DSW Capital upgrades outlook after strong first half

(Sharecast News) - DSW Capital reported a resilient performance for the six months ended 30 September on Monday, with results in line with expectations and momentum building in merger and acquisition activity. The AIM-traded firm said the strong half-year performance, bolstered by deal completions in October ahead of the Autumn Budget, had prompted it to upgrade its financial guidance for the 2025 financial year.

For the first half, network revenue increased 6.8% year-on-year to £7.8m, supported by improving M&A activity in the latter part of the period.

Adjusted pre-tax profit remained stable at £0.2m, while statutory pre-tax profit recovered to £0.1m, compared to a loss of £0.1m in the prior year.

The company said it maintained a strong balance sheet, with net assets of £7.5m and a cash position of £2.3m , despite subdued early M&A markets and dividend payments.

It said the acquisition of DR Solicitors, completed in November, was expected to transform the business by reducing reliance on the cyclical SME M&A market.

DR Solicitors would contribute a scalable, cash-generative legal platform, with £3.1m in annual revenue and £1.2m pre-tax profit.

The diversification was projected to shift M&A-related revenue dependency from 67% to around a third.

Looking ahead, DSW Capital raised its guidance for the full year, expecting a 43.8% increase in consolidated network revenue to £23m and a 190% rise in adjusted pre-tax profit to £1.45m.

While M&A deal volumes were expected to normalise after October's exceptional activity, the company said it was entering the second half in a stronger position, with diversified revenue streams and continued investment in its long-term growth strategy.

"The group is stronger than it has ever been," said chief executive officer James Dow.

"We are delivering on our stated strategy to diversify, with the previously announced acquisition of DR Solicitors demonstrating our ability to attract earnings-enhancing niche service lines to the group, as well as significantly reducing our historic reliance on mergers and acquisitions."

Dow said that, while the company was "delighted" to upgrade its guidance for the 2025 financial year, and the board was confident in the mid to long term prospects for the group, it was "mindful" of macro-economic and political uncertainties that could yet impact M&A activity.

"While the recruitment market has tightened, due to the improving M&A market, the opportunities for DSW and DR remain strong and we look forward to updating the market further, as the year progresses."

Reporting by Josh White for Sharecast.com.