TIDMRBGP
RNS Number : 0393B
Rosenblatt Group PLC
18 September 2018
18 September 2018
Rosenblatt Group Plc
("Rosenblatt" or the "Group" or the "Company")
Unaudited Interim Results for the period ended 30 June 2018
Rosenblatt Group plc (AIM:RBGP), the professional legal services
company, is pleased to announce its unaudited results for the
eight-week period ended 30 June 2018.
Financial Highlights:
-- Revenue of GBP3.0 million (2017: GBP2.6 million***)
-- Adjusted EBITDA of GBP1.0 million* (2017: GBP0.9 million***),
-- Adjusted profit before tax of GBP0.95 million** (2017: GBP0.80 million***)
-- Strong balance sheet with net assets of GBP32.7 million
-- Cash and cash equivalents of GBP11.8 million
* Adjusted EBITDA is defined as earnings before interest, tax,
share-based payment expense, non-operating exceptional costs,
depreciation and amortisation
** Adjusted profit before tax is defined as earnings before tax,
share-based payment expense and non-operating exceptional costs
*** To provide a relative comparison on trading, reference is
made to 2/12 of the income statement (i.e. two months of trading)
from the prior year of Rosenblatt Solicitors, the business and
certain of the assets of which were acquired by the Company on 8
May 2018 by the Company, that was incorporated on the 6 February
2018.
Operational Highlights:
-- Group was successfully admitted to AIM on 8 May 2018, following a placing of GBP43 million
-- New litigation funding subsidiary launched today - Rosenblatt Litigation Funding Ltd
Nicola Foulston, CEO, Rosenblatt Group plc, commented: "Our
maiden results show that Rosenblatt has made a strong start to life
as a public company. Our current caseload and pipeline of new
business remain healthy and consistent with what we expected at the
time of our IPO in May.
"We are progressing with the strategy we set out at IPO to
deliver long-term value to shareholders. This includes using the
proceeds to underwrite more of Rosenblatt's litigation portfolio by
increasing the number of cases we are undertaking on either a
conditional fee or damages-based agreement basis.
"To enable this, we have set up a separate subsidiary,
Rosenblatt Litigation Funding Ltd, with GBP2 million of the
proceeds of the float. This will give us the capability to take on
more cases where there is a third-party cost element, thereby
retaining the funding margin otherwise paid to an external funder.
We are delighted to have already secured our first case, which is a
Damages-Based Agreement, with more in the pipeline.
"Looking ahead, the market for legal services is stable, despite
a cautious UK business environment, with strong demand for
litigation services, dispute resolution and third-party funding.
The Group remains confident that this will continue to be the case,
regardless of any uncertainty caused by Brexit."
Enquiries:
Rosenblatt Group plc Via Redleaf
Nicola Foulston, CEO
Cenkos Securities plc (Nominated Adviser Tel: 020 7397 8900
and Broker)
Stephen Keys/ Nick Wells
Redleaf (for media enquiries) Tel: 020 3757 6867;
Robin Tozer rosenblatt@redleafpr.com
Elisabeth Cowell
About Rosenblatt Group plc
Rosenblatt Group plc is a professional legal services company,
which includes one of the UK's leading dispute resolution
practices. It provides a range of legal services to its diversified
client base, which includes companies, banks, entrepreneurs and
individuals. Complementing this is the Group's increasingly
international footprint, advising on complex cross-jurisdictional
cases in China, Israel, America and India. Rosenblatt's practice
areas cover dispute resolution, corporate, banking and finance,
insolvency and financial restructuring, construction and projects,
employment, financial services, IP/technology/media, real estate,
regulatory and tax.
Chief Executive's Statement
Overview
Our maiden results as a public company, show that the Company
has consolidated the achievements made in 2017 and has continued to
trade strongly under its new structure. We expect this to continue
through the remainder of 2018 as we complete the integration of the
business of Rosenblatt Solicitors into the Group.
Revenue for the period was GBP3.0 million (2017: GBP2.6
million***) with our advisory services across our Dispute
Resolution, Real Estate and Employment practices delivering
double-digit growth compared to the previous year. Adjusted EBITDA
of GBP1.0 million (2017: GBP0.9 million***), equivalent to 33.6 per
cent of total revenue, is consistent with the high margins we aim
to deliver.
The Group has a strong balance sheet, with net assets of GBP32.7
million, and cash and cash equivalents of GBP11.8 million, which
will support our growth plans.
Divisional performance
Our main practise areas, which are focused on contentious law,
namely Dispute Resolution and Employment have performed well. In
total, these are up 53.5% on 2017*** with strong gross margins of
73% and 66% respectively.
In line with our expectations, the Corporate division which is
focused on commercial transactions has not performed as strongly as
last year. Like other sub-sectors of the legal market, it has been
impacted by the cautious business environment in part caused by
Brexit uncertainty. However, there is a good pipeline of new
business in both this and our real estate division which has
performed well.
Litigation Funding
The Company is pleased to announce that, ahead of the timetable
set out at Admission, it has established Rosenblatt Litigation
Funding Ltd ("RLFL"), a separate subsidiary to fund external
litigation cost. Initially, GBP2.0 million of the proceeds of the
float will be used by RLFL and will enable the Group to take on
more cases where there is a third-party cost element and retain the
funding margin that would otherwise be paid to an external
funder.
The Company is delighted that RLFL has secured its first case
under a Damages-Based Agreement and is in the process of
on-boarding two further cases.
Board Changes and personnel
On 12 July 2018, non-Executive Chairman, Brook Land resigned and
was succeeded by non-Executive Director, Stephen Davidson, while on
31 August 2018, Finance Director, Patrick Firebrace stood down for
personal reasons. The Group has appointed an experienced interim
Finance Director, Robert Parker until a permanent replacement is
named.
On 3 September 2018, Victoria Hull joined the Board as a
non-Executive Director. She is a highly experienced director and
has had an extensive legal career. Victoria is currently a
non-executive director of Ultra Electronics plc and is a former
Executive Director and General Counsel of Invensys plc and Telewest
Communications plc. The Group is currently seeking an additional
non-Executive Director to join the Board.
Equity ownership is now a crucial part of the Company's culture
and the Directors have been encouraged by the enhanced levels of
productivity and focus across the Company since the IPO.
Outlook
In the Company's Admission Document, the Directors stated that
the business, which at the time was part of Rosenblatt Solicitors,
had traded strongly since the beginning of the year. For the first
three months of 2018, Rosenblatt Solicitors, the business and
certain assets of which were acquired by the Company, delivered
turnover of GBP3.5 million****. Since Admission, the Directors have
been pleased with the progress that has continued to be made, both
in terms of the trading of the core business and the implementation
of management's strategy.
The overall outlook for the broader legal sector is mixed due to
the uncertainty caused by Brexit, which is impacting general
business confidence. However, we believe that there is increasing
demand for litigation services and the funding to support such
actions which provide significant opportunities for the Group. We
remain confident that Rosenblatt is ideally placed to capitalise on
the cases and commercial opportunities that have already come to us
since IPO and which we expect to continue as our profile and track
record are enhanced further as a public company.
The Company has been encouraged by the level of inbound
enquiries it has received regarding potential acquisition
opportunities, whether they be at the individual, team or firm
level. The Board will pursue those that meet its strategic and
valuation criteria. The Directors are confident about the outcome
for the rest of the year.
****taken from the unaudited management accounts of Rosenblatt
Solicitors for the three months ended 31 March 2018.
Nicola Foulston
Chief Executive Officer
Rosenblatt Group plc
18 September 2018
Finance Director's Review
Revenue for the 8-week period to 30 June 2018 was GBP3.0 million
(2017: GBP2.6 million***), an increase of 15.4% over a comparison
of last year. Advisory activity services across our Dispute
Resolution, Real Estate and Employment lines have delivered
double-digit revenue growth while, as expected, Corporate activity
was down on the comparative period due to uncertainty caused by
Brexit impacting business confidence.
Adjusted EBITDA* for the 8 weeks was GBP1.0 million (2017:
GBP0.9 million***) representing 33.6% of total income,
demonstrating a maintenance of a healthy margin as revenue
grows.
Operating costs adjusted for exceptional costs relating to the
IPO were GBP2.1 million (2017: GBP1.7 million***), including a
GBP0.3 million increase in personnel costs, the majority of which
arose from new recruitment and PLC management costs.
The loss before tax for the Period of GBP0.02 million includes
GBP1.0 million of costs related to the IPO, resulting in a loss
after tax of GBP0.016 million. Adjusted Profit before Tax** was
GBP1.0 million (2017: GBP0.8 million***). This has been achieved
through continuing tight control of Group operating expenses as the
business continues to expand.
The average number of employees during the period was 70, of
which five were Directors. Personnel costs were GBP1.4 million
(2017: GBP1.1 million***).
Balance sheet, cash flow and financing
The net proceeds of the Placing received by the Company was
GBP31.8 million. The balance of the proceeds, having acquired the
business and assets of Rosenblatt Solicitors, was GBP11.8 million,
with approximately GBP5.0 to GBP7.0 million intended to be used for
the in-house funding of litigation and working capital; and
approximately GBP5.0 to GBP7.0 million for acquisitions of
complementary businesses, investment in IT and AI systems.
The Group has a strong balance sheet with net assets of GBP32.7
million of which cash and cash equivalents was GBP11.8 million at
30 June 2018.
Collection of debts and the lock up of work in progress ("WIP")
remains a key focus for the Group, with total lock up (Debtor and
WIP days) being 68 days at the end of the period, an improvement
over the average for 2017. This will be a continued focus in the
second half of the year.
Robert Parker
Interim Finance Director
18 September 2018
Consolidated statement of profit and loss and other
comprehensive income
for the period from 6th February to 30 June 2018
Unaudited Period
for the 8 weeks
to 30th June
2018
Note GBP
Revenue 4 3,043,908
Personnel costs (1,362,926)
Depreciation and amortisation (72,934)
Other operating expenses (1,631,435)
Operating profit (23,387)
Adjusted EBITDA 1,021,491
Depreciation and amortisation (72,934)
Non-recurring charges
Admission Costs (971,944)
Financial income 3,260
Financial expenses (1,663)
Net financing (expense) / income 1,598
Loss before tax (21,790)
Taxation 6,154
Loss for the period after taxation (15,636)
=============================
Statutory Earnings per share
Basic and diluted earnings per
ordinary shares 5 (0.02)
Basic and diluted earnings after
non-recurring items per ordinary
shares 5 1.19p
=============================
The results for the periods presented above are derived
from continuing operations.
There were no elements of other comprehensive income for
the financial period other than those included in the
income statement and therefore no statement of comprehensive
income has been prepared.
Consolidated statement of financial position at 30 June
2018
Unaudited at
30 June
2018
Note GBP
Non-current assets
Property, plant and equipment 283,579
Intangible assets & goodwill 6 17,737,610
Non-current assets 18,021,189
Current assets
Trade and other receivables 5,204,330
Cash and cash equivalents 11,791,978
Current assets 16,996,308
Total assets 35,017,497
Non-current liabilities
Deferred tax liabilities (168,193)
Non-current liabilities (168,193)
Current liabilities
Trade and other payables (2,191,802)
Current tax liabilities 4,249
Current liabilities (2,187,553)
Total liabilities (2,355,746)
NET ASSETS 32,661,751
=======================================
EQUITY
Share Capital 160,184
Share Premium 32,517,203
Retained Earnings (15,636)
---------------------------------------
Total Equity 32,661,751
=======================================
Consolidated cashflow statement for the period from 6 February
2018 to 30 June 2018
Unaudited Period for the
8 weeks to
30 June 2018
Operating activities
Loss for the period after tax (15,636)
Adjustments for:
Depreciation 16,656
Amortisation of intangible assets 56,278
Financial income (3,260)
Financial expense 1,663
Admission costs relating to IPO 971,944
1,027,645
(Increase) in trade and other receivables (2,635,966)
Increase in trade and other payables 1,693,693
Cash generated from operations 85,372
Interest paid -
Net cash from operating activities 85,372
Cashflows from investing activities
Purchase of tangible fixed assets (435)
Sale of tangible fixed assets -
Acquisition of trade and assets of Rosenblatt
solicitors (20,000,000)
Interest received 3,260
Interest paid (1,663)
Net cash from investing activities (19,998,838)
Cashflows from financing activities
Issuing of new shares 31,705,444
Net cash from financing activities 31,705,444
Increase in cash and cash equivalents 11,791,978
Cash and cash equivalents at the beginning
of the year -
Cash and cash equivalents
at the end of the year 11,791,978
Consolidated statement of changes in equity for period ended 30
June 2018
Retained
Share Capital Share Premium Earnings Total Equity
At 6 February 2018 0.002 - - 0.002
Comprehensive income;
Loss for the year - - (15,636) (15,636)
Transactions with owners
recognised directly in
equity
Issue of shares 160,184 34,926,216 35,086,400
Share issue costs - (2,409,013) (2,409,013)
------------- ------------- --------- ------------
Balance at 30 June 2018 160,184 32,517,203 (15,636) 32,661,751
Notes for the period from 6 February to 30 June 2018
1. STATUTORY INFORMATION
Rosenblatt Group Plc and its sole subsidiary, Rosenblatt
Limited, are limited companies based at 9-13 St Andrew Street,
London, EC4A 3AF.
2. ACCOUNTING POLICIES
Basis of preparation and significant accounting policies
These interim unaudited financial statements for the period from
incorporation of Rosenblatt Group Plc on 6 February 2018 to 30 June
2018 have been prepared in accordance with the accounting policies
set out in the Admission Document of the Group dated 8th May
2018.
The recognition and measurement requirements of all
International Financial Reporting Standards ('IFRSs'),
International Accounting Standards ('IAS') and interpretations
currently endorsed by the International Accounting Standards Board
('IASB') and its committees as adopted by the EU and as required to
be adopted by AIM listed companies have been applied.
The financial information contained in this interim report does
not constitute statutory accounts for the period ended 30 June
2018. The business was Incorporated on the 6th February 2018 and
admitted to AIM on the 8th May 2018 when it commenced trading.
The condensed unaudited financial statements for the period to
30 June 2018 have not been audited or reviewed by auditors pursuant
to the Auditing Practices Board guidance on Review of Interim
Financial Information.
The accounting policies set out below have been applied
consistently to the period presented in this financial
information.
Judgements made by the directors in the application of these
accounting policies that have a significant effect on the financial
information and estimates with a significant risk of material
adjustment in the next year are discussed further in note 2
("Accounting Estimates and Judgements").
Business Combinations
The Group applies the acquisition method of accounting to
account for business combinations in accordance with IFRS 3,
'Business Combinations'. The consideration paid for the acquisition
of a subsidiary is the fair values of the assets transferred, the
liabilities incurred at the date of acquisition. The consideration
transferred includes the fair value of any asset or liability
resulting from a contingent consideration arrangement. The excess
of the consideration transferred over the fair value of the Group's
share of the identifiable net assets acquired is recorded as
goodwill. All transaction related costs are expensed in the period
they are incurred as operating expenses. If the consideration is
lower than the fair value of the net assets of the subsidiary
acquired, the difference is recognised in the income statement.
Any contingent consideration to be transferred by the Group is
recognised at fair value at the acquisition date. Subsequent
changes to the fair value of the contingent consideration that is
deemed to be an asset or liability is recognised in accordance with
IAS 39 in the income statement.
Going concern
These interim accounts are prepared on a going concern basis as
the Directors have a reasonable expectation that the Group has
adequate resources to continue in operational existence for the
foreseeable future. On 8 May 2018 the Group was admitted to AIM and
acquired, through its subsidiary, Rosenblatt Limited, the trade and
certain assets of Rosenblatt Solicitors. Rosenblatt Limited, and
the Group, are cash generative on an underlying basis, with a
strong trading performance since the acquisition.
Accounting estimates and judgements
Revenue from service contracts
Where fees are contractually able to be rendered by reference to
time charged at agreed rates, the revenue is recognised to the
extent that it is not considered likely to be reversed.
Where revenue is subject to contingent fee arrangements, the
Group estimates the amount of variable consideration to which it
will be entitled and constrains the revenue recognised to the
amount considered highly probable that there will be no significant
reversal of. Due to the nature of the work being performed, this
typically means that contingent revenues are not recognised until
such time as the outcome of the matter being worked on is certain.
Factors the Group considers when determining whether revenue should
be constrained are whether:
i. The amount of consideration receivable is highly susceptible
to factors outside the Group's influence.
ii. The uncertainty is not expected to be resolved for a long time.
iii. The Group has limited previous experience (or limited other
evidence) with similar contracts.
iv. The range of possible consideration amounts is broad with a
large number of possible outcomes.
Different views being determined for the amount of revenue to be
constrained in relation to each contingent fee arrangement may
result in a different value being determined for revenue and also a
different carrying value being determined for unbilled amounts for
client work.
In calculating revenue from fixed price contracts, the Group
makes certain estimates as to the stage of completion of those
contracts. In doing so, the Group estimates the remaining time and
external costs to be incurred in completing contracts and the
clients' willingness to pay for the services provided. A different
assessment of the outturn of the contract may result in a different
value being determined for the revenue and also a different
carrying value being determined for unbilled amounts for client
work.
Trade and other receivables
Provision levels in relation to trade and other receivables are
determined after consideration of the likelihood of the clients to
pay the amounts considered due and hence an estimation of expected
credit losses that may arise. A different assessment of the
recoverability of either balance with reference to either the
ability or willingness of the client to pay, may result in
different values being determined.
When preparing the financial statements, management makes a
number of judgements, estimates and assumptions about the
recognition and measurement of assets, liabilities, income and
expenses.
Significant management judgements
IFRS 15 'Revenue from Contracts with Customers'
IFRS 15 'Revenue from Contracts with Customers' On 1 January
2018, IFRS 15 replaces the existing revenue recognition accounting
standards - IAS 18 Revenue' and IAS 11 'Construction Contracts'.
This standard introduces a new revenue recognition model that
recognises revenue either at a point in time or over time. The
model features a contract based five-step analysis of transactions
to determine whether, how much and when revenue is recognised; this
includes the matching of stand-alone prices for services provided
to the satisfaction of performance obligations.
Under IFRS 15, revenue must be accounted for at the individual
contract level. Therefore, the contracts will be disaggregated, and
the assessment of revenue will depend on the performance
obligations under the contract. The Group considers that there are
typically two revenue contract types used in performing
professional services advice, being non-contingent and contingent
contract types. Non-contingent work is typically recognised at a
fixed value or based upon the value of time incurred to complete
the work. It is recognised over the duration of the contract.
Contingent work is typically recognised once pre-agreed stages of
the contracts performance are reached or concluded as a result of
an event linked to each work type performance. Contingent work can
contain a profit premium mark up as a result of the risks
associated with offering this type of contractual arrangement to
clients. Management believe that the performance of the Group's
legal and complementary services can be categorised within these
two category types. The group only recognises revenues that are
contracted.
Recognition of deferred tax assets
The extent to which deferred tax assets can be recognised us
based on an assessment of the probability that future taxable
income will be available against which the deductible temporary
differences and tax loss carry-forwards can be utilised. In
addition, significant judgement is required in assessing the impact
of any legal or economic limits or uncertainties in various tax
jurisdictions.
Estimation uncertainty
Useful lives of depreciable assets
Management reviews its estimate of the useful lives of
depreciable assets at each reporting date, based on the expected
utility of the assets. Uncertainties in these estimates relate to
technological obsolescence that may change the utility of certain
software and IT equipment.
Business combinations
Management uses valuation techniques when determining the fair
values of certain assets and liabilities acquired in a business
combination.
3. Acquisitions and disposals
Acquisition of Rosenblatt Partnership
On the 8th May 2018, the Group acquired the trade and specific
assets and liabilities of Rosenblatt Partnership. The acquisition
was made in line with the business strategy to acquire legal
services businesses and Rosenblatt is an established business in
our target market.
Amount settled in cash 20,000,000
-----------------------
Property, plant and equipment 299,800
Brand Value 750,000
Customer contracts 200,111
Deferred Tax (170,098)
Total non-current assets 1,079,813
-----------------------
Trade and other receivables 2,315,367
Total current assets 2,315,367
-----------------------
Trade and other payables (238,956)
Total Current liabilities (238,956)
-----------------------
Identifiable net assets 3,156,224
=======================
Goodwill on acquisition 16,843,776
=======================
Net Cash outflow on acquisition 20,000,000.0
=======================
The details of the business combination are as follows:
The acquisition of the trade, certain assets and liabilities was
settled with cash amounting to GBP20,000,000. The fair value of the
acquired assets is deemed to be equal to that of the book
value.
All receivables acquired are expected to be collected in
full.
The fair value of the WIP was calculated by assessing the terms
of each individual contract in accordance with IFRS 15.
4. OPERATING SEGMENTS
The Chief Operating Decision Makers ("CODM") are the Board of
directors of Rosenblatt Group Plc and its subsidiary, Rosenblatt
Limited. The Group has the following four strategic business
groups, which are its reportable segments.
These business groups offer different services and are reported
separately because of the different specialisms from the legal
teams in those business groups.
The following summary describes the operations of each
reportable segment:
Reportable segment Operations
Real Estate Provision of legal advice in respect
of construction, planning, real estate
and residential property development
services. These revenue streams are
often time and materials or fixed fee
arrangements, with a minority-based
success fee.
Employment Provision of legal advice in respect
of employment and pension services.
These revenue streams are often time
and materials or fixed fee arrangements
with a minority-based success fee.
Corporate Provision of legal advice in respect
of corporate, family, private client
and taxation services. These revenue
streams are often time and materials
or fixed fee arrangements with a minority-based
success fee.
Dispute Resolution Provision of legal advice in respect
of commercial dispute resolution. The
dispute resolution revenue stream is
often long-term projects with a significant
element of reward weighted to a successful
outcome.
Segment revenue:
2018 (GBP)
Dispute Resolution 2,228,894
Corporate 372,187
Real Estate 336,024
Employment 106,803
-----------
3,043,908
Segment contribution:
Real Employment Corporate Dispute Total
Estate Resolution
GBP GBP GBP GBP GBP
Period ended 30
June 2018
Segment revenue 336,024 106,803 372,187 2,228,894 3,043,908
Segment
contribution 186,819 71,254 57,620 1,627,403 1,943,096
Costs not
allocated to
segments - - - -
Other operating
income - - - - 3,260
Depreciation and
amortisation - - - - (72,933)
Personnel
costs - - - - (262,113)
Other operating
expense - - - - (588,156)
Net financial
costs - - - - (1,663)
Adjusted Profit
for the
period after
taxation - - - - 1,021,491
5. EARNINGS PER SHARE
2018
Number
Weighted average number of ordinary shares in issue,
being weighted average number of shares for calculating
basic earnings per share 80,092,106
GBP
Loss for the period and basic earnings attributable
to ordinary equity shareholders (15,636)
Admission Costs 971,944
Underlying earnings before non-underlying items 956,308
Earnings per share is calculated as follows: Pence
Basic and diluted earnings per ordinary share (0.02)
Basic and diluted earnings per ordinary share after
non-recurring items 1.19p
6. INTANGIBLES
Cost Goodwill Customer Brand Total
Contracts
As at 6 February
2018
Acquired through business
combination 16,843,776 200,111 750,000 17,793,887
Adjustments in the
period
Disposals - - - -
As at 30 June
2018 16,843,776 200,111 750,000 17,793,887
Accumulated Amortisation
As at 6 February
2018 - - - -
Charge for period - 50,028 6,250 56,278
As at 30 June
2018 - 50,028 6,250 56,278
Net book value
As at 2 February
2018 - - - -
As at 30 June
2018 16,843,776 150,083 743,750 17,737,609
Details of the Intangibles are provided in Note 3
Acquisitions
These financial statements were approved by the directors on
18th September 2018 and were signed and authorised for issue on
their behalf by:
Nicola Foulston
Chief Executive Officer
Company registered number: 11189598
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR VDLFFVKFLBBD
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