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• Revenue: GBP46.5 million, up 8.3% year-over-year.

• Adjusted PBT: GBP6.1 million, up 7.2%.

• Gross Profit Margin: 26%, slightly down from 26.2% last year.

• Operating Cash Conversion: 106%.

• Net Cash: GBP8.3 million.

• Adjusted EPS: 14.6p.

• Interim Dividend: 6.2p per share.

• Principal Recruitment: 30 new principals recruited.

• Total Fee Earners: 557.

• Revenue per Principal: Increased from GBP105,500 to GBP106,300.

• Headcount Growth: Increased from 63 to 69, up 9.5%.

• Debtor Days: 33 days, consistent with last year.

• Corporation Tax Cash Outflow: Additional GBP1.6 million due to tax payment schedule change.

• Warning! GuruFocus has detected 6 Warning Signs with WAR:ATT.

Release Date: September 12, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Keystone Law Group PLC (LSE:KEYS) reported an 8.3% increase in turnover revenue for the half-year ending July 31, 2024.

• The company operates a debt-free business model with GBP8.3 million in cash, highlighting strong financial health.

• Keystone's unique business model allows lawyers to work flexibly from various locations, which has been a key factor in its success.

• The firm has a strong recruitment pipeline, having taken on 30 new principal lawyers and 16 new pod members during the period.

• Keystone Law Group PLC declared an interim dividend of 6.2p per share, reflecting confidence in its financial performance.

Negative Points

• The gross profit margin slightly decreased from 26.2% to 26%, due to a change in the business mix.

• The net increase in principal lawyers was only 10, as 20 lawyers left during the period, which could indicate retention challenges.

• The company faces increased costs related to inflation and investments in infrastructure and personnel.

• Keystone's operating model may limit its ability to expand internationally, as the focus remains on the UK market.

• The transition to being classified as a 'super-large' business by HMRC has resulted in a cash flow impact due to accelerated tax payments.

Q & A Highlights

Q: How does Keystone Law ensure that its 550 lawyers provide top-class service and comply with regulations? A: James Knight, CEO, explained that the process begins with rigorous recruitment, similar to conventional law firms. They assess CVs, conduct multiple interviews, and evaluate the legal background and client base of potential lawyers. Compliance and risk management are crucial, with a dedicated team to support lawyers and handle any issues that arise.

Q: Has Keystone Law considered reducing its share of revenue to increase the share for lawyers? A: Ashley Patrick Miller, CFO, stated that the current revenue share is appropriate and aligns with market standards. Adjusting it could negatively impact the business. The existing model provides a fair return to shareholders and is considered the best deal for lawyers.