REG - Keystone Law Grp PLC - Half Year Results
14/09/2023 07:00
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RNS Number : 3739M Keystone Law Group PLC 14 September 2023
14 September 2023
Keystone Law Group Plc
('Keystone', the 'Group' or the 'Company')
Interim results for the six month period ended 31 July 2023
- Strong client demand drives excellent operational and financial
performance with a 25.2% increase in adjusted PBT
- Ongoing business confidence supports interim ordinary dividend
of 5.8p and special dividend of 12.5p
- FY 2024 outlook comfortably ahead of current market
expectations((1))
Keystone, the network and tech-enabled challenger law firm, is pleased to
announce its interim results for the six months ended 31 July 2023 ("H1
2024").
Financial Highlights:
· Revenue growth of 14.9% to £42.3 million (H1 2023: £36.8
million)
· Revenue per Principal up 12.2% to £104k (H1 2023: £92.8k)
· PBT increased 29.3% to £5.3 million (H1 2023: £4.1 million)
· Adjusted PBT increased 25.2% to £5.7 million (H1 2023: £4.5
million)
· Adjusted basic EPS of 13.6p, up 22.5% (H1 2023: 11.1p)
· Strong operating cash conversion at 113.3% with cash generated
from operations of £6.3 million (H1 2023: £4.9 million).
· The Group remains debt-free with net cash of £11.3m (H1 2023:
£7.5m)
· Declared interim ordinary dividend of 5.8p (H1 2023: 5.2p) and
special dividend of 12.5p
Operational Highlights:
· Recruitment market conditions evolved positively
· Keystone generated strong market and recruitment momentum during
H1 2024:
o 144 qualified high-calibre new applicants (H1 2023: 122)
o 25 Principals joined, increasing the number of Principals to 415 (31
January 2023: 398)
o Total fee earners increased to 523 (31 January 2023: 507)
· Ongoing investment in our people, culture and technology platform
Current Trading and Outlook:
· Activity levels and client demand remain strong
· Recruitment market conditions have moved in the Group's favour,
with the Keystone model continuing to attract high-calibre talent, although
economic uncertainty continues to weigh on candidate flow
· The Board is confident that the business will continue to trade
well for the rest of the year and that FY 2024 results will be comfortably
ahead of current market expectations((1)).
James Knight, Chief Executive Officer of Keystone, commented:
"I have been delighted with the performance of the business during the first
half of this year. As anticipated, recruitment market conditions have moved
in our favour and Keystone's model continues to prove highly attractive to the
high-calibre lawyers we pride ourselves on being able to attract and retain. I
look forward to the rest of the year, confident that Keystone's core business
fundamentals will continue to deliver strong results."
(1) Management understands current market expectations to be revenue
£78.9m and adjusted PBT £9.5m
Analyst Briefing
A meeting for analysts will be held virtually at 9.30am this morning. Analysts
wishing to attend this event can register via email at
keystonelaw@vigoconsulting.com.
For further information please contact:
Keystone Law Group plc
James Knight, Chief Executive Officer
Ashley Miller, Finance Director
www.keystonelaw.com
+44 (0) 20 3319 3700
Panmure Gordon (UK) Limited (Nominated Adviser and Joint Broker)
Dominic Morley (Corporate Finance)
Rupert Dearden (Corporate Broking)
www.panmure.com (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 / Kate Kilgallen
keystonelaw@vigoconsulting.com
+44 (0)207 390 0233
The information contained within this announcement is deemed to constitute
inside information as stipulated under the Market Abuse Regulation (EU) No.
596/2014 as it forms part of UK domestic law by virtue of the European Union
(Withdrawal) Act 2018 ("MAR").
Notes to editors
Keystone (AIM: KEYS), is an award-winning, UK Top 100, law firm, providing
conventional legal services in a £10bn addressable market through its
scalable and unique model, with three defining characteristics:
· Lawyers have freedom, flexibility and autonomy, and are paid up
to 75% of what they bill.
· Lawyers determine how, when and where they work, in contrast to
the conventional law firm model.
· Lawyers are provided full infrastructure and support via its central
office team, bespoke user-friendly IT platform, and network of colleagues and
events.
Keystone is a full-service law firm, with 20 service areas and more than 50
industry sectors delivered by over 400 high calibre self-employed Principal
lawyers who work from their own offices.
In November 2020, Keystone was named Law Firm of the Year by The Lawyer, the
first time a 'new' law firm has won the award.
More information about Keystone can be found at www.keystonelaw.co.uk
(http://www.keystonelaw.co.uk/) .
Chief Executive's Statement
I am extremely pleased to report that Keystone Law has again delivered a
strong performance during the first half of this financial year ("H1-2024" or
the "period"), with revenue rising to £42.3m (14.9% up on H1-2023: £36.8m),
reported PBT of £5.3m and adjusted PBT((1)) of £5.7m (£4.1m and £4.5m
respectively in H1-2023) and cash generated from operations of £6.3m, an
increase of 27.8% (H1-2023: £4.9m).
In spite of the broader economic headwinds, client demand has remained strong
across all practice areas throughout the period and this, together with rate
rises implemented during last year, has driven increased revenue per Principal
of £104k, up 12.2% on H1-2023.
During the period, we have seen conditions in the legal recruitment market
evolve positively for Keystone. The extremely high level of demand for
candidates, experienced during FY-2023, has now slightly subsided and,
although the uncertain economic outlook continues to weigh on candidate
movement, the results of our recruitment activity in H1-2024 have been
extremely encouraging. The table below reflects these positive results:
Qualified New Applicants Offers Made Offers Accepted
H1 2022 136 36 28
H1 2023 122 34 17
H1 2024 144 42 25
Twenty five Principals joined us during the Period (H1-2023: 22) bringing the
total number of Principals to 415 (31 January 2023: 398). These Principals,
existing and new, have continued to recruit Pod members to build their
practices and leverage the value of their clients. These Pod members satisfy
either permanent resource needs or shorter term project-based demand providing
both scalability and flexibility to our lawyers and, over time, have become an
increasingly important element of the Keystone model.
The central office team has continued to deliver exceptional service to our
lawyers. The ongoing investment in our IT platform and infrastructure is
very much part of "business as usual" for Keystone. Our bespoke platform is
the technological hub of the business; built to support our model, it provides
our lawyers with first class, dynamic systems, which deliver a high-quality
user experience, whilst ensuring compliance and comprehensive IT security.
We have also continued to invest in the networking programmes and social
events, thereby providing extensive opportunities for our lawyers to establish
and build their personal and professional networks within Keystone. These
events are a core element of the Group's cultural DNA, encouraging
collaboration and cross-referral of work thereby creating a fertile
environment for our lawyers to deliver high calibre, multi-lawyer and cross
disciplinary solutions to our clients.
I would, therefore, like to take this opportunity to thank everyone at
Keystone for their dedication and passion, which has made these excellent
results possible.
Dividend
I am pleased to announce that the Board has declared an interim ordinary
dividend of 5.8p per share as well as a special dividend of 12.5p per share.
These dividends will be payable on 13 October 2023 to shareholders on the
register on 22 September 2023 and the shares will go ex-dividend on 21
September 2023.
Summary and Outlook
In summary, I have been delighted with all aspects of the Group's performance
during H1-2024. Our lawyers have continued to respond to demand across the
legal sector driving strong revenue growth, and this, together with the
interest rate evolution and our strong balance sheet, has contributed to the
enhanced profits we report today.
As expected, some of the heat has come out of the legal recruitment market and
this has been beneficial to our growth.
Although it is clear that the UK economy continues to face significant
headwinds, to date we have not been adversely affected by these, and whilst
there may be some impact on overall client demand during the second half, we
remain confident that Keystone will continue to deliver strong results for the
rest of this year, which will be comfortably ahead of current market
expectations((2)).
James Knight
Chief Executive Officer
13 September 2023
(1) Adjusted PBT is calculated using profit before tax and adding
back amortisation and share-based payments for all periods.
(2) Management understands current market expectations to be
revenue £78.9m and adjusted PBT £9.5m
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the period ended 31 July 2023
Note 6 Months to 6 Months to
July 2023 July 2022
(Unaudited) (Unaudited)
£ £
Revenue 42,304,803 36,809,493
Cost of sales (31,212,674) (27,105,062)
Gross profit 11,092,129 9,704,431
Depreciation and amortisation (448,914) (440,937)
Share-based payments 2 (250,073) (226,280)
Administrative expenses 2 (5,591,918) (4,881,419)
Other operating income 23,698 25,397
Operating profit 4,824,922 4,181,192
Finance income 689,802 14,228
Finance costs (249,121) (48,649)
Profit before tax 5,265,603 4,146,771
Corporation tax expense (1,430,321) (870,401)
Profit and total comprehensive income for the period attributable to equity 3,835,282 3,276,370
holders of the Parent
Basic EPS (p) 1 12.2 10.5
Diluted EPS (p) 1 12.0 10.3
The above results were derived from continuing operations.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 31 July 2023
Note 31 July 2023 31 July 2022 31 January
2023
(Unaudited) (Unaudited)
(Audited)
£ £
£
Assets
Non-current assets
Property, plant and equipment
- Owned assets 168,197 194,936 187,677
- Right-of-use assets 308,146 719,006 513,577
Total property, plant and equipment 476,343 913,942 701,254
Intangible assets 5,231,396 5,582,280 5,406,838
Other assets 13,627 13,628 13,628
5,721,366 6,509,850 6,121,720
Current assets
Trade and other receivables 3 23,672,904 21,204,072 22,605,908
Cash and cash equivalents 11,347,917 7,457,485 9,151,875
35,020,821 28,661,557 31,757,783
Total assets 40,742,187 35,171,407 37,879,503
Equity and liabilities
Equity
Share capital 62,797 62,548 62,732
Share premium 9,920,760 9,920,760 9,920,760
Share-based payments reserve 1,077,714 976,238 1,028,247
Retained earnings 7,464,355 4,796,659 6,847,378
Equity attributable to equity holders of the Parent 18,525,626 15,756,205 17,859,117
Non-current liabilities
Lease liabilities - 340,607 109,484
Deferred tax liabilities 84,789 167,521 132,432
Provisions - 127,213 183,501
84,789 635,341 425,417
Current liabilities
Trade and other payables 20,125,906 17,402,869 18,347,358
Lease liabilities 416,905 538,544 538,544
Provisions 207,586 - -
Corporation tax liability 1,381,375 838,448 709,067
22,131,772 18,779,861 19,594,969
Total liabilities 22,216,561 19,415,202 20,020,386
Total equity and liabilities 40,742,187 35,171,407 37,879,503
The interim statements were approved and authorised for issue by the Board of
Directors on 13 September 2023 and were signed on its behalf by:
A Miller
Director
consolidated statement OF CHANGES IN EQUITY
For the period ended 31 July 2023
Attributable to equity holders of the Parent
Share Share Share-based payment reserve Retained earnings Total
capital premium £ £ £
£ £
At 1 February 2022 (audited) 62,548 9,920,760 749,958 8,150,365 18,883,631
Profit for the period and total comprehensive income - - - 3,276,370 3,276,370
Transactions with owners
Share-based payment awards - - 226,280 - 226,280
Dividends paid - - - (6,630,076) (6,630,076)
At 31 July 2022 (unaudited) 62,548 9,920,760 976,238 4,796,659 15,756,205
Profit for the period and total comprehensive income - - - 3,457,339 3,457,339
Transactions with owners
Share-based payments vesting 184 - (224,419) 224,419 184
Share-based payments awards - - 276,428 - 276,428
Dividends paid - - - (1,631,039) (1,631,039)
At 31 January 2023 (audited) 62,732 9,920,760 1,028,247 6,847,378 17,859,117
Profit for the period and total comprehensive income - - - 3,835,282 3,835,282
Transactions with owners
Share-based payments vesting 65 - (200,605) 200,605 65
Share-based payments awards - - 250,072 - 250,072
Dividends paid - - - (3,418,910) (3,418,910)
At 31 July 2023 (unaudited) 62,797 9,920,760 1,077,714 7,464,355 18,525,626
CONSOLIDATED STATEMENT OF CASH FLOWS
For the period ended 31 July 2023
Note 6 Months to July 2023 (Unaudited) 6 Months to July 2022 (Unaudited) Year ended 31 January 2023 (Audited)
£ £
Cash flows from operating activities
Profit before tax 5,265,603 4,146,771 8,384,677
Adjustments to cash flows from non-cash items
Depreciation and amortisation 2 448,914 440,937 885,699
Share-based payments 250,073 226,280 502,708
Finance income (689,802) (14,228) (221,810)
Finance costs 249,121 48,649 147,089
5,523,909 4,848,409 9,698,363
Working capital adjustments
(Increase) in trade and other receivables (1,066,996) (1,230,258) (2,632,094)
Increase in trade and other payables 1,778,548 1,259,703 2,204,192
Increase in provisions 24,085 19,268 75,556
Cash generated from operations 6,259,546 4,897,122 9,346,017
Interest paid on client balances (201,475) (1,004) (70,791)
Interest portion of lease liability (47,646) (47,645) (76,298)
Corporation taxes paid (805,656) (1,019,244) (1,964,281)
Cash generated from operating activities 5,204,769 3,829,229 7,234,647
Cash flows from/(used in) investing activities
Interest received 689,802 14,228 221,810
Purchases of property plant and equipment (48,561) (7,451) (64,080)
Net cash generated from/(used in) 641,241 6,777 157,730
investing activities
Cash flows from financing activities
Proceeds from issue of ordinary shares 65 - 184
Lease repayments (231,123) (231,121) (462,247)
Dividends paid (3,418,910) (6,630,076) (8,261,115)
Net cash (used in) financing activities (3,649,968) (6,861,197) (8,723,178)
Net (decrease)/increase in cash and cash equivalents 2,196,042 (3,025,191) (1,330,801)
Cash at 1 February 9,151,875 10,482,676 10,482,676
Cash at 31 July 11,347,917 7,457,485 9,151,875
NOTES TO THE interim report
1. General Information
The Company was incorporated as Keystone Law Group Limited on 13 May 2014
under the Companies Act 2006 (registration no. 09039092) and subsequently used
as the vehicle to acquire Keystone Law Limited (the main trading company in
the Group) and its subsidiaries on 17 October 2014. The Company was
re-registered as a Public Limited Company on 10 November 2017. The Company was
incorporated and is domiciled in England and Wales. The principal activity of
the Group is the provision of legal services. The address of its registered
office is:
48 Chancery Lane
London
WC2A 1JF
The Interim Report is presented in Pounds Sterling, being the functional
currency of the companies within the Group.
Accounting Policies
Statement of Compliance
The Interim Report has been prepared in accordance with the recognition and
measurement principles of UK-adopted International Accounting Standards.
Basis of Preparation
The Interim Report does not constitute statutory accounts as defined in
Section 434 of the Companies Act 2006. The Group's statutory financial
statements for the year ended 31 January 2023 have been filed with the
Registrar of Companies. The auditor's report on those financial statements was
unqualified and did not contain a statement under Section 498 (2) or (3) of
the Companies House 2006. The Interim Report information has been prepared in
accordance with the recognition and measurement principles of UK adopted
International Accounting Standards, and on the same basis, and using the same
accounting policies, as used in the financial statements for the year ended 31
January 2023.
The Interim Report has not been audited or reviewed, in accordance with the
International Standard on Review Engagement 2410 (UK) issued by the Financial
Reporting Council.
Going Concern
The Interim Report has been prepared on a going concern basis as the Directors
have reasonable expectation that the Group has adequate resources to continue
in operational existence for the foreseeable future. The Group has no debt, is
strongly cash generative, and has a strong trading performance. The Group's
forecasts and projections show that the Group has sufficient resources for
both current and anticipated cash requirements.
ACCOUNTING DEVELOPMENTS
There have been no new standards or interpretations, relevant to the Group's
operations, applied in the Interim Report for the first time.
ADJUSTED PBT
Adjusted PBT is utilised as a key performance indication for the Group and is
calculated as follows:
6 months to July 2023 6 months to July 2022
(Unaudited) (Unaudited)
£'000 £'000
Profit before tax 5,266 4,147
Amortisation 175 175
Share-based payments 250 226
Adjusted PBT 5,691 4,548
Earnings per Share
Basic earnings per share is calculated by dividing the profit for the period
by the weighted average number of ordinary shares outstanding during the
period. The weighted average number of shares in the period was 31,373,312
(H1-2023: 31,273,941) and the basic earnings per share was 12.2p (H1-2023:
10.5p). Diluted earnings per share is calculated by dividing the same profit
by the weighted average number of ordinary shares, taking into account the
dilution effect from grants made under the Long Term Incentive Plan
(31,880,828 (H1-2023: 31,733,387)). Diluted earnings per share was 12.0p
(H1-2023: 10.3p).
The adjusted earnings per share was 13.6p (H1-2023: 11.8p), whilst the diluted
adjusted earnings per share was 13.4p (H1-2023: 11.6p). Adjusted earnings are
stated by making the same adjustments to earnings as those made in calculating
adjusted PBT.
2. Expenses by Nature
Expenses are comprised of: 6 months to July 2023 6 months to July 2022
(Unaudited) (Unaudited)
£ £
Depreciation - right-of-use assets 205,430 205,430
Depreciation - other 68,042 60,065
Amortisation 175,442 175,442
Staff costs 2,865,957 2,373,245
Share-based payments 250,073 226,280
Other administrative expenses 3,281,296 2,828,007
6,846,240 5,868,469
Included within staff costs above are the costs of employed fee earners who
are included within cost of sale (H1-2024: £555,335; H1-2023: £319,842).
3. Trade and Other Receivables
31 July 31 July 31 January
2023 2022 2023
(Unaudited) (Unaudited) (Audited)
£ £ £
Trade receivables 14,721,714 13,909,185 13,285,914
Provision for impairment of trade receivables (4,589,670) (4,716,481) (4,114,670)
Net trade receivables 10,132,045 9,192,704 9,171,244
Accrued income 10,706,147 9,322,320 10,030,078
Prepayments 1,733,806 1,278,865 2,271,739
Unbilled disbursements 945,286 1,235,809 970,078
Other receivables 155,621 174,374 162,769
Total current trade and other receivables 23,672,904 21,204,072 22,605,908
Net trade receivables average age (days) (unaudited) 32 32 36
4. DIVIDENDS
The Directors have declared an interim ordinary dividend of 5.8p per share
(H1-2023: 5.2p per share) as well as a special dividend of 12.5p per share.
The dividends will be paid on 13 October 2023 to shareholders on the register
on 22 September 2023 with the shares going ex-dividend on 21 September 2023.
In accordance with IAS10 "Events after the Balance Sheet Date", these
dividends have not been reflected in the Interim Report.
Keystone Law
48 Chancery Lane
London
WC2A 1JF
www.keystonelaw.co.uk
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