TIDMRBGP
RNS Number : 4489X
RBG Holdings PLC
26 April 2023
26(th) April 2023
RBG Holdings plc
("RBG", the "Group", or the "Company")
Audited results for the year ended 31 December 2022
RBG Holdings plc (AIM: RBGP), the legal services and
professional services group, today announces its audited results
for the year ended 31 December 2022.
Highlights [1] [2]
-- Group revenue (including gains on litigation assets) up 25.6% to GBP54.1m (2021: GBP43.1m)
-- Adjusted EBITDA up 54.2% to GBP15.8m (2021: GBP10.3m)
-- Adjusted profit before tax up 66.3% to GBP10.9m (2021: GBP6.6m)
-- Non-recurring costs of GBP1.2m (2021: GBP0.9m)
-- EBITDA up 55.5% to GBP14.6m (2021: GBP9.4m)
-- Profit before tax up 70.4% to GBP9.7m (2021: GBP5.7m)
-- Profit from continuing operations up 76.8% to GBP7.8m (2021: GBP4.4m)
-- Loss on discontinued operations, net of tax GBP(4.0)m (2021: Profit GBP2.8m)
-- Profit for the year (including discontinued operations) of GBP3.8m (2021: GBP7.3m)
-- Adjusted free cashflow generation GBP4.0m (2021: GBP6.4m)
-- Net debt of GBP19.2m (2021: GBP14.4m)
-- Final interim dividend of 0.5p confirmed. Total dividend for
2022 of 2.5p per share (2021: 5p per share)
-- Legal services average revenue per fee earner improved 25.6% to GBP436,000 (2021: GBP347,000)
Post Period Events:
-- Board changes: Jon Divers, Group COO, appointed Group CEO;
Tania MacLeod (Senior Partner, Rosenblatt) and Nick Davis (Senior
Partner, Memery Crystal) appointed to the Board as Executive
Directors
-- Strategic Review: Proposed disposal of LionFish Litigation Finance Ltd
Keith Hamill, Chairman, RBG Holdings plc, commented:
"Through their successful integration, our leading law firm
brands, Rosenblatt and Memery Crystal have strengthened performance
capability within the Group. Deal origination in Convex Capital
remains positive in 2023, with a growing pipeline of potential
opportunities".
"Since its IPO in 2018, RBG has grown Group revenues by more
than three times whilst doubling [3] statutory EBITDA. Our final
interim dividend of 0.5p per share has been confirmed today, and we
look forward to the coming year with renewed optimism about the
prospects for our Group."
The Company's Annual Report and Accounts for the year ended 31
December 2022 is available to view on the Group's website later
today at:
www.rbgholdings.co.uk/investor-relations/reports-documents-and-circulars
Enquiries:
RBG Holdings plc Via SEC Newgate
Jon Divers, Chief Executive Officer
Singer Capital Markets (Nomad and Broker) Tel: +44 (0)20 7496 3000
Rick Thompson / Alex Bond / James Fischer
(Corporate Finance)
Tom Salvesen (Corporate Broking)
SEC Newgate (for media/analyst enquiries) Tel: +44 (0)7540 106366
Tali Robinson / Robin Tozer rbg@secnewgate.co.uk
About RBG Holdings plc
RBG Holdings plc is a legal services and professional services
group, which comprises three core brands:
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 offers a partner-led service to a broad range of clients,
from multinational companies, financial institutions and
owner-managed businesses to individual entrepreneurs.
Convex Capital Limited
Convex Capital is a specialist sell-side M&A 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.
In December 2022, the Group announced its intention to dispose
of its litigation finance business, LionFish:
LionFish Litigation Finance Limited ("LionFish")
The Group also provides litigation finance in selected cases
through a separate arm, LionFish. LionFish finances litigation
matters being run by other solicitors in return for a significant
return on the outcome of those cases and is positioned to be a
unique, alternative provider to the traditional litigation
funders.
Further information is available at: www.rbgholdings.com
Chairman's Statement
Overview
Since its IPO in 2018, RBG has grown Group revenues by more than
three times whilst doubling [4] statutory EBITDA. Our final interim
dividend of 0.5p per share has been confirmed today. The Group's
legal services and professional services businesses have gone from
strength to strength, delivering excellent results with significant
growth. Group revenue was up 25.6% to GBP54.1m (2021: GBP43.1m),
resulting in adjusted EBITDA of GBP15.8m at a margin of 29.2%
(2021: GBP10.3m, 23.8%). The legal services business also delivered
a 26 percent increase in average revenue per fee earner to
GBP436,000 (2021: GBP347,000). Litigation losses in LionFish did
however impact the overall Group results which was disappointing
and as previously stated, this division is under strategic
review.
Financials [5]
-- Group revenue (including gains on litigation assets) up 25.6% to GBP54.1m (2021: GBP43.1m)
-- Adjusted EBITDA up 54.2% to GBP15.8m (2021: GBP10.3m)
-- Profit before tax up 70.4% to GBP9.7m (2021: GBP5.7m)
-- Profit from continuing operations up 76.8% GBP7.8m (2021: GBP4.4m)
-- Loss on discontinued operations, net of tax GBP(4.0)m (2021: Profit GBP2.8m)
Our net debt position was GBP19.2m (2021: GBP14.4m). The Group
has a GBP15.0m revolving credit facility and a GBP10.0m five-year
term loan taken to fund the Memery Crystal acquisition which has
already been paid down to GBP7.0m. We are committed to reducing
debt as a core part of our strategy.
Our balance sheet together with our continued cash generation
from our core businesses will support our long-term growth plans,
and future dividends.
Dividend
The Board is committed to its published long-term progressive
dividend policy. In line with that policy, the Board 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 and is proposing a total payment of 2.5 pence per
share for 2022 (2 pence paid at the half year and 0.5 pence at the
full year) to shareholders on the register as at 5 May 2023.
Based on the current outlook, we expect to continue to pay up to
60 per cent of retained earnings in the 2023 financial year by way
of dividend.
Strategy
The Group's strategy is to build a high margin, cash-generative,
legal and professional services group with diversified revenue and
profit streams to deliver sustained shareholder value.
Acquiring the professional services business Convex Capital in
2019 created a new revenue stream. In legal services, the
successful acquisition of Memery Crystal in 2021 diversified our
revenue, which is now evenly split across three main practice
areas, Dispute Resolution, Corporate and Real Estate. We see
considerable opportunity in these core business areas. Our emphasis
will be on driving organic growth by recruiting and developing new
fee earners and, where appropriate, assessing M&A opportunities
that will supplement our strategy. However, we will only do deals
at the right price and with the right deal structure. Each of the
acquisitions we have made so far - Convex Capital and Memery
Crystal - has met these criteria. They were immediately earnings
enhancing with the potential to generate significant value for
shareholders over the medium and long term.
To ensure the Business remains absolutely focused on its goal,
the Board has taken the decision to divest LionFish where
litigation matters are run by third-party solicitors and reduce the
Group's exposure to third-party litigation funding commitments. The
proceeds from any sale will be used for working capital purposes
and to reduce net debt.
The Board believes that following the completion of the
divestment of LionFish, and with a new highly experienced executive
team in place, the Group is well placed to deliver its goal of
sustained shareholder value.
Board Changes
On 31 December 2022, Suzanne Drakeford-Lewis was appointed to
the Board as Group Finance Director following the departure of CFO,
Robert Parker.
On 31 January 2023, the employment contract of Nicola Foulston,
CEO, was terminated. Jon Divers, the Group COO, was appointed to
the Board as CEO. The Board was further strengthened with the
appointments of Tania MacLeod (Senior Partner, Rosenblatt) and Nick
Davis (Senior Partner, Memery Crystal) as Executive Directors.
The Board now consists of four executive directors and four
non-executive directors, providing a blend of different experiences
and backgrounds. All non-executives are considered independent.
People
The strength of the Group is in our ability to retain and
attract high-quality people. This is evidenced by our performance,
and I want to thank everyone for their hard work. I would also like
to thank shareholders for their continued support.
Sustainability
We aim to build an organisation that delivers long-term value to
our shareholders, successful outcomes for our clients, and is a
responsible employer that supports its employees and has a positive
impact in the communities in which it operates. For example, this
year we have partnered with the Sutton Trust to run work experience
and mentoring programmes for university students. We also elected
The Matthew Elvidge Trust as our Charity of the Year for 2022.
While the nature of the business means the Group does not have a
significant environmental impact, the Board believes that good
environmental practices, such as the recycling of paper waste and
conservation of energy usage, will support its strategy by
enhancing the reputation of the Group. For example, our Fleet
Street address has 100% renewable power supply, and the waste is
100% recycled or waste to energy (no landfill).
We want to go further and we are looking at ways we can improve
as an employer, and a member of the business community to address
the challenges society is facing.
Outlook
Through their successful integration, our leading law firm
brands, Rosenblatt and Memery Crystal have strengthened performance
capability within the Group. Deal origination in Convex Capital
remains positive in 2023, with a growing pipeline of potential
opportunities. We look forward to the year ahead with optimism and
a renewed focus on the core businesses and driving organic
growth.
Keith Hamill
Chairman
25 April 2023
Group Chief Executive Officer's Statement
Overview
Overall, the Group has benefitted from diversification and
delivered profitability and cash generation in a challenging
year.
RBG Legal Services ("RBGLS"): Rosenblatt and Memery Crystal
-- Revenue up 37.8% to GBP44.9m (2021: GBP32.6m) due to the strong demand for its services
-- Average revenue per fee earner of GBP436,000 (2021: GBP347,000)
-- Utilisation of 76% (2021: 84%) and realisation of 90% (2021: 86%)
-- At 31 December 2022, RBGLS employed 179 people, including 120 fee earners
Our legal services business trades under two leading mid-tier
law firm brands - Rosenblatt and Memery Crystal, both of which
retain their own brand identities and continue to operate as two
separately branded law firms. The two brands are aligned to
contentious (Rosenblatt) and non-contentious (Memery Crystal) legal
services to reflect their distinct position within the legal
services market.
To realise operational synergies, the two businesses are now
fully integrated and based at one office on Fleet Street in London.
The integration has delivered a business which has a more balanced
offering across the three main legal areas - Dispute Resolution
(via Rosenblatt), and Corporate and Real Estate (through Memery
Crystal). This gives a natural hedge to the changing economic
environment and has increased the Group's scale and enhanced the
ability to win non-contentious mandates as well as improving the
new business pipeline.
Convex Capital Limited ("Convex")
-- Completed six deals during 2022 delivering GBP5.3m of revenue (2021:14 deals, GBP9.4m)
-- At 14 April 2023, Convex had a strong pipeline of 24 deals,
with a number of deals in advanced stages of negotiation
-- Convex has a motivated, dynamic team of 13 people, of whom 12 are fee earners
Convex Capital, the specialist sell-side corporate finance
advisory business 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 companies. Convex Capital identifies and
proactively targets businesses that it believes represent
attractive acquisition opportunities.
The acquisition of Convex Capital was part of the Board's
strategy to diversify the Group beyond legal services, focusing on
other high-margin professional service areas. Convex Capital is an
entrepreneurial, cash-generative business operating across the UK
and Europe and provides the Group with further funds for
reinvestment into other high-margin areas.
The business is actively building its 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.
The strength of its pipeline has grown and despite the economic
headwinds, the business is in a good position to perform well
during 2023.
Convex has been working on a succession plan over the last two
years and in January 2023, Isaac Asamoah, James Edge and Tom
Campbell were appointed Directors of the business to drive its next
phase. Mike Driver, the former managing director, is now a
consultant to the business. The three new Directors have been with
the business for a number of years and have been responsible for
delivering a significant element of the revenue and profits.
Discontinued Operation - LionFish Litigation Finance Limited
("LionFish")
-- Losses on third-party litigation assets during the year of
GBP4.3m (2021: GBP4.1m gains on litigation assets)
-- At 31 December 2022, LionFish had 9 investments with GBP8.3m
committed (with GBP5.0m drawn down) over the life of the cases,
which is circa three years
A strategic review undertaken during the year has resulted in us
looking to divest LionFish, our third-party litigation finance
business. The review looked at the scale of investment business
required to ensure the risk of each individual investment was
minimalised and the Board concluded that the Group did not have the
Balance Sheet to support the growth required and that LionFish
would be better placed in a dedicated asset management
business.
With this in mind, we have sought buyers for the business and
have received four offers. Due diligence is currently underway in
respect of an offer that will both deliver cash back to the Group
and a share of the upside in successful cases.
Outlook
Overall, the Group had a good 2022 and, despite the losses in
LionFish, we delivered solid profits. Following the previously
announced decision to sell LionFish, we continue to focus on
adapting the Group to changing client needs and to growing our
portfolio of services. We look forward to the year ahead with
optimism and a renewed focus on the core businesses and driving
organic growth.
Jon Divers
Group Chief Executive Officer
25 April 2023
Financial Review
Key Performance Indicators (KPIs) [6]
-- Group revenue (including gains on litigation assets) up 25.6% to GBP54.1m (2021: GBP43.1m)
-- Adjusted EBITDA up 54.2% to GBP15.8m (2021: GBP10.3m)
-- Adjusted Profit before tax up 66.3% to GBP10.9m (2021: GBP6.6m)
-- Non-recurring costs of GBP1.2 million (2021: GBP0.9m)
-- EBITDA up 55.5% to GBP14.6m (2021: GBP9.4m)
-- Profit before tax up 70.4% to GBP9.7m (2021: GBP5.7m)
-- Profit from continuing operations up 76.8% to GBP7.8m (2021: GBP4.4m)
-- Loss on discontinued operations, net of tax GBP(4.0)m (2021: profit GBP2.8m)
-- Profit for the year (including discontinued operations) of GBP3.8m (2021: GBP7.3m)
-- Adjusted free cashflow generation GBP4.0m (2021: GBP6.4m)
-- Net debt of GBP19.2m (2021: GBP14.4m)
-- Final interim dividend of 0.5p confirmed. Total dividend for
2022 of 2.5p per share (2021: 5p per share)
-- Legal services average revenue per fee earner improved 25.6% to GBP436,000 (2021: GBP347,000)
The Group has continued to deliver increased revenue and strong
profitability in its legal services and professional services
businesses and is well positioned to deliver its growth strategy
through organic growth, carefully selected acquisitions and
high-quality litigation investments in cases run by Rosenblatt.
Revenue and gains on litigation assets
Group revenue including gains on litigation assets for the
period was GBP54.1m compared to GBP43.1m in 2021, representing a
25.6% increase.
Legal services revenue was up 37.8% to GBP44.9m from GBP32.6m in
2021, with the integration of Rosenblatt and Memery Crystal
complete and the practice performing to the Board's expectations.
Revenue was more evenly split across the three main practice areas,
Dispute Resolution (40%), Corporate (37%) and Real Estate (23%).
Dispute Resolution continued to perform well and in addition took
on contingent work with associated unrecognised time worked of
GBP2.5m (2021: GBP3.4m). Average revenue per fee earner increased
to GBP436,000 (2021: GBP347,000), reflecting better resource
management in the integrated practice.
Convex had a solid year, in spite of challenging economic
conditions in the second half which resulted in the deferral of
anticipated deal completions into 2023. Six deals were completed
with revenue of GBP5.3m compared with 14 deal completions in 2021
with GBP9.4m of revenue.
Gains on litigation assets on litigation cases run by Rosenblatt
were up to GBP3.8m from GBP1.1m in 2021. These gains included
successfully realised litigation asset sales with proceeds
totalling GBP2.7m (2021: GBP1.8m).
Staff costs
Total staff costs in 2022 were GBP30.7m (2021: GBP26.8m), which
includes GBP25.1m for legal services and GBP3.5m for Convex. The
average number of employees for the Group was 211 (2021: 175).
Overhead costs
During 2022, the Group incurred overheads of GBP39.5m (before
depreciation and amortisation) (2021: GBP33.7m), of which staff
costs were GBP30.7m (2021: GBP26.8m).
Other operating costs were GBP8.8m (2021: GBP6.9m), of which
non-recurring costs, including restructuring costs, represented
GBP1.2m (2021: GBP0.9m). Other costs included insurances of GBP1.8m
(2021: GBP1.5m), rates GBP0.9m (2021: GBP0.7m), and training and
recruitment GBP0.6m (2021: GBP0.6m).
Operationally, there remains a significant focus on IT and we
have invested sensibly over recent years and further enhanced both
our internal and client facing experiences of IT usage.
EBITDA and Adjusted EBITDA
In assessing performance, the Group uses EBITDA as a KPI. EBITDA
was GBP14.6m, including GBP1.2m of non-underlying items (2021:
GBP9.4m including non-underlying items of GBP0.9m). Adjusted EBITDA
for 2022 was GBP15.8m (29.2% of revenue and gains on litigation
assets) (2021: GBP10.3m, 23.8%). The integration of Rosenblatt and
Memery Crystal resulted in a sustained improvement in legal
services EBITDA margin to 30.6% (2021: 24.4%), in line with Board
expectations. Convex delivered an EBITDA of GBP1.2m despite the
deferral of anticipated deals in the second half of the year (2021:
EBITDA GBP4.2m).
Profit before tax
Profit before tax for 2022 was GBP9.7m, representing 18.0% of
revenue and gains on litigation assets (2021: GBP5.7m,13.3%); this
includes GBP1.2m of non-underlying items (2021: GBP0.9m).
Adjusted profit before tax was GBP10.9m, representing 20.2% of
revenue and gains on litigation assets (2021: GBP6.6m, 15.3%).
Corporation tax
The Group's tax charge for the year is GBP1.9m with an effective
tax rate of 19.9% (2021: GBP1.3m, 22.8%).
Discontinued operations
LionFish has been classified as a discontinued operation and has
been excluded from our headline performance measures. Operating
losses before non-underlying items for discontinued operations were
GBP4.8m (2021: GBP3.5m operating profit). Total losses after tax
for the business for 2022 totalled GBP4.0m (2021: GBP2.8m profit
after tax).
Details on discontinued operations are shown in Note 10.
Earnings Per Share (EPS)
The weighted average number of shares in 2022 was 95.3 million
which gives a basic earnings per share (EPS) on continuing
operations for the year of 8.18p (2021: 4.83p) and diluted earnings
per share (EPS) on continuing operations for the year of 8.17p
(2021: 4.82p).
Balance Sheet
2022 2021 [7]
GBP'm GBP'm
------- ---------
Goodwill, intangible and tangible assets 82.9 81.1
------- ---------
Current Assets 26.9 19.3
------- ---------
Current Liabilities (13.6) (11.3)
------- ---------
Assets held for sale 5.3 4.9
------- ---------
Liabilities held for sale (6.5) (2.1)
------- ---------
95.0 91.9
------- ---------
Net debt (19.2) (14.4)
------- ---------
Non-Current Liabilities (14.4) (14.5)
------- ---------
Deferred consideration - (2.2)
------- ---------
Net assets 61.4 60.8
------- ---------
The Group's net assets as at 31 December 2022 increased by
GBP0.6m on the prior year due to profitable trading during the
year.
Goodwill, Tangible and Intangible Assets
Included within tangible assets is GBP15.1m (2021: GBP15.9m)
which relates to IFRS 16 right of use assets for the Group's
property leases. Total intangible assets of GBP55.0m (2021:
GBP55.9m) incorporate the goodwill and intangible assets acquired
on the acquisitions of the Rosenblatt, Convex, and Memery Crystal
businesses. The Group has considered the amounts at which goodwill
and intangible assets are stated on the basis of forecast future
cash flows and concluded that that these assets have not been
materially impaired.
Working capital
Management of lock up and cash generation has continued to be a
key focus of the Group over the year. For the 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. In Convex and LionFish, invoices are raised,
and cash is received at the point of deal completion. Lock up days
at 31 December 2022 were 137 (2021: 109), with debtor days being 58
(2021: 59 days) and WIP days being 79 days (2021: 50 days). As the
business has become more balanced across departments, lock up has
increased driven by non-contentious transactions, which have longer
payment terms. This is an area of significant focus for management.
Trade debtors less provision for impairment at the end of the year
were GBP9.9m (2021: GBP9.6m) and contract assets at the year-end
were GBP9.7m (2021: GBP6.0m).
Net debt
We have a revolving credit facility (RCF) of GBP15.0m and an
acquisition term loan of GBP10.0m repayable over five years (GBP3m
repaid at 31 December 2022). Our net debt position at the year end
was GBP19.2 million (2021: GBP14.4 million), providing sufficient
liquidity entering the new financial year.
Cash Conversion
2022 2021
GBPm GBPm
Cash flows from operating
activities 13.2 12.6
------ ------
Movements in working capital 0.1 (0.7)
------ ------
Increase in litigation assets (7.8) (4.7)
------ ------
Net cash generated from operations 5.5 7.2
------ ------
Interest (1.3) (0.7)
------ ------
Capital expenditure (0.2) (0.1)
------ ------
Free cash flow 4.0 6.4
------ ------
Underlying profit after tax 3.8 7.3
------ ------
Cash conversion 103% 88%
------ ------
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 current and prior year. Cash
conversion has increased from 88% in 2021 to 103% in 2022.
Summary
We are pleased with the profitability and performance of the
continuing operations of the Group during the year. The legal and
professional services businesses are performing well despite the
continuing impact of the situation in Ukraine, current inflationary
pressures and the uncertain economic climate. However, it is
important to acknowledge the impact of these events, as they will
continue to pose a significant challenge moving forward.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEARED 31 DECEMBER 2022
Note 1 January 1 January
to to
31 December 31 December
2022 2021 [8]
GBP GBP
Revenue 5 50,307,263 41,985,338
Gains on litigation assets 5 3,821,700 1,095,000
Personnel costs 7 (30,713,284) (26,773,146)
Depreciation and amortisation expense (3,543,302) (2,936,240)
Other expenses (8,787,105) (6,901,019)
Profit from operations 6 11,085,272 6,469,933
EBITDA 14,628,574 9,406,173
Non-underlying items
Costs of acquiring subsidiary 367,303 863,435
Restructuring costs 834,808 -
Adjusted EBITDA 15,830,685 10,269,608
----------------------------------------------- ----- ------------- -------------
Finance expense 8 (1,361,514) (801,659)
Finance income 8 32,739 22,676
Share of post-tax profits of equity accounted
associate - 21,643
Loss on sale of associate 18 (21,643) -
------------- -------------
Profit before tax 9,734,854 5,712,593
9,
Tax expense 10 (1,932,586) (1,300,577)
Profit from continuing operations 7,802,268 4,412,016
(Loss)/Profit on discontinued operations,
net of tax 10 (3,984,887) 2,845,397
Profit for the year 3,817,381 7,257,413
------------- -------------
Total (loss)/profit and comprehensive
income attributable to:
Owners of the parent 4,202,943 6,972,873
Non-controlling interest (385,562) 284,540
3,817,381 7,257,413
------------- -------------
Earnings per share attributable to the
ordinary equity holders of the parent 11
Profit
Basic (pence) from continuing operations 8.18 4.83
Diluted (pence) from continuing operations 8.17 4.82
Basic (pence) from total operations 4.41 7.63
Diluted (pence) from total operations 4.40 7.62
There were no elements of other comprehensive income for the
financial year other than those included in the income
statement.
The attached notes form part of these financial statements.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2022
Company registered number: Note 31 December 31 December
11189598 2022 2021 [9]
GBP GBP
Assets
Current assets
Trade and other receivables 20 26,937,181 19,330,914
Cash and cash equivalents 3,000,678 4,736,546
------------ ------------
29,937,859 24,067,460
Non-current assets
Property, plant and equipment 13 2,229,958 2,582,911
Right-of-use assets 14 15,074,132 15,913,008
Intangible assets 15 55,021,817 55,859,230
Litigation assets 19 10,603,024 6,675,538
Investments in associate 18 - 101,643
------------ ------------
82,928,931 81,132,330
Assets held for sale - discontinued
operations 10 5,347,117 4,922,385
Total assets 118,213,907 110,122,175
============ ============
Liabilities
Current liabilities
Trade and other payables 21 9,465,968 10,099,544
Leases 14 2,238,052 2,150,440
Current tax liabilities 21 1,601,655 1,002,637
Provisions 23 211,536 164,291
Loans and borrowings 22 2,205,640 2,129,592
------------ ------------
15,722,851 15,546,504
Non-current liabilities
Loans and borrowings 22 20,000,000 17,000,000
Deferred tax liabilities 24 744,328 850,042
Provisions 23 150,000 150,000
Leases 14 13,713,932 13,698,661
------------ ------------
34,608,260 31,698,703
Liabilities held for sale -
discontinued operations 10 6,463,058 2,053,440
Total liabilities 56,794,169 49,298,647
============ ============
NET ASSETS 61,419,738 60,823,528
============ ============
Issued capital and reserves
attributable to owners of the
parent
Share capital 26 190,662 190,662
Share premium reserve 27 49,232,606 49,232,606
Retained earnings 27 11,996,470 11,113,365
------------ ------------
61,419,738 60,536,633
Non-controlling interest - 286,895
TOTAL EQUITY 61,419,738 60,823,528
============ ============
The financial statements were approved and authorised for issue
by the Board of Directors on 25 April 2023 and were signed on its
behalf by:
Jon Divers, Director
The attached notes form part of these financial statements.
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEARED 31 DECEMBER 2022
Note 2022 2021 [10]
GBP GBP
Cash flows from operating activities
Profit/(Loss) for the year before
tax from:
Continuing operations 9,734,855 5,712,593
Discontinued operations (4,899,522) 3,513,641
Adjustments for:
Depreciation of property, plant and
equipment 556,403 525,606
Amortisation of right-of-use assets 2,153,585 1,781,058
Amortisation of intangible fixed assets 837,413 633,414
Fair value movement of litigation
assets net of realisations 3,418,176 (318,814)
Finance income (32,739) (22,676)
Finance expense 1,361,514 801,659
Share of post-tax profits of equity
accounted associate - (21,643)
Loss on sale of equity accounted associate 21,643 -
------------ -------------
13,151,328 12,604,838
(Increase) in trade and other receivables (3,600,176) (2,220,725)
Increase in trade and other payables 3,609,645 1,428,920
(Increase) in litigation assets (7,781,846) (4,683,128)
Increase in provisions 47,245 47,416
Cash generated from operations 5,426,196 7,177,321
Tax paid (601,569) (1,077,855)
------------ -------------
Net cash flows from operating activities 4,824,627 6,099,466
Investing activities
Purchase of property, plant and equipment (199,741) (130,179)
Sale of associate 80,000 -
Acquisition of associate - (80,000)
Acquisition of subsidiary, net of
cash - (12,000,000)
Payment of deferred consideration (2,248,319) (4,518,585)
Interest received 32,739 22,676
------------ -------------
Net cash (used in) investing activities (2,335,321) (16,706,088)
Financing activities
Dividends paid to holders of the parent (4,736,071) (4,430,414)
Dividend paid to non-controlling interest - (200,000)
Proceeds from loans and borrowings 5,000,000 20,000,000
Repayment of loans and borrowings (2,000,000) (11,000,000)
Repayments of lease liabilities (1,211,829) (1,856,938)
Interest paid on loans and borrowings (756,768) (279,497)
Interest paid on lease liabilities (528,698) (392,570)
------------ -------------
Net cash (used in)/from financing
activities (4,233,366) 1,840,581
Net (decrease) in cash and cash equivalents (1,744,060) (8,766,041)
Cash and cash equivalents at beginning
of year 4,756,143 13,522,184
Cash and cash equivalents at end
of year 3,012,083 4,756,143
------------ -------------
Cash and cash equivalents - continuing
operations 3,000,678 4,736,546
Cash and cash equivalents - discontinued
operations 11,405 19,597
------------ -------------
Cash and cash equivalents per consolidated
balance sheet 3,012,083 4,756,143
The attached notes form part of these financial statements.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEARED 31 DECEMBER 2022
Current year Share Share Retained Total Non-controlling Total equity
Capital Premium Earnings attributable interest
to equity
holders
of parent
GBP GBP GBP GBP GBP GBP
Balance at 1
January
2022 190,662 49,232,606 11,113,365 60,536,633 286,895 60,823,528
Comprehensive
income
for the year
Profit for the
year - - 4,202,943 4,202,943 (385,562) 3,817,381
--------- ----------- --------------- -------------- ---------------- -------------
Total
comprehensive
Income
for the year - - 4,202,943 4,202,943 (385,562) 3,817,381
Contributions
by and
distributions
to owners
Dividends - - (4,736,071) (4,736,071) - (4,736,071)
Purchase of NCI
share
capital - - (98,767) (98,767) 98,667 (100)
Reversal of
call option
over shares of
associate - - 500,000 500,000 - 500,000
Reversal of put
option
over shares of
subsidiary - - 1,015,000 1,015,000 - 1,015,000
--------- ----------- --------------- -------------- ---------------- -------------
Total
contributions
by
and
distributions
to owners - - (3,319,838) (3,319,838) 98,667 (3,221,171)
Balance at 31
December
2022 190,662 49,232,606 11,996,470 61,419,738 - 61,419,738
========= =========== =============== ============== ================ =============
The attached notes form part of these financial statements.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEARED 31 DECEMBER 2022 (CONTINUED)
Prior year Share Share Retained Total Non-controlling Total equity
Capital Premium Earnings attributable interest
to equity
holders
of parent
GBP GBP GBP GBP GBP GBP
Balance at 1
January 2021
(restated
[11] ) 171,184 37,565,129 9,070,906 46,807,219 202,355 47,009,574
Comprehensive
income for the
year
Profit for the
year - - 6,972,873 6,972,873 284,540 7,257,413
------------ ------------ ------------ ------------- ---------------- -------------
Total
comprehensive
Income for
the year - - 6,972,873 6,972,873 284,540 7,257,413
Contributions
by and
distributions
to owners
Dividends - - (4,430,414) (4,430,414) (200,000) (4,630,414)
Issue of share
capital 19,478 11,667,477 - 11,686,955 - 11,686,955
Grant of put
option over
shares
in subsidiary - - (500,000) (500,000) - (500,000)
------------ ------------ ------------ ------------- ---------------- -------------
Total
contributions
by and
distributions
to owners 19,478 11,667,477 (4,930,414) 6,756,541 (200,000) 6,556,541
Balance at 31
December 2021 190,662 49,232,606 11,113,365 60,536,633 286,895 60,823,528
============ ============ ============ ============= ================ =============
The attached notes form part of these financial statements.
COMPANY STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2022
Company registered number: Note 31 December 31 December
11189598 2022 2021
restated [12]
GBP GBP
Assets
Current assets
Trade and other receivables 20 14,204,102 11,405,341
Cash and cash equivalents 413,635 2,460,489
------------ --------------
14,617,737 13,865,830
Non-current assets
Trade and other receivables 20 39,554,433 35,343,534
Property, plant and equipment 13 45 1,083
Investments in subsidiaries 17 27,501,378 27,501,278
Investments in associate 18 - 80,000
------------ --------------
67,055,856 62,925,895
Total assets 81,673,593 76,791,725
============ ==============
Liabilities
Current liabilities
Trade and other payables 21 4,290,801 2,143,456
Loans and borrowings 22 2,205,640 2,129,592
------------ --------------
6,496,441 4,273,048
Non-current liabilities
Loans and borrowings 22 20,000,000 17,000,000
Deferred tax liabilities 24 635,334 660,270
------------ --------------
20,635,334 17,660,270
Total liabilities 27,131,775 21,933,318
============ ==============
NET ASSETS 54,541,818 54,858,407
============ ==============
Issued capital and reserves
attributable to owners of
the parent
Share capital 26 190,662 190,662
Share premium reserve 27 49,232,606 49,232,606
Retained earnings 27 5,118,550 5,435,139
------------ --------------
54,541,818 54,858,407
The Company has taken advantage of the exemption contained in
S408 Companies Act 2006 and has not presented a separate income
statement for the Company. The Company recorded a profit after tax
of GBP4,419,482 for the year ended 31 December 2022 (2021:
GBP7,105,524).
The financial statements were approved and authorised for issue
by the Board of Directors on 25 April 2023 and were signed on its
behalf by:
Jon Divers
Director
The attached notes form part of these financial statements.
COMPANY STATEMENT OF CASH FLOWS
FOR THE YEARED 31 DECEMBER 2022
Note 2022 2021
GBP GBP
Cash flows from operating activities
Profit for the year before tax 3,491,188 6,550,348
Adjustments for:
Depreciation of property, plant and
equipment 13 1,038 4,764
Finance income (14,164) (11,386)
Finance expense 811,352 397,916
------------ -------------
4,289,414 6,941,642
Decrease in trade and other receivables 1,329,641 526,485
Increase/(decrease) in trade and
other payables 379,823 (412,658)
Cash generated from operations 5,998,878 7,055,469
Tax paid - -
------------ -------------
Net cash flows from operating activities 5,998,878 7,055,469
Investing activities
Acquisition of associate - (80,000)
Sale of associate 18 80,000 -
Purchase of NCI share capital (100) -
Amounts (loaned to) subsidiaries (7,435,942) (21,661,696)
Interest received 14,164 11,386
------------ -------------
Net cash flows (used in) investing
activities (7,341,879) (21,730,310)
Financing activities
Dividends paid to holders of the
parent 12 (4,736,071) (4,430,414)
Amounts borrowed from subsidiaries 1,767,522 520,683
Proceeds from loans and borrowings 5,000,000 20,000,000
Repayment of loans and borrowings (2,000,000) (11,000,000)
Interest paid on loans and borrowings (735,304) (268,324)
------------ -------------
Net cash flows (used in)/from financing
activities (703,853) 4,821,945
Net (decrease) in cash and cash
equivalents (2,046,854) (9,852,896)
Cash and cash equivalents at beginning
of year 2,460,489 12,313,385
Cash and cash equivalents at end
of year 413,635 2,460,489
------------ -------------
The attached notes form part of these financial statements.
COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE YEARED 31 DECEMBER 2022
Current year Share Share Premium Retained Total
Capital Earnings
GBP GBP GBP GBP
Balance at 1 January 2022 190,662 49,232,606 5,435,139 54,858,407
Comprehensive profit for
the year
Profit for the year - - 4,419,582 4,419,582
--------- -------------- ------------ ------------
Total comprehensive profit
for the year - - 4,419,582 4,419,582
Contributions by and distributions
to owners
Dividends - - (4,736,071) (4,736,071)
Total contributions by and
distributions to owners - - (4,736,071) (4,736,071)
Balance at 31 December 2022 190,662 49,232,606 5,118,650 54,541,918
========= ============== ============ ============
COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE YEARED 31 DECEMBER 2022 (CONTINUED)
Prior year Share Share Retained Total
Capital Premium Earnings
GBP GBP GBP GBP
Balance at 1 January
2021 171,184 37,565,129 2,760,029 40,496,342
Comprehensive profit
for the year
Profit for the year - - 7,105,524 7,105,524
Total comprehensive
profit for the year - - 7,105,524 7,105,524
Contributions by and
distributions to owners
Dividends - - (4,430,414) (4,430,414)
Issue of share capital 19,478 11,667,477 - 11,686,955
--------- ----------- ------------ ------------
Total contributions
by and distributions
to owners 19,478 11,667,477 (4,430,414) 7,256,541
Balance at 31 December
2021 190,662 49,232,606 5,435,139 54,858,407
The attached notes form part of these financial statements.
NOTES FORMING PART OF THE CONSOLIDATED AND COMPANY FINANCIAL
STATEMENTS
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.
The financial information set out in this release does not
constitute the Company's full statutory accounts for the year ended
31 December 2022 for the purposes of section 434(3) of the
Companies Act 2006, but it is derived from those accounts that have
been audited. Statutory accounts for 2021 have been delivered to
the registrar of companies, and those for 2022 will be delivered
after the forthcoming AGM. BDO LLP and Moore Kingston Smith LLP
have reported on the accounts for the year ended 31 December 2021
and the year ended 31 December 2022 respectively: their reports
were unqualified and did not contain statements under section
498(2) or (3) of the Companies Act 2006.
While the information included in this preliminary announcement
has been prepared in accordance with the recognition and
measurement principles of UK adopted international accounting
standards, this announcement does not itself contain sufficient
information to comply with UK adopted international accounting
standards. The Company expects to publish full financial statements
for the year ended 31 December 2022 that comply with UK adopted
international accounting standards on 26 April 2023.
The accounting policies set out below are in accordance with UK
adopted international accounting standards, and International
Financial Reporting Interpretations Committee ('IFRIC')
interpretations that were applicable for the year ended 31 December
2022.
The financial statements have been prepared for year ended 31
December 2022, with a comparative year to 31 December 2021
(restated), and are presented in Sterling, which is also the
Group's functional currency.
The principal accounting policies adopted in the preparation of
the consolidated financial statements are set out in Note 2. The
policies have been consistently applied to the year presented,
unless otherwise stated.
The preparation of financial statements in compliance with UK
adopted international accounting standards 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 judgements and estimates have
been made in preparing the financial statements and their effect
are disclosed in Note 3.
Basis of measurement
The consolidated financial statements have been prepared on a
historical cost basis, except for the following items (refer to
individual accounting policies for details):
-- Litigation assets - fair value through profit or loss
Discontinued operations
During the year, the Board approved plans to dispose of the
Group's interests in LionFish. LionFish is classified as held for
sale at the balance sheet date. The net results of LionFish have
been presented as discontinued operations in the Group statement of
comprehensive income (for which the comparatives have been
restated). See Note 10 for further details.
Going concern
As described in the Strategic Report the Group expects to be
able to operate within the Group's financing facilities and in
accordance with the covenants set out in all available facility
agreements. Accordingly, the Directors have a reasonable
expectation that the Company and the Group have adequate resources
to continue in operational existence for the foreseeable future and
they have adopted the going concern basis of accounting in
preparing the annual Group financial statements.
Changes in accounting policies
a. New standards, interpretations and amendments effective from 1 January 2022
New standards that have been adopted in the annual financial
statements for the year ended 31 December 2022 but have not had a
significant effect on the Group are:
-- Onerous Contracts - Cost of Fulfilling a Contract (Amendments to IAS 37);
-- Property, Plant and Equipment: Proceeds before Intended Use (Amendments to IAS 16);
-- Annual Improvements to IFRS Standards 2018-2020 (Amendments
to IFRS 1, IFRS 9, IFRS 16 and IAS 41); and
-- References to Conceptual Framework (Amendments to IFRS 3).
b. New standards, interpretations and amendments not yet effective
There are a number of standards, amendments to standards, and
interpretations which have been issued by the IASB that are
effective in future accounting periods that the Group has decided
not to adopt early.
The following amendments are effective for the period beginning
1 January 2023:
-- Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS Practice Statement 2);
-- IFRS 17 Insurance Contracts;
-- Definition of Accounting Estimates (Amendments to IAS 8); and
-- Deferred Tax Related to Assets and Liabilities arising from a
Single Transaction (Amendments to IAS 12)
The Group is currently assessing the impact of these new
accounting standards and amendments and does not expect that they
will have a material impact on the Group.
The following amendments are effective for the period beginning
1 January 2024:
-- IFRS 16 Leases (Amendment - Liability in a Sale and Leaseback);
-- IAS 1 Presentation of Financial Statements (Amendment -
Classification of Liabilities as Current or Non-current); and
-- IAS 1 Presentation of Financial Statements (Amendment -
Non-current Liabilities with Covenants)
2. Accounting policies
Revenue
Revenue comprises the fair value of consideration receivable in
respect of services provided during the year, inclusive of
recoverable expenses incurred but excluding value added tax.
Legal 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.
Professional services revenues
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.
Adjusted EBITDA and exceptionals
The Group presents adjusted EBITDA as an operating KPI utilised
by management to monitor performance.
EBITDA is adjusted for one off costs that are considered to be
exceptional, being:
-- Restructuring costs
-- One off costs connected to acquisitions
These costs are considered to be exceptional because they do not
relate to the ongoing trade and performance of the business.
Without presenting adjusted EBITDA, the EBITDA would not be
consistent as it would be subject to fluctuations that do not
reflect underlying performance of the Group.
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.
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.
Impairment of non-financial assets (excluding inventories,
investment properties and deferred tax assets)
Impairment tests on goodwill and other intangible assets with
indefinite useful economic lives are undertaken annually at the
financial period end. Other non-financial assets are subject to
impairment tests whenever events or changes in circumstances
indicate that their carrying amount may not be recoverable. Where
the carrying value of an asset exceeds its recoverable amount
(i.e., the higher of value in use and fair value less costs to
sell), the asset is written down accordingly.
Where it is not possible to estimate the recoverable amount of
an individual asset, the impairment test is carried out on the
smallest group of assets to which it belongs for which there are
separately identifiable cash flows; its cash generating units
('CGUs'). Goodwill is allocated on initial recognition to each of
the Group's CGUs that are expected to benefit from a business
combination that gives rise to the goodwill.
Impairment charges are included in profit or loss, except to the
extent they reverse gains previously recognised in other
comprehensive income. An impairment loss recognised for goodwill is
not reversed.
Foreign currency
Transactions entered into by Group entities in a currency other
than the currency of the primary economic environment in which they
operate (their "functional currency") are recorded at the rates
ruling when the transactions occur. Foreign currency monetary
assets and liabilities are translated at the rates ruling at the
reporting date. Exchange differences arising on the retranslation
of unsettled monetary assets and liabilities are recognised
immediately in profit or loss.
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.
Litigation assets are reviewed for impairment where events or
circumstances indicate that their carrying amount may not be
recoverable. Where the carrying value of the litigation assets
exceeds its recoverable amount, the asset is written down
accordingly.
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 transactions 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.
Defined contribution schemes
Contributions to defined contribution pension schemes are
charged to the consolidated statement of comprehensive income in
the year to which they relate.
Short-term benefits
Short-term employee benefit obligations are measured on an
undiscounted basis and are expensed as the related service is
provided. A liability is recognised for the amount expected to be
paid under short-term cash bonus or profit-sharing plans if the
Group has a present legal or constructive obligation to pay this
amount as a result of past service provided by the employee and the
obligation can be estimated reliably.
Share-based payments
Where equity settled share options are awarded to employees, the
fair value of the options at the date of grant is charged to the
consolidated statement of comprehensive income over the vesting
period. Non-market vesting conditions are taken into account by
adjusting the number of equity instruments expected to vest at each
reporting date so that, ultimately, the cumulative amount
recognised over the vesting period is based on the number of
options that eventually vest. Non-vesting conditions and market
vesting conditions are factored into the fair value of the options
granted. As long as all other vesting conditions are satisfied, a
charge is made irrespective of whether market vesting conditions
are satisfied. The cumulative expense is not adjusted for failure
to achieve a market vesting condition or where a non-vesting
condition is not satisfied.
Where the terms and conditions of options are modified before
they vest, the increase in the fair value of the options, measured
immediately before and after the modification, is also charged to
the consolidated statement of comprehensive income over the
remaining vesting period. Where equity instruments are granted to
persons other than employees, the consolidated statement of
comprehensive income is charged with the fair value of goods and
services received.
Leased assets
Identifying leases
The Group accounts for a contract, or a portion of a contract,
as a lease when it conveys the right to use an asset for a period
of time in exchange for consideration. Leases are those contracts
that satisfy the following criteria:
(a) There is an identified asset;
(b) The Group obtains substantially all the economic benefits
from use of the asset; and
(c) The Group has the right to direct use of the asset
The Group considers whether the supplier has substantive
substitution rights. If the supplier does have those rights, the
contract is not identified as giving rise to a lease.
In determining whether the Group obtains substantially all the
economic benefits from use of the asset, the Group considers only
the economic benefits that arise from use of the asset, not those
incidental to legal ownership or other potential benefits.
In determining whether the Group has the right to direct use of
the asset, the Group considers whether it directs how and for what
purpose the asset is used throughout the period of use. If there
are no significant decisions to be made because they are
pre-determined due to the nature of the asset, the Group considers
whether it was involved in the design of the asset in a way that
predetermines how and for what purpose the asset will be used
throughout the period of use. If the contract or portion of the
contract does not satisfy these criteria, the Group applies other
applicable IFRSs rather than IFRS 16.
All leases are accounted for by recognising a right-of-use asset
and a lease liability except for:
-- Leases of low value assets; and
-- Leases with a term of 12 months or less
Lease liabilities are measured at the present value of the
contractual payments due to the lessor over the lease term, with
the discount rate determined by reference to the rate inherent in
the lease unless this is not readily determinable, in which case
the Group's incremental borrowing rate on commencement of the lease
is used. Variable lease payments are only included in the
measurement of the lease liability if they depend on an index or
rate. In such cases, the initial measurement of the lease assumes
the variable element will remain unchanged throughout the lease
term. Other variable lease payments are expensed in the period to
which they relate.
On initial recognition, the carrying value of the lease
liability also includes:
-- amounts expected to be payable under any residual value guarantee
-- the exercise price of any purchase option granted in favour
of the Group if it is reasonably certain to assess that option
-- any penalties payable for terminating the lease, if the term
of the lease has been estimated on the basis of the termination
option being exercised
Right-of-use assets are initially measured at the amount of the
lease liability, reduced for any lease incentives received, and
increased for:
-- lease payments made at or before the commencement of the lease
-- initial direct costs incurred and
-- the amount of any provision recognised where the Group is
contractually required to dismantle, remove or restore the leased
asset
Subsequent to initial measurement lease liabilities increase as
a result of interest charged at a constant rate on the balance
outstanding and are reduced for lease payments made. Right-of-use
assets are amortised on a straight-line basis over the remaining
term of the lease or over the remaining economic life of the asset
if this is judged to be shorter than the lease term.
When the Group revises its estimate of the term of any lease, it
adjusts the carrying amount of the lease liability to reflect the
payments to make over the revised term, which are discounted using
a revised discount rate. The carrying value of lease liabilities is
similarly revised when the variable element of future lease
payments dependent on a rate or index is revised, except the
discount rate remains unchanged. In both cases an equivalent
adjustment is made to the carrying value of the right-of-use asset,
with the revised carrying amount being amortised over the remaining
lease term.
For contracts that both convey a right to the Group to use an
identified asset and require services to be provided to the Group
by the lessor for a variable amount, the Group has elected to
account for the right-of-use payments as a lease and expense the
service charge payments in the period to which they relate.
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 15 - 19 years Straight line Estimated discounted
cash flow
Customer contracts 1 - 2 years 1 year In line with Estimated discounted
contract revenues cash flow
Restrictive 2 years 1 year Straight line Cost
covenant extension
Non-current investments
Investments in subsidiary undertakings are stated at cost less
amounts written off for impairment. Investments are reviewed for
impairment where events or circumstances indicate that their
carrying amount may not be recoverable.
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.
Income tax
Income tax expense represents the sum of the tax currently
payable.
The tax currently payable is based on taxable profit for the
year. Taxable profit differs from profit as reported in the
statement of comprehensive income because it excludes items of
income or expense that are taxable or deductible in other years and
it further excludes items that are not taxable or tax
deductible.
The Group's liability for current tax is calculated using tax
rates (and tax laws) that have been enacted or substantively
enacted by the end of the financial year.
Deferred taxation
Deferred tax assets and liabilities are recognised where the
carrying amount of an asset or liability in the consolidated
statement of financial position differs from its tax base, except
for differences arising on:
-- the initial recognition of goodwill
-- the initial recognition of an asset or liability in a
transaction which is not a business combination and at the time of
the transaction affects neither accounting or taxable profit,
and
-- investments in subsidiaries and joint arrangements where the
Group is able to control the timing of the reversal of the
difference and it is probable that the difference will not reverse
in the foreseeable future
Recognition of deferred tax assets is restricted to those
instances where it is probable that taxable profit will be
available against which the difference can be utilised.
The amount of the asset or liability is determined using tax
rates that have been enacted or substantively enacted by the
reporting date and are expected to apply when the deferred tax
liabilities/assets are settled /recovered.
Deferred tax assets and liabilities are offset when the Group
has a legally enforceable right to offset current tax assets and
liabilities and the deferred tax assets and liabilities relate to
taxes levied by the same tax authority on either:
-- The same taxable group company, or
-- Different group entities which intend either to settle
current tax assets and liabilities on a net basis, or to realise
the assets and settle the liabilities simultaneously, in each
future period in which significant amounts of deferred tax assets
or liabilities are expected to be settled or recovered.
Property, plant and equipment
Items of property, plant and equipment are initially recognised
at cost, and subsequently stated at cost less any accumulated
depreciation and impairment losses. As well as the purchase price,
cost includes directly attributable costs and the estimated present
value of any future unavoidable costs of dismantling and removing
items. The corresponding liability is recognised within
provisions.
Depreciation is provided on all items of property, plant and
equipment so as to write off their carrying value over their
expected useful economic lives. It is provided at the following
rates:
Leasehold improvements - Straight line over the life of the lease
Plant and equipment - 33% per annum straight line
Fixtures and fittings - 25% per annum straight line
Computer equipment - 33% per annum straight line
Investments in associates
Investments in associates are accounted for under the equity
method, initially recorded at cost, and then subsequently stated at
cost, adjusted for attributable share of profit or loss after the
date of acquisition.
Share Capital
Ordinary shares are recorded at nominal value and proceeds
received in excess of nominal value of shares issued, if any, are
accounted for as share premium. Both ordinary shares and share
premium are classified as equity.
Provisions
Professional indemnity provision
A provision is recognised when the Group has a present legal or
constructive obligation as a result of a past event, that can be
reliably measured, and it is probable that an outflow of economic
benefits will be required to settle the obligation. Where material,
the impact of the time value of money is taken into account by
discounting the expected future cash flow at a pre-tax rate, which
reflects risks specific to the liability.
Insurance cover is maintained in respect of professional
negligence claims. This cover is principally written through
insurance companies. Premiums are expensed as they fall due with
prepayments or accruals being recognised accordingly. Expected
reimbursements are recognised once they become receivable. The
liability and associated reimbursement asset are shown separately
in the financial statements. Where outflow of resources is
considered probable and reliable estimates can be made, provision
is made for the cost (including related legal costs) of settling
professional negligence claims brought against the Group by third
parties and disciplinary proceedings brought by regulatory
authorities. Amounts provided for are based on Management's
assessment of the specific circumstances in each case. No separate
disclosure is made of the detail of such claims and proceedings, as
to do so could seriously prejudice the position of the Group. In
the event the insurance companies cannot settle the full liability,
the liability will revert to the Group.
Dilapidations provision
The Group recognises a provision for the future costs of
dilapidations on leased office space. The provision is an estimate
of the total cost to return applicable office space to its original
condition at the end of the lease term.
Restatements
The 2021 comparative numbers have been restated for the
following correction which is described fully in Note 31:
-- Reclassification of amounts due from Group companies between
current and non-current assets to reflect expectations of the
timing of repayment
The Company statement of financial position adjustment decreased
current trade and other receivables by GBP35,343,534 and increased
non-current trade and other receivables by GBP35,343,534.
The 2021 comparative numbers have been restated to reflect
LionFish being disclosed as a discontinued operation in the current
year, refer to Note 10.
3. Critical accounting estimates and judgments
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 contingent fee arrangements,
including where services are provided under Damages Based
Agreements ("DBAs"), the Group estimates the total amount of
variable consideration to which it will be entitled and constrains
the revenue recognition 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.
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.
Critical accounting estimates and judgements (continued)
3.
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.
Critical accounting estimates and judgements (continued)
3.
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 DBA 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 damages 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 damages based
agreement from period to period, the prior year valuation is taken
as the initial indication of fair value, subject to assessment for
overstatement.
Litigation assets are reviewed for impairment where events or
circumstances indicate that their carrying amount may not be
recoverable. Where the carrying value of the litigation asset
exceeds its recoverable amount, the asset is written down
accordingly
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.
In the prior year, the Company was informed that HMRC had
started an inquiry into the valuation of employee related
securities issued by the Company in April 2018 prior to the IPO,
this inquiry is on-going. For full details, refer to Note 32.
4. Financial instruments - Risk Management
The Group is exposed through its operations to the following
financial risks:
-- Credit risk
-- Interest rate risk and
-- Liquidity risk
In common with all other businesses, the Group is exposed to
risks that arise from its use of financial instruments. This note
describes the Group's objectives, policies and processes for
managing those risks and the methods used to measure them. Further
quantitative information in respect of these risks is presented
throughout these financial statements.
There have been no substantive changes in the Group's exposure
to financial instrument risks, its objectives, policies and
processes for managing those risks or the methods used to measure
them from the previous period unless otherwise stated in this
note.
(i) Principal financial instruments
The principal financial instruments used by the Group, from
which financial instrument risk arises, are as follows:
-- Trade receivables
-- Cash and cash equivalents
-- Litigation assets and liabilities
-- Trade and other payables
-- Derivative financial liabilities
-- Floating-rate bank loans
(ii) Financial instruments by category
Financial assets - Fair value through Amortised cost
Group profit or loss
31 December 31 December 31 December 31 December
2022 2021 2022 2021
restated restated
GBP GBP GBP GBP
Cash and cash equivalents - - 3,000,678 4,736,546
Trade and other receivables - - 25,047,445 17,367,064
Litigation assets 10,603,024 6,675,538 - -
Total financial assets 10,603,024 6,675,538 28,048,123 22,103,610
------------ ------------ ------------ ------------
On 31 December 2022, financial assets held at fair value through
profit or loss of GBP5,331,698 were transferred to assets held for
sale (2021: GBP4,895,514). Financial assets held at amortised cost
of GBP4,755,219 were transferred to assets held for sale (2021:
GBP779,678). Refer to note 10 for further details
Financial instruments - Risk Management (continued)
4.
Financial assets - Fair value through Amortised cost
Company profit or loss
31 December 31 December 31 December 31 December
2022 2021 2022 2021
restated restated
GBP GBP GBP GBP
Cash and cash equivalents - - 413,635 2,460,489
Trade and other receivables - - 53,758,535 46,748,875
Total financial assets - - 54,172,170 49,209,364
-------------- ------------ ------------ ------------
Financial Liabilities Fair value through profit Amortised cost
- Group or loss
31 December 31 December 31 December 31 December
2022 2021 2022 2021
restated
GBP GBP GBP GBP
Trade payables and
accruals - - 6,845,356 4,564,874
Loans and borrowings - - 22,205,640 19,129,592
Derivative financial
liabilities - - - 1,515,000
Other payables - - 100 2,308,328
Total financial
liabilities - - 29,051,096 27,517,794
--------------- ------------- ------------ ------------
On 31 December 2022, financial liabilities carried at amortised
cost of GBP1,283,385 were transferred to liabilities held for sale
(2021: GBP803,881), refer to note 10.
Financial Liabilities Fair value through profit Amortised cost
- Company or loss
31 December 31 December 31 December 31 December
2022 2021 2022 2021
restated
GBP GBP GBP GBP
Trade payables and
accruals - - 4,290,801 2,143,546
Total financial liabilities - - 4,290,801 2,143,546
--------------- ------------- ------------ ------------
Trade and other payables are due within twelve months.
Financial instruments - Risk Management (continued)
4.
(iii) Financial instruments not measured at fair value
Financial instruments not measured at fair value includes cash
and cash equivalents, trade and other receivables, trade and other
payables, loans and borrowings, litigation liabilities and
derivative financial liabilities.
Due to their short-term nature, the carrying value of cash and
cash equivalents, trade and other receivables, and trade and other
payables approximates their fair value.
(iv) Financial instruments measured at fair value
Litigation assets are classified as level 3 in the fair value
hierarchy of financial instruments.
The methods and procedures to fair value litigation assets may
include, but are not limited to: (i) obtaining information provided
by third parties when available; (ii) performing comparisons of
comparable or similar investment matters; (iii) calculating the
present value of future cash flows; (iv) assessing other analytical
data and information relating to the investment that is an
indication of value; (v) reviewing the amounts invested in these
investments; (vii) entering into a market transaction with an arm's
length party.
The material estimates and assumptions used in the analysis of
fair value include the status and risk profile of the risks
underlying the investment, the timing and expected amount of cash
flows based on the investment structure and agreement, the
appropriateness of discount rates used, if any, and in some cases,
the timing of, and estimated minimum proceeds from, a favourable
outcome. Significant judgement and estimation goes into the
assumptions which underlie the analyses, and the actual values
realised with respect to investments could be materially different
from values obtained based on the use of the estimates.
The reconciliation of the opening and closing fair value balance
of the level 3 financial instruments is provided in Note 19
together with a sensitivity analysis.
General objectives, policies and processes
The Board has overall responsibility for the determination of
the Group's risk management objectives and policies and, whilst
retaining ultimate responsibility for them, it has delegated the
authority for designing and operating processes that ensure the
effective implementation of the objectives and policies to the
Group's finance function. The Board receives monthly reports from
the Group Finance Director through which it reviews the
effectiveness of the processes put in place and the appropriateness
of the objectives and policies it sets.
The overall objective of the Board is to set policies that seek
to reduce risk as far as possible without unduly affecting the
Group's competitiveness and flexibility. Further details regarding
these policies are set out below:
Credit risk
Credit risk is the risk of financial loss to the Group if a
client or counterparty to a financial instrument fails to meet its
contractual obligations. The Group is mainly exposed to credit risk
from credit sales. It is Group policy to assess the credit risk of
new and irregular clients before entering contracts and to require
money on account of work for these clients. The Group reviews, on a
regular basis, whether to perform further work where clients have
unpaid bills. The Group works with a broad spread of long-standing
reputable clients to ensure there are no significant concentrations
of credit risk.
Credit risk also arises from cash and cash equivalents and
deposits with banks and financial institutions. Cash and cash
equivalents are invested with banks with an A+ credit rating.
Financial instruments - Risk Management (continued)
4.
Interest rate risk
The Group is exposed to cash flow interest rate risk from
borrowings under the Term Facility and Revolving Credit Facility at
variable rate. The Board reviews the interest rate exposure on a
regular basis.
During 2022 and 2021, the Group's borrowings at variable rate
were denominated in sterling. At 31 December 2022, if interest
rates on sterling denominated borrowings had been 150 basis points
higher/lower with all other variables held constant, profit after
tax for the year would have been GBP267,000 lower/higher, mainly as
a result of higher/lower interest expense on floating-rate
borrowings. The directors consider that 150 basis points is the
maximum likely change in sterling interest rates over the next
year, being the period up to the next point at which the Group
expects to make these disclosures.
Liquidity risk
Liquidity risk arises from the Group's management of working
capital and the finance charges and principal repayments on its
debt instruments. It is the risk that the Group will encounter
difficulty in meeting its financial obligations as they fall due.
The Group's policy is to ensure that it will always have sufficient
cash (or agreed facilities) to allow it to meet its liabilities
when they become due and to take advantage of business
opportunities.
The Board reviews the projected financing requirements annually
when agreeing the Group's budget and receives rolling 12-month cash
flow projections for the Group on a regular basis as well as
information regarding cash balances.
On 19 April 2021, the Group signed an amendment and restatement
agreement for a GBP15,000,000 three-year Revolving Credit Facility
and GBP10,000,000 three-year Term Facility Commitment with HSBC UK
Bank plc. The Group may utilise any proportion of the facilities,
paying an interest margin of 2.4% - 3.15% over SONIA on
utilisations and a commitment fee on the unutilised facility. The
facility is secured by the debenture which grants first ranking
fixed and floating security of the property and assets of the Group
as referenced in Notes 13 and 15. During 2022, the Group drew down
the remaining GBP5 million of the Revolving Credit Facility and
GBP2 million of the Term Facility Commitment was repaid during the
year. At the year end the Group had GBP3.0 million in cash, and so
a net debt position of GBP19.2 million (2021: GBP14.4 million).
At the end of the financial year, cash flow projections
indicated that the Group expected to have sufficient liquid
resources to meet its obligations, including scheduled lease
payments (Note 14), under all reasonably expected
circumstances.
Capital Management
The Group monitors "adjusted capital" which comprises all
components of equity (i.e., share capital, share premium,
non-controlling interest and retained earnings).
The Group's objectives when maintaining capital are:
-- to safeguard the entity's ability to continue as a going
concern, so that it can continue to provide returns for
shareholders and benefits for other stakeholders, and
-- to provide an adequate return to shareholders by pricing
products and services commensurately with the level of risk
The Group expects to pursue a progressive dividend policy over
time, driven primarily by the level of cash retained within the
business as well as investment opportunities available to the Group
and from time to time review the continued appropriateness of such
policy.
5. Segment information
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
(litigation financing activities operated by LionFish are included
in discontinued operations, Note 10)
-- Professional Services - Provision of sell-side M&A
corporate finance services, provided by Convex
2022 Legal Litigation Professional Total
services finance services
GBP GBP GBP GBP
Segment revenue 44,873,908 - 5,433,355 50,307,263
=========== =========== ============= ============
Segment gains on litigation
assets comprising:
Proceeds on disposal of litigation
assets - 2,741,700 - 2,741,700
Realisation of litigation assets - (720,000) - (720,000)
----------- ----------- ------------- ------------
Profit on disposal of litigation
assets - 2,021,700 - 2,021,700
Fair value movement on litigation
assets - 1,800,000 - 1,800,000
----------- ----------- ------------- ------------
- 3,821,700 - 3,821,700
=========== =========== ============= ============
Segment contribution 22,699,777 - 1,944,104 24,643,881
=========== =========== ============= ============
Segment gains on litigation
assets - 3,821,700 - 3,821,700
=========== =========== ============= ============
Costs not allocated to segments
Personnel costs (5,074,989)
Depreciation and amortisation (3,543,302)
Other operating expense (8,762,018)
Net financial expenses (1,328,775)
Loss on sale of equity accounted
associate (21,643)
Group profit for the year before
tax on continuing operations 9,734,854
============
Segment information (continued)
5.
2021 (restated) Legal Litigation Professional Total
services finance 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 - 1,825,000 - 1,825,000
Realisation of litigation assets - (730,000) - (730,000)
----------- ----------- ------------- ------------
Profit on disposal of litigation
assets - 1,095,000 - 1,095,000
Fair value movement on litigation - - - -
assets
----------- ----------- ------------- ------------
- 1,095,000 - 1,095,000
=========== =========== ============= ============
Segment contribution 15,007,758 - 4,631,515 19,639,273
=========== =========== ============= ============
Segment gains on litigation
assets - 1,095,000 - 1,095,000
=========== =========== ============= ============
Costs not allocated to segments
Personnel costs (4,430,718)
Depreciation and amortisation (2,936,240)
Other operating expense (6,897,382)
Net financial expenses (778,983)
Share of post-tax profits on
equity accounted associate 21,643
Group profit for the year before
tax on continuing operations 5,712,593
============
Total assets and liabilities by operating segment are not
reviewed by the chief operating decision makers and are therefore
not disclosed.
A geographical analysis of revenue is given below:
Revenue by location of
clients
2022 2021
GBP GBP
United Kingdom 43,393,963 36,893,981
Europe 1,528,152 549,860
North America 567,170 760,208
Other 4,817,978 3,781,289
50,307,263 41,985,338
------------ -----------
Revenues from Legal Services clients that account for more than
10% of Group revenue was GBP6,632,334 (2021: GBPnil).
Segment information (continued)
5.
Contract assets
2022 2021
Group GBP GBP
At 1 January 5,976,258 2,996,925
Acquired through business combinations - 3,560,480
Transfers in the period from contract assets
to trade receivables (3,039,106) (2,464,783)
Impairment of contract assets (412,125) -
Excess of revenue recognised over cash (or
rights to cash) being recognised during the
year 7,178,785 1,883,636
At 31 December 9,703,812 5,976,258
------------ ------------
Contract assets are included within "trade and other
receivables" on the face of the statement of financial position.
They arise when the Group has performed services in accordance with
the agreement with the relevant client and has obtained right to
consideration for those services, but such income has not been
billed at the balance sheet date.
6. Profit from operations and auditor's remuneration
2022 2021
restated
GBP GBP
Profit from operations is stated after
charging:
Fees payable to the company's auditors:
Audit fees 290,000 246,350
Other services - pursuant to legislation/regulation 36,684 41,150
Depreciation of property, plant and
equipment 552,305 525,607
Amortisation of right-of-use assets 2,153,585 1,781,058
Amortisation/impairment of intangible
assets 837,413 633,415
Lease expense:
Short-term - -
Low value - 3,874
For the year ended 31 December 2022, depreciation of property,
plant and equipment of GBP4,098 (2021: GBP3,838) was transferred to
discontinued operations.
Profit from operations and auditor's remuneration (continued)
6.
The Alternative Performance Measures used by Management are
shown below:
2022 2021
restated
GBP GBP
Operating profit 11,085,272 6,469,933
Depreciation and amortisation expense 3,543,302 2,936,240
Non-underlying items 1,202,111 863,435
----------- -----------
Adjusted EBITDA 15,830,685 10,269,608
----------- -----------
2022 2021
restated
GBP GBP
Profit before tax 9,734,854 5,712,593
Non-underlying items 1,202,111 863,435
----------- -----------
Adjusted PBT 10,936,965 6,576,028
----------- -----------
7. Employees
Group
2022 2021
restated
GBP GBP
Staff costs (including directors) consist
of:
Wages and salaries 22,804,330 20,483,009
Short-term non-monetary benefits 294,501 214,208
Cost of defined contribution scheme 711,529 664,240
Share-based payment expense 6,244 72,000
Social security costs 2,999,841 2,485,004
----------- -----------
26,816,445 23,918,461
Personnel costs stated in the consolidated statement of
comprehensive income includes the costs of contractors of
GBP3,896,839 (2021: GBP2,854,685).
Staff costs transferred to discontinued operations during the
year of GBP474,361 (2021: GBP436,194)
Contractors' costs transferred to discontinued operations during
the year of GBP7,655 (2021: GBP144,437)
The average number of employees (including directors) during the
year was as follows:
2022 2021
Number Number
Legal and professional staff 138 113
Administrative staff 73 62
------- -------
211 175
------- -------
Employees (continued)
7.
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 for continuing operations to the funds and amounted to
GBP711,529 (2021: GBP664,240).
Contributions amounting to GBP260,548 (2021: GBP127,296) were
payable to the funds at year end and are included in Trade and
other payables.
Company
The average number of employees (excluding directors) during the
period was nine (2021: six); all other personnel are employed by
subsidiary undertakings.
Details of the Directors' remuneration, share interests and
transactions with directors are included in the Directors' Report
and in Note 29. The directors are considered to be the key
management personnel.
8. Finance income and expense
2022 2021
GBP GBP
Recognised in profit or loss
Finance income
Interest received on bank deposits 32,739 22,676
----------------------- ---------------------
Net finance income recognised in profit
or loss 32,739 22,676
Finance expense
Interest expense on financial liabilities
measured at amortised cost (832,816) (409,089)
Interest expense on lease liabilities (528,698) (392,570)
----------------------- ---------------------
(1,361,514) (801,659)
Net finance (expense) recognised on profit
or loss (1,328,775) (778,983)
----------------------- ---------------------
The above financial income and expense include the following in
respect of assets/(liabilities) not at fair value through profit or
loss:
2022 2021
GBP GBP
Total interest income on financial assets 32,739 22,676
Total interest expense on financial liabilities (832,816) (409,089)
--------------------- ---------------------
(800,077) (386,413)
9. Tax expense
2022 2021
restated
GBP GBP
Current tax expense
Current tax on profits for the year 1,116,247 1,960,545
Adjustment for under provision in prior
years 8,341 7,487
---------- ----------
Total current tax 1,124,588 1,968,032
Deferred tax expense
Origination and reversal of temporary differences
in current period (Note 24) (130,212) 789
Origination and reversal of temporary differences 23,575 -
in prior period (Note 24)
---------- ----------
Total tax expense 1,017,951 1,968,821
---------- ----------
Tax charge attributable to:
Profit from continuing operations 1,932,586 1,300,577
Profit/(loss) from discontinued operations (914,635) 668,244
Tax expense excluding share of tax of equity
accounted associate 1,017,951 1,968,821
Share of tax expense of equity accounted
associate - 5,175
---------- ----------
1,017,951 1,973,996
---------- ----------
The reasons for the difference between the actual tax charge for
the period and the standard rate of corporation tax in the United
Kingdom applied to profits for the year are as follows:
2022 2021
restated
GBP GBP
Profit/(loss) for the year from:
Continuing operations 7,802,268 4,412,016
Discontinued operations (3,984,887) 2,845,397
3,817,381 7,257,413
Income tax expense (including income
tax on associate) attributable to: 1,017,951 1,973,996
Continuing operations 1,932,586 1,305,752
Discontinued operations (914,635) 668,244
Profit before income taxes 4,835,332 9,231,409
------------ ----------
Tax using the Company's domestic tax
rate of 19% 918,713 1,753,968
Expenses not deductible for tax purposes 91,370 117,317
Fixed asset differences (675) (3,276)
Adjustments in respect of prior periods 8,341 7,487
Adjustments in respect of prior periods 23,575 -
(deferred tax)
Remeasurement of deferred tax for changes
in tax rates (23,373) 98,500
Total tax expense 1,017,951 1,973,996
------------ ----------
Tax expense (continued)
9.
Changes in tax rates and factors affecting the future tax
charge
Following the Finance Bill 2021, enacted on 24 May 2021, the UK
corporate tax rate increased from 19% to 25% on 1 April 2023. As
IFRS requires deferred tax to be measured at tax rates that have
been substantively enacted at the reporting date, the Group's
deferred tax balances have been re-measured accordingly and the
impact has been reflected within the consolidated financial
statements.
10. Discontinued operations
In December 2022, the Board announced its intention to dispose
of LionFish Litigation Finance Limited ("LionFish").
On 12 August 2020, the Company agreed put options over the
shares of LionFish held by the non-controlling interest. Under this
agreement, the holder of the shares could require the Company to
buy the shares in LionFish, with consideration based on a multiple
of LionFish profits, settled by the issue of ordinary shares in the
Company. On 8 December 2022, the minority shares were transferred
to the Group for GBPnil and this agreement was terminated. The
present value of the put option was released through the Statement
of Changes in Equity (2021: GBP1,015,000).
Financial performance and cash flow information
The financial performance and cash flow information presented
are for the 12 months ending 31 December 2022 and 31 December
2021
2022 2021
Discontinued operations - LionFish GBP GBP
(Loss)/Gain on litigation assets (4,318,025) 4,112,524
Expenses other than finance costs (500,608) (598,883)
Non-underlying items (80,889) -
Tax credit/(expense) 914,635 (668,244)
(Loss)/Profit for the year (3,984,887) 2,845,397
------------ ------------
Attributable to:
Equity holders of the parent (3,599,325) 2,560,857
Non-controlling interests (385,562) 284,540
(3,984,887) 2,845,397
2022 2021
Cash flow GBP GBP
Net cash (outflow)/inflow from
operating activities (845,511) 2,166,222
Net cash outflow from investing
activities (389) (549)
Net cash outflow from financing
activities - (2,000,000)
------------ ------------
Net (decrease)/increase in cash
generated (845,900) 165,673
------------ ------------
10. Discontinued operations (continued)
Assets and liabilities of disposal group held for sale
The following major classes of assets and liabilities in
relation to LionFish have been classified as held for sale in the
consolidated statement of financial position.
2022 2021
GBP GBP
Property, plant and equipment 2,770 6,479
Litigation investments 5,331,698 4,895,514
Trade and other receivables 1,244 795
Cash and cash equivalents 11,405 19,597
---------- ----------
Assets held for sale 5,347,117 4,922,385
---------- ----------
Trade and other payables 1,283,883 803,881
Amounts due to parent company 4,766,624 760,081
Tax liabilities 412,551 489,478
---------- ----------
Liabilities held for sale 6,463,058 2,053,440
---------- ----------
11. Earnings per share
Total Total
2022 2021
Restated
Numerator GBP GBP
Profit for the year and earnings used in
basic and diluted EPS:
From continuing operations 7,802,268 4,412,016
From discontinued operations (3,599,325) 2,560,857
Non-Underlying items
Costs of acquiring subsidiary 367,303 863,435
Restructuring costs 834,808 -
Less: tax effect of above items (209,647) (69,242)
Profit for the year adjusted for non-underlying
items from continuing operations 8,794,732 5,206,209
------------ -----------
Denominator Number Number
Weighted average number of shares used
in basic EPS 95,331,236 91,408,901
Impact of share options 188,392 153,437
------------ -----------
Weighted average number of shares used
in diluted EPS 95,519,628 91,562,338
------------ -----------
11. Earnings per share (continued)
2022 2021
Pence Pence
Restated
Basic earnings per ordinary share from
continuing operations 8.18 4.83
Diluted earnings per ordinary share from
continuing operations 8.17 4.82
Basic earnings per ordinary share from
discontinued operations (3.78) 2.80
Diluted earnings per ordinary share from
discontinued operations (3.78) 2.80
Basic earnings per ordinary share from
total operations 4.41 7.63
Diluted earnings per ordinary share from
total operations 4.40 7.62
Basic earnings per ordinary share adjusted
for non-underlying items from continuing
operations 9.23 5.70
Diluted earnings per ordinary share adjusted
for non-underlying items from continuing
operations 9.21 5.69
12. Dividends
2022 2021
GBP GBP
Interim dividend of 3p (2021: 3p) per ordinary
share proposed and paid during the year
relating to the previous year's results 2,832,898 2,541,412
Interim dividend of 2p (2021: 2p) per ordinary
share paid during the year 1,903,173 1,889,002
---------- ----------
4,736,071 4,430,414
---------- ----------
13. Property, plant and equipment
Group
Leasehold Fixtures Computer Total
improvements and fittings Equipment
GBP GBP GBP GBP
Cost
At 1 January 2022 (restated) 2,710,279 251,294 779,546 3,741,119
Additions 7,471 87,883 103,998 199,352
At 31 December 2022 2,717,750 339,177 883,544 3,940,471
Accumulated depreciation
and impairment
At 1 January 2022 (restated) 487,148 116,989 554,071 1,158,208
Charge for the year 285,370 109,399 157,536 552,305
At 31 December 2022 772,518 226,388 711,607 1,710,513
Net book value
At 1 January 2022 (restated) 2,223,131 134,305 225,475 2,582,911
-------------- -------------- ----------- ----------
At 31 December 2022 1,945,232 112,789 171,937 2,229,958
-------------- -------------- ----------- ----------
Property, plant and equipment transferred to held for sale at 31
December 2022 of GBP2,770 (2021: GBP6,479).
Company
Computer Total
Equipment
GBP GBP
Cost
At 1 January 2022 18,750 18,750
Additions - -
At 31 December 2022 18,750 18,750
Accumulated depreciation and impairment
At 1 January 2022 17,667 17,667
Charge for the year 1,038 1,038
----------- -------
At 31 December 2022 18,705 18,705
Net book value
At 1 January 2022 1,083 1,083
----------- -------
At 31 December 2022 45 45
----------- -------
Under a debenture signed and registered on 19 April 2021, HSBC
UK Bank plc have a fixed charge over the property, plant and
equipment of the Group.
14. 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.
The percentages in the table below reflect the current
proportions of lease payments that are either fixed or variable.
The sensitivity reflects the impact on the carrying amount of lease
liabilities and right-of-use assets if there was an uplift of 5% on
the balance sheet date to lease payments that are variable.
At 31 December 2022 Lease Variable Sensitivity
Contract Payments
Number % GBP000
Property leases with payments linked
to inflation 1 56.1% +/- 218
Property leases with periodic uplifts
to market rentals 2 43.9% +/- 584
3 100.0% +/- 802
The percentages in the table below reflect the proportions of
lease payments that are either fixed of variable for the
comparative period.
At 31 December 2021 Lease Variable Sensitivity
Contract Payments
Number % GBP000
Property leases with payments linked
to inflation 1 46.7% +/- 253
Property leases with periodic uplifts
to market rentals 2 53.3% +/- 539
3 100.0% +/- 792
Right-of-use Assets
Land and Computer Total
buildings equipment
GBP GBP GBP
At 1 January 2021 5,822,408 3,304 5,825,712
Acquired through business combinations 11,798,710 - 11,798,710
Amortisation (1,777,754) (3,304) (1,781,058)
Variable lease payment adjustment 69,644 - 69,644
------------ ----------- ------------
At 31 December 2021 15,913,008 - 15,913,008
At 1 January 2022 15,913,008 - 15,913,008
Amortisation (2,153,585) - (2,153,585)
Variable lease payment adjustment 1,314,709 - 1,314,709
------------ ----------- ------------
At 31 December 2022 15,074,132 - 15,074,132
14. Leases (continued)
Lease liabilities
Land and buildings Computer Total
equipment
GBP GBP GBP
At 1 January 2021 5,947,655 3,407 5,951,062
Acquired through business combinations 11,685,333 - 11,685,333
Interest expense 392,523 47 392,570
Variable lease payment adjustment 69,644 - 69,644
Lease payments (2,246,054) (3,454) (2,249,508)
------------------- ----------- ------------
At 31 December 2021 15,849,101 - 15,849,101
At 1 January 2022 15,849,101 - 15,849,101
Interest expense 528,698 - 528,698
Variable lease payment adjustment 1,314,709 - 1,314,709
Lease payments (1,740,524) - (1,740,524)
------------------- ----------- ------------
At 31 December 2022 15,951,984 - 15,951,984
At 31 December 2022, lease liabilities were falling due as
follows:
Group Up to Between Between Between Over 5 Total
3 months 3 and 12 1 and 2 2 and 5 years
months years years
GBP GBP GBP GBP GBP GBP
Lease liabilities 549,028 1,689,023 2,342,088 5,421,661 5,950,183 15,951,984
The aggregate undiscounted commitments for low-value leases as
at 31 December 2022 was GBPnil (2021: GBPnil).
15. Intangible assets
Group
Goodwill Customer Brand Other Total
Contracts
GBP GBP GBP GBP GBP
Cost
At 1 January 2021 33,035,260 1,367,784 1,411,596 1,000,000 36,814,640
Additions 18,826,908 338,794 1,948,878 - 21,114,580
----------- ----------- ---------- ---------- -----------
At 31 December 2021 51,862,168 1,706,578 3,360,474 1,000,000 57,929,220
At 1 January 2022 51,862,168 1,706,578 3,360,474 1,000,000 57,929,220
Additions - - - - -
----------- ----------- ---------- ---------- -----------
At 31 December 2022 51,862,168 1,706,578 3,360,474 1,000,000 57,929,220
Accumulated amortisation
and impairment
At 1 January 2021 - 1,293,939 142,636 - 1,436,575
Amortisation charge - 172,660 127,422 333,333 633,415
----------- ----------- ---------- ---------- -----------
At 31 December 2021 - 1,466,599 270,058 333,333 2,069,990
At 1 January 2022 - 1,466,599 270,058 333,333 2,069,990
Amortisation charge - 169,389 168,024 500,000 837,413
----------- ----------- ---------- ---------- -----------
At 31 December 2022 - 1,635,988 438,082 833,333 2,907,403
Net book value
At 31 December 2021 51,862,168 239,979 3,090,416 666,667 55,859,230
----------- ----------- ---------- ---------- -----------
At 31 December 2022 51,862,168 70,590 2,922,392 166,667 55,021,817
----------- ----------- ---------- ---------- -----------
Under a debenture signed and registered on 19 April 2021, HSBC
UK Bank plc have a fixed charge over the intangible assets of the
Group.
16. Impairment of goodwill and other intangible assets
The Group is required to test, on an annual basis, whether
goodwill and other intangible assets have suffered any impairment.
The recoverable amounts are determined based on value in use
calculations. The use of this method requires the estimation of
future cash flows and the determination of a discount rate in order
to calculate the present value of the cash flows. The recoverable
amounts were determined to be higher than the carrying amounts and
so no impairment losses were recognised.
The recoverable amounts have been determined from value in use
calculations based on an extrapolation of the cash flow projections
from the formally approved budget. Values assigned to the key
assumptions represent management's estimate of expected future
trends and are as follows:
-- A pre-tax discount rate of 18% was applied in determining the
recoverable amount. The discount rate is based on the average
weighted cost of capital
-- Growth rates over the longer term of between 0-3% are based
on management's understanding of the market opportunities for
services provided
-- Increases in costs are based on current inflation rates and
expected levels of recruitment needed to generate predicted revenue
growth
-- Cash flows have been assessed over ten years with the
assumption that the business will be ongoing at the end of that
period
The review demonstrated sufficient headroom such that the
estimated carrying values are not sensitive to changes in
assumptions. Having reviewed the key assumptions used, the
Directors do not believe that there is a reasonably possible change
in any of the key assumptions that require further disclosure.
17. Subsidiaries
The principal subsidiaries of RBG Holdings plc, which are
incorporated in England and Wales and have been included in these
consolidated financial statements, are as follows:
Name Principal Registered Proportion Non-controlling
Activity Number of ownership interests' ownership
interest
2022 2021 2022 2021
RBL Law Limited Legal Services 09986118 100% 100% - -
RBG Legal Services
Limited Legal Services 13287062 100% 100% - -
Convex Group (Holdings)
Limited Holding Company 11490871 100% 100% - -
Professional
Convex Capital Limited Services 11491052 100% 100% - -
LionFish Litigation Litigation
Finance Limited Finance 12165991 100% 90% - 10%
Islero Assignments
Limited Dormant 12754244 100% 90% - 10%
Memery Crystal Limited Dormant 13600674 100% 100% - -
Rosenblatt Limited Dormant 13601148 100% 100% - -
The principal place of business of Convex Group (Holdings)
Limited and Convex Capital Limited is Bass Warehouse, 4 Castle
Street, Manchester, M3 4LZ. The principal place of business and
registered office of RBG Legal Services Limited is 165 Fleet
Street, London, England, EC4A 2DY. The principal place of business
of the other subsidiaries and the registered address of each
subsidiary is 9-13 St. Andrew Street, London, England EC4A 3AF.
17. Subsidiaries (continued)
For the year ending 31 December 2022, the principal subsidiary
companies, set out above, were exempt from the requirements of the
Companies Act relating to the audit of individual accounts by
virtue of section 479A of the Companies Act 2006. RBG Holdings plc,
has given a statement of guarantee under the Companies Act 2006
section 479C, whereby RBG Holdings plc will guarantee all
outstanding liabilities to which the respective subsidiary
companies are subject as at 31 December 2022.
Company
2022 2021
GBP GBP
Cost and net book value
At 1 January 27,501,278 15,814,321
Investments in subsidiaries 100 11,686,957
Impairment - -
----------- -----------
At 31 December 27,501,378 27,501,278
----------- -----------
18. Investments in associate
In June 2022, the Group sold its 40% interest in Adnitor
Limited. The post-tax loss on disposal of investment in associate
was determined as follows:
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).
19. Litigation assets
The table below provides analysis of the movements in the Level
3 financial assets.
2022 2021
Level 3 Level 3
restated
GBP GBP
At 1 January 6,675,538 6,569,110
Additions 2,847,486 836,428
Realisations (720,000) (730,000)
Fair value movement 1,800,000 -
----------- ----------
At 31 December 10,603,024 6,675,538
----------- ----------
At 31 December, litigation assets of GBP5,331,698 (2021:
GBP4,895,514) were transferred to assets held for sale
-discontinued operations.
Sensitivity of Level 3 valuations
Following investment, the Group engages in a semi-annual review
of each investment's fair value. At 31 December 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 GBP1,060,302 (2021:
GBP667,554).
20. Trade and other receivables
Group Company Group Company
2022 2022 2021 2021
Restated Restated
GBP GBP GBP GBP
Trade receivables 10,660,265 - 10,183,246 -
Less: provision for impairment
of trade receivables (745,523) - (555,600) -
----------- ----------- ----------- -----------
Trade receivables - net 9,914,742 - 9,627,646 -
Contract assets 9,703,812 - 5,976,258 -
Amounts due from group companies - 53,167,678 - 45,731,735
Amounts due from discontinued
operations 4,766,624 - 760,081
Other receivables 662,267 403,633 1,003,079 775,085
----------- ----------- ----------- -----------
Total financial assets other
than cash and cash equivalents
classified as amortised cost 25,047,445 53,571,311 17,367,064 46,506,820
Prepayments 1,889,736 187,224 1,963,850 242,055
Total trade and other receivables 26,937,181 53,758,535 19,330,914 46,748,875
----------- ----------- ----------- -----------
Due within one year or less 26,937,181 14,204,102 19,330,914 11,405,341
Due after more than one year - 39,554,433 - 35,343,534
----------- ----------- ----------- -----------
26,937,181 53,758,535 19,330,914 46,748,875
At 31 December, trade and other receivables of GBP1,244 (2021:
GBP795) were transferred to assets held for sale - discontinued
operations.
20. Trade and other receivables (continued)
The carrying value of trade and other receivables classified at
amortised cost approximates fair value.
The Group does not hold any collateral as security.
The Group applies the IFRS 9 simplified approach to measuring
expected credit losses using a lifetime expected credit loss
provision for trade receivables and contract assets. To measure
expected credit losses on a collective basis, trade receivables and
contract assets are grouped based on similar credit risk and aging.
The contract assets have similar risk characteristics to the trade
receivables for similar types of contracts.
The expected loss rates are based on the Group's credit losses
experienced over the period since incorporation, adjusted for
current and forward-looking information on macroeconomic factors
affecting the Group's customers. The Group has identified the gross
domestic product (GDP), unemployment rate and inflation rate as the
key macroeconomic factors in the countries where the Group
operates.
The lifetime expected loss provision for trade receivables and
contract assets is as follows:
Current More than More than More than Total
30 days 60 days 120 days GBP
past due past due past due
31 December 2022
Expected loss
rate 0% 3% 4% 19%
Gross carrying
amount 14,437,136 1,832,694 820,647 3,273,600 20,364,077
Loss provision 57,161 49,528 30,947 607,887 745,523
31 December 2021
Expected loss
rate 1% 5% 12% 10%
Gross carrying
amount 11,576,904 1,653,063 1,217,482 1,712,055 16,159,504
Loss provision 152,889 77,204 148,553 176,954 555,600
None of the trade receivables and contract assets have been
subject to a significant increase in credit risk since initial
recognition.
Movements in the impairment allowance for trade receivables are
as follows:
2022 2021
GBP GBP
At 1 January 555,600 219,643
Increase during the year 248,427 524,647
Receivable written off during the year as
uncollectible (24,247) (173,050)
Unused amounts reversed (34,257) (15,640)
At 31 December 745,523 555,600
--------- ----------
Included in other receivables is GBP12,475 (2021: GBP518,944)
which is owed by the Employee Benefit Trust.
20. Trade and other receivables (continued)
Company
The loans due from RBG Legal Services and LionFish Litigation
Finance are on demand and interest free.
Management considers that there is no increase in credit risk on
the related party loans. Given that the loans are on demand,
lifetime credit losses and 12-month credit losses will be the same.
Having considered different recoverability scenarios which
incorporated macroeconomic information (such as market interest
rates and growth rates), current and forward-looking information,
management consider the expected credit losses to be close to
nil.
21. Trade and other payables
Group Company Group Company
2022 2022 2021 2021
restated
GBP GBP GBP GBP
Trade payables 3,969,311 - 1,874,413 -
Corporation tax payable 1,601,655 - 1,002,637 -
Other taxes and social
security 2,620,512 - 1,711,342 -
Amounts due to group companies - 2,873,359 - 1,105,837
Derivative financial liabilities - - 1,515,000 -
Other payables 100 100 2,308,328 -
Accruals 2,876,045 1,417,342 2,690,461 1,037,619
----------- ---------- ----------- ----------
At 31 December 11,067,623 4,290,801 11,102,181 2,143,456
----------- ---------- ----------- ----------
Due within one year or
less 11,067,623 4,290,801 11,102,181 2,143,456
Due after more than one - - - -
year
----------- ---------- ----------- ----------
11,067,623 4,290,801 11,102,181 2,143,456
----------- ---------- ----------- ----------
The carrying value of trade and other payables classified as
financial liabilities measured at amortised cost approximates fair
value.
Other payables for 2021 contains GBP2,248,319 of deferred
consideration (refer to note 25).
At 31 December, trade and other payables of GBP1,696,434 (2021:
GBP1,293,359) were transferred to liabilities held for sale -
discontinued operations (refer to note 10).
22. Loans and borrowings
The book value and fair value of loans and borrowings which all
denominated in sterling are as follows:
Book value Fair value Book value Fair value
31 Dec 31 Dec 31 Dec 31 Dec
22 22 21 21
GBP GBP GBP GBP
Non-current
Bank loans
Secured 20,000,000 20,000,000 17,000,000 17,000,000
Current
Bank loans
Secured 2,205,640 2,205,640 2,129,592 2,129,592
At 31 December 22,205,640 22,205,640 19,129,592 19,129,592
The rate at which Sterling denominated loans and borrowings are
payable is 2.90% above SONIA (2021: 2.40%).
The bank loans are secured by fixed and floating charges over
the assets of the Group. The bank loans are repayable over three
years. The Group has GBPnil undrawn committed borrowing facilities
available at 31 December 2022 (2021: GBP5,000,000).
23. Provisions
Group
Leasehold Legal disputes Total
dilapidations
GBP GBP
At 1 January 2021 - 116,875 116,875
Charged to profit or loss - 47,416 47,416
Acquired through business
combinations 150,000 - 150,000
--------------- --------------- --------
At 31 December 2021 150,000 164,291 314,291
At 1 January 2022 150,000 164,291 314,291
Charged to profit or loss - 47,245 47,245
At 31 December 2022 150,000 211,536 361,536
Due within one year or less - 211,536 211,536
Due after more than one
year 150,000 - 150,000
--------------- --------------- --------
150,000 211,536 361,536
Leasehold dilapidations relate to the estimated cost of
returning a leasehold property to its original state at the end of
the lease in accordance with the lease terms. The main uncertainty
relates to estimating the cost that will be incurred at the end of
the lease.
The Group is currently involved in a number of legal disputes.
The amount provided represents the directors' best estimate of the
Group's liability having taken legal advice. Uncertainties relate
to whether claims will be settled out of court or if not whether
the Group is successful in defending any action. Because of the
nature of the disputes, the directors have not disclosed future
information on the basis that they believe that this would be
seriously prejudicial to the Group's position in defending the
cases brought against it.
24. Deferred tax
Deferred tax is calculated in full on temporary differences
under the liability method using a tax rate of 25% (2021: 25%).
Following the Finance Bill 2021, enacted on 24 May 2021, the UK
corporate tax rate increased from 19% to 25% on 1 April 2023. As
IFRS requires deferred tax to be measured at tax rates that have
been substantively enacted at the reporting date, the Group's
deferred tax balances have been re-measured accordingly and the
impact has been reflected within the consolidated financial
statements.
The movement on the deferred tax account is as shown below:
Group Company Group Company
2022 2022 2021 2021
restated
GBP GBP GBP GBP
At 1 January 850,042 660,270 304,853 502,711
Recognised in profit or loss
Tax expense (106,637) (24,936) 1,025 157,559
Transferred to held for sale
- discontinued operations 923 - (1,856) -
---------- --------- --------- --------
744,328 635,334 304,022 660,270
Arising on business combination - - 546,020 -
---------- --------- --------- --------
At 31 December 744,328 635,334 850,042 660,270
---------- --------- --------- --------
Details of the deferred tax liability and amounts recognised in
the profit or loss are as follows:
Group Accelerated Business Other temporary Total
capital combinations and deductible
allowances differences
GBP GBP GBP GBP
Balance 1 January 2021 58,005 255,133 (8,285) 304,853
Charges/(credited) to
profit or loss (919) 31,446 (29,502) 1,025
Arising on business combination - 546,020 - 546,020
Transferred to held for
sale - discontinued operations (1,856) - - (1,856)
------------ -------------- ---------------- ----------
Balance 31 December 2021 55,230 832,599 (37,787) 850,042
------------ -------------- ---------------- ----------
Balance 1 January 2022 55,230 832,599 (37,787) 850,042
Charges/(credited) to
profit or loss 1,651 (84,353) (23,941) (106,643)
Transferred to held for
sale - discontinued operations 929 - - 929
------------ -------------- ---------------- ----------
Balance 31 December 2022 57,810 748,246 (61,728) 744,328
------------ -------------- ---------------- ----------
24. Deferred tax (continued)
Company Accelerated Reversal Other temporary Total
capital of deferred and deductible
allowances consideration differences
GBP GBP GBP GBP
Balance 1 January 2021 1,111 501,600 - 502,711
Charges/(credited) to
profit or loss (841) 158,400 - 157,559
Arising on business combination - - - -
Balance 31 December
2021 270 660,000 - 660,270
------------ --------------- ---------------- ---------
Balance 1 January 2022 270 660,000 - 660,270
Charges/(credited) to
profit or loss (260) - (24,677) (24,937)
Balance 31 December
2022 10 660,000 (24,677) 635,333
------------ --------------- ---------------- ---------
25. Acquisition
During the year ended 31 December 2021, RBG Holdings plc
acquired Memery Crystal Limited (subsequently renamed RBG Legal
Services Limited). Memery Crystal is a specialist international law
firm that 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, employment and dispute
resolution.
Book value Adjustment Fair value
GBP GBP GBP
Property, plant and
equipment 2,509,589 - 2,509,589
Right-of-use assets - 11,798,710 11,798,710
Trade receivables 4,327,167 - 4,327,167
Other receivables 4,440,189 (113,377) 4,326,812
Brand value - 1,948,878 1,948,878
Client Contracts - 338,794 338,794
Trade and other
payables (5,328,635) 2,818,396 (2,510,239)
Lease liabilities - (11,685,333) (11,685,333)
Deferred tax liability - (546,020) (546,020)
Net assets 5,948,310 4,560,048 10,508,358
----------------------- ------------------------ ------------------------
Fair value of consideration paid
GBP
Cash 12,000,000
Shares 11,686,956
Deferred cash consideration 5,648,310
----------------------
29,335,266
----------------------
Goodwill 18,826,908
During the year ended 31 December 2022, the Group paid deferred
consideration of GBP2,248,319 (2021: GBP3,400,000).
26. Share capital
Authorised
2022 2022 2021 2021
Number GBP Number GBP
Ordinary shares of 0.2p each 95,331,236 190,662 95,331,236 190,662
Allotted, issued and fully paid
2022 2022 2021 2021
Number GBP Number GBP
Ordinary shares of 0.2p each
At 1 January 95,331,236 190,662 85,592,106 171,184
Other issues for cash during
the year - - 9,739,130 19,478
At 31 December 95,331,236 190,662 95,331,236 190,662
----------- -------- ----------- --------
Ordinary shares rank equally as regards to dividends, other
distributions and return on capital. Each ordinary share carries
the right to one vote.
27. Reserves
Financial instruments issued by the Group are classified as
equity only to the extent that they do not meet the definition of a
financial liability or financial asset.
The following describes the nature and purpose of each reserve
within equity:
Reserve Description and purpose
Share capital Amount subscribed for share capital
at nominal value.
Share premium Amount subscribed for share capital
in excess of nominal value less
transaction costs.
Retained earnings All other net gains and losses
and transactions with owners (e.g.,
dividends) not recognised elsewhere.
28. Share-based payment
The Group operates two equity settled share-based remuneration
schemes: a United Kingdom tax authority approved scheme and an
unapproved scheme. Under the schemes the only vesting condition is
that the individual remains an employee of the Group over the
vesting period.
2022 2022 2021 2021
Weighted Weighted
average exercise average exercise
price price
GBP Number GBP Number
Outstanding 1 January - 153,437 - -
Granted during the
year 0.11 1,264,977 - 153,437
Forfeited during
the year 0.04 (1,132,461) - -
Exercised during - - - -
the year
------------------ ------------ ------------------ --------
Outstanding at 31
December 0.35 285,953 - 153,437
------------------ ------------ ------------------ --------
The exercise price of options outstanding at 31 December 2022
ranged between GBPnil and GBP1.03 (2021: GBPnil) and their weighted
contractual life was 9 years (2021: 8 years). Of the total number
of options outstanding at 31 December 2022, 20,000 had vested and
were exercisable (2021: 70,000). No options were exercised in the
year. The weighted average fair value of each option granted during
the year was GBP0.92 (2021: GBP1.08).
The following information is relevant in the determination of
the fair value of options granted during the year under the equity
settled share-based remuneration schemes operated by the Group.
2022 2021
Option pricing model used Black-Scholes Black-Scholes
Weighted average share price at date of grant GBP1.18 GBP1.11
Contractual life (in days) 3,653 3,653
Expected volatility 24% 24%
Expected dividend yield 5% 5%
Risk-free interest rate 1% 1%
The share-based remuneration expense disclosed in Note 7 relates
entirely to equity settled schemes. The Group did not enter into
any share-based payment transactions with parties other than
employees during the year.
29. Related party transactions
Group
During the year, Group companies entered into the following
transactions with related parties who are not members of the
Group:
Related party Supply Purchase Supply of Purchase
of services of services services of services
2022 2022 2021 2021
GBP GBP GBP GBP
Velocity Venture Capital
Ltd* (713) 222,733 - 387,245
Motorsport Circuit Management
Ltd* 11,250 - 7,750 -
N Foulston - - - -
Winros** - 794,458 - 848,999
Note: *A company controlled by Nicola Foulston, ** A partnership
in which Ian Rosenblatt is a partner.
In addition, during the year, GBP19,480 of contingent work was
performed by the Group in relation to a Conditional Fee Agreement
with Winros (2021: GBP26,842). At 31 December 2022, there were no
amounts due to any related party (2021: GBPnil). At 31 December
2022, GBP16,500 was due from Motorsport Circuit Management Ltd
(2021: GBP7,750).
Sales and purchase of services to related parties were conducted
on an arm's length basis on normal trading terms. The Group has not
made any allowance for bad or doubtful debts in respect of related
party debtors nor has any guarantee been given or received during
2022 for related party transactions.
There are various other companies controlled by Nicola Foulston,
which use the Group's office as their registered address, with
which there have been no transactions during the year.
Ian Rosenblatt is not a director of any company in the Group,
nor a member of key management personnel, nor does he have a
significant influence over the Group. He is a substantial
shareholder, as disclosed in the Directors' Report and under the
AIM Rules for Companies is classified as a related party.
Total remuneration of Key Management Personnel during the year
was GBP1,285,961 (2021: GBP1,566,918). Further details of
directors' remuneration are given in the Directors' Report.
Company
In addition to the amounts disclosed in the Directors' Report,
the Company has entered into the following transactions with
related parties.
During 2022, the Company reimbursed fees and expenses paid on
its behalf by RBGLS totalling GBP2,571,884 (2021: GBP935,335). At
31 December 2022, the company was owed GBP48,401,054 by RBGLS
(2021: GBP42,970,594) and owed GBP2,226,035 to RBL Law (2021:
GBP2,001,060).
During 2022, Convex Capital Limited reimbursed fees and expenses
paid on its behalf by the Company totalling GBP571,264 (2021:
GBP9,089). At 31 December 2022, the company owed GBP647,324 to
Convex Capital Limited (2021: GBP1,398,347 owed to Convex Capital
Limited).
During 2022, LionFish Litigation Finance Limited reimbursed fees
and expenses paid on its behalf by the Company totalling
GBP1,067,602 (2021: GBP376,133). At 31 December 2022, the company
was owed GBP4,766,624 by LionFish Litigation Finance Limited (2021:
GBP636,581 owed by LionFish Litigation Finance Limited).
30. Notes supporting statement of cash flows
Significant non-cash transactions from investing activities are
as follows:
2022 2021
GBP GBP
Equity consideration for business combination - 11,686,956
Non-cash transactions from financing activities are shown in the
reconciliation of liabilities from financing transactions
below:
Non-current Current Total
loans and loans and
borrowings borrowings
GBP GBP GBP
At 1 January 2022 17,000,000 2,129,592 19,129,592
Cash flows (net) 3,000,000 - 3,000,000
Non-cash flows
Interest accruing in year - 76,048 76,048
------------ ------------ -----------
At 31 December 2022 20,000,000 2,205,640 22,205,640
------------ ------------ -----------
At 1 January 2021 10,000,000 - 10,000,000
Cash flows (net) 7,000,000 2,000,000 9,000,000
Non-cash flows
Interest accruing in year - 129,592 129,592
At 31 December 2021 17,000,000 2,129,592 19,129,592
------------ ------------ -----------
31. Restatement of prior year
2021 comparatives in the Company statement of financial position
and Note 20 have been restated in these financial statements to
include the effect of the adjustments as stated in Note 2. The
following table presents the impact of these restatements.
31 December
2021 1 January
As originally 2022
presented Adjustment Restated
GBP GBP GBP
Current assets
Trade and other receivables 46,748,875 (35,343,534) 11,405,341
--------------- ------------- ------------
Non-current assets
Trade and other receivables - 35,343,534 35,343,534
--------------- ------------- ------------
(i) Reclassification of amounts due from Group companies between
current and non-current assets
32. Contingent liabilities
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. HMRC have queried the issue
of shares between 4 April 2018 and 16 April 2018 at a par value. A
valuation of the shares at above the issue price could result in a
liability to the recipient of the issued shares which would be
required to be collected by the Company and paid to HMRC. Any
liability would be re-imbursed in full by the recipient. The
directors' belief is that the investigation is without merit.
[1] All measures apart from net debt and including prior year
comparatives are shown on a continuing operations basis unless
otherwise stated
[2] Figures for 2021 include seven months of contribution from
Memery Crystal following the completion of the acquisition at the
end of May 2021
[3] Comparison shown on a pre-IFRS 16 basis
[4] Comparison shown on a pre-IFRS 16 basis
[5] All measures apart from net debt and including prior year
comparatives are shown on a continuing operations basis unless
otherwise stated
[6] All measures apart from net debt are shown on a continuing
operations basis unless otherwise stated. Prior year comparatives
are also shown on a continuing operations basis. Further details on
discontinued operations can be found in Note 10.
[7] Comparatives have been restated to present LionFish as a
discontinued operation. Refer to Notes 1 and 10 for further
details.
[8] Comparatives have been restated to present LionFish as a
discontinued operation. Refer to Note 10 for further details.
[9] Comparatives have been restated to present LionFish as a
discontinued operation. Refer to Note 10 for further details.
[10] Comparatives have been restated to present LionFish as a
discontinued operation. Refer to Note 10 for further details.
[11] Comparatives have been restated to present LionFish as a
discontinued operation. Refer to Note 10 for further details.
[12] Comparatives have been restated to present intercompany
balances between current and non-current per Note 31
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.
RNS may use your IP address to confirm compliance with the terms
and conditions, to analyse how you engage with the information
contained in this communication, and to share such analysis on an
anonymised basis with others as part of our commercial services.
For further information about how RNS and the London Stock Exchange
use the personal data you provide us, please see our Privacy
Policy.
END
FR FLFFASDIEFIV
(END) Dow Jones Newswires
April 26, 2023 02:00 ET (06:00 GMT)
Rbg (LSE:RBGP)
Gráfica de Acción Histórica
De Abr 2024 a May 2024
Rbg (LSE:RBGP)
Gráfica de Acción Histórica
De May 2023 a May 2024
