TIDMKEYS
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 GBP75.3 million (2022: GBP69.6 million)
-- Revenue per Principal up 4.1% to GBP190k (2022: GBP182.5k)
-- PBT of GBP8.4 million (2022: GBP8.4 million)
-- Adjusted PBT of GBP9.2 million, up 6.3% v Underlying Adjusted
PBT 2022 of GBP8.7 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 GBP9.3 million (2022: GBP10.0 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 (GBP9.1m) was enhanced by approximately
GBP0.4m from impact of Covid-19 and related restrictions, excluding
these underlying adjusted PBT was cGBP8.7m 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
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
+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 GBP10bn 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 .
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
GBP75.3m (2022: GBP69.6m), and adjusted PBT(1) increasing to
GBP9.2m representing an adjusted PBT margin of 12.3% (2022:
GBP9.1m, 13.0%,having benefitted from cost savings of cGBP0.4m).
Cash generation, a key feature of the business model, has remained
strong, with cash generated from operations of GBP9.3m (2022:
GBP10.0m) 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.
DIVID
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
GBP75.3m (2022: GBP69.6m), whilst adjusted PBT increased to GBP9.2m
(2022: GBP9.1m, having benefitted from cost savings resulting from
the Covid-19 restrictions preventing face to face activities (PBT
GBP8.3m, 2022: GBP8.3m)). The cash generative nature of the model
has continued strongly, with cash generated from operations of
GBP9.3m (2022: GBP10.0m), leaving the business with a closing cash
balance of GBP9.2m.
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 (GBP190.0k, 2022: GBP182.5k), 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 GBP75.3m, 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 GBP190k
(2022: GBP182.5k), 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
GBP19.6m (2022: GBP18.4m), 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 GBP9.9m (2022:
GBP8.7m). Staff costs, excluding the cost of NIC on LTIP awards
(2023: GBP75k, 2022: GBP236k), increased by 14.2% to GBP4.2m (2022:
GBP3.7m), 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 GBP5.7m (2022: GBP4.8m).
The 2022 cost base had benefitted by approximately GBP0.4m 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 GBP0.4m to GBP0.5m.
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
GBP GBP
---------------------------------- --------- ---------
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 GBP0.4m 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.GBP8.7m 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 GBP9.3m (2022: GBP10.0m).
Capital expenditure was GBP0.06m (2022: GBP0.04m). Corporation tax
payments increased to GBP2.0m (2022: GBP1.5m), 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 GBP0.1m (2022: GBP0.01m
net interest paid). Lease repayments of GBP0.5m (2022: GBP0.4m)
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 GBP6.9m
(2022: GBP7.8m). The Group paid dividends of GBP8.3m, GBP5.2m in
respect of Ordinary dividends and GBP3.1m as a Special dividend
(2022: GBP4.7m Ordinary dividend). This left closing cash of
GBP9.2m (2022: GBP10.5m) and no debt.
NET ASSETS
The Group's balance sheet is extremely strong with net assets
having decreased from GBP18.9m to GBP17.9m by virtue of retained
earnings of GBP7.5m, dividends paid of GBP8.3m and GBP0.2m 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.
DIVID
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 GBP8.3m includes
GBP3.1m of Special dividend.
On behalf of the Board
Ashley Miller
Finance Director
24 April 2023
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
YEARED 31 JANUARY 2023
2023 2022
Note GBP GBP
--------------------------------------------------- ---- ------------ ------------
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 holders of the Parent 6,733,709 6,649,633
--------------------------------------------------- ---- ------------ ------------
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
2023 2022
Note GBP GBP
---------------------------------------------------- ---- ---------- ----------
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
YEARED 31 JANUARY 2023
Attributable to equity holders of the Parent
Share based
Share payments Retained
capital Share premium reserve earnings Total
GBP GBP GBP GBP GBP
---------------------------- -------- ------------- ----------- ----------- -----------
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
YEARED 31 JANUARY 2023
2023 2022
Note GBP GBP
----------------------------------------------------- ---- ----------- -----------
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
GBP GBP
--------------------- --------- ---------
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
GBP GBP
----------------------------------- ---------- ----------
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: GBP851,653,
2022: GBP610,607).
4. FINANCE INCOME AND COSTS
2023 2022
GBP GBP
--------------------------------- --------- --------
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
GBP GBP
------------------------------------------- --------- ---------
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
GBP74,626 (2022: GBP235,702) 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
GBP GBP
--------------------------- ---- ----
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
GBP GBP
-------------------------------------------- ---------- -------------
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
No of 2022
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
GBP GBP
---------------------------------------------- ----------- -----------
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 Expected 2022 2022 Expected
Gross 2023 Provision Loss Rate Gross 2022 Provision Loss Rate
GBP GBP % GBP GBP %
------------------- ---------- -------------- ------------- ---------- -------------- -------------
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
GBP GBP GBP GBP
-------------------------------- ------ ------ ---------- ----------
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: GBP7,435,836; 2022: GBP6,441,299).
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 7 to 12 1 to 5 Pay when
months months years paid Total
GBP GBP GBP GBP GBP
------------------- --------- --------- ------- ---------- ----------
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 7 to 12 1 to 5 Pay when
months months years paid Total
GBP GBP GBP GBP GBP
------------------- --------- --------- ------- ---------- ----------
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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END
FR SESFMFEDSEEL
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