RNS Number : 6146T
Manolete Partners PLC
16 November 2023
 

16 November 2023

 

MANOLETE PARTNERS PLC

("Manolete" or the "Company")

 

Half-year results for the six months ended 30 September 2023

Manolete (AIM:MANO), the leading UK-listed insolvency litigation financing company, today announces its unaudited results for the six months ended 30 September 2023.

 

Steven Cooklin, Chief Executive Officer, commented:

 

"It is pleasing to report another six months of strong growth in the business. A 21% increase in case completions and a 116% increase in new case investments has translated into a 104% increase in total revenues and positive profitability and EPS in the first half of the current trading year compared to the 6 months ended 30 September 2022. The prior period was negatively impacted by fair value write downs which were not repeated in H1 FY24.

 

"We ended the current half year reporting period with 417 live cases in-progress, 58% higher than at the same time last year. Our in-house Legal and Net Worth Reporting teams have been significantly expanded to address this current and anticipated strong increase in our business activities.

 

"The exceptional results that our team has already delivered on the Barclays Bounce Back Loan Pilot position us well to expand our work in this area, with the prospect of further potential work with Barclays and the launch of a separate pilot with another well-known bank".

 

Financial highlights:

 

·      Total revenues increased by 104% to £11.2m from H1 FY23 (£5.5m) as a result of both positive realised and unrealised revenue compared to a significant fair value write down in the prior year comparative.

·      Gross profit reported of £5.0m in this period, H1 FY24, compared to a £(2.2)m gross loss in H1 FY23.The primary drivers were:

positive realised and unrealised gross profit contributed in H1 FY24 whilst in the prior period, H1 FY23, was negatively affected by a write down in unrealised revenue; and

an increase in new cases signings (179 new cases H1 FY24, 83 H1 FY23).

·      EBIT profit of £1.6m has been achieved compared to a loss of £5.3m recorded in H1 FY23, a turnaround of £6.9m.

·      Profit Before Tax was £0.9m compared to a Loss Before Tax of £5.4m in H1 FY23.

·      Gross cash generated from completed cases decreased 45% to £8.7m (H1 FY23: £15.7m). However, as previously reported, the figure for H1 FY23 included an exceptionally large single case settlement of £9.5m. Excluding that large case, H1 FY24 was 40% higher than the £6.2m generated in H1 FY23.

·      Net assets as at 30 September 2023 were £39.8m (H1 FY23: £37.8m). Net Debt was £12.0m consisting of borrowings of £12.9m, offset by cash balances of £0.9m (H1 FY23: £9.4m consisting of a drawn down loan of £9.8m, offset by cash balances of £0.4m).

·      £12m of the £25m HSBC Revolving Credit Facility remains available for utilisation, as at 30 September 2023 (H1 FY23, £15m unutilised).

·      Basic earnings per share improved to positive 1.4 pence (H1 FY23: negative 10.2 pence).

·      No interim dividend is proposed (H1 FY23: £nil).

 

Operational and market highlights:

 

·      Ongoing delivery of realised returns: 116 case completions in H1 FY24 representing a 21% increase (95 case realisations in H1 FY23), generating gross settlement proceeds of £9.2m (H1 FY23: £18.3m), over an average duration of 11.5 months. As previously reported, H1 FY23 included an exceptionally large single case return of £9.5m. Excluding that large case, H1 FY24 gross settlement proceeds were 142% higher than the £3.8m generated in H1 FY23.

·      The average duration of the 116 case realisations in H1 FY24 was 11.5 months (H1 FY23: 14.9 months). This signifies a return to the Company's long established case duration of around 12.7 months, which had expanded temporarily due to the challenges presented by Covid.

·      Average money multiple (gross proceeds less the Insolvent Estate's share of the net returns, divided by the sum of the upfront payment to the Insolvent Estate and total legal costs and other expenses of the claim) of 2.3 times for the 116 cases completed in H1 FY24 (H1 FY23 2.2 times).

·      Average case duration across the full lifetime portfolio of 803 completed cases as at 30 September 2023 was 12.7 months (H1 FY23: 13.3 months).

·      New case investments increased by 116% to 179 (H1 FY23: 83 new case investments) as the higher level of insolvencies in the economy translated to higher new cases signed as well as the impact of the Barclays Bounce Back Loan Pilot (BBLs).

·      New case enquiries remained at elevated levels, increasing marginally from 341 in H1 FY23 to 348 in H1 FY24.

·      58% increase in live cases: 417 in process as at 30 September 2023 (264 as at 30 September 2022) which includes 53 live BBLs.

·      Excluding the Cartel cases, all vintages up to and including the 2019 vintage are now fully completed. Only seven cases remain open in the 2020 vintage. 76% of the Company's live cases have been signed in the last 18 months.

·      The Bounce Back Loan ("BBL") pilot with Barclays Bank covering a range of defaulted BBL cases continues to perform well. Starting in January 2023, the Company has now signed 80 Barclays BBL cases of which 27 have already been completed. The results of Manolete's recoveries in the pilot continue to be impressive, and the Company is engaging with Barclays to potentially extend our work with them. The Company is hopeful to shortly commence a separate BBL pilot with another well-known bank.

·      The truck Cartel cases continue to progress well. Following a positive judgment on the first test cases (Royal Mail and British Telecom), several similar (non-Manolete) UK truck cartel cases have now reached settlement. A marginal uplift to Manolete's fair value has been recorded in this interim period due to a reduction of forecast future costs relating to the smaller cases. A relatively minor appeal on the DAF/British Telecom case is listed for hearing in the Court of Appeal next month. Once that has concluded, the Board will be looking to move the Company's 22 truck related cartel cases forward to resolution.

·      In anticipation of further sustained high levels of activity in the UK insolvency sector, we have added significantly to our in-house Legal and Net Worth Reporting teams with several high-quality new joiners.

 

For further information, please contact:

Manolete Partners Plc

via Instinctif Partners

Steven Cooklin (Chief Executive Officer)




Peel Hunt (NOMAD and Broker)

+44 (0)20 7418 8900

Paul Shackleton




Instinctif Partners (Financial PR)

+44 (0)7949 939237

Tim Linacre

Isadora Pegler


 

 

Chief Executive Officer's Statement

 

Introduction

I am pleased to present our unaudited statements for the half year to 30 September 2023.

 

Manolete is the leading UK quoted company in the insolvency litigation finance market, a market which plays an important role in returning funds to creditors, particularly HMRC.

 

Performance

Following an extended period of almost two years, while the UK Government took action to temporarily supress UK insolvencies during the period of the Covid pandemic, the insolvency market returned to largely normal operations from April 2022. Since then, UK insolvencies in total, and Creditors Voluntary Liquidations ("CVLs"), in particular, are now at levels not seen since the 2008 financial crisis. Larger company insolvencies, which typically enter an insolvency process via Administration, are now also at least back to pre-pandemic levels.

 

Liquidators and Administrators will always require some time to undertake the necessary investigations into any insolvent company, before being in position to present potential litigation claims to third party funders. Therefore, it was not until the H2 FY23 period, that Manolete started to benefit from a significant increase in the level of its business. That resulted in the strong growth reported in that the second half of FY23. The financial results for H1 FY24 show a continuation of that strong growth across all KPIs of the Company, as well as a significant 104% increase in revenues compared to H1 FY23 and a return to profitability at the EBIT, pre-tax and post-tax levels compared to losses on all of those three measures for H1 FY23.

 

The first wave of insolvencies after April 2022 was driven by the sharply rising and sustained increase in CVLs. These generally represent smaller companies and therefore, typically, smaller claim values. This has resulted in an 18% lower average completion value per case in H1 FY24 (£79.3k per case) compared to H1 FY23 (£96.8k per case) (excluding the exceptionally large single case completion). It is only in the last seven months that the UK insolvency market has seen any sustained recovery to pre-pandemic levels of Administration appointments. As the insolvency market develops through the current business cycle, the Directors anticipate a return to higher average case sizes, reflecting a greater mix of larger company insolvencies.


Vintages Table

This table highlights some of the key features of Manolete's model:

1.     Consistently high IRRs across 803 completed cases.

2.     Fast case completions, at an average of 12.7 months per case (H1 FY23: 13.3 months per case) from the date of signing the investment agreement to the date that the case is legally completed. Cash tends to be collected, on average, over the following 12 months (H1 FY23 12 months).

3.     All cases completed for the 2019 vintage and earlier.

4.     Only seven of the 141 cases invested in 2020 remain open.

 

Case Vintages as at 30 September 2023

Case

 

No. of
investments

No.
completed

%
completion

No
outstanding

Open case investments

Closed case investments

Total
invested

Total
recovered

Total
gain

IP
share

Manolete
gain

 

Duration completed cases

ROI

MoM

IRR

Vintage

 

No

No

% total

No

£'000

£'000

£'000

£'000

£'000

£'000

£'000

 

Months

%

%

%

2010

2010

3

3

100%

0

0

52

52

28

(24)

10

(35)

 

7.0m

(67%)

.3x

0%

2011

2011

0

0

0

0

0

0

0

0

0

0

 

0.0m

0%

.0x

0%

2012

2012

8

8

100%

0

0

763

763

2,524

1,761

580

1,181

 

18.0m

155%

2.5x

258%

2013

2013

10

10

100%

0

0

174

174

780

606

316

290

 

7.1m

166%

2.7x

147%

2014

2014

42

42

100%

0

0

594

594

3,884

3,290

2,427

863

 

10.0m

145%

2.5x

455%

2015

2015

39

39

100%

0

0

1,404

1,404

7,029

5,625

3,290

2,335

 

12.8m

166%

2.7x

502%

2016

2016

36

36

100%

0

0

1,936

1,936

9,393

7,457

4,164

3,293

 

15.0m

170%

2.7x

180%

2017

2017

31

31

100%

0

0

1,446

1,446

4,469

3,023

1,905

1,118

 

14.1m

77%

1.8x

462%

2018

2018

29

29

100%

0

0

3,967

3,967

23,714

19,747

12,972

6,775

 

16.9m

171%

2.7x

71%

2019

2019

59

59

100%

0

0

2,745

2,745

14,855

12,110

7,528

4,582

 

17.4m

167%

2.7x

95%

2020

2020

141

134

95%

7

924

6,811

7,734

18,188

11,378

7,105

4,272

 

17.2m

63%

1.6x

80%

2021

2021

198

166

84%

32

1,442

7,216

8,658

22,855

15,639

8,444

7,195

 

13.8m

100%

2.0x

106%

2022

2022

159

121

76%

38

1,384

2,619

4,003

8,140

5,522

3,033

2,488

 

10.6m

95%

2.0x

223%

2023

2023

263

114

43%

149

1,837

1,453

3,290

8,078

6,626

3,341

3,286

 

5.6m

226%

3.3x

1994%

H1 2024

2024

179

11

6%

168

677

59

736

428

368

183

185

 

2.7m

312%

4.1x

2794%

Total (exc. Cartel cases)

 

1,197

803

67.1%

394

6,264

31,238

37,501

124,365

93,127

55,297

37,827

 

12.7m

121%

2.2x

131%

(i) The vintages table excludes 22 cartel cases and is net of deductions for bad debt provisions (excluding ECL provisions).

(ii) Ongoing cases includes partial realisations.

(iii) The large case completion in FY21 is presented net of discounting.

(iv) IRR's are presented for vintages where there are 12 or more months of historical cashflow information.



Strategy, Team and Outlook

The Company ended H1 FY24 with 417 live cases in-progress, a 58% increase over the previous period-end. The Directors believe that given the challenging prevalent economic environment, featuring high inflation, significantly higher interest rates and far higher levels of UK insolvencies, this elevated level of business activity is likely to continue for a significant period. To accommodate this much higher level of current and anticipated future activity, in the last 6 months, the Company has added two new expert in-house insolvency litigators to its in-house Legal Team, bringing the Legal Team up to 17 in total and added two further experienced staff to its Net Worth Report Team.

 

From January 2023, the Company started to take assignments of cases from the specialist recovery work it is undertaking with Barclays Bank on a range of defaulted Bounce Back Loans ("BBLs") issued by Barclays. By 30 September 2023, the Company had taken on 80 BBL such cases from the Barclays BBL pilot and had already completed 27 of those cases.  The Company is now in discussion with Barclays Bank regarding a potential extension of that programme. The Company is also hopeful to soon commence a separate BBL pilot with another well-known bank.

 

January 2023 also saw judgment handed down after the trials of the British Telecom and Royal Mail Truck Cartel cases. The judgment supports the Net Book Value of Manolete's truck cartel cases which is directly derived from the work done by the Company's retained specialist cartel valuation firm, Fideres Partners LLP. One of the defendants (DAF) has been granted permission to appeal on one out of its five heads of appeal. The appeal is due to be heard in the Court of Appeal next month. These initial test cases were then followed by a several similar claims settling, although, as is usual, the terms of the settlements are confidential. Currently the Company's 22 truck cartel claims remain stayed but once the DAF appeal has been concluded the Board will be looking to move all of the Company's truck cartel claims forward to a resolution.

 

Dividend

No interim dividend is proposed for the six months to 30 September 2023.

 

Steven Cooklin

Chief Executive Officer

 

 

Chief Financial Officer's Review

 

I am pleased to give my review of the Company's unaudited results for the half year to 30 September 2023.

 

Trading summary


6 months

ended 30 September

2023

6 months

ended 30

 September

2022

6 months

ended 31

March

2023


Unaudited

Unaudited

Unaudited


£'000s

£'000s

£'000s





Revenue

11,230

5,514

15,240

Cost of sales

(6,234)

(7,701)

(9,380)

Gross profit/(loss)

4,996

(2,187)

5,860

 

 

 

 

Administrative expenses

(3,436)

(3,071)

(3,724)

Operating profit/(loss)

1,560

(5,258)

2,136

 

 

 

 

KPI's

 

 

 

Gross profit margin %

44%

(40)%

38%

Operating profit margin %

14%

(95)%

14%

New cases (#)

179

83

180

Completed cases (#)

116

95

98

Live cases at period end (#)

417

264

 

The financial results for the 6 months to 30 September 2023 (H1 FY24) report an Operating profit of £1.6m (H1 FY23 £(5.3)m) which is a significant improvement on the same period last year. In the prior year, as previously reported in the H1 FY23 interim report and financial statements for the year to 31 March 2023, there was a significant write down in fair values resulting in an operating loss, which has not been required this period.  In H2 FY23, there was a strong recovery in trading performance that has been continued into H1 FY24.  

 

Operationally, the business performed strongly and completed 116 cases in the 6 month period to 30 September 2023 (95 cases, H1 FY23) and signed 179 new cases (83 new cases, H1 FY23) and continues to realise cash proceeds from both historic and current year completed cases. 

 

Revenue


6 months

ended 30 September

2023

6 months

ended 30

 September

2022

6 months

ended 31

March

2023


Unaudited

Unaudited

Unaudited


£'000s

£'000s

£'000s





Realised revenue

9,401

13,598

13,194

Unrealised revenue

1,829

(8,084)

2,045

Revenue

11,230

5,514

15,239

 

 

 

 

Mix %




Realised revenue

84%

247%

87%

Unrealised revenue

16%

(147%)

13%

 

Revenue increased from £5.5m in H1 FY23 to £11.2m in H1 FY24, an increase of 104%, which was a result of more normalised trading conditions in H1 FY24 compared to difficult market conditions resulting in a fair value write down in H1 FY23, hence the increase in unrealised revenue. We look at each realised and unrealised revenue separately:

 

Realised revenue decreased from £13.6m H1 FY23 to £9.4m in H1 FY24, a decrease of 31%. This was a result of a 'one-off' exceptionally large case being settled in H1 FY23 (Manolete share of revenue of £4.9m) which was not repeated in FY24. Case completions grew by 22% to 116 cases in H1 FY24 (H1 FY23: 95 cases) demonstrating a greater volume of case completions but lower average case completion value. When compared to H2 FY23, realised revenue decreased from £13.2m to £9.4m, H1 FY24, a result of lower average case completion value (£155k per case in H2 FY23 compared to £81k).

 

Unrealised revenue increased to £1.8m H1 FY24 compared with £(8.1)m in H1 FY23. As previously mentioned, the prior year period included an increased level of write-downs of existing live cases £(5.2)m which included a single case fair value write down of £(2.3)m following an adverse decision at trial. There were no such adverse trial decisions in FY24 or fair value write downs. H1 FY24 represents a return to 'normal' in terms of a net positive unrealised revenue figure.

 

Gross profit / (loss)


6 months

ended 30 September

2023

6 months

ended 30

 September

2022

6 months

ended 31

March

2023


Unaudited

Unaudited

Unaudited


£'000s

£'000s

£'000s





Realised gross profit

3,167

5,897

3,812

Unrealised gross profit

1,829

(8,084)

2,048

Gross profit / (loss)

4,996

(2,187)

5,860

 

 

 

 

 




Margin %




Realised gross profit

34%

43%

29%

Unrealised gross profit

100%

(100)%

100%

Gross profit margin %

44%

(40)%

38%

 

Gross profit increased from £(2.2)m in H1 FY23 to £5.0m in H1 FY24, primarily due to the positive contribution of newly signed cases in comparison to the reduction in the fair value of cases in the prior year. Once again, we should review realised and unrealised gross profit separately.

 

Realised gross profit decreased to £3.2m H1 FY24 (£5.9m H1 FY23), due to the single large case completion in the prior year but partially offset by a higher number of case completions. Realised gross profit margin decreased to 34% H1 FY24 from 43% H1 FY23.

 

Unrealised gross profit of £1.8m H1 FY24 is as previously discussed under revenue above, a return to more 'normal' unrealised figures following a reduction in the fair value of live cases in the prior year. When unrealised revenue is compared to the six months to 31 March 2023, H2 FY23, lower value cases on average have been signed in H1 FY24 resulting in a marginally lower unrealised revenue, £1.8m versus £2.0m.  

 

Administrative expenses

Administrative expenses increased by 9.7% to £3.4m in the six months to 30 September 2023 (H1 FY23: £3.1m) which is principally attributable to an increase in staff costs by £328k, a result of both annual staff salary increases and additional headcount as staff numbers are increased to be line with increased volumes of cases.

 

Increases in marketing expenses (increased marketing activity) and professional fees (inflation) were broadly offset by a decrease in bad debt expenses in this period.

 

When compared to the 6 month period to 31 March 2023, Administration expenses have decreased by £287k, a result of lower bad debt charges in this 6 month period.

 

Statutory operating profit/(loss) Earnings Before Interest and Tax

Operating profit/(loss) increased to £1.6m in H1 FY24 (H1 FY23: £(5.3)m) with an operating profit margin of 14% (H1 FY23: (95)%).

 

Finance costs

Finance costs increased to £647k in H1 FY24 (H1 FY23: £205k) as base rate interest rates have significantly increased in the 6 month period to 30 September 2023, as well as our debt draw down increasing in the period.

 

Dividend

No interim dividend is proposed for FY24 (FY23 interim dividend, nil).

 

Investment in cases

The Company was managing 417 live case investments (including Cartel cases) as at 30 September 2023, compared to 264 live cases (including Cartel cases) as at 30 September 2022, a 58% increase. The total investment in cases amounted to £39.4m at 30 September 2023, an increase of 9.1% from the value as at 30 September 2022 of £36.2m (31 March 2023 value of £36.5m).

 

Investments in cases are shown at fair value, based on the Company's estimate of the likely future realised gross profit. Management, following discussion with the in-house legal team, on a case by case basis, amend the valuations of cases each month to accurately reflect management's view of fair value. In addition, at the interim and year end reporting periods, a sample of material valuations are corroborated with the external lawyers working on the case who provide updated legal opinions as to the current status of the case. The Company does not capitalise any of its internal costs, these are fully expensed to the Statement of Comprehensive income.

 

Trade and other receivables

Trade and other receivables have increased marginally to £24.3m at 30 September 2023 compared with £22.3m at 30 September 2022. This amount is net of provision for bad debts.

 

Operational cashflows


6 months

ended 30 September

2023

6 months

ended 30

 September

2022

6 months

ended 31

March

2023


Unaudited

Unaudited

Unaudited


£'000s

£'000s

£'000s





Gross cash receipts

8,739

15,716

10,992

IP share & legal costs on completed cases

(4,163)

(8,084)

(5,126)

Cashflows from completed cases

4,576

7,632

                          5,866





Overheads

(3,112)

(2,584)

(2,974)

Net cash generated from operations before investment in cases and corporation tax

1,464

5,048

2,892





Corporation tax

-

(354)

-

Investment in cases

(3,193)

(2,803)

(2,935)

Net cash (used in) / generated from operations

(1,729)

1,891

(43)

 

Gross cash receipts of £8.7m in H1 FY24 (£15.7m H1 FY23) represents a decrease in cash generation in comparison with H1 FY23. This is due to the exceptionally single large case completion in the prior year for which cash of £9.5m was collected within the same month. If the exceptional case is removed from prior year cash generation figures, a prior year comparative of £6.2m is a more understandable comparison to the current period, £8.7m cash generation.  

 

In the six months to 31 March 2023, there was also a net cash outflow a result of the increased investment in new cases signed.

 

Cash generation was positive after payment of IP share and external legal costs on those completed cases and after payment of overheads of £(3.1)m.

 

We continue to utilise both our cash resources and draw down of HSBC loan facility to invest in new and existing cases, with a cash investment of £3.2m (£2.8m H1 FY23) in the six-month period.    

 

Debt financing

The Company has drawn down £13.0m (£9.8m H1 FY23) of its £25.0m HSBC loan facility as at 30 September 2023 and continues to deploy loan capital to finance investment in cases. During H1 FY24 the Company drew down a net £2.5m of its HSBC loan facility (repaid £3.5m H1 FY23). The Company held cash reserves of £0.9m as at 30th September 2023 and had £12.0m available of the £25.0m HSBC facility (£15.0m available at 30th September 2022). This facility and cash reserves will be used to fund the expected growth in case volumes following the full relaxation of the Temporary Measures on 1 April 2022. 

 

There has been a breach in the interest cover and leverage covenants for the 30th September 2023 quarter for which HSBC have signed a waiver. Management are working with HSBC in order to put in place a long term covenant solution.

 

Mark Tavener

Chief Financial Officer

 

Unaudited Statement of Comprehensive Income for the period ended 30 September 2023

 

 

 

6 months ended 30 September 2023

 

6 months ended 30 September 2022

Year

ended 31 March

2023

 

 

Unaudited

 

Unaudited

Audited

 

Note

£'000s

 

£'000s

£'000s

 






Revenue

3

11,230


5,514

20,753







Cost of sales


(6,234)


(7,701)

(17,081)

Gross Profit / (Loss)


4,996

 

(2,187)

3,672







Administrative expenses

4

(3,436)


(3,071)

(6,793)

Operating Profit / (Loss)


1,560

 

(5,258)

(3,121)

 


 

 

 

 

Finance income


7


2

7

Finance expense

5

(647)


(205)

(839)

Profit / (Loss) before tax

 

920

 

(5,461)

(3,953)







Taxation


(295)


1,020

829

Profit / (Loss) and total comprehensive income for the year attributable to the equity owners of the Company


625

 

(4,441)

(3,124)

 


 

 

 

 

Earnings per share attributable to equity owners of the Company


 

 

 

 

 


 

 

 

 

Basic (£ per share)

11

£0.01


£(0.10)

£(0.07)

Diluted (£ per share)

11

£0.01


£(0.10)

£(0.07)

 

The above results were derived from continuing operations.

 

 


Unaudited Statement of Financial Position at 30 September 2023

 

Company Number: 07660874

 

 30 September 2023

 

Restated     30 September 2022

 31 March 2023

 

 

Unaudited

 

Unaudited

Audited

 

Note

£'000s

 

£'000s

£'000s

Non-current assets






Investments

6

13,530


13,198

13,389

Intangible assets


-


2

-

Trade and other receivables

9

11,606


12,952

12,315

Deferred tax asset


137


104

267

Total non-current assets


25,273


26,256

25,971

 






Current assets






Investments

6

25,905


22,964

23,073

Trade and other receivables

9

12,700


9,366

12,063

Corporation tax asset


470


979

735

Cash and cash equivalents


949


359

636

Total current assets


40,024


33,668

36,507







Total assets

 

65,297

 

59,924

62,478

 






EQUITY AND LIABILITIES






Equity


 

 

 

 

Share capital


175


175

175

Share premium


157


157

157

Share based payment reserve


742


485

699

Special reserve


-


5

-

Retained earnings


38,755


37,027

38,130

Total equity attributable to the equity owners of the company


39,829


37,849

39,161



 

 

 

 

Non-current liabilities


 

 

 

 

Trade and other payables

10

7,019


7,749

7,393

Borrowings


12,928


9,833

10,381

Total non-current liabilities


19,947


17,582

17,774



 

 

 

 

Current liabilities






Trade and other payables

10

5,521


4,493

5,543

Current tax liabilities


-


-

-

Total current liabilities


5,521


4,493

5,543

Total liabilities


25,468


22,075

23,317

 






Total equity and liabilities


65,297

 

59,924

62,478

 

The interim statements were approved by the Board of Directors and authorised for issue on 14 November 2023.

 

 


Unaudited Statement of Changes in Equity for the period ended 30 September 2023

 


Attributable to equity owners of the Company


Share Capital

Share Premium

Share based payment reserve

Special Non-distributable reserve

Retained Earnings

Total Equity


£000s

£000s

£000s

£000s

£000s

£000s







 

As at 1 April 2022 (unaudited)

175

142

429

5

41,468

42,219

 






 

Comprehensive Income






 

Profit and total comprehensive income

-

-

-

-

(4,441)

(4,441)








Transactions with owners







Share based payment expense

-

-

49

-

-

49

Share based payments exercised


15




15

Deferred tax on share-based payments

-

-

7

-

-

7

Dividends

-

-

-

-

-

-

As at 30 September 2022 (unaudited)

175

157

485

5

37,027

37,849

 

 

 

 

 

 

 

Comprehensive Income

 

 

 

 

 

 

Profit and total comprehensive income

-

-

-

-

1,317

1,317

 

 

 

 

 

 

 

Transactions with owners

 

 

 

 

 

 

Share based payment expense

-

-

101

-

-

101

Share based payments exercised

-

-

-

-

-

-

Deferred tax on share-based payments

-

-

113

-

-

113

Transfer in relation to creditors paid

-

-

-

(5)

5

-

Dividends

-

-

-

-

(219)

(219)

As at 31 March 2023 (audited)

175

157

699

-

38,130

39,161

 

 

 

 

 

 

 

Comprehensive Income

 

 

 

 

 

 

Profit and total comprehensive income

-

-

-

-

625

625

 







Transactions with owners







Share based payment expense

-

-

144

-

-

144

Share based payments exercised

-

-

-

-

-

-

Deferred tax on share-based payments

-

-

(101)

-

-

(101)

Dividends

-

-

-

-

-

-








As at 30 September 2023 (unaudited)

175

157

742

-

38,755

39,829

 

 


Unaudited Statement of Cashflows for the period ended 30 September 2023

 


 

6 months ended 30 September 2023

 

6 months ended 30 September 2022

Year ended 31 March 2023


 

Unaudited

 

Unaudited

Audited


Note

£'000s

 

£'000s

£'000s

 

 

 




Profit / (Loss) before tax


920


(5,461)

(3,953)

 






Adjustments for other operating items:






Adjustments for non-cash items

8

4,895


12,723

15,554

Operating cashflows before movements in working capital


5,815


7,262

11,601







Changes in working capital:






Net increase / (decrease) in trade and other receivables


72


(2,044)

(4,105)

Net (decrease) / increase in trade and other payables


(531)


(170)

512

Net cash generated from operations before corporation tax and investment in cases


5,356


5,048

8,008







Corporation tax paid


-


(354)

(353)

Investment in cases

6

(7,085)


(2,803)

(5,806)

Net cash (used in) / generated from operating activities


(1,729)


1,891

1,849

 






Cash flows from investing activities












Finance income received


7


2

7

Net cash generated from investing activities

 

7

 

2

7

 






Cash flows from financing activities












Proceeds from borrowings


2,500


1,000

2,750

Repayments made on borrowings


-


(4,500)

(5,750)

Dividends paid


-


-

(219)

Interest paid


(464)


(193)

(160)

Loan arrangement fees


-


-

-

Lease repayment


-


(97)

(97)

Net cash generated from / (used in) financing activities

 

2,036

 

(3,790)

(3,476)







Net increase / (decrease) in cash and cash equivalents

 

313

 

(1,897)

(1,620)







Cash and cash equivalents at the beginning of the year


636


2,256

2,256

Cash and cash equivalents at the end of the period

 

949

 

359

636

 

 


Unaudited notes to the financial statements for the period ended 30 September 2023

 

1    Company information

 

Manolete Partners PLC (the "Company") is a public company limited by shares incorporated in England and Wales. The Company is domiciled in England and its registered office is 2-4 Packhorse Road, Gerrards Cross, Buckinghamshire, SL9 7QE. The Company's ordinary shares are traded on the AIM Market.

 

The principal activity of the Company is that of acquiring and funding insolvency litigation cases.

 

2    Accounting policies

 

(a)    Basis of preparation

 

The half-yearly financial statements do not constitute statutory accounts within the meaning of Section 434 of the Companies Act 2006.

 

The interim condensed financial statements for the six months ended 30 September 2023 have been prepared in accordance with IAS 34 Interim Financial Reporting. The interim condensed consolidated financial statements do not include all the information and disclosures required in the annual financial statements, and should be read in conjunction with the Company's annual financial statements as at 31 March 2023.

The statutory accounts for the year ended 31 March 2023 have been filed with the Registrar of Companies at Companies House. The auditor's report on the statutory accounts for the year ended 31 March 2023 was unqualified and did not contain any statements under Section 498 (2) or (3) of the Companies Act 2006.

 

(b)    Going concern

 

The interim financial statements relating to the Company have been prepared on the going concern basis.

 

Whilst the Company breached its covenant tests in respect of Interest cover and Leverage for the quarter to 30th September 2023, a covenant waiver had been agreed at period end with HSBC and signed in respect of this breach. Furthermore, the Company is in discussion with HSBC in relation to resetting the covenants on the loan facility to reflect the current position and requirements of the Company.

 

After making appropriate enquires, the Directors of the Company have a reasonable expectation that the Company has adequate resources to continue in operational existence for the foreseeable future and for at least one year from the date of the signed interim financial statements. In reaching this conclusion, the Directors have considered the position with respect to covenant compliance, short-term cash forecast, the general environment with respect to number of insolvencies in the UK economy and ongoing discussion with HSBC respect to future covenant tests. We refer you to the 'Debt financing' paragraph within the CFO statement.  For these reasons, they continue to adopt the going concern basis in preparing the Company's interim financial statements.

 

(c)    Revenue recognition

 

Revenue comprises two elements: the movement in fair value of investments and realised consideration.

 

Realised consideration occurs when a case is settled, or a Court judgement received. This is an agreed upon and documented figure.

 

The movement in the fair value of investments is recognised as Unrealised gains within Revenue. This is management's assessment of the increase or decrease in valuation of an open case, the inclusion of value for a new case and the removal of the fair value of a completed case. These valuations are estimated following the progress of a case towards completion and also reflect the judgement of the legal team working on the case (see Note 2(d). Significant Judgements and Estimates). Hence, unrealised revenue is the movement in the fair value of the investments in open cases over a period of time.

 

When a case is completed the carrying value is a deduction to unrealised income and the actual settlement value is recorded as realised revenue.

 

Revenue recognition differs between a purchased case, where full recognition of the settlement is recognised as revenue (including the insolvent estate's share) and a funded case where only the Company's share of a settlement is recognised as revenue. This differing treatment arises because the Company owns the rights to the purchased case.

 

As revenue relates entirely to financing arrangements, revenue is recognised under the classification and measurement provisions of IFRS 9.

 

(d)    Significant judgements and estimates

 

The preparation of the Company's interim financial statements in accordance with UK adopted International Accounting Standards requires the Directors to make estimates and assumptions that affect the reported amounts of assets and liabilities at the statement of financial position date, amounts reported for revenues and expenses during the period, and the disclosure of contingent liabilities at the reporting date. However, uncertainty about these assumptions and estimates could result in outcomes that could require a material adjustment to the carrying amount of the assets or liabilities affected in the future.

 

Estimates and judgements are continually evaluated and are based on historical experiences and other factors, including expectations of future events that are believed to be reasonable under the circumstances.

 

The Company makes estimates and assumptions concerning the future. The resulting accounting estimates will, by definition, seldom equal the related actual results. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are detailed below.

 

Valuation of investments

 

Investments in cases are categorised as fair value through profit and loss. Fair values are determined on the specifics of each investment and will typically change upon an investment progressing through a key stage in the litigation or arbitration process in a manner that, in the Directors' opinion, would result in a third party being prepared to pay an amount different to the original sum invested for the company's rights in connection with the investment. Due to the nature of Manolete's business model, an unrealised fair value gain will be recognised on initial investment in a case. Thereafter positive material progression of an investment will give rise to an increase in fair value and an adverse progression a decrease.

 

The key stages that an individual case passes through typically includes: initial review carried out by in house legal team and presented to the investment committee to decide whether to make a purchase or funding offer. External solicitors are instructed and a letter before claim to include notice of assignment or funding is sent to the opposing party. The opposing party is invited to make payment or proposals for payment or to engage in ADR (Alternative Dispute Resolution). In the absence of a satisfactory response proceedings may be issued. The progress of a case feeds into the Directors' valuation of that case each month, as set out below. 

 

In accordance with IFRS 9 and IFRS 13, the Company is required to estimate the fair value of open cases at the half year and year end reporting periods, at 30 September and 31 March each year. The Company undertakes the following steps:

 

·      On a monthly basis, a spreadsheet of each team member's individual case valuations is provided to the internal lawyer for confirmation. Following responses from the individual lawyers, the Directors then adjust case fair values depending upon objective case developments, for instance: an offer to settle, mediation agreed, positive or negative legal advice. These adjustments to fair value may result in an increase or decrease in value or no change required.

·      At reporting period ends, written assessments are obtained for a sample of open case investments from external solicitors or primary counsel working on the case on behalf of Manolete.

 

In all cases, a headline valuation is the starting point of a valuation from which a discount is applied to reflect legal advice obtained, strength of defendant's case, the likely amount a defendant might be able to pay to settle the case, progress of the case through the legal process and settlement offers.  

 

3   Segmental reporting

 

During the six months ended 30 September 2023, revenue was derived from cases funded on behalf of the insolvent estate and cases purchased from the insolvent estate, which are wholly undertaken within the UK. Where cases are funded, upon conclusion, the Company has the right to its share of revenue; whereas for purchased cases, it has the right to receive all revenue, from which a payment to the insolvent estate is made. Revenue arising from funded cases and purchased cases are considered one business segment and are considered to be the one principal activity of the Company. All revenues derive from continuing operations and are not seasonal in nature.

 

Net realised gains on investments in cases represents realised revenue on completed cases.

 

Fair value movements include the increase / (decrease) in fair value of open cases, the removal of the carrying fair value of realised cases (in the period when a case is completed and recognised as realised revenue) and the addition of the fair value of new cases.

 


6 months ended 30 September 2023

 

6 months ended 30 September 2022

Year

ended 31 March

2023


Unaudited

 

Unaudited

Audited


£'000s

 

£'000s

£'000s


 

 

 

 

Net realised gains on investments in cases

9,402


13,598

26,790

Fair value movements (net of transfers to realisations)

1,828


(8,084)

(6,037)

Revenue

11,230

 

5,514

20,753

 

 

 

 

 

Arising from:

 

 

 

 

Purchased cases

12,034

 

5,399

15,321

Funded cases

(804)

 

115

5,432

Revenue

11,230

 

5,514

20,753

 


4     Analysis of expenses by nature

Internal legal costs are included within administrative expenses whereas external legal costs are either capitalised as Investments for open cases or recognised as cost of sales on completed cases. The breakdown by nature of administrative expenses is as follows:


6 months ended 30 September 2023

 

6 months ended 30 September 2022

Year

ended 31 March

2023


Unaudited

 

Unaudited

Audited


£'000s

 

£'000s

£'000s

Staff costs, including pension and healthcare costs                                                                                         

2,155

 

1,827

3,737

Bad debts including expected credit losses

359

576

1,534

Professional fees

312

211

512

Marketing costs

232

169

344

Other costs, including office costs

378

288

666

Total administrative expenses                                                            

3,436

 

3,071

6,793

 


5     Finance expense


6 months ended 30 September 2023

 

6 months ended 30 September 2022

Year

ended 31 March

2023


Unaudited

 

Unaudited

Audited


£'000s

 

£'000s

£'000s

Lease liability interest

-

 

1

1

Interest on bank borrowings

548

 

103

251

Bank loan charges

99

 

101

587

Total finance costs

647

 

205

839

 


6    Investments 

Investments represent the expected gross profit generated on the Company's ongoing portfolio of cases on settlement. This incorporates the expected settlement less the costs incurred to initially purchase the claim, costs incurred to date, expected future costs, and the share of net gain due to the Insolvency Practitioner. 

 

 

6 months ended 30 September 2023

 

6 months ended 30 September 2022

Year

ended 31 March

2023


Unaudited

 

Unaudited

Audited


£'000s

 

£'000s

£'000s

Investments brought forward

36,462


45,718

45,718

Additions

7,085


2,803

5,806

Realisations

(5,940)


(4,275)

(9,025)

Fair value movement (net of transfers to realisations)

1,828


(8,084)

(6,037)

Total investments

39,435

 

36,162

36,462

 

 

 

 

 

Current

25,905

 

22,964

23,073

Non-current

13,530

 

13,198

13,389

Total investments

39,435

 

36,162

36,462

 


7   Analysis of fair value movements

 

6 months ended 30 September 2023

 

6 months ended 30 September 2022

Year

ended 31 March

2023

 

Unaudited

 

Unaudited

Audited


£'000s


£'000s

£'000s

New case investments

7,150


3,207

9,659

Increase in existing case fair value (exc. cartel cases)

506


367

134

Decrease in existing case fair value (exc. cartel cases)

(2,794)


(5,242)

(2,519)

Case completions

(3,175)


(7,416)

(14,503)

Increase in fair value attributable to Cartel cases

141


1,000

1,192

Fair value movement (net of transfers to realisations)

1,828

 

(8,084)

(6,037)

 


8   Non-cash adjustments to cashflows generated from operations

 

6 months ended 30 September 2023

 

6 months ended 30 September 2022

Year

ended 32 March

2023

 

Unaudited

 

Unaudited

Audited

 

£'000s

 

£'000s

£'000s

Fair value movements (net of transfers to realisations)

(1,828)


8,084

6,037

Legal costs on realised cases

5,939


4,275

9,024

Finance expense

647


205

236

Depreciation & amortisation

-


96

99

Share based payments

144


65

260

Deferred tax

-


-

(95)

Finance income

(7)


(2)

(7)

Non-cash adjustments to cashflows generated from operations

4,895

 

 

12,723

 

15,554

 


9   Trade and other receivables


30 September 2023

 

Restated        30 September 2022

 31 March

2023


Unaudited

 

Unaudited

Audited


£'000s

 

£'000s

£'000s

Amounts falling due in more than one year:

 

 

 

 

Trade receivables                                   

Contract asset

9,150

2,456


11,310

1,642

10,270

2,045

Trade and other receivables due in more than one year

11,606

 

12,952

12,315






Amounts falling due within one year:





Gross trade receivables

18,011


12,316

16,505

Less:





Specific provisions

(2,873)


(1,961)

(2,881)

Allowance for expected credit loss

(2,577)


(1,199)

(1,794)

Trade receivables                                   

12,561


9,156

11,830






Prepayments

139

 

210

233

Trade and other receivables due within a year

12,700

 

9,366

12,063

 


10 Trade and other payables


 30 September 2023

 

Restated        30 September 2022

 31 March

2023


Unaudited

 

Unaudited

Audited


£'000s

 

£'000s

£'000s

Amounts falling due in more than one year:





Accruals - direct costs

Contract liability

5,314

1,705


6,624

1,125

5,982

1,411

Total trade and other payables due in excess of one year

7,019

 

7,749

7,393






Amounts falling due within one year:





Trade payables

611


736

802

Accruals - direct costs

4,226


3,280

3,984

Other creditors

562


371

645

Other taxation and social security

122


106

112

Total trade and other payables due in one year

5,521

 

4,493

5,543

 


11   Earnings per share

The Basic Earnings Per Share is calculated by dividing the profit attributable to ordinary equity holders by the weighted average number of ordinary shares outstanding during the period. Diluted Earnings Per Share is calculated by dividing the profit after tax by the weighted average number of shares in issue during the period, adjusted for potentially dilutive share options. The following reflects the income and share data used in the earnings per share calculation:


6 months ended 30 September 2023

 

6 months ended 30 September 2022

Year

ended 31 March

2023


Unaudited

 

Unaudited

Audited


£'000s

 

£'000s

£'000s


 

 

 

 

Profit and total comprehensive income for the period attributable to the equity owners of the Company

625


(4,441)

(3,255)






Weighted average number of ordinary shares

43,761,305


43,746,459

43,756,351

Basic Earnings Per Share

£0.01

 

£(0.10)

£(0.07)






Diluted weighted average number of ordinary shares

45,975,328


45,218,368

45,442,219

Diluted Earnings Per Share

£0.01

 

£(0.10)

£(0.07)

 

 


12   Restatement of Statement of Financial Position

 

The contract asset and contract liability balances relate to the discount unwinding on the present value of the receivable and accrued IP costs from the large case that completed in FY21. Following a review of the contractual terms of the contract asset and liability, the directors concluded that these balances should have been presented as long term. The adjustments to the Statement of Financial Position as at 30 September 2022 are shown below. This had no impact upon the Statement of Comprehensive Income, Statement of Changes in Equity or Statement of Cash Flows in the current or prior financial year.

?

 

Statement of Financial Position as at 30 September 2022


Previously reported at 30 September 2022

 

Adjustment

As restated at 30 September 2022


 

 

 

 


£'000s

 

£'000s

£'000s

Non-current assets

 

 

 

 

Trade and other receivables

11,310


1,642

12,952

 





Current assets





Trade and other receivables

11,008


(1,642)

9,366

 

 

 

 


Non-current liabilities





Trade and other payables

6,624


1,125

7,749

 

 

 

 

 

Current liabilities

 

 

 

 

Trade and other payables

5,618

 

(1,125)

4,493

 

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