Biles: Stepping down next month
Shares in listed law firm Ince Group collapsed to their lowest-ever level yesterday after it said a £8.6m fund-raise was needed to ward off financial problems.
It revealed too that the ransomware attack suffered in March is estimated to have cost £5m, while longstanding chief executive Adrian Biles – who took the firm public in August 2017 – is to step down next month ahead of likely staff cuts.
An accelerated book-build today raised more than £7m from a share placement, while Ince is also taking out a £1.6m loan from its funding bank.
It told investors this morning: “Without the fund-raising, the group will face financial difficulties and the company will need to look to alternative sources of funding in the short term which may not be readily available or so advantageous to the group or its shareholders.”
The firm’s shares, which reached a peak of 191p in September 2018, have been on a downward trajectory since spring 2021, when they were around 80p, and the news today saw the price more than halve to just 5.4p.
The placing price is 5p and the shares being issued represent around 62% of the enlarged share capital.
Executive director Donald Brown, who is also chief executive of the recently acquired corporate adviser Arden Partners, bought almost £1m worth of shares and is to succeed Mr Biles as group chief executive next month, when the new shares are admitted. Mr Biles will also resign from the board.
Fellow Arden directors James Reed-Daunter and Christopher Yates bought £100,000 and £50,000 of shares respectively.
The net proceeds will be used to strengthen the group’s balance sheet, provide additional working capital and implement a “cost-rationalisation programme”.
Upon the draw-down of the loan in full, Ince will have total borrowings with its principal funding bank of £17m, comprising the loan, a term loan of £7.4m – which is repayable quarterly from September 2022 to March 2024 – and a credit facility of £8m.
Ince explained how Covid has impacted all of its offices, particularly in the UK and Asia, with cash lock-up levels especially high in the latter. It issued a profit warning in May, because of the additional impact of the Ukraine conflict on global shipping – a key market for the group – and the cyber-attack.
“The attack principally affected non-client data and internal systems, including a disruptive impact on billings in the final and very important weeks of FY22, with the recording of hours worked having to move to a manual process and the production of invoices by fee-earners being impossible for an extended period.
“Recovery from these disruptions was longer and slower than anticipated and the disruption to the group’s normal way of working has had a negative impact on both people and systems.”
The systems have been substantially restored but the firm currently estimates that the cash impact was nearly £5m, for which it has submitted an initial insurance claim.
This should partially be covered by the group’s business interruption insurance cover of up to £2m, but management “estimate the claim could take up to 12 months to be processed and received”.
Ince has agreed with its bank that these funds will be used to repay the loan and part of the term loan.
“The cash impact of these events and their consequences mean that the group continues to operate at the limit of its borrowing facilities (and was unable to make a short-term repayment (‘clean down’ payment) on 31 May 2022) and short-term working capital has been negatively impacted.
“Therefore, the group is seeking to complete the fund-raising to support its short and medium-term working capital requirements and implement a cost rationalisation programme.”
The announcement said that, only top of recent annualised cost savings of £2.2m from property rationalisations, headcount reductions and reduced overheads – the firm was focused on delivering the £1m of “synergies” identified in the Arden acquisition and has identified further cost savings of £4m across the group which could be “accelerated with the proceeds of the fund-raising”.
These included “potential for a reduced overseas footprint, review and rationalisation of non-core business streams, further property rationalisation and headcount reductions and tighter control of overhead costs”.
More positively, the firm reported that revenues in the past two months have “progressively recovered to near 2021 levels” as activity levels picked up.
As part of the new funding deal, the firm’s bank has waived any breaches of covenants and other terms under the existing facilities agreement, including in respect of the clean-down payment due on 31 May 2022.
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