Keystone Law gets a networking boost

For decades, the legal industry in the UK was bound up with precedent, but not only in the evidentiary sense. It was an area of the economy that seemed impervious to change, holding fast to the traditional law firm partnership model. In recent times, however, differing commercial models in the industry have emerged.

Keystone Law (KEYS) provides a case in point. It provides litigants with cost-effective legal services that harness the ongoing digital transition. But it doesn't just offer advantages for clients. James Knight, chief executive of Keystone, maintains that the business model also “offers lawyers genuine flexibility and autonomy”.

That’s probably not a bad thing from a recruitment perspective. It added 22 lawyers, or 'principals', to its platform in the six months to the end of July, bringing the total to 399, although the number of 'pods' (essentially legal service teams that contract with Keystone) pulled back through the period. Revenue per principal was £93,000, up from £89,000 in the 2021 half-year, but it will be interesting to note whether professional services fees keep pace with inflation over the coming months.

The ability of its principals to network and develop professional relationships is intrinsic to the Keystone model, so prospects have been helped by the fact that it conducted a full programme of face-to-face networking and social events, the first time it as been able to do so since the outbreak of the pandemic. This kind of cross-fertilisation can only be good for casework volumes.

Despite continued investment in the platform and the central office team, Keystone remains debt-free, while cash flow growth and related conversion rates are also plus points. The shares have pulled back in 2022 and now change hands at a 47 per cent discount to the consensus price target, but this is one challenger that we feel will eclipse the old order. Buy.

Last IC view: Buy, 715p, 28 Apr 2022