Creating a diversified Professional Services Group advising UK SMEs

Results PresentationFY21

INTRODUCTIONS

JOHN RIGBYCHIEF EXECUTIVE OFFICER

John has over 20 years of operational, sales and commercial management experience within the sector and developed the national sales and marketing infrastructure of the Group. Having joined the business in 2000, John became Managing Director of the Group in 2010 and led the Group through its successful IPO in 2017 as well as the recent fundraise and the expansion of the Group following its acquisitions.

ANDREW MELBOURNECHIEF FINANCIAL OFFICER

A fellow of the Chartered Institute of Management Accountants with an MSc in Strategic Financial Management, Andrew possesses over 20 years’ of financial accounting and corporate finance experience. Joining the Group in 2012, Andrew’s strong financial, strategy and commercial management skills has been integral in the growth of the Group, and along with John played an important part in the Group’s placing on the AIM and the subsequent acquisitions made.

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ALL GROUP DIVISIONS PERFORMED AHEAD OF FORECASTS, DELIVERING MULTIPLE UPGRADES THROUGHOUT THE PERIOD

A TRANSFORMATIONAL YEAR, CREATING A DIVERSIFIED PROFESSIONAL SERVICES GROUP ADVISING UK SMEs

THE GROUP DELIVERED RECORD FINANCIAL PERFORMANCE WITH A 215% INCREASE IN REVENUES, AND A 131% INCREASE IN ADJUSTED EBITDA*

FIVE ACQUISITIONS COMPLETED, TWO NEW SERVICE LINES LAUNCHED AND ONE JOINT VENTURE ESTABLISHED IN THE PERIOD

A HIGH MARGIN, CASH GENERATIVE AND DEBT FREE GROUP. AT YEAR END AN UNUTILISED £15M DEBT FACILITY IN PLACE FOR FUTURE ACQUISITIONS

POSITIVE TRENDS ACROSS KEY PERFORMANCE INDICATORS THROUGHOUT ALL DIVISIONS

PROGRESSIVE DIVIDEND POLICY DELIVERING ATTRACTIVE RETURNS TO SHAREHOLDERS

GROUP HIGHLIGHTS

GROUP PERFORMANCE WAS ACHIEVED AGAINST THE BACKDROP OF THE COVID-19 PANDEMIC, WHICH CAUSED DISRUPTION THROUGH LOCKDOWNS, HOME WORKING AND OFFICE CLOSURES

* Adjusted for share-based payments and exceptional acquisition costs

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GROUP STRUCTURE

K3 CAPITAL GROUP PLC

M&A DIVISION RESTRUCTURING DIVISION TAX DIVISION

CORE BRANDS

ADDITIONS - FY21

OFFICES

STAFF

3

170+

17 UK / 5 OVERSEAS

270+

2

70+

ADDITIONS - FY22

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DUBAI SINGAPORE POLAND

£47.2m £15.7m £14.3m215% 131% 72%

GROUP FINANCIAL HIGHLIGHTS

£50m

£40m

£30m

£20m

£10m

£0m

FY19 FY20 FY21

£13.6m £15.0m

£47.2M £15m

£10m

£5m

£0m

FY19 FY20 FY21

£5.0m

£6.8m

£15.7m

£15m

£10m

£5m

£0m

REVENUE ADJUSTED EBITDA*

FY19 FY20 FY21

NET CASH

£14.3m

£8.3m

£5.8m

* Adjusted for share-based payments and exceptional acquisition costs• Market expectations were £14.25m, the result of £15.7m is driven by c£0.5m of uptick in trading, and c£1.0m due to new WIP policy• Adjustments to EBITDA are for exceptional costs linked acquisitions including deemed remuneration being reclassified from deferred consideration

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M&A RESTRUCTURING TAX

33% 9.10pADJUSTED EBITDA MARGIN DIVIDEND PER SHARE

18.56pADJUSTED EARNINGS PER SHARE*

22%(FY20: 7.47p)

50%(FY20: 12.37p)

CURRENT BRANDS

FUTURE OPPORTUNITIES (ACQUISITIONS/LATERAL HIRES)

GROWTH STRATEGY

BUILDING A DIVERSIFIED PROFESSIONAL SERVICES GROUP ADVISING UK SMEs WHICH CAN BENEFIT FROM K3C’S DISTRIBUTION PLATFORMS AND GIVE STABILITY ACROSS THE ECONOMIC CYCLE

RESTRUCTURING

TAX

ADVISORY

M&AOTHER

REGIONAL/INTERNATIONAL BOLT ONS COMPLEMENTARY SERVICES SECTOR SPECIALISMS

C

OMPLEM

ENTA

RY S

ERVI

CES

SECTOR SPECIALISMS COMPLEMENTARY SERV

ICES

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M&A DIVISION

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KEY HIGHLIGHTS

M&A DIVISION

RECORD TRADING PERFORMANCE THROUGH ORGANIC GROWTH - REVENUE £16M, EBITDA £8.3M

KPI ACTIVITY AND TRANSACTION FEE PIPELINES CONTINUE TO BUILD MOMENTUM ACROSS ALL THREE BRANDS

VOLUME BRANDS PROVIDING ROBUST MODEL AND IMPROVED QUALITY OF EARNINGS

STRONG CURRENT TRADING PERFORMANCE THROUGHOUT THE FIRST FOUR MONTHS OF FY22

AGILE BUSINESS MODEL WHICH HAS DEVELOPED THROUGHOUT THE PANDEMIC TO DELIVER EFFICIENCIES AND EXCEPTIONAL RESULTS

POST YEAR END ACQUISITION OF KNIGHT CF BRINGS SECTOR SPECIALISMS WITHIN THE ACTIVE TELECOMS AND TECH SEGMENT

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FY19£M

FY20£M

FY21£M

Revenue 13.6 15.0 16.0

Overheads 2.6 2.2 1.6Payroll 6.0 6.0 6.1Total Overheads 8.6 8.2 7.7

EBITDA 5.0 6.8 8.3*

M&A REVENUE

£16.0m

M&A EBITDA

£8.3m

M&A MARGIN

52%

FINANCIALS

M&A DIVISION

* Prior to allocation of central costs

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KPIs

M&A DIVISION

APPOINTMENTS MANDATES BANKED RETAINER FEE INCOME NDAs / BUYER REGISTRATIONS

12% 6% 7%

BUYER MEETINGS OFFERS TRANSACTION FEE INCOME REVENUE

25%

15% 22% 11% 7%

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RESTRUCTURING DIVISION

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RESTRUCTURING DIVISION

KEY HIGHLIGHTS

RECORD TRADING PERFORMANCE - REVENUE £25.9M, EBITDA £6.0M (10 MONTHS)

CONTINUING SUCCESS OF FORENSIC INVESTIGATIONS AND CORPORATE FINANCE DEPARTMENTS

BUILDING THE TEAM AND FEE EARNERS IN ANTICIPATION OF POST-PANDEMIC DEMAND

EXPANSION OF OVERSEAS FOOTPRINT WITH CONTINUED BUILD OUT IN KEY OFCs

GROWTH IN MARKET SHARE AGAINST HEADWIND OF A FALLING INSOLVENCY MARKET

ONE UK REGIONAL BOLT ON ACQUISITION COMPLETED IN THE PERIOD WITH A PIPELINE OF DEALS UNDER CONSIDERATION

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RESTRUCTURING DIVISION

FYMAR 19

£M (unaudited)

FYMAR 20

£M (unaudited)

10 monthsto MAY 21

£M

Revenue 16.2 22.2 25.9

Overheads 5.4 6.5 5.7Payroll 8.6 11.3 14.2Total Overheads 14.0 17.8 19.9

EBITDA 2.2 4.4 6.0*

RESTRUCTURING REVENUE

£25.9m

RESTRUCTURING EBITDA

£6.0m

RESTRUCTURING MARGIN

23%

FINANCIALS

* Prior to allocation of central costs

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QUANTUMA APPOINTMENTS MARKET SHARE FEE EARNERS

0% 50% 52%

RESTRUCTURING DIVISION

3.29%

16,1664.92%

KPIs (12m PERIOD TO MAY)

Quantuma Apps2021 5292020 532

UK Apps2021 10,7442020 16,166

2021 2042020 134

532

10,744

529

2020 2021 2020 2021

134

204

UK Apps Quantuma Apps

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TAX DIVISION

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KEY HIGHLIGHTS

TAX DIVISION

RECORD TRADING PERFORMANCE - REVENUE £5.2M, EBITDA £3.1M (11 MONTHS RANDD & 3 MONTHS INTAX)

LAUNCH OF K3 TAX ADVISORY FURTHER DIVERSIFIES REVENUES AND CREATES A STRONG SYNERGY WITH THE M&A AND RESTRUCTURING DIVISIONS

GLOBE HAS DRIVEN A SIGNIFICANT IMPROVEMENT IN KPI PERFORMANCE WHICH SEES NEW CLIENT WINS INCREASE BY 50%

POST YEAR END ACQUISITION OF KNIGHT R&D BRINGS SCALE AND STRENGTH TO R&D FUNCTION

ROLL OUT OF GLOBE TECHNOLOGY, REPLICATING THE DATA VOLUME AND DIRECT MARKETING FUNCTION

ACQUISITION OF INTAX IN MONTH 9, WORKING CLOSELY WITH THE FORENSIC TEAMS WITHIN THE QUANTUMA OFFICES

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TAX DIVISION

FYJUL 19

£M (unaudited)

FYJUL 20

£M (unaudited)

11 monthsto MAY 21*

£M

Revenue 4.0 4.3 5.2

Total Overheads 2.0 2.1 2.1

EBITDA 2.0 2.2 3.1**

TAX REVENUE

£5.2m

TAX EBITDA

£3.1m

TAX MARGIN

60%

FINANCIALS

* includes 3.5 months InTax from 16 Feb 2021

** Prior to allocation of central costs

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RANDD KPIs (12m PERIOD TO MAY)

TAX DIVISION

AVERAGE NEW CLIENTS CONTRACTED PER MONTH AVERAGE CLAIMS SUBMITTED TO HMRC PER MONTH

25

20

15

10

5

0

2019 2020 2021

10

15

23 60

50

40

30

20

10

0

2019 2020 2021

3943

57

53% 33%

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CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

Year ended 31 May 2021£’000 2021 2020

Revenue  47,171 14,994Cost of sales (13,724) -Gross profit 33,447 14,994Distribution costs (2,128) (938)Administrative expenses (23,581) (7,597)Other income 1 -

Adjusted EBITDA 15,710 6,833

Share-based payments (145) (43)Depreciation of tangible assets (680) (277)Amortisation of intangible assets (1,254) (54)Transaction costs (1,955) -Deemed remuneration (3,937) -

Operating profit 7,739 6,459Share of results of joint ventures 61 -Finance income 3 7Finance costs (198) (29)Profit before taxation 7,605 6,437Taxation (2,439) (1,215)Profit for the financial year 5,166 5,222

Other comprehensive incomeItems that may be reclassified to profit or lossExchange differences on translation of foreign operations (40) -Other comprehensive income for the year (40) -Total comprehensive income for the year 5,126 5,222

Attributable to:Owners of the Company 5,132 5,222Non-controlling interests (6) -

5,126 5,222

Headline earnings per share: £0.19 £0.12

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• Market expectations were £14.25m, the result of £15.7m is driven by c£0.5m of uptick in trading, and c£1.0m due to new WIP policy• Adjustments to EBITDA are for exceptional costs linked acquisitions including deemed remuneration being reclassified from deferred consideration

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

Year ended 31 May 2021£’000 2021 2020

ASSETSNon-current assetsIntangible assets 41,596 4,046Property, plant and equipment 628 56Right-of-use assets 2,448 871Investments 19 -Total non-current assets 44,691 4,973Current assetsTrade and other receivables 10,916 5Other assets 881 266Cash and cash equivalents 14,307 8,271Total current assets 26,104 8,542TOTAL ASSETS 70,795 13,515Current liabilitiesTrade and other payables 10,938 1,080Current tax liabilities 1,640 924Contract liabilities 1,476 1,369Lease liabilities 512 200Contingent consideration 1,683 -Total current liabilities 16,249 3,573Non-current liabilitiesLease liabilities 1,702 671Deferred tax liabilities 687 25Provisions 395 -Contingent consideration 2,518 -Total non-current liabilities 5,302 696TOTAL LIABILITIES 21,551 4,269NET ASSETS 49,244 9,246EQUITYEquity attributable to owners of the Company:Issued capital and share premium 24,963 2,413Merger reserve 16,108 -Share option reserve 896 118Foreign exchange reserve (40) -Retained earnings 7,323 6,715Equity attributable to owners of the company 49,250 9,246Non-controlling interests (6) -TOTAL EQUITY 49,244 9,246

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CONSOLIDATED STATEMENT OF CASH FLOWS

Year ended 31 May 2021£’000 2021 2020

Cash flows from operating activities Profit for the financial year 5,166 5,222Adjustments for:Depreciation of property, plant and equipment 140 58Depreciation of right-of-use assets 540 219Amortisation of intangible assets 1,254 54Share of profit of joint ventures (61) -Finance income (3) (7)Interest payable 198 29Income tax expense 2,439 1,215Expense recognised in respect of equity-settled share-based payments 145 43Increase in deemed remuneration liabilities 3,937 -

13,755 6,833Movements in working capital:(Increase)/decrease in trade and other receivables (1,266) 38Decrease in other assets 224 114Increase/(decrease) in trade and other payables (excluding deemed remuneration liabilities) 3,070 (50)Increase/(decrease) in contract liabilities 107 (276)Increase in provisions 395 -

Cash generated from operations 16,285 6,659

Finance income received 3 7Income taxes paid (2,162) (589)Net cash from operating activities 14,126 6,077Investing activitiesDividends received from joint ventures 40 -Purchases of property, plant and equipment (579) (26)Purchases of intangible assets (104) (35)Acquisition of subsidiary (24,328) -Net cash used in investing activities (24,971) (61)Financing activitiesDividends paid to owners of the Company (4,664) (3,250)Interest paid (10) -Lease liability interest paid (89) (29)Repayment of the lease liabilities (778) (219)Proceeds on issue of shares 22,443 -Net cash from/(used in) financing activities 16,902 (3,498)Net cash from/(used in) financing activitiesNet increase in cash and cash equivalents 6,057 2,518Cash and cash equivalents at beginning of year 8,271 5,753Effect of foreign exchange rate changes (21) -Cash and cash equivalents at end of year 14,307 8,271

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CURRENT TRADING AND FUTURE OUTLOOK

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• The Group has seen momentum built throughout FY21 continue into FY22

• The 4 month period to the end of September 2021 sees revenues fall firmly in line with market consensus

• The M&A Division experiencing record KPI activity in Q1 with strong transaction fee pipelines for the remainder of FY22

• Post year end additions of Knight CF and Knight TS bring additional growth opportunities

• The Restructuring Division has built capacity to capitalise on the return of normal market conditions

• Continued investment into Forensics and Overseas footprint further complements growth

• The Tax Division has seen continued diversification with post year end acquisition of Knight R&D

• Roll out of K3 Globe technology creates significant opportunity for growth

• The board are confident in the delivery of current market consensus performance in FY22

• Continue to look for high quality, accretive, and complementary acquisition opportunities

INTERIM DIVIDEND

DIVIDEND PER SHARE

9.1P *

FY20: 7.47P **

PROPOSED FINAL DIVIDEND

Subject to shareholder approval, a final dividend of 6.1p per Ordinary Share will be paid on the 30 November 2021 with a record date of 19 November 2021 and an ex-dividend date is 18 November 2021.

During the period under review, the Board revised its intended dividend policy in light of the evolved strategy of the enlarged Group. It is the Board’s intention to retain an attractive dividend policy in the spirit of that which was implemented on the AIM listing, however, it has been modified to allow sufficient cash reserves to build over future years in order to satisfy contingent payments linked to recent acquisitions, whilst also reserving cash to fund potential future acquisitions.

As such, the Board is committed to a progressive fixed dividend policy. If the final dividend is approved, the total dividend paid by the Company relating to FY21 will be 9.1p per eligible ordinary share, a 22% increase on prior year (2020: 7.47p).

* Interim dividend per share of 3.0p (calculated over 68.5m shares in issue) and the proposed final dividend per share of 6.1p.

** Interim dividend per share of 3.7p (calculated over 42m shares in issue) and the final dividend per share of 3.8p (calculated over 68.5m shares in issue).

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