The London Stock Exchange: an estimated £1.5bn of dividends has been scrapped in response to the pandemic Shutterstock
Top 50 listed UK law firm Gateley has cancelled its planned interim dividend pay out in response to reduced activity caused by the Covid-19 pandemic.
The firm announced the measure today, when the firm said it was also suspending financial guidance “until both the impact and duration of the COVID-19 pandemic becomes clearer”.
The move is in line with a string of dividend cancellations across the UK economy and a call by the Financial Conduct Authority for companies to delay their results amid heavy global stock market falls, with the total estimated amount of scrapped payments in the UK alone standing at £1.5bn.
It will also reflect boardroom sentiment in business law firms across Europe and the US, given the disruption caused by the unprecedented measures being taken to try and halt the spread of the virus.
Gateley’s interim dividend payment was announced on 14 January alongside a healthy set of H1 financial results, with an 11.8% increase in revenue to £51.8m achieved against a 10.2% increase in profit before tax to £5.5m.
At that point, the firm announced an 11.5% increase in the dividend to 2.9 pence per ordinary share to be paid on 31 March.
In today’s update the firm, which announced the acquisition of high-profile Belfast media boutique Paul Tweed for £2m earlier this month, said its board believed the cancellation to be “prudent and in the best interests of all stakeholders to maximise the group's short-term liquidity”.
The firm said trading had been in line with expectations until the end of February following a “solid” first half performance and further “earnings enhancing acquisitions” before a reduction of activity from 1 March “as a result of the disruption caused by the COVID-19 pandemic to our clients and to our staff".
The firm added: “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.
Despite this, however, the firm conceded “that it is presently impossible to predict the group's likely trading performance in the short-term”.
Chief executive Michael Ward said: "As a board, we consider these measures to be in the best interests of all our stakeholders. Gateley is a resilient and well-balanced business and our economic and geographically diversified business model is well-placed to withstand difficult economic conditions.
The firm’s share price has fallen from an early March high of 195.5 pence to 122.5 pence at close of business yesterday.
Other listed UK law firms have also experienced sharp falls in their share prices. On 13 March, litigation funder Burford Capital delayed the announcement of its financial results due to the impact of Covid-19.
Further reading on the Covid-19 pandemic