Stock exchange: Big share price bump for Knights
Shares in listed law firms Knights and the Ince Group have risen in the wake of trading updates, with Ince also announcing plans to raise another £4m to invest in its core legal services business.
Knights’ shares have jumped nearly 17% over the last two days after it revealed that revenue and profit were both up by 18% so far this year compared to 2021.
The update said that, in the six months to 31 October, revenue had hit £71m and underlying profit before tax £9m, with margin maintained at 12.6%.
Net debt was up £7m to nearly £36m after paying acquisition consideration and related costs.
Prior year acquisitions, Keebles, Archers Law and Langleys “have integrated and are performing well”, while in the period it completed the £11.5m acquisition of South of England firm Coffin Mew and the sale of Home Property Lawyers – which was part of Langleys – to Scottish firm Gilson Gray.
Lock-up of 103 days, a slight increase on a year earlier, “reflects the group’s continued discipline of day-to-day cash collection”. As at 31 October, “there was significant headroom of £24.4m against the group’s revolving credit facility of £60m”.
Chief executive David Beech said: “We have continued to successfully execute our strategy, delivering profitable, cash generative growth. As we enter the second half, we are encouraged by the Group’s strong performance, as we continue to attract high quality talent and potential acquisitions to the group.”
In March, Knights’ share price crashed from 365p to 145p on the back of a profits warning and continued to drift downwards to as low as 61p last month. But the last two days have helped it recover somewhat to nearly 94p.
Ince has been going through a significant change in strategy in recent months to focus on its legal practice, supported by a £9.3m fund-raise it only completed in August.
In September, it disposed of the first business it acquired after listing, a corporate tax consultancy, while the solicitor who took the firm public and expanded its operations left the business.
Last month, Ince announced plans to sell the corporate adviser and stockbroker it only bought in April for a £7m loss.
The new shares will be sold at 6p and the price jumped 8.4% to 5.8p in yesterday’s trading. But it is still only a little above its all-time low-point, having reached a peak of 191p in September 2018.
In addition to the placing, Ince plans to raise £250,000 from existing shareholders via REX, which describes itself as a platform that aggregates investor demand from multiple sources.
The net proceeds of both “will be used to invest in the group’s core legal services business, following recent management and structural changes, to enhance opportunities for growth and further legal practice development”, investors were told.
“This will include modernising IT systems to enable operational efficiencies to be obtained; investing in lateral hire recruitment and marketing; and accelerating deferred remuneration payments to partners.”
Ince still has not published its audited results for the year to 31 March 2022, which it said was due to “ongoing delays in China as a result of Covid-19 restrictions which are impacting the audit process”.
If these results and those of the first half of 2022/23 are not published by 31 December, Ince said trading in its shares on AIM would be suspended until they were.
But it said revenue for 2021/22 was now expected to be £94m; in May, the firm issued a profit warning on the back of revenue predicted to be £97m, compared to £100m in 2020/21.
“This is primarily as a result of the revised statutory accounting treatment of the group’s entities in Singapore and certain of those in Germany,” it said.
Revenue for the six months to 31 October are expected to be £41m, down from £50m a year earlier, which Ince said was due to the cyber-attack it suffered in March, “accounting deconsolidations” of the Singapore and Germany parts of the group, and the recent restructuring and business disposals.
More positively, it told the market: “The number of new instructions and client wins is increasing, especially in the group’s core business lines and traditional markets, and the board of Ince expects that the second half of this financial year will be stronger and similar to the second half of FY22, as the board seeks to achieve a sustainable revenue platform focused on profitable growth.”
It added: “The group has refocused its strategy on growth in core practice areas and in sectors where Ince has a strong brand and reputation, both in the UK and internationally.
“There is also an increased focus on standard key law firm metrics and people performance management, particularly around chargeable hours for fee-earners, profitability and growth of partner books of business, and partner control of working capital.
“This refocused strategy along with the proposed recruitment of lateral hires and IT and operational efficiencies are expected to lead to significant opportunities for margin improvement going forward.”
The disposals have helped to reduce the deferred consideration on the balance sheet from £15m earlier this year to £8m. A number of key partners “exchanging amounts owed for shares” has also helped.
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