Knights in shining debut

In its first set of results since joining Aim last June, Knights (KGH) reported solid trading for the half-year ended 31 October 2018. While most of the top-line growth stemmed from acquisitions, £1.8m – or 10.3 per cent – was generated organically. The legal and professional services group also managed to increase fees per fee-earner by 24.5 per cent to £66,000. 

Knights bought corporate law firm Turner Parkinson the same month it floated. It then purchased Spearing Waite, an independent Leicester-based law firm, in October. These have now been integrated and Knights expects annualised cost synergies of roughly £0.75m across both. Meanwhile, to coincide with the release of its half-year numbers, Knights also announced an acquisition of employment-law specialist Cummins Solicitors for £1.6m.

Reported earnings were dampened by amortisation charges and non-underlying costs relating to acquisitions and the IPO, as well as share-based payment charges. But, on an adjusted basis, pre-tax profits rose 104 per cent to £4.4m. More impressive was the cash conversion rate which, at 116 per cent, was up from just 18 per cent year on year. Knights attributed this to reducing "lock up" – combined debtor days and work-in-progress days – which fell from 100 to 87. Across PwC’s 'Law Firm Survey 2018,' year-end lock-up for the top 10 firms (by annual global fee income) was 123 days, and 135 days for top 51-100 firms.

House broker Numis expects adjusted pre-tax profits of £9.5m and EPS of 10.7p for FY2019 (from £4.8m and 5.2p in FY2018).