15 September 2021
RBG Holdings plc
("RBG", the "Group", or the "Company")
Unaudited Interim Results for the period ended 30 June 2021
RBG Holdings plc (AIM: RBGP), the professional services group, is pleased to announce its unaudited results for the six months ended 30 June 2021.
Group Financial Highlights[1]:
· Group revenue and gains up 53.2% to £18.3 million (2020: £12.0 million)
o Underlying revenues (excluding Memery Crystal) up 35.2% to £16.2 million (2020: £12.0 million)
o £1.5 million of gains on litigation assets (2020: £0)
· Group EBITDA up 95.4% to £5.2 million (2020: £2.6 million)
o Underlying EBITDA (excluding Memery Crystal) up 71.3% to £4.5 million (2020: £2.6 million)
o Group EBITDA margin up to 28.1% (2020: 22.0%)
· Group profit before tax up 279% to £3.9 million (2020: £1.4 million)
· Group profit after tax of £3.1 million (2020: £1.2 million)
· Group earnings per share up 157.0% to 3.47 pence (2020: 1.35 pence)
· An interim dividend of 2 pence per share in respect of the six months to 30 June 2021 was paid on 27 August 2021
· Adjusted free cash flow generation in the period was £2.2 million (2020: £0.4 million)
· Net debt of £9.8 million (2020: net debt of £1.6 million) reflecting new £10.0 million term facility
· As at 30 June 2021, the Group, through Rosenblatt and LionFish Litigation Finance (UK) Limited ("LionFish"), had invested in 15 litigation cases. Total associated contingent work in progress (WIP) of £6.9 million and a total cash investment of £7.7 million
Business Highlights:
RBG Legal Services ("RBGLS") - Combination of the Rosenblatt and Memery Crystal brands
· Revenue from legal services and gains on litigation assets of £12.8 million (2020: £11.7 million). £1.0 million from gains on litigation assets. Unrecognised contingent WIP of £1.8 million in the period
· Memery Crystal acquisition completed at the end of May for total consideration of £30.0 million
· Average revenue per fee earner of £375,000 (2020: £497,000) reflecting additional fee earners from Memery Crystal prior to the benefits of integration
· Total lockup was 102 days (2020: 114 days) of which debtor days were 46 (2020: 49)
· As at 30 June 2021, RBGLS had invested in 5 litigation cases with an associated contingent WIP of £5.8 million and total cash investment of £4.9 million
LionFish (Litigation Finance)
· Disposal proceeds of £0.8 million in the first half (2020: £nil), building on the £3.2 million of participation rights sold in the seven months of 2020 following launch
· Gains on litigation assets of £0.5 million
· LionFish has approved 10 litigation cases with a funding commitment of £8.0 million over the next three years, of which £3.2 million has been drawn down
· Strong pipeline of cases looking for finance. LionFish has received 393 enquiries since launch with 10 cases approved, 54 under consideration and 329 rejected
Convex Capital (Specialist sell-side M&A boutique)
· M&A activity has been strong in 2021: Convex completed 8 deals resulting in revenue of £5.0 million (2020: £0.3 million) in the period
· Strong pipeline as at 13 September 2021 - 36 active deals, of which nine are at various stages of completion.
Nicola Foulston, CEO, RBG Holdings plc, commented: "Our diversified revenue model is proving incredibly resilient, despite uncertain times, and we are building a strong platform from which to drive future growth.
"Our legal services business, strengthened by the acquisition of Memery Crystal, continues to receive a high volume of new client instructions. Since the lifting of lockdown our legal services and M&A businesses have seen strong growth in M&A and Capital Markets activity. Our Corporate and Dispute Resolution practices have performed exceptionally strongly as a result. We are building one of London's premier mid-tier law firms providing quality advice to entrepreneurs and high net worth individuals.
"After its first year of operation, our litigation finance business, LionFish has been a success, already funding ten third-party cases. By selling a percentage of the invested assets, it has generated profit from day one of its inception as well as helping to de-risk the Group's investment. Our M&A advisory business, Convex Capital, has bounced back strongly from a difficult 2020 with the return of M&A activity.
"The Group has had an excellent first six months which is reflected in our revenue and profit growth. With strong demand for all Group services, we are on track to meet our recently upgraded market expectations for the full year. While acknowledging the economic conditions continue to be volatile, we look forward to the coming months with optimism and are excited about the long-term prospects for the Group."
Enquiries:
| RBG Holdings plc Nicola Foulston, CEO
| Via SEC Newgate
|
| Singer Capital Markets (Nomad and Broker) Shaun Dobson Alex Bond Tom Salvesen
| Tel: +44 (0)20 7496 3000 |
| SEC Newgate (for media enquiries) Robin Tozer/Isabelle Smurfit
| Tel: +44 (0)20 3757 6880; rbg@secnewgate.co.uk |
About RBG Holdings plc
RBG Holdings plc is a professional services group, which comprises the following divisions:
RBG Legal Services Limited ("RBGLS")
RBGLS is the Group's legal services division which combines the businesses previously operated by Rosenblatt Limited and Memery Crystal Limited
Rosenblatt
Rosenblatt is one of the UK's pioneering law firms and a leader in dispute resolution. Rosenblatt provides a range of legal services to its diversified client base, which includes companies, banks, entrepreneurs, and individuals. Complementing this is Rosenblatt's increasingly international footprint, advising on complex cross-jurisdictional disputes. Rosenblatt's practice areas include banking & finance, competition & regulatory, corporate, dispute resolution, employment, financial crime, financial services, insolvency & financial restructuring, IP/technology/media, real estate, serious & general crime, tax resolution and white-collar crime.
Memery Crystal
Specialist international law firm Memery Crystal offers legal services in a range of areas such as corporate (including a market-leading corporate finance offering), real estate, commercial, IP & technology (CIPT), banking & finance, tax & wealth structuring, employment and dispute resolution. Memery Crystal is one of the leading firms in the UK to advise the emerging cannabis sector on a wide range of business issues. Memery Crystal offers a partner-led service to a broad range of clients, from multinational companies, financial institutions and owner-managed businesses to individual entrepreneurs.
LionFish Litigation Finance (UK) Limited ("LionFish")
The Group also provides litigation finance in selected cases through a separate arm, LionFish Litigation Finance (UK) Limited. LionFish finances litigation matters being run by other solicitors in return for a significant return on the outcome of those cases. As such, the Group has two types of litigation assets - Rosenblatt's own client matters, and litigation matters run by third-party solicitors. LionFish is positioned to be a unique, alternative provider to the traditional litigation funders.
Convex Capital Limited ("Convex Capital")
Convex Capital is a specialist sell-side corporate finance boutique based in Manchester. Convex Capital is entirely focused on helping companies, particularly owner-managed and entrepreneurial businesses, realise their value through sales to large corporates. Convex Capital identifies and proactively targets firms that it believes represent attractive acquisition opportunities.
Chief Executive's Statement
Overview
The Group continues to evolve into a broad, high-quality professional services group with a litigation finance business leveraging on the Group's legal expertise and building a diverse revenue base that removes dependence on any one business or fee generator.
The acquisition of Memery Crystal is part of the Group's strategy to acquire high-value, strategically additive assets. The combination of Memery Crystal with the Group's pioneering law firm Rosenblatt means we are building one of London's premier mid-tier law firms providing quality advice to entrepreneurs and high net worth individuals building on both the Rosenblatt and Memery Crystal brands.
Alongside our ambitious litigation finance business, LionFish, and our disruptive M&A advisory business, Convex Capital, the strategy of the Group is clear. First, we want to leverage our core professional services businesses and capitalise on those areas that offer the highest returns for shareholders. Furthermore, we use the expertise within the Group to maximise the potential returns by selectively investing in contingent asset classes such as litigation and generate revenue through the sale of participation rights in these assets, which also reduces the Group's risk.
Overall, the Group has performed well despite the challenges of the pandemic. Our legal services business has led the way with strong professional services revenues and has been augmented by the acquisition of Memery Crystal. In time, the acquisition will deliver greater profit as the integration improves our operating efficiencies and our pricing structures as we combine business support functions.
As a result of the strong performance across the Group, with each subsidiary exhibiting growth, our revenue and gains on litigation assets for the period was up 53.2% to £18.3 million (2020: £12.0 million) at a gross margin of 42.1%.
Our sell-side M&A advisory boutique, Convex Capital, performed well across the period, delivering eight completed deals and £5.0 million of revenue in the first six months. Importantly, momentum in deal flow remains strong in the current environment and our pipeline of opportunities continues to grow.
We continue to invest in litigation assets, with 15 live deals across Rosenblatt and LionFish. LionFish has invested in 10 deals since its inception in May 2020. In addition to litigation finance delivering an additional £0.8 million of participation rights sales following the £3.2 million reported last year, there were gains on litigation assets of £0.5 million.
Group EBITDA was up to £5.2 million (2020: £2.6 million) at a margin of 28.1% (2020: 22.0%). As previously disclosed, we target an EBITDA margin of 35% or more, aiming to achieve a higher net margin by the year end. The Group's profit before tax was £3.9 million (2020: £1.4 million) and profit after tax was £3.1 million (2020: £1.2 million).
Our balance sheet remains satisfactory. Our net debt position was £9.8 million versus £1.6 million in 2020. This change reflects the investment in Memery Crystal and the £10 million term loan to fund the acquisition, which will be paid down over five years. In addition, the Group has an additional £15 million revolving credit facility to draw to support the Group's growth.
Our balance sheet will support our long-term growth plans, including acquisitions, continued investment in litigation investment opportunities and future dividends.
RBG Legal Services Limited ("RBGLS")
Following the completion of the acquisition of Memery Crystal in May 2021, the Group has now combined its two law firms, Rosenblatt and Memery Crystal, into a new legal services corporate entity called RBG Legal Services Limited, enabling the Group to realise the transaction's synergies fully. This new structure is consistent with other listed law firms. The integration is progressing as planned and both businesses will be fully integrated within the last quarter.
While RBGLS will operate with one SRA number, the businesses will retain their own brand identities and continue to operate as two separately branded law firms. During the Autumn, the Group anticipates that the two brands - Rosenblatt and Memery Crystal - will become aligned to contentious and non-contentious services to reflect their brand position within the market. Furthermore, the Group plans to integrate all support functions and move into a single office in the last quarter of 2021.
We are building one of London's premier mid-tier law firms providing quality advice to entrepreneurs and high net worth individuals. As at 30 June 2021 the combined businesses had 212 people, including 139 fee earners, with a particular strength in its Dispute Resolution and Corporate and Real Estate offerings.
Rosenblatt successfully served its clients remotely during the first half of the year, winning a broad range of new instructions, including corporate transactions, employment advisory work and financial restructuring mandates. The acquisition of Memery Crystal has significantly enhanced the Group's scale and ability to win such mandates as well as improving opportunity pipeline.
Due to the strong demand for its services, revenue, and gains on the sale of assets in the first six months were up 9.7% to £12.8 million (2020: £11.7 million). The consolidated business has helped diversify the legal services business. The Dispute Resolution division, which is responsible for 53% (61% previously) of RBGLS's revenue, performed well with revenue of £6.1 million. Real Estate now represents 19% of the combined business, and Corporate represents 22%.
As well as the financial metrics, the other KPIs on which the Company is focused have performed well. The average revenue per fee earner was £375,000 (2020: £497,000). This change reflects the diversification of the legal services business into more non-contentious areas of law, following the acquisition of Memery Crystal, which are less profitable due to fixed fees and prior to the benefits of the integration. However, this provides a natural hedge to the Group's dispute resolution activities which, while more profitable, are more contingent.
In line with its strategy, the Group has increased the amount of contingent work it has taken on, enabled by the Group' strong balance sheet. Such litigation cases need to pass the Group's stringent legal and commercial review process. Importantly, RBGLS can enter into more Alternative Billing Arrangements (ABAs), which generate incremental margins on a successful case outcome. No revenue is recognised by the Company until the result of the case has occurred. Such revenue is considered contingent.
RBGLS has invested a further £0.9 million in 5 cases. The amount of contingent work carried out by the legal services business during the period was £1.8 million (2020: £0.9 million). As at 30 June 2021, RBGLS had invested £5.8 million in 5 cases, with a total contingent WIP of £6.2 million.
LionFish Litigation Finance (UK) Limited ("LionFish")
Since our IPO in 2018, our strategy has been to develop our own litigation finance business as an important pillar of the Group. The Group initially invested in Rosenblatt's own client matters, but on 1 May 2020 the Group launched LionFish. LionFish finances litigation matters being run by other solicitors in return for a significant return on the outcome of those cases. As such, the Group now has two types of litigation investments - RBGLS's own client matters, and litigation matters run by third-party solicitors.
Both types of litigation investments not only have significant return potential, but they represent an opportunity to extract further value from the Group's legal and commercial expertise and diversify its sources of income.
Rosenblatt has a proven record of accomplishment in evaluating the legal merits of a litigation matter to optimise its profit. By leveraging this ability, alongside the origination capabilities of LionFish, and the Group's commercial acumen, the Group can identify third-party litigation cases and make investments with strong risk-adjusted returns.
This approach creates further revenue potential from sales in participation rights from litigation finance business beyond Rosenblatt's own client matters. LionFish delivered an additional £0.8 million of participation rights sales in addition to the £3.2 million reported last year. There were gains on litigation assets of £0.5 million.
While litigation finance sales help manage the Group's litigation investment exposure, it is also part of a strategy to create a secondary market for litigation investments.
The Company believes it is important to reiterate the conservative approach we adopt towards the handling of, and accounting for, our litigation investments. We judge the fair value of investments to be equal to, or as close to, cost plus disposal proceeds, which means fair values do not materially exceed net cash disbursed, as well as having rules limiting the Group's cash and revenue exposure.
Based on the Group's strategy to target a return of two times the money invested, Lionfish has invested in 10 cases with £8 million committed (with £3.2 million drawn down) over the life of the cases, which is circa three years.
As at the 30 June 2021, LionFish has received 393 enquiries for finance, of which 10 cases were approved, 54 remain under consideration and 329 rejected, a 97% rejection rate on concluded enquiries. We have a strict investment process where the cases go through an initial review, before a more stringent legal and commercial review, and finally a full review by the Group's investment committee. The process is efficient and customer-focused, aiming for a quick decision and turnaround.
Convex Capital Limited ("Convex Capital")
Convex Capital, the specialist sell-side corporate finance advisory boutique based in Manchester, was acquired by the Group in September 2019. Convex Capital is entirely focused on helping companies, particularly owner-managed and entrepreneurial businesses, realise their value through sales to large corporates or Private Equity. Convex Capital identifies and proactively targets businesses that it believes represent attractive acquisition opportunities. Convex has a motivated, dynamic team of 14 people, of which 13 are fee-earners.
The acquisition of Convex Capital was part of the Board's strategy to diversify the Group beyond legal services, focusing on other high-margin professional service areas. Convex Capital is an entrepreneurial, cash-generative business operating across the UK and Europe and will provide the Group with further funds for reinvestment into other high-margin areas.
As at 30 June 2021, Convex Capital had completed eight deals and delivered £5.0 million of revenue. The strength of its pipeline and the agile nature of the business has enabled Convex Capital to accelerate deals that COVID-19 has not impacted. As at 13 September 2021, Convex Capital had 36 active deals, of which nine are at various stages of completion.
The business is actively building the target pipeline with a data-driven approach to generate deals rather than the traditional passive model where the target company waits to be approached and then appoints a corporate finance partner.
Last year the management of Convex Capital failed to achieve the earn-out agreed at the time of acquisition because of the economic environment. For 2021, the earn-out was replaced with a one-off commission agreement for the key directors. Under the arrangement, the directors exchanged salary for commission based on deal completion. A commission of 20% can be earned on all completed deals, and 50% of that success fee must be used to purchase shares in RBG.
M&A
We will continue to assess M&A opportunities to build and diversify the business to create long term shareholder value. Our acquisition focus will remain on high-margin, specialist businesses, which can also create opportunities for cross-referrals but only at the right value and with the right deal structure. The Group remains disciplined in its approach to M&A and will continue to review potential opportunities according to its selective criteria.
Dividend
The Company's balance sheet remains solid, and the Board is committed to a progressive dividend policy.
The Company paid an interim dividend relating to the six months to 30 June 2021 of 2 pence per share on 27 August 2021. The total dividend relating to the year ending 31 December 2020 was 5 pence per share.
Outlook
The Group is performing well despite the COVID-19 pandemic and remains well-positioned as we progress through the second half of the year. We have worked hard to grow our services, adapt to changing client needs and build our litigation finance business. Our strategy of diversification has provided protection through the pandemic and enabled the Group to progress towards its ambitious goals.
Notwithstanding the acquisition of Memery Crystal, the Group has had an excellent first six months which is reflected in our improved revenue and profit growth. With strong demand for all Group services, we are on track to meet the recently upgraded market expectations for the full year. Whilst acknowledging that economic conditions continue to be volatile, we look forward to the coming months with optimism and are excited about the long-term prospects for the Group.
Nicola Foulston
Group Chief Executive Officer
15 September 2021
Chief Financial Officer's Review
Financial Review
During the first half of 2021 we have continued to build on our strong track record of delivering a profitable business. We have increasing revenue and EBITDA from diverse sources while investing in the growth of the business. The Group is well positioned to deliver its growth strategy through product diversification, carefully selected acquisitions and high-quality litigation investments.
Key Performance Indicators (KPIs)
· Group revenue (including gains from litigation assets): £18.3 million (2020: £12.0 million)
· EBITDA: £5.2 million, representing 28.1% of revenue (2020: £2.6 million, 22.0%)
· Profit before tax: £3.9 million, representing 21.5% of revenue (2020: £1.4 million, 12.1% of revenue)
· Net debt of £9.8 million (2020: net debt of £1.6 million) reflecting new £10.0 million term facility. The Group has a new £15 million revolving credit facility which is fully available to support the growth of the growing business
· Total lock up: 102 days (of which, debtor days were 46) (2020: 114 days, debtor days 49).
· RBG Legal Services revenue per fee earner: £375,000 (2020: £497,000)
· Rosenblatt Utilisation / Realisation for the 6 months to June 2021 was 86%/93% (2020: 93%/116%). Memery Crystal for June 2021 was 102%/84% (Rosenblatt target is 1,500 hours and Memery Crystal 1,300)
Revenue and Gains on Litigation Assets
Reported Group revenue and gains on litigation assets for the period is £18.3 million compared to £12.0 million in 2020, representing a 53.2% increase.
Of this increase, 35.1% (or £4.2 million) was a result of the organic business as Convex Capital and LionFish delivered ahead of last year and 18.1% was delivered from the newly acquired business. This half year shows £1.5m gain on litigation assets against zero in the previous year. The organic professional services revenue growth is up 22.7% to £14.7 million from £12.0 million in 2020. This arose due to strong performance in Convex Capital of £5.0 million, delivering 8 deals against one last year and £0.3 million of revenue in 2020.
Staff costs
Total staff costs for the first half of 2021 were £10.6 million (2020: £ 7.5 million), which includes £2.4m for Convex (£1.2m in relation to the Directors bonus scheme of 20% of completed deals, of which 50% must be re-invested in RBG shares), £0.2 million for LionFish and £1.2m from Memery Crystal. The average number of employees was 121 (2020: 92). The acquisition of Memery Crystal has added 139 staff to Group's headcount, which at the end of the period totalled 239 (2020: 88), of which 151 are fee earners.
Overhead costs
During the half year to 30 June 2021, the Group incurred overheads of £13.2 million (before depreciation and amortisation) (2020: £9.3 million). Staff costs were £10.6 million (2020: £7.5 million), of which contractors' costs were £1.4 million (2020: £1.4 million).
Other operating costs were £2.6 million (2020: £1.8 million), of which the cost of the acquisition represented £0.5 million, and incremental Memery Crystal operating costs were £0.5 million.
EBITDA
EBITDA for the half year to 30 June 2021 was £5.2 million representing 28.1% of revenue (2020: £2.6 million, 22.0% of revenue) which includes a £4.7 million contribution from the organic business. Within the organic business we have £1.4 million of gains on litigation assets.
Profit Before Tax
The profit before tax for the period was £3.9 million representing 21.5% of revenue (2020: £1.4 million, 12.1% of revenue).
Earnings Per Share (EPS)
The weighted average number of shares in 2021 was 87.4 million which gives a basic earnings per share (Basic EPS) for the period of 3.47p (2020: 1.35p).
Balance Sheet
|
| 2021 | 2020 £m |
| Goodwill, intangible and tangible assets | 83.8 | 45.4 |
| Current Assets | 17.1 | 15.1 |
| Current Liabilities | (9.6) | (6.4) |
|
| 91.3 | 54.1 |
| Net debt | (9.8) | (1.6) |
| Non-Current Liabilities | (15.5) | (5.8) |
|
|
|
|
| Deferred consideration | (7.2) | (4.0) |
| Net assets | 58.8 | 42.7 |
The Group's net assets as at 30 June 2021 increased by £16 million on the prior year due to the increase in goodwill and intangible assets resulting from the acquisition of Memery Crystal and an increase in the trading for the period.
Goodwill, Tangible and Intangible Assets
Included within tangible assets is £17 million which relates to IFRS 16 right of use assets for the Group's leases. Within total intangible assets of £56.1 million, £20.9 million relates to current year acquisitions and have been attributed between goodwill, customer contracts and brand. The Company has considered the amounts at which goodwill and intangible assets are stated on the basis of forecast future cash flows and although these are subjected to unusually high levels of general uncertainty due to COVID-19, concluded that that these assets have not been materially impaired.
Working Capital
Management of lock up has continued to be a key focus of the Group over the period. Convex and LionFish are invoiced on a cash basis, but our legal services business lock up days is a measure of the length of time it takes to convert work done into cash. It is calculated as the combined debtor and WIP days for the Group. This is a key focus for management and the Board as it drives the cash generation necessary to support the growth strategy of the Group. Lock up days at 30 June 2021 were 102 compared to 114 for the previous year, with debtor days being 46 (2020: 49).
Net Debt
We have a new revolving credit facility of £15 million and a new acquisition term loan of £10 million repayable over 5 years. Our net debt position is £9.8 million at the end of the period (2020: £1.6 million) leaving the full RCF facility available. This positions the Group well to deliver its strategy into 2021 and support the business through any uncertainty due to COVID-19.
Cash Conversion
|
| 2021 | 2020 £m |
| Net cash generated from operations | 2.5 | (0.9) |
| Interest | (0.3) | (0.2) |
| Capital expenditure | 0 | (0.1) |
| Free cash flow | 2.2 | (1.2) |
| Underlying profit after tax | 3.1 | 1.2 |
| Cash conversion | 71% | (100)% |
The cash conversion percentage measures the Group's conversion of its underlying profit after tax into free cash flows. Net cash generated from operations includes £1.4 million (2020: £1.5 million) of net litigation investments. Cash conversion of 71% (2020: 100%) for the half year shows an increase from previous periods as a result of the stronger six-month trading period, which historically is back end loaded. It is a further focus of the business to drive to our target of 75%. For 2020 the year end cash conversion was 76%.
Net Debt / Net Cash and cash equivalents
Net debt at the end of the period was £9.8 million (2020: £1.6 million net debt). The net decrease in cash and cash equivalents of £3.3 million for the period included £2.2 million of inflows generated from operating activities (net of £1.4 million of further investments in litigation assets). Investing activities gave rise to an outflow of £12.1 million, of which £12 million related to the cash element of the acquisition of Memery Crystal. Inflows from financing activities of £6.6 million is predominantly made up of £10.0 million of term loan to fund the acquisition less £2.7 million in dividends.
Summary
We are pleased with the profitability and performance of the Group during the first half of the year. The business has responded well to the challenges of COVID-19. However, it is important to acknowledge the impact of COVID-19 on business life, and it will be a significant challenge moving forward. There will be greater uncertainty until the full impact is more visible.
Robert Parker
Chief Financial Officer
15 September 2021
Unaudited consolidated statement of comprehensive income
For the period ended 30 June 2021
|
|
| Unaudited | Unaudited | Audited | |
|
| Note | 1 January to | 1 January to | 1 January to | |
|
|
| 30 June 2021 | 30 June 2020 | 31 December 2020 | |
|
|
| £ | £ | £ | |
|
|
|
|
|
| |
| Revenue | 4 | 16,852,571 | 11,973,119 | 22,449,332 | |
|
|
|
|
|
| |
| Gains on litigation assets | 4 | 1,494,425 | - | 3,122,727 | |
|
|
|
|
|
| |
| Personnel costs | 5 | (10,628,767) | (7,538,307) | (14,780,204) | |
| Depreciation and amortisation expense |
| (975,334) | (1,024,787) | (2,081,501) | |
| Other expenses |
| (2,565,144) | (1,797,370) | (633,999) | |
|
|
| _______ | _______ | _______ | |
|
|
|
|
|
| |
| Profit from operations |
| 4,177,751 | 1,612,655 | 8,076,355 | |
|
|
|
|
|
| |
| EBITDA |
| 5,153,085 | 2,637,442 | 10,157,856 | |
| Non-underlying items |
|
|
| ||
| Deferred consideration release |
| - | - | (2,640,000) | |
| Cost of acquiring subsidiary |
| 524,905 | - | - | |
| Adjusted EBITDA |
| 5,677,990 | 2,637,442 | 7,517,856 | |
|
|
|
|
|
| |
| Finance expense |
| (249,259) | (184,458) | (394,534) | |
| Finance income |
| 16,178 | 18,081 | 24,460 | |
|
|
| _______ | _______ | _______ | |
|
|
|
|
|
| |
| Profit before tax |
| 3,944,670 | 1,446,278 | 7,706,281 | |
|
|
|
|
|
| |
| Tax expense |
| (891,448) | (288,457) | (1,024,936) | |
|
|
| _______ | _______ | _______ | |
|
|
|
|
|
| |
| Profit and total comprehensive income |
| 3,053,222 | 1,157,821 | 6,681,345 | |
|
|
| _______ | _______ | _______ | |
|
|
|
|
|
| |
| Total profit and comprehensive income attributable to: |
|
|
|
| |
| Owners of the parent |
| 3,034,450 | 1,157,821 | 6,454,738 | |
| Non-controlling interest |
| 18,772 | - | 226,607 | |
|
|
| _______ | _______ | _______ | |
|
|
|
|
|
| |
|
|
| 3,053,222 | 1,157,821 | 6,681,345 | |
|
|
| _______ | _______ | _______ | |
|
|
|
|
|
| |
| Earnings per share attributable to the ordinary equity holders of the parent | 6 |
|
|
| |
|
|
|
|
|
| |
| Profit |
|
|
|
| |
| Basic (pence) |
| 3.47 | 1.35 | 7.54 | |
| Diluted (pence) |
| 3.47 | 1.35 | 7.54 | |
|
|
| _______ | _______ | _______ | |
Unaudited consolidated statement of financial position
As at 30 June 2021
|
|
| Unaudited | Unaudited | Audited |
| Company registered number: 11189598 | Note | 30 June | 30 June | 31 December |
|
|
| 2021 | 2020 | 2020 |
| Assets |
| £ | £ | £ |
| Current assets |
|
|
|
|
| Trade and other receivables |
| 17,126,750 | 15,145,049 | 7,696,925 |
| Cash and cash equivalents |
| 10,194,188 | 8,443,748 | 13,522,184 |
|
|
| _______ | _______ | _______ |
|
|
|
|
|
|
|
|
| 27,320,938 | 23,588,797 | 21,219,109 |
| Non-current assets |
|
|
|
|
| Property, plant and equipment | 8 | 2,831,745 | 579,826 | 475,229 |
| Right-of-use assets | 10 | 17,035,042 | 6,277,912 | 5,825,712 |
| Intangible assets | 11 | 56,128,413 | 34,757,968 | 35,378,065 |
| Litigation assets | 12 | 7,707,643 | 3,782,823 | 6,294,754 |
| Investments in associates | 9 | 80,000 | - | - |
|
|
| _______ | _______ | _______ |
|
|
|
|
|
|
|
|
| 83,782,843 | 45,398,529 | 47,973,760 |
|
|
| _______ | _______ | _______ |
|
|
|
|
|
|
| Total assets |
| 111,103,781 | 68,987,326 | 69,192,869 |
|
|
| _______ | _______ | _______ |
| Liabilities |
|
|
|
|
| Current liabilities |
|
|
|
|
| Trade and other payables |
| 11,363,867 | 8,775,171 | 3,894,546 |
| Loans and borrowings | 13 | 2,000,000 | - | - |
| Leases | 10 | 2,521,314 | 833,450 | 870,019 |
| Current tax liabilities |
| 1,292,299 | 689,817 | 657,437 |
| Provisions |
| 142,621 | 95,375 | 116,875 |
|
|
| _______ | _______ | _______ |
|
|
|
|
|
|
|
|
| 17,320,101 | 10,393,813 | 5,538,877 |
| Non-current liabilities |
|
|
|
|
| Loans and borrowings | 13 | 18,000,000 | 10,000,000 | 10,000,000 |
| Deferred tax liability |
| 803,223 | 348,440 | 304,853 |
| Trade and other payables |
| 1,515,000 | - | 1,015,000 |
| Leases | 10 | 14,713,596 | 5,500,602 | 5,081,043 |
|
|
| _______ | _______ | _______ |
|
|
|
|
|
|
|
|
| 35,031,819 | 15,849,042 | 16,400,896 |
|
|
| _______ | _______ | _______ |
|
|
|
|
|
|
| Total liabilities |
| 52,351,920 | 26,242,855 | 21,939,773 |
|
|
| _______ | _______ | _______ |
|
|
|
|
|
|
| NET ASSETS |
| 58,751,861 | 42,744,471 | 47,253,096 |
|
|
| _______ | _______ | _______ |
| Issued capital and reserves attributable to owners of the parent |
|
|
|
|
| Share capital |
| 190,662 | 171,184 | 171,184 |
| Share premium reserve |
| 49,232,606 | 37,565,129 | 37,565,129 |
| Retained earnings |
| 9,283,114 | 5,008,158 | 9,290,076 |
|
|
| _______ | _______ | _______ |
|
|
|
|
|
|
|
|
| 58,706,382 | 42,744,471 | 47,026,389 |
|
|
|
|
|
|
| Non-controlling interest |
| 45,479 | - | 226,707 |
|
|
| _______ | _______ | _______ |
|
|
|
|
|
|
| TOTAL EQUITY |
| 58,751,861 | 42,744,471 | 47,253,096 |
|
|
| _______ | _______ | _______ |
The interim statements were approved by the Board of Directors and authorised for issue on 14 September 2021.
Unaudited consolidated statement of cash flows
For the period ended 30 June 2021
|
|
| Unaudited | Unaudited | Audited |
|
| Note | 30 June | 30 June | 31 December |
|
|
| 2021 | 2020 | 2020 |
| Cash flows from operating activities |
| £ | £ | £ |
| Profit for the period before tax |
| 3,944,670 | 1,446,278 | 7,706,281 |
| Adjustments for: |
|
|
|
|
| Depreciation of property, plant and equipment | 8 | 199,196 | 162,598 | 335,634 |
| Amortisation of right-of-use assets | 10 | 589,380 | 482,286 | 986,061 |
| Amortisation of intangible fixed assets | 11 | 186,757 | 379,903 | 759,806 |
| Finance income |
| (16,178) | (18,081) | (24,460) |
| Finance expense |
| 249,259 | 184,458 | 394,534 |
|
|
| _______ | _______ | _______ |
|
|
|
|
|
|
|
|
| 5,153,084 | 2,637,442 | 10,157,856 |
|
|
|
|
|
|
| Decrease/(increase) in trade and other receivables |
| (872,208) | (4,056,237) | 3,391,887 |
| (Decrease) in trade and other payables |
| (442,862) | 2,064,235 | (2,816,390) |
| (Increase) in litigation assets | 12 | (1,412,889) | (1,572,937) | (4,084,868) |
| Increase in provisions |
| 25,746 | 20,375 | 41,875 |
|
|
| _______ | _______ | _______ |
|
|
|
|
|
|
| Cash generated from operations |
| 2,450,871 | (907,122) | 6,690,360 |
|
|
|
|
|
|
| Tax paid |
| (276,765) | (1,067,832) | (1,880,277) |
|
|
| _______ | _______ | _______ |
|
|
|
|
|
|
| Net cash flows from operating activities |
| 2,174,106 | (1,974,954) | 4,810,083 |
|
Investing activities |
| _______ | _______ | _______ |
| Purchases of property, plant and equipment | 8 | (46,125) | (104,042) | (172,482) |
| Purchase of other intangibles |
| - | - | (1,000,000) |
| Acquisition of subsidiary, net of cash |
| (12,000,000) | - | - |
| Purchase of shares in associate | 9 | (80,000) | - | - |
| Interest received |
| 16,178 | 18,081 | 24,460 |
|
|
| _______ | _______ | _______ |
|
|
|
|
|
|
| Net cash used in investing activities |
| (12,109,947) | (85,961) | (1,148,022) |
|
|
| _______ | _______ | _______ |
| Financing activities |
|
|
|
|
| Issue of ordinary shares in subsidiaries |
| - | - | 100 |
| Dividends paid to holders of the parent |
| (2,741,412) | (823,284) | (823,283) |
| Proceeds from loans and borrowings | 13 | 21,000,000 | 11,000,000 | 21,000,000 |
| Repayment of loans and borrowings | 13 | (11,000,000) | (1,000,000) | (11,000,000) |
| Repayments of lease liabilities | 10 | (401,485) | (397,751) | (832,316) |
| Interest paid on loans and borrowings |
| (127,173) | (76,678) | (185,497) |
| Interest paid on lease liabilities | 10 | (122,085) | (107,780) | (209,037) |
|
|
| _______ | _______ | _______ |
|
|
|
|
|
|
| Net cash from financing activities |
| 6,607,845 | 8,594,507 | 7,949,967 |
|
|
| _______ | _______ | _______ |
|
|
|
|
|
|
| Net increase/(decrease) in cash and cash equivalents |
| (3,327,996) | 6,533,592 | 11,612,028 |
| Cash and cash equivalents at beginning of period |
| 13,522,184 | 1,910,156 | 1,910,156 |
|
|
| _______ | _______ | _______ |
|
|
|
|
|
|
| Cash and cash equivalents at end of period |
| 10,194,188 | 8,443,748 | 13,522,184 |
|
|
| _______ | _______ | _______ |
Consolidated statement of changes in equity
For the period ended 30 June 2021
|
|
|
|
| Total |
|
|
|
|
|
|
| attributable |
|
|
|
|
|
|
| to equity | Non- |
|
|
| Share | Share | Retained | holders of | controlling | Total |
|
| Capital | Premium | Earnings | parent | Interest | Equity |
|
| £ | £ | £ | £ | £ | £ |
|
|
|
|
|
|
|
|
| Balance at 1 January 2020 | 171,184 | 37,565,129 | 4,673,621 | 42,409,934 | - | 42,409,934 |
|
|
|
|
|
|
|
|
| Comprehensive income for the period |
|
|
|
|
|
|
| Profit for the period | - | - | 1,157,821 | 1,157,821 | - | 1,157,821 |
|
| ______ | ______ | ______ | _____ | ______ | ______ |
|
|
|
|
|
|
|
|
| Comprehensive Income for the period | - | - | 1,157,821 |
1,157,821 |
- | 1,157,821 |
|
| ______ | ______ | ______ | _____ | _____ | ______ |
| Contributions by and distributions to owners |
|
|
|
|
|
|
| Dividends | - | - | (823,284) | (823,284) | - | (823,284) |
|
| ______ | ______ | ______ | _____ | ______ | ______ |
|
|
|
|
|
|
|
|
| Total contributions by and distributions to owners | - | - | (823,284) |
(823,284) |
- | (823,284) |
|
| ______ | ______ | ______ | _____ | ______ | ______ |
|
|
|
|
|
|
|
|
| Balance at 30 June 2020 (unaudited) | 171,184 | 37,565,129 | 5,008,158 | 42,744,471 | - | 42,744,471 |
|
| ______ | ______ | ______ | ______ | ______ | ______ |
Consolidated statement of changes in equity
For the period ended 30 June 2021 (continued)
|
|
|
|
| Total |
|
|
|
|
|
|
| Attributable |
|
|
|
|
|
|
| to equity | Non- |
|
|
| Share | Share | Retained | holders of | controlling | Total |
|
| Capital | Premium | Earnings | parent | Interest | Equity |
|
| £ | £ | £ | £ | £ | £ |
|
|
|
|
|
|
|
|
| Balance at 1 July 2020 | 171,184 | 37,565,129 | 5,008,158 | 42,744,471 | - | 42,744,471 |
|
|
|
|
|
|
|
|
| Comprehensive profit for the period |
|
|
|
|
|
|
| Profit for the period | - | - | 5,296,918 | 5,296,918 | 226,607 | 5,523,525 |
|
| ______ | ______ | ______ | ______ | ______ | ______ |
|
|
|
|
|
|
|
|
| Total comprehensive profit for the period | - | - | 5,296,918 | 5,296,918 |
226,607 | 5,523,525 |
|
| ______ | ______ | ______ | ______ | ______ | ______ |
| Contributions by and distributions to owners |
|
|
|
|
|
|
| Issue of share capital |
|
|
|
| 100 | 100 |
| Grant of put option over shares of subsidiary | - | - | (1,015,000) | (1,015,000) | - | (1,015,000) |
|
|
|
|
|
|
|
|
|
| ______ | ______ | ______ | ______ | ______ | ______ |
|
|
|
|
|
|
|
|
| Total contributions by and distributions to owners | - | - | (1,015,000) | (1,015,000) |
100 | (1,014,900) |
|
| ______ | ______ | ______ | ______ | ______ | ______ |
|
|
|
|
|
|
|
|
| Balance at 31 December 2020 (audited) | 171,184 | 37,565,129 | 9,290,076 | 47,026,389 | 226,707 | 47,253,096 |
|
| ______ | ______ | ______ | ______ | ______ | ______ |
|
|
|
|
|
|
|
|
Consolidated statement of changes in equity
For the period ended 30 June 2021 (continued)
|
|
|
|
| Total |
|
|
|
|
|
|
| Attributable |
|
|
|
|
|
|
| to equity | Non- |
|
|
| Share | Share | Retained | holders of | controlling | Total |
|
| Capital | Premium | Earnings | parent | Interest | Equity |
|
| £ | £ | £ | £ | £ | £ |
|
|
|
|
|
|
|
|
| Balance at 1 January 2021 | 171,184 | 37,565,129 | 9,290,076 | 47,026,389 | 226,707 | 47,253,096 |
|
|
|
|
|
|
|
|
| Comprehensive profit for the period |
|
|
|
|
|
|
| Profit for the period | - | - | 3,034,450 | 3,034,450 | 18,772 | 3,053,222 |
|
| ______ | ______ | ______ | ______ | ______ | ______ |
| Total comprehensive profit for the period |
|
|
|
|
|
|
|
| - | - | 3,034,450 | 3,034,450 | 18,772 | 3,053,222 |
|
| ______ | ______ | ______ | ______ | ______ | ______ |
| Contributions by and distributions to owners |
|
|
|
|
|
|
| Dividends | - | - | (2,541,412) | (2,541,412) | (200,000) | (2,741,412) |
| Issue of share capital | 19,478 | 11,667,477 | - | 11,686,955 | - | 11,686,955 |
| Grant of put option over shares of associate | - | - | (500,000) | (500,000) | - | (500,000) |
|
| ______ | ______ | ______ | ______ | ______ | ______ |
|
|
|
|
|
|
|
|
| Total contributions by and distributions to owners | 19,478 | 11,667,477 | (3,041,412) | 8,645,543 |
(200,000) | 8,445,543 |
|
| ______ | ______ | ______ | ______ | ______ | ______ |
|
|
|
|
|
|
|
|
| Balance at 30 June 2021 | 190,662 | 49,232,606 | 9,283,114 | 57,706,382 | 45,479 | 58,751,861 |
|
| ______ | ______ | ______ | ______ | ______ | ______ |
|
|
|
|
|
|
|
|
The attached notes form part of these financial statements.
Unaudited notes to the financial statements for the period ended 30 June 2021
1 | Basis of preparation |
RBG Holdings plc is a public limited company, incorporated in the United Kingdom. The principal activity of the Group is the provision of legal and professional services, including management and financing of litigation projects.
Status of Interim Report
The Interim Report covers the six months ended 30 June 2021, with comparative figures for the six months ended 30 June 2020 and the year ended 31 December 2020 and was approved by the Board of Directors on 14 September 2021. The Interim Report is unaudited.
The interim condensed set of consolidated financial statements in the Interim Report are not statutory accounts as defined by Section 434 of the Companies Act 2006.
The statutory accounts for the year ended 31 December 2020 have been reported on by the Group's auditors and delivered to the Registrar of Companies. The audit report thereon was unqualified, did not include references to matters to which the auditors drew attention by way of emphasis without qualifying the report, and did not contain a statement under Section 498 of the Companies Act 2006.
The principal accounting policies adopted in the preparation of the unaudited consolidated financial statements are set out in Note 2. The policies have been consistently applied to the periods presented, unless otherwise stated.
The unaudited consolidated financial statements of the Group have been prepared in accordance with IFRS as adopted by the UK and those parts of the Companies Act 2006 applicable to companies reporting under IFRS. The preparation of financial statements in compliance with IFRS requires the use of certain critical accounting estimates. It also requires Group management to exercise judgement in applying the Group's accounting policies. The areas where significant judgements and estimates have been made in preparing the financial statements and their effect are disclosed in Note 3.
Going concern
The Group financial statements are prepared on a going concern basis as the Directors have a reasonable expectation that the Group has adequate resources to continue in operational existence for at least twelve months from the date of approval of the financial statements.
2 | Significant accounting policies |
Revenue
Revenue comprises the fair value of consideration receivable in respect of services provided during the period, inclusive of recoverable expenses incurred but excluding value added tax.
Legal and Other Professional services revenues
Where fees are contractually able to be rendered by reference to time charged at agreed rates, the revenue is recognised over time, based on time worked charged at agreed rates, to the extent that it is considered recoverable.
Where revenue is subject to contingent fee arrangements, including where services are provided under Damages Based Agreements (DBAs), the Group estimates the amount of variable consideration to which it will be entitled and constrains the revenue recognised to the amount for which it is considered highly probable that there will be no significant reversal. Due to the nature of the work being performed, this typically means that contingent revenues are not recognised until such time as the outcome of the matter being worked on is certain.
Notes (continued)
2 | Significant accounting policies (continued) |
Bills raised are payable on delivery and until paid form part of Trade receivables. The Group has taken advantage of the practical exemption in IFRS 15 not to account for significant financing components where the Group expects the time difference between receiving consideration and the provision of the service to a client will be one year or less. Where revenue has not been billed at the balance sheet date, it is included as contract assets and forms part of Trade and other receivables.
Basis of consolidation
Where the company has control over an investee, it is classified as a subsidiary. The company controls an investee if all three of the following elements are present: power over the investee, exposure to variable returns from the investee, and the ability of the investor to use its power to affect those variable returns. Control is reassessed whenever facts and circumstances indicate that there may be a change in any of these elements of control.
The consolidated financial statements present the results of the company and its subsidiaries ("the Group") as if they formed a single entity. Intercompany transactions and balances between group companies are therefore eliminated in full.
The consolidated financial statements incorporate the results of business combinations using the acquisition method. In the statement of financial position, the acquiree's identifiable assets, liabilities and contingent liabilities are initially recognised at their fair values at the acquisition date. The results of acquired operations are included in the consolidated statement of comprehensive income from the date on which control is obtained. They are deconsolidated from the date on which control ceases.
Non-Controlling interests
The total comprehensive income of non-wholly owned subsidiaries is attributed to owners of the parent and to the non-controlling interests in proportion to their relative ownership interests.
Where the Company has agreed a put option over the shares of a subsidiary held by a non-controlling interest, the liability for the estimated exercise value of the put option is recognised at fair value in the financial statements of the Company and is recognised at present value in the financial statements of the Group. Movements in the estimated liability after initial recognition are recognised in the income statement.
Associates
Where the Group has the power to participate in (but not control) the financial and operating policy decisions of another entity, it is classified as an associate. Associates are initially recognised in the consolidated statement of financial position at cost. Subsequently associates are accounted for using the equity method, where the Group's share of post-acquisition profits and losses and other comprehensive income is recognised in the consolidated statement of profit and loss and other comprehensive income (except for losses in excess of the Group's investment in the associate unless there is an obligation to make good those losses).
Profits and losses arising on transactions between the Group and its associates are recognised only to the extent of unrelated investors' interests in the associate. The investor's share in the associate's profits and losses resulting from these transactions is eliminated against the carrying value of the associate. Any premium paid for an associate above the fair value of the Group's share of the identifiable assets, liabilities and contingent liabilities acquired is capitalised and included in the carrying amount of the associate.
Where there is objective evidence that the investment in an associate has been impaired the carrying amount of the investment is tested for impairment in the same way as other non-financial assets.
Notes (continued)
| 2 | Significant accounting policies (continued) |
Goodwill
Goodwill represents the excess of the cost of a business combination over the Group's interest in the fair value of identifiable assets, liabilities and contingent liabilities acquired.
Cost comprises the fair value of assets given, liabilities assumed, and equity instruments issued, plus the amount of any non-controlling interests in the acquiree plus, if the business combination is achieved in stages, the fair value of the existing equity interest in the acquiree. Contingent consideration is included in cost at its acquisition date fair value and in the case of contingent consideration classified as a financial liability, remeasured subsequently through profit or loss. Direct costs of acquisition are recognised immediately as an expense.
Goodwill is capitalised as an intangible asset with any impairment in carrying value being charged to the consolidated statement of comprehensive income. Where the fair value of identifiable assets, liabilities and
contingent liabilities exceed the fair value of consideration paid; the excess is credited in full to the consolidated statement of comprehensive income on the acquisition date.
Financial assets
The Group classifies its financial assets into one of the categories discussed below, depending on the purpose for which the asset was acquired. The Group's accounting policy for each category is as follows:
Fair value through profit or loss
Litigation assets relate to the provision of funding to litigation matters in return for a participation share in the settlement of that case (Damages Based Award). Investments are initially measured at the sum invested and are subsequently held at fair value through the profit and loss.
Where the Group sells an interest in its entitlement to any award under a Damages Based Award to a third party, the difference between the disposal proceeds and the cost of investment disposed gives rise to a profit on disposal which is recognised through the profit and loss when the sale is agreed. These sales are non-recourse and if the case is successful, the relevant % of the settlement received is paid to the third party.
Amortised cost
These assets arise principally from the provision of goods and services to customers (e.g., trade receivables), but also incorporate other types of financial assets where the objective is to hold these assets in order to collect contractual cash flows and the contractual cash flows are solely payments of principal and interest. They are initially recognised at fair value plus transaction costs that are directly attributable to their acquisition or issue and are subsequently carried at amortised cost using the effective interest rate method, less provision for impairment.
Impairment provisions for current and non-current trade receivables are recognised based on the simplified approach within IFRS 9 using a provision matrix in the determination of the lifetime expected credit losses. During this process the probability of the non-payment of the trade receivables is assessed. This probability is then multiplied by the amount of the expected loss arising from default to determine the lifetime expected credit loss for the trade receivables. For trade receivables, which are reported net, such provisions are recorded in a separate provision account with the loss being recognised in profit or loss. On confirmation that the trade receivable will not be collectable, the gross carrying value of the asset is written off against the associated provision.
From time to time, the Group elects to renegotiate the terms of trade receivables due from customers with which it has previously had a good trading history. Such renegotiations will lead to changes in the timing of payments rather than changes to the amounts owed and in consequence, the new expected cash flows are discounted at the original effective interest rate and any resulting difference to the carrying value is recognised in the consolidated statement of comprehensive income (operating profit).
Notes (continued)
| 2 | Significant accounting policies (continued) |
Impairment provisions for receivables from related parties and loans to related parties, including those from subsidiary companies, are recognised based on a forward looking expected credit loss model. The methodology used to determine the amount of the provision is based on whether there has been a significant increase in credit risk since initial recognition of the financial asset. This annual assessment considers forward-looking information on the general economic and specific market conditions together with a review of the operating performance and cash flow generation of the entity relative to that at initial recognition. For those where the credit risk has not increased significantly since initial recognition of the financial asset, twelve month expected credit losses along with gross interest income are recognised. For those for which credit risk has increased significantly, lifetime expected credit losses along with the gross interest income are recognised. For those that are determined to be credit impaired, lifetime expected credit losses along with interest income on a net basis are recognised.
The Group's financial assets measured at amortised cost comprise trade and other receivables and cash and cash equivalents in the consolidated statement of financial position. Cash and cash equivalents includes cash in hand, deposits held at call with banks, and other short term highly liquid investments with original maturities of three months or less.
Financial liabilities
The Group classifies its financial liabilities depending on the purpose for which the liability was acquired.
Other financial 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 | 17-20 years | Straight line | Estimated discounted cash flow |
|
| Customer contracts | 1-2 years | 0-2 year | In line with contract revenues | Estimated discounted cash flow
|
|
| Restrictive covenant extension | 2 years | 1-2 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
- Accounting for business combinations and fair value
Business combinations are accounted for at fair value. Valuation of acquired intangibles requires estimates of future growth rates, profitability, remaining useful lives and discount rates for input to the business combination valuation methodology. A difference in the estimated future growth rates, profitability, the use of a different discount rate, or the selection of a different valuation method may result in a different assessment of fair value of the asset or liability acquired as part of the business combination.
- Estimated impairment of intangible assets including goodwill
Determining whether an intangible asset is impaired requires an estimation of the value in use of the cash generating units to which the intangible has been allocated. The value in use calculation requires the entity to estimate the future cash flows expected to arise from each cash generating unit and determine a suitable discount rate. A difference in the estimated future cash flows or the use of a different discount rate may result in a different estimated impairment of intangible assets.
- Revenue recognition
Where the group performs work that is chargeable based on hours worked at agreed rates, assessment must be made of the recoverability of the unbilled time at the period end. This is on a matter by matter basis, with reference to historic and post year-end recoveries. Different views on recoverability would give rise to a different value being determined for revenue and a different carrying value for unbilled revenue.
Where revenue is subject to contingent fee arrangements, the Group estimates the amount of variable consideration to which it will be entitled and constrains the revenue recognised to the amount for which it is considered highly probable that there will be no significant reversal. Due to the nature of the work being performed, this typically means that contingent revenues are not recognised until such time as the outcome of the matter being worked on is certain. Factors the Group considers when determining whether revenue should be constrained are whether:-
i) The amount of consideration receivable is highly susceptible to factors outside the Group's influence
ii) The uncertainty is not expected to be resolved for a long time
iii) The Group has limited previous experience (or limited other evidence) with similar contracts
iv) The range of possible consideration amounts is broad with a large number of possible outcomes
Different views being determined for the amount of revenue to be constrained in relation to each contingent fee arrangement may result in a different value being determined for revenue and also a different carrying value being determined for unbilled amounts for client work.
Notes (continued)
| 3 | Critical accounting estimates and judgements (continued) |
Where the group enters into Damages Based Agreements ("DBAs") that include both the provision of services and the provision of litigation finance, the Group must apportion the total expected settlement between that arising as conditional revenue for services and that arising as a return on participation. This requires estimation of the total amount of time cost and disbursements that will be incurred on a matter and the expected settlement value; the allocation of the DBA to revenue is made with reference to standard returns on contingent fee work. Different views will impact the level of unrecognised contingent revenue and also the recognised financial asset relating to the DBA participation.
Where non-contingent fees as well as contingent revenue are earned on DBAs, the group must make a judgement as to whether non-contingent amounts represent revenue or a reduction in funding, with reference to the terms of the agreement and timing and substance of time worked and payments made. Where non-contingent revenue arises, the Group must match it against the services to which it relates. This requires Management to estimate work done as a proportion of total expected work to which the fee relates. Different views could impact the level of non-contingent revenue recognised.
- Impairment of trade receivables
Receivables are held at cost less provisions for impairment. Impairment provisions are recognised based on the simplified approach within IFRS 9 using a provision matrix in the determination of the lifetime expected credit losses. A different assessment of the impairment provision with reference to the probability of the non-payment of trade debtors or the expected loss arising from default, may result in different values being determined.
- Litigation assets and fair value
LionFish
For each of LionFish's investments, sales prices of part disposals have been used to value the gross value of the interest in damages retained by the Group. In order to calculate the proportion of each investment retained, the Group has estimated the expected total return on the investment and the expected return payable to the onward investor. As returns are dependent on the timing of the settlement, these estimates are driven by assumptions over the most likely timing of settlement, which is based on semi-annual individual case by case reviews by management.
In order to calculate the profit on disposal, the Group allocates the corresponding proportion of the total expected cost of the investment against the proportion of the investment sold. The total expected cost of each investment involves an assumption regarding the total expected drawdown on that investment, which may be less than the total value of funds committed. Management make this assumption based on their semi-annual case by case reviews of each individual investment. The recorded profits on disposal and carrying values are relatively insensitive to assumptions made, with the exception that matters for which capital invested is insured are sensitive to the estimated settlement date. In general, the later the anticipated settlement date, the greater the carrying value of the investment. Management has exercised caution in its assessment of settlement dates.
Rosenblatt
Unlike LionFish's investments, the total return on RB's litigation assets is a proportion of damages awarded, rather than being dependent on timing of settlement. As this figure is potentially large and uncertain, and has a strong impact on fair value calculations, where possible the Group avoids using it as an input to its fair value calculations.
Notes (continued)
| 3 | Critical accounting estimates and judgements (continued) |
Where a recent disposal of an interest in a damage based agreement has been made, the sales price of the disposal has been used to value the gross value of the interest in damages retained by the Group. The sales price is adjusted downwards for the cost of the Group's ongoing funding of the matter, which is not borne by the onward investor. This involves an estimate of the likely amount and timing of disbursements over the course of the matter, the minimum being funds already disbursed at the balance sheet date. As management believes the sales price of disposals to represent the floor level, having been used to create a market and de-risk the original investment, the minimum level of disbursements has also been used in valuing the investment. If the present value of the maximum level of disbursements were applied against the value of damages based on disposal price, this would reduce the fair value of the investment to zero. Conversely, if a discounted cash flow method of valuation were used, including an estimate of the likely amount of damages on settlement, the value of the investment would be significantly increased.
It is presumed that fair value and cost approximate to each other on initial recognition and where a damages based agreement is at an early stage, such that the level of time worked is de minimis, the financial asset has been valued at cost, subject to assessment for overstatement.
Where there has been minimal activity on a damages based agreement from period to period, the prior year valuation is taken as the initial indication of fair value, subject to assessment for overstatement.
- Put options over shares held by non-controlling interest
The following key estimates and judgements have been used in determining the present value of put options over the shares held by the non-controlling interest in LionFish:-
i) It has been assumed that the option holder will exercise at the earliest possible opportunity, being 12 August 2022
ii) The value at the date of exercise, which is calculated as a multiple of average profit over the preceding two years, has been based on the actual profit after tax for the period ended 31 December 2020 and the budgeted profit after tax for the year ended 31 December 2021
In determining the fair value of the put options, it has been assumed that fair value of the put shares in LionFish is equal to the fair value of the shares in the Company for which they would be exchanged, and that the fair value of the option is zero.
- Claims and regulatory matters
The Group from time to time receives claims in respect of professional service matters. The Group defends such claims where appropriate but makes provision for the possible amounts considered likely to be payable, having regard to any relevant insurance cover held by the Group. A different assessment of the likely outcome of each case or of the possible cost involved may result in a different provision or cost.
-
Notes (continued)
| 4 | Segment information |
The Group's reportable segments are strategic business groups that offer different products and services. Operating segments are reported in a manner consistent with the internal reporting provided to the chief operating decision maker, which has been identified as the Board of Directors of RBG Holdings plc.
The following summary describes the operations of each reportable segment:
· Legal services - Provision of legal advice
· Litigation finance - Sale of litigation assets
· Other Professional services -Provision of sell-side M&A corporate finance services
|
| Unaudited 6 months ended 30 June 2021 |
| Legal services | Litigation finance | Other Professional services | Total | ||
|
|
|
| £ | £ | £ | £
| ||
|
|
|
|
|
|
|
| ||
|
| Segment revenue |
| 11,833,512 | - | 5,019,059 | 16,852,571 | ||
|
|
|
| _______ | _______ | _______ | _______ | ||
|
|
|
|
|
|
|
| ||
|
| Segment gains on litigation assets comprising: |
|
|
|
|
| ||
|
| Proceeds on disposal of litigation assets |
| - | 2,386,000 | - | 2,386,000 | ||
|
| Realisation of litigation assets |
| - | (1,116,059) | - | (1,116,059) | ||
|
|
|
| _______ | _______ | _______ | _______ | ||
|
|
|
|
|
|
|
| ||
|
| Profit on disposal of litigation assets |
| - | 1,269,941 | - | 1,269,941 | ||
|
| Fair value movement on litigation assets |
| - | 224,484 | - | 224,484 | ||
|
|
|
| _______ | _______ | _______ | _______ | ||
|
|
|
|
|
|
|
| ||
|
|
|
| - | 1,494,425 | - | 1,494,425 | ||
|
|
|
| _______ | _______ | _______ | _______ | ||
|
|
|
|
|
|
|
| ||
|
| Segment contribution |
| 5,515,276 | - | 2,403,649 | 7,918,925 | ||
|
|
|
| _______ | _______ | _______ |
| ||
|
|
|
|
|
|
|
| ||
|
| Segment gains on litigation assets |
| - | 1,494,425 | - | 1,494,425 | ||
|
|
|
| _______ | _______ | _______ |
| ||
|
|
|
|
|
|
|
| ||
|
|
| Costs not allocated to segments |
|
|
|
|
| |
|
|
| Personnel costs |
|
|
| (1,701,228) |
| |
|
|
| Depreciation and amortisation |
|
|
| (975,334) |
| |
|
|
| Other operating expense |
|
|
| (2,559,037) |
| |
|
|
| Net financial expenses |
|
|
| (233,081) |
| |
|
|
|
|
|
|
| _______ |
| |
|
|
|
|
|
|
|
|
| |
|
| Group profit for the period before tax |
|
|
| 3,944,670 |
| ||
|
|
|
|
|
|
| _______ |
| |
Notes (continued)
4 | Segment information (continued) | | |
|
| Unaudited 6 months ended 30 June 2020 |
| Legal services | Litigation finance | Other Professional services | Total | |||||||
|
|
|
| £ | £ | £ | £
| |||||||
|
|
|
|
|
|
|
| |||||||
|
| Segment revenue |
| 11,680,284 | - | 292,835 | 11,973,119 | |||||||
|
|
|
| _______ | _______ | _______ | _______ | |||||||
|
|
|
|
|
|
|
| |||||||
|
| Segment gains on litigation assets |
| -- | - | - | - | |||||||
|
|
|
| _______ | _______ | _______ | _______ | |||||||
|
|
|
|
|
|
|
| |||||||
|
| Segment contribution |
| 6,533,036 | (65,374) | (781,725) | 5,685,937 | |||||||
|
|
|
| _______ | _______ | _______ |
| |||||||
|
|
|
|
|
|
|
| |||||||
|
| Segment gains on litigation assets |
| -- | - | - | - | |||||||
|
|
|
| _______ | _______ | _______ |
| |||||||
|
|
|
|
|
|
|
| |||||||
|
|
| Costs not allocated to segments |
|
|
| ||||||||
|
|
| Personnel costs |
| (1,277,058) |
| ||||||||
|
|
| Depreciation and amortisation |
| (1,024,787) |
| ||||||||
|
|
| Other operating expense |
| (1,771,437) |
| ||||||||
|
|
| Net financial expenses |
| (166,377) |
| ||||||||
|
|
|
|
| _______ |
| ||||||||
|
|
|
|
|
|
| ||||||||
|
| Group profit for the period before tax |
| 1,446,278 |
| |||||||||
|
|
|
|
| _______ |
| ||||||||
Notes (continued)
4 | Segment information (continued) | | |
|
| Audited year ended 31 December 2020 |
| Legal services | Litigation finance | Other Professional services | Total | ||
|
|
|
| £ | £ | £ | £
| ||
|
|
|
|
|
|
|
| ||
|
| Segment revenue |
| 20,864,341 | - | 1,584,991 | 22,449,332 | ||
|
|
|
| _______ | _______ | _______ | _______ | ||
|
|
|
|
|
|
|
| ||
|
| Segment gains on litigation assets comprising: |
|
|
|
|
| ||
|
| Proceeds on disposal of litigation assets |
| - | 3,561,000 | - | 3,561,000 | ||
|
| Realisation of litigation assets |
| - | (2,353,164) | - | (2,353,164) | ||
|
|
|
| _______ | _______ | _______ | _______ | ||
|
|
|
|
|
|
|
| ||
|
| Profit on disposal of litigation assets |
| - | 1,207,836 | - | 1,207,836 | ||
|
| Fair value movement on litigation assets |
| - | 1,914,891 | - | 1,914,891 | ||
|
|
|
| _______ | _______ | _______ | _______ | ||
|
|
|
|
|
|
|
| ||
|
|
|
| - | 3,122,727 | - | 3,122,727 | ||
|
|
|
| _______ | _______ | _______ | _______ | ||
|
|
|
|
|
|
|
| ||
|
| Segment contribution |
| 10,868,778 | - | (605,593) | 10,263,185 | ||
|
|
|
| _______ | _______ | _______ |
| ||
|
|
|
|
|
|
|
| ||
|
| Segment gains on litigation assets |
| - | 3,122,727 | - | 3,122,727 | ||
|
|
|
| _______ | _______ | _______ |
| ||
|
|
|
|
|
|
|
| ||
|
|
| Costs not allocated to segments |
|
|
|
|
| |
|
|
| Personnel costs |
|
|
| (2,634,661) |
| |
|
|
| Depreciation and amortisation |
|
|
| (2,081,501) |
| |
|
|
| Other operating expense |
|
|
| (593,395) |
| |
|
|
| Net financial expenses |
|
|
| (370,074) |
| |
|
|
|
|
|
|
| _______ |
| |
|
|
|
|
|
|
|
|
| |
|
| Group profit for the year before tax |
|
|
| 7,706,281 |
| ||
|
|
|
|
|
|
| _______ |
| |
| 5 | Employees | Unaudited | Unaudited | Audited |
|
|
| 6 mos ended | 6 mos ended | Year ended |
|
|
| 30 Jun 2021 | 30 Jun 2020 | 31 Dec 2020 |
|
| Group | £ | £ | £ |
|
|
|
|
|
|
|
| Staff costs (including directors) consist of: |
|
|
|
|
|
|
|
|
|
|
| Wages and salaries | 7,951,210 | 5,292,969 | 9,902,596 |
|
| Short-term non-monetary benefits | 63,203 | 56,624 | 122,854 |
|
| Cost of defined contribution scheme | 185,761 | 134,522 | 262,518 |
|
| Share-based payment expense | - | - | 39,403 |
|
| Social security costs | 999,835 | 644,035 | 1,225,260 |
|
|
| _______ | _______ | _______ |
|
|
|
|
|
|
|
|
| 9,200,009 | 6,128,150 | 11,552,631 |
|
|
| _______ | _______ | _______ |
Personnel Costs stated in the Consolidated statement of comprehensive income includes the costs of contractors of £1,428,758 (HY2020: £1,410,157, FY2020: £3,227,573).
Notes (continued)
5 | Employees (continued) | | |
The average number of employees (including directors) during the period was as follows:
|
|
| Unaudited | Unaudited | Audited |
|
|
| 6 mos ended | 6 mos ended | Year ended |
|
|
| 30 June 2021 | 30 Jun 2020 | 31 Dec 2020 |
|
|
| Number | Number | Number |
|
|
|
|
|
|
|
| Legal and professional staff | 75 | 57 | 55 |
|
| Administrative staff | 46 | 35 | 35 |
|
|
| _______ | _______ | _______ |
|
|
|
|
|
|
|
|
| 121 | 92 | 90 |
|
|
| _______ | _______ | _______ |
Defined contribution pension schemes are operated on behalf of the employees of the Group. The assets of the schemes are held separately from those of the Group in independently administered funds. The pension charge represents contributions payable by the Group to the funds and amounted to £185,761 (HY2020: £134,522, FY2020: £262,518). Contributions amounting to £106,619 (HY2020: £77,274, FY2020: £40,574) were payable to the funds at period end and are included in Trade and other payables.
6 | Earnings per share |
|
|
| Unaudited | Unaudited | Audited |
|
|
| 6 mos ended | 6 mos ended | Year ended |
|
|
| 30 June 2021 | 30 Jun 2020 | 31 Dec 2020 |
|
| Numerator | £ | £ | £ |
|
|
|
|
|
|
|
| Profit for the period and earnings used in basic and diluted EPS | 3,034,450 | 1,157,821 | 6,454,738 |
|
|
|
|
|
|
|
| Non-Underlying items |
|
|
|
|
| Costs of acquiring subsidiary | 524,905 | - | (2,640,000) |
|
| Less: tax effect of above items | - | - | - |
|
|
| _______ | _______ | _______ |
|
|
|
|
|
|
|
| Profit for the period adjusted for Non-Underlying items | 3,559,355 | 1,157,821 | 3,814,738 |
|
|
| _______ | _______ | _______ |
|
|
|
|
|
|
|
| Denominator | Number | Number | Number |
|
|
|
|
|
|
|
| Weighted average number of shares used in basic and diluted EPS | 87,421,556 | 85,592,106 | 85,592,106 |
|
|
| _______ | _______ | _______ |
Earnings per share is calculated as follows:
|
| Unaudited | Unaudited | Audited |
|
| 6 mos ended | 6 mos ended | 2020 |
|
| 30 June 2021 | 30 Jun 2020 |
|
|
| Pence | Pence | Pence |
|
|
|
|
|
| Basic earnings per ordinary share | 3.47 | 1.35 | 7.54 |
|
|
|
|
|
| Diluted earnings per ordinary share | 3.47 | 1.35 | 7.54 |
|
|
|
|
|
| Basic earnings per ordinary share adjusted for Non-Underlying items | 4.07 | 1.35 | 4.46 |
|
|
|
|
|
| Diluted earnings per ordinary share adjusted for Non-Underlying items | 4.07 | 1.35 | 4.46 |
Notes (continued)
6 | Earnings per share (continued) |
Clawback arrangements over certain shares of Cascades Ltd would have an anti-dilutive effect on earnings per share and therefore no impact on diluted earnings per share.
7 | Dividends | |
On 26 February 2021, an interim dividend of 3 pence per share was paid in respect of the 2020 financial year and
on 27 August 2021, an interim dividend of 2 pence per share was paid in respect of the 2021 financial year.
8 | Property, plant and equipment |
|
| Group | Plant and | Fixtures | Computer | Total |
|
|
| Machinery | and fittings | Equipment |
|
|
|
| £ | £ | £ | £ |
|
| Cost |
|
|
|
|
|
|
|
|
|
|
|
|
| At 1 January 2021 | 335,501 | 149,136 | 628,684 | 1,113,321 |
|
| Additions | 4,804 | - | 41,318 | 46,122 |
|
| Acquired through business combination | 2,369,972 | 92,498 | 47,123 | 2,509,593 |
|
|
| _______ | _______ | _______ | _______ |
|
|
|
|
|
|
|
|
| At 30 June 2021 | 2,710,277 | 241,634 | 717,125 | 3,669,036 |
|
|
| _______ | _______ | _______ | _______ |
|
|
|
|
|
|
|
|
| Accumulated Depreciation and Impairment |
|
|
|
|
|
|
|
|
|
|
|
|
| At 1 January 2021 | 281,571 | 45,055 | 311,466 | 638,092 |
|
| Charge for the period | 62,422 | 24,081 | 112,696 | 199,199 |
|
|
| _______ | _______ | _______ | _______ |
|
|
|
|
|
|
|
|
| At 30 June 2021 | 343,993 | 73,406 | 419,890 | 837,291 |
|
|
| _______ | _______ | _______ | _______ |
|
|
|
|
|
|
|
|
| Net book value |
|
|
|
|
|
|
|
|
|
|
|
|
| At 1 January 2021 | 53,930 | 104,081 | 317,218 | 475,229 |
|
|
|
|
|
|
|
|
| At 30 June 2021 | 2,366,284 | 172,498 | 292,963 | 2,831,745 |
|
|
| _______ | _______ | _______ | _______ |
Under debentures signed and registered on 25 October 2019 and 19 April 2021, HSBC UK Bank plc have fixed and floating charges over the tangible assets of the Group.
9 | Investment in associates |
The following entities have been included in the consolidated financial statements using the equity method:
|
| Name of entity | Place of incorporation | Proportion of ownership interest held | ||
|
|
|
|
| ||
|
|
|
| Unaudited | Unaudited | Audited |
|
|
|
|
|
|
|
|
|
|
| 2021 | 2020 | 2020 |
|
|
|
|
|
|
|
|
| Adnitor Limited | United Kingdom | 40% | - | - |
On 1 February 2021 RBG Holdings plc purchased 40 ordinary shares of £1 each in Adnitor Limited for a consideration of £80,000.
Notes (continued)
10 | Leases |
The Group leases its business premises in the United Kingdom. The lease contracts either provide for annual increases in the periodic rent payments linked to inflation or for payments to be reset periodically to market rental rates. The Group also leases an item of office equipment, with fixed payments over the lease term.
Right-of-Use Assets
|
|
| Land and buildings | Computer equipment | Total |
|
|
| £ | £ | £ |
|
|
|
|
|
|
|
| At 1 January 2021 | 5,822,408 | 3,304 | 5,825,712 |
|
| Acquired through business combinations | 11,798,710 | - | 11,798,710 |
|
| Amortisation | (586,076) | (3,304) | (589,380) |
|
|
| _______ | _______ | _______ |
|
|
|
|
|
|
|
| At 30 June 2021 | 17,035,042 | - | 17,035,042 |
|
|
| _______ | _______ | _______ |
Lease liabilities
|
|
| Land and buildings | Computer equipment | Total |
|
|
| £ | £ | £ |
|
|
|
|
|
|
|
| At 1 January 2021 | 5,947,655 | 3,407 | 5,951,062 |
|
| Acquired through business combinations | 11,685,333 | - | 11,685,333 |
|
| Interest expense | 122,038 | 47 | 122,085 |
|
| Lease payments | (520,116) | (3,454) | (523,570) |
|
|
| _______ | _______ | _______ |
|
|
|
|
|
|
|
| At 30 June 2021 | 17,234,910 | - | 17,234,910 |
|
|
| _______ | _______ | _______ |
At 30 June 2021, lease liabilities were falling due as follows:
| Group | Up to 3 months | Between 3 and 12 months | Between 1 and 2 years | Between 2 and 5 years | Over 5 years | Total |
|
| £ | £ | £ | £ | £ | £ |
| Lease liabilities | 921,511 | 1,599,803 | 2,127,101 | 6,840,906 | 5,745,589 | 17,234,910 |
Notes (continued)
| 11 | Intangible assets |
|
|
|
|
|
|
| Group | Goodwill | Customer | Brand | Other | Total |
|
|
|
| Contracts |
|
|
|
|
|
| £ | £ | £ | £ | £ |
|
| Cost |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| At 1 January 2021 | 33,035,260 | 1,367,784 | 1,411,596 | 1,000,000 | 36,814,640 |
|
| Acquired through business combinations |
18,794,041 |
194,185 |
1,948,878 | - |
20,937,104 |
|
|
| _______ | _______ | _______ | _______ | _______ |
|
|
|
|
|
|
|
|
|
| At 30 June 2021 | 51,829,301 | 1,561,969 | 3,360,474 | 1,000,000 | 57,751,744 |
|
|
| _______ | _______ | _______ | _______ | _______ |
|
|
|
|
|
|
|
|
|
| Accumulated amortisation and impairment |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| At 1 January 2021 | - | 1,293,939 | 142,636 | - | 1,436,575 |
|
| Amortisation charge | - | 60,013 | 43,410 | 83,333 | 186,756 |
|
|
| _______ | _______ | _______ | _______ | _______ |
|
|
|
|
|
|
|
|
|
| At 30 June 2021 | - | 1,353,952 | 186,046 | 83,333 | 1,623,331 |
|
|
| _______ | _______ | _______ | _______ | _______ |
|
|
|
|
|
|
|
|
|
| Net book value |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| At 1 January 2021 | 33,035,260 | 73,845 | 1,268,960 | 1,000,000 | 35,378,065 |
|
|
|
|
|
|
|
|
|
| At 30 June 2021 | 51,829,301 | 208,017 | 3,174,428 | 916,667 | 56,128,413 |
|
|
| _______ | _______ | _______ | _______ | _______ |
Under debentures signed and registered on 25 October 2019 and 19 April 2021, HSBC UK Bank plc have fixed and floating charges over the intangible assets of the Group.
12 | Litigation assets | |
The table below provides analysis of the movements in the Level 3 financial assets.
|
|
| Unaudited | Unaudited | Audited |
|
|
| 30 June | 30 June | 31 December |
|
|
| 2021 | 2020 | 2020 |
|
|
| Level 3 | Level 3 | Level 3 |
|
|
| £ | £ | £ |
|
|
|
|
|
|
|
| At 1 January | 6,294,754 | 2,209,886 | 2,209,886 |
|
| Additions | 2,304,464 | 1,572,937 | 4,523,141 |
|
| Realisations | (1,116,059) | - | (2,353,164) |
|
| Fair value movement | 224,484 | - | 1,914,891 |
|
|
| _______ | _______ | _______ |
|
|
|
|
|
|
|
| At 30 June / 31 December | 7,707,643 | 3,782,823 | 6,294,754 |
|
|
| _______ | _______ | _______ |
Sensitivity of Level 3 valuations
Following investment, the Group engages in a semi-annual review of each investment's fair value. At 30 June 2021, should the value of investments have been 10% higher or lower than provided for in the Group's fair value estimation, while all other variables remained constant, the Group's income and net assets would have increased and decreased respectively by £770,764 (HY2020: £378,282, FY2020: £629,475).
Notes (continued)
| 13 | Loans and borrowings |
The book value and fair value of loans and borrowings which all denominated in sterling are as follows:
|
|
| Unaudited | Unaudited | Unaudited | Unaudited | Audited | Audited |
|
|
| Book value | Fair value | Book value | Fair value | Book value | Fair value |
|
|
| 30 Jun 21 | 30 Jun 2021 | 30 Jun 2020 | 30 Jun 2020 | 31 Dec 2020 | 31 Dec2020 |
|
|
| £ | £ | £ | £ | £ | £ |
|
| Current |
|
|
|
|
|
|
|
| Bank loans |
|
|
|
|
|
|
|
| - Secured | 2,000,000 | 2,000,000 | - | - | - | - |
|
|
|
|
|
|
|
|
|
|
| Non-Current |
|
|
|
|
|
|
|
| Bank loans |
|
|
|
|
|
|
| - | - Secured | 18,000,000 | 18,000,000 | 10,000,000 | 10,000,000 | 10,000,000 | 10,000,000 |
|
|
|
|
|
|
|
|
|
|
|
| _______ | _______ | _______ | _______ | _______ | _______ |
|
|
|
|
|
|
|
|
|
|
| At 30 June / 31 December | 20,000,000 | 20,000,000 | 10,000,000 | 10,000,000 | 10,000,000 | 10,000,000 |
|
|
|
|
|
|
|
|
|
|
|
| _______ | _______ | _______ | _______ | _______ | _______ |
|
|
|
|
|
|
|
|
|
The rate at which Sterling denominated loans and borrowings are payable is 2.4% above SONIA (2020: 1.75% above LIBOR).
The bank loans are secured by fixed and floating charges over the assets of the Group. The Group has £5 million undrawn committed borrowing facilities available at 30 June 2021 (HY2020: £nil, FY2020: £nil).
| 14 | Business combinations during the period |
On 28 May 2021, RBG Holdings plc acquired Memery Crystal Limited ("Memery Crystal"). Memery Crystal is a specialist international law firm, based in London, which on acquisition had 146 employees (including 29 partners and an additional 66 fee earners). The acquisition was made in line with the business strategy to acquire complementary, high gross margin, professional services businesses and Memery Crystal is an established business in the Group's target market. Memery Crystal has a strong focus on transactions, which makes is a complementary fit with RB, which derives most of its revenue from contentious law.
Notes (continued)
| 14 | Business combinations during the period (continued) |
At the date of authorisation of the interim financial statements a detailed assessment of the fair value of the identifiable net assets has not been fully completed. Details of the provisional fair value of identifiable assets and liabilities acquired purchase consideration and goodwill are as follows:
|
|
| Provisional value | Adjustment | Fair value |
|
|
| £ | £ | £ |
|
|
|
|
|
|
|
|
|
|
|
|
|
| Property, plant and equipment | 2,509,587 | - | 2,509,587 |
|
| Right-of-use assets | - | 11,798,710 | 11,798,710 |
|
| Brand value | - | 1,948,878 | 1,948,878 |
|
| Customer contracts | - | 194,185 | 194,185 |
|
| Trade and other receivables | 8,670,994 | (113,377) | 8,557,617 |
|
| Trade and other payables | (1,584,766) | - | (1,584,766) |
|
| Deferred income | (2,968,398) | 2,968,398 | - |
|
| Other taxation and social security | (749,956) | - | (749,956) |
|
| Lease liabilities | - | (11,685,333) | (11,685,333) |
|
| Deferred tax liability | - | (518,546) | (518,546) |
|
|
| _______ | _______ | _______ |
|
|
|
|
|
|
|
| Total net assets | 5,877,461 | 4,592,915 | 10,470,376 |
|
|
| _______ | _______ | _______ |
|
|
|
|
|
|
Trade and other receivables with a fair value of £8,557,617 were acquired, representing trade and other debtors of £4,276,786, contract assets of £3,865,089 and prepayments of £529,119. The Group is still assessing the debtor book and contract asset ledger and is not yet in a position to accurately assess the final level of uncollectable contractual cashflows.
Fair value of consideration paid
|
|
| £ |
|
|
|
|
|
| Cash | 12,000,000 |
|
| Ordinary shares issued | 11,686,956 |
|
| Deferred cash consideration | 5,577,461 |
|
|
| _______ |
|
|
|
|
|
| Total consideration | 29,264,417 |
|
|
| _______ |
|
|
|
|
|
| Goodwill (Note 11) | 18,794,041 |
|
|
| _______ |
Acquisition costs of £524,905 arose as a result of the transaction. These have been recognised as part of other expenses in the statement of comprehensive income.
The initial consideration for the acquisition was settled with cash amounting to £12,000,000 and the issue of 9,739,130 ordinary shares with a nominal value of 0.2p each. The fair value of the ordinary shares has been based on the acquisition date share price (£1.20 per share). In addition, there is a deferred cash consideration of £5,577,461, which is payable in two tranches six and twelve months post acquisition, and is included within Other Payables.
Whilst fair value adjustments will result in changes to the value of recognised goodwill, it is expected that a significant amount of goodwill will be recognised. This goodwill represents items, such as the workforce, which do not qualify for recognition as assets. The goodwill recognised will not be deductible for tax purposes.
Since the acquisition date, Memery Crystal has contributed £2,168,000 to group revenues and £379,000 to group profit.
[1] Figures for 2021 include one month of contribution from Memery Crystal following the completion of the acquisition at the end of May.
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