Knights Group posts strong full-year results with 28% revenue growth driven by organic acceleration and strategic acquisitions

Knights Group has delivered the sort of update shareholders were hoping for – strong revenue growth, a clear rebound in organic performance, and solid cash generation. The headline number is eye-catching: underlying revenue rose 28% to £207.7 million, helped by acquisitions and a marked improvement in trading through the second half.

For me, the most important line in the whole release is not actually the 28% revenue jump. It is the return to organic growth of 7.1%, including 11.8% in the second half. That tells you the core business is moving again, not just getting bigger by buying other firms.

Knights Group FY26 results: the key numbers investors need to know

Metric	FY26	FY25
Underlying revenue	£207.7 million	£162.0 million
Organic growth	7.1%	-0.3%
Underlying EBITDA	£51.5 million	£42.9 million
Underlying EBITDA margin	24.8%	26.5%
Underlying PBT	£33.2 million	£28.0 million
Reported PBT	£10.2 million	£12.3 million
Underlying basic EPS	28.14p	23.95p
Basic EPS	5.40p	8.83p
Net debt	£65.4 million	£64.8 million
Total dividend	5.63p	4.81p

Why Knights Group organic growth matters more than the flashy headline revenue rise

Acquisitions clearly did a lot of the lifting. Of the £45.7 million increase in underlying revenue, £18.6 million came from acquisitions completed during the year and £16.5 million came from the full-year impact of deals done in FY25.

That said, the remaining £10.6 million was organic. In plain English, that means growth generated by the existing business rather than bought in. After last year’s -0.3% organic performance, getting back to 7.1% is a meaningful improvement and suggests Knights’ recruitment, pricing and service expansion are working.

The second half is especially encouraging. Organic growth accelerated to 11.8%, which gives some credibility to management’s claim of a positive start to the new year.

Knights Group acquisitions strategy is working – but it comes with accounting baggage

Knights completed four acquisitions in the year: Birkett Long LLP, Birkett Long IFA LLP, Rix & Kay Solicitors LLP and Le Gros Solicitors Limited. These deals expanded its presence in the South East and strengthened Cardiff, while also adding a financial planning capability through Birkett Long IFA.

Strategically, this makes sense. Knights is pitching itself as a consolidator in the regional legal market, where scale, technology and succession issues are pushing firms away from the old partnership model. That backdrop sounds favourable for a buyer with funding and integration experience.

But there is a catch. The big gap between underlying profit and reported profit is all about acquisition-related charges and other non-underlying costs. Reported profit before tax fell to £10.2 million from £12.3 million, even though underlying profit before tax rose to £33.2 million.

That difference is not small. Non-underlying costs totalled £17.9 million, including £8.1 million of contingent acquisition payments treated as remuneration, £3.5 million of transaction costs and £2.0 million of redundancy and reorganisation staff costs.

This is where investors need a cool head. If you believe these costs are genuinely one-off or deal-related, the underlying story looks strong. If you think acquisitions will remain a permanent feature, then the reported numbers matter more than management would like.

Knights cash flow, debtor days and debt position all look healthier than the profit gap suggests

One of the best parts of this RNS is cash performance. Underlying cash conversion was 163%, up from 130%, which is very strong. That means Knights turned accounting profit into cash very effectively.

The working capital metrics back that up. Debtor days improved to 30 from 31, work in progress – or WIP, meaning unbilled legal work – fell to 54 days from 55, and total lock up improved to 84 days from 86. In a law firm, that discipline matters because cash can easily get trapped in slow billing and slower collection.

Net debt was broadly flat at £65.4 million despite around £17 million of acquisition-related cash outflows. That is a good result. Better still, the banking covenant leverage ratio improved to 1.5 times EBITDA from 1.6 times.

After the year end, Knights renewed and extended its revolving credit facility to £159 million from £100 million, committed until July 2029. That gives it plenty of firepower, although it also tells you the acquisitive strategy is not slowing down.

Knights margins slipped in FY26 – and that is the main operational warning sign

This was not a perfect set of results. Underlying EBITDA margin fell to 24.8% from 26.5%, while underlying profit before tax margin slipped to 16.0% from 17.3%.

Management says the pressure came from higher employer national insurance, lower client interest income and around £1.0 million of extra AI and technology spending. That feels believable, and some of it is investment rather than deterioration. Still, margins going the wrong way is something investors should keep watching.

There is another wrinkle in the tax line. The total effective tax rate on reported profit was 54%, up from 38%, mainly because contingent acquisition payments are not deductible for corporation tax. That helps explain why basic EPS dropped 39% to 5.40p even as the underlying business improved.

Knights dividend increase and outlook point to management confidence

The board proposed a final dividend of 3.69p, taking the full-year total to 5.63p, up 17% from 4.81p. Companies do not usually raise the dividend at that pace if trading is going off the rails, so that is another modest positive.

Management also sounds confident on the outlook. It says trading has started positively, the acquisition pipeline is healthy, and previously announced discussions with Moore Barlow LLP are continuing. A small post year-end deal was also completed, with Knights acquiring specific assets of Mayfair Property Law Limited for £1.65 million.

What Knights Group shareholders should take away from these full-year results

My read is that this is a good update with one obvious complication. Operationally, Knights looks back on the front foot: organic growth has returned, acquisitions are contributing, cash generation is excellent, and debt has stayed under control.

The complication is that statutory profit still looks messy. If you are the kind of investor who dislikes heavy use of adjusted numbers, you will not love the drop in reported profit before tax and EPS. That criticism would be fair.

Even so, the balance of evidence here is positive. Knights appears to be executing its strategy in a consolidating regional legal market, and the second-half acceleration suggests real momentum rather than financial engineering alone.

In short, this looks like a stronger business than a quick glance at reported EPS would suggest. The next job for management is to prove that today’s growth can keep coming through without the acquisition accounting mess dominating the story every year.