RNS Number : 3739M
Keystone Law Group PLC
14 September 2023
 

14 September 2023

 

 

Keystone Law Group Plc

('Keystone', the 'Group' or the 'Company')

Interim results for the six month period ended 31 July 2023

-       Strong client demand drives excellent operational and financial performance with a 25.2% increase in adjusted PBT

-       Ongoing business confidence supports interim ordinary dividend of 5.8p and special dividend of 12.5p

-       FY 2024 outlook comfortably ahead of current market expectations(1)

Keystone, the network and tech-enabled challenger law firm, is pleased to announce its interim results for the six months ended 31 July 2023 ("H1 2024").


Financial Highlights:

·      Revenue growth of 14.9% to £42.3 million (H1 2023: £36.8 million)

·      Revenue per Principal up 12.2% to £104k (H1 2023: £92.8k)

·      PBT increased 29.3% to £5.3 million (H1 2023: £4.1 million)

·      Adjusted PBT increased 25.2% to £5.7 million (H1 2023: £4.5 million)

·      Adjusted basic EPS of 13.6p, up 22.5% (H1 2023: 11.1p)

·      Strong operating cash conversion at 113.3% with cash generated from operations of £6.3 million (H1 2023: £4.9 million).

·      The Group remains debt-free with net cash of £11.3m (H1 2023: £7.5m)

·      Declared interim ordinary dividend of 5.8p (H1 2023: 5.2p) and special dividend of 12.5p

 

Operational Highlights:

·      Recruitment market conditions evolved positively

·      Keystone generated strong market and recruitment momentum during H1 2024:

144 qualified high-calibre new applicants (H1 2023: 122)

25 Principals joined, increasing the number of Principals to 415 (31 January 2023: 398)

Total fee earners increased to 523 (31 January 2023: 507)

·      Ongoing investment in our people, culture and technology platform

 

Current Trading and Outlook:

·      Activity levels and client demand remain strong

·      Recruitment market conditions have moved in the Group's favour, with the Keystone model continuing to attract high-calibre talent, although economic uncertainty continues to weigh on candidate flow

·      The Board is confident that the business will continue to trade well for the rest of the year and that FY 2024 results will be comfortably ahead of current market expectations(1).

 

James Knight, Chief Executive Officer of Keystone, commented:

"I have been delighted with the performance of the business during the first half of this year.  As anticipated, recruitment market conditions have moved in our favour and Keystone's model continues to prove highly attractive to the high-calibre lawyers we pride ourselves on being able to attract and retain. I look forward to the rest of the year, confident that Keystone's core business fundamentals will continue to deliver strong results."

 

(1)    Management understands current market expectations to be revenue £78.9m and adjusted PBT £9.5m

 

Analyst Briefing

 

A meeting for analysts will be held virtually at 9.30am this morning. Analysts wishing to attend this event can register via email at keystonelaw@vigoconsulting.com.

 

 

For further information please contact:

Keystone Law Group plc

James Knight, Chief Executive Officer

Ashley Miller, Finance Director

www.keystonelaw.com

 +44 (0) 20 3319 3700

 

Panmure Gordon (UK) Limited (Nominated Adviser and Joint Broker)

Dominic Morley (Corporate Finance)

Rupert Dearden (Corporate Broking)

www.panmure.com

+44 (0) 20 7886 2500

 

Investec Bank plc (Joint Broker)

Carlton Nelson

James Rudd

www.investec.co.uk

+44 (0) 20 7597 5970

 

Vigo Consulting (Financial Public Relations)

Jeremy Garcia / Kate Kilgallen

keystonelaw@vigoconsulting.com

+44 (0)207 390 0233

 

The information contained within this announcement is deemed to constitute inside information as stipulated under the Market Abuse Regulation (EU) No. 596/2014 as it forms part of UK domestic law by virtue of the European Union (Withdrawal) Act 2018 ("MAR").

 

Notes to editors

Keystone (AIM: KEYS), is an award-winning, UK Top 100, law firm, providing conventional legal services in a £10bn addressable market through its scalable and unique model, with three defining characteristics:

·      Lawyers have freedom, flexibility and autonomy, and are paid up to 75% of what they bill.

·      Lawyers determine how, when and where they work, in contrast to the conventional law firm model.

·    Lawyers are provided full infrastructure and support via its central office team, bespoke user-friendly IT platform, and network of colleagues and events.

 

Keystone is a full-service law firm, with 20 service areas and more than 50 industry sectors delivered by over 400 high calibre self-employed Principal lawyers who work from their own offices.

In November 2020, Keystone was named Law Firm of the Year by The Lawyer, the first time a 'new' law firm has won the award.

More information about Keystone can be found at www.keystonelaw.co.uk.

 

Chief Executive's Statement

I am extremely pleased to report that Keystone Law has again delivered a strong performance during the first half of this financial year ("H1-2024" or the "period"), with revenue rising to £42.3m (14.9% up on H1-2023: £36.8m), reported PBT of £5.3m and adjusted PBT(1) of £5.7m  (£4.1m and £4.5m respectively in H1-2023) and cash generated from operations of £6.3m, an increase of 27.8% (H1-2023: £4.9m).

In spite of the broader economic headwinds, client demand has remained strong across all practice areas throughout the period and this, together with rate rises implemented during last year, has driven increased revenue per Principal of £104k, up 12.2% on H1-2023. 

During the period, we have seen conditions in the legal recruitment market evolve positively for Keystone.  The extremely high level of demand for candidates, experienced during FY-2023, has now slightly subsided and, although the uncertain economic outlook continues to weigh on candidate movement, the results of our recruitment activity in H1-2024 have been extremely encouraging. The table below reflects these positive results:

 


Qualified New Applicants

 

Offers Made

 

Offers Accepted

 

H1 2022

136

36

28

H1 2023

122

34

17

H1 2024

144

42

25

 

Twenty five Principals joined us during the Period (H1-2023: 22) bringing the total number of Principals to 415 (31 January 2023: 398). These Principals, existing and new, have continued to recruit Pod members to build their practices and leverage the value of their clients.  These Pod members satisfy either permanent resource needs or shorter term project-based demand providing both scalability and flexibility to our lawyers and, over time, have become an increasingly important element of the Keystone model.

The central office team has continued to deliver exceptional service to our lawyers.  The ongoing investment in our IT platform and infrastructure is very much part of "business as usual" for Keystone. Our bespoke platform is the technological hub of the business; built to support our model, it provides our lawyers with first class, dynamic systems, which deliver a high-quality user experience, whilst ensuring compliance and comprehensive IT security.   We have also continued to invest in the networking programmes and social events, thereby providing extensive opportunities for our lawyers to establish and build their personal and professional networks within Keystone.  These events are a core element of the Group's cultural DNA, encouraging collaboration and cross-referral of work thereby creating a fertile environment for our lawyers to deliver high calibre, multi-lawyer and cross disciplinary solutions to our clients.

I would, therefore, like to take this opportunity to thank everyone at Keystone for their dedication and passion, which has made these excellent results possible.

Dividend

I am pleased to announce that the Board has declared an interim ordinary dividend of 5.8p per share as well as a special dividend of  12.5p per share. These dividends will be payable on 13 October 2023 to shareholders on the register on 22 September 2023 and the shares will go ex-dividend on 21 September 2023.

Summary and Outlook

In summary, I have been delighted with all aspects of the Group's performance during H1-2024.  Our lawyers have continued to respond to demand across the legal sector driving strong revenue growth, and this, together with the interest rate evolution and our strong balance sheet, has contributed to the enhanced profits we report today.

As expected, some of the heat has come out of the legal recruitment market and this has been beneficial to our growth.

Although it is clear that the UK economy continues to face significant headwinds, to date we have not been adversely affected by these, and whilst there may be some impact on overall client demand during the second half, we remain confident that Keystone will continue to deliver strong results for the rest of this year, which will be comfortably ahead of current market expectations(2).

 

James Knight

Chief Executive Officer

13 September 2023

 

(1)       Adjusted PBT is calculated using profit before tax and adding back amortisation and share-based payments for all periods.

(2)       Management understands current market expectations to be revenue £78.9m and adjusted PBT £9.5m

 

 

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

For the period ended 31 July 2023

 


Note

6 Months to

July 2023

(Unaudited)

£

6 Months to

July 2022

(Unaudited)

£

Revenue


42,304,803

36,809,493

Cost of sales


(31,212,674)

(27,105,062)

Gross profit


11,092,129

9,704,431

Depreciation and amortisation


(448,914)

(440,937)

Share-based payments

2

(250,073)

(226,280)

Administrative expenses

2

(5,591,918)

(4,881,419)

Other operating income


23,698

25,397

Operating profit


4,824,922

4,181,192

Finance income


689,802

14,228

Finance costs


(249,121)

(48,649)

Profit before tax


5,265,603

4,146,771

Corporation tax expense


(1,430,321)

(870,401)

Profit and total comprehensive income for the period attributable to equity holders of the Parent


3,835,282

3,276,370

Basic EPS (p)

1

12.2

10.5

Diluted EPS (p)

1

12.0

10.3

 

The above results were derived from continuing operations.

 

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

As at 31 July 2023

 


Note

31 July 2023

(Unaudited)

£

31 July 2022

(Unaudited)

£

31 January
2023

(Audited)

£

Assets





Non-current assets





Property, plant and equipment





- Owned assets


168,197

194,936

187,677

- Right-of-use assets


308,146

719,006

513,577

Total property, plant and equipment


476,343

913,942

701,254

Intangible assets


5,231,396

5,582,280

5,406,838

Other assets


13,627

13,628

13,628



5,721,366

6,509,850

6,121,720

Current assets





Trade and other receivables

3

23,672,904

21,204,072

22,605,908

Cash and cash equivalents


11,347,917

7,457,485

9,151,875



35,020,821

28,661,557

31,757,783

Total assets


40,742,187

35,171,407

37,879,503

Equity and liabilities





Equity





Share capital


62,797

62,548

62,732

Share premium


9,920,760

9,920,760

9,920,760

Share-based payments reserve


1,077,714

976,238

1,028,247

Retained earnings


7,464,355

4,796,659

6,847,378

Equity attributable to equity holders of the Parent


18,525,626

15,756,205

17,859,117

Non-current liabilities





Lease liabilities


-

340,607

109,484

Deferred tax liabilities


84,789

167,521

132,432

Provisions


-

127,213

183,501



84,789

635,341

425,417

Current liabilities





Trade and other payables


20,125,906

17,402,869

18,347,358

Lease liabilities


416,905

538,544

538,544

Provisions


207,586

-

-

Corporation tax liability


1,381,375

838,448

709,067



22,131,772

18,779,861

19,594,969

Total liabilities


22,216,561

19,415,202

20,020,386

Total equity and liabilities


40,742,187

35,171,407

37,879,503

 

The interim statements were approved and authorised for issue by the Board of Directors on 13 September 2023 and were signed on its behalf by:

A Miller

Director

 

consolidated statement OF CHANGES IN EQUITY

For the period ended 31 July 2023

 


Attributable to equity holders of the Parent

Share

capital

£

Share

premium

£

Share-based payment reserve

£

Retained earnings

£

Total

£

At 1 February 2022 (audited)

62,548

9,920,760

749,958

8,150,365

18,883,631

Profit for the period and total comprehensive income

-

-

-

3,276,370

3,276,370

Transactions with owners






Share-based payment awards

-

-

226,280

-

226,280

Dividends paid

-

-

-

(6,630,076)

(6,630,076)

At 31 July 2022 (unaudited)

62,548

9,920,760

976,238

4,796,659

15,756,205

Profit for the period and total comprehensive income

-

-

-

3,457,339

3,457,339

Transactions with owners






Share-based payments vesting

184

-

(224,419)

224,419

184

Share-based payments awards

-

-

276,428

-

276,428

Dividends paid

-

-

-

(1,631,039)

(1,631,039)

At 31 January 2023 (audited)

62,732

9,920,760

1,028,247

6,847,378

17,859,117

Profit for the period and total comprehensive income

-

-

-

3,835,282

3,835,282

Transactions with owners

 

 

 

 

 

Share-based payments vesting

65

-

(200,605)

200,605

65

Share-based payments awards

-

-

250,072

-

250,072

Dividends paid

-

-

-

(3,418,910)

(3,418,910)

At 31 July 2023 (unaudited)

62,797

9,920,760

1,077,714

7,464,355

18,525,626

 


CONSOLIDATED STATEMENT OF CASH FLOWS

For the period ended 31 July 2023

 


Note

6 Months to July 2023 (Unaudited)

£

6 Months to July 2022 (Unaudited)

£

Year ended 31 January 2023 (Audited)

Cash flows from operating activities




Profit before tax


5,265,603

4,146,771

8,384,677

Adjustments to cash flows from non-cash items




Depreciation and amortisation

2

448,914

440,937

885,699

Share-based payments


250,073

226,280

502,708

Finance income


(689,802)

(14,228)

(221,810)

Finance costs


249,121

48,649

147,089



5,523,909

4,848,409

9,698,363

Working capital adjustments





(Increase) in trade and other receivables

(1,066,996)

(1,230,258)

(2,632,094)

Increase in trade and other payables

1,778,548

1,259,703

2,204,192

Increase in provisions


24,085

19,268

75,556

Cash generated from operations


6,259,546

4,897,122

9,346,017

Interest paid on client balances


(201,475)

(1,004)

(70,791)

Interest portion of lease liability


(47,646)

(47,645)

(76,298)

Corporation taxes paid


(805,656)

(1,019,244)

(1,964,281)

Cash generated from operating activities

5,204,769

3,829,229

7,234,647

Cash flows from/(used in) investing activities




Interest received


689,802

14,228

221,810

Purchases of property plant and equipment

(48,561)

(7,451)

(64,080)

Net cash generated from/(used in)

investing activities

641,241

6,777

157,730

Cash flows from financing activities





Proceeds from issue of ordinary shares


65

-

184

Lease repayments


(231,123)

(231,121)

(462,247)

Dividends paid


(3,418,910)

(6,630,076)

(8,261,115)

Net cash (used in) financing activities

(3,649,968)

(6,861,197)

(8,723,178)

Net (decrease)/increase in cash and cash equivalents


2,196,042

(3,025,191)

(1,330,801)

Cash at 1 February


9,151,875

10,482,676

10,482,676

Cash at 31 July


11,347,917

7,457,485

9,151,875

 

NOTES TO THE interim report


1. General Information

The Company was incorporated as Keystone Law Group Limited on 13 May 2014 under the Companies Act 2006 (registration no. 09039092) and subsequently used as the vehicle to acquire Keystone Law Limited (the main trading company in the Group) and its subsidiaries on 17 October 2014. The Company was re-registered as a Public Limited Company on 10 November 2017. The Company was incorporated and is domiciled in England and Wales. The principal activity of the Group is the provision of legal services. The address of its registered office is:

48 Chancery Lane

London

WC2A 1JF

The Interim Report is presented in Pounds Sterling, being the functional currency of the companies within the Group.


Accounting Policies

Statement of Compliance

The Interim Report has been prepared in accordance with the recognition and measurement principles of UK-adopted International Accounting Standards.


Basis of Preparation

The Interim Report does not constitute statutory accounts as defined in Section 434 of the Companies Act 2006. The Group's statutory financial statements for the year ended 31 January 2023 have been filed with the Registrar of Companies. The auditor's report on those financial statements was unqualified and did not contain a statement under Section 498 (2) or (3) of the Companies House 2006. The Interim Report information has been prepared in accordance with the recognition and measurement principles of UK adopted International Accounting Standards, and on the same basis, and using the same accounting policies, as used in the financial statements for the year ended 31 January 2023.

The Interim Report has not been audited or reviewed, in accordance with the International Standard on Review Engagement 2410 (UK) issued by the Financial Reporting Council.


Going Concern

The Interim Report has been prepared on a going concern basis as the Directors have reasonable expectation that the Group has adequate resources to continue in operational existence for the foreseeable future. The Group has no debt, is strongly cash generative, and has a strong trading performance. The Group's forecasts and projections show that the Group has sufficient resources for both current and anticipated cash requirements.


ACCOUNTING DEVELOPMENTS

There have been no new standards or interpretations, relevant to the Group's operations, applied in the Interim Report for the first time.


ADJUSTED PBT

Adjusted PBT is utilised as a key performance indication for the Group and is calculated as follows:


6 months to July 2023

(Unaudited)

£'000

6 months to July 2022

(Unaudited)

£'000

Profit before tax

5,266

4,147

Amortisation

175

175

Share-based payments

250

226

Adjusted PBT

5,691

4,548

 

Earnings per Share

Basic earnings per share is calculated by dividing the profit for the period by the weighted average number of ordinary shares outstanding during the period. The weighted average number of shares in the period was 31,373,312 (H1-2023: 31,273,941) and the basic earnings per share was 12.2p (H1-2023: 10.5p). Diluted earnings per share is calculated by dividing the same profit by the weighted average number of ordinary shares, taking into account the dilution effect from grants made under the Long Term Incentive Plan (31,880,828 (H1-2023: 31,733,387)).  Diluted earnings per share was 12.0p (H1-2023: 10.3p).

The adjusted earnings per share was 13.6p (H1-2023: 11.8p), whilst the diluted adjusted earnings per share was 13.4p (H1-2023: 11.6p). Adjusted earnings are stated by making the same adjustments to earnings as those made in calculating adjusted PBT.

 

2. Expenses by Nature

Expenses are comprised of:

6 months to July 2023

(Unaudited)

£

6 months to July 2022

 (Unaudited)

£

Depreciation - right-of-use assets

205,430

205,430

Depreciation - other

68,042

60,065

Amortisation

175,442

175,442

Staff costs

2,865,957

2,373,245

Share-based payments

250,073

226,280

Other administrative expenses

3,281,296

2,828,007


6,846,240

5,868,469

 

Included within staff costs above are the costs of employed fee earners who are included within cost of sale (H1-2024: £555,335; H1-2023: £319,842).


3. Trade and Other Receivables


31 July

2023

(Unaudited)

£

31 July

2022

(Unaudited)

£

31 January

2023

(Audited)

£

Trade receivables

14,721,714

13,909,185

13,285,914

Provision for impairment of trade receivables

(4,589,670)

(4,716,481)

(4,114,670)

Net trade receivables

10,132,045

9,192,704

9,171,244

Accrued income

10,706,147

9,322,320

10,030,078

Prepayments

1,733,806

1,278,865

2,271,739

Unbilled disbursements

945,286

1,235,809

970,078

Other receivables

155,621

174,374

162,769

Total current trade and other receivables

23,672,904

21,204,072

22,605,908

Net trade receivables average age (days) (unaudited)

32

32

36

 

4. DIVIDENDS

The Directors have declared an interim ordinary dividend of 5.8p per share (H1-2023: 5.2p per share) as well as a special dividend of 12.5p per share. The dividends will be paid on 13 October 2023 to shareholders on the register on 22 September 2023 with the shares going ex-dividend on 21 September 2023. In accordance with IAS10 "Events after the Balance Sheet Date", these dividends have not been reflected in the Interim Report.

 

Keystone Law

48 Chancery Lane
London
WC2A 1JF

www.keystonelaw.co.uk

 

 

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