DWF, the UK’s biggest listed law firm, today announced a £42.5m deal to buy a practice in Spain as it also reported flat half-year results.
DWF will pay £6.2m cash up front for full-service firm Rousaud Costas Duran, with a further £13.1m cash paid based on results over the next three years. The remainder will be made up from the issuing of shares.
The deal adds 40 new partners and 400 staff in total and is the biggest single acquisition made by a UK listed firm.
The acquisition coincided with the release of a largely flat set of financial results for the six months ended 31 October, as gross profit margins fell and gross profit increased only marginally.
DWF said net revenue increased 10% for the period to £146.8m, resulting in gross profit increasing 2% to £73.7m. Gross profit margin was down from 54.2% to 50.2% and adjusted profit before tax slipped by 26% to £9.9m. Reported profit before tax totalled £4.7m, down from £5.3m on the same period last year.
The company reported an increase in administrative expenses which affected profits, including £8m spent on non-underlying items in the first half of 2019 and the inclusion of share-based payments of £4.4m.
Closing net debt was £49.5m, ‘as expected’, which reflects the ‘seasonal nature of the working capital cycle and the timing of new plc-related outflows such as corporation tax’.
DWF said investments in the business have ‘slightly diluted’ first-half margins but should deliver profitable second-half growth and a year-on-year improvement in underlying gross margin percentage at the full year. The company declared a first interim dividend of 1.25p a share payable in December with a second interim dividend anticipated in February 2020.
Group chief executive Andrew Leaitherland said growth has accelerated in the autumn and the company continues to make progress on potential acquisitions.
He added: ‘With revenues naturally weighted towards the second half due to seasonality and business investments, and with costs expected to be relatively flat we expect further meaningful progress in the second half.’
DWF shares fell 1% to 119.3p this morning. The firm floated on the main market of the London Stock Exchange in March this year, raising around £75m.