A strong performance as we invested in a diversified platform for growth

Knights, one of the UK's fastest growing legal and professional services businesses, today announces its half year results for the six months ended 31 October 2019.

Financial highlights

  • 34% increase in revenue to £32.0m (HY 2019: £23.9m), including 13% organic revenue growth
  • Underlying PBT(1)rose by 20% to £5.3m (HY 2019: £4.4m) or by 24% from £4.2m in HY 2019 on a restated IFRS 16 basis
  • Underlying EPS(1) increased by 9% to 5.95p (HY 2019: 5.48p) or by 14% from 5.24p in HY 2019 on a restated IFRS 16 basis
  • Basic EPS increased by 68% to 2.88p (HY 2019 : 1.71p) or by 96% from 1.47p in HY 2019 on a restated IFRS 16 basis
  • Good underlying cash conversion(2)at 77%, (HY 2019: 138%) following significant investment in recruitment to drive organic growth
  • Net debt of £17.1m as at 31 October 2019, reflecting a net cash outflow in the period mainly due to the payment of deferred consideration and the one off increased corporation tax payments, £1.4m ahead of management plan (31 October 2018: £9.5m)
  • Interim dividend up 83% to 1.10p (HY 2019: 0.6p)

Operational highlights

  • Strong momentum in recruitment and continued investment to support organic growth

    • Successfully recruited a net 43 fee earners in the first half, compared to 46 fee earners in the full year to 30 April 2019
    • Average fees per fee earner of £126,000 (HY 2019: £131,000), despite a lag effect due to the higher level of new joiners who take some time to achieve the normal run rate on fee generation
    • Recruited 15 operational staff and expanded operational management with new Client Services Director and Recruitment Director appointments, to support ongoing growth
    • Progress in embracing technology to improve efficiency and provide a scalable operational backbone
    • Relocated to larger offices in Manchester
    • Recruited 18 fee earners for a new office in York which will officially open in January 2020
  • Continued development of prior period acquisitions with integrated businesses providing platforms for expansion
  • Increased presence in Manchester, Leicester and Oxfordshire with the growth from 248 fee earners at the time of the acquisitions of Turner Parkinson, Cummins, Spearing Waite and BrookStreet to 290 fee earners at the end of the first half

Current trading and outlook

  • Confident of meeting the Board’s expectations for the full year:

    • A strong start to the second half
    • Acquired two businesses, providing a high quality platform from which to grow our operations in Birmingham in Q3:
    • EGL on 1 November 2019 with 28 fee earners
    • ERT on 6 January 2020, adding 24 fee earners
    • Continued momentum in recruiting high quality professionals with a further 31 accepting positions as at 31 October 2019
    • Attractive acquisition pipeline of independent law firms outside of London continues to grow

David Beech, CEO of Knights, commented:

“The Group has delivered another period of strong, profitable growth including double digit organic growth. This performance, combined with our investments in the hiring of fee earners and operational support colleagues, premises and systems, positions Knights well to continue to build the leading legal and professional services business outside London.

“The clear momentum we have in recruiting strong talent, the successful development of prior period acquisitions and the acquisition of two high calibre businesses in the second half of the year, underpins our confidence that the Group will meet the Board’s expectations for the full year.”

(1)  The underlying figures are before amortisation of goodwill; non-underlying costs relating to acquisitions, non-recurring finance costs in both periods, and non-underlying share based payments and IFRS 16 impact in the prior period only.    The Board believes that these adjusted figures provide a more meaningful measure of the Group’s underlying performance. A full reconciliation between our underlying and statutory profits is provided in note 10.

(2)  Cash conversion is calculated as the total of net cash from operations, tax paid and payments of lease interest and lease finance liabilities under IFRS 16 for periods from 1 May 2019, divided by the underlying profit after tax, which is calculated from profit after tax by adding back amortisation, non-underlying costs, share-based payment charges and the tax in respect of these costs.  The cash flow impact of the additional corporation tax paid in HY20 as a result of the change in the large company corporation tax regime has been excluded from this calculation.

A presentation of the interim year results will be made to analysts at 9.30am, Wednesday 15 January at Numis' offices. To register interest in attending, please contact Robert Collett-Creedy at MHP Communications on 020 3128 8147 or email knights@mhpc.com.

To download the full press statement click here.