REG - Keystone Law Grp PLC - Half Year Report
12/09/2024 07:00
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RNS Number : 8468D Keystone Law Group PLC 12 September 2024
12 September 2024
Keystone Law Group Plc
("Keystone", the "Group" or the "Company")
Results for the six months ended 31 July 2024
- Strong financial performance continuing to deliver sustainable growth and
progressive dividends
- Recruitment activity remained buoyant with Keystone adding 30 new Principals
across H1 2025
- Keystone now expects revenue and adjusted PBT slightly ahead of current
expectations for FY 2025
Keystone, the tech-enabled challenger law firm, is pleased to announce its
results for the six months ended 31 July 2024 ("H1 2025" or the "Period").
Financial Highlights:
· Revenue growth of 8.3% to £46.5 million (H1 2024: £42.9 million*)
· Adjusted PBT increased by 7.2% to £6.1 million (H1 2024: £5.7
million)
· Adjusted PBT margin stable at 13.1% (H1 2024: 13.3%)
· Adjusted basic EPS of 14.6p (H1 2024: 13.6p)
· Cash generated from operations of £6.2 million (H1 2024: £6.3
million) with operating cash conversion of 106% (H1 2024: 113.3%); the Group
remains debt-free and with net cash of £8.3m
· Declared interim ordinary dividend of 6.2p per share (H1 2024:
5.8p)
*restated as per restatement in recent annual report and accounts
Operational Highlights:
· Strong performance across all recruitment KPI's as the legal
recruitment market remained positive:
o 153 high-calibre new applicants in the Period (H1 2024: 144)
o 56 offers made (H1 2024: 42) and 31 offers accepted (H1 2024: 25)
o 30 new Principals joined in the Period, increasing the number of
Principals to 442 (31 January 2024: 432).
· Total fee earners increased to 557 (31 January 2024: 549)
· Current refurbishment of the London office which, when complete,
will provide greater workplace flexibility and enhanced lawyer experience,
remains on track
· The calibre of candidates joining the Group demonstrates the
mainstream appeal of the model and emphasises Keystone's position as market
leader within our sub-sector
Current Trading and Outlook:
· In light of the strong first half performance and the positive
start to the second half of the year, the Board is confident that Keystone
will deliver both revenue and adjusted PBT slightly ahead of current market
expectations.
James Knight, Chief Executive Officer of Keystone, commented:
"Keystone's position in the market continues to strengthen and I am delighted
that our ongoing operational excellence has been reflected in our financial
performance. The business has delivered well across all our operational KPIs,
reflecting the ongoing growth in demand for the benefits that Keystone
provides."
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's management team will provide a separate presentation and Q&A
for investors at 1.00pm on Monday 16 September 2024.
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 (http://www.keystonelaw.com)
+44 (0) 20 3319 3700
Panmure Liberum Limited (Nominated Adviser and Joint Broker)
Atholl Tweedie (Corporate Finance)
Rupert Dearden (Corporate Broking)
www.panmureliberum.com (http://www.panmureliberum.com)
+44 (0) 20 7886 2500
Investec Bank plc (Joint Broker)
Carlton Nelson
James Rudd
www.investec.co.uk (http://www.investec.co.uk)
+44 (0) 20 7597 5970
Vigo Consulting (Financial Public Relations)
Jeremy Garcia / Fiona Hetherington
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, an extensive network
of high-calibre colleagues and a busy programme of networking and social
events.
Keystone is a full-service law firm, with 20 service areas and more than 50
industry sectors delivered by almost 450 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) .
Chief Executive's Statement
I am pleased to report that Keystone has continued to perform well, delivering
strong results for the first half of this financial year ("H1 2025" or the
"Period"). Revenue for the period of £46.5m was 8.3% up on H1 2024 (restated)
(£42.9m), reported PBT rose to £5.5m and adjusted PBT((1)) increased to
£6.1m (increases of 5.3% and 7.2% on H1 2024 results of £5.3m and £5.7m
respectively). Furthermore, the cash generative nature of the model meant that
these profits converted to cash, with cash generated from operations of £6.2m
(H1 2024: £6.3m).
Conditions in the legal recruitment market have also remained positive for
Keystone and we have experienced increases across all the recruitment KPIs as
shown in the graph below.
Qualified New Applicants Offers Made Offers Accepted Starters
H1 2023 122 34 17 22
H1 2024 144 42 25 25
H1 2025 153 56 31 30
H1 2025 saw 30 new Principals join us, bringing the total number of Principals
to 442 (31 January 2024: 432). As highlighted in our recent Annual Report and
Accounts, Keystone now regularly attracts candidates from the leading law
firms in the UK, which continued to be the case during the first half of this
year. This demonstrates the mainstream acceptability and appeal of Keystone's
model, as well as our position as market leader within the sub-sector,
commonly referred to as the 'platform' or 'consultancy' model.
The central office team has continued to deliver outstanding support to all
our lawyers, both new and existing. Successfully onboarding new joiners is a
key element in ensuring the long-term sustainable growth of the business,
whilst providing excellent ongoing support to established Keystone lawyers is
equally fundamental. It is important for us to focus as much on service
delivery and lawyer retention as we do on recruitment. During the Period, the
team has worked unceasingly to successfully deliver on each of these
objectives. For our new lawyers, this has meant providing a bespoke,
one-to-one onboarding process, focusing on understanding the individual needs
and opportunities of each new Principal, providing solutions to any challenges
they may have and helping them to build the professional support network which
they need to maximise the opportunities which their practice offers. For our
established lawyers, the team has focused on continually enhancing the lawyer
experience whilst delivering support of the highest calibre across all
departments.
Having renewed our leases in Chancery Lane, we have been busy planning the
refit of the two floors to enhance the workspace experience. The
implementation phase of the project started in July and will continue through
H2 2025; during which time, we will maintain service levels for our lawyers by
maintaining one floor open throughout. Once completed, our lawyers and the
central office team will benefit from a modern, flexible environment providing
a variety of workspaces, including highly professional client meeting rooms,
collaborative workspaces and areas for silent working.
I would like to take this opportunity to thank my central office colleagues
for their dedication and passion, which continues to drive the business
forwards and has made these results possible.
Dividend
I am pleased to announce that the Board has declared an interim ordinary
dividend of 6.2p per share. This dividend will be payable on 11 October 2024
to shareholders on the register on 20 September 2024, and the shares will go
ex-dividend on 19 September 2024.
Summary and outlook
We are delighted with the all-round success of the H1 2025 results. We have
delivered a strong performance across all KPIs of the business, continuing to
build sustainable growth and increased profits whilst re-enforcing Keystone's
position as a market leader.
Although the UK economy continues to have its challenges and the recent change
in government has introduced a new element of uncertainty to the future, we
remain confident that Keystone will continue to build on this performance to
deliver ongoing sustainable growth. Therefore the Board is confident that
Keystone will deliver both revenue and adjusted PBT slightly ahead of current
market expectations((2)).
James Knight
Chief Executive Officer
11 September 2024
(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
of £93.3m and adjusted PBT of £11.5m.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the period ended 31 July 2024
Note 6 months to July 2024 6 months to July 2023
(Unaudited) (Restated)
£ (Unaudited)
£
Revenue 46,468,026 42,889,098
Cost of sales (34,383,352) (31,645,054)
Gross profit 12,084,674 11,244,044
Trade receivables impairment (255,217) (584,285)
Corresponding reduction in trade payables 177,885 432,370
(77,332) (151,915)
Depreciation and amortisation (447,286) (448,914)
Share-based payments 2 (378,934) (250,073)
Administrative expenses 2 (6,194,844) (5,591,918)
Other operating income 28,710 23,698
Operating profit 5,014,988 4,824,922
Finance income 929,379 689,802
Finance costs (400,167) (249,121)
Profit before tax 5,544,200 5,265,603
Corporation tax expense (1,492,880) (1,430,321)
Profit and total comprehensive income for the period attributable to equity 4,051,320 3,835,282
holders of the Parent
Basic EPS (p) 1 12.9 12.2
Diluted EPS (p) 1 12.6 12.0
The above results were derived from continuing operations.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 31 July 2024
Note 31 July 2024 31 July 2023 31 January 2023
(Unaudited) (Unaudited) (Audited)
£ £ £
Assets
Non-current assets
Property, plant and equipment
- Owned assets 80,028 168,197 120,517
- Right-of-use assets 2,206,259 308,146 2,428,005
Total property, plant and equipment 2,286,287 476,343 2,548,522
Intangible assets 4,880,512 5,231,396 5,055,954
Investments 129,350 13,627 129,350
7,296,419 5,721,366 7,733,826
Current assets
Trade and other receivables 3 27,270,682 23,672,904 25,194,349
Corporation tax 29,899 - -
Cash and cash equivalents 8,311,102 11,347,917 8,367,072
35,611,683 35,020,821 33,561,421
Total assets 42,907,832 40,742,187 41,295,247
Equity and liabilities
Equity
Share capital 63,186 62,797 62,963
Share premium 9,920,760 9,920,760 9,920,760
Share-based payments reserve 874,353 1,077,714 1,059,531
Retained earnings 6,562,760 7,464,355 5,896,437
Equity attributable to equity holders of the Parent 17,421,058 18,525,626 16,969,691
Non-current liabilities
Lease liabilities 1,762,833 - 2,027,866
Deferred tax liabilities 14,610 84,789 49,699
Provisions 912,071 - 907,945
2,689,514 84,789 2,985,510
Current liabilities
Trade and other payables 22,202,412 20,125,906 19,782,587
Lease liabilities 594,848 416,905 344,804
Provisions - 207,586 -
Corporation tax liability - 1,381,375 1,242,655
22,797,260 22,131,772 21,370,046
Total liabilities 25,486,773 22,216,561 24,355,556
Total equity and liabilities 42,907,832 40,742,187 41,295,247
The interim statements were approved and authorised for issue by the Board of
Directors on 11 September 2024 and were signed on its behalf by:
A Miller
Director
consolidated statement OF CHANGES IN EQUITY
For the period ended 31 July 2024
Attributable to equity holders of the Parent
Share Share Share-based payment reserve Retained earnings Total
capital premium £ £ £
£ £
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
Profit for the period and total comprehensive income - - - 3,814,408 3,814,408
Transactions with owners
Share-based payments vesting 166 - (378,755) 378,755 166
Share-based payments awards - - 360,572 - 360,572
Dividends paid - - - (5,761,081) (5,761,081)
At 31 January 2024 (audited) 62,963 9,920,760 1,059,531 5,896,437 16,939,691
Profit for the period and total comprehensive income - - - 4,051,320 4,051,320
Transactions with owners
Share-based payments vesting 223 - (564,112) 564,112 223
Share-based payments awards - - 378,934 - 378,934
Dividends paid - - - 3,949,109 3,949,109
At 31 July 2024 (unaudited) 63,186 9,920,760 874,353 6,562,760 17,421,058
CONSOLIDATED STATEMENT OF CASH FLOWS
For the period ended 31 July 2024
Note 6 months to July 2024 (Unaudited) 6 months to July 2023 (Unaudited) Year ended 31 January 2024 (Audited)
£ £ £
Cash flows from operating activities
Profit before tax 5,544,200 5,265,603 10,306,331
Adjustments to cash flows from non-cash items
Depreciation and amortisation 2 447,286 448,914 897,814
Share-based payments 378,934 250,073 610,644
Revaluation of other assets - - (70,810)
Finance income (929,379) (689,802) (1,575,930)
Finance costs 400,167 249,121 686,726
5,841,208 5,523,909 10,854,775
Working capital adjustments
(Increase) in trade and other receivables (2,076,333) (1,066,996) (2,588,441)
Increase in trade and other payables 2,419,825 1,778,548 1,435,229
Increase in provisions 4,126 24,085 724,444
Cash generated from operations 6,188,826 6,259,546 10,426,007
Interest paid on client balances (370,980) (201,475) (615,726)
Interest portion of lease liability (29,187) (47,646) (71,468)
Corporation taxes paid (2,800,524) (805,656) (2,205,784)
Cash generated from operating activities 2,988,135 5,204,769 7,533,029
Cash flows from/(used in) investing activities
Interest received 929,379 689,802 1,575,930
Purchases of property, plant and equipment (9,609) (48,561) (68,910)
Investment in other assets - - (44,812)
Net cash generated from/(used in) investing activities 919,770 641,241 1,462,208
Cash flows from financing activities
Proceeds from issue of ordinary shares 223 65 231
Lease repayments (14,989) (231,123) (600,280)
Dividends paid (3,949,109) (3,418,910) (9,179,991)
Net cash (used in) financing activities (3,963,875) (3,649,968) (9,780,040)
Net (decrease)/increase in cash and cash equivalents (55,970) 2,196,042 (784,803)
Cash at 1 February 8,367,072 9,151,875 9,151,875
Cash at 31 July 8,311,102 11,347,917 8,367,072
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 2024 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 2024.
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 ("FRC").
PRIOR YEAR RESTATEMENT
As reflected in the Group's Annual Report and Accounts for the year ended 31
January 2024, in January 2024, the FRC submitted a request for further
information on the Group's Annual Report and Accounts for the year ended 31
January 2023. The review conducted by the FRC was based solely on the Group's
published Annual Report and Accounts and does not provide assurance that the
Annual Report and Accounts are correct in all material respects; the FRC's
role is not to verify the information provided but to consider compliance with
reporting requirements.
Following completion of this review, the Directors concluded that although the
"pay when paid" payment terms of the lawyers' fees means that any impairment
in trade receivables automatically generates a directly related adjustment to
trade payables (being approximately 75% of the net value impaired); for
statutory reporting purposes, these items should be considered and disclosed
separately. Accordingly, in order to reflect these transactions in full
compliance with para 5.5.8 of IFRS 9 and IAS 1.82(BA), the consolidated
statement of comprehensive income for the year ended 31 January 2023 was
restated to reflect the impairment charge separately and not as a reduction in
revenue, with the corresponding adjustment to lawyer fee notes equally shown
separately and not as a reduction to cost of sales; this, in turn, has led to
the restatement of the corresponding values in this Interim Report for the six
months ended 31 July 2023.
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 2024 6 months to July 2023
(Unaudited) (Unaudited)
£'000 £'000
Profit before tax 5,544 5,266
Amortisation 175 175
Share-based payments 379 250
Adjusted PBT 6,098 5,691
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 31,515,028 (H1
2024: 31,373,312) and the basic earnings per share was 12.9p (H1 2024: 12.2p).
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 (32,041,554; H1
2024: 31,880,828). Diluted earnings per share was 12.6p (H1 2024: 12.0p).
The adjusted earnings per share was 14.6p (H1 2024: 13.6p), whilst the diluted
adjusted earnings per share was 14.4p (H1 2024: 13.4p). 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 2024 6 months to July 2023
(Unaudited) (Unaudited)
£ £
Depreciation - right-of-use assets 221,746 205,430
Depreciation - other 50,098 68,042
Amortisation 175,442 175,442
Staff costs 3,291,181 2,865,957
Share-based payments 378,934 250,073
Other administrative expenses 3,531,933 3,281,296
7,649,334 6,846,240
Included within staff costs above are the costs of employed fee earners who
are included within cost of sale (H1 2025: £628,270; H1 2024: £555,335).
3. Trade and Other Receivables
31 July 2024 31 July 2023 31 January 2024
(Unaudited) (Unaudited) (Audited)
£ £ £
Trade receivables 17,250,579 14,721,714 15,308,230
Provision for impairment of trade receivables (4,649,750) (4,589,670) (4,812,995)
Net trade receivables 12,600,828 10,132,045 10,495,235
Accrued income 11,760,727 10,706,147 11,571,696
Prepayments 1,504,815 1,733,806 1,843,276
Unbilled disbursements 1,021,297 945,286 793,825
Reimbursement asset 280,000 - 280,000
Other receivables 383,015 155,621 210,317
Total current trade and other receivables 27,270,682 23,672,904 25,194,349
Net trade receivables average age (days) (unaudited) 33 32 34
4. DIVIDENDS
The Directors have declared an interim ordinary dividend of 6.2p per share (H1
2024: ordinary dividend of 5.8p per share; special dividend of 12.5p per
share). The dividend will be paid on 11 October 2024 to shareholders on the
register on 20 September 2024, with the shares going ex-dividend on 19
September 2024. 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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