A huge increase in costs arising from acquisitions plunged international firm DWF into an eight-figure loss for the first half of 2020/21. The listed business today reported an accounting £11m pre-tax deficit for the period to 31 October - compared with an £8m profit in the same period last year.
The company told the London Stock Exchange that losses were impacted by a jump in administrative expenses, with adjusted profits actually rising 23% to £13.4m. Net revenue rose 15.4% to £167.6m, although profit margins were marginally down and net debt rose by 9% to £58.5m.
Costs during the year increased from £63m to £92m, largely down to £12.5m spent on acquisitions. Cost savings announced earlier this year, which included what the company calls ‘removing excess capacity’, are expected to be reflected in the second half as notice periods for departing staff expire.
This has been a tumultuous year for the firm, with finances hit by the pandemic and chief executive Andrew Leaitherland replaced overnight in May by Sir Nigel Knowles.
The board today said it was happy with the group’s performance to date and ‘increasingly confident’ about the next six months, with a strong sales pipeline and more stable trading environment.
Knowles said: ‘Given the extreme impact of Covid-19 on the worldwide economy, we are pleased with the performance of the business in the first half of FY21 following the swift actions taken by the new management team. We are also encouraged that despite ongoing Covid related restrictions in a number of the markets in which we operate, November activity levels were strong.’
DWF said agreements have been made in principle to reduce office space in several locations, promoting more flexible working and saving £600,000 a year. Headcount in its managed services office in Pune, India, will double to 1,000.
The professional indemnity and commercial insurance practice group has been the ‘standout performer’ this year Motor and fraud were most impacted by the lockdown, with claims volumes down 75% compared with pre-Covid levels.
Demand for insurance services is expected to increase in the next six months due to the expected large volume of Covid disease and fatality claims. Business interruption claims should also rise following the forthcoming Supreme Court judgment on Covid policy coverage, the announcement stated.
The board approved an interim dividend of 1.5p per share. DWF Group shares rose 2% to 84p this morning.