A resilient performance against a challenging backdrop; foundations to drive organic growth established
Knights, a fast-growing legal and professional services business in the UK, today announces its full year results for the year ended 30 April 2023
- Revenue increased by 13.1% to £142.1m (FY22: £125.6m)
- Gross margin of 48.5% (FY22: 49.3%)
- Underlying PBT up 19.1% to £21.6m (FY22: £18.1m); underlying PBT margin increased to 15.2% (FY22: 14.4%)
- Reported PBT increased to £11.5m (FY22: £1.1m)
- Underlying EPS increased to 20.20p (FY22: 17.23p). Basic EPS 9.28p (FY22: loss of 3.02p)
- Lock up was 87 days (FY22: 86), with debtor days at 30 (FY22: 31)
- Cash conversion of 117% (FY22: 109%)
- Net debt of £29.2m (30 April 22: £28.9m), in line with the Board's expectations
- Final dividend of 2.50p recommended (FY22: 2.04p), giving a 15% increase in the total dividend to 4.03p (FY22: 3.50p)
Strategic and operational highlights
Resilient performance and bolstered position as one of the UK's largest regional commercial law firms
- Delivered profitable, cash generative growth from a diversified service offering and expanded client base with a noticeable increase in the interest income earned on client monies, net of interest paid out to clients which we expect to continue with interest rates having reverted to higher historic norms. Should interest rates soften, we expect this to stimulate higher levels of activity in the transactional parts of our business, such as M&A and residential property
- Continued to scale the business, strengthening our presence in key markets across the UK and our position as one of the largest legal and professional services businesses outside London
- Continued to attract top-tier professionals. Average number of full time equivalent fee earners employed during the period was 1,077 (FY22: 1,015)
Significantly expanded regional footprint, providing a strong platform for organic growth
- Successfully integrated prior year acquisitions, Keebles, Archers Law and Langleys, which are performing well
- Acquired two well reputed law firms, Coffin Mew and Meade King, in the South of England, expanding our reach and adding c.100 fee earners. Both are integrating and performing well
- Acquisitions of Baines Wilson and St James' Law post period end provide entry into important growth markets in the North of England, significantly strengthening our reputation in the region
Current trading and Outlook
- Solid start to the current year as we navigate continuing macroeconomic uncertainty and rising interest rates, with growth in less cyclical areas, new client wins and an increase in recruitment activity
- Confident of a return to organic growth in FY24 as we realise the benefits of:
- our pricing strategy, with rate increases from 1 May 2023
- recruitment momentum, with eight partners hired already in FY24 (total for FY23: 13)
- recent client wins including EuroFinance, World Rugby, Marie Curie and TTI Inc., demonstrating the success of our large, and international, corporate client initiatives
- good early organic recruitment into recently acquired locations, particularly Bristol, Newcastle and Brighton
- strong momentum in non-cyclical services such as private wealth and clinical negligence
- A more favourable market for attracting professionals as well as acquisition opportunities and valuations
- Confident of an unchanged outlook for the current financial year with recent recruitment expected to drive second half weighting
David Beech, CEO of Knights, commented:
"This has been an important year for Knights, during which we placed a particular focus on strengthening our management team and developing our operating model to support the execution of our strategy and accelerate growth."
"Given the sharp rises in interest rates as we started the current financial year, we are seeing a softening of work in some transactional and debt-reliant activity such as Residential Property, M&A, and our volume re-mortgage business, Integrar. However, this is being mitigated by a combination of growth in other areas which are less cyclical, such as Private Wealth and CL Medilaw (our specialist clinical negligence team), new client wins and our pricing strategy."
"As we move through the year, we expect to benefit incrementally from recent positive recruitment momentum, a heightened focus on growth and business development and the strengthening of our operational management."
"We will continue carefully to consider acquisition opportunities which will consolidate or expand our existing footprint and provide a strong platform for future organic growth."
"Our outlook for the current financial year is therefore unchanged, with recent recruitment expected to drive a second half weighting, and we remain confident in our strategy and our ability to deliver profitable, cash generative growth. We will continue to leverage our position as one of the largest commercial law firms located outside London, to grow our client and fee earner base organically and to drive operational improvements, complemented by acquisitive growth."
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