DWF – in times of adversity one can take advantage

Now could well be the best time to jump into the shares of legal services business DWF Group, argues Mark Watson-Mitchell. 

DWF Group (LON:DWF) is a global legal services business, supplying services not only to the international legal market but also providing complementary connected services to its clients.

It offers its legal services to its clients using its three principal strategic objectives: understanding its clients, engaging its people and doing things differently.

And doing things differently is certainly what happened last week, it appears.

Which gives investors an opportunity to take advantage of a somewhat pressured share price.

Last Friday morning the group declared that Andrew Leaitherland, who was at the company for the last twenty years, fourteen of which as its chief executive and managing partner, was immediately leaving the group that he had helped to expand and take public just over a year ago.

On the face of it this was something of a putsch, with the then chairman Sir Nigel Knowles vacating that office and taking over the CEO role. There were worries about lower revenue growth and the group’s funding.

Knowles is no fool. He was CEO and global co-chairman of the £1.5bn DLA Piper law firm. So, he knows a trick or two in the legal sector and that is what punters should now back as the reason to make some quick purchases.

Over the weekend it was hardly covered in the press, but the company’s shares fell back nearly 20% on Friday on the news of the departure and new appointment, with the shares closing just 1p above their lowest at 67p.

That was also the lowest level since the group floated in March 2019. The company’s IPO saw it achieve a £366m market capitalisation on the issue of 61.5m new shares and the vendor sale of 16.6m shares at 122p each, totalling 300m in issue.

A number of acquisitions and issues subsequently have seen the number of shares issued rise to 324m.

Today the group has some 33 key operating locations on four continents and employs some 4,200 people. DWF’s business is organised into four divisions: Commercial, Insurance, International and Connected Services.

Commercial Services provides a range of complex legal services and managed services to clients and includes the corporate, litigation and real estate practice groups.

Insurance provides a range of complex legal services and managed services predominantly to insurers and their insureds and includes the catastrophic personal injury, occupational health and casualty; motor, fraud, resolution law and in-house teams; and professional indemnity and commercial insurance practice groups.

International includes the DWF offices that provide complex legal services and managed services outside of the UK. The International division focuses on the same areas of legal services as the Commercial Services and Insurance divisions and, though it is in an earlier stage of its development in relation to the Commercial Services and Insurance divisions, it is an important component of the group’s growth strategy.

Connected Services offers complementary products or services to the traditional legal services offered by DWF’s other three divisions and consists of a range of professional, business or consulting services, a number of which include or are enabled by technology products and solutions.

The group is now securing sufficient facilities to carry it through this current virus crisis, so let us hope that the latest crisis is easily dismissed and the company’s shares, which hit 143p just two months ago, recover to trade at around the 100p level fairly soon.

It will be very much a matter of just how well the company and its advisers spin the ‘putsch’ and the company’s immediate future.

Between now and the end of July, when its results for the year to end-April 2020 will be announced, I would expect a good upward movement in the shares.

I now set an end-2020 target price of 100p.