Strong financial performance; well positioned to capitalise on opportunities in the recruitment market
Keystone Law Group plc (AIM: KEYS), the fast growing, UK Top 100, challenger law firm, today announces its half year results for the six months ended 31 July 2021 ('H1-2022').
I am delighted to report that Keystone has delivered a very strong financial performance in the first half of this financial year (‘H1-2022’ or the ‘period’), with revenue rising to £33.7m (37.6% up on H1-2021: £24.5m, 10.2% up on H2-2021: £30.6m), reported PBT of £4.3m (up 118% on H1-2021: £1.9m, up 23.1% on H2-2021 £3.5m), adjusted PBT(1) of £4.6m (up 109% on H1-2021: £2.2m, up 22.4% on H2-2021 £3.8m) and cash generated from operations of £4.2m up 27.2% (H1-2021: £3.3m, H2-2021: £3.3m).
Throughout the period, the business has continued to perform extremely well. The ongoing Covid-19 restrictions have had no detrimental effect on the operational efficiency of the model; a model which was described at the Lawyer Awards 2020 as being “vindicated in spades” and “light years ahead” and this has been demonstrated in the financial results.
Activity levels across all practice areas have been very high throughout the period as the economy has opened up and, to some small degree, changes to stamp duty and the rumoured changes to the capital gains tax regime have driven demand across the legal industry. Furthermore, the Covid-19 restrictions on movement have reduced the normal seasonal downturns often experienced around Easter and the early summer months. The total number of Principals(2) has grown to 386, with 21 joining in the period (H1- 2021: 27). The increased activity has also driven continued growth in the demand for junior support, delivered both through the Pods(2) and the Central office lawyers. As a result, we have had 16 new Pod members join taking the total number of Pod members to 83 (31 January 2021: 74) across 48 Pods (31 January 2021: 44), whilst the number of central office lawyers has increased by 1 to 10. All of which means that we now have a total of 479 fee earners (31 January 2021: 452).
The conditions in the recruitment market during the period have been more akin to those experienced in H2-2021 than during H1-2021 as the ongoing disruption and uncertainty caused by Covid-19 restrictions, now combined with the generally robust levels of activity across the legal industry, encouraged high quality candidates to remain where they are rather than seek new opportunities. Accordingly, qualified new candidate applications in the period were 136 compared to 145 during the same period last year and 108 during H2-2021. We extended offers to 36 candidates (H1-2021 53, H2-2021 28) and 28 candidates accepted offers in the period (H1-2021 41, H2-2021 29).
The central office team have continued to rise to the challenge of delivering the broad and varied array of social and networking opportunities, albeit that these have had to be online rather than in person, which form such an important part of maintaining the cohesive Keystone culture. These events are an essential means by which both new and existing lawyers develop and maintain the internal networks and relationships which underpin the collegiate spirit of Keystone. It is this networked collegiate approach which so successfully delivers multi lawyer and cross disciplinary solutions to our clients.
I am pleased to announce that the Board has declared an interim dividend of 4.5p per share in line with our stated dividend policy. The dividend will be payable on 15 October 2021 to shareholders on the register on 24 September 2021 and the shares will go ex-dividend on 23 September 2021.
Summary and Outlook
In summary, I am extremely pleased with the financial performance of the period. The activity levels across the business have driven strong revenue and slightly enhanced gross profit margins as the utilisation of the central office lawyers has recovered following a slowdown last year. This, together with some cost savings resulting from Covid-19 restrictions, has generated a highly profitable set of results.
The prolonged period of uncertainty which the Covid-19 restrictions have caused, combined with the expectation that these restrictions would soon be ending has undoubtedly dampened the appetite of some high quality candidates to seek new opportunities for the moment and in light of these conditions I am satisfied with the growth in the lawyer base that we have achieved.
Looking ahead, activity remains buoyant and I am confident that the relaxation of the Covid-19 restrictions and more significantly, the return to office which will generally affect potential candidates during the second half of this year will serve to provide further impetus to the legal recruitment market and we are well positioned to take advantage of the opportunities that this will present. As such, I am confident that we will deliver another good performance during the rest of this year which will be materially ahead of current market expectations.
Chief Executive Officer
15 September 2021
(1) Adjusted PBT is calculated utilising profit before tax and adding back amortisation and share based payments for all periods.
(2) The terms Principal and Pod were defined on page 7 of the annual report and accounts for year ended 31 January 2021