TIDMRBGP

RNS Number : 9665V

RBG Holdings PLC

20 April 2021

20 April 2021

RBG Holdings plc

("RBG", the "Group", or the "Company")

Audited Results for the year ended 31 December 2020

Solid performance as Group benefits from diversified revenue streams

RBG Holdings plc (AIM: RBGP), the professional services group, is pleased to announce its audited results for the year ended 31 December 2020.

Financial Highlights:

   --    Group revenue and gains on litigation assets up 8% to GBP25.6 million (2019: GBP23.7 million) 

o Professional Services revenue up 12.6% to GBP22.4 million (2019: GBP19.9 million)

o Gains on litigation assets of GBP3.1 million (2019: GBP3.8 million)

   --    EBITDA of GBP10.2 million (2019: GBP9.4 million) 
   --    Adjusted EBITDA[1] of GBP7.5 million 
   --    Profit before tax of GBP7.7 million[2] (2019: GBP7.6 million) 
   --    Profit after tax of GBP6.7 million (2019: GBP6.2 million) 
   --    Paid dividend of 3p per share in respect of the 2020 financial year on 26 February 2021 

-- Balance sheet remains robust with net cash of GBP3.5 million as at 31 December 2020 (31 December 2019: GBP1.9 million)

Operational Highlights:

Rosenblatt Limited ("RBL") - Strong focus on maintaining margins and cash collection

-- Revenue of GBP20.9 million, up 15% (2019 GBP18.1 million) - most successful year ever in terms of professional services revenue

-- RBL took on more contingent work in 2020 with associated unrecognised time worked of GBP2.1 million (2019: GBP1.9 million)

-- Average revenue per fee earner: GBP425,800 (2019: GBP393,000) placing RBL in the top 10 in the Legal 100; three partners added during 2020 taking total fee earners to 49 (2019: 46)

-- Utilisation / Realisation: 89% / 106% (2019: 77% / 96%) - well ahead of 75% & 85% target respectively

-- Dispute resolution division performed well with corporate division revenue double that of 2019

-- Strong cash collection - Total Lockup[3] was 99 days (2019: 122 days) of which debtor days were 47 days (2019: 45)

-- Five contingent cases via alternative billing arrangements are being progressed. Some larger investments provide a potential return that is not provided in market forecasts

LionFish Litigation Finance (UK) Limited ("LionFish") - Leverage assets to provide significant one-off returns

-- In May 2020, LionFish launched as a provider of finance to the third-party litigation market (not RBL cases) with an experienced Managing Director, Tets Ishikawa

-- LionFish has received 240 enquiries for finance, and seven cases have been invested in as at 31 December 2020

-- Total cash deployed of GBP1.8 million across seven cases (as at 31 December 2020). Total capital commitment of GBP4.9 million

Convex Capital Limited ("Convex Capital") - Strong comeback after deal completion limited by Covid

-- Convex Capital pipeline was significantly impacted by Covid with deals delayed or cancelled. Only completed two deals in 2020, generating revenues of GBP1.6 million (2019: GBP1.9 million)

-- Management pivoted sector focus and rebuilt pipeline over the second half of 2020 to put Convex Capital back in a position to deliver in 2021

-- Since 1 January 2021, Convex has completed seven deals generating revenue of GBP4.5 million. Pipeline of 33 deals with six currently at various stages of completion

Post-Period Highlight:

-- Acquisition of Memery Crystal (conditional on completion) which is in line with the Group's M&A strategy, which aims to focus on high-margin professional services companies and to take advantage of consolidation opportunities in the UK legal sector

-- Memery Crystal is a specialist international law firm, based in London, with 146 employees, including 29 partners, and an additional 66 fee earners as at date of exchange

-- Memery Crystal's focus on transactions makes it a complementary fit with RBL, which derives most of its revenue from contentious law

-- Both businesses will retain their own brand identities and separate offices, and together will form the Group's Legal Services Division

-- The total consideration for the acquisition is GBP30 million (comprising GBP18.8 million in cash and GBP11.2 million in RBG shares). Further details of the transaction are contained within a separate stock exchange announcement released earlier this morning

-- The Board expects the transaction to be immediately, and materially, earnings and value-enhancing for the Group

-- In connection with the acquisition, the Group has extended its revolving credit facility to GBP15 million and taken out acquisition finance totalling GBP10 million (key terms of which can be found in this morning's announcement)

-- For year ending 30 April 2020, Memery Crystal reported revenue of GBP23.2 million, profit[4] of GBP8.0 million, and had GBP7.3 million of net assets

Nicola Foulston, CEO, RBG Holdings plc, commented: "2020 was a year when the Group demonstrated the resilience of its evolving business model, and how our diversified revenue streams can deliver robust and sustainable financial results, despite the challenges of the pandemic. I am delighted with how the business has adapted, shown its entrepreneurial spirit, and progressed in difficult times.

"Every year since we came to the market, we have delivered a solid financial performance while laying the groundwork for future growth. Our law firm, RBL, had its most successful year ever in terms of revenue from its core legal services business and continues to strengthen its offering. The business performed across all practice areas, particularly those areas focused on contentious law such as dispute resolution, and our corporate division has also been busy. This year, RBL will continue to drive its litigation business, and we have identified new growth areas across the whole business.

"Our third-party litigation finance business, LionFish hit the ground running after its launch in May 2020. It already has a portfolio of seven deals with the first return expected in the first half of the current financial year. During a turbulent year, as a result of Covid, the team at Convex Capital led by Mike Driver worked hard to develop a new, stronger pipeline of M&A transactions. The fruits of all that effort has already shown in early 2021, with seven deals already completed, and more to come.

"The acquisition of Memery Crystal announced today is an excellent addition to the Group both culturally and strategically. Like RBL, Memery Crystal performed strongly in 2020. The Firm is a compelling operational fit with RBL, providing a greater corporate, commercial, and real estate offering than we have currently. Together, the businesses will form our Legal Services Division providing clients with a full-service offering across different sectors and legal disciplines. We see opportunities to grow both businesses.

"Across the Group, we have experience in supporting clients in times of upheaval which means we can react to the opportunities and challenges the current crisis will inevitably offer. Our services will be in demand. We have a solid balance sheet, and we are optimistic that the Group will continue its positive progress over the coming year."

Investor Presentation

RBG will provide a live investor presentation about the Group's results for the 12 months ended 31 December 2020 via the Investor Meet Company (IMC) platform today at 10.30am. Hosted by CEO Nicola Foulston, the online presentation is open to all existing and potential shareholders. Investors can sign up to IMC for free and add RBG Holdings plc via https://www.investormeetcompany.com/rbg-holdings-plc/register-investor

Investors who have already registered and added to meet the Company, will be automatically invited. Questions can be submitted at any time during the live presentation.

Enquiries:

 
 RBG Holdings plc                        Via SEC Newgate 
  Nicola Foulston, CEO 
 N+1 Singer (Nomad and Broker)          Tel: +44 (0)20 7496 3000 
  Shaun Dobson / Alex Bond (Corporate 
  Finance) 
  Tom Salvesen (Corporate Broking) 
 SEC Newgate (for media enquiries)      Tel: +44 (0)7540 106366; 
  Robin Tozer/Tom Carnegie               rbg@secnewgate.co.uk 
 

About RBG Holdings plc

RBG Holdings plc is a professional services group, which includes one of the UK's pioneering law firms, Rosenblatt Limited ("RBL"), which is a leader in dispute resolution.

RBL provides a range of legal services to its diversified client base, which includes companies, banks, entrepreneurs and individuals. Complementing this is the RBL's increasingly international footprint, advising on complex cross-jurisdictional matters. RBL's practice areas include banking & finance, competition & regulatory, corporate, dispute resolution, employment, financial crime, financial services, insolvency & financial restructuring, IP/technology/media, real estate, serious & general crime, tax resolution and white-collar crime.

The Group also provides litigation finance in selected cases through a separate arm, LionFish Litigation Finance (UK) Limited ("LionFish"). LionFish finances litigation matters being run by other solicitors in return for a significant return on the outcome of those cases. As such, the Group has two types of litigation assets - RBL's own client matters, and litigation matters run by third-party solicitors. LionFish is positioned to be a unique, alternative provider to the traditional litigation funders.

The Group also owns Convex Capital Limited ("Convex Capital"), a specialist sell-side corporate finance boutique based in Manchester. Convex Capital is entirely focussed 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.

Chairman's Statement

Overview

On behalf of the Board, I am pleased to announce our 2020 annual results. That the Board can report such a strong financial performance is a tribute to everyone in the Group who has responded superbly to the challenge presented by COVID-19. The Group has been able to support all our clients remotely, maintaining the high client service standards for which we are known. Since our IPO, operational management has been strengthened in every subsidiary, and we are benefitting from our strategy to diversify the revenue streams of the business.

Companies and individuals need the specialist advice that both Rosenblatt Limited ("RBL") and Convex Capital Limited ("Convex Capital") provide. Difficult times like these mean that people need help to handle complex situations such as business restructurings as well as entrepreneurs who want to participate in M&A. We have won new client instructions across the Group which reflects our expertise and the high demand for our complementary services.

Our law firm, RBL, had its most successful year ever in terms of revenue, EBITDA, and gross margin, the latter exceeding management's target of 35 per cent. Its flexible business model meant we were in a strong position when the pandemic struck so RBL has continued to deliver high margins and revenue per lawyer, a core KPI, remaining significantly ahead of many of its peers.

After a tough 2020, where deal completions were impacted by the onset of COVID-19, the Convex Capital management team built a strong pipeline of deals across a variety of sectors which have shown resilience during the crisis. This is now being converted, and we have a solid platform from which to drive further growth.

Furthermore, the Group now has two types of litigation assets - RBL's own client matters, and litigation matters run by third-party solicitors. This is through our separately branded business for third-party solicitors, LionFish Litigation Finance (UK) Limited ("LionFish") launched in May 2020. Headed by an experienced MD, Tets Ishikawa, the business uses all of the expertise of RBL to assess appropriate opportunities and has hit the ground running with a growing portfolio of investments.

Looking ahead, the Board believes the Group is in a strong position with a solid balance sheet and a clear strategy to deliver continued growth.

Strategy

The strategy of the Group is delivering a diversified revenue and profit stream where no one part of the Group dominates, and we leverage the expertise across the Group to deliver incremental returns. We are using the expertise within the Group to maximise the potential returns by selectively investing in contingent asset classes such as litigation. We can do this by RBL working contingently on clients' cases, or by LionFish providing litigation funding to third party cases. Furthermore, we have begun to use acquisitions to diversify the business away from a reliance on legal revenues to create a broad, professional services group.

One of the key group principles is driving profit and our law firm RBL has achieved this by maintaining consistently high margins. The management has done well in delivering revenue of almost GBP426,000 per fee earner and a 52% gross margin. This puts RBL in the top 10 of the Legal 100 for revenue per fee earner. In addition, we have added new practice areas including competition & regulatory, financial crime, serious & general crime, and white-collar crime.

Our strong profit driven business model has enabled us to increase the amount of work we do for clients on a partly contingent basis in exchange for receiving a pre-agreed proportion of any damages awarded. This approach means we can increase the margin with a benefit to the client who would otherwise pay higher amounts to a third-party funder. The business has a strong litigation track record. RBL has a long-standing track record in picking the right cases, with an 86% success rate over the last 10 years.

In line with our stated strategy, we have created a new cash-generation opportunity, with litigation finance sales. By selectively selling a percentage of our participation rights in the contingent cases that we invest in through Damages Based Agreements, the Group raises working capital. The investment and divestment decisions are driven through a stringent set of criteria, marrying both our commercial expertise with our legal expertise to assess the risk profile of each case. We have adopted a conservative approach to estimates as part of our fair valuing of litigation assets: while accounting standards require the recognition of these investments at fair value, we have assessed the fair value to be close to cash disbursed less cash received on disposals.

Finally, the acquisition of Convex Capital, a specialist sell-side corporate finance boutique in September 2019 further diversified the business away from a reliance on legal revenues. Convex Capital is a high-margin, entrepreneurial, business that can also create cross-referral opportunities for other parts of the Group. We expect to see an increase in M&A activity in 2021 driven by the economic conditions, with Convex Capital well placed to benefit.

M&A

In line with our strategy, we will continue to assess selective M&A to build and diversify the business. We aim to grow our service offering to clients and diversify our revenue. Our ambition is to create a broad, high-quality, high margin professional services group. We focus on high-margin, specialist companies which can also create opportunities for cross-referrals. 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 has met these criteria, First, Convex Capital in September 2019, and, in April 2021, Memery Crystal. Memery Crystal is a very exciting acquisition which will be immediately earnings enhancing, and we believe has the potential to generate significant value for shareholders over the long-term. I would like to welcome all the partners and employees of Memery Crystal to RBG, and we are excited about the opportunities the combined Group will create.

The Group will remain disciplined in its approach to M&A and continue to review potential opportunities according to its selective criteria.

Dividend

The Group's balance sheet is strong, and the Board is committed to its long-term progressive dividend policy set out in its Admission document. Under that policy, the Board normally expects to pay up to 60 per cent of distributable retained earnings from the core business in any financial year by way of dividend, subject to cash requirements.

Given the uncertainty in 2020, the Board made the prudent decision to make one payment for the 2020 financial year of 3 pence per share. Based on current outlook, we expect to pay up to 60 per cent of retained earnings in the 2021 financial year by way of dividend. Over time, we expect to have opportunities to pay special dividends because of returns from our litigation assets.

People

The strength of the Group is in our ability to retain and attract high-quality people. This is evidenced by our performance. In this most difficult of times, I want to thank everyone for their hard work, and their resilience.

Keith Hamill

Chairman

20 April 2021

Chief Executive's Statement

Overview

Despite a challenging backdrop, we are pleased to have delivered a strong financial performance, with the Group developing in-line with our stated strategy. The business is evolving into a broader high-quality professional services group, with our pioneering law firm, RBL at its heart, a growing litigation finance division, and a successful M&A business.

Group revenue and gains on litigation assets was up 8% to GBP25.6 million (2019: GBP23.7 million), primarily driven by a record year at our law firm, RBL. Gains on litigation assets were GBP3.1 million (2019: GBP3.8 million), which were primarily generated by LionFish, our new third-party litigation finance business, launched in May 2020.

EBITDA grew to GBP10.2 million (2019: GBP9.4 million), with EBITDA margins of 40% (2019: 39%). This includes GBP2.6m of the write back of the deferred Convex Capital earn out. After adjusting for this, the Group made EBITDA of GBP7.5 million, representing an EBITDA margin of 29%.

The Group has a strong balance sheet, with net cash of GBP3.5 million as at 31 December 2020. Cash collections remain as forecast. The Company also has a GBP10 million revolving credit facility with HSBC. Our balance sheet will support our growth plans, including acquisitions, continued investment in litigation finance opportunities, and the dividend. W e expect to be able to pay out up to 60 per cent of retained earnings in the financial year by way of dividend.

RBL

COVID-19 created a challenging trading environment. In 2020, however, RBL achieved the best performance in its 32-year history on its core business of selling legal services. This performance was due to strong revenues from contentious law, and high-value corporate transactions. RBL took on more contingent work in 2020, with associated unrecognised time worked on a contingent basis of GBP2.1 million (2019: GBP1.9 million).

Our focus, as always, is on profit and cash, not only billing revenue, and we seek to control back-end cost to support profit generation. The business has a monthly "heartbeat" looking at revenue, margin, WIP and debtors. Gross margins of 52% drive strong profits and there is a back-end focus on collection and realisation. Total lockup[5] was 99 days (2019: 122 days) of which debtor days were 47 days (2019:45). The industry average for lockup is 136 days.

Our investment in IT and a flexible business model meant the business was well placed to handle the challenge of remote working. We continued to win new instructions, benefitting from our diversified client base, reputation for handling complex cases, and our strong relationships with entrepreneurs and business founders.

In times of difficulty, it is often the case that these entrepreneurs become more proactive requiring more innovative support. We have adapted our strategy to make sure RBL is well placed to meet the needs of customers considering the demands created by the pandemic. We have added competition & regulatory, financial crime, serious & general crime, and white-collar crime practice areas.

In January 2021, we appointed a new Managing Director, Barry Roche, to focus on maintaining commercial excellence, and growth through business development. Barry will enhance RBL's performance review culture. Departments and individuals are coached and provided with detailed analysis of key KPI's including debtors, WIP, utilisation and recovery.

Success is reflected in the KPIs. Average revenue per fee earner was up to GBP425,800 (2019: GBP393,000). At IPO we targeted utilisation of 75% of 1,500 billable hours, with recovery of 85% on fees billed. Actual resource allocation was 89% utilisation on 1,500 hours, with 106% recovery. Industry average is 70% on 1,200 hours.

In 2021, we will continue to drive the litigation business, and have identified additional areas of growth and specific strategies to support these. These areas include employment, competition law and insolvency & restructuring. Our business development strategy will focus on our digital profile and networking. We have created a business development training program, improved our client engagement process so we can better understand and exceeding our clients' expectations, and ensured all Partners are developing their capabilities.

We are building a strong dynamic team working on cross-selling and referrals. RBL has developed a close working alliance with LionFish where the RBL dispute resolution team assess all potential investments. The RBL corporate team works closely with Convex Capital on its transactions.

We expect RBL to benefit from life post-Brexit and post-COVID as business returns to normality.

Litigation Finance

The Group now has two types of litigation assets - RBL's own client matters, and litigation matters run by third-party solicitors funded by LionFish.

Our approach to litigation assets will always be conservative in nature to limit exposure and risk. No more than 25% of our revenues can be committed to contingent work in progress within RBL. A maximum of 25% of the net assets of the Group can be invested in external funding. A maximum of 50% of the external funding can be invested in any one case over GBP0.5 million within RBL.

Our accounting approach will follow our same conservative commercial approach. Some larger investments provide a potential return that is not provided in our market forecasts and where possible, within the requirements of IFRS 9 Accounting for Financial Instruments to fair value these investments, we hold these investments at a fair value based on recent transaction prices. These fair values at the year end were close to being equivalent to the cost of funds disbursed less disposal proceeds.

RBL litigation assets

RBL invests time at cost and advances cash for disbursements and court fees on its own client Damages Based Agreements when commercially advantageous to do so. RBL's litigation assets offer high potential returns. The current RBL litigation assets include the three largest cases project named Neptune, Shango and Mercury.

LionFish

In May 2020, we launched a separately branded business - LionFish Litigation Finance (UK) Limited. LionFish invests cash in third party litigation matters run by law firms other than RBL. An experienced managing director, Tets Ishikawa was appointed, and the business is now established.

Since launch to 31 December 2020, LionFish has received 240 enquiries for finance, and seven have been invested in. There has been cash investment of GBP1.8 million across the seven cases (total capital commitment of GBP4.9 million if all cases go to trial). The first realisation is anticipated in HY 2021. Expected average investment duration is around two years.

Part of our approach is to sell a percentage of our participation rights in the cases that we invest in. This year, we realised gains from litigation finance sales of GBP3.1 million, the majority coming from LionFish's investment in 7 cases.

Convex Capital

Acquired by the Group in September 2019, Convex Capital is a specialist provider of sell-side only M&A advice to UK, US and European entrepreneurs. It is focused on helping businesses to maximise their value through sales to large corporates, private equity, or family offices. Deal sizes range from GBP10 million to GBP500 million with an average of GBP40m. On average, Convex Capital's fees are over GBP750,000 which is significantly above the industry norms. Fees are 100% contingent on success, so Convex Capital is completely aligned with the client.

2020 was challenging, as deals proved hard to complete with the lack of face-to-face meetings as well as COVID obscuring financial performance. Many deals were postponed or delayed. Only two deals were completed in 2020, with total fees of GBP1.6 million. The Convex Capital team, led by CEO Mike Driver, has worked to pivot its sector focus to successfully rebuild its transaction pipeline over the last six months. The pipeline is more focused on areas which are COVID-19 resilient. This strong pipeline is now being converted. Since 1 January 2021, Convex Capital has already completed seven deals generating revenue of GBP4.5 million. Convex Capital has a pipeline of 33 deals with six currently at various stages of completion.

Furthermore, the Convex Capital senior management team agreed for 2021 to exchange their fixed base salary arrangements for a flexible commission structure directly linked to income from completed deals. Under the terms of this scheme, Convex Capital management will instruct N+1 Singer to use a minimum of 50% of commission earned to acquire shares in RBG in the open market[6]. This new commission scheme replaces the deferred consideration arrangements under the sale and purchase agreement with the Convex Capital sellers, announced at the time of the acquisition in September 2019. This deferred consideration was due to be payable one year after completion of the purchase, based on certain performance criteria, which were not met due to the pandemic.

Outlook

The new financial year will again be dominated by the wider economic conditions brought about by the legacy of the COVID-19 pandemic. Across the Group, we have demonstrated our experience in supporting clients in times of upheaval which means we can react to the opportunities and challenges the current crisis will inevitably offer. The business is trading as expected in the first quarter with delivery from Convex Capital accelerated.

In RBL, we are focused on capturing growth opportunities; contentious law thrives in difficult times. The business will benefit from life post-Brexit and post-COVID as businesses return to normality. Our litigation finance business, LionFish is now established, and we expect the number of cases it invests in to grow, with the first return expected in the first half. With a strong pipeline of deals, and increased interest in M&A in 2021, Convex Capital is expected to perform well.

We also expect Memery Crystal to make a significant contribution to the Group. Our immediate focus is to successfully integrate Memery Crystal, and we will provide updates on our progress. I am very confident that RBL and Memery Crystal will enable us to capture growth opportunities across the legal services industry.

In 2021, our services will be in demand. We have a solid balance sheet, and we are optimistic that the Group will continue its positive progress over the coming year. I would like to thank all our shareholders for their continued support.

Nicola Foulston

Chief Executive

20 April 2021

Chief Financial Officer's review

Financial review

During 2020, we have continued to build on our strong track-record of profitable growth by increasing revenue and driving our EBITDA margins, which are leading among those of the listed legal sector. The Group is well positioned to deliver its growth strategy through product diversification, high-quality recruitment, and carefully selected acquisitions.

Key Performance Indicators (KPIs)

   --    Revenue and gains on litigation assets: GBP25.6 million (2019: GBP23.7 million) 

-- Revenue in legal and professional services up 12.6% to GBP22.4 million (2019: GBP19.9 million)

   --    Gains on litigation assets:  GBP3.1 million (2019: GBP3.8 million) 

-- EBITDA: GBP10.2 million, 40% of revenue and gains on litigation assets (2019: GBP9.4 million, 40%)

-- Adjusted EBITDA: GBP7.5 million,29% of revenue and gains on litigation assets (2019: GBP9.4 million, 40%)

-- Profit Before Tax: GBP7.7 million, 30% of revenue and gain on litigation assets, includes GBP2.6 million write back of the deferred earn out (2019: GBP7.6 million, 32%)

   --    Total lock up: 99 days (2019: 122 days) 
   --    Revenue Per Fee Earner: GBP425,800 (2019: GBP393,000) 
   --    Utilisation / Realisation: 89% / 106% (2019: 77% / 96%) 
   --    Net Cash: GBP3.5million (2019: GBP1.9 million) 
   --    EPS: 7.54p (2019: 7.56p) 

Revenue and gains on litigation assets

Reported Group revenue and gains on litigation assets for the period is GBP25.6 million compared to GBP23.7 million, representing an 8% increase.

Of this increase, GBP2.7 million came from legal services revenue, whilst revenue from other professional services and gains on litigation assets were marginally behind year on year. The number of partners in our legal services business has remained broadly constant at 20 with 49 fee earners and an annualised revenue per fee earner of GBP426,000. Of the Litigation gains of GBP3.1 million, GBP3.08 million came from LionFish.

Divisional highlights

RBL

 
  --   Total revenue and gains on litigation assets of GBP20.9 
        million, (2019 GBP21.9 million of which GBP3.8 million 
        was gains on litigation assets) 
  --   Legal services revenues GBP20.8 million, up 15.3% on last 
        year (2019: GBP18.1 million) 
  --   Dispute resolution continued to perform well, in addition 
        to taking on more contingent work with associated unrecognised 
        time worked of GBP2.1 million 
  --   Corporate performed exceptionally well with revenue of 
        GBP5.1 million, 155% up on 2019 
  --   EBITDA 35% of revenue (2019: 31% of revenue) 
  --   Average revenue per fee earner GBP425,800 (2019: GBP393,000) 
  --   Total Lockup was 99 days (2019: 122) of which Debtor Days 
        were 47 days (2019: 45) 
  --   Recruited 3 new partners through the year 
 

Litigation finance

LionFish

 
  --   Successfully realised litigation asset sales in seven cases 
        with proceeds totalling GBP3.1 million 
  --   These gains are from where LionFish owns a percentage of 
        the participation rights in a settlement on a contingent 
        case, financed through a Damages Based Agreement (DBA), 
        and then sells on a proportion of its participation rights 
  --   Cash investment of GBP1.8 million in seven cases, with 
        a full commitment of GBP4.9 million if funded through to 
        court 
 

RBL

 
  --   Successfully realised litigation asset sales with proceeds 
        totalling GBP0.4 million (2019: GBP3.8 million) 
 

Convex Capital

 
            --   Completed two transactions in the year, generating revenue 
                  of GBP1.6 million (2019 from acquisition: GBP1.9 million), 
                  EBITDA loss GBP0.9 million (2019 from acquisition: GBP0.8 
                  million profit) 
            --   Earn-out was not achieved which released GBP2.6 million 
                  back to the income statement at Group level 
 

Staff costs

Total staff costs in 2020 were GBP14.8 million (2019: GBP11.5 million), including GBP2.0 million for Convex Capital (2019 from acquisition: GBP0.9 million) and GBP0.3 million for LionFish (2019: GBPnil). In total, this represents 58% of revenue and gains on litigation assets compared to 48% in 2019.

The year-end headcount totalled 92 (2019: 95), with average headcount for the year of 90 (2019: 81).

Overhead costs

During 2020, the Group incurred overheads of GBP15.4 million (before depreciation and amortisation) (2019: GBP14.3 million, including only three months of Convex). Personnel costs were GBP14.8 million (2019: GBP11.5 million), which included contractors' costs of GBP3.2 million (2019: GBP2.1 million).

Other operating costs were GBP0.6 million (2019: GBP2.8 million), which includes operating costs at Convex of GBP0.4 million (2019 from acquisition: GBP0.2 million) and the deduction of GBP2.6 million of the deferred consideration release. Other costs including insurances of GBP0.7 million (2019: GBP0.5 million), rates GBP0.3 million (2019: GBP0.3 million), training and recruitment GBP0.3 million (2019: GBP0.2 million) and books & subscriptions of GBP0.2 million (2019: GBP0.2 million).

Operationally, there remains a significant focus on IT, and our current and future infrastructure. We have invested sensibly over recent years and further enhanced both our internal and client facing experiences of IT usage. We have taken steps both before and during the pandemic to continue to refine existing processes, including moving to Microsoft Teams, investing in a new client opening technology and streamlining service delivery.

Our response to COVID-19

As COVID-19 swept across the UK in mid-March 2020, we prioritised the wellbeing of all staff across the Group. This involved the immediate closure of all our offices and resultant changes in working practices, to ensure continuity of service to our clients as staff continued to support them and the business remotely. I am extremely pleased with the calm response of our staff and the team spirit shown across the Group in the face of such difficult circumstances.

EBITDA

In assessing performance, the Group uses EBITDA as a KPI. EBITDA for 2020 was GBP10.2 million (40% of revenue and gains on litigation assets) (2019: GBP 9.4 million, 40%). This includes the Convex deferred consideration write back of GBP2.6 million and excluding this non-underlying item gives an Adjusted EBITDA of GBP7.5 million (29% of revenue and gains on litigation assets) (2019: GBP9.4 million, 40%). In 2020, the EBITDA performance has been held back by the losses in Convex of GBP0.9 million.

Profit Before Tax

The profit before tax for 2020 was GBP7.7 million, representing 30% of revenue and gains on litigation assets (2019: GBP7.6 million, 32%). This includes the GBP2.6 million Convex deferred consideration write back and excluding this gives profit before tax for 2020 of GBP5.1 million, representing 20% of revenue and gains on litigation assets.

Earnings Per Share (EPS)

The weighted average number of shares in 2020 was 85.6 million, which gives a basic earnings per share (Basic EPS) for the year of 7.54p (2019: 7.56p).

Corporation tax

The Group's tax charge for the year is GBP1.02 million with an effective tax rate of 13.3% (2019: GBP1.47 million, 19.1%) which has been impacted by Convex deferred consideration write back which is non-taxable income.

Balance sheet

 
                                              2020    2019 
                                              GBPm    GBPm 
 Goodwill, intangible and tangible assets     48.0    44.7 
                                            ------  ------ 
 Current assets                                7.7    11.1 
                                            ------  ------ 
 Current liabilities                         (4.4)   (5.0) 
                                            ------  ------ 
                                              51.3    50.8 
                                            ------  ------ 
 Net cash and cash equivalents                 3.5     1.9 
                                            ------  ------ 
 Non-current liabilities                     (6.4)   (6.3) 
                                            ------  ------ 
 
 Deferred consideration                      (1.1)   (4.0) 
                                            ------  ------ 
 Net assets                                   47.3    42.4 
                                            ------  ------ 
 

The Group's net assets as at 31 December 2020 increased by GBP4.9 million, due to profitable trading in the year.

Goodwill, tangible and intangible assets

Included within tangible assets, GBP5.8 million relates to IFRS 16 right of use for the Group's leases. Within intangible assets and goodwill is GBP33 million of intangible assets identified, on prior year acquisitions, such as goodwill, customer relationships and brand. The Board carries out an impairment review of goodwill each year to ensure the carrying value is supportable. Also included within intangible assets is GBP1 million one-off payment made to Ian Rosenblatt during 2020 in respect of an extension and broadening of the restrictive covenants put in place at the IPO to an additional term through to 2023 As at 31 December 2020 the Board concluded that the goodwill and intangible assets are not impaired.

Non-current assets also includes GBP6.3 million in litigation assets (2019: GBP2.2 million).

Working capital

Management of lock up has continued to be a key focus of the Group over the period, as it measures the length of time it takes to convert work done into cash. It is calculated as the combined debtor and contract asset (WIP) days for the Group. This is a key focus for Management and the Board, as it drives the cash generation necessary to support the growth strategy of the Group. Lock up days at 31 December 2020 were 99 compared to 122 the previous year. Management are satisfied with the level of lock up at the year-end, which remains significantly ahead of the industry average for quoted legal firms.

Trade debtors at the end of the year were GBP3.4 million (2019: GBP3.4 million). Contract assets at the year-end were GBP3.0 million, down from GBP3.8 million at the end of 2019.

Net cash

Net cash at the year-end was GBP3.5 million (2019: GBP1.9 million), with cash at bank of GBP13.5 million and a fully drawn Revolving Credit Facility of GBP10 million. The cash movement during the year included an additional GBP6.7 million generated from operations, less GBP1.9 million paid in corporation tax, GBP1.1 million outflow on investing activities, GBP0.8 million in dividends and GBP1 million in operating lease payments.

Under Governmental COVID-19 measures, the Group deferred the payment of GBP0.5 million of VAT until 2021. The net cash position at year-end, together with the GBP10m Revolving Credit Facility, positions the Group well to deliver its strategy into 2021 and also support the business through the continuing uncertainty caused by COVID-19.

Cash conversion

 
                            2020     2019 
                           GBP'M    GBP'M 
 Cash generated from 
  operating activities       6.7      1.5 
                         -------  ------- 
 Interest                  (0.4)    (0.2) 
                         -------  ------- 
 Capital expenditure       (1.2)    (0.5) 
                         -------  ------- 
 Free cash flow              5.1      0.8 
                         -------  ------- 
 Profit after tax            6.7      6.2 
                         -------  ------- 
 Cash conversion             76%      13% 
                         -------  ------- 
 

The cash conversion percentage measures the Group's conversion of its underlying profit after tax into free cash flows. Cash conversion of 76% for the year shows an increase from previous periods and is a further focus of the business.

Capital expenditure

During the year, the Group continued to invest in its systems and premises to ensure our professionals have a high-quality working environment and consistent systems across the Group, to aid integration and support our one-firm culture. The investment during the year also enabled the ability to work remotely when required, as a result of COVID-19. This investment enabled a smooth transition of the business to remote working, enabling staff to provide services in a seamless fashion. To this end, during 2020, we invested GBP0.2 million in our existing IT systems and offices (2019: GBP0.5 million).

Corporation tax- cash flow impact

Going forward, the Group will fall under the very large quarterly payments regime for its Corporation Tax. This will have the effect of advancing the Corporation Tax payments, such that the full estimated amount is paid during the year rather than only 50%. Management expects post tax cash conversion to average out at circa75% going forward.

Summary

We are pleased with the continued profitability during the year. The investment in the Group puts us in a strong position to grow the business both organically through recruitment, and through selective acquisition opportunities. However, it is important to acknowledge the continued impact of COVID-19 on business life. COVID-19 has and will be a significant challenge moving forward that will continue to create great uncertainty.

Robert Parker

Chief Financial Officer

20 April 2021

Consolidated statement of comprehensive income

For the year ended 31 December 2020

 
 
                                           Note      1 January      1 January 
                                                            to             to 
                                                   31 December    31 December 
                                                          2020           2019 
                                                           GBP            GBP 
 
 Revenue                                      5     22,449,332     19,941,240 
 
 Gains on litigation assets                   5      3,122,727      3,800,000 
 
 Personnel costs                              7   (14,780,204)   (11,496,875) 
 Depreciation and amortisation expense             (2,081,501)    (1,576,180) 
 Other expenses                                      (633,999)    (2,808,567) 
                                                       _______        _______ 
 
 Profit from operations                       6      8,076,355      7,859,618 
 
 EBITDA                                             10,157,856      9,435,798 
 Non-underlying items 
 Deferred consideration release                    (2,640,000)        - 
 Adjusted EBITDA                                     7,517,856      9,435,798 
----------------------------------------  -----  -------------  ------------- 
 
 Finance expense                              8      (394,534)      (253,210) 
 Finance income                               8         24,460         41,027 
                                                       _______        _______ 
 
 Profit before tax                                   7,706,281      7,647,435 
 
 Tax expense                                  9    (1,024,936)    (1,470,837) 
                                                       _______        _______ 
 
 Profit and total comprehensive income               6,681,345      6,176,598 
                                                       _______        _______ 
 
 Total profit and comprehensive income 
  attributable to: 
 Owners of the parent                                6,454,738      6,176,598 
 Non-controlling interest                              226,607        - 
                                                       _______        _______ 
 
                                                     6,681,345      6,176,598 
                                                       _______        _______ 
 
 Earnings per share attributable to the 
  ordinary equity holders of the parent      10 
 
 Profit 
 Basic (pence)                                            7.54           7.56 
 Diluted (pence)                                          7.54           7.50 
                                                       _______        _______ 
 

The results for the year presented above are derived from continuing operations.

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 2020

 
 Company registered number: 11189598         Note   31 December   31 December 
                                                           2020          2019 
 Assets                                                     GBP           GBP 
 Current assets 
 Trade and other receivables                   19     7,696,925    11,088,812 
 Cash and cash equivalents                           13,522,184     1,910,156 
                                                        _______       _______ 
 
                                                     21,219,109    12,998,968 
 Non-current assets 
 Property, plant and equipment                 12       475,229       638,382 
 Right-of-use assets                           13     5,825,712     6,760,198 
 Intangible assets                             14    35,378,065    35,137,871 
 Litigation assets                             18     6,294,754     2,209,886 
                                                        _______       _______ 
 
                                                     47,973,760    44,746,337 
                                                        _______       _______ 
 
 Total assets                                        69,192,869    57,745,305 
                                                        _______       _______ 
 Liabilities 
 Current liabilities 
 Trade and other payables                      20     3,894,546     6,710,936 
 Leases                                        13       870,019       811,105 
 Current tax liabilities                       20       657,437     1,395,489 
 Provisions                                    22       116,875        75,000 
                                                        _______       _______ 
 
                                                      5,538,877     8,992,530 
 Non-current liabilities 
 Loans and borrowings                          21    10,000,000             - 
 Deferred tax liability                        23       304,853       422,144 
 Trade and other payables                      20     1,015,000             - 
 Leases                                        13     5,081,043     5,920,697 
                                                        _______       _______ 
 
                                                     16,400,896     6,342,841 
                                                        _______       _______ 
 
 Total liabilities                                   21,939,773    15,335,371 
                                                        _______       _______ 
 
 NET ASSETS                                          47,253,096    42,409,934 
                                                        _______       _______ 
 Issued capital and reserves attributable 
  to 
  owners of the parent 
 Share capital                                 24       171,184       171,184 
 Share premium reserve                         25    37,565,129    37,565,129 
 Retained earnings                             25     9,290,076     4,673,621 
                                                        _______       _______ 
 
                                                     47,026,389    42,409,934 
 
 Non-controlling interest                               226,707             - 
                                                        _______       _______ 
 
 TOTAL EQUITY                                        47,253,096    42,409,934 
                                                        _______       _______ 
 

Consolidated statement of cash flows

For the year ended 31 December 2020

 
                                               Note           2020           2019 
                                                               GBP            GBP 
 Cash flows from operating activities 
 Profit for the year before tax                          7,706,281      7,647,435 
 Adjustments for: 
 Depreciation of property, plant and 
  equipment                                      12        335,634        232,728 
 Amortisation of right-of-use assets             13        986,061        891,794 
 Amortisation of intangible fixed assets         14        759,806        451,658 
 Finance income                                   8       (24,460)       (41,027) 
 Finance expense                                  8        394,534        253,210 
                                                           _______        _______ 
 
                                                        10,157,856      9,435,798 
 
 Decrease/(increase) in trade and other 
  receivables                                            3,391,887    (5,091,691) 
 (Decrease) in trade and other payables                (2,816,390)      (710,714) 
 (Increase) in litigation assets                 18    (4,084,868)    (2,209,886) 
 Increase in provisions                                     41,875         39,736 
                                                           _______        _______ 
 
 Cash generated from operations                          6,690,360      1,463,243 
 
 Tax paid                                              (1,880,277)    (1,637,610) 
                                                           _______        _______ 
 
 Net cash flows from operating activities                4,810,083      (174,367) 
                                                           _______        _______ 
   Investing activities 
 Purchases of property, plant and equipment      12      (172,482)      (534,155) 
 Purchase of other intangibles                         (1,000,000)              - 
 Acquisition of subsidiary, net of cash                          -    (6,008,389) 
 Interest received                                          24,460         41,027 
                                                           _______        _______ 
 
 Net cash used in investing activities                 (1,148,022)    (6,501,517) 
                                                        _______        _______ 
 Financing activities 
 Issue of ordinary shares in subsidiaries                      100              - 
 Dividends paid to holders of the parent         11      (823,283)    (3,811,342) 
 Proceeds from loans and borrowings              21     21,000,000      1,637,608 
 Repayment of loans and borrowings               21   (11,000,000)    (1,637,608) 
 Repayments of lease liabilities                 13      (832,316)      (699,875) 
 Interest paid on loans and borrowings                   (185,497)       (27,564) 
 Interest paid on lease liabilities              13      (209,037)      (225,646) 
                                                           _______        _______ 
 
 Net cash from financing activities                      7,949,967    (4,764,427) 
                                                           _______        _______ 
 
 Net (decrease)/increase in cash and 
  cash equivalents                                      11,612,028   (11,440,311) 
 Cash and cash equivalents at beginning 
  of year                                                1,910,156     13,350,467 
                                                           _______        _______ 
 
 Cash and cash equivalents at end of 
  year                                                  13,522,184      1,910,156 
                                                           _______        _______ 
 

The attached notes form part of these financial statements.

Consolidated statement of changes in equity

For the year ended 31 December 2020

 
                                                                       Total 
                                                                attributable 
                                                                   to equity          Non- 
                            Share        Share      Retained         holders   controlling         Total 
                                                                          of 
                          Capital      Premium      Earnings          parent      Interest        Equity 
                              GBP          GBP           GBP             GBP           GBP           GBP 
 
 Balance at 1 January 
  2020                    171,184   37,565,129     4,673,621      42,409,934             -    42,409,934 
 
 Comprehensive income 
  for the year 
 Profit for the year            -            -     6,454,738       6,454,738       226,607     6,681,345 
                           ______       ______        ______           _____        ______        ______ 
 
 Total comprehensive 
  Income 
  for the year                  -            -     6,454,738       6,454,738       226,607     6,681,345 
                           ______       ______        ______           _____         _____        ______ 
 Contributions by and 
 distributions to 
 owners 
 Dividends                      -            -     (823,283)       (823,283)             -     (823,283) 
 Issue of share capital         -            -             -               -           100           100 
 Grant of put option 
  over 
  shares in subsidiary          -            -   (1,015,000)     (1,015,000)             -   (1,015,000) 
                           ______       ______        ______           _____        ______        ______ 
 
 Total contributions 
  by and distributions 
  to owners                     -            -   (1,838,283)     (1,838,283)           100   (1,838,183) 
                           ______       ______        ______           _____        ______        ______ 
 
 Balance at 31 December 
  2020                    171,184   37,565,129     9,290,076      47,026,389       226,707    47,253,096 
                           ______       ______        ______          ______        ______        ______ 
 
 
 

The attached notes form part of these financial statements.

Consolidated statement of changes in equity

For the year ended 31 December 2020 (continued)

 
                                                                             Total 
                                                                      Attributable 
                                                                         to equity          Non- 
                                   Share        Share      Retained        holders   controlling         Total 
                                                                                of 
                                 Capital      Premium      Earnings         parent      Interest        Equity 
                                     GBP          GBP           GBP            GBP           GBP           GBP 
 
 Balance at 1 January 2019       160,184   32,516,129     2,308,365     34,984,678             -    34,984,678 
 
 Comprehensive profit for 
  the year 
 Profit for the year                   -            -     6,176,598      6,176,598             -     6,176,598 
                                  ______       ______        ______         ______        ______        ______ 
 Total comprehensive profit 
  for the year 
                                       -            -     6,176,598      6,176,598             -     6,176,598 
                                  ______       ______        ______         ______                      ______ 
 Contributions by and 
  distributions to owners 
 Dividends                             -            -   (3,811,342)    (3,811,342)             -   (3,811,342) 
 Issue of share capital           11,000    5,049,000             -      5,060,000             -     5,060,000 
                                  ______       ______        ______         ______        ______        ______ 
 
 Total contributions by 
  and distributions to owners     11,000    5,049,000   (3,811,342)      1,248,658             -     1,248,658 
                                  ______       ______        ______         ______        ______        ______ 
 
 Balance at 31 December 
  2019                           171,184   37,565,129     4,673,621     42,409,934             -    42,409,934 
                                  ______       ______        ______         ______        ______        ______ 
 
 

The attached notes form part of these financial statements.

Company statement of financial position

As at 31 December 2020

 
 Company registered number: 11189598         Note         2020         2019 
                                                           GBP          GBP 
 Assets 
 Current assets 
 Trade and other receivables                   19   24,900,931   26,492,958 
 Cash and cash equivalents                          12,313,385      359,684 
                                                       _______      _______ 
 
                                                    37,214,316   26,852,642 
 Non-current assets 
 Property, plant and equipment                 12        5,847       10,427 
 Investments                                   16   15,814,321   15,813,422 
                                                       _______      _______ 
 
                                                    15,820,168   15,823,849 
                                                       _______      _______ 
 
 Total assets                                       53,034,484   42,676,491 
                                                       _______      _______ 
 Liabilities 
 Current liabilities 
 Trade and other payables                      20    2,035,431    4,326,969 
                                                       _______       ______ 
 
                                                     2,035,431    4,326,969 
 Non-current liabilities 
 Loans and borrowings                          21   10,000,000            - 
 Deferred tax liability                        23      502,711        1,773 
                                                       _______      _______ 
 
                                                    10,502,711        1,773 
                                                       _______      _______ 
 
 Total liabilities                                  12,538,142    4,328,742 
                                                       _______      _______ 
 
 NET ASSETS                                         40,496,342   38,347,749 
                                                       _______      _______ 
 Issued capital and reserves attributable 
  to owners of the parent 
 Share capital                                 24      171,184      171,184 
 Share premium reserve                         25   37,565,129   37,565,129 
 Retained earnings                             25    2,760,029      611,436 
                                                       _______      _______ 
 
 TOTAL EQUITY                                       40,496,342   38,347,749 
                                                       _______      _______ 
 
 

Company statement of financial position

As at 31 December 2020 (continued)

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 GBP2,971,876 for the year ended 31 December 2020 (2019: GBP5,718,891).

The financial statements were approved and authorised for issue by the Board of Directors on 19 April 2021 and were signed on its behalf by:

Nicola Foulston

Director

The attached notes form part of these financial statements.

Company statement of cash flows

For the year ended 31 December 2020

 
                                               Note           2020          2019 
                                                               GBP           GBP 
 Cash flows from operating activities 
 Profit for the year before tax                          3,110,117     5,720,664 
 Adjustments for: 
 Depreciation of property, plant and 
  equipment                                      12          6,205         5,212 
 Finance income                                            (4,754)      (11,269) 
 Finance expense                                           174,079        25,945 
                                                           _______       _______ 
 
                                                         3,285,647     5,740,552 
 
 (Increase) in trade and other receivables               1,954,724   (4,029,201) 
 (Decrease)/increase in trade and other 
  payables                                             (2,291,537)     (289,197) 
                                                           _______       _______ 
 
 Cash generated from operations                          2,948,834     1,422,154 
 
 Tax paid                                                        -             - 
                                                           _______       _______ 
 
 Net cash flows from operating activities                2,948,834     1,422,154 
                                                           _______       _______ 
   Investing activities 
 Purchases of property, plant and equipment      12        (1,625)       (1,625) 
 Investment in subsidiary                                    (900)             - 
 Acquisition of subsidiary, net of cash                          -   (6,313,322) 
 Interest received                                           4,754        11,269 
                                                           _______       _______ 
 
 Net cash used in investing activities                       2,229   (6,303,678) 
                                                           _______       _______ 
 Financing activities 
 Issue of ordinary shares                                        -             - 
 Dividends paid to holders of the parent         11      (823,283)   (3,811,342) 
 Proceeds from loans and borrowings                     21,000,000     1,637,608 
 Repayment of loans and borrowings                    (11,000,000)   (1,637,608) 
 Interest paid on loans and borrowings                   (174,079)      (25,945) 
                                                           _______       _______ 
 
 Net cash from financing activities                      9,002,638   (3,837,287) 
                                                           _______       _______ 
 
 Net increase/(decrease) in cash and 
  cash equivalents                                      11,953,701   (8,718,811) 
 Cash and cash equivalents at beginning 
  of year                                                  359,684     9,078,495 
                                                           _______       _______ 
 
 Cash and cash equivalents at end of 
  year                                                  12,313,385       359,684 
                                                           _______       _______ 
 

.

Company statement of changes in equity

For the year ended 31 December 2020

 
                                                                        Retained        Total 
                                       Share Capital   Share premium    Earnings 
                                                 GBP             GBP         GBP          GBP 
 
 Balance at 1 January 2020                   171,184      37,565,129     611,436   38,347,749 
 
 Comprehensive profit for 
  the year 
 Profit for the year                               -               -   2,971,876    2,971,876 
                                              ______          ______      ______       ______ 
 Total comprehensive profit 
  for the year                                     -               -   2,971,876    2,971,876 
                                              ______          ______      ______       ______ 
 
 Contributions by and distributions 
  to owners 
 Dividends                                         -               -   (823,283)   ( 823,283) 
 Issue of share capital                            -               -           -            - 
                                              ______          ______      ______       ______ 
 
 Total contributions by and 
  distributions to owners                          -               -   (823,283)   ( 823,283) 
                                              ______          ______      ______       ______ 
 
 Balance at 31 December 2020                 171,184      37,565,129   2,760,029   40,496,342 
                                              ______          ______      ______       ______ 
 

Company statement of changes in equity

For the year ended 31 December 2020 (continued)

 
                                                                          Retained         Total 
                                       Share Capital   Share premium      Earnings 
                                                 GBP             GBP           GBP           GBP 
 
 Balance at 1 January 2019                   160,184      32,516,129   (1,296,113)    31,380,200 
 
 Comprehensive profit for 
  the year 
 Profit for the year                               -               -     5,718,891     5,718,891 
                                              ______          ______        ______        ______ 
 Total comprehensive profit 
  for the year                                     -               -     5,718,891     5,718,891 
                                              ______          ______        ______        ______ 
 
 Contributions by and distributions 
  to owners 
 Dividends                                         -               -   (3,811,342)   (3,811,342) 
 Issue of share capital                       11,000       5,049,000             -     5,060,000 
                                              ______          ______        ______        ______ 
 
 Total contributions by and 
  distributions to owners                     11,000       5,049,000   (3,811,342)     1,248,658 
                                              ______          ______        ______        ______ 
 
 Balance at 31 December 2019                 171,184      37,565,129       611,436    38,347,749 
                                              ______          ______        ______        ______ 
 

The attached notes form part of these financial statements.

Notes (forming part of the consolidated financial statements)

 
 1   Basis of preparation 
 

RBG Holdings plc is a public limited company, incorporated on 6 February 2018 and domiciled in the United Kingdom.

The financial information set out in this release does not constitute the Company's full statutory accounts for the year ended 31 December 2020 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 2019 have been delivered to the registrar of companies, and those for 2020 will be delivered after the forthcoming AGM. The auditors have reported on the accounts for the period ended 31 December 2019 and the year end 31 December 2020: 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 International Financial Reporting Standards (IFRS) as adopted by the UK, this announcement does not itself contain sufficient information to comply with IFRS. The Company expects to publish full financial statements for the year ended 31 December 2020 that comply with IFRS on 21 April 2021.

The accounting policies set out below are in accordance with IFRS, as adopted by the UK, and International Financial Reporting Interpretations Committee ('IFRIC') interpretations that were applicable for the year ended 31 December 2020.

The financial statements have been prepared for year ended 31 December 2020, with a comparative year to 31 December 2019, 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 period presented, unless otherwise stated.

The preparation of financial statements in compliance with IFRS requires the use of certain critical accounting estimates. It also requires Group management to exercise judgment in applying the Group's accounting policies. The areas where significant 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 
   -     Contingent consideration - fair value through profit or loss 

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.

Notes (continued)

 
 1   Basis of preparation (continued) 
 

Changes in accounting policies

a) New standards, interpretations and amendments effective from 1 January 2020

New standards that have been adopted in the annual financial statements for the year ended 31 December 2020 but have not had a significant effect on the Group are:

-- IAS 1 Presentation of Financial Statements and IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors (Amendment - Definition of Material)

   --      IFRS 3 Business Combinations (Amendment - Definition of Business) 
   --      Conceptual Framework for Financial Reporting (Revised) 
   --      COVID-19 Related Rent Concessions (Amendment to IFRS16) 
   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 2021:

   --      Interest Rate Benchmark Reform (Amendments to IFRS9, IAS 39, IFRS 7 and IFRS16) 

The following amendments are effective for the period beginning 1 January 2022:

   --      Onerous Contract - 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 IFRS1, IFRS 9, IFRS 16 and IAS 41)

   --      References to Conceptual Framework (Amendments to IFRS 3) 

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.

Notes (continued)

 
 2   Accounting policies 
 

Revenue

Revenue comprises the fair value of consideration receivable in respect of services provided during the period, inclusive of recoverable expenses incurred but excluding value added tax.

Legal and Other Professional services revenues

Where fees are contractually able to be rendered by reference to time charged at agreed rates, the revenue is recognised over time, based on time worked charged at agreed rates, to the extent that it is considered recoverable.

Where revenue is subject to contingent fee arrangements, including where services are provided under Damages Based Agreements (DBAs), the Group estimates the amount of variable consideration to which it will be entitled and constrains the revenue recognised to the amount for which it is considered highly probable that there will be no significant reversal. Due to the nature of the work being performed, this typically means that contingent revenues are not recognised until such time as the outcome of the matter being worked on is certain.

Bills raised are payable on delivery and until paid form part of Trade receivables. The Group has taken advantage of the practical exemption in IFRS 15 not to account for significant financing components where the Group expects the time difference between receiving consideration and the provision of the service to a client will be one year or less. Where revenue has not been billed at the balance sheet date, it is included as contract assets and forms part of Trade and other receivables.

Basis of consolidation

Where the company has control over an investee, it is classified as a subsidiary. The company controls an investee if all three of the following elements are present: power over the investee, exposure to variable returns from the investee, and the ability of the investor to use its power to affect those variable returns. Control is reassessed whenever facts and circumstances indicate that there may be a change in any of these elements of control.

The consolidated financial statements present the results of the company and its subsidiaries ("the Group") as if they formed a single entity. Intercompany transactions and balances between group companies are therefore eliminated in full.

The consolidated financial statements incorporate the results of business combinations using the acquisition method. In the statement of financial position, the acquiree's identifiable assets, liabilities and contingent liabilities are initially recognised at their fair values at the acquisition date. The results of acquired operations are included in the consolidated statement of comprehensive income from the date on which control is obtained. They are deconsolidated from the date on which control ceases.

Non-Controlling interests

The total comprehensive income of non-wholly owned subsidiaries is attributed to owners of the parent and to the non-controlling interests in proportion to their relative ownership interests.

Where the Company has agreed a put option over the shares of a subsidiary held by a non-controlling interest, the liability for the estimated exercise value of the put option is recognised at fair value in the financial statements of the Company and is recognised at present value in the financial statements of the Group. Movements in the estimated liability after initial recognition are recognised in the income statement.

Goodwill

Goodwill represents the excess of the cost of a business combination over the Group's interest in the fair value of identifiable assets, liabilities and contingent liabilities acquired.

Notes (continued)

 
 2   Accounting policies (continued) 
 

Goodwill (continued)

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 (Damages Based Award). Investments are initially measured at the sum invested and are subsequently held at fair value through the profit and loss.

Where the Group sells an interest in its entitlement to any award under a Damages Based Award to a third party, the difference between the disposal proceeds and the cost of the 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.

Notes (continued)

 
 2   Accounting policies (continued) 
 

Amortised cost

These assets arise principally from the provision of goods and services to customers (eg 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.

Notes (continued)

 
 2   Accounting policies (continued) 
 

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.

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.

Notes (continued)

 
 2   Accounting policies (continued) 
 

Leased assets (continued)

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 reasonable 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.

Notes (continued)

Externally acquired intangible assets (continued)

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 asset      Useful economic   Remaining          Amortisation     Valuation method 
                          life              useful economic    method 
                                            life 
 
   Brand                 20 years          17-19 years        Straight         Estimated discounted 
                                                               line             cash flow 
   Customer contracts    1-2 years         1 year             In line          Estimated discounted 
                                                               with contract    cash flow 
                                                               revenues 
   Restrictive           2 years           2 years            Straight         Cost 
    covenant extension                                         line 
 

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.

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.

Notes (continued)

 
 2   Accounting policies (continued) 
 

Property, plant and equipment

Items of property, plant and equipment are initially recognised at cost. 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:

 
   Plant and machinery     -   25-33% per annum straight line 
   Fixtures and fittings   -   25% per annum straight line 
   Computer equipment      -   33% per annum straight line 
 

Provisions

The group has recognised provisions for liabilities of uncertain timing or amount including those for legal claims. The provision is measured at the best estimate of the expenditure required to settle the obligation at the reporting date, discounted at a pre-tax rate reflecting current market assessments of the time value of money and risks specific to the liability. Where a legal claim is within the scope of an insurance policy held by the Group, provision will be made up to the level of the excess payable on the insurance claim.

Notes (continued)

 
 3   Critical accounting estimates and judgements 
 

The Group makes certain estimates and assumptions regarding the future. Estimates and judgements are continually evaluated based on actual experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. In the future, actual experience may differ from these estimates and assumptions. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial period are discussed below.

Judgements, estimates and assumptions

   -     Accounting for business combinations and fair value 

Business combinations are accounted for at fair value. Valuation of acquired intangibles requires estimates of future growth rates, profitability, remaining useful lives and discount rates for input to the business combination valuation methodology. A difference in the estimated future growth rates, profitability, the use of a different discount rate, or the selection of a different valuation method may result in a different assessment of fair value of the asset or liability acquired as part of the business combination.

   -     Estimated impairment of intangible assets including goodwill 

Determining whether an intangible asset is impaired requires an estimation of the value in use of the cash generating units to which the intangible has been allocated. The value in use calculation requires the entity to estimate the future cash flows expected to arise from each cash generating unit and determine a suitable discount rate. A difference in the estimated future cash flows or the use of a different discount rate may result in a different estimated impairment of intangible assets.

   -     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:-

i) The amount of consideration receivable is highly susceptible to factors outside the Group's influence.

   ii)    The uncertainty is not expected to be resolved for a long time. 

iii) The Group has limited previous experience (or limited other evidence) with similar contracts.

iv) The range of possible consideration amounts is broad with a large number of possible outcomes.

Different views being determined for the amount of revenue to be constrained in relation to each contingent fee arrangement may result in a different value being determined for revenue and also a different carrying value being determined for unbilled amounts for client work.

Notes (continued)

 
 3   Critical accounting estimates and judgements (continued) 
 

Where the group enters into Damages Based Agreements ("DBAs") that include both the provision of services and the provision of litigation finance, the Group must apportion the total expected settlement between that arising as conditional revenue for services and that arising as a return on participation. This requires estimation of the total amount of time cost and disbursements that will be incurred on a matter and the expected settlement value; the allocation of the DBA to revenue is made with reference to standard returns on contingent fee work. Different views will impact the level of unrecognised contingent revenue and also the recognised financial asset relating to the DBA participation.

Where non-contingent fees as well as contingent revenue are earned on DBAs, the group must make a judgement as to whether non-contingent amounts represent revenue or a reduction in funding, with reference to the terms of the agreement and timing and substance of time worked and payments made. Where non-contingent revenue arises, the Group must match it against the services to which it relates. This requires Management to estimate work done as a proportion of total expected work to which the fee relates. Different views could impact the level of non-contingent revenue recognised.

   -     Impairment of trade receivables 

Receivables are held at cost less provisions for impairment. Impairment provisions are recognised based on the simplified approach within IFRS 9 using a provision matrix in the determination of the lifetime expected credit losses. A different assessment of the impairment provision with reference to the probability of the non-payment of trade debtors or the expected loss arising from default, may result in different values being determined.

   -     Litigation assets and fair value 

LionFish

For each of LionFish's investments, a part disposal has been made in the period, and the sales prices of these disposals have been used to value the gross value of the interest in damages retained by the Group. In order 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, which is based on semi-annual individual case by case reviews by management.

In order 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. Management make this assumption based on their semi-annual case by case reviews of each individual investment. 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. 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.

RBL

Unlike LionFish's investments, the total return on RBL'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.

Notes (continued)

 
 3   Critical accounting estimates and judgements (continued) 
 

Where a recent disposal of an interest in a damage based agreement has been made, the sales price of the disposal has been used to value the gross value of the interest in damages retained by the Group. The sales price is adjusted downwards for the cost of the Group's ongoing funding of the matter, which is not borne by the onward investor. This involves an estimate of the likely amount and timing of disbursements over the course of the matter, the minimum being funds already disbursed at the balance sheet date. As management believes the sales price of disposals to represent the floor level, having been used to create a market and de-risk the original investment, the minimum level of disbursements has also been used in valuing the investment. If the present value of the maximum level of disbursements were applied against the value of damages based on disposal price, this would reduce the fair value of the investment to zero. Conversely, if a discounted cash flow method of valuation were used, including an estimate of the likely amount of damages on settlement, the value of the investment would be significantly increased.

It is presumed that fair value and cost approximate to each other on initial recognition and where a 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.

   -     Put options over shares held by non-controlling interest 

The following key estimates and judgements have been used in determining the present value of put options over the shares held by the non-controlling interest in LionFish:-

i) It has been assumed that the option holder will exercise at the earliest possible opportunity, being 12 August 2022

ii) The value at the date of exercise, which is calculated as a multiple of average profit over the preceding two years, has been based on the actual profit after tax for the period ended 31 December 2020 and the budgeted profit after tax for the year ended 31 December 2021.

In determining the fair value of the put options, it has been assumed that fair value of the put shares in LionFish is equal to the fair value of the shares in the Company for which they would be exchanged, and that the fair value of the option is zero.

   -     Claims and regulatory matters 

The Group from time to time receives claims in respect of professional service matters. The Group defends such claims where appropriate, but makes provision for the possible amounts considered likely to be payable, having regard to any relevant insurance cover held by the Group. A different assessment of the likely outcome of each case or of the possible cost involved may result in a different provision or cost.

-

Notes (continued)

 
           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

- Trade and other payables

- Floating-rate bank loans

(ii) Financial instruments by category

Financial assets

 
                                  Fair value through profit         Amortised cost 
                                           or loss 
                                  31 December    31 December   31 December   31 December 
                                         2020           2019          2020          2019 
                                          GBP            GBP           GBP           GBP 
 
  Cash and cash equivalents                 -              -    13,522,184     1,910,156 
  Trade and other receivables               -              -     7,074,425    10,393,807 
  Litigation assets                 6,294,754      2,209,886             -             - 
                                      _______        _______       _______       _______ 
 
  Total financial assets            6,294,754      2,209,886    20,596,609    12,303,963 
                                      _______        _______       _______       _______ 
 

Financial liabilities

 
                                   Fair value through profit          Amortised cost 
                                             or loss 
                                    31 December    31 December   31 December   31 December 
                                           2020           2019          2020          2019 
                                            GBP            GBP           GBP           GBP 
 
  Trade payables and 
   accruals                                   -              -     1,618,264     1,555,988 
  Loans and borrowings                        -              -    10,000,000             - 
  Other payables                              -      2,640,000     2,133,595     1,430,000 
                                        _______        _______       _______       _______ 
 
  Total financial liabilities                 -      2,640,000    13,751,859     2,985,988 
                                        _______        _______       _______       _______ 
 

Trade and other payables are due within twelve months.

Notes (continued)

 
           4             Financial instruments - Risk Management (continued) 
 

Principal financial instruments (continued)

(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 and loans and borrowings.

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 18 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 Chief Financial Officer 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.

Notes (continued)

 
           4             Financial instruments - Risk Management (continued) 
 

General objectives, policies and processes (continued)

Interest rate risk

The Group is exposed to cash flow interest rate risk from borrowings under the Revolving Credit Facility at variable rate. The Board reviews the interest rate exposure on a regular basis.

During 2020 and 2019, the Group's borrowings at variable rate were denominated in sterling. At 31 December 2020, if interest rates on sterling denominated borrowings had been 100 basis points higher/lower with all other variables held constant, profit after tax for the year would have been GBP78,000 lower/higher, mainly as a result of higher/lower interest expense on floating-rate borrowings. The directors consider that 100 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 25(th) October 2019, the Group signed a GBP10,000,000 three-year Revolving Credit Facility with HSBC UK Bank plc. The Group may utilise any proportion of the facility, paying an interest margin of 1.75-2.25% over LIBOR 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 12 and 14. During 2020, the Group drew down the full GBP10m facility. At the year end the Group had GBP13.5m in cash, and so a net cash position of GBP3.5m (2019: GBP1.9m).

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 13), 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.

Notes (continued)

 
 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 Rosenblatt 
   --      Litigation finance - Sale of litigation assets, by Rosenblatt and LionFish 

-- Other Professional services -Provision of sell-side M&A corporate finance services, by Convex

 
  2020                                                  Legal    Litigation   Other Professional           Total 
                                                     services       finance             services 
                                                          GBP           GBP                  GBP             GBP 
 
  Segment revenue                                  20,864,341             -            1,584,991      22,449,332 
                                                      _______       _______              _______         _______ 
 
  Segment gains on litigation 
   assets comprising: 
           Proceeds on disposal of litigation 
           assets                                           -     3,561,000                    -       3,561,000 
           Realisation of litigation assets                 -   (2,353,164)                    -     (2,353,164) 
                                                      _______       _______              _______         _______ 
 
           Profit on disposal of litigation 
            assets                                          -     1,207,836                    -       1,207,836 
           Fair value movement on litigation 
            assets                                          -     1,914,891                    -       1,914,891 
                                                      _______       _______              _______         _______ 
 
                                                            -     3,122,727                    -       3,122,727 
                                                      _______       _______              _______         _______ 
 
  Segment contribution                             10,868,778             -            (605,593)      10,263,185 
                                                      _______       _______              _______ 
 
  Segment gains on litigation 
   assets                                                  --     3,122,727                   --       3,122,727 
                                                      _______       _______              _______ 
 
   Costs not allocated to segments 
   Personnel costs                                                                                 (2,634,661) 
   Depreciation and amortisation                                                                   (2,081,501) 
   Other operating expense                                                                           (593,395) 
   Net financial expenses                                                                            (370,074) 
                                                                                                       _______ 
 
  Group profit for the year before 
   tax                                                                                               7,706,281 
                                                                                                       _______ 
 
 

Notes (continued)

 
 5   Segment information (continued) 
 
 
  2019                                            Legal   Litigation   Other Professional           Total 
                                               services      finance             services 
                                                    GBP          GBP                  GBP             GBP 
 
  Segment revenue                            18,089,740            -            1,851,500      19,941,240 
                                                _______      _______              _______         _______ 
 
  Segment gains on litigation 
  assets                                             --    3,800,000                   --       3,800,000 
                                                _______      _______              _______         _______ 
 
  Segment contribution                       10,231,521            -            1,037,839      11,269,360 
                                                _______      _______              _______ 
 
  Segment gains on litigation 
  assets                                             --    3,800,000                   --       3,800,000 
                                                _______      _______              _______ 
 
   Costs not allocated to segments 
   Personnel costs                                                                          (2,861,240) 
   Depreciation and amortisation                                                            (1,576,180) 
   Other operating expense                                                                  (2,772,322) 
   Net financial expenses                                                                     (212,183) 
                                                                                                _______ 
 
  Group profit for the year before 
   tax                                                                                        7,647,435 
                                                                                                _______ 
 
 

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 
                           2020         2019 
                            GBP          GBP 
 
  United Kingdom     20,680,948   17,420,189 
  Europe                387,829      301,799 
  North America           7,833       71,591 
  Other               1,372,722    2,147,661 
                        _______      _______ 
 
                     22,449,332   19,941,240 
                        _______      _______ 
 

Revenues from Legal services clients that account for more than 10% of Group revenue total GBP12,829,816 (2019: GBP7,905,967).

Notes (continued)

 
  Contract assets 
                                                         2020          2019 
  Group                                                   GBP           GBP 
 
  At 1 January 2020                                 3,797,152     3,040,152 
  Acquired through business combinations                    -             - 
  Transfers in the period from contract assets 
   to trade receivables                           (3,429,927)   (2,692,814) 
  Excess of revenue recognised over cash (or 
   rights to cash) being recognised during the 
   year                                             2,629,700     3,449,814 
                                                      _______       _______ 
 
  At 31 December 2020                               2,996,925     3,797,152 
                                                      _______       _______ 
 

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 
                                                              2020      2019 
                                                               GBP       GBP 
      Profit from operations is stated after charging: 
 
      Fees payable to the company's auditors 
   - Audit fees                                            177,500   147,750 
   - Other services                                         12,500    12,500 
  Depreciation of property, plant and equipment            335,634   232,729 
  Amortisation of right-of-use assets                      986,061   891,794 
  Amortisation/impairment of intangible assets             759,806   451,658 
      Lease expense: 
       - Short term                                              -         - 
   - Low value                                               3,335     1,872 
 

The Alternative Performance Measures used by Management are shown below:

 
                                                  2020        2019 
                                                   GBP         GBP 
 
  Operating profit                           8,076,355   7,859,618 
  Depreciation and amortisation expense      2,081,501   1,576,180 
  Non-underlying items                     (2,640,000)           - 
                                               _______     _______ 
 
  Adjusted EBITDA                            7,517,856   9,435,798 
                                               _______     _______ 
 
 
                                 2020        2019 
                                  GBP         GBP 
 
  Profit before tax         7,706,281   7,647,435 
  Non-underlying items    (2,640,000)           - 
                              _______     _______ 
 
  Adjusted PBT              5,066,281   7,647,435 
                              _______     _______ 
 

Notes (continued)

 
 7    Employees 
                                                   2020        2019 
      Group                                         GBP         GBP 
 
      Staff costs (including directors) 
       consist of: 
 
  Wages and salaries                          9,902,596   8,071,730 
  Short-term non-monetary benefits              122,854     114,448 
  Cost of defined contribution scheme           262,518     262,998 
      Share-based payment expense                39,403           - 
  Social security costs                       1,225,260     981,110 
                                                _______     _______ 
 
                                             11,552,631   9,430,286 
                                                _______     _______ 
 

Personnel Costs stated in the Consolidated statement of comprehensive income includes the costs of contractors of GBP3,227,573 (2019: GBP2,066,589).

The average number of employees (including directors) during the period was as follows:

 
                                     2020      2019 
                                   Number    Number 
 
  Legal and professional staff         55        50 
  Administrative staff                 35        31 
                                  _______   _______ 
 
                                       90        81 
                                  _______   _______ 
 

Defined contribution pension schemes are operated on behalf of the employees of the Group. The assets of the schemes are held separately from those of the Group in independently administered funds. The pension charge represents contributions payable by the Group to the funds and amounted to GBP262,518 (2019: GBP262,998). Contributions amounting to GBP40,574 (2019: GBP42,308) were payable to the funds at period end and are included in Trade and other payables.

Company

The average number of employees (excluding directors) during the period was one (2019: nil); 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 26. The directors are considered to be the key management personnel.

Notes (continued)

 
 8   Finance income and expense 
 

Recognised in profit or loss

 
                                                    2020        2019 
  Finance income                                     GBP         GBP 
 
  Interest received on bank deposits              24,460      41,027 
                                                 _______     _______ 
 
  Net finance income recognised in profit 
   or loss                                        24,460      41,027 
                                                 _______     _______ 
 
  Finance expense                                    GBP         GBP 
 
  Interest expense on financial liabilities 
   measured at amortised cost                  (185,497)    (27,565) 
  Interest expense on lease liabilities        (209,037)   (225,645) 
                                                 _______     _______ 
 
                                               (394,534)   (253,210) 
                                                 _______     _______ 
 
  Net finance (expense) recognised in 
   profit or loss                              (370,074)   (212,183) 
                                                 _______     _______ 
 

The above financial income and expense include the following in respect of assets/(liabilities) not at fair value through profit or loss:

 
  Total interest income on financial 
   assets                                   24,460     41,027 
  Total interest expense on financial 
   liabilities                           (185,497)   (27,565) 
                                           _______    _______ 
 
                                           161,037     13,462 
                                           _______    _______ 
 
 
 9   Tax expense 
 
 
                                                2020        2019 
                                                 GBP         GBP 
  Current tax expense 
 
  Current tax on profits for the year      1,141,107   1,487,925 
  Adjustment for under provision in 
   prior periods                               1,120      61,538 
                                             _______     _______ 
 
  Total current tax                        1,142,227   1,549,463 
 
  Deferred tax expense 
 
  Origination and reversal of temporary 
   differences (Note 23)                   (117,291)    (78,626) 
                                             _______     _______ 
 
  Total tax expense                        1,024,936   1,470,837 
                                             _______     _______ 
 

Notes (continued)

 
 9   Tax expense (continued) 
 

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 period are as follows:

 
                                                   2020        2019 
                                                    GBP         GBP 
 
  Profit on ordinary activities before 
   taxation                                   7,706,281   7,647,435 
                                                _______     _______ 
 
  Tax using the Company's domestic tax 
   rate of 19%                                1,464,193   1,453,013 
  Expenses not deductible for tax purposes        5,293      31,715 
  Income not taxable for tax purposes         (501,600)           - 
  Adjustments in respect of prior periods         1,120      61,539 
  Adjustments in respect of prior periods 
   (deferred tax)                                 5,606    (11,816) 
  Remeasurement of deferred tax for 
   changes in tax rates                          50,324    (63,614) 
                                                _______     _______ 
 
  Total tax expense                           1,024,936   1,470,837 
                                                _______     _______ 
 

Changes in tax rates and factors affecting the future tax charge

Following an announcement in the Budget on 11 March 2020, which was substantively enacted on 17 March 2020, the UK corporation tax rate applicable for the years beginning 1 April 2020 and 1 April 2021 now remains at 19%, rather than the previously enacted reduction to 17%. This rate of 19% has been applied to deferred tax balances which are expected to reverse after 1 April 2020, the date on which that rate became effective.

 
 10   Earnings per share 
 
 
                                                Total        Total 
                                                 2020         2019 
  Numerator                                       GBP          GBP 
 
  Profit for the period and earnings 
   used in basic and diluted EPS            6,454,738    6,176,598 
 
  Non-Underlying items 
  Deferred consideration release          (2,640,000)            - 
  Less: tax effect of above items                   -            - 
                                              _______      _______ 
 
  Profit for the year adjusted for Non 
   Underlying items                         3,814,738    6,176,598 
                                              _______      _______ 
 
  Denominator                                  Number       Number 
 
  Weighted average number of shares 
   used in basic EPS                       85,592,106   81,704,435 
  Effect of: 
  Contingent share consideration on 
   business combination                             -      603,422 
                                              _______      _______ 
 
  Weighted average number of shares 
   used in diluted EPS                     85,592,106   82,307,857 
                                              _______      _______ 
 

Notes (continued)

 
 10   Earnings per share (continued) 
 

Earnings per share is calculated as follows:

 
                                                        2020    2019 
                                                       Pence   Pence 
 
       Basic earnings per ordinary share                7.54    7.56 
 
       Diluted earnings per ordinary share              7.54    7.50 
 
       Basic earnings per ordinary share adjusted 
        for Non Underlying items                        4.46    7.56 
 
       Diluted earnings per ordinary share adjusted 
        for Non Underlying items                        4.46    7.50 
 

Clawback arrangements over certain shares of Cascades Ltd would have an anti-dilutive effect on earnings per share and therefore no impact on diluted earnings per share.

 
 11   Dividends 
 
 
                                                  2020        2019 
                                                   GBP         GBP 
 
  Interim dividend of 0p (2019: 2.8p) 
   per Ordinary share proposed and paid 
   during the year relating to the previous 
   year's results                                    -   2,228,300 
 
  Interim dividend of 1.0p (2019: 2.0p) 
   per Ordinary share paid during the 
   year                                        823,283   1,583,042 
                                               _______     _______ 
 
                                               823,283   3,811,342 
                                               _______     _______ 
 

On 26 February 2021, an interim dividend was paid of 3 pence per share in respect of the 2020 financial year.

Notes (continued)

 
 12   Property, plant and equipment 
 
 
  Group                       Plant and       Fixtures    Computer       Total 
                              Machinery   and fittings   Equipment 
                                    GBP            GBP         GBP         GBP 
  Cost 
 
  At 1 January 2020             324,512        116,258     501,408     942,178 
  Additions                      10,989         32,878     128,615     172,482 
  Disposals                           -              -     (1,339)     (1,339) 
                                _______        _______     _______     _______ 
 
  At 31 December 2020           335,501        149,136     628,684   1,113,321 
                                _______        _______     _______     _______ 
 
  Accumulated Depreciation 
   and Impairment 
 
  At 1 January 2020             172,297          9,097     122,402     303,796 
  Charge for the year           109,274         35,958     190,403     335,635 
  Disposals                           -              -     (1,339)     (1,339) 
                                _______        _______     _______     _______ 
 
  At 31 December 2020           281,571      45,055        311,466     638,092 
                                _______        _______     _______     _______ 
 
  Net book value 
 
  At 1 January 2020             152,215        107,161     379,006     638,382 
 
  At 31 December 2020            53,930        104,081     317,218     475,229 
                                _______        _______     _______     _______ 
 

Notes (continued)

 
 12   Property, plant and equipment (continued) 
 
 
  Company                        Computer     Total 
                                Equipment 
                                      GBP       GBP 
  Cost 
 
  At 1 January 2020                17,125    17,125 
  Additions                         1,625     1,625 
  Acquired through 
   business combinations                -         - 
                                  _______   _______ 
 
  At 31 December 2020              18,750    18,750 
                                  _______   _______ 
 
  Accumulated Depreciation 
   and Impairment 
 
  At 1 January 2020                 6,698     6,698 
  Charge for the year               6,205     6,205 
                                  _______   _______ 
 
  At 31 December 2020              12,903    12,903 
                                  _______   _______ 
 
  Net book value 
 
  At 1 January 2020                10,427    10,427 
 
  At 31 December 2020               5,847     5,847 
                                  _______   _______ 
 

Under a debenture signed and registered on 25 October 2019, HSBC UK Bank plc have a fixed charge over the property, plant and equipment of the Group.

 
 13   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 Group also leases an item of office equipment, with fixed payments over the lease term.

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.

Notes (continued)

 
 13   Leases (continued) 
 
 
  At 31 December 2020      Lease Contracts   Fixed Payments    Variable   Sensitivity 
                                                               Payments 
                                    Number                %           %        GBP000 
 
  Property leases with 
   payments linked to 
   inflation                             1                -       88.0%       +/- 290 
  Property leases with 
   periodic uplifts to 
   market rentals                        1                -       11.3%        +/- 10 
  Leases of plant and 
   equipment                             1             0.7%           -             - 
                                   _______          _______     _______       _______ 
 
                                         3             0.7%       99.3%        +/-300 
                                   _______          _______     _______       _______ 
 

The percentages in the table below reflect the proportions of lease payments that are either fixed or variable for the comparative period.

 
  At 31 December 2019      Lease Contracts   Fixed Payments    Variable   Sensitivity 
                                                               Payments 
                                    Number                %           %        GBP000 
 
  Property leases with 
   payments linked to 
   inflation                             1                -       89.7%       +/- 323 
  Property leases with 
   periodic uplifts to 
   market rentals                        1                -        9.7%        +/- 13 
  Leases of plant and 
   equipment                             1             0.6%           -             - 
                                   _______          _______     _______       _______ 
 
                                         3             0.6%       99.4%        +/-336 
                                   _______          _______     _______       _______ 
 

Right-of-Use Assets

 
                                              Land and     Computer     Total 
                                             buildings    equipment 
                                                   GBP          GBP         GBP 
 
  At 1 January 2019                          7,294,194       16,518   7,310,712 
  Acquired through business combinations       274,380            -     274,380 
  Amortisation                               (885,187)      (6,607)   (891,794) 
  Variable lease payment adjustment             66,900            -      66,900 
                                               _______      _______     _______ 
 
  At 31 December 2019                        6,750,287        9,911   6,760,198 
                                               _______      _______     _______ 
 
 
                                         Land and     Computer     Total 
                                        buildings    equipment 
                                              GBP          GBP         GBP 
 
  At 1 January 2020                     6,750,287        9,911   6,760,198 
  Amortisation                          (979,454)      (6,607)   (986,061) 
  Variable lease payment adjustment        51,575            -      51,575 
                                          _______      _______     _______ 
 
  At 31 December 2020                   5,822,408        3,304   5,825,712 
                                          _______      _______     _______ 
 

Notes (continued)

 
 13   Leases (continued) 
 

Lease liabilities

 
                                              Land and     Computer     Total 
                                             buildings    equipment 
                                                   GBP          GBP         GBP 
 
  At 1 January 2019                          7,073,880       16,518   7,090,398 
  Acquired through business combinations       274,380            -     274,380 
  Interest expense                             225,187          459     225,646 
  Variable lease payment adjustment             66,900            -      66,900 
  Lease payments                             (918,615)      (6,906)   (925,521) 
                                               _______      _______     _______ 
 
  At 31 December 2020                        6,721,732       10,071   6,731,803 
                                               _______      _______     _______ 
 
 
                                          Land and     Computer      Total 
                                         buildings    equipment 
                                               GBP          GBP           GBP 
 
  At 1 January 2020                      6,721,732       10,071     6,731,803 
  Interest expense                         208,790          247       209,037 
  Variable lease payment adjustment         51,575            -        51,575 
  Lease payments                       (1,034,442)      (6,911)   (1,041,353) 
                                           _______      _______       _______ 
 
  At 31 December 2020                    5,947,655        3,407     5,951,062 
                                           _______      _______       _______ 
 

At 31 December 2020, lease liabilities were falling due as follows:

 
 Group                Up to 3     Between    Between     Between   Over 5 years       Total 
                       months    3 and 12    1 and 2     2 and 5 
                                   months      years       years 
                          GBP         GBP        GBP         GBP            GBP         GBP 
 Lease liabilities    213,432     656,587    885,479   2,685,051      1,510,513   5,951,062 
 

The aggregate undiscounted commitments for low-value leases as at 31 December 2020 was GBP5,460.

Notes (continued)

 
 14    Intangible assets 
       Group                         Goodwill    Customer       Brand       Other        Total 
                                                Contracts 
                                          GBP         GBP         GBP         GBP          GBP 
       Cost 
 
  At 1 January 2019                17,260,221     200,111     750,000           -   18,210,332 
  Acquired through 
   business combinations           15,775,039   1,167,673     661,596           -   17,604,308 
                                      _______     _______     _______     _______      _______ 
 
  At 31 December 2019              33,035,260   1,367,784   1,411,596           -   35,814,640 
                                      _______     _______     _______     _______      _______ 
 
  At 1 January 2020                33,035,260   1,367,784   1,411,596           -   35,814,640 
  Additions                                 -           -           -   1,000,000    1,000,000 
                                      _______     _______     _______     _______      _______ 
 
  At 31 December 2020              33,035,260   1,367,784   1,411,596   1,000,000   36,814,640 
                                      _______     _______     _______     _______      _______ 
 
       Accumulated amortisation 
        and impairment 
 
  At 1 January 2019                         -     200,111      25,000           -      225,111 
  Amortisation charge                       -     404,602      47,056           -      451,658 
                                      _______     _______     _______     _______      _______ 
 
  At 31 December 2019                       -     604,713      72,056           -      676,769 
                                      _______     _______     _______     _______      _______ 
 
 
  At 1 January 2020                         -     604,713      72,056           -      676,769 
  Amortisation charge                       -     689,226      70,580           -      759,806 
                                      _______     _______     _______     _______      _______ 
 
  At 31 December 2020                       -   1,293,939     142,636           -    1,436,575 
                                      _______     _______     _______     _______      _______ 
 
       Net book value 
 
  At 1 January 2019                17,260,221           -     725,000           -   17,985,221 
 
  At 31 December 2019              33,035,260     763,071   1,339,540           -   35,137,871 
 
  At 31 December 2020              33,035,260      73,845   1,268,960   1,000,000   35,378,065 
                                      _______     _______     _______     _______      _______ 
 

Under a debenture signed and registered on 25 October 2019, HSBC UK Bank plc have a fixed charge over the intangible assets of the Group.

As announced on 24 January 2020 and disclosed in the Report and Financial Statements for the year ended 31 December 2019, RBL negotiated with Ian Rosenblatt an extension and broadening of the restrictive covenants put in place at the IPO (and described in the Company's admission document) to an additional two-year term through to 2023. In consideration of this arrangement, RBL made a one-off payment to Mr Rosenblatt of GBP1 million, reflected in Other Intangible assets above.

Notes (continued)

 
 15   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 long term of between 2-4% are based on management's understanding of the market opportunities for services provided, whilst in the case of Convex Capital, a return to pre COVID-19 business levels was not assumed until 2023.

-- 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.

 
 16   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 of ownership          Non-Controlling 
                          Activity              Number              interest at 31      interests ownership 
                                                                          December           at 31 December 
                                                                2020          2019         2020        2019 
 
  Rosenblatt 
   Limited               Legal Services       09986118          100%          100%            -           - 
  Convex Group 
   (Holdings) 
   Limited               Holding Company      11490871          100%          100%            -           - 
  Convex Capital         Professional 
   Limited                Services            11491052          100%          100%            -           - 
  LionFish Litigation 
   Finance (UK)          Litigation 
   Limited                Finance             12165991           90%             -          10%           - 
  Islero Assignments 
   Limited               Dormant              12754244          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 of the other subsidiaries and the registered address of each subsidiary is 9-13 St. Andrew Street, London, England EC4A 3AF.

For the year ending 31 December 2020, 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 2020.

Notes (continued)

 
 17   Non-controlling interests 
 

The NCI of LionFish Litigation Finance (UK) Finance , which is 90% owned by the Group, is considered to be immaterial.

 
 18   Litigation assets 
 

The table below provides analysis of the movements in the Level 3 financial assets.

 
                                2020          2019 
                             Level 3       Level 3 
                                 GBP           GBP 
 
  At 1 January             2,209,886             - 
  Additions                4,523,141     2,209,886 
  Realisations           (2,353,164)   (3,800,000) 
  Fair value movement      1,914,891     3,800,000 
                             _______       _______ 
 
  At 31 December           6,294,754     2,209,886 
                             _______       _______ 
 

Sensitivity of Level 3 valuations

Following investment, the Group engages in a semi-annual review of each investment's fair value. At 31 December 2020, 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 GBP629,475 (2019: GBP220,988).

 
 19    Trade and other receivables 
                                                Group      Company        Group      Company 
                                                 2020         2020         2019         2019 
                                                  GBP          GBP          GBP          GBP 
 
  Trade receivables                         3,592,075            -    3,469,642            - 
  Less: provision for impairment 
   of trade receivables                     (219,643)            -     (64,923)            - 
                                              _______      _______      _______      _______ 
 
  Trade receivables - net                   3,372,432            -    3,404,719            - 
  Contract assets                           2,996,925            -    3,797,152            - 
  Amounts due from subsidiaries                     -   24,143,299            -   25,995,864 
  Other receivables                           705,068      673,073    3,191,936      489,677 
                                              _______      _______      _______      _______ 
 
  Total financial assets other 
   than cash and cash equivalents 
   classified as amortised cost             7,074,425   24,816,372   10,393,807   26,485,541 
  Prepayments                                 622,500       84,559      695,005        7,417 
                                              _______      _______      _______      _______ 
 
  Total trade and other receivables         7,696,925   24,900,931   11,088,812   26,492,958 
                                              _______      _______      _______      _______ 
 

Notes (continued)

 
 19   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:

 
 31 December 2020                  More than   More than   More than 
                                     30 days     60 days    120 days       Total 
                         Current    past due    past due    past due         GBP 
 
 Expected loss rate          0 %          2%          2%      23% 
 Gross carrying 
  amount               5,073,270     381,262     352,867     781,601   6,589,000 
 Loss provision           23,566       7,028       6,505     182,544     219,643 
 
 
 31 December 2019                  More than   More than   More than 
                                     30 days     60 days    120 days       Total 
                         Current    past due    past due    past due         GBP 
 
 Expected loss rate          0 %          2%          2%          5% 
 Gross carrying 
  amount               5,894,884     365,492     402,330     604,088   7,266,795 
 Loss provision           14,684       8,406       9,254      32,579      64,923 
 

None of the trade receivables and contract assets have been subject to a significant increase in credit risk since initial recognition.

Notes (continued)

 
 19   Trade and other receivables (continued) 
 

Movements in the impairment allowance for trade receivables are as follows:

 
                                 2020      2019 
                                  GBP       GBP 
 
  At 1 January 2020            64,923    27,790 
  Increase during the year    154,720    37,133 
                              _______   _______ 
 
  At 31 December 2020         219,643    64,923 
                              _______   _______ 
 

Company

The loan due from RBL is on demand and interest free.

Management considers that there is no increase in credit risk on the related party loan. Given that the loan is 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 loss to be close to nil.

 
 20   Trade and other payables 
 
 
                                         Group     Company       Group     Company 
                                          2020        2020        2019        2019 
                                           GBP         GBP         GBP         GBP 
 
  Trade payables                       465,300           -     789,857           - 
  Corporation tax payable              657,437           -   1,395,489           - 
  Other taxes and social security    1,157,687           -   1,084,948       - 
  Amounts due to group companies             -     662,213           -    44,321 
  Other payables                     2,133,595   1,118,595   4,070,000   4,070,000 
  Accruals                           1,152,964     254,623     766,131     212,648 
                                       _______     _______     _______     _______ 
 
  At 31 December                     5,566,983   2,035,431   8,106,425   4,326,969 
                                       _______     _______     _______     _______ 
 
  Due within one year or less        4,551,983   2,035,431   8,106,425   4,326,969 
  Due after more than one year       1,015,000           -           -           - 
                                       _______     _______     _______     _______ 
 
                                     5,566,983   2,035,431   8,106,425   4,326,969 
                                       _______     _______     _______     _______ 
 

The carrying value of trade and other payables classified as financial liabilities measured at amortised cost approximates fair value.

On 12 August 2020, the Company agreed put and call options over the shares of LionFish held by the non-controlling interest. Under this agreement, the holder of the shares can 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, at any point in the period from 12 August 2022 to 12 August 2030. Similarly under the agreement, the Company can require the holder of the shares to sell the shares of LionFish for a consideration calculated and settled in the same way at any point in the period from 12 August 2025 to 12 August 2030.

Notes (continued)

 
 21   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 20    31 Dec 20      31 Dec       31 Dec 
                                                                          19           19 
                                               GBP          GBP          GBP          GBP 
                Non-Current 
                Bank loans 
 
           -                *    Secured    10,000,000   10,000,000       -            - 
 
                                             _______      _______      _______      _______ 
 
  At 31 December                            10,000,000   10,000,000       -            - 
 
                                             _______      _______      _______      _______ 
 
 

The rate at which Sterling denominated loans and borrowings are payable is 1.75% above LIBOR.

The bank loans are secured by fixed and floating charges over the assets of the Group. The Group has no undrawn committed borrowing facilities available at 31 December 2020 (2019: GBP10,000,000).

 
 22    Provisions 
       Group                            Other provisions   Other provisions 
                                                    2020               2019 
                                                     GBP                GBP 
 
  At 1 January                                    75,000             35,264 
  Charged to profit or loss                       41,875             39,736 
                                                 _______            _______ 
 
  At 31 December                                 116,875             75,000 
                                                 _______            _______ 
 
  Due within one year or less                    116,875             75,000 
       Due after more than one year             _______-           _______- 
 
                                                 116,875             75,000 
                                                 _______            _______ 
 

Other provisions represent the amount equal to the insurance excess payable on outstanding claims against the Group which are covered by the Group's professional indemnity insurance policy. The amount or timing of amounts payable in these cases is uncertain as the resolution of the cases is unknown at the period end.

Notes (continued)

 
 23   Deferred tax 
 

Deferred tax is calculated in full on temporary differences under the liability method using a tax rate of 19%.

Following an announcement in the Budget on 11 March 2020, which was substantively enacted on 17 March 2020, the UK corporation tax rate applicable for the years beginning 1 April 2020 and 1 April 2021 now remains at 19%, rather than the previously enacted reduction to 17%. This rate of 19% has been applied to deferred tax balances which are expected to reverse after 1 April 2020, the date on which that rate became effective.

The movement on the deferred tax account is as shown below:

 
                              Group   Company      Group   Company 
                               2020      2020       2019      2019 
                                GBP       GBP        GBP       GBP 
 
  At 1 January              422,144     1,773    144,062         - 
 
  Recognised in profit 
   and loss 
  Tax expense             (117,291)   500,938   (78,626)     1,773 
                            _______   _______    _______   _______ 
 
                            304,853   502,711     65,436     1,773 
 
  Arising on business             -         -    356,708         - 
   combination 
                            _______   _______    _______   _______ 
 
  At 31 December            304,853   502,711    422,144     1,773 
                            _______   _______    _______   _______ 
 
 
 24   Share capital 
 
 
                                                  Authorised 
                                        2020      2020         2019      2019 
                                      Number       GBP       Number       GBP 
 
 
  Ordinary shares of 0.2p each    85,592,106   171,184   85,592,106   171,184 
                                     _______   _______      _______   _______ 
 
 
                                        Allotted, issued and fully paid 
  Allotted, issued and fully            2020      2020         2019      2019 
   paid 
                                      Number       GBP       Number       GBP 
  Ordinary shares of 0.2p each 
  At 1 January                    85,592,106   171,184   80,092,106   160,184 
  Other issues for cash during             -         -            -         - 
   the year 
  Other issues during the year             -         -    5,500,000    11,000 
                                     _______   _______      _______   _______ 
 
  At 31 December                  85,592,106   171,184   85,592,106   171,184 
                                     _______   _______      _______   _______ 
 

Ordinary shares rank equally as regards to dividends, other distributions and return on capital. Each ordinary share carries the right to one vote.

Notes (continued)

 
 25   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. 
 
 
 26   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 of         Purchase of   Supply of   Purchase 
                                                                               of 
                              Services            Services    Services   Services 
 
                                  2020                2020        2019       2019 
                                   GBP                 GBP         GBP        GBP 
 
  Velocity Venture 
   Capital Ltd*                 14,250             209,786      18,886    194,836 
  N Foulston                     6,500                   -           -          - 
  Motorsport Circuit                 -                   -       1,000          - 
   Management Limited* 
  WDK Motorsport Limited*            -                   -     (2,550)          - 
  Cascades Ltd **                    -                   -       2,500          - 
  Winros***                          -           1,128,051           -    655,587 
 

Note: *A company controlled by Nicola Foulston, ** A company wholly owned by the Foulston Family Trust of which Nicola Foulston is a beneficiary, *** A partnership in which Ian Rosenblatt is a partner.

In addition, during the year, GBP80,180 of contingent work was performed by the Group in relation to a Conditional Fee Agreement with Winros. At 31 December 2020, there were no amounts due to any related party (2019: GBPnil) and no amounts due by any related party (2019: GBPnil).

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 2020 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. During the year a one-off payment of GBP1 million was made to Mr Rosenblatt for the extension and broadening of the restrictive covenants put in place at the IPO, more detail of which is given in Note 14.

Total remuneration of Key Management Personnel during the year was GBP835,565 (2019: GBP846,283). Further details of directors' remuneration are given in the Directors' Report .

Notes (continued)

 
 26   Related party transactions (continued) 
 

Company

In addition to the amounts disclosed in the Directors' Report, the Company has entered into the following transactions with related parties.

During 2020, the company reimbursed fees and expenses paid on its behalf by Rosenblatt Limited totalling GBP1,026,323 (2019: GBP151,653). At 31 December 2020, the company was owed GBP22,340,825 by Rosenblatt Limited (2019: GBP25,995,864).

At 31 December 2020, the company was owed GBP1,802,474 by Convex Capital Limited (2019: GBP44,321 owed to Convex Capital Limited).

During 2020, LionFish Litigation Finance (UK) Limited reimburse fees and expenses paid on its behalf by the Company totalling GBP143,602 (2019: GBPnil). At 31 December 2020, the company owed GBP662,213 to LionFish Litigation Finance (UK) Limited (2019: GBPnil).

 
 27   Notes supporting statement of cash flows 
 

Significant non-cash transactions from investing activities are as follows:

 
                                              2020        2019 
                                               GBP         GBP 
 
  Equity consideration for business 
   combination                         (2,640,000)   7,700,000 
 

Non-cash transactions from financing activities are shown in the reconciliation of liabilities from financing transactions below:

 
                                    Non-current     Current loans     Total 
                                      loans and    and borrowings 
                                     borrowings 
                                            GBP               GBP       GBP 
 
 At 1 January 2020                            -                 -         - 
 Cash flows                           (122,836)                 -         - 
 Non-cash flows 
 - Interest accruing in year            174,048                 - 
                                        _______           _______   _______ 
 
 At 31 December 2020                     51,212                 -         - 
                                        _______           _______   _______ 
 
 
 At 1 January 2019                         -          -          - 
 Cash flows                                -   (27,565)   (27,565) 
 Non-cash flows 
 - Interest accruing in year               -     27,565     27,565 
                                     _______    _______    _______ 
 
 At 31 December 2019                       -          -          - 
                                     _______    _______    _______ 
 

Notes (continued)

 
 28   Events after the reporting date 
 

On 19 April 2021, the Group announced the acquisition of Memery Crystal (conditional on completion), a specialist international law firm based in London, for GBP30 million (GBP18.8 million in cash and GBP11.2 million in shares). Memery Crystal, with 146 employees (including 29 partners and an additional 66 fee earners), has a strong focus on transactions, which makes it a complementary fit with RBL, which derives most of its revenue from contentious law.

[1] Excluding GBP2.6 million write back of the deferred Convex Capital earnout

[2] Includes GBP2.6 million write back of the deferred Convex Capital earnout

[3] Total Lockup is average debtor days plus average accrued income days

[4] Profit for the year before members remuneration and profit share

[5] Total Lockup is average debtor days plus average accrued income days.

[6] The authority granted by management under the scheme is irrevocable and non-discretionary, and during a Close Period the Board has no power to invoke any changes to the authority. Any purchases will be undertaken at the sole discretion of N+1 Singer Limited. The Group confirms that it currently has no unpublished price sensitive information.

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END

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April 20, 2021 02:01 ET (06:01 GMT)

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