MIDAS SHARE TIPS: The legal eagles of DWF have spread their wings and are on the up and up and its stock should rise
In charge: DWF chief executive Sir Nigel Knowles
In May 2020, having issued its second profit warning in three months, law firm DWF took action. Out went long-standing chief executive Andrew Leaitherland. In came Sir Nigel Knowles, best known for turning DLA Piper from a small, Sheffield-based partnership into one of the biggest law firms in the world.
When Knowles moved into the hot seat at DWF, the shares were below 50p. Today, the stock is £1.15, well above its low point but still shy of the £1.22 price at which the firm came to market in 2019.
That shortfall should soon disappear as Knowles’ expansion plans bear fruit. The firm is a decent dividend payer too, with 6.6p pencilled in for the year to this April, putting the stock on a yield of almost 6 per cent.
DWF is different from its peers in two key ways. The group is the only law firm to be listed on the main market of the Stock Exchange, a position that gives it a certain cachet with clients, particularly larger ones.
It also offers customers much more than standard legal support. Yes, there is a top-quality law practice, providing advice and guidance in areas such as hiring and firing, mergers and acquisitions, business restructurings and regulation. But there are two related divisions as well – Mindcrest and Connected Services.
Mindcrest has created software to do certain types of legal work faster and more cheaply than lawyers. Well regarded and highly competitive, it is winning plenty of business.
Connected Services adds another string to Knowles’ bow, helping clients in risk assessment, auditing, claims management, training and forensic accounting.
Each of DWF’s divisions performs slightly different tasks for customers, but the overall plan is to provide firms with a one-stop shop for legal advice and related support.
This strategy has been given new impetus under Knowles’ stewardship. There has been rigorous examination of every part of the business and renewed focus on efficiency, streamlining how work is done and cutting the days between starting a job and being paid for it.
Knowles has also spent time talking to staff and customers, and the results are starting to show, with brokers forecasting a 30 per cent rise in profit to £44.5million for the year to April 30.
The firm has also won some important new clients, including the NHS and Allianz, the world’s biggest insurance group. Today, DWF derives most of its revenues from the UK and core legal business. Over time, Knowles plans to drive growth at Mindcrest and Connected Services, while expanding DWF’s presence abroad. The firm already operates in 30 spots around the world and only last week announced new ventures in Spain and Portugal. Others are sure to follow.
Midas verdict: As the popular lawyers’ notebook says: ‘You win some and you lose some but you make money from all of them.’ In other words, lawyers can thrive, whatever the climate. For DWF, there are further grounds for optimism. The group’s breadth of services and presence overseas add a certain resilience. And, even though the firm has come on in leaps and bounds since Knowles was appointed, he remains highly ambitious, suggesting further growth is on the cards. At £1.15, the stock is a long-term buy – and the dividend adds a further kicker.
Traded on: Main market Ticker: DWF Contact: dwfgroup.com or 03333 202220
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