Keystone Law Group plc

Good afternoon and welcome to the Keystone Law Group plc investor presentation. Throughout this recorded presentation investors will be in listen only mode. Questions are encouraged and could be submitted at any time via the Q&A tab situated on the right hand corner of your screen. Simply type in your questions and press send. The company may not be in a position to answer every question it receives during the meeting itself however the company can review all questions submitted today and publish responses where it's appropriate to do so. Before we begin I'd like to submit the following poll. I'd now like to hand you over to James Knight, CEO. Good afternoon sir.

Thank you. Welcome to interim results for Keystone. Six months ended 31st of July, 2026. I am unsure exactly how familiar you are with the model, but Keystone has been alive and well for the last 25 years. and operating very much the same model now as we did right from the start at the time a very revolutionary disruptive model lawyers working from their own offices earning a high percentage of fees rather than the conventional partnership employed salaried model this gave lawyers this continues to give lawyers a great sense of freedom and flexibility whilst also allowing them to be part of a strong community to have all of the support and the infrastructure of the conventional law firm as we throughout the years we've grown bigger we've grown stronger the support has become increasingly sophisticated in line with the sophistication of our lawyers and our clients and of course technology which always played a strong part of what we do has increasingly come to the fore, never more so than today with AI innovations. The firm has grown really well on an annualized basis for the last 25 years. We IPO'd in 2017 and have continued to go really well since then. The market in which Keystone operates the mid-market commercial law market is large it's about 14 billion pounds and that's just the sector that we operate in and most of that well I'd say almost all of that is addressable by the Keystone model we are able to scale quickly unencumbered by We operate a very efficient paid when paid model which allows the lawyers to achieve the efficiencies and the freedoms and the flexibilities that they want whilst helping our financials. We operate a progressive dividend policy and that has consistently returned value to shareholders ever since IPO in 2017. Moving now to the results of the six-month period just gone I'm delighted to announce another strong financial performance with revenue increasing 22.5 percent Revenue Per Principle up 14.5%, adjusted profit before tax increased 31.3%. Those are the income high level stats. The payaways, this is the first time ever that we have completed a full gamut of different styles of pay-away share buyback interim dividends and special dividends and you can see the figures there the share buyback of 1.5 million pounds is let's say roughly related to the value of the LTIPS which ensured or eliminated the dilution that would have flown from the issuing of new shares for the LTIPS interim dividend 9.6 pence, special dividend 15 pence. Whilst we grow as a firm, it is also extremely important that we Improve. I like to say that this is a law firm that is improving quicker than it is growing. It has been wonderful to have launched our brand Refresh over the last six months. bringing the look and feel of Keystone up to where we've become every 10 years or so it's necessary to deal with do these things cultures change time change looks change so we need to keep abreast with that the AI is another big focus we have been rolling out an extremely Good Tool called Co-Counsel owned by Thomson Reuters, one of the big choices available and certainly the one that we believe is highly suitable for Keystone. It has been well received by our lawyers and the rollout and uptake continues. Recruitment is always a big part of the story. 23 high-caliber principals joined us and the same number coincidentally of POD members. These are junior lawyers that are employed by our senior lawyers who we call principals. Looking focusing on the recruitment KPIs last year was an extremely strong market for us certainly we recruited stronger more substantially than than usual this last six months is a little bit off from where we are there but still extremely good in many ways certainly the caliber of the lawyers it's very important that we maintain a high caliber for our reputation because that is our product for our liability our risk for all reasons this firm it has a tremendously good reputation because we have such good lawyers 23 new principals recruited during the period as I mentioned earlier brings us up to 501 principals in the firm 682 lawyers in total I mentioned earlier that the AI is a important focus for us at the current time obviously it's important for our lawyers to have the tools so that they can remain competitive there's some excellent tools out there for lawyers there's the legora the harvey's the lexus nexus and co-counsel the one that we believe is appropriate for this firm uh rollout is is ongoing and follows on from other AI initiatives that are continuing to receive take up from lawyers. We're also producing a number of tools or have produced that help with the operations of the firm internally. The most recent one that we are launching in the near future just testing at the current time deals with a source of funds and a requirement for us to establish where our clients monies have come from by asking certain questions it's a device that will save time and deal with what is often a rather difficult exchange for lawyers when delving into the wealth of our clients. We'll pass over now to Ashley to take us through the financial highlights.

Yes, it's been a very strong period for us this year, or this six months. We've seen revenue growth of 22.5%, taking us up to 66.3 million, whilst adjusted PBIT has grown 31.6% to 8.1 million. The continued strength of interest meant that we have adjusted PBT up 31.3% to 9.6 million, which is a margin of 14.5%. Cash conversion in this business is always strong the pay when paid model fundamentally makes that the case so our conversion of 95.6 percent in the first half is reflective of that. That left us with 10.5 million pounds of cash and the adjusted EPS in the period of 23.1p is an increase from 17.8 pence the same period last year and James has already mentioned the dividends that we are paying at this time. If we move across for a bit more colour on the income statement, you'll see that the revenue growth has been driven essentially by broad based client demands. So we've seen strength across the business as a whole, albeit that we have had some standout strength within the corporate and corporate restructuring. Essentially a couple of million pounds worth of revenue was slightly lumpier in the first half and so we've seen about 20% of the revenue come from corporate this year versus 16% last year. We've also seen continued strength in recruitment during the second half of last year particularly and into this half driving that revenue. So we've seen the average principals increase 7.1% year on year whilst total fee earners rose 12.5%. All of this resulted in an increased revenue per principal of 14.5% taking us up to £133.8k. Now we're a very real business and it's really important that whilst we recruit these lawyers of the high quality and the high calibre we need to ensure that we continue to invest in the business to provide the support and infrastructure that they need and to that end we've continued to invest in our people. So we've seen staff costs increase 15% year on year with average headcount increasing from 79 to 92. Other admin costs also increased by 14%. Within that sort of one of the larger areas was a transition, a move to a different IT managed provider, managed service provider, we now work with Acora. And the reason for that migration was very much that we identified about 18 months ago, that the provider we were with at the time wasn't really the part that we needed to continue to scale the business and grow into the future the new part that we've taken at core is much better suited to deal with the complexity that we have now as a growing as as the business of the scale we are at so we're very happy with the transition it went exceedingly well and as I say but it has resulted in a slightly increased in cost all of these factors resulted in our enhanced drop through of revenue to adjusted PBIT with a margin at 12.3% which is up 0.9% this year or this period and the net interest remains strong increasing 0.3 million leaving us with a margin adjusted PBT of 9.6 million On to the balance sheet. The balance sheet here is, as always, very clean, very strong and very simple. We are always cash positive. We don't have any debt and we're net cash position of 10.5 million at the end of the period. The pay when paid model of the business ensures that trade debtors remain very much aligned in interest for the lawyers have to get paid so 33 debtor days remains very strong and there is always a corresponding liability for any remaining debtors on the balance sheet. We've already explained that we carried out the share buyback of one and a half million in the period which when we bought just under 268 000 shares which we used to fulfill our commitments under the LTIPS which vested in the period. on to the cash flow and again it's a very clean cash flow statement this year as always very strong cash conversion as is the nature of the business capex is operating at normal levels which for our business is sub 0.1 per annum on the balance on the cash flow obviously reflective of the share buyback we have the 1.5 million which is new this year and whilst the dividends in this year reflect as lower than previously that was because in 1h last year we paid not only an ordinary but also a special dividend at that point in time.