RBG Holdings Plc
Annual Report 2023

Plain-text annual report

Annual Report & Accounts Year ended 31 December 2023 Contents Strategic Report Company information Year at a glance The Group at a glance Chair’s statement Chief Executive Officer’s statement Strategic report Principal risks and uncertainties Corporate Social Responsibility Equality, Diversity, and Inclusion Corporate Governance Board of Directors Corporate Governance statement Directors’ report Financial Statements Independent auditor’s report to the members of RBG Holdings plc Consolidated statement of comprehensive income Consolidated statement of financial position Consolidated statement of cash flows Consolidated statement of changes in equity Company statement of financial position Company statement of cash flows Company statement of changes in equity Notes to the Consolidated and Company financial statements 4 6 8 10 14 18 34 36 42 48 58 59 60 61 62 63 64 65 Strategic Report Contents Strategic Report Company information Year at a glance The Group at a glance Chair’s statement Chief Executive Officer’s statement Strategic report Principal risks and uncertainties Corporate Social Responsibility Equality, Diversity, and Inclusion 4 6 8 10 14 18 4 Company information SEDOL Symbol: AIM: RBGP Websites www.rbgholdings.co.uk www.rosenblatt-law.co.uk www.memerycrystal.com 5 Directors Marianne Ismail Non-Executive Chair Patsy Baker Non-Executive Director David Wilkinson Non-Executive Director N Foulston (terminated 31 January 2023) Suzanne Drakeford-Lewis Group Finance Director (resigned 30 June 2023) Keith Hamill OBE Non-Executive Chairman (resigned 22 June 2023) Jon Divers Chief Executive Officer (appointed 3 March 2023) Kevin McNair Chief Financial Officer (appointed 28 November 2023) Ian Rosenblatt OBE Executive Vice Chair (appointed 27 July 2023, resigned 28 March 2024) Tania MacLeod Director (appointed 3 March 2023) Nick Davis Director (appointed 3 March 2023) Secretary and registered office J Lovitt (appointed 27 March 2023) 165 Fleet Street, London, EC4A 2DY Company number 11189598 Country of incorporation of parent company United Kingdom Auditor Moore Kingston Smith LLP 6th Floor, 9 Appold Street, London, EC2A 2AP Principal bankers HSBC UK Bank plc 60 Queen Victoria Street, London, EC4N 4TR Lloyds Bank 25 Gresham Street, London, EC2V 7HN Nominated advisers and brokers Singer Capital Markets 1 Bartholomew Lane, London, EC2N 2AX Registrars Computershare The Pavilions, Bridgwater Road, Bristol, BS13 8AE Financial communications consultants SEC Newgate 14 Greville Street, London, EC1N 8SB Strategic Report 6 Year at a glance Highlights1 Revenue £39.2m 12.6% 2022: £44.9m excluding proceeds on disposal of damages based assets Revenue (including discontinued operations) £41.4m 13.4% 62.5% 54.3% Adjusted2 EBITDA Adjusted EBITDA (including discontinued operations) Adjusted2 loss before tax Non-recurring costs Loss before tax Loss from continuing operations Loss on discontinued operations (including goodwill impairment), net of tax Loss for the year (including discontinued operations) Free cashflow outflow Net debt RBG Legal Services fee earner utilisation RBG Legal Services fee earner realisation £4.6m £4.0m £0.7m £10.6m £11.4m £11.0m £12.9m £23.9m £3.1m £22.9m 70% 87% 2022: £47.9m 2022: £12.4m 2022: £8.7m 2022: £7.6m 2022: £9.7m 2022: £2.1m 2022: £1.6m 2022: loss £3.1m 2022: inflow £4.7m 2022: £4.0m 2022: £19.2m 2022: 76% 2022: 90% 1 2 All measures apart from net debt and including prior year comparatives are shown on a continuing operations basis unless otherwise stated (Convex Capital and LionFish Litigation Finance are treated as discontinued operations). The Group presents adjusted EBITDA and loss before tax as an operating KPI, they are adjusted for one off costs that are considered to be exceptional, refer to Note 1 for further information. Strategic highlights: New appointments of: - Jon Divers, Chief Executive Officer - Kevin McNair, Chief Financial Officer Disposal of LionFish, the Group’s litigation finance operation Renewing the Group’s banking facilities totalling £24.0m on terms deemed favourable by the Board Implementation of a new Enterprise Resource Planning ‘ERP’ management information system Scaling back from unfunded Damages Based Agreements A full comprehensive review of all aspects of the accounting treatment of work in progress and debtors We recognise that 2023 was a challenging year for the Group. However, the significant progress in realigning the business gives the Board confidence that the Group is on a much stronger footing than it has been for some time. The new Executive team, led by CEO Jon Divers, has made difficult decisions to reduce the Group’s risk profile, its cost base, and to refocus RBG on its core legal activities, like the business that floated in 2018, where the Board believes profits will be maximised. Marianne Ismail, Chair, RBG Holdings plc 7 Events after reporting date: • On 22 February 2024, the Group raised £0.9 million before expenses through the issue of new ordinary shares. A further £2.1 million before expenses was raised through the issue of new ordinary shares on 12 March 2024. The fundraising, which took place at a tight discount to the prevailing share price, was strongly supported by existing institutional shareholders, including certain directors who subscribed for £1.0 million of shares as part of the fundraise. The purpose of the raise was to provide additional working capital to the Group and to reduce the use of the Group’s banking facilities. • On 28 March 2024, the Group completed the disposal of Convex Capital to a joint venture led by its management team for an initial consideration of £2.0 million, with up to £600,000 of contingent consideration payable on completion of certain subsequent transactions. Following the disposal, the Group is focused purely on legal services, its core business. • Following the completion of the disposal of Convex Capital, Ian Rosenblatt stepped down from the Board. Ian remains the Group’s largest shareholder and largest generator of revenue. Outlook: • Trading during the first quarter of 2024 has been in line with expectations. Ignoring the impact of the unusually large piece of work that ran during mid and late 2022 into January 2023, Legal Services has traded slightly ahead in Q1 2024 compared to Q1 2023 on a like for like basis; • Management is focused on specific areas of legal services which they believe offer the best opportunities for organic growth. Some of these are existing practices within the Group, others are complementary where the Group has recently recruited new partners and is looking to add additional resource; • The seven new partners that have joined in the past nine months have made an encouraging start. They are closely aligned to the areas which management believe offer the best growth and margin opportunities; • There is, and there always will be, a heavy focus on cost reduction wherever possible across the Group although management are conscious of the need to maintain scalability within the support functions of the business; and • The Board is optimistic that 2023 marked the end of the pivot from the Group’s previous strategy and that there are opportunities for the Group to grow. Strategic Report 8 9 The Group at a glance Our purpose Sustainability While the nature of the business means the Group does not have a significant environmental impact, the Board believes that good environmental practices, such as the recycling of paper waste and conservation of energy usage, will support its strategy by enhancing the reputation of the Group. Recent examples of this include: • Our Fleet Street address has 100% renewable power supply; and • Our Fleet Street address’s waste is 100% recycled or waste to energy (no landfill) The Group Following restructuring activity in 20233 and at the beginning of 2024 , RBG Holdings plc is a legal services group. Through our leading law firm brands, Rosenblatt and Memery Crystal, the Group offers clients the full spectrum of legal services including employment, corporate transactions, IP, and dispute resolution. Rosenblatt is one of the UK’s pioneering legal practices and a leader in dispute resolution (litigation). 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 was ranked in Tier 1 in The Legal 500 (Legalease) in 2024 for commercial litigation: mid-market. Memery Crystal is a specialist in non-contentious, corporate legal services. Its specialist areas include corporate (including a market-leading corporate finance offering), real estate, commercial, IP & technology (CIPT), banking & finance, tax & wealth structuring, and employment law. Memery Crystal is one of the leading legal practices 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 entrepreneurs. Memery Crystal was ranked in 12 categories in The Legal 500 (Legalease) directory in 2024. The Group aims to concentrate on developing a leading legal services business that will create long-term value to its shareholders, by delivering successful outcomes for its clients, and is a responsible employer that supports its employees and has a positive impact in the communities in which it operates. Charity of the Year The group raised a total of £35,807 for chosen charity KEEN London through various fundraising activities such as bake sales, raffles, walks and sporting events. KEEN addresses the lack of support for young people with additional needs to access meaningful employment or volunteering opportunities and gain valuable transferable skills. The money raised paid for 350 hours’ worth of sessions with over 100 children, plus rent payment for a year and much more. Equality, diversity and inclusion The Group is immensely proud of the work completed by its’ various staff-led equality, diversity, and inclusion networks in 2023. This included: • an International Women’s Day event on the topic of miscarriage, baby loss and fertility treatment organised by the Gender Parity network. • a talk by alcohol awareness charity, Alcohol Change UK to mark World Mental Health Day • a talk by Sara Gibbs, a comedy writer and autistic advocate, who talked through a number of workplace neurodiversity tips organised by the Disability and Neurodiversity network • a Pride entertainment night with a performance by London drag queen and host Kara Couture organised by the LGBTQ+ network • a talk from alumni of the MBA 30 initiative and founder of Black British Initiative, a presentation from co-founder of the first contemporary African photography gallery, and a black street art tour in Shoreditch to celebrate Black History Month Company culture The Group has endeavoured to improve internal communications this year, introducing some new initiatives to encourage transparency on operations, but also to educate staff. In a post pandemic world where hybrid working is very much the norm, communication and culture can suffer, as such monthly town hall group-wide calls have been introduced on top of the existing quarterly updates, with guest speakers from within the group each month. 3 The Group completed the disposal of Convex Capital on 28 March 2024. Our Strategy The Board’s strategy is to build a high margin, cash-generative, legal services Group with diversified revenue and profit streams to deliver organic growth and sustained shareholder value. Whilst the prevailing economic environment has been challenging, we see considerable opportunity in the three main practice areas of the Group (Dispute Resolution, Corporate and Real Estate), as the economic outlook improves, and operational improvements take hold. These improvements include the recruitment of seven new partners in 2023, the implementation of a new ERP management information system to enhance workflow across the different practices and focusing on improving the performance of all fee earners through providing more timely and robust key performance indicators (KPIs) pertaining to fee earner performance, such as utilisation rates, recovery rates, and fee cost ratios. Dividend Policy The Group’s priority is to reduce its debt and as a result in July 2023 suspended its dividend policy for the foreseeable future. The Board recognises the importance of dividends to shareholders and will seek to reinstate its dividend policy once it has made headway in reducing the Group’s debt to a more prudent level. Discontinued Operations LionFish Litigation Finance LionFish was a start-up founded in 2019 by the previous management as a unique, alternative provider to the traditional litigation funders. It finances litigation matters being run by other solicitors in return for a significant return on the outcome of those cases. In 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. Convex Capital Convex 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. Following a strategic review of the business in 2023, the Board made the decision to dispose of Convex Capital, this is in line with the Group’s strategy to reduce its risk profile and to refocus the Company on its established legal services businesses – Rosenblatt and Memery Crystal. On 28 March 2024, the Group announced that it had completed the disposal of Convex. Investment Case RBG Holdings plc is a leading legal services group with a diversified revenue base, and commercially driven management team. In 2023, a new management team took on the leadership of the business. This new team have undertaken a thorough review of the Group’s operations and set about reducing the risk of the Group, increasing stability and implementing operational improvements. This included a comprehensive review of the Group’s balance sheet and accounting policies and addressing a number of significant historic issues. The new management team are confident that a re- focussed and aligned RBG can return to higher margins, strong cash generation, and industry leading KPIs over the course of 2024. The Group’s core legal services business has a proven track record of delivering growth through many economic cycles. The interests of management and senior staff are aligned with those of shareholders as many hold substantial equity stakes. The Group is run by experienced directors and senior managers with considerable expertise in the legal services industry, and in UK listed companies. Strategic Report 10 Chair’s statement Marianne Ismail Chair Overview We recognise that 2023 was a challenging year, but it was also a year of inflexion for the Group and the significant progress in realigning the business gives the Board confidence that the Group is on a much stronger footing than it has been for some time. The new Executive team, led by CEO Jon Divers, has made difficult decisions to reduce the Group’s risk profile, its cost base and to refocus RBG on its core legal activities, similar to the business that floated in 2018, where the Board believes profits can be maximised. 11 Rosenblatt was ranked in Tier 1 in The Legal 500 (Legalease) in 2024 for commercial litigation. Memery Crystal was ranked in 12 categories in The Legal 500 (Legalease) directory in 2024. Both brands have over 30 years’ proven trading history and the ability to deliver solid revenues and profits. Driving the organic growth of these businesses is at the heart of our strategy, and we believe that by focusing on our core strengths, with a simpler balance sheet, and reduced levels of debt, the market will be able to recognise the underlying value of the Group. It was clear that the strategy and approach adopted by the previous management which deviated from the original strategy presented at IPO, was no longer appropriate. The required resources to reorient to a new strategy drained the business of profit and working capital, at a time when there have been significant macro-economic challenges impacting the Group. Two significant changes to derisk and strengthen the balance sheet were the 2023 disposal of LionFish Litigation Finance Limited (“LionFish”), and the post-period end disposal of Convex Capital Limited (“Convex Capital”). Today the business is much closer to the one that floated in 2018 and in the view of the Board is stronger. At IPO, we floated the law firm, Rosenblatt to which in 2021 we added Memery Crystal to form RBG Legal Services Limited (“RBGLS”). Rosenblatt and Memery Crystal are aligned to contentious and non-contentious services to reflect their brand position within the market, resulting in London’s premier mid-tier law firm providing quality advice to corporates, entrepreneurs and high net worth individuals. Driving the organic growth of these businesses is at the heart of our strategy, and we believe that by focusing on our core strengths, with a simpler balance sheet, and reduced levels of debt, the market will be able to recognise the underlying value of the Group. Strategic Report 12 Financials4 Strategy Board Changes People 13 Revenue of £39.2m (2022: £44.9m, excluding gains on litigation assets) Adjusted EBITDA of £4.6m (2022: £12.4m) Loss before tax £11.4m (2022: £2.1m) Loss from continuing operations £11.0m (2022: £1.6m) Loss on discontinued operations (including goodwill impairment), net of tax £12.9m (2022: loss £3.1m) The numbers we have reported for the 12-months to 31 December 2023 highlight the headwinds the business has faced. Revenue and profit from our continuing operations has reduced, largely due to lower corporate spend on legal services, in particular relating to transactions such as IPOs and M&A. We also had to make provisions in relation to the legacy the previous management left in terms of unfunded Damages Based Agreements (DBAs) and historic debtors. As we progress through 2024, we do so with noticeably improved operating processes that will begin feeding through in terms of improved margins. We have taken steps to reduce our cost base, including the consolidation of our property portfolio, and we have a much simpler balance sheet that will give greater clarity to investors. Our new agreement with HSBC and recent successful fund raise gives the management team the operational headroom to deleverage the business more quickly as it brings operational performance back up to acceptable levels. At 31 December 2023, our net debt position was £22.9m (2022: £19.2m). The Group has a £17.5m revolving credit facility and a £10.0m five-year term loan taken to fund the Memery Crystal acquisition which has already been paid down to £6.5m. In addition to this, the Group has two short term facilities that were obtained in the current year of £0.3m and £0.5m, these respective facilities have been paid down to £0.2m and £0.4m at year end. We are committed to reducing debt as a core part of our strategy. The Group’s strategy is to build a high margin, cash-generative, legal services group with diversified revenue and profit streams to deliver organic growth and sustained shareholder value. The successful acquisition of Memery Crystal in 2021 diversified our legal services revenue, which remains evenly split across three main practice areas; Dispute Resolution, Corporate and Real Estate. While the prevailing economic environment has been challenging, we see considerable opportunity in these core business areas, as the economic outlook improves, and operational improvements take hold. These improvements include the recruitment of seven new partners, the implementation of a new ERP management information system to enhance workflow across the different practices and focusing on improving the performance of all fee earners through providing more timely and robust key performance indicators (KPIs) pertaining to fee earner performance, such as utilisation rates, recovery rates, and fee cost ratios. Our emphasis will be on driving organic growth by recruiting and developing new fee earners. In 2023, we added seven new partners, and as at 31 December 2023, RBG Legal Services had 128 fee earners overall. To ensure the Business remains absolutely focused on its goal, the Board took the decision to divest LionFish where litigation matters are run by third-party solicitors and reduce the Group’s exposure to third-party litigation funding commitments. The proceeds from the sale were used for working capital purposes. The Group will not participate in unfunded Alternative Billing Arrangements due to their unpredictability. After the period-end in March 2024, we also sold Convex Capital to its management for a total consideration of up to £2.6 million, comprising an initial cash consideration of £2.0 million paid on completion and an earn out contingent on the completion of certain subsequent transactions. Convex Capital is an excellent business, but the unpredictable nature of the M&A market meant it was hard to forecast revenue flows in any one year. Convex Capital also required working capital from the Group, which we believe can be better deployed to support the core legal services business and to help reduce debt. Following the disposals, the Group is focused purely on legal services, and we expect to go from strength to strength as a result. On 31 January 2023, the employment contract of Nicola Foulston, CEO, was terminated. The Group subsequently settled a claim from her and her management company Velocity Venture Capital Limited which settles all outstanding matters between the parties. The strength of the Group is in our ability to retain and attract high-quality people. Despite the challenging year, we have retained and added to our key staff. I would like to sincerely thank everyone for their hard work and thanks are also due to our shareholders for their continued support. Jon Divers, the Group COO, was appointed to the Board as CEO. The Board was further strengthened with the appointments of Tania MacLeod (Senior Partner, Rosenblatt), Nick Davis (Senior Partner, Memery Crystal) and Ian Rosenblatt OBE (largest shareholder and individual revenue generator) as Executive Directors. In November, Kevin McNair, Interim Finance Director, was appointed to the Board as Chief Financial Officer. Kevin replaced Suzanne Drakeford-Lewis, who resigned from her role in June 2023, to take a six-month sabbatical for personal reasons, and subsequently confirmed to the Board of her decision not to return in 2024. Following the disposal of Convex Capital, Ian Rosenblatt resigned from the Board. He joined the Board to support the restructuring and refocusing of the business to legal services. Ian remains fully committed to the Group and has circa four years remaining on his restrictive covenants. The Board now consists of four executive directors and three non-executive directors, providing a blend of different experiences and backgrounds. All non-executives are considered independent. We are in the process of recruiting another independent non-executive director to strengthen the independence of the Board and to ensure strong corporate governance and the Board hopes to complete this process prior to the Company’s 2024 Annual General Meeting expected to be held in (or around) June 2024. Sustainability, Equality, Diversity and Inclusion We aim to build an organisation that delivers long-term value to our shareholders, successful outcomes for our clients, and is a responsible employer that supports its employees and has a positive impact in the communities in which it operates. For example, this year we have partnered with the Sutton Trust to run work experience and mentoring programs for university students. We also elected KEEN London as our Charity of the Year for 2023. While the nature of the business means the Group does not have a significant environmental impact, the Board believes that good environmental practices, such as the recycling of paper waste and conservation of energy usage, will support its strategy by enhancing the reputation of the Group. For example, our Fleet Street address has 100% renewable power supply, and the waste is 100% recycled or waste converted to energy (no landfill). We want to go further and are looking at ways we can improve as an employer, and as a member of the business community to address the challenges society is facing. Outlook With much of the restructuring completed, and a better economic outlook, the Group is in a much-improved position. The business has returned to its roots, and is built around two highly successful law firms, with proven track records across the whole economic cycle. We are continuing to reduce our cost base and are making significant operational improvements to increase revenue and improve margin. We look forward to the coming years with renewed confidence. 4 All measures apart from net debt and including prior year comparatives are shown on a continuing operations basis unless otherwise stated (Convex Capital and LionFish Litigation Finance are treated as discontinued operations). Marianne Ismail Chair 30 April 2024 Strategic Report 14 15 Chief Executive Officer’s statement Overview 2023 has been a year of significant change in the business as we work to deliver the Board’s strategy of building a high margin, cash-generative, legal services group delivering sustained shareholder value. Our legal services business trades under two leading mid-tier law firm brands – Rosenblatt and Memery Crystal, which have their own brand identities and operate as two separately branded law firms. The two brands are aligned to contentious (Rosenblatt) and non-contentious (Memery Crystal) legal services to reflect their distinct position within the legal services market. RBGLS has a balanced offering across the three main legal areas – Dispute Resolution (via Rosenblatt), and Corporate and Real Estate (through Memery Crystal). The organic growth of the two firms, primarily through accretive hires, is key to our future success. We are focused on strengthening and growing in all areas we work in, by improving the performance of all fee earners, and adding seven new partners during 2023. Some strengthen our existing practices, and others add new areas of expertise as we look to build a full-service law firm. The recruitment has added two new areas so far, insolvency, and international arbitration. The partners in these areas are already gaining traction in their specific markets and are generating new revenue streams. One of the keys to sustained operational improvement has been the implementation of a new ERP management information system in May, and we are already seeing the benefits. Ensuring all partners have access to the same document and time management systems, not only enhances the workflow across the different practices, but it also provides more timely and robust key performance indicators (KPIs) pertaining to fee earner performance, such as utilisation rates, recovery rates, and fee cost ratios. This consolidated approach eliminates the inefficiencies associated with managing separate systems, allowing for a more seamless flow of information, and enabling the Group to make data-driven decisions that optimise resource allocation and drive operational excellence. As we enter 2024, the two businesses are fully integrated and based at one office on Fleet Street in London, with work ongoing to rationalise our property portfolio to reduce cost. We have focused on reducing the risk profile of the Group by disposing of non-core assets such as LionFish and Convex Capital and scaling back from unfunded DBAs. We have also strengthened the balance sheet through a successful fundraise and renewed banking facilities and there has been a comprehensive review of all aspects of the accounting treatments of work in progress and debtors. Additionally, we are implementing significant operational improvements in our core legal services business, RBGLS, to meet the goal of being a high margin, cash-generative group. These changes will leave the Group in a far stronger position than at the start of 2023, especially as the macro- economic environment improves. RBG Legal Services (“RBGLS”): Rosenblatt and Memery Crystal • Revenue down 12.6% to £39.2m (2022: £44.9m) reflecting reduced corporate spend relating to transactions such as IPOs and M&A • RBGLS fee earner utilisation of 70% (2022: 76%) and realisation of 87% (2022: 90%) • At 31 December 2023, RBGLS employed 183 people, including 128 fee earners We have made significant improvements to the business in 2023 and we are now in a better position to deliver the Board’s strategy of building a high margin, cash-generative, legal services group delivering sustained shareholder value. Jon Divers Group CEO Strategic Report 16 17 Discontinued Operations LionFish Litigation Finance Limited (“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. Convex Capital Limited (“Convex Capital”) • Completed three deals during 2023 delivering £2.2m of revenue (2022: 6 deals, £5.3m) Convex Capital, the specialist sell-side corporate finance advisory business based in Manchester, was acquired by the Group in September 2019, to broaden the Group’s exposure to the wider professional services sector and was sold in March 2024 via a management buyout (MBO) of the business. As with the sale of LionFish, the disposal was in line with the Group’s strategy to reduce its risk profile and to refocus on and invest in RBG’s established legal services businesses - Rosenblatt and Memery Crystal - where the Board believes it can best maximise profits. The management of Convex Capital acquired the business from the Group for a total consideration of up to £2.6 million, comprising an initial cash consideration of £2.0 million paid on completion and an earn out. Under the terms of the earn out, post completion of the Disposal, the Company will receive 38% of any gross fees received upon completion of four existing and named Convex projects up to a maximum of £0.6 million in cash. The disposal will result in a non-cash loss of £13.3 million. While Convex Capital is an excellent business, its future is better served in the hands of its management team. As with LionFish, its sale will mean concentrating the resources of the Group on its core legal services businesses to maximise profits, using the released cash to reduce RBG’s net debt and to invest in organic growth. The disposal will reduce the demands on the Company’s working capital, through a reduction of circa £2.2million per annum in ongoing costs in relation to Convex. In the 12-months to 31 December 2023, Convex Capital generated revenues of £2.2 million (FY22: £5.3 million) and losses after tax of £0.2 million (FY22: profit of £0.9 million). Outlook We have made significant improvements to the business in 2023 and we are now in a better position to deliver the Board’s strategy of building a high margin, cash-generative, legal services group delivering sustained shareholder value. We have enhanced our operations which will lead to sustained margin improvements and have also added more fee earners. This, along with our actions to derisk the business, and to simplify and strengthen the Group’s balance sheet, give us a greater confidence about the performance of the Company as the market improves. Jon Divers Group Chief Executive Officer 30 April 2024 Strategic Report 18 Strategic report 19 Principal activities, strategy and outlook Revenue The principal activity of RBG Holdings plc, “the Group”, during the year was the provision of legal and professional services. The Group’s legal services business, RBG Legal Services (“RBGLS”), trades under two leading mid-tier law firm brands, Rosenblatt (“RB”) for contentious work and Memery Crystal (“MC”) for non-contentious work. The Group’s strategy is to continue to build a high margin, cash-generative, legal services business with diversified revenue streams, with more emphasis on driving organic growth and when appropriate making selective, strategic acquisitions. Financial Review Key Performance Indicators (KPIs)5 Revenue down 12.6% to £39.2m (2022: £44.9m, excluding proceeds on disposal of damages based assets) - Revenue including discontinued operations down 13.4% to £41.4m (2022: £47.9m) Group revenue for the period was £39.2m compared to £44.9m in 2022, representing a 12.6% decrease. As Convex is treated as an asset held for sale, the Group revenue reflects the performance of Legal Services. Revenue across the Legal Services departments was impacted by different factors. Dispute Resolution (42% of total revenue) was down 9.5%. This department benefited from an unusually large case in H2 2022 so its performance in 2023 was broadly in line with expectations. Corporate revenue (38% of total revenue) was down 12.1%, reflecting the depressed state of the equity capital markets and lower M&A activity. M&A activity began to pick up in Q4 of 2023 and this continued in Q1 2024. There are early signs of improvement in the equity capital markets in 2024 but this is unlikely to turn into revenue growth until H2. Real Estate (20% of total revenue) was down 22.2%. This reflects the historically low levels of activity across all parts of the commercial real estate sector. Although there are early signs of recovery in parts of the sector, management expectations for revenue growth in 2024 are cautious. Adjusted EBITDA down 62.5% to £4.6m (2022: £12.4m) Other operating income - Adjusted EBITDA including discontinued operations down 54.3% to £4.0m (2022 restated: £8.7m) Other operating income of £0.9m (2022: £0.2m) relates to net interest earned on client monies held. Adjusted loss before tax of £0.7m (2022: profit £7.6m) Non-recurring costs of £10.6m (2022: £9.7m) Loss before tax £11.4m (2022: £2.1m) Loss from continuing operations £11.0m (2022: £1.6m) Loss on discontinued operations (including goodwill impairment), net of tax £12.9m (2022: loss £3.1m) Loss for the year (including discontinued operations) of £23.9m (2022: £4.7m) Free cashflow outflow (£3.1m) (2022: inflow £4.0m) Net debt of £22.9m (2022: £19.2m) RBG Legal Services fee earner utilisation of 70% (2022: 76%) RBG Legal Services fee earner realisation of 87% (2022: 90%) 2023 was a challenging year for the Group. However, the significant progress in realigning the business gives the Board confidence that the Group is on a much stronger footing than it has been for some time. The Group has now noticeably improved operating processes that have begun feeding through in terms of improved margins in 2024. Our new agreement with HSBC alongside the recent successful fundraise gives the Group operational headroom to de-leverage the business while Group performance begins to improve. There are early signs of recovery in some of the key areas of legal services that were badly impacted in 2023. We expect revenue and profit to improve in 2024. Continuing to focus on the Group’s operational efficiency, expanding margins and generating cash are the key priorities for the Board. Disbursement asset revenue and expenditure Disbursement asset revenue and expenditure relates to funds invested in disbursements on RBGLS’ Damages based agreement (‘DBA’) cases. Due to an error identified in accounting policies, these cases are now accounted for under IFRS 15. Refer to notes 2 and 8 for further explanation. Staff costs5 Total staff costs in 2023 were £26.9m (2022: £27.2m), which includes £25.7m for legal services. The average number of employees for the Group was 200 (2022: 211). Overhead costs5 During 2022, the Group incurred overheads of £46.5m (before depreciation and amortisation) (2022: £44.0m), of which staff costs were £26.9m (2022: £27.2m). Other overhead costs were £19.6m (2022 restated: £15.0m), of which non-recurring costs, represented £10.6m (2022: £9.7m). Other costs included insurances of £1.4m (2022: £1.8m), rates £0.7m (2022: £0.9m), and training and recruitment £0.7m (2022 £0.6m). Operationally, there remains a significant focus on IT and we have invested sensibly over recent years and further enhanced both our internal and client facing experiences of IT usage. 5 All measures apart from net debt are shown on a continuing operations basis unless otherwise stated. Prior year comparatives are also shown on a continuing operations basis. Further details on discontinued operations can be found in Note 13. The Directors present their Strategic Report for the year ended 31 December 2023. Strategic Report 20 21 EBITDA and Adjusted EBITDA6 In assessing performance, the Group uses EBITDA and adjusted EBITDA as important KPIs. EBITDA loss was a loss of £5.1m, including £10.6m of non-underlying items (2022: EBITDA £2.7m including non-underlying items of £9.7m). Adjusted EBITDA for 2023 was £4.6m (11.8% of revenue) (2022 restated: £12.4m, 27.5%). Legal Services adjusted EBITDA margin of 17.0% (2022: 33.2%) was impacted by a decline in revenue, due to lower corporate spend on legal services, in particular relating to transactions such as IPOs and M&A. Profit before tax Loss before tax for 2023 was £11.4m, (2022: £2.1m); this includes £10.6m of non-underlying items (2022: £9.7m). Adjusted7 loss before tax was £0.7m, (2022: profit £7.6m). Corporation tax The Group’s tax benefit for the year is £0.3m with an effective tax rate of 2.8% (2022 restated: £0.5m, 22.2%). Discontinued operations 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. Convex has been classified as held for sale and has been excluded from our headline performance measures. Operating losses before non-underlying items for Convex were £0.2m (2022: operating profit £1.2m). Total losses after tax for the business for 2023 totalled £0.2m (2022: profit after tax £0.9m). Details on discontinued operations are shown in Note 13. Earnings Per Share (EPS)6 The weighted average number of shares in 2023 was 95.3 million which gives a basic earnings per share (EPS) on continuing operations for the year of (11.58p) (2022: restated (1.73p)) and diluted earnings per share (EPS) on continuing operations for the year of (11.56p) (2022: (1.72p)). Balance Sheet Goodwill, intangible and tangible assets Current Assets Current Liabilities 6 Assets held for sale Liabilities held for sale 6 Net debt Non-Current Liabilities Net assets 2023 £’m 55.1 19.1 (13.8) 3.3 (1.0) 62.7 (22.9) (11.4) 28.4 8 2022 £’m 55.3 27.9 (12.2) 22.5 (7.5) 86.0 (19.2) (14.1) 52.7 The Group’s net assets as at 31 December 2023 decreased by £24.3m on the prior year as a result of the losses recognised in 2023 as well as impairment in Convex intangible assets. Goodwill, Tangible and Intangible Assets6 During the year, the management team took the decision to write off all remaining litigation assets from the balance sheet. This was tied to the Board’s decision to step back from significant Damages based agreement (DBA) cases similar to those the Group had undertaken in the past. Previously, disbursements incurred on these DBAs were held on the balance sheet as litigation assets and measured under IFRS 9 at fair value through profit or loss. Based on the substances of the underlying agreements for the two damages based agreements, the recovery from the client of disbursements represents a revenue stream arising from costs to fulfil a contract with a customer and therefore falls within the scope of IFRS 15, not IFRS 9. This is because IFRS 9 states that it does not apply to “rights and obligations within the scope of IFRS 15 that are financial instruments, except for those that IFRS 15 specifies are accounted for in accordance with IFRS 9”. Refer to notes 2, 3, 22 and 32 for further information on this prior period adjustment. Included within tangible assets is £12.4m (2022: £14.4m) which relates to IFRS 16 right of use assets for the Group’s property leases. Total intangible assets of £40.5m (2022: £38.7m) incorporate the goodwill and intangible assets acquired on the acquisitions of the Rosenblatt, and Memery Crystal businesses. During the year, the Group extended Ian Rosenblatt’s restrictive covenant, refer to note 18 for further information. The Group has considered the amounts at which goodwill and intangible assets are stated on the basis of forecast future cash flows and concluded that that these assets have not been materially impaired. 6 7 8 All measures apart from net debt are shown on a continuing operations basis unless otherwise stated. Prior year comparatives are also shown on a continuing operations basis. Further details on discontinued operations can be found in Note 13. The Group presents adjusted profit before tax as an operating KPI, it is adjusted for one off costs that are considered to be exceptional, refer to Note 1 for further information. Comparatives have been restated to present Convex as a discontinued operation. Refer to Notes 1 and 13 for further details. Working capital9 Management of lock up and cash generation has continued to be a key focus of the Group over the year. For the Legal Services business, lock up days is a measure of the length of time it takes to convert work done into cash. It is calculated as the combined debtor and WIP days. Lock up days at 31 December 2023 were 127 (2022 restated: 137), with debtor days being 49 (2022: 58 days) and WIP days being 77 days (2022: 79 days). Lock up has decreased from the previous year due to the increase in provision made against trade receivables. This is an area of significant focus for management. Trade debtors less provision for impairment at the end of the year were £8.0m (2022: £9.9m) and contract assets (work in progress) at the year-end were £8.2m (2022: £9.7m). Net debt9 We have a revolving credit facility (RCF) of £17.5m and an acquisition term loan of £10.0m, of which, a total of £3.5m had been repaid at 31 December 2023. Our net debt position at the year end was £22.9 million (2022: £19.2 million). Cash Conversion10 Cash flows from operating activities Movements in working capital Increase in litigation assets Net cash (used in)/generated from operations Interest Capital expenditure Free cash flow Underlying loss after tax Cash conversion 2023 2022 £’m (5.1) 4.3 (0.3) (1.1) (1.7) (0.3) (3.1) (10.2) £’m 12.8 0.5 (7.8) 5.4 (1.3) (0.2) 4.0 (4.7) 30% (84%) The cash conversion percentage measures the Group’s conversion of its underlying profit after tax into free cash flows. Cash conversion was 30% in 2023 (2022: (84%)). Summary We have made significant changes to the business in 2023 and we are now in a better position to deliver the Board’s strategy of building a high margin, cash-generative, legal services group delivering sustained shareholder value. Going concern The Group’s business activities, together with the factors likely to affect its future development, performance and position, are set out in the financial review pages 18 to 21, together with the financial position of the Group, its cash flows, liquidity position and borrowing facilities. Financial projections have been prepared to April 2025, the going concern review period, and form part of a three-year plan which show positive earnings and cash flow generation and projected compliance with banking covenants at each testing date. The Board confirm that they have a reasonable expectation that the Group has adequate resources to continue in operational existence for at least 12 months from the date of signing these financial statements. This confirmation is made after reviewing assumptions about the future trading performance. This process included a reverse ‘stress test’ used to inform downside testing which identified the break point in the Group’s liquidity. Whilst the sensitivities applied do show an expected downside impact on the Group’s financial performance in future periods, for all scenarios modelled the Board have identified appropriate mitigating actions to ensure that the Group maintain a robust balance sheet and liquidity position. Possible mitigating actions considered include lowering capital expenditure, reductions in personnel and overhead expenditure and other short-term cash management activities within the Group’s control as part of their assessment of going concern. The Group expects to be able to operate within the Group’s financing facilities and in accordance with the covenants set out in all available facility agreements. Accordingly, the Directors have a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future and they have adopted the going concern basis of accounting in preparing the annual Group financial statements. 9 All measures apart from net debt are shown on a continuing operations basis unless otherwise stated. Prior year comparatives are also shown on a continuing operations basis. Further details on discontinued operations can be found in Note 13. 10 Comparatives have been restated to present Convex as a discontinued operation. Refer to Notes 1 and 13 for further details. Strategic Report 22 23 Principal risks and uncertainties The Board monitors both existing and emerging risks, recording these in a risk register and regularly assesses their status. Due to the nature of the business and the markets in which it operates, many of the risks it faces are ongoing over longer than any single year. The principal risks and uncertainties identified by the Board are detailed below. Risk description and impact Mitigating factors Recruitment is led by our HR team and the talent management team within that. Over the last 12 months, our recruitment process has been developed to include a strong value proposition for candidates. Remuneration arrangements include a range of benefits and are competitive. A comprehensive training programme is in place for all staff providing management, leadership, technical and skills training. The Board is responsible for the implementation of succession plans for each of the businesses and investment continues to be made in the recruitment of appropriate staff where required. The Group constantly endeavours to maintain its reputation as a provider of client focused commercial advice and has adopted internal management processes and training programmes to support this. While the Group will use all reasonable endeavours to protect its intellectual property rights, should this be required, it may not be able to prevent any unauthorised use or disclosure of its intellectual property having an adverse effect on the operating, marketing, and financial performance of the Group. Our people Well trained and experienced people are essential for the delivery of excellent professional services and is fundamental to our success. The market for such people remains competitive and the loss of or failure to recruit and retain such people could impact on the Group’s ability to deliver professional services and financial performance. A failure to implement effective succession planning throughout the business could also adversely affect financial performance. Reputation The success of the Group’s business depends on the maintenance of good client relationships and its reputation for providing high-quality, highly valued professional services. If a client’s expectations are not met, or if the Business is involved in litigation or claims relating to its performance in a matter, the reputation of the Group could be significantly damaged. The Group’s reputation could also be damaged through Rosenblatt’s involvement (as an adviser or as a litigant) in high-profile or unpopular legal proceedings. Rosenblatt may be required to incur legal expenses in defending itself against any litigation arising in, or out of, such cases and may also incur significant reputational and financial harm if such litigation is successful or if there is negative press coverage. The Group regards its brand names, domain names, trade secrets and similar intellectual property as important to its success. Its businesses have been developed with a strong emphasis on branding. Should the brand name of Rosenblatt, or Memery Crystal be damaged in any way or lose market appeal, the Group’s businesses could be adversely impacted. Risk description and impact Mitigating factors Operational risk and IT systems The Group places significant reliance on its IT systems, any loss of these facilities would have a serious impact on the Group’s operations. The Group can give no assurance that all such risks will be adequately covered by its existing systems or its insurance policies to prevent an adverse effect on the Group’s financial performance. During the year the Group successfully transitioned to a new enterprise resource planning ‘ERP’ management system. The Group is also susceptible to cyber risks which continue to increase within the legal and other professional services sectors. The risk relates primarily to the malicious hacking of the Group’s and/or client data, or ransom attacks. Professional liability and uninsured risks The Group provides predominantly legal advice. Like all providers of professional services, it is susceptible to potential liability from negligence, breach of client contract and other claims by clients. As well as the risk of financial damage, such claims also carry a risk of damage to the Group’s reputation. The professional indemnity insurance held by the Group may not cover all potential claims or may not be adequate to indemnify the Group for all liability that may be incurred (or loss which may be suffered). Any liability or legal defense expenses that are not covered by insurance or are in excess of the insurance coverage could have a material adverse effect on the Group’s business and financial condition. Regulatory and compliance risks The Group is subject to a range of regulations. Failure to comply with these could have significant implications for the business ranging from reputational damage to criminal prosecution and sentencing. The Group seeks advice from both internal and external experts to support it in its adherence to applicable regulations and guidelines. Through duty of confidentiality and non-disclosure, the SRA regulates the use and disclosure of client information. The Group is exposed to the risk of employees engaging in misconduct, including the improper use or disclosure of confidential client information. Employee misconduct could result in considerable harm to the Group’s reputation, as well as regulatory sanctions and financial damage. The Group monitors the resilience of IT information systems and other facilities on an ongoing basis. The Group, and external partners assisting in the development and implementation of the new system have undertaken risk assessment procedures and believe that adequate safeguards are in place to minimise the risk of loss or disruption to the business. The Group has an ongoing programme to implement procedures and controls to mitigate this risk and external advice is sought as appropriate. The Group monitors the resilience of its information systems and other facilities on an ongoing basis, introducing updates and upgrades as appropriate. The Group regularly reviews its security arrangements, to identify and subsequently address weaknesses within the current systems. The Group has a cyber insurance policy in place to help to mitigate this risk. The Group is advised by market leading insurance brokers and the Directors believe that it holds comprehensive professional liability insurance. Any claims are defended strongly with senior members of the business involved at all stages and external advice is sought where appropriate. The Group works hard to ensure its employees provide excellent advice and service to its clients underpinned by quality processes and bespoke training programmes. The Directors of RBGLS are in dialogue with the SRA to minimise such risk as far as they are able, and to ensure that this regulation is made known to shareholders. The SRA also has power to force the divestment of any shareholding which breaches this rule via the courts and/ or to suspend or revoke the Licensed Body status of RBGLS, which would have a serious effect on the Group. We have invested in RBGLS’ compliance team to ensure that the business manages risks and complies with the SRA Accounts Rules. Remedial action necessary for any breaches identified during the year or as part of the annual review is communicated to RBGLS by the Compliance Officer for Legal Practice (‘COLP’) and/or Compliance Officer for Finance and Administration (‘COFA’). Staff are trained and reminded of these duties and although management processes are in place to mitigate this risk, it cannot be removed in full. Strategic Report 24 25 Streamlined energy and carbon reporting Greenhouse gas emissions (‘GHG’) statement. The Group has reported scope 2 and 3 greenhouse gas (‘GHG’) emissions in accordance with the requirements of Streamlined Energy and Carbon Reporting (‘SECR’). Energy and GHG sources included in the process: • Scope 2: Purchased electricity • Scope 3: Fuel used for business travel in employee- owned or hired vehicles The table opposite details the regulated SECR energy and GHG emission sources for the current reporting period 1 January 2023 to 31 December 2023. The figures were calculated using UK government conversion factors, expressed as tonnes of carbon dioxide equivalent. Energy (kWh) Gas Electricity Transport Total energy (kWh) Emissions (tCO2e) Gas Electricity Transport Total emissions (tCO2e) Intensity (tCO2e/£m revenue) Revenue (£m) tCO2e per £m of revenue Intensity (tCO2e/FTE) Full time equivalent employees tCO2e per FTE 31 Dec 2023 31 Dec 2022 restated11 259,031 410,375 11,849 681,255 256,498 361,488 13,833 631,819 47.3 85.0 2.1 134.4 42.1 3.2 200 0.7 46.8 69.9 1.6 118.3 50.3 2.4 211 0.6 The Board believes that good environmental practices, such as the recycling of paper waste and conservation of energy usage, will support its strategy by enhancing the reputation of the Group. The number one consumable in the legal and professional services sector is paper, which has traditionally been used heavily in law firms. Hybrid and flexible working have significantly reduced paper consumption and accelerated habit changes and our focus is to sustain and expand these good habits and skills. Due to the nature of its business, the Group does not have a significant environmental impact. 11 2022 figures have been restated to reflect an error in the gas consumption figures taken from meter readings. Section 172 Statement This section serves as our Section 172 (“s172”) statement and should be read in conjunction with the Strategic report and the Corporate Governance statement. The Directors are aware of and comply with their duty under Section 172 of the Companies Act 2006 to act in the way which they consider, in good faith, would be most likely to promote the success of the Company for the benefit of its members as a whole and, in doing so, to continue to have regard (amongst other matters) to: • the likely consequences of any decision in the long term • the interests of the Company’s employees • the need to foster the Company’s business relationships with suppliers, customers and others • the impact of the Company’s operations on the community and the environment • the desirability of the Company maintaining a reputation for high standards of business conduct, and • the need to act fairly between members of the Company In this context, acting in good faith and fairly, the Directors consider what is most likely to promote the success of the Company for its members in the long term. We explain in this annual report, and below, how the Board engages with stakeholders. • The Board regularly reviews the Company’s principal stakeholders and how it engages with them. This is achieved through information provided by management and by direct engagement with stakeholders themselves • Relations with key stakeholders such as employees, shareholders and customers are considered in the running of the business on an everyday basis • We aim to work responsibly with our stakeholders. The Board regularly reviews policies and procedures, including those around anti-corruption and anti-bribery, equal opportunities and whistleblowing • The Board engages and interacts with our teams through the use of intranets, monthly email updates and news flash emails The key Board decisions made in the year are set out below: Significant events/decisions Key s172 matter(s) affected Key s172 matter(s) affected Decision to divest the specialist sell-side corporate finance advisory business, Convex Shareholders, employees, clients Convex Capital is an excellent business, but the unpredictable nature of the M&A market meant it was difficult to forecast revenue flows in any one year. Convex Capital also required working capital from the Group which we believe can be better deployed to support the core business and to help reduce debt. Dividend Shareholders, employees Approval of 2024 budget Employees, shareholders and clients During 2023, the Board announced it was suspending the Group’s dividend policy for the foreseeable future. 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. The Group’s business plan is to drive sustainable growth in the long term, which is in the interest of all stakeholders. The Board has paid close consideration to this objective in establishing and approving the 2024 budget. In the current economic climate this has involved close monitoring of the impact of the current economic uncertainty on each sector in which the Group operates, ensuring no over reliance on a single market or client; ensuring the Group is best placed to continue delivering a high standard of client service and increasing focus on minimising our environmental impact. The Directors consider that they have acted in the way most likely to promote the success of the Group for the benefit of its members as a whole. Strategic Report 26 Corporate Social Responsibility Charities and communities The Group aims to build an organisation that delivers long-term value to its shareholders, successful outcomes for its clients, and is a responsible employer that supports its employees and has a positive impact in the communities in which it operates. Social responsibility Sustainability We believe that running a profitable and growing business, which creates jobs and contributes to the economic success of the areas in which it operates, is a platform for good corporate social responsibility. We have a long-standing commitment to support our staff in engaging with their local communities and charities. This social awareness is present throughout the business, from our employees to our clients, our professional connections and the suppliers we use. To deliver strong, sustainable shareholder returns over the long-term, the operation of a profitable business is a priority and that means investing for growth. To achieve this, the Group recognises that it needs to operate in a sustainable manner and therefore has adopted core principles to its business operations which provide a framework for both managing risk and maintaining its position as a good ‘corporate citizen’. 27 Every year, the Group partners with a charity, as voted by staff, to provide fundraising support. In 2023, the chosen charity was KEEN London. KEEN addresses the lack of support for young people with additional needs to access meaningful employment or volunteering opportunities and gain valuable transferable skills. They provide free and highly sought-after one-to-one support to children with additional needs at sports and games sessions in some of the most deprived parts of London. Highlights from the year of fundraising include staff competing in a Tough Mudder and Winter Walk, attending a party for KEEN’s 21st Anniversary, and a large Christmas raffle, with various smaller activities such as baking competitions and dress down days throughout the year. The Group is proud to have supported KEEN London and their cause. In total, the Group raised £35,807 for our charity of the year KEEN London. These funds paid for 350 hours’ worth of sessions with over 100 children, plus allowing 15 preschool children to attend KEEN’s ‘Rising Stars’ sessions. The money raised also covered KEEN’s rent payments for a year. In a survey conducted by the charity, 94% of families had noticed an increase in wellbeing, and the charity also fed back that they had rarely received such a high total from their fundraising partners, historically. Our charity for 2024 In December, staff voted to support Noah’s Ark Children’s Hospice as its 2024 charity of the year. Strategic Report 29 Equality, Diversity, and Inclusion We are an equal opportunities employer, and it is our policy to ensure that all job applicants and employees are treated fairly and on merit regardless of race, sex, marital/ civil partnership status, age, disability, religious belief, pregnancy, maternity, gender reassignment or sexual orientation. We have an established Equality, Diversity and Inclusion committee, which having surveyed employees, develops an annual programme of training and events to address any operational and training needs identified. The Group is immensely proud of the work completed by its’ various staff-led equality, diversity, and inclusion networks in 2023. The Group also continued to support the Beyond the Bow initiative, which organises Christmas presents and care packages for disadvantaged children in foster homes, those experiencing homelessness or those who need therapeutic care due to adverse childhood experiences. In total, staff donated 120 packages to the initiative, beating their previous record. 28 Other charitable initiatives 2023 marks the Group’s fourth consecutive year of working with Sutton Trust, a social mobility charity that designs programmes to support students from underprivileged backgrounds at university. The Sutton Trust helps these students to gain an insight into working life, as well as giving them a chance to gain the experience and skills needed to apply for internships and graduate roles. This year the Group organised work experience placements for 16 students who had an interest in becoming a lawyer. This year, The Group also supported MBA30, an exciting new initiative launched by Black British Initiative (BBI) in 2023 aimed at helping thirty black entrepreneurs, by sponsoring one student through their MBA. In addition to this, Rosenblatt Legal Director, Luther Kisanga, gave a talk as part of the programme. The Group are looking to build on this partnership in 2024 by providing additional support through our own professional knowledge and via our wider contacts. Strategic Report 30 The Black Ethnicity Network organised a number of activities to coincide with Black History Month, including a talk by Darren Miller, Founder of Black British Initiative (BBI), which runs the aforementioned MBA 30 initiative, who was joined by two alumni of the programme. In addition to this, the network organised a talk and presentation from Sofia Wham (co-founder of the UK’s first contemporary African photography gallery) and Aisha Seriki (an artist specialising in fine art photography). The Group also took part in a street art tour through Shoreditch. 31 The Gender Parity committee celebrated International Women’s Day in 2023 by hosting a women’s event on the topic of miscarriage, baby loss, and fertility treatment. The Group also promoted the stories of women who had influenced the lives of staff. The Disability and Neurodiversity network organised a talk by Sara Gibbs, a comedy writer and autistic advocate, who talked through a number of workplace neurodiversity tips. The network also shared important and useful information with the firm during UK Disability Awareness Month, and, to mark World Mental Health Day, organised a talk by alcohol awareness charity, Alcohol Change UK. Lastly, the LGBTQ+ network hosted a Pride Entertainment Night on 15 June which featured a performance by the London drag queen and event host, Kara Couture. The network also shared useful definitions relating to lesbian, gay, bisexual, transgender, and queer terms, along with other sexual identities including pansexuality and asexuality. Strategic Report Corporate Governance Contents Corporate Governance Board of Directors Corporate Governance statement Directors’ report 34 36 42 32 Developing our people Modern slavery We are committed to preventing acts of modern slavery and human trafficking from occurring within our business and supply chain and expect our suppliers to adopt the same high standards. As part of our commitment to combating modern slavery, the Directors have approved the adoption and implementation of a specific modern slavery policy. We expect all of our suppliers to adhere to our Anti-Slavery Policy and will not tolerate slavery and human trafficking within our supply chains. Our slavery and human trafficking statement, made in accordance with section 54(1) of the Modern Slavery Act 2015 can be found on our website, www.rbgholdings.co.uk. Anti-bribery policy We value our reputation for ethical behaviour and upholding the utmost integrity and we comply with the FCA’s clients’ best interests rule. We understand that in addition to the criminality of bribery and corruption, any such crime would also have an adverse effect on our reputation and integrity. The Group does not tolerate bribery and corruption and we ensure all our employees and suppliers are aware of our approach as to limit our exposure to bribery by: • Setting out clear anti-bribery and corruption policies • Providing mandatory training to all employees • Encouraging our employees to be vigilant and report any suspected cases of bribery in accordance with the specified procedures Political donations The Group made no political donations in the year (2022: £nil). Pages 18 to 32 constitute the strategic report, which has been approved by the Board of Directors and signed on its behalf by: Kevin McNair Chief Financial Officer 30 April 2024 The Group continues to create opportunities for staff at all levels of the Group. We have a strong track record as an employer of choice in the provision of legal graduate traineeships and apprenticeship schemes highlighting the Group’s motivation to ‘grow our own’. Trainees work alongside qualified professionals in completing a period of recognised training (often known as a training contract) giving individuals supervised experience in legal practice. This is the final stage of the process of qualification as a solicitor where they refine and develop their professional skills. The Group operates two fee-earning networks dedicated to our Junior Lawyers and Senior Lawyers. These groups allow the relevant individuals to develop skills such as business development, networking, and cross referring, all taking place within a friendly and collaborative environment. A number of development opportunities were provided via the networks this year, including a Q&A with two of the firm’s Partners, and a LinkedIn masterclass by our BD & Marketing team. On top of these, frequent training sessions open to all staff run throughout the year, with topics ranging from spotlighting a service to educate staff, systems, and policies training, to training on softer skills. The Group has also expanded a mentoring scheme which provides guidance and support to junior employees and creates a positive working environment. The scheme has several crucial benefits, not least developing skills and knowledge and helping integrate mentees to the Group culture and environment. Currently, there are over 40 pairings involving trainees to heads of department. The HR department support mentors by providing mentoring masterclass workshops, which provide them with the relevant skills to have effective conversations with their mentees and support their development within the firm. Company culture The Group has endeavoured to improve internal communications this year, introducing some new initiatives to encourage transparency on operations, but also to educate staff. Monthly town hall group-wide calls have been introduced on top of the existing quarterly in person updates, with guest speakers from within the group each month. In addition, staff have a direct forum to address questions to the CEO through an anonymous #askjon email. Staff were also surveyed in March 2023 on a range of topics, with the findings being shared and addressed directly in the quarterly updates. The firm has also introduced monthly ‘hub days’ in which office attendance is compulsory. Training sessions and social activities are organised on these days. The Group further encourages employee involvement in the performance of the business through participation in share ownership. Throughout the year, regular social activities and staff drinks are organised, both to support charity efforts and improve the company culture – this year, activities have included pub quizzes, a scavenger hunt, and a football match between Rosenblatt and Memery Crystal. 34 Board of Directors 35 Marianne Ismail Non-Executive Chair Jon Divers Chief Executive Officer Kevin McNair Chief Financial Officer Marianne Ismail has worked in financial services for over 30 years in a variety of small and large regulated entities. She was a Managing Director of Morgan Stanley for 10 years working in New York and internationally and has held senior positions in Citigroup and Standard Chartered Bank. She has a strong understanding of the management of growing companies and of corporate risk. Marianne has held FCA significant influence functions throughout her career. Until July 2020, she was Pro Chancellor and Chair of the governing body of the University of Greenwich and is currently a Director and CEO of Microbira Ltd and a NED of Qatar Islamic Bank - UK. Jon Divers joined RBG Legal Services in February 2022 as Chief Operating Officer and became CEO of RBG Holdings in early 2023. Prior to this role in Professional Services, Jon held a variety of senior management and Managing Director roles in the transport and logistics sector. He has a strong focus on organic revenue growth and margin through cost control and believes all businesses have an opportunity for improved efficiency. Jon’s background in industry has given him a broad range of experience working with international and time sensitive supply chains, union wage negotiations and demanding clients. He believes that these commercial skills transfer well into Professional Services as a sector that is transforming and changing rapidly. Kevin McNair joined RBG Holdings in June 2023, initially as Interim Chief Financial Officer. He was appointed to the role permanently in November 2023. Kevin has over 30 years’ experience in financial management and capital markets. He has spent the past 20 years as CFO of various publicly quoted and privately equity-backed businesses, primarily in the professional services and industrial services sectors. Kevin’s focus has been on transforming the performance of people-based businesses and improving their financial stability. He has worked closely with the institutional investment and corporate banking communities in the UK and across Europe for more than two decades. David Wilkinson Non-Executive Director Patsy Baker Non-Executive Director Nick Davis Executive Director Tania MacLeod Executive Director David Wilkinson is an experienced Non-Executive Chairman and Director, with a history of advising fast-growth, entrepreneurial businesses and professional practices. He is Audit Committee Chair at Marks Electrical Group plc, an online domestic appliance retailer, which floated on AIM in 2021. He chairs a private company, CH Bailey, a formerly AIM-listed business in overseas commercial and hospitality property, and he is a Non-Executive Director of Verso Biosense, a medical technology spinout from Southampton University. Patsy Baker is as highly respected communications professional. She continues as Senior Group Advisor to the Accordience Group having stepped down as Chairman of Citigate Dewe Rogerson last year. She provides corporate affairs counsel to the Group’s international clients and oversees the delivery and coordination of integrated communication campaigns. She joined Lord Bell as a director at Bell Pottinger Communications in 1994, has provided Senior Board Counsel to CEOs in the UK FTSE 250, and has promoted and protected the reputations of many well-known brands. Patsy is an advisory board member of Invescore and also sits on the external affairs committee of the Design Museum. Nick Davis is a qualified lawyer with over 20 years of experience in practice. Nick was CEO of Memery Crystal LLP at the time of its acquisition by the Group in May 2021. Nick joined Memery Crystal in 2000 and specialises in corporate finance with expertise in IPOs, equity capital markets and mergers & acquisitions. Nick sits on the AIM Advisory Group of the London Stock Exchange, a group that provides input and advises on matters affecting the operation and regulation of AIM. Nick was previously a Non-Executive Director of AIM Listed Shanta Gold Limited between 2012 and 2014, and a Director of a subsidiary of The Supreme Cannabis Company listed on the TSX. Tania MacLeod is a qualified lawyer who trained at, and in 1997 became a partner in, Rosenblatt Solicitors. In 2018, the business of Rosenblatt Solicitors was acquired by Rosenblatt Limited, which was subsequently acquired by Rosenblatt Group plc (now RBG Holdings plc) as part of its IPO and admission to AIM. Tania will continue in a fee earning capacity as Senior Partner of Rosenblatt and Head of Dispute Resolution, titles which she retained upon her appointment to the Group Board. Corporate Governance36 37 Corporate Governance statement Overview The Board recognises its responsibility towards good and competent corporate governance. The Board is aligned in promoting long-term growth for the benefit of all of the Group’s stakeholders and as such has adopted the Quoted Companies’ Alliance Corporate Governance Code (“QCA Code”). The Board believes that the QCA Code is appropriate to allow the Group to fulfil its obligations to stakeholders. The composition of the Board Following the Board changes described in the Chair’s Statement on pages 10 to 13, the Board comprises seven directors, four Executives and three Non-Executives, reflecting a blend of different experience and background. All of the Non-Executives are considered independent. Roles and responsibilities Marianne Ismail, as Group Non-Executive Chair, assumes responsibility for leading the Board and ensuring that the Group’s corporate governance is appropriate and effective. As Non-Executive Chairman, she is also responsible for ensuring the Board agenda recognises financial and operational matters to allow for effective delivery of the Group strategy. Jon Divers, as CEO is responsible for the day-to-day operations of the Group and the Executive Directors have the responsibility of delivering the Board strategy on a day-to-day basis and reporting back on their progress. Board meetings The Board is scheduled to meet on a regular basis throughout the year, with additional meetings called if required. As a minimum the Board will meet six times a year. A comprehensive board pack is distributed to all Directors prior to each scheduled Board meeting, so that all Directors can give due consideration to the matters in hand. The Board’s main responsibilities are to agree and review Group strategy, approve annual budgets, review management performance, financial results, Board appointments and dividend policy. Attendance at scheduled board and committee meetings during the year and since appointment is shown in the table below. Board Audit Committee Remuneration Committee Number Number Number J Divers N Davis T MacLeod K McNair I Rosenblatt M Ismail D Wilkinson P Baker K Hamill S Drakeford-Lewis N Foulston 17/17 15/16 16/16 2/2 7/7 17/17 14/15 9/15 3/5 6/6 0/1 3/3 n/a n/a 1/1 n/a 3/3 3/3 3/3 2/2 2/2 n/a 4/4 n/a n/a n/a n/a 4/4 4/4 4/4 3/3 3/3 n/a On page 25, the s172 Statement sets out the key decisions that the Board has made in the year. Board committees The Board has delegated specific responsibilities to the Audit and Remuneration Committees. Each Committee has terms of reference setting out its duties, authority and reporting responsibilities. The terms of reference of each Committee were put in place at the time of the Company’s admission to AIM and are kept under review to ensure they remain appropriate and reflect any changes in legislation, regulation or best practice. Each committee comprises the Non-Executive Directors and the Executive Directors attend by invitation. Each Committee has unrestricted access to employees of the business or external advisors to meetings, to the extent that they consider it necessary in relation to any specific matter under consideration. During the year the Committees have utilised external advice with the Remuneration Committee liaising with Evelyn Partners for the purposes of advising on the terms of the performance share awards and benchmarking executive pay, and the Audit Committee meeting with the Group’s external auditors, both with and without the presence of Executive Directors and members of the finance team. Board effectiveness The skills and experience of the Board are set out in their biographical details on pages 34 to 35. The experience and knowledge of each of the Directors gives them the ability to constructively challenge strategy and scrutinise performance. On joining the Board, new directors undergo an induction programme tailored to the existing knowledge and experience of the director concerned. Time commitments All Directors have been advised of the time required to fulfil the role prior to appointment and were asked to confirm that they could make the required commitment before they were appointed, and this minimum requirement is included in their letters of appointment. Development The Company Secretary ensures that all Directors are kept abreast of changes in relevant legislation and regulations, with the assistance of the Group’s advisers where appropriate. Executive Directors are subject to the Group’s performance review process through which their performance against objectives is reviewed and their personal and professional development needs considered. Conflicts of interest At each meeting, the Board considers Directors’ conflicts of interest. The Company’s Articles of Association (Articles) provide for the Board to authorise any actual or potential conflicts of interest. Directors’ and Officers’ liability insurance The Company has purchased Directors’ and Officers’ liability insurance as allowed by the Company’s Articles. Risk management and internal controls The Board is responsible for maintaining a sound system of internal controls to safeguard shareholders’ investments and the Company’s assets. Such a system is designed to manage rather than eliminate the risk of failure to achieve business objectives and can provide only reasonable and not absolute assurance against material misstatement or loss. The Board has considered the need for an internal audit function but has concluded that the internal control system in place is appropriate for the size and complexity of the Group. The Board is also responsible for the identification and evaluation of major risks faced by the Group and for determining the appropriate course of action to manage those risks. Relations with stakeholders The Board is aware that the long-term success of the Group is reliant upon its employees, clients, shareholders, suppliers and regulators and as such the Group maintains consistent communication with these stakeholders to ensure that its continued growth in accordance with its strategy reflects their needs and expectations as well as those of the Group. The Group endeavours to ensure that clients are met regularly to canvas their opinion on the service levels received and provide any feedback as to how these relationships and/or services can be improved. The Group has a strong track- record of retaining deep client relationships with some of these relationships being in excess of 25 years across a number of service lines provided within the Group’s business. The Executive Directors meet with the institutional shareholders both on an ad hoc basis and on a more structured basis around the publication of the Group’s interim and end of year results. General information about the Group is available on the website at www.rbgholdings.co.uk. Corporate Governance 38 39 Audit Committee report Members of the Audit Committee Audit process The auditor prepares an annual planning report for consideration by the committee, which details areas of audit focus and anticipated key audit risks, together with the anticipated level of materiality. The auditor presents this to the committee, and it is reviewed and approved by the committee. Following the external audit process, the auditor presented its findings to the Committee for discussion. A number of areas were reviewed around revenue recognition, going concern, valuation and cut-off of contract assets, recoverability of trade receivables, valuation of provisions for legal disputes, valuation and impairment of goodwill and other intangible assets, valuation of litigation assets and gain/ loss on disposal of litigation assets, changes to accounting policies, disposal of LionFish Litigation Finance Limited and accounting estimates. These areas were identified by the external auditors during the year and it was agreed that management’s treatment and representation were in compliance with accounting standards. Risk management and internal controls The Board has established a framework of risk management and internal control systems, policies and procedures. The committee is responsible for reviewing the risk management and internal control framework, ensuring that it operates effectively. The committee is satisfied that the internal controls currently in place are sufficient and operating effectively for a business of this size. At present the Group does not have an internal audit function and the committee believes that in view of the current size and nature of the Group’s business, management is able to derive sufficient assurance as to the adequacy and effectiveness of the internal controls and risk management procedures without a formal internal audit function. This will be kept under review as the business evolves. David Wilkinson Chair of the Audit Committee 30 April 2024 The Audit Committee is chaired by David Wilkinson, and its other members are Marianne Ismail and Patsy Baker. The Group Chief Financial Officer, other Executive Directors and external auditors are permitted to attend meetings of the committee by invitation. The Audit Committee has primary responsibility for monitoring the quality of internal controls and ensuring that the financial performance of the Group is properly measured and reported on. It receives and reviews reports from the Group’s management and auditors relating to the interim and annual accounts and accounting and internal control systems in use throughout the Group. The Audit Committee meets at least three times a year and has unrestricted access to the Group’s Auditors. The committee meets annually with the external auditors, without Executive Directors being present, to discuss any issues arising from their audit work. Neither the Group nor the Directors have any relationships that impair the external auditor’s independence. Duties During the year the Audit Committee discharged its responsibilities by: • approving the external auditor’s plan for the audit of the Group’s annual financial statements, including key audit matters, key risks, confirmation of auditor independence, terms of engagement and audit fees • reviewing the Group’s draft annual report and accounts and the external auditor’s detailed audit completion report including consideration of key audit matters and risks • reviewing the Group’s half year and full year results announcements • considered the appropriateness of disclosures in the annual financial statements regarding Alternative Performance Measures (“APMs”) • Moore Kingston Smith LLP (“MKS”) were re-appointed as external auditor in 2023 Role of the external auditor The Committee monitors the relationship with the external auditor, considering their performance in discharging the audit, the scope of the audit and terms of engagement, their independence and objectivity and remuneration. Any instruction for the external auditor to provide non-audit services to the Group must be approved in advance by the committee. A breakdown of the fees charged by MKS analysed between audit and non-audit services is provided in Note 9 to the accounts. The committee has confirmed that it is satisfied with the independence, objectivity and effectiveness of MKS and has recommended to the Board that the auditors be reappointed. There will be a resolution to reappoint the auditors at the forthcoming AGM. David Wilkinson Chair of the Audit Committee Corporate Governance40 41 Patsy Baker Chair of the Remuneration Committee This report sets out how the Committee operates and summarises the remuneration policy. Details of the remuneration paid to the Directors for the year is set out in the Directors’ report on pages 42 to 45. Members of the Remuneration Committee Directors’ remuneration The Remuneration Committee is appointed by the Board and is formed entirely of Non-Executive Directors. The Committee is chaired by Patsy Baker, its other members are Marianne Ismail and David Wilkinson. Executive Directors attend meetings by invitation, but no Director is present when his or her remuneration is discussed. The Remuneration Committee is responsible for setting the Group’s general policy on remuneration and approving matters relating to the remuneration and terms of employment of the Executive Directors and key senior employees. The Committee also makes recommendations to the Board on proposals for the granting of share options and other equity incentives pursuant to any share option scheme or equity incentive scheme in operation from time to time. The Committee is responsible for recommending the structure for Non-Executive Director pay, which is subject to approval of the Board. The Committee meets formally at least three times a year and receives internal advice from Executive Directors and external advice from remuneration consultants where necessary. In exercising its role, the Committee has regard to the QCA Remuneration Committee Guide and associated guidance. Policy The remuneration policy of the Group is driven by our approach to align the best interests of shareholders and management. The committee looks to set remuneration for Executive Directors and key senior employees at appropriate market levels, with reference to their roles and responsibilities. Incentive arrangements which provide appropriate reward are implemented and measured against key performance criteria designed to deliver the Group’s objectives and strategy and are reviewed annually. Duties During the year, the Remuneration Committee undertook the following activities: • determining salary increases and incentive outcomes for the Executive Directors and key senior employees • approving overall salary increases and incentive outcomes for the Group • reviewing and approving harmonised bonus and long-term incentive plans across the Group The remuneration arrangements for Executive Directors consist of a basic salary together with a performance bonus. In addition, they receive private medical insurance. Performance related pay is not guaranteed or contractual and is based on performance targets surrounding the Group, with criteria set on an annual basis by the Remuneration Committee. The bonus payable in the year is disclosed in the table of Directors’ emoluments in the Directors’ report on pages 42 to 45. Long-term incentive plans are in place to seek to incentivise the Executive Directors to enhance shareholder value through growing the Group’s share price. Details of awards issued under the plans are disclosed in the Directors’ report on pages 42 to 45. Executive Directors enter into service agreements, which may be terminated by either party by giving written notice of not less than twelve months. The service agreements contain provisions for early termination in the event of a breach of a material term of the service agreement by the Executive Director or where the Executive Director ceases to be a Director of the Company for any reason. Non-Executive Directors Non-Executive Directors’ remuneration is determined by the Board. The Chairman of the Board and the other Non-Executive Directors receive an annual fee for their services, reflective of their level of responsibility, relevant experience and specialist knowledge and are reimbursed for appropriate travel expenses to and from Board meetings. The Non-Executive Directors serve under letters of appointment, which may be terminated by either party giving three months’ written notice. The Non-Executive Directors are typically expected to serve two-year terms but may be invited by the Board to serve for an additional period. Patsy Baker Chair of the Remuneration Committee 30 April 2024 Our Corporate Governance page can be found at https://www.rbgholdings.co.uk/about/corporate-governance/. All enquiries sent via “Contact Us” on the website or via email info@rbgholdings.co.uk will be forwarded to an appropriate member of our team and will be dealt with promptly. Remuneration Committee report Corporate Governance42 Directors’ Report The Directors’ interests in the shares of the Company as at 31 December 2023 are set out below: 43 0.2p Ordinary Shares 0.2p Ordinary Shares 2023 2023 2022 2022 0.2p Ordinary Shares Directors’ remuneration payable in the year is set out below: The directors present their report and the audited financial statements of the Group for the year ended 31 December 2023. Principal activities and business review Substantial shareholdings The principal activities of the Group during the year were the provision of professional services. The results for the year and the financial position of the Group are as shown in the annexed financial statements. A review of the business and its future development is given in the Chair’s and Chief Executive Officer’s statements. Results and dividends The results for the year are set out in the consolidated statement of comprehensive income on page 58. As announced in July 2023, following feedback from significant shareholders, the Group’s priority is to reduce debt and as a result suspended its dividend policy for the foreseeable future. Future developments Our priorities for the following financial year are disclosed in the Chief Executive Officer’s statement on pages 14 to 16. The Company was notified that the following were interested in 3% or more of the issued ordinary share capital at 31 December 2023: Ian Rosenblatt Premier Miton Investors Dowgate Wealth Limited Interactive Investor Hargreaves Lansdown Asset Management AJ Bell Securities Charles Stanley Interactive Brokers Stonehage Fleming Family & Partners Number 16,966,464 11,922,021 7,707,360 7,647,620 7,409,365 4,390,521 3,789,880 3,251,000 2,865,588 % of issued share capital 17.80% 12.51% 8.08% 8.02% 7.77% 4.61% 3.98% 3.41% 3.01% Directors and their interests The directors who served throughout the year, except where otherwise stated and in place at the date of this report are as follows: Marianne Ismail Patsy Baker David Wilkinson Jon Divers Kevin McNair Ian Rosenblatt OBE Tania MacLeod Nick Davis N Foulston Keith Hamill Suzanne Drakeford-Lewis Non-Executive Chair Non-Executive Director Non-Executive Director Chief Executive Officer (appointed 3 March 2023) Chief Financial Officer (appointed 28 November 2023) Executive Vice Chair (appointed 27 July 2023, resigned 28 March 2024) Executive Director (appointed 3 March 2023) Executive Director (appointed 3 March 2023) (Terminated 31 January 2023) Non-Executive Chairman (resigned 22 June 2023) Group Finance Director (resigned 30 June 2023) - - - - - 12.0% 0.1% 0.0% 12.1% Total £ 85,000 40,000 40,000 301,928 306,902 2,258,834 385,093 21,771 45,000 131,325 37,152 3,653,005 Total £ - 445,487 90,000 40,000 15 635,000 37,737 37,737 % of issued share capital Number % of issued share capital 12 I Rosenblatt 12 T MacLeod 12 N Davis J Divers 12 M Ismail Cascades Ltd* N Foulston S Drakeford-Lewis 13 Number 16,966,464 1,305,044 1,100,674 100,529 100,000 - - - 17.8% 1.4% 1.2% 0.1% 0.1% - - - - - - - - 11,410,000 105,264 4,112 *A company wholly owned by the Foulston Family Trust of which Nicola Foulston is a beneficiary. 19,572,711 20.5% 11,519,376 Dividends of £12,028 were paid on these shares during the year in relation to 2022 results (2022: £575,763). Directors’ remuneration 31 December 2023 M Ismail P Baker D Wilkinson N Davis (appointed 3 Mar 2023) T MacLeod (appointed 3 Mar 2023) I Rosenblatt (appointed 27 Jul 2023) J Divers (appointed 3 Mar 2023) K McNair (appointed 28 Nov 23) K Hamill (resigned 22 Jun 2023) S Drakeford-Lewis (resigned 30 Jun 2023) N Foulston (terminated 31 Jan 2023) Basic Salary and/or Directors Fees Employer Pension Contributions £ 85,000 40,000 40,000 288,845 298,254 ** 2,258,834 372,593 20,833 45,000 127,500 37,152 3,614,011 £ - - - 13,083 8,648 - 12,500 938 - 3,825 - 38,994 ** Of this amount, £600,000 remained payable as at 31 December. Ian Rosenblatt subsequently agreed to receive this amount in shares as part of the equity that was announced in February 2024. 31 December 2022 S Drakeford-Lewis 14 N Foulston (terminated 31 Jan 2023) K Hamill M Ismail R Parker (resigned 31 Dec 2022) P Baker D Wilkinson Basic Salary and/or Directors Fees Employer Pension Contributions £ - 445,820 90,000 40,000 611,000 37,737 37,737 £ - (333) - - 24,000 - - 1,262,294 23,667 1,285,961 12 Appointed during the year ended 31 December 2023. 13 No dividends disclosed as S Drakeford-Lewis was appointed on 31 December 2022. 14 No remuneration disclosed as S Drakeford-Lewis was appointed on 31 December 2022. 15 £292,500 of the total related to termination payment. Corporate Governance 44 45 The directors are responsible for keeping adequate accounting records that are sufficient to show and explain the Company’s transactions and disclose with reasonable accuracy at any time the financial position of the Company and enable them to ensure that the financial statements comply with the requirements of the Companies Act 2006. They are also responsible for safeguarding the assets of the Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. The directors are responsible for ensuring the annual report and the financial statements are made available on a website. Financial statements are published on the Company’s website in accordance with legislation in the United Kingdom governing the preparation and dissemination of financial statements, which may vary from legislation in other jurisdictions. The maintenance and integrity of the Company’s website is the responsibility of the Directors. The Directors’ responsibility also extends to the ongoing integrity of the financial statements contained therein. The Company has made qualifying third-party indemnity provisions for the benefit of its directors which were made during the year and remain in force at the date of this report. Auditor A resolution to reappoint Moore Kingston Smith LLP as auditor for the ensuing year will be proposed at the Annual General Meeting in accordance with Section 489 of the Companies Act 2006. Disclosure of information to auditor The Directors confirm that, as far as they are each aware, there is no relevant audit information of which the Group’s auditors are unaware; and each director has taken all the steps that they ought to have taken as a director to make themselves aware of any relevant audit information and to establish that the Group’s auditors are aware of that information. On behalf of the Board Jon Divers Chief Executive Officer 30 April 2024 Directors who have an interest in the shares of the Company will benefit through dividend payments. During the year the following bonuses were received by directors and are included within Basic Salary and/or Directors’ Fees. 31 Dec 2023 16 31 Dec 2022 J Divers N Davis S Drakeford-Lewis R Parker £ 122,593 17,178 25,000 - £ - - - 50,000 No awards were granted in the year under the Group’s Executive Incentive Plan (“EIP”). The Directors have not been granted any other share options or benefitted from other long-term incentive arrangements during the year. Engagement with employees and stakeholders The Group operates an equal opportunities employment policy. The Group’s policy on recruitment, development, training and promotion includes provision to give full and fair consideration to disabled persons, having particular regard to their aptitudes and abilities. The Group appreciates and values the input of all its employees and encourages development and training to enhance employee skills. The Group ensures that employees are aware of any important matters that may impact on the performance of the Group. Details of how the Directors have engaged with and had regard to employees is addressed in the s172 report on page 25. The directors have regard to the need to foster the company’s business relationships with suppliers, customers and others and the impact on principal decisions in the year is also addressed in the s172 report. Going concern As described in the Strategic Report on pages 18 to 32 the Group expects to be able to operate within the Group’s financing facilities and in accordance with the covenants set out in all available facility agreements. Accordingly, the Directors have a reasonable expectation that the Company and the Group have adequate resources to continue in operational existence for the foreseeable future and they have adopted the going concern basis of accounting in preparing the annual Group financial statements. Financial risk management Financial risk is managed by the Board on an ongoing basis. The key financial risks relating to the Group are outlined in more detail in Note 4 to the consolidated financial statements. The Group’s principal risks and uncertainties are outlined in the Strategic report. Post balance sheet events • On 22 February 2024, the Group raised £0.9 million before expenses through the issue of new ordinary shares. A further £2.1 million before expenses was raised through the issue of new ordinary shares on 12 March 2024. The fundraising, which took place at a tight discount to the prevailing share price, was strongly supported by existing institutional shareholders, including certain directors who subscribed for £1.0 million of shares as part of the fundraise. The purpose of the raise was to provide additional working capital to the Group and to reduce the use of the Group’s banking facilities. • On 28 March 2024, the Group completed the disposal of Convex Capital to a joint venture led by its management team. Under the terms of the agreement, the Group received initial consideration of £2.0 million with up to another £600,000 payable on completion of certain subsequent transactions. Following the disposal, the Group is focused purely on legal services, its core business. • Following the completion of the disposal of Convex, Ian Rosenblatt stepped down from the Board. Ian remains the Group’s largest shareholder and largest revenue earner. Annual General Meeting The provisional date for the Company’s AGM is 19 June 2024. Political donations No political donations were made during either 2023 or 2022. Directors’ responsibilities statement The directors are responsible for preparing the Strategic report, Directors’ report and the financial statements in accordance with applicable law and regulations. Company law requires the Directors to prepare financial statements for each financial year. Under that law the directors have elected to prepare the Group and Company financial statements in accordance with UK adopted International Accounting Standards. Under company law the Directors must not approve the financial statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and Company and of the profit or loss of the Group for that year. The directors are also required to prepare financial statements in accordance with the rules of the London Stock Exchange for companies trading securities on AIM. In preparing these financial statements, the directors are required to: • select suitable accounting policies and then apply them consistently; • make judgements and accounting estimates that are reasonable and prudent; • state whether they have been prepared in accordance with UK adopted International Accounting Standards, subject to any material departures disclosed and explained in the financial statements; • prepare the financial statements on the going concern basis unless it is inappropriate to presume that the company will continue in business. 16 Bonuses paid during the year ended 31 December 2023 relate to 31 December 2022 results. Jon Divers Chief Executive Officer Corporate Governance46 47 Corporate Governance48 Independent Auditor’s Report to the members of RBG Holdings plc We have determined the matters described below to be the key audit matters to be communicated in our audit report. 49 Key Audit Matters How our scope addressed this matter Opinion We have audited the financial statements of RBG Holdings Plc (the ‘Parent Company’ and its subsidiaries (the ‘Group’)) for the year ended 31 December 2023 which comprise the Consolidated statement of comprehensive income, the Consolidated and Company statements of financial position, the Consolidated and Company Statements of cash flows, the Consolidated and Company statements of changes in equity and notes to the financial statements, including significant accounting policies. The financial reporting framework that has been applied in the preparation of the Group and Parent Company financial statements is applicable law and UK adopted International Accounting Standards and as regards the Parent Company financial statements, as applied in accordance with the provisions of the Companies Act 2006. In our opinion: • the financial statements give a true and fair view of the Group’s and of the Parent Company’s affairs as at 31 December 2023 and of the Group’s loss for the year then ended; • the Group financial statements have been properly prepared in accordance with UK adopted International Accounting Standards; • the Parent Company financial statements have been properly prepared in accordance with UK adopted International Accounting Standards and as applied in accordance with the provisions of the Companies Act 2006; and • the financial statements have been prepared in accordance with the requirements of the Companies Act 2006. Basis for opinion We conducted our audit in accordance with International Standards on Auditing (UK) (ISAs (UK)) and applicable law. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the audit of the financial statements section of our report. We are independent of the Group in accordance with the ethical requirements that are relevant to our audit of the financial statements in the UK, including the FRC’s Ethical Standard as applied to listed entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion. An overview of the scope of our audit Our Group audit was scoped by obtaining an understanding of the Group and its environment, including the Group’s system of internal control, and assessing the risks of material misstatement in the financial statements. We also addressed the risk of management override of internal controls, including assessing whether there was evidence of bias by the Directors that may have represented a risk of material misstatement. The components of the Group were evaluated by the Group audit team based on a measure of materiality, considering each component as a percentage of the Group’s net assets, gross revenue, adjusted earnings before interest, tax, depreciation and amortisation (adjusted EBITDA) and results before tax, which allowed the Group audit team to assess the significance of each component and determine the planned audit response. The Group is made up of the Parent Company and four subsidiaries as at 31 December 2023, RBG Legal Services Limited, Convex Capital Limited, RBL Law Limited and Convex Group (Holdings) Limited. We considered the Parent Company and RBG Legal Services Limited to represent the two significant components of the group which were subject to full scope audits performed by the group audit engagement team. As RBL Law Limited, Convex Capital Limited and Convex Group (Holdings) Limited were not considered to be significant components we performed limited audit procedures on key balances and classes of transactions to cover specific identified risks. Lionfish Litigation Finance Limited was disposed of during 2023 and therefore our audit procedures focused on key balances and classes of transactions up to the date of disposal. For significant components requiring a full scope audit approach, we evaluated controls by performing walkthroughs and test of controls over the financial reporting systems identified as part of our risk assessment, reviewed the accounts production process, and addressed critical accounting matters. We then undertook substantive testing on significant transactions and material account balances. Key audit matters Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the financial statements of the current period and include the most significant assessed risks of material misstatement (whether or not due to fraud) we identified, including those which had the greatest effect on: the overall audit strategy, the allocation of resources in the audit; and directing the efforts of the engagement team. These matters were addressed in the context of our audit of the financial statements, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. This is not a complete list of all risks identified by our audit. Revenue recognition, specifically valuation of contract assets Refer to the accounting policies in Note 2 on page 67 in the Group financial statements. Revenue from legal services and other professional services is recognised based on reference to time charged at agreed rates. As at the reporting date, there can be instances when the Company has provided services to customers for which not all the performance obligations have been satisfied as at the reporting date. Estimation and recognition of the amount of performance obligations which have been met at the reporting date and recoverability of the amounts involved is a matter of judgment and we therefore considered it a significant area of focus for the audit and a key audit matter. Our audit work included, but was not restricted to, the following procedures: We evaluated the operating effectiveness of certain key controls identified in relation to revenue. We evaluated the Group’s accounting policy in respect of revenue recognition to ensure it is compliant with IFRS 15. We selected a sample of revenue items on which to perform tests of detail and the substantive testing and controls-based testing procedures performed in respect of revenue included the following: • Confirming revenue was recognised in accordance with the terms and conditions entered into with customers. • Agreeing a sample of fee earner timesheet entries recorded in the time recording system to the physical fee note (sales invoice), the entries to the accounting system, and the cash received. • Agreeing the hourly rates per timesheets for selected matters to the group’s agreed charge out rate listing to test the accuracy of recorded time. • Performing controls-based testing for a sample of selected matters and agreeing these to the letters of engagement, the signed physical fee notes (sales invoices) and the approval of entries to the accounting system. • Performing cut-off testing on either side of the reporting date. • Reviewing material credit notes and invoices raised after the reporting date. • Analytically reviewing fee income to assess whether there were any unusual trends. • Reviewing material journals posted to revenue. • Selecting samples of contract assets and agreeing them to fee notes (sales invoices) raised subsequent to the reporting date and subsequent remittance. Where fee notes (sales invoices) were unavailable, obtaining alternative supporting evidence to gain assurance over recoverability. • Comparing the valuation of contract assets at the reporting date to historic recovery rates for the legal department to which the matters relate. • Critically assessing management’s assumptions used in arriving at the final valuation for contract assets to gain assurance that there was no management bias. Key observations: As a result of our critical assessment of management’s assumptions used in arriving at the final valuation for contract assets, we identified some material misstatements in revenue recognition and consequently some material adjustments were made to the carrying values of contract assets. Based on the procedures performed and with the adjustments referred to above having been made, we consider that the assumptions made by management in recognising revenue on part completed contracts with customers at the reporting date to be appropriate and in accordance with the requirements of IFRS 15. Corporate Governance50 51 Key Audit Matters How our scope addressed this matter Key Audit Matters How our scope addressed this matter Recoverability of Trade Receivables Refer to the accounting policies in Note 2 on page 69 in the Group financial statements. There can be instances where the Company has invoiced their customers for legal services provided within the financial year, but fee notes (sales invoices) remain unpaid until after the reporting date. Estimation and recognition of the recoverable amount at the reporting date for these items is a matter of judgment. In addition, the Company changed its approach in arriving at the accounting estimate in respect of the provision for impairment of trade receivables, and we therefore considered it a significant area of focus for the audit and a key audit matter. Our audit work included, but was not restricted to, the following procedures: Evaluating the Group’s accounting policies in respect of revenue recognition and provision for expected credit losses to ensure they are compliant with IFRS 15 and IFRS 9 respectively. Selecting samples of trade receivables and agreeing them to receipts subsequent to the reporting date. Where receipts were unavailable, obtaining alternative supporting evidence to gain assurance over recoverability. Assessing the overall recoverability of trade receivables by reviewing the proportion of total trade receivables at the reporting date that had been recovered by the date of signing the auditor’s report including checking the consistency of total recoverability within similar timeframes for previous accounting periods. Enquiring with management about the amended approach adopted giving rise to the change in accounting estimate during the year in respect of the provision for expected credit losses on trade receivables. Critically assessing management’s revised assumptions and the justifications used in arriving at the final provision for expected credit losses on trade receivables to gain assurance this did not constitute management override. Analysing the reliability of the change in accounting estimate by performing sensitivity analysis on historical results in respect of the recoverability of trade receivables. Assessing whether the change in accounting estimate in respect of the provision for expected credit losses was applied in accordance with IFRS 9 and IAS 8. Key observations: As a result of our critical assessment of management’s assumptions used in arriving at the final valuation of trade receivables, we identified some material misstatements in revenue recognition and consequently some material adjustments were made to the carrying values of trade receivables. Based on the procedures performed and with the adjustments referred to above having been made, we consider that the assumptions made by management in arriving at the provision for expected credit losses on trade receivables at the reporting date to be appropriate and in accordance with the requirements of IFRS 9. As referenced in Note 3 of the Group’s financial statements, expected credit losses are now recognised based on the ageing of fee notes (sales invoices) with invoices over 270 days being fully provided for. Management also makes an assessment for invoices under 270 days old to determine their recoverability. Valuation of litigation assets and gain/loss on disposal of litigation assets (litigation assets hived up from LionFish Litigation Finance Limited) The Group enters into contracts under which it provides funding to litigants. Litigation assets are measured at fair value as described in the accounting policy on page 69. The Group is entitled to a fixed return that is contingent on the successful outcome of the case which in turn is dependent upon the timing of the settlement of the case. It has also entered into contracts under which a share in any damages to which the Group is entitled are disposed of to a third-party. The calculation of the results on disposal and the fair value of the remaining investments requires significant estimation and judgement and we therefore considered it a significant area of focus for the audit and a key audit matter. Specifically: • Estimation of the likely date of settlement impacts the expected returns to be receivable and the fair value of the remaining investments; and • Estimation of the total funding that will be drawn down under each contract impacts the cost of sales for the gain on sale of investments. Our audit work included, but was not restricted to, the following procedures: We evaluated the Group’s accounting policy in respect of the litigation assets to ensure it is compliant with IFRS 9. • We agreed sale proceeds on the disposal of LionFish Litigation Finance Limited to the bank statements and share purchase agreement. • We tested the arithmetical accuracy of the calculations through recalculation of the costs, fair value, and profit on disposal. • We agreed the drawdown of litigation funds during the year to the bank statements. • We critically assessed and challenged management’s assumptions adopted to calculate the amounts written off to the profit and loss account upon disposal of litigation assets and liabilities from the balance sheet during the year. Key observations: The three litigation assets that were not sold as part of the LionFish Litigation Finance Limited disposal were hived up into RBG Holdings Plc, These assets were hived up at cost amounting to £1.78m and subsequently impaired to £Nil. We have reviewed management’s assessment of the amount impaired and considered this to be appropriate, as the three litigation cases were lost during the year and therefore held no remaining value. Based on our audit work, we concluded that the disposal of LionFish Litigation Finance Limited was not materially misstated in the financial statements. Corporate Governance52 53 Key Audit Matters How our scope addressed this matter Key Audit Matters How our scope addressed this matter Treatment of damages based agreements, including the provision of legal services A prior period adjustment has been made in the comparative financial information presented in the financial statements, on the basis that an incorrect accounting policy previously adopted in respect of the treatment of damages based agreements. As described in the accounting policy on page 73, the Group enters into composite contracts of providing both legal services and funding to its litigation customers. In return for these services the Group receives a share in any damages awarded. Estimation and recognition of the amount of performance obligations which have been met at the reporting date and recoverability of the amounts involved is a matter of judgment and we therefore considered it a significant area of focus for the audit and a key audit matter. Our audit work included, but was not restricted to, the following procedures. • Critically assessing the reasonableness of key assumptions, such as estimated damages-based awards, by corroborating the underlying documents through discussion with the Lead Partner for each matter and considering the outcomes of similar historic cases. • Challenging the key assumptions used by management in the reassessment of the first case including the change in success rates through discussions with the Lead Partner. • Critically assessing the management reassessment of recoverability of trade receivables under the second case of the damages based agreements. Key observations: From our work performed, we agreed with management’s assessment that a prior period adjustment was required in respect of incorrect accounting policies previously adopted for damages based agreements. From our assessment and challenge of management and the Lead Partner of each damages based agreement: • The reassessment is based on both the timeline of legal proceedings and merits of the first case which led to management’s judgement that the chance of success significantly reduced from 90% to 50% in February 2022. We concluded that this was appropriate. • We concluded that management’s judgement regarding the IFRS 9 Expected Credit loss full provision on the second case at each respective year end was not materially misstated. Based on our audit work, we concluded that the quantum of the prior period adjustment was purely due to the reassessment performed and described above and not the incorrect application of accounting policies in the prior period. Annual impairment review of goodwill and other intangible assets Refer to the accounting policies in Note 2 on page 68 and Note 3 on page 74 for key judgements in the Group financial statements. As at the reporting date the group had intangible assets for continuing operations of £40.49m (2022 restated: £ 38.69 m) including goodwill of £36.09m (2022 restated: £36.09m). The process for assessing whether an impairment exists under International Accounting Standard IAS 36 ‘Impairment of Assets’ is complex. The process of determining the value in use, through forecasting cash flows (primarily revenue less costs) and the determination of the appropriate discount rate and other assumptions to be applied, is highly judgemental and can significantly impact the results of the impairment review. Based on the judgemental nature of an impairment review, we therefore identified valuation of goodwill and other intangible assets as a key audit matter. Our audit work included, but was not restricted to, the following procedures: • Obtaining management’s assessment of the Group cash generating units (CGUs) and critically assessing the Value In Use (VIU) model for each CGU to test compliance with the requirements of the applicable accounting standards, specifically IAS 36, and the mathematical accuracy of the model. • Critically assessing and challenging the impairment model prepared by management in terms of the inputs including recalculating the weighted average cost of capital (WACC). • Performing sensitivity analysis on the impairment model and assessing the accuracy of the forecasts used based on historical trading performance for each CGU. • Evaluating the accounting policy and detailed disclosures in the notes to the financial statements to determine whether information provided in the financial statements is compliant with the requirements of IAS 36 and consistent with the results of the impairment review. • Reviewing the amortisation accounting policy for intangible fixed assets to ensure it was appropriate. • Substantively auditing additions to intangible assets ensuring that they are in accordance with IAS 38 in respect of criteria for capitalisation. Key observations: Based on our audit work, we concluded that goodwill and other intangible assets are not materially misstated at the reporting date and that management’s assessment that no impairment was required was appropriate. Corporate Governance54 Our application of materiality The scope and focus of our audit were influenced by our assessment and application of materiality. We define materiality as the magnitude of misstatement that could reasonably be expected to influence the economic decisions of the users of financial statements. We use materiality to determine the scope of our audit and the nature, timing, and extent of our audit procedures and to evaluate the effect of misstatements, both individually and on the financial statements as a whole. We apply the concept of materiality both in planning and performing our audit, and in evaluating the effect of misstatements. Based on our professional judgment we determined materiality for the 2023 financial statements as a whole and performance materiality as follows: Group financial statements Parent company financial statements Materiality £232,000 £231,999 Basis for determining materiality Rationale for the benchmark applied Performance materiality Basis for determining performance materiality 5% of Adjusted EBITDA The Group has reiterated its continued focus on growth and increasing revenue and profit margins during 2023. As such, the Group continues to be a profit orientated business and Adjusted EBITDA is considered to be the key financial metric on which the users of the financial statements are likely to focus on. Based on an allocated proportion of Group materiality using 2% of Gross Assets capped at Group Materiality. As for group materiality. £116,000 £115,999 50% of Group financial statement materiality. This was considered an appropriate percentage based on our risk assessment and our assessment of the overall control environment of the group. 50% of Parent company financial statement materiality. We set materiality for each component of the Group based on a percentage of Group materiality dependent on the size of each component and our assessment of the risk of material misstatement relevant to that component. Both parent company materiality and component materiality, was capped at Group materiality and as such was £231,999. In the audit of each component, we further applied performance materiality levels of 50% of total component materiality to our testing to ensure that the risk of errors exceeding component materiality was appropriately mitigated. We agreed with the Audit Committee that we would report to them all individual audit differences in excess of £11,600 for the Group and £11,599 for the Parent Company and each component. We also agreed to report differences below this threshold that, in our view, warranted reporting on qualitative grounds. We also reported to the Audit Committee on disclosure matters that we identified when assessing the overall presentation of the financial statements. 55 Conclusions related to going concern In auditing the financial statements, we have concluded that the Directors’ use of the going concern basis of accounting in the preparation of the financial statements is appropriate. Our evaluation of the Directors’ assessment of the Group and Parent Company’s ability to continue to adopt the going concern basis of accounting included the following procedures: • Critically assessing the going concern assessment prepared by management covering at least twelve months from the date of the audit report; • Performing sensitivity analysis on the forecasts to ensure there is sufficient cash flow headroom for the group to continue as a going concern for at least that period; • Reviewing the trading performance of the group post year end and comparing it to the forecasts to assess their accuracy; and • Assessing the adequacy of the going concern disclosures in the financial statements. Based on the work we have performed, we have not identified any material uncertainties relating to events or conditions that, individually or collectively, may cast significant doubt on the Group and the Parent Company’s ability to continue as a going concern for a period of at least twelve months from when the financial statements are authorised for issue. Our responsibilities and the responsibilities of the Directors with respect to going concern are described in the relevant sections of this report. Other information The other information comprises the information included in the annual report, other than the financial statements and our auditor’s report thereon. The Directors are responsible for the other information contained within the annual report. Our opinion on the financial statements does not cover the other information and, except to the extent otherwise explicitly stated in our report, we do not express any form of assurance conclusion thereon. Our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the financial statements, or our knowledge obtained in the course of the audit or otherwise appears to be materially misstated. If we identify such material inconsistencies or apparent material misstatements, we are required to determine whether there is a material misstatement in the financial statements themselves. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard. Opinions on other matters prescribed by the Companies Act 2006 In our opinion, based on the work undertaken in the course of the audit: • the information given in the Strategic Report and the Directors’ Report for the financial year for which the financial statements are prepared is consistent with the financial statements; and • the Strategic Report and the Directors’ Report have been prepared in accordance with applicable legal requirements. Matters on which we are required to report by exception In the light of the knowledge and understanding of the Group and the Parent Company and their environment obtained in the course of the audit, we have not identified material misstatements in the Strategic Report or the Directors’ Report. We have nothing to report in respect of the following matters where the Companies Act 2006 requires us to report to you if, in our opinion: • adequate accounting records have not been kept by the Parent Company, or returns adequate for our audit have not been received from branches not visited by us; or • the Parent Company financial statements are not in agreement with the accounting records and returns; or • certain disclosures of directors’ remuneration specified by law are not made; or • we have not received all the information and explanations we require for our audit. Responsibilities of Directors As explained more fully in the Directors’ responsibilities statement set out on pages 44-45, the Directors are responsible for the preparation of the financial statements and for being satisfied that they give a true and fair view, and for such internal control as the directors determine is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, the directors are responsible for assessing the Group’s and the Parent Company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the Group or the Parent Company or to cease operations, or have no realistic alternative but to do so. Corporate GovernanceFinancial Statements Contents Financial Statements Independent auditor’s report to the members of RBG Holdings plc Consolidated statement of comprehensive income Consolidated statement of financial position Consolidated statement of cash flows Consolidated statement of changes in equity Company statement of financial position Company statement of cash flows Company statement of changes in equity Notes to the Consolidated and Company financial statements 48 58 59 60 61 62 63 64 65 56 Auditor’s Responsibilities for the audit of the financial statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. A further description of our responsibilities is available on the FRC’s website at https://wwww.frc.org.uk/auditors/auditor- assurance/auditor-s-responsibilities-for-the-audit-of-the-fi/description-of-the-auditor’s-responsibilities-for This description forms part of our auditor’s report. Explanation as to what extent the audit was considered capable of detecting irregularities, including fraud Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud is detailed below. The objectives of our audit in respect of fraud, are; to identify and assess the risks of material misstatement of the financial statements due to fraud; to obtain sufficient appropriate audit evidence regarding the assessed risks of material misstatement due to fraud, through designing and implementing appropriate responses to those assessed risks; and to respond appropriately to instances of fraud or suspected fraud identified during the audit. However, the primary responsibility for the prevention and detection of fraud rests with both management and those charged with governance of the company. Our approach was as follows: • We obtained an understanding of the legal and regulatory requirements applicable to the company and considered that the most significant are the Companies Act 2006, UK adopted international accounting standards, the rules of the Solicitors Regulation Authority, the rules of the Alternative Investment Market, and UK taxation legislation. • We obtained an understanding of how the Group and Parent Company complies with these requirements by discussions with management and those charged with governance. • We assessed the risk of material misstatement of the financial statements, including the risk of material misstatement due to fraud and how it might occur, by holding discussions with management and those charged with governance. • We inquired of management and those charged with governance as to any known instances of non-compliance or suspected non-compliance with laws and regulations. • Based on this understanding, we designed specific appropriate audit procedures to identify instances of non-compliance with laws and regulations. This included making enquiries of management and those charged with governance and obtaining additional corroborative evidence as required. There are inherent limitations in the audit procedures described above. We are less likely to become aware of instances of non-compliance with laws and regulations that are not closely related to events and transactions reflected in the financial statements. Also, the risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve deliberate concealment by, for example, forgery or intentional misrepresentations, or through collusion. Use of our report This report is made solely to the Parent Company’s members, as a body, in accordance with Chapter 3 of Part 16 of the Companies Act 2006. Our audit work has been undertaken for no purpose other than to draw to the attention of the Parent Company’s members those matters which we are required to include in an auditor’s report addressed to them. To the fullest extent permitted by law, we do not accept or assume responsibility to any party other than the Parent Company and the Parent Company’s members as a body, for our work, for this report, or for the opinions we have formed. John Staniforth (Senior Statutory Auditor) for and on behalf of Moore Kingston Smith LLP Chartered Accountants Statutory Auditor 6th Floor 9 Appold Street London EC2A 2AP 30 April 2024 58 59 Consolidated statement of comprehensive income Consolidated statement of financial position For the year ended 31 December 2023 As at 31 December 2023 Revenue Proceeds on disposal of damages based agreements Other operating income Disbursement asset revenue Disbursement asset expenditure Personnel costs Depreciation and amortisation expense Other expenses (Loss) from operations EBITDA Non-underlying items Costs of acquiring subsidiary Contract assets - damages based agreement asset impairment Release of onerous contract provision Trade receivables – provision against damages based agreement re-ceivable Costs associated with disposal of LionFish Costs associated with re-financing project Other one-off costs Trade receivables provision change Restructuring (release)/costs Adjusted EBITDA Finance expense Finance income Loss on sale of associate (Loss) before tax Tax income/(expense) (Loss) from continuing operations Profit/(Loss) on discontinued operations, net of tax Impairment associated with discontinued operation (Loss) for the year Total (loss) and comprehensive income attributable to: Owners of the parent Non-controlling interest 1 Jan to 31 Dec 2023 1 Jan to 17 31 Dec 2022 Restated Note £ £ 5 5 7 8 8 39,209,854 44,873,908 - 2,021,700 885,422 156,046 1,221,854 2,847,487 (827,834) (3,241,507) 10 (26,878,460) (27,184,117) (3,251,607) (3,432,764) (19,606,276) (16,816,487) 9 (9,247,048) (775,734) (5,995,440) 2,657,030 6 25,000 367,303 - 6,670,481 301,727 920,127 5,648,109 787,193 2,081,890 1,038,163 (168,167) 562,979 1,296,470 - - - - 803,631 4,638,602 12,357,894 11 11 21 (2,170,109) (1,333,663) 51,318 - 14,509 (21,643) (11,365,839) (2,116,531) 12, 13 322,721 469,118 (11,043,118) (1,647,413) 13 20 818,932 (3,073,351) (13,694,754) - (23,918,940) (4,720,763) (23,918,940) (4,335,201) - (385,562) (23,918,940) (4,720,763) (11.58) (11.58) (25.09) (25.05) (1.73) (1.73) (4.55) (4.55) Company registered number: 11189598 Note £ £ £ 31 Dec 2022 18 31 Dec 2023 restated 31 Jan 2022 restated Assets Current assets Trade and other receivables Current tax asset Cash and cash equivalents Non-current assets Property, plant and equipment Right-of-use assets Intangible assets Deferred tax Litigation assets Trade and other receivables Investments in associates Assets held for sale Total assets Liabilities Current liabilities Trade and other payables Leases Current tax liabilities Provisions Loans and borrowings Non-current liabilities Loans and borrowings Deferred tax liabilities Provisions Leases Liabilities held for sale Total liabilities NET ASSETS Issued capital and reserves attributable to owners of the parent Share capital Share premium reserve Retained (losses)/earnings Non-controlling interest TOTAL EQUITY 22 22 16 17 18 26 32 22 21 18,374,752 27,214,577 19,330,914 725,723 656,982 - 2,262,750 2,588,240 4,736,546 21,363,225 30,459,799 24,067,460 2,047,706 2,208,091 2,582,911 12,390,892 14,419,414 15,913,008 40,488,453 38,693,983 55,859,230 216,445 - - - - - - - - - 6,402,444 101,643 55,143,496 55,321,488 80,859,236 13 3,369,134 22,882,556 4,922,385 79,875,854 108,663,843 109,849,081 23 17 23 25 24 24 26 25 17 13 27 28 28 11,593,485 9,642,454 10,099,544 2,224,373 1,979,578 - - 75,000 605,556 2,150,440 1,002,637 164,291 2,624,407 2,205,640 2,129,592 16,517,264 14,433,228 15,546,504 22,687,488 20,000,000 17,000,000 - 150,000 229,361 150,000 850,042 150,000 11,344,768 13,713,932 13,698,661 34,182,255 34,093,293 31,698,703 958,476 7,528,822 2,053,440 51,657,996 56,055,344 49,298,647 28,217,858 52,608,500 60,550,434 190,662 190,662 190,662 49,232,606 49,232,606 49,232,606 (21,205,410) 3,185,232 10,840,271 28,217,858 52,608,500 60,263,539 - - 286,895 28,217,858 52,608,500 60,550,434 The financial statements on pages 58 to 103 were approved and authorised for issue by the Board of Directors on 30 April 2024 and were signed on its behalf by: Earnings per share attributable to the ordinary equity holders of the parent 14 Basic (pence) from continuing operations Diluted (pence) from continuing operations Basic (pence) from total operations Diluted (pence) from total operations There were no elements of other comprehensive income for the financial year other than those included in the income statement. The attached notes form part of these financial statements. Jon Divers, Director The attached notes form part of these financial statements 17 Comparatives have been restated to present Convex Capital as a discontinued operation. Refer to Note 13 for further details. 18 Comparatives have been restated to present Convex as a discontinued operation. Refer to Note 13 for further details. Financial Statements 60 Consolidated statement of cash flows For the year ended 31 December 2023 Cash flows from operating activities (Loss) for the year before tax from: Continuing operations Discontinued operations Adjustments for: Depreciation of property, plant and equipment Amortisation of right-of-use assets Amortisation of intangible fixed assets Fair value movement of litigation assets net of realisations Impairment of contract assets (damages based agreement asset) Release of onerous contract provision Trade receivables – provision against damages based agreement receivable Finance income Finance expense Loss on sale of equity accounted associate Decrease/(increase) in trade and other receivables Increase in trade and other payables (Increase) in litigation assets (Decrease)/increase in provisions Cash generated from operations Tax paid Net cash flows (used in)/generated from operating activities Investing activities Purchase of property, plant and equipment Sale of associate Purchase of other intangibles Disposal of discontinued operations litigation assets Consideration received (litigation assets) Payment of deferred consideration Interest received Net cash generated from/(used in) investing activities Financing activities Dividends paid to holders of the parent Proceeds from loans and borrowings Repayment of loans and borrowings Repayments of lease liabilities Interest paid on loans and borrowings Interest paid on lease liabilities Net cash (used in) financing activities Net (decrease) in cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year Cash and cash equivalents – continuing operations Cash and cash equivalents – discontinued operations Cash and cash equivalents per consolidated balance sheet The attached notes form part of these financial statements. 19 Comparatives have been restated to present Convex as a discontinued operation. Refer to Note 13 for further details. Note 2023 £ 19 2022 restated £ (11,365,839) (2,116,531) 673,594 (3,772,086) 500,559 556,403 2,138,917 2,153,585 738,611 (1,168,566) - 301,727 920,127 (51,646) 837,413 5,218,176 6,670,481 562,979 1,296,470 (32,739) 2,213,795 1,361,514 - 21,643 (5,098,721) 12,757,308 3,788,638 (3,600,176) 1,083,815 3,609,645 (325,488) (530,556) (7,781,846) 441,265 (1,082,312) 5,426,196 (899,649) (601,569) (1,981,961) 4,824,627 (326,941) (199,741) - 80,000 18 (2,500,000) 1,821,800 3,782,098 - - - - (2,248,319) 51,646 32,739 2,828,604 (2,335,321) 15 (471,702) (4,736,071) 3,249,950 5,000,000 (718,888) (2,000,000) (1,841,233) (1,211,829) (1,197,725) (509,019) (756,768) (528,698) (1,488,617) (4,233,366) (641,974) (1,744,060) 3,012,083 4,756,143 2,370,109 3,012,083 2,262,750 2,588,240 13 107,359 423,843 2,370,109 3,012,083 61 Consolidated statement of changes in equity For the year ended 31 December 2023 Current year Share Capital Share Premium Retained Earnings Total attributable to equity holders of parent Non- controlling interest Balance at 1 January 2023 as originally presented 190,662 49,232,606 11,996,470 61,419,738 Correction of error (refer to note 32) Balance at 1 January 2023 - - (8,811,238) (8,811,238) 190,662 49,232,606 3,185,232 52,608,500 £ £ £ £ Comprehensive income for the year Loss for the year Total comprehensive loss for the year Contributions by and distributions to owners Dividends Total contributions by and distributions to owners - - - - - - - - (23,918,940) (23,918,940) (23,918,940) (23,918,940) (471,702) (471,702) (471,702) (471,702) Balance at 31 December 2023 190,662 49,232,606 21,205,410 28,217,858 The attached notes form part of these financial statements. £ - - - - - - - - Consolidated statement of changes in equity For the year ended 31 December 2023 (continued) Prior year Share Capital Share Premium Retained Earnings Total attributable to equity holders of parent Non- controlling interest £ £ £ £ £ Total equity £ 61,419,738 (8,811,238) 52,608,500 (23,918,940) (23,918,940) (471,702) (471,702) 28,217,858 Total equity £ Balance at 1 January 2022 as originally presented 190,662 49,232,606 11,113,365 60,536,633 286,895 60,823,528 Correction of error (refer to note 32) - - (273,094) (273,094) - (273,094) Balance at 1 January 2022 (restated, refer to note 32) Comprehensive income for the year (Loss) for the year (restated, refer to note 32) Comprehensive income for the year Contributions by and distributions to owners Dividends Purchase of NCI share capital Reversal of call option over shares of associate Reversal of put option over shares of subsidiary Total contributions by and distributions to owners 190,662 49,232,606 10,840,271 60,263,539 286,895 60,550,434 - - - - - - - - - - - - - - (4,335,201) (4,335,201) (385,562) (4,720,763) (4,335,201) (4,335,201) (385,562) (4,720,763) (4,736,071) (4,736,071) - (4,736,071) (98,767) 500,000 (98,767) 500,000 1,015,000 1,015,000 98,667 (100) - - 500,000 1,015,000 (3,319,838) (3,319,838) 98,667 (3,221,171) Balance at 31 December 2022 190,662 49,232,606 3,185,232 52,608,500 - 52,608,500 The attached notes form part of these financial statements. Financial Statements 62 Company statement of financial position As at 31 December 2023 Company statement of cash flows For the year ended 31 December 2023 63 Company registered number: 11189598 Assets Current assets Trade and other receivables Cash and cash equivalents Current tax assets Non-current assets Trade and other receivables Property, plant and equipment Investments in subsidiaries Total assets Liabilities Current liabilities Trade and other payables Loans and borrowings Non-current liabilities Loans and borrowings Deferred tax liabilities Total liabilities NET ASSETS Issued capital and reserves attributable to owners of the parent Share capital Share premium reserve Retained earnings 31 Dec 2023 31 Dec 2022 restated Note £ £ 22 22 22 16 20 23 24 24 26 27 28 28 4,394,018 14,204,102 340,549 145,364 413,635 - 4,879,931 14,617,737 40,412,117 39,554,433 - 45 13,806,624 27,501,378 54,218,741 67,055,856 59,098,672 81,673,593 4,219,262 2,624,407 4,290,801 2,205,640 6,843,669 6,496,441 22,687,488 20,000,000 199,505 635,334 22,886,993 20,635,334 29,730,661 27,131,775 29,368,011 54,541,818 190,662 190,662 49,232,606 49,232,606 (20,055,257) 5,118,550 29,368,011 54,541,818 Cash flows from operating activities Loss/Profit for the year before tax Adjustments for: Depreciation of property, plant and equipment Impairment of investment in discontinued operation Finance income Finance expense (Increase)/decrease in trade and other receivables Increase in trade and other payables Cash (used in)/generated from operations Tax paid Net cash flows from operating activities Investing activities Sale of associate Purchase of NCI share capital Amounts repaid by/(loaned to) subsidiaries Interest received Net cash flows (used in) investing activities Financing activities Dividends paid to holders of the parent Amounts (repaid to)/borrowed from subsidiaries Proceeds from loans and borrowings Repayment of loans and borrowings Interest paid on loans and borrowings Net cash flows generated from/(used in) financing activities Net (decrease) in cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year The attached notes form part of these financial statements. Note 2023 £ 2022 £ (25,137,934) 3,491,188 16 45 13,694,754 (10,648) 1,666,894 1,038 - (14,164) 811,352 (9,786,889) 4,289,414 (445,778) 575,785 1,329,641 379,823 (9,656,882) 5,998,878 (145,362) - (9,802,244) 5,998,878 15 - - 80,000 (100) 9,398,176 (7,435,942) 10,648 14,164 9,408,824 (7,341,879) (471,702) (647,324) 3,249,950 (4,736,071) 1,767,522 5,000,000 (718,888) (2,000,000) (1,091,703) 320,334 (735,304) (703,853) (73,086) (2,046,854) 413,635 2,460,489 340,549 413,635 The Company has taken advantage of the exemption contained in S408 Companies Act 2006 and has not presented a separate income statement for the Company. The Company recorded a loss after tax of £24,702,105 for the year ended 31 December 2022 (2022: profit £4,419,482). The financial statements on pages 58 to 103 were approved and authorised for issue by the Board of Directors on 30 April 2024 and were signed on its behalf by: Jon Divers Director The attached notes form part of these financial statements. Financial Statements 64 65 Company statement of changes in equity Notes to the consolidated and company financial statements For the year ended 31 December 2023 1. Basis of preparation Current year Share Capital Share Premium Retained Earnings £ £ £ Total £ Balance at 1 January 2023 190,662 49,232,606 5,118,550 54,541,818 Comprehensive profit for the year Loss for the year Total comprehensive profit for the year Contributions by and distributions to owners Dividends Total contributions by and distributions to owners - - - - - - - - (24,702,105) (24,702,105) (24,702,105) (24,702,105) (471,702) (471,702) (471,702) (471,702) Balance at 31 December 2023 190,662 49,232,606 (20,055,257) 29,368,011 RBG Holdings plc is a public limited company, incorporated in the United Kingdom. The principal activity of the Group is the provision of legal and professional services, including management and financing of litigation projects. The Group and Company financial statements have been prepared in accordance with UK adopted international accounting standards and those parts of the Companies Act 2006 applicable to companies reporting under UK adopted international accounting standards. These financial statements consolidate those of the Company and its subsidiaries (together referred to as the “Group”). The Company has taken advantage of the exemption contained in S408 Companies Act 2006 and has not presented a separate income statement for the Company. The financial statements have been prepared for year ended 31 December 2023, with a comparative year to 31 December 2022 (restated), and are presented in Sterling, which is also the Group’s functional currency. The principal accounting policies adopted in the preparation of the consolidated financial statements are set out in Note 2. The policies have been consistently applied to the year presented, unless otherwise stated. The preparation of financial statements in compliance with UK adopted international accounting standards requires the use of certain critical accounting estimates. It also requires Group management to exercise judgment in applying the Group’s accounting policies. The areas where significant judgements and estimates have been made in preparing the financial statements and their effect are disclosed in Note 3. The attached notes form part of these financial statements. Prior year Share Capital Share Premium RetainedEarnings £ £ £ Total £ Basis of measurement The consolidated financial statements have been prepared on a historical cost basis. Balance at 1 January 2022 190,662 49,232,606 5,435,139 54,858,407 Discontinued operations Comprehensive profit for the year Profit for the year Total comprehensive profit for the year Contributions by and distributions to owners Dividends Total contributions by and distributions to owners - - - - - - - - 4,419,482 4,419,482 4,419,482 4,419,482 (4,736,071) (4,736,071) (4,736,071) (4,736,071) Balance at 31 December 2022 190,662 49,232,606 5,118,650 54,541,818 The attached notes form part of these financial statements. During the year, the Board approved plans to dispose of the Group’s interests in Convex. Convex is classified as held for sale at the balance sheet date. The net results of Convex have been presented as discontinued operations in the Group statement of comprehensive income (for which the comparatives have been restated). See Note 13 for further details. Going concern The Group has prepared financial projections to April 2025, the going concern review period. The Board recognises that the Groups’ financial performance in 2023 included a decline in revenue and a total reported loss (including discontinued operations) after tax of £23,918,941. This loss included an impairment of Convex Capital intangible assets of £13,694,754 and one-off costs that are considered to be exceptional totalling £10,634,042. After the reporting date, the Group raised a total of £3.0 million before expenses through the issue of new ordinary shares and completed the disposal of Convex Capital for an initial consideration of £2.0 million. The Directors are confident that much of these losses were attributable to factors that will not impact the Group going forward. The financial projections performed form part of a three-year plan which shows positive earnings and cash flow generation and projected compliance with banking covenants at each testing date. The Board confirm that they have a reasonable expectation that the Group has adequate resources to continue in operational existence for at least 12 months from the date of signing the financial statements. This confirmation is made after reviewing assumptions about the future trading performance. This process included a reverse `stress test’ used to inform downside testing which identified the break point in the Group’s liquidity. Whilst the sensitivities applied do show an expected downside impact on the Group’s financial performance in future periods, for all scenarios modelled, the Board have identified appropriate mitigating actions, including lowering capital expenditure, reductions in personnel and overhead expenditure and other short-term cash management activities within the Group’s control as part of their assessment of going concern. Financial Statements66 Changes in accounting policies A. New standards, interpretations and amendments effective from 1 January 2023 New standards that have been adopted in the annual financial statements for the year ended 31 December 2023 but have not had a significant effect on the Group are: • Disclosure of Accounting Policies (Amendments to IAS 1 Presentation of Financial Statements and IFRS Practice Statement 2 Making Materiality Judgements); • Definition of Accounting Estimates (Amendments to IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors); • Deferred Tax related to Assets and Liabilities arising from a Single Transaction (Amendments to IAS 12 Income Taxes); and • International Tax Reform – Pillar Two Model Rules (Amendment to IAS 12 Income Taxes) (effective immediately upon the issue of the amendments and retrospectively) B. New standards, interpretations and amendments not yet effective There are a number of standards, amendments to standards, and interpretations which have been issued by the IASB that are effective in future accounting periods that the Group has decided not to adopt early. The following amendments are effective for the period beginning 1 January 2024: • Liability in a Sale and Leaseback (Amendments to IFRS 16 Leases); • Classification of Liabilities as Current or Non-Current (Amendments to IAS 1 Presentation of Financial Statements); • Non-current Liabilities with Covenants (Amendments to IAS 1 Presentation of Financial Statements); and • Supplier Finance Arrangements (Amendments to IAS 7 Statement of Cash Flows and IFRS 7 Financial Instruments: Disclosures) The Group is currently assessing the impact of these new accounting standards and amendments and does not expect that they will have a material impact on the Group. The following amendments are effective for the period beginning 1 January 2025: • Lack of Exchangeability (Amendments to IAS 21 The Effects of Changes in Foreign Exchange Rates) C. Prior year restatement During the current financial year, it was identified that previous accounting policy to capitalise Rosenblatt disbursements (including counsel fees) associated with its Damages Based Agreement (“DBA”) matters as litigation assets and measure the assets under IFRS 9 at fair value through profit and loss was incorrect. These disbursements constitute payments of costs to fulfil a contract under IFRS 15 that could be reimbursed in the future depending on the outcome of the case. They should be capitalised to the extent that they are expected to be recovered. There are two specific cases that this error impacts and each is treated differently based on the terms of the agreement. For the first case, the disbursements are payable to the Group, only if the case wins or where the client or the Group terminates the engagement. Under IFRS 15, this case is treated as a contract asset and an impairment assessment is performed under IFRS 15. During the year ended 31 December 2022, the probability of success was reduced from 90% to 50%, at this point, the contract asset was written off and the case became an onerous contract and costs to fulfil the contract were provided for. For the second case, the disbursements are recoverable in a win or lose situation. As such, the revenue recognition point is the point at which the expense is incurred by the Group. IFRS 15 requires the presentation of any unconditional rights to consideration as a receivable separately from contract assets and an expected credit loss (ECL) assessment is performed at year end. Refer to Note 32 Restatement of prior year for further information. 67 2. Accounting policies Revenue Revenue comprises the fair value of consideration receivable in respect of services provided during the year, inclusive of recoverable expenses incurred but excluding value added tax. Legal services revenues Where fees are contractually able to be rendered by reference to time charged at agreed rates, the revenue is recognised over time, based on time worked charged at agreed rates, to the extent that it is considered recoverable. Where revenue is subject to contingent fee arrangements, including where services are provided under Damages Based Agreements (DBAs), the Group estimates the amount of variable consideration to which it will be entitled and constrains the revenue recognised to the amount for which it is considered highly probable that there will be no significant reversal. Due to the nature of the work being performed, this typically means that contingent revenues are not recognised until such time as the outcome of the matter being worked on is certain. The Group has two cases under Damages Based Agreements. For the first case, the disbursements are recoverable either in the case of a win, or where the client or the Group terminates the engagement. The recovery of the disbursements are recognised as revenue under IFRS 15 to the extent it is highly probable that a significant reversal in the amount will not occur in the future. Under IFRS 15, this case is treated as a contract asset, and an impairment assessment is performed in line with the standard. For the second case, disbursements are recoverable in a win or lose situation. As such, the revenue recognition point is the point at which the expense is incurred by the Group, when a disbursement is incurred, the Group recognises the expense incurred in the profit or loss and the associated revenue in relation to the recovery of the disbursement. IFRS 15 requires the presentation of any unconditional rights to consideration as a receivable separately from contract assets. At each reporting date, the Group performs an expected credit loss (ECL) assessment on the receivable line with IFRS 9, and where applicable, an impairment is recognised. Bills raised are payable on delivery and until paid form part of trade receivables. The Group has taken advantage of the practical exemption in IFRS 15 not to account for significant financing components where the Group expects the time difference between receiving consideration and the provision of the service to a client will be one year or less. Where revenue has not been billed at the balance sheet date, it is included as contract assets and forms part of trade and other receivables. Corporate finance revenues Corporate finance revenue is contingent on the completion of a deal and is recognised when the deal has completed. Bills raised are payable on deal completion and are generally paid at that time. Interest received on client monies Interest is recognised on client monies held, this is recognised in the profit or loss based on the effective interest rate during the period. This forms part of other income as this is driven by the ongoing operations of the business, Adjusted EBITDA and exceptionals The Group presents adjusted EBITDA as an operating KPI utilised by management to monitor performance. EBITDA is adjusted for one-off costs that are considered to be exceptional, being: • One-off costs connected to acquisitions • Contract assets - damages based agreement asset impairment • Release of onerous contract provision • Trade receivables – provision against damages based agreement receivable • Group costs associated with discontinued operations • Costs associated with refinancing project • Release of restructuring costs • Trade receivables provision change These costs are considered to be exceptional because they do not relate to the ongoing trade and performance of the business. Without presenting adjusted EBITDA, the EBITDA would not be consistent as it would be subject to fluctuations that do not reflect underlying performance of the Group. Financial Statements68 Basis of consolidation Where the company has control over an investee, it is classified as a subsidiary. The company controls an investee if all three of the following elements are present: power over the investee, exposure to variable returns from the investee, and the ability of the investor to use its power to affect those variable returns. Control is reassessed whenever facts and circumstances indicate that there may be a change in any of these elements of control. The consolidated financial statements present the results of the company and its subsidiaries (“the Group”) as if they formed a single entity. Intercompany transactions and balances between group companies are therefore eliminated in full. The consolidated financial statements incorporate the results of business combinations using the acquisition method. In the statement of financial position, the acquiree’s identifiable assets, liabilities and contingent liabilities are initially recognised at their fair values at the acquisition date. The results of acquired operations are included in the consolidated statement of comprehensive income from the date on which control is obtained. They are deconsolidated from the date on which control ceases. Goodwill Goodwill represents the excess of the cost of a business combination over the Group’s interest in the fair value of identifiable assets, liabilities and contingent liabilities acquired. Cost comprises the fair value of assets given, liabilities assumed, and equity instruments issued, plus the amount of any non-controlling interests in the acquiree plus, if the business combination is achieved in stages, the fair value of the existing equity interest in the acquiree. Contingent consideration is included in cost at its acquisition date fair value and, in the case of contingent consideration classified as a financial liability, remeasured subsequently through profit or loss. Direct costs of acquisition are recognised immediately as an expense. Goodwill is capitalised as an intangible asset with any impairment in carrying value being charged to the consolidated statement of comprehensive income. Where the fair value of identifiable assets, liabilities and contingent liabilities exceed the fair value of consideration paid, the excess is credited in full to the consolidated statement of comprehensive income on the acquisition date. Impairment of non-financial assets (excluding inventories, investment properties and deferred tax assets) Impairment tests on goodwill and other intangible assets with indefinite useful economic lives are undertaken annually at the financial period end. Other non-financial assets are subject to impairment tests whenever events or changes in circumstances indicate that their carrying amount may not be recoverable. Where the carrying value of an asset exceeds its recoverable amount (i.e., the higher of value in use and fair value less costs to sell), the asset is written down accordingly. Where it is not possible to estimate the recoverable amount of an individual asset, the impairment test is carried out on the smallest group of assets to which it belongs for which there are separately identifiable cash flows; its cash generating units (‘CGUs’). Goodwill is allocated on initial recognition to each of the Group’s CGUs that are expected to benefit from a business combination that gives rise to the goodwill. Impairment charges are included in profit or loss, except to the extent they reverse gains previously recognised in other comprehensive income. An impairment loss recognised for goodwill is not reversed. Foreign currency Transactions entered into by Group entities in a currency other than the currency of the primary economic environment in which they operate (their “functional currency”) are recorded at the rates ruling when the transactions occur. Foreign currency monetary assets and liabilities are translated at the rates ruling at the reporting date. Exchange differences arising on the retranslation of unsettled monetary assets and liabilities are recognised immediately in profit or loss. 69 Financial assets The Group classifies its financial assets under the amortised cost category, the Group’s accounting policy is as follows: Fair value through profit or loss Litigation assets relate to the provision of funding to litigation matters in return for a participation share in the settlement of that case. Investments are initially measured at the sum invested and are subsequently held at fair value through the profit or loss. When the Group disposes of a proportion of its participation share in the settlement of the case to a third-party under an uninsured (“naked”) contract, where the percentage of the litigation asset being disposed of and the percentage return remain proportionate irrespective of the final outcome of the litigation, the difference between the disposal proceeds and the cost of investment disposed gives rise to a profit on disposal which is recognised through the profit and loss when the sale is agreed. These sales are non-recourse and, if the case is successful, the relevant % of the settlement received is paid to the third-party. For uninsured cases, the Group uses the value of third-party disposals to calculate the gross value of the proportion of the investment retained by the Group and deducts the expected cost of investment to be borne by the Group to give the fair value of the Group’s investment. The proportion of each investment retained is calculated using the expected total return on the investment, the expected return payable to the onward investor and the expected total return retained by the Group. For insured cases, when the Group disposes of a proportion of its participation share in the settlement of the case to a third- party, where the third-party return is calculated as a fixed percentage daily rate irrespective of the settlement value of a successful litigation outcome, the derecognition requirements under IFRS 9 para 3.2.2 are not met and no sale or profit on disposal arise. The Group retains the full litigation asset and the proceeds of disposal under the third-party contract are included as litigation liabilities. The fair value of the litigation asset is calculated using the expected total return retained by the Group in the different possible outcomes factored by Management’s expectation of the likelihood of each outcome. Litigation assets are reviewed for impairment where events or circumstances indicate that their carrying amount may not be recoverable. Where the carrying value of the litigation assets exceeds its recoverable amount, the asset is written down accordingly. As part of the sale of LionFish during the year, three litigation asset cases were retained by the Group and not included in the sale, they were subsequently impaired to nil in the year. Amortised cost These assets arise principally from the provision of goods and services to customers (e.g., trade receivables), but also incorporate other types of financial assets where the objective is to hold these assets in order to collect contractual cash flows and the contractual cash flows are solely payments of principal and interest. They are initially recognised at fair value plus transaction costs that are directly attributable to their acquisition or issue and are subsequently carried at amortised cost using the effective interest rate method, less provision for impairment. Impairment provisions for current and non-current trade receivables are recognised based on the simplified approach within IFRS 9 using a provision matrix in the determination of the lifetime expected credit losses. During this process the probability of the non-payment of the trade receivables is assessed. This probability is then multiplied by the amount of the expected loss arising from default to determine the lifetime expected credit loss for the trade receivables. For trade receivables, which are reported net, such provisions are recorded in a separate provision account with the loss being recognised in profit or loss. On confirmation that the trade receivable will not be collectable, the gross carrying value of the asset is written off against the associated provision. From time to time, the Group elects to renegotiate the terms of trade receivables due from customers with which it has previously had a good trading history. Such renegotiations will lead to changes in the timing of payments rather than changes to the amounts owed and, in consequence, the new expected cash flows are discounted at the original effective interest rate and any resulting difference to the carrying value is recognised in the consolidated statement of comprehensive income (operating profit). Impairment provisions for receivables from related parties and loans to related parties, including those from subsidiary companies, are recognised based on a forward looking expected credit loss model. The methodology used to determine the amount of the provision is based on whether there has been a significant increase in credit risk since initial recognition of the financial asset. This annual assessment considers forward-looking information on the general economic and specific market conditions together with a review of the operating performance and cash flow generation of the entity relative to that at initial recognition. For those where the credit risk has not increased significantly since initial recognition of the financial asset, twelve month expected credit losses along with gross interest income are recognised. For those for which credit risk has increased significantly, lifetime expected credit losses along with the gross interest income are recognised. For those that are determined to be credit impaired, lifetime expected credit losses along with interest income on a net basis are recognised. The Group’s financial assets measured at amortised cost comprise trade and other receivables and cash and cash equivalents in the consolidated statement of financial position. Cash and cash equivalents includes cash in hand, deposits held at call with banks, and other short term highly liquid investments with original maturities of three months or less. Financial Statements70 Financial liabilities The Group classifies its financial liabilities depending on the purpose for which the liability was acquired. Other financial liabilities All the Group’s financial liabilities are classified as other financial liabilities, which include the following items: Bank borrowings are initially recognised at fair value net of any transactions costs directly attributable to the issue of the instrument. Such interest bearing liabilities are subsequently measured at amortised cost using the effective interest rate method, which ensures that any interest expense over the period to repayment is at a constant rate on the balance of the liability carried in the consolidated statement of financial position. For the purposes of each financial liability, interest expense includes initial transaction costs and any premium payable on redemption, as well as any interest or coupon payable while the liability is outstanding. Trade payables and other short-term monetary liabilities, which are initially recognised at fair value and subsequently carried at amortised cost using the effective interest method. Defined contribution schemes Contributions to defined contribution pension schemes are charged to the consolidated statement of comprehensive income in the year to which they relate. Short-term benefits Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the related service is provided. A liability is recognised for the amount expected to be paid under short-term cash bonus or profit-sharing plans if the Group has a present legal or constructive obligation to pay this amount as a result of past service provided by the employee and the obligation can be estimated reliably. Share-based payments Where equity settled share options are awarded to employees, the fair value of the options at the date of grant is charged to the consolidated statement of comprehensive income over the vesting period. Non-market vesting conditions are taken into account by adjusting the number of equity instruments expected to vest at each reporting date so that, ultimately, the cumulative amount recognised over the vesting period is based on the number of options that eventually vest. Non-vesting conditions and market vesting conditions are factored into the fair value of the options granted. As long as all other vesting conditions are satisfied, a charge is made irrespective of whether market vesting conditions are satisfied. The cumulative expense is not adjusted for failure to achieve a market vesting condition or where a non-vesting condition is not satisfied. Where the terms and conditions of options are modified before they vest, the increase in the fair value of the options, measured immediately before and after the modification, is also charged to the consolidated statement of comprehensive income over the remaining vesting period. Where equity instruments are granted to persons other than employees, the consolidated statement of comprehensive income is charged with the fair value of goods and services received. Leased assets Identifying leases The Group accounts for a contract, or a portion of a contract, as a lease when it conveys the right to use an asset for a period of time in exchange for consideration. Leases are those contracts that satisfy the following criteria: (a) There is an identified asset; (b) The Group obtains substantially all the economic benefits from use of the asset; and (c) The Group has the right to direct use of the asset The Group considers whether the supplier has substantive substitution rights. If the supplier does have those rights, the contract is not identified as giving rise to a lease. In determining whether the Group obtains substantially all the economic benefits from use of the asset, the Group considers only the economic benefits that arise from use of the asset, not those incidental to legal ownership or other potential benefits. In determining whether the Group has the right to direct use of the asset, the Group considers whether it directs how and for what purpose the asset is used throughout the period of use. If there are no significant decisions to be made because they are pre-determined due to the nature of the asset, the Group considers whether it was involved in the design of the asset in a way that predetermines how and for what purpose the asset will be used throughout the period of use. If the contract or portion of the contract does not satisfy these criteria, the Group applies other applicable IFRSs rather than IFRS 16. All leases are accounted for by recognising a right-of-use asset and a lease liability except for: • Leases of low value assets; and • Leases with a term of 12 months or less 71 Lease liabilities are measured at the present value of the contractual payments due to the lessor over the lease term, with the discount rate determined by reference to the rate inherent in the lease unless this is not readily determinable, in which case the Group’s incremental borrowing rate on commencement of the lease is used. Variable lease payments are only included in the measurement of the lease liability if they depend on an index or rate. In such cases, the initial measurement of the lease assumes the variable element will remain unchanged throughout the lease term. Other variable lease payments are expensed in the period to which they relate. On initial recognition, the carrying value of the lease liability also includes: • amounts expected to be payable under any residual value guarantee • the exercise price of any purchase option granted in favour of the Group if it is reasonably certain to assess that option • any penalties payable for terminating the lease, if the term of the lease has been estimated on the basis of the termination option being exercised Right-of-use assets are initially measured at the amount of the lease liability, reduced for any lease incentives received, and increased for: • lease payments made at or before the commencement of the lease • initial direct costs incurred and • the amount of any provision recognised where the Group is contractually required to dismantle, remove or restore the leased asset Subsequent to initial measurement lease liabilities increase as a result of interest charged at a constant rate on the balance outstanding and are reduced for lease payments made. Right-of-use assets are amortised on a straight-line basis over the remaining term of the lease or over the remaining economic life of the asset if this is judged to be shorter than the lease term. When the Group revises its estimate of the term of any lease, it adjusts the carrying amount of the lease liability to reflect the payments to make over the revised term, which are discounted using a revised discount rate. The carrying value of lease liabilities is similarly revised when the variable element of future lease payments dependent on a rate or index is revised, except the discount rate remains unchanged. In both cases an equivalent adjustment is made to the carrying value of the right-of-use asset, with the revised carrying amount being amortised over the remaining lease term. The lease calculations have been prepared up to the end of the lease term as defined in the lease agreements. Where there has been a remeasurement or rent-free-period, the lease calculations are adjusted accordingly. For contracts that both convey a right to the Group to use an identified asset and require services to be provided to the Group by the lessor for a variable amount, the Group has elected to account for the right-of-use payments as a lease and expense the service charge payments in the period to which they relate. Externally acquired intangible assets Externally acquired intangible assets are initially recognised at cost and subsequently amortised over their useful economic lives. Intangible assets are recognised on business combinations if they are separable from the acquired entity or give rise to other contractual/legal rights. The amounts ascribed to such intangibles are arrived at by using appropriate valuation techniques. The significant intangibles recognised by the Group, their useful economic lives and the methods used for amortisation and to determine the cost of intangibles acquired in a business combination are as follows: Intangible asset Brand Useful economic life Remaining useful economic life Amortisation method Valuation method 20 years 14 – 19 years Straight line Estimated discounted cash flow Customer contracts 1 – 2 years Nil In line with contract revenues Estimated discounted cash flow Restrictive covenant extension 5 years 4 years Straight line Cost Non-current investments Investments in subsidiary undertakings are stated at cost less amounts written off for impairment. Investments are reviewed for impairment where events or circumstances indicate that their carrying amount may not be recoverable. Dividends Dividends are recognised when they become legally payable. In the case of interim dividends to equity shareholders, this is when declared by the directors. In the case of final dividends, this is when approved by the shareholders at the AGM. Financial Statements72 Income tax Income tax expense represents the sum of the tax currently payable. The tax currently payable is based on taxable profit for the year. Taxable profit differs from profit as reported in the statement of comprehensive income because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are not taxable or tax deductible. The Group’s liability for current tax is calculated using tax rates (and tax laws) that have been enacted or substantively enacted by the end of the financial year. Deferred taxation Deferred tax assets and liabilities are recognised where the carrying amount of an asset or liability in the consolidated statement of financial position differs from its tax base, except for differences arising on: • the initial recognition of goodwill • the initial recognition of an asset or liability in a transaction which is not a business combination and at the time of the transaction affects neither accounting or taxable profit, and • investments in subsidiaries and joint arrangements where the Group is able to control the timing of the reversal of the difference and it is probable that the difference will not reverse in the foreseeable future Recognition of deferred tax assets is restricted to those instances where it is probable that taxable profit will be available against which the difference can be utilised. The amount of the asset or liability is determined using tax rates that have been enacted or substantively enacted by the reporting date and are expected to apply when the deferred tax liabilities/assets are settled /recovered. Deferred tax assets and liabilities are offset when the Group has a legally enforceable right to offset current tax assets and liabilities and the deferred tax assets and liabilities relate to taxes levied by the same tax authority on either: • The same taxable group company, or • Different group entities which intend either to settle current tax assets and liabilities on a net basis, or to realise the assets and settle the liabilities simultaneously, in each future period in which significant amounts of deferred tax assets or liabilities are expected to be settled or recovered. Property, plant and equipment Items of property, plant and equipment are initially recognised at cost, and subsequently stated at cost less any accumulated depreciation and impairment losses. As well as the purchase price, cost includes directly attributable costs and the estimated present value of any future unavoidable costs of dismantling and removing items. The corresponding liability is recognised within provisions. Depreciation is provided on all items of property, plant and equipment so as to write off their carrying value over their expected useful economic lives. It is provided at the following rates: Leasehold improvements Straight line over the life of the lease Plant and equipment 33% per annum straight line Fixtures and fittings 25% per annum straight line Computer equipment 33% per annum straight line Share Capital Ordinary shares are recorded at nominal value and proceeds received in excess of nominal value of shares issued, if any, are accounted for as share premium. Both ordinary shares and share premium are classified as equity. 73 Provisions Professional indemnity provision A provision is recognised when the Group has a present legal or constructive obligation as a result of a past event, that can be reliably measured, and it is probable that an outflow of economic benefits will be required to settle the obligation. Where material, the impact of the time value of money is taken into account by discounting the expected future cash flow at a pre-tax rate, which reflects risks specific to the liability. Insurance cover is maintained in respect of professional negligence claims. This cover is principally written through insurance companies. Premiums are expensed as they fall due with prepayments or accruals being recognised accordingly. Expected reimbursements are recognised once they become receivable. Where outflow of resources is considered probable and reliable estimates can be made, provision is made for the cost (including related legal costs) of settling professional negligence claims brought against the Group by third parties and disciplinary proceedings brought by regulatory authorities. Amounts provided for are based on Management’s assessment of the specific circumstances in each case. No separate disclosure is made of the detail of such claims and proceedings, as to do so could seriously prejudice the position of the Group. In the event the insurance companies cannot settle the full liability, the liability will revert to the Group. Dilapidations provision The Group recognises a provision for the future costs of dilapidations on leased office space. The provision is an estimate of the total cost to return applicable office space to its original condition at the end of the lease term. Onerous contracts The Group recognises a provision for the unavoidable costs of meeting a contract where the obligations of the contract exceed the economic benefits to be received under it. Restatements The 2022 comparative numbers have been restated for the following corrections which is described fully in Note 32: A prior period adjustment has been made for incorrect accounting policies that were previously adopted in relation to disbursements incurred on two damages based agreements. The disbursements were previously held on the balance sheet as Litigation Assets and measured the assets under IFRS 9 at fair value through profit and loss. Based on the substances of the underlying agreements for the two damages based agreements, the recovery from the client of disbursements represents a revenue stream arising from a costs to fulfil a contract with a customer and therefore falls within the scope of IFRS 15, not IFRS 9. This is because IFRS 9 states that it does not apply to “rights and obligations within the scope of IFRS 15 that are financial instruments, except for those that IFRS 15 specifies are accounted for in accordance with IFRS 9”. For the first case, the disbursements are payable to the Group, only if the case wins or where the client or the Group terminates the engagement. Under IFRS 15, this case is treated as a contract asset and an impairment assessment is performed under IFRS 15. Management has reassessed the probability of success during the year ended 31 December 2022 and has reduced this from 90% to 50%, at this point, the contract asset was written off the case became an onerous contract and costs to fulfil the contract were provided for. The reassessment made for probability of success was based on management’s assessment of the information available at the time and hindsight has not been applied in assessing the impact of the prior period adjustment. The write off of the contract asset at the point of probability of success reducing was £6,670,481. At that point, a provision for the onerous contract of £956,999 was recognised. £562,979 of this provision was released during the remaining months of the year ended 31 December 2022. For the second case, the disbursements are recoverable in a win or lose situation. As such, the revenue recognition point is the point at which the expense is incurred by the Group. IFRS 15 requires the presentation of any unconditional rights to consideration as a receivable separately from contract assets and an expected credit loss (ECL) assessment is performed at year end. The Group performed an ECL assessment at each year end for this case and determined that the disbursements are not recoverable if the case were to lose and therefore have been provided for. The assessment on the ECL has been made based on management’s knowledge of the case and the parties involved, hindsight has not been applied for the of assessing the impact of the prior period adjustment. The impact of this ECL assessment was that opening reserves were reduced by £273,094 for the provision recognised against the receivable. The provision for receivables was increased at 31 December 2022 for £1,296,470, and an additional £920,127 recognised against the receivable at 31 December 2023. The impact of the above prior period error has therefore impacted the 31 December 2022 basic and diluted earnings per share figures presented in the consolidated statement of comprehensive income. Refer to Note 32 for further details. The 2022 comparative numbers have been restated to reflect Convex being disclosed as a discontinued operation in the current year, refer to Note 13. Financial Statements74 75 3. Critical accounting estimates and judgements 3. Critical accounting estimates and judgements (continued) The Group makes certain estimates and assumptions regarding the future. Estimates and judgements are continually evaluated based on actual experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. In the future, actual experience may differ from these estimates and assumptions. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial period are discussed below. Judgements, estimates and assumptions Estimated impairment of intangible assets including goodwill Determining whether an intangible asset is impaired requires an estimation of the value in use of the cash generating units to which the intangible has been allocated. The value in use calculation requires the entity to estimate the future cash flows expected to arise from each cash generating unit and determine a suitable discount rate. A difference in the estimated future cash flows or the use of a different discount rate may result in a different estimated impairment of intangible assets. Revenue recognition Where the group performs work that is chargeable based on hours worked at agreed rates, assessment must be made of the recoverability of the unbilled time at the period end. This is on a matter by matter basis, with reference to historic and post year-end recoveries. Different views on recoverability would give rise to a different value being determined for revenue and a different carrying value for unbilled revenue. Where revenue is subject to alternative billing arrangements, the Group estimates the amount of variable consideration to which it will be entitled and constrains the revenue recognised to the amount for which it is considered highly probable that there will be no significant reversal. Due to the nature of the work being performed, this typically means that contingent revenues are not recognised until such time as the outcome of the matter being worked on is certain. Factors the Group considers when determining whether revenue should be constrained are whether: - a) The amount of consideration receivable is highly susceptible to factors outside the Group’s influence b) The uncertainty is not expected to be resolved for a long time c) The Group has limited previous experience (or limited other evidence) with similar contracts d) The range of possible consideration amounts is broad with a large number of possible outcomes Different views being determined for the amount of revenue to be constrained in relation to each contingent fee arrangement may result in a different value being determined for revenue and also a different carrying value being determined for unbilled amounts for client work. Disbursements incurred in association with DBAs are recognised initially under IFRS 15 as they constitute payments for costs incurred as part of the provision of legal services to the Group’s client that could be reimbursed in the future depending on the outcome of the case. The Group has two DBA cases which are recognised as follows: For the first case, the disbursements are payable to the Group, only if the case wins or where the client or Group terminates the engagement. Under IFRS 15, this case is treated as a contract asset and an impairment assessment is performed under IFRS 15 regarding the probability of success of the case, when it becomes probable that the case will not be successful, an impairment is required, and the contract becomes onerous. Different views on the probability of success could impact whether an impairment is recognised. This change in accounting estimate has resulted in an impairment of nil in the current year (2022: £6,670,481). For the second case, the disbursements are recoverable in a win or lose situation. As such, the revenue recognition point is the point at which the expense is incurred by the Group. IFRS 15 requires the presentation of any unconditional rights to consideration as a receivable separately from contract assets and an expected credit loss (ECL) assessment is performed by management at year end. Different views on the ability to recover the receivable could impact the amount of provision required. This change in accounting estimate has resulted in an increase in the provision of receivables for disbursements on this case of £920,127 (2022: £1,296,470). The change in accounting estimate as a result of the above prior period adjustment has resulted in a material change from the amounts published in the 2023 interim results. The interim results recorded a write off of £11.0m associated with these DBA cases within 2023. The prior period adjustment identified above, has resulted in the first disbursement asset case being recorded as a contract asset and impaired within the year ending 31 December 2022, the second case is recorded as a trade receivable and has been assessed for expected credit loss impairment at each year end. Refer to notes 22 and 32 for further information. Where non-contingent fees as well as contingent revenue are earned on DBAs, the group must make a judgement as to whether non-contingent amounts represent revenue or a reduction in funding, with reference to the terms of the agreement and timing and substance of time worked and payments made. Where non-contingent revenue arises, the Group must match it against the services to which it relates. This requires Management to estimate work done as a proportion of total expected work to which the fee relates. Different views could impact the level of non-contingent revenue recognised. Impairment of trade receivables Receivables are held at cost less provisions for impairment. During the year ended 31 December 2023, the Group changes it’s accounting for impairment provisions, they are now recognised based on the ageing of invoices with invoices over 270 days being fully provided for, management also make an assessment for invoices under 270 days old to determine their collectability. This change in accounting estimate has resulted in an impairment provision against trade receivables for legal services of £3,787,379 (2022: £745,523). Claims and regulatory matters The Group from time to time receives claims in respect of professional service matters. The Group defends such claims where appropriate but makes provision for the possible amounts considered likely to be payable, having regard to any relevant insurance cover held by the Group. A different assessment of the likely outcome of each case or of the possible cost involved may result in a different provision or cost. In the year ending 31 December 2021, the Company was informed that HMRC had started an inquiry into the valuation of employee related securities issued by the Company in April 2018 prior to the IPO, this inquiry is on-going. For full details, refer to Note 33. 4. Financial instruments – Risk Management The Group is exposed through its operations to the following financial risks: • Credit risk • Interest rate risk and • Liquidity risk In common with all other businesses, the Group is exposed to risks that arise from its use of financial instruments. This note describes the Group’s objectives, policies and processes for managing those risks and the methods used to measure them. Further quantitative information in respect of these risks is presented throughout these financial statements. There have been no substantive changes in the Group’s exposure to financial instrument risks, its objectives, policies and processes for managing those risks or the methods used to measure them from the previous period unless otherwise stated in this note. (i) Principal financial instruments The principal financial instruments used by the Group, from which financial instrument risk arises, are as follows: • Trade receivables • Cash and cash equivalents • Trade and other payables • Floating-rate bank loans (ii) Financial instruments by category Financial assets - Group Cash and cash equivalents Trade and other receivables Total financial assets Fair value through profit or loss 31 Dec 2023 31 Dec 2022 restated £ - - - £ - - - Amortised cost 31 Dec 2022 restated 31 Dec 2023 £ £ 2,262,750 2,588,242 17,354,918 25,701,508 19,617,668 28,289,750 Financial Statements76 77 4. Financial instruments – Risk Management (continued) 4. Financial instruments – Risk Management (continued) On 31 December 2023, financial assets held at fair value through profit or loss of £nil were transferred to assets held for sale (2022: £4,895,514). Financial assets held at amortised cost of £103,173 were transferred to assets held for sale (2022: £5,167,655). Refer to note 13 for further details. Financial assets - Company Fair value through profit or loss Amortised cost Cash and cash equivalents Trade and other receivables Total financial assets 31 Dec 2023 31 Dec 2022 31 Dec 2023 31 Dec 2022 £ - - - £ - - - £ £ 340,549 413,635 44,806,135 53,758,535 45,146,684 54,172,170 Financial Liabilities - Group Fair value through profit or loss 31 Dec 2023 31 Dec 2022 31 Dec 2023 Amortised cost 31 Dec 2022 restated Trade payables and accruals Loans and borrowings Other payables Total financial liabilities £ - - - - £ - - - - £ £ 9,236,080 7,381,930 25,311,894 22,205,640 108,261 100 34,656,235 29,587,670 On 31 December 2023, financial liabilities carried at amortised cost of £103,972 were transferred to liabilities held for sale (2022: £1,340,455), refer to note 13. Financial Liabilities - Company Fair value through profit or loss Amortised cost Trade payables and accruals Total financial liabilities 31 Dec 2023 31 Dec 2022 31 Dec 2023 31 Dec 2022 £ - - £ - - £ £ 4,164,191 4,290,801 4,164,191 4,290,801 Trade and other payables are due within twelve months. (iii) Financial instruments not measured at fair value Financial instruments not measured at fair value includes cash and cash equivalents, trade and other receivables, trade and other payables, loans and borrowings. Due to their short-term nature, the carrying value of cash and cash equivalents, trade and other receivables, and trade and other payables approximates their fair value. General objectives, policies and processes The Board has overall responsibility for the determination of the Group’s risk management objectives and policies and, whilst retaining ultimate responsibility for them, it has delegated the authority for designing and operating processes that ensure the effective implementation of the objectives and policies to the Group’s finance function. The Board receives monthly reports from the Group Finance Director through which it reviews the effectiveness of the processes put in place and the appropriateness of the objectives and policies it sets. The overall objective of the Board is to set policies that seek to reduce risk as far as possible without unduly affecting the Group’s competitiveness and flexibility. Further details regarding these policies are set out below: Credit risk Credit risk is the risk of financial loss to the Group if a client or counterparty to a financial instrument fails to meet its contractual obligations. The Group is mainly exposed to credit risk from credit sales. It is Group policy to assess the credit risk of new and irregular clients before entering contracts and to require money on account of work for these clients. The Group reviews, on a regular basis, whether to perform further work where clients have unpaid bills. The Group works with a broad spread of long- standing reputable clients to ensure there are no significant concentrations of credit risk. Credit risk also arises from cash and cash equivalents and deposits with banks and financial institutions. Cash and cash equivalents are invested with banks with an A+ credit rating. Interest rate risk The Group is exposed to cash flow interest rate risk from borrowings under the Term Facility and Revolving Credit Facility at variable rate. The Board reviews the interest rate exposure on a regular basis. During 2023 and 2022, the Group’s borrowings at variable rate were denominated in sterling. At 31 December 2023, if interest rates on sterling denominated borrowings had been 150 basis points higher/lower with all other variables held constant, profit after tax for the year would have been £291,600 lower/higher, mainly as a result of higher/lower interest expense on floating-rate borrowings. The directors consider that 150 basis points is the maximum likely change in sterling interest rates over the next year, being the period up to the next point at which the Group expects to make these disclosures. Liquidity risk Liquidity risk arises from the Group’s management of working capital and the finance charges and principal repayments on its debt instruments. It is the risk that the Group will encounter difficulty in meeting its financial obligations as they fall due. The Group’s policy is to ensure that it will always have sufficient cash (or agreed facilities) to allow it to meet its liabilities when they become due and to take advantage of business opportunities. The Board reviews the projected financing requirements annually when agreeing the Group’s budget and receives rolling 12-month cash flow projections for the Group on a regular basis as well as information regarding cash balances. In December 2023, the Group renewed and extended its existing borrowing facilities with HSBC. The renewed facility which runs until 31 December 2025, total £24.0 million and consists of a £17.5 million revolving credit facility and a £6.5 million term loan. The renewed facility replaces the facilities which were due for renewal in April 2024. The interest rate on the renewed facility will remain the same as for the previous facilities, paying a margin of 2.4% - 3.15% over the Sterling Overnight Index Average (SONIA), resulting in a current effective rate of 8.3%. The facility is secured by the debenture which grants first ranking fixed and floating security of the property and assets of the Group as referenced in Notes 16 and 18. Additionally, the Group drew down £0.8m from two short term loans that are repayable over two years. At the year end the Group had £2.3 million in cash, and so a net debt position of £22.9 million (2022: £19.2 million). At the end of the financial year, cash flow projections indicated that the Group expected to have sufficient liquid resources to meet its obligations, including scheduled lease payments (Note 17), under all reasonably expected circumstances. Capital Management The Group monitors “adjusted capital” which comprises all components of equity (i.e., share capital, share premium, non-controlling interest and retained earnings). The Group’s objectives when maintaining capital are: • to safeguard the entity’s ability to continue as a going concern, so that it can continue to provide returns for shareholders and benefits for other stakeholders, and • to provide an adequate return to shareholders by pricing products and services commensurately with the level of risk Financial Statements78 5. Segment information A geographical analysis of revenue is given below: 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) • Professional Services – Provision of sell-side M&A corporate finance services, (professional services are provided by Convex and have been reclassified to discontinued operations, Note 13) United Kingdom Europe North America Other 79 Revenue by location of clients 2022 £ 2022 restated £ 28,976,058 37,960,608 1,838,158 2,514,385 5,881,253 1,528,152 567,170 4,817,978 39,209,854 44,873,908 2023 Segment revenue Disbursement asset revenue Disbursement asset expenditure Segment contribution Costs not allocated to segments Personnel costs Depreciation and amortisation Other operating expense Net financial expenses Group loss for the year before tax on continuing operations 2022 (restated) Segment revenue Segment gains on litigation assets comprising: Proceeds on disposal of damages based assets Disbursement asset revenue Disbursement asset expenditure Segment contribution Legal services £ Total £ 39,209,854 39,209,854 1,221,854 (827,834) 1,221,854 (827,834) 17,180,771 17,180,771 (3,569,936) (3,251,607) (19,606,277) (2,118,791) (11,365,839) Legal services £ 44,873,908 Third party participation rights £ Total £ - 44,873,908 - - 2,021,700 2,021,700 2,021,700 2,021,700 2,847,487 (3,241,507) 22,461,803 2,847,487 (3,241,507) - 22,461,803 Segment gains on litigation assets - 2,021,700 2,021,700 Costs not allocated to segments Personnel costs Depreciation and amortisation Other operating expense Net financial expenses Loss on sale of equity accounted associate Group profit for the year before tax on continuing operations (5,035,073) (3,432,764) (16,791,399) (1,319,155) (21,643) (2,116,531) Total assets and liabilities by operating segment are not reviewed by the chief operating decision makers and are therefore not disclosed. Revenues from Legal Services clients that account for more than 10% of Group revenue was £5,326,686 (2022: £6,632,334). Contract assets – work in progress Group At 1 January Transfers in the period from contract assets to trade receivables Impairment of contract assets Excess of revenue recognised over cash (or rights to cash) being recognised during the year At 31 December 2023 £ 2022 £ 9,703,812 5,976,258 (5,059,785) (3,039,106) (733,191) 4,332,502 (412,125) 7,178,785 8,243,338 9,703,812 Contract assets are included within “trade and other receivables” on the face of the statement of financial position. They arise when the Group has performed services in accordance with the agreement with the relevant client and has obtained right to consideration for those services, but such income has not been billed at the balance sheet date. 6. Material profit or loss items The Group has identified a number of items which are material due to the significance of their nature and/or amount. These are listed separately here to provide a better understanding of the financial performance of the Group. The below items have been identified as non-underlying and therefore are adjusted for in the calculation of adjusted EBITDA. Non-underlying items Costs of acquiring subsidiary Contract assets - damage based agreement asset impairment Release of onerous contract provision Trade receivables – provision against damages based agreement receivable Costs associated with discontinued operations Costs associated with re-financing project Other one-off costs Trade receivable provision Restructuring (release)/costs Note 2023 £ 2022 £ A B B C D E F G H 25,000 367,303 - 6,670,481 301,727 920,127 5,648,109 787,193 2,081,890 1,038,163 (168,167) 562,979 1,296,470 - - - - 803,631 Financial Statements 80 6. Material profit or loss items (continued) 6a Cost of acquiring subsidiary Costs associated with the failed acquisition of a subsidiary within 2022. The cost incurred within 2023 relates to additional invoice received within the year, relating to the project from 2022. 6b Contract assets – damages based agreement impairment Damages based agreement assets are initially recognised as revenue under IFRS 15 to the extent it is highly probable that a significant reversal in the amount will not occur in the future and a disbursement asset will be recognised in the balance sheet. The Group has two cases under damages based agreements. For the first case, disbursements are recoverable either in the case of a win or where the client or the Group terminate the agreement. Under IFRS 15, this case is treated as a contract asset and an impairment assessment is performed under IFRS 15. During the year ended 31 December 2022, the probability of success of this case was reduced from 90% to 50% and the value of the contract asset at this point in time (£6,670,481) was written off. At this point in time, the contract became onerous and the Group recognised a provision for costs to fulfil the contract. 6c Trade receivables – provision against damages based agreement For the second damages based agreement asset that the Group has, the disbursements are recoverable in a win or lose situation. As such, the revenue recognition point is the point at which the expense is incurred by the Group. IFRS 15 requires the presentation of any unconditional rights to consideration as a receivable separately from contract assets and an expected credit loss (ECL) assessment is performed at year end. As a result of the ECL assessment, the Group has fully provided against the receivable for this damages based agreement. 7. Other operating income Group Other income Bank interest on client monies 8. Disbursement asset revenue/expenditure Group Disbursement asset revenue Disbursement asset expenditure Costs incurred Provision (released)/recognised 81 2023 £ - 885,422 885,422 2022 £ 159,280 (3,234) 156,046 2023 £ 2022 £ 1,221,854 2,847,487 1,221,854 (394,020) 2,847,487 394,020 (827,834) (3,241,507) The costs relate directly to the contract, the first case met the definition of an onerous contract at the end of 2022, therefore a provision was made within 2022 for costs to meet the obligations of the contract. During the year ended 31 December 2023, the provision was released against the costs incurred. This case lost during the current year and therefore no asset was recognised for these costs. The costs associated with the second case were recognised as an asset from costs to fulfil a contract, this asset was reviewed for ECL and was impaired based on the Group’s assessment that the costs would not be recoverable from the client. 6d Costs associated with disposal of LionFish 9. Profit from operations and auditor’s remuneration During the year ended 31 December 2023, the Group disposed of its subsidiary LionFish Litigation. As a result of this disposal, the Group wrote off a portion of the intercompany balance owed by LionFish. Additionally, as part of the consideration received for the sale of LionFish, the Group retained Litigation Asset relating to previous cases which LionFish had invested in and had lost at point of sale, so the remaining balance sheet value associated with these cases was written off. 6e Costs associated with re-financing project During the year ended 31 December 2023, the Group carried out and completed a re-financing project which result in the extension of its existing facilities. The Group engaged with a third-party consultancy Group to assist with the management of this project. 6f Other one-off costs During the year ended 31 December 2023, the Group has incurred a number of one-off or non-recurring costs, they have been classified as non-underlying as they do not represent costs incurred in the normal course of business. These costs include legal fees for settlement claims, costs associated with settlements and public relation costs associated with these settlements. 6g Trade receivables provision – estimate change During the year ended 31 December 2023, the Group reviewed the accounting estimate for expected credit losses on trade receivables and determined there was not sufficient coverage. As a result, an amount has been recognised as non-underlying items that represents the change in provision as at 31 December 2023. 6h Restructuring (release)/costs During the year ended 31 December 2022, there were restructuring costs incurred by the Group, the release within the year ended 31 December 2023 represents the portion of the 2022 cost that was not incurred/paid out and therefore required the accrual to be released. Profit from operations is stated after charging: Fees payable to the company’s auditors: Audit fees Other services – pursuant to legislation/regulation Depreciation of property, plant and equipment Amortisation of right-of-use assets Amortisation/impairment of intangible assets 2023 £ 2022 restated £ 351,765 3,035 484,412 290,000 36,684 530,529 2,028,585 2,064,823 738,610 837,412 For the year ended 31 December 2023, depreciation of property, plant and equipment of £12,091 (2022 restated: £25,874) was transferred to discontinued operations. Amortisation of right of use assets of £110,332 (2022: £88,762) was transferred to discontinued operations. The Alternative Performance Measures used by Management are shown below: Operating (loss)/profit Depreciation and amortisation expense Non-underlying items Adjusted EBITDA (Loss)/Profit before tax Non-underlying items Adjusted (Loss)/Profit before tax 2023 £ (9,247,048) 3,251,607 10,634,042 2022 restated £ (775,734) 3,432,764 9,700,864 4,638,601 12,357,894 2023 £ 2022 restated £ (11,635,839) (2,116,531) 10,634,042 9,700,864 (731,797) 7,584,333 Financial Statements82 10. Employees Group Staff costs (including directors) consist of: Wages and salaries Short-term non-monetary benefits Cost of defined contribution scheme Share-based payment expense Social security costs 2023 £ 2022 restated £ 19,639,680 20,060,891 265,217 762,278 - 254,585 695,206 6,244 2,394,358 2,619,683 23,061,533 23,636,609 Personnel costs stated in the consolidated statement of comprehensive income includes the costs of contractors of £3,816,927 (2022 restated: £3,547,508). Staff costs transferred to discontinued operations during the year of £324,474 (2022 restated: £3,654,197) Contractors’ costs transferred to discontinued operations during the year of £866 (2022 restated: £356,986) The average number of employees (including directors) during the year was as follows: Legal and professional staff Administrative staff 2023 Number 2022 Number £ 136 64 200 £ 138 73 211 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 for continuing operations to the funds and amounted to £762,278 (2022 restated: £693,157). Contributions amounting to £189,132 (2022: £256,340) were payable to the funds at year end and are included in Trade and other payables. Company The average number of employees (excluding directors) during the period was four (2022: nine); all other personnel are employed by subsidiary undertakings. Directors’ remuneration payable in the year is set out below: 31 December 2023 M Ismail P Baker D Wilkinson N Davis (appointed 3 Mar 2023) T MacLeod (appointed 3 Mar 2023) I Rosenblatt (appointed 27 Jul 2023) J Divers (appointed 3 Mar 2023) K McNair (appointed 28 Nov 23) K Hamill (resigned 22 Jun 2023) S Drakeford-Lewis (resigned 30 Jun 2023) N Foulston (terminated 31 Jan 2023) Basic Salary and/or Directors Fees Employer Pension Contributions £ 85,000 40,000 40,000 288,845 298,254 ** 2,258,834 372,593 20,833 45,000 127,500 37,152 3,614,011 £ - - - 13,083 8,648 - 12,500 938 - 3,825 - 38,994 Total £ 85,000 40,000 40,000 301,928 306,902 2,258,834 385,093 21,771 45,000 131,325 37,152 3,653,005 ** Of this amount, £600,000 remained payable as at 31 December. Ian Rosenblatt subsequently agreed to receive this amount in shares as part of the equity that was announced in February 2024. 10. Employees (continued) 31 December 2022 S Drakeford-Lewis 20 N Foulston (terminated 31 Jan 2023) K Hamill M Ismail R Parker (resigned 31 Dec 2022) P Baker D Wilkinson 83 Basic Salary and/or Directors Fees Employer Pension Contributions £ - 445,820 90,000 40,000 611,000 37,737 37,737 £ - (333) - - 24,000 - - Total £ - 445,487 90,000 40,000 21 635,000 37,737 37,737 1,262,294 23,667 1,285,961 Directors who have an interest in the shares of the Company will benefit through dividend payments. During the year the following bonuses were received by directors and are included within Basic Salary and/or Directors’ Fees. J Divers N Davis S Drakeford-Lewis R Parker 31 Dec 2023 22 31 Dec 2022 £ 122,593 17,178 25,000 £ - - - - 50,000 Details of the transactions with Directors are included in Note 30. The directors are considered to be the key management personnel. 11. Finance income and expense Recognised in profit or loss Finance income Interest received on bank deposits Net finance income recognised in profit or loss Finance expense Interest expense on financial liabilities measured at amortised cost Interest expense on lease liabilities Net finance (expense) recognised on profit or loss 2023 £ 2022 £ 51,318 51,318 14,509 14,509 (1,687,122) (482,987) (811,352) (522,311) (2,170,109) (1,333,663) (2,118,791) (1,319,154) The above financial income and expense include the following in respect of assets/(liabilities) not at fair value through profit or loss: Total interest income on financial assets Total interest expense on financial liabilities 2023 £ 51,318 2022 £ 14,509 (1,687,122) (1,635,804) (811,352) (796,843) 20 No remuneration disclosed as S Drakeford-Lewis was appointed on 31 December 2022. 21 £292,500 of the total related to termination payment. 22 Bonuses paid during the year ended 31 December 2023 relate to 31 December 2022 results. Financial Statements 84 12. Tax expense Current tax expense Current tax on profits for the year Adjustment for under provision in prior years Total current tax Deferred tax expense Origination and reversal of temporary differences in current period (Note 26) Origination and reversal of temporary differences in prior period (Note 26) Total tax expense Tax charge attributable to: Profit from continuing operations Profit/(loss) from discontinued operations Tax expense excluding share of tax of equity accounted associate 2023 2022 restated £ - - - £ - (443,490) (443,492) (445,317) (747,939) - 23,575 (445,317) (1,167,854) (322,720) (122,597) (469,118) (698,736) (455,317) (1,167,854) (455,317) (1,167,854) The reasons for the difference between the actual tax charge for the period and the standard rate of corporation tax in the United Kingdom applied to profits for the year are as follows: (Loss) for the year from: Continuing operations Discontinued operations Income tax expense (including income tax on associate) attributable to: Continuing operations Discontinued operations (Loss) before income taxes Tax using the Company’s domestic tax rate of 23.5% (2022: 19%) Fixed asset differences Expenses not deductible for tax purposes Income not taxable for tax purposes Timing differences not recognised in the computation Adjustments in respect of prior periods Adjustments in respect of prior periods (deferred tax) Remeasurement of deferred tax for changes in tax rates Movement in deferred tax not recognised Total tax expense 2023 £ 2022 restated £ (11,043,119) (1,647,413) (12,875,822) (3,073,350) (23,918,941) (4,720,763) (445,317) (322,720) (122,597) (1,167,854) (469,118) (698,737) 24,364,258 (5,888,617) (5,725,601) (1,118,837) 91,463 3,480,519 (350,666) (42,036) - - (675) 91,370 - - 8,341 23,575 (32,552) (171,627) 2,133,556) - (445,317) (1,167,854) Changes in tax rates and factors affecting the future tax charge On 1 April 2023, the UK corporation tax rate increased from 19% to 25%. The effect of the new rate on the Group’s tax charge has been applied to the financial statements. 13. Discontinued operations Convex Capital Limited During the year ended 31 December 2023, the Board made the decision to dispose of Convex Capital Limited (“Convex”). Financial performance and cash flow information The financial performance and cash flow information presented are for the 12 months ending 31 December 2023 and 31 December 2022 Summary of discontinued operations – reconciliation to profit or loss 85 Revenue Expenses other than finance costs Finance costs Non-underlying items Impairment of intangible assets Tax credit Loss from selling discontinued operations (Loss) for the year Reconciliation to statement of cash flows Net cash (outflow)/inflow from operating activities Net cash (outflow) from investing activities Net cash inflow/(outflow) from financing activities Net (decrease)/increase in cash generated Cash and cash equivalents at beginning of period Cash and cash equivalents at end of period Breakdown of discontinued operations by entity: Discontinued operations - Convex Revenue Expenses other than finance costs Finance costs Non-underlying items Tax credit/(expense) (Loss)/Profit for the year Attributable to: Equity holders of the parent Cash flow Net cash (outflow)/inflow from operating activities Net cash (outflow) from investing activities Net cash inflow/(outflow) from financing activities Net (decrease)/increase in cash generated 2023 £ 2022 £ 2,211,674 956,050 (2,871,945) (4,609,684) (43,358) (6,387) 1,490,928 (112,066) (13,694,754) 122,597 (90,964) - 698,737 - (12,875,822) (3,073,350) 2023 £ 2022 £ (796,422) 1,388,283 (2,586) (12,964) 482,524 (1,139,753) (316,484) 423,843 235,566 188,277 107,359 423,843 2023 £ 2022 £ 2,234,800 5,274,075 (2,539,273) (4,109,076) (26,220) - 122,597 (208,096) (6,387) (31,177) (215,899) 911,536 (208,096) 911,536 2023 £ 2022 £ (893,119) 1,396,086 (2,586) (12,575) 590,626 (1,139,753) (305,079) 243,758 Financial Statements86 13. Discontinued operations (continued) 13. Discontinued operations (continued) 87 Assets and liabilities of disposal group held for sale Financial performance and cash flow information The following major classes of assets and liabilities in relation to Convex have been classified as held for sale in the consolidated statement of financial position. The financial performance and cash flow information presented are for the 12 months ending 31 December 2023 and 31 December 2022. Property, plant and equipment Right-of-use assets Intangible assets Trade and other receivables Cash and cash equivalents Assets held for sale Trade and other payables Leases Amounts due to parent company Tax liabilities Liabilities held for sale 2023 £ 10,661 544,386 2022 £ 21,867 654,718 2,600,000 16,327,834 106,728 107,359 118,582 412,438 3,369,134 17,535,439 240,181 541,610 82,692 93,944 (176,486) 654,452 - 587,799 958,476 1,065,765 Lionfish Litigation Finance Limited In December 2022, the Board announced its intention to dispose of LionFish Litigation Finance Limited (“LionFish”). On 12 August 2020, the Company agreed put options over the shares of LionFish held by the non-controlling interest. Under this agreement, the holder of the shares could require the Company to buy the shares in LionFish, with consideration based on a multiple of LionFish profits, settled by the issue of ordinary shares in the Company. On 8 December 2022, the minority shares were transferred to the Group for £nil and this agreement was terminated, during the year ended 31 December 2022 the present value of the put option was released through the Statement of Changes in Equity. In July 2023 the Group completed its disposal of LionFish to Blackmead Infrastructure Limited. The post-tax loss on disposal of discontinued operation was determined as follows: Cash consideration received Other consideration received Total consideration received Cash disposed of Net cash inflow of disposal of discontinued operation Net assets disposed (other than cash): Property, plant and equipment Trade and other receivables Litigation assets Trade and other payables Pre-tax loss on disposal of discontinued operation Related tax benefit Loss on disposal of discontinued operation 31 Dec 23 £ 1,074,734 3,782,098 4,856,832 4,000 4,852,832 (742) (1,136) (5,603,898) 661,980 (4,943,796) (90,964) 22,741 (68,223) Discontinued operations - LionFish (Loss) on litigation assets Expenses other than finance costs Finance costs Non-underlying items Tax credit/(expense) Loss from selling discontinued operation after tax Profit/(Loss) for the year Attributable to: Equity holders of the parent Non-controlling interests Cash flow Net cash inflow/(outflow) from operating activities Net cash outflow from investing activities Net cash outflow from financing activities Net (decrease) in cash generated 2023 £ 2022 £ (23,126) (4,318,025) (332,672) (17,138) 1,490,928 - (90,964) (500,608) - (80,889) 914,635 - 1,027,028 (3,984,887) 1,027,028 (3,599,325) - (385,562) 1,027,028 (3,984,887) 2023 £ 96,697 - (108,102) (11,405) 2022 £ (7,803) (389) - (8,192) 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 Property, plant and equipment Litigation investments Trade and other receivables Cash and cash equivalents Assets held for sale Trade and other payables Amounts due to parent company Tax liabilities Liabilities held for sale 2023 £ - - - - - - - - 2022 £ 2,770 5,331,698 1,244 11,405 5,347,117 1,283,883 4,766,624 412,551 6,463,058 Financial Statements88 14. Earnings per share Numerator Profit for the year and earnings used in basic and diluted EPS: From continuing operations From discontinued operations Non-Underlying items Costs of acquiring subsidiary Contract assets - damage based agreement asset impairment Release of onerous contract provision Trade receivables – provision against damages based agreement receivable Group costs associated with discontinued operations Costs associated with refinancing project Other one-off costs (Release)/accrual of restructuring costs Trade receivable provision change Less: tax effect of above items Profit for the year adjusted for non-underlying items from continuing operations Denominator Weighted average number of shares used in basic EPS Impact of share options Weighted average number of shares used in diluted EPS Basic earnings per ordinary share from continuing operations Diluted earnings per ordinary share from continuing operations Basic earnings per ordinary share from discontinued operations Diluted earnings per ordinary share from discontinued operations Basic earnings per ordinary share from total operations Diluted earnings per ordinary share from total operations Basic earnings per ordinary share adjusted for non-underlying items from continuing operations Diluted earnings per ordinary share adjusted for non-underlying items from continuing operations Total 2023 £ Total 2022 Restated £ (11,043,118) (1,647,413) 818,932 (2,687,789) 25,000 367,303 - 6,670,481 301,727 920,127 5,648,109 787,193 2,081,890 (168,167) 1,038,163 562,979 1,296,470 - - - 803,631 - (2,658,511) (1,824,410) (3,067,586) 6,229,042 2023 2022 Number Number 95,331,236 95,331,236 188,392 188,392 95,519,628 95,519,628 2023 Pence (11.58) (11.58)* 0.86 0.86 (25.09) (25.09)* (3.22) (3.22)* 2022 Restated Pence (1.73) (1.73)* (2.82) (2.82)* (4.55) (4.55)* 6.53 6.52 On 22 February and 12 March 2024, the Group issued shares of 9,533,125 and 23,814,521 respectively. Following the Second Admission (12 March 2024), it issued share capital comprised 128,678,882 shares. Earnings per share have been recalculated based on a weighted average of the number of shares at 31 December 2023 and following the Second Admission on 12 March 2024. Denominator Weighted average number of shares used in basic EPS Impact of share options Weighted average number of shares used in diluted EPS Number 112,005,059 188,392 112,193,451 14. Earnings per share (continued) Basic earnings per ordinary share from continuing operations Diluted earnings per ordinary share from continuing operations Basic earnings per ordinary share from discontinued operations Diluted earnings per ordinary share from discontinued operations Basic earnings per ordinary share from total operations Diluted earnings per ordinary share from total operations Basic earnings per ordinary share adjusted for non-underlying items from continuing operations Diluted earnings per ordinary share adjusted for non-underlying items from continuing operations 15. Dividends Interim dividend of 0.5p (2022: 3p) per ordinary share proposed and paid during the year relating to the previous year’s results Interim dividend of nil (2022: 2p) per ordinary share paid during the year * The potentially dilutive instruments were anti-dilutive during 2022 and 2023. 16. Property, plant and equipment Group 89 2023 Pence (9.86) (9.84) 0.73 0.73 (21.36) (21.32) (2.74) (2.73) 2023 £ 2022 £ 471,702 2,832,898 - 1,903,173 471,702 4,736,071 Leasehold improvements Fixtures and fittings Computer Equipment Cost At 1 January 2022 Additions Transferred to assets held for sale At 31 December 2022 (restated) At 1 January 2023 (restated) Additions At 31 December 2023 Accumulated depreciation and impairment At 1 January 2022 Charge for the period Transferred to assets held for sale At 31 December 2022 (restated) At 1 January 2023 (restated) Charge for the year At 31 December 2023 Net book value At 1 January 2022 At 31 December (restated) At 31 December 2023 £ 2,710,279 7,471 (20,197) 2,697,553 2,697,553 - 2,697,553 487,148 285,370 (17,216) 755,302 755,303 246,723 1,002,026 2,223,131 1,942,250 1,695,527 £ 251,294 87,883 (10,602) 328,575 328,575 3,713 332,288 116,989 109,399 (7,847) 218,541 218,540 89,439 307,979 134,305 110,035 24,309 £ 779,546 103,998 (56,552) 826,992 826,992 320,314 Total £ 3,741,119 199,352 (87,351) 3,853,120 3,853,120 324,027 1,147,306 4,177,147 554,071 157,536 (40,421) 671,186 671,186 148,250 819,436 225,475 155,806 327,870 1,158,208 552,305 (65,484) 1,645,029 1,645,029 484,412 2,129,441 2,582,911 2,208,091 2,047,706 Property, plant and equipment transferred to held for sale at 31 December 2023 of £10,661 (2022: £24,637). The Group has no contractual commitments for the acquisition of property, plant and equipment. Financial Statements90 16. Property, plant and equipment (continued) Company Cost At 1 January 2022 Additions At 31 December 2022 At 1 January 2023 Additions At 31 December 2023 Accumulated depreciation and impairment At 1 January 2022 Charge for the year At 31 December 2022 At 1 January 2023 Charge for the year At 31 December 2023 Net book value At 1 January 2023 At 31 December 2023 Computer Equipment £ 18,750 - 18,750 18,750 - 18,750 17,667 1,038 18,705 18,705 45 18,750 45 - Total £ 18,750 - 18,750 18,750 - 18,750 17,667 1,038 18,705 18,705 45 18,750 45 - Under a debenture signed and registered on 19 April 2021, HSBC UK Bank plc have a fixed charge over the property, plant and equipment of the Group. The Company has no contractual commitments for the acquisition of property, plant and equipment. 17. Leases The Group leases its business premises in the United Kingdom. The lease contracts either provide for annual increases in the periodic rent payments linked to inflation or for payments to be reset periodically to market rental rates. The percentages in the table below reflect the current proportions of lease payments that are either fixed or variable. The sensitivity reflects the impact on the carrying amount of lease liabilities and right-of-use assets if there was an uplift of 5% on the balance sheet date to lease payments that are variable. At 31 December 2023 Property leases with payments linked to inflation Property leases with periodic uplifts to market rentals Lease Contract Number 1 1 2 Variable Payments % 38.7% 61.3% 100.0% Sensitivity £000 +/- 174 +/- 574 +/- 748 The percentages in the table below reflect the proportions of lease payments that are either fixed of variable for the comparative period. At 31 December 2022 Property leases with payments linked to inflation Property leases with periodic uplifts to market rentals Lease Contract Number 1 1 2 Variable Payments % 78.3% 21.7% 100.0% Sensitivity £000 +/- 218 +/- 653 +/- 872 17. Leases (continued) Right-of-use Assets At 1 January 2022 Amortisation Variable lease payment adjustment Transferred to assets held for sale At 31 December 2022 (restated) At 1 January 2023 Amortisation At 31 December 2023 Lease liabilities At 1 January 2022 Interest expense Variable lease payment adjustment Lease payments Transferred to assets held for sale At 31 December 2022 (restated) At 1 January 2023 Interest expense Lease payments At 31 December 2023 At 31 December 2023, lease liabilities were falling due as follows: 91 Land and buildings £ Total £ 15,913,008 15,913,008 (2,153,585) (2,153,585) 1,314,709 (654,718) 1,314,709 (654,718) 14,419,414 14,419,414 14,419,414 14,419,414 (2,028,522) (2,028,522) 12,390,892 12,390,892 Land and buildings £ Total £ 15,849,101 15,849,101 528,698 1,314,709 528,698 1,314,709 (1,740,524) (1,740,524) (258,474) (258,474) 15,693,510 15,693,510 15,693,510 15,693,510 472,410 472,410 (2,596,779) (2,596,779) 13,569,141 13,569,141 Group Lease liabilities Up to 3 months Between 3 and 12 months Between 1 and 2 years Between 2 and 5 years £ £ £ Over 5 years £ Total £ 1,677,528 2,318,301 4,183,776 4,842,691 13,569,141 £ 546,845 The aggregate undiscounted commitments for low-value leases as at 31 December 2023 was £nil (2022: £nil). Financial Statements92 18. Intangible assets Group Cost At 1 January 2022 Additions Transferred to assets held for sale At 31 December 2022 (restated) At 1 January 2023 Additions At 31 December 2023 Accumulated amortisation and impairment At 1 January 2022 Amortisation charge Transferred to assets held for sale At 31 December 2022 At 1 January 2023 Amortisation charge At 31 December 2023 Net book value At 1 January 2022 At 31 December 2022 (restated) At 31 December 2023 Goodwill £ Customer Contracts £ Brand £ Other £ Total £ 51,862,168 1,706,578 3,360,474 1,000,000 57,929,220 - (15,775,039) 36,087,129 - (1,167,673) 538,905 - (661,596) 2,698,878 - - - (17,604,308) 1,000,000 40,324,912 36,087,129 538,905 2,698,878 1,000,000 40,324,912 - - - 36,087,129 538,905 2,698,878 2,500,000 3,500,000 2,500,000 42,824,912 - - - - - - - 1,466,599 169,389 (1,167,673) 468,315 468,315 70,590 538,905 270,058 168,024 (108,801) 329,281 329,281 134,940 464,221 333,333 500,000 - 833,333 833,333 500,000 2,069,990 837,413 (1,276,474) 1,630,929 1,630,929 705,530 1,333,333 2,336,459 51,862,168 36,087,129 36,087,129 239,979 70,590 - 3,090,416 2,369,597 2,234,657 666,667 166,667 55,859,230 38,693,983 2,166,667 40,488,453 Under a debenture signed and registered on 19 April 2021, HSBC UK Bank plc have a fixed charge over the intangible assets of the Group. During the year, intangible assets with an opening net book value of £16,327,834 relating to Convex Capital were transferred to assets held for sale. Further amortisation of £33,080 was charged to these intangible assets during the year ended 31 December 2023. An impairment assessment was performed on these intangible assets where it was determined that an impairment of £13,694,754 was required. 19. Impairment of goodwill and other intangible assets The Group is required to test, on an annual basis, whether goodwill and other intangible assets have suffered any impairment. The recoverable amounts are determined based on value in use calculations. The use of this method requires the estimation of future cash flows and the determination of a discount rate in order to calculate the present value of the cash flows. The recoverable amounts were determined to be higher than the carrying amounts and so no impairment losses were recognised. The recoverable amounts have been determined from value in use calculations based on an extrapolation of the cash flow projections from the formally approved budget. Values assigned to the key assumptions represent management’s estimate of expected future trends and are as follows: • A pre-tax discount rate of 25% was applied in determining the recoverable amount. The discount rate is based on the average weighted cost of capital • Growth rates over the longer term of between 0-3% are based on management’s understanding of the market opportunities for services provided • Increases in costs are based on current inflation rates and expected levels of recruitment needed to generate predicted revenue growth • Cash flows have been assessed over ten years with the assumption that the business will be ongoing at the end of that period The review demonstrated sufficient headroom such that the estimated carrying values from continuing operations are not sensitive to changes in assumptions. Having reviewed the key assumptions used, the Directors do not believe that there is a reasonably possible change in any of the key assumptions that require further disclosure. An impairment in relation to Convex Capital goodwill and intangible assets was made during the financial year. 20. Subsidiaries The principal subsidiaries of RBG Holdings plc, which are incorporated in England and Wales and have been included in these consolidated financial statements, are as follows: 93 Name RBL Law Limited RBG Legal Services Limited Convex Group (Holdings) Limited Convex Capital Limited LionFish Litigation Finance Limited 23 Islero Assignments Limited Memery Crystal Limited Rosenblatt Limited Principal Activity Registered Number Proportion of ownership interest Legal Services Legal Services Holding Company Professional Services Litigation Finance Dormant Dormant Dormant 09986118 13287062 11490871 11491052 12165991 12754244 13600674 13601148 2023 100% 100% 100% 100% - - 100% 100% 2022 100% 100% 100% 100% 100% 100% 100% 100% The principal place of business of Convex Group (Holdings) Limited and Convex Capital Limited is Bass Warehouse, 4 Castle Street, Manchester, M3 4LZ. The principal place of business and registered office of RBG Legal Services Limited is 165 Fleet Street, London, England, EC4A 2DY. The principal place of business of the other subsidiaries and the registered address of each subsidiary is 165 Fleet Street, London, England, EC4A 2DY. For the year ending 31 December 2023, the principal subsidiary companies, set out above, were exempt from the requirements of the Companies Act relating to the audit of individual accounts by virtue of section 479A of the Companies Act 2006. RBG Holdings plc, has given a statement of guarantee under the Companies Act 2006 section 479C, whereby RBG Holdings plc will guarantee all outstanding liabilities to which the respective subsidiary companies are subject as at 31 December 2023. Company Cost and net book value At 1 January Investments in subsidiaries Impairment in subsidiary held for sale At 31 December 2023 £ 2022 £ 27,501,278 27,501,278 - (13,694,754) 13,806,624 100 - 27,501,378 Impairment in subsidiary held for sale relates to Convex Capital Limited which was classified as a discontinued operation at 31 December 2023 and subsequently sold in March 2024. This impairment has been arrived at by reviewing intangible assets held in Convex, less consideration received. 21. Investments in associate In June 2022, the Group sold its 40% interest in Adnitor Limited. The post-tax loss on disposal of investment in associate was determined as follows: Cash consideration received Total consideration received Net assets disposed (other than cash): Investment in associate Loss on disposal of discontinued operation, net of tax 2023 £ - - - - 2022 £ 80,000 80,000 101,643 (21,643) 23 LionFish Litigation Finance Limited was sold in July 2023. Financial Statements 94 22. Trade and other receivables Group Trade receivables Less: provision for impairment of trade receivables Trade receivables – net Contract assets Amounts due from discontinued operations Corporation tax receivable Other taxes and social security Other receivables Group 31 Dec 2023 Group 31 Dec 2022 Restated Group 1 Jan 2022 Restated £ £ £ 14,131,346 12,229,829 10,456,340 (6,170,819) (2,315,087) (828,694) 7,960,527 9,914,742 9,627,646 8,243,338 9,703,812 12,378,702 82,692 725,723 - 4,766,624 656,982 - 760,081 - - 1,068,361 659,347 1,003,079 Total financial assets other than cash and cash equivalents classified as amortised cost 18,080,641 25,701,508 23,769,508 Prepayments 1,019,834 2,170,051 1,963,850 Total trade and other receivables 19,100,475 27,871,559 25,733,358 Due within one year or less Due after more than one year 19,100,475 27,871,559 19,330,914 - - 6,402,444 19,100,475 27,871,559 25,733,358 At 31 December 2023, trade and other receivables of £106,728 (2022: £119,806) were transferred to assets held for sale – discontinued operations. Trade receivables are made up of the following: a Trade receivables for legal services revenue b Trade receivables for damages based agreement Group 31 Dec 2023 Group 31 Dec 2022 Group 1 Jan 2022 £ £ £ 11,641,655 10,660,265 10,183,246 2,489,691 1,569,564 273,094 14,131,346 12,229,829 10,456,340 a Trade receivables from legal services revenue relates to balances due on work invoiced for the supply of legal services. b Trade receivables for damages based agreement relates to a case the Group has entered into and the disbursements are recoverable from the client whether the case wins or loses. At each reporting date, an ECL assessment is performed on the asset in line with IFRS 9 and an impairment is recognised as appropriate. The Group have performed an ECL assessment at each year end and have determined that in the event of a loss, the disbursements are not recoverable and have therefore impaired the asset. Contract assets are made up of the following: a Work in progress b Damages based agreement assets Group 31 Dec 2023 Group 31 Dec 2022 Group 1 Jan 2022 £ £ 8,243,338 9,703,812 - - £ 5,976,258 6,402,444 8,243,338 9,703,812 12,378,702 a Work in progress relates to time recorded by fee earners that has not been billed at balance sheet date. b Where revenue is subject to alternative billing arrangements, including services provided under Damages based agreements (DBAs) the Group recognises an asset for the disbursements on these cases. The Group has two cases that fall under damages based agreements. For the first case, disbursements are recoverable either in the case of a win or where the client or the Group terminate the agreement. Under IFRS 15, this case is treated as a contract asset and an impairment assessment is performed under IFRS 15. During the year ended 31 December 2022, the probability of success was reduced from 90% to 50%, at this point, the case became an onerous contract and costs to fulfil the contract were provided for. 22. Trade and other receivables (continued) The table below provides analysis of the movements in damages based agreement asset. At 1 January Additions Realisations Write off of damages based agreement asset At 31 December 95 2023 £ - - - - - 2022 Restated £ 6,402,444 988,037 (720,000) (6,670,481) - The carrying value of trade and other receivables classified at amortised cost approximates fair value. The Group does not hold any collateral as security. The Group applies the IFRS 9 simplified approach to measuring expected credit losses using a lifetime expected credit loss provision for trade receivables and contract assets. To measure expected credit losses on a collective basis, trade receivables and contract assets are grouped based on similar credit risk and aging. The contract assets have similar risk characteristics to the trade receivables for similar types of contracts. The expected loss rates are based on the Group’s credit losses experienced over the period since incorporation, adjusted for current and forward-looking information on macroeconomic factors affecting the Group’s customers. The Group has identified the gross domestic product (GDP), unemployment rate and inflation rate as the key macroeconomic factors in the countries where the Group operates. The lifetime expected credit loss provision for trade receivables and contract assets is as follows: 31 December 2023 Expected loss rate Current More than 30 days past due More than 60 days past due More than 120 days past due Total £ 18.0% 3.9% 7.9% 7.9% Gross carrying amount – trade receivables 2,536,027 1,247,100 1,664,689 6,193,839 11,641,655 Gross carrying amount – contract assets (Work in Progress) 8,243,338 Gross carrying amount – trade receivables – DBA assets 2,489,691 - - - - - - 8,243,338 2,489,691 Loss provision 2,507,392 48,029 131,270 3,484,129 6,170,819 Current More than 30 days past due More than 60 days past due More than 120 days past due Total £ 31 December 2022 Expected loss rate Gross carrying amount – trade receivables 10.2% 2.7% 4,733,325 1,832,694 Gross carrying amount – contract assets (Work in Progress) 9,703,812 Gross carrying amount – trade receivables – DBA assets 1,569,564 - - 3.8% 820,647 - - 18.6% 3,273,600 10,660,265 - - 9,703,812 1,569,564 Loss provision 1,626,725 49,528 30,947 607,887 2,315,087 None of the trade receivables and contract assets have been subject to a significant increase in credit risk since initial recognition. Movements in the impairment allowance for trade receivables are as follows: At 1 January Increase during the year Receivable written off during the year as uncollectible Unused amounts reversed At 31 December 2023 £ 2,315,087 4,008,754 (62,595) (90,427) 2022 £ 828,694 1,544,896 (24,247) (34,257) 6,170,820 2,315,087 Included in other receivables is £17,872 (2022: £12,475) which is owed by the Employee Benefit Trust. Financial Statements96 22. Trade and other receivables (continued) Company Amounts due from group companies Corporation tax receivable Other taxes and social security Other receivables 2023 £ 2022 £ 43,934,885 53,167,678 145,364 347,822 361,110 - - 403,633 Total financial assets other than cash and cash equivalents classified as amortised cost 44,789,181 53,571,311 Prepayments Total trade and other receivables Due within one year or less Due after more than one year 162,318 187,224 44,951,499 53,758,535 4,539,382 40,412,117 14,204,102 39,554,433 44,951,499 53,758,535 The loans due from RBG Legal Services and LionFish Litigation Finance are on demand and interest free. Management considers that there is no increase in credit risk on the related party loans. Given that the loans are on demand, lifetime credit losses and 12-month credit losses will be the same. Having considered different recoverability scenarios which incorporated macroeconomic information (such as market interest rates and growth rates), current and forward-looking information, management consider the expected credit losses to be close to nil. 23. Trade and other payables Trade payables Corporation tax payable Other taxes and social security Amounts due to discontinued operations Amounts due to group companies Derivative financial liabilities Other payables Accruals At 31 December Due within one year or less Due after more than one year Group 2023 £ Company 2023 £ Group 2022 restated £ 4,911,641 547,550 3,927,448 - - - 2,318,419 - 100 - 2,260,424 647,324 - - 100 - 2,194,073 - - - 108,261 4,379,510 11,593,485 Company 2022 £ - - - 2,873,359 - 100 1,353,193 4,219,262 2,807,158 9,642,454 1,417,342 4,290,801 11,593,485 4,219,262 9,642,454 4,290,801 - - - - 11,593,485 4,219,262 9,642,454 4,290,801 The carrying value of trade and other payables classified as financial liabilities measured at amortised cost approximates fair value. At 31 December, trade and other payables of £334,175 (2022 restated: £2,107,747) were transferred to liabilities held for sale – discontinued operations (refer to note 13). 24. Loans and borrowings The book value and fair value of loans and borrowings which are all denominated in sterling are as follows: 97 Non-current Bank loans Secured Current Bank loans Secured At 31 December Book value 31 Dec 23 Fair value 31 Dec 23 Book value 31 Dec 22 Fair value 31 Dec 22 £ £ £ £ 22,687,488 22,687,488 20,000,000 20,000,000 2,624,407 2,624,407 2,205,640 2,205,640 25,311,894 25,311,894 22,205,640 22,205,640 The rate at which Sterling denominated loans and borrowings are payable is 3.15% above SONIA (2022: 2.90%). The bank loans are secured by fixed and floating charges over the assets of the Group. The bank loans are repayable over four years, during the year ending 31 December 2023, the Group signed an amendment and restatement deed which postponed the termination date. The Group has £nil undrawn committed borrowing facilities available at 31 December 2023 (2022: £nil). 25. Provisions Group At 1 January 2022 Charged to profit or loss (Released) through profit or loss At 31 December 2022 At 1 January 2023 (Release) through profit or loss At 31 December 2023 Due within one year or less Due after more than one year Leasehold dilapidations £ 150,000 - - Legal disputes £ 164,291 47,245 - 150,000 211,536 150,000 - 150,000 - 150,000 150,000 211,536 (136,536) 75,000 75,000 - 75,000 Onerous contracts £ - 956,999 (562,979) 394,020 394,020 (394,020) - - - - Total £ 314,291 1,004,244 (562,979) 755,556 755,556 (530,556) 225,000 75,000 150,000 225,000 Leasehold dilapidations relate to the estimated cost of returning a leasehold property to its original state at the end of the lease in accordance with the lease terms. The main uncertainty relates to estimating the cost that will be incurred at the end of the lease. The Group is currently involved in a number of legal disputes. The amount provided represents the directors’ best estimate of the Group’s liability having taken legal advice. Uncertainties relate to whether claims will be settled out of court or if not whether the Group is successful in defending any action. Because of the nature of the disputes, the directors have not disclosed further information on the basis that they believe that this would be seriously prejudicial to the Group’s position in defending the cases brought against it. The Group recognises a contract asset in line with IFRS 15 for one of its damages based agreement cases. Management re-assessed the probability of success of the case based on the information available at the time and the probability of success was reduced from 90% to 50% during the year ended 31 December 2022 and the contract asset associated with this was impaired. At this point in time, the case became an onerous contract and as such, a provision was made for costs to fulfil the contract. Financial Statements98 26. Deferred tax Deferred tax is calculated in full on temporary differences under the liability method using a tax rate of 25% (2022: 25%). On 1 April 2023 the UK corporate tax rate increased from 19% to 25%. As IFRS requires deferred tax to be measured at tax rates that have been substantively enacted at the reporting date, the Group’s deferred tax balances have been re-measured accordingly and the impact has been reflected within the consolidated financial statements. The movement on the deferred tax account is as shown below: At 1 January Recognised in profit or loss Tax expense Transferred to held for sale – discontinued operations At 31 December (asset)/liability Group 2022 £ Company 2022 £ Group Restated £ Company £ 229,361 635,333 729,985 660,270 (323,209) (122,597) (216,445) (435,828) - 199,505 (682,668) 182,044 229,361 (24,937) - 635,333 Details of the deferred tax liability and amounts recognised in the profit or loss are as follows: Group Balance 1 January 2022 Charges/(credited) to profit or loss Transferred to held for sale – discontinued operations Balance 31 December 2022 Balance 1 January 2023 Charges/(credited) to profit or loss Transferred to held for sale – discontinued operations Balance 31 December 2023 Company Balance 1 January 2022 Charges/(credited) to profit or loss Balance 31 December 2022 Balance 1 January 2023 Charges/(credited) to profit or loss Balance 31 December 2023 27. Share capital Accelerated capital allowances Business combinations Other temporary and deductible differences £ 55,230 1,657 103,683 160,570 160,570 52,003 (489) 212,084 £ 832,599 (84,353) - £ (37,787) (641,668) - 748,246 (679,455) 748,246 (322,993) - (679,455) (174,327) - 425,253 (853,782) Accelerated capital allowances Business combinations Other temporary and deductible differences £ 270 (260) 10 10 - 10 £ 660,000 - 660,000 660,000 - 660,000 £ - (24,677) (24,677) (24,677) (435,828) (460,505) Total £ 850,042 (724,364) 103,683 229,361 229,361 (445,317) (489) (216,445) Total £ 660,270 (24,677) 635,333 635,333 (435,828) 199,505 2023 Number Authorised 2023 £ 2022 Number 2022 £ Ordinary shares of 0.2p each 95,331,236 190,662 95,331,236 190,662 Ordinary shares of 0.2p each At 1 January Other issues for cash during the year At 31 December Allotted, issued and fully paid 2023 Number 2023 £ 2022 Number 2022 £ 95,331,236 190,662 95,331,236 190,662 - - - - 95,331,236 190,662 95,331,236 190,662 Ordinary shares rank equally as regards to dividends, other distributions and return on capital. Each ordinary share carries the right to one vote. 99 28. Reserves Financial instruments issued by the Group are classified as equity only to the extent that they do not meet the definition of a financial liability or financial asset. The following describes the nature and purpose of each reserve within equity: Risk description and impact Description and purpose Share capital Share premium Retained earnings Amount subscribed for share capital at nominal value. Amount subscribed for share capital in excess of nominal value less transaction costs. All other net gains and losses and transactions with owners (e.g., dividends) not recognised elsewhere. 29. Share-based payment The Group operates two equity settled share-based remuneration schemes: a United Kingdom tax authority approved scheme and an unapproved scheme. Under the schemes the only vesting condition is that the individual remains an employee of the Group over the vesting period. Outstanding 1 January Granted during the year Forfeited during the year Exercised during the year 2023 Weighted average exercise price £ - - - - 2023 Number 285,953 - - - Outstanding at 31 December 0.36 285,953 2022 Weighted average exercise price £ - 0.11 0.04 - 0.35 2022 Number 153,437 1,264,977 (1,132,461) - 285,953 The exercise price of options outstanding at 31 December 2023 ranged between £nil and £1.05 (2022: £nil and £1.03) and their weighted contractual life was 8 years (2022: 9 years). Of the total number of options outstanding at 31 December 2023, 23,437 had vested and were exercisable (2022: 20,000). No options were exercised in the year. No options were granted during the year (2022: fair value of each option granted was £0.92). No options were granted during the year ended 31 December 2023, The following information is relevant in the determination of the fair value of options granted during the year ended 31 December 2022 under the equity settled share-based remuneration schemes operated by the Group. Option pricing model used Weighted average share price at date of grant Contractual life (in days) Expected volatility Expected dividend yield Risk-free interest rate 2022 Black-Scholes £1.18 3,653 24% 5% 1% The share-based remuneration expense disclosed in Note 10 relates entirely to equity settled schemes. The Group did not enter into any share-based payment transactions with parties other than employees during the year. Financial Statements100 30. Related party transactions Group 31. Notes supporting statement of cash flows Non-cash transactions from financing activities are shown in the reconciliation of liabilities from financing transactions below: 101 During the year, Group companies entered into the following transactions with related parties who are not members of the Group: Related party Velocity Venture Capital Ltd 24 Motorsport Circuit Management Ltd 24 25 N Davis SEC Newgate 26 Oliver Rosenblatt Senbla Limited 27 28 Winros Supply of services 2023 Purchase of services 2023 Supply of services 2022 Purchase of services 2022 £ - - 654 13,323 1,534 668 - £ - - - 315,920 - - 3,229,543 £ (713) 11,250 - - - - - £ 222,733 - - - - - 794,458 In addition, at 31 December 2023, the Group owed £375,000 to Nicola Foulston as part of the settlement agreement (total settlement was £500,000, £125,000 was paid before year end). In addition, during the year, £8,687 of contingent work was performed by the Group in relation to a Conditional Fee Agreement with Winros (2022: £19,480), total work in progress at year end was £527,098 with unbilled disbursements of £209,457. During the year ended 31 December 2023, Ian Rosenblatt’s restrictive covenant was extended for an additional 5 years for a value of £2,500,000, at year end, £1,241,665 was still outstanding. At 31 December, amounts due to related parties were as follows: SEC Newgate Winros At 31 December, amounts due from related parties were as follows: SEC Newgate 25 N Davis Senbla Limited 2023 £ 150,620 102,412 2023 £ 5,285 163 668 2022 £ - - 2022 £ - - - Sales and purchase of services to related parties were conducted on an arm’s length basis on normal trading terms. Total remuneration of Key Management Personnel during the year was £3,653,005 (2022: £1,285,916). Further details of directors’ remuneration are given in the Directors’ Report on pages 42 to 45. Company In addition to the amounts disclosed in the Directors’ Report on pages 42 to 45, the Company has entered into the following transactions with related parties. During 2023, the Company reimbursed fees and expenses paid on its behalf by RBGLS totalling £642,109 (2022: £2,571,884). At 31 December 2023, the company was owed £43,532,103 by RBGLS (2021: £48,401,054) and owed £2,318,419 to RBL Law (2022: £2,226,035). During 2023, Convex Capital Limited reimbursed fees and expenses paid on its behalf by the Company totalling £887,016 (2022: £571,264). At 31 December 2023, the company was owed £82,692 by Convex Capital Limited (2022: £647,324 owed to Convex Capital Limited). During 2023, LionFish Litigation Finance Limited reimbursed fees and expenses paid on its behalf by the Company totalling £564,203 (2022: £1,067,602). At 31 December 2023, there were no amounts owing to or from LionFish Litigation Finance Limited (2022: £4,766,624 owed by LionFish Litigation Finance Limited). At 1 January 2022 Cash flows (net) Non-cash flows Interest accruing in year At 31 December 2022 At 1 January 2023 Cash flows (net) Non-cash flows Interest accruing in year At 31 December 2023 Non-current loans and borrowings Current loans and borrowings £ 17,000,000 3,000,000 £ 2,129,592 - Total £ 19,129,592 3,000,000 - 76,048 76,048 20,000,000 2,205,640 22,205,640 20,000,000 2,687,488 2,205,640 (156,425) 22,205,640 2,531,063 - 575,191 575,191 22,687,488 2,624,406 25,311,894 32. Restatement of prior year The 2022 comparatives have been restated in these financial statements to include the effect of the adjustments as stated in Note 2. The following table presents the impact of these restatements. Restatement to 2022 opening balances Non-current assets Trade and other receivables 29 Equity Retained earnings Restatement to 2022 statement of comprehensive income: Gains on litigation assets Disbursement asset revenue Disbursement asset expenditure Non-underlying items: Contract assets - damage based agreement asset impairment Release of onerous contract provision Trade receivables – provision against damages based agreement receivable 31 Dec 2021 As originally presented Adjustment (i) 1 Jan 2022 Restated £ £ £ 6,675,538 (273,094) 6,402,444 11,113,365 (273,094) 10,840,271 31 Dec 2022 As originally presented Adjustment (i) 31 Dec 2022 Restated £ £ £ 3,821,700 (1,800,000) 2,021,700 - - - - - 2,847,487 2,847,487 (3,241,507) (3,241,507) (6,670,481) (6,670,481) (562,979) (562,979) (1,296,470) (1,296,470) Tax expense 1,932,586 (2,401,704) (469,118) Breakdown of tax adjustment Transferred to assets held for sale (Note 13) Restatement (i) (215,898) (2,185,806) (2,401,704) 24 A company controlled by Nicola Foulston. 25 Invoice raised during 2023, relating to services supplied during 2022, invoice paid post year end. 26 Included within purchase of services is £103,920 relating to non-underlying items. 27 A partnership in which Ian Rosenblatt is a partner. 28 Included within purchase of services is £209,456 relating to disbursements. 29 Damages based agreements originally presented as “litigation assets”. Financial Statements 31 Dec 2022 As originally presented Adjustment (i) 31 Dec 2022 Restated £ - 8.18 8.17 4.41 4.40 £ - (9.91) (9.89) (8.96) (8.94) £ - (1.73) (1.72) (4.55) (4.54) 31 Dec 2022 As originally presented Adjustment (i) 1 Jan 2023 Restated £ £ 10,603,024 (10,603,024) £ - (211,536) (1,601,655) (394,020) 2,258,637 (605,556) 656,983 (744,328) 514,967 (229,361) 11,996,470 (8,811,238) 999,426 690,559 1,568,079 2,258,637 (102,760) 617,727 514,967 103 32. Restatement of prior year (continued) (i) A prior period adjustment has been made for incorrect accounting policies that were previously adopted in relation to disbursements incurred on two damages based agreements. The disbursements were previously held on the balance sheet as Litigation Assets and measured the assets under IFRS 9 at fair value through profit and loss. Based on the substances of the underlying agreements for the two damages based agreements, the recovery from the client of disbursements represents a revenue stream arising from a costs to fulfil a contract with a customer and therefore falls within the scope of IFRS 15. For the first case, the disbursements are payable to the Group, only if the case wins or where the client or the Group terminates the engagement. Under IFRS 15, this case is treated as a contract asset and an impairment assessment is performed under IFRS 15. Management have reassessed the probability of success in this case and determined that during the year ended 31 December 2022, the probability of success reduced from 90% to 50%, this reassessment is based on the information available at that point in time, hindsight was not applied when making this reassessment. The reduction in the probability of success resulted in a write off of the contract asset at that time. Additionally, the reduction in probability of success from 90% to 50% resulted in this case becoming an onerous contract and as such, the costs to fulfil the contract were provided for. For the second case, the disbursements are recoverable in a win or lose situation. As such, the revenue recognition point is the point at which the expense is incurred by the Group. IFRS 15 requires the presentation of any unconditional rights to consideration as a receivable separately from contract assets and an expected credit loss (ECL) assessment is performed at each year end. The Group has performed an ECL assessment as each period end and based on management’s knowledge of the case and parties involved at each period end, hindsight has not been applied in making this assessment. The receivable associated with this damages based agreement has been fully provided for at each year end. 33. Contingent liabilities The Company has been informed that HMRC has started an inquiry into the valuation of employee related securities issued by the Company in April 2018 prior to the IPO. HMRC have queried the issue of shares between 4 April 2018 and 16 April 2018 at a par value. A valuation of the shares at above the issue price could result in a liability to the recipient of the issued shares which would be required to be collected by the Company and paid to HMRC. Any liability would be re-imbursed in full by the recipient. The directors’ belief is that the investigation is without merit. The Group is involved in two claims from current or previous employees. The claim related to a previous employee has gone to a tribunal and the Group is awaiting the outcome of that tribunal. The claim related to a current employee has not yet reached a tribunal. Based on legal advice taken, management is confident that both claims are without merit and await a successful outcome to both. As such, no contingent liability has been recognised during the period in relation to them. 34. Events after the reporting date On 22 February 2024, the Group raised £0.9 million before expenses through the issue of new ordinary shares. A further £2.1 million before expenses was raised through the issue of new ordinary shares on 12 March 2024. The fundraising was strongly supported by existing institutional shareholders. Additionally, certain directors subscribed for £1.0 million of shares as part of the fundraise. The purpose of the raise was to provide additional working capital to the Group. On 28 March 2024, the Group completed the disposal of Convex Capital to a joint venture led by its management team. Under the terms of the agreement, the Group received initial consideration of £2.0 million with up to another £600,000 payable on completion of certain subsequent transactions. Following the completion of the disposal of Convex, Ian Rosenblatt stepped down from the Board. Ian remains the Group’s largest shareholder and largest revenue earner. 102 32. Restatement of prior year (continued) Earnings per share attributable to the ordinary equity holders of the parent Basic (pence) from continuing operations Diluted (pence) from continuing operations Basic (pence) from total operations Diluted (pence) from total operations Restatement to 2022 statement of financial position: Non-current assets Trade and other receivables 30 Current liabilities Provisions Tax liabilities Non-current liabilities Deferred tax Equity Retained earnings Breakdown of tax adjustments Tax liabilities: Transferred to assets held for sale (Note 13) Restatement (i) Deferred tax: Transferred to assets held for sale (Note 13) Restatement (i) 30 Damages based agreements originally presented as “litigation assets”. Financial Statements rbgholdings.co.uk 165 Fleet Street London EC4A 2DY 

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