Strong profit growth with a return to organic growth; in line with expectations

Knights today announces its half year results for the six months ended 31 October 2023.

Financial highlights

  • Revenue up 6% to £75.3m (H1 FY23: £71.2m) in line with Board expectations
  • Strong growth in underlying EBITDA of 25% to £18.2m (H1 FY23: £14.6m)
  • Reported profit before tax increased by 68% to £6.9m (H1 FY23: £4.1m)
  • Basic underlying Earnings Per Share up 21% to 9.99p (H1 FY23: 8.26p); reported Basic EPS up 54% to 5.34p (H1 FY23: 3.46p)
  • Debtor days improved to 31 (H1 FY23: 32); lock up improved to 93 days (H1 FY23: 103 days)
  • Good cash conversion of 69% (H1 FY23: 57%)
  • Net debt of £38.3m, (H1 FY23: £35.6m, FY23: £29.2m) after a cash outlay of c.£7.5m relating to acquisition consideration and related non underlying costs
  • Interim dividend 1.61p per share (H1 FY23: 1.53p per share)

Strategic and operational highlights

Leveraging our increased scale, strong reputation and differentiated model

  • 20 senior fee earners hired in the period, up from nine in H1 FY23
  • Significant reduction in staff churn from 11% to 6%
  • Grown share of larger client spend
  • Pricing strategy embedded, with clients recognising the strong value of our premium service
  • Continued cost discipline, leveraging post-acquisition synergies and driving efficiencies across the Group

Acquisitions providing a platform for organic growth

  • Expanded presence in the North, with acquisitions of St James’ Law in Newcastle and Baines Wilson in Carlisle which have integrated well and are performing as expected
  • Acquisitions providing excellent platforms for organic growth through recruitment; already hired five partners into each of Bristol (entered Feb 2023) and Newcastle (entered May 2023)

Board changes

  • Appointment of Dave Wilson as non-executive Chairman, bringing extensive PLC, international board-level and operational experience

Current trading and outlook

  • Trading continuing in line with the Board’s expectations
  • New £70m revolving credit facility agreed in November 2023
  • Confident in the resilience of the business and its ability to attract and retain quality talent and clients, despite macroeconomic pressures
  • Focussing on driving organic growth, efficiencies and strengthening platform for future acquisitions

David Beech, CEO of Knights, said:

“Knights has delivered a good performance in the period, reflecting our sharp focus on driving profitability and organic growth and the resilience provided by our diversified services, capabilities, and client base.

“We are delighted with the strong momentum in recruitment and retention in the half, which is testament to the attractiveness of our scale, reputation and model, the efforts of our client service directors, and enhancements we have made to our employee proposition, benefits and engagement.  Together with improved retention across the business, this influx of high-calibre talent will underpin organic growth in the future.

“We continue to expand our relationships with larger clients who increasingly recognise the benefits of Knights’ premium, diversified offering and collaborative, corporatised model.

“Whilst mindful of macroeconomic conditions, trading in the second half is in line with the Board’s expectations and we continue to focus on driving organic growth and efficiency, providing a strong platform for future acquisitions.”