Legal Business

‘We have an insatiable appetite for recruiting’: Keystone posts double-digit revenue rise as hiring picks up

Keystone Law has released its financial results for 2023-24, posting a 15.1% revenue boost to reach £87.9m.

The results, which cover the financial year to 31 January 2024, come after a sustained period of recruitment for the firm, which is continuing to sign up lawyers attracted to its non-traditional, decentralised model.

On 3 May, the firm welcomed former Allen & Overy structured and asset finance head Mario Jacovides, as well as DLA Piper disputes partner Linos Choo and Simmons & Simmons corporate partner Patrick Graves, alongside a series of other additions from firms including Milbank, Gowling WLG and Squire Patton Boggs.

Based on this year’s results, Keystone has proposed to pay shareholders a final ordinary dividend of 12.5p per share in line with its listed status, up from 11.2p.  Adjusted profit before tax (PBT) also rose to £11.3m from last year’s £9.2m, indicating an adjusted PBT margin of 12.8%. 

Speaking to Legal Business, CEO James Knight (pictured) pointed to recruitment as the driving force behind the growth, while recalling that he had cited this as a challenge last year in the face of market-wide difficulties. 

‘This year has been very much about the recruitment side, which has picked up. The legal market has been incredibly buoyant and frothy and recruitment metrics across the board have picked up, almost back to pre-Covid levels. We have an insatiable appetite for recruiting the right lawyers,’ he said. 

Knight added: ‘My own view is that it came out of the fact Covid and Brexit created so many changes.’ 

In the last financial year alone, the firm welcomed 51 new principals – the firm’s partner-equivalent title – resulting in an 8.5% increase in headcount from 432. Additionally, the total number of fee-earners rose to 549, reflecting an 8.3% increase. 

Revenue per principal also saw double-digit growth of 10%, to £212,000 from last year’s £193,000.  

Knight explained: ‘One driver here is the increasing level of sophistication of the work we are getting involved in as the Keystone brand grows.’ 

He also highlighted that the firm’s recruitment of ‘pod members,’ where senior lawyers can bring junior lawyers into specialised teams, is another catalyst for this growth.

Keystone made waves in 2002 with the introduction of its ‘virtual’ model, which allows its lawyers greater independence and a larger share of billing revenue, due to the reduced overheads carried by traditional law firms. Fast forward to now, there are more than 65 fee-sharing firms across the UK such as gunnercooke, which entered the LB100 in 2022. (See LB’s firm profile – gunnercooke: Cooking up a storm last year) 

On the future of the fee-share model, Knight concluded: ‘Nothing happens in its entirety, and nothing happens overnight. But there is a substantial shift that in the next five years we’re going to see as a big percentage of convention of legal services in the mid-market moving to platform firms. We welcome that very much.’

For more, see Keystone Law: Our Little Book

Legal Business

Dispelling the myths about Keystone Law

From disruptive startup to a tech-enabled top 100 UK law firm, Keystone Law has grown rapidly over the last 20 years. As one of the longest-running consultancy model firms, its business model is now firmly established as a permanent fixture of the legal landscape. Despite its size and growth trajectory, many misconceptions about how the firm’s model and how it truly works still exist among solicitors. Here we speak with Mark Machray, Keystone’s director of growth and development, who explains what makes Keystone stand out among other fee-sharing firms and he dispels some of the myths.

Many solicitors who contemplate joining a fee-sharing firm worry that they are going to be on their own. How do you reassure them that they won’t?

If you think of Keystone as simply a platform, then it’s easy to understand why lawyers might think of it as a solitary way of working, but Keystone has so much more to offer than that. We have over 400 senior lawyers who regularly interact with each other, who by nature are entrepreneurial and see the benefit of developing strong relationships with colleagues.

Legal Business

‘A great year for growth and consolidation’: Keystone’s revenue up in the face of market-wide recruitment difficulties

Keystone Law has released its financial results for 22/23, reporting a positive 8% revenue increase since last year with a turnover of £75.3m in comparison to last year’s £69.6m. A breakdown of revenue earnings per principal also shows a promising 4% rise to £190k since January 2022.

Although revenue grew, cash generated from the business decreased by 7% from £10m to £9.3m. The figure given for profit before tax (PBT) is £8.4m, the same as 12 months ago, while adjusted PBT is up by 6% to £9.2m.

Based on this year’s results, Keystone has proposed to pay shareholders a final dividend of 10p, which is down from 11.2p this time last year.

Speaking to Legal Business, CEO James Knight (pictured) said: ‘We are marginally ahead of market expectations. We were predicted to do something that was reasonably good, and we did a little more, so we are very happy. Revenues are up 8.1%, the profit is up 6.3% and we are able to pay a nice dividend to our shareholders. The firm is growing in all respects.

‘It has been a little challenging on the recruitment side because there is so much demand from clients across the whole legal market. However, we have benefited from that as well because everyone has found recruitment to be a challenge as everyone is looking for new lawyers.’

Knight explained in further detail the reasons for the firm’s financial success. ‘We are starting to see the broader market slow down and we feel very confidently that this will play to our strengths as we have already taken on some excellent lawyers with 32 new senior lawyers alongside a number of junior member recruits.

‘Our principal driver of growth is excellent hires. New recruits bring their own clients with them, which bolsters the work that we do and helps to grow our revenues. We have also really worked hard on the infrastructure of the firm and the technology we use to improve our systems and take on more sophisticated work. It has been a great year for growth and consolidation.’

CFO Ashley Miller explained how being a limited company is a contributing factor to Keystone’s overall financial growth: ‘We offer lawyers something really special in terms of potential earnings, lifestyle, flexibility, autonomy and remote working. We offer that whole package, which means we attract the best lawyers. It has been a challenging recruitment market for law firms that are getting lots of clients and don’t want to turn away the work. We can deal with our existing client demands as we bring in the client and the lawyer at the same time.’

When asked about Keystone’s goals for next year, Knight emphasised the value of improving the existing product: ‘We will continue to provide a first-class service and support in infrastructure. We are completely focused on that and delivering the clients’ demands.  We are not an acquisitive law firm – we have no plans to acquire other organisations or move into areas other than the law. This is a good market for us, worth about £10bn, so we have a very significant opportunity to grow within the field we currently operate.’

Legal Business

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Legal Business

‘Business as usual’: Keystone’s revenue up 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 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‘. 

Legal Business

Keystone Law: Our Little Book

‘400 lawyers, 25 services, 19 sectors, one ethos.’ So says the mysteriously titled ‘Our Little Book’, which adorns the table in the meeting room greeting Legal Business after the short journey from Fleet Street to Keystone Law’s Chancery Lane office. The very idea of there being an office might raise eyebrows, given the firm’s reputation as a ‘virtual law firm’. The London location is the only physical space owned by the company and, with its abundance of meeting rooms and hot-desking spaces, is not designed to house everyone at once.

A lack of a conventional workspace is only the start. The firm breaks from tradition in all manner of ways, and yet has grown apace in recent years. Revenue rose 27% to £69.6m in the 2021/22 financial year, and scarcely a month passes without a flurry of new recruits announced. After several pandemic-hit years in which people from all walks of life reassessed their working habits, the model is viewed with a good deal less suspicion than it once was.

Legal Business

Keystone hails £400k saving on overheads as revenue rockets 27% and profits soar

Keystone Law has made last year’s 11% uptick in turnover look ordinary by comparison, today (28 April) announcing an eye-catching 27% boost in revenues from £55m to £69.6m.

This rate was bettered by the profitability increase: adjusted profit before tax stood at £9.1m, representing a pacey 52% jump from last year’s £6m figure. Overall, Keystone is in a healthy financial position, boasting zero debt and a strong operating cash conversion of 103%, with cash generated from £10m in operations.

Despite Keystone’s market reputation as a flexible firm with remote working a fundamental aspect, chief executive James Knight (pictured) told Legal Business that roughly £400,000 was saved on overheads during the pandemic: ‘We run a lot of events and put a strong emphasis on real-world interactions with clients. Obviously for a large part of last year these had to move online, with the £400,000 saving going straight to our bottom line.’

As with 2021’s results, the firm can point to an impressive track record in recruitment as a major factor in the swelling finances. Throughout 2022, Keystone recruited 41 ‘principals’, with that partner equivalent headcount growing from 353 to 394. This was in fact a notable drop-off from 2021, when 51 principals were recruited. Keystone noted that such was the surging client demand in all firms last year, the recruitment market was impacted as lawyers were ‘too busy fee-earning to seek change.’

This did not stop Keystone from attracting partners en masse to its flexible working model – as recently as this week, the firm announced a batch of ten partner-level hires across a range of practice areas, and in January Keystone picked up 12 partner-level lawyers in a similar fashion.

Such was its financial success, Keystone is proposing a final ordinary dividend for the year of 11.2p per share (compared to 7.1p in 2021), bringing the total ordinary dividend for 2022 to 15.7p. This is a significant increase on last year’s total ordinary dividend of 10.7p per share.

Further, ‘recognising the strength of the balance sheet’, Keystone intends to hand out an additional special dividend of 10p per share if approved at the firm’s AGM, slated for 5 July.

Knight concluded: ‘We are very happy with the results, but fundamentally it’s not about our share price, it’s about doing a good job. If you can provide clients with a good service, then everything else will follow.’

Legal Business

Disputes perspectives: Claire Shaw

I was an incredibly good girl and my mother was incredibly opinionated: I basically did whatever she told me to do! For years I wanted to be a doctor but then I realised I absolutely hated chemistry and you couldn’t be one without chemistry. So I had a crisis after my O-Levels where I thought ‘Oh God what am I going to be then?’ So suddenly my mum said: ‘Right, that’s it then, you’re going to be a lawyer.’ She’s of that generation that absolutely idolised professions – she always called our family doctor by his first name.

Legal Business

Resilient Keystone sees double-digit revenue growth in financials buoyed by senior recruitment

Keystone Law has significantly outstripped its half-year results unveiled in September, by posting a healthy 11% increase in turnover for the full year to 31 January 2021.

Revenues were up to £55m from last year’s £49.6m, with the rate of increase nearly double the 6.5% announced in the half-year results.

Profit before tax also notably rebounded after an 18% dip declared in September due to internal investments, such as additional office space at its Chancery Lane headquarters. Profits were up marginally on a full-year basis from £5.2m to £5.4m.

Chief executive James Knight (pictured) said: ‘The nature of Keystone’s business model, whereby our 350+ lawyers were all well acquainted with remote working when lockdown began, has undoubtedly made it easier for the firm to remain 100% operationally efficient since March 2020. Nevertheless, I am extremely proud of what the firm and our people have achieved in the last year, not just for maintaining that efficiency but also for delivering solid growth.’

He also took aim at firms who would be potentially unwilling to shift attitudes towards remote working: ‘I am excited about the year ahead, not least because the vast majority of the legal profession has started to suspect something that we have known for 20 years: if the right tools and infrastructure are in place then lawyers, even when undertaking complicated, multidisciplinary transactions, can deliver a far better service if they are given flexibility and autonomy while enjoying a better work-life balance.’

Underpinning the solid results was a year of concerted senior recruitment. Over the last 12 months, Keystone has expanded its bench of principals (partner-equivalents) by an impressive 58, from 328 to 369. Between the additional office space and lateral recruitment, the firm can rightly be proud of pursuing such considerable investment while ensuring no member of staff was furloughed due to the pandemic.

In August 2020 alone, Keystone made 10 lateral partner hires covering areas such as corporate, IP and restructuring and insolvency.

After originally opting not to recommend a final dividend for the year ending 31 January 2020 due to Covid uncertainty, in light of the firm’s robust financial performance, Keystone is proposing to pay out a final dividend for the end of this financial year of 10.6p per share.

This includes a 3.5p per share payment, described as ‘the remaining value which would have been paid in respect of 31 January 2020 had the pandemic not occurred’, and a 7.1p per share payment ‘in accordance with the established dividend policy.’

Legal Business

Keystone shrugs off coronavirus uncertainty but internal investments see profits tumble 

Keystone Law is producing a resilient performance as the year unfolds, the firm’s interim results show, with revenues up despite the financial impact of the Covid-19 lockdown, but profits have slumped following internal investment at the UK-listed firm.

Revenue in the first half of the firm’s financial year was up 6.5% to £24.5m from £23m last year. However, adjusted profit before tax was down 18% to £2.2m for the period ‘due to investment in the central office support team as well as additional office space in Chancery Lane.’ 

‘It was a good start to the year until lockdown stopped things,’ Keystone’s CEO James Knight (pictured) told Legal Business. ‘New client demand was down around 30% at one point though it is now almost back to pre-Covid levels.’

The firm’s last full set of financials for the year to 31 January 2020 showed revenue was up 16% to £49.6m, with Keystone continuing a run of pacey financial results in recent years. Increasingly it is thought firms with a strong cash position are best placed to endure the economic uncertainty brought by the Covid-19 lockdown. Should that be the case, Keystone will feel confident after ending its interim period with a net cash figure of £6.9m compared to £3.4m in the same period last year.

Though he firm’s growth over the first half of 2020/21 was driven partly by new client needs in light of the pandemic, Keystone’s financial director, Ashley Miller, told Legal Business. ‘While it has been a bit lumpy, what we have seen is a return of the business streams to where we were pre-Covid.’

Miller and Knight also highlighted the firm’s continued push in lateral hires, with lawyer numbers at the firm increasing to 426 over the interim period with 27 new partner-level hires. Earlier this month Keystone added three laterals to its ranks, with corporate specialist Sandra Bates and environmental law expert Yohanna Weber joining from Fladgate and Fieldfisher respectively while commercial property lawyer Alex Heaton joined from Reed Smith.