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

This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact rns@lseg.com or visit www.rns.com.

RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our Privacy Policy.

END

FR BKDBBFBKKBQK

(END) Dow Jones Newswires

April 01, 2022 04:33 ET (08:33 GMT)

Rbg (LSE:RBGP)
Gráfica de Acción Histórica
De May 2022 a Jun 2022 Haga Click aquí para más Gráficas Rbg.
Rbg (LSE:RBGP)
Gráfica de Acción Histórica
De Jun 2021 a Jun 2022 Haga Click aquí para más Gráficas Rbg.