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Firm points out a close reading of its accounts shows a healthy debt position
In last week’s debt feature we highlighted Wright Hassall, flagging up a net debt figure of £3,562,991 and a net debt to capital ratio of 880.41 per cent.
We also stated that the firm had £237,533 net debt per each of its 15 members. These figures marked out Wright Hassall as an “outlier” in the graphic headed The burden of debt: key outliers.
The firm has subsequently pointed out that these were not the correct figures. As Wright Hassall’s senior partner Nick Abell explains, the firm’s actual capital level is £2,252,011.
“[In] our accounts you will see, under the heading ‘Subscribed Capital’, the figure of £1,812,314,” says Abell. “This is the capital the members have invested in the firm.
The sums of £404,697 and £35,000 under the headings ‘member’s capital’ and ‘semi-permanent reserves’ are actually permanent capital of the firm. These are residual sums arising from a property deal which the members chose to reinvest into the business rather than distribute as profit to themselves. The combination of these figures give the £2,252,011 amount.”
Abell adds that the net debt figure of £3,562,991 includes a tax reserve against any future tax payments resulting from this property deal.
“It is contingent on the future profits of the business giving rise to a tax liability relating to that property transaction, so it is not truly net current debt,” says Abell. “I accept that this is hard to understand in our accounts, but the true position is that our net debt should be quoted at £2,900,442. As a consequence of the above figure, the net debt per member should be stated as £193,363, not £237,533.”
The true percentage of net debt to capital for Wright Hassall based on the 2012 LLPs is 128.79 per cent, not 880.41 per cent.
Abell adds: “Indeed, this has reduced significantly in 2013”