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

  • Strong revenue growth of 15.3% to £23.0 million (H1-2019: £19.9 million)
  • Adjusted PBT1 increased by 15.4% to £2.7 million (H1-2019: £2.3 million)
  • Basic EPS rising to 6.3 pence (H1-2019: 5.5 pence)
  • Robust cash conversion at 90.3% with operating cashflow2 of £2.4 million (H1-2019: £2.2 million)
  • Interim ordinary dividend of 3.2 pence per share, in line with progressive dividend policy
  • Special dividend of 8.0 pence per share

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

  • Principal1 lawyer recruitment continues to be strong

    • Number of qualified new applicants rose by 7.5% to 114 (H1-2019: 106)
    • Principal lawyers accepting offers increased by 24% to 36 (H1-2019: 29)
    • Number of principals increased by 27 (H1-2019: 25)
  • Demand for junior support, both through Pods1 and central office employed lawyers, continues to grow: Pod members increased by five and central office lawyers by two
  • Invested in new office space to deliver more meeting rooms, hot desks and improved lawyer centre
  • Aligned existing lease to new now hold co-terminus five year leases
  • Keystone model and brand continues to be increasingly well respected
  • Performance in the period has been ahead of expectations and this has laid a strong foundation for the rest of the year

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."

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.


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.

For the period ended 31 July 2019

 Note6 Months to
6 Months to
Revenue 22,984,36419,940,081
Cost of sales (16,796,779)(14,559,616)
Gross profit 6,187,5855,380,465
Depreciation and amortisation2(354,993)(332,141)
Administrative expenses2(3,502,288)(2,958,137)
Other operating income 35,16032,816
Operating profit 2,365,4642,123,003
Finance income 68,48250,681
Finance costs3(3,020)(5,982)
Profit before tax 2,430,9262,167,702
Corporation tax expense (462,551)(457,092)
Profit and total comprehensive income for the year attributable to equity holders of the Parent 1,968,3751,710,610
Basic and diluted EPS (p) 6.35.5


The above results were derived from continuing operations.

For the period ended 31 July 2019

 Note31 July
31 July
31 January
Non-current assets    
Property, plant and equipment 278,70043,780 55,775
Right of use assets 2,245,784887,086746,666
Intangible assets 6,634,9326,985,816 6,810,373
Available-for-sale financial assets 13,62813,628 13,628
  9,173,0447,930,310 7,626,442
Current assets    
Trade and other receivables 15,482,70911,804,946 14,510,726
Cash and cash equivalents 6,357,4495,312,192 6,343,637
  21,840,15817,117,138 20,854,363
Total assets 31,013,20225,047,448 28,480,805
Equity and liabilities    
Share capital 62,54862,548 62,548
Share premium 9,920,7609,920,760 9,920,760
Share based payments reserve 88,224-43,205
Retained earnings 5,266,5714,016,232 5,331,002
Equity attributable to equity holders of the Parent 15,338,10313,999,540 15,357,515
Non-current liabilities    
Lease liabilities42,054,201676,648524,677
Deferred tax liabilities 372,088442,266 407,177
  2,426,2891,118,914 931,854
Current liabilities    
Trade and other payables 12,388,6669,238,336 11,575,061
Lease liabilities4320,523320,063311,971
Corporation tax liability 496,741284,625 210,291
Provisions 42,88085,970 94,113
  13,248,8109,928,994 12,191,436
Total liabilities 15,675,09911,047,908 13,123,290
Total equity and liabilities 31,013,20225,047,448 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

Keystone Law Group plc

Registered No: 09038082

For the period ended 31 July 2019

  Attributable to equity holders of the Parent 
At 1 February 2018 (audited)62,5489,920,760-2,568,34312,551,651
Profit for the period and total comprehensive income---1,710,6101,710,610
Dividend Paid---(262,721)(262,721)
At 31 July 2018 (unaudited)62,5489,920,760-4,016,23213,999,540
Profit for the period and total comprehensive income---2,096,6192,096,619
Share based payments--43,205--
Dividend Paid---(781,849)(781,849)
At 31 January 2019 (audited)62,5489,920,76043,2055,331,00215,357,515
Profit for the period and total comprehensive income---1,968,3751,968,375
Share based payments--45,019-45,019
Dividend Paid---(2,032,806)(2,032,806)
At 31 July 2019 (unaudited)62,5489,920,76088,2245,266,57115,338,103


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

For the period ended 31 July 2019

 Note6 Months
to July
6 Months
to July
Year ended
31 January
Cash flows from operating activities    
Profit before tax 2,430,9262,167,702 4,745,011
Adjustments to cash flows from non-cash items    
Depreciation and amortisation2354,993332,141 665,588
Share based payments 45,019- 43,205
Finance income (68,482)(50,681) (120,463)
Finance costs 3,0205,982 7,659
  2,765,4762,455,144 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 2,555,8652,377,297 4,902,556
Interest Paid3(3,020)(5,982) (7,659)
Corporation taxes paid (211,189)(267,307) (857,420)
Cash generated from operating activities 2,341,6562,104,008 4,037,477
Cash flows from investing / (used in) activities    
Interest received368,48250,681 120,463
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 13,8121,722,223 2,753,667
Cash at 1 February 6,343,6373,589,970 3,589,970
Cash at 31 July 6,357,4495,312,192 6,343,637


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