A growing number of listed law firm Keystone Law’s consultants are employing their own lawyers as the model develops, the company said today as it unveiled double-digit growth in revenue and profit.
Chief executive James Knight also took a shot at law firms using the government’s furlough scheme, saying it was not “ethically responsible” to do so just to protect profits.
In the year to 30 January 2020, Keystone saw revenue rise 16% to £49.6m, with adjusted profit before tax up 12% to £5.8m.
The number of ‘principal lawyers’ working with the firm rose 18% to 328, with some 239 applications during the year.
Over the last two years, some principals have begun to build ‘pods’, employing lawyers to assist them. Like the principals, they are not employed by Keystone, although Keystone does centrally employ junior solicitors, trainees and paralegals to provide some support.
Some 35 new pod members were recruited over the past year, up from 26 the year before.
“The establishment and proliferation of these pods has not only provided a means by which new and existing lawyers are able to develop larger practices, but also further enhances and extends the appeal of the Keystone model in the market place as a whole,” Keystone told investors today.
Mr Knight added that creating pods allowed principals to plan succession, while it was also possible for the junior lawyers in time to leave pods and become principals themselves.
In all, the total number of fee-earners at Keystone increased 22% to 393.
The coronavirus crisis has led to a “meaningful decline” in the number of new instructions, the firm said, while reassuring investors that it was in a “strong position” to deal with the impact.
Mr Knight said: “Our model is designed to service our clients remotely and so it was a very small step to move our central support services onto the same footing, achieving this with no adverse effects to service delivery.
“Furthermore, we are in a strong financial position, both in terms of liquidity, being debt free and having over £4.4m of cash, and in terms of the high proportion of our cost base which is fully variable and on a ‘paid when paid’ basis.” That is, principals only receive payment after the client pays the firm.
He speculated that senior lawyers who have experienced remote working during the pandemic may look to do so on a permanent basis in future by applying to Keystone.
But he was not concerned about other firms allowing more flexible working after the crisis passed, and closing the gap. “Keystone is more than just that,” he said. “There are also cultural and hierarchical issues at play… Our system is not easy to replicate overnight.”
Mr Knight added that Keystone would not look to use the government’s furlough scheme for its 44 centrally employed support staff.
He said: “Like many conventional law firms, Keystone Law is in a good position to weather this storm. We are very likely to see a meaningful reduction in client instructions, particularly in terms of corporate transactions, and a consequential drop in anticipated earnings.
“However, I do not believe it is ethically responsible to take government money designed for genuinely cash strapped businesses, in order to maximise our own profits.”