REG - RBG Holdings PLC - Unaudited Interim Results
30/09/2024 07:00
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RNS Number : 1230G RBG Holdings PLC 30 September 2024
30 September 2024
This announcement contains inside information for the purposes of Article 7 of
EU Regulation 596/2014 as retained as part of UK law by virtue of the European
Union (Withdrawal) Act 2018 (as amended). Upon the publication of this
announcement, this inside information is now considered to be in the public
domain.
RBG Holdings plc
("RBG", the "Group", or the "Company")
Unaudited Interim Results for the six months ended 30 June 2024
Executing a clear strategy to restore value and reduce risk profile
RBG Holdings plc (AIM: RBGP), the legal services group, today announces its
unaudited results for the six months ended 30 June 2024 ("H1 2024").
Strategic Highlights:
During the first six months of the financial year, the Group's leadership team
continued the transformation of the Group into a focussed legal services
business, while strengthening the Company's balance sheet.
This has included:
· Disposing of Convex Capital Limited ("Convex Capital") through a
management led buyout for a total consideration of up to £2.6 million.
· Reducing the Company's cost base by approximately £4.5 million on an
annualised basis by:
o Surrendering the lease on the St. Andrew Street property which accounted
for c.40% of the Group's annual property costs.
o A targeted headcount reduction in all areas of the business.
o Re-tendering various outsourced business processes to ensure better value
for money.
· Improving the Group´s working capital cycle, known as lockup.
o Completing a £2.1 million gross fundraise in March 2024.
· The Group was during the period and remains in full compliance with
its banking covenants.
Financial Results 1 (#_ftn1) :
Trading within the Group's Legal Services businesses was robust and in line
with management expectations in the first four months, but there was a marked
decline in activity in May and June because of a number of factors including
the General Election, with several key areas of the business affected by this
decline in trading.
· Revenue of £18.4m (H1 2023: £19.8m)
· Adjusted EBITDA of £0.03m (H1 2023 restated: £4.0m)
· Adjusted loss before tax from continuing operations of £2.8m (H1
2023 restated: £1.3m)
· Non-recurring costs of £2.9m (H1 2023 restated: £3.1m)
· Statutory EBITDA loss of £2.9m (H1 2023 restated: profit of £0.9m)
· Loss before tax of £5.7m (H1 2023 restated: £1.8m)
· Loss per share of 4.13 pence (H1 2023 restated: 2.45 pence profit)
· Loss from continuing operations of £4.4m (H1 2023 restated: profit
£1.2m)
· Adjusted free cash outflow in the period was £4.4m (H1 2023
restated: free cash inflow £2.6m)
· Pre IFRS 16 net debt of £24.3m (H1 2023: net debt of £21.0m, FY
2023: net debt £22.9m))
· The Group was during the period and remains in full compliance with
its banking covenants.
Discontinued operations:
· Loss from discontinued operations of £0.4m (H1 2023 restated: profit
£1.1m)
Current Trading & Outlook
· The Company announced on 30 July 2024 that trading in July was robust
and that the Company had a significant number of opportunities within its
pipeline. While new business pipelines are improving across the board, there
is a natural time lag before translating into material improved revenue.
· The focus on cost reduction means the Company is within budget on
costs and whilst trading in September has shown encouraging signs of
improvement, trading conditions for the rest of the financial year remain
difficult to predict. Accordingly, the Board now expects that the Group
performance for FY 2024 will be significantly below market expectations.
Jon Divers, CEO, RBG Holdings plc, commented: "The have been some challenging
times during the first six months of 2024. Trading from January to April was
robust and in-line with our expectations, however, the announcement of a
General Election had a marked impact on all areas of the business. The summer
is traditionally a quieter period, but I am pleased with the activity levels
in September.
"The Board and management have been focused on delivering the Group's strategy
to refocus the business on its core legal services offer, and to reduce costs
and debt. This resulted in the disposal of Convex Capital, and since late
2023, we have reduced the Company's cost base by approximately £4.5 million
on an annualised basis. We have not yet seen the benefits of these reduced
costs which will to filter through to EBITDA and profit before tax in H1 2025.
"As well as reducing cost, driving the organic growth in our legal services
businesses - Rosenblatt and Memery Crystal - is at the heart of our plans. In
2023, we recruited seven new Partners with another two joined in in the first
half of 2024. Each partner creates more revenue opportunities for the Group.
"The Group is now a much leaner, and more efficient business with
opportunities for organic growth through our new Partners. We look forward
to returning the business to profit and restoring shareholder value."
The person responsible for the release of this announcement is Kevin McNair,
Chief Financial Officer.
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
Robin Tozer / Molly Gretton
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.com (http://www.memerycrystal.com)
Chief Executive's Statement
Group revenue was £18.4m (H1 2023: £19.8m). The first four months were in
line with management expectations, however the Group subsequently experienced
a quieter May and June due to a number of factors including the General
Election. Loss before tax of £5.7m (H1 2023 restated: £1.8m), was in part
due to non-recurring costs of £2.9m (H1 2023 restated: £3.1m) related to the
restructuring of the business to lower costs and refocus on legal services.
As a result of this restructuring, we have reduced the Company's cost base by
approximately £4.5 million on an annualised basis: by surrendering the lease
on the St. Andrew Street property; a targeted headcount reduction in all areas
of the business; and, re-tendering various outsourced business processes to
ensure better value for money.
Reducing property costs has been a key focus. The St. Andrew Street property
in London accounted for c.40% of the Group's annual property costs, The
savings amount to c.£3.5m over three years with no dilapidation's liability.
We continue to look at additional ways to reduce our property footprint and
associated costs and are making good progress in this regard.
We have improved the Group´s working capital cycle, known as lockup, through
disciplined chasing of outstanding receivables and prudent measurement of our
WIP.
We expect the benefits of this cost-cutting to filter through to EBITDA and
profit before tax in H1 2025 and allow us to reduce debt. Our pre IFRS 16
net debt position as at 30 June 2024 was £24.3m (H1 2023: £21.0m, FY 2023:
net debt £22.9m).
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 remain committed to organic growth, and to
remain one of London's premier mid-tier law firms providing quality advice to
corporates, entrepreneurs and high net worth individuals.
As at 30 June 2024, the combined businesses had 181 people (H1 2023: 174),
including 127 fee earners (H1 2023: 120). In H1 2024 we have recruited two new
Partners and have internally promoted five fee earners to Partners. Internal
development and promotion are central to our strategy and all promoted
Partners have high levels of experience and knowledge in their respective
fields, creating greater revenue opportunities.
While we have added new Partners, we have reduced the number of employees
overall to better reflect client demands of Partner led service and reduced
the overall cost base to a more appropriate level to improve efficiency across
the Group.
Across RBGLS, we are winning a broad range of new instructions, including
corporate transactions, international arbitration cases, employment advisory
work and financial restructuring mandates. The scale of the enlarged law
firm has enabled us to win these mandates as well as improve the opportunity
pipeline. Other accretive areas of legal services are being discussed
constantly, and we are keen to add to the client offering by broadening the
range of services we can offer.
Convex Capital Limited ("Convex Capital")
On 28 March 2024, the Group completed the disposal of the business and certain
assets of Convex Capital to the management team. The consideration for the
disposal is up to £2.6m, comprising an immediate payment of £2.0m paid on
completion and an earn out. Under the terms of the earn out, post completion
of the disposal the Group will receive 38% of any gross fees received upon
completion of four existing and named Convex projects up to a maximum of
£0.6m in cash. To date, three of these four projects have completed with one
being delayed until an expected close in 2025.
Board
The Nomination committee is well advanced in terms of the recruitment of an
additional non-executive director to strengthen the Board.
Dividend Policy
The Board recognises the importance of dividends to shareholders and will
reinstate its dividend policy once it has made further headway in reducing the
Group's debt to a more prudent level.
Outlook
Activity levels across RBGLS in September are an improvement on the previous
months, and the pipelines of new business are improving, but these have not
yet translated into material revenue. While we are optimistic, volatile
trading conditions mean that there is a significant uncertainty as to whether
the Group will meet the market's expectations for FY 2024. However, the
business is in a much better position than previous years.
The focus on cost reduction means the Company is within its costs budget, and
the benefits of the difficult decisions we have taken to achieve this, will
feed through to the bottom line in the second half of 2025.
RBG is a business that is firmly focused on growing its legal services
offering, and ensuring its cost base is appropriate, with a view to improving
the underlying profitability of the Group and return value to shareholders.
We remain positive about the Group's long-term prospects following the
actions taken.
Jon Divers
Group Chief Executive Officer
30 September 2024
Chief Financial Officer's Review
Financial Review
During the first half of 2024, the management team continued with the
refocussing of the Group on its core legal services activities and the
strengthening of the balance sheet. While the key financial indicators for
H1 2024 were down from the previous year, they represent a solid basis from
which to grow the business in H2 2024 and beyond.
Key Performance Indicators 2 (#_ftn2) :
· Revenue down 6.8% to £18.4m (H1 2023: £19.8m)
· Adjusted EBITDA £0.03m (H1 2023 restated: £4.0m)
· Adjusted loss before tax from continuing operations of £2.8m (H1
2023 restated: £1.3m)
· Non-recurring costs £2.9m (H1 2023 restated: £3.1m)
· Statutory EBITDA loss of £2.9m (H1 2023 restated: profit of £0.9m)
· Loss before tax of £5.7m (H1 2023 restated: £1.8m)
· Loss from continuing operations £4.4m (H1 2023 restated: profit of
£1.2m)
· Loss from discontinued operations £0.4m (H1 2023 restated: profit of
£1.1m)
· Adjusted free cash outflow in the period was £4.4m (H1 2023
restated: free cash inflow £2.6m)
· Pre IFRS 16 net debt of £24.3m (H1 2023: net debt of £21.0m, FY
2023: net debt £22.9m))
· The Group was during the period and remains in full compliance with
its banking covenants.
Revenue
Reported Group revenue for the period is £18.4m compared to £19.8m in FY
2023, representing a 6.8% decrease.
The first four months of 2024 were in line with management's expectations,
however the Group subsequently experienced a quieter May and June due to a
number of factors including the General Election.
Staff costs
Total staff costs for H1 2024 were £15.7m (H1 2023 restated: £12.6 m).
Included in the £15.6m for H1 2024 is £0.6m of restructuring costs and
£1.1m of remuneration paid in relation to prior periods which have been
classified as non-underlying. Therefore, on a like for like basis, staff costs
have increased from £12.6m in H1 2023, to £13.8m in H1 2024, which
represents a 9% increase. This increase is due primarily to salary increases
made in Q4 2023. Additionally, the staff reductions in H1 2024 will only flow
through as lower costs in Q4 2024.
The average number of employees across the Group was 192 (H1 2023: 201). The
reduction is primarily attributable to the redundancy exercise undertaken by
the firm in H1 2024. During previous periods of strong revenue growth and high
business activity, the Group increased its headcount to meet demand. However,
as business levels normalised, it became apparent that the form was carrying
more staff than necessary for the available workload. Consequently, the Group
made the difficult decision to reduce headcount to better align with its
operational needs.
Other expenses
During H1 2024, the Group incurred other expenses of £6.1m (H1 2023 restated:
£6.9m).
Included within these amounts were £1.2m of non-underlying items (H1 2023
restated: £3.1m).
Therefore, excluding non-underlying items, other costs have increased by
£1.2m, or 31.5%. This increase was driven principally by a £445k increase in
bad debts driven by the change in accounting estimate at 31 December 2023,
recruitment fees increased by £106k, building rates increased by £102k and
disbursements written off increased by £121k.
The non-underlying items of £1.2m are made up of £0.4m for provision against
damages based agreement receivable, £0.7m of other one-off costs and £0.1m
associated with refinancing.
EBITDA
EBITDA loss for the half year to 30 June 2024 was £2.9m (H1 2023 restated:
EBITDA £1.0m).
Loss Before Tax
The loss before tax for the period was £5.7m (H1 2023 restated: £1.8m).
Earnings Per Share (EPS)
The weighted average number of shares in 2024 was 116.8m which gives a basic
earnings per share (Basic EPS) from total operations for the period of (4.13)p
(H1 2023 restated: 2.45p).
Balance Sheet
30 Jun 2024 30 Jun 2023 3 (#_ftn3) 31 Dec 2023 £m
£m
£m
Goodwill, intangible and tangible assets 53.6 68.2 55.1
Current Assets 21.6 25.8 19.1
Current Liabilities (13.8) (10.9) (13.9)
Assets held for sale 0.8 10.8 3.3
Liabilities held for sale (1.3) (6.4) (1.0)
60.8 87.6 62.6
Net debt (24.3) (21.0) (22.9)
Non-Current Liabilities (10.4) (12.2) (11.5)
Net assets 26.2 54.5 28.2
The Group's net assets as at 30 June 2024 decreased by £28.3m on H1 2023. Of
this decrease, £13.7m relates to the impairment of Convex goodwill as at 31
December 2023, discontinued operations net assets have decreased by £5.0m due
predominantly to the sale of LionFish in July 2023, net debt has increased by
£3.3m due to drawdowns in back half of 2023. Net current assets have
decreased by £7.2m, driven by the write off of the intercompany balance owed
to the Group by LionFish of £4.0m, and the increase in the provision for
impairment of trade receivables by £3.0m.
Goodwill, Tangible and Intangible Assets
Included within tangible assets is £11.4m, which relates to IFRS 16 right of
use assets for the Group's leases. Within total intangible assets of £40.2m,
£36.1m relates to goodwill, £2.2m relates to Brand of acquisitions and
£1.9m 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 2024 were 125 compared to 152 for the previous year,
with debtor days being 52 (H1 2023: 61 days) and WIP days being 73 (H1 2023:
91 days). This is an area of intense focus for management as the business
grows. At 30 June 2024, trade debtors less provision for impairment were
£8.4m (H1 2023: £10.5m) and contract assets were £7.4m (H1 2023: £9.8m).
Borrowings
The Group´s net debt position was £24.3m at the end of the period (H1 2023:
£21.0m, FY 2023: net debt £22.9m). In December 2023, the facility was
extended until 31 December 2025. The Group was during the period and remains
in full compliance with its banking covenants.
Cash Conversion
2024 2023
£m restated
£m
Cash flows from operating activities (3.0) 2.0
Movements in working capital (0.2) 2.5
Increase in litigation assets - (0.7)
Net cash (used in) / generated from operations (3.2) 3.8
Interest (1.3) (1.1)
Capital expenditure (0.0) (0.1)
Free cash (outflow)/inflow (4.4) 2.6
Underlying (loss)/profit after tax (4.8) 2.3
Cash conversion 91% 110%
The cash conversion percentage measures the Group's conversion of its
underlying profit after tax into free cash flows. Net cash used in operations
includes £0.4 m (H1 2023: £0.1 m) for provision against damages based
agreement receivable.
Free cash outflow of £4.4m is driven largely by the loss before tax for H1
2024 of £5.7m for continuing operations.
Summary
While we are clearly not satisfied with trading during H1 2024, we are pleased
to have made significant progress on cost reduction and lockup. The
simplification of the Group´s operations following the disposals of all
non-core activities means we are now a pure legal services business and our
focus going forward will be to optimise the performance of these activities.
The subdued market conditions of the past 18 months have held back topline
growth in legal services but there are encouraging signs that these will
improve in Q4 2024 and going into 2025.
Kevin McNair
Chief Financial Officer
30 September 2024
Unaudited consolidated statement of comprehensive income
For the period ended 30 June 2024
Unaudited Unaudited Audited
Note 1 Jan to 1 Jan to 1 Jan to
30 Jun 2024 30 Jun 2023 4 (#_ftn4) 31 Dec 2023
Restated
£ £ £
Revenue 4 18,448,929 19,825,042 39,209,854
Other operating income 370,600 194,159 885,442
Disbursement asset revenue 417,425 432,301 1,221,854
Disbursement asset expenditure (417,425) (38,281) (827,834)
Personnel costs 5 (15,568,822) (12,618,370) (26,878,460)
Depreciation and amortisation expense (1,590,719) (1,662,929) (3,251,607)
Other expenses (6,146,415) (6,881,860) (19,606,276)
(Loss) from operations (4,486,427) (749,938) (9,247,048)
EBITDA Loss / EBITDA (2,895,708) 912,992 (5,995,440)
Non-underlying items
Cost of acquiring subsidiary - 25,000 25,000
Litigation asset write off - -
Release of onerous contract provision 301,727 301,727
Trade receivables - provision against damages based agreement receivable 417,425 130,574 920,127
Costs associated with discontinued operations 11,711 2,155,000 5,648,109
Costs associated with re-financing project 66,418 - 787,193
Other one-off costs 628,689 738,210 2,081,890
Trade receivables provision change - - 1,038,163
Remuneration paid in respect of prior periods 1,110,427
Restructuring (release)/costs 649,125 (256,288) (168,167)
Costs associated with equity raise 5,809 - -
Adjusted EBITDA 30,791 4,007,215 4,638,602
Finance expense (1,285,598) (1,029,368) (2,170,109)
Finance income 36,420 23,971 51,318
(Loss) before tax (5,735,605) (1,755,335) (11,365,839)
Tax benefit/(expense) 1,319,469 2,995,263 322,721
(Loss)/profit from continuing operations (4,416,136) 1,239,929 (11,043,118)
(Loss)/Profit on discontinued operations, net of tax 6 (408,309) 1,096,700 818,932
Impairment associated with discontinued operation - - (13,694,754)
(Loss)/profit and total comprehensive income (4,824,444) 2,336,629 (23,918,940)
Earnings per share attributable to the ordinary equity holders of the parent 7
Profit
Basic (pence) from continuing operations (3.78) 1.30 (11.58)
Diluted (pence) from continuing operations (3.77) 1.30 (11.56)
Basic (pence) from total operations (4.13) 2.45 (25.09)
Diluted (pence) from total operations (4.12) 2.45 (25.04)
Unaudited consolidated statement of financial position
As at 30 June 2024
Company registered number: 11189598 Unaudited Unaudited Audited
Note 30 Jun 2024 30 Jun 2023 31 Dec 2023
restated
£ £ £
Assets
Current assets
Trade and other receivables 19,369,124 26,181,939 18,374,752
Cash and cash equivalents 1,512,671 1,317,775 2,262,750
Current tax assets 2,215,557 3,629,899 725,723
23,097,351 31,129,613 21,363,225
Non-current assets
Property, plant and equipment 8 1,811,468 2,108,298 2,047,706
Right-of-use assets 9 11,376,599 13,405,121 12,390,892
Intangible assets 10 40,154,442 52,705,782 40,488,453
Deferred tax 216,388 - 216,445
53,558,897 68,219,201 55,143,496
Assets held for sale - discontinued operations 6 756,521 10,855,980 3,369,134
Total assets 77,412,769 110,204,794 79,875,854
Liabilities
Current liabilities
Trade and other payables 11,372,891 12,256,347 11,593,485
Leases 9 2,270,856 2,176,581 2,224,373
Current tax liabilities - - -
Provisions 145,158 420,001 75,000
Loans and borrowings 11 4,100,826 21,988,192 2,624,407
17,889,731 36,841,120 16,517,264
Non-current liabilities
Deferred tax liability - 86,926 -
Provisions 150,000 - 150,000
Leases 9 10,202,163 12,074,195 11,344,768
Loans and borrowings 11 21,750,000 374,975 22,687,488
32,102,163 12,536,096 34,182,255
Liabilities held for sale - discontinued operations 6 1,266,727 6,354,151 958,476
Total liabilities 51,258,621 55,731,367 51,657,996
NET ASSETS 26,154,149 54,473,427 28,217,858
Issued capital and reserves attributable to owners of the parent
Share capital 12 257,358 190,662 190,662
Share premium reserve 12 51,926,645 49,232,606 49,232,606
Retained earnings (26,029,854) 5,050,159 (21,205,410)
TOTAL EQUITY 26,154,149 54,473,427 28,217,858
The interim statements were approved by the Board of Directors and authorised
for issue on 30 September 2024.
Unaudited consolidated statement of cash flows
For the period ended 30 June 2024
Unaudited Unaudited Audited
Note 30 Jun 2024 30 Jun 2023 31 Dec 2023
£ £ £
Cash flows from operating activities
Profit/(Loss) for the year before tax from:
Continuing operations (5,735,605) (1,755,335) (11,365,839)
Discontinued operations (551,695) 985,845 673,594
Adjustments for:
Depreciation of property, plant and equipment 8 244,743 253,799 500,559
Amortisation of right-of-use assets 9 1,069,459 1,069,459 2,138,917
Amortisation of intangible fixed assets 10 334,011 404,596 738,611
Fair value movement of litigation assets net of realisations - (379,013) (1,168,566)
Release of onerous contract provision - 301,727 301,727
Trade receivables - provision against damages based agreement receivable 417,425 130,574 920,127
Finance income (37,329) (23,971) (51,646)
Finance expense 1,298,021 1,043,497 2,213,795
(2,960,970) 2,031,178 (5,098,721)
Decrease/(increase) in trade and other receivables 100,185 (192,174) 3,788,638
(Decrease)/ Increase in trade and other payables (356,759) 2,612,316 1,083,815
(Increase) in litigation assets - (704,503) (325,488)
Increase/(decrease) in provisions 70,158 58,465 (530,556)
Cash generated from operations (3,147,386) 3,805,282 (1,082,312)
Tax paid (99,998) (394,512) (899,649)
Net cash flows from operating activities (3,247,384) 3,410,770 (1,981,961)
Investing activities
Purchase of property, plant and equipment (6,178) (147,162) (326,941)
Disposal of property, plant and equipment 7,296 - -
Purchase of other intangibles - (2,500,000) (2,500,000)
Disposal of discontinued operations litigation assets - - 1,821,800
Consideration received (litigation assets) - - 3,782,098
Consideration received for sale of Convex 2,480,580 - -
Interest received 37,329 23,971 51,646
Net cash (used in) investing activities 2,519,027 (2,623,191) 2,828,604
Financing activities
Dividends paid to holders of the parent - (471,702) (471,702)
Equity raise 2,760,735 - -
Proceeds from loans and borrowings 11 - 749,950 3,249,950
Repayment of loans and borrowings 11 (437,548) (500,000) (718,888)
Repayments of lease liabilities 9 (1,154,054) (1,102,585) (1,841,233)
Interest paid on loans and borrowings (1,070,738) (853,987) (1,197,725)
Interest paid on lease liabilities 9 (227,383) (257,963) (509,019)
Net cash (used in)/from financing activities (128,888) (2,436,287) (1,488,617)
Net increase/(decrease) in cash and cash equivalents (857,245) (1,648,708) (641,974)
Cash and cash equivalents at beginning of year 2,370,109 3,012,083 3,012,083
Cash and cash equivalents at end of year 1,512,864 1,363,375 2,370,109
Cash and cash equivalents - continuing operations 1,512,671 1,317,775 2,262,750
Cash and cash equivalents - discontinued operations 193 45,600 107,359
Cash and cash equivalents per consolidated balance sheet 1,512,864 1,363,375 2,370,109
Consolidated statement of changes in equity
For the period ended 30 June 2024
Share Capital Share Premium Retained Earnings Total equity
£ £ £ £
Balance at 1 January 2023 190,662 49,232,606 3,185,232 52,608,500
Comprehensive profit for the period
Profit for the period - - 2,336,629 2,336,629
Total comprehensive profit for the period - - 2,336,629 2,336,629
Contributions by and distributions to owners
Dividends - - (471,702) (471,702)
Total contributions by and distributions to owners - - (471,702) (471,702)
Balance at 30 June 2023 (unaudited) 190,662 49,232,606 5,050,159 54,473,427
Consolidated statement of changes in equity
For the period ended 30 June 2024 (continued)
Share Capital Share Premium Retained Earnings Total equity
£ £ £ £
Balance at 1 July 2023 190,662 49,232,606 5,050,159 54,473,427
Comprehensive profit for the period
(Loss) for the period - - (26,255,568) (26,255,568)
Total comprehensive profit for the period - - (26,255,568) (26,255,568)
Contributions by and distributions to owners
Dividends - - - -
Total contributions by and distributions to owners - - - -
Balance at 31 December 2023 190,662 49,232,606 (21,205,410) 28,217,858
Consolidated statement of changes in equity
For the period ended 30 June 2024 (continued)
Share Capital Share Premium Retained Earnings Total equity
£ £ £ £
Balance at 1 January 2024 190,662 49,232,606 (21,205,410) 28,217,858
Comprehensive profit for the period
(Loss) for the period - - (4,824,444) (4,824,444)
Total comprehensive profit for the period - - (4,824,444) (4,824,444)
Contributions by and distributions to owners
Equity raise 66,696 2,694,039 - 2,760,735
Total contributions by and distributions to owners 66,696 2,694,039 - 2,760,735
Balance at 30 June 2024 (unaudited) 257,358 51,926,645 (26,029,854) 26,154,149
Unaudited notes to the financial statements for the period ended 30 June 2024
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 2024, with comparative
figures for the six months ended 30 June 2023 and the year ended 31 December
2023 and was approved by the Board of Directors on 30 September 2024. 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 2023 have been reported
on by the Group's auditors and delivered to the Registrar of Companies. The
audit report thereon was unqualified, did not include references to matters to
which the auditors drew attention by way of emphasis without qualifying the
report, and did not contain a statement under Section 498 of the Companies Act
2006.
The principal accounting policies adopted in the preparation of the unaudited
consolidated financial statements are set out in Note 2. The policies have
been consistently applied to the periods presented, unless otherwise stated.
The unaudited consolidated financial statements of the Group have been
prepared in accordance with IFRS as adopted by the UK and those parts of the
Companies Act 2006 applicable to companies reporting under IFRS. The
preparation of financial statements in compliance with IFRS requires the use
of certain critical accounting estimates. It also requires Group management to
exercise judgement in applying the Group's accounting policies. The areas
where significant judgements and estimates have been made in preparing the
financial statements and their effect are disclosed in Note 3.
Going concern
The Group financial statements are prepared on a going concern basis as the
Directors have a reasonable expectation that the Group has adequate resources
to continue in operational existence for at least twelve months from the date
of approval of the financial statements.
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 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.
The Group has two cases under Damages Based Agreements.
For the first case, the disbursements are recoverable either in the case of a
win, or where the client or the Group terminates the engagement. The recovery
of the disbursements are recognised as revenue under IFRS 15 to the extent it
is highly probable that a significant reversal in the amount will not occur in
the future. Under IFRS 15, this case is treated as a contract asset, and an
impairment assessment is performed in line with the standard.
For the second case, disbursements are recoverable in a win or lose situation.
As such, the revenue recognition point is the point at which the expense is
incurred by the Group, when a disbursement is incurred, the Group recognises
the expense incurred in the profit or loss and the associated revenue in
relation to the recovery of the disbursement. IFRS 15 requires the
presentation of any unconditional rights to consideration as a receivable
separately from contract assets. At each reporting date, the Group performs an
expected credit loss (ECL) assessment on the receivable line with IFRS 9, and
where applicable, an impairment is recognised.
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.
Corporate finance revenue
Corporate finance 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.
Interest received on client monies
Interest is recognised on client monies held, this is recognised in the profit
or loss based on the effective interest rate during the period. This forms
part of other income as this is driven by the ongoing operations of the
business.
Notes (continued)
2. Significant accounting policies (continued)
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.
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 under the amortised cost category,
the Group's accounting policy is as follows:
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.
Notes (continued)
2. Significant accounting policies (continued)
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.
Notes (continued)
2. Significant accounting policies (continued)
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 13-19 years Straight line Estimated discounted cash flow
Customer contracts 1-2 years Nil In line with contract revenues Estimated discounted cash flow
Restrictive covenant extension 5 years 4 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.
Restatements
The 2023 comparative numbers have been restated for the following corrections
which is described fully in Note 13:
A prior period adjustment has been made for incorrect accounting policies that
were previously adopted in relation to disbursements incurred on two damages
based agreements. The disbursements were previously held on the balance sheet
as Litigation Assets and measured the assets under IFRS 9 at fair value
through profit and loss.
Based on the substances of the underlying agreements for the two damages based
agreements, the recovery from the client of disbursements represents a revenue
stream arising from a costs to fulfil a contract with a customer and therefore
falls within the scope of IFRS 15, not IFRS 9. This is because IFRS 9 states
that it does not apply to "rights and obligations within the scope of IFRS 15
that are financial instruments, except for those that IFRS 15 specifies are
accounted for in accordance with IFRS 9".
For the first case, the disbursements are payable to the Group, only if the
case wins or where the client or the Group terminates the engagement. Under
IFRS 15, this case is treated as a contract asset and an impairment assessment
is performed under IFRS 15. Management has reassessed the probability of
success during the year ended 31 December 2022 and has reduced this from 90%
to 50%, at this point, the contract asset was written off the case became an
onerous contract and costs to fulfil the contract were provided for.
The reassessment made for probability of success was based on management's
assessment of the information available at the time and hindsight has not been
applied in assessing the impact of the prior period adjustment. The write off
of the contract asset at the point of probability of success reducing was
£6,670,481. At that point, a provision for the onerous contract of £956,999
was recognised. £562,979 of this provision was released during the remaining
months of the year ended 31 December 2022.
For the second case, the disbursements are recoverable in a win or lose
situation. As such, the revenue recognition point is the point at which the
expense is incurred by the Group. IFRS 15 requires the presentation of any
unconditional rights to consideration as a receivable separately from contract
assets and an expected credit loss (ECL) assessment is performed at year end.
The Group performed an ECL assessment at each year end for this case and
determined that the disbursements are not recoverable if the case were to lose
and therefore have been provided for.
The assessment on the ECL has been made based on management's knowledge of the
case and the parties involved, hindsight has not been applied for the of
assessing the impact of the prior period adjustment. The impact of this ECL
assessment was that opening reserves were reduced by £273,094 for the
provision recognised against the receivable. The provision for receivables was
increased at 31 December 2022 for £1,296,470, and an additional £920,127
recognised against the receivable at 31 December 2023.
The 2023 comparative numbers have been restated to reflect Convex being
disclosed as a discontinued operation in the current year.
Notes (continued)
3. Critical accounting estimates and judgements
The Group makes certain estimates and assumptions regarding the future.
Estimates and judgements are continually evaluated based on actual experience
and other factors, including expectations of future events that are believed
to be reasonable under the circumstances. In the future, actual experience may
differ from these estimates and assumptions. The estimates and assumptions
that have a significant risk of causing a material adjustment to the carrying
amounts of assets and liabilities within the next financial period are
discussed below.
Judgements, estimates and assumptions
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 alternative billing 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.
Notes (continued)
3. Critical accounting estimates and judgements (continued)
Disbursements incurred in association with DBAs are recognised initially under
IFRS 15 as they constitute payments for costs incurred as part of the
provision of legal services to the Group's client that could be reimbursed in
the future depending on the outcome of the case.
The Group has two DBA cases which are recognised as follows:
For the first case, the disbursements are payable to the Group, only if the
case wins or where the client or Group terminates the engagement. Under IFRS
15, this case is treated as a contract asset and an impairment assessment is
performed under IFRS 15 regarding the probability of success of the case, when
it becomes probable that the case will not be successful, an impairment is
required, and the contract becomes onerous. Different views on the probability
of success could impact whether an impairment is recognised. This change in
accounting estimate has resulted in an impairment of nil in the current year.
For the second case, the disbursements are recoverable in a win or lose
situation. As such, the revenue recognition point is the point at which the
expense is incurred by the Group. IFRS 15 requires the presentation of any
unconditional rights to consideration as a receivable separately from contract
assets and an expected credit loss (ECL) assessment is performed by management
at year end. Different views on the ability to recover the receivable could
impact the amount of provision required.
The change in accounting estimate as a result of the above prior period
adjustment has resulted in a material change from the amounts published in the
2023 interim results. The interim results recorded a write off of £11.0m
associated with these DBA cases within 2023. The prior period adjustment
identified above, has resulted in the first disbursement asset case being
recorded as a contract asset and impaired within the year ending 31 December
2022, the second case is recorded as a trade receivable and has been assessed
for expected credit loss impairment at each year end. Refer to notes 13 for
further information.
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. During the year
ended 31 December 2023, the Group changes it's accounting for impairment
provisions, they are now recognised based on the ageing of invoices with
invoices over 270 days being fully provided for, management also make an
assessment for invoices under 270 days old to determine their collectability.
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 year ending 31 December 2021, 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.
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)
Unaudited 6 months ended 30 June 2024 Legal services Total
£ £
Segment revenue 18,448,929 18,448,929
Disbursement asset revenue 417,425 417,425
Disbursement asset expenditure (417,425) (417,425)
Segment contribution 7,318,917 7,318,917
Costs not allocated to segments
Personnel costs (2,308,657)
Depreciation and amortisation (1,590,719)
Other operating expense (7,905,967)
Net financial expenses (1,249,178)
Group profit for the period before tax from continuing operations (5,735,605)
Notes (continued)
4. Segment information (continued)
Unaudited 6 months ended 30 June 2023 (restated) Legal services Total
£ £
Segment revenue 19,825,042 19,825,042
Disbursement asset revenue 432,301 432,301
Disbursement asset expenditure (38,281) (38,281)
Segment contribution 9,742,788 9,742,788
Costs not allocated to segments
Personnel costs (1,947,933)
Depreciation and amortisation (1,662,929)
Other operating expense (6,881,863)
Net financial expenses (1,005,397)
Group profit for the period before tax from continuing operations (1,755,335)
Audited 12 months ended 31 December 2023 Legal services Total
£ £
Segment revenue 39,209,854 39,209,854
Segment gains on litigation assets comprising:
Disbursement asset revenue 1,221,854 1,221,854
Disbursement asset expenditure (827,834) (827,834)
Segment contribution 17,180,771 17,180,771
Costs not allocated to segments
Personnel costs (3,569,936)
Depreciation and amortisation (3,251,607)
Other operating expense (19,606,277)
Net financial expenses (2,118,791)
Group profit for the period before tax on continuing operations (11,365,839)
Notes (continued)
5. Employees
Unaudited Unaudited Audited
6 mos ended 6 mos ended Year ended
30 Jun 2024 30 Jun 2023 31 Dec 2023
restated
Group £ £ £
Staff costs (including directors) consist of:
Wages and salaries 12,399,635 9,643,806 19,639,680
Short-term non-monetary benefits 142,609 141,596 265,217
Cost of defined contribution scheme 439,800 350,144 762,278
Share-based payment expense - - -
Social security costs 1,413,153 1,178,721 2,394,358
14,395,197 11,314,267 23,061,533
Personnel costs stated in the consolidated statement of comprehensive income
includes the costs of contractors of £1,173,625 (HY2023: £1,304,103 FY2023:
£3,816,927).
Staff costs transferred to discontinued operations during the year of
£339,503 (HY2023 restated: £1,187,552 FY2023: £324,474).
Contractors' costs transferred to discontinued operations during the year of
£nil (HY2023: £866 FY2023: £866)
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 2024 30 Jun 2023 31 Dec 2023
Number Number Number
Legal and professional staff 130 142 136
Administrative staff 62 74 64
192 216 200
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 £439,800
(HY2023 restated: £350,144, FY2023: £762,278).
Contributions amounting to £194,313 (HY2023 restated: £177,006, FY2023:
£189,132) were payable to the funds at period end and are included in trade
and other payables.
Notes (continued)
6. Discontinued operations
Summary of discontinued operations
Reconciliation to profit or loss
30 Jun 2024 30 Jun 2023 31 Dec 2023
£ £ £
Revenue 2,500 435,634 2,211,674
Expenses other than finance costs (542,680) (1,519,133) (2,871,945)
Finance costs (11,514) (14,129) (43,358)
Non-underlying - 2,146,360 1,490,928
Impairment of intangible assets - - (13,694,754)
Tax credit/(expense) 143,386 47,968 122,597
Loss from selling discontinued operations - - (90,964)
(Loss)/Profit for the year (408,309) 1,096,700 (12,875,822)
Reconciliation to statement of cash flows
30 Jun 2024 30 Jun 2023 31 Dec 2023
£ £ £
Net cash (outflow) from operating activities (580,498) (946,060) (796,423)
Net cash inflow/(outflow) from investing activities 2,448 (2,914) (2,585)
Net cash inflow from financing activities 470,885 570,731 482,524
Net (decrease) in cash generated (107,166) (378,243) (316,484)
Cash and cash equivalents at beginning of period 107,359 423,843 843,843
Cash and cash equivalents at end of period 193 45,600 107,359
Breakdown of discontinued operations by entity
Convex Capital Limited
During the year ended 31 December 2023, the Board made the decision to dispose
of Convex Capital Limited ("Convex").
On 28 March 2024 the management of Convex Capital acquired the business from
the Group for a total consideration of up to £2.6m, comprising an initial
cash consideration of £2.0m paid on completion and an earn out. Under the
terms of the Earn Out, post completion of the disposal, the Company received
38% of any gross fees received upon completion of four existing and named
Convex projects up to a maximum of £0.6 million in cash.
Notes (continued)
6. Discontinued operations (continued)
The post-tax loss on disposal of discontinued operation was determined as
follows:
30-Jun-24
£
Cash consideration received 2,000,000
Other consideration received 490,580
Total consideration received 2,490,580
Cash disposed of -
Net cash inflow of disposal of discontinued operation 2,490,580
Net assets disposed (other than cash):
Property, plant and equipment (9,147)
Intangible assets (4,411,440)
Trade and other receivables (88,351)
Right of use assets (525,997)
Trade and other payables 638,198
Lease liabilities 522,604
(3,874,132)
Pre-tax loss on disposal of discontinued operation (1,383,552)
Related tax benefit 345,888
Loss on disposal of discontinued operation (1,037,664)
Financial performance and cash flow information
Unaudited Unaudited Audited
30 Jun 2024 30 Jun 2023 31 Dec 2023
Discontinued operations - Convex £ £ £
Revenue 2,500 717,751 2,234,800
Expenses other than finance costs (542,680) (1,272,538) (2,539,273)
Finance costs (11,514) (14,129) (26,220)
Tax credit/(expense) 143,386 110,855 122,597
Loss from selling discontinued operation after tax - - -
(Loss)/Profit for the year (408,309) (458,061) (208,096)
Attributable to:
Equity holders of the parent (409,309) (458,061) (208,096)
Unaudited Unaudited Audited
30 Jun 2024 30 Jun 2023 31 Dec 2023
Cash flow £ £ £
Net cash (outflow) from operating activities (580,498) (938,660) (893,119)
Net cash inflow/(outflow) from investing activities 2,448 (2,914) (2,586)
Net cash inflow from financing activities 470,885 570,731 590,626
Net (decrease) in cash generated (107,166) (370,843) (305,079)
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 Convex
have been classified as held for sale in the consolidated statement of
financial position.
Unaudited Unaudited Audited
30 Jun 2024 30 Jun 2023 31 Dec 2023
£ £ £
Property, plant and equipment 1,153 17,051 10,661
Right-of-use assets 489,220 599,552 544,386
Intangible assets 119,420 4,411,440 2,600,000
Amounts due from parent company - 6,641 -
Trade and other receivables 146,535 169,919 106,728
Cash and cash equivalents 193 41,600 107,359
Assets held for sale 756,521 5,246,203 3,369,134
Trade and other payables 104,016 239,825 240,181
Leases 483,678 598,629 541,610
Amounts due to parent company 621,116 - 82,692
Tax liabilities 57,867 344,740 93,944
Liabilities held for sale 1,266,727 1,183,194 958,476
Notes (continued)
6. Discontinued operations (continued)
Lionfish Litigation Finance Limited
In December 2022, the Board announced its intention to dispose of Lionfish
Litigation Finance Limited ("Lionfish").
In July 2023, the Group completed its disposal of Lionfish to Blackmead
Infrastructure Limited.
The post-tax loss on disposal of discontinued operation was determined as
follows:
31-Dec-23
£
Cash consideration received 1,074,734
Other consideration received 3,782,098
Total consideration received 4,856,832
Cash disposed of 4,000
Net cash inflow of disposal of discontinued operation 4,852,832
Net assets disposed (other than cash):
Property, plant and equipment (742)
Trade and other receivables (1,136)
Litigation assets (5,603,898)
Trade and other payables 661,980
(4,943,796)
Pre-tax loss on disposal of discontinued operation (90,964)
Related tax benefit 22,741
Loss on disposal of discontinued operation (68,223)
Notes (continued)
6. Discontinued operations (continued)
Financial performance and cash flow information
The financial performance and cash flow information presented are for the 6
months ending 30 June 2024 and 30 June 2023 and 12 months ending 31 December
2023.
Unaudited Unaudited Audited
30 Jun 2024 30 Jun 2023 31 Dec 2023
Discontinued operations - LionFish £ £ £
(Loss)/Gain on litigation assets - (282,117) (23,126)
Expenses other than finance costs - (246,595) (332,672)
Finance costs - - (17,138)
Non-underlying items - 2,146,360 1,490,928
Tax credit/(expense) - (62,887) -
Loss from selling discontinued operation after tax - - (90,964)
(Loss)/Profit for the year - 1,554,761 1,027,028
Attributable to:
Equity holders of the parent - 1,554,761 1,027,028
- 1,554,761 1,027,028
Unaudited Unaudited Audited
30 Jun 2024 30 Jun 2023 31 Dec 2023
Cash flow £ £ £
Net cash (outflow)/inflow from operating activities - 131,230 96,697
Net cash outflow from investing activities - (389) -
Net cash outflow from financing activities - - (108,102)
Net (decrease)/increase in cash generated - 130,841 (11,405)
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 2024 30 Jun 2023 31 Dec 2023
£ £ £
Property, plant and equipment - 742 -
Litigation investments - 5,603,898 -
Trade and other receivables - 1,137 -
Cash and cash equivalents - 4,000 -
Assets held for sale - 5,609,777 -
Trade and other payables - 848,720 -
Amounts due to parent company - 3,989,013 -
Tax liabilities - 333,218 -
Liabilities held for sale - 5,170,957 -
Notes (continued)
7. Earnings per share
Unaudited Unaudited Audited
6 mos ended 6 mos ended Year ended
restated
30 Jun 2024 30 Jun 2023 31 Dec 2023
Numerator £ £ £
Profit for the period and earnings used in basic and diluted EPS:
From continuing operations (4,416,136) 1,239,929 (11,043,118)
From discontinued operations (408,309) 1,096,700 818,932
Non-Underlying items
Costs of acquiring subsidiary - 25,000 25,000
Contract assets - damage based agreement asset impairment -
Release of onerous contract provision - 301,727 301,727
Trade receivables - provision against damages based agreement receivable 417,425 130,574 920,127
Group costs associated with discontinued operations 11,711 2,155,000 5,648,109
Costs associated with re-financing project 66,418 - 787,193
Other one-off costs 628,689 738,210 2,081,890
Restructuring costs/(release) 599,125 (256,288) (168,167)
Trade receivable provision change - - 1,038,163
Less: tax effect of above items (430,842) (773,556) (2,658,511)
(Loss)/profit for the period from continuing operations adjusted for (3,123,609) 3,560,596 (3,067,586)
non-underlying items
Denominator Number Number Number
Weighted average number of shares used in basic EPS 116,795,701 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 116,984,093 95,519,628 95,519,628
Notes (continued)
7. Earnings per share (continued)
Unaudited Unaudited Audited
30 Jun 2024 30 Jun 2023 31 Dec 2023
restated
Pence Pence Pence
Basic earnings per ordinary share from continuing operations (3.78) 1.30 (11.58)
Diluted earnings per ordinary share from continuing operations (3.78)* 1.30 (11.58)*
Basic earnings per ordinary share from discontinued operations (0.35) 1.15 0.86
Diluted earnings per ordinary share from discontinued operations (0.35) 1.15 0.86
Basic earnings per ordinary share from total operations (4.13) 2.45 (25.09)
Diluted earnings per ordinary share from total operations (4.13)* 2.45 (25.09)*
Basic earnings per ordinary share adjusted for non-underlying items from (2.67) 3.73 (3.22)
continuing operations
Diluted earnings per ordinary share adjusted for non-underlying items from (2.67) 3.73 (3.22)*
continuing operations
* The potentially dilutive instruments were anti-dilutive during 2023 and
2024.
Notes (continued)
8. Property, plant and equipment
Group Leasehold improvements Fixtures and fittings Computer equipment Total
£ £ £ £
Cost
At 1 January 2024 2,697,553 332,288 1,147,306 4,177,147
Additions - - 6,178 6,178
At 30 June 2024 2,697,553 332,288 1,153,484 4,183,325
Accumulated Depreciation and Impairment
At 1 January 2024 1,002,026 307,979 819,436 2,129,441
Charge for the period 139,170 21,100 82,146 242,416
At 30 June 2024 1,141,196 329,079 901,582 2,371,857
Net book value
At 1 January 2024 1,695,527 24,309 327,870 2,047,706
At 30 June 2024 1,556,357 3,209 251,902 1,811,468
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)
9. 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 2024 12,390,892 12,390,892
Amortisation (1,014,293) (1,014,293)
At 30 June 2024 11,376,599 11,376,599
Lease liabilities
Land and buildings Total
£ £
At 1 January 2024 13,569,141 13,569,141
Interest expense 216,082 216,082
Lease payments (1,312,203) (1,312,203)
At 30 June 2024 12,473,019 12,473,019
At 30 June 2024, 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 560,842 1,710,014 2,366,520 3,721,967 4,113,677 12,473,019
Notes (continued)
10. Intangible assets
Group Goodwill Customer Contracts Brand Other Total
£ £ £ £ £
Cost
At 1 January 2024 36,087,129 538,905 2,698,878 3,500,000 42,824,912
Additions - - - - -
At 30 June 2024 36,087,129 538,905 2,698,878 3,500,000 42,824,912
Accumulated amortisation and impairment
At 1 January 2024 - 538,905 464,221 1,333,333 2,336,459
Amortisation charge - - 84,010 250,000 334,010
At 30 June 2024 - 538,905 548,231 1,583,333 2,670,469
Net book value
At 1 January 2024 36,087,129 - 2,234,657 2,1667,667 40,488,453
At 30 June 2024 36,087,129 - 2,150,647 1,916,667 40,154,443
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)
11. Loans and borrowings
The book value and fair value of loans and borrowings which all denominated in
sterling are as follows:
Loans and borrowings - Book Value
Unaudited Unaudited Audited
30 Jun 24 30 Jun 2023 31 Dec 2023
£ £ £
Non-current
Bank loans - Secured 21,750,000 374,975 22,687,448
Current
Bank loans - Secured 4,100,826 21,988,192 2,624,407
Total 25,850,826 22,363,167 25,311,894
Loans and borrowings - Fair Value
Unaudited Unaudited Audited
30 Jun 24 30 Jun 2023 31 Dec 2023
£ £ £
Non-current
Bank loans - Secured 21,750,000 374,975 22,687,448
Current
Bank loans - Secured 4,100,826 21,988,192 2,624,407
Total 25,850,826 22,363,167 25,311,894
The rate at which Sterling denominated loans and borrowings are payable is
3.15% above SONIA (H1 2023: 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 2024 (HY2023: £nil, FY2023: £nil).
12. Share capital
Authorised
30 Jun 24 30 Jun 24 30 Jun 23 30 Jun 23 31 Dec 23 31 Dec 23
Number £ Number £ Number £
Ordinary shares of 0.2p each 128,678,881 257,358 95,331,235 190,662 95,331,235 190,662
Notes (continued)
12. Share capital (continued)
Allotted, issued and fully paid
30 Jun 24 30 Jun 24 30 Jun 23 30 Jun 23 31 Dec 23 31 Dec 23
Number £ Number £ Number £
At 1 Jan 95,331,235 190,662 95,331,235 190,662 95,331,235 190,662
Issued for cash during the period 33,347,646 66,695 - - - -
At 30 Jun / 31 Dec 128,678,881 257,358 95,331,235 190,662 95,331,235 190,662
13. Restatement of prior year
The 2023 comparatives have been restated in these financial statements to
include the effect of the adjustments as stated in Note 2. The following table
presents the impact of these restatements.
Restatement to 2023 opening balances
31 Dec 2022 1 Jan 2023
As originally presented Adjustment (i) Restated
£ £ £
Equity
Retained Earnings 11,996,470 (8,811,238) 3,185,232
Restatement to 2023 statement of financial position
30 Jun 2023
As originally presented Adjustment (i) Restated
£ £ £
Current Assets
Current tax assets 1,719,020 1,910,879 3,629,899
Non-current liabilities
Deferred tax 706,592 (619,666) 86,926
Equity
Retained earnings 2,864,354 2,185,805 5,050,159
Breakdown of tax adjustments
Tax assets:
Transferred to assets held for sale (Note 6) (1,939)
Restatement (i) (617,727)
(619,666)
Deferred tax:
Transferred to assets held for sale (Note 6) 342,801
Restatement (i) 1,568,078
1,910,879
Notes (continued)
13. Restatement of prior year (continued)
(i) A prior period adjustment has been made for incorrect accounting policies
that were previously adopted in relation to disbursements incurred on two
damages based agreements.
The disbursements were previously held on the balance sheet as Litigation
Assets and measured the assets under IFRS 9 at fair value through profit and
loss.
Based on the substances of the underlying agreements for the two damages based
agreements, the recovery from the client of disbursements represents a revenue
stream arising from a costs to fulfil a contract with a customer and therefore
falls within the scope of IFRS 15.
For the first case, the disbursements are payable to the Group, only if the
case wins or where the client or the Group terminates the engagement. Under
IFRS 15, this case is treated as a contract asset and an impairment assessment
is performed under IFRS 15. Management have reassessed the probability of
success in this case and determined that during the year ended 31 December
2022, the probability of success reduced from 90% to 50%, this reassessment is
based on the information available at that point in time, hindsight was not
applied when making this reassessment. The reduction in the probability of
success resulted in a write off of the contract asset at that time.
Additionally, the reduction in probability of success from 90% to 50% resulted
in this case becoming an onerous contract and as such, the costs to fulfil the
contract were provided for.
For the second case, the disbursements are recoverable in a win or lose
situation. As such, the revenue recognition point is the point at which the
expense is incurred by the Group. IFRS 15 requires the presentation of any
unconditional rights to consideration as a receivable separately from contract
assets and an expected credit loss (ECL) assessment is performed at each year
end.
The Group has performed an ECL assessment as each period end and based on
management's knowledge of the case and parties involved at each period end,
hindsight has not been applied in making this assessment. The receivable
associated with this damages based agreement has been fully provided for at
each year end.
14. Events after the reporting date
In August 2024 the Group came to an agreement with the landlord of one of
their buildings to exit the St. Andrew Street lease early.
1 (#_ftnref1) All measures, including prior year comparatives are shown on a
continuing operations basis unless otherwise stated
2 (#_ftnref2) All measures, including prior year comparatives are shown on a
continuing operations basis unless otherwise stated
3 (#_ftnref3) Comparatives have been restated to present Convex as a
discontinued operation. Refer to Notes 1 and 10 for further details.
4 (#_ftnref4) Comparatives have been restated to present Convex as a
discontinued operation. Refer to Note 6 for further details
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