REG - Knights Group Hldgs - Half Year Results
14/01/2025 07:00
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RNS Number : 1667T Knights Group Holdings PLC 14 January 2025
Knights Group Holdings plc
("Knights" or the "Group")
Half Year Results
Continued profitable growth and further margin enhancement
Knights, the national legal and professional services business, today
announces its half year results for the six months ended 31 October 2024.
Financial highlights
· Strong growth in underlying PBT(1) of 25.9% to £14.6m (H1 FY24:
£11.6m); Underlying PBT(1) margin up 3.0% pts to 18.4% (H1 FY24: 15.4%)
· Revenue up 5.4% to £79.4m (H1 FY24: £75.3m)
· Reported profit before tax increased by 30.4% to £9.0m (H1 FY24:
£6.9m)
· Basic underlying EPS(2) up 27.2% to 12.71p (H1 FY24: 9.99p); Basic
reported EPS up 33.7% to 7.14p (H1 FY24: 5.34p)
· Debtor days of 33 (H1 FY24: 31); lock up(3) of 98 days (H1 FY24: 93
days)
· Good cash conversion(4) of 63% (H1 FY24: 69%)
· Net debt(5) at £50.1m (1.4x bank leverage), (H1 FY24: £38.3m (1.3x
bank leverage), FY24: £35.2m (1.1x bank leverage) after a cash outlay of
c.£8.9m relating to initial and deferred consideration in respect of
acquisitions
· Interim dividend 1.76p per share (H1 FY24: 1.61p per share)
Strategic and operational highlights
Focus on driving higher quality revenues, underpinned by strong national
reputation
· 23 senior fee earners hired in the period (H1 FY24: 20)
· Growth in higher margin business areas of CL Medilaw, real estate and
New Homes, while strategically reducing lower margin areas such as insolvency
· Streamlined and centralised internal business functions resulting in
an improved fee earner to non-fee earner ratio of 3.7:1 (H1 FY24: 3.6:1)
· Maintained cost discipline and operational excellence; continued
investment in the technology platform
· Experienced team of Client and Business Services Directors, with
average tenure of over five years
Expanded footprint and delivering organic growth from prior year acquisitions
· Strengthened presence in West Midlands, adding offices in Worcester,
Kidderminster, Solihull and Birmingham through the acquisition of Thursfields
Legal Limited, which has integrated well and is performing in line with
expectations
· Total revenue from recent acquisitions of Baines Wilson, St. James'
Law and Meade King is ahead of expectations and delivering good organic growth
opportunities
Current trading and outlook
· Trading in H2 FY25 has begun in line with our full year expectations
· Breadth and scale of offering securing significant recent client wins
· Growing reputation driving strong recruitment and acquisition
pipeline
· Confident of further organic growth in the second half
David Beech, CEO of Knights, commented:
"Knights has delivered a strong performance in the first half, with a
significant increase in profitability, supported by strong recruitment,
significant client wins, contributions from prior year acquisitions and
excellent cost discipline.
"The second half of the year has started in line with our expectations, with
important recent client wins, and continued recruitment momentum, underpinning
our confidence in delivering further organic growth in the second half.
"Knights' growing reputation as a quality UK legal services provider with
national scale continues to support our recruitment and acquisition pipeline
and we have a good pipeline of further hires for the second half.
"This positive momentum, together with our continued focus on operational
excellence positions us well for delivering full year profits in line with our
expectations."
A presentation of the results will be made to analysts and investors at 9.00am
this morning. To register for access, or for any other enquiries, please
contact MHP Group on: Knights@mhpgroup.com.
Enquiries
Knights
David Beech, CEO Via MHP
Kate Lewis
Deutsche Numis (Nomad and Broker)
Stuart Skinner, Kevin Cruickshank 020 7260 1000
MHP (Media enquiries)
Katie Hunt, Eleni Menikou 020 3128 8100
+44 (0)7884 494112
knights@mhpgroup.com
Notes to Editors
Knights is a fast-growing legal and professional services business, ranked
within the UK's top 50 largest law firms by revenue. Knights was one of the
first law firms in the UK to move from the traditional partnership model to a
corporate structure in 2012 and has since grown rapidly. Knights has
specialists in all key areas of Corporate and Commercial law and Private
Wealth services. It is focussed on key UK markets outside London and currently
operates from 26 offices located in Birmingham, Brighton, Bristol, Carlisle,
Cheltenham, Chester, Exeter, Kidderminster, Kings Hill, Leeds, Leicester,
Lincoln, Manchester, Newbury, Newcastle, Nottingham, Oxford, Portsmouth,
Sheffield, Solihull, Stoke, Teesside, Weybridge, Wilmslow, Worcester and
York.
Footnotes
(1 )Underlying PBT is before amortisation of acquired intangibles,
non-underlying operating expenses, and non-underlying finance costs.
Non-underlying operating expenses include transaction and onerous lease
expenses in relation to acquisitions, contingent acquisition payments,
disposal of acquired assets, along with one-off restructuring staff and
professional expenses, mainly incurred on acquisitions, through streamlining
support functions or strategic reorganisations.
Contingent acquisition payments are treated as a non-underlying expense as
this represents payments for acquisitions which are dependent on the continued
employment of certain individuals in the business for an agreed contractual
period after an acquisition of one to three years to preserve the acquired
goodwill and customer relationships. Accounting standards require such
arrangements to be treated as remuneration in the Statement of Comprehensive
Income. However, the individuals also receive market rate salaries, therefore,
if not separately identified, these payments would significantly distort the
reported results.
(2 )Underlying EPS is underlying PAT divided by the weighted
average number of ordinary shares in issue.
(3 )Lock up is calculated as the combined debtor and WIP days as at
a point in time. Debtor days are calculated on a count back basis using the
gross debtors at the period end and compared with total fees raised over prior
months. WIP days are calculated based on the gross work in progress (excluding
that relating to clinical negligence claims, insolvency, and ground rents, as
these matters operate mainly on a conditional fee arrangement and a different
profile to the rest of the business) and calculating how many days billing
this relates to, based on average fees (again excluding clinical negligence
claims, insolvency, and ground rents fees) per month for the last 3 months.
Lock up days excludes the impact of acquisitions in the last quarter of the
reporting period.
(4 )Cash conversion is calculated as the total of cash from
operations, less tax paid and underlying IFRS 16 net lease payments, divided
by underlying profit after tax.
(5 )Net debt includes cash and cash equivalents, borrowings and
acquired debt but excludes lease liabilities.
(6 ) Underlying EBITDA is operating profit before depreciation,
amortisation and non-underlying operating expenses as defined above(1)
(7 )Underlying PAT is underlying PBT less any tax in respect of
underlying items.
(8 )Underlying EBITDA post IFRS 16 is used as a metric as this reflects
the profits after deduction of rental costs which is most comparable to the
EBITDA reported at IPO, before the introduction of IFRS 16.
These footnotes apply throughout the RNS
Chief Executive's Review
Overview
The Group has delivered a strong first half performance, reflecting our
unwavering focus on profitable revenue growth and supporting our confidence in
delivering profits in line with our expectations for the full year.
Underlying PBT increased by 25.9% to c.£14.6m (H1 FY24: £11.6m), and the
Group achieved a three percentage points increase in Underlying PBT margin to
18.4% (H1 FY24: 15.4%), building on its progression from 12.6% in H1 FY23,
driven by a three percentage point increase in gross profit margin from 47.5%
to 50.5%.
This demonstrates the benefits of our focus on building higher quality
revenues by continually strengthening our team and service capability;
excellent recovery of annual rate increases; and operational excellence and
cost discipline, supported by a strong performance from recent acquisitions.
Revenue grew by 5.4% to c.£79.4m (H1 FY24: £75.3m) driven predominantly by
acquisitions. Organic revenue growth in the period was broadly flat with good
growth in our CL Medilaw business, residential housing and commercial real
estate offsetting the subdued remortgage market and corporate M&A markets,
reflecting the resilience of our diversified service offering.
Prior year acquisitions, Baines Wilson and St. James' Law are fully
integrated, with Baines Wilson, in particular, trading ahead of expectations
during the first half, and Thursfields, which we acquired In September 2024,
has integrated well and is also performing in line with our expectations.
Maintaining a disciplined approach to working capital remains fundamental to
our business, and during the period debtor days were 33 (H1 FY24: 31 days)
and lock up days were 98 (H1 FY24: 93, H1 FY23: 103).
Knights' net debt increased to £50.1m, predominantly driven by £8.9m initial
and deferred acquisition costs and we were pleased to have agreed an extended
revolving credit facility, providing the Group with significant headroom to
execute its value-accretive acquisition strategy as suitable opportunities
arise.
Higher quality revenues from a stronger team
As the breadth of Knights' offering has grown in scale, bringing in, for
example, additional capability in niche areas like IP, data, immigration,
banking and ESG, we have been increasingly well positioned to focus on higher
performing teams and areas of the business such as CL Medilaw, real estate and
New Homes, whilst strategically reducing work in lower margin areas.
We also continue to strengthen the quality of our team. Our recruitment
momentum has continued at pace, with 23 senior professionals hired in the
first half, compared with 20 in the same period the previous year. We are
attracting high calibre talent from across the industry - from top 20 firms
and leading independents to those seeking to come back to private practice
from in-house roles - who are drawn to our corporate structure and collegiate
culture as an alternative to the financial risk and structural challenges
associated with the partnership model. This momentum has continued into the
second half with 20 offers accepted already and a strong pipeline of
candidates.
Our overall churn was 10% for the six months, as we continue to focus on
motivating and rewarding high performance, consistent with our drive towards
more profitable revenue generation.
Driving operational excellence and cost discipline
We are seeing the benefits of having had many of our expanded leadership team,
including those who joined with acquired businesses, in place for a
substantial tenure with most having now been in the business for over 5 years.
This maturity of leadership and resulting depth of understanding of the
business has enabled us to continue to sharpen our focus on operational
excellence across the Group, driving efficiencies, innovation and
collaboration throughout the business and maximising integration synergies
from acquisitions.
The growth of margin during the first half reflects this, and our strong
ongoing cost discipline, aided by our regional footprint, has insulated us
from some of the financial pressures seen in the City, including significant
salary and property cost inflation.
During the first half, we continued to streamline and centralise several
internal business functions, which has delivered cost savings and
efficiencies, whilst delivering enhanced support and greater collaboration
across the Group. As a result, at 3.7:1 (H1 FY24: 3.6:1), our fee earner to
non-fee earner ratio demonstrates that we are at the leading edge of our
industry in terms of operating an efficient and lean delivery platform.
We have always aimed to be at the forefront of implementing new technologies
to support and enhance our service delivery. In the first half, we have, in
partnership with leading technology providers, continued to explore the use of
the right platforms to enhance our internal and client-focused processes and
services to ensure we stay ahead of the curve. We have continued to migrate to
cloud-based from on-premise systems, reducing reliance on costly hardware, and
are adopting AI applications in a measured way to support identified needs and
opportunities, with a new AI-enabled document management system expected to go
live in our next financial year. We remain alert to the potential benefits
that emerging technologies bring in our industry, whilst recognising that a
considered approach is required.
Excellent recovery and wins reflect the value clients attribute to our
services
The strength of our brand and recognition of the value of our service is also
demonstrated by positive momentum in new client wins.
We have also fully embedded annual rate increases, communicated in November,
and effective from 1(st) May each year. Our excellent recovery of these rates,
which is a key measure of success for the Group, reflects both our commercial
focus and the recognition of Knights' value by our clients.
With Knights' reputation and national brand growing - attracting people,
clients and acquisition targets to our Group - we are now implementing a
number of marketing and brand initiatives to continue to drive increased
awareness from a broader audience, ranging from local, regional and national
business development activity through to a greater central infrastructure
focused on brand marketing.
Strong performance from recent acquisitions
During the half, the Group acquired Thursfields Legal Limited, a premium,
independent, full service legal services business, based in the West Midlands
but with a national client base. The acquisition has significantly
strengthened Knights' presence in the region, adding offices in Worcester,
Kidderminster, Solihull and Birmingham. It also adds to the Group's Private
Wealth service lines, with Thursfields' strong reputation in Private Client,
Family and Residential Property, alongside Corporate, Real Estate and Dispute
Resolution services. The team has integrated well and is performing in line
with our expectations.
This acquisition is consistent with our well-established acquisition strategy,
which has seen us expand through selective acquisitions to become an operator
of scale, with nationwide coverage outside London. This strategy is
delivering, with the prior year acquisitions of Baines Wilson and St. James'
Law performing ahead of expectations, maintaining in excess of 100% of the
total acquired revenues. Our previous acquisition of Meade King in February
2023 continues to demonstrate our ability to grow organically from an acquired
platform with our Bristol office now demonstrating strong revenue growth.
We continue to have a healthy pipeline of acquisition opportunities, which we
expect to pursue on a selective basis.
Dividend
The Group's progressive dividend policy seeks to maintain a balance between
retaining profits to execute our strategy, and delivering value for
shareholders as our strategy yields positive performances.
The Board is therefore proposing an interim dividend of 1.76p per share (H1
FY24: 1.61p), an increase of 9%. The dividend will be payable on 14 March 2025
to shareholders on the register at 14 February 2025.
Proven track record as a corporatised consolidator having built a national
brand of scale
When Knights changed to a corporate model, well over a decade ago, we were a
pioneer in the industry. Since then, we have proven the benefits of the
corporate model and of being a consolidator of our fragmented sector, in which
the traditional partnership model faces increasing structural pressures.
We have clear momentum in the number of professionals joining us from leading
regional and national firms, attracted to our corporate structure over the
partnership alternative and our fast-emerging national brand, and we have
established our reputation as the most compelling acquirer, of scale, in the
sector.
As a result, first half underlying PBT is three times our full year equivalent
at IPO in April 2018, and we have grown from 430 to 1,335 people since IPO,
demonstrating our ability to build value through acquisitions, integration and
retaining higher performing people.
It is particularly interesting to see this approach being validated by the
considerable levels of investment from private equity in a parallel
professional service, accountancy.
Current Trading and Outlook
We have started the second half of the year in line with our expectations,
with significant recent client wins and our recruitment momentum underpinning
our confidence in delivering further organic growth in the second half.
We have a good pipeline of further hires for the second half, driven by the
ever-increasing awareness of the Knights brand and its growing reputation
across the UK legal services market. These factors, together with our ongoing
focus on operational efficiency and excellence, position us well for a good
performance in the second half, delivering full year profits in line with
our expectations.
David Beech
CEO
Financial review
The Group has continued to deliver improvements in profits and margin with
underlying EBITDA(6) growing by 17.6% in the first half of the year to £21.4m
(H1 FY24: £18.2m), representing a 280 basis points increase in underlying
EBITDA margin to 27.0% (H1 FY24: 24.2%). The improvement in margin reflects
our continued focus on profitable revenue growth, continued cost management
and optimisation of synergies as the Group grows.
6 months ended 6 months ended % change
31 October 2024
31 October 2023
(Unaudited)
(Unaudited)
£'000
£'000
Revenue 79,414 75,296 5%
Direct fee earner costs (38,970) (39,215) (1%)
Other direct costs (378) (307) 23%
Gross profit 40,066 35,774 12%
Gross profit % 50.5% 47.5%
Other operating income 4,857 5,471 (11%)
Other staff costs (8,727) (8,610) 1%
Impairment of trade receivables and contract assets (622) (131) 375%
Other operating charges (14,157) (14,312) (1%)
Underlying EBITDA(6) 21,417 18,192 18%
Underlying EBITDA % 27.0% 24.2%
Depreciation charges under IFRS 16 (2,499) (2,854) (12%)
Finance charges under IFRS 16 (1,000) (713) 40%
Underlying EBITDA post IFRS 16 charges(8) 17,918 14,625 23%
Depreciation and amortisation charges (excluding amortisation on acquired (1,571) (1,514) 4%
intangibles)
Underlying finance costs (1,856) (1,535) 21%
Underlying finance income 126 - -
Underlying profit before tax(1) 14,617 11,576 26%
Underlying profit before tax margin 18.4% 15.4%
Underlying tax charge (3,691) (3,004) 23%
Underlying profit after tax(7) 10,926 8,572 27%
Basic underlying EPS (pence)(2) 12.71 9.99 27%
Revenue
Revenue for the half year is £79.4m compared to £75.3m for the same period
last year, an increase of 5%. Of this increase, £3.6m is acquisition-related
being increased income from FY24 and FY25 acquisitions, with the balance of
£0.5m relating to the net organic revenue growth.
Organic revenues
Organic growth in the period was 0.7%. Organic revenue growth excludes
income growth from acquisitions in the year of acquisition and for the first
full financial year following acquisition based on the fees generated by
individuals joining the Group from the acquired business.
The Board is focussed on our long term commitment to positioning ourselves at
the premium end of the market by focussing on profitable revenue and reducing
less profitable revenue streams. As part of this focus, during the second
half of FY24 we made the strategic decision to significantly reduce our
restructuring and insolvency team due to lower margins in this area.
Excluding the impact of the strategic reduction of revenues in this area,
organic growth was 1.8% for the period.
Our continued focus on profitable revenue streams, and moving away from less
profitable work streams, has resulted in a 5.9% increase in organic gross
profit in the period.
Revenue from acquisitions
At acquisition we typically budget to retain 80% of acquired revenues. In
FY24 we acquired Baines Wilson and St James Law. Both acquisitions are
performing well with combined revenues from these acquisitions exceeding
budget. The acquisition of St James Law provided entry into the Newcastle
market which has proved to be an excellent base for recruitment and is
delivering strong organic growth opportunities.
In the period to 31 October 2024, we acquired Thursfields Legal Limited
expanding our presence in the West Midlands. The acquired business is now
fully integrated onto the Group's systems and is performing well, having
contributed £3m of revenue in the half year in line with expectations.
Employee costs
Our continued focus on managing our cost base, focus on profitable revenue
growth and leveraging our investment in support staff has resulted in a
reduction in total staff costs as a percentage of revenue to 60.1% in the
period compared to 63.5% in the comparable period last year. This reduction
has been achieved through a combination of increased gross margin with direct
staff costs reducing to 49.1% of revenue (H1 FY24: 52.1%). We have also
started to leverage our support staff costs in the period through the
centralisation of a number of business services teams, reducing our support
staff costs to 11.0% of revenue (H1 FY24: 11.4%).
Other operating income
Other operating income has reduced in the period to £4.9m (H1 FY24: £5.5m)
driven by decreasing interest rates and average client balances held during
the period.
Other operating charges
Other operating charges have continued to reduce as a percentage of revenue to
18.3% for the period to 31 October 2024 (H1 FY24: 19.4%; H1 FY23 20.0%) as we
continue to consolidate our cost base, optimise synergies from acquisitions
and leverage our cost base through continued profitable revenue growth.
Underlying EBITDA(6
)
Underlying EBITDA excludes non-underlying operating expenses which consist of
transaction and onerous lease expenses in relation to acquisitions, contingent
acquisition payments and one-off restructuring and professional expenses
mainly incurred in the streamlining of support functions or strategic
reorganisations. The Board considers this to be a key metric to measure
business performance.
Contingent acquisition payments are treated as a non-underlying expense as
this represents payments for acquisitions. These are dependent on the
continued employment of certain individuals in the business for an agreed
contractual period after an acquisition of one to three years to preserve the
acquired goodwill and customer relationships. Accounting standards require
such arrangements to be treated as remuneration in the Statement of
Comprehensive Income. However, the individuals also receive market rate
salaries, therefore, if not separately identified, these payments would
significantly distort the reported results.
During the period, underlying EBITDA increased by 18% to £21.4m (H1 FY24:
£18.2m) representing an increase in underlying EBITDA margin to 27.0% (H1
FY24: 24.2%). The improved margin is a result of improved gross margin to
50.5% (H1 FY24: 47.5%), leveraging support staff costs and good control of
central overheads offset by a reduction in net income received from client
balances. Excluding the impact of income received from client interest,
underlying EBITDA margin has increased to 21.2% (H1 FY24: 17.3%) demonstrating
the improving profitability of the underlying core business.
IFRS 16 depreciation and finance charges
The IFRS 16 depreciation and finance charges reflect the accounting charge in
respect of all leases with a term of over one year. The costs in the period
have reduced to 4.4% of revenue (H1 FY24 : 4.7%) as we continue to right size
our property portfolio through downsizing and subletting of excess space
together with organic and acquisitive growth in revenues enabling us to
further leverage our property costs.
Depreciation and amortisation charges
The charge in the half year has increased marginally from £1.5m to £1.6m,
remaining at 2% of revenue as we continue to invest in our IT and property
refurbishments to support the growth of the Group.
Finance charges
Finance charges, excluding lease interest, increased by £0.4m in the period
to £1.9m (H1 FY24: £1.5m) as a result of higher average interest rates on
our RCF facility over the period together with increased average net debt
balances due to cash outflows in relation to acquisitions.
Underlying finance income
This income relates primarily to income recognised from the sub leases of
parts of our property portfolio where there was excess space.
Underlying Profit Before Tax (PBT)(1)
Underlying profit before tax excludes amortisation of acquired intangibles,
transaction and onerous lease expenses in relation to acquisitions, contingent
acquisition payments, disposals of acquired assets, and one off restructuring
and professional costs mainly incurred in the streamlining of support
functions or strategic reorganisations.
Underlying PBT has been calculated as an alternative performance measure to
provide a more meaningful performance measure and to aid year on year
comparison of the profitability of the underlying business.
6 months ended 6 months ended
31 October 2024
31 October 2023
(Unaudited)
(Unaudited)
£'000
£'000
Profit before tax 8,974 6,892
Amortisation on acquired intangibles 1,869 1,794
Contingent acquisition payments treated as remuneration 1,447 1,548
Other non-underlying costs 2,327 1,342
Underlying profit before tax 14,617 11,576
The Group's underlying PBT has increased by 26% to £14.6m (H1 FY24: £11.6m).
The underlying profit before tax margin has increased to 18.4% compared to
15.4% in the prior period as a result of the increase in EBITDA margin and the
leveraging of IFRS 16 property lease costs, offset by increased finance costs.
Reported profit before tax
The reported profit before tax in the period has increased by 30% to £9.0m
(H1 FY24: £6.9m) driven by an increase in underlying profit before tax of
£3.0m offset by increased amortisation on acquired intangibles and
non-underlying costs of £0.9m.
Taxation
The corporation tax charge for the period was £2.8m (H1 FY24: £2.3m)
reflecting a reduced effective rate of tax of 32% (H1 FY24 34%) due to lower
disallowable expenditure in this half year relative to the comparable period
last year.
The effective rate of tax on the underlying profit of the business was 25% (H1
FY24: 26%) in line with current corporation tax rates.
Earnings per Share (EPS)
Basic EPS in the period increased by 34% to 7.14p (H1 FY24: 5.34p) per
share. Taking account of the dilutive impact of potential share options, the
basic Diluted EPS has increased by 32% to 6.87p (H1 FY24: 5.21p) per share.
To enable a comparison of year-on-year underlying performance, excluding any
one off items, the underlying EPS has also been calculated. The basic
underlying EPS(2) has increased by 27% to 12.71p (H1 FY24: 9.99p) per
share. The weighted average number of shares used to calculate the
undiluted EPS for the half year was 85,934,299 (H1 FY24: 85,816,798).
Dividend
In line with the Group's progressive dividend policy, reflecting the improved
performance of the Group balanced with the Board's strategy to continue to
reinvest profits of the Group to fund future growth plans, the Board has
declared an interim dividend of 1.76p per share (H1 FY24: 1.61p per share).
This will be a cash only dividend, payable on 14 March 2025 to all
shareholders on the register on 14 February 2025.
Balance Sheet
31 October 2024 31 October 2023 30 April
(Unaudited) (Unaudited) 2024
£'000
£'000
(Audited)
£'000
Intangible assets and goodwill 90,877 88,615 86,900
Right-of-use assets 37,287 35,770 34,034
Investments 50 - 50
Loan to joint venture 2,500 - 2,523
Property, plant and equipment 19,895 11,750 14,896
Assets held for sale 171 - -
Working capital 63,709 57,185 53,125
Other provisions and deferred tax (15,476) (14,541) (14,590)
Lease liabilities net of lease receivables (42,103) (40,394) (38,573)
156,910 138,385 138,365
Cash and cash equivalents 4,075 6,333 5,453
Borrowings (54,139) (44,620) (40,617)
Net debt(5) (50,064) (38,287) (35,164)
Deferred consideration (2,399) (3,997) (2,941)
Net assets 104,447 96,101 100,260
The Group's net assets increased by £4.1m from £100.3m as at 30 April 2024
to £104.4m as at 31 October 2024. This increase was primarily due to
profits generated in the half year to 31 October 2024 less the final dividend
paid in respect of the year ended 30 April 2024 of £2.4m. Assets held for
resale relate to investments acquired as part of the Thursfields acquisition
that will be realised post period end.
Working capital and cash management
31 October 2024 31 October 2023 30 April 2024
£'000
£'000
£'000
Contract assets 48,857 43,587 40,191
Trade and other receivables 33,009 30,516 32,753
Corporation tax asset 915 1,239 304
Total current assets 82,781 75,342 73,248
Trade and other payables (18,901) (17,949) (19,935)
Contract liabilities (171) (208) (188)
Total current liabilities (19,072) (18,157) (20,123)
Net working capital 63,709 57,185 53,125
Net working capital has increased by £6.5m to £63.7m as at 31 October 2024
(31 October 2023: £57.2m). Of this increase £1.1m related to working
capital acquired on the acquisition of Thursfields. The remaining increase
relates to increased contract assets, net of acquisitions, of £3.3m primarily
in our CL Medilaw business due to continued strong growth in this area along
with an increase in trade and other receivables, net of acquired balances,
primarily driven by timing of bills and an increase in debtor days from 31
days as at 31 October 2023 to 33 days as at 31 October 2024. This increase in
working capital from contract assets and trade and other receivables is offset
by a decrease in the corporation tax asset of £0.3m and a decrease in trade
and other payables, net of acquired balances, of £0.7m due to timing of
payments.
The management of lock up(3) continues to be an important KPI for the Group.
As at 31 October 2024 lock up was 98 days (31 October 2023: 93 days) being 33
debtor days and 65 WIP days (31 October 2023: 31 debtor days and 62 WIP
days). These calculations exclude the WIP on CL Medilaw and Insolvency
matters as generally the amount of time it takes to conclude these matters is
significantly longer than for other work types in the Group. To include the
WIP on these matters in our KPI reporting would significantly distort the
reported figures and therefore could distract the majority of the business
from focussing on continuing to maintain its excellent lock up discipline.
If the WIP were to be included in the lock up calculations for all matters
this would give total lock up days, with no exclusions, of 144 days as at 31
October 2024 (31 October 2023: 136 days) reflecting an increase in the level
of WIP in our CL Medilaw business as this work type continues to grow.
Cash Flow
Cash Flow 6 months ended 6 months ended
31 October 2024
31 October 2023
(Unaudited)
(Unaudited)
£'000
£'000
Underlying EBITDA 21,417 18,192
Change in working capital (8,388) (6,074)
Cash outflow for IFRS 16 leases (2,957) (3,303)
Movement in underlying share-based payment charge 445 852
Cash generated from underlying operations (pre-tax) 10,517 9,667
Tax paid (3,617) (3,754)
Net cash generated from underlying operating activities 6,900 5,913
Underlying profit after tax(7) 10,926 8,572
Underlying cash conversion(4) 63% 69%
Cash generation remains a key focus for the Board and management team. This
continued focus and management of lock up generated underlying operating
cashflows of £6.9m in the period being a conversion rate of 63% on underlying
profits. This good cash generation in the period has resulted in net debt of
£50.1m as at 31 October 2024 (31 October 2023: £38.3m) after a cash outlay
of £8.9m relating to acquisition consideration in the period and a £6.2m
outlay on capital expenditure in the period.
The table below shows a reconciliation of the key cash flow movements
impacting the movement in net debt from 30 April 2024.
Net debt(5)
£'000
Net debt 30 April 2024 35,164
Other net cash (inflows) from operating activities (6,900)
Deferred and contingent acquisition payments 2,488
Consideration paid for acquisitions in the period (including acquired debt and 6,387
cash)
Non-underlying costs paid 2,468
Interest on borrowings 1,882
Dividends paid 2,396
Capital expenditure (net of landlord contributions) 6,179
Net debt as at 31 October 2024 50,064
At £50.1m, this level of debt was in line with internal budgets as at 31
October 2024 with leverage for bank covenant purposes at 1.4 times EBITDA (as
defined for covenant purposes) which is well within our banking covenants.
On 19 November 2024 we extended our existing revolving credit facility with
HSBC UK, AIB (GB) and NatWest to provide total committed funding of £100m
until November 2027. Terms and interest margins remain the same with
applicable margins over SONIA of between 1.65% and 2.55% depending on
leverage.
With these extended facilities the Group is in a strong financial position
with sufficient headroom and flexibility within our financing arrangements to
enable us to continue to execute our growth strategy.
Kate Lewis
CFO
Knights Group Holdings plc
Consolidated Statement of Comprehensive Income
For the 6 month period ended 31 October 2024
Note 6 months ended 31 October 2024 6 months ended 31 October 2023 Year ended
(Unaudited) (Unaudited) 30 April 2024 (Audited)
£'000 £'000 £'000
Revenue 79,414 75,296 149,957
Other operating income 4,857 5,471 10,439
Staff costs* 3 (47,697) (47,825) (93,007)
Depreciation and amortisation charges* 4 (4,070) (4,368) (8,510)
Impairment of trade receivables and contract assets (622) (131) (489)
Other operating charges* 5 (14,535) (14,619) (28,218)
Operating profit before non-underlying costs and amortisation on acquired 17,347 13,824 30,172
intangibles
Amortisation on acquired intangibles 4 (1,869) (1,794) (3,580)
Non-underlying operating costs 6 (3,711) (2,818) (6,630)
Operating profit 11,767 9,212 19,962
Finance costs* 7 (2,898) (2,280) (4,939)
Finance income 8 168 32 89
Non-underlying finance costs 6 (63) (72) (281)
Net finance costs (2,793) (2,320) (5,131)
Profit before tax 8,974 6,892 14,831
Taxation - underlying* (3,691) (3,004) (6,598)
Tax impact of non-underlying costs 852 691 1,614
Taxation (2,839) (2,313) (4,984)
Profit and total comprehensive income for the period attributable to equity 6,135 4,579 9,847
owners of the parent
Earnings per share Pence Pence Pence
Basic earnings per share 9 7.14 5.34 11.47
Diluted earnings per share 9 6.87 5.21 11.11
* Excluding non underlying items and amortisation on acquired intangibles
Knights Group Holdings plc
Consolidated Statement of Financial Position
As at 31 October 2024
31 October 2024 31 October 2023 30 April 2024
(Unaudited) (Unaudited) (Audited)
£'000 £'000 £'000
Assets
Non-current assets
Intangible assets and goodwill 90,877 88,615 86,900
Investments 50 - 50
Property, plant and equipment 19,895 11,750 14,896
Right-of-use assets 37,287 35,770 34,034
Finance lease receivables 1,486 1,509 1,633
Trade and other receivables 2,500 - 2,523
152,095 137,644 140,036
Current assets
Assets held for sale 171 - -
Contract assets 48,857 43,587 40,191
Trade and other receivables 33,009 30,516 32,753
Finance lease receivables 366 320 364
Corporation tax asset 915 1,239 304
Cash and cash equivalents 4,075 6,333 5,453
87,393 81,995 79,065
Total assets 239,488 219,639 219,101
Equity and liabilities
Equity
Share capital 171 171 171
Share premium 75,262 75,262 75,262
Merger reserve (3,506) (3,506) (3,506)
Retained earnings 32,520 24,174 28,333
Equity attributable to owners of the parent 104,447 96,101 100,260
Non-current liabilities
Lease liabilities 38,926 36,917 35,389
Borrowings 53,808 394 40,149
Deferred consideration 550 1,502 350
Deferred tax 8,923 8,101 8,288
Provisions 3,686 4,141 3,968
105,893 51,055 88,144
Current liabilities
Lease liabilities 5,029 5,306 5,181
Borrowings 331 44,226 468
Trade and other payables 18,901 17,949 19,935
Deferred consideration 1,849 2,495 2,591
Contract liabilities 171 208 188
Provisions 2,867 2,299 2,334
29,148 72,483 30,697
Total liabilities 135,041 123,538 118,841
Total equity and liabilities 239,488 219,639 219,101
Knights Group Holdings plc
Consolidated Statement of Changes in Equity
For the 6 month period ended 31 October 2024
Attributable to equity holders of the Parent
Share capital Share premium Merger reserve Retained earnings £'000 Total
£'000
£'000
£'000
£'000
Balance at 1 May 2023 (audited) 171 75,262 (3,506) 20,880 92,807
Profit for the period and total comprehensive income - - - 4,579 4,579
Transactions with owners in their capacity as owners:
Credit to equity for equity-settled share-based payments - - - 859 859
Dividends - - - (2,144) (2,144)
Balance at 31 October 2023 (unaudited) 171 75,262 (3,506) 24,174 96,101
Profit for the period and total comprehensive income - - - 5,268 5,268
Transactions with owners in their capacity as owners:
Credit to equity for equity-settled share-based payments - - - 272 272
Dividends - - - (1,381) (1,381)
Balance at 30 April 2024 (audited) 171 75,262 (3,506) 28,333 100,260
Profit for the period and total comprehensive income - - - 6,135 6,135
Transactions with owners in their capacity as owners:
Credit to equity for equity-settled share-based payments - - - 448 448
Dividends - - - (2,396) (2,396)
Balance at 31 October 2024 (unaudited) 171 75,262 (3,506) 32,520 104,447
Knights Group Holdings plc
Consolidated Statement of Cash Flows
For the 6 month period ended 31 October 2024
Note 6 months ended 31 October 2024 6 months ended 31 October 2023 Year ended
(Unaudited) (Unaudited) 30 April 2024 (Audited)
£'000 £'000 £'000
Operating activities
Cash generated from operations 11 13,474 12,970 36,254
Non-underlying operating costs paid 6 (2,468) (2,053) (4,246)
Tax paid (3,617) (3,754) (5,432)
Contingent acquisition payments (1,123) (2,229) (3,745)
Net cash from operating activities 6,266 4,934 22,831
Investing activities
Acquisition of subsidiaries (net of cash acquired) (6,424) (1,888) (1,888)
Disposal of assets held for sale 37 - -
Other loans made - - (2,500)
Investment in joint venture - - (50)
Purchase of intangible fixed assets (24) (25) (40)
Purchase of property, plant and equipment (6,117) (2,835) (8,165)
Proceeds from lease receivables 230 188 405
Payment of deferred consideration (1,365) (1,167) (2,417)
Net cash used in investing activities (13,663) (5,727) (14,655)
Financing activities
Proceeds of borrowings 21,500 15,450 23,200
Repayment of borrowings (7,550) (4,650) (16,325)
Repayment of debt acquired with current year subsidiaries - (661) (661)
Repayment of debt acquired with prior year subsidiaries (428) (86) (166)
Landlord capital contribution 40 225 396
Associated lease costs (78) (26) (72)
Repayment of lease liabilities (2,271) (2,747) (5,113)
Interest and other finance costs paid (2,798) (2,280) (4,502)
Dividends paid (2,396) (2,144) (3,525)
Net cash from/(used in) financing activities 6,019 3,081 (6,768)
Net (decrease)/increase in cash and cash equivalents (1,378) 2,288 1,408
Cash and cash equivalents at the beginning of the period 5,453 4,045 4,045
Total cash and cash equivalents at end of period 4,075 6,333 5,453
Knights Group Holdings plc
Notes to the Consolidated Interim Financial Statements
For the 6 month period ended 31 October 2024
1. General Information
Knights Group Holdings plc ("the Company") is a public company limited by
shares and is registered, domiciled and incorporated in England (registration
no. 11290101).
The Group consists of Knights Group Holdings plc and all of its subsidiaries.
The principal activity and nature of operations of the Group is the provision
of legal and professional services. The address of its registered office is:
The Brampton
Newcastle-under-Lyme
Staffordshire
ST5 0QW
2. Accounting policies
2.1 Basis of preparation
The accounting policies used in the preparation of the interim financial
information for the six months ended 31 October 2024 are in accordance with
the recognition and measurement criteria of UK-Adopted International
Accounting Standards and are consistent with those which will be adopted in
the annual statutory financial statements for the year ending 30 April 2025.
The Group's statutory financial statements for the year ended 30 April 2024,
prepared under UK-adopted International Accounting Standards, have been filed
with the Registrar of Companies. The auditor's report on those financial
statements was unqualified and did not contain a statement under Section
498(2) or (3) of the Companies Act 2006. This interim financial information
was approved by the board on 13 January 2025.
The financial statements contained in this interim report do not constitute
statutory accounts as defined in section 434 of the Companies Act 2006.
The interim report has not been audited or reviewed in accordance with the
International Standard on Review Engagements (UK) 2410 issued by the Financial
Reporting Council.
Monetary amounts are presented in sterling, being the functional currency of
the Group, rounded to the nearest thousand except where otherwise indicated.
2.2 Going concern
The interim financial information has been prepared on a going concern basis
as the Directors have a reasonable expectation that the Group has adequate
resources to continue in operational existence for the foreseeable future. The
Group has a strong trading performance, generates strong operating cashflows
and has banking facilities of £100,000,000, available until November 2027.
The Group's forecasts show sufficient cash generation and headroom in banking
facilities and covenants by comparison to anticipated future requirements to
support the Directors' conclusions that the assumption of the going concern
basis of accounting in preparing the interim financial information is
appropriate.
The Group continues to trade profitably and cash generation at an operating
cashflow level has remained strong and in line with expectation. In order to
satisfy the validity of the going concern assumption, a number of different
trading scenarios including a reduction in revenues and costs and an increase
in interest rates and lock up have been modelled and reviewed. Some of these
scenarios forecast a significantly more negative trading performance than is
expected. In all of these scenarios the Group remained profitable and with
significant headroom in its cash resources for the 12 months from the date of
approval of this interim financial information.
2.3 Accounting developments
There have been no new standards or interpretations relevant to the Group's
operations applied in the interim financial information for the first time.
3. Staff costs
6 months ended 6 months ended Year ended
31 October 2024 31 October 2023 30 April 2024 (Audited)
(Unaudited) (Unaudited) £'000
£'000 £'000
Employee costs 47,694 47,291 93,221
Share-based payment charge 448 859 1,131
Aggregate remuneration of employees 48,142 48,150 94,352
Redundancy costs and share-based payment charges analysed as non-underlying (445) (325) (1,345)
costs (note 6)
Underlying staff costs in Consolidated Statement of Comprehensive Income 47,697 47,825 93,007
4. Depreciation and amortisation charges
6 months ended 6 months ended Year ended
31 October 2024 31 October 2023 30 April 2024 (Audited)
(Unaudited) (Unaudited) £'000
£'000 £'000
Depreciation 1,457 1,294 2,656
Depreciation of right-of-use assets 2,499 2,854 5,607
Amortisation on computer software 54 51 103
Loss on disposal of property, plant and equipment 60 169 144
Underlying depreciation and amortisation charges in Consolidated Statement of 4,070 4,368 8,510
Comprehensive Income
Amortisation on acquired intangibles 1,869 1,794 3,580
5,939 6,162 12,090
Amortisation on acquired intangibles has been separately identified within
overall depreciation and amortisation charges as it is deemed to be a
non-underlying cost, on the basis that it relates to acquisitions. As such for
the period ended 31 October 2023 it has been reclassified to enable clearer
presentation of the non-underlying items included within operating profit.
This has not resulted in any change to reported operating profit.
5. Other operating charges
6 months ended 6 months ended Year ended
31 October 2024 31 October 2023 30 April 2024 (Audited)
(Unaudited) (Unaudited) £'000
£'000 £'000
Establishment costs 4,065 3,900 7,775
Short term and low value lease costs 113 147 247
Other overhead expenses 10,357 10,572 20,196
14,535 14,619 28,218
6. Non-underlying costs
6 months ended 6 months ended Year ended
31 October 2024 31 October 2023 30 April 2024 (Audited)
(Unaudited) (Unaudited) £'000
£'000 £'000
Redundancy and reorganisation staff costs 442 318 1,335
Share-based payment charges 3 7 10
Contingent acquisition payments treated as remuneration 1,447 1,548 2,824
Impairment of right-of-use assets - 153 153
Loss/(Profit) on disposal of right-of-use assets 137 (54) (125)
Loss on disposal of property, plant and equipment 149 84 930
Transaction costs 1,533 762 1,503
Non-underlying operating costs 3,711 2,818 6,630
Non-underlying finance costs 63 72 281
3,774 2,890 6,911
Non-underlying costs cash movement
6 months ended 6 months ended Year ended
31 October 2024 31 October 2023 30 April 2024 (Audited)
(Unaudited) (Unaudited) £'000
£'000 £'000
Non-underlying costs 3,774 2,890 6,911
Adjustments for:
Contingent acquisition payments shown separately (1,447) (1,548) (2,824)
Non-cash movements:
Share-based payment charge (3) (7) (10)
Impairment of right-of-use assets - (153) (153)
(Loss)/Profit on disposal of right-of-use assets (10) 54 449
(Loss) on disposal of property, plant and equipment (149) (84) (930)
Transaction costs (63) - (443)
Non-underlying finance costs (63) (72) (281)
Additional cash movements:
Rental payments on onerous leases 193 335 605
Service charge payments on onerous leases 56 48 104
Dilapidation payments 180 590 818
2,468 2,053 4,246
Non-underlying costs relate to redundancy costs to streamline the support
function of the Group following acquisitions or strategic reorganisations,
transaction costs in respect of acquisitions, onerous lease costs in respect
of acquisitions, disposals of acquired assets and share-based payment charges
relating to one off share schemes offered to employees as part of the IPO and
on acquisitions.
Contingent acquisition payments are included in non-underlying costs as it
represents payments which are contingent on the continued employment of those
individuals with the Group, agreed under the terms of the sale and purchase
agreements with vendors of certain businesses acquired. The payments extend
over periods of one to three years and are designed to preserve the value of
goodwill and customer relationships acquired in the business combinations.
IFRS requires such arrangements to be treated as remuneration and charged to
the Consolidated Statement of Comprehensive Income. The individuals also
receive market rate salaries for their work, in line with other similar
members of staff in the Group. The contingent earnout payments are
significantly in excess of these market salaries and would distort the Group's
results if not separately identified.
7. Finance costs
6 months ended 6 months ended Year ended
31 October 2024 31 October 2023 30 April 2024 (Audited)
(Unaudited) (Unaudited) £'000
£'000 £'000
Interest on borrowings 1,856 1,535 3,402
Interest on leases 1,042 745 1,537
2,898 2,280 4,939
8. Finance income
6 months ended 6 months ended Year ended
31 October 2024 31 October 2023 30 April 2024 (Audited)
(Unaudited) (Unaudited) £'000
£'000 £'000
Loan interest receivable 126 - 23
Lease interest receivable 42 32 66
168 32 89
9. Earnings per share
Basic and diluted earnings per share have been calculated using profit after
tax and the weighted average number of ordinary shares in issue during the
period.
6 months ended 6 months ended Year ended
31 October 2024 31 October 2023 30 April 2024 (Audited)
(Unaudited) (Unaudited) Number
Number Number
Weighted average number of ordinary shares for the purposes of basic earnings 85,934,299 85,816,798 85,840,067
per share
Effect of dilutive potential ordinary shares:
Share options 3,300,000 2,075,973 2,778,654
Weighted average number of ordinary shares for the purposes of diluted 89,234,299 87,892,771 88,618,721
earnings per share
£'000 £'000 £'000
Profit after tax 6,135 4,579 9,847
Earnings per share Pence Pence Pence
Basic earnings per share 7.14 5.34 11.47
Diluted earnings per share 6.87 5.21 11.11
Underlying profit after tax (PAT) and adjusted per share (EPS)
Underlying PAT and EPS are presented as alternative performance measures to
show the underlying performance of the Group excluding the effects of
amortisation of intangible assets, share-based payments and non-underlying
items.
6 months ended 6 months ended Year ended
31 October 2024 31 October 2023 30 April 2024
(Unaudited) (Unaudited) (Audited)
£'000 £'000 £'000
Profit after tax 6,135 4,579 9,847
Amortisation on acquired intangibles 1,869 1,794 3,580
Non-underlying costs 3,774 2,890 6,911
Tax impact of non-underlying costs (852) (691) (1,614)
Underlying profit after tax 10,926 8,572 18,724
Underlying earnings per share Pence Pence Pence
Basic underlying earnings per share 12.71 9.99 21.81
Diluted underlying earnings per share 12.24 9.75 21.13
10. Acquisitions
Thursfields Legal Limited ('Thursfields')
On 25 July 2024 the Group exchanged contracts to acquire Thursfields by
purchasing the shares of the entity. This acquisition completed on 14
September 2024. Thursfields is a law firm which will significantly strengthen
Knights' presence in the West Midlands.
The amounts recognised in respect of the identifiable assets acquired and
liabilities assumed are as set out in the table below. These figures are
provisional as the purchase accounting is not yet finalised:
Carrying amount £'000 Fair value adjustment £'000 Total
£'000
Identifiable assets
Identifiable intangible assets - 1,627 1,627
Property, plant and equipment 552 (3) 549
Assets held for sale 208 - 208
Right-of-use assets - 602 602
Contract assets 1,947 - 1,947
Trade and other receivables 776 - 776
Cash and cash equivalents 3,899 - 3,899
Liabilities
Trade and other payables (1,662) - (1,662)
Lease liabilities - (602) (602)
Provisions (222) 5 (217)
Deferred tax (4) (407) (411)
Total identifiable assets and liabilities 5,494 1,222 6,716
Goodwill 4,406
Total consideration 11,122
Satisfied by:
Cash 10,323
Deferred consideration 799
Total consideration transferred 11,122
Net cash outflow arising on acquisition:
Cash consideration (net of cash acquired) 6,424
Net cash outflow arising on acquisition 6,424
Intangibles relating to customer relationships of £1,627,000 has been arrived
at using the excess earnings method. The goodwill of £4,406,000 represents
the assembled workforce, with the acquisition bringing a number of new fee
earners and expected synergies. None of the goodwill is expected to be
deductible for income tax purposes.
A contingent consideration arrangement was entered into as part of the
acquisition. This is contingent on the sellers remaining in employment with
the Group therefore it has been excluded from the consideration and will be
recognised in the Consolidated Statement of Comprehensive Income on a
straight-line basis as a remuneration expense over the 3 years
post-acquisition period. This is recognised within non-underlying operating
costs.
The maximum undiscounted amount of all potential future payments under the
contingent consideration arrangement is £4,117,000 and is payable in equal
instalments on the first, second and third anniversary of completion.
There are also undiscounted deferred consideration payments totalling
£883,000 outstanding. This is payable in instalments on the first, second
and third anniversaries of completion.
Thursfields contributed £3,044,000 of revenue to the Group's Statement of
Comprehensive Income for the period from 1 May 2024 to 31 October 2024. The
profit contributed is not separately identifiable due to the hive-up of its
trade and assets being incorporated into Knights Professional Services Limited
from 14 September 2024.
11. Reconciliation of profit to net cash generated from operations
6 months ended 31 October 2024 6 months ended 31 October 2023 Year ended
(Unaudited) (Unaudited) 30 April 2024 (Audited)
£'000 £'000 £'000
Profit before taxation 8,974 6,892 14,831
Adjustments for:
Amortisation on computer software 54 51 103
Amortisation on acquired intangibles 1,869 1,794 3,580
Depreciation - property, plant and equipment 1,457 1,294 2,656
Depreciation - right-of-use assets 2,499 2,854 5,607
Loss on disposal of property, plant and equipment 60 169 144
Contingent acquisition payments 1,447 1,548 2,824
Other non-underlying operating costs 2,264 1,270 3,806
Non-underlying finance costs 63 72 281
Share-based payment charge 445 852 1,121
Finance income (168) (32) (89)
Finance costs 2,898 2,280 4,939
Operating cash flows before movements in working capital 21,862 19,044 39,803
(Increase) in contract assets (6,719) (5,028) (1,632)
Decrease/(increase) in trade and other receivables 648 1,420 (767)
Increase in provisions 325 170 29
(Decrease) in contract liabilities (17) (11) (29)
(Decrease) in trade and other payables (2,625) (2,625) (1,150)
Cash generated from operations 13,474 12,970 36,254
12. Alternative performance measures
Underlying EBITDA is calculated as follows:
6 months ended 31 October 2024 6 months ended 31 October 2023 Year ended
(Unaudited) (Unaudited) 30 April 2024 (Audited)
£'000 £'000 £'000
Operating profit 11,767 9,212 19,962
Depreciation and amortisation charges (note 4) 5,939 6,162 12,090
Non-underlying operating costs (note 6) 3,711 2,818 6,630
Underlying EBITDA 21,417 18,192 38,682
Depreciation of right-of-use assets (note 4) (2,499) (2,854) (5,607)
Interest on leases (note 7) (1,042) (745) (1,537)
Lease interest receivable (note 8) 42 32 66
Underlying EBITDA post IFRS 16 17,918 14,625 31,604
Underlying PBT (Profit Before Tax) is calculated as follows:
6 months ended 31 October 2024 6 months ended 31 October 2023 Year ended
(Unaudited) (Unaudited) 30 April 2024 (Audited)
£'000 £'000 £'000
Profit before tax 8,974 6,892 14,831
Amortisation on acquired intangibles (note 4) 1,869 1,794 3,580
Non-underlying operating costs (note 6) 3,711 2,818 6,630
Non-underlying finance costs (note 6) 63 72 281
Underlying profit before tax 14,617 11,576 25,322
Net debt is calculated as follows:
6 months ended 31 October 2024 6 months ended 31 October 2023 Year ended
(Unaudited) (Unaudited) 30 April 2024 (Audited)
£'000 £'000 £'000
Borrowings 54,139 44,620 40,617
Cash and cash equivalents (4,075) (6,333) (5,453)
Net debt 50,064 38,287 35,164
13. Free cash flow and cash conversion %
Free cash flow measures the Group's underlying cash generation. Cash
conversion % measures the Group's conversion of its underlying PAT (Profit
After Tax) into free cash flows. Free cash flow is calculated as the total of
net cash from operating activities after adjusting for tax paid and the impact
of IFRS 16. Cash conversion % is calculated by dividing free cash flow by
underlying PAT, which is reconciled to profit after tax (note 9).
6 months ended 31 October 2024 6 months ended 31 October 2023 Year ended
(Unaudited) (Unaudited) 30 April 2024 (Audited)
£'000 £'000 £'000
Cash generated from operations (note 11) 13,474 12,970 36,254
Tax paid (3,617) (3,754) (5,432)
Net underlying cash outflow for IFRS 16 leases (2,957) (3,303) (6,245)
Free cash flow 6,900 5,913 24,577
Underlying profit after tax (note 9) 10,926 8,572 18,724
Cash conversion (%) 63% 69% 131%
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