First set of accounts for Advance Northumberland reveal £4million loss

Northumberland County Council’s controversial development and regeneration company, Arch, was replaced by Advance Northumberland towards the end of 2018.

The official transfer of all of the assets and trade to the new holding company took place on November 13 that year.

Now, its first set of accounts have been lodged with Companies House, for the year ending March 31, 2019, which covers the last seven-and-a-half months of Arch and the first four-and-a-half months of Advance.

They also cover the first full year under the Conservative administration, which took power at County Hall after the May 2017 elections, with a pledge to ‘scrap Arch’ prominent in its manifesto.

The accounts show that the company’s turnover – albeit under a new name – continued to rise, from £36.1million to £39.8million, while gross profit also grew slightly, from £22.0million to £22.3million.

However, Advance’s overall loss after tax for the 2018-19 financial year was £4.08million, slightly lower than the £4.4million recorded the year before, while shareholder funds – the amount of equity in a company, in this case belonging to the county council as sole shareholder – dropped from £55miilion to £50.8million.

This is attributed largely to three factors – a revaluation of the investment portfolio resulting in a net decrease of £8.2million, a £50,000 drop in the capital contribution from the county council and a fall in the group’s profit and loss reserve of £4.1million.

Advance, as with its predecessor Arch, continues to owe a significant amount of money to the county council.

The company owes a total of £11.6million due within one year, down from £12.4million in 2017-18, of which £3.8million is to the county council.

In relation to longer-term credit, there is a total of £278.6million outstanding, around £2million higher than the previous year, with all but £1.1million of it owed to the local authority.

In the preamble to the accounts, it states: ‘Advance Northumberland Limited is not expecting to invest in more executive homes, but is likely to look towards a greater emphasis on more affordable housing schemes.

‘There will be a continued emphasis on industrial and commercial infrastructure which will deliver more jobs in Northumberland.’

Meanwhile, the turbulent history of Arch is into its final chapter.

While officially replaced by new vehicle Advance more than a year ago, it has remained an entity on the books of Companies House until recently when an application to strike the company off the register was lodged.

A notice of this was to appear in the London Gazette, the official journals of record, on Tuesday, January 21, which means that unless anyone raises a justified objection, Arch will be dissolved in two months’ time.

The county council’s external auditors raised questions about the merits of replacing Arch with Advance in their report on the authority’s 2018-19 accounts, given that all of Arch’s subsidiaries were transferred to the new company, stating: ‘It is our view that the same outcome could have been achieved by changing the name of Arch Corporate Holdings to Advance Northumberland at a significantly lower cost to the council, but this was not an option considered by cabinet.’

However, at the audit committee meeting in November where this report was discussed, Coun Nick Oliver, the cabinet member for corporate services, said it wasn’t a ‘pointless exercise’, as suggested by one councillor, but had to take place because of the ‘serious reputational damage’ – concerns about the use of consultants, property purchases, hospitality and the awarding of major contracts have all been revealed publicly over the past two years.

Plus, this was the meeting where the breakdown in relationship between the authority and its auditors, Ernst and Young (EY), became apparent, with EY resigning, just as the council was making moves to remove them anyway.

The value for money risk in the audit results report also related to ‘appropriate processes and controls for managing the subsidiary companies’, but this was due to the fact that the new governance arrangements for Advance had not been in place for the full financial year.

Partner Stephen Reid conceded that if they had been, it most likely would have resulted in a different conclusion.

EY has now also resigned as the auditors of Advance Northumberland, given its relationship to the county council.