Legal Business Blogs

Financials 2021/22: Slipping profits and muted organic growth overshadow another acquisitive year for Knights

Knights has failed to build on its encouraging H1 results, today (12 July) unveiling a sedate 2% organic growth in revenues and a 2% dip in underlying profit before tax (PBT).

Factoring in the firm’s buyouts of regional firms Langleys, Mundays and Keebles throughout the year, overall turnover jumped 22% from £103.2m to £125.6m. In a statement, Knights attributed the stuttering organic growth to being ‘held back by Omicron in the typically important fourth quarter’.

Underlying PBT slipped 2% to £18.1m, down from last year’s £18.4m. This represented a profit margin of 14%, a drop from 18% in 2021. Net debt stood at £28.9m, significantly up from last year’s £21.1m, after paying £18m of initial and deferred cash payments for the firm’s various acquisitions.

Despite the muted results, Knights’ share price rocketed from 97p last night to a high of 112p this morning, with confidence suitably high enough for the firm to announce a total dividend of 3.5p per share. Last year, Knights paid shareholders nothing, while the payout amounted to 110p in 2020.

David Beech (pictured), Knights’ chief executive, said: ‘We have delivered another robust financial performance despite the short-term challenges experienced in the fourth quarter, with a positive start to the new financial year supported by the acquisitions completed in prior years.

‘I’m very pleased not only with the level of growth we have delivered over the last ten years since we corporatised, growing from two offices and £9m of revenue to a top 50 law firm with 22 offices, and revenue of over £125m but also with our continued discipline to deliver market-leading working capital days and cash generation.’

Knights attracted 19 new partners in the last year to assist its growth, with overall staff costs rising from £62.7m to £76.9m. And as an indicator of the firm’s financial strength, its top earning director received just over £1.1m last year, roughly five times the £212,000 figure stated for 2021.

Beech concluded: ‘We continue to execute our strategy and remain confident in our outlook, as we leverage our enhanced scale and national reputation to realise our ambition to be the leading legal and professional services firm outside London.’