Listed law firm Gateley yesterday cancelled a dividend payout to ensure its short-term liquidity in the face of the Covid-19 pandemic.
In an update to the market yesterday, the firm said trading until the end of February had been in line with expectations but that “activity has, understandably, reduced since 1 March 2020, as a result of the disruption caused by the COVID-19 pandemic to our clients and to our staff”.
“The group remains highly resilient, with a strong client base and a well-balanced and diversified service offering. We have successfully mobilised our staff to work from home in line with all government guidelines and many parts of the business are currently busy assisting clients with COVID-19 related issues as well as other ongoing matters.”
However, as it was presently impossible to predict the group’s likely trading performance in the short term, the board has decided to suspend financial guidance for the time being.
“The board also believes that it would be prudent and in the best interests of all stakeholders to maximise the group’s short-term liquidity. With this in mind, it has decided to cancel the group’s interim dividend of 2.9 pence per share, which was due for payment on 31 March 2020.”
Chief executive Michael Ward said Gateley was “well-placed to withstand difficult economic conditions”.
As with all stocks, Gateley’s share price has dived in recent weeks. Having reached an all-time high of 218p in early February, it closed yesterday at 121.5p.
Redde Northgate – the newly merged business that owns New Law Solicitors and Principia Law – issued a similar message, that trading was in line with market expectations up until the end of February and that it was suspending forward guidance for the time being.
It said that, as at 29 February, the group had £200m of headroom on its bank facilities, while cash recovery has continued “without significant disruption”.
But whilst the balance sheet was “strong”, the group has put in place measures to further conserve cash, particularly in limiting spend on new hire vehicles.
Chief executive Martin Ward said: “The matters that we can control on cost and cash are being managed carefully. The headroom the group has is significant and we will continue to manage our resources carefully through the coronavirus crisis.
“We are taking all possible measures to ensure we can deliver the best possible outcomes for all our stakeholders.”
NAHL – the owner of National Accident Helpline – had been due to announce its results yesterday, but in line with the recommendation of the Financial Conduct Authority suspended this because of the pandemic.
Meanwhile, last week, the newest listed law firm, MJ Hudson, announced interim results for the second half of 2019, with revenue up 26% to £10m, of which 12.5% was organic.
Adjusted EBITDA more than doubled to £1.7m, with adjusted pre-tax profit of £300,000, compared to a £100,000 loss during the same period in 2018.
The firm, which is an alternative business structure but describes itself as an international financial services support provider operating in the alternative investments market, told investors that the listing in December has “transformed the strength” of its balance sheet, moving from a net debt position of £12m to a net cash position of £20m at 31 December 2019.
Chief executive Matthew Hudson said: “New business momentum within the alternatives sector continues to drive our growth. Recent acquisitions are integrating well and broadening our touch points with clients…
“Externally, we cannot ignore the current risk posed by coronavirus and its impact on global stock markets and investing. Naturally, we continue to monitor this situation, however our belief in our business is shaped by the long-term nature of the alternatives sector which we serve and its long-term uncorrelated performance in times of historic stock market volatility.
“We remain cautiously confident about our current financial year given what has already been achieved in the six months to December, the momentum in our business and the full year impact of recent acquisitions. At the same time, our conviction in our markets and our long-term opportunity has deepened.”