RBG Holdings plc (AIM: RBGP), the professional services group, is pleased to announce its unaudited results for the six months ended 30 June 2020.

Overview

The Group has continued to trade profitably during the period, which included the coronavirus crisis, led by its law firm Rosenblatt Limited (“RBL”). RBL was the primary source of revenue from legal services, which was up 42% on the previous six-month period.

There have been no cash realisations from litigation investment sales of the Group’s investment assets during the period (2019: £2.0 million) while the Group created and launched a new separately branded business for its third-party litigation finance investments, now called LionFish Litigation Finance (UK) Limited (“LionFish”). Furthermore, the crisis has meant that Convex Capital Limited (“Convex Capital”), the Group’s M&A business, has seen deals delayed and some cancelled, albeit the outlook is now improving.

The reduction of these two high margin revenue streams has impacted the Group’s profitability in the first six months. However, much of this revenue has been deferred and the Group is well positioned for litigation investment sales and targeting M&A deals to be completed in the second half of the current financial year.

Having reviewed the current half year results, the Board has decided to postpone the decision regarding any dividend until the year end when it expects to have better visibility on the Group’s performance for 2020 and wider economic indicators.

Group Financial Highlights:

• Revenue and realised gains (including no realised gains) of £12.0 million, up 17% (2019: £10.2 million including £2.0 million of realised gains)
• EBITDA of £2.6 million (2019: £3.8 million including realised gains of £2.0 million)
• Profit before tax of £1.4 million (2019: £3.2 million)
• Profit after tax of £1.2 million (2019: £2.6 million)
• Earnings per share: 1.35 pence (2019: 3.19 pence)
• Net debt of £1.6 million (2019: net cash of £8.7 million) reflecting increased investment in contingent legal work and litigation investments. The Group has a £10 million revolving credit facility which it has drawn down.
• As at the 30 June 2020, the Group through RBL and LionFish, has invested in 8 litigation cases. There is a total associated contingent work in progress (WIP) of £3.8 million and a total cash investment of £3.7 million in these cases across RBL and LionFish. By the 15 September 2020, the Group through LionFish had invested in a further 3 cases, 11 in total with total cash investments of £4.7 million
• No cash realisations from litigation investment sales in the period. Well positioned to achieve sales in the second half, building on sales of £3.8 million in 2019.

Business Highlights:

RBL (law firm)

• Revenue from legal services was up 42% to £11.7 million (2019: £8.2 million)
• Unrecognised contingent WIP was £0.9 million in addition to £11.7 million of actual revenue
• Dispute Resolution division is performing well with revenue up 13%.
• Revenue from the Corporate division up 335% to £3.3 million, greater than the whole of 2019 (HY 2019: £0.8 million; FY 2019: £2.0 million)
• Average revenue per fee earner £497,000 (2019: £350,000)
• Total Lockup was 114 days (2019: 118 days) of which debtor days were 49 (2019: 47)
• As at 15 September 2020, RBL has invested in 8 litigation cases with an associated contingent WIP of £3.8 million, and total cash investments of £4 million.

LionFish (Litigation Finance)

• The Group created a separately branded business for its third-party litigation finance business which it launched in May 2020 – LionFish Litigation Finance (UK) Limited
• Industry expert Tets Ishikawa appointed as Managing Director
• As at 15 September 2020, LionFish has approved six cases with a funding commitment of £2.36m and executed three with £0.7 million invested to date. Since launch, LionFish has received 112 matters for possible funding, of which six were approved and 23 still under active review.
• LionFish launched ISLERO in July 2020 – a new generation of financing solutions for insolvency claims.
• The outlook for LionFish is good with a strong pipeline of cases looking for finance.

Convex Capital (Specialist sell-side M&A boutique)

• Impacted by Covid-19 with deals delayed and some cancelled. However, M&A activity is beginning to increase, and the business is targeting a number of second half completions
• Revenue of £0.3 million equates to one completed transaction and an additional fee from a previous deal based on deferred performance

Nicola Foulston, CEO, RBG Holdings plc, commented: “Overall, there has been positive strategic and operational progress across the Group which has helped offset the negative impact of the coronavirus and has resulted in a stronger platform from which to drive future growth. The business, especially our law firm RBL, has proved incredibly resilient despite the recent upheaval. Our staff adapted quickly to remote working and work proceeded as planned across all practice areas.

Furthermore, we received a high volume of new instructions as a result of client need for financial restructuring and employment-related issues as a result of the pandemic. In addition, our Corporate division which had been subdued because of the uncertain economic environment caused by Brexit has performed exceptionally strongly alongside our Dispute Resolution practice.

“In May, we launched our new Litigation Finance business called LionFish to finance third-party litigation. Partly because of this, there were no litigation sales in the first six months. We expect these to return in the second half with a number of tangible opportunities well progressed. We are also reviewing a growing number of cases for possible finance, and launched a new product aimed at insolvency claims, ISLERO. Our M&A business, Convex Capital was the part of the Group most impacted by the lockdown with deals delayed and some cancelled. However, as the lockdown eases, we are beginning to see the return of M&A activity which should positively impact the second half performance.

“While the Group has seen strong revenue growth overall, driven by the law firm, our profitability has reduced. This should mainly be a timing issue if our plan to achieve higher margin profit from LionFish’s litigation investment realisations and Convex Capital’s fees in the second half is realised. Like all businesses, it is difficult at this stage to predict with certainty what will happen in the coming months. However, there is a growing demand for our legal services with many clients turning to us to help them manage issues during the crisis. With the potential return of the higher-margin litigation investment sales and M&A fees, we look forward to the coming months with cautious optimism.”