REG - RBG Holdings PLC - Results for the year ended 31 Dec 2022
26/04/2023 07:00
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RNS Number : 4489X RBG Holdings PLC 26 April 2023
26(th) April 2023
RBG Holdings plc
("RBG", the "Group", or the "Company")
Audited results for the year ended 31 December 2022
RBG Holdings plc (AIM: RBGP), the legal services and professional services
group, today announces its audited results for the year ended 31 December
2022.
Highlights 1 (#_ftn1) 2 (#_ftn2)
· Group revenue (including gains on litigation assets) up 25.6% to
£54.1m (2021: £43.1m)
· Adjusted EBITDA up 54.2% to £15.8m (2021: £10.3m)
· Adjusted profit before tax up 66.3% to £10.9m (2021: £6.6m)
· Non-recurring costs of £1.2m (2021: £0.9m)
· EBITDA up 55.5% to £14.6m (2021: £9.4m)
· Profit before tax up 70.4% to £9.7m (2021: £5.7m)
· Profit from continuing operations up 76.8% to £7.8m (2021: £4.4m)
· Loss on discontinued operations, net of tax £(4.0)m (2021: Profit
£2.8m)
· Profit for the year (including discontinued operations) of £3.8m
(2021: £7.3m)
· Adjusted free cashflow generation £4.0m (2021: £6.4m)
· Net debt of £19.2m (2021: £14.4m)
· Final interim dividend of 0.5p confirmed. Total dividend for 2022 of
2.5p per share (2021: 5p per share)
· Legal services average revenue per fee earner improved 25.6% to
£436,000 (2021: £347,000)
Post Period Events:
· Board changes: Jon Divers, Group COO, appointed Group CEO; Tania MacLeod
(Senior Partner, Rosenblatt) and Nick Davis (Senior Partner, Memery Crystal)
appointed to the Board as Executive Directors
· Strategic Review: Proposed disposal of LionFish Litigation Finance
Ltd
Keith Hamill, Chairman, RBG Holdings plc, commented:
"Through their successful integration, our leading law firm brands, Rosenblatt
and Memery Crystal have strengthened performance capability within the Group.
Deal origination in Convex Capital remains positive in 2023, with a growing
pipeline of potential opportunities".
"Since its IPO in 2018, RBG has grown Group revenues by more than three times
whilst doubling 3 (#_ftn3) statutory EBITDA. Our final interim dividend of
0.5p per share has been confirmed today, and we look forward to the coming
year with renewed optimism about the prospects for our Group."
The Company's Annual Report and Accounts for the year ended 31 December 2022
is available to view on the Group's website later today at:
www.rbgholdings.co.uk/investor-relations/reports-documents-and-circulars
(http://www.rbgholdings.co.uk/investor-relations/reports-documents-and-circulars)
Enquiries:
RBG Holdings plc Via SEC Newgate
Jon Divers, Chief Executive Officer
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/analyst enquiries) Tel: +44 (0)7540 106366 rbg@secnewgate.co.uk (mailto:rbg@secnewgate.co.uk)
Tali Robinson / Robin Tozer
About RBG Holdings plc
RBG Holdings plc is a legal services and professional services group, which
comprises three core brands:
Rosenblatt
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
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 offers a partner-led service
to a broad range of clients, from multinational companies, financial
institutions and owner-managed businesses to individual entrepreneurs.
Convex Capital Limited
Convex Capital is a specialist sell-side M&A 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.
In December 2022, the Group announced its intention to dispose of its
litigation finance business, LionFish:
LionFish Litigation Finance Limited ("LionFish")
The Group also provides litigation finance in selected cases through a
separate arm, LionFish. LionFish finances litigation matters being run by
other solicitors in return for a significant return on the outcome of those
cases and is positioned to be a unique, alternative provider to the
traditional litigation funders.
Further information is available at: www.rbgholdings.com
(http://www.rbgholdings.com)
Chairman's Statement
Overview
Since its IPO in 2018, RBG has grown Group revenues by more than three times
whilst doubling 4 (#_ftn4) statutory EBITDA. Our final interim dividend of
0.5p per share has been confirmed today. The Group's legal services and
professional services businesses have gone from strength to strength,
delivering excellent results with significant growth. Group revenue was up
25.6% to £54.1m (2021: £43.1m), resulting in adjusted EBITDA of £15.8m at a
margin of 29.2% (2021: £10.3m, 23.8%). The legal services business also
delivered a 26 percent increase in average revenue per fee earner to £436,000
(2021: £347,000). Litigation losses in LionFish did however impact the
overall Group results which was disappointing and as previously stated, this
division is under strategic review.
Financials 5 (#_ftn5)
· Group revenue (including gains on litigation assets) up 25.6% to
£54.1m (2021: £43.1m)
· Adjusted EBITDA up 54.2% to £15.8m (2021: £10.3m)
· Profit before tax up 70.4% to £9.7m (2021: £5.7m)
· Profit from continuing operations up 76.8% £7.8m (2021: £4.4m)
· Loss on discontinued operations, net of tax £(4.0)m (2021: Profit
£2.8m)
Our net debt position was £19.2m (2021: £14.4m). The Group has a £15.0m
revolving credit facility and a £10.0m five-year term loan taken to fund the
Memery Crystal acquisition which has already been paid down to £7.0m. We are
committed to reducing debt as a core part of our strategy.
Our balance sheet together with our continued cash generation from our core
businesses will support our long-term growth plans, and future dividends.
Dividend
The Board is committed to its published long-term progressive dividend policy.
In line with that policy, the Board 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 and is proposing a total
payment of 2.5 pence per share for 2022 (2 pence paid at the half year and 0.5
pence at the full year) to shareholders on the register as at 5 May 2023.
Based on the current outlook, we expect to continue to pay up to 60 per cent
of retained earnings in the 2023 financial year by way of dividend.
Strategy
The Group's strategy is to build a high margin, cash-generative, legal and
professional services group with diversified revenue and profit streams to
deliver sustained shareholder value.
Acquiring the professional services business Convex Capital in 2019 created a
new revenue stream. In legal services, the successful acquisition of Memery
Crystal in 2021 diversified our revenue, which is now evenly split across
three main practice areas, Dispute Resolution, Corporate and Real Estate. We
see considerable opportunity in these core business areas. Our emphasis will
be on driving organic growth by recruiting and developing new fee earners and,
where appropriate, assessing M&A opportunities that will supplement our
strategy. 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 - Convex Capital
and Memery Crystal - has met these criteria. They were immediately earnings
enhancing with the potential to generate significant value for shareholders
over the medium and long term.
To ensure the Business remains absolutely focused on its goal, the Board has
taken the decision to divest LionFish where litigation matters are run by
third-party solicitors and reduce the Group's exposure to third-party
litigation funding commitments. The proceeds from any sale will be used for
working capital purposes and to reduce net debt.
The Board believes that following the completion of the divestment of
LionFish, and with a new highly experienced executive team in place, the Group
is well placed to deliver its goal of sustained shareholder value.
Board Changes
On 31 December 2022, Suzanne Drakeford-Lewis was appointed to the Board as
Group Finance Director following the departure of CFO, Robert Parker.
On 31 January 2023, the employment contract of Nicola Foulston, CEO, was
terminated. Jon Divers, the Group COO, was appointed to the Board as CEO. The
Board was further strengthened with the appointments of Tania MacLeod (Senior
Partner, Rosenblatt) and Nick Davis (Senior Partner, Memery Crystal) as
Executive Directors.
The Board now consists of four executive directors and four non-executive
directors, providing a blend of different experiences and backgrounds. All
non-executives are considered independent.
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.
Sustainability
We aim to build an organisation that delivers long-term value to our
shareholders, successful outcomes for our clients, and is a responsible
employer that supports its employees and has a positive impact in the
communities in which it operates. For example, this year we have partnered
with the Sutton Trust to run work experience and mentoring programmes for
university students. We also elected The Matthew Elvidge Trust as our Charity
of the Year for 2022.
While the nature of the business means the Group does not have a significant
environmental impact, the Board believes that good environmental practices,
such as the recycling of paper waste and conservation of energy usage, will
support its strategy by enhancing the reputation of the Group. For example,
our Fleet Street address has 100% renewable power supply, and the waste is
100% recycled or waste to energy (no landfill).
We want to go further and we are looking at ways we can improve as an
employer, and a member of the business community to address the challenges
society is facing.
Outlook
Through their successful integration, our leading law firm brands, Rosenblatt
and Memery Crystal have strengthened performance capability within the Group.
Deal origination in Convex Capital remains positive in 2023, with a growing
pipeline of potential opportunities. We look forward to the year ahead with
optimism and a renewed focus on the core businesses and driving organic
growth.
Keith Hamill
Chairman
25 April 2023
Group Chief Executive Officer's Statement
Overview
Overall, the Group has benefitted from diversification and delivered
profitability and cash generation in a challenging year.
RBG Legal Services ("RBGLS"): Rosenblatt and Memery Crystal
· Revenue up 37.8% to £44.9m (2021: £32.6m) due to the strong demand
for its services
· Average revenue per fee earner of £436,000 (2021: £347,000)
· Utilisation of 76% (2021: 84%) and realisation of 90% (2021: 86%)
· At 31 December 2022, RBGLS employed 179 people, including 120 fee
earners
Our legal services business trades under two leading mid-tier law firm brands
- Rosenblatt and Memery Crystal, both of which retain their own brand
identities and continue to operate as two separately branded law firms. The
two brands are aligned to contentious (Rosenblatt) and non-contentious (Memery
Crystal) legal services to reflect their distinct position within the legal
services market.
To realise operational synergies, the two businesses are now fully integrated
and based at one office on Fleet Street in London. The integration has
delivered a business which has a more balanced offering across the three main
legal areas - Dispute Resolution (via Rosenblatt), and Corporate and Real
Estate (through Memery Crystal). This gives a natural hedge to the changing
economic environment and has increased the Group's scale and enhanced the
ability to win non-contentious mandates as well as improving the new business
pipeline.
Convex Capital Limited ("Convex")
· Completed six deals during 2022 delivering £5.3m of revenue (2021:14
deals, £9.4m)
· At 14 April 2023, Convex had a strong pipeline of 24 deals, with a
number of deals in advanced stages of negotiation
· Convex has a motivated, dynamic team of 13 people, of whom 12 are fee
earners
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.
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.
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.
The strength of its pipeline has grown and despite the economic headwinds, the
business is in a good position to perform well during 2023.
Convex has been working on a succession plan over the last two years and in
January 2023, Isaac Asamoah, James Edge and Tom Campbell were appointed
Directors of the business to drive its next phase. Mike Driver, the former
managing director, is now a consultant to the business. The three new
Directors have been with the business for a number of years and have been
responsible for delivering a significant element of the revenue and profits.
Discontinued Operation - LionFish Litigation Finance Limited ("LionFish")
· Losses on third-party litigation assets during the year of £4.3m
(2021: £4.1m gains on litigation assets)
· At 31 December 2022, LionFish had 9 investments with £8.3m committed
(with £5.0m drawn down) over the life of the cases, which is circa three
years
A strategic review undertaken during the year has resulted in us looking to
divest LionFish, our third-party litigation finance business. The review
looked at the scale of investment business required to ensure the risk of each
individual investment was minimalised and the Board concluded that the Group
did not have the Balance Sheet to support the growth required and that
LionFish would be better placed in a dedicated asset management business.
With this in mind, we have sought buyers for the business and have received
four offers. Due diligence is currently underway in respect of an offer that
will both deliver cash back to the Group and a share of the upside in
successful cases.
Outlook
Overall, the Group had a good 2022 and, despite the losses in LionFish, we
delivered solid profits. Following the previously announced decision to sell
LionFish, we continue to focus on adapting the Group to changing client needs
and to growing our portfolio of services. We look forward to the year ahead
with optimism and a renewed focus on the core businesses and driving organic
growth.
Jon Divers
Group Chief Executive Officer
25 April 2023
Financial Review
Key Performance Indicators (KPIs) 6 (#_ftn6)
· Group revenue (including gains on litigation assets) up 25.6% to
£54.1m (2021: £43.1m)
· Adjusted EBITDA up 54.2% to £15.8m (2021: £10.3m)
· Adjusted Profit before tax up 66.3% to £10.9m (2021: £6.6m)
· Non-recurring costs of £1.2 million (2021: £0.9m)
· EBITDA up 55.5% to £14.6m (2021: £9.4m)
· Profit before tax up 70.4% to £9.7m (2021: £5.7m)
· Profit from continuing operations up 76.8% to £7.8m (2021: £4.4m)
· Loss on discontinued operations, net of tax £(4.0)m (2021: profit
£2.8m)
· Profit for the year (including discontinued operations) of £3.8m
(2021: £7.3m)
· Adjusted free cashflow generation £4.0m (2021: £6.4m)
· Net debt of £19.2m (2021: £14.4m)
· Final interim dividend of 0.5p confirmed. Total dividend for 2022 of
2.5p per share (2021: 5p per share)
· Legal services average revenue per fee earner improved 25.6% to
£436,000 (2021: £347,000)
The Group has continued to deliver increased revenue and strong profitability
in its legal services and professional services businesses and is well
positioned to deliver its growth strategy through organic growth, carefully
selected acquisitions and high-quality litigation investments in cases run by
Rosenblatt.
Revenue and gains on litigation assets
Group revenue including gains on litigation assets for the period was £54.1m
compared to £43.1m in 2021, representing a 25.6% increase.
Legal services revenue was up 37.8% to £44.9m from £32.6m in 2021, with the
integration of Rosenblatt and Memery Crystal complete and the practice
performing to the Board's expectations. Revenue was more evenly split across
the three main practice areas, Dispute Resolution (40%), Corporate (37%) and
Real Estate (23%). Dispute Resolution continued to perform well and in
addition took on contingent work with associated unrecognised time worked of
£2.5m (2021: £3.4m). Average revenue per fee earner increased to £436,000
(2021: £347,000), reflecting better resource management in the integrated
practice.
Convex had a solid year, in spite of challenging economic conditions in the
second half which resulted in the deferral of anticipated deal completions
into 2023. Six deals were completed with revenue of £5.3m compared with 14
deal completions in 2021 with £9.4m of revenue.
Gains on litigation assets on litigation cases run by Rosenblatt were up to
£3.8m from £1.1m in 2021. These gains included successfully realised
litigation asset sales with proceeds totalling £2.7m (2021: £1.8m).
Staff costs
Total staff costs in 2022 were £30.7m (2021: £26.8m), which includes £25.1m
for legal services and £3.5m for Convex. The average number of employees for
the Group was 211 (2021: 175).
Overhead costs
During 2022, the Group incurred overheads of £39.5m (before depreciation and
amortisation) (2021: £33.7m), of which staff costs were £30.7m (2021:
£26.8m).
Other operating costs were £8.8m (2021: £6.9m), of which non-recurring
costs, including restructuring costs, represented £1.2m (2021: £0.9m). Other
costs included insurances of £1.8m (2021: £1.5m), rates £0.9m (2021:
£0.7m), and training and recruitment £0.6m (2021: £0.6m).
Operationally, there remains a significant focus on IT and 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. EBITDA was £14.6m,
including £1.2m of non-underlying items (2021: £9.4m including
non-underlying items of £0.9m). Adjusted EBITDA for 2022 was £15.8m (29.2%
of revenue and gains on litigation assets) (2021: £10.3m, 23.8%). The
integration of Rosenblatt and Memery Crystal resulted in a sustained
improvement in legal services EBITDA margin to 30.6% (2021: 24.4%), in line
with Board expectations. Convex delivered an EBITDA of £1.2m despite the
deferral of anticipated deals in the second half of the year (2021: EBITDA
£4.2m).
Profit before tax
Profit before tax for 2022 was £9.7m, representing 18.0% of revenue and gains
on litigation assets (2021: £5.7m,13.3%); this includes £1.2m of
non-underlying items (2021: £0.9m).
Adjusted profit before tax was £10.9m, representing 20.2% of revenue and
gains on litigation assets (2021: £6.6m, 15.3%).
Corporation tax
The Group's tax charge for the year is £1.9m with an effective tax rate of
19.9% (2021: £1.3m, 22.8%).
Discontinued operations
LionFish has been classified as a discontinued operation and has been excluded
from our headline performance measures. Operating losses before non-underlying
items for discontinued operations were £4.8m (2021: £3.5m operating profit).
Total losses after tax for the business for 2022 totalled £4.0m (2021: £2.8m
profit after tax).
Details on discontinued operations are shown in Note 10.
Earnings Per Share (EPS)
The weighted average number of shares in 2022 was 95.3 million which gives a
basic earnings per share (EPS) on continuing operations for the year of 8.18p
(2021: 4.83p) and diluted earnings per share (EPS) on continuing operations
for the year of 8.17p (2021: 4.82p).
Balance Sheet
2022 2021 7 (#_ftn7)
£'m £'m
Goodwill, intangible and tangible assets 82.9 81.1
Current Assets 26.9 19.3
Current Liabilities (13.6) (11.3)
Assets held for sale 5.3 4.9
Liabilities held for sale (6.5) (2.1)
95.0 91.9
Net debt (19.2) (14.4)
Non-Current Liabilities (14.4) (14.5)
Deferred consideration - (2.2)
Net assets 61.4 60.8
The Group's net assets as at 31 December 2022 increased by £0.6m on the prior
year due to profitable trading during the year.
Goodwill, Tangible and Intangible Assets
Included within tangible assets is £15.1m (2021: £15.9m) which relates to
IFRS 16 right of use assets for the Group's property leases. Total intangible
assets of £55.0m (2021: £55.9m) incorporate the goodwill and intangible
assets acquired on the acquisitions of the Rosenblatt, Convex, and Memery
Crystal businesses. The Group has considered the amounts at which goodwill and
intangible assets are stated on the basis of forecast future cash flows and
concluded that that these assets have not been materially impaired.
Working capital
Management of lock up and cash generation has continued to be a key focus of
the Group over the year. 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 days at 31 December 2022 were 137 (2021: 109), with debtor days being
58 (2021: 59 days) and WIP days being 79 days (2021: 50 days). As the business
has become more balanced across departments, lock up has increased driven by
non-contentious transactions, which have longer payment terms. This is an area
of significant focus for management. Trade debtors less provision for
impairment at the end of the year were £9.9m (2021: £9.6m) and contract
assets at the year-end were £9.7m (2021: £6.0m).
Net debt
We have a revolving credit facility (RCF) of £15.0m and an acquisition term
loan of £10.0m repayable over five years (£3m repaid at 31 December 2022).
Our net debt position at the year end was £19.2 million (2021: £14.4
million), providing sufficient liquidity entering the new financial year.
Cash Conversion
2022 2021
£m
£m
Cash flows from operating activities 13.2 12.6
Movements in working capital 0.1 (0.7)
Increase in litigation assets (7.8) (4.7)
Net cash generated from operations 5.5 7.2
Interest (1.3) (0.7)
Capital expenditure (0.2) (0.1)
Free cash flow 4.0 6.4
Underlying profit after tax 3.8 7.3
Cash conversion 103% 88%
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 and prior year. Cash conversion has increased from 88% in 2021
to 103% in 2022.
Summary
We are pleased with the profitability and performance of the continuing
operations of the Group during the year. The legal and professional services
businesses are performing well despite the continuing impact of the situation
in Ukraine, current inflationary pressures and the uncertain economic climate.
However, it is important to acknowledge the impact of these events, as they
will continue to pose a significant challenge moving forward.
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 DECEMBER 2022
Note 1 January to 1 January to
31 December 2022 31 December 2021 8 (#_ftn8)
£ £
Revenue 5 50,307,263 41,985,338
Gains on litigation assets 5 3,821,700 1,095,000
Personnel costs 7 (30,713,284) (26,773,146)
Depreciation and amortisation expense (3,543,302) (2,936,240)
Other expenses (8,787,105) (6,901,019)
Profit from operations 6 11,085,272 6,469,933
EBITDA 14,628,574 9,406,173
Non-underlying items
Costs of acquiring subsidiary 367,303 863,435
Restructuring costs 834,808 -
Adjusted EBITDA 15,830,685 10,269,608
Finance expense 8 (1,361,514) (801,659)
Finance income 8 32,739 22,676
Share of post-tax profits of equity accounted associate - 21,643
Loss on sale of associate 18 (21,643) -
Profit before tax 9,734,854 5,712,593
Tax expense 9, 10 (1,932,586) (1,300,577)
Profit from continuing operations 7,802,268 4,412,016
(Loss)/Profit on discontinued operations, net of tax 10 (3,984,887) 2,845,397
Profit for the year 3,817,381 7,257,413
Total (loss)/profit and comprehensive income attributable to:
Owners of the parent 4,202,943 6,972,873
Non-controlling interest (385,562) 284,540
3,817,381 7,257,413
Earnings per share attributable to the ordinary equity holders of the parent 11
Profit
Basic (pence) from continuing operations 8.18 4.83
Diluted (pence) from continuing operations 8.17 4.82
Basic (pence) from total operations 4.41 7.63
Diluted (pence) from total operations 4.40 7.62
There were no elements of other comprehensive income for the financial year
other than those included in the income statement.
The attached notes form part of these financial statements.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2022
Company registered number: 11189598 Note 31 December 2022 31 December 2021 9 (#_ftn9)
£ £
Assets
Current assets
Trade and other receivables 20 26,937,181 19,330,914
Cash and cash equivalents 3,000,678 4,736,546
29,937,859 24,067,460
Non-current assets
Property, plant and equipment 13 2,229,958 2,582,911
Right-of-use assets 14 15,074,132 15,913,008
Intangible assets 15 55,021,817 55,859,230
Litigation assets 19 10,603,024 6,675,538
Investments in associate 18 - 101,643
82,928,931 81,132,330
Assets held for sale - discontinued operations 10 5,347,117 4,922,385
Total assets 118,213,907 110,122,175
Liabilities
Current liabilities
Trade and other payables 21 9,465,968 10,099,544
Leases 14 2,238,052 2,150,440
Current tax liabilities 21 1,601,655 1,002,637
Provisions 23 211,536 164,291
Loans and borrowings 22 2,205,640 2,129,592
15,722,851 15,546,504
Non-current liabilities
Loans and borrowings 22 20,000,000 17,000,000
Deferred tax liabilities 24 744,328 850,042
Provisions 23 150,000 150,000
Leases 14 13,713,932 13,698,661
34,608,260 31,698,703
Liabilities held for sale - discontinued operations 10 6,463,058 2,053,440
Total liabilities 56,794,169 49,298,647
NET ASSETS 61,419,738 60,823,528
Issued capital and reserves attributable to owners of the parent
Share capital 26 190,662 190,662
Share premium reserve 27 49,232,606 49,232,606
Retained earnings 27 11,996,470 11,113,365
61,419,738 60,536,633
Non-controlling interest - 286,895
TOTAL EQUITY 61,419,738 60,823,528
The financial statements were approved and authorised for issue by the Board
of Directors on 25 April 2023 and were signed on its behalf by:
Jon Divers, Director
The attached notes form part of these financial statements.
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2022
Note 2022 2021 10 (#_ftn10)
£ £
Cash flows from operating activities
Profit/(Loss) for the year before tax from:
Continuing operations 9,734,855 5,712,593
Discontinued operations (4,899,522) 3,513,641
Adjustments for:
Depreciation of property, plant and equipment 556,403 525,606
Amortisation of right-of-use assets 2,153,585 1,781,058
Amortisation of intangible fixed assets 837,413 633,414
Fair value movement of litigation assets net of realisations 3,418,176 (318,814)
Finance income (32,739) (22,676)
Finance expense 1,361,514 801,659
Share of post-tax profits of equity accounted associate - (21,643)
Loss on sale of equity accounted associate 21,643 -
13,151,328 12,604,838
(Increase) in trade and other receivables (3,600,176) (2,220,725)
Increase in trade and other payables 3,609,645 1,428,920
(Increase) in litigation assets (7,781,846) (4,683,128)
Increase in provisions 47,245 47,416
Cash generated from operations 5,426,196 7,177,321
Tax paid (601,569) (1,077,855)
Net cash flows from operating activities 4,824,627 6,099,466
Investing activities
Purchase of property, plant and equipment (199,741) (130,179)
Sale of associate 80,000 -
Acquisition of associate - (80,000)
Acquisition of subsidiary, net of cash - (12,000,000)
Payment of deferred consideration (2,248,319) (4,518,585)
Interest received 32,739 22,676
Net cash (used in) investing activities (2,335,321) (16,706,088)
Financing activities
Dividends paid to holders of the parent (4,736,071) (4,430,414)
Dividend paid to non-controlling interest - (200,000)
Proceeds from loans and borrowings 5,000,000 20,000,000
Repayment of loans and borrowings (2,000,000) (11,000,000)
Repayments of lease liabilities (1,211,829) (1,856,938)
Interest paid on loans and borrowings (756,768) (279,497)
Interest paid on lease liabilities (528,698) (392,570)
Net cash (used in)/from financing activities (4,233,366) 1,840,581
Net (decrease) in cash and cash equivalents (1,744,060) (8,766,041)
Cash and cash equivalents at beginning of year 4,756,143 13,522,184
Cash and cash equivalents at end of year 3,012,083 4,756,143
Cash and cash equivalents - continuing operations 3,000,678 4,736,546
Cash and cash equivalents - discontinued operations 11,405 19,597
Cash and cash equivalents per consolidated balance sheet 3,012,083 4,756,143
The attached notes form part of these financial statements.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2022
Current year Share Capital Share Premium Retained Earnings Total attributable to equity holders of parent Non-controlling interest Total equity
£ £ £ £ £ £
Balance at 1 January 2022 190,662 49,232,606 11,113,365 60,536,633 286,895 60,823,528
Comprehensive income for the year
Profit for the year - - 4,202,943 4,202,943 (385,562) 3,817,381
Total comprehensive Income for the year - - 4,202,943 4,202,943 (385,562) 3,817,381
Contributions by and distributions to owners
Dividends - - (4,736,071) (4,736,071) - (4,736,071)
Purchase of NCI share capital - - (98,767) (98,767) 98,667 (100)
Reversal of call option over shares of associate - - 500,000 500,000 - 500,000
Reversal of put option over shares of subsidiary - - 1,015,000 1,015,000 - 1,015,000
Total contributions by and distributions to owners - - (3,319,838) (3,319,838) 98,667 (3,221,171)
Balance at 31 December 2022 190,662 49,232,606 11,996,470 61,419,738 - 61,419,738
The attached notes form part of these financial statements.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2022 (CONTINUED)
Prior year Share Capital Share Premium Retained Earnings Total attributable to equity holders of parent Non-controlling interest Total equity
£ £ £ £ £ £
Balance at 1 January 2021 (restated 11 (#_ftn11) ) 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.
COMPANY STATEMENT OF FINANCIAL POSITION
AS AT 31 DECEMBER 2022
Company registered number: 11189598 Note 31 December 2022 31 December 2021
restated 12 (#_ftn12)
£ £
Assets
Current assets
Trade and other receivables 20 14,204,102 11,405,341
Cash and cash equivalents 413,635 2,460,489
14,617,737 13,865,830
Non-current assets
Trade and other receivables 20 39,554,433 35,343,534
Property, plant and equipment 13 45 1,083
Investments in subsidiaries 17 27,501,378 27,501,278
Investments in associate 18 - 80,000
67,055,856 62,925,895
Total assets 81,673,593 76,791,725
Liabilities
Current liabilities
Trade and other payables 21 4,290,801 2,143,456
Loans and borrowings 22 2,205,640 2,129,592
6,496,441 4,273,048
Non-current liabilities
Loans and borrowings 22 20,000,000 17,000,000
Deferred tax liabilities 24 635,334 660,270
20,635,334 17,660,270
Total liabilities 27,131,775 21,933,318
NET ASSETS 54,541,818 54,858,407
Issued capital and reserves attributable to owners of the parent
Share capital 26 190,662 190,662
Share premium reserve 27 49,232,606 49,232,606
Retained earnings 27 5,118,550 5,435,139
54,541,818 54,858,407
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 £4,419,482 for the year ended 31
December 2022 (2021: £7,105,524).
The financial statements were approved and authorised for issue by the Board
of Directors on 25 April 2023 and were signed on its behalf by:
Jon Divers
Director
The attached notes form part of these financial statements.
COMPANY STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 DECEMBER 2022
Note 2022 2021
£ £
Cash flows from operating activities
Profit for the year before tax 3,491,188 6,550,348
Adjustments for:
Depreciation of property, plant and equipment 13 1,038 4,764
Finance income (14,164) (11,386)
Finance expense 811,352 397,916
4,289,414 6,941,642
Decrease in trade and other receivables 1,329,641 526,485
Increase/(decrease) in trade and other payables 379,823 (412,658)
Cash generated from operations 5,998,878 7,055,469
Tax paid - -
Net cash flows from operating activities 5,998,878 7,055,469
Investing activities
Acquisition of associate - (80,000)
Sale of associate 18 80,000 -
Purchase of NCI share capital (100) -
Amounts (loaned to) subsidiaries (7,435,942) (21,661,696)
Interest received 14,164 11,386
Net cash flows (used in) investing activities (7,341,879) (21,730,310)
Financing activities
Dividends paid to holders of the parent 12 (4,736,071) (4,430,414)
Amounts borrowed from subsidiaries 1,767,522 520,683
Proceeds from loans and borrowings 5,000,000 20,000,000
Repayment of loans and borrowings (2,000,000) (11,000,000)
Interest paid on loans and borrowings (735,304) (268,324)
Net cash flows (used in)/from financing activities (703,853) 4,821,945
Net (decrease) in cash and cash equivalents (2,046,854) (9,852,896)
Cash and cash equivalents at beginning of year 2,460,489 12,313,385
Cash and cash equivalents at end of year 413,635 2,460,489
The attached notes form part of these financial statements.
COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2022
Current year Share Capital Share Premium Retained Earnings Total
£ £ £ £
Balance at 1 January 2022 190,662 49,232,606 5,435,139 54,858,407
Comprehensive profit for the year
Profit for the year - - 4,419,582 4,419,582
Total comprehensive profit for the year - - 4,419,582 4,419,582
Contributions by and distributions to owners
Dividends - - (4,736,071) (4,736,071)
Total contributions by and distributions to owners - - (4,736,071) (4,736,071)
Balance at 31 December 2022 190,662 49,232,606 5,118,650 54,541,918
COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 DECEMBER 2022 (CONTINUED)
Prior year 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 year
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.
NOTES FORMING PART OF THE CONSOLIDATED AND COMPANY 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 2022 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 2021 have been
delivered to the registrar of companies, and those for 2022 will be delivered
after the forthcoming AGM. BDO LLP and Moore Kingston Smith LLP have reported
on the accounts for the year ended 31 December 2021 and the year ended 31
December 2022 respectively: 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 2022 that comply with UK adopted international
accounting standards on 26 April 2023.
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 2022.
The financial statements have been prepared for year ended 31 December 2022,
with a comparative year to 31 December 2021 (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 year 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
Discontinued operations
During the year, the Board approved plans to dispose of the Group's interests
in LionFish. LionFish is classified as held for sale at the balance sheet
date. The net results of LionFish have been presented as discontinued
operations in the Group statement of comprehensive income (for which the
comparatives have been restated). See Note 10 for further details.
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
2022
New standards that have been adopted in the annual financial statements for
the year ended 31 December 2022 but have not had a significant effect on the
Group are:
· Onerous Contracts - 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 IFRS
1, IFRS 9, IFRS 16 and IAS 41); and
· References to Conceptual Framework (Amendments to IFRS 3).
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
2023:
· Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS
Practice Statement 2);
· IFRS 17 Insurance Contracts;
· 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)
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
2024:
· IFRS 16 Leases (Amendment - Liability in a Sale and Leaseback);
· IAS 1 Presentation of Financial Statements (Amendment -
Classification of Liabilities as Current or Non-current); and
· IAS 1 Presentation of Financial Statements (Amendment - Non-current
Liabilities with Covenants)
2. Accounting policies
Revenue
Revenue comprises the fair value of consideration receivable in respect of
services provided during the year, inclusive of recoverable expenses incurred
but excluding value added tax.
Legal 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.
Professional services revenues
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.
Adjusted EBITDA and exceptionals
The Group presents adjusted EBITDA as an operating KPI utilised by management
to monitor performance.
EBITDA is adjusted for one off costs that are considered to be exceptional,
being:
· Restructuring costs
· One off costs connected to acquisitions
These costs are considered to be exceptional because they do not relate to the
ongoing trade and performance of the business. Without presenting adjusted
EBITDA, the EBITDA would not be consistent as it would be subject to
fluctuations that do not reflect underlying performance of the Group.
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.
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.
Litigation assets are reviewed for impairment where events or circumstances
indicate that their carrying amount may not be recoverable. Where the carrying
value of the litigation assets exceeds its recoverable amount, the asset is
written down accordingly.
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.
Short-term benefits
Short-term employee benefit obligations are measured on an undiscounted basis
and are expensed as the related service is provided. A liability is recognised
for the amount expected to be paid under short-term cash bonus or
profit-sharing plans if the Group has a present legal or constructive
obligation to pay this amount as a result of past service provided by the
employee and the obligation can be estimated reliably.
Share-based payments
Where equity settled share options are awarded to employees, the fair value of
the options at the date of grant is charged to the consolidated statement of
comprehensive income over the vesting period. Non-market vesting conditions
are taken into account by adjusting the number of equity instruments expected
to vest at each reporting date so that, ultimately, the cumulative amount
recognised over the vesting period is based on the number of options that
eventually vest. Non-vesting conditions and market vesting conditions are
factored into the fair value of the options granted. As long as all other
vesting conditions are satisfied, a charge is made irrespective of whether
market vesting conditions are satisfied. The cumulative expense is not
adjusted for failure to achieve a market vesting condition or where a
non-vesting condition is not satisfied.
Where the terms and conditions of options are modified before they vest, the
increase in the fair value of the options, measured immediately before and
after the modification, is also charged to the consolidated statement of
comprehensive income over the remaining vesting period. Where equity
instruments are granted to persons other than employees, the consolidated
statement of comprehensive income is charged with the fair value of goods and
services received.
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 reasonably certain to assess that option
· any penalties payable for terminating the lease, if the term of the
lease has been estimated on the basis of the termination option being
exercised
Right-of-use assets are initially measured at the amount of the lease
liability, reduced for any lease incentives received, and increased for:
· lease payments made at or before the commencement of the lease
· initial direct costs incurred and
· the amount of any provision recognised where the Group is
contractually required to dismantle, remove or restore the leased asset
Subsequent to initial measurement lease liabilities increase as a result of
interest charged at a constant rate on the balance outstanding and are reduced
for lease payments made. Right-of-use assets are amortised on a straight-line
basis over the remaining term of the lease or over the remaining economic life
of the asset if this is judged to be shorter than the lease term.
When the Group revises its estimate of the term of any lease, it adjusts the
carrying amount of the lease liability to reflect the payments to make over
the revised term, which are discounted using a revised discount rate. The
carrying value of lease liabilities is similarly revised when the variable
element of future lease payments dependent on a rate or index is revised,
except the discount rate remains unchanged. In both cases an equivalent
adjustment is made to the carrying value of the right-of-use asset, with the
revised carrying amount being amortised over the remaining lease term.
For contracts that both convey a right to the Group to use an identified asset
and require services to be provided to the Group by the lessor for a variable
amount, the Group has elected to account for the right-of-use payments as a
lease and expense the service charge payments in the period to which they
relate.
Externally acquired intangible assets
Externally acquired intangible assets are initially recognised at cost and
subsequently amortised over their useful economic lives.
Intangible assets are recognised on business combinations if they are
separable from the acquired entity or give rise to other contractual/legal
rights. The amounts ascribed to such intangibles are arrived at by using
appropriate valuation techniques.
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 15 - 19 years Straight line Estimated discounted cash flow
Customer contracts 1 - 2 years 1 year In line with contract revenues Estimated discounted cash flow
Restrictive covenant extension 2 years 1 year 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.
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.
Income tax
Income tax expense represents the sum of the tax currently payable.
The tax currently payable is based on taxable profit for the year. Taxable
profit differs from profit as reported in the statement of comprehensive
income because it excludes items of income or expense that are taxable or
deductible in other years and it further excludes items that are not taxable
or tax deductible.
The Group's liability for current tax is calculated using tax rates (and tax
laws) that have been enacted or substantively enacted by the end of the
financial year.
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, and
subsequently stated at cost less any accumulated depreciation and impairment
losses. 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 - Straight line over the life of the lease
Plant and equipment - 33% per annum straight line
Fixtures and fittings - 25% per annum straight line
Computer equipment - 33% per annum straight line
Investments in associates
Investments in associates are accounted for under the equity method, initially
recorded at cost, and then subsequently stated at cost, adjusted for
attributable share of profit or loss after the date of acquisition.
Share Capital
Ordinary shares are recorded at nominal value and proceeds received in excess
of nominal value of shares issued, if any, are accounted for as share premium.
Both ordinary shares and share premium are classified as equity.
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 2021 comparative numbers have been restated for the following correction
which is described fully in Note 31:
· Reclassification of amounts due from Group companies between current
and non-current assets to reflect expectations of the timing of repayment
The Company statement of financial position adjustment decreased current trade
and other receivables by £35,343,534 and increased non-current trade and
other receivables by £35,343,534.
The 2021 comparative numbers have been restated to reflect LionFish being
disclosed as a discontinued operation in the current year, refer to Note 10.
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
Estimated impairment of intangible assets including goodwill
Determining whether an intangible asset is impaired requires an estimation of
the value in use of the cash generating units to which the intangible has been
allocated. The value in use calculation requires the entity to estimate the
future cash flows expected to arise from each cash generating unit and
determine a suitable discount rate. A difference in the estimated future cash
flows or the use of a different discount rate may result in a different
estimated impairment of intangible assets.
Revenue recognition
Where the group performs work that is chargeable based on hours worked at
agreed rates, assessment must be made of the recoverability of the unbilled
time at the period end. This is on a matter by matter basis, with reference to
historic and post year-end recoveries. Different views on recoverability would
give rise to a different value being determined for revenue and a different
carrying value for unbilled revenue.
Where revenue is subject to contingent fee arrangements, the Group estimates
the amount of variable consideration to which it will be entitled and
constrains the revenue recognised to the amount for which it is considered
highly probable that there will be no significant reversal. Due to the nature
of the work being performed, this typically means that contingent revenues are
not recognised until such time as the outcome of the matter being worked on is
certain. Factors the Group considers when determining whether revenue should
be constrained are whether: -
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 contingent fee arrangements, including where
services are provided under Damages Based Agreements ("DBAs"), the Group
estimates the total amount of variable consideration to which it will be
entitled and constrains the revenue recognition 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.
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.
3. Critical accounting estimates and judgements (continued)
Impairment of trade receivables
Receivables are held at cost less provisions for impairment. Impairment
provisions are recognised based on the simplified approach within IFRS 9 using
a provision matrix in the determination of the lifetime expected credit
losses. A different assessment of the impairment provision with reference to
the probability of the non-payment of trade debtors or the expected loss
arising from default, may result in different values being determined.
Litigation assets and fair value
LionFish
For each of LionFish's 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.
3. Critical accounting estimates and judgements (continued)
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 DBA 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.
Litigation assets are reviewed for impairment where events or circumstances
indicate that their carrying amount may not be recoverable. Where the carrying
value of the litigation asset exceeds its recoverable amount, the asset is
written down accordingly
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.
In the prior year, the Company was informed that HMRC had started an inquiry
into the valuation of employee related securities issued by the Company in
April 2018 prior to the IPO, this inquiry is on-going. For full details, refer
to Note 32.
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 - Group Fair value through profit or loss Amortised cost
31 December 2022 31 December 2021 31 December 2022 31 December 2021
restated restated
£ £ £ £
Cash and cash equivalents - - 3,000,678 4,736,546
Trade and other receivables - - 25,047,445 17,367,064
Litigation assets 10,603,024 6,675,538 - -
Total financial assets 10,603,024 6,675,538 28,048,123 22,103,610
On 31 December 2022, financial assets held at fair value through profit or
loss of £5,331,698 were transferred to assets held for sale (2021:
£4,895,514). Financial assets held at amortised cost of £4,755,219 were
transferred to assets held for sale (2021: £779,678). Refer to note 10 for
further details
4. Financial instruments - Risk Management (continued)
Financial assets - Company Fair value through profit or loss Amortised cost
31 December 2022 31 December 2021 31 December 2022 31 December 2021
restated restated
£ £ £ £
Cash and cash equivalents - - 413,635 2,460,489
Trade and other receivables - - 53,758,535 46,748,875
Total financial assets - - 54,172,170 49,209,364
Financial Liabilities - Group Fair value through profit or loss Amortised cost
31 December 2022 31 December 2021 31 December 2022 31 December 2021
restated
£ £ £ £
Trade payables and accruals - - 6,845,356 4,564,874
Loans and borrowings - - 22,205,640 19,129,592
Derivative financial liabilities - - - 1,515,000
Other payables - - 100 2,308,328
Total financial liabilities - - 29,051,096 27,517,794
On 31 December 2022, financial liabilities carried at amortised cost of
£1,283,385 were transferred to liabilities held for sale (2021: £803,881),
refer to note 10.
Financial Liabilities - Company Fair value through profit or loss Amortised cost
31 December 2022 31 December 2021 31 December 2022 31 December 2021
restated
£ £ £ £
Trade payables and accruals - - 4,290,801 2,143,546
Total financial liabilities - - 4,290,801 2,143,546
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 Group Finance Director 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 2022 and 2021, the Group's borrowings at variable rate were denominated
in sterling. At 31 December 2022, 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 £267,000
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 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 13 and 15. During 2022, the Group drew down the remaining
£5 million of the Revolving Credit Facility and £2 million of the Term
Facility Commitment was repaid during the year. At the year end the Group had
£3.0 million in cash, and so a net debt position of £19.2 million (2021:
£14.4 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 14), 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
(litigation financing activities operated by LionFish are included in
discontinued operations, Note 10)
· Professional Services - Provision of sell-side M&A corporate
finance services, provided by Convex
2022 Legal services Litigation finance Professional services Total
£ £ £ £
Segment revenue 44,873,908 - 5,433,355 50,307,263
Segment gains on litigation assets comprising:
Proceeds on disposal of litigation assets - 2,741,700 - 2,741,700
Realisation of litigation assets - (720,000) - (720,000)
Profit on disposal of litigation assets - 2,021,700 - 2,021,700
Fair value movement on litigation assets - 1,800,000 - 1,800,000
- 3,821,700 - 3,821,700
Segment contribution 22,699,777 - 1,944,104 24,643,881
Segment gains on litigation assets - 3,821,700 - 3,821,700
Costs not allocated to segments
Personnel costs (5,074,989)
Depreciation and amortisation (3,543,302)
Other operating expense (8,762,018)
Net financial expenses (1,328,775)
Loss on sale of equity accounted associate (21,643)
Group profit for the year before tax on continuing operations 9,734,854
5. Segment information (continued)
2021 (restated) Legal services Litigation finance 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 - 1,825,000 - 1,825,000
Realisation of litigation assets - (730,000) - (730,000)
Profit on disposal of litigation assets - 1,095,000 - 1,095,000
Fair value movement on litigation assets - - - -
- 1,095,000 - 1,095,000
Segment contribution 15,007,758 - 4,631,515 19,639,273
Segment gains on litigation assets - 1,095,000 - 1,095,000
Costs not allocated to segments
Personnel costs (4,430,718)
Depreciation and amortisation (2,936,240)
Other operating expense (6,897,382)
Net financial expenses (778,983)
Share of post-tax profits on equity accounted associate 21,643
Group profit for the year before tax on continuing operations 5,712,593
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
2022 2021
£ £
United Kingdom 43,393,963 36,893,981
Europe 1,528,152 549,860
North America 567,170 760,208
Other 4,817,978 3,781,289
50,307,263 41,985,338
Revenues from Legal Services clients that account for more than 10% of Group
revenue was £6,632,334 (2021: £nil).
5. Segment information (continued)
Contract assets
2022 2021
Group £ £
At 1 January 5,976,258 2,996,925
Acquired through business combinations - 3,560,480
Transfers in the period from contract assets to trade receivables (3,039,106) (2,464,783)
Impairment of contract assets (412,125) -
Excess of revenue recognised over cash (or rights to cash) being recognised 7,178,785 1,883,636
during the year
At 31 December 9,703,812 5,976,258
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
2022 2021
restated
£ £
Profit from operations is stated after charging:
Fees payable to the company's auditors:
Audit fees 290,000 246,350
Other services - pursuant to legislation/regulation 36,684 41,150
Depreciation of property, plant and equipment 552,305 525,607
Amortisation of right-of-use assets 2,153,585 1,781,058
Amortisation/impairment of intangible assets 837,413 633,415
Lease expense:
Short-term - -
Low value - 3,874
For the year ended 31 December 2022, depreciation of property, plant and
equipment of £4,098 (2021: £3,838) was transferred to discontinued
operations.
6. Profit from operations and auditor's remuneration (continued)
The Alternative Performance Measures used by Management are shown below:
2022 2021
restated
£ £
Operating profit 11,085,272 6,469,933
Depreciation and amortisation expense 3,543,302 2,936,240
Non-underlying items 1,202,111 863,435
Adjusted EBITDA 15,830,685 10,269,608
2022 2021
restated
£ £
Profit before tax 9,734,854 5,712,593
Non-underlying items 1,202,111 863,435
Adjusted PBT 10,936,965 6,576,028
7. Employees
Group
2022 2021
restated
£ £
Staff costs (including directors) consist of:
Wages and salaries 22,804,330 20,483,009
Short-term non-monetary benefits 294,501 214,208
Cost of defined contribution scheme 711,529 664,240
Share-based payment expense 6,244 72,000
Social security costs 2,999,841 2,485,004
26,816,445 23,918,461
Personnel costs stated in the consolidated statement of comprehensive income
includes the costs of contractors of £3,896,839 (2021: £2,854,685).
Staff costs transferred to discontinued operations during the year of
£474,361 (2021: £436,194)
Contractors' costs transferred to discontinued operations during the year of
£7,655 (2021: £144,437)
The average number of employees (including directors) during the year was as
follows:
2022 2021
Number Number
Legal and professional staff 138 113
Administrative staff 73 62
211 175
7. Employees (continued)
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 for continuing operations to the funds and
amounted to £711,529 (2021: £664,240).
Contributions amounting to £260,548 (2021: £127,296) were payable to the
funds at year end and are included in Trade and other payables.
Company
The average number of employees (excluding directors) during the period was
nine (2021: six); 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 29. The directors
are considered to be the key management personnel.
8. Finance income and expense
2022 2021
£ £
Recognised in profit or loss
Finance income
Interest received on bank deposits 32,739 22,676
Net finance income recognised in profit or loss 32,739 22,676
Finance expense
Interest expense on financial liabilities measured at amortised cost (832,816) (409,089)
Interest expense on lease liabilities (528,698) (392,570)
(1,361,514) (801,659)
Net finance (expense) recognised on profit or loss (1,328,775) (778,983)
The above financial income and expense include the following in respect of
assets/(liabilities) not at fair value through profit or loss:
2022 2021
£ £
Total interest income on financial assets 32,739 22,676
Total interest expense on financial liabilities (832,816) (409,089)
(800,077) (386,413)
9. Tax expense
2022 2021
restated
£ £
Current tax expense
Current tax on profits for the year 1,116,247 1,960,545
Adjustment for under provision in prior years 8,341 7,487
Total current tax 1,124,588 1,968,032
Deferred tax expense
Origination and reversal of temporary differences in current period (Note 24) (130,212) 789
Origination and reversal of temporary differences in prior period (Note 24) 23,575 -
Total tax expense 1,017,951 1,968,821
Tax charge attributable to:
Profit from continuing operations 1,932,586 1,300,577
Profit/(loss) from discontinued operations (914,635) 668,244
Tax expense excluding share of tax of equity accounted associate 1,017,951 1,968,821
Share of tax expense of equity accounted associate - 5,175
1,017,951 1,973,996
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 year are as follows:
2022 2021
restated
£ £
Profit/(loss) for the year from:
Continuing operations 7,802,268 4,412,016
Discontinued operations (3,984,887) 2,845,397
3,817,381 7,257,413
Income tax expense (including income tax on associate) attributable to: 1,017,951 1,973,996
Continuing operations 1,932,586 1,305,752
Discontinued operations (914,635) 668,244
Profit before income taxes 4,835,332 9,231,409
Tax using the Company's domestic tax rate of 19% 918,713 1,753,968
Expenses not deductible for tax purposes 91,370 117,317
Fixed asset differences (675) (3,276)
Adjustments in respect of prior periods 8,341 7,487
Adjustments in respect of prior periods (deferred tax) 23,575 -
Remeasurement of deferred tax for changes in tax rates (23,373) 98,500
Total tax expense 1,017,951 1,973,996
9. Tax expense (continued)
Changes in tax rates and factors affecting the future tax charge
Following the Finance Bill 2021, enacted on 24 May 2021, the UK corporate tax
rate increased from 19% to 25% on 1 April 2023. As IFRS requires deferred tax
to be measured at tax rates that have been substantively 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. Discontinued operations
In December 2022, the Board announced its intention to dispose of LionFish
Litigation Finance Limited ("LionFish").
On 12 August 2020, the Company agreed put options over the shares of LionFish
held by the non-controlling interest. Under this agreement, the holder of the
shares could require the Company to buy the shares in LionFish, with
consideration based on a multiple of LionFish profits, settled by the issue of
ordinary shares in the Company. On 8 December 2022, the minority shares were
transferred to the Group for £nil and this agreement was terminated. The
present value of the put option was released through the Statement of Changes
in Equity (2021: £1,015,000).
Financial performance and cash flow information
The financial performance and cash flow information presented are for the 12
months ending 31 December 2022 and 31 December 2021
2022 2021
Discontinued operations - LionFish £ £
(Loss)/Gain on litigation assets (4,318,025) 4,112,524
Expenses other than finance costs (500,608) (598,883)
Non-underlying items (80,889) -
Tax credit/(expense) 914,635 (668,244)
(Loss)/Profit for the year (3,984,887) 2,845,397
Attributable to:
Equity holders of the parent (3,599,325) 2,560,857
Non-controlling interests (385,562) 284,540
(3,984,887) 2,845,397
2022 2021
Cash flow £ £
Net cash (outflow)/inflow from operating activities (845,511) 2,166,222
Net cash outflow from investing activities (389) (549)
Net cash outflow from financing activities - (2,000,000)
Net (decrease)/increase in cash generated (845,900) 165,673
10. Discontinued operations (continued)
Assets and liabilities of disposal group held for sale
The following major classes of assets and liabilities in relation to LionFish
have been classified as held for sale in the consolidated statement of
financial position.
2022 2021
£ £
Property, plant and equipment 2,770 6,479
Litigation investments 5,331,698 4,895,514
Trade and other receivables 1,244 795
Cash and cash equivalents 11,405 19,597
Assets held for sale 5,347,117 4,922,385
Trade and other payables 1,283,883 803,881
Amounts due to parent company 4,766,624 760,081
Tax liabilities 412,551 489,478
Liabilities held for sale 6,463,058 2,053,440
11. Earnings per share
Total Total
2022 2021
Restated
Numerator £ £
Profit for the year and earnings used in basic and diluted EPS:
From continuing operations 7,802,268 4,412,016
From discontinued operations (3,599,325) 2,560,857
Non-Underlying items
Costs of acquiring subsidiary 367,303 863,435
Restructuring costs 834,808 -
Less: tax effect of above items (209,647) (69,242)
Profit for the year adjusted for non-underlying items from continuing 8,794,732 5,206,209
operations
Denominator Number Number
Weighted average number of shares used in basic EPS 95,331,236 91,408,901
Impact of share options 188,392 153,437
Weighted average number of shares used in diluted EPS 95,519,628 91,562,338
11. Earnings per share (continued)
2022 2021
Pence Pence
Restated
Basic earnings per ordinary share from continuing operations 8.18 4.83
Diluted earnings per ordinary share from continuing operations 8.17 4.82
Basic earnings per ordinary share from discontinued operations (3.78) 2.80
Diluted earnings per ordinary share from discontinued operations (3.78) 2.80
Basic earnings per ordinary share from total operations 4.41 7.63
Diluted earnings per ordinary share from total operations 4.40 7.62
Basic earnings per ordinary share adjusted for non-underlying items from 9.23 5.70
continuing operations
Diluted earnings per ordinary share adjusted for non-underlying items from 9.21 5.69
continuing operations
12. Dividends
2022 2021
£ £
Interim dividend of 3p (2021: 3p) per ordinary share proposed and paid during 2,832,898 2,541,412
the year relating to the previous year's results
Interim dividend of 2p (2021: 2p) per ordinary share paid during the year 1,903,173 1,889,002
4,736,071 4,430,414
13. Property, plant and equipment
Group
Leasehold improvements Fixtures and fittings Computer Equipment Total
£ £ £ £
Cost
At 1 January 2022 (restated) 2,710,279 251,294 779,546 3,741,119
Additions 7,471 87,883 103,998 199,352
At 31 December 2022 2,717,750 339,177 883,544 3,940,471
Accumulated depreciation and impairment
At 1 January 2022 (restated) 487,148 116,989 554,071 1,158,208
Charge for the year 285,370 109,399 157,536 552,305
At 31 December 2022 772,518 226,388 711,607 1,710,513
Net book value
At 1 January 2022 (restated) 2,223,131 134,305 225,475 2,582,911
At 31 December 2022 1,945,232 112,789 171,937 2,229,958
Property, plant and equipment transferred to held for sale at 31 December 2022
of £2,770 (2021: £6,479).
Company
Computer Equipment Total
£ £
Cost
At 1 January 2022 18,750 18,750
Additions - -
At 31 December 2022 18,750 18,750
Accumulated depreciation and impairment
At 1 January 2022 17,667 17,667
Charge for the year 1,038 1,038
At 31 December 2022 18,705 18,705
Net book value
At 1 January 2022 1,083 1,083
At 31 December 2022 45 45
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.
14. 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 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 2022 Lease Contract Variable Payments Sensitivity
Number % £000
Property leases with payments linked to inflation 1 56.1% +/- 218
Property leases with periodic uplifts to market rentals 2 43.9% +/- 584
3 100.0% +/- 802
The percentages in the table below reflect the proportions of lease payments
that are either fixed of variable for the comparative period.
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
Right-of-use Assets
Land and buildings Computer equipment Total
£ £ £
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
At 1 January 2022 15,913,008 - 15,913,008
Amortisation (2,153,585) - (2,153,585)
Variable lease payment adjustment 1,314,709 - 1,314,709
At 31 December 2022 15,074,132 - 15,074,132
14. Leases (continued)
Lease liabilities
Land and buildings Computer equipment Total
£ £ £
At 1 January 2021 5,947,655 3,407 5,951,062
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) (2,249,508)
At 31 December 2021 15,849,101 - 15,849,101
At 1 January 2022 15,849,101 - 15,849,101
Interest expense 528,698 - 528,698
Variable lease payment adjustment 1,314,709 - 1,314,709
Lease payments (1,740,524) - (1,740,524)
At 31 December 2022 15,951,984 - 15,951,984
At 31 December 2022, 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 549,028 1,689,023 2,342,088 5,421,661 5,950,183 15,951,984
The aggregate undiscounted commitments for low-value leases as at 31 December
2022 was £nil (2021: £nil).
15. Intangible assets
Group
Goodwill Customer Contracts Brand Other Total
£ £ £ £ £
Cost
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
At 1 January 2022 51,862,168 1,706,578 3,360,474 1,000,000 57,929,220
Additions - - - - -
At 31 December 2022 51,862,168 1,706,578 3,360,474 1,000,000 57,929,220
Accumulated amortisation and impairment
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
At 1 January 2022 - 1,466,599 270,058 333,333 2,069,990
Amortisation charge - 169,389 168,024 500,000 837,413
At 31 December 2022 - 1,635,988 438,082 833,333 2,907,403
Net book value
At 31 December 2021 51,862,168 239,979 3,090,416 666,667 55,859,230
At 31 December 2022 51,862,168 70,590 2,922,392 166,667 55,021,817
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.
16. 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.
17. 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
2022 2021 2022 2021
RBL Law Limited Legal Services 09986118 100% 100% - -
RBG Legal Services Limited Legal Services 13287062 100% 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 100% 90% - 10%
Islero Assignments Limited Dormant 12754244 100% 90% - 10%
Memery Crystal Limited Dormant 13600674 100% 100% - -
Rosenblatt Limited Dormant 13601148 100% 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.
17. Subsidiaries (continued)
For the year ending 31 December 2022, 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 2022.
Company
2022 2021
£ £
Cost and net book value
At 1 January 27,501,278 15,814,321
Investments in subsidiaries 100 11,686,957
Impairment - -
At 31 December 27,501,378 27,501,278
18. Investments in associate
In June 2022, the Group sold its 40% interest in Adnitor Limited. The post-tax
loss on disposal of investment in associate was determined as follows:
2022
£
Cash consideration received 80,000
Total consideration received 80,000
Net assets disposed (other than cash):
Investment in associate 101,643
Loss on disposal of discontinued operation, net of tax (21,643)
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 was 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.
On the disposal of the Group's interest in Adnitor Limited this agreement was
terminated and the present value of the option released through the Statement
of Changes in Equity (2021: £500,000).
19. Litigation assets
The table below provides analysis of the movements in the Level 3 financial
assets.
2022 2021
Level 3 Level 3
restated
£ £
At 1 January 6,675,538 6,569,110
Additions 2,847,486 836,428
Realisations (720,000) (730,000)
Fair value movement 1,800,000 -
At 31 December 10,603,024 6,675,538
At 31 December, litigation assets of £5,331,698 (2021: £4,895,514) were
transferred to assets held for sale -discontinued operations.
Sensitivity of Level 3 valuations
Following investment, the Group engages in a semi-annual review of each
investment's fair value. At 31 December 2022, 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 £1,060,302
(2021: £667,554).
20. Trade and other receivables
Group Company Group Company
2022 2022 2021 2021
Restated Restated
£ £ £ £
Trade receivables 10,660,265 - 10,183,246 -
Less: provision for impairment of trade receivables (745,523) - (555,600) -
Trade receivables - net 9,914,742 - 9,627,646 -
Contract assets 9,703,812 - 5,976,258 -
Amounts due from group companies - 53,167,678 - 45,731,735
Amounts due from discontinued operations 4,766,624 - 760,081
Other receivables 662,267 403,633 1,003,079 775,085
Total financial assets other than cash and cash equivalents classified as 25,047,445 53,571,311 17,367,064 46,506,820
amortised cost
Prepayments 1,889,736 187,224 1,963,850 242,055
Total trade and other receivables 26,937,181 53,758,535 19,330,914 46,748,875
Due within one year or less 26,937,181 14,204,102 19,330,914 11,405,341
Due after more than one year - 39,554,433 - 35,343,534
26,937,181 53,758,535 19,330,914 46,748,875
At 31 December, trade and other receivables of £1,244 (2021: £795) were
transferred to assets held for sale - discontinued operations.
20. Trade and other receivables (continued)
The carrying value of trade and other receivables classified at amortised cost
approximates fair value.
The Group does not hold any collateral as security.
The Group applies the IFRS 9 simplified approach to measuring expected credit
losses using a lifetime expected credit loss provision for trade receivables
and contract assets. To measure expected credit losses on a collective basis,
trade receivables and contract assets are grouped based on similar credit risk
and aging. The contract assets have similar risk characteristics to the trade
receivables for similar types of contracts.
The expected loss rates are based on the Group's credit losses experienced
over the period since incorporation, adjusted for current and forward-looking
information on macroeconomic factors affecting the Group's customers. The
Group has identified the gross domestic product (GDP), unemployment rate and
inflation rate as the key macroeconomic factors in the countries where the
Group operates.
The lifetime expected loss provision for trade receivables and contract assets
is as follows:
Current More than 30 days past due More than 60 days past due More than 120 days past due Total
£
31 December 2022
Expected loss rate 0% 3% 4% 19%
Gross carrying amount 14,437,136 1,832,694 820,647 3,273,600 20,364,077
Loss provision 57,161 49,528 30,947 607,887 745,523
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
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:
2022 2021
£ £
At 1 January 555,600 219,643
Increase during the year 248,427 524,647
Receivable written off during the year as uncollectible (24,247) (173,050)
Unused amounts reversed (34,257) (15,640)
At 31 December 745,523 555,600
Included in other receivables is £12,475 (2021: £518,944) which is owed by
the Employee Benefit Trust.
20. Trade and other receivables (continued)
Company
The loans due from 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
2022 2022 2021 2021
restated
£ £ £ £
Trade payables 3,969,311 - 1,874,413 -
Corporation tax payable 1,601,655 - 1,002,637 -
Other taxes and social security 2,620,512 - 1,711,342 -
Amounts due to group companies - 2,873,359 - 1,105,837
Derivative financial liabilities - - 1,515,000 -
Other payables 100 100 2,308,328 -
Accruals 2,876,045 1,417,342 2,690,461 1,037,619
At 31 December 11,067,623 4,290,801 11,102,181 2,143,456
Due within one year or less 11,067,623 4,290,801 11,102,181 2,143,456
Due after more than one year - - - -
11,067,623 4,290,801 11,102,181 2,143,456
The carrying value of trade and other payables classified as financial
liabilities measured at amortised cost approximates fair value.
Other payables for 2021 contains £2,248,319 of deferred consideration (refer
to note 25).
At 31 December, trade and other payables of £1,696,434 (2021: £1,293,359)
were transferred to liabilities held for sale - discontinued operations (refer
to note 10).
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 22 31 Dec 22 31 Dec 21 31 Dec 21
£ £ £ £
Non-current
Bank loans
Secured 20,000,000 20,000,000 17,000,000 17,000,000
Current
Bank loans
Secured 2,205,640 2,205,640 2,129,592 2,129,592
At 31 December 22,205,640 22,205,640 19,129,592 19,129,592
The rate at which Sterling denominated loans and borrowings are payable is
2.90% above SONIA (2021: 2.40%).
The bank loans are secured by fixed and floating charges over the assets of
the Group. The bank loans are repayable over three years. The Group has £nil
undrawn committed borrowing facilities available at 31 December 2022 (2021:
£5,000,000).
23. Provisions
Group
Leasehold dilapidations Legal disputes Total
£ £
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
At 1 January 2022 150,000 164,291 314,291
Charged to profit or loss - 47,245 47,245
At 31 December 2022 150,000 211,536 361,536
Due within one year or less - 211,536 211,536
Due after more than one year 150,000 - 150,000
150,000 211,536 361,536
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% (2021: 25%).
Following the Finance Bill 2021, enacted on 24 May 2021, the UK corporate tax
rate increased from 19% to 25% on 1 April 2023. As IFRS requires deferred tax
to be measured at tax rates that have been substantively 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
2022 2022 2021 2021
restated
£ £ £ £
At 1 January 850,042 660,270 304,853 502,711
Recognised in profit or loss
Tax expense (106,637) (24,936) 1,025 157,559
Transferred to held for sale - discontinued operations 923 - (1,856) -
744,328 635,334 304,022 660,270
Arising on business combination - - 546,020 -
At 31 December 744,328 635,334 850,042 660,270
Details of the deferred tax liability and amounts recognised in the profit or
loss are as follows:
Group Accelerated capital allowances Business combinations Other temporary and deductible differences Total
£ £ £ £
Balance 1 January 2021 58,005 255,133 (8,285) 304,853
Charges/(credited) to profit or loss (919) 31,446 (29,502) 1,025
Arising on business combination - 546,020 - 546,020
Transferred to held for sale - discontinued operations (1,856) - - (1,856)
Balance 31 December 2021 55,230 832,599 (37,787) 850,042
Balance 1 January 2022 55,230 832,599 (37,787) 850,042
Charges/(credited) to profit or loss 1,651 (84,353) (23,941) (106,643)
Transferred to held for sale - discontinued operations 929 - - 929
Balance 31 December 2022 57,810 748,246 (61,728) 744,328
24. Deferred tax (continued)
Company Accelerated capital allowances Reversal of deferred consideration Other temporary and deductible differences Total
£ £ £ £
Balance 1 January 2021 1,111 501,600 - 502,711
Charges/(credited) to profit or loss (841) 158,400 - 157,559
Arising on business combination - - - -
Balance 31 December 2021 270 660,000 - 660,270
Balance 1 January 2022 270 660,000 - 660,270
Charges/(credited) to profit or loss (260) - (24,677) (24,937)
Balance 31 December 2022 10 660,000 (24,677) 635,333
25. Acquisition
During the year ended 31 December 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.
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
Fair value of consideration paid
£
Cash 12,000,000
Shares 11,686,956
Deferred cash consideration 5,648,310
29,335,266
Goodwill 18,826,908
During the year ended 31 December 2022, the Group paid deferred consideration
of £2,248,319 (2021: £3,400,000).
26. Share capital
Authorised
2022 2022 2021 2021
Number £ Number £
Ordinary shares of 0.2p each 95,331,236 190,662 95,331,236 190,662
Allotted, issued and fully paid
2022 2022 2021 2021
Number £ Number £
Ordinary shares of 0.2p each
At 1 January 95,331,236 190,662 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 95,331,236 190,662
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. Share-based payment
The Group operates two equity settled share-based remuneration schemes: a
United Kingdom tax authority approved scheme and an unapproved scheme. Under
the schemes the only vesting condition is that the individual remains an
employee of the Group over the vesting period.
2022 2022 2021 2021
Weighted average exercise price Weighted average exercise price
£ Number £ Number
Outstanding 1 January - 153,437 - -
Granted during the year 0.11 1,264,977 - 153,437
Forfeited during the year 0.04 (1,132,461) - -
Exercised during the year - - - -
Outstanding at 31 December 0.35 285,953 - 153,437
The exercise price of options outstanding at 31 December 2022 ranged between
£nil and £1.03 (2021: £nil) and their weighted contractual life was 9 years
(2021: 8 years). Of the total number of options outstanding at 31 December
2022, 20,000 had vested and were exercisable (2021: 70,000). No options were
exercised in the year. The weighted average fair value of each option granted
during the year was £0.92 (2021: £1.08).
The following information is relevant in the determination of the fair value
of options granted during the year under the equity settled share-based
remuneration schemes operated by the Group.
2022 2021
Option pricing model used Black-Scholes Black-Scholes
Weighted average share price at date of grant £1.18 £1.11
Contractual life (in days) 3,653 3,653
Expected volatility 24% 24%
Expected dividend yield 5% 5%
Risk-free interest rate 1% 1%
The share-based remuneration expense disclosed in Note 7 relates entirely to
equity settled schemes. The Group did not enter into any share-based payment
transactions with parties other than employees during the year.
29. 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
2022 2022 2021 2021
£ £ £ £
Velocity Venture Capital Ltd* (713) 222,733 - 387,245
Motorsport Circuit Management Ltd* 11,250 - 7,750 -
N Foulston - - - -
Winros** - 794,458 - 848,999
Note: *A company controlled by Nicola Foulston, ** A partnership in which Ian
Rosenblatt is a partner.
In addition, during the year, £19,480 of contingent work was performed by the
Group in relation to a Conditional Fee Agreement with Winros (2021: £26,842).
At 31 December 2022, there were no amounts due to any related party (2021:
£nil). At 31 December 2022, £16,500 was due from Motorsport Circuit
Management Ltd (2021: £7,750).
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 2022 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 £1,285,961
(2021: £1,566,918). Further details of directors' remuneration are given in
the Directors' Report.
Company
In addition to the amounts disclosed in the Directors' Report, the Company has
entered into the following transactions with related parties.
During 2022, the Company reimbursed fees and expenses paid on its behalf by
RBGLS totalling £2,571,884 (2021: £935,335). At 31 December 2022, the
company was owed £48,401,054 by RBGLS (2021: £42,970,594) and owed
£2,226,035 to RBL Law (2021: £2,001,060).
During 2022, Convex Capital Limited reimbursed fees and expenses paid on its
behalf by the Company totalling £571,264 (2021: £9,089). At 31 December
2022, the company owed £647,324 to Convex Capital Limited (2021: £1,398,347
owed to Convex Capital Limited).
During 2022, LionFish Litigation Finance Limited reimbursed fees and expenses
paid on its behalf by the Company totalling £1,067,602 (2021: £376,133). At
31 December 2022, the company was owed £4,766,624 by LionFish Litigation
Finance Limited (2021: £636,581 owed by LionFish Litigation Finance Limited).
30. Notes supporting statement of cash flows
Significant non-cash transactions from investing activities are as follows:
2022 2021
£ £
Equity consideration for business combination - 11,686,956
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 2022 17,000,000 2,129,592 19,129,592
Cash flows (net) 3,000,000 - 3,000,000
Non-cash flows
Interest accruing in year - 76,048 76,048
At 31 December 2022 20,000,000 2,205,640 22,205,640
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
31. Restatement of prior year
2021 comparatives in the Company statement of financial position and Note 20
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
these restatements.
31 December 2021
As originally presented 1 January 2022
Restated
Adjustment
£ £ £
Current assets
Trade and other receivables 46,748,875 (35,343,534) 11,405,341
Non-current assets
Trade and other receivables - 35,343,534 35,343,534
(i) Reclassification of amounts due from Group companies between current and
non-current assets
32. 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 4 April 2018
and 16 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.
1 (#_ftnref1) All measures apart from net debt and including prior year
comparatives are shown on a continuing operations basis unless otherwise
stated
2 (#_ftnref2) Figures for 2021 include seven months of contribution from
Memery Crystal following the completion of the acquisition at the end of May
2021
3 (#_ftnref3) Comparison shown on a pre-IFRS 16 basis
4 (#_ftnref4) Comparison shown on a pre-IFRS 16 basis
5 (#_ftnref5) All measures apart from net debt and including prior year
comparatives are shown on a continuing operations basis unless otherwise
stated
6 (#_ftnref6) All measures apart from net debt are shown on a continuing
operations basis unless otherwise stated. Prior year comparatives are also
shown on a continuing operations basis. Further details on discontinued
operations can be found in Note 10.
7 (#_ftnref7) Comparatives have been restated to present LionFish as a
discontinued operation. Refer to Notes 1 and 10 for further details.
8 (#_ftnref8) Comparatives have been restated to present LionFish as a
discontinued operation. Refer to Note 10 for further details.
9 (#_ftnref9) Comparatives have been restated to present LionFish as a
discontinued operation. Refer to Note 10 for further details.
10 (#_ftnref10) Comparatives have been restated to present LionFish as a
discontinued operation. Refer to Note 10 for further details.
11 (#_ftnref11) Comparatives have been restated to present LionFish as a
discontinued operation. Refer to Note 10 for further details.
12 (#_ftnref12) Comparatives have been restated to present intercompany
balances between current and non-current per Note 31
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. END FR FLFFASDIEFIVRecent news on RBG Holdings
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