Legal Business

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.’

Legal Business

Expansive Knights bounces back with 9% organic growth after another year of acquisitions

Listed firm Knights has returned to form with a 9% organic growth in revenue to £59.7m in its half-year results.

This marks a significant reverse from its H1 results last year, when the firm conceded that a slew of acquisitions masked a 15% fall in turnover in real terms.

Knight’s buyouts of smaller firms continued apace this year though, with it strengthening in Yorkshire through the £11.5m purchase of Keebles, as well as expanding in the south east with the £5.3m acquisition of Mundays. The firm also entered the north east with the £5.2m takeover of Teeside-based Archers, completed in November. When including this raft of add-ons, revenue jumped by 29% for the period.

Knights attributed the organic upturn to improved client demand, as well as an expansion of its services. Chief executive David Beech (pictured) told Legal Business: ‘M&A was a big success for us in the past year – it’s been a boom period in that regard for most firms. But our entrance into Teeside we feel gives us a unique platform to take advantage of its new Freeport. The practice is modest in size, but big in opportunity.’

The firm saw its underlying profit before tax rise an impressive 26% to £7.6m and also boasted of ‘exceptionally strong cash conversion’ of 105%, up on the 103% reported this time last year.

According to Beech, Knights made 20 ‘senior level hires’ this year (including lawyers but also other professionals such as bankers), bringing with them significant client relationships which likewise boosted organic growth. This remains broadly consistent with the 18 such additions reported last year.

Beech said: ‘If you compare ourselves with previous years, we have recruited really well. Especially as we are in a very competitive period for partner-level recruitment. There’s a push away from the old partnership model, particularly from the next generation of lawyers. This has coincided with us being much surer of who we are as a brand – people read about us and appreciate our unique structure.’

As regards upcoming acquisitions, Beech said: ‘watch this space’. On that front, the firm has recently agreed a £60m revolving credit facility to create ‘significant headroom’, and ‘to continue to scale our business across the UK organically and through selected acquisitions.’

Legal Business

Acquisitions mask decline in organic growth as Knights releases Covid-hit  H1  financials 

Listed firm Knights may have posted a robust 45% rise in 2021 half-year revenues from £31.9m to £46.2m, but acknowledged that without its slew of acquisitions turnover dropped in real terms from the same period last year by £4.8m (15%).

The results came after a year in which Knights opened in Leeds through the £20.1m buyout of Shulmans, while also establishing a south east presence through the acquisition of ASB Law in a deal worth up to £8.5m. The £8m purchase of Nottingham-based Fraser Brown in February 2020 marked the firm’s tenth acquisition since its listing in June 2018.  

Profit before tax was up 13% to £6m, compared to £5.3m for the same period last year. And in further defiance of the difficult trading, the firm’s gross margin matched last year’s pre-Covid levels, at 46%.

CEO David Beech (pictured) told Legal Business: ‘Before Covid we achieved 10% organic growth, so it’s a new impact for us. We knew it was coming in March. It was not a comfortable or pleasant experience for us when it hit. I am sure that organic growth will return this year, particularly through strategic recruitment, but April to July last year was pretty tough.’

However, this morning’s (19 January) results paint a generally good picture of the firm’s financial health – trading improved enough in the latter part of 2020 to fully restore the salaries of all staff by 1 November. At the outset of the pandemic, Knights was among a host of firms to announce salary cuts, in this case, a 10% cut for all staff earning over £30,000.  ‘We restored salaries on the earliest possible day we could’, Beech said.

The accounts bear the full costs of the firm’s Covid-instigated restructuring efforts in March last year and beyond. For the full financial year ending April 2020, Knights spent close to £3m on ‘redundancy and reorganisation costs’. For the first half of 2020/21, the firm has already spent almost £1.1m in similar costs. According to Knights’ report, the costs are part of an effort to ‘streamline the support function of the group following acquisitions’ and ‘as a result of reorganisation actions taken in relation to the impact of Covid-19’.


Knights has continued to expand, entering into the south west market with the £2.1m buyout of Exeter-based OTB Eveling in December. However, this deal did not factor into the H1 results.

Further positive indicators come from the firm’s active recruitment. Throughout the period, Knights hired 18 senior fee earners (partner equivalent) and made 83 internal promotions. Beech commented: ‘Our acquisitions have integrated faster and better than we could have predicted. That quick accessibility to people in their homes meant we could accelerate recruitment and integration – it’s a stable and happy ship.’

And while potentially pre-emptive, even a 15% fall in organic revenue could seem a fair performance once the wider market begins to reveal its own Covid-impacted finances.

Beech looks to the future: ‘There’s going to be lots of activity in the UK later this year, lots of consumer and corporate spend in the summer and autumn. We will be supporting clients as they step up their activity.’


Legal Business

Listed firms suffer Covid-19 fallout as Knights staff face sweeping cuts and Ince cancels dividend

Knights board members and staff earning more than £30,000 face pay cuts of at least 10% and some staff will be made redundant, while Ince has followed Gateley in slashing its interim dividend due to the impact of coronavirus.

The listed law firms today (26 March) provided trading updates to the London Stock Exchange, citing increased economic uncertainty brought by the Covid-19 pandemic and responding with measures ranging from pay cuts and redundancies to dividend cancellations and warnings around collecting fees.

Knights struck a relatively bullish tone in terms of the limited impact the firm says it has seen on its revenue and cash flows to date, but nevertheless introduced a raft of cost saving measures given the uncertain outlook.

These include reducing board members’ salaries by 30% and the salaries of staff earning £30,000 or more by 10% from 1 April, taking a ‘more prudent approach to resourcing’ that will involve some redundancies, halting non-essential capital expenditure and eliminating all discretionary spend, including marketing. The firm is in consultation on potential redundancies and declined to comment on how many staff could be affected.

Knights chief executive David Beech commented: ‘While we have traded in line with market expectations to date, we have decided to take a number of precautionary measures in response to the anticipated economic impact from the spread of the virus, to ensure maximum flexibility to respond to the changing market environment. The business is in a strong financial position and I am confident that the group’s strategy, supported by a talented team, will see Knights emerge from the near-term uncertainties in a strong position.’

Meanwhile, fellow listed firm Ince – formerly known as Gordon Dadds – has cancelled its interim dividend of 2p a share, worth around £1.4m, after the board concluded it was no longer confident of delivering results in line with expectations for both the six months and year to 31 March 2020. The board also cited the inevitable impact on cash flows and uncertainty around the collection of fees as a result of the pandemic.

Chief executive Adrian Biles commented: ‘These are unprecedented and challenging times and the welfare of our clients, staff and partners is paramount. We are doing everything we can to ensure that when the pandemic eases we will be well placed to move forward with our growth strategy. The underlying business of the group is robust and will survive the current turbulence.’

Legal Business

Knights puts hand in pocket again for £28.6m double acquisition

Knights has made its largest splash to date, taking £28.6m out of its war chest to acquire two more regional firms, while also launching a £20m share placement towards funding the deals.

The listed firm has agreed to acquire Leeds-based outfit Shulmans for approximately £20.1m and south east firm ASB Law in a deal worth up to £8.5m. The respective acquisitions will see a total of 219 fee earners decamp to Knights upon completion.

Shulmans operates as a full-service firm with a strong focus on telecom masts, dilapidations and overseas investment in UK property. In its most recent financial results, Shulmans posted a 9% increase in turnover to £17.6m. Meanwhile, ASB Law posted an £11m turnover increase for 2017/18. It also has a presence in Crawley and Maidstone.

Knights hopes the acquisitions will result in a ‘high single-digit’ percentage increase for the financial year ending 30 April 2021. The ASB deal is expected to be completed next month on 17 April with Shulmans later finalised on 24 April.

In a bid to replenish its resources, Knights has also announced a placing of 4,761,905 ordinary shares to raise £20m, which will also partially fund future inorganic growth. The announcement was followed by a marginal increase in Knights’ shares to 456p this morning.

The acquisitions mark an active start to the year for the firm. Last month, Knights announced it had acquired Nottingham-based firm Fraser Brown in an £8m deal which brought over 81 fee earners. Meanwhile, the firm also agreed a new £40m revolving credit facility split equally with HSBC and Allied Irish Bank last month. Overall, Knights now counts ten acquisitions since its listing.

The recent buyouts have in part been driven by the firm’s impressive debut financial results as a listed entity, having upped revenue 51% last year to £52.7m, 15% of which was organic growth. Off the back of the results, Knights chief executive David Beech (pictured) had told Legal Business the firm would make ‘up to four acquisitions’.

The firm’s first deal after floating was a buyout of Manchester independent Turner Parkinson, which was followed up in 2018 with a buyout of Leicester-based Spearing Waite.

Legal Business

Knights eyes another four acquisitions after 51% revenue increase in first post-IPO results

Knights has produced a strong debut financial year following its AIM listing, with acquisitions and organic growth propelling the firm to more than £50m in turnover.

Turnover at the company was up 51% to £52.7m, slightly ahead of expectations the company flagged in May, including 15% organic growth. Revenue per fee earner was up 22% to £131,000, with a net 46 increase in fee earners over the year, while net debt fell to £14.1m from £26.3m.

The firm’s listing last June provided Knights with a £28.1m war chest, resourcing the law company for four acquisitions in the last year while underlying legal work and financial discipline was said to have led to the double-digit organic growth.

‘The organic growth is driven by smarter business,’ Knights chief executive David Beech (pictured) told Legal Business. ‘We’re training fee-earners on financial management and client engagement. Coaching them on how to recover their time is not something that’s taught in law school.’

Inorganic growth came courtesy of a flurry of acquisitions from June 2018, first absorbing Manchester-based firm Turner Parkinson, while in October of last year Knights acquired Leicester’s largest law firm, Spearing Waite, in an £8.5m deal. The company’s most recent move was a £1.5m buy in January for Leicester-based employment specialist Cummins Solicitors, which counted five fee-earners and £784,000 in revenue.

The company also announced today (9 July) it had extended its rolling £27m credit facility until 25 June 2023, with future buyouts in the pipeline. Beech said the ideal acquisition size would be a firm of four or five partners with up to £10m in revenue.

‘You’ll see up to four acquisitions,’ Beech commented. ‘The IPO has enabled us to be choosy about what to go for next, but we’ve got great momentum.’

Beech added that while the money raised at IPO had obviously been beneficial in securing acquisitions, the company was still getting used to life on the public markets.

‘We’re learning to deal with the processes that come from being a listed company,’ he said. ‘Dealing with half-year results and things requires support and time and can sometimes take you away from the business.’

Listed law firm results have so far been strong: Rosenblatt’s revenue rose 19%, Keystone added 35% to its top-line, while Gateley flagged that its revenue would be at least £102m this year. The market’s most recent listing, DWF, reports its full-year financial results at the end of this month.

Legal Business

Knights talks up selective acquisition policy amid strong first-half financials

The chief executive of Knights says its listing last June  has instilled market confidence in its ability to deliver an ambitious acquisition pipeline. This comes as the law company announced a third law firm acquisition today (15 January) and reported a 37% increase in revenue to £23.9m for the six months to 31 October.

Knights, the largest law firm initial public offering (IPO) to date after raising £50m last year, has acquired Leicester-based employment specialist Cummins Solicitors, which has five fee-earners and £784,000 in revenue, in a £1.5m deal. It takes Knights’ total fee-earner numbers to 485 across eight offices.

The acquisition was announced alongside Knights’ first half-year results since its IPO, and follows an £8.5m deal for Leicester-based Spearing Waite last October. Alongside the increase in revenue – of which organic growth was said to be 10% – earnings before interest, tax, depreciation and amortisation grew 50% to £5.3m.

Knights chief executive David Beech (pictured) told Legal Business the performance confirmed what the firm had been doing for the past six years since he acquired the then £8m firm for a ‘low seven-figure’ sum alongside investor James Caan.

The firm moved from a partnership – with seven equity partners – to a plc in 2012 and Beech says that has firmly set a corporate culture within the business as the partners moved away from being owners to employees.

‘We want to reinvest most of the profits into growing the business through recruitment and acquisitions,’ he commented. ‘The listing has created profile and a confidence in the market when we go and talk to people, they don’t question our ability to deliver an acquisition.’

Beech said there was a strong pipeline of new recruits and acquisitions – the group wants to grow 50:50 between the two and added 35 recruits in the half-year – which meant the firm could afford to be pickier with targets with the capacity to complete four acquisitions a year. Cultural fit was the key, he said, with Cummins’ founder Michael Cummins seen as a future leader.

‘We are low ego, friendly, team orientated, and, it’s a bit crude, but we have a no-dickhead policy,’ Beech said. ‘You have to search, but they’re out there.’

Revenue per fee-earner also increased 25% to £66,000, which Beech said reflected a 10% improvement on recovery and training its fee earners to not underestimate costs when engaging clients. Former non-executive director Richard King has come on board as chief operating officer to help with that.

‘We’re getting quite ambitious,’ Beech said. ‘I wouldn’t have used ambition as a word six years ago but we’re gaining confidence.’

Knights’ strong performance follows that of Gateley, which was the first UK firm to list back in 2015, announcing last week its half-year revenue for the same period was up 20% to $46.4m. The firm expects its revenue to surpass £100m for the full financial year.

Legal Business

Knights builds on IPO acquisition strategy with £8.5m deal for Leicester law firm

Staffordshire-based Knights has dipped into its IPO ‘war chest’ again, acquiring Leicester’s largest law firm in a multi-million pound deal.

It marks Knight’s second buyout since its £103.5m listing on the Alternative Investment Market (AIM) in June – the largest UK firm listing to date – with a deal for Manchester independent Turner Parkinson announced shortly after floating.

Today’s acquisition (9 October), Spearing Waite, gives Knights a new hub in Leicester and adds 59 fee earners, bringing its total to 450 across the country. In the financial year ending March 2018, Spearing Waite generated £7.1m in revenue, with £3.2m in distributable profits to partners.

Knights purchases the interests of Spearing Waite’s four equity partners for cash consideration of £5.35m and nearly 100,000 new shares in Knights, as well as deferred consideration of £800,000 paid over the next three years. Knights will also discharge up to £2m in debt and grant stock awards up to £265,000, meaning the overall deal will cost up to £8.5m.

The deal went live on 1 October, with Spearing Waite keeping its branding for ‘a short transitional period’ before being officially relaunched as Knights on 1 January 2019.

Knights chief executive David Beech (pictured) told Legal Business that Spearing Waite was an attractive proposition due to its core strengths in real estate, corporate and litigation. He added: ‘Most important for us was cultural fit. We want to integrate businesses as well as we can, not have disparate businesses around the country.’

Beech said the buyout was ‘right in the sweet spot’ of the firm’s acquisition strategy. This comes after the firm announced in June that it wanted to use its floating proceeds to land three buyouts by 2020. He added: ‘It’s a great example of what we are wanting to do. We’re pleased to have got it done, but now we have some work to do to integrate them well.’

Last month, fellow-listed firm Gordon Dadds announced a surprise move for struggling Ince & Co, in a tie-up which will create a £114m firm. If the move passes partnership votes, it will create the UK’s largest listed law firm.

Legal Business

Knights shareholders to get £20m windfall after float valued at over £100m

Staffordshire-based Knights is set to raise £50m from its initial public offering (IPO) on AIM this week (29 June), with the firm’s four selling shareholders to split £20m in proceeds.

The float – which would be the largest legal IPO to date – is also expected to give Knights a market capitalisation of £103.5m, in line with the firm’s forecast from earlier in the month.

Four of the firm’s shareholders – commercial operations director Mark Beech, facilities director Joanne Beech, Newcastle-under-Lyme office head Karl Bamford and non-executive chairman Balbinder Johal – will split £20m between them as a result of the IPO.

Chief executive David Beech (pictured) will retain a shareholding of around 45.5% and will be subject to a three-year lock-in period in which he will be unable to sell his shares. The other shareholders will hold 1.7% each.

In the firm’s admission document, it said that the net proceeds from the float would be used to ‘repay the majority of the group’s existing debt facilities and for general working capital and corporate purposes.’

Earlier this month, David Beech told Legal Business that a listing would provide ‘a sufficient war chest to achieve three more acquisitions.’ 

Knights had already been in buyout mode, announcing an agreement in May to buy Manchester firm Turner Parkinson for an undisclosed sum. The acquisition added 45 additional fee earners and a seventh UK office.

Knights’ AIM listing follows Rosenblatt this year, and Gordon Dadds and Keystone Law in the second half of last year. Gateley was the first UK firm to take the step back in 2015, raising £30m at a £100m valuation.

However, Knight’s record for the largest UK law firm listing may not stand for long. Top 25 LB100 firm DWF confirmed this month it is also considering a potential float. Standard valuation models would value a listing at between £400m and £600m.

Fieldfisher also confirmed recently it had engaged in ‘pilot fishing’, a process of pitching the idea of a float to potential investors, but an IPO anytime soon seems unlikely.



Legal Business

‘A sufficient war chest’: Knights turn to IPO for acquisition agenda

One of the earliest adopters of the Alternative Business Structure (ABS) model is turning to the public capital markets to raise tens of millions to pay off debt and fund a war chest big enough to land three acquisitions by 2020.

Stafforshire-based Knights said on Monday (4 June) it was listing on the Alternative Investment Market (AIM), becoming the fifth law firm to do so. The float is expected to give the business a valuation of more than £100m, which would make it the largest legal initial public offering (IPO) to date.

Knights, which became an ABS in 2012 and has previously been backed by private equity investment, broke into the Legal Business 100 for the first time last year but wants to raise money to pay down its debt facilities, generate working capital and for general corporate purposes. It is yet to determine how much will be raised in the IPO.

Chief executive David Beech (pictured) told Legal Business: ‘What drove the decision was the desire to grow faster through recruitment and acquisition. We feel to do this, flotation was needed to pursue our vision.’

The firm would not specify the amount of its debt facilities, but for its accounts for the year to 30 April 2017 the firm lists a £7m bank loan and another unspecified loan of £22.3m, although debt is believed to be lower now. As well as paying most of its debt, Knights wants to add 200 fee earners by 2020.

Beech added: ‘We will have a sufficient war chest to achieve three more acquisitions.’

In late May, the firm announced an agreement to acquire Manchester firm Turner Parkinson for an undisclosed sum, adding 45 fee earners and an office to Knights’ six bases in the UK. The firm’s offices in Chester, Cheltenham, Derby, Newcastle-Under-Lyme, Oxford and Wilmslow boast 350 fee earners between them.

The firm believes it can achieve growth either through the acquisition of legal teams or firms and in new regional markets or complementary service lines. Beech believes the firm has existing strength in corporate, litigation, real estate and employment.

For the year ended 30 April 2017, Knights reported revenue of £33.5m, up 64% and fuelled in large part by the acquisition of Oxford-based Darbys in 2016, which added £10m in revenue over the year. The firm says revenue this year is £34.9m, a small uptick.

Knights’ AIM listing follows Rosenblatt this year, and Gordon Dadds and Keystone Law in the second half of last year. Gateley was the first firm to take the step back in 2015, raising £30m at a £100m valuation.

Beech believes more law firms will follow and is critical of the traditional model: ‘I think lawyers are the last bastion of equity partnership, it’s not a suitable model for profitable business and promotes internal politics. It’s a very dysfunctional model.’