Current trading and COVID-19 update

RNS Number : 6332H

Knights Group Holdings PLC

26 March 2020

 

26 March 2020

Knights Group Holdings plc

("Knights", the "Company" and the "Group")

Current trading and COVID-19 update

Knights Group Holdings plc (AIM: KGH), one of the UK's fastest growing legal and professional services businesses, today provides an update on its current trading, the precautionary measures it has put in place in relation to COVID-19, and the Group's liquidity.

Current trading and COVID-19 update

Group trading to date has been in line with market expectations for the full year ending 30 April 2020, with no adverse change to the Group's performance thus far as a result of Coronavirus. 

The health and wellbeing of Knights' people has been the Group's priority since the outbreak of the COVID-19 virus, and as such, all employees have been working from home since 13 March 2020. This action was taken ahead of the UK government's official request for businesses to facilitate home working.

Business continuity has also been a key focus at Knights. The Group's previous investments in secure, robust systems, infrastructure and technology platforms support the operational efficiency of its business and have enabled teams to work effectively from home, with productivity remaining at normal levels. This investment, along with a strong team culture, has enabled Knights to protect its colleagues without adversely disrupting service levels to clients.

The Group operates a resilient business model, with its full service offering and geographic reach supporting a highly diversified revenue and client base, and industry leading working capital management.

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.

A number of cost saving initiatives focused in areas that do not compromise the prospects of the business in the long term have been identified and implemented.  These include:

o  stopping or deferring all non-essential capital expenditure across the firm;

o  eliminating all discretionary spend, including marketing;

o  reducing Board members' salaries by 30% and reducing the salaries of all staff whose salaries are £30,000 or more by 10%, with effect from 1 April 2020; and

o  making staff cost savings to reflect a more prudent approach to resourcing.

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. As a result, the Board does not believe it would be appropriate to provide forward looking financial guidance to investors and analysts at this time.  However, we remain confident in the Group's market positioning and long-term ambition to become the leading legal and professional services business outside London. 

Balance sheet and liquidity

The Group has a strong balance sheet with a conservative gearing level and good liquidity.

The Group had recently extended its revolving credit facility with HSBC UK and Allied Irish Bank (GB) to £40m until June 2023, giving the Group a total of c.£23m in undrawn committed facilities for working capital purposes, based on current market expectations for c.£17m of net debt as at the year ending 30 April 2020. This level of expected net debt will be less than 1 times proforma EBITDA.

We are in regular discussion with our banking partners, all of whom remain supportive of Knights as a business.

David Beech, CEO of Knights, commented:

" Since the outbreak of the coronavirus, our primary concern has been the safety and wellbeing of our colleagues, who have responded with great commitment and resilience.

"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 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."

For further information, contact:

Knights David Beech, CEO	Via MHP Communications
Numis (Nomad and Broker) Stuart Skinner, Kevin Cruickshank	020 7260 1000
MHP Communications (Media enquiries)  Andrew Jaques, Katie Hunt, Rachel Mann	020 3128 8100 07585 301464 [e-mail]

Notes to Editors

Knights is a fast-growing, legal and professional services business, ranked within the UK's top 100 largest law firms by revenue. Knights was one of the first law firms in the UK to move from the traditional partnership model to a corporate structure in 2012 and has since grown rapidly. Knights has specialists in all key areas of corporate and commercial law so that it can offer end-to-end support to businesses of all sizes and in all sectors. It is focussed on key UK markets outside London and currently operates from 15 offices located in Birmingham, Cheltenham, Chester, Crawley, Derby, Leeds, Leicester, Lincoln, Maidstone, Manchester, Nottingham, Oxford, Stoke, Wilmslow and York.

 

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