Audited Final Results

DSW Capital PLC

13 July 2023

 

13 July 2023

DSW CAPITAL PLC

("DSW Capital", "DSW" or the "Group")

(AIM: DSW)

Audited Final Results

Resilient performance in challenging market conditions

DSW Capital, a profitable, mid-market, challenger professional services licence network and owner of the Dow Schofield Watts brand, is pleased to announce its full year results for the year ended 31 March 2023 ("FY23" or the "Period").

FY23 started well, with the Group delivering a strong half year performance. This progress, however, was frustrated by the significant shift in sentiment which followed the Autumn Mini-Budget, affecting confidence and activity in the Group's primary market, SME M&A.

Whilst these challenging market conditions have continued into FY24, the Board's focus is firmly on Fee Earner recruitment and the expansion of its Network portfolio into counter-cyclical services, as demonstrated in the Bridgewood Financial Solutions ("Bridgewood") transaction, also announced today.

Financial highlights

·	Network Revenue of £18.3m (FY22: £18.3m) - FY22's record performance matched despite challenging H2
·	Group revenue at £2.7m (FY22: £2.7m)
·	Total income from licensees £3.0m (FY22: £3.0m)
·	Adjusted Pre-Tax Profit of £1.4m (FY22: £2.0m), with the decline in profitability reflecting a full year's plc costs including investment in additional central resource
·	Statutory Profit before Tax increased to £0.7m (FY22: Loss before Tax £0.03m)
·	Earnings per share 2.0 pence (FY22: loss per share (2.0) pence)
·	Strong balance sheet: -      Cash balances at Period end £4.6m (FY22: £4.7m) -      Net Assets of £7.9m (FY22: £8.0m) -      Cash conversion for the period of 88% (FY22: 105%).
·	Proposed Final Dividend of 2.0 pence per share, giving a total dividend per share for the year of 3.76p (FY22: 4.22p)*

Operational highlights

·	Fee Earners at Period end increased to 97 (FY22: 88), up 10.2%, demonstrating the attractiveness of the licence model and the network's heightened profile following IPO, with low levels of attrition at 8.4% (FY22: 16.1%)
·	Launch of our Future Leaders Programme, a programme produced in conjunction with BecomingX, investing in the next generation of DSW Leaders
·	Laid the foundations for our Recruitment Drive, to build a pipeline of ambitious professionals to join the DSW Network, partnering with Alexander Mann Solutions and bolstering our Recruitment team
·	Named by Experian** as the 11th most active corporate finance adviser in the UK in 2023, moving up the rankings from 18th in the prior year
·	Continued to deliver progress against our ESG Strategy, which was launched in April 2022, with the publication of our second ESG report

Post year end highlights

·	The Group now has a healthy pipeline of candidates, following launch of the Recruitment Drive, with two new licensed businesses having signed heads of terms
·	Provided funding support for an MBO of Bridgewood, bringing the business into the Network and acquiring ongoing licence fee income for DSW -      Bridgewood is a corporate recovery team of fourteen individuals based in Nottingham -      Strengthens DSW's counter-cyclical Network Revenues -      Adds a further geographical location, the Midlands, to the Network, which will raise the DSW's profile in that region, increasing the likelihood of further Fee Earners joining the Network
·	First DSW Group Conference announced, which will take place on 21 September 2023, bringing together our teams from across the UK

Current trading and outlook

·	FY24 trading performance to date at similar levels to Q4 FY23, as macro-economic concerns continue to restrict M&A activity
·	Opportunity for organic and acquisitive growth remains significant and the Directors are confident in the strength, resilience and appeal of the Group's business model
·	Focus remains on broadening the range of service lines in DSW's portfolio, to build resilience in the business through economic cycles
·	Investment in recruitment and supporting our existing licensees with improved central infrastructure to ensure that DSW is well positioned for further growth
·	The Board remains cautious about its expectations for FY24 but intends to capitalise on the recruitment opportunities that such challenging economic conditions often create
·	Whilst mindful of the pressure challenging trading conditions place on less mature licensees, the Board remains confident about the long-term prospects for the Group

* Full details of the dividend payments for FY22 are set out in note 12 to the accounts.

** Experian Market IQ: 2023 Report

James Dow, Chief Executive Officer, said:

"While the outcome for FY23 was not what we expected, at the start of the financial year, we are pleased with the progress the Group has made in other areas. Our investment in building a strong infrastructure to support our growth continued and we have significantly enhanced our recruitment capabilities despite the tough market; remaining greedy whilst others are fearful. This approach has served us well to date and we are confident that we will benefit from this investment in subsequent trading periods. 

"The post-year end addition of Bridgewood to the DSW Network demonstrates our ambitions to re-balance the portfolio and expand the geographical presence of the Group. We believe the increasing scrutiny and regulation facing some of our larger competitors, in combination with the current market conditions, will enable us to attract more quality Fee Earners to DSW, supporting our future growth and expansion."

Definitions

Network Revenue is defined as total revenue earned by licensees, as opposed to total revenue reported by the Company

Adjusted Pre-Tax Profit is defined as profit before 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.

Cash conversion is calculated as cash generated by operations divided by operating cash flows before movements in working capital

Total income from licensees represents statutory revenue plus share of results in associates

FY24 is the year ended 31 March 2024

Online investor presentation

An online investor presentation and Q&A will be hosted by the management team on Monday 17 July at 11.45am. To participate, please register with PI World at: https://bit.ly/DSW_FY23_webinar.

Dividend and Record Pay Date

The record date for the Group's proposed dividend is 15 September 2023, and the dividend payment date is 29 September 2023. The ex-dividend date is 14 September 2023.

Notice of AGM

The Group's annual general meeting ("AGM") will be held on 18 September 2023 at 10:00am at the Midland Hotel Manchester, 16 Peter St, Manchester M60 2DS. Notice of the AGM will be posted with copies of the Group's report and accounts on 18 August 2023.

For further information please contact:

DSW Capital James Dow, Chief Executive Officer Nicole Burstow, Chief Financial Officer	Tel: [phone] Tel: [phone]
Shore Capital (Nominated Adviser & Broker) James Thomas / Mark Percy / Rachel Goldstein Guy Wiehahn / Isobel Jones (Corporate Broking)	Tel: [phone]
Belvedere Communications Cat Valentine Keeley Clarke	Tel: [phone] Tel: [phone] [e-mail]

About DSW Capital

DSW Capital, owner of the Dow Schofield Watts brand, is a profitable, 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 23 licensee businesses with 107 fee earners, across eight offices in England and two 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 results for the year ended 31 March 2023, and to welcome Bridgewood, a corporate recovery and insolvency advisory business, based in Nottingham. Despite a strong start to the year, the Mini-Budget in the Autumn affected confidence and activity in our primary market, SME M&A, which inevitably impacted Group performance in H2.

Despite these frustrations, the DSW Network demonstrated the resilience of the individual businesses, by delivering £18.3m of Network Revenue, equal to the record level set in the prior year. DSW continues to maintain 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.

The DSW Network, which comprises 23 licensee businesses, rose up the ranks to be named by Experian as the 11^th most active corporate finance adviser (by number of deals) in the UK. As anticipated, the heightened profile of DSW resulting from our IPO led to increased recruitment activity in H1 with a high number of talented individuals joining DSW. We now have 97 Fee Earners as of 31 March 2023, an increase of 10.2% 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, the addition of new service lines and geographic locations, strategic acquisition of licence fees, and investing in "Break Outs" (existing teams in larger firms).

Being a professional services business, our focus is on the recruitment of new partners and 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 88 to 97, an increase of 10.2%, and the number of partners rose from 39 to 41. 

The current market conditions can be a catalyst for ambitious professionals to seek alternatives to the traditional employment models, as 'push' factors become more prominent due to inflationary pressures and consequently internal politics, and remuneration discussions can leave many disappointed. We see this as a great opportunity for DSW to invest in our recruitment pipeline in FY24, which we expect to benefit us in subsequent trading periods.

Addition of Bridgewood to the Network

We were delighted to announce, this morning, that, as part of our strategy to add new services lines, DSW supported the management buyout of Bridgewood, a corporate recovery business based in Nottingham. The transaction with Bridgewood strengthens our counter-cyclical offering and provides DSW with its first office in the Midlands, which will raise DSW's profile in that region, increasing the likelihood of further Fee Earners joining the Network.

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 and a cornerstone of our ESG Strategy. We recognise that 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 continues to be a core value, as new professionals and businesses are welcomed to the Network.

Technology

We continue to invest in the right technologies to protect our licensees and their clients, whilst also keeping pace with the rapidly changing IT landscape, to embed efficiencies and enhance the value and quality of service provided to our licensees. With this investment, our licensees are able to continue to fully embrace the flexibility and autonomy afforded to them by the DSW model, choosing how and where their teams work to help maintain a strong work life balance and increased collaboration.

We have also invested in an additional senior IT resource to help shape and implement our IT Strategy and provide industry leading expert advice to the Board. Our key focus areas include continued investment in our Cyber Security, maintaining excellent IT Service levels and providing a platform for future innovation.

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, Jillian Jones and I, are considered independent. Jon Schofield is not considered independent. The current Board reflects a blend of different experience and backgrounds and is considered appropriate for the scale of the business.

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 DSW has complied with the QCA Corporate Governance Code throughout FY23, and you can find more information on our governance arrangements in the Corporate Governance Statement in the annual report.

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. We invested in an external risk advisor to support us in raising the bar on compliance and regulatory matters. This included refreshing our Risk Management Framework, reviewing all policies and standards, and a series of risk management workshops with licenses businesses.

We introduced a clear and consistent format for identifying and assessing risks, both for DSW Capital and those risks faced by our licensees. This framework has been rolled out across the Network and adopted by licensees as part of their own risk assessments.

We continue to invest in our compliance support, providing relevant guidance and training to promote a pro-active approach to risk management across the DSW Network.

For more detail, please refer to Risk Management section in the annual report.

Environmental, Social and Governance ("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. The Group's ESG cornerstones and priority areas remain high on the Board's agenda. We are delighted to publish our second ESG report within this year's Annual Report, which provides a review of our progress to date and the meaningful action we are taking in areas in which we can have the most impact. You can read more detail on our progress in the Environmental, Social and Governance report in the annual report.

The Board continues to make voluntary SECR disclosures, as it recognises the important role all businesses must play to reduce carbon emissions and increase energy efficiency. Please refer to the Directors Report in the annual report.

Dividend

The Board is committed to its long-term dividend policy and is today proposing a final ordinary dividend for the year ended 31 March 2023 of 2.0 pence, in line with its dividend policy to pay out 70% of adjusted profit after tax. An interim dividend of 1.76 pence per share in respect of the six months to 30 September 2022 was paid on 11 January 2023.

If approved by shareholders, this will take total cumulative dividends that will be paid out to shareholders post-IPO to 7.98 pence per share.

Outlook

While recognising that economic conditions remain volatile, I am confident in the Group's ability to continue to deliver on its growth strategy. As a Board, we firmly believe that DSW is an attractive alternative to the Big 4 accounting firms, which enables talented professionals to achieve their potential and provides a bespoke, personalised service. Several of our competitors continue to experience intense regulatory pressure and disruption, making our unique model increasingly attractive to a large number of professionals who are seeking to take greater control of their careers.

The Board looks forward to FY24 with optimism and remains excited about the long-term prospects for the Group.

Heather Lauder

Independent Non-Executive Chair

Chief Executive Officer's Review

I am pleased to report on the year ended 31 March 2023, which was undoubtedly a game of two halves for DSW, with our progress being frustrated by the significant shift in sentiment that followed the fateful Autumn Mini-Budget. Despite this disruption, we matched the record Network Revenue achieved in FY22 to deliver £18.3m (FY22: £18.3m) and ended the year with a record number of professionals.

The Group's admission to AIM created a strong "halo" effect, which, combined with a resilient SME M&A market in the first half of the year, powered strong growth right through to October 2022 with Fee Earners rising from 88 to 97.

The Mini-Budget in September softened the SME M&A market, resulting in both lower levels of transactional activity and reduced licensee confidence in recruitment, which meant no new Fee Earners were added between October and the year end. Whilst the political landscape settled, business sentiment and M&A activity has remained cautious since then.

The change in economic conditions, whilst frustrating, brings significant expansion opportunities for the Group, particularly in terms of new partner recruitment. 

Mixed trading results  

Network revenue for the year was maintained at last year's record level of £18.3m (FY22: £18.3m), as our licensees continue to prosper and maintain their market positions. However, average revenue per Fee Earner declined 15.1% to £193k (FY22: £227k), reflecting the previously noted softening of the M&A market, and reduced utilisation in the second half of the year.  

Adjusted profit before tax decreased by 29.6% to £1.4m (FY22: £2.0m), with the decline in profitability reflecting a full year's plc costs, including additional central resource. Revenue for the Group was £2.7m (FY22: £2.7m) and statutory profit for the year was £485k (FY22: loss of £334k) after the deduction of the share-based payment ("SBP") charge and IPO costs.

DSW received an average licence fee (including profit share where applicable) of 16.6% (FY22: 16.9%), the slight reduction reflecting reduced profit share contributions. 

Balance sheet strength 

With strong cash balances at the year-end of £4.6m (FY22: £4.7m) after paying dividends of £1.26m, we remain well-resourced to execute on our strategy. 

DSW's strategy and delivery against it 

Our strategic aim remains to have a more resilient and diversified group of licensed businesses. At present, corporate finance and due diligence represents the majority of our business (68% vs. 70% in the previous year¹). As communicated at the time of the AIM listing, DSW aims to scale its licence model through organic growth of existing licensees, recruitment of new licensees, investing in "Break Outs" (existing teams in larger firms) and the acquisition of licence fees. 

Our recruitment processes continue to improve. In March 2023, we committed significant investment in additional central recruitment capability and relaunched our break-out initiative with clearer messaging that we are offering "golden hellos" to new teams.

Regarding acquisitions of licence fees, we remain in regular contact with companies that we admire and continue to work hard to convince them of our attractiveness, as a suitor offering the right solution for all their stakeholders. The transaction with Bridgewood, a corporate recovery business based in Nottingham, announced this morning demonstrates that our ability to attract quality businesses, which strengthen and diversify the Group.

Our focus remains on attracting further high margin, complementary, niche service lines with a strong synergistic fit with the existing DSW Network.  

Continued organic growth 

Being a professional services business, our focus is on the recruitment of new partners and 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 88 to 97, an increase of 10.2% (FY22: 14.3%) and the number of partners rose from 39 to 41. 

Since March 2013, the number of Fee Earners has increased from 30 to 97, which equates to a ten-year compound annual growth rate ("CAGR") of over 12%, and an increase of 15 (18.3%) since the flotation.  

The first half of the year was dominated by a scarcity of available talent and our licensee partners led the way in recruiting employees to their teams. The change in economic conditions in the autumn, meant existing licensees took a more prudent approach to recruitment and, generally, there was significantly softer demand for talent.  

Empowering professionals  

Since launching the business in 2002 as a three-man start-up, we have focussed on attracting others to our path, to build their own mid-market challenger professional service businesses. We finished the year with 21 licensed businesses in our network, adding a new wealth advisory partner and a new M&A advisory business.  

Our vision is to become the most sought-after destination for ambitious, entrepreneurial professionals to start and develop their own businesses. Our focus is on partners, rather than clients. 

This focus on people is our super-power. Other professional firms will profess the importance of people but position their services and capabilities towards their clients. DSW's clients are our partners. The strength of our business model is this clear focus on helping people meet their aspirations. 

Recruitment drive 

When there is a buoyant demand for services, our ability to recruit is more constrained as the push factors encouraging people to seek new opportunities is significantly lower. A slowdown in activity results in lower bonuses, disappointing salary awards and postponed promotions, which increases push factors and the propensity of candidates to consider a move.   

We know that DSW remains a desirable place to work for ambitious people, who cherish their autonomy and want to grow their own business free from the internal politics of larger firms. 

Recognising the significant shift in recruitment conditions towards the end of the year, we significantly increased our investment in recruitment which we will continue through FY24. It is important that we are greedy whilst others are fearful. This approach has served us well to date. 

A growing brand and reputation 

DSW must continue to demonstrate that it is a highly attractive proposition for both clients and professionals who work within the UK mid-market. The quality of DSW's clients and the quality of our people is reflected in our significant average revenues per fee earner of £193k (FY22: £227k). This is an important metric and, while lower in FY23 than anticipated at the start of the year, this still compares very favourably with other professional service firms. 

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 2022, which marked DSW as the 11^th most active adviser (by number of deals) in the UK (18^th position in 2021 and 25th place in 2020²). 

In November, DSW ranked 48^th in Accountancy Age's top 50 accountancy firms (based on revenue) to the year ended March 2022, compared to the previous year's ranking of 49^{th 3}.

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. We believe this network of 31 members is the 8^th largest in the world. 

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. 

The Pandea conference held in Rotterdam in May 2023, attracted 21 of the 31 member firms. 

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 make it possible for our 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 increasing levels of support to our licensees. 

Our initiatives this year included the launch of our Future Leaders Programme in conjunction with BecomingX. The programme is a six-month personal development journey to prepare the next generation of DSW leaders. The selected employees take part in inspiring training sessions, receive individual executive coaching, and collaborate with colleagues to design and deliver strategic initiatives. Our first cohort of 12 employees and partners started in January of this year. 

These initiatives are right at the heart of supporting our licensee partners and employees to be the best that they can be.  Their development reinforces the foundations of our licensee businesses and therefore for DSW for the coming years.  

Our partners and their teams are our greatest ambassadors. On behalf of our shareholders, I would like to take this opportunity to thank DSW partners for their continuing commitment to DSW and all that it stands for. 

Looking ahead 

DSW is a resilient business with a long track record of growth in Fee Earners but, with our roots in M&A advisory, we are financially impacted by the current lower levels of deal activity in M&A - particularly the SME segment.   

The new financial year has started in line with our expectations, with trading performance at similar levels to Q4 FY23.  Consequently, we remain uncertain as to the speed of recovery in SME M&A activity and cognisant of the macro vulnerabilities.

Our focus, however, is firmly on recruitment, as these short-term economic uncertainties 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. Accordingly, we have significantly increased the resources committed to recruitment which has strengthened our recruitment pipeline.

We remain very confident in the strength of our business model to continue to attract Fee Earners, as demonstrated by the transaction with Bridgewood announced today. We have a strong balance sheet and are confident that our considerable efforts to acquire licence fees and recruit teams will bear fruit. 

James Dow 

Chief Executive Officer 

1. Calculation includes all licensing income including income from associates

2. https://dswcapital.com/dsw-ranks-11th-in-the-uks-deals-advisers-in-2022/

3. https://dswcapital.com/dow-schofield-watts-rises-in-accountancy-top-50-50/

Chief Financial Officer's Review

Key Performance Indicators

The following KPIs are used by management to monitor the financial performance of the Group:

	2023	2022	2021
Revenue (£'000)	2,714	2,681	2,354
Total income from licensees (£'000)	2,998	2,990	2,456
Adjusted EBITDA* (£'000)	1,536	2,233	1,824
Adjusted PBT (£'000)	1,409	2,002	1,592
Adjusted PBT margin (%)	51.9	74.6	67.6
Net Assets (£'000)	7,895	7,985	2,212

The Group also measures its performance using the following KPIs which are derived from the performance of the DSW Network:

	2023	2022	2021
Total revenue of all Network licensees (£'000)	18,263	18,285	15,342
Revenue per fee earner (£'000)	193	227	196
Revenue per partner (£,000)	445	446	432
Fee Earners (Number)	97	88	77

After a very strong first half of the year, the performance of the Group in the second half was significantly disrupted by the turbulent economic conditions that followed the Mini-Budget in the Autumn. 

We have a very talented network of partners and employees and their hard work, commitment to their clients and resourcefulness have enabled them to maintain the record level of billings achieved in the prior year despite an overall decline in market activity. As such, DSW has improved its market share now ranking the 11^th most active adviser (by number of deals) in the UK (18^th position in 2021**).

The difficult economic conditions have, however, impeded both organic and new partner recruitment, which in turn frustrated the Group's ability to grow. Additionally, with a full year of IPO costs to bear, this has further impacted on the Group's profitability.

Our investment in central infrastructure, whilst having a short-term impact on profit will position the Group well for the future. Our current year initiatives have focused on increasing the appeal of the model to new recruits whilst making it more "sticky" for existing licensees; developing future talent; and increasing collaboration across the Network. 

Income Statement

Revenue and Network Revenue

Network revenue for the year was £18.3m, which remains flat on the prior year. While many of our businesses have reported record years, the reduced M&A activity has impacted Corporate Finance, our most significant service line. This reduction has lowered utilisation and revenue per fee earner by 15.1% to £193k. Our average licence fee has been maintained at 16.6% (FY22: 16.9%) resulting in consistent levels of licensing income of £3.0m (2022: £3.1m). Referrals across the Network have increased to 14.2% of total Revenue (2022; 13.9%) demonstrating the collegiate culture across the Group, even in difficult trading conditions.

Fee Earners

The number of Fee Earners is a key driver of growth and we have seen a 10.2% increase on the prior year to 97, against the backdrop of a challenging recruitment market. The growth in Fee Earners was heavily weighted to the first half of the year with the uncertain economic environment in the second half causing our licensees to take a cautious approach to recruitment. These conditions have been particularly frustrating following the boost to recruitment experienced on the back of the IPO. Nevertheless, the downturn creates greater push factors in the candidate pool which creates greater opportunity. We are investing in our recruitment capabilities so that we are well positioned to attack the opportunity and are confident that this should generate significant benefit in the latter part of FY24 and into FY25.

Despite a reduction in revenue per Fee Earner from £227k to £193k, this KPI remains comparable to our larger listed peers such as Knights, DWF, Gateley and Keystone Law as well as the Big 4. Many of our businesses have improved their market positions and our talented teams continue to be award winning in their local markets. The strength of the DSW brand continues to grow and we remain a genuine alternative to the largest firms.

Central Costs

We are committed to maintaining a lean cost base whilst ensuring we provide our licensees with the support they need to thrive and fulfil their potential.

Central costs (excluding the share-based payment charge and IPO costs) have increased by £0.55m, on the prior year. The majority of the increase is due to the full year effect of plc costs and investment in our central infrastructure. 

We are 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 10 people (excluding directors), 8.0 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.

We made two senior hires in the second half of FY22, a Talent and Resource Manager and a Strategic Projects Director, with a full year's cost being incurred in FY23. In the current year we have invested in senior IT resource to develop our IT strategy and a platform for future innovation. In addition, we recruited a marketing executive and an office administrator. We have continued to enhance the level of compliance support provided to licenses; increased marketing activity to improve brand awareness; and launched our Future Leaders training program, investing in high potential employees across the Network to develop the next generation of partners.  In addition, we have launched several initiatives to increase collaboration across the Network. Our target is to grow the percentage of referrals as a proportion of total income (2023: 14.2%) such that it exceeds the average licence fee (2023: 16.6%), creating an even more compelling proposition to new partners.

Our Adjusted Pre-tax Profit was £1.4m (2022: £2.0m) which is a decrease of 29.6% on the prior year, reflecting the increased cost base noted above.

Adjusted PBT and Exceptional Costs

Adjusted PBT is calculated as follows:

	2023 (£000's)	2022 (£000's)
Profit / (Loss) before tax	715	(31)
Share based payments	694	1,167
IPO costs	-	866
Adjusted PBT	1,409	2,002

We have a share-based payment charge in the year of £0.7m which reflects the accounting impact of the one-off issue of growth shares to partners 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, solely reflecting the executive LTIP scheme.

Taxation

The effective rate of tax (based on PBT excluding the share-based payments charge which is non-deductible) is 16.3%, slightly below the statutory rate due to an over-provision in the prior year and the reversal of certain costs previously treated as non-deductible. The prior year effective rate (26.7%) was higher 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 6p (2022: 10p). 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 Group's business model is highly 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 27 days (calculated as amounts owed to DSW Capital from licensees divided by Network Revenue), compared to 30 days in the prior year. This remains well below the listed peer group. 

Cash generated from operations was £1.35m (2021: £1.44m). Operating cash conversion in the year was 88% which is lower than the prior year (2022: 105%) due to start-up funding provided to new licensee businesses. Corporation tax payments were £0.2m (2022: £0.5m).

Capital expenditure was minimal in the period (£0.04m) and lease payments of £0.08m relate to the Head Office in Daresbury. Interest income (£0.1m) has been earnt on licensee loans and the Group's cash balances.

As a result, the closing cash and cash equivalents balance before the payment of dividends was £5.85m (2022: £4.49m), giving a net increase of £1.12m. The Group paid dividends of £1.26m in the year (2022: £0.38m) leaving closing cash of £4.58m (2022: £4.72m) and no debt.

Net Assets

The Group has a strong balance sheet with net assets of £7.9m at the year-end (2022: £8.0m). In addition, the Group has significant cash resources to take advantage of the current recruitment and strategic acquisition opportunities.

Dividend

The Board is proposing to pay a final ordinary dividend of 2.0 pence for ended 31 March 2023 in line with its dividend policy to pay out 70% of adjusted profit after tax. An interim dividend of 1.76 pence per share in respect of the six months to 30 September 2022 was paid on 11 January 2023.

The final dividend will be approved at the Company's AGM which will be held on 18 September 2023 at The Midland Hotel, Manchester, M60 2DS.

Since IPO in December 2021, the Group will have paid out 7.98 pence per share in dividends, following the approval of the FY23 Final Dividend of 2.0 pence.

Nicole Burstow

Chief Financial Officer

*Adjusted EBITDA is defined as Adjusted profit before tax adjusted to add back impairment of loans due from associated undertakings (£22k), finance costs (£24k), depreciation (£139k), amortisation (£46k) and deduct finance income (£104k).

** https://dswcapital.com/dsw-ranks-11th-in-the-uks-dealsadvisers-in-2022/

Consolidated statement of comprehensive income

For the year ended 31 March 2023

		2023		2022
	Note	£'000		£'000
Continuing operations
Revenue	4	2,714		2,681
Gross profit		2,714		2,681
Share of results of associates	16	284		309
Share of results of jointly controlled entity	17	25		102
Administrative expenses		(2,366)		(3,018)
Operating profit		657		74
Adjusted operating profit*		1,351		2,107
Share based payments expense IPO expenses		(694) -		(1,167) (866)
Operating profit		657		74
Finance income	9	104		82
Impairment of loans due from associated undertakings		(22)		(127)
Finance costs	10	(24)		(60)
Profit / (loss) before tax		715		(31)
Income tax	11	(230)		(303)
Profit / (loss) for the year	6	485		(334)
Total comprehensive income / (loss) for the year attributable to owners of the Company		485		(334)
Earnings per share
From continuing operations
Basic	13	£0.02		(£0.02)
Diluted	13	£0.02		(£0.02)

* 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 2023

		2023			2022
	Note	£'000			£'000
Non-current assets
Intangible assets	14	748			794
Property, plant and equipment	15	440			525
Investments	18	922			922
Investments in associates	18	209			290
Interests in jointly controlled entities	18	39			23
Prepayments and Accrued Income	19	166			175
Deferred tax asset	21	9			4
		2,533			2,733
Current assets
Trade receivables	19	924			832
Prepayments and Accrued Income	19	350			362
Other receivables	19	567			369
Cash and bank balances		4,584			4,722
		6,425			6,285
Total assets		8,958			9,018
Current liabilities
Trade payables	22	162			86
Other taxation	22	211			210
Other payables	22	76			54
Accruals and Deferred Income	22	133			163
Current tax liabilities	22	95			63
Lease liability	24	91			83
		768			659
Net current assets		5,657			5,626
Lease liability	24	220			302
Dilapidation provision	22	75			72
		295		374
Total liabilities		1,063		1,033
Net assets		7,895		7,985
Equity
Share capital	23	55		54
Share premium		5,271		5,280
Share-based payment reserve	25	1,868		1,174
Retained earnings		701		1,477
Total Equity attributable to owners of the Company		7,895		7,985

Company statement of financial position

As at 31 March 2023

		2023			2022
	Note	£'000			£'000
Non-current assets
Intangible assets	14	748			794
Property, plant and equipment	15	40			39
Investments	18	922			922
Investments in associates	18	209			290
Interests in jointly controlled entities	18	39			23
Prepayments and accrued income	19	166			175
Deferred tax asset	21	9			4
		2,133			2,247
Current assets
Trade receivables	19	869			801
Prepayments and Accrued Income	19	293			307
Other receivables	19	696			499
Cash and bank balances		4,563			4,714
		6,421			6,321
Total assets		8.554			8,568
Current liabilities
Trade payables	22	32			29
Other taxation	22	210			177
Other payables	22	76			54
Accruals and Deferred Income	22	128			154
Current tax liabilities	22	95			63
		541			477
Net current assets		5,880			5,844
Total liabilities		541		477
Net assets		8,013		8,091
Equity
Share capital	23	55		54
Share premium		5,271		5,280
Share-based payment reserve	25	1,868		1,174
Retained earnings		819		1,583
Total Equity attributable to owners of the Company		8,013		8,091

The profit after tax for the Company was £497,000 (2022: loss of £305,000). Under s408 of the Companies Act 2006, the company is exempt from the requirement to present its own income statement.

Consolidated statement of changes in equity

For the year ended 31 March 2023

	Share capital	Share premium	Share-based payments reserve	Retained earnings	Total equity
	£'000	£'000	£'000	£'000	£'000
Balance at 31 March 2021	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
Profit for the year	-	-	-	485	485
Dividends	-	-	-	(1,261)	(1,261)
Share-based payments	-	-	694	-	694
Issue of shares in year	1	(9)	-	-	(8)
Balance at 31 March 2023	55	5,271	1,868	701	7,895

Company statement of changes in equity

For the year ended 31 March 2023

	Share capital	Share premium	Share-based payments reserve	Retained earnings	Total equity
	£'000	£'000	£'000	£'000	£'000
Balance at 31 March 2021	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
Profit for the year	-	-	-	497	497
Dividends	-	-	-	(1,261)	(1,261)
Share-based payments	-	-	694	-	694
Issue of shares in year	1	(9)	-	-	(8)
Balance at 31 March 2023	55	5,271	1,868	819	8,013

Consolidated cash flow statement

For the year ended 31 March 2023

			2023			2022
	Note		£'000			£'000
Profit / (loss) for the year			485			(334)
Adjustments for:
Income tax expense	11		230			303
Net interest income			(80)			(22)
Depreciation of property, plant and equipment	15		139			87
Amortisation of intangible assets	14		46			39
Share-based payment expense	25		694			1,167
Impairment of loans due from associated undertakings			22			127
Operating cash flows before movements in working capital			1,536			1,367
(Increase)/decrease in trade and other receivables			(308)			192
Increase in trade and other payables			41			73
Decrease/(increase) in amounts owed from associates in relation to profit share			81			(196)
Cash generated by operations			1,350			1,436
Income taxes paid			(203)			(502)
Net cash from operating activities			1,147			934
Investing activities
Purchases of property, plant and equipment	15		(43)			(37)
Net cash used in investing activities			(43)			(37)
Financing activities
Dividends paid	12		(1,261)					(380)
Finance lease payments		(77)					(77)
Net interest received		104					45
Repayments of loans and borrowings		-					(992)
(Costs of) / proceeds from issue of ordinary shares net of share issue costs		(8)					4,620
Net cash (used in) / from financing activities		(1,242)					3,216
Net (decrease) / increase in cash and cash equivalents		(138)					4,113
Cash and cash equivalents at beginning of year		4,722					609
Cash and cash equivalents at end of year		4,584					4,722

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 (£), which is the currency of the economic environment in which the Group operates.  All amounts are rounded to the nearest £'000 except where noted. 

2. Accounting policies

Basis of Preparation

The financial information set out in this preliminary announcement does not constitute statutory accounts as defined by section 434 of the Companies Act 2006.

The results for the year ended 31 March 2023 have been extracted from the full accounts of the Group for that year 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 2023 were approved by the Directors on 12 July 2023.

The financial information for the year ended 31 March 2022 is derived from the statutory accounts for that year, which have been delivered to the Registrar of Companies. The report of the auditor on those filed accounts was unqualified.

The accounts for the year ended 31 March 2023 and 31 March 2022 did not contain a statement under s498 (1) to (4) of the Companies Act 2006. The statutory accounts for the year ended 31 March 2023 will be distributed to shareholders on 18 August 2023, in advance of the Annual General Meeting and made available on our website (https://dswcapital.com/investors/) or on request by contacting the Company Secretary at the Company's Registered Office.

Statement of Compliance

The Group financial statements have been properly prepared in accordance with UK adopted international accounting standards; the Parent Company financial statements have been properly prepared in accordance with UK adopted international accounting standards and has applied in accordance with the provisions of the Companies Act 2006.

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 the current year, the Group has applied a number of amendments to IFRS accounting standards issued by the International Accounting Standards Board (IASB) that are mandatorily effective for an accounting period that begins on or after 1 January 2022.Their adoption has not had any material impact on the disclosures or on the amounts reported in these financial statements.

·	Amendments to IAS 16 - Property Plant and Equipment: Proceeds before intended use
·	Amendments to IFRS 3 - Reference to Conceptual Framework
·	Annual improvements to IFRS Standards 2018-2020 Cycle
·	Amendments to IFRS 9 - Financial Instruments and IFRS 16 leases

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.

·	IFRS 17 - Insurance Contracts
·	Amendments to IFRS 10 and IAS 28 - Sale or Contribution of Assets between an Investor and its Associate or Joint Venture
·	Amendments to IAS 1 - Classification of Liabilities as current or non-current
·	Amendments to IAS 1 and IFRS Practice Statement 2 - Disclosure of Accounting Policies
·	Amendment to IAS 8 - Definition of Accounting Estimates
·	Amendments to IAS 12 - Deferred tax related Assets and Liabilities arising from a Single Transaction

The directors do not expect 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 the cash balance and the forecasts for the next twelve months following the date of this 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. The Group has a significant cash balance of £4.6m, no debt, has a model which is strongly cash generative and a limited fixed cost base. At 31 March 2023, the Group has net assets of £7.9m (2022: £8.0m) and net current assets of £5.7m (2022: £5.6m) which reflects the strong financial position for the Group. In addition, the Group is profitable with adjusted profit after tax of £1.2m in the year ended 31 March 2023.

Scenario analysis has been performed on the underlying forecasts and, given the Group's cash balance is over two times the size of the forecast annual cost base, this demonstrates that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future. As stated in note 28, the Group completed a transaction with Bridgewood Financial Solutions Limited on 12^th July 2023 to acquire licence fee income and provide funding to support a management buyout.  The transaction will be funded out of the Group's available cash resources and will provide loans totaling £880,000 of cash, of which £100,000 will be a working capital loan to Bridgewood.  Following the completion of the transaction, the Directors remain comfortable that the Company and the Group have sufficient funds to comfortably cover its cost base for at least 12 months from the date of signing the accounts.

As such, the Group financial statements have been prepared on a going concern basis as the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future.

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.

Retirement and termination benefit costs

Payments to defined contribution retirement benefit plans are recognised as an expense in the consolidated statement of comprehensive income 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 the consolidated statement of comprehensive income 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 & fittings	20% straight line

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 the consolidated statement of comprehensive income 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 in the statement of financial position 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.

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 29.

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 25.

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 the consolidated statement of comprehensive income 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. Where 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.  As 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 2023, 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 three years from the date of the statement of financial position.

Key sources of estimation uncertainty

The key assumptions concerning the future, and other key sources of estimation uncertainty at the reporting period that may have a significant risk of causing 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

	2023		2022
	£'000		£'000
External revenue by product line
License Fee Income	2,549		2,531
Profit Share Income	165		150
Total	2,714		2,681

A further breakdown of revenue by reporting line is shown below:

	2023		2022
	£'000		£'000
External revenue by reporting line
License fees attributable to Mergers & Acquisition ('M&A')	1,817		1,889
License fees attributable to Other	732		642
Profit share attributable to M&A	165		150
Total Revenue	2,714		2,681

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 £0.68m (2022: £0.96m) 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 2023 or 2022.

6. Profit for the year

Profit for the year has been arrived at after charging/(crediting):

	2023		2022
	£'000		£'000
Depreciation of property, plant and equipment	139		87
Amortisation	46		39
Employee pension	14		36
IPO costs	-		866
Expected credit loss - license fees	130		(6)
Expected credit loss - outstanding loans	22		127
Expected credit loss - profit share	(84)		14

7. Auditors' remuneration

	2023		2022
	£'000		£'000
Audit of the Group financial statements	63		60
Fees payable to the Company's auditors in respect of:
Interim financial reporting	-		16
Reporting Accountants	-		126
Total auditors' remuneration	63		202

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:

	2023		2022
	Number		Number
Central Heads	15		16
	15		16

Their aggregate remuneration comprised:

	2023		2022
	£'000		£'000
Wages and salaries	790		669
Social security costs	98		74
Other pension costs (see note 26)	14		36
	902		779

'Other pension costs' relate to the defined contribution plan charge as detailed in Note 26.

Aggregate Directors' remuneration

	2023		2022
	£'000		£'000
Wages and salaries	455		393
Social security costs	63		49
Other pension costs (see note 26)	8		31
	526		473

The highest paid Director's total emoluments in the year were £213,500 (2022: £276,308) of which £nil (2022: £31,321) related to pension costs.

Directors' transactions

Dividends totaling £1,260,953 were paid in the year in respect of ordinary shares (2022: £379,995). Of the dividends, £324,682 (2022: £379,995) were paid to Directors of the Company who were currently serving at the time of payment. See Note 12 for details.

9. Finance income

	2023		2022
	£'000		£'000
Interest income:
Loan Interest	80		80
	80		80
Other finance income	24		2
Total finance income	104		82

10. Finance costs

	2023		2022
	£'000		£'000
Interest on bank loans	-		(36)
Amortisation of debt issue costs	-		(11)
Interest costs on lease	(19)		(11)
Other finance costs	(5)		(2)
	(24)		(60)

11. Income Tax

	2023		2022
	£'000		£'000
Corporation income tax:
Current year	260		340
Adjustments in respect of prior years	(25)		(36)
	235		304
Deferred tax (see note 21)
Origination and reversal of temporary differences	(5)		(1)
	230		303

The standard rate of corporation tax applied to reported profit is 19 per cent (2022: 19 per cent).

The charge for the year can be reconciled to the profit before tax as follows:

	2023		2022
	£'000		£'000
Profit / (loss) before tax on continuing operations	715		(31)
Tax at the UK corporation tax rate of 19 per cent (2022: 19 per cent)	136		(6)
Tax effect of expenses that are not deductible in determining taxable profit and reversal of prior year expenses not deducted previously	(14)		128
Depreciation in excess of capital allowances	7		5
Other tax effects	4		3
Tax effect of adjustments in relation to prior periods	(25)		(36)
Tax effect of income not taxable in determining taxable profit	(5)		(12)
Movement in deferred tax assets/liabilities	(5)		(1)
Tax effect of share based payment adjustment	132		222
Tax expense for the year	230		303

From 1 April 2023, there is no longer a single corporation tax rate for non-ring-fenced profits. At the spring budget 2021, the government announced that the corporation tax rate for non-ring-fenced profits would increase to 25% for profits above £250k. Companies with profits between £50,000 and £250,000 will pay tax at the main rate, reduced by a marginal relief.

12. Dividends

	2023		2022
Amounts recognised as distributions to equity holders in the year:	£'000		£'000
Final dividend for the year to 31 March 2022 consisting of:
Interim catch up dividend for the year to 31 March 2022 of £0.0056 per share (2021: £nil)	118		-
Final dividend for the year ended 31 March 2022 of £0.0366 per share (2021: £0.0667 per share)	772		127
Interim dividend for the year ended 31 March 2023 of £0.0176 per share (2022: £0.133 per share)	371		253
	1,261		380
Proposed final dividend for the year ended 31 March 2023 consisting of: Prior year interim catch up dividend for the year to 31 March 2022 of £0.0056 per share	-		120
Final dividend for the year to 31 March 2023 of £0.02 per share (2022: £0.0366 per share)	439		786
	439		906

The proposed final dividend is subject to approval by shareholders at the Annual General Meeting and has not been included as a liability in these financial statements. The proposed dividend is payable to all shareholders on the Register of Members on 14 September 2023.

13. Earnings per share

From continuing operations

The calculation of the basic and diluted earnings per share is based on the following data:

		2023		2022
Earnings		£'000		£'000
Earnings for the purposes of basic earnings per share being net profit / (loss) attributable to owners of the Company		485		(334)
Effect of dilutive potential ordinary shares:		-		-
Earnings for the purposes of diluted earnings per share		485		(334)

		2023		2022
Number of shares
Weighted average number of ordinary shares for the purposes of basic earnings per share		21,075,581		17,014,850
Effect of dilutive potential ordinary shares:
Share Options		674,454		122,844
Weighted average number of ordinary shares for the purposes of diluted earnings per share		21,750,035		17,137,694

From continuing operations

		2023		2022
Earnings		£		£
Basic earnings per share		0.02		(0.02)
Diluted earnings per share		0.02		(0.02)

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; and
·	The tax effect of the above items

The calculation of adjusted basic and adjusted diluted earnings per share is based on:

				2023		2022
				£'000		£'000
Profit / (loss) after tax on continuing operations				485		(334)
Adjusted for:
Share-based payment expense				694		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				1,179		1,656
			2023			2022
Earnings			£			£
Adjusted basic earnings per share			0.06			0.10
Adjusted diluted earnings per share			0.05			0.10

Tax adjustments of £nil (2021: £43,000) 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

		Intellectual Property & Trademarks
		£'000
Cost
At 1 April 2021		747
Additions		160
At 31 March 2022		907
Additions		-
At 31 March 2023		907
Amortisation
At 1 April 2021		74
Charge for the year		39
At 31 March 2022		113
Charge for the year		46
At 31 March 2023		159
Carrying amount
At 31 March 2022		794
At 31 March 2023		748

All intangible assets relate to intellectual property on which license fees are charged. £676k of the carrying amount as at 31 March 2023 (2022: £707k) relates to Camlee Group.

15. Property, plant and equipment - Group

	Right of Use Asset	Office Fixtures, Fittings & Equipment		Total
	£'000	£'000		£'000
Cost
At 1 April 2021	-	184		184
Additions	520	37		557
At 31 March 2022	520	221		741
Additions	11	43		54
At 31 March 2023	531	264		795
Accumulated depreciation
At 1 April 2021	-	129		129
Charge for the year	52	35		87
At 31 March 2022	52	164		216
Charge for the year	105	34		139
At 31 March 2023	157	198		355
Carrying amount
At 31 March 2022	468	57		525
At 31 March 2023	374	66		440

Property, plant and equipment - Company

	Office Fixtures, Fittings & Equipment
	£'000
Cost
At 1 April 2021	97
Additions	31
At 31 March 2022	128
Additions	28
At 31 March 2023	156
Accumulated depreciation
At 1 April 2021	62
Charge for the year	27
At 31 March 2022	89
Charge for the year	27
At 31 March 2023	116
Carrying amount
At 31 March 2022	39
At 31 March 2023	40

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

	2023		2022
	£'000		£'000
The Group's share of profit from continuing operations	284		309
The Group's share of profit and total comprehensive income	284		309

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

	2023		2022
	£'000		£'000
The Group's share of profit from continuing operations	25		102
The Group's share of profit and total comprehensive income	25		102

18. Investments - Group and Company

	2023		2022
	£'000		£'000
Financial assets measured under the equity method
Investment in Associates	209		290
Investment in jointly controlled entities	39		23
Financial assets measured at amortised cost
Other investments	922		922
Total Investments	1,170		1,235

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 Investment in Associates and Investment in jointly controlled entities is included in the cashflow statement as increase in amounts due from associates.

19. Trade and other receivables

	Company 2023		Company 2022		Group 2023		Group  2022
	£'000		£'000		£'000		£'000
Trade receivables	910		879		965		910
Loss allowance	(41)		(78)		(41)		(78)
	869		801		924		832
Other receivables	804		686		805		686
Loss Allowance	(238)		(317)		(238)		(317)
	566		369		567		369
Prepayments and Accrued Income	471		574		528		629
Loss Allowance	(12)		(92)		(12)		(92)
	459		482		516		537
	1,894		1,652		2,007		1,738
Amounts due from subsidiary undertakings	130		130		-		-
	2,024		1,782		2,007		1,738

Included in prepayments and accrued income for both the company and the group are £166k (2022: £175k) due in greater than 1 year. Other receivables are made up from loans due from licensees and prepayments and accrued income relates to profit share due from licensees. Amounts due from subsidiary undertakings, in other receivables on the consolidated statement of financial position, 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 102 Days (2022: 84 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;

	2023		2022
	£'000		£'000
Not past due	772		698
Past due 61 to 90 days	7		-
Past due 91 to 120 days	53		51
Past due over 120 days	92		83
	924		832

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

Analysis of changes in net debt

	01 April 2021	Cash flow	Amortisation of debt issue costs	Non-cash debt items	31 March 2022
Cash & bank balances	609	4,113	-	-	4,722
Bank Loans	(942)	942	-	-	-
Debt issue costs	41	-	(41)	-	-
Convertible Loan Notes	(540)	-	-	540	-
New Loans	(50)	50	-	-	-
Net Debt	(882)	5,105	(41)	540	4,722
	01 April 2022	Cash flow	Amortisation of debt issue costs	Non-cash debt items	31 March 2023
Cash & bank balances	4,722	(138)	-	-	4,584
Net Debt	4,722	(138)	-	-	4,584

Balances at 31 March 2023 comprise:

		Current assets
		£'000
Cash and bank balances		4,584

21. Deferred tax - Group and Company

The following are the major deferred tax liabilities and assets recognised by the Group and movements thereon during the current and prior reporting period.

	2023		2022
	£'000		£'000
At the beginning of the year asset	4		3
Credited in the year	5		1
At the end of the year asset	9		4

22. Trade and other payables

	Company 2023		Company 2022		Group 2023		Group 2022
	£'000		£'000		£'000		£'000
Trade payables	32		29		162		86
Other taxation and social security	210		177		211		210
Other payables	76		54		76		54
Accruals and Deferred Income	128		154		133		163
Corporation Tax	95		63		95		63
	541		477		677		576

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:

	2023		2022
	£'000		£'000
Dilapidation provision	75		72
	75		72

23. Share capital - Group and Company

	2023			2022
	Number	£'000		Number	£'000
Authorised, issued and fully paid:
Ordinary shares	21,926,360	55		21,482,508	54
	21,926,360	55		21,482,508	54

	2023
	Number	£'000
As at 31 March 2022	21,482,508	54
Share issue	443,852	1
As at 31 March 2023	21,926,360	55

On the 26^th August 2022, the following transactions took place in relation to the Company's share capital;

i.	417,185 ordinary shares were issued as part of the PSP award scheme, further details of which can be found in Note 25.
ii.	26,667 ordinary shares were issued to James Dow in respect of his FY22 performance bonus as disclosed in the FY22 Annual Report.

24. 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
		£'000
Balance at 1 April 2021		-
Additions in the year		520
Depreciation		(52)
Balance at 31 March 2022		468
Additions in the year		11
Depreciation		(105)
Balance at 31 March 2023		374
Lease liabilities		Total
		£'000
Balance at 1 April 2021		-
New leases recognised in the year		451
Interest expense		11
Lease amounts invoiced and paid in the year		(77)
Balance at 31 March 2022		385
New leases recognised in year		11
Interest expense		19
Lease amounts invoiced and paid in the year		(77)
Lease amounts invoiced and included within creditors at 31 March 2023		(27)
Balance at 31 March 2023		311
Income Statement	2023	2022
	£'000	£'000
Interest expense (note 10)	19	11
Expense relating to leases of low-value assets	10	7
Expense relating to short-term leases	63	61
At 31 March 2023	92	79

As at the 31 March 2023, 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;

	2023	2022
	£'000	£'000
Within one year	91	83
In one to two years	96	87
In two to three years	101	92
In three to four years	23	98
In over four years	-	25
	311	385

The total cash outflow in the year paid in respect of leases was £76,800 (2022: £76,800). Under the terms of the lease, £105,472 per annum is charged until the first break date in October 2026.

25. Share-based payments

In the year ended 31 March 2023 the Group operated three equity-settled share-based payment plans as described below.

The Group recognised total expenses of £693,787 in respect of equity-settled share-based payment transactions in the year ended 31 March 2023.

The charge to the income statement is set out below:

Share plans:	2023		2022
Growth share plan	368,269		1,060,453
Legacy Awards	253,301		73,879
Performance bonus	-		30,000
PSP Awards	72,217		2,761
Total SBP expense	693,787		1,167,093

Share-based payments movement for the year ended 31 March 2023:

	SBP Expense (£)	SBP Reserve (£)
Growth share plan	368,269	(368,269)
Legacy Awards	253,301	(253,301)
PSP Awards	72,217	(72,217)
Total movement	693,787	(693,787)

Share-based payments movement for the year ended 31 March 2022:

	SBP Expense (£)	SBP Reserve (£)
Growth share plan	1,060,453	(1,060,453)
Legacy Awards	73,879	(73,879)
Performance bonus	30,000	(30,000)
PSP Awards	2,761	(2,761)
Total movement	1,167,093	(1,167,093)

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.

After the IPO, 214,308 C Growth Shares and 17,268 E Growth shares were converted to 1,150,548 ordinary shares in issue. 45,479 D Growth Shares were converted to Deferred Shares which were cancelled at the AGM in September 2022. The Group recognised total expenses of £368,269 related to the Growth Share Plan in the year ended 31 March 2023.

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 three 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 £26m. The CFO Legacy Award was 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 £26m (the "Leeds Legacy Awards"). To fulfil these obligations, those individuals will be granted options to acquire the interest below a £26m 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 £1.00 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 £253,301. 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:

	2023		2022
	No. of share options		No. of share options
Outstanding at beginning of year	328,000		-
Granted during the year	-		328,000
Exercised during the year	-		-
Outstanding at the end of the year	328,000		328,000
Exercisable at the end of the year	-		-

There were no share options exercised, forfeited or expired within the period.

The Legacy Awards vested on 31 March 2023. Following vesting, the CFO will be entitled to exchange a proportion of her interest in the shares with the Trustee's interest in shares so that each party has a number of whole shares equivalent in value to their respective interests. For a period of four years after vesting, the Leeds participants will be entitled to exercise their options to acquire the Legacy Shares beneath the hurdle.

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 £1.00 with an exercise price per award of nil.

Awards outstanding at 31 March 2023 are shown below:

	2023		2022
	No. of share options		No. of share options
Outstanding at beginning of year	95,000		-
Granted during the year	417,185		95,000
Outstanding at the end of the year	512,185		95,000
Exercisable at the end of the year	-		-

There were no awards forfeited, exercised or expired in the period.

The Group used the Black Scholes Model to calculate the anticipated value of the PSP awards. The charge for the year is £72,217.

26. 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 £14,274 (2022: £35,679) represents contributions payable to these plans by the Group at rates specified in the rules of the plans. As at 31 March 2023 there was £1,895 (2022: £nil) which had not been paid over to the plans and is included within creditors due in less than 1 year.

27. 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 2023	Company 2022	Group 2023	Group 2022
	£'000	£'000	£'000	£'000
Cash and cash equivalents	4,563	4,714	4,584	4,722
Trade and other receivables	1,565	1,300	1,491	1,201
	6,128	6,014	6,075	5,923

Financial Liabilities

	Held at amortised cost
	Company 2023	Company 2022	Group 2023	Group 2022
	£'000	£'000	£'000	£'000
Trade and other payables	236	237	371	303
Borrowings	-	-	-	-
	236	237	371	303

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 ended 31 March 2022. 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 23.

28. Events after the reporting period

Since the year end the Directors have recommended the payment of a final ordinary dividend of £0.02 per share for the year ended 31 March 2023. Furthermore, on 12th July 2023, DSW Capital completed a transaction with Bridgewood Financial Solutions Ltd, to acquire licence fee income and provide funding to support a management buyout.   DSW Capital will licence the DSW trademark to DSW Bridgewood and its subsidiary companies in return for licence fee income.

29. 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 current shareholders.

	2023		2022
	Revenue and Cost Recharges		Revenue and Cost Recharges
	£'000		£'000
PHD Equity Partners	-		-
PHD Industrial Holdings	252		200
DSW Investments 2 LLP	104		99
Other investments	684		920
Totals	1,040		1,219

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:

	2023		2022
	Amounts due from related parties		Amounts due from related parties
	£'000		£'000
PHD Equity Partners	-		-
PHD Industrial Holdings	-		1
DSW Investments 2 LLP	33		-
Other investments	277		497
Totals	310		498

Salary and fees payable to James Dow and Jon Schofield are as disclosed in the Remuneration and Nominations Committee Report. Salary totalling £41,300 (2022: £18,761) 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.

	2023		2022
	£'000		£'000
Wages and salaries	540		431
Social security costs	74		54
Other pension costs (see note 26)	9		32
	623		517

This includes amounts in respect of a previous director who provided services and was remunerated by the Group in the year.

 

END