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27 March 2020

Listed top 30 UK firm DWF issues profit warning as impact of Coronavirus bites

Additional credit facilities sought and cost cutting imposed in response to pandemic

Pic of Leaitherland

CEO Andrew Leaitherland led DWF through its listing last year and subsequent acquisitions.

DWF, the UK’s largest listed law firm, has issued a profit warning and is seeking additional contingency credit facilities due to the impact of the Covid-19 pandemic.

The firm told investors today that lower than expected revenue due to the coronavirus outbreak was having a material impact on anticipated profits for the financial year, with its corporate, finance and real estate teams all having been adversely affected.

While it still expects to achieve double digit growth in underlying adjusted profit before tax and high single-digit organic revenue growth, it has accelerated its existing cost savings programme and is in negotiations with its lenders to secure increased working capital headroom as a 'prudent' contingency measure.

The firm, which has a workforce of 4,200 and 33 offices across the world, is the latest in a procession of listed UK firms to issue statements this week to investors on the impact of the virus as their share prices fall sharply.

Knights has announced salary cuts while fellow listed firms Ince, Gateley and, today, Keystone have all cancelled dividend payments.

DWF, which posted revenue of £272.4m last year, said that while it had experienced strong year-on-year growth to date, Covid-19 had impacted key markets in the most important quarter for growth of its financial year ending 30 April.

It also pointed to the level of investment it has made in order to grow its business, with an extensive lateral hiring programme adding 28 new partners, not including those joining by way of acquisition.

“Due to the current environment, partners who have joined recently are taking longer to ramp up their practices than would normally be the case but the Board are confident that, as the normal business environment returns, new joiner productivity will progress as had previously been anticipated,” the firm said.

It said it was negotiating additional credit on top of its £80m revolving credit facility as a prudent contingency measure to secure ‘increased headroom for working capital purposes’. Positive initial discussions are ongoing.

“The group has a resilient, counter cyclical business model that benefits from significant recurring revenues from institutional clients in its key industry sectors of Insurance, financial services and real estate,” it added. “While the current environment is unprecedented, the Board is confident that the Group is well placed to continue to provide best service to its clients and benefit from future opportunities when the business environment normalises.”

In January, the firm, which listed on the London Stock Exchange last year, announced the acquisition of longstanding Chicago-based managed services business Mindcrest for $18.5m, hard on the heels of its acquisition of Spanish law firm RCD  for €50m in December.

Meanwhile, top 100 UK firm Keystone, which operates a virtual law firm model, said it would not be recommending a final dividend payment when it announces its financial results for the year ending 21 January. 

While trading for the first six weeks of this financial year was stong and in line with expectations, it said ‘the current situation is unprecedented and the wider economic impact on our clients, together with the timing of this within our financial year and unknown duration for which it may apply, mean that the impact on the group for the year ending 31 January 2021 cannot yet be assessed’.  

Further reading on the Covid-19 pandemic

Unprecedented response to Covid-19 is 'testament to legal profession's resilience

US businesses 'clamouring' for guidance on fast-moving Covid-19 crisis, survey finds

Staff welfare, supply chain and privacy: the coronavirus-related issues keeping GCs awake at night

'I have realised how powerful technology now is': an Italian lawyer's take on Covid-19

Coronavirus risk may be unprecedented, but the fundamental principles of crisis response still apply

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