TIDMRBGP
RNS Number : 9397G
RBG Holdings PLC
01 April 2022
Please note that the following announcement replaces the
'Audited results - year ended 31 December 2021' announcement
released on 1 April 2022 at 07:01 under RNS No 8659G, with a
correction to the wording in the Group Financial Highlights
section.
The Adjusted free cash flow generation figure for 2021 has been
changed from GBP5.3 million to GBP6.4 million with the restated
figure for 2020 changing from GBP5.1 million to GBP8.1 million.
All other details remain unchanged.
The full corrected version is shown below.
1 April 2022
RBG Holdings plc
("RBG", the "Group", or the "Company")
Audited results for the twelve months ended 31 December 2021
Strong performance as Group increasingly benefits from
diversified revenue streams
RBG Holdings plc (AIM: RBGP), the professional services group,
is pleased to announce its audited results for the twelve months
ended 31 December 2021.
Group Financial Highlights[1]:
-- Group revenue (including gains from litigation assets) up
86.7% to GBP47.2 million (2020 restated: GBP25.3 million)
-- Group organic revenue, excluding Memery Crystal, up 19.6% to
GBP26.8 million (2020: GBP22.4 million)
-- Gains on litigation assets up 84.5% to GBP5.2 million (2020 restated: GBP2.8 million)
-- Adjusted EBITDA[2] up 91.0% to GBP13.8 million, (2020 restated: GBP7.2 million)
-- Adjusted profit before tax up 111.7% to GBP10.1 million (2020 restated: GBP4.8 million)
-- EBITDA is up 31.1% to GBP12.9 million (2020 restated: GBP9.9
million) and profit before tax is up 24.6% to GBP9.2 million (2020
restated: GBP7.4 million)
-- Adjusted free cash flow generation was GBP6.4 million (2020 restated: GBP8.1 million)
-- Net debt of GBP14.2 million (2020: net cash of GBP3.5
million) reflecting new GBP10 million term facility to fund the
acquisition of Memery Crystal (of which GBP1 million has already
been repaid)
-- Total dividend paid to shareholders in respect of the 2021
financial year was 5 pence per share (2020: 3 pence per share),
reflecting the Board's confidence in the Group's continued
prospects
Operational Highlights:
RBG Legal Services Limited ("RBGLS") - Combination of the
Rosenblatt and Memery Crystal businesses
-- Revenue (including gains on litigation assets) up 61.2% to
GBP33.7 million (2020: GBP20.9 million)
-- Legal services revenue up 56.3% to GBP32.6 million (2020:
GBP20.9 million) with revenue now more evenly split across Dispute
Resolution (35.8%), Corporate (35.3%) and Real Estate (28.9%)
-- Dispute Resolution continued to perform well, in addition to
taking on more contingent work with associated unrecognised time
worked of GBP3.4 million (2020: GBP2.0 million)
-- Successfully realised litigation asset sales with proceeds
totalling GBP1.8 million (2020: GBP0.4 million)
-- The integration of Rosenblatt and Memery Crystal support
functions now largely complete and has led to a sustained
improvement in EBITDA margin to 27%. The Board expects this to rise
towards 35% over the medium-term
-- Average revenue per fee earner of GBP347,000 (2020:
GBP425,800) reflecting new larger workforce. Total staff is 193
(2020:73, Rosenblatt only) of which 137 are fee earners (2020: 43,
Rosenblatt only)
-- Total Lockup was 109 days (2020: 99) of which Debtor Days
were 59 days (2020: 47, Rosenblatt only)
LionFish Litigation Finance Limited ("LionFish")
-- Successfully realised litigation asset sales[3] in five cases
with proceeds totalling GBP3.1 million (2020 restated: GBP2.6
million)
-- Cash investment of GBP1.8 million in 10 cases (2020: GBP1.8
million in 7 cases), with a full commitment of GBP10.5 million (if
funded through to trial over the next 2-3 years)
-- First case successfully completed, delivering a return of two
times money invested as per strategy
Convex Capital Limited ("Convex Capital")
-- Completed 14 deals, generating revenue of GBP9.4 million (2020: 2 deals, GBP1.6 million)
-- EBITDA of GBP4.2 million (2020: loss of GBP0.9 million)
Post-period highlights:
-- Since the year end, Convex Capital has completed two further
deals, delivering revenue of GBP1.7 million
-- As at 28 March 2022, Convex Capital had a strong pipeline of
20 deals, with six going through due diligence
-- In February 2022, LionFish agreed a GBP20 million litigation
investment arrangement with a large alternative investment firm
-- In the first quarter of 2022, trading has been as expected.
Historically, in legal services, Corporate is quieter at this time
of year, however, the Group is creating opportunities in other
areas of the business
Nicola Foulston, CEO, RBG Holdings plc, commented: "RBG
continues to evolve into a well-diversified, high-quality
professional services group, with a litigation finance business
that leverages the Group's legal expertise. We are building a Group
with a broad revenue base that reduces any dependence on any one
business, sector, or fee generator. With the pandemic still
presenting a significant challenge, our financial performance in
2021 demonstrated once again the resilience of our business model.
Every year since our IPO, I am pleased to say that we have
delivered a solid financial performance, while laying the
groundwork for future profitable growth.
"From November 2021, our legal services business RBGLS started
trading under its two distinct brands, Rosenblatt for contentious
law, such as Dispute Resolution, and Memery Crystal for
non-Contentious law, such as Corporate and Real Estate. The
business is almost fully integrated and is now based at one office
on Fleet Street. The final part of the integration, which is
putting both businesses on the same practise management software,
is expected to be completed by the end of 2022. The acquisition of
Memery Crystal was part of the Group's strategy to acquire
high-value assets that amplify and broaden our client offering. The
benefits are already being felt with improved organic revenue
growth, enhanced operating efficiency, and margins growing, with
scope for further improvement over the medium term.
"Our sell-side M&A advisory boutique, Convex Capital, had an
exceptional year with 14 completed deals, after a difficult 2020
when the M&A market ground to a halt. Importantly, deal flow
momentum remains strong in 2022, and the pipeline of opportunities
is growing.
"We continue to invest in litigation assets, with 23 live deals,
either in our own matters through RBGLS or in third party matters
via LionFish. LionFish's recently signed litigation investment
arrangement will provide the business with flexible capital to
allow the management team to focus on the quality of profits, not
the quantity of monies deployed into litigation risks.
"The strategy of the Group is clear. In our core professional
services businesses, we want to capitalise on the areas that offer
the highest returns for shareholders, such as our high margin legal
services businesses. Furthermore, we will use the Group's expertise
to maximise the potential returns by selectively investing in
contingent asset classes such as litigation.
" Overall, the Group has had an excellent twelve months which is
reflected in our improved revenue and profit growth. With strong
demand for all Group services, we delivered the upgraded market
expectations for the 2021 financial year from January's trading
update. While acknowledging that macro-economic conditions continue
to be volatile, the new financial year has started as expected
giving us cause to look forward to the coming year with optimism.
We are excited about the long-term prospects for the Group."
Enquiries:
RBG Holdings plc Via SEC Newgate
Nicola Foulston, CEO
Singer Capital Markets (Nomad and Broker) Tel: +44 (0)20 7496 3000
Rick Thompson / Alex Bond / James Fischer
(Corporate Finance)
Tom Salvesen (Corporate Broking)
SEC Newgate (for media enquiries) Tel: +44 (0)7540 106366
Robin Tozer/Richard Bicknell rbg@secnewgate.co.uk
About RBG Holdings plc
RBG Holdings plc is a professional services group, which
comprises the following divisions:
RBG Legal Services Limited ("RBGLS")
RBGLS is the Group's legal services division which combines the
businesses previously operated by Rosenblatt Limited and Memery
Crystal LLP.
Rosenblatt ("RB")
Rosenblatt is one of the UK's pioneering legal practices and a
leader in dispute resolution. Rosenblatt provides a range of legal
services to its diversified client base, which includes companies,
banks, entrepreneurs and individuals. Complementing this is
Rosenblatt's increasingly international footprint, advising on
complex cross-jurisdictional disputes.
Memery Crystal ("MC")
Memery Crystal offers legal services in a range of areas such as
corporate (including a market-leading corporate finance offering),
real estate, commercial, IP & technology (CIPT), banking &
finance, tax & wealth structuring and employment. Memery
Crystal is one of the leading legal practices in the UK to advise
the emerging cannabis sector on a wide range of business issues.
Memery Crystal offers a partner-led service to a broad range of
clients, from multinational companies, financial institutions and
owner-managed businesses to individual entrepreneurs.
LionFish Litigation Finance Limited ("LionFish")
The Group also provides litigation finance in selected cases
through a separate arm, LionFish Litigation Finance Limited.
LionFish finances litigation matters being run by other solicitors
in return for a significant return on the outcome of those cases.
As such, the Group has two types of litigation assets -
Rosenblatt's own client matters, and litigation matters run by
third-party solicitors. LionFish is positioned to be a unique,
alternative provider to the traditional litigation funders.
Convex Capital Limited ("Convex Capital")
Convex Capital is a specialist sell-side corporate finance
boutique based in Manchester. Convex Capital is entirely focused on
helping companies, particularly owner-managed and entrepreneurial
businesses, realise their value through sales to large corporates.
Convex Capital identifies and proactively targets firms that it
believes represent attractive acquisition opportunities.
Chairman's Statement
Overview
On behalf of the Board, I am pleased to announce our 2021
results. Our performance shows that the Group is benefitting from
our strategy to diversify the revenue of the business. A larger
more diversified Group has generated improved revenue, EBITDA, and
margins.
Our legal services business, RBGLS has had a successful year and
is now trading under two brands - Rosenblatt and Memery Crystal.
These brands provide clients with a diversified offering, balanced
across three main legal areas - Dispute Resolution (via
Rosenblatt), and Corporate and Real Estate (through Memery
Crystal). The business is beginning to realise the benefits of the
integration and resultant scale.
Across RBGLS, we have continued to win new client instructions
which reflects our expertise and the high demand for our
complementary services. In difficult times like these, people need
help to handle complex situations such as business restructurings
as well as entrepreneurs who want to participate in M&A. As a
result, RBGLS has delivered growing revenue, high margins, and a
core KPI for the Group, revenue per fee earner, has remained
significantly ahead of industry standards. This is despite a big
increase in the number of fee earners following the acquisition of
Memery Crystal.
At Convex Capital, after a tough 2020 when deal completions were
impacted by COVID-19, the management team re-built a strong
pipeline of deals across a variety of sectors. This meant that in
2021, Convex Capital completed 14 deals generating revenue of
GBP9.4 million (2020: 2 deals, GBP1.6 million) . Since the year
end, Convex Capital has completed two further deals, delivering
revenue of GBP1.7 million. As at 28 March 2022, Convex Capital had
a strong pipeline of 20 deals, with six deals going through due
diligence.
The Group has continued to invest and grow its two types of
litigation assets - RBGLS' own client matters, and litigation
matters run by third-party solicitors through our separately
branded business, LionFish. The arrangements, recently announced
with an alternative investment manager, has provided LionFish with
increased funding to leverage investments and increase returns.
Looking ahead, the Board believes the Group remains in a strong
operational and financial position with a solid balance sheet and a
strategy to deliver continued profitable growth.
Strategy
The Group's strategy is to build a high margin professional
services business with diversified revenue and profit streams. The
aim is for no single part of the Group to dominate, and to leverage
the expertise across the Group to deliver incremental returns.
Using the legal expertise within the Group, we will maximise
potential returns by selectively investing in contingent asset
classes, such as litigation. This can be achieved through
Rosenblatt working on clients' cases on a contingent basis, or by
LionFish providing litigation funding to cases being run by third
parties.
A key focus of the Group is to grow profit. RBGLS delivers this
by maintaining consistently high margins. In 2021, the largely
integrated business has done well in delivering revenue of
GBP347,000 per fee earner and a gross margin of 46.1% (2020:
GBP425,800 per fee earner and a 52.1% gross margin).
Our service-led, profit driven business model has enabled us to
selectively increase the amount of work we do for clients on a
partly contingent basis. This is in exchange for receiving a
pre-agreed proportion of any damages awarded within the limits set
by the Board for contingent work. This approach means we can
increase our margin with one-off settlements, but our pricing
strategy will deliver a benefit to the client who would otherwise
pay higher amounts to a third-party funder. Rosenblatt 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 created a new
cash-generation opportunity, with litigation finance sales. By
selectively selling a percentage of our participation rights in the
contingent cases that RBGLS invests 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 currently
assessed the fair value to be close to cash disbursed less cash
received on disposals in the early stage of the investment
cycles.
At LionFish, our strategy has evolved having, in February 2022,
agreed a GBP20 million litigation investment arrangement with a
large alternative investment firm. W e will now generate income
from settlements and our new investments rather than sell
participation rights.
M&A
In line with our strategy, we continue to assess M&A
opportunities to diversify the business and grow our service
offering to clients. Our ambition is to create a broad,
high-quality, high margin professional services group. As such, 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 May
2021, Memery Crystal. Memery Crystal has been immediately earnings
enhancing and has the potential to generate significant value for
shareholders over the long-term.
Dividend
The Group's balance sheet is satisfactory. The Board is
committed to its long-term progressive dividend policy. In line
with that policy, the Board normally expects to pay up to 60 per
cent of distributable retained earnings from the core business in
any financial year by way of dividend, subject to cash
requirements.
The Board made a total payment of 5 pence per share for the year
2021(2 pence paid at the half year and 3 pence at the full year).
Based on current outlook, we expect to pay up to 60 per cent of
retained earnings in the 2022 financial year by way of dividend, in
line with the Group's published dividend policy. Over time, we
expect to have opportunities to pay special dividends because of
returns generated from the Group's litigation assets.
Executive Incentive Plan ("EIP") & Growth Share Scheme
We have agreed a new EIP as well as Growth Share Schemes for two
of the Group's subsidiaries, RBGLS and Convex Capital. The EIP will
replace the Group's existing senior executive bonus scheme, and the
Growth Share Schemes will replace the Convex Capital flexible
commission scheme introduced in 2021, and for the first time,
introduce a growth share scheme for RBGLS. These growth share
schemes are designed to replicate what would happen in a privately
held equity partnership.
Since the Group's admission to AIM in 2018, RBG has delivered
significant growth through a combination of organic and
acquisition-led performance. Given the growth and evolution of the
Group, the Board believes a new remuneration structure is needed to
retain and motivate the senior management team and key performing
employees, focusing them on long term value creation and aligning
their interests directly with shareholders.
Further details of the EIP and Growth Share Schemes can be found
in the separate stock exchange announcement issued on 1 April
2022.
Board Appointments
In June 2021, we appointed Patsy Baker and David Wilkinson to
the Board as independent non-executives while another Non-Executive
Director Victoria Hull retired. Both Patsy and David have brought
considerable experience to the Board. Patsy is the Chair of
Citigate Dewe Rogerson, a leading global strategic financial
communications consultancy, part of Huntsworth Communications which
specialises in healthcare and public relations. Patsy was a
Non-Executive Director of The Westminster Group plc, a security
company listed on AIM, where she chaired the Nominations and
Disclosure committees. From 1994 to 2017, Patsy was responsible for
Group Client Relationships and Business Development at Bell
Pottinger. There, Patsy used her extensive networks to advise
boards on leadership and corporate reputation within the UK
financial and business communities.
David Wilkinson is an experienced Non-Executive Chairman and
Director, with a history of advising fast-growth, entrepreneurial
businesses and professional practices. He is Senior Independent
Director and Audit Committee Chair at Saietta Group plc, an
electric motor business which floated on AIM in July last year and
is Audit Committee Chair at Marks Electrical Group plc, an online
domestic appliance retailer, which also floated on AIM last year.
He chairs two private companies, CH Bailey, a formally AIM-listed
business in overseas commercial and hospitality property, and Goal
Group, a UK market leader in technology-based reclamation of
withholding tax and legal class action proceeds. He is also a Non-
Executive Director of Verso Biosense, a medical technology spinout
from Southampton University.
Following the appointment of David and Patsy, the Board now
consists of two executive directors and four non-executive
directors, providing a blend of different experiences and
backgrounds. All non-executives are considered independent. David
and Patsy have joined the Remuneration Committee, Nomination
Committee and Audit Committee of the Board of the Group with David
the Chair of the Remuneration Committee.
Ukraine
In response to the Russian invasion of Ukraine, the Group
immediately reviewed any relationships across the business with
Russian companies and individuals to ascertain if we were acting
for any individual or corporate client that did not comply with the
UK's sanctions regime. Overall, we have limited exposure through
our law firms - Rosenblatt and Memery Crystal - while neither
Convex Capital or LionFish have any Russian clients.
People
The strength of the Group is in our ability to retain and
attract high-quality people. This is evidenced by our performance,
and I want to thank everyone for their hard work. I would also like
to thank shareholders for their continued support.
Keith Hamill
Chairman
31 March 2022
Chief Executive's Statement
Overview
The Group continues to evolve into a diversified, high-quality
professional services group with a litigation finance business
leveraging the Group's legal expertise. We are building a broad
revenue base that removes dependence on any one income generator.
The combination of Memery Crystal with the Group's pioneering law
firm Rosenblatt means we have built one of London's premier
mid-tier law firms providing quality advice to entrepreneurs and
high net worth individuals.
Overall, the Group has performed well despite the challenges of
the pandemic. Our legal services business, RBGLS, has contributed
to the strong professional services revenue generated by the Group.
This includes our sell-side M&A advisory boutique, Convex
Capital, which has had an exceptional year, and this has been
augmented by the acquisition of Memery Crystal. We are already
seeing the delivery of greater profits as the integration of Memery
Crystal has improved operating efficiency as we combine business
support functions.
As a result of the strong performance across the Group, with
each subsidiary exhibiting growth, our revenue (and gains on
litigation assets) was up 86.7% to GBP47.2 million (2020 restated:
GBP25.3 million) at a gross margin of 42.0% (2020 restated: 41.5%).
Organic growth was up 19.6% with revenue to GBP26.8 million (2020
restated: GBP22.4 million) and organic adjusted EBITDA has grown
29.6% to GBP9.4 million (2020 restated: GBP7.2 million).
Convex Capital completed 14 deals and GBP9.4 million of revenue
in 2021 (2020: 2 deals and GBP1.6 million). Importantly, deal flow
momentum remains strong, and the pipeline of opportunities
continues to grow.
We continue to invest in litigation assets, with 23 active deals
across RBGLS and LionFish. LionFish has invested in 11 deals since
its inception in May 2020 with one already completed. There were
gains on litigation assets during the year of GBP5.2 million (2020
restated: GBP2.8 million).
Group EBITDA increased to GBP12.9 million (2020 restated: GBP9.9
million) at a margin of 27.4% (2020 restated: 39.0%) due to the
acquisition of Memery Crystal. As previously disclosed, we target
an EBITDA margin of 35% or more. Adjusted EBITDA was GBP13.8
million (2020 restated: GBP7.2 million) at a margin of 29.2% (2020
restated: 28.6%).
The Group's profit before tax was GBP9.2 million (2020 restated:
GBP7.4 million) and profit after tax was GBP7.3 million (2020
restated: GBP6.4 million).
Our balance sheet remains satisfactory. Our net debt position
was GBP14.2 million versus net cash of GBP3.5 million in 2020. This
change reflects the investment in Memery Crystal and the GBP10.0
million term loan to fund the acquisition, which will be paid down
over three years. The Group has a GBP15.0 million revolving credit
facility of which GBP10.0 million has been drawn. Our balance sheet
will support our long-term growth plans, including acquisitions,
continued investment in litigation investment opportunities, and
future dividends.
RBG Legal Services Limited ("RBGLS")
Following the completion of the acquisition of Memery Crystal in
May 2021, the Group has combined its two law firms, Rosenblatt, and
Memery Crystal, into a new legal services corporate entity called
RBG Legal Services Limited ("RBGLS"). This approach will enable the
Group to fully realise the transaction's synergies. The business is
almost fully integrated and is now based at one office on Fleet
Street in London. The final part of the integration, which is
putting both businesses on a single practice management system, is
expected to be completed in the last quarter of 2022.
Rosenblatt and Memery Crystal retain their own brand identities
and continue to operate as two separately branded law firms (under
the umbrella of RBGLS as the regulated entity). From November 2021,
the two brands became aligned to contentious (Rosenblatt) and
non-contentious (Memery Crystal) legal services to reflect their
position within the legal services market.
As at 31 December 2021, RBGLS employed 193 people, including 137
fee earners, with a strong offering to clients across Dispute
Resolution, Corporate and Real Estate practise areas. The
acquisition of Memery Crystal has significantly enhanced the
Group's scale and ability to win non-contentious mandates as well
as improving the new business pipeline, diversifying the revenue
contribution by department, and delivering a more balanced legal
business.
Due to the strong demand for its services, revenue (and gains on
the sale of assets) was up 61.4% to GBP33.7 million (2020: GBP20.9
million). The consolidated business has helped diversify the legal
services business. We have a balanced business across the key areas
of Dispute Resolution, Corporate and Real Estate. As a result of
the acquisition of Memery Crystal, Dispute Resolution is now a more
balanced part of our business giving a natural hedge to the
changing environment.
As well as the financial metrics, the Company has performed well
in terms of the other KPIs of focus. The average revenue per fee
earner was GBP347,000 (2020: GBP425,800), reflecting the
diversification of the legal services business into more
non-contentious areas of law, following the acquisition of Memery
Crystal. These areas are less profitable due to fixed fees and are
yet to fully benefit from the integration. However, these areas
provide a natural hedge to Rosenblatt's focus on Dispute
Resolution. Our revenue per fee earner is still within the top 20
of the Legal 100[4].
In line with its strategy, RBGLS has delivered a managed
increased in the amount of contingent work it has taken on, enabled
by the Group's solid balance sheet, with net assets of GBP60.8
million (2020 restated: GBP47.0 million) and a banking facility to
support our growth strategy. These investments are always taken in
consideration of delivering a balanced investment strategy within
the limits set by the Board to ensure the business is not overly
exposed to contingent cases. Such litigation cases need to pass the
Group's stringent legal and commercial review process. Importantly,
as RBGLS' revenue and profit grow we can enter into more
Alternative Billing Arrangements (ABAs), which generate incremental
margins on a successful case outcome. No revenue is recognised by
the Company until the result of the case has occurred. Such revenue
is considered contingent.
During the year, RBGLS invested a further GBP2.8 million in
external disbursements and counsel fees in relation to its
litigation investments. The amount of contingent work carried out
by the legal services business during the period was GBP3.4 million
(2020: GBP2.1 million). As at 31 December 2021, RBGLS had invested
a total of GBP7.6 million in external disbursements and counsel
fees in 13 litigation investments, with a total contingent WIP of
GBP11.3 million.
LionFish Litigation Finance Limited ("LionFish")
Since our IPO in 2018, our strategy has been to develop our own
litigation finance business as an important pillar of the Group.
The Group initially just invested in Rosenblatt's own client
matters, but on 1 May 2020 the Group launched LionFish. LionFish
finances litigation matters being run by other solicitors in return
for a significant return on the outcome of those cases. Lionfish
exclusively funds third party solicitors and does not fund any
RBGLS contingent cases. As such, the Group now has two types of
litigation investments - RBGLS's own client matters, and litigation
matters run by third-party solicitors. Both types of litigation
investments not only have significant return potential, but they
represent an opportunity to extract further value from the Group's
legal and commercial expertise and diversify its sources of
income.
Before investing, LionFish utilises the expertise of Rosenblatt
which has a proven record of evaluating the legal merits of a
litigation matter to optimise its profit. By leveraging this
ability, alongside the origination capabilities of LionFish, and
the Group's commercial acumen, the Group can identify potentially
profitable third-party litigation cases and make investments with
strong risk-adjusted returns. We have a strict investment process
where the cases go through an initial review, before a more
stringent legal and commercial review, and finally a full review by
the Group's investment committee. The process is efficient and
customer-focused, aiming for a quick decision and turnaround.
As at 31 December 2021, LionFish had received 517 enquiries for
finance: 45 remain under consideration and 448 were rejected; an
87% rejection rate on concluded enquiries. Based on the Group's
strategy to target a return of two times the money invested, since
its launch, Lionfish has invested in 11 cases with GBP10.5 million
committed (with GBP3.7 million drawn down) over the life of the
cases, which is circa three years. One case has completed
delivering a return of two times the money invested.
I believe it is important to reiterate the conservative approach
we adopt towards the handling of, and accounting for, our
litigation investments. While accounting standards require the
recognition of these investments at fair value, we have currently
assessed the fair value to be close to cash disbursed less cash
received on disposals in the early stage of the investment cycles,
which means fair values do not materially exceed net cash
disbursed, as well as having rules limiting the Group's cash and
revenue exposure.
Since launch, LionFish has delivered further revenue from sales
in participation rights from litigation finance business beyond
Rosenblatt's own client matters. In 2021, LionFish delivered GBP3.1
million of participation rights sales (2020 restated: GBP2.6
million). There were gains on litigation assets of GBP4.1 million
(2020 restated: GBP2.8 million). While litigation finance sales
help manage the Group's litigation investment exposure, it is also
part of a strategy to create a secondary market for litigation
investments.
The LionFish strategy and scale has evolved since the year-end.
On 15 February 2022, the Group announced that LionFish had agreed a
GBP20 million litigation investment arrangement (the "Arrangement")
with a large alternative investment firm (the "Firm"). Under the
terms of the Arrangement, the Firm will participate in all of
LionFish's litigation investments, investing up to 75% in each of
LionFish's investments across the portfolio over a two-year period.
LionFish will be entitled to receive a significant share of the
returns of the Arrangement after a high single-digit return hurdle
has been met, therefore providing significant additional potential
returns to LionFish beyond its own investment. It means that the
Group will now look to generate income from LionFish's settlements
and new investments, and we will not look to sell participation
rights.
LionFish will have sole discretion in terms of which investments
to pursue within a broad set of agreed parameters (similar to
LionFish's current investment parameters). The focus of the
Arrangement will be on maintaining LionFish's highly selective,
quality-focused investment standards, without any undue deployment
pressure. LionFish will also be responsible for the administration
of each underlying litigation investment.
The Arrangement provides LionFish with significant additional
capital flexibility in the investments it makes, allowing it to
manage a more diversified and granular portfolio of risks off
balance sheet, as well as to move away from the investor sales
model currently being used to reduce risk. By partnering with a
large alternative investment manager, LionFish has the opportunity
to extend or repeat the Arrangement on a rolling basis, potentially
providing a long-term flexible capital source that can grow in line
with the business. The Arrangement has been approved by RBG's
banking partners and is not a debt or credit facility. The Group's
balance sheet will remain unchanged as a result of the
Arrangement.
Convex Capital
Convex Capital, the specialist sell-side corporate finance
advisory business based in Manchester, was acquired by the Group in
September 2019. Convex Capital is entirely focused on helping
companies, particularly owner-managed and entrepreneurial
businesses, realise their value through sales to large corporates
or private equity companies. Convex Capital identifies and
proactively targets businesses that it believes represent
attractive acquisition opportunities. Convex has a motivated,
dynamic team of 12 people, of which 11 are fee-earners.
The acquisition of Convex Capital was part of the Board's
strategy to diversify the Group beyond legal services, focusing on
other high-margin professional service areas. Convex Capital is an
entrepreneurial, cash-generative business operating across the UK
and Europe and provides the Group with further funds for
reinvestment into other high-margin areas.
During 2021, Convex Capital completed fourteen deals and
delivered GBP9.4 million of revenue. The strength of its pipeline
and the agile nature of the business has enabled Convex Capital to
accelerate deals that COVID-19 has not affected. Since the year
end, Convex Capital has completed two further deals, delivering
revenue of GBP1.7 million. As at 28 March 2022, Convex Capital had
a strong pipeline of 20 deals, with six deals going through due
diligence.
The business is actively building its target pipeline with a
data-driven approach to generate deals rather than the traditional
passive model where the target company waits to be approached and
then appoints a corporate finance partner.
Last year the management of Convex Capital failed to achieve the
earn-out agreed at the time of acquisition because of the economic
environment. For 2021, the earn-out was replaced with a one-off
commission agreement for the key directors. Under the arrangement,
the directors exchanged salary for commission based on deal
completion. A commission of 20% was earned on all completed deals,
and 50% of that success fee was used to purchase shares in RBG.
During 2021, a total of 556,153 shares were acquired through the
commission arrangement. The new Growth Share Scheme will replace
the flexible commission scheme used in 2021. Further details of the
Growth Share Scheme can be found in the separate stock exchange
announcement issued on 1 April 2022.
Outlook
The Group is performing well despite the continuing impact of
COVID-19, the situation in Ukraine, and current inflationary
pressures. RBG remains well-positioned to deliver profitable growth
as we progress through the second half of the year. Over the last
year, we have worked hard to grow our services, adapt the Group to
changing client needs and build our litigation finance business.
Our strategy of diversification has provided protection through the
pandemic and has enabled the Group to further progress towards its
ambitious goals. The Group remains disciplined in its approach to
M&A and will continue to review potential opportunities
according to its selective criteria.
Overall, the Group had an excellent 2021 which is reflected in
our improved revenue and profit growth. With strong demand for all
the Group's services, we delivered the upgraded market expectations
for the 2021 full year. While acknowledging that economic
conditions continue to be volatile, we look forward to the coming
year with optimism and are excited about the long-term prospects
for the Group.
Nicola Foulston
Group Chief Executive Officer
31 March 2022
Chief Financial Officer's review
Financial review
The financial results contain a restatement of the prior year
figures. The restatement is described fully in Note 30 and
summarised below:
-- Reclassification of contracts for insured litigation assets,
which were previously treated as sales, which do not meet the
derecognition requirements of IFRS 9 para 3.2.2.
-- Restatement of the fair value of the uninsured contracts to
correct an error in the previous valuation
The Consolidated statement of financial position adjustments
increased litigation assets by GBP274,356, increased trade and
other payables by GBP575,000, reduced current tax liabilities by
GBP57,122 and reduced equity by GBP243,522. The Consolidated
statement of comprehensive income adjustments decreased gains on
litigation assets by GBP300,644 and reduced tax expenses by
GBP57,122.
During 2021 we have continued to build on our strong track
record of profitability. Revenue and EBITDA is increasingly coming
from diverse sources while we continue investing in the growth of
the business. The Group is well positioned to deliver its growth
strategy through product diversification, carefully selected
acquisitions and high-quality litigation investments.
Key Performance Indicators (KPIs)
-- Group revenue (including gains from litigation assets):
GBP47.2 million (2020 restated: GBP25.3 million)
-- Revenue, including gains from litigation assets, and adjusted
EBITDA[5] have increased 86.7% and 91.0% respectively
-- Organic business revenue has increased 19.6%
-- Adjusted EBITDA: GBP13.8million, representing 29.2% of
revenue and gains on litigation assets (2020 restated: GBP7.2
million, 28.6%)
-- EBITDA: GBP12.9 million, representing 27.4% of revenue and
gains on litigation assets (2020 restated: GBP9.9 million, 39.0%,
includes GBP2.6 million of the released deferred earn out not
earned)
-- Adjusted Profit before tax: GBP10.1 million, representing
21.4% of revenue and gains from litigation assets (2020 restated:
GBP4.8 million, 18.9%)
-- Profit before tax: GBP9.2 million, representing 19.6% of
revenue and gains on litigation assets (2020 restated: GBP7.4
million, 29.3%)
-- Net debt of GBP14.2 million (2020: net cash of GBP3.5
million) reflecting new GBP10.0 million term facility. The Group
has a new GBP15.0 million revolving credit facility which is
available to support the growth of the business
-- Total Lockup was 109 days (2020: 99) of which Debtor Days were 59 (2020: 47)
-- RBG Legal Services revenue per fee earner: GBP347,000 (2020: GBP425,800)
-- RBG Legal Services Utilisation/ Realisation was 84%/86% (2020: 89%/106%)
Revenue and Gains on Litigation Assets
Reported Group revenue and gains on litigation assets for the
period is GBP47.2 million compared to GBP25.3 million in 2020
(restated), representing an 86.7% increase.
Of this increase, 26.8% (or GBP6.8 million) was a result of the
organic business as Convex Capital and LionFish delivered ahead of
last year, and the remainder was delivered from the newly acquired
business. Gains on Litigation Assets were GBP5.2 million against
GBP2.8 million in the previous year (restated), LionFish delivered
GBP4.1 million of the gains against GBP2.8 million last year
(restated).
Combined professional services revenue is up 87.0% to GBP42.0
million from GBP22.4 million in 2020, this growth is driven, in
part, by the acquisition of Memery Crystal. Legal services revenue
for RBGLS within professional services is up 56.1% to GBP32.6
million from GBP20.9 million in 2020. There was a strong
performance in Convex Capital of GBP9.4 million, completing 14
deals against one last year and GBP1.6 million of revenue in 2020,
completing two deals.
Divisional highlights
RBGLS
-- Total revenue and gains on litigation assets of GBP33.7
million, (2020: GBP20.9 million, RB only)
-- Legal services revenues: GBP32.6 million, up 56.3% on last
year (2020: GBP20.9 million, RB only)
-- Legal services business is now integrated and trading under the two brands
-- Staff numbers are 193 (2020:73, RB only) of which 137 are fee earners (2020: 43, RB only)
-- Revenue mix across the business is now more evenly split
across Dispute Resolution, Corporate and Real Estate
-- Dispute Resolution continued to perform well, in addition to
taking on more contingent work with associated unrecognised time
worked of GBP3.4 million
-- EBITDA is 27.0% of revenue and gains on litigation assets
(2020: 35.1% of revenue and gains on litigation assets, RB
only)
-- Average revenue per fee earner GBP347,000 (2020: GBP425,800, RB only)
-- Total Lockup was 109 days (2020: 99, RB only) of which Debtor
Days were 59 days (2020: 47, RB only)
LionFish
-- Successfully realised litigation asset sales in eight cases
with proceeds totalling GBP3.1 million (2020 restated:
GBP2.6million)
-- 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 ten cases (2020: GBP1.8
million in 7 cases), with a full commitment of GBP10.5 million if
funded through to trial over the next 2-3 years
-- During the year successfully completed the first case and
delivered a return of two times money invested as per the
strategy
Rosenblatt
-- Successfully realised litigation asset sales with proceeds totalling GBP1.8 million (2020: GBP0.4million)
Convex Capital
-- Completed fourteen transactions in the year, generating
revenue of GBP9.4 million (2020 from acquisition: GBP1.6 million)
and EBITDA of GBP4.2 million (2020: EBITDA loss GBP0.9 million)
-- During the year the senior team had a one off 20% commission
scheme based on completed deals
Staff costs
Total staff costs in 2021 were GBP27.4 million (2020: GBP14.8
million), which includes GBP4.8 million for Convex (GBP3.3 million
in relation to the Directors bonus scheme of 20% of completed
deals, of which 50% was re-invested in RBG shares), GBP0.6 million
for LionFish and GBP19.6 million from RBGLS. The average number of
employees for the Group was 175 (2020: 90). The acquisition of
Memery Crystal has added 128 staff to the Group's headcount. RBGLS
at the end of the period totalled 193 (2020: 73), of which 137 are
fee earners.
Overhead costs
During 2021, the Group incurred overheads of GBP34.3 million
(before depreciation and amortisation) (2020: GBP15.4 million).
Staff costs were GBP27.4 million (2020: GBP14.8 million), of which
contractors' costs were GBP3.0 million (2020: GBP3.2 million).
Other operating costs were GBP6.9 million (2020: GBP0.6 million,
includes a deduction of GBP2.6 million for the deferred
consideration release), of which the cost of the acquisition
represented GBP0.9 million. Other costs including insurances of
GBP1.5 million (2020: GBP0.7 million), rates GBP0.7 million (2020:
GBP0.3 million), training and recruitment GBP0.6 million (2020:
GBP0.3 million).
Operationally, there remains a significant focus on IT and in
2021 we invested in Adnitor Limited to deliver cost effective IT
solutions (details of which are included in Note 17). We have
invested sensibly over recent years and further enhanced both our
internal and client facing experiences of IT usage.
EBITDA and Adjusted EBITDA
In assessing performance, the Group uses EBITDA as a KPI. The
acquisition of Memery Crystal will initially suppress our Group
EBITDA but will eventually increase it as the integration benefits
fully flow through in 2022. EBITDA for 2021 was GBP12.9 million
(27.4% of revenue and gains on litigation assets) (2020 restated:
GBP9.9 million, 39.0%, which includes non-trading adjustment of
GBP2.6 million release of deferred earn out). This includes GBP0.9
million for costs of acquiring a subsidiary and excluding this
non-underlying item gives an Adjusted EBITDA of GBP13.8 million
(29.2% of revenue and gains on litigation assets) (2020 restated:
GBP7.2 million, 28.6%).
Profit Before Tax
Profit before tax for 2021 was GBP9.2 million representing 19.6%
of revenue and gains on litigation assets (2020 restated: GBP7.4
million, 29.3% of revenue. This includes the GBP2.6 million Convex
deferred consideration write back and excluding this gives profit
before tax for 2020 (restated) of GBP4.8 million, representing
18.9% of revenue and gains on litigation assets.
Adjusted profit before tax was GBP10.1 million representing
21.4% of revenue and gains on litigation assets (2020 restated:
GBP4.8 million, 18.9%).
Earnings Per Share (EPS)
The weighted average number of shares in 2021 was 91.4 million
which gives a basic earnings per share (Basic EPS) for the period
of 7.63 (2020 restated: 7.29p).
2020 earnings included GBP2.6 million write back of the deferred
Convex Capital earn out.
Corporation tax
The Group's tax charge for the year is GBP2.0 million with an
effective tax rate of 21.3% (2020 restated: GBP1.0 million, 10.5%
which was impacted by Convex deferred consideration write back
which is non-taxable income). Following the announcement made in
the Chancellor's Spring Budget regarding an increase to the UK
corporate tax rate from 19% to 25% from 1 April 2023, the Finance
Bill 2021 was subsequently enacted on 24 May 2021. As IFRS requires
deferred tax to be measured at tax rates that have been
subsequently enacted at the reporting date, the Group's deferred
tax balances have been re-measured accordingly and the impact has
been reflected within the consolidated financial statements (full
details can be found in Note 9).
Balance Sheet
2021 2020
GBPm GBPm
Goodwill, intangible and tangible assets 86.0 48.2
------- ------
Current Assets 18.6 7.8
------- ------
Current Liabilities (12.7) (6.0)
------- ------
91.9 50.0
------- ------
Net debt (14.2) 3.5
------- ------
Non-Current Liabilities (14.7) (5.4)
------- ------
Deferred consideration (2.2) (1.1)
------- ------
Net assets 60.8 47.0
------- ------
The Group's net assets as at 31 December 2021 increased by
GBP13.8 million on the prior year due to the increase in goodwill
and intangible assets resulting from the acquisition of Memery
Crystal and an increase in the profitable trading for the
period.
Goodwill, Tangible and Intangible Assets
Included within tangible assets is GBP15.9 million (2020: GBP5.8
million) which relates to IFRS 16 right of use assets for the
Group's leases. Within total intangible assets of GBP55.9 million
(2020: GBP35.4 million), GBP21.1 million relates to current year
acquisitions and have been attributed between goodwill, customer
contracts and brand. The Company has considered the amounts at
which goodwill and intangible assets are stated on the basis of
forecast future cash flows and although these are subjected to
unusually high levels of general uncertainty due to COVID-19,
concluded that that these assets have not been materially
impaired.
Working Capital
Management of lock up has continued to be a key focus of the
Group over the period. For the Legal Services business, lock up
days is a measure of the length of time it takes to convert work
done into cash. It is calculated as the combined debtor and WIP
days. In Convex and LionFish, invoices are raised and cash is
received at the point of deal completion. Lock up is a key focus
for management and the Board as cash generation is a Group focus.
Lock up days at 31 December 2021 were 109 (2020: 99), with debtor
days being 59 (2020: 47). This has increased as the business has
become more balanced and driven by non-contentious transactions,
which have longer payment terms. Trade debtors less provision for
impairment at the end of the year were GBP9.6 million (2020: GBP3.4
million) reflecting the scale up of the business after the
acquisition. Equally, contract assets at the year end was GBP6.0
million (2020: GBP3.0 million) again reflecting the newly
consolidated business and the doubling in the size of RBGLS.
Net Debt
We have a new revolving credit facility (RCF) of GBP15.0 million
and a new acquisition term loan of GBP10.0 million repayable over
three years. Our net debt position at the year end was GBP14.2
million (net cash 2020: GBP3.5 million) leaving a substantial part
of the RCF facility available. This positions the Group well to
deliver its strategy into 2022 and support the business through any
uncertainty.
Cash Conversion
2021 2020
GBPm GBPm
Cash flows from operating
activities 12.6 10.0
------ ------
Movements in working capital (0.7) 4.1
------ ------
Increase in litigation assets (4.7) (4.5)
------ ------
Net cash generated from operations 7.2 9.6
------ ------
Interest (0.7) (0.4)
------ ------
Capital expenditure (0.1) (1.2)
------ ------
Free cash flow 6.4 8.1
------ ------
Underlying profit after tax 7.3 6.4
------ ------
Cash conversion 88% 125%
------ ------
The cash conversion percentage measures the Group's conversion
of its underlying profit after tax into free cash flows. Movements
in working capital have been adjusted for deferred consideration
payments made to Memery Crystal in the current year and Convex in
the prior year. Net cash generated from operations includes GBP0.3
million (2020: net cash outflow GBP3.7 million) of net litigation
investments. Cash conversion of 88% (2020 restated: 125%) was
impacted by the acquisition during the year as shown in the
movement in working capital in 2021.
Net Debt / Net Cash and cash equivalents
Net debt at the end of the period was GBP14.2 million (2020:
GBP3.5 million net cash). The net decrease in cash and cash
equivalents of GBP8.8 million for the period included GBP6.1
million of inflows generated from operating activities (including
GBP4.7 million of further investments in litigation assets).
Investing activities gave rise to an outflow of GBP16.9 million, of
which GBP15.4 million related to the cash element of the
acquisition of Memery Crystal. Inflows from financing activities of
GBP2.0 million is predominantly made up of net GBP9.0 million of
term loan to fund the acquisition less GBP4.4 million in dividends
and GBP2.5 million payments of the term loan and lease.
Summary
We are pleased with the profitability and performance of the
Group during the year; we have integrated a significant business in
Memery Crystal and still delivered results. Convex Capital has come
back to a normalised state and LionFish is progressing. The
business is performing well despite the continuing impact of
COVID-19, the fast-evolving situation in Ukraine and current
inflationary pressures. However, it is important to acknowledge the
impact of these events on business life, as they will be a
significant challenge moving forward.
Robert Parker
Chief Financial Officer
31 March 2022
Consolidated statement of comprehensive income
For the year ended 31 December 2021
Note 1 January 1 January
to to
31 December 31 December
2021 2020
restated
GBP GBP
Revenue 5 41,985,338 22,449,332
Gains on litigation assets 5 5,207,524 2,822,083
Personnel costs 7 (27,353,777) (14,780,204)
Depreciation and amortisation expense (2,940,078) (2,081,501)
Other expenses (6,915,433) (633,999)
Profit from operations 6 9,983,574 7,775,711
EBITDA 12,923,652 9,857,212
Non-underlying items
Costs of acquiring subsidiary 25 863,435 -
Deferred consideration release - (2,640,000)
Adjusted EBITDA 13,787,087 7,217,212
----------------------------------------------------- ----- ----------------- -------------
Finance expense 8 (801,659) (394,534)
Finance income 8 22,676 24,460
Share of post-tax profits of equity accounted 21,643 -
associates
----------------- -------------
Profit before tax 9,226,234 7,405,637
Tax expense 9 (1,968,821) (967,814)
Profit and total comprehensive income 7,257,413 6,437,823
----------------- -------------
Total profit and comprehensive income attributable
to:
Owners of the parent 6,972,873 6,235,568
Non-controlling interest 284,540 202,255
7,257,413 6,437,823
----------------- -------------
Earnings per share attributable to the
ordinary equity holders of the parent 10
Profit
Basic and diluted (pence) 7.63 7.29
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
For the year ended 31 December 2021
Company registered number: Note 31 December 31 December
11189598 2021 2020
restated
GBP GBP
Assets
Current assets
Trade and other receivables 20 18,571,628 7,696,925
Cash and cash equivalents 4,756,143 13,522,184
------------ ------------
23,327,771 21,219,109
Non-current assets
Property, plant and equipment 12 2,589,390 475,229
Right-of-use assets 13 15,913,008 5,825,712
Intangible assets 14 55,859,230 35,378,065
Litigation assets 19 11,571,052 6,569,110
Investments in associates 17 101,643 -
------------ ------------
86,034,323 48,248,116
Total assets 109,362,094 69,467,225
============ ============
Liabilities
Current liabilities
Trade and other payables 21 10,153,425 3,894,546
Leases 13 2,150,440 870,019
Current tax liabilities 21 1,490,495 600,316
Provisions 23 314,291 116,875
Loans and borrowings 22 2,129,592 -
------------ ------------
16,238,243 5,481,756
Non-current liabilities
Loans and borrowings 22 17,000,000 10,000,000
Deferred tax liability 24 851,662 304,853
Trade and other payables 21 750,000 1,590,000
Leases 13 13,698,661 5,081,043
------------ ------------
32,300,353 16,975,895
Total liabilities 48,538,566 22,457,651
============ ============
NET ASSETS 60,823,528 47,009,574
============ ============
Issued capital and reserves
attributable to owners
of the parent
Share capital 26 190,662 171,184
Share premium reserve 27 49,232,606 37,565,129
Retained earnings 27 11,113,365 9,070,906
------------ ------------
60,536,633 46,807,219
Non-controlling interest 18 286,895 202,355
TOTAL EQUITY 60,823,528 47,009,574
============ ============
The financial statements were approved and authorised for issue
by the Board of Directors on 31 March 2022 and were signed on its
behalf by:
Nicola Foulston
Director
Consolidated statement of cash flows
For the year ended 31 December 2021
Note 2021 2020
restated
GBP GBP
Cash flows from operating activities
Profit for the year before tax 9,226,234 7,405,637
Adjustments for:
Depreciation of property, plant and
equipment 525,606 335,634
Amortisation of right-of-use assets 1,781,058 986,061
Amortisation of intangible fixed assets 633,414 759,806
Fair value movement of litigation
assets net of realisations (318,814) 163,917
Finance income (22,676) (24,460)
Finance expense 801,659 394,534
Share of post-tax profits of equity (21,643) -
accounted associated
------------- -------------
12,604,838 10,021,129
Decrease/(increase) in trade and other
receivables (2,220,725) 3,391,887
Increase in trade and other payables 1,428,920 710,015
(Increase) in litigation assets (4,683,128) (4,523,141)
Increase in provisions 47,416 41,875
Cash generated from operations 7,177,321 9,641,765
Tax paid (1,077,885) (1,880,277)
Net cash flows from operating activities 6,099,466 7,761,488
============= =============
Investing activities
Purchase of property, plant and equipment (130,179) (172,482)
Acquisition of associate (80,000) -
Acquisition of subsidiary, net of
cash 25 (12,000,000) -
Payment of deferred consideration (4,518,585) (2,951,405)
Dividend paid to non-controlling interest (200,000) -
Purchase of other intangibles - (1,000,000)
Interest received 22,676 24,460
Net cash used in investing activities (16,906,088) (4,099,427)
============= =============
Financing activities
Issue of ordinary shares in subsidiaries - 100
Dividends paid to holders of the parent (4,430,414) (823,283)
Proceeds from loans and borrowings 20,000,000 21,000,000
Repayment of loans and borrowings (11,000,000) (11,000,000)
Repayments of lease liabilities (1,856,938) (832,316)
Interest paid on loans and borrowings (279,497) (185,497)
Interest paid on lease liabilities (392,570) (209,037)
Net cash from financing activities 2,040,581 7,949,967
============= =============
Net increase/(decrease) in cash and
cash equivalents (8,766,041) 11,612,028
Cash and cash equivalents at beginning
of year 13,522,184 1,910,156
Cash and cash equivalents at end of
year 4,756,143 13,522,184
============= =============
The attached notes form part of these financial statements.
Consolidated statement of changes in equity
For the year ended 31 December 2021
Share Share Premium Retained Total Non-controlling Total equity
Capital Earnings attributable interest
to equity
holders
of parent
GBP GBP GBP GBP GBP GBP
Balance at 1
January 2021
(restated) 171,184 37,565,129 9,070,906 46,807,219 202,355 47,009,574
Comprehensive
income for
the year
Profit for the
year - - 6,972,873 6,972,873 284,540 7,257,413
--------- -------------- ------------- ------------- ---------------- -------------
Total
comprehensive
Income
for the year - - 6,972,873 6,972,873 284,540 7,257,413
Contributions
by and
distributions
to owners
Dividends - - (4,430,414) (4,430,414) (200,000) (4,630,414)
Issue of share
capital 19,478 11,667,477 - 11,686,955 - 11,686,955
Grant of put
option over
shares in
subsidiary - - (500,000) (500,000) - (500,000)
--------- -------------- ------------- ------------- ---------------- -------------
Total
contributions
by
and
distributions
to owners 19,478 11,667,477 (4,930,414) 6,756,541 (200,000) 6,556,541
Balance at 31
December 2021 190,662 49,232,606 11,113,365 60,536,633 286,895 60,823,528
========= ============== ============= ============= ================ =============
The attached notes form part of these financial statements.
Share Share Premium Retained Total Non-controlling Total equity
Capital Earnings attributable interest
to equity
holders
of parent
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
(restated) - - 6,235,568 6,235,568 202,255 6,437,823
--------- -------------- ------------- ------------- ---------------- -------------
Total
comprehensive
income
for the year
(restated) - - 6,235,568 6,235,568 202,255 6,437,823
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
(restated) 171,184 37,565,129 9,070,906 46,807,219 202,355 47,009,574
========= ============== ============= ============= ================ =============
The attached notes form part of these financial statements.
Company statement of financial position
As at 31 December 2021
Company registered number: Note 31 December 2021 31 December 2020
11189598
GBP GBP
Assets
Current assets
Trade and other receivables 20 46,748,875 24,900,931
Cash and cash equivalents 2,460,489 12,313,385
----------------- -----------------
49,209,364 37,214,316
Non-current assets
Property, plant and equipment 12 1,083 5,847
Investments in subsidiaries 16 27,501,278 15,814,321
Investments in associates 17 80,000 -
----------------- -----------------
27,582,361 15,820,168
Total assets 76,791,725 53,034,484
================= =================
Liabilities
Current liabilities
Trade and other payables 21 2,143,456 2,035,431
Loans and borrowings 22 2,129,592 -
----------------- -----------------
4,273,048 2,035,431
Non-current liabilities
Loans and borrowings 22 17,000,000 10,000,000
Deferred tax liability 24 660,270 502,711
----------------- -----------------
17,666,270 10,502,711
Total liabilities 21,933,318 12,538,142
================= =================
NET ASSETS 54,858,407 40,496,342
================= =================
Issued capital and reserves
attributable to owners
of the parent
Share capital 26 190,662 171,184
Share premium reserve 27 49,232,606 37,565,129
Retained earnings 27 5,435,139 2,760,029
----------------- -----------------
54,858,407 40,496,342
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 GBP7,105,524 for the year ended 31 December 2021 (2020:
GBP2,971,876).
The financial statements were approved and authorised for issue
by the Board of Directors on 31 March 2022 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 2021
Note 2021 2020
GBP GBP
Cash flows from operating activities
Profit for the year before tax 6,550,348 3,110,117
Adjustments for:
Depreciation of property, plant and
equipment 12 4,764 6,205
Finance income (11,386) (4,754)
Finance expense 397,916 174,079
------------- -------------
6,941,642 3,285,647
Decrease in trade and other receivables 526,485 28,899
(Decrease) in trade and other payables (412,658) (2,832,370)
Cash generated from operations 7,055,469 482,176
Tax paid - -
Net cash flows from operating activities 7,055,469 482,176
============= =============
Investing activities
Purchase of property, plant and equipment - (1,625)
Acquisition of associate 17 (80,000)
Amounts loaned to subsidiaries
Investment in subsidiary - (900)
Amounts loaned to subsidiaries (21,661,696) 1,925,825
Interest received 11,386 4,754
Net cash used in investing activities (21,730,310) 1,928,054
============= =============
Financing activities
Issue of ordinary shares - -
Dividends paid to holders of the parent 11 (4,430,414) (823,283)
Amounts borrowed from subsidiaries 520,683 540,833
Proceeds from loans and borrowings 20,000,000 21,000,000
Repayment of loans and borrowings (11,000,000) (11,000,000)
Interest paid on loans and borrowings (268,324) (174,079)
Net cash from financing activities 4,821,945 9,543,471
============= =============
Net increase/(decrease) in cash and
cash equivalents (9,852,896) 11,953,701
Cash and cash equivalents at beginning
of year 12,313,385 359,684
Cash and cash equivalents at end of
year 2,460,489 12,313,385
============= =============
The attached notes form part of these financial statements.
Company statement of changes in equity
For the year ended 31 December 2021
Share Share Retained Total
Capital Premium Earnings
GBP GBP GBP GBP
Balance at 1 January 2021 171,184 37,565,129 2,760,029 40,496,342
Comprehensive profit for
the period
Profit for the year - - 7,105,524 7,105,524
--------- ----------- ------------ ------------
Total comprehensive profit
for the year - - 7,105,524 7,105,524
Contributions by and distributions
to owners
Dividends - - (4,430,414) (4,430,414)
Issue of share capital 19,478 11,667,477 - 11,686,955
--------- ----------- ------------ ------------
Total contributions by and
distributions to owners 19,478 11,667,477 (4,430,414) 7,256,541
Balance at 31 December 2021 190,662 49,232,606 5,435,139 54,858,407
========= =========== ============ ============
The attached notes form part of these financial statements.
Share Share Retained Total
Capital 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 period
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
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 in
the United Kingdom. The principal activity of the Group is the
provision of legal and professional services, including management
and financing of litigation projects.
The financial information set out in this release does not
constitute the Company's full statutory accounts for the year ended
31 December 2021 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 2020 have been delivered to
the registrar of companies, and those for 2021 will be delivered
after the forthcoming AGM. The auditors have reported on the
accounts for the period ended 31 December 2020 and the year end 31
December 2021: their reports were unqualified, and did not contain
statements under section 498(2) or (3) of the Companies Act
2006.
While the information included in this preliminary announcement
has been prepared in accordance with the recognition and
measurement principles of UK adopted international accounting
standards, this announcement does not itself contain sufficient
information to comply with UK adopted international accounting
standards. The Company expects to publish full financial statements
for the year ended 31 December 2021 that comply with UK adopted
international accounting standards on 1 April 2022.
The accounting policies set out below are in accordance with UK
adopted international accounting standards, and International
Financial Reporting Interpretations Committee ('IFRIC')
interpretations that were applicable for the year ended 31 December
2021.
The financial statements have been prepared for year ended 31
December 2021, with a comparative year to 31 December 2020
(restated), and are presented in Sterling, which is also the
Group's functional currency.
The principal accounting policies adopted in the preparation of
the consolidated financial statements are set out in Note 2. The
policies have been consistently applied to the period presented,
unless otherwise stated.
The preparation of financial statements in compliance with UK
adopted international accounting standards requires the use of
certain critical accounting estimates. It also requires Group
management to exercise judgment in applying the Group's accounting
policies. The areas where significant judgements and estimates have
been made in preparing the financial statements and their effect
are disclosed in Note 3.
Basis of measurement
The consolidated financial statements have been prepared on a
historical cost basis, except for the following items (refer to
individual accounting policies for details):
-- Litigation assets - fair value through profit or loss
-- Put and call options - 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.
Changes in accounting policies
a. New standards, interpretations and amendments effective from 1 January 2021
New standards that have been adopted in the annual financial
statements for the year ended 31 December 2021 but have not had a
significant effect on the Group are:
-- Interest Rate Benchmark Reform (Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16)
-- COVID-19 Related Rent Concessions beyond 30 June 2021 (Amendment to IFRS16)
-- Amendments to References to the Conceptual Framework in IFRS
Standards (Conceptual Framework)
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 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.
The following amendments are effective for the period beginning
1 January 2023:
-- Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS Practice Statement 2);
-- Definition of Accounting Estimates (Amendments to IAS 8); and
-- Deferred Tax Related to Assets and Liabilities arising from a
Single Transaction (Amendments to IAS 12).
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.
Other professional services revenues
Other professional services revenue is contingent on the
completion of a deal and is recognised when the deal has completed.
Bills raised are payable on deal completion and are generally paid
at that time.
Basis of consolidation
Where the company has control over an investee, it is classified
as a subsidiary. The company controls an investee if all three of
the following elements are present: power over the investee,
exposure to variable returns from the investee, and the ability of
the investor to use its power to affect those variable returns.
Control is reassessed whenever facts and circumstances indicate
that there may be a change in any of these elements of control.
The consolidated financial statements present the results of the
company and its subsidiaries ("the Group") as if they formed a
single entity. Intercompany transactions and balances between group
companies are therefore eliminated in full.
The consolidated financial statements incorporate the results of
business combinations using the acquisition method. In the
statement of financial position, the acquiree's identifiable
assets, liabilities and contingent liabilities are initially
recognised at their fair values at the acquisition date. The
results of acquired operations are included in the consolidated
statement of comprehensive income from the date on which control is
obtained. They are deconsolidated from the date on which control
ceases.
Non-Controlling interests
The total comprehensive income of non-wholly owned subsidiaries
is attributed to owners of the parent and to the non-controlling
interests in proportion to their relative ownership interests.
Where the Company has agreed a put option over the shares of a
subsidiary held by a non-controlling interest, the liability for
the estimated exercise value of the put option is recognised at
fair value in the financial statements of the Company and is
recognised at present value in the financial statements of the
Group. Movements in the estimated liability after initial
recognition are recognised in the statement of changes in
equity.
Goodwill
Goodwill represents the excess of the cost of a business
combination over the Group's interest in the fair value of
identifiable assets, liabilities and contingent liabilities
acquired.
Cost comprises the fair value of assets given, liabilities
assumed and equity instruments issued, plus the amount of any
non-controlling interests in the acquiree plus, if the business
combination is achieved in stages, the fair value of the existing
equity interest in the acquiree. Contingent consideration is
included in cost at its acquisition date fair value and, in the
case of contingent consideration classified as a financial
liability, remeasured subsequently through profit or loss. Direct
costs of acquisition are recognised immediately as an expense.
Goodwill is capitalised as an intangible asset with any
impairment in carrying value being charged to the consolidated
statement of comprehensive income. Where the fair value of
identifiable assets, liabilities and contingent liabilities exceed
the fair value of consideration paid, the excess is credited in
full to the consolidated statement of comprehensive income on the
acquisition date.
Impairment of non-financial assets (excluding inventories,
investment properties and deferred tax assets)
Impairment tests on goodwill and other intangible assets with
indefinite useful economic lives are undertaken annually at the
financial period end. Other non-financial assets are subject to
impairment tests whenever events or changes in circumstances
indicate that their carrying amount may not be recoverable. Where
the carrying value of an asset exceeds its recoverable amount (i.e.
the higher of value in use and fair value less costs to sell), the
asset is written down accordingly.
Where it is not possible to estimate the recoverable amount of
an individual asset, the impairment test is carried out on the
smallest group of assets to which it belongs for which there are
separately identifiable cash flows; its cash generating units
('CGUs'). Goodwill is allocated on initial recognition to each of
the Group's CGUs that are expected to benefit from a business
combination that gives rise to the goodwill.
Impairment charges are included in profit or loss, except to the
extent they reverse gains previously recognised in other
comprehensive income. An impairment loss recognised for goodwill is
not reversed.
Foreign currency
Transactions entered into by Group entities in a currency other
than the currency of the primary economic environment in which they
operate (their "functional currency") are recorded at the rates
ruling when the transactions occur. Foreign currency monetary
assets and liabilities are translated at the rates ruling at the
reporting date. Exchange differences arising on the retranslation
of unsettled monetary assets and liabilities are recognised
immediately in profit or loss.
Financial assets
The Group classifies its financial assets into one of the
categories discussed below, depending on the purpose for which the
asset was acquired. The Group's accounting policy for each category
is as follows:
Fair value through profit or loss
Litigation assets relate to the provision of funding to
litigation matters in return for a participation share in the
settlement of that case. Investments are initially measured at the
sum invested and are subsequently held at fair value through the
profit or loss.
When the Group disposes of a proportion of its participation
share in the settlement of the case to a third party under an
uninsured ("naked") contract, where the percentage of the
litigation asset being disposed of and the percentage return remain
proportionate irrespective of the final outcome of the litigation,
the difference between the disposal proceeds and the cost of
investment disposed gives rise to a profit on disposal which is
recognised through the profit and loss when the sale is agreed.
These sales are non-recourse and, if the case is successful, the
relevant % of the settlement received is paid to the third party.
For uninsured cases, the Group uses the value of third party
disposals to calculate the gross value of the proportion of the
investment retained by the Group and deducts the expected cost of
investment to be borne by the Group to give the fair value of the
Group's investment. The proportion of each investment retained is
calculated using the expected total return on the investment, the
expected return payable to the onward investor and the expected
total return retained by the Group.
For insured cases, when the Group disposes of a proportion of
its participation share in the settlement of the case to a third
party, where the third party return is calculated as a fixed
percentage daily rate irrespective of the settlement value of a
successful litigation outcome, the derecognition requirements under
IFRS 9 para 3.2.2 are not met and no sale or profit on disposal
arise. The Group retains the full litigation asset and the proceeds
of disposal under the third party contract are included as
litigation liabilities. The fair value of the litigation asset is
calculated using the expected total return retained by the Group in
the different possible outcomes factored by Management's
expectation of the likelihood of each outcome.
Amortised cost
These assets arise principally from the provision of goods and
services to customers (e.g. trade receivables), but also
incorporate other types of financial assets where the objective is
to hold these assets in order to collect contractual cash flows and
the contractual cash flows are solely payments of principal and
interest. They are initially recognised at fair value plus
transaction costs that are directly attributable to their
acquisition or issue, and are subsequently carried at amortised
cost using the effective interest rate method, less provision for
impairment.
Impairment provisions for current and non-current trade
receivables are recognised based on the simplified approach within
IFRS 9 using a provision matrix in the determination of the
lifetime expected credit losses. During this process the
probability of the non-payment of the trade receivables is
assessed. This probability is then multiplied by the amount of the
expected loss arising from default to determine the lifetime
expected credit loss for the trade receivables. For trade
receivables, which are reported net, such provisions are recorded
in a separate provision account with the loss being recognised in
profit or loss. On confirmation that the trade receivable will not
be collectable, the gross carrying value of the asset is written
off against the associated provision.
From time to time, the Group elects to renegotiate the terms of
trade receivables due from customers with which it has previously
had a good trading history. Such renegotiations will lead to
changes in the timing of payments rather than changes to the
amounts owed and, in consequence, the new expected cash flows are
discounted at the original effective interest rate and any
resulting difference to the carrying value is recognised in the
consolidated statement of comprehensive income (operating
profit).
Impairment provisions for receivables from related parties and
loans to related parties, including those from subsidiary
companies, are recognised based on a forward looking expected
credit loss model. The methodology used to determine the amount of
the provision is based on whether there has been a significant
increase in credit risk since initial recognition of the financial
asset. This annual assessment considers forward-looking information
on the general economic and specific market conditions together
with a review of the operating performance and cash flow generation
of the entity relative to that at initial recognition. For those
where the credit risk has not increased significantly since initial
recognition of the financial asset, twelve month expected credit
losses along with gross interest income are recognised. For those
for which credit risk has increased significantly, lifetime
expected credit losses along with the gross interest income are
recognised. For those that are determined to be credit impaired,
lifetime expected credit losses along with interest income on a net
basis are recognised.
The Group's financial assets measured at amortised cost comprise
trade and other receivables and cash and cash equivalents in the
consolidated statement of financial position. Cash and cash
equivalents includes cash in hand, deposits held at call with
banks, and other short term highly liquid investments with original
maturities of three months or less.
Financial liabilities
The Group classifies its financial liabilities depending on the
purpose for which the liability was acquired.
Other financial liabilitie s
All the Group's financial liabilities are classified as other
financial liabilities, which include the following items:
Bank borrowings are initially recognised at fair value net of
any transactions costs directly attributable to the issue of the
instrument. Such interest bearing liabilities are subsequently
measured at amortised cost using the effective interest rate
method, which ensures that any interest expense over the period to
repayment is at a constant rate on the balance of the liability
carried in the consolidated statement of financial position. For
the purposes of each financial liability, interest expense includes
initial transaction costs and any premium payable on redemption, as
well as any interest or coupon payable while the liability is
outstanding.
Trade payables and other short-term monetary liabilities, which
are initially recognised at fair value and subsequently carried at
amortised cost using the effective interest method.
Defined contribution schemes
Contributions to defined contribution pension schemes are
charged to the consolidated statement of comprehensive income in
the year to which they relate.
Leased assets
Identifying leases
The Group accounts for a contract, or a portion of a contract,
as a lease when it conveys the right to use an asset for a period
of time in exchange for consideration. Leases are those contracts
that satisfy the following criteria:
(a) There is an identified asset;
(b) The Group obtains substantially all the economic benefits
from use of the asset; and
(c) The Group has the right to direct use of the asset
The Group considers whether the supplier has substantive
substitution rights. If the supplier does have those rights, the
contract is not identified as giving rise to a lease.
In determining whether the Group obtains substantially all the
economic benefits from use of the asset, the Group considers only
the economic benefits that arise from use of the asset, not those
incidental to legal ownership or other potential benefits.
In determining whether the Group has the right to direct use of
the asset, the Group considers whether it directs how and for what
purpose the asset is used throughout the period of use. If there
are no significant decisions to be made because they are
pre-determined due to the nature of the asset, the Group considers
whether it was involved in the design of the asset in a way that
predetermines how and for what purpose the asset will be used
throughout the period of use. If the contract or portion of the
contract does not satisfy these criteria, the Group applies other
applicable IFRSs rather than IFRS 16.
All leases are accounted for by recognising a right-of-use asset
and a lease liability except for:
-- Leases of low value assets; and
-- Leases with a term of 12 months or less
Lease liabilities are measured at the present value of the
contractual payments due to the lessor over the lease term, with
the discount rate determined by reference to the rate inherent in
the lease unless this is not readily determinable, in which case
the Group's incremental borrowing rate on commencement of the lease
is used. Variable lease payments are only included in the
measurement of the lease liability if they depend on an index or
rate. In such cases, the initial measurement of the lease assumes
the variable element will remain unchanged throughout the lease
term. Other variable lease payments are expensed in the period to
which they relate.
On initial recognition, the carrying value of the lease
liability also includes:
-- amounts expected to be payable under any residual value guarantee
-- the exercise price of any purchase option granted in favour
of the Group if it is 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
Leased assets (continued)
Right-of-use assets are initially measured at the amount of the
lease liability, reduced for any lease incentives received, and
increased for:
-- lease payments made at or before the commencement of the lease
-- initial direct costs incurred and
-- the amount of any provision recognised where the Group is
contractually required to dismantle, remove or restore the leased
asset
Subsequent to initial measurement lease liabilities increase as
a result of interest charged at a constant rate on the balance
outstanding and are reduced for lease payments made. Right-of-use
assets are amortised on a straight-line basis over the remaining
term of the lease or over the remaining economic life of the asset
if this is judged to be shorter than the lease term.
When the Group revises its estimate of the term of any lease, it
adjusts the carrying amount of the lease liability to reflect the
payments to make over the revised term, which are discounted using
a revised discount rate. The carrying value of lease liabilities is
similarly revised when the variable element of future lease
payments dependent on a rate or index is revised, except the
discount rate remains unchanged. In both cases an equivalent
adjustment is made to the carrying value of the right-of-use asset,
with the revised carrying amount being amortised over the remaining
lease term.
For contracts that both convey a right to the Group to use an
identified asset and require services to be provided to the Group
by the lessor for a variable amount, the Group has elected to
account for the right-of-use payments as a lease and expense the
service charge payments in the period to which they relate.
Externally acquired intangible assets
Externally acquired intangible assets are initially recognised
at cost and subsequently amortised over their useful economic
lives.
Intangible assets are recognised on business combinations if
they are separable from the acquired entity or give rise to other
contractual/legal rights. The amounts ascribed to such intangibles
are arrived at by using appropriate valuation techniques.
The significant intangibles recognised by the Group, their
useful economic lives and the methods used for amortisation and to
determine the cost of intangibles acquired in a business
combination are as follows:
Intangible Useful economic Remaining useful Amortisation Valuation method
asset life economic life method
Brand 20 years 16 - 19 years Straight line Estimated discounted
cash flow
Customer contracts 1 - 2 years 1 - 2 years In line with Estimated discounted
contract revenues cash flow
Restrictive 2 years 1 - 2 years Straight line Cost
covenant extension
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.
Where the Group has the power to participate in (but not
control) the financial and operating policy decisions of another
entity, it is classified as an associate. Associates are initially
recognised in the consolidated statement of financial position at
cost. Subsequently associates are accounted for using the equity
method, where the Group's share of post-acquisition profits and
losses and other comprehensive income are recognised in the
consolidated statement of comprehensive income (except for losses
in excess of the Group's investment in the associate unless there
is an obligation to make good those losses).
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
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:
Leasehold improvements - 25-33% per annum straight line
Fixtures and fittings - 25% per annum straight line
Computer equipment - 33% per annum straight line
Provisions
Professional indemnity provision
A provision is recognised when the Group has a present legal or
constructive obligation as a result of a past event, that can be
reliably measured and it is probable that an outflow of economic
benefits will be required to settle the obligation. Where material,
the impact of the time value of money is taken into account by
discounting the expected future cash flow at a pre-tax rate, which
reflects risks specific to the liability.
Insurance cover is maintained in respect of professional
negligence claims. This cover is principally written through
insurance companies. Premiums are expensed as they fall due with
prepayments or accruals being recognised accordingly. Expected
reimbursements are recognised once they become receivable. The
liability and associated reimbursement asset are shown separately
in the financial statements. Where outflow of resources is
considered probable and reliable estimates can be made, provision
is made for the cost (including related legal costs) of settling
professional negligence claims brought against the Group by third
parties and disciplinary proceedings brought by regulatory
authorities. Amounts provided for are based on Management's
assessment of the specific circumstances in each case. No separate
disclosure is made of the detail of such claims and proceedings, as
to do so could seriously prejudice the position of the Group. In
the event the insurance companies cannot settle the full liability,
the liability will revert to the Group.
Dilapidations provision
The Group recognises a provision for the future costs of
dilapidations on leased office space. The provision is an estimate
of the total cost to return applicable office space to its original
condition at the end of the lease term.
Restatements
The 2020 comparative numbers have been restated for the
following corrections which are described fully in Note 30:
-- Reclassification of contracts for insured litigation assets,
which were previously treated as sales, which do not meet the
derecognition requirements of IFRS 9 para 3.2.2.
-- Restatement of the fair value of the uninsured contracts to
correct an error in the previous valuation
The Consolidated statement of financial position adjustments
increased litigation assets by GBP274,356, increased trade and
other payables by GBP575,000, reduced current tax liabilities by
GBP57,122 and reduced equity by GBP243,522. The Consolidated
statement of comprehensive income adjustments decreased gains on
litigation assets by GBP300,644 and reduced tax expenses by
GBP57,122
3. Critical accounting estimates and judgments
The Group makes certain estimates and assumptions regarding the
future. Estimates and judgements are continually evaluated based on
actual experience and other factors, including expectations of
future events that are believed to be reasonable under the
circumstances. In the future, actual experience may differ from
these estimates and assumptions. The estimates and assumptions that
have a significant risk of causing a material adjustment to the
carrying amounts of assets and liabilities within the next
financial period are discussed below.
Judgements, estimates and assumptions
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.
3. Critical accounting estimates and judgements (continued)
Revenue recognition
Where the group performs work that is chargeable based on hours
worked at agreed rates, assessment must be made of the
recoverability of the unbilled time at the period end. This is on a
matter by matter basis, with reference to historic and post
year-end recoveries. Different views on recoverability would give
rise to a different value being determined for revenue and a
different carrying value for unbilled revenue.
Where revenue is subject to contingent fee arrangements, the
Group estimates the amount of variable consideration to which it
will be entitled and constrains the revenue recognised to the
amount for which it is considered highly probable that there will
be no significant reversal. Due to the nature of the work being
performed, this typically means that contingent revenues are not
recognised until such time as the outcome of the matter being
worked on is certain. Factors the Group considers when determining
whether revenue should be constrained are whether: -
a) The amount of consideration receivable is highly susceptible
to factors outside the Group's influence
b) The uncertainty is not expected to be resolved for a long
time
c) The Group has limited previous experience (or limited other
evidence) with similar contracts
d) The range of possible consideration amounts is broad with a
large number of possible outcomes
Different views being determined for the amount of revenue to be
constrained in relation to each contingent fee arrangement may
result in a different value being determined for revenue and also a
different carrying value being determined for unbilled amounts for
client work.
Where the group enters into Damages Based Agreements ("DBAs")
that include both the provision of services and the provision of
litigation finance, the Group must apportion the total expected
settlement between that arising as conditional revenue for services
and that arising as a return on participation. This requires
estimation of the total amount of time cost and disbursements that
will be incurred on a matter and the expected settlement value; the
allocation of the DBA to revenue is made with reference to standard
returns on contingent fee work. Different views will impact the
level of unrecognised contingent revenue and also the recognised
financial asset relating to the DBA participation.
Where non-contingent fees as well as contingent revenue are
earned on DBAs, the group must make a judgement as to whether
non-contingent amounts represent revenue or a reduction in funding,
with reference to the terms of the agreement and timing and
substance of time worked and payments made. Where non-contingent
revenue arises, the Group must match it against the services to
which it relates. This requires Management to estimate work done as
a proportion of total expected work to which the fee relates.
Different views could impact the level of non-contingent revenue
recognised.
Impairment of trade receivables
Receivables are held at cost less provisions for impairment.
Impairment provisions are recognised based on the simplified
approach within IFRS 9 using a provision matrix in the
determination of the lifetime expected credit losses. A different
assessment of the impairment provision with reference to the
probability of the non-payment of trade debtors or the expected
loss arising from default, may result in different values being
determined.
3. Critical accounting estimates and judgements (continued)
Litigation assets and fair value
LionFish
For each of LionFish's uninsured ("naked") investments, a third
party disposal has been made. To calculate the profit on disposal,
the Group allocates the corresponding proportion of the total
expected cost of the investment against the proportion of the
investment sold. The total expected cost of each investment
involves an assumption regarding the total expected drawdown on
that investment, which may be less than the total value of funds
committed. To calculate the proportion of each investment retained,
the Group has estimated the expected total return on the investment
and the expected return payable to the onward investor. As returns
are dependent on the timing of the settlement, these estimates are
driven by assumptions over the most likely timing of settlement.
The sales prices of the part disposal are used to value the gross
value of the proportion of the litigation asset retained by the
Group and the estimated remaining capital to invest is deducted to
give the fair value of the Group's investment. The estimates used
in these calculations are based on semi-annual individual case by
case reviews by Management.
The fair value of LionFish's insured investments is calculated
using the expected total return retained by the Group in the
different possible outcomes factored by Management's expectation of
the likelihood of each outcome. As returns are dependent on the
timing of the settlement, these estimates are driven by assumptions
over the most likely timing of settlement. The total expected cost
of each investment involves an assumption regarding the total
expected drawdown on that investment, which may be less than the
total value of funds committed. The expected total returns retained
by the Group in the different possible outcomes are then factored
by Management's expectation of the likelihood of each outcome. The
estimates used in these calculations, are based on semi-annual
individual case by case reviews by Management.
The recorded profits on disposal and carrying values are
relatively insensitive to assumptions made, with the exception that
matters for which capital invested is insured are sensitive to the
estimated settlement date and the success likelihood factor
applied. In general, the later the anticipated settlement date, the
greater the carrying value of the investment. Management has
exercised caution in its assessment of settlement dates. Management
have used historic success rates on contingent contentious cases to
factor the returns for the different possible outcomes.
Rosenblatt
Unlike LionFish's investments, the total return on Rosenblatt's
litigation assets is a proportion of damages awarded, rather than
being dependent on timing of settlement. As this figure is
potentially large and uncertain, and has a strong impact on fair
value calculations, where possible the Group avoids using it as an
input to its fair value calculations.
Where a recent disposal of an interest in a damage based
agreement has been made, the sales price of the disposal has been
used to value the gross value of the interest in damages retained
by the Group. The sales price is adjusted downwards for the cost of
the Group's ongoing funding of the matter, which is not borne by
the onward investor. This involves an estimate of the likely amount
and timing of disbursements over the course of the matter, the
minimum being funds already disbursed at the balance sheet date. As
management believes the sales price of disposals to represent the
floor level, having been used to create a market and de-risk the
original investment, the minimum level of disbursements has also
been used in valuing the investment. If the present value of the
maximum level of disbursements were applied against the value of
damages based on disposal price, this would reduce the fair value
of the investment to zero. Conversely, if a discounted cash flow
method of valuation were used, including an estimate of the likely
amount of damages on settlement, the value of the investment would
be significantly increased.
It is presumed that fair value and cost approximate to each
other on initial recognition and where a 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: -
a. It has been assumed that the option holder will exercise at
the earliest possible opportunity, being 12 August 2022
b. The value at the date of exercise, which is calculated as a
multiple of average profit over the preceding two years, has been
based on the actual profit after tax for the periods ended 31
December 2020 and 31 December 2021
In determining the fair value of the put options, it has been
assumed that fair value of the put shares in LionFish is equal to
the fair value of the shares in the Company for which they would be
exchanged, and that the fair value of the option is zero.
3. Critical accounting estimates and judgements (continued)
Call option over shares held by non-controlling interest
On 1 February 2021, the Company agreed a call option over the
shares of Adnitor Limited held by the majority shareholder. Under
this agreement, the Company is required to purchase the remaining
shares in Adnitor Limited by the fifth anniversary of the
agreement. The following key estimates and judgements have been
used in determining the present value of the option over the shares
held by majority shareholder: -
a. It has been assumed that the Company will exercise on
earliest date that it can be required to exercise, that is the
fifth anniversary of the agreement, being 1 February 2026.
b. The value at the date of exercise, which is calculated as a
multiple of the average profits of Adnitor Limited over the
preceding two years, as long as that exceeds the minimum of GBP1
million, has been based GBP1 million.
In determining the fair value of the option, it has been assumed
that fair value of the option shares in Adnitor Limited is equal to
the fair value of the shares in the Company for which they would be
exchanged, and that the fair value of the option is zero.
Claims and regulatory matters
The Group from time to time receives claims in respect of
professional service matters. The Group defends such claims where
appropriate, but makes provision for the possible amounts
considered likely to be payable, having regard to any relevant
insurance cover held by the Group. A different assessment of the
likely outcome of each case or of the possible cost involved may
result in a different provision or cost.
The Company has been informed that HMRC has started an inquiry
into the valuation of employee related securities issued by the
Company in April 2018 prior to the IPO. For full details, refer to
Note 31.
4. Financial instruments - Risk Management
The Group is exposed through its operations to the following
financial risks:
-- Credit risk
-- Interest rate risk and
-- Liquidity risk
In common with all other businesses, the Group is exposed to
risks that arise from its use of financial instruments. This note
describes the Group's objectives, policies and processes for
managing those risks and the methods used to measure them. Further
quantitative information in respect of these risks is presented
throughout these financial statements.
There have been no substantive changes in the Group's exposure
to financial instrument risks, its objectives, policies and
processes for managing those risks or the methods used to measure
them from the previous period unless otherwise stated in this
note.
(i) Principal financial instruments
The principal financial instruments used by the Group, from
which financial instrument risk arises, are as follows:
-- Trade receivables
-- Cash and cash equivalents
-- Litigation assets and liabilities
-- Trade and other payables
-- Derivative financial liabilities
-- Floating-rate bank loans
(ii) Financial instruments by category
Financial Assets Fair value through profit Amortised cost
or loss
31 December 31 December 31 December 2021 31 December
2021 2020 2020
restated
GBP GBP GBP GBP
Cash and cash
equivalents - - 4,756,143 13,522,184
Trade and other
receivables - - 16,606,983 7,074,425
Litigation assets 11,571,052 6,569,110 - -
Total financial
assets 11,571,052 6,569,110 21,363,126 20,596,609
============= ============= ================= ============
Financial Liabilities Fair value through profit Amortised cost
or loss
31 December 31 December 31 December 31 December
2021 2020 2021 2020
GBP GBP GBP GBP
Trade payables and
accruals - - 4,618,755 1,618,264
Loans and borrowings - - 19,129,592 10,000,000
Litigation liabilities - - 750,000 575,000
Derivative financial
liabilities - - 1,515,000 1,015,000
Other payables - - 2,308,328 1,118,595
Total financial liabilities - - 28,321,675 14,326,859
=============== ============= ============ ============
Trade and other payables are due within twelve months.
4. Financial instruments - Risk Management (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, loans and borrowings, litigation liabilities and
derivative financial liabilities.
Due to their short-term nature, the carrying value of cash and
cash equivalents, trade and other receivables, and trade and other
payables approximates their fair value.
(iv) Financial instruments measured at fair value
Litigation assets are classified as level 3 in the fair value
hierarchy of financial instruments.
The methods and procedures to fair value litigation assets may
include, but are not limited to: (i) obtaining information provided
by third parties when available; (ii) performing comparisons of
comparable or similar investment matters; (iii) calculating the
present value of future cash flows; (iv) assessing other analytical
data and information relating to the investment that is an
indication of value; (v) reviewing the amounts invested in these
investments; (vii) entering into a market transaction with an arm's
length party.
The material estimates and assumptions used in the analysis of
fair value include the status and risk profile of the risks
underlying the investment, the timing and expected amount of cash
flows based on the investment structure and agreement, the
appropriateness of discount rates used, if any, and in some cases,
the timing of, and estimated minimum proceeds from, a favourable
outcome. Significant judgement and estimation goes into the
assumptions which underlie the analyses, and the actual values
realised with respect to investments could be materially different
from values obtained based on the use of the estimates.
The reconciliation of the opening and closing fair value balance
of the level 3 financial instruments is provided in Note 19
together with a sensitivity analysis.
General objectives, policies and processes
The Board has overall responsibility for the determination of
the Group's risk management objectives and policies and, whilst
retaining ultimate responsibility for them, it has delegated the
authority for designing and operating processes that ensure the
effective implementation of the objectives and policies to the
Group's finance function. The Board receives monthly reports from
the 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.
4. Financial instruments - Risk Management (continued)
Interest rate risk
The Group is exposed to cash flow interest rate risk from
borrowings under the Term Facility and Revolving Credit Facility at
variable rate. The Board reviews the interest rate exposure on a
regular basis.
During 2021 and 2020, the Group's borrowings at variable rate
were denominated in sterling. At 31 December 2021, if interest
rates on sterling denominated borrowings had been 150 basis points
higher/lower with all other variables held constant, profit after
tax for the year would have been GBP240,000 lower/higher, mainly as
a result of higher/lower interest expense on floating-rate
borrowings. The directors consider that 150 basis points is the
maximum likely change in sterling interest rates over the next
year, being the period up to the next point at which the Group
expects to make these disclosures.
Liquidity risk
Liquidity risk arises from the Group's management of working
capital and the finance charges and principal repayments on its
debt instruments. It is the risk that the Group will encounter
difficulty in meeting its financial obligations as they fall due.
The Group's policy is to ensure that it will always have sufficient
cash (or agreed facilities) to allow it to meet its liabilities
when they become due and to take advantage of business
opportunities.
The Board reviews the projected financing requirements annually
when agreeing the Group's budget and receives rolling 12-month cash
flow projections for the Group on a regular basis as well as
information regarding cash balances.
On 19(th) April 2021, the Group signed an amendment and
restatement agreement for a GBP15,000,000 three-year Revolving
Credit Facility and GBP10,000,000 three-year Term Facility
Commitment with HSBC UK Bank plc. The Group may utilise any
proportion of the facilities, paying an interest margin of 2.4 -
3.15% over SONIA on utilisations and a commitment fee on the
unutilised facility. The facility is secured by the debenture which
grants first ranking fixed and floating security of the property
and assets of the Group as referenced in Notes 12 and 14. During
2021, the Group drew down the full GBP10.0 million of the Revolving
Credit Facility and GBP10 million of the Term Facility Commitment
of which GBP1 million has been repaid at year end. At the year end
the Group had GBP4.8 million in cash, and so a net debt position of
GBP14.2 million (2020: net cash GBP3.5 million).
At the end of the financial year, cash flow projections
indicated that the Group expected to have sufficient liquid
resources to meet its obligations, including scheduled lease
payments (Note 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.
5. Segment information
The Group's reportable segments are strategic business groups
that offer different products and services. Operating segments are
reported in a manner consistent with the internal reporting
provided to the chief operating decision maker, which has been
identified as the Board of Directors of RBG Holdings plc.
The following summary describes the operations of each
reportable segment:
-- Legal services - Provision of legal advice, by RBGLS (trading
under two brands, Rosenblatt and Memery Crystal
-- Litigation finance - Sale of litigation assets, by Rosenblatt
and LionFish
-- Other Professional services -Provision of sell-side M&A
corporate finance services, by Convex
2021 Legal services Litigation Other Professional Total
finance services
GBP GBP GBP GBP
Segment revenue 32,570,661 - 9,414,677 41,985,338
=============== ============ =================== ============
Segment gains on litigation
assets comprising:
Proceeds on disposal of litigation
assets - 4,888,711 - 4,888,711
Realisation of litigation assets - (2,162,031) - (2,162,031)
--------------- ------------ ------------------- ------------
Profit on disposal of litigation
assets - 2,726,680 - 2,726,680
Fair value movement on litigation
assets - 2,480,844 - 2,480,844
--------------- ------------ ------------------- ------------
- 5,207,524 - 5,207,524
=============== ============ =================== ============
Segment contribution 15,007,758 - 4,288,915 19,296,673
=============== ============ =================== ============
Segment gains on litigation
assets - 5,207,524 - 5,207,524
=============== ============ =================== ============
Costs not allocated to segments
Personnel costs (4,668,749)
Depreciation and amortisation (2,940,078)
Other operating expense (6,911,796)
Net financial expenses (757,340)
Group profit for the year before
tax 9,226,234
============
5. Segment information (continued)
2020 (restated) Legal services Litigation Other Professional Total
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 - 2,986,000 - 2,986,000
Realisation of litigation assets - (2,034,719) - (2,034,719)
--------------- ------------ ------------------- ------------
Profit on disposal of litigation
assets - 951,281 - 951,281
Fair value movement on litigation
assets - 1,870,802 - 1,870,802
--------------- ------------ ------------------- ------------
- 2,822,083 - 2,822,083
=============== ============ =================== ============
Segment contribution 10,868,778 - (605,593) 10,263,185
=============== ============ =================== ============
Segment gains on litigation
assets - 2,822,083 - 2,822,083
=============== ============ =================== ============
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 7,405,637
============
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
2021 2020
GBP GBP
United Kingdom 36,893,981 20,680,948
Europe 549,860 387,829
North America 760,208 7,833
Other 3,781,289 1,372,722
41,985,338 22,449,332
------------ -----------
Revenues from Legal Services clients that account for more than
10% of Group revenue was GBPnil (2020: GBP12,829,816).
5. Segment information (continued)
Contract assets
2021 2020
Group GBP GBP
At 1 January 2021 2,996,925 3,797,152
Acquired through business combinations 3,560,480 -
Transfers in the period from contract assets
to trade receivables (2,464,783) (3,429,927)
Excess of revenue recognised over cash (or
rights to cash) being recognised during the
year 1,883,636 2,629,700
At 31 December 2021 5,976,258 2,996,925
------------ ------------
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
2021 2020
GBP GBP
Profit from operations is stated after
charging:
Fees payable to the company's auditors:
Audit fees 246,350 177,500
Other services 41,150 12,500
Depreciation of property, plant and
equipment 525,607 335,634
Amortisation of right-of-use assets 1,781,058 986,061
Amortisation/impairment of intangible
assets 633,414 759,806
Lease expense:
Short-term - -
Low value 3,874 3,335
The Alternative Performance Measures used by Management are
shown below:
2021 2020
restated
GBP GBP
Operating profit 9,983,574 7,775,711
Depreciation and amortisation expense 2,940,078 2,081,501
Non-underlying items 863,435 (2,640,000)
----------- ------------
Adjusted EBITDA 13,787,087 7,217,212
----------- ------------
2021 2020
restated
GBP GBP
Profit before tax 9,226,234 7,405,637
Non-underlying items 863,435 (2,640,000)
----------- ------------
Adjusted PBT 10,089,669 4,765,637
----------- ------------
7. Employees
Group
2021 2020
GBP GBP
Staff costs (including directors) consist
of:
Wages and salaries 20,868,566 9,902,596
Short-term non-monetary benefits 214,208 122,854
Cost of defined contribution scheme 673,817 262,518
Share-based payment expense 72,000 39,403
Social security costs 2,526,064 1,225,260
----------- -----------
24,354,655 11,552,631
----------- -----------
Personnel costs stated in the consolidated statement of
comprehensive income includes the costs of contractors of
GBP2,999,122 (2020: GBP3,227,573).
The average number of employees (including directors) during the
period was as follows:
2021 2020
Number Number
Legal and professional staff 113 55
Administrative staff 62 35
------- -------
175 90
------- -------
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 GBP673,817 (2020:
GBP262,518).
Contributions amounting to GBP127,296 (2020: GBP40,574) 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 six (2020: one); 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 28. The directors are considered to be the key
management personnel.
8. Finance income and expense
2021 2020
GBP GBP
Recognised in profit or loss
Finance income
Interest received on bank deposits 22,676 24,460
--------------------- ---------------------
Net finance income recognised in profit
or loss 22,676 24,460
Finance expense
Interest expense on financial liabilities
measured at amortised cost (409,089) (185,497)
Interest expense on lease liabilities (392,570) (209,037)
--------------------- ---------------------
(801,659) (394,534)
Net finance (expense) recognised on profit
or loss (778,983) (370,074)
--------------------- ---------------------
The above financial income and expense include the following in
respect of assets/(liabilities) not at fair value through profit or
loss:
2021 2020
GBP GBP
Total interest income on financial assets 22,676 24,460
Total interest expense on financial liabilities (409,089) (185,497)
--------------------- ---------------------
(386,413) (161,037)
9. Tax expense
2021 2020
restated
GBP GBP
Current tax expense
Current tax on profits for the year 1,960,545 1,083,985
Adjustment for under provision in prior
periods 7,487 1,120
---------- ----------
Total current tax 1,968,032 1,085,105
Deferred tax expense
Origination and reversal of temporary differences
(Note 24) 789 (117,291)
---------- ----------
Total tax expense 1,968,821 967,814
---------- ----------
Tax expense excluding share of tax of equity
accounted associate 1,968,821 967,814
Share of tax expense of equity accounted 5,175 -
joint venture
---------- ----------
1,973,996 967,814
---------- ----------
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:
2021 2020
restated
GBP GBP
Profit for the year 7,257,413 6,437,823
Income tax expense (including income tax
on associate) 1,973,996 967,814
---------- ----------
Profit before income taxes 9,231,409 7,405,637
---------- ----------
Tax using the Company's domestic tax rate
of 19% 1,753,968 1,407,072
Expenses not deductible for tax purposes 117,317 5,293
Fixed asset differences (3,276) -
Income not taxable for tax purposes - (501,600)
Adjustments in respect of prior periods 7,487 1,120
Adjustments in respect of prior periods
(deferred tax) - 5,606
Remeasurement of deferred tax for changes
in tax rates 98,500 50,324
Total tax expense 1,973,996 967,814
---------- ----------
Changes in tax rates and factors affecting the future tax
charge
Following the announcement made in the Chancellor's Spring
Budget regarding an increase to the UK corporate tax rate from 19%
to 25% from 1 April 2023, the Finance Bill 2021 was subsequently
enacted on 24 May 2021. As IFRS requires deferred tax to be
measured at tax rates that have been subsequently enacted at the
reporting date, the Group's deferred tax balances have been
re-measured accordingly and the impact has been reflected within
the consolidated financial statements.
10. Earnings per share
Total Total
2021 2020
restated
Numerator GBP GBP
Profit for the period and earnings used
in basic and diluted EPS 6,972,873 6,235,568
Non-Underlying items
Costs of acquiring subsidiary 863,435
Deferred consideration release - (2,640,000)
Less: tax effect of above items (69,242) -
Profit for the year adjusted for Non Underlying
items 7,767,066 3,595,568
----------- ------------
Denominator Number Number
Weighted average number of shares used
in basic and diluted EPS 91,408,901 85,592,106
----------- ------------
2021 2020
restated
Pence Pence
Basic and diluted earnings per ordinary
share 7.63 7.29
Basic and diluted earnings per ordinary
share adjusted for non-underlying items 8.50 4.20
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
2021 2020
GBP GBP
Interim dividend of 3p (2019: 0p) per ordinary 2,541,412 -
share proposed and paid during the year
relating to the previous year's results
Interim dividend of 2p (2020: 1p) per ordinary
share paid during the year 1,889,002 823,283
---------- --------
4,430,414 823,283
---------- --------
On 25 February 2022, an interim dividend was paid of 3 pence per
share in respect of the 2021 financial year.
12. Property, plant and equipment
Group
Leasehold Fixtures Computer Total
improvements and fittings Equipment
GBP GBP GBP GBP
Cost
At 1 January 2021 335,501 149,136 628,684 1,113,321
Additions 4,804 9,660 115,715 130,179
Acquired through business
combinations 2,369,974 92,498 47,117 2,509,589
At 31 December 2021 2,710,279 251,294 791,516 3,753,089
Accumulated depreciation and
impairment
At 1 January 2021 281,571 45,055 311,466 638,092
Charge for the year 205,577 71,934 248,096 525,607
At 31 December 2021 487,148 116,989 559,562 1,163,699
Net book value
At 1 January 2021 53,930 104,081 317,218 475,229
-------------- -------------- ----------- ----------
At 31 December 2021 2,223,131 134,305 231,954 2,589,390
-------------- -------------- ----------- ----------
Company
Computer Total
Equipment
GBP GBP
Cost
At 1 January 2021 18,750 18,750
Additions - -
Acquired through business combinations - -
----------- -------
At 31 December 2021 18,750 18,750
Accumulated depreciation and impairment
At 1 January 2021 12,903 12,903
Charge for the year 4,764 4,764
----------- -------
At 31 December 2021 17,667 17,667
Net book value
At 1 January 2021 5,847 5,847
----------- -------
At 31 December 2021 1,083 1,083
----------- -------
Under a debenture signed and registered on 19 April 2021, HSBC
UK Bank plc have a fixed charge over the property, plant and
equipment of the Group.
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.
At 31 December 2021 Lease Variable Sensitivity
Contract Payments
Number % GBP000
Property leases with payments linked
to inflation 1 46.7% +/- 253
Property leases with periodic uplifts
to market rentals 2 53.3% +/- 539
3 100.0% +/- 792
The percentages in the table below reflect the proportions of
lease payments that are either fixed of variable for the
comparative period.
13 Leases (continued)
At 31 December 2020 Lease Fixed Variable Sensitivity
Contract Payments 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
Right-of-use Assets
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
At 1 January 2021 5,822,408 3,304 5,825,712
Acquired through business combinations 11,798,710 - 11,798,710
Amortisation (1,777,754) (3,304) (1,781,058)
Variable lease payment adjustment 69,644 - 69,644
------------ ----------- ------------
At 31 December 2021 15,913,008 - 15,913,008
Lease liabilities
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 1 January 2021 5,947,655 3,407 5,591,062
Acquired through business combinations 11,685,333 - 11,685,333
Interest expense 392,523 47 392,570
Variable lease payment adjustment 69,644 - 69,644
Lease payments (2,246,054) (3,454) (1,984,959)
------------ ----------- ------------
At 31 December 2021 15,849,101 - 16,113,650
13. Leases (continued)
At 31 December 2021, lease liabilities were falling due as
follows:
Group Up to 3 Between Between Between Over 5 Total
months 3 and 12 1 and 2 2 and 5 years
months years years
GBP GBP GBP GBP GBP GBP
Lease liabilities 535,786 1,614,654 2,153,633 5,591,359 5,953,669 15,849,101
The aggregate undiscounted commitments for low-value leases as
at 31 December 2021 was GBPnil (2020: GBP5,460).
14. Intangible assets
Group
Goodwill Customer Brand Other Total
Contracts
GBP GBP GBP GBP GBP
Cost
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
At 1 January 2021 33,035,260 1,367,784 1,411,596 1,000,000 36,814,640
Additions 18,826,908 338,794 1,948,878 - 21,114,580
----------- ----------- ---------- ---------- -----------
At 31 December 2021 51,862,168 1,706,578 3,360,474 1,000,000 57,929,220
Accumulated amortisation
and impairment
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
At 1 January 2021 - 1,293,939 142,636 - 1,436,575
Amortisation charge - 172,660 127,422 333,333 633,415
----------- ----------- ---------- ---------- -----------
At 31 December 2021 - 1,466,599 270,058 333,333 2,069,990
Net book value
At 31 December 2020 33,035,260 73,845 1,268,960 1,000,000 35,378,065
----------- ----------- ---------- ---------- -----------
At 31 December 2021 51,862,168 239,979 3,090,416 666,667 55,859,230
----------- ----------- ---------- ---------- -----------
Under a debenture signed and registered on 19 April 2021, HSBC
UK Bank plc have a fixed charge over the intangible assets of the
Group.
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 longer term of between 0-3% are based
on management's understanding of the market opportunities for
services provided
-- Increases in costs are based on current inflation rates and
expected levels of recruitment needed to generate predicted revenue
growth
-- Cash flows have been assessed over ten years with the
assumption that the business will be ongoing at the end of that
period
The review demonstrated sufficient headroom such that the
estimated carrying values are not sensitive to changes in
assumptions. Having reviewed the key assumptions used, the
Directors do not believe that there is a reasonably possible change
in any of the key assumptions that require further disclosure.
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 Activity Registered Proportion of Non-controlling
Number ownership interest interests' ownership
2021 2020 2021 2020
RBL Law Limited Legal Services 09986118 100% 100% - -
RBG Legal Services
Limited Legal Services 13287062 100% - - -
Convex Group (Holdings)
Limited Holding Company 11490871 100% 100% - -
Convex Capital Professional
Limited Services 11491052 100% 100% - -
LionFish Litigation Litigation
Finance Limited Finance 12165991 90% 90% 10% 10%
Islero Assignments
Limited Dormant 12754244 90% 90% 10% 10%
Memery Crystal
Limited Dormant 13600674 100% - - -
Rosenblatt Limited Dormant 13601148 100% - - -
The principal place of business of Convex Group (Holdings)
Limited and Convex Capital Limited is Bass Warehouse, 4 Castle
Street, Manchester, M3 4LZ. The principal place of business and
registered office of RBG Legal Services Limited is 165 Fleet
Street, London, England, EC4A 2DY. The principal place of business
of the other subsidiaries and the registered address of each
subsidiary is 9-13 St. Andrew Street, London, England EC4A 3AF.
16. Subsidiaries (continued)
For the year ending 31 December 2021, 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 2021.
Company
2021 2020
GBP GBP
Cost and net book value
At 1 January 15,814,321 15,813,421
Investments in subsidiaries 11,686,957 900
Impairment - -
----------- -----------
At 31 December 27,501,278 15,814,321
----------- -----------
On 28 May 2021, RBG Holdings plc acquired Memery Crystal Limited
(subsequently renamed RBG Legal Services Limited). Refer to Note 25
for full details.
17. Investment in associates
The following entities have been included in the consolidated
financial statements using the equity method:
Name of entity Place of incorporation Proportion of ownership
interest held
2021 2020
Adnitor Limited United Kingdom 40% -
On 1 February 2021 RBG Holdings plc purchased 40 ordinary shares
of GBP1 each in Adnitor Limited for a consideration of GBP80,000.
As part of the share purchase, the Company agreed a call option
over the shares of Adnitor Limited held by the majority
shareholder. Under this agreement, the Company is required to
purchase the remaining shares in Adnitor Limited by the fifth
anniversary of the agreement.
For the year ended 31 December 2021, Adnitor Limited's total
revenue was GBP415,829 and profit after tax was GBP59,026. The
investment in associates has been accounted using the equity method
and an amount of GBP21,643 have been included in the Consolidated
statement of comprehensive income.
18. Non-controlling interests
The NCI of LionFish Litigation Finance Limited, which is 90%
owned by the Group, is considered to be immaterial.
19. Litigation assets
The table below provides analysis of the movements in the Level
3 financial assets.
2021 2020
restated
Level 3 Level 3
GBP GBP
At 1 January 6,569,110 2,209,886
Additions 4,683,128 4,523,141
Realisations (2,162,031) (2,034,718)
Fair value movement 2,480,845 1,870,801
------------ ------------
At 31 December 11,571,052 6,569,110
------------ ------------
Sensitivity of Level 3 valuations
Following investment, the Group engages in a semi-annual review
of each investment's fair value. At 31 December 2021, should the
value of investments have been 10% higher or lower than provided
for in the Group's fair value estimation, while all other variables
remained constant, the Group's income and net assets would have
increased and decreased respectively by GBP1,157,105 (2020
restated: GBP656,911).
20. Trade and other receivables
Group Company Group Company
2021 2021 2020 2020
GBP GBP GBP GBP
Trade receivables 10,183,246 - 3,592,075 -
Less: provision for impairment
of trade receivables (555,600) - (219,643) -
----------- ----------- ---------- -----------
Trade receivables - net 9,627,646 - 3,372,432 -
Contract assets 5,976,258 - 2,996,925 -
Amounts due from subsidiaries - 45,731,735 - 24,143,299
Other receivables 1,003,079 775,085 705,068 673,073
----------- ----------- ---------- -----------
Total financial assets other than
cash and cash equivalents classified
as amortised cost 16,606,983 46,506,820 7,074,425 24,816,372
Prepayments 1,964,645 242,055 622,500 84,559
Total trade and other receivables 18,571,628 46,748,875 7,696,925 24,900,931
----------- ----------- ---------- -----------
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.
20. Trade and other receivables (continued)
The lifetime expected loss provision for trade receivables and
contract assets is as follows:
Current More than More than More than Total
30 days 60 days 120 days GBP
past due past due past due
31 December 2021
Expected loss
rate 1% 5% 12% 10%
Gross carrying
amount 11,576,904 1,653,063 1,217,482 1,712,055 16,159,504
Loss provision 152,889 77,204 148,553 176,954 555,600
31 December 2020
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
None of the trade receivables and contract assets have been
subject to a significant increase in credit risk since initial
recognition.
Movements in the impairment allowance for trade receivables are
as follows:
2021 2020
GBP GBP
At 1 January 2021 219,643 64,923
Increase during the year 524,647 186,763
Receivables written off during year as uncollectible (173,050) (2,108)
Unused amounts reversed (15,640) (29,935)
At 31 December 2021 555,600 219,643
---------- ---------
Included in other receivables is GBP518,944 (2020: GBP468,318)
which is owed by the Employee Benefit Trust.
Company
The loans due from RBL Law, RBG Legal Services and LionFish
Litigation Finance are on demand and interest free.
Management considers that there is no increase in credit risk on
the related party loans. Given that the loans are on demand,
lifetime credit losses and 12-month credit losses will be the same.
Having considered different recoverability scenarios which
incorporated macroeconomic information (such as market interest
rates and growth rates), current and forward looking information,
management consider the expected credit losses to be close to
nil.
21. Trade and other payables
Group Company Group Company
2021 2021 2020 2020
restated
GBP GBP GBP GBP
Trade payables 1,928,294 - 465,300 -
Corporation tax payable 1,490,495 - 600,316 -
Other taxes and social
security 1,711,342 - 1,157,687 -
Amounts due to group
companies - 1,105,837 - 662,213
Derivative financial
liabilities 1,515,000 - 1,015,000 -
Litigation liability 750,000 - 575,000 -
Other payables 2,308,328 - 1,118,595 1,118,595
Accruals 2,690,461 1,037,619 1,152,964 254,623
----------- ---------- ---------- ----------
At 31 December 12,393,920 2,143,456 6,084,862 2,035,431
----------- ---------- ---------- ----------
Due within one year
or less 11,643,920 2,143,456 4,494,862 2,035,431
Due after more than
one year 750,000 - 1,590,000 -
----------- ---------- ---------- ----------
12,393,920 2,143,456 6,084,862 2,035,431
----------- ---------- ---------- ----------
The carrying value of trade and other payables classified as
financial liabilities measured at amortised cost approximates fair
value.
On 1 February 2021, the Company agreed a call option over the
shares of Adnitor Limited held by the majority shareholder. Under
this agreement, the Company is required to purchase the remaining
shares in Adnitor Limited by the fifth anniversary of the
agreement, with consideration based on a multiple of Adnitor's
profits, settled by the issue of ordinary shares in the Company.
The present value of the option, GBP500,000 (2020: GBPnil) is
included within derivative financial liabilities.
During 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 issues of ordinary shares in the
Company, at any point in the period from 12 August 2022 to 11
August 2030. The present value of the option, GBP1,015,000 (2020:
GBP1,015,000) is included within derivative financial
liabilities.
Included within other payables is GBP2,248,320 million for
deferred consideration of the acquisition of Memery Crystal, which
is described in detail in Note 25.
22. Loans and borrowings
The book value and fair value of loans and borrowings which all
denominated in sterling are as follows:
Book value Fair value Book value Fair value
31 Dec 21 31 Dec 21 31 Dec 20 31 Dec 20
GBP GBP GBP GBP
Non-current
Bank loans
Secured 17,000,000 17,000,000 10,000,000 10,000,000
Current
Bank loans
Secured 2,129,592 2,129,592 - -
----------- ----------- ----------- -----------
At 31 December 19,129,592 19,129,592 10,000,000 10,000,000
The rate at which Sterling denominated loans and borrowings are
payable is 2.4% above SONIA.
The bank loans are secured by fixed and floating charges over
the assets of the Group. The Group has GBP5,000,000 undrawn
committed borrowing facilities available at 31 December 2021 (2020:
GBPnil).
23. Provisions
Group
Leasehold Legal disputes Total
dilapidations
GBP GBP
At 1 January 2020 - 75,000 75,000
Charged through profit or
loss - 41,875 41,875
--------------- --------------- --------
At 31 December 2020 - 116,875 116,875
At 1 January 2021 - 116,875 116,875
Charged to profit or loss - 47,416 47,416
Acquired through business
combinations 150,000 - 150,000
--------------- --------------- --------
At 31 December 2021 150,000 164,291 314,291
Due within one year or less - 164,291 164,291
Due after more than one
year 150,000 - 150,000
--------------- --------------- --------
150,000 164,291 314,291
Leasehold dilapidations relate to the estimated cost of
returning a leasehold property to its original state at the end of
the lease in accordance with the lease terms. The main uncertainty
relates to estimating the cost that will be incurred at the end of
the lease.
The Group is currently involved in a number of legal disputes.
The amount provided represents the directors' best estimate of the
Group's liability having taken legal advice. Uncertainties relate
to whether claims will be settled out of court or if not whether
the Group is successful in defending any action. Because of the
nature of the disputes, the directors have not disclosed future
information on the basis that they believe that this would be
seriously prejudicial to the Group's position in defending the
cases brought against it.
24. Deferred tax
Deferred tax is calculated in full on temporary differences
under the liability method using a tax rate of 25% (2020: 19%).
Following the announcement made in the Chancellor's Spring
Budget regarding an increase to the UK corporate tax rate from 19%
to 25% from 1 April 2023, the Finance Bill 2021 was subsequently
enacted on 24 May 2021. As IFRS requires deferred tax to be
measured at tax rates that have been subsequently enacted at the
reporting date, the Group's deferred tax balances have been
re-measured accordingly and the impact has been reflected within
the consolidated financial statements.
The movement on the deferred tax account is as shown below:
Group Company Group Company
2021 2021 2020 2020
GBP GBP GBP GBP
At 1 January 304,853 502,711 422,144 1,773
Recognised in profit or loss
Tax expense 789 157,559 (117,291) 500,938
-------- -------- ---------- --------
305,642 660,270 304,853 502,711
Arising on business combination 546,020 - - -
-------- -------- ---------- --------
At 31 December 851,662 660,270 304,853 502,711
-------- -------- ---------- --------
25. Business combinations during the period
On 28 May 2021, RBG Holdings plc acquired Memery Crystal Limited
(subsequently renamed RBG Legal Services Limited). Memery Crystal
is a specialist international law firm that offers legal services
in a range of areas such as corporate (including a market-leading
corporate finance offering), real estate, commercial, IP &
technology (CIPT), banking & finance, tax & wealth
structuring, employment and dispute resolution..
The acquisition was made in line with the business strategy to
acquire complementary, high gross margin, professional services
businesses and Memery Crystal is an established business in the
Group's target market.
Details of the fair value of identifiable assets and liabilities
acquired, purchase consideration and goodwill are as follows:
Book value Adjustment Fair value
GBP GBP GBP
Property, plant and
equipment 2,509,589 - 2,509,589
Right-of-use assets - 11,798,710 11,798,710
Trade receivables 4,327,167 - 4,327,167
Other receivables 4,440,189 (113,377) 4,326,812
Brand value - 1,948,878 1,948,878
Client Contracts - 338,794 338,794
Trade and other
payables (5,328,635) 2,818,396 (2,510,239)
Lease liabilities - (11,685,333) (11,685,333)
Deferred tax liability - (546,020) (546,020)
Net assets 5,948,310 4,560,048 10,508,358
----------------------- ------------------------ ------------------------
The fair value of the trade receivables acquired as part of the
business combination amounted to GBP4,327,167, with a gross
contractual amount of GBP5,328,226. As of the acquisition date, the
Group's best estimate of the contractual cash flow not expected to
be collected amounted to GBP1,001,059.
Fair value of consideration paid
GBP
Cash 12,000,000
Shares 11,686,956
Deferred cash consideration 5,648,310
----------------------
29,335,266
----------------------
Goodwill (Note 14) 18,826,908
Acquisition costs of GBP863,435 arose as a result of the
transaction. These have been recognised as part of other expenses
in the consolidated statement of comprehensive income.
Since the acquisition date, Memery Crystal has contributed
GBP15,188,416 to group revenues and GBP2,565,812 to group
profit.
26. Share capital
Authorised
2021 2021 2020 2020
Number GBP Number GBP
Ordinary shares of 0.2p each 95,331,236 190,662 85,592,106 171,184
Allotted, issued and fully paid
2021 2021 2020 2020
Number GBP Number GBP
Ordinary shares of 0.2p each
At 1 January 85,592,106 171,184 85,592,106 171,184
Other issues for cash during
the year 9,739,130 19,478 - -
At 31 December 95,331,236 190,662 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.
27. Reserves
Financial instruments issued by the Group are classified as
equity only to the extent that they do not meet the definition of a
financial liability or financial asset.
The following describes the nature and purpose of each reserve
within equity:
Reserve Description and purpose
Share capital Amount subscribed for share capital
at nominal value.
Share premium Amount subscribed for share capital
in excess of nominal value less
transaction costs.
Retained earnings All other net gains and losses
and transactions with owners (e.g.
dividends) not recognised elsewhere.
28. 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 Supply of Purchase
services of services services of services
2021 2021 2020 2020
GBP GBP GBP GBP
Velocity Venture Capital
Ltd* - 387,245 14,250 209,786
Motorsport Circuit Management 7,750 - - -
Ltd*
N Foulston - - 6,500 -
Winros** - 848,999 - 1,128,051
Note: *A company controlled by Nicola Foulston, ** A partnership
in which Ian Rosenblatt is a partner.
In addition, during the year, GBP26,842 of contingent work was
performed by the Group in relation to a Conditional Fee Agreement
with Winros (2020: GBP80,180). At 31 December 2021, there were no
amounts due to any related party (2020: GBPnil). At 31 December
2021, GBP7,750 was due from Motorsport Circuit Management Ltd
(2020: 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
2021 for related party transactions.
There are various other companies controlled by Nicola Foulston,
which use the Group's office as their registered address, with
which there have been no transactions during the year.
Ian Rosenblatt is not a director of any company in the Group,
nor a member of key management personnel, nor does he have a
significant influence over the Group. He is a substantial
shareholder, as disclosed in the Directors' Report and under the
AIM Rules for Companies is classified as a related party.
Total remuneration of Key Management Personnel during the year
was GBP1,566,918 (2020: GBP835,565). Further details of directors'
remuneration are given in the Directors' Report .
During 2021, the Group purchased goods and services from Adnitor
Limited totalling GBP399,055. At 31 December 2021 there were no
amounts owed to Adnitor Limited.
Company
In addition to the amounts disclosed in the Directors' Report,
the Company has entered into the following transactions with
related parties.
During 2021, the Company reimbursed fees and expenses paid on
its behalf by RBGLS totalling GBP935,335 (2020: GBP1,026,323, RBL
Law). At 31 December 2021, the company was owed GBP42,970,594 by
RBGLS (2020: nil) and was owed GBP2,001,060 by RBL Law (2020:
GBP22,340,825).
During 2021, Convex Capital Limited reimbursed fees and expenses
paid on its behalf by the Company totalling GBP9,089 (2020: nil).
At 31 December 2021, the company owed GBP1,398,437 to Convex
Capital Limited (2020: GBP1,802,474 owed by Convex Capital
Limited).
During 2021, LionFish Litigation Finance Limited reimbursed fees
and expenses paid on its behalf by the Company totalling GBP376,133
(2020: GBP143,602). At 31 December 2021, the company was owed
GBP636,581 by LionFish Litigation Finance Limited (2020: GBP662,213
owed to LionFish Litigation Finance Limited).
29. Notes supporting statement of cash flows
Significant non-cash transactions from investing activities are
as follows:
2021 2020
GBP GBP
Equity consideration for business combination 11,686,956 (2,640,000)
Non-cash transactions from financing activities are shown in the
reconciliation of liabilities from financing transactions
below:
Non-current Current Total
loans and loans and
borrowings borrowings
GBP GBP GBP
At 1 January 2021 10,000,000 - 10,000,000
Cash flows (net) 7,000,000 2,000,000 9,000,000
Non-cash flows
Interest accruing in year - 129,592 129,592
------------ ------------ -----------
At 31 December 2021 17,000,000 2,129,592 19,129,592
------------ ------------ -----------
At 1 January 2020 - - -
Cash flows (net) 10,000,000 - 10,000,000
At 31 December 2020 10,000,000 - 10,000,000
------------ ------------ -----------
30. Restatement of prior year
The 2020 comparatives have been restated in these financial
statements to include the effect of the adjustments as stated in
Note 2. The following table presents the impact of the
restatements.
31 December Adjustment 1 January
2020 (i) 2021
As originally Restated
presented
GBP GBP GBP
Non-current assets
Litigation assets 6,294,754 274,356 6,569,110
-------------- ----------- ------------
Current liabilities
Current tax liabilities (657,437) 57,122 (600,315)
-------------- ----------- ------------
Non-current liabilities
Trade and other payables (1,015,000) (575,000) (1,590,000)
-------------- ----------- ------------
Equity
Retained earnings 9,290,076 (219,170) 9,070,906
Non-controlling interest 226,707 (24,352) 202,355
-------------- ----------- ------------
(i) Reclassification of contracts for insured litigation assets
which were previously treated as sales, which do not meet the
derecognition requirements of IFRS 9 para 3.2.2. and a restatement
of the fair value of the uninsured contracts to correct an error in
the previous valuation. The Consolidated statement of financial
position adjustments increased litigation assets by GBP274,356,
increased trade and other payables by GBP575,000, reduced current
tax liabilities by GBP57,122 and reduced equity by GBP243,522. The
Consolidated statement of comprehensive income adjustments
decreased gains on litigation assets by GBP300,644 and reduced tax
expenses by GBP57,122.
31. Contingent liabilities
The Company has been informed that HMRC has started an inquiry
into the valuation of employee related securities issued by the
Company in April 2018 prior to the IPO. HMRC have queried the issue
of shares between 4th April 2018 and 16th April 2018 at a par
value. A valuation of the shares at above the issue price could
result in a liability to the recipient of the issued shares which
would be required to be collected by the Company and paid to HMRC.
Any liability would be re-imbursed in full by the recipient. The
directors' belief is that the investigation is without merit.
32. Events after reporting date
On 15 February 2022, the Group announced that LionFish had
agreed a GBP20 million litigation investment arrangement (the
"Arrangement") with a large alternative investment firm (the
"Firm"). Under the terms of the Arrangement, the Firm will
participate in all of LionFish's litigation investments, investing
up to 75% in each of LionFish's investments across the portfolio
over a two-year period. LionFish will be entitled to receive a
significant share of the returns of the Arrangement after a high
single-digit return hurdle has been met, therefore providing
significant additional potential returns to LionFish beyond its own
investment. It means that the Group will now look to generate
income from LionFish's settlements and new investments, and we will
not look to sell participation rights.
[1] Figures for 2021 include seven months of contribution from
Memery Crystal following the completion of the acquisition at the
end of May 2021.
[2] Including GBP0.9 million costs of acquiring Memery
Crystal
[3] These gains are from where LionFish or RBGLS 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
[4] Revenue per fee earner data taken from The Lawyer UK 200:
Top 100 latest data. UK firms are ranked 1-100 by firm-wide revenue
(year end 2020/21)
[5] Including GBP0.9 million costs of acquiring Memery
Crystal
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END
FR BKDBBFBKKBQK
(END) Dow Jones Newswires
April 01, 2022 04:33 ET (08:33 GMT)
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