Listed firm Knights has announced it will reduce by 10% the salaries of all staff earning more than £30,000.
The national firm needs to make staff cost savings to reflect a ‘more prudent approach to resourcing’ as it responds to the financial pressures caused by the coronavirus lockdown.
Board members’ salaries will also be cut by 30%, with the changes taking effect from 1 April.
The firm, which had acquired several businesses in the weeks leading up to the crisis, will stop or defer all non-essential capital expenditure and eliminate discretionary spend, including marketing.
In a statement to the London Stock Exchange, chief executive David Beech said: ‘Whilst we have traded in line with market expectations to date, we have decided to take a number of precautionary measures in response to the anticipated economic impact from the spread of the virus, to ensure maximum flexibility to respond to the changing market environment.
‘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 group recently extended its revolving credit facility with HSBC UK and Allied Irish Bank (GB) to £40m until June 2023, giving it a total of around £23m in undrawn committed facilities for working capital purposes. Based on current market expectations the group has around £17m of net debt as at the year ending 30 April 2020.
In line with other listed firms, Knights has said it will not provide forward-looking financial guidance to investors and analysts at this time.
All employees have been working from home since 13 March. Knights said previous investments in secure, robust systems, infrastructure and technology platforms have enabled teams to work effectively from home, with productivity remaining at normal levels.
Knights' shares were steady this morning at 330p, compared with 488p before the crisis.
The firm is highly unlikely to be the only one implementing salary cuts as several workstreams dry up and revenues plummet. The difference with Knights is that as a listed firm it is required to report such changes publicly.
Meanwhile, another listed firm, the Ince Group, has announced it is 'no longer confident' of producing results in line with market expectations either for the year ending 31 March 2020 or for the 2020/21 year.
The Ince board has cancelled the interim dividend due for payment next year and is limiting discretionary expenditure and is ‘examining other means’ of reducing spending further. The company said it is exploring financial initiatives to support business announced by the UK government and will use them ‘wherever commercially sensible’.
The COVID-19 is having a ‘significant’ effect on the group’s UK business, having progressively impacted all its international offices beginning with China. Clients’ businesses may also be affected, with consequent uncertainty about the timing of collection of fees.
The firm’s share price dropped almost 10% following today’s update. Shares are worth 23p, having traded at more than 115p at the turn of the year.
*The Law Society is keeping the coronavirus situation under review and monitoring the advice it receives from the Foreign & Commonwealth Office and Public Health England.