London-listed Knights Group Holdings is a small-cap company that provides consulting services. These include debt recovery, corporate advisory, dispute resolutions, human resource management, notary services, taxation and insolvency issues. The company serves clients across the UK in various sectors and industries. David Beech, a corporate lawyer and former private equity fund manager, leads the company. He leads a team of more than 1,000 professionals who serve more than 10,000 clients.
The thesis for investing in Knights Group is that it has a great business model with the potential for strong and consistent profitability. Knights Group aims to become the leading legal and professional services business outside London. To achieve this, its business model must focus on the relationship between the client and the company.
Consulting is not solely about the substance or effectiveness of solutions when it comes to client retention. Relationships must be managed carefully to ensure clients remain, driving business profitability. Knights Group prides itself on a client-centric approach, emphasising both the delivery and manner of solutions to ensure sustained success.
The case for investing in the company rests on three key pillars. First, the company focuses on regional markets throughout the UK, where it can become the leading business in the sector. The goal is to create a mature corporate platform that enables an efficient and profitable business model. Strategically targeting markets in which the company can become the leader further increases the scale and awareness of its services.
Cost-wise, Knights Group operates from regional locations with lower competition, which reduces cost pressure and provides great value to clients through better, competitive fees. Regarding its employees, the company does not have personal or team targets, which it argues will foster a collegiate and client-focused culture. While subjective, employee well-being is crucial in consulting. Although the strategy may not suit everyone, Knights Group boasts an above-market fee-earner to non-fee-earner ratio. This suggests that, at the very least, employees are better off financially with the company.
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Secondly, Knights Group has professional advisors with a commercial mindset. This is facilitated and supported by technology and actionable analytics through the client services directors, who provide a clear and continued focus on revenue and cash flow generation. This is great for investors as there is always a pulling factor to ensure the business’s profitability. There is a separation between the practitioners, who focus on the client and the managers who run the business, which is a great check and balance to ensure the company’s profitability.
Finally, Knights Group has a scalable model. The regional market in the UK is worth close to GBP4 billion ($6.6 billion), well above the company’s market cap. Organic growth through a strong platform, complemented by strategic M&A, enables the company to capture the regional market opportunity. By consistently investing in technology for the platform, the company is able to provide an optimised and scalable platform for future growth.
Going forward, the company will focus on generating higher-quality revenues by investing in stronger teams and specialising in more profitable sectors. This also includes exiting lower-margin consultancy regions, such as insolvency. Further, Knights Group has added expertise and capabilities in IP, data, immigration, banking and environmental, social and governance (ESG) to increase its domestic footprint.
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In Knights Group’s 1H2025 results, revenue was up 5.4% y-o-y, with underlying profits growing 25.9% over the same period. The company’s positive and growing operating cash flow reflects its sound fundamentals, while its strong margins reflect its moat in the industry. Ebitda and operating margins were 21.6% and 13.6%, respectively, while return on equity and return on assets were 10.2% and 4.6%, respectively.
Financial health-wise, Knights Group has a current ratio of 2.6 times, reflecting ample liquidity. Although its net debt-to-equity ratio of 75% could be a cause for concern, an interest coverage ratio of over four times offsets it. Knights Group is one of the more attractive company valuations among local peers, where it trades at a significant 74%, 50% and 57% discount for its forward P/E, EV/Ebitda and P/B ratios, respectively.
Sentiment-wise, there are three “buy” calls, two “hold” calls and no “sell” calls for Knights Group from analysts, with an average target price of 35% above its current trading price of GBP1.22. Based on our in0house valuations (see Charts 1a and 1b), we think the company’s fair value is GBP1.47.
Disclaimer: This article is for information purposes only and does not constitute a recommendation or solicitation or expression of views to influence readers to buy or sell stocks, including the stocks mentioned herein. This article does not take into account an investor’s particular financial situation, investment objectives, investment horizon, risk profile, risk tolerance and preferences. Any personal investments should be done at the investor's own discretion and/or after consulting licensed investment professionals, at their own risk.
