TIDMRBGP
RNS Number : 1080X
RBG Holdings PLC
18 December 2023
18 December 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.
RBG Holdings plc
("RBG", the "Group", or the "Company")
Trading Update
RBG Holdings plc (AIM: RBGP), the legal and professional
services group, today publishes a trading update for the twelve
months ending 31 December 2023 ("FY 2023").
2023 has been a pivotal year for the Group. The new leadership
team has taken action to reduce the Group's risk profile and
refocus on its core business activities where the Board believes it
can best maximise profits. These key actions include:
Reduce Risk
-- the disposal of LionFish
-- scaling back from unfunded Alternative Billing Arrangements
("ABAs") and no longer carrying investments in ABAs as assets on
the balance sheet
Increase Stability
-- appointment of a new Chief Financial Officer, Kevin McNair
-- renewing banking facilities totalling GBP24.5m at interest
rates deemed favourable by the Board
Focus on Growth
-- the recruitment of seven new partners who have already
started to gain traction in their specific markets and are
generating new revenue streams
Prudent Financial Management
-- suspension of the dividend policy
-- a full root and branch review of all aspects of the
accounting treatments of work in progress and debtors
-- an increase in bad debt provisions
Operational Management
-- implementation of new ERP management information system
-- instruction of two agents on the Group's leasehold properties
to consolidate its property portfolio
Trading
Legal Services
In its results for the six months ended 30 June 2023, the
Company announced that Legal Services performed broadly in line
with the Board's expectations during H1 2023, despite the
challenging economic conditions.
The second half of the financial year has historically been the
stronger of the two halves, however activity levels during H2 2023
have been at similar levels to H1 2023 and there has not been the
increase in revenue and profitability seen in previous years and
that the Board had anticipated. In particular, Memery Crystal, has
been impacted by the lack of activity in both Commercial Real
Estate and Equity Capital Markets with transactions that were
forecast in Q4 2023 either being delayed into 2024 or cancelled
altogether.
Corporate Finance Advisory
The Group's specialist sell-side corporate finance advisory
business, Convex Capital, continues to have a strong pipeline of 18
deals. A number are in advanced stages of negotiations and had been
forecast to complete in Q4, but transactions are taking
significantly longer to complete in 2023 as a consequence of the
current economic environment and weakness in the M&A market.
Convex Capital completed three transactions this year delivering
total fee income of GBP2.19m versus a previous Board expectation of
GBP4.5m. Until recently, the Board had confidence over its
expectation but it has now become clear that no more transactions
will complete this side of the financial year end. The pipeline is
positioned to deliver the delayed transactions in 2024.
Financial Performance
LionFish & ABA costs
-- Lionfish: the disposal resulted in a reported loss on
disposal of GBP0.7m; an adverse cost ruling regarding a case prior
to the disposal has subsequently incurred a settlement of GBP0.4m
net of insurance.
-- The change in accounting policy set out in the RNS of 27 July
2023 has resulted in disbursements of GBP0.72m being expensed
during the period; these were incurred in respect of the final
remaining large ABA - any successful outcome will be returned to
the Group as revenue.
Debtors & Work in Progress:
-- As part of the recent re-financing exercise undertaken during
the second half of 2023 and concluded in December, management
undertook a comprehensive review of the historic debtor book and
the historic work in progress being carried on the balance sheet.
Some was very historic in nature and the decision has been taken to
write off GBP1.8m of debtors and work in progress. As this will be
a change in accounting policies, it will require a restatement of
the 2022 accounts.
Legal & Professional fees:
-- Costs relating to employment cases under the previous
leadership team have been incurred (principally in the second half)
totalling GBP1.9m.
-- In addition, a further c. GBP0.2m was incurred during H2 in the run-down of another ABA.
As a result of the various factors set out above, the Board now
expects that revenue for FY 2023 will be slightly lower than market
expectations at approximately GBP42m and adjusted EBITDA is
expected to be approximately GBP4m(1) . The table below sets out
comparable figures for FY 2022 and FY 2023. These figures do not
include the impact of LionFish, a discontinued business, in either
period.
Revenue ( GBPm
) H2 2023 H2 2022 FY 2023 FY 2022
Legal services 19.4 23.8 39.7 44.5
Convex 1.5 1.1 2.2 5.3
-------- -------- -------- --------
Total 20.9 24.9 41.9 49.8
Adjusted EBITDA
( GBPm ) 1.6 8.8 c. 4.0 15.8
The Company recently announced that it had renewed and extended
its existing borrowing facilities with its current lender, HSBC,
under which the debt headroom was raised to GBP24.5m. The Company
had a pre-IFRS 16 net debt position of GBP22.1m as at 15 December
2023. Under the Board's base case scenario which includes improved
working capital management , the Company has sufficient cash
headroom over the next 12 month period.
Commenting on the Trading Update and Outlook for FY 2023,
Marianne Ismail, Non-Executive Chair of RBG Holdings plc, said:
"The Board recognises that FY 2023 has been a year of
significant transition and a disappointing one for shareholders.
Nonetheless, the Board is confident that the business is moving
into FY 2024 on a significantly stronger footing than at the start
of this year.
"I would like to thank the new management team for the bold
decisions taken in tackling historical issues that have drained the
business of management time, profit and working capital during
2023.
"The Group now has noticeably improved operating processes that
will begin feeding through in terms of improved margins in 2024.
Our new agreement with HSBC gives the team operational headroom to
deleverage the business while it brings performance back up to
acceptable levels.
"There are early signs of recovery in some of the key areas of
legal services that were badly impacted in 2023 but we will be
presenting a more conservative budget for 2024, with revenue and
profit expected to be slightly higher than 2023, that is designed
to demonstrate both clarity and profitability to investors and
other key stakeholders.
"Continuing to improve the Group's operational efficiency,
expand margins and generate cash are the key priorities for the
Board and management team going forward. We will continue to review
our costs in light of our revenues and the market conditions."
The person responsible for the release of this announcement is
Kevin McNair, Chief Financial Officer.
(1) Adjusted for GBP11.4m of litigation write offs, GBP1.4m of
legal and professional fees, GBP2.8m of Lionfish costs and GBP0.9m
of other non-underlying costs
Enquiries:
RBG Holdings plc Via SEC Newgate
Jon Divers, Chief Executive Officer
Kevin McNair, Chief Financial Officer
Tel: +44 (0)20 7496 3000
Singer Capital Markets (Nomad and Broker)
Rick Thompson / Alex Bond / James Fischer (Corporate
Finance)
Tom Salvesen (Corporate Broking)
SEC Newgate (for media/analyst enquiries) Tel: +44 ( 0)7970 664807
Tali Robinson / Robin Tozer rbg@secnewgate.co.uk
About RBG Holdings plc
-- Further information about RBG Holdings plc is available at: www.rbgholdings.co.uk
-- Further information about Rosenblatt (founded in 1989) is available at: www.rosenblatt.co.uk
-- Further information about Memery Crystal (founded in 1979) is
available at: www.memerycrystal.com
-- Further information about Convex Capital (founded in 2010) is
available at: www.convexcap.com
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END
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