The Shaw Trust was forced to liquidate its investment portfolio during 2018 and 2019, after suffering operating losses of more than £18m.
The employment charity’s annual accounts, which will be published by Companies House this week and which have been seen by Civil Society News, show that the charity also faced a sharp rise in pensions liabilities and a significant fall in the value attached to recent private acquisitions.
The Shaw Trust, one of the 50 biggest charities in the country, says that it is already “showing considerable improvement” after a difficult last financial year, and aims to be in surplus again by 2022.
The charity’s income in 2018-19 was £206m, compared to expenditure of £224m.
The Trust's reserves dropped by more than half in the year to August 2019, from £75m to £35m. Cash-in-hand available to the charity at the end of the 12 months fell for the fifth consecutive year, although Civil Society News understands that the charity has made progress rebuilding both reserves and cash since then.
‘Poor performance’ of private acquisitions
The accounts show that The Shaw Trust’s pensions liability stood at £60m, up from £42m at the end of the 18-months accounts released for 2017-18.
The charity was forced to reduce its goodwill valuations, which refer to the intangible value of new assets, by £16m. One acquisition was the private Prospects Group in November 2017, and the accounts say that the write down in goodwill “predominantly reflected that the performance of Prospects Group subsequent to the acquisition was not as anticipated”.
The Shaw Trust's investment portfolio was valued at £17.5m before it was liquidated to fund ongoing costs.
The charity’s biggest sources of income were government contracts from the Department of Work and Pensions, the Department of Education and Education and Skills Funding Agency, worth a total of £64.2m. This is around £20m lower than the equivalent figure in 2017-18.
The accounts acknowledge that 2018-19 was “a challenging year, with the ending of certain contracts and poor performance in others. The organisation had been slow to manage and integrate the recent acquisitions and adjust the cost base accordingly.
“The introduction of a new management team in the middle of 2019 began the restructure programme for the business, including the approval and implementation of a three-year turnaround plan. This business plan has been approved by the trustees and has the full support of funders and other stakeholders.”
The accounts also confirm that the charity expects to “return to operational profitability during the period” of this business plan.
Actions already taken
Chris Luck, who joined the charity as chief executive midway through 2019, told Charity Finance magazine last month that the mergers and acquisitions pursued before he arrived “had, to a degree, become quite overwhelming, and needed to be acted on”.
Shaw Trust: We are implementing a turnaround plan
Today Stephen King, chief financial officer at The Shaw Trust, said: “These accounts reflect the historical position of Shaw Trust during its last financial year to the end of August 2019.
“Since this date we have been successfully implementing a turnaround plan, having brought in a new senior team, structures and performance measures, and made significant progress, working collaboratively and with the support of our funders and key stakeholders.
“Performance has shown considerable improvement over the last 12 months, and we are confident of closing out this year in a stronger financial position, strengthening our reserves and supporting thousands more people each year.”