National firm Knights is to cut the salaries of all staff earning over £30,000 and has started a redundancy exercise, while fellow listed law firm Ince has cancelled its dividend payout as firms react to the impact of the coronavirus crisis.
In a stock exchange announcement today, Knights said it has only seen limited impact on revenues and cash flows to date but was pre-emptively putting “precautionary measures in place” given the increased economic uncertainty.
From 1 April, board members’ salaries will be cut by 30%, while all staff earning at least £30,000 will see a 10% cut.
Knights is also stopping or deferring all non-essential capital expenditure; eliminating all discretionary spend, including marketing; and “making staff cost savings to reflect a more prudent approach to resourcing”.
The firm has confirmed that this latter euphemism means that it has begun a redundancy exercise; such has been Knights’ rate of growth that it has been over-staffing.
It said these initiatives would “not compromise the prospects of the business in the long term”.
The firm reassured investors that group trading to date has been in line with market expectations and its investment in IT means productivity and service levels have remained at normal levels.
But it continued: “The board believe these actions to be prudent in light of the uncertain economic outlook. Given the rapidly changing situation, it is currently difficult to predict the potential impact on the activity levels of our clients.”
The announcement said Knights has a strong balance sheet with a “conservative gearing level and good liquidity”.
Having only recently extended its revolving credit facility to £40m until June 2023, Knights has £23m in undrawn committed facilities for working capital purposes
Chief executive David Beech said: “We enter this period of uncertainty as a resilient, well-invested, diversified and cash generative business offering a unique proposition in the highly fragmented and often under-invested market for legal services outside London.
The business is in a strong financial position and I am confident that the group’s strategy, supported by a talented team, will see Knights emerge from the near-term uncertainties in a strong position.”
The Ince Group has followed Gateley’s decision earlier this week to cancel dividend payments.
Its announcement said: “The board has now concluded that the pandemic… is now having a significant effect on the group’s UK business, having progressively impacted all of the international offices, beginning with Greater China…
“Clients’ businesses may be also be impacted, with consequent uncertainty about the timing of collection of our fees.
“The group is therefore limiting discretionary expenditure except on items to support the immediate ability to meet our clients’ expectations and is examining other means of reducing expenditure.
“We are also exploring the many initiatives announced by the UK government and will use them wherever commercially sensible.”
As a result, the firm said it was no longer confident of delivering results in line with market expectations, either for the current period ending 31 March 2020 or for the following 12 months.
It was cancelling the interim dividend due for payment next month “in the interests of prudence”.
Chief executive Adrian Biles said: “These are unprecedented and challenging times and the welfare of our clients, staff and partners is paramount.
“We are doing everything we can to ensure that when the pandemic eases we will be well placed to move forward with our growth strategy. The underlying business of the group is robust and will survive the current turbulence.”
The Financial Conduct Authority today announced that it was extending the four months listed companies have from their financial year-end to publish audited financial statements by two months.
The voluntary moratorium the authority put in place on the publication of preliminary statements of account last week will end on 5 April, it added.