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 |
CashLeases
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