In its maiden full-year results since joining London's junior market last June, Knights (KGH) continued its impressive momentum, unveiling a 51 per cent surge in underlying cash profits.
However, growth remains acquisitions-led, with four companies purchased since its initial public offering, including Turner Parkinson, one of the top corporate law firms by deal volume in the north west. In reducing the lock-up days for these acquisitions – the time taken to convert work done into cash – from 122 to 99, free cash flow more than tripled to £9.3m. This lifted cash conversion from 71 per cent to 115 per cent (although broker Arden expects this to stabilise at 75 per cent). Meanwhile, net debt almost halved to £14.1m, some £3.7m lower than expected.
Organic revenue growth of 15 per cent was driven by net recruitment of 46 new fee earners (including 11 partners) and a 22 per cent increase in average fees per fee earner to £131,000. This was due to an improved 80 per cent recovery rate – the proportion of fees recovered from clients when accounting for all time spent on work.
Numis expects adjusted pre-tax profit of £15m and EPS of 16.5p in 2020, rising to £17.8m and 19.5p in 2021.
| KNIGHTS GROUP HOLDINGS (KGH) | ||||
| ORD PRICE: | 286p | MARKET VALUE: | £210m | |
| TOUCH: | 280-286p | 12-MONTH HIGH: | 311p | LOW: 170p |
| DIVIDEND YIELD: | 0.7% | PE RATIO: | 49 | |
| NET ASSET VALUE: | 53.6p* | NET DEBT: | 36% | |
| Year to 30 Apr | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2018** | 34.9 | 4.2 | 6.44 | - |
| 2019 | 52.7 | 5.2 | 5.84 | 1.9 |
| % change | +51 | +26 | -9 | - |
| Ex-div: | 29 Aug | |||
| Payment: | 30 Sep | |||
| *Includes intangible assets of £46.4m, or 63p a share **Pre-IPO | ||||
