LionFish Litigation Funding losses cause concern for Rosenblatt
The listed owner of law firm Rosenblatt is braced for a £4m hit after its litigation funding subsidiary suffered two damaging losses, its parent company told the stock exchange today.
RBG Holdings, the professional services group encompassing Rosenblatt and Memery Crystal, said its litigation finance business LionFish had lost two cases in which it had invested and the board has concluded that any further appeals on these cases are no longer viable.
In a statement to the London Stock Exchange, RBG said LionFish will now have a non-cash write-off of £4m in 2022 based on missing its previous £2.3m profit expectations. The actual loss associated with these case investments comes to around £1.1m.
The announcement had an immediate effect on RBG Holdings shares which fell 20% within a few hours to 66.5p. A year ago RBG shares were valued at 112.5p. By midday on Tuesday its price had recovered slightly to 69.5p.
Committed funding on ongoing LionFish cases is £3.3m over the next two years but that could change if the company feels further losses are likely, and the group is likely to ‘refocus’ in future on its professional services business, the statement continued.
RBG said: ‘The board has been reviewing its strategy with respect to third party litigation funding through LionFish with a view to reducing the group’s ongoing exposure to the remaining committed funding. The group expects to make a further announcement after the year-end.’
The struggle of the litigation finance arm is in contrast to the law firm businesses, which are said to have had a ‘robust performance year-to-date, despite the market headwinds’.
As a result, RBG is on track to exceed the board’s expectations for the full year and will post pre-tax profits of between £11m and £12m.
As a result of this performance, the group still intends to announce as planned a second interim dividend for the twelve months to 31 December 2022 in line with its policy of distributing up to 60% of retained profits.
Group chief executive Nicola Foulston, said:
‘I am very disappointed with the LionFish position. We are taking steps to address the ongoing exposure to this subsidiary. We will also look at the efficiency of the cost base so that in 2023 we continue to deliver strong cash generation and good yield.
‘I am pleased to see the robust trading of our professional services business, which follows a strong 2021 financial year. We are seeing the benefits of the integration of Memery Crystal and Rosenblatt with improved operating efficiency driving higher margins.'