Interest rate hikes hitting key sectors, reveals leading firm

A national listed firm has admitted interest rate rises are hitting certain key sectors as it reports ‘resilient’ annual results.

Knights Group said the sharp rises in interest rates this year had caused a ‘softening of work’ in some transactional and debt-reliant activity such as residential property, volume re-mortgages and M&A work. Interest rates are at their highest level for 15 years after the Bank of England set them at 5% last month to slow the rise in the cost of living.

The reduction in work had been mitigated by growth in areas which are less cyclical such as private wealth and clinical negligence, the company said.

Knights said economic uncertainty and interest rate rises, as well as the closure of its volume debt recovery business and higher-than-expected staff turnover, had resulted in ‘broadly flat’ overall organic growth for the group during the year ended 30 April 2023.

But continued acquisitions during the period – Coffin Mew and Meade King were added on top of recent captures Keebles, Archers Law and Langleys – helped to secure a 13% increase in revenue to £142m and resulted in underlying profit before tax of £33.4m – up by 21.7%. Of the increase in revenue, £8.8m was from acquisitions made during the financial year and £8.3m was from acquisitions made part way through the previous year.

Net debt has increased from £28.9m to £29.2m and lock-up increased marginally to 87 days.

Chief executive David Beech said: ‘It has been an important year of solid progress for Knights, during which we placed a particular focus on strengthening our management team and developing our operating model to support the execution of our strategy and accelerate the future growth of our business.

‘By continuing to scale the business, establishing and bolstering our presence in key markets across the UK, we have now become one of the largest, fully collaborative legal and professional services groups in the country.’

Staff costs have risen 13% in the last year to almost £90m as the number of fee earners rose from 1,080 to 1,154. The group paid £1.265m to staff through equity-settled share-based payments, compared to £835,000 in 2022. Dividends totalling £664,000 (compared to £250,000 in 2022) were paid in the year in respect of ordinary shares held by the company’s directors.

Redundancy and reorganisation costs during the last year were £1.36m, compared to around £2.1m the year before.

The Knights board is this year proposing a final dividend of 2.5p, giving a total for the year of 4.03p, an increase of 15%. The dividend will be payable on 29 September.

Today’s results caused a jump in the Knights share price, which rose 8.15% by 11am to 69p. The share price was as high as 126p in January this year.

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