The struggles of marketing outfit QualitySolicitors are brought into sharp focus by new accounts that reveal a steep fall in income and job cuts which leave the business with fewer than 10 full-time staff.

For the year ended 31 March 2017, accounts filed on 20 December show that Quality Solicitors Organisation Limited generated turnover of £1.34m, down 25.6% on 2016.

The company, which once aspired to be the first household-name legal brand, shed more than half of its full-time staff in 2016/17. By March it employed just one sales person (down from seven) and two people in marketing (down from four). Annual salary costs fell during the year from more than £900,000 to around £257,000. Exceptional costs on redundancies totalled £250,000. 

Despite the fall in revenue, the annual report and financial statements show a pre-tax profit of £16,010,450 - compared with a loss of £765,031 in 2015-16. The company says this was 'predominantly due to an exceptional item... the release from an intercompany debt'. The income statement shows 'exceptional administrative income' of £15,968,781. The strategic report also shows a net margin before tax of 7.5%, against a 25.5% loss the previous year. 

In a statement, a spokesman for the company told the Gazette that QualitySolicitors 'has achieved what we set out to do in making the business profitable and sustainable'.

He added: 'As outlined last year, upfront cost cuts were necessary in order to achieve this. As anticipated revenue has since decreased due to the new QS strategy not suiting every individual business. Since the move of offices in May 2016 which resulted in an initial decrease in staff numbers, we’ve increased headcount to give a solid foundation for growth and continue to service our partner firms.’

Alluding to its status as a going concern, the directors' report states that the balance sheet at 31 March 2017 showed liabilities exceeding assets by £713,475. However it states that directors have received confirmation that controlling party UKLS Topco 'intends to support the company for the foreseeable future'. Although Jersey-based UKLS Topco is the parent undertaking of controlling groups within the organisation, the ultimate controlling party remains an equity fund managed by Palamon Capital Partners LP, which owns the majority of shares in the parent company.

QualitySolicitors has acknowledged in the past that it has changed its approach to take account of some firms leaving the network and those that remain wanting different levels of marketing support.

The report does not place a figure on how many firms remain in the QualitySolicitors network, noting only that the company experienced a decrease in subscriptions. The Palamon website states there are more than 80 partner firms – this is in comparison to the estimate of 100 in November 2016.

In a statement posted alongside the results, director Nigel Berry said: ‘The performance of the business has set a platform for future growth, in part due to the strong partnerships it has with its network of solicitors and the business development activities it undertakes. The company is looking to build on this in the coming year and to continue to grow its market share.’

In 2016 QualitySolicitors discarded an ambitious franchise scheme originally conceived to establish the network as the first ‘household name’ legal brand. The network pledged instead to offer a package enabling member firms to decide how closely they wished to publicly associate with QS, after suffering a spate of defections.