Keystone Law has announced its financial results for the first half of 22/23, which show a solid 9% increase on the same period last year as the top line reached £36.8m.
Cash generated from operations was also up to £4.9m, a 17% increase. Collectively the results enabled Keystone to pay an interim dividend of 5.2p per share in line with its listed status.
Though revenue rose, profit before tax (PBT) fell compared to the same period last year. The latest figure of £4.1m was 3% down compared to the first half of 21/22. Adjusted PBT was £4.5m, down 1% on 12 months ago.
Speaking to Legal Business, CEO James Knight (pictured) said: ‘We’ve returned to business as usual. Last year, we were saving money on the lack of networking, face-to-face seminars, and everything that we do to get our lawyers to know each other. Now we’re pleased to be back to hosting events. If we hadn’t saved money in the past and were hosting events normally then, our profits would have been up 3%, which would have been pretty much in line with the increase in revenue.’
Knight was particularly pleased with the number of principals (the firm’s partner equivalents) that had been brought onboard, as 22 new arrivals joined the firm in the last six months. When asked if he was satisfied with the additions, Knight said ‘Very much so. Twenty-two principals over the six months [is very good] especially in this environment where many lawyers are sitting tight because of uncertainties and because the market is so robust and so strong and they’re getting paid very well and having no trouble meeting their billing targets.’
While the number of principals was up, pod member numbers fell to 70, compared to 80 in January this year. The system by which the business can attract teams of lawyers, pods enable individual principals to employ teams of junior lawyers to assist with their work.
Finance director Ashley Miller emphasised that little can be read into short-term fluctuations: ‘The thing about pod members is that it will continue to grow as the business grows, but within short-term windows it can go up or go down as various pods flex to deal with whatever is going on. The lawyers do gear up. If they’re running a project which requires a number of juniors, they’ll bring those in. If the project comes to an end they’ll gear them down. So it’s really just a question of timing in that respect.
‘The real drivers of revenue and growth in the business are the principals. They’re the people who bring in work for themselves and their colleagues and really the juniors are a delivery engine for those. We’ve been very happy that the revenue per principle has remained consistent with the second half of last year.’
Looking forward, Knight was firm in his belief that market uncertainty amid high inflation and predictions of a recession will play into the firm’s hands. He said: ‘How long is this very strong demand from clients going to remain in the face of these forewarned headwinds? As it cools, we believe the pressure on lawyers in the conventional law firms will increase and the propensity to make moves to firms like Keystone will correspondingly increase but it’s hard to say when that is going to occur.’
For more on Keystone Law, read our recent deep dive ‘Our Little Book‘.
