Back

Interim Results

Keystone Law (AIM: KEYS), the fast growing, UK Top 100, challenger law firm, today announces its interim results for the six months ended 31 July 2019 ('H1-2020' or the 'period').


Financial Highlights

1 Adjusted PBT is calculated utilising profit before tax and adding back amortisation for both periods; for the current year share based payments and one off costs associated with property relocation is also added back.

2 Operating Cashflow is calculated utilising cash generated from operations and deducting repayment of other borrowings; these being property lease payments in respect of the Keystone offices.

Business Highlights

1 Principal lawyers are the senior lawyer 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 company 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.

James Knight, Chief Executive Officer of Keystone Law, commented: "I am pleased to report another strong set of Interim Results, as reflected by both the Group's financial and operational performance. The revenue and profit growth has been driven by the ongoing strength of the recruitment activity as we continue to attract high calibre principal lawyers looking to take advantage of the benefits that the Keystone model offers and build their practices. This is providing clear evidence of the Group's ability to scale and take advantage of the considerable mid-market opportunity.

"The performance of the existing lawyers, together with the strength of the recruitment pipeline at the half year all serve to underpin our confidence in the second half."

 

back to top

 

Chief Executive Officer's Statement

I am pleased to report that the Group has continued to trade strongly and above expectations throughout the first half of this financial year ('H1-2020'). As a result, revenue for the first six months has increased by 15.3% to £23.0m (H1-2019: £19.9m), reported PBT has increased by 12.1% to £2.4m (H1-2019: £2.2m) and adjusted PBT* has increased by 15.4% to £2.7m (H1-2019: £2.3m). Cash conversion has also remained strong with operating cashflow** of £2.4m being a conversion of 90.3% (H1-2019: £2.2m and 94.6%).

Throughout the first half of this year the management team has continued to focus on delivering the UK centric organic growth strategy of the business and has been pleased with the progress made during the period. The Keystone model is becoming increasingly accepted within the legal profession and, as such, we continue to see high calibre candidates attracted to the business. Lawyer recruitment has been strong with 114 (H1-2019: 106) qualified new applicants (Principals) entering the pipeline this year, whilst Principals accepting offers has increased by 24% to 36 (H1-2019: 29). We have also seen a continuation of the growth of Pods (Principals' service companies employing more than one lawyer) with 10 new Pod members joining during the period (H1-2019: 7). Total lawyer numbers have increased by 34 (with 45 lawyers starting in the period) to 355 (H1-2019: increased by 31).

Whilst recruitment of high calibre new lawyers with client followings is undoubtably the number one driver of growth for the business, that growth is underpinned by the continual work by our lawyers in developing and maintaining their practices. The Marketing team and the Growth and Development team have had another busy six months supporting Keystone lawyers in achieving this. Those teams deliver extensive and often personalised support, with all new lawyers benefiting from substantial up-front investment to help them successfully establish their practice at Keystone. Our lawyers have continued to benefit from the multitude of centrally organised events and networking opportunities as well as the high quality marketing collateral and tender support delivered by the Marketing team.

In response to the growing demand for client meeting rooms and hot desking facilities we have taken advantage of the opportunity to lease a second floor in the same building as our central offices at Chancery Lane. As such, from the second half of this year, we will be able to offer our lawyers twice as many meeting rooms as well as increasing both the hot desks and the permanent desks available to those lawyers who wish to pay for this facility. The timing of this new floor has been very propitious becoming available in time to replace the existing lawyer centre where the lease ends in December. We have also taken advantage of the lease negotiations to agree new terms on our existing lease, such that both floors are now under new five year co-terminus leases.

It has been a busy period for all of the central office and the team has worked hard to deliver a first class service to both our lawyers and our clients. We continue to strive to be 'best in class' and focus on supporting our lawyers across all disciplines, ensuring that they are free to focus on working with their clients to deliver exceptionally high calibre legal services.

Dividend

As a result of the strong performance in H1-2020, as well as the ongoing confidence which the Board has in the outlook for the full year, I am pleased to announce that the Board has declared an interim ordinary dividend of 3.2 pence per share (H1-2019: 2.5 pence per share). Having reviewed the cash position and working capital requirements of the Group, the Board has also decided to declare a special dividend of 8.0 pence per share. The dividends will be payable on 25 October 2019 to shareholders on the register on 4 October 2019 and the shares will go ex-dividend on 3 October 2019.

Summary and Outlook

In summary, the Board is extremely pleased with the performance of the Group in the first half of this year, which has been ahead of expectations, and it is confident that this has laid a strong foundation for the rest of the year.

The performance of existing Keystone lawyers, together with the recruitment activity during the first half of the year and the strength of the recruitment pipeline at the half year, all serve to underpin management's confidence in the second half.

 

James Knight
Chief Executive Officer
23 September 2019

 

* Adjusted PBT is calculated utilising profit before tax and adding back amortisation for both periods; for the current year share based payments and one off costs associated with property relocation are also added back.

* * Operating Cashflow is calculated utilising cash generated from operations and deducting repayment of other borrowings; these being property lease payments in respect of the Keystone offices.

 

back to top

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the period ended 31 July 2019

  Note 6 Months to
July
2019
(Unaudited)
£
6 Months to
July
2018
(Restated)
(Unaudited)
£
Revenue   22,984,364 19,940,081
Cost of sales   (16,796,779) (14,559,616)
Gross profit   6,187,585 5,380,465
Depreciation and amortisation 2 (354,993) (332,141)
Administrative expenses 2 (3,502,288) (2,958,137)
Other operating income   35,160 32,816
Operating profit   2,365,464 2,123,003
Finance income   68,482 50,681
Finance costs 3 (3,020) (5,982)
Profit before tax   2,430,926 2,167,702
Corporation tax expense   (462,551) (457,092)
Profit and total comprehensive income for the year attributable to equity holders of the Parent   1,968,375 1,710,610
Basic and diluted EPS (p)   6.3 5.5

 

The above results were derived from continuing operations.

 

back to top

CONSOLIDATED STATEMENT OF FINANCIAL POSITION
For the period ended 31 July 2019

  Note 31 July
2019
(Unaudited)
£
31 July
2018
(Restated)
(Unaudited)
£
31 January
2019
(Restated)
(Audited)
£
Assets        
Non-current assets        
Property, plant and equipment   278,700 43,780 55,775
Right of use assets   2,245,784 887,086 746,666
Intangible assets   6,634,932 6,985,816 6,810,373
Available-for-sale financial assets   13,628 13,628 13,628
    9,173,044 7,930,310 7,626,442
Current assets        
Trade and other receivables   15,482,709 11,804,946 14,510,726
Cash and cash equivalents   6,357,449 5,312,192 6,343,637
    21,840,158 17,117,138 20,854,363
Total assets   31,013,202 25,047,448 28,480,805
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   88,224 - 43,205
Retained earnings   5,266,571 4,016,232 5,331,002
Equity attributable to equity holders of the Parent   15,338,103 13,999,540 15,357,515
Non-current liabilities        
Lease liabilities 4 2,054,201 676,648 524,677
Deferred tax liabilities   372,088 442,266 407,177
    2,426,289 1,118,914 931,854
Current liabilities        
Trade and other payables   12,388,666 9,238,336 11,575,061
Lease liabilities 4 320,523 320,063 311,971
Corporation tax liability   496,741 284,625 210,291
Provisions   42,880 85,970 94,113
    13,248,810 9,928,994 12,191,436
Total liabilities   15,675,099 11,047,908 13,123,290
Total equity and liabilities   31,013,202 25,047,448 28,480,805

 

The interim statements were approved and authorised for issue by the Board of Directors on 20 September 2019 and were signed on its behalf by:

A Miller
Director

Keystone Law Group plc

Registered No: 09038082

 

back to top

STATEMENT OF CHANGES IN EQUITY
For the period ended 31 July 2019

    Attributable to equity holders of the Parent  
  Share
capital
£
Share
premium
£
Share
based
payment
reserve
£
Retained
earnings
£
Total
£
At 1 February 2018 (audited) 62,548 9,920,760 - 2,568,343 12,551,651
Profit for the period and total comprehensive income - - - 1,710,610 1,710,610
Dividend Paid - - - (262,721) (262,721)
At 31 July 2018 (unaudited) 62,548 9,920,760 - 4,016,232 13,999,540
Profit for the period and total comprehensive income - - - 2,096,619 2,096,619
Share based payments - - 43,205 - -
Dividend Paid - - - (781,849) (781,849)
At 31 January 2019 (audited) 62,548 9,920,760 43,205 5,331,002 15,357,515
Profit for the period and total comprehensive income - - - 1,968,375 1,968,375
Share based payments - - 45,019 - 45,019
Dividend Paid - - - (2,032,806) (2,032,806)
At 31 July 2019 (unaudited) 62,548 9,920,760 88,224 5,266,571 15,338,103

 

Application of IFRS16 has not resulted in any changes to the historic reserves values.

 

back to top

CONSOLIDATED STATEMENT OF CASH FLOWS
For the period ended 31 July 2019

  Note 6 Months
to July
2018
(Unaudited)
£
6 Months
to July
2018
(Restated)
(Unaudited)
£
Year ended
31 January
2019
(Restated)
(Audited)
£
Cash flows from operating activities        
Profit before tax   2,430,926 2,167,702 4,745,011
Adjustments to cash flows from non-cash items        
Depreciation and amortisation 2 354,993 332,141 665,588
Share based payments   45,019 - 43,205
Finance income   (68,482) (50,681) (120,463)
Finance costs   3,020 5,982 7,659
    2,765,476 2,455,144 5,341,300
Working capital adjustments        
(Increase) / Decrease in trade and
other receivables
  (971,983) 189,767 (2,516,013)
Increase / (Decrease) in trade and
other payables
  813,605 (267,614) 2,058,456
(Decrease) / Increase in provisions   (51,233) - 19,113
Cash generated from operations   2,555,865 2,377,297 4,902,556
Interest Paid 3 (3,020) (5,982) (7,659)
Corporation taxes paid   (211,189) (267,307) (857,420)
Cash generated from operating activities   2,341,656 2,104,008 4,037,477
Cash flows from investing / (used in) activities        
Interest received 3 68,482 50,681 120,463
Purchases of property plant and equipment   (248,711) (9,699) (39,609)
Net cash generated from investing activities   (180,229) 40,982 80,854
Cash flows from financing activities        
Repayment of lease liabilities   (114,809) (160,045) (320,094)
Dividend Paid   (2,032,806) (262,722) (1,044,570)
Net cash (used in) from financing activities   (2,147,615) (422,767) (1,364,664)
Net increase in cash and cash equivalents   13,812 1,722,223 2,753,667
Cash at 1 February   6,343,637 3,589,970 3,589,970
Cash at 31 July   6,357,449 5,312,192 6,343,637

 

back to top

Notes

Notes to the Financial Statements are available in the printable PDF version