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Listed law firm’s shares soar on positive trading update

Knight: Good strategic progress

Keystone Law – the most successful listed law firm in 2018 when judged by share price – saw it soar a further 15% yesterday after a positive trading update.

The pioneering ‘dispersed’ law firm made up of nearly 300 self-employed senior lawyers, told investors that it has continued to “trade strongly through the second half of the year, delivering significant growth”.

“The group expects to report profits which will be comfortably ahead of current market expectations,” it said.

The stock exchange announcement continued: “Keystone is well positioned to establish itself as one of the leading UK mid-market law firms with a clear and simple growth strategy enabling it to take advantage of the significant addressable market.”

The share price was up 50p to 390p. Our analysis of legal shares during 2018 [1] showed that Keystone, which listed in November 2017 at 160p, closed 2018 on 360p before dipping earlier this month. The shares had peaked at 443p in September after strong interim results [2].

Chief executive James Knight said: “I am delighted with the progress the group has made in our first full year on AIM.

“Our distinctive platform model has successfully attracted a significant number of new, high-quality lawyers which has helped us scale the business.

“This impressive growth coupled with the excellent performance and hard work of our lawyers means that we are confident that we will comfortably beat market expectations. We continue to make good strategic progress.”

The results will be published in May. Keystone says it has “a strongly cash generative financial model”, since lawyers are only paid once the firm has been paid.

When it listed, Keystone said its focus [3] would continue to be on organic growth through bringing in more lawyers. They work from home, supported by the firm’s 40-strong administrative hub in London, and receive 60-75% of their fees.

However, it said that “longer term, the board believes that suitable acquisitions of smaller businesses, with similar business models but strengths either in specific geographical or niche legal practice areas, may present options to accelerate growth further”. This has not yet happened.