REG - RBG Holdings PLC - Unaudited Interim Results
28/09/2023 07:00
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RNS Number : 9133N RBG Holdings PLC 28 September 2023
28 September 2023
RBG Holdings plc
("RBG", "the Group", or "the Company")
Unaudited Interim Results for the six months ended 30 June 2023
Executing a clear strategy to restore value and reduce risk profile
RBG Holdings plc (AIM: RBGP), the professional services group, today announces
its unaudited results for the six months ended 30 June 2023.
Strategic Highlights:
During the first six months of the financial year, the Group's new executive
management team which brings expertise from the practice leaders of the core
revenue generation centres, took action to:
· Return the Group's focus to its core Legal Services business where
both of its core brands have over 30 years' proven track record of trading
through:
o Targeting organic growth in the highly cash generative Legal Services
business and increasing average revenue per fee earner which is now among the
highest in the industry 1 (#_ftn1) .
o Hiring seven additional partners since April 2023
o From May, the two law firms started sharing a Practice Management System
allowing them to work seamlessly on the same cases, and improving cross
selling opportunities
· Reduce the Group's risk profile through:
o Ceasing to carry any investment in Conditional Fee Arrangements ("CFAs")
and Damages Based Agreements ("DBAs") as assets on its balance sheet in
contrast to the treatment by the previous management; any fees from wins on
such cases will simply be recorded as revenue when paid
o Writing down the retained value of all remaining CFAs, DBAs and the
retained LionFish cases on the balance sheet to zero, leading to a non-cash
write off of £12.8m
· Prioritise the reduction of the Group's debt by:
o Disposing of LionFish Litigation Finance Limited in July for a
consideration of up to £3.07m, of which £1.07m was used for immediate
repayment of an intercompany loan
o Suspending the dividend policy
Financial Highlights 2 (#_ftn2) :
Continuing Operations H1 2023 H1 2022
RBGLS revenue £19.8m £20.7m
RBGLS gains on litigation assets - £1.6m
Convex Revenue £0.7m £4.2m
Group Revenue £20.5m £26.5m
RBGLS adjusted EBITDA £4.4m £6.8m
Convex adjusted EBITDA (£0.5)m £1.9m
Central overhead costs (£1.0)m (£1.7)m
Group adjusted EBITDA £2.9m £7.0m
· Revenue of £20.5m (H1 2022: £24.9m excluding gains on litigation
assets, £26.5m including) reflecting reduced deal flow at Convex Capital due
to market conditions
· Adjusted EBITDA of £2.9m (H1 2022: £7.0m)
· Adjusted profit before tax of £0.4m (H1 2022: £4.6m)
· Non-recurring non-cash costs of £13.7m (H1 2022: £nil) of which the
majority relates to the decision to write off the Group's litigation assets
· Statutory EBITDA loss of £10.8m (H1 2022: profit of £7.0m)
· Loss before tax of £13.3m (H1 2022: profit of £4.6m)
· Loss per share of 9.08 pence (H1 2022: 3.62 pence profit)
· Loss from continuing operations of £10.2m (H1 2022: profit £3.6m)
· Adjusted free cash flow generation in the period was £0.4m (H1 2022:
£3.1m)
· Pre IFRS 16 net debt of £21.0m (H1 2022: net debt of £17.5m)
Discontinued operations:
· Profit from discontinued operations of £1.6m (H1 2022: loss £0.2m)
Post Balance Sheet Events (July 2023)
· Appointment in July of Ian Rosenblatt OBE, the Group's largest
shareholder and individual revenue generator, to the Board as Executive Vice
Chair
Current Trading & Outlook
· The first half of the Company's financial year has historically been
the slower of the two halves, and the Board can already see this trend
continuing, with a strong start to H2 2023
· Trading within the Group's Legal Services division was robust in the
first half, and the Group has good visibility on revenue and profitability in
this division for the second half
· As a result, the Board is confident that the core Legal Services
business will meet full year market expectations
· Convex Capital has grown its pipeline to 22 deals, seven of which are
in the latter stages of completion. The Board is confident that several of
these deals will complete before the end of the year
· The Board therefore expects to meet its current market forecasts for
FY23 3 (#_ftn3)
· Positive discussions with lenders underway regarding the Group's debt
facilities due for refinancing in April 2024
Jon Divers, CEO, RBG Holdings plc, commented: "Over the last six months, the
new leadership team has established a clear strategy to restore value to the
Group by focusing on the Group's core Legal Services business. Furthermore, we
have reduced the Group's risk profile and are prioritising the payback of the
Company's debt. To help achieve this, we have now disposed of LionFish,
suspended the dividend, and discontinued the previous management's strategy of
carrying investments in CFAs and DBAs as assets on our balance sheet and only
recognising revenue when it is paid.
"Overall, I am pleased with the performance of our core Legal Services
businesses, Rosenblatt and Memery Crystal, which are delivering solid revenues
and profits. Their trading, despite the wider economic environment, has
highlighted the resilience and counter cyclical nature of the businesses, both
of which have over 30 years' proven trading history. Driving the organic
growth of these businesses is at the heart of our plans. Our average revenue
per fee earner have improved significantly during the period and is among the
highest in the industry. Since April, we have hired seven additional
Partners; five have already started with the remaining two joining either
later in the year or early 2024. They all have high levels of experience and
knowledge in their respective fields, creating more revenue opportunities.
"M&A activity in the UK during the first half of 2023, industry-wide, has
been at a much lower level than in recent years. As a result, our specialist
sell-side M&A advisory business, Convex Capital, only completed one deal
in the first half of 2023. However, momentum is returning, and the business
has a strong and growing pipeline. We are confident that several deals will
complete before the end of the year.
"The decisive action we have taken during the first half, means that the Group
has been de-risked and simplified, providing greater visibility to investors
going forward. The ongoing business is profitable and highly cash generative
and we are committed to reducing the Group's debt. We have a clear vision, a
solid foundation on which to grow, and an absolute commitment to restoring the
Group's value."
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 (Financial Communications) Tel: +44 (0)7540 106366
Tali Robinson / Robin Tozer
rbg@secnewgate.co.uk
About RBG Holdings plc
Further information about RBG Holdings plc is available at:
www.rbgholdings.co.uk (http://www.rbgholdings.co.uk)
Further information about Rosenblatt (founded in 1989) is available at:
www.rosenblatt.co.uk (http://www.rosenblatt.co.uk)
Further information about Memery Crystal (founded in 1979) is available at:
www.memerycrystal.co.uk (http://www.memerycrystal.co.uk)
Further information about Convex Capital (founded in 2010) is available at:
www.convexcap.com (http://www.convexcap.com)
Chief Executive's Statement
Since my appointment at the beginning of the year, the newly strengthened
Board and I have returned the Group's focus to its core Legal Services
business, reduced the Group's risk profile, and prioritised the reduction of
the Group's debt.
The performance in the first six months of the financial year reflects this
approach, and has involved significant non-cash write offs, particularly
through our decision to write down to zero our litigation finance assets.
However, in the future it means we will be able to focus more on organic
growth in Legal Services and Convex Capital while reducing debt. We believe
this approach will be the most effective way of restoring shareholder value.
Group revenue was £20.5m (H1 2022: £26.5m including gains from litigation
assets) which partially reflected the absence of gains from litigation assets
in line with our decision to exit LionFish Litigation Finance Limited
("LionFish") and reduce the risk profile of the Group. Revenue was also
impacted by reduced M&A deal flow at Convex Capital due to market
conditions which delayed completions, some of which we now expect to occur in
the second half of 2023.
Our pre IFRS 16 net debt position as at 30 June 2023 was £21.0m (H1 2022:
£17.5m) which rose during the period due to the emergence of a number of
one-off, unforeseen legacy payments that needed settling. Repaying this debt
is a critical priority for the new executive team and we have already paid
back £3.5m from the Group's £10m term loan. Exiting our third-party
litigation finance business, LionFish, along with a number of other actions
taken will also mean that the Group can focus on the reduction of our net debt
going forward. Furthermore, we have had positive discussions with lenders
regarding the Group's debt facilities due for refinancing in April 2024.
The nomination committee is actively engaged with a search agency to identify
an additional non-executive director.
RBG Legal Services Limited ("RBGLS")
RBGLS combines our two legal brands - Rosenblatt and Memery Crystal - which
are aligned to contentious and non-contentious services to reflect their brand
position within the market. We are building one of London's premier mid-tier
law firms providing quality advice to corporates, entrepreneurs and high net
worth individuals.
We are focused on the organic growth of these businesses. As at 30 June 2023,
the combined businesses had 174 people, including 120 fee earners, with
particular strength in Dispute Resolution, Corporate and Real Estate. Since
April, we have hired seven new Partners; five have already started with the
remaining two joining either later in the year or early in 2024. They all have
high levels of experience and knowledge in their respective fields, creating
more revenue opportunities.
The average revenue per fee earner was £406,000 (H1 2022: £363,000). Our
revenue per fee earner is in the top 20 of all UK law firms 4 (#_ftn4) driven
by improved allocation of resources. The small reduction in gross margin to
39% (H1 2022: 42%) reflects the diversification of the Legal Services business
into more non-contentious areas of law, following the acquisition of Memery
Crystal. This is lower margin work but more consistent, which provides a
natural hedge to the Group's dispute resolution activities which, while more
profitable, are more contingent.
The combined businesses are winning a broad range of new instructions,
including corporate transactions, employment advisory work and financial
restructuring mandates. The significantly enhanced scale has enabled us to win
these mandates as well as improve the opportunity pipeline. From May, the two
law firms started sharing a Practice Management System allowing them to work
seamlessly on the same cases, and improving cross selling opportunities.
The macroeconomic uncertainty seen in the first quarter of 2023 contributed to
revenue in H1 2023 being more subdued than in 2022. Underlying revenue
(excluding gains on litigation assets) was £19.8m in 2023 compared to £20.7m
in 2022, a decrease of 4.4%. The consolidated Legal Services business has
given us a more balanced business across the key areas of Dispute Resolution,
Corporate and Real Estate. The Dispute Resolution division was responsible for
44.4% (H1 2022: 31.6%) of RBGLS's revenue, Corporate was 42.0% (H1 2022:
44.0%), and Real Estate represented 13.6% (H1 2022: 24.4%) of the combined
business.
During the period, the Board reviewed the previous management's strategy to
invest in a number of Conditional Fee Arrangements ("CFAs") and Damages Based
Agreements ("DBAs") undertaken through RBGLS. Over the past six years, RBGLS
invested in 13 cases with a total cash investment of £17.4m. The carrying
value of the remaining cases was £13.3m. One of these cases, Project
Shango, accounted for £9.3m of the total. As announced in July, having taken
advice, the Board concluded that Project Shango would not be successful. The
Board took the prudent decision to further write down the value of all
remaining cases on the balance sheet to zero, including the four remaining
fully funded retained LionFish investments. The total non-cash write off is
£13.3m. Any successful outcomes of the cases will be returned to the Group as
revenue in line with RBGLS's percentage stake in the cases.
This decision simplified and de-risked the Group's balance sheet, providing
greater visibility to investors. RBGLS will continue to offer its clients
alternative billing arrangements (both CFAs and DBAs) where appropriate but
any investments in such cases will be expensed when incurred and not be
carried as assets on its balance sheet in contrast to the treatment by the
previous management. Any fees from wins on such cases will simply be recorded
as revenue when paid.
Convex Capital Limited ("Convex Capital")
Convex Capital, the specialist sell-side corporate finance advisory boutique
based in Manchester, is entirely focused on helping companies, particularly
owner-managed and entrepreneurial businesses, realise their value through
sales to large corporates or private equity investors. Convex Capital
identifies and proactively targets businesses that it believes represent
attractive acquisition opportunities. Convex has a motivated, dynamic team of
14 people, 13 of whom are fee-earners.
The acquisition of Convex Capital was part of the Board's strategy focusing on
other high-margin professional services areas. Convex Capital is an
entrepreneurial, cash-generative business operating across the UK and Europe
and will provide the Group with further funds for reinvestment into other
high-margin areas.
As at 30 June 2023, Convex Capital had completed one deal and delivered £0.7m
of revenue reflecting the subdued M&A market across the UK. The strength
of its pipeline and the agile nature of the business has enabled Convex
Capital to maintain deal flow through the first half. As at 27 September 2023,
Convex Capital had 22 active deals. We are confident that several of these
deals will complete before the end of the year.
The business is actively building the target pipeline with a data-driven
approach to generate deals rather than the traditional passive model where the
target company waits to be approached and then appoints a corporate finance
partner. Completed deals lead to recommendations (which still go through the
active data driven qualification). It is the Board's expectation that the
current macro-economic environment will support the on-going fundamentals that
drive M&A.
LionFish
On 12 July 2023, the Group completed the disposal of the non-core business,
LionFish to Blackmead Infrastructure Limited ("Blackmead") which reduced the
Group's exposure to litigation funding commitments.
LionFish was started by the previous management and financed litigation
matters run by third-party solicitors. The consideration for the disposal is
up to £3.07m, comprising an immediate payment of £1.07m to be used for
repayment of an intercompany loan, an additional payment of up to £2.0m,
subject to performance conditions to be used to repay additional intercompany
debt, and £1 for the entire share capital of LionFish. The proceeds from
the sale will be used for working capital purposes and to reduce Group
borrowings. The net asset value of the four cases acquired by Blackmead had an
adjusted net book value of £3.7m, leading to a loss on disposal of £0.64m.
Balance Sheet and Dividend Policy
The previous management's strategy to acquire new businesses and invest in
LionFish had a significant impact on the Group's cash resources over the past
four years. Following feedback from significant shareholders about the
importance of reducing borrowings, the Board announced it was suspending the
Group's dividend policy for the foreseeable future. The disposal of LionFish
and a pause in any future acquisitions will enable the Group to more
effectively prioritise debt reduction. The Board recognises the importance of
dividends to shareholders and will reinstate its dividend policy once it has
made headway in reducing the Group's debt to a more prudent level.
Outlook
The work undertaken in the first half of 2023 by the new executive leadership
team leaves the Group well placed to execute its strategic objectives of
returning the focus to the Group's core Legal Services business, reducing the
Group's risk profile, and paying down debt.
The Board notes the first half of the Company's financial year has
historically been the slower of the two halves, and the Board expects this
trend to continue in 2023. Trading within the Group's Legal Services division
was robust in H1, despite the economic headwinds, and the Group has good
visibility on revenue and profitability for this division for H2.
As a result, the Board is confident that the core Legal Services business will
meet its full year expectations. Convex Capital has grown its pipeline to 22
deals over the past few months, seven of which are in the latter stages of
completion. We are confident that several of these deals will complete before
the end of the year. The Board therefore expects to achieve full-year market
forecast.
Economic conditions continue to be volatile, but we look forward to the coming
months with optimism and are confident about the Group's long-term prospects
following the actions taken.
Jon Divers
Group Chief Executive Officer
28 September 2023
Chief Financial Officer's Review
Financial Review
The first half of 2023 was about the new management team refocussing the Group
on its core activities and cleaning up some of the historic baggage of
previous periods. While the key financial indicators for H1 2023 were down
from the previous year, they represent a solid basis from which to grow the
business going forward.
Key Performance Indicators 5 (#_ftn5) :
· Revenue down 22.6% to £20.5m (H1 2022: £26.5m (which included gains
on litigation assets of £1.6 m))
· Adjusted EBITDA £2.9m (H1 2022: £7.0 m)
· Adjusted profit before tax £0.4m (H1 2022: profit £4.6m)
· Non-recurring costs £13.7m (H1 2022: £nil)
· EBITDA loss of £10.8m (H1 2022: profit of £7.0m)
· Loss before tax of £13.3m (H1 2022: profit of £4.6m)
· Loss from continuing operations £10.2m (H1 2022: profit of £3.6m)
· Profit from discontinued operations £1.6m (H1 2022: loss of £0.2m)
· Adjusted free cash flow generation in the period was £0.4m (H1 2022:
£3.1m)
· Net debt of £21.0m (H1 2022: net debt of £17.5m)
· Legal services average revenue per fee earner £406,000 (H1 2022:
£363,000)
Revenue and Gains on Litigation Assets
Reported Group revenue for the period is £20.5m compared to £26.6m in 2022,
representing a 22.6% decrease (H1 2022 included gains on litigation assets of
£1.6m).
Revenue from Legal Services decreased from £22.3m in H1 2022 to £19.8m in H1
2023. The 2022 figures, however, include £1.6m of gains on litigation
assets (2023: £nil). In July, the Group announced that it was writing off
the value of its remaining litigation assets following the disposal of
LionFish and would not, therefore, have any future gains or losses on the
revaluation of litigation assets. The underlying trading revenue of the
Legal Services division on a like for like basis (excluding gains on
litigation assets) of £19.8m was 4% lower than the £20.7m for 2022.
The more significant drop in revenue was at Convex. Revenue for H1 2023 was
down to £0.7m from £4.2m in 2022. The impact on revenues was driven by a
very challenging market for M&A in H1 2023 as interest rates continues to
increase and transactions volumes collapsed across the sector. Fortunately,
the transactions that Convex were working on suffered delays rather than
failure and the pipeline for H2 2023 and beyond remains strong.
Staff costs
Total staff costs for the first half of 2023 were £13.6m (H1 2022: £15.6 m),
which includes £12.1m for Legal Services and £0.9m for Convex. The average
number of employees across the Group was 201 (H1 2022: 216). The reduction
reflects the Group's more flexible approach to staffing and the use of
consultant solicitors to allow the business to more effectively scale up and
scale down during the course of the year.
Overhead costs
During the half year 2023, the Group incurred overheads of £31.3m (before
depreciation and amortisation) (H1 2022: £19.5m). The vast majority of this
increase is due to non-underlying items during the period which totalled
£13.7m (H1 2022: £nil).
The non-underlying items of £13.7m are made up of £11.0m for RBGLS
litigation asset write offs, £2.2m for Group costs associated with
discontinued operations, a £0.3m release of prior year restructuring cost
accrual and £0.7m of other one-off costs.
Adjusting for the non-underlying items, the overheads for H1 2023 were £17.6m
compared with £19.5m. This included a reduction in central overheads of
£700k as a result of the changes in the leadership team. The decrease of
£1.9m, or 13% was driven principally by staff costs being 13% less in HY2023,
professional fees down 31% and marketing and promotion down 18%.
EBITDA
EBITDA loss for the half year to 30 June 2023 was (£10.8m) (H1 2022: EBITDA
£7.0 m).
Loss Before Tax
The loss before tax for the period was £13.3m representing (H1 2022: profit
of £4.6 m).
Earnings Per Share (EPS)
The weighted average number of shares in 2023 was 95.3m which gives a basic
earnings per share (Basic EPS) from total operations for the period of (9.08)p
(H1 2022: 3.62p).
Balance Sheet
2023 2022 6 (#_ftn6)
£m
£m
Goodwill, intangible and tangible assets 73.2 80.8
Current Assets 26.4 21.9
Current Liabilities (15.2) (10.7)
Assets held for sale 5.6 8.3
Liabilities held for sale (5.2) (5.6)
84.8 94.7
Net debt (21.0) (17.5)
Non-Current Liabilities (13.3) (15.3)
Net assets 50.6 61.9
The Group's net assets as at 30 June 2023 decreased by £9.6m on the prior
year. Of this decrease, £11.0m relates to the non-cash write off of
litigation assets.
Goodwill, Tangible and Intangible Assets
Included within tangible assets is £14.0m which relates to IFRS 16 right of
use assets for the Group's leases. Within total intangible assets of £57.1m,
£51.9m relates to goodwill, £2.8m relates to Brand of acquisitions and
£2.4m to other intangible assets. The Company has considered the amounts at
which goodwill and intangible assets are stated on the basis of forecast
future cash flows and have concluded that these assets have not been
materially impaired.
Working Capital
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.
Lock up days at 30 June 2023 were 152 compared to 120 for the previous year,
with debtor days being 61 (H1 2022: 52 days) and WIP days being 91 (H1 2022:
68 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 intense focus for management as the business
grows. At 30 June 2023, trade debtors less provision for impairment were
£10.5m (H1 2022: £7.7m) and contract assets were £9.8m (H1 2022: £8.0m).
In Convex, invoices are raised, and cash is received, at the point of deal
completion.
Borrowings
The Group has a revolving credit facility of £15m and a term loan of £10m
repayable over 5 years (£3.5m repaid as at 30 June 2023).
Our net debt position was £21.0m at the end of the period (H1 2022:
£17.5m). Pressure on working capital has meant the Group relied more
heavily on the revolving credit facility in 2023 than previously. Management
expects this to continue through the remainder of 2023 but then to reduce
significantly in 2024.
The Group has commenced a review of its borrowing facilities in anticipation
of their upcoming renewal in April 2024. We are currently in discussions
with a number of potential debt providers as part of that process. The Group
remains in compliance with the terms and conditions of its existing loan
agreements and will continue to update the market on progress in relation to
the refinancing of those facilities.
Cash Conversion
2023 2022
£m
£m
Cash flows from operating activities 1.9 7.6
Movements in working capital 2.5 1.1
Increase in litigation assets (0.7) (4.9)
Net cash generated from operations 3.7 3.8
Interest (0.7) (0.6)
Capital expenditure (2.6) (0.1)
Free cash flow 0.4 3.1
Underlying profit after tax (8.7) 3.4
Cash conversion (5%) 91%
The cash conversion percentage measures the Group's conversion of its
underlying profit after tax into free cash flows. Net cash generated from
operations includes £0.7 m (H1 2022: £4.9 m) of net litigation investments.
Cash conversion of (5%) (H1 2022: 91%) for the half year shows a decrease from
previous periods as a result of the stronger six-month trading period.
Summary
We are pleased with the underlying profitability and performance of the Group
during the first half of the year as the new management team refocuses the
business. The Legal Services division has responded well to the challenges of
the uncertain economy whereas Convex has been more materially impacted.
Convex's healthy pipeline of transactions provides the opportunity for it to
return to profitability while the Legal Services business returns to the
consistent growth of the past several years.
Kevin McNair
Interim Finance Director
28 September 2023
Unaudited consolidated statement of comprehensive income
For the period ended 30 June 2023
Unaudited Unaudited Audited
Note 1 January to 1 January to 1 January to
30 June 2023 30 June 2022 7 (#_ftn7) 31 December 2022
£ £ £
Revenue 4 20,511,679 24,890,833 50,307,263
Gains on litigation assets 4 - 1,619,950 3,821,700
Personnel costs 5 (13,567,521) (15,628,776) (30,713,284)
Depreciation and amortisation expense (1,725,825) (1,808,368) (3,543,302)
Other expenses (17,714,260) (3,876,955) (8,787,105)
Profit from operations (12,495,926) 5,196,684 11,085,272
EBITDA (10,770,101) 7,005,052 14,628,574
Non-underlying items
Cost of acquiring subsidiary 25,000 - 367,303
Litigation asset write-off 11,035,325 - -
Costs associated with discontinued operations 2,155,000 - -
Other one-off costs 738,210 - -
Restructuring (release)/costs (256,288) - 834,808
Adjusted EBITDA 2,927,147 7,005,052 15,830,685
Finance expense (1,043,497) (619,598) (1,361,514)
Finance income 218,130 8,666 32,739
Loss on sale of associate - (21,643) (21,643)
Profit before tax (13,321,293) 4,564,109 9,734,854
Tax benefit/(expense) 3,106,118 (952,736) (1,932,586)
(Loss)/profit from continuing operations (10,215,175) 3,611,373 7,802,268
Profit/(loss) on discontinued operations, net of tax 6 1,554,761 (174,203) (3,984,887)
(Loss)/profit and total comprehensive income (8,660,414) 3,437,170 3,817,381
Total profit and comprehensive income attributable to:
Owners of the parent (8,660,414) 3,454,590 4,202,943
Non-controlling interest - (17,420) (385,562)
(8,660,414) 3,437,170 3,817,381
Earnings per share attributable to the ordinary equity holders of the parent 7
Profit
Basic (pence) from continuing operations (10.72) 3.79 8.18
Diluted (pence) from continuing operations (10.69) 3.78 8.17
Basic (pence) from total operations (9.08) 3.62 4.41
Diluted (pence) from total operations (9.07) 3.62 4.40
Unaudited consolidated statement of financial position
As at 30 June 2023
Company registered number: 11189598 Unaudited Unaudited Audited
Note 30 June 2023 30 June 2022 8 (#_ftn8) 31 December 2022
£ £ £
Assets
Current assets
Trade and other receivables 26,351,858 21,874,871 26,937,181
Cash and cash equivalents 1,359,375 4,691,574 3,000,678
Current tax assets 1,719,020 - -
29,430,253 26,566,445 29,937,859
Non-current assets
Property, plant and equipment 9 2,125,349 2,446,548 2,229,958
Right-of-use assets 10 14,004,673 15,369,432 15,074,132
Intangible assets 11 57,117,222 55,440,526 55,021,817
Litigation assets 12 - 7,537,479 10,603,024
73,247,244 80,793,985 82,928,931
Assets held for sale - discontinued operations 6 5,609,777 8,315,251 5,347,117
Total assets 108,287,274 115,675,681 118,213,907
Liabilities
Current liabilities
Trade and other payables 12,489,537 7,333,719 9,465,968
Leases 10 2,291,833 1,891,890 2,238,052
Current tax liabilities - 1,126,480 1,601,655
Provisions 420,001 340,061 211,536
Loans and borrowings 13 21,988,192 2,182,163 2,205,640
37,189,563 12,874,313 15,872,851
Non-current liabilities
Deferred tax liability 706,592 1,077,367 744,328
Leases 10 12,557,566 14,175,692 13,713,932
Loans and borrowings 13 374,975 20,000,000 20,000,000
13,639,133 35,253,059 34,458,260
Liabilities held for sale - discontinued operations 6 5,170,957 5,620,509 6,463,058
Total liabilities 55,999,652 53,747,881 56,794,169
NET ASSETS 52,287,622 61,927,800 61,419,738
Issued capital and reserves attributable to owners of the parent
Share capital 190,662 190,662 190,662
Share premium reserve 49,232,606 49,232,606 49,232,606
Retained earnings 2,864,354 12,235,057 11,996,470
52,287,622 61,658,325 61,419,738
Non-controlling interest - 269,475 -
TOTAL EQUITY 52,287,622 61,927,800 61,419,738
The interim statements were approved by the Board of Directors and authorised
for issue on 28 September 2023.
Unaudited consolidated statement of cash flows
For the period ended 30 June 2023
Unaudited Unaudited Audited
Note 30 June 2023 30 June 2022 9 (#_ftn9) 31 December 2022
£ £ £
Cash flows from operating activities
Profit/(Loss) for the year before tax from:
Continuing operations (13,321,293) 4,564,109 9,734,855
Discontinued operations 1,617,647 (215,665) (4,899,522)
Adjustments for:
Depreciation of property, plant and equipment 9 253,799 286,851 556,403
Amortisation of right-of-use assets 10 1,069,459 1,104,851 2,153,585
Amortisation of intangible fixed assets 11 404,596 418,704 837,413
Fair value movement of litigation assets net of realisations - 811,381 3,418,176
Write off of litigation assets 11,035,325 - -
Finance income (218,130) (8,666) (32,739)
Finance expense 1,043,497 619,598 1,361,514
Loss on sale of equity accounted associate - 21,643 21,643
1,884,900 7,602,806 13,151,328
Decrease/(increase) in trade and other receivables (192,174) 1,110,376 (3,600,176)
Increase/(decrease) in trade and other payables 2,661,522 16,626 3,609,645
(Increase) in litigation assets 12 (704,503) (4,936,934) (7,781,846)
Increase in provisions 58,465 25,770 47,245
Cash generated from operations 3,708,209 3,818,644 5,426,196
Tax paid (394,512) (601,566) (601,569)
Net cash flows from operating activities 3,313,697 3,217,078 4,824,627
Investing activities
Purchase of property, plant and equipment 9 (147,162) (148,838) (199,741)
Purchase of other intangibles (2,500,000) - -
Sale of Associate - - 80,000
Payment of deferred consideration - (2,248,319) (2,248,319)
Interest received 218,130 8,666 32,739
Net cash (used in) investing activities (2,429,032) (2,388,491) (2,335,321)
Financing activities
Dividends paid to holders of the parent (471,702) (2,832,898) (4,736,071)
Proceeds from loans and borrowings 13 749,950 4,000,000 -
Repayment of loans and borrowings 13 (500,000) (1,000,000) 5,000,000
Repayments of lease liabilities 10 (1,360,548) (342,794) (2,000,000)
Interest paid on loans and borrowings (693,111) (303,126) (1,211,829)
Interest paid on lease liabilities 10 (257,963) (263,900) (756,768)
Net cash (used in)/from financing activities (2,533,374) (742,718) (4,233,366)
Net increase/(decrease) in cash and cash equivalents (1,648,708) 85,869 (1,744,060)
Cash and cash equivalents at beginning of year 3,012,083 4,756,143 4,756,143
Cash and cash equivalents at end of year 1,363,375 4,842,012 3,012,083
Cash and cash equivalents - continuing operations 1,359,375 4,691,574 3,000,678
Cash and cash equivalents - discontinued operations 4,000 150,438 11,405
Cash and cash equivalents per consolidated balance sheet 1,363,375 4,842,012 3,012,083
Consolidated statement of changes in equity
For the period ended 30 June 2023
Share Capital Share Premium Retained Earnings Total attributable to equity holders of the 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 profit for the period
Profit for the period - - 3,454,590 3,454,590 (17,420) 3,437,170
Total comprehensive profit for the period - - 3,454,590 3,454,590 (17,420) 3,437,170
Contributions by and distributions to owners
Dividends - - (2,832,898) (2,832,898) - (2,832,898)
Reversal of call option over shares of associate - - 500,000 500,000 - 500,000
Total contributions by and distributions to owners - - (2,332,898) (2,332,898) - (2,332,898)
Balance at 30 June 2022 (unaudited) 190,662 49,232,606 12,235,057 61,658,325 269,475 61,927,800
Consolidated statement of changes in equity
For the period ended 30 June 2023 (continued)
Share Capital Share Premium Retained Earnings Total attributable to equity holders of the parent Non-controlling interest Total equity
£ £ £ £ £ £
Balance at 1 July 2022 190,662 49,232,606 12,235,057 61,658,325 269,475 61,927,800
Comprehensive profit for the period
Profit for the period - - 748,353 748,353 (368,142) 380,211
Total comprehensive profit for the period - - 748,353 748,353 (368,142) 380,211
Contributions by and distributions to owners
Dividends - - (1,903,173) (1,903,173) - (1,903,173)
Purchase of NCI share capital - - (98,767) (98,767) 98,667 (100)
Reversal of put option over shares of subsidiary - - 1,015,000 1,015,000 - 1,015,000
Total contributions by and distributions to owners - - (986,940) (986,940) 98,667 (888,273)
Balance at 31 December 2022 190,662 49,232,606 11,996,470 61,419,738 - 61,419,738
Consolidated statement of changes in equity
For the period ended 30 June 2023 (continued)
Share Capital Share Premium Retained Earnings Total attributable to equity holders of the parent Non-controlling interest Total equity
£ £ £ £ £ £
Balance at 1 January 2023 190,662 49,232,606 11,996,470 61,419,738 - 61,419,738
Comprehensive profit for the period
Profit for the period - - (8,660,414) (8,660,414) - (8,660,414)
Total comprehensive profit for the period - - (8,660,414) (8,660,414) - (8,660,414)
Contributions by and distributions to owners
Dividends - - (471,702) (471,702) - (471,702)
Total contributions by and distributions to owners - - (471,702) (471,702) - (471,702)
Balance at 30 June 2023 (unaudited) 190,662 49,232,606 2,864,354 52,287,622 - 52,287,622
Unaudited notes to the financial statements for the period ended 30 June 2023
1. Basis of preparation
RBG Holdings plc is a public limited company, incorporated in the United
Kingdom. The principal activity of the Group is the provision of legal and
professional services, including management and financing of litigation
projects.
Status of Interim Report
The Interim Report covers the six months ended 30 June 2023, with comparative
figures for the six months ended 30 June 2022 and the year ended 31 December
2022 and was approved by the Board of Directors on 28 September 2023. The
Interim Report is unaudited.
The interim condensed set of consolidated financial statements in the Interim
Report are not statutory accounts as defined by Section 434 of the Companies
Act 2006.
The statutory accounts for the year ended 31 December 2022 have been reported
on by the Group's auditors and delivered to the Registrar of Companies. The
audit report thereon was unqualified, did not include references to matters to
which the auditors drew attention by way of emphasis without qualifying the
report, and did not contain a statement under Section 498 of the Companies Act
2006.
The principal accounting policies adopted in the preparation of the unaudited
consolidated financial statements are set out in Note 2. The policies have
been consistently applied to the periods presented, unless otherwise stated.
The unaudited consolidated financial statements of the Group have been
prepared in accordance with IFRS as adopted by the UK and those parts of the
Companies Act 2006 applicable to companies reporting under IFRS. The
preparation of financial statements in compliance with IFRS requires the use
of certain critical accounting estimates. It also requires Group management to
exercise judgement in applying the Group's accounting policies. The areas
where significant judgements and estimates have been made in preparing the
financial statements and their effect are disclosed in Note 3.
Discontinued operations
During the year ended 31 December 2022, 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 6 for further details.
Going concern
The Group financial statements are prepared on a going concern basis as the
Directors have a reasonable expectation that the Group has adequate resources
to continue in operational existence for at least twelve months from the date
of approval of the financial statements.
Notes (continued)
2. Significant 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 and Other Professional services revenues
Where fees are contractually able to be rendered by reference to time charged
at agreed rates, the revenue is recognised over time, based on time worked
charged at agreed rates, to the extent that it is considered recoverable.
Where revenue is subject to contingent fee arrangements, including where
services are provided under Damages Based Agreements (DBAs), the Group
estimates the amount of variable consideration to which it will be entitled
and constrains the revenue recognised to the amount for which it is considered
highly probable that there will be no significant reversal. Due to the nature
of the work being performed, this typically means that contingent revenues are
not recognised until such time as the outcome of the matter being worked on is
certain.
Bills raised are payable on delivery and until paid form part of trade
receivables. The Group has taken advantage of the practical exemption in IFRS
15 not to account for significant financing components where the Group expects
the time difference between receiving consideration and the provision of the
service to a client will be one year or less. Where revenue has not been
billed at the balance sheet date, it is included as contract assets and forms
part of trade and other receivables.
Professional services revenue
Professional services revenue is contingent on the completion of a deal and is
recognised when the deal has completed. Bills raised are payable on deal
completion and are generally paid at that time.
Basis of consolidation
Where the company has control over an investee, it is classified as a
subsidiary. The company controls an investee if all three of the following
elements are present: power over the investee, exposure to variable returns
from the investee, and the ability of the investor to use its power to affect
those variable returns. Control is reassessed whenever facts and circumstances
indicate that there may be a change in any of these elements of control.
The consolidated financial statements present the results of the company and
its subsidiaries ("the Group") as if they formed a single entity. Intercompany
transactions and balances between group companies are therefore eliminated in
full.
The consolidated financial statements incorporate the results of business
combinations using the acquisition method. In the statement of financial
position, the acquiree's identifiable assets, liabilities and contingent
liabilities are initially recognised at their fair values at the acquisition
date. The results of acquired operations are included in the consolidated
statement of comprehensive income from the date on which control is obtained.
They are deconsolidated from the date on which control ceases.
Non-Controlling interests
The total comprehensive income of non-wholly owned subsidiaries is attributed
to owners of the parent and to the non-controlling interests in proportion to
their relative ownership interests.
Notes (continued)
2. Significant accounting policies (continued)
Goodwill
Goodwill represents the excess of the cost of a business combination over the
Group's interest in the fair value of identifiable assets, liabilities and
contingent liabilities acquired.
Cost comprises the fair value of assets given, liabilities assumed, and equity
instruments issued, plus the amount of any non-controlling interests in the
acquiree plus, if the business combination is achieved in stages, the fair
value of the existing equity interest in the acquiree. Contingent
consideration is included in cost at its acquisition date fair value and, in
the case of contingent consideration classified as a financial liability,
remeasured subsequently through profit or loss. Direct costs of acquisition
are recognised immediately as an expense.
Goodwill is capitalised as an intangible asset with any impairment in carrying
value being charged to the consolidated statement of comprehensive income.
Where the fair value of identifiable assets, liabilities and contingent
liabilities exceed the fair value of consideration paid, the excess is
credited in full to the consolidated statement of comprehensive income on the
acquisition date.
Financial assets
The Group classifies its financial assets into one of the categories discussed
below, depending on the purpose for which the asset was acquired. The Group's
accounting policy for each category is as follows:
Fair value through profit or loss
Litigation assets relate to the provision of funding to litigation matters in
return for a participation share in the settlement of that case. 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.
Notes (continued)
2. Significant accounting policies (continued)
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.
Notes (continued)
2. Significant accounting policies (continued)
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.
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 14-19 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 5 years 5 years Straight line Cost
Notes (continued)
2. Significant accounting policies (continued)
Dividends
Dividends are recognised when they become legally payable. In the case of
interim dividends to equity shareholders, this is when declared by the
directors. In the case of final dividends, this is when approved by the
shareholders at the AGM.
3. Critical accounting estimates and judgements
The Group makes certain estimates and assumptions regarding the future.
Estimates and judgements are continually evaluated based on actual experience
and other factors, including expectations of future events that are believed
to be reasonable under the circumstances. In the future, actual experience may
differ from these estimates and assumptions. The estimates and assumptions
that have a significant risk of causing a material adjustment to the carrying
amounts of assets and liabilities within the next financial period are
discussed below.
Judgements, estimates and assumptions
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
Notes (continued)
3. Critical accounting estimates and judgements (continued)
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.
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.
Notes (continued)
3. Critical accounting estimates and judgements (continued)
The recorded profits on disposal and carrying values are relatively
insensitive to assumptions made, with the exception that matters for which
capital invested is insured are sensitive to the estimated settlement date and
the success likelihood factor applied. In general, the later the anticipated
settlement date, the greater the carrying value of the investment. Management
has exercised caution in its assessment of settlement dates. Management have
used historic success rates on contingent contentious cases to factor the
returns for the different possible outcomes.
Rosenblatt
Unlike LionFish's investments, the total return on Rosenblatt's litigation
assets is a proportion of damages awarded, rather than being dependent on
timing of settlement. As this figure is potentially large and uncertain, and
has a strong impact on fair value calculations, where possible the Group
avoids using it as an input to its fair value calculations.
Where a recent disposal of an interest in a 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.
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.
Notes (continued)
4. Segment information
The Group's reportable segments are strategic business groups that offer
different products and services. Operating segments are reported in a manner
consistent with the internal reporting provided to the chief operating
decision maker, which has been identified as the Board of Directors of RBG
Holdings plc.
The following summary describes the operations of each reportable segment:
· Legal services - Provision of legal advice, 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 6)
· Other Professional services - Provision of sell-side M&A
corporate finance services, by Convex
Unaudited 6 months ended 30 June 2023 Legal services Litigation finance Other Professional services Total
£ £ £ £
Segment revenue 19,789,153 - 722,526 20,511,679
Segment gains on litigation assets comprising:
Proceeds on disposal of litigation assets - - - -
Realisation of litigation assets - - - -
Profit on disposal of litigation assets - - - -
Fair value movement on litigation assets - - - -
- - - -
Segment contribution 9,118,720 - (211,253) 8,907,467
Segment gains on litigation assets - - - -
Costs not allocated to segments
Personnel costs (1,963,308)
Depreciation and amortisation (1,725,825)
Other operating expense (17,714,260)
Net financial expenses (825,367)
Group profit for the period before tax from continuing operations (13,321,293)
Notes (continued)
4. Segment information (continued)
Unaudited 6 months ended 30 June 2022 (restated) Legal services Litigation finance Other Professional services Total
£ £ £ £
Segment revenue 20,692,323 - 4,198,510 24,890,833
Segment gains on litigation assets comprising:
Proceeds on disposal of litigation assets - 2,431,331 - 2,489,950
Realisation of litigation assets - (811,381) - (811,381)
Profit on disposal of litigation assets - 1,619,950 - 1,678,569
Fair value movement on litigation assets - - - -
- 1,619,950 - 1,678,569
Segment contribution 9,778,777 - 2,172,232 11,957,009
Segment gains on litigation assets - 1,619,950 - 1,619,950
Costs not allocated to segments
Personnel costs (2,698,648)
Depreciation and amortisation (1,808,368)
Other operating expense (3,873,259)
Net financial expenses (632,575)
Group profit for the period before tax from continuing operations 4,564,109
Notes (continued)
4. Segment information (continued)
Audited 12 months ended 31 December 2022 Legal services Litigation finance Other 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 period before tax on continuing operations 9,734,854
Notes (continued)
5. Employees
Unaudited Unaudited Audited
6 mos ended 6 mos ended Year ended
30 Jun 2023 30 Jun 2022 31 Dec 2022
restated
Group £ £ £
Staff costs (including directors) consist of:
Wages and salaries 10,465,679 11,953,139 22,804,330
Short-term non-monetary benefits 156,968 137,905 294,501
Cost of defined contribution scheme 357,320 359,240 711,529
Share-based payment expense - - 6,244
Social security costs 1,283,451 1,509,641 2,999,841
12,263,418 13,959,925 26,816,445
Personnel costs stated in the consolidated statement of comprehensive income
includes the costs of contractors of £1,304,103 (HY2022: £1,668,851 FY2022:
£3,896,839).
Staff costs transferred to discontinued operations during the year of
£238,398 (HY2022: £255,342 FY2022: £474,361).
Contractors' costs transferred to discontinued operations during the year of
£866 (HY2022: £9,595 FY2022: £7,655)
The average number of employees (including directors) during the period was as
follows:
Unaudited Unaudited Audited
6 mos ended 6 mos ended Year ended
30 June 2023 30 Jun 2022 31 Dec 2022
Number Number Number
Legal and professional staff 135 142 138
Administrative staff 66 74 73
201 216 211
Defined contribution pension schemes are operated on behalf of the employees
of the Group. The assets of the schemes are held separately from those of the
Group in independently administered funds. The pension charge represents
contributions payable by the Group to the funds and amounted to £357,320
(HY2022: £365,071, FY2022: £711,529).
Contributions amounting to £180,593 (HY2022: £136,336, FY2022: £260,548)
were payable to the funds at period end and are included in trade and other
payables.
Notes (continued)
6. Discontinued operations
In December 2022, the Board announced its intention to dispose of LionFish
Litigation Finance Limited ("LionFish").
Financial performance and cash flow information
The financial performance and cash flow information presented are for the 6
months ending 30 June 2023 and 30 June 2022 and 12 months ending 31 December
2022.
Unaudited Unaudited Audited
30 Jun 2023 30 Jun 2022 31 Dec 2022
Discontinued operations - LionFish £ £ £
(Loss)/Gain on litigation assets (282,117) 58,619 (4,318,025)
Expenses other than finance costs (246,595) (274,284) (500,608)
Non-underlying items 2,146,360 - (80,889)
Tax credit/(expense) (62,887) 41,462 914,635
(Loss)/Profit for the year 1,554,761 (174,203) (3,984,887)
Attributable to:
Equity holders of the parent 1,554,761 (156,783) (3,599,325)
Non-controlling interests - (17,420) (385,562)
1,554,761 (174,203) (3,984,887)
Unaudited Unaudited Audited
30 Jun 2023 30 Jun 2022 31 Dec 2022
Cash flow £ £ £
Net cash (outflow)/inflow from operating activities 134,815 131,230 (845,511)
Net cash outflow from investing activities - (389) (389)
Net cash outflow from financing activities - - -
Net (decrease)/increase in cash generated 134,815 130,841 (845,900)
Notes (continued)
6. 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.
Unaudited Unaudited Audited
30 Jun 2023 30 Jun 2022 31 Dec 2022
£ £ £
Property, plant and equipment 742 4,830 2,770
Litigation investments 5,603,898 8,159,126 5,331,698
Trade and other receivables 1,137 857 1,244
Cash and cash equivalents 4,000 150,438 11,405
Assets held for sale 5,609,777 8,315,251 5,347,117
Trade and other payables 848,720 838,013 1,283,883
Amounts due to parent company 3,989,013 4,334,480 4,766,624
Tax liabilities 333,218 448,016 412,551
Liabilities held for sale 5,170,957 5,620,509 6,463,058
Notes (continued)
7. Earnings per share
Unaudited Unaudited Audited
6 mos ended 6 mos ended Year ended
30 June 2023 30 June 2022 31 Dec 2022
Numerator £ £ £
Profit for the period and earnings used in basic and diluted EPS:
From continuing operations (10,215,175) 3,611,373 7,802,268
From discontinued operations 1,554,761 (156,783) (3,599,325)
Non-Underlying items
Costs of acquiring subsidiary 25,000 - 367,303
Litigation asset write off 11,035,325 - -
Costs associated with discontinued operations 2,155,000 - -
One off costs 738,210 - -
Restructuring (release)/costs (256,288) - 834,808
Less: tax effect of above items - - (209,647)
Profit for the period from continuing operations adjusted for non-underlying 3,482,073 3,611,373 8,794,732
items
Denominator Number Number Number
Weighted average number of shares used in basic EPS 95,331,236 95,331,236 95,331,236
Impact of share options 188,392 188,392 188,392
Weighted average number of shares used in diluted EPS 95,519,628 95,519,628 95,519,628
Notes (continued)
7. Earnings per share (continued)
Unaudited Unaudited Audited
30 Jun 2023 30 Jun 2022 31 Dec 2022
Pence Pence Pence
Basic earnings per ordinary share from continuing operations (10.72) 3.79 8.18
Diluted earnings per ordinary share from continuing operations (10.69) 3.78 8.17
Basic earnings per ordinary share from discontinued operations 1.63 (0.16) (3.78)
Diluted earnings per ordinary share from discontinued operations 1.63 (0.16) (3.78)
Basic earnings per ordinary share from total operations (9.08) 3.62 4.41
Diluted earnings per ordinary share from total operations (9.07) 3.62 4.40
Basic earnings per ordinary share adjusted for non-underlying items from 3.65 3.79 9.23
continuing operations
Diluted earnings per ordinary share adjusted for non-underlying items from 3.65 3.78 9.21
continuing operations
8. Dividends
On 16 June 2023, a final dividend of 0.5 pence per share was paid in respect
of the 2022 financial year.
Notes (continued)
9. Property, plant and equipment
Group Leasehold improvements Fixtures and fittings Computer equipment Total
£ £ £ £
Cost
At 1 January 2023 2,717,750 339,177 883,544 3,940,471
Additions - 699 146,463 147,162
At 30 June 2023 2,717,750 339,876 1,030,007 4,087,633
Accumulated Depreciation and Impairment
At 1 January 2023 772,518 226,388 711,607 1,710,513
Charge for the period 120,992 54,538 76,241 251,771
At 30 June 2023 893,510 280,926 787,848 1,962,284
Net book value
At 1 January 2023 1,945,232 112,789 171,937 2,229,958
At 30 June 2023 1,824,240 58,950 242,159 2,125,349
Under debentures signed and registered on 19 April 2021, HSBC UK Bank plc have
fixed and floating charges over the property, plant and equipment of the
Group.
Notes (continued)
10. Leases
The Group leases its business premises in the United Kingdom. The lease
contracts either provide for annual increases in the periodic rent payments
linked to inflation or for payments to be reset periodically to market rental
rates.
Right-of-Use Assets
Land and buildings Total
£ £
At 1 January 2023 15,074,132 15,074,132
Amortisation (1,069,459) (1,069,459)
At 30 June 2023 14,004,673 14,004,673
Lease liabilities
Land and buildings Total
£ £
At 1 January 2023 15,951,984 15,951,984
Interest expense 257,963 257,963
Lease payments (1,360,549) (1,360,549)
At 30 June 2023 14,849,399 14,849,399
10. Leases (continued)
At 30 June 2023, 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 564,368 1,727,466 2,391,085 4,992,192 5,174,288 14,849,399
Notes (continued)
11. Intangible assets
Group Goodwill Customer Contracts Brand Other Total
£ £ £ £ £
Cost
At 1 January 2023 51,862,168 1,706,578 3,360,474 1,000,000 57,929,220
Additions - - - 2,500,000 2,500,000
At 30 June 2023 51,862,168 1,706,578 3,360,474 3,000,000 60,429,220
Accumulated amortisation and impairment
At 1 January 2023 - 1,635,988 438,082 833,333 2,907,403
Amortisation charge - 70,590 84,005 250,000 404,595
At 30 June 2023 - 1,706,578 522,087 1,083,333 3,311,998
Net book value
At 1 January 2023 51,862,168 70,590 2,922,392 166,667 55,021,817
At 30 June 2023 51,862,168 - 2,838,387 2,416,667 57,117,222
Under debentures signed and registered on 19 April 2021, HSBC UK Bank plc have
fixed and floating charges over the intangible assets of the Group.
Notes (continued)
12. Litigation assets
The table below provides analysis of the movements in the Level 3 financial
assets.
Unaudited 30 June 2023 Unaudited 30 June 2022 Audited 31 December 2023
Level 3 Level 3 Level 3
restated
£ £ £
At 1 January 10,603,024 11,571,052 6,675,538
Additions 432,301 4,936,934 2,847,486
Realisations - (811,381) (720,000)
Fair value movement - - 1,800,000
Write off (11,035,325) - -
At 30 June / 31 December - 15,696,605 10,603,024
Sensitivity of Level 3 valuations
Following investment, the Group engages in a semi-annual review of each
investment's fair value. At 30 June 2023, 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 £nil
(HY2022: £1,569,661, FY2022: £1,060,302).
Notes (continued)
13. Loans and borrowings
The book value and fair value of loans and borrowings which all denominated in
sterling are as follows:
Unaudited Unaudited Unaudited Unaudited Audited Audited
Book value Fair value Book value Fair value Book value Fair value
30 Jun 22 30 Jun 2022 30 Jun 2022 30 Jun 2022 31 Dec 2022 31 Dec 2022
£ £ £ £ £ £
Non-current
Bank loans
Secured 374,975 374,975 20,000,000 20,000,000 20,000,000 20,000,000
Current
Bank loans
Secured 21,988,192 21,988,192 2,182,163 2,182,163 2,205,640 2,205,640
Total 22,363,167 22,363,167 22,182,163 22,182,163 22,205,640 22,205,640
The rate at which Sterling denominated loans and borrowings are payable is
2.90% above SONIA (H1 2022: 2.90% above SONIA).
The bank loans are secured by fixed and floating charges over the assets of
the Group. The Group has £nil undrawn committed borrowing facilities
available at 30 June 2023 (HY2022: £1 million, FY2022: £nil).
14. Events after the reporting date
On 12 July 2023, the Group disposed of its third-party litigation finance
business, LionFish Litigation Finance Limited ("LionFish"). The disposal of
LionFish to Blackmead Infrastructure Limited was for a consideration of up to
£3.07m, of which £1.07m was used for immediate repayment of the intercompany
loan. In addition to this, the Group has written off the litigation assets
that were retained as part of the disposal, in line with management's decision
to write down the value of all cases on the balance sheet to zero.
1 (#_ftnref1) Revenue per fee earner data taken from The Lawyer UK 200: Top
100 latest data. UK firms are ranked 1-100 by firm-wide revenue (year end
2021/22)
2 (#_ftnref2) All measures, including prior year comparatives are shown on a
continuing operations basis unless otherwise stated
3 (#_ftnref3) RBG understands that consensus market expectations for the
year ended 31 December 2023 are for revenues of £44.7 million and Adj. EBITDA
of £10.2 million (Source: FactSet)
4 (#_ftnref4) Revenue per fee earner data taken from The Lawyer UK 200: Top
100 latest data. UK firms are ranked 1-100 by firm-wide revenue (year end
2021/22)
5 (#_ftnref5) All measures, including prior year comparatives are shown on a
continuing operations basis unless otherwise stated
6 (#_ftnref6) Comparatives have been restated to present LionFish as a
discontinued operation. Refer to Notes 1 and 10 for further details.
7 (#_ftnref7) Comparatives have been restated to present LionFish as a
discontinued operation. Refer to Note 6 for further details
8 (#_ftnref8) Comparatives have been restated to present LionFish as a
discontinued operation. Refer to Note 6 for further details
9 (#_ftnref9) Comparatives have been restated to present LionFish as a
discontinued operation. Refer to Note 6 for further details
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