Acquisitions Masks Decline in Natural Progress as Knights Releases Covid Hit H1 Monetary Information
Publicly traded company Knights saw revenue potentially jump 45% from £ 31.9m to £ 46.2m in half-year 2021, but conceded that sales, excluding its numerous acquisitions, were down $ 4 in real terms from the same period last year. £ 8m down (15%).
The results came after a year of opening Knights in Leeds with the £ 20.1 million acquisition of Shulmans and a presence in the South East with the up to £ 8.5 million acquisition of ASB Law was built. The purchase of Fraser Brown, based in Nottingham, in February 2020 for £ 8 million was the company’s tenth acquisition since it was listed in June 2018.
Pre-tax profit increased 13% to £ 6m compared to £ 5.3m for the same period last year. Despite tough trading, the company’s gross margin was 46%, on par with prior-year Covid.
CEO David Beech (pictured) told Legal Business: ‘Before Covid, we achieved 10% organic growth. This is a new impact for us. We knew it would come in March. It wasn’t a pleasant or enjoyable experience for us when it hit. I’m sure organic growth will return this year, particularly through strategic recruiting, but April through July last year were quite difficult. ‘
However, this morning’s (Jan 19) results paint a generally good picture of the company’s financial health – trading improved enough by the end of 2020 to fully restore salaries to all employees by Nov 1. At the start of the pandemic, Knights was among a multitude of companies announcing pay cuts, in this case a 10% cut for all employees who earned more than £ 30,000. “We restored salaries as early as possible,” Beech said.
The accounts bear the full cost of the company’s restructuring efforts initiated by Covid in March last year and beyond. For the entire fiscal year up to April 2020, Knights spent almost GBP 3 million on “redundancy and reorganization costs”. For the first half of 2020/21, the company has already spent almost £ 1.1m on similar costs. According to Knights’ report, the cost is part of an effort to “streamline the Group’s post-acquisition support function” and “as a result of reorganization measures related to the impact of Covid-19.”
Knights continued to expand, entering the Southwest market with the £ 2.1 million buyout of OTB Eveling in Exeter in December. However, this deal did not take into account the results of the first half of the year.
Further positive indicators result from the company’s active recruitment. Throughout the period, Knights hired 18 high-level earners (partner equivalent) and carried out 83 internal promotions. Beech commented, ‘Our acquisitions have integrated faster and better than we could have predicted. This quick access to people in their homes meant we could speed up recruiting and integration – it’s a stable and happy ship. ‘
And while this is potentially preventative, even a 15% drop in organic revenue could be a fair performance once the broader market begins to reveal its own Covid-affected finances.
Buche looks to the future: “There will be a lot of activity in the UK later this year, with a lot of consumer and business spending in the summer and autumn. We will support customers in increasing their activities. ‘