REG - RBG Holdings PLC - Audited results - year ended 31 December 2021
01/04/2022 07:15
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RNS Number : 8659G RBG Holdings PLC 01 April 2022
1 April 2022
RBG Holdings plc
("RBG", the "Group", or the "Company")
Audited results for the twelve months ended 31 December 2021
Strong performance as Group increasingly benefits from diversified revenue
streams
RBG Holdings plc (AIM: RBGP), the professional services group, is pleased to
announce its audited results for the twelve months ended 31 December 2021.
Group Financial Highlights 1 :
· Group revenue (including gains from litigation assets) up 86.7%
to £47.2 million (2020 restated: £25.3 million)
· Group organic revenue, excluding Memery Crystal, up 19.6% to
£26.8 million (2020: £22.4 million)
· Gains on litigation assets up 84.5% to £5.2 million (2020
restated: £2.8 million)
· Adjusted EBITDA 2 up 91.0% to £13.8 million, (2020 restated:
£7.2 million)
· Adjusted profit before tax up 111.7% to £10.1 million (2020
restated: £4.8 million)
· EBITDA is up 31.1% to £12.9 million (2020 restated: £9.9
million) and profit before tax is up 24.6% to £9.2 million (2020 restated:
£7.4 million)
· Adjusted free cash flow generation was £5.3 million (2020: £5.1
million)
· Net debt of £14.2 million (2020: net cash of £3.5 million)
reflecting new £10 million term facility to fund the acquisition of Memery
Crystal (of which £1 million has already been repaid)
· Total dividend paid to shareholders in respect of the 2021
financial year was 5 pence per share (2020: 3 pence per share), reflecting the
Board's confidence in the Group's continued prospects
Operational Highlights:
RBG Legal Services Limited ("RBGLS") - Combination of the Rosenblatt and
Memery Crystal businesses
· Revenue (including gains on litigation assets) up 61.2% to £33.7
million (2020: £20.9 million)
· Legal services revenue up 56.3% to £32.6 million (2020: £20.9
million) with revenue now more evenly split across Dispute Resolution (35.8%),
Corporate (35.3%) and Real Estate (28.9%)
· Dispute Resolution continued to perform well, in addition to
taking on more contingent work with associated unrecognised time worked of
£3.4 million (2020: £2.0 million)
· Successfully realised litigation asset sales with proceeds
totalling £1.8 million (2020: £0.4 million)
· The integration of Rosenblatt and Memery Crystal support
functions now largely complete and has led to a sustained improvement in
EBITDA margin to 27%. The Board expects this to rise towards 35% over the
medium-term
· Average revenue per fee earner of £347,000 (2020: £425,800)
reflecting new larger workforce. Total staff is 193 (2020:73, Rosenblatt only)
of which 137 are fee earners (2020: 43, Rosenblatt only)
· Total Lockup was 109 days (2020: 99) of which Debtor Days were 59
days (2020: 47, Rosenblatt only)
LionFish Litigation Finance Limited ("LionFish")
· Successfully realised litigation asset sales 3 in five cases
with proceeds totalling £3.1 million (2020 restated: £2.6 million)
· Cash investment of £1.8 million in 10 cases (2020: £1.8 million
in 7 cases), with a full commitment of £10.5 million (if funded through to
trial over the next 2-3 years)
· First case successfully completed, delivering a return of two
times money invested as per strategy
Convex Capital Limited ("Convex Capital")
· Completed 14 deals, generating revenue of £9.4 million (2020: 2
deals, £1.6 million)
· EBITDA of £4.2 million (2020: loss of £0.9 million)
Post-period highlights:
· Since the year end, Convex Capital has completed two further
deals, delivering revenue of £1.7 million
· As at 28 March 2022, Convex Capital had a strong pipeline of 20
deals, with six going through due diligence
· In February 2022, LionFish agreed a £20 million litigation
investment arrangement with a large alternative investment firm
· In the first quarter of 2022, trading has been as expected.
Historically, in legal services, Corporate is quieter at this time of year,
however, the Group is creating opportunities in other areas of the business
Nicola Foulston, CEO, RBG Holdings plc, commented: "RBG continues to evolve
into a well-diversified, high-quality professional services group, with a
litigation finance business that leverages the Group's legal expertise. We are
building a Group with a broad revenue base that reduces any dependence on any
one business, sector, or fee generator. With the pandemic still presenting a
significant challenge, our financial performance in 2021 demonstrated once
again the resilience of our business model. Every year since our IPO, I am
pleased to say that we have delivered a solid financial performance, while
laying the groundwork for future profitable growth.
"From November 2021, our legal services business RBGLS started trading under
its two distinct brands, Rosenblatt for contentious law, such as Dispute
Resolution, and Memery Crystal for non-Contentious law, such as Corporate and
Real Estate. The business is almost fully integrated and is now based at one
office on Fleet Street. The final part of the integration, which is putting
both businesses on the same practise management software, is expected to be
completed by the end of 2022. The acquisition of Memery Crystal was part of
the Group's strategy to acquire high-value assets that amplify and broaden our
client offering. The benefits are already being felt with improved organic
revenue growth, enhanced operating efficiency, and margins growing, with scope
for further improvement over the medium term.
"Our sell-side M&A advisory boutique, Convex Capital, had an exceptional
year with 14 completed deals, after a difficult 2020 when the M&A market
ground to a halt. Importantly, deal flow momentum remains strong in 2022, and
the pipeline of opportunities is growing.
"We continue to invest in litigation assets, with 23 live deals, either in our
own matters through RBGLS or in third party matters via LionFish. LionFish's
recently signed litigation investment arrangement will provide the business
with flexible capital to allow the management team to focus on the quality of
profits, not the quantity of monies deployed into litigation risks.
"The strategy of the Group is clear. In our core professional services
businesses, we want to capitalise on the areas that offer the highest returns
for shareholders, such as our high margin legal services businesses.
Furthermore, we will use the Group's expertise to maximise the potential
returns by selectively investing in contingent asset classes such as
litigation.
"Overall, the Group has had an excellent twelve months which is reflected in
our improved revenue and profit growth. With strong demand for all Group
services, we delivered the upgraded market expectations for the 2021 financial
year from January's trading update. While acknowledging that macro-economic
conditions continue to be volatile, the new financial year has started as
expected giving us cause to look forward to the coming year with optimism. We
are excited about the long-term prospects for the Group."
Enquiries:
RBG Holdings plc Via SEC Newgate
Nicola Foulston, CEO
Singer Capital Markets (Nomad and Broker) Tel: +44 (0)20 7496 3000
Rick Thompson / Alex Bond / James Fischer (Corporate Finance)
Tom Salvesen (Corporate Broking)
SEC Newgate (for media enquiries) Tel: +44 (0)7540 106366 rbg@secnewgate.co.uk (mailto:rbg@secnewgate.co.uk)
Robin Tozer/Richard Bicknell
About RBG Holdings plc
RBG Holdings plc is a professional services group, which comprises the
following divisions:
RBG Legal Services Limited ("RBGLS")
RBGLS is the Group's legal services division which combines the businesses
previously operated by Rosenblatt Limited and Memery Crystal LLP.
Rosenblatt ("RB")
Rosenblatt is one of the UK's pioneering legal practices and a leader in
dispute resolution. Rosenblatt provides a range of legal services to its
diversified client base, which includes companies, banks, entrepreneurs and
individuals. Complementing this is Rosenblatt's increasingly international
footprint, advising on complex cross-jurisdictional disputes.
Memery Crystal ("MC")
Memery Crystal offers legal services in a range of areas such as corporate
(including a market-leading corporate finance offering), real estate,
commercial, IP & technology (CIPT), banking & finance, tax &
wealth structuring and employment. Memery Crystal is one of the leading legal
practices in the UK to advise the emerging cannabis sector on a wide range of
business issues. Memery Crystal offers a partner-led service to a broad range
of clients, from multinational companies, financial institutions and
owner-managed businesses to individual entrepreneurs.
LionFish Litigation Finance Limited ("LionFish")
The Group also provides litigation finance in selected cases through a
separate arm, LionFish Litigation Finance Limited. LionFish finances
litigation matters being run by other solicitors in return for a significant
return on the outcome of those cases. As such, the Group has two types of
litigation assets - Rosenblatt's own client matters, and litigation matters
run by third-party solicitors. LionFish is positioned to be a unique,
alternative provider to the traditional litigation funders.
Convex Capital Limited ("Convex Capital")
Convex Capital is a specialist sell-side corporate finance boutique based in
Manchester. Convex Capital is entirely focused on helping companies,
particularly owner-managed and entrepreneurial businesses, realise their value
through sales to large corporates. Convex Capital identifies and proactively
targets firms that it believes represent attractive acquisition opportunities.
Chairman's Statement
Overview
On behalf of the Board, I am pleased to announce our 2021 results. Our
performance shows that the Group is benefitting from our strategy to diversify
the revenue of the business. A larger more diversified Group has generated
improved revenue, EBITDA, and margins.
Our legal services business, RBGLS has had a successful year and is now
trading under two brands - Rosenblatt and Memery Crystal. These brands provide
clients with a diversified offering, balanced across three main legal areas -
Dispute Resolution (via Rosenblatt), and Corporate and Real Estate (through
Memery Crystal). The business is beginning to realise the benefits of the
integration and resultant scale.
Across RBGLS, we have continued to win new client instructions which reflects
our expertise and the high demand for our complementary services. In difficult
times like these, people need help to handle complex situations such as
business restructurings as well as entrepreneurs who want to participate in
M&A. As a result, RBGLS has delivered growing revenue, high margins, and a
core KPI for the Group, revenue per fee earner, has remained significantly
ahead of industry standards. This is despite a big increase in the number of
fee earners following the acquisition of Memery Crystal.
At Convex Capital, after a tough 2020 when deal completions were impacted by
COVID-19, the management team re-built a strong pipeline of deals across a
variety of sectors. This meant that in 2021, Convex Capital completed 14 deals
generating revenue of £9.4 million (2020: 2 deals, £1.6 million). Since the
year end, Convex Capital has completed two further deals, delivering revenue
of £1.7 million. As at 28 March 2022, Convex Capital had a strong pipeline of
20 deals, with six deals going through due diligence.
The Group has continued to invest and grow its two types of litigation assets
- RBGLS' own client matters, and litigation matters run by third-party
solicitors through our separately branded business, LionFish. The
arrangements, recently announced with an alternative investment manager, has
provided LionFish with increased funding to leverage investments and increase
returns.
Looking ahead, the Board believes the Group remains in a strong operational
and financial position with a solid balance sheet and a strategy to deliver
continued profitable growth.
Strategy
The Group's strategy is to build a high margin professional services business
with diversified revenue and profit streams. The aim is for no single part of
the Group to dominate, and to leverage the expertise across the Group to
deliver incremental returns. Using the legal expertise within the Group, we
will maximise potential returns by selectively investing in contingent asset
classes, such as litigation. This can be achieved through Rosenblatt working
on clients' cases on a contingent basis, or by LionFish providing litigation
funding to cases being run by third parties.
A key focus of the Group is to grow profit. RBGLS delivers this by maintaining
consistently high margins. In 2021, the largely integrated business has done
well in delivering revenue of £347,000 per fee earner and a gross margin of
46.1% (2020: £425,800 per fee earner and a 52.1% gross margin).
Our service-led, profit driven business model has enabled us to selectively
increase the amount of work we do for clients on a partly contingent basis.
This is in exchange for receiving a pre-agreed proportion of any damages
awarded within the limits set by the Board for contingent work. This approach
means we can increase our margin with one-off settlements, but our pricing
strategy will deliver a benefit to the client who would otherwise pay higher
amounts to a third-party funder. Rosenblatt has a long-standing track record
in picking the right cases, with an 86% success rate over the last 10 years.
In line with our stated strategy, we created a new cash-generation
opportunity, with litigation finance sales. By selectively selling a
percentage of our participation rights in the contingent cases that RBGLS
invests in through Damages Based Agreements, the Group raises working capital.
The investment and divestment decisions are driven through a stringent set of
criteria, marrying both our commercial expertise with our legal expertise to
assess the risk profile of each case. We have adopted a conservative approach
to estimates as part of our fair valuing of litigation assets: while
accounting standards require the recognition of these investments at fair
value, we have currently assessed the fair value to be close to cash disbursed
less cash received on disposals in the early stage of the investment cycles.
At LionFish, our strategy has evolved having, in February 2022, agreed a £20
million litigation investment arrangement with a large alternative investment
firm. We will now generate income from settlements and our new investments
rather than sell participation rights.
M&A
In line with our strategy, we continue to assess M&A opportunities to
diversify the business and grow our service offering to clients. Our ambition
is to create a broad, high-quality, high margin professional services group.
As such, we focus on high-margin, specialist companies which can also create
opportunities for cross-referrals. However, we will only do deals at the right
price and with the right deal structure.
Each of the acquisitions we have made so far has met these criteria. First,
Convex Capital in September 2019, and, in May 2021, Memery Crystal. Memery
Crystal has been immediately earnings enhancing and has the potential to
generate significant value for shareholders over the long-term.
Dividend
The Group's balance sheet is satisfactory. The Board is committed to its
long-term progressive dividend policy. In line with that policy, the Board
normally expects to pay up to 60 per cent of distributable retained earnings
from the core business in any financial year by way of dividend, subject to
cash requirements.
The Board made a total payment of 5 pence per share for the year 2021(2 pence
paid at the half year and 3 pence at the full year). Based on current outlook,
we expect to pay up to 60 per cent of retained earnings in the 2022 financial
year by way of dividend, in line with the Group's published dividend policy.
Over time, we expect to have opportunities to pay special dividends because of
returns generated from the Group's litigation assets.
Executive Incentive Plan ("EIP") & Growth Share Scheme
We have agreed a new EIP as well as Growth Share Schemes for two of the
Group's subsidiaries, RBGLS and Convex Capital. The EIP will replace the
Group's existing senior executive bonus scheme, and the Growth Share Schemes
will replace the Convex Capital flexible commission scheme introduced in 2021,
and for the first time, introduce a growth share scheme for RBGLS. These
growth share schemes are designed to replicate what would happen in a
privately held equity partnership.
Since the Group's admission to AIM in 2018, RBG has delivered significant
growth through a combination of organic and acquisition-led performance.
Given the growth and evolution of the Group, the Board believes a new
remuneration structure is needed to retain and motivate the senior management
team and key performing employees, focusing them on long term value creation
and aligning their interests directly with shareholders.
Further details of the EIP and Growth Share Schemes can be found in the
separate stock exchange announcement issued on 1 April 2022.
Board Appointments
In June 2021, we appointed Patsy Baker and David Wilkinson to the Board as
independent non-executives while another Non-Executive Director Victoria Hull
retired. Both Patsy and David have brought considerable experience to the
Board. Patsy is the Chair of Citigate Dewe Rogerson, a leading global
strategic financial communications consultancy, part of Huntsworth
Communications which specialises in healthcare and public relations. Patsy was
a Non-Executive Director of The Westminster Group plc, a security company
listed on AIM, where she chaired the Nominations and Disclosure committees.
From 1994 to 2017, Patsy was responsible for Group Client Relationships and
Business Development at Bell Pottinger. There, Patsy used her extensive
networks to advise boards on leadership and corporate reputation within the UK
financial and business communities.
David Wilkinson is an experienced Non-Executive Chairman and Director, with a
history of advising fast-growth, entrepreneurial businesses and professional
practices. He is Senior Independent Director and Audit Committee Chair at
Saietta Group plc, an electric motor business which floated on AIM in July
last year and is Audit Committee Chair at Marks Electrical Group plc, an
online domestic appliance retailer, which also floated on AIM last year. He
chairs two private companies, CH Bailey, a formally AIM-listed business in
overseas commercial and hospitality property, and Goal Group, a UK market
leader in technology-based reclamation of withholding tax and legal class
action proceeds. He is also a Non- Executive Director of Verso Biosense, a
medical technology spinout from Southampton University.
Following the appointment of David and Patsy, the Board now consists of two
executive directors and four non-executive directors, providing a blend of
different experiences and backgrounds. All non-executives are considered
independent. David and Patsy have joined the Remuneration Committee,
Nomination Committee and Audit Committee of the Board of the Group with David
the Chair of the Remuneration Committee.
Ukraine
In response to the Russian invasion of Ukraine, the Group immediately reviewed
any relationships across the business with Russian companies and individuals
to ascertain if we were acting for any individual or corporate client that did
not comply with the UK's sanctions regime. Overall, we have limited exposure
through our law firms - Rosenblatt and Memery Crystal - while neither Convex
Capital or LionFish have any Russian clients.
People
The strength of the Group is in our ability to retain and attract high-quality
people. This is evidenced by our performance, and I want to thank everyone for
their hard work. I would also like to thank shareholders for their continued
support.
Keith Hamill
Chairman
31 March 2022
Chief Executive's Statement
Overview
The Group continues to evolve into a diversified, high-quality professional
services group with a litigation finance business leveraging the Group's legal
expertise. We are building a broad revenue base that removes dependence on any
one income generator. The combination of Memery Crystal with the Group's
pioneering law firm Rosenblatt means we have built one of London's premier
mid-tier law firms providing quality advice to entrepreneurs and high net
worth individuals.
Overall, the Group has performed well despite the challenges of the pandemic.
Our legal services business, RBGLS, has contributed to the strong professional
services revenue generated by the Group. This includes our sell-side M&A
advisory boutique, Convex Capital, which has had an exceptional year, and this
has been augmented by the acquisition of Memery Crystal. We are already seeing
the delivery of greater profits as the integration of Memery Crystal has
improved operating efficiency as we combine business support functions.
As a result of the strong performance across the Group, with each subsidiary
exhibiting growth, our revenue (and gains on litigation assets) was up 86.7%
to £47.2 million (2020 restated: £25.3 million) at a gross margin of 42.0%
(2020 restated: 41.5%). Organic growth was up 19.6% with revenue to £26.8
million (2020 restated: £22.4 million) and organic adjusted EBITDA has grown
29.6% to £9.4 million (2020 restated: £7.2 million).
Convex Capital completed 14 deals and £9.4 million of revenue in 2021 (2020:
2 deals and £1.6 million). Importantly, deal flow momentum remains strong,
and the pipeline of opportunities continues to grow.
We continue to invest in litigation assets, with 23 active deals across RBGLS
and LionFish. LionFish has invested in 11 deals since its inception in May
2020 with one already completed. There were gains on litigation assets during
the year of £5.2 million (2020 restated: £2.8 million).
Group EBITDA increased to £12.9 million (2020 restated: £9.9 million) at a
margin of 27.4% (2020 restated: 39.0%) due to the acquisition of Memery
Crystal. As previously disclosed, we target an EBITDA margin of 35% or more.
Adjusted EBITDA was £13.8 million (2020 restated: £7.2 million) at a margin
of 29.2% (2020 restated: 28.6%).
The Group's profit before tax was £9.2 million (2020 restated: £7.4
million) and profit after tax was £7.3 million (2020 restated: £6.4
million).
Our balance sheet remains satisfactory. Our net debt position was £14.2
million versus net cash of £3.5 million in 2020. This change reflects the
investment in Memery Crystal and the £10.0 million term loan to fund the
acquisition, which will be paid down over three years. The Group has a £15.0
million revolving credit facility of which £10.0 million has been drawn. Our
balance sheet will support our long-term growth plans, including acquisitions,
continued investment in litigation investment opportunities, and future
dividends.
RBG Legal Services Limited ("RBGLS")
Following the completion of the acquisition of Memery Crystal in May 2021, the
Group has combined its two law firms, Rosenblatt, and Memery Crystal, into a
new legal services corporate entity called RBG Legal Services Limited
("RBGLS"). This approach will enable the Group to fully realise the
transaction's synergies. The business is almost fully integrated and is now
based at one office on Fleet Street in London. The final part of the
integration, which is putting both businesses on a single practice management
system, is expected to be completed in the last quarter of 2022.
Rosenblatt and Memery Crystal retain their own brand identities and continue
to operate as two separately branded law firms (under the umbrella of RBGLS as
the regulated entity). From November 2021, the two brands became aligned to
contentious (Rosenblatt) and non-contentious (Memery Crystal) legal services
to reflect their position within the legal services market.
As at 31 December 2021, RBGLS employed 193 people, including 137 fee earners,
with a strong offering to clients across Dispute Resolution, Corporate and
Real Estate practise areas. The acquisition of Memery Crystal has
significantly enhanced the Group's scale and ability to win non-contentious
mandates as well as improving the new business pipeline, diversifying the
revenue contribution by department, and delivering a more balanced legal
business.
Due to the strong demand for its services, revenue (and gains on the sale of
assets) was up 61.4% to £33.7 million (2020: £20.9 million). The
consolidated business has helped diversify the legal services business. We
have a balanced business across the key areas of Dispute Resolution, Corporate
and Real Estate. As a result of the acquisition of Memery Crystal, Dispute
Resolution is now a more balanced part of our business giving a natural hedge
to the changing environment.
As well as the financial metrics, the Company has performed well in terms of
the other KPIs of focus. The average revenue per fee earner was £347,000
(2020: £425,800), reflecting the diversification of the legal services
business into more non-contentious areas of law, following the acquisition of
Memery Crystal. These areas are less profitable due to fixed fees and are yet
to fully benefit from the integration. However, these areas provide a natural
hedge to Rosenblatt's focus on Dispute Resolution. Our revenue per fee earner
is still within the top 20 of the Legal 100 4 .
In line with its strategy, RBGLS has delivered a managed increased in the
amount of contingent work it has taken on, enabled by the Group's solid
balance sheet, with net assets of £60.8 million (2020 restated: £47.0
million) and a banking facility to support our growth strategy. These
investments are always taken in consideration of delivering a balanced
investment strategy within the limits set by the Board to ensure the business
is not overly exposed to contingent cases. Such litigation cases need to pass
the Group's stringent legal and commercial review process. Importantly, as
RBGLS' revenue and profit grow we can enter into more Alternative Billing
Arrangements (ABAs), which generate incremental margins on a successful case
outcome. No revenue is recognised by the Company until the result of the case
has occurred. Such revenue is considered contingent.
During the year, RBGLS invested a further £2.8 million in external
disbursements and counsel fees in relation to its litigation investments. The
amount of contingent work carried out by the legal services business during
the period was £3.4 million (2020: £2.1 million). As at 31 December 2021,
RBGLS had invested a total of £7.6 million in external disbursements and
counsel fees in 13 litigation investments, with a total contingent WIP of
£11.3 million.
LionFish Litigation Finance Limited ("LionFish")
Since our IPO in 2018, our strategy has been to develop our own litigation
finance business as an important pillar of the Group. The Group initially just
invested in Rosenblatt's own client matters, but on 1 May 2020 the Group
launched LionFish. LionFish finances litigation matters being run by other
solicitors in return for a significant return on the outcome of those cases.
Lionfish exclusively funds third party solicitors and does not fund any RBGLS
contingent cases. As such, the Group now has two types of litigation
investments - RBGLS's own client matters, and litigation matters run by
third-party solicitors. Both types of litigation investments not only have
significant return potential, but they represent an opportunity to extract
further value from the Group's legal and commercial expertise and diversify
its sources of income.
Before investing, LionFish utilises the expertise of Rosenblatt which has a
proven record of evaluating the legal merits of a litigation matter to
optimise its profit. By leveraging this ability, alongside the origination
capabilities of LionFish, and the Group's commercial acumen, the Group can
identify potentially profitable third-party litigation cases and make
investments with strong risk-adjusted returns. We have a strict investment
process where the cases go through an initial review, before a more stringent
legal and commercial review, and finally a full review by the Group's
investment committee. The process is efficient and customer-focused, aiming
for a quick decision and turnaround.
As at 31 December 2021, LionFish had received 517 enquiries for finance: 45
remain under consideration and 448 were rejected; an 87% rejection rate on
concluded enquiries. Based on the Group's strategy to target a return of two
times the money invested, since its launch, Lionfish has invested in 11 cases
with £10.5 million committed (with £3.7 million drawn down) over the life of
the cases, which is circa three years. One case has completed delivering a
return of two times the money invested.
I believe it is important to reiterate the conservative approach we adopt
towards the handling of, and accounting for, our litigation investments. While
accounting standards require the recognition of these investments at fair
value, we have currently assessed the fair value to be close to cash disbursed
less cash received on disposals in the early stage of the investment cycles,
which means fair values do not materially exceed net cash disbursed, as well
as having rules limiting the Group's cash and revenue exposure.
Since launch, LionFish has delivered further revenue from sales in
participation rights from litigation finance business beyond Rosenblatt's own
client matters. In 2021, LionFish delivered £3.1 million of participation
rights sales (2020 restated: £2.6 million). There were gains on litigation
assets of £4.1 million (2020 restated: £2.8 million). While litigation
finance sales help manage the Group's litigation investment exposure, it is
also part of a strategy to create a secondary market for litigation
investments.
The LionFish strategy and scale has evolved since the year-end. On 15 February
2022, the Group announced that LionFish had agreed a £20 million litigation
investment arrangement (the "Arrangement") with a large alternative investment
firm (the "Firm"). Under the terms of the Arrangement, the Firm will
participate in all of LionFish's litigation investments, investing up to 75%
in each of LionFish's investments across the portfolio over a two-year period.
LionFish will be entitled to receive a significant share of the returns of the
Arrangement after a high single-digit return hurdle has been met, therefore
providing significant additional potential returns to LionFish beyond its own
investment. It means that the Group will now look to generate income from
LionFish's settlements and new investments, and we will not look to sell
participation rights.
LionFish will have sole discretion in terms of which investments to pursue
within a broad set of agreed parameters (similar to LionFish's current
investment parameters). The focus of the Arrangement will be on maintaining
LionFish's highly selective, quality-focused investment standards, without any
undue deployment pressure. LionFish will also be responsible for the
administration of each underlying litigation investment.
The Arrangement provides LionFish with significant additional capital
flexibility in the investments it makes, allowing it to manage a more
diversified and granular portfolio of risks off balance sheet, as well as to
move away from the investor sales model currently being used to reduce risk.
By partnering with a large alternative investment manager, LionFish has the
opportunity to extend or repeat the Arrangement on a rolling basis,
potentially providing a long-term flexible capital source that can grow in
line with the business. The Arrangement has been approved by RBG's banking
partners and is not a debt or credit facility. The Group's balance sheet will
remain unchanged as a result of the Arrangement.
Convex Capital
Convex Capital, the specialist sell-side corporate finance advisory business
based in Manchester, was acquired by the Group in September 2019. Convex
Capital is entirely focused on helping companies, particularly owner-managed
and entrepreneurial businesses, realise their value through sales to large
corporates or private equity companies. Convex Capital identifies and
proactively targets businesses that it believes represent attractive
acquisition opportunities. Convex has a motivated, dynamic team of 12 people,
of which 11 are fee-earners.
The acquisition of Convex Capital was part of the Board's strategy to
diversify the Group beyond legal services, focusing on other high-margin
professional service areas. Convex Capital is an entrepreneurial,
cash-generative business operating across the UK and Europe and provides the
Group with further funds for reinvestment into other high-margin areas.
During 2021, Convex Capital completed fourteen deals and delivered £9.4
million of revenue. The strength of its pipeline and the agile nature of the
business has enabled Convex Capital to accelerate deals that COVID-19 has not
affected. Since the year end, Convex Capital has completed two further deals,
delivering revenue of £1.7 million. As at 28 March 2022, Convex Capital had a
strong pipeline of 20 deals, with six deals going through due diligence.
The business is actively building its target pipeline with a data-driven
approach to generate deals rather than the traditional passive model where the
target company waits to be approached and then appoints a corporate finance
partner.
Last year the management of Convex Capital failed to achieve the earn-out
agreed at the time of acquisition because of the economic environment. For
2021, the earn-out was replaced with a one-off commission agreement for the
key directors. Under the arrangement, the directors exchanged salary for
commission based on deal completion. A commission of 20% was earned on all
completed deals, and 50% of that success fee was used to purchase shares in
RBG. During 2021, a total of 556,153 shares were acquired through the
commission arrangement. The new Growth Share Scheme will replace the flexible
commission scheme used in 2021. Further details of the Growth Share Scheme
can be found in the separate stock exchange announcement issued on 1 April
2022.
Outlook
The Group is performing well despite the continuing impact of COVID-19, the
situation in Ukraine, and current inflationary pressures. RBG remains
well-positioned to deliver profitable growth as we progress through the second
half of the year. Over the last year, we have worked hard to grow our
services, adapt the Group to changing client needs and build our litigation
finance business. Our strategy of diversification has provided protection
through the pandemic and has enabled the Group to further progress towards its
ambitious goals. The Group remains disciplined in its approach to M&A and
will continue to review potential opportunities according to its selective
criteria.
Overall, the Group had an excellent 2021 which is reflected in our improved
revenue and profit growth. With strong demand for all the Group's services, we
delivered the upgraded market expectations for the 2021 full year. While
acknowledging that economic conditions continue to be volatile, we look
forward to the coming year with optimism and are excited about the long-term
prospects for the Group.
Nicola Foulston
Group Chief Executive Officer
31 March
2022
Chief Financial Officer's review
Financial review
The financial results contain a restatement of the prior year figures. The
restatement is described fully in Note 30 and summarised below:
· Reclassification of contracts for insured litigation assets,
which were previously treated as sales, which do not meet the derecognition
requirements of IFRS 9 para 3.2.2.
· Restatement of the fair value of the uninsured contracts to
correct an error in the previous valuation
The Consolidated statement of financial position adjustments increased
litigation assets by £274,356, increased trade and other payables by
£575,000, reduced current tax liabilities by £57,122 and reduced equity by
£243,522. The Consolidated statement of comprehensive income adjustments
decreased gains on litigation assets by £300,644 and reduced tax expenses by
£57,122.
During 2021 we have continued to build on our strong track record of
profitability. Revenue and EBITDA is increasingly coming from diverse sources
while we continue investing in the growth of the business. The Group is well
positioned to deliver its growth strategy through product diversification,
carefully selected acquisitions and high-quality litigation investments.
Key Performance Indicators (KPIs)
· Group revenue (including gains from litigation assets): £47.2
million (2020 restated: £25.3 million)
· Revenue, including gains from litigation assets, and adjusted
EBITDA 5 have increased 86.7% and 91.0% respectively
· Organic business revenue has increased 19.6%
· Adjusted EBITDA: £13.8million, representing 29.2% of revenue and
gains on litigation assets (2020 restated: £7.2 million, 28.6%)
· EBITDA: £12.9 million, representing 27.4% of revenue and gains
on litigation assets (2020 restated: £9.9 million, 39.0%, includes £2.6
million of the released deferred earn out not earned)
· Adjusted Profit before tax: £10.1 million, representing 21.4% of
revenue and gains from litigation assets (2020 restated: £4.8 million, 18.9%)
· Profit before tax: £9.2 million, representing 19.6% of revenue
and gains on litigation assets (2020 restated: £7.4 million, 29.3%)
· Net debt of £14.2 million (2020: net cash of £3.5 million)
reflecting new £10.0 million term facility. The Group has a new £15.0
million revolving credit facility which is available to support the growth of
the business
· Total Lockup was 109 days (2020: 99) of which Debtor Days were 59
(2020: 47)
· RBG Legal Services revenue per fee earner: £347,000 (2020:
£425,800)
· RBG Legal Services Utilisation/ Realisation was 84%/86% (2020:
89%/106%)
Revenue and Gains on Litigation Assets
Reported Group revenue and gains on litigation assets for the period is £47.2
million compared to £25.3 million in 2020 (restated), representing an 86.7%
increase.
Of this increase, 26.8% (or £6.8 million) was a result of the organic
business as Convex Capital and LionFish delivered ahead of last year, and the
remainder was delivered from the newly acquired business. Gains on Litigation
Assets were £5.2 million against £2.8 million in the previous year
(restated), LionFish delivered £4.1 million of the gains against £2.8
million last year (restated).
Combined professional services revenue is up 87.0% to £42.0 million from
£22.4 million in 2020, this growth is driven, in part, by the acquisition of
Memery Crystal. Legal services revenue for RBGLS within professional services
is up 56.1% to £32.6 million from £20.9 million in 2020. There was a strong
performance in Convex Capital of £9.4 million, completing 14 deals against
one last year and £1.6 million of revenue in 2020, completing two deals.
Divisional highlights
RBGLS
· Total revenue and gains on litigation assets of £33.7 million,
(2020: £20.9 million, RB only)
· Legal services revenues: £32.6 million, up 56.3% on last year
(2020: £20.9 million, RB only)
· Legal services business is now integrated and trading under the
two brands
· Staff numbers are 193 (2020:73, RB only) of which 137 are fee
earners (2020: 43, RB only)
· Revenue mix across the business is now more evenly split across
Dispute Resolution, Corporate and Real Estate
· Dispute Resolution continued to perform well, in addition to
taking on more contingent work with associated unrecognised time worked of
£3.4 million
· EBITDA is 27.0% of revenue and gains on litigation assets (2020:
35.1% of revenue and gains on litigation assets, RB only)
· Average revenue per fee earner £347,000 (2020: £425,800, RB
only)
· Total Lockup was 109 days (2020: 99, RB only) of which Debtor
Days were 59 days (2020: 47, RB only)
LionFish
· Successfully realised litigation asset sales in eight cases with
proceeds totalling £3.1 million (2020 restated: £2.6million)
· These gains are from where LionFish owns a percentage of the
participation rights in a settlement on a contingent case, financed through a
Damages Based Agreement (DBA), and then sells on a proportion of its
participation rights
· Cash investment of £1.8 million in ten cases (2020: £1.8
million in 7 cases), with a full commitment of £10.5 million if funded
through to trial over the next 2-3 years
· During the year successfully completed the first case and
delivered a return of two times money invested as per the strategy
Rosenblatt
· Successfully realised litigation asset sales with proceeds
totalling £1.8 million (2020: £0.4million)
Convex Capital
· Completed fourteen transactions in the year, generating revenue
of £9.4 million (2020 from acquisition: £1.6 million) and EBITDA of £4.2
million (2020: EBITDA loss £0.9 million)
· During the year the senior team had a one off 20% commission
scheme based on completed deals
Staff costs
Total staff costs in 2021 were £27.4 million (2020: £14.8 million), which
includes £4.8 million for Convex (£3.3 million in relation to the Directors
bonus scheme of 20% of completed deals, of which 50% was re-invested in RBG
shares), £0.6 million for LionFish and £19.6 million from RBGLS. The average
number of employees for the Group was 175 (2020: 90). The acquisition of
Memery Crystal has added 128 staff to the Group's headcount. RBGLS at the end
of the period totalled 193 (2020: 73), of which 137 are fee earners.
Overhead costs
During 2021, the Group incurred overheads of £34.3 million (before
depreciation and amortisation) (2020: £15.4 million). Staff costs were £27.4
million (2020: £14.8 million), of which contractors' costs were £3.0 million
(2020: £3.2 million).
Other operating costs were £6.9 million (2020: £0.6 million, includes a
deduction of £2.6 million for the deferred consideration release), of which
the cost of the acquisition represented £0.9 million. Other costs including
insurances of £1.5 million (2020: £0.7 million), rates £0.7 million (2020:
£0.3 million), training and recruitment £0.6 million (2020: £0.3 million).
Operationally, there remains a significant focus on IT and in 2021 we invested
in Adnitor Limited to deliver cost effective IT solutions (details of which
are included in Note 17). We have invested sensibly over recent years and
further enhanced both our internal and client facing experiences of IT usage.
EBITDA and Adjusted EBITDA
In assessing performance, the Group uses EBITDA as a KPI. The acquisition of
Memery Crystal will initially suppress our Group EBITDA but will eventually
increase it as the integration benefits fully flow through in 2022. EBITDA for
2021 was £12.9 million (27.4% of revenue and gains on litigation assets)
(2020 restated: £9.9 million, 39.0%, which includes non-trading adjustment of
£2.6 million release of deferred earn out). This includes £0.9 million for
costs of acquiring a subsidiary and excluding this non-underlying item gives
an Adjusted EBITDA of £13.8 million (29.2% of revenue and gains on litigation
assets) (2020 restated: £7.2 million, 28.6%).
Profit Before Tax
Profit before tax for 2021 was £9.2 million representing 19.6% of revenue and
gains on litigation assets (2020 restated: £7.4 million, 29.3% of revenue.
This includes the £2.6 million Convex deferred consideration write back and
excluding this gives profit before tax for 2020 (restated) of £4.8 million,
representing 18.9% of revenue and gains on litigation assets.
Adjusted profit before tax was £10.1 million representing 21.4% of revenue
and gains on litigation assets (2020 restated: £4.8 million, 18.9%).
Earnings Per Share (EPS)
The weighted average number of shares in 2021 was 91.4 million which gives a
basic earnings per share (Basic EPS) for the period of 7.63 (2020 restated:
7.29p).
2020 earnings included £2.6 million write back of the deferred Convex Capital
earn out.
Corporation tax
The Group's tax charge for the year is £2.0 million with an effective tax
rate of 21.3% (2020 restated: £1.0 million, 10.5% which was impacted by
Convex deferred consideration write back which is non-taxable income).
Following the announcement made in the Chancellor's Spring Budget regarding
an increase to the UK corporate tax rate from 19% to 25% from 1 April 2023,
the Finance Bill 2021 was subsequently enacted on 24 May 2021. As IFRS
requires deferred tax to be measured at tax rates that have been subsequently
enacted at the reporting date, the Group's deferred tax balances have been
re-measured accordingly and the impact has been reflected within the
consolidated financial statements (full details can be found in Note 9).
Balance Sheet
2021 2020
£m
£m
Goodwill, intangible and tangible assets 86.0 48.2
Current Assets 18.6 7.8
Current Liabilities (12.7) (6.0)
91.9 50.0
Net debt (14.2) 3.5
Non-Current Liabilities (14.7) (5.4)
Deferred consideration (2.2) (1.1)
Net assets 60.8 47.0
The Group's net assets as at 31 December 2021 increased by £13.8 million on
the prior year due to the increase in goodwill and intangible assets resulting
from the acquisition of Memery Crystal and an increase in the profitable
trading for the period.
Goodwill, Tangible and Intangible Assets
Included within tangible assets is £15.9 million (2020: £5.8 million) which
relates to IFRS 16 right of use assets for the Group's leases. Within total
intangible assets of £55.9 million (2020: £35.4 million), £21.1 million
relates to current year acquisitions and have been attributed between
goodwill, customer contracts and brand. The Company has considered the amounts
at which goodwill and intangible assets are stated on the basis of forecast
future cash flows and although these are subjected to unusually high levels of
general uncertainty due to COVID-19, concluded that that these assets have not
been materially impaired.
Working Capital
Management of lock up has continued to be a key focus of the Group over the
period. For the Legal Services business, lock up days is a measure of the
length of time it takes to convert work done into cash. It is calculated as
the combined debtor and WIP days. In Convex and LionFish, invoices are raised
and cash is received at the point of deal completion. Lock up is a key focus
for management and the Board as cash generation is a Group focus. Lock up days
at 31 December 2021 were 109 (2020: 99), with debtor days being 59 (2020: 47).
This has increased as the business has become more balanced and driven by
non-contentious transactions, which have longer payment terms. Trade debtors
less provision for impairment at the end of the year were £9.6 million (2020:
£3.4 million) reflecting the scale up of the business after the acquisition.
Equally, contract assets at the year end was £6.0 million (2020: £3.0
million) again reflecting the newly consolidated business and the doubling in
the size of RBGLS.
Net Debt
We have a new revolving credit facility (RCF) of £15.0 million and a new
acquisition term loan of £10.0 million repayable over three years. Our net
debt position at the year end was £14.2 million (net cash 2020: £3.5
million) leaving a substantial part of the RCF facility available. This
positions the Group well to deliver its strategy into 2022 and support the
business through any uncertainty.
Cash Conversion
2021 2020
£m
£m
Cash flows from operating activities 12.6 10.0
Movements in working capital (0.7) 4.1
Increase in litigation assets (4.7) (4.5)
Net cash generated from operations 7.2 9.6
Interest (0.7) (0.4)
Capital expenditure (0.1) (1.2)
Free cash flow 6.4 8.1
Underlying profit after tax 7.3 6.4
Cash conversion 88% 125%
The cash conversion percentage measures the Group's conversion of its
underlying profit after tax into free cash flows. Movements in working capital
have been adjusted for deferred consideration payments made to Memery Crystal
in the current year and Convex in the prior year. Net cash generated from
operations includes £0.3 million (2020: net cash outflow £3.7 million) of
net litigation investments. Cash conversion of 88% (2020 restated: 125%) was
impacted by the acquisition during the year as shown in the movement in
working capital in 2021.
Net Debt / Net Cash and cash equivalents
Net debt at the end of the period was £14.2 million (2020: £3.5 million net
cash). The net decrease in cash and cash equivalents of £8.8 million for the
period included £6.1 million of inflows generated from operating activities
(including £4.7 million of further investments in litigation assets).
Investing activities gave rise to an outflow of £16.9 million, of which
£15.4 million related to the cash element of the acquisition of Memery
Crystal. Inflows from financing activities of £2.0 million is predominantly
made up of net £9.0 million of term loan to fund the acquisition less £4.4
million in dividends and £2.5 million payments of the term loan and lease.
Summary
We are pleased with the profitability and performance of the Group during the
year; we have integrated a significant business in Memery Crystal and still
delivered results. Convex Capital has come back to a normalised state and
LionFish is progressing. The business is performing well despite the
continuing impact of COVID-19, the fast-evolving situation in Ukraine and
current inflationary pressures. However, it is important to acknowledge the
impact of these events on business life, as they will be a significant
challenge moving forward.
Robert Parker
Chief Financial Officer
31 March 2022
Consolidated statement of comprehensive income
For the year ended 31 December 2021
Note 1 January to 1 January to
31 December 2021 31 December 2020
restated
£ £
Revenue 5 41,985,338 22,449,332
Gains on litigation assets 5 5,207,524 2,822,083
Personnel costs 7 (27,353,777) (14,780,204)
Depreciation and amortisation expense (2,940,078) (2,081,501)
Other expenses (6,915,433) (633,999)
Profit from operations 6 9,983,574 7,775,711
EBITDA 12,923,652 9,857,212
Non-underlying items
Costs of acquiring subsidiary 25 863,435 -
Deferred consideration release - (2,640,000)
Adjusted EBITDA 13,787,087 7,217,212
Finance expense 8 (801,659) (394,534)
Finance income 8 22,676 24,460
Share of post-tax profits of equity accounted associates 21,643 -
Profit before tax 9,226,234 7,405,637
Tax expense 9 (1,968,821) (967,814)
Profit and total comprehensive income 7,257,413 6,437,823
Total profit and comprehensive income attributable to:
Owners of the parent 6,972,873 6,235,568
Non-controlling interest 284,540 202,255
7,257,413 6,437,823
Earnings per share attributable to the ordinary equity holders of the parent 10
Profit
Basic and diluted (pence) 7.63 7.29
The results for the year presented above are derived from continuing
operations.
There were no elements of other comprehensive income for the financial year
other than those included in the income statement.
The attached notes form part of these financial statements.
Consolidated statement of financial position
For the year ended 31 December 2021
Company registered number: 11189598 Note 31 December 2021 31 December 2020
restated
£ £
Assets
Current assets
Trade and other receivables 20 18,571,628 7,696,925
Cash and cash equivalents 4,756,143 13,522,184
23,327,771 21,219,109
Non-current assets
Property, plant and equipment 12 2,589,390 475,229
Right-of-use assets 13 15,913,008 5,825,712
Intangible assets 14 55,859,230 35,378,065
Litigation assets 19 11,571,052 6,569,110
Investments in associates 17 101,643 -
86,034,323 48,248,116
Total assets 109,362,094 69,467,225
Liabilities
Current liabilities
Trade and other payables 21 10,153,425 3,894,546
Leases 13 2,150,440 870,019
Current tax liabilities 21 1,490,495 600,316
Provisions 23 314,291 116,875
Loans and borrowings 22 2,129,592 -
16,238,243 5,481,756
Non-current liabilities
Loans and borrowings 22 17,000,000 10,000,000
Deferred tax liability 24 851,662 304,853
Trade and other payables 21 750,000 1,590,000
Leases 13 13,698,661 5,081,043
32,300,353 16,975,895
Total liabilities 48,538,566 22,457,651
NET ASSETS 60,823,528 47,009,574
Issued capital and reserves attributable to owners of the parent
Share capital 26 190,662 171,184
Share premium reserve 27 49,232,606 37,565,129
Retained earnings 27 11,113,365 9,070,906
60,536,633 46,807,219
Non-controlling interest 18 286,895 202,355
TOTAL EQUITY 60,823,528 47,009,574
The financial statements were approved and authorised for issue by the Board
of Directors on 31 March 2022 and were signed on its behalf by:
Nicola Foulston
Director
Consolidated statement of cash flows
For the year ended 31 December 2021
Note 2021 2020
restated
£ £
Cash flows from operating activities
Profit for the year before tax 9,226,234 7,405,637
Adjustments for:
Depreciation of property, plant and equipment 525,606 335,634
Amortisation of right-of-use assets 1,781,058 986,061
Amortisation of intangible fixed assets 633,414 759,806
Fair value movement of litigation assets net of realisations (318,814) 163,917
Finance income (22,676) (24,460)
Finance expense 801,659 394,534
Share of post-tax profits of equity accounted associated (21,643) -
12,604,838 10,021,129
Decrease/(increase) in trade and other receivables (2,220,725) 3,391,887
Increase in trade and other payables 1,428,920 710,015
(Increase) in litigation assets (4,683,128) (4,523,141)
Increase in provisions 47,416 41,875
Cash generated from operations 7,177,321 9,641,765
Tax paid (1,077,885) (1,880,277)
Net cash flows from operating activities 6,099,466 7,761,488
Investing activities
Purchase of property, plant and equipment (130,179) (172,482)
Acquisition of associate (80,000) -
Acquisition of subsidiary, net of cash 25 (12,000,000) -
Payment of deferred consideration (4,518,585) (2,951,405)
Dividend paid to non-controlling interest (200,000) -
Purchase of other intangibles - (1,000,000)
Interest received 22,676 24,460
Net cash used in investing activities (16,906,088) (4,099,427)
Financing activities
Issue of ordinary shares in subsidiaries - 100
Dividends paid to holders of the parent (4,430,414) (823,283)
Proceeds from loans and borrowings 20,000,000 21,000,000
Repayment of loans and borrowings (11,000,000) (11,000,000)
Repayments of lease liabilities (1,856,938) (832,316)
Interest paid on loans and borrowings (279,497) (185,497)
Interest paid on lease liabilities (392,570) (209,037)
Net cash from financing activities 2,040,581 7,949,967
Net increase/(decrease) in cash and cash equivalents (8,766,041) 11,612,028
Cash and cash equivalents at beginning of year 13,522,184 1,910,156
Cash and cash equivalents at end of year 4,756,143 13,522,184
The attached notes form part of these financial statements.
Consolidated statement of changes in equity
For the year ended 31 December 2021
Share Capital Share Premium Retained Earnings Total attributable to equity holders of parent Non-controlling interest Total equity
£ £ £ £ £ £
Balance at 1 January 2021 (restated) 171,184 37,565,129 9,070,906 46,807,219 202,355 47,009,574
Comprehensive income for the year
Profit for the year - - 6,972,873 6,972,873 284,540 7,257,413
Total comprehensive Income for the year - - 6,972,873 6,972,873 284,540 7,257,413
Contributions by and distributions to owners
Dividends - - (4,430,414) (4,430,414) (200,000) (4,630,414)
Issue of share capital 19,478 11,667,477 - 11,686,955 - 11,686,955
Grant of put option over shares in subsidiary - - (500,000) (500,000) - (500,000)
Total contributions by and distributions to owners 19,478 11,667,477 (4,930,414) 6,756,541 (200,000) 6,556,541
Balance at 31 December 2021 190,662 49,232,606 11,113,365 60,536,633 286,895 60,823,528
The attached notes form part of these financial statements.
Share Capital Share Premium Retained Earnings Total attributable to equity holders of parent Non-controlling interest Total equity
£ £ £ £ £ £
Balance at 1 January 2020 171,184 37,565,129 4,673,621 42,409,934 - 42,409,934
Comprehensive income for the year
Profit for the year (restated) - - 6,235,568 6,235,568 202,255 6,437,823
Total comprehensive income for the year (restated) - - 6,235,568 6,235,568 202,255 6,437,823
Contributions by and distributions to owners
Dividends - - (823,283) (823,283) - (823,283)
Issue of share capital - - - - 100 100
Grant of put option over shares in subsidiary - - (1,015,000) (1,015,000) - (1,015,000)
Total contributions by and distributions to owners - - (1,838,283) (1,838,283) 100 (1,838,183)
Balance at 31 December 2020 (restated) 171,184 37,565,129 9,070,906 46,807,219 202,355 47,009,574
The attached notes form part of these financial statements.
Company statement of financial position
As at 31 December 2021
Company registered number: 11189598 Note 31 December 2021 31 December 2020
£ £
Assets
Current assets
Trade and other receivables 20 46,748,875 24,900,931
Cash and cash equivalents 2,460,489 12,313,385
49,209,364 37,214,316
Non-current assets
Property, plant and equipment 12 1,083 5,847
Investments in subsidiaries 16 27,501,278 15,814,321
Investments in associates 17 80,000 -
27,582,361 15,820,168
Total assets 76,791,725 53,034,484
Liabilities
Current liabilities
Trade and other payables 21 2,143,456 2,035,431
Loans and borrowings 22 2,129,592 -
4,273,048 2,035,431
Non-current liabilities
Loans and borrowings 22 17,000,000 10,000,000
Deferred tax liability 24 660,270 502,711
17,666,270 10,502,711
Total liabilities 21,933,318 12,538,142
NET ASSETS 54,858,407 40,496,342
Issued capital and reserves attributable to owners of the parent
Share capital 26 190,662 171,184
Share premium reserve 27 49,232,606 37,565,129
Retained earnings 27 5,435,139 2,760,029
54,858,407 40,496,342
The Company has taken advantage of the exemption contained in S408 Companies
Act 2006 and has not presented a separate income statement for the Company.
The Company recorded a profit after tax of £7,105,524 for the year ended 31
December 2021 (2020: £2,971,876).
The financial statements were approved and authorised for issue by the Board
of Directors on 31 March 2022 and were signed on its behalf by:
Nicola Foulston
Director
The attached notes form part of these financial statements.
Company statement of cash flows
For the year ended 31 December 2021
Note 2021 2020
£ £
Cash flows from operating activities
Profit for the year before tax 6,550,348 3,110,117
Adjustments for:
Depreciation of property, plant and equipment 12 4,764 6,205
Finance income (11,386) (4,754)
Finance expense 397,916 174,079
6,941,642 3,285,647
Decrease in trade and other receivables 526,485 28,899
(Decrease) in trade and other payables (412,658) (2,832,370)
Cash generated from operations 7,055,469 482,176
Tax paid - -
Net cash flows from operating activities 7,055,469 482,176
Investing activities
Purchase of property, plant and equipment - (1,625)
Acquisition of associate 17 (80,000)
Amounts loaned to subsidiaries
Investment in subsidiary - (900)
Amounts loaned to subsidiaries (21,661,696) 1,925,825
Interest received 11,386 4,754
Net cash used in investing activities (21,730,310) 1,928,054
Financing activities
Issue of ordinary shares - -
Dividends paid to holders of the parent 11 (4,430,414) (823,283)
Amounts borrowed from subsidiaries 520,683 540,833
Proceeds from loans and borrowings 20,000,000 21,000,000
Repayment of loans and borrowings (11,000,000) (11,000,000)
Interest paid on loans and borrowings (268,324) (174,079)
Net cash from financing activities 4,821,945 9,543,471
Net increase/(decrease) in cash and cash equivalents (9,852,896) 11,953,701
Cash and cash equivalents at beginning of year 12,313,385 359,684
Cash and cash equivalents at end of year 2,460,489 12,313,385
The attached notes form part of these financial statements.
Company statement of changes in equity
For the year ended 31 December 2021
Share Capital Share Premium Retained Earnings Total
£ £ £ £
Balance at 1 January 2021 171,184 37,565,129 2,760,029 40,496,342
Comprehensive profit for the period
Profit for the year - - 7,105,524 7,105,524
Total comprehensive profit for the year - - 7,105,524 7,105,524
Contributions by and distributions to owners
Dividends - - (4,430,414) (4,430,414)
Issue of share capital 19,478 11,667,477 - 11,686,955
Total contributions by and distributions to owners 19,478 11,667,477 (4,430,414) 7,256,541
Balance at 31 December 2021 190,662 49,232,606 5,435,139 54,858,407
The attached notes form part of these financial statements.
Share Capital Share Premium Retained Earnings Total
£ £ £ £
Balance at 1 January 2020 171,184 37,565,129 611,436 38,347,749
Comprehensive profit for the period
Profit for the year - - 2,971,876 2,971,876
Total comprehensive profit for the year - - 2,971,876 2,971,876
Contributions by and distributions to owners
Dividends - - (823,283) (823,283)
Issue of share capital - - - -
Total contributions by and distributions to owners - - (823,283) (823,283)
Balance at 31 December 2020 171,184 37,565,129 2,760,029 40,496,342
The attached notes form part of these financial statements.
Notes (forming part of the consolidated financial statements)
1. Basis of preparation
RBG Holdings plc is a public limited company, incorporated in the United
Kingdom. The principal activity of the Group is the provision of legal and
professional services, including management and financing of litigation
projects.
The financial information set out in this release does not constitute the
Company's full statutory accounts for the year ended 31 December 2021 for the
purposes of section 434(3) of the Companies Act 2006, but it is derived from
those accounts that have been audited. Statutory accounts for 2020 have been
delivered to the registrar of companies, and those for 2021 will be delivered
after the forthcoming AGM. The auditors have reported on the accounts for the
period ended 31 December 2020 and the year end 31 December 2021: their reports
were unqualified, and did not contain statements under section 498(2) or (3)
of the Companies Act 2006.
While the information included in this preliminary announcement has been
prepared in accordance with the recognition and measurement principles of UK
adopted international accounting standards, this announcement does not itself
contain sufficient information to comply with UK adopted international
accounting standards. The Company expects to publish full financial statements
for the year ended 31 December 2021 that comply with UK adopted international
accounting standards on 1 April 2022.
The accounting policies set out below are in accordance with UK adopted
international accounting standards, and International Financial Reporting
Interpretations Committee ('IFRIC') interpretations that were applicable for
the year ended 31 December 2021.
The financial statements have been prepared for year ended 31 December 2021,
with a comparative year to 31 December 2020 (restated), and are presented in
Sterling, which is also the Group's functional currency.
The principal accounting policies adopted in the preparation of the
consolidated financial statements are set out in Note 2. The policies have
been consistently applied to the period presented, unless otherwise stated.
The preparation of financial statements in compliance with UK adopted
international accounting standards requires the use of certain critical
accounting estimates. It also requires Group management to exercise judgment
in applying the Group's accounting policies. The areas where significant
judgements and estimates have been made in preparing the financial statements
and their effect are disclosed in Note 3.
Basis of measurement
The consolidated financial statements have been prepared on a historical cost
basis, except for the following items (refer to individual accounting policies
for details):
· Litigation assets - fair value through profit or loss
· Put and call options - fair value through profit or loss
Going concern
As described in the Strategic Report the Group expects to be able to operate
within the Group's financing facilities and in accordance with the covenants
set out in all available facility agreements. Accordingly, the Directors have
a reasonable expectation that the Company and the Group have adequate
resources to continue in operational existence for the foreseeable future and
they have adopted the going concern basis of accounting in preparing the
annual Group financial statements.
Changes in accounting policies
a. New standards, interpretations and amendments effective from 1 January
2021
New standards that have been adopted in the annual financial statements for
the year ended 31 December 2021 but have not had a significant effect on the
Group are:
· Interest Rate Benchmark Reform (Amendments to IFRS 9, IAS 39,
IFRS 7, IFRS 4 and IFRS 16)
· COVID-19 Related Rent Concessions beyond 30 June 2021 (Amendment
to IFRS16)
· Amendments to References to the Conceptual Framework in IFRS
Standards (Conceptual Framework)
b. New standards, interpretations and amendments not yet effective
There are a number of standards, amendments to standards, and interpretations
which have been issued by the IASB that are effective in future accounting
periods that the Group has decided not to adopt early. The following
amendments are effective for the period beginning 1 January 2022:
· Onerous Contract - Cost of fulfilling a Contract (Amendments to
IAS 37)
· Property, plant and Equipment: Proceeds before Intended Use
(Amendments to IAS 16)
· Annual Improvements to IFRS Standards 2018-2020 (Amendments to
IFRS1, IFRS 9, IFRS 16 and IAS 41)
· References to Conceptual Framework (Amendments to IFRS 3)
The Group is currently assessing the impact of these new accounting standards
and amendments and does not expect that they will have a material impact on
the Group.
The following amendments are effective for the period beginning 1 January
2023:
· Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS
Practice Statement 2);
· Definition of Accounting Estimates (Amendments to IAS 8); and
· Deferred Tax Related to Assets and Liabilities arising from a
Single Transaction (Amendments to IAS 12).
2. Accounting policies
Revenue
Revenue comprises the fair value of consideration receivable in respect of
services provided during the period, inclusive of recoverable expenses
incurred but excluding value added tax.
Legal and Other Professional services revenues
Where fees are contractually able to be rendered by reference to time charged
at agreed rates, the revenue is recognised over time, based on time worked
charged at agreed rates, to the extent that it is considered recoverable.
Where revenue is subject to contingent fee arrangements, including where
services are provided under Damages Based Agreements (DBAs), the Group
estimates the amount of variable consideration to which it will be entitled
and constrains the revenue recognised to the amount for which it is considered
highly probable that there will be no significant reversal. Due to the nature
of the work being performed, this typically means that contingent revenues are
not recognised until such time as the outcome of the matter being worked on is
certain.
Bills raised are payable on delivery and until paid form part of trade
receivables. The Group has taken advantage of the practical exemption in IFRS
15 not to account for significant financing components where the Group expects
the time difference between receiving consideration and the provision of the
service to a client will be one year or less. Where revenue has not been
billed at the balance sheet date, it is included as contract assets and forms
part of trade and other receivables.
Other professional services revenues
Other professional services revenue is contingent on the completion of a deal
and is recognised when the deal has completed. Bills raised are payable on
deal completion and are generally paid at that time.
Basis of consolidation
Where the company has control over an investee, it is classified as a
subsidiary. The company controls an investee if all three of the following
elements are present: power over the investee, exposure to variable returns
from the investee, and the ability of the investor to use its power to affect
those variable returns. Control is reassessed whenever facts and circumstances
indicate that there may be a change in any of these elements of control.
The consolidated financial statements present the results of the company and
its subsidiaries ("the Group") as if they formed a single entity. Intercompany
transactions and balances between group companies are therefore eliminated in
full.
The consolidated financial statements incorporate the results of business
combinations using the acquisition method. In the statement of financial
position, the acquiree's identifiable assets, liabilities and contingent
liabilities are initially recognised at their fair values at the acquisition
date. The results of acquired operations are included in the consolidated
statement of comprehensive income from the date on which control is obtained.
They are deconsolidated from the date on which control ceases.
Non-Controlling interests
The total comprehensive income of non-wholly owned subsidiaries is attributed
to owners of the parent and to the non-controlling interests in proportion to
their relative ownership interests.
Where the Company has agreed a put option over the shares of a subsidiary held
by a non-controlling interest, the liability for the estimated exercise value
of the put option is recognised at fair value in the financial statements of
the Company and is recognised at present value in the financial statements of
the Group. Movements in the estimated liability after initial recognition are
recognised in the statement of changes in equity.
Goodwill
Goodwill represents the excess of the cost of a business combination over the
Group's interest in the fair value of identifiable assets, liabilities and
contingent liabilities acquired.
Cost comprises the fair value of assets given, liabilities assumed and equity
instruments issued, plus the amount of any non-controlling interests in the
acquiree plus, if the business combination is achieved in stages, the fair
value of the existing equity interest in the acquiree. Contingent
consideration is included in cost at its acquisition date fair value and, in
the case of contingent consideration classified as a financial liability,
remeasured subsequently through profit or loss. Direct costs of acquisition
are recognised immediately as an expense.
Goodwill is capitalised as an intangible asset with any impairment in carrying
value being charged to the consolidated statement of comprehensive income.
Where the fair value of identifiable assets, liabilities and contingent
liabilities exceed the fair value of consideration paid, the excess is
credited in full to the consolidated statement of comprehensive income on the
acquisition date.
Impairment of non-financial assets (excluding inventories, investment properties and deferred tax assets)
Impairment tests on goodwill and other intangible assets with indefinite
useful economic lives are undertaken annually at the financial period end.
Other non-financial assets are subject to impairment tests whenever events or
changes in circumstances indicate that their carrying amount may not be
recoverable. Where the carrying value of an asset exceeds its recoverable
amount (i.e. the higher of value in use and fair value less costs to sell),
the asset is written down accordingly.
Where it is not possible to estimate the recoverable amount of an individual
asset, the impairment test is carried out on the smallest group of assets to
which it belongs for which there are separately identifiable cash flows; its
cash generating units ('CGUs'). Goodwill is allocated on initial recognition
to each of the Group's CGUs that are expected to benefit from a business
combination that gives rise to the goodwill.
Impairment charges are included in profit or loss, except to the extent they
reverse gains previously recognised in other comprehensive income. An
impairment loss recognised for goodwill is not reversed.
Foreign currency
Transactions entered into by Group entities in a currency other than the
currency of the primary economic environment in which they operate (their
"functional currency") are recorded at the rates ruling when the transactions
occur. Foreign currency monetary assets and liabilities are translated at the
rates ruling at the reporting date. Exchange differences arising on the
retranslation of unsettled monetary assets and liabilities are recognised
immediately in profit or loss.
Financial assets
The Group classifies its financial assets into one of the categories discussed
below, depending on the purpose for which the asset was acquired. The Group's
accounting policy for each category is as follows:
Fair value through profit or loss
Litigation assets relate to the provision of funding to litigation matters in
return for a participation share in the settlement of that case. Investments
are initially measured at the sum invested and are subsequently held at fair
value through the profit or loss.
When the Group disposes of a proportion of its participation share in the
settlement of the case to a third party under an uninsured ("naked") contract,
where the percentage of the litigation asset being disposed of and the
percentage return remain proportionate irrespective of the final outcome of
the litigation, the difference between the disposal proceeds and the cost of
investment disposed gives rise to a profit on disposal which is recognised
through the profit and loss when the sale is agreed. These sales are
non-recourse and, if the case is successful, the relevant % of the settlement
received is paid to the third party. For uninsured cases, the Group uses the
value of third party disposals to calculate the gross value of the proportion
of the investment retained by the Group and deducts the expected cost of
investment to be borne by the Group to give the fair value of the Group's
investment. The proportion of each investment retained is calculated using the
expected total return on the investment, the expected return payable to the
onward investor and the expected total return retained by the Group.
For insured cases, when the Group disposes of a proportion of its
participation share in the settlement of the case to a third party, where the
third party return is calculated as a fixed percentage daily rate irrespective
of the settlement value of a successful litigation outcome, the derecognition
requirements under IFRS 9 para 3.2.2 are not met and no sale or profit on
disposal arise. The Group retains the full litigation asset and the proceeds
of disposal under the third party contract are included as litigation
liabilities. The fair value of the litigation asset is calculated using the
expected total return retained by the Group in the different possible outcomes
factored by Management's expectation of the likelihood of each outcome.
Amortised cost
These assets arise principally from the provision of goods and services to
customers (e.g. trade receivables), but also incorporate other types of
financial assets where the objective is to hold these assets in order to
collect contractual cash flows and the contractual cash flows are solely
payments of principal and interest. They are initially recognised at fair
value plus transaction costs that are directly attributable to their
acquisition or issue, and are subsequently carried at amortised cost using the
effective interest rate method, less provision for impairment.
Impairment provisions for current and non-current trade receivables are
recognised based on the simplified approach within IFRS 9 using a provision
matrix in the determination of the lifetime expected credit losses. During
this process the probability of the non-payment of the trade receivables is
assessed. This probability is then multiplied by the amount of the expected
loss arising from default to determine the lifetime expected credit loss for
the trade receivables. For trade receivables, which are reported net, such
provisions are recorded in a separate provision account with the loss being
recognised in profit or loss. On confirmation that the trade receivable will
not be collectable, the gross carrying value of the asset is written off
against the associated provision.
From time to time, the Group elects to renegotiate the terms of trade
receivables due from customers with which it has previously had a good trading
history. Such renegotiations will lead to changes in the timing of payments
rather than changes to the amounts owed and, in consequence, the new expected
cash flows are discounted at the original effective interest rate and any
resulting difference to the carrying value is recognised in the consolidated
statement of comprehensive income (operating profit).
Impairment provisions for receivables from related parties and loans to
related parties, including those from subsidiary companies, are recognised
based on a forward looking expected credit loss model. The methodology used to
determine the amount of the provision is based on whether there has been a
significant increase in credit risk since initial recognition of the financial
asset. This annual assessment considers forward-looking information on the
general economic and specific market conditions together with a review of the
operating performance and cash flow generation of the entity relative to that
at initial recognition. For those where the credit risk has not increased
significantly since initial recognition of the financial asset, twelve month
expected credit losses along with gross interest income are recognised. For
those for which credit risk has increased significantly, lifetime expected
credit losses along with the gross interest income are recognised. For those
that are determined to be credit impaired, lifetime expected credit losses
along with interest income on a net basis are recognised.
The Group's financial assets measured at amortised cost comprise trade and
other receivables and cash and cash equivalents in the consolidated statement
of financial position. Cash and cash equivalents includes cash in hand,
deposits held at call with banks, and other short term highly liquid
investments with original maturities of three months or less.
Financial liabilities
The Group classifies its financial liabilities depending on the purpose for
which the liability was acquired.
Other financial liabilities
All the Group's financial liabilities are classified as other financial
liabilities, which include the following items:
Bank borrowings are initially recognised at fair value net of any transactions
costs directly attributable to the issue of the instrument. Such interest
bearing liabilities are subsequently measured at amortised cost using the
effective interest rate method, which ensures that any interest expense over
the period to repayment is at a constant rate on the balance of the liability
carried in the consolidated statement of financial position. For the purposes
of each financial liability, interest expense includes initial transaction
costs and any premium payable on redemption, as well as any interest or coupon
payable while the liability is outstanding.
Trade payables and other short-term monetary liabilities, which are initially
recognised at fair value and subsequently carried at amortised cost using the
effective interest method.
Defined contribution schemes
Contributions to defined contribution pension schemes are charged to the
consolidated statement of comprehensive income in the year to which they
relate.
Leased assets
Identifying leases
The Group accounts for a contract, or a portion of a contract, as a lease when
it conveys the right to use an asset for a period of time in exchange for
consideration. Leases are those contracts that satisfy the following criteria:
(a) There is an identified asset;
(b) The Group obtains substantially all the economic benefits from use of
the asset; and
(c) The Group has the right to direct use of the asset
The Group considers whether the supplier has substantive substitution rights.
If the supplier does have those rights, the contract is not identified as
giving rise to a lease.
In determining whether the Group obtains substantially all the economic
benefits from use of the asset, the Group considers only the economic benefits
that arise from use of the asset, not those incidental to legal ownership or
other potential benefits.
In determining whether the Group has the right to direct use of the asset, the
Group considers whether it directs how and for what purpose the asset is used
throughout the period of use. If there are no significant decisions to be made
because they are pre-determined due to the nature of the asset, the Group
considers whether it was involved in the design of the asset in a way that
predetermines how and for what purpose the asset will be used throughout the
period of use. If the contract or portion of the contract does not satisfy
these criteria, the Group applies other applicable IFRSs rather than IFRS 16.
All leases are accounted for by recognising a right-of-use asset and a lease
liability except for:
· Leases of low value assets; and
· Leases with a term of 12 months or less
Lease liabilities are measured at the present value of the contractual
payments due to the lessor over the lease term, with the discount rate
determined by reference to the rate inherent in the lease unless this is not
readily determinable, in which case the Group's incremental borrowing rate on
commencement of the lease is used. Variable lease payments are only included
in the measurement of the lease liability if they depend on an index or rate.
In such cases, the initial measurement of the lease assumes the variable
element will remain unchanged throughout the lease term. Other variable lease
payments are expensed in the period to which they relate.
On initial recognition, the carrying value of the lease liability also
includes:
· amounts expected to be payable under any residual value guarantee
· the exercise price of any purchase option granted in favour of
the Group if it is reasonable certain to assess that option
· any penalties payable for terminating the lease, if the term of
the lease has been estimated on the basis of the termination option being
exercised
Leased assets (continued)
Right-of-use assets are initially measured at the amount of the lease
liability, reduced for any lease incentives received, and increased for:
· lease payments made at or before the commencement of the lease
· initial direct costs incurred and
· the amount of any provision recognised where the Group is
contractually required to dismantle, remove or restore the leased asset
Subsequent to initial measurement lease liabilities increase as a result of
interest charged at a constant rate on the balance outstanding and are reduced
for lease payments made. Right-of-use assets are amortised on a straight-line
basis over the remaining term of the lease or over the remaining economic life
of the asset if this is judged to be shorter than the lease term.
When the Group revises its estimate of the term of any lease, it adjusts the
carrying amount of the lease liability to reflect the payments to make over
the revised term, which are discounted using a revised discount rate. The
carrying value of lease liabilities is similarly revised when the variable
element of future lease payments dependent on a rate or index is revised,
except the discount rate remains unchanged. In both cases an equivalent
adjustment is made to the carrying value of the right-of-use asset, with the
revised carrying amount being amortised over the remaining lease term.
For contracts that both convey a right to the Group to use an identified asset
and require services to be provided to the Group by the lessor for a variable
amount, the Group has elected to account for the right-of-use payments as a
lease and expense the service charge payments in the period to which they
relate.
Externally acquired intangible assets
Externally acquired intangible assets are initially recognised at cost and
subsequently amortised over their useful economic lives.
Intangible assets are recognised on business combinations if they are
separable from the acquired entity or give rise to other contractual/legal
rights. The amounts ascribed to such intangibles are arrived at by using
appropriate valuation techniques.
The significant intangibles recognised by the Group, their useful economic
lives and the methods used for amortisation and to determine the cost of
intangibles acquired in a business combination are as follows:
Intangible asset Useful economic life Remaining useful economic life Amortisation method Valuation method
Brand 20 years 16 - 19 years Straight line Estimated discounted cash flow
Customer contracts 1 - 2 years 1 - 2 years In line with contract revenues Estimated discounted cash flow
Restrictive covenant extension 2 years 1 - 2 years Straight line Cost
Non-current investments
Investments in subsidiary undertakings are stated at cost less amounts written
off for impairment. Investments are reviewed for impairment where events or
circumstances indicate that their carrying amount may not be recoverable.
Where the Group has the power to participate in (but not control) the
financial and operating policy decisions of another entity, it is classified
as an associate. Associates are initially recognised in the consolidated
statement of financial position at cost. Subsequently associates are accounted
for using the equity method, where the Group's share of post-acquisition
profits and losses and other comprehensive income are recognised in the
consolidated statement of comprehensive income (except for losses in excess of
the Group's investment in the associate unless there is an obligation to make
good those losses).
Dividends
Dividends are recognised when they become legally payable. In the case of
interim dividends to equity shareholders, this is when declared by the
directors. In the case of final dividends, this is when approved by the
shareholders at the AGM.
Deferred taxation
Deferred tax assets and liabilities are recognised where the carrying amount
of an asset or liability in the consolidated statement of financial position
differs from its tax base, except for differences arising on:
· the initial recognition of goodwill
· the initial recognition of an asset or liability in a transaction
which is not a business combination and at the time of the transaction affects
neither accounting or taxable profit, and
· investments in subsidiaries and joint arrangements where the
Group is able to control the timing of the reversal of the difference and it
is probable that the difference will not reverse in the foreseeable future
Recognition of deferred tax assets is restricted to those instances where it
is probable that taxable profit will be available against which the difference
can be utilised.
The amount of the asset or liability is determined using tax rates that have
been enacted or substantively enacted by the reporting date and are expected
to apply when the deferred tax liabilities/assets are settled /recovered.
Deferred tax assets and liabilities are offset when the Group has a legally
enforceable right to offset current tax assets and liabilities and the
deferred tax assets and liabilities relate to taxes levied by the same tax
authority on either:
· The same taxable group company, or
· Different group entities which intend either to settle current
tax assets and liabilities on a net basis, or to realise the assets and settle
the liabilities simultaneously, in each future period in which significant
amounts of deferred tax assets or liabilities are expected to be settled or
recovered
Property, plant and equipment
Items of property, plant and equipment are initially recognised at cost. As
well as the purchase price, cost includes directly attributable costs and the
estimated present value of any future unavoidable costs of dismantling and
removing items. The corresponding liability is recognised within provisions.
Depreciation is provided on all items of property, plant and equipment so as
to write off their carrying value over their expected useful economic lives.
It is provided at the following rates:
Leasehold improvements - 25-33% per annum straight line
Fixtures and fittings - 25% per annum straight line
Computer equipment - 33% per annum straight line
Provisions
Professional indemnity provision
A provision is recognised when the Group has a present legal or constructive
obligation as a result of a past event, that can be reliably measured and it
is probable that an outflow of economic benefits will be required to settle
the obligation. Where material, the impact of the time value of money is taken
into account by discounting the expected future cash flow at a pre-tax rate,
which reflects risks specific to the liability.
Insurance cover is maintained in respect of professional negligence claims.
This cover is principally written through insurance companies. Premiums are
expensed as they fall due with prepayments or accruals being recognised
accordingly. Expected reimbursements are recognised once they become
receivable. The liability and associated reimbursement asset are shown
separately in the financial statements. Where outflow of resources is
considered probable and reliable estimates can be made, provision is made for
the cost (including related legal costs) of settling professional negligence
claims brought against the Group by third parties and disciplinary proceedings
brought by regulatory authorities. Amounts provided for are based on
Management's assessment of the specific circumstances in each case. No
separate disclosure is made of the detail of such claims and proceedings, as
to do so could seriously prejudice the position of the Group. In the event the
insurance companies cannot settle the full liability, the liability will
revert to the Group.
Dilapidations provision
The Group recognises a provision for the future costs of dilapidations on
leased office space. The provision is an estimate of the total cost to return
applicable office space to its original condition at the end of the lease
term.
Restatements
The 2020 comparative numbers have been restated for the following corrections
which are described fully in Note 30:
· Reclassification of contracts for insured litigation assets,
which were previously treated as sales, which do not meet the derecognition
requirements of IFRS 9 para 3.2.2.
· Restatement of the fair value of the uninsured contracts to
correct an error in the previous valuation
The Consolidated statement of financial position adjustments increased
litigation assets by £274,356, increased trade and other payables by
£575,000, reduced current tax liabilities by £57,122 and reduced equity by
£243,522. The Consolidated statement of comprehensive income adjustments
decreased gains on litigation assets by £300,644 and reduced tax expenses by
£57,122
3. Critical accounting estimates and judgments
The Group makes certain estimates and assumptions regarding the future.
Estimates and judgements are continually evaluated based on actual experience
and other factors, including expectations of future events that are believed
to be reasonable under the circumstances. In the future, actual experience may
differ from these estimates and assumptions. The estimates and assumptions
that have a significant risk of causing a material adjustment to the carrying
amounts of assets and liabilities within the next financial period are
discussed below.
Judgements, estimates and assumptions
Accounting for business combinations and fair value
Business combinations are accounted for at fair value. Valuation of acquired
intangibles requires estimates of future growth rates, profitability,
remaining useful lives and discount rates for input to the business
combination valuation methodology. A difference in the estimated future growth
rates, profitability, the use of a different discount rate, or the selection
of a different valuation method may result in a different assessment of fair
value of the asset or liability acquired as part of the business combination.
Estimated impairment of intangible assets including goodwill
Determining whether an intangible asset is impaired requires an estimation of
the value in use of the cash generating units to which the intangible has been
allocated. The value in use calculation requires the entity to estimate the
future cash flows expected to arise from each cash generating unit and
determine a suitable discount rate. A difference in the estimated future cash
flows or the use of a different discount rate may result in a different
estimated impairment of intangible assets.
3. Critical accounting estimates and judgements (continued)
Revenue recognition
Where the group performs work that is chargeable based on hours worked at
agreed rates, assessment must be made of the recoverability of the unbilled
time at the period end. This is on a matter by matter basis, with reference to
historic and post year-end recoveries. Different views on recoverability would
give rise to a different value being determined for revenue and a different
carrying value for unbilled revenue.
Where revenue is subject to contingent fee arrangements, the Group estimates
the amount of variable consideration to which it will be entitled and
constrains the revenue recognised to the amount for which it is considered
highly probable that there will be no significant reversal. Due to the nature
of the work being performed, this typically means that contingent revenues are
not recognised until such time as the outcome of the matter being worked on is
certain. Factors the Group considers when determining whether revenue should
be constrained are whether: -
a) The amount of consideration receivable is highly susceptible to factors
outside the Group's influence
b) The uncertainty is not expected to be resolved for a long time
c) The Group has limited previous experience (or limited other evidence) with
similar contracts
d) The range of possible consideration amounts is broad with a large number of
possible outcomes
Different views being determined for the amount of revenue to be constrained
in relation to each contingent fee arrangement may result in a different value
being determined for revenue and also a different carrying value being
determined for unbilled amounts for client work.
Where the group enters into Damages Based Agreements ("DBAs") that include
both the provision of services and the provision of litigation finance, the
Group must apportion the total expected settlement between that arising as
conditional revenue for services and that arising as a return on
participation. This requires estimation of the total amount of time cost and
disbursements that will be incurred on a matter and the expected settlement
value; the allocation of the DBA to revenue is made with reference to standard
returns on contingent fee work. Different views will impact the level of
unrecognised contingent revenue and also the recognised financial asset
relating to the DBA participation.
Where non-contingent fees as well as contingent revenue are earned on DBAs,
the group must make a judgement as to whether non-contingent amounts represent
revenue or a reduction in funding, with reference to the terms of the
agreement and timing and substance of time worked and payments made. Where
non-contingent revenue arises, the Group must match it against the services to
which it relates. This requires Management to estimate work done as a
proportion of total expected work to which the fee relates. Different views
could impact the level of non-contingent revenue recognised.
Impairment of trade receivables
Receivables are held at cost less provisions for impairment. Impairment
provisions are recognised based on the simplified approach within IFRS 9 using
a provision matrix in the determination of the lifetime expected credit
losses. A different assessment of the impairment provision with reference to
the probability of the non-payment of trade debtors or the expected loss
arising from default, may result in different values being determined.
3. Critical accounting estimates and judgements (continued)
Litigation assets and fair value
LionFish
For each of LionFish's uninsured ("naked") investments, a third party disposal
has been made. To calculate the profit on disposal, the Group allocates the
corresponding proportion of the total expected cost of the investment against
the proportion of the investment sold. The total expected cost of each
investment involves an assumption regarding the total expected drawdown on
that investment, which may be less than the total value of funds committed. To
calculate the proportion of each investment retained, the Group has estimated
the expected total return on the investment and the expected return payable to
the onward investor. As returns are dependent on the timing of the settlement,
these estimates are driven by assumptions over the most likely timing of
settlement. The sales prices of the part disposal are used to value the gross
value of the proportion of the litigation asset retained by the Group and the
estimated remaining capital to invest is deducted to give the fair value of
the Group's investment. The estimates used in these calculations are based on
semi-annual individual case by case reviews by Management.
The fair value of LionFish's insured investments is calculated using the
expected total return retained by the Group in the different possible outcomes
factored by Management's expectation of the likelihood of each outcome. As
returns are dependent on the timing of the settlement, these estimates are
driven by assumptions over the most likely timing of settlement. The total
expected cost of each investment involves an assumption regarding the total
expected drawdown on that investment, which may be less than the total value
of funds committed. The expected total returns retained by the Group in the
different possible outcomes are then factored by Management's expectation of
the likelihood of each outcome. The estimates used in these calculations, are
based on semi-annual individual case by case reviews by Management.
The recorded profits on disposal and carrying values are relatively
insensitive to assumptions made, with the exception that matters for which
capital invested is insured are sensitive to the estimated settlement date and
the success likelihood factor applied. In general, the later the anticipated
settlement date, the greater the carrying value of the investment. Management
has exercised caution in its assessment of settlement dates. Management have
used historic success rates on contingent contentious cases to factor the
returns for the different possible outcomes.
Rosenblatt
Unlike LionFish's investments, the total return on Rosenblatt's litigation
assets is a proportion of damages awarded, rather than being dependent on
timing of settlement. As this figure is potentially large and uncertain, and
has a strong impact on fair value calculations, where possible the Group
avoids using it as an input to its fair value calculations.
Where a recent disposal of an interest in a damage based agreement has been
made, the sales price of the disposal has been used to value the gross value
of the interest in damages retained by the Group. The sales price is adjusted
downwards for the cost of the Group's ongoing funding of the matter, which is
not borne by the onward investor. This involves an estimate of the likely
amount and timing of disbursements over the course of the matter, the minimum
being funds already disbursed at the balance sheet date. As management
believes the sales price of disposals to represent the floor level, having
been used to create a market and de-risk the original investment, the minimum
level of disbursements has also been used in valuing the investment. If the
present value of the maximum level of disbursements were applied against the
value of damages based on disposal price, this would reduce the fair value of
the investment to zero. Conversely, if a discounted cash flow method of
valuation were used, including an estimate of the likely amount of damages on
settlement, the value of the investment would be significantly increased.
It is presumed that fair value and cost approximate to each other on initial
recognition and where a damages based agreement is at an early stage, such
that the level of time worked is de minimis, the financial asset has been
valued at cost, subject to assessment for overstatement.
Where there has been minimal activity on a damages based agreement from period
to period, the prior year valuation is taken as the initial indication of fair
value, subject to assessment for overstatement.
Put options over shares held by non-controlling interest
The following key estimates and judgements have been used in determining the
present value of put options over the shares held by the non-controlling
interest in LionFish: -
a. It has been assumed that the option holder will exercise at the
earliest possible opportunity, being 12 August 2022
b. The value at the date of exercise, which is calculated as a multiple of
average profit over the preceding two years, has been based on the actual
profit after tax for the periods ended 31 December 2020 and 31 December 2021
In determining the fair value of the put options, it has been assumed that
fair value of the put shares in LionFish is equal to the fair value of the
shares in the Company for which they would be exchanged, and that the fair
value of the option is zero.
3. Critical accounting estimates and judgements (continued)
Call option over shares held by non-controlling interest
On 1 February 2021, the Company agreed a call option over the shares of
Adnitor Limited held by the majority shareholder. Under this agreement, the
Company is required to purchase the remaining shares in Adnitor Limited by the
fifth anniversary of the agreement. The following key estimates and judgements
have been used in determining the present value of the option over the shares
held by majority shareholder: -
a. It has been assumed that the Company will exercise on earliest date
that it can be required to exercise, that is the fifth anniversary of the
agreement, being 1 February 2026.
b. The value at the date of exercise, which is calculated as a multiple of
the average profits of Adnitor Limited over the preceding two years, as long
as that exceeds the minimum of £1 million, has been based £1 million.
In determining the fair value of the option, it has been assumed that fair
value of the option shares in Adnitor Limited is equal to the fair value of
the shares in the Company for which they would be exchanged, and that the fair
value of the option is zero.
Claims and regulatory matters
The Group from time to time receives claims in respect of professional service
matters. The Group defends such claims where appropriate, but makes provision
for the possible amounts considered likely to be payable, having regard to any
relevant insurance cover held by the Group. A different assessment of the
likely outcome of each case or of the possible cost involved may result in a
different provision or cost.
The Company has been informed that HMRC has started an inquiry into the
valuation of employee related securities issued by the Company in April 2018
prior to the IPO. For full details, refer to Note 31.
4. Financial instruments - Risk Management
The Group is exposed through its operations to the following financial risks:
· Credit risk
· Interest rate risk and
· Liquidity risk
In common with all other businesses, the Group is exposed to risks that arise
from its use of financial instruments. This note describes the Group's
objectives, policies and processes for managing those risks and the methods
used to measure them. Further quantitative information in respect of these
risks is presented throughout these financial statements.
There have been no substantive changes in the Group's exposure to financial
instrument risks, its objectives, policies and processes for managing those
risks or the methods used to measure them from the previous period unless
otherwise stated in this note.
(i) Principal financial instruments
The principal financial instruments used by the Group, from which financial
instrument risk arises, are as follows:
· Trade receivables
· Cash and cash equivalents
· Litigation assets and liabilities
· Trade and other payables
· Derivative financial liabilities
· Floating-rate bank loans
(ii) Financial instruments by category
Financial Assets Fair value through profit or loss Amortised cost
31 December 2021 31 December 2020 31 December 2021 31 December 2020
restated
£ £ £ £
Cash and cash equivalents - - 4,756,143 13,522,184
Trade and other receivables - - 16,606,983 7,074,425
Litigation assets 11,571,052 6,569,110 - -
Total financial assets 11,571,052 6,569,110 21,363,126 20,596,609
Financial Liabilities Fair value through profit or loss Amortised cost
31 December 2021 31 December 2020 31 December 2021 31 December 2020
£ £ £ £
Trade payables and accruals - - 4,618,755 1,618,264
Loans and borrowings - - 19,129,592 10,000,000
Litigation liabilities - - 750,000 575,000
Derivative financial liabilities - - 1,515,000 1,015,000
Other payables - - 2,308,328 1,118,595
Total financial liabilities - - 28,321,675 14,326,859
Trade and other payables are due within twelve months.
4. Financial instruments - Risk Management (continued)
(iii) Financial instruments not measured at fair value
Financial instruments not measured at fair value includes cash and cash
equivalents, trade and other receivables, trade and other payables, loans and
borrowings, litigation liabilities and derivative financial liabilities.
Due to their short-term nature, the carrying value of cash and cash
equivalents, trade and other receivables, and trade and other payables
approximates their fair value.
(iv) Financial instruments measured at fair value
Litigation assets are classified as level 3 in the fair value hierarchy of
financial instruments.
The methods and procedures to fair value litigation assets may include, but
are not limited to: (i) obtaining information provided by third parties when
available; (ii) performing comparisons of comparable or similar investment
matters; (iii) calculating the present value of future cash flows; (iv)
assessing other analytical data and information relating to the investment
that is an indication of value; (v) reviewing the amounts invested in these
investments; (vii) entering into a market transaction with an arm's length
party.
The material estimates and assumptions used in the analysis of fair value
include the status and risk profile of the risks underlying the investment,
the timing and expected amount of cash flows based on the investment structure
and agreement, the appropriateness of discount rates used, if any, and in some
cases, the timing of, and estimated minimum proceeds from, a favourable
outcome. Significant judgement and estimation goes into the assumptions which
underlie the analyses, and the actual values realised with respect to
investments could be materially different from values obtained based on the
use of the estimates.
The reconciliation of the opening and closing fair value balance of the level
3 financial instruments is provided in Note 19 together with a sensitivity
analysis.
General objectives, policies and processes
The Board has overall responsibility for the determination of the Group's risk
management objectives and policies and, whilst retaining ultimate
responsibility for them, it has delegated the authority for designing and
operating processes that ensure the effective implementation of the objectives
and policies to the Group's finance function. The Board receives monthly
reports from the Chief Financial Officer through which it reviews the
effectiveness of the processes put in place and the appropriateness of the
objectives and policies it sets.
The overall objective of the Board is to set policies that seek to reduce risk
as far as possible without unduly affecting the Group's competitiveness and
flexibility. Further details regarding these policies are set out below:
Credit risk
Credit risk is the risk of financial loss to the Group if a client or
counterparty to a financial instrument fails to meet its contractual
obligations. The Group is mainly exposed to credit risk from credit sales. It
is Group policy to assess the credit risk of new and irregular clients before
entering contracts and to require money on account of work for these clients.
The Group reviews, on a regular basis, whether to perform further work where
clients have unpaid bills. The Group works with a broad spread of long
standing reputable clients to ensure there are no significant concentrations
of credit risk.
Credit risk also arises from cash and cash equivalents and deposits with banks
and financial institutions. Cash and cash equivalents are invested with banks
with an A+ credit rating.
4. Financial instruments - Risk Management (continued)
Interest rate risk
The Group is exposed to cash flow interest rate risk from borrowings under the
Term Facility and Revolving Credit Facility at variable rate. The Board
reviews the interest rate exposure on a regular basis.
During 2021 and 2020, the Group's borrowings at variable rate were denominated
in sterling. At 31 December 2021, if interest rates on sterling denominated
borrowings had been 150 basis points higher/lower with all other variables
held constant, profit after tax for the year would have been £240,000
lower/higher, mainly as a result of higher/lower interest expense on
floating-rate borrowings. The directors consider that 150 basis points is the
maximum likely change in sterling interest rates over the next year, being the
period up to the next point at which the Group expects to make these
disclosures.
Liquidity risk
Liquidity risk arises from the Group's management of working capital and the
finance charges and principal repayments on its debt instruments. It is the
risk that the Group will encounter difficulty in meeting its financial
obligations as they fall due. The Group's policy is to ensure that it will
always have sufficient cash (or agreed facilities) to allow it to meet its
liabilities when they become due and to take advantage of business
opportunities.
The Board reviews the projected financing requirements annually when agreeing
the Group's budget and receives rolling 12-month cash flow projections for the
Group on a regular basis as well as information regarding cash balances.
On 19(th) April 2021, the Group signed an amendment and restatement agreement
for a £15,000,000 three-year Revolving Credit Facility and £10,000,000
three-year Term Facility Commitment with HSBC UK Bank plc. The Group may
utilise any proportion of the facilities, paying an interest margin of 2.4 -
3.15% over SONIA on utilisations and a commitment fee on the unutilised
facility. The facility is secured by the debenture which grants first ranking
fixed and floating security of the property and assets of the Group as
referenced in Notes 12 and 14. During 2021, the Group drew down the full
£10.0 million of the Revolving Credit Facility and £10 million of the Term
Facility Commitment of which £1 million has been repaid at year end. At the
year end the Group had £4.8 million in cash, and so a net debt position of
£14.2 million (2020: net cash £3.5 million).
At the end of the financial year, cash flow projections indicated that the
Group expected to have sufficient liquid resources to meet its obligations,
including scheduled lease payments (Note 13), under all reasonably expected
circumstances.
Capital Management
The Group monitors "adjusted capital" which comprises all components of equity
(i.e. share capital, share premium, non-controlling interest and retained
earnings).
The Group's objectives when maintaining capital are:
· to safeguard the entity's ability to continue as a going concern, so that
it can continue to provide returns for shareholders and benefits for other
stakeholders, and
· to provide an adequate return to shareholders by pricing products and
services commensurately with the level of risk
The Group expects to pursue a progressive dividend policy over time, driven
primarily by the level of cash retained within the business as well as
investment opportunities available to the Group and from time to time review
the continued appropriateness of such policy.
5. Segment information
The Group's reportable segments are strategic business groups that offer
different products and services. Operating segments are reported in a manner
consistent with the internal reporting provided to the chief operating
decision maker, which has been identified as the Board of Directors of RBG
Holdings plc.
The following summary describes the operations of each reportable segment:
· Legal services - Provision of legal advice, by RBGLS (trading under two
brands, Rosenblatt and Memery Crystal
· Litigation finance - Sale of litigation assets, by Rosenblatt and LionFish
· Other Professional services -Provision of sell-side M&A corporate
finance services, by Convex
2021 Legal services Litigation finance Other Professional services Total
£ £ £ £
Segment revenue 32,570,661 - 9,414,677 41,985,338
Segment gains on litigation assets comprising:
Proceeds on disposal of litigation assets - 4,888,711 - 4,888,711
Realisation of litigation assets - (2,162,031) - (2,162,031)
Profit on disposal of litigation assets - 2,726,680 - 2,726,680
Fair value movement on litigation assets - 2,480,844 - 2,480,844
- 5,207,524 - 5,207,524
Segment contribution 15,007,758 - 4,288,915 19,296,673
Segment gains on litigation assets - 5,207,524 - 5,207,524
Costs not allocated to segments
Personnel costs (4,668,749)
Depreciation and amortisation (2,940,078)
Other operating expense (6,911,796)
Net financial expenses (757,340)
Group profit for the year before tax 9,226,234
5. Segment information (continued)
2020 (restated) Legal services Litigation finance Other Professional services Total
£ £ £ £
Segment revenue 20,864,341 - 1,584,991 22,449,332
Segment gains on litigation assets comprising:
Proceeds on disposal of litigation assets - 2,986,000 - 2,986,000
Realisation of litigation assets - (2,034,719) - (2,034,719)
Profit on disposal of litigation assets - 951,281 - 951,281
Fair value movement on litigation assets - 1,870,802 - 1,870,802
- 2,822,083 - 2,822,083
Segment contribution 10,868,778 - (605,593) 10,263,185
Segment gains on litigation assets - 2,822,083 - 2,822,083
Costs not allocated to segments
Personnel costs (2,634,661)
Depreciation and amortisation (2,081,501)
Other operating expense (593,395)
Net financial expenses (370,074)
Group profit for the year before tax 7,405,637
Total assets and liabilities by operating segment are not reviewed by the
chief operating decision makers and are therefore not disclosed.
A geographical analysis of revenue is given below:
Revenue by location of clients
2021 2020
£ £
United Kingdom 36,893,981 20,680,948
Europe 549,860 387,829
North America 760,208 7,833
Other 3,781,289 1,372,722
41,985,338 22,449,332
Revenues from Legal Services clients that account for more than 10% of Group
revenue was £nil (2020: £12,829,816).
5. Segment information (continued)
Contract assets
2021 2020
Group £ £
At 1 January 2021 2,996,925 3,797,152
Acquired through business combinations 3,560,480 -
Transfers in the period from contract assets to trade receivables (2,464,783) (3,429,927)
Excess of revenue recognised over cash (or rights to cash) being recognised 1,883,636 2,629,700
during the year
At 31 December 2021 5,976,258 2,996,925
Contract assets are included within "trade and other receivables" on the face
of the statement of financial position. They arise when the Group has
performed services in accordance with the agreement with the relevant client
and has obtained right to consideration for those services but such income has
not been billed at the balance sheet date.
6. Profit from operations and auditor's remuneration
2021 2020
£ £
Profit from operations is stated after charging:
Fees payable to the company's auditors:
Audit fees 246,350 177,500
Other services 41,150 12,500
Depreciation of property, plant and equipment 525,607 335,634
Amortisation of right-of-use assets 1,781,058 986,061
Amortisation/impairment of intangible assets 633,414 759,806
Lease expense:
Short-term - -
Low value 3,874 3,335
The Alternative Performance Measures used by Management are shown below:
2021 2020
restated
£ £
Operating profit 9,983,574 7,775,711
Depreciation and amortisation expense 2,940,078 2,081,501
Non-underlying items 863,435 (2,640,000)
Adjusted EBITDA 13,787,087 7,217,212
2021 2020
restated
£ £
Profit before tax 9,226,234 7,405,637
Non-underlying items 863,435 (2,640,000)
Adjusted PBT 10,089,669 4,765,637
7. Employees
Group
2021 2020
£ £
Staff costs (including directors) consist of:
Wages and salaries 20,868,566 9,902,596
Short-term non-monetary benefits 214,208 122,854
Cost of defined contribution scheme 673,817 262,518
Share-based payment expense 72,000 39,403
Social security costs 2,526,064 1,225,260
24,354,655 11,552,631
Personnel costs stated in the consolidated statement of comprehensive income
includes the costs of contractors of £2,999,122 (2020: £3,227,573).
The average number of employees (including directors) during the period was as
follows:
2021 2020
Number Number
Legal and professional staff 113 55
Administrative staff 62 35
175 90
Defined contribution pension schemes are operated on behalf of the employees
of the Group. The assets of the schemes are held separately from those of the
Group in independently administered funds. The pension charge represents
contributions payable by the Group to the funds and amounted to £673,817
(2020: £262,518).
Contributions amounting to £127,296 (2020: £40,574) were payable to the
funds at period end and are included in Trade and other payables.
Company
The average number of employees (excluding directors) during the period was
six (2020: one); all other personnel are employed by subsidiary undertakings.
Details of the Directors' remuneration, share interests and transactions with
directors are included in the Directors' Report and in Note 28. The directors
are considered to be the key management personnel.
8. Finance income and expense
2021 2020
£ £
Recognised in profit or loss
Finance income
Interest received on bank deposits 22,676 24,460
Net finance income recognised in profit or loss 22,676 24,460
Finance expense
Interest expense on financial liabilities measured at amortised cost (409,089) (185,497)
Interest expense on lease liabilities (392,570) (209,037)
(801,659) (394,534)
Net finance (expense) recognised on profit or loss (778,983) (370,074)
The above financial income and expense include the following in respect of
assets/(liabilities) not at fair value through profit or loss:
2021 2020
£ £
Total interest income on financial assets 22,676 24,460
Total interest expense on financial liabilities (409,089) (185,497)
(386,413) (161,037)
9. Tax expense
2021 2020
restated
£ £
Current tax expense
Current tax on profits for the year 1,960,545 1,083,985
Adjustment for under provision in prior periods 7,487 1,120
Total current tax 1,968,032 1,085,105
Deferred tax expense
Origination and reversal of temporary differences (Note 24) 789 (117,291)
Total tax expense 1,968,821 967,814
Tax expense excluding share of tax of equity accounted associate 1,968,821 967,814
Share of tax expense of equity accounted joint venture 5,175 -
1,973,996 967,814
9. Tax expense (continued)
The reasons for the difference between the actual tax charge for the period
and the standard rate of corporation tax in the United Kingdom applied to
profits for the period are as follows:
2021 2020
restated
£ £
Profit for the year 7,257,413 6,437,823
Income tax expense (including income tax on associate) 1,973,996 967,814
Profit before income taxes 9,231,409 7,405,637
Tax using the Company's domestic tax rate of 19% 1,753,968 1,407,072
Expenses not deductible for tax purposes 117,317 5,293
Fixed asset differences (3,276) -
Income not taxable for tax purposes - (501,600)
Adjustments in respect of prior periods 7,487 1,120
Adjustments in respect of prior periods (deferred tax) - 5,606
Remeasurement of deferred tax for changes in tax rates 98,500 50,324
Total tax expense 1,973,996 967,814
Changes in tax rates and factors affecting the future tax charge
Following the announcement made in the Chancellor's Spring Budget regarding an
increase to the UK corporate tax rate from 19% to 25% from 1 April 2023, the
Finance Bill 2021 was subsequently enacted on 24 May 2021. As IFRS requires
deferred tax to be measured at tax rates that have been subsequently enacted
at the reporting date, the Group's deferred tax balances have been re-measured
accordingly and the impact has been reflected within the consolidated
financial statements.
10. Earnings per share
Total Total
2021 2020
restated
Numerator £ £
Profit for the period and earnings used in basic and diluted EPS 6,972,873 6,235,568
Non-Underlying items
Costs of acquiring subsidiary 863,435
Deferred consideration release - (2,640,000)
Less: tax effect of above items (69,242) -
Profit for the year adjusted for Non Underlying items 7,767,066 3,595,568
Denominator Number Number
Weighted average number of shares used in basic and diluted EPS 91,408,901 85,592,106
2021 2020
restated
Pence Pence
Basic and diluted earnings per ordinary share 7.63 7.29
Basic and diluted earnings per ordinary share adjusted for non-underlying 8.50 4.20
items
Clawback arrangements over certain shares of Cascades Ltd would have an
anti-dilutive effect on earnings per share and therefore no impact on diluted
earnings per share.
11. Dividends
2021 2020
£ £
Interim dividend of 3p (2019: 0p) per ordinary share proposed and paid during 2,541,412 -
the year relating to the previous year's results
Interim dividend of 2p (2020: 1p) per ordinary share paid during the year 1,889,002 823,283
4,430,414 823,283
On 25 February 2022, an interim dividend was paid of 3 pence per share in
respect of the 2021 financial year.
12. Property, plant and equipment
Group
Leasehold improvements Fixtures and fittings Computer Equipment Total
£ £ £ £
Cost
At 1 January 2021 335,501 149,136 628,684 1,113,321
Additions 4,804 9,660 115,715 130,179
Acquired through business combinations 2,369,974 92,498 47,117 2,509,589
At 31 December 2021 2,710,279 251,294 791,516 3,753,089
Accumulated depreciation and impairment
At 1 January 2021 281,571 45,055 311,466 638,092
Charge for the year 205,577 71,934 248,096 525,607
At 31 December 2021 487,148 116,989 559,562 1,163,699
Net book value
At 1 January 2021 53,930 104,081 317,218 475,229
At 31 December 2021 2,223,131 134,305 231,954 2,589,390
Company
Computer Equipment Total
£ £
Cost
At 1 January 2021 18,750 18,750
Additions - -
Acquired through business combinations - -
At 31 December 2021 18,750 18,750
Accumulated depreciation and impairment
At 1 January 2021 12,903 12,903
Charge for the year 4,764 4,764
At 31 December 2021 17,667 17,667
Net book value
At 1 January 2021 5,847 5,847
At 31 December 2021 1,083 1,083
Under a debenture signed and registered on 19 April 2021, HSBC UK Bank plc
have a fixed charge over the property, plant and equipment of the Group.
13. Leases
The Group leases its business premises in the United Kingdom. The lease
contracts either provide for annual increases in the periodic rent payments
linked to inflation or for payments to be reset periodically to market rental
rates. The Group also leases an item of office equipment, with fixed payments
over the lease term.
The percentages in the table below reflect the current proportions of lease
payments that are either fixed or variable. The sensitivity reflects the
impact on the carrying amount of lease liabilities and right-of-use assets if
there was an uplift of 5% on the balance sheet date to lease payments that are
variable.
At 31 December 2021 Lease Contract Variable Payments Sensitivity
Number % £000
Property leases with payments linked to inflation 1 46.7% +/- 253
Property leases with periodic uplifts to market rentals 2 53.3% +/- 539
3 100.0% +/- 792
The percentages in the table below reflect the proportions of lease payments
that are either fixed of variable for the comparative period.
13 Leases (continued)
At 31 December 2020 Lease Contract Fixed Payments Variable Payments Sensitivity
Number % % £000
Property leases with payments linked to inflation 1 - 88.0% +/- 290
Property leases with periodic uplifts to market rentals 1 - 11.3% +/- 10
Leases of plant and equipment 1 0.7% - -
3 0.7% 99.3% +/- 300
Right-of-use Assets
Land and buildings Computer equipment Total
£ £ £
At 1 January 2020 6,750,287 9,911 6,760,198
Amortisation (979,454) (6,607) (986,061)
Variable lease payment adjustment 51,575 - 51,575
At 31 December 2020 5,822,408 3,304 5,825,712
At 1 January 2021 5,822,408 3,304 5,825,712
Acquired through business combinations 11,798,710 - 11,798,710
Amortisation (1,777,754) (3,304) (1,781,058)
Variable lease payment adjustment 69,644 - 69,644
At 31 December 2021 15,913,008 - 15,913,008
Lease liabilities
Land and buildings Computer equipment Total
£ £ £
At 1 January 2020 6,721,732 10,071 6,731,803
Interest expense 208,790 247 209,037
Variable lease payment adjustment 51,575 - 51,575
Lease payments (1,034,442) (6,911) (1,041,353)
At 31 December 2020 5,947,655 3,407 5,951,062
At 1 January 2021 5,947,655 3,407 5,591,062
Acquired through business combinations 11,685,333 - 11,685,333
Interest expense 392,523 47 392,570
Variable lease payment adjustment 69,644 - 69,644
Lease payments (2,246,054) (3,454) (1,984,959)
At 31 December 2021 15,849,101 - 16,113,650
13. Leases (continued)
At 31 December 2021, lease liabilities were falling due as follows:
Group Up to 3 months Between 3 and 12 months Between 1 and 2 years Between 2 and 5 years Over 5 years Total
£ £ £ £ £ £
Lease liabilities 535,786 1,614,654 2,153,633 5,591,359 5,953,669 15,849,101
The aggregate undiscounted commitments for low-value leases as at 31 December
2021 was £nil (2020: £5,460).
14. Intangible assets
Group
Goodwill Customer Contracts Brand Other Total
£ £ £ £ £
Cost
At 1 January 2020 33,035,260 1,367,784 1,411,596 - 35,814,640
Additions - - -- 1,000,000 1,000,000
At 31 December 2020 33,035,260 1,367,784 1,411,596 1,000,000 36,814,640
At 1 January 2021 33,035,260 1,367,784 1,411,596 1,000,000 36,814,640
Additions 18,826,908 338,794 1,948,878 - 21,114,580
At 31 December 2021 51,862,168 1,706,578 3,360,474 1,000,000 57,929,220
Accumulated amortisation and impairment
At 1 January 2020 - 604,713 72,056 - 676,769
Amortisation charge - 689,226 70,580 - 759,806
At 31 December 2020 - 1,293,939 142,636 - 1,436,575
At 1 January 2021 - 1,293,939 142,636 - 1,436,575
Amortisation charge - 172,660 127,422 333,333 633,415
At 31 December 2021 - 1,466,599 270,058 333,333 2,069,990
Net book value
At 31 December 2020 33,035,260 73,845 1,268,960 1,000,000 35,378,065
At 31 December 2021 51,862,168 239,979 3,090,416 666,667 55,859,230
Under a debenture signed and registered on 19 April 2021, HSBC UK Bank plc
have a fixed charge over the intangible assets of the Group.
15. Impairment of goodwill and other intangible assets
The Group is required to test, on an annual basis, whether goodwill and other
intangible assets have suffered any impairment. The recoverable amounts are
determined based on value in use calculations. The use of this method requires
the estimation of future cash flows and the determination of a discount rate
in order to calculate the present value of the cash flows. The recoverable
amounts were determined to be higher than the carrying amounts and so no
impairment losses were recognised.
The recoverable amounts have been determined from value in use calculations
based on an extrapolation of the cash flow projections from the formally
approved budget. Values assigned to the key assumptions represent management's
estimate of expected future trends and are as follows:
· A pre-tax discount rate of 18% was applied in determining the
recoverable amount. The discount rate is based on the average weighted cost of
capital
· Growth rates over the longer term of between 0-3% are based on
management's understanding of the market opportunities for services provided
· Increases in costs are based on current inflation rates and
expected levels of recruitment needed to generate predicted revenue growth
· Cash flows have been assessed over ten years with the assumption
that the business will be ongoing at the end of that period
The review demonstrated sufficient headroom such that the estimated carrying
values are not sensitive to changes in assumptions. Having reviewed the key
assumptions used, the Directors do not believe that there is a reasonably
possible change in any of the key assumptions that require further disclosure.
16. Subsidiaries
The principal subsidiaries of RBG Holdings plc, which are incorporated in
England and Wales and have been included in these consolidated financial
statements, are as follows:
Name Principal Activity Registered Number Proportion of ownership interest Non-controlling interests' ownership
2021 2020 2021 2020
RBL Law Limited Legal Services 09986118 100% 100% - -
RBG Legal Services Limited Legal Services 13287062 100% - - -
Convex Group (Holdings) Limited Holding Company 11490871 100% 100% - -
Convex Capital Limited Professional Services 11491052 100% 100% - -
LionFish Litigation Finance Limited Litigation Finance 12165991 90% 90% 10% 10%
Islero Assignments Limited Dormant 12754244 90% 90% 10% 10%
Memery Crystal Limited Dormant 13600674 100% - - -
Rosenblatt Limited Dormant 13601148 100% - - -
The principal place of business of Convex Group (Holdings) Limited and Convex
Capital Limited is Bass Warehouse, 4 Castle Street, Manchester, M3 4LZ. The
principal place of business and registered office of RBG Legal Services
Limited is 165 Fleet Street, London, England, EC4A 2DY. The principal place of
business of the other subsidiaries and the registered address of each
subsidiary is 9-13 St. Andrew Street, London, England EC4A 3AF.
16. Subsidiaries (continued)
For the year ending 31 December 2021, the principal subsidiary companies, set
out above, were exempt from the requirements of the Companies Act relating to
the audit of individual accounts by virtue of section 479A of the Companies
Act 2006. RBG Holdings plc, has given a statement of guarantee under the
Companies Act 2006 section 479C, whereby RBG Holdings plc will guarantee all
outstanding liabilities to which the respective subsidiary companies are
subject as at 31 December 2021.
Company
2021 2020
£ £
Cost and net book value
At 1 January 15,814,321 15,813,421
Investments in subsidiaries 11,686,957 900
Impairment - -
At 31 December 27,501,278 15,814,321
On 28 May 2021, RBG Holdings plc acquired Memery Crystal Limited (subsequently
renamed RBG Legal Services Limited). Refer to Note 25 for full details.
17. Investment in associates
The following entities have been included in the consolidated financial
statements using the equity method:
Name of entity Place of incorporation Proportion of ownership interest held
2021 2020
Adnitor Limited United Kingdom 40% -
On 1 February 2021 RBG Holdings plc purchased 40 ordinary shares of £1 each
in Adnitor Limited for a consideration of £80,000. As part of the share
purchase, the Company agreed a call option over the shares of Adnitor Limited
held by the majority shareholder. Under this agreement, the Company is
required to purchase the remaining shares in Adnitor Limited by the fifth
anniversary of the agreement.
For the year ended 31 December 2021, Adnitor Limited's total revenue was
£415,829 and profit after tax was £59,026. The investment in associates has
been accounted using the equity method and an amount of £21,643 have been
included in the Consolidated statement of comprehensive income.
18. Non-controlling interests
The NCI of LionFish Litigation Finance Limited, which is 90% owned by the
Group, is considered to be immaterial.
19. Litigation assets
The table below provides analysis of the movements in the Level 3 financial
assets.
2021 2020
restated
Level 3 Level 3
£ £
At 1 January 6,569,110 2,209,886
Additions 4,683,128 4,523,141
Realisations (2,162,031) (2,034,718)
Fair value movement 2,480,845 1,870,801
At 31 December 11,571,052 6,569,110
Sensitivity of Level 3 valuations
Following investment, the Group engages in a semi-annual review of each
investment's fair value. At 31 December 2021, should the value of investments
have been 10% higher or lower than provided for in the Group's fair value
estimation, while all other variables remained constant, the Group's income
and net assets would have increased and decreased respectively by £1,157,105
(2020 restated: £656,911).
20. Trade and other receivables
Group Company Group Company
2021 2021 2020 2020
£ £ £ £
Trade receivables 10,183,246 - 3,592,075 -
Less: provision for impairment of trade receivables (555,600) - (219,643) -
Trade receivables - net 9,627,646 - 3,372,432 -
Contract assets 5,976,258 - 2,996,925 -
Amounts due from subsidiaries - 45,731,735 - 24,143,299
Other receivables 1,003,079 775,085 705,068 673,073
Total financial assets other than cash and cash equivalents classified as 16,606,983 46,506,820 7,074,425 24,816,372
amortised cost
Prepayments 1,964,645 242,055 622,500 84,559
Total trade and other receivables 18,571,628 46,748,875 7,696,925 24,900,931
The carrying value of trade and other receivables classified at amortised cost
approximates fair value.
The Group does not hold any collateral as security.
The Group applies the IFRS 9 simplified approach to measuring expected credit
losses using a lifetime expected credit loss provision for trade receivables
and contract assets. To measure expected credit losses on a collective basis,
trade receivables and contract assets are grouped based on similar credit risk
and aging. The contract assets have similar risk characteristics to the trade
receivables for similar types of contracts.
The expected loss rates are based on the Group's credit losses experienced
over the period since incorporation, adjusted for current and forward-looking
information on macroeconomic factors affecting the Group's customers. The
Group has identified the gross domestic product (GDP), unemployment rate and
inflation rate as the key macroeconomic factors in the countries where the
Group operates.
20. Trade and other receivables (continued)
The lifetime expected loss provision for trade receivables and contract assets
is as follows:
Current More than 30 days past due More than 60 days past due More than 120 days past due Total
£
31 December 2021
Expected loss rate 1% 5% 12% 10%
Gross carrying amount 11,576,904 1,653,063 1,217,482 1,712,055 16,159,504
Loss provision 152,889 77,204 148,553 176,954 555,600
31 December 2020
Expected loss rate 0% 2% 2% 23%
Gross carrying amount 5,073,270 381,262 352,867 781,601 6,589,000
Loss provision 23,566 7,028 6,505 182,544 219,643
None of the trade receivables and contract assets have been subject to a
significant increase in credit risk since initial recognition.
Movements in the impairment allowance for trade receivables are as follows:
2021 2020
£ £
At 1 January 2021 219,643 64,923
Increase during the year 524,647 186,763
Receivables written off during year as uncollectible (173,050) (2,108)
Unused amounts reversed (15,640) (29,935)
At 31 December 2021 555,600 219,643
Included in other receivables is £518,944 (2020: £468,318) which is owed by
the Employee Benefit Trust.
Company
The loans due from RBL Law, RBG Legal Services and LionFish Litigation Finance
are on demand and interest free.
Management considers that there is no increase in credit risk on the related
party loans. Given that the loans are on demand, lifetime credit losses and
12-month credit losses will be the same. Having considered different
recoverability scenarios which incorporated macroeconomic information (such as
market interest rates and growth rates), current and forward looking
information, management consider the expected credit losses to be close to
nil.
21. Trade and other payables
Group Company Group Company
2021 2021 2020 2020
restated
£ £ £ £
Trade payables 1,928,294 - 465,300 -
Corporation tax payable 1,490,495 - 600,316 -
Other taxes and social security 1,711,342 - 1,157,687 -
Amounts due to group companies - 1,105,837 - 662,213
Derivative financial liabilities 1,515,000 - 1,015,000 -
Litigation liability 750,000 - 575,000 -
Other payables 2,308,328 - 1,118,595 1,118,595
Accruals 2,690,461 1,037,619 1,152,964 254,623
At 31 December 12,393,920 2,143,456 6,084,862 2,035,431
Due within one year or less 11,643,920 2,143,456 4,494,862 2,035,431
Due after more than one year 750,000 - 1,590,000 -
12,393,920 2,143,456 6,084,862 2,035,431
The carrying value of trade and other payables classified as financial
liabilities measured at amortised cost approximates fair value.
On 1 February 2021, the Company agreed a call option over the shares of
Adnitor Limited held by the majority shareholder. Under this agreement, the
Company is required to purchase the remaining shares in Adnitor Limited by the
fifth anniversary of the agreement, with consideration based on a multiple of
Adnitor's profits, settled by the issue of ordinary shares in the Company. The
present value of the option, £500,000 (2020: £nil) is included within
derivative financial liabilities.
During 2020, the Company agreed put and call options over the shares of
LionFish held by the non-controlling interest. Under this agreement, the
holder of the shares can require the Company to buy the shares in LionFish,
with consideration based on a multiple of LionFish profits, settled by the
issues of ordinary shares in the Company, at any point in the period from 12
August 2022 to 11 August 2030. The present value of the option, £1,015,000
(2020: £1,015,000) is included within derivative financial liabilities.
Included within other payables is £2,248,320 million for deferred
consideration of the acquisition of Memery Crystal, which is described in
detail in Note 25.
22. Loans and borrowings
The book value and fair value of loans and borrowings which all denominated in
sterling are as follows:
Book value Fair value Book value Fair value
31 Dec 21 31 Dec 21 31 Dec 20 31 Dec 20
£ £ £ £
Non-current
Bank loans
Secured 17,000,000 17,000,000 10,000,000 10,000,000
Current
Bank loans
Secured 2,129,592 2,129,592 - -
At 31 December 19,129,592 19,129,592 10,000,000 10,000,000
The rate at which Sterling denominated loans and borrowings are payable is
2.4% above SONIA.
The bank loans are secured by fixed and floating charges over the assets of
the Group. The Group has £5,000,000 undrawn committed borrowing facilities
available at 31 December 2021 (2020: £nil).
23. Provisions
Group
Leasehold dilapidations Legal disputes Total
£ £
At 1 January 2020 - 75,000 75,000
Charged through profit or loss - 41,875 41,875
At 31 December 2020 - 116,875 116,875
At 1 January 2021 - 116,875 116,875
Charged to profit or loss - 47,416 47,416
Acquired through business combinations 150,000 - 150,000
At 31 December 2021 150,000 164,291 314,291
Due within one year or less - 164,291 164,291
Due after more than one year 150,000 - 150,000
150,000 164,291 314,291
Leasehold dilapidations relate to the estimated cost of returning a leasehold
property to its original state at the end of the lease in accordance with the
lease terms. The main uncertainty relates to estimating the cost that will be
incurred at the end of the lease.
The Group is currently involved in a number of legal disputes. The amount
provided represents the directors' best estimate of the Group's liability
having taken legal advice. Uncertainties relate to whether claims will be
settled out of court or if not whether the Group is successful in defending
any action. Because of the nature of the disputes, the directors have not
disclosed future information on the basis that they believe that this would be
seriously prejudicial to the Group's position in defending the cases brought
against it.
24. Deferred tax
Deferred tax is calculated in full on temporary differences under the
liability method using a tax rate of 25% (2020: 19%).
Following the announcement made in the Chancellor's Spring Budget regarding an
increase to the UK corporate tax rate from 19% to 25% from 1 April 2023, the
Finance Bill 2021 was subsequently enacted on 24 May 2021. As IFRS requires
deferred tax to be measured at tax rates that have been subsequently enacted
at the reporting date, the Group's deferred tax balances have been re-measured
accordingly and the impact has been reflected within the consolidated
financial statements.
The movement on the deferred tax account is as shown below:
Group Company Group Company
2021 2021 2020 2020
£ £ £ £
At 1 January 304,853 502,711 422,144 1,773
Recognised in profit or loss
Tax expense 789 157,559 (117,291) 500,938
305,642 660,270 304,853 502,711
Arising on business combination 546,020 - - -
At 31 December 851,662 660,270 304,853 502,711
25. Business combinations during the period
On 28 May 2021, RBG Holdings plc acquired Memery Crystal Limited (subsequently
renamed RBG Legal Services Limited). Memery Crystal is a specialist
international law firm that offers legal services in a range of areas such as
corporate (including a market-leading corporate finance offering), real
estate, commercial, IP & technology (CIPT), banking & finance, tax
& wealth structuring, employment and dispute resolution..
The acquisition was made in line with the business strategy to acquire
complementary, high gross margin, professional services businesses and Memery
Crystal is an established business in the Group's target market.
Details of the fair value of identifiable assets and liabilities acquired,
purchase consideration and goodwill are as follows:
Book value Adjustment Fair value
£ £ £
Property, plant and equipment 2,509,589 - 2,509,589
Right-of-use assets - 11,798,710 11,798,710
Trade receivables 4,327,167 - 4,327,167
Other receivables 4,440,189 (113,377) 4,326,812
Brand value - 1,948,878 1,948,878
Client Contracts - 338,794 338,794
Trade and other payables (5,328,635) 2,818,396 (2,510,239)
Lease liabilities - (11,685,333) (11,685,333)
Deferred tax liability - (546,020) (546,020)
Net assets 5,948,310 4,560,048 10,508,358
The fair value of the trade receivables acquired as part of the business
combination amounted to £4,327,167, with a gross contractual amount of
£5,328,226. As of the acquisition date, the Group's best estimate of the
contractual cash flow not expected to be collected amounted to £1,001,059.
Fair value of consideration paid
£
Cash 12,000,000
Shares 11,686,956
Deferred cash consideration 5,648,310
29,335,266
Goodwill (Note 14) 18,826,908
Acquisition costs of £863,435 arose as a result of the transaction. These
have been recognised as part of other expenses in the consolidated statement
of comprehensive income.
Since the acquisition date, Memery Crystal has contributed £15,188,416 to
group revenues and £2,565,812 to group profit.
26. Share capital
Authorised
2021 2021 2020 2020
Number £ Number £
Ordinary shares of 0.2p each 95,331,236 190,662 85,592,106 171,184
Allotted, issued and fully paid
2021 2021 2020 2020
Number £ Number £
Ordinary shares of 0.2p each
At 1 January 85,592,106 171,184 85,592,106 171,184
Other issues for cash during the year 9,739,130 19,478 - -
At 31 December 95,331,236 190,662 85,592,106 171,184
Ordinary shares rank equally as regards to dividends, other distributions and
return on capital. Each ordinary share carries the right to one vote.
27. Reserves
Financial instruments issued by the Group are classified as equity only to the
extent that they do not meet the definition of a financial liability or
financial asset.
The following describes the nature and purpose of each reserve within equity:
Reserve Description and purpose
Share capital Amount subscribed for share capital at nominal value.
Share premium Amount subscribed for share capital in excess of nominal value less
transaction costs.
Retained earnings All other net gains and losses and transactions with owners (e.g. dividends)
not recognised elsewhere.
28. Related party transactions
Group
During the year, Group companies entered into the following transactions with
related parties who are not members of the Group:
Related party Supply of services Purchase of services Supply of services Purchase of services
2021 2021 2020 2020
£ £ £ £
Velocity Venture Capital Ltd* - 387,245 14,250 209,786
Motorsport Circuit Management Ltd* 7,750 - - -
N Foulston - - 6,500 -
Winros** - 848,999 - 1,128,051
Note: *A company controlled by Nicola Foulston, ** A partnership in which
Ian Rosenblatt is a partner.
In addition, during the year, £26,842 of contingent work was performed by the
Group in relation to a Conditional Fee Agreement with Winros (2020: £80,180).
At 31 December 2021, there were no amounts due to any related party (2020:
£nil). At 31 December 2021, £7,750 was due from Motorsport Circuit
Management Ltd (2020: £nil).
Sales and purchase of services to related parties were conducted on an arm's
length basis on normal trading terms. The Group has not made any allowance for
bad or doubtful debts in respect of related party debtors nor has any
guarantee been given or received during 2021 for related party transactions.
There are various other companies controlled by Nicola Foulston, which use the
Group's office as their registered address, with which there have been no
transactions during the year.
Ian Rosenblatt is not a director of any company in the Group, nor a member of
key management personnel, nor does he have a significant influence over the
Group. He is a substantial shareholder, as disclosed in the Directors' Report
and under the AIM Rules for Companies is classified as a related party.
Total remuneration of Key Management Personnel during the year was £1,566,918
(2020: £835,565). Further details of directors' remuneration are given in the
Directors' Report.
During 2021, the Group purchased goods and services from Adnitor Limited
totalling £399,055. At 31 December 2021 there were no amounts owed to Adnitor
Limited.
Company
In addition to the amounts disclosed in the Directors' Report, the Company has
entered into the following transactions with related parties.
During 2021, the Company reimbursed fees and expenses paid on its behalf by
RBGLS totalling £935,335 (2020: £1,026,323, RBL Law). At 31 December 2021,
the company was owed £42,970,594 by RBGLS (2020: nil) and was owed
£2,001,060 by RBL Law (2020: £22,340,825).
During 2021, Convex Capital Limited reimbursed fees and expenses paid on its
behalf by the Company totalling £9,089 (2020: nil). At 31 December 2021, the
company owed £1,398,437 to Convex Capital Limited (2020: £1,802,474 owed by
Convex Capital Limited).
During 2021, LionFish Litigation Finance Limited reimbursed fees and expenses
paid on its behalf by the Company totalling £376,133 (2020: £143,602). At 31
December 2021, the company was owed £636,581 by LionFish Litigation Finance
Limited (2020: £662,213 owed to LionFish Litigation Finance Limited).
29. Notes supporting statement of cash flows
Significant non-cash transactions from investing activities are as follows:
2021 2020
£ £
Equity consideration for business combination 11,686,956 (2,640,000)
Non-cash transactions from financing activities are shown in the
reconciliation of liabilities from financing transactions below:
Non-current loans and borrowings Current loans and borrowings Total
£ £ £
At 1 January 2021 10,000,000 - 10,000,000
Cash flows (net) 7,000,000 2,000,000 9,000,000
Non-cash flows
Interest accruing in year - 129,592 129,592
At 31 December 2021 17,000,000 2,129,592 19,129,592
At 1 January 2020 - - -
Cash flows (net) 10,000,000 - 10,000,000
At 31 December 2020 10,000,000 - 10,000,000
30. Restatement of prior year
The 2020 comparatives have been restated in these financial statements to
include the effect of the adjustments as stated in Note 2. The following table
presents the impact of the restatements.
31 December 2020 Adjustment (i) 1 January 2021
As originally presented Restated
£ £ £
Non-current assets
Litigation assets 6,294,754 274,356 6,569,110
Current liabilities
Current tax liabilities (657,437) 57,122 (600,315)
Non-current liabilities
Trade and other payables (1,015,000) (575,000) (1,590,000)
Equity
Retained earnings 9,290,076 (219,170) 9,070,906
Non-controlling interest 226,707 (24,352) 202,355
(i) Reclassification of contracts for insured litigation
assets which were previously treated as sales, which do not meet the
derecognition requirements of IFRS 9 para 3.2.2. and a restatement of the fair
value of the uninsured contracts to correct an error in the previous
valuation. The Consolidated statement of financial position adjustments
increased litigation assets by £274,356, increased trade and other payables
by £575,000, reduced current tax liabilities by £57,122 and reduced equity
by £243,522. The Consolidated statement of comprehensive income adjustments
decreased gains on litigation assets by £300,644 and reduced tax expenses by
£57,122.
31. Contingent liabilities
The Company has been informed that HMRC has started an inquiry into the
valuation of employee related securities issued by the Company in April 2018
prior to the IPO. HMRC have queried the issue of shares between 4th April 2018
and 16th April 2018 at a par value. A valuation of the shares at above the
issue price could result in a liability to the recipient of the issued shares
which would be required to be collected by the Company and paid to HMRC. Any
liability would be re-imbursed in full by the recipient. The directors' belief
is that the investigation is without merit.
32. Events after reporting date
On 15 February 2022, the Group announced that LionFish had agreed a £20
million litigation investment arrangement (the "Arrangement") with a large
alternative investment firm (the "Firm"). Under the terms of the Arrangement,
the Firm will participate in all of LionFish's litigation investments,
investing up to 75% in each of LionFish's investments across the portfolio
over a two-year period. LionFish will be entitled to receive a significant
share of the returns of the Arrangement after a high single-digit return
hurdle has been met, therefore providing significant additional potential
returns to LionFish beyond its own investment. It means that the Group
will now look to generate income from LionFish's settlements and new
investments, and we will not look to sell participation rights.
1 Figures for 2021 include seven months of contribution from Memery Crystal
following the completion of the acquisition at the end of May 2021.
2 Including £0.9 million costs of acquiring Memery Crystal
3 These gains are from where LionFish or RBGLS owns a percentage of the
participation rights in a settlement on a contingent case, financed through a
Damages Based Agreement (DBA), and then sells on a proportion of its
participation rights
4 Revenue per fee earner data taken from The Lawyer UK 200: Top 100 latest
data. UK firms are ranked 1-100 by firm-wide revenue (year end 2020/21)
5 Including £0.9 million costs of acquiring Memery Crystal
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