REG - Knights Group Hldgs - Full Year Results
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RNS Number : 3028Z Knights Group Holdings PLC 15 September 2025
Knights Group Holdings plc
("Knights" or the "Group")
Full Year Results
Strategic progress driving double digit profit growth
Knights, the national legal and professional services business, today
announces its full year results for the year ended 30 April 2025.
Financial highlights
· Revenue increased by 8% to £162.0m (FY24: £150.0m)
· Gross margin up 170 bps to 50.5% (FY24: 48.8%)
· Underlying EBITDA (7) up 11% to £42.9m (FY24: £38.7m) a 70bps
increase in margin to 26.5% (FY24: 25.8%)
· Underlying PBT(1) up 11% to £28.0m (FY24: £25.3m); a 40 bps
increase in margin to 17.3% (FY24: 16.9%)
· Underlying basic EPS(2) increased 10% to 23.95p (FY24: 21.81p)
· Reported PBT of £12.3m (FY24: £14.8m) and Basic EPS of 8.83p
(FY24: 11.47p) primarily impacted by increased non underlying acquisition
related costs
· Lock up(3) days normalised to 86 (FY24: 78 days, FY23: 87,
FY22: 86), with debtor days remaining industry leading at 31 (FY24: 28 days)
· Strong cash conversion(4) of 130% (FY24: 131%), facilitating
continued growth
· Net debt(5) of £64.8m (30 April 24: £35.2m), after £25.1m
of acquisition consideration; EBITDA / net debt banking covenant ratio of 1.6x
(30 April 2024: 1.1x)
· Final dividend of 3.05p (FY24: 2.79p), giving a 9.3% increase
in the total dividend to 4.81p (FY24: 4.40p)
Strategic and operational highlights
Recruitment momentum and operational excellence positions us well for future
organic growth
· Recruited 51 senior fee earners, 28% more than in FY24 (40),
reflecting the appeal of our corporatised model and exceptional reputation,
scale, and culture
· Churn(6) reduced to 10% in H2, significantly lower than
industry average driven by engagement activity initiatives across the business
· Strong client wins; clients attracted to and benefitting from
increasingly diverse service offering
· Good pricing discipline combined with a continued focus on cost
optimisation and operational excellence
Executing on our value-accretive acquisition strategy including our largest
acquisition to date
· Significantly increased scale through two high-quality
acquisitions in our key growth markets, adding 247 fee earners to the Group
and broadening our service offering
o Acquired Thursfields Legal Limited, cementing Knights' leading position in
the Midlands
o Significantly scaled up our South East presence with IBB Law LLP, our
largest acquisition to date
· Both acquisitions are integrating well and trading in line with
expectations
· Post period end, acquired Birkett Long LLP, extending our legal
and wealth advisory services, and Rix & Kay LLP, strengthening our Kent
and Sussex footprint
Current trading and outlook
· Trading at the start of the current year is encouraging and in
line with expectations
· Increasing numbers of high quality people and firms continue to
join Knights
· Financial headroom to build on strong acquisition track record
· Confident in further profitable growth in FY26 and the
medium-term
David Beech, CEO of Knights, commented:
"Our proven strategy continues to deliver, as shown by our double-digit profit
growth and enhanced margins during the year, despite ongoing macroeconomic
challenges.
"This has been a year of step changes for the business, with strategic
progress and a strengthened leadership team embedding enhanced operational
discipline - all underpinning the Group's platform for future growth. We
have built strong recruitment momentum and reduced churn, while advancing our
value-accretive acquisition strategy - including our largest acquisition to
date in the second half - and continuing to win new clients.
"We have started the current financial year in line with our expectations and
are well positioned to seize the opportunities presented by the structural
trends in our industry. We are now benefitting from increased recognition of
our differentiated proposition as a leading brand, which combines national
scale and premium services with local presence and relationships.
"We expect growth in FY26 to be supported by the momentum we have seen
building through attracting and retaining high calibre professionals and
clients, complemented by building on our strong acquisition track record, with
an encouraging current pipeline of opportunities under consideration. We,
therefore, continue our focus on delivering profitable growth through the year
and in the medium-term, as we build and extend our services across the UK."
Footnotes
(1 )Underlying PBT excludes amortisation of acquired intangibles,
non-underlying operating expenses, and non-underlying finance costs.
Non-underlying operating expenses include transaction and onerous lease
expenses, contingent acquisition payments, disposal of acquired assets, along
with one-off restructuring 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 )Churn is calculated based on the number of qualified fee
earners who had been employed by the Group for more than one year. Churn is
calculated taking the number of leavers in the above group over the financial
year as a percentage of the average number of colleagues for the year. Churn
excludes expected churn from acquisitions in the year of acquisition and the
first full year post acquisition. Retention is 100% less the churn rate.
(7 )Underlying EBITDA is operating profit before depreciation,
amortisation and non-underlying operating expenses as defined above.
(8 )Underlying PAT is underlying PBT less any tax in respect of
underlying items.
(9 )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
Enquiries
Knights
David Beech, CEO Via MHP
Kate Lewis, CFO
Deutsche Numis (Nomad and Broker)
Stuart Skinner, Kevin Cruickshank 020 7260 1000
MHP (Media enquiries)
Katie Hunt, Eleni Menikou, Lucy Gibbs +44 (0)7736 464749
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 32 offices located in Ascot, Basildon, Beaconsfield, Birmingham,
Brighton, Bristol, Cardiff, Carlisle, Chelmsford, Cheltenham, Chester,
Colchester, Exeter, Kings Hill, Leeds, Leicester, Lincoln, Manchester,
Newcastle, Nottingham, Oxford, Portsmouth, Reading, Sheffield, Solihull,
Stoke, Teesside, Uxbridge, Weybridge, Wilmslow, Worcester and York.
Chairman's statement
I am pleased to present Knights' results for FY25.
During my time as Chair, I have witnessed first-hand the key elements that
differentiate us from our traditional peers. There is a distinctive
collaborative culture, facilitated by the Group's corporate model, and thanks
to concerted efforts within the business, an embedded 'one team' mindset. As a
result, Knights has been able to attract high quality talent, through both
recruitment and acquisitions, enabling it to become one of the leading
national legal and professional services providers, operating throughout the
UK regions and delivering comprehensive, premium solutions to clients,
locally.
These strengths, combined with the tireless dedication of our talented
professionals and executive management team, have driven a good performance
with strong profit growth, despite an uncertain macroeconomic environment.
The Group achieved an 11% increase in underlying profit before tax ("UPBT") to
£28 million, reflecting improved margins on revenue of £162.0 million, an 8%
increase from FY24.
On behalf of the Board, I would like to express our gratitude to our dedicated
colleagues, for their efforts in achieving this success, and to our clients
and shareholders for their continued support.
A strategy that continues to deliver
Our strategy has driven remarkable growth since our IPO, with the management
team and business support teams continuing to execute it well throughout the
year. The Group continued to build its platform through acquisitions which,
combined with driving operational efficiency, and recruiting top talent,
positions us favourably for organic growth and operational leverage in the
coming year.
High quality talent continues to be attracted to Knights' friendly and
supportive culture, with an increasing number of professionals joining the
business during the year.
We added significant scale through two high quality acquisitions during the
year, which brought a total 247 fee earners to the Group and further expanded
our range of services. In the first half, we acquired Thursfields Legal
Limited (Thursfields), enhancing our Midlands presence. In the second half, we
significantly expanded our South East presence by acquiring IBB Law LLP.
Post period end we have acquired Birkett Long LLP, extending our legal and
wealth advisory services and Rix & Kay LLP, strengthening our Kent and
Sussex footprint. We have also acquired Le Gros Solicitors Limited adding a
team of 6 professionals to build on our recent partner appointments in
Cardiff.
As part of Knights, these acquisitions benefit from our well-developed
infrastructure from day one, and will provide strong platforms for ongoing
recruitment and growth. On behalf of the Board, I would like to welcome
all our new colleagues that have joined Knights during the year and to thank
all at Knights for the hard work that has resulted in such seamless
integration of all our acquisitions.
We are well-positioned financially to continue our growth strategy, through
hiring talented individuals, opening new offices, and selectively pursuing
value enhancing acquisitions.
Dividend Policy
The Group's dividend policy, to distribute 20% of underlying profit after tax,
balances profit retention to support our long-term growth strategy with
shareholder returns as our growth strategy continues to yield positive
results. The Board proposes a final dividend of 3.05p, which, along with the
interim dividend of 1.76p per share, totals a 4.81p dividend for the year, a
9.3% increase from FY24's 4.40p. The dividend is scheduled for payment on 7
November 2025 to shareholders recorded on 10 October 2025, pending shareholder
approval at the Group's AGM.
Summary
The Board is pleased with the Group's performance and the step changes made
during the year - with significant strategic progress, operational discipline
and a strengthened and well-embedded leadership team in place - all enhancing
the platform for future growth. We, therefore, continue our focus on driving
further profitable growth, as we benefit from ongoing recruitment momentum,
acquisition opportunities and client wins, and as we continue to expand across
the UK.
Chief executive's review
Our proven strategy has continued to deliver, as demonstrated by the Group
reporting an excellent profit performance and enhanced margins, despite a
macroeconomic backdrop that remains challenging. We have strong momentum in
recruitment which, coupled with significantly increased retention in the
second half of the year, will drive future growth, and we have continued to
execute our value-accretive acquisition strategy, including making our largest
acquisition to date in the second half of the year.
Knights is one of the largest legal services businesses outside London and is
now benefitting from growing recognition of our national brand - with
professionals, sellers of law firms, and clients attracted to our
differentiated proposition which combines a national scale provider of a broad
range of premium services with a local presence and relationships.
We built on our progress in the first half, with positive momentum in the
latter part of the year. We continued to scale and expand our national
footprint through selective acquisitions, enhancing our presence in key growth
markets, in the West Midlands, and we significantly strengthened our footprint
in the attractive South East market. All acquisitions during the period, and
prior year acquisitions, are integrating well and performing as anticipated.
Knights' strong reputation, increasing scale, and differentiated corporate
model and collaborative culture, continue to attract new, and support the
retention of, high quality talent across the business. We recruited 28%
more senior fee earners in the year, compared to prior year, with all new
recruits, including those that join via acquisition, now undertaking their
inductions at our refurbished Stoke office, the central hub of our business.
This is supporting seamless integration into the business and embedding the
core aspects of our unique, collaborative culture and model from day one.
Our internal measure of churn(6) reduced significantly, to just 10% in the
second half of the year, which we believe to be significantly lower than the
industry average. The maturity and settled nature of our business is reflected
in the achievement post year end of an employee NPS score of +59.
Clients continue to be attracted to Knights' increasingly diverse services
offering, with several key wins and clients being able to benefit from our
increasing range of services, which is testament to our relentless dedication
to high quality client service. Optimising costs and operational excellence
also remain a key focus and have supported our strong profit performance.
A strong performance, marking an inflection point
Knights delivered another consecutive year of double-digit profit growth, and
continued to scale the business at pace, despite the effect of ongoing
macroeconomic uncertainty on business confidence.
Total revenue for the year was £162.0m, an 8% increase compared with the
previous year (FY24: £150.0m), driven primarily by acquisitions. We
maintained organic revenues across our balanced portfolio and service lines
and locations. While growth from recruitment was held back by a period of
higher churn coming into the first half of the financial year, the reduction
in churn during the second half means the business is now well-positioned for
increased organic revenue growth.
Pricing discipline - with sustained and consistent annual rate increases -
combined with driving efficiencies and cost optimisation across the Group,
remain key priorities and drivers of our strong profit performance.
We have also realised synergies from the effective integration of acquired
businesses, building on our strong track record of generating value from
acquisitions.
Our debtor days remain industry-leading, at 31 as at 30 April 2025 (30 April
2024: 28), reflecting our commitment to disciplined working capital
management.
This financial discipline, alongside strategic recruitment, and driving new
business and stronger client relationships are cultivated across the business
by our Client Services Directors ("CSDs") in their respective regions, and we
recently appointed a Group Client Service Director to oversee and support the
regional CSDs. With most of this team now having been in place for a number of
years, the business now benefits from their greater experience in managing the
business and leading a high-performance culture.
Growing from a strong foundation
Knights' model, pioneering when established 13 years ago, is now increasingly
emulated across the professional services sector. For us, it continues to be a
differentiator and key to attracting talent. It remains a compelling
alternative to the traditional partnership model, which increasingly faces
structural challenges and is no longer attractive to a new generation of
talent unwilling to make a financial commitment to the firm and wishing to
work in a supportive, high calibre firm with a strong platform built around
broad-based services and a mature, centralised operational infrastructure.
This has helped us bring 51 new senior fee earners into the Group during the
year (FY24: 40), attracted not only by our modern, corporatised model, but
also Knights' excellent reputation, scale, and strong culture which
prioritises collaboration, excellence and a clear commercial mindset.
Our increased coverage nationwide means we can now also access a wider pool of
talent and is enabling us to selectively explore opportunities to open offices
organically, adjacent to regions where we are already strong. For instance,
we are currently establishing a presence in Cardiff, where we have already
employed ten partners, aided by the city's proximity to our offices in Bristol
and Cheltenham. This expansion will accelerate further as we open an office
in the city in September 2025. Our ability to grow in this way is testament to
the heightened awareness and reputation of Knights across the UK and we expect
to open further such offices in the future.
Importantly, the initiatives we have driven through the business to increase
mentoring from our Client Services Directors, face to face time in the
offices, and regular forums for Partners and Senior Associates to come
together in our Stoke office is supporting a stronger team culture and better
understanding of the breadth of our services and our business strategy. We
are pleased that this has resulted in a substantial step down in churn in the
second half of the year to 10% (15% across the full year), a level we expect
to become more normalised as we continue to engage with the team in this
way. Bringing our most experienced people together is also supporting
greater cross-collaboration, with colleagues increasingly forming teams across
different offices to deliver the best possible solutions to clients.
We continue to embrace technology, and are monitoring rapid advances in areas
such as AI closely. Post year end, we have recruited a Chief Information and
Technology Officer, John Earl, who has over 23 years' experience working with
global organisations, to further optimise our data and technology use.
Building on our years of experience in developing solutions built on
automation, systemisation and workflows, where we remain a sector leader, we
are now exploring and deploying a number of AI-enabled tools and are exploring
further AI tools and platforms for other commercial uses, remaining mindful of
sensitivities, including security, and taking a measured approach to ensure we
remain at the forefront of developments without compromising our robust
systems, whilst selecting the most appropriate technologies.
Executing our value-accretive acquisition strategy
The regional legal services market remains highly fragmented, with numerous
opportunities for consolidation. In line with our strategy to bolster future
organic growth through selective, value-accretive acquisitions, during the
year we acquired two high-quality law firms. As well as aligning culturally
with the Group and adding to existing service lines across the business, these
acquisitions allowed us to expand in growth areas such as Private Wealth and
explore adjacencies such as wealth advisory services. As part of Knights,
acquired firms can accelerate growth by broadening their offering to clients
and leveraging the strength of Knights' well-invested central infrastructure,
which is increasingly valuable given the more onerous regulatory, technology
and cost burdens facing independent firms.
In the first half, we acquired Thursfields, a premium, full service legal
services business with offices across the West Midlands, and a national client
base which now benefits from access to Knights' broad range of services and
established platform.
Thursfields has offices in Worcester, Solihull and Birmingham, and a strong
Private Wealth offering, spanning Private Client, Family and Residential
Property, alongside Corporate, Real Estate and Dispute Resolution. The
acquisition has cemented Knights' position as a leading legal and professional
services business in the Midlands and added 86 fee earners to the Group.
Building scale in the attractive South East market
In the second half, the Group scaled up significantly in the areas immediately
surrounding London.
We acquired IBB Law LLP, a premium service law firm based in the South East,
with locations in Uxbridge, Beaconsfield, Reading and Ascot, providing
proximity to areas of inward investment and major corporate clusters. The
acquisition, Knight's largest to date, complements Knights' existing offices
in Oxford and Weybridge, enhancing our presence in the region and adding 161
fee earners.
All acquisitions acquired during the year have integrated well and are
performing to plan.
Post period end we have also acquired Birkett Long LLP, a premium service
regional law firm and independent financial advisory business based in three
locations across Essex, in Colchester, Chelmsford and Basildon. With a leading
position in the region, the acquisition brought a team of 98 fee earners to
Knights, with an equal split between service lines for business and private
clients. Birkett Long IFA LLP, a separate legal entity, which has been
established for 30 years, brought a team of 13. Together, they provide the
unique ability to offer both legal and wealth advisory services under one roof
and have provided an entry point into financial advisory for the Group, which
we have long considered a complementary service line and growth opportunity.
We have also acquired Rix & Kay LLP, a firm with a strong reputation
across Kent and Sussex, building on recent expansion in Essex and the Thames
Valley. The business has particular strength in Corporate, Commercial
Property, Disputes and Private Client work. The 27 fee earners joining via the
acquisition will relocate to existing Knights offices in Brighton and Kings
Hill.
In August 2025 we acquired Le Gros Solicitors Limited, adding a team of six
professionals to our recent partner appointments in Cardiff.
We continue to assess a solid pipeline of opportunities across a growing
number of legal and professional services firms seeking integration into a
large, well-established group.
In November 2024 we extended our existing revolving credit facility to provide
total committed funding of £100m until November 2027. With these extended
facilities, the Group is in a strong financial position with sufficient
headroom and flexibility to enable us to continue to execute our growth
strategy.
Current trading and outlook
Trading in the early part of the current year has been in line with our
expectations. We are seeing the benefits of our maturity and growth to date,
with increased levels of recruitment alongside reduced churn positioning us
well to deliver future growth.
We are also well positioned to seize the opportunities presented by structural
trends in our industry. Knights is reaching an inflection point in terms of
scale, the breadth of our service offer and operational excellence. An
increasing number of people are joining our teams, and we are consistently
adding high quality acquisitions to the Group, which expand our opportunities
for organic growth. We have financial headroom to build on our strong
acquisition track record and have an encouraging pipeline of active
opportunities under review.
As such we expect FY26 trading to be supported by the momentum we have seen
building through the year, particularly the improvement in churn during the
second half. We have a strong team of Client Services Directors, who are
playing an increasingly vital role in both people and client acquisition, as
well as continuing to embed strong operational discipline. We are, therefore,
confident in further growth through the year and in the medium-term,
complemented by our value-accretive acquisition strategy.
Financial review
CFO Review
I am pleased to report another year of profitable, cash generative growth with
revenue of £162.0m, up 8% compared to the prior year (FY24: £150.0m) and
underlying EBITDA(7) increasing by 11% to £42.9m (FY24: £38.7m).
Reported profit before tax (PBT) fell to £12.3m (FY24: £14.8m) due to
increased non underlying costs driven primarily by large acquisitions being
completed in the year resulting in higher one-off costs from both the
acquisitions and subsequent integration and restructuring processes.
Our continued disciplined approach to the management of lock up(3) has
generated excellent cash conversion(4) of 130% for the year (FY24: 131%)
enabling us to fund our continued growth strategy.
An increase in recruitment during the year and two complementary acquisitions,
the second of which is the largest acquisition to date for the Group, have
enabled us to deliver these positive results despite the continued uncertainty
in the macro-economic environment throughout the period.
Financial results
Year ended Year ended % change
30 April 2025 30 April 2024
£'000
£'000
Revenue 161,966 149,957 8%
Other operating income 9,649 10,439 (8%)
Staff costs (97,607) (93,007) 5%
Other operating charges (29,839) (28,218) 6%
Impairment of trade receivables and contract assets (1,241) (489) 154%
Underlying EBITDA(7) 42,928 38,682 11%
Underlying EBITDA % 26.5% 25.8%
Depreciation charges under IFRS 16 (5,223) (5,607) (7%)
Finance costs under IFRS 16 (2,249) (1,471) 53%
Underlying EBITDA post IFRS 16 charges 35,456 31,604 12%
Depreciation and amortisation charges (excluding amortisation on acquired (3,617) (2,903) 25%
intangibles)
Investment income 58 - -
Underlying finance charges (excluding IFRS 16) (4,133) (3,402) 21%
Underlying finance income 239 23 939%
Underlying profit before tax(1) 28,003 25,322 11%
Underlying profit before tax margin 17.3% 16.9%
Underlying tax charge (7,448) (6,598) 13%
Underlying profit after tax(8) 20,555 18,724 10%
Underlying basic EPS (pence) (2) 23.95 21.81 10%
Revenue
Reported revenue for the year is £162.0m compared to £150.0m in FY24, an
increase of 8%.
Of this increase, £12.5m was generated from acquisitions made during the
year, with revenues from acquisitions made in FY24 remaining static in FY25,
meaning that total organic revenues have reduced by £0.5m in the year.
Organic revenues
In the second half of FY24 we made the strategic decision to significantly
reduce our restructuring and insolvency team. This led to a reduction in
revenues of c.£0.8m in FY25 compared to FY24. Excluding the effect of this
strategic reduction in revenue, organic revenue grew by £0.3m in the year.
Whilst some areas of the Group demonstrated strong organic growth e.g. CL
Medilaw and residential property, other areas such as corporate and private
client work declined due to macro-economic factors and churn within the
business in FY24 and the first half of FY25.
Despite this, leading indicators of future organic growth have been improving
particularly in the second half of the year with improvements in pricing,
recruitment of senior fee earners with a strong client following and a
significant reduction in churn levels.
Revenue from acquisitions
At the start of FY24 we acquired Baines Wilson and St James Law. Combined
revenues in FY25 have remained broadly in line with FY24. Both acquisitions
have also delivered organic growth with the Newcastle office acquired as part
of the St James Law acquisition recruiting 10 senior fee earners (senior
associates and partners) since acquisition.
The acquisitions of Thursfields Legal Limited and IBB Law LLP completed during
the year. Both acquisitions are fully integrated onto the central business
systems and are performing as expected contributing £12.5m of revenue since
acquisition.
Staff costs
Total staff costs of £97.6m (FY24: £93.0m) have decreased as a percentage of
revenue to 60.3% (FY24: 62.0%) reflecting the continued discipline on cost
control whilst investing in the future growth of the business through
recruitment of quality fee earners. During FY25 we invested in the continued
recruitment of partners and senior associates with strong client relationships
and in our business services team and management to ensure the Group is well
placed to support future growth.
Direct staff costs
Fee earning staff costs have reduced to 49.5% of revenue (FY24: 51.2%). The
leveraging of these costs reflects the reduction in organic staff numbers
through churn in FY24 and the first half of this financial year. This
improvement in gross margin to 50.5% (FY24: 48.8%) reflects higher fees per
fee earner, control of fee earner costs and improvement in pricing.
Whilst managing our costs we have continued to invest in the recruitment of
senior fee earners to support our future organic growth with 51 new senior fee
earners being recruited organically during the year compared to 40 in FY24.
Excluding the drag on gross margin from the investment in new recruits, gross
margin for the year would be over 51%, due to the increased recruitment in the
year and the time taken for new recruits to be operating at run rate income
and gross margin levels.
Support staff costs
Non fee earner staff costs have remained at 10.8% of revenue in the year
(FY24: 10.8%) as we continue to invest in our management structure whilst
leveraging our support staff costs and ensuring we have the sustainable
business services platform in place to support our future growth.
Other operating charges
Other operating charges of £29.8m have reduced to 18.4% of revenue (FY24:
18.8%), leveraging our cost base through disciplined cost control and the full
year impact of the work undertaken in the last 18 months to consolidate
supplier contracts and maximise synergy savings from acquisitions.
Other operating income
Other operating income has decreased to £9.6m from £10.4m driven by a
decrease in interest earned on client monies held due to lower interest rates
in the year.
Underlying EBITDA(7)
Underlying EBITDA(7) excludes non-underlying operating expenses. These
expenses include non-recurring transaction and onerous lease expenses,
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 the
underlying business performance.
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 goodwill
and customer relationships. Accounting standards require such payments 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 year, underlying EBITDA increased by £4.2m to £42.9m (FY24:
£38.7m) representing an increase in margin to 26.5% (FY24: 25.8%) driven
mainly by the increase in gross margin in the period as well as leveraging
other costs.
IFRS 16 Depreciation and finance charges
The IFRS 16 rental and finance expenses represents the accounting charge in
respect of all leases with a term of over one year. Although during the year
total charges have increased to £7.5m (FY24: £7.1m), costs as a percentage
of revenue have reduced from 4.7% of revenue in FY24 to 4.6% of revenue in
FY25 as we continue to manage our property portfolio to optimise our space
wherever possible.
Depreciation and amortisation charges
The increase in depreciation and amortisation charges in the year to £3.6m
(2.2% of revenue) from £2.9m (1.9% of revenue) in FY24 is a result of
continued investment in property upgrades and refurbishments to support the
growth of the business.
Finance charges
Finance charges increased by £0.7m in the year to £4.1m (FY24: £3.4m)
driven mainly by increased drawn balances on our RCF facility to fund
acquisitions during the year.
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, 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 (see
note 39 of the financial statements) to provide a more meaningful measure and
year on year comparison of the profitability of the underlying business.
Year ended 30 April 2025 Year ended
£'000
30 April 2024
£'000
Profit before tax 12,269 14,831
Amortisation on acquired intangibles 4,033 3,580
Contingent acquisition payments treated as remuneration 3,752 2,824
Other non-underlying costs 7,949 4,087
Underlying profit before tax(1) 28,003 25,322
Total Group underlying PBT has increased by 11% to £28.0m (FY24: £25.3m).
The underlying profit before tax margin in the year increased to 17.3% from
16.9% in FY24 primarily from an increase in gross margin offset by a reduction
in other income and an increase in interest payable.
Reported profit before tax (PBT)
Reported PBT for the year has reduced to £12.3m in the year (FY24: £14.8m)
due to an increase in non-underlying operating and finance costs from £6.9m
in the prior year to £11.7m in FY25.
Non underlying operating costs have increased in the year due to two larger
acquisitions completed during the year resulting in £1.7m increased
restructuring and transaction costs and a £1.0m increase in the charge to the
Consolidated Statement of Comprehensive Income, in relation to contingent
acquisition payments treated as remuneration under IFRS. There was also a
one-off £2.1m charge in relation to impairment of right of use assets in
relation to Worcester, Leicester and Newbury offices where offices have been
relocated or merged into other Group offices. This has enabled us to focus on
rationalisation of the property portfolio. There were also higher levels of
transaction related costs and contract termination costs given the larger
acquisitions completed during the year compared to the prior year.
Taxation
The taxation charge for the year is £4.7m (FY24: £5.0m) made up of a current
tax charge of £4.9m (FY24: £5.2m) partially offset by a deferred tax credit
of £0.2m (FY24: £0.2m) giving an increased effective rate of tax for the
Group of 38% (FY24: 34%). The increase in effective rate compared to prior
year and compared to the UK corporation tax rate of 25% is due to increased
disallowable expenses, mainly contingent acquisition payments.
The effective rate of tax on the underlying profit of the Group is 27% (FY24:
26%).
Earnings per share (EPS)
Basic EPS in the period decreased by 23% to 8.83p per share (FY24: 11.47p per
share) due to the reduction in reported profits after tax driven by the
increased non-underlying costs as explained above. To aid comparison of EPS on
a like for like basis, underlying EPS(2) has also been calculated based on the
underlying profit after tax, calculated as set out below.
Year ended Year ended
30 April 2025 30 April 2024
£'000
£'000
Operating profit before non-underlying charges and amortisation on acquired 34,088 30,172
intangibles
Investment income 58 -
Finance costs (6,445) (4,939)
Finance income 302 89
Underlying profit before tax(1) 28,003 25,322
Taxation - underlying (7,448) (6,598)
Underlying profit after tax(8) 20,555 18,724
The underlying basic EPS(2) has increased by 10% to 23.95p for the year (FY24:
21.81p). The weighted average number of shares used to calculate the basic EPS
in the year was 85,813,426.
Considering the dilutive impact of potential share options, the diluted EPS
for FY25 is 8.43p per share (FY24: 11.11p per share). Underlying diluted EPS
has increased by 8.3% to 22.88p per share (FY24: 21.13p per share).
Dividend
The Board continues to adopt a progressive dividend policy balanced with its
commitment to continue to invest in the future growth potential of the
business. Subject to approval at the Annual General Meeting in October 2025
the Board proposes a final dividend of 3.05p per share. This together with the
interim dividend of 1.76p per share brings the total dividend in respect of
FY25 to 4.81p per share (FY24: 4.40p per share) representing an increase of
9.3%.
Balance Sheet
30 April 2025 30 April 2024
£'000
£'000
Goodwill and intangible assets 105,873 86,900
Right of use assets 46,635 34.034
Investment in joint venture 111 50
Loan to joint venture 2,000 2,523
Property, plant and equipment 23,685 14,896
Assets and liabilities held for sale 394 -
Working capital 64,640 53,125
Other provisions and deferred tax (20,272) (14,590)
Lease liabilities net of lease receivables (52,529) (38,573)
170,537 138,365
Cash and cash equivalents 5,853 5,453
Borrowings (70,682) (40,617)
Net debt(5) (64,829) (35,164)
Deferred consideration (1,175) (2,941)
Net assets 104,533 100,260
The Group's net assets as at 30 April 2025 increased by £4.2m to £104.5m
(FY24: £100.3m) primarily reflecting profit for the year net of dividends
paid in the period being £3.9m and £0.6m relating to the net impact of share
based payment movements and purchase of own shares into the Employee Benefit
Trust incorporated in the year. The key movements in the Balance Sheet are
discussed in more detail below.
Goodwill and intangible assets
Goodwill and intangible assets includes £32.8m of intangible assets relating
to the Knights brand and customer relationships from current and prior year
acquisitions. Purchased computer software amounts to £0.2m with the remaining
balance of £72.9m relating to goodwill from acquisitions.
The Board carries out an impairment review of goodwill each year to ensure the
carrying value in the financial statements is supportable. The value in use of
the goodwill was calculated using a number of different scenarios, some of
which assumed a considerably more negative outcome than is anticipated by the
Directors. In all instances, the future trading of the business was more than
sufficient to justify the carrying value of goodwill. Therefore, as at 30
April 2025, the Board is satisfied that the goodwill was not impaired.
Investment in, and Loan to joint venture
The investment in joint ventures includes £0.08m relating to the joint
venture with Convex entered into in FY24 (being the initial £0.05m invested
plus share of assets recognised in the year) and £0.03m relating to a joint
venture with Kubera Wealth acquired as part of the IBB Law LLP acquisition in
the year.
Property, plant and equipment
During the year the Group has continued to invest in its property
infrastructure and business platform ensuring that the platform is well able
to support our future growth plans.
We continued to invest in our technology and IT systems, investing £2.2m in
the year (FY24: £1.4m).
During FY25 we have also continued to invest in our property portfolio,
refurbishing existing and acquired offices to ensure we offer the same high
quality grade A office space across the Group. Investment in the
refurbishment of offices was higher than normal in FY25 at £9.6m mainly
driven by the refurbishment of our central hub in Stoke where we invested
£5.8m. Our central hub is key to us working as one team and allows us to
collaborate with and train our colleagues in a high-quality central location
which we consider key to cementing and developing our one team culture. As we
grow our office footprint through organic openings and acquisitions, providing
high quality space will remain a key differentiator to our regional
competitors.
This investment in property and technology together with assets acquired as
part acquisitions, net of disposals and depreciation has resulted in a net
increase in our tangible fixed assets of £8.8m to £23.7m as at 30 April 2025
(30 April 2024: £14.9m).
Working capital
Working capital is calculated as follows:
30 April 2025 30 April 2024
£'000
£'000
Contract assets 50,998 40,191
Trade and other receivables 39,552 32,753
Corporation tax receivable 882 304
Total current assets 91,432 73,248
Trade and other payables (26,662) (19,935)
Contractual liabilities (130) (188)
Total current liabilities (26,792) (20,123)
Net working capital 64,640 53,125
Net working capital has increased to £64.6m as at 30 April 2025 (30 April
2024: £53.1m), an increase of £11.5m or 22% from the prior year. This
increase is mainly driven by additional working capital from acquisitions
together with an increase in contract assets at the year end. Based on run
rate revenues for FY25 of £181m and FY24 of £150m (taking account of the
full year impact of acquisitions) working capital represents 35.7% of revenue
in FY25 compared to 35.4% in FY24.
Trade and other receivables as a percentage of run rate revenue have increased
slightly to 22.0% (FY24: 21.8%) due to increases in prepayments driven by
timing of invoices received pre year end. Trade and other payables have also
increased as a percentage of run rate revenue mainly due to accruals inherited
from the acquisition of IBB Law LLP.
Contract assets have increased by £10.9m to £51.0m as at 30 April 2025 (30
April 2024: £40.1m). The main reasons for the increase in contract assets
are the acquisitions completed during the year, which added £6.3m of contract
assets at the point of completion, and the continued growth of our CL Medilaw
business, which holds higher levels of work in progress than the rest of the
Group due to the nature of work done. Despite the increase in total contract
assets in the CL Medilaw business, the total level of contingent work in
progress at the year end has decreased marginally compared to the prior year.
The management of working capital continues to be a fundamental KPI for the
Group with strong systems and controls in place to manage the levels of trade
receivables and work in progress across the Group. The time taken to convert
a unit of time incurred into cash is reported as the number of lock up(3) days
for the Group and is a KPI monitored by the Board, Client Services Directors
and wider management team. As at 30 April 2025 lock up(3) was 86 days (30
April 2024: 78 days), an increase of 8 days from the exceptional result
achieved in FY24 but still in line with FY23, 87 days, and FY22, 86 days, and
our internal target of 90 days.
Due to the disproportionate amount of time that it takes to conclude certain
types of work, such as our CL Medilaw, Real Estate Investment and Insolvency
matters these work types are excluded from our WIP days calculation as
exceptions, so as not to distract the majority of the Group from focussing on
achieving its excellent lock up(3) days. If WIP days were calculated
including all valued WIP of the Group this would give WIP days of 81 and hence
total lock up with no exclusions of 113 days as at 30 April 2025 (30 April
2024: 113 days).
The bad debt charge for the year has increased to 0.8% (FY24: 0.3%) as a
result of a one-off write off during the year (£0.6m) due to an insolvency
event.
Right of use assets
The right of use assets capitalised in the Consolidated Statement of Financial
Position represents the carrying value of property, equipment and vehicle
leases. The increase in the value of right of use assets during the year to
£46.6m, from £34.0m as at 30 April 2024, resulted from an increase in assets
of £23.4m relating to new leases acquired through acquisitions and the
relocation of existing offices to new properties, less disposals and
impairment of £5.5m as we terminate existing leases and sublet excess space
as part of our ongoing review of the property portfolio, less depreciation of
£5.3m for the year.
Lease liabilities net of lease receivables
Lease liabilities net of lease receivables represents the present value of the
total liabilities recognised in respect of the right of use assets, net of the
present value of all amounts receivable in respect of any subleases of these
assets.
The increase in net lease liabilities and receivables in the year to £52.5m
from £38.6m as at 30 April 2024, is the net impact of receipts and payments
made on existing lease agreements together with the increase in new leases
entered into during the year and leases acquired, net of disposals and lease
impairments recognised during the year.
Cash conversion(4), net debt(5), financing and leverage
Cash generation continues to be a key focus for the Board and management team.
The Group measures cash by comparing the free cash flow from operations as a
percentage of its underlying profit after tax(8). As a result of the continued
focus on this and specifically the management of lock up(3), the Group
generated underlying cashflows before capital expenditure of £26.7m during
year equating to a cash conversion of 130%.
Cash flow
Year ended Year ended
30 April 2025 30 April 2024
£'000
£'000
Underlying EBITDA(7) 42,928 38,682
Change in working capital (5,121) (3,549)
Cash outflow for IFRS 16 leases (6,515) (6,245)
Movement in underlying share-based payment charge 1,195 1,121
Cash generated from underlying operations (pre-tax) 32,487 30,009
Tax paid (5,820) (5,432)
Net cash generated from underlying operating activities 26,667 24,577
Underlying profit after tax 20,555 18,724
Underlying cash conversion 130% 131%
The strong cash generation in the year has resulted in net debt(5) of £64.8m
at the year end (30 April 20024: £35.2m) despite a cash outlay of £25.1m
relating to acquisitions and investments in the year along with deferred and
contingent acquisition payments paid for acquisitions in prior years. The
continued strong cash conversion has also enabled us to invest £11.8m in our
property portfolio and systems to ensure we continue to provide high quality
infrastructure to support our premium service delivery and future growth
strategy.
During the year the business implemented an Employee Benefit Trust to purchase
shares in the market. An amount of £0.6m was invested in this during the
second half of FY25.
The table below shows a reconciliation of the key cashflows impacting the
movement in net debt in the year.
Year ended
30 April 2025
£'000
Net debt 30 April 2024 35,164
Other net cash (inflows) from operating activities (26,764)
Deferred and contingent acquisition payments 5,187
Consideration paid for acquisitions in the year (including acquired debt and 25,145
cash)
Unpaid acquired debt 1,104
Non-underlying costs paid 5,366
Interest on borrowings 3,901
Purchase of own shares 598
Dividends paid 3,903
Associated lease costs 264
Disposal of assets held for sale (141)
Joint venture loan capital and interest received (734)
Capital expenditure (net of landlord contributions) 11,836
Net debt 30 April 2025 64,829
In November 2024 we renewed and extended our revolving credit facility (RCF)
to £100m, committed until November 2027. As at 30 April 2025 the Group has
c.£30m headroom in the RCF and is well within all covenants. For banking
purposes our leverage as at 30 April 2025 was 1.6 times EBITDA (as defined for
covenant purposes). Interest is payable on the loan at a margin of between
1.65% and 2.55% above SONIA dependent on leverage.
The Group is therefore in a strong financial position with sufficient headroom
and flexibility within our financing arrangements to enable us to continue to
execute our growth strategy.
Capital expenditure
Capital expenditure (net of landlord contributions) during the year was
£11.8m (FY24: £7.9m). The increase in the amount spent in the year compared
to the prior year is due to the continued review of our property portfolio and
the refurbishment of existing and acquired office space as we continue to
consolidate our existing portfolio where appropriate, whilst also investing in
new and existing space to provide Grade A offices ensuring colleagues benefit
from a high-quality working environment. During FY25 we undertook a
significant one-off refurbishment of our Stoke central Hub at a cost of
c.£5.8m and therefore although we will continue to invest in our IT
infrastructure and our property portfolio in FY26 and the medium term, we
anticipate capital expenditure to reduce to a more normalised level of c.£6m.
Acquisitions
During the year we completed two acquisitions and also acquired another joint
venture as part of the IBB Law LLP acquisition. The table below summarises the
impact of these acquisitions and prior acquisitions on the cashflows during
the year and in future years. This shows the consideration payable net of any
cash in the acquired business.
Financial year ended Acquisitions of subsids (net of acquired cash) Repayment of debt acquired with subsids Expected Contingent & deferred acquisition payments Expected net cash impact of acquisitions pre year end
£'m
£'m
£'m
£'m
2025 25.0 0.6 5.2 30.8
2026 - 1.0 6.2 7.2
2027 - 0.3 5.0 5.3
2028 - 0.2 4.7 4.9
The above includes estimated contingent acquisition payments disclosed as
remuneration in the Consolidated Statement of Comprehensive Income.
Summary
Results for the year to 30 April 2025 reflect a year of continued
consolidation and acquisitive growth. We have seen acquisitive growth during
the year together with improvements in underlying profitability. Our
increasing scale and diversity have provided good resilience against a
continuing uncertain macro-economic environment. The reducing churn levels and
continued investment in recruitment and business development places the Group
in a strong position for the coming year.
Our continued excellent management of cash and extension of our banking
facilities has resulted in a strong Balance Sheet with sufficient headroom in
our banking facilities to fund future investment and growth.
Consolidated Statement of Comprehensive Income
For the year ended 30 April 2025
Note
Year ended 30 April 2025 Year ended 30 April 2024
£'000 £'000
Revenue 5 149,967
161,966
Other operating income 7 9,649 10,439
Staff costs* 8 (97,607) (93,007)
Depreciation and amortisation charges* 11 (8,840) (8,510)
Impairment of trade receivables and contract assets (1,241) (489)
Other operating charges* 12 (29,839) (28,218)
Operating profit before non-underlying charges and amortisation on acquired 34,088 30,172
intangibles
Amortisation on acquired intangibles 11 (4,033) (3,580)
Non-underlying operating costs 13 (11,455) (6,630)
Operating profit 18,600 19,962
Investment income 22 58 -
Finance costs* 14 (6,445) (4,939)
Finance income 15 302 89
Non-underlying finance costs 13 (246) (281)
Net finance costs (6,389) (5,131)
Profit before tax 12,269 14,831
Taxation - underlying* 17 (7,448) (6,598)
Tax impact of non-underlying costs 17 2,755 1,614
Taxation (4,693) (4,984)
Profit and total comprehensive income for the year attributable to equity 7,576 9,847
owners of the parent
Earnings per share Pence Pence
Basic earnings per share 8.83 11.47
Diluted earnings per share 8.43 11.11
The above results were derived from the Group's continuing operations.
* Excluding non-underlying items and amortisation on acquired intangibles
Consolidated Statement of Financial Position
As at 30 April 2025
Note 30 April 2025 30 April 2024
£'000 £'000
Assets
Non-current assets
Goodwill 20 72,893 61,788
Intangible assets 20 32,980 25,112
Investments 22 111 50
Property, plant and equipment 23 23,685 14,896
Right-of-use assets 23 46,635 34,034
Finance lease receivables 26 1,335 1,633
Trade and other receivables 25 2,000 2,523
179,639 140,036
Current assets
Contract assets 24 50,998 40,191
Trade and other receivables 25 39,552 32,753
Finance lease receivables 26 405 364
Corporation tax asset 882 304
Cash and cash equivalents 5,853 5,453
Assets held for sale 27 1,283 -
98,973 79,065
Total assets 278,612 219,101
Equity and liabilities
Equity
Share capital 28 171 171
Share premium 75,277 75,262
Treasury shares (576) -
Merger reserve (3,506) (3,506)
Retained earnings 33,167 28,333
Equity attributable to owners of the parent 104,533 100,260
Non-current liabilities
Lease liabilities 30 48,603 35,389
Borrowings 31 69,807 40,149
Deferred consideration 32 563 350
Deferred tax 33 11,217 8,288
Provisions 35 5,404 3,968
135,594 88,144
Current liabilities
Lease liabilities 30 5,666 5,181
Borrowings 31 875 468
Trade and other payables 34 26,662 19,935
Deferred consideration 32 612 2,591
Contract liabilities 24 130 188
Provisions 35 3,651 2,334
Liabilities held for sale 27 889 -
38,485 30,697
Total liabilities 174,079 118,841
Total equity and liabilities 278,612 219,101
Consolidated Statement of Changes in Equity
For the year ended 30 April 2025
Note Share capital Share premium Merger reserve Treasury shares Retained earnings Total
£'000
£'000
£'000
£'000
£'000
£'000
As at 1 May 2023 171 75,262 (3,506) - 20,880 92,807
Profit for the period and total comprehensive income - - - - 9,847 9,847
Transactions with owners in their capacity as owners:
Credit to equity for equity-settled share-based payments 9 - - - - 1,131 1,131
Dividends 19 - - - - (3,525) (3,525)
Balance at 30 April 2024 171 75,262 (3,506) - 28,333 100,260
Profit for the period and total comprehensive income - - - 7,576 7,576
-
Transactions with owners in their capacity as owners:
Credit to equity for equity-settled share-based payments 9 - - - 1,161 1,161
-
Purchase of own shares - - - (598) - (598)
Issue of shares - 15 - 22 - 37
Dividends 19 - - - - (3,903) (3,903)
Balance at 30 April 2025 171 75,277 (3,506) (576) 33,167 104,533
Consolidated Statement of Cash Flows
For the year ended 30 April 2025
Note
Year ended 30 April 2025 Year ended 30 April 2024
£'000 £'000
Operating activities
Cash generated from operations 37 39,011 36,254
Non-underlying operating costs paid 13 (5,366) (4,246)
Tax paid (5,820) (5,432)
Contingent acquisition payments (2,571) (3,745)
Net cash from operating activities 25,254 22,831
Investing activities
Acquisition of subsidiaries (net of cash acquired) 21 (24,972) (1,888)
Other investments and loans made (2,500)
Other loan repayments 500 -
Loan interest received 234 -
Investment in joint ventures 22 - (50)
Purchase of intangible fixed assets 20 (83) (40)
Purchase of property, plant and equipment 23 (11,753) (8,165)
Proceeds from lease receivables 26 458 405
Disposal of asset held for sale 22 141 -
Payment of deferred consideration (2,616) (2,417)
Net cash used in investing activities (38,091) (14,655)
Financing activities
Proceeds of borrowings 52,150 23,200
Repayment of borrowings (22,550) (16,325)
Repayment of debt acquired with current year subsidiaries 21 (172) (661)
Repayment of debt acquired with prior year subsidiaries (473) (166)
Repayment of lease liabilities (4,661) (5,113)
Landlord capital contribution 42 396
Associated lease costs (306) (72)
Interest and other finance costs paid (6,213) (4,502)
Purchase of own shares (598) -
Dividends paid (3,903) (3,525)
Net cash used in financing activities 13,316 (6,768)
Net increase in cash and cash equivalents 479 1,408
Cash and cash equivalents at the beginning of the period 5,453 4,045
Cash - continuing operations 5,853 5,453
Cash - assets held for sale (note 27) 79 -
Total cash and cash equivalents at end of period 5,932 5,453
Notes to the Consolidated Financial Statements
For the year ended 30 April 2025
1. General information
Knights Group Holdings plc ("the Company") is a public company limited by
shares and is registered, domiciled and incorporated in England.
The Group consists of Knights Group Holdings plc, all of its subsidiaries and
its share of joint ventures.
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 financial statements have been prepared in accordance with UK-adopted
International Accounting Standards.
Applying these standards requires the directors to exercise judgement and use
certain critical accounting estimates. The judgments and estimates that the
directors deem significant in the preparation of these financial statements
are explained in note 4.
The financial statements have been prepared on the historical cost basis.
Historical cost is generally based on the fair value of the consideration
given in exchange for goods and services.
Monetary amounts are presented in sterling, being the functional currency of
the Group's subsidiaries, rounded to the nearest thousand except where
otherwise indicated.
The principal accounting policies adopted are set out below. These policies
have been consistently applied to all periods presented in the financial
statements, unless otherwise stated.
2.2 Going concern
The accounts are 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 recently
renewed and increased its banking facilities from £70,000,000 to
£100,000,000, available until 7 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 financial statements 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 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 the accounts.
2.3 Basis of consolidation
The consolidated financial statements incorporate the results of Knights Group
Holdings plc, all of its subsidiaries and share of joint venture.
Subsidiaries
Subsidiaries are entities controlled by the Group. The Group controls an
entity when it is exposed to, or has rights to, variable returns from its
involvement with the entity and has the ability to affect those returns
through its power over the entity. In assessing control, the Group takes into
consideration potential voting rights that are currently exercisable. The
acquisition date is the date on which control is transferred to the acquirer
which is the date of exchange of the sale and purchase agreement. The
financial statements of subsidiaries are included in the consolidated
financial statements from the date that control commences until the date that
control ceases.
Transactions eliminated on consolidation
All intra-group transactions, balances and unrealised gains on transactions
between group companies are eliminated on consolidation. Unrealised losses are
also eliminated unless the transaction provides evidence of an impairment of
the asset transferred.
Where necessary, adjustments are made to the financial information of
subsidiaries to bring the accounting policies used into line with those used
by the Group.
Audit exemption of subsidiaries
The following subsidiaries are exempt from the requirements of the UK
Companies Act 2006 relating to the audit of individual accounts by virtue of
s479A of the Act.
Name Registered number
Knights 1759 Limited 10279177
K & S Trust Corporation Limited 02885753
CLM Trust Corporation Limited 11247326
Thursfields Legal Limited 08829685
Thursfields (Legal Services) Limited 02689313
Thursfields LLP OC355657
IBB Law LLP OC430367
IBB Law (UK) Limited 02669392
The outstanding liabilities at 30 April 2025 of the above named subsidiaries
have been guaranteed by the Company pursuant to s479A to s479C of the Act. In
the opinion of the directors, the possibility of the guarantee being called
upon is remote since the trade, assets and majority of liabilities of these
subsidiaries were transferred to Knights Professional Services Limited before
30 April 2025.
2.4 Business combinations
The cost of a business combination is the fair value at the acquisition date
of the assets given, equity instruments issued and liabilities incurred or
assumed.
The excess of the cost of a business combination over the fair value of the
identifiable assets, liabilities and contingent liabilities acquired is
recognised as goodwill.
Costs related to the acquisition, other than those associated with the issue
of debt or equity securities, are expensed as incurred.
Where settlement of any part of cash consideration is deferred, the amounts
payable in the future are discounted to their present value as at the date of
exchange. This discount rate used is the rate at which similar borrowing
could be obtained from an independent financier under comparable terms and
conditions.
Deferred consideration is classified as a financial liability, which is held
at amortised cost. The unwinding of the discount is recognised in
non-underlying costs. Contingent acquisition payments are contingent on an
employee remaining in employment with the Group, and are accounted for
separately from the business combination as remuneration as described in notes
13 and 21.
2.5 Revenue
The Group earns revenue from the provision of legal and professional services.
Revenue for these services is recognised over time in the accounting period in
which the services are rendered, as the Group has an enforceable right to
payment for work performed to date under its client terms of engagement.
Fee arrangements for legal and professional services include fixed fee
arrangements, unconditional fee-for-service arrangements ("time and
materials"), and variable or contingent fee arrangements.
For fixed fee arrangements, revenue is recognised based on the stage of
completion with reference to the actual services provided as a proportion of
the total services expected to be provided under the contract. The stage of
completion is measured using the input method, and completion is tracked on a
contract-by-contract basis using the hours spent by professionals providing
the services.
In fee-for-service contracts, revenue is recognised up to the amount of fees
that the Group is entitled to bill for services performed to date based on
contracted rates.
Under variable or contingent fee arrangements, fees may be earned only in the
event of a successful outcome of a client's claim. Fees under these
arrangements may be fixed or may be variable based on a specified percentage
of damages awarded under a claim.
For variable or contingent fee arrangements management makes a detailed
assessment of the amount of revenue expected to be received and the
probability of success of each case. Variable consideration is recognised over
the duration of the matter, only to the extent that it is highly probable that
the amount recognised will not be subject to significant reversal when the
matter is concluded, based on the expected amount recoverable at that point in
time. In such circumstances, a level of judgement is required to determine the
likelihood of success of a given matter, as well as the estimated amount of
fees that will be recovered in respect of the matter. Where the likelihood of
success of a contingent fee arrangement is less than highly probable, the
value recognised in contract assets is further reduced to reflect this
uncertainty.
Certain contingent fee arrangements are undertaken on a partially funded
basis. In such arrangements, the funded portion of fees is not contingent on
the successful outcome of the litigation and in these instances the revenue is
recognised up to the amount of fees that the Group is entitled to bill for
services performed to date based on contracted rates. The remaining
consideration is variable and conditional on the successful resolution of the
litigation. The variable consideration is recognised over the duration of the
matter and included in revenue based on the expected amount recoverable only
to the extent that it is highly probable that the amount recognised will not
be subject to significant reversal when the uncertainty is resolved at that
point in time.
The Group's contracts with clients each comprise of a single distinct
performance obligation, being the provision of legal and professional services
in relation to a particular matter, and the transaction price is therefore
allocated to this single performance obligation.
Estimates of revenues, costs or extent of progress toward completion are
revised if circumstances change. Any resulting increases or decreases in
estimated revenues or costs are reflected in the Consolidated Statement of
Comprehensive Income in the period in which the circumstances that give rise
to the revision become known by management.
The Group has determined that no significant financing component exists in
respect of the provision of legal and professional services because the period
between when the Group transfers its services to a client and when the client
pays for that service will generally be one year or less.
Consideration for services provided under contingent or variable fee
arrangements may be paid after a longer period. In these cases, no significant
financing component exists because the consideration promised by the client is
variable subject to the occurrence or non-occurrence of a future event that is
not substantially within the control of the client or the Group.
A trade receivable is recognised when a bill has been issued to the client, as
this is the point in time that the consideration is unconditional because only
the passage of time is required before the payment is due.
Unbilled revenue is recognised as contract assets. Costs incurred in
fulfilling the future performance obligations of a contract are recognised as
contract assets if the costs are expected to be recovered.
Contract liabilities are recognised in respect of consideration billed in
advance of satisfying the performance obligation under the contract.
Revenue does not include disbursements. Recoverable expenses incurred on
client matters that are expected to be recovered and are billed during the
period are recognised in other income.
2.6 Interest received on client deposits
Interest recognised on client deposits held is recognised in the Consolidated
Statement of Comprehensive Income as it accrues, based on the effective
interest rate during the period. This forms part of other operating income as
this is driven by the ongoing operations of the business.
2.7 Taxation
The tax expense represents the sum of the current tax expense and the deferred
tax expense. Current tax assets are recognised when the tax paid exceeds the
tax payable. Current tax is based on taxable profit for the year. Current tax
assets and liabilities are measured using tax rates that have been enacted or
substantively enacted by the reporting date.
Deferred tax is recognised for temporary differences, calculated at the tax
rates that are expected to apply to the period when the asset is realised or
the liability is settled based on tax rates that have been enacted or
substantively enacted by the reporting date except for;
· When the deferred tax asset or liability arises from the initial
recognition of goodwill or an asset or liability in a transaction that is not
a business combination and that, at the time of the transaction, affects
neither the accounting nor taxable profits; or
· When the taxable temporary difference is associated with
interests in subsidiaries, associates or joint ventures, and the timing of the
reversal can be controlled and it is probable that the temporary difference
will not reverse in the foreseeable future.
Deferred tax assets are recognised only to the extent that it is probable that
they will be recovered by the reversal of deferred tax liabilities or other
future taxable profits.
Deferred tax is recognised on differences between the value of assets (other
than goodwill) and liabilities recognised in a business combination and the
amounts that can be deducted or assessed for tax. The deferred tax recognised
is adjusted against goodwill.
Current tax assets and current tax liabilities and deferred tax assets and
deferred tax liabilities are offset if, and only if, there is a legally
enforceable right to set off the amounts and the entity intends either to
settle on a net basis or to realise the asset and settle the liability
simultaneously.
2.8 Intangible assets - Goodwill
Goodwill arising on the acquisition of an entity represents the excess of the
cost of acquisition over the Group's interest in the net fair value of the
identifiable assets, liabilities and contingent liabilities of the entity
recognised at the date of acquisition. Goodwill is initially recognised as an
asset at cost and is subsequently measured at cost less accumulated impairment
losses. Goodwill is tested annually by the directors for evidence of
impairment.
2.9 Intangible assets - Other than goodwill
Intangible assets purchased, other than in a business combination, are
recognised when future economic benefits are probable and the cost or value of
the asset can be measured reliably.
Intangible assets arising on a business combination, such as customer
relationships, are initially recognised at estimated fair value, except where
the asset does not arise from legal or contractual rights, and there is no
history or evidence of exchange transactions for the same or similar assets
and estimating the assets fair value would depend on immeasurable variables.
The fair value represents the directors' best estimate of future economic
benefit to be derived from these assets discounted at an appropriate rate.
Other intangible assets are initially recognised at cost (which for intangible
assets acquired in a business combination is the fair value at acquisition
date) and are subsequently measured at cost less accumulated amortisation and
accumulated impairment losses.
Customer relationships that are acquired by the Group as part of a business
combination are stated at cost less accumulated amortisation and impairment
losses (see accounting policy 'Impairment of non-financial assets'). Cost
reflects management's judgement of the fair value of the individual intangible
asset calculated by reference to the net present value of future benefits
accruing to the Group from the utilisation of the asset, discounted at an
appropriate discount rate
Intangible assets are amortised to the Consolidated Statement of Comprehensive
Income on a straight-line basis over their estimated useful lives, as follows:
Purchased computer software - 4 years
Customer relationships - 3-25 years
Brand - 100 years
Purchased computer software is amortised over a period of 4 years, being the
minimum period expected to benefit from the asset.
Customer relationships are amortised over a period of 3-25 years being the
average length of relationship with key clients for acquired entities.
Brand value is amortised over a period of 100 years based on the directors'
assessment of the future life of the brand. This is supported by a trading
history dating back to 1759. Brand value relates to the 'Knights' brand only.
Other acquired brands are not recognised as an asset as the impact of such
recognition would not be material.
2.10 Property, plant and equipment
Property, plant and equipment are stated at cost net of depreciation and any
provision for impairment.
Depreciation is provided on property, plant and equipment at rates calculated
to write each asset down to its estimated residual value over its expected
useful life, as follows:
Freehold
property
- 2% on cost
Expenditure on short leasehold property - 10% on
cost
Leasehold
property
- 1% on cost
Office
equipment
- 25% on cost
Furniture and
fittings
- 10% on cost
Motor vehicles
- 25% on cost
Right-of-use assets
-
useful life of the lease (between 2 and 25 years)
Residual value is calculated on prices prevailing at the reporting date, after
estimated costs of disposal, for the asset as if it were at the age and in the
condition expected at the end of its useful life.
2.11 Investment in joint ventures
Entities in which the Group has a long-term interest and share control under a
contractual arrangement are classified as joint ventures. Joint ventures are
accounted for using the equity method. Where necessary, adjustments are made
to bring the accounting policies of joint ventures into line with those used
by the Group.
2.12 Impairment of non-financial assets
An assessment is made at each reporting date of whether there are indications
that non-financial assets may be impaired or that an impairment loss
previously recognised has fully or partially reversed. If such indications
exist, the Group estimates the recoverable amount of the asset or, for
goodwill, the recoverable amount of the cash-generating unit.
Shortfalls between the carrying value of non-financial assets and their
recoverable amounts, being the higher of the fair value less costs to sell and
value in use, are recognised as impairment losses. All impairment losses are
recognised in the Consolidated Statement of Comprehensive Income.
Recognised impairment losses are reversed (other than for goodwill) if, and
only if, the reasons for the impairment loss have ceased to apply. Reversals
of impairment losses are recognised in the Consolidated Statement of
Comprehensive Income. On reversal of an impairment loss, the depreciation or
amortisation is adjusted to allocate the asset's revised carrying amount (less
any residual value) over its remaining useful life.
2.13 Leases
Group as lessee
The Group leases offices, equipment and vehicles. Rental contracts are for
periods of between 2 and 25 years. Lease terms are negotiated on a
lease-by-lease basis and contain a variety of terms and conditions.
The Group assesses whether a contract is, or contains, a lease at inception of
the contract. The Group recognises a right-of-use asset and a corresponding
lease liability with respect to all lease arrangements in which it is the
lessee, except for short term leases (defined as leases with a lease term of
12 months or less) or leases of low value assets (being those assets with a
value less than £4,000). For short term and low value leases, the Group
recognises the lease payments as an operating expense on a straight-line basis
over the term of the lease.
Assets and liabilities arising from a lease are initially measured on a
present value basis. Lease liabilities include the net present value of the
following lease payments:
· fixed payments (including in-substance fixed payments), less any
lease incentives receivable;
· variable lease payments that are based on an index or a rate;
· amounts expected to be payable by the Group under residual value
guarantees;
· the exercise price of a purchase option if the Group is
reasonably certain to exercise that option; and
· payments of penalties for terminating the lease, if the lease
term assumed reflects the group exercising that option.
The lease payments are discounted using the interest rate implicit in the
lease. If that rate cannot be determined, the Group's incremental borrowing
rate is used, being the rate that the Group would have to pay to borrow the
funds necessary to obtain an asset of similar value in a similar economic
environment with similar terms and conditions.
Underlying lease payments of both principal and interest are included in
financing activities in the cash flow. Onerous lease payments of both
principal and interest are included in non-underlying operating activities in
the Statement of Cash Flows.
The lease liability is presented as a separate line in the Consolidated
Statement of Financial Position.
Right-of-use assets are recognised at commencement of the lease and initially
measured at the amount of the present value of the lease liability, plus any
incremental costs of obtaining the lease and any lease payments made at or
before the leased asset is available for use by the Group.
After initial recognition, the lease liability is reduced for payments made
and increased to reflect interest on the lease liability (using the effective
interest method). The related right-of-use asset is depreciated over the term
of the lease or, if shorter, the useful economic life of the leased asset. The
lease term shall include the period of an extension option where it is
reasonably certain that the option will be exercised. Interest on the lease
liability is recognised in the Consolidated Statement of Comprehensive Income.
An estimate of the costs to be incurred in restoring the leased asset to the
condition required under the terms and conditions of the lease is recognised
as part of the cost of the right-of-use asset when the Group incurs the
obligation for these costs. The costs are incurred at the start of the lease
or over the lease term. The provision is measured at the present value of the
best estimate of the expenditure required to settle the obligation.
The Group remeasures the lease liability (and makes a corresponding adjustment
to the related right-of-use
asset) whenever:
· the lease term has changed or there is a significant change in
the assessment of exercise of a purchase option, in which case the lease
liability is remeasured by discounting the revised lease payments using a
revised discount rate;
· the lease payments change due to changes in an index or rate or a
change in expected payment under a guaranteed residual value, in which cases
the lease liability is remeasured by discounting the revised lease payments
using the initial discount rate (unless the lease payments change is due to a
change in a floating interest rate, in which case a revised discount rate is
used);
· a lease contract is modified and the lease modification is not
accounted for as a separate lease, in which case the lease liability is
remeasured by discounting the revised lease payments using a revised discount
rate.
Group as lessor
The Group enters into lease agreements as a lessor with respect to some of its
properties.
When the Group acts as a lessor, it determines at lease inception whether each
lease is a finance lease or an operating lease. To classify each lease, the
Group makes an overall assessment of whether the lease transfers substantially
all of the risks and rewards incidental to ownership of the underlying asset.
If this is the case, then the lease is a finance lease; if not, then it is an
operating lease. As part of this assessment, the Group considers certain
indicators such as whether the lease is for a major part of the economic life
of the asset.
Finance lease receivables are initially measured on a present value basis.
This includes the net present value of the following lease payments
receivable:
· fixed payments receivable (including in-substance fixed
payments), less any lease incentives payable;
· variable lease payments receivable that are based on an index or
a rate;
· amounts expected to be receivable by the Group under residual
value guarantees; and
· payments received on penalties for terminating the lease, if the
lease term assumed reflects the group exercising that option.
The lease payments receivable are discounted using the interest rate implicit
in the head lease.
When the Group is an intermediate lessor, it accounts for its interests in the
head lease and the sub-lease separately. It assesses the lease classification
of a sub-lease with reference to the right-of-use asset arising from the head
lease, not with reference to the underlying asset. If a head lease is a
short-term lease to which the Group applies the exemption described above,
then it classifies the sub-lease as an operating lease.
Underlying lease payments received of both principal and interest are included
in investing activities in the cash flow.
The finance lease receivable is presented as a separate line in the
Consolidated Statement of Financial Position.
After initial recognition, the lease receivable is reduced for payments
received and increased to reflect interest on the lease receivable (using the
effective interest method). The lease term shall include the period of an
extension option where it is reasonably certain that the option will be
exercised. Interest on the lease receivable is recognised in the Consolidated
Statement of Comprehensive Income.
The Group remeasures the lease receivable (and makes a corresponding
adjustment to the Consolidated Statement of Comprehensive Income) whenever:
· the lease term has changed or there is a significant change in
the assessment of exercise of a purchase option, in which case the lease
receivable is remeasured by discounting the revised lease payments receivable
using a revised discount rate;
· the lease payments receivable change due to changes in an index or
rate or a change in expected receivable under a guaranteed residual value, in
which cases the lease receivable is remeasured by discounting the revised
lease payments receivable using the initial discount rate (unless the lease
payments receivable change is due to a change in a floating interest rate, in
which case a revised discount rate is used);
· a lease contract is modified and the lease modification is not
accounted for as a separate lease, in which case the lease receivable is
remeasured by discounting the revised lease payments receivable using a
revised discount rate.
2.14 Retirement benefits
2.14a Defined contribution scheme
The Group operates a defined contribution scheme. The amount charged to the
Consolidated Statement of Comprehensive Income in respect of pension costs is
the contributions payable in the year. Differences between contributions
payable in the year and contributions actually paid are shown as either
accrued expenses or prepayments and other receivables.
2.14b Defined benefit pension scheme
For defined benefit schemes the amounts charged to operating profit are the
current service costs and gains and losses on settlements and curtailments.
They are included as part of staff costs. The interest cost and the expected
return on assets are shown as a net amount in other finance costs or finance
income.
Defined benefit schemes are funded, with the assets of the scheme held
separately from those of the Group, in separate trustee administered funds.
Pension scheme assets are measured at fair value and liabilities are measured
on an actuarial basis using the projected unit credit method and discounted at
a rate equivalent to the current rate of return on a high quality corporate
bond of equivalent currency and term to the scheme liabilities. The actuarial
valuations are obtained at least triennially and are updated at each reporting
date.
Defined benefit assets are not recognised in the Consolidated Statement of
Financial Position, on the basis that they are not deemed to be material.
For the 'With Profit Section' contributions are recognised in the Consolidated
Statement of Comprehensive Income in the period to which they relate as there
is insufficient information available to use defined benefit accounting. A
liability will be recognised based on the agreed share of the Group in the
scheme. No liability has been recognised in the current or prior period on the
basis that they are not deemed to be material.
2.15 Share-based payments
The cost of providing share-based payments to employees is charged to the
Consolidated Statement of Comprehensive Income over the vesting period of the
awards. The cost is based on the fair value of awards at the date of grant
of the award using an appropriate valuation model. The amount recognised as
an expense will be adjusted to reflect differences between the expected and
actual vesting levels. Further details of the schemes are included in note
9.
2.16 Financial instruments
Financial instruments are recognised on the date when the Group becomes a
party to the contractual provisions of the instrument. Financial instruments
are recognised initially at fair value.
Financial assets
Contract assets and trade and other receivables
Contract assets and trade and other receivables are initially measured at fair
value. These assets are subsequently measured at amortised cost, being the
transaction price less any amounts settled and any impairment losses.
Impairment of financial assets
The Group recognises a loss allowance for expected credit losses ('ECL') on
contract assets and trade and other receivables. The expected credit losses on
trade receivables includes specific provisions against known receivables and
an estimate using a provision matrix by reference to past experience, adjusted
for forward looking considerations, and an analysis of the debtor's current
financial position on the remaining balance. The expected credit losses on
contract assets and other receivables is assessed based on expected credit
loss experienced on these types of assets adjusted for known foreseeable
estimated losses.
Financial liabilities and equity
Financial instruments are classified as liabilities and equity instruments
according to the substance of the contractual arrangements entered into. An
equity instrument is any contract that evidences a residual interest in the
assets of the Group after deducting all of its liabilities.
Trade and other payables
Trade and other payables due within one year are initially measured at fair
value and subsequently measured at amortised cost, being the transaction price
less any amounts settled.
Deferred consideration
Deferred consideration is initially recognised at the fair value of the
amounts payable and subsequently at amortised cost of the agreed payments in
accordance with the agreement. Any interest payable on the balance is
reflected in the value of the liability and charged monthly to the Statement
of Comprehensive Income as it arises.
Borrowings
Borrowings are initially recognised at the fair value of the consideration
received net of issue costs associated with the borrowings. Borrowings are
subsequently measured at amortised cost using the effective interest
method. Interest expense is recognised on the basis of the effective
interest method and is included in finance costs.
Derecognition of financial assets and liabilities
A financial asset is derecognised only when the contractual rights to cash
flows expire or are settled, or substantially all the risks and rewards of
ownership are transferred to another party. A financial liability (or part
thereof) is derecognised when the obligation specified in the contract is
discharged, cancelled or expires.
2.17 Provisions
Provisions are recognised when the Group has a present legal or constructive
obligation as a result of a past event, it is probable that an outflow of
economic benefits will be required to settle the obligation, and a reliable
estimate of the amount can be made. Where the effect of the time value of
money is material, provisions are discounted using rate that reflects current
market assessments of the time value of money and the risks specific to the
liability.
Onerous service charge provisions are recognised when the unavoidable costs of
meeting service charge obligations exceed the expected economic benefits to be
derived from the leased properties. The provision represents the present value
of the expected future service charge payments for the remaining lease term.
Any onerous lease payments for rent are recognised within lease liabilities.
In common with comparable practices, the Group is involved in a number of
disputes in the ordinary course of business which may give rise to claims.
Professional indemnity insurance cover is maintained in respect of
professional negligence claims. Premiums are expensed as they fall due with
prepayments being recognised accordingly. A provision is made in the
financial statements for all claims where costs are likely to be incurred. The
provision represents management's best estimate of the cost of defending and
concluding claims and any excesses that may become payable. No separate
disclosure is made for the cost of claims covered by insurance as to do so
could seriously prejudice the position of the Group.
Dilapidation provisions are recognised where the Group has an obligation under
lease agreements to return leased properties to their original condition at
the end of the lease term. An estimate of the costs to be incurred in
restoring the leased asset to the condition required under the terms and
conditions of the lease is recognised as part of the cost of the right-of-use
asset when the Group incurs the obligation for these costs. The costs are
incurred at the start of the lease or over the lease term. The provision is
measured at the present value of the best estimate of the expenditure required
to settle the obligation.
Provisions are reviewed at each reporting date and adjusted to reflect the
current best estimate.
2.18 Treasury Shares
The Group operates an Employee Benefit Trust ("EBT") under which ordinary
shares are repurchased from the market and are subsequently issued to satisfy
employee share options which are exercised. These are treated as treasury
shares under IAS 32 and are added to the Treasury Shares Reserve.
Treasury shares are deducted from equity in accordance with IAS 32 Financial
Instruments: Presentation. No gain or loss is recognised in profit or loss on
the purchase, sale, issue or cancellation of the Company's own equity
instruments. Any dividends on treasury shares are waived.
3. Accounting developments
New and amended IFRSs that are effective in this period for the first time:
The Group has applied the following amendments for the first time in these
financial statements:
New and amended IFRSs
Amendments to IAS 7: Statement of Cashflows
Amendments to IAS 1: Presentation of Financial Statements
Amendments to IFRS 16: Leases
The application of these new amendments did not have a material impact on the
financial statements.
New and amended IFRSs that are effective for the future
At the date of these financial statements, there are new standards and
amendments to IFRSs in issue but not yet effective and have therefore not been
applied as set out below:
New and amended IFRSs Effective date
IFRS 18 Presentation and Disclosure in Financial Statements 1 January 2027
IFRS 19 - Subsidiaries without Public Accountability - Disclosures 1 January 2027
Amendments to IFRS 9 and IFRS 7 - Classification and Measurement of Financial 1 January 2026
Instruments
The full impact of IFRS 18 on the financial statements is in the process of
being reviewed, however the directors do not expect that the adoption of the
standard will have a material impact on the financial statements of the Group
in future periods.
4. Critical accounting judgements and key sources of estimation
uncertainty
In the application of the Group's accounting policies, which are described in
note 2, the directors are required to make judgements, estimates and
assumptions about the carrying amounts of assets and liabilities that are not
readily apparent from other sources. The estimates and associated assumptions
are based on historical experience and other factors that are considered to be
relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis.
Revisions to accounting estimates are recognised in the period in which the
estimate is revised if the revision affects only that period, or in the period
of the revision and future periods if the revision affects both current and
future periods.
Critical accounting judgements
The following are the critical judgements, apart from those involving
estimations (which are dealt with separately below), that the directors have
made in the process of applying the Group's accounting policies and that have
the most significant effect on the amounts recognised in the financial
statements.
Amounts recoverable on contracts - contingent fee arrangements
A level of judgement is required to determine the likelihood of success of a
given matter for contingent fee arrangements. This is determined on a
contract-by-contract basis after considering the relevant facts and
circumstances surrounding each matter. The valuation exercise is conducted by
experienced professionals with a detailed understanding of the individual
matters. The carrying value of contingent fee arrangements at 30 April 2025
was £12,836,000 (2024: £13,070,000).
Business combinations
Management make judgements regarding the date of control of an acquisition in
accordance with IFRS 10. The judgement considers the individual legal
agreements on each transaction and the date at which the Group starts to
exercise control over the activities of the subsidiary, usually the date of
exchange of contracts. Financial performance of the acquisitions is included
in the consolidated Group from the deemed date of control.
Alternative performance measures (APMs)
The Group presents various APMs to assist the user in understanding the
underlying performance of the Group. The selection of these APMs requires the
exercise of judgement as to the key performance indicators used.
Key sources of estimation uncertainty
The key assumptions concerning the future, and other key sources of estimation
uncertainty in the reporting period that may have a significant risk of
causing a material adjustment to the carrying amounts of assets and
liabilities within the next financial year, are discussed below.
IFRS 16
The Group makes estimates of the cost of restoring leased assets to their
original condition when required to do so under the terms and conditions of
the lease. Those estimates are based on the current condition of the leased
assets and past experience of restoration costs. As at 30 April 2025 the
Group had total provisions of £6,726,000 (2024: £4,761,000) (see note 35).
Amounts recoverable on contract assets- recoverable amounts
The valuation of amounts recoverable on contract assets ('AROC') involves the
use of estimates of the likely recovery rate which will be made on the gross
value of chargeable time recorded to each matter.
This percentage represents management's best estimate of future value
following a line by line review of the matters by professionals. The
estimation process takes into account the progress of the case at the
reporting date, the estimated eventual fee payable by the client and the
amount of time which will be incurred in bringing the matter to a successful
conclusion. The amount recognised in AROC at the year end was £50,998,000
(2024: £40,191,000), a 3% change in the estimated recovery of all matters
would impact the profit for the period by approximately £1,895,000 (2024:
£1,469,000).
Accounting for business combinations and valuation of acquired intangibles
Business combinations are accounted for at fair value. The valuation of
goodwill and acquired intangibles is calculated separately on each individual
acquisition. In attributing value to intangible assets arising on acquisition,
management has made certain assumptions in relation to the expected growth
rates, length of key customer relationships and the appropriate weighted
average cost of capital ('WACC') and internal rate of return ('IRR').
Profitability at an EBITDA margin level is also assumed, but is considered
reasonably predictable.
The value attributable to the intangible assets acquired on acquisitions also
impacts the deferred tax provision relating to these items.
The total carrying value of acquired intangibles (excluding brands) is
£27,960,000 (2024: £20,027,000). In order to assess the impact of the key
assumptions on the values disclosed in the Financial Statements the Directors
have applied the following sensitivities to the acquisitions in the current
year:
Key assumption Rate applied in the financial statements Sensitivity tested Annual profit impact Value of intangible assets
£'000
£'000
Long term growth rate 2% 0% 47 (60)
WACC and IRR 10.5 - 11.6% (1) Increase by 5% 203 (369)
Length of customer relationships 5.1 - 8.0 years Increase of 5 years 114 1,640
(1) Each acquisition has been reviewed and, dependent upon the structure
of the acquisition, an appropriate WACC or IRR rate has been applied. These
sensitivities have been calculated by adjusting the adopted rates as noted
above.
Growth rates are estimated based on the current conditions at the date of each
acquisition with reference to independent surveys of future growth rates in
the legal profession in real, inflation adjusted terms.
The length of customer relationships is estimated by considering the length of
time the acquiree has had its significant client relationships up to the date
of acquisition and historic customer attrition rates as appropriate.
The Directors consider the resulting valuations used give a reasonable
approximation as to the value of the intangibles acquired and that any
reasonably possible change in any one of the estimations in isolation would
not have a material impact on the financial statements.
Intangible Assets - carrying amount of goodwill - impairment review
The Directors undertake an annual impairment review of goodwill to assess
whether the carrying value of £72,893,000 is still supported by using a
discounted cash flow model to derive the value in use of the cash generating
unit ('CGU'). Cash flow forecasts are derived from the most recent financial
budgets approved by management for the next three years and extrapolated using
a terminal value calculation.
The key assumptions for the value in use calculations are those regarding the
discount rates and growth rates for the Group's revenues from legal and
professional services and the EBITDA margin. Management estimates discount
rates using pre-tax rates that reflect current market assessments of the time
value of money and the risks specific to the CGU.
Revenue growth over the three years of the forecast period reflects, for FY26,
the current run rate of revenue from the Group's existing business and a full
year of revenue from acquisitions made during the year ended 30 April 2025,
with an element of organic growth in FY27 and FY28. The long-term growth rate
of 2% (2024: 2%) is based on UK economic growth forecasts for the legal
services market.
The Group has conducted a sensitivity analysis on the impairment test of the
CGU value in use. Management considers there is no reasonably plausible
scenario under which goodwill would be impaired.
5. Revenue
All revenue is derived from contracts with clients and is recognised over
time. As explained further in note 6, the Group's legal and professional
services business operates as a single business unit so there are no relevant
categories into which revenue can be disaggregated.
The transaction price allocated to unsatisfied performance obligations of
contracts at 30 April 2025 is not required to be disclosed because it is
comprised of contracts that are expected to have a duration of one year or
less.
Management information does not distinguish between contingent and
non-contingent revenue as contingent fees are not separately identifiable from
other fees.
6. Segmental reporting
The Board of Directors, as the chief operating decision-making body, reviews
financial information for and makes decisions about the Group's overall legal
and professional services business and has identified a single operating
segment, that of legal and professional services operating entirely in the UK.
The legal and professional services business operates through a number of
different service lines and in different locations; however, management effort
is consistently directed to the firm operating as a single segment. No
segmental reporting disclosure is therefore provided as all revenue is derived
from this single segment.
7. Other operating income
Year ended 30 April 2025 Year ended 30 April 2024
£'000 £'000
Other income 811 758
Bank interest on client monies 8,838 9,681
9,649 10,439
8. Staff costs
The average monthly number of employees (including executive directors) of the
Group was:
Year ended 30 April 2025 Year ended 30 April 2024
Number Number
Fee earners 1,079 1,131
Other employees 275 298
1,354 1,429
Their aggregate remuneration comprised:
Year ended Year ended 30 April 2024
30 April 2025 £'000
£'000
Wages and salaries 84,380 80,456
Social security costs 9,452 9,053
Other pension costs 3,829 2,615
Share-based payment charge 1,200 1,131
Other employment costs 1,018 1,097
Aggregate remuneration of employees 99,879 94,352
Redundancy costs and share-based payment charges analysed as non-underlying (2,272) (1,345)
costs
Underlying staff costs in Consolidated Statement of Comprehensive Income 97,607 93,007
Directors' remuneration
Companies Act disclosures
The total amounts for directors' remuneration in accordance with Schedule 5 to
the Accounting Regulations were as follows:
Year ended 30 April 2025 Year ended 30 April 2024
£'000 £'000
Salaries, fees, bonuses and benefits in kind 1,000 749
Money purchase pension contributions 14 7
1,014 756
The number of directors to whom benefits are accruing under money purchase
pension schemes is 1 (2024: 1).
The remuneration of the highest paid director was:
Year ended 30 April 2025 Year ended 30 April 2024
£'000 £'000
Salaries, fees, bonuses, benefits in kind and gains on exercise of options 380 315
Money purchase pension contributions 14 -
394 315
9. Share-based payments
The Group issues equity-settled share-based payments to its employees. The
Group recognised total expenses of £1,200,000 (2024: £1,131,000) relating to
equity-settled share-based payment transactions in the year. £1,195,000
(2024: £1,121,000) is recognised within staff costs, and £5,000 (2024:
£10,000) is classified as non-underlying costs.
Any charges relating to schemes introduced as one-off schemes as part of the
listing on AIM in 2018 are included in non-underlying costs because in the
directors view these schemes were as a reward to employees for their past
performance prior to the IPO and on acquisitions. All charges relating to
other recurring LTIP or SAYE schemes are included as a normal operating
expense.
The following schemes were in place during the period:
Omnibus Plan
The Omnibus Plan is a discretionary share plan, which is administered, and the
grant of awards is supervised by, the Remuneration Committee.
Two forms of award are available under the Omnibus Plan, as considered
appropriate by the Remuneration Committee, as follows:
a) "Restricted Stock Awards": Awards granted in the form of nil or
nominal cost share options, subject to time-based vesting requirements and
continued employment within the Group. No performance targets will apply to
Restricted Stock Awards.
b) "Performance Share Awards": Awards granted in the form of nil or
nominal cost share options, whereby vesting is subject to satisfaction of
performance conditions and continued employment within the Group. The
performance condition is in relation to meeting target underlying EPS values.
Restricted stock awards Performance share awards
Number Weighted average exercise price Number Weighted average exercise price
Pence
Pence
Outstanding at 1 May 2023 3,170,654 0.2 367,064 0.2
Granted during the period 433,332 0.2 - 0.2
Dividend equivalents awarded 144,200 0.2 9,471 0.2
Forfeited during the period (105,912) 0.2 (138,397) 0.2
Exercised during the period (100,184) 0.2 - -
Outstanding at 30 April 2024 3,542,090 0.2 238,138 0.2
Exercisable at 30 April 2024 992,586 0.2 - -
Granted during the period 1,050,000 0.2 3,120,000 0.2
Dividend equivalents awarded 132,516 0.2 6,316 0.2
Forfeited during the period (258,154) 0.2 (55,015) 0.2
Exercised during the period (72,927) 0.2 - 0.2
Outstanding at 30 April 2025 4,393,525 0.2 3,309,439 0.2
Exercisable at 30 April 2025 1,971,598 0.2 - -
The options outstanding at 30 April 2025 had a weighted average exercise price
of 0.2p and a weighted average remaining contractual life of 2.5 years. The
average share price for options exercised during the year was 131.1p.
During the year 1,050,000 options were granted as restricted stock awards and
3,120,000 options were granted as performance stock awards. The maximum term
of any award is four years.
The aggregate of the estimated fair values of the options granted during the
year was £4,707,960. The model used is based on intrinsic values and the
inputs are as follows:
Date Granted Number of Shares Fair Value Share Price (p) Exercise Price (p) Expected Life Type of award
£
26 July 2024 270,000 347,760 129.0 0.2 3.0 years Restricted stock
29 October 2024 780,000 872,040 112.0 0.2 3.8 years Restricted stock
29 October 2024 3,120,000 3,488,160 112.0 0.2 3.8 years Performance share
Company Share Option Plan ('CSOP')
The CSOP is separate from the Knights Omnibus Plan. Subject to Rule 2 of the
CSOP, CSOP Options granted under the CSOP have the same terms as Share Options
as defined in and granted under the Knights Omnibus Plan, but as modified by
the CSOP.
As approved by HMRC these are awards granted in the form of share options at
an exercise price of £1.238 representing the average of the closing prices
quoted for Shares in the Financial Times in respect of the five dealing days
immediately preceding the Grant Date. The awards are subject to time-based
vesting requirements and continued employment within the Group. No performance
targets will apply to the CSOP's.
Number Weighted average exercise price
Pence
Outstanding at 1 May 2024 - -
Granted during the period 1,017,765 123.8
Forfeited during the period (48,465) 123.8
Outstanding at 30 April 2025 969,300 123.8
The options outstanding at 30 April 2025 had a weighted average exercise price
of 123.8p and a weighted average remaining contractual life of 2.5 years.
The aggregate of the estimated fair values of the options granted during the
year was £324,428. The inputs into the Black-Scholes model are as follows:
Exercise price 123.8p
Expected volatility 55.2%
Expected life 3.0 years
Risk-free rate 4.1%
Expected dividend yield 3.9%
Share Incentive Plan ('SIP')
The SIP is an "all employee" scheme under which every eligible employee within
the Group was invited to participate. The original SIP scheme was launched in
September 2019, eligible employees could apply to invest up to £1,800 from
pre-tax income in partnership shares; matching shares were awarded on the
basis of two free matching shares for each partnership share purchased.
In January 2024, the Group launched a new 'evergreen' SIP scheme which allows
eligible employees to purchase shares each month with the maximum investment
per employee per year being £1,800. Matching shares are awarded on the basis
of one free matching share for every two partnership shares purchased.
Under both schemes, matching shares are forfeited if the employee leaves
within three years of the grant date.
Partnership Shares Matching Shares Dividend Shares Number
Number
Number
Outstanding at 1 May 2023 118,196 236,393 -
Granted during the period 48,856 24,418 16,188
Withdrawn during the period (37,219) - -
Reallocated during the period (6,766) (12,733) 19,499
Forfeited during the period - (70,351) (4,784)
Outstanding at 30 April 2024 123,067 177,727 30,903
Unrestricted at 30 April 2024 74,285 153,346 30,903
Granted during the period 76,141 38,053 12,216
Withdrawn during the period (22,292) - -
Reallocated during the period - - -
Forfeited during the period - (30,735) (3,150)
Outstanding at 30 April 2025 176,916 185,045 39,969
Unrestricted at 30 April 2025 61,658 127,440 39,969
Sharesave Scheme ('SAYE')
This is an HMRC approved scheme and is open to any person that was an employee
or officer of the Group at the launch date of each scheme. Under the scheme,
members save a fixed amount each month for three years. Subject to remaining
in employment by the Group, at the end of the three-year period they are
entitled to use these savings to buy shares in the Company at 80% of the
market value at launch date.
The first scheme was launched in November 2018 and further new SAYE schemes
were launched in February 2020 and March 2022.
SAYE options
Number Weighted average exercise price
Pence
Outstanding at 1 May 2023 870,168 306
Forfeited during the period (569,621) 310
Outstanding at 30 April 2024 300,547 298
Exercisable at 30 April 2024 7,977 361
Forfeited during the period (135,308) 300
Outstanding at 30 April 2025 165,239 296
Exercisable at 30 April 2025 165,239 296
The options outstanding at 30 April 2025 had a weighted average exercise price
of 296p.
March 2022 Scheme
The aggregate of the estimated fair values of the options granted in March
2022 is £110,000. The inputs into the Black-Scholes model are as follows:
Exercise price 296p
Weighted average share price 148p
Expected volatility 53.7%
Expected life 3.1 years
Risk-free rate 5.9%
Expected dividend yield 3.0%
The March 2022 scheme matured on 30 April 2025, the number of share options
exercised in respect of this scheme as at 30 April 2025 is nil. There are
165,239 share options which remain exercisable.
10. Retirement benefit schemes
The Group operates a defined contribution pension scheme for employees. The
total cost charged to income of £3,829,000 (2024: £2,615,000) represents
contributions payable to the scheme by the Group. As at 30 April 2025, total
contributions of £759,000 (2024: £551,000) due in respect of the reporting
period had not been paid over to the schemes.
The defined benefit impact is discussed in note 41. There were no charges
against income in the year ended 30 April 2025.
11. Depreciation and amortisation charges
Year ended 30 April 2025 Year ended 30 April 2024
£'000 £'000
Depreciation 3,333 2,656
Depreciation on right-of-use assets 5,223 5,607
Amortisation on computer software 92 103
Loss on disposal of property, plant and equipment 192 144
Underlying depreciation and amortisation charges in Consolidated Statement of 8,840 8,510
Comprehensive Income
Amortisation on acquired intangibles 4,033 3,580
12,873 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.
12. Other operating charges
Year ended 30 April 2025 Year ended 30 April 2024
£'000 £'000
Establishment costs 8,301 7,775
Short term and low value lease costs 62 247
Other overhead expenses 21,476 20,196
29,839 28,218
13. Non-underlying costs
Year ended 30 April 2025 Year ended 30 April 2024
£'000 £'000
Redundancy and reorganisation staff costs 2,266 1,335
Share-based payment charges 5 10
Contingent acquisition payments treated as remuneration 3,752 2,824
Impairment of right-of-use assets 2,078 153
Impairment of acquired software 352 -
Recognition of onerous service charge 750 -
(Profit) on disposal of right-of-use assets (340) (125)
Loss on disposal of property, plant and equipment 315 930
Transaction costs 2,277 1,503
Non-underlying operating costs 11,455 6,630
Non-underlying finance costs 246 281
11,701 6,911
Non-underlying costs cash movement
Year ended 30 April 2025 Year ended 30 April 2024
£'000 £'000
Non-underlying costs 11,701 6,911
Adjustments for:
Contingent acquisition payments shown separately (3,752) (2,824)
Non-cash movements:
Share-based payment charge (5) (10)
Impairment of right-of-use assets (2,078) (153)
Impairment of acquired software (352) -
Recognition of onerous service charge (750) -
Profit on disposal of right-of-use assets 468 449
(Loss) on disposal of property, plant and equipment (315) (930)
Transaction costs (107) (443)
Non-underlying finance costs (246) (281)
Additional cash movements:
Rental payments on onerous leases 435 605
Service charge payments on onerous leases 128 104
Dilapidation payments 239 818
5,366 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, this is where properties have become vacant as employees have
been moved into right-sized offices in the same region. Also 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.
14. Finance costs
Year ended 30 April 2025 Year ended 30 April 2024
£'000 £'000
Interest on borrowings 4,133 3,402
Interest on leases 2,312 1,537
6,445 4,939
15. Finance income
Year ended 30 April 2025 Year ended 30 April 2024
£'000 £'000
Loan interest receivable 239 23
Lease interest receivable 63 66
302 89
16. Auditor's remuneration
Year ended 30 April 2025 Year ended 30 April 2024
£'000 £'000
Fees payable to the parent company's auditor and their associates for the 56 50
audit of the parent company's annual accounts
Fees payable to the auditor and their associates for other services to the
Group:
- The audit of the Company's subsidiaries 177 170
Total audit fees 233 220
- Audit-related assurance services 25 25
Total non-audit fees 25 25
17. Taxation
Year ended 30 April 2025 Year ended 30 April 2024
£'000 £'000
Corporation tax:
Current year 4,626 4,991
Adjustments in respect of prior years 224 218
4,850 5,209
Deferred tax:
Origination and reversal of temporary differences (157) (225)
Tax expense for the year 4,693 4,984
The charge for the period can be reconciled to the Consolidated Statement of
Comprehensive Income as follows:
Year ended Year ended 30 April 2024
30 April 2025 £'000
£'000
Profit before tax 12,269 14,831
Tax at the UK corporation tax rate of 25% (2024: 3,067 3,708
25%)
Expenses that are not deductible in determining taxable profit 1,382 1,058
Partnership tax paid on acquired subsidiaries 20 -
Adjustment in respect of prior years 224 218
Tax expense for the year 4,693 4,984
Consisting of:
Taxation - underlying 7,448 6,598
Tax impact of non-underlying costs (2,755) (1,614)
The impact of non-underlying costs on the effective rate of tax is set out
below:
Year ended 30 April 2025 Year ended 30 April 2024
Total Underlying Non-Underlying £'000 Total Underlying Non-Underlying £'000
£'000
£'000
£'000 £'000
Profit before tax 12,269 28,003 (15,734) 14,831 25,322 (10,491)
Tax expense 4,693 7,448 (2,755) 4,984 6,598 (1,614)
Effective rate of tax 38% 27% 18% 34% 26% 15%
18. 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.
Year ended 30 April 2025 Year ended 30 April 2024
Number Number
Weighted average number of ordinary shares for the purposes of basic earnings 85,950,758 85,840,067
per share
Weighted average shares held in EBT (137,332) -
85,813,426 85,840,067
Effect of dilutive potential ordinary shares:
Share options 4,027,011 2,778,654
Weighted average number of ordinary shares for the purposes of diluted 89,840,437 88,618,721
earnings per share
£'000 £'000
Profit after tax 7,576 9,847
Earnings per share Pence Pence
Basic earnings per share 8.83 11.47
Diluted earnings per share 8.43 11.11
Underlying earnings per share is calculated as an alternative performance
measure in note 39.
19. Dividends
Year ended Year ended 30 April 2024
30 April 2025 £'000
£'000
Amounts recognised as distributions to equity holders in the year:
Final dividend for the year ended 30 April 2024 of 2.79p per share (2023: 2,396 2,145
2.50p)
Interim dividend for the year ended 30 April 2025 of 1.76p per share (2024: 1,507 1,380
1.61p per share)
3,903 3,525
For the year ended 30 April 2025 the Board have proposed a final dividend of
3.05p per share (2024: 2.79p per share). The proposed final dividend is
subject to approval by shareholders at the Annual General Meeting and has not
been included as a liability in these financial statements. The proposed
dividend is payable to all shareholders on the register of members on 10
October 2025. The payment of this dividend will not have any tax consequences
for the Group.
20. Intangible assets and goodwill
Goodwill Brand Customer relationships Purchased computer software Total
£'000 £'000 £'000 £'000 £'000
Cost
As at 1 May 2023 59,661 5,401 35,134 495 100,691
Acquisitions of subsidiaries 2,049 - 395 - 2,444
Adjustments 78 - - - 78
Additions - - - 40 40
Disposals - - (1,097) - (1,097)
As at 30 April 2024 61,788 5,401 34,432 535 102,156
Acquisitions of subsidiaries 11,261 - 11,912 352 23,525
Adjustments (156) - - (2) (158)
Additions - - - 83 83
Impairment - - - (352) (352)
As at 30 April 2025 72,893 5,401 46,344 616 125,254
Amortisation and impairment
As at 1 May 2023 - 432 11,976 262 12,670
Amortisation charge - 54 3,526 103 3,683
Eliminated on disposal - - (1,097) - (1,097)
As at 30 April 2024 - 486 14,405 365 15,256
Amortisation charge - 54 3,979 92 4,125
As at 30 April 2025 - 540 18,384 457 19,381
Carrying amount
At 30 April 2025 72,893 4,861 27,960 159 105,873
At 30 April 2024 61,788 4,915 20,027 170 86,900
At 30 April 2023 59,661 4,969 23,158 233 88,021
The carrying amount of goodwill of £72,893,000 (2024: £61,788,000) has been
allocated to the single cash generating unit (CGU) present in the business,
which is the provision of legal and professional services.
The recoverable amount of the Group's goodwill has been determined by a value
in use calculation using a discounted cash flow model. The Group has prepared
cash flow forecasts derived from the most recent financial budgets approved by
management for the next three years after which cash flows are extrapolated
using a terminal value calculation based on an estimated growth rate of 2%
(2024: 2%). This rate does not exceed the expected average long-term growth
rate for the UK legal services market.
The key assumptions for the value in use calculations are those regarding the
growth rates for the Group's revenues from legal and professional services,
the EBITDA margin and the discount rate. Management estimates discount rates
using pre-tax rates that reflect current market assessments of the time value
of money and the risks specific to the CGU.
The rate used to discount the forecast cash flows is based on a pre tax
estimated weighted average cost of capital of 12.9% (2024: 13.4%).
Revenue growth over the three years of the forecast period reflects, for FY26,
the current run rate of revenue from the Group's existing business and a full
year of revenue from acquisitions made during the year ended 30 April 2025,
and an element of organic growth in FY27 and FY28 through continued
recruitment and increases in chargeable hours and recovered rates. The
long-term growth rate is based on UK economic growth forecasts for the legal
services market.
The Group has conducted a sensitivity analysis on the impairment test of the
CGU value in use. Management considers there is no reasonably plausible
scenario under which goodwill would be impaired.
21. Acquisitions
Acquisitions summary
During the year the Group has completed two acquisitions Thursfield Legal
Limited and IBB Law LLP. The table below summarises the consideration paid and
the net cash flow arising on all acquisitions in the period:
Total
£'000
Total identifiable assets less liabilities acquired 18.894
Goodwill 11,261
Total consideration 30,155
Satisfied by:
Cash 29,357
Deferred consideration arrangement 798
Total consideration transferred 30,155
Net cash outflows arising on acquisition:
Cash consideration net of cash acquired 24,972
Net investing cash outflow arising on acquisition 24,972
Repayment of debt acquired 172
Net financing cash outflow arising on acquisition 172
Repayment of debt in future years 932
Details for the individual acquisitions are included on the following pages.
The acquisition date in each case is the date of exchange of the sale and
purchase agreement, being the date on which control passes and the Group is
exposed to variable returns.
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 - 1,631 1,631
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 842 (66) 776
Cash and cash equivalents 3,899 - 3,899
Liabilities
Trade and other payables (1,712) - (1,712)
Lease liabilities - (602) (602)
Provisions (222) 5 (217)
Deferred tax (4) (408) (412)
Total identifiable assets and liabilities 5,510 1,159 6,669
Goodwill 4,453
Total consideration 11,122
Satisfied by:
Cash 10,324
Deferred consideration 798
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 £1,631,000 has been arrived
at using the excess earnings method. The goodwill of £4,453,000 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 £8,164,000 of revenue to the Group's Statement of
Comprehensive Income for the period from 27 July 2024 to 30 April 2025. 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.
IBB Law LLP ('IBB')
On 28 February 2025 the Group exchanged contracts to acquire IBB by purchasing
the controlling membership interests of the entity. This acquisition completed
on 4 April 2025. IBB is a law firm which will significantly strengthen
Knights' presence in the South East.
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 352 10,281 10,633
Property, plant and equipment 325 11 336
Investments 132 - 132
Right-of-use assets - 3,921 3,921
Contract assets 4,369 - 4,369
Trade and other receivables 4,748 - 4,748
Cash and cash equivalents 485 - 485
Liabilities
Trade and other payables (3,560) 281 (3,279)
Lease liabilities - (3,921) (3,921)
Borrowings (1,043) (61) (1,104)
Provisions (1,421) - (1,421)
Deferred tax - (2,674) (2,674)
Total identifiable assets and liabilities 4,387 7,838 12,225
Goodwill 6,808
Total consideration 19,033
Satisfied by:
Cash 19,033
Deferred consideration -
Total consideration transferred 19,033
Net cash outflow arising on acquisition:
Cash consideration (net of cash acquired) 18,548
Net cash outflow arising on acquisition 18,548
Intangibles relating to customer relationships of £10,281,000 has been
arrived at using the excess earnings method. The goodwill of £6,808,000
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 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 £9,000,000 and is payable in equal
instalments on the first, second and third anniversary of completion.
IBB contributed £4,334,000 of revenue to the Group's Statement of
Comprehensive Income for the period from 28 February 2025 to 30 April 2025.
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 4 April 2025.
22. Investments
Joint ventures £'000 Other investments £'000 Total £'000
At 1 May 2024 50 - 50
Acquired 16 350 366
Investment income 30 28 58
Dividends received (13) - (13)
Disposed - (167) (167)
Reclassified as held for sale - (183) (183)
At 30 April 2025 83 28 111
On 28 March 2024, the Group acquired 50% of the share capital of Convex
Corporate Finance Limited ('Convex') as part of a joint venture with key
management personnel of Convex. The initial investment was £50,000 and each
joint venturer has equal voting rights. The profit within Convex for the
period ending 30 April 2025 was £1,026,000. A share of net assets of £13,000
has been recognised in the Group during the year as the first £1,000,000 of
profits in each financial year are allocated to the key management personnel
of Convex.
On 28 February 2025, the Group acquired IBB Law LLP, as part of this
acquisition, the Group acquired IBB Wealth Limited, a 50% joint venture
between IBB Law LLP and Kubera Wealth Limited. During the year the Group has
recognised a share of net assets of £16,000 representing 50% of the profit in
IBB Wealth Limited in the period post-acquisition.
As part of the Thursfields acquisition, the Group acquired an investment in
the capital and current accounts in Thursfields Child Care LLP, this was
subsequently disposed of during the year. A 9% investment in respect of
Meridies Insurance Company Limited was also acquired, the Group has taken
steps to exit this investment during the year and this value has subsequently
been classified as held for sale at the year end.
As part of the IBB acquisition, the Group acquired an investment in an
insurance captive called Lawnet the Group has taken steps to exit this
investment during the year and this value has subsequently been classified as
held for sale at the year end.
23. Property, plant and equipment
Expenditure on short leasehold property Freehold property £'000 Long leasehold property Office equipment Furniture and fittings Total
£'000 £'000 £'000 £'000 £'000
Motor Vehicles Right-of-use assets
£'000
£'000
Cost
As at 1 May 2023 8,690 - - 6,452 1,317 90 55,487 72,036
Acquisitions of subsidiaries 7 - 380 35 37 - - 459
Additions 5,297 - - 1,424 1,444 - 7,076 15,241
Disposals (1,178) - - (1,410) (262) - (11,346) (14,196)
Impairment - - - - - - (882) (882)
As at 30 April 2024 12,816 - 380 6,501 2,536 90 50,335 72,658
Acquisitions of subsidiaries 137 409 - 164 178 - 4,522 5,410
Additions 7,956 - - 2,182 1,616 - 18,875 30,629
Disposals (247) - - (1,154) (511) - (6,216) (8,128)
Reclassification to held for sale - - - (8) - - - (8)
Adjustment - - - - - - (260) (260)
Impairment - - - - - - - -
Alignment (2) - - (1) (3) 1 1 (4)
As at 30 April 2025 20,660 409 380 7,684 3,816 91 67,257 100,297
Depreciation and impairment
As at 1 May 2023 2,465 - - 3,501 568 11 17,287 23,832
Depreciation charge 979 - 4 1,474 176 23 5,607 8,263
Eliminated on disposal (422) - - (1,257) (95) - (5,864) (7,638)
Impairment - - - - - - (729) (729)
As at 30 April 2024 3,022 - 4 3,718 649 34 16,301 23,728
Depreciation charge 1,605 5 4 1,410 286 23 5,268 8,601
Eliminated on disposal (65) - - (1,009) (330) - (3,025) (4,429)
Impairment - - - - - - 2,078 2,078
Alignment - - - (1) - - - (1)
As at 30 April 2025 4,562 5 8 4,118 605 57 20,622 29,977
Carrying amount
At 30 April 2025 16,098 404 372 3,566 3,211 34 46,635 70,320
At 30 April 2024 9,794 - 376 2,783 1,887 56 34,034 48,930
At 30 April 2023 6,225 - - 2,951 749 79 38,200 48,204
Net impairment charges of £2,078,000 (2024: £153,000) due to leases being
classified as onerous are included in non-underlying operating costs (see note
13).
See note 30 for further details of right of use assets.
24. Contract assets and liabilities
Contract assets Trade receivables Contract liabilities £'000
£'000
£'000
At 30 April 2025 50,998 30,639 (130)
At 30 April 2024 40,191 25,931 (188)
At 30 April 2023 38,215 23,610 (218)
The movement during the year is not separately identifiable.
Contract assets
Contract assets consist of unbilled revenue in respect of legal and
professional services performed to date.
Contract assets in respect of fee-for-service and fixed fee arrangements are
billed at appropriate intervals, normally on a monthly basis in arrears, in
line with the performance of the services. Where such matters remain unbilled
at the period end the asset is valued on a contract-by-contract basis at its
expected recoverable amount.
The Group undertakes some matters based on contingent fee arrangements.
These matters are billed when the claim is successfully settled. For matters
ongoing at the period end, each matter is valued based on its specific
circumstances. If the matter has agreed funding arrangements in place,
then it is valued based on the estimated amount recoverable from the funding
depending on the stage of completion of the matter.
If the liability of a matter has been admitted and performance obligations
satisfied, such that it is no longer contingent, these matters are valued
based on the expected recoverable amount. Due to the complex nature of these
matters, they can take a considerable time to be finalised therefore
performance obligations may be settled in one period but the matter not billed
until a later financial period. The amount of contingent fee work in progress
at 30 April 2025 was £12,836,000 (2024: £13,070,000).
If the performance obligations for contingent matters have not been satisfied
at the reporting date, these assets are valued on a contract-by-contract basis
taking into account the expected recoverable amount and the likelihood of
success. Where the likelihood of success of a contingent fee arrangement is
less than highly probable, the amount recognised in contract assets is further
reduced to reflect this uncertainty.
During the year, contract assets of £6,316,000 (2024: £344,000) were
acquired in business combinations.
An impairment loss of £48,000 has been recognised in relation to contract
assets in the year (2024: £36,000). This is based on the expected credit loss
under IFRS 9 of these types of assets. The contract asset loss is estimated at
0.2% (2024: 0.2%) of the balance.
Trade receivables
Trade receivables are recognised when a bill has been issued to the client, as
this is the point in time that the consideration is unconditional because only
the passage of time is required before the payment is due. Trade receivables
also includes disbursements.
Bills are payable within thirty days of date of issue unless otherwise agreed
with the client.
Contract liabilities
When matters are billed in advance or on the basis of a monthly retainer, this
is recognised in contract liabilities and released over time as the services
are performed.
25. Trade and other receivables
30 April 2025 30 April 2024
£'000 £'000
Trade receivables 32,023 26,694
Impairment provision - trade receivables (1,384) (763)
Prepayments and other receivables 8,913 6,822
Amount owed from joint venture 2,000 2,523
41,552 35,276
Trade and other receivables 30 April 2025 30 April 2024
£'000 £'000
> 1 year 2,000 2,523
< 1 year 39,552 32,753
41,552 35,276
Trade receivables
The average credit period taken on sales is 31 days as at 30 April 2025 (2024:
28 days). No interest is charged on trade receivables. The Group uses
appropriate methods to recover all balances once overdue. Once the expectation
of recovery is deemed remote a debt may be written off.
The Group measures the loss allowance for trade receivables at an amount equal
to 12 months expected credit losses ('ECL'). The Group applies the simplified
approach to providing for expected credit losses prescribed by IFRS 9, which
permits the use of a provision matrix when measuring the expected loss
provision for all trade receivables. As the Group's expected credit loss
experience does not show significantly different loss patterns for different
client segments, the provision for loss allowance is based on past due status.
The following table details the risk profile of trade receivables (excluding
disbursements) based on the Group's provision matrix:
30 April 2025 30 April 2024
Gross carrying amount Expected credit losses Expected credit loss rate Gross carrying amount Expected credit losses Expected credit loss rate
£'000 £'000 % £'000 £'000 %
Not past due 18,287 52 0.28 14,893 42 0.28
1-30 days past due 2,765 19 0.67 3,667 14 0.38
31-60 days past due 1,933 6 0.33 1,378 5 0.36
61-90 days past due 398 1 0.33 209 1 0.48
>91 days past due 3,740 510 13.65 2,176 605 27.80
12 month ECL £'000 27,123 588 2.17 22,323 667 2.99
In addition to the above on trade receivables a further £284,000 (2024:
£96,000) impairment loss has been recognised against disbursement balances
(excluding CL Medilaw). This is based on 100% impairment against all
disbursements with no activity on the matter for over 12 months and 0.3%
against the remainder of the balance based upon the expected credit loss of
this type of asset.
The movement in the allowance for impairment in respect of trade receivables
and contract assets during the year was as follows:
2025 2024
£'000 £'000
Balance at 1 May 763 914
Increase in loss allowance recognised in profit and loss during the year 1,241 489
Acquired provisions 814 129
Receivables written off during the year as uncollectable (1,434) (769)
Balance at 30 April 1,384 763
26. Finance lease receivable
The Group sub-leases floors in three office buildings on head leases that were
acquired in previous periods. The Group has classified the sub-leases as
finance leases because the sub-leases are for the whole of the remaining term
of the head leases.
The following table sets out a maturity analysis of lease receivables, showing
the undiscounted lease payments to be received after the reporting date.
30 April 2025 30 April 2024
£'000 £'000
Less than one year 457 424
One to two years 457 424
Two to three years 457 424
Three to four years 436 424
Four to five years 151 406
More than five years 73 225
2,031 2,327
Less: unearned finance income (291) (330)
1,740 1,997
Finance lease receivable 30 April 2025 30 April 2024
£'000 £'000
> 1 year 1,335 1,633
< 1 year 405 364
1,740 1,997
Total lease payments received for the year ended 30 April 2025 was £458,000
(2024: £405,000).
The Group's finance lease arrangements do not include variable payments.
The directors of the Group estimate the loss allowance on finance lease
receivables at the end of the reporting period at an amount equal to lifetime
ECL. None of the finance lease receivables at the end of the reporting period
are past due, and considering the historical default experience and the future
prospects of the sectors in which the lessees operate, the directors of the
Group consider that no finance lease receivable is impaired.
27. Disposal of assets and liabilities held for sale
IBB Crime
On 4 April 2025 the Group completed the acquisition of IBB Law LLP which
included a legal aid funded crime business. At the time of acquisition, it was
noted that this work-type, which is considered non-core to Knights, would be
reviewed following completion.
In April 2025, management committed to a plan to sell the legal aid funded
crime business. Accordingly, all assets and liabilities are presented as
assets and liabilities held for sale. Efforts to sell the crime business
commenced and on 18 July 2025, the Group completed the sale of the crime
business.
No fair value gains or losses have been recognised on reclassification as fair
values of assets and liabilities are deemed to be equal to the carrying value
at the period end.
As at 30 April 2025, the crime business was stated at fair value less cost to
sell and comprised of the following assets and liabilities:
30 April 2025
£'000
Tangible assets 8
Contract assets 358
Trade and other receivables 655
Cash and cash equivalents 79
Assets held for sale 1,100
30 April 2025
£'000
Trade and other payables (889)
Liabilities held for sale (889)
Assets held for sale do not include £246,000 due to other group entities
which have been eliminated on consolidation.
Other assets and liabilities held for sale
During the year, Knights acquired unlisted investments as part of the
acquisitions of Thursfields Legal Limited and IBB Law LLP. At 30 April 2025,
the Group has committed to disposing its share in these investments in line
with the terms of share agreement for the individual investments.
Assets held for sale IBB Crime Other investments £'000 Total £'000
£'000
At 1 May 2024 - - -
Additions 1,100 183 1,283
At 30 April 2025 1,100 183 1,283
Liabilities held for sale IBB Crime Other investments £'000 Total £'000
£'000
At 1 May 2024 - - -
Additions (889) - (889)
At 30 April 2025 (889) - (889)
28. Share capital
Ordinary shares
Number £'000
As at 1 May 2023 85,813,976 171
Changes during the period
Ordinary shares of 0.2p each issued in respect of exercised share options 100,184 -
At 30 April 2024 (allotted, called up and fully paid) 85,914,160 171
Changes during the period
Ordinary shares of 0.2p each issued in respect of exercised share options 53,148 -
At 30 April 2025 (allotted, called up and fully paid) 85,967,308 171
29. Treasury Shares
At 30 April 2025, the Group held treasury shares with a total value of
£576,000 (2024: £nil). These shares are held to satisfy obligations under
the Group's share-based payment schemes.
During the year, the Group purchased 499,283 of its own ordinary shares to be
held in treasury. These purchases were made throughout the year; the total
cost of these purchases was £598,000. Additionally, 19,799 shares were
transferred out of treasury during the year to satisfy employee share option
exercises. The shares transferred were valued at £22,000, based on a FIFO
costs basis.
Treasury shares
Number £'000
As at 1 May 2024 - -
Changes during the period
Treasury shares purchased (499,283) (598)
Treasury shares issued in respect of exercised share options 19,799 22
At 30 April 2025 (479,484) (576)
Treasury shares are deducted from equity in accordance with IAS 32 Financial
Instruments: Presentation. No gain or loss is recognised in profit or loss on
the purchase, sale, issue or cancellation of the Company's own equity
instruments. Any dividends on treasury shares are waived.
30. Lease liabilities
Incremental borrowing rates applied to individual leases ranged between 1.7%
and 8.3%.
The table below sets out the Consolidated Statement of Financial Position as
at 30 April 2025 and 30 April 2024:
30 April 2025 30 April 2024
£'000 £'000
Right-of-use assets
Property 46,115 33,496
Equipment 520 538
46,635 34,034
Lease liability
> 1 year 48,603 35,389
< 1 year 5,666 5,181
54,269 40,570
Right of use assets include additions and acquired assets of £23,250,000
(2024: £6,565,000) for property and £27,000 (2024: £511,000) for equipment.
The related depreciation charge for the year is £5,102,000 (2024:
£5,127,000) for property and £165,000 (2024: £480,000) for equipment.
The table below shows lease liabilities maturity analysis - contractual
undiscounted cash flows at 30 April 2025:
30 April 2025 30 April 2024
Property Equipment Total Property Equipment Total
£'000 £'000 £'000 £'000 £'000 £'000
Less than one year 8,058 202 8,260 6,810 188 6,998
One to five years 28,731 457 29,188 23,485 509 23,994
More than five years 34,434 3 34,437 20,342 - 20,342
71,223 662 71,885 50,637 697 51,334
Less unaccrued future interest (17,517) (99) (17,616) (10,658) (106) (10,764)
53,706 563 54,269 39,979 591 40,570
The table below shows amounts recognised in the Consolidated Statement of
Comprehensive Income for short term and low value leases as at 30 April
2025:
30 April 2025 30 April 2024
Property Equipment Total Property Equipment Total
£'000
£'000
£'000
£'000
£'000
£'000
Expenses relating to short - term and low value leases 61 1 62 215 32 247
For right-of-use asset depreciation and lease interest charges on leases see
note 11 and 14.
Total lease payments, including payments for short term and low value leases,
for the year ended 30 April 2025 were £7,307,000 (2024: £7,502,000).
31. Borrowings
30 April 2025 30 April 2024
£'000 £'000
Secured borrowings at amortised cost:
Bank loans 69,400 39,800
Other loans 1,282 817
Total borrowings 70,682 40,617
Amount due for settlement within 12 months 875 468
Amount due for settlement after 12 months 69,807 40,149
The above excludes lease liabilities.
All of the Group's borrowings are denominated in sterling.
The Group has a credit facility of £100,000,000 in total (2024:
£70,000,000). The facility remains available until 7 November 2027.
The facility is a revolving credit facility and has the ability to roll on a
monthly, quarterly, half yearly basis or any other period at the Groups option
and is due for final repayment in November 2027. The facility is secured by a
fixed and floating charge over the Group's assets. The facility carries an
interest margin above SONIA of between 1.65% and 2.55% depending on the
leverage level. A commitment fee of one third of the applicable margin is
payable on the undrawn amounts.
32. Deferred consideration
30 April 2025 30 April 2024
£'000 £'000
Non-current liabilities
Deferred consideration 563 350
Current liabilities
Deferred consideration 612 2,591
Deferred consideration as at 30 April 2025 relates to the acquisition of
Coffin Mew LLP, St James' Law Limited and Thursfields Legal Limited and is not
contingent.
In addition, the Group has accrued contingent acquisition payments relating to
acquisitions included within trade and other payables. This is contingent
based upon the continued employment of certain individuals and is being
accrued on a monthly basis in the Consolidated Statement of Comprehensive
Income in accordance with the terms of the agreements. It is expected that
employment will continue for the terms of the agreements and, therefore, the
contingent acquisition payments will be payable in full.
33. Deferred tax
The following are the major deferred tax liabilities and (assets) recognised
by the Group and movements thereon during the current and prior reporting
period.
Accelerated capital allowances Intangible assets Share-based payments Unpaid employer contributions £'000 Total
£'000 £'000 £'000
£'000
IFRS 16
£'000
As at 1 May 2023 1,376 7,032 (459) - 439 8,388
Acquisitions of subsidiaries 26 99 - - - 125
Charge/(credit) for the year 947 (895) (221) (1) (55) (225)
As at 30 April 2024 2,349 6,236 (680) (1) 384 8,288
Acquisitions of subsidiaries 4 2,978 - - 104 3,086
Charge/(credit) for the year 1,273 (1,008) (268) (87) (67) (157)
As at 30 April 2025 3,626 8,206 (948) (88) 421 11,217
Deferred tax assets and liabilities are offset where the Group has a legally
enforceable right to do so. The following is the analysis of the deferred tax
balances after offset for financial reporting purposes:
30 April 2025 30 April 2024
£'000 £'000
Deferred tax assets (1,036) (681)
Deferred tax liabilities 12,253 8,969
11,217 8,288
34. Trade and other payables
30 April 2025 30 April 2024
£'000 £'000
Trade payables 6,915 5,574
Other taxation and social security 9,291 7,435
Other payables 2,675 1,281
Accruals 7,781 5,645
26,662 19,935
Trade payables and accruals principally comprise amounts outstanding for trade
purchases and ongoing costs. The average credit period taken for trade
purchases is 22 days (2024: 22 days). No interest is payable on the trade
payables.
The Directors consider that the carrying amount of trade payables approximates
to their fair value.
Included within other payables is a contingent acquisition payments liability,
this arises on acquisition and the liability is contingent on employees
completing a specified length of service. As at 30 April 2025 £2,458,000 of
contingent acquisition payments are included within other payables (2024:
£1,277,000). The total potential value of the contingent liability is
£12,252,000 (2024: £2,960,000).
35. Provisions
Dilapidation provision Onerous contract provision Professional indemnity provision
£'000
£'000 £'000 Total
£'000
As at 1 May 2023 4,827 282 1,326 6,435
Acquisitions of subsidiaries 38 - 10 48
Additional provision in the year 853 66 1,125 2,044
Utilisation of provision (957) (104) (1,164) (2,225)
As at 30 April 2024 4,761 244 1,297 6,302
Acquisitions of subsidiaries 1,492 - 145 1,637
Additional provision in the year 902 762 772 2,436
Utilisation of provision (429) (128) (763) (1,320)
As at 30 April 2025 6,726 878 1,451 9,055
Consisting of:
Non-current liabilities 4,693 711 - 5,404
Current liabilities 2,033 167 1,451 3,651
The dilapidations provision relates to the potential rectification of
leasehold sites upon expiration of the leases. This has been based on internal
estimates of the schedule of works included in the lease.
The onerous contract provision relates to service charges on vacant offices
where the Group is the lessee. The Group is actively marketing these leases
for reassignment. The provision represents the Directors' estimate of the
future service charge costs to be paid by the Group prior to reassignment of
the leases. The onerous contracts provision also includes contracts acquired
via acquisition that are no longer utilised but are non-cancellable. The
provision represents the present value of the remaining payments under the
terms of the lease. Future service charge payments are offset against the
provision.
The professional indemnity provision relates to a number of disputes in the
ordinary course of business for all claims where costs are likely to be
incurred and represents the cost of defending and concluding claims and any
excess amounts that may become payable. The Group carries professional
indemnity insurance and no separate disclosure is made of the cost of claims
covered by insurance as to do so could seriously prejudice the position of the
Group.
36. Financial instruments
Categories of financial instruments
30 April 2025 30 April 2024
£'000 £'000
Financial assets
Amortised cost
Contract assets 50,998 40,191
Trade and other receivables (excluding prepayments) 33,699 29,134
Lease receivable 1,741 1,997
Cash and cash equivalents 5,853 5,453
Financial liabilities
Amortised cost
Borrowings 70,682 40,617
Deferred consideration 1,175 2,941
Trade and other payables 14,913 11,223
Leases 54,269 40,570
Financial risk management objectives
The Group's Executive board and finance function monitors and manages the
financial risks relating to the operations of the Group. These risks include
market risk (interest rate risk), credit risk, liquidity risk and cash flow
interest rate risk.
Market risk
The Group's activities expose it primarily to the financial risks of changes
in interest rates (see below). Market risk exposures are measured using
sensitivity analysis.
There has been no change to the Group's exposure to market risks or the manner
in which these risks are managed and measured.
Interest rate risk management
The Group is exposed to interest rate risk because the Group borrows funds at
floating interest rates. The risk is managed by the Group by keeping the level
of borrowings at a manageable level. The Group is also exposed as it holds
client monies where interest is received at floating interest rates. This risk
is managed by ensuring that the Group holds client monies with banks where
interest rates are maximised. Overall the Group do not see interest rate risk
as a significant risk as fluctuations in rates would impact both interest
receivable and payable amounts. The operations of the Group are not dependent
on the finance income received.
Interest rate sensitivity analysis
The sensitivity analysis below has been determined based on the exposure to
interest rates for financial instruments at the end of the reporting period.
For floating rate liabilities, the sensitivity is prepared assuming the amount
of the liability outstanding at the end of the reporting period was
outstanding for the whole year.
If interest rates had been 0.5% higher/lower and all other variables were held
constant, the Group's profit for the year ended 30 April 2025 would
decrease/increase by £353,000 (2024: decrease/increase by £203,000). This is
attributable to the Group's exposure to interest rates on its variable rate
borrowings.
For floating rate assets, the sensitivity is prepared taking an average client
balance held throughout the year.
If interest rates had been 0.5% higher/lower and all other variables were held
constant, the Group's profit for the year ended 30 April 2025 would
decrease/increase by £1,275,000 (2024: decrease/increase by £956,000). This
is attributable to the Group's exposure to interest rates on its variable rate
client monies held.
Credit risk management
Note 25 details the Group's maximum exposure to credit risk and the
measurement bases used to determine expected credit losses.
The risk of bad debts is mitigated by the Group having a policy of performing
credit checks or receiving payments on account for new clients when practical
and ensuring that the Group's exposure to any individual client is tightly
controlled, through credit control policies and procedures.
Liquidity risk
Liquidity risk arises from the Group's management of working capital and the
financial charges on its debt instruments and repayments of principal. There
is a risk that the Group will encounter difficulty in meeting its financial
obligations as they fall due or not meet its required covenants. The Group
manages this risk and its cash flow requirements through detailed annual,
monthly and daily cash flow forecasts. These forecasts are reviewed
regularly to ensure that the Group has sufficient working capital to enable it
to meet all of its short-term and long-term cash flow needs.
Measurement of fair values
Financial assets and liabilities are measured in accordance with the fair
value hierarchy and assessed as Level 1, 2 or 3 based on the following
criteria:
· Level 1: quoted prices (unadjusted) in active markets for
identical assets or liabilities.
· Level 2: inputs other than quoted prices included in Level 1 that
are observable for the asset or liability, either directly (i.e. as prices) or
indirectly (i.e. derived from prices).
· Level 3: inputs for the asset or liability that are not based on
observable market data (unobservable inputs).
Based on the Groups financial instruments disclosed at fair value, cash is
level 1, borrowings is level 2 and deferred consideration is level 3. The
remaining financial instruments are measured at amortised cost.
If the inputs used to measure the fair value of an asset or a liability fall
into different levels of the fair value hierarchy, then the fair value
measurement is categorised in its entirety in the same level of the fair value
hierarchy as the lowest level input that is significant to the entire
measurement.
The tables below analyse the Group's financial liabilities into relevant
maturity groupings based on their contractual maturities. The amounts
disclosed in the table are the contractual undiscounted cash flows.
Contractual maturities of financial liabilities
30 April 2025 < 1 year 1-2 years £'000 2-5 years Total
£'000
£'000
£'000
Borrowings 875 585 69,222 70,682
Deferred consideration 612 563 - 1,175
Trade and other payables 17,371 - - 17,371
30 April 2024 < 1 year 1-2 years £'000 2-5 years Total
£'000
£'000
£'000
Borrowings 468 55 40,094 40,617
Deferred consideration 2,591 350 - 2,941
Trade and other payables 12,501 - - 12,501
Trade and other payables above exclude other taxation and social security
costs.
The Group has met its covenant tests during the year.
For lease maturity see note 30.
Capital management
The capital structure of the Group consists of borrowings (as disclosed in
note 31) and equity of the Group (comprising issued capital, reserves, and
retained earnings as disclosed in the Consolidated Statement of Changes in
Equity).
In managing its capital, the Group's primary objective is to provide a return
for its equity shareholders through capital growth and future dividend
income. The Group seeks to maintain a gearing ratio that balances risk and
returns at an acceptable level and also to maintain a sufficient funding base
to enable the Group to meet its working capital and strategic investment needs
and objectives.
Gearing ratio
The gearing ratio at the year end is as follows:
30 April 2025 30 April 2024
£'000 £'000
Borrowings (note 31) 70,682 40,617
Cash and cash equivalents (5,853) (5,453)
Net debt 64,829 35,164
Equity 104,532 100,260
% %
Net debt to equity ratio 62 35
Significant accounting policies
Details of the significant accounting policies and methods adopted (including
the criteria for recognition, the basis of measurement and the bases for
recognition of income and expenses) for each class of financial asset,
financial liability and equity instrument are disclosed in note 2.
37. Reconciliation of profit before taxation to net cash generated from
operations
Year ended 30 April 2025 Year ended 30 April 2024
£'000 £'000
Profit before taxation 12,269 14,831
Adjustments for:
Amortisation on computer software 92 103
Amortisation on acquired intangibles 4,033 3,580
Depreciation - property, plant and equipment 3,333 2,656
Depreciation - right-of-use assets 5,223 5,607
Loss on disposal (net of £315,000 (2024: £930,000 loss) included in 192 144
non-underlying costs)
Contingent acquisition payments 3,752 2,824
Other non-underlying operating costs 7,703 3,806
Non-underlying finance costs 246 281
Share-based payments 1,194 1,121
Non-operating income (48) -
Finance income (302) (89)
Finance costs 6,445 4,939
Operating cash flows before movements in working capital 44,132 39,803
(Increase) in contract assets (4,850) (1,632)
(Increase) in trade and other receivables (1,903) (767)
Increase in provisions 71 29
(Decrease) in contract liabilities (58) (29)
Increase/(Decrease) in trade and other payables 1,619 (1,150)
Cash generated from operations 39,011 36,254
38. Changes in liabilities arising from financing activities
The table below details changes in the Group's liabilities arising from
financing activities, including both cash and non-cash changes. Liabilities
arising from financing activities are those for which cash flows were, or
future cash flows will be, classified in the Group's Consolidated Statement of
Cash Flows as cash flows from financing activities.
Borrowings Leases
£'000
£'000
As at 1 May 2023 33,265 44,916
New borrowings and leases 23,200 6,690
Acquired borrowings and leases 638 -
Finance costs 3,402 1,537
Interest and other finance costs paid (2,965) (1,537)
Unpaid interest not applied to principal (437) -
Non-cash movement 5 (5,378)
Repayment of debt acquired with prior year subsidiaries (166) -
Repayments (16,325) (5,113)
Amounts included in operating activities - (545)
As at 30 April 2024 40,617 40,570
New borrowings and leases 52,150 17,750
Adjustments to existing leases - 70
Acquired borrowings and leases 1,033 4,595
Interest charged 4,133 2,312
Interest paid (4,067) (2,312)
Unpaid interest not applied to principal (66) -
Non-cash movement 6 (3,659)
Repayment of debt acquired with current year subsidiaries (172) -
Repayment of debt acquired with prior year subsidiaries (473) -
Repayments (22,550) (4,661)
Amounts included in operating activities 71 (393)
As at 30 April 2025 70,682 54,272
39. Alternative performance measures
This Annual Report contains both statutory measures and alternative
performance measures. In management's view the underlying performance of the
business provides a more meaningful measure and year on year comparison of how
the Group's business is managed and measured on a day-to-day basis.
The Group's alternative performance measures and key performance indicators
are aligned to the Group's strategy and together are used to measure the
performance of the business.
Alternative performance measures are non-GAAP (Generally Accepted Accounting
Practice) measures and provide supplementary information to assist with the
understanding of the Group's financial results and with the evaluation of
operating performance for all the periods presented. Alternative performance
measures, however, are not a measure of financial performance under UK-adopted
International Accounting Standards ('IAS') and should not be considered as a
substitute for measures determined in accordance with IFRS. As the Group's
alternative performance measures are not defined terms under IFRS they may
therefore not be comparable with similarly titled measures reported by other
companies.
Reconciliations of alternative performance measures to the most directly
comparable measures reported in accordance with IFRS are provided below.
a) Underlying EBITDA
Underlying EBITDA is presented as an alternative performance measure to show
the underlying operating performance of the Group excluding the effects of
depreciation, amortisation and non-underlying items.
Year ended 30 April 2025 Year ended 30 April 2024
£'000 £'000
Operating profit 18,600 19,962
Depreciation and amortisation charges (note 11) 12,873 12,090
Non-underlying operating costs (note 13) 11,455 6,630
Underlying EBITDA 42,928 38,682
Depreciation of right of use assets (note 11) (5,223) (5,607)
Interest on leases (note 14) (2,312) (1,537)
Lease interest receivable (note 15) 63 66
Underlying EBITDA post IFRS16 charges 35,456 31,604
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.
b) Underlying profit before tax (PBT)
Underlying PBT is presented as an alternative performance measure to show the
underlying performance of the Group excluding the effects of amortisation of
acquired intangible assets and non-underlying items.
Year ended 30 April 2025 Year ended 30 April 2024
£'000 £'000
Profit before tax 12,269 14,831
Amortisation on acquired intangibles (note 11) 4,033 3,580
Non-underlying operating costs (note 13) 11,455 6,630
Non-underlying finance costs (note 13) 246 281
Underlying profit before tax 28,003 25,322
c) Underlying operating profit to underlying profit after tax (PAT)
Underlying PAT is presented as an alternative performance measure to show the
underlying performance of the Group excluding the effects of investment
income, finance costs and income.
Year ended 30 April 2025 Year ended 30 April 2024
£'000 £'000
Operating profit before non-underlying charges 34,088 30,172
Investment income (note 22) 58 -
Finance costs (note 14) (6,445) (4,939)
Finance income (note 15) 302 89
Underlying profit before tax 28,003 25,322
Taxation (7,448) (6,598)
Underlying profit after tax 20,555 18,724
d) Underlying profit after tax (PAT) and adjusted earnings 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.
Year ended 30 April 2025 Year ended 30 April 2024
£'000 £'000
Profit after tax 7,576 9,847
Amortisation on acquired intangibles (note 11) 4,033 3,580
Non-underlying costs (note 13) 11,701 6,911
Tax impact of non-underlying costs (note 17) (2,755) (1,614)
Underlying profit after tax 20,555 18,724
Underlying earnings per share Pence Pence
Basic underlying earnings per share 23.95 21.81
Diluted underlying earnings per share 22.88 21.13
Tax has been calculated at the corporation tax rate of 25% (2024: 25%) and
deferred tax rate of 25% (2024: 25%)
e) 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 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 flows. Cash conversion % is calculated by dividing free cash flow by
underlying PAT, which is reconciled to profit after tax above.
Year ended 30 April 2025 Year ended 30 April 2024
£'000 £'000
Cash generated from operations (note 37) 39,011 36,254
Tax paid (5,820) (5,432)
Net underlying cash outflow for IFRS16 leases (6,515) (6,245)
Free cashflow 26,676 24,577
Underlying profit after tax 20,555 18,724
Cash conversion (%) 130% 131%
f) Net debt
Net debt is presented as an alternative performance measure to show the net
position of the Group after taking account of bank borrowings and cash at bank
and in hand.
30 April 2025 30 April 2024
£'000 £'000
Borrowings (note 31) 70,682 40,617
Cash and cash equivalents (5,853) (5,453)
Net debt 64,829 35,164
40. Capital commitments
As at 30 April 2025 there is a capital commitment of £361,000 (2024:
£6,342,000).
41. Defined benefit pension schemes
The Stonehams Pension Scheme
The Group operates a legacy defined benefit pension arrangement, the Stonehams
Pension Scheme (the "Scheme"). The Scheme provides benefits based on salary
and length of service on retirement, leaving service, or death. The following
disclosures exclude any allowance for any other pension schemes operated by
the Group.
The Scheme was acquired as part of the acquisition of ASB Law where contracts
were exchanged on 5 March 2020. Therefore, the disclosures below represent the
period of ownership from 5 March 2020 to 30 April 2025. The scheme is closed
and provides benefits for 38 legacy employees (now pensioners and deferred
members).
The Scheme is subject to the Statutory Funding Objective under the Pensions
Act 2004. A valuation of the Scheme is carried out at least once every three
years to determine whether the Statutory Funding Objective is met. As part of
the process the Group must agree with the Trustees of the Scheme the
contributions to be paid to address any shortfall against the Statutory
Funding Objective.
The most recent comprehensive actuarial valuation of the Scheme was carried
out as at 31 December 2021. The results of that valuation were updated to 30
April 2025 allowing for cashflows in and out of the Scheme and changes to
assumptions over the period.
From March 2023 it was agreed that Employer contributions towards
administration expenses would be deferred until January 2026. Administration
expenses are to be met directly from the assets of the Scheme. The Group will
separately meet the cost of the PPF levy.
The Scheme typically exposes the Group to actuarial risks such as: investment
risk, interest rate risk and longevity risk.
Investment risk The present value of the defined benefit plan liability is calculated using a
discount rate determined by reference to high quality corporate bond yields;
if the return on plan assets is below this rate, it will create a plan
deficit.
Currently assets are invested in a variety of funds, which will reduce
volatility. The investment approach is reviewed every three years as part of
the valuation process.
Interest risk There is some hedging in the asset portfolio, but at a low level.
A decrease in the bond interest rate will increase the plan liability but this
will be partially offset by an increase in the return on the plan's debt
investments.
Longevity risk The present value of the defined benefit plan liability is calculated by
reference to the best estimate of the mortality of plan participants both
during and after their employment. An increase in the life expectancy of the
plan participants will increase the plan's liability.
The average duration of the Scheme's obligations is 12 years.
Actuarial assumptions
Principal actuarial assumptions
30 April 2025 30 April 2024
% %
Discount rate 5.50 5.06
Retail Prices Index ("RPI") Inflation 3.15 3.57
Consumer Price Index ("CPI") Inflation 2.25 2.67
Pension increase (LPI 5%) 3.05 3.40
Pension increase (LPI 2.5%)
2.13 2.25
Post retirement mortality Males: 90% S3PMA 106%/99% (m/f) S2PA CMI_2022 projections using a long-term improvement rate of
1.5% pa and initial addition of 0.3%
Females: 100% S3PFA (CMI 2023 model) using a long term improvement rate of 1%
Commutation 80% of members are assumed to take the maximum tax free cash possible using 80% of members are assumed to take the maximum tax free cash possible using
current commutation factors current commutation factors
Life expectancy at age 65 of male aged 65 22.1 22.0
Life expectancy at age 65 of female aged 65 23.8 23.8
Life expectancy at age 65 of male aged 45 23.0 23.0
Life expectancy at age 65 of female aged 45 24.9 24.9
The weighted average duration of the Scheme's obligations is 12 years.
The current asset split is as follows
Asset allocation at 30 April 2025 Asset allocation at 30 April 2024
Equities and growth assets 50% 51%
Bonds, LDI and cash 50% 49%
Value as at 30 April Value as at 30 April
2025
2024
£'000
£'000
Fair value of assets 1,982 2,132
Present value of funded obligations (1,467) (1,605)
Surplus in scheme 515 527
Deferred tax - -
Net defined benefit surplus after deferred tax 515 527
The fair value of the assets can be analysed as follows:
Value as at 30 April Value as at 30 April
2025
2024
£'000
£'000
Low risk investment funds 984 1,050
Credit Investment funds 604 647
Cash 394 435
Fair value of assets 1,982 2,132
30 April 2025 30 April 2024
£'000
£'000
Administration costs 39 36
Net interest on liabilities (26) (27)
Total charge to the Statement of Comprehensive Income 13 9
Remeasurements over the period since acquisition
30 April 2025 30 April 2024
£'000
£'000
Loss on assets in excess of interest (105) (115)
Gain on scheme obligation from assumptions and experience 127 31
Loss on scheme obligations due to scheme experience (21) 8
Gain on scheme obligations from demographic assumptions - 34
Total remeasurements 1 (42)
The change in value of assets
30 April 2025 30 April 2024
£'000
£'000
Fair value of assets brought forward 2,132 2,314
Interest on assets 104 105
Benefits paid (110) (136)
Administration costs (39) (36)
Loss on assets in excess of interest (105) (115)
Fair value of assets carried forward 1,982 2,132
Actual return on assets (1) (10)
Change in value of liabilities
30 April 2025 30 April 2024
£'000
£'000
Value of liabilities brought forward 1,605 1,736
Interest cost 78 78
Benefits paid (110) (136)
Actuarial gain (106) (73)
Value of liabilities carried forward 1,467 1,605
Sensitivity of the value placed on the liabilities
Approximate effect on liability
30 April 2025 30 April 2024
£'000
£'000
Discount rate
Minus 0.50% 78 93
Inflation
Plus 0.50% 64 70
Life Expectancy
Plus 1.0 years 41 49
Significant actuarial assumptions for the determination of the defined benefit
obligation are discount rate, inflation rate and mortality. The sensitivity
analysis above has been determined based on reasonably possible changes of the
respective assumptions occurring at the end of the reporting period, while
holding all other assumptions constant.
The sensitivity analysis presented above may not be representative of the
actual change in the defined benefit obligation as it is unlikely that the
changes in assumptions would occur in isolation of one another as some of the
assumptions may be correlated.
The With Profits Section of the Cheviot pension
Allocation of liabilities between employers
The With Profits Section was acquired initially as part of the acquisition of
ASB Law where the transaction completed on 17 April 2020. However a couple of
recent acquisitions have also been legacy members of the scheme resulting in
an increased overall percentage for Knights.
The Trustee has discretion under the contribution rule on how the cost of
providing the benefits of the With Profits Section is allocated between
employers. The contribution rule applies until the earlier of the discharge of
the employer by the Trustee and the termination of the With Profits Section.
The Trustee's current policy is not to discharge employers. Employers
therefore remain liable under the contribution rule even if their last member
dies or transfers out.
The Trustee has been considering how best to ensure all employers bear an
appropriate share of the With Profits Section's obligations whilst ensuring
fairness between employers and a practical and transparent methodology for the
future.
As discussed at the Employers' Meeting on 5 July 2017, the Trustee has decided
to fix the allocation between employers on the basis of the promised benefits
just before the Section was re-classified in 2014 (the valuation as at 31
December 2013). The allocation to each employer will be expressed as a
percentage of the total Scheme liabilities. The intention is to apply this
percentage to any funding, buyout or IFRS deficit in the future to calculate
any contribution that may be due or any accounting liability.
The estimated percentage in relation to Knights Professional Services Limited
as at 30 April 2025 is 0.9554%.
This approach enables each employer to calculate the extent of their
obligation to the Section on the basis of the funding level at any time.
Cheviot will publish funding updates on the website: quarterly, on the scheme
funding basis, which includes an allowance for future investment returns; and
annually, on an estimated buyout basis, which looks at the position should all
benefits be secured with an external provider.
Estimated funding position as at 30 April:
Scheme funding basis
30 April 2025 30 April 2024
£'000 £'000
Total 52,500 58,300
assets
Total liabilities excluding expenses (57,200) (63,000)
Deficit (4,700) (4,700)
Funding level 92% 93%
Information provided as at 30 April 2025 is at 31 March 2025, the latest
information available. This is not expected to be materially different from
the 30 April 2025 position.
Allocation to the Group
The estimated share of the Scheme liabilities is 0.9554%.
Over the year to 30 April 2025, the Section's funding position is a small
deficit.
30 April 2025 30 April 2024
£'000 £'000
Estimated cost of providing benefits (546) (498)
Value of assets 502 461
Resulting deficit (44) (37)
Funding level 92% 93%
The deficit has not been recognised as management consider this to be
temporary and not material.
The Trustee continues to monitor the funding position.
The Trustee reserves the right to withdraw, replace or amend the policy for
the allocation between employers in the future.
42. Related party transactions
Balances and transactions between the Company and its subsidiaries, which are
related parties, have been eliminated on consolidation and are not disclosed
in this note. Transactions between the Group and its other related parties are
disclosed below.
KPV Propco Ltd is a company controlled by Mr D.A. Beech, a person with
significant influence over the Group and a member of key management personnel.
The Group leases a property from KPV Propco Ltd. During the year rents of
£606,000 (2024: £376,000) were charged by KPV Propco Ltd to the Group. A new
lease of The Brampton, Newcastle-under-Lyme was granted for a term of 25 years
from and including 9 December 2024 to 8 December 2049 at a current rent of
£801,000 per annum (excluding VAT).
During the year Knights Professional Services Limited charged KPV Propco Ltd
for professional services totalling £8,000 (2024: £145,000) and a management
fee of £20,000 (2024: £40,000). At 30 April 2025, there was an amount of
£nil owed by the Group to KPV Propco Ltd (2024: £24,000).
During the year Knights Professional Services Limited provided legal services
to the Directors in an individual capacity of £2,000 (2024: £10,000). At 30
April 2025, there was an amount of £nil (2024: £nil) owed to the Group from
the Directors.
Remuneration of key management personnel
The remuneration of the key management personnel of the Group is set out below
in aggregate for each of the categories specified in IAS 24 Related Party
Disclosures.
Year ended 30 April 2025 Year ended 30 April 2024
£'000 £'000
Short-term employee benefits and social security costs 1,739 1,338
Pension costs 37 20
Share-based payments 182 (23)
1,958 1,335
Key management personnel includes Board members and directors of the Group and
the main trading company Knights Professional Services Limited.
Transactions with directors
Dividends totalling £868,000 (2024: £789,000) were paid in the year in
respect of ordinary shares held by the Company's directors.
43. Post balance sheet events
On 2 May 2025 the Group exchanged contracts to acquire Birkett Long LLP and
Birkett Long IFA (collectively trading as Birkett Long). The Group will
acquire Birkett Long for total consideration of £16.6m. The transaction
completed on 13 June 2025 and all assets and liabilities of Birkett Long LLP
were hived into the Group on that date.
On 30 June 2025 the Group exchanged contracts to acquire Rix & Kay LLP.
The Group will acquire Rix & Kay LLP for a total consideration of
£0.87m. The transaction completed on 1 August 2025 and all assets and
liabilities of Rix & Kay LLP were hived into the Group on that date.
On 18 July 2025 the group disposed of the crime business, acquired as part of
the IBB Law LLP acquisition in April 2025.
On 15 August 2025 the Group completed the acquisition of Le Gros Solicitors
Limited for a total consideration of £0.5m. All assets and liabilities of Le
Gros were hived up to the Group on that date.
Initial accounting for the business combination is not yet complete and the
fair value of net assets acquired has not yet been determined; accordingly
details of the assets acquired and liabilities assumed, and goodwill arising
on the acquisitions, cannot be given.
44. Basis of preparation
The financial information set out in this preliminary announcement does not
constitute the Group's statutory financial statements for the years ended 30
April 2025 or 30 April 2024. The financial information has been extracted from
the Group's statutory financial statements for the year ended 30 April 2025.
The auditors have reported on those financial statements; their report was
unqualified, did not include references to any matters to which the auditors
drew attention by way of emphasis and did not contain a statement under
Section 498(2) or (3) of the Companies Act 2006.
The statutory accounts for the year ended 30 April 2025 will be filed with the
Registrar of Companies following the Company's Annual General Meeting. The
statutory accounts for the year ended 30 April 2024 have been filed with the
Registrar of Companies. The report of the auditors on those statutory accounts
was also unqualified, and also did not contain a statement under section
498(2) or (3) of the Act.
Glossary of Terms
Financial Performance Measure
This document contains certain financial measures that are not defined or
separately recognised under IFRS. These measures are used by the Board and
other users of the accounts to evaluate the Group's underlying trading
performance excluding the impact of any non-recurring items and items that do
not reflect the underlying day-to-day trading of the Group. These measures are
not audited and are not standard measures of financial performance under IFRS.
There are no generally accepted principles governing the calculation of these
measures and the criteria upon which these measures are based can vary from
company to company. Accordingly, these measures should be viewed as
supplemental to, not as a substitute for, the financial measures calculated
under IFRS.
Underlying EBITDA
Underlying EBITDA is presented as an alternative performance measure to show
the underlying operating performance of the Group excluding the effects of
depreciation, amortisation, and non-underlying items.
Year ended Year ended
30 April 2025 30 April 2024
£'000 £'000
Operating profit 18,600 19,962
Depreciation and amortisation charges (note 11) 12,873 12,090
Non-underlying operating costs (note 13) 11,455 6,630
Underlying EBITDA 42,928 38,682
Depreciation of right of use assets (5,223) (5,607)
Interest on leases (2,312) (1,537)
Lease interest receivable 63 66
Underlying EBITDA post IFRS 16 35,456 31,604
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.
Underlying Profit Before Tax (PBT)
Underlying PBT is presented as an alternative performance measure to show the
underlying performance of the Group excluding the effects of amortisation on
acquired intangible assets, and non-underlying items.
Year ended Year ended
30 April 2025 30 April 2024
£'000 £'000
Profit before tax 12,269 14,831
Amortisation on acquired intangibles (note 11) 4,033 3,580
Non-underlying operating costs (note 13) 11,455 6,630
Non-underlying finance costs (note 13) 246 281
Underlying profit before tax 28,003 25,322
Underlying Operating Profit to Underlying Profit After Tax (PAT)
Underlying PAT is presented as an alternative performance measure to show the
underlying performance of the Group excluding the effects of investment
income, finance costs and income.
Year ended Year ended
30 April 2025 30 April 2024
£'000 £'000
Operating profit before non-underlying charges 34,088 30,172
Investment income (note 22) 58 -
Finance costs (note 14) (6,445) (4,939)
Finance income (note 15) 302 89
Underlying profit before tax 28,003 25,322
Taxation (7,448) (6,598)
Underlying profit after tax 20,555 18,724
Underlying Profit After Tax (PAT) and Underlying Earnings per Share (EPS)
Underlying PAT and underlying EPS are presented as alternative performance
measures to show the underlying performance of the Group excluding the effects
of amortisation on acquired intangible assets and non-underlying items.
Year ended Year ended
30 April 2025 30 April 2024
£'000 £'000
Profit after tax 7,576 9,847
Amortisation on acquired intangibles (note 11) 4,033 3,580
Non-underlying costs (note 13) 11,701 6,911
Tax impact of non-underlying costs (note 17) (2,755) (1,614)
Underlying profit after tax 20,555 18,724
Underlying earnings per share Pence Pence
Basic underlying earnings per share 21.81
23.59
Diluted underlying earnings per share 22.88 21.13
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 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 flows. Cash conversion % is calculated by dividing free cash flow by
underlying profit after tax, which is reconciled to profit after tax above.
Year ended Year ended
30 April 2025 30 April 2024
£'000 £'000
Cash generated from operations (note 37) 39,011 36,254
Tax paid (5,820) (5,432)
Total cash outflow for IFRS 16 leases (6,515) (6,245)
Free cashflow 26,676 24,577
Underlying profit after tax 20,555 18,724
Cash conversion (%) 130% 131%
Net debt
Net debt is presented as an alternative performance measure to show the net
position of the Group after taking account of bank borrowings and cash at bank
and in hand.
30 April 2025 30 April 2024
£'000 £'000
Borrowings (note 31) 70,682 40,617
Cash and cash equivalents (5,853) (5,453)
Net debt 64,829 35,164
Working Capital
Working capital is calculated as:
30 April 2025 30 April 2024
£'000 £'000
Current assets
Contract assets 50,998 40,191
Trade and other receivables 39,552 32,753
Corporation tax receivable 882 304
Total current assets 91,432 73,248
Current liabilities
Trade and other payables (26,662) (19,935)
Contract liabilities (130) (188)
Total current liabilities (26,792) (20,123)
Net working capital 64,640 53,125
Other Definitions
Colleague/Talent Retention/Employee Turnover
Churn is calculated based on the number of qualified fee earners who had been
employed by the Group for more than one year. Churn is calculated taking the
number of leavers in the above group over the financial year as a percentage
of the average number of colleagues for the year. Retention is 100% less the
churn rate. Churn excludes expected churn from acquisitions.
Fee Earner Concentration
This is calculated taking the largest fees allocated to an individual fee
earner as a percentage of the total turnover for the year and demonstrates the
Group's reliance on the fee earning potential of an individual fee earner.
Client Concentration
On an individual basis this is calculated as the percentage of total turnover
for the financial year that arises from fees of the largest client. For the
top 10 client concentration calculation this takes the fee income from the 10
largest clients for the year as a percentage of the total turnover for the
year.
Top 50 clients
Based on fee income from the 50 largest clients for the year, excluding CL
Medilaw and one off transactions.
Client Satisfaction
Net Promoter Score (NPS) measures the loyalty of a client to a company and can
be used to gauge client satisfaction. NPS scores are measured with a single
question survey and reported with a number from -100 to +100, the higher the
score, the higher the client loyalty/satisfaction.
Colleague Satisfaction
Employee Net Promoter Score (ENPS) measures the loyalty of employees to a
company and how likely they are to recommend their employer as a place to
work, which can also be used to gauge employee satisfaction. ENPS scores are
measured with a single question survey and reported with a number from -100 to
+100, the higher the score the higher the employee loyalty.
Fee Earners
When referring to the number of fee earners in the Group we include all
individuals working in the Group on a mainly fee earning basis. This includes
professionals (legal and non-legal) of all levels including paralegals,
trainees and legal assistants. When referring to the number of fee earners in
the business this will refer to the absolute number of individuals working in
the Group. When using the number of fee earners to calculate the average fees
or profit per fee earner or the ratio of fee earners to support staff these
calculations are based on the number of full-time equivalent (FTE) individuals
to reflect that a number of individuals choose to work on a part-time basis.
Non-Fee Earners/Support Staff
This includes all employees that are not fee earning.
Recurring Revenue
This is calculated based on the amount of revenue in a year that reoccurs in
the following year from the same clients.
Lock Up
This 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 the total fees raised over prior months. WIP
(work in progress) days are calculated based on the gross work in progress
(excluding that relating to clinical negligence claims, insolvency, highways
and real estate investment as these matters operate on a mainly 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, highways and real estate investment
fees) per month for the last 3 months.
Lock up days excludes the impact of acquisitions in the last quarter of the
financial year.
Organic Growth
Organic growth excludes revenue growth from acquisitions in the year of their
acquisition, and for the first full financial year following acquisition,
based on the fees generated by the individuals joining the Group from the
acquired entity. Recruitment of individuals into the acquired offices post
acquisition is treated as part of the organic growth of the business.
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