Listed firm Knights has made one of its biggest acquisitions to date, spending £11.5m to expand its reach across the south of England. The firm announced today that it has agreed to acquire Coffin Mew from its 12 owners for an initial £5.5m in cash and shares worth £1m, with three deferred payments adding up to £5m over the next three years.

Purchasing Coffin Mew adds more than 100 fee earners and gives Knights a presence in Portsmouth, Southampton, Brighton and Newbury, as well as entry into new markets. It also sends a positive message to the market following a share collapse earlier this year following a profit warning.

That warning was repeated today, as Knights told the London Stock Exchange in a trading update that underlying profit before tax for the year ending 30 April 2022 is expected to be £18.1m – down from £18.4m last year. This comes on the back of a year in which revenue increased by 22% to £125.5m.

Knights will hope that the Coffin Mew announcement is the first step towards recovery.  The 130-year-old firm reported revenue of £11.3m for the year ended 31 March. Its profit margin last year was 8%, but Knights said it expects this to double following full integration of the firms and the resulting cost savings.

Cash to finance the deal is coming from Knights’ existing facilities, with completion expected on 8 July.

David Beech, Knights chief executive, said: ‘The acquisition allows us to significantly expand our presence in the South East, by entering a number of key new locations, as we continue to make good progress in achieving our ambition to become the leading legal and professional service business outside of London.’

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Beech: 'Positive trading momentum'

On the trading update, Beech added: ‘The group has performed as anticipated in our update in March and we are encouraged by the positive trading momentum we are seeing in the current year.’

Knights also announced today that Richard King intends to step down from his role as chief operating officer at the end of this month. The firm credited him for having put in place the operational infrastructure to support the scaling up of the business, both organically and through acquisition.

Despite the mixed trading update, Knights Group Holdings shares were up 20% by 10am today to 113.5p. This is still well below the 420p value recorded earlier this year.