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DWF Group PLC

25 August 2023

DWF Group PLC

("DWF" or "the company" or "Group)

The information contained within this announcement is deemed to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014. Upon publication of this announcement, this inside information is now considered to be in the public domain.

25 August 2023

Full year results for the year ended 30 April 2023

DWF, the global provider of integrated legal and business services, today announces its full-year results for the year ended 30 April 2023. The Board is pleased with the Group's performance considering the challenging backdrop for the broader economy and the legal sector.

GROUP FINANCIAL SUMMARY


£m (unless otherwise stated)	FY2022/23	FY2021/22	Change
Revenue	451.6	416.1	8.6 %
Net revenue1	380.1	350.2	8.5 %
Gross profit	191.7	180.9	6.0 %
Gross profit margin2	50.4%	51.7%	(1.3) ppts
Cost to income ratio1	37.2%	38.4%	(1.2) ppts
Adjusted EBITDA1	69.6	66.7	4.3 %
Operating profit	24.2	27.7	(12.4)%
Adjusted profit before tax ('Adjusted PBT') 1	43.3	41.4	4.7 %
Profit before tax ('PBT')	17.2	22.3	(23.1)%
Adjusted diluted EPS (pence) 1	10.2	10.7	(4.7)%
Diluted EPS (pence)	3.8	6.5	(41.5)%
Gross lock-up days1	196 days	179 days	17 days
Free cash flow1	12.9	12.9	(0.5) %
Net debt1	101.7	71.8	29.9
Leverage1	1.46x	1.08x	0.38x

FY2022/23 HIGHLIGHTS

· Group net revenue growth of 8.5% (5% like-for-like3) to £380.1m. Reported revenue growth of 8.6% to £451.6m.

· Gross profit margin reduced by 1.3ppts to 50.4% (FY22 51.7%) reflecting direct cost pressure from salary increases.

· Cost to income ratio improved by 1.2ppts versus FY22 to 37.2%, helping to offset margin pressures.

· Adjusted PBT up 4.7% to £43.3m, with direct cost and interest rate pressures weighing on profitability.

· Adjusted PBT margin4 of 11.4%, a reduction of 0.4 percentage points on FY22 reflecting cost pressures.

· Reported PBT of £17.2m (FY22 £22.3m), which differs to Adjusted PBT due to adjusting items of £26.2m (FY22 £19.1m).

· Adjusted diluted EPS of 10.2p (FY22 10.7p) a 4.7% decrease on prior year due to the non-recurring tax benefit in the prior year which related to deductions for historical restructuring costs.

· Lock-up days of 196 versus prior year of 179, representing a 17 day stretch (14 excluding acquisitions) due to sector wide trend towards extended billing and payment terms

· £12.9m free cash flow generated (FY22 £12.9m), flat on PY due to lock-up stretch.

· Net debt of £101.7m, £29.9m higher than FY22 due to initial consideration payments of £10m for the acquisition of Acumension and Whitelaw Twining in the year, combined with the impact of the 17 day lock-up stretch versus the prior year.

· Leverage has increased to 1.46x EBITDA (FY22 1.08x).

STRATEGIC HIGHLIGHTS

· Two strategic acquisitions made in the year with Acumension and Whitelaw Twining.

· Cost efficiency programme has continued with target savings of £15.0m offsetting salary pressures and interest rate increases.

· New divisional structure from 1st May 2023 further integrates the delivery of client service by combining legal and business services which are aligned with the needs of the Group's clients, whilst maximising the opportunity for future profitable revenue growth.

· On 21 July 2023, we were pleased to announce the Board's unanimous recommendation of an all cash offer for DWF Group plc from Aquila Bidco Limited, a newly incorporated wholly-owned subsidiary of funds advised by Inflexion ("Offer").

OUTLOOK AND CURRENT TRADING

· The first three months of trading for FY24 have been in line with management expectations from a revenue and income perspective, however lock-up stretch has had a balance sheet and cash impact.

· Management are considering the achievability of the lock-up target of 170 days given economic headwinds which are driving longer billing and payment cycles.

· With the current trends not expected to abate, the Board is not expecting to undertake any material M&A in the short term on a stand-alone basis as it seeks to address the ongoing challenges presented by lock-up stretch, increasing interest costs and the balance sheet leverage.

ACQUISITION BY INFLEXION

· The acquisition by Inflexion is expected to complete during the final quarter of this calendar year.

· As part of the Offer from Inflexion, shareholders will be entitled to receive a special dividend of 3 pence per share. The special dividend, payment of which will be funded by Inflexion, is conditional upon, and only payable if, the Offer becomes effective. Absent the Offer, in light of the broader challenges in the sector and for DWF, the Board would need to consider the appropriate level of dividend for the 6 month period ending Apr-23, if any, and also its medium term capital management framework including sustainable dividend distributions.

· With respect to the recommended cash acquisition of DWF Group plc by Inflexion Private Equity Partners LLP the shareholder Court Meetings and a General Meeting are to be held on 12th September 2023 to consider the scheme of arrangement.

· The DWF Directors recommend unanimously that DWF Shareholders vote in favour (or procure votes in favour) of the Scheme at the applicable Court Meetings and vote in favour (or procure votes in favour) of the Resolution at the General Meeting as the DWF Directors who hold DWF Shares as at the date of the Scheme Document have irrevocably undertaken to do (or procure to be done) in respect of their own beneficial holdings, amounting to 9,655,772 DWF Shares in aggregate, representing approximately 2.8 per cent. of the ordinary share capital of DWF as at 11 August 2023.

· Bidco has also received irrevocable undertakings to vote (or, where applicable, procure voting) in favour of the Court Meetings and the General Meeting from 107 DWF Partners and Senior Employees who hold DWF Shares totalling 132,370,677 DWF Shares representing approximately 38.7 per cent. of the existing issued ordinary share capital of DWF as at 11 August 2023.

Sir Nigel Knowles, Chief Executive Officer, commented:

"We have once again grown the business profitably in what continues to be a very challenging economic environment. Like other legal businesses, we have seen salary and inflationary pressures, the impact of interest rate increases and variable demand particularly in transactional areas. Despite these challenges, we have seen our organic growth strategy and integrated propositions continue to resonate with clients, and have also added quality businesses to the Group via our acquisitions of Acumension and Whitelaw Twining"

Paul Rimmer, CEO of Commercial Services, commented:

"The Senior Partners and leaders and I wanted to take this opportunity, on behalf of ourselves and the broader DWF partners and employees, to say thank you to our institutional shareholders for their support since DWF's IPO. The business has made substantial progress over the last 4.5 years in an evolving market and we are now excited about delivering the next stage of our strategy under private ownership. The quantum of irrevocable undertakings obtained from the senior partners and leaders demonstrates our collective strong belief in the rationale for the proposed acquisition, especially access to additional capital, more flexibility on investment spend and the ability to maintain additional leverage capacity in the business as we invest to counter macro headwinds. This is an essential opportunity to ensure DWF has a firm footing for growth over the medium term and we all look forward to supporting our clients under Inflexion's ownership."

The person responsible for making this announcement on behalf of the Company is Chris Stefani, Group Chief Financial Officer.

For further information:

H/Advisors Maitland (public relations advisers to DWF)

Sam Turvey or Sam Cartwright

+44(0)20 7379 5151

DWF Group plc

James Igoe

+44(0)7971 783533

Head of Communications & IR

About DWF Group

DWF is a global provider of integrated legal and business services. It has approximately 4,000 people and with offices and associations located across the globe. For more information visit: dwfgroup.com

Forward looking statements

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

LEI: 213800O9QREOHTOGQ266

1 Described in the glossary to the financial statements

2 Gross profit margin is defined as gross profit divided by net revenue

3 Like-for-like ('L4L') net revenue growth removes the impact of acquisitions

4 Adjusted PBT margin is defined as Adjusted PBT divided by net revenue

Chair's Statement

Dear Shareholder,

I am delighted to introduce our Annual Report and Accounts for the year ended 30 April 2023. The past year has been marked by continued macroeconomic volatility with considerable inflationary pressures across food, energy and other essential consumer categories. These pressures have led, in many countries, to a cost of living crisis and rising interest rates, which in turn, has fuelled further uncertainty about economic growth rates.

Despite these challenging conditions, our differentiated integrated legal and business services offering and our focus on delivering positive outcomes has enabled us to continue to perform well relative to some challenging sentiments in the legal sector.

I would like to offer my thanks, and the thanks of the whole Board, to all of our colleagues across the Group for their continued commitment, dedication and high-quality delivery throughout the year.

Group performance

We are focused on driving shareholder value through the delivery of sustainable attractive growth. That is what we have achieved again this year.

The Board is pleased with the Group's performance on revenue growth, profitability and cost control. Net revenue is up by more than 8% to £380m, with a like-for-like growth rate of 5%. Pleasingly we have seen this rate of growth improve in the second half of the financial year although this was against a challenging H2 in FY22.

Adjusted profit before tax increased by 4.7% to £43.3m, supported by our cost programme which now anticipates savings of £15m, helping to in part offset the well-publicised upward salary cost pressures affecting the sector. Reported profit before tax was £17.2m which represents a £5m or 23% reduction on prior year owing to an increase in adjusting items of £7m in the year as well as rising interest costs.

This performance reflects the impact of the Group's Integrated Legal Management strategy and ongoing key client focus, delivering integrated solutions to more Group clients.

Culture

We are a people business where developing a positive and inclusive culture, underpinned by our values and behaviours, is critical to our success.

Over the past year, I have enjoyed spending more time in our offices meeting with partners and colleagues, hearing first-hand about their experiences of working for DWF and perspectives on the culture within our organisation.

We have been able to organise more colleague engagement activities in-person and in different locations. This allowed the Board to hold informal meetings with a cross-section of DWF colleagues, at every career level and from all parts of the business. We have all found these very valuable.

I would like to express my thanks to all attendees at these meetings in providing their thoughts and opinions in an open and constructive manner.

The feedback received at these meetings is echoed through our well established engagement survey, where our engagement score has remained stable at 76. In the context of macroeconomic volatility, we are pleased with this strong performance in this key indicator.

Our role in society

ESG is core to our business model and long-term strategy and it remains a priority focus area for the Board. FY22/23 marked the first full year since publication of our ESG Strategy and I am pleased to report that we have made meaningful progress in a number of areas.

This includes reductions of our Scope 1 and Scope 2 CO2 emissions of 20% and 41% respectively, compared with FY21/22. We have continued to enhance our office space, with Pune, India and the new Edinburgh office both powered entirely by renewable energy.

On our diversity & inclusion agenda, we increased overall ethnic minority representation to 14%, against a target of 13% by 2025 and we invested in a range of new and improved family friendly policies, significantly enhancing our maternity, paternity and adoption leave schemes.

We are also proud that in the last financial year the DWF Foundation, an independent charity established by DWF in 2015, exceeded the £1 million mark for grants distributed. Funded in large part by the fundraising activities of DWF colleagues, the Foundation is an excellent example of the positive outcomes achieved through colleagues living our values. A point reinforced by the nearly 9,000 hours of volunteering time delivered by colleagues through the last financial year.

I talk more about our purpose, values and culture in the Governance introduction. You can read more detail on our priorities and actions in the ESG section of our Annual Report and Accounts.

Annual General Meeting 2023

The Annual General Meeting will be held on 20 October 2023.

Looking ahead

On 21 July 2023, we were pleased to announce the Board's unanimous recommendation of an all cash offer for DWF Group plc from Aquila Bidco Limited, a newly incorporated wholly-owned subsidiary of funds advised by Inflexion. This transaction is highly attractive not only for our internal and external shareholders, but also for our clients, employees and other stakeholders. The DWF board of directors recognises the opportunities that could be delivered under private ownership with Inflexion, which includes access to significant capital to invest in people and technology, accelerated lateral hiring and transformative acquisitions across jurisdictions. Inflexion has a clear ambition to support the management team to execute its strategy to create a global professional services business emanating from the legal sector and this will enhance the already exceptional and differentiated services that we deliver for our clients.

Shareholders will already have received a copy of the Scheme Document which was published on 15 August 2023. The shareholder Court Meetings and a General Meeting to approve the scheme of arrangement have been scheduled for 12 September 2023.

Subject to shareholder approval and the satisfaction (or, where applicable, waiver) of the Conditions and further terms set out in Part 3 of the Scheme Document, the Acquisition is expected to become effective during Q2 FY2024.

I would like to thank all of our Board members for their time and focus throughout this year.

Jonathan Bloomer

Chair

24 August 2023

Chief Executive Officer's Review

How did the Group perform this year?

We have once again grown the business profitably in what has been a very challenging economic environment. Like other legal businesses, we have seen salary and inflationary pressures, the impact of interest rate increases and variable demand particularly in transactional areas. Despite these challenges, we have seen our organic growth strategy and integrated propositions continue to resonate with clients, and have also added quality businesses to the Group via our acquisitions of Acumension and Whitelaw Twining.

You have further extended your capabilities in North America through the transaction with Whitelaw Twining in Canada. How is this integration progressing and what next for this region?

We were pleased to complete this transaction with Whitelaw Twining, one of Canada's top legal businesses which we knew would always represent a high quality opportunity for our clients. Good progress has been made since they became part of the DWF Group in December.

We have already expanded into the Toronto legal services market with the hire of three partners, four additional lawyers, one paralegal and two support staff. We are also seeing great collaboration - between our legal and business services colleagues within Canada and between our Canadian team and colleagues globally.

This move marked the next step in DWF's North American strategy and has given us an integrated legal and business services offering in Canada which also aligns to the Group's existing claims and legal operations offering in Chicago.

In a highly-competitive talent market, what have you done this year to strengthen your colleague proposition?

Attracting and retaining the very best talent remains a top priority. That is why in the past year we have taken steps to continue strengthening our colleague proposition. I would highlight two areas where we have made particular progress, through significantly enhanced family friendly policies and improvements made to a number of our office locations through our future workplace strategy.

Our enhanced family friendly policies including aligning our maternity leave provision for all colleagues and partners to offer 26 weeks at full salary, with this same 26-week provision available to colleagues and partners taking adoption leave. We have doubled our paternity leave entitlement from two weeks to a four-week benefit and increased our Shared Parental Leave benefit from two weeks with full pay, to eight weeks. These investments carry a cost, but the improvements benefit our colleagues and support our drive to create an inclusive culture.

Our future workplace strategy includes a commitment to reducing the amount of overall office space and improving the quality, contributing to our ESG commitments through our use of materials and improving colleague wellbeing with smart and functional work areas. The actions taken this year include a relocation in Edinburgh, where we selected a building which has been designed with a clear focus on sustainability, creating an exceptional working environment and having a positive impact on the local community.

We have also delivered a refit of our Bristol office, with work also underway in Liverpool. Whilst this strategy remains a work in progress, our expectation is that we will review all of our office space globally with the aim that our current and future colleagues view our office spaces as places they enjoy working from.

In March you announced changes to your global operating structure. What will these changes allow you to do differently and how do they support your integrated legal management approach?

The changes we announced in March were a natural evolution in our strategy as they allow us to go further in how we deliver our integrated offering to clients. It means our internal operations are better aligned with the services we provide and the clients and markets we serve. Many of our largest global clients are insurers and our integrated legal management approach is of particular relevance to them. By bringing legal and business services colleagues together into our two largest divisions, we are delivering a truly integrated offering to clients, driving greater internal collaboration and supporting profitable revenue growth.

What is the outlook for the year ahead?

We continue to be in turbulent times economically, and indeed the legal sector has seen pressures from both rising costs and volatility in demand particularly for transactional work. We have always viewed ourselves as having a defensive model but are not immune to the environment in which we operate. The margin dilution from salary and interest rate increases, which brought us in at the bottom end of Adjusted PBT expectations, will continue to need mitigating actions on price, productivity and cost control. We believe we have put the right initiatives in place to protect our P&L, but are also having to work hard to ensure lock-up stays within a sensible range as clients are inevitably holding on to cash for longer. This has implications for our leverage and our ability to execute our strategy. We remain confident in our prospects, but cannot be complacent about the headwinds affecting all businesses. Indeed, absent the Offer from Inflexion, the Board would need to consider the appropriate level of dividend, if any, for the period ending Apr-23 and DWF's medium term capital management framework.

Sir Nigel Knowles

Group Chief Executive Officer

24 August 2023

Financial Review

A Challenging Environment

The Group has delivered profitable growth in a particularly difficult environment for the sector. The results include reported revenue growth of 8.6% to £452m (PY £416m), net revenue growth of 8.5% to £380m (PY £350m), a 4.7% increase in adjusted profit before tax to £43.3m (PY £41.4m) and a reported profit before tax reduction of 23% to £17.2m (PY £22.3m).

In addition to top-line growth rates, the Group is gradually seeing the stabilisation and reversal of gross margin dilution from salary inflation over the last 18 months. The gross margin gap to prior year at FY23 has reduced compared to HY23, reflecting some improvements in pricing combined with the cost programme announced in December 2022. Overheads and the cost-to-income ratio are trending favourably with £11m of the previously announced cost savings secured by the end of FY23. These dynamics help to underscore confidence in market guidance as management has taken action to offset some of the adverse economic circumstances not envisaged when guidance was last issued.

Working capital performance continues to be an area of challenge in an environment where clients are generally looking to manage their own working capital cycle by often seeking longer billing or payment cycles. The Group reported lock-up days of 190 at HY23 which reflected an 11 day increase on FY22. As expected, this position stabilised in H2 with the like-for-like lock-up day performance for the full year at 193 days (like-for-like excludes M&A). Net debt performance follows lock-up days with FY23 net debt of £101.7m.

Revenue

Revenue for the year is £452m (FY2021/22 £416m) representing growth of 8.6%. However, the Group focusses revenue measurement on net revenue as revenue is distorted by the level of irrecoverable expenses incurred on delivery of client matters where such expenses do not necessarily reflect the activity levels of the projects or the business.

Net revenue for the Group is £380m (FY2021/22 £350m) representing reported growth of 8.5% and like-for-like growth (excluding acquisitions of Acumension and Whitelaw Twining) of 5%.

Divisional performance

Highlights of the performance by division are set out below:

Legal Advisory (83% of Group Net Revenue/85% of Group Gross Profit)


£m	FY2022/23	FY2021/22	Change %/ppts
Revenue	385.3	355.1	+8.5 %
Net revenue	316.6	292.0	+8.4 %
Direct costs	(154.0)	(138.7)	+11.0 %
Gross profit	162.6	153.2	+6.1 %
Gross margin %/ppts	51.4%	52.5%	-(1.1)ppts

Legal Advisory delivered net revenue growth of 8% (LFL growth of 5%) despite facing a number of challenges throughout FY23, including the impact of the Russia and Ukraine conflict and significant political uncertainty in the United Kingdom during Q2 and Q3. High single digit percentage growth in a number of our global teams such as Dispute Resolution and Finance & Restructuring, with double digit percentage growth in Tax & Private Capital, has been partly offset by transactional teams which have been impacted by the broader economic uncertainty and delays in the regulatory pipeline. Insurance grew by 5% and is generally less affected by macro factors due to its defensive nature. As the first financial year following the easing of Covid-19 restrictions, FY23 chargeable activity was also adversely impacted by increased absence as many colleagues took their first substantial holidays since 2019.

Given these various top line headwinds, fee earner, team and location performance levels have been closely monitored to identify potential strategic cost savings and protect margins. Along with tight controls over recruitment, these activities helped mitigate the impact of cost pressures that intensified from the FY23 sector 'war on talent' and market demands including cost of living pay increases for non-qualified grades upwards. Such actions needed to be balanced sensibly with the longer-term needs of the division.

Recruitment has been enhanced where the future pipeline warrants investment, for example in insurance and our new sustainable business offering and global arbitration teams. There has been a drive to build presence in London and to recruit high quality lateral hires into France and other overseas locations, whilst supporting wider growth in lower cost jurisdictions to facilitate efficient best-shoring of work.

Consequently direct costs have increased ahead of net revenue growth, resulting in a degree of gross margin degradation. There has also been an impact from lengthening matter lifecycles which have led to slower payments from clients, placing pressure on working capital and increasing lock-up days. This is consistent with trends reported across the sector and a broad range of measures have been introduced to mitigate risks in this regard. This working capital stretch is considered to be a timing issue which will ultimately unwind.

The end of the year saw the launch of a number of initiatives, such as the planned introduction of pricing technology solutions to help counteract ongoing inflationary cost pressures.

In addition, expansion into new locations (including Saudi Arabia and Canada) will support the drive for profitable future growth.

Connected Services (11% of Group Net Revenue/9% of Group Gross Profit)


£m	FY2022/23	FY2021/22	Change %/ppts
Revenue	41.5	34.2	+21.5 %
Net revenue	40.7	33.9	+20.1 %
Direct costs	(22.7)	(18.8)	+20.8 %
Gross profit	17.9	15.0	+19.1 %
Gross margin %/ppts	44.0%	44.4%	-(0.4)ppts

Connected Services delivered net revenue growth of 20% compared to FY22 (LFL growth of 14%). This growth was supported by the acquisition of Acumension in September, a team of 47 legal costs management specialists in the UK, which has expanded DWF's costs management capability and enhanced the service for clients in the insurance and public sectors.

Whilst net revenue has grown by £6.8m, gross profit did not increase by the same proportion, resulting in gross margin decline for the division. This was due to cost pressures driven primarily by cost of living linked pay increases across a number of territories, particularly the UK, US and Canada. This margin dilution began to ease in Q4 as a result of cost measures and pricing interventions and is expected to improve along with the rest of the Group over time, particularly as efficiencies are secured through the new divisional structure.

The Claims Management and Adjusting business has grown by 12%. This was driven by both the US and Canadian geographies where the strength of the North American insurance market led to new client wins, teams in Chicago and Vancouver were expanded and as the business benefitted from the pound weakening against the dollar. The United Kingdom and Ireland business remained flat as new business replaced Covid-19 Business Interruption claims work. Combining the Claims Management and Adjusting business with Insurance Legal Services in FY24 will promote greater client sharing and collaboration.

The Regulatory business, which largely aligns to the new Commercial Services Division, has grown by 23% and saw an improving gross margin. With the exception of Audit, which underwent a restructure during the year, all businesses showed double-digit net revenue growth, reflecting a strong pipeline of work due to our clients increasing demand for regulatory advice.

The wider Group restructure produces synergies with what was the Legal Advisory division and presents the opportunity to reduce cost within the division. The full impact of the cost efficiency programme began to show through in the final quarter and, with the majority of the identified savings being support roles, should have limited impact on revenue.

Mindcrest (6% of Group Net Revenue/6% of Group Gross Profit)


£m	FY2022/23	FY2021/22	Change %/ppts
Revenue	24.8	26.8	-(7.4)%
Net revenue	22.9	24.4	-(6.3)%
Direct costs	(11.7)	(11.8)	-(0.7)%
Gross profit	11.2	12.7	-(11.4)%
Gross margin %/ppts	49.0%	51.8%	-(2.8)ppts

Mindcrest had a transitionary year as structural changes were implemented, including a change in leadership and the recruitment of new sales resource. The focus for H2 has been on building pipeline and embedding the new dual go-to-market strategy, focussing both on sales to the top 450 Group clients as well as internal work transfer to secure Group margin benefit. As with other divisions, the cost efficiency programme has driven some cost removal but has also facilitated investment into sales resource in the US (the largest alternative legal services provider market globally).

Divisional net revenue contracted by 6% in the year, owing to the conclusion of one of the division's flagship engagements which began winding down in H2 of FY22. Despite net revenue having contracted year-on-year, H2 of FY23 saw top line growth of 9% as compared to H2 of FY22 as the division starts to generate momentum. Certain services within the division have enjoyed particular success, reflecting improved demand from financial services clients. This includes eDiscovery services, which grew revenue by 15%, and lender/recovery services, which grew by 10%.

In addition to the restructuring and refocussing activities, the division saw similar inflationary cost of living pressure across all geographies (more so in United Kingdom following announcement of Living Wage increases). The margin pressures began to ease in Q4 due to cost savings and the positive pipeline development.

Direct costs

Direct costs, which reflect the salary costs of fee-earning partners and staff, have increased by £19m, or 11%, to £188m. The acquisitions of Acumension and Whitelaw Twining accounted for £6.5m of year-on-year increases, and in addition salary increases and recruitment of new partners and fee-earners accounted for the remaining £12.5m (7%) increase. A combination of broader inflationary pressures and the well documented legal sector battle for talent have driven the salary uplifts.

Gross profit

Gross profit of £192m reflects the impact of organic and inorganic revenue growth and the salary increases from recruitment and salary uplifts, with gross profit increasing by £11m or 6% on FY2021/22. This reflects a gross margin % of net revenue of 50.4% (FY2021/22 51.7%). This reduction reflects the investment made in additional fee earning resources and the impact of salary increases driven by sector and broader inflationary pressures. Pricing and productivity are areas of focus which are expected to help mitigate the gross margin dilution.

Administrative expenses

Administrative expenses (including impairment) have increased to £168m (FY2021/22 £153m) which is a £14m or 9% increase. However, on an underlying basis excluding adjusting items, administrative expenses for FY2022/23 are £141m (FY2021/22 £134m), an increase of £7m or 5%. Approximately two thirds of the year-on-year increase is attributable to the additional overheads from the acquisitions of Acumension and Whitelaw Twining. The balance predominantly represents increases in support staff salaries, travel, business development and IT costs.

The restriction of underlying overhead growth to 5% has delivered a cost-to-income ratio of 37.2% (FY2021/22 38.4%).

During the year, the Group announced a cost efficiency programme with the aim of reducing both direct and indirect costs to help offset other inflationary pressures. The outturn on administrative expenses and the resulting reduction in cost-to-income ratio is partly attributable to the savings delivered by this cost programme, which began to reflect in the numbers in the final quarter of the year. In May, the Group announced an increase in the cost savings target from £10-£12m to £15m in recognition of the continuing (and in the case of interest rates, increasing) pressure on the Group's 'Adjusted Profit Before Tax' guidance. Cost control will continue to be an area of focus with savings in property (via estate reduction), project spend and other discretionary overheads helping to mitigate ongoing salary inflation and interest increases.

Adjusting items (the difference between reported and underlying administrative expenses) were £26m (FY2021/22 £19m). The increase is due to additional share based payment charges, accelerated depreciation for vacant property, acquisition fees and restructuring costs. The table below provides more details with full analysis contained in note 2 to the financial statements:


£m	FY2022/23	FY2021/22
Office closures and scale-backs	10.0	(0.2)
Acquisition related expenses	6.5	9.6
Gain on bargain purchase	(4.5)	-
Other share based payments	10.8	9.6
Restructuring costs	3.3	-
Refinancing costs	-	0.1
Total adjusting items	26.2	19.1

Adjusting items in FY2022/23 can be summarised as:

1. Historical office closures, impairments and scalebacks where some final costs were charged to the income statement in the year in relation to Germany and the Pune lease for the unused 8th floor was impaired;

2. Acquisition related expenses principally relating to amortisation and impairment of intangibles recognised on acquisition, acquisition related remuneration for Acumension and Whitelaw Twining and acquisition related advisory fees;

3. Share based payment expenses reflecting grants from the Employee Benefit Trust which is a pre-funded trust established on IPO; and,

4. Non-recurring costs relating to the execution of the cost reduction programme

Net finance expense and interest payable on leases

Net finance expenses relating to bank charges and borrowings were £5.3m (FY2021/22 £3.7m). Interest on bank borrowings increased as a result of a combination of higher interest rates and an increase in the level of net debt due to acquisition outflows and higher lock-up.

Interest payable on leases of £1.7m (FY2021/22 £1.7m) reflects the notional interest cost relating to lease borrowings.

Profit before tax

The Group reported a profit before tax of £17.2m (FY2021/22 £22.3m) which represents a £5m or 23% reduction on the prior year. The reduction is primarily driven by the £7m increase in adjusting items as detailed above in the administrative expenses section.

Adjusted PBT is £43.3m (FY2021/22 £41.4m) which represents a 4.7% increase on the prior year. The key factors driving the slightly lower "drop-through" from revenue growth are the gross margin dilution due to direct cost increases and significant interest increases from both base rate rises and sector lock-up stretch driving higher net debt. These factors are partially, but not wholly, offset by the initial impacts from the cost programme which means the adjusted PBT margin of 11.4% represents a 0.4ppts reduction on prior year (FY2021/22 11.8%).

Tax

The reported tax charge for the year, excluding prior year adjustments, is £5.7m (FY2021/22 £6.1m) on a profit before tax of £17.2m (FY2021/22 £22.3m). This represents an effective rate of tax of 32.9%. The effective tax rate was higher than the UK statutory tax rate primarily due to current year tax losses that have not been recognised as deferred tax assets (increasing the tax charge by £2.5m) and the tax effect of non-deductible expenses (increasing the tax charge by £1.7m) offset by the utilisation of unrecognised losses brought forward (reducing the tax charge by £2.1m).

The Group also booked prior year adjustments of a net credit of £1.0m. Those adjustments principally arise as a result of (a) finalisation of prior period partnership tax returns and partner drawings impacting the profits subject to UK corporation tax (£0.5m), and (b) revaluations of the Group's deferred tax assets relating to tax depreciation timing differences and expected tax deductions for share based payments as at 30 April 2022 (£0.5m).

This gives a net tax charge of £4.7m for the year (FY2021/22 £2.0m).

There are no open tax audits or investigations across the Group. In line with Group tax strategy, it is not considered that any aggressive or materially uncertain tax positions have been adopted by any of the Group entities. As such, the level of tax risk faced by the Group is considered to be low.

EPS

Diluted EPS has decreased to 3.8p in FY2022/23 compared to 6.5p in FY2021/22. The reduction is due to three factors: an increase in one-off (adjusting items) compared to the prior year, reducing the reported profit; an increase in tax charge compared to prior year, which benefitted from deductions from historical closures and scalebacks; and an increase in the share count from the acquisition of Whitelaw Twining during the second half of the year.

Adjusted diluted EPS has decreased to 10.2p (FY2021/22 10.7p), a reduction of 0.5p or 5%. This reduction is due to the aforementioned one-off benefit in the prior year tax charge which enhanced the prior year EPS by an estimated 0.9p.

Dividend

The Group's capital allocation policy is to prioritise having sufficient capital to fund ongoing operating requirements and strategic investment in the Group's long term growth. Under normal circumstances, the Board targets a pay-out ratio of up to 70% of adjusted profit after tax. For FY2022/23, however, no final dividend has yet been declared given the proposed acquisition of DWF Group by Inflexion (which will include a special dividend payment of 3 pence per share if the Offer becomes effective) and unanimous recommendation that DWF Shareholders vote in favour of the deal. If the Offer does not become effective, the Board will need to consider the appropriate level of dividend, if any, for H2 2022/23.

Working capital, cash flow and net debt

The Group measures working capital efficiency using "lock-up days". Lock-up days are comprised of two elements: Work-in-progress ("WIP days"), representing the amount of time between performing work and invoicing clients; and Debtor days, representing the length of time between invoicing and cash collection.

During the year, the Group saw a stretch in lock-up days to 190 days at the half year, after achieving consistent reductions over the previous four reporting periods. This lock-up increase was in line with reported lock-up stretch in the legal sector as client demands have driven either extended billing cycles or longer payment terms. Whilst the lock-up increase for the Group, at 5% at half year, outperformed the sector-wide increase of 10% it nevertheless has driven a higher overall lock-up balance and resultant net debt outcome. The stated intention at the half-year was to stabilise the position and this was broadly achieved with year-end lock-up of 196 days (193 on a like-for-like basis excluding Whitelaw Twining acquisition). In an inflationary environment with rising interest rates the upward pressure on billing and collection terms is potentially an ongoing risk. Whilst the Group will continue to mitigate this by improving the efficiency of internal influencing factors, the external environment is not expected to enable significant near-term reductions in lock-up.

The Group expects to continue to operate well within its available facilities and for all covenants to be compliant for the remaining tenure of the RCF.

Capital expenditure

The main capital expenditure requirements of the Group are for IT infrastructure, replenishment and project work and office refurbishments. Overall capex (excluding right-of-use asset additions under IFRS 16, and intangible assets recognised from acquisitions) in FY2022/23 was £6.3m compared to £7.9m in FY2021/22.

Current trading and future outlook

The performance in FY2022/23 reflects another year of profitable growth, albeit delivering an Adjusted PBT figure at the lower end of expectations. Whilst profits increased year-on-year, gross and net margins were diluted primarily as a result of direct cost pressures from increased salaries demanded across the sector. The Group has taken actions to mitigate these cost challenges via the cost programme which has made good progress and is expected to help to mitigate the ongoing upward cost pressures.

The balance sheet, specifically lock-up, has proved to be a continuing challenge with the lock-up stretch seen in H1 sustaining through H2 and into the new year. This increase in lock-up days has led to increases in net debt and leverage and reflects sector-wide pressures on billing frequencies and payment terms. Working capital efficiency remains a key focus of the Group in order to maximise cash generation to manage borrowing costs. Inevitably, there are conflicting pressures between lock-up management, borrowing costs, leverage, investments in M&A and dividend requirements which are being carefully managed and considered by management and the Board.

The Group continues to see growth and profit opportunities but the various performance levers will require cautious management in what continues to be a challenging environment.

Chris Stefani

Group Chief Financial Officer

24 August 2023

FINANCIAL STATEMENTS

Consolidated income statement

Year ended 30 April 2023


		2023	2022
	Notes	£'000	£'000
Revenue	3	451,641	416,052
Recoverable expenses	3	(71,505)	(65,810)
Net revenue	3	380,136	350,242
Direct costs	3	(188,395)	(169,332)
Gross profit	3	191,741	180,910
Administrative expenses		(162,220)	(146,691)
Gain on bargain purchase	9	4,459	-
Trade receivables impairment	13	(1,454)	(2,973)
Accelerated depreciation/amortisation	4	(6,452)	-
Other impairment	4	(1,856)	(3,593)
Operating profit	4	24,218	27,653
Net finance expense	5	(5,310)	(3,664)
Net interest expense on leases	5	(1,739)	(1,673)
Profit before tax		17,169	22,316

Total of adjusting items as defined under the Group's alternative performance measures	2	(26,158)	(19,081)
Adjusted profit before tax	2	43,327	41,397

Taxation	6	(4,722)	(2,029)
Profit for the year		12,447	20,287

Earnings per share attributable to the owners of the parent:
Basic (p)	8	4.0	6.8
Diluted (p)	8	3.8	6.5

The results are from continuing operations.

Consolidated statement of comprehensive income

Year ended 30 April 2023


	2023	2022
	£'000	£'000
Profit for the year	12,447	20,287

Items that are or may be subsequently reclassified to the income statement:
Foreign currency translation differences - foreign operations	(1,388)	83
Total other comprehensive (expense)/income for the year	(1,388)	83
Total comprehensive income for the year	11,059	20,370

There is no taxation on items within other comprehensive income.

Consolidated statement of financial position

As at 30 April 2023


		2023	2022
	Notes	£'000	£'000
Non-current assets
Intangible assets	10	49,890	45,604
Property, plant and equipment	11	9,300	11,239
Right-of-use assets	12	57,223	65,234
Trade and other receivables	13	412	1,464
Deferred tax assets	20	4,320	3,938
Total non-current assets		121,145	127,479
Current assets
Trade and other receivables	13	243,339	190,174
Cash and cash equivalents (excluding bank overdrafts)	14	36,404	28,310
Total current assets		279,743	218,484
Total assets		400,888	345,963
Current liabilities
Trade and other payables	15	59,855	63,325
Corporation tax liabilities		9,366	6,190
Deferred consideration		583	890
Lease liabilities	16	13,712	14,576
Interest-bearing loans and borrowings	17	23,512	9,786
Provisions	18	6,898	6,315
Amounts due to members of partnerships in the Group	27	30,700	28,243
Total current liabilities		144,626	129,325
Non-current liabilities
Deferred tax liabilities	20	7,501	5,869
Lease liabilities	16	58,298	63,163
Interest-bearing loans and borrowings	17	114,640	90,344
Provisions	18	3,772	4,147
Total non-current liabilities		184,211	163,523
Total liabilities		328,837	292,848
Net assets		72,051	53,115
Equity
Share capital	21	3,420	3,254
Share premium	21	91,940	89,365
Treasury shares	21	(129)	(129)
Other reserves	22	17,021	4,929
Accumulated losses	22	(40,201)	(44,304)
Total equity		72,051	53,115

Consolidated statement of changes in equity

Year ended 30 April 2023


				Other reserves
	Share capital	Share premium	Treasury shares	Merger reserve	Share-based payments reserve	Translation reserve	Accumulated losses	Total equity
	(note 21)	(note 21)	(note 21)	(note 22)	(note 22)	(note 22)	(note 22)
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
At 1 May 2022	3,254	89,365	(129)	(2,385)	11,512	(4,198)	(44,304)	53,115
Profit for the year	-	-	-	-	-	-	12,447	12,447
Other comprehensive income	-	-	-	-	-	(1,388)	-	(1,388)
Total comprehensive income	-	-	-	-	-	(1,388)	12,447	11,059
Shares issued	166	2,575		-		-	-	2,741
Dividends paid	-	-	-	-	-	-	(15,113)	(15,113)
Share-based payments (note 23)	-	-	-	-	20,774	-	-	20,774
Recycling of share-based payments (note 23)	-	-	-	-	(7,294)	-	7,294	-
Tax on share-based payments	-	-	-	-	-	-	(525)	(525)
At 30 April 2023	3,420	91,940	(129)	(2,385)	24,992	(5,586)	(40,201)	72,051

Year ended 30 April 2022


				Other reserves
	Share capital	Share premium	Treasury shares	Merger reserve	Share-based payments reserve	Translation reserve	Accumulated losses	Total equity
	(note 21)	(note 21)	(note 21)	(note 22)	(note 22)	(note 22)	(note 22)
	£'000	£'000	£'000	£'000	£'000	£'000	£'000	£'000
At 1 May 2021	3,246	88,610	(129)	(2,385)	12,885	(4,281)	(60,566)	37,380
Profit for the year	-	-	-	-	-	-	20,287	20,287
Other comprehensive income	-	-	-	-	-	83	-	83
Total comprehensive income	-	-	-	-	-	83	20,287	20,370
Shares issued	8	755	-	-	-	-	-	763
Dividends paid	-	-	-	-	-	-	(13,537)	(13,537)
Share-based payments (note 23)	-	-	-	-	7,701	-	-	7,701
Recycling of share-based payments (note 23)	-	-	-	-	(9,074)	-	9,074	-
Tax on share-based payments	-	-	-	-	-	-	438	438
At 30 April 2022	3,254	89,365	(129)	(2,385)	11,512	(4,198)	(44,304)	53,115

Consolidated statement of cash flows

Year ended 30 April 2023


		2023	2022
	Note	£'000	£'000
Cash flows from operating activities
Cash generated from operations before adjusting items	26	42,929	41,623
Cash used to settle non-underlying items		(6,756)	(8,464)
Cash generated from operations		36,173	33,159
Interest paid		(5,979)	(4,596)
Interest received		468	-
Tax paid		(3,713)	(2,854)
Net cash generated from operating activities		26,949	25,709
Cash flows from investing activities
Proceeds from sale of investment		-	227
Acquisition of subsidiary, net of cash acquired	9	(16,807)	(3,540)
Purchase of property, plant and equipment		(2,874)	(3,581)
Purchase of other intangible assets		(3,452)	(4,300)
Net cash flows used in investing activities		(23,133)	(11,194)
Cash flows from financing activities
Dividends paid	7	(15,113)	(13,537)
Loan arrangement fee		(163)	(626)
Proceeds from borrowings		37,089	109,727
Repayment of borrowings		(10,908)	(104,861)
Repayment of principal of lease liabilities	16	(14,447)	(13,396)
Interest received		-	101
Capital contributions by members	27	7,237	2,132
Repayments to former members	27	(4,807)	(1,072)
Net cash flows used in financing activities		(1,112)	(21,532)

Net increase/(decrease) in cash and cash equivalents		2,704	(7,017)

Cash and cash equivalents at the beginning of year		27,704	34,580
Effects of foreign exchange rate changes on cash and cash equivalents		188	141
Cash and cash equivalents at the end of year	14	30,596	27,704

Consolidated notes to the financial statements

Year ended 30 April 2023

1 Accounting policies

1.1 Nature of these financial statements

The following financial information does not amount to full financial statements within the meaning of Section 434 of Companies Act 2006. The financial information has been extracted from the Group's Annual Report and Financial Statements for the year ended 30 April 2023 on which an unqualified report has been made by the Company's auditors. The 2023 statutory accounts will be delivered to Companies House in due course.

Copies of the Annual Report and Financial Statements will be posted to shareholders shortly and will be available from the Company's registered office at 20 Fenchurch Street, London, EC2M 3AG.

1.2 Statement of accounting policies

The preliminary announcement for the year ended 30 April 2023 has been produced based on the Group's annual financial statements which are prepared in accordance with UK-adopted International Financial Reporting Standards. The accounting policies applied in this preliminary announcement are consistent with those reported in the Group's annual financial statements for the year ended 30 April 2023 along with new standards and interpretations which became mandatory for the financial year.

1.3 Going concern

The Directors have assessed the going concern basis adopted by the Group in the preparation of the consolidated financial statements, taking into account the current financial position including its available financing facilities, the business model and future outlook, as well as the principal risks as listed in the Strategic Report. The Directors conclude that the Group has adequate resources to continue as a going concern across the period of assessment.

Assessment of going concern

The going concern assessment has been considered for the period to 31 October 2024 and is carried out as follows:

· The Group's Board-approved budget base case is used to calculate the net debt position, liquidity, covenant compliance and available headroom over the going concern period.

· The going concern assessment has been carried out on two different base cases, the first of which assumes the recommendation of an all cash offer for DWF Group plc from Aquila Bidco Limited is accepted, and the second of which assumes that the business continues as a Plc.

· The assessment of going concern is carried out with reference to available financing facilities under both scenarios, the ability to pay debts as they fall due and the covenants associated with the financing facilities.

· Plausible downside scenarios are modelled to quantify the impact of a variety of risks materialising over the going concern period.

· Mitigating actions which could be taken are identified, quantified and included in the assessment.

· The reasonable worst case scenario, along with mitigating actions, is then used to test that the Group would continue to have headroom in its available financing facilities, settle liabilities as they fall due and comply with the associated financial covenants over the going concern period.

Financing facilities

The Group closed the year with committed banking facilities of £158m (of which £139m were drawn). The largest of these is the £120m revolving credit facility ('RCF'), which was increased through exercising the accordion facility in February 2023. This RCF matures in December 2025, with one additional 12-month extension option. The undrawn portion of the RCF is readily accessible and does not require any further approval for drawdown by the Group's banking syndicate. The facility agreement also permits the Group to obtain a further £25m of external funding and £15m of leasing facilities, if required. The covenant thresholds across the assessment period are set out below:


Covenant	Oct-23	Jan-24	Apr-24	Jul-24	Oct-24
Net Asset Value to Consolidated Net Borrowings	1.60x	1.60x	1.60x	1.60x	1.60x
Interest Cover	4.00x	4.00x	4.00x	4.00x	4.00x
Leverage	1.75x	1.75x	1.75x	1.75x	1.75x

Each of the covenants noted above is measured on a pre-IFRS 16 basis in accordance with the banking facility agreement. Interest cover is defined as the ratio of EBITDA to interest expense, and leverage is defined as the ratio of net debt to EBITDA.

If the recommendation of an all cash offer for DWF Group plc from Aquila Bidco Limited is approved, the current facilities will be fully repaid on completion, and new committed banking facilities of £330m will become available to the Group. The new facilities have long-term maturity dates, and include two working capital facilities, comprising £30m initial, with an additional optional £40m to drawdown on. There is also an additional £60m facility available to be utilised for future acquisitions, subject to lender approval. There are different covenant thresholds across the facilities, but the minimum covenant ratio has been modelled for the assessment period and these are as follows:


Covenant	Oct-23	Jan-24	Apr-24	Jul-24	Oct-24
Leverage	-	-	-	4.50x	4.50x

Future outlook, risks and uncertainties

The going concern and viability assessments are closely linked and therefore the conclusions of the going concern assessment are directly relevant to and should be read in conjunction with the viability statement. The Board-approved base case combined with the annual three-year plan, adjusted to include Whitelaw Twining, has been used to measure the going concern and future viability of the Group. This assessment has been performed on the same two bases as going concern. This includes monitoring net debt positions and cash management activities of the Group and their effect on covenant testing. The going concern and viability of the Group have been assessed taking into account the potential impact of certain downside scenarios arising from the principal risks and uncertainties.

In particular, the Board has considered the impact of both a de-listing and business-as-usual scenario, including impacts on cash flows and covenants. In addition the assessment considers the potential reduction in demand caused by either macro environmental factors, commercial pipeline, our ability to retain or attract the correct level of talent as well as inflationary pressures over and above each base case.

Mitigating actions

If faced with the reasonable worst-case scenario, the Board also considers possible mitigating actions available to the Group to maintain liquidity and covenant compliance. These can be swiftly implemented should the worst-case scenario arise and include (but are not limited to):

· freezing recruitment and a slowdown in investment in recruitment and reward;

· reducing discretionary operating spend such as marketing and travel;

· reducing non-committed capital expenditure;

· revision of the existing dividend policy; and

· cost cutting measures in non-fee earning areas including an acceleration of the execution of the Group's real estate reduction strategy

Reverse stress test

In addition to the modelling of the above scenarios, a reverse stress test was conducted by the Group to assess the quantum of increased inflationary pressures and a stretch in working capital that would materially impact our ability to comply with financial covenants. Such a material impact is not considered a reasonable scenario to adversely impact the going concern assessment, under either scenario.

Conclusion

Based on this assessment, the Directors have a reasonable expectation that the Group and Company has sufficient resources to continue its operations for the period of assessment. In particular the Directors have a reasonable expectation that the Group and Company will operate under its existing financing facilities, will comply with all covenants with adequate headroom and settle all other liabilities as they fall due. The Directors therefore consider it appropriate for the Group and Company to adopt the going concern basis in preparing these financial statements.

The directors are satisfied that under the no deal basis there is sufficient support and knowledge of the cash flows and operations of the business to adopt a going concern basis for the Group and Company. The all cash offer for DWF Group plc from Aquila Bidco Limited outlined above remains subject to shareholder approval. Assuming such approval is received, the transaction is expected to complete within 12 months of these Financial Statements. Aquila Bidco Limited have stated their intentions surrounding the Group's future outlook and funding plans and these align to the Group's current business plan and strategy. However, as the decisions around future strategy and intentions will no longer be in the exclusive control of the DWF Group PLC Directors, this creates a material uncertainty that may cast significant doubt on the Group and Company's ability to continue as a going concern as at 24th August 2023. The financial statements do not include the adjustments that would result if the Group or Company were unable to continue as a going concern.

2 Alternative performance measures

APM's are not intended to supplant IFRS measures but are included in response to investor feedback or to provide readers of the financial statements with additional understanding of the underlying trading performance of the Group.

APMs are fully defined and information as to why they are useful is provided in the glossary. Adjusted profit before tax reconciles to profit before tax as follows:


	2023	2022
	£'000	£'000
Profit before tax	17,169	22,316
Adjusting items:
Amortisation of intangible assets - acquired	3,929	4,655
Impairment of intangible assets	1,494	2,966
Impairment of tangible and right of use assets	362	627
Accelerated depreciation/amortisation	6,452	-
Non-underlying items	6,248	1,224
Gain on bargain purchase	(4,459)	-
Share-based payments expense	12,132	9,609
Total of adjusting items	26,158	19,081
Adjusted PBT	43,327	41,397

In FY23, an accelerated depreciation charge of £6.5m (FY22: £nil) was recognised in relation to the right of use, and other fixed assets located within a vacant floor in the Pune office. There are no future plans to occupy this space given the adoption of hybrid working, therefore associated assets have been fully depreciated in the year.

Adjusted profit before tax reconciles to profit before tax with reconciling items by nature as follows:


	2023	2022
	£'000	£'000
Profit before tax	17,169	22,316
Office closures and scale-backs	9,972	(238)
Acquisition-related expenses	6,493	9,564
Gain on bargain purchase	(4,459)	-
Share-based payment expense	10,822	9,609
Restructuring costs	3,330	-
Refinancing costs	-	146
Adjusted PBT	43,327	41,397

Cash used to settle non-underlying items includes £5.4m (FY22: £3.8m) relating to closures and other restructure costs and £1.4m (FY22: £4.6m) relating to acquisition-related advisory fees.

Non-underlying items are set out in the table below:


		2023	2022
		£'000	£'000
Acquisition-related advisory fees	a	1,254	336
Acquisition-related expenses	b	-	1,104
Closure and scale-back of operations	c	1,664	(362)
Restructuring costs	d	3,330	-
Non-underlying items within operating profit		6,248	1,078
Non-underlying finance expense	e	-	146
Total non-underlying items		6,248	1,224

a. The Group periodically considers and analyses potential acquisition targets and recognises there is inherent complexity and risk associated with acquisitions. The Group manages this by employing external professional advisors to perform legal, financial, commercial and tax due diligence on targets. These costs relate to opportunities the Group identifies and pursues, of which a portion result in successful acquisitions. Acquisition fees in the current period relate to the acquisitions of Acumension and Whitelaw Twining as well as fees for aborted acquisitions.

b. Acquisition-related expense relates to the remuneration expense from the acquisition of Mindcrest in FY20. Payments to the sellers of Mindcrest were deemed to be remuneration (and not consideration) under IFRS 3, and therefore expensed over the deemed service period rather than included in goodwill. As these costs are not considered recurring and ceased in February 2022, they have been included within adjusting items in order to give greater clarity of underlying trading performance.

c. Closure and scale-back of operations in the current year relate to ongoing costs relating to the scale-back of operations in Germany which commenced in FY21 and final costs for the completion of closures and scale-backs in other jurisdictions such as Singapore. These costs comprise people and supplier exit expenses as a result of the decision taken.

d. During the year, the Group commenced an efficiency programme with the aim of removing cost from the business. Costs of executing the restructuring are considered non-recurring as a restructuring of this size is one-off and as a result is reported as a non-underlying item to provide clarity of underlying trading performance.

e. These costs are associated with the FY22 re-financing and include professional fees incurred that are significant in value and by their nature are not recurring annually.

The cost to income ratio is used to assess the levels of operational gearing in the Group. The cost to income ratio is defined as administrative expenses less adjusting items and divided by net revenue and is calculated as follows:


	2023	2022
	£'000	£'000
Net revenue	380,136	350,242
Administrative expenses, gain on bargain purchase, accelerated depreciation and impairment	167,523	153,257
Total of adjusting items	(26,158)	(19,081)
Less: re-financing costs included in adjusting items	-	146
Adjusted administrative expenses	141,365	134,322
Cost to income ratio	37.2%	38.4%

3 Operating segments

Reporting segments

In accordance with IFRS 8: Operating Segments ('IFRS 8'), the Group's operating segments are based on the operating results reviewed by the Board, who represent the chief operating decision maker ('CODM'). The Group has the following three strategic divisions, which are its reportable segments. These divisions offer different services and are reported separately because of different specialisms within teams in the business group.

The following summary describes the operations of each reportable segment:


Reportable segment	Operations

Legal Advisory	Premium legal advice, commercial intelligence and relevant industry experience.
Connected Services	Collection of products and business services that enhance and complement our legal offerings.
Mindcrest*	Outsourced and process-led legal services, designed to standardise, systemise, scale and optimise legal workflows.

The revenue, net revenue and gross profit are attributable to the principal activities of the Group.

Effective from 1 May 2023, the Group changed from the above strategic divisions to:


Reportable segment	Operations

Commercial Services	Combining our commercial Legal Advisory teams with business services including Global Entity Management, Forensic Accountants, ESG Consulting and Regulatory Consulting.
Insurance Services	Combining our insurance-focused legal and business services expertise under a single leadership team.
Legal Operations	Our alternative legal services provider, delivering services including eDiscovery, contract management, compliance, legal technology, consulting and operations, and knowledge management.

These changes to the Group's internal structure are a natural evolution to those made at the start of FY22, and will allow DWF to go further in how it delivers its integrated offering to clients.

For year ended 30 April 2023


	Legal Advisory	Connected Services	Mindcrest	Total
	£'000	£'000	£'000	£'000
Revenue	385,263	41,547	24,831	451,641
Recoverable expenses	(68,685)	(894)	(1,926)	(71,505)
Net revenue	316,578	40,653	22,905	380,136
Direct costs	(153,959)	(22,749)	(11,687)	(188,395)
Gross profit	162,619	17,904	11,218	191,741
Gross margin %	51.4%	44.0%	49.0%	50.4%
Administrative expenses				(162,220)
Gain on bargain purchase				4,459
Trade receivables impairment				(1,454)
Other impairment				(1,856)
Accelerated depreciation/amortisation				(6,452)
Operating profit				24,218
Net finance expense				(5,310)
Net interest expense on leases				(1,739)
Profit before tax				17,169
Taxation				(4,722)
Profit for the year				12,447

Within administrative expenses, there is an impairment loss of £1.5m recognised relating to the Zing CGU. This is attributable to the Connected Services segment.

For year ended 30 April 2022


	Legal Advisory	Connected Services	Mindcrest	Total
	£'000	£'000	£'000	£'000
Revenue	355,063	34,181	26,808	416,052
Recoverable expenses	(63,110)	(324)	(2,376)	(65,810)
Net revenue	291,953	33,857	24,432	350,242
Direct costs	(138,729)	(18,828)	(11,775)	(169,332)
Gross profit	153,224	15,029	12,657	180,910
Gross margin %	52.5%	44.4%	51.8%	51.7%
Administrative expenses				(146,691)
Trade receivables impairment				(2,973)
Other impairment				(3,593)
Operating profit				27,653
Net finance expense				(3,664)
Net interest expense on leases				(1,673)
Profit before tax				22,316
Taxation				(2,029)
Profit for the year				20,287

There are no inter-segmental revenues which are material for disclosure. Administrative expenses represent indirect costs that are not specifically allocated to segments.

Non-current assets, revenue and net revenue by region

The UK is the Parent Company's country of domicile and the Group generates the majority of its revenue from external clients in the UK. The geographical analysis of revenue and net revenue is on the basis of the country of origin in which the client is invoiced.

The Group's non-current assets, net revenue and revenue by geographical region are as follows:


	Non-current assets		Revenue		Net revenue
	2023	2022	2023	2022	2023	2022
	£'000	£'000	£'000	£'000	£'000	£'000
UK	75,702	57,141	333,442	310,381	268,284	250,584
Spain	23,419	23,935	40,241	36,515	40,241	36,515
North America	14,331	12,100	23,833	7,717	23,828	7,702
Asia	1,464	14,063	11,654	11,107	10,312	8,838
Rest of World	1,497	14,838	42,471	50,332	37,471	46,603
Total allocated to geographical regions	116,413	122,077	451,641	416,052	380,136	350,242

Deferred tax assets	4,320	3,938
Non-current other trade receivables	412	1,464
Total	121,145	127,479

Total assets and liabilities for each reportable segment are not provided to the CODM and therefore not presented.

4 Operating profit and auditor's remuneration


	2023	2022
	£'000	£'000
Recognised in the income statement
Impairment of intangible assets	1,494	2,966
Amortisation of intangible assets - acquired	3,929	4,655
Impairment of property, plant and equipment and right-of-use assets	362	627
Accelerated depreciation/amortisation	6,452	-
Gain on bargain purchase	(4,459)	-
Non-underlying items (less: non-underlying finance expense)	6,248	1,078
Share-based payments expense (note 23)	12,132	9,609
Total of adjusting items within operating profit	26,158	18,935
Members' remuneration charged as an expense	44,829	43,670
Net foreign exchange gain	(1,431)	(1,856)
Amortisation of intangible assets - software and capitalised development costs	3,268	4,251
Depreciation of tangible assets	3,562	2,960
Depreciation of right-of-use assets	12,365	12,737


Auditor's remuneration
Audit of the Group financial statements	535	510
Total audit fees	535	510
Amounts payable to the Company's auditor and its associates in respect of:
Audit of financial information of subsidiaries, subsidiary undertakings and partnerships of the DWF Group plc	150	125
Other services pursuant to legislation or regulation	429	105
Total fees	1,114	740

5 Net finance expense and net interest expense on leases


	2023	2022
	£'000	£'000
Finance income
Interest receivable	861	101
	861	101
Finance expense
Interest payable on bank borrowings	4,969	2,300
Other interest payable	112	54
Bank and other charges	1,090	1,265
Non-underlying finance expense	-	146
	6,171	3,765
Net finance expense	5,310	3,664
Net interest expense on leases
Interest expense on lease liabilities	1,739	1,673
	1,739	1,673

6 Taxation


	2023	2022
	£'000	£'000
UK corporation tax on profit	4,858	5,639
Foreign tax on profit	2,188	2,822
Adjustments in respect of prior periods	(445)	(5,443)
Current tax expense	6,601	3,018
Deferred tax credit	(1,341)	(2,354)
Adjustments in respect of prior periods	(538)	1,365
Total deferred tax credit	(1,879)	(989)
Total tax charge for the year	4,722	2,029

The effective tax rate is higher (2022: lower) than the average rate of corporate tax in the UK of 19.5% (2022: 19%), and excluding prior year adjustments the effective tax rate is higher than the average rate of corporate tax in the UK. The difference is explained below:


	2023	2022
	£'000	£'000
Profit before taxation	17,169	22,316
Tax on Group profit at standard UK corporation tax rate of 19.5%/25% (2022: 19%)	3,348	4,240
Foreign tax rate differences	498	(4)
Non-deductible expenses	1,656	706
Adjustments in respect of prior periods	(983)	(4,079)
Brought forward tax losses utilised	(2,115)	(263)
Tax losses in year not recognised as assets	2,478	2,060
Impact of share price on expected tax deduction	-	203
Effect on deferred tax of change in corporation tax rate	(160)	(834)
Group total tax charge for the year	4,722	2,029

In the Spring Budget 2021, the Government announced that from 1 April 2023 the corporation tax rate would increase to 25%. The impact of the change in tax rate has been recognised in tax expense in the income statement, except to the extent that it relates to items previously recognised outside the income statement.

The reported tax charge for the year, excluding prior year adjustments, is £5.7m on a profit before tax of £17.2m, representing an effective rate of tax of 33%. The effective tax rate was higher than the UK statutory tax rate primarily due to tax losses that have not been recognised as deferred tax assets (increasing the tax charge by £2.5m) and the tax effect of non-tax deductible expenses (increasing the tax charge by £1.6m) offset by the effect of the utilisation of unrecognised losses brought forward (reducing the tax charge by £2.1m). Please refer to Note 20 for further details.

7 Dividends

Distributions to owners of the parent in the year:


	2023	2022
	pence per share	pence per share
Final dividend recognised as distributions in the year	3.25	3.00
Interim dividend recognised as distributions in the year	1.60	1.50
Total dividend paid in the year	4.85	4.50
Final dividend proposed	-	3.25


	2023	2022
	£'000	£'000
Final dividend recognised as distributions in the year	9,821	9,008
Interim dividend recognised as distributions in the year	5,292	4,529
Total dividend paid in the year	15,113	13,537
Final dividend proposed	-	10,574

The Directors are not proposing a final dividend for the financial year ended 30 April 2023. A special dividend, which is conditional upon the scheme of arrangement becoming effective, is proposed as described in the scheme document published by the Company on 15 August 2023.

8 Earnings per share


	2023	2022
	£'000	£'000
Profit for the year for the purpose of basic earnings per share	12,447	20,287


	Number	Number
Weighted average number of ordinary shares for the purposes of basic earnings per share	311,419,070	298,898,991
Effect of dilutive potential ordinary shares:
Future exercise of share awards and options	12,001,403	13,639,188
Weighted average number of ordinary shares for the purposes of diluted earnings per share	323,420,473	312,538,179
Earnings per share attributable to the owners of the parent:
Basic earnings per share (p)	4.0	6.8
Diluted earnings per share (p)	3.8	6.5

Adjusted basic and adjusted diluted earnings per share are APMs (as defined in the glossary) and have been calculated using profit for the purpose of basic earnings per share adjusted for total adjusting items and the tax effect of those items.

Adjusted basic and adjusted diluted earnings per share may be reconciled to basic earnings per share as follows:


	2023	2022
	£'000	£'000
Profit for the year	12,447	20,287
Add / (remove):
Total of adjusting items (note 2)	26,158	19,081
Tax effect of adjustments above	(3,763)	(4,651)
Adjusted profit for the purpose of adjusted earnings per share	34,842	34,717

	Number	Number
Weighted average number of ordinary shares for the purposes of adjusted basic earnings per share	311,419,070	298,898,991

Ordinary shares for the purposes of adjusted diluted earnings per share	341,979,578	325,352,865
Adjusted basic earnings per share (p)	11.2	11.6
Adjusted diluted earnings per share (p)	10.2	10.7

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. These are recognised on consolidation as treasury shares. The future exercise of 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 ordinary shares for basic earnings per share and adjusted basic earnings per share.

The definitions of adjusted basic earnings per share and adjusted diluted earnings per share can be found in the glossary to these financial statements.

9 Acquisitions of subsidiaries and transactions related to previous acquisitions

Acquisitions in the year to 30 April 2023

Business combinations are accounted for using the acquisition accounting method as at the acquisition date, which is the date at which control is transferred to the Group.

Two acquisitions were made in the year; Acuhold Limited ('Acumension') and Whitelaw Twining Law Corporation ('Whitelaw Twining'). Details of the acquisitions are as follows:


	Country of incorporation	Nature of activity	Date of acquisition	Consideration £'000	Percentage ownership
Acumension	UK	Costs management	2 September 2022	5,530	100%
Whitelaw Twining	Canada	Insurance	5 December 2022	5,260	100%

Acumension is a leading specialist in legal costs management headquartered in Manchester, focused on utilising technological capability to deal with complex defendant costs, and will expand our existing Costs business within the Connected Services division.

Whitelaw Twining, is a leading Canadian law firm headquartered in Vancouver, specialising in insurance, commercial litigation, personal injury and dispute resolution. Whitelaw Twining brings a strong strategic fit, greater scale and an enhanced platform in North America, with synergy opportunities alongside DWF's existing Canadian claims and adjusting businesses.

The fair values of the assets and liabilities and the associated goodwill arising from the acquisitions are as follows:


	Acumension £'000	Whitelaw Twining £'000
Intangible assets	223	8,453
Property, plant and equipment	89	-
Right-of-use asset	-	4,835
Trade and other receivables	2,854	15,204
Cash and cash equivalents	1,690	91
Trade and other payables	(352)	(4,466)
Lease liabilities	-	(4,835)
Provisions	-	(342)
Amounts due to members	-	(3,361)
Loans and borrowings	-	(3,614)
Deferred tax liability	(81)	(2,246)
Net assets acquired	4,423	9,719
Purchase consideration	5,530	5,260
Purchase consideration satisfied by:
Initial cash consideration	4,368	304
Deferred cash consideration	1,086	2,347
Assets transferred as consideration	76	-
Contingent consideration	-	15
Shares issued to shareholders	-	2,594
Provisional goodwill / (gain on bargain purchase)	1,107	(4,459)

Within the £5,530,000 consideration for Acumension, £1,086,000 is deferred and payable over one year post-acquisition and is not contingent on future performance targets. Of this deferred consideration, £760,000 has been paid in the period. Contingent consideration of £1,250,000 was payable based on certain KPIs being met in the first year post-acquisition. These targets were deemed to be unlikely to be met as at the acquisition date and therefore not included within the fair value assessment of consideration. The provisional fair values in relation to Acumension as disclosed in the FY23 interim accounts have been updated resulting in an increase to goodwill of £452,000 and a decrease in acquired net assets of £1,761,000.

Of the £5,260,000 consideration for Whitelaw Twining, £2,347,000 was deferred and payable in February 2023. This was not contingent on future performance targets. During the period, all deferred consideration was paid. An additional consideration of £15,000 was contingent on future performance targets in FY23. These were achieved, and the contingent consideration paid in March 2023.

In addition to the consideration paid for Whitelaw Twining, 13,143,000 of shares were issued that vest over a period of between one and five years to July 2027. These shares are contingent on continuing service of the sellers. This is accounted for as remuneration and within the scope of IFRS 2 Share-Based Payments. An IFRS 2 charge of £1,293,000 has been recognised in the income statement for FY23, and a balance of £9,234,000 included within prepayments.

The goodwill for Acumension is attributable to the benefits of operating an already well-established business in the relevant sector and the synergies that are expected to be achieved from incorporating the business into the Group's operations. The goodwill will be allocated to the Costs CGU. As the purchase was not made with any qualifying intellectual property, all goodwill acquired is non-tax deductible.

Goodwill is measured at the acquisition date as the fair value of consideration transferred, plus non-controlling interests and the fair value of any previously held equity interests less the net recognised amount (which is generally fair value) of the identifiable assets and liabilities assumed. Goodwill is subject to an annual review for impairment (or more frequently if necessary) in accordance with our accounting policies. Any impairment is charged to the income statement as it arises.

The following intangible assets were recognised at acquisition. These have been measured at their fair value through the multi-period excess earnings method (customer relationships) and royalty relief method (brand).


	Acumension £'000	Whitelaw Twining £'000
Intangible assets - brands	-	2,086
Intangible assets - customer relationships	223	6,235
Total fair value of intangibles on acquisition	223	8,321
Deferred tax recognised as a result of the intangibles	(57)	(2,246)
Total fair value on acquisition	166	6,075

Cash flows arising from the acquisition were as follows:


	Acumension £'000	Whitelaw Twining £'000
Initial purchase consideration	(4,368)	(304)
Cash and cash equivalents acquired	1,690	(3,523)
Total fair value on acquisition	(2,678)	(3,827)
Deferred consideration paid in the year	(760)	(2,347)
Net cash outflow in the year	(3,438)	(6,174)

The table below outlines the revenue and PBT of the acquirees since the acquisition date, which is included in the consolidated statement of comprehensive income for the year, and the annualised revenue and PBT of the acquirees had the acquisition dates for the business combinations been at the beginning of the year:


	Revenue contributed post-acquisition	PBT contributed post-acquisition	Revenue in year of acquisition	PBT in year of acquisition
	£'000	£'000	£'000	£'000
Acumension	2,233	427	3,137	126
Whitelaw Twining	10,025	877	23,676	997

Transaction costs comprised mainly advisor fees, including financial, tax and legal due diligence. These are all included within administrative expenses (non-underlying items) within note 2.

During FY23, the Group has concluded on the fair value of the net assets in respect of acquisitions completed, resulting in an increase of of £3.9m in net assets and a corresponding decrease in goodwill.

Acquisitions in the year to 30 April 2022

Two acquisitions were made in the year; Zing 365 Holdings Limited ('Zing') and BCA Claims and Consulting Limited ('BCA').

Full details of the acquisitions can be found in the Annual Report and Accounts 2022 at www.dwfgroup.com.

10 Intangible assets


		Acquired
	Goodwill	Customer relationships	Brand	External software costs	Capitalised development costs	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Cost
At 1 May 2022	14,034	36,812	1,933	6,762	14,165	73,706
Additions - internally developed	-	-	-	-	2,726	2,726
Additions - externally purchased	-	-	-	731	-	731
Additions through acquisitions	1,107	6,458	2,086	132	-	9,783
Effect of movements in foreign exchange	(38)	(110)	263	(58)	-	57
At 30 April 2023	15,103	43,160	4,282	7,567	16,891	87,003
Amortisation and impairment
At 1 May 2022	1,357	13,132	1,782	4,444	7,387	28,102
Amortisation for the year	-	3,743	186	987	2,281	7,197
Accelerated Amortisation	-	-	-	133	-	133
Impairment	1,403	91	-	-	-	1,494
Effect of movements in foreign exchange	-	172	36	(21)	-	187
At 30 April 2023	2,760	17,138	2,004	5,543	9,668	37,113
Net book value
At 30 April 2023	12,343	26,022	2,278	2,024	7,223	49,890
At 1 May 2022	12,677	23,680	151	2,318	6,778	45,604


		Acquired
	Goodwill	Customer relationships	Brand	External software costs	Capitalised development costs	Total
	£'000	£'000	£'000	£'000	£'000	£'000
Cost
At 1 May 2021	11,141	35,608	1,633	4,322	11,311	64,015
Additions - internally developed	-	-	-	-	2,854	2,854
Additions - externally purchased	2,403	1,475	248	1,446	-	5,572
Disposals	-	-	-	(354)	-	(354)
Asset transfers	-	-	-	1,347	-	1,347
Effect of movements in foreign exchange	490	(271)	52	1	-	272
At 30 April 2022	14,034	36,812	1,933	6,762	14,165	73,706
Amortisation and impairment
At 1 May 2021	1,357	6,128	1,041	1,587	4,729	14,842
Amortisation for the year	-	3,945	711	1,593	2,658	8,907
Disposals	-	-	-	(94)	-	(94)
Impairment	-	2,955	-	11	-	2,966
Asset transfers	-	-	-	1,347	-	1,347
Effect of movements in foreign exchange	-	104	30	-	-	134
At 30 April 2022	1,357	13,132	1,782	4,444	7,387	28,102
Net book value
At 30 April 2022	12,677	23,680	151	2,318	6,778	45,604
At 1 May 2021	9,784	29,480	592	2,735	6,582	49,173

Individual intangible assets that are material to the financial statements are set out below:

· Customer relationships - Whitelaw Twining: Net book value at 30 April 2023 £6.0m (2022: £nil) - remaining amortisation period is 13.5 years

· Customer relationships - Spain: Net book value at 30 April 2023 £18.0m (2022: £19.5m) - remaining amortisation period is 7 years

Goodwill

Goodwill considered significant in comparison to the Group's total carrying amount of such assets has been allocated to CGU's or groups of CGU's as follows:


	2023	2022
	£'000	£'000
Insurance	3,921	3,921
Claims Management and Adjusting	2,150	2,150
Costs	1,398	1,398
Other individually immaterial CGUs	4,874	5,208
	12,343	12,677

The recoverable amounts of the CGUs are determined from value in use calculations. The calculations have been based on a discounted cash flow model covering a period of five years using forecast revenues and costs, extended to perpetuity. The inputs into the model appropriately consider the relevant market maturity and local factors. The first year of the forecast is established from the budget for FY24 which is underpinned by the business plan that has been signed off by the Board. Cash flows for FY24 through to FY27 have been included on a consistent basis with the Board approved strategy. In each case, the calculations use a long term growth rate of 2% (2022: 2%) consistent with the sector average and a pre-tax discount rate of 12-13% (2022: 10-12%). These pre-tax discount rates reflect current market assessments for the time value of money and the specific risks associated with each CGU. The long-term growth rates used are based on management's expectations of future changes in the markets for each CGU.

The review for the Zing 365 CGU indicated that the recoverable amount was lower than the carrying value by £1.5m. The carrying value of the CGU has therefore been reduced to its recoverable amount, resulting in a Goodwill impairment charge of £1.4m, with the remaining £0.1m impairment allocated against the Customer Relationships intangible. This charge is recognised within administrative expenses in the Group income statement, and is attributable to the Connected Services segment.

Goodwill that has been allocated to other individually immaterial CGUs in the table above is monitored at a lower level than operating segment. Significant headroom exists for each CGU, with the exception of the Zing 365 CGU. No other reasonable worst-case scenario gives rise to a material impairment risk.

11 Property, plant and equipment


	Leasehold improvements	Office equipment and fixtures and fittings	Computer equipment	Total
	£'000	£'000	£'000	£'000
Cost
At 1 May 2022	18,170	13,938	37,491	69,599
Additions	855	1,160	871	2,886
Acquired through business combinations	-	89	-	89
Disposals	(68)	(322)	(151)	(541)
Effect of movements in foreign exchange	(209)	(29)	(20)	(258)
At 30 April 2023	18,748	14,836	38,191	71,775
Accumulated depreciation
At 1 May 2022	14,066	9,163	35,131	58,360
Charge for the year	789	1,367	1,406	3,562
Accelerated depreciation	985	190	-	1,175
Disposals	-	(319)	(57)	(376)
Effect of movements in foreign exchange	(32)	(181)	(33)	(246)
At 30 April 2023	15,808	10,220	36,447	62,475
Net book value
At 30 April 2023	2,940	4,616	1,744	9,300
At 1 May 2022	4,104	4,775	2,360	11,239

In FY23, an accelerated depreciation charge of £1.2m (FY22: £nil) was recognised in relation to leasehold improvements and office equipment located within a vacant floor in the Pune office. There are no future plans to occupy this space given the adoption of hybrid working, therefore associated assets have been fully depreciated in the year.


	Leasehold improvements	Office equipment and fixtures and fittings	Computer equipment	Total
	£'000	£'000	£'000	£'000
Cost
At 1 May 2021	16,179	15,366	38,499	70,044
Additions	508	1,169	1,903	3,580
Disposals	(669)	(448)	(1,584)	(2,701)
Asset transfers	2,130	(2,130)	(1,347)	(1,347)
Effect of movements in foreign exchange	22	(19)	20	23
At 30 April 2022	18,170	13,938	37,491	69,599
Accumulated depreciation
At 1 May 2021	13,287	8,235	35,907	57,429
Charge for the year	778	1,029	1,153	2,960
Disposals	(463)	(129)	(608)	(1,200)
Impairment	402	84	17	503
Asset transfers	46	(46)	(1,347)	(1,347)
Effect of movements in foreign exchange	16	(10)	9	15
At 30 April 2022	14,066	9,163	35,131	58,360
Net book value
At 30 April 2022	4,104	4,775	2,360	11,239
At 1 May 2021	2,892	7,131	2,592	12,615

12 Right-of-use assets

Leases as a lessee


	Property	Equipment	Total
	£'000	£'000	£'000
Right-of-use assets
At 1 May 2021	67,073	2,093	69,166
Additions	10,467	-	10,467
Acquisitions	-	-	-
Depreciation	(12,264)	(473)	(12,737)
Impairment	(124)	-	(124)
Disposals	(1,110)	-	(1,110)
Remeasurement adjustment	(1,156)	-	(1,156)
Effect of movements in foreign exchange	729	(1)	728
At 30 April 2022	63,615	1,619	65,234
Additions	3,487	-	3,487
Acquisitions	4,835	-	4,835
Depreciation	(11,907)	(458)	(12,365)
Accelerated depreciation	(5,144)	-	(5,144)
Impairment	(362)	-	(362)
Remeasurement adjustment	1,559	(23)	1,536
Effect of movements in foreign exchange	2	-	2
At 30 April 2023	56,085	1,138	57,223

In FY23, an accelerated depreciation charge of £5.1m (FY22: £nil) was recognised in relation to the right of use asset for a vacant floor in the Pune office. There are no future plans to occupy this space given the adoption of hybrid working, therefore associated assets have been fully depreciated in the year. The remeasurement adjustment relates to the impact of term and rent changes on property leases during the year.

Leases as a lessor

During FY22, the Group has sub-leased property in Australia. In the recognition of the lease receivables pertaining to the sub-leased property, the Group has reversed impairment of £nil (2022: £1.0m) which was previously recorded against the right-of-use assets.

13 Trade and other receivables


	2023	2022
	£'000	£'000
Current
Trade receivables	104,593	88,949

Amounts recoverable from clients in respect of unbilled revenue	92,890	71,958
Unbilled disbursements	11,232	7,982
Contract assets	104,122	79,940

Trade receivables and contract assets	208,715	168,889

Other receivables	4,143	2,216
Amounts due from Members of partnerships	2,441	2,238
Lease receivables	310	432
Reimbursement asset	4,962	4,040
Prepayments	22,768	12,359
	243,339	190,174
Non-current
Other receivables	225	938
Lease receivables	187	526
	412	1,464

The reimbursement asset is principally attributable to the professional indemnity provision (see note 18). Prepayments include £9.2m (2022: £nil) relating to acquisition-related remuneration expense (see note 9).

Ageing of trade receivables, amounts recoverable from clients in respect of unbilled revenue and unbilled disbursements


	2023	2022
	£'000	£'000
Trade receivables not past due	18,286	14,794
Trade receivables past due
0 - 90 days	68,522	59,876
91 - 180 days	11,432	8,846
181 - 270 days	4,538	3,337
271 - 365 days	2,746	2,366
More than 365 days	10,615	11,459
Gross trade receivables	116,139	100,678
Amounts recoverable from clients in respect of unbilled revenue	92,890	71,958
Unbilled disbursements	11,232	7,982

Expected credit losses	(8,438)	(8,588)
Other impairment provisions	(3,108)	(3,141)

Total trade receivables and contract assets	208,715	168,889

Lifetime expected credit losses are used to measure the loss allowance. These balances are held against trade receivables, amounts recoverable from clients in respect of unbilled revenue and unbilled disbursements. Other impairment provisions are applied against the trade receivables which are not based on the average expected credit loss rates presented below. The other categories of trade and other receivables do not contain impaired assets.

Expected credit loss rates

To measure the expected credit losses, trade receivables and contract assets have been grouped based on shared credit risk characteristics and the days past due. The contract assets relate to unbilled revenue and have substantially the same risk characteristics as the trade receivables for the same types of contracts.

The average expected credit loss rates for trade receivables and contract assets are presented below.


	Group rates		Spain rates
	2023	2022	2023	2022
0 - 90 days	0.9%	0.5%	2.7%	0.9%
91 - 180 days	3.5%	3.4%	8.7%	4.2%
181 - 270 days	7.6%	10.5%	19.8%	13.1%
271 - 365 days	12.5%	19.9%	25.8%	20.7%
More than 365 days	63.4%	50.6%	49.1%	45.0%

Movement in provision for impairment


	2023	2022
	£'000	£'000
At 1 May 2022	11,729	13,031
Provision utilised and other movements	(1,637)	(4,275)
Charges to income statement	1,454	2,973
At 30 April 2023	11,546	11,729

Other movements include expected credit loss provisions acquired from business combinations in the year of £421,000 (2022: £61,500).

Trade receivables, unbilled disbursements and contracts assets are written off where there is no reasonable expectation of recovery. For trade receivables and unbilled disbursements, impairment losses are presented as net impairment losses within operating profit whereas contract asset impairment losses are presented as a reduction in revenue. Subsequent recoveries of amounts previously written off are credited against the same line item.

14 Cash and cash equivalents


	2023	2022
	£'000	£'000
Cash at bank and in hand	36,404	28,310
Bank overdrafts	(5,808)	(606)
Cash and cash equivalents	30,596	27,704

15 Trade and other payables


	2023	2022
	£'000	£'000
Trade payables	28,716	27,896
Other payables	3,101	3,748
Other taxation and social security	14,164	15,284
Deferred income	1,795	2,014
Accruals	12,079	14,383
Trade and other payables	59,855	63,325

Other payables relates principally to payroll-related creditors.

16 Lease liabilities


	2023	2022
	£'000	£'000
At 1 May 2022	77,739	84,002
Additions	3,387	7,683
Acquisitions	4,835	-
Interest expense related to lease liabilities	1,738	1,673
Net foreign currency translation (gain)/loss	(379)	763
Remeasurement adjustment	875	(1,313)
Repayment of lease liabilities (including interest)	(16,185)	(15,069)
At 30 April 2023	72,010	77,739


Current lease liabilities	13,712	14,576
Non-current lease liabilities	58,298	63,163
	72,010	77,739

The maturity of lease liabilities can be found in note 19. The undiscounted contractual cash flows relating to lease liabilities accounted for in accordance with IFRS 16 is £78.1m (2022: £82.9m). Operating costs, included within administrative expenses, relating to short-term and low value leases during the year were £2.2m (2022: £1.6m).

17 Interest-bearing loans and borrowings

This note provides information about the Group's interest-bearing loans and borrowings, which are measured at amortised cost. For more information about the contractual terms and the Group's exposure to interest rate and foreign currency risk, refer to note 19.

Obligations under interest-bearing loans and borrowings


	2023	2022
	£'000	£'000
Current liabilities
Bank loans	11,425	9,093
Supplier payment facility	6,279	87
Bank overdrafts	5,808	606
	23,512	9,786
Non-current liabilities
Bank loans	115,069	90,907
Unamortised finance costs	(429)	(563)
	114,640	90,344
	138,152	100,130

On 22 December 2021, the Group completed a refinancing of its principal rolling credit facility ('RCF'). The new facility was increased to £120m in February 2023 and matures in December 2025 with one additional 12-month extension option.

The Group operates a supplier payment facility with HSBC, which has a limit of £11m. This facility is utilised in paying certain suppliers from time to time and repaid in the short-term.

Analysis of cash and cash equivalents and other interest-bearing loans and borrowings:


	1 May 2022	Cash flow	Exchange movement	Non-cash movement	30 April 2023
	£'000	£'000	£'000	£'000	£'000
Cash and cash equivalents	27,704	2,705	187	-	30,596
Bank loans	(99,437)	(26,017)	(313)	(297)	(126,064)
Supplier payments facility	(87)	34,831	-	(41,023)	(6,279)
Total net debt (excluding IFRS 16)	(71,820)	11,519	(126)	(41,320)	(101,747)


	1 May 2021	Cash flow	Exchange movement	Non-cash movement	30 April 2022
	£'000	£'000	£'000	£'000	£'000
Cash and cash equivalents	34,580	(7,017)	141	-	27,704
Bank loans	(94,544)	(4,240)	227	(880)	(99,437)
Supplier payments facility	(204)	15,683	-	(15,566)	(87)
Total net debt (excluding IFRS 16)	(60,168)	4,426	368	(16,446)	(71,820)

Non-cash movements within bank loans relate to the amortisation of fees incurred on arrangement of the facility, over the expected life of the facility. Non-cash movements within the supplier payments facility relate to the utilisation of the facility to settle liabilities with suppliers, with the supplier payments facility being settled with cash when the liability becomes due.

Net debt including lease liabilities in scope of IFRS 16 is £173.8m (2022: £149.6m).

Net debt is an APM and is defined in the glossary.

18 Provisions


	Dilapidation provision	Professional indemnity provision	Total
	£'000	£'000	£'000
At 1 May 2022	4,462	6,000	10,462
Utilised in the year	(213)	(2,428)	(2,641)
Released in the year	(68)	(414)	(482)
Provisions made in the year	107	4,014	4,121
Acquired through business combinations	342	-	342
Reclassified to other payables	-	(1,132)	(1,132)
At 30 April 2023	4,630	6,040	10,670
Current	858	6,040	6,898
Non-current	3,772	-	3,772

Professional indemnity provision

The provision for professional indemnity reflects the Group's expected outflow for legal claims brought against the Group relating to historic professional services rendered. A provision is only recognised where an outflow is probable. The probability is established by reference to whether a claim is more likely than not to be successful. A professional indemnity liability for a claim that is agreed (i.e. the timing and amount of payments are well understood) is recognised in accruals (see note 15). Claims are assessed as being settled in full within the next five years.

Separately, the Group recognises expected reimbursements from professional indemnity insurance when it is virtually certain that the reimbursement will be received (note 13). No separate disclosure is made of the detail of such claims or proceedings, or the costs recovered by insurance, as such detail would be seriously prejudicial to the position of the Group.

There are circumstances of which the Group is aware but there is insufficient information available to either estimate whether a claim will develop or, where a claim appears possible, make an assessment of the outflow. Such circumstances are contingent liabilities of the Group.

Dilapidation provision

Dilapidation provisions are established for restoration and reinstatement costs for property leases, held at the date of the statement of financial position. Such provisions are estimated at the start of the lease and updated annually. The Group's current lease portfolio terminates over the course of the next eleven years.

19 Financial instruments

The Directors have overall responsibility for the oversight of the Group's risk management framework. Further explanation on management of risk factors is provided in the risk section of the Strategic report.

The Group's trading and financing activities expose it to various financial risks that if left unmanaged could adversely impact on current or future earnings. These risks can be categorised as credit risk, liquidity risk, market risk (interest rate risk and foreign currency risk) and capital risk.

Credit risk

Credit risk is the risk of financial loss to the Group if a client or counterparty to a financial instrument fails to meet its contractual obligations, and arises principally from the Group's trade receivables. Credit checks are performed for new clients and ongoing monitoring takes place for existing clients. A provision is carried for expected credit losses, see note 13.

In connection with the Group's financial instruments there is not believed to be a material concentration risk based on the nature of the instruments.

Liquidity risk

Liquidity risk is the risk that the Group will not be able to meet its financial obligations as they fall due. The Group maintains sufficient cash or working capital facilities to meet the cash requirements of the Group in order to mitigate this risk.

The Group is financed through a combination of members' capital (repayable on retirement of the member), undistributed profits, cash and bank borrowing facilities.

The Group's principal facility is a £120m (2022: £100m) RCF. Details of amounts drawn can be found in note 17. Management maintain a rolling 12-month cash flow and covenant forecasts to ensure visibility of short-term liquidity and manage facility usage, in addition to annual budgets and longer-term planning. The RCF matures in 2025, with one 12-month extension option and there are no contracted repayments until that date. The Group anticipates continued utilisation of the facility to fund working capital.

Note 1.3 sets out the financial covenants attached to the RCF held with the Group's banking syndicate, and more information on how the Group manages liquidity risk.

The Group has bank guarantees of £0.7m denominated in euros (2022: £0.7m). The Group has issued rental guarantees of £2.1m denominated in Euros and Australian dollars (2022: £2.1m).

Maturity analysis

The table below presents the outstanding contractual maturity profile by fiscal year for the Group's interest-bearing loans and borrowings and lease liabilities. Trade and other payables are excluded from this profile as they fall due within a year.

The majority of the Group's borrowings comprise the drawn-down balance on the RCF, as discussed above. The payments shown below reflect the contractual repayments upon expiry of the facility, excluding the extension options, so if the facility is extended these repayments will be deferred.


	Borrowings		Lease liabilities
	2023	2022	2023	2022
Payments	£'000	£'000	£'000	£'000
Year to 2023	-	9,180	-	16,030
Year to 2024	11,451	-	15,364	14,639
Year to 2025	-	90,907	14,212	13,056
Year to 2026	115,042	-	13,102	11,850
Year to 2027	-	-	11,867	-
Later years	-	-	23,553	27,326
	126,493	100,087	78,098	82,901
Effect of discounting cash flows	-	-	(6,088)	(5,162)
Carrying value	126,493	100,087	72,010	77,739

Market risk

Market risk is the risk that changes in market prices, such as foreign exchange rates and interest rates, will affect the Group's income. The Group's exposure to market risk predominantly relates to interest and currency risk.

Interest rate risk

The Group's bank borrowings incur both fixed and variable interest charges. The variable rates on its principal borrowing facilities are linked to SONIA or EURIBOR plus a margin.

The Group's principal facility exposure to variable interest rates poses a risk in both the cash flows and the impact on the income statement with potential interest increases expected in FY24.

Foreign currency risk

The Group has overseas operations in Europe, the Middle East, Asia, Australia, and North America and is therefore exposed to changes in the respective currencies in these territories. The Group maintains bank balances in local currency. Cash positions are monitored and any imbalances are dealt with by purchasing currency at the spot rate.

Capital risk

The capital structure of the Group consists of net debt, as disclosed in note 17, and equity. The Group's objectives when managing capital are to safeguard the Group's ability to continue as a going concern and to provide optimal returns for shareholders. The Group manages its capital structure and makes adjustments to it, in light of changes to economic conditions and the strategic objectives of the Group.

Fair value measurement

Financial assets and liabilities are measured in accordance with the fair value hierarchy and assessed as Level 1, 2 or 3 based on the following criteria:

· Level 1: fair value measurement based on quoted prices (unadjusted) in active markets for identical assets or liabilities;

· Level 2: fair value measurements derived from inputs other than quoted prices that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e. derived from prices);

· Level 3: fair value measurements derived from valuation techniques that include inputs for the asset or liability that are not based on observable market data.

Investments, held at fair value through profit or loss, are a Level 3 financial asset. The remaining financial instruments are measured at amortised cost. The carrying values of the Group's financial assets and liabilities approximate their fair values.

The table below sets out the Group's accounting classification of each category of financial assets and liabilities and their carrying values at the end of the financial year.


		2023	2022
	Notes	£'000	£'000

Measured at amortised cost:
Cash and cash equivalents	14	30,596	27,704
Trade and other receivables	13	220,983	179,279
Total financial assets		251,579	206,983

Measured at amortised cost:
Trade and other payables	15	58,360	61,311
Lease liabilities	16	72,010	77,739
Borrowings	17	132,773	100,087
Amounts due to members of partnerships in the Group	27	30,700	28,243
Total financial liabilities		293,843	267,380

Financial instruments sensitivity analysis

The Group has exposure to interest rate and foreign exchange rate movements given the nature of its borrowings and operations. At the end of the year, the effect of hypothetical changes in interest and currency rates are as follows.

Interest rate sensitivity

At 30 April 2023, based upon the amount of variable rate debt outstanding, the Group's pre-tax profits would change by approximately £1.1m for each one percentage point change in interest rates applicable to the variable rate debt and, after tax effect, equity would change by approximately £0.9m.

Foreign exchange rate sensitivity

The Group transacts in a range of currencies, but is primarily exposed to changes in the Euro and US Dollar exchange rates.

A 20% (FY22: 20%) strengthening and weakening of the above currencies against Pound Sterling would have the following impacts on net assets and profit shown below.

This calculation assumes that the change occurred at the statement of financial position date and had been applied to risk exposures existing at that date. This analysis assumes that all other variables, in particular interest rates, remain constant. The analysis is performed on the same basis for comparative periods.


		Effect of change in	Effect of change in
Strengthening	Year	EUR rate	USD rate
Impact on equity	FY23	2,041	194
Impact on equity	FY22	1,796	203
Impact on profit or loss	FY23	(1,541)	(31)
Impact on profit or loss	FY22	(647)	(207)


		Effect of change in	Effect of change in
Weakening	Year	EUR rate	USD rate
Impact on equity	FY23	(1,361)	(129)
Impact on equity	FY22	(1,198)	(135)
Impact on profit or loss	FY23	1,027	1
Impact on profit or loss	FY22	431	138

20 Deferred taxation

The deferred tax asset is as follows:


	2023	2022
	£'000	£'000
Assets
At 1 May 2022	3,938	4,649
Deferred tax (credit)/debit recognised directly in equity	(525)	438
Deferred tax credit/(charge) in the income statement for the year	894	(1,173)
Exchange rate translation	13	24
At 30 April 2023	4,320	3,938

Deferred tax assets of £4.3m have been recognised in respect of tax depreciation timing differences (£1.6m), expected tax deductions for share-based payments (£2.5m) and other temporary differences (£0.2m). It is anticipated that the Group and certain related subsidiary undertakings will make sufficient taxable profit to allow the benefit of the deferred tax asset to be utilised. A potential deferred tax asset of £14.2m (2022: £11.7m) has not been recognised relating to tax losses in subsidiary undertakings that are not anticipated to make sufficient taxable profit to allow the benefit of the deferred tax asset to be utilised.

The deferred tax liability as at 30 April 2023 is as follows:


	2023	2022
	£'000	£'000
Non-current liabilities
At 1 May 2022	5,869	7,584
Arising on acquisition of intangibles	2,303	503
Deferred tax credit in the income statement for the year	(985)	(2,163)
Exchange rate translation	314	(55)
At 30 April 2023	7,501	5,869

The deferred tax liability principally relates to the recognition of acquired intangible assets arising on consolidation.

21 Share capital


	Number	Share capital	Share premium	Treasury shares	Total
	of 1p each	£'000	£'000	£'000	£'000
At 1 May 2021	324,554,653	3,246	88,610	(129)	91,727
Shares issued on acquisition of Zing 365 Holdings Ltd	798,212	8	755	-	763
At 30 April 2022	325,352,865	3,254	89,365	(129)	92,490
Shares issued on transaction with Whitelaw Twining	16,626,713	166	2,575	-	2,741
At 30 April 2023	341,979,578	3,420	91,940	(129)	95,231

On 6 December 2022, 16,504,757 ordinary shares were issued as a result of the transaction with Whitelaw Twining Law Corporation. A further 121,956 ordinary shares were issued on 31 March 2023 in relation to the same transaction.

The Group has 11,309,876 (2022: 24,322,488) shares held in treasury.

22 Reserves

The following describes the nature and purpose of each reserve within equity:


Share premium	The amount subscribed for share capital in excess of the nominal value.
Treasury shares	The treasury shares reserve represents shares in DWF Group plc held by the Group's share trusts. The trusts are consolidated in the Group's financial statements.
Merger reserve	The difference between the nominal value of shares acquired by the Company in the share-for-share exchange with the former DWF LLP members and the nominal value of shares issued to acquire them.
Share-based payments reserve	The cumulative share-based payment expense net of release of amounts in respect of option exercised.
Translation reserve	Gains / losses in translating the net assets of overseas operations into GBP.
Accumulated losses	All other net gains and losses and transactions with owners not recognised elsewhere.

23 Share-based payments

Share-based payment arrangements

The Group operates three share-based payment plans (2022: three plans), all of which are equity settled and consist only of share awards.

· The equity incentive plan ('EIP'): This is used to incentivise and reward performance from primarily Directors, upper-level management and members. Within the EIP are the following schemes: The EIP-IPO award, the career level 1-3 award, the long-term incentive plan ('LTIP') and the promotion award.

· The buy-as-you-earn ('BAYE') plan: All employees, excluding members, are eligible for the BAYE plan which is used to incentivise retention and reward contribution. Within the BAYE are the following schemes: The BAYE-IPO award, the free-share award and, the share incentive plan matching award ('SIP matching award').

· The deferred bonus plan: This comprises the deferred bonus award scheme. This plan is used as an alternative to cash bonuses for eligible employees and awards may be made following year-end results announcements.

The social security expenses in relation to share-based payment arrangements are based on the rates and treatment prevailing in each jurisdiction. This is accounted for as a cash-settled award.

Charge to the income statement

The charge to the income statement is set out below:


	2023	2022
	£'000	£'000
Share plans:
Equity incentive plan	11,229	6,721
Buy-as-you-earn plan	174	871
Deferred bonus plan	236	109
	11,639	7,701
Social security expenses	493	1,908
Total expense	12,132	9,609

Impact of share-based payments ('SBP') movement in 2023:


	SBP expense £'000	SBP reserve £'000	Accumulated losses £'000	Prepayments £'000	Other taxation and social security £'000
Acquisition of Whitelaw Twining	1,310	(10,445)	-	(9,234)	-
Share-based payment schemes	10,329	(10,329)	-	-	-
Recycling of vested shares	-	7,294	(7,294)	-	-
Social security expenses	493	-	-	-	(493)
Total movement	12,132	(13,480)	(7,294)	(9,234)	(493)

Prepaid share-based payments charge in the year relates to shares issued as part of the Whitelaw Twining acquisition that is treated as remuneration rather than consideration. Refer to Note 9 for further detail.

Impact of share-based payments ('SBP') movement in 2022:


	SBP expense £'000	SBP reserve £'000	Accumulated losses £'000	Prepayments £'000	Other taxation and social security £'000
Share-based payment schemes	7,701	(7,701)	-	-	-
Recycling of vested shares	-	9,074	(9,074)	-	-
Social security expenses	1,908	-	-	-	(1,908)
Total movement	9,609	1,373	(9,074)	-	(1,908)

Summary of share awards

The following table shows the movements in share awards across all plans for the year:


	2023 Number of shares '000	2022 Number of shares '000
Number of shares awards outstanding 1 May	34,073	33,046
Awards granted during the year	26,849	12,331
Awards vested during the year	(7,805)	(8,598)
Awards lapsed during the year	(6,026)	(2,706)
Number of shares awards outstanding 30 April	47,091	34,073

The weighted average remaining contractual life at the end of the period is 1.3 years (2022: 1.8 years).

The exercise price of all share awards is nil. The weighted average share price at the vesting date for all awards vested during the year was £0.86 (2022: £1.07).

Details of the Group's share awards are as follows:

Share awards under the DWF Group plc 2019 EIP - IPO award

At IPO, conditional and restricted share awards were granted to a limited number of the senior management team.

The awards are subject to a service condition and have an entitlement to receive dividend equivalents. A portion of the awards were previously subject to performance targets, but these have subsequently been removed.

Share awards under the DWF Group PLC EIP - Career level 1-3 award

This scheme is to incentivise senior employees for performance and exceptional contributions to the Group, on promotion or as a lateral or senior hire to the Group. Additionally, as part of the RCD acquisition, shares are ring-fenced for future grant to employees of the acquired business which fall under this award.

All of the awards under this scheme are subject to service conditions and a portion of the awards are also subject to performance targets. There is an entitlement to receive dividend equivalents on the awards.

Share awards under the DWF Group PLC EIP - Long-Term Incentive Plan

The Group incentivises its Executive Board with long-term rewards based on challenging performance targets.

The awards under this scheme are also subject to service conditions. There is no dividend or dividend equivalent entitlement until such time as they vest and after a holding period.

Share awards under the DWF Group PLC EIP - Promotion award

The Group may incentivise its employees on promotion with a share award from this scheme.

All of the awards under this scheme are subject to service conditions. A portion of the awards were previously subject to performance targets, but these have subsequently been removed. There is an entitlement to receive dividend equivalents on the awards.

Share awards under the DWF Group plc BAYE - IPO award

At IPO, awards were granted to eligible employees.

The awards under this scheme were subject to service conditions. There was no entitlement to receive dividends or dividend equivalents on the awards until such time as they vested.

Share awards under the DWF Group plc BAYE - Free-share award

The Group incentivises its employees for exceptional contributions from this scheme.

The awards under this scheme are subject to service conditions. There is no entitlement to receive dividends or dividend equivalents until such time as they vest.

Share awards under the DWF Group plc BAYE - Plan matching award ('BAYE matching shares award')

The Group offers its employees in the UK, Spain and the US the opportunity to actively buy shares in DWF Group plc and become an investor in the business. The Group will match a certain number of awards, subject to service conditions.

There is no entitlement to receive dividends or dividend equivalents until such time as they vest.

Share awards under the DWF Group plc - Deferred bonus plan

The Group may make awards under this scheme to eligible employees as part of the bonus plan.

The awards under this scheme are subject to service conditions. There is no entitlement to receive dividends or dividend equivalents until such time as they vest.

Share awards granted

The Black Scholes method was used to value all share awards granted during the year. The following table outlines the inputs and assumptions used:


	2023				2022
	EIP	BAYE	Deferred bonus	EIP		BAYE	Deferred bonus
Weighted average fair value at measurement date	0.75	0.65	0.78	1.14		1.10	0.95
Weighted average share price at grant date	0.84	0.65	0.93	1.19		1.20	1.17
Expected volatility	38.55%	35.14%	43.21%	42.96%		43.46%	43.52%
Expected life (years)	1.71	1.96	2.92	2.87		1.37	2.87
Expected dividend yield	6.85%	7.60%	7.67%	1.33%		5.72%	6.57%
Risk free interest rate	2.99%	4.00%	2.03%	0.50%		0.51%	0.18%
Estimate of attrition	16.98%	25.18%	27.94%	21.60%		9.42%	20.46%
Estimate of performance conditions being met	88.47%	N/A	N/A	85.70%		N/A	N/A

The expectations and estimates used represent the average across the tranches granted. Expected volatility was determined by reference to the period for which the share price history is available. The expected life used is the vested date of the award.

24 Key management personnel

Compensation paid to key management personnel


	2023	2022
	£'000	£'000
Remuneration of the PLC Board
Short-term employee benefits	1,899	2,717
Post-employment benefits	101	92
Share-based payments	555	640
	2,555	3,449

Key management personnel comprise the PLC Board of Directors. The amount paid to the highest paid member of key management was £0.8m (2022: £0.8m).

Related parties

Zeus Capital Limited was a related party of the Group by virtue of Sir Nigel Knowles being Chairman of Zeus Capital Limited. Total sales by the Group to Zeus Capital in the period were £5,000 (PY: £255,000) relating to the provision of legal services. Zeus Capital Limited also act as broker to the Group, and fees payable to Zeus Capital Limited in the period was £50,000 (PY: £43,750). No amounts were payable or outstanding at the year end or at the prior year end.

Onedome Limited is also a related party of the Group by virtue of Sir Nigel Knowles being a director of the company. Total sales to Onedome Limited in the period were £78,000 (PY: £nil) relating to the provision of legal services. An amount of £94,000 was outstanding from Onedome Limited as at the year end (PY: £nil).

Cannaray Limited is a related party of the Group by virtue of Sir Nigel Knowles being a director of the company. Total sales by the Group to Cannaray Limited in the period were £11,000 (PY: £30,000) relating to the provision of legal services. An amount of £13,000 was outstanding from Cannaray Limited as at the year end (PY: £nil).

25 Employee information and their pay and benefits

The average number of persons employed by the Group (including Executive Directors) during the year, analysed by category, and the aggregate payroll costs of these persons were as follows:


	2023	2022
	No.	No.
Legal advisors	2,542	2,426
Support staff	1,296	1,222
	3,838	3,648


	£'000	£'000
Wages and salaries	217,504	199,828
Social security costs	13,390	11,694
Contributions to defined contribution plans	7,843	6,698
	238,737	218,220

The Group operates defined contribution pension plans. The total annual pension cost for the defined contribution plan was £7.8m (2022: £6.7m) and the outstanding balance at 30 April 2023 was £1.3m (30 April 2022: £0.9m).

26 Cash generated from operations

a) Cash generated from operations before adjusting items


	2023	2022
	£'000	£'000
Cash flows from operating activities
Profit before tax	17,169	22,316
Adjustments for:
Amortisation of acquired intangible assets	3,929	4,655
Impairment of intangible assets	1,494	-
Impairment of tangible and right of use assets	362	-
Accelerated depreciation/amortisation	6,452	3,593
Depreciation of right-of-use asset	12,365	12,737
Other depreciation and amortisation	6,830	7,211
Non-underlying items	6,248	1,224
Gain on bargain purchase	(4,459)	-
Share-based payments expense	12,132	9,609
Interest expense on lease liabilities	1,739	1,673
Net finance expense	5,310	3,518
Operating cash flows before movements in working capital	69,571	66,536
Increase in trade and other receivables	(24,775)	(8,031)
(Decrease) in trade and other payables	(79)	(17,641)
(Decrease)/increase in provisions	(1,309)	4,798
Decrease in amounts due to members of partnerships in the Group	(479)	(4,039)
Cash generated in operations before adjusting items	42,929	41,623

b) Free cash flows

Free cash flow is an APM and is defined in the glossary.


	2023	2022
	£'000	£'000
Free cash flows
Operating cash flows before movements in working capital	69,571	66,536
Net working capital movement	(26,163)	(20,874)
Amounts due to members of partnerships in the Group	(479)	(4,039)
Cash generated from operations before adjusting items	42,929	41,623
Net interest paid	(5,511)	(4,596)
Tax paid	(3,713)	(2,854)
Repayment of lease liabilities	(14,447)	(13,396)
Purchase of property, plant and equipment	(2,874)	(3,581)
Purchase of other intangible assets	(3,452)	(4,300)
Free cash flows	12,932	12,896

c) Working capital measures


	2023	2022
	£'000	£'000
WIP days
Amounts recoverable from clients in respect of unbilled revenue	92,890	71,958
Unbilled disbursements	11,232	7,982
Total WIP	104,122	79,940
Annualised net revenue	396,757	350,490
WIP days	96	83

Debtor days
Trade receivables (net of allowance for doubtful receivables)	104,593	88,949
Other receivables	4,368	3,154
Total debtors	108,961	92,103
Annualised net revenue	396,757	350,490
Debtor days	100	96

Total lock-up days
Total WIP	104,122	79,940
Total debtors	108,961	92,103
Total lock-up	213,083	172,043
Annualised net revenue	396,757	350,490
Total lock-up days	196	179

Annualised net revenue, an APM as defined in the glossary, reflects the total net revenue for the previous 12-month period inclusive of pro-forma adjustments for acquisitions.

Lock-up days is an APM and is defined in the glossary.

The Group also measures lock-up as above but excluding other receivables as this more closely aligns with lock-up measurement of other businesses in the legal sector and also as other receivables do not represent sales outstanding. Excluding other receivables, lockup days are 192 days (2022: 176 days).

27 Amounts due to members of partnerships in the Group

Amounts due to members of partnerships in the Group comprise members' capital and other amounts due to members classified as liabilities as follows:


	Members' capital	Other amounts due to members	Total amounts due to members of partnerships in the Group
	£'000	£'000	£'000
At 1 May 2022	14,370	13,873	28,243
Members' remuneration charged as an expense	-	44,829	44,829
Unrealised foreign exchange translation differences	54	452	506
Capital introduced by members	7,237	-	7,237
Repayments of capital	(4,807)	-	(4,807)
Drawings	-	(45,308)	(45,308)
At 30 April 2023	16,854	13,846	30,700


	Members' capital	Other amounts due to members	Total amounts due to members of partnerships in the Group
	£'000	£'000	£'000
At 1 May 2021	13,348	18,144	31,492
Members' remuneration charged as an expense	-	43,670	43,670
Unrealised foreign exchange translation differences	(38)	(80)	(118)
Capital introduced by members	2,132	-	2,132
Repayments of capital	(1,072)	-	(1,072)
Drawings	-	(47,861)	(47,861)
At 30 April 2022	14,370	13,873	28,243

The average number of members during the year was as follows:


	2023	2022

Average number of members of partnerships held by the Group during the year	385	366

28 Events after the reporting date

On 21 July 2023, the Board unanimously announced the recommendation of an all cash offer for DWF Group Plc from Aquila Bidco Limited, a newly incorporated wholly-owned subsidiary of funds advised by Inflexion. It is not possible to estimate the financial effect on the Company as a result of this change in ultimate parent ownership.

UNAUDITED INFORMATION

Appendix

Reconciliation to new global operating structure - year ended 30 April 2023

The following reconciliation shows how the current year's revenue, net revenue and gross profit would be presented under the new operating structure:


	As reported for the year ended 30 April 2023	Impact of restructure	Under new global operating structure effective 1 May 2023
	£'000	£'000	£'000
Net revenue
Legal Advisory	316,577	(316,577)	-
Connected Services	40,653	(40,653)	-
Commercial Services	-	203,118	203,118
Insurance Services	-	162,930	162,930
Mindcrest	22,906	(22,906)	-
Legal Operations	-	14,088	14,088
Net revenue	380,136	-	380,136
Direct cost
Legal Advisory	(153,959)	153,959	-
Connected Services	(22,749)	22,749	-
Commercial Services	-	(98,343)	(98,343)
Insurance Services	-	(83,842)	(83,842)
Mindcrest	(11,687)	11,687	-
Legal Operations	-	(6,210)	(6,210)
Direct cost	(188,395)	-	(188,395)
Gross profit
Legal Advisory	162,618	(162,618)	-
Connected Services	17,904	(17,904)	-
Commercial Services	-	104,775	104,775
Insurance Services	-	79,088	79,088
Mindcrest	11,219	(11,219)	-
Legal Operations	-	7,878	7,878
Gross profit	191,741	-	191,741

UNAUDITED INFORMATION

Glossary

Alternative Performance Measures ('APMs')

In accordance with the Guidelines on APMs issued by the European Securities and Markets Authority ('ESMA'), additional information is provided on the APMs used by the Group below. In the reporting of financial information, the Group uses certain measures that are not required under IFRS.

These additional measures (commonly referred to as APMs) provide the Group's stakeholders with additional information on the performance of the business. These measures are consistent with those used internally, and are considered insightful to understanding the financial performance of the Group. The Group's APMs provide an important measure of how the Group is performing by providing a meaningful comparison of how the business is managed and measured on a day-to-day basis and achieves consistency and comparability between reporting periods.

These APMs may not be directly comparable with similar measures reported by other companies and they are not intended to be a substitute for, or superior to, IFRS measures. All Income Statement measures are provided for continuing operations unless otherwise stated.


APM Net revenue
Closest equivalent statutory measure Revenue
Definition and purpose Revenue less recoverable expenses Recoverable expenses do not attract a profit margin and can vary significantly month-to-month such that they may distort the link between revenue and the performance of the Group. Net revenue is widely reported in the legal sector as the key measure reflecting underlying trading, and allows greater comparability with other legal businesses.
Reconciliation	2023	2022
	£'000	£'000
Revenue	451,641	416,052
Recoverable expenses	(71,505)	(65,810)
Net revenue	380,136	350,242

APM

Adjusting items

Closest equivalent statutory measure

None

Definition and purpose

Those items which the Group excludes from its statutory metrics to arrive at adjusted profit or cash flow metrics in order to present further measures of the Group's performance.

These include items which are significant in size or by nature are non-trading or non-recurring. This provides a comparison of how the business is managed and measured on a day-to-day basis and provides consistency and comparability between reporting periods, as well as allows our results to be compared more fairly with other similar businesses.

Share-based payment charges within adjusting items relate to shares allocated from the pre-funded employee benefit trust, which are not dilutive to shareholders.

Reconciliation

See note 2

APM

Adjusted earnings before interest, tax, depreciation and amortisation ('adjusted EBITDA')

Closest equivalent statutory measure

Operating profit

Definition and purpose

Operating profit adjusted for adjusting items, as detailed in note 2, and adding back depreciation and amortisation.

Adjusted EBITDA is useful as a measure of comparative operating performance between both previous periods, and other companies as it is reflective of adjustments for adjusting items and other factors that affect operating performance. Adjusted EBITDA removes the affect of depreciation and amortisation, and adjusting items as described above, as well as items relating to capital structure (finance costs and income) and items outside the control of management.


Reconciliation	2023	2022
	£'000	£'000
Operating profit	24,218	27,653
Depreciation of right-of-use assets	12,365	12,737
Other depreciation and amortisation	6,830	7,211
Total of adjusting items	26,158	19,081
Adjusted EBITDA	69,571	66,682


APM Adjusted profit before tax ('adjusted PBT')
Closest equivalent statutory measure Profit before tax
Definition and purpose Profit before tax and after reflecting the impact of adjusting items. Adjusted PBT is useful as a measure of comparative operating performance between both previous periods, and other companies as it is reflective of adjustments for non-underlying items, amortisation of acquired intangibles, share based payments expense, impairment/impairment reversal and other factors that affect operating performance. Adjusted PBT is used to provide a useful and consistent measure of the ongoing performance of the Group. Adjusted measures are reconciled to statutory measures in note 2.
Reconciliation	2023	2022
	£'000	£'000
Profit before tax	17,169	22,316
Total of adjusting items (note 2)	26,158	19,081
Adjusted profit before tax	43,327	41,397


APM Cost to income ratio
Closest equivalent statutory measure Not applicable
Definition and purpose Adjusted administrative expenses and impairment as detailed in note 2, divided by net revenue as defined above. After adjusting for significant items that are one-off in nature, the cost to income ratio is an essential metric in assessing the levels of underlying operational gearing in the Group. The Group uses the cost to income ratio to measure the efficiency of its activities. A decrease in cost to income ratio indicates an improvement to efficiency, and likewise an increase indicates a decline. Management note that the usefulness of the cost to income ratio is inherently limited by the fact that it is a ratio and thus does not provide information on the absolute amount of operating revenue and expenses.
Reconciliation	2023	2022
	£'000	£'000
Net revenue	380,136	350,242
Adjusted administrative expenses and impairment (note 2)	141,365	134,322
Cost to income ratio	37.2%	38.4%


APM Adjusted administrative expenses
Closest equivalent statutory measure Administrative expenses and impairment
Definition and purpose Adjusted administrative expenses are defined as administrative expenses plus impairment less adjusting items (as defined above). Adjusted administrative expenses provide a useful and consistent measure of the ongoing administrative expenses of the Group. In particular, the adjusted administrative expenses are utilised within the Group's definition of 'Cost to income ratio' which is also defined above.
Reconciliation See note 2


APM Net debt (excluding IFRS 16)
Closest equivalent statutory measure Cash and cash equivalents less borrowings
Definition and purpose Net debt comprises cash and cash equivalents less interest-bearing loans and borrowings (including the supplier payments facility). Net debt is one measure that can be used to indicate the strength of the Group's statement of financial position and can be a useful measure of the indebtedness of the Group. This metric excludes the Group's lease liabilities under IFRS 16 in order to provide consistency with how the Group manages and reports its indebtedness and also providing consistency with the definition of Net debt under the Group's principal banking agreement.
Reconciliation See note 17


APM Lock-up days
Closest equivalent statutory measure Not applicable
Definition and purpose Lock-up days comprise work-in-progress ('WIP') days, representing the amount of time between performing work and invoicing clients; and debtor days, representing the length of time between invoicing and cash collection. WIP days are calculated as unbilled revenue divided by annualised net revenue multiplied by 365 days. Debtor days are calculated as trade and other receivables, excluding amounts due from members of partnerships, divided by annualised net revenue multiplied by 365 days. Annualised net revenue is the total net revenue for the previous 12 month period with adjustments for acquisitions and discontinuations.
Reconciliation See note 26


APM Adjusted diluted earnings per share ('adjusted DEPS')
Closest equivalent statutory measure Diluted earnings per share ('DEPS')
Definition and purpose Adjusted earnings divided by the total number of ordinary shares in issue. Adjusted earnings is defined as earnings from continuing operations adjusted for: - non-underlying items; - share-based payments expense; - gain on investment; - amortisation of acquired intangible assets; - impairment; and - the tax effect of the above items; Whilst this metric is not prepared in accordance with IAS 33 'Earnings per Share', it is an important APM to provide the Group's stakeholders with a fully diluted EPS metric using the Group's adjusted earnings for the period that is consistent year on year.
Reconciliation See note 8


APM Adjusted earnings per share ('adjusted EPS')
Closest equivalent statutory measure Basic EPS
Definition and purpose Adjusted earnings divided by weighted average number of ordinary shares for the purposes of the basic earnings per share calculation. See adjusted diluted EPS definition and purpose above for details of adjusting measures. This metric provides the Group's stakeholders with an EPS metric using the Group's adjusted profitability but with a denominator consistent with the statutory basic EPS measure.
Reconciliation See note 8


APM Like for like ('L4L')
Closest equivalent statutory measure N/A
Definition and purpose Like for like metrics, are applied to net revenue, direct costs, gross profit and gross margin to exclude the acquisitions of Acumension and Whitelaw Twining. This metric allows the Group's stakeholders to compare the performance of the business on a consistent basis with the prior period, given that the acquisitions of Acumension and Whitelaw Twining were a significant change to the Group.
Reconciliation
Not applicable


APM Revenue per partner
Closest equivalent statutory measure Revenue
Definition and purpose Revenue per partner is defined as net revenue divided by average number of partners (on a full time equivalent basis) for the period. This metric allows the Group's stakeholders to view the performance of the business based on average revenue per partner, split by division (this includes both member and employee partners).
Reconciliation	2023	2022
	£'000	£'000
Legal Advisory	937	896
Connected Services	1,457	1,382
Mindcrest	8,589	12,216
Group	1,001	975


APM Annualised net revenue
Closest equivalent statutory measure Revenue
Definition and purpose Annualised net revenue reflects the total net revenue for the previous 12-month period inclusive of pro-forma adjustments for acquisitions and discontinuations/closures/scale-backs. This metric is utilised as a denominator for lock up, WIP and debtor day calculations which allow greater comparability within the legal sector consistent with prior and full year metrics.
Reconciliation
Not applicable


APM Free cash flow
Closest equivalent statutory measure Not applicable
Definition and purpose Free cash flow is the amount by which the operating cash flow exceeds working capital, amounts payable to members, tax, interest and capital expenditure. This metric provides the Group's stakeholders detail around the efficiency of cash generation and utilisation.
Reconciliation
See note 26


APM Leverage
Closest equivalent statutory measure Not applicable
Definition and purpose Leverage is calculated as net debt, divided by the last 12 months adjusted EBITDA (both defined above). This metric provides the Group's stakeholders detail around the Group's ability to repay debt and meet payment obligations. Leverage should be compared with a benchmark, or industry average and is widely used by analysts and credit rating agencies.
Reconciliation	2023	2022
	£'000	£'000
Adjusted EBITDA (last 12 months)	69,571	66,682
Net debt	101,747	71,820
Leverage	1.46	1.08

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Consolidated income statement

Consolidated statement of comprehensive income

Consolidated statement of financial position

Consolidated statement of changes in equity

Consolidated statement of cash flows

Consolidated notes to the financial statements

Year ended 30 April 2023

1 Accounting policies

1.1 Nature of these financial statements

1.2 Statement of accounting policies

1.3 Going concern

2 Alternative performance measures

3 Operating segments

4 Operating profit and auditor's remuneration

5 Net finance expense and net interest expense on leases

6 Taxation

7 Dividends

8 Earnings per share

9 Acquisitions of subsidiaries and transactions related to previous acquisitions

10 Intangible assets

11 Property, plant and equipment

12 Right-of-use assets

13 Trade and other receivables

14 Cash and cash equivalents

15 Trade and other payables

16 Lease liabilities

17 Interest-bearing loans and borrowings

18 Provisions

19 Financial instruments

20 Deferred taxation

21 Share capital

22 Reserves

23 Share-based payments

24 Key management personnel

25 Employee information and their pay and benefits

26 Cash generated from operations

27 Amounts due to members of partnerships in the Group

28 Events after the reporting date

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