TIDMRBGP
RNS Number : 9133N
RBG Holdings PLC
28 September 2023
28 September 2023
RBG Holdings plc
("RBG", "the Group", or "the Company")
Unaudited Interim Results for the six months ended 30 June
2023
Executing a clear strategy to restore value and reduce risk
profile
RBG Holdings plc (AIM: RBGP), the professional services group,
today announces its unaudited results for the six months ended 30
June 2023.
Strategic Highlights:
During the first six months of the financial year, the Group's
new executive management team which brings expertise from the
practice leaders of the core revenue generation centres, took
action to:
-- Return the Group's focus to its core Legal Services business
where both of its core brands have over 30 years' proven track
record of trading through:
o Targeting organic growth in the highly cash generative Legal
Services business and increasing average revenue per fee earner
which is now among the highest in the industry [1] .
o Hiring seven additional partners since April 2023
o From May, the two law firms started sharing a Practice
Management System allowing them to work seamlessly on the same
cases, and improving cross selling opportunities
-- Reduce the Group's risk profile through:
o Ceasing to carry any investment in Conditional Fee
Arrangements ("CFAs") and Damages Based Agreements ("DBAs") as
assets on its balance sheet in contrast to the treatment by the
previous management; any fees from wins on such cases will simply
be recorded as revenue when paid
o Writing down the retained value of all remaining CFAs, DBAs
and the retained LionFish cases on the balance sheet to zero,
leading to a non-cash write off of GBP12.8m
-- Prioritise the reduction of the Group's debt by:
o Disposing of LionFish Litigation Finance Limited in July for a
consideration of up to GBP3.07m, of which GBP1.07m was used for
immediate repayment of an intercompany loan
o Suspending the dividend policy
Financial Highlights [2] :
Continuing Operations H1 2023 H1 2022
RBGLS revenue GBP19.8m GBP20.7m
---------- ----------
RBGLS gains on litigation assets - GBP1.6m
---------- ----------
Convex Revenue GBP0.7m GBP4.2m
---------- ----------
Group Revenue GBP20.5m GBP26.5m
---------- ----------
RBGLS adjusted EBITDA GBP4.4m GBP6.8m
---------- ----------
Convex adjusted EBITDA (GBP0.5)m GBP1.9m
---------- ----------
Central overhead costs (GBP1.0)m (GBP1.7)m
---------- ----------
Group adjusted EBITDA GBP2.9m GBP7.0m
---------- ----------
-- Revenue of GBP20.5m (H1 2022: GBP24.9m excluding gains on
litigation assets, GBP26.5m including) reflecting reduced deal flow
at Convex Capital due to market conditions
-- Adjusted EBITDA of GBP2.9m (H1 2022: GBP7.0m)
-- Adjusted profit before tax of GBP0.4m (H1 2022: GBP4.6m)
-- Non-recurring non-cash costs of GBP13.7m (H1 2022: GBPnil) of
which the majority relates to the decision to write off the Group's
litigation assets
-- Statutory EBITDA loss of GBP10.8m (H1 2022: profit of GBP7.0m)
-- Loss before tax of GBP13.3m (H1 2022: profit of GBP4.6m)
-- Loss per share of 9.08 pence (H1 2022: 3.62 pence profit)
-- Loss from continuing operations of GBP10.2m (H1 2022: profit GBP3.6m)
-- Adjusted free cash flow generation in the period was GBP0.4m (H1 2022: GBP3.1m)
-- Pre IFRS 16 net debt of GBP21.0m (H1 2022: net debt of GBP17.5m)
Discontinued operations:
-- Profit from discontinued operations of GBP1.6m (H1 2022: loss GBP0.2m)
Post Balance Sheet Events (July 2023)
-- Appointment in July of Ian Rosenblatt OBE, the Group's
largest shareholder and individual revenue generator, to the Board
as Executive Vice Chair
Current Trading & Outlook
-- The first half of the Company's financial year has
historically been the slower of the two halves, and the Board can
already see this trend continuing, with a strong start to H2
2023
-- Trading within the Group's Legal Services division was robust
in the first half, and the Group has good visibility on revenue and
profitability in this division for the second half
-- As a result, the Board is confident that the core Legal
Services business will meet full year market expectations
-- Convex Capital has grown its pipeline to 22 deals, seven of
which are in the latter stages of completion. The Board is
confident that several of these deals will complete before the end
of the year
-- The Board therefore expects to meet its current market forecasts for FY23 [3]
-- Positive discussions with lenders underway regarding the
Group's debt facilities due for refinancing in April 2024
Jon Divers, CEO, RBG Holdings plc, commented: "Over the last six
months, the new leadership team has established a clear strategy to
restore value to the Group by focusing on the Group's core Legal
Services business. Furthermore, we have reduced the Group's risk
profile and are prioritising the payback of the Company's debt. To
help achieve this, we have now disposed of LionFish, suspended the
dividend, and discontinued the previous management's strategy of
carrying investments in CFAs and DBAs as assets on our balance
sheet and only recognising revenue when it is paid.
"Overall, I am pleased with the performance of our core Legal
Services businesses, Rosenblatt and Memery Crystal, which are
delivering solid revenues and profits. Their trading, despite the
wider economic environment, has highlighted the resilience and
counter cyclical nature of the businesses, both of which have over
30 years' proven trading history. Driving the organic growth of
these businesses is at the heart of our plans. Our average revenue
per fee earner have improved significantly during the period and is
among the highest in the industry. Since April, we have hired seven
additional Partners; five have already started with the remaining
two joining either later in the year or early 2024. They all have
high levels of experience and knowledge in their respective fields,
creating more revenue opportunities.
"M&A activity in the UK during the first half of 2023,
industry-wide, has been at a much lower level than in recent years.
As a result, our specialist sell-side M&A advisory business,
Convex Capital, only completed one deal in the first half of 2023.
However, momentum is returning, and the business has a strong and
growing pipeline. We are confident that several deals will complete
before the end of the year.
"The decisive action we have taken during the first half, means
that the Group has been de-risked and simplified, providing greater
visibility to investors going forward. The ongoing business is
profitable and highly cash generative and we are committed to
reducing the Group's debt. We have a clear vision, a solid
foundation on which to grow, and an absolute commitment to
restoring the Group's value."
Enquiries:
RBG Holdings plc Via SEC Newgate
Jon Divers, Chief Executive Officer
Singer Capital Markets (Nomad and Broker) Tel: +44 (0)20 7496
Rick Thompson / Alex Bond / James Fischer (Corporate 3000
Finance)
Tom Salvesen (Corporate Broking)
SEC Newgate (F inancial Communications ) Tel: +44 (0)7540 106366
Tali Robinson / Robin Tozer rbg@secnewgate.co.uk
About RBG Holdings plc
Further information about RBG Holdings plc is available at:
www.rbgholdings.co.uk
Further information about Rosenblatt (founded in 1989) is
available at: www.rosenblatt.co.uk
Further information about Memery Crystal (founded in 1979) is
available at: www.memerycrystal.co.uk
Further information about Convex Capital (founded in 2010) is
available at: www.convexcap.com
Chief Executive's Statement
Since my appointment at the beginning of the year, the newly
strengthened Board and I have returned the Group's focus to its
core Legal Services business, reduced the Group's risk profile, and
prioritised the reduction of the Group's debt.
The performance in the first six months of the financial year
reflects this approach, and has involved significant non-cash write
offs, particularly through our decision to write down to zero our
litigation finance assets. However, in the future it means we will
be able to focus more on organic growth in Legal Services and
Convex Capital while reducing debt. We believe this approach will
be the most effective way of restoring shareholder value.
Group revenue was GBP20.5m (H1 2022: GBP26.5m including gains
from litigation assets) which partially reflected the absence of
gains from litigation assets in line with our decision to exit
LionFish Litigation Finance Limited ("LionFish") and reduce the
risk profile of the Group. Revenue was also impacted by reduced
M&A deal flow at Convex Capital due to market conditions which
delayed completions, some of which we now expect to occur in the
second half of 2023.
Our pre IFRS 16 net debt position as at 30 June 2023 was
GBP21.0m (H1 2022: GBP17.5m) which rose during the period due to
the emergence of a number of one-off, unforeseen legacy payments
that needed settling. Repaying this debt is a critical priority for
the new executive team and we have already paid back GBP3.5m from
the Group's GBP10m term loan. Exiting our third-party litigation
finance business, LionFish, along with a number of other actions
taken will also mean that the Group can focus on the reduction of
our net debt going forward. Furthermore, we have had positive
discussions with lenders regarding the Group's debt facilities due
for refinancing in April 2024.
The nomination committee is actively engaged with a search
agency to identify an additional non-executive director.
RBG Legal Services Limited ("RBGLS")
RBGLS combines our two legal brands - Rosenblatt and Memery
Crystal - which are aligned to contentious and non-contentious
services to reflect their brand position within the market. We are
building one of London's premier mid-tier law firms providing
quality advice to corporates, entrepreneurs and high net worth
individuals.
We are focused on the organic growth of these businesses. As at
30 June 2023, the combined businesses had 174 people, including 120
fee earners, with particular strength in Dispute Resolution,
Corporate and Real Estate. Since April, we have hired seven new
Partners; five have already started with the remaining two joining
either later in the year or early in 2024. They all have high
levels of experience and knowledge in their respective fields,
creating more revenue opportunities.
The average revenue per fee earner was GBP406,000 (H1 2022:
GBP363,000). Our revenue per fee earner is in the top 20 of all UK
law firms [4] driven by improved allocation of resources. The small
reduction in gross margin to 39% (H1 2022: 42%) reflects the
diversification of the Legal Services business into more
non-contentious areas of law, following the acquisition of Memery
Crystal. This is lower margin work but more consistent, which
provides a natural hedge to the Group's dispute resolution
activities which, while more profitable, are more contingent.
The combined businesses are winning a broad range of new
instructions, including corporate transactions, employment advisory
work and financial restructuring mandates. The significantly
enhanced scale has enabled us to win these mandates as well as
improve the opportunity pipeline. From May, the two law firms
started sharing a Practice Management System allowing them to work
seamlessly on the same cases, and improving cross selling
opportunities.
The macroeconomic uncertainty seen in the first quarter of 2023
contributed to revenue in H1 2023 being more subdued than in 2022.
Underlying revenue (excluding gains on litigation assets) was
GBP19.8m in 2023 compared to GBP20.7m in 2022, a decrease of 4.4%.
The consolidated Legal Services business has given us a more
balanced business across the key areas of Dispute Resolution,
Corporate and Real Estate. The Dispute Resolution division was
responsible for 44.4% (H1 2022: 31.6%) of RBGLS's revenue,
Corporate was 42.0% (H1 2022: 44.0%), and Real Estate represented
13.6% (H1 2022: 24.4%) of the combined business.
During the period, the Board reviewed the previous management's
strategy to invest in a number of Conditional Fee Arrangements
("CFAs") and Damages Based Agreements ("DBAs") undertaken through
RBGLS. Over the past six years, RBGLS invested in 13 cases with a
total cash investment of GBP17.4m. T he carrying value of the
remaining cases was GBP13.3m. One of these cases, Project Shango,
accounted for GBP9.3m of the total. As announced in July, having
taken advice, the Board concluded that Project Shango would not be
successful. The Board took the prudent decision to further write
down the value of all remaining cases on the balance sheet to zero,
including the four remaining fully funded retained LionFish
investments. The total non-cash write off is GBP13.3m. Any
successful outcomes of the cases will be returned to the Group as
revenue in line with RBGLS's percentage stake in the cases.
This decision simplified and de-risked the Group's balance
sheet, providing greater visibility to investors. RBGLS will
continue to offer its clients alternative billing arrangements
(both CFAs and DBAs) where appropriate but any investments in such
cases will be expensed when incurred and not be carried as assets
on its balance sheet in contrast to the treatment by the previous
management. Any fees from wins on such cases will simply be
recorded as revenue when paid.
Convex Capital Limited ("Convex Capital")
Convex Capital, the specialist sell-side corporate finance
advisory boutique based in Manchester, is entirely focused on
helping companies, particularly owner-managed and entrepreneurial
businesses, realise their value through sales to large corporates
or private equity investors. Convex Capital identifies and
proactively targets businesses that it believes represent
attractive acquisition opportunities. Convex has a motivated,
dynamic team of 14 people, 13 of whom are fee-earners.
The acquisition of Convex Capital was part of the Board's
strategy focusing on other high-margin professional services areas.
Convex Capital is an entrepreneurial, cash-generative business
operating across the UK and Europe and will provide the Group with
further funds for reinvestment into other high-margin areas.
As at 30 June 2023, Convex Capital had completed one deal and
delivered GBP0.7m of revenue reflecting the subdued M&A market
across the UK. The strength of its pipeline and the agile nature of
the business has enabled Convex Capital to maintain deal flow
through the first half. As at 27 September 2023, Convex Capital had
22 active deals. We are confident that several of these deals will
complete before the end of the year.
The business is actively building the target pipeline with a
data-driven approach to generate deals rather than the traditional
passive model where the target company waits to be approached and
then appoints a corporate finance partner. Completed deals lead to
recommendations (which still go through the active data driven
qualification). It is the Board's expectation that the current
macro-economic environment will support the on-going fundamentals
that drive M&A.
LionFish
On 12 July 2023, the Group completed the disposal of the
non-core business, LionFish to Blackmead Infrastructure Limited
("Blackmead") which reduced the Group's exposure to litigation
funding commitments.
LionFish was started by the previous management and financed
litigation matters run by third-party solicitors. The consideration
for the disposal is up to GBP3.07m, comprising an immediate payment
of GBP1.07m to be used for repayment of an intercompany loan, an
additional payment of up to GBP2.0m, subject to performance
conditions to be used to repay additional intercompany debt, and
GBP1 for the entire share capital of LionFish. The proceeds from
the sale will be used for working capital purposes and to reduce
Group borrowings. The net asset value of the four cases acquired by
Blackmead had an adjusted net book value of GBP3.7m, leading to a
loss on disposal of GBP0.64m.
Balance Sheet and Dividend Policy
The previous management's strategy to acquire new businesses and
invest in LionFish had a significant impact on the Group's cash
resources over the past four years. Following feedback from
significant shareholders about the importance of reducing
borrowings, the Board announced it was suspending the Group's
dividend policy for the foreseeable future. The disposal of
LionFish and a pause in any future acquisitions will enable the
Group to more effectively prioritise debt reduction. The Board
recognises the importance of dividends to shareholders and will
reinstate its dividend policy once it has made headway in reducing
the Group's debt to a more prudent level.
Outlook
The work undertaken in the first half of 2023 by the new
executive leadership team leaves the Group well placed to execute
its strategic objectives of returning the focus to the Group's core
Legal Services business, reducing the Group's risk profile, and
paying down debt.
The Board notes the first half of the Company's financial year
has historically been the slower of the two halves, and the Board
expects this trend to continue in 2023. Trading within the Group's
Legal Services division was robust in H1, despite the economic
headwinds, and the Group has good visibility on revenue and
profitability for this division for H2.
As a result, the Board is confident that the core Legal Services
business will meet its full year expectations. Convex Capital has
grown its pipeline to 22 deals over the past few months, seven of
which are in the latter stages of completion. We are confident that
several of these deals will complete before the end of the year.
The Board therefore expects to achieve full-year market
forecast.
Economic conditions continue to be volatile, but we look forward
to the coming months with optimism and are confident about the
Group's long-term prospects following the actions taken.
Jon Divers
Group Chief Executive Officer
28 September 2023
Chief Financial Officer's Review
Financial Review
The first half of 2023 was about the new management team
refocussing the Group on its core activities and cleaning up some
of the historic baggage of previous periods. While the key
financial indicators for H1 2023 were down from the previous year,
they represent a solid basis from which to grow the business going
forward.
Key Performance Indicators [5] :
-- Revenue down 22.6% to GBP20.5m (H1 2022: GBP26.5m (which
included gains on litigation assets of GBP1.6 m))
-- Adjusted EBITDA GBP2.9m (H1 2022: GBP7.0 m)
-- Adjusted profit before tax GBP0.4m (H1 2022: profit GBP4.6m)
-- Non-recurring costs GBP13.7m (H1 2022: GBPnil)
-- EBITDA loss of GBP10.8m (H1 2022: profit of GBP7.0m)
-- Loss before tax of GBP13.3m (H1 2022: profit of GBP4.6m)
-- Loss from continuing operations GBP10.2m (H1 2022: profit of GBP3.6m)
-- Profit from discontinued operations GBP1.6m (H1 2022: loss of GBP0.2m)
-- Adjusted free cash flow generation in the period was GBP0.4m (H1 2022: GBP3.1m)
-- Net debt of GBP21.0m (H1 2022: net debt of GBP17.5m)
-- Legal services average revenue per fee earner GBP406,000 (H1 2022: GBP363,000)
Revenue and Gains on Litigation Assets
Reported Group revenue for the period is GBP20.5m compared to
GBP26.6m in 2022, representing a 22.6% decrease (H1 2022 included
gains on litigation assets of GBP1.6m).
Revenue from Legal Services decreased from GBP22.3m in H1 2022
to GBP19.8m in H1 2023. The 2022 figures, however, include GBP1.6m
of gains on litigation assets (2023: GBPnil). In July, the Group
announced that it was writing off the value of its remaining
litigation assets following the disposal of LionFish and would not,
therefore, have any future gains or losses on the revaluation of
litigation assets. The underlying trading revenue of the Legal
Services division on a like for like basis (excluding gains on
litigation assets) of GBP19.8m was 4% lower than the GBP20.7m for
2022.
The more significant drop in revenue was at Convex. Revenue for
H1 2023 was down to GBP0.7m from GBP4.2m in 2022. The impact on
revenues was driven by a very challenging market for M&A in H1
2023 as interest rates continues to increase and transactions
volumes collapsed across the sector. Fortunately, the transactions
that Convex were working on suffered delays rather than failure and
the pipeline for H2 2023 and beyond remains strong.
Staff costs
Total staff costs for the first half of 2023 were GBP13.6m (H1
2022: GBP15.6 m), which includes GBP12.1m for Legal Services and
GBP0.9m for Convex. The average number of employees across the
Group was 201 (H1 2022: 216). The reduction reflects the Group's
more flexible approach to staffing and the use of consultant
solicitors to allow the business to more effectively scale up and
scale down during the course of the year.
Overhead costs
During the half year 2023, the Group incurred overheads of
GBP31.3m (before depreciation and amortisation) (H1 2022:
GBP19.5m). The vast majority of this increase is due to
non-underlying items during the period which totalled GBP13.7m (H1
2022: GBPnil).
The non-underlying items of GBP13.7m are made up of GBP11.0m for
RBGLS litigation asset write offs, GBP2.2m for Group costs
associated with discontinued operations, a GBP0.3m release of prior
year restructuring cost accrual and GBP0.7m of other one-off
costs.
Adjusting for the non-underlying items, the overheads for H1
2023 were GBP17.6m compared with GBP19.5m. This included a
reduction in central overheads of GBP700k as a result of the
changes in the leadership team. The decrease of GBP1.9m, or 13% was
driven principally by staff costs being 13% less in HY2023,
professional fees down 31% and marketing and promotion down
18%.
EBITDA
EBITDA loss for the half year to 30 June 2023 was (GBP10.8m) (H1
2022: EBITDA GBP7.0 m).
Loss Before Tax
The loss before tax for the period was GBP13.3m representing (H1
2022: profit of GBP4.6 m).
Earnings Per Share (EPS)
The weighted average number of shares in 2023 was 95.3m which
gives a basic earnings per share (Basic EPS) from total operations
for the period of (9.08)p (H1 2022: 3.62p).
Balance Sheet
2023 2022 [6]
GBPm GBPm
Goodwill, intangible and tangible assets 73.2 80.8
------- ---------
Current Assets 26.4 21.9
------- ---------
Current Liabilities (15.2) (10.7)
------- ---------
Assets held for sale 5.6 8.3
------- ---------
Liabilities held for sale (5.2) (5.6)
------- ---------
84.8 94.7
------- ---------
Net debt (21.0) (17.5)
------- ---------
Non-Current Liabilities (13.3) (15.3)
------- ---------
Net assets 50.6 61.9
------- ---------
The Group's net assets as at 30 June 2023 decreased by GBP9.6m
on the prior year. Of this decrease, GBP11.0m relates to the
non-cash write off of litigation assets.
Goodwill, Tangible and Intangible Assets
Included within tangible assets is GBP14.0m which relates to
IFRS 16 right of use assets for the Group's leases. Within total
intangible assets of GBP57.1m, GBP51.9m relates to goodwill,
GBP2.8m relates to Brand of acquisitions and GBP2.4m to other
intangible assets. The Company has considered the amounts at which
goodwill and intangible assets are stated on the basis of forecast
future cash flows and have concluded that these assets have not
been materially impaired.
Working Capital
For the Legal Services business, lock up days is a measure of
the length of time it takes to convert work done into cash. It is
calculated as the combined debtor and WIP days.
Lock up days at 30 June 2023 were 152 compared to 120 for the
previous year, with debtor days being 61 (H1 2022: 52 days) and WIP
days being 91 (H1 2022: 68 days). As the business has become more
balanced across departments, lock up has increased, driven by
non-contentious transactions, which have longer payment terms. This
is an area of intense focus for management as the business grows.
At 30 June 2023, trade debtors less provision for impairment were
GBP10.5m (H1 2022: GBP7.7m) and contract assets were GBP9.8m (H1
2022: GBP8.0m).
In Convex, invoices are raised, and cash is received, at the
point of deal completion.
Borrowings
The Group has a revolving credit facility of GBP15m and a term
loan of GBP10m repayable over 5 years (GBP3.5m repaid as at 30 June
2023).
Our net debt position was GBP21.0m at the end of the period (H1
2022: GBP17.5m). Pressure on working capital has meant the Group
relied more heavily on the revolving credit facility in 2023 than
previously. Management expects this to continue through the
remainder of 2023 but then to reduce significantly in 2024.
The Group has commenced a review of its borrowing facilities in
anticipation of their upcoming renewal in April 2024. We are
currently in discussions with a number of potential debt providers
as part of that process. The Group remains in compliance with the
terms and conditions of its existing loan agreements and will
continue to update the market on progress in relation to the
refinancing of those facilities.
Cash Conversion
2023 2022
GBPm GBPm
Cash flows from operating activities 1.9 7.6
------ ------
Movements in working capital 2.5 1.1
------ ------
Increase in litigation assets (0.7) (4.9)
------ ------
Net cash generated from operations 3.7 3.8
------ ------
Interest (0.7) (0.6)
------ ------
Capital expenditure (2.6) (0.1)
------ ------
Free cash flow 0.4 3.1
------ ------
Underlying profit after tax (8.7) 3.4
------ ------
Cash conversion (5%) 91%
------ ------
The cash conversion percentage measures the Group's conversion
of its underlying profit after tax into free cash flows. Net cash
generated from operations includes GBP0.7 m (H1 2022: GBP4.9 m) of
net litigation investments. Cash conversion of (5%) (H1 2022: 91%)
for the half year shows a decrease from previous periods as a
result of the stronger six-month trading period.
Summary
We are pleased with the underlying profitability and performance
of the Group during the first half of the year as the new
management team refocuses the business. The Legal Services division
has responded well to the challenges of the uncertain economy
whereas Convex has been more materially impacted. Convex's healthy
pipeline of transactions provides the opportunity for it to return
to profitability while the Legal Services business returns to the
consistent growth of the past several years.
Kevin McNair
Interim Finance Director
28 September 2023
Unaudited consolidated statement of comprehensive income
For the period ended 30 June 2023
Unaudited Unaudited Audited
Note 1 January 1 January 1 January
to to to
30 June 30 June 31 December
2023 2022 [7] 2022
GBP GBP GBP
Revenue 4 20,511,679 24,890,833 50,307,263
Gains on litigation assets 4 - 1,619,950 3,821,700
Personnel costs 5 (13,567,521) (15,628,776) (30,713,284)
Depreciation and amortisation expense (1,725,825) (1,808,368) (3,543,302)
Other expenses (17,714,260) (3,876,955) (8,787,105)
Profit from operations (12,495,926) 5,196,684 11,085,272
EBITDA (10,770,101) 7,005,052 14,628,574
Non-underlying items
Cost of acquiring subsidiary 25,000 - 367,303
Litigation asset write-off 11,035,325 - -
Costs associated with discontinued 2,155,000 - -
operations
Other one-off costs 738,210 - -
Restructuring (release)/costs (256,288) - 834,808
Adjusted EBITDA 2,927,147 7,005,052 15,830,685
------------------------------------------- ----- ------------- ------------- -------------
Finance expense (1,043,497) (619,598) (1,361,514)
Finance income 218,130 8,666 32,739
Loss on sale of associate - (21,643) (21,643)
Profit before tax (13,321,293) 4,564,109 9,734,854
Tax benefit/(expense) 3,106,118 (952,736) (1,932,586)
(Loss)/profit from continuing
operations (10,215,175) 3,611,373 7,802,268
------------- ------------- -------------
Profit/(loss) on discontinued operations,
net of tax 6 1,554,761 (174,203) (3,984,887)
(Loss)/profit and total comprehensive
income (8,660,414) 3,437,170 3,817,381
------------- ------------- -------------
Total profit and comprehensive
income attributable to:
Owners of the parent (8,660,414) 3,454,590 4,202,943
Non-controlling interest - (17,420) (385,562)
(8,660,414) 3,437,170 3,817,381
------------- ------------- -------------
Earnings per share attributable
to the ordinary equity holders
of the parent 7
Profit
Basic (pence) from continuing operations (10.72) 3.79 8.18
Diluted (pence) from continuing
operations (10.69) 3.78 8.17
Basic (pence) from total operations (9.08) 3.62 4.41
Diluted (pence) from total operations (9.07) 3.62 4.40
------------- ------------- -------------
Unaudited consolidated statement of financial position
As at 30 June 2023
Company registered number: 11189598 Unaudited Unaudited Audited
Note 30 June 30 June 31 December
2023 2022 [8] 2022
GBP GBP GBP
Assets
Current assets
Trade and other receivables 26,351,858 21,874,871 26,937,181
Cash and cash equivalents 1,359,375 4,691,574 3,000,678
Current tax assets 1,719,020 - -
------------ ------------ ------------
29,430,253 26,566,445 29,937,859
Non-current assets
Property, plant and equipment 9 2,125,349 2,446,548 2,229,958
Right-of-use assets 10 14,004,673 15,369,432 15,074,132
Intangible assets 11 57,117,222 55,440,526 55,021,817
Litigation assets 12 - 7,537,479 10,603,024
73,247,244 80,793,985 82,928,931
Assets held for sale - discontinued
operations 6 5,609,777 8,315,251 5,347,117
Total assets 108,287,274 115,675,681 118,213,907
============ ============ ============
Liabilities
Current liabilities
Trade and other payables 12,489,537 7,333,719 9,465,968
Leases 10 2,291,833 1,891,890 2,238,052
Current tax liabilities - 1,126,480 1,601,655
Provisions 420,001 340,061 211,536
Loans and borrowings 13 21,988,192 2,182,163 2,205,640
------------ ------------ ------------
37,189,563 12,874,313 15,872,851
Non-current liabilities
Deferred tax liability 706,592 1,077,367 744,328
Leases 10 12,557,566 14,175,692 13,713,932
Loans and borrowings 13 374,975 20,000,000 20,000,000
13,639,133 35,253,059 34,458,260
Liabilities held for sale - discontinued
operations 6 5,170,957 5,620,509 6,463,058
Total liabilities 55,999,652 53,747,881 56,794,169
============ ============ ============
NET ASSETS 52,287,622 61,927,800 61,419,738
============ ============ ============
Issued capital and reserves attributable
to owners of the parent
Share capital 190,662 190,662 190,662
Share premium reserve 49,232,606 49,232,606 49,232,606
Retained earnings 2,864,354 12,235,057 11,996,470
------------ ------------ ------------
52,287,622 61,658,325 61,419,738
Non-controlling interest - 269,475 -
TOTAL EQUITY 52,287,622 61,927,800 61,419,738
============ ============ ============
The interim statements were approved by the Board of Directors
and authorised for issue on 28 September 2023.
Unaudited consolidated statement of cash flows
For the period ended 30 June 2023
Unaudited Unaudited Audited
Note 30 June 30 June 31 December
2023 2022 [9] 2022
GBP GBP GBP
Cash flows from operating activities
Profit/(Loss) for the year before
tax from:
Continuing operations (13,321,293) 4,564,109 9,734,855
Discontinued operations 1,617,647 (215,665) (4,899,522)
Adjustments for:
Depreciation of property, plant
and equipment 9 253,799 286,851 556,403
Amortisation of right-of-use assets 10 1,069,459 1,104,851 2,153,585
Amortisation of intangible fixed
assets 11 404,596 418,704 837,413
Fair value movement of litigation
assets net of realisations - 811,381 3,418,176
Write off of litigation assets 11,035,325 - -
Finance income (218,130) (8,666) (32,739)
Finance expense 1,043,497 619,598 1,361,514
Loss on sale of equity accounted
associate - 21,643 21,643
------------- ------------ ------------
1,884,900 7,602,806 13,151,328
Decrease/(increase) in trade and
other receivables (192,174) 1,110,376 (3,600,176)
Increase/(decrease) in trade and
other payables 2,661,522 16,626 3,609,645
(Increase) in litigation assets 12 (704,503) (4,936,934) (7,781,846)
Increase in provisions 58,465 25,770 47,245
Cash generated from operations 3,708,209 3,818,644 5,426,196
Tax paid (394,512) (601,566) (601,569)
------------- ------------ ------------
Net cash flows from operating activities 3,313,697 3,217,078 4,824,627
Investing activities
Purchase of property, plant and
equipment 9 (147,162) (148,838) (199,741)
Purchase of other intangibles (2,500,000) - -
Sale of Associate - - 80,000
Payment of deferred consideration - (2,248,319) (2,248,319)
Interest received 218,130 8,666 32,739
Net cash (used in) investing activities (2,429,032) (2,388,491) (2,335,321)
Financing activities
Dividends paid to holders of the
parent (471,702) (2,832,898) (4,736,071)
Proceeds from loans and borrowings 13 749,950 4,000,000 -
Repayment of loans and borrowings 13 (500,000) (1,000,000) 5,000,000
Repayments of lease liabilities 10 (1,360,548) (342,794) (2,000,000)
Interest paid on loans and borrowings (693,111) (303,126) (1,211,829)
Interest paid on lease liabilities 10 (257,963) (263,900) (756,768)
Net cash (used in)/from financing
activities (2,533,374) (742,718) (4,233,366)
Net increase/(decrease) in cash
and cash equivalents (1,648,708) 85,869 (1,744,060)
Cash and cash equivalents at beginning
of year 3,012,083 4,756,143 4,756,143
Cash and cash equivalents at end
of year 1,363,375 4,842,012 3,012,083
Cash and cash equivalents - continuing
operations 1,359,375 4,691,574 3,000,678
Cash and cash equivalents - discontinued
operations 4,000 150,438 11,405
------------
Cash and cash equivalents per consolidated
balance sheet 1,363,375 4,842,012 3,012,083
Consolidated statement of changes in equity
For the period ended 30 June 2023
Share Share Premium Retained Total Non-controlling Total equity
Capital Earnings attributable interest
to equity
holders of
the parent
GBP GBP GBP GBP GBP GBP
Balance at 1
January 2022 190,662 49,232,606 11,113,365 60,536,633 286,895 60,823,528
Comprehensive
profit for the
period
Profit for the
period - - 3,454,590 3,454,590 (17,420) 3,437,170
------------- -------------- ------------ ------------- ---------------- -------------
Total
comprehensive
profit for
the period - - 3,454,590 3,454,590 (17,420) 3,437,170
Contributions
by and
distributions
to owners
Dividends - - (2,832,898) (2,832,898) - (2,832,898)
Reversal of
call option
over shares
of associate - - 500,000 500,000 - 500,000
Total
contributions
by and
distributions
to owners - - (2,332,898) (2,332,898) - (2,332,898)
Balance at 30
June 2022
(unaudited) 190,662 49,232,606 12,235,057 61,658,325 269,475 61,927,800
------------- -------------- ------------ ------------- ---------------- -------------
Consolidated statement of changes in equity
For the period ended 30 June 2023 (continued)
Share Share Premium Retained Total Non-controlling Total equity
Capital Earnings attributable interest
to equity
holders of
the parent
GBP GBP GBP GBP GBP GBP
Balance at 1
July 2022 190,662 49,232,606 12,235,057 61,658,325 269,475 61,927,800
Comprehensive
profit for the
period
Profit for the
period - - 748,353 748,353 (368,142) 380,211
------------- -------------- ------------ ------------- ---------------- -------------
Total
comprehensive
profit for
the period - - 748,353 748,353 (368,142) 380,211
Contributions
by and
distributions
to owners
Dividends - - (1,903,173) (1,903,173) - (1,903,173)
Purchase of
NCI share
capital - - (98,767) (98,767) 98,667 (100)
Reversal of
put option
over shares
of subsidiary - - 1,015,000 1,015,000 - 1,015,000
Total
contributions
by and
distributions
to owners - - (986,940) (986,940) 98,667 (888,273)
Balance at 31
December 2022 190,662 49,232,606 11,996,470 61,419,738 - 61,419,738
------------- -------------- ------------ ------------- ---------------- -------------
Consolidated statement of changes in equity
For the period ended 30 June 2023 (continued)
Share Share Premium Retained Total Non-controlling Total equity
Capital Earnings attributable interest
to equity
holders of
the parent
GBP GBP GBP GBP GBP GBP
Balance at 1
January 2023 190,662 49,232,606 11,996,470 61,419,738 - 61,419,738
Comprehensive
profit for the
period
Profit for the
period - - (8,660,414) (8,660,414) - (8,660,414)
------------- -------------- ------------ ------------- ---------------- -------------
Total
comprehensive
profit for
the period - - (8,660,414) (8,660,414) - (8,660,414)
Contributions
by and
distributions
to owners
Dividends - - (471,702) (471,702) - (471,702)
Total
contributions
by and
distributions
to owners - - (471,702) (471,702) - (471,702)
Balance at 30
June 2023
(unaudited) 190,662 49,232,606 2,864,354 52,287,622 - 52,287,622
------------- -------------- ------------ ------------- ---------------- -------------
Unaudited notes to the financial statements for the period ended
30 June 2023
1. Basis of preparation
RBG Holdings plc is a public limited company, incorporated in
the United Kingdom. The principal activity of the Group is the
provision of legal and professional services, including management
and financing of litigation projects.
Status of Interim Report
The Interim Report covers the six months ended 30 June 2023,
with comparative figures for the six months ended 30 June 2022 and
the year ended 31 December 2022 and was approved by the Board of
Directors on 28 September 2023. The Interim Report is
unaudited.
The interim condensed set of consolidated financial statements
in the Interim Report are not statutory accounts as defined by
Section 434 of the Companies Act 2006.
The statutory accounts for the year ended 31 December 2022 have
been reported on by the Group's auditors and delivered to the
Registrar of Companies. The audit report thereon was unqualified,
did not include references to matters to which the auditors drew
attention by way of emphasis without qualifying the report, and did
not contain a statement under Section 498 of the Companies Act
2006.
The principal accounting policies adopted in the preparation of
the unaudited consolidated financial statements are set out in Note
2. The policies have been consistently applied to the periods
presented, unless otherwise stated.
The unaudited consolidated financial statements of the Group
have been prepared in accordance with IFRS as adopted by the UK and
those parts of the Companies Act 2006 applicable to companies
reporting under IFRS. The preparation of financial statements in
compliance with IFRS requires the use of certain critical
accounting estimates. It also requires Group management to exercise
judgement in applying the Group's accounting policies. The areas
where significant judgements and estimates have been made in
preparing the financial statements and their effect are disclosed
in Note 3.
Discontinued operations
During the year ended 31 December 2022, the Board approved plans
to dispose of the Group's interests in LionFish. LionFish is
classified as held for sale at the balance sheet date. The net
results of LionFish have been presented as discontinued operations
in the Group statement of comprehensive income (for which the
comparatives have been restated). See Note 6 for further
details.
Going concern
The Group financial statements are prepared on a going concern
basis as the Directors have a reasonable expectation that the Group
has adequate resources to continue in operational existence for at
least twelve months from the date of approval of the financial
statements.
Notes (continued)
Significant accounting policies
2.
Revenue
Revenue comprises the fair value of consideration receivable in
respect of services provided during the year, inclusive of
recoverable expenses incurred but excluding value added tax.
Legal and Other Professional services revenues
Where fees are contractually able to be rendered by reference to
time charged at agreed rates, the revenue is recognised over time,
based on time worked charged at agreed rates, to the extent that it
is considered recoverable.
Where revenue is subject to contingent fee arrangements,
including where services are provided under Damages Based
Agreements (DBAs), the Group estimates the amount of variable
consideration to which it will be entitled and constrains the
revenue recognised to the amount for which it is considered highly
probable that there will be no significant reversal. Due to the
nature of the work being performed, this typically means that
contingent revenues are not recognised until such time as the
outcome of the matter being worked on is certain.
Bills raised are payable on delivery and until paid form part of
trade receivables. The Group has taken advantage of the practical
exemption in IFRS 15 not to account for significant financing
components where the Group expects the time difference between
receiving consideration and the provision of the service to a
client will be one year or less. Where revenue has not been billed
at the balance sheet date, it is included as contract assets and
forms part of trade and other receivables.
Professional services revenue
Professional services revenue is contingent on the completion of
a deal and is recognised when the deal has completed. Bills raised
are payable on deal completion and are generally paid at that
time.
Basis of consolidation
Where the company has control over an investee, it is classified
as a subsidiary. The company controls an investee if all three of
the following elements are present: power over the investee,
exposure to variable returns from the investee, and the ability of
the investor to use its power to affect those variable returns.
Control is reassessed whenever facts and circumstances indicate
that there may be a change in any of these elements of control.
The consolidated financial statements present the results of the
company and its subsidiaries ("the Group") as if they formed a
single entity. Intercompany transactions and balances between group
companies are therefore eliminated in full.
The consolidated financial statements incorporate the results of
business combinations using the acquisition method. In the
statement of financial position, the acquiree's identifiable
assets, liabilities and contingent liabilities are initially
recognised at their fair values at the acquisition date. The
results of acquired operations are included in the consolidated
statement of comprehensive income from the date on which control is
obtained. They are deconsolidated from the date on which control
ceases.
Non-Controlling interests
The total comprehensive income of non-wholly owned subsidiaries
is attributed to owners of the parent and to the non-controlling
interests in proportion to their relative ownership interests.
Notes (continued)
Significant accounting policies (continued)
2.
Goodwill
Goodwill represents the excess of the cost of a business
combination over the Group's interest in the fair value of
identifiable assets, liabilities and contingent liabilities
acquired.
Cost comprises the fair value of assets given, liabilities
assumed, and equity instruments issued, plus the amount of any
non-controlling interests in the acquiree plus, if the business
combination is achieved in stages, the fair value of the existing
equity interest in the acquiree. Contingent consideration is
included in cost at its acquisition date fair value and, in the
case of contingent consideration classified as a financial
liability, remeasured subsequently through profit or loss. Direct
costs of acquisition are recognised immediately as an expense.
Goodwill is capitalised as an intangible asset with any
impairment in carrying value being charged to the consolidated
statement of comprehensive income. Where the fair value of
identifiable assets, liabilities and contingent liabilities exceed
the fair value of consideration paid, the excess is credited in
full to the consolidated statement of comprehensive income on the
acquisition date.
Financial assets
The Group classifies its financial assets into one of the
categories discussed below, depending on the purpose for which the
asset was acquired. The Group's accounting policy for each category
is as follows:
Fair value through profit or loss
Litigation assets relate to the provision of funding to
litigation matters in return for a participation share in the
settlement of that case. Investments are initially measured at the
sum invested and are subsequently held at fair value through the
profit or loss.
When the Group disposes of a proportion of its participation
share in the settlement of the case to a third-party under an
uninsured ("naked") contract, where the percentage of the
litigation asset being disposed of and the percentage return remain
proportionate irrespective of the final outcome of the litigation,
the difference between the disposal proceeds and the cost of
investment disposed gives rise to a profit on disposal which is
recognised through the profit and loss when the sale is agreed.
These sales are non-recourse and, if the case is successful, the
relevant % of the settlement received is paid to the third-party.
For uninsured cases, the Group uses the value of third-party
disposals to calculate the gross value of the proportion of the
investment retained by the Group and deducts the expected cost of
investment to be borne by the Group to give the fair value of the
Group's investment. The proportion of each investment retained is
calculated using the expected total return on the investment, the
expected return payable to the onward investor and the expected
total return retained by the Group.
Notes (continued)
Significant accounting policies (continued)
2.
For insured cases, when the Group disposes of a proportion of
its participation share in the settlement of the case to a
third-party, where the third-party return is calculated as a fixed
percentage daily rate irrespective of the settlement value of a
successful litigation outcome, the derecognition requirements under
IFRS 9 para 3.2.2 are not met and no sale or profit on disposal
arise. The Group retains the full litigation asset and the proceeds
of disposal under the third-party contract are included as
litigation liabilities. The fair value of the litigation asset is
calculated using the expected total return retained by the Group in
the different possible outcomes factored by Management's
expectation of the likelihood of each outcome.
Litigation assets are reviewed for impairment where events or
circumstances indicate that their carrying amount may not be
recoverable. Where the carrying value of the litigation assets
exceeds its recoverable amount, the asset is written down
accordingly.
Amortised cost
These assets arise principally from the provision of goods and
services to customers (e.g., trade receivables), but also
incorporate other types of financial assets where the objective is
to hold these assets in order to collect contractual cash flows and
the contractual cash flows are solely payments of principal and
interest. They are initially recognised at fair value plus
transaction costs that are directly attributable to their
acquisition or issue and are subsequently carried at amortised cost
using the effective interest rate method, less provision for
impairment.
Impairment provisions for current and non-current trade
receivables are recognised based on the simplified approach within
IFRS 9 using a provision matrix in the determination of the
lifetime expected credit losses. During this process the
probability of the non-payment of the trade receivables is
assessed. This probability is then multiplied by the amount of the
expected loss arising from default to determine the lifetime
expected credit loss for the trade receivables. For trade
receivables, which are reported net, such provisions are recorded
in a separate provision account with the loss being recognised in
profit or loss. On confirmation that the trade receivable will not
be collectable, the gross carrying value of the asset is written
off against the associated provision.
From time to time, the Group elects to renegotiate the terms of
trade receivables due from customers with which it has previously
had a good trading history. Such renegotiations will lead to
changes in the timing of payments rather than changes to the
amounts owed and, in consequence, the new expected cash flows are
discounted at the original effective interest rate and any
resulting difference to the carrying value is recognised in the
consolidated statement of comprehensive income (operating
profit).
Impairment provisions for receivables from related parties and
loans to related parties, including those from subsidiary
companies, are recognised based on a forward looking expected
credit loss model. The methodology used to determine the amount of
the provision is based on whether there has been a significant
increase in credit risk since initial recognition of the financial
asset. This annual assessment considers forward-looking information
on the general economic and specific market conditions together
with a review of the operating performance and cash flow generation
of the entity relative to that at initial recognition. For those
where the credit risk has not increased significantly since initial
recognition of the financial asset, twelve month expected credit
losses along with gross interest income are recognised. For those
for which credit risk has increased significantly, lifetime
expected credit losses along with the gross interest income are
recognised. For those that are determined to be credit impaired,
lifetime expected credit losses along with interest income on a net
basis are recognised.
The Group's financial assets measured at amortised cost comprise
trade and other receivables and cash and cash equivalents in the
consolidated statement of financial position. Cash and cash
equivalents includes cash in hand, deposits held at call with
banks, and other short term highly liquid investments with original
maturities of three months or less.
Notes (continued)
Significant accounting policies (continued)
2.
Financial liabilities
The Group classifies its financial liabilities depending on the
purpose for which the liability was acquired.
Other financial liabilitie s
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 Useful economic Remaining Amortisation Valuation method
asset life useful economic method
life
Brand 20 years 14-19 years Straight line Estimated discounted
cash flow
Customer contracts 1-2 years 1 year In line with Estimated discounted
contract revenues cash flow
Restrictive 5 years 5 years Straight line Cost
covenant extension
Notes (continued)
Significant accounting policies (continued)
2.
Dividends
Dividends are recognised when they become legally payable. In
the case of interim dividends to equity shareholders, this is when
declared by the directors. In the case of final dividends, this is
when approved by the shareholders at the AGM.
3. Critical accounting estimates and judgements
The Group makes certain estimates and assumptions regarding the
future. Estimates and judgements are continually evaluated based on
actual experience and other factors, including expectations of
future events that are believed to be reasonable under the
circumstances. In the future, actual experience may differ from
these estimates and assumptions. The estimates and assumptions that
have a significant risk of causing a material adjustment to the
carrying amounts of assets and liabilities within the next
financial period are discussed below.
Judgements, estimates and assumptions
Estimated impairment of intangible assets including goodwill
Determining whether an intangible asset is impaired requires an
estimation of the value in use of the cash generating units to
which the intangible has been allocated. The value in use
calculation requires the entity to estimate the future cash flows
expected to arise from each cash generating unit and determine a
suitable discount rate. A difference in the estimated future cash
flows or the use of a different discount rate may result in a
different estimated impairment of intangible assets.
Revenue recognition
Where the Group performs work that is chargeable based on hours
worked at agreed rates, assessment must be made of the
recoverability of the unbilled time at the period end. This is on a
matter by matter basis, with reference to historic and post
year-end recoveries. Different views on recoverability would give
rise to a different value being determined for revenue and a
different carrying value for unbilled revenue.
Where revenue is subject to contingent fee arrangements, the
Group estimates the amount of variable consideration to which it
will be entitled and constrains the revenue recognised to the
amount for which it is considered highly probable that there will
be no significant reversal. Due to the nature of the work being
performed, this typically means that contingent revenues are not
recognised until such time as the outcome of the matter being
worked on is certain. Factors the Group considers when determining
whether revenue should be constrained are whether: -
a) The amount of consideration receivable is highly susceptible
to factors outside the Group's influence
b) The uncertainty is not expected to be resolved for a long time
c) The Group has limited previous experience (or limited other evidence) with similar contracts
d) The range of possible consideration amounts is broad with a large number of possible outcomes
Notes (continued)
Critical accounting estimates and judgements (continued)
3.
Different views being determined for the amount of revenue to be
constrained in relation to each contingent fee arrangement may
result in a different value being determined for revenue and also a
different carrying value being determined for unbilled amounts for
client work.
Where the group enters into contingent fee arrangements,
including where services are provided under Damages Based
Agreements ("DBAs"), the Group estimates the total amount of
variable consideration to which it will be entitled and constrains
the revenue recognition to the amount for which it is considered
highly probable that there will be no significant reversal. Due to
the nature of the work being performed, this typically means that
contingent revenues are not recognised until such time as the
outcome of the matter being worked on is certain.
Where non-contingent fees as well as contingent revenue are
earned on DBAs, the group must make a judgement as to whether
non-contingent amounts represent revenue or a reduction in funding,
with reference to the terms of the agreement and timing and
substance of time worked and payments made. Where non-contingent
revenue arises, the Group must match it against the services to
which it relates. This requires Management to estimate work done as
a proportion of total expected work to which the fee relates.
Different views could impact the level of non-contingent revenue
recognised.
Impairment of trade receivables
Receivables are held at cost less provisions for impairment.
Impairment provisions are recognised based on the simplified
approach within IFRS 9 using a provision matrix in the
determination of the lifetime expected credit losses. A different
assessment of the impairment provision with reference to the
probability of the non-payment of trade debtors or the expected
loss arising from default, may result in different values being
determined.
Litigation assets and fair value
LionFish
For each of LionFish's uninsured ("naked") investments, a
third-party disposal has been made. To calculate the profit on
disposal, the Group allocates the corresponding proportion of the
total expected cost of the investment against the proportion of the
investment sold. The total expected cost of each investment
involves an assumption regarding the total expected drawdown on
that investment, which may be less than the total value of funds
committed. To calculate the proportion of each investment retained,
the Group has estimated the expected total return on the investment
and the expected return payable to the onward investor. As returns
are dependent on the timing of the settlement, these estimates are
driven by assumptions over the most likely timing of settlement.
The sales prices of the part disposal are used to value the gross
value of the proportion of the litigation asset retained by the
Group and the estimated remaining capital to invest is deducted to
give the fair value of the Group's investment. The estimates used
in these calculations are based on semi-annual individual case by
case reviews by Management.
The fair value of LionFish's insured investments is calculated
using the expected total return retained by the Group in the
different possible outcomes factored by Management's expectation of
the likelihood of each outcome. As returns are dependent on the
timing of the settlement, these estimates are driven by assumptions
over the most likely timing of settlement. The total expected cost
of each investment involves an assumption regarding the total
expected drawdown on that investment, which may be less than the
total value of funds committed. The expected total returns retained
by the Group in the different possible outcomes are then factored
by Management's expectation of the likelihood of each outcome. The
estimates used in these calculations, are based on semi-annual
individual case by case reviews by Management.
Notes (continued)
Critical accounting estimates and judgements (continued)
3.
The recorded profits on disposal and carrying values are
relatively insensitive to assumptions made, with the exception that
matters for which capital invested is insured are sensitive to the
estimated settlement date and the success likelihood factor
applied. In general, the later the anticipated settlement date, the
greater the carrying value of the investment. Management has
exercised caution in its assessment of settlement dates. Management
have used historic success rates on contingent contentious cases to
factor the returns for the different possible outcomes.
Rosenblatt
Unlike LionFish's investments, the total return on Rosenblatt's
litigation assets is a proportion of damages awarded, rather than
being dependent on timing of settlement. As this figure is
potentially large and uncertain, and has a strong impact on fair
value calculations, where possible the Group avoids using it as an
input to its fair value calculations.
Where a recent disposal of an interest in a DBA has been made,
the sales price of the disposal has been used to value the gross
value of the interest in damages retained by the Group. The sales
price is adjusted downwards for the cost of the Group's ongoing
funding of the matter, which is not borne by the onward investor.
This involves an estimate of the likely amount and timing of
disbursements over the course of the matter, the minimum being
funds already disbursed at the balance sheet date. As management
believes the sales price of disposals to represent the floor level,
having been used to create a market and de-risk the original
investment, the minimum level of disbursements has also been used
in valuing the investment. If the present value of the maximum
level of disbursements were applied against the value of damages
based on disposal price, this would reduce the fair value of the
investment to zero. Conversely, if a discounted cash flow method of
valuation were used, including an estimate of the likely amount of
damages on settlement, the value of the investment would be
significantly increased.
It is presumed that fair value and cost approximate to each
other on initial recognition and where a damages based agreement is
at an early stage, such that the level of time worked is de
minimis, the financial asset has been valued at cost, subject to
assessment for overstatement.
Where there has been minimal activity on a damages based
agreement from period to period, the prior year valuation is taken
as the initial indication of fair value, subject to assessment for
overstatement.
Litigation assets are reviewed for impairment where events or
circumstances indicate that their carrying amount may not be
recoverable. Where the carrying value of the litigation asset
exceeds its recoverable amount, the asset is written down
accordingly.
Claims and regulatory matters
The Group from time to time receives claims in respect of
professional service matters. The Group defends such claims where
appropriate but makes provision for the possible amounts considered
likely to be payable, having regard to any relevant insurance cover
held by the Group. A different assessment of the likely outcome of
each case or of the possible cost involved may result in a
different provision or cost.
The Company has been informed that HMRC has started an inquiry
into the valuation of employee related securities issued by the
Company in April 2018 prior to the IPO.
Notes (continued)
Segment information
4.
The Group's reportable segments are strategic business groups
that offer different products and services. Operating segments are
reported in a manner consistent with the internal reporting
provided to the chief operating decision maker, which has been
identified as the Board of Directors of RBG Holdings plc.
The following summary describes the operations of each
reportable segment:
-- Legal services - Provision of legal advice, by RBGLS (trading
under two brands, Rosenblatt and Memery Crystal)
-- Litigation finance - Sale of litigation assets, by Rosenblatt
(litigation financing activities operated by LionFish are included
in discontinued operations, Note 6)
-- Other Professional services - Provision of sell-side M&A
corporate finance services, by Convex
Unaudited 6 months ended Legal Litigation Other Total
30 June 2023 services finance Professional
services
GBP GBP GBP GBP
Segment revenue 19,789,153 - 722,526 20,511,679
=========== =========== ============== =============
Segment gains on litigation
assets comprising:
Proceeds on disposal of - - - -
litigation assets
Realisation of litigation - - - -
assets
----------- ----------- -------------- -------------
Profit on disposal of litigation - - - -
assets
Fair value movement on - - - -
litigation assets
----------- ----------- -------------- -------------
- - - -
----------- ----------- -------------- -------------
Segment contribution 9,118,720 - (211,253) 8,907,467
=========== =========== ============== =============
Segment gains on litigation - - - -
assets
=========== =========== ============== =============
Costs not allocated to
segments
Personnel costs (1,963,308)
Depreciation and amortisation (1,725,825)
Other operating expense (17,714,260)
Net financial expenses (825,367)
Group profit for the period
before tax from continuing
operations (13,321,293)
-------------
Notes (continued)
4. Segment information (continued)
Unaudited 6 months ended Legal Litigation Other Total
30 June 2022 (restated) services finance Professional
services
GBP GBP GBP GBP
Segment revenue 20,692,323 - 4,198,510 24,890,833
=========== =========== ============== ============
Segment gains on litigation
assets comprising:
Proceeds on disposal of
litigation assets - 2,431,331 - 2,489,950
Realisation of litigation
assets - (811,381) - (811,381)
----------- ----------- -------------- ------------
Profit on disposal of litigation
assets - 1,619,950 - 1,678,569
Fair value movement on - - - -
litigation assets
----------- ----------- -------------- ------------
- 1,619,950 - 1,678,569
----------- ----------- -------------- ------------
Segment contribution 9,778,777 - 2,172,232 11,957,009
=========== =========== ============== ============
Segment gains on litigation
assets - 1,619,950 - 1,619,950
=========== =========== ============== ============
Costs not allocated to
segments
Personnel costs (2,698,648)
Depreciation and amortisation (1,808,368)
Other operating expense (3,873,259)
Net financial expenses (632,575)
Group profit for the period
before tax from continuing
operations 4,564,109
------------
Notes (continued)
4. Segment information (continued)
Audited 12 months ended Legal Litigation Other Total
31 December 2022 services finance Professional
services
GBP GBP GBP GBP
Segment revenue 44,873,908 - 5,433,355 50,307,263
=========== =========== ============== ============
Segment gains on litigation
assets comprising:
Proceeds on disposal of
litigation assets - 2,741,700 - 2,741,700
Realisation of litigation
assets - (720,000) - (720,000)
----------- ----------- -------------- ------------
Profit on disposal of litigation
assets - 2,021,700 - 2,021,700
Fair value movement on
litigation assets - 1,800,000 - 1,800,000
----------- ----------- -------------- ------------
- 3,821,700 - 3,821,700
----------- ----------- -------------- ------------
Segment contribution 22,699,777 - 1,944,104 24,643,881
=========== =========== ============== ============
Segment gains on litigation
assets - 3,821,700 - 3,821,700
=========== =========== ============== ============
Costs not allocated to
segments
Personnel costs (5,074,989)
Depreciation and amortisation (3,543,302)
Other operating expense (8,762,018)
Net financial expenses (1,328,775)
Loss on sale of equity accounted
associate (21,643)
Group profit for the period
before tax on continuing
operations 9,734,854
------------
Notes (continued)
5. Employees
Unaudited Unaudited Audited
6 mos ended 6 mos ended Year ended
30 Jun 2023 30 Jun 2022 31 Dec
2022
restated
Group GBP GBP GBP
Staff costs (including directors)
consist of:
Wages and salaries 10,465,679 11,953,139 22,804,330
Short-term non-monetary benefits 156,968 137,905 294,501
Cost of defined contribution scheme 357,320 359,240 711,529
Share-based payment expense - - 6,244
Social security costs 1,283,451 1,509,641 2,999,841
------------ ------------ -----------
12,263,418 13,959,925 26,816,445
------------ ------------ -----------
Personnel costs stated in the consolidated statement of
comprehensive income includes the costs of contractors of
GBP1,304,103 (HY2022: GBP1,668,851 FY2022: GBP3,896,839).
Staff costs transferred to discontinued operations during the
year of GBP238,398 (HY2022: GBP255,342 FY2022: GBP474,361).
Contractors' costs transferred to discontinued operations during
the year of GBP866 (HY2022: GBP9,595 FY2022: GBP7,655)
The average number of employees (including directors) during the
period was as follows:
Unaudited Unaudited Audited
6 mos ended 6 mos ended Year ended
30 June 30 Jun 2022 31 Dec 2022
2023
Number Number Number
Legal and professional staff 135 142 138
Administrative staff 66 74 73
------------ ------------ ------------
201 216 211
------------ ------------ ------------
Defined contribution pension schemes are operated on behalf of
the employees of the Group. The assets of the schemes are held
separately from those of the Group in independently administered
funds. The pension charge represents contributions payable by the
Group to the funds and amounted to GBP357,320 (HY2022: GBP365,071,
FY2022: GBP711,529).
Contributions amounting to GBP180,593 (HY2022: GBP136,336,
FY2022: GBP260,548) were payable to the funds at period end and are
included in trade and other payables.
Notes (continued)
6. Discontinued operations
In December 2022, the Board announced its intention to dispose
of LionFish Litigation Finance Limited ("LionFish").
Financial performance and cash flow information
The financial performance and cash flow information presented
are for the 6 months ending 30 June 2023 and 30 June 2022 and 12
months ending 31 December 2022.
Unaudited Unaudited Audited
30 Jun 30 Jun 31 Dec
2023 2022 2022
Discontinued operations - LionFish GBP GBP GBP
(Loss)/Gain on litigation assets (282,117) 58,619 (4,318,025)
Expenses other than finance costs (246,595) (274,284) (500,608)
Non-underlying items 2,146,360 - (80,889)
Tax credit/(expense) (62,887) 41,462 914,635
(Loss)/Profit for the year 1,554,761 (174,203) (3,984,887)
---------- ---------- ------------
Attributable to:
Equity holders of the parent 1,554,761 (156,783) (3,599,325)
Non-controlling interests - (17,420) (385,562)
---------- ---------- ------------
1,554,761 (174,203) (3,984,887)
---------- ---------- ------------
Unaudited Unaudited Audited
30 Jun 30 Jun 31 Dec
2023 2022 2022
Cash flow GBP GBP GBP
Net cash (outflow)/inflow from
operating activities 134,815 131,230 (845,511)
Net cash outflow from investing
activities - (389) (389)
Net cash outflow from financing - - -
activities
---------- ---------- ------------
Net (decrease)/increase in cash
generated 134,815 130,841 (845,900)
---------- ---------- ------------
Notes (continued)
6. Discontinued operations (continued)
Assets and liabilities of disposal group held for sale
The following major classes of assets and liabilities in
relation to LionFish have been classified as held for sale in the
consolidated statement of financial position.
Unaudited Unaudited Audited
30 Jun 30 Jun 31 Dec
2023 2022 2022
GBP GBP GBP
Property, plant and equipment 742 4,830 2,770
Litigation investments 5,603,898 8,159,126 5,331,698
Trade and other receivables 1,137 857 1,244
Cash and cash equivalents 4,000 150,438 11,405
---------- ---------- ----------
Assets held for sale 5,609,777 8,315,251 5,347,117
---------- ---------- ----------
Trade and other payables 848,720 838,013 1,283,883
Amounts due to parent company 3,989,013 4,334,480 4,766,624
Tax liabilities 333,218 448,016 412,551
---------- ---------- ----------
Liabilities held for sale 5,170,957 5,620,509 6,463,058
---------- ---------- ----------
Notes (continued)
7. Earnings per share
Unaudited Unaudited Audited
6 mos ended 6 mos ended Year ended
30 June 30 June 31 Dec 2022
2023 2022
Numerator GBP GBP GBP
Profit for the period and earnings
used in basic and diluted EPS:
From continuing operations (10,215,175) 3,611,373 7,802,268
From discontinued operations 1,554,761 (156,783) (3,599,325)
Non-Underlying items
Costs of acquiring subsidiary 25,000 - 367,303
Litigation asset write off 11,035,325 - -
Costs associated with discontinued
operations 2,155,000 - -
One off costs 738,210 - -
Restructuring (release)/costs (256,288) - 834,808
Less: tax effect of above items - - (209,647)
Profit for the period from continuing
operations adjusted for non-underlying
items 3,482,073 3,611,373 8,794,732
------------- ------------ ------------
Denominator Number Number Number
Weighted average number of shares
used in basic EPS 95,331,236 95,331,236 95,331,236
Impact of share options 188,392 188,392 188,392
Weighted average number of shares
used in diluted EPS 95,519,628 95,519,628 95,519,628
Notes (continued)
7. Earnings per share (continued)
Unaudited Unaudited Audited
30 Jun 30 Jun 31 Dec
2023 2022 2022
Pence Pence Pence
Basic earnings per ordinary share
from continuing operations (10.72) 3.79 8.18
Diluted earnings per ordinary share
from continuing operations (10.69) 3.78 8.17
Basic earnings per ordinary share
from discontinued operations 1.63 (0.16) (3.78)
Diluted earnings per ordinary share
from discontinued operations 1.63 (0.16) (3.78)
Basic earnings per ordinary share
from total operations (9.08) 3.62 4.41
Diluted earnings per ordinary share
from total operations (9.07) 3.62 4.40
Basic earnings per ordinary share
adjusted for non-underlying items
from continuing operations 3.65 3.79 9.23
Diluted earnings per ordinary share
adjusted for non-underlying items
from continuing operations 3.65 3.78 9.21
8. Dividends
On 16 June 2023, a final dividend of 0.5 pence per share was
paid in respect of the 2022 financial year.
Notes (continued)
9. Property, plant and equipment
Group Leasehold Fixtures Computer Total
improvements and fittings equipment
GBP GBP GBP GBP
Cost
At 1 January 2023 2,717,750 339,177 883,544 3,940,471
Additions - 699 146,463 147,162
-------------- -------------- ----------- ----------
At 30 June 2023 2,717,750 339,876 1,030,007 4,087,633
Accumulated Depreciation
and Impairment
At 1 January 2023 772,518 226,388 711,607 1,710,513
Charge for the period 120,992 54,538 76,241 251,771
-------------- -------------- ----------- ----------
At 30 June 2023 893,510 280,926 787,848 1,962,284
Net book value
At 1 January 2023 1,945,232 112,789 171,937 2,229,958
At 30 June 2023 1,824,240 58,950 242,159 2,125,349
-------------- -------------- ----------- ----------
Under debentures signed and registered on 19 April 2021, HSBC UK
Bank plc have fixed and floating charges over the property, plant
and equipment of the Group.
Notes (continued)
10. Leases
The Group leases its business premises in the United Kingdom.
The lease contracts either provide for annual increases in the
periodic rent payments linked to inflation or for payments to be
reset periodically to market rental rates.
Right-of-Use Assets
Land and Total
buildings
GBP GBP
At 1 January 2023 15,074,132 15,074,132
Amortisation (1,069,459) (1,069,459)
At 30 June 2023 14,004,673 14,004,673
Lease liabilities
Land and Total
buildings
GBP GBP
At 1 January 2023 15,951,984 15,951,984
Interest expense 257,963 257,963
Lease payments (1,360,549) (1,360,549)
------------ ------------
At 30 June 2023 14,849,399 14,849,399
10. Leases (continued)
At 30 June 2023, lease liabilities were falling due as
follows:
Group Up to 3 Between Between Between Over 5 Total
months 3 and 12 1 and 2 2 and 5 years
months years years
GBP GBP GBP GBP GBP GBP
Lease liabilities 564,368 1,727,466 2,391,085 4,992,192 5,174,288 14,849,399
Notes (continued)
11. Intangible assets
Group Goodwill Customer Brand Other Total
Contracts
GBP GBP GBP GBP GBP
Cost
At 1 January 2023 51,862,168 1,706,578 3,360,474 1,000,000 57,929,220
Additions - - - 2,500,000 2,500,000
----------- ----------- ---------- ---------- -----------
At 30 June 2023 51,862,168 1,706,578 3,360,474 3,000,000 60,429,220
Accumulated amortisation
and impairment
At 1 January 2023 - 1,635,988 438,082 833,333 2,907,403
Amortisation charge - 70,590 84,005 250,000 404,595
----------- ----------- ---------- ---------- -----------
At 30 June 2023 - 1,706,578 522,087 1,083,333 3,311,998
Net book value
At 1 January 2023 51,862,168 70,590 2,922,392 166,667 55,021,817
----------- ----------- ---------- ---------- -----------
At 30 June 2023 51,862,168 - 2,838,387 2,416,667 57,117,222
----------- ----------- ---------- ---------- -----------
Under debentures signed and registered on 19 April 2021, HSBC UK
Bank plc have fixed and floating charges over the intangible assets
of the Group.
Notes (continued)
12. Litigation assets
The table below provides analysis of the movements in the Level
3 financial assets.
Unaudited Unaudited Audited
30 June 2023 30 June 2022 31 December
2023
Level 3 Level 3 Level 3
restated
GBP GBP GBP
At 1 January 10,603,024 11,571,052 6,675,538
Additions 432,301 4,936,934 2,847,486
Realisations - (811,381) (720,000)
Fair value movement - - 1,800,000
Write off (11,035,325) - -
-------------- -------------- -------------
At 30 June / 31 December - 15,696,605 10,603,024
-------------- -------------- -------------
Sensitivity of Level 3 valuations
Following investment, the Group engages in a semi-annual review
of each investment's fair value. At 30 June 2023, should the value
of investments have been 10% higher or lower than provided for in
the Group's fair value estimation, while all other variables
remained constant, the Group's income and net assets would have
increased and decreased respectively by GBPnil (HY2022:
GBP1,569,661, FY2022: GBP1,060,302).
Notes (continued)
13. Loans and borrowings
The book value and fair value of loans and borrowings which all
denominated in sterling are as follows:
Unaudited Unaudited Unaudited Unaudited Audited Audited
Book value Fair value Book value Fair value Book value Fair value
30 Jun 30 Jun 30 Jun 30 Jun 31 Dec 31 Dec
22 2022 2022 2022 2022 2022
GBP GBP GBP GBP GBP GBP
Non-current
Bank loans
Secured 374,975 374,975 20,000,000 20,000,000 20,000,000 20,000,000
Current
Bank loans
Secured 21,988,192 21,988,192 2,182,163 2,182,163 2,205,640 2,205,640
Total 22,363,167 22,363,167 22,182,163 22,182,163 22,205,640 22,205,640
The rate at which Sterling denominated loans and borrowings are
payable is 2.90% above SONIA (H1 2022: 2.90% above SONIA).
The bank loans are secured by fixed and floating charges over
the assets of the Group. The Group has GBPnil undrawn committed
borrowing facilities available at 30 June 2023 (HY2022: GBP1
million, FY2022: GBPnil).
14. Events after the reporting date
On 12 July 2023, the Group disposed of its third-party
litigation finance business, LionFish Litigation Finance Limited
("LionFish"). The disposal of LionFish to Blackmead Infrastructure
Limited was for a consideration of up to GBP3.07m, of which
GBP1.07m was used for immediate repayment of the intercompany loan.
In addition to this, the Group has written off the litigation
assets that were retained as part of the disposal, in line with
management's decision to write down the value of all cases on the
balance sheet to zero.
[1] Revenue per fee earner data taken from The Lawyer UK 200:
Top 100 latest data. UK firms are ranked 1-100 by firm-wide revenue
(year end 2021/22)
[2] All measures, including prior year comparatives are shown on
a continuing operations basis unless otherwise stated
[3] RBG understands that consensus market expectations for the
year ended 31 December 2023 are for revenues of GBP44.7 million and
Adj. EBITDA of GBP10.2 million (Source: FactSet)
[4] Revenue per fee earner data taken from The Lawyer UK 200:
Top 100 latest data. UK firms are ranked 1-100 by firm-wide revenue
(year end 2021/22)
[5] All measures, including prior year comparatives are shown on
a continuing operations basis unless otherwise stated
[6] Comparatives have been restated to present LionFish as a
discontinued operation. Refer to Notes 1 and 10 for further
details.
[7] Comparatives have been restated to present LionFish as a
discontinued operation. Refer to Note 6 for further details
[8] Comparatives have been restated to present LionFish as a
discontinued operation. Refer to Note 6 for further details
[9] Comparatives have been restated to present LionFish as a
discontinued operation. Refer to Note 6 for further details
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END
IR NKOBBKBKBCCB
(END) Dow Jones Newswires
September 28, 2023 02:00 ET (06:00 GMT)
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