Rosenblatt outstrips listed peers on revenue per fee-earner

Stock exchange: High margin for Rosenblatt

City firm Rosenblatt has the highest revenue per fee-earner of any of the listed law firms, it told investors yesterday.

The analysis came as the firm unveiled strong results for the first half of 2019, with revenue increasing 12% to £10.2m, and profit before tax up similarly to £3.2m.

Rosenblatt’s investor presentation said annualised revenues per fee-earner were £411,000, compared to £271,000 at Ince (formerly Gordon Dadds), £170,000 at Gateley, £168,000 at DWF, £133,000 at Keystone and £101,000 at Knights. This gave an overall average of £209,000.

The figure was “consistent with the levels seen in magic circle Firms”. Recruits are expected to deliver three times their cost of employment.

Rosenblatt has 46 fee-earners and it said that “equity ownership for all fee-earners is both a crucial part of the company’s culture and attractive to potential recruits from major players in the legal sector”.

At 37.5% (up from 33.2% last year), the City firm – which is the smallest of the six – also boasted the highest EBITDA margin, which is a measure of a company’s operating profit as a percentage of its revenue.

Knights was the next highest (21.5%), followed by Gateley (18.5%), Ince (14.4%), DWF (12.3%) and Keystone (11.9%).

Rosenblatt said it has a strong balance sheet, with net assets of £35m, cash of £8.7m and no debt.

“Our balance sheet will support our growth plans, including acquisitions, continued investment in litigation finance opportunities, and the dividend.”

Rosenblatt, which listed on 8 May 2018 at 105p, has seen its share price fluctuate significantly since then. It reached a high of 135p a few weeks later, but then hit 70p last December, before climbing again to 123p in March. It has since fallen again, to a low of 78p last month, but is on the rise again. It closed at 100p yesterday.

Earlier this month, the firm made its first acquisition as a listed business – and began diversifying away from legal services – by spending up to £22m on a specialist sell-side corporate finance boutique, Convex Capital.

Dispute resolution is Rosenblatt’s main area of practice, contributing 62% of its revenue, or 76% if the proceeds of the sale a part of its investment in a piece of litigation is excluded – this contributed £2m towards its revenue. The firm, which has a litigation funding subsidiary, is currently running three cases under damages-based agreements (DBAs).

The firm has also just added a white collar fraud and financial crime division to the dispute resolution team, after hiring partner Manraj Somal from KPMG, where he was UK head of corporate crime legal.

The corporate and real estate divisions, meanwhile, were “impacted by the uncertain economic environment”, with revenues down 27% on 2018.

“However, there is a good pipeline of new business. The board is confident that once the market improves, these divisions will contribute more to the group.”

Nicola Foulston, chief executive of RBG Holdings plc – the new name for the listed business – said: “The first six months have seen financial and operational progress, in what has been a challenging economic environment.

“We continue to see double-digit growth in our revenue, and importantly, we are maintaining high net margins on the work we do…

“It is important to note that our growth prospects are not just dependant on litigation finance and M&A. We can generate traditional legal service revenues from contentious work at attractive margins.

“Looking ahead, we are excited by the prospects of the business, especially as the market improves, and as we grow and broaden the professional services, we can provide to clients.”

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