TIDMRBGP
RNS Number : 9665V
RBG Holdings PLC
20 April 2021
20 April 2021
RBG Holdings plc
("RBG", the "Group", or the "Company")
Audited Results for the year ended 31 December 2020
Solid performance as Group benefits from diversified revenue
streams
RBG Holdings plc (AIM: RBGP), the professional services group,
is pleased to announce its audited results for the year ended 31
December 2020.
Financial Highlights:
-- Group revenue and gains on litigation assets up 8% to GBP25.6 million (2019: GBP23.7 million)
o Professional Services revenue up 12.6% to GBP22.4 million
(2019: GBP19.9 million)
o Gains on litigation assets of GBP3.1 million (2019: GBP3.8
million)
-- EBITDA of GBP10.2 million (2019: GBP9.4 million)
-- Adjusted EBITDA[1] of GBP7.5 million
-- Profit before tax of GBP7.7 million[2] (2019: GBP7.6 million)
-- Profit after tax of GBP6.7 million (2019: GBP6.2 million)
-- Paid dividend of 3p per share in respect of the 2020 financial year on 26 February 2021
-- Balance sheet remains robust with net cash of GBP3.5 million
as at 31 December 2020 (31 December 2019: GBP1.9 million)
Operational Highlights:
Rosenblatt Limited ("RBL") - Strong focus on maintaining margins
and cash collection
-- Revenue of GBP20.9 million, up 15% (2019 GBP18.1 million) -
most successful year ever in terms of professional services
revenue
-- RBL took on more contingent work in 2020 with associated
unrecognised time worked of GBP2.1 million (2019: GBP1.9
million)
-- Average revenue per fee earner: GBP425,800 (2019: GBP393,000)
placing RBL in the top 10 in the Legal 100; three partners added
during 2020 taking total fee earners to 49 (2019: 46)
-- Utilisation / Realisation: 89% / 106% (2019: 77% / 96%) -
well ahead of 75% & 85% target respectively
-- Dispute resolution division performed well with corporate
division revenue double that of 2019
-- Strong cash collection - Total Lockup[3] was 99 days (2019:
122 days) of which debtor days were 47 days (2019: 45)
-- Five contingent cases via alternative billing arrangements
are being progressed. Some larger investments provide a potential
return that is not provided in market forecasts
LionFish Litigation Finance (UK) Limited ("LionFish") - Leverage
assets to provide significant one-off returns
-- In May 2020, LionFish launched as a provider of finance to
the third-party litigation market (not RBL cases) with an
experienced Managing Director, Tets Ishikawa
-- LionFish has received 240 enquiries for finance, and seven
cases have been invested in as at 31 December 2020
-- Total cash deployed of GBP1.8 million across seven cases (as
at 31 December 2020). Total capital commitment of GBP4.9
million
Convex Capital Limited ("Convex Capital") - Strong comeback
after deal completion limited by Covid
-- Convex Capital pipeline was significantly impacted by Covid
with deals delayed or cancelled. Only completed two deals in 2020,
generating revenues of GBP1.6 million (2019: GBP1.9 million)
-- Management pivoted sector focus and rebuilt pipeline over the
second half of 2020 to put Convex Capital back in a position to
deliver in 2021
-- Since 1 January 2021, Convex has completed seven deals
generating revenue of GBP4.5 million. Pipeline of 33 deals with six
currently at various stages of completion
Post-Period Highlight:
-- Acquisition of Memery Crystal (conditional on completion)
which is in line with the Group's M&A strategy, which aims to
focus on high-margin professional services companies and to take
advantage of consolidation opportunities in the UK legal sector
-- Memery Crystal is a specialist international law firm, based
in London, with 146 employees, including 29 partners, and an
additional 66 fee earners as at date of exchange
-- Memery Crystal's focus on transactions makes it a
complementary fit with RBL, which derives most of its revenue from
contentious law
-- Both businesses will retain their own brand identities and
separate offices, and together will form the Group's Legal Services
Division
-- The total consideration for the acquisition is GBP30 million
(comprising GBP18.8 million in cash and GBP11.2 million in RBG
shares). Further details of the transaction are contained within a
separate stock exchange announcement released earlier this
morning
-- The Board expects the transaction to be immediately, and
materially, earnings and value-enhancing for the Group
-- In connection with the acquisition, the Group has extended
its revolving credit facility to GBP15 million and taken out
acquisition finance totalling GBP10 million (key terms of which can
be found in this morning's announcement)
-- For year ending 30 April 2020, Memery Crystal reported
revenue of GBP23.2 million, profit[4] of GBP8.0 million, and had
GBP7.3 million of net assets
Nicola Foulston, CEO, RBG Holdings plc, commented: "2020 was a
year when the Group demonstrated the resilience of its evolving
business model, and how our diversified revenue streams can deliver
robust and sustainable financial results, despite the challenges of
the pandemic. I am delighted with how the business has adapted,
shown its entrepreneurial spirit, and progressed in difficult
times.
"Every year since we came to the market, we have delivered a
solid financial performance while laying the groundwork for future
growth. Our law firm, RBL, had its most successful year ever in
terms of revenue from its core legal services business and
continues to strengthen its offering. The business performed across
all practice areas, particularly those areas focused on contentious
law such as dispute resolution, and our corporate division has also
been busy. This year, RBL will continue to drive its litigation
business, and we have identified new growth areas across the whole
business.
"Our third-party litigation finance business, LionFish hit the
ground running after its launch in May 2020. It already has a
portfolio of seven deals with the first return expected in the
first half of the current financial year. During a turbulent year,
as a result of Covid, the team at Convex Capital led by Mike Driver
worked hard to develop a new, stronger pipeline of M&A
transactions. The fruits of all that effort has already shown in
early 2021, with seven deals already completed, and more to
come.
"The acquisition of Memery Crystal announced today is an
excellent addition to the Group both culturally and strategically.
Like RBL, Memery Crystal performed strongly in 2020. The Firm is a
compelling operational fit with RBL, providing a greater corporate,
commercial, and real estate offering than we have currently.
Together, the businesses will form our Legal Services Division
providing clients with a full-service offering across different
sectors and legal disciplines. We see opportunities to grow both
businesses.
"Across the Group, we have experience in supporting clients in
times of upheaval which means we can react to the opportunities and
challenges the current crisis will inevitably offer. Our services
will be in demand. We have a solid balance sheet, and we are
optimistic that the Group will continue its positive progress over
the coming year."
Investor Presentation
RBG will provide a live investor presentation about the Group's
results for the 12 months ended 31 December 2020 via the Investor
Meet Company (IMC) platform today at 10.30am. Hosted by CEO Nicola
Foulston, the online presentation is open to all existing and
potential shareholders. Investors can sign up to IMC for free and
add RBG Holdings plc via
https://www.investormeetcompany.com/rbg-holdings-plc/register-investor
Investors who have already registered and added to meet the
Company, will be automatically invited. Questions can be submitted
at any time during the live presentation.
Enquiries:
RBG Holdings plc Via SEC Newgate
Nicola Foulston, CEO
N+1 Singer (Nomad and Broker) Tel: +44 (0)20 7496 3000
Shaun Dobson / Alex Bond (Corporate
Finance)
Tom Salvesen (Corporate Broking)
SEC Newgate (for media enquiries) Tel: +44 (0)7540 106366;
Robin Tozer/Tom Carnegie rbg@secnewgate.co.uk
About RBG Holdings plc
RBG Holdings plc is a professional services group, which
includes one of the UK's pioneering law firms, Rosenblatt Limited
("RBL"), which is a leader in dispute resolution.
RBL provides a range of legal services to its diversified client
base, which includes companies, banks, entrepreneurs and
individuals. Complementing this is the RBL's increasingly
international footprint, advising on complex cross-jurisdictional
matters. RBL's practice areas include banking & finance,
competition & regulatory, corporate, dispute resolution,
employment, financial crime, financial services, insolvency &
financial restructuring, IP/technology/media, real estate, serious
& general crime, tax resolution and white-collar crime.
The Group also provides litigation finance in selected cases
through a separate arm, LionFish Litigation Finance (UK) Limited
("LionFish"). LionFish finances litigation matters being run by
other solicitors in return for a significant return on the outcome
of those cases. As such, the Group has two types of litigation
assets - RBL's own client matters, and litigation matters run by
third-party solicitors. LionFish is positioned to be a unique,
alternative provider to the traditional litigation funders.
The Group also owns Convex Capital Limited ("Convex Capital"), a
specialist sell-side corporate finance boutique based in
Manchester. Convex Capital is entirely focussed on helping
companies, particularly owner-managed and entrepreneurial
businesses, realise their value through sales to large corporates.
Convex Capital identifies and proactively targets firms that it
believes represent attractive acquisition opportunities.
Chairman's Statement
Overview
On behalf of the Board, I am pleased to announce our 2020 annual
results. That the Board can report such a strong financial
performance is a tribute to everyone in the Group who has responded
superbly to the challenge presented by COVID-19. The Group has been
able to support all our clients remotely, maintaining the high
client service standards for which we are known. Since our IPO,
operational management has been strengthened in every subsidiary,
and we are benefitting from our strategy to diversify the revenue
streams of the business.
Companies and individuals need the specialist advice that both
Rosenblatt Limited ("RBL") and Convex Capital Limited ("Convex
Capital") provide. Difficult times like these mean that people need
help to handle complex situations such as business restructurings
as well as entrepreneurs who want to participate in M&A. We
have won new client instructions across the Group which reflects
our expertise and the high demand for our complementary
services.
Our law firm, RBL, had its most successful year ever in terms of
revenue, EBITDA, and gross margin, the latter exceeding
management's target of 35 per cent. Its flexible business model
meant we were in a strong position when the pandemic struck so RBL
has continued to deliver high margins and revenue per lawyer, a
core KPI, remaining significantly ahead of many of its peers.
After a tough 2020, where deal completions were impacted by the
onset of COVID-19, the Convex Capital management team built a
strong pipeline of deals across a variety of sectors which have
shown resilience during the crisis. This is now being converted,
and we have a solid platform from which to drive further
growth.
Furthermore, the Group now has two types of litigation assets -
RBL's own client matters, and litigation matters run by third-party
solicitors. This is through our separately branded business for
third-party solicitors, LionFish Litigation Finance (UK) Limited
("LionFish") launched in May 2020. Headed by an experienced MD,
Tets Ishikawa, the business uses all of the expertise of RBL to
assess appropriate opportunities and has hit the ground running
with a growing portfolio of investments.
Looking ahead, the Board believes the Group is in a strong
position with a solid balance sheet and a clear strategy to deliver
continued growth.
Strategy
The strategy of the Group is delivering a diversified revenue
and profit stream where no one part of the Group dominates, and we
leverage the expertise across the Group to deliver incremental
returns. We are using the expertise within the Group to maximise
the potential returns by selectively investing in contingent asset
classes such as litigation. We can do this by RBL working
contingently on clients' cases, or by LionFish providing litigation
funding to third party cases. Furthermore, we have begun to use
acquisitions to diversify the business away from a reliance on
legal revenues to create a broad, professional services group.
One of the key group principles is driving profit and our law
firm RBL has achieved this by maintaining consistently high
margins. The management has done well in delivering revenue of
almost GBP426,000 per fee earner and a 52% gross margin. This puts
RBL in the top 10 of the Legal 100 for revenue per fee earner. In
addition, we have added new practice areas including competition
& regulatory, financial crime, serious & general crime, and
white-collar crime.
Our strong profit driven business model has enabled us to
increase the amount of work we do for clients on a partly
contingent basis in exchange for receiving a pre-agreed proportion
of any damages awarded. This approach means we can increase the
margin with a benefit to the client who would otherwise pay higher
amounts to a third-party funder. The business has a strong
litigation track record. RBL has a long-standing track record in
picking the right cases, with an 86% success rate over the last 10
years.
In line with our stated strategy, we have created a new
cash-generation opportunity, with litigation finance sales. By
selectively selling a percentage of our participation rights in the
contingent cases that we invest in through Damages Based
Agreements, the Group raises working capital. The investment and
divestment decisions are driven through a stringent set of
criteria, marrying both our commercial expertise with our legal
expertise to assess the risk profile of each case. We have adopted
a conservative approach to estimates as part of our fair valuing of
litigation assets: while accounting standards require the
recognition of these investments at fair value, we have assessed
the fair value to be close to cash disbursed less cash received on
disposals.
Finally, the acquisition of Convex Capital, a specialist
sell-side corporate finance boutique in September 2019 further
diversified the business away from a reliance on legal revenues.
Convex Capital is a high-margin, entrepreneurial, business that can
also create cross-referral opportunities for other parts of the
Group. We expect to see an increase in M&A activity in 2021
driven by the economic conditions, with Convex Capital well placed
to benefit.
M&A
In line with our strategy, we will continue to assess selective
M&A to build and diversify the business. We aim to grow our
service offering to clients and diversify our revenue. Our ambition
is to create a broad, high-quality, high margin professional
services group. We focus on high-margin, specialist companies which
can also create opportunities for cross-referrals. However, we will
only do deals at the right price and with the right deal
structure.
Each of the acquisitions we have made so far has met these
criteria, First, Convex Capital in September 2019, and, in April
2021, Memery Crystal. Memery Crystal is a very exciting acquisition
which will be immediately earnings enhancing, and we believe has
the potential to generate significant value for shareholders over
the long-term. I would like to welcome all the partners and
employees of Memery Crystal to RBG, and we are excited about the
opportunities the combined Group will create.
The Group will remain disciplined in its approach to M&A and
continue to review potential opportunities according to its
selective criteria.
Dividend
The Group's balance sheet is strong, and the Board is committed
to its long-term progressive dividend policy set out in its
Admission document. Under that policy, the Board normally expects
to pay up to 60 per cent of distributable retained earnings from
the core business in any financial year by way of dividend, subject
to cash requirements.
Given the uncertainty in 2020, the Board made the prudent
decision to make one payment for the 2020 financial year of 3 pence
per share. Based on current outlook, we expect to pay up to 60 per
cent of retained earnings in the 2021 financial year by way of
dividend. Over time, we expect to have opportunities to pay special
dividends because of returns from our litigation assets.
People
The strength of the Group is in our ability to retain and
attract high-quality people. This is evidenced by our performance.
In this most difficult of times, I want to thank everyone for their
hard work, and their resilience.
Keith Hamill
Chairman
20 April 2021
Chief Executive's Statement
Overview
Despite a challenging backdrop, we are pleased to have delivered
a strong financial performance, with the Group developing in-line
with our stated strategy. The business is evolving into a broader
high-quality professional services group, with our pioneering law
firm, RBL at its heart, a growing litigation finance division, and
a successful M&A business.
Group revenue and gains on litigation assets was up 8% to
GBP25.6 million (2019: GBP23.7 million), primarily driven by a
record year at our law firm, RBL. Gains on litigation assets were
GBP3.1 million (2019: GBP3.8 million), which were primarily
generated by LionFish, our new third-party litigation finance
business, launched in May 2020.
EBITDA grew to GBP10.2 million (2019: GBP9.4 million), with
EBITDA margins of 40% (2019: 39%). This includes GBP2.6m of the
write back of the deferred Convex Capital earn out. After adjusting
for this, the Group made EBITDA of GBP7.5 million, representing an
EBITDA margin of 29%.
The Group has a strong balance sheet, with net cash of GBP3.5
million as at 31 December 2020. Cash collections remain as
forecast. The Company also has a GBP10 million revolving credit
facility with HSBC. Our balance sheet will support our growth
plans, including acquisitions, continued investment in litigation
finance opportunities, and the dividend. W e expect to be able to
pay out up to 60 per cent of retained earnings in the financial
year by way of dividend.
RBL
COVID-19 created a challenging trading environment. In 2020,
however, RBL achieved the best performance in its 32-year history
on its core business of selling legal services. This performance
was due to strong revenues from contentious law, and high-value
corporate transactions. RBL took on more contingent work in 2020,
with associated unrecognised time worked on a contingent basis of
GBP2.1 million (2019: GBP1.9 million).
Our focus, as always, is on profit and cash, not only billing
revenue, and we seek to control back-end cost to support profit
generation. The business has a monthly "heartbeat" looking at
revenue, margin, WIP and debtors. Gross margins of 52% drive strong
profits and there is a back-end focus on collection and
realisation. Total lockup[5] was 99 days (2019: 122 days) of which
debtor days were 47 days (2019:45). The industry average for lockup
is 136 days.
Our investment in IT and a flexible business model meant the
business was well placed to handle the challenge of remote working.
We continued to win new instructions, benefitting from our
diversified client base, reputation for handling complex cases, and
our strong relationships with entrepreneurs and business
founders.
In times of difficulty, it is often the case that these
entrepreneurs become more proactive requiring more innovative
support. We have adapted our strategy to make sure RBL is well
placed to meet the needs of customers considering the demands
created by the pandemic. We have added competition &
regulatory, financial crime, serious & general crime, and
white-collar crime practice areas.
In January 2021, we appointed a new Managing Director, Barry
Roche, to focus on maintaining commercial excellence, and growth
through business development. Barry will enhance RBL's performance
review culture. Departments and individuals are coached and
provided with detailed analysis of key KPI's including debtors,
WIP, utilisation and recovery.
Success is reflected in the KPIs. Average revenue per fee earner
was up to GBP425,800 (2019: GBP393,000). At IPO we targeted
utilisation of 75% of 1,500 billable hours, with recovery of 85% on
fees billed. Actual resource allocation was 89% utilisation on
1,500 hours, with 106% recovery. Industry average is 70% on 1,200
hours.
In 2021, we will continue to drive the litigation business, and
have identified additional areas of growth and specific strategies
to support these. These areas include employment, competition law
and insolvency & restructuring. Our business development
strategy will focus on our digital profile and networking. We have
created a business development training program, improved our
client engagement process so we can better understand and exceeding
our clients' expectations, and ensured all Partners are developing
their capabilities.
We are building a strong dynamic team working on cross-selling
and referrals. RBL has developed a close working alliance with
LionFish where the RBL dispute resolution team assess all potential
investments. The RBL corporate team works closely with Convex
Capital on its transactions.
We expect RBL to benefit from life post-Brexit and post-COVID as
business returns to normality.
Litigation Finance
The Group now has two types of litigation assets - RBL's own
client matters, and litigation matters run by third-party
solicitors funded by LionFish.
Our approach to litigation assets will always be conservative in
nature to limit exposure and risk. No more than 25% of our revenues
can be committed to contingent work in progress within RBL. A
maximum of 25% of the net assets of the Group can be invested in
external funding. A maximum of 50% of the external funding can be
invested in any one case over GBP0.5 million within RBL.
Our accounting approach will follow our same conservative
commercial approach. Some larger investments provide a potential
return that is not provided in our market forecasts and where
possible, within the requirements of IFRS 9 Accounting for
Financial Instruments to fair value these investments, we hold
these investments at a fair value based on recent transaction
prices. These fair values at the year end were close to being
equivalent to the cost of funds disbursed less disposal
proceeds.
RBL litigation assets
RBL invests time at cost and advances cash for disbursements and
court fees on its own client Damages Based Agreements when
commercially advantageous to do so. RBL's litigation assets offer
high potential returns. The current RBL litigation assets include
the three largest cases project named Neptune, Shango and
Mercury.
LionFish
In May 2020, we launched a separately branded business -
LionFish Litigation Finance (UK) Limited. LionFish invests cash in
third party litigation matters run by law firms other than RBL. An
experienced managing director, Tets Ishikawa was appointed, and the
business is now established.
Since launch to 31 December 2020, LionFish has received 240
enquiries for finance, and seven have been invested in. There has
been cash investment of GBP1.8 million across the seven cases
(total capital commitment of GBP4.9 million if all cases go to
trial). The first realisation is anticipated in HY 2021. Expected
average investment duration is around two years.
Part of our approach is to sell a percentage of our
participation rights in the cases that we invest in. This year, we
realised gains from litigation finance sales of GBP3.1 million, the
majority coming from LionFish's investment in 7 cases.
Convex Capital
Acquired by the Group in September 2019, Convex Capital is a
specialist provider of sell-side only M&A advice to UK, US and
European entrepreneurs. It is focused on helping businesses to
maximise their value through sales to large corporates, private
equity, or family offices. Deal sizes range from GBP10 million to
GBP500 million with an average of GBP40m. On average, Convex
Capital's fees are over GBP750,000 which is significantly above the
industry norms. Fees are 100% contingent on success, so Convex
Capital is completely aligned with the client.
2020 was challenging, as deals proved hard to complete with the
lack of face-to-face meetings as well as COVID obscuring financial
performance. Many deals were postponed or delayed. Only two deals
were completed in 2020, with total fees of GBP1.6 million. The
Convex Capital team, led by CEO Mike Driver, has worked to pivot
its sector focus to successfully rebuild its transaction pipeline
over the last six months. The pipeline is more focused on areas
which are COVID-19 resilient. This strong pipeline is now being
converted. Since 1 January 2021, Convex Capital has already
completed seven deals generating revenue of GBP4.5 million. Convex
Capital has a pipeline of 33 deals with six currently at various
stages of completion.
Furthermore, the Convex Capital senior management team agreed
for 2021 to exchange their fixed base salary arrangements for a
flexible commission structure directly linked to income from
completed deals. Under the terms of this scheme, Convex Capital
management will instruct N+1 Singer to use a minimum of 50% of
commission earned to acquire shares in RBG in the open market[6].
This new commission scheme replaces the deferred consideration
arrangements under the sale and purchase agreement with the Convex
Capital sellers, announced at the time of the acquisition in
September 2019. This deferred consideration was due to be payable
one year after completion of the purchase, based on certain
performance criteria, which were not met due to the pandemic.
Outlook
The new financial year will again be dominated by the wider
economic conditions brought about by the legacy of the COVID-19
pandemic. Across the Group, we have demonstrated our experience in
supporting clients in times of upheaval which means we can react to
the opportunities and challenges the current crisis will inevitably
offer. The business is trading as expected in the first quarter
with delivery from Convex Capital accelerated.
In RBL, we are focused on capturing growth opportunities;
contentious law thrives in difficult times. The business will
benefit from life post-Brexit and post-COVID as businesses return
to normality. Our litigation finance business, LionFish is now
established, and we expect the number of cases it invests in to
grow, with the first return expected in the first half. With a
strong pipeline of deals, and increased interest in M&A in
2021, Convex Capital is expected to perform well.
We also expect Memery Crystal to make a significant contribution
to the Group. Our immediate focus is to successfully integrate
Memery Crystal, and we will provide updates on our progress. I am
very confident that RBL and Memery Crystal will enable us to
capture growth opportunities across the legal services
industry.
In 2021, our services will be in demand. We have a solid balance
sheet, and we are optimistic that the Group will continue its
positive progress over the coming year. I would like to thank all
our shareholders for their continued support.
Nicola Foulston
Chief Executive
20 April 2021
Chief Financial Officer's review
Financial review
During 2020, we have continued to build on our strong
track-record of profitable growth by increasing revenue and driving
our EBITDA margins, which are leading among those of the listed
legal sector. The Group is well positioned to deliver its growth
strategy through product diversification, high-quality recruitment,
and carefully selected acquisitions.
Key Performance Indicators (KPIs)
-- Revenue and gains on litigation assets: GBP25.6 million (2019: GBP23.7 million)
-- Revenue in legal and professional services up 12.6% to
GBP22.4 million (2019: GBP19.9 million)
-- Gains on litigation assets: GBP3.1 million (2019: GBP3.8 million)
-- EBITDA: GBP10.2 million, 40% of revenue and gains on
litigation assets (2019: GBP9.4 million, 40%)
-- Adjusted EBITDA: GBP7.5 million,29% of revenue and gains on
litigation assets (2019: GBP9.4 million, 40%)
-- Profit Before Tax: GBP7.7 million, 30% of revenue and gain on
litigation assets, includes GBP2.6 million write back of the
deferred earn out (2019: GBP7.6 million, 32%)
-- Total lock up: 99 days (2019: 122 days)
-- Revenue Per Fee Earner: GBP425,800 (2019: GBP393,000)
-- Utilisation / Realisation: 89% / 106% (2019: 77% / 96%)
-- Net Cash: GBP3.5million (2019: GBP1.9 million)
-- EPS: 7.54p (2019: 7.56p)
Revenue and gains on litigation assets
Reported Group revenue and gains on litigation assets for the
period is GBP25.6 million compared to GBP23.7 million, representing
an 8% increase.
Of this increase, GBP2.7 million came from legal services
revenue, whilst revenue from other professional services and gains
on litigation assets were marginally behind year on year. The
number of partners in our legal services business has remained
broadly constant at 20 with 49 fee earners and an annualised
revenue per fee earner of GBP426,000. Of the Litigation gains of
GBP3.1 million, GBP3.08 million came from LionFish.
Divisional highlights
RBL
-- Total revenue and gains on litigation assets of GBP20.9
million, (2019 GBP21.9 million of which GBP3.8 million
was gains on litigation assets)
-- Legal services revenues GBP20.8 million, up 15.3% on last
year (2019: GBP18.1 million)
-- Dispute resolution continued to perform well, in addition
to taking on more contingent work with associated unrecognised
time worked of GBP2.1 million
-- Corporate performed exceptionally well with revenue of
GBP5.1 million, 155% up on 2019
-- EBITDA 35% of revenue (2019: 31% of revenue)
-- Average revenue per fee earner GBP425,800 (2019: GBP393,000)
-- Total Lockup was 99 days (2019: 122) of which Debtor Days
were 47 days (2019: 45)
-- Recruited 3 new partners through the year
Litigation finance
LionFish
-- Successfully realised litigation asset sales in seven cases
with proceeds totalling GBP3.1 million
-- These gains are from where LionFish owns a percentage of
the participation rights in a settlement on a contingent
case, financed through a Damages Based Agreement (DBA),
and then sells on a proportion of its participation rights
-- Cash investment of GBP1.8 million in seven cases, with
a full commitment of GBP4.9 million if funded through to
court
RBL
-- Successfully realised litigation asset sales with proceeds
totalling GBP0.4 million (2019: GBP3.8 million)
Convex Capital
-- Completed two transactions in the year, generating revenue
of GBP1.6 million (2019 from acquisition: GBP1.9 million),
EBITDA loss GBP0.9 million (2019 from acquisition: GBP0.8
million profit)
-- Earn-out was not achieved which released GBP2.6 million
back to the income statement at Group level
Staff costs
Total staff costs in 2020 were GBP14.8 million (2019: GBP11.5
million), including GBP2.0 million for Convex Capital (2019 from
acquisition: GBP0.9 million) and GBP0.3 million for LionFish (2019:
GBPnil). In total, this represents 58% of revenue and gains on
litigation assets compared to 48% in 2019.
The year-end headcount totalled 92 (2019: 95), with average
headcount for the year of 90 (2019: 81).
Overhead costs
During 2020, the Group incurred overheads of GBP15.4 million
(before depreciation and amortisation) (2019: GBP14.3 million,
including only three months of Convex). Personnel costs were
GBP14.8 million (2019: GBP11.5 million), which included
contractors' costs of GBP3.2 million (2019: GBP2.1 million).
Other operating costs were GBP0.6 million (2019: GBP2.8
million), which includes operating costs at Convex of GBP0.4
million (2019 from acquisition: GBP0.2 million) and the deduction
of GBP2.6 million of the deferred consideration release. Other
costs including insurances of GBP0.7 million (2019: GBP0.5
million), rates GBP0.3 million (2019: GBP0.3 million), training and
recruitment GBP0.3 million (2019: GBP0.2 million) and books &
subscriptions of GBP0.2 million (2019: GBP0.2 million).
Operationally, there remains a significant focus on IT, and our
current and future infrastructure. We have invested sensibly over
recent years and further enhanced both our internal and client
facing experiences of IT usage. We have taken steps both before and
during the pandemic to continue to refine existing processes,
including moving to Microsoft Teams, investing in a new client
opening technology and streamlining service delivery.
Our response to COVID-19
As COVID-19 swept across the UK in mid-March 2020, we
prioritised the wellbeing of all staff across the Group. This
involved the immediate closure of all our offices and resultant
changes in working practices, to ensure continuity of service to
our clients as staff continued to support them and the business
remotely. I am extremely pleased with the calm response of our
staff and the team spirit shown across the Group in the face of
such difficult circumstances.
EBITDA
In assessing performance, the Group uses EBITDA as a KPI. EBITDA
for 2020 was GBP10.2 million (40% of revenue and gains on
litigation assets) (2019: GBP 9.4 million, 40%). This includes the
Convex deferred consideration write back of GBP2.6 million and
excluding this non-underlying item gives an Adjusted EBITDA of
GBP7.5 million (29% of revenue and gains on litigation assets)
(2019: GBP9.4 million, 40%). In 2020, the EBITDA performance has
been held back by the losses in Convex of GBP0.9 million.
Profit Before Tax
The profit before tax for 2020 was GBP7.7 million, representing
30% of revenue and gains on litigation assets (2019: GBP7.6
million, 32%). This includes the GBP2.6 million Convex deferred
consideration write back and excluding this gives profit before tax
for 2020 of GBP5.1 million, representing 20% of revenue and gains
on litigation assets.
Earnings Per Share (EPS)
The weighted average number of shares in 2020 was 85.6 million,
which gives a basic earnings per share (Basic EPS) for the year of
7.54p (2019: 7.56p).
Corporation tax
The Group's tax charge for the year is GBP1.02 million with an
effective tax rate of 13.3% (2019: GBP1.47 million, 19.1%) which
has been impacted by Convex deferred consideration write back which
is non-taxable income.
Balance sheet
2020 2019
GBPm GBPm
Goodwill, intangible and tangible assets 48.0 44.7
------ ------
Current assets 7.7 11.1
------ ------
Current liabilities (4.4) (5.0)
------ ------
51.3 50.8
------ ------
Net cash and cash equivalents 3.5 1.9
------ ------
Non-current liabilities (6.4) (6.3)
------ ------
Deferred consideration (1.1) (4.0)
------ ------
Net assets 47.3 42.4
------ ------
The Group's net assets as at 31 December 2020 increased by
GBP4.9 million, due to profitable trading in the year.
Goodwill, tangible and intangible assets
Included within tangible assets, GBP5.8 million relates to IFRS
16 right of use for the Group's leases. Within intangible assets
and goodwill is GBP33 million of intangible assets identified, on
prior year acquisitions, such as goodwill, customer relationships
and brand. The Board carries out an impairment review of goodwill
each year to ensure the carrying value is supportable. Also
included within intangible assets is GBP1 million one-off payment
made to Ian Rosenblatt during 2020 in respect of an extension and
broadening of the restrictive covenants put in place at the IPO to
an additional term through to 2023 As at 31 December 2020 the Board
concluded that the goodwill and intangible assets are not
impaired.
Non-current assets also includes GBP6.3 million in litigation
assets (2019: GBP2.2 million).
Working capital
Management of lock up has continued to be a key focus of the
Group over the period, as it measures the length of time it takes
to convert work done into cash. It is calculated as the combined
debtor and contract asset (WIP) days for the Group. This is a key
focus for Management and the Board, as it drives the cash
generation necessary to support the growth strategy of the Group.
Lock up days at 31 December 2020 were 99 compared to 122 the
previous year. Management are satisfied with the level of lock up
at the year-end, which remains significantly ahead of the industry
average for quoted legal firms.
Trade debtors at the end of the year were GBP3.4 million (2019:
GBP3.4 million). Contract assets at the year-end were GBP3.0
million, down from GBP3.8 million at the end of 2019.
Net cash
Net cash at the year-end was GBP3.5 million (2019: GBP1.9
million), with cash at bank of GBP13.5 million and a fully drawn
Revolving Credit Facility of GBP10 million. The cash movement
during the year included an additional GBP6.7 million generated
from operations, less GBP1.9 million paid in corporation tax,
GBP1.1 million outflow on investing activities, GBP0.8 million in
dividends and GBP1 million in operating lease payments.
Under Governmental COVID-19 measures, the Group deferred the
payment of GBP0.5 million of VAT until 2021. The net cash position
at year-end, together with the GBP10m Revolving Credit Facility,
positions the Group well to deliver its strategy into 2021 and also
support the business through the continuing uncertainty caused by
COVID-19.
Cash conversion
2020 2019
GBP'M GBP'M
Cash generated from
operating activities 6.7 1.5
------- -------
Interest (0.4) (0.2)
------- -------
Capital expenditure (1.2) (0.5)
------- -------
Free cash flow 5.1 0.8
------- -------
Profit after tax 6.7 6.2
------- -------
Cash conversion 76% 13%
------- -------
The cash conversion percentage measures the Group's conversion
of its underlying profit after tax into free cash flows. Cash
conversion of 76% for the year shows an increase from previous
periods and is a further focus of the business.
Capital expenditure
During the year, the Group continued to invest in its systems
and premises to ensure our professionals have a high-quality
working environment and consistent systems across the Group, to aid
integration and support our one-firm culture. The investment during
the year also enabled the ability to work remotely when required,
as a result of COVID-19. This investment enabled a smooth
transition of the business to remote working, enabling staff to
provide services in a seamless fashion. To this end, during 2020,
we invested GBP0.2 million in our existing IT systems and offices
(2019: GBP0.5 million).
Corporation tax- cash flow impact
Going forward, the Group will fall under the very large
quarterly payments regime for its Corporation Tax. This will have
the effect of advancing the Corporation Tax payments, such that the
full estimated amount is paid during the year rather than only 50%.
Management expects post tax cash conversion to average out at
circa75% going forward.
Summary
We are pleased with the continued profitability during the year.
The investment in the Group puts us in a strong position to grow
the business both organically through recruitment, and through
selective acquisition opportunities. However, it is important to
acknowledge the continued impact of COVID-19 on business life.
COVID-19 has and will be a significant challenge moving forward
that will continue to create great uncertainty.
Robert Parker
Chief Financial Officer
20 April 2021
Consolidated statement of comprehensive income
For the year ended 31 December 2020
Note 1 January 1 January
to to
31 December 31 December
2020 2019
GBP GBP
Revenue 5 22,449,332 19,941,240
Gains on litigation assets 5 3,122,727 3,800,000
Personnel costs 7 (14,780,204) (11,496,875)
Depreciation and amortisation expense (2,081,501) (1,576,180)
Other expenses (633,999) (2,808,567)
_______ _______
Profit from operations 6 8,076,355 7,859,618
EBITDA 10,157,856 9,435,798
Non-underlying items
Deferred consideration release (2,640,000) -
Adjusted EBITDA 7,517,856 9,435,798
---------------------------------------- ----- ------------- -------------
Finance expense 8 (394,534) (253,210)
Finance income 8 24,460 41,027
_______ _______
Profit before tax 7,706,281 7,647,435
Tax expense 9 (1,024,936) (1,470,837)
_______ _______
Profit and total comprehensive income 6,681,345 6,176,598
_______ _______
Total profit and comprehensive income
attributable to:
Owners of the parent 6,454,738 6,176,598
Non-controlling interest 226,607 -
_______ _______
6,681,345 6,176,598
_______ _______
Earnings per share attributable to the
ordinary equity holders of the parent 10
Profit
Basic (pence) 7.54 7.56
Diluted (pence) 7.54 7.50
_______ _______
The results for the year presented above are derived from
continuing operations.
There were no elements of other comprehensive income for the
financial year other than those included in the income
statement.
The attached notes form part of these financial statements.
Consolidated statement of financial position
As at 31 December 2020
Company registered number: 11189598 Note 31 December 31 December
2020 2019
Assets GBP GBP
Current assets
Trade and other receivables 19 7,696,925 11,088,812
Cash and cash equivalents 13,522,184 1,910,156
_______ _______
21,219,109 12,998,968
Non-current assets
Property, plant and equipment 12 475,229 638,382
Right-of-use assets 13 5,825,712 6,760,198
Intangible assets 14 35,378,065 35,137,871
Litigation assets 18 6,294,754 2,209,886
_______ _______
47,973,760 44,746,337
_______ _______
Total assets 69,192,869 57,745,305
_______ _______
Liabilities
Current liabilities
Trade and other payables 20 3,894,546 6,710,936
Leases 13 870,019 811,105
Current tax liabilities 20 657,437 1,395,489
Provisions 22 116,875 75,000
_______ _______
5,538,877 8,992,530
Non-current liabilities
Loans and borrowings 21 10,000,000 -
Deferred tax liability 23 304,853 422,144
Trade and other payables 20 1,015,000 -
Leases 13 5,081,043 5,920,697
_______ _______
16,400,896 6,342,841
_______ _______
Total liabilities 21,939,773 15,335,371
_______ _______
NET ASSETS 47,253,096 42,409,934
_______ _______
Issued capital and reserves attributable
to
owners of the parent
Share capital 24 171,184 171,184
Share premium reserve 25 37,565,129 37,565,129
Retained earnings 25 9,290,076 4,673,621
_______ _______
47,026,389 42,409,934
Non-controlling interest 226,707 -
_______ _______
TOTAL EQUITY 47,253,096 42,409,934
_______ _______
Consolidated statement of cash flows
For the year ended 31 December 2020
Note 2020 2019
GBP GBP
Cash flows from operating activities
Profit for the year before tax 7,706,281 7,647,435
Adjustments for:
Depreciation of property, plant and
equipment 12 335,634 232,728
Amortisation of right-of-use assets 13 986,061 891,794
Amortisation of intangible fixed assets 14 759,806 451,658
Finance income 8 (24,460) (41,027)
Finance expense 8 394,534 253,210
_______ _______
10,157,856 9,435,798
Decrease/(increase) in trade and other
receivables 3,391,887 (5,091,691)
(Decrease) in trade and other payables (2,816,390) (710,714)
(Increase) in litigation assets 18 (4,084,868) (2,209,886)
Increase in provisions 41,875 39,736
_______ _______
Cash generated from operations 6,690,360 1,463,243
Tax paid (1,880,277) (1,637,610)
_______ _______
Net cash flows from operating activities 4,810,083 (174,367)
_______ _______
Investing activities
Purchases of property, plant and equipment 12 (172,482) (534,155)
Purchase of other intangibles (1,000,000) -
Acquisition of subsidiary, net of cash - (6,008,389)
Interest received 24,460 41,027
_______ _______
Net cash used in investing activities (1,148,022) (6,501,517)
_______ _______
Financing activities
Issue of ordinary shares in subsidiaries 100 -
Dividends paid to holders of the parent 11 (823,283) (3,811,342)
Proceeds from loans and borrowings 21 21,000,000 1,637,608
Repayment of loans and borrowings 21 (11,000,000) (1,637,608)
Repayments of lease liabilities 13 (832,316) (699,875)
Interest paid on loans and borrowings (185,497) (27,564)
Interest paid on lease liabilities 13 (209,037) (225,646)
_______ _______
Net cash from financing activities 7,949,967 (4,764,427)
_______ _______
Net (decrease)/increase in cash and
cash equivalents 11,612,028 (11,440,311)
Cash and cash equivalents at beginning
of year 1,910,156 13,350,467
_______ _______
Cash and cash equivalents at end of
year 13,522,184 1,910,156
_______ _______
The attached notes form part of these financial statements.
Consolidated statement of changes in equity
For the year ended 31 December 2020
Total
attributable
to equity Non-
Share Share Retained holders controlling Total
of
Capital Premium Earnings parent Interest Equity
GBP GBP GBP GBP GBP GBP
Balance at 1 January
2020 171,184 37,565,129 4,673,621 42,409,934 - 42,409,934
Comprehensive income
for the year
Profit for the year - - 6,454,738 6,454,738 226,607 6,681,345
______ ______ ______ _____ ______ ______
Total comprehensive
Income
for the year - - 6,454,738 6,454,738 226,607 6,681,345
______ ______ ______ _____ _____ ______
Contributions by and
distributions to
owners
Dividends - - (823,283) (823,283) - (823,283)
Issue of share capital - - - - 100 100
Grant of put option
over
shares in subsidiary - - (1,015,000) (1,015,000) - (1,015,000)
______ ______ ______ _____ ______ ______
Total contributions
by and distributions
to owners - - (1,838,283) (1,838,283) 100 (1,838,183)
______ ______ ______ _____ ______ ______
Balance at 31 December
2020 171,184 37,565,129 9,290,076 47,026,389 226,707 47,253,096
______ ______ ______ ______ ______ ______
The attached notes form part of these financial statements.
Consolidated statement of changes in equity
For the year ended 31 December 2020 (continued)
Total
Attributable
to equity Non-
Share Share Retained holders controlling Total
of
Capital Premium Earnings parent Interest Equity
GBP GBP GBP GBP GBP GBP
Balance at 1 January 2019 160,184 32,516,129 2,308,365 34,984,678 - 34,984,678
Comprehensive profit for
the year
Profit for the year - - 6,176,598 6,176,598 - 6,176,598
______ ______ ______ ______ ______ ______
Total comprehensive profit
for the year
- - 6,176,598 6,176,598 - 6,176,598
______ ______ ______ ______ ______
Contributions by and
distributions to owners
Dividends - - (3,811,342) (3,811,342) - (3,811,342)
Issue of share capital 11,000 5,049,000 - 5,060,000 - 5,060,000
______ ______ ______ ______ ______ ______
Total contributions by
and distributions to owners 11,000 5,049,000 (3,811,342) 1,248,658 - 1,248,658
______ ______ ______ ______ ______ ______
Balance at 31 December
2019 171,184 37,565,129 4,673,621 42,409,934 - 42,409,934
______ ______ ______ ______ ______ ______
The attached notes form part of these financial statements.
Company statement of financial position
As at 31 December 2020
Company registered number: 11189598 Note 2020 2019
GBP GBP
Assets
Current assets
Trade and other receivables 19 24,900,931 26,492,958
Cash and cash equivalents 12,313,385 359,684
_______ _______
37,214,316 26,852,642
Non-current assets
Property, plant and equipment 12 5,847 10,427
Investments 16 15,814,321 15,813,422
_______ _______
15,820,168 15,823,849
_______ _______
Total assets 53,034,484 42,676,491
_______ _______
Liabilities
Current liabilities
Trade and other payables 20 2,035,431 4,326,969
_______ ______
2,035,431 4,326,969
Non-current liabilities
Loans and borrowings 21 10,000,000 -
Deferred tax liability 23 502,711 1,773
_______ _______
10,502,711 1,773
_______ _______
Total liabilities 12,538,142 4,328,742
_______ _______
NET ASSETS 40,496,342 38,347,749
_______ _______
Issued capital and reserves attributable
to owners of the parent
Share capital 24 171,184 171,184
Share premium reserve 25 37,565,129 37,565,129
Retained earnings 25 2,760,029 611,436
_______ _______
TOTAL EQUITY 40,496,342 38,347,749
_______ _______
Company statement of financial position
As at 31 December 2020 (continued)
The Company has taken advantage of the exemption contained in
S408 Companies Act 2006 and has not presented a separate income
statement for the Company. The Company recorded a profit after tax
of GBP2,971,876 for the year ended 31 December 2020 (2019:
GBP5,718,891).
The financial statements were approved and authorised for issue
by the Board of Directors on 19 April 2021 and were signed on its
behalf by:
Nicola Foulston
Director
The attached notes form part of these financial statements.
Company statement of cash flows
For the year ended 31 December 2020
Note 2020 2019
GBP GBP
Cash flows from operating activities
Profit for the year before tax 3,110,117 5,720,664
Adjustments for:
Depreciation of property, plant and
equipment 12 6,205 5,212
Finance income (4,754) (11,269)
Finance expense 174,079 25,945
_______ _______
3,285,647 5,740,552
(Increase) in trade and other receivables 1,954,724 (4,029,201)
(Decrease)/increase in trade and other
payables (2,291,537) (289,197)
_______ _______
Cash generated from operations 2,948,834 1,422,154
Tax paid - -
_______ _______
Net cash flows from operating activities 2,948,834 1,422,154
_______ _______
Investing activities
Purchases of property, plant and equipment 12 (1,625) (1,625)
Investment in subsidiary (900) -
Acquisition of subsidiary, net of cash - (6,313,322)
Interest received 4,754 11,269
_______ _______
Net cash used in investing activities 2,229 (6,303,678)
_______ _______
Financing activities
Issue of ordinary shares - -
Dividends paid to holders of the parent 11 (823,283) (3,811,342)
Proceeds from loans and borrowings 21,000,000 1,637,608
Repayment of loans and borrowings (11,000,000) (1,637,608)
Interest paid on loans and borrowings (174,079) (25,945)
_______ _______
Net cash from financing activities 9,002,638 (3,837,287)
_______ _______
Net increase/(decrease) in cash and
cash equivalents 11,953,701 (8,718,811)
Cash and cash equivalents at beginning
of year 359,684 9,078,495
_______ _______
Cash and cash equivalents at end of
year 12,313,385 359,684
_______ _______
.
Company statement of changes in equity
For the year ended 31 December 2020
Retained Total
Share Capital Share premium Earnings
GBP GBP GBP GBP
Balance at 1 January 2020 171,184 37,565,129 611,436 38,347,749
Comprehensive profit for
the year
Profit for the year - - 2,971,876 2,971,876
______ ______ ______ ______
Total comprehensive profit
for the year - - 2,971,876 2,971,876
______ ______ ______ ______
Contributions by and distributions
to owners
Dividends - - (823,283) ( 823,283)
Issue of share capital - - - -
______ ______ ______ ______
Total contributions by and
distributions to owners - - (823,283) ( 823,283)
______ ______ ______ ______
Balance at 31 December 2020 171,184 37,565,129 2,760,029 40,496,342
______ ______ ______ ______
Company statement of changes in equity
For the year ended 31 December 2020 (continued)
Retained Total
Share Capital Share premium Earnings
GBP GBP GBP GBP
Balance at 1 January 2019 160,184 32,516,129 (1,296,113) 31,380,200
Comprehensive profit for
the year
Profit for the year - - 5,718,891 5,718,891
______ ______ ______ ______
Total comprehensive profit
for the year - - 5,718,891 5,718,891
______ ______ ______ ______
Contributions by and distributions
to owners
Dividends - - (3,811,342) (3,811,342)
Issue of share capital 11,000 5,049,000 - 5,060,000
______ ______ ______ ______
Total contributions by and
distributions to owners 11,000 5,049,000 (3,811,342) 1,248,658
______ ______ ______ ______
Balance at 31 December 2019 171,184 37,565,129 611,436 38,347,749
______ ______ ______ ______
The attached notes form part of these financial statements.
Notes (forming part of the consolidated financial
statements)
1 Basis of preparation
RBG Holdings plc is a public limited company, incorporated on 6
February 2018 and domiciled in the United Kingdom.
The financial information set out in this release does not
constitute the Company's full statutory accounts for the year ended
31 December 2020 for the purposes of section 434(3) of the
Companies Act 2006, but it is derived from those accounts that have
been audited. Statutory accounts for 2019 have been delivered to
the registrar of companies, and those for 2020 will be delivered
after the forthcoming AGM. The auditors have reported on the
accounts for the period ended 31 December 2019 and the year end 31
December 2020: their reports were unqualified, and did not contain
statements under section 498(2) or (3) of the Companies Act
2006.
While the information included in this preliminary announcement
has been prepared in accordance with the recognition and
measurement principles of International Financial Reporting
Standards (IFRS) as adopted by the UK, this announcement does not
itself contain sufficient information to comply with IFRS. The
Company expects to publish full financial statements for the year
ended 31 December 2020 that comply with IFRS on 21 April 2021.
The accounting policies set out below are in accordance with
IFRS, as adopted by the UK, and International Financial Reporting
Interpretations Committee ('IFRIC') interpretations that were
applicable for the year ended 31 December 2020.
The financial statements have been prepared for year ended 31
December 2020, with a comparative year to 31 December 2019, and are
presented in Sterling, which is also the Group's functional
currency.
The principal accounting policies adopted in the preparation of
the consolidated financial statements are set out in Note 2. The
policies have been consistently applied to the period presented,
unless otherwise stated.
The preparation of financial statements in compliance with IFRS
requires the use of certain critical accounting estimates. It also
requires Group management to exercise judgment in applying the
Group's accounting policies. The areas where significant judgements
and estimates have been made in preparing the financial statements
and their effect are disclosed in Note 3.
Basis of measurement
The consolidated financial statements have been prepared on a
historical cost basis, except for the following items (refer to
individual accounting policies for details):
- Litigation assets - fair value through profit or loss
- Contingent consideration - fair value through profit or loss
Going concern
As described in the Strategic Report the Group expects to be
able to operate within the Group's financing facilities and in
accordance with the covenants set out in all available facility
agreements. Accordingly, the Directors have a reasonable
expectation that the Company and the Group have adequate resources
to continue in operational existence for the foreseeable future and
they have adopted the going concern basis of accounting in
preparing the annual Group financial statements.
Notes (continued)
1 Basis of preparation (continued)
Changes in accounting policies
a) New standards, interpretations and amendments effective from
1 January 2020
New standards that have been adopted in the annual financial
statements for the year ended 31 December 2020 but have not had a
significant effect on the Group are:
-- IAS 1 Presentation of Financial Statements and IAS 8
Accounting Policies, Changes in Accounting Estimates and Errors
(Amendment - Definition of Material)
-- IFRS 3 Business Combinations (Amendment - Definition of Business)
-- Conceptual Framework for Financial Reporting (Revised)
-- COVID-19 Related Rent Concessions (Amendment to IFRS16)
b) New standards, interpretations and amendments not yet effective
There are a number of standards, amendments to standards, and
interpretations which have been issued by the IASB that are
effective in future accounting periods that the Group has decided
not to adopt early. The following amendments are effective for the
period beginning 1 January 2021:
-- Interest Rate Benchmark Reform (Amendments to IFRS9, IAS 39, IFRS 7 and IFRS16)
The following amendments are effective for the period beginning
1 January 2022:
-- Onerous Contract - Cost of fulfilling a Contract (Amendments to IAS 37)
-- Property, plant and Equipment: Proceeds before Intended Use (Amendments to IAS 16)
-- Annual Improvements to IFRS Standards 2018-2020 (Amendments
to IFRS1, IFRS 9, IFRS 16 and IAS 41)
-- References to Conceptual Framework (Amendments to IFRS 3)
The Group is currently assessing the impact of these new
accounting standards and amendments and does not expect that they
will have a material impact on the Group.
Notes (continued)
2 Accounting policies
Revenue
Revenue comprises the fair value of consideration receivable in
respect of services provided during the period, inclusive of
recoverable expenses incurred but excluding value added tax.
Legal and Other Professional services revenues
Where fees are contractually able to be rendered by reference to
time charged at agreed rates, the revenue is recognised over time,
based on time worked charged at agreed rates, to the extent that it
is considered recoverable.
Where revenue is subject to contingent fee arrangements,
including where services are provided under Damages Based
Agreements (DBAs), the Group estimates the amount of variable
consideration to which it will be entitled and constrains the
revenue recognised to the amount for which it is considered highly
probable that there will be no significant reversal. Due to the
nature of the work being performed, this typically means that
contingent revenues are not recognised until such time as the
outcome of the matter being worked on is certain.
Bills raised are payable on delivery and until paid form part of
Trade receivables. The Group has taken advantage of the practical
exemption in IFRS 15 not to account for significant financing
components where the Group expects the time difference between
receiving consideration and the provision of the service to a
client will be one year or less. Where revenue has not been billed
at the balance sheet date, it is included as contract assets and
forms part of Trade and other receivables.
Basis of consolidation
Where the company has control over an investee, it is classified
as a subsidiary. The company controls an investee if all three of
the following elements are present: power over the investee,
exposure to variable returns from the investee, and the ability of
the investor to use its power to affect those variable returns.
Control is reassessed whenever facts and circumstances indicate
that there may be a change in any of these elements of control.
The consolidated financial statements present the results of the
company and its subsidiaries ("the Group") as if they formed a
single entity. Intercompany transactions and balances between group
companies are therefore eliminated in full.
The consolidated financial statements incorporate the results of
business combinations using the acquisition method. In the
statement of financial position, the acquiree's identifiable
assets, liabilities and contingent liabilities are initially
recognised at their fair values at the acquisition date. The
results of acquired operations are included in the consolidated
statement of comprehensive income from the date on which control is
obtained. They are deconsolidated from the date on which control
ceases.
Non-Controlling interests
The total comprehensive income of non-wholly owned subsidiaries
is attributed to owners of the parent and to the non-controlling
interests in proportion to their relative ownership interests.
Where the Company has agreed a put option over the shares of a
subsidiary held by a non-controlling interest, the liability for
the estimated exercise value of the put option is recognised at
fair value in the financial statements of the Company and is
recognised at present value in the financial statements of the
Group. Movements in the estimated liability after initial
recognition are recognised in the income statement.
Goodwill
Goodwill represents the excess of the cost of a business
combination over the Group's interest in the fair value of
identifiable assets, liabilities and contingent liabilities
acquired.
Notes (continued)
2 Accounting policies (continued)
Goodwill (continued)
Cost comprises the fair value of assets given, liabilities
assumed and equity instruments issued, plus the amount of any
non-controlling interests in the acquiree plus, if the business
combination is achieved in stages, the fair value of the existing
equity interest in the acquiree. Contingent consideration is
included in cost at its acquisition date fair value and, in the
case of contingent consideration classified as a financial
liability, remeasured subsequently through profit or loss. Direct
costs of acquisition are recognised immediately as an expense.
Goodwill is capitalised as an intangible asset with any
impairment in carrying value being charged to the consolidated
statement of comprehensive income. Where the fair value of
identifiable assets, liabilities and
contingent liabilities exceed the fair value of consideration
paid, the excess is credited in full to the consolidated statement
of comprehensive income on the acquisition date.
Impairment of non-financial assets (excluding inventories,
investment properties and deferred tax assets)
Impairment tests on goodwill and other intangible assets with
indefinite useful economic lives are undertaken annually at the
financial period end. Other non-financial assets are subject to
impairment tests whenever events or changes in circumstances
indicate that their carrying amount may not be recoverable. Where
the carrying value of an asset exceeds its recoverable amount (i.e.
the higher of value in use and fair value less costs to sell), the
asset is written down accordingly.
Where it is not possible to estimate the recoverable amount of
an individual asset, the impairment test is carried out on the
smallest group of assets to which it belongs for which there are
separately identifiable cash flows; its cash generating units
('CGUs'). Goodwill is allocated on initial recognition to each of
the Group's CGUs that are expected to benefit from a business
combination that gives rise to the goodwill.
Impairment charges are included in profit or loss, except to the
extent they reverse gains previously recognised in other
comprehensive income. An impairment loss recognised for goodwill is
not reversed.
Foreign currency
Transactions entered into by Group entities in a currency other
than the currency of the primary economic environment in which they
operate (their "functional currency") are recorded at the rates
ruling when the transactions occur. Foreign currency monetary
assets and liabilities are translated at the rates ruling at the
reporting date. Exchange differences arising on the retranslation
of unsettled monetary assets and liabilities are recognised
immediately in profit or loss.
Financial assets
The Group classifies its financial assets into one of the
categories discussed below, depending on the purpose for which the
asset was acquired. The Group's accounting policy for each category
is as follows:
Fair value through profit or loss
Litigation assets relate to the provision of funding to
litigation matters in return for a participation share in the
settlement of that case (Damages Based Award). Investments are
initially measured at the sum invested and are subsequently held at
fair value through the profit and loss.
Where the Group sells an interest in its entitlement to any
award under a Damages Based Award to a third party, the difference
between the disposal proceeds and the cost of the investment
disposed gives rise to a profit on disposal which is recognised
through the profit and loss when the sale is agreed. These sales
are non-recourse and, if the case is successful, the relevant % of
the settlement received is paid to the third party.
Notes (continued)
2 Accounting policies (continued)
Amortised cost
These assets arise principally from the provision of goods and
services to customers (eg trade receivables), but also incorporate
other types of financial assets where the objective is to hold
these assets in order to collect contractual cash flows and the
contractual cash flows are solely payments of principal and
interest. They are initially recognised at fair value plus
transaction costs that are directly attributable to their
acquisition or issue, and are subsequently carried at amortised
cost using the effective interest rate method, less provision for
impairment.
Impairment provisions for current and non-current trade
receivables are recognised based on the simplified approach within
IFRS 9 using a provision matrix in the determination of the
lifetime expected credit losses. During this process the
probability of the non-payment of the trade receivables is
assessed. This probability is then multiplied by the amount of the
expected loss arising from default to determine the lifetime
expected credit loss for the trade receivables. For trade
receivables, which are reported net, such provisions are recorded
in a separate provision account with the loss being recognised in
profit or loss. On confirmation that the trade receivable will not
be collectable, the gross carrying value of the asset is written
off against the associated provision.
From time to time, the Group elects to renegotiate the terms of
trade receivables due from customers with which it has previously
had a good trading history. Such renegotiations will lead to
changes in the timing of payments rather than changes to the
amounts owed and, in consequence, the new expected cash flows are
discounted at the original effective interest rate and any
resulting difference to the carrying value is recognised in the
consolidated statement of comprehensive income (operating
profit).
Impairment provisions for receivables from related parties and
loans to related parties, including those from subsidiary
companies, are recognised based on a forward looking expected
credit loss model. The methodology used to determine the amount of
the provision is based on whether there has been a significant
increase in credit risk since initial recognition of the financial
asset. This annual assessment considers forward-looking information
on the general economic and specific market conditions together
with a review of the operating performance and cash flow generation
of the entity relative to that at initial recognition. For those
where the credit risk has not increased significantly since initial
recognition of the financial asset, twelve month expected credit
losses along with gross interest income are recognised. For those
for which credit risk has increased significantly, lifetime
expected credit losses along with the gross interest income are
recognised. For those that are determined to be credit impaired,
lifetime expected credit losses along with interest income on a net
basis are recognised.
The Group's financial assets measured at amortised cost comprise
trade and other receivables and cash and cash equivalents in the
consolidated statement of financial position. Cash and cash
equivalents includes cash in hand, deposits held at call with
banks, and other short term highly liquid investments with original
maturities of three months or less.
Financial liabilities
The Group classifies its financial liabilities depending on the
purpose for which the liability was acquired.
Other financial liabilitie s
All the Group's financial liabilities are classified as other
financial liabilities, which include the following items:
Bank borrowings are initially recognised at fair value net of
any transactions costs directly attributable to the issue of the
instrument. Such interest bearing liabilities are subsequently
measured at amortised cost using the effective interest rate
method, which ensures that any interest expense over the period to
repayment is at a constant rate on the balance of the liability
carried in the consolidated statement of financial position. For
the purposes of each financial liability, interest expense includes
initial transaction costs and any premium payable on redemption, as
well as any interest or coupon payable while the liability is
outstanding.
Notes (continued)
2 Accounting policies (continued)
Trade payables and other short-term monetary liabilities, which
are initially recognised at fair value and subsequently carried at
amortised cost using the effective interest method.
Defined contribution schemes
Contributions to defined contribution pension schemes are
charged to the consolidated statement of comprehensive income in
the year to which they relate.
Leased assets
Identifying leases
The Group accounts for a contract, or a portion of a contract,
as a lease when it conveys the right to use an asset for a period
of time in exchange for consideration. Leases are those contracts
that satisfy the following criteria:
(a) There is an identified asset:
(b) The Group obtains substantially all the economic benefits
from use of the asset; and
(c) The Group has the right to direct use of the asset.
The Group considers whether the supplier has substantive
substitution rights. If the supplier does have those rights, the
contract is not identified as giving rise to a lease.
In determining whether the Group obtains substantially all the
economic benefits from use of the asset, the Group considers only
the economic benefits that arise from use of the asset, not those
incidental to legal ownership or other potential benefits.
In determining whether the Group has the right to direct use of
the asset, the Group considers whether it directs how and for what
purpose the asset is used throughout the period of use. If there
are no significant decisions to be made because they are
pre-determined due to the nature of the asset, the Group considers
whether it was involved in the design of the asset in a way that
predetermines how and for what purpose the asset will be used
throughout the period of use. If the contract or portion of the
contract does not satisfy these criteria, the Group applies other
applicable IFRSs rather than IFRS 16.
All leases are accounted for by recognising a right-of-use asset
and a lease liability except for:
-- Leases of low value assets: and
-- Leases with a term of 12 months or less.
Lease liabilities are measured at the present value of the
contractual payments due to the lessor over the lease term, with
the discount rate determined by reference to the rate inherent in
the lease unless this is not readily determinable, in which case
the Group's incremental borrowing rate on commencement of the lease
is used. Variable lease payments are only included in the
measurement of the lease liability if they depend on an index or
rate. In such cases, the initial measurement of the lease assumes
the variable element will remain unchanged throughout the lease
term. Other variable lease payments are expensed in the period to
which they relate.
Notes (continued)
2 Accounting policies (continued)
Leased assets (continued)
On initial recognition, the carrying value of the lease
liability also includes:
-- amounts expected to be payable under any residual value guarantee:
-- the exercise price of any purchase option granted in favour
of the Group if it is reasonable certain to assess that option:
-- any penalties payable for terminating the lease, if the term
of the lease has been estimated on the basis of the termination
option being exercised.
Right-of-use assets are initially measured at the amount of the
lease liability, reduced for any lease incentives received, and
increased for:
-- lease payments made at or before the commencement of the lease:
-- initial direct costs incurred; and
-- the amount of any provision recognised where the Group is
contractually required to dismantle, remove or restore the leased
asset.
Subsequent to initial measurement lease liabilities increase as
a result of interest charged at a constant rate on the balance
outstanding and are reduced for lease payments made. Right-of-use
assets are amortised on a straight-line basis over the remaining
term of the lease or over the remaining economic life of the asset
if this is judged to be shorter than the lease term.
When the Group revises its estimate of the term of any lease, it
adjusts the carrying amount of the lease liability to reflect the
payments to make over the revised term, which are discounted using
a revised discount rate. The carrying value of lease liabilities is
similarly revised when the variable element of future lease
payments dependent on a rate or index is revised, except the
discount rate remains unchanged. In both cases an equivalent
adjustment is made to the carrying value of the right-of-use asset,
with the revised carrying amount being amortised over the remaining
lease term.
For contracts that both convey a right to the Group to use an
identified asset and require services to be provided to the Group
by the lessor for a variable amount, the Group has elected to
account for the right-of-use payments as a lease and expense the
service charge payments in the period to which they relate.
Externally acquired intangible assets
Externally acquired intangible assets are initially recognised
at cost and subsequently amortised over their useful economic
lives.
Intangible assets are recognised on business combinations if
they are separable from the acquired entity or give rise to other
contractual/legal rights. The amounts ascribed to such intangibles
are arrived at by using appropriate valuation techniques.
Notes (continued)
Externally acquired intangible assets (continued)
The significant intangibles recognised by the Group, their
useful economic lives and the methods used for amortisation and to
determine the cost of intangibles acquired in a business
combination are as follows:
Intangible asset Useful economic Remaining Amortisation Valuation method
life useful economic method
life
Brand 20 years 17-19 years Straight Estimated discounted
line cash flow
Customer contracts 1-2 years 1 year In line Estimated discounted
with contract cash flow
revenues
Restrictive 2 years 2 years Straight Cost
covenant extension line
Non current investments
Investments in subsidiary undertakings are stated at cost less
amounts written off for impairment. Investments are reviewed for
impairment where events or circumstances indicate that their
carrying amount may not be recoverable.
Dividends
Dividends are recognised when they become legally payable. In
the case of interim dividends to equity shareholders, this is when
declared by the directors. In the case of final dividends, this is
when approved by the shareholders at the AGM.
Deferred taxation
Deferred tax assets and liabilities are recognised where the
carrying amount of an asset or liability in the consolidated
statement of financial position differs from its tax base, except
for differences arising on:
- the initial recognition of goodwill
- the initial recognition of an asset or liability in a
transaction which is not a business combination and at the time of
the transaction affects neither accounting or taxable profit,
and
- investments in subsidiaries and joint arrangements where the
Group is able to control the timing of the reversal of the
difference and it is probable that the difference will not reverse
in the foreseeable future.
Recognition of deferred tax assets is restricted to those
instances where it is probable that taxable profit will be
available against which the difference can be utilised.
The amount of the asset or liability is determined using tax
rates that have been enacted or substantively enacted by the
reporting date and are expected to apply when the deferred tax
liabilities/assets are settled /recovered.
Deferred tax assets and liabilities are offset when the Group
has a legally enforceable right to offset current tax assets and
liabilities and the deferred tax assets and liabilities relate to
taxes levied by the same tax authority on either:
- The same taxable group company, or
- Different group entities which intend either to settle current
tax assets and liabilities on a net basis, or to realise the assets
and settle the liabilities simultaneously, in each future period in
which significant amounts of deferred tax assets or liabilities are
expected to be settled or recovered.
Notes (continued)
2 Accounting policies (continued)
Property, plant and equipment
Items of property, plant and equipment are initially recognised
at cost. As well as the purchase price, cost includes directly
attributable costs and the estimated present value of any future
unavoidable costs of dismantling and removing items. The
corresponding liability is recognised within provisions.
Depreciation is provided on all items of property, plant and
equipment so as to write off their carrying value over their
expected useful economic lives. It is provided at the following
rates:
Plant and machinery - 25-33% per annum straight line
Fixtures and fittings - 25% per annum straight line
Computer equipment - 33% per annum straight line
Provisions
The group has recognised provisions for liabilities of uncertain
timing or amount including those for legal claims. The provision is
measured at the best estimate of the expenditure required to settle
the obligation at the reporting date, discounted at a pre-tax rate
reflecting current market assessments of the time value of money
and risks specific to the liability. Where a legal claim is within
the scope of an insurance policy held by the Group, provision will
be made up to the level of the excess payable on the insurance
claim.
Notes (continued)
3 Critical accounting estimates and judgements
The Group makes certain estimates and assumptions regarding the
future. Estimates and judgements are continually evaluated based on
actual experience and other factors, including expectations of
future events that are believed to be reasonable under the
circumstances. In the future, actual experience may differ from
these estimates and assumptions. The estimates and assumptions that
have a significant risk of causing a material adjustment to the
carrying amounts of assets and liabilities within the next
financial period are discussed below.
Judgements, estimates and assumptions
- Accounting for business combinations and fair value
Business combinations are accounted for at fair value. Valuation
of acquired intangibles requires estimates of future growth rates,
profitability, remaining useful lives and discount rates for input
to the business combination valuation methodology. A difference in
the estimated future growth rates, profitability, the use of a
different discount rate, or the selection of a different valuation
method may result in a different assessment of fair value of the
asset or liability acquired as part of the business
combination.
- Estimated impairment of intangible assets including goodwill
Determining whether an intangible asset is impaired requires an
estimation of the value in use of the cash generating units to
which the intangible has been allocated. The value in use
calculation requires the entity to estimate the future cash flows
expected to arise from each cash generating unit and determine a
suitable discount rate. A difference in the estimated future cash
flows or the use of a different discount rate may result in a
different estimated impairment of intangible assets.
- Revenue recognition
Where the group performs work that is chargeable based on hours
worked at agreed rates, assessment must be made of the
recoverability of the unbilled time at the period end. This is on a
matter by matter basis, with reference to historic and post
year-end recoveries. Different views on recoverability would give
rise to a different value being determined for revenue and a
different carrying value for unbilled revenue.
Where revenue is subject to contingent fee arrangements, the
Group estimates the amount of variable consideration to which it
will be entitled and constrains the revenue recognised to the
amount for which it is considered highly probable that there will
be no significant reversal. Due to the nature of the work being
performed, this typically means that contingent revenues are not
recognised until such time as the outcome of the matter being
worked on is certain. Factors the Group considers when determining
whether revenue should be constrained are whether:-
i) The amount of consideration receivable is highly susceptible
to factors outside the Group's influence.
ii) The uncertainty is not expected to be resolved for a long time.
iii) The Group has limited previous experience (or limited other
evidence) with similar contracts.
iv) The range of possible consideration amounts is broad with a
large number of possible outcomes.
Different views being determined for the amount of revenue to be
constrained in relation to each contingent fee arrangement may
result in a different value being determined for revenue and also a
different carrying value being determined for unbilled amounts for
client work.
Notes (continued)
3 Critical accounting estimates and judgements (continued)
Where the group enters into Damages Based Agreements ("DBAs")
that include both the provision of services and the provision of
litigation finance, the Group must apportion the total expected
settlement between that arising as conditional revenue for services
and that arising as a return on participation. This requires
estimation of the total amount of time cost and disbursements that
will be incurred on a matter and the expected settlement value; the
allocation of the DBA to revenue is made with reference to standard
returns on contingent fee work. Different views will impact the
level of unrecognised contingent revenue and also the recognised
financial asset relating to the DBA participation.
Where non-contingent fees as well as contingent revenue are
earned on DBAs, the group must make a judgement as to whether
non-contingent amounts represent revenue or a reduction in funding,
with reference to the terms of the agreement and timing and
substance of time worked and payments made. Where non-contingent
revenue arises, the Group must match it against the services to
which it relates. This requires Management to estimate work done as
a proportion of total expected work to which the fee relates.
Different views could impact the level of non-contingent revenue
recognised.
- Impairment of trade receivables
Receivables are held at cost less provisions for impairment.
Impairment provisions are recognised based on the simplified
approach within IFRS 9 using a provision matrix in the
determination of the lifetime expected credit losses. A different
assessment of the impairment provision with reference to the
probability of the non-payment of trade debtors or the expected
loss arising from default, may result in different values being
determined.
- Litigation assets and fair value
LionFish
For each of LionFish's investments, a part disposal has been
made in the period, and the sales prices of these disposals have
been used to value the gross value of the interest in damages
retained by the Group. In order to calculate the proportion of each
investment retained, the Group has estimated the expected total
return on the investment and the expected return payable to the
onward investor. As returns are dependent on the timing of the
settlement, these estimates are driven by assumptions over the most
likely timing of settlement, which is based on semi-annual
individual case by case reviews by management.
In order to calculate the profit on disposal, the Group
allocates the corresponding proportion of the total expected cost
of the investment against the proportion of the investment sold.
The total expected cost of each investment involves an assumption
regarding the total expected drawdown on that investment, which may
be less than the total value of funds committed. Management make
this assumption based on their semi-annual case by case reviews of
each individual investment. The recorded profits on disposal and
carrying values are relatively insensitive to assumptions made,
with the exception that matters for which capital invested is
insured are sensitive to the estimated settlement date. In general,
the later the anticipated settlement date, the greater the carrying
value of the investment. Management has exercised caution in its
assessment of settlement dates.
RBL
Unlike LionFish's investments, the total return on RBL's
litigation assets is a proportion of damages awarded, rather than
being dependent on timing of settlement. As this figure is
potentially large and uncertain, and has a strong impact on fair
value calculations, where possible the Group avoids using it as an
input to its fair value calculations.
Notes (continued)
3 Critical accounting estimates and judgements (continued)
Where a recent disposal of an interest in a damage based
agreement has been made, the sales price of the disposal has been
used to value the gross value of the interest in damages retained
by the Group. The sales price is adjusted downwards for the cost of
the Group's ongoing funding of the matter, which is not borne by
the onward investor. This involves an estimate of the likely amount
and timing of disbursements over the course of the matter, the
minimum being funds already disbursed at the balance sheet date. As
management believes the sales price of disposals to represent the
floor level, having been used to create a market and de-risk the
original investment, the minimum level of disbursements has also
been used in valuing the investment. If the present value of the
maximum level of disbursements were applied against the value of
damages based on disposal price, this would reduce the fair value
of the investment to zero. Conversely, if a discounted cash flow
method of valuation were used, including an estimate of the likely
amount of damages on settlement, the value of the investment would
be significantly increased.
It is presumed that fair value and cost approximate to each
other on initial recognition and where a damages based agreement is
at an early stage, such that the level of time worked is de
minimis, the financial asset has been valued at cost, subject to
assessment for overstatement.
Where there has been minimal activity on a damages based
agreement from period to period, the prior year valuation is taken
as the initial indication of fair value, subject to assessment for
overstatement.
- Put options over shares held by non-controlling interest
The following key estimates and judgements have been used in
determining the present value of put options over the shares held
by the non-controlling interest in LionFish:-
i) It has been assumed that the option holder will exercise at
the earliest possible opportunity, being 12 August 2022
ii) The value at the date of exercise, which is calculated as a
multiple of average profit over the preceding two years, has been
based on the actual profit after tax for the period ended 31
December 2020 and the budgeted profit after tax for the year ended
31 December 2021.
In determining the fair value of the put options, it has been
assumed that fair value of the put shares in LionFish is equal to
the fair value of the shares in the Company for which they would be
exchanged, and that the fair value of the option is zero.
- Claims and regulatory matters
The Group from time to time receives claims in respect of
professional service matters. The Group defends such claims where
appropriate, but makes provision for the possible amounts
considered likely to be payable, having regard to any relevant
insurance cover held by the Group. A different assessment of the
likely outcome of each case or of the possible cost involved may
result in a different provision or cost.
-
Notes (continued)
4 Financial instruments - Risk Management
The Group is exposed through its operations to the following
financial risks:
-- Credit risk
-- Interest rate risk and
-- Liquidity risk.
In common with all other businesses, the Group is exposed to
risks that arise from its use of financial instruments. This note
describes the Group's objectives, policies and processes for
managing those risks and the methods used to measure them. Further
quantitative information in respect of these risks is presented
throughout these financial statements.
There have been no substantive changes in the Group's exposure
to financial instrument risks, its objectives, policies and
processes for managing those risks or the methods used to measure
them from the previous period unless otherwise stated in this
note.
(i) Principal financial instruments
The principal financial instruments used by the Group, from
which financial instrument risk arises, are as follows:
- Trade receivables
- Cash and cash equivalents
- Litigation assets
- Trade and other payables
- Floating-rate bank loans
(ii) Financial instruments by category
Financial assets
Fair value through profit Amortised cost
or loss
31 December 31 December 31 December 31 December
2020 2019 2020 2019
GBP GBP GBP GBP
Cash and cash equivalents - - 13,522,184 1,910,156
Trade and other receivables - - 7,074,425 10,393,807
Litigation assets 6,294,754 2,209,886 - -
_______ _______ _______ _______
Total financial assets 6,294,754 2,209,886 20,596,609 12,303,963
_______ _______ _______ _______
Financial liabilities
Fair value through profit Amortised cost
or loss
31 December 31 December 31 December 31 December
2020 2019 2020 2019
GBP GBP GBP GBP
Trade payables and
accruals - - 1,618,264 1,555,988
Loans and borrowings - - 10,000,000 -
Other payables - 2,640,000 2,133,595 1,430,000
_______ _______ _______ _______
Total financial liabilities - 2,640,000 13,751,859 2,985,988
_______ _______ _______ _______
Trade and other payables are due within twelve months.
Notes (continued)
4 Financial instruments - Risk Management (continued)
Principal financial instruments (continued)
(iii) Financial instruments not measured at fair value
Financial instruments not measured at fair value includes cash
and cash equivalents, trade and other receivables, trade and other
payables and loans and borrowings.
Due to their short-term nature, the carrying value of cash and
cash equivalents, trade and other receivables, and trade and other
payables approximates their fair value.
(iv) Financial instruments measured at fair value
Litigation assets are classified as level 3 in the fair value
hierarchy of financial instruments.
The methods and procedures to fair value litigation assets may
include, but are not limited to: (i) obtaining information provided
by third parties when available; (ii) performing comparisons of
comparable or similar investment matters; (iii) calculating the
present value of future cash flows; (iv) assessing other analytical
data and information relating to the investment that is an
indication of value; (v) reviewing the amounts invested in these
investments; (vii) entering into a market transaction with an arm's
length party.
The material estimates and assumptions used in the analysis of
fair value include the status and risk profile of the risks
underlying the investment, the timing and expected amount of cash
flows based on the investment structure and agreement, the
appropriateness of discount rates used, if any, and in some cases,
the timing of, and estimated minimum proceeds from, a favourable
outcome. Significant judgement and estimation goes into the
assumptions which underlie the analyses, and the actual values
realised with respect to investments could be materially different
from values obtained based on the use of the estimates.
The reconciliation of the opening and closing fair value balance
of the level 3 financial instruments is provided in Note 18
together with a sensitivity analysis.
General objectives, policies and processes
The Board has overall responsibility for the determination of
the Group's risk management objectives and policies and, whilst
retaining ultimate responsibility for them, it has delegated the
authority for designing and operating processes that ensure the
effective implementation of the objectives and policies to the
Group's finance function. The Board receives monthly reports from
the Chief Financial Officer through which it reviews the
effectiveness of the processes put in place and the appropriateness
of the objectives and policies it sets.
The overall objective of the Board is to set policies that seek
to reduce risk as far as possible without unduly affecting the
Group's competitiveness and flexibility. Further details regarding
these policies are set out below:
Credit risk
Credit risk is the risk of financial loss to the Group if a
client or counterparty to a financial instrument fails to meet its
contractual obligations. The Group is mainly exposed to credit risk
from credit sales, It is Group policy to assess the credit risk of
new and irregular clients before entering contracts and to require
money on account of work for these clients. The Group reviews, on a
regular basis, whether to perform further work where clients have
unpaid bills. The Group works with a broad spread of long standing
reputable clients to ensure there are no significant concentrations
of credit risk.
Credit risk also arises from cash and cash equivalents and
deposits with banks and financial institutions. Cash and cash
equivalents are invested with banks with an A+ credit rating.
Notes (continued)
4 Financial instruments - Risk Management (continued)
General objectives, policies and processes (continued)
Interest rate risk
The Group is exposed to cash flow interest rate risk from
borrowings under the Revolving Credit Facility at variable rate.
The Board reviews the interest rate exposure on a regular
basis.
During 2020 and 2019, the Group's borrowings at variable rate
were denominated in sterling. At 31 December 2020, if interest
rates on sterling denominated borrowings had been 100 basis points
higher/lower with all other variables held constant, profit after
tax for the year would have been GBP78,000 lower/higher, mainly as
a result of higher/lower interest expense on floating-rate
borrowings. The directors consider that 100 basis points is the
maximum likely change in sterling interest rates over the next
year, being the period up to the next point at which the Group
expects to make these disclosures.
Liquidity risk
Liquidity risk arises from the Group's management of working
capital and the finance charges and principal repayments on its
debt instruments. It is the risk that the Group will encounter
difficulty in meeting its financial obligations as they fall due.
The Group's policy is to ensure that it will always have sufficient
cash (or agreed facilities) to allow it to meet its liabilities
when they become due and to take advantage of business
opportunities.
The Board reviews the projected financing requirements annually
when agreeing the Group's budget and receives rolling 12-month cash
flow projections for the Group on a regular basis as well as
information regarding cash balances.
On 25(th) October 2019, the Group signed a GBP10,000,000
three-year Revolving Credit Facility with HSBC UK Bank plc. The
Group may utilise any proportion of the facility, paying an
interest margin of 1.75-2.25% over LIBOR on utilisations and a
commitment fee on the unutilised facility. The facility is secured
by the debenture which grants first ranking fixed and floating
security of the property and assets of the Group as referenced in
Notes 12 and 14. During 2020, the Group drew down the full GBP10m
facility. At the year end the Group had GBP13.5m in cash, and so a
net cash position of GBP3.5m (2019: GBP1.9m).
At the end of the financial year, cash flow projections
indicated that the Group expected to have sufficient liquid
resources to meet its obligations, including scheduled lease
payments (Note 13), under all reasonably expected
circumstances.
Capital Management
The Group monitors "adjusted capital" which comprises all
components of equity (i.e. share capital, share premium,
non-controlling interest and retained earnings).
The Group's objectives when maintaining capital are:
- to safeguard the entity's ability to continue as a going
concern, so that it can continue to provide returns for
shareholders and benefits for other stakeholders, and
- to provide an adequate return to shareholders by pricing
products and services commensurately with the level of risk.
The Group expects to pursue a progressive dividend policy over
time, driven primarily by the level of cash retained within the
business as well as investment opportunities available to the Group
and from time to time review the continued appropriateness of such
policy.
Notes (continued)
5 Segment information
The Group's reportable segments are strategic business groups
that offer different products and services. Operating segments are
reported in a manner consistent with the internal reporting
provided to the chief operating decision maker, which has been
identified as the Board of Directors of RBG Holdings plc.
The following summary describes the operations of each
reportable segment:
-- Legal services - Provision of legal advice, by Rosenblatt
-- Litigation finance - Sale of litigation assets, by Rosenblatt and LionFish
-- Other Professional services -Provision of sell-side M&A
corporate finance services, by Convex
2020 Legal Litigation Other Professional Total
services finance services
GBP GBP GBP GBP
Segment revenue 20,864,341 - 1,584,991 22,449,332
_______ _______ _______ _______
Segment gains on litigation
assets comprising:
Proceeds on disposal of litigation
assets - 3,561,000 - 3,561,000
Realisation of litigation assets - (2,353,164) - (2,353,164)
_______ _______ _______ _______
Profit on disposal of litigation
assets - 1,207,836 - 1,207,836
Fair value movement on litigation
assets - 1,914,891 - 1,914,891
_______ _______ _______ _______
- 3,122,727 - 3,122,727
_______ _______ _______ _______
Segment contribution 10,868,778 - (605,593) 10,263,185
_______ _______ _______
Segment gains on litigation
assets -- 3,122,727 -- 3,122,727
_______ _______ _______
Costs not allocated to segments
Personnel costs (2,634,661)
Depreciation and amortisation (2,081,501)
Other operating expense (593,395)
Net financial expenses (370,074)
_______
Group profit for the year before
tax 7,706,281
_______
Notes (continued)
5 Segment information (continued)
2019 Legal Litigation Other Professional Total
services finance services
GBP GBP GBP GBP
Segment revenue 18,089,740 - 1,851,500 19,941,240
_______ _______ _______ _______
Segment gains on litigation
assets -- 3,800,000 -- 3,800,000
_______ _______ _______ _______
Segment contribution 10,231,521 - 1,037,839 11,269,360
_______ _______ _______
Segment gains on litigation
assets -- 3,800,000 -- 3,800,000
_______ _______ _______
Costs not allocated to segments
Personnel costs (2,861,240)
Depreciation and amortisation (1,576,180)
Other operating expense (2,772,322)
Net financial expenses (212,183)
_______
Group profit for the year before
tax 7,647,435
_______
Total assets and liabilities by operating segment are not
reviewed by the chief operating decision makers and are therefore
not disclosed.
A geographical analysis of revenue is given below:
Revenue by location
of clients
2020 2019
GBP GBP
United Kingdom 20,680,948 17,420,189
Europe 387,829 301,799
North America 7,833 71,591
Other 1,372,722 2,147,661
_______ _______
22,449,332 19,941,240
_______ _______
Revenues from Legal services clients that account for more than
10% of Group revenue total GBP12,829,816 (2019: GBP7,905,967).
Notes (continued)
Contract assets
2020 2019
Group GBP GBP
At 1 January 2020 3,797,152 3,040,152
Acquired through business combinations - -
Transfers in the period from contract assets
to trade receivables (3,429,927) (2,692,814)
Excess of revenue recognised over cash (or
rights to cash) being recognised during the
year 2,629,700 3,449,814
_______ _______
At 31 December 2020 2,996,925 3,797,152
_______ _______
Contract assets are included within "trade and other
receivables" on the face of the statement of financial position.
They arise when the Group has performed services in accordance with
the agreement with the relevant client and has obtained right to
consideration for those services but such income has not been
billed at the balance sheet date.
6 Profit from operations and auditor's remuneration
2020 2019
GBP GBP
Profit from operations is stated after charging:
Fees payable to the company's auditors
- Audit fees 177,500 147,750
- Other services 12,500 12,500
Depreciation of property, plant and equipment 335,634 232,729
Amortisation of right-of-use assets 986,061 891,794
Amortisation/impairment of intangible assets 759,806 451,658
Lease expense:
- Short term - -
- Low value 3,335 1,872
The Alternative Performance Measures used by Management are
shown below:
2020 2019
GBP GBP
Operating profit 8,076,355 7,859,618
Depreciation and amortisation expense 2,081,501 1,576,180
Non-underlying items (2,640,000) -
_______ _______
Adjusted EBITDA 7,517,856 9,435,798
_______ _______
2020 2019
GBP GBP
Profit before tax 7,706,281 7,647,435
Non-underlying items (2,640,000) -
_______ _______
Adjusted PBT 5,066,281 7,647,435
_______ _______
Notes (continued)
7 Employees
2020 2019
Group GBP GBP
Staff costs (including directors)
consist of:
Wages and salaries 9,902,596 8,071,730
Short-term non-monetary benefits 122,854 114,448
Cost of defined contribution scheme 262,518 262,998
Share-based payment expense 39,403 -
Social security costs 1,225,260 981,110
_______ _______
11,552,631 9,430,286
_______ _______
Personnel Costs stated in the Consolidated statement of
comprehensive income includes the costs of contractors of
GBP3,227,573 (2019: GBP2,066,589).
The average number of employees (including directors) during the
period was as follows:
2020 2019
Number Number
Legal and professional staff 55 50
Administrative staff 35 31
_______ _______
90 81
_______ _______
Defined contribution pension schemes are operated on behalf of
the employees of the Group. The assets of the schemes are held
separately from those of the Group in independently administered
funds. The pension charge represents contributions payable by the
Group to the funds and amounted to GBP262,518 (2019: GBP262,998).
Contributions amounting to GBP40,574 (2019: GBP42,308) were payable
to the funds at period end and are included in Trade and other
payables.
Company
The average number of employees (excluding directors) during the
period was one (2019: nil); all other personnel are employed by
subsidiary undertakings.
Details of the Directors' remuneration, share interests and
transactions with directors are included in the Directors' Report
and in Note 26. The directors are considered to be the key
management personnel.
Notes (continued)
8 Finance income and expense
Recognised in profit or loss
2020 2019
Finance income GBP GBP
Interest received on bank deposits 24,460 41,027
_______ _______
Net finance income recognised in profit
or loss 24,460 41,027
_______ _______
Finance expense GBP GBP
Interest expense on financial liabilities
measured at amortised cost (185,497) (27,565)
Interest expense on lease liabilities (209,037) (225,645)
_______ _______
(394,534) (253,210)
_______ _______
Net finance (expense) recognised in
profit or loss (370,074) (212,183)
_______ _______
The above financial income and expense include the following in
respect of assets/(liabilities) not at fair value through profit or
loss:
Total interest income on financial
assets 24,460 41,027
Total interest expense on financial
liabilities (185,497) (27,565)
_______ _______
161,037 13,462
_______ _______
9 Tax expense
2020 2019
GBP GBP
Current tax expense
Current tax on profits for the year 1,141,107 1,487,925
Adjustment for under provision in
prior periods 1,120 61,538
_______ _______
Total current tax 1,142,227 1,549,463
Deferred tax expense
Origination and reversal of temporary
differences (Note 23) (117,291) (78,626)
_______ _______
Total tax expense 1,024,936 1,470,837
_______ _______
Notes (continued)
9 Tax expense (continued)
The reasons for the difference between the actual tax charge for
the period and the standard rate of corporation tax in the United
Kingdom applied to profits for the period are as follows:
2020 2019
GBP GBP
Profit on ordinary activities before
taxation 7,706,281 7,647,435
_______ _______
Tax using the Company's domestic tax
rate of 19% 1,464,193 1,453,013
Expenses not deductible for tax purposes 5,293 31,715
Income not taxable for tax purposes (501,600) -
Adjustments in respect of prior periods 1,120 61,539
Adjustments in respect of prior periods
(deferred tax) 5,606 (11,816)
Remeasurement of deferred tax for
changes in tax rates 50,324 (63,614)
_______ _______
Total tax expense 1,024,936 1,470,837
_______ _______
Changes in tax rates and factors affecting the future tax
charge
Following an announcement in the Budget on 11 March 2020, which
was substantively enacted on 17 March 2020, the UK corporation tax
rate applicable for the years beginning 1 April 2020 and 1 April
2021 now remains at 19%, rather than the previously enacted
reduction to 17%. This rate of 19% has been applied to deferred tax
balances which are expected to reverse after 1 April 2020, the date
on which that rate became effective.
10 Earnings per share
Total Total
2020 2019
Numerator GBP GBP
Profit for the period and earnings
used in basic and diluted EPS 6,454,738 6,176,598
Non-Underlying items
Deferred consideration release (2,640,000) -
Less: tax effect of above items - -
_______ _______
Profit for the year adjusted for Non
Underlying items 3,814,738 6,176,598
_______ _______
Denominator Number Number
Weighted average number of shares
used in basic EPS 85,592,106 81,704,435
Effect of:
Contingent share consideration on
business combination - 603,422
_______ _______
Weighted average number of shares
used in diluted EPS 85,592,106 82,307,857
_______ _______
Notes (continued)
10 Earnings per share (continued)
Earnings per share is calculated as follows:
2020 2019
Pence Pence
Basic earnings per ordinary share 7.54 7.56
Diluted earnings per ordinary share 7.54 7.50
Basic earnings per ordinary share adjusted
for Non Underlying items 4.46 7.56
Diluted earnings per ordinary share adjusted
for Non Underlying items 4.46 7.50
Clawback arrangements over certain shares of Cascades Ltd would
have an anti-dilutive effect on earnings per share and therefore no
impact on diluted earnings per share.
11 Dividends
2020 2019
GBP GBP
Interim dividend of 0p (2019: 2.8p)
per Ordinary share proposed and paid
during the year relating to the previous
year's results - 2,228,300
Interim dividend of 1.0p (2019: 2.0p)
per Ordinary share paid during the
year 823,283 1,583,042
_______ _______
823,283 3,811,342
_______ _______
On 26 February 2021, an interim dividend was paid of 3 pence per
share in respect of the 2020 financial year.
Notes (continued)
12 Property, plant and equipment
Group Plant and Fixtures Computer Total
Machinery and fittings Equipment
GBP GBP GBP GBP
Cost
At 1 January 2020 324,512 116,258 501,408 942,178
Additions 10,989 32,878 128,615 172,482
Disposals - - (1,339) (1,339)
_______ _______ _______ _______
At 31 December 2020 335,501 149,136 628,684 1,113,321
_______ _______ _______ _______
Accumulated Depreciation
and Impairment
At 1 January 2020 172,297 9,097 122,402 303,796
Charge for the year 109,274 35,958 190,403 335,635
Disposals - - (1,339) (1,339)
_______ _______ _______ _______
At 31 December 2020 281,571 45,055 311,466 638,092
_______ _______ _______ _______
Net book value
At 1 January 2020 152,215 107,161 379,006 638,382
At 31 December 2020 53,930 104,081 317,218 475,229
_______ _______ _______ _______
Notes (continued)
12 Property, plant and equipment (continued)
Company Computer Total
Equipment
GBP GBP
Cost
At 1 January 2020 17,125 17,125
Additions 1,625 1,625
Acquired through
business combinations - -
_______ _______
At 31 December 2020 18,750 18,750
_______ _______
Accumulated Depreciation
and Impairment
At 1 January 2020 6,698 6,698
Charge for the year 6,205 6,205
_______ _______
At 31 December 2020 12,903 12,903
_______ _______
Net book value
At 1 January 2020 10,427 10,427
At 31 December 2020 5,847 5,847
_______ _______
Under a debenture signed and registered on 25 October 2019, HSBC
UK Bank plc have a fixed charge over the property, plant and
equipment of the Group.
13 Leases
The Group leases its business premises in the United Kingdom.
The lease contracts either provide for annual increases in the
periodic rent payments linked to inflation or for payments to be
reset periodically to market rental rates. The Group also leases an
item of office equipment, with fixed payments over the lease
term.
The percentages in the table below reflect the current
proportions of lease payments that are either fixed or variable.
The sensitivity reflects the impact on the carrying amount of lease
liabilities and right-of-use assets if there was an uplift of 5% on
the balance sheet date to lease payments that are variable.
Notes (continued)
13 Leases (continued)
At 31 December 2020 Lease Contracts Fixed Payments Variable Sensitivity
Payments
Number % % GBP000
Property leases with
payments linked to
inflation 1 - 88.0% +/- 290
Property leases with
periodic uplifts to
market rentals 1 - 11.3% +/- 10
Leases of plant and
equipment 1 0.7% - -
_______ _______ _______ _______
3 0.7% 99.3% +/-300
_______ _______ _______ _______
The percentages in the table below reflect the proportions of
lease payments that are either fixed or variable for the
comparative period.
At 31 December 2019 Lease Contracts Fixed Payments Variable Sensitivity
Payments
Number % % GBP000
Property leases with
payments linked to
inflation 1 - 89.7% +/- 323
Property leases with
periodic uplifts to
market rentals 1 - 9.7% +/- 13
Leases of plant and
equipment 1 0.6% - -
_______ _______ _______ _______
3 0.6% 99.4% +/-336
_______ _______ _______ _______
Right-of-Use Assets
Land and Computer Total
buildings equipment
GBP GBP GBP
At 1 January 2019 7,294,194 16,518 7,310,712
Acquired through business combinations 274,380 - 274,380
Amortisation (885,187) (6,607) (891,794)
Variable lease payment adjustment 66,900 - 66,900
_______ _______ _______
At 31 December 2019 6,750,287 9,911 6,760,198
_______ _______ _______
Land and Computer Total
buildings equipment
GBP GBP GBP
At 1 January 2020 6,750,287 9,911 6,760,198
Amortisation (979,454) (6,607) (986,061)
Variable lease payment adjustment 51,575 - 51,575
_______ _______ _______
At 31 December 2020 5,822,408 3,304 5,825,712
_______ _______ _______
Notes (continued)
13 Leases (continued)
Lease liabilities
Land and Computer Total
buildings equipment
GBP GBP GBP
At 1 January 2019 7,073,880 16,518 7,090,398
Acquired through business combinations 274,380 - 274,380
Interest expense 225,187 459 225,646
Variable lease payment adjustment 66,900 - 66,900
Lease payments (918,615) (6,906) (925,521)
_______ _______ _______
At 31 December 2020 6,721,732 10,071 6,731,803
_______ _______ _______
Land and Computer Total
buildings equipment
GBP GBP GBP
At 1 January 2020 6,721,732 10,071 6,731,803
Interest expense 208,790 247 209,037
Variable lease payment adjustment 51,575 - 51,575
Lease payments (1,034,442) (6,911) (1,041,353)
_______ _______ _______
At 31 December 2020 5,947,655 3,407 5,951,062
_______ _______ _______
At 31 December 2020, lease liabilities were falling due as
follows:
Group Up to 3 Between Between Between Over 5 years Total
months 3 and 12 1 and 2 2 and 5
months years years
GBP GBP GBP GBP GBP GBP
Lease liabilities 213,432 656,587 885,479 2,685,051 1,510,513 5,951,062
The aggregate undiscounted commitments for low-value leases as
at 31 December 2020 was GBP5,460.
Notes (continued)
14 Intangible assets
Group Goodwill Customer Brand Other Total
Contracts
GBP GBP GBP GBP GBP
Cost
At 1 January 2019 17,260,221 200,111 750,000 - 18,210,332
Acquired through
business combinations 15,775,039 1,167,673 661,596 - 17,604,308
_______ _______ _______ _______ _______
At 31 December 2019 33,035,260 1,367,784 1,411,596 - 35,814,640
_______ _______ _______ _______ _______
At 1 January 2020 33,035,260 1,367,784 1,411,596 - 35,814,640
Additions - - - 1,000,000 1,000,000
_______ _______ _______ _______ _______
At 31 December 2020 33,035,260 1,367,784 1,411,596 1,000,000 36,814,640
_______ _______ _______ _______ _______
Accumulated amortisation
and impairment
At 1 January 2019 - 200,111 25,000 - 225,111
Amortisation charge - 404,602 47,056 - 451,658
_______ _______ _______ _______ _______
At 31 December 2019 - 604,713 72,056 - 676,769
_______ _______ _______ _______ _______
At 1 January 2020 - 604,713 72,056 - 676,769
Amortisation charge - 689,226 70,580 - 759,806
_______ _______ _______ _______ _______
At 31 December 2020 - 1,293,939 142,636 - 1,436,575
_______ _______ _______ _______ _______
Net book value
At 1 January 2019 17,260,221 - 725,000 - 17,985,221
At 31 December 2019 33,035,260 763,071 1,339,540 - 35,137,871
At 31 December 2020 33,035,260 73,845 1,268,960 1,000,000 35,378,065
_______ _______ _______ _______ _______
Under a debenture signed and registered on 25 October 2019, HSBC
UK Bank plc have a fixed charge over the intangible assets of the
Group.
As announced on 24 January 2020 and disclosed in the Report and
Financial Statements for the year ended 31 December 2019, RBL
negotiated with Ian Rosenblatt an extension and broadening of the
restrictive covenants put in place at the IPO (and described in the
Company's admission document) to an additional two-year term
through to 2023. In consideration of this arrangement, RBL made a
one-off payment to Mr Rosenblatt of GBP1 million, reflected in
Other Intangible assets above.
Notes (continued)
15 Impairment of goodwill and other intangible assets
The Group is required to test, on an annual basis, whether
goodwill and other intangible assets have suffered any impairment.
The recoverable amounts are determined based on value in use
calculations. The use of this method requires the estimation of
future cash flows and the determination of a discount rate in order
to calculate the present value of the cash flows. The recoverable
amounts were determined to be higher than the carrying amounts and
so no impairment losses were recognised.
The recoverable amounts have been determined from value in use
calculations based on an extrapolation of the cash flow projections
from the formally approved budget. Values assigned to the key
assumptions represent management's estimate of expected future
trends and are as follows:
-- A pre-tax discount rate of 18%was applied in determining the
recoverable amount. The discount rate is based on the average
weighted cost of capital.
-- Growth rates over the long term of between 2-4% are based on
management's understanding of the market opportunities for services
provided, whilst in the case of Convex Capital, a return to pre
COVID-19 business levels was not assumed until 2023.
-- Increases in costs are based on current inflation rates and
expected levels of recruitment needed to generate predicted revenue
growth.
-- Cash flows have been assessed over ten years with the
assumption that the business will be ongoing at the end of that
period.
The review demonstrated sufficient headroom such that the
estimated carrying values are not sensitive to changes in
assumptions. Having reviewed the key assumptions used, the
Directors do not believe that there is a reasonably possible change
in any of the key assumptions that require further disclosure.
16 Subsidiaries
The principal subsidiaries of RBG Holdings plc, which are
incorporated in England and Wales and have been included in these
consolidated financial statements, are as follows:
Name Principal Registered Proportion of ownership Non-Controlling
Activity Number interest at 31 interests ownership
December at 31 December
2020 2019 2020 2019
Rosenblatt
Limited Legal Services 09986118 100% 100% - -
Convex Group
(Holdings)
Limited Holding Company 11490871 100% 100% - -
Convex Capital Professional
Limited Services 11491052 100% 100% - -
LionFish Litigation
Finance (UK) Litigation
Limited Finance 12165991 90% - 10% -
Islero Assignments
Limited Dormant 12754244 100% - - -
The principal place of business of Convex Group (Holdings)
Limited and Convex Capital Limited is Bass Warehouse, 4 Castle
Street, Manchester, M3 4LZ. The principal place of business of the
other subsidiaries and the registered address of each subsidiary is
9-13 St. Andrew Street, London, England EC4A 3AF.
For the year ending 31 December 2020, the principal subsidiary
companies, set out above, were exempt from the requirements of the
Companies Act relating to the audit of individual accounts by
virtue of section 479A of the Companies Act 2006. RBG Holdings plc,
has given a statement of guarantee under the Companies Act 2006
section 479C, whereby RBG Holdings plc will guarantee all
outstanding liabilities to which the respective subsidiary
companies are subject as at 31 December 2020.
Notes (continued)
17 Non-controlling interests
The NCI of LionFish Litigation Finance (UK) Finance , which is
90% owned by the Group, is considered to be immaterial.
18 Litigation assets
The table below provides analysis of the movements in the Level
3 financial assets.
2020 2019
Level 3 Level 3
GBP GBP
At 1 January 2,209,886 -
Additions 4,523,141 2,209,886
Realisations (2,353,164) (3,800,000)
Fair value movement 1,914,891 3,800,000
_______ _______
At 31 December 6,294,754 2,209,886
_______ _______
Sensitivity of Level 3 valuations
Following investment, the Group engages in a semi-annual review
of each investment's fair value. At 31 December 2020, should the
value of investments have been 10% higher or lower than provided
for in the Group's fair value estimation, while all other variables
remained constant, the Group's income and net assets would have
increased and decreased respectively by GBP629,475 (2019:
GBP220,988).
19 Trade and other receivables
Group Company Group Company
2020 2020 2019 2019
GBP GBP GBP GBP
Trade receivables 3,592,075 - 3,469,642 -
Less: provision for impairment
of trade receivables (219,643) - (64,923) -
_______ _______ _______ _______
Trade receivables - net 3,372,432 - 3,404,719 -
Contract assets 2,996,925 - 3,797,152 -
Amounts due from subsidiaries - 24,143,299 - 25,995,864
Other receivables 705,068 673,073 3,191,936 489,677
_______ _______ _______ _______
Total financial assets other
than cash and cash equivalents
classified as amortised cost 7,074,425 24,816,372 10,393,807 26,485,541
Prepayments 622,500 84,559 695,005 7,417
_______ _______ _______ _______
Total trade and other receivables 7,696,925 24,900,931 11,088,812 26,492,958
_______ _______ _______ _______
Notes (continued)
19 Trade and other receivables (continued)
The carrying value of trade and other receivables classified at
amortised cost approximates fair value.
The Group does not hold any collateral as security.
The Group applies the IFRS 9 simplified approach to measuring
expected credit losses using a lifetime expected credit loss
provision for trade receivables and contract assets. To measure
expected credit losses on a collective basis, trade receivables and
contract assets are grouped based on similar credit risk and aging.
The contract assets have similar risk characteristics to the trade
receivables for similar types of contracts.
The expected loss rates are based on the Group's credit losses
experienced over the period since incorporation, adjusted for
current and forward-looking information on macroeconomic factors
affecting the Group's customers. The Group has identified the gross
domestic product (GDP), unemployment rate and inflation rate as the
key macroeconomic factors in the countries where the Group
operates.
The lifetime expected loss provision for trade receivables and
contract assets is as follows:
31 December 2020 More than More than More than
30 days 60 days 120 days Total
Current past due past due past due GBP
Expected loss rate 0 % 2% 2% 23%
Gross carrying
amount 5,073,270 381,262 352,867 781,601 6,589,000
Loss provision 23,566 7,028 6,505 182,544 219,643
31 December 2019 More than More than More than
30 days 60 days 120 days Total
Current past due past due past due GBP
Expected loss rate 0 % 2% 2% 5%
Gross carrying
amount 5,894,884 365,492 402,330 604,088 7,266,795
Loss provision 14,684 8,406 9,254 32,579 64,923
None of the trade receivables and contract assets have been
subject to a significant increase in credit risk since initial
recognition.
Notes (continued)
19 Trade and other receivables (continued)
Movements in the impairment allowance for trade receivables are
as follows:
2020 2019
GBP GBP
At 1 January 2020 64,923 27,790
Increase during the year 154,720 37,133
_______ _______
At 31 December 2020 219,643 64,923
_______ _______
Company
The loan due from RBL is on demand and interest free.
Management considers that there is no increase in credit risk on
the related party loan. Given that the loan is on demand, lifetime
credit losses and 12 month credit losses will be the same. Having
considered different recoverability scenarios which incorporated
macroeconomic information (such as market interest rates and growth
rates), current and forward looking information, management
consider the expected credit loss to be close to nil.
20 Trade and other payables
Group Company Group Company
2020 2020 2019 2019
GBP GBP GBP GBP
Trade payables 465,300 - 789,857 -
Corporation tax payable 657,437 - 1,395,489 -
Other taxes and social security 1,157,687 - 1,084,948 -
Amounts due to group companies - 662,213 - 44,321
Other payables 2,133,595 1,118,595 4,070,000 4,070,000
Accruals 1,152,964 254,623 766,131 212,648
_______ _______ _______ _______
At 31 December 5,566,983 2,035,431 8,106,425 4,326,969
_______ _______ _______ _______
Due within one year or less 4,551,983 2,035,431 8,106,425 4,326,969
Due after more than one year 1,015,000 - - -
_______ _______ _______ _______
5,566,983 2,035,431 8,106,425 4,326,969
_______ _______ _______ _______
The carrying value of trade and other payables classified as
financial liabilities measured at amortised cost approximates fair
value.
On 12 August 2020, the Company agreed put and call options over
the shares of LionFish held by the non-controlling interest. Under
this agreement, the holder of the shares can require the Company to
buy the shares in LionFish, with consideration based on a multiple
of LionFish profits, settled by the issue of ordinary shares in the
Company, at any point in the period from 12 August 2022 to 12
August 2030. Similarly under the agreement, the Company can require
the holder of the shares to sell the shares of LionFish for a
consideration calculated and settled in the same way at any point
in the period from 12 August 2025 to 12 August 2030.
Notes (continued)
21 Loans and borrowings
The book value and fair value of loans and borrowings which all
denominated in sterling are as follows:
Book value Fair value Book value Fair value
31 Dec 20 31 Dec 20 31 Dec 31 Dec
19 19
GBP GBP GBP GBP
Non-Current
Bank loans
- * Secured 10,000,000 10,000,000 - -
_______ _______ _______ _______
At 31 December 10,000,000 10,000,000 - -
_______ _______ _______ _______
The rate at which Sterling denominated loans and borrowings are
payable is 1.75% above LIBOR.
The bank loans are secured by fixed and floating charges over
the assets of the Group. The Group has no undrawn committed
borrowing facilities available at 31 December 2020 (2019:
GBP10,000,000).
22 Provisions
Group Other provisions Other provisions
2020 2019
GBP GBP
At 1 January 75,000 35,264
Charged to profit or loss 41,875 39,736
_______ _______
At 31 December 116,875 75,000
_______ _______
Due within one year or less 116,875 75,000
Due after more than one year _______- _______-
116,875 75,000
_______ _______
Other provisions represent the amount equal to the insurance
excess payable on outstanding claims against the Group which are
covered by the Group's professional indemnity insurance policy. The
amount or timing of amounts payable in these cases is uncertain as
the resolution of the cases is unknown at the period end.
Notes (continued)
23 Deferred tax
Deferred tax is calculated in full on temporary differences
under the liability method using a tax rate of 19%.
Following an announcement in the Budget on 11 March 2020, which
was substantively enacted on 17 March 2020, the UK corporation tax
rate applicable for the years beginning 1 April 2020 and 1 April
2021 now remains at 19%, rather than the previously enacted
reduction to 17%. This rate of 19% has been applied to deferred tax
balances which are expected to reverse after 1 April 2020, the date
on which that rate became effective.
The movement on the deferred tax account is as shown below:
Group Company Group Company
2020 2020 2019 2019
GBP GBP GBP GBP
At 1 January 422,144 1,773 144,062 -
Recognised in profit
and loss
Tax expense (117,291) 500,938 (78,626) 1,773
_______ _______ _______ _______
304,853 502,711 65,436 1,773
Arising on business - - 356,708 -
combination
_______ _______ _______ _______
At 31 December 304,853 502,711 422,144 1,773
_______ _______ _______ _______
24 Share capital
Authorised
2020 2020 2019 2019
Number GBP Number GBP
Ordinary shares of 0.2p each 85,592,106 171,184 85,592,106 171,184
_______ _______ _______ _______
Allotted, issued and fully paid
Allotted, issued and fully 2020 2020 2019 2019
paid
Number GBP Number GBP
Ordinary shares of 0.2p each
At 1 January 85,592,106 171,184 80,092,106 160,184
Other issues for cash during - - - -
the year
Other issues during the year - - 5,500,000 11,000
_______ _______ _______ _______
At 31 December 85,592,106 171,184 85,592,106 171,184
_______ _______ _______ _______
Ordinary shares rank equally as regards to dividends, other
distributions and return on capital. Each ordinary share carries
the right to one vote.
Notes (continued)
25 Reserves
Financial instruments issued by the Group are classified as
equity only to the extent that they do not meet the definition of a
financial liability or financial asset.
The following describes the nature and purpose of each reserve
within equity:
Reserve Description and purpose
Share capital Amount subscribed for share capital at
nominal value.
Share premium Amount subscribed for share capital in
excess of nominal value less transaction
costs.
Retained earnings All other net gains and losses and transactions
with owners (e.g. dividends) not recognised
elsewhere.
26 Related party transactions
Group
During the year, Group companies entered into the following
transactions with related parties who are not members of the
Group:
Related party Supply of Purchase of Supply of Purchase
of
Services Services Services Services
2020 2020 2019 2019
GBP GBP GBP GBP
Velocity Venture
Capital Ltd* 14,250 209,786 18,886 194,836
N Foulston 6,500 - - -
Motorsport Circuit - - 1,000 -
Management Limited*
WDK Motorsport Limited* - - (2,550) -
Cascades Ltd ** - - 2,500 -
Winros*** - 1,128,051 - 655,587
Note: *A company controlled by Nicola Foulston, ** A company
wholly owned by the Foulston Family Trust of which Nicola Foulston
is a beneficiary, *** A partnership in which Ian Rosenblatt is a
partner.
In addition, during the year, GBP80,180 of contingent work was
performed by the Group in relation to a Conditional Fee Agreement
with Winros. At 31 December 2020, there were no amounts due to any
related party (2019: GBPnil) and no amounts due by any related
party (2019: GBPnil).
Sales and purchase of services to related parties were conducted
on an arm's length basis on normal trading terms. The Group has not
made any allowance for bad or doubtful debts in respect of related
party debtors nor has any guarantee been given or received during
2020 for related party transactions.
There are various other companies controlled by Nicola Foulston,
which use the Group's office as their registered address, with
which there have been no transactions during the year.
Ian Rosenblatt is not a director of any company in the Group,
nor a member of key management personnel, nor does he have a
significant influence over the Group. He is a substantial
shareholder, as disclosed in the Directors' Report and under the
AIM Rules for Companies is classified as a related party. During
the year a one-off payment of GBP1 million was made to Mr
Rosenblatt for the extension and broadening of the restrictive
covenants put in place at the IPO, more detail of which is given in
Note 14.
Total remuneration of Key Management Personnel during the year
was GBP835,565 (2019: GBP846,283). Further details of directors'
remuneration are given in the Directors' Report .
Notes (continued)
26 Related party transactions (continued)
Company
In addition to the amounts disclosed in the Directors' Report,
the Company has entered into the following transactions with
related parties.
During 2020, the company reimbursed fees and expenses paid on
its behalf by Rosenblatt Limited totalling GBP1,026,323 (2019:
GBP151,653). At 31 December 2020, the company was owed
GBP22,340,825 by Rosenblatt Limited (2019: GBP25,995,864).
At 31 December 2020, the company was owed GBP1,802,474 by Convex
Capital Limited (2019: GBP44,321 owed to Convex Capital
Limited).
During 2020, LionFish Litigation Finance (UK) Limited reimburse
fees and expenses paid on its behalf by the Company totalling
GBP143,602 (2019: GBPnil). At 31 December 2020, the company owed
GBP662,213 to LionFish Litigation Finance (UK) Limited (2019:
GBPnil).
27 Notes supporting statement of cash flows
Significant non-cash transactions from investing activities are
as follows:
2020 2019
GBP GBP
Equity consideration for business
combination (2,640,000) 7,700,000
Non-cash transactions from financing activities are shown in the
reconciliation of liabilities from financing transactions
below:
Non-current Current loans Total
loans and and borrowings
borrowings
GBP GBP GBP
At 1 January 2020 - - -
Cash flows (122,836) - -
Non-cash flows
- Interest accruing in year 174,048 -
_______ _______ _______
At 31 December 2020 51,212 - -
_______ _______ _______
At 1 January 2019 - - -
Cash flows - (27,565) (27,565)
Non-cash flows
- Interest accruing in year - 27,565 27,565
_______ _______ _______
At 31 December 2019 - - -
_______ _______ _______
Notes (continued)
28 Events after the reporting date
On 19 April 2021, the Group announced the acquisition of Memery
Crystal (conditional on completion), a specialist international law
firm based in London, for GBP30 million (GBP18.8 million in cash
and GBP11.2 million in shares). Memery Crystal, with 146 employees
(including 29 partners and an additional 66 fee earners), has a
strong focus on transactions, which makes it a complementary fit
with RBL, which derives most of its revenue from contentious
law.
[1] Excluding GBP2.6 million write back of the deferred Convex
Capital earnout
[2] Includes GBP2.6 million write back of the deferred Convex
Capital earnout
[3] Total Lockup is average debtor days plus average accrued
income days
[4] Profit for the year before members remuneration and profit
share
[5] Total Lockup is average debtor days plus average accrued
income days.
[6] The authority granted by management under the scheme is
irrevocable and non-discretionary, and during a Close Period the
Board has no power to invoke any changes to the authority. Any
purchases will be undertaken at the sole discretion of N+1 Singer
Limited. The Group confirms that it currently has no unpublished
price sensitive information.
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END
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April 20, 2021 02:01 ET (06:01 GMT)
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