TIDMRBGP
RNS Number : 5422N
RBG Holdings PLC
25 September 2019
25 September 2019
RBG Holdings plc (formerly Rosenblatt Group plc)
("Rosenblatt" or the "Group" or the "Company")
Unaudited Interim Results for the period ended 30 June 2019
RBG Holdings plc (AIM:RBGP), the professional services group
(formerly Rosenblatt Group plc), is pleased to announce its
unaudited results for the six months ended 30 June 2019.
Financial Highlights:
-- Revenue of GBP10.2 million, up 11.7% (2018 adjusted: GBP9.13
million***), including first sale of a participation right
in a damages-based agreement (DBA)
-- EBITDA of GBP3.84 million, up 25.5% (2018 adjusted*: GBP3.06
million***)
-- Profit before tax of GBP3.2 million, up 12.2% (2018 adjusted:
GBP2.85 million***)
-- Profit after tax of GBP2.5 million (2018 adjusted**: GBP2.28
million***)
-- Balance sheet with net assets of GBP35.3 million, cash of
GBP8.7 million and no debt
-- Interim dividend of 2 pence per share
* Adjusted EBITDA in 2018 is defined as earnings before
interest, tax, share-based payment expense, non-operating
exceptional IPO costs, depreciation and amortisation. From 2019,
EBITDA is defined as earnings before Interest, Tax, Depreciation
and Amortisation
** Adjusted profit before tax is defined as earnings before tax,
share-based payment expense, and non-operating exceptional IPO
costs in 2018
*** To provide a relative comparison on trading, we have taken
the two months of trading in 2018 following the IPO (May and June)
and pro-rated for the half year
Operational Highlights:
Operational performance
-- Main practice areas, which are focused on contentious law,
namely Dispute Resolution and Employment, have performed
well in the current market
-- Dispute Resolution revenue was GBP6.3 million with an additional
GBP1.4 million of contingent work not yet recognised reflecting
our move into more contingent litigation. (2018 adjusted:
GBP6.7 million*** and GBP0.28 million of contingent work)
-- Corporate and Real Estate divisions have been impacted
by the uncertain economic environment with revenues down
27% to GBP1.6 million (2018 adjusted: GBP2.1 million**)
Litigation Finance
-- Successfully realised revenues from the sale of a partial
participation right in a DBA, generating income of GBP2
million
-- Cash investment of GBP1.5 million in four cases in the
period. In total, the Group has four cases in progress,
and three under consideration for finance
-- Conservative and prudent accounting approach -
1. The provision of legal services is recognised under
IFRS 15 when crystallised
2. The provision of funding for third-party legal fees
is recognised under IFRS 9
3. Income from the sale of participation in a DBA is recognised
in the period of sale
-- All Litigation Assets will be carried at fair value; The
judgment of management is that this is currently equal
to cost, with only realised gains recorded
-- Management will always be prudent in estimating the carrying
value
M&A / Name Change
-- Acquired Convex Capital Limited ("Convex") a specialist
sell-side corporate finance boutique, based in Manchester,
UK on 16 September 2019
-- The acquisition is in line with the Group's strategy to
diversify the Group beyond legal services and create opportunities
for cross-referrals
-- The total consideration for the acquisition, assuming all
earn-out and deferred consideration payments are made is
GBP22 million
-- The Board expects the transaction to be immediately, and
materially, earnings and value enhancing.
-- To reflect the evolving nature of the Group, from primarily
a provider of legal services, to a broader supplier of
professional services, the name of the Company has been
changed to RBG Holdings plc
Nicola Foulston, CEO, RBG Holdings plc, commented: "The first
six months have seen financial and operational progress, in what
has been a challenging economic environment. We continue to see
double-digit growth in our revenue, and importantly, we are
maintaining high net margins on the work we do. In September, we
increased the areas in which we can support our clients with the
launch of our new White Collar Fraud and Financial Crime
division.
"We continue to implement the strategy outlined at the time of
our IPO, including growing our litigation finance arm and pursuing
M&A opportunities. We have a very prudent approach to
litigation finance, including adopting a conservative accounting
methodology. In addition, we de-risk our investments by selling on
participation rights in the case to third parties which also
generates revenue. We have reported the first of such sales
today.
"Earlier this month we acquired Convex, a specialist sell-side
corporate finance boutique. The acquisition was in line with our
approach to M&A. It helps diversify our revenue beyond legal
services and creates the opportunity for cross-referrals of
business.
"It is important to note that our growth prospects are not just
dependant on litigation finance and M&A. We can generate
traditional legal service revenues from contentious work at
attractive margins. Looking ahead, we are excited by the prospects
of the business, especially as the market improves, and as we grow
and broaden the professional services, we can provide to
clients."
Enquiries:
RBG Holdings plc Via Newgate Communications
Nicola Foulston, CEO
Stifel (Nominated Adviser and Broker) Tel: +44 (0)20 7710
7600
Gareth Hunt
Stewart Wallace (QE)
Tom Marsh
Newgate Communications (for media enquiries) Tel: +44 (0)20 3757
Robin Tozer/Tom Carnegie 6880; rosenblatt@newgatecomms.com
About RBG Holdings plc
RBG Holdings plc is a professional services group, which
includes one of the UK's leading law firms, Rosenblatt Limited,
which is a leader in dispute resolution.
Rosenblatt Limited provides a range of legal services to its
diversified client base, which includes companies, banks,
entrepreneurs and individuals. Complementing this is the Company's
increasingly international footprint, advising on complex
cross-jurisdictional matters. Rosenblatt Limited's practice areas
include dispute resolution, corporate, banking and finance,
insolvency and financial restructuring, construction and projects,
employment, financial services, IP/technology/media, real estate,
regulatory and tax resolution. The Group also provides litigation
finance in selected cases through a separate arm.
The Group also owns Convex Capital Limited, a specialist
sell-side corporate finance boutique, based in Manchester, UK.
Convex is entirely focussed on helping companies, particularly
owner-managed and entrepreneurial businesses, realise their value
through sales to large corporates. Convex identifies and
proactively targets firms that it believes represent attractive
acquisition opportunities.
Chief Executive's Statement
Overview
Overall the Group is performing well and delivering year on year
growth at high net margins in line with our strategy. The Group's
financial year is typically second-half weighted, and it is
expected that marginally more revenue will be recognised in the
second half of the year, as is traditionally the case.
Revenue for the period was GBP10.2 million (2018 adjusted:
GBP9.13 million***) with gross margins of 62%. This is an
exceptional performance when you consider revenue also grew in
2018.
EBITDA grew to GBP3.85 million (2018 adjusted:
GBP3.06million***), with EBITDA margins of 37.5% that are above the
high margins we aim to deliver. We target margins of around 35% or
more.
The Group has a strong balance sheet with net assets of GBP35.3
million, cash of GBP8.7 million and no debt. Our balance sheet will
support our growth plans, including acquisitions, continued
investment in litigation finance opportunities, and the
dividend.
Divisional performance
Our main practice areas, which are focused on contentious law,
namely Dispute Resolution and Employment, have performed well in
the current market. Revenue from Dispute Resolution in the period
was GBP6.3 million with an additional GBP1.4 million of contingent
work not yet recognised. This was compared to GBP6.7 million ***
and GBP0.28 million of contingent work in 2018. Dispute Resolution
is the most significant contributor to the total revenue produced
by the Group, representing 62% of Group revenue, or 76% excluding
the DBA litigation investment sale.
In line with our expectations and as previously highlighted, the
Corporate and Real Estate divisions, which are focused on
commercial transactions, have been impacted by the uncertain
economic environment. The divisions have therefore experienced more
difficult trading with revenues down 27% on 2018***. However, there
is a good pipeline of new business. The Board is confident that
once the market improves, these divisions will contribute more to
the Group.
Post the period end, we launched a new White Collar Fraud and
Financial Crime division. The new division will be headed by a
recently appointed partner, Manraj Somal. The division will provide
advice and support for individuals and companies dealing with
compliance, investigations (internal and external), defending
prosecutions or helping clients who are the victims of financial
crime. Manraj has been tasked with building the new division,
including recruiting staff and working closely with other
Rosenblatt divisions and practice areas. Manraj joined Rosenblatt
from KPMG LLP, where he was UK Head of Corporate Crime Legal.
The new division will be an addition to Rosenblatt's
internationally renowned Dispute Resolution practice. The division
will increase the areas in which Rosenblatt can support its
clients. Financial crime is an increasing threat driven by the
growth of cybercrimes such as identity theft and phishing, as well
as more traditional forms of financial crime such as money
laundering and fraud.
*** To provide a relative comparison on trading, we have taken
the two months of trading in 2018 following the IPO (May and June)
and pro-rated for the half year
Litigation Finance
Litigation Finance represents an incremental opportunity for us
to monetise our case flow and to diversify our income streams. It
allows us to retain the margin that would otherwise be paid to a
third-party funder, increasing the number of cases we can take on,
but also creates a revenue opportunity in terms of our ability to
sell participation rights in the cases we invest in. This is in
line with our strategy to de-risk our investments.
We are pleased with the progress in Litigation Finance. During
the period, we have invested GBP1.5 million in external third-party
costs across four litigation investments. We have also completed
the first DBA sale. The sale of a 4.7% participation right has
contributed GBP2 million to revenue. Currently, the Group has four
cases in progress and three under consideration. Case duration is
hard to predict, but the returns on investment are high.
In recent months, the litigation funding sector and its
accounting practices have come under scrutiny. Our approach is
conservative, considered and results from our long-standing
expertise in litigation. One of our core principles is that we only
finance cases where we run the litigation and have an intimate
knowledge of the case. We have also adopted a very conservative
approach within the requirements of the accounting standards. Put
simply, we have only accounted for realised gains. We have judged
the fair value of investments, to be equal to cost. We stated our
intention to follow this approach in April 2019 on the publication
of our final results.
We have taken this approach for several reasons. Litigation
investments are often complex and unpredictable, requiring a solid
understanding of the judiciary in each jurisdiction as well as
excellent risk management capabilities. Also, such investments come
with contingent liabilities that need to be carefully managed and
fully understood. It is not possible to forecast the probability of
success, and this probability has no precedent to predict the value
fairly or with certainty. While we sell participation rights in the
investment asset, in the Company's view, this is not a fair
indication of the carrying value of the whole investment while the
outcome of the litigation remains uncertain.
We believe successful management of litigation finance requires
a team with strong legal capabilities and decades of experience of
the judiciary. Furthermore, decisions on making investments need
strong commercial principles, the ability to approach cases
innovatively and the option to de-risk them.
Rosenblatt has all these requisite skills and a track record of
minimising financial risk. The Group has more than 30 years of
experience in undertaking litigation on behalf of clients, and
within the last ten years, some cases have been on a risk basis. In
these cases, Rosenblatt Limited conducted them based on either a
Conditional Fee Arrangement, providing time for free, or at partial
cost recovery. Before decided to undertake work on a contingent
basis, Rosenblatt Limited follows a set of core principles:
-- To limit the revenue exposure - the Group can only commit
up to 25% of the revenue of Rosenblatt Limited, limiting
the contingent time fee-earners can spend on contingent
case.
-- To limit the Group's cash exposure - total investment in
cases (such as spend on third party resource) is limited
to 25% of the net assets of the Group. In any one case
the maximum cash exposure is 50% of the cash liability,
with the rest to be provided by external investors or other
funders.
Our business, and growth prospects are not just dependant on
litigation finance or working at risk. Given our business model, we
are able to generate traditional legal service revenues at
attractive margins from contentious law. This is in the event the
case dynamics or risk profile do not meet our selective criteria
for investment. We have a diversified legal offering, including
services across a range of disciplines. Our litigation practice
also involves defence work. In these cases, there is no contingent
fee element and we are paid by clients for the work we do as the
case proceeds.
M&A
On 16 September 2019, we announced the acquisition of Convex, a
specialist sell-side M&A corporate finance boutique based in
Manchester, UK. The purchase is in line with the Group's M&A
strategy. This strategy aims to diversify the Group beyond legal
services, focusing on high-margin professional services companies
like Convex, which will also create opportunities for the
cross-referral of business.
Convex is entirely focussed on helping companies, particularly
owner-managed and entrepreneurial businesses, realise their value
through sales to large corporates. Convex identifies and
proactively targets firms that it believes represent attractive
acquisition opportunities.
The Board expects the transaction to be immediately and
materially earnings and value-enhancing for the Group. For the
financial year ended[1] 30 June 2019, Convex generated revenues of
GBP8.7 million and profit before tax of GBP4.3 million. As of 30
June 2019, Convex had net assets of GBP3.7 million and no net debt.
Convex was owned by its directors. All directors and employees of
Convex are remaining with the business.
Like Rosenblatt, Convex is an entrepreneurial, high-margin and
cash generative business in the professional services sector, with
a strong network of clients and partners across the UK and Europe.
Convex was established in 2011 by Chairman, Mike Driver. It has
completed over GBP1 billion in transactions over the last four
years and completed 13 deals in the last year alone, with EBITDA
margins of more than 50 per cent.
The acquisition of Convex is expected to help generate a regular
flow of fee-based work for Rosenblatt's corporate division, which
is focused on commercial transactions. The Group believes that by
working closely together, there will be an opportunity to
cross-sell services to the client bases of both companies.
Rosenblatt also intends to use Convex's Manchester base to
create a new regional business hub. The Group will market its
expanded professional services offering from the hub, which will
also create the opportunity for further cost savings on back-office
functions.
The acquisition has been structured in accordance with the
Board's M&A strategy. This strategy means that the majority of
the consideration is to be paid in shares, with a maximum of 40% to
be paid in cash. A significant proportion of the consideration is
deferred, to lock in the new business and the talent being
acquired. This approach ensures the acquisition value is protected,
and that the management of Convex are appropriately incentivised to
deliver returns for Rosenblatt shareholders as well as
themselves.
The total consideration for the acquisition, assuming all
earn-out and deferred consideration payments are made, is GBP22
million. The consideration is structured as follows:
-- An initial consideration, payable on completion of GBP13.6
million. Of this GBP13.6 million, GBP7 million will be
paid in cash from the Company's existing resources and
GBP6.6 million will be satisfied by the issue of 5.5 million
new Rosenblatt shares (the "Initial Consideration Shares")
based on an issue price of 120 pence per share (a premium
of 35.6% to the closing price on 13 September 2019).
-- A deferred consideration, payable after one year, of GBP8.4
million. Of this GBP8.4 million, GBP1.8m million will
be paid in cash, and GBP6.6 million will be satisfied
by the issue of 4.7 million new Rosenblatt shares (the
"Deferred Consideration Shares"), at a minimum price of
140 pence per share (a premium of 58.2% to the closing
price on 13 September 2019) or, if higher, the market
value of the shares at the time. The Deferred Consideration
Shares will only be issued if Convex exceeds a threshold
EBITDA of GBP6 million for the period from 16 September
2019 to 16 September 2020.
Key management and employees of Convex have agreed to a
long-term lock-in for the Group's shares and agreed to non-compete
clauses. The Initial Consideration Shares and the Deferred
Consideration Shares will be subject to a lock-in of three years
from their respective issuance dates. Management and employees of
Convex will also join the Rosenblatt performance bonus scheme to
ensure close alignment with the interests of shareholders.
We continue to see many other M&A opportunities in the
professional services sector. We are committed to pursuing the
right opportunities, which meet our investment criteria and provide
shareholders with an appropriate return on investment.
Dividend
The Board has a progressive dividend policy. It expects to pay
out at least 60 per cent of retained earnings in any financial year
by way of dividend. The Company will pay an interim dividend for
the six months to 30 June 2019 of 2p per share. This sum will be
paid to shareholders on the register as at 4 October 2019.
Furthermore, as a result of opportunities in Litigation Finance,
if successful, the Board may pay special dividends in addition to
the interim and final dividends. Due to the unpredictable nature of
this type of work, it is not possible to forecast when cash from a
successful case will be received. If appropriate, special dividends
will be announced at the time of the Group's half year and final
results.
Board Changes and personnel
The Board has continued to strengthen. Robert Parker was named
as permanent CFO in January 2019 after a successful period as
interim since August of last year. Also, in January 2019, Marianne
Ismail joined the Board as a Non-Executive Director. She is a
highly experienced director with extensive experience in fund
management.
Since the IPO, we have been able to retain and attract new
talent to the business to support our growth plans. Our
entrepreneurial culture and approach to remuneration have proved
popular. Equity ownership for all fee-earners is both a crucial
part of the Company's culture and attractive to potential recruits
from major players in the legal sector.
We are proud of the fact that our revenue per fee earner is
GBP441,000 per annum. This is among the highest of our listed peers
and consistent with the levels seen in Magic Circle Firms. Recruits
are expected to deliver three times their cost of employment.
We remain encouraged by the enhanced levels of productivity and
focus across the Group since the IPO.
Name Change
To reflect the evolving nature of the Group from one which was
primarily a provider of legal services, to a broader supplier of
professional services, the Board has changed the name of the
Company to RBG Holdings plc. RBG Holdings plc is comprised of a
number of subsidiaries including the law firm Rosenblatt Limited
(acquired at the time of IPO), Convex Capital Limited, and the
Group's litigation finance arm.
Outlook
The Group has traded well since the beginning of the year in
difficult market circumstances. We have been pleased with the
progress that has continued to be made. Progress is both in terms
of the trading of the core business and implementation of the
Board's strategy, especially in litigation finance. We are
targeting further participation right realisations however, the
exact timing of these will depend on several factors. Litigation
finance is a long-term investment, and we have no control on when
the cases will complete,
The overall outlook for the broader legal sector is mixed. This
outlook is due to the uncertain economic environment. However, we
believe that there is an increasing demand for litigation services
and the finance to support such services which provide significant
opportunities for the Group.
We are encouraged by the sales of our litigation finance
investments so far, and the growth of the legal business. We have
invested in key hires to drive our core business and have expanded
into new areas identified at the float, including White Collar
Fraud and Financial Crime. Our approach to remuneration, which
creates significant equity participation for fee-earners, is
proving attractive in terms of recruitment, and importantly aligns
employees' interests with that of shareholders.
We are confident about the outcome for the rest of the year. The
Group's financial year is typically second-half weighted and it is
expected, as is traditional, that marginally more revenue will be
recognised in the second half.
Nicola Foulston
Chief Executive Officer
RBG Holdings plc
25 September 2019
Chief Financial Officer's Review
Revenue for the six months to 30 June 2019 was GBP10.2 million
(2018: GBP 9.13 million***), an increase of 11.7% year-on-year,
which includes GBP2 million of DBA income during the period.
Advisory activity services have remained strong in difficult
environments, Corporate and Real Estate activity was down
significantly 27%*** on the comparative period due to uncertainty
caused by Brexit impacting business confidence.
EBITDA* for the period was GBP3.84 million (2018: GBP 3.06
million***) representing a healthy margin of 37.5%.
Operating costs were GBP6.94 million (2018: GBP 6.15
million***), including a GBP1 million increase in personnel costs,
the majority of which arose from new recruitment and PLC management
costs.
The profit before tax** for the period is GBP3.2 million (2018:
GBP2.85 million***, which excludes GBP1.0 million of costs related
to the IPO). This has resulted in a 12.3% growth against adjusted
profit through continuing tight control of Group operating expenses
as the business continues to expand.
Profit after tax of GBP2.56 million is 25% of revenue for the
period.(2018: GBP2.28m***)
The average number of employees during the period was 75, of
which five were Directors. Personnel costs were GBP5.2 million
(2018: GBP4.1 million***).
Balance sheet, cash flow and financing
The Group has a balance sheet with net assets of GBP35.3 million
at 30 June 2019 of which cash and cash equivalents was GBP8.7
million and investments in Litigation Investments was GBP1.86
million.
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 134 days at the end of the period. This will be a
continued focus in the second half of the year.
Robert Parker
Chief Financial Officer
RBG Holdings plc
25 September 2019
* Adjusted EBITDA in 2018 is defined as earnings before
interest, tax, share-based payment expense, non-operating
exceptional IPO costs, depreciation and amortisation. From 2019,
EBITDA is defined as earnings before Interest, Tax, Depreciation
and Amortisation
** Adjusted profit before tax is defined as earnings before tax,
share-based payment expense, and non-operating exceptional IPO
costs in 2018
*** To provide a relative comparison on trading, we have taken
the two months of trading in 2018 following the IPO (May and June)
and pro-rated for the half year
Unaudited consolidated statement of comprehensive income for the
period ended 30 June 2019
Note 1 January 6 February to
to 30 June 30 June 2018
2019
GBP GBP
Revenue 4 10,235,314 3,043,908
Personnel Costs 5 (5,167,352) (1,362,926)
Depreciation and amortisation expense (545,785) (72,934)
Other expenses (1,226,737) (1,631,435)
_______ _______
Profit from operations 3,295,440 (23,387)
Adjusted EBITDA 3,841,225 1,021,491
Depreciation and amortisation expense (545,785) (72,934)
Non-underlying items
Admission costs - (971,944)
-------------------------------------------- ----- ------------ --------------
Finance expense (113,886) (1,663)
Finance income 15,312 3,260
_______ _______
Profit before tax 4 3,196,866 (21,790)
Tax expense (642,394) 6,154
_______ _______
Profit attributable to the ordinary equity
holders of the parent 2,554,472 (15,636)
_______ _______
Earnings per share attributable to the
ordinary equity holders of the parent 6
Profit
Basic (pence) 3.19 (0.02)
Diluted (pence) 3.19 (0.02)
_______ _______
Unaudited consolidated statement of financial position as at 30
June 2019
Company registered number: 11189598 Note 2019 2018
GBP GBP
Assets
Current assets
Trade and other receivables 9,239,787 5,204,330
Cash and cash equivalents 8,673,109 11,791,978
_______ _______
17,912,896 16,996,308
Non-current assets
Property, plant and equipment 8 7,436,188 283,579
Intangible assets 9 17,966,471 17,737,610
Litigation investments 10 1,735,822 -
______ _______
27,138,481 18,021,189
_______ _______
Total assets 45,051,377 35,017,497
_______ _______
Liabilities
Current liabilities
Trade and other payables 1,383,437 2,191,802
Current tax liabilities 1,399,202 (4,249)
Provisions 56,904 -
Leases 11 887,683 -
_______ _______
3,727,226 2,187,553
Non-current liabilities
Deferred tax liability 140,781 168,193
Leases 11 5,872,520 -
_______ _______
6,013,301 168,193
_______ _______
Total liabilities 9,740,527 2,355,746
_______ _______
NET ASSETS 35,310,850 32,661,751
_______ _______
Issued capital and reserves attributable
to
owners of the parent
Share capital 160,184 160,184
Share premium reserve 32,516,129 32,517,203
Retained earnings 2,634,537 (15,636)
_______ _______
TOTAL EQUITY 35,310,850 32,661,751
_______ _______
The interim statements were approved by the Board of Directors
and authorised for issue on 24 September 2019.
Unaudited consolidated statement of cash flows for the period
ended 30 June 2019
Note 2019 2018
GBP GBP
Cash flows from operating activities
Profit for the period before tax 3,196,866 (21,790)
Adjustments for:
Depreciation of property, plant and
equipment 8 527,035 16,656
Amortisation of intangible fixed assets 9 18,750 56,278
Finance income (15,312) (3,260)
Finance expense 113,886 1,663
_______ _______
3,841,225 49,547
Increase in trade and other receivables (3,486,096) (2,888,963)
Increase in trade and other payables (514,726) 1,952,846
Increase in provisions 21,640 -
_______ _______
Cash generated from operations (137,957) (886,570)
Tax paid - -
_______ _______
Net cash flows from operating activities (137,957) (886,570)
_______ _______
Investing activities
Purchases of property, plant and equipment (347,379) (435)
Purchase of business - (20,000,000)
Interest received 15,312 3,260
_______ _______
Net cash used in investing activities (332,067) (19,997,175)
_______ _______
Financing activities
Issue of ordinary shares - 32,677,386
Dividends paid to holders of the parent 7 (2,228,300) -
Repayments of leases 11 (444,081) -
Interest paid on loans and borrowings - (1,663)
Investment in cases (1,534,953) -
_______ _______
Net cash from financing activities (4,207,334) 32,675,723
_______ _______
Net increase in cash and cash equivalents (4,677,358) 11,791,978
Cash and cash equivalents at beginning 13,350,467 -
of period
_______ _______
Cash and cash equivalents at end of
period 8,673,109 11,791,978
_______ _______
Unaudited consolidated statement of changes in equity for period
ended 30 June 2019
Share Share Premium Retained Total Equity
Capital Earnings
GBP GBP GBP GBP
At 6 February 2018 - - - -
Comprehensive income;
Loss for the period - - (15,636) (15,636)
Transactions with owners
recognised directly in
equity
Issue of share capital 160,184 34,926,316 - 35,086,500
Share issue costs - (2,409,113)- - (2,409,113)
Balance at 30 June 2018
(unaudited) 160,184 32,517,203 (15,636) 32,661,751
At 1 July 2018 160,184 32,517,203 (15,636) 32,661,751
Comprehensive income;
Profit for the period - - 2,324,001 2,324,001
Transactions with owners
recognised directly in
equity
Share issue costs - (1,074) (1,074)
Balance at 31 December
2018 (audited) 160,184 32,516,129 2,308,365 34,984,678
At 1 January 2019 160,184 32,516,129 2,308,365 34,984,678
Comprehensive income;
Profit for the period - - 2,554,472 2,554,472
Transactions with owners
recognised directly in
equity
Dividends - - (2,228,300) (2,228,300)
Balance at 30 June 2019
(unaudited) 160,184 32,516,129 2,634,537 35,310,850
Unaudited notes to the financial statements for the period ended
30 June 2019
1 Basis of preparation
RBG Holdings plc (formerly Rosenblatt Group plc) is a public
limited company domiciled in the United Kingdom and its registered
office is 9-13 St Andrew Street, London, EC4A 3AF. The Company was
incorporated on 6(th) February 2018, shares in the company were
admitted to trading on AIM on 8(th) May 2018 and it commenced
trading on this date.
The principal activity of the Group is the provision of legal
and professional services, including management and financing of
litigation projects.
The condensed consolidated financial statements of the Group,
which have been prepared for the period from 1 January 2019 to 30
June 2019, do not constitute statutory accounts for the period and
should be read in conjunction with the Group's annual consolidated
financial statements as of 31 December 2018. The comparatives
relate to the period from incorporation on 6(th) February 2018 to
30 June 2018.
The consolidated financial statements have not been audited or
reviewed by auditors pursuant to the Auditing Practices Board
guidance on Review of Interim Financial Information.
The principal accounting policies adopted in the preparation of
the unaudited consolidated financial statements are set out in Note
2. The policies have been consistently applied to the periods
presented, unless otherwise stated.
The unaudited consolidated financial statements of the Group
have been prepared in accordance with IFRS as adopted by the
European Union and those parts of the Companies Act 2006 applicable
to companies reporting under IFRS. The preparation of financial
statements in compliance with IFRS requires the use of certain
critical accounting estimates. It also requires Group management to
exercise judgment in applying the Group's accounting policies. The
areas where significant judgments and estimates have been made in
preparing the financial statements and their effect are disclosed
in Note 3.
Going concern
The Group financial statements 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.
Changes in accounting policies
a) New standards, interpretations and amendments effective from
1 January 2019
The Group adopted IFRS 16 Leases (IFRS 16) with a transition
date of 1 January 2019. The group has applied modified
retrospective adoption and has therefore not restated comparatives
but recognised the leases on the balance sheet at the date of
initial application (i.e. 1 January 2019). Right-of-use assets have
been measured by reference to the measurement of lease liability at
the date of application and so there is no impact on net assets at
this date
On adoption of IFRS 16, the Group recognised lease liabilities
of GBP7.1m in relation to property and equipment leases, which had
previously been classified as operating leases in accordance with
IAS 17. These liabilities were measured at the present value of the
remaining lease payments, discounted using the lessee's incremental
borrowing rate as of 1 January 2019. The weighted average
incremental borrowing rate applied to the lease liabilities on 1
January 2019 was 3.25%. Lease liabilities are included within
payables in the consolidated statement of financial position. The
associated right-of-use assets are measured at the amount of the
lease liability adjusted for prepaid lease payments recognised in
the 31 December 2018 balance sheet and are included within
property, plant and equipment in the consolidated statement of
financial position.
2 Significant accounting policies
Revenue
Revenue comprises the fair value of consideration receivable in
respect of services provided or assets sold during the period,
inclusive of recoverable expenses incurred but excluding value
added tax.
Revenue is recognised when the Group has performed services in
accordance with the agreement with the relevant client and has
obtained a right to consideration for those services. Where such
income has not been billed at the balance sheet date, it is
included as contract assets and forms part of Trade and other
receivables.
Where the Group enters into contingent fee arrangements,
including where services are provided under Damage Based Agreements
(DBA), no revenue is recognised until the contingent event has
occurred, as the Directors consider to do so would give rise to the
risk of significant reversals.
Where the Group sells a share of its entitlement to any award
under a DBA to a third party, the income is recognised in the
period of the sale.
Financial assets
The Group classifies its financial assets into one of the
categories discussed below, depending on the purpose for which the
asset was acquired. The Group has not classified any of its
financial assets as held to maturity.
Fair value through profit or loss
Litigation investments relate to the provision of funding of
litigation projects and they are held at fair value through the
profit and loss.
Amortised cost
These assets arise principally from the provision of goods and
services to customers (e.g. trade receivables). They are initially
recognised at fair value plus transaction costs that are directly
attributable to their acquisition or issue and are subsequently
carried at amortised cost using the effective interest rate method,
less provision for impairment.
Financial liabilities
The Group classifies its financial liabilities depending on the
purpose for which the liability was acquired.
Other financial liabilities
All the Group's financial liabilities are classified as other
financial liabilities, which include the following items:
- Trade payables and other short-term monetary liabilities,
which are initially recognised at fair value and subsequently
carried at amortised cost using the effective interest method.
- Leases are measured as described above.
Dividends
Dividends are recognised when they become legally payable. In
the case of interim dividends to equity shareholders, this is when
the dividend is paid. In the case of final dividends, this is when
approved by the shareholders at the AGM.
3 Critical accounting estimates and judgements
The Group makes certain estimates and assumptions regarding the
future. Estimates and judgements are continually evaluated based on
actual experience and other factors, including expectations of
future events that are believed to be reasonable under the
circumstances. In the future, actual experience may differ from
these estimates and assumptions. The estimates and assumptions that
have a significant risk of causing a material adjustment to the
carrying amounts of assets and liabilities within the next
financial period are discussed below.
Estimates and assumptions
- Revenue recognition
Where fees are contractually able to be rendered by reference to
time charged at agreed rates, the revenue is recognised over time,
based on time worked charged at agreed rates, to the extent that it
is not considered likely to be reversed.
Where revenue is subject to contingent fee arrangements
including DBAs, the Group estimates the amount of variable
consideration to which it will be entitled and constrains the
revenue recognised to the amount for which it is considered highly
probable that there will be no significant reversal. 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.
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.
- Fair value of litigation investments
The most significant estimates relate to the valuation of
litigation investments at fair value through profit or loss which
are determined by the Group. Fair values are determined on the
specifics of each investment and will typically change upon an
investment having a return entitlement or progressing in a manner
that, in the Group's judgement, would result in a third party being
prepared to pay an amount different from the original sum invested
for the Group's rights in connection with the investment.
The estimation of fair value is inherently uncertain. Awards and
settlements are hard to predict and often have a wide range of
possible outcomes. Furthermore, there is much unpredictability in
the actions of courts, litigants and defendants because of the
large number of variables involved and consequent difficulty of
predictive analysis. In addition, there is little activity in
transacting investments and hence little relevant data for
benchmarking the effect of investment progression on fair value,
although the existence of secondary market transactions is a
valuation input.
- Accounting for business combinations and fair value
Business combinations are accounted for at fair value. Valuation
of acquired intangibles requires estimates of future growth rates,
profitability, remaining useful lives and discount rates for input
to the business combination valuation methodology. A difference in
the estimated future growth rates, profitability, the use of a
different discount rate, or the selection of a different valuation
method may result in a different assessment of fair value of the
asset or liability acquired as part of the business
combination.
- Estimated impairment of intangible assets including goodwill
Determining whether an intangible asset is impaired requires an
estimation of the value in use of the cash generating units to
which the intangible has been allocated. The value in use
calculation requires the entity to estimate the future cash flows
expected to arise from each cash generating unit and determine a
suitable discount rate. A difference in the estimated future cash
flows or the use of a different discount rate may result in a
different estimated impairment of intangible assets.
- Impairment of trade receivables
Receivables are held at cost less provisions for impairment.
Impairment provisions are recognised based on the simplified
approach within IFRS 9 using a provision matrix in the
determination of the lifetime expected credit losses. A different
assessment of the impairment provision with reference to the
probability of the non-payment of trade debtors or the expected
loss arising from default, may result in different values being
determined.
- Claims and regulatory matters
The Group from time to time receives claims in respect of
professional service matters. The Group defends such claims where
appropriate but makes provision for the possible amounts considered
likely to be payable. A different assessment of the likely outcome
of each case or of the possible cost involved may result in a
different provision or cost.
4 Segment revenue and results
The chief operating decision makers (CODMs) are the Board of
Directors of Rosenblatt Group plc. The Group has the following five
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:
-- Real Estate - Provision of legal advice in respect of
construction, planning, real estate and residential property
development services.
-- Employment - Provision of legal advice in respect of employment and pension services.
-- Corporate - Provision of legal advice in respect of
corporate, private client and taxation services.
-- Dispute Resolution - Provision of legal advice in respect of commercial dispute resolution.
-- DBA Income - Sale of entitlement of awards under DBAs
2019 Real Estate Employment Corporate Dispute DBA Income Total
Resolution
GBP GBP GBP GBP GBP GBP
Segment revenue 803,211 381,321 754,246 6,296,536 2,000,000 10,235,314
_______ _______ _______ _______ _______ _______
Segment contribution 357,690 230,693 (315,023) 4,087,375 1,994,058 6,354,793
_______ _______ _______ _______ _______
Costs not allocated to segments
Personnel costs (1,298,806)
Depreciation and amortisation (545,785)
Other operating expense (1,214,762)
Net financial expenses (98,574)
_______
Group profit for the period before tax 3,196,866
_______
2018 Real Estate Employment Corporate Dispute DBA Income Total
Resolution
GBP GBP GBP GBP GBP GBP
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
Personnel costs (262,113)
Depreciation and amortisation (72,934)
Other operating expense (659,492)
Admission costs (971,944)
Net financial income 1,597
_______
Group profit for the period before tax (21,790)
_______
5 Employees
2019 2018
Group GBP
Staff costs (including directors)
consist of:
Wages and salaries 3,748,821 1,110,302
Short-term non-monetary benefits 46,218 8,072
Social security costs 439,431 134,741
Cost of defined contribution scheme 134,449 32,134
_______ _______
4,368,919 1,285,249
_______ _______
Personnel Costs stated in the Consolidated statement of
comprehensive income includes the costs of contractors who are not
employees.
The average number of employees (including directors) during the
period was as follows:
2019 2018
Number Number
Legal and professional staff 44 44
Administrative staff 31 26
_______ _______
75 70
_______ _______
A defined contribution pension scheme is operated by the group
on behalf of the employees of one of the subsidiary undertakings.
The assets of the scheme are held separately from those of the
group in an independently administered fund. The pension charge
represents contributions payable by the group to the fund and
amounted to GBP134,449 (2018:GBP32,134). Contributions amounting to
GBP66,907 (2018:GBP50,443) were payable to the fund at period end
and are included in Trade and other payables.
6 Earnings per share
2019 2018
Numerator GBP GBP
Profit for the period and earnings
used in basic and diluted EPS 2,554,472 (15,636)
Add Non Underlying items
* Admission costs - 971,944
_______ _______
Profit for the period adjusted for
Non Underlying items 2,554,472 956,308
_______ _______
Denominator Number Number
Weighted average number of shares
used in basic and diluted EPS 80,092,106 80,092,106
_______ _______
Earnings per share is calculated as follows:
2019 2018
Pence Pence
Basic and diluted earnings per ordinary
share 3.19 (0.02)
Basic and diluted earnings per ordinary
share adjusted for Non Underlying items 3.19 1.19
Clawback arrangements over certain shares of Cascades Ltd would
have an anti-dilutive effect on earnings per share and therefore no
impact on diluted earnings per share.
7 Dividends
On 24 May 2019, Rosenblatt Group plc paid a dividend of
GBP2,228,300 in respect of 2018 (2.8p per share).
On 24 July 2019, Rosenblatt Ltd declared an interim dividend for
2019 resulting in a distribution to Rosenblatt Group plc of
GBP2,900,000. The Company will pay an interim Dividend for the 6
months to 30 June 2019 of 2p per share. This dividend has not been
accrued in the consolidated statement of financial position as it
has been proposed after the reporting period.
8 Property, plant and equipment
Group Land and Plant Fixtures Computer
and
Buildings Machinery and fittings Equipment Total
GBP GBP GBP GBP GBP
Cost
At 1 January 2019 7,294,194 309,568 435 82,714 7,686,911
Additions - 2,239 26,511 318,629 347,379
Acquired through
business combinations - - - - -
Disposals - - - - -
_______ _______ _______ _______ _______
At 30 June 2019 7,294,194 311,807 26,946 401,343 8,034,290
_______ _______ _______ _______ _______
Accumulated Depreciation
and Impairment
At 1 January 2019 - 67,436 63 3,568 71,067
Charge for the period 429,070 51,595 307 46,063 527,035
Disposals - - - - -
_______ _______ _______ _______ _______
At 30 June 2019 429,070 119,031 370 49,631 598,102
_______ _______ _______ _______ _______
Net book value
At 1 January 2019 7,294,194 242,132 372 79,146 7,615,844
At 30 June 2019 6,865,124 192,776 26,576 351,712 7,436,188
_______ _______ _______ _______ _______
9 Intangible assets
Group Goodwill Customer Brand Total
Contracts
GBP GBP GBP GBP
Cost
At 1 January 2019 17,260,221 200,111 750,000 18,210,332
Acquired through
business combinations - - - -
_______ _______ _______ _______
At 30 June 2019 17,260,221 200,111 750,000 18,210,332
_______ _______ _______ _______
Accumulated amortisation
and impairment
At 1 January 2019 - 200,111 25,000 225,111
Amortisation charge - - 18,750 18,750
Impairment losses - - - -
_______ _______ _______ _______
At 30 June 2019 - 200,111 43,750 243,861
_______ _______ _______ _______
Net book value
At 1 January 2019 17,260,221 - 725,000 17,985,221
At 30 June 2019 17,260,221 - 706,250 17,966,471
_______ _______ _______ _______
The intangible assets arose on the acquisition of the trade and
specific assets and liabilities of Rosenblatt Partnership, by
Rosenblatt Limited on 8 May 2018.
10 Litigation investments
Litigation Investments comprise the funding provided to
Litigation projects. Assets are fair valued at each balance sheet
date and any movement in fair value from previous balance sheet
date is recognised in the profit or loss (see Note 3).
2019 2018
GBP GBP
At 1 January 2019 200,869 -
Additions 1,534,953 -
Fair value movement (net of transfers - -
to realisations)
_______ _______
At 30 June 2019 1,735,822 -
_______ _______
11 Leases
The Group leases its business premises and the lease provides
for annual increases in the periodic rent payments linked to
inflation, within a band of a 2-4% increase per annum. The Group
also leases an item of office equipment, with fixed payments over
the lease term.
Right-of-Use Assets
Land and Computer equipment Total
buildings
GBP GBP GBP
At 1 January 2019 7,294,194 17,094 7,311,288
Additions - - -
Amortisation (429,070) (3,419) (432,489)
Variable lease payment adjustment - - -
_______ _______ _______
At 30 June 2019 6,865,124 13,675 6,878,799
_______ _______ _______
Lease liabilities
Land and Computer equipment Total
buildings
GBP GBP GBP
At 1 January 2019 7,073,880 16,518 7,090,398
Additions - - -
Interest expense 113,631 255 113,886
Variable lease payment adjustment - - -
Lease payments (440,628) (3,453) (444,081)
_______ _______ _______
At 30 June 2019 6,746,883 13,320 6,760,203
_______ _______ _______
At 30 June 2019, lease liabilities were falling due as
follows:
Group Up to 3 Between Between Between 2 Over 5 Total
months 3 and 12 1 and 2 and 5 years years
months years
GBP GBP GBP GBP GBP
Lease liabilities 224,622 663,061 876,466 2,545,106 2,450,948 6,760,203
[1] Represents the eleven months from when Convex converted from
a partnership to a limited company - 1 August 2018 to 30 June
2019
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 CKQDNKBKBCCB
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