Shareholders of one of the country’s fastest-growing firms will receive no dividend this year, despite a surge in profits and the group passing £100m in revenue for the first time.
In full-year results for the year ended 30 April 2021, the listed Knights Group told the London Stock Exchange today that its decision not to award a final dividend reflected cost-saving measures taken by the group during the last year in response to the pandemic. These included all staff earning more than £30,000 taking a 10% reduction and the board taking a 30% cut. These measures remained in place until 1 November when all employees returned to full salaries.
The company’s share price dipped this morning following the announcement, dropping by 2.47% to 434p by 9am. Knights has said that it intends to resume distributing dividends for the 2021/22 year in line with the previous policy of paying out 20% of profit after tax.
Knights has become one of the highest-profile firms in the country through a strategy of buying other practices in different regions of the country. The company has bought 13 firms in the last three years, including OTB Eveling LLP, Mundays LLP and Keebles LLP in the 2020/21 year alone. In the last year, the number of fee earners has increased from 664 to 933.
Overall during 2020/21, the firm increased revenue by 39% to £103.2m, while underlying profit before tax rose by 35% to £18.4m. Of the increase in revenue, £2.1m was the result of acquisitions made during the year, while £28.4m related to the impact of acquisitions made in 2019/20. Without recent acquisitions included, organic revenue actually fell by 3% in 2020/21 – mostly due to a 15% fall in the first half of the year due to the immediate impact of the Covid-19 pandemic.
Having suffered a £1.1m loss before tax in the first half of 2020/21, Knights recorded profit before tax of £6.6m in the second half, giving overall profits for the year of £5.5m (an annual increase of 36%).
Knights said net debt was ‘lower than expected’ but did increase from £16m in April 2020 to £21.3m a year later. The increase was largely attributed to spending £12.5m on acquisitions during the year and deferred payments for acquisitions in previous years. The group’s borrowing facility remains at £40m, giving ‘significant headroom’ to continue a growth strategy into 2022 through organic recruitment and ‘carefully selected, culturally aligned acquisitions’.
Reflecting on this year’s results, chief executive David Beech said: ‘In a challenging year for many businesses across the UK, the Board’s confidence in the Group’s strategy has been reinforced.
‘We expect that COVID-19 will only accentuate the recruitment and acquisition opportunities for our resilient, well-invested, diversified and cash generative business in the highly fragmented and often under-invested market for legal services outside London.’