Knights Group Holdings Plc · LSE:KGH
Knights — FY2020 Earnings Presentation
25 slides from Knights's earnings presentation, July 2020
Slide 1: Full year results for the year ended 30 April 2020
Full year results for the year ended 30 April 2020 A resilient business ready to scale throughout the UK July 2020
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: COVID-19 update
COVID-19 update Seamless operational response Financial strength • Health and wellbeing of Knights' people the • Highly cash generative with industry-leading Group's priority; all employees working effectively lock up management process from home until September at earliest • A strong balance sheet
Slide 4: Strengthened our platform for growth
Strengthened our platform for growth Strengthened 108 net new fee operational Strong organic earners, with 39% backbone with growth of 10% joining from experienced Top 50 law firms management hires PBT margins Entered the major Successful increased to legal markets of integration of 6 18.3%, with a
Slide 5: Delivered ahead of IPO expectations
Delivered ahead of IPO expectations NB FY 2019 figures have been restated to reflect IFRS 16 5
Slide 6: Full year overview – key financial highlights
Full year overview – key financial highlights Revenue up 41% Underlying PBT (1) Underlying EPS(1) 10% organic growth up 45% up 27% to £74.3m to £13.6m to 14.33p (FY 2019: £52.7m) (FY 2019(2) : £9.4m) (FY 2019: 11.31p) Net debt less than 1x 80% cash conversion(1) 85 lock up days(3) reported underlyin
Slide 7: Solid financial performance
Solid financial performance Summary income statement (£,000) 30 April 30 April 2020 2019 • Organic growth of 10% Revenue 74,254 52,662 • Income from acquisitions £10.5m in the period Revenue Growth 41.0% 51.0% Other operating income 894 415 • Full year impact of FY19 acquisitions £5.9m Staff costs(1
Slide 8: Investment driving profitable growth
Investment driving profitable growth Adjusted PBT per fee earner (£'000) 25 20 Underlying PBT (£m) 16.0 15 10 14.0 5 0.9 0.3 12.0 1.8 0.5 2.6 0 2.9 1.2 FY 2018 FY 2019 FY 2020 10.0 Fees per fee earner 8.0 (£'000) 140 13.6 6.0 120 9.4 100 4.0 80 2.0 60 40 0.0 FY 2019 Acquisitions* Organic Fee earner
Slide 9: Balance sheet & liquidity
Balance sheet & liquidity Summary balance sheet 30 April 30 April £’000 2020 2019 • Adoption of IFRS 16 ‘Leases’ increased assets and Goodwill & other intangibles 69,135 46,444 liabilities on the balance sheet by £24m each Right of use asset 23,749 19,470 Property, plant and equipment & other assets
Slide 10: Net debt bridge
Net debt bridge • Net debt at £15.9m; £1.4m ahead of market expectations 4.0 20.5 18.9 3.4 1.1 0.9 8.6 1.8 15.9 14.1 2.6 Net Debt at Operating Capex Dividend Acquisitions Deferred Issue of share One off costs One off tax VAT deferral Net debt at 30 30 April 2019 cash generated payments consideration
Slide 11: Focus on cash management
Focus on cash management • Lock up(1) excluding acquisitions at 30 April 2020 85 days Summary cash flow (£,000) (2019: 88 days) 30 April 30 April 2020 2019 • Total year end lock up of 105 days (30 April 2019: 93 days) reflects 130 days in recently acquired businesses at year Underlying Profit before
Slide 12: Drivers for growth
Drivers for growth Leveraging overheads Service line highlights • Operating charges have reduced from 18% to 16% of revenue Real Estate: • Built critical mass in conveyancing and development • Churn rates remain very low at 5% • Added defensive re-mortgaging, volume housing, • Capacity to recruit in
Slide 13: Continuing to execute on our strategy: Organic growth
Continuing to execute on our strategy: Organic growth Momentum in recruitment Growing our presence in of high calibre talent locations outside of Operating more efficiently London Recruited 108 net new fee earners Opening of York office in during the year, resulting in a January and subsequent Signi
Slide 14: Continuing to execute our strategy – Supplemented by strategic acquisitions
Continuing to execute our strategy – Supplemented by strategic acquisitions Highly selective, quality acquisitions during the period: Emms Gilmore Liberson Well established independent commercial law firm in Birmingham, adding 28 fee earners 1 November 2019 Entry into Birmingham Specialist commercia
Slide 15: Continuing to execute our strategy – Supplemented by strategic acquisitions
Continuing to execute our strategy – Supplemented by strategic acquisitions • Integration of Fraser Brown, ASB and Shulmans progressed ahead of expectations during lockdown • Benefitted from integrating remotely; efficient onboarding of fee earners, clients, back office and IT • Initial synergy savi
Slide 16: The market opportunity
The market opportunity Market size – revenues by region Lawyers at other < 3% share Top 50 firms of a £2.6bn with a quality £93m addressable client following market want to reduce c.160 firms financial risk £437m Revenue £443m £2 – £60m outside London £85m Client demand Broad range of £159m £251m £2
Slide 17: Continuing to execute our strategy in the regions
Continuing to execute our strategy in the regions • Acquisitions have provided us with a national platform for organic growth • 18 new senior fee earners have accepted positions to join in the current financial year, including from Top 50 firms • Many looking to move away from the financial risk ass
Slide 18: Summary & current trading
Summary & current trading • Delivered ahead of IPO aspirations • Early signs of a recovery in market conditions compared to the disruption experienced at the beginning of April • Do not currently anticipate requirement for further cost savings; keeping salary cuts under review • Expect recruitment t
Slide 19: Appendix
Knights pic Appendix
Slide 20: Investment case
Investment case Experienced operator, having corporatised in 2012 A leading firm outside London Industry leading working A scalable model capital days Big city expertise in a Track record of unlocking value fragmented market from a Commercial mindset is a key from acquisitions competitive cost base
Slide 21: Financial guidance
Financial guidance Turnover Full year impact of 2020 acquisitions - circa £25m assuming normal 20% potential churn on acquisition Full year impact of new recruits from 2020 – assume 50% increase in fees from 108 recruits Impact of downturn in economy – unknown; circa 10% -20% in H1; H2 dependant on
Slide 22: Leadership team
Leadership team PLC Board Central Steve Bal Jane management Dolton Johal Pateman Senior Non Non Exec Non Exec Exec Director Chairman Director Kate David Richard Lewis Beech King Chief Financial Chief Operating Officer CEO Officer Group Client Client Office Finance Director of Sales Recruitment Compl
Slide 23: Continuing to execute our strategy – Supplemented by strategic acquisitions
Continuing to execute our strategy – Supplemented by strategic acquisitions Unleashing the potential Accelerating growth of talented people we acquire in the wider region James Sheridan Michael Cummins “The acquisition by Knights has enabled me to broaden and “We built a strong reputation as a speci
Slide 24: Reconciliation of adjusted to statutory measures – PAT and EPS
Reconciliation of adjusted to statutory measures – PAT and EPS Adjusted profit after tax (£,000) / Adjusted earnings per share (pence) FY 2020 FY2019 (IFRS 16 adjusted) Profit after tax 1,820 3,609 Amortisation 1,427 693 Non-underlying operating costs 8,090 1,847 Non-underlying finance costs 41 2,03
Slide 25: Reconciliation of adjusted to statutory measures – PBT
Reconciliation of adjusted to statutory measures – PBT Adjusted profit before tax (£,000) FY 2020 FY2019 (IFRS 16 adjusted) Profit before tax 4.058 4,849 Amortisation on acquired intangibles 1,427 693 Non-underlying operating costs 8,090 1,847 Non-underlying finance costs 41 2,038 Adjusted profit be
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