RBG Holdings, a publicly listed legal services company, has experienced a significant decline in its share price, which nearly halved in early trading following the announcement of another 7% drop in turnover accompanied by a £5.7 million loss for the first half of the year. Furthermore, the company has warned that its full-year performance will fall substantially short of market expectations.
The share price plummeted 45%, reaching an all-time low of 3.25p. This downturn follows the company’s earlier high of 148p in June 2021 and a starting price of 64p at the beginning of 2023. The decline accelerated last December after warnings of poor results, culminating in May with a 14% revenue drop.
In the first half of 2024, the group reported revenues of £18.4 million, down £1.4 million from the same period the previous year, and losses before tax tripling to £5.7 million, partly due to £2.9 million in non-recurring restructuring costs aimed at reducing expenses and refocusing on legal services.
Cost reduction efforts, resulting in £4.5 million savings, were implemented by terminating the lease on Rosenblatt’s previous headquarters in St Andrew Street, a strategic reduction in workforce, and re-tendering outsourced services. “We expect these cost-cutting benefits to positively impact EBITDA and profit before tax in H1 2025, aiding in debt reduction,” the company stated, with net debt standing at £24.3 million, an increase of £1.4 million over the past six months.
RBG Holdings has encountered a challenging year, including selling its litigation funding arm, LionFish, and disposing of all contingent work. The company secured £2.8 million from shareholders and agreed to sell Convex Capital to another firm, Knights, with an initial £2 million transaction, plus £600,000 contingent upon certain conditions.
Despite improvements in new business pipelines, the company acknowledges a lag in revenue realisation. While September trading shows promise, the remaining months of the financial year are fraught with uncertainty. Consequently, the board now anticipates significantly lower group performance expectations for FY 2024.
Chief Executive Jon Divers emphasised the importance of organic growth within their legal services arms, Rosenblatt and Memery Crystal, highlighting new partner recruitment as a key strategy. “With the addition of nine new partners since 2023, we see significant opportunities for revenue growth and renewed profitability,” Divers stated.
Chief Finance Officer Kevin McNair reported a reduction in the average number of employees, down to 192 from the previous year, primarily due to redundancies to better align workforce size with current business needs. ‘During periods of high demand, the group’s headcount swelled unnecessarily, leading to difficult but necessary reductions,’ McNair explained.
The company’s lock-up period has improved from 152 to 125 days, suggesting better financial health despite ongoing challenges.
The recent financial difficulties faced by RBG Holdings underscore the turbulent nature of the legal services market. With strategic cost reductions and a focus on organic growth, the company aims to navigate these challenges and restore financial stability and shareholder value. However, the path to recovery remains uncertain, influenced by market conditions and internal restructuring.
