Keystone Law's (KEYS) maiden half-year result since its November admission to Aim revealed performance ahead of expectations, with impressive top-line growth translating into even stronger earnings momentum. The shares climbed over a tenth as the market backed the challenger law firm's prospects over the second half.
Revenue growth was organic – attributed to Keystone’s “rising reputation as a leading, quality mid-market” firm. And there’s some evidence to support this: the number of new applicants increased by 6 per cent to 132, while lawyers actually accepting offers grew by 9 per cent to 36.
What’s attracting recruits? Beyond the fact that Keystone may simply be better-known since its IPO, it also offers an unusual model. Lawyers are self-employed consultants, supported by the firm’s centralised back-office platform. And they receive up to 75 per cent of the fees from work undertaken, once Keystone has been paid. The appeal of this flexible model is understandable. The structure also serves Keystone well, given that – as sales build – its overhead costs grow at a lower proportional rate. Hence the dramatic improvement we're seeing in profitability.
Broker Panmure Gordon expects adjusted pre-tax profits of £4.4m and EPS of 11.3p for the year to January 2019 (FY2018: £2.9m and 8.1p).
| KEYSTONE LAW (KEYS) | ||||
| ORD PRICE: | 365p | MARKET VALUE: | £ 114m | |
| TOUCH: | 360-370p | 12-MONTH HIGH: | 382p | LOW: 175p |
| DIVIDEND YIELD: | 0.9% | PE RATIO: | 49 | |
| NET ASSET VALUE: | 45p* | NET CASH: | £5.3m | |
| Half-year to 31 Jul | Turnover (£m) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2017 | 15.3 | 1.2 | 4.0 | 0.0 |
| 2018 | 19.9 | 2.2 | 5.5 | 2.5 |
| % change | +30 | +74 | +38 | - |
| Ex-div: | 04 Oct | |||
| Payment: | 26 Oct | |||
| *Includes intangible assets of £7m or 22p a share | ||||
