Keystone shareholders see big dividend payout after strong year

Knight: Sustainable growth

Listed fee-share practice Keystone Law has unveiled strong annual results as it hailed a return to pre-pandemic levels of recruitment.

Keystone, which was the best-performing listed legal business last year when judged by share price, reported revenue up by 15% to £88m in the year to 31 January and adjusted profit before tax jumping 23% to £11.3m.

In 2023, Keystone’s share price was up 19% to 510p in 2023, albeit still far short of its all-time high of 865p in 2021. It has since jumped to 665p as at the close of trading yesterday.

Having paid an interim dividend of 5.8p, it is to pay a final dividend of 12.5p per share, bringing the total for the year to 18.3p, compared to 16.1p in 2023. It also paid a special dividend of 12.5p at the half year in light of the strength of the balance sheet and “our confidence in the future”.

The firm now has 432 principals, 34 more than a year earlier, after 51 joined during the year, the vast majority from top-100 law firms. Keystone received 270 applicants, compared to 232 in 2023, and made offers to 103 of them, 42 of whom accepted.

The number of lawyers recruited by principals to their ‘pods’ has grown a little to 102. Keystone said between 15% and 20% of each year’s cohort of lawyers choose to build their practice in this way.

With central staff too, Keystone has 549 fee-earners on its books in total, 42 more than a year earlier.

Chief executive James Knight told Legal Futures that the “big news for us is the return of the favourable recruitment market”, with fewer firms recruiting while “our appetite remains the same”.

“We’ve been able to recruit at a pre-pandemic level,” he said.

As well as the impact of Brexit and Covid, which helped fuel the recruitment boom, starting to cool, Mr Knight said increasing pressure on fee-earners to return to the office was also driving them towards fee-share practices.

He suggested this was “only a forerunner of a shift in the mid-market law firm” towards the consultancy model.

Recent research found that more than twice as many lawyers opted to leave traditional firms last year to move to fee-share or ‘platform’ law firms than moved in the other direction.

Keystone’s brand and awareness and acceptance of how it operated boosted its profile too, Mr Knight said, and more than a quarter of new recruits came directly from the top 25 firms or large US practices.

Mr Knight said: “The strength of our operational and financial performance across 2024 has enabled the group to maintain its longstanding progressive dividend policy, returning over £30m to shareholders since listing on AIM in 2017.

“We enter the new financial year confident in the ability of the business to continue to deliver high-quality earnings and sustainable growth in the year ahead.”

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