UK listed law firms react to Covid-19 by cutting salaries and ditching dividend payments
Knights reduces employee salaries above £30k by 10%; Ince cancels interim dividend
Listed UK law firm Knights has announced salary cuts in response to Covid-19 while fellow public company Ince has followed Gateley in ditching its planned interim dividend payment .
The moves, which are being portrayed as prudent measures in the face of the uncertainty generated by the pandemic, were outlined in regulatory updates to the London Stock Exchange today (26 March).
Knights, which earlier this month acquired a brace of regional law firms as part of its strategy to be the largest legal and professional services firm outside London, has reduced board members’ salaries by 30% and those of all employees earning more than £30,000 annually by 10% from 1 April.
It is also stopping or deferring all non-essential capital expenditure, eliminating discretionary spending and ‘making staff cost savings to reflect a more prudent approach to resourcing’.
“While the group has seen limited impact on revenues and cash flows to date, management has pre-emptively put a number of precautionary measures in place given the increased economic uncertainty created by the spread of the coronavirus pandemic,” it said.
It added that it had recently extended its revolving credit facility with HSBC UK and Allied Irish Bank to £40m helping it to maintain ‘a strong balance sheet with a conservative gearing level and good liquidity’.
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.”
For its part, Ince – which has a substantial international network of offices – said the Covid-19 pandemic was ‘now having a significant effect on the Group's UK business, having progressively impacted all of the international offices, beginning with Greater China’.
It said it was not possible to forecast the group’s trading performance during the pandemic and ‘can no longer be confident of delivering results which are in line with market expectations either for the current period ending 31 March 2020 or for the year to 31 March 2021’.
The uncertainty – including over the timing of fee collection - has prompted the firm to cancel its 2p-a-share interim dividend payment, due to be paid on 16 April, and impose limits on discretionary expenditure.
It is also ‘exploring the many initiatives announced by the UK Government and will use them wherever commercially sensible’.
Chief executive Adrian Biles said: “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."
Gateley announced the scrapping of its planed interim pay out on Tuesday (24 March).
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