A listed law firm owner has admitted to writing off millions of pounds in litigation investments and revealed that shareholders have asked the company to reduce its debts.

RBG Holdings, which owns the brands Rosenblatt and Memery Crystal, has already offloaded its litigation finance business LionFish and has now reviewed its strategy of investing in other CFAs and DBAs over the last six years.

In a trading update, RBG said one of these cases, nicknamed Project Shango, was worth £9.3m on its own, but the RBG board has now effectively written off that money after concluding the case will not be successful.

In light of this outcome, it was decided to write down the value of all remaining cases on the balance sheet – including those retained when LionFish was sold – to zero, making a total non-cash write-off of £13.3m.

RBG said the decision ‘simplifies and de-risks’ the group’s balance sheet. Any fees from future investments will be recorded as revenue.

The trading update states that the group’s current focus is on reducing net debt. Major shareholders have provided ‘clear feedback’ that their preference is for RBG to accelerate this process and as a result, the board is suspending dividends until net debt is at a ‘more sustainable level’.

The priority in the short term is to repay an outstanding loan of £6.5m, but the group’s revolving credit facility of £15m is also set for renewal next April.

Jon Divers, chief executive, said the exit from all litigation finance matters will ensure that time and resources are focused on the business’ core strengths.

He added: '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.’

Shares in RBG Holdings plc nosedived to 17.4p following yesterday’s announcement – the lowest ever recorded and a fraction of the 91.5p price a year ago. In this morning's trading they rallied 2% to 17.75p. 

 

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