TIDMKEYS
RNS Number : 9772W
Keystone Law Group PLC
29 April 2021
29 April 2021
Keystone Law Group plc
('Keystone' or the 'Group' or 'Company')
Full year results for the period ending 31 January 2021
Resilient financial performance supported by a differentiated
& scalable business model
Keystone Law Group plc (AIM: KEYS), the fast growing, UK Top
100, challenger law firm, today announces its full year results for
the year ended 31 January 2021 ('FY2021').
Financial Highlights
-- Revenue growth of 10.9% to GBP55.0 million (FY2020: GBP49.6million)
-- PBT of GBP5.4 million (FY2020: GBP5.2 million)
-- Adjusted PBT of GBP6.0 million, representing growth of 3.6% (FY2020: GBP5.8 million)
-- Basic EPS of 13.8 pence, up 3.8% from 13.3 pence
-- Adjusted EPS of 15.6 pence, up 4.0% from 15.0 pence
-- Strong operating cash conversion at 100% with cash generated
from operations of GBP6.6 million (FY2020: GBP4.9 million)
-- Maintained robust cash position of GBP7.4 million, remain debt free
-- Proposed final dividend of 10.6p (2020: Nil) taking full year
Ordinary DPS to 17.2p (2020: 3.2p Ordinary and 8.0p Special)
Strategic Highlights
-- Our unique model continues to drive strong organic growth
o Lawyer recruitment has remained robust, with qualified new
applicants up 6% to 253 (FY2020: 239) and accepted offers
increasing 25% to 70 (FY2020: 56)
o Lawyers have continued to grow their practices despite
Covid-19 having a negative effect on client demand, with 74 (FY
2020: 52) Pod members operating within 44 Pods
-- We actioned a swift and effective response to Covid-19,
supporting our people throughout with a strong focus on
wellbeing
o Seamlessly moved all staff to homeworking from 13 March 2020,
ahead of the first lockdown, for which we were well positioned due
to our strong IT infrastructure
o Did not furlough employees or defer tax payments
o We have undertaken a full programme of online events for our
lawyers to help support their health and happiness and enable them
to maintain their networks within the business
-- We continue to invest into our proprietary technology,
improving ease of access and lawyer utilisation of the system to
further facilitate remote working
-- Our model and strong supportive culture has received external
recognition - in 2020 we won the Law Firm of the Year at The Lawyer
awards, and in January this year we were awarded the Roll on Friday
'Firm of the Year', with Keystone scoring 94% satisfaction
rating
Current trading and outlook
-- The current financial year has started well, with good levels
of activity from our existing lawyers, and the number and quality
of new applicants gives us confidence in the year ahead
James Knight, Chief Executive Officer of Keystone Law,
commented:
The nature of Keystone's business model, whereby our 350+
lawyers were all well acquainted with remote working when lockdown
began, has undoubtedly made it easier for the firm to remain 100%
operationally efficient since March 2020. Nevertheless, I am
extremely proud of what the firm and our people have achieved in
the last year, not just for maintaining that efficiency but also
for delivering solid growth. I was particularly impressed with how
our central office team switched seamlessly to home working and
their collective performance since in supporting our lawyers has
been faultless.
I am excited about the year ahead, not least because the vast
majority of the legal profession has started to suspect something
that we have known for 20 years: if the right tools and
infrastructure are in place then lawyers, even when undertaking
complicated, multi-disciplinary transactions, can deliver a far
better service if they are given flexibility and autonomy while
enjoying a better work-life balance.
-S-
For further information please contact:
Keystone Law Group plc
James Knight, Chief Executive Officer
Ashley Miller, Finance Director +44 (0) 20 3319
www.keystonelaw.com 3700
Panmure Gordon (UK) Limited (Nominated Adviser
and Joint Broker)
Dominic Morley (Corporate Finance)
Erik Anderson (Corporate Broking) +44 (0) 20 7886
www.panmure.com 2500
Investec Bank plc (Joint Broker)
Carlton Nelson
James Rudd
www.investec.co.uk
+44 (0) 20 7597
Media enquiries: 5970
FTI Consulting
Laura Ewart +44 (0)7711 387
Shiv Talwar 085
keystonelaw@fticonsulting.com
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,
29 April 2021. Analysts wishing to attend this event can register
via email at keystonelaw@ fticonsulting.com . Keystone's Full Year
2021 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, 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 350 high calibre
self-employed 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 .
CHAIRMAN'S STATEMENT
I am pleased to introduce Keystone Law's results for the year
ended 31 January 2021.
In what has been a very challenging year for all, our technology
and our culture have ensured that we have remained 100%
operationally effective, continuing to support our clients
throughout the year. COVID-19 and the resultant government
restrictions affected client demand, especially during the first
half of the year. In this context, the Group has had a good year,
with revenue increasing by 10.9% to GBP55.0m (2020: GBP49.6m) and
adjusted PBT* increasing by 3.6% to GBP6.0m, representing a 10.8%
margin (2020: GBP5.8m, 11.6% margin) (PBT increase of 3.4% to
GBP5.4m (9.8% margin) from GBP5.2m (10.5% margin).
Cash generation has been particularly strong, with cash
generated from operations of GBP6.6m (2020 GBP4.9m) representing an
operating cash conversion of 100% (2020: 82%).
* Adjusted PBT for 2021 is calculated by adding share based
payment costs and amortisation to PBT (2020: calculated by adding
share based payment costs, amortisation and one off costs
associated with the property changes back to PBT). Details of these
calculations are shown in the Financial Review.
Dividend
As we announced in our Interim Statement, the Board believed
that it was appropriate to reinstate payments of dividends and
given the strong cash generation two interim dividends of 3.3p each
were declared, the first being an amount equivalent to
approximately half of that which would have been paid in respect of
the year ended 31 January 2020 had the pandemic not happened and
the second being in line with the Group's established dividend
policy. In light of the strong second half performance and taking
into account the strength of the balance sheet, the Board is
proposing to pay a final dividend for the year ended 31 January
2021 of 10.6p per share (2020: GBPNil). This dividend is comprised
of two amounts, the first being an amount of 3.5p per share which
is the remaining value which would have been paid in respect of 31
January 2020 had the pandemic not occurred and the balance of 7.1p
per share in accordance with the established dividend policy. This
brings the total dividend for the year to 17.2p per share (2020:
3.2p per share); 6.8p per share which would have been paid in
respect of the year ended 31 January 2020 were it not for the
pandemic and 10.4p per share in line with the Group's dividend
policy.
Board and Governance
I am happy to report that the Board has continued to operate
within the structures and governance requirements of the Quoted
Companies Alliance ("QCA") code as set out in the corporate
governance section of our annual report and accounts.
We were pleased to welcome Isabel Napper to the Board as
non-executive director during the year. Now that Peter Whiting is
stepping down, as previously announced, she will Chair the
Remuneration Committee. Also effective today, Simon Philips will
take over as Chair of the Audit Committee We would like to thank
Peter for his contribution to the Board since our IPO in 2017.
Our People and technology
Our people and our technology are two of the pillars on which
Keystone is built, and the strength and resilience of these has
been clearly demonstrated this year. Throughout the pandemic
ensuring the health and wellbeing of our people has been central to
our approach to dealing with the situation. In early March 2020,
ahead of the government's first lockdown, we moved all central
office staff to home working. The technology we use to provide the
lawyers the flexibility to work whenever and from wherever they
want ensured that this was a simple step and since then we have
continued to operate in this manner. As such our technology has
ensured that we have remained 100% operationally efficient
throughout the year whilst our corporate culture was already fully
adapted to supporting colleague working in a remote
environment.
Outlook
I am pleased to say that the current year has started well.
Whilst there remains some uncertainty as to how the economy will
respond as Government restrictions relax, as a Board, we are
confident in the Group's ability to continue to deliver on its
organic growth strategy, taking advantage of the sizeable market
opportunity which exists to continue to deliver strong results.
Robin Williams
Non-executive Chairman
28 April 2021
Chief executive's Review
Operational Review
Introduction and Highlights
I am very pleased to be able to report that, in spite of the
challenges faced by the COVID-19 pandemic, Keystone has had another
successful and award-winning year.
The business has continued to grow, with revenue up 10.9% to
GBP55m (2020: GBP49.6m) and adjusted PBT increasing by 3.6% to
GBP6.0m (2020: GBP5.8m) (PBT increase of 3.4% to GBP5.4m). The cash
generative nature of the model and thus its resilience has also
been strongly demonstrated this year, with operating cash generated
of GBP6.6m. This has given us the confidence not only to reinstate
dividends in line with our stated policy but also to "catch up" the
amount which would have been declared for the year ended 31 January
2020 had it not been for the outbreak of the pandemic.
Being 100% operational also meant that our recruitment
activities continued unabated throughout the year and as such the
number of Principals* increased from 328 to 369 and we saw the
number of Pod members increase from 54 to 74, as both new and
existing lawyers chose to expand their practice in this way.
In November we won what is arguably the most prestigious award
in the UK Legal Industry; The Lawyer Awards: Law Firm of the Year.
It is the first time that this award has been granted to a "new
law" firm and reasserts our belief that Keystone is now very much
recognised by the "establishment". This award recognises the best
in class when it comes to private practice legal services over the
past 12 months. Keystone was described by the award givers as, the
firm which had "rethought the model", which was "light years ahead
of everyone on virtual working" and was "big on work life
balance".
We also won Firm of the Year 2021 in the Roll on Friday awards.
This award is given to the "happiest firm" in the UK, based on a
satisfaction survey run by Rollonfriday.com of lawyers and support
staff in law firms across the UK. Keystone won by some margin, with
a 94% satisfaction rating across such categories as pay, career
development, work / life balance and culture.
We are tremendously proud of these two awards as they go to the
very heart of what Keystone is; a business which enables lawyers to
deliver high quality legal services to clients whilst providing a
culture which delivers support, well-being and happiness to our
people; both elements of which we believe are fundamental to the
success of Keystone.
* Principal lawyers are the senior lawyers 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 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. A junior
lawyer who is employed by a Pod is, to all intents and purposes, a
Keystone lawyer and presented to the outside world in much the same
way as a conventional law firm would present a conventionally
employed junior lawyer. Junior lawyers are properly interviewed and
vetted by the recruitment team in Central Office to ensure that
they are of the requisite quality and calibre. As is the case for
the Principal lawyers, these juniors sign a compliance agreement
with Keystone and are required to comply with all rules and
regulations governing the professional conduct of Keystone's
lawyers.
OUR RESPONSE TO COVID-19
Our response to the pandemic has focused on two things, keeping
our people safe and maintaining 100% operational efficiency. The
health, well-being and happiness of our people is, and always has
been, at the heart of the Keystone culture and this drove our
decision to move our central office team to homeworking ahead of
the first government lockdown. Having the technology stack already
designed to support remote working meant that we were able to
implement this decision swiftly without impacting on the quality of
support that our lawyers receive.
During the short periods through the pandemic, when the
government guidance encouraged a reopening of elements of society,
we enabled lawyers to use our client meeting rooms when this was
necessary. Ensuring that this was done in a COVID secure manner was
a key priority and we therefore, encouraged the lawyers to only use
the facilities where it was unavoidable, reduced meeting room
capacity significantly and provided all the additional cleaning and
other sanitary facilities necessary to protect anyone who was on
site.
Maintaining Keystone's culture, a culture built on social
interaction and cohesion has presented a new set of challenges this
year. In normal times, we dedicate substantial time and energy to
ensuring that our people are well connected to one another and to
the central team. This is usually achieved thanks to the number of
physical events which we run, be it Continuing Professional
Development events, sector / lawyer lunches, sports or cultural
events. All of these bring our lawyers together in a social
environment which enables them to network both personally and
professionally. It is this aspect of the Keystone experience which
has been most challenged by the government response to COVID-19. In
the absence of physical events, we have had to take a more creative
approach by replicating traditional networking events using online
alternatives. Accordingly, we have continued to run an extensive
number of events online which have evolved and varied over the
period in order to keep them fresh and attractive to our people and
have even launched our very own online pub; "The Keystone Arms"
which hosted around 350 Keystone lawyers at the opening night.
Treating our lawyers as valued personnel rather than commodities is
one of the pillars upon which our culture is built and is essential
to Keystone's success. A myriad of thoughtful initiatives such as
sending champagne for every lawyer birthday or creating special
Keystone colouring-in books to help reduce the pain of home
schooling, have genuinely helped Keystone's personnel remain upbeat
and effective throughout this challenging year.
From a financial perspective, we decided that the strength of
our balance sheet and the resilient nature of our business model,
made it inappropriate for Keystone to take advantage of the
government schemes that were put in place to support struggling
businesses. As such, we did not furlough any employees or defer any
tax payments.
SCALABLE MODEL DRIVING ORGANIC GROWTH
Our clear, simple strategy for growth remains unchanged; organic
growth through the recruitment of high calibre lawyers in the UK
legal services market.
In furtherance of this strategy we actively encourage and
support Principals to grow their own Pods by recruiting juniors to
work with them. In this way, Principal lawyers are able to build
larger practices, thus increasing the average revenue per
Principal, and by doing so, further leverage the value of their
client relationships. To the extent that Principals need junior
support but do not have a permanent need, or do not wish to build
their own Pod, we also employ a number of junior lawyers within the
Central office team whose role it is to provide the necessary ad
hoc support to the whole lawyer base.
Our model offers an attractive proposition for experienced
lawyers as it gives them control to develop their practice on their
own terms, concentrating exclusively on client development and the
delivery of legal work. They enjoy the ability to work when and
where they want and they appreciate the user-friendly bespoke
technology with access to over 365 experienced colleagues to
service their clients. Meanwhile an efficient central office team
provides them with the full range of logistical support they need.
All this comes together with the ability to earn more money for the
work they do whilst enjoying an improved work / life balance and a
culture which is open, friendly and collegiate whilst remaining
highly professional.
In the twelve months ended 31 January 2021, the size and nature
of the market remained essentially unchanged. The government
restrictions on movement meant that this year all UK lawyers have
had to work from home for long periods of time and whilst many will
have struggled with their firm's technology there has been a clear
structural shift in the attitude towards remote working. This
change has undoubtedly served to further erode any erroneous
perceptions, which some lawyers working in traditional firms may
still have held, regarding the ability of lawyers to work in this
way and as such will have further extended the reach of the
Keystone model. Winning "Law Firm of the Year" at the Lawyer Awards
clearly demonstrates this change and confirms that Keystone is now
firmly accepted by the mainstream legal establishment.
2021 has been another strong year for recruitment with the
number of qualified new applicants increasing 6% to 253 and the
number of offers accepted by candidates increasing by 25% to 70.
The shape of the year has been unusual insofar as the "ordinary"
triggers which drive recruitment peaks, notably the post holiday
return to work, have been largely absent and it has been other
events driving candidates desire for change. This was very apparent
during the first lock down which created a significant level of
uncertainty across the legal industry and coincided with an uptick
in the number of qualified new applicants, especially from the
recruitment agencies. The second half saw further disruption as the
restrictions were first relaxed through the summer period before
once again escalating, albeit in something of a patchwork manner,
during the rest of the year. The uncertainty created by these
changes impacted on both the overall number, but also the timing,
of qualified new applicants which ebbed and flowed in response to
the changing picture. The start of the 2022 financial year has seen
a fair but variable start with events continuing to evolve as we
move from full lockdown to the start of the relaxation of
restrictions in line with the government's roadmap.
In spite of the negative effect that COVID-19 had on client
demand, most notably during the first half of the year, our lawyers
have continued to grow their practices by recruiting juniors and
colleagues into their Pods and as of 31 January 2021 we had 74
(2020: 56) Pod members operating within 44 Pods (2020: 31). This
growth has been driven by a combination of new and existing
Principals and further endorses the strength and flexibility of the
model.
continuing Investment in IT
The investment made over many years in our IT infrastructure
meant that we started the year in a strong position and as such
COVID-19 had only a limited effect on the focus of the IT team this
year. As always we continued to develop and enhance our core
systems to ensure that they remain "best in class", always seeking
to provide the best user experience and to drive ever greater
operational efficiencies. Over and above this, IT security
continues to be a key focus for the team and having rolled out a
number of security enhancements to the estate last year, we
continued to enhance the security environment as well as stepping
up the awareness programme on cybersecurity.
The one area where COVID-19 did affect the IT team was in the
take up and usage of video conferencing platforms as a primary tool
for client meetings as well as internal interaction with
colleagues. We had all the necessary tools in place prior to the
pandemic although usage levels were low with most people favouring
more conventional means of meeting. Once again, having the tools
available ahead of the outbreak meant that we were well-placed to
ensure a seamless transition from physical meetings to online
meetings and the IT team worked extremely well to educate Keystone
personnel on the availability and functionality of Microsoft
Teams.
Ongoing Investment in the Central office team
Once again this year, the Central office team has demonstrated
the "positive and can do" attitude of which I have become so proud
over the years. It is worth noting that the Central Office team
have previously only worked from our offices in Chancery Lane but
with the outbreak of the pandemic they immediately switched to
remote working. Their positive attitude to this seismic shift in
the working environment ensured that we could continue to support
our lawyers without interruption and deliver the "best in class"
service to which they have become accustomed. This year has
demonstrated the flexibility and adaptability of all aspects of the
Keystone model and as ever the Central office team has played a key
part in delivering this. I would like to take this opportunity to
thank all of the Central office team for their hard work and
enthusiasm.
Looking ahead
The current year has started well. The activity of the existing
lawyers is strong and both the number and quality of qualified new
applicants provide confidence in the year ahead. With the
government roadmap in place and progress being made towards the
relaxation and hopefully end to lockdown restrictions, it is to be
hoped that the general economic outlook will improve. Having
performed well in spite of the restrictions last year, the Group is
well positioned to take advantage of the improving position this
year and deliver another strong performance.
James Knight
Chief Executive
28 April 2021
Financial Review and Strategic Report
Key Performance Indicators (KPI s)
The following KPIs are used by the management to monitor the
financial performance of the Group.
Revenue growth: 10.9% increase (2020: 16.3%)
Adjusted PBT growth: 3.6% increase (2020: 12.0%)
Adjusted PBT margin: 10.8% (2020 11.6%)
PBT growth: 3.4% increase (2020: 10.1%)
PBT margin: 9.8% (2020: 10.5%)
Operating cash conversion %: 100% (2020: 81%)
Trade debtor days: 38 (2020: 36)
Net Assets: GBP16.6m (2020: GBP14.1m)
The calculation of adjusted PBT is shown below.
Income Statement
I am pleased to report revenue for the year of GBP55.0m, an
increase of 10.9% on the prior year. As previously reported, whilst
the pandemic caused significant disruption to client demand in the
first half of the year, we experienced a return to pre Covid-19
levels during the second half. This is clearly demonstrated by the
relative growth rates experienced in each period: year on year
growth in the first half was 6.5% whereas the second half revenue
was up 14.7%. Revenue growth has been driven by the lawyers
recruited last year contributing a full year of productivity as
well as contributions from the lawyers who have been recruited
during this year, with principal lawyer numbers increasing from 328
to 369.
Gross Profit
The gross profit margin of the business has fallen this year to
25.9% (2020: 26.7%). The key reason for this this reduction has
been driven by two factors, both of which affect the level of
profitability generated by our employed junior lawyers. The first
of these causes has been the pandemic and the resultant impact on
client demand, especially in the first half of the year. The second
is, rather perversely, a reflection of the successful evolution of
the Pod concept. The Pod concept has developed quite substantially
over the last couple of years to the extent that it is now a
generally accepted means by which Keystone lawyers develop their
practice. As such, it does mean that certain circumstances which
historically would have resulted in exceedingly high utilisation of
the employed juniors are now less likely to occur. One such example
scenario is where a Principal lawyer is involved in a large case
which requires full time junior support over a prolonged period of
time; historically such a situation would have resulted in
additional gross margin through the employed lawyers, whereas with
the evolution of the Pod concept it is far more common that a
Principal in this position would recruit a junior into their Pod
such that we would benefit from the revenue at the standard gross
margin.
Administrative Expenses
Administrative expenses have increased by 6.7% to GBP7.7m (2020:
GBP7.2m). The largest single component of this is staff costs which
increased by 15.2% to GBP3.3m (2020: GBP2.9m), with support staff
increasing from an average of 44 in 2020 to 47 in 2021. At the
start of the pandemic, the Board decided that given the financial
strength and resilience of the Group, it would be inappropriate to
take advantage of government schemes aimed at supporting those in
need and as such we did not furlough any staff during the period.
That said, whilst the average number of support staff increased
year on year, support staff headcount remained flat across the
year. Other administrative costs increased by 1.2% to GBP4.42m
(2020: GBP4.36m).
Other costs
During 2020, the Group entered into new lease arrangements in
respect of our principal office at 48 Chancery Lane and 2021 was
the first full year that these arrangements came into effect. As
such the charge for amortisation of right of use assets increased
by 11% and depreciation increased by 51% to GBP0.1m as the charge
in respect of the investment made in leasehold improvements last
year also took full effect. The charge in respect of share based
payments increased from GBP0.13m to GBP0.2m as a new grant was made
and the cost of all historic grants continued to be charged to the
income statement, whilst finance income was negligible in the year
as interest rates fell close to Nil.
PBT, Adjusted PBT and PBT MARGINS
Adjusted PBT is calculated as follow:
2021 2020
GBP GBP
----------------------------------- --------- ---------
Profit before tax 5,405,135 5,225,891
Amortisation 350,884 350,884
Share based payments 208,671 128,286
One off impact of property changes - 51,547
Adjusted PBT 5,964,690 5,756,608
----------------------------------- --------- ---------
PBT Margin 9.8% 10.5%
----------------------------------- --------- ---------
Adjusted PBT Margin 10.8% 11.6%
----------------------------------- --------- ---------
The decline in both PBT and adjusted PBT margins this year (0.7%
and 0.8% respectively) has been principally driven by the reduction
in gross profit margin, which was caused by a lower level of
utilisation of the centrally employed junior lawyers as explained
above. With interest rates falling almost to nil, finance income
fell by GBP0.1m contributing a further 0.3% decline in the margin.
These movements were partly offset because administrative expenses,
net of other operating income, fell as a percentage of revenue by
0.4% reflecting the continuing benefits of operational gearing in
the business.
Taxation
The effective tax rate of 19.9% is higher than the standard rate
and lower than that of the prior year (20.3%). Due to the nature of
our business and the investment we make in providing networking
opportunities in social environments for our lawyers, the tax rate
of the business is always likely to be slightly higher than the
standard rate as these costs are disallowable for corporation tax
purposes. Compared to the previous year, the level of disallowable
expenses was lower as we were unable to hold a number of lawyer
events due to the restrictions imposed on social interaction.
Earnings Per Share
Basic earnings per share increased from 13.3p to 13.8p, with the
dilution effect from shares awarded under LTIP being negligible.
Adjusted earnings per share (calculated by making the same
adjustments to earnings as has been made in calculating adjusted
PBT and divided by the average shares in circulation this year) has
increased by 4% to 15.6p (2020: 15.0p).
Statement of Financial Position
Cash
The Group's business model is strongly cash generative because
its most significant cost, the fees paid to lawyers, is only paid
once Keystone has been paid for the work it has delivered.
Operating cash conversion for the year was particularly strong this
year at 100% (2020: 81%) generating cash from operations of GBP6.6m
(2020: GBP4.9m). Last year's cash conversion had been somewhat
depressed by an increase in the level of client disbursements which
had been paid by the Group and not yet recovered from clients at
the year end, this position unwound during this financial year with
the level of disbursement funding falling this year. Furthermore,
the growth in accrued income this year has been slower than in the
prior year (net GBP0.1m) due to the disruption caused by the
pandemic. Capital expenditure was GBP0.05m (2020: GBP0.4m) having
returned to the normal run rate within the business having incurred
the costs associated with fitting out the new floor of offices
taken in Chancery Lane last year. Corporation tax payments were
GBP1.0m (2020: GBP0.8m). Net interest received (ex the interest
portion of lease payments) of GBP0.02m (2020: GBP0.14m) has fallen
substantially as interest base rates have fallen to almost Nil
whilst the interest element of lease payments was GBP0.1m (2020:
GBP0.08m). Lease repayments of GBP0.4m reflect the normal run rate
of payments under our existing leases (2020: GBP0.2m benefitted
from rent free periods at the start of the new leases). As such,
cash generated by the business in the year, being net cash flow pre
dividend payments, was GBP5.0m (2020: GBP3.6m). The Group paid
dividends of GBP2.1m (2020: GBP5.5m), which included two ordinary
interim dividends of 3.3p per share each. This left closing cash of
GBP7.4m (2020: GBP4.4m) and no debt.
Net Assets
The net assets of the Group have increased from GBP14.1m to
GBP16.6m, with retained earnings of profits of GBP4.3m less the
dividends of GBP2.1m. This leaves the business with a strong
balance sheet.
Section 172 Companies Act Statement
The statements below address the reporting requirements of the
Board under Section 172 of the Companies Act and the Companies
(Miscellaneous Reporting) Regulations 2018.
The Directors of the company have a duty to promote the success
of the company. A director of the company must act in the way they
consider, in good faith, to promote the success of the company for
the benefit of its members, and in doing so have regard (amongst
other matters) to:
-- the likely consequences of any decision in the long term;
-- the interests of the Company's employees;
-- the need to foster the Company's operations on the community and the environment;
-- the desirability of the Company to maintain a reputation for
high standards of business conduct and
-- the need to act fairly between members and the Company.
The Directors are committed to developing and maintaining a
governance frameworks that is appropriate to the business and
supports effective decision making coupled with robust oversight of
risks and internal controls.
Keystone has a clearly stated long term organic growth strategy
and as such all significant business decisions consider both the
short and long term impact in the process. Key to delivering this
strategy is to continue to recruit and retain high calibre lawyers.
In order to be an attractive place for high calibre lawyers to
work, it is essential that Keystone maintains its reputation for
delivering work to the highest professional standards. Central to
the success of the business is the development and maintenance of
its open, welcoming and collegiate culture and we invest
significant time and resources to ensure that these facets are
maintained and developed for the benefit of all those involved with
the Company.
Keystone's primary asset is its people, be it the central office
staff, the lawyers, the clients or third party suppliers with whom
we work (such as counsel, experts and other professionals). As a
business, we dedicate substantial time, effort and resources in
working to develop and maintain strong relationships from which all
parties benefit. As a people business, the impact of business
decisions on our principal stakeholders is always central to the
decision making process.
The nature of the Group's business is fundamentally low impact
to the environment, we have an extremely small office footprint and
the use of technology across the business further reduces the
environmental impact as our lawyers have no need to commute to
work.
The Directors treat all members of the Company fairly and
consistently, as required by both professional standards and in
compliance with various pieces of legislation. We provide
information to all shareholders and other third parties on an equal
basis.
Dividend
In light of the strength of the second half performance and
taking into account the strength of the balance sheet, the Board is
proposing to pay a final dividend for the year ended 31 January
2021 of 10.6p per share (2020: nil). This dividend is comprised of
two elements, the first being an amount of 3.5p per share which is
the remaining value which would have been paid in respect of 31
January 2020 had the pandemic not occurred and the balance of 7.1p
per share in accordance with the established dividend policy. This
brings the total dividend for the year to 17.2p per share (2020:
11.2p per share (3.2p Ordinary and 8.0p Special)); 6.8p per share
which would have been paid in respect of the year ended 31 January
2020 were it not for the pandemic and 10.4p per share in line with
the Group's dividend policy.
The proposed final dividend will be payable on 9 July 2021 to
shareholders on the register at the close of business on 11 June
2021.
On behalf of the Board
Ashley Miller
Finance Director
28 April 2021
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
YEARED 31 JANUARY 2021
2021 2020
Note GBP GBP
-------------------------------------------- ---- ------------ ------------
Revenue 55,027,227 49,630,634
Cost of sales (40,770,513) (36,402,826)
-------------------------------------------- ---- ------------ ------------
Gross profit 14,256,714 13,227,808
Depreciation and amortisation 3 (874,110) (794,658)
Share based payments 3 (208,671) (128,286)
Administrative expenses 3 (7,706,481) (7,219,826)
Other operating income 11,285 75,227
-------------------------------------------- ---- ------------ ------------
Operating profit 5,478,737 5,160,265
-------------------------------------------- ---- ------------ ------------
Finance income 4 39,515 151,991
Finance costs 4 (113,117) (86,365)
-------------------------------------------- ---- ------------ ------------
Profit before tax 5,405,135 5,225,891
Corporation tax expense (1,076,094) (1,063,271)
-------------------------------------------- ---- ------------ ------------
Profit and total comprehensive income for
the year attributable to equity holders of
the Parent 4,329,041 4,162,620
-------------------------------------------- ---- ------------ ------------
Basic and diluted EPS (p) 6 13.8 13.3
-------------------------------------------- ---- ------------ ------------
The above results were derived from continuing operations.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 JANUARY 2021
2021 2020
Note GBP GBP
-------------------------------------- ---- ---------- ----------
Assets
Non-current assets
Property, plant and equipment
- Owned assets 323,940 385,000
- Right-of-use assets 1,335,297 1,746,157
-------------------------------------- ---- ---------- ----------
Total property, plant and equipment 1,659,237 2,131,157
Intangible assets 6,108,606 6,459,490
Other assets 13,628 13,628
-------------------------------------- ---- ---------- ----------
7,781,471 8,604,275
-------------------------------------- ---- ---------- ----------
Current assets
Trade and other receivables 7 18,108,298 16,561,439
Cash and cash equivalents 7,371,300 4,386,586
-------------------------------------- ---- ---------- ----------
25,479,598 20,948,025
-------------------------------------- ---- ---------- ----------
Total assets 33,261,069 29,552,300
-------------------------------------- ---- ---------- ----------
Equity and liabilities
Equity
Share capital 62,548 62,548
Share premium 9,920,760 9,920,760
Share based payments reserve 380,162 171,491
Retained earnings 6,223,096 3,958,134
-------------------------------------- ---- ---------- ----------
Equity attributable to equity holders
of the Parent 16,586,566 14,112,933
-------------------------------------- ---- ---------- ----------
Non-current liabilities
-------------------------------------- ---- ---------- ----------
Lease liabilities 8 1,015,924 1,499,900
Deferred tax liabilities 266,821 336,999
-------------------------------------- ---- ---------- ----------
1,282,745 1,836,899
-------------------------------------- ---- ---------- ----------
Current liabilities
Trade and other payables 8 14,032,341 12,500,318
Lease liabilities 8 538,544 497,791
Corporation tax liability 719,445 541,892
Provisions 101,428 62,467
-------------------------------------- ---- ---------- ----------
15,391,758 13,602,468
-------------------------------------- ---- ---------- ----------
Total liabilities 16,674,503 15,439,367
-------------------------------------- ---- ---------- ----------
Total equity and liabilities 33,261,069 29,552,300
-------------------------------------- ---- ---------- ----------
A Miller
Director
Keystone Law Group Plc
Registered No. 09038082
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
YEARED 31 JANUARY 2021
Attributable to equity holders of the Parent
Share based
Share Share payments Retained
capital premium reserve earnings Total
GBP GBP GBP GBP GBP
---------------------------- -------- --------- ----------- ----------- -----------
At 31 January 2019 62,548 9,920,760 43,205 5,331,002 15,357,515
Profit for the year and
total comprehensive income - - - 4,162,620 4,162,620
Dividends paid in the year - - - (5,535,488) (5,535,488)
Share based payments - - 128,286 - 128,286
----------------------------- -------- --------- ----------- ----------- -----------
At 31 January 2020 62,548 9,920,760 171,491 3,958,134 14,112,933
Profit for the year and
total comprehensive income - - - 4,329,041 4,329,041
Dividends paid in the year - - - (2,064,079) (2,064,079)
Share based payments - - 208,671 - 208,671
----------------------------- -------- --------- ----------- ----------- -----------
At 31 January 2021 62,548 9,920,760 380,162 6,223,096 16,586,566
----------------------------- -------- --------- ----------- ----------- -----------
CONSOLIDATED STATEMENT OF CASH FLOWS
YEARED 31 JANUARY 2021
2021 2020
Note GBP GBP
----------------------------------------------------- ---- ----------- -----------
Cash flows from operating activities
Profit before tax 5,405,135 5,225,891
Adjustments to cash flows
Depreciation and amortisation 3 874,110 794,658
Share based payments 3 208,671 128,286
Finance income 4 (39,515) (151,991)
Finance costs 4 113,117 86,365
----------------------------------------------------- ---- ----------- -----------
6,561,518 6,083,209
Working capital adjustments
Increase in trade and other receivables (1,546,859) (2,050,713)
Increase in trade and other payables 1,532,023 925,257
Increase / (decrease) in provisions 38,962 (31,646)
----------------------------------------------------- ---- ----------- -----------
Cash generated from operations 6,585,644 4,926,107
Interest paid (17,826) (8,710)
Interest portion of lease liability (95,291) (77,655)
Corporation taxes paid (968,719) (801,849)
----------------------------------------------------- ---- ----------- -----------
Cash generated from operating activities 5,503,808 4,037,893
----------------------------------------------------- ---- ----------- -----------
Cash flows from/(used in) investing activities
Interest received 39,515 151,991
Purchases of property, plant and equipment (51,306) (403,501)
----------------------------------------------------- ---- ----------- -----------
Net cash used in investing activities (11,791) (251,510)
----------------------------------------------------- ---- ----------- -----------
Cash flows from financing activities
----------------------------------------------------- ---- ----------- -----------
Lease repayments (443,224) (207,946)
Dividends paid in year (2,064,079) (5,535,488)
----------------------------------------------------- ---- ----------- -----------
Net cash (used in) financing activities (2,507,303) (5,743,434)
----------------------------------------------------- ---- ----------- -----------
Net increase/(decrease) in cash and cash equivalents 2,984,714 (1,957,051)
Cash at 1 February 4,386,586 6,343,637
----------------------------------------------------- ---- ----------- -----------
Cash at 31 January 7,371,300 4,386,586
----------------------------------------------------- ---- ----------- -----------
Notes to the Financial Statements
1. General Information
The Company was incorporated as Keystone Law Group Limited on 13
May 2014 under the Companies Act 2006 (registration no. 09038082)
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 Financial Statements are presented in Pounds Sterling, being
the functional currency of the Group.
2. Accounting policies
Statement of compliance
The Financial Statements have been prepared in accordance with
International Accounting Standards in conformity with the
requirements of the Companies Act 2006.
Summary of significant accounting policies and key accounting
estimates
The principal accounting policies applied in the preparation of
the Financial Statements are set out below. These policies have
been consistently applied to all the years presented, unless
otherwise stated.
Basis of preparation
The preliminary announcement does not constitute full financial
statements for the years ended 31 January 2021 or 2020.
The results for the year ended 31 January 2021 included in this
preliminary announcement are extracted from the audited financial
statements for the year ended 31 January 2021 which were approved
by the Directors on 28 April 2021. The auditor's report on those
financial statements was unqualified. It did not include a
statement under Section 498(2) or 498(3) of the Companies Act
2006.
The 2021 annual report will be posted to shareholders and
included within the investor relations section of our website in
due course and will be considered at the Annual General Meeting to
be held on 5 July 2021. The financial statements for the year ended
31 January 2021 have not yet been delivered to the Registrar of
Companies.
The auditor's report on the consolidated financial statements of
Keystone Law Group plc for the period ended 31 January 2020 was
unqualified and did not include a statement under Section 498(2) or
498(3) of the Companies Act 2006. The financial statements for the
period ended 31 January 2020 have been delivered to the Registrar
of Companies.
Going concern
The Group and Company financial statements have been prepared on
a going concern basis as the Directors have a reasonable
expectation that the Group has adequate resources to continue in
operational existence for the foreseeable future. The Group is cash
positive, has no debt, has a model which is strongly cash
generative and has, to date, a strong trading performance. The
Group's forecasts and projections show that the Group has
sufficient resources for both current and anticipated cash
requirements.
3. Expenses by nature
Expenses are comprised of:
2021 2020
GBP GBP
----------------------------------- --------- ---------
Depreciation 112,366 74,276
Amortisation - intangible assets 350,884 350,884
Amortisation - right of use assets 410,860 369,498
Share based payments 208,671 128,286
Staff costs 3,790,848 3,414,691
Other administrative expenses 4,417,034 4,364,920
----------------------------------- --------- ---------
9,290,663 8,702,555
----------------------------------- --------- ---------
Included within staff costs above are the costs of employed fee
earners who are included within cost of sales (2021: GBP501,401;
2020: GBP559,785).
4. Finance income and costs
2021 2020
GBP GBP
------------------------------------------- --------- --------
Finance income
Interest income on bank deposits 39,515 151,991
Finance costs
Interest on bank overdrafts and borrowings (17,826) (8,710)
Interest on leases for own use (95,291) (77,655)
------------------------------------------- --------- --------
Total finance costs (113,117) (86,365)
------------------------------------------- --------- --------
Net finance costs (73,602) 65,626
------------------------------------------- --------- --------
5. Staff costs
The aggregate payroll costs (including Directors' remuneration)
were as follows:
2021 2020
GBP GBP
------------------------------------------- --------- ---------
Wages and salaries 3,307,043 2,984,228
Social security costs 360,521 322,025
Pension costs, defined contribution scheme 123,284 108,438
------------------------------------------- --------- ---------
3,790,848 3,414,691
------------------------------------------- --------- ---------
The average number of persons employed by the Group (including
Directors) during the year, analysed by category was as
follows:
2021 2020
GBP GBP
--------------------------- ---- ----
Fee Earners 9 10
Administration and support 47 44
--------------------------- ---- ----
Total 56 54
--------------------------- ---- ----
The Company does not employ any employees and as such has no
staff costs.
6. EARNINGS PER SHARE
The calculations of earnings per share are based on the
following profits and number of shares:
2021 2020
GBP GBP
-------------------------------------------- --------- ---------
Profit attributable to owners of the Parent 4,329,041 4,162,620
-------------------------------------------- --------- ---------
Amortisation 350,884 350,884
-------------------------------------------- --------- ---------
Share based payments 208,671 128,286
-------------------------------------------- --------- ---------
One off impact of property changes - 51,547
-------------------------------------------- --------- ---------
Adjusted earnings 4,888,596 4,693,247
-------------------------------------------- --------- ---------
2021
No of 2020
shares No of shares
-------------------------------------- ---------- -------------
Weighted average number of shares
For basic earnings per share 31,273,941 31,273,941
Dilutive effect of grants under LTIP 205,143 135,227
-------------------------------------- ---------- -------------
For diluted earnings per share 31,479,084 31,409,168
-------------------------------------- ---------- -------------
Basic earnings per share (p) 13.8 13.3
Diluted earnings per share (p) 13.8 13.3
-------------------------------------- ---------- -------------
Adjusted basic earnings per share (p) 15.6 15.0
-------------------------------------- ---------- -------------
Adjusted basic earnings per share is calculated by taking
adjusted earnings and dividing it by undiluted average shares for
the year.
7. Trade and other receivables
Company Group
2021 2020 2021 2020
GBP GBP GBP GBP
---------------------------------------------- --------- --------- ----------- -----------
Trade receivables - - 10,381,433 10,084,511
Provision for impairment of trade receivables - - (2,976,731) (2,659,483)
---------------------------------------------- --------- --------- ----------- -----------
Net trade receivables - - 7,404,702 7,425,028
Receivables from related parties 7,453,426 4,744,973 - 10,360
Accrued income - - 7,519,042 6,642,950
Prepayments 13,742 29,785 1,592,149 1,036,900
Other receivables - - 1,592,405 1,446,201
---------------------------------------------- --------- --------- ----------- -----------
Total current trade and other receivables 7,467,168 4,774,758 18,108,298 16,561,439
---------------------------------------------- --------- --------- ----------- -----------
Trade receivables stated above include amounts due at the end of
the reporting period for which an allowance for expected credit
loss has not been recognised as the amounts are still considered
recoverable and there has been no significant change in credit
quality.
The provision for impairment of trade receivables (analysed
below) is the difference between the carrying value and the present
value of the expected proceeds.
2021 2020
2021 2021 Expected 2020 2020 Expected
Gross Provision Loss Rate Gross Provision Loss Rate
GBP GBP % GBP GBP %
--------------- ---------- ---------- ---------- ---------- ---------- ----------
0 to 30 days 3,438,200 - 0.0 3,612,605 - 0.0
31 to 60 days 1,814,914 - 0.0 1,634,222 - 0.0
61 to 90 days 875,870 - 0.0 1,024,966 - 0.0
91 to 120 days 599,953 - 0.0 589,719 - 0.0
4 to 6 months 344,544 - 0.0 292,601 26,757 9.1
6 months to 1
year 1,297,737 966,516 74.5 1,348,970 1,051,298 77.9
Over 1 year 2,010,215 2,010,215 100.0 1,581,428 1,581,428 100.0
--------------- ---------- ---------- ---------- ---------- ---------- ----------
10,381,433 2,976,731 28.7 10,084,511 2,659,483 26.4
--------------- ---------- ---------- ---------- ---------- ---------- ----------
The Directors consider that the carrying value of trade and
other receivables approximates to fair value.
8. Trade and other payables
Company Group
2021 2020 2021 2020
GBP GBP GBP GBP
----------------------------------- ------ ------ ---------- ----------
Trade payables - - 6,936,732 6,483,907
Accrued expenses 30,450 24,171 6,945,752 5,782,595
Amounts owed to group undertakings - - - -
Social security and other taxes - - 149,857 233,816
Other payables - - - -
----------------------------------- ------ ------ ---------- ----------
Total trade and other payables 30,450 24,171 14,032,341 12,500,318
----------------------------------- ------ ------ ---------- ----------
Included within the above accrued expenses is the liability for
lawyer fees associated with the accrued income (2021 GBP5,585,486,
2020: GBP4,922,086).
The Group's exposure to market and liquidity risks related to
trade and other payables is show below. The Group pays its trade
payables on terms and as such trade payables are not yet due at the
balance sheet dates.
Financial liabilities
0 to 6 7 to 12 1 to 5 Pay when
months months years paid Total
GBP GBP GBP GBP GBP
------------------- --------- --------- --------- ---------- ----------
Trade payables 328,054 433,703 - 6,174,975 6,936,732
Accrued expenses 795,266 565,000 - 5,585,486 6,945,752
Lease liabilities 269,272 269,272 1,015,924 - 1,554,468
------------------- --------- --------- --------- ---------- ----------
At 31 January 2021 1,392,592 1,267,975 1,015,924 11,760,461 15,436,952
------------------- --------- --------- --------- ---------- ----------
0 to 6 7 to 12 1 to 5 Pay when
months months years paid Total
GBP GBP GBP GBP GBP
------------------- ------- ------- --------- ---------- ----------
Trade payables 274,918 - - 6,208,989 6,483,907
Accrued expenses 480,509 380,000 - 4,922,086 5,782,595
Lease liabilities 228,519 269,272 1,499,900 - 1,997,691
------------------- ------- ------- --------- ---------- ----------
At 31 January 2020 983,946 649,272 1,499,900 11,131,075 14,264,193
------------------- ------- ------- --------- ---------- ----------
Financial liabilities are held at amortised cost. There is no
significant difference between the fair value and carrying value of
financial instruments.
Amounts shown as pay when paid above principally reflect amounts
payable in respect of lawyers' fees, as well as values payable to
third party counsel and experts whose fees have been incurred on
behalf of the Groups clients as disbursements.
The Company had accrued expenses of GBP30,450 (2020: 24,171) all
of which would fall within the 0 to 6 months category above.
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END
FR PPUPWCUPGGQR
(END) Dow Jones Newswires
April 29, 2021 02:00 ET (06:00 GMT)
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