TIDMKEYS
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 GBP42.3 million (H1 2023: GBP36.8 million)
-- Revenue per Principal up 12.2% to GBP104k (H1 2023: GBP92.8k)
-- PBT increased 29.3% to GBP5.3 million (H1 2023: GBP4.1 million)
-- Adjusted PBT increased 25.2% to GBP5.7 million (H1 2023: GBP4.5 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 GBP6.3 million (H1 2023: GBP4.9
million).
-- The Group remains debt-free with net cash of GBP11.3m (H1 2023: GBP7.5m)
-- 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 GBP78.9m and adjusted PBT GBP9.5m
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
+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 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 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 .
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
GBP42.3m (14.9% up on H1-2023: GBP36.8m), reported PBT of GBP5.3m
and adjusted PBT(1) of GBP5.7m (GBP4.1m and GBP4.5m respectively in
H1-2023) and cash generated from operations of GBP6.3m, an increase
of 27.8% (H1-2023: GBP4.9m).
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 GBP104k, 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 Offers Offers
New Applicants Made 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 GBP78.9m and adjusted PBT GBP9.5m
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the period ended 31 July 2023
6 Months to 6 Months to
July 2023 July 2022
(Unaudited) (Unaudited)
Note GBP GBP
--------------------------------------- ---- ------------- ------------
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
holders of the Parent 3,835,282 3,276,370
--------------------------------------- ---- ------------- ------------
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
31 January
31 July 31 July
2023 2022 2023
(Unaudited) (Unaudited) (Audited)
Note GBP GBP GBP
---------------------------- ---- ------------- ------------ ----------
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 Retained
capital premium payment reserve earnings Total
GBP GBP GBP GBP GBP
----------------------------- -------- --------- ---------------- ----------- -----------
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
----------------------------- -------- --------- ---------------- ----------- -----------
CONSOLIDA TED STATEMENT OF CASH FLOWS
For the period ended 31 July 2023
6 Months to 6 Months to Year ended
July 2023 (Unaudited) July 2022 (Unaudited) 31 January
Note GBP GBP 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)
investing activities 641,241 6,777 157,730
-------------------------------------------- ---------------------- ---------------------- ---------------
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 6 months
to July to July
2023 2022
(Unaudited) (Unaudited)
GBP'000 GBP'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
6 months 6 months
to July to July
2023 2022
(Unaudited) (Unaudited)
Expenses are comprised of: GBP GBP
----------------------------------- ------------- -------------
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: GBP555,335;
H1-2023: GBP319,842).
3. Trade and Other Receivables
31 July 31 July 31 January
2023 2022 2023
(Unaudited) (Unaudited) (Audited)
GBP GBP GBP
------------------------------ ------------- ------------ -----------
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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