REG - Keystone Law Grp PLC - Half Year Results
15/09/2022 07:01
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RNS Number : 5057Z Keystone Law Group PLC 15 September 2022
15 September 2022
Half year results for the period ending 31 July 2022
Continued strong financial performance driven by high client demand
Keystone Law Group plc (AIM: KEYS), the fast growing, UK Top 100, challenger
law firm, today announces its half year results for the year ended 31 July
2022 ('H1-2023).
Financial Highlights:
· Revenue of £36.8m (up 9.3% on H1-2022)
· PBT of £4.1m (down 2.5% on H1-2022((1)))
· Adjusted PBT of £4.5m (down 1% on H1-2022((1)))
· Basic EPS of 10.5p (H1-2022: 10.8p)
· Adjusted basic EPS of 11.8p (H1-2022: 11.9p)
· Strong operating cash conversion of 101%, with cash generated from
operations of £4.9m (up 16.5% on H1-2022); remain debt free
· Interim dividend of 5.2p per share (H1-2022: 4.5p)
(1) Profitability in H1-2022 was enhanced by approximately £0.2m of
cost savings as Covid restrictions prevented face to face networking events.
This year a full programme of face to face events has been delivered.
Strategic Highlights:
· 22 Principals have joined despite it being one of the most
challenging recruitment markets in over a decade and we have increased the
overall number of Principals to 399 (31 January 2022: 394).
· Delivered the full programme of face-to-face networking and social
events which form part of the Keystone DNA, underpinning the collegiate
culture and providing lawyers with the opportunity to enhance their internal
networks.
· Continued to invest into our central office team and IT platforms,
ensuring we provide our lawyers with a first-class service.
Current trading and outlook:
· Client demand has remained strong.
· We continue to attract good quality candidates despite a
challenging recruitment environment.
· Well placed to deliver another strong performance at Full Year
which we expect to be comfortably in line with current market expectations.
James Knight, Chief Executive Officer of Keystone Law, commented:
"Keystone has delivered another very good financial performance for the first
half of the year, with our lawyers continuing to work hard to deliver quality
service to clients in response to high demand, driving strong revenue growth
and good levels of profitability.
Our unique business model, which offers lawyers genuine flexibility and
autonomy alongside the support of a high quality central office and technology
platform, enables us to service these high levels of demand while acting as a
key attraction to lawyers seeking new opportunities and ways of working.
We maintain a robust cash position with strong cash generation, and are
pleased to declare an interim dividend of 5.2p 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, 15 September
2022. Analysts wishing to attend this event can register via email at
keystonelaw@fticonsulting.com. Keystone's Half Year 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) .
Chief Executive's Statement
I am delighted to report that Keystone Law has again delivered a strong
financial performance in the first half of this financial year ("H1-2023" or
the "period"), with revenue rising to £36.8m (9.3% up on H1-2022: £33.7m),
reported PBT of £4.1m and adjusted PBT((1)) of £4.5m (£4.3m and £4.6m
respectively in H1-2022; a period when profitability was enhanced by
approximately £0.2m of cost savings as Covid restrictions prevented face to
face events) and cash generated from operations of £4.9m up 16.5% (H1-2022:
£4.2m).
H1-2023 has seen a continuation of the market conditions experienced during
H2-2022. Client demand across the industry has remained high and our lawyers
have continued to take advantage of this to drive strong revenue growth. As
such, revenue per principal was £93k in the period compared to £89k in
H1-2022 and £92k in H2-2022.
The continued strength of demand has caused, what recruitment firm Robert
Walters have described as, "the biggest war for talent seen in over a decade",
with 85% of law firms in London recruiting. In light of these challenging
market conditions, I am satisfied with the levels of recruitment achieved and
the quality of candidates who continue to be attracted to Keystone Law.
Qualified New Applicants Offers Made Offers Accepted
Qualified New Applicants
Offers Made
Offers Accepted
H1 2022 136 36 28
H2 2022 92 40 28
H1 2023 122 34 17
During the period, 22 Principals have joined (H1-2022: 21) bringing the total
number of Principals to 399 (31 January 2022: 394). Whilst the overall number
of Pod members has fallen to 70 (31 January 2022: 80), both existing and new
Principals have continued to build their practices and leverage the value of
their clients by recruiting into their Pods, with 11 new pod members joining
during H1-2023 (H1-2022: 16).
I have been delighted that we have been able to deliver a full programme of
face-to-face networking and social events. This is the first period that
this has been possible since the outbreak of the Covid pandemic. These
events are a fundamental part of the DNA of the business, providing frequent
opportunities for our lawyers to meet, to build and foster both the
professional relationships and friendships that help our people flourish.
These events provide ongoing opportunities to develop the internal networks,
providing access to the extensive knowledge and experience, which successfully
delivers multi lawyer and cross disciplinary solutions to our clients. Our
continuing growth ensures that there is an ever-growing pool of talented and
likeminded people to meet and the absence of internal politics or hierarchy
makes these events both highly enjoyable and rewarding.
Across the central office team, we continue to invest in attracting and
retaining the talent needed to provide our lawyers with a first-class service
across all disciplines. Our people are our greatest asset and the
distinctive relationship which exists between our central office team and our
lawyers (with our lawyers being treated as clients) is another example of what
makes the Keystone model so attractive. Accordingly, I would like to thank
all our people for their ongoing dedication and commitment to delivering the
excellent service which so engenders the Keystone culture.
Dividend
I am pleased to announce that the Board has declared an interim dividend of
5.2p per share. The dividend will be payable on 14 October 2022 to
shareholders on the register on 23 September 2022 and the shares will go
ex-dividend on 22 September 2022.
Summary and Outlook
In summary, I am very happy with the financial performance delivered during
H1-2023. Our lawyers have continued to take full advantage of the client
demand to drive strong revenue, delivering adjusted PBT largely in line with
H1-2022, with Operating cash conversion((3))of 101%. In a challenging
recruitment environment, our business model has continued to attract good
quality candidates and in light of these conditions I have been satisfied with
the rate of recruitment.
Looking ahead, whilst demand remains strong, our lawyers will continue to
deliver high quality services to our clients driving strong revenue and good
profitability and as demand normalises across the industry, the pressures that
this will cause on potential candidates will provide further impetus to our
organic growth. As such, I am confident that we will continue to deliver
strong results for the rest of this year which will be comfortably in line
with current market expectations.
James Knight
Chief Executive Officer
15 September 2022
(1) Adjusted PBT is calculated using profit before tax and adding
back amortisation and share-based payments for all periods.
(2) Operating cash conversion is calculated using cash generated from
operations and dividing it by the PBT after non cash items.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the period ended 31 July 2022
Note 6 Months to 6 Months to
July 2022 July 2021
(Unaudited) (Unaudited)
£ £
Revenue 36,809,493 33,672,472
Cost of sales (27,105,062) (24,751,915)
Gross profit 9,704,431 8,920,557
Depreciation and amortisation 2 (440,937) (438,436)
Share-based payments (226,280) (169,175)
Administrative expenses 2 (4,881,419) (4,014,381)
Other operating income 25,397 -
Operating profit 4,181,192 4,298,565
Finance income 14,228 3,196
Finance costs (48,649) (47,729)
Profit before tax 4,146,771 4,254,032
Corporation tax expense (870,401) (864,970)
Profit and total comprehensive income for the year attributable to equity 3,276,370 3,389,062
holders of the Parent
Basic EPS (p) 1 10.5 10.8
The above results were derived from continuing operations.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 31 July 2022
Note 31 July 2022 31 July 2021 31 January
2022
(Unaudited) (Unaudited)
(Audited)
£ £
£
Assets
Non-current assets
Property, plant and equipment
- Owned assets 194,936 273,337 247,551
- Right-of-use assets 719,006 1,129,867 924,437
Total property, plant and equipment 913,942 1,403,204 1,171,988
Intangible assets 5,582,280 5,933,164 5,757,722
Other assets 13,628 13,628 13,628
6,509,850 7,349,996 6,943,338
Current assets
Trade and other receivables 3 21,204,072 19,024,724 19,973,814
Cash and cash equivalents 7,457,485 7,243,438 10,482,676
28,661,557 26,268,162 30,456,490
Total assets 35,171,407 33,618,158 37,399,828
Equity and liabilities
Equity
Share capital 62,548 62,548 62,548
Share premium 9,920,760 9,920,760 9,920,760
Share-based payments reserve 976,238 549,337 749,958
Retained earnings 4,796,659 6,297,120 8,150,365
Equity attributable to equity holders of the Parent 15,756,205 16,829,765 18,883,631
Non-current liabilities
Lease liabilities 340,607 794,298 571,730
Deferred tax liabilities 167,521 231,732 202,610
Provisions 127,213 120,698 107,945
635,341 1,146,728 882,285
Current liabilities
Trade and other payables 17,402,869 14,228,636 16,143,166
Lease liabilities 538,544 538,544 538,544
Corporation tax liability 838,448 874,485 952,202
18,779,861 15,641,665 17,633,912
Total liabilities 19,415,202 16,788,393 18,516,197
Total equity and liabilities 35,171,407 33,618,158 37,399,828
The interim statements were approved and authorised for issue by the Board of
Directors on 15 September 2022 and were signed on its behalf by:
A Miller
Director
consolidated statement OF CHANGES IN EQUITY
For the period ended 31 July 2022
Attributable to equity holders of the Parent
Share Share Share-based payment reserve Retained earnings Total
capital premium £ £ £
£ £
At 1 February 2021 (audited) 62,548 9,920,760 380,162 6,223,096 16,586,566
Profit for the period and total comprehensive income - - - 3,389,062 3,389,062
Share-based payments - - 169,175 - 169,175
Dividend paid - - - (3,315,038) (3,315,038)
At 31 July 2021 (unaudited) 62,548 9,920,760 549,337 6,297,120 16,829,765
Profit for the period and total comprehensive income - - - 3,260,571 3,260,571
Share-based payments - - 200,621 - 200,621
Dividend paid - - - (1,407,326) (1,407,326)
At 31 January 2022 (audited) 62,548 9,920,760 749,958 8,150,365 18,883,631
Profit for the period and total comprehensive income - - - 3,276,370 3,276,370
Share-based payments - - 226,280 - 226,280
Dividend paid - - - (6,630,076) (6,630,076)
At 31 July 2022 (unaudited) 62,548 9,920,760 976,238 4,796,659 15,756,205
CONSOLIDATED STATEMENT OF CASH FLOWS
For the period ended 31 July 2022
Note 6 Months to July 2022 (Unaudited) 6 Months to July 2021 (Unaudited) Year ended 31 January 2022 (Audited)
£ £
Cash flows from operating activities
Profit before tax 4,146,771 4,254,032 8,363,199
Adjustments to cash flows from non-cash items
Depreciation and amortisation 2 440,937 438,436 877,991
Share-based payments 226,280 169,175 369,796
Finance income (14,228) (3,196) (7,511)
Finance costs 48,649 47,729 95,395
4,848,409 4,906,176 9,698,870
Working capital adjustments
(Increase) in trade and other receivables (1,230,258) (916,426) (1,865,516)
Increase in trade and other payables 1,259,703 196,295 2,110,824
Increase in provisions 19,268 19,270 6,517
Cash generated from operations 4,897,122 4,205,315 9,950,695
Interest paid (1,004) (83) (104)
Interest portion of lease liability (47,645) (47,646) (95,291)
Corporation taxes paid (1,019,244) (745,019) (1,545,956)
Cash generated from operating activities 3,829,229 3,412,567 8,309,344
Cash flows from/(used in) investing activities
Interest received 14,228 3,196 7,511
Purchases of property plant and equipment (7,451) (6,963) (39,858)
Net cash generated from / (used in) investing activities 6,777 (3,767) (32,347)
Cash flows from financing activities
Repayment of lease liabilities (231,121) (221,624) (443,257)
Dividend paid (6,630,076) (3,315,038) (4,722,364)
Net cash (used in) financing activities (6,861,197) (3,536,662) (5,165,621)
Net (decrease)/increase in cash and cash equivalents (3,025,191) (127,862) 3,111,376
Cash at 1 February 10,482,676 7,371,300 7,371,300
Cash at 31 July 7,457,485 7,243,438 10,482,676
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 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 2022 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 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 2022.
The Interim Report has not been audited or reviewed in accordance with the
International Standard on Review Engagement 2410 (UK) issued by the Financial
Reporting Council.
Going Concern
The Interim Report has been prepared on a going concern basis as the Directors
have reasonable expectation that the Group has adequate resources to continue
in operational existence for the foreseeable future. The Group has no debt, is
strongly cash generative, and has a strong trading performance. The Group's
forecasts and projections show that the Group has sufficient resources for
both current and anticipated cash requirements.
ACCOUNTING DEVELOPMENTS
There have been no new standards or interpretations, relevant to the Group's
operations, applied in the Interim Report for the first time.
ADJUSTED PBT
Adjusted PBT is utilised as a key performance indication for the Group and is
calculated as follows:
6 months to July 2022 6 months to July 2021
(Unaudited) (Unaudited)
£'000 £'000
Profit before tax 4,147 4,254
Amortisation 175 175
Share-based payments 226 169
Adjusted PBT 4,548 4,598
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 31,273,941
(H1-2022: 31,273,941) and the basic earnings per share was 10.5p (H1-2022:
10.8p). Diluted earnings per share is calculated by dividing the same profit
by the weighted average number of ordinary shares, taking into account the
dilution effect from grants made under the Long Term Incentive Plan
(31,733,387 (H1-2022: 31,597,083)). Diluted earnings per share was 10.3p
(H1-2022: 10.7p).
The adjusted earnings per share was 11.8p (H1-2022: 11.9p), whilst the diluted
adjusted earnings per share was 11.6p (H1-2022: 11.8p). 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 2022 6 months to July 2021
(Unaudited) (Unaudited)
£ £
Depreciation - right-of-use assets 205,430 205,430
Depreciation - other 60,065 57,564
Amortisation 175,442 175,442
Staff costs 2,373,245 2,091,302
Share-based payments 226,280 169,175
Other administrative expenses 2,828,007 2,206,166
5,868,469 4,905,079
Included within staff costs above are the costs of employed fee earners who
are included within cost of sale (H1-2023: £319,842; H1-2022: £283,087).
3. Trade and Other Receivables
31 July 31 July 31 January
2022 (Unaudited) 2021 2022
£ (Unaudited) (Audited)
£ £
Trade receivables 13,909,185 12,179,168 12,266,858
Provision for impairment of trade receivables (4,716,481) (3,952,255) (4,082,672)
Net trade receivables 9,192,704 8,226,913 8,184,186
Accrued income 9,322,320 7,923,182 8,640,475
Prepayments 1,278,865 1,167,187 1,823,118
Unbilled disbursements 1,235,809 1,479,806 1,109,691
Other receivables 174,374 227,636 176,344
Total current trade and other receivables 21,204,072 19,024,724 19,973,814
Net trade receivables average age (days) 32 34 32
4. DIVIDENDS
The Directors have declared an interim dividend of 5.2p per share (H1-2022:
4.5p per share). The dividend will be paid on 14 October 2022 to shareholders
on the register on 23 September 2022 with the shares going ex-dividend on 22
September 2022. 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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