Knights Group Holdings Plc · LSE:KGH
Knights — H1 FY2023 Earnings Presentation
29 slides from Knights's earnings presentation, January 2023
Slide 1: Half year results
Half year results For the Six Months Ended 31 October 2022 Continued growth underpinned by differentiated business model January 2023
Slide 2: Company disclaimer
Company disclaimer These presentation slides (the “Slides” have been issued by Knights Group Holdings plc (the “company”). The Slides have been prepared by and are the sole responsibility of the Company. Although all reasonable care has been taken to ensure that the facts stated in the Slides and ac
Slide 3: A diversified full service national provider
A diversified full service national provider A full suite of services strengthened A broad client base of quality by sector specialisms and non-legal national and local businesses: services (% of total revenues) Real estate Employment Revenue to Over 36.0% 5.0% c £3,000 Dispute Resolution Private Cl
Slide 4: Leading position outside London – a platform for profitable cash generative growth
Leading position outside London – a platform for profitable cash generative growth Premium position supported by scale and reputation Premium Continued focus on markets outside London Mid-teens Sustainable, quality from a competitive adjusted PBT profitable Leveraging deeper post-pandemic regional t
Slide 5: Track record of profitable, cash generative growth
Track record of profitable, cash generative growth Revenue Underlying PBT 160 25 146.5 140 20.9 125.6 20 18.4 18.1 120 103.2 100 15 £m 13.6 £m 80 74.3 10 9.4 60 52.7 40 34.9 32.1 5.1 4.8 5 4.0 20.2 20 0 0 2016 2017 2018 2019 2020 2021 2022 2023* 2016 2017 2018 2019 2020 2021 2022 2023* * The consens
Slide 6: Strategy continues to drive sustainable growth
Strategy continues to drive sustainable growth 1 Differentiated corporate structure increasingly relevant, understood and attractive Strong cultural integration, driven by the growing Client Services Executive, ‘one team’ 2 collaborative culture and return to office Step change in credibility with s
Slide 7: Half year overview – key financials
Half year overview 1 – key financials FY Revenue Underlying PBT2 Underlying EPS2 +19% +19% +18% (organic growth of 0.4%) To To At £71.2m £9.0m 8.26p (HY 2022: £59.7m) (HY 2022: £7.6m) (HY 2022: 6.98p) Net Debt Underlying Cash Conversion Period End Lockup3: £35.6m 57% 103 days after c£8.0m of acquisi
Slide 8: Improving margin and leveraging overheads
Improving margin and leveraging overheads Summary income statement (£’000) • £10.5m of revenue growth, due to acquisitions completed in FY22/23 31 October 31 October 2022 2021 • Broadly flat organic growth, due to planned exit from some volume service lines Revenue 71,200 59,730 Revenue Growth 19% 2
Slide 9: 19% increase in underlying PBT
19% increase in underlying PBT Underlying PBT Bridge (£m) 16.0 14.0 1.4 (2.6) (1.0) Investment in 12.0 (1.0) acquisitions and 6.0 (0.6) 10.0 (0.7) (0.1) properties, creating a platform for future 8.0 organic growth 6.0 4.0 7.6 9.0 2.0 Strong performance 0.0 of acquisitions completed in the last fina
Slide 10: Key Performance Indicators
Key Performance Indicators Gross profit margin (%) 50.0 49.1 49.0 48.0 49.1% 48.0 Gross Margin 47.0 46.0 46.0 45.0 44.0 HY21 HY22 HY23 19% HY Revenue Growth Fees per fee earner (£k) (0.4% organic in HY23) 68 65.6 66 64.2 64 62 60 58 £65.6k 56 54.2 Fees per fee earner for 54 HY23 52 50 H1 FY21 H1 FY2
Slide 11: Summary cash flows
Summary cash flows 57% £’000 31 October 2022 31 October 2021 Underlying Cash Conversion Underlying profit before tax 8,989 7,552 Depreciation & amortisation 4,006 3,326 • Decreased cash conversion for the period, driven by an Change in working capital (6,376) (1,978) increased net outflow in working
Slide 12: Lock-up days
Strong working capital Progress reducing lockup days of acquisitions Group lockup days1 At 104 103 acquisition At 31 Oct 22 102 105 days 74 days 100 FY21 99 99 98 119 days 68 days Lock-up days 96 94 94 94 197 days 113 days 92 FY22 151 days 74 days 90 88 HY19 HY20 HY21 HY22 HY23 169 days 152 days 103
Slide 13: Balance sheet & liquidity
Balance sheet & liquidity Summary balance sheet £’000 31 October 2022 30 April 2022 31 October 2021 Goodwill & other intangibles 88,498 82,172 75,843 Right of use asset 41,822 40,663 39,458 • Goodwill and intangible assets arising due Property, plant and equipment & other assets 10,327 10,240 9,825
Slide 14: Net debt bridge
Net debt bridge 40 1.7 Net debt at 35 1.1 30 £35.6m 8.0 +£6.7m from (4.1) 25 £28.9m at April 22 20 35.6 15 28.9 RCF available 10 £60m £24.4m headroom 5 in current facilities as at 31 October 2022 0 Net debt* at 30 Cash generated Net cash Capex Dividends Net debt* at 31 April 2022 from operations out
Slide 15: A resilient platform to deliver on our market opportunity
A resilient platform to deliver on our market opportunity A diversified Building our A large market platform with backbone to outside London agility to flow support resilient to a work across sustainable downturn teams growth Multiple growth Complemented levers, by selective supporting acquisitions
Slide 16: A large, market outside London resilient to a downturn
A large, market outside London resilient to a downturn Key With just a 4% share of this Offices Acquisitions completed since regional market 30 April 2021 £ Total addressable market Knights is an attractive alternative for equity partners in a recession £3.3bn legal services market outside London Hi
Slide 17: Building our backbone to support sustainable growth
Building our backbone to support sustainable growth Expanding number of Client Services Directors – our key executives This team, together with the Operational Directors, now reports directly to the CEO and CFO Andrew Pilkington Group Client Services Director James Sarah James Martin Helen Victoria
Slide 18: Multiple growth levers, supporting market share gains
Multiple growth levers, supporting market share gains National and local BD Accelerating in a recession 9% from 1 May 2023 Recruitment Price Increase Business Cross sell Development New large corporate CSD focus on top clients focus 100 clients Knights │ Half year results 18 18
Slide 19: Multiple growth levers supporting market share gains
Multiple growth levers supporting market share gains Recruitment, retention and development Growing our client base 9 Partners and Senior Associate fee earners Robust demand for services across sticky and recruited diverse client base 101 Promotions Ability to cross sell from a national ‘one team’ c
Slide 20: Summary & current trading
Summary & current trading 1 2 3 Continued focus on A return to offices generating Small acquisitions and growing the business improved performance and selected bolt on organically increased opportunities to opportunities train professionals 4 5 6 Recruitment momentum Continued execution of Confident
Slide 21: Appendix
Appendix
Slide 22: Deferred and Contingent consideration
Deferred and Contingent consideration Deferred consideration Contingent consideration Total (£’000) (£’000) (£’000) Accrued at 31 October 2022 6,018 2,700 8,718 Payable at 31 October 2022: H2 FY23 1,210 2,499 3,709 FY24 2,377 3,635 6,012 FY25 2,377 2,206 4,583 FY26 167 833 1,000 Total 6,131 9,173 15
Slide 23: Organic growth calculation
Organic growth calculation £'000 31 October 2022 31 October 2021 Income pre FY 22 / HY 23 acquisitions 54,115 53,901 Organic growth excludes income H1 22 acquisition income 4,320 5,829 growth from acquisitions in the year of their acquisition, and for the first full H2 22 acquisition income 7,383 -
Slide 24: Reconciliation of fee earner numbers
Reconciliation of fee earner numbers Opening FTE at 1 May 2022 978 Acquisition starters (net of any FY22 and FY23 acquisition levers) 70 Re-classification / internal transfer to support teams (16) Net organic movement 41 FTE at 31 October 2022 1,073 Knights │ Half year results 24
Slide 25: Reconciliation of underlying to statutory measures – PBT
Reconciliation of underlying to statutory measures – PBT Underlying profit before tax (£,000) 31 October 2022 31 October 2021 Profit before tax 4,116 848 Amortisation on acquired intangibles 1,740 1,900 Non-underlying operating costs 3,133 4,804 Adjusted profit before tax 8,989 7,552 Knights │ Half
Slide 26: Reconciliation of underlying to statutory measures – PAT and EPS
Reconciliation of underlying to statutory measures – PAT and EPS Underlying profit after tax (£,000) / Underlying earnings per share (pence) 31 October 2022 31 October 2021 Profit after tax 2,956 (1,690) Amortisation on acquisition related intangibles 1,740 1,900 Non-underlying operating costs 3,133
Slide 27: Leadership team
Leadership team David Beech Kate Lewis Chief Financial CEO Officer Andrew Pilkington Mark Beech Colin Jones Chris Yearsley James Sheridan Lisa Bridgwood Group Client Services Group Compliance Group Operations Group Finance Group M&A Director General Counsel Director Director and COLP Director Direct
Slide 28: Capital allocation
Capital allocation Cash flow Approach Maintaining industry leading Highly cash Strong cash Existing generation 1 business lockup, leveraging scale and enhancing acquisition cashflows generative with limited capex requirements Investment in quality people, Organic Invest to achieve 2 growth collabora
Slide 29: Thank you
Thank you Knights Registered Office The Brampton Newcastle-Under-Lyme Staffordshire ST5 0QW Tel: 0344 371 2562
Knights Group Holdings — H1 FY2023 Earnings Presentation on 6ix