DWF Group plc

("DWF" or "the Company" or "Group")

LEI: 213800O9QREOHTOGQ266

10 December 2020

Half-year results for the period ended 31 October 2020

Strong revenue and profit performance despite macro environment

DWF, the global legal business, today announces its half-year results for the period ended 31 October 2020.

GROUP FINANCIAL SUMMARY

HY21 FINANCIAL HIGHLIGHTS

·    Group revenue growth of over 15% (3% organic)⁸ at a gross margin of just below 50%

o  3% growth in Insurance Services division, all organic

o  7% growth in Commercial Services (including Managed Services), with organic revenue flat as activity levels recovered through H1 from the sudden weakness experienced in March and April due to COVID-19

o  58% growth in International, with RCD acquisition in Spain adding £15.7m of revenue, alongside organic growth of 3%

o  19% growth in Connected Services, all organic

·    Adjusted PBT of £13.4m which is 23% higher than HY20 and close to the FY20 comparator of £15.2m

·   Reported PBT is a loss of £11.0m, which differs to Adjusted PBT due to significant, largely non-cash, acquisition related expenses treated as non-underlying items

·    £19.6m free cash flow generated in H1 versus an outflow of £9.2m in the prior year, assisted by c£14m of COVID-19 related deferrals

·    Net debt of £58.5m is £8.9m higher than HY20 and a reduction of £6.4m versus April 20 position despite £12.4m of acquisition related outflows in HY21

OPERATIONAL & STRATEGIC PERFORMANCE

·  A 5 day reduction in lock-up days versus HY20 and a 10 day reduction versus FY20 position due to improving operational processes and client engagement

·   Cost to income ratio improved by 1.3ppts versus HY20 to 40.4%, and by 1.0ppts from FY20, demonstrating the impact of cost control and efficiency measures

·    Revenue per partner increased by 0.4% to £446k (half year basis) despite H1 investment in new partners

·    15 new partner hires in the period which are expected to support ongoing organic growth particularly in Insurance Services and International

·    Agreements in principle made to reduce office space and/or vary lease terms in several locations as a first stage of the Group's new property strategy, promoting greater flexible working and securing annualised cash savings of £0.6m

·   Investment in new Pune, India office to increase headcount capacity to c1,000 from c500 to support Managed Services build

OUTLOOK AND CURRENT TRADING

·    The Board is pleased with the Group's performance to date in FY21 and is increasingly confident in the outlook for the full year as the Group continues to see a strong sales pipeline and anticipates a more stable trading environment in 2021  

·    The Group's focus on a one team culture and global mind-set is driving more connectivity both internally and with its clients, who are seeing the benefits of the Group's integrated legal and business services offering.  

·    Managed Services is an important component of that and, having successfully integrated Mindcrest, it is generating both revenue and margin opportunities for the Group as it scales.

·   The Board has approved an interim dividend for FY21 of 1.50 pence per share which is payable on 5 March 2021 to shareholders on the register as at 29 January 2021.  The Board has given careful consideration to the quantum of the interim dividend to ensure that it is progressive but retains flexibility whilst there remains a degree of uncertainty as to the trading environment for the remainder of the financial year

Sir Nigel Knowles, Chief Executive Officer, commented:

"Given the extreme impact of COVID-19 on the worldwide economy, we are pleased with the performance of the business in the first half of FY21 following the swift actions taken by the new management team. We are also encouraged that despite ongoing COVID related restrictions in a number of the markets in which we operate November activity levels were strong.  We have achieved strong revenue growth in the period thanks to the contributions of RCD and Mindcrest and a pleasing return to organic growth. Operationally, the decisive cost actions taken at the beginning of this financial year and a continued focus on cash management has seen a reduction in both net debt and lock-up days. These factors have combined to help us deliver a good profit performance with adjusted PBT in the first half of FY21 close to that achieved for the full year in FY20.

"We expect the uncertain macro environment to continue into 2021, although the positive news in relation to potential vaccines for COVID-19 allows some optimism for a more settled economy as we progress through next year. We therefore are increasingly confident in the prospects for the Group as we look ahead to the rest of FY21 and recent client wins and panel appointments such as those for Serco and Zurich are testament to the strength of our differentiated offering."

For further information

DWF Group plc

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Richard Crowley

About DWF

DWF is a global legal business providing integrated legal and business services operating from 31 key locations with more than 4,000 people. The Company became the first Main Market Premium Listed legal business on the London Stock Exchange in March 2019. For more information visit: dwfgroup.com

Forward looking statements

This announcement contains certain forward-looking statements with respect to the Company's current targets, expectations and projections about future performance, anticipated events or trends and other matters that are not historical facts. These forward-looking statements, which sometimes use words such as "aim", "anticipate", "believe", "intend", "plan", "estimate", "expect" and words of similar meaning, include all matters that are not historical facts and reflect the directors' beliefs and expectations and involve a number of risks, uncertainties and assumptions that could cause actual results and performance to differ materially from any expected future results or performance expressed or implied by the forward-looking statement.

¹ Cost to income ratio is defined in note 2

² Adjusted EBITDA is defined in note 2

³ Adjusted PBT is defined in note 2

⁴ Adjusted diluted EPS is defined in note 8

⁵ Gross lock-up days is defined in note 21

⁶ Free cash flow is defined in note 21

⁷ Net debt is defined in note 17

⁸ Organic revenue growth removes the impact of acquisitions and discontinued operations

CHIEF EXECUTIVE OFFICER'S REPORT

STRENGTH AND RESILIENCE DELIVERS A STRONG START TO FY21

Given the extreme impact of COVID-19 on the worldwide economy, we are pleased with our performance in the first half of this financial year, following the swift actions taken by the new management team.  Revenue increased by more than 15% to £167.6m for the half-year driven by our acquisitions of RCD and Mindcrest alongside organic growth of 3% across the Group. Adjusted profit before tax increased by 23% to £13.4m, close to the FY20 comparator.

Our insurance business demonstrated its resilience, generating 3% of organic growth. In particular, our Professional Indemnity and Commercial Insurance teams experienced significant activity levels due to their involvement advising clients in the FCA proceedings regarding COVID-19 policy coverage.

Despite the challenging environment, Commercial & Managed Services was broadly flat in organic revenue terms, with overall growth and an enhanced service proposition resulting from the Mindcrest acquisition. Corporate and Real Estate activity levels have steadily recovered through H1 following a material impact in Q4 of FY20, whilst as expected demand remains strong in Litigation.

International has grown strongly, with revenue increasing by 58% compared with the same period last year. Whilst this growth was driven by the acquisition of RCD in Spain, we also saw 3% organic growth in the division with France, Italy, Poland and Dubai all performing well. Connected Services continued its strong growth profile, with revenue up by 19% and gross profit increasing by 39% thanks to divisional operational improvements.

In addition to increasing revenues and improved profitability, we saw a reduction in our gross lock-up days and increased free cash flow, which have helped us to reduce our net debt by £6.4m since April, despite £12.4m of acquisition related outflows in the first half.

After experiencing a significant impact from COVID-19 in Q4 of FY20, the strength and resilience of our business model has enabled us to respond strongly.

As I set out in my statement at our full-year results in September, following my appointment in May we took a number of steps to improve operational performance and reduce cost. These included the closure of offices in Brussels and Singapore and a reduction in our presence in Dubai.

In addition to these cost saving measures, we have also made a number of targeted investments in the first half. We recruited 15 partners, with new arrivals in a number of locations including Australia, Germany and Poland. We made several appointments in Insurance Services and targeted recruitment in Commercial Services to strengthen our insolvency and restructuring capabilities leading to high profile appointments such as on the recent administration of clothing retailer, Bonmarché.

We have recruited a further five partners who will join us in the second half of this financial year. These include three partners joining our Insurance Services division to set up a new presence in Southampton.

We have also invested in our Connected Services capabilities, including through the recruitment of a Senior Loss Adjuster in Milan that enabled the launch of DWF Adjusting in Italy. We recruited a new head of DWF Advocacy in the UK and, in Australia, launched a new Connected Service, DWF Risk, to provide work health and safety and workplace relations services.

We also continue to invest in the build of our global Managed Services platform, including a new office space in Pune. This new office, that our teams will begin to occupy from early 2021 (COVID restrictions permitting) has space for 1,000 people which is around double the current workforce in Pune. We also signed a contract with Peppermint Technology for our Managed Services division to use its case management platform.

Our continued investment in, and commitment to, innovation helped us to achieve a new highest-ever position in the Financial Times' Innovative Lawyers ranking. Last year we achieved a ranking of 8^th and this year we climbed one place to 7^th. We were also ranked by the FT as one of seven legal businesses it defined as the 'pacesetters' when it comes to legal innovation.

Our innovative approach to the delivery of integrated legal and business services has helped us to secure appointment or reappointment to 28 legal panels, including Serco and Zurich.

The first half also saw the completion of our largest ever client listening exercise. We surveyed more than 400 clients from across all of our sectors to ask them to rate the service we provide and to give us their feedback on what we do well, but also on where we can improve.

Clients were asked to rate the experience of our service, applying a score of between 0 and 10 against how likely they are to recommend us. I'm really pleased to report that 56% of our clients rated us as a 9 or 10 - which means they are classed as 'Promoters' of DWF. Our Net Promoter Score is 47, which is also very positive and compares favourably to our industry peers.

We have continued to focus on ensuring DWF is an attractive place to work. One of our key initiatives in this half-year has been the launch of a new Group Bonus Plan which we believe fairly rewards our people and strengthens the alignment of interests with our shareholders. The plan is linked to the overall performance of the Group, along with divisional and personal performance conditions.

We have recently launched our latest Pulse Survey to track employee engagement and have announced internally the formation of a new 'Pulse Forum'. This Forum will comprise representatives from across our locations, offices and career levels and its purpose will be to consider the results of the Pulse Survey and to provide recommendations of further ways to improve our people proposition.

One of the key ingredients that drives engagement at DWF is the work of the DWF Foundation. The Foundation is an independent charity that was set up by DWF in 2015. It celebrated its 5^th anniversary earlier this month and at the same time it reached £500,000 of charitable grants and donations. Through the fundraising activities of our people, it has been able to support around 250 charities around the world. Its work has never been more important and it is something we are incredibly proud to support.

Outlook and current trading

The Board is pleased with the Group's performance to date in FY21 and is increasingly confident in the outlook for the full year as the Group continues to see a strong sales pipeline and anticipates a more stable trading environment in 2021.   The Group's focus on a one team culture and global mind-set is driving more connectivity both internally and with its clients, who are seeing the benefits of the Group's integrated legal and business services offering.  Managed Services is an important component of that and, having successfully integrated Mindcrest, it is generating both revenue and margin opportunities for the Group as it scales.

Operating efficiency remains a priority, and the changes that the Group is beginning to make to its office estate are expected to deliver material and multi-year savings, whilst retaining agile environments which will enable even more flexible working in the future.

As is the case with other listed businesses, it remains difficult to give detailed guidance on key metrics.  However, the current view of the sales pipeline, anticipated activity levels, and cost development, suggest a similar performance trend in H2 to that seen in the first half, with some additional benefit possible from the cost saving measures which have been implemented if activity levels are sustained at current levels.

FINANCIAL REVIEW

A STRONG RECOVERY FROM FY20 COVID-19 IMPACT

Financial overview

The performance for the first half of FY21 has shown a material improvement on FY20 Q4 which was impacted by COVID-19.  The Board is pleased with the Group's response to the pandemic with the global move to fully agile working and swift action taken on costs delivering a strong revenue and profit performance for HY21.

All divisions have shown both revenue growth and gross profit improvement in HY21 compared to the equivalent period in the prior year with aggregate top line growth of 15.4% (2.7% organic) and a gross margin of 49.6% reflecting a positive H1 trajectory.  This performance reflects the contribution of RCD and Mindcrest but also a gradual improvement in underlying activity to pre-COVID levels as the Group saw the benefits of its diversified offering.  This top line performance, combined with measures taken to right-size direct costs, have improved gross profit contribution.  Strict controls of overhead expenditure have also been implemented reducing the cost to income ratio from 41.7% in HY20 to 40.4%, which is also a 1.0ppts improvement on FY20.  This has led to an improved Adjusted Profit before Tax for HY21, with further direct cost benefits expected in H2 as headcount reductions implemented in H1 take effect as notice periods expire.

Working capital performance has remained robust despite the challenging macro environment.  Gross lock-up days have reduced on both comparator periods and free cash flow generation has significantly outperformed the equivalent period in the prior year.  Whilst there has been some benefit from COVID-19 tax deferrals, the underlying free cash flow is nevertheless significantly better than the prior year.

Revenue

Group revenue increased 15% to £167.6m for HY21 (HY20: £145.2m).  Despite the impact of COVID-19, the Group has delivered creditable organic growth across Insurance Services (3%) and Connected Services (19%).  International showed some recovery (3% organic revenue growth) despite ongoing headwinds in a few key locations, particularly Australia and Germany.  Commercial Services, which was the most impacted by COVID-19, delivered a flat organic performance year on year, with an improving trajectory.

Acquisitions further supplemented this divisional organic growth, with Commercial Services growing 7% (including Mindcrest) and International growing by 58%, (benefitting from a strong performance from RCD in Spain).

For the first time, Managed Services has been split out of Commercial Services. The figures in this report are presented on both a reported and like-for-like basis.

Direct costs

Direct costs were £84.4m, increasing 17% primarily due to the impact of acquisitions (HY20: £72.0m).  On an organic basis direct costs have increased by 3%.  Across the business, actions have been taken as part of the Group's previously announced £15m cost reduction programme to manage and reduce direct costs in order to align resource levels to activity, with savings arising as notice periods of leavers expire.  Separately, selective investments have been made in 14 partner hires, with those investments targeted in Insurance Services and International to reflect areas where the Group believes there are revenue opportunities which justify the investment.

Gross profit

Gross profit grew 13.5% to £83.1m in the first half (HY20: £73.2m) but reflects a slight dilution in gross margin from 50.4% to 49.6%.  This reported dilution is due to the change in margin mix as a result of acquisitions impact on direct costs.  On an organic basis, gross profit has improved by £1.6m with gross profit margin of 50.6% being just 0.3ppts below HY20.  Cost saving measures already taken in relation to headcount reductions will continue to improve profitability as notice periods expire.

Working capital

Working capital continues to be a key area of focus and opportunity across the business.  Gross lock-up days comprise WIP days, the amount of time between starting work and invoicing clients, and debtor days, the length of time between invoicing and cash collection.

In the final quarter of FY20 gross lock-up days deteriorated which management believe reflected a temporary change in billing and payment behaviours due to COVID-19.  This led to combined lock-up days of 206 in April 20.  Over the course of HY21 significant operational efforts have gone into improving the working capital performance in order to deliver the October 2020 position of 196 days, an improvement of 10 days since April 20 and an improvement of 5 days compared to October 2019.

This improvement in lock-up days is reflected in the improved net debt position, reducing by £6.4m from 30 April 20 to £58.5m at 31 October 20.  Whilst net debt is £8.9m higher than 31 October 19, the current year position reflects the impact of the acquisitions of RCD and Mindcrest where total cash consideration paid since the December 19 and February 20 acquisition dates is £19.7m.

Free cash flow generation for HY21 was £19.6m, which contrasts with a £9.2m outflow in HY20, and an outflow of £4.6m for FY20 full year.  Whilst net debt has reduced in H1 from April 20, H2 outflows for deferred consideration and COVID-19 deferrals will offset operational cash generation such that net debt is expected to be broadly flat for the year.  However, further improvement to gross lock-up days remains a key area of operational focus and represents an opportunity to reduce working capital.

Reducing leverage remains a priority for the Group and whilst net debt may not reduce materially in FY21, mainly due to the aforementioned deferred outflows, leverage will reduce as profitability improves.

Divisional Performance

The divisional performance figures that follow reflect a small number of changes to the alignment of some locations.  From an operational perspective, Belfast and Dublin have been realigned to the Commercial Services and Insurance Services divisions.  The divisional figures reflect these operational changes which were effected to improve alignment across UK and Ireland as a whole and to drive greater revenue and cost synergies than were possible by retaining these locations within the International division. 

Insurance Services

In an insurance market significantly impacted by COVID-19, including a lengthy lockdown at the start of the financial year followed by localised restrictions, the Group's Insurance Services division performed remarkably strongly finishing the half year with 3% growth (all organic) versus prior year and with a slightly improved gross profit margin of 49.7% (HY20 49.0%).

The Professional Indemnity and Commercial Insurance practice group has been the standout performer. The Group experienced significant activity levels in H1, as it advised some of our largest clients in relation to the highly publicised FCA declaratory proceedings on COVID-19 policy coverage. 

As expected, the Motor and Fraud practice group was most impacted by the lockdown dramatically reducing the volume of claims which at one stage were down 75% compared to pre-lockdown levels.  The reduction in instructions has been compounded by delays in the conclusion of cases due to court closures and a combination of other factors, which have led to more time being required on fixed fee cases plus a degree of working capital drag due to settlement delays.  Despite this, most teams have now returned to near normal levels of activity.  Cost savings have been effected to protect gross profit contribution.  Some of these delays are easing but the effect of the current second wave measures on road traffic accident claims is being carefully monitored.

The Group expects that demand for insurance services will increase in the second half of the financial year due to a combination of factors including the expected large volume of COVID-19 disease and fatality claims which are already starting to come through from care homes and food processors amongst others. There should also be a strong flow of business interruption claims following the Supreme Court judgement on COVID-19 policy coverage, which will potentially be delivered before Christmas.  Insurers are also revisiting their business models and the Group has already benefited from a permanent large outsourcing of claims from one of its biggest clients. Recent lateral hires together with the new Southampton team are also expected to make important contributions to the second half of the year.

Commercial and Managed Services

Commercial & Managed Services (including Mindcrest) delivered revenue growth of 7% in HY21.  Commercial Services experienced a material adverse impact in Q4 of FY20 as a result of COVID-19, however it has delivered flat organic revenues year on year in HY21 and has seen activity levels on an improving trajectory compared to H2 of FY20.

Whilst results are largely being driven by the Litigation practice group, where client demand remains particularly strong, transactional activity in both Corporate Services and Real Estate has also held up well despite macroeconomic uncertainty. The division invested in a number of lateral hires during FY20, several of whom arrived during Q4, and these investments are delivering new client wins contributing positively to the half year revenue position.

Although direct costs at the end of H1 were broadly in line with those incurred in the same period last year, actions have been taken through the course of the first half to right-size the division, removing excess capacity and cost and improving utilisation.  It is expected that as notice periods expire the benefit of these savings will be delivered in the second half.

The division continues to make good progress with its key objectives, including transitioning work to Managed Services and working more closely with Connected Services, allowing more efficient operating practices and broadening client relationships.

Managed Services continues to attract client interest in the Group's integrated offering, with a number of large bids currently underway which could supplement the above internal work-transfer opportunities.

The outlook for H2 is improving, with all areas of the division currently showing strong pipelines which, alongside the cost reduction programme benefits, are expected to support gross profit margin.

International

The International division remains a key growth area for the Group, delivering revenue growth of 58% to £40.3m in HY21 (HY20: £25.5m) as a result of the acquisition of RCD, which has performed strongly.  The organic performance in the division was 3% growth on prior year reflecting mixed results across different geographies.

France, Italy and Poland are all showing revenue growth as a result of investments in new partner hires and, as expected, there is a degree of short term margin dilution as a result.  Germany, after the slimming down of Cologne, is building new capabilities in Dusseldorf and will have a diluted margin as the new hires develop their practices.  The recently rationalised Dubai office is performing well and is now delivering a sustainable gross profit contribution.  Australia is undergoing a degree of consolidation after a period of heavy investment, with the current year focus being on ensuring resource levels are appropriate for the work in hand and are reflective of the pipeline given the pandemic impacts in different locations.

Cost savings implemented in late FY20 and HY21 are gradually being reflected, however gross profit margin of 40.9% was slightly down (HY20: 42.2%).  It is expected that as the cost savings already executed continue to be delivered the full year margin will further improve.  The closures of Brussels and Singapore have also removed loss-making operations allowing a deeper management focus on the remaining key locations.

International continues to present opportunities for growth and carries latent capacity due to the level of partner and fee-earner investment made in recent periods.  As and when the COVID-19 impacts around the world reduce as restrictions ease it is expected that the investments made to date will begin to generate an improving return.

Connected Services

The Group's Connected Services division has had a strong first half of the year with revenue growth of 19% (to £12.8m) compared to prior year, all organic.  Whilst the underlying gross margin development of the Connected Services businesses was delayed towards the end of the last financial year due to COVID-19, there has been a marked improvement in HY21 with gross profit margin increasing to 43%.  This is a result of divisional operational improvements (including the closure of our DWF Resource business and a number of team restructures) together with increasing awareness of divisional capabilities driving more opportunities from new and existing clients and through internal referrals.

It has been a particularly strong start to the financial year for our businesses that have been providing clients with a unified approach to COVID-19 related business interruption claims.  Our integrated solution to managing such claims has resulted in our Claims Management and Adjusting colleagues working closely with our Forensic Accountancy team (and legal colleagues) to support the quantification and challenge of business interruption losses in the UK.  As a result, the UK Claims Management and Adjusting business, and the Forensic Accounting team, have had particularly strong performances.  Overall, our Claims Management and Adjusting business (with presence in Australia, Canada, France, Ireland, Italy, UK and USA) has grown by 22%. 

The Regulatory Consulting business, launched in FY20, has been successful in converting a strong FY20 year-end pipeline to client wins delivering H1 revenue in excess of £0.5m.  Despite the unprecedented disruption to the court service, revenue in the Advocacy team (DWF's alternative solution to the external Bar and traditional chambers) has grown with increased efficiencies arising from the transition to virtual hearings.  The demand for services within the DWF 360 software development business has improved (following a number of large projects being put on hold at the start of COVID-19) with revenue ahead of target at the end of H1.     

Management are confident with the outlook for the second half of the year with strong pipeline activity across all businesses and a focus on exploring more innovative ways to meet client needs.

Administrative expenses

Reported administrative expenses increased from £63.4m in HY20 to £92.1m in HY21.  However, as described in note 2, there are four factors impacting comparability: 

·   The inclusion of £12.5m of non-underlying items in HY21, compared to just £1.1m in HY20.  These predominantly relate to the acquisition accounting for RCD and Mindcrest.

·   An amortisation and impairment charge of £2.5m in HY21 (HY20 £0.2m) which also relates to recent acquisitions.

·    An increase in Share Based Payment expenses in FY21, with a charge of £9.5m versus £4.4m in the prior year.  This increase primarily relates to the acquisition accounting for RCD.

·    A £2.8m gain on bargain purchase included as a credit in the FY20 figures relating to the acquisition in Poland.

The items above are excluded as they are all either one-off, non-cash or non-trading related expenses.

On an underlying basis, administrative expenses increased 11.7% to £67.6m (HY20: £60.5m).  The majority of this increase relates to the administrative expenses of RCD and Mindcrest.  On an organic basis, previously announced cost savings have prevented any underlying increase to overheads and the Group continues to see ongoing savings from actions already taken as well as a temporary benefit from COVID-19 affected expense categories such as travel and business development.

The Group has improved its cost to income ratio to 40.4% (HY20: 41.7%) reflecting the Group's stated strategy of delivering operational gearing by using its platform more effectively. 

Interest

Interest expense comprises £1.0m of interest payable on leases (HY20 £1.0m) and net finance expense of £1.1m (HY20 £0.8m) which represents bank charges, loan interest and interest on the drawn element of the main Group £80m RCF facility.  The increase in the net finance expense compared to HY20 is a result of a higher net debt position for HY21 as the business gradually deleverages after incurring the acquisition outflows for RCD and Mindcrest.  

IFRS 16-related interest payable on leases of £1.0m is recognised separately on the face of the income statement to allow for greater understanding of the composition of finance costs by the Group.

Profit before tax

Reported profit before tax for HY21 is a loss of £11.0m compared to a profit of £8.0m in HY20.  This reported position is impacted by the non-underlying items referenced in the Administrative Expenses section.  Adjusted PBT is £13.4m compared to the prior year position of £10.9m, an increase of £2.5m or 23%.  This improvement in adjusted profitability reflects the FY21 impact of acquisitions, the improving activity levels in the business and the control of costs at both direct cost and administrative cost level.

Taxation

The Group is subject to corporation tax and payments on account of £0.4m (HY20 £3.0m) have been made in the first half with a tax charge to the Income statement of £0.5m (HY20 £1.4m). 

Dividend

The Group's capital allocation policy is to retain sufficient capital to fund ongoing operating requirements and to invest in the Group's long-term growth, while also paying attractive dividends. The Group has a target dividend pay-out ratio of up to 70% of DWF Group plc's Adjusted Profit After Tax.

The Group paid a final dividend in relation to FY20 of 0.75p per share, taking total dividend in relation to FY20 to 3.25p.  The Board has approved an interim dividend for FY21 of 1.50 pence per share which is payable on 5 March 2021 to shareholders on the register as at 29 January 2021.  The Board has given careful consideration to the quantum of the interim dividend to ensure that it is progressive but retains flexibility whilst there remains a degree of uncertainty as to the trading environment for the remainder of the financial year.

Capital expenditure

The Group has incurred cash outflows on tangible fixed assets of £2.9m in HY21 (HY20: £1.6m) with the majority of the increase due to the fit-out of the new office in Pune, India, to accommodate anticipated growth in Mindcrest (Managed Services).

In addition, the Group incurred £1.2m of expenditure on intangibles in HY21 (HY20: £0.9m) primarily relating to the ongoing build of the Managed Services platform.

Conclusion

The Group has delivered an improving performance in HY21 against the backdrop of an uncertain macro environment, with activity levels, revenue, cash generation and profitability all showing improvement.  Demand for services, and capacity to deliver those services, has steadily improved over the course of H1. The Group has a strong pipeline of work coming into the second half of the financial year and expects increasingly to see the benefits from its previously announced £15m cost reduction programme as it continues to target improvement in its net profit margin in the medium term.

Statement of Directors' responsibilities

The Directors confirm to the best of their knowledge that the interim information has been prepared in accordance with International Accounting Standard 34 Interim Financial Reporting as adopted by the European Union. The Interim Management Report includes a fair review of the Interim Information and, as required by DTR 4.2 TR and DTR 4.2 8R, the following information:

·    an indication of important events that have occurred during the first six months of the financial year, and their impact on the condensed set of financial statements, and a description of the principal risks and uncertainties for the remaining six months of the financial year; and

·   disclosure of material related party transactions that have taken place in the first six months of the current financial year and of any material changes in the related party transactions described in the last Annual Report and Financial Statements.

This responsibility statement was approved by the board of Directors on 9 December 2020 and is signed on its behalf by:

Chris Stefani

Chief Financial Officer

OFFICERS

Directors:

Jonathan Bloomer

Chairman

Chris Sullivan

Deputy Chairman and Senior Independent Director

Sir Nigel Knowles

Chief Executive Officer

Chris Stefani

Chief Financial Officer

Matthew Doughty

Chief Operating Officer

Teresa Colaianni
Independent Non-Executive Director

Vinodka Murria OBE

Independent Non-Executive Director

Luke Savage

Independent Non-Executive Director

Samantha Tymms

Independent Non-Executive Director

Michele Cicchetti
Partner Director

Seema Bains
Partner Director

Company Secretary:

Mollie Stoker

Registered office:

20 Fenchurch Street

London

EC3M 3AG

United Kingdom

Tel: +44 333 320 2220

dwfgroup.com

Company registration number: 11561594
 

FINANCIAL STATEMENTS

Unaudited Consolidated Income Statement

Notes 1 to 24 are an integral part of these consolidated financial statements.

Unaudited Consolidated Statement of Comprehensive Income

Items in the above statements are disclosed net of tax. Notes 1 to 24 are an integral part of these consolidated financial statements.

Unaudited Consolidated Statement of Financial Position

Notes 1 to 24 are an integral part of these consolidated financial statements.