Rbg Holdings Regulatory News (RBGP)

18 July 2022

RBG Holdings plc

("RBG" or the "Group")

Pre-Close Trading Update

RBG Holdings plc (AIM: RBGP), the professional services group, today publishes a pre-close trading update ahead of the publication of its financial results for the six months ending 30 June 2022 on 13 September 2022. 

The Board is pleased to announce that the Group continues to trade in line with current market expectations*.

RBG Legal Services Limited ("RBGLS")

RBG's legal services division, RBGLS, holds the Company's two client-facing brands of 'Rosenblatt', for contentious legal services, and 'Memery Crystal', for non-contentious legal services. Overall, RBGLS has performed well with a particularly strong performance in its Corporate and Banking practices.

The integration of RBGLS (and within that the Rosenblatt and Memery Crystal brands) is complete with the businesses set to move to a new practice management software system in the last quarter of 2022 to support the integration and the potential for future cross-sell initiatives.

Pleasingly, because of management actions to date, the EBITDA margin of Memery Crystal has improved by 10% to 27%. The EBITDA margin of RBGLS is 30% and is expected to rise towards 35% over the medium-term as the benefits of the integrated business are fully maximised. The advantages are two strong brands, greater scale, and the creation of what the Group considers to be a leading mid-tier law firm.

Convex Capital Limited ("Convex Capital")

The Group's specialist sell-side corporate finance boutique has continued its strong performance into 2022. As at 30 June 2022, Convex Capital had completed five deals generating revenue of £4.2 million (2021: 8 deals, revenue of £5.0 million). Furthermore, as at 18 July 2022, Convex Capital has a strong pipeline of 20 deals with a number currently at various stages of completion. It is the Board's expectation that the current macro-economic environment will support the ongoing fundamentals that drive M&A.

Litigation Finance

Since its launch in May 2020, LionFish Litigation Finance Limited ("LionFish") has invested in 12 cases, with one case having settled successfully in 2021. Current active cases have a total capital commitment of £11.3 million of which £5.5 million has been deployed (as at 30 June 2022). Disposals since inception total £5.9 million.

In February 2022, LionFish agreed a £20.0 million litigation investment arrangement with a large alternative investment firm which will provide the business with flexible capital. They will invest 75% on any new deals and have retrospectively invested £2.0 million in existing cases in Rosenblatt and LionFish.

This year, LionFish is expected to generate the majority of its gains from potential settlements, the timings of which are not within RBG's control and are thus difficult to predict.

Balance Sheet

The integration of Memery Crystal has progressed to plan with the expected synergies having a positive impact on the wider Group. Consequently, the Group has already paid back £2.0 million of the £10.0 million term loan used to fund the acquisition (in addition to £5.6 million in deferred cash consideration). The term loan will be paid down over five years. Furthermore, the Group has used £10.0 million of its £15.0 million revolving credit facility as the Group's working capital requirements have doubled since the acquisition of Memery Crystal. As a result, the Group's balance sheet remains in line with expectations with net debt at £17.2 million (2021: £10.0 million). Headroom remains sufficient to support the Group's growth plans.

Dividend

The Company will announce the details of its interim dividend when it publishes its financial results in September.

Commenting Group CEO Nicola Foulston, said: "Having delivered the upgraded market expectations for the 2021 financial year, we are pleased with the continued solid trading performance of the Group. Macro-economic conditions are volatile, and we are conscious of the ever-changing economic environment. However, our diversified strategy helps provide resilience and protection through a broad revenue base that is not dependent on any one sector. The integration of Memery Crystal and Rosenblatt has been a success with improved operating efficiency driving higher margins.

"Our Litigation Finance business continues to develop and offers the potential for substantial returns for shareholders. Finally, our M&A business, Convex Capital, continues to perform well and is converting its pipeline. We are confident about the long-term prospects of the Group."

*RBG understands that consensus market expectations for the year ended 31 December 2022 (excluding outliers) are for revenues of £56.2 million, Adj. EBITDA of £17.3 million and Adj. PBT of £13.1 million (Source: FactSet).

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About RBG Holdings plc

RBG Holdings plc is a professional services group, which comprises the following divisions:

RBG Legal Services Limited ("RBGLS")

RBGLS is the Group's legal services division which combines the businesses previously operated by Rosenblatt Limited and Memery Crystal LLP.

Rosenblatt

Rosenblatt is one of the UK's pioneering legal practices and a leader in dispute resolution. Rosenblatt provides a range of legal services to its diversified client base, which includes companies, banks, entrepreneurs and individuals. Complementing this is Rosenblatt's increasingly international footprint, advising on complex cross-jurisdictional disputes.

Memery Crystal

Memery Crystal offers legal services in a range of areas such as corporate (including a market-leading corporate finance offering), real estate, commercial, IP & technology (CIPT), banking & finance, tax & wealth structuring and employment. 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 individual entrepreneurs.

LionFish Litigation Finance Limited ("LionFish")

The Group also provides litigation finance in selected cases through a separate arm, LionFish Litigation Finance Limited. LionFish finances litigation matters being run by other solicitors in return for a significant return on the outcome of those cases. As such, the Group has two types of litigation assets - Rosenblatt's own client matters, and litigation matters run by third-party solicitors. LionFish is positioned to be a unique, alternative provider to the traditional litigation funders.

Convex Capital Limited ("Convex Capital")

Convex Capital is a specialist sell-side corporate finance boutique based in Manchester. Convex Capital is entirely focused on helping companies, particularly owner-managed and entrepreneurial businesses, realise their value through sales to large corporates. Convex Capital identifies and proactively targets firms that it believes represent attractive acquisition opportunities.