RBG Holdings: Final Results

20th April 2021

Audited Results for the year ended 31 December 2020

Solid performance as Group benefits from diversified revenue streams

RBG Holdings plc (AIM: RBGP), the professional services group, is pleased to announce its audited results for the year ended 31 December 2020.

Financial Highlights:

  • Group revenue and gains on litigation assets up 8% to £25.6 million (2019: £23.7 million)
    • Professional Services revenue up 12.6% to £22.4 million (2019: £19.9 million)
    • Gains on litigation assets of £3.1 million (2019: £3.8 million)
  • EBITDA of £10.2 million (2019: £9.4 million)
  • Adjusted EBITDA[1] of £7.5 million
  • Profit before tax of £7.7 million[2] (2019: £7.6 million)
  • Profit after tax of £6.7 million (2019: £6.2 million)
  • Paid dividend of 3p per share in respect of the 2020 financial year on 26 February 2021
  • Balance sheet remains robust with net cash of £3.5 million as at 31 December 2020 (31 December 2019: £1.9 million)

Operational Highlights:

Rosenblatt Limited (“RBL”) – Strong focus on maintaining margins and cash collection

  • Revenue of £20.9 million, up 15% (2019 £18.1 million) – most successful year ever in terms of professional services revenue
  • RBL took on more contingent work in 2020 with associated unrecognised time worked of £2.1 million (2019: £1.9 million)
  • Average revenue per fee earner: £425,800 (2019: £393,000) placing RBL in the top 10 in the Legal 100; three partners added during 2020 taking total fee earners to 49 (2019: 46)
  • Utilisation / Realisation: 89% / 106% (2019: 77% / 96%) – well ahead of 75% & 85% target respectively
  • Dispute resolution division performed well with corporate division revenue double that of 2019
  • Strong cash collection – Total Lockup[3] was 99 days (2019: 122 days) of which debtor days were 47 days (2019: 45)
  • Five contingent cases via alternative billing arrangements are being progressed. Some larger investments provide a potential return that is not provided in market forecasts

LionFish Litigation Finance (UK) Limited (“LionFish”) – Leverage assets to provide significant one-off returns

  • In May 2020, LionFish launched as a provider of finance to the third-party litigation market (not RBL cases) with an experienced Managing Director, Tets Ishikawa
  • LionFish has received 240 enquiries for finance, and seven cases have been invested in as at 31 December 2020
  • Total cash deployed of £1.8 million across seven cases (as at 31 December 2020). Total capital commitment of £4.9 million

Convex Capital Limited (“Convex Capital”) – Strong comeback after deal completion limited by Covid

  • Convex Capital pipeline was significantly impacted by Covid with deals delayed or cancelled. Only completed two deals in 2020, generating revenues of £1.6 million (2019: £1.9 million)
  • Management pivoted sector focus and rebuilt pipeline over the second half of 2020 to put Convex Capital back in a position to deliver in 2021
  • Since 1 January 2021, Convex has completed seven deals generating revenue of £4.5 million. Pipeline of 33 deals with six currently at various stages of completion

Post-Period Highlight:

  • Acquisition of Memery Crystal (conditional on completion) which is in line with the Group’s M&A strategy, which aims to focus on high-margin professional services companies and to take advantage of consolidation opportunities in the UK legal sector
  • Memery Crystal is a specialist international law firm, based in London, with 146 employees, including 29 partners, and an additional 66 fee earners as at date of exchange
  • Memery Crystal’s focus on transactions makes it a complementary fit with RBL, which derives most of its revenue from contentious law
  • Both businesses will retain their own brand identities and separate offices, and together will form the Group’s Legal Services Division
  • The total consideration for the acquisition is £30 million (comprising £18.8 million in cash and £11.2 million in RBG shares). Further details of the transaction are contained within a separate stock exchange announcement released earlier this morning
  • The Board expects the transaction to be immediately, and materially, earnings and value-enhancing for the Group
  • In connection with the acquisition, the Group has extended its revolving credit facility to £15 million and taken out acquisition finance totalling £10 million (key terms of which can be found in this morning’s announcement)
  • For year ending 30 April 2020, Memery Crystal reported revenue of £23.2 million, profit[4] of £8.0 million, and had £7.3 million of net assets

Nicola Foulston, CEO, RBG Holdings plc, commented:

“2020 was a year when the Group demonstrated the resilience of its evolving business model, and how our diversified revenue streams can deliver robust and sustainable financial results, despite the challenges of the pandemic. I am delighted with how the business has adapted, shown its entrepreneurial spirit, and progressed in difficult times.

“Every year since we came to the market, we have delivered a solid financial performance while laying the groundwork for future growth. Our law firm, RBL, had its most successful year ever in terms of revenue from its core legal services business and continues to strengthen its offering. The business performed across all practice areas, particularly those areas focused on contentious law such as dispute resolution, and our corporate division has also been busy. This year, RBL will continue to drive its litigation business, and we have identified new growth areas across the whole business.

“Our third-party litigation finance business, LionFish hit the ground running after its launch in May 2020. It already has a portfolio of seven deals with the first return expected in the first half of the current financial year. During a turbulent year, as a result of Covid, the team at Convex Capital led by Mike Driver worked hard to develop a new, stronger pipeline of M&A transactions. The fruits of all that effort has already shown in early 2021, with seven deals already completed, and more to come.

“The acquisition of Memery Crystal announced today is an excellent addition to the Group both culturally and strategically. Like RBL, Memery Crystal performed strongly in 2020. The Firm is a compelling operational fit with RBL, providing a greater corporate, commercial, and real estate offering than we have currently. Together, the businesses will form our Legal Services Division providing clients with a full-service offering across different sectors and legal disciplines. We see opportunities to grow both businesses.

“Across the Group, we have experience in supporting clients in times of upheaval which means we can react to the opportunities and challenges the current crisis will inevitably offer. Our services will be in demand. We have a solid balance sheet, and we are optimistic that the Group will continue its positive progress over the coming year.”

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