Knights Group initiation - An attractive and undervalued regional consolidator
Knights’ FY25 results illustrate the power of its business model to attract high-quality legal professionals across the UK, both organically and through selective acquisitions. FY25 revenues rose 8% to £162m, with operating leverage driving Adj. PBT up 11% and margin up 40bps to 17.3%. Investment in offices and acquisitions, along with encouraging current trading, underpins our forecasts for profitable growth. Yet the stock is trading on only c.5x cal 2026 PER and hence the shares are well below our 230p fair value.We also examine the strength of its differentiated “corporatised law” business model. As an active consolidator in the premium regional legal market, Knights has funded over 20 acquisitions in the past 12 years, culminating in group revenues rising 8% to £162m in FY25 and £200m+ in FY26E (a 13-year CAGR of 27%). Good pricing discipline and a focus on operational excellence has seen average revenues per fee-earner rise 12% and underlying PBT margins rose 40bps to 17.3%.
In our view, Knights offers a compelling mix of organic and acquisitive growth. Yet, its valuation is at a significant discount to peers and its historic trading range. Trading on only c.5x cal 2026 PER and offering a c.16% cal FCF yield (pre-acquisitions) we see scope for a significant rerating.
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