Research: Industrials
The interim results confirm a robust period for DWF Group. The growth strategy remains and the recent acquisition of Whitelaw Twining in Canada confirms management’s intention to build a global brand. DWF is trading on a 7.0x P/E, which suggests c 45% upside to the lower end of its historical range. It also trades at a material discount to peers and offers a 7.6% dividend yield.
DWF Group |
Step-by-step strategic progress
Business services |
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3 January 2023 |
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The interim results confirm a robust period for DWF Group. The growth strategy remains and the recent acquisition of Whitelaw Twining in Canada confirms management’s intention to build a global brand. DWF is trading on a 7.0x P/E, which suggests c 45% upside to the lower end of its historical range. It also trades at a material discount to peers and offers a 7.6% dividend yield.
Interims highlight robust trading
Given the uncertain economic environment, DWF’s interim results highlight resilient revenue performance with strong profit growth. Net revenue increased and costs were controlled, resulting in a welcome reduction in the cost to income ratio and a 17.9% increase in the operating profit. PBT rose 17.1% to £12.9m, reflecting a lower level of adjusted items in the period, while the adjusted figure was broadly flat on an unusually strong comparative period. Adjusted EPS increased by 8.5% to 5.1p and a dividend of 1.6p was declared, up 7% and in line with policy. Net debt rose from £77.2m to £86.5m, representing leverage of 1.27x annualised EBITDA.
Strategic progress evident in costs and M&A
The 3.4% net revenue growth was a combination of 4% growth within Legal Advisory, 16% in Connected Services and a 17% contraction in Mindcrest after a reorganisation and subsequent investment in sales resource that is expected to generate future income. Overall, net revenue per partner increased 1% to £492k. The gross margin of 49.9% reflected continued salary pressure in the sector, offset by strict overhead cost control. The 5% increase in lock-up days to 190 is much better than the sector average of 11% increase (source: 2022 PwC Law Firms’ Survey). DWF won some significant new mandates and retenders through deepening relationships with key clients and extended its capabilities through strategic M&A including the acquisition of Whitelaw Twining for up to £28m. Within Legal Advisory, the largest division, it was appointed to 30 new panels, with the top 10 having a potential combined revenue of c £30m per year and a 3-year term.
Valuation: 7.0x forward P/E offers attractive upside
The outlook is encouraging as momentum generated in H1 is likely to extend into H2, traditionally the stronger period, and costs are kept under control. DWF expects to hit FY23 PBT estimates, adjusted for an additional £1m of interest costs driven by the unexpected base rate increases. DWF is trading on a forward consensus P/E of 7.0x, which compares to a fairly short-quoted range of c 10–12x. By comparison, Keystone Law and Gateley Group trade on P/Es of 19.6x and 10.7x respectively. The 7.6% yield should give comfort to investors in search of income.
Consensus estimates
Source: Refinitiv |
EDISON QUICKVIEWS ARE NORMALLY ONE-OFF PUBLICATIONS WITH NO COMMITMENT TO WRITING ANY FOLLOW UP. QUICKVIEW NOTES USE CONSENSUS EARNINGS ESTIMATES.
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Research: TMT
WANdisco’s $12.7m data migration deal with a global automotive manufacturer further strengthens the company’s position in the rapidly evolving automotive sector. It also highlights the central role that WANdisco plays in enabling data-centric Internet of Things (IoT) strategies. While the one-off nature of this contract means that the lifetime value of this deal is likely less than the recently announced large commit-to-consume deals, it is still very significant in size, prompting further upgrades to our bookings and cash estimates. The faster revenue recognition of this deal supports meaningful upgrades to revenues and reduced forecast losses.
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