REG - Keystone Law Grp PLC - Final Results
24/04/2023 07:00
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RNS Number : 1202X Keystone Law Group PLC 24 April 2023
24 April 2023
Keystone Law Group Plc
('Keystone', the 'Group' or the 'Company')
Full year results for the period ended 31 January 2023
Sustained financial and operational growth underpinned by Keystone's unique
model and technology platform
Keystone, the network and tech-enabled challenger law firm, is pleased to
announce its full year results for the year ended 31 January 2023 ("FY 2023").
Financial Highlights:
· Revenue growth of 8.1% to £75.3 million (2022: £69.6 million)
· Revenue per Principal up 4.1% to £190k (2022: £182.5k)
· PBT of £8.4 million (2022: £8.4 million)
· Adjusted PBT of £9.2 million, up 6.3% v Underlying Adjusted PBT
2022 of £8.7 million ((1))
· Adjusted basic EPS of 24.2 pence, up 2.5% from 23.6 pence
· Strong operating cash conversion at 96.5% with cash generated
from operations of £9.3 million (2022: £10.0 million); the Group remains
debt-free
· Proposed final ordinary dividend of 10.9p (2022: 11.2p), bringing
total ordinary DPS for the year to 16.1p (2022: 15.7p)
(1) Adjusted PBT in 2022 (£9.1m) was enhanced by approximately
£0.4m from impact of Covid-19 and related restrictions, excluding these
underlying adjusted PBT was c£8.7m and Underlying adjusted PBT margin would
have been 12.5%
Operational Highlights:
· Registered 232 qualified high-calibre new applicants (2022: 228)
against a backdrop of a highly competitive recruitment market
· 32 Principals joined across FY 2023, increasing the number of
Principals to 398 (2022: 394)
· Total fee earners increased to 507 (2022: 481)
· Delivered of a full programme of face-to-face networking and
social events, which form such an essential part of our DNA, enhancing both
the professional and personal experience of those working at Keystone
· Continued investment in our central office team, ensuring that
the service delivery ethos and level of support enjoyed by our lawyers remains
second to none
· Ongoing investment in technology platform:
o designing and building proprietary pitch creation tool to enable our
lawyers to produce personalised pitches quickly and easily
o developing bespoke tool to drive greater operational efficiency in
preparation and submission of applications to legal directories
Current Trading and Outlook:
· Keystone has made a positive start to the current financial year,
with levels of client demand remaining strong
· Conditions in the recruitment market are starting to change as
demand for lawyers is falling from the exceptional levels experienced in
recent years. However, candidates still cautious of change
· The Board remains confident that FY 2024 will be another good
year.
James Knight, Chief Executive Officer of Keystone, commented:
"Keystone has delivered another strong financial performance; growing revenue,
increasing underlying profits and generating strong cashflow. Our unique
business model continues to appeal to the high-calibre candidates we seek to
recruit and, in what has been a highly competitive recruitment market, we have
continued to grow our lawyer base.
The new financial year has started well. We have started to see demand for
recruitment of lawyers across the industry cooling slightly from exceptional
levels, and I am confident that as the year progresses, we will see
traditional push factors generating increased candidate flow which will
further support our growth."
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 .
Retail Investor Presentation
Keystone Law's management team will provide a separate presentation and
Q&A for investors at 1.00pm on Wednesday, 26 April 2023.
The presentation will be hosted on the Investor Meet Company digital platform,
where questions can be submitted pre-event up until 9.00am on the day before
the meeting, or at any time during the live presentation.
To sign up to IMC, please visit:
www.investormeetcompany.com/keystone-law-group-plc/register-investor
(http://www.investormeetcompany.com/keystone-law-group-plc/register-investor)
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 (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
Vigo Consulting (Financial Public Relations)
Jeremy Garcia / Charlie Neish / 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 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 STATEMENT
I am pleased to introduce Keystone Law's results for the year ended 31 January
2023.
Keystone has continued to perform well, delivering another strong set of
financial results with revenue growing 8.1% to £75.3m (2022: £69.6m), and
adjusted PBT((1)) increasing to £9.2m representing an adjusted PBT margin of
12.3% (2022: £9.1m, 13.0%,having benefitted from cost savings of c£0.4m).
Cash generation, a key feature of the business model, has remained strong,
with cash generated from operations of £9.3m (2022: £10.0m) representing an
operating cash conversion of 96.5% (2022: 102.7%).
((1)) Adjusted PBT is calculated by adding share based payment costs and
amortisation of intangible assets to PBT. Details of these calculations are
shown in the Financial Review.
DIVIDEND
In accordance with the Group's established dividend policy, the Board is
proposing to pay a final ordinary dividend for the year ended 31 January 2023
of 10.9p per share (2022: 11.2p), bringing the total ordinary dividend for the
year to 16.1p (2022: 15.7p).
OUR PEOPLE
On behalf of the Board, I would like to thank all of our Central Office team
for their constant efforts. Their professionalism and commitment underpins the
success of Keystone and, during the year, we have continued to invest in the
team to ensure that the highest standards of professional support which we
provide to our lawyers is maintained as we grow. In a period of such high
demand for legal services, it is, of course, the efforts of our lawyers which
have contributed strongly to these results and we also thank them for their
ongoing commitment and dedication to their clients.
BOARD AND GOVERNANCE
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.
Simon Philips has now been on the Board for over eight years, having joined in
October 2014, when Root Capital (later rebranded ScaleUp Capital) invested in
Keystone and, as recently announced, he has decided to step down following the
announcement of these results.
Salar Farzad has recently been appointed to the Board as Non-executive
Director, serving as a member of the various committees of the Board, and,
following Simon's resignation, he will assume the role of Chair of the Audit
Committee.
On behalf of the Board, I would like to express my thanks to Simon for the
significant contribution he has made during his tenure and to welcome Salar to
the Board.
OUTLOOK
I am pleased to say that the current year has started well. Although the
outlook for the UK economy remains somewhat uncertain, we are confident that
Keystone will continue to grow and carry on delivering strong results.
Robin Williams
Non-executive Chairman
24 April 2023
CHIEF EXECUTIVE'S REVIEW
INTRODUCTION AND HIGHLIGHTS
I am very pleased to be able to report another strong set of results for
Keystone.
2023 has been a second consecutive year of strong client demand across the
legal industry and our lawyers have taken full advantage of this situation to
help drive increased revenue per Principal, thereby ensuring that Group
revenue has increased by 8.1% to £75.3m (2022: £69.6m), whilst adjusted PBT
increased to £9.2m (2022: £9.1m, having benefitted from cost savings
resulting from the Covid-19 restrictions preventing face to face activities
(PBT £8.3m, 2022: £8.3m)). The cash generative nature of the model has
continued strongly, with cash generated from operations of £9.3m (2022:
£10.0m), leaving the business with a closing cash balance of £9.2m.
Despite the very competitive legal recruitment market, we have ended the year
with 398 Principals* (2022: 394) and a total of 507 fee earners (2022: 481).
* 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 is
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
interviewed and fully 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 RETURN OF FACE-TO-FACE NETWORKING
It has been a great benefit that we have been able to resume our programme of
face-to-face networking and social events for our lawyers and clients this
year. During lockdown, we had been unable to deliver a full programme of such
events, and, whilst we had successfully used technology to meet many of the
needs that in person events engender, there can be no doubt that the full
potential of these activities is best achieved when people are physically
together.
The Keystone events programme forms an essential part of our DNA, providing
opportunities for our lawyers to come together to build and develop the bonds
of collegiality and friendship, which enhance both the professional and
personal experience of those working at Keystone.
The intangible value of our culture is essential in attracting and retaining
high-calibre lawyers seeking to build and develop their practices, whilst
benefitting from the positive impact on their lives that working in such an
environment has; it is one of the main reasons why our lawyers are so
evangelical about Keystone. The culture is a living and breathing facet of the
business, which we nurture and grow, and the events provide the forum for our
lawyers to experience this first-hand, whilst themselves contributing to its
continuing growth.
The events address a multitude of professional and personal needs for our
lawyers, ensuring that they know their colleagues extremely well, fomenting an
environment in which work is cross-referred. Multi-lawyer and
multi-disciplinary teams come together to work harmoniously to fulfil the
needs of our clients, something which is demonstrated by the fact that over
30% of work is cross-referred.
HIGHLY COMPETITIVE LEGAL RECRUITMENT MARKET
Our strategy remains clear and simple: to drive growth organically through
recruitment of high-calibre lawyers from across the mid-market segment of the
UK legal services industry, whilst supporting those who join us to build and
develop their practice, enabling them to focus exclusively on client
development and legal work.
This year, client demand across the legal industry has remained strong and the
most apparent impact of this has been the increased revenue per Principal
(£190.0k, 2022: £182.5k), which has been the key driver of our revenue
growth. This demand has also impacted the legal recruitment market on both the
demand and the supply sides. On the demand side, most law firms across the
sector have been actively recruiting in order to fulfil the client demand,
which has led to significant wage inflation as firms have competed for talent
by offering substantial pay packages. This, in turn, has created a candidate
led market, where the balance of power has shifted towards employed lawyers
who are presented with a variety of options forcing law firms to be more
aggressive when it comes to retaining lawyers by actively buying candidates
back in.
On the supply side, many of the push factors, which in normal times cause
lawyers to seek change, have been absent. The significant demand has meant
that lawyers have had less difficulty in hitting targets, wage inflation has
meant that they are better rewarded for the work they do, and, with the
balance of power in their favour rather than the employers, they have been
able to avoid politics and resist pressures to return to offices which would
otherwise, probably, have been brought to bear. Whilst it is very difficult to
predict timing, we do not believe that these factors will continue
indefinitely.
Overlaid onto these factors, the instability in the UK macroeconomic climate
created an environment in which candidates were less likely to seek change and
this also impacted candidate flow during the second half of the year.
Throughout this, Keystone has remained an attractive and competitive
proposition for potential candidates, having received 232 qualified applicants
in the period (2022: 228) and made offers to 79 candidates (2022: 76) with 42
candidates accepting offers (2022: 56).
CONTINUING INVESTMENT IN IT
It has been another busy year for the team as they have worked to deliver
continual functional improvements and operational enhancements across our
proprietary software platform ("Keyed-In) and the wider IT estate.
Over and above the day-to-day enhancements and improvements, the team also
delivered some larger projects focused on the simplification and automation of
tools used by our lawyers in their marketing initiatives. This included
designing and building a proprietary pitch creation tool so that lawyers can
prepare highly professional, effective and personalised pitches quickly and
easily. Another project was the development of a bespoke tool to drive
greater operational efficiency into the process of preparing and submitting
applications to the legal directories, a project which was nominated for Best
Use of Technology in the Modern Law Awards.
OUR CENTRAL OFFICE TEAM BENEFIT FROM ONGOING HOME WORKING
As always, the Central Office team has provided outstanding support to our
lawyers throughout the year. This support, and the manner in which is
delivered, is another key tenet of Keystone's success. The team is committed
to providing excellent service to our lawyers, whom we consider, in many ways,
to be our clients, such that the service delivery ethos is second to none.
This dynamic is radically different to that experienced by many lawyers in
conventional law firms and is another feature of the Keystone model which
attracts and retains our lawyers.
LOOKING AHEAD
The Group has made a positive start to the year as our lawyers have remained
busy meeting client demand. Conditions in the recruitment market have started
to change, with demand for lawyers falling from the extremely high levels
experienced last year. On the supply side, the market remains tight as
candidates continue to be cautious and those push factors, which generally
encourage increased movement, are yet to have a significant impact. We
believe, that as the year progresses, demand on the recruitment front will
continue to tighten and we will see an increased candidate flow, which will
further help Keystone grow its Principal numbers. Overall, we are confident
that 2024 will be another good year for Keystone.
James Knight
Chief Executive
24 April 2023
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: 8.1% increase (2022: 26.5%)
• Adjusted PBT growth: 1.1% increase (2022: 52.3%)
• Adjusted PBT margin: 12.3% (2022: 13.0%)
• PBT growth: 0.3% increase (2022: 54.7%)
• PBT margin: 11.1% (2022: 12.0%)
• Adjusted basic EPS: 24.2p (2022: 23.6p)
• Operating cash conversion %((1)): 96.5% (2022: 102.7%)
• Trade debtor days: 36 (2022: 32)
• Qualified New Applicants((2)): 232 (2022: 228)
• Offers Made((2)): 79 (2022: 76)
• Offers Accepted((2)): 42 (2022: 56)
((1)) Operating cash conversion is calculated utilising cash generated from
operations and dividing it by the PBT before non-cash movements and net
interest.
((2)) Non-financial KPIs are commented on with the Chief Executive's review .
The calculation of adjusted PBT, adjusted PBT margin and adjusted EPS is shown
below.
INCOME STATEMENT
I am pleased to report revenue for the year of £75.3m, an increase of 8.1% on
the prior year. Our lawyers have taken full advantage of the continued strong
client demand across the legal industry to drive revenue per Principal up by
4.1% to £190k (2022: £182.5k), whilst the average number of Principals
increased from 381.5 to 396.
GROSS PROFIT
The gross profit of the business has risen this year by 6.4% to £19.6m (2022:
£18.4m), with a gross profit margin of 26.0% (2022: 26.4%). The increased
profit has been driven by the strong demand across the business driving
additional revenue, which has been concentrated, marginally, more within our
lawyers' Pods this year, such that we have benefitted from a slightly less
enhanced margin from our centrally employed lawyers.
ADMINISTRATIVE EXPENSES
Administrative expenses have increased by 14% to £9.9m (2022: £8.7m). Staff
costs, excluding the cost of NIC on LTIP awards (2023: £75k, 2022: £236k),
increased by 14.2% to £4.2m (2022: £3.7m), with average headcount increasing
from 53 to 59 as we have continued to invest in our people to provide our
lawyers with the highest standards of support, which they expect. Other
administrative costs increased by 17.9% to £5.7m (2022: £4.8m). The 2022
cost base had benefitted by approximately £0.4m due to the combined impact of
savings generated by not running the majority of in person networking events
as well as incurring a lower professional indemnity insurance premium in the
period, as these policies are priced against the turnover of the previous
period, i.e. year ended 31 January 2021, during which revenue was adversely
impacted due to Covid-19. Much of the remaining increase in the other
administrative expenses this year has resulted from the implementation, during
2022, of new software tools to provide enhanced IT security, which fully
impacted the cost base of the business during 2023.
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 6.6%. The charge in respect of share based payments
increased from £0.4m to £0.5m. The increases to interest rates, having been
close to nil last year, have meant that we have seen relatively significant
increases to both finance income and finance costs this year.
PBT, ADJUSTED PBT AND PBT MARGINS
Adjusted PBT is calculated as follows:
2023 2022
£ £
Profit before tax 8,384,677 8,363,199
Amortisation of intangible assets 350,884 350,884
Share based payments 502,708 369,796
Adjusted PBT 9,238,269 9,083,879
PBT Margin 11.1% 12.0%
Adjusted PBT Margin 12.3% 13.0%
As mentioned above, profits in 2022 were enhanced by approximately £0.4m as
other administrative expenses were artificially reduced by impacts of Covid-19
and related restrictions. Accordingly, had the cost base in 2022 not
benefitted from this then, PBT would have been c.£8.7m and the underlying
adjusted PBT would have increased by 6.3% (underlying PBT 5.3%). On this
basis, PBT margin would have been c.11.4% and the adjusted PBT margin would
have been c.12.5% with the slight decline this year being the result of a
slightly lower gross profit margin.
TAXATION
The effective tax rate of 19.7% is higher than the standard rate and lower
than that of the prior year (20.5%). 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 effective tax
rate has reduced because the July 2018 LTIP award vested creating a tax
deductible charge, whereas the accounting share based payment charge was
non-deductible.
EARNINGS PER SHARE
Basic earnings per share increased from 21.3p to 21.5p, with fully diluted EPS
being 21.2p (2022: 21.0p). Adjusted basic earnings per share (calculated by
making the same adjustments to earnings as have been made in calculating
adjusted PBT and divided by the average shares in issue this year) increased
to 24.2p (2022: 23.6p).
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, which had
been particularly strong in 2022, has remained strong this year at 96.5%
(2022: 102.7%), generating cash from operations of £9.3m (2022: £10.0m).
Capital expenditure was £0.06m (2022: £0.04m). Corporation tax payments
increased to £2.0m (2022: £1.5m), reflecting the increase in profits in 2022
compared to 2021 (corporation tax is paid in quarterly instalments with half
being due after the financial year end). The increase in interest rates has
manifested itself in the increased value of net interest received (excluding
the interest portion of lease payments) of £0.1m (2022: £0.01m net interest
paid). Lease repayments of £0.5m (2022: £0.4m) reflect the normal run rate
of payments under our existing leases which run until April 2024. As such,
cash generated by the business in the year, being net cash flow pre dividend
payments, was £6.9m (2022: £7.8m). The Group paid dividends of £8.3m,
£5.2m in respect of Ordinary dividends and £3.1m as a Special dividend
(2022: £4.7m Ordinary dividend). This left closing cash of £9.2m (2022:
£10.5m) and no debt.
NET ASSETS
The Group's balance sheet is extremely strong with net assets having decreased
from £18.9m to £17.9m by virtue of retained earnings of £7.5m, dividends
paid of £8.3m and £0.2m movement in reserves to account for the vesting of
LTIP awards.
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 has a fundamentally low impact on 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 2023 of 10.9p per share (2022: 11.2p). This brings the total ordinary
dividend for the year to 16.1p per share (2022: 15.7p per share). Subject to
approval at the Annual General Meeting, the final dividend will be paid on 7
July 2023 to shareholders on the register at the close of business on 16 June
2023.
The cash value of dividends paid this year of £8.3m includes £3.1m of
Special dividend.
On behalf of the Board
Ashley Miller
Finance Director
24 April 2023
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
YEAR ENDED 31 JANUARY 2023
Note 2023 2022
£ £
Revenue 75,259,930 69,615,770
Cost of sales (55,686,460) (51,216,643)
Gross profit 19,573,470 18,399,127
Depreciation and amortisation 3 (885,699) (877,991)
Share based payments 3 (502,708) (369,796)
Other administrative expenses 3 (9,927,058) (8,706,591)
Other operating income 51,951 6,334
Operating profit 8,309,956 8,451,083
Finance income 4 221,810 7,511
Financing costs 4 (147,089) (95,395)
Profit before tax 8,384,677 8,363,199
Corporation tax (1,650,968) (1,713,566)
Profit and total comprehensive income for the year attributable to equity 6,733,709 6,649,633
holders of the Parent
Basic EPS (p) 6 21.5 21.3
Diluted EPS (p) 6 21.2 21.0
The above results were derived from continuing operations.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 JANUARY 2023
Note 2023 2022
£ £
Assets
Non-current assets
Property, plant and equipment
Owned assets 187,677 247,551
Right-of-use assets 513,577 924,437
Total property, plant and equipment 701,254 1,171,988
Intangible assets 5,406,838 5,757,722
Other non-current assets 13,628 13,628
6,121,720 6,943,338
Current assets
Trade and other receivables 7 22,605,908 19,973,814
Cash and cash equivalents 9,151,875 10,482,676
31,757,783 30,456,490
Total assets 37,879,503 37,399,828
Equity and liabilities
Equity
Share capital 62,732 62,548
Share premium 9,920,760 9,920,760
Share based payments reserve 1,028,247 749,958
Retained earnings 6,847,378 8,150,365
Equity attributable to equity holders of the Parent 17,859,117 18,883,631
Non-current liabilities
Lease liabilities 8 109,484 571,730
Deferred tax liabilities 132,432 202,610
Provisions 183,501 107,945
425,417 882,285
Current liabilities
Trade and other payables 8 18,347,358 16,143,166
Lease liabilities 8 538,544 538,544
Corporation tax liability 709,067 952,202
19,594,969 17,633,912
Total liabilities 20,020,386 18,516,197
Total equity and liabilities 37,879,503 37,399,828
Ashley Miller
Director
24 April 2023
Keystone Law Group Plc
Registered No. 09038082
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
YEAR ENDED 31 JANUARY 2023
Attributable to equity holders of the Parent
Share Share premium Share based payments reserve Retained earnings Total
capital
£ £ £ £
£
At 31 January 2021 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
Transactions with owners
Dividends paid in the year - - - (4,722,364) (4,722,364)
Share based payments - - 369,796 - 369,796
At 31 January 2022 62,548 9,920,760 749,958 8,150,365 18,883,631
Profit for the year and total comprehensive income - - - 6,733,709 6,733,709
Transactions with owners
Dividends paid in the year - - - (8,261,115) (8,261,115)
Share based payments vesting 184 - (224,419) 224,419 184
Share based payment awards - - 502,708 - 502,708
At 31 January 2023 62,732 9,920,760 1,028,247 6,847,378 17,859,117
CONSOLIDATED STATEMENT OF CASH FLOWS
YEAR ENDED 31 JANUARY 2023
Note 2023 2022
£ £
Cash flows from operating activities
Profit before tax 8,384,677 8,363,199
Adjustments
Depreciation and amortisation 3 885,699 877,991
Share based payments 3 502,708 369,796
Finance income 4 (221,810) (7,511)
Financing costs 4 147,089 95,395
9,698,363 9,698,870
Working capital adjustments
Increase in trade and other receivables (2,632,094) (1,865,516)
Increase in trade and other payables 2,204,192 2,110,824
Increase in provisions 75,556 6,517
Cash generated from operations 9,346,017 9,950,695
Interest paid (70,791) (104)
Interest portion of lease liability (76,298) (95,291)
Corporation taxes paid (1,964,281) (1,545,956)
Cash generated from operating activities 7,234,647 8,309,344
Cash flows from/(used in) investing activities
Interest received 221,810 7,511
Purchases of property, plant and equipment (64,080) (39,858)
Net cash used in investing activities 157,730 (32,347)
Cash flows from financing activities
Proceeds from issue of ordinary shares 184 -
Lease repayments (462,247) (443,257)
Dividends paid in year (8,261,115) (4,722,364)
Net cash used in financing activities (8,723,178) (5,165,621)
Net (decrease)/increase in cash and cash equivalents (1,330,801) 3,111,376
Cash at 1 February 10,482,676 7,371,300
Cash at 31 January 9,151,875 10,482,676
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 preparation of Financial Statements, in conformity with UK-adopted
International Accounting Standards requires the use of certain critical
accounting estimates. It also requires management to exercise its judgement in
the process of applying the Group's accounting policies.
BASIS OF CONSOLIDATION
The preliminary announcement does not constitute full financial statements for
the years ended 31 January 2023 or 2022.
The annual audited financial statements of the Group for the year ended 31
January 2023 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 2023 included in this preliminary
announcement are extracted from the audited financial statements for the year
ended 31 January 2023 which were approved by the Directors on 24 April 2023.
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 2023 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 4 July 2023. The financial
statements for the year ended 31 January 2023 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 2022 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 2022 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 PROFIT BEFORE TAX ("PBT")
Adjusted PBT is utilised as a key performance indication for the Group and is
calculated as follows:
2023 2022
£ £
Profit before tax 8,384,677 8,363,199
Amortisation 350,884 350,884
Share based payments 502,708 369,796
Adjusted PBT 9,238,269 9,083,879
3. EXPENSES BY NATURE
Expenses are comprised of:
2023 2022
£ £
Depreciation 123,955 116,247
Amortisation - intangible assets 350,884 350,884
Amortisation - right of use assets 410,860 410,860
Share based payments 502,708 369,796
Staff costs 5,102,472 4,502,652
Other administrative expenses 5,676,239 4,814,546
12,167,118 10,564,985
Included within staff costs above are the costs of employed fee earners who
are included within cost of sales (2023: £851,653, 2022: £610,607).
4. FINANCE INCOME AND COSTS
2023 2022
£ £
Finance income
Interest income on bank deposits 221,810 7,511
Finance costs
Interest on client monies held (70,791) (104)
Interest on leases for own use (76,298) (95,291)
Total finance costs (147,089) (95,395)
Net finance income/(costs) 74,721 (87,884)
5. STAFF COSTS
The aggregate payroll costs (including Directors' remuneration but excluding
share based payment charges disclosed separately in note 5) were as follows:
2023 2022
£ £
Wages and salaries 4,347,674 3,712,410
Social security costs 579,237 642,722
Pension costs, defined contribution scheme 175,561 147,520
5,102,472 4,502,652
Included within the social security costs above is an amount of £74,626
(2022: £235,702) in respect of employer's national insurance contributions
which will be payable in respect of shares granted under the Group's LTIP
scheme.
The average number of persons employed by the Group (including Directors)
during the year, analysed by category, was as follows:
2023 2022
£ £
Fee Earners 12 10
Administration and support 59 53
Total 71 63
6. EARNINGS PER SHARE
The calculations of earnings per share are based on the following profits and
number of shares:
2023 2022
£ £
Profit attributable to owners of the Parent 6,733,709 6,649,633
Amortisation 350,844 350,844
Share based payments 502,708 369,796
Adjusted earnings 7,587,301 7,370,273
2023 2022
No of shares No of shares
Weighted average number of shares
For basic earnings per share 31,307,540 31,273,941
Dilutive effect of grants under LTIP 472,211 367,371
For diluted earnings per share 31,779,752 31,641,312
Basic earnings per share (p) 21.5 21.3
Diluted earnings per share (p) 21.2 21.0
Adjusted basic earnings per share (p) 24.2 23.6
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
Group
2023 2022
£ £
Trade receivables 13,285,914 12,266,858
Provision for impairment of trade receivables (4,114,670) (4,082,672)
Net trade receivables 9,171,244 8,184,186
Receivables from related parties - -
Accrued income 10,030,078 8,680,475
Prepayments 2,271,739 1,823,118
Unbilled disbursements 970,078 1,109,691
Other receivables 162,769 176,344
Total current trade and other receivables 22,605,908 19,973,814
The fair value of those trade and other receivables classified as financial
instruments are disclosed in the financial instruments note 27.
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.
2023 2023 Provision 2023 Expected Loss Rate 2022 2022 Provision 2022 Expected Loss Rate
Gross £ % Gross £ %
£ £
0 to 30 days 4,982,633 - - 4,683,432 10,258 0.2
31 to 60 days 2,096,401 - - 1,585,671 59,002 3.7
61 to 90 days 1,029,435 - - 1,059,987 37,349 3.5
91 to 120 days 781,767 2,904 0.4 659,660 199,882 30.3
4 to 6 months 367,305 131,825 35.9 430,269 39,543 9.2
6 months to 1 year 2,146,285 2,097,853 97.7 1,662,321 1,551,121 93.3
Over 1 year 1,882,088 1,882,088 100.0 2,185,517 2,185,517 100.0
13,285,914 4,114,670 31.0 12,266,858 4,082,672 33.3
The Directors consider that the carrying value of trade and other receivables
approximates to fair value.
The movement in the provision for impairment of trade receivables was as
follows:
2023 2022
Balance at 1 February 4,082,672 2,976,731
Charge for the year 1,146,978 1,518,431
Amounts written off (1,113,980) (412,490)
Balance at 31 January 4,114,670 4,082,672
8. TRADE AND OTHER PAYABLES
Company Group
2023 2022 2023 2022
£ £ £ £
Trade payables - - 8,466,313 7,484,190
Accrued expenses 49,599 35,751 9,462,974 8,309,204
Social security and other taxes - - 418,071 349,772
Total trade and other payables 49,599 35,751 18,347,358 16,143,166
Included within the above accrued expenses is the liability for lawyer fees
associated with the accrued income
(2023: £7,435,836; 2022: £6,441,299).
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 reporting dates.
FINANCIAL LIABILITIES
0 to 6 months 7 to 12 months 1 to 5 Pay when paid Total
years
£ £
£ £
£
Trade payables 89,574 615,709 - 7,761,030 8,466,313
Accrued expenses 1,384,052 643,086 - 7,435,836 9,462,974
Lease Liabilities 269,272 269,272 109,538 - 648,082
At 31 January 2023 1,742,898 1,528,067 109,538 15,196,866 18,577,369
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 1,373,538 690,430 13,353,480 17,039,779
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 amounts payable to third party counsel
and experts whose fees have been incurred on behalf of the Group's clients as
disbursements. Lease liabilities are shown at their undiscounted value.
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