‘Business as usual’: Keystone revenue rises but profits fall as Covid cost savings end

Keystone Law has announced its financial results for the first half of 22/23, which show a solid increase of 9% over the same period last year, with revenue reaching £36.8 million.

Cash generated from operations also increased to £4.9m, an increase of 17%. Collectively, the results enabled Keystone to pay an interim dividend of 5.2 pence per share, in line with its listed status.

Although revenue increased, profit before tax (PBT) fell compared to the same period last year. The latest figure of £4.1m was down 3% from the first half of 21/22. Adjusted PBT was £4.5m, down 1% from 12 months ago.

Talk to Legal Affairs, CEO James Knight (pictured) said: ‘We are back to business as usual. Last year, we saved money on the lack of networking, face-to-face seminars, and everything we do to get our lawyers to know each other. Now we are happy to be back to organize events. If we hadn’t saved money in the past and were running events normally back then, our profits would have increased by 3%, which would have been roughly in line with the increase in revenue.

Knight was particularly pleased with the number of directors (the company’s partner equivalents) that had been recruited, as 22 newcomers joined the company in the last six months. When asked if he was happy with the additions, Knight replied, “Absolutely. Twenty-two directors over the six months [is very good] especially in this environment where many lawyers are sitting around because of the uncertainties and because the market is so robust and strong and they are very well paid and have no trouble meeting their billing targets.

While the number of directors was on the rise, the number of band members fell to 70 from 80 in January this year. The system by which the company can attract teams of lawyers, pods allow individual principals to employ teams of junior lawyers to assist them in their work.

Chief Financial Officer Ashley Miller pointed out that little can be read about short-term fluctuations: “The problem with pod members is that it will continue to grow as the business grows, but in short-term windows, it can go up or down like various pods. flex to deal with whatever comes your way. The lawyers are getting ready. If they’re running a project that needs a certain number of juniors, they’ll bring them in. If the project ends, they will reduce them. So it’s really just a matter of timing in that regard.

“The real drivers of the company’s turnover and growth are the principals. These are the people who bring work for themselves and their colleagues and really the juniors are a delivery engine for those. We are very pleased that revenue in principle has remained constant compared to the second half of last year.

Looking ahead, Knight was confident that market uncertainty amid high inflation and expectations of a recession will work in the company’s favor. He said: ‘How long will this very strong customer demand remain in the face of these predicted headwinds?’ As it cools, we believe the pressure on lawyers from conventional law firms will increase and the propensity to turn to firms like Keystone will rise accordingly, but it’s hard to say when that will happen.

To learn more about the Keystone Act, read our recent deep-dive “Our Little Book.”