Expanded RBG ends half-year as expected

The AIM-traded firm said its RBGLS legal services division, which runs the brand 'Rosenblatt' for contentious legal services and 'Memery Crystal' for non-contentious services, performed “well”, with a “particularly strong” performance in its corporate and banking practices.

It said the integration of RBGLS, and within that the Rosenblatt and Memery Crystal brands, was now complete, with the businesses set to move to a new practice management software system in the last quarter of 2022, to support the integration and the potential for future cross-sell initiatives.

RBG said that, as a result of management actions, the EBITDA margin of Memery Crystal had improved by 10 percentage points to 27%.

The EBITDA margin of RBGLS overall was 30%, and was expected to rise towards 35% over the medium-term as the benefits of the integrated business were maximised.

It said the advantages were two strong brands, greater scale, and the creation of what the board considered to be a “leading mid-tier law firm”.

At its specialist sell-side corporate finance boutique Convex Capital, meanwhile, RBG said it had continued its strong performance into 2022.

As at 30 June, Convex had completed five deals generating revenue of £4.2m, compared to eight deals for £5m a year ago.

Furthermore, as at 18 July, Convex had a “strong pipeline” of 20 deals with a number currently at various stages of completion.

“It is the board's expectation that the current macro-economic environment will support the ongoing fundamentals that drive mergers and acquisitions,” RBG’s directors said in their statement.

Finally, RBG said that since its launch in May 2020, its LionFish Litigation Finance operation had invested in 12 cases, with one case having settled successfully in 2021.

Current active cases had a total capital commitment of £11.3m, of which £5.5m had been deployed as at 30 June.

Disposals since inception totalled £5.9m.

In February, LionFish agreed a £20m litigation investment arrangement with a “large alternative investment firm”, which would provide the business with flexible capital.

The board said the investor would contribute 75% to any new deals, and had retrospectively invested £2m in existing cases in Rosenblatt and LionFish.

“This year, LionFish is expected to generate the majority of its gains from potential settlements, the timings of which are not within RBG's control and are thus difficult to predict.”

Looking at the books, RBG said the integration of Memery Crystal had progressed to plan, with the expected synergies having a positive impact on the wider group.

As a result, the group had already paid back £2m of the £10m term loan used to fund the acquisition, in addition to £5.6m in deferred cash consideration.

The term loan would be paid down over five years.

Additionally, the firm said it had used £10m of its £15m revolving credit facility as its working capital requirements had doubled since the acquisition of Memery Crystal.

As a result, its balance sheet remained in line with expectations, with net debt widening to £17.2m from £10m.

Headroom remained “sufficient” to support the group's growth plans.

RBG said it would announce the details of its interim dividend with its financial results in September.

“Having delivered the upgraded market expectations for the 2021 financial year, we are pleased with the continued solid trading performance of the group,” said group CEO Nicola Foulston.

Macroeconomic conditions are volatile, and we are conscious of the ever-changing economic environment.

“However, our diversified strategy helps provide resilience and protection through a broad revenue base that is not dependent on any one sector.”

Foulston said the integration of Memery Crystal and Rosenblatt had been “a success”, with improved operating efficiency driving higher margins.

“Our litigation finance business continues to develop and offers the potential for substantial returns for shareholders.

“Finally, our merger and acquisition business, Convex Capital, continues to perform well and is converting its pipeline.

“We are confident about the long-term prospects of the group.”

At 1256 BST, shares in RBG Holdings were down 1.69% at 87.5p.

Reporting by Josh White at Sharecast.com.