Knight: Keystone has changed a lot in last 25 years
AIM-listed firm Keystone Law announced a special dividend for shareholders yesterday on the back of strong half-year results.
In the six months to 31 July, the firm recorded revenue up 23% to £66m and adjusted profit before tax up 31% to £9.6m, with the profit margin up almost a percentage point to 14.5%, in part thanks to interest rates being held.
The balance sheet now shows net cash of £10.5m, £4m more than a year earlier.
On top of an interim dividend of 9.6p per share, the company is to pay a special dividend of 15p.
Chief executive James Knight said in corporate and corporate restructuring work had been particularly strong, helping revenue per principal grow 15% to £133,800.
This was despite a “softer” recruitment market, he said, with candidate movement across the market reduced from the levels seen last year.
Keystone still added 23 new principals, a net gain of 10 over the start of the financial year, and it now has 501 principals. Between them they hired 23 new members of their ‘pods’, joining taking the total number of fee-earners to 682, a net increase of 28 in the six months.
Mr Knight told Legal Futures that Keystone has progressed over the past 25 years from a firm whose primary appeal was its work-life balance offering “into a proper, successful, quality law firm in its own right”.
He explained: “We’re not just attracting lawyers on basis of lifestyle benefits but on basis that we’re bigger, better, stronger and more dynamic than other competing conventional law firms. This business is changing.
“The market is vast – the offering is improving all the time, as are our brand, reputation and size.”
Though other fee-share firms have engaged in mergers and acquisitions, Mr Knight said Keystone would not. “We prefer to focus on recruiting lawyers into the firm, sometimes from other fee-sharing firms but more usually from conventional firms. The complexity, difficulty and risk involved in M&A is such that if you don’t need to do it, it’s better to grow organically.”
Last year, Keystone implemented enterprise-grade versions of ChatGPT and Claude as well as the Netdocuments generative AI tool, and has more recently rolled out CoCounsel Legal.
As a fee-share firm, Keystone cannot mandate use of these tools and Mr Knight said its approach was to motivate its lawyers to use them by heavily subsidising CoCounsel but requiring them to pay something towards it.
This also saved some money – paying for all of it would cost £1.5m, he said.
In May, Keystone carried out a £1.5m share buy-back programme to ensure it had sufficient shares to meet the commitment under its long-term incentive plan, instead of having to issue new shares.
Keystone’s shares leapt by 7.8% to 664p on the back of the results.
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