Company Registration No. 03798877 (England and Wales)
G L HEARN LIMITED
ANNUAL REPORT AND FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
G L HEARN LIMITED
COMPANY INFORMATION
Directors
B Wilson
Capita Corporate Director Limited
R Williamson
Secretary
Capita Group Secretary Limited
Company number
03798877
Registered office
65 Gresham Street
London
England
EC2V 7NQ
Auditor
KPMG LLP
15 Canada Square
London
E14 5GL
G L HEARN LIMITED
CONTENTS
Page
Strategic report
1 - 3
Directors' report
4 - 5
Independent auditor's report to the members of G L Hearn Limited
6 - 9
Income statement
10
Balance sheet
11 - 12
Statement of changes in equity
13
Notes to the financial statements
14 - 34
G L HEARN LIMITED
STRATEGIC REPORT
FOR THE YEAR ENDED 31 DECEMBER 2021
- 1 -

The Directors present their Strategic report and financial statements for the year ended 31 December 2021.

Review of the business

G L Hearn Limited (“the Company”) is a wholly owned subsidiary (indirectly held) of Capita plc. Capita plc along with its subsidiaries are hereafter referred to as “the Group”. The Company operates within the Group’s Portfolio division.

 

The principal activity of the Company is that of the provision of property and planning advisory services from offices in London, Manchester, Birmingham, Glasgow, Sunderland, Cheltenham and Southampton.The Directors are not aware, at the date of this report, of any other major changes in the Company's activities in the next year.

 

As shown in the Company's income statement on page 10, the Company has reported a turnover of £21,237,377 for the year ended 31 December 2021 (2020: £21,928,421) and operating profit of £1,173,949 for the year ended 31 December 2021 (2020 restated: Operating loss - £234,955). The improvement in operational performance is due to realignment of the Company's support team, IT and property footprint to better reflect the size of the organisation in 2021.

 

The balance sheet on pages 11 - 12 of the financial statements shows the Company's financial position at the year end. Net assets of the Company are £22,081,609 for the year ended 31 December 2021 (2020 restated : £21,081,918). Details of amounts owed by/to its parent Company and fellow subsidiary undertakings are shown in notes 10 and 12 to the financial statements.

 

Key performance indicators used by Capita plc are operating margins, free cash flow, capital expenditure and return on capital employed. Capita plc and its subsidiaries manage their operations on a divisional basis and as a consequence, some of these indicators are monitored only at a divisional level. The performance of the Portfolio Services division of Capita plc is discussed in the Group's annual report which does not form part of this report.

 

Principal risks and uncertainties

The Company is subject to various risks and uncertainties during the ordinary course of its business, many of which result from factors outside of its control. The Company’s risk management framework provides reasonable (but cannot provide absolute) assurance that significant risks are identified and addressed. An active risk management process identifies, assesses, mitigates and reports on strategic, financial, operational and compliance risk.

 

The principal themes of risk for the Company are:

 

To mitigate the effect of these risks and uncertainties, the Company adopts a number of systems and procedures, including:

 

 

Capita plc, has also implemented appropriate controls and risk governance techniques across all of its businesses which are discussed in the Group’s annual report which does not form part of this report.

G L HEARN LIMITED
STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2021
- 2 -

Section 172 Statement

Capita plc’s section 172 statement applies to both the Division and the Company to the extent it relates to the Company’s activities. Common policies and practices are applied across the Group through divisional management teams and a common governance framework. The following disclosure describes how the Directors have regard to the matters set out in section 172(1a) to (f) and forms the Directors’ statement as required under section 414CZA of the Companies Act 2006.

Further details of the Group’s approach to each stakeholder are provided in Capita plc’s section 172 statement on pages 40 and 41 of Capita plc’s 2021 Annual Report.

Our People

Why they are important

 

What matters to them?

 

How we engaged?

 

 

Topics of Engagement

 

Outcomes and actions

 

 

Risks to stakeholder

relationship

 

Key Metrics

 

They deliver our business strategy; they support the organisation to build a values-based culture; and they deliver our products and services ensuring client satisfaction.

Flexible working, learning and development opportunities leading to career progression, fair pay and benefits as a reward for performance, two-way communication, and feedback.

People surveys, regular all-employee communications, employee director participation in Board discussions, employee focus groups and network groups and workforce engagement on remuneration.

Protection of employees during Covid-19, human resources policies during Covid-19, future ways of working as a result of Covid-19, and creating an inclusive workplace.

Issue of Capita-specific Covid-19 guidance and regular updates; new and

temporary HR policies; increased provision and support for employee

wellbeing and flexible working; and simplification of property portfolio and office space.

Our ability to recruit due to the global economic bounceback, our ability to retain people, impacting the quality of service we can provide and our ability to change our culture and practices in line with our responsible business agenda.

Employee net promoter score, people survey completion level.

Clients and Customers

Why they are important

 

What matters to them?

 

 

How we engaged?

 

 

Topics of Engagement

 

Outcomes and actions

 

 

 

Risks to stakeholder

relationship

Key Metrics

 

They are recipients of Capita’s services; and Capita’s reputation depends on delighting them.

High-quality service delivery; delivery of transformation projects within agreed timeframes; rapid response to support pandemic planning; and responsible and sustainable business credentials.

Client meetings and surveys, Regular meetings with government and annual review with Cabinet Office and Created a senior client partner programme giving an experienced, single point of contact for key clients and customers

Remote working on client services as a result of Covid-19, current service delivery, possible future services, co-creation of client value propositions.

Feedback provided to business units to address any issues raised, client value propositions team supporting divisions with co‑creation ideas; and senior client partner programme undertaking client-focused growth sprints to build understanding of client issues and ideas to help address them.

Loss of business by not providing the services they want, damage to reputation by not delivering to their requirements

Customer NPS; specific feedback on client engagements.

Supplier and Partners

Why they are important

 

 

They share our values and help us deliver our purpose; maintain high standards in our supply chain; and achieve social, economic and environmental benefits aligned to the Social Value Act.

G L HEARN LIMITED
STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2021
- 3 -

Section 172 Statement (Continued)

 

Supplier and Partners

What matters to them?

 

How we engaged?

 

Topics of Engagement

Outcomes and actions

 

 

Risks to stakeholder

relationship

Key Metrics

 

Payments made within agreed payment terms, clear and fair procurement process, building lasting commercial relationships, and working inclusively with all types of business.

Supplier meetings throughout source to procure process, regular reviews with suppliers, supplier questionnaires and risk assessments.

Supplier payments, sourcing requirements, supplier performance, and the Supplier Charter.

Alignment of payments with agreed terms; supplier feedback on improvements to procurement process; improvement plans and innovation opportunities; and improved adherence to supplier charter.

Environmental issues, commitment to tackling net zero, supply chain resilience

 

% of supplier payments within agreed terms; supplier relationship management feedback score; SME spend allocation; and supplier diversity profile

Investors

Why they are important

 

What matters to them?

 

How we engaged?

 

 

 

Topics of Engagement

 

Outcomes and actions

 

Risks to stakeholder

relationship

Key metrics

 

They own the business and provide essential capital; and their input and

feedback is considered when making decisions.

Reporting on strategic, operational and ESG factors; financial performance; access to the Board and senior management; and regular communication.

Financial and other reports and trading updates, regular investor programme with Board and feedback throughout the year, discussions around AGM on resolutions and governance topics, dedicated investor relations contacts and email inbox and regular Board reports from investor relations function and external advisers

Transformation progress, balance sheet and liquidity, ongoing impact of Covid-19 and governance.

More frequent market communication; and increased level of engagement with largest shareholders.

Changes to outsourcing market, eg government policy, delivery on strategic and financial objectives, key aspects of governance. eg remuneration’

Revenue; profit; free cash flow; net debt and gearing; and AGM voting

Society

Why they are important

 

What matters to them?

 

How we engaged?

 

 

Topics of Engagement

Outcomes and actions

 

Risks to stakeholder

relationship

Key Metrics

 

Capita is a provider of key services to government impacting a large proportion of the population.

Social mobility, youth skills and jobs; digital inclusion; diversity and inclusion; climate change; business ethics and accreditations and benchmarking.

Memberships of non-governmental organisations, charitable and community partnerships, external accreditations and benchmarking and working with clients, suppliers and the Cabinet Office

Youth employment, tackling digital exclusion, workplace inequalities, and Climate change.

Publication of net zero plan; real living wage accreditation; youth and employability programme; and commitments to tackle racism and enhance ethnic diversity.

Lack of understanding of the issues important to them and insufficient communication or involvement in shaping and influencing strategies and plans

Net zero by 2035; community investment; workforce diversity and ethnicity data, including pay gaps.

 

On behalf of the Board

B Wilson
Director
12 September 2022
G L HEARN LIMITED
DIRECTORS' REPORT
FOR THE YEAR ENDED 31 DECEMBER 2021
- 4 -

The Directors present their Director's report and financial statements for the year ended 31 December 2021.

Results and dividends

The results for the year are set out on page 10.

No interim or final dividend was paid during the year (2020: £nil).

Directors

The Directors who held office during the year and up to the date of signature of the financial statements were as follows:

 

B Wilson
Capita Corporate Director Limited
R Williamson
Business relationships
Details regarding relationships with suppliers, clients and others, together with further cross-references, are provided in the section 172 statement on page 2 and 3.
Political donations
The Company made no political donations and incurred no political expenditure during the year (2020: £nil).
Disabled persons

Applications for employment by disabled persons are always fully considered, bearing in mind the aptitudes of the applicant concerned. In the event of members of staff becoming disabled, every effort is made to ensure that their employment within the Company's continues and that the appropriate training is arranged. It is the policy of the Company that the training, career development and promotion of disabled persons should, as far as possible, be identical to that of other employees.

Employee involvement

The Company's policy is to consult and discuss with employees, through unions, staff councils and at meetings, matters likely to affect employees' interests.

 

Information of matters of concern to employees is given through information bulletins and reports which seek to achieve a common awareness on the part of all employees of the financial and economic factors affecting the Group's performance.

 

The Company participates in the Group’s equity-settled employee share scheme operated by Capita plc, the ultimate parent undertaking.  Details of the scheme are contained in the Group’s annual report for 2021.

 

Details of number of employees and related costs can be found in note 17 to the financial statements.

 

Auditor

KPMG LLP, having indicated its willingness to continue in office, will be deemed to be reappointed as auditor under section 487(2) of the Companies Act 2006.

G L HEARN LIMITED
DIRECTORS' REPORT (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2021
- 5 -
Statement of Directors' responsibilities in respect of the Strategic report, the Directors' report and the financial statements

The Directors are responsible for preparing the Strategic report, Directors' report and the financial statements in accordance with applicable law and regulations.

 

Company law requires the Directors to prepare financial statements for each financial year. Under that law the Directors have elected to prepare the financial statements in accordance with UK Accounting Standards and applicable law (UK Generally Accepted Accounting Practice), including FRS 101 Reduced Disclosure Framework.

 

Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Company and of the profit or loss of the Company for that period. In preparing these financial statements the Directors are required to:

The Directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company’s transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the financial statements comply with the Companies Act 2006. They are responsible for such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error, and have general responsibility for taking such steps as are reasonably open to them to safeguard the assets of the Company and to prevent and detect fraud and other irregularities.

 

The Directors are responsible for the maintenance and integrity of the corporate and financial information included on the company’s website. Legislation in the UK governing the preparation and dissemination of financial statements may differ from legislation in other jurisdictions.

Statement of disclosure to auditor

So far as each person who was a Director at the date of approving this report is aware, there is no relevant audit information, being information needed by the auditor in connection with preparing its report, of which the Company’s auditor is unaware. Having made enquiries of fellow Directors and the Company’s auditor, each Director has taken all the steps that he/she might reasonably be expected to take as a Director in order to make himself/herself aware of any relevant audit information and to establish that the Company’s auditor is aware of that information.

Qualifying third party indemnity provisions

The Company has granted an indemnity to the Directors of the Company against liability in respect of proceedings brought by third parties, subject to the conditions set out in the Companies Act 2006. Such qualifying third party indemnity provision remains in force as at the date of approving the Directors' report.

On behalf of the Board
B Wilson
Director
12 September 2022
INDEPENDENT AUDITOR'S REPORT
TO THE MEMBERS OF G L HEARN LIMITED
- 6 -

We have audited the financial statements of G L Hearn Limited (“the company”) for the year ended 31 December 2021 which comprise the Income Statement, the Balance Sheet, the Statement of Changes in Equity and related notes, including the accounting policies in note 1.

In our opinion the financial statements:

 

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”) and applicable law. Our responsibilities are described below. We have fulfilled our ethical responsibilities under, and are independent of the Company in accordance with, UK ethical requirements including the FRC Ethical Standard. We believe that the audit evidence we have obtained is a sufficient and appropriate basis for our opinion.

Material uncertainty related to going concern

We draw attention to note 1.1 to the financial statements which indicates that the Company is reliant on its ultimate parent undertaking, Capita plc, and the Group is considering the sale of the Company, in regard to its ability to continue as a going concern. The most recent financial statements of Capita plc include material uncertainties that may cast significant doubt on its ability to continue as a going concern.

These events and conditions, along with the other matters explained in note 1.1 constitute a material uncertainty that may cast significant doubt on the Company’s ability to continue as a going concern.

 

Our opinion is not modified in respect of this matter.

Going concern

The directors have prepared the financial statements on the going concern basis. As stated above, they have concluded that a material uncertainty related to going concern exists.

Based on our financial statements audit work, we consider that the directors’ use of the going concern basis of accounting in the preparation of the financial statements is appropriate.

Fraud and breaches of laws and regulations – ability to detect

Identifying and responding to risks of material misstatement due to fraud

 

To identify risks of material misstatement due to fraud (“fraud risks”) we assessed events or conditions that could indicate an incentive or pressure to commit fraud or provide an opportunity to commit fraud.

Our risk assessment procedures included:

 

 

We communicated identified fraud risks throughout the audit team and remained alert to any indications of fraud throughout the audit.

 

INDEPENDENT AUDITOR'S REPORT (CONTINUED)
TO THE MEMBERS OF G L HEARN LIMITED
- 7 -
Fraud and breaches of laws and regulations – ability to detect (continued)

As required by auditing standards, and taking into account possible pressures to meet profit targets and revenue targets, we perform procedures to address the risk of management override of controls and the risk of fraudulent revenue recognition, in particular around recognition of transactional sales in the incorrect period, the risk that management may be in a position to make inappropriate accounting entries, and the risk of bias in accounting judgements such as the profiling of the accrued income.

 

We did not identify any additional fraud risks.

 

We performed procedures including:

 

Identifying and responding to risks of material misstatement related to compliance with laws and regulations

 

We identified areas of laws and regulations that could reasonably be expected to have a material effect on the financial statements from our general commercial and sector experience and through discussion with the directors (as required by auditing standards), and from inspection of the Company’s regulatory and legal correspondence and discussed with the directors the policies and procedures regarding compliance with laws and regulations. We communicated identified laws and regulations throughout our team and remained alert to any indications of non-compliance throughout the audit.

The potential effect of these laws and regulations on the financial statements varies considerably.

 

Firstly, the Company is subject to laws and regulations that directly affect the financial statements including financial reporting legislation (including related companies legislation), distributable profits legislation and taxation legislation and we assessed the extent of compliance with these laws and regulations as part of our procedures on the related financial statement items.

 

Secondly, the Company is subject to many other laws and regulations where the consequences of non-compliance could have a material effect on amounts or disclosures in the financial statements, for instance through the imposition of fines or litigation. We identified the following areas as those most likely to have such an effect: health and safety, data protection laws, anti-bribery, RICS regulations and employment law recognising the nature of the Company’s activities. Auditing standards limit the required audit procedures to identify non-compliance with these laws and regulations to enquiry of the directors and inspection of regulatory and legal correspondence, if any. Therefore, if a breach of operational regulations is not disclosed to us or evident from relevant correspondence, an audit will not detect that breach.

 

Context of the ability of the audit to detect fraud or breaches of law or regulation

 

Owing to the inherent limitations of an audit, there is an unavoidable risk that we may not have detected some material misstatements in the financial statements, even though we have properly planned and performed our audit in accordance with auditing standards. For example, the further removed non-compliance with laws and regulations is from the events and transactions reflected in the financial statements, the less likely the inherently limited procedures required by auditing standards would identify it.

In addition, as with any audit, there remained a higher risk of non-detection of fraud, as these may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal controls. Our audit procedures are designed to detect material misstatement. We are not responsible for preventing non-compliance or fraud and cannot be expected to detect non-compliance with all laws and regulations.

INDEPENDENT AUDITOR'S REPORT (CONTINUED)
TO THE MEMBERS OF G L HEARN LIMITED
- 8 -
Strategic report and Directors' report

The directors are responsible for the strategic report and the directors’ report. Our opinion on the financial statements does not cover those reports and we do not express an audit opinion thereon.

Our responsibility is to read the strategic report and the directors’ report and, in doing so, consider whether, based on our financial statements audit work, the information therein is materially misstated or inconsistent with the financial statements or our audit knowledge. Based solely on that work:

Matters on which we are required to report by exception

Under the Companies Act 2006 we are required to report to you if, in our opinion:

We have nothing to report in these respects.

Directors' responsibilities

As explained more fully in their statement set out on page 4, the directors are responsible for: the preparation of the financial statements and for being satisfied that they give a true and fair view; such internal control as they determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error; assessing the Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern; and using the going concern basis of accounting unless they either intend to liquidate the Company or to cease operations, or have no realistic alternative but to do so.

Auditor's responsibilities

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue our opinion in an auditor’s report. Reasonable assurance is a high level of assurance, but does not guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the financial statements.

A fuller description of our responsibilities is provided on the FRC’s website at www.frc.org.uk/auditorsresponsibilities.

INDEPENDENT AUDITOR'S REPORT (CONTINUED)
TO THE MEMBERS OF G L HEARN LIMITED
- 9 -
The purpose of our audit work and to whom we owe our responsibilities

This report is made solely to the Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken so that we might state to the Company’s members those matters we are required to state to them in an auditor’s report and for no other purpose. To the fullest extent permitted by law, we do not accept or assume responsibility to anyone other than the Company and the Company’s members, as a body, for our audit work, for this report, or for the opinions we have formed.

Robert Brent (Senior Statutory Auditor)
for and on behalf of KPMG LLP, Statutory Auditors
Statutory Auditor
Chartered Accountants
15 Canada Square
London
E14 5GL
12 September 2022
G L HEARN LIMITED
INCOME STATEMENT
FOR THE YEAR ENDED 31 DECEMBER 2021
- 10 -
Restated*
2021
2020
Notes
£
£
Revenue
3
21,237,377
21,928,421
Cost of sales
(15,347,529)
(16,329,677)
Gross profit
5,889,848
5,598,744
Administrative expenses
(4,715,899)
(5,833,699)
Operating profit/(loss)
4
1,173,949
(234,955)
Finance income
5
628
-
Profit/(loss) before tax
1,174,577
(234,955)
Income tax (charge)/credit
6
(174,886)
58,835
Total comprehensive income/(expense) for the year
999,691
(176,120)
*Refer note 22 for more details on restated balances

The notes on pages 14 to 34 form an integral part of these financial statements.

 

The income statement has been prepared on the basis that all operations are continuing operations.

 

There are no recognised gains and losses other than those passing through the income statement.

G L HEARN LIMITED
BALANCE SHEET
AS AT
31 DECEMBER 2021
31 December 2021
- 11 -
Restated*
2021
2020
Notes
£
£
Non-current assets
Property, plant and equipment
7
42,672
169,173
Intangible assets
8
1,622,587
1,627,606
Investments in subsidiary
9
3,816
3,816
Deferred tax
6
228,149
207,567
Total non-current assets
1,897,224
2,008,162
Current assets
Trade and other receivables
10
19,462,242
19,965,763
Cash
11
2,825,818
1,510,080
Total current assets
22,288,060
21,475,843
Total assets
24,185,284
23,484,005
Current liabilities
Trade and other payables
12
1,891,459
2,257,273
Deferred income
13
46,856
19,553
Provisions
14
20,813
5,813
Income tax payable
137,103
84,685
Total current liabilities
2,096,231
2,367,324
Non-current liabilities
Trade and other payables
12
7,444
34,763
Total non-current liabilities
7,444
34,763
Total liabilities
2,103,675
2,402,087
Net assets
22,081,609
21,081,918
G L HEARN LIMITED
BALANCE SHEET (CONTINUED)
AS AT
31 DECEMBER 2021
31 December 2021
Restated*
2021
2020
Notes
£
£
- 12 -
Capital and reserves
Issued share capital
15
1,036,866
1,036,866
Share premium
2,634,250
2,634,250
Other reserves
41,000
41,000
Retained earnings
18,369,493
17,369,802
Total equity
22,081,609
21,081,918
*Refer note 22 for more details on resatated balances
The notes on pages 14 to 34 form an integral part of these financial statements
Approved by Board and authorised for issue on 12 September 2022
B Wilson
Director
Company Registration No. 03798877
G L HEARN LIMITED
STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2021
- 13 -
Called up share capital
Share premium account
Retained earnings
Other reserves
Total equity
£
£
£
£
£
At 1 January 2020
1,036,866
2,634,250
18,659,697
41,000
21,258,038
Impact of restatement (refer note 22)
-
-
(1,113,775)
-
(1,113,775)
At 1 January 2020 (restated)
1,036,866
2,634,250
17,545,922
41,000
20,144,263
Total comprehensive expense for the year (restated)
(refer note 22)
-
-
(176,120)
-
(176,120)
Contribution in respect of share based payment charge
-
-
4,712
-
4,712
Settlement of share based payment charged by intercompany
-
-
(4,712)
-
(4,712)
At 31 December 2020 (restated)
1,036,866
2,634,250
17,369,802
41,000
21,081,918
Total comprehensive income for the year
-
-
999,691
-
999,691
Contribution in respect of share based payment charge
-
-
892
-
892
Settlement of share based payment charged by intercompany
-
-
(892)
-
(892)
At 31 December 2021
1,036,866
2,634,250
18,369,493
41,000
22,081,609

Share capital

The nominal proceeds on issue of the Company's equity share capital, comprising £1 ordinary shares.

 

Share premium

The amount paid to the Company by shareholders, in cash or other consideration, over and above the nominal value of the shares issued to them.

 

Retained earnings

Retained earnings represents the accumulated profits of the Company.

 

Other reserves

Other reserves constitutes the capital redemption reserve. The Company can redeem shares by repaying the market value to the shareholder whereupon the shares are cancelled. Redemption must be from distributable profits. The capital redemption reserve represents shares redeemed.

 

The notes on pages 14 to 34 form an integral part of these financial statements.

 

G L HEARN LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 DECEMBER 2021
- 14 -
1
Accounting policies
1.1
Basis of preparation

G L Hearn Limited is a company incorporated and domiciled in the United Kingdom.

 

The financial statements are prepared under the historical cost basis except where stated otherwise and in accordance with applicable accounting standards.

 

In determining the appropriate basis of preparation for the annual report and financial statements for the year ended 31 December 2021, the Company’s Directors (“the Directors”) are required to consider whether the Company can continue in operational existence for the foreseeable future, being a period of at least 12 months following the approval of these financial statements. The Directors have concluded that it is appropriate to adopt the going concern basis, having undertaken a rigorous assessment of the financial forecasts, key uncertainties, and sensitivities, as set out below.

Board assessment

Base case scenario

The financial forecasts used for the going concern assessment are derived from financial projections for 2022-2023 for the Company which have been subject to review and challenge by management and the Directors. The Directors have approved the projections. Under the base case scenario, completion of Capita plc’s group wide transformation programme has simplified and strengthened the business and facilitates further efficiency savings enabling sustainable growth in revenue, profit, and cash flow over the medium term.

Severe but plausible downside

In addition to the base case, the Directors have also considered severe but plausible downside scenarios. The Directors have taken account of trading downside risks, which assume the Company is not successful in delivering the anticipated levels of revenue, profit, and cash flow growth. The downside scenario used for the going concern assessment also includes potential adverse financial impacts due to additional inflationary pressure which cannot be passed on to customers, not achieving targeted margins on new or major contracts, unforeseen operational issues leading the contract losses and cash outflows, and unexpected potential fines and losses linked to incidents such as data breaches and/or cyber-attacks.

Offsetting these risks the Directors have considered available mitigations within the direct control of the Company, including reductions to variable pay rises, setting aside any bonus payments and limiting discretionary spend.

Reliance on Capita plc (‘the Group’)

The Director’s assessment of going concern has considered the extent to which the Company is reliant on the Group. The Company is reliant on the Group in respect of the following:

Given the reliance the Company has on the Group, the Directors have considered the financial position of the ultimate parent undertaking as disclosed in its most recent consolidated financial statements, being for the six months period ended 30 June 2022.

G L HEARN LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2021
1
Accounting policies
(Continued)
- 15 -
1.1     Basis of preparation (continued)

Ultimate parent undertaking – Capita plc

The Capita plc Board (‘the Board’) concluded that it was appropriate to adopt the going concern basis, having undertaken a rigorous assessment of the financial forecasts, key uncertainties, and sensitivities, when preparing the Group’s condensed consolidated financial statements at 30 June 2022. These condensed consolidated financial statements were approved by the Board on 4 August 2022 and are available on the Group’s website (www.capita.com/investors). Below is a summary of the position at 4 August 2022:

Accounting standards require that ‘the foreseeable future’ for going concern assessment covers a period of at least twelve months from the date of approval of these condensed consolidated financial statements, although those standards do not specify how far beyond twelve months a Board should consider. In its going concern assessment, the Board has considered the period from the date of approval of these condensed consolidated financial statements to 31 December 2023, which is just less than eighteen months from the date of approval of the Group condensed consolidated financial statements ('the going concern period') and includes the scheduled repayments of private placement loan notes in the second half of 2023.

The base case financial forecasts demonstrate liquidity headroom and compliance with all covenant measures throughout the going concern period to 31 December 2023.The base case projections used for going concern assessment purposes reflect business disposals completed up to the date of approval of these condensed consolidated financial statements but do not reflect the benefit of any further disposals that are in the pipeline. The liquidity headroom assessment in the base case projections reflects the Group’s existing committed financing facilities and debt redemptions and does not reflect any potential future refinancing.

The principal mitigation to the possibility of insufficient liquidity in the severe but plausible downside scenario is the continuation of the Board approved disposal programme which covers businesses that do not align with the Group’s longer-term strategy. The Group has a strong track record of executing major disposals. In 2021, the Board targeted to achieve £700m of disposal proceeds by 30 June 2022 and has exceeded this target. The disposal programme continues, with further disposal processes launched in 2022. The Board is confident that the disposal programme will be delivered, thereby introducing substantial net cash proceeds to the Group, albeit with a corresponding removal of consolidated profits and cash flows associated with the disposal businesses.

In addition to the ongoing disposal programme, the Group may seek to mitigate the liquidity risks which might arise in the downside scenario by seeking further sources of financing beyond its existing committed funding facilities. The Board has been successful in obtaining new and extended financing facilities in recent years, most recently the extension of the RCF which was signed in July 2022.

Material uncertainties related to the group:

The Board recognises that the disposal programme requires agreement from third parties and that major disposals may be subject to shareholder and, potentially, lender and regulatory approval. Similarly, any new refinancing requires agreement with lenders. Such agreements and approvals are outside the direct control of the Group. Therefore, given that some of the mitigating actions which might be taken to strengthen the Group's liquidity position in the severe but plausible downside scenario are outside the control of the Group, this gives rise to material uncertainties, as defined in accounting standards, relating to events and circumstances which may cast significant doubt about the Group’s ability to continue as a going concern and to continue in operation and discharge its liabilities in the normal course of business.

Adoption of going concern basis by the Group:

Reflecting the Board’s confidence in the benefits expected from the completion of the transformation programme and execution of the approved disposal programme coupled with the potential to obtain further financing beyond its existing committed funding facilities, the Group continues to adopt the going concern basis in preparing these condensed consolidated financial statements. The Board has concluded that the Group will be able to continue in operation and meet their liabilities as they fall due over the period to 31 December 2023. Consequently, these condensed consolidated financial statements do not include any adjustments that would be required if the going concern basis of preparation were to be inappropriate.

G L HEARN LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2021
1
Accounting policies
(Continued)
- 16 -
1.1     Basis of preparation (continued)

Conclusion

Although the Company has a reliance on the Group as detailed above, even in a severe but plausible downside for both the Company and the Group, the Directors are confident the Company will continue to have adequate financial resources to continue in operation and discharge its liabilities as they fall due over the period to 31 December 2023 (the “going concern period”). Consequently, the annual report and financial statements have been prepared on the going concern basis.

In addition, the Company’s parent company has signed a contract to sell the Company and the intentions of the acquirer are not certain at the date of approval of these financial statements, which means that the Directors are unable to assess or control all scenarios for the Company’s future, including its funding and the post-sale group structure.

As the Group’s condensed consolidated financial statements have identified material uncertainties giving rise to significant doubt over the Group’s ability to continue as a going concern, given the Company’s reliance on the Group as set out above, as well as the uncertainty around the intentions of the acquirer, these conditions and events give rise to a material uncertainty which may cast significant doubt about the Company’s ability to continue as a going concern and, therefore, that the Company may be unable to continue in operation and discharge its liabilities in the normal course of business. The financial statements do not include any adjustments which would be required if the going concern basis of preparation were to be deemed inappropriate.

G L HEARN LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2021
1
Accounting policies
(Continued)
- 17 -
1.2
Compliance with accounting standards

The Company has applied FRS101 – Reduced Disclosure Framework in the preparation of its financial statements. The Company has prepared and presented these financial statements by applying the recognition, measurement and disclosure requirements of international accounting standards in conformity with the requirements of the Companies Act 2006.

 

The Company's ultimate parent undertaking, Capita plc, includes the Company in its consolidated statements. The consolidated financial statements are prepared in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006 and with UK-adopted International Financial Reporting Standards (IFRSs) and the Disclosure and Transparency Rules of the UK's Financial Conduct Authority. These are available to the public and may be obtained from Capita plc’s website on https://www.capita.com/investors.

 

In these financial statements, the Company has applied the disclosure exemptions available under FRS 101 in respect of the following items:

 

- A cash flow statement and related notes;

- Comparative period reconciliations for share capital, property, plant and equipment and intangible assets;

- Disclosures in respect of capital management;

- The effects of new but not yet effective IFRSs;

- Certain disclosures regarding IFRS 15 Revenue from Contracts with Customers;

- Certain disclosures regarding IFRS 16 Leases;

- Disclosures in respect of the compensation of key management personnel; and

- Disclosures in respect of transactions with wholly owned subsidiaries.

 

As the consolidated financial statements of Capita plc include equivalent disclosures, the Company has also taken the disclosure exemptions under FRS 101 available in respect of the following items:

 

1.3
Change in accounting policies

Onerous Contracts – Cost of Fulfilling a Contract (Amendments to IAS 37)

 

The amendments specify which costs an entity includes in determining the cost of fulfilling a contract for the purpose of assessing whether the contract is onerous. The amendments apply for annual reporting periods beginning on or after 1 January 2022 to contracts existing at the date when the amendments are first applied. At the date of initial application, the cumulative effect of applying the amendments is recognised as an opening balance adjustment to retained earnings or other components of equity, as appropriate. The comparatives are not restated.

 

The Company is in the advanced stages of the assessment of the amended standard and based on its current assessment, it is not expected to have any material impact to the Company’s financial statements.

G L HEARN LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2021
1
Accounting policies
(Continued)
- 18 -
1.4
Revenue recognition

Revenue is wholly earned within the United Kingdom.

 

The revenue and profits recognised in any period are based on the delivery of performance obligations and an assessment of when control is transferred to the customer.

 

In determining the amount of revenue and profits to record, and related balance sheet items (such as, trade receivables, accrued income and deferred income) to recognise in the period, management is required to form a number of key judgements and assumptions.

 

These judgements are inherently subjective and may cover future events such as the achievement of contractual milestones, performance KPIs and planned cost savings.

 

Revenue is recognised either when the performance obligation in the contract has been performed (so 'point in time' recognition) or 'over time' as control of the performance obligation is transferred to the customer.

 

For all contracts and at contract inception, the total transaction price is estimated, being the amount to which the Company expects to be entitled and has rights to under the present contract. This includes an assessment of any variable consideration where the Company's performance may result in additional revenues based on the achievement of agreed KPIs. Such amounts are only included based on the expected value or the most likely outcome method, and only to the extent that it is highly probable that no revenue reversal will occur.

 

The transaction price does not include estimates of consideration resulting from change orders for additional goods and services unless these are agreed.

Once the total transaction price is determined, the Company allocates this to the identified performance obligations in proportion to their relative stand-alone selling prices and recognises revenue when (or as) those performance obligations are satisfied. The Company frequently sells a customer bespoke solution, and in these cases the Company typically uses the expected cost-plus margin or a contractually stated price approach to estimate the standalone selling price of each performance obligation.

 

For each performance obligation, the Company determines if revenue will be recognised over time or at a point in time. Where the Company recognises revenue over time for long term contracts, this is in general due to the Company performing and the customer simultaneously receiving and consuming the benefits provided over the life of the contract.

 

For each performance obligation to be recognised over time, the Company applies a revenue recognition method that faithfully depicts the Company’s performance in transferring control of the services to the customer.

 

Transactional (Point in time) contracts

The Company delivers a range of transactional services for which revenue is recognised at the point in time when control of the service has transferred to the customer. This is considered to be when the customer obtains control of an asset or service in a contract with customer specified acceptance criteria.

 

Long-term contracts

In respect of long-term contracts and contracts for on-going services, revenue represents the value of work done in the year, including estimates of amounts not invoiced. Revenue in respect of long-term contracts and contracts for on-going services is recognised by reference to the stage of completion based on the achievement of performance obligations specified within the contract.

G L HEARN LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2021
1
Accounting policies
(Continued)
- 19 -
1.4     Revenue recognition (continued)

Contract modifications

The Company’s contracts are often amended for changes in contract specifications and requirements. Contract modifications exist when the amendment either creates new or changes the existing enforceable rights and obligations. The effect of a contract modification on the transaction price and the Company’s measure of progress for the performance obligation to which it relates, is recognised as an adjustment to revenue prospectively as an additional separate contract

 

Principal versus agent

The Company has arrangements with some of its customers whereby it needs to determine if it acts as a principal or an agent as more than one party is involved in providing the services to the customer. The Company acts as a principal if it controls a promised service before transferring that service to the customer. The Company is an agent if its role is to arrange for another entity to provide the services. Factors considered in making this assessment are most notably the discretion the Company has in establishing the price for the specified service and whether the Company is primarily responsible for fulfilling the promise to deliver the service.

 

Where the Company is acting as a principal, revenue is recorded on a gross basis. Where the Company is acting as an agent revenue is recorded at a net amount reflecting the margin earned.

 

Deferred and accrued income

The Company’s customer contracts include a range of payment schedules dependent upon the nature and type of services being provided. The Company often agrees payment schedules at the inception of long term contracts under which it receives payments throughout the term of the contracts. These payment schedules may include performance-based payments or progress payments as well as regular monthly or quarterly payments for ongoing service delivery.

 

Where payments made are greater than the revenue recognised at the period end date, the Company recognises a deferred income contract liability for this difference. Where payments made are less than the revenue recognised at the period end date, the Company recognises an accrued income asset for this difference.

1.5
Goodwill

Goodwill is stated at cost less any accumulated impairment losses. It is not amortised but is tested annually for impairment. This is not in accordance with The Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008 which requires that all goodwill be amortised. The Directors consider that this would fail to give a true and fair view of the profit for the year and that the economic measure of performance in any period is properly made by reference only to any impairment that may have arisen. It is not practicable to quantify the effect on the financial statements of this departure.

1.6
Other Intangibles

Intangibles are valued at cost less accumulated amortization. Amortisation is calculated to write off the cost in equal annual instalments over their estimated useful life, which is typically 5 years. In case of capitalized software development costs research expenditure is written off to the income statement in the period in which it is incurred. Development expenditure is written off in the same way unless and until the Company is satisfied as to the technical, commercial and financial viability of individual projects. In these cases, the development expenditure is written off in the same way unless and until the Company is satisfied as to the technical, commercial and financial viability of individual projects. In cases, the development expenditure is capitalized and amortised over the period during which the Company is expected to benefit.

G L HEARN LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2021
1
Accounting policies
(Continued)
- 20 -
1.7
Property, plant and equipment

Property, plant and equipment are stated at cost less depreciation. Depreciation is provided at rates calculated to write off the cost less estimated residual value of each asset over its expected useful life, as follows:

Leasehold improvements
over the period of the lease
Fixtures, fittings and equipment
4 - 5 years
Computer equipment
3 - 5 years
1.8
Government grants

Government grants are not recognised until there is a reasonable assurance that the Company will comply with the conditions attaching to them and that the grants will be received. Government grants are recognised in the income

statement on a systematic basis over the periods in which the Company recognises as expenses the related costs for which the grants are intended to compensate. Government grants that are receivable as compensation for expenses or losses already incurred or for the purpose of giving immediate financial support to the Company with no future related costs are recognised in the income statement in the period in which they become receivable.

1.9
Leasing

The Company leases various assets, comprising land and buildings.

The determination whether an arrangement is, or contains, a lease is based on whether the contract conveys a right to control the use of an identified asset for a period of time in exchange for consideration.

The following sets out the Company’s lease accounting policy for all leases with the exception of leases with low value and term of 12 months or less which are expensed to the consolidated income statement.

The Company as a lessee – Right-of-use assets and lease liabilities

 

At the inception of the lease, the Company recognises a right-of-use asset at cost, which comprises the present value of minimum lease payments determined at the inception of the lease. Right-of-use assets are depreciated using the straight-line method over the shorter of estimated life or the lease term. Depreciation is included within administrative expenses in the consolidated income statement. Amendment to lease terms resulting in a change in payments or the length of the lease results in an adjustment to the right-of-use asset and liability. Right-of-use assets are reviewed for impairment when events or changes in circumstances indicate the carrying value may not be fully recoverable.

The Company recognises lease liabilities where a lease contract exists and right-of-use assets representing the right to use the underlying leased assets.At the commencement date of the lease, the Company recognises lease liabilities measured at the present value of the lease payments to be made over the lease term.

In calculating the present value of lease payments, the Company uses its incremental borrowing rate at the lease commencement date because the interest rate implicit in the lease is not readily determinable. After the commencement date, the amount of lease liabilities is increased to reflect the accretion of interest and reduced for the lease payments made. The incremental borrowing rate is the rate of interest that the Company would have to pay to borrow, over a similar term and with a similar security, the funds necessary to obtain an asset of a similar value to the right-of-use asset in a similar economic environment. Incremental borrowing rates are determined monthly and depend on the term, country, currency and start date of the lease. The incremental borrowing rate is determined based on a series of inputs including: the risk-free rate based on swap market data; a country-specific risk adjustment; a credit risk adjustment; and an entity-specific adjustment where the entity risk profile is different to that of the Group.

G L HEARN LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2021
1
Accounting policies
(Continued)
- 21 -
1.9
Leasing (continued)
The lease liability is subsequently remeasured (with a corresponding adjustment to the related right-of-use asset) when there is a change in future lease payments due to a renegotiation or market rent review, a change of an index or rate or a reassessment of the lease term.
Lease payments are apportioned between a finance charge and a reduction of the lease liability based on the constant interest rate applied to the remaining balance of the liability. Interest expense is included within net finance costs in the consolidated income statement. Lease payments comprise fixed payments, including in-substance fixed payments such as service charges and variable lease payments that depend on an index or a rate, initially measured using the minimum index or rate at inception date. The payments also include any lease incentives and any penalty payments for terminating the lease, if the lease term reflects the lessee exercising that option. The lease term determined comprises the non-cancellable period of the lease contract. Periods covered by an option to extend the lease are included if the Company has reasonable certainty that the option will be exercised, and periods covered by an option to terminate are included if it is reasonably certain that this will not be exercised. The Company has elected to apply the practical expedient in IFRS 16 paragraph 15 not to separate non-lease components such as service charges from lease rental charges.
1.10
Investment in subsidiaries

All investments are initially recorded at their cost. Subsequently they are reviewed for impairment if events or changes in circumstances indicate the carrying value may not be recoverable.

1.11
Pensions

The Company participates in a number of defined contribution schemes and contributions are charged to the profit and loss account in the year in which they are due. These schemes are funded and the payment of contributions is made to separately administered trust funds. The assets of these schemes are held separately from the Company.

 

The Company remits monthly pension contributions to Capita Business Services Limited, a fellow subsidiary undertaking of Capita plc, which pays the group liability centrally. Any unpaid pension contributions at the year end have accrued in the accounts of that Company.

G L HEARN LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2021
1
Accounting policies
(Continued)
- 22 -
1.12
Financial instruments

Investments and other financial assets

 

Classification

The Company classifies its financial assets in the following measurement categories:

 

The Company reclassifies debt investments when and only when its business model for managing those assets changes.

 

Recognition and derecognition

Regular way purchases and sales of financial assets are recognised on trade date (that is, the date on which the Company commits to purchase or sell the asset). Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or have been transferred and the Company has transferred substantially all the risks and rewards of ownership.

 

Measurement

At initial recognition, the Company measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss (FVPL), transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets carried at FVPL are expensed in profit or loss.

 

Impairment

The Company assesses, on a forward-looking basis, the expected credit losses associated with its debt instruments carried at amortised cost and FVOCI. The impairment methodology applied depends on whether there has been a significant increase in credit risk.

 

For trade receivables, the Company applies the simplified approach permitted by IFRS 9, which requires expected lifetime losses to be recognised from initial recognition of the receivables.

 

Trade and other payables

Trade and other payables are recognised initially at fair value. Subsequent to initial recognition they are measured at amortised cost using the effective interest method.

 

Trade and other receivables

The Company assesses on a forward-looking basis the expected credit losses associated with its receivables carried at amortised cost. The impairment methodology applied depends on whether there has been a significant increase in credit risk. For trade receivables, the Company applies the simplified approach permitted by IFRS 9, resulting in trade receivables recognised and carried at original invoice amount less an allowance for any uncollectible amounts based on expected credit losses.

 

Cash and cash equivalents

Cash and short-term deposits in the balance sheet comprise cash at bank and in hand and short-term deposits with an original maturity of 3 months or less. Bank overdrafts are shown within current financial liabilities.

 

G L HEARN LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2021
1
Accounting policies
(Continued)
- 23 -
1.13
Impairment of non-financial assets

At each reporting date, the Company assesses whether there is any indication that an asset may be impaired. Where an indicator of impairment exists, the Company makes a formal estimate of the asset's recoverable amount. Where the carrying amount of an asset exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount. The recoverable amount is the higher of an asset's or cash-generating unit's fair value less costs to sell and its value in use is determined by discounting the expected future cash flows at a pre-tax rate that reflects risks specific to the liability.

1.14
Provisions

A provision is recognised when the Company has a present legal or constructive obligation as a result of a past event that can be reliably measured and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects risks specific to the liability.

 

1.15
Taxation

Tax on the profit or loss for the year comprises current and deferred tax. Tax is recognised in the income statement except to the extent that it relates to items recognised directly in equity or other comprehensive income, in which case it is recognised directly in equity or other comprehensive income.

 

Current tax is the expected tax payable or receivable on the taxable income or loss for the year, using tax rates enacted or substantively enacted at the balance sheet date, and any adjustment to tax payable in respect of previous years.

 

Deferred income tax is provided, using the liability method, on all temporary differences at the balance sheet date between the tax bases and liabilities and their carrying amounts for financial reporting purposes.

 

Deferred income tax assets are recognised for all deductible temporary differences, carry-forward of unused tax assets and unused tax losses, to the extent that it is probable that taxable profit will be available against which the deductible temporary differences and the carry-forward of unused tax assets and unused tax losses can be utilised, except where the deferred income tax asset relating to the deductible temporary differences arises from the initial recognition of an asset or liability in a transaction that is not a business combination and, at the time of the transaction, affects neither the accounting profit nor taxable profit or loss.

 

The carrying amount of deferred income tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the deferred income tax asset to be utilised.

 

Deferred income tax assets and liabilities are measured at the tax rates that are expected to apply to the year when the asset is realised or the liability is settled, based on tax rates (and tax laws) that have been enacted or substantively enacted at the balance sheet date.

1.16
Foreign exchange

Monetary assets and liabilities denominated in foreign currencies are translated into sterling at the rates of exchange ruling at the balance sheet date. Transactions in foreign currencies are recorded at the rate ruling at the date of the transaction. The results of overseas operations are translated at average rates of exchange. All differences are taken to the profit and loss account.

G L HEARN LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2021
1
Accounting policies
(Continued)
- 24 -
1.17

Group accounts

The financial statements present information about the Company as an individual undertaking and not about its Group. The Company has not prepared Group accounts as it is fully exempt from the requirement to do so by section 400 of the Companies Act 2006 as it is a subsidiary undertaking of Capita plc, a Company incorporated in England and Wales, and is included in the consolidated accounts of that Company.

2
Significant accounting judgements, estimates and assumptions

The preparation of financial statements in conformity with generally accepted accounting principles requires the Directors to make judgements and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingencies at the date of the financial statements and the reported income and expense during the reported periods. Although these judgements and assumptions are based on the Directors' best knowledge of the amount, events or actions, actual results may differ from these estimates.

 

The key sources of estimation uncertainty that have a significant risk of causing material adjustment to the carrying amounts of assets and liabilities within the next financial year are the measurement and impairment of goodwill and provisions. The Company determines whether goodwill is impaired on an annual basis and thus requires an estimation of the value in use of the cash-generating units to which the intangible assets are allocated. This involves estimation of future cash flows and choosing a suitable discount rate. The measurement of provisions reflects management's assessment of the probable outflow of economic benefits resulting from an existing obligation. Provisions are calculated on a case by case basis and involve judgement as regards the final timing and quantum of any financial outlay.

 

3
Revenue

The total revenue of the Company for the year has been derived from its principal activity wholly undertaken in the United Kingdom.

4
Operating profit/(loss)
Notes
2021
2020
£
£
Operating profit for the year is stated after charging:
Net foreign exchange losses
479
242
Depreciation on property, plant and equipment
7
182,751
35,385
Amortisation of intangible assets
8
5,019
438
Short term leases - Plant & Machinery
29,400
21,692
Short term leases - Other assets
116,750
48,635

Audit fees are borne by the ultimate parent undertaking, Capita plc. The audit fee for the current period was £30,000 (2020: £25,000). The Company has taken advantage of the exemption provided by regulations 6(2)(b) of The Companies (Disclosure of Auditor Remuneration and Liability Limitation Agreements) Regulations 2008 not to provide information in respect of fees for other (non-audit) services as this information is required to be given in the Company accounts of the ultimate parent undertaking, which it is required to prepare in accordance with the Companies Act 2006.

5
Finance income
2021
2020
£
£
Interest on bank deposits
628
-
628
-
G L HEARN LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2021
- 25 -
6
Income tax
The major components of income tax expense for the years ended 31 December 2021 and 2020 are:
Restated*
2021
2020
£
£
Current income tax
UK corporation tax
202,686
(58,368)
Adjustments in respect of prior periods
(7,218)
(90,116)
195,468
(148,484)
Deferred income tax
Origination and reversal of temporary differences
(27,313)
7,273
Adjustment in respect of prior periods
6,731
82,376
(20,582)
89,649
Total tax charge/(credit) reported in the income statement
174,886
(58,835)

The reconciliation between tax charge and the accounting profit multiplied by the UK corporation tax rate for the years ended 31 December 2021 and 2020 is as follows:

Restated*
2021
2020
£
£
Profit/(loss) before taxation
1,174,577
(234,955)
(Loss)/profit before taxation multiplied by standard rate of corporation tax in the UK of 19% (2020: 19%)
223,170
(44,641)
Taxation impact of factors affecting tax charge:
Expenses not deductible for tax purposes
6,959
18,821
Impact of changes in statutory tax rates
(54,756)
(25,275)
Adjustments in respect of current income tax of prior periods
(7,218)
(90,116)
Adjustments in respect of deferred income tax of prior periods
6,731
82,376
Total tax adjustments
(48,284)
(14,194)
Total tax/(credit)
174,886
(58,835)
G L HEARN LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2021
6
Income tax
(Continued)
- 26 -
Balance sheet
Income statement
Restated*
Restated*
2021
2020
2021
2020
£
£
£
£
Deferred tax assets
Decelerated capital allowances
221,515
173,281
(48,234)
16,748
Other short term timing differences
6,634
34,286
27,652
72,901
Net deferred tax asset
228,149
207,567
Deferred tax charge/(credit)
(20,582)
89,649
Deferred tax

A change to the main UK corporation tax rate was substantively enacted on 24 May 2021. The rate applicable from 1 April 2023 increases from 19% to 25%. The deferred tax asset at 31 December 2021 has been calculated based on this rate, resulting in a £54,756 tax credit to the income statement in 2021.

 

 

7
Property, plant and equipment
Leasehold improvements
Furniture, fixture and equipment
Computer equipment
Total
£
£
£
£
Cost
At 1 January 2021
116,000
248,101
196,485
560,586
Additions
-
-
56,250
56,250
Disposals
(116,000)
(248,101)
(196,485)
(560,586)
At 31 December 2021
-
-
56,250
56,250
Depreciation
At 1 January 2021
94,379
165,404
131,630
391,413
Disposals
(116,000)
(248,101)
(196,485)
(560,586)
Charge for the year
21,621
82,697
78,433
182,751
At 31 December 2021
-
-
13,578
13,578
Net book value
At 31 December 2020
21,621
82,697
64,855
169,173
At 31 December 2021
-
-
42,672
42,672
The Company continues to be part of Group's restructuring and multiyear transformation plan. As a result, the Company acquired IT related assets from Capita Property and Infrastructure Limited.
G L HEARN LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2021
- 27 -
8
Intangible assets
Software
Goodwill
Total
£
£
£
Cost
At 1 January 2021
15,732
4,303,206
4,318,938
Disposals
(15,732)
-
(15,732)
At 31 December 2021
-
4,303,206
4,303,206
Amortisation and impairment
At 1 January 2021
10,713
2,680,619
2,691,332
Charge for the year
5,019
-
5,019
Disposals
(15,732)
-
(15,732)
At 31 December 2021
-
2,680,619
2,680,619
Net book value
At 31 December 2020
5,019
1,622,587
1,627,606
At 31 December 2021
-
1,622,587
1,622,587
9
Investment in subsidiary
Shares in subsidiary undertakings
Cost and net book value
At 1 January 2021 and 31 December 2021
3,816
Details of the Company's direct subsidiary at 31 December 2021 is as follows:
Company
Country of registration or incorporation
Ordinary shares held (%)
Nature of business
G L Hearn Management Limited
United Kingdom
100
Non- Trading
Registered Office: 65 Gresham Street, London, EC2V 7NQ.
G L HEARN LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2021
- 28 -
10
Trade and other receivables
Restated*
Current
2021
2020
£
£
Trade receivables
3,735,122
3,896,231
Accrued income
859,530
1,146,662
Prepayments
351,435
297,997
Amounts due from parent and fellow subsidiary undertaking
14,516,155
14,624,873
19,462,242
19,965,763

Amount due from ultimate parent undertaking is interest bearing and amounts due from fellow subsidiary undertaking are non-interest bearing and are repayable on demand.

*Refer note 22 for more details on restated balances
11
Cash
2021
2020
£
£
Cash at bank and in hand
2,825,818
1,510,080
2,825,818
1,510,080
12
Trade and other payables
Current
2021
2020
£
£
Trade payables
338,860
469,742
VAT payable
849,924
957,584
Accruals
649,184
562,869
Other payables
34,937
7,240
Amounts due to fellow subsidiary undertaking
18,554
259,838
1,891,459
2,257,273
Amounts due to fellow subsidiary undertaking are non-interest bearing and are repayable on demand.
Non-current
2021
2020
£
£
Other payables
7,444
34,763
7,444
34,763
G L HEARN LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2021
- 29 -
13
Deferred income
2021
2020
£
£
Deferred income
46,856
19,553
46,856
19,553
14
Provisions
Current
Dilapidations
£
As at 1 January 2021
5,813
Additions during the year
15,000
As at 31 December 2021
20,813

The Company is required to perform repairs on leased properties prior to the properties being vacated at the end of their lease term. Dilapidation provisions for such costs are where a legal obligation is identified and the liability can be reasonably quantified.

 

15
Issued share capital
2021
2020
2021
2020
Numbers
Numbers
£
£
Issued and fully paid
Ordinary shares of £1 each
At 1 January
1,036,866
1,036,866
1,036,866
1,036,866
At 31 December
1,036,866
1,036,866
1,036,866
1,036,866
16
Pensions and other post-retirement benefit commitments

The total costs charged to income in respect of defined contribution plans is £1,163,174 (2020: £1,150,262).

G L HEARN LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2021
- 30 -
17
Employees

The average monthly number of employees (including non-executive Directors) were:

2021
2020
Number
Number
Sales
4
4
Operations
217
240
Administration
10
11
231
255

Their aggregate remuneration comprised:

2021
2020
Employee costs
£
£
Wages and salaries
11,874,311
11,614,967
Social security costs
1,513,000
1,467,229
Pension costs
1,163,174
1,150,262
Shared based payments (charged by intercompany)
892
4,712
14,551,377
14,237,170
The above includes payroll costs for temporary staff as well as recharges to/from other Group entities in respect of various services delivered/received by the Company throughout the year.

During the year, the Company furloughed employees unable to work as a result of the Covid-19 pandemic and applied to the Coronavirus Job Retention Scheme (CJRS) operated by the UK Government. Amounts received under CJRS are treated as a government grant and deducted from the relevant cost in the Company’s income statement. During the year, the Company received £38,377 under CJRS. These amounts are included within the relevant cost headings in the table above.

G L HEARN LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2021
- 31 -
18
Related party transactions
The following table provides the total amount of transactions that have been entered into with related parties for the relevant financial year:
Nature of Transaction
Name of Company
Year
Fellow Subsidiary
Purchase of Goods/ Services
Capita Glamorgan Consultancy Limited
December 31, 2021
13,350
December 31, 2020
-
Urban Vision Partnership Limited
December 31, 2021
5,016
December 31, 2020
25,479
Total
December 31, 2021
18,366
December 31, 2020
25,479
Sales of Goods
Thirty three LLP
December 31, 2021
-
December 31, 2020
5,643
Capita Glamorgan Consultancy Limited
December 31, 2021
124,495
December 31, 2020
79,488
Urban Vision Partnership Limited
December 31, 2021
9,342
December 31, 2020
27,056
Total
December 31, 2021
133,837
December 31, 2020
112,187
19
Directors' remuneration
2021
2020
£
£
Remuneration for qualifying services
431,935
513,341
Company pension contributions to defined contribution schemes
30,211
51,619
462,146
564,960
Two directors were paid by the Company (2020: 3). The other directors have not provided qualifying services to the Company and are paid by other companies within the Group. In addition to the above, the Directors of the Company were reimbursed for the expenses incurred by them whilst performing business responsibilities.
The number of Directors for whom retirement benefits are accruing under defined contribution schemes amounted to 2 (2020: 3).
G L HEARN LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2021
19
Directors' remuneration
(Continued)
- 32 -
Remuneration disclosed above include the following amounts paid to the highest paid Director:
2021
2020
£
£
Remuneration for qualifying services
254,589
182,866
Company pension contributions to defined contribution schemes
19,539
18,343
274,128
201,209
20
Controlling party

The Company's immediate parent undertaking is Capita Property and Infrastructure Holdings Limited, a company incorporated in England and Wales.

 

The Company's ultimate parent undertaking is Capita plc, a company incorporated in England and Wales. The accounts of Capita plc are available from the registered office at 65 Gresham Street, London, EC2V 7NQ.

21
Post balance sheet events

On 8 April, 2022 the Company's share capital was reduced to 1 Ordinary share of £1 nominal value through the cancellation of 1,036,865 Ordinary shares of £1 each. The Company's share premium account was also reduced by £2,634,250 to nil. The amounts, by which the share capital and share premium account are so reduced, are credited to Retained earnings.

On 26 April, 2022 Company declared the dividend amounting to £18,124,640 to Capita Property and Infrastructure Holding Limited to be settled by way of amounts receivable from Capita plc of £15,624,640 and balance £2,500,000 to be paid in cash.

 

In July 2022, Capita property and Infrastructure Holdings Limited invested £1,217,869 in G L Hearn Limited against which G L Hearn Limited issued 1 ordinary share of nominal value of £1 at a share premium of £1,217,868.

G L HEARN LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2021
- 33 -
22
Prior period adjustment
G L Hearn Management Limited, a fellow subsidiary of the G L Hearn Limited (“the Company”) holds the client money accounts on behalf of the Company. Interest accrued on the client monies is used to offset bank charges and other costs incurred by GL Hearn Management Limited and the remaining balances are transferred to the Company. As a part of the review, management identified that it was Company's obligation to return the interest earned on client monies to the clients and not recognise the same in the income statement.

This has been corrected by reducing the opening retained earnings with a corresponding decrease in intercompany receivables. This adjustment has resulted in a decrease in profit before tax, retained earnings and net assets in the prior year.
The following shows the effect of the prior year adjustment made to the income statement and balance sheet for the year ended 31 December 2020:
Restated Income Statement as at 31 December 2020
2020
Impact of restatement
Restated 2020
£
£
£
Revenue
21,928,421
-
21,928,421
Cost of sales
(16,329,677)
-
(16,329,677)
Gross profit
5,598,744
-
5,598,744
Administrative expenses
(5,729,605)
(104,094)
(5,833,699)
Operating loss
(130,861)
(104,094)
(234,955)
Net finance Cost
-
-
-
Profit before tax
(130,861)
(104,094)
(234,955)
Income tax credit
39,060
19,775
58,835
Total comprehensive expense for the year
(91,801)
(84,319)
(176,120)
G L HEARN LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 31 DECEMBER 2021
22
Prior period adjustment
(Continued)
- 34 -
Restated Balance Sheet as at 31 December 2020
2020
Impact of restatement
Restated 2020
Non-current assets
Property, plant and equipment
169,173
-
169,173
Intangible assets
1,627,606
-
1,627,606
Investments in subsidiaries
3,816
-
3,816
Deferred tax
207,567
-
207,567
2,008,162
-
2,008,162
Current assets
Trade and other receivables*
21,183,632
(1,217,869)
19,965,763
Cash
1,510,080
-
1,510,080
22,693,712
(1,217,869)
21,475,843
Total assets
24,701,874
(1,217,869)
23,484,005
Current liabilities
Trade and other payables
2,257,273
-
2,257,273
Deferred income
19,553
-
19,553
Provisions
5,813
-
5,813
Income tax payable
104,460
(19,775)
84,685
2,387,099
(19,775)
2,367,324
Non-current liabilities
Trade and other payables
34,763
-
34,763
Total non-current liabilities
34,763
-
34,763
Total liabilities
2,421,862
(19,775)
2,402,087
Net assets
22,280,012
1,198,094
21,081,918
Capital and reserves
Issued share capital
1,036,866
-
1,036,866
Other reserves
41,000
-
41,000
Retained earnings
18,567,896
(1,198,094)
17,369,802
Total equity
22,280,012
(1,198,094)
21,081,918
* Restatement is within amounts due from parent and fellow subsidiary undertaking.
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