REG - Keystone Law Grp PLC - Final Results
28/04/2022 07:00
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RNS Number : 6045J Keystone Law Group PLC 28 April 2022
28 April 2022
Full year results for the period ending 31 January 2022
Elevated financial performance driven by strong client demand; special
dividend declared
Keystone Law Group plc (AIM: KEYS), the fast growing, UK Top 100, challenger
law firm, today announces its full year results for the year ended 31 January
2022 ('2022').
Financial Highlights:
· Revenue growth of 26.5% to £69.6 million (2021: £55.0 million)
· PBT of £8.4 million (2021: £5.4 million)
· Adjusted PBT of £9.1 million, representing growth of 52.3%
(2021: £6 million)
· Basic EPS of 21.3 pence, up 42.7% (2021: 13.8 pence)
· Adjusted basic EPS of 23.6 pence, up 51.3% from 15.6 pence
· Strong operating cash conversion at 102.7% with cash generated
from operations of £10.0 million (2021: £6.6 million); remain debt free
· Proposed final ordinary dividend of 11.2p (2021: 7.1p((1))), plus
a special dividend of 10p per share
((1) )2021 dividend excludes 3.5p paid as catch up for non-payment of a final
dividend for the year ended 31 January 2020
Strategic Highlights:
· In a challenging recruitment market we have increased the number
of Principals to 394 (2021: 369), and lawyers continued to grow their
practices with Pod members increasing from 74 to 80.
· Our Central Office team will continue to work remotely, having
demonstrated outstanding levels of support to lawyers and clients by this
means throughout the pandemic.
· We have continued to run regular social and networking events for
lawyers to foster a supportive and collegiate culture, mostly taking the form
of online events this year, but also face to face events when restrictions
allowed.
· We continue to invest into our IT systems, to ensure "best in
class" core systems and drive ever greater operational efficiencies for
lawyers.
Current trading and outlook:
· The current financial year has started well with lawyers
remaining busy.
· We have made a fair start on recruitment, continuing to attract
high quality candidates.
· Well placed to deliver another strong performance.
James Knight, Chief Executive Officer of Keystone Law, commented:
"Keystone has had another very successful year. Our unique business model,
with technology enabled remote working and flexibility at its core, has
ensured that our lawyers have been perfectly placed to capitalise on the high
levels of client demand throughout the period.
As a result of the experience of the last two year, remote working within
the legal profession has now been accepted by the mainstream and I believe it
will remain a preference for many. Keystone offers so much more than just
remote working. It gives genuine flexibility, providing the platform for our
lawyers to take control of the manner in which they build their practices,
often to earn more money, whilst being supported by a central office team of
the highest calibre.
Being highly cash generative and capital light has meant that we have built a
strong cash position and we are extremely pleased to be able to propose both a
final ordinary dividend of 11.2p and a special dividend of 10p per share."
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)
Erik Anderson (Corporate Broking)
www.panmure.com (http://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
Media enquiries
FTI Consulting
Laura Ewart
keystonelaw@fticonsulting.com
+44 (0)7711 387 085
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").
Analyst Briefing
A meeting for analysts will be held virtually at 9.30am today, 28 April 2022.
Analysts wishing to attend this event can register via email at
keystonelaw@fticonsulting.com. Keystone's Full Year 2022 results announcement
will also be available today on the Group's website at www.keystonelaw.com
(http://www.keystonelaw.com) .
Notes to editors
Keystone is an award-winning law firm, providing conventional legal services
to SMEs and high net worth individuals in a £9bn addressable market.
Keystone has a scalable and unique model, with three defining characteristics:
· Our lawyers have freedom, flexibility and autonomy, and are paid
up to 75% of what they bill.
· Our lawyers determine how, when and where they work, in contrast
to the conventional law firm model.
· We offer lawyers 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 nearly 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
(http://www.keystonelaw.co.uk) .
CHAIRMAN'S REVIEW
I am pleased to introduce Keystone Law's results for the year ended 31 January
2022.
It has been another good year for Keystone and we are delighted to be
reporting very strong financial results. Our model has continued to
demonstrate its value, placing our lawyers in prime position to take advantage
of the strong demand across the legal industry in spite of the Covid-19
restrictions which have ebbed and flowed throughout the period. Accordingly,
revenue has increased by 26.5% to £69.6m (2021: £55.0m), and adjusted
PBT((1)) has increased by 52.3% to £9.1m representing an adjusted PBT margin
of 13.0% (2021: £6.0m, 10.8%). Cash generation has remained strong, with
cash generated from operations of £10.0m (2021: £6.6m) representing an
operating cash conversion of 102.7% (2021: 100%).
((1))Adjusted PBT is calculated by adding share based payment costs and
amortisation to PBT. Details of these calculations are shown in the
Financial Review.
DIVIDEND
In accordance with the Group's stated dividend policy, the Board is proposing
to pay a final ordinary dividend for the year ended 31 January 2022 of 11.2p
per share (2021: 7.1p((2))) bringing the total ordinary dividend for the year
to 15.7p (2021:10.4p((1))).
Furthermore, recognising the strength of the balance sheet and considering the
cash requirements of the Group as well as the cash generative nature of our
model, the Board is also proposing to pay a special dividend of 10p per share.
If approved at our AGM, this will be the second special dividend that we have
paid since we joined the AIM market. This has been made possible by the
strong cash generation and capital light nature of our business model together
with our organic growth strategy.
((2) )2021 dividend excludes amounts (3.3p interim and 3.5p final) paid as
catch up for non-payment of a final dividend for year ended 31 January 2020
OUR PEOPLE
As the CEO remarks, our central office team has provided excellent support to
our lawyers and clients throughout the year and I would like to thank them on
behalf of the Board.
BOARD AND GOVERNANCE
I am happy to report that the Board has continued to operate within the
structures and governance requirements of the Quoted Companies Alliance
("QCA") Code as set out in the corporate governance section of the Annual
Report and Accounts.
In response to the evolution of ESG (Environmental, social and governance)
within the governance framework, we have extended our reporting this year to
incorporate those areas of our ESG strategy which had not previously been
communicated beyond the Boardroom. We are proud that our model has a low
carbon density and are committed to strive to reduce the already small
footprint further where possible.
During the year, we made changes to the Chairing of Board Committees and I
would like to thank both Simon Philips and Isabel Napper for their commitment
to their new roles.
OUTLOOK
I am pleased to say that the current year has started well. Whilst the UK
economy is starting to be affected by certain headwinds, we are confident that
Keystone is well placed to continue yielding the benefit of its organic growth
strategy and delivering ongoing strong results.
Robin Williams
Non-executive Chairman
27April 2022
CHIEF EXECUTIVE'S REVIEW
Operational Review
INTRODUCTION AND HIGHLIGHTS
I am very pleased to be able to report that Keystone has had another
successful year.
In what has been a unique period of trading conditions, the business has
continued to grow, with revenue up 26.5% to £69.6m (2021: £55m) and adjusted
PBT increasing by 52.3% to £9.1m (2021: £6.0m) (PBT increase of 54.7% to
£8.4m). The cash generative nature of the model and its resilience have
continued to be strongly demonstrated this year, with cash generated from
operations of £10.0m. This cash position, together with our confidence in the
ongoing strength of performance, has given us the confidence not only to
propose a final ordinary dividend in line with our stated policy of 11.2p but
also to propose a special dividend of 10p.
Client demand across the industry has been high and our model has ensured that
our lawyers have been able to take advantage of this to drive enhanced revenue
during the period. Equally, for much of the year, Covid-19 restrictions have
prevented us from delivering many of the face-to-face networking and marketing
events in which we normally invest. The confluence of these two factors has
resulted in the Group enjoying heightened profits this year.
The same factors which have contributed to the strong financial performance
have also affected the conditions within the recruitment market and, in light
of these, I am satisfied that the number of Principals* has increased from 369
to 394 and we saw the number of Pod members increase from 74 to 80.
*Principal lawyers are the senior lawyers who own the service company ("Pod")
which contracts with Keystone. The relationship between Keystone and its
lawyers is governed by two agreements: a service agreement (which governs the
commercial terms and is between the Pod and Keystone) and a compliance
agreement (which governs the behaviour of lawyers and is between each lawyer
and Keystone). Pods can employ more than one fee earner. A junior lawyer who
is employed by a Pod is, to all intents and purposes, a Keystone lawyer and
presented to the outside world in much the same way as a conventional law firm
would present a conventionally employed junior lawyer. Junior lawyers are
properly interviewed and vetted by the recruitment team in central office to
ensure that they are of the requisite quality and calibre. As is the case for
the Principal lawyers, these juniors sign a compliance agreement with Keystone
and are required to comply with all rules and regulations governing the
professional conduct of Keystone's lawyers.
THE ONGOING RESPONSE TO COVID-19
Throughout the pandemic, we have focused on ensuring that our people are both
safe and fully productive. Both the culture and technology on which Keystone
is built have proven their worth in these challenging times.
Ordinarily, we invest substantial time, effort and resources in regularly
bringing our lawyers together, face to face, to facilitate networking and
build relationships which engender a real sense of belonging and collegiality
across the business. This made the transition to online events, necessitated
by the pandemic, a great success and our people have continued to come
together at regular events, face to face when restrictions allowed but equally
adapting formats to continue to maintain and enhance the cohesion which is
ever present within Keystone.
Prior to the pandemic, it was our lawyers who benefitted from the flexibility
of remote working facilitated by our technology but since moving offsite
during the first lockdown, our Central Office team has demonstrated that this
method of working is equally applicable to them. Throughout the last two
years, they have delivered support services of the highest calibre to both our
clients and our lawyers and, as such, we have decided to continue with this
model when the pandemic ends.
DRIVING ORGANIC GROWTH TO A SCALABLE MODEL
We have continued to drive forwards in the delivery of our clear and simple
strategy; organic growth through the recruitment of high calibre lawyers from
within the mid-market segment of the UK legal services industry.
We actively encourage and support our Principals to grow their practices in
the manner best suited to them. During the recruitment and onboarding
process, and throughout a Principal's time at Keystone, we work with them to
understand the nature of their practice and to help them develop relationships
with the colleagues they will need to meet the needs of their clients and grow
their practice. Where appropriate, we encourage and assist them in the growth
of their Pods, which they can do by recruiting their own juniors, providing
the means to build larger practices, further enhancing the value of their
client relationships and increasing their income earning potential. For those
who either do not need or wish to have a dedicated junior resource, we employ
a number of junior lawyers within the central office team whose role it is to
provide the necessary ad hoc support to the whole lawyer base.
Our model is an appealing proposition for many lawyers across the industry who
find themselves constrained or dissatisfied by the conventional model. We
encourage our lawyers to stand out from the crowd, developing their practices
on their own terms, offering genuine flexibility, concentrating exclusively on
client development and the delivery of high calibre legal work. The regular
social and networking events provide the opportunities for our lawyers to
really get to know each other and it is by forming these genuine relationships
that our lawyers are able to deliver an enhanced service to their clients when
delivering multi-disciplinary and multi-lawyer assignments.
All of this is made possible by the technology which sits at the heart of what
we do, developed to meet the needs of our people and supported by our central
office team which provides best in class support across all areas needed by
our lawyers.
UNIQUE MARKET CONDITIONS
The recruitment market has had unique challenges this year. The high level
of demand across the industry has seen many lawyers simply too busy to
consider moving roles, whilst the timing of changes in government restrictions
in response to the evolution of the pandemic has also played its part in
influencing candidates' behaviour. As reported in our Interim Statement,
conditions during the first half of this year were very similar to those
experienced during the second half of the last financial year. Potential
candidates were very busy dealing with client work and although restrictions
were slowly relaxing, there remained much uncertainty. The second half of
the year saw greater disruption. The relaxation of most restrictions in late
July, coupled with the anticipation of the return to office life in early
autumn, led to a prolonged period of slower activity as potential candidates
decided to enjoy the summer and defer making decisions about the future until
they had seen what the return to office life looked like in practice. During
October we saw the market pick up again, but the outbreak of the Omicron
variant in late November and the reimposition of restrictions caused a further
hiatus in activity as people once again decided to wait and see what the New
Year would bring. As such, the number of qualified new applicants this year
was 228 (2021: 253), whilst we made 76 offers (2021: 81) and 56 candidates
accepted offers (2021: 70).
CONTINUING INVESTMENT IN IT
In spite of the ongoing pandemic, this year has been a year of "business as
usual" for the IT team. Our IT systems and infrastructure have been
developed over many years to deliver results to our remote workforce and, as
such, the ongoing government restrictions have not affected the focus of the
team this year. The constant evolution of the risk profile across the IT
landscape means that IT security is a constant and ongoing focus for the team
as we continually enhance and update the tools used to provide protection
across our IT estate. Likewise, our development team work constantly to
deliver the upgrades and enhancements across our core systems to keep them
"best in class" and drive ever greater operational efficiencies.
ONGOING INVESTMENT IN THE CENTRAL OFFICE TEAM
This year, I have been delighted with the manner in which the Central Office
team has excelled following the move from office-based to remote working which
was implemented at the start of the pandemic. They have continued to deliver
outstanding service to our lawyers and because of this, we have decided that
when the pandemic ends, we will continue to operate in this way. This will
enable all our people to enjoy the benefits and flexibility afforded by remote
working whilst retaining access to high quality facilities at our offices in
Chancery Lane to meet the needs of our clients, our lawyers and our Central
Office team.
LOOKING AHEAD
It has been a good start to the year, with our lawyers remaining busy. The
sanctions imposed on Russia since the invasion of Ukraine have had only a very
limited and immaterial impact on us. We have also made a fair start to
recruitment, with high quality candidates continuing to be attracted to the
business. As such, we are well placed to deliver another strong performance
this year
James Knight
Chief Executive
27 April 2022
FINANCIAL REVIEW AND STRATEGIC REPORT
KEY PERFORMANCE INDICATORS (KPIs)
The following KPIs are used by the management to monitor the financial and
operational performance of the Group:
• Revenue growth: 26.5% increase (2021: 10.9%)
• Adjusted PBT growth: 52.3% increase (2021: 3.6%)
• Adjusted PBT margin: 13.0% (2021: 10.8%)
• PBT growth: 54.7% increase (2021: 3.4%)
• PBT margin: 12.0% (2021: 9.8%)
• Adjusted basic EPS: 23.6p (2021: 15.6p)
• Operating cash conversion %: 102.7% (2021: 100%)
• Trade debtor days: 32 (2021: 38)
• Qualified New Applicants((1)): 228 (2021: 253)
• Offers Made((1)): 76 (2021: 81)
• Offers Accepted((1)): 56 (2021: 70)
(1) Non-financial KPI's are commented on with the Chief Executive's review
The calculation of adjusted PBT is shown below.
INCOME STATEMENT
I am pleased to report revenue for the year of £69.6m, an increase of 26.5%
on the prior year. Following a drop in client demand in the prior year,
particularly during the first half of the year, the legal market has bounced
back strongly with activity levels being very strong throughout the period.
Our lawyers have taken full advantage of this demand to deliver enhanced
revenue this year, whilst further growth has been delivered by the continued
growth in the number of Principals, which have increased from 369 to 394 this
year.
GROSS PROFIT
The gross profit margin of the business has risen this year to 26.4% (2021:
25.9%). This increase has been driven by the strong demand across the business
which has meant that our centrally employed lawyers have been in high demand,
with higher utilisation rates generating enhanced margins.
ADMINISTRATIVE EXPENSES
Administrative expenses have increased by 13.0% to £8.7m (2021: £7.7m). The
largest single component of this is staff costs which increased by 18.3% to
£3.9m (2021: £3.3m), with support staff increasing from an average of 47 in
2021 to 53 in 2022. Other administrative costs increased by 10.3% to £4.8m
(2021: £4.4m). The Covid-19 related government restrictions, which were in
place for much of this year, continued to depress the level of administrative
expenses, primarily because face-to-face social and networking events for our
lawyers and clients were unable to be held for most of the year.
OTHER COSTS
Amortisation, both of right of use assets and intangible assets remained
unchanged year on year with no changes to the underlying assets, whilst
depreciation increased by 3%. The charge in respect of share based payments
increased from £0.2m to £0.4m as a new grant was made and the cost of all
historic grants continued to be charged to the income statement, whilst
finance income was negligible in the year as interest rates fell close to nil.
PBT, ADJUSTED PBT AND PBT MARGINS
Adjusted PBT is calculated as follows:
2022 2021
£ £
Profit before tax 8,363,199 5,405,135
Amortisation 350,884 350,884
Share based payments 369,796 208,671
Adjusted PBT 9,083,879 5,964,690
PBT Margin 12.0% 9.8%
Adjusted PBT Margin 13.0% 10.8%
Both PBT and adjusted PBT have been enriched this year, benefitting from the
confluence of enhanced revenue, as our lawyers responded to the high demand
for their services, and suppressed administrative costs caused by the Covid-19
related government restrictions. Had it not been for these two factors
coinciding in the period, the margin would have been approximately 1% lower
than reported.
TAXATION
The effective tax rate of 20.5% is higher than the standard rate and lower
than that of the prior year (19.9%). Due to the nature of our business and the
investment we make in providing networking opportunities in social
environments for our lawyers, the tax rate of the business is always likely to
be slightly higher than the standard rate as these costs are disallowable for
corporation tax purposes. Compared to the previous year, the level of
disallowable expenses was higher as we were able to hold a small number of
events during the late summer and early autumn period, whereas during the
prior year, we were unable to run any face-to-face events.
EARNINGS PER SHARE
Basic earnings per share increased from 13.8p to 21.3p, with fully diluted EPS
being 21.0p (2021: 13.8p). Adjusted basic earnings per share (calculated by
making the same adjustments to earnings as has been made in calculating
adjusted PBT and divided by the average shares in circulation this year)
increased by 51.3% to 23.6p (2021: 15.6p).
STATEMENT OF FINANCIAL POSITION
CASH
The Group's business model is strongly cash generative because its most
significant cost, the fees paid to lawyers, is only paid once Keystone has
been paid for the work it has delivered. Operating cash conversion has
remained very strong this year at 102.7% (2021: 100%), generating cash from
operations of £10.0m (2021: £6.6m). Capital expenditure was £0.04m (2021:
£0.05m). Corporation tax payments were £1.5m (2021: £1.0m). Net interest
received (ex the interest portion of lease payments) of £0.01m (2021:
£0.02m) remains negligible as interest base rates continue to be almost nil,
whilst the interest element of lease payments was £0.1m (2021: £0.1m). Lease
repayments of £0.4m reflect the normal run rate of payments under our
existing leases which run until April 2024 (2021: £0.4m). As such, cash
generated by the business in the year, being net cash flow pre dividend
payments, was £7.8m (2021: £5.0m). The Group paid dividends of £4.7m (2021:
£2.1m). This left closing cash of £10.5m (2021: £7.4m) and no debt.
NET ASSETS
The net assets of the Group have increased from £16.6m to £18.9m, with
retained earnings of £6.6m less the dividends of £4.7m. This leaves the
business with a strong balance sheet.
SECTION 172 COMPANIES ACT STATEMENT
The statements below address the reporting requirements of the Board under
Section 172 of the Companies Act and the Companies (Miscellaneous Reporting)
Regulations 2018.
The Directors of the Company have a duty to promote the success of the
Company. A Director of the Company must act in the way they consider, in good
faith, to promote the success of the Company for the benefit of its members,
and in doing so have regard (amongst other matters) to:
• the likely consequences of any decision in the long term;
• the interests of the Company's employees;
• the need to foster the Company's operations on the community and the
environment;
• the desirability of the Company to maintain a reputation for high
standards of business conduct; and
• the need to act fairly between members and the Company.
The Directors are committed to developing and maintaining a governance
framework that is appropriate to the business and supports effective decision
making coupled with robust oversight of risks and internal controls.
Keystone has a clearly stated long term organic growth strategy and, as such,
all significant business decisions consider both the short and long term
impact in the process. The key to delivering this strategy is to continue to
recruit and retain high calibre lawyers. In order to be an attractive place
for high calibre lawyers to work, it is essential that Keystone maintains its
reputation for delivering work to the highest professional standards. Central
to the success of the business is the development and maintenance of its open,
welcoming and collegiate culture and we invest significant time and resources
to ensure that these facets are maintained and developed for the benefit of
all those involved with the Company.
Keystone's primary asset is its people, be it the central office staff, the
lawyers, the clients or third party suppliers with whom we work (such as
counsel, experts and other professionals). As a business, we dedicate
substantial time, effort and resources in working to develop and maintain
strong relationships from which all parties benefit. As a people business, the
impact of business decisions on our principal stakeholders is always central
to the decision making process.
The nature of the Group's business is fundamentally low impact to the
environment, we have an extremely small office footprint and the use of
technology across the business further reduces the environmental impact as our
lawyers have no need to commute to work.
The Directors treat all members of the Group fairly and consistently, as
required by both professional standards and in compliance with various pieces
of legislation. We provide information to all shareholders and other third
parties on an equal basis.
DIVIDEND
The Board is proposing to pay a final ordinary dividend for the year ended 31
January 2022 of 11.2p per share (2021: 7.1p((1))). This brings the total
ordinary dividend for the year to 15.7p per share (2021: 10.4p((1)) per
share).
In light of the strength of the balance sheet, together with the cash
generative nature of the business model, the Board is also proposing a special
dividend of 10.0p per share.
The large movement in the cash flows from dividends paid this year versus last
year reflects the timing of payments as we caught up the value of the final
dividend that would have been declared for the year ended 31 January 2020.
This meant that the 3.5p per share (£1,094,588) catch-up which was paid as
part of the final dividend for the year ended 31 January 2021 fell into the
cashflow for this year. Accordingly, the cash value of dividends paid during
the year was £4,722,364 (2021: £2,064,079).
Both the proposed Ordinary and Special dividends will be payable on 8 July
2022 to shareholders on the register at the close of business on 17 June 2022.
((1) )2021 dividend excludes amounts (3.3p interim and 3.5p final) paid as
catch up for non-payment of a final dividend for the year ended 31 January
2020
On behalf of the Board
Ashley Miller
Finance Director
27 April 2022
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
YEAR ENDED 31 JANUARY 2022
Note 2022 2021
£ £
Revenue 69,615,770 55,027,227
Cost of sales (51,216,643) (40,770,513)
Gross profit 18,399,127 14,256,714
Depreciation and amortisation 3 (877,991) (874,110)
Share based payments 3 (369,796) (208,671)
Administrative expenses 3 (8,706,591) (7,706,481)
Other operating income 6,334 11,285
Operating profit 8,451,083 5,478,737
Finance income 4 7,511 39,515
Finance costs 4 (95,395) (113,117)
Profit before tax 8,363,199 5,405,135
Corporation tax expense (1,713,566) (1,076,094)
Profit and total comprehensive income for the year attributable to equity 6,649,633 4,329,041
holders of the Parent
Basic EPS (p) 6 21.3 13.8
The above results were derived from continuing operations.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 JANUARY 2022
Note 2022 2021
£ £
Assets
Non-current assets
Property, plant and equipment
Owned assets 247,551 323,940
Right-of-use assets 924,437 1,335,297
Total property, plant and equipment 1,171,988 1,659,237
Intangible assets 5,757,722 6,108,606
Other assets 13,628 13,628
6,943,338 7,781,471
Current assets
Trade and other receivables 7 19,973,814 18,108,298
Cash and cash equivalents 10,482,676 7,371,300
30,456,490 25,479,598
Total assets 37,399,828 33,261,069
Equity and liabilities
Equity
Share capital 62,548 62,548
Share premium 9,920,760 9,920,760
Share based payments reserve 749,958 380,162
Retained earnings 8,150,365 6,223,096
Equity attributable to equity holders of the Parent 18,883,631 16,586,566
Non-current liabilities
Lease liabilities 8 571,730 1,015,924
Deferred tax liabilities 202,610 266,821
Provisions 107,945 101,428
882,285 1,384,173
Current liabilities
Trade and other payables 8 16,143,166 14,032,341
Lease liabilities 8 538,544 538,544
Corporation tax liability 952,202 719,445
17,633,912 15,290,330
Total liabilities 18,516,197 16,674,503
Total equity and liabilities 37,399,828 33,261,069
The prior year comparatives have been restated to reclassify the provisions
balance as non-current liabilities as the leases to which this relates do not
expire within the next twelve months.
Ashley Miller
Director
27 April 2022
Keystone Law Group Plc
Registered No. 09038082
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
YEAR ENDED 31 JANUARY 2022
Attributable to equity holders of the Parent
Note Share Share premium Share based payments reserve Retained earnings Total
capital
£ £ £ £
£
At 31 January 2020 18 62,548 9,920,760 171,491 3,958,134 14,112,933
Profit for the year and total comprehensive income - - - 4,329,041 4,329,041
Dividends paid in the year - - - (2,064,079) (2,064,079)
Share based payments - - 208,671 - 208,671
At 31 January 2021 18 62,548 9,920,760 380,162 6,223,096 16,586,566
Profit for the year and total comprehensive income - - - 6,649,633 6,649,633
Dividends paid in the year - - - (4,722,364) (4,722,364)
Share based payments - - 369,796 - 369,796
At 31 January 2022 18 62,548 9,920,760 749,958 8,150,365 18,883,631
CONSOLIDATED STATEMENT OF CASH FLOWS
YEAR ENDED 31 JANUARY 2022
Note 2022 2021
£ £
Cash flows from operating activities
Profit before tax 8,363,199 5,405,135
Adjustments to cash flows
Depreciation and amortisation 3 877,991 874,110
Share based payments 3 369,796 208,671
Finance income 4 (7,511) (39,515)
Finance costs 4 95,395 113,117
9,698,870 6,561,518
Working capital adjustments
Increase in trade and other receivables (1,865,516) (1,546,859)
Increase in trade and other payables 2,110,824 1,532,023
Increase in provisions 6,517 38,962
Cash generated from operations 9,960,695 6,585,644
Interest paid (104) (17,826)
Interest portion of lease liability (95,291) (95,291)
Corporation taxes paid (1,545,956) (968,719)
Cash generated from operating activities 8,309,344 5,503,808
Cash flows from/(used in) investing activities
Interest received 7,511 39,515
Purchases of property, plant and equipment (39,858) (51,306)
Net cash used in investing activities (32,347) (11,791)
Cash flows from financing activities
Lease repayments (443,257) (443,224)
Dividends paid in year (4,722,364) (2,064,079)
Net cash (used in) financing activities (5,165,621) (2,507,303)
Net increase in cash and cash equivalents 3,111,376 2,984,714
Cash at 1 February 7,371,300 4,386,586
Cash at 31 January 10,482,676 7,371,300
Notes to the Financial Statements
1. GENERAL INFORMATION
The Company was incorporated as Keystone Law Group Limited on 13 May 2014
under the Companies Act 2006 (registration no. 09038082) 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 limited by shares 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 preliminary announcement is presented in Pounds Sterling, being the
functional currency of the companies within the Group.
2. ACCOUNTING POLICIES
BASIS OF PREPARATION
The preliminary announcement does not constitute full financial statements for
the years ended 31 January 2022 or 2021.
The annual audited financial statements of the Group for the year ended 31
January 2022 have been prepared in accordance with UK adopted International
Accounting Standards. This preliminary financial information has been prepared
on the same basis as the accounting policies adopted in those accounts but
does not include all the disclosures required in financial statements prepared
in accordance with UK adopted International Accounting Standards and
accordingly does not itself comply with UK adopted International Accounting
Standards.
The results for the year ended 31 January 2022 included in this preliminary
announcement are extracted from the audited financial statements for the year
ended 31 January 2022 which were approved by the Directors on 27 April 2022.
The auditor's report on those financial statements was unqualified. It did
not include a statement under Section 498(2) or 498(3) of the Companies Act
2006.
The 2022 annual report will be posted to shareholders and included within the
investor relations section of our website in due course and will be considered
at the Annual General Meeting to be held on 5 July 2022. The financial
statements for the year ended 31 January 2022 have not yet been delivered to
the Registrar of Companies.
The auditor's report on the consolidated financial statements of Keystone Law
Group Plc for the period ended 31 January 2021 was unqualified and did not
include a statement under Section 498(2) or 498(3) of the Companies Act 2006.
The financial statements for the period ended 31 January 2021 have been
delivered to the Registrar of Companies
GOING CONCERN
The Group and Company financial statements have been prepared on a going
concern basis as the Directors have a reasonable expectation that the Group
has adequate resources to continue in operational existence for the
foreseeable future. The Group is cash positive, has no debt, has a model which
is strongly cash generative and has, to date, a strong trading performance.
The Group's forecasts and projections show that the Group has sufficient
resources for both current and anticipated cash requirements for a period of
at least one year from the approval of these financial statements.
ADJUSTED PBT
Adjusted PBT is utilised as a key performance indication for the Group and is
calculated as follows:
2022 2021
£ £
Profit before tax 8,363,199 5,405,135
Amortisation 350,884 350,884
Share based payments 369,796 208,671
Adjusted PBT 9,083,879 5,964,690
3. EXPENSES BY NATURE
Expenses are comprised of:
2022 2021
£ £
Depreciation 116,247 112,366
Amortisation - intangible assets 350,884 350,884
Amortisation - right of use assets 410,860 410,860
Share based payments 369,796 208,671
Staff costs 4,502,652 3,790,848
Other administrative expenses 4,814,546 4,417,034
10,564,985 9,290,663
Included within staff costs above are the costs of employed fee earners who
are included within cost of sales
(2022: £610,607; 2021: £501,401).
4. FINANCE INCOME AND COSTS
2022 2021
£ £
Finance income
Interest income on bank deposits 7,511 39,515
Finance costs
Interest on client monies held (104) (17,826)
Interest on leases for own use (95,291) (95,291)
Total finance costs (95,395) (113,117)
Net finance costs (87,884) (73,602)
5. STAFF COSTS
The aggregate payroll costs (including Directors' remuneration but excluding
share base payment charges) were as follows:
2022 2021
£ £
Wages and salaries 3,712,410 3,307,043
Social security costs 642,723 360,521
Pension costs, defined contribution scheme 147,520 123,284
4,502,652 3,790,848
Included within the social security costs above is an amount of £235,702
(2021: £Nil) in respect of employers national insurance contributions which
will be payable in respect of shares granted under the Group's LTIP scheme.
The first of these awards is due to vest in July 2023 and no cost had been
accrued previously due to the uncertainty and lack of materiality of any such
liability.
The average number of persons employed by the Group (including Directors)
during the year, analysed by category was as follows:
2022 2021
£ £
Fee Earners 10 9
Administration and support 53 47
Total 63 56
6. EARNINGS PER SHARE
The calculations of earnings per share are based on the following profits and
number of shares:
2022 2021
£ £
Profit attributable to owners of the Parent 6,649,633 4,329,041
Amortisation 350,844 350,884
Share based payments 369,796 208,671
Adjusted earnings 7,370,273 4,888,596
2022 2021
No of shares No of shares
Weighted average number of shares
For basic earnings per share 31,273,941 31,273,941
Dilutive effect of grants under LTIP 367,371 205,143
For diluted earnings per share 31,641,312 31,479,084
Basic earnings per share (p) 21.3 13.8
Diluted earnings per share (p) 21.0 13.8
Adjusted basic earnings per share (p) 23.6 15.6
Adjusted basic earnings per share is calculated by taking adjusted earnings
and dividing it by undiluted average shares for the year.
7. TRADE AND OTHER RECEIVABLES
2022 2021
£ £
Trade receivables 12,266,858 10,381,433
Provision for impairment of trade receivables (4,082,672) (2,976,731)
Net trade receivables 8,184,186 7,404,702
Receivables from related parties - -
Accrued income 8,680,475 7,519,042
Prepayments 1,823,118 1,592,149
Unbilled disbursements 1,109,691 1,224,387
Other receivables 176,344 368,018
Total current trade and other receivables 19,973,814 18,108,298
The fair value of those trade and other receivables classified as financial
instrument are disclosed in the financial instruments note.
The Group's exposure to credit and market risks, including impairments and
allowances for credit losses, relating to trade and other receivables is
disclosed in the financial risk management and impairment of financial assets
note.
Trade receivables stated above include amounts due at the end of the reporting
period for which an allowance for expected credit loss has not been recognised
as the amounts are still considered recoverable and there has been no
significant change in credit quality.
The provision for impairment of trade receivables (analysed below) is the
difference between the carrying value and the present value of the expected
proceeds. For all other categories of current receivables there is no
difference between the carrying value and the expected proceeds.
2022 2022 Provision 2022 Expected Loss Rate 2021 2021 Provision 2021 Expected Loss Rate
Gross £ % Gross £ %
£ £
0 to 30 days 4,683,432 10,258 0.2 3,438,200 - 0.0
31 to 60 days 1,585,671 59,002 3.7 1,814,914 - 0.0
61 to 90 days 1,059,987 37,349 3.5 875,870 - 0.0
91 to 120 days 659,660 199,882 30.3 599,953 - 0.0
4 to 6 months 430,269 39,543 9.2 344,544 - 0.0
6 months to 1 year 1,662,321 1,551,121 93.3 1,297,737 966,516 74.5
Over 1 year 2,185,517 2,185,517 100.0 2,010,215 2,010,215 100.0
12,266,858 4,082,672 33.3 10,381,433 2,976,731 28.7
The Directors consider that the carrying value of trade and other receivables
approximates to fair value.
8. TRADE AND OTHER PAYABLES
2022 2021
£ £
Trade payables 7,484,190 6,936,732
Accrued expenses 8,309,204 6,945,752
Amounts owed to group undertakings - -
Social security and other taxes 349,772 149,857
Other payables - -
Total trade and other payables 16,143,166 14,032,341
Included within the above accrued expenses is the liability for lawyer fees
associated with the accrued income
(2022: 6,441,299, 2021: £5,585,486).
The fair value of the trade and other payables classified as financial
instruments is disclosed in the financial instruments note.
The Group's exposure to market and liquidity risks related to trade and other
payables is disclosed in the financial risk management and impairment of
financial assets note. The Group pays its trade payables on terms and as such
trade payables are not yet due at the balance sheet dates.
FINANCIAL LIABILITIES
0 to 6 months 7 to 12 months 1 to 5 Pay when paid Total
years
£ £
£ £
£
Trade payables 107,942 464,067 - 6,912,181 7,484,190
Accrued expenses 1,237,203 630,702 - 6,441,299 8,309,204
Lease liabilities 277,186 278,769 690,430 - 1,246,385
At 31 January 2022 1,622,331 1,364,041 690,430 13,353,480 17,039,779
0 to 6 months 7 to 12 months 1 to 5 Pay when paid Total
years
£ £
£ £
£
Trade payables 328,054 433,703 - 6,174,975 6,936,732
Accrued expenses 795,266 565,000 - 5,585,486 6,945,752
Lease liabilities 269,272 269,272 1,246,385 - 1,784,929
At 31 January 2021 1,392,592 1,267,975 1,246,385 11,760,461 15,667,413
Financial liabilities are held at amortised cost. There is no significant
difference between the fair value and carrying value of financial instruments.
Amounts shown as pay when paid above principally reflect amounts payable in
respect of lawyers' fees, as well as values payable to third party counsel and
experts whose fees have been incurred on behalf of the Groups clients as
disbursements. Lease liabilities are shown at their undiscounted value.
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