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Strong results propel Keystone’s share price ever upwards

Keystone Law: Well ahead of market expectations

Keystone Law today announced annual results “comfortably ahead of market expectations” as its share price continues to soar, having more than tripled in the 18 months since it listed on AIM.

The self-described “challenger law firm”, a pioneer of the platform model that , saw revenue grow 35% to £42.7m in the year to 31 January 2019, with adjusted profit before tax up 57% to £5.1m and a profit margin rising from 10.4% to 12%.

However, the gross profit margin fell slightly from 27.6% to 27.1%, which Keystone put down in part a reduction in the proportion of billing done on central office-owned clients – where lawyers are the client ‘owner” they get 15% of the fees, so where central office is the ‘owner’, the lawyers only receive 60% rather than the usual 75%.

Keystone listed in November 2017 at 160p and closed yesterday at 507p. It was the most successful listed law firm in 2018 [1] when judged by share price.

It told investors that revenue growth has been driven by the lawyers recruited last year contributing a full year of productivity, as well as contributions from the lawyers who have been recruited during the year.

The business has also benefitted from a “particularly significant piece of litigation work”, which has generated £2.2m of revenue in the year.

The firm added 63 principals to its team in the 12 months – those who own a service company (or pod) which contracts with Keystone – out of 270 applications.

In all principal lawyer numbers were up 14% at 277 and the firm reported increasing demand for juniors to support them, either employed directly by principals or in Keystone’s central office team. Total fee-earners have increased 21% to 321.

Chief executive James Knight said the increased brand recognition which the firm sought to achieve through listing “has certainly been achieved”.

He continued: “The business has continued to demonstrate its appeal to high-calibre lawyers and their clients within the UK legal ‘mid-market’.”