RBG Holdings – Time to Revert to Average?

In just over two weeks Nicola Foulston, CEO of RBG Holdings (LON:RBGP) the professional services group, will be announcing the company’s Trading Update for the year to end December.

The early December statement that its LionFish Litigation Finance subsidiary had suffered two massive losses, detailed a £4m non-cash write-off, as well as noting that committed funding on the two LionFish cases is going to £3.3m over the next two years.

In reaction the group’s shares collapsed in price from 84p to just 55p at one stage.

Buyers Pounced

Cheap buyers popped into the market and took stock out, with a massive 1.27m shares traded on the day. That night they closed at 64.5p.

Over the following few days, the shares ranged in between 65p to 73p.

On 5 December Nicola Foulston waded into the dealings, taking out 250,000 shares @ 64.65p. The next day she bought another 100,000 @ 68.75p each, followed by an additional 35,000 @ 67p each on 9 December.

Those dealings took Foulston’s holdings up to a useful 11,900,264 shares representing 12.45% of the group’s equity.

I’m a ‘Fan’

I have to state here and now, that I am a long-time fan of the woman who took over control of her late father’s motor racing circuits group in 1989.

She re-shaped its interests, guided along the way by a young lawyer, Ian Rosenblatt, before taking the Brands Hatch Leisure group public in 1996.

I nominated her for a Veuve Cliquot Businesswoman of the Year Award, which she won in 1997, she was and remains the awards youngest ever recipient.

When it went public in 1996 the group was valued at just £6m. Within just a few years Foulston built it up to be the largest organiser and promoter of motor sport in Europe.

In 1999 Brands Hatch Leisure was acquired for over $195m by the US marketing giant Interpublic.

Proven Abilities

So, Nicola had proven her abilities well before she took over as CEO of Ian Rosenblatt’s group in September 2016.

The group was valued at £76m when it floated in May 2018 @ 95p a share, having just raised £43m of fresh capital.

Memery Crystal Expanded its Mid-Tier Status

Despite a number of acquisitions along the way, including the £30m takeover of Memery Crystal, another higher-end legal services provider, in April 2021, its market capitalisation still looks extremely low at just £61m.

Good Interims

At the halfway stage to end June last year, the group was declaring its solid performance delivered by its resilient business model.

Its interim revenues were up 44.8% at £26.6m, while its pre-tax profits were 10.8% better at £4.4m, its earnings were 3.62p and its interim dividend was 2p a share.

However, the 5 December announcement saw broker re-estimating the 2022 revenues and profits, and for subsequent years.

The LionFish losses were very impactive, but they were balance somewhat by the progress that the group’s Professional Services side had made in the second half.

Trading Update Due

On Wednesday 25 January the group will be updating its shareholders on the 2022 results and, hopefully, giving a positive spin upon its current year prospects.

Analyst James Tetley at Singer Capital Markets has a Buy rating on the group’s shares, with a price objective of 105p, compared to Friday night’s closing price of just 63.5p.

His estimates for the year to end December 2022 were for £49.5m revenues (£47.2m), £6.9m (£10.7m) of adjusted pre-tax profits, generating earnings of 5.8p (8.9p) and a 3.6p (5.0p) a share dividend.

For the year now underway Tetley is going for £52m revenues, £10.1m profits, 7.9p earnings and a 4.5p dividend per share.

My View – Get Averaging

In my view, in a couple of weeks we will get the ‘chapter and verse’ on the LionFish losses and what is likely to happen to that business.

With the combination of Memery Crystal and the Rosenblatt law businesses, the group now has one of London’s premier mid-tier law firms.

It has the ability to work itself out of any subsidiary issues and concentrate upon its currently powerful business.

Nicola Foulston as CEO knows the strength of the business and its potential, which is no doubt why she swept into the market taking cheap stock out within her very restricted time for dealing in her group’s equity.

‘Insider’ Dealings

I so often say that we should follow the dealings of the ‘insiders’ and this is one excellent example to follow.

A year ago the group’s shares touched 133p, it may well take time to recover to that level, but I suggest that any holders could use the current price for averaging.

(Profile 05.02.21 @ 80p set a Target Price of 100p*)
(Profile 17.08.22 @ 88.5p set a Target Price of 120p)

(Asterisks * denote that Target Prices have been achieved since Profile
publication)