REG - RBG Holdings PLC - Pre-close Trading and Business Update

RBG HoldingsAnnouncement

27/07/2023 07:15

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RNS Number : 3292H  RBG Holdings PLC  27 July 2023

This announcement contains inside information for the purposes of Article 7 of
EU Regulation 596/2014 as retained as part of UK law by virtue of the European
Union (Withdrawal) Act 2018 (as amended). Upon the publication of this
announcement, this inside information is now considered to be in the public
domain.

 

27 July 2023

 

RBG Holdings plc

("RBG", the "Group", or the "Company")

 

Pre-close Trading and Business Update

 

RBG Holdings plc (AIM: RBGP), the legal and professional services group, today
publishes a pre-close trading and business update ahead of the expected
publication of its financial results for the six months ending 30 June 2023 in
September 2023.

 

Trading Update

RBG Legal Services ("RBGLS") which trades under two brands - Rosenblatt and
Memery Crystal - has performed broadly in line with the Board's expectations,
despite the challenging economic conditions. The performance demonstrates the
ability of these two leading law firms, both with over 30 years of trading
experience, to perform through different economic cycles and reinforces the
success of the integration during the past two years.

 

The Group's specialist sell-side corporate finance advisory business, Convex
Capital, has a strong pipeline of 18 deals (as at 1 July 2023) and it is
expected that deal flow will become more consistent in the second half of the
year. While a number are in advanced stages of negotiations, transactions are
taking longer to complete as a consequence of the current economic
environment. It is currently expected that a number of these pipeline deals
will complete in the second half. However, the Board believes that full-year
Adjusted EBITDA is now more likely to be in the range of £10m to £12m.

 

Business Update

A detailed review of all the Group's activities has been undertaken since the
new management team took over at the start of this calendar year, led by CEO
Jon Divers. The following actions have been taken:

 

Litigation Finance

 

On 12 July 2023, the Group completed the disposal of the non-core business,
LionFish Litigation Finance Limited ("LionFish") to Blackmead Infrastructure
Limited ("Blackmead") which reduced the Group's exposure to litigation funding
commitments.

 

LionFish was created by the previous management and financed litigation
matters run by third-party solicitors. The consideration for the disposal is
up to £3.07m, of which £1.07m was used for immediate repayment of an
intercompany loan. The proceeds from the sale are being used for working
capital purposes and to reduce the net debt of the Group. The announcement of
12 July 2023 referenced a net asset value of the four cases acquired by
Blackmead of £4.05m, however this should have referenced an adjusted net book
value of £3.7m, with a reduced loss on disposal of £0.64m.

 

Conditional Fee Arrangements ('CFAs')

 

Separately, the Board has reviewed the previous management's strategy to
invest in a number of Conditional Fee Arrangements ("CFAs") and Damages Based
Agreements ("DBAs") undertaken through RBGLS. Over the past six years, RBGLS
invested in 13 cases with a total cash investment of £17.4m. The current
carrying value of the remaining cases is £13.3m.  One of these cases,
Project Shango, accounted for £9.3m of the total. Having taken advice, the
Board has now concluded that Project Shango will not be successful.

 

In light of this outcome on Project Shango, the Board has taken the prudent
decision to further write down the value of all remaining cases on the balance
sheet to zero, including the four remaining fully funded retained LionFish
investments. The total non-cash write off will be £13.3m. Any successful
outcomes of the cases will be returned to the Group as revenue in line with
RBGLS' percentage stake in the cases.

 

This decision simplifies and de-risks the Group's balance sheet, providing
greater visibility to investors. RBGLS will continue to offer its clients
alternative billing arrangements (both CFAs and DBAs) where appropriate but
any investments in such cases will not be carried as assets on its balance
sheet in contrast to the treatment by the previous management. Any fees from
wins on such cases will simply be recorded as revenue when paid.

 

Dividend

The Board is currently focused on reducing the Group's net debt from its
existing level. A number of major shareholders have provided clear feedback
that their preference is for RBG to accelerate this process and as a result,
the Board is suspending the Group's dividend policy. The Directors' intention
is to reinstate a dividend when RBG has achieved a more sustainable level of
net debt.

 

In the short term, repaying the outstanding term loan of £6.5m as at 30 June
2023 remains the priority. Additionally, the Group's revolving credit facility
of £15.0m is set for renewal in April 2024 and the process of refinancing
this is already underway. The Board is confident that this will be concluded
well ahead of next April.

 

Jon Divers, CEO, RBG, said: "Since the appointment of the Group's new senior
management team, we have been working with the Board to undertake a detailed
review of the business to stabilise our earnings and to achieve greater
visibility. We have now exited all litigation finance matters, to ensure that
our time and resources are focused on our core strengths.

 

"We are committed to reducing the Group's debt as well as investing in growing
our legal services businesses, Rosenblatt and Memery Crystal, which are both
working on an increasing volume of client matters.  We have a reinvigorated
and highly motivated team, all pulling in the same direction. We have had to
take tough decisions but are optimistic about the business outlook for the
second half of the year and beyond and are committed to returning the Group to
prosperity."

 

 

Additional Information

The person responsible for arranging release of this announcement on behalf of
the Company is Jon Divers, Chief Executive Officer.

 

 

 

Enquiries:

 

 RBG Holdings plc                                                 Via SEC Newgate

 Jon Divers, Chief Executive Officer

 Singer Capital Markets (Nomad and Broker)                       Tel: +44 (0)20 7496 3000

 Rick Thompson / Alex Bond / James Fischer (Corporate Finance)

 Tom Salvesen (Corporate Broking)
 SEC Newgate (for media/analyst enquiries)                       Tel: +44 (0)7540 106366 rbg@secnewgate.co.uk (mailto:rbg@secnewgate.co.uk)

 Tali Robinson / Robin Tozer

 

 

About RBG Holdings plc

RBG Holdings plc is a legal services and professional services group, which
comprises three core brands:

 

Rosenblatt

Rosenblatt is one of the UK's pioneering legal practices and a leader in
dispute resolution. Rosenblatt provides a range of legal services to its
diversified client base, which includes companies, banks, entrepreneurs and
individuals. Complementing this is Rosenblatt's increasingly international
footprint, advising on complex cross-jurisdictional disputes.

 

Memery Crystal

Memery Crystal offers legal services in a range of areas such as corporate
(including a market-leading corporate finance offering), real estate,
commercial, IP & technology (CIPT), banking & finance, tax &
wealth structuring and employment. Memery Crystal offers a partner-led service
to a broad range of clients, from multinational companies, financial
institutions and owner-managed businesses to individual entrepreneurs.

 

Convex Capital Limited

Convex Capital is a specialist sell-side M&A boutique based in Manchester.
Convex Capital is entirely focused on helping companies, particularly
owner-managed and entrepreneurial businesses, realise their value through
sales to large corporates. Convex Capital identifies and proactively targets
firms that it believes represent attractive acquisition opportunities.

 

 

 

Further information is available at: www.rbgholdings.com
(http://www.rbgholdings.com)

 

 

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