TIDMRBGP
RNS Number : 7827L
RBG Holdings PLC
15 September 2021
15 September 2021
RBG Holdings plc
("RBG", the "Group", or the "Company")
Unaudited Interim Results for the period ended 30 June 2021
RBG Holdings plc (AIM: RBGP), the professional services group,
is pleased to announce its unaudited results for the six months
ended 30 June 2021.
Group Financial Highlights[1]:
-- Group revenue and gains up 53.2% to GBP18.3 million (2020: GBP12.0 million)
o Underlying revenues (excluding Memery Crystal) up 35.2% to
GBP16.2 million (2020: GBP12.0 million)
o GBP1.5 million of gains on litigation assets (2020: GBP0)
-- Group EBITDA up 95.4% to GBP5.2 million (2020: GBP2.6 million)
o Underlying EBITDA (excluding Memery Crystal) up 71.3% to
GBP4.5 million (2020: GBP2.6 million)
o Group EBITDA margin up to 28.1% (2020: 22.0%)
-- Group profit before tax up 279% to GBP3.9 million (2020: GBP1.4 million)
-- Group profit after tax of GBP3.1 million (2020: GBP1.2 million)
-- Group earnings per share up 157.0% to 3.47 pence (2020: 1.35 pence)
-- An interim dividend of 2 pence per share in respect of the
six months to 30 June 2021 was paid on 27 August 2021
-- Adjusted free cash flow generation in the period was GBP2.2 million (2020: GBP0.4 million)
-- Net debt of GBP9.8 million (2020: net debt of GBP1.6 million)
reflecting new GBP10.0 million term facility
-- As at 30 June 2021, the Group, through Rosenblatt and
LionFish Litigation Finance (UK) Limited ("LionFish"), had invested
in 15 litigation cases. Total associated contingent work in
progress (WIP) of GBP6.9 million and a total cash investment of
GBP7.7 million
Business Highlights:
RBG Legal Services ("RBGLS") - Combination of the Rosenblatt and
Memery Crystal brands
-- Revenue from legal services and gains on litigation assets of
GBP12.8 million (2020: GBP11.7 million). GBP1.0 million from gains
on litigation assets. Unrecognised contingent WIP of GBP1.8 million
in the period
-- Memery Crystal acquisition completed at the end of May for
total consideration of GBP30.0 million
-- Average revenue per fee earner of GBP375,000 (2020:
GBP497,000) reflecting additional fee earners from Memery Crystal
prior to the benefits of integration
-- Total lockup was 102 days (2020: 114 days) of which debtor days were 46 (2020: 49)
-- As at 30 June 2021, RBGLS had invested in 5 litigation cases
with an associated contingent WIP of GBP5.8 million and total cash
investment of GBP4.9 million
LionFish (Litigation Finance)
-- Disposal proceeds of GBP0.8 million in the first half (2020:
GBPnil), building on the GBP3.2 million of participation rights
sold in the seven months of 2020 following launch
-- Gains on litigation assets of GBP0.5 million
-- LionFish has approved 10 litigation cases with a funding
commitment of GBP8.0 million over the next three years, of which
GBP3.2 million has been drawn down
-- Strong pipeline of cases looking for finance. LionFish has
received 393 enquiries since launch with 10 cases approved, 54
under consideration and 329 rejected
Convex Capital (Specialist sell-side M&A boutique)
-- M&A activity has been strong in 2021: Convex completed 8
deals resulting in revenue of GBP5.0 million (2020: GBP0.3 million)
in the period
-- Strong pipeline as at 13 September 2021 - 36 active deals, of
which nine are at various stages of completion.
Nicola Foulston, CEO, RBG Holdings plc, commented: "Our
diversified revenue model is proving incredibly resilient, despite
uncertain times, and we are building a strong platform from which
to drive future growth.
"Our legal services business, strengthened by the acquisition of
Memery Crystal, continues to receive a high volume of new client
instructions. Since the lifting of lockdown our legal services and
M&A businesses have seen strong growth in M&A and Capital
Markets activity. Our Corporate and Dispute Resolution practices
have performed exceptionally strongly as a result. We are building
one of London's premier mid-tier law firms providing quality advice
to entrepreneurs and high net worth individuals.
"After its first year of operation, our litigation finance
business, LionFish has been a success, already funding ten
third-party cases. By selling a percentage of the invested assets,
it has generated profit from day one of its inception as well as
helping to de-risk the Group's investment. Our M&A advisory
business, Convex Capital, has bounced back strongly from a
difficult 2020 with the return of M&A activity.
"The Group has had an excellent first six months which is
reflected in our revenue and profit growth. With strong demand for
all Group services, we are on track to meet our recently upgraded
market expectations for the full year. While acknowledging the
economic conditions continue to be volatile, we look forward to the
coming months with optimism and are excited about the long-term
prospects for the Group."
Enquiries:
RBG Holdings plc Via SEC Newgate
Nicola Foulston, CEO
Singer Capital Markets (Nomad and Tel: +44 (0)20 7496 3000
Broker)
Shaun Dobson
Alex Bond
Tom Salvesen
SEC Newgate (for media enquiries) Tel: +44 (0)20 3757 6880;
Robin Tozer/Isabelle Smurfit rbg@secnewgate.co.uk
About RBG Holdings plc
RBG Holdings plc is a professional services group, which
comprises the following divisions:
RBG Legal Services Limited ("RBGLS")
RBGLS is the Group's legal services division which combines the
businesses previously operated by Rosenblatt Limited and Memery
Crystal Limited
Rosenblatt
Rosenblatt is one of the UK's pioneering law firms and a leader
in dispute resolution. Rosenblatt provides a range of legal
services to its diversified client base, which includes companies,
banks, entrepreneurs, and individuals. Complementing this is
Rosenblatt's increasingly international footprint, advising on
complex cross-jurisdictional disputes. Rosenblatt'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.
Memery Crystal
Specialist international law firm Memery Crystal offers legal
services in a range of areas such as corporate (including a
market-leading corporate finance offering), real estate,
commercial, IP & technology (CIPT), banking & finance, tax
& wealth structuring, employment and dispute resolution. Memery
Crystal is one of the leading firms in the UK to advise the
emerging cannabis sector on a wide range of business issues. Memery
Crystal offers a partner-led service to a broad range of clients,
from multinational companies, financial institutions and
owner-managed businesses to individual entrepreneurs.
LionFish Litigation Finance (UK) Limited ("LionFish")
The Group also provides litigation finance in selected cases
through a separate arm, LionFish Litigation Finance (UK) Limited.
LionFish finances litigation matters being run by other solicitors
in return for a significant return on the outcome of those cases.
As such, the Group has two types of litigation assets -
Rosenblatt's own client matters, and litigation matters run by
third-party solicitors. LionFish is positioned to be a unique,
alternative provider to the traditional litigation funders.
Convex Capital Limited ("Convex Capital")
Convex Capital is a specialist sell-side corporate finance
boutique based in Manchester. Convex Capital is entirely focused on
helping companies, particularly owner-managed and entrepreneurial
businesses, realise their value through sales to large corporates.
Convex Capital identifies and proactively targets firms that it
believes represent attractive acquisition opportunities.
Chief Executive's Statement
Overview
The Group continues to evolve into a broad, high-quality
professional services group with a litigation finance business
leveraging on the Group's legal expertise and building a diverse
revenue base that removes dependence on any one business or fee
generator.
The acquisition of Memery Crystal is part of the Group's
strategy to acquire high-value, strategically additive assets. The
combination of Memery Crystal with the Group's pioneering law firm
Rosenblatt means we are building one of London's premier mid-tier
law firms providing quality advice to entrepreneurs and high net
worth individuals building on both the Rosenblatt and Memery
Crystal brands.
Alongside our ambitious litigation finance business, LionFish,
and our disruptive M&A advisory business, Convex Capital, the
strategy of the Group is clear. First, we want to leverage our core
professional services businesses and capitalise on those areas that
offer the highest returns for shareholders. Furthermore, we use the
expertise within the Group to maximise the potential returns by
selectively investing in contingent asset classes such as
litigation and generate revenue through the sale of participation
rights in these assets, which also reduces the Group's risk.
Overall, the Group has performed well despite the challenges of
the pandemic. Our legal services business has led the way with
strong professional services revenues and has been augmented by the
acquisition of Memery Crystal. In time, the acquisition will
deliver greater profit as the integration improves our operating
efficiencies and our pricing structures as we combine business
support functions.
As a result of the strong performance across the Group, with
each subsidiary exhibiting growth, our revenue and gains on
litigation assets for the period was up 53.2% to GBP18.3 million
(2020: GBP12.0 million) at a gross margin of 42.1%.
Our sell-side M&A advisory boutique, Convex Capital,
performed well across the period, delivering eight completed deals
and GBP5.0 million of revenue in the first six months. Importantly,
momentum in deal flow remains strong in the current environment and
our pipeline of opportunities continues to grow.
We continue to invest in litigation assets, with 15 live deals
across Rosenblatt and LionFish. LionFish has invested in 10 deals
since its inception in May 2020. In addition to litigation finance
delivering an additional GBP0.8 million of participation rights
sales following the GBP3.2 million reported last year, there were
gains on litigation assets of GBP0.5 million.
Group EBITDA was up to GBP5.2 million (2020: GBP2.6 million) at
a margin of 28.1% (2020: 22.0%). As previously disclosed, we target
an EBITDA margin of 35% or more, aiming to achieve a higher net
margin by the year end. The Group's profit before tax was GBP3.9
million (2020: GBP1.4 million) and profit after tax was GBP3.1
million (2020: GBP1.2 million).
Our balance sheet remains satisfactory. Our net debt position
was GBP9.8 million versus GBP1.6 million in 2020. This change
reflects the investment in Memery Crystal and the GBP10 million
term loan to fund the acquisition, which will be paid down over
five years. In addition, the Group has an additional GBP15 million
revolving credit facility to draw to support the Group's
growth.
Our balance sheet will support our long-term growth plans,
including acquisitions, continued investment in litigation
investment opportunities and future dividends.
RBG Legal Services Limited ("RBGLS")
Following the completion of the acquisition of Memery Crystal in
May 2021, the Group has now combined its two law firms, Rosenblatt
and Memery Crystal, into a new legal services corporate entity
called RBG Legal Services Limited, enabling the Group to realise
the transaction's synergies fully. This new structure is consistent
with other listed law firms. The integration is progressing as
planned and both businesses will be fully integrated within the
last quarter.
While RBGLS will operate with one SRA number, the businesses
will retain their own brand identities and continue to operate as
two separately branded law firms. During the Autumn, the Group
anticipates that the two brands - Rosenblatt and Memery Crystal -
will become aligned to contentious and non-contentious services to
reflect their brand position within the market. Furthermore, the
Group plans to integrate all support functions and move into a
single office in the last quarter of 2021.
We are building one of London's premier mid-tier law firms
providing quality advice to entrepreneurs and high net worth
individuals. As at 30 June 2021 the combined businesses had 212
people, including 139 fee earners, with a particular strength in
its Dispute Resolution and Corporate and Real Estate offerings.
Rosenblatt successfully served its clients remotely during the
first half of the year, winning a broad range of new instructions,
including corporate transactions, employment advisory work and
financial restructuring mandates. The acquisition of Memery Crystal
has significantly enhanced the Group's scale and ability to win
such mandates as well as improving opportunity pipeline.
Due to the strong demand for its services, revenue, and gains on
the sale of assets in the first six months were up 9.7% to GBP12.8
million (2020: GBP11.7 million). The consolidated business has
helped diversify the legal services business. The Dispute
Resolution division, which is responsible for 53% (61% previously)
of RBGLS's revenue, performed well with revenue of GBP6.1 million.
Real Estate now represents 19% of the combined business, and
Corporate represents 22%.
As well as the financial metrics, the other KPIs on which the
Company is focused have performed well. The average revenue per fee
earner was GBP375,000 (2020: GBP497,000). This change reflects the
diversification of the legal services business into more
non-contentious areas of law, following the acquisition of Memery
Crystal, which are less profitable due to fixed fees and prior to
the benefits of the integration. However, this provides a natural
hedge to the Group's dispute resolution activities which, while
more profitable, are more contingent.
In line with its strategy, the Group has increased the amount of
contingent work it has taken on, enabled by the Group' strong
balance sheet. Such litigation cases need to pass the Group's
stringent legal and commercial review process. Importantly, RBGLS
can enter into more Alternative Billing Arrangements (ABAs), which
generate incremental margins on a successful case outcome. No
revenue is recognised by the Company until the result of the case
has occurred. Such revenue is considered contingent.
RBGLS has invested a further GBP0.9 million in 5 cases. The
amount of contingent work carried out by the legal services
business during the period was GBP1.8 million (2020: GBP0.9
million). As at 30 June 2021, RBGLS had invested GBP5.8 million in
5 cases, with a total contingent WIP of GBP6.2 million.
LionFish Litigation Finance (UK) Limited ("LionFish")
Since our IPO in 2018, our strategy has been to develop our own
litigation finance business as an important pillar of the Group.
The Group initially invested in Rosenblatt's own client matters,
but on 1 May 2020 the Group launched LionFish. LionFish finances
litigation matters being run by other solicitors in return for a
significant return on the outcome of those cases. As such, the
Group now has two types of litigation investments - RBGLS's own
client matters, and litigation matters run by third-party
solicitors.
Both types of litigation investments not only have significant
return potential, but they represent an opportunity to extract
further value from the Group's legal and commercial expertise and
diversify its sources of income.
Rosenblatt has a proven record of accomplishment in evaluating
the legal merits of a litigation matter to optimise its profit. By
leveraging this ability, alongside the origination capabilities of
LionFish, and the Group's commercial acumen, the Group can identify
third-party litigation cases and make investments with strong
risk-adjusted returns.
This approach creates further revenue potential from sales in
participation rights from litigation finance business beyond
Rosenblatt's own client matters. LionFish delivered an additional
GBP0.8 million of participation rights sales in addition to the
GBP3.2 million reported last year. There were gains on litigation
assets of GBP0.5 million.
While litigation finance sales help manage the Group's
litigation investment exposure, it is also part of a strategy to
create a secondary market for litigation investments.
The Company believes it is important to reiterate the
conservative approach we adopt towards the handling of, and
accounting for, our litigation investments. We judge the fair value
of investments to be equal to, or as close to, cost plus disposal
proceeds, which means fair values do not materially exceed net cash
disbursed, as well as having rules limiting the Group's cash and
revenue exposure.
Based on the Group's strategy to target a return of two times
the money invested, Lionfish has invested in 10 cases with GBP8
million committed (with GBP3.2 million drawn down) over the life of
the cases, which is circa three years.
As at the 30 June 2021, LionFish has received 393 enquiries for
finance, of which 10 cases were approved, 54 remain under
consideration and 329 rejected, a 97% rejection rate on concluded
enquiries. We have a strict investment process where the cases go
through an initial review, before a more stringent legal and
commercial review, and finally a full review by the Group's
investment committee. The process is efficient and
customer-focused, aiming for a quick decision and turnaround.
Convex Capital Limited ("Convex Capital")
Convex Capital, the specialist sell-side corporate finance
advisory boutique based in Manchester, was acquired by the Group in
September 2019. Convex Capital is entirely focused on helping
companies, particularly owner-managed and entrepreneurial
businesses, realise their value through sales to large corporates
or Private Equity. Convex Capital identifies and proactively
targets businesses that it believes represent attractive
acquisition opportunities. Convex has a motivated, dynamic team of
14 people, of which 13 are fee-earners.
The acquisition of Convex Capital was part of the Board's
strategy to diversify the Group beyond legal services, focusing on
other high-margin professional service areas. Convex Capital is an
entrepreneurial, cash-generative business operating across the UK
and Europe and will provide the Group with further funds for
reinvestment into other high-margin areas.
As at 30 June 2021, Convex Capital had completed eight deals and
delivered GBP5.0 million of revenue. The strength of its pipeline
and the agile nature of the business has enabled Convex Capital to
accelerate deals that COVID-19 has not impacted. As at 13 September
2021, Convex Capital had 36 active deals, of which nine are at
various stages of completion.
The business is actively building the target pipeline with a
data-driven approach to generate deals rather than the traditional
passive model where the target company waits to be approached and
then appoints a corporate finance partner.
Last year the management of Convex Capital failed to achieve the
earn-out agreed at the time of acquisition because of the economic
environment. For 2021, the earn-out was replaced with a one-off
commission agreement for the key directors. Under the arrangement,
the directors exchanged salary for commission based on deal
completion. A commission of 20% can be earned on all completed
deals, and 50% of that success fee must be used to purchase shares
in RBG.
M&A
We will continue to assess M&A opportunities to build and
diversify the business to create long term shareholder value. Our
acquisition focus will remain on high-margin, specialist
businesses, which can also create opportunities for cross-referrals
but only at the right value and with the right deal structure. The
Group remains disciplined in its approach to M&A and will
continue to review potential opportunities according to its
selective criteria.
Dividend
The Company's balance sheet remains solid, and the Board is
committed to a progressive dividend policy.
The Company paid an interim dividend relating to the six months
to 30 June 2021 of 2 pence per share on 27 August 2021. The total
dividend relating to the year ending 31 December 2020 was 5 pence
per share.
Outlook
The Group is performing well despite the COVID-19 pandemic and
remains well-positioned as we progress through the second half of
the year. We have worked hard to grow our services, adapt to
changing client needs and build our litigation finance business.
Our strategy of diversification has provided protection through the
pandemic and enabled the Group to progress towards its ambitious
goals.
Notwithstanding the acquisition of Memery Crystal, the Group has
had an excellent first six months which is reflected in our
improved revenue and profit growth. With strong demand for all
Group services, we are on track to meet the recently upgraded
market expectations for the full year. Whilst acknowledging that
economic conditions continue to be volatile, we look forward to the
coming months with optimism and are excited about the long-term
prospects for the Group.
Nicola Foulston
Group Chief Executive Officer
15 September 2021
Chief Financial Officer's Review
Financial Review
During the first half of 2021 we have continued to build on our
strong track record of delivering a profitable business. We have
increasing revenue and EBITDA from diverse sources while investing
in the growth of the business. The Group is well positioned to
deliver its growth strategy through product diversification,
carefully selected acquisitions and high-quality litigation
investments.
Key Performance Indicators (KPIs)
-- Group revenue (including gains from litigation assets):
GBP18.3 million (2020: GBP12.0 million)
-- EBITDA: GBP5.2 million, representing 28.1% of revenue (2020: GBP2.6 million, 22.0%)
-- Profit before tax: GBP3.9 million, representing 21.5% of
revenue (2020: GBP1.4 million, 12.1% of revenue)
-- Net debt of GBP9.8 million (2020: net debt of GBP1.6 million)
reflecting new GBP10.0 million term facility. The Group has a new
GBP15 million revolving credit facility which is fully available to
support the growth of the growing business
-- Total lock up: 102 days (of which, debtor days were 46) (2020: 114 days, debtor days 49).
-- RBG Legal Services revenue per fee earner: GBP375,000 (2020: GBP497,000)
-- Rosenblatt Utilisation / Realisation for the 6 months to June
2021 was 86%/93% (2020: 93%/116%). Memery Crystal for June 2021 was
102%/84% (Rosenblatt target is 1,500 hours and Memery Crystal
1,300)
Revenue and Gains on Litigation Assets
Reported Group revenue and gains on litigation assets for the
period is GBP18.3 million compared to GBP12.0 million in 2020,
representing a 53.2% increase.
Of this increase, 35.1% (or GBP4.2 million) was a result of the
organic business as Convex Capital and LionFish delivered ahead of
last year and 18.1% was delivered from the newly acquired business.
This half year shows GBP1.5m gain on litigation assets against zero
in the previous year. The organic professional services revenue
growth is up 22.7% to GBP14.7 million from GBP12.0 million in 2020.
This arose due to strong performance in Convex Capital of GBP5.0
million, delivering 8 deals against one last year and GBP0.3
million of revenue in 2020.
Staff costs
Total staff costs for the first half of 2021 were GBP10.6
million (2020: GBP 7.5 million), which includes GBP2.4m for Convex
(GBP1.2m in relation to the Directors bonus scheme of 20% of
completed deals, of which 50% must be re-invested in RBG shares),
GBP0.2 million for LionFish and GBP1.2m from Memery Crystal. The
average number of employees was 121 (2020: 92). The acquisition of
Memery Crystal has added 139 staff to Group's headcount, which at
the end of the period totalled 239 (2020: 88), of which 151 are fee
earners.
Overhead costs
During the half year to 30 June 2021, the Group incurred
overheads of GBP13.2 million (before depreciation and amortisation)
(2020: GBP9.3 million). Staff costs were GBP10.6 million (2020:
GBP7.5 million), of which contractors' costs were GBP1.4 million
(2020: GBP1.4 million).
Other operating costs were GBP2.6 million (2020: GBP1.8
million), of which the cost of the acquisition represented GBP0.5
million, and incremental Memery Crystal operating costs were GBP0.5
million.
EBITDA
EBITDA for the half year to 30 June 2021 was GBP5.2 million
representing 28.1% of revenue (2020: GBP2.6 million, 22.0% of
revenue) which includes a GBP4.7 million contribution from the
organic business. Within the organic business we have GBP1.4
million of gains on litigation assets.
Profit Before Tax
The profit before tax for the period was GBP3.9 million
representing 21.5% of revenue (2020: GBP1.4 million, 12.1% of
revenue).
Earnings Per Share (EPS)
The weighted average number of shares in 2021 was 87.4 million
which gives a basic earnings per share (Basic EPS) for the period
of 3.47p (2020: 1.35p).
Balance Sheet
2021 2020
GBPm GBPm
Goodwill, intangible and tangible assets 83.8 45.4
------- ------
Current Assets 17.1 15.1
------- ------
Current Liabilities (9.6) (6.4)
------- ------
91.3 54.1
------- ------
Net debt (9.8) (1.6)
------- ------
Non-Current Liabilities (15.5) (5.8)
------- ------
Deferred consideration (7.2) (4.0)
------- ------
Net assets 58.8 42.7
------- ------
The Group's net assets as at 30 June 2021 increased by GBP16
million on the prior year due to the increase in goodwill and
intangible assets resulting from the acquisition of Memery Crystal
and an increase in the trading for the period.
Goodwill, Tangible and Intangible Assets
Included within tangible assets is GBP17 million which relates
to IFRS 16 right of use assets for the Group's leases. Within total
intangible assets of GBP56.1 million, GBP20.9 million relates to
current year acquisitions and have been attributed between
goodwill, customer contracts and brand. The Company has considered
the amounts at which goodwill and intangible assets are stated on
the basis of forecast future cash flows and although these are
subjected to unusually high levels of general uncertainty due to
COVID-19, concluded that that these assets have not been materially
impaired.
Working Capital
Management of lock up has continued to be a key focus of the
Group over the period. Convex and LionFish are invoiced on a cash
basis, but our legal services business lock up days is a measure of
the length of time it takes to convert work done into cash. It is
calculated as the combined debtor and WIP days 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 30 June 2021 were 102 compared to 114 for the
previous year, with debtor days being 46 (2020: 49).
Net Debt
We have a new revolving credit facility of GBP15 million and a
new acquisition term loan of GBP10 million repayable over 5 years.
Our net debt position is GBP9.8 million at the end of the period
(2020: GBP1.6 million) leaving the full RCF facility available.
This positions the Group well to deliver its strategy into 2021 and
support the business through any uncertainty due to COVID-19.
Cash Conversion
2021 2020
GBPm GBPm
Net cash generated from operations 2.5 (0.9)
------ -------
Interest (0.3) (0.2)
------ -------
Capital expenditure 0 (0.1)
------ -------
Free cash flow 2.2 (1.2)
------ -------
Underlying profit after tax 3.1 1.2
------ -------
Cash conversion 71% (100)%
------ -------
The cash conversion percentage measures the Group's conversion
of its underlying profit after tax into free cash flows. Net cash
generated from operations includes GBP1.4 million (2020: GBP1.5
million) of net litigation investments. Cash conversion of 71%
(2020: 100%) for the half year shows an increase from previous
periods as a result of the stronger six-month trading period, which
historically is back end loaded. It is a further focus of the
business to drive to our target of 75%. For 2020 the year end cash
conversion was 76%.
Net Debt / Net Cash and cash equivalents
Net debt at the end of the period was GBP9.8 million (2020:
GBP1.6 million net debt). The net decrease in cash and cash
equivalents of GBP3.3 million for the period included GBP2.2
million of inflows generated from operating activities (net of
GBP1.4 million of further investments in litigation assets).
Investing activities gave rise to an outflow of GBP12.1 million, of
which GBP12 million related to the cash element of the acquisition
of Memery Crystal. Inflows from financing activities of GBP6.6
million is predominantly made up of GBP10.0 million of term loan to
fund the acquisition less GBP2.7 million in dividends.
Summary
We are pleased with the profitability and performance of the
Group during the first half of the year. The business has responded
well to the challenges of COVID-19. However, it is important to
acknowledge the impact of COVID-19 on business life, and it will be
a significant challenge moving forward. There will be greater
uncertainty until the full impact is more visible.
Robert Parker
Chief Financial Officer
15 September 2021
Unaudited consolidated statement of comprehensive income
For the period ended 30 June 2021
Unaudited Unaudited Audited
Note 1 January 1 January 1 January
to to to
30 June 2021 30 June 2020 31 December
2020
GBP GBP GBP
Revenue 4 16,852,571 11,973,119 22,449,332
Gains on litigation assets 4 1,494,425 - 3,122,727
Personnel costs 5 (10,628,767) (7,538,307) (14,780,204)
Depreciation and amortisation expense (975,334) (1,024,787) (2,081,501)
Other expenses (2,565,144) (1,797,370) (633,999)
_______ _______ _______
Profit from operations 4,177,751 1,612,655 8,076,355
EBITDA 5,153,085 2,637,442 10,157,856
Non-underlying items
Deferred consideration release - - (2,640,000)
Cost of acquiring subsidiary 524,905 - -
Adjusted EBITDA 5,677,990 2,637,442 7,517,856
---------------------------------------- ----- ------------- ------------- -------------
Finance expense (249,259) (184,458) (394,534)
Finance income 16,178 18,081 24,460
_______ _______ _______
Profit before tax 3,944,670 1,446,278 7,706,281
Tax expense (891,448) (288,457) (1,024,936)
_______ _______ _______
Profit and total comprehensive income 3,053,222 1,157,821 6,681,345
_______ _______ _______
Total profit and comprehensive income
attributable to:
Owners of the parent 3,034,450 1,157,821 6,454,738
Non-controlling interest 18,772 - 226,607
_______ _______ _______
3,053,222 1,157,821 6,681,345
_______ _______ _______
Earnings per share attributable to the
ordinary equity holders of the parent 6
Profit
Basic (pence) 3.47 1.35 7.54
Diluted (pence) 3.47 1.35 7.54
_______ _______ _______
Unaudited consolidated statement of financial position
As at 30 June 2021
Unaudited Unaudited Audited
Company registered number: 11189598 Note 30 June 30 June 31 December
2021 2020 2020
Assets GBP GBP GBP
Current assets
Trade and other receivables 17,126,750 15,145,049 7,696,925
Cash and cash equivalents 10,194,188 8,443,748 13,522,184
_______ _______ _______
27,320,938 23,588,797 21,219,109
Non-current assets
Property, plant and equipment 8 2,831,745 579,826 475,229
Right-of-use assets 10 17,035,042 6,277,912 5,825,712
Intangible assets 11 56,128,413 34,757,968 35,378,065
Litigation assets 12 7,707,643 3,782,823 6,294,754
Investments in associates 9 80,000 - -
_______ _______ _______
83,782,843 45,398,529 47,973,760
_______ _______ _______
Total assets 111,103,781 68,987,326 69,192,869
_______ _______ _______
Liabilities
Current liabilities
Trade and other payables 11,363,867 8,775,171 3,894,546
Loans and borrowings 13 2,000,000 - -
Leases 10 2,521,314 833,450 870,019
Current tax liabilities 1,292,299 689,817 657,437
Provisions 142,621 95,375 116,875
_______ _______ _______
17,320,101 10,393,813 5,538,877
Non-current liabilities
Loans and borrowings 13 18,000,000 10,000,000 10,000,000
Deferred tax liability 803,223 348,440 304,853
Trade and other payables 1,515,000 - 1,015,000
Leases 10 14,713,596 5,500,602 5,081,043
_______ _______ _______
35,031,819 15,849,042 16,400,896
_______ _______ _______
Total liabilities 52,351,920 26,242,855 21,939,773
_______ _______ _______
NET ASSETS 58,751,861 42,744,471 47,253,096
_______ _______ _______
Issued capital and reserves attributable
to
owners of the parent
Share capital 190,662 171,184 171,184
Share premium reserve 49,232,606 37,565,129 37,565,129
Retained earnings 9,283,114 5,008,158 9,290,076
_______ _______ _______
58,706,382 42,744,471 47,026,389
Non-controlling interest 45,479 - 226,707
_______ _______ _______
TOTAL EQUITY 58,751,861 42,744,471 47,253,096
_______ _______ _______
The interim statements were approved by the Board of Directors
and authorised for issue on 14 September 2021.
Unaudited consolidated statement of cash flows
For the period ended 30 June 2021
Unaudited Unaudited Audited
Note 30 June 30 June 31 December
2021 2020 2020
Cash flows from operating activities GBP GBP GBP
Profit for the period before tax 3,944,670 1,446,278 7,706,281
Adjustments for:
Depreciation of property, plant and
equipment 8 199,196 162,598 335,634
Amortisation of right-of-use assets 10 589,380 482,286 986,061
Amortisation of intangible fixed assets 11 186,757 379,903 759,806
Finance income (16,178) (18,081) (24,460)
Finance expense 249,259 184,458 394,534
_______ _______ _______
5,153,084 2,637,442 10,157,856
Decrease/(increase) in trade and other
receivables (872,208) (4,056,237) 3,391,887
(Decrease) in trade and other payables (442,862) 2,064,235 (2,816,390)
(Increase) in litigation assets 12 (1,412,889) (1,572,937) (4,084,868)
Increase in provisions 25,746 20,375 41,875
_______ _______ _______
Cash generated from operations 2,450,871 (907,122) 6,690,360
Tax paid (276,765) (1,067,832) (1,880,277)
_______ _______ _______
Net cash flows from operating activities 2,174,106 (1,974,954) 4,810,083
_______ _______ _______
Investing activities
Purchases of property, plant and equipment 8 (46,125) (104,042) (172,482)
Purchase of other intangibles - - (1,000,000)
Acquisition of subsidiary, net of cash (12,000,000) - -
Purchase of shares in associate 9 (80,000) - -
Interest received 16,178 18,081 24,460
_______ _______ _______
Net cash used in investing activities (12,109,947) (85,961) (1,148,022)
_______ _______ _______
Financing activities
Issue of ordinary shares in subsidiaries - - 100
Dividends paid to holders of the parent (2,741,412) (823,284) (823,283)
Proceeds from loans and borrowings 13 21,000,000 11,000,000 21,000,000
Repayment of loans and borrowings 13 (11,000,000) (1,000,000) (11,000,000)
Repayments of lease liabilities 10 (401,485) (397,751) (832,316)
Interest paid on loans and borrowings (127,173) (76,678) (185,497)
Interest paid on lease liabilities 10 (122,085) (107,780) (209,037)
_______ _______ _______
Net cash from financing activities 6,607,845 8,594,507 7,949,967
_______ _______ _______
Net increase/(decrease) in cash and
cash equivalents (3,327,996) 6,533,592 11,612,028
Cash and cash equivalents at beginning
of period 13,522,184 1,910,156 1,910,156
_______ _______ _______
Cash and cash equivalents at end of
period 10,194,188 8,443,748 13,522,184
_______ _______ _______
Consolidated statement of changes in equity
For the period ended 30 June 2021
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
period
Profit for the period - - 1,157,821 1,157,821 - 1,157,821
______ ______ ______ _____ ______ ______
Comprehensive Income for the
period - - 1,157,821 1,157,821 - 1,157,821
______ ______ ______ _____ _____ ______
Contributions by and distributions
to owners
Dividends - - (823,284) (823,284) - (823,284)
______ ______ ______ _____ ______ ______
Total contributions by and
distributions to owners - - (823,284) (823,284) - (823,284)
______ ______ ______ _____ ______ ______
Balance at 30 June 2020 (unaudited) 171,184 37,565,129 5,008,158 42,744,471 - 42,744,471
______ ______ ______ ______ ______ ______
Consolidated statement of changes in equity
For the period ended 30 June 2021 (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 July 2020 171,184 37,565,129 5,008,158 42,744,471 - 42,744,471
Comprehensive profit for the
period
Profit for the period - - 5,296,918 5,296,918 226,607 5,523,525
______ ______ ______ ______ ______ ______
Total comprehensive profit for
the period - - 5,296,918 5,296,918 226,607 5,523,525
______ ______ ______ ______ ______ ______
Contributions by and distributions
to owners
Issue of share capital 100 100
Grant of put option over shares
of subsidiary - - (1,015,000) (1,015,000) - (1,015,000)
______ ______ ______ ______ ______ ______
Total contributions by and
distributions to owners - - (1,015,000) (1,015,000) 100 (1,014,900)
______ ______ ______ ______ ______ ______
Balance at 31 December 2020
(audited) 171,184 37,565,129 9,290,076 47,026,389 226,707 47,253,096
______ ______ ______ ______ ______ ______
Consolidated statement of changes in equity
For the period ended 30 June 2021 (continued)
Total
Attributable
to equity Non-
Share Share Retained holders of controlling Total
Capital Premium Earnings parent Interest Equity
GBP GBP GBP GBP GBP GBP
Balance at 1 January 2021 171,184 37,565,129 9,290,076 47,026,389 226,707 47,253,096
Comprehensive profit for the
period
Profit for the period - - 3,034,450 3,034,450 18,772 3,053,222
______ ______ ______ ______ ______ ______
Total comprehensive profit
for the period
- - 3,034,450 3,034,450 18,772 3,053,222
______ ______ ______ ______ ______ ______
Contributions by and distributions
to owners
Dividends - - (2,541,412) (2,541,412) (200,000) (2,741,412)
Issue of share capital 19,478 11,667,477 - 11,686,955 - 11,686,955
Grant of put option over shares
of associate - - (500,000) (500,000) - (500,000)
______ ______ ______ ______ ______ ______
Total contributions by and
distributions to owners 19,478 11,667,477 (3,041,412) 8,645,543 (200,000) 8,445,543
______ ______ ______ ______ ______ ______
Balance at 30 June 2021 190,662 49,232,606 9,283,114 57,706,382 45,479 58,751,861
______ ______ ______ ______ ______ ______
The attached notes form part of these financial statements.
Unaudited notes to the financial statements for the period ended
30 June 2021
1 Basis of preparation
RBG Holdings plc is a public limited company, incorporated in
the United Kingdom. The principal activity of the Group is the
provision of legal and professional services, including management
and financing of litigation projects.
Status of Interim Report
The Interim Report covers the six months ended 30 June 2021,
with comparative figures for the six months ended 30 June 2020 and
the year ended 31 December 2020 and was approved by the Board of
Directors on 14 September 2021. The Interim Report is
unaudited.
The interim condensed set of consolidated financial statements
in the Interim Report are not statutory accounts as defined by
Section 434 of the Companies Act 2006.
The statutory accounts for the year ended 31 December 2020 have
been reported on by the Group's auditors and delivered to the
Registrar of Companies. The audit report thereon was unqualified,
did not include references to matters to which the auditors drew
attention by way of emphasis without qualifying the report, and did
not contain a statement under Section 498 of the Companies Act
2006.
The principal accounting policies adopted in the preparation of
the unaudited consolidated financial statements are set out in Note
2. The policies have been consistently applied to the periods
presented, unless otherwise stated.
The unaudited consolidated financial statements of the Group
have been prepared in accordance with IFRS as adopted by the UK and
those parts of the Companies Act 2006 applicable to companies
reporting under IFRS. The preparation of financial statements in
compliance with IFRS requires the use of certain critical
accounting estimates. It also requires Group management to exercise
judgement 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.
Going concern
The Group financial statements are prepared on a going concern
basis as the Directors have a reasonable expectation that the Group
has adequate resources to continue in operational existence for at
least twelve months from the date of approval of the financial
statements.
2 Significant 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.
Notes (continued)
2 Significant accounting policies (continued)
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.
Associates
Where the Group has the power to participate in (but not
control) the financial and operating policy decisions of another
entity, it is classified as an associate. Associates are initially
recognised in the consolidated statement of financial position at
cost. Subsequently associates are accounted for using the equity
method, where the Group's share of post-acquisition profits and
losses and other comprehensive income is recognised in the
consolidated statement of profit and loss and other comprehensive
income (except for losses in excess of the Group's investment in
the associate unless there is an obligation to make good those
losses).
Profits and losses arising on transactions between the Group and
its associates are recognised only to the extent of unrelated
investors' interests in the associate. The investor's share in the
associate's profits and losses resulting from these transactions is
eliminated against the carrying value of the associate. Any premium
paid for an associate above the fair value of the Group's share of
the identifiable assets, liabilities and contingent liabilities
acquired is capitalised and included in the carrying amount of the
associate.
Where there is objective evidence that the investment in an
associate has been impaired the carrying amount of the investment
is tested for impairment in the same way as other non-financial
assets.
Notes (continued)
2 Significant accounting policies (continued)
Goodwill
Goodwill represents the excess of the cost of a business
combination over the Group's interest in the fair value of
identifiable assets, liabilities and contingent liabilities
acquired.
Cost comprises the fair value of assets given, liabilities
assumed, and equity instruments issued, plus the amount of any
non-controlling interests in the acquiree plus, if the business
combination is achieved in stages, the fair value of the existing
equity interest in the acquiree. Contingent consideration is
included in cost at its acquisition date fair value and in the case
of contingent consideration classified as a financial liability,
remeasured subsequently through profit or loss. Direct costs of
acquisition are recognised immediately as an expense.
Goodwill is capitalised as an intangible asset with any
impairment in carrying value being charged to the consolidated
statement of comprehensive income. Where the fair value of
identifiable assets, liabilities and
contingent liabilities exceed the fair value of consideration
paid; the excess is credited in full to the consolidated statement
of comprehensive income on the acquisition date.
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 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.
Amortised cost
These assets arise principally from the provision of goods and
services to customers (e.g., trade receivables), but also
incorporate other types of financial assets where the objective is
to hold these assets in order to collect contractual cash flows and
the contractual cash flows are solely payments of principal and
interest. They are initially recognised at fair value plus
transaction costs that are directly attributable to their
acquisition or issue and are subsequently carried at amortised cost
using the effective interest rate method, less provision for
impairment.
Impairment provisions for current and non-current trade
receivables are recognised based on the simplified approach within
IFRS 9 using a provision matrix in the determination of the
lifetime expected credit losses. During this process the
probability of the non-payment of the trade receivables is
assessed. This probability is then multiplied by the amount of the
expected loss arising from default to determine the lifetime
expected credit loss for the trade receivables. For trade
receivables, which are reported net, such provisions are recorded
in a separate provision account with the loss being recognised in
profit or loss. On confirmation that the trade receivable will not
be collectable, the gross carrying value of the asset is written
off against the associated provision.
From time to time, the Group elects to renegotiate the terms of
trade receivables due from customers with which it has previously
had a good trading history. Such renegotiations will lead to
changes in the timing of payments rather than changes to the
amounts owed and in consequence, the new expected cash flows are
discounted at the original effective interest rate and any
resulting difference to the carrying value is recognised in the
consolidated statement of comprehensive income (operating
profit).
Notes (continued)
2 Significant accounting policies (continued)
Impairment provisions for receivables from related parties and
loans to related parties, including those from subsidiary
companies, are recognised based on a forward looking expected
credit loss model. The methodology used to determine the amount of
the provision is based on whether there has been a significant
increase in credit risk since initial recognition of the financial
asset. This annual assessment considers forward-looking information
on the general economic and specific market conditions together
with a review of the operating performance and cash flow generation
of the entity relative to that at initial recognition. For those
where the credit risk has not increased significantly since initial
recognition of the financial asset, twelve month expected credit
losses along with gross interest income are recognised. For those
for which credit risk has increased significantly, lifetime
expected credit losses along with the gross interest income are
recognised. For those that are determined to be credit impaired,
lifetime expected credit losses along with interest income on a net
basis are recognised.
The Group's financial assets measured at amortised cost comprise
trade and other receivables and cash and cash equivalents in the
consolidated statement of financial position. Cash and cash
equivalents includes cash in hand, deposits held at call with
banks, and other short term highly liquid investments with original
maturities of three months or less.
Financial liabilities
The Group classifies its financial liabilities depending on the
purpose for which the liability was acquired.
Other financial liabilitie s
All the Group's financial liabilities are classified as other
financial liabilities, which include the following items:
Bank borrowings are initially recognised at fair value net of
any transactions costs directly attributable to the issue of the
instrument. Such interest bearing liabilities are subsequently
measured at amortised cost using the effective interest rate
method, which ensures that any interest expense over the period to
repayment is at a constant rate on the balance of the liability
carried in the consolidated statement of financial position. For
the purposes of each financial liability, interest expense includes
initial transaction costs and any premium payable on redemption, as
well as any interest or coupon payable while the liability is
outstanding.
Trade payables and other short-term monetary liabilities, which
are initially recognised at fair value and subsequently carried at
amortised cost using the effective interest method.
Externally acquired intangible assets
Externally acquired intangible assets are initially recognised
at cost and subsequently amortised over their useful economic
lives.
Intangible assets are recognised on business combinations if
they are separable from the acquired entity or give rise to other
contractual/legal rights. The amounts ascribed to such intangibles
are arrived at by using appropriate valuation techniques.
The significant intangibles recognised by the Group, their
useful economic lives and the methods used for amortisation and to
determine the cost of intangibles acquired in a business
combination are as follows:
Intangible asset Useful economic Remaining Amortisation Valuation method
life useful economic method
life
Brand 20 years 17-20 years Straight Estimated discounted
line cash flow
Customer contracts 1-2 years 0-2 year In line Estimated discounted
with contract cash flow
revenues
Restrictive 2 years 1-2 years Straight Cost
covenant extension line
Notes (continued)
2 Significant accounting policies (continued)
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.
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, sales prices of part
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.
Rosenblatt
Unlike LionFish's investments, the total return on RB'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 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
-- Litigation finance - Sale of litigation assets
-- Other Professional services -Provision of sell-side M&A corporate finance services
Unaudited 6 months ended 30 Legal Litigation Other Professional Total
June 2021 services finance services
GBP GBP GBP GBP
Segment revenue 11,833,512 - 5,019,059 16,852,571
_______ _______ _______ _______
Segment gains on litigation
assets comprising:
Proceeds on disposal of litigation
assets - 2,386,000 - 2,386,000
Realisation of litigation assets - (1,116,059) - (1,116,059)
_______ _______ _______ _______
Profit on disposal of litigation
assets - 1,269,941 - 1,269,941
Fair value movement on litigation
assets - 224,484 - 224,484
_______ _______ _______ _______
- 1,494,425 - 1,494,425
_______ _______ _______ _______
Segment contribution 5,515,276 - 2,403,649 7,918,925
_______ _______ _______
Segment gains on litigation
assets - 1,494,425 - 1,494,425
_______ _______ _______
Costs not allocated to segments
Personnel costs (1,701,228)
Depreciation and amortisation (975,334)
Other operating expense (2,559,037)
Net financial expenses (233,081)
_______
Group profit for the period before
tax 3,944,670
_______
Notes (continued)
4 Segment information (continued)
Unaudited 6 months ended 30 Legal Litigation Other Professional Total
June 2020 services finance services
GBP GBP GBP GBP
Segment revenue 11,680,284 - 292,835 11,973,119
_______ _______ _______ _______
Segment gains on litigation -- - - -
assets
_______ _______ _______ _______
Segment contribution 6,533,036 (65,374) (781,725) 5,685,937
_______ _______ _______
Segment gains on litigation -- - - -
assets
_______ _______ _______
Costs not allocated to segments
Personnel costs (1,277,058)
Depreciation and amortisation (1,024,787)
Other operating expense (1,771,437)
Net financial expenses (166,377)
_______
Group profit for the period before
tax 1,446,278
_______
Notes (continued)
4 Segment information (continued)
Audited year ended 31 December Legal Litigation Other Professional Total
2020 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
_______
5 Employees Unaudited Unaudited Audited
6 mos ended 6 mos ended Year ended
30 Jun 2021 30 Jun 2020 31 Dec 2020
Group GBP GBP GBP
Staff costs (including directors)
consist of:
Wages and salaries 7,951,210 5,292,969 9,902,596
Short-term non-monetary benefits 63,203 56,624 122,854
Cost of defined contribution scheme 185,761 134,522 262,518
Share-based payment expense - - 39,403
Social security costs 999,835 644,035 1,225,260
_______ _______ _______
9,200,009 6,128,150 11,552,631
_______ _______ _______
Personnel Costs stated in the Consolidated statement of
comprehensive income includes the costs of contractors of
GBP1,428,758 (HY2020: GBP1,410,157, FY2020: GBP3,227,573).
Notes (continued)
5 Employees (continued)
The average number of employees (including directors) during the
period was as follows:
Unaudited Unaudited Audited
6 mos ended 6 mos ended Year ended
30 June 2021 30 Jun 2020 31 Dec 2020
Number Number Number
Legal and professional staff 75 57 55
Administrative staff 46 35 35
_______ _______ _______
121 92 90
_______ _______ _______
Defined contribution pension schemes are operated on behalf of
the employees of the Group. The assets of the schemes are held
separately from those of the Group in independently administered
funds. The pension charge represents contributions payable by the
Group to the funds and amounted to GBP185,761 (HY2020: GBP134,522,
FY2020: GBP262,518). Contributions amounting to GBP106,619 (HY2020:
GBP77,274, FY2020: GBP40,574) were payable to the funds at period
end and are included in Trade and other payables.
6 Earnings per share
Unaudited Unaudited Audited
6 mos ended 6 mos ended Year ended
30 June 2021 30 Jun 2020 31 Dec 2020
Numerator GBP GBP GBP
Profit for the period and earnings
used in basic and diluted EPS 3,034,450 1,157,821 6,454,738
Non-Underlying items
Costs of acquiring subsidiary 524,905 - (2,640,000)
Less: tax effect of above items - - -
_______ _______ _______
Profit for the period adjusted for
Non-Underlying items 3,559,355 1,157,821 3,814,738
_______ _______ _______
Denominator Number Number Number
Weighted average number of shares
used in basic and diluted EPS 87,421,556 85,592,106 85,592,106
_______ _______ _______
Earnings per share is calculated as follows:
Unaudited Unaudited Audited
6 mos ended 6 mos ended 2020
30 June 2021 30 Jun 2020
Pence Pence Pence
Basic earnings per ordinary share 3.47 1.35 7.54
Diluted earnings per ordinary share 3.47 1.35 7.54
Basic earnings per ordinary share adjusted
for Non-Underlying items 4.07 1.35 4.46
Diluted earnings per ordinary share adjusted
for Non-Underlying items 4.07 1.35 4.46
Notes (continued)
6 Earnings per share (continued)
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.
7 Dividends
On 26 February 2021, an interim dividend of 3 pence per share
was paid in respect of the 2020 financial year and
on 27 August 2021, an interim dividend of 2 pence per share was
paid in respect of the 2021 financial year.
8 Property, plant and equipment
Group Plant and Fixtures Computer Total
Machinery and fittings Equipment
GBP GBP GBP GBP
Cost
At 1 January 2021 335,501 149,136 628,684 1,113,321
Additions 4,804 - 41,318 46,122
Acquired through business
combination 2,369,972 92,498 47,123 2,509,593
_______ _______ _______ _______
At 30 June 2021 2,710,277 241,634 717,125 3,669,036
_______ _______ _______ _______
Accumulated Depreciation
and Impairment
At 1 January 2021 281,571 45,055 311,466 638,092
Charge for the period 62,422 24,081 112,696 199,199
_______ _______ _______ _______
At 30 June 2021 343,993 73,406 419,890 837,291
_______ _______ _______ _______
Net book value
At 1 January 2021 53,930 104,081 317,218 475,229
At 30 June 2021 2,366,284 172,498 292,963 2,831,745
_______ _______ _______ _______
Under debentures signed and registered on 25 October 2019 and 19
April 2021, HSBC UK Bank plc have fixed and floating charges over
the tangible assets of the Group.
9 Investment in associates
The following entities have been included in the consolidated
financial statements using the equity method:
Name of entity Place of incorporation Proportion of ownership interest
held
Unaudited Unaudited Audited
2021 2020 2020
Adnitor Limited United Kingdom 40% - -
On 1 February 2021 RBG Holdings plc purchased 40 ordinary shares
of GBP1 each in Adnitor Limited for a consideration of
GBP80,000.
Notes (continued)
10 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.
Right-of-Use Assets
Land and Computer Total
buildings equipment
GBP GBP GBP
At 1 January 2021 5,822,408 3,304 5,825,712
Acquired through business combinations 11,798,710 - 11,798,710
Amortisation (586,076) (3,304) (589,380)
_______ _______ _______
At 30 June 2021 17,035,042 - 17,035,042
_______ _______ _______
Lease liabilities
Land and Computer Total
buildings equipment
GBP GBP GBP
At 1 January 2021 5,947,655 3,407 5,951,062
Acquired through business combinations 11,685,333 - 11,685,333
Interest expense 122,038 47 122,085
Lease payments (520,116) (3,454) (523,570)
_______ _______ _______
At 30 June 2021 17,234,910 - 17,234,910
_______ _______ _______
At 30 June 2021, 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 921,511 1,599,803 2,127,101 6,840,906 5,745,589 17,234,910
Notes (continued)
11 Intangible assets
Group Goodwill Customer Brand Other Total
Contracts
GBP GBP GBP GBP GBP
Cost
At 1 January 2021 33,035,260 1,367,784 1,411,596 1,000,000 36,814,640
Acquired through
business combinations 18,794,041 194,185 1,948,878 - 20,937,104
_______ _______ _______ _______ _______
At 30 June 2021 51,829,301 1,561,969 3,360,474 1,000,000 57,751,744
_______ _______ _______ _______ _______
Accumulated amortisation
and impairment
At 1 January 2021 - 1,293,939 142,636 - 1,436,575
Amortisation charge - 60,013 43,410 83,333 186,756
_______ _______ _______ _______ _______
At 30 June 2021 - 1,353,952 186,046 83,333 1,623,331
_______ _______ _______ _______ _______
Net book value
At 1 January 2021 33,035,260 73,845 1,268,960 1,000,000 35,378,065
At 30 June 2021 51,829,301 208,017 3,174,428 916,667 56,128,413
_______ _______ _______ _______ _______
Under debentures signed and registered on 25 October 2019 and 19
April 2021, HSBC UK Bank plc have fixed and floating charges over
the intangible assets of the Group.
12 Litigation assets
The table below provides analysis of the movements in the Level
3 financial assets.
Unaudited Unaudited Audited
30 June 30 June 31 December
2021 2020 2020
Level 3 Level 3 Level 3
GBP GBP GBP
At 1 January 6,294,754 2,209,886 2,209,886
Additions 2,304,464 1,572,937 4,523,141
Realisations (1,116,059) - (2,353,164)
Fair value movement 224,484 - 1,914,891
_______ _______ _______
At 30 June / 31 December 7,707,643 3,782,823 6,294,754
_______ _______ _______
Sensitivity of Level 3 valuations
Following investment, the Group engages in a semi-annual review
of each investment's fair value. At 30 June 2021, should the value
of investments have been 10% higher or lower than provided for in
the Group's fair value estimation, while all other variables
remained constant, the Group's income and net assets would have
increased and decreased respectively by GBP770,764 (HY2020:
GBP378,282, FY2020: GBP629,475).
Notes (continued)
13 Loans and borrowings
The book value and fair value of loans and borrowings which all
denominated in sterling are as follows:
Unaudited Unaudited Unaudited Unaudited Audited Audited
Book value Fair value Book value Fair value Book value Fair value
30 Jun 30 Jun 30 Jun 30 Jun 31 Dec 31 Dec2020
21 2021 2020 2020 2020
GBP GBP GBP GBP GBP GBP
Current
Bank loans
* Secured 2,000,000 2,000,000 - - - -
Non-Current
Bank loans
- * Secured 18,000,000 18,000,000 10,000,000 10,000,000 10,000,000 10,000,000
_______ _______ _______ _______ _______ _______
At 30 June / 31
December 20,000,000 20,000,000 10,000,000 10,000,000 10,000,000 10,000,000
_______ _______ _______ _______ _______ _______
The rate at which Sterling denominated loans and borrowings are
payable is 2.4% above SONIA (2020: 1.75% above LIBOR).
The bank loans are secured by fixed and floating charges over
the assets of the Group. The Group has GBP5 million undrawn
committed borrowing facilities available at 30 June 2021 (HY2020:
GBPnil, FY2020: GBPnil).
14 Business combinations during the period
On 28 May 2021, RBG Holdings plc acquired Memery Crystal Limited
("Memery Crystal"). Memery Crystal is a specialist international
law firm, based in London, which on acquisition had 146 employees
(including 29 partners and an additional 66 fee earners). The
acquisition was made in line with the business strategy to acquire
complementary, high gross margin, professional services businesses
and Memery Crystal is an established business in the Group's target
market. Memery Crystal has a strong focus on transactions, which
makes is a complementary fit with RB, which derives most of its
revenue from contentious law.
Notes (continued)
14 Business combinations during the period ( continued)
At the date of authorisation of the interim financial statements
a detailed assessment of the fair value of the identifiable net
assets has not been fully completed. Details of the provisional
fair value of identifiable assets and liabilities acquired purchase
consideration and goodwill are as follows:
Provisional Adjustment Fair value
value
GBP GBP GBP
Property, plant and equipment 2,509,587 - 2,509,587
Right-of-use assets - 11,798,710 11,798,710
Brand value - 1,948,878 1,948,878
Customer contracts - 194,185 194,185
Trade and other receivables 8,670,994 (113,377) 8,557,617
Trade and other payables (1,584,766) - (1,584,766)
Deferred income (2,968,398) 2,968,398 -
Other taxation and social security (749,956) - (749,956)
Lease liabilities - (11,685,333) (11,685,333)
Deferred tax liability - (518,546) (518,546)
_______ _______ _______
Total net assets 5,877,461 4,592,915 10,470,376
_______ _______ _______
Trade and other receivables with a fair value of GBP8,557,617
were acquired, representing trade and other debtors of
GBP4,276,786, contract assets of GBP3,865,089 and prepayments of
GBP529,119. The Group is still assessing the debtor book and
contract asset ledger and is not yet in a position to accurately
assess the final level of uncollectable contractual cashflows.
Fair value of consideration paid
GBP
Cash 12,000,000
Ordinary shares issued 11,686,956
Deferred cash consideration 5,577,461
_______
Total consideration 29,264,417
_______
Goodwill (Note 11) 18,794,041
_______
Acquisition costs of GBP524,905 arose as a result of the
transaction. These have been recognised as part of other expenses
in the statement of comprehensive income.
The initial consideration for the acquisition was settled with
cash amounting to GBP12,000,000 and the issue of 9,739,130 ordinary
shares with a nominal value of 0.2p each. The fair value of the
ordinary shares has been based on the acquisition date share price
(GBP1.20 per share). In addition, there is a deferred cash
consideration of GBP5,577,461, which is payable in two tranches six
and twelve months post acquisition, and is included within Other
Payables.
Whilst fair value adjustments will result in changes to the
value of recognised goodwill, it is expected that a significant
amount of goodwill will be recognised. This goodwill represents
items, such as the workforce, which do not qualify for recognition
as assets. The goodwill recognised will not be deductible for tax
purposes.
Since the acquisition date, Memery Crystal has contributed
GBP2,168,000 to group revenues and GBP379,000 to group profit.
[1] Figures for 2021 include one month of contribution from
Memery Crystal following the completion of the acquisition at the
end of May.
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END
IR USOKRAOUKAAR
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September 15, 2021 02:00 ET (06:00 GMT)
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