Profits soar as listed legal business benefits from litigation investment

Foulston: Building one of London’s premier mid-tier law firms

RBG Holdings, the AIM-listed company that now owns two law firms, saw profits increase nearly three-fold in the first six months of the year, fuelled by gains from its litigation work.

Group revenue rose 53% from £12m to £18.3m in the year to 30 June, with £1.5m of this attributed to gains on litigation assets.

Underlying revenues – excluding Memery Crystal, whose acquisition contributed to only the last month of the period – were up 35% to £16.2m. Group profit before tax leapt 279% to £3.9m.

Convex Capital, the group’s specialist sell-side M&A boutique, completed eight deals resulting in £5m of revenue – it made a negligible contribution in the same period last year.

Net debt was £9.8m, compared to just £1.6m a year earlier, reflecting the company’s new £10m term facility. Total lock-up was 102 days, down from 114.

RBG bought Memery Crystal for £30m and it brought average revenue per fee earner down from £497,000 to £375,000.

Group chief executive Nicola Foulston explained: “This change reflects the diversification of the legal services business into more non-contentious areas of law, following the acquisition of Memery Crystal, which are less profitable due to fixed fees and prior to the benefits of the integration.

“However, this provides a natural hedge to the Group’s dispute resolution activities which, while more profitable, are more contingent.”

Rosenblatt has taken on five cases on a contingent basis, with contingent WIP of £5.8m and total cash investment of £4.9m.

Litigation funding arm LionFish Litigation Finance recorded £500,000 in gains on litigation assets and generated £800,000 by selling participation rights in its invested cases.

It has now committed £8m to 10 litigation cases over the next three years, of which £3.2m has been drawn down, having received 393 enquiries since launch. A further 54 are under consideration while the remaining 329 have been rejected

Ms Foulston said: “Our diversified revenue model is proving incredibly resilient, despite uncertain times, and we are building a strong platform from which to drive future growth.

“Our legal services business, strengthened by the acquisition of Memery Crystal, continues to receive a high volume of new client instructions.

“Since the lifting of lockdown our legal services and M&A businesses have seen strong growth in M&A and capital markets activity… We are building one of London’s premier mid-tier law firms providing quality advice to entrepreneurs and high net-worth individuals.”

As at 30 June, the combined businesses had 212 people, including 139 fee-earners.

Dispute resolution generates 53% of legal revenues, with corporate at 22% and real estate 19%.

Ms Foulston said the group remained on the look-out for further acquisitions “to build and diversify the business to create long-term shareholder value”.

RBG’s share price jumped 8% in early trading on the back of the results to 139p. This summer the share price has reached new heights, going as high as 160p in June.

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