This is an
important metric in our positioning towards being the most
sought-after destination for ambitious professionals.
DSW's achievements and capabilities are most notable in its
original core service areas of corporate finance and due diligence.
Our prominence in M&A was highlighted by an Experian research
report for Q1 of 2022, which marked DSW as the 6(th) most active
adviser (by number of deals) in the UK. More representative was the
18(th) position of DSW for 2021 as a whole up from 25(th) place in
2020.
An IPO "halo"
Our admission to the AIM market of the London Stock Exchange in
December 2021 was extremely successful and endorsed our confidence
in the strength and potential of the DSW platform model and our
market opportunity.
We considered that admission was an important step in our
development, providing access to capital to fund licence fee
acquisitions, to increase brand awareness and recognition, and add
further credibility to the DSW offering amongst potential new
licensees and clients of the Network, thereby enhancing the
Network's future growth potential.
Listing on AIM was a significant undertaking, and our success
was made possible by an amazing internal team and external
advisers, who managed the process so expertly and enthusiastically.
I would like to thank everyone who contributed to this outstanding
achievement and significant milestone for our firm.
The overall strength of the DSW brand is crucial in attracting
and retaining both clients and professionals. I passionately
believe that our admission to AIM has enhanced and strengthened
that brand and that the IPO "halo" effect is supporting our growth
plans.
DSW's strategy and delivery against it
Growth strategy
As communicated at the time of the AIM listing, DSW aims to
scale its licence model through organic growth of existing
licensees, geographical expansion, additional service lines,
recruitment of new licensees and investing in "Break Outs"
(existing teams in larger firms) and the acquisition of licence
fees.
We have had a productive year on Fee Earner recruitment, with
year-end Fee Earners of 88, up a net 11 (having been at 82 at the
time of listing in December). This growth rate is in line with our
projections. Our recruitment processes continue to improve and our
investment in additional central recruitment capability has
resulted in a significant uplift in new applicants.
In terms of "break-outs" and acquisitions of licence fees, our
significant efforts are ongoing. In March 2022, we launched a DSW
Entrepreneurship Grant scheme on social media offering significant
financial incentives to encourage teams to join DSW and we would
expect this to bear fruit in the current year. With regard to
acquisitions of licence fees, we remain in regular contact with
companies we admire and continue to work hard to convince them of
our attractiveness as a suitor, offering the right solution for all
their stakeholders.
Our focus remains on high margin, complementary, niche service
lines with a strong synergistic fit with the existing DSW
Network.
International network
DSW has an established partnership network of global advisory
firms, called "Pandea Global M&A". Pandea Global M&A
comprises selected independent firms with a primary focus on the
origination and execution of middle market M&A activities. The
Pandea network increases the DSW Network's access to overseas
buyers, investors, and valuable local knowledge, while providing
its UK-based clients with access to an enlarged pool of acquisition
targets.
Central team
As a team, we remain committed to delivering the highest level
of service to our partners. It is the delivery of these services
which makes it possible for the Fee Earners to focus on delivering
high quality work for their clients. The team is young, talented,
and extraordinary and I thank all of them for their considerable
efforts in delivering the flotation and supporting the licensees to
achieve another successful year.
During this year, we have expanded the team to assist with the
recruitment and the growth of our licensees. These appointments
include:
-- an additional recruitment manager for the recruitment pipeline
of newly established licensee businesses and for growing
existing licensee businesses. This additional resource also
provides us with people development support and conducts
new partner assessments and team assessments; and
-- a strategic projects director to drive licensee development,
licensee cross referrals and provide us with a class leading
ESG framework and strategy.
These investments are right at the heart of empowering our
licensees to build their own businesses and we are looking to
extend our central capabilities to further that support to help our
partners and their employees to be "the best that you can be".
This focus on developing our battalions of licensees will make
sure that they continue to represent DSW successfully and their
development reinforces the foundations of the licensee business and
therefore for DSW for the coming years.
Our partners and their teams are our greatest ambassadors. I
would like to take this opportunity to thank DSW partners across
the Network for their continuing commitment to DSW and all that it
stands for.
Looking ahead
This is a truly exciting time for DSW. The market sector in
which we operate is substantial and developing in a way that makes
DSW's business model increasingly attractive to ambitious
entrepreneurial professionals and their clients. As accounting and
tax specialists continue to demand flexible and mobile working
solutions, DSW's first mover advantage puts us in an excellent
position to benefit from the significant cultural changes now
taking place within the Big 4.
We remain confident in the strength of our business model. We
are generally protected from the impact of wage and cost inflation
as our partners bear most of these risks of operational gearing.
However, we are not immune from a downturn in M&A activity
particularly if it is focused on the SME marketplace. But these
short-term challenges often give rise to the greatest long-term
opportunities, as our candidate pool of new partners and employees
is as much fuelled by personal disappointment as it is by
significant opportunity.
The new financial year has started well, in line with the
Board's expectations, and we look forward to another year of
sustainable organic growth.
James Dow
Chief Executive Officer
13 July 2022
Chief Financial Officer's Review
Key Performance Indicators
The following KPIs are used by management to monitor the
financial performance of the Group:
2022 2021 2020
Revenue (GBP,000) 2,681 2,354 1,689
Total income from Licensees*
(GBP,000) 2,990 2,456 1,754
Adjusted EBITDA** (GBP,000) 2,233 1,824 1,136
Adjusted PBT (GBP,000) 2,002 1,592 996
Adjusted PBT margin (%) 74.6 67.6 59.0
Net Assets 7,985 2,212 1,327
* Total income from licensees represents statutory revenue
plus share of results in associates
** Adjusted EBITDA is defined as Adjusted profit before tax
adjusted to add back impairment of loans due from associated
undertakings (GBP127k), finance costs (GBP60k), depreciation
(GBP87k), amortisation (GBP39k) and deduct finance income
(GBP82k)
The Group also measures its performance using the following KPIs
which are derived from the performance of the DSW Network:
2022 2021 2020
Total revenue of all Network licensees
(GBP,000) 18,285 15,342 12,362
Revenue per fee earner (GBP,000) 227 196 166
Revenue per partner (GBP,000) 446 432 388
Fee Earners (Number) 88 77 83
Income Statement
Revenue and Network Revenue
I am delighted to report our maiden set of results as a listed
business. We have an extremely talented network of partners and
employees and their hard work and relentless commitment to
exceptional client service has driven a very strong
performance.
Network revenue for the year was GBP18.3m, an increase of 19.6%
on the prior year. The buoyancy in the M&A market was unabated
in the Period and we have continued to work with our licensee
partners to grow their businesses and teams. Meanwhile, the high
quality of work delivered, represented by a 15.8% growth in revenue
per Fee Earner, has further enhanced top line growth. This has
translated into total income from licensees of GBP2.99m for DSW
Capital, an increase of 21.7% on the prior year representing an
average licence fee of 16.9%.
Fee Earners
The number of Fee Earners is a key driver of growth and we have
seen a 14.3% increase on the prior year, against the backdrop of a
challenging recruitment market. This has been particularly notable
post IPO, where we have seen an uptick in recruitment from the
enhanced profile of being a plc, further assisted by investment in
central recruitment resources and marketing.
With 88 Fee Earners, DSW's Network is smaller than other listed
professional services firms; however, the revenue per fee earner of
GBP227k is comparable with larger listed peers such as Knights,
DWF, Gateley and Keystone Law. Furthermore, we believe our average
revenue per fee earner for the year is comparable to all of the Big
4 based on their latest available financial results.
Central Costs
The Group has a lean platform model, which is largely insulated
from wage inflation as licensee employee costs are borne by the
licensee businesses and partners are remunerated based on the fees
they bill. The fixed cost base includes only 10 people (excluding
directors), 6.5 full time equivalents. Similarly, the licensee
businesses bear their own property costs or work from home,
therefore the Group's exposure to inflationary pressures is limited
to its one office premises.
Central costs (excluding the share-based payment charge and IPO
costs) have increased by GBP0.17m, 37% on the prior year. The
majority of the increase is due to the full year impact of
non-executive remuneration and the alignment of executive and
non-executive remuneration to market commensurate rates. In
addition, we have bolstered our central infrastructure in the year
with the addition of a Talent and Resource Manager and a Strategic
Projects Director to support the growth of the Network. We are
committed to maintaining a lean central cost base whilst ensuring
we provide our licensees with the support they need to thrive and
fulfil their potential. This has resulted in an Adjusted Pre-tax
Profit of GBP2.0m, an increase of 25% on the prior year.
Adjusted PBT and Exceptional Costs
Adjusted PBT is calculated as follows:
2022 2021
(GBP000's) (GBP000's)
(Loss) / Profit before
tax (31) 1,585
Share based payments 1,167 7
IPO costs 866 -
-------------- -------------
Adjusted PBT 2,002 1,592
We have a significant exceptional share-based payment charge in
the year of GBP1.2m which reflects the accounting impact of the
one-off issue of growth shares to partners and employees prior to
the IPO. The growth shares were converted to ordinary shares on IPO
and there is no dilutive impact on shareholders going forward. The
charge is being spread over the period from issue to 1-2 years post
IPO depending on the individual share conditionality. The expense
is expected to reduce in future periods and from 16 December 2023
will represent a more normalised basis, reflecting the effect of
the executive LTIP scheme only.
Total IPO costs incurred were GBP1.27m, of which GBP0.40m has
been recognised in equity and the remaining GBP0.87m in the Income
Statement.
Taxation
The effective rate of tax (based on PBT excluding the
share-based payments charge which is non-deductible) is 26.7%. This
is higher than the statutory tax rate and the prior year (20.5%)
due to non-deductible IPO costs in the Period.
Earnings Per Share
Earnings per share has been diluted year on year by the shares
issued and share re-organisation on IPO. Adjusted basic earnings
per share for the year is 10p (2021: 66p). Adjusted EPS removes the
impact of the share-based payment charge and IPO costs incurred in
the year (as shown above).
Balance Sheet
Cash
The cash balance has benefitted from the net funds of the IPO of
GBP3.8m (after IPO costs). The bank loan was repaid out of the
proceeds with a total of GBP0.99m repayments against borrowings in
the year.
The Group's business model is strongly cash generative as the
working capital requirement for the licensee businesses which
includes employee and property costs are borne by the individual
licensees. In addition, partners only get paid when their invoices
are paid so they are highly motivated to collect cash from clients.
The DSW Network lock up equivalent for the year was 30 days
(calculated as amounts owed to DSW Capital from licensees divided
by Network Revenue), well below the listed peer group.
Cash generated from operations was GBP1.44m (2021: GBP1.01m).
Operating cash conversion in the year was 105% which is higher than
the prior year (2021: 56%) due to very strong billings in the final
quarter and the associated licence fees being paid on a quarterly
basis in Q1 of 2022. This has also driven the year-on-year swing in
working capital. Corporation tax payments were GBP0.5m (2021:
GBP0.2m), whilst we had a net receipt in respect of loans to
licensees due to repayments made as businesses mature.
Capital expenditure was minimal in the Period (GBP0.04m) and
lease payments of GBP0.08m relate to the Head Office in Daresbury
where a formal lease arrangement was entered into in October
2021.
As a result, the net increase in cash and cash equivalents
before the payment of dividends was GBP4.49m (2021: net increase
GBP0.65m). The Group paid dividends of GBP0.38m in the year (2021:
GBP0.38m) leaving closing cash of GBP4.72m (2021: GBP0.61m) and no
debt.
Net Assets
The net assets of the Group have increased from GBP2.2m to
GBP8.0m in the year, recognising the capital raised on IPO and
profit for the year and a robust financial performance. This leaves
the business with a strong balance sheet and the excellent capital
base to grow the business, both organically and through strategic
acquisition opportunities.
Dividend
The Board is proposing to pay a final ordinary dividend for the
year ended 31 March 2022 consisting of an interim catch up dividend
of 0.56 pence per share and a final dividend of 3.66 pence per
share, to align with its dividend policy going forward. An interim
dividend of GBP0.25m in respect of the six months to 30 Sept 2021
was paid on 13 October 2021.
Both the interim catch up dividend and the final dividend will
be approved at the Company's AGM, which will be held in September
2022.
Nicole Burstow
Chief Financial Officer
13 July 2022
Consolidated statement of comprehensive income
For the year ended 31 March 2022
Year ended Year ended
31 March 31 March
2022 2021
(Restated)
Note GBP'000 GBP'000
Continuing operations
Revenue 4 2,681 2,354
Gross profit 2,681 2,354
Share of results of associates 16 309 102
Share of results of jointly
controlled entity 17 102 15
Administrative expenses (3,018) (728)
Operating profit 74 1,743
Adjusted operating profit(1) 2,107 1,750
Share based payments expense (1,167) (7)
IPO Expenses (866) -
------------------------------------ ------ ------------- ---- ----------------
Operating profit 74 1,743
Finance income 9 82 84
Impairment of loans due from
associated undertakings (127) (139)
Finance costs 10 (60) (103)
(Loss) / Profit before tax (31) 1,585
Income tax 11 (303) (327)
(Loss) / Profit for the year 6 (334) 1,258
=============
Total comprehensive (loss) /
income for the year attributable
to owners of the Company (334) 1,258
============= ================
Earnings per share
From continuing operations
Basic 13 (GBP0.02) GBP0.66
=============
Diluted 13 (GBP0.02) GBP0.66
============= ====
1. Adjusted Operating profit, which is defined as operating
profit adjusted for items not considered part of underlying trading
including IPO costs and share based payments, is a non-GAAP metric
used by management and is not an IFRS disclosure.
Consolidated statement of financial position
As at 31 March 2022
As at As at
31 March 31 March
2022
2021
(Restated)
Note GBP'000 GBP'000
Non-current assets
Intangible assets 14 794 673
Property, plant and equipment 15 525 56
Investments 18 922 922
Investments in associates 18 290 97
Interests in jointly controlled
entities 18 23 19
Prepayments and Accrued Income 19 175 184
Deferred tax asset 22 4 3
------------ --------------
2,733 1,954
------------ --------------
Current assets
Trade receivables 19 832 1,352
Prepayments and Accrued Income 19 362 255
Other receivables 19 369 266
Cash and bank balances 4,722 609
6,285 2,482
Total assets 9,018 4,436
============ ==============
Current liabilities
Trade payables 23 86 81
Other taxation 23 210 278
Other payables 23 54 24
Accruals and Deferred Income 23 163 88
Current tax liabilities 23 63 262
Borrowings 20 - 326
Lease liability 25 83 -
659 1,059
------------ --------------
Net current assets 5,626 1,423
------------ --------------
Borrowings 20 - 625
Convertible loan notes 21 - 540
Lease liability 25 302 -
Dilapidation provision 23 72 -
374 1,165
------------ --------------
Total liabilities 1,033 2,224
Net assets 7,985 2,212
Equity
Share capital 24 54 2
Share premium 5,280 -
Share-based payment reserve 26 1,174 7
Retained earnings 1,477 2,203
Total Equity attributable to
owners of the Company 7,985 2,212
Company statement of financial position
As at 31 March 2022
As at As at
31 March 31 March
2022 2021
(Restated)
Note GBP'000 GBP'000
Non-current assets
Intangible assets 14 794 673
Property, plant and equipment 15 39 35
Investments 18 922 922
Investments in associates 18 290 97
Interests in jointly controlled
entities 18 23 19
Prepayments and accrued income 19 175 184
Deferred tax asset 22 4 3
------------ --------------
2,247 1,933
------------ --------------
Current assets
Trade receivables 19 801 1,316
Prepayments and Accrued Income 19 307 190
Other receivables 19 499 366
Cash and bank balances 4,714 584
6,321 2,456
Total assets 8,568 4,389
============ ==============
Current liabilities
Trade payables 23 29 10
Other taxation 23 177 276
Other payables 23 54 24
Accruals and Deferred Income 23 154 87
Current tax liabilities 23 63 262
Borrowings 20 - 276
477 935
------------ --------------
Net current assets 5,844 1,521
------------ --------------
Borrowings 20 - 625
Convertible loan notes 21 - 540
- 1,165
------------ --------------
Total liabilities 477 2,100
Net assets 8,091 2,289
Equity
Share capital 24 54 2
Share premium 5,280 -
Share-based payment reserve 26 1,174 7
Retained earnings 1,583 2,280
Total Equity attributable to
owners of the Company 8,091 2,289
The loss after tax for the Company was GBP305,819 (2021: profit
of GBP1,274,699).
Consolidated statement of changes in equity
For the year ended 31 March 2022
Share capital Share premium Share-based payments Retained earnings Total equity
reserve
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------- --------------- ---------------------- ------------------- --------------
Balance at 31 March
2020 (restated) 2 - - 1,325 1,327
Profit for the year - - - 1,258 1,258
Dividends - - - (380) (380)
Share-based payments - - 7 - 7
--------------- --------------- ---------------------- ------------------- --------------
Balance at 31 March
2021 (restated) 2 - 7 2,203 2,212
Loss for the year - - - (334) (334)
Dividends - - - (380) (380)
Share-based payments - - 1,167 - 1,167
Issue of shares in
year 52 5,280 - (12) 5,320
Balance at 31 March
2022 54 5,280 1,174 1,477 7,985
--------------- --------------- ---------------------- ------------------- --------------
Company statement of changes in equity
For the year ended 31 March 2022
Share capital Share premium Share-based payments Retained earnings Total equity
reserve
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
--------------- --------------- ---------------------- ------------------- --------------
Balance at 31 March
2020 (restated) 2 - - 1,386 1,388
Profit for the year - - - 1,274 1,274
Dividends - - - (380) (380)
Share-based payments - - 7 - 7
--------------- --------------- ---------------------- ------------------- --------------
Balance at 31 March
2021 (restated) 2 - 7 2,280 2,289
Loss for the year - - - (305) (305)
Dividends - - - (380) (380)
Share-based payments - - 1,167 - 1,167
Issue of shares in
year 52 5,280 - (12) 5,320
Balance at 31 March
2022 54 5,280 1,174 1,583 8,091
--------------- --------------- ---------------------- ------------------- --------------
Consolidated cash flow statement
For the year ended 31 March 2022
Year ended Year ended
31 March 31 March
2022 2021
Note GBP'000 GBP'000
(Loss) / profit for the year (334) 1,258
Adjustments for:
Income tax expense 11 303 327
Net interest (income)/expense (22) 19
Depreciation of property, plant
and equipment 15 87 36
Amortisation of intangible assets 14 39 37
Share-based payment expense 26 1,167 7
Impairment of loans due from
associated undertakings 127 139
------------
Operating cash flows before
movements in working capital 1,367 1,823
Decrease/(increase) in trade
and other receivables 192 (1,266)
Increase in trade and other
payables 73 367
(Increase)/decrease in amounts
owed from associates in relation
to profit share (196) 89
Cash generated by operations 1,436 1,013
Income taxes paid (502) (203)
Net cash from operating activities 934 810
Investing activities
Purchases of property, plant
and equipment 15 (37) (16)
Net cash used in investing
activities (37) (16)
------------ --------------
Financing activities
Dividends paid 12 (380) (380)
Finance lease payments (77) -
Interest received/(paid) 45 19
Repayments of loans and borrowings (992) (217)
Proceeds from loans and borrowings - 50
Proceeds from issue of ordinary 4,620 -
shares net of issue costs
Net cash from / (used in) financing
activities 3,216 (528)
Net increase in cash and cash
equivalents 4,113 266
Cash and cash equivalents at
beginning of year 609 343
------------ ---------
Cash and cash equivalents at
end of year 4,722 609
============ =========
NOTES TO THE FINANCIAL STATEMENTS
1. General information
The Company was incorporated as DSW Capital Limited on 23 March
2010 under the Companies Act 2006 (Registration number: 07200401).
The Company was re-registered as DSW Capital plc on 26 October
2021. The Company is incorporated and domiciled in England and
Wales. The principal activity of the Company and its subsidiary,
DSW Services LLP, (together referred to as the 'Group') is the
licensing of the Dow Schofield Watts brand and associated brand
names for use in the professional services sector.
The address of the Company's registered office is:
7400 Daresbury Park
Daresbury
Warrington
WA4 4BS
The Financial Statements are presented in Pounds Sterling (GBP),
which is the currency of the economic environment in which the
Group operates. All amounts are rounded to the nearest GBP'000
except where noted.
2. Accounting policies
Basis of Preparation
The preliminary announcement does not constitute full financial
statements for the years ended 31 March 2022 or 2021 within the
meaning of section 434 of the Companies Act 2006.
The results for the year ended 31 March 2022 have been extracted
from the annual audited financial statements of the Group for the
year ended 31 March 2022 prepared in accordance with UK adopted
International Accounting Standards which received an unqualified
auditor's report and which have not yet been delivered to the
Registrar of Companies. This preliminary financial information has
been prepared on the same basis as the accounting policies adopted
in those financial statements but does not include all the
disclosures required in financial statements prepared in accordance
with UK adopted International Accounting Standards and accordingly
does not itself comply with UK adopted International Accounting
Standards. The audited financial statements for the year ended 31
March 2022 were approved by the Directors on 13 July 2022.
The financial information for the year ended 31 March 2021 has
been derived from the financial statements of the Company for that
year which were prepared under section 1A of Financial Reporting
Standard 102, which have been delivered to the Registrar of
Companies. The auditor's report on those financial statements was
unqualified. The financial statements for the year ended 31 March
2022 and 31 March 2021 did not include a statement under Section
498(1) to (4) of the Companies Act 2006.
The 2022 annual report will be distributed to shareholders and
included within the investor relations section of our website in
due course and will be considered at the Annual General Meeting to
be held in September 2022.
Statement of Compliance
These Financial Statements have been prepared in accordance with
International Financial Reporting Standards and International
Accounting Standards as issued by the International Accounting
Standards Board (IASB) and Interpretations (collectively
IFRSs).
The Group has historically prepared company only accounts under
UK Generally Accepted Accounting Practices (FRS 102). As such,
consolidated financial information has been prepared under IFRS for
the first time for the purpose of presentation in these financial
statements. Details of the transition and prior year adjustments
have been disclosed in note 31.
The preparation of financial statements in compliance with
adopted UK IFRS requires the use of certain critical accounting
estimates. It also requires Group management to exercise judgment
in applying the Group's accounting policies. The areas where
significant judgments and estimates have been made in preparing the
financial statements and their effect are disclosed in note 3.
Impact of the initial application of other new and amended IFRS
Standards that are effective for the current year
In preparing the Financial Statements the Group has applied the
below amendments to IFRS Standards and Interpretations that are
effective for an annual period that begins on or after 1 January
2021. Their adoption has not had any material impact on the
disclosures or on the amounts reported in these Financial
Statements:
-- COVID-19-Related Rent Concessions beyond 30 June 2021 (Amendments to IFRS 16)
-- Interest Rate Benchmark Reform - IBOR 'phase 2' (Amendments
to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16)
New and revised IFRS Standards in issue but not yet
effective
In preparing these Financial Statements, the Group has not
applied the following new and revised IFRS Standards that have been
issued but are not yet effective.
Amendments to IAS 16 Property, Plant and Equipment: Proceeds
before Intended Use
Amendments to IFRS 3 Reference to the Conceptual Framework
Annual Improvements Amendments to IFRS 1 First-time Adoption
to IFRS Standards 2018-2020 of International Financial Reporting
Cycle Standards, IFRS 9 Financial Instruments,
IFRS 16 Leases, and IAS 41 Agriculture
The Directors do not expect that the adoption of the Standards
listed above will have a material impact on the Financial
Statements of the Group in future periods.
Basis of accounting
The Financial Statements have been prepared on the historical
cost basis, except for the revaluation of financial instruments
that are measured at revalued amounts or fair values at the end of
each reporting period, as explained in the accounting policies
below. Historical cost is generally based on the fair value of the
consideration given in exchange for goods and services.
Fair value is the price that would be received to sell an asset
or paid to transfer a liability in an orderly transaction between
market participants at the measurement date, regardless of whether
that price is directly observable or estimated using another
valuation technique
The principal accounting policies adopted are set out below.
Going concern
In considering the appropriateness of the going concern basis of
preparation, the Directors have considered forecasts for the next
twelve months following the date of this Annual Report, which
includes detailed cash flow forecasts and working capital
availability. These forecasts show that sufficient resources remain
available to the business for the foreseeable future, allowing the
Group to meet its liabilities as they fall due.
At 31 March 2022, the Group has net assets of GBP8.0 million
(2021: GBP2.2m) and net current assets of GBP5.6m (2021: GBP1.4m)
which reflects the strong financial position for both the Group and
the Company. In addition, the Group remains profitable with
adjusted profit after tax of GBP1.7m in the year ended 31 March
2022 continuing the trend of increased profitability seen in the
previous two financial periods.
Over the last two years the COVID-19 pandemic has created an
unprecedented and constantly changing challenge to all businesses.
The Group has been resilient throughout the pandemic with minimal
disruption and even signs of increased productivity across the
network, as demonstrated by the strong results reported for the
year ended 31 March 2022. In light of the government's "Living with
Covid" policy, management do not anticipate further disruptions
from COVID-19 and consider it to be a reasonable expectation that
the forecasts will not be materially impacted by future COVID-19
outbreaks.
The process of monitoring the fast-evolving situation in Eastern
Europe, recessionary threats and current inflationary pressures on
the Group's financial performance and liquidity is ongoing. Whilst
the Group does not have operations in Russia or Ukraine, the
far-reaching impact on energy prices and the cost of living have
been considered as part of our going concern assessment. Each
licensee business bears its own working capital requirement
including employee and property costs. Furthermore licensee
partners are only remunerated out of licensee profits, insulating
the group from the impact of wage inflation. Given our low
operational gearing, diversified revenue streams and lean cost base
the Directors believe that DSW Capital is resistant to
macro-economic uncertainty.
Scenario analysis has been performed on the underlying forecasts
and, given the Group's current cash balance is over 4 times the
size of the overheads, the forecasts demonstrate that the Company
and the Group have adequate resources to continue in operational
existence for the foreseeable future. The payment of a dividend has
been approved totalling GBP888k which will reduce the group's cash
balance by this amount at the time of payment.
After making enquiries, the Directors have formed a judgement,
at the date of the Annual Report, that there is a reasonable
expectation that the Group and the Company have adequate resources
to continue in operational existence for the foreseeable future.
Thus, the Directors continue to adopt the going concern basis of
accounting in preparing the financial statements for the year ended
31 March 2022.
Basis of consolidation
The consolidated Financial Statements incorporate the Financial
Statements of the Company and entities controlled by the Company
(its subsidiaries) made up to 31 March each year. Control is
achieved when the Company:
-- has the power over the investee;
-- is exposed, or has rights, to variable returns from its involvement with the investee; and
-- has the ability to use its power to affects its returns.
The Company reassesses whether or not it controls an investee if
facts and circumstances indicate that there are changes to one or
more of the three elements of control listed above.
When the Company has less than a majority of the voting rights
of an investee, it considers that it has power over the investee
when the voting rights are sufficient to give it the practical
ability to direct the relevant activities of the investee
unilaterally. The Company considers all relevant facts and
circumstances in assessing whether or not the Company's voting
rights in an investee are sufficient to give it power,
including:
-- the size of the Company's holding of voting rights relative
to the size and dispersion of holdings of the other vote
holders;
-- potential voting rights held by the Company, other vote holders or other parties;
-- rights arising from other contractual arrangements; and
-- any additional facts and circumstances that indicate that the
Company has, or does not have, the current ability to direct the
relevant activities at the time that decisions need to be made.
All intragroup assets and liabilities, equity, income, expenses
and cash flows relating to transactions between the members of the
Group are eliminated on consolidation.
Investments in associates and jointly controlled entities
An associate is an entity over which the Group has significant
influence and that is neither a subsidiary nor an interest in a
jointly controlled entity. Significant influence is the power to
participate in the financial and operating policy decisions of the
investee but is not control or joint control over those
policies.
A jointly controlled entity is a joint arrangement whereby the
parties that have joint control of the arrangement have rights to
the net assets of the joint arrangement. Joint control is the
contractually agreed sharing of control of an arrangement, which
exists only when decisions about the relevant activities require
unanimous consent of the parties sharing control.
The results and assets and liabilities of associates or jointly
controlled entities are incorporated in these Financial Statements
using the equity method of accounting.
Under the equity method, an investment in an associate or a
jointly controlled entity is recognised initially in the
consolidated statement of financial position at cost and adjusted
thereafter to recognise the Group's share of the profit or loss and
other comprehensive income of the associate or jointly controlled
entity. The Group's share of the profit or loss is driven by the
contractual arrangements in place. The Group's share of the profit
or loss is defined by the economic interest in the associate or
jointly controlled entity as stipulated in the legal arrangements,
which differs from the percentage voting rights held.
The requirements of IAS 36 are applied to determine whether it
is necessary to recognise any impairment loss with respect to the
Group's investment in an associate or a jointly controlled entity.
When necessary, the entire carrying amount of the investment is
tested for impairment in accordance with IAS 36 as a single asset
by comparing its recoverable amount (higher of value in use and
fair value less costs of disposal) with its carrying amount.
The Group discontinues the use of the equity method from the
date when the investment ceases to be an associate or a jointly
controlled entity.
Other Investments
Where long-term loans are made to licensees, the Directors of
the Company have accounted for them as investments under IFRS 9.
These loans are accounted for using the amortised cost method. See
note 3 for associated critical judgements involved in determining
the appropriate classification of long-term loans to licensees.
Revenue recognition
Revenue comprises revenue recognised by the Group in respect of
services supplied during the year, exclusive of Value Added
Tax.
The Group recognises revenue from the following major
sources:
-- Licence fee income
-- Profit share income
Licence fee income is recognised at the point at which the
performance obligations as defined by the contractual arrangements
have been satisfied, which is primarily when revenue has been
invoiced by the licensees over time. Profit share income is only
recognised at the point at which the risk of reversal is deemed to
be remote.
Leases
The Group applies IFRS 16 to account for leases. At inception of
a contract, the Group assesses whether a contract is, or contains,
a lease. A contract is, or contains, a lease if the contract
conveys the right to control the use of an identified asset for a
period of time in exchange for consideration.
The Group recognises a right-of-use asset and a lease liability
at the lease commencement date. The right-of-use asset is initially
measured at cost, which comprises the initial amount of the lease
liability adjusted for any lease payments made at or before the
commencement date, plus any initial direct costs incurred and an
estimate of costs to restore the underlying asset, less any lease
incentives received.
The right-of-use asset is subsequently depreciated using the
straight-line method from the commencement date to the earlier of
the end of the useful life of the right-of-use asset or the end of
the lease term. In addition, the right-of-use asset is periodically
reduced by impairment losses, if any, and adjusted for certain
remeasurements of the lease liabilities.
The lease liability is initially measured at the present value
of lease payments that were not paid at the commencement date,
discounted using the Group's incremental borrowing rate. The
incremental borrowing rate applied to lease liabilities during the
year is 5.55%.
The lease liability is measured at amortised cost using the
effective interest method. If there is a remeasurement of the lease
liability, a corresponding adjustment is made to the carrying
amount of the right-of-use asset or is recorded directly in profit
or loss if the carrying amount of the right-of-use asset is
zero.
Short-term leases and low value assets
The Group has elected not to recognise right-of-use assets and
lease liabilities for short-term leases that have a lease term of
12 months or less or leases of low value assets. These lease
payments are expensed on a straight-line basis over the lease
term.
Dilapidations provision
The Group recognises a provision for the future costs of
dilapidations on leased office space. The provision is an estimate
of the total cost to return applicable office space to its original
condition at the end of the lease term.
Operating profit
Operating profit is stated after charging the share of results
of associates and jointly controlled entities, but before finance
income and finance costs.
Government Grants
Government grants are not recognised until there is reasonable
assurance that the Group will comply with the conditions attaching
to them and that the grants will be received. Government grants are
then recognised in the consolidated income statement on a
systematic basis over the periods in which the Group recognises as
expenses the related costs for which the grants are intended to
compensate.
The Group has elected to net grant income off against the
related costs as permitted under IAS 20. In 2022, no government
grants were received. In the prior year, government grants of
GBP13,614 were received as part of the Coronavirus Job Retention
Scheme ("JRS"). There are no future related costs in respect of
these grants which were received solely as compensation for costs
incurred in the year.
Retirement and termination benefit costs
Payments to defined contribution retirement benefit plans are
recognised as an expense in the income statement in the periods
during which services are rendered by employees. Payments made to
state-managed retirement benefit plans are accounted for as
payments to defined contribution plans where the Group's
obligations under the plans are equivalent to those arising in a
defined contribution retirement benefit plan.
Short-term and other long-term employee benefits
Wages, salaries, paid annual leave and sick leave and bonuses
are accrued in the period in which the associated services are
rendered by employees of the Group.
Taxation
The income tax expense represents the sum of the tax currently
payable and deferred tax.
Current tax
The tax currently payable is based on taxable profit for the
year. Taxable profit differs from net profit as reported in profit
or loss because it excludes items of income or expense that are
taxable or deductible in other years and it further excludes items
that are never taxable or deductible. The Group's liability for
current tax is calculated using tax rates that have been enacted or
substantively enacted by the end of the reporting period .
Deferred tax
Deferred tax is recognised on temporary differences arising
between the tax bases of assets and liabilities and their carrying
amounts in the Financial Statements and on unused tax losses or tax
credits available to the Group. Deferred tax is determined using
tax rates and laws that have been enacted or substantively enacted
by the reporting date.
Property, plant and equipment
Property, plant and equipment is stated in the statement of
financial position at cost less accumulated depreciation and
accumulated impairment loss.
Depreciation is charged so as to write off the cost of assets
over their estimated useful lives, as follows:
Office equipment 33% straight line
Office fixtures & 20% straight line
fittings
The estimated useful lives, residual values and depreciation
method are reviewed at the end of each reporting period, with the
effect of any changes in estimate accounted for on a prospective
basis.
Intangible assets acquired separately
Intangible assets with finite useful lives that are acquired
separately are carried at cost less accumulated amortisation and
accumulated impairment losses. Amortisation is recognised on a
straight-line basis over their estimated useful lives which are
disclosed below. The estimated useful life and amortisation method
are reviewed at the end of each reporting period, with the effect
of any changes in estimate being accounted for on a prospective
basis. The estimated useful life of intangible assets is as
follows:
Intangible assets 10 - 25 years
The intangibles relate to intellectual property and trademarks
acquired.
Financial instruments
Financial assets and financial liabilities are recognised in the
Group's statement of financial position when the Group becomes a
party to the contractual provisions of the instrument.
Financial assets and financial liabilities are initially
measured at fair value, except for trade receivables that do not
have a significant financing component which are measured at
transaction price. Transaction costs that are directly attributable
to the acquisition or issue of financial assets and financial
liabilities (other than financial assets and financial liabilities
at fair value through profit or loss) are added to or deducted from
the fair value of the financial assets or financial liabilities, as
appropriate, on initial recognition. Transaction costs directly
attributable to the acquisition of financial assets or financial
liabilities at fair value through profit or loss are recognised
immediately in profit or loss.
Financial assets
The Group's financial assets include cash and cash equivalents
and trade and other receivables that arise from the business
operations and loans to licensees.
All financial assets are recognised and derecognised on a trade
date where the purchase or sale of a financial asset is under a
contract whose terms require delivery of the investment within the
timeframe established by the market concerned, and are initially
measured at fair value, plus transaction costs.
All recognised financial assets are measured subsequently in
their entirety at amortised cost.
Classification of financial assets
Amortised cost and effective interest method
(a) Trade and other receivables
Trade receivables are stated at their original invoiced value.
Trade receivables are reduced by appropriate allowances for
estimated irrecoverable amounts. See Note 3 for details of the loss
allowance.
(b) Loans owing from licensees
Loans are measured at amortised cost at their effective interest
rates. The amortised cost of a loan is the amount at which the loan
is measured at initial recognition minus the principal repayments,
plus the cumulative amortisation using the effective interest
method of any difference between that initial amount and the
maturity amount, adjusted for any loss allowance. The gross
carrying amount of a financial asset is the amortised cost of a
financial asset before adjusting for any loss allowance.
(c) Cash and cash equivalents
Cash and cash equivalents comprise cash on hand and other
short-term highly liquid investments that are readily convertible
to a known amount of cash and are subject to insignificant risk of
changes in value.
Interest income is recognised in profit or loss and is included
in the "finance income" line item (note 9).
Impairment of financial assets
The Group recognises a loss allowance for expected credit losses
on the Group's loans to licensees and trade receivables. The amount
of expected credit losses is updated at each reporting date to
reflect changes in credit risk since initial recognition of the
respective financial asset.
The expected loss rates for these financial assets are based on
the Group's historical credit losses experienced over the
three-year period prior to the period end. An additional portfolio
expected loss provision is calculated in which the historical loss
rates are then adjusted for current and forward-looking information
on macroeconomic factors affecting the Group's licensees. The Group
has identified the changing insolvency rates in the UK as the key
macroeconomic factor.
(i) Definition of default
The Group considers when a licensee business is terminated or
ceases to trade as default events.
(ii) Measurement and recognition of expected credit losses
The measurement of expected credit losses is a function of the
probability of default, loss given default (i.e., the magnitude of
the loss if there is a default), and the exposure at default. The
assessment of the probability of default and loss given default is
based on historical data adjusted by forward-looking information as
described above. As for the exposure at default, for financial
assets, this is represented by the assets' gross carrying amount at
the reporting date.
For financial assets, the expected credit loss is estimated as
the difference between all contractual cash flows that are due to
the Group in accordance with the contract and all the cash flows
that the Group expects to receive, discounted at the original
effective interest rate.
The Group recognises an impairment loss in profit or loss for
all financial instruments with a corresponding adjustment to their
carrying amount through a loss allowance account.
Financial liabilities and equity
Classification as debt or equity
Debt and equity instruments are classified as either financial
liabilities or as equity in accordance with the substance of the
contractual arrangements and the definitions of a financial
liability and an equity instrument.
Financial liabilities
All financial liabilities are measured subsequently at amortised
cost using the effective interest method.
Financial liabilities are included on the balance sheet as trade
and other payables and borrowings.
(a) Trade and other payables
Trade payables are stated at their original invoiced value.
Accounts payable are classified as current liabilities if the
company does not have an unconditional right, at the end of the
reporting period, to defer settlement of the creditor for at least
twelve months after the reporting date. If there is an
unconditional right to defer settlement for at least twelve months
after the reporting date, they are presented as non-current
liabilities.
(b) Borrowings
All borrowings are initially recorded at the amount of proceeds
received, net of transaction costs. Borrowings are subsequently
carried at amortised cost and the interest expense is recognised on
the basis of the effective interest method and is included in
finance costs. Borrowings are classified as current liabilities
unless the Group has an unconditional right to defer settlement of
the liability for at least 12 months after the reporting date.
Convertible Loan Note - Measurement
Upon IPO the convertible loan notes converted into 700,000
ordinary shares. See Note 21 for further details.
Dividend Policy
The Board has adopted a progressive dividend policy to reflect
the expectation of future cash flow generation and long-term
earnings potential of the Group. The Board may, however, revise the
Group's dividend policy from time to time in line with the actual
results of the Group.
Dividends are recognised once they have been paid.
Related Party Transactions
Details of related party transactions entered into by members of
the Group are set out in Note 30.
Share-based payments
Equity-settled share-based payments to employees and others
providing similar services are measured at the fair value of the
equity instruments at the grant date. The fair value excludes the
effect of non-market-based vesting conditions. Details regarding
the determination of the fair value of equity-settled share-based
transactions are set out in note 26.
The fair value determined at the grant date of the
equity-settled share-based payments is expensed on a straight-line
basis over the vesting period, based on the Group's estimate of the
number of equity instruments that will eventually vest. At each
reporting date, the Group revises its estimate of the number of
equity instruments expected to vest as a result of the effect of
non-market-based vesting conditions. The impact of the revision of
the original estimates, if any, is recognised in profit or loss
such that the cumulative expense reflects the revised estimate,
with a corresponding adjustment to reserves.
3. Critical accounting judgements and key sources of estimation
uncertainty
In applying the Group's accounting policies, which are described
in note 2, the Directors are required to make judgements (other
than those involving estimations) that have a significant impact on
the amounts recognised and to make estimates and assumptions about
the carrying amounts of assets and liabilities that are not readily
apparent from other sources. The estimates and associated
assumptions are based on historical experience and other factors
that are considered to be relevant. Actual results may differ from
these estimates.
The estimates and underlying assumptions are reviewed on an
ongoing basis.
Critical judgements in applying the Group's accounting
policies
The following are the critical judgements, apart from those
involving estimations (which are presented separately below), that
the Directors have made in the process of applying the Group's
accounting policies and that have the most significant effect on
the amounts recognised in the Financial Statements.
Consideration of control over a licensee
Where the Group holds voting rights in an underlying licensee,
an assessment of the ability to exert control over these entities
is made based on whether the Group has the practical ability to
direct the relevant activities of these entities unilaterally.
Investments in associates have been recognised for entities where
the Group holds between 20% and 50% of the voting rights and does
not have any unilateral powers other than protective ones. As the
Group has more than 20% of the voting rights, it is deemed to have
significant influence over the licensees and thus they are
accounted for as investment in associates.
There is one entity in which the Group has 51% of the voting
rights and 16.7% of the economic rights. However, all significant
operational decisions require the unanimous consent of the parties.
A s such this entity has been recognised as an investment in a
jointly controlled entity.
Classification of long-term loans to licensees
Where long-term loans are made to licensees, these are accounted
for as investments under IFRS 9 using the amortised cost method.
The long-term loan provided to a licensee has a 20-year term and is
only repayable at the end of the term and therefore in substance,
is more akin to an investment. The interest rate is 7.1%.
Share based payments
In the year ended 31 March 2022, the Group operated three equity
share based payment plans. Management have formed a judgement on
the vesting period over which the associated charge should be
spread. This has been formed with reference to the individual
conditionality associated with the different classes of share
awards and ranges between one to four years from the balance sheet
date.
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 a material adjustment to the carrying
amounts of assets and liabilities within the next financial year,
are discussed below.
Calculation of expected loss allowance for related party
loans
When measuring expected credit loss ("ECL"), the Group uses
reasonable and supportable forward-looking information, which is
based on assumptions for the future movement of different economic
drivers and how these drivers will affect each other.
Probability of default constitutes a key input in measuring ECL.
Probability of default is an estimate of the likelihood of default
over a given time horizon, the calculation of which includes
historical data, assumptions and expectations of future conditions
for the licensee business.
The Group assesses each licensee individually as to the
probability of default on their loans based on their cash balances
and their ability to pay the cash flows due.
Also, the Group has elected to calculate an additional portfolio
expected loss provision in which the historical loss rates are
adjusted for current and forward-looking information on
macroeconomic factors affecting the Group's licensees. The Group
has identified the changing insolvency rates in the UK as the key
macroeconomic factor as the failure of corporates is deemed to be a
reasonable macroeconomic predictor for the likely failure of a
licensee business on a portfolio basis.
4. Revenue
The disclosure of revenue by product line is consistent with the
revenue information that is disclosed for each reportable segment
under IFRS 8 (see note 5).
Disaggregation of revenue
2022 2021
GBP'000 GBP'000
External revenue by product line
License Fee Income 2,531 2,243
Profit Share Income 150 101
Other Income - 10
Total 2,681 2,354
A further breakdown of revenue by reporting line is shown
below:
2022 2021
GBP'000 GBP'000
External revenue by reporting line
License fees attributable to Mergers
& Acquisition ('M&A') 1,889 1,864
License fees attributable to Other 642 379
Profit share attributable to M&A 150 101
Profit share attributable to Other - -
--------- ---------
Total Revenue by reporting line 2,681 2,344
--------- ---------
Other income - 10
--------- ---------
Total Revenue 2,681 2,354
========= =========
5. Operating segments
Products and services from which reportable segments derive
their revenues
Operating segments are reported in a manner consistent with the
internal reporting provided to the Chief Operating Decision Marker
(CODM). The CODM, who is responsible for allocating resources and
assessing performance of the operating segments, has been
identified as the Group's Chief Executive.
The Group has four reporting lines, identified above, which
divide license fees and profit share income between those
attributable to M&A and Other, but the Group only has one
operating segment due to the nature of services provided across the
whole Group being the same, being revenue derived from licensing of
the Dow Schofield Watts brand and associated brand names for use in
the professional services sector. The Group's revenues, costs,
assets, liabilities and cash flows are therefore totally
attributable to this reporting segment.
Internal management reports are reviewed by the Directors
monthly, including revenue information by licensee. Such revenue
information alone does not constitute sufficient information upon
which to base resource allocation decisions.
Performance of the segment is assessed based on revenue data
only.
As the Group only has one reportable segment, all segmented
information is provided by the consolidated statement of
comprehensive income, the consolidated statement of financial
position, the consolidated statement of changes in equity and the
consolidated statement of cash flows.
Geographical information
The Group has operations in one geographic location, the United
Kingdom, and therefore the Group only has one reporting geographic
operating segment. This is in line with internal reporting.
Information about major customers
Included in revenues arising from License fees attributable to
M&A are revenues of approximately GBP0.96m (2021: GBP1.17m)
which arose from license fee income from the Group's largest
licensee. No other single licensee contributed 10 per cent or more
to the Group's revenue in either 2022 or 2021.
6.(Loss) / Profit for the year
Profit for the year has been arrived at after
charging/(crediting):
2022 2021
GBP'000 GBP'000
Government grant for the purpose of immediate
financial support - (14)
Depreciation of property, plant and equipment 87 36
Amortisation 39 37
Employee pension 36 2
IPO costs 866 -
Expected credit loss - license fees (6) 29
Expected credit loss - outstanding loans 127 139
Expected credit loss - profit share 14 -
In 2022 no government grants were received. In the prior year,
government grants of GBP13,614 were received as part of the
Coronavirus Job Retention Scheme ("JRS"). There are no future
related costs in respect of these grants which were received solely
as compensation for costs incurred in the year.
7. Auditors' remuneration
2022 2021
GBP'000 GBP'000
Audit of the Group financial statements 60 50
Fees payable to the Company's auditors
in respect of:
Interim financial reporting 16 -
Reporting Accountants 126 -
Total auditors' remuneration 202 50
========= =========
Non-audit services relate to the appointment of BDO LLP as
reporting accountants during the IPO and the interim review of
financial information by the Company's auditors which was completed
as part of the IPO.
8. Staff costs
The average number of persons employed by the Group (including
Directors) during the year, analysed by category was as
follows:
2022 2021
Number Number
Central Heads 16 13
16 13
======== ========
Their aggregate remuneration comprised:
2022 2021
Year ended Year ended
31 March 31 March
2022 2021
GBP'000 GBP'000
Wages and salaries 669 340
Social security costs 74 31
Other pension costs (see note 27) 36 2
-------------
779 373
============ =============
'Other pension costs' relate to the defined contribution plan
charge as detailed in Note 27.
Aggregate Directors' remuneration
2022 2021
GBP'000 GBP'000
Wages and salaries 393 259
Social security costs 49 28
Other pension costs (see note 27) 31 1
473 288
========= =========
The highest paid Director's total emoluments in the year were
GBP276,308 (2021: GBP127,313) of which GBP31,321 (2021: GBP1,313)
related to pension costs.
Directors' transactions
Dividends totaling GBP379,995 were paid in the year in respect
of ordinary shares (2021: GBP380,000). The dividends were all paid
to Directors of the Company who were currently serving at the time
of payment. See Note 12 for details.
9. Finance income
2022 2021
GBP'000 GBP'000
Interest income:
Loan Interest 80 80
80 80
--------- ---------
Other finance income 2 4
--------- ---------
Total finance income 82 84
========= =========
10. Finance costs
2022 2021
GBP'000 GBP'000
Interest on bank loans (36) (64)
Amortisation of debt issue costs (11) (14)
Interest costs on lease (11) -
Other finance costs (2) (25)
(60) (103)
========= =========
11. Income Tax
2022 2021
GBP'000 GBP'000
Corporation income tax:
Current year 340 329
Adjustments in respect of prior years (36) 12
---------
304 341
--------- ---------
Deferred tax (see note 22)
Origination and reversal of temporary
differences (1) (14)
--------- ---------
303 327
========= =========
The standard rate of corporation tax applied to reported profit
is 19 per cent (2021: 19 per cent).
The charge for the year can be reconciled to the profit before
tax as follows:
2022 2021
GBP'000 GBP'000
(Loss) / Profit before tax on continuing
operations (31) 1,585
Tax at the UK corporation tax rate
of 19 per cent (2021: 19 per cent) (6) 301
Tax effect of expenses that are not
deductible in determining taxable
profit 128 11
Depreciation in excess of capital
allowances 5 11
Other tax effects 3 6
Tax effect of adjustments in relation
to prior periods (36) 12
Tax effect of income not taxable in (12) -
determining taxable profit
Movement in deferred tax assets/liabilities (1) (14)
Tax effect of share based payment 222 -
adjustment
---------
Tax expense for the year 303 327
On 26 October 2015, the UK corporation tax rate was reduced to
19% for the years beginning 1 April 2020 and 1 April 2021. As a
result of the March 2021 Budget, the UK corporation tax rate will
increase to 25% for the financial year beginning 1 April 2023. All
deferred tax has been assessed including at 25% rate beyond
FY23.
12. Dividends
2022 2021
GBP'000 GBP'000
Amounts recognised as distributions
to equity holders in the year:
Final dividend for the year ended 127 -
31 March 2021 of GBP0.0667 (2020:
GBPnil per share)
Interim dividend for the year ended
31 March 2022 of GBP0.133 per share
(2021: GBP390 per share) 253 370
Special dividend for the year GBPnil
(2021: GBP0.005 per share) - 10
380 380
========= =========
Proposed final dividend for the year
ended 31 March 2022 consisting of:
Interim catch up dividend for the 120 -
year to 31 March 2022 of GBP0.0056
per share (2021: GBPnil)
Final dividend for the year to 31
March 2022 of GBP0.0366 per share
(2021: GBP0.0667 per share) 786 127
906 127
========= =========
13. Earnings per share
From continuing operations
The calculation of the basic and diluted earnings per share is
based on the following data:
2022 2021
Earnings GBP'000 GBP'000
Earnings for the purposes of basic
earnings per share being net profit
attributable to owners of the Company (334) 1,258
Effect of dilutive potential ordinary - -
shares:
Earnings for the purposes of diluted
earnings per share (334) 1,258
2022 2021
Number of shares
Weighted average number of ordinary
shares for the purposes of basic
earnings per share 17,014,850 1,900,000
Effect of dilutive potential ordinary
shares:
Share Options 122,844 -
Weighted average number of ordinary
shares for the purposes of diluted
earnings per share 17,137,694 1,900,000
From continuing operations
2022 2021
Earnings GBP GBP
Basic earnings per share (0.02) 0.66
-------
Diluted earnings per share (0.02) 0.66
======== =======
Adjusted earnings per share is included as an Alternative
Performance Measure ('APM') and is not presented in accordance with
IAS 33. It has been calculated using adjusted earnings calculated
as profit after tax but before;
-- Share-based payments expense;
-- IPO costs
-- The tax effect of the above items
The calculation of adjusted basic and adjusted diluted earnings
per share is based on;
2022 2021
GBP'000 GBP'000
(Loss) / Profit after tax on continuing
operations (334) 1,258
Adjusted for:
Share-based payment expense 1,167 -
IPO Costs 866 -
Tax effect of adjustments above (43) -
Adjusted earnings for the purposes
of adjusted basic and adjusted diluted
earnings per share 1,656 1,258
2022 2021
Earnings GBP GBP
Adjusted basic earnings per share 0.10 0.66
----------
Adjusted diluted earnings per share 0.10 0.66
========== ==========
Tax adjustments of GBP43,000 (2021: GBP nil) have been made in
arriving at the adjusted earnings per share. This is based on an
estimated full year equivalent tax rate, which is largely driven by
the UK corporation tax rate of 19% adjusted upwards to take into
account the effect of non-deductible expenses.
Shares held in trust are issued shares that are owned by the
Group's employee benefit trusts for future issue to employees as
part of share incentive schemes. The future exercise of the share
awards and options is the dilutive effect of share awards granted
to employees that have not yet vested.
Shares held in trust are deducted from the weighted average
number of shares for basic earnings per share. For its adjusted
basic measure, the group uses the weighted average number of
ordinary shares.
14. Intangible assets
Total
GBP'000
Cost
At 1 April 2020 707
Additions 40
At 31 March 2021 747
---------
Additions 160
At 31 March 2022 907
---------
Amortisation
At 1 April 2020 37
Charge for the year 37
---------
At 31 March 2021 74
---------
Charge for the year 39
---------
At 31 March 2022 113
---------
Carrying amount
=========
At 31 March 2021 673
=========
At 31 March 2022 794
=========
All intangible assets relate to intellectual property on which
license fees are charged. GBP707k of the carrying amount as at 31
March 22 (2021: GBP531k) relates to Camlee Group.
15. Property, plant and equipment - Group
Office Fixtures,
Right of Fittings
Use Asset & Equipment Total
GBP'000 GBP'000 GBP'000
Cost
At 1 April 2020 - 168 168
Additions - 16 16
At 31 March 2021 - 184 184
Additions 520 37 557
At 31 March 2022 520 221 741
Accumulated depreciation
At 1 April 2020 - 93 93
Charge for the year - 36 36
At 31 March 2021 - 129 129
Charge for the year 52 35 87
At 31 March 2022 52 164 216
Carrying amount
------------ ------------------ ---------
At 31 March 2021 - 56 56
============ ================== =========
At 31 March 2022 468 57 525
============ ================== =========
Property, plant and equipment - Company
Office Fixtures,
Fittings
& Equipment
GBP'000
Cost
At 1 April 2020 87
Additions 10
At 31 March 2021 97
Additions 31
At 31 March 2022 128
Accumulated depreciation
At 1 April 2020 33
Charge for the year 29
At 31 March 2021 62
Charge for the year 27
At 31 March 2022 89
Carrying amount
------------------
At 31 March 2021 35
==================
At 31 March 2022 39
==================
16. Associates
As none of the individual associates are deemed to be material
associates, they have been grouped together in aggregate below.
Aggregate information of associates that are not individually
material
2022 2021
GBP'000 GBP'000
The Group's share of profit from
continuing operations 309 102
The Group's share of profit and
total comprehensive income 309 102
Change in the Group's ownership interest in an associate
Where the Company is a member of a licensee's business, a profit
share arrangement is in place which entitles the Company to profits
over a contractual threshold which is stated within an LLP
agreement. The Group accounts for associates based on their
economic share as stated in the legal agreements, rather than based
on the Company's voting rights. Therefore, the accounting always
mirrors the economic arrangement. When there is a change in profit
share, this is not deemed to constitute a change in the Group's
ownership interest in an associate as this relates to a change in
economic interest only, hence there is no change to the equity
accounting basis. A change in the Group's ownership interest
therefore is only recognised where there is a change in the
Company's voting rights.
17. Jointly controlled entities
The jointly controlled entity is not deemed to be a material
jointly controlled entity.
Information of jointly controlled entity that is not
individually material
2022 2021
GBP'000 GBP'000
The Group's share of profit from
continuing operations 102 15
The Group's share of profit and
total comprehensive income 102 15
18. Investments - Group and Company
2022 2021
GBP'000 GBP'000
Financial assets measured under the equity method
Investment in Associates 290 97
Investment in jointly controlled
entities 23 19
Financial assets measured at amortised cost
Other investments 922 922
--------- ---------
Total Investments 1,235 1,038
========= =========
Where long-term loans are made to licensees, which are disclosed
within "Other investments" above, the Directors of the Company have
accounted for them as investments under IFRS 9. These loans are
accounted for using the amortised cost method. The movement in
these investments is included in the cash flow statement as
increase in amounts due from associates.
19. Trade and other receivables
Company Company Group Group
2022 2021 2022 2021
GBP'000 GBP'000 GBP'000 GBP'000
Trade receivables 879 1,404 910 1,440
Loss allowance (78) (88) (78) (88)
---------- --------- ---------
801 1,316 832 1,352
Other receivables 686 538 686 538
Loss Allowance (317) (272) (317) (272)
---------- ---------- --------- ---------
369 266 369 266
Prepayments and
Accrued Income 574 452 629 517
Loss Allowance (92) (78) (92) (78)
---------- ---------- --------- ---------
482 374 537 439
========== ========== ========= =========
1,652 1,956 1,738 2,057
========== ========== ========= =========
Amounts due from
subsidiary undertakings 130 100 - -
========== ========== ========= =========
1,782 2,056 1,738 2,057
========== ========== ========= =========
Included in prepayments and accrued income for both the company
and the group are GBP175k (2021: GBP184k) due in greater than 1
year. Other receivables are made up from loans due from licensees
and prepayments and accrued income relates to prepayments and
profit share due from licensees. Amounts due from subsidiary
undertakings, in other receivables on the balance sheet, are
interest free and repayable on demand.
Trade receivables
The Group assessed each licensee individually as to their
probability of default based on previous credit loss history which
is adjusted for current and forward-looking information. It is not
appropriate to group the licensee trade receivable balances as
there are specific circumstances associated with each business,
notably, service line, sector, location and maturity of the
business.
Average Credit Period taken is 84 Days (2021: 64 days) and no
interest is charged on the receivables.
The ageing of trade receivables net of the loss allowance at the
reporting date was as followed;
2022 2021
GBP'000 GBP'000
Not past due 698 1,263
Past due 61 to 90 days - 9
Past due 91 to 120 days 51 20
Past due over 120 days 83 60
---------
832 1,352
========= ---------
The provision for impairment of trade receivables is the
difference between the carrying value and the present value of the
expected proceeds. The Directors consider that the carrying value
of trade receivables approximates to fair value.
20. Borrowings
2022 2021
GBP'000 GBP'000
Secured borrowing at amortised
cost
Bank loans - 942
Debt issue costs - (41)
Other loan - 50
Total borrowings - 951
--------- ---------
Non-current - 625
========= =========
Current - 326
========= ---------
The other principal features of the Group's borrowings are as
follows.
(a) A loan of GBP1.16m was taken out by the Company on 10
February 2020. The loan was secured by a debenture from each
Obligor over all its assets and a security from the Shareholders
over the entire issued share capital of the Company. The rate of
interest on the loan was the aggregate of the 5.25% Margin and 3
month LIBOR (subject to a LIBOR floor of 0.75%). Capital repayments
of GBP72k were paid quarterly in January, April, July, October.
GBP11k of capitalised debt issue costs were amortised to finance
charges in 2022 (2021: GBP14k). This loan was repaid with proceeds
from the share issue in December 2021.
(b) A Bounce Back loan of GBP50,000 was taken out in October
2020 to enable DSW Services to access finance more quickly during
the coronavirus outbreak. This loan was repaid in full in October
2021 and no interest was paid.
All borrowings were held in the Company and Group other than the
GBP50,000 bounce back loan.
The weighted average interest rates paid during the year were as
follows:
2022 2021
% %
Bank loans 6.0 6.2
Analysis of changes in net debt
01 April Cash flow Amortisation Non-cash 31 March
2020 of debt issue debt items 2021
costs
---------- ----------- ---------------- ------------- ----------
Cash & bank
balances 342 267 - 609
Bank Loans (1,159) 217 - (952)
Debt issue
costs 55 - (14) 41
Convertible
Loan Notes (396) (144) (540)
New Loans - (50) - (50)
Net Debt (1,158) 434 (14) (144) (882)
---------- ----------- ---------------- ------------- ----------
01 April Cash flow Amortisation Non-cash 31 March
2021 of debt issue debt items 2022
costs
---------- ----------- ---------------- ------------- ----------
Cash & bank
balances 609 4,113 4,722
Bank Loans (942) 942 - - -
Debt issue
costs 41 - (41) - -
Convertible
Loan Notes (540) - - 540 -
BB Loan (50) 50 - - -
Net Debt (882) 5,105 (41) 540 4,722
---------- ----------- ---------------- ------------- ----------
Balances at 31 March 2022 comprise:
Current
assets
GBP'000
Cash and bank
balances 4,722
21. Convertible loan notes - Group and Company
The Group issued GBP500k of convertible loan notes to the
founders of a licensee which were convertible to equity in DSW
Capital on IPO. As the float happened within 4 years, the value of
the loan notes was uplifted to GBP700k. Given that the uplift value
was fixed, it was in effect a 'known' outcome which was only
contingent upon an event and therefore a provision was recognised.
It was deemed appropriate to recognise a provision of GBP40k in the
prior year due to the Group's estimation that there was a 20%
chance of the float occurring as at 31 March 2021. On 16(th)
December 2021, DSW Capital floated on AIM and the value of the loan
notes was uplifted to GBP700k before being immediately converted to
Ordinary Share Capital of DSW Capital plc.
22. Deferred tax - Company and Group
The following are the major deferred tax liabilities and assets
recognised by the Group and movements thereon during the current
and prior reporting period.
2022 2021
GBP'000 GBP'000
At the beginning of the year
asset/(liability) 3 (11)
Charge in the year - -
Released in the year - 11
Credited in the year 1 3
--------- ---------
At the end of the year asset 4 3
========= =========
23. Trade and other payables
2022 2021 2022 2021
GBP'000 GBP'000 GBP'000 GBP'000
Trade payables 29 10 86 81
Other taxation and
social security 177 276 210 278
Other payables 54 24 54 24
Accruals and Deferred
Income 154 87 163 88
Corporation Tax 63 262 63 262
--------- --------- ---------
477 659 576 733
========= ========= ========= =========
Trade payables and accruals principally comprise amounts
outstanding for trade purchases and ongoing costs. The Group has
financial risk management policies in place to ensure that all
payables are paid within the pre-agreed credit terms.
The Directors consider that the carrying amount of trade
payables approximates to their fair value.
Amounts falling due in greater than one year include:
2022 2021
GBP'000 GBP'000
Dilapidation provision 72 -
72 -
========= =========
24. Share capital - Group and Company
2022 2021
Number GBP'000 Number GBP'000
Authorised, issued and fully
paid:
Ordinary shares 21,482,508 54 - -
Ordinary A shares - - 950,000 1
Ordinary B shares - - 950,000 1
------------ --------- ----------- ---------
At 31 March 21,482,508 54 1,900,000 2
============ ========= =========== =========
Authorised, issued and nil
paid:
Ordinary C shares - - 218,541 -
Ordinary D Shares - - 45,479 -
------------ --------- ----------- ---------
At 31 March - - 264,020 -
------------ --------- ----------- ---------
Total 21,482,508 54 2,164,020 2
============ ========= =========== =========
Ordinary A Shares B Shares C Shares D Shares E Shares
As at 31 March
2021 - 950,000 950,000 218,541 45,479 -
Share issue 6,123,000 - - - - 17,268
Cancelled shares - - - (4,233) - -
Bonus issue - 7,579,480 7,579,480 6,046,745 - 430,051
Consolidated - (1,425,000) (1,425,000) (5,143,392) - (414,432)
Converted to
Ordinary 15,359,508 (7,104,480) (7,104,480) (1,117,661) - (32,887)
Converted to - - - - (45,479) -
Deferred
------------ ------------- ------------- ------------- ---------- -----------
As at 31 March 21,482,508 - - - - -
2022
============ ============= ============= ============= ========== ===========
On the 26th October, the following transactions took place in
relation to the company's share capital;
i. 4,233 Ordinary C Shares were fully paid up, bought back by
the company and subsequently cancelled.
ii. 17,268 Ordinary E Shares were issued which were nil paid and
have no voting rights. These shares were issued as part of the
Growth Share Plan discussed in note 26. These were subsequently
fully paid at their subscription price of GBP0.9614 per share prior
to the re-capitalisation which took place on 16(th) December
2021.
iii. 50,000 Redeemable preference shares with a nominal value of
GBP1.00 were issued and were quarter paid. These shares have no
voting rights.
iv. On the 26(th) October 2021, the Company formally
re-registered as a public company under the name of DSW Capital
plc.
On the 16(th) December 2021, the following transactions took
place in relation to the company's share capital;
v. The company undertook a bonus issue and consolidation of
shares such that the nominal values of the A, B, C and E shares
equalled GBP0.0025. The D Shares were unaffected.
vi. A further bonus issue then occurred, immediately following
which the A, B, C and E shares were redesignated as one class of
Ordinary Shares. The D Shares were redesignated into deferred
shares which continue to have a nominal value of GBP0.0001. These
shares have no rights to vote or income and are expected to be
cancelled at the AGM in September 2022.
vii. 328,000 ordinary shares were issued in respect of the share
awards set out in the Admission document and 700,000 ordinary
shares were issued to the Camlee Noteholders in respect of the
conversion of the Camlee Loan Notes, further details of which can
be found in note 21.
viii. 5,000,000 ordinary shares were issued as part of DSW
Capital's admission to AIM.
ix. 95,000 ordinary shares were issued as part of the PSP award
scheme further details of which can be found in note 26.
On the 17(th) December, the 50,000 redeemable preference shares
were repaid in full.
25. Leases
DSW Services, a subsidiary of DSW Capital PLC, entered into a
formal lease arrangement for the Daresbury office, effective from 1
October 2021. Prior to this date, the lease had been recognised as
a short-term lease and therefore did not meet the criteria under
IFRS 16. Further detail on the lease accounting policy can be found
in note 2.
The consolidated statement of financial position and
consolidated statement of comprehensive income show the following
amounts relating to leases:
Right-of-use assets Total
GBP'000
Balance at 1 April 2021 -
New leases recognised in the year 520
Depreciation (52)
Balance at 31 March 2022 468
---------
Lease liabilities Total
GBP'000
Balance at 1 April 2021 -
New leases recognised in the year 451
Interest expense 11
Lease payments (77)
Balance at 31 March 2022 385
---------
Income Statement 2022
GBP'000
Interest expense (note 10) 11
Expense relating to leases of low-value
assets 7
Expense relating to short-term leases 61
At 31 March 2022 79
---------
As at the 31 March 2022, the Group recognised lease liabilities
in respect of outstanding commitments for future minimum lease
payments under non-cancellable lease contracts, which fall due as
follows;
Total
GBP'000
Within one year 83
In one to two years 87
In two to three years 92
In three to four years 98
In over four years 25
Balance at 31 March 2022 385
---------
The total cash outflow in the year paid in respect of leases was
GBP76,800. Under the terms of the lease, GBP102,400 per annum is
due for 5 years until the first break date.
26. Share-based payments
In the year ended 31 March 2022 the Group operated three
equity-settled share-based payment plans as described below.
The Group recognised total expenses of GBP1,167,093 in respect
of equity-settled share-based payment transactions in the year
ended 31 March 2022.
The charge to the income statement is set out below:
Share plans: 2022 2021
------------------------- ----------- -------
Growth share plan 1,060,453 6,850
Legacy Awards 73,879 -
FY22 performance bonus 30,000 -
PSP Awards 2,761 -
------------------------- ----------- -------
Total SBP expense 1,167,093 6,850
------------------------- ----------- -------
Share-based payments movement for the year ended 31 March
2022:
SBP Expense (GBP) SBP Reserve (GBP)
------------------------- ------------------- -------------------
Growth share plan 1,060,453 (1,060,453)
Legacy Awards 73,879 (73,879)
FY22 performance bonus 30,000 (30,000)
PSP Awards 2,761 (2,761)
------------------------- ------------------- -------------------
Total movement 1,167,093 (1,167,093)
------------------------- ------------------- -------------------
Share-based payments movement for the year ended 31 March
2021:
SBP Expense (GBP) SBP Reserve (GBP)
-------------------- ------------------- -------------------
Growth share plan 6,850 (6,850)
-------------------- ------------------- -------------------
Total movement 6,850 (6,850)
-------------------- ------------------- -------------------
Details of Directors' share awards are set out in the Directors'
Remuneration Report.
Growth Shares
DSW Capital implemented a Growth Share Plan in March 2021 for
key members of its management team and a number of individuals
within the licensees from which DSW receives licence fees.
Any value received for the Growth Shares was conditional on a
future Exit event taking place and certain individual
restrictions.
As at 31 March 2022, 214,308 C Growth Shares and 17,268 E Growth
shares have converted to 1,150,548 ordinary shares in issue. 45,479
D Growth Shares have converted to Deferred Shares which are
expected to be cancelled at the AGM in September 2022. The Group
recognised total expenses of GBP1,040,453 related to the Growth
Share Plan in the year ended 31 March 2022.
The Growth Shares have been valued using the Black-Scholes
pricing model. Management have formed a judgement on the vesting
period over which the associated charge should be spread. This has
been formed with reference to the individual conditionality
associated with the different classes of share awards and ranges
between one to four years from the balance sheet date.
Legacy Awards
Following the IPO in December 2021, a Legacy Award was awarded
to be held by the Chief Financial Officer entitling them to 1.53%
of the equity value in excess of GBP26m. The CFO Legacy Award is
subject to continuing employment until 31 March 2023, with such
awards vesting on 31 March 2023. Further, it was agreed that
certain employees of Dow Schofield Watts CF Leeds were entitled to
approximately 1.53% of equity value up to a maximum equity value of
GBP26m (the "Leeds Legacy Awards"). To fulfil these obligations,
those individuals will be granted options to acquire the interest
below a GBP26m equity value in the same 1.53% shareholding that the
CFO Legacy Award is granted over, similarly vesting on 31 March
2023. The share price per award is GBP1.00 with an exercise price
per award of nil.
The Legacy Awards have been valued using the Black-Scholes
pricing model. The charge for the year is GBP73,879. The key
assumptions used in the calculation of the fair value of the
share-based payments are as follows:
Leeds Legacy Award CFO Award
Spot price 100p 100p
Strike price 0.025p 122p
Volatility 35% 35%
Risk Free Rate 0.02% 0.02%
Dividend Yield 0% 0%
Fair Value per share 9.1p 8.6p
==================== ===========
Details of the share options outstanding during the year are as
follows:
2022 2021
---------------- ---------------
No. of share No. of share
options options
---------------- ---------------
Outstanding at beginning of year - -
Granted during the year 328,000 -
Outstanding at the end of the 328,000 -
year
---------------- ---------------
Exercisable at the end of the - -
year
---------------- ---------------
There were no share options exercised, forfeited or expired
within the period.
FY22 performance bonus
The Remuneration and Nominations Committee have awarded James
Dow, Chief Executive Officer, a performance bonus for FY22 with a
value of GBP30,000. It has been agreed that the performance bonus
will be settled in shares.
PSP Awards
The Board recognises the importance of ensuring that members of
the Group are effectively and appropriately incentivised and their
interests aligned with those of DSW Capital. Similarly, the Board
believes that the ongoing success of the DSW Network depends to a
high degree on retaining and incentivising the performance of its
key people.
To that end, the Group has adopted the Performance Share Plan
("PSP"), to align the interests of Executive Directors and key
employees ("Participants") with those of the Shareholders. The PSP
will be a long-term incentive plan which will form the primary
long-term incentive arrangement for the Executive Directors. The
Remuneration and Nominations Committee will consider the granting
of PSP awards to the participants on an annual basis.
A summary of the structure of the rules of the Plan is set out
below:
-- Annual awards will be determined by reference to a number of
shares equal in value to a maximum of 200 per cent. of base salary
of participants;
-- Grants shall be subject to a three-year vesting period
(subject to the satisfaction of the performance conditions
-- Following vesting, there will be a further 24 month holding
period before participants are able to sell any shares; and
-- Awards are subject to malus and clawback provisions.
Challenging performance conditions will be set for each award
under the PSP. For the first awards, the Remuneration and
Nominations Committee intends that the awards will vest based on
relative total shareholder return ("TSR") targets against an
applicable comparator group. The share price per award is GBP1.00
with an exercise price per award of nil.
Awards outstanding at 31 March 2022 are shown below:
2022 2021
-------------- --------------
No. of share No. of share
options options
-------------- --------------
Outstanding at beginning of year - -
Granted during the year 95,000 -
Outstanding at the end of the 95,000 -
year
-------------- --------------
Exercisable at the end of the - -
year
-------------- --------------
There were no awards forfeited, exercised or expired in the
period.
The Group used the Expected Value method to calculate the
anticipated value of the PSP awards. The charge for the year is
GBP2,761 .
27. Retirement benefit plans
Defined contribution plans
The Group operates defined contribution retirement benefit plans
for all qualifying employees.
The Group is required to contribute a specified percentage of
payroll costs to the retirement benefit plan to fund the benefits.
The only obligation of the Group with respect to the retirement
benefit plan is to make the specified contributions.
The total expense recognised in profit or loss of GBP35,679
(2021: GBP1,710) represents contributions payable to these plans by
the Group at rates specified in the rules of the plans. As at 31
March 2022 and 31 March 2021, there were no contributions due in
respect of the current reporting period which had not been paid
over to the plans.
28. Financial Instruments
In common with other businesses, the Group is exposed to risks
that arise from its use of financial instruments. This note
describes the Group's objectives, policies and processes for
managing those risks and the methods used to measure them. Further
quantitative information in respect of these risks is presented
throughout these financial statements.
The significant accounting policies regarding financial
instruments are disclosed in Note 2. The principal financial
instruments used by the Group, from which financial instrument risk
arises, are as follows:
Financial assets
Held at amortised cost
Company Company Group Group
2022 2021 2022 2021
(Restated)
GBP'000 GBP'000 GBP'000 GBP'000
Cash and cash equivalents 4,714 584 4,722 609
Trade and other
receivables 1,300 1,682 1,201 1,618
---------- -------------- --------- ---------
6,014 2,266 5,923 2,227
---------- -------------- --------- ---------
Financial Liabilities
Held at amortised cost
Company Company Group Group
2022 2021 2022 2021
GBP'000 GBP'000 GBP'000 GBP'000
Trade and other
payables 237 121 303 193
Borrowings - 901 - 951
--------- --------- --------- ---------
237 1,022 303 1,144
--------- --------- --------- ---------
There is no significant difference between the fair value and
carrying value of the financial instruments.
(a) Financial risk management objectives
The Board has overall responsibility for the oversight of the
Group's risk management framework. A formal process for reviewing
and managing risk in the business has been developed. A register of
strategic and operational risk is maintained and reviewed by the
Board, who also monitor the status of agreed actions to mitigate
key risks. The Board's objective in managing financial risks is to
ensure the long-term sustainability of the Group.
The overall objective of the Board is to set policies that seek
to reduce risk as far as possible without unduly affecting the
Group's competitiveness and flexibility. Further details regarding
these policies are set out below:
(b) Credit risk management
Credit risk refers to the risk that the counterparty will
default on its contractual obligations resulting in financial loss
to the Group. The Group's credit risk is primarily attributable to
its startup loans provided to licensees. The Group mitigates this
risk by encouraging ongoing engagement of senior management with
network members and monthly reporting which allows close monitoring
of emerging credit risks and facilitates early support and advice
to mitigate or remediate performance.
Credit risk with cash and cash equivalents is reduced by placing
funds with banks with high credit ratings.
(b)(i) Overview of the Group's exposure to credit risk
The Group recognises a loss allowance for expected credit losses
on the Group's loans to licensees and trade receivables.
The amount of expected credit losses is updated at each
reporting date to reflect changes in credit risk since initial
recognition of the respective financial asset. The expected loss
rates for these financial assets are based on the Group's
historical credit losses experienced over the three-year period
prior to the period end.
An additional portfolio expected loss provision is calculated in
which the historical loss rates are then adjusted for current and
forward-looking information on macroeconomic factors affecting the
Group's customers. The Group has identified the changing insolvency
rates in the UK as the key macroeconomic factor.
The Group applies the IFRS 9 simplified approach to measuring
expected credit losses which uses a lifetime expected loss
allowance for all trade receivables and contract assets.
(c) Liquidity risk management
Ultimate responsibility for liquidity risk management rests with
the board of Directors, which has established an appropriate
liquidity risk management framework for management of the Group's
short, medium and long-term funding and liquidity management
requirements. The Group manages liquidity risk by maintaining
adequate reserves and banking facilities and by continuously
monitoring forecast and actual cash flows.
Network members in difficulty are asked to provide short-term
cash flow forecasts on a monthly basis to support risk monitoring
and potential funding requirements and Partners may be asked to
reduce drawings on a temporary basis.
(c)(i) Liquidity and interest risk
The bank loan was repaid in the year. There is no interest
payable on trade payable balances and the operations of the Group
are not dependent on the finance income received.
(c)(ii) Financing facilities
The Group is using the cash inflows from the financial assets
and in the prior year previously available bank facilities to
manage liquidity.
(d) Capital risk management
The Group considers its capital to comprise its ordinary share
capital and retained profits as its equity capital. In managing its
capital, the Group's primary objective is to provide return for its
equity shareholders through capital growth and future dividend
income.
The Group's policy is to seek to maintain a gearing ratio that
balances risks and returns at an acceptable level and also to
maintain a sufficient funding base to enable the Group to meet its
working capital and strategic investment needs.
In making decisions to adjust its capital structure to achieve
these aims, either through new share issues or the issue of debt,
the Group considers not only its short-term position but also its
long-term operational and strategic objectives.
Details of the Group's capital are disclosed in the statement of
changes in equity and Note 24.
29. Events after the reporting period
Since the end of the year the directors have recommended the
payment of a top up to the interim dividend for the year to 31
March 2022 of 0.56 pence per share totaling GBP120k and a final
dividend of 3.66 pence per share totaling GBP786k as detailed in
Note 12.
The partner of DSW Wealth Advisory LLP has made the Directors
aware of his intention to leave the partnership with effect from 22
July 2022. The Directors believe that this will not have a material
impact on the results of the Group.
30. Related party transactions
Balances and transactions between the Company and its
subsidiary, which are related parties, have been eliminated on
consolidation and are not disclosed in this note. Transactions
between the Group and its related parties are disclosed below.
Related parties are those licensees where the Company is a member
of the related LLP.
Revenue and Cost Recharges
Group entities entered into the following transactions with
related parties who are not members of the Group. All entities
other than DSW Investments 2 LLP are licensee businesses. DSW
Investments 2 LLP is an entity owned by certain directors of the
company.
2022 2021
Revenue and Revenue and
Cost Recharges Cost Recharges
GBP'000 GBP'000
PHD Equity Partners - 127
PHD Industrial Holdings 200 12
DSW Investments 2 LLP 99 65
Other investments 920 485
Totals 1,219 689
================= =================
Other investments relate to routine and similar transactions
which arose in the ordinary course of business, with DSW CF Leeds,
DSW Wealth Advisory, DSW TS Leeds and DSW Business Recovery.
Amounts due from/to related parties
Group entities had the following balances, including loans to
related parties, outstanding at year end with related parties who
are not members of the Group:
2022 2021
Amounts due Amounts due
from/(to) related from/(to) related
parties parties
GBP'000 GBP'000
PHD Equity Partners - 19
PHD Industrial Holdings 1 14
DSW Investments 2 LLP - 26
Other investments 497 213
Totals 498 272
==================== ====================
Salary and fees payable to James Dow and Jon Schofield are as
disclosed in the Remuneration and Nominations Committee Report.
Salary totalling GBP18,761 (2021: nil) has been paid to Susie Dow
in the year.
Remuneration of key management personnel
The remuneration of the Directors, who are the key management
personnel of the Group, is set out below in aggregate for each of
the categories specified in IAS.
Year ended Year ended
31 March 2022 31 March 2021
GBP'000 GBP'000
Wages and salaries 431 259
Social security costs 54 28
Other pension costs (see
note 27) 32 1
----------------
517 288
================ ================
This includes amounts in respect of a previous director who
provided services and was remunerated by the group in the year.
31 . Prior year adjustments
The Group has historically prepared company only accounts under
UK Generally Accepted Accounting Practices (FRS 102). As such,
financial information has been prepared under IFRS for the first
time for the purpose of presentation in this document. The prior
year comparatives have been restated resulting from this first time
adoption as detailed below:
Originally Adjustment Restated
stated
GBP'000 GBP'000 GBP'000
----------------------------------- ------------ ------------ ----------
Company statement of financial
position
Trade debtors 1,380 (64) 1,316
Prepayments and accrued income 490 (116) 374
Other debtors 405 (39) 366
Investment in associates - 97 97
Investment in jointly controlled
entities - 19 19
Retained earnings 2,383 (103) 2,280
----------------------------------- ------------ ------------ ----------
In the company financial statements these adjustments arise
principally from the requirements of IFRS 9 with an expected credit
loss provision recognised along with the reclassification of trade
and other receivables in line with the requirements of IFRS 10 to
better reflect the nature of the assets within investments.
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