Listed legal business eyes revenue diversification

Foulston: Cautious but optimistic

RBG Holdings plc is aiming to broaden its non-legal offering and reduce its reliance on the revenues of City law firm Rosenblatt, it said today as it announced strong results for the 2019 financial year.

The smallest of the listed legal businesses, RBG saw revenue rise 26% to £23.7m, profit after tax increase 34% to £6.2m and EBITDA jump 46% to £9.4m.

Its balance sheet shows net assets of £42.4m, cash of £1.9m, and no debt.

The law firm accounted for 92% of revenue, with the rest coming from its litigation funding division and from Convex Capital, the sell-side corporate finance boutique the group bought last September for up to £22m.

Rosenblatt specialises in litigation and focuses on high-margin work, delivering revenues of £393,000 per fee-earner and a 57% gross margin.

The firm only funds litigation where it is instructed and listing has enabled it to take on more part-contingent work.

In 2019, RBG invested £1.9m in external third-party costs across eight cases, and generated £3.8m in realised gains from the sale of a percentage of its participation rights in two contingent cases. Currently, the group has eight cases in progress, and six under consideration.

Group chairman Keith Hamill said the aim was to “build and diversify the business”.

He explained: “We aim to grow our service offering by taking advantage of what is a highly fragmented professional services market to engage in consolidation – but only at the right value, and with the right deal structure.

“Acquisitions will diversify the business away from a reliance on legal revenues and will help us fulfil our ambition of creating a broad, high-quality professional services group.”

He said the focus would be on “high-margin, specialist companies which can also create opportunities for cross-referrals”.

Earlier this month, RBG told investors that its trading had been unaffected by the coronavirus crisis and group chief executive Nicola Foulston said this continued to be the case.

“We have been able to support all our clients remotely, aided by the IT investment since the IPO. The firm has had many new client instructions, in particular to handle complex financial restructurings and employment issues, arising from the crisis.

“At Convex, there is likely to be a delay in the completion of specific transactions, but the pipeline is strong.”

Ms Foulston said she was “cautious but optimistic” that the group would continue its progress over the coming months.

RBG normally expects to pay out a minimum of 60% of retained earnings as dividends but due to the pandemic, the board has postponed the decision about whether to pay one until May.

RBG listed in May 2018 at 105p, reached a high of 135p a few weeks later. It closed 2019 at 92p but has since declined in line with the market due to Covid-19, hitting a low of 50p on 1 April. At the time of writing, the results had seen the share price jump nearly 10% to 70p.

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