Annual Report & Accounts 2026
56
Whilst billing arrangements vary according to the nature of the work being undertaken and the client relationship, most work is billed either monthly or at particular stages in the legal process. Whatever the billing arrangements, the value of the service transfers to the client over the course of the assignment and, accordingly, revenue is recognised as assignment activity progresses, except in respect of contingent fee assignments, which are only recognised in the period when the contingent event occurs and collectability of the fee is assured.
Unbilled fee income on matters is included as accrued income within receivables and is valued according to the Group’s Work in Progress (“WIP”) valuation policy, which is set out in note 3.
OPERATING PROFIT
Operating profit is stated after all expenses but before finance income or expenses.
ADJUSTED PROFIT BEFORE TAX (“PBT”)
Adjusted PBT is utilised as a key performance indication for the Group and is calculated as follows:
2026 £
2026 £
Profit before tax
14,671,612
11,684,999
Gain in respect of investment held at fair value
(184,388)
–
Amortisation
–
248,536
Share-based payments
851,320
780,662
Adjusted PBT
15,338,544
12,714,197
The Board consider adjusted PBT and adjusted PBIT to be better measures of performance than PBT or PBIT, as the adjustments made exclude items which are either not a result of the underlying performance of the business (as is the case for the unrealised gain on the investment held at fair value or the amortisation, in the prior years, which arose from the structuring of the 2014 private equity investment in the business) or where the cost represents neither a cash impact to the business, nor is it a reflection of the value received by the recipient (as is the case with share-based payment costs).
SHARE-BASED PAYMENTS
The cost of providing share-based payments to employees is charged to profit or loss over the vesting period of the related awards. The cost is based on the fair value of the awards of shares made determined at the date of the award using a combination of the Black–Scholes and Monte Carlo pricing models as appropriate, given the vesting and other conditions attached to the awards. The value of the charge may be adjusted to reflect expected and actual levels of vesting.
DISBURSEMENTS
Disbursements are not included in income or expenses as these are incurred as agent for the client. When incurred, these are recognised as an asset and categorised within trade and other receivables with a corresponding liability recognised within trade and other payables.
TAXATION
The corporation tax expense for the period comprises current and deferred tax. Tax is recognised in the income statement, except that a change attributable to an item of income or expense recognised as other comprehensive income is also recognised directly in other comprehensive income.
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
2. ACCOUNTING POLICIES CONTINUED
Whilst billing arrangements vary according to the nature of the work being undertaken and the client relationship, most work is billed either monthly or at particular stages in the legal process. Whatever the billing arrangements, the value of the service transfers to the client over the course of the assignment and, accordingly, revenue is recognised as assignment activity progresses, except in respect of contingent fee assignments, which are only recognised in the period when the contingent event occurs and collectability of the fee is assured.
Unbilled fee income on matters is included as accrued income within receivables and is valued according to the Group’s Work in Progress (“WIP”) valuation policy, which is set out in note 3.
OPERATING PROFIT
Operating profit is stated after all expenses but before finance income or expenses.
ADJUSTED PROFIT BEFORE TAX (“PBT”)
Adjusted PBT is utilised as a key performance indication for the Group and is calculated as follows:
2026 £
2026 £
Profit before tax
14,671,612
11,684,999
Gain in respect of investment held at fair value
(184,388)
–
Amortisation
–
248,536
Share-based payments
851,320
780,662
Adjusted PBT
15,338,544
12,714,197
The Board consider adjusted PBT and adjusted PBIT to be better measures of performance than PBT or PBIT, as the adjustments made exclude items which are either not a result of the underlying performance of the business (as is the case for the unrealised gain on the investment held at fair value or the amortisation, in the prior years, which arose from the structuring of the 2014 private equity investment in the business) or where the cost represents neither a cash impact to the business, nor is it a reflection of the value received by the recipient (as is the case with share-based payment costs).
SHARE-BASED PAYMENTS
The cost of providing share-based payments to employees is charged to profit or loss over the vesting period of the related awards. The cost is based on the fair value of the awards of shares made determined at the date of the award using a combination of the Black–Scholes and Monte Carlo pricing models as appropriate, given the vesting and other conditions attached to the awards. The value of the charge may be adjusted to reflect expected and actual levels of vesting.
DISBURSEMENTS
Disbursements are not included in income or expenses as these are incurred as agent for the client. When incurred, these are recognised as an asset and categorised within trade and other receivables with a corresponding liability recognised within trade and other payables.
TAXATION
The corporation tax expense for the period comprises current and deferred tax. Tax is recognised in the income statement, except that a change attributable to an item of income or expense recognised as other comprehensive income is also recognised directly in other comprehensive income.
NOTES TO THE FINANCIAL STATEMENTS CONTINUED
2. ACCOUNTING POLICIES CONTINUED