Company registration number 11488115 (England and Wales)
HODGE JONES & ALLEN SOLICITORS LIMITED
ANNUAL REPORT AND FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 APRIL 2023
Tavistock House South
Tavistock Square
Rayner Essex LLP
London
Chartered Accountants
WC1H 9LG
HODGE JONES & ALLEN SOLICITORS LIMITED
CONTENTS
Page
Strategic report
1 - 2
Directors' report
3 - 4
Independent auditor's report
5 - 7
Statement of comprehensive income
8
Balance sheet
9
Statement of changes in equity
10
Statement of cash flows
11
Notes to the financial statements
12 - 24
HODGE JONES & ALLEN SOLICITORS LIMITED
COMPANY INFORMATION
Directors
Patrick Allen
Rajesh Chada
Julie Hardy
Jayesh Kunwardia
Susan Labinjoh
Agata Usewicz
Chun Wong
Company number
11488115
Registered office
180 North Gower Street
London
NW1 2NB
Auditor
Rayner Essex LLP
Tavistock House South
Tavistock Square
London
WC1H 9LG
Bankers
NatWest Bank plc
PO Box 12258
1 Princes Street
London
EC2R 4PA
HODGE JONES & ALLEN SOLICITORS LIMITED
STRATEGIC REPORT
FOR THE YEAR ENDED 30 APRIL 2023
- 1 -
The directors present the strategic report for the year ended 30 April 2023.
Review of the business
The business of Hodge Jones & Allen commenced in 1977 and has been running for 46 years. The firm remains true to its founding ethos which means acting primarily for individuals who wish to defend or assert their rights against corporate opponents including government, local authorities, insurance companies and other corporate bodies.
The firm acts for clients involved in high profile cases, such as group actions and for clients with a wide range of other personal legal matters. Initially much of the work of the business was funded by legal aid but this has declined steadily over the years, with a significant amount of the business performed under conditional fee arrangements.
On 14 May 2021, Hodge Jones & Allen LLP was incorporated, a limited liability partnership with common control.
On 15 October 2021, Hodge Jones & Allen LLP purchased the non-legal aid business from Hodge Jones & Allen Solicitors Limited for a total consideration of £12,816,691 including assets, liabilities and goodwill. As part of the sale transaction the company undertook a share capital reduction, reducing its issued share capital from £9,273,943 to £927.
Principal risks and uncertainties
The principal risk and uncertainties have been divided into three categories, market and regulatory risk, staff retention and recruitment and liquidity.
Market and regulatory risk
There have been changes over the last 12 years introduced by government to the recovery of costs in civil proceedings particularly under no-win no fee arrangements. The firm has adjusted to those changes. Further changes are expected with the raising of the small claims limit. The firm is adjusting to these changes by maintaining a wide spread of legal work in a variety of areas.
Staff retention and recruitment
The firm continues to attract and retain high quality staff and the performance of staff through the year has been exceptional. We will continue to focus on our staff to provide appropriate reward and support so they can continue to deliver a first class service to our clients.
Liquidity
A large proportion of the work of the company is funded by legal aid and paid by the government. However, a significant proportion of the business is undertaken under conditional fee arrangements, which results in a significant upfront investment of time with the timing of quantum of revenue on each case being unpredictable. The associated liquidity risk continues to be addressed and managed through the financial support from its bank as well as backing from Patrick Allen. The bank has indicated that they will continue to provide support with the extension of the overdraft facility and Patrick Allen has confirmed he will also provide financial support, if required, for a period of at least 12 months from the date of signing the Financial Statements, subject to no change in ownership.
Key performance indicators
The key performance indicators of the Company include the monitoring of Work in Progress along with recovery rates. Fee earners are expected to monitor their time and fee targets, the firm also continually review the type and level of cases that are taken on.
Future Developments
The firm continues to attract high-profile multi-party actions, which includes the Grenfell Inquiry, this is expected to run for a further year. The firm is also engaged in respect of the Undercover Police Inquiry and Post Office Inquiry. The successful outcome of these multi-party actions will improve the cash position of the firm for the next two years. Many clients protesting in the Extinction Rebellion have been presented by the criminal defence team. Post year end, the firm has undertaken an exercise to streamline costs within the business to improve both cash flow and profitability.
HODGE JONES & ALLEN SOLICITORS LIMITED
STRATEGIC REPORT (CONTINUED)
FOR THE YEAR ENDED 30 APRIL 2023
- 2 -
Patrick Allen
Director
17 January 2024
HODGE JONES & ALLEN SOLICITORS LIMITED
DIRECTORS' REPORT
FOR THE YEAR ENDED 30 APRIL 2023
- 3 -
The directors present their annual report and financial statements for the year ended 30 April 2023.
Principal activities
The principal activity of the company is the provision of legal services.
Results and dividends
The results for the year are set out on page 8.
No dividends have been paid by the company since incorporation and there are no proposed dividends.
During the year ended 30 April 2023, the company made distributions to the Employee Ownership Trust of £nil (2022: £9,123,731).
Directors
The directors who held office during the year and up to the date of signature of the financial statements were as follows:
Patrick Allen
Rajesh Chada
Julie Hardy
Jayesh Kunwardia
Susan Labinjoh
Agata Usewicz
Chun Wong
Auditor
The auditor, Rayner Essex LLP, is deemed to be reappointed under section 487(2) of the Companies Act 2006.
Statement of directors' responsibilities
The directors are responsible for preparing the annual 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 United Kingdom Generally Accepted Accounting Practice (United Kingdom Accounting Standards and applicable law). 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:
select suitable accounting policies and then apply them consistently;
make judgements and accounting estimates that are reasonable and prudent;
prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue in business.
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 also responsible for safeguarding the assets of the company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
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 of which the company’s auditor is unaware. Additionally, the directors individually have taken all the necessary steps that they ought to have taken as directors in order to make themselves aware of all relevant audit information and to establish that the company’s auditor is aware of that information.
HODGE JONES & ALLEN SOLICITORS LIMITED
DIRECTORS' REPORT (CONTINUED)
FOR THE YEAR ENDED 30 APRIL 2023
- 4 -
Medium-sized companies exemption
This report has been prepared in accordance with the provisions applicable to companies entitled to the medium-sized companies exemption.
On behalf of the board
Patrick Allen
Director
17 January 2024
HODGE JONES & ALLEN SOLICITORS LIMITED
INDEPENDENT AUDITOR'S REPORT
TO THE MEMBERS OF HODGE JONES & ALLEN SOLICITORS LIMITED
- 5 -
Opinion
We have audited the financial statements of Hodge Jones & Allen Solicitors Limited (the 'company') for the year ended 30 April 2023 which comprise the statement of comprehensive income, the balance sheet, the statement of changes in equity, the statement of cash flows and notes to the financial statements, including significant accounting policies. The financial reporting framework that has been applied in their preparation is applicable law and United Kingdom Accounting Standards, including Financial Reporting Standard 102 The Financial Reporting Standard applicable in the UK and Republic of Ireland (United Kingdom Generally Accepted Accounting Practice).
In our opinion the financial statements:
give a true and fair view of the state of the company's affairs as at 30 April 2023 and of its profit for the year then ended;
have been properly prepared in accordance with United Kingdom Generally Accepted Accounting Practice; and
have been prepared in accordance with the requirements of the Companies Act 2006.
We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the financial statements section of our report. We are independent of the company in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Conclusions relating to going concern
In auditing the financial statements, we have concluded that the directors' use of the going concern basis of accounting in the preparation of the financial statements is appropriate.
Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the company's ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report.
The other information comprises the information included in the annual report other than the financial statements and our auditor's report thereon. The directors are responsible for the other information contained within the annual report. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the course of the audit, or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether this gives rise to a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact.
We have nothing to report in this regard.
Opinions on other matters prescribed by the Companies Act 2006
In our opinion, based on the work undertaken in the course of our audit:
the information given in the strategic report and the directors' report for the financial year for which the financial statements are prepared is consistent with the financial statements; and
the strategic report and the directors' report have been prepared in accordance with applicable legal requirements.
HODGE JONES & ALLEN SOLICITORS LIMITED
INDEPENDENT AUDITOR'S REPORT (CONTINUED)
TO THE MEMBERS OF HODGE JONES & ALLEN SOLICITORS LIMITED
- 6 -
Matters on which we are required to report by exception
In the light of the knowledge and understanding of the company and its environment obtained in the course of the audit, we have not identified material misstatements in the strategic report or the directors' report.
We have nothing to report in respect of the following matters in relation to which the Companies Act 2006 requires us to report to you if, in our opinion:
adequate accounting records have not been kept, or returns adequate for our audit have not been received from branches not visited by us; or
the financial statements are not in agreement with the accounting records and returns; or
certain disclosures of remuneration specified by law are not made; or
we have not received all the information and explanations we require for our audit.
Responsibilities of directors
As explained more fully in the directors' responsibilities statement, the directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the directors are responsible for 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 the directors either intend to liquidate the company or to cease operations, or have no realistic alternative but to do so.
Auditor's responsibilities for the audit of the financial statements
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 an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance but is not a 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 the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements.
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud, is detailed below.
The extent to which the audit was considered capable of detecting irregularities including fraud
Our approach to identifying and assessing the risks of material misstatement in respect of irregularities, including fraud and non-compliance with laws and regulations, was as follows:
the engagement partner ensured that the engagement team collectively had the appropriate competence, capabilities and skills to identify or recognise non-compliance with applicable laws and regulations;
we identified the laws and regulations applicable to the company through discussions with the directors and other management, and from our commercial knowledge and experience of the sector they operate in;
we focused on specific laws and regulations which we considered may have a direct material effect on the financial statements or the operations of the company, including the Companies Act 2006, SRA compliance, taxation legislation, data protection, anti money laundering, anti-bribery, employment and GDPR regulations;
we assessed the extent of compliance with the laws and regulations identified above through making enquiries of management and inspecting legal correspondence; and
identified laws and regulations were communicated within the audit team regularly and the team remained alert to instances of non-compliance throughout the audit.
HODGE JONES & ALLEN SOLICITORS LIMITED
INDEPENDENT AUDITOR'S REPORT (CONTINUED)
TO THE MEMBERS OF HODGE JONES & ALLEN SOLICITORS LIMITED
- 7 -
We assessed the susceptibility of the company's financial statements to material misstatement, including obtaining an understanding of how fraud might occur, by:
the engagement partner ensuring that the engagement team collectively had the appropriate competence, capabilities and skills to identify or recognise non-compliance with applicable laws and regulations;
making enquiries of management as to where they considered there was a susceptibility to fraud, their knowledge of actual, suspected and alleged fraud; and
considering the internal controls in place to mitigate risks of fraud and non-compliance with laws and regulations.
To address the risk of fraud through management bias and override of controls, we;
performed analytical procedures to identify any unusual or unexpected relationships;
tested journal entries to identify unusual transactions;
assessed whether judgements and assumptions made in determining the accounting estimates set out in note 3 were indicative of potential bias; and
investigated the rationale behind significant or unusual transactions.
In response to the risk of irregularities and non-compliance with laws and regulations, we designed procedures which included, but were not limited to:
agreeing financial statement disclosures to underlying supporting documentation
enquiring of management as to actual and potential litigation and claims; and
reviewing correspondence with HMRC, the SRA and the company's management.
There are inherent limitations in our audit procedures described above. The more removed that laws and regulations are from financial transactions, the less likely it is that we would become aware of non-compliance. Auditing standards also limited the audit procedures required to identify non-compliance with laws and regulations to enquiry of the directors and other management and inspection of regulatory and legal correspondence, if any.
Material misstatements that arise due to fraud can be harder to detect than those that arise from error as they may involve deliberate concealment or collusion.
A further description of our responsibilities is available on the Financial Reporting Council’s website at: https://www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditor's report.
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.
Lucy Kate Ghawss ACA
Senior Statutory Auditor
For and on behalf of Rayner Essex LLP
17 January 2024
Chartered Accountants
Statutory Auditor
Tavistock House South
Tavistock Square
London
WC1H 9LG
HODGE JONES & ALLEN SOLICITORS LIMITED
STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 30 APRIL 2023
- 8 -
30 April
Continuing
Discontinued
30 April
2023
operations
operations
2022
Notes
£
£
£
£
Turnover
3
12,283,425
8,242,416
4,386,754
12,629,170
Administrative expenses
(8,730,301)
(7,953,669)
(4,154,091)
(12,107,760)
Other operating income
4,783
7,778
5,814
13,592
Operating profit
4
3,557,907
296,525
238,477
535,002
Interest receivable and similar income
7
12,216
116
351
467
Interest payable and similar expenses
8
(192,396)
(246,823)
(246,823)
Profit/(loss) on disposal of operations
- Discontinued operations
9
-
-
11,115,454
11,115,454
Profit before taxation
3,377,727
49,818
11,354,282
11,404,100
Tax on profit
10
(660,040)
(44,313)
(202,353)
(246,666)
Profit for the financial year
2,717,687
5,505
11,151,929
11,157,434
HODGE JONES & ALLEN SOLICITORS LIMITED
BALANCE SHEET
AS AT
30 APRIL 2023
30 April 2023
- 9 -
2023
2022
Notes
£
£
£
£
Current assets
Debtors
13
14,266,992
10,186,403
Cash at bank and in hand
3,022
14,266,992
10,189,425
Creditors: amounts falling due within one year
14
(6,216,107)
(4,691,143)
Net current assets
8,050,885
5,498,282
Creditors: amounts falling due after more than one year
15
(746,998)
(912,082)
Net assets
7,303,887
4,586,200
Capital and reserves
Called up share capital
19
927
927
Profit and loss reserves
7,302,960
4,585,273
Total equity
7,303,887
4,586,200
These financial statements have been prepared in accordance with the provisions relating to medium-sized companies.true
The financial statements were approved by the board of directors and authorised for issue on 17 January 2024 and are signed on its behalf by:
Patrick Allen
Director
Company registration number 11488115 (England and Wales)
HODGE JONES & ALLEN SOLICITORS LIMITED
STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 APRIL 2023
- 10 -
Share capital
Other reserves
Profit and loss reserves
Total
Notes
£
£
£
£
Balance at 1 May 2021
9,273,943
(7,782,983)
1,061,537
2,552,497
Year ended 30 April 2022:
Profit and total comprehensive income for the year
-
-
11,157,434
11,157,434
Distributions to Employee Ownership Trust
12
-
-
(9,123,731)
(9,123,731)
Reduction of shares
19
(9,273,016)
7,782,983
1,490,033
-
Balance at 30 April 2022
927
-
4,585,273
4,586,200
Year ended 30 April 2023:
Profit and total comprehensive income for the year
-
-
2,717,687
2,717,687
Balance at 30 April 2023
927
-
7,302,960
7,303,887
HODGE JONES & ALLEN SOLICITORS LIMITED
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 30 APRIL 2023
- 11 -
2023
2022
Notes
£
£
£
£
Cash flows from operating activities
Cash generated from/(absorbed by) operations
23
283,904
(138,710)
Interest paid
(132,204)
(153,778)
Income taxes paid
(146,690)
(336,828)
Net cash inflow/(outflow) from operating activities
5,010
(629,316)
Investing activities
Purchase of intangible assets
(18,255)
Purchase of tangible fixed assets
(2,464)
Proceeds from disposal of part of trade
12,816,691
Interest received
12,216
467
Net cash generated from investing activities
12,216
12,796,439
Financing activities
Proceeds from borrowings
550,000
Repayment of borrowings
(109,095)
(412,240)
Repayment of bank loans
(200,000)
(2,540,774)
Payment of finance leases obligations
(2,548)
(1,490)
Dividends paid
(9,123,731)
Net cash generated from/(used in) financing activities
238,357
(12,078,235)
Net increase in cash and cash equivalents
255,583
88,888
Cash and cash equivalents at beginning of year
(598,878)
(687,766)
Cash and cash equivalents at end of year
(343,295)
(598,878)
Relating to:
Cash at bank and in hand
3,022
Bank overdrafts included in creditors payable within one year
(343,295)
(601,900)
HODGE JONES & ALLEN SOLICITORS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
FOR THE YEAR ENDED 30 APRIL 2023
- 12 -
1
Accounting policies
Company information
Hodge Jones & Allen Solicitors Limited is a private company limited by shares incorporated in England and Wales. The registered office is 180 North Gower Street, London, NW1 2NB.
The principal activity of the company is the provision of legal services.
1.1
Accounting convention
These financial statements have been prepared in accordance with FRS 102 “The Financial Reporting Standard applicable in the UK and Republic of Ireland” (“FRS 102”) and the requirements of the Companies Act 2006.
The financial statements are prepared in sterling, which is the functional currency of the company. Monetary amounts in these financial statements are rounded to the nearest £.
The financial statements have been prepared under the historical cost convention, modified to include certain financial instruments at fair value. The principal accounting policies adopted are set out below.
1.2
Going concern
The bank has indicated that they will continue to provide support with the extension of the overdraft facility and Patrick Allen has confirmed he will also provide financial support, if required, for a period of at least 12 months from the date of signing the Financial Statements, subject to no change in ownership. The successful outcome of a multi-party action in FY23 will improve the cash position of the Firm for the next two years. true
Post year end, the firm has undertaken an exercise to streamline costs within the business to improve both cash flow and profitability.
Based on the above and reviewing profit and cash flow forecasts for the period to 30 April 2025, the directors have concluded that the company has adequate available cash resources to pay its debts as they fall due for the foreseeable future and, as a result, have prepared the accounts on the going concern basis.
1.3
Turnover
Turnover represents the fair value of professional services provided to clients during the period. Turnover is recognised as contract activity progresses and the right to consideration based on time spent, and expertise provided and expenses incurred, exclusive of VAT. Any unbilled work in progress is recognised and based on actual average historical recovery rate over the past 2 years.
Turnover in respect of contingent fee assignments is recognised in the period in which the contingent event occurs and once the fee is assured i.e. once a settlement has been agreed. The valuation of accrued income is based on actual average historical recovery rate over the past 2 years.
1.4
Tangible fixed assets
Tangible fixed assets are initially measured at cost and subsequently measured at cost or valuation, net of depreciation and any impairment losses.
Depreciation is recognised so as to write off the cost or valuation of assets less their residual values over their useful lives.
1.5
Cash and cash equivalents
Cash and cash equivalents are basic financial assets and include cash in hand, deposits held at call with banks, other short-term liquid investments with original maturities of three months or less, and bank overdrafts. Bank overdrafts are shown within borrowings in current liabilities.
HODGE JONES & ALLEN SOLICITORS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 30 APRIL 2023
1
Accounting policies
(Continued)
- 13 -
1.6
Financial instruments
The company has elected to apply the provisions of Section 11 ‘Basic Financial Instruments’ and Section 12 ‘Other Financial Instruments Issues’ of FRS 102 to all of its financial instruments.
Financial instruments are recognised in the company's balance sheet when the company becomes party to the contractual provisions of the instrument.
Financial assets and liabilities are offset, with the net amounts presented in the financial statements, when there is a legally enforceable right to set off the recognised amounts and there is an intention to settle on a net basis or to realise the asset and settle the liability simultaneously.
Basic financial assets
Basic financial assets, which include debtors and cash and bank balances, are initially measured at transaction price including transaction costs and are subsequently carried at amortised cost using the effective interest method unless the arrangement constitutes a financing transaction, where the transaction is measured at the present value of the future receipts discounted at a market rate of interest. Financial assets classified as receivable within one year are not amortised.
Other financial assets
Other financial assets, including investments in equity instruments which are not subsidiaries, associates or joint ventures, are initially measured at fair value, which is normally the transaction price. Such assets are subsequently carried at fair value and the changes in fair value are recognised in profit or loss, except that investments in equity instruments that are not publicly traded and whose fair values cannot be measured reliably are measured at cost less impairment.
Impairment of financial assets
Financial assets, other than those held at fair value through profit and loss, are assessed for indicators of impairment at each reporting end date.
Financial assets are impaired where there is objective evidence that, as a result of one or more events that occurred after the initial recognition of the financial asset, the estimated future cash flows have been affected. If an asset is impaired, the impairment loss is the difference between the carrying amount and the present value of the estimated cash flows discounted at the asset’s original effective interest rate. The impairment loss is recognised in profit or loss.
If there is a decrease in the impairment loss arising from an event occurring after the impairment was recognised, the impairment is reversed. The reversal is such that the current carrying amount does not exceed what the carrying amount would have been, had the impairment not previously been recognised. The impairment reversal is recognised in profit or loss.
Derecognition of financial assets
Financial assets are derecognised only when the contractual rights to the cash flows from the asset expire or are settled, or when the company transfers the financial asset and substantially all the risks and rewards of ownership to another entity, or if some significant risks and rewards of ownership are retained but control of the asset has transferred to another party that is able to sell the asset in its entirety to an unrelated third party.
Classification of financial liabilities
Financial liabilities and equity instruments are classified according to the substance of the contractual arrangements entered into. An equity instrument is any contract that evidences a residual interest in the assets of the company after deducting all of its liabilities.
HODGE JONES & ALLEN SOLICITORS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 30 APRIL 2023
1
Accounting policies
(Continued)
- 14 -
Basic financial liabilities
Basic financial liabilities, including creditors, bank loans, loans from related parties and preference shares that are classified as debt, are initially recognised at transaction price unless the arrangement constitutes a financing transaction, where the debt instrument is measured at the present value of the future payments discounted at a market rate of interest. Financial liabilities classified as payable within one year are not amortised.
Debt instruments are subsequently carried at amortised cost, using the effective interest rate method.
Trade creditors are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Amounts payable are classified as current liabilities if payment is due within one year or less. If not, they are presented as non-current liabilities. Trade creditors are recognised initially at transaction price and subsequently measured at amortised cost using the effective interest method.
Derecognition of financial liabilities
Financial liabilities are derecognised when the company’s contractual obligations expire or are discharged or cancelled.
1.7
Equity instruments
Equity instruments issued by the company are recorded at the proceeds received, net of transaction costs. Dividends payable on equity instruments are recognised as liabilities once they are no longer at the discretion of the company.
1.8
Taxation
The tax expense represents the sum of the tax currently payable and deferred tax.
Current tax
The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the profit and loss account because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The company’s liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the reporting end date.
Deferred tax
Deferred tax liabilities are generally recognised for all timing differences and deferred tax assets are recognised to the extent that it is probable that they will be recovered against the reversal of deferred tax liabilities or other future taxable profits. Such assets and liabilities are not recognised if the timing difference arises from goodwill or from the initial recognition of other assets and liabilities in a transaction that affects neither the tax profit nor the accounting profit.
The carrying amount of deferred tax assets is reviewed at each reporting end 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 asset to be recovered. Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset is realised. Deferred tax is charged or credited in the profit and loss account, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity. Deferred tax assets and liabilities are offset when the company has a legally enforceable right to offset current tax assets and liabilities and the deferred tax assets and liabilities relate to taxes levied by the same tax authority.
HODGE JONES & ALLEN SOLICITORS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 30 APRIL 2023
1
Accounting policies
(Continued)
- 15 -
1.9
Employee benefits
The costs of short-term employee benefits are recognised as a liability and an expense, unless those costs are required to be recognised as part of the cost of stock or fixed assets.
The cost of any unused holiday entitlement is recognised in the period in which the employee’s services are received.
Termination benefits are recognised immediately as an expense when the company is demonstrably committed to terminate the employment of an employee or to provide termination benefits.
1.10
Retirement benefits
Payments to defined contribution retirement benefit schemes are charged as an expense as they fall due.
1.11
Leases
Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership to the lessees. All other leases are classified as operating leases.
Assets held under finance leases are recognised as assets at the lower of the assets fair value at the date of inception and the present value of the minimum lease payments. The related liability is included in the balance sheet as a finance lease obligation. Lease payments are treated as consisting of capital and interest elements. The interest is charged to profit or loss so as to produce a constant periodic rate of interest on the remaining balance of the liability.
Rentals payable under operating leases, including any lease incentives received, are charged to profit or loss on a straight line basis over the term of the relevant lease except where another more systematic basis is more representative of the time pattern in which economic benefits from the leases asset are consumed.
1.12
Government grants
Government grants are recognised at the fair value of the asset received or receivable when there is reasonable assurance that the grant conditions will be met and the grants will be received.
A grant that specifies performance conditions is recognised in income when the performance conditions are met. Where a grant does not specify performance conditions it is recognised in income when the proceeds are received or receivable. A grant received before the recognition criteria are satisfied is recognised as a liability.
2
Judgements and key sources of estimation uncertainty
In the application of the company’s accounting policies, the directors are required to make judgements, estimates and assumptions about the carrying amount of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates.
The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised where the revision affects only that period, or in the period of the revision and future periods where the revision affects both current and future periods.
HODGE JONES & ALLEN SOLICITORS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 30 APRIL 2023
2
Judgements and key sources of estimation uncertainty
(Continued)
- 16 -
Key sources of estimation uncertainty
The estimates and assumptions which have a significant risk of causing a material adjustment to the carrying amount of assets and liabilities are as follows.
Work in progress and accrued income
The company's revenue recognition policies are central to how the business values work carried out in each financial year. These policies require estimates to be made in respect of work in progress and accrued income which require assessments and judgements. Work in progress is valued based on actual average recovery rates, this is calculated based on cases settled during the previous 2 years and excludes contingent fee arrangement cases. Once a case is settled the work in progress value is transferred to accrued income based on a fee earners assessment using the external cost drafters for support in calculating the estimate. Contingent fee arrangement cases are recognised when the case is settled and the revenue can be reliably estimated.
Change in accounting estimate
During the year the company changed the way in which they estimated the value of accrued income for those cases which had been settled, including contingent fee arrangement cases. Previously the estimate was based on the fee earners assessment which was very judgemental. Therefore this has now been changed to be based on actual average recovery rates so that it remains in line with the Work in Progress estimation technique and is less judgemental. There has been no change in the recognition criteria, just a change in the valuation estimation technique. The change in estimate has resulted in an increase in profit after tax of £756,037.
Results of discontinued operations
In arriving at the split between the results of continuing and discontinued operations for the previous year, the directors exercised judgement when allocating the expenditure in a reasonable manner. Turnover per department was used for apportionment of administrative expenses and some specific expenditure items (such as staff costs) were split on the basis of actual costs incurred for the respective trades. This basis was also adopted in calculating the assets and liabilities at the date of sale.
Provisions
Provisions are recognised at the statement of financial position date at the management's best estimate of the expenditure required to settle the present obligation. The carrying amounts of provisions are regularly reviewed and adjusted for new facts or changes in law, technology or financial markets.
3
Turnover
2023
2022
£
£
Turnover analysed by class of business
Legal services
12,283,425
12,629,170
2023
2022
£
£
Turnover analysed by geographical market
United Kingdom
12,283,425
12,629,170
HODGE JONES & ALLEN SOLICITORS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 30 APRIL 2023
- 17 -
4
Operating profit
2023
2022
Operating profit for the year is stated after charging/(crediting):
£
£
Government grants
-
(10,634)
Fees payable to the company's auditor for the audit of the company's financial statements
27,000
25,000
Depreciation of owned tangible fixed assets
-
19,415
Amortisation of intangible assets
-
32,115
Operating lease charges
791,070
1,168,152
5
Employees
The average monthly number of persons (including directors) employed by the company during the year was:
2023
2022
Number
Number
Fee earning
107
136
Administration
2
20
Total
109
156
Their aggregate remuneration comprised:
2023
2022
£
£
Wages and salaries
5,842,623
7,404,560
Social security costs
584,731
748,960
Pension costs
139,134
186,531
6,566,488
8,340,051
6
Directors' remuneration
2023
2022
£
£
Remuneration for qualifying services
482,877
739,532
Company pension contributions to defined contribution schemes
4,074
14,368
486,951
753,900
HODGE JONES & ALLEN SOLICITORS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 30 APRIL 2023
6
Directors' remuneration
(Continued)
- 18 -
Remuneration disclosed above include the following amounts paid to the highest paid director:
2023
2022
£
£
Remuneration for qualifying services
135,800
135,800
Company pension contributions to defined contribution schemes
4,074
4,074
7
Interest receivable and similar income
2023
2022
£
£
Interest income
Interest on bank deposits
1
467
Other interest income
12,215
Total income
12,216
467
2023
2022
Investment income includes the following:
£
£
Interest on financial assets not measured at fair value through profit or loss
1
467
8
Interest payable and similar expenses
2023
2022
£
£
Interest on financial liabilities measured at amortised cost:
Interest on bank overdrafts and loans
192,396
246,823
9
Profit/ (loss) on disposal of operations
2023
2022
£
£
Gain on disposal of non-legal aid business
-
11,115,454
On 15 October 2021, Hodge Jones & Allen LLP, a limited liability partnership under common control, purchased the non-legal aid business from Hodge Jones & Allen Solicitors Limited for £12,816,691, based on an external valuation. The gain on disposal of £11,115,454 represents the difference between the amount received and the net assets disposed of.
HODGE JONES & ALLEN SOLICITORS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 30 APRIL 2023
- 19 -
10
Taxation
2023
2022
£
£
Current tax
UK corporation tax on profits for the current period
660,040
168,000
Deferred tax
Origination and reversal of timing differences
78,666
Total tax charge
660,040
246,666
The actual charge for the year can be reconciled to the expected charge for the year based on the profit or loss and the standard rate of tax as follows:
2023
2022
£
£
Profit before taxation
3,377,727
11,404,100
Expected tax charge based on the standard rate of corporation tax in the UK of 25.00% (2022: 19.00%)
844,432
2,166,779
Tax effect of expenses that are not deductible in determining taxable profit
2,071
37,526
Effect of change in corporation tax rate
(186,463)
Depreciation
9,791
Capital allowances
47,556
Accrued interest
18,284
Disposal to related entity
(2,111,936)
Adjustment for deferred tax
78,666
Taxation charge for the year
660,040
246,666
11
Discontinued operations
On 14 May 2021, Hodges Jones & Allen LLP was incorporated, a limited liability partnership with common control.
On 15 October 2021, Hodges Jones & Allen LLP purchased the non-legal aid business from Hodges Jones & Allen Solicitors Limited.
12
Distributions
2023
2022
£
£
Distributions to Employee Ownership Trust
9,123,731
HODGE JONES & ALLEN SOLICITORS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 30 APRIL 2023
- 20 -
13
Debtors
2023
2022
Amounts falling due within one year:
£
£
Trade debtors
4,297,573
3,120,206
Other debtors
542,317
194,491
Prepayments and accrued income
9,172,852
6,504,456
14,012,742
9,819,153
2023
2022
Amounts falling due after more than one year:
£
£
Other debtors
254,250
367,250
Total debtors
14,266,992
10,186,403
The debtor due in greater than one year is in relation to amounts owing from Hodge Jones & Allen LLP representing their contribution to the CBILs loan repayments.
14
Creditors: amounts falling due within one year
2023
2022
Notes
£
£
Bank loans and overdrafts
16
543,295
801,900
Obligations under finance leases
17
2,583
2,547
Other borrowings
16
580,002
139,097
Trade creditors
2,750,503
2,040,750
Corporation tax
836,663
323,313
Other taxation and social security
379,935
317,871
Other creditors
175,208
229,373
Accruals and deferred income
947,918
836,292
6,216,107
4,691,143
Bank overdraft and loans are secured by fixed and floating charges over the company's assets.
Included in trade creditors is £2,729,328 (2022: £2,011,525) relating to disbursements for which there is a corresponding balance included within trade debtors.
HODGE JONES & ALLEN SOLICITORS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 30 APRIL 2023
- 21 -
15
Creditors: amounts falling due after more than one year
2023
2022
Notes
£
£
Bank loans and overdrafts
16
450,000
650,000
Obligations under finance leases
17
2,620
5,204
Other creditors
294,378
256,878
746,998
912,082
Bank overdraft and loans are secured by fixed and floating charges over the company's assets.
16
Loans and overdrafts
2023
2022
£
£
Bank loans
650,000
850,000
Bank overdrafts
343,295
601,900
Other loans
580,002
139,097
1,573,297
1,590,997
Payable within one year
1,123,297
940,997
Payable after one year
450,000
650,000
Bank overdraft and loans are secured by fixed and floating charges over the company's assets.
17
Finance lease obligations
2023
2022
Future minimum lease payments due under finance leases:
£
£
Within one year
2,583
2,547
In two to five years
2,620
5,204
5,203
7,751
Finance lease payments represent rentals payable by the company for certain items of plant and machinery. Leases include purchase options at the end of the lease period, and no restrictions are placed on the use of the assets. The average lease term is 5 years. All leases are on a fixed repayment basis and no arrangements have been entered into for contingent rental payments.
HODGE JONES & ALLEN SOLICITORS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 30 APRIL 2023
- 22 -
18
Retirement benefit schemes
2023
2022
Defined contribution schemes
£
£
Charge to profit or loss in respect of defined contribution schemes
139,134
186,531
The company operates a defined contribution pension scheme for all qualifying employees. The assets of the scheme are held separately from those of the company in an independently administered fund.
19
Share capital
2023
2022
2023
2022
Ordinary share capital
Number
Number
£
£
Issued and fully paid
Ordinary share capital of £0.0001 (£1) each
9,273,943
9,273,943
927
927
On 29 September 2021 the company reduced its share capital by £9,273,015.61 by reducing the nominal value of each ordinary share of £1 each to 9,273,943 ordinary shares of £0.0001 each.
The reduction of capital was made using distributable reserves by crediting the merger reserve, with the balance credited to retained earnings.
20
Related party transactions
On 14 May 2021, Hodge Jones & Allen LLP was incorporated, a limited liability partnership with common control.
On 15 October 2021, Hodge Jones & Allen LLP purchased the non-legal aid business from Hodge Jones & Allen Solicitors Limited for a total consideration of £12,816,691 including assets, liabilities and goodwill.
In the year, Hodge Jones & Allen LLP recharged the company for shared costs for a net amount of £3,529,567 (2022: £1,131,624).
At the year end, the company owed Hodge Jones & Allen LLP £33,976 (2022: £383,465) in relation to recharged expenses, and £294,378 (2022: £256,878) in relation to a contribution towards dilapidations due in greater than 1 year.
At the year end, Hodge Jones & Allen LLP owed the company £767,250 (2022: £560,124) in relation to intercompany loans.
The banks hold cross guarantees with Hodge Jones & Allen LLP.
HODGE JONES & ALLEN SOLICITORS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 30 APRIL 2023
- 23 -
21
Directors' transactions
Patrick Allen, a director, has provided a personal guarantee of up to £3,700,000 (2022: £700,000) in relation to the company's banking facilities. The guarantee contains a fixed and floating charge over the assets of the company. The interest accrued at the year end amounted to £241,604 (2022: £211,889).
Patrick Allen provided a short term loan to the company of £123,975 which is being repaid by the company in monthly instalments of £25,000. The balance at 30 April 2023 was £23,975 (2022: £48,975). The interest accruing from this loan at the year end was £6,518 (2022: £5,285).
Patrick Allen provided a further short term loan during the year to the company of £550,000. The balance at 30 April 2023 was £550,000 (2022: £nil). The interest accruing from this loan at the year end was £23,959 (2022: £nil).
Other loans outstanding of £30,002 have been guaranteed by the directors.
22
Ultimate controlling party
The ultimate controlling party is the HJA Employee Ownership Trust whose corporate trustee is Hodge Jones & Allen Trustees Limited.
23
Cash generated from/(absorbed by) operations
2023
2022
£
£
Profit for the year after tax
2,717,687
11,157,434
Adjustments for:
Taxation charged
660,040
246,666
Finance costs
192,396
246,823
Investment income
(12,216)
(467)
Gain on disposal of business
-
(11,115,454)
Amortisation and impairment of intangible assets
32,115
Depreciation and impairment of tangible fixed assets
19,415
Increase in provisions
34,375
Movements in working capital:
(Increase)/decrease in debtors
(4,080,589)
10,342
Increase/(decrease) in creditors
806,586
(769,959)
Cash generated from/(absorbed by) operations
283,904
(138,710)
HODGE JONES & ALLEN SOLICITORS LIMITED
NOTES TO THE FINANCIAL STATEMENTS (CONTINUED)
FOR THE YEAR ENDED 30 APRIL 2023
- 24 -
24
Analysis of changes in net debt
1 May 2022
Cash flows
30 April 2023
£
£
£
Cash at bank and in hand
3,022
(3,022)
-
Bank overdrafts
(601,900)
258,605
(343,295)
(598,878)
255,583
(343,295)
Borrowings excluding overdrafts
(989,097)
(240,905)
(1,230,002)
Obligations under finance leases
(7,751)
2,548
(5,203)
(1,595,726)
17,226
(1,578,500)
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