FY 21 EPS was 5% ahead of our estimate and net cash also beat. We upgraded FY 22 EPS by 8% on the day and expect our estimates to be conservatively set. The scalability of Keystone’s model is highly attractive. Prudently assuming 50 new principal recruits and £0.8m of additional central cost per annum for the next decade, we estimate a 10-year EPS CAGR of 9%. We believe Keystone deserves to trade at a premium to the legal services peer group given the low-risk ‘paid when paid’ working capital model, high revenue growth and opportunities for specials.
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