Keystone Law : Interim Results Investor presentation

About this update from Keystone Law Group Plc

INTERIM RESULTS for the six months ended 31 July 2024 EXECUTIVE SUMMARY 1. THE MODEL Market leading platform law firm Over 550 high quality, closely vetted, lawyers working from their own offices Simple pay when paid, performance- based, remuneration structure Lawyers themselves introduce 98% of clients Tech acts as a hub, driving efficiencies and limiting costs 2. GROWTH & SCALABLE Growth predominantly driven through recruitment of high calibre lawyers Excellent ability to scale due to pay when paid, own office working and fully scalable technology platform Pod concept further promotes growth and scale 3. THE OPPORTUNITY Profitable, cash generative, low risk, resilient business with excellent track record Seen by many as operating law firm model of the future, particularly in post COVID world Over £10bn largely addressable market 2 RESULTS HIGHLIGHTS STRONG PERFORMANCE ACROSS ALL KPI'S Revenue up 8.3% on H1 2024 Adjusted PBT up 7.2% on H1 2024 Operating cash conversion 106% Debt free with £8.3m cash Ordinary interim dividend 6.2p per share 3 RECRUITMENT ACTIVITY REMAINED POSITIVE Recruitment market remained positive All recruitment KPI's up on H1 2024 30 Principals joined in the Period 16 Pod members joined Total fee earners up to 557 QUALITY ENHANCING STAKEHOLDER VALUE Keystone consistently attracts candidates from leading law firms in UK Bespoke, one to one, onboarding ensures new lawyers maximise the opportunity of their practice High quality service delivery enhances lawyer experience and Keystone's reputation. This results in high retention rates and drives recruitment through lawyer referrals RECRUITMENT ACTIVITY REMAINED VIBRANT 153 56 31 Applicants (Principals) Offers Made (Principals) Offers Accepted (Principals) Up 6.25 % on H1 2024 Up 9.5% on H1 2024 Up 24% on H1 2024 30 442 30 New Principals joined Principals increased from Pod structure offers lawyers H1 2024 : 25 432 to 442 growth potential and flexibility Qualified New Applicants 153 144 122 H1-2023H1-2024H1-2025 Offers Made / Accepted & Starters 56 34 42 31 30 22 25 25 17 H1-2023 H1 2024 H1 2025 Recruitment market remained positive throughout the period in spite of the potential for disruption with the political uncertainty leading up to the General election 4 FINANCIAL HIGHLIGHTS £46.5m 26.0% £6.1m 13.1% Revenue +8.3% GM% Adj. PBT +7.2% Adj. PBT Margin (1) H1 2024 (1) : £42.9m H1 2024: 26.2% H1 2024: £5.7m H1 2024 (1) : 13.3% 106% £8.3m 14.6p 6.2p Operating cash conversion Net cash Adjusted EPS Ordinary DPS H1 2024: 113.3% H1 2024: £11.3m H1 2024: 13.6p H1 2024: Ordinary 5.8p Following the FRC review of 31 January 2023 annual report and accounts, revenue & cost of sale were restated to disclose the effects of the impairment review as a cost below gross profit to fully comply with IFRS 9 and IAS 1.82 (ba), This had no impact on PBT, adjusted PBT, earnings or cash. 5 INCOME STATEMENT Six months ended 31 July H1 2024 H1 2024 £'000 H1 2025 (Restated (1) ) (Reported) Change Revenue 46,468 42,889 42,305 8.3% Gross profit 12,085 11,244 11,092 7.5% GM% 26.0% 26.2% 26.2% Revenue Revenue up 8.3% to £46.5m driven mainly by growth in Principal numbers which are up 7.6%, whilst revenue per Principal has increased marginally from £105.5k to £106.3k. Other Admin Other administrative expenses have increased by 7.6%, driven by increased lawyer numbers, ongoing investment which enhances our offering as well as general inflationary cost increases Staff costs (2,663) (2,311) (2,311) 15.2% Other administrative expenses (3,532) (3,281) (3,281) 7.6% Amort & Interest - right of use assets (223) (206) (206) 7.9% Depreciation (50) (68) (68) -26.4% Net impairment of trade receivables (77) (152) -49.1% Adjusted Administrative Expenses (6,545) (6,018) (5,866) 8.8% Other operating income 29 24 24 Net finance income/(cost) 529 441 441 GM% Margin only revenue (2) remained flat, with revenue growth driven by our core UK Principals and their pods. This change in mix caused GM% to reduce by 0.2% Finance Income Interest rates have remained high throughout the period continuing to support higher levels of finance income. Adjusted PBT 6,098 5,691 5,691 7.2% Adjusted PBT% 13.1% 13.3% 13.6% Adjusted PBIT% 12.0% 12.2% 12.4% Adjusted basic EPS (p) 14.6 13.6 12.2 7.4% Average Principals 437 407 407 7.6% Average Revenue £ / Principal 106,334 105,508 104,071 0.8% 6 (1) Following the FRC review of 31 January 2023 annual report and accounts, revenue & cost of sale were restated to disclose the effects of the impairment review as a cost below gross profit to fully comply with IFRS 9 and IAS 1.82 (ba), This had no impact on PBT, adjusted PBT, earnings or cash. Margin only revenue generated by central office employed lawyers and lawyers operating in Isle of Man. Staff Costs Average headcount has increased 9.5% (from 63 to 69) year on year as we continue to invest in the resources necessary to support the growing lawyer base. Furthermore the remuneration we offer the Central office team needs to remain competitive to attract and retain high calibre people to the Central office team. Adj PBT & PBT % Adj PBT has increased 7.2% to £6.1m. This represents adj PBT margin of 13.1%, down 0.2% on H1-2024, as the decline in GM% has flowed through. BALANCE SHEET As at : 31-Jul 31-Jul 31-Jan £'000 2024 2023 2024 Property, plant and equipment 80 168 121 Cash Leases Right of use assets 2,206 308 2,428 Intangible assets 4,881 5,231 5,056 Investments 129 14 129 Total non current assets 7,296 5,721 7,734 Trade and other receivables 27,301 23,673 25,194 Cash and cash equivalents 8,311 11,348 8,367 Total current assets 35,612 35,021 33,561 Total assets 42,908 40,742 41,295 Share capital 63 63 63 Share premium 9,921 9,921 9,921 Share based payments reserve 874 1,078 1,060 Retained earnings 6,563 7,464 5,896 Equity attributable to equity holders 17,421 18,526 16,940 Lease liabilities 1,763 0 2,028 Provisions 912 0 908 Deferred tax liabilities 15 85 50 Total non current liabilites 2,690 85 2,986 Trade and other payables 22,202 20,126 19,783 Cash positive and debt free; net cash £8.3m Debtor Days Trade debtor days are 33 (H1 2024: 32) Payables Trade debtors and accrued income have corresponding 75% liability to lawyers as paid when paid. Included in trade and other payables Recently renewed leases on two floors in Chancery Lane maintaining same space as previously held. 5 years co terminus to April 2029 Intangible Assets Intangible assets are a function of the structuring of the private equity investment in October 2014 Lease liabilities 595 417 345 Corporation tax liability 0 1,381 1,243 Provisions 0 208 0 7 Total current liabilities 22,797 22,132 21,370 Total liabilities 25,487 22,217 24,356 Total equity and liabilities 42,908 40,742 41,295 As at : 31-Jul 31-Jul 31-Jan £'000 2024 2023 2024 Trade and other receivables Trade receivables 12,600 10,132 10,495 Accrued income 11,761 10,706 11,572 Prepayments and other receivables 2,940 2,835 3,127 CASH FLOW Year ended 31 January £'000 H1 2025 H1 2024 Profit before tax 5,544 5,266 Cashflow Dynamic Lease payments 8 Depreciation - right of use assets 222 205 Amortisation & other depreciation 226 243 Share based payments 379 250 Net finance (income) / costs (529) (441) 5,841 5,524 Movement in working capital 348 736 Cash generated from operations 6,189 6,260 Interest portion of leases (29) (48) Net Interest received 558 488 Corporation tax paid (2,801) (806) CAPEX (10) (49) Repayments of lease liabilities (15) (231) Cash flow pre dividends 3,893 5,615 Dividends paid (3,949) (3,419) Net Cash flow (56) 2,196 Closing Cash 8,311 11,348 Operating cash conversion (1) 106.0% 113.3% Operating cash conversion calculated utilising cash generated from operations and dividing it by the PBT before non cash movements and net interest Business model inherently cash generative and capital light with lawyers only paid when Keystone is paid Cash Conversion Operating cash conversion (1) remained strong at 106% compared to 113.3% (longer term average of c.95%) Corporation Tax Following YE Jan 2024 profits, Keystone now classified as "super-large" by HMRC, so timing of quarterly payments accelerated and all tax due to be paid during the year. H1 2025 is a transitional period so we have paid the final two payments for YE Jan 24 and the first two payments for YE Jan 25. New leases signed effective April 24, with six month rent free periods, so negligible cash outflow this period. Net interest Interest rates remained high throughout the Period. £0.9m interest received (H1 2024: £0.7m ) £0.4m paid on client balances (H1 2024: £0.2m) Dividends paid Dividend paid represents final Ordinary dividend from Y/E January 2024 of 12.5p per share (H1 2024: 10.9p) SUMMARY & OUTLOOK Summary Outlook A strong all-round performance Confident of continuing to deliver strong results Strong performance across all business KPI's Recruitment market conditions remain favourable, despite economic uncertainty and change in government Client demand has held up, whilst growth in Principals continued to drive revenue growth We are confident that we will continue to deliver a strong performance with both revenue and adjusted PBT being Continued strong growth in Adjusted PBT slightly ahead of market expectations prior to this announcement We have recruited well and taken on 30 new Principals 9 APPENDIX - BUSINESS OVERVIEW

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