TIDMRBGP
RNS Number : 1817Z
RBG Holdings PLC
13 September 2022
13 September 2022
RBG Holdings plc
("RBG", the "Group", or the "Company")
Unaudited Interim Results for the six months ended 30 June
2022
Solid performance delivered by resilient business model
RBG Holdings plc (AIM: RBGP), the professional services group,
is pleased to announce its unaudited results for the six months
ended 30 June 2022.
Group Financial Highlights [1] :
-- Revenue (including gains from litigation assets) up 44.8% to
GBP26.6 million (2021: GBP18.3 million)
o GBP1.7 million of gains from litigation assets (2021: GBP1.5
million)
-- EBITDA up 31.8% to GBP6.8 million (2021: GBP5.2 million)
o EBITDA margin is 25.6% (2021: 28.1%)
-- Profit before tax up 10.8% to GBP4.4 million (2021: GBP3.9 million)
-- Profit after tax up 13.3% to GBP3.5 million (2021: GBP3.1 million)
-- Earnings per share up 4.4% to 3.62 pence (2021: 3.47 pence)
-- Adjusted free cash flow generation in the period was GBP3.1 million (2021: GBP2.2 million)
-- Net debt of GBP17.3 million (2021: net debt of GBP9.8 million)
-- An interim dividend of 2 pence per share in respect of the
six months to 30 June 2022 will be paid on the 30 November 2022
Business Highlights:
RBG Legal Services Limited ("RBGLS") - Combination of the
Rosenblatt and Memery Crystal brands
-- Revenue (including gains from litigation assets) up 74.2% to
GBP22.3 million (2021: GBP12.8 million)
-- Legal services revenue up 74.9% to GBP20.7 million (2021: GBP11.8 million)
-- EBITDA up 62.6% to GBP6.8 million (2021: GBP4.2 million)
-- EBITDA margin is 30.7% (2021: 32.9%) with the decrease driven
by the changing revenue mix, as anticipated, following the
acquisition of Memery Crystal
-- Successfully realised litigation asset sales with proceeds
totalling GBP2.3 million (2021: GBP1.6 million)
-- Average revenue per fee earner of GBP363,000 (2021:
GBP375,000) reflects the diversification of the legal services
business into more non-contentious areas of law, following the
acquisition of Memery Crystal
-- Total lockup was 120 days (2021: 102 days) of which debtor
days were 51 (2021: 46) with the increase driven by the mix of the
business following the acquisition of Memery Crystal
-- As at 30 June 2022, RBGLS had invested in 13 litigation cases
with an associated contingent WIP of GBP12.5 million (2021: GBP5.8
million) and a total cash investment of GBP9.3 million (GBP4.9
million)
Convex Capital Limited ("Convex Capital")
-- M&A activity has been strong in 2022: As at 30 June 2022,
Convex had completed five deals resulting in revenue of GBP4.2
million (2021: GBP5.0 million)
-- Strong pipeline as at 8 September 2022: 24 active deals, of
which three are in late stages of the completion process
Litigation Finance
-- Since its launch in May 2020, LionFish Litigation Finance
Limited ("LionFish") has invested in 12 cases, with one case having
settled successfully in 2021
-- Current active cases have a total capital commitment of
GBP11.3 million of which GBP5.5 million has been deployed (as at 30
June 2022). Disposals since inception total GBP5.9 million
-- In February 2022, LionFish agreed a GBP20.0 million
litigation investment arrangement with a large alternative
investment firm which will provide the business with flexible
capital. They will invest 75% on any new deals and have
retrospectively invested GBP2.0 million in existing cases in
Rosenblatt and LionFish
-- This year, LionFish is expected to generate the majority of
its gains from potential settlements, the timings of which are not
within RBG's control and are thus difficult to predict
Operational and Strategic Highlights:
-- New RBGLS COO Jon Divers, appointed in February 2022, has
recently been confirmed in position and has full day-to-day
operational responsibility for the legal services division
-- Memery Crystal business transferred into one legal entity,
RBGLS, which completed 1 September 2021
-- The integration is almost complete with both businesses
migrating onto a single practice management system which is
expected to be complete in the fourth quarter of 2022
-- With this integration, management has successfully delivered
on a key part of the Group's strategy which is to acquire
high-value, strategically additive assets and improve their
performance
-- The combination of Memery Crystal with the Group's pioneering
law firm Rosenblatt means the Group now has one of London's premier
mid-tier law firms
-- The Group continues to pursue acquisition opportunities to
build and diversify the business to create long term shareholder
value, where financing allows, in line with its M&A
strategy
-- A number of acquisition opportunities have been identified
which adhere to the Group's highly selective criteria and the Group
continues to make progress on these
Outlook:
-- The Group has had another solid six months which is reflected
in improved revenue and profit growth
-- The Group's revenues and EBITDA have historically been second
half weighted on an organic (and standalone) basis. With consistent
demand for all the Group's services we are currently on track to
meet our expectations for the full year
Nicola Foulston, CEO, RBG Holdings plc, commented: " Overall,
the Group has had a solid first six months which is reflected in
our continued revenue and profit growth. Our diversified revenue
model has proved to be resilient in these uncertain times. We have
built a strong platform from which to deliver growth over the
coming years.
"Our legal services business integration is almost complete with
two trading brands; Rosenblatt for contentious law and Memery
Crystal for non-contentious law. We are building one of London's
premier mid-tier law firms providing quality advice to
entrepreneurs and high-net-worth individuals. The business is
receiving a high volume of new client instructions enabled by our
expertise and increased scale. All our legal services businesses
have seen consistent growth and steady flow of activity with our
Corporate, Real Estate, and Dispute Resolution practices having all
performed well.
"LionFish continues to grow and is funding eleven active cases.
By selling a percentage of the invested assets, it has generated
profit from day one of its inception as well as helping to de-risk
the Group's investment. The new litigation investment arrangement
will provide the business with flexible capital to support its
growth rather than the Group's balance sheet.
"Our M&A advisory business, Convex Capital, has performed
well in the first six months with five deals completing and remains
well-positioned to benefit in the current macro-economic
environment.
"With consistent demand for all Group services, we are on track
to meet our expectations for the full year. While acknowledging the
economic conditions continue to be volatile, we look forward to the
next six months with optimism and are excited about the long-term
prospects for the Group."
Concert Party
The Company set out specifics of a concert party in its
Admission Document, published 2 May 2018 ("Existing Concert
Party"). Following consultation with the Takeover Panel, the
Existing Concert Party has now been disbanded and two sub-concert
parties formed (the "Sub-Concert Parties"). The individuals within
each Sub-Concert Party, together with their interests in the issued
share capital of the Company as at 12 September 2022, are set out
below:
Interest Interest
(No. Ordinary (% of Ordinary
Shares) Shares)
--------------------- -------------- ---------------
Sub-Concert Party 1
Cascades Limited* 11,410,000 11.97%
NF SIPP* 105,264 0.11%
-------------- ---------------
Total 11,515,264 12.08%
Sub-Concert Party 2
Mr Ian Rosenblatt 16,911,214 17.74%
Ms Tania MacLeod 1,305,000 1.37%
-------------- ---------------
Total 18,216,214 19.11%
---------------------- -------------- ---------------
*Entities in which Nicola Foulston has a beneficial interest
Total Issued Share Capital 95,331,236
Enquiries:
RBG Holdings plc Via SEC Newgate
Nicola Foulston, CEO
Singer Capital Markets (Nomad and Broker) Tel: +44 (0)20 7496
Rick Thompson / Alex Bond / James Fischer 3000
(Corporate Finance)
Tom Salvesen (Corporate Broking)
SEC Newgate (F inancial Communications Tel: +44 (0)7540
) 106366
Robin Tozer/Max Richardson rbg@secnewgate.co.uk
About RBG Holdings plc
RBG Holdings plc is a professional services group, which
comprises the following divisions:
RBG Legal Services Limited ("RBGLS")
RBGLS is the Group's legal services division which combines the
businesses previously operated by Rosenblatt Limited and Memery
Crystal LLP.
Rosenblatt
Rosenblatt is one of the UK's pioneering legal practices and a
leader in dispute resolution. Rosenblatt provides a range of legal
services to its diversified client base, which includes companies,
banks, entrepreneurs and individuals. Complementing this is
Rosenblatt's increasingly international footprint, advising on
complex cross-jurisdictional disputes.
Memery Crystal
Memery Crystal offers legal services in a range of areas such as
corporate (including a market-leading corporate finance offering),
real estate, commercial, IP & technology (CIPT), banking &
finance, tax & wealth structuring and employment. Memery
Crystal is one of the leading legal practices in the UK to advise
the emerging cannabis sector on a wide range of business issues.
Memery Crystal offers a partner-led service to a broad range of
clients, from multinational companies, financial institutions and
owner-managed businesses to individual entrepreneurs.
LionFish Litigation Finance Limited ("LionFish")
The Group also provides litigation finance in selected cases
through a separate arm, LionFish Litigation Finance Limited.
LionFish finances litigation matters being run by other solicitors
in return for a significant return on the outcome of those cases.
As such, the Group has two types of litigation assets -
Rosenblatt's own client matters, and litigation matters run by
third-party solicitors. LionFish is positioned to be a unique,
alternative provider to the traditional litigation funders.
Convex Capital Limited ("Convex Capital")
Convex Capital is a specialist sell-side corporate finance
boutique based in Manchester. Convex Capital is entirely focused on
helping companies, particularly owner-managed and entrepreneurial
businesses, realise their value through sales to large corporates.
Convex Capital identifies and proactively targets firms that it
believes represent attractive acquisition opportunities.
Chief Executive's Statement
Overview
The Group continues to evolve into a broad, high-quality
professional services group with a litigation finance business
leveraging the Group's legal expertise and building a diverse
revenue base that removes dependence on any one business or fee
generator.
The integration of Memery Crystal is almost complete. With this
we have successfully delivered on a key part of the Group's
strategy which is to acquire high-value, strategically additive
assets and improve their performance. The combination of Memery
Crystal with the Group's pioneering law firm Rosenblatt means we
now have one of London's premier mid-tier law firms. Building on
both the Rosenblatt and Memery Crystal brands, our legal services
businesses provide quality advice to entrepreneurs and
high-net-worth individuals.
The strategy of the Group is clear. We want to leverage our core
professional services businesses, which account for 90% of our
revenue and profits and capitalise on those areas that offer the
highest returns for shareholders. Furthermore, we use the expertise
within the Group to maximise the potential returns by selectively
investing in contingent asset classes such as litigation. We
generate revenue through the sale of participation rights in these
assets, which also reduces the Group's risk.
Overall, the Group has performed well despite the macro-economic
challenges led by both of our professional services businesses,
which have recorded continuing revenue growth. The acquisition of
Memery Crystal has added more revenue diversification across the
fee earners, deeper profitability across the business, which will
grow as the integration improves our pricing structures, and
operating efficiencies through the combination of business support
functions.
As a result of the solid performance across the Group, our
revenue including gains on litigation assets for the period grew
44.8% to GBP26.6 million (2021: GBP18.3 million) with a gross
margin of 40.2%.
Our sell-side M&A advisory boutique, Convex Capital,
performed well in the first six months, completing five deals and
GBP4.2 million of revenue. Importantly, momentum in deal flow
remains strong in the current macro-economic environment, and our
pipeline continues to grow.
We continue to invest in litigation assets, with 13 live deals
across Rosenblatt and LionFish. LionFish has invested in 12 deals
since its inception in May 2020 with one completed. For the six
months ended 30 June 2022, the Group has delivered GBP2.5 million
in participation rights sales (2021: GBP2.4 million). There were
gains on litigation assets of GBP1.7 million (2021: GBP1.5
million).
Group EBITDA was up 31.8% to GBP6.8 million (2021: GBP5.2
million) at a margin of 25.6% (2021: 28.1%). The year-on-year
decline is due to a larger percentage of our business now skewed
toward legal services as a result of the Memery Crystal
acquisition, which in its nature is lower margin. As previously
disclosed, we are targeting an EBITDA margin of 35% or more, and
remain on-track to achieve a higher net margin by the year-end. The
Group's profit before tax was GBP4.4 million (2021: GBP3.9 million)
and profit after tax was GBP3.5 million (2021: GBP3.1 million).
Our net debt position as at 30 June 2022 was GBP17.3 million
(2021: GBP9.8 million), in line with management expectations. This
reflects the investment in Memery Crystal and the GBP10.0 million
term loan to fund the acquisition, which will be paid down over
five years. We have already paid back GBP2.0 million. In addition,
the Group has an additional GBP15.0 million revolving credit
facility. We have drawn GBP14.0 million of the revolving credit
facility as the Group's working capital requirements have doubled
since the acquisition of Memery Crystal. There is further capacity
to support the Group's growth. The Group has continued to trade
comfortably within its debt covenants.
RBG Legal Services Limited ("RBGLS")
Following the completion of the acquisition of Memery Crystal in
May 2021, the Group has almost concluded the integration of its two
law firms, Rosenblatt and Memery Crystal. The new legal services
corporate entity, RBG Legal Services Limited, will enable the Group
to realise the synergies of the transaction fully.
The two brands - Rosenblatt and Memery Crystal - are aligned to
contentious and non-contentious services to reflect their brand
position within the market. We are building one of London's premier
mid-tier law firms providing quality advice to entrepreneurs and
high net worth individuals. As at 30 June 2022, the combined
businesses had 182 people, including 126 fee earners, with
particular strength in Dispute Resolution, Corporate and Real
Estate.
The combined businesses are winning a broad range of new
instructions, including corporate transactions, employment advisory
work and financial restructuring mandates. The significantly
enhanced scale has enabled us to win these mandates as well as
improve the opportunity pipeline.
Due to the strong demand for legal services, revenue (and gains
on the sale of litigation assets) were up 74.2% to GBP22.3 million
(2021: GBP12.8 million). The consolidated business has helped
diversify the legal services business. We have a balanced business
across the key areas of Dispute Resolution, Corporate and Real
Estate. The Dispute Resolution division is responsible for 31.6%
(2021: 63.3%) of RBGLS's revenue, Real Estate represents 24.4%
(2021: 17.2%) and Corporate is 44.0% (2021: 19.5%) of the combined
business.
As well as the financial metrics, the other KPIs on which the
Company is focused have performed well. The average revenue per fee
earner was GBP363,000 (2021: GBP375,000). Our revenue per fee
earner is in the top 20 of all UK law firms [2] . The small
reduction reflects the diversification of the legal services
business into more non-contentious areas of law, following the
acquisition of Memery Crystal. This is less profitable work but
more consistent, which provides a natural hedge to the Group's
dispute resolution activities which, while more profitable, are
more contingent.
In line with its strategy, the Group has increased the amount of
contingent work it has taken on, enabled by the Group's bigger
balance sheet. This is managed within the risk profile of the
Group, where fee-paying work has to be prioritised. Contingent
litigation cases need to pass the Group's stringent legal and
commercial review process. Importantly, RBGLS can enter into more
Alternative Billing Arrangements (ABAs), which generate incremental
margins on a successful case outcome. No revenue is recognised by
the Company until the result of the case has occurred. Such revenue
is considered contingent.
For the six months ended 30 June 2022, RBGLS invested GBP1.7
million in external disbursements and counsel fees in relation to
its litigation investments. The amount of contingent work carried
out by the legal services business during the period was GBP1.2
million (2021: GBP1.9 million). As at 30 June 2022, RBGLS had
invested a total of GBP9.3 million in external disbursements and
counsel fees in 13 litigation investments, with a total contingent
WIP of GBP12.5 million.
We have confirmed the appointment of a Chief Operating Officer
for RBGLS, Jon Divers. He was initially appointed in February 2022,
and has recently been confirmed in position, Jon has full
day-to-day operational responsibility for the legal services
division. He brings over 20 years of senior management experience
at major companies including Mercedes Benz and Jungheinrich UK.
Convex Capital Limited ("Convex Capital")
Convex Capital, the specialist sell-side corporate finance
advisory boutique based in Manchester, was acquired by the Group in
September 2019. Convex Capital is entirely focused on helping
companies, particularly owner-managed and entrepreneurial
businesses, realise their value through sales to large corporates
or Private Equity. Convex Capital identifies and proactively
targets businesses that it believes represent attractive
acquisition opportunities. Convex has a motivated, dynamic team of
14 people, of which 13 are fee-earners.
The acquisition of Convex Capital was part of the Board's
strategy focusing on other high-margin professional service areas.
Convex Capital is an entrepreneurial, cash-generative business
operating across the UK and Europe and will provide the Group with
further funds for reinvestment into other high-margin areas.
As at 30 June 2022, Convex Capital had completed five deals and
delivered GBP4.2 million of revenue. The strength of its pipeline
and the agile nature of the business has enabled Convex Capital to
maintain deals through the first half. As at 8 September 2022,
Convex Capital had 24 active deals, of which three are in late
stages of the completion process.
The business is actively building the target pipeline with a
data-driven approach to generate deals rather than the traditional
passive model where the target company waits to be approached and
then appoints a corporate finance partner. In addition, Convex
Capital's success is proving to be an active producer of new leads.
Completed deals lead to recommendations (which still go through the
active data driven qualification). It is the Board's expectation
that the current macro-economic environment will support the
on-going fundamentals that drive M&A.
LionFish Litigation Finance Limited ("LionFish")
Since our IPO in 2018, our strategy has been to develop our own
litigation finance business. The Group initially invested only in
Rosenblatt's own client matters, but on 1 May 2020 the Group
launched LionFish. LionFish finances litigation matters being run
by other solicitors in return for a significant return on the
outcome of those cases. As such, the Group now has two types of
litigation investments - RBGLS's own client matters, and litigation
matters run by third-party solicitors.
Both types of litigation investments not only have significant
return potential, but they represent an opportunity to extract
further value from the Group's legal and commercial expertise and
diversify its sources of income.
Rosenblatt has a proven record of accomplishment in evaluating
the legal merits of a litigation matter to optimise its profit. By
leveraging this ability, alongside the origination capabilities of
LionFish, and the Group's commercial acumen, the Group can identify
third-party litigation cases and make investments with strong
risk-adjusted returns.
This approach creates further revenue potential from sales in
participation rights from litigation finance business beyond
Rosenblatt's own client matters. For the 6 months ended 30 June
2022, LionFish has delivered GBP0.2 million in participation rights
sales (2021: GBP0.8 million). There were gains on litigation assets
of GBP0.1 million (2021: GBP0.5 million).
The Company believes it is important to reiterate the
conservative approach we adopt towards the handling of, and
accounting for, our litigation investments. We judge the fair value
of investments to be equal to, or as close to, cost plus disposal
proceeds, which means fair values do not materially exceed net cash
disbursed, as well as having rules limiting the Group's cash and
revenue exposure.
Based on the Group's strategy to target a return of two times
the money invested, Lionfish is actively invested in 11 cases with
a total capital commitment of GBP11.3 million of which GBP5.5
million has been deployed as at 30 June 2022 with GBP5.8 million
committed over the life of the cases, which is circa three years.
This year, LionFish is expected to generate the majority of its
gains from potential settlements, the timings of which are not
within RBG's control and are thus difficult to predict.
In February 2022, LionFish agreed a GBP20.0 million litigation
investment arrangement with a large alternative investment firm
which will provide the business with flexible capital. They will
invest 75% on any new deals and have retrospectively invested
GBP2.0 million in existing cases in Rosenblatt and LionFish.
M&A
We continue to assess M&A opportunities to build and
diversify the business to create long term shareholder value, where
financing allows. Our acquisition focus remains on high-margin,
specialist businesses, which can also create opportunities for
cross-referrals but only at the right value and with the right deal
structure. The Group remains disciplined in its approach to M&A
but continues to actively review potential opportunities according
to its selective criteria.
Dividend
The Company's balance sheet remains solid, and the Board is
committed to a progressive dividend policy. In line with that
policy, the Board normally expects to pay up to 60 per cent of
distributable retained earnings from the core business in any
financial year by way of dividend, subject to cash
requirements.
An interim dividend of 2 pence per share in respect of the six
months to 30 June 2022 will be paid on 30 November 2022. The
dividend record date is 23 September 2022, and the shares will be
marked ex-dividend on 22 September 2022. The total dividend
relating to the year ending 31 December 2021 was 5 pence per
share.
Change of Auditor
Following a competitive tender process, the Group has appointed
Moore Kingston Smith LLP ("MKS") as its new external auditor. MKS
will conduct the audit of the Group's financial statements for the
financial year ended 31 December 2022. Any proposal to re-appoint
MKS in respect of the financial year beginning 1 January 2023 will
be subject to shareholder approval at the next AGM.
BDO LLP has resigned by notice to the Group under section 516 of
the Companies Act 2006 and has confirmed that there are no matters
connected with their resignation that they consider need to be
brought to the attention of the members or creditors of the Group
for the purposes of section 519 of the Companies Act 2006.
Outlook
The Group has delivered another solid performance over the first
half of the year which is reflected in improved revenue and profit
growth. With consistent demand for all the Group's services, we
remain on track to meet our expectations for the full year the
Group's revenues and EBITDA have historically been second half
weighted. While acknowledging that economic conditions continue to
be volatile, we look forward to the coming months with optimism
about the long-term prospects for the Group.
Nicola Foulston
Group Chief Executive Officer
12 September 2022
Chief Financial Officer's Review
Financial Review
During the first half of 2022 we have continued to build on our
strong track record of delivering a profitable business. We are
growing our revenues and EBITDA from diverse sources, de-risking
each individual fee earner. The Group is well positioned to manage
the uncertain economic environment through a strategy of business
and services diversification, carefully selected acquisitions that
are well managed and delivering increasing profits.
Key Performance Indicators (KPIs)
-- Group revenue (including gains from litigation assets):
GBP26.6 million (2021: GBP18.3 million)
-- EBITDA: GBP6.8 million, representing 25.6% of revenue (2021: GBP5.2 million, 28.1%)
-- Profit before tax: GBP4.4 million, representing 16.4% of
revenue (2021: GBP3.9 million, 21.5% of revenue)
-- Net debt of GBP17.3 million (2021: net debt of GBP9.8
million) reflecting the GBP10.0 million acquisition term facility,
of which GBP2.0 million has been repaid. The Group also has a GBP15
million revolving credit facility, GBP1 million of which is
available to be drawn down.
-- Total lock up: 120 days (of which, debtor days were 52) (2021: 102 days, debtor days 46).
-- RBG Legal Services revenue per fee earner: GBP363,000 (2021: GBP375,000)
-- RBGLS Utilisation/Realisation for the 6 months to June 2022
was 75%/88% (2021: Rosenblatt 86%/93% and Memery Crystal
102%/84%)
Revenue and Gains on Litigation Assets
Reported Group revenue and gains on litigation assets for the
period is GBP26.6 million compared to GBP18.3 million in 2021,
representing a 44.8% increase.
Staff costs
Total staff costs for the first half of 2022 were GBP15.9
million (2021: GBP10.6 million), which includes GBP2.1m for Convex
(GBP0.7m in relation to the bonus scheme on completed deals),
GBP0.3 million for LionFish and GBP12.3m for RBGLS. The average
number of employees was 216 (2021: 121).
Overhead costs
During the half year to 30 June 2022, the Group incurred
overheads of GBP19.8 million (before depreciation and amortisation)
(2021: GBP13.2 million). Staff costs were GBP15.9 million (2021:
GBP10.6 million), of which contractors' costs were GBP1.7 million
(2021: GBP1.4 million).
Other operating costs were GBP3.9 million (2021: GBP2.6 million,
of which the cost of the acquisition represented GBP0.5 million,
and incremental Memery Crystal operating costs were GBP0.5
million).
EBITDA
EBITDA for the half year to 30 June 2022 was GBP6.8 million
representing 25.6% of revenue including gains from litigation
assets (2021: GBP5.2 million, 28.1%).
Profit Before Tax
The profit before tax for the period was GBP4.4 million
representing 16.4% of revenue including gains from litigation
assets (2021: GBP3.9 million, 21.5%).
Earnings Per Share (EPS)
The weighted average number of shares in 2021 was 95.3 million
which gives a basic earnings per share (Basic EPS) for the period
of 3.62p (2021: 3.47p).
Balance Sheet
2022 2021
GBPm GBPm
restated
Goodwill, intangible and tangible assets 89.0 84.1
------- ----------
Current Assets 17.5 17.1
------- ----------
Current Liabilities (11.7) (8.1)
------- ----------
94.8 93.1
------- ----------
Net debt (17.3) (9.8)
------- ----------
Non-Current Liabilities (15.6) (17.6)
------- ----------
Deferred consideration - (7.2)
------- ----------
Net assets 61.9 58.5
------- ----------
The Group's net assets as at 30 June 2022 increased by GBP3.4
million on the prior year.
Goodwill, Tangible and Intangible Assets
Included within tangible assets is GBP15.4 million which relates
to IFRS 16 right of use assets for the Group's leases. Within total
intangible assets of GBP55.4 million, GBP51.9 million relates to
goodwill, GBP3.0 million relates to brand and GBP0.2 million
relates to customer contracts. The Company has considered the
amounts at which goodwill and intangible assets are stated on the
basis of forecast future cash flows and have concluded that these
assets have not been materially impaired.
Working Capital
Management of lock up has continued to be a key focus of the
Group over the period. Convex and LionFish are invoiced on a cash
basis, but our legal services business lock up days is a measure of
the length of time it takes to convert work done into cash. It is
calculated as the combined debtor and WIP days for the Group. This
is a key focus for management and the Board as it drives the cash
generation necessary to support the growth strategy of the Group.
Lock up days at 30 June 2022 were 120 compared to 102 for the
previous year, with debtor days being 51 (2021: 46) with the
increase driven by the mix of the business following the
acquisition of Memery Crystal.
Net Debt
We have a revolving credit facility of GBP15 million and an
acquisition term loan of GBP10 million repayable over 5 years. Our
net debt position is GBP17.3 million at the end of the period
(2021: GBP9.8 million), includes GBP8 million of the term loan used
to acquire Memery Crystal.
Cash Conversion
2022 2021
GBPm GBPm
Cash flows from operating activities 7.6 5.2
------ ------
Movements in working capital 1.1 (1.3)
------ ------
Increase in litigation assets (4.9) (1.4)
------ ------
Net cash generated from operations 3.8 2.5
------ ------
Interest (0.6) (0.2)
------ ------
Capital expenditure (0.1) (0.1)
------ ------
Free cash flow 3.1 2.2
------ ------
Underlying profit after tax 3.5 3.1
------ ------
Cash conversion 90% 71%
------ ------
The cash conversion percentage measures the Group's conversion
of its underlying profit after tax into free cash flows. Movements
in working capital have been adjusted for deferred consideration
payments made to Memery Crystal in the period. Net cash generated
from operations includes GBP4.9 million (2021: GBP1.4 million) of
net litigation investments. Cash conversion of 90% (2021: 71%) for
the half year shows an increase from previous periods as a result
of the stronger six-month trading period. It is a further focus of
the business to drive to our target of 75 %, which has been
exceeded by our strong focus on cash conversion.
Net Debt / Net Cash and cash equivalents
Net debt at the end of the period was GBP17.3 million (2021:
GBP9.8 million net debt). The net decrease in cash and cash
equivalents of GBP5.4 million for the period included GBP3.2
million of inflows generated from operating activities (net of
GBP4.9 million of further investments in litigation assets).
Investing activities gave rise to an outflow of GBP2.4 million, of
which GBP2.2 million related to the deferred consideration payment
made in relation to the acquisition of Memery Crystal. Outflows
from financing activities of GBP0.7 million is predominantly made
up of GBP3.0 million net proceeds of revolving credit facility less
GBP2.8 million in dividends.
Summary
We are pleased with the profitability and performance of the
Group during the first half of the year. The business has responded
well to the challenges of the uncertain economy. However, it is
important to acknowledge the continued impact and it will be a
significant challenge moving forward.
Robert Parker
Chief Financial Officer
12 September 2022
Unaudited consolidated statement of comprehensive income
For the period ended 30 June 2022
Unaudited Unaudited Audited
Note 1 January 1 January 1 January
to to to
30 June 30 June 31 December
2022 2021 2021
GBP GBP GBP
Revenue 4 24,890,833 16,852,571 41,985,338
Gains on litigation assets 4 1,678,569 1,494,425 5,207,524
Personnel costs 5 (15,893,713) (10,628,767) (27,353,777)
Depreciation and amortisation expense (1,810,406) (975,334) (2,940,078)
Other expenses (3,884,264) (2,565,144) (6,915,433)
Profit from operations 4,981,019 4,177,751 9,983,574
EBITDA 6,791,425 5,153,085 12,923,652
Non-underlying items
Cost of acquiring subsidiary - 524,905 863,435
Adjusted EBITDA 6,791,425 5,677,990 13,787,087
--------------------------------------- ----- ------------- ------------- -------------
Finance expense (619,598) (249,259) (801,659)
Finance income 8,666 16,178 22,676
Share of post-tax profits of equity
accounted associates - - 21,643
Profit before tax 4,370,087 3,944,670 9,226,234
Tax expense (911,274) (891,448) (1,968,821)
Profit from continuing operations 3,458,813 3,053,222 7,257,413
------------- ------------- -------------
(Loss) on discontinued operations,
net of tax 6 (21,643) - -
Profit and total comprehensive
income 3,437,170 3,053,222 7,257,413
------------- ------------- -------------
Total profit and comprehensive
income attributable to:
Owners of the parent 3,454,590 3,034,450 6,972,873
Non-controlling interest (17,420) 18,772 284,540
3,437,170 3,053,222 7,257,413
------------- ------------- -------------
Earnings per share attributable
to the ordinary equity holders
of the parent
Profit
Basic and diluted (pence) 3.62 3.47 7.63
------------- ------------- -------------
Unaudited consolidated statement of financial position
As at 30 June 2022
Company registered number: 11189598 Unaudited Unaudited Audited
Note 30 June 30 June 31 December
2022 2021 2021
restated
GBP GBP GBP
Assets
Current assets
Trade and other receivables 17,541,249 17,126,750 18,571,628
Cash and cash equivalents 4,842,012 10,194,188 4,756,143
------------ ------------ ------------
22,383,261 27,320,938 23,327,771
Non-current assets
Property, plant and equipment 9 2,451,377 2,831,745 2,589,390
Right-of-use assets 10 15,369,432 17,035,042 15,913,008
Intangible assets 11 55,440,526 56,128,413 55,859,230
Litigation assets 12 15,696,605 7,981,999 11,571,052
Investments in associates 6 - 80,000 101,643
------------ ------------ ------------
88,957,940 84,057,199 86,034,323
Total assets 111,341,201 111,378,137 109,362,094
============ ============ ============
Liabilities
Current liabilities
Trade and other payables 7,921,732 11,363,867 10,153,425
Leases 10 1,891,890 2,521,314 2,150,440
Current tax liabilities 1,572,876 1,235,177 1,490,495
Provisions 340,061 142,621 314,291
Loans and borrowings 13 2,182,163 2,000,000 2,129,592
------------ ------------ ------------
13,908,722 17,262,979 16,238,243
Non-current liabilities
Deferred tax liability 1,078,987 803,223 851,662
Trade and other payables 250,000 2,090,000 750,000
Leases 10 14,175,692 14,713,596 13,698,661
Loans and borrowings 13 20,000,000 18,000,000 17,000,000
35,504,679 35,606,819 32,300,323
Total liabilities 49,413,401 52,869,798 48,538,566
============ ============ ============
NET ASSETS 61,927,800 58,508,339 60,823,528
============ ============ ============
Issued capital and reserves attributable
to owners of the parent
Share capital 190,662 190,662 190,662
Share premium reserve 49,232,606 49,232,606 49,232,606
Retained earnings 12,235,057 9,063,944 11,113,365
------------ ------------ ------------
61,658,325 58,487,212 60,536,633
Non-controlling interest 269,475 21,127 286,895
TOTAL EQUITY 61,927,800 58,508,339 60,823,528
============ ============ ============
The interim statements were approved by the Board of Directors
and authorised for issue on 12 September 2022.
Unaudited consolidated statement of cash flows
For the period ended 30 June 2022
Unaudited Unaudited Audited
Note 30 June 30 June 31 December
2022 2021 2021
GBP GBP GBP
Cash flows from operating activities
Profit for the year before tax 4,370,087 3,944,670 9,226,234
Adjustments for:
Depreciation of property, plant
and equipment 9 286,851 199,196 525,606
Amortisation of right-of-use assets 10 1,104,851 589,380 1,781,058
Amortisation of intangible fixed
assets 11 418,704 186,757 633,414
Fair value movement of litigation
assets net of realisations 811,381 - (318,814)
Finance income (8,666) (16,178) (22,676)
Finance expense 619,598 249,259 801,659
Share of post-tax profits of equity
accounted associates - (21,643)
------------ ------------- -------------
7,602,806 5,153,084 12,604,838
Decrease/(increase) in trade and
other receivables 1,110,376 (872,208) (2,220,725)
Increase/(decrease) in trade and
other payables 16,626 (442,862) 1,428,920
(Increase) in litigation assets 12 (4,936,934) (1,412,889) (4,683,128)
Increase in provisions 25,770 25,746 47,416
Cash generated from operations 3,818,644 2,450,871 7,177,321
Tax paid (601,566) (276,765) (1,077,855)
Net cash flows from operating activities 3,217,078 2,174,106 6,099,466
============ ============= =============
Investing activities
Purchase of property, plant and
equipment 9 (148,838) (46,125) (130,179)
Acquisition of associate - (80,000) (80,000)
Acquisition of subsidiary, net of
cash - (12,000,000) (12,000,000)
Payment of deferred consideration (2,248,319) - (4,518,585)
Dividend paid to non-controlling
interest - - (200,000)
Interest received 8,666 16,178 22,676
Net cash used in investing activities (2,388,491) (12,109,947) (16,906,088)
============ ============= =============
Financing activities
Dividends paid to holders of the
parent (2,832,898) (2,741,412) (4,430,414)
Proceeds from loans and borrowings 13 4,000,000 21,000,000 20,000,000
Repayment of loans and borrowings 13 (1,000,000) (11,000,000) (11,000,000)
Repayments of lease liabilities 10 (342,794) (401,485) (1,856,938)
Interest paid on loans and borrowings (303,126) (127,173) (279,497)
Interest paid on lease liabilities 10 (263,900) (122,085) (392,570)
Net cash from financing activities (742,718) 6,607,845 2,040,581
============ ============= =============
Net increase/(decrease) in cash
and cash equivalents 85,869 (3,327,996) (8,766,041)
Cash and cash equivalents at beginning
of year 4,756,143 13,522,184 13,522,184
Cash and cash equivalents at end
of year 4,842,012 10,194,188 4,756,143
============ ============= =============
Consolidated statement of changes in equity
For the period ended 30 June 2022
Share Capital Share Premium Retained
Earnings
GBP GBP GBP
Balance at 1 January 2021 171,184 37,565,129 9,070,906
Comprehensive profit for the period
Profit for the period - - 3,034,450
------------------- ---------------- ------------
Total comprehensive profit for
the period - - 3,034,450
Contributions by and distributions
to owners
Dividends - - (2,541,412)
Issue of share capital 19,478 11,667,477 -
Grant of put option over shares
of associate - - (500,000)
Total contributions by and distributions
to owners 19,478 11,667,477 (3,041,412)
Balance at 30 June 2021 (unaudited
and restated) 190,662 49,232,606 9,063,944
=================== ================ ============
Total attributable Non-controlling Total
to equity interest equity
holders
of parent
GBP GBP GBP
Balance at 1 January 2021 46,807,219 202,355 47,009,574
Comprehensive profit for the
period
Profit for the period 3,034,450 18,772 3,053,222
------------------- ---------------- ------------
Total comprehensive profit for
the period 3,034,450 18,772 3,053,222
Contributions by and distributions
to owners
Dividends (2,541,412) (200,000) (2,741,412)
Issue of share capital 11,686,955 - 11,686,955
Grant of put option over shares
of associate (500,000) - (500,000)
Total contributions by and distributions
to owners 8,645,543 (200,000) 8,445,543
Balance at 30 June 2021 (unaudited
and restated) 58,487,212 21,127 58,508,339
=================== ================ ============
Consolidated statement of changes in equity
For the period ended 30 June 2022 (continued)
Share Capital Share Premium Retained
Earnings
GBP GBP GBP
Balance at 1 July 2021 190,662 49,232,606 9,063,944
Comprehensive profit for the period
Profit for the period - - 3,938,423
-------------- -------------- ------------
Total comprehensive profit for
the period - - 3,938,423
Contributions by and distributions
to owners
Dividends - - (1,889,002)
Total contributions by and distributions
to owners - - (1,889,002)
Balance at 31 December 2021 (audited) 190,662 49,232,606 11,113,365
============== ============== ============
Total attributable Non-controlling Total
to equity Interest equity
holders of
parent
GBP GBP GBP
Balance at 1 July 2021 58,487,212 21,127 58,508,339
Comprehensive profit for the
period
Profit for the period 3,938,423 265,768 4,204,191
------------------- ---------------- ------------
Total comprehensive profit for
the period 3,938,423 265,768 4,204,191
Contributions by and distributions
to owners
Dividends (1,889,002) - (1,889,002)
Total contributions by and distributions
to owners (1,889,002) - (1,889,002)
Balance at 31 December 2021
(audited) 60,536,633 286,895 60,823,528
=================== ================ ============
Consolidated statement of changes in equity
For the period ended 30 June 2022 (continued)
Share Capital Share Premium Retained
Earnings
GBP GBP GBP
Balance at 1 January 2022 190,662 49,232,606 11,113,365
Comprehensive profit for the period
Profit for the period - - 3,454,590
-------------- -------------- ------------
Total comprehensive profit for
the period - - 3,454,590
Contributions by and distributions
to owners
Dividends - - (2,832,898)
Release grant of put option over
shares of associate - - 500,000
Total contributions by and distributions
to owners - - (2,332,898)
Balance at 30 June 2022 190,662 49,232,606 12,235,057
============== ============== ============
Total attributable Non-controlling Total
to equity interest equity
holders
of parent
GBP GBP GBP
Balance at 1 January 2022 60,536,633 286,895 60,823,528
Comprehensive profit for the
period
Profit for the period 3,454,590 (17,420) 3,437,170
------------------- ---------------- ------------
Total comprehensive profit for
the period 3,454,590 (17,420) 3,437,170
Contributions by and distributions
to owners
Dividends (2,832,898) - (2,832,898)
Release grant of put option over
shares of associate 500,000 - 500,000
Total contributions by and distributions
to owners (2,332,898) - (2,332,898)
Balance at 30 June 2022 61,658,325 269,475 61,927,800
=================== ================ ============
The attached notes form part of these financial statements.
Unaudited notes to the financial statements for the period ended
30 June 2022
1. Basis of preparation
RBG Holdings plc is a public limited company, incorporated in
the United Kingdom. The principal activity of the Group is the
provision of legal and professional services, including management
and financing of litigation projects.
Status of Interim Report
The Interim Report covers the six months ended 30 June 2022,
with comparative figures for the six months ended 30 June 2021 and
the year ended 31 December 2021 and was approved by the Board of
Directors on 12 September 2022. The Interim Report is
unaudited.
The interim condensed set of consolidated financial statements
in the Interim Report are not statutory accounts as defined by
Section 434 of the Companies Act 2006.
The statutory accounts for the year ended 31 December 2021 have
been reported on by the Group's auditors and delivered to the
Registrar of Companies. The audit report thereon was unqualified,
did not include references to matters to which the auditors drew
attention by way of emphasis without qualifying the report, and did
not contain a statement under Section 498 of the Companies Act
2006.
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 UK 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
judgement in applying the Group's accounting policies. The areas
where significant judgements 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 at
least twelve months from the date of approval of the financial
statements.
Significant accounting policies
2.
Revenue
Revenue comprises the fair value of consideration receivable in
respect of services provided during the period, inclusive of
recoverable expenses incurred but excluding value added tax.
Legal and Other Professional services revenues
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 considered recoverable.
Where revenue is subject to contingent fee arrangements,
including where services are provided under Damages Based
Agreements (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.
Bills raised are payable on delivery and until paid form part of
trade receivables. The Group has taken advantage of the practical
exemption in IFRS 15 not to account for significant financing
components where the Group expects the time difference between
receiving consideration and the provision of the service to a
client will be one year or less. Where revenue has not been billed
at the balance sheet date, it is included as contract assets and
forms part of trade and other receivables.
Other professional services revenues
Other professional services revenue is contingent on the
completion of a deal and is recognised when the deal has completed.
Bills raised are payable on deal completion and are generally paid
at that time.
Basis of consolidation
Where the company has control over an investee, it is classified
as a subsidiary. The company controls an investee if all three of
the following elements are present: power over the investee,
exposure to variable returns from the investee, and the ability of
the investor to use its power to affect those variable returns.
Control is reassessed whenever facts and circumstances indicate
that there may be a change in any of these elements of control.
The consolidated financial statements present the results of the
company and its subsidiaries ("the Group") as if they formed a
single entity. Intercompany transactions and balances between group
companies are therefore eliminated in full.
The consolidated financial statements incorporate the results of
business combinations using the acquisition method. In the
statement of financial position, the acquiree's identifiable
assets, liabilities and contingent liabilities are initially
recognised at their fair values at the acquisition date. The
results of acquired operations are included in the consolidated
statement of comprehensive income from the date on which control is
obtained. They are deconsolidated from the date on which control
ceases.
Non-Controlling interests
The total comprehensive income of non-wholly owned subsidiaries
is attributed to owners of the parent and to the non-controlling
interests in proportion to their relative ownership interests.
Where the Company has agreed a put option over the shares of a
subsidiary held by a non-controlling interest, the liability for
the estimated exercise value of the put option is recognised at
fair value in the financial statements of the Company and is
recognised at present value in the financial statements of the
Group. Movements in the estimated liability after initial
recognition are recognised in the income statement.
Goodwill
Goodwill represents the excess of the cost of a business
combination over the Group's interest in the fair value of
identifiable assets, liabilities and contingent liabilities
acquired.
Cost comprises the fair value of assets given, liabilities
assumed, and equity instruments issued, plus the amount of any
non-controlling interests in the acquiree plus, if the business
combination is achieved in stages, the fair value of the existing
equity interest in the acquiree. Contingent consideration is
included in cost at its acquisition date fair value and in the case
of contingent consideration classified as a financial liability,
remeasured subsequently through profit or loss. Direct costs of
acquisition are recognised immediately as an expense.
Goodwill is capitalised as an intangible asset with any
impairment in carrying value being charged to the consolidated
statement of comprehensive income. Where the fair value of
identifiable assets, liabilities and contingent liabilities exceed
the fair value of consideration paid; the excess is credited in
full to the consolidated statement of comprehensive income on the
acquisition date.
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's accounting policy for each category
is as follows:
Fair value through profit or loss
Litigation assets relate to the provision of funding to
litigation matters in return for a participation share in the
settlement of that case. Investments are initially measured at the
sum invested and are subsequently held at fair value through the
profit or loss.
When the Group disposes of a proportion of its participation
share in the settlement of the case to a third party under an
uninsured ("naked") contract, where the percentage of the
litigation asset being disposed of and the percentage return remain
proportionate irrespective of the final outcome of the litigation,
the difference between the disposal proceeds and the cost of
investment disposed gives rise to a profit on disposal which is
recognised through the profit and loss when the sale is agreed.
These sales are non-recourse and, if the case is successful, the
relevant % of the settlement received is paid to the third party.
For uninsured cases, the Group uses the value of third-party
disposals to calculate the gross value of the proportion of the
investment retained by the Group and deducts the expected cost of
investment to be borne by the Group to give the fair value of the
Group's investment. The proportion of each investment retained is
calculated using the expected total return on the investment, the
expected return payable to the onward investor and the expected
total return retained by the Group.
For insured cases, when the Group disposes of a proportion of
its participation share in the settlement of the case to a third
party, where the third-party return is calculated as a fixed
percentage daily rate irrespective of the settlement value of a
successful litigation outcome, the derecognition requirements under
IFRS 9 para 3.2.2 are not met and no sale or profit on disposal
arise. The Group retains the full litigation asset and the proceeds
of disposal under the third-party contract are included as
litigation liabilities. The fair value of the litigation asset is
calculated using the expected total return retained by the Group in
the different possible outcomes factored by Management's
expectation of the likelihood of each outcome.
Amortised cost
These assets arise principally from the provision of goods and
services to customers (e.g., trade receivables), but also
incorporate other types of financial assets where the objective is
to hold these assets in order to collect contractual cash flows and
the contractual cash flows are solely payments of principal and
interest. 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.
Impairment provisions for current and non-current trade
receivables are recognised based on the simplified approach within
IFRS 9 using a provision matrix in the determination of the
lifetime expected credit losses.
During this process the probability of the non-payment of the
trade receivables is assessed. This probability is then multiplied
by the amount of the expected loss arising from default to
determine the lifetime expected credit loss for the trade
receivables. For trade receivables, which are reported net, such
provisions are recorded in a separate provision account with the
loss being recognised in profit or loss. On confirmation that the
trade receivable will not be collectable, the gross carrying value
of the asset is written off against the associated provision.
From time to time, the Group elects to renegotiate the terms of
trade receivables due from customers with which it has previously
had a good trading history. Such renegotiations will lead to
changes in the timing of payments rather than changes to the
amounts owed and, in consequence, the new expected cash flows are
discounted at the original effective interest rate and any
resulting difference to the carrying value is recognised in the
consolidated statement of comprehensive income (operating
profit).
Impairment provisions for receivables from related parties and
loans to related parties, including those from subsidiary
companies, are recognised based on a forward looking expected
credit loss model. The methodology used to determine the amount of
the provision is based on whether there has been a significant
increase in credit risk since initial recognition of the financial
asset. This annual assessment considers forward-looking information
on the general economic and specific market conditions together
with a review of the operating performance and cash flow generation
of the entity relative to that at initial recognition. For those
where the credit risk has not increased significantly since initial
recognition of the financial asset, twelve month expected credit
losses along with gross interest income are recognised. For those
for which credit risk has increased significantly, lifetime
expected credit losses along with the gross interest income are
recognised. For those that are determined to be credit impaired,
lifetime expected credit losses along with interest income on a net
basis are recognised.
The Group's financial assets measured at amortised cost comprise
trade and other receivables and cash and cash equivalents in the
consolidated statement of financial position. Cash and cash
equivalents includes cash in hand, deposits held at call with
banks, and other short term highly liquid investments with original
maturities of three months or less.
Financial liabilities
The Group classifies its financial liabilities depending on the
purpose for which the liability was acquired.
Other financial liabilitie s
All the Group's financial liabilities are classified as other
financial liabilities, which include the following items:
Bank borrowings are initially recognised at fair value net of
any transaction costs directly attributable to the issue of the
instrument. Such interest-bearing liabilities are subsequently
measured at amortised cost using the effective interest rate
method, which ensures that any interest expense over the period to
repayment is at a constant rate on the balance of the liability
carried in the consolidated statement of financial position. For
the purposes of each financial liability, interest expense includes
initial transaction costs and any premium payable on redemption, as
well as any interest or coupon payable while the liability is
outstanding.
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.
Externally acquired intangible assets
Externally acquired intangible assets are initially recognised
at cost and subsequently amortised over their useful economic
lives.
Intangible assets are recognised on business combinations if
they are separable from the acquired entity or give rise to other
contractual/legal rights. The amounts ascribed to such intangibles
are arrived at by using appropriate valuation techniques.
The significant intangibles recognised by the Group, their
useful economic lives and the methods used for amortisation and to
determine the cost of intangibles acquired in a business
combination are as follows:
Intangible Useful economic Remaining Amortisation Valuation method
asset life useful economic method
life
Brand 20 years 16-19 years Straight line Estimated discounted
cash flow
Customer contracts 1-2 years 1-2 years In line with Estimated discounted
contract revenues cash flow
Restrictive 2 years 1-2 years Straight line Cost
covenant extension
Dividends
Dividends are recognised when they become legally payable. In
the case of interim dividends to equity shareholders, this is when
declared by the directors. 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.
Judgements, estimates and assumptions
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.
Revenue recognition
Where the group performs work that is chargeable based on hours
worked at agreed rates, assessment must be made of the
recoverability of the unbilled time at the period end. This is on a
matter by matter basis, with reference to historic and post
year-end recoveries. Different views on recoverability would give
rise to a different value being determined for revenue and a
different carrying value for unbilled revenue.
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 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. Factors the Group considers when determining
whether revenue should be constrained are whether:-
a) The amount of consideration receivable is highly susceptible
to factors outside the Group's influence
b) The uncertainty is not expected to be resolved for a long time
c) The Group has limited previous experience (or limited other evidence) with similar contracts
d) 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.
Where the group enters into Damages Based Agreements ("DBAs")
that include both the provision of services and the provision of
litigation finance, the Group must apportion the total expected
settlement between that arising as conditional revenue for services
and that arising as a return on participation. This requires
estimation of the total amount of time cost and disbursements that
will be incurred on a matter and the expected settlement value; the
allocation of the DBA to revenue is made with reference to standard
returns on contingent fee work. Different views will impact the
level of unrecognised contingent revenue and also the recognised
financial asset relating to the DBA participation.
Where non-contingent fees as well as contingent revenue are
earned on DBAs, the group must make a judgement as to whether
non-contingent amounts represent revenue or a reduction in funding,
with reference to the terms of the agreement and timing and
substance of time worked and payments made. Where non-contingent
revenue arises, the Group must match it against the services to
which it relates. This requires Management to estimate work done as
a proportion of total expected work to which the fee relates.
Different views could impact the level of non-contingent revenue
recognised.
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.
Litigation assets and fair value
LionFish
For each of LionFish's uninsured ("naked") investments, a third
party disposal has been made. To calculate the profit on disposal,
the Group allocates the corresponding proportion of the total
expected cost of the investment against the proportion of the
investment sold. The total expected cost of each investment
involves an assumption regarding the total expected drawdown on
that investment, which may be less than the total value of funds
committed. To calculate the proportion of each investment retained,
the Group has estimated the expected total return on the investment
and the expected return payable to the onward investor. As returns
are dependent on the timing of the settlement, these estimates are
driven by assumptions over the most likely timing of settlement.
The sales prices of the part disposal are used to value the gross
value of the proportion of the litigation asset retained by the
Group and the estimated remaining capital to invest is deducted to
give the fair value of the Group's investment. The estimates used
in these calculations are based on semi-annual individual case by
case reviews by Management.
The fair value of LionFish's insured investments is calculated
using the expected total return retained by the Group in the
different possible outcomes factored by Management's expectation of
the likelihood of each outcome. As returns are dependent on the
timing of the settlement, these estimates are driven by assumptions
over the most likely timing of settlement. The total expected cost
of each investment involves an assumption regarding the total
expected drawdown on that investment, which may be less than the
total value of funds committed. The expected total returns retained
by the Group in the different possible outcomes are then factored
by Management's expectation of the likelihood of each outcome. The
estimates used in these calculations, are based on semi-annual
individual case by case reviews by Management.
The recorded profits on disposal and carrying values are
relatively insensitive to assumptions made, with the exception that
matters for which capital invested is insured are sensitive to the
estimated settlement date and the success likelihood factor
applied. In general, the later the anticipated settlement date, the
greater the carrying value of the investment. Management has
exercised caution in its assessment of settlement dates. Management
have used historic success rates on contingent contentious cases to
factor the returns for the different possible outcomes.
Rosenblatt
Unlike LionFish's investments, the total return on Rosenblatt's
litigation assets is a proportion of damages awarded, rather than
being dependent on timing of settlement. As this figure is
potentially large and uncertain, and has a strong impact on fair
value calculations, where possible the Group avoids using it as an
input to its fair value calculations.
Where a recent disposal of an interest in a damage-based
agreement has been made, the sales price of the disposal has been
used to value the gross value of the interest in damages retained
by the Group. The sales price is adjusted downwards for the cost of
the Group's ongoing funding of the matter, which is not borne by
the onward investor. This involves an estimate of the likely amount
and timing of disbursements over the course of the matter, the
minimum being funds already disbursed at the balance sheet date. As
management believes the sales price of disposals to represent the
floor level, having been used to create a market and de-risk the
original investment, the minimum level of disbursements has also
been used in valuing the investment. If the present value of the
maximum level of disbursements were applied against the value of
damages based on disposal price, this would reduce the fair value
of the investment to zero. Conversely, if a discounted cash flow
method of valuation were used, including an estimate of the likely
amount of damages on settlement, the value of the investment
would be significantly increased.
It is presumed that fair value and cost approximate to each
other on initial recognition and where a damage-based agreement is
at an early stage, such that the level of time worked is de
minimis, the financial asset has been valued at cost, subject to
assessment for overstatement.
Where there has been minimal activity on a damage-based
agreement from period to period, the prior year valuation is taken
as the initial indication of fair value, subject to assessment for
overstatement.
Put options over shares held by non-controlling interest
The following key estimates and judgements have been used in
determining the present value of put options over the shares held
by the non-controlling interest in LionFish: -
a) It has been assumed that the option holder will exercise at
the earliest possible opportunity, being 12 August 2022
b) The value at the date of exercise, which is calculated as a
multiple of average profit over the preceding two years has been
based on the actual profit after tax for the period ended 31
December 2020 and 31 December 2021
In determining the fair value of the put options, it has been
assumed that fair value of the put shares in LionFish is equal to
the fair value of the shares in the Company for which they would be
exchanged, and that the fair value of the option is zero.
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, having regard to any relevant insurance cover
held by the Group. A different assessment of the likely outcome of
each case or of the possible cost involved may result in a
different provision or cost.
The Company has been informed that HMRC has started an inquiry
into the valuation of employee related securities issued by the
Company in April 2018 prior to the IPO.
Segment information
4.
The Group's reportable segments are strategic business groups
that offer different products and services. Operating segments are
reported in a manner consistent with the internal reporting
provided to the chief operating decision maker, which has been
identified as the Board of Directors of RBG Holdings plc.
The following summary describes the operations of each
reportable segment:
-- Legal services - Provision of legal advice, by RBGLS (trading
under two brands, Rosenblatt and Memery Crystal)
-- Litigation finance - Sale of litigation assets, by Rosenblatt and LionFish
-- Other Professional services - Provision of sell-side M&A
corporate finance services, by Convex
Unaudited 6 months ended Legal Litigation Other Total
30 June 2022 services finance Professional
services
GBP GBP GBP GBP
Segment revenue 20,692,323 - 4,198,510 24,890,833
=========== =========== ============== ==============
Segment gains on litigation
assets comprising:
Proceeds on disposal of
litigation assets - 2,489,950 - 2,489,950
Realisation of litigation
assets - (811,381) - (811,381)
----------- ----------- -------------- --------------
Profit on disposal of litigation
assets - 1,678,569 - 1,678,569
Fair value movement on - - - -
litigation assets
----------- ----------- -------------- --------------
- 1,678,569 - 1,678,569
=========== =========== ============== ==============
Segment contribution 9,778,777 - 2,033,580 11,812,357
=========== =========== ============== ==============
Segment gains on litigation
assets - 1,678,569 - 1,678,569
=========== =========== ============== ==============
Costs not allocated to
segments
Personnel costs (2,818,933)
Depreciation and amortisation (1,810,406)
Other operating expense (3,880,568)
Net financial expenses (610,932)
Group profit for the period
before tax 4,370,087
============
4. Segment information (continued)
Unaudited 6 months ended Legal Litigation Other Total
30 June 2021 services finance Professional
services
GBP GBP GBP GBP
Segment revenue 11,833,512 - 5,019,059 16,852,571
=========== ============ ============== ==============
Segment gains on litigation
assets comprising:
Proceeds on disposal of
litigation assets - 2,386,000 - 2,386,000
Realisation of litigation
assets - (1,116,059) - (1,116,059)
----------- ------------ -------------- --------------
Profit on disposal of litigation
assets - 1,269,941 - 1,269,941
Fair value movement on
litigation assets - 224,484 - 224,484
----------- ------------ -------------- --------------
- 1,494,425 - 1,494,425
=========== ============ ============== ==============
Segment contribution 5,515,276 - 2,403,649 7,918,925
=========== ============ ============== ==============
Segment gains on litigation
assets - 1,494,425 - 1,494,425
=========== ============ ============== ==============
Costs not allocated to
segments
Personnel costs (1,701,228)
Depreciation and amortisation (975,334)
Other operating expense (2,559,037)
Net financial expenses (233,081)
Group profit for the period
before tax 3,994,670
============
4. Segment information (continued)
Audited 12 months ended Legal Litigation Other Total
31 December 2021 services finance Professional
services
GBP GBP GBP GBP
Segment revenue 32,570,661 - 9,414,677 41,985,338
=========== ============ ============== ==============
Segment gains on litigation
assets comprising:
Proceeds on disposal of
litigation assets - 4,888,711 - 4,888,711
Realisation of litigation
assets - (2,162,031) - (2,162,031)
----------- ------------ -------------- --------------
Profit on disposal of litigation
assets - 2,726,680 - 2,726,680
Fair value movement on
litigation assets - 2,480,844 - 2,480,844
----------- ------------ -------------- --------------
- 5,207,524 - 5,207,524
=========== ============ ============== ==============
Segment contribution 15,007,758 - 4,288,915 19,296,673
=========== ============ ============== ==============
Segment gains on litigation
assets - 5,207,524 - 5,207,524
=========== ============ ============== ==============
Costs not allocated to
segments
Personnel costs (4,668,749)
Depreciation and amortisation (2,940,078)
Other operating expense (6,911,796)
Net financial expenses (757,340)
Group profit for the period
before tax 9,226,234
============
5. Employees
Unaudited Unaudited Audited
6 mos ended 6 mos ended Year ended
30 Jun 2022 30 Jun 2021 31 Dec
2021
Group GBP GBP GBP
Staff costs (including directors)
consist of:
Wages and salaries 12,174,082 7,951,210 20,868,566
Short-term non-monetary benefits 138,244 63,203 214,208
Cost of defined contribution scheme 365,071 185,761 673,817
Share-based payment expense - - 72,000
Social security costs 1,537,870 999,835 2,526,064
------------ ------------ -----------
14,215,267 9,200,009 24,354,655
------------ ------------ -----------
Personnel costs stated in the consolidated statement of
comprehensive income includes the costs of contractors of
GBP1,678,446 (HY2021: GBP1,428,758, FY2021: GBP2,999,122).
The average number of employees (including directors) during the
period was as follows:
Unaudited Unaudited Audited
6 mos ended 6 mos ended Year ended
30 June 30 Jun 2021 31 Dec 2021
2022
Number Number Number
Legal and professional staff 142 75 113
Administrative staff 74 46 62
------------ ------------ ------------
216 121 175
------------ ------------ ------------
Defined contribution pension schemes are operated on behalf of
the employees of the Group. The assets of the schemes are held
separately from those of the Group in independently administered
funds. The pension charge represents contributions payable by the
Group to the funds and amounted to GBP365,071 (HY2021: GBP185,761,
FY2021: GBP673,817). Contributions amounting to GBP136,336 (HY2021:
GBP106,619, FY2021: GBP127,296) were payable to the funds at period
end and are included in trade and other payables.
6. Discontinued operations
In June 2022, the Group sold its 40% interest in Adnitor Limited
which is the only operation presented as a discontinued operation
in 2022.
The post-tax loss on disposal of discontinued operations was
determined as follows:
Unaudited
6 mos ended
30 June 2022
GBP
Cash consideration received 80,000
--------------
Total consideration received 80,000
Net assets disposed (other than cash):
Investment in associate 101,643
Loss on disposal of discontinued operation, net of
tax (21,643)
On 1 February 2021, the Company agreed a call option over the
shares of Adnitor Limited held by the majority shareholder. Under
this agreement, the Company was required to purchase the remaining
shares in Adnitor Limited by the fifth anniversary of the
agreement, with consideration based on a multiple of Adnitor's
profits, settled by the issue of ordinary shares in the Company. On
the disposal of the Group's interest in Adnitor Limited this
agreement was terminated and the present value of the option
released through the Statement of Changes in Equity (2021:
GBP500,000).
7. Earnings per share
Unaudited Unaudited Audited
6 mos ended 6 mos ended Year ended
30 June 30 June 31 Dec 2021
2022 2021
Numerator GBP GBP GBP
Profit for the period and earnings
used in basic and diluted EPS 3,454,590 3,034,450 6,972,873
Non-Underlying items
Costs of acquiring subsidiary - 524,905 863,435
Less: tax effect of above items - - (69,242)
Profit for the period adjusted for
non-underlying items 3,454,590 3,559,355 7,767,066
------------ ------------ ------------
Denominator Number Number Number
Weighted average number of shares
used in basic and diluted EPS 95,331,236 87,421,556 91,408,901
------------ ------------ ------------
Earnings per share is calculated as follows:
Unaudited Unaudited Audited
6 mos ended 6 mos ended 2021
30 June 30 June
2022 2021
Pence Pence Pence
Basic and diluted earnings per ordinary
share 3.62 3.47 7.63
Basic and diluted earnings per ordinary
share adjusted for non-underlying items 3.62 4.07 8.50
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.
8. Dividends
On 22 February 2022, an interim dividend of 3 pence per share
was paid in respect of the 2021 financial year.
9. Property, plant and equipment
Group Leasehold Fixtures Computer Total
improvements and fittings equipment
GBP GBP GBP GBP
Cost
At 1 January 2022 2,710,279 251,294 791,516 3,753,089
Additions 7,471 85,160 56,207 148,838
-------------- -------------- ----------- ----------
At 30 June 2022 2,717,750 336,454 847,723 3,901,927
Accumulated Depreciation
and Impairment
At 1 January 2022 487,148 116,989 559,562 1,163,699
Charge for the period 143,113 47,441 96,297 286,851
-------------- -------------- ----------- ----------
At 30 June 2022 630,261 164,430 655,859 1,450,550
Net book value
At 1 January 2022 2,223,131 134,305 231,954 2,589,390
At 30 June 2022 2,087,489 172,024 191,864 2,451,377
-------------- -------------- ----------- ----------
Under debentures signed and registered on 19 April 2021, HSBC UK
Bank plc have fixed and floating charges over the property, plant
and equipment of the Group.
10. Leases
The Group leases its business premises in the United Kingdom.
The lease contracts either provide for annual increases in the
periodic rent payments linked to inflation or for payments to be
reset periodically to market rental rates.
Right-of-Use Assets
Land and Total
buildings
GBP GBP
At 1 January 2022 15,913,008 15,913,008
Amortisation (1,104,851) (1,104,851)
Variable lease payment adjustment 561,275 561,275
------------ ------------
At 30 June 2022 15,369,432 15,369,432
Lease liabilities
Land and Total
buildings
GBP GBP
At 1 January 2022 15,849,101 15,849,101
Interest expense 263,900 263,900
Variable lease payment adjustment 561,275 561,275
Lease payments (606,694) (606,694)
----------- -----------
At 30 June 2022 16,067,582 16,067,582
At 30 June 2022, lease liabilities were falling due as
follows:
Group Up to 3 Between Between Between Over 5 Total
months 3 and 12 1 and 2 2 and 5 years
months years years
GBP GBP GBP GBP GBP GBP
Lease liabilities 340,385 1,551,505 4,411,902 7,546,964 2,216,826 16,067,582
11. Intangible assets
Group Goodwill Customer Brand Other Total
Contracts
GBP GBP GBP GBP GBP
Cost
At 1 January 2022 51,862,168 1,706,578 3,360,474 1,000,000 57,929,220
At 30 June 2022 51,862,168 1,706,578 3,360,474 1,000,000 57,929,220
Accumulated amortisation
and impairment
At 1 January 2022 - 1,466,599 270,058 333,333 2,069,990
Amortisation charge - 84,696 84,008 250,000 418,704
----------- ----------- ---------- ---------- -----------
At 30 June 2022 - 1,551,295 354,066 583,333 2,488,694
Net book value
At 1 January 2022 51,862,168 239,979 3,090,416 666,667 55,859,230
----------- ----------- ---------- ---------- -----------
At 30 June 2022 51,862,168 155,283 3,006,408 416,667 55,440,526
----------- ----------- ---------- ---------- -----------
Under debentures signed and registered on 19 April 2021, HSBC UK
Bank plc have fixed and floating charges over the intangible assets
of the Group.
12. Litigation assets
The table below provides analysis of the movements in the Level
3 financial assets.
Unaudited Unaudited Audited
30 June 2022 30 June 2021 31 December
2021
Level 3 Level 3 Level 3
restated
GBP GBP GBP
At 1 January 11,571,052 6,569,110 6,569,110
Additions 4,936,934 2,304,464 4,683,128
Realisations (811,381) (1,116,059) (2,162,031)
Fair value movement - 224,484 2,480,845
-------------- -------------- -------------
At 30 June / 31 December 15,696,605 7,981,999 11,571,052
-------------- -------------- -------------
Sensitivity of Level 3 valuations
Following investment, the Group engages in a semi-annual review
of each investment's fair value. At 30 June 2022, should the value
of investments have been 10% higher or lower than provided for in
the Group's fair value estimation, while all other variables
remained constant, the Group's income and net assets would have
increased and decreased respectively by GBP1,569,661 (HY2021
restated: GBP798,200, FY2021: GBP1,157,105).
13. Loans and borrowings
The book value and fair value of loans and borrowings which all
denominated in sterling are as follows:
Unaudited Unaudited Unaudited Unaudited Audited Audited
Book value Fair value Book value Fair value Book value Fair value
30 Jun 30 Jun 30 Jun 30 Jun 31 Dec 31 Dec
22 2022 2021 2021 2021 2021
GBP GBP GBP GBP GBP GBP
Non-current
Bank loans
Secured 20,000,000 20,000,000 18,000,000 18,000,000 17,000,000 17,000,000
Current
Bank loans
Secured 2,182,163 2,182,163 2,000,000 2,000,000 2,129,592 2,129,592
At 30 June/31
December 22,182,163 22,182,163 20,000,000 20,000,000 19,129,592 19,129,592
The rate at which Sterling denominated loans and borrowings are
payable is 2.65% above SONIA (2021: 2.40% above SONIA).
The bank loans are secured by fixed and floating charges over
the assets of the Group. The Group has GBP1 million undrawn
committed borrowing facilities available at 30 June 2022 (HY2021:
GBP5 million, FY2021: GBP5 million).
[1] Figures for 2021 include one month of contribution from
Memery Crystal following the completion of the acquisition at the
end of May 2021.
[2] Revenue per fee earner data taken from The Lawyer UK 200:
Top 100 latest data. UK firms are ranked 1-100 by firm-wide revenue
(year end 2020/21)
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