Keystone Law Group PLC (LON:KEYS) shares were on the slide on Tuesday as the group warned of a “material decline” in the number of new instructions since the start of the coronavirus pandemic.
In its full-year results, the AIM-listed group also it could not assess the impact of the outbreak on its current year, although added that it believed the most likely outcome will still see it being profitable and cash generative.
“Whilst it is an extremely challenging time across the UK economy, we are in a strong position to deal with the challenges which lie ahead… we are in a strong financial position, both in terms of liquidity, being debt free and having over £4.4mln of cash, and in terms of the high proportion of our cost base which is fully variable and on a paid when paid basis”, said chief executive James Knight.
In the figures for the year ended 31 January, the company reported a pre-tax profit of £5.2mln, up 10.1% on the prior year, while revenues rose 16.3% to £49.6mln.
The company also said despite the pandemic its current year to date had seen billing and cash generation remain strong and in line with expectations.
In a note on Tuesday, analysts at Shore Capital said while the company was seeing subdued demand for its lawyers, its operating model gave it “a significant advantage relative to traditional firms”.
“[Keystone’s] largely variable cost base, whereby its lawyers receive 60- 75% of the fees they generate, paid only when Keystone has received payment from its clients, positions the group well for the continued uncertainty that lies ahead. Furthermore, the fact its model is designed to service its clients remotely means the disruption caused by the government imposed lockdown has been minimal”, the broker said.
ShoreCap added that the company’s “diverse revenue streams with no overreliance on a specific area of law” should also serve it well.
However, the uncertain outlook helped drive Keystone’s shares down 6.1% to 420p in early trading.