Keystone Law H1 2027 Profit Surges 31% on Platform Model

Keystone Law Group (LON: KEYS) reported a 31.3% increase in adjusted profit before tax for the six months ended July 31, 2026, driven by its platform model and strong revenue growth. The firm's revenue climbed 22.5% year-over-year to £66.3 million, with adjusted profit before tax surging to £9.6 million. The adjusted PBT margin reached 14.5%, up from 13.6% in the prior-year period. Gross profit grew 22.6% to £16.9 million, maintaining a 25.5% gross margin. Staff costs increased 15.1%, and other administrative expenses rose 14.2%. Adjusted earnings per share (EPS) increased 29.8% to 23.1 pence. The firm completed a £1.5 million share buyback program in May 2026, purchasing 267,815 shares. Revenue per principal increased 14.5% to £133,800. Operating cash conversion was 95.6%, compared to 104.2% in the prior-year period. Cash generated from operations totaled £8.1 million, with cash flow pre-dividends at £7.6 million. The firm ended the period with £10.5 million in net cash and zero debt, up from £6.5 million a year earlier. Dividends declared included an interim ordinary dividend of 9.6 pence per share and a special dividend of 15 pence per share. For fiscal 2026, revenue reached £115.2 million, and adjusted PBT was £15.3 million, growing at 20% per year from 2021 to 2026. Principals grew from 198 to 501, and other fee earners expanded from 10 to 181 between July 2016 and July 2026. In H1 2027, the firm recruited 23 new principals and added 23 pod members, bringing the total to 501 principals and 682 total fee earners. Qualified applicants declined to 148, offers made decreased to 37, and acceptances fell to 23. The firm serves the U.K. mid-market legal services sector, valued at over £14 billion annually. Property practice accounted for 23% of revenue, followed by litigation at 17%, commercial at 17%, and corporate at 16%. ChatGPT and Claude are regularly used by half of Keystone's lawyers, and Netdocuments Generative AI is used by one-third. CoCounsel was rolled out during H1 2027. The firm's platform model is described as "the premier platform law firm empowering lawyers to deliver exceptional client service." Management noted that the platform model is now "accepted by the mainstream," positioning the firm as the "stand-out choice for top quality lawyers seeking the benefits it offers." The moderation in recruitment was attributed to "geo-political uncertainty." Existing principals are "confidently recruiting Pod members and driving up revenue per Principal." The period was characterized as "another positive period for Keystone" with "excellent financial performance underpinned by strong legal demand and solid recruitment." The firm reported a "good start to H2 2027" and expects revenue to be comfortably ahead and adjusted profit to be materially ahead of pre-announcement market expectations for FY 2027. Management described the uncaptured portion of the addressable market as providing "a long runway for organic growth."