Value of listed law firm halves in a single day
Fast-growing law firm Knights saw its share price crash more than 50% on Tuesday (March 22) after a profit warning it blamed on high levels of staff sickness and working from home.
It also warned of a “softening in business confidence” but shareholders suffered a more concrete loss of confidence in the professional services group, sending Knights shares down to its lowest level in more than three years.
Knights has been enjoying strong growth into new geographic areas driven by acquisitions, which have included Turner Parkinson, Spearing Waite, Cummins Solicitors, EGL, Fraser Brown, Shulmans, Mundays, Keebles, Archers Law and Langleys Solicitors.
The group has also invested heavily in offices, including prominent sites at Two Chamberlain Square in Birmingham and the Majestic in Leeds.
Tuesday morning’s profit warning is its first mis-step since going public four years ago.
Knights chief executive David Beech, whose 19.9% stake in the group has meant his shareholding has lost £30m in value on Tuesday, said: “Following a good first half, it is frustrating that recent events have held the business back from delivering a stronger performance in the second half.
“Beyond this near-term uncertainty, the opportunity to cement our leading position in key legal services markets outside London remains substantial and we are as well placed as ever to deliver on that opportunity.”
Knights now expects its underlying pre-tax profits to show no growth on last year despite a 20% increase in revenues to around £126m for the year to April.
The group’s revenues are typically weighted towards the second half of the year but it said “a continuation of the impact of Omicron and recent macro conditions have slowed growth to a greater extent than anticipated”.
It had been hit by “greater illness rates amongst our people, resulting in the business not benefitting from a faster return to office working and the consequent advantages of our team-based culture”.
Corporate work had seen a slowdown, which it suggested was “possibly due to concerns around the strength of the economy”.
The group had a market value of nearly £400m when its shares touched 470p last April, more than three times its 2018 IPO price.
By close on Tuesday, was down to 180p – or 50.7% over the day.