Good afternoon, ladies and gentlemen, and welcome to the Keystone Law Group PLC investor presentation. Questions are encouraged. They can be submitted at any time via the Q&A tab that's just situated on the right-hand corner of your screen. Please just 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. The company can review all questions submitted today and will publish our responses where it's appropriate to do so on the Investor Meet Company platform. Before we begin, we would just like to submit the following poll. I would now like to hand you over to the exec management team from Keystone Law Group PLC. James, good afternoon, sir.
Thank you very much, good afternoon, everybody. Welcome to Keystone's annual results for the year just gone, finishing end of January 2026. I am delighted to report that it's been a good year for Keystone. I'd like to give you a little bit of a summary, a bit more background to the firm just in case you are not aware of what sort of organization it is. We are a regulated law firm. We operate a very different model described as the platform model. It is something that we invented in 2002. It has now become a very mainstream type option for lawyers coming from private practice.
Lawyers have a great deal of freedom, flexibility, and autonomy to work with their clients in the way that they choose, but they also have a tremendous amount of infrastructure support, and regulation insofar as it is necessary, all provided by the Keystone central office. We used to be the only platform law firm in the country, we are now considered to be the premier platform law firm. We are the number one. This is a much better than being alone, the outlier. It may be seen as competition, in actual fact it adds to the efficacy of the business model. We have grown into a significant law firm now over the years, with that becomes an extremely strong sense of community, cross-referral of work, a sense of belonging, a culture, a dynamism.
We are essentially seeking to give our lawyers everything that they could possibly have, any benefit in the conventional workplace, while also removing some of the downsides of the conventional workplace. The technology is a significant part of what we do, and we'll come on to talk about AI in due course. We have grown consistently since creation, and in IPO November 2017, since IPO, we have continued to scale up in an extremely proactive way and managed to return dividends on every six months since we IPO'd. We do have a great ability to scale, thanks to the pay-when-paid model that we operate and the fact that our lawyers operate from their own offices, whether that be at home or elsewhere, enabling us to scale in a way that is not inhibited in the same way as the conventional workplace.
The offices in Central London do have meeting rooms, hot desking, even permanent desks, for the very few that wish to use those permanent desks. We have a proven track record in delivering sustainable growth and a progressive dividend policy. I'd like to turn now to the results themselves for the year just gone. As I mentioned at the start, it was a great year for us. In fact, one of the best years. Well, I think possibly the best year we've ever had in terms of really well-rounded results. Nothing that is an outlier, nothing that I would prefer to be better. Revenue increased 17.9%. Adjusted PBT is up 20.6%.
Operating cash conversion is always good at Keystone as a result of the pay-when-paid business model, 98.9% being pretty much around where it normally is. We've never had debt. We've got cash in the bank. As also mentioned earlier, we are very good at paying dividends, having done so at the interim period at GBP 0.075, paying 17.2% in the near future. That's a 22% or 22.5% increase on last year. The other side of our business is the recruitment. That is because we grow this firm by recruiting good quality lawyers with good quality client followings. That is the numero uno way that we do grow the firm.
In a way, it gives you insight to the future in terms of next year's results. 61 new Principals. These are the senior lawyers. They are self-employed, but they are Keystone lawyers at the same time, and very much presented as Keystone lawyers. 63 new Pod Members. These are junior lawyers employed by the Principals. Again, Keystone lawyers, with all the insulation and all the environment of Keystone around them. New Principals have this year been particularly effective in bringing in pod members with them. In other words, mostly these would or may have been their junior lawyers at their previous law firm. This gives an indication of the confidence in which they are joining us, bringing an overhead for themselves with them, knowing that they are going to be extremely busy and going to need this support from day one.
Total fee earners up 13.5%. Turning across the page, we see some details on, more details on the recruitment KPIs. We focus, as I mentioned, this is the number one source of growth. Yes, our revenue per Principal has increased beautifully, 10.5% over the year. However, the number one driver is the recruitment. The figures speak for themselves. All of the metrics are good. The total number of Principals at Keystone is 491, and the total number of fee earners is now 654. I would mention at this stage that we've become a very significant firm now. Obviously, in the early days, we were small, an outlier.
We attracted lawyers and clients because we offered something that was new and innovative: the freedom, the flexibility, and the autonomy. What we are now, obviously, that is a great attraction for Principals joining us. We are also now a significantly powerful law firm that is attracting lawyers who wish to join us because of what we have become. They may like the flexible working, et cetera, but really they're joining us because they, we are a better, stronger brand, better colleagues than their previous firms. Notwithstanding, previously we had some advantages, now we have those advantages and many more. AI is, of course, an incredibly important story. It's a subject on everybody's mind at the current time.
Keystone has always been propagated upon our IT, right from the word go. Our story was that we use IT and technology to drive efficiencies, to reduce overheads, and to support work. It's very much ingrained in our DNA to try and take advantage of any new, useful IT tools. The AI story is extremely useful and the technology that's coming on board are some of these are absolutely fantastic tools to help with fee earning. We have assembled a team that has been looking into this over the last eight months of lawyers, IT, management, Principals, et cetera, to test and carefully assess what is best out there. Is it Harvey? Is it Legora? Is it Juro? Is it CoCounsel?
We have very recently, in fact, just announced to the firm on Tuesday at the spring conference that CoCounsel is the solution that we are going with. It's amazing. We've tested it all the way. It's perfect for this business. It's owned by Thomson Reuters. It encapsulates PLC, which is the template database and knowledge hub that we principally use anyway, and Westlaw is a, comprised of 10,000 legal books. It is, I think, the perfect solution for us. Other solutions that we have been using up until now and will continue to use are things like KeyBot. KeyBot being, that's our name for an environment that is very much like ChatGPT and Claude that gets you so far. I mean, it has been a very useful stand-in.
It continues to be relevant for the for more general type work required. I mean, it does what ChatGPT does. It is, you know, it's as good as far as it goes, but it, it only goes to the public environment, to the internet, whereas CoCounsel is going straight into accessing. It can do everything that Chat can do or KeyBot can do, but it can also do a whole lot more. We have, six months ago, I did announce that we had created an AI solution on the operating manual to interrogate that. That's going extremely well. We have a new AI solution coming out about source of funds to help with the money laundering side of things.
We've brought in the ndMAX Assist, which is part of NetDocuments, which is there to help interrogate the documents in our massive database knowledge hub, where everything is held in a secure manner being part of NetDocuments. Far too early to tell how the technology that is now being sort of introduced— is now people are getting upskilled on, learning, and getting used to using, quite how that will affect pricing, et cetera. We're very confident that these tools are going to be great enhancers. I think with AI, one of the most important things is to embrace it, is to get ahead of it, to use it, to become skilled on it. In the legal profession at the current time, only about 3% of lawyers are using AI.
Even with KeyBot, we had some 360 something of our lawyers were using that. Our lawyers are more, let's say tech friendly, I think, than many. I suppose the model is about entrepreneurialism, is seizing opportunities. That is what is happening on that front. Since I last presented to you, we have undertaken our brand refresh. This has been about a year's work. What you see in front of you, in terms of the slides is, if you can remember what it used to look like, it's a different look. It's one that I'm very happy with. It's modern, fresh, dynamic. I think so anyway, and our lawyers do as well.
On the right-hand side there, you can see the results of a very recent survey from our lawyers indicating not 100% happiness, but you're never gonna get that with a, with a rebrand or a refresh. You know, there's always people don't like change. I mean, in terms of people that agree that they like it or they're not too sure, it's overwhelming, and I'd say very, very good for a brand refresh. We involved them in the process, in as much as, not decision-making process, but involved, kept them up-updated as we went along, so they felt that they were really part of the progression. I'll pass over now to Ashley who will take you through the financials.
As James has said, it's been a particularly strong period for us last year, with revenue growth of 17.9%, taking us to GBP 115.2 million of revenue. Adjusted PBIT was up 11.4% to GBP 12.9 million, and adjusted PBT up 20.6% to GBP 15.3 million, which represented a margin of 13.3%. The operating cash conversion at just under 99% was particularly strong, although we do consistently deliver a conversion in the region of 95%-100%. We finished the period with GBP 9.7 million cash in the bank. We are debt-free. We had EPS, adjusted EPS for the period of GBP 0.37, and the ordinary DPS in total will be GBP 0.247.
In terms of the income statement, just a bit more detail behind those numbers, the revenue growth was really driven by accommodation of the broad-based demand and continued strength in recruitment, with average Principal numbers increasing 6.7%, and the average total number of fee earners rising 9.3%. Revenue per Principal also grew strongly, earned 10.5% in the period, moving from GBP 220,000 to 243,500. The revenue growth this year has really been driven considerably by our Principals and their pods.
As a result of that, the revenue we gain from the areas we enjoy an enhanced margin on, which are a small number of lawyers in the Isle of Man and our centrally employed lawyers reduced as a percentage of the mix, which meant the gross profit margin moved down to 25.4, 25.5% in the period. Staff costs in the business increased 17% as we continue to invest in our people. We really do have to, across the piece, it is fundamental that we continue to invest in all elements of the business, the infrastructure, the people, the IT, the tech, in order to facilitate and empower our lawyers to deliver the high quality services they need to deliver to our clients.
We saw that in the staff costs with an increase in the head count, rising on average from 69 last year to 81. As well as that, in order to attract and retain the best talent, we need to pay a competitive wage in this market. On the other admin costs, we saw an increased spend of 19.3%, with the largest single feature being one of those strange situations where it's a good thing to pay an increased cost. That's because our recruitment costs increased by GBP 0.5 million this year. That was a feature of a number of lawyers coming through our recruitment channel, the recruiters, where we pay our recruiters with reference to a percentage, with reference to the size of the practice that they bring with them.
Larger practices resulted in a higher cost there. Over and above this, the other main drivers really were the cost of investment in IT, the ongoing cost of the refresh, and also just the general growth in the business, as so many of our costs are semi-variable or variable, linked with the activities we carry out. As a result of all of this, our adjusted PBIT increased 11.4% to GBP 12.9 million on a margin of 11.2%. This year we have benefited from renegotiation in the first half of the year of interest rates with the banks, meaning that we are getting, as interest rates have started to fall, we're getting a better share of the interest rate. Consequently, we've seen a step up there.
That's left our adjusted PBT increase of 20.6% to GBP 15.3 million or a margin of 13.3%. The balance sheet of the business is very clean and very straightforward. Our cash position is strong, and we're debt-free. The alignment of interest we have with our lawyers because of the pay-when-paid model means that working capital lockup in the business is minimal, and debtor days were 35 at the year-end compared to 34 the year before. We also, because of this pay-when-paid, have a significant interconnectivity between the debtor balances and our creditor liabilities, with GBP 23 million of the trade and other payables only payable upon receipt of funds to Keystone. On the provisions, it's important to recognize that whilst, as required by governance, we disclose the under professional indemnity provision, we disclose the gross liability.
We also have a corresponding asset being the amount we'd recover under our insurance. Consequently, the net increase of the position year on year was only GBP 75,000. The intangible assets on the balance sheet are a reflection of a structure, a PE structure of a deal done in October 2014 before we came to market and therefore have nothing really to do with trading. The cash flow again, just demonstrates the strength and the high quality of the earnings we have with the conversion into cash, very significant. Operating cash conversion's already been mentioned before. This year, we've seen the net interest flow through from the P&L account, comes through into an increase in the cash flow.
Really across a number of lines such as corporation tax, CapEx, and lease payments, this year is a return to a normal run rate where we'd had distortions in 2025. On the corporation tax, 2025 was a year we transitioned through to paying all corporation tax in year, which meant we last year paid six quarterly payments as opposed to four. On the CapEx, again, last year we had a significant outlay in terms of the fit out of our offices upon signing our new leases. That refit cost was a one-off last year, and we've reverted to our normal levels this year of about GBP 0.1 of CapEx. Likewise, the lease payments this year are the normal run rate, with last year benefiting from a rent-free period upon re-signing of the leases.
The dividends this year, the cash flow impact was larger than the previous year. That's really a factor not only of the progressive dividend, but also the payment of the special dividend that we paid during the year, declared this time last year of GBP 4.7 million.
Thank you, Ashley. Not much more to say about the year just gone. I wish every year was as good as that one. In terms of outlook, I think it's good. We've started the year well. The pipeline from or let's say the recruits, both Principals and pod members made during the 12 months just gone, will basically help to inform , the year ahead. At the same time, of course, we continue, as ever, to recruit good quality, high caliber lawyers. Something that our brand and reputation helps us enhance it, as we become ever more respected, ever more larger in many ways. The pool of lawyers who are keen to join Keystone, increases ever more.
I would say, though, that we have really managed to become very much part of the establishment whilst still retaining our entrepreneurial model and our very unique culture. I should emphasize that Keystone is a law firm where people are very team-orientated. They know each other well. They operate together very well, very collaborative. This is a very much a human business, not a platform of disparate individuals just tapping into the software. I think that the trading conditions for the year ahead are going to be much the same as the ones just gone, as in the level of client demand, which I must say is very good. I have no complaints about that at all. I'm confident that we will deliver a strong set of results in due course, in line with our market expectations.
Yeah, I look forward to answering your questions as we go into the next stage.
Perfect, guys. If I may just jump back in there. Thank you very much indeed for your presentation this afternoon. Ladies and gentlemen, please do continue to submit your questions just by using the Q&A tab that's situated on the right-hand corner of your screen. Just while the team take a few moments to review those questions that have been submitted already, I'd just like to remind you that a recording of this presentation, along with a copy of the slides and the published Q&A, can all be accessed via your investor dashboards. Guys, you can see that we have received a number of questions, and thank you to all of those on the call for taking the time to submit their questions. James, Ashley, at this point, if I may just hand back to you to address those questions where appropriate.
If I pick up from you at the end, that'd be great. Thank you.
Thank you, again. Yes, I'll read out and deal with the first question that we have here. How high do you think the referral share can go? To give us some indication of its flywheel effect, when did it reach the 30%? The referral fee referred to here is based upon the very simple remuneration structure that we use at Keystone. Its simplicity is part of its success in many ways. It's a percentage basis that in terms of the fees that lawyers take home. They take home 60% of fees for work that they do. They take home an additional 15% of fees on clients that they brought into the firm. Either way, that leaves central office, Keystone, the legal entity, with 25%.
That is our gross income, our gross revenue, and upon which we pay all the overheads of the firm. If a lawyer brings in the work and does it, they get the 60%+ 15%. If they refer it to a colleague, they get the 15%, and the lawyer who does the work gets the 60%. It is as simple as that. Effective in its simplicity and its fairness. The referral, the amount of work cross-referred in the firm is about 33% of work. Not relevant to the percentage that I just gave you. Though that was just a little bit of background. 33% is cross-referred. That's very good.
I mean it compares very favorably with the conventional law firms. It's better basically, and it's better because our lawyers know each other well and because they're very co-collaborative. It's sort of the, it's as good as it can get in many ways. If it does tick up a little bit, well, all well and good. I think you can certainly think that that's pretty stable. Obviously the numbers in terms of the GBP will increase in line with turnover and revenue, but the share will be pretty much the same.
Okay. How about I take this next one? There's a question here on how much of the revenue last year was derived from increase in rate versus other things. We don't break it out exactly those splits, but to be clear, the revenue increase or the cost of the revenue per Principal increase is really being driven by a number of factors. You've got this sort of umbrella overarching fact that we are driving up the value chain and becoming ever more respectable and bringing in lawyers with larger practices. That's also supported with the investment they make in bringing on board the juniors, and we've seen a very successful period there with the pod principals increasing substantially this year. Both of those will have fed into those.
The ongoing demand from the market is also a factor. In terms of revenue and pricing, we do also review prices each year, our hourly rates and rack rates, on an annual basis broadly to reflect sort of inflationary increases in the market and to an extent as our brand uplifts, that also gets factored into those considerations. Whilst we don't give an exact split out, those are the various factors driving that onwards.
Next question. You have previously stated that hirings are not limited by cash flows or capacity. What is the limitation? Why don't you go hiring 20-30 net annually, up to 50-100 net, in other words, in terms of new Principals? Well, it is true that cash flow and office space capacity are not restraints. However, this is where it's important to understand that Keystone is a very real law firm, a very real business, not just a technology platform. Technology is a very important part of what we do. We have recruitment channels. Every good CV application that we get goes into a pipeline for further assessment. We interview several times. We assess. We're looking for excellent CV. We're looking for membership of The Legal 500 and Chambers directories. .
We're looking for a good fit into the business. We may not be paying salaries, but we're responsible for the work that is undertaken. The quality of our lawyers goes straight to our brand, our reputation, our claims history, and our insurance policy. It's important to get it right. The numbers that come out of that, the numbers that we've seen over the last few years, and in this case 61, are the right numbers to allow us to maintain that caliber and to scale in a considered, articulate way, making sure that the lawyers receive a proper induction process and get assimilated into the firm. We're largely, you know, happy at the speed of growth. By law firm standards, extremely strong as it is.
Maintaining quality, maintaining consistency, been doing this 24 years now in the right way is much more important than throwing caution to the wind and just opening the doors to everybody, which would be the death knell of Keystone.
Okay. A number of people have raised questions around AI, productivity, pricing, and the interrelationship of all of that. Obviously we're at the start of a journey with the rollout of AI, in terms of the actual implementation and how that flows through. Really, our expectation is if we start at the top in terms of the client demand, we don't anticipate that in the space of market we operate in, that AI is likely to impact on the actual demand for legal services. The reason we say that is, or we believe that is very much that at the level of the market we operate, our clients are dealing with transactions which are either highly complex, dealing with very high- value assets, and/or very personal circumstances of value to them.
To that end, they're unlikely to see, consider an option of going online and essentially downloading a contract, which albeit it's got an AI element to it's unlikely they're going to self-serve. We don't see that being an impact at that perspective. In terms of coming on to how pricing may change or develop over time and whether or not there's an expectation there, again, from our perspective, we believe that most clients in our space are happy with the value that they get for the product they receive and the mechanics by which that are calculating, whether that's by hourly rate, fixed fee, capped with reference to transaction sizes. All of these tools already exist within the legal markets.
However one calculates fees, if this is the rate and the value is not there or not perceived to be there, it would be challenged anyway. We believe that the efficiencies that may be generated are unlikely to be met with significant pricing pressure as a result of that because it also delivers value in its own context. We've also been asked in terms of how Keystone will value benefit from the productivity gains generated by the lawyers because of our model and the way we pay our lawyers. The point is this, that we really, as a business, we already invest. Our very starting point on investment and support to our lawyers is to provide all the tools and solutions they need and support in order to empower them to deliver legal services of the highest quality.
Really, this is no different on the AI space. This is another tool which will be in that space. There will be an overarching benefit to us through this investment, through positioning us strongly in the marketplace, a lot continuing to build our brand and continuing on the attraction. Then from a financial benefit perspective, it's the value that any efficiencies that the lawyers gain themselves, i.e., if something will take less time to do, that will potentially give them the opportunity to drive more revenue should they have more demand out there and be demand constrained as opposed to supply or be supply constrained as opposed to demand constrained. The take would come really through our additional revenue growth rather than through other areas.
There's also then been a question about whether we would be using, there are significant AI efficiencies in the facilities that could enhance margin, as in the central office function. Really at this point in time, whilst there are a number of tools we're using and rolling out to support the, really to support the lawyers in some of the back office things that they do, whether that's conflict checking, anti-money laundering, those sorts of things. Most of the facilities, the support that the people we invest in in the central office are not doing the sort of roles which AI is very good at doing, i.e., we're not sat in front dealing with large volumes of data or transactional pieces in that sort of nature.
A lot of the roles are very much delivering services which are either people-based, whether that's our community and engagement team or our marketing team and/or, within the admin team doing the administration roles to support our lawyers there. It's unlikely we're going to see a significant change in margin off the back of AI generation.
Thanks, Ashley. Next question. What is your international strategy? Well, Keystone does have a what you might call a sister firm in Australia called Keypoint. It would be Keystone except there was already a, unfortunately a Keystone, a law firm of that name in Australia when we launched this back in 2013 or 2014. It's done well. It's grown a little bit, but it's not a big part of the story. We actually own 19 and a bit percent of Keypoint. It pays some dividends, it's profitable. It doesn't really move the dial that significantly. It's been successful, but it was more of a licensing type arrangement. We're not an integrated law firm. We're completely separate organizations.
In summary, we do not have plans to move internationally into other countries, Europe or Asia or anywhere else. There are very many reasons for that. We have looked at it very carefully in the past. There are very many reasons why there is a limited upside and quite a large potential downside. We are very happy with the domestic market in the U.K. This is the second biggest legal market in the world. Our segment of that is worth approximately GBP 12 billion. It is an area that we have really only just started on, so to run off to different countries would be something that I would suggest a complete mistake.
We are gonna concentrate on this market, concentrate on what we know best and do best. I'm not adverse to taking business risks, but when they make sense, and this one, I promise you, does not.
Okay. We've got a question, a couple of questions again in relation to the Ministry of Justice consultation on the Ministry of Justice taking an element of client account interest, and the timing on when that consultation might become clear. In terms of the consultation itself and what the impact could be on Keystone really does depend on the results and the outturn of that consultation and where it lands. Ultimately they were consulting on whether they would take a percentage of client interest for the government essentially. The impact to Keystone, to the extent that that were the case, would be that there would be less net finance income to the business, as I say, whether that's to come about.
In terms of the consultation or the timing on the answer on when the government will actually land on a decision, it is, there isn't a clear date I'm afraid. There was a clear timeline for us to, for us to provide responses, and the industry did go back, overwhelmingly, against the proposal, as you can imagine. In terms of the timing on when the government may or may not do that, we're unsure because they haven't set a deadline.
For what it's worth, my view would be that to the extent they do make a decision, they do wish to push, press ahead with some element of that, it would be likely to take a period of time before it could be implemented because it would be quite a significant change and potentially quite complex if it needs to involve the banks as well as the law firms. That, I'm afraid, is where we're at on that.
I'll read the next question for Ashley to answer. Do you expect to continue defaulting to special dividends to return surplus capital, or are share buybacks now actively under consideration?
As a board, we continue to. You know, we've always taken an approach on paying our ordinary dividend, which is progressive, but also ensuring that we don't sit on surplus cash for periods of time. To date, we've paid various, several special dividends returning to date nearly the entire share price, 95% I think it is, of the IPO price. In terms of going forward, at each opportunity, we consider all options open to the business, whether that be specials and/or buybacks. We, as I say, at this point in time, we will keep the situation under review.
Thank you. Do you expect the increased momentum in revenue per principal growth partially derived from the increased hiring of other fee earners will continue for the foreseeable future? Revenue per principal was up 10.5% during this period and has been consistently up over previous periods. It is, I would not suggest necessarily a complete reflection of the hiring policy. It is as much a reflection on the let's say the enhanced quality of the lawyers, the number of factors, the referral amount of referral work, and very importantly as well, the pod members that are joining with Principals and adding to the bottom line of those Principals. I'm not sure if Ashley, you've got anything else to add to that.
No, not really.
Okay. Great.
There's a question here with regards to professional indemnity insurance, who covers it, where does it sit and how does the insurance market works on this. The answer is that we are the law firm. We provide the services to the clients, to that extent, therefore, we are liable for the work delivered to them. We carry a good strong position from a professional indemnity insurance, and you can see from the movement on the balance sheet and also the movement through the P&L as a result of movements in provisions that our position is very strong. The increase in provisions this year was GBP 75,000 year-on-year as a net position.
The insurance market really is priced against on two bases. One is linked to our revenue. The other is a percentage based on risk. We don't disclose the exact pricing percentages obviously, that would be commercially sensitive. What I can say is we have a very good claims history and our insurers are very, very happy with us, and therefore we have a very competitively priced insurance policy.
Raymond has asked two questions. I'll deal with the first one. Ashley will deal with the second one. Can you continue to attract lawyers of sufficient commercial quality going forward? In short, I firmly believe so. We've been doing this for 24 years or so. We are most certainly able, continuing to attract lawyers who have a good fit, good experience, good expertise, good clients, and are highly beneficial to the firm. The legal profession, as I mentioned earlier, is very significant in this country. Not only that, we are appealing to more and more of those lawyers. So we are at a revenue of GBP 115 million per annum, which is where we are at the moment, and a market in the GBP billions.
We are confident that we have a long way to go before finding enough lawyers, well, until we exhaust the pool of lawyers, that's for sure.
It was also been a question raised in terms of what's our cost to the normal level of bad debt or trade receivable impairments. You can see on the face of the P&L actually in the full P&L, not so much on the statement, but within the RNS. The trade receivable impairment, the cost, the gross cost of that this year was GBP 1.7 million. It was GBP 1.5 million in the prior year. That said, because of the fact that we have our pay-when-paid and the relate lawyer has their fee notes, if we aren't paid, they're not paid, there's a corresponding reduction in cost the other way. Actually the net cost to the business for from bad debts last year was only GBP 500,000.
It was GBP 400,000 the year before that. It's not considerable and clearly as the lawyers are on a pay-when-paid, there is no cash impact to the business from these things.
Gareth asks, now you have 654 principals. In actual fact we have 654 fee earners, but the same question really applies. Does the possibility of malpractice suits increase disproportionately? No, it doesn't increase disproportionately. The more lawyers one has, the more revenue one has, the more difficulties, the more of everything. You know, we are the law firm, we are responsible for the work, we have the insurance. We also have an extremely effective compliance team that is there to get involved at the very early stage if something does go wrong. Every law firm, things go wrong. Every law firm has complaints, claims and compliance issues. It's how well you manage it that is really very important and we manage it extremely well.
The bigger we get, the bigger our team that manages problems gets. We have an extremely good claims history. We have an exceptionally good claims history. You know, that's part of what we do. That is our job.
There's a couple of questions about our margins and our look forward of margins where we see those in moving forwards. Really we need to look at the margins, I think in two different levels. Firstly, looking at the adjusted PBIT margin, essentially our operating margin. And we're very comfortable with the margins that are out in expectations, which is really broadly a continuation of the margin at the level we're broadly at at the moment. We're comfortable that all the investment we can do in the business continues to be achievable within those margins and that delivers a good return. The reason I separate that out from the PBT is clearly the interest we receive depends not so much on us driving the business forward, nor the positive attributes we have.
Very much dictated by Bank of England base rates and such features of that. Therefore, the current market expectations are that this year we will be operating in environments probably of a kind of hold interest rates and therefore generating circa GBP 2 million worth of net interest in this period. Thereafter, we'll return to a reduction in interest rates as we move further forward. That therefore sees a decline in net interest received into the business and consequently with the effect that has on the PBT margin.
Thanks, Ashley. I'll read this one out for Ashley. Your operating margin has increased from 10% to 10.6% in five years. Given your growth, is this not disappointing?
I think the honest answer to that is no, not really. I think we've delivered some very successful growth over the last five years. The revenue growth, the growth in profit in absolute terms, the returns we've given in terms of earnings, the dividend growth over that period. If you talk about the last five years, our operating, our ordinary dividends moved from GBP 0.157 a share- GBP 0.247 a share. The earnings in the period over five years from GBP 0.236-GBP 0.37. The percentage margin for me is less important in so far as we can sustain a consistently strong margin, I feel, given that we start from a gross profit margin of 25%.
We are investing in the business we are today, and the sort of lawyers we're able to attract requires an infrastructure appropriate to that to continue the sustainable long-term growth of the business.
Thank you. David asks, is there anything to read in the rising percentage of accepted offers. Bearing in mind that it fluctuates over the three periods shown. Not really. Vagaries in the market, vagaries in terms of the applicants that we receive. We seek to initially assess applications just on paper by CV in the normal way, and then if that looks good, it goes into the pipeline, and we invite the applicant to meet with us. That meeting can go well or not so well. We may or may not make an offer after that, and that offer may or may not be accepted. It's just I suppose in many ways it's just a normal recruitment process and there's always gonna be vagaries here and there.
The final one here is really just clarity of what our revenue is. Our revenue, we are the law firm. We bill the clients in the entirety of the fee, and our revenue is the entirety of the revenue that we bill those lawyers. It is not the amount we retain after paying our lawyers away. Our payment to our lawyers is the cost of sales.
Thank you.
I think that's the last of the questions there.
I think that's all. I'd like to say thank you to everybody for attending today's seminar or today's presentation I should say. I look forward to presenting updates in about six months' time.
Perfect, guys. If I may just jump back in there. Thank you very much indeed for being so generous with your time then addressing all of those questions that came in from investors this afternoon. Of course, if there are any further questions that do come through, we'll make these available to you after the meeting. Apart from that, guys, thank you very much indeed for updating investors this afternoon. Could I please ask investors not to close this session as you will now be automatically redirected for the opportunity to provide your feedback in order the management team can really better understand your views and expectations. This will only take a few moments to complete, but I'm sure it'll be greatly valued by the company.
On behalf of the management team of Keystone Law Group PLC, we would like to thank you for attending today's presentation. That now concludes today's session, so good afternoon to you all.