Knights Group Holdings Plc · LSE:KGH
Knights — FY2023 Earnings Presentation
32 slides from Knights's earnings presentation, July 2023
Slide 1: Full year results
Full year results For the year ended 30 April 2023 A resilient performance against a challenging backdrop July 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 resilient and diversified platform
A resilient and diversified platform One of the largest legal and professional services groups outside London Well balanced across services and sectors A diversified local, national and international client base A full suite of services strengthened by sector specialisms and non-legal services (% To
Slide 4: Track record of profitable, cash generative growth
Track record of profitable, cash generative growth 180 Revenue 30.0 Underlying PBT 159.6 160 25.4 25.0 142.1 140 21.6 125.6 120 20.0 18.4 18.1 103.2 100 £’m £’m 15.0 13.6 80 74.3 60 10.0 9.4 52.7 40 34.9 32.1 5.1 4.8 5.0 4.0 20.2 20 0 0.0 2016 2017 2018 2019 2020 2021 2022 2023 2024* 2016 2017 2018
Slide 5: Better positioned for growth
Better positioned for growth Clear building Prior headwinds Benefits of blocks for diminishing scale organic growth Favourable Recent backdrop for acquisitions recruitment and performing well acquisitions Knights │ Full year results 5
Slide 6: Full year overview – key financials
Full year overview 1 – key financials FY Revenue Underlying PBT2 Underlying EPS2 +13% +19% +17% (organic decline of 0.1%) To To At £142.1m £21.6m 20.20p (FY 2022: £125.6m) (FY 2022: £18.1m) (FY 2022: 17.23p) Net Debt Underlying Cash Conversion Period End Lockup3: £29.2m 117% 87 days after c£11.4m of
Slide 7: Robust financial performance
Robust financial performance Summary income statement (£’000) • £16.5m of revenue growth, predominantly 30 April 2023 30 April 2022 due to acquisitions completed in FY22/23 Revenue 142,080 125,604 • Gross margin decreased to 48.5% (FY22: Revenue Growth 13% 22% 49.3%) reflecting continued recruitment
Slide 8: Revenue bridge (£'m)
Revenue bridge (£’m) 150 Acquisition income Organic income (0.4) (0.4) 140 (4.5) 4.7 8.8 130 8.3 32.0 120 15.3 110 100 110.3 110.1 90 Revenue FY22 Full year impact of Revenue from Impact of sale of Reduction in debt Reduction in Other organic Revenue FY23 FY22 acquisitions FY23 acquisitions HPL reco
Slide 9: Significant increase in underlying PBT
Significant increase in underlying PBT Underlying PBT Bridge (£’m) 35 Net Strong positive platform impact forof £4.1m futurefrom profitable interest received growthnet driven of interest by 30 experienced paid due to rising Client (3.1) Services Directors’ interest rates 5.4 (2.3) 25 (1.3) 7.4 (1.3)
Slide 10: Key Performance Indicators
Key Performance Indicators Gross profit margin (%) Average number of FTE* fee earner 60 1100 1077 55 48.9 49.3 48.5 1050 1015 50 1000 45 950 40 900 852 35 850 30 800 25 750 20 700 FY21 FY22 FY23 FY21 FY22 FY23 Fees per FTE fee earner (£k) 145 142 140 3.9 : 1 Fee earner to non- 135 Gross Margin fee e
Slide 11: Summary cash flows
Summary cash flows 117% £’000 30 April 2023 30 April 2022 Underlying Cash Conversion Underlying profit before tax 21,595 18,131 Depreciation & amortisation 8,175 6,963 Change in working capital (4,458) (2,985) Benefited from a £1.8m corporation tax debtor in FY22. Excluding this, cash conversion Net
Slide 12: Progress reducing lockup days
Progress reducing lockup days Industry leading working capital of acquisitions Group lockup days* continues to progress At At acquisition 30 April 23 140 134 105 days 84 days 130 131 FY21 121 120 118 110 119 days 86 days 100 Lock-up days 90 197 days 109 days 80 70 88 85 89 86 87 60 151 days FY22 73
Slide 13: Balance sheet & liquidity
Balance sheet & liquidity Summary balance sheet £’000 30 April 2023 30 April 2022 • Increase in finance lease receivables due to Goodwill & other intangibles 88,021 82,172 further sub-letting excess office space Right of use asset 38,200 40,663 inherited on acquisitions. Property, plant and equipmen
Slide 14: Net debt bridge (£'m)
Net debt bridge (£’m) Net debt at 35 £29.2m £28.9m at 31 April 22 30 3.1 25 1.9 RCF available 2.1 3.1 £60m 20 (1.1) £30m headroom (20.2) in current facilities as 6.3 at 30 April 2023 15 28.9 29.2 5.1 10 1.18x leverage 5 (covenant 2.5x) 0 Net debt* 30 Net cash Deferred and Consideration Receipt from
Slide 15: Better positioned for growth
Better positioned for growth 1 Prior headwinds diminishing 2 Clear building blocks for organic growth 3 Benefits of scale 4 Recent acquisitions performing well 5 Favourable backdrop for recruitment and acquisitions Knights │ Full year results 15
Slide 16: Headwinds have diminished significantly
1 Headwinds have diminished significantly A confluence of challenges in FY23: An improving picture in FY24: Higher than expected initial churn from Leeds now stabilised and growing Leeds, post-acquisition A ‘hot’ market for talent increased Strong early recruitment churn Transition back to the offic
Slide 17: Six building blocks for organic growth
2 Six building blocks for organic growth Increase in Large corporate Price increases partners and wins from 1 May 2023 senior associates - 9% across 80% of revenue - 12 hired in FY24 with a good pipeline - traction with European roadshows Land and Resilience in Doing more for expand diversity bigger
Slide 18: Enhancing productivity
3 Enhancing productivity Expanded and more Added two new executive experienced operational Return to the office roles management team • 2 additional CSDs since • Now 70% occupancy vs • COO brings together the beginning of the 85% pre Covid operational and client year; group now 14 service teams supp
Slide 19: Recent acquisitions performing well
4 Recent acquisitions performing well Carefully considered acquisitions for Case Study - Nottingham further organic growth: • Acquired in March 2020 • South Yorkshire, the North East and the • 95% of acquired revenues retained East of England • Low churn • Keebles, Archers, Langleys • Fully integrat
Slide 20: Favourable backdrop for recruitment and acquisitions
5 Favourable backdrop for recruitment and acquisitions Knights a more attractive model for talent in Increased pressure on firms to be part of a an uncertain environment larger platform • Heightened awareness of Knights’ model • More firms seeking financial security of and collaborative culture due
Slide 21: ESG
ESG Knights’ strategic ESG programme includes a framework of KPIs and goals which are continuously kept under review During the year we have made good progress against commitments and added new objectives New targets have been developed targeting net-zero across our value chain by 2050 We are seeing
Slide 22: Summary & current trading
Summary & current trading 1 2 3 Solid start to the new financial year; macro Positive talent acquisition Quality organic growth and headwinds generally offset trends and improving productivity drive gaining by resilience in diversity and retention rate momentum increased interest income 4 5 6 Confid
Slide 23: Appendix
Appendix
Slide 24: Deferred and Contingent consideration
Deferred and Contingent consideration Deferred consideration Contingent consideration Total (£’000) (£’000) (£’000) Accrued at 30 April 2023 4,849 2,404 7,253 Payable at 30 April 2023: FY24 2,376 3,810 6,186 FY25 2,376 2,381 4,757 FY26 167 1,008 1,175 Total 4,919 7,199 12,118 Non Underlying P&L char
Slide 25: Organic growth calculation
Organic growth calculation £'000 30 April 2023 30 April 2022 Income pre FY 22 / HY 23 acquisitions 110,167 110,329 FY 22 acquisition income 22,455 14,169 Organic growth excludes income growth from acquisitions in the year of FY 23 acquisition income 8,764 - their acquisition, and for the first full
Slide 26: 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) 76 Re-classification / internal transfer to support teams (21) Net organic movement 37 FTE at 30 April 2023 1,070 Knights │ Full year results 26
Slide 27: Reconciliation of underlying to statutory measures – PBT
Reconciliation of underlying to statutory measures – PBT Underlying profit before tax (£’000) 30 April 2023 30 April 2022 Profit before tax 11,529 1,056 Amortisation on acquired intangibles 3,441 3,815 Non-underlying operating costs 6,791 13,260 Non-underlying gains on disposal (318) - Non-underlyin
Slide 28: 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) 30 April 2023 30 April 2022 Profit after tax 7,944 (2,531) Amortisation on acquisition related intangibles 3,441 3,815 Non-underlying operating costs 6,625 13,
Slide 29: Leadership team
Leadership team Knights │ Full year results 29
Slide 30: 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 31: Guidance
Guidance Full year impact of FY23 acquisitions FY24 acquisitions of Baines Wilson and St James Law from June 2023 (applying normal 80% expected churn) Revenue Organic increase - based on 9% price increase applied to c70% of matters 17 recruits in H2 FY23 assume generate additional income at c£131k p
Slide 32: Thank you
Thank you Knights Registered Office The Brampton Newcastle-Under-Lyme Staffordshire ST5 0QW Tel: 0344 371 2562
Knights Group Holdings — FY2023 Earnings Presentation on 6ix