A robust performance across an enlarged business
Knights, the fastest growing legal services business over the last four years, today announces its half year results for the six months ended 31 October 2020.
- Revenue increased by 45% to £46.2m (H1 20: £31.9m), with the benefit of the contribution of £19.1m from acquisitions
- Gross margins were maintained at 46%, despite a 15% impact on revenue from COVID-19
- Underlying PBT rose by 13% to £6.0m (H1 20: £5.3m)
- Underlying EPS of 5.93p (H1 20 5.95p). Reported loss per share of 1.80p (H1 20: EPS of 2.88p)
- Underlying cash conversion of 103% (H1 20: 77%) reflecting strong management of lock-up and the successful integration of the three late FY 20 acquisitions
- Period end lock up was 94 days excluding the impact of acquisitions (H1 20: 94 days), reflecting strong focus on cash collection, supported by robust systems
- Net debt of £14.4m as at 31 October 2020 (30 April 2020: £15.9m), representing conservative gearing (0.6 x consensus FY21 EBITDA) and providing significant headroom under the Group’s £40m Revolving Credit Facility
Strategic and operational highlights
- Trading recovered through the first half, reaching near pre-COVID levels in October, providing sufficient confidence to resume full salaries for staff from 1 November
- Continued strong momentum in senior recruitment to support future organic growth
- Recruited 18 senior fee earners during the period (H1 20: 7 senior fee earners), the majority joining from other Top 50 law firms
- Focus on engagement with and nurturing of existing talent reflected in a 4% senior fee earner churn rate, 83 promotions and an increase in our Employee Net Promoter Score
- Agreed leases for modern offices in prime locations in Birmingham, Leeds and Nottingham, supporting Knights’ collaborative culture and providing capacity for future organic growth; flexible working expected to enable 20% greater capacity
- Prior investment in technology platform enables growth, quality and an increase in operational bandwidth
- Entered an attractive new market in the South West, with Knights’ robust scalable platform supporting simultaneous acquisitions and increased scale
- Successfully integrated three quality acquisitions of Shulmans, ASB and Fraser Brown remotely and ahead of schedule
- Entered the South West with the acquisition of OTB Eveling in December, with Knights’ scale and national reputation already attracting quality recruits
Current trading and outlook
- Given the improvement in current trading and the 18 new senior recruits in H1, management are confident that the Group’s organic growth will return to double-digit levels for H2
- Current trading is in line with market expectations for the full year, albeit the Board remains vigilent of macro uncertainty
- Management expects recruitment momentum to continue in the second half, with a strong pipeline of new recruits and 12 further senior fee earners already expected to join in H2
- Expect to execute on an attractive acquisition pipeline during calendar year 2021, with COVID-19 accentuating the opportunities available from which we will remain highly selective
- Knights’ competitive position continues to strengthen as a market leader in the regions
David Beech, CEO of Knights, commented:
“We have delivered a robust first half performance of profitable, cash generative growth across an enlarged Group, despite the macro economic environment. The health and wellbeing of our people continues to be the Group's priority and this performance is credit to our teams’ continued provision of excellent service to our clients, remotely.
“Activity levels have improved further since period end, providing confidence that we will return to double-digit organic growth for the second half.
“We continue to execute on our strategy of driving organic growth, supplemented by targeted acquisitions that build scale and provide entry into attractive regional markets. Our well invested business and strong culture is attracting senior fee earners, many of whom are joining from Top 50 law firms. Our prior investments have enabled us to successfully onboard new colleagues, win exciting new clients and rapidly integrate four acquisitions during a period of working remotely.
“Having broadened Knights’ geographic reach, our competitive position as a market leader in the regions has continued to strengthen through the period, and we anticipate that COVID-19 will accentuate the recruitment and acquisition opportunities for our resilient business in the highly fragmented market for legal services outside London.
“We remain confident in our strategy and the prospects for the Group.”
A presentation of the half year results will be made to analysts via a webinar at 9.30am today. To register interest in attending, please contact Pandora Yadgaroff at MHP Communications on 020 3128 8168 or email firstname.lastname@example.org.
To download the full press statement please click here.