Keystone Law Share Discussion Threads

[nurdin] 13/4/2018 11:18

Nice bounce...results to be 'comfortably ahead'

[hydrus] 23/2/2018 09:13

Thanks Nurdin - helpful. If they have added 35 since July then it looks more like the rate is increasing and in course to add 60-70 by July this year.The last point is interesting - guess it would be a pain for a firm to pursue and also why upset a client who may one day want to use the firm again.

[nurdin] 23/2/2018 09:02

For what its worth,had a brief chat with the Company yesterday to clear up a few concerns I had.The key points which came out from our discussions were:

-they currently have 276 lawyers on their books.That is an increase of some 35 from July last year.Seems to me staff numbers are growing quite linearly,adding some 30-40 staff each year.

-churn rate.Very low..not many want to leave once they have joined!

-growth both from recruitment of new staff and from existing staff bringing in new customers.

-yes while it is true that new staff are restricted by provisions in their employment contracts with their previous firms which prevents them taking their client with them,the provision is not enforced rigidly in practice.I guess the previous owners accept that there is nothing much they can do about it if a client wants to move with the lawyer.

Hope that helps.

[hydrus] 17/2/2018 17:58

One of the risks outlined in the admission document is whether a court might decide KEYS contracted lawyers are actually employees. That would be a game changer I imagine for their model. However, having briefly read up on employment law definition of employees I suspect they would have a good chance of batting it back.

[jonwig] 17/2/2018 16:50

@ Hydrus - yes, in a partnership, the company's assets belong to the partners, so leaving can lead to complications. Details? Can't help.

GTLY replaces this with share incentive plans which is a logical development for a plc. They've managed to attract a lot of staff from other firms because of this.

I really should get round to reading the KEYS prospectus.

[hydrus] 17/2/2018 15:47

In terms of recruitment of new lawyers my understanding based on the admissions document is they look for experienced lawyers at other practices who bring clients with them. However, I would have thought legal firms would have provisions in employment contracts to stop lawyers leaving and working with existing clients for a period (perhaps 12 months or so). I'd be interested if anyone had perspective on whether this is a challenge for KEYS? I am invested here. I do like the model and the financial metrics are stunning. ROCE and cash generation are good and margins clearly accelerating due to operational gearing. The rate of profit growth bodes very well for a successful investment.

[jonwig] 17/2/2018 14:57

@ Rose, nurdin - that's right, GOR has a central 'back office' in Cardiff which enables routine admin for either its own employees or affiliated firms. That's on top of its acquisition policy.

GTLY (which I think I know well, and have a big holding in, for me) is mostly commercial, with a big presence in the construction industry. The 'hourly billing' format is becoming almost unknown in this environment. So comparison with GOR and KEYS might be unfair.

Incidentally, many large firms are no longer willing to use outside counsel on a 'hourly billing' basis - Microsoft is a prominent example. (Look at GTLY's trade receivables, which I'm comfortable with, as an example of maybe back-door funding - I haven't done a similar check with GOR or KEYS.)

[rosejs2] 17/2/2018 11:40

Nurdin...Agree with your comments regarding Keystone..Gatley I believe are more of the traditional law firm but Gordon Dadds is far from it...See GOR info below

Turnover for the financial year ended 31 March 2017 was £25m with £2m adjusted profit before tax

Gordon Dadds LLP has expanded revenues at a compound annual growth rate of 70.7 per cent since 2013

The UK legal services market is poised for increasing consolidation, especially in the Company’s target market pool of £6.6bn of annual revenue – consisting of c1000 UK firms with annual revenues in the range of £2 million to £40million

Gordon Dadds has a purpose built, sophisticated and fully integrated technology platform based in Cardiff, which has received £3.2m of investment since 2013 and is ready to incorporate future acquisitions

Gordon Dadds’ strong management team has already successfully integrated 10 firms onto this cost-efficient platform

[nurdin] 17/2/2018 10:59

Glad you agree quant.Yes recruitment of new lawyers is key to their growth but revenues would also be boosted by the current complement of lawyers growing their own businesses under their own steam.They are incentivised to do so with higher level of commissions. I think it is a great model.

The company is very unlike Gately or Gordon Dadds who strike me as more traditional law firms but I am happy to be corrected.

[quant_investor] 16/2/2018 23:35

Yep looks like quite an interesting business model with lawyers potentially able to bill more hours with admin duties taken care of by the back-office function.

Growth obviously reliant on the recruitment of more practioners but the operational gearing here is quite obvious.

Liquidity might improve as the stock gets more coverage.

Price at a similar level prior to the recent ‘comfortably ahead’ update.

Might dip my toe in next week.

[nurdin] 16/2/2018 09:33

Just gone through their Admission document.The main stand out for me there is the high operational gearing in business model..all overhead costs are by and large fixed so any revenue increase falls straight to the bottom line.Model not unlike that of JE. but with higher margins.A great shame the NMS is so low!!

[nurdin] 15/2/2018 17:56

Looks a great little company but the NMS is just 1.5k.That is a big put off for me..

[jonwig] 14/2/2018 16:54

@ quant - I can't at the moment, as I gave this a miss (BUR, GOR and GTLY which you didn't mention being holdings of mine). But I do see that acquisitions get little mention in the prospectus.

[quant_investor] 14/2/2018 16:33

I do like this sector as I think if has defensive qualities together with opportunities for growth. I’ve done very nicely with BUR and I think GOR will gradually make a number of earning enhancing aquisitions in the current months.

This looks interesting too, though I’m wary of new issues promising high levels of growth. At least thy haven’t fallen at the first hurdle. I should really go through the admission document and work out if the projected high levels of growth are credible.

Can anyone give me a quick heads up on the story here?

[hydrus] 14/2/2018 09:33

As we are now in their 2018/19 financial year it's worth looking at rating based on current broker forecast of 9.6p which puts it on a PE ratio of around 26. However I'd expect that to be upgraded based on today's statement.I don't think the rating is high taking into account the rate of growth.

[hydrus] 14/2/2018 07:49

6.4 EPS according to Stockopedia

[mngf] 14/2/2018 07:40

I wish companies stated what market expectations are!

[hydrus] 14/2/2018 07:25

Looks good, happy with that statement.

[eggbaconandbubble] 26/1/2018 17:40

Well I suggest you do asap!

[aishah] 08/1/2018 13:18

One of 2018 tips in Evening Standard:

RUSSELL LYNCH KEYSTONE LAW
The disrupters have moved on everything in recent years: could the staid legal profession — ripe for a shake-up — be next? Keystone Law, which floated in November, has a “dispersedR21; model with small central overheads. It is pitching at the £9 billion mid-market with a growing army of experienced, self-employed lawyers. Boss James Knight reckons the business is easily scalable organically and through deals. It is debt-free and made profits of £1.2 million last year, double two years previously. Could it be the legal world’s Purplebricks? Fingers crossed... Tipped at 190p

[sharesoc] 03/12/2017 18:32

There is a blog post which mentions Keystone available here:

[martywidget] 27/11/2017 08:54

£50 million legal 'disruptor' comes to AIM



{Recent articles}:

Keystone Law Group PLC to become AIM's third listed legal firm
www.proactiveinvestors.co.uk/companies/news/187432/keystone-law-group-plc-to-become-aim-s-third-listed-legal-firm-187432.html

Disruptive law firm Keystone reveals £50m float plans


Law firms take the plunge with stock market flotation {registration required}
As a third British firm prepares to list on the London Stock Exchange, Steven Scott finds that the path to public ownership can be rocky


UK firm lines up AIM float


‘A milestone’: Keystone becomes third UK law firm to float on London Stock Exchange


Keystone Law set to become third UK firm to float


Keystone to become third listed UK law firm with £15m placing


New Law business Keystone to float on the London Stock Exchange


New-breed Keystone Law plans £15m stock market entry


New Law business Keystone to float on the London Stock Exchange [registration required]


U.K. Law Firm Poised to Become Third in Country to Go Public

[jonwig] 27/11/2017 08:48

Will be interesting. Now three law firms on AIM. I hold the other two. This is more like Gordon Dadds than Gateley, I think.