LGSS Law, the social enterprise law firm owned by three councils, is on track to return to profit, its Executive Director has said, after its accounts for 2018/19 showed losses of more than £1.2m, up from £300,000 the previous year.
The accounts for the 12 months to 31 March 2019 also revealed that turnover at the alternative business structure owned by Northamptonshire, Cambridgeshire and Central Bedfordshire Councils fell from £8.7m to £7.8m.
Debbie Carter-Hughes, Executive Director of LGSS Law, said the loss had been anticipated, adding: "The financial results we have published relate to more than nine months ago and do not reflect the changes we have made.
“We have been looking at what we do and adopted a ‘back-to-basics’ approach.”
This has involved a focus on LGSS Law’s internal operations – such as gaining efficiencies through its case management system and its administrative support – at the expense of actively seeking growth.
Carter-Hughes said: “It is looking really positive for 2019/20. We are now on track to make a £150,000 profit. The changes take time but this financial year we are seeing the benefits. Our shareholders are fully behind us in terms of what we are trying to do.”
She revealed that historic billing issues between the ABS and one if its shareholder councils, Northamptonshire, had now been resolved. “This has made a huge difference – it has made our relationship and our working a lot better.”
Carter-Hughes said there were gaps in the public sector legal market, notably as a result of the recruitment challenges the local government sector faces, and this would help deliver business growth in the future.
LGSS Law has also seen a move to reduce the locum headcount in favour of permanent recruitment, a move that had been successful, she said.
The ABS saw some significant management changes in 2019, including the appointment of law firm strategy consultant Professor Stephen Mayson in April as non-executive chairman as well as new shareholder representatives.
On the likely impact of the prospective local government reorganisation in Northamptonshire – the county council, one of LGSS Law’s shareholders, and its districts are set to be replaced by two unitary authorities – Carter-Hughes said: “At the moment we are in discussions and we are waiting to see the outcome.”
The 2018/19 accounts revealed that Cambridgeshire provided LGSS Law with an overdraft facility of £499,000 during the year, of which £375,000 has been drawn down. During the prior year, Northamptonshire provided it with an overdraft facility of which £950,000 had been drawn down.
The 2018/19 accounts said: “The directors have a reasonable expectation that the company will continue in operational existence for the foreseeable future. However, the directors are aware of certain material uncertainties which may cause doubt on the company’s ability to continue as a going concern.
“At 31 March 2019, the company’s balance sheet was in a net liability position following a second period of losses. Furthermore, the company continues to be reliant on the support of its shareholders in the form of existing loans, overdrafts and trade payables balances. However, the shareholders have agreed to subordinate all existing loans, overdrafts and other amounts payable which, together with forecasts showing an improved position over the next twelve months, has allowed the Directors to have a reasonable expectation that the company will continue in operational existence for the foreseeable future.”