RBG Holdings – get the champagne ready for good news

Nearly twenty-five years ago I nominated a smart young woman for the Veuve Cliquot ‘Business Woman of the Year’ Award – which she won at the tender age of just 29.

That young lady’s father had built up a large equipment leasing company called Atlantic Computers, but sadly he was killed, at the age of just 40, in a 150mph crash on the Silverstone Racing Circuit. That was way back in September 1987.

The year before, in 1986, he had followed his strong interest in motor sport when he acquired a number of UK racing circuits from Grovewood Securities – Silverstone was not one of them.

That was the creation of the Brands Hatch Leisure Group, which owned the Brands Hatch, Snetterton, Oulton Park and Cadwell Park motor racing circuits.

His daughter was appointed the Chief Executive of the company in 1990, when she was just 22 years old.

Over the next six years she transformed that previously struggling group, before floating the company in 1996.

That was the year that I first met Nicola Foulston, her father was John Foulston, just as she was bringing her company to the market. That was when she impressed me enough to earn my endorsement for Veuve Cliquot.

Just three years later, by which time BHL was the largest organiser and promoter of motorsport in Europe, she sold off the entire company for £120m to Interpublic, the US marketing group.

Almost retiring from the ‘public scene’ she then concentrated upon a private equity investment company with interests in Europe and in the States.

So why am I telling you all this?

Simply because she is now the CEO of the AIM listed RBG Holdings (LON:RBGP), which floated in 2018, two years after she joined the company, formerly known as the Rosenblatt Group.

She had been a client for some 30 years of the Rosenblatt legal practice, she knew the team and recognised the potential of its founder and its management.

A leader in dispute resolution

RBG Holdings is a professional services group, which includes one of the UK’s pioneering law firms, Rosenblatt’s, which is considered to be a leader in dispute resolution.

It provides a range of legal services to its diversified client base of companies, banks, entrepreneurs and private individuals.

Its practice areas include Dispute Resolution, Corporate, Banking and Finance, Insolvency and Financial Restructuring, Construction and Projects, Employment, Financial Crime, Financial Services, IP/Technology/Media, Real Estate, Regulatory and Tax Resolution.

Also in litigation finance

The group also provides litigation finance through its subsidiary LionFish Litigation Finance (UK).

It has the ability to focus upon financing good commercial litigation risks in a way that actually meets the needs of the client, whether they are in a straightforward mid-value claim in the courts of England and Wales, or a complex, specialist high value multi-jurisdictional claim.

And a business sales boutique

The Manchester-based Convex Capital, a specialist sell-side corporate finance mergers and acquisition boutique, is another part of the RBG grouping.

This side is entirely focussed on helping companies, particularly owner-managed and entrepreneurial businesses, realise their value through sales to large corporates.

Convex identifies and proactively targets firms that it believes represent attractive acquisition opportunities.

Floated off in 2018

The group was floated by Cenkos Securities in May 2018 when it raised some £32m of new funds for the company, together with a vending shareholder raising almost £8m.

The shares rapidly peaked at 137.5p in late May that year, they have not been as high since then. From their low of 48.5p in early April last year they have subsequently risen to the current 80p, following a very bullish Trading Update announced on Thursday of last week.

Positive Trading Update

Nicola Foulston commented:

“The group has demonstrated its resilience during a very challenging year. Our law firm, RBL has achieved its best financial performance since it was founded.

Following the launch of LionFish, we are building a portfolio of litigation investments which offer the potential for high returns for our shareholders.

The group’s M&A business, Convex Capital, naturally saw its ability to complete deals hindered by the lockdowns. However, the business has built a strong pipeline, and we expect higher levels of M&A activity in the current financial year.

We are looking forward to the year ahead with confidence.”

Corporate brokers are very positive

In a research report comment analyst James Bayliss at N+1 Singer is expecting the group to report revenues for the year to end December 2020 of £25.5m (£23.7m), with adjusted pre-tax profits reflecting Covid-19 slowdown at £5.4m (£7.6m).

Those estimates will put earnings out at 5.3p (4.0p) and a lower dividend of 3.0p (5.0p) per share.

The group has a strong balance sheet having ended the last year with some £3.5m of cash, compared to £1.9m previously.

However, he is going for a rebound this year to £28m revenue, £7.7m profit, earnings of 7.3p and a dividend of 4.40p per share. He is rating the shares on an intrinsic value, when compared to its peer group, of 120p per share.

No doubt such a bullish statement together with a confident broker summation explains the recent strength in the shares, currently 80p.

Good institutional backing

There are some 85.6m shares in issue, of which two main holders are founder Ian Rosenblatt (19.8%) and the Foulston Family Trust (13.5%).

Large holders include Premier Miton Group (15.0%), BlackRock Investment Management (UK) (6.78%), FIL Investment Advisers (5.66%), Schroder Investment Management (4.83%), Canaccord Genuity Wealth (3.39%), Hargreaves Lansdown Stockbrokers (2.94%), Ninety One UK (2.35%), and Livingbridge VC (2.21%).

This really is quite a tight equity, so any lumpy buying could well get the shares a lot higher and fairly quickly too.

My view

I believe that Nicola Foulston is a canny lady and that she certainly has the ability to significantly expand the group and its prospects.

In anticipation of further good statements from the company, when the results are announced on Tuesday 20 April, I rate the shares very positively with an easy Target Price of 100p.