RBG Holdings PLC

Collapse vs SkinBioTherapeutics’ Strategic Expansion - We are asked

Two Diverging Paths: RBG Holdings’ Collapse v SkinBioTherapeutics’ Strategic Expansion

A few readers have recently contacted the ‘old duffer’ to ask for his thoughts on RBG Holdings. He has passed the buck onto me. Ain’t I the blessed one! I’ll spare their blushes—particularly as one echoes the views of Mr Tom Winnifrith, aka Mr Angry, namely that the company’s downfall stemmed from a misplaced focus on diversity. One party raised concerns over the strategic acquisition SkinBioTherapeutics has undergone with Dermatonics and Bio-Tech Solutions, fearing similar net debt woes. Frankly, this is obscured in the extreme.

The reality, however, is far less ideological and far more damning. RBG Holdings’ collapse into administration in January 2025—following a 99% share price decline from its 2021 peak—was driven by systemic financial mismanagement, governance failures, and strategic blunders. Diversity initiatives were, at best, incidental to the company’s demise.

By contrast, SkinBioTherapeutics has undergone a fundamental transformation, shifting from an R&D-focused biotech into a revenue-generating commercial entity through the strategic acquisitions of Dermatonics and Bio-Tech Solutions. While some investors have raised concerns about debt accumulation, these worries appear misplaced when viewed in the context of the company’s structured approach to financing and immediate earnings accretion, which should improve in the second year and beyond.

We could, of course, argue that the ladies running the marketing team are not merit-based hires, but that would be harsh at this stage, given the limited funding for effective marketing. I have little doubt that this will change this year.

RBG Holdings: A Case Study in Corporate Mismanagement

Financial Mismanagement

• Litigation Funding Debacle: The £4m write-off from its LionFish litigation arm in 2023 triggered a liquidity crisis, with losses accelerating to £5.7m in H1 2024. By year-end, annual revenue had fallen 13% to £39.2m.

• Acquisition Overreach: The £30m purchase of Memery Crystal (2021) and the £22m acquisition of Convex Capital (2019) failed to generate synergies, leaving RBG with £25.6m in net debt by 2023.

Governance Failures

• Founder Feud: Major shareholder Ian Rosenblatt (20.5%) publicly clashed with CEO Jon Divers, filing a winding-up petition in January 2025 after RBG terminated his consultancy over allegations he had secretly acquired rival firm Rosenblatt Law Ltd.

• Leadership Instability: Four CEO changes since 2023, including Nicola Foulston’s £500k wrongful dismissal settlement, and the resignation of long-serving NED Patsy Baker amid refinancing negotiations.

This level of sheer incompetence brings to mind the kind of reckless bravado you'd expect in an episode of Suits—where lawyers strut around, hurling legal jargon, and casually tossing in non-compete clauses like confetti at a wedding. Of course, I’ll spare you any mention of Meghan Markle, Father—wouldn’t want to start that debate on these pages.

Strategic Missteps

• Failed Restructuring: Attempts to sell the Rosenblatt-branded business back to its founder collapsed, while solvent sale discussions with third parties proved fruitless.

• Market Confidence Erosion: Shares plummeted from 160p (2021) to 0.89p before suspension, with market cap shrinking from £41m to just £2.2m.

Well, of course. What do you expect when legal eagles wash their dirty linen in public?

Diversity v Performance

While RBG had female leadership—including former CEO Nicola Foulston and Chair Marianne Ismail—the key failures were financial and strategic:

• Baker, as remuneration committee chair, approved £3.6m in 2023 director pay amid spiralling losses. Mr Angry would have cheered this on!

• Ismail presided over the ill-fated Memery Crystal acquisition and the failed Rosenblatt sale process.
  However, male-led decisions were just as disastrous—Rosenblatt’s secret law firm setup and Divers’ inability to stabilise operations were pivotal in the collapse.

Ultimately, as Mr Angry puts it, RBG’s fate was sealed by "£36 million war chest into a £25 million black hole in just seven years." It was a story of poor capital allocation, weak governance, and strategic misjudgment—not corporate diversity.

SkinBioTherapeutics: A Model of Disciplined Growth

While RBG’s downfall highlights the perils of unchecked expansion and poor financial discipline, SkinBioTherapeutics’ recent acquisitions demonstrate a very different approach to corporate growth. Some investors have expressed concerns that the acquisitions of Dermatonics and Bio-Tech Solutions could saddle the company with excessive debt, but these fears seem unwarranted.

The Debt Question: Sensible Leverage or Risky Bet?

It is not uncommon for investors to react warily to debt-funded expansion, particularly in small-cap biotech, where capital discipline is often the difference between long-term success and financial distress. However, SkinBioTherapeutics has structured its financing in a way that ensures any debt taken on is effectively self-funding through operational cash flow. However, this has come at a cost of around a 20% dilution.

Financial Strength Post-Acquisition

• Dermatonics Acquisition (January 2024):

  • £1.68m upfront payment

  • £1.25m earn-out, initially funded via convertible bond (later scrapped due to shareholder dilution concerns)

• Bio-Tech Solutions Acquisition (October 2024):

  • £1.25m total cost, financed via:

    • £950k loan from long-term shareholder David Brierwood

    • £250k equity placement

Revenue Growth & Financial Stability

Post-acquisition, SkinBioTherapeutics has:

• £800k in cash reserves

• Annualised FY25 revenue of £6.3m—a 24x increase over pre-acquisition forecasts

• Positive EBITDA from both acquisitions:

  • Dermatonics: £422k EBITDA in 2024

  • Bio-Tech Solutions: £900k projected FY25 EBITDA

• Projected cash flow positivity from FY25

• Operational cost savings of 32% from in-house manufacturing synergies

Strategic Context

While the initial convertible notes raised eyebrows, the restructured financing and immediate financial benefits have alleviated leverage concerns. The two deals have added £3m in combined FY25 revenue and £1.3m EBITDA, ensuring that the debt is effectively serviced through operational cash flows. With a cash runway extending to mid-2026 and no further capital raises planned, the group’s net debt position stands at just 16% of projected FY25 EBITDA—a highly manageable ratio for a growth-focused biotech firm.

As CEO Stuart Ashman has emphasised, the transition from an R&D entity to a commercial business with a £6.3m revenue base (without Croda recurring tierd roalties) justifies the tactical use of leverage, particularly given the acquisitions' role in securing GMP manufacturing infrastructure and NHS distribution channels.

A Tale of Two Companies

The contrasting fates of RBG Holdings and SkinBioTherapeutics illustrate two very different approaches to corporate expansion. RBG Holdings, once a high-flying professional services firm, ultimately collapsed under the weight of poor capital allocation, excessive executive pay, and governance failings. By contrast, SkinBioTherapeutics has executed a disciplined, accretive acquisition strategy, balancing growth with financial sustainability.

For investors, the lesson is clear: debt, when used strategically, can be a powerful tool for expansion—but when mismanaged, it can lead to ruin. SkinBioTherapeutics has positioned itself as a serious commercial entity with strong revenue visibility, whereas RBG Holdings serves as a cautionary tale of unchecked ambition gone wrong.

For those seeking exposure to growth-stage companies, the difference between strategic execution and financial recklessness has rarely been so stark.

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