TIDMKEYS
RNS Number : 5057Z
Keystone Law Group PLC
15 September 2022
15 September 2022
Half year results for the period ending 31 July 2022
Continued strong financial performance driven by high client
demand
Keystone Law Group plc (AIM: KEYS), the fast growing, UK Top
100, challenger law firm, today announces its half year results for
the year ended 31 July 2022 ('H1-2023).
Financial Highlights:
-- Revenue of GBP36.8m (up 9.3% on H1-2022)
-- PBT of GBP4.1m (down 2.5% on H1-2022(1) )
-- Adjusted PBT of GBP4.5m (down 1% on H1-2022(1) )
-- Basic EPS of 10.5p (H1-2022: 10.8p)
-- Adjusted basic EPS of 11.8p (H1-2022: 11.9p)
-- Strong operating cash conversion of 101%, with cash generated
from operations of GBP4.9m (up 16.5% on H1-2022); remain debt
free
-- Interim dividend of 5.2p per share (H1-2022: 4.5p)
(1) Profitability in H1-2022 was enhanced by approximately
GBP0.2m of cost savings as Covid restrictions prevented face to
face networking events. This year a full programme of face to face
events has been delivered.
Strategic Highlights:
* 22 Principals have joined despite it being one of the
most challenging recruitment markets in over a decade
and we have increased the overall number of
Principals to 399 (31 January 2022: 394).
* Delivered the full programme of face-to-face
networking and social events which form part of the
Keystone DNA, underpinning the collegiate culture and
providing lawyers with the opportunity to enhance
their internal networks.
* Continued to invest into our central office team and
IT platforms, ensuring we provide our lawyers with a
first-class service.
Current trading and outlook:
-- Client demand has remained strong.
-- We continue to attract good quality candidates despite a
challenging recruitment environment.
-- Well placed to deliver another strong performance at Full
Year which we expect to be comfortably in line with current market
expectations.
James Knight, Chief Executive Officer of Keystone Law,
commented:
"Keystone has delivered another very good financial performance
for the first half of the year, with our lawyers continuing to work
hard to deliver quality service to clients in response to high
demand, driving strong revenue growth and good levels of
profitability.
Our unique business model, which offers lawyers genuine
flexibility and autonomy alongside the support of a high quality
central office and technology platform, enables us to service these
high levels of demand while acting as a key attraction to lawyers
seeking new opportunities and ways of working.
We maintain a robust cash position with strong cash generation,
and are pleased to declare an interim dividend of 5.2p per
share."
For further information please contact:
Keystone Law Group plc
James Knight, Chief Executive Officer
Ashley Miller, Finance Director
www.keystonelaw.com
+44 (0) 20 3319 3700
Panmure Gordon (UK) Limited (Nominated Adviser and Joint
Broker)
Dominic Morley (Corporate Finance)
Erik Anderson (Corporate Broking)
www.panmure.com
+44 (0) 20 7886 2500
Investec Bank plc (Joint Broker)
Carlton Nelson
James Rudd
www.investec.co.uk
+44 (0) 20 7597 5970
Media enquiries
FTI Consulting
Laura Ewart
keystonelaw@fticonsulting.com
+44 (0)7711 387 085
The information contained within this announcement is deemed to
constitute inside information as stipulated under the Market Abuse
Regulation (EU) No. 596/2014 as it forms part of UK domestic law by
virtue of the European Union (Withdrawal) Act 2018 ("MAR").
Analyst Briefing
A meeting for analysts will be held virtually at 9.30am today,
15 September 2022. Analysts wishing to attend this event can
register via email at keystonelaw@fticonsulting.com. Keystone's
Half Year results announcement will also be available today on the
Group's website at www.keystonelaw.com .
Notes to editors
Keystone is an award-winning law firm, providing conventional
legal services to SMEs and high net worth individuals in a GBP9bn
addressable market.
Keystone has a scalable and unique model, with three defining
characteristics:
-- Our lawyers have freedom, flexibility and autonomy, and are
paid up to 75% of what they bill.
-- Our lawyers determine how, when and where they work, in
contrast to the conventional law firm model.
-- We offer lawyers full infrastructure and support via its
central office team, bespoke user-friendly IT platform, and network
of colleagues and events.
Keystone is a full-service law firm, with 20 service areas and
more than 50 industry sectors delivered by nearly 400 high calibre
self-employed Principal lawyers who work from their own
offices.
In November 2020, Keystone was named Law Firm of the Year by The
Lawyer, the first time a 'new' law firm has won the award.
More information about Keystone can be found at
www.keystonelaw.co.uk .
Chief Executive's Statement
I am delighted to report that Keystone Law has again delivered a
strong financial performance in the first half of this financial
year ("H1-2023" or the "period"), with revenue rising to GBP36.8m
(9.3% up on H1-2022: GBP33.7m), reported PBT of GBP4.1m and
adjusted PBT(1) of GBP4.5m (GBP4.3m and GBP4.6m respectively in
H1-2022; a period when profitability was enhanced by approximately
GBP0.2m of cost savings as Covid restrictions prevented face to
face events) and cash generated from operations of GBP4.9m up 16.5%
(H1-2022: GBP4.2m).
H1-2023 has seen a continuation of the market conditions
experienced during H2-2022. Client demand across the industry has
remained high and our lawyers have continued to take advantage of
this to drive strong revenue growth. As such, revenue per principal
was GBP93k in the period compared to GBP89k in H1-2022 and GBP92k
in H2-2022.
The continued strength of demand has caused, what recruitment
firm Robert Walters have described as, "the biggest war for talent
seen in over a decade", with 85% of law firms in London recruiting.
In light of these challenging market conditions, I am satisfied
with the levels of recruitment achieved and the quality of
candidates who continue to be attracted to Keystone Law.
Qualified Offers Offers
New Applicants Made Accepted
--------------- ------ ---------
H1 2022 136 36 28
H2 2022 92 40 28
H1 2023 122 34 17
-------- ---
During the period, 22 Principals have joined (H1-2022: 21)
bringing the total number of Principals to 399 (31 January 2022:
394). Whilst the overall number of Pod members has fallen to 70 (31
January 2022: 80), both existing and new Principals have continued
to build their practices and leverage the value of their clients by
recruiting into their Pods, with 11 new pod members joining during
H1-2023 (H1-2022: 16).
I have been delighted that we have been able to deliver a full
programme of face-to-face networking and social events. This is the
first period that this has been possible since the outbreak of the
Covid pandemic. These events are a fundamental part of the DNA of
the business, providing frequent opportunities for our lawyers to
meet, to build and foster both the professional relationships and
friendships that help our people flourish. These events provide
ongoing opportunities to develop the internal networks, providing
access to the extensive knowledge and experience, which
successfully delivers multi lawyer and cross disciplinary solutions
to our clients. Our continuing growth ensures that there is an
ever-growing pool of talented and likeminded people to meet and the
absence of internal politics or hierarchy makes these events both
highly enjoyable and rewarding.
Across the central office team, we continue to invest in
attracting and retaining the talent needed to provide our lawyers
with a first-class service across all disciplines. Our people are
our greatest asset and the distinctive relationship which exists
between our central office team and our lawyers (with our lawyers
being treated as clients) is another example of what makes the
Keystone model so attractive. Accordingly, I would like to thank
all our people for their ongoing dedication and commitment to
delivering the excellent service which so engenders the Keystone
culture.
Dividend
I am pleased to announce that the Board has declared an interim
dividend of 5.2p per share. The dividend will be payable on 14
October 2022 to shareholders on the register on 23 September 2022
and the shares will go ex-dividend on 22 September 2022.
Summary and Outlook
In summary, I am very happy with the financial performance
delivered during H1-2023. Our lawyers have continued to take full
advantage of the client demand to drive strong revenue, delivering
adjusted PBT largely in line with H1-2022, with Operating cash
conversion(3) of 101%. In a challenging recruitment environment,
our business model has continued to attract good quality candidates
and in light of these conditions I have been satisfied with the
rate of recruitment.
Looking ahead, whilst demand remains strong, our lawyers will
continue to deliver high quality services to our clients driving
strong revenue and good profitability and as demand normalises
across the industry, the pressures that this will cause on
potential candidates will provide further impetus to our organic
growth. As such, I am confident that we will continue to deliver
strong results for the rest of this year which will be comfortably
in line with current market expectations.
James Knight
Chief Executive Officer
15 September 2022
(1) Adjusted PBT is calculated using profit before tax and
adding back amortisation and share-based payments for all
periods.
(2) Operating cash conversion is calculated using cash generated
from operations and dividing it by the PBT after non cash
items.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the period ended 31 July 2022
6 Months 6 Months
to to
July 2022 July 2021
(Unaudited) (Unaudited)
Note GBP GBP
---------------------------------- ---- ------------- ------------
Revenue 36,809,493 33,672,472
Cost of sales (27,105,062) (24,751,915)
---------------------------------- ---- ------------- ------------
Gross profit 9,704,431 8,920,557
Depreciation and amortisation 2 (440,937) (438,436)
Share-based payments (226,280) (169,175)
Administrative expenses 2 (4,881,419) (4,014,381)
Other operating income 25,397 -
---------------------------------- ---- ------------- ------------
Operating profit 4,181,192 4,298,565
Finance income 14,228 3,196
Finance costs (48,649) (47,729)
---------------------------------- ---- ------------- ------------
Profit before tax 4,146,771 4,254,032
Corporation tax expense (870,401) (864,970)
---------------------------------- ---- ------------- ------------
Profit and total comprehensive
income for the year attributable
to equity holders of the
Parent 3,276,370 3,389,062
---------------------------------- ---- ------------- ------------
Basic EPS (p) 1 10.5 10.8
---------------------------------- ---- ------------- ------------
The above results were derived from continuing operations.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
As at 31 July 2022
31 January
31 July 2022 31 July 2021 2022
(Unaudited) (Unaudited) (Audited)
Note GBP GBP GBP
------------------------------ ---- ------------- ------------ ----------
Assets
Non-current assets
Property, plant and equipment
- Owned assets 194,936 273,337 247,551
- Right-of-use assets 719,006 1,129,867 924,437
------------------------------ ---- ------------- ------------ ----------
Total property, plant and
equipment 913,942 1,403,204 1,171,988
------------------------------ ---- ------------- ------------ ----------
Intangible assets 5,582,280 5,933,164 5,757,722
------------------------------ ---- ------------- ------------ ----------
Other assets 13,628 13,628 13,628
------------------------------ ---- ------------- ------------ ----------
6,509,850 7,349,996 6,943,338
------------------------------ ---- ------------- ------------ ----------
Current assets
Trade and other receivables 3 21,204,072 19,024,724 19,973,814
Cash and cash equivalents 7,457,485 7,243,438 10,482,676
------------------------------ ---- ------------- ------------ ----------
28,661,557 26,268,162 30,456,490
------------------------------ ---- ------------- ------------ ----------
Total assets 35,171,407 33,618,158 37,399,828
------------------------------ ---- ------------- ------------ ----------
Equity and liabilities
Equity
Share capital 62,548 62,548 62,548
Share premium 9,920,760 9,920,760 9,920,760
Share-based payments reserve 976,238 549,337 749,958
Retained earnings 4,796,659 6,297,120 8,150,365
------------------------------ ---- ------------- ------------ ----------
Equity attributable to equity
holders of the Parent 15,756,205 16,829,765 18,883,631
------------------------------ ---- ------------- ------------ ----------
Non-current liabilities
Lease liabilities 340,607 794,298 571,730
Deferred tax liabilities 167,521 231,732 202,610
Provisions 127,213 120,698 107,945
------------------------------ ---- ------------- ------------ ----------
635,341 1,146,728 882,285
------------------------------ ---- ------------- ------------ ----------
Current liabilities
Trade and other payables 17,402,869 14,228,636 16,143,166
Lease liabilities 538,544 538,544 538,544
Corporation tax liability 838,448 874,485 952,202
------------------------------ ---- ------------- ------------ ----------
18,779,861 15,641,665 17,633,912
------------------------------ ---- ------------- ------------ ----------
Total liabilities 19,415,202 16,788,393 18,516,197
------------------------------ ---- ------------- ------------ ----------
Total equity and liabilities 35,171,407 33,618,158 37,399,828
------------------------------ ---- ------------- ------------ ----------
The interim statements were approved and authorised for issue by
the Board of Directors on 15 September 2022 and were signed on its
behalf by:
A Miller
Director
consolidated statement OF CHANGES IN EQUITY
For the period ended 31 July 2022
Attributable to equity holders of the Parent
-----------------------------
Share Share Share-based Retained
capital premium payment reserve earnings Total
GBP GBP GBP GBP GBP
----------------------------- -------- --------- ---------------- ----------- -----------
At 1 February 2021 (audited) 62,548 9,920,760 380,162 6,223,096 16,586,566
Profit for the period
and total comprehensive
income - - - 3,389,062 3,389,062
Share-based payments - - 169,175 - 169,175
Dividend paid - - - (3,315,038) (3,315,038)
----------------------------- -------- --------- ---------------- ----------- -----------
At 31 July 2021 (unaudited) 62,548 9,920,760 549,337 6,297,120 16,829,765
Profit for the period
and total comprehensive
income - - - 3,260,571 3,260,571
Share-based payments - - 200,621 - 200,621
Dividend paid - - - (1,407,326) (1,407,326)
----------------------------- -------- --------- ---------------- ----------- -----------
At 31 January 2022 (audited) 62,548 9,920,760 749,958 8,150,365 18,883,631
----------------------------- -------- --------- ---------------- ----------- -----------
Profit for the period
and total comprehensive
income - - - 3,276,370 3,276,370
Share-based payments - - 226,280 - 226,280
Dividend paid - - - (6,630,076) (6,630,076)
----------------------------- -------- --------- ---------------- ----------- -----------
At 31 July 2022 (unaudited) 62,548 9,920,760 976,238 4,796,659 15,756,205
----------------------------- -------- --------- ---------------- ----------- -----------
CONSOLIDATED STATEMENT OF CASH FLOWS
For the period ended 31 July 2022
6 Months 6 Months
to July to July Year ended
2022 (Unaudited) 2021 (Unaudited) 31 January
Note GBP GBP 2022 (Audited)
----------------------------------------- ----- ----------------- ----------------- ---------------
Cash flows from operating activities
Profit before tax 4,146,771 4,254,032 8,363,199
Adjustments to cash flows from non-cash
items
Depreciation and amortisation 2 440,937 438,436 877,991
Share-based payments 226,280 169,175 369,796
Finance income (14,228) (3,196) (7,511)
Finance costs 48,649 47,729 95,395
----------------------------------------- ----- ----------------- ----------------- ---------------
4,848,409 4,906,176 9,698,870
Working capital adjustments
(Increase) in trade and other receivables (1,230,258) (916,426) (1,865,516)
Increase in trade and other payables 1,259,703 196,295 2,110,824
Increase in provisions 19,268 19,270 6,517
----------------------------------------- ----- ----------------- ----------------- ---------------
Cash generated from operations 4,897,122 4,205,315 9,950,695
Interest paid (1,004) (83) (104)
Interest portion of lease
liability (47,645) (47,646) (95,291)
Corporation taxes paid (1,019,244) (745,019) (1,545,956)
----------------------------------------- ----- ----------------- ----------------- ---------------
Cash generated from operating activities 3,829,229 3,412,567 8,309,344
------------------------------------------------ ----------------- ----------------- ---------------
Cash flows from/(used in) investing
activities
Interest received 14,228 3,196 7,511
Purchases of property plant and equipment (7,451) (6,963) (39,858)
------------------------------------------------ ----------------- ----------------- ---------------
Net cash generated from / (used in) investing
activities 6,777 (3,767) (32,347)
------------------------------------------------ ----------------- ----------------- ---------------
Cash flows from financing
activities
Repayment of lease liabilities (231,121) (221,624) (443,257)
Dividend paid (6,630,076) (3,315,038) (4,722,364)
----------------------------------------- ----- ----------------- ----------------- ---------------
Net cash (used in) financing activities (6,861,197) (3,536,662) (5,165,621)
------------------------------------------------ ----------------- ----------------- ---------------
Net (decrease)/increase
in cash and cash equivalents (3,025,191) (127,862) 3,111,376
Cash at 1 February 10,482,676 7,371,300 7,371,300
----------------------------------------- ----- ----------------- ----------------- ---------------
Cash at 31 July 7,457,485 7,243,438 10,482,676
----------------------------------------- ----- ----------------- ----------------- ---------------
NOTES TO THE interim report
1. General Information
The Company was incorporated as Keystone Law Group Limited on 13
May 2014 under the Companies Act 2006 (registration no. 09039092)
and subsequently used as the vehicle to acquire Keystone Law
Limited (the main trading company in the Group) and its
subsidiaries on 17 October 2014. The Company was re-registered as a
Public Limited Company on 10 November 2017. The Company was
incorporated and is domiciled in England and Wales. The principal
activity of the Group is the provision of legal services. The
address of its registered office is:
48 Chancery Lane
London
WC2A 1JF
The Interim Report is presented in Pounds Sterling, being the
functional currency of the companies within the Group.
Accounting Policies Statement of Compliance
The Interim Report has been prepared in accordance with UK
adopted International Accounting Standards.
Basis of Preparation
The Interim Report does not constitute statutory accounts as
defined in Section 434 of the Companies Act 2006. The Group's
statutory financial statements for the year ended 31 January 2022
have been filed with the Registrar of Companies. The auditor's
report on those financial statements was unqualified and did not
contain a statement under Section 498 (2) or (3) of the Companies
House 2006. The Interim Report information has been prepared in
accordance with UK adopted International Accounting Standards and
on the same basis and using the same accounting policies as used in
the financial statements for the year ended 31 January 2022.
The Interim Report has not been audited or reviewed in
accordance with the International Standard on Review Engagement
2410 (UK) issued by the Financial Reporting Council.
Going Concern
The Interim Report has been prepared on a going concern basis as
the Directors have reasonable expectation that the Group has
adequate resources to continue in operational existence for the
foreseeable future. The Group has no debt, is strongly cash
generative, and has a strong trading performance. The Group's
forecasts and projections show that the Group has sufficient
resources for both current and anticipated cash requirements.
ACCOUNTING DEVELOPMENTS
There have been no new standards or interpretations, relevant to
the Group's operations, applied in the Interim Report for the first
time.
ADJUSTED PBT
Adjusted PBT is utilised as a key performance indication for the
Group and is calculated as follows:
6 months 6 months
to July to July
2022 2021
(Unaudited) (Unaudited)
GBP'000 GBP'000
--------------------- ------------- ------------
Profit before tax 4,147 4,254
Amortisation 175 175
Share-based payments 226 169
--------------------- ------------- ------------
Adjusted PBT 4,548 4,598
--------------------- ------------- ------------
Earnings per Share
Basic earnings per share is calculated by dividing the profit
for the period by the weighted average number of ordinary shares
outstanding during the period. The weighted average number of
shares in the period was 31,273,941 (H1-2022: 31,273,941) and the
basic earnings per share was 10.5p (H1-2022: 10.8p). Diluted
earnings per share is calculated by dividing the same profit by the
weighted average number of ordinary shares, taking into account the
dilution effect from grants made under the Long Term Incentive Plan
(31,733,387 (H1-2022: 31,597,083)). Diluted earnings per share was
10.3p (H1-2022: 10.7p).
The adjusted earnings per share was 11.8p (H1-2022: 11.9p),
whilst the diluted adjusted earnings per share was 11.6p (H1-2022:
11.8p). Adjusted earnings are stated by making the same adjustments
to earnings as those made in calculating adjusted PBT.
2. Expenses by Nature
6 months to 6 months to
July 2022 July 2021
(Unaudited) (Unaudited)
Expenses are comprised of: GBP GBP
----------------------------------- ------------- -------------
Depreciation - right-of-use assets 205,430 205,430
Depreciation - other 60,065 57,564
Amortisation 175,442 175,442
Staff costs 2,373,245 2,091,302
Share-based payments 226,280 169,175
Other administrative expenses 2,828,007 2,206,166
----------------------------------- ------------- -------------
5,868,469 4,905,079
----------------------------------- ------------- -------------
Included within staff costs above are the costs of employed fee
earners who are included within cost of sale (H1-2023: GBP319,842;
H1-2022: GBP283,087).
3. Trade and Other Receivables
31 July 31 January
31 July 2021 2022
2022 (Unaudited) (Unaudited) (Audited)
GBP GBP GBP
---------------------------------------------- ------------------ ------------ -----------
Trade receivables 13,909,185 12,179,168 12,266,858
Provision for impairment of trade receivables (4,716,481) (3,952,255) (4,082,672)
---------------------------------------------- ------------------ ------------ -----------
Net trade receivables 9,192,704 8,226,913 8,184,186
Accrued income 9,322,320 7,923,182 8,640,475
Prepayments 1,278,865 1,167,187 1,823,118
Unbilled disbursements 1,235,809 1,479,806 1,109,691
Other receivables 174,374 227,636 176,344
---------------------------------------------- ------------------ ------------ -----------
Total current trade and other receivables 21,204,072 19,024,724 19,973,814
---------------------------------------------- ------------------ ------------ -----------
Net trade receivables average age (days) 32 34 32
---------------------------------------------- ------------------ ------------ -----------
4. DIVIDS
The Directors have declared an interim dividend of 5.2p per
share (H1-2022: 4.5p per share). The dividend will be paid on 14
October 2022 to shareholders on the register on 23 September 2022
with the shares going ex-dividend on 22 September 2022. In
accordance with IAS10 "Events after the Balance Sheet Date", these
dividends have not been reflected in the Interim Report.
Keystone Law
48 Chancery Lane
London
WC2A 1JF
www.keystonelaw.co.uk
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