QualitySolicitors reduced its losses by more than £1m in the latest financial year, newly published accounts show, but the franchise remains dependent on millions of pounds worth of investment from its private equity owners.
In the 15-month period ended 31 March 2015 the company posted an operating loss of £2.3m, down from £3.6m in calendar 2013.
Turnover – understood mainly to derive from firms paying to be a member of the network – fell from £3.2m in 2013 to £2.8m in 2014/15. In March this year chief executive Eddie Ross (pictured) disclosed that the number of QS member firms had fallen from 120 to 100 over the course of the previous two years.
The balance sheet at March 2015 shows that the company's liabilities then exceeded assets by £15.9m.
Some £16m is due to be paid to creditors within one year of the balance sheet's publication. The equivalent figure was £1.9m in the 2013 accounts.
However, the directors reported they have received confirmation from controlling party Palamon that it ‘intends to support the company for the foreseeable future’.
During the reporting period an on-demand loan facility with Palamon attracted interest at 10%, adding up to £258,926 charged to the profit and loss account. However the interest was not paid.
During the course of 2014/15, founding directors Craig Holt and Saleem Arif both resigned from the company. In October 2014 it was acquired by UKLS Midco Limited, becoming a part of the Palamon-owned Simplify Group.
Directors’ total remuneration fell from £1.1m in 2013 to £747,703 for the 15-month period ended 31 March, with the highest-paid director receiving £195,000 in 2014/15.
QualitySolicitors was founded in 2008 and officially launched in May 2009 as an internet-based alliance of independent law firms.
The network grew quickly through significant advertising and high-profile tie-ups such as a deal in 2011 to set up legal access points in stores of WHSmith.
That link has since ended, and the company has admitted it grew too quickly in its early years. Ross stated earlier this year that he wants member firms to have more freedom on how to run their business.
QS has been contacted for comment.