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, Financial) 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.
Q: What are the limiting factors for growing the number of principals, and is there a target for new recruits?
A: Ashley Patrick Miller noted that the only limiting factor is the availability of high-quality lawyers. The market is large, and they focus on maintaining high standards to drive sustainable growth. There is no specific target, but they aim to recruit top talent.
Q: How does Keystone Law manage part-time lawyers and support clients in their absence?
A: Ashley Patrick Miller explained that lawyers manage their client relationships and work flexibly to meet client needs. They ensure open communication and resource allocation to maintain service quality, similar to conventional law firms.
Q: What is the long-term future of Keystone Law?
A: James Knight expressed optimism, highlighting the growing popularity of the platform model in the legal sector. Keystone's model allows for scalable growth without cash flow issues, positioning the firm well for future expansion in the mid-sector legal market.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
