Law firm warns on profits and seeks to bolster finances as virus impact continues

Manchester law firm DWF has issued a profits warning, and is seeking further financial support, due to the coronavirus pandemic.

In an update today the firm, which became the largest listed legal business on the London Stock Exchange when it floated last year, said it estimates group revenues for the financial year ending April 30, 2020, will show total growth of between 15% and 20% which is below management’s previous expectations.

It added: “Although the group continues to expect double-digit percentage growth in underlying adjusted profit before tax this year, it expects a material impact on the expected FY20 profits due to lower than expected revenue and the level of investment made during the year to grow the platform.

“The group has already implemented cost savings during the course of the year and has accelerated its cost saving programme which is expected to deliver circa £10m in cash savings during FY21 and annualised savings of £13.5m in FY22.”

As the group expects that it will generate lower than anticipated profits in 2020 it also expects net debt at the year-end to be higher than anticipated.

And although it said the group has sufficient liquidity to deal with current working capital requirements – it has a revolving credit facility with HSBC, NatWest and Lloyds of £80m and currently expects to continue to operate within the limits of that facility – the board said it believes it prudent to seek additional contingency facilities from its lenders to ensure the group has increased headroom for working capital purposes and a relaxation of certain covenants for a period of time.

“The group has a strong relationship with its lenders and has had positive initial discussions, which are ongoing,” it said.

It added that the payment of any final dividend for financial year 2020 will be determined later in the year once the group’s financial results are known and have been considered by the board.

Meanwhile, housebuilder Redrow announced today that it is to shut all its construction sites.

The group, based in Ewloe, near Chester, said many office-based colleagues have been working from home and earlier in the week it closed its sales centres.

It also reduced its workforce on sites to target construction operations on plots that are due to complete over the coming weeks.

But it said it has become increasingly impracticable as its supply chain has been significantly impacted in recent days.

As a result the board has now decided to commence, with immediate effect, an orderly and safe closure of all of its sites and offices.

Redrow says it has a strong balance sheet with total net assets of around £1.6bn.

Despite this, as a consequence of the board’s decision to close sites, and the need to retain some flexibility through a prolonged period of inactivity, the company has started discussions with its syndicate of six banks in respect of additional committed banking facilities over and above the current £250m revolving credit facility.

“It is our intention to increase the additional ‘accordion’ facility of £50m that is available to us to £100m,” it said today, adding: “We have also submitted an application to the Bank of England for eligibility for the Government’s COVID-19 Corporate Financing Facility.”

Further, it said it will immediately commence ‘furloughing’ a significant proportion of its staff under the Government’s Job Retention Scheme.

“When there is a return to normality in the supply chain, and we are satisfied it is safe for our workforce to return to work, we will reopen sites and recommence production with an initial focus on fulfilling our substantial order book that stands at £1.4bn of which £0.9bn is contracted.”

John Tutte

Executive chairman John Tutte, said: “These are unprecedented times. The actions we have announced today will give us the flexibility to manage the business through this turbulent period to ensure we are ready to resume production when it is safe to do so”.

Following the Financial Conduct Authority’s call for companies to postpone announcing preliminary results for at least two weeks, Knowsley-based specialist brakes manufacturer Surface Transforms has moved publication of its results for the seven months to December 31, 2019.

Instead of announcing the figures on March 30, it will now publish in early May.

It said its financial year 2019 results remain in line with the company’s announcement released on February 28, 2020, when the firm, which makes brakes for aircraft and high performance cars, said revenues increased 183% to £1.451m compared with £512,000 in the seven months to December 31, 2018, while losses before and after tax narrowed, from £1.509m in 2018, to £1.302m.

It said cash at December 31, 2019, was £770,000, against £319,000 in December 2018.

Announcing its handling of the current lockdown situation, it said that, in order to ensure business continuity in its day-to-day operations, the group has implemented a series of actions to protect the health and safety of its employees.

These include the segregation of operational teams into distinct shifts; regular dialogue with employees and clients; the strict enforcement of the company’s health and hygiene practices which follow specific health protection protocols; the adoption of flexible working arrangements including home working wherever possible; and stringent restrictions on travel and meetings.

Surface Transforms said the COVID-19 situation continues to evolve rapidly which could impact revenues going forward.

“However, the business remains fully operational and is manufacturing brake discs with sufficient raw material and component inventory to continue to do so for some months.

“Since the start of the year, the company has not yet received any notification of orders being rescinded or OEM (original equipment manufacturer) deferment of pre-contracted purchases.

“The company remains in active communications with all its key customers. The board continues to closely monitor the situation whilst also actively exploring the availability of various government announced initiatives and will provide further updates as appropriate.”