A local authority shared services legal venture that reported a £1.2m loss on turnover of £7.8m in 2018/19 insists it is on course to return to the black this year.
LGSS Law, set up in 2015, is wholly owned by Cambridgeshire and Northamptonshire county councils, along with Central Bedfordshire, which became a third owner in 2016. Accounts filed by the company show that in the year ended 31 March 2019, revenue declined from £8.7m to £7.8m. Annual losses rose from £300,000 to £1.2m.
LGSS Law told the Gazette that it took a ‘back-to-basics’ approach in 2018/19 and decided not to continue an external growth agenda until internal operations were adequate and robust. This affected revenue due to significant reduction in some external work. Increasing administrative costs and income being lower than originally predicted affected profit.
During 2018/19 and into 2019/20, the company said it reviewed its structure and that fee-earner productivity and efficiency have increased through training and better performance management tools.
LGSS Law said: ‘The current financial year, 2019/20, has accordingly seen significant change in the firm’s finances, with the company confidently forecasting a profit at the end of the financial year and further improvements in 2020/21.’
The three owners are also upbeat. A spokesperson for Northamptonshire, which gave LGSS Law a £1m overdraft facility, said the company had faced ‘considerable’ financial difficulties. ‘However, the LGSS Law board have been proactively addressing these legacy financial issues and while there is still more work to be done, the firm is now on course to turn over a profit this financial year, as well as becoming increasingly well-established and respected in the market.’
Cambridgeshire, which provided a £499,000 overdraft facility, said: ‘The purpose of the overdraft facility is to provide working capital to ensure the law firm avoids any cashflow difficulty in the “lag” between work, billing and receipt of payment… This working capital will always be required by the company. However, it is expected that its financial position will improve over time for the loans to be paid down.’