FY25 headline numbers from Knights Group – revenue up, margins sharper
Knights Group Holdings has posted a solid FY25, with revenue up 8% to £162.0m and margins moving the right way. The Group’s corporatised model continues to show its teeth, delivering double-digit profit growth on its preferred measures despite a choppy backdrop for legal services.
| Metric | FY25 | FY24 | Change |
|---|---|---|---|
| Revenue | £162.0m | £150.0m | +8% |
| Gross margin | 50.5% | 48.8% | +170 bps |
| Underlying EBITDA | £42.9m | £38.7m | +11% (margin 26.5%) |
| Underlying PBT | £28.0m | £25.3m | +11% (margin 17.3%) |
| Underlying basic EPS | 23.95p | 21.81p | +10% |
| Reported PBT | £12.3m | £14.8m | -17% |
| Reported basic EPS | 8.83p | 11.47p | -23% |
| Cash conversion | 130% | 131% | – |
| Lock up days | 86 | 78 | +8 days |
| Debtor days | 31 | 28 | +3 days |
| Net debt | £64.8m | £35.2m | +£29.6m |
| Total dividend | 4.81p | 4.40p | +9.3% |
Quick definitions: underlying results strip out acquisition and one-off costs to show the core business trend. Lock up is the time taken to convert work done into cash, combining work in progress and receivables.
Underlying vs reported profit – the gap explained
Underlying PBT rose 11% to £28.0m, but reported PBT fell to £12.3m. The difference is down to higher non-underlying costs associated with acquisitions and integration, plus items like contingent acquisition payments that accounting rules treat as remuneration. On per-share numbers, it is the same story: underlying basic EPS up 10% to 23.95p, reported basic EPS down to 8.83p.
For investors, this matters. Knights is leaning into consolidation. That means a near-term drag from deal and integration costs, while the underlying trajectory shows the operational engine improving.
Organic growth picture and pricing discipline
Revenue growth was driven primarily by acquisitions. Organic revenue reduced by £0.5m, though Knights notes this reflects a deliberate scaling back of restructuring and insolvency work which shaved roughly £0.8m from FY25. Excluding that strategic decision, organic revenue edged up by £0.3m.
More importantly, quality improved. Gross margin expanded to 50.5% on better pricing, higher fees per fee earner and tighter cost control. The business has been pushing through “sustained and consistent” rate increases, which is exactly what you want to see when inflation and wage pressure are still around.
People engine firing – recruitment up, churn down
Talent is the lifeblood of a law firm. Knights recruited 51 senior fee earners in the year, up 28% on FY24, and cut churn to 10% in H2. That is a very decent improvement and should support future organic growth, since newcomers typically take time to reach run-rate productivity.
The refurbished Stoke hub is now the induction centre for all new joiners, which should accelerate cultural integration and cross-selling. Post year end, the employee NPS hit +59, which is a healthy read on engagement.
Acquisitions – building regional scale and adjacencies
Knights executed two sizeable deals during the year:
- Thursfields Legal Limited – strengthening the Midlands, adding 86 fee earners and a strong Private Wealth offering.
- IBB Law LLP – the largest Knights deal to date, significantly scaling the South East footprint with 161 fee earners.
Both are said to be integrating well and trading in line with expectations. After the period, Knights added Birkett Long LLP and its financial advisory arm, entered Kent and Sussex with Rix & Kay LLP, and picked up Le Gros Solicitors Limited in Cardiff. The Birkett Long IFA element is strategically interesting, opening up legal plus wealth advisory for clients under one roof.
Cash, debt and dividends – disciplined but geared for M&A
Cash conversion stayed strong at 130%, underpinned by tight working capital control and industry-leading debtor days of 31. Lock up normalised to 86 days, up from an exceptional 78 last year but in line with historic levels and the firm’s 90-day internal target.
Net debt rose to £64.8m, reflecting £25.1m of acquisition consideration, integration spend and £11.8m of capex, including £5.8m for the Stoke hub. Leverage on the banking definition is 1.6x EBITDA, with roughly £30m headroom on the extended £100m revolving credit facility running to November 2027. The balance sheet therefore has room to keep consolidating, provided integration keeps pace.
The Board proposes a final dividend of 3.05p, taking the total to 4.81p, up 9.3% year on year. The pay-out is aligned to a policy of distributing 20% of underlying profit after tax.
Operational fine print worth noting
- Bad debt charge increased to 0.8% due to a one-off insolvency write-off of £0.6m. Not pretty, but manageable.
- Other operating income fell to £9.6m from £10.4m, mainly due to lower interest on client monies.
- IFRS 16 lease costs ticked up in absolute terms, but fell as a share of revenue to 4.6%.
- Capital expenditure of £11.8m is guided to normalise to about £6m in FY26 after the one-off Stoke refurbishment.
Outlook for FY26 – what to watch
Management says trading at the start of the year is in line with expectations and remains confident in further profitable growth in FY26. The investment case now hinges on three levers:
- Retention staying low while recruitment remains strong, so organic growth can finally kick through.
- Acquisition integration delivering the expected synergies and margin uplift.
- Working capital discipline holding, keeping cash conversion high to self-fund a chunk of growth.
My take – a business at scale, with consolidation momentum
This is an encouraging set of results. Underlying profits up 11%, margins improving, and a clear step-up in recruitment and retention. The reported numbers are weighed down by deal and integration costs, which is the price of building a national platform. Provided Knights continues to integrate cleanly and avoids any blow-ups in acquired books, the underlying improvements should translate into cleaner reported earnings over time.
Positives
- Double-digit underlying profit growth and stronger gross margin at 50.5%.
- Cash conversion at 130% with debtor days at 31 is best-in-class for the sector.
- Two high-quality acquisitions landed and more added post year end, expanding services and geography.
- Churn down to 10% in H2 and 51 senior hires bodes well for organic growth in FY26.
Watch-outs
- Organic revenue was flat overall in FY25, with growth expected to come through as hires mature.
- Net debt has stepped up to £64.8m. Leverage is comfortable at 1.6x, but the M&A drumbeat requires continued discipline.
- Lock up days rose from an exceptionally low FY24 base. Keeping it near the 90-day target is key to sustaining cash conversion.
Overall, Knights looks like a consolidator hitting its stride. If FY26 brings cleaner organic growth on top of the scaled platform and the new South East and Essex hubs, the investment case should keep compounding. For now, the dividend is nudging up, cash generation is robust, and the pipeline of people and firms joining the platform remains encouraging.
