Hamill: Considerable opportunity for growth
Listed business RBG Holdings is in the process of selling its third-party litigation funding subsidiary, LionFish, it confirmed yesterday.
Its annual results also showed that acquisition of London firm Memery Crystal is paying off, with turnover and profits up substantially.
RBG, originally the vehicle for City dispute resolution firm Rosenblatt, bought Memery Crystal for £30m in 2021 so as to add non-contentious balance to its business.
Dispute resolution now accounts for 40% of legal services revenue, with 37% from corporate work and 23% from real estate.
In 2022, group revenue was up 26% to £54m, resulting in adjusted EBITDA of £16m at a margin of 29.2% (compared to £10.3m and 23.8% in 2021).
Average revenue per fee-earner jumped from £347,000 to £436,000 – this is a recovery from pre-Memery Crystal days, when it was £497,000.
Losses of £4m from LionFish impacted the overall group results, but profit before tax was still up 70% to £9.7m.
The company has now decided to sell LionFish. Group chief executive Jon Divers said a strategic review looked at the scale of investment business required to ensure the risk of each individual investment was minimalised “and the board concluded that the group did not have the balance sheet to support the growth required and that LionFish would be better placed in a dedicated asset management business”.
RBG has received four offers for the business. “Due diligence is currently underway in respect of an offer that will both deliver cash back to the group and a share of the upside in successful cases,” Mr Divers said.
RBG also owns Convex Capital, a sell-side corporate finance advisory business which last year completed six deals, delivering £5.3m of revenue (2021:14 deals, £9.4m), and has a pipeline of 24 further deals.
Since listing in 2018, RBG has grown group revenues by more than three times whilst doubling statutory EBITDA.
RBG’s net debt position was £19m, nearly £5m higher than a year earlier. It has a £15m revolving credit facility and a £10m five-year term loan taken to fund the Memery Crystal acquisition, which has so far been paid down to £7m.
“We are committed to reducing debt as a core part of our strategy,” investors were told.
Group chair Keith Hamill said the board saw “considerable opportunity” for organic growth “and, where appropriate, assessing M&A opportunities that will supplement our strategy”.
He added: “The board believes that following the completion of the divestment of LionFish, and with a new highly experienced executive team in place, the group is well placed to deliver its goal of sustained shareholder value.”
RBG is paying a final interim dividend of 0.5p, taking the total dividend for 2022 of 2.5p per share, half the figure in 2021.
RBG has had a tricky few months following the announcement of the £4m LionFish write-off and also the dismissal in January of then chief executive Nicola Foulston.
Soon after, it emerged that that Ms Foulston had used a highly offensive racial term at a dinner attended by a Black lawyer.
Our annual analysis of the performance of listed legal businesses showed that RBG was the best performer in 2021 but its share price dived 45% last year from 116.5p to 64p.
It dipped further this year to 37p last month but has recovered a little since and was up 12% yesterday on the results to 50p.
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