REG - Manolete Partners - Audited results for the year ended 31 March 2024
03/09/2024 07:00
For best results when printing this announcement, please click on link below:
http://newsfile.refinitiv.com/getnewsfile/v1/story?guid=urn:newsml:reuters.com:20240903:nRSC6155Ca&default-theme=true
RNS Number : 6155C Manolete Partners PLC 03 September 2024
3 September 2024
MANOLETE PARTNERS PLC
("Manolete" or the "Company")
Audited results for the year ended 31 March 2024
Strong momentum continues with significant macro-economic tailwinds supporting
continued growth.
Manolete (AIM:MANO), the leading UK-listed insolvency litigation financing
company, today announces its audited results for the year ended 31 March 2024.
Steven Cooklin, Chief Executive Officer, commented:
"These annual results show that Manolete has now recovered strongly from the
UK Government's suppression of the UK insolvency sector that prevailed during
the Covid period. The Company has returned to profitability and has continued
its track record of consistent operational cash generation. That has been
driven by a record number of 251 case completions in FY24.
The trading results for the new financial year, which commenced on 1 April
2024, clearly show that this positive momentum has continued: year to date,
new case enquiries are running 22% ahead of FY24 and our in-house legal team
has already completed 116 cases with an aggregate value of £11.8m (compared
to this stage last year, where we had completed 93 cases for a total value of
£6.3m). This is also reflected in our gross cash receipts where we have
already collected £10.3m in the first five months of this financial year,
compared to £8.7m for the whole six-month, first half period of the previous
financial year.
"Widely reported, challenging, multiple, macro-economic factors including:
high interest rates, persistent inflationary threats, stretched Government
balance sheets and global conflicts, provide strong tailwinds and significant
momentum for further growth. As the clear market leader in the UK insolvency
litigation finance sector, the Company is exceptionally well positioned to
take advantage of these conditions".
Financial (statutory and non-statutory) highlights:
· Realised revenues on completed cases were £24.2m, a decrease of
10% (FY23: £26.8m) although FY23 included an exceptionally large, funded case
completion of which £4.9m was recorded in realised revenue (total settlement
£9.5m). Adjusting for that single exceptional case, FY24 realised revenues
were 11% higher than FY23.
· 92% of total revenues represented by realised revenues on fully
completed cases (FY23: 129%).
· Increase in the valuation of the cartel cases contributed £0.1m
to gross profit in FY24 (FY23: £1.2m).
· EBIT increased to £2.5m, which represented a positive change
from an EBIT loss of £3.1m in the prior year.
· Gross cash receipts from completed cases were £17.7m, a decrease
of 34% (FY23: £26.7m, however, FY23 included the same one-off exceptionally
large case completion, referred to above, which delivered gross cash receipts
of £9.5m. Excluding that case, gross cash receipts rose by 3%).
· The Company's retained share of gross cash receipts from completed
cases (after all legal costs and payments to Insolvent Estates) was £10.8m, a
decrease of 18% (FY23: £13.1m) but again, the only reason for the decrease
was the £9.5m exceptional case in FY23.
· Cash generated from operations (after all completed case costs and
all overheads but before new case investments and taxation) was £5.0m (FY23:
£8.0m).
· As at 31 March 2024, the Company had cash balances of £1.4m and
borrowings of £13.7m resulting in a net debt of £12.3m (FY23: £0.6m and
£10.5m, respectively and therefore a net debt of £9.9m).
Operational highlights:
· A record number of new case investments in UK insolvency cases,
an increase of 18%: 311 in FY24 (FY23: 263).
· A record number of 251 cases were completed in FY24 (FY23: 193
cases), with an average duration per case of 13.2 months (FY23: 15.5 months),
generating a Money Multiple of 1.9x (FY23: 1.9x) and an IRR of 131% (FY23:
131%) (based on unaudited internal management information).
· As previously reported, following the ending in April 2022 of the
Covid-related emergency legislation to suppress UK insolvencies and the
withdrawal of very substantial financial support to UK businesses by the
previous Government, the number of UK insolvencies have been at record high
levels. The first wave of these insolvencies has predominantly been the
smaller and weaker "zombie" companies. Only in recent months have the larger
company insolvencies, typically by way of Administration, returned to levels
seen before the Covid pandemic. This has resulted in record high numbers of
cases taken on by Manolete but the average case size is smaller than had been
the case, pre-pandemic. By way of comparison: FY21 was the trading year that
best reflects the completion values of cases acquired and funded before the
Covid-19 impact (this is because, on average, cases take around 12 months to
complete). In FY21, audited realised revenues were £24.4m from 135 cases: an
average of £180k per case, which is close to double the average for FY24 of
£96k.
· ROI of 116% and Money Multiple of 2.2x from 933 completed cases
since inception (based on unaudited internal management information).
· Average case duration across the full lifetime portfolio of 933
completed cases is 12.7 months
· 19% increase in live cases: 418 in process as at 31 March 2024
(351 as at 31 March 2023)
Current Trading
· The first five months of FY25 have been buoyant:
o Highest ever number of new case enquiries year to date: 348 (FY24: 286).
o 103 new case investments, which is broadly tracking the record 146 new
case investments for the whole first six months of FY24.
o 116 case completions at an aggregate value of £11.8m (FY24: 93 case
completions at a total value of £6.3m).
o Gross cash receipts from previously completed cases is £10.3m, compared
to £8.7m for the whole first six months of FY24.
o Net cash receipts (after all payments to insolvent estates and all
associated external legal costs) are £6.5m year to date for FY25, compared to
£4.6m for the whole first six months of FY24.
Outlook
· Given that the number of corporate insolvencies in the UK remain
at record highs, the Company can look forward to a sustained period of growth.
A strong recovery in the number of larger case investments signed in the
second half of FY24 is also an encouraging indicator of future business
strength.
A copy of the annual report and accounts will be available on the Company's
website shortly and will be posted to shareholders in due course.
For further information please contact:
Manolete Partners via Instinctif Partners
Steven Cooklin (Chief Executive Officer)
Canaccord Genuity (NOMAD and Broker) +44 (0)20 7523 8309
Emma Gabriel
Instinctif Partners manolete@instinctif.com (mailto:manolete@instinctif.com)
Hannah Scott +44 (0)20 7457 2020
Tim Linacre +44 (0)7949 939 237
Chairman's Statement
I am delighted to present my third report as your Chairman.
Overview
I am pleased to report the Company has delivered a strong performance with a
record 311 new case investments in the year to 31 March 2024 (FY23: 263).
One of Company's key priorities has been growing the business through its
expanding network of Insolvency Practitioners and insolvency lawyers
throughout the UK and our results for the year are a strong reflection of
that. The results for FY24 show the Company has pulled away from the more
static market conditions for the insolvency sector following Government's
support measures during the Covid pandemic.
The Board agrees we have put that difficult Covid backdrop behind us and the
Company is now demonstrating its potential for a marked improvement in
performance. Corporate insolvencies are very high, so as we return to profit,
the trends for the business give me and the Board considerable optimism that
the Company can take full advantage of these attractive market conditions.
Financial results
Revenues for the year to 31 March 2024 increased by 27% to £26.3m (FY23:
£20.7m) The Company has reported an operating profit of £2.5m for FY24
compares to the operating loss of £3.1m reported for FY23.
There were 251 case completions (FY23: 193) which is a record for the Company.
Those 251 cases generated a realised revenue of £24.2m (FY23: £26.8m). In
FY24, Manolete delivered gross cash recoveries from completed cases of
£17.7m, (FY23: £26.7m but that included a one-off very large case with a
gross cash recovery of £9.5m. Adjusting for that, FY23 was £17.2m). The
£17.7m of cash generation was spread across 309 separate completed cases
(FY23: 237). At the year-end Manolete had 418 live cases in progress (FY23:
351).
As at the year-end of 31 March 2024, the Company had cash balances of £1.5m,
£13.7m drawn down on its HSBC debt facility and therefore a net debt of
£12.3m. The existing covenants, which had not changed significantly since
2018, were deemed no longer appropriate to the Company. As a result, revised
covenants were agreed that are cash based rather than profit based and the
total facility size of the RCF with HSBC was reduced from £25m to £17.5m in
March 2024. Details are set out in the CFO's report.
Strategy
The Board supports the Legal and Business Development teams in successfully
driving up the numbers of case enquiries which in turn leads to greater new
case investments and so increased revenue, profitability and cash generation
for the Company. This has long been the Company's approach to the insolvency
sector and increasing high quality case enquiries remains its key measure. It
has proven to be an effective strategy with the Company achieving record case
inquiries and investments in FY24 with 733 new case enquiries, 6% ahead of
last year's (adjusted for bulk BBL referrals) figure of 692.
The Manolete Board's strategy is to drive both elements of our revenues:
higher volumes and higher average case sizes.
Manolete is constantly seeking to engage with new insolvency professionals to
stimulate more business opportunities. The Company is the only litigation
funder to enjoy long term strategic partnership agreements with: R3 (the
insolvency industry trade body); the Institute of Chartered Accountants in
England and Wales and the Insolvency Practitioners Association.
Dividend
The Board has reviewed the dividend policy and is recommending no dividend is
awarded in respect of this financial year (FY23: nil). The priority of the
Company is to retain cash reserves for investment in current and future
cases.
Corporate Governance
The Board of Directors is committed to good corporate governance. We engender
a culture of mutual respect at all levels of the company and have established
Manolete as a highly trusted brand in the insolvency sector. The Company has
adopted the ten principles of the 2023 Version of the Corporate Governance
Code as set out by the Quoted Companies Alliance. Our arrangements are further
described in our Corporate Governance Statement on pages 29 to 32.
The Audit Committee report on pages 34 to 35 and the Remuneration Committee
report on pages 36 to 38 describe the remits and approaches of those
committees to fully meeting their governance responsibilities. A statement
on corporate governance is also provided on our website
(https://investors.manolete-partners.com/company-information/corporate-governance
(https://investors.manolete-partners.com/company-information/corporate-governance)
).
People
On behalf of the Board, I would like to mark our appreciation to a team of
highly dedicated, extremely collegiate and committed colleagues for their
focus and hard work during a successful year.
Board
The Board has seen no changes this financial year. As Chairman, I am content
the Board possesses the necessary spread of proficiency and balance
particularly in legal and accounting expertise.
Outlook
The Company has enjoyed a substantially improved business performance in FY24
and has increased its personnel numbers to provide the Company with the
necessary high quality professionals to manage the much increased workflow
that we are now enjoying. Given that the number of corporate insolvencies in
the UK remains very high, the Company can look forward to a sustained period
of growth. A strong recovery in the number of larger case investments signed
in the second half of FY24 is also an encouraging indicator of future business
strength.
Lord Leigh
Non-Executive Chairman
3 September 2024
CEO's Statement
The much-improved performance of the Company that was seen in the second half
of FY23 followed into FY24 and those more buoyant trading conditions persisted
throughout the year. This clearly evidenced that the UK insolvency market was
rehabilitating from the temporary two-year suppression of insolvencies that
the Government had enacted during the Covid-19 pandemic (June 2020 - April
2022).
Following that challenging Covid period, the insolvency market picture has now
completely changed, presenting Manolete with the most attractive trading
conditions since the business was formed in 2009. Significantly higher
prevalent interest rates, heightened concerns over geo-political conflicts in
Eastern Europe and the Middle East and the withdrawal of the largescale
financial supports provided by the Government to UK businesses during the
Covid-19 period, has resulted in the highest level of UK insolvencies for 30
years. Insolvency Service statistics from January 2024 show the number of
Creditor Voluntary Liquidations, the largest constituent part of the UK
insolvency market, in 2023 was at its highest level since 1960.
The following graph issued by the Insolvency Service on 19 July 2024, clearly
illustrates the impact of these measures on the UK insolvency industry: the
dramatic reduction in all forms of company insolvencies as the Government
passed temporary emergency legislation in June 2020 was aimed at suppressing
insolvencies while the pandemic took hold. UK insolvency laws did not return
to normal until April 2022. Since then, UK insolvencies have been materially
higher than pre-pandemic levels, for a sustained period.
There is a natural, and unavoidable, time lag before the larger number of
insolvencies convert into higher numbers of Manolete case investments. This is
due the time required by the office holder (i.e. the Liquidator, Administrator
or Trustee in Bankruptcy) to investigate the affairs of the insolvent entity
before being in a position to assess and refer cases on to Manolete for
acquisition. The time lag can vary considerably in length: some office holders
may take just a matter of days to refer cases, others, typically involving
more complex cases, can take several years. Following the return to normal
operation of UK insolvency laws in April 2022, the noticeable rebound in new
case enquiries into Manolete took around seven months. Once a case enquiry
comes into Manolete, if approved by the Company's Investment Committee, it
usually takes no more than a few weeks to convert the enquiry into a signed
case. Manolete approves and converts around 29% of case enquiries into signed
cases. It is very rare that an office holder ever rejects an offer of
investment (usually an offer to buy the case via an assignment or, very
rarely, to fund the office holder to purse the claim).
This time lag can be seen clearly feeding into the Company's Key Performance
Indicators as described below:
(i) Manolete New Case Enquiries
The graph below shows a slowly recovering level of new case enquiries in H1
FY23 as UK insolvency numbers rose. Then, having got past the seven-month time
lag for claim investigations to occur, H2 FY23 showed a strong increase in the
level of new enquiries, giving the Company a record level of new case
enquiries for that latter six-month period. However, the H2 FY23 number is
somewhat flattered by the inclusion of around 100 bulk case referrals from the
Company's Bounce Back Loan ("BBL") pilot with Barclays Bank (more on this
below). Even excluding the BBL pilot factor, it can be seen that the overall
shape of the case enquiries graph largely mirrors the shape of the UK
Insolvencies graph above, albeit with an approximate time delay of seven
months. Once Manolete had passed that seven month time lag, it can be seen
that the Company's levels of new case enquiries have, not only recovered very
strongly from the Government suppression during Covid, they have consistently
exceeded the high levels that were being achieved in the months and years
prior to the onset of the pandemic.
(ii) New Case Investments
As noted earlier, the time lag between new case enquiries coming into the
Company and those qualifying cases being signed up as new case investments is
very much shorter. Our Net Worth Reporting team is able to analyse and present
the financial assessment of the proposed defendants on a claim within a few
days. If the Net Worth Report is positive, our in-house legal team interrogate
the merits of the potential claims. They are then usually able to report to
the Company's Investment Committee within an average of 7-10 days, with offers
being sent to office holders the next day. Office holders are usually in a
position to decide on our offer within a week or two.
Therefore, the new case investments graph (see the second graph below),
mirrors the shape of both the UK insolvency graph and the new case enquiries
graphs presented above. However, the overall picture is somewhat distorted by
the fact that the Company signed the large majority of its 82 Barclays BBL
pilot cases in H2 FY23 (48 Barclays BBL cases signed) and H1 FY24 (32 Barclays
BBL cases signed). Only two Barclays BBL cases were signed in H2 FY24, as that
onboarding and investment stage in the BBL pilot was largely completed by the
end of H1 FY24. The second graph below excludes the Barclays BBL cases from
all figures and is therefore a clearer and better representation of the
underlying performance of Manolete "core business", outside of the pilot
project.
As with the earlier analysis of UK insolvencies and Manolete's new case
enquiries, the level of new case investments has remained at elevated levels
over the last 18 months of trading, materially ahead of the peak level
achieved by the Company prior to Covid-19 pandemic.
As a consequence of the above positive tailwinds, the Company delivered a
strong performance in FY24:
· A record number of new case enquiries (excluding the Barclays
pilot), with FY24 recording 733 enquiries compared to FY23's 692 adjusted for
bulk BBL referrals.
· Invested in a record number of 311 new UK insolvency claims, an
increase of 18% (FY23: 263).
· A record number of 251 cases were completed, an increase of 30%
(FY23: 193).
· Total reported revenues for FY24 were £26.3m, 27% higher than
FY23 of £20.8m. With realised revenues contributing 92% of the FY24 total
revenues.
· Realised revenues on completed cases were £24.2m, a decrease of
10% (FY23: £26.8m) although FY23 included an exceptionally large funded case
completion of which £4.9m was recorded in realised revenue (total settlement
£9.5m). Adjusting for that single exceptional case, FY24 realised revenues
were 11% higher than FY23.
· In FY24, Manolete delivered gross cash recoveries (cash received
on completed cases before payments to insolvent estates and associated legal
costs) from completed cases of £17.7m, (FY23: £26.7m but that included the
previously mentioned one-off significantly large case gross cash recovery of
£9.5m. Adjusting for that single large case recovery, FY23 was £17.2m). The
£17.7m of cash generation was spread across 309 separate completed cases
(i.e. cases completed in prior years as well as in the current financial year)
(FY23: 237), highlighting the attractive granularity of Manolete's business
model.
· Cash generated from operations (after all completed case costs and
all overheads but before new case investments and taxation) was £5.0m (FY23:
£8.0m). Again, FY23 benefitted from the exceptional outsize case, referred to
earlier.
· FY24 saw the Company report a operating profit of £2.5m compared
to a rare operating loss of £3.1m in FY23.
· Increase in the valuation of the cartel cases contributed £0.1m
to gross profit in FY24 (FY23: £1.2m).
Cartel Cases
There have been more material and positive developments relating to the
Company's cartel cases in recent months. Early in calendar year 2023, the
judgments for the large truck cartel cases relating to BT Group Plc and Royal
Mail Group Limited were handed down with significant damages and interest
being awarded to the Claimants. DAF then presented an appeal against that
decision. DAF's appeal of this judgment was unanimously dismissed by all three
Justices in the Court of Appeal on 27 February 2024.
Manolete's cartel cases have been issued in the Competition and Appeals
Tribunal, and they are currently stayed in that Court (which means they are
effectively paused by mutual agreement. This is usually to allow the parties
to engage in Alternative Dispute Resolution e.g. by way of mediation or
Without Prejudice meetings and/or offers and counter-offers, and the like).
Where settlements cannot be concluded, the stay is terminated and progress to
trial resumes.
UK Bounce Back Loans ("BBLs")
The Company has performed exceptionally well on the BBL pilot that it is
conducting for Barclays Bank. A number of initiatives are under review that
may potentially expand the Company's work in this area.
Investment Returns
Our investment track record, by vintage, continues to demonstrate outstanding
results. Manolete's model is characterised by short case durations, high ROIs
(Return on Investment), exceptional Money Multiples and IRRs. The Company
calculates case duration from the date we sign the investment agreement to the
date the case is legally concluded. On average, cash collection takes around
12 months after legal completion.
Note: Vintage table above is unaudited
The more mature vintages of FY18 to FY22 all have total case recoveries of
over £10m per year and IRRs ranging from 70% to 162%.
Industry Recognition
During the year, the Company was named, for the fourth time in succession, as
the only company in the insolvency litigation funding sector to be ranked in
Band 1 of the legal industry's prestigious Chambers Guide. The Band 1 ranking
is a great testament to the tremendous work of all the Company's employees.
Current Trading
FY25 has started well, with new case enquiries remaining at the elevated
levels that were achieved throughout FY24.
People and Stakeholders
I am always very grateful for the skill and dedication of Manolete's
exceptional team.
Steven Cooklin
Chief Executive Officer
3 September 2024
CFO's Statement
I am pleased to give my review of the Company's results for the year to 31
March 2024.
Financial overview: 31 March 2024 31 March 2023 YoY
Financial KPIs £000s £000s %
Revenue 26,295 20,753 27%
Gross profit 10,145 3,672 176%
Gross margin % 38.6% 17.7%
Operating profit/(loss) 2,501 (3,121) 180%
Operating profit margin % 10% (15%)
Profit/(loss) after tax 933 (3,124) 130%
Investment valuation 40,196 36,462 10%
Non-financial KPIs
New cases 311 263
Completed cases* 251 193
Live cases at year end** 418 351
*including 7 partially completed cases (9 partial completions FY23)
**including 22 cartel cases and 41 BBL cases in FY24 (22 cartel cases and 42
BBL cases in FY23)
Revenue 31 March 2024 31 March 2023
£000s % £000s %
Realised revenue 24,183 92 26,790 129
Unrealised revenue 2,112 8 (6,037) (29)
Revenue 26,295 20,753
31 March 2024 31 March 2023 YOY
£000s £000s %
Realised Gross Profit 8,032 9,798 (18)
Realised Gross Margin 33.2% 36.2%
Revenues can be classified into realised revenue (actual completions) of
£24.2m in FY24 (FY23: £26.8m) and unrealised revenue (movements in
valuations of new and live cases) of £2.1m in FY24 (FY23: (£6.0m)).
Realised revenue decreased by 9.8% to £24.2m (FY23: £26.8m) as in FY23,
there was an unusually large single case completion contributing revenue of
£4.9m itself which was exceptional in size and not expected to be repeated
each year. If this exceptionally large case is adjusted for, FY24 realised
revenue exceeds adjusted FY23 revenue by £2.3m, 11%. FY24 performance was
driven by a record number of case completions of 251 (FY23: 193).
Unrealised revenue of £2.1m FY24 (FY23: (£6.0m)) was a welcome return to
more 'normal' trading conditions with new case valuations exceeding write
downs and completions. In the prior year, FY23, we undertook a number of write
down of fair values of live cases during the first half of the year, as
reported at our Interim Results for September 2022 as well as the high level
of completions which are removed from unrealised and recorded as realised
revenue. The write down in fair value of cases was a one-off exercise that
reflected the harsher economic climate at that time therefore a more
conservative view of case realisation values.
For comparison purposes, it should be noted that in the prior year, unrealised
revenue included a £1.2m uplift in the cartel valuation whilst in FY24 the
cartel case valuation uplift was virtually unchanged, £0.1m uplift.
Gross profit of £10.1m in FY24 (FY23: £3.7m) compares favourably to FY23, an
increase of 176% as the prior year negative unrealised revenue had a
significantly negative impact on gross profit.
BBL pilot
During FY24, the Company signed a further 34 Bounce back loan cases ("BBLs")
from our previously announced pilot project with Barclays Bank, bringing the
total BBLs signed to 82. There were 35 BBLs completed in FY24 in addition to
the 6 completed in FY23 hence live BBLs at year end numbered 41 cases (FY23:
42 live cases).
In FY24, 41 live BBLs had a positive impact in the Profit and loss account
with a valuation of £475k (FY23: £495k) and completed BBL cases in FY24 have
contributed a realised gross profit to the Company of £381k in FY24 (FY23:
£108k) (after deduction of initial purchase cost and external cost and profit
share).
Administrative expenses
31 March 2024 31 March 2023 YoY
growth
£000s £000s %
Wages and salaries 4,482 3,737 20%
Bad debt expense 1,362 1,534 (11%)
Professional fees 669 512 31%
Marketing 365 344 6%
Other costs, including office costs 766 666 15%
Administrative costs 7,644 6,793 13%
Administrative expenses increased by 13% to £7.6m in FY24 (FY23: £6.8m). The
increase in administration expenses was primarily a result of an increase in
salary costs itself a factor of an annual 6% salary increase for existing
staff following annual salary reviews and a headcount increase of six FTEs (of
which two were in-house legal team).
Bad debt expense decreased by 11% to £1.4m (FY23: £1.5m) following a
thorough review of receivables. The bad debt expense primarily relates to a
small number of debtors who have either entered into bankruptcy or whose
assets have been hidden overseas.
Professional fee expenses of £0.7m (FY23: £0.5m) have increased by 31% due
to hiring of corporate finance advisors for the covenant reset exercise,
increased recruitment fees whilst also consisting of mostly recurring items
such as audit, tax and PR services (all of which have increased in line with
inflation).
Marketing costs of £0.4m (FY23: £0.3m) have increased as business
development activities continue to increase.
Other costs of £0.8m FY24 (FY23: £0.7m), primarily relate to rental costs of
office space in London, Durham and Manchester as well as travelling and
entertainment costs which have increased with increased marketing efforts.
Operating profit
The Company reported an operating profit of £2.5m in FY24 in comparison to an
operating loss of £3.1m in FY23.
Finance expense
Finance expense increased to £1.5m FY24 (FY23: £0.8m) as a result of higher
interest rates. The Company paid a margin of 3.7% above SONIA. The Company
also paid a 0.7% commitment fee on any unused facility with HSBC. As at 31
March 2024, £13.7m of the £17.5m HSBC facility had been drawn down (FY23:
£10.5m).
Profit after tax
Profit after tax of £0.9m was recorded in FY24 (FY23: £3.1m loss). The
post-tax margin has increased from (15)% to 3.5%.
Earnings per share
As disclosed in Note 12, earnings per share increased from (7.1) pence to 2.1
pence.
Balance sheet - Investment in Cases
The Company was managing 418 live case investments as at 31 March 2024,
compared to 351 live cases as at 31 March 2023, a net increase of 67 cases, or
19%. The total investment value of the 418 live cases amounted to £40.2m as
at 31 March 2024 an increase of 10% (FY23: £36.5m). This increase in
Investment value of cases reflects the increase in new cases being signed. The
valuation includes the investment in the cartel cases as at 31 March 2024 of
£13.5m. That has been left materially unchanged from £13.4m in FY23.
Investment in cases is shown at fair value, based on the Company's estimate of
the future realised profit.
Management, following discussion on a case-by-case basis with the in-house
legal team, amend valuations of cases each month end to accurately reflect
management's view of fair value. In addition, at the interim and final
reporting periods, a sample of material valuations are corroborated with the
external lawyers working on the case and an independent legal expert, who
provide updated legal opinions as to the current status of the case. The
Company does not capitalise any of its internal costs, such as salaries, these
are fully expensed to the Statement of Comprehensive Income as incurred.
Cash Flows 31 March 2024 31 March 2023
£000s £000s
Gross cash receipts 17,730 26,708
IP share & legal costs on completed cases (6,900) (13,608)
Cashflows from completed cases 10,830 13,100
Overheads (5,865) (5,092)
Net cash generated from operations before investment in cases and corporation 4,965 8,008
tax
Corporation tax - (353)
Net cash generated from operations after corporation tax and before investment 4,965 7,655
in new cases
Investment in cases (6,355) (5,806)
Net cash generated (used in)/ from operations (1,390) 1,849
% growth in case cash investments 9% 13%
Gross cash receipts
Gross cash receipts whilst still strong at £17.7m in FY24 were lower than
prior year (FY23: £26.7m) by 34% due to the exceptionally large case in the
prior year which generated cash of £9.5m itself. Importantly, cash generated
from operations before investment in cases and corporation tax remains a
strong positive cash inflow of £5.0m in FY24 (FY23: £8.0m) which has been
reinvested in the portfolio.
Cash receipts are being generated both from payment schedules of prior year
completions as well as from current year case completions.
The graph below shows the growth in gross cash generation (including both IP
share and Manolete share of cash receipts) year on year. As the business
matures, its ability to generate cash and ultimately be self-funding is a key
characteristic.
Overheads & Corporation Tax (cash)
Excluding non-cash items (including bad debt expense), spending incurred on
overheads has increased from £5.1m FY23 to £5.9m FY24 principally as result
of an increase in headcount, annual salary increases and bonuses.
The Company has benefited from brought forward tax losses and no corporation
tax is expected to become payable in respect of FY24.
Investment in cases
We have continued to invest in existing and new cases with total capital of
£5.8m deployed during FY24 and was the same in FY23 which has been funded
through cash receipts from completed cases and draw down of the HSBC loan.
Working Capital
Absorption of £1.8m into working capital during FY24 is primarily due to
increased trade receivables. This increase in net trade receivables will
generate cash in FY25 and beyond. Debtor days on a basic basis increased to
491 in FY24 (FY23: 365) due to a large outstanding debtor in relation to a
single case of £1.7m and significant realised revenue in the last month of
the year, a significant proportion of which was received in cash in the first
month of the new FY25 trading year.
31 March 2024 31 March 2023
Net working capital £000s £000s
Net working capital 17,956 16,115
Change in net working capital (1,841) (5,957)
DSO (Days sales outstanding) basic 497 365
DSO countback 335 335
Debt Financing
As at 31 March 2024 the Company had drawn down £13.7m (FY23: £10.5m) of its
£17.5m HSBC loan facility and has continued to deploy loan capital during the
year to finance investment in cases. The Company held cash reserves of £1.5m
as at 31 March 2024 which are available to deploy on new case investment.
The Company agreed a waiver with HSBC in respect of the leverage covenant for
the quarters ending 30 September 2023 and 31 December 2023 as historical
losses incurred in FY23 were resulting in a breach of the leverage and
interest cover covenants.
Following this event, the Company has agreed a number of amendments to the
loan agreement with a new set of covenants for the remaining period of the
HSBC RCF to 30 June 2025 which are cashflow based metrics, with the complete
removal of the leverage covenant. The maximum loan has been reduced to £17.5m
from £25.0m and the interest charges are 4.7% margin above SONIA. The amended
agreement came into force before the 31 March 2024.
Mark Tavener
Chief Financial Officer
3 September 2024
Strategic Report
The Directors present their strategic report for the year ended 31 March 2024.
Strategy and Business Model
The Company's strategy for growth and its business model are described in
detail on the Company's website, www.manolete-partners.com
(http://www.manolete-partners.com) and at the start of this report.
On pages 22 to 23, we have set out the principal risks which may present
challenges in executing the business model and delivering the strategy.
As the UK Insolvency market continued to return to normal operation, business
performance is now consistently performing well and starting to mirror the
impressive growth and investment returns that the Company was delivering prior
to the Covid-19 pandemic period. Year-on-year revenues increased by 27%,
driven by an increase in unrealised revenues offset by a decrease in realised
revenue (see table below). Operating profits improved by £5.6m to an
operating profit of £2.5m and net assets increased 3% to £40.5m. The second
half of FY24 saw a welcome return of larger claim opportunities, as the
business cycle evolves this trend is expected to continue.
The number of employees was 29 (FY23: 25) at the end of the financial year, as
demand has increased significantly for our UK insolvency litigation financing
products over the last six months. Despite recruitment challenges in some
areas of the UK, the Company is not experiencing any problems attracting new
recruits.
The business has grown significantly following the difficult trading
conditions of the previous two years. At the financial year-end the cumulative
number of signed litigation investments has grown to 1,351 cases, with a
record 418 live, in-progress cases as at 31 March 2024.
Year Ended Year Ended % change
31 March 2024 31 March 2023
Financial KPIs £000s £000s
Realised revenue 24,183 26,790 (10%)
Unrealised revenue 2,112 (6,037) (135%)
Total revenue 26,295 20,753 27%
Gross profit 10,145 3,672 176%
Operating profit/(loss) 2,501 (3,121) (180%)
Profit/(loss) after tax 933 (3,124) (123%)
Value of investments 40,196 36,462 10%
Non-financial KPIs
Number of lifetime signed litigation investments 1,351 1,040 30%
Live cases at end of reporting period 418 351 19%
New cases 311 263 18%
Completed cases 251 193 30%
The movements in key performance indicators is analysed in the Report of the
Chief Executive Officer on pages 12 to 16 and the Report of the Chief
Financial Officer on pages 17 to 20.
Outlook and Current Trading
We are confident we have invested in a portfolio of cases that will produce
attractive returns for the Company. The Government measures to suppress UK
insolvencies during the pandemic have now ended as have the wide-scale UK
economic support measures, which give us confidence in our future prospects.
The Board has considered the Going Concern status of the business in relation
to the general wider economic environment and has concluded that it is
appropriate for the accounts to be prepared on a going concern basis. Further
detail on the board's consideration of going concern is included on page 50.
The board believes that the business is now well-positioned to take advantage
of the strong tailwinds that have started to drive its resumed growth
trajectory.
The Company has made a good start to FY25 and we look forward to a promising
future.
Statement of Comprehensive Income
31 March 31 March
2024 2023
Note £'000s £'000s
Revenue 4 26,295 20,753
Cost of sales (16,150) (17,081)
Gross profit 10,145 3,672
Administrative expenses 8 (7,644) (6,793)
Operating profit/(loss) 6 2,501 (3,121)
Finance income 9 16 7
Finance expense 9 (1,479) (839)
Profit/(Loss) before tax 1,038 (3,953)
Taxation 11 (105) 829
Profit/(Loss) and total comprehensive income for the year attributable to the 933 (3,124)
equity owners of the company
Earnings per share
Basic (pence per share) 12 2.11p (7.14)p
Diluted (pence per share) 12 2.07p (7.14)p
The above results were derived from continuing operations.
The notes at the end of this announcement form part of these financial
statements.
Statement of financial position
Company Number: 07660874 31 March 31 March
2024 2023
Restated
Note £'000s £'000s
Non-current assets
Investments 13 11,293 14,983
Intangible assets 14 - -
Trade and other receivables 16 14,203 12,315
Deferred tax asset 19 938 267
Right-of-use asset 15 - -
Total non-current assets 26,434 27,565
Current assets
Investments 13 28,903 21,479
Trade and other receivables 16 15,077 12,063
Corporation tax receivable 11 - 735
Cash and cash equivalents 17 1,452 636
Total current assets 45,432 34,913
Total assets 71,866 62,478
EQUITY AND LIABILITIES
Equity
Share capital 21 175 175
Share premium 22 157 157
Share based payment reserve 22 1,076 699
Special reserve 22 - -
Retained earnings 22 39,063 38,130
Total equity attributable to the equity owners of the company 40,471 39,161
Non-current liabilities
Trade and other payables 18 8,434 7,393
Borrowings 20 13,726 10,381
Total non-current liabilities 22,160 17,774
Current liabilities
Trade and other payables 18 9,235 5,543
Current tax liabilities 11 - -
Lease liability 15/20 - -
Total current liabilities 9,235 5,543
Total liabilities 31,395 23,317
Total equity and liabilities 71,866 62,478
The notes at the end of this announcement form part of these financial
statements.
The financial statements were approved by the Board of Directors and
authorised for issue on 3 September 2024.
Steven Cooklin
Chief Executive Officer
Statement of Changes in Equity
Share capital Share premium Share based Special reserve Retained earnings Total Equity*
payment reserve
£'000s £'000s £'000s £'000s £'000s £'000s
As at 1 April 2022 175 142 429 5 41,468 42,219
Comprehensive income
Loss for the year - - - - (3,124) (3,124)
Transactions with owners
Dividends - - - - (219) (219)
Transfer in relation to creditors paid - - - (5) 5 -
Share based payment expense - - 150 - - 150
Share options exercised - 15 - - - 15
Deferred tax on share-based payments - - 120 - - 120
As at 31 March 2023 175 157 699 - 38,130 39,161
Comprehensive income
Profit for the year - - - - 933 933
Transactions with owners
Share based payment expense - - 336 - - 336
Deferred tax on share-based payments - - 41 - - 41
As at 31 March 2024 175 157 1,076 - 39,063 40,471
*attributable to the equity owners of the Company.
The notes at the end of this announcement form part of these financial
statements.
Statement of Cash Flows
31 March 31 March
2024 2023
Note £'000s £'000s
Profit/(Loss) before tax 1,038 (3,953)
Adjustments for other operating items:
Adjustments for non-cash items: 26 4,420 15,554
Operating cashflows before movements in working capital 5,458 11,601
Changes in working capital:
Net increase in trade and other receivables (4,901) (4,105)
Net increase in trade and other payables 4,408 512
Net cash generated from operations before corporation tax and investments 4,965 8,008
Corporation tax paid - (353)
Investment in cases 13 (6,355) (5,806)
Net cash generated (used in)/from operating activities (1,390) 1,849
Cash flows from investing activities
Finance income received 9 16 7
Net cash generated from investing activities 16 7
Cash flows from financing activities
Proceeds/(Repayments) from borrowings 20 3,250 (3,000)
Dividends paid 10 - (219)
Interest paid (1,060) (160)
Repayment of lease liabilities 15 - (97)
Net cash generated from/(used in) from financing activities 2,190 (3,476)
Net increase/(decrease) in cash and cash equivalents 816 (1,620)
Cash and cash equivalents at the beginning of the year 636 2,256
Cash and cash equivalents at the end of the year 1,452 636
The notes at the end of this announcement form part of these financial
statements.
Notes forming part of the Financial Statements
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. Summary of significant accounting policies
The principal accounting policies applied in the preparation of these
financial statements are set out below. The policies have been consistently
applied to all the years presented, unless otherwise stated.
2.1 Basis of preparation
The financial statements have been properly prepared in accordance with UK
adopted International Accounting Standards and in conformity with the
requirements of the Companies Act 2006. Under company law the directors must
not approve the financial statements unless they are satisfied that they give
a true and fair view of the state of affairs the Company and of the profit or
loss of the Company for that period.
Measurement bases
The financial statements have been prepared under the historical cost
convention. Historical cost is generally based on the fair value of the
consideration given in exchange for assets.
The preparation of the financial statements in compliance with UK adopted
International Accounting Standards requires the use of certain critical
accounting estimates and management judgements in applying the accounting
policies. The significant estimates and judgements that have been made and
their effect is disclosed in note 3.
2.2 Going concern
The Company achieved an improved performance in the year, reporting profit
before tax of £1.0m, cash generated from operations (before new investments)
of £5.0m and net current assets at 31 March 2024 of £36.2m.
The Board have prepared a detailed base case cash projection for a period of
18 months from the date of signing of these financial statements together with
a downside cash projection in which more unfavourable assumptions are
applied. These unfavourable assumptions include an elevated credit loss rate
and an assumed write down of one high value case. The Board consider these
circumstances to reflect a plausible downside scenario.
As the HSBC RCF loan is due to expire within the going concern review period,
on 1 July 2025, Management has sought assurances from HSBC that a renewal of
the facility will be available to the Company at the appropriate time and this
renewal process will begin in January 2025. HSBC have supported and funded the
business since prior to IPO. Whilst any renewal is subject to formal
discussions in 2025, the Board are optimistic of the continued support of HSBC
based on the longstanding relationship and informal discussions. At the date
of signing the financial statements, the balance drawn on the RCF is £12.5m.
During the year the Company breached certain RCF covenants relating to
interest cover and leverage. In March 2024 the RCF covenant package was
reset to better align with the Company's business model. The Board have
considered the ability of the Company to comply with the covenants during the
going concern review period by reference to the base case and downside case.
In both cases the Company is forecast to operate within the terms of the
covenants.
In addition, Management is exploring Term Loan opportunities with new funders
alongside the existing HSBC RCF facility to provide additional growth funding
and has appointed a corporate finance firm to assist in this process. Whilst
no equity funding is being sought, it remains an option in the future for the
Company should additional growth funding be required as the number of cases in
the portfolio increases.
These sources of finance, along with a profitable forecast for trading and
cash generation for the next 18 months and with mitigating actions available
to the directors, if short-term cash was needed to be generated, has led the
Directors to conclude that it is appropriate to adopt the going concern basis
in preparing the financial statements.
Whilst undertaking the going concern review, the Directors considered the
possible existence of a material uncertainty but decided that no such
uncertainty exists given the historical level of funding support, post year
end trading and our long-term relationship with HSBC, in particular.
For these reasons, they continue to adopt the going concern basis in preparing
the Company's financial statements.
2.3 Functional and presentation currency
The financial information is presented in the functional currency, pounds
sterling ("£") except where otherwise indicated.
2.4 New standards, amendments and interpretations
New and amended IFRS Standards that are effective for the current year:
During the current year, the Company adopted all new and revised standards and
interpretations issued by the International Accounting Standards Board and the
International Financial Reporting Interpretations Committee and that are
endorsed by the UK that are effective for annual accounting periods beginning
on or after 1 January 2023. None of them had a material impact on the
financial statements.
- Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS
Practice Statement 2)
The amendments to IAS 1 require companies to disclose their material
accounting policy information rather than their significant accounting
policies. The amendments to IFRS Practice Statement 2 provide guidance on how
to apply the concept of materiality to accounting policy disclosures.
- Definition of Accounting Estimates (Amendments to IAS 8)
The amendments clarify how companies should distinguish changes in accounting
policies from changes in accounting estimates. That distinction is important
because changes in accounting estimates are applied prospectively only to
future transactions and other future events, but changes in accounting
policies are generally also applied retrospectively to past transactions and
other past events.
- Deferred Tax Relating to Assets and Liabilities arising from a
Single Transaction (Amendments to IAS 12)
IAS 12 specifies how a company accounts for income tax, including deferred
tax, which represents tax payable or recoverable in the future. In specified
circumstances, companies are exempt from recognising deferred tax when they
recognise assets or liabilities for the first time. The amendments clarify
that the exemption does not apply and that companies are required to recognise
deferred tax on such transactions.
New and revised IFRS Standards in issue but not yet effective:
The following relevant IFRSs and amendments have been issued by the IASB but
are not effective until a future period.
- IAS 1 Presentation of Financial Statements (Amendments to
Classification of Liabilities as Current or Non-current) (Effective from the
year ending 31 March 2025)
The amendments clarify that liabilities are classified as either current or
non-current, depending on the rights that exist at the end of the reporting
period. Classification is unaffected by the expectations of the entity or
events after the reporting date. The amendment also clarifies what IAS 1 means
when it refers to the 'settlement' of a liability.
- IAS 1 Presentation of Financial Statements (Amendment to
Non-current liabilities with covenants). (Effective from the year ending 31
March 2025)
The amendments improved the information an entity provides when its right to
defer settlement of a liability for at least 12 months is subject to
compliance with covenants.
- On 9 April 2024 the IASB issued IFRS 18 'Presentation and
Disclosure in Financial Statements', which is expected to be effective for
Manolete for the year ending 31 March 2028, subject to UK endorsement.
IFRS 18 sets out requirements for the presentation and disclosure of information in general purpose financial statements and replaces IAS 1 'Presentation of Financial Statements'.
The Board are currently assessing the impact of these new amendments on the
company's financial reporting for future periods. However, the board does
not expect any of the above to have a material impact on future results.
2.4 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 3. 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, net of
eliminations of the previously recorded fair value of completed cases.
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.
2.5 Finance expense and income
Finance expense
Finance expense comprises interest on bank loans and other interest payable.
Interest on bank loans and other interest is charged to the Statement of
Comprehensive Income over the term of the debt using the effective interest
rate method so that the amount charged is at a constant rate on the carrying
amount. Issue costs are initially recognised as a reduction in the proceeds of
the associated capital instrument. Finance expenses also include costs
associated with loan renewal fees, covenant amendments and unutilised fees.
Finance income
Finance income comprises interest receivable on funds invested and other
interest receivable. Interest income is recognised in profit or loss as it
accrues using the effective interest method.
2.6 Employee benefits: Pension obligations
The Company operates a defined contribution plan. A defined contribution plan
is a pension plan under which the Company pays fixed contributions into a
separate entity. The Company has no legal or constructive obligations to pay
further contributions if the fund does not hold sufficient assets to pay all
employees the benefits relating to employee service in the current and prior
periods.
The Company has no further payment obligations once the contributions have
been paid. The contributions are recognised as employee benefit expense when
they are due. Prepaid contributions are recognised as an asset to the extent
that a cash refund or a reduction in the future payments is available.
2.7 Financial assets
Classification
The Company classifies its financial assets at amortised cost or fair value
through profit or loss. Financial assets do not comprise prepayments.
Management determines the classification of its financial assets at initial
recognition.
Financial assets at amortised cost
The Company's financial assets held at amortised cost comprise trade and other
receivables and cash in the Statement of Financial Position.
These assets are non-derivative financial assets with fixed or determinable
payments that are not quoted in an active market. They arise principally
through the provision of services to customers (e.g. trade receivables), but
also incorporate other types of contractual monetary assets. They are
initially recognised at fair value plus transaction costs that are directly
attributable to their acquisition or issue and are subsequently carried at
amortised cost using the effective interest method, less provision for
impairment.
Impairment of financial assets
Impairment provisions are recognised when there is objective evidence (such as
significant financial difficulties on the part of the counterparty or default
or significant delay in payment) that the Company will be unable to collect
all of the amounts due under the terms receivable, the amount of such a
provision being the difference between the net carrying amount and the present
value of the future expected cash flows associated with the impaired asset.
Impairment provisions for trade receivables are recognised specifically
against receivables where Management have identified default or delays to
payment in addition to the simplified approach within IFRS 9 using lifetime
expected credit losses. The Company applies the simplified approach in
providing for expected credit losses under IFRS 9 which allows the use of the
lifetime expected credit loss provision for all trade receivables. In
measuring the expected credit losses, trade receivables have been stratified
by settlement type and days past due. Expected lifetime credit loss rates are
based on payment profiles of completed cases from April 2022 to December 2023.
For trade receivables which are reported net, such provisions are recorded in
a separate provision account with the loss being recognised within
administrative expenses in the Statement of Comprehensive Income. On
confirmation that the trade receivables will not be collectable, the gross
carrying value of the asset is written off against the associated provision.
Investments
Investments in cases are categorised at fair value through profit or 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. Positive material progression of an investment will give rise to
an increase in fair value and an adverse progression a decrease. Management
identifies and selects a number of material case valuations for external
opinion. As such at any year-end, the valuation of a sample of material
investments was underpinned by an external legal opinion, which supports the
Directors' valuation.
The cartel cases are classified as non-current investments, with the exception
of those which have entered into discussions, as they are long-term in nature
where settlement will involve a considerable level of analysis, negotiation
and legal process that is expected by Management to exceed 12 months. All
other cases are classified as current assets as the Company policy is to reach
a timely settlement on these cases in order to re-cycle working capital and
this is expected to be within 12 months (although this can vary case to case
and year to year, the average age of settled cases in FY24 in 12.7 months).
Valuation of investments
Determining the value of purchased and funded litigation requires an
estimation of the value of such assets upon acquisition and at each reporting
date. The future income generation of such litigation is estimated from known
information and the opinion of external senior specialist counsel and
solicitors in select cases. Valuations of each case, at the balance sheet
date, are therefore arrived at by the Directors, considering Counsel's, or
external lawyer's, assessment of the chances of a successful outcome, the
state of progress of the matter through the legal system and the Directors'
assessment of all other risks specific to the case.
2.8 Financial assets
Contract assets are initially recognised in respect of earned interest revenue
earned on completed cases but where the settlement will be paid to the Company
over a significant period of time (i.e. there is a significant financing
component implicit in the transaction). The unwinding of contract assets is
recognised within revenue.
2.9 Financial liabilities
The Company classifies its financial liabilities in the category of financial
liabilities at amortised cost. All financial liabilities are recognised in the
statement of financial position when the Company becomes a party to the
contractual provision of the instrument. Trade and other payables and
borrowings are included in this category.
Borrowings
Borrowings are recognised initially at fair value, net of transaction costs
incurred. Borrowings are subsequently carried at amortised cost; any
difference between the proceeds (net of transaction costs) and the redemption
value is recognised in the income statement over the period of the borrowings
using the effective interest method.
Borrowings are de-recognised from the balance sheet when the obligation
specified in the contract is discharged, is cancelled or expires. The
difference between the carrying amount of a financial liability that has been
extinguished or transferred to another party and the consideration paid,
including any non-cash assets transferred or liabilities assumed, is
recognised in profit or loss as other operating income or finance costs.
Borrowings are classified as current liabilities unless the Company has an
unconditional right to defer settlement of the liability for at least 12
months after the reporting period.
Whilst the original arrangement fees in relation to a £25m loan facility with
HSBC set up in June 2021 were capitalised and amortised over the length of the
agreement, initially 3 years. Fees in relation to an amendment of the loan
agreement (covenant amendment) in March 2024 were expensed to the Statement of
Comprehensive Income in FY24.
These capitalised costs of £23,892 as at 31 March 2024 (31 March 2023:
£119,426) have been netted off against borrowings in the Statement of
Financial Position. Amendment fees of £62,500 were expensed to the Statement
of Comprehensive Income in March 2024.
Trade and other payables
Trade and other payables are initially recognised at fair value and
subsequently measured at amortised cost. Accounts payable are classified as
current liabilities if payment is due within one year or less. If not, they
are presented as non-current liabilities.
Contract liabilities
Contract liabilities represent the Company's obligation to transfer goods or
services to a customer and are recognised when a customer pays consideration,
or when the Company recognises a receivable to reflect its unconditional right
to consideration (whichever is earlier) before the consolidated entity has
transferred the goods or services to the customer. The unwinding of contract
liabilities is recognised within Cost of Sales.
2.10 Share capital
Ordinary shares are classified as equity. There is one class of ordinary share
in issue, as detailed in note 21. Incremental costs directly attributable to
the issue of new shares are shown in share premium as a deduction from the
proceeds, net of tax.
2.11 Income tax
Income tax for the years presented comprises current and deferred tax. Income
tax is recognised in profit or loss except to the extent that it relates to
items recognised directly in equity, in which case it is recognised in equity
Deferred income tax is recognised on temporary differences arising between the
tax bases of assets and liabilities and their carrying amounts.
Temporary differences are not recognised if they arise from a) the initial
recognition of goodwill, and b) for the initial recognition of other assets or
liabilities in a transaction other than a business combination that at the
time of the transaction affects neither accounting nor taxable profit or loss.
The amount of deferred tax provided is based on the expected manner of
realisation or settlement of the carrying amount of assets and liabilities,
using tax rates enacted or substantively enacted at the balance sheet date.
Deferred income tax assets and liabilities are offset when there is a legally
enforceable right to offset current tax assets against current tax liabilities
and when the deferred income taxes assets and liabilities relate to income
taxes levied by the same taxation authority on either the taxable entity or
different taxable entities where there is an intention to settle the balances
on a net basis.
2.12 Share-based payments
Equity-settled share-based compensation benefits are provided to employees.
Equity-settled transactions are awards of shares, or options over shares, that
are provided to employees in exchange for the rendering of services.
The cost of equity-settled transactions are measured at fair value on grant
date. Fair value is independently determined using the Monte Carlo, Binomial
or Black Scholes pricing model which takes into account the exercise price,
the term of the option, the impact of dilution, the share price at grant date
and expected price volatility of the underlying share, the expected dividend
yield and the risk free interest rate for the term of the option, together
with non-vesting conditions that do not determine whether the consolidated
entity receives the services that entitle the employees to receive payment. No
account is taken of any other vesting conditions.
The cost of equity-settled transactions are recognised as an expense with a
corresponding increase in equity over the vesting period. The cumulative
charge to profit or loss is calculated based on the grant date fair value of
the award, the best estimate of the number of awards that are likely to vest
and the expired portion of the vesting period. The amount recognised in profit
or loss for the period is the cumulative amount calculated at each reporting
date less amounts already recognised in previous periods.
2.13 Dividends
Dividends are recognised when declared during the financial year.
3. Significant judgements and estimates
The preparation of the Company's financial statements under 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 year, 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 liability 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 or 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 on whether to make a purchase or funding offer, correspondence
from the Company in-house lawyer, usually via externally retained solicitors,
to the opposing party notifying them of the Company's assignment or funding of
the claim, a fully particularised Letter Before Action and an invitation to
without prejudice settlement meetings or mediation, if the opposing party does
not respond then legal proceedings are issued. Further evidence may be
gathered to support the claim. Eventually a court process may be entered into.
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 recognise
live case investments at fair value 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 weekly basis, the internal legal team report developments into the
Investment Committee on a case-by-case basis in writing. Full reviews then
take place on a monthly basis to review progress on all live cases, on a
case-by-case basis.
• On a monthly basis, the directors 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
be an increase or decrease in value or no change required;
• At reporting period ends, a sample of open case investments for which
written assessments are obtained from external solicitors or primary counsel
working on the case on behalf of the Company.
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.
Movements in fair value on investments in cases are included within revenue in
the Statement of Comprehensive Income. Fair value gains or losses are
unrealised until a final outcome or stage is reached. At the year-end there
were 418 open cases, of these 366 had a valuation of less than £100k. These
cases are not expected to have an individually material impact on the business
when they are settled. The remaining 52 cases make up £24.8m of the
Investments and are material to the business, the significant judgements and
estimates in their valuations at the balance sheet date were as follows:
1. Judgements:
1.1 The amount that cases are discounted to recognise cases being settled
before they are taken to Court, based on the facts of each case and
management's judgement of the likely outcome.
1.2 Litigation is inherently uncertain. The Company seeks to mitigate its risk
by: seeking to settle cases as early as possible. Nevertheless, the risk and
uncertainty can never be completely removed. The key inputs are: the headline
claim value, the likely settlement value, the opposing party's ability to pay
and the likely costs in achieving judgement. These inputs are inter-related to
an extent.
1.3 The Company accrues for future legal costs on the basis that cases will be
settled before trial which is how the vast majority of cases completed to date
have been settled. When it becomes clear a case will progress all the way to
trial then the additional costs are accrued at this point on a case-by-case
basis.
1.4 The Company classifies all legal cases (non-cartel) as current assets as
the intention and expectation is to reach a settlement within 12 months.
Cartel cases are classified as non-current assets as the legal process for
these Competition Law cases is a longer-term process except where settlement
negotiations have commenced.
2. Estimates:
2.1 All cases will be subject to the internal key stages and regular fair
value review processes as described above. For the avoidance of doubt, the
fair value review requires an estimate to be made by senior management based
upon the facts and progress of the case and their experience. For a sample
selected by Management , an external opinion is requested from counsel or a
solicitor who is working on the case which provides an independent description
of the merits of the case.
These assessments include various assumptions that could change over time and
lead to different assessments over the next 12 months.
2.2 Future legal costs have been estimated on the estimated time the case will
take to complete and whether it will go to Court. Future results could be
materially impacted if these original estimates change either positively or
negatively.
2.3 Recovery of debts is based on the Company's ability to recover assets
owned by the counterparty. Prior to case acceptance, a net worth review of the
defendant is undertaken to assess whether they own sufficient assets to
support the claim value. Cases that are settled without going to Court
typically recover in full, whilst those that result in Court cases are less
predictable in terms of full recovery.
2.4 The valuations assume that there is no recovery for interest and costs
except for the cartel cases which do assume a figure for both costs recovery
and interest charge. If cases go to Court and result in a judgement in the
Company's favour, it is likely that the Company will be awarded interest and
costs.
Sensitivity analysis has not been included in the financial statements, due to
the vast amount of inputs and number of variables which are inherently
specific to each case, making it impossible to provide meaningful data. Whilst
the Board considers the methodologies and assumptions adopted in the valuation
are supportable, reasonable and robust, because of the inherent uncertainty of
valuation, it is reasonably possible, on the basis of existing knowledge, that
outcomes within the next financial year are different from the assumptions
could require a material adjustment to the carrying amount of the £40.2m of
investments disclosed in the balance sheet (Note 13). However, as an
indication we note that a 10% increase/(decrease) in the fair value of our top
20 cases (excluding cartel cases) would result in an increase/(decrease) in
the fair value investment of +/- £0.9m.
Approach to cartel case valuation:
Following publication of the ruling in respect of an EU Competition test case
(the "BT / Royal Mail" case) we requested that our independent expert
valuation firm apply the assumptions contained within the test case ruling to
the valuation of Manolete's 22 cartel cases. Following the ruling and the
receipt of further case data, the directors consider that additional
discounting, or the use of a "tier based" system is no longer required and the
year-end valuation therefore represents Manolete's percentage ownership of the
overall case valuation. The cartel case carrying valuation as at 31 March 2024
was £15.1m (FY23 £15.0m).
Recoverability of trade receivables
The Company's business model involves the provision of services for credit.
The Company normally receives payment for services it has provided once a
claim has been pursued and settled or decided in Court. The average time from
taking on a case to settlement is c.12.7 months although this can vary
significantly from case to case. As part of the settlement agreement, the
timing of payment of the award by the defendant to the Company is agreed and
this is a legally binding document. Settlements can be received in full on the
day of settlement or (at Management's discretion) paid in instalments over a
defined settlement plan.
As such, Management applies a number of estimates and judgements in the
recording of trade receivables, for example: in relation to default judgements
Management assess the likely recoverability and do not necessarily recognise
the full judgement.
The Company applies the simplified approach in providing for expected credit
losses under IFRS 9 which allows the use of the lifetime expected credit loss
provision for all trade receivables. In measuring the expected credit losses,
trade receivables have been stratified by settlement type and days past due.
Expected lifetime expected credit loss rates are based on the payment profiles
of completed cases from April 2022 to December 2023. The Company attempts to
assess the probability of credit losses but seeks to mitigate its credit risk
by undertaking rigorous net worth checks before taking on a case. Occasionally
credit defaults do occur when counterparties default on an agreed settlement
payable by instalments. There is a concentration risk in relation to the trade
receivable of £7.2m which relates to a large case completion in FY21.
Repayments to date have been made according to the agreed schedule. Based on
Management's assessment of the receivable no provision has been recognised
against this balance.
Recovery of receivables is closely monitored by Management and action, where
appropriate, will be taken to pursue any overdue payments. The Company seeks
to obtain charging orders over the property of trade receivables as security
where possible. The receivables' ageing analysis is also evaluated on a
regular basis for potential doubtful debts. Where potential doubtful debts are
identified specific bad debt provisions are held against these. It is the
Directors' opinion that no further provision for doubtful debts is required.
Please see note 16 of the accounts.
Recoverability of deferred tax asset on utilised tax losses
The Company has recognised a deferred tax asset of £600k in respect of
estimated unutilised trading losses which are available to carry forward
against future taxable profits. In the prior year, no deferred tax asset was
recognised in respect of carried forward trading losses. Management have
considered whether, in their judgement, it is probable (i.e. more likely than
not) that sufficient taxable profits will be generated such that an asset can
be recognised. During the year the Company reported a profit before tax of
£1.0m which represented a return to profit following a loss before tax of
£4.0m in the prior year. As described in the Strategic Report, the Board
consider that the performance in FY24 reflects a recovery from the effects of
temporary Covid-related business support measures and therefore, having
considered the Company's projections used for going concern assessments, that
it is probable that taxable profits will be available against which to utilise
the full £2.4m of available unutilised losses.
4. Segmental reporting
During the year ended 31 March 2024, revenue was derived from cases funded on
behalf of the insolvent estate and cases purchased from the insolvent estate,
which are mostly 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. Revenues 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.
31 March 2024 31 March 2023
£000s £000s
Net realised gains on investments in cases 24,183 26,790
Fair value movements (net of transfers to realisations) - Note 13 2,112 (6,037)
26,295 20,753
Net realised gains on investments includes £805k (FY23: £802k) in respect of
the unwinding of a discounted settlement receivable. See note 16 for further
detail.
31 March 2024 31 March 2023
£000s £000s
Arising from:
Purchased cases 26,985 15,321
Funded cases (690) 5,432
26,295 20,753
5. Directors and employees
Staff costs for the Company during the year:
31 March 2024 31 March 2023
Staff costs (including directors): £000s £000s
Wages and salaries 3,562 3,031
Social security costs 436 429
Other pension costs and benefits 484 277
Total staff costs 4,482 3,737
The average monthly number of employees (including executive and non-executive
directors) employed by activity was:
31 March 31 March
2024 2023
No. No.
Directors (executive and non-executive) 6 6
Management and administration 23 18
Average headcount 29 24
The aggregate amount charged in the accounts for key management personnel
(including employer's National Insurance contributions), being the directors
of the company, were as follows:
31 March 31 March 2023
Directors' emoluments: 2024
£000s £000s
Salaries and fees 1,524 1,404
Other pension costs and benefits 30 16
1,554 1,420
Directors remuneration is detailed in the Remuneration report. The number of
directors to whom retirement benefits accrued was 3 (FY23: 2). No options were
exercised by directors in FY24 (FY23: no directors exercised options)
31 March 31 March 2023
2024
£000s £000s
Highest paid director:
Salaries and fees 534 529
Other pension costs and benefits 11 6
545 535
Management consider the directors to be the key management personnel. The
total share based payment expense in the year attributable to the Board was
£247k. (FY23: £141k).
6. Operating profit
Is stated after charging:
31 March 31 March
2024 2023
£000s £000s
Bad debt expenses 1,362 1,534
Share based payments 336 150
Depreciation of right of use asset - 86
Amortisation of intangible assets - 13
7. Auditor remuneration
Amounts payable to RSM UK Audit LLP in respect of the Interim audit and
Gravita II LLP in respect of the Year-end audit in respect of both audit and
non-audit services are set out below.
31 March 2024 31 March 2023
£000s £000s
Fee payable to Company's auditor and its associates for the statutory audit of 122 110
the Company's financial statements
Fees payable to Company's auditor and its associates for other services:
Interim agreed upon procedures (2024 and 2023: RSM UK Audit LLP) 11 11
Total 133 121
8. 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:
31 March 2024 31 March 2023
£000s £000s
Staff costs, including pension and healthcare 4,482 3,737
costs
Bad debts including expected credit losses 1,362 1,534
Professional fees 669 512
Marketing costs 365 344
Other costs, including office costs 766 666
Total administrative 7,644 6,793
expenses
9. Finance income and finance expense
31 March 2024 31 March 2023
£000s £000s
Bank interest 16 7
Total finance income 16 7
31 March 2024 31 March 2023
£000s £000s
Lease liability interest - 1
Other loan interest 196 251
Bank loan charges 1,283 587
Total finance expense 1,479 839
10. Dividends
Dividends paid during the financial year were as follows.
31 March 2024 31 March 2023
Declared during the year £000s £000s
Final dividend for the year ended 31 March 2023 of 0.0p per share, (October - -
2022: 0.5p)
Interim dividend for the year ended 31 March 2024, of 0.0p per share (FY23: - -
0.0p)
Total dividends paid - -
Proposed after the end of year and not recognised as a liability
Final dividend for the year ended 31 March 2024: 0.0p per share (31 March - -
2023: 0.0p per share)
11. Taxation
31 March 2024 31 March 2023
Analysis of charge/(credit) in year £000s £000s
Current tax charge/(credit) on profits/losses for the year - (735)
Adjustments in respect of prior periods 735 (42)
Income tax charge/(credit) 735 (777)
Deferred tax credit (630) (52)
Total tax charge/(credit) 105 (829)
The tax (credit)/charge for the year differs from the standard rate of
corporation tax in the UK of 25%. (FY23: 19%). The differences are explained
below.
31 March 2024 31 March 2023
£000s £000s
Profit/(Loss) on ordinary activities before tax 1,038 (3,953)
Profit/(Loss) on ordinary activities multiplied by the rate of corporation tax 259 (751)
in the UK as above
Effects of:
Expenses not deductible 105 44
Other differences - (28)
Adjustments to current tax in respect of previous periods 735 (42)
Deferred tax charged directly to equity 41 120
Temporary differences not recognised in the computation (71) (108)
Remeasurement of deferred tax for change in tax rates - (64)
Brought forward losses utilised in the year (364) -
Recognition of asset not previously recognised (600) -
Total taxation charge/(credit) 105 (829)
At 31 March 2024 the Company had estimated unutilised losses to carry forward
of £2.4m (FY23: £3.9m). In light of the Company's return to profitability in
FY24, a deferred tax asset of £600k in respect of estimated tax losses of
£2.4m has been recognised (see Note 19.) In the prior year, a potential
deferred tax asset of £1.0m was not recognised due to the loss reported in
the year and the uncertainty of timing of future profits. From 1 April 2023
the headline rate of UK corporation tax increased to 25% and the deferred tax
asset has been measured by reference to this rate. Losses do not expire
12. Earnings per share
The basic earnings per share is calculated by dividing the profit/(loss)
attributable to ordinary equity holders by the weighted average number of
ordinary shares outstanding during the year. Diluted earnings per share is
calculated by dividing the profit/(loss) after tax by the weighted average
number of shares in issue during the year, adjusted for potentially dilutive
share options.
The following reflects the income and share data used in the earnings per
share calculation:
31 March 31 March 2023
2024
£000s £000s
Profit/(Loss) for the period attributable to equity holders of the Company 933 (3,124)
Weighted average number of ordinary shares 44,135,972 43,756,351
Earnings per share 2.11p (7.14)p
Basic Earnings Per Share is based on the profit for the year attributable to
the equity holders of the Company dividend by the weighted average number of
ordinary shares during the period.
31 March 31 March 2023
2024
£000s £000s
Profit/(Loss) for the period attributable to equity holders of the Company 933 (3,124)
Diluted weighted average number of ordinary shares 45,128,751 43,756,351
Diluted earnings per share 2.07p (7.14)p
Reconciliation of number of shares and diluted shares at year end:
31 March 31 March 2023
2024
£000s £000s
Weighted average number of shares for Basic Earnings Per Share 43,761,305 43,756,351
Adjustments for calculation of Diluted Earnings Per Share:
Options over ordinary shares 1,366,751 -
Weighted average number of shares for Diluted Earnings Per Share 45,128,056 43,736,351
The earnings per share is diluted by options over ordinary shares, as detailed
in note 23. In FY23, there was no diluting factor due to share options as a
loss after tax was reported.
13. Investments (as restated)
Non-current investments and current asset investments comprise the costs
incurred in bringing funded and purchased cases to the position that they have
reached at the balance sheet date. In addition, where an event has occurred
that causes the Directors to revalue the amount invested, a fair value
adjustment is made by the Directors based on Counsel's and the Directors'
opinion, which can either be positive or negative (see Note 3 on accounting
estimates).
31 March 2024 31 March 2023
£000s £000s
As at 1 April 2023 36,462 45,718
Prepaid cost additions 6,355 5,806
Realised prepaid costs (4,733) (9,025)
Fair value movement (net of transfers to realisations) 2,112 (6,037)
As at 31 March 2024 40,196 36,462
Restated
31 March 2024 31 March 2023
£000s £000s
Current 28,903 21,479
Non-current 11,293 14,983
As at 31 March 2024 40,196 36,462
Prepaid and initial legal costs relating to the cartel cases have been
reclassified as non-current investments consistent with the classification of
the fair value of these cartel cases in both FY24 and restated for FY23. A
proportion of cartel case investment has been disclosed as current investment
in FY24 as negotiations with the Truck manufacturer have commenced.
Investment figures in FY23 have been restated to include the external legal
costs incurred on cartel cases as a non-current asset (previously shown as a
current asset). As such, this resulted in £1,594k of legal costs in FY23
being removed from current investments and included within non-current
investments. Hence, current investments reduced from £23.1m to £21.5m and
non-current investments increased from £13.4m to £15.0m. This is a
reclassification only and has no impact on the profit and loss, earnings per
share or diluted earnings per share.
Analysis of fair value movements
31 March 2024 31 March 2023
£000s £000s
New case investments 12,325 9,659
Increase in existing case fair value (excl. cartel cases) 488 134
Decrease in existing case fair value (excl. cartel cases) (3,982) (2,519)
Case completions - transferred to realisations (6,811) (14,503)
Increase in fair value of cartel cases 92 1,192
Fair value movement (net of transfers to realisations) 2,112 (6,037)
14. Intangible assets
Intangible assets comprised the costs of developing the Company's website. The
website developments costs are amortised over the useful life of the website,
which is estimated to be three years.
Website development costs 31 March 2024 31 March 2023
£000s £000s
As at 1 April 2023 - 13
Amortisation charge - (13)
As at 31 March 2024 - -
15. Right-of-Use asset
The Company held one lease, an office property lease for 21 Gloucester Place,
London which expired in September 2022. The new lease relating to this office
is short term and the Company has applied the short-term lease exemption from
capitalising the lease, along with other short term office leases..
31 March 2024 31 March 2023
£000s £000s
As at 1 April 2023 - 86
Depreciation - (86)
As at 31 March 2024 - -
31 March 2024 31 March 2023
Lease liability £000s £000s
Current - -
Non-current - -
As at 31 March 2024 - -
16. Trade and other receivables
31 March 2024 31 March 2023
£000s £000s
Amounts falling due in excess of one year:
Trade receivables 11,738 10,270
Contract asset 2,465 2,045
Total trade and other receivables due in excess of one year 14,203 12,315
Amounts falling due within one year:
Gross trade receivables 21,203 16,505
Less:
Specific provisions (4,507) (2,881)
Allowance for expected credit losses (1,838) (1,794)
Trade receivables 14,858 11,830
Prepayments 219 233
Total trade and other receivables due within one year 15,077 12,063
Trade receivables are amounts due from settled cases in the ordinary course of
business. Trade receivables are recognised initially at the amount of
consideration that is unconditional, unless they contain significant financing
components, when they are recognised at fair value. The Company holds the
trade receivables with the objective of collecting the contractual cash flows
and therefore measures them subsequently at amortised cost using the effective
interest method. Ageing of the expected credit loss allowance us included in
note 27.
The contract asset relates to the unwinding of the discounting applied to the
present value of the settlement of a large case which settled in FY21.
Unwinding income of £805k (2023: £802k) and unwinding expense of £578k
(2023: £566k) were recognised in the year in respect of this single large
case. No other receivables are discounted.
No impairment provision has been recognised in respect of contract assets as
there is no past history of impairment losses and future losses are not
anticipated.
Movements in the allowance for expected credit losses (ECL) are as follows:
31 March 2024 31 March 2023
ECL Provision £000s £000s
At 1 April 2023 1,794 865
Increase in provisions for impairment 44 929
As at 31 March 2024 1,838 1,794
The Company applies the simplified approach in providing for expected credit
losses under IFRS 9 which allows the use of the lifetime expected credit loss
provision for all trade receivables. In measuring the expected credit losses,
trade receivables have been stratified by settlement type and days past due.
Expected lifetime credit loss rates are based on the payment profiles of
completions from April 2022 to December 2023.
17. Cash and cash equivalents
31 March 2024 31 March 2023
£000s £000s
Cash at bank and in hand 1,452 636
All bank balances are denominated in pounds sterling.
18. Trade and other payables
31 March 2024 31 March
2023
£000s £000s
Amounts falling due in excess of one year:
Accruals - direct costs 6,651 5,982
Contract liability 1,783 1,411
Total trade and other payables due in excess of one year 8,434 7,393
Amounts falling due in one year:
Trade payables 1,325 802
Accruals - direct costs 6,714 3,984
Other creditors 1,058 645
Other taxation and social security 138 112
Total trade and other payables due within one year 9,235 5,543
Trade payables are unsecured and are usually paid within 30 days of
recognition. The carrying value of trade and other payables approximates their
fair value, as the impact of discounting is not significant except one large
case described below.
Accruals - direct costs relate primarily to accrued amounts due to Insolvency
Practitioners on the Company's completed cases and accrued legal costs of
completed cases. Of the £8.4m shown as non-current, £3.9m relates to the
amounts payable to the Insolvency Practitioner due in more than one year in
respect of the large case completion in FY21.
The contract liability relates to the unwinding of the discounting applied to
the present value of amounts payable to the insolvency practitioner following
the settlement of a large case settled in FY21.
19. Deferred tax asset
31 March 2024 31 March
2023
£000s £000s
At 1 April 2023 267 95
Deferred tax charged in the income statement for the period 630 292
Deferred tax included directly in equity 41 (120)
At 31 March 2024 938 267
Deferred tax has been charged to equity reserve where these movements in
deferred tax assets relate to releases and creation of share options.
Deferred tax assets are recognised in respect of:
31 March 2024 31 March
2023
£000s £000s
Unutilised losses carried forward 600 -
Timing differences on share options 336 266
Other items 2 1
Total 938 267
20. Borrowings
31 March 2024 31 March 2023
£000s £000s
Non-current
Bank loans 13,726 10,381
Total non-current borrowings 13,726 10,381
Current
Lease liability - -
Total current borrowings - -
Arrangement fees in relation to a £25m loan facility set up with HSBC in June
2021 are capitalised and amortised over the original length of the loan
facility, a period of three years. There is an option to extend for a further
year.
Gross borrowings are £13.7m as at 31 March 2024 (FY23: £10.5m) but are
presented net of HSBC set-up amortised costs of £24k above which are being
amortised over 3 years. Maturity analysis of bank loans is included in note
27.
The Company agreed on 22 June 2021, a new RCF for £25m over an initial
three-year period to 1 July 2024, with an option to extend by a further year.
In July 2022 the Company chose to take the extension to 1 July 2025.
In March 2024, the Company agreed an amendment to the RCF to replace the suite
of profit based covenants with cash based covenants and to reduce the RCF loan
to £17.5m with the interest rate maximum increased to 4.7% over SONIA.
Under terms of the agreement, Steven Cooklin is required to maintain a minimum
shareholding of 5% of the issued share capital of the Company and is subject
to a change in control clause such that no investor may hold more than 30
percent of the voting rights of the Company.
During the year the original leverage covenant and interest cover covenant
breaches were waived for the quarters, 30(th) June 2023, 30 September 2023 and
31 December 2024.
Reconciliation of liabilities arising from financing activities:
1 April Cash flows Non-cash changes 31 March 2024
2023
£000s £000s £000s £000s
Bank borrowings 10,381 3,250 95 13,726
Total liabilities from financing activities 10,381 3,250 95 13,726
1 April Cash flows Non-cash changes 31 March 2023
2022
£000s £000s £000s £000s
Bank borrowings 13,285 (3,000) 96 10,381
Lease liabilities 96 (97) 1 -
Total liabilities from financing activities 13,381 (3,097) 97 10,381
The Directors consider the carrying value of all financial liabilities to be
equivalent to their fair value.
21. Share capital
31 March 2024 31 March 2023
Allotted and issued No. No.
Ordinary shares of £0.004 each 43,761,305 43,761,305
Voting rights
The holders of ordinary shares are entitled to one voting right per share.
Dividends
The holders of ordinary shares are entitled to dividends out of the profits of
the Company available for distribution.
22. Reserves
Share capital
Includes the Company's nominal share capital.
Share premium
Includes all premiums received on issue of share capital in excess of nominal
value.
Share based payment reserve
Includes amounts recognised for the fair value of share options in issue in
accordance with IFRS 2 plus the equity element of associated deferred tax
asset movements.
Special non-distributable reserve
A special non-distributable reserve was created in FY19 to ensure there was
sufficient reserves held within the Company to satisfy creditors at the time
of a conversion of share premium to distributable reserves to allow a dividend
to be paid in FY19. The balance on this reserve was reduced to nil in FY23.
Retained earnings
Includes all current and prior periods retained profits and losses.
23. Share options
The Company operates a number of share-based payment schemes as follows:
CSOP Share Scheme
The Board has adopted the Manolete Partners Share Option Plan (CSOP) to enable
conditional share awards to be granted, which may be subject to achievement of
performance criteria and the awards are exercisable between three and ten
years following their grant. There are no cash-settlement alternatives and the
awards are therefore accounted for under IFRS 2 as equity settled share-base
payments.
In addition to CSOP share options, unapproved share options have also been
granted which do not qualify for the tax exempt criteria. These are separately
detailed below.
Year ended 31(st) March 2024
Grant date Vesting Exercise price Balance brought forward Granted during the year Exercised during the year Lapsed/ forfeited Balance carried forward
Date
21/11/2019 21/11/2021 1.12 370,806 - - - 370,806
08/07/2019 08/07/2022 4.45 50,557 - - - 50,557
29/11/2019 29/11/2022 4.65 16,127 - - - 16,127
09/12/2019 09/12/2022 4.30 193,781 - - - 193,781
27/07/2020 27/07/2023 4.15 14,456 - - - 14,456
16/11/2022 16/11/2025 2.58 34,950 - - - 34,950
680,677 - - - 680,677
Exercisable at the end of the year - - - - -
Weighted average exercise price 2.50 - - - 2.50
Year ended 31(st) March 2023
Grant date Vesting Exercise Balance brought forward Granted during the year Exercised during the year Lapsed/ forfeited Balance carried forward
Date price
21/11/2019 21/11/2021 1.12 384,038 - (13,232) - 370,806
08/07/2019 08/07/2022 4.45 50,557 - - - 50,557
29/11/2019 29/11/2022 4.65 16,127 - - - 16,127
09/12/2019 09/12/2022 4.30 193,781 - - - 193,781
27/07/2020 27/07/2023 4.15 21,684 - - (7,228) 14,456
16/11/2022 16/11/2025 2.58 - 34,950 - - 34,950
666,187 34,950 (13,232) (7,228) 680,677
Exercisable at the end of the year - - - - -
Weighted average exercise price 2.48 2.58 1.12 4.15 2.50
Options outstanding as at 31 March 2024 are exercisable at prices ranging
between £1.12 and £4.65 (FY23 £1.12 and £4.65) and the weighted average
contractual life of the options outstanding at the reporting date is 67 months
(FY23: 79 months) as analysed in the table below:
Number of Weighted average remaining contractual life (months)
share options
Exercise price range FY24 FY23 FY24 FY23
£1.12 - £1.99 370,806 370,806 63 75
£2.00 - £3.99 34,950 34,950 68 80
£4.00 - £4.65 274,921 274,921 104 116
680,677 680,677 67 79
Number of Average exercise price £
share options
FY24 FY23 FY24 FY23
CSOP Options 168,938 168,938 3.01 3.01
Unapproved Options 511,739 511,739 2.32 2.32
Total 680,677 680,677 2.50 2.50
Fair value calculations
The fair value of the CSOP share options plans are calculated at the date of
the grant using the Black-Scholes option pricing model. Expected volatility
was determined by calculating the historical volatility of the Company's share
price over an appropriate period. There were no CSOP share options granted
during the year ended 31 March 2024.
Long-term incentive plan
In FY21 the Company introduced an equity-settled long-term incentive plan
(LTIP) scheme for the executive directors and other senior executives.
Performance is measured at the end of the three-year performance period. If
the required minimum Earnings Per Share (EPS) performance conditions have been
satisfied, 25% of the shares will vest, increasing to 100% of shares if the
maximum EPS target is achieved. Straight-line vesting will apply if
performance falls between two points. FY23 LTIP scheme is split evenly over
three performance conditions; EPS, Strategy performance and Share Price.
Options awarded will expire ten years from the date of grant and are issued at
the nominal value of the Company's share capital pf £0.004p but the Company's
remuneration committee may waive the requirement at their discretion.
The following table summarises the movements in LTIP options during the year:
Year ended 31(st) March 2024
Grant date Vesting Date Exercise price Balance brought forward Granted during the year Exercised during the year Lapsed/ forfeited Balance carried forward
30/09/2020 30/03/2022 0.004 53,333 - - - 53,333
30/09/2020 30/09/2023 0.004 321,334 - - - 321,334
02/12/2021 02/12/2024 0.004 357,806 - - - 357,806
29/07/2022 29/07/2025 0.004 349,800 - - - 349,800
29/07/2022 29/07/2023 0.004 16,054 - - - 16,054
18/07/2023 18/07/2026 0.004 - 475,587 - - 475,587
1,098,327 475,587 - - 1,573,914
Weighted average exercise price 0.004 0.004 - - 0.004
Year ended 31(st) March 2023
Grant date Vesting Date Exercise price Balance brought forward Granted during the year Exercised during the year Lapsed/ forfeited Balance carried forward
30/09/2020 30/03/2022 0.004 53,333 - - - 53,333
30/09/2020 30/09/2023 0.004 321,334 - - - 321,334
02/12/2021 02/12/2024 0.004 357,806 - - - 357,806
02/12/2021 30/03/2022 0.004 53,333 - (53,333) - -
29/07/2022 29/07/2025 0.004 - 349,800 - - 349,800
29/07/2022 29/07/2023 0.004 - 16,054 - - 16,054
785,806 365,854 (53,333) - 1,098,327
Weighted average exercise price 0.004 0.004 0.004 - 0.004
No options were exercised during the period and no options were modified. The
weighted average remaining contractual life of these options is 13.7 months
(FY23: 20.6 months). No LTIP options were in issue prior to the 1 April 2020.
Fair value calculations
The fair value of the LTIP share options plans are calculated at the date of
the grant using the Monte-Carlo and Binomial simulation pricing models.
Expected volatility was determined by calculating the historical volatility of
the Company's share price over an appropriate period. The following table
presents the inputs used in the option pricing model for the share options
granted in the years ended 31 March 2024 and 31 March 2023 based on the
information at the date of grant:
Grant date of award Share price at grant date Exercise price Expected volatility Dividend yield Risk-free interest rate Fair value at grant date
29/07/2022 2.78 0.004 52.3% 0% 1.87% 2.34
29/07/2022 2.78 0.004 31.7% 0% 1.87% 2.34
18/07/2023 2.08 0.004 46.5% 0% 4.77% 0.64
LTIP awards granted during the year ended 31 March 2024 are subject to the
Earnings Per Share performance, Strategy performance and share price
conditions.
2 Year Share Scheme
In FY24, the Company introduced a 2 year share scheme for the employees of the
organisation (excluding Directors). Share options are awarded at the end of
each financial year, following approval by the Remuneration Committee, and
based on an individual's performance. These share options vest after 2 years
of continued good performance in the Company. Once vested, the options can be
exercised until 10 years from the grant date. The options are equity settled.
The options were valued using a Black Scholes model.
The following table summarises the movements in 2 Year Share Scheme options
during the year:
Year ended 31(st) March 2024
Grant date Vesting Date Exercise price Balance brought forward Granted during the year Exercised during the year Lapsed/ forfeited Balance carried forward
29/06/2023 29/06/2025 0.004 - 87,167 - - 87,167
- 87,167 - - 87,167
Weighted average exercise price - 0.004 - - 0.004
24. Retirement benefits
The Company operates a defined contribution pension scheme for all qualifying
employees. During the year, the Company charged £99,669 (FY23: £82,774) as
employer's pension contributions. The outstanding pension creditor as at 31
March 2024 was £8,227 (FY23: £5,339).
25. Financial instruments - classification and measurement
Financial assets
Financial assets measured at amortised cost comprise trade receivables,
contract assets and cash, as follows:
31 March 2024 31 March 2023
£000s £000s
Trade receivables 26,596 22,100
Contract assets 2,465 2,045
Cash and cash equivalents 1,452 636
Total 30,513 24,781
Financial assets measured at fair value through profit or loss comprise of
investments;
31 March 2024 31 March 2023
£000s £000s
Investments 40,196 36,462
Total 40,196 36,462
Financial liabilities
Financial liabilities measured at amortised cost comprise of trade and other
payables, bank loans, and lease liabilities, as follows:
31 March 31 March
2024 2023
£000s £000s
Trade and other payables 17,669 12,936
Bank loans 13,726 10,381
Total 31,395 23,317
Fair value
The fair value of investments is determined as set out in the accounting
policies in Note 2. The fair value hierarchy of financial instruments measured
at fair value is provided below:
31st March 2024 Level 1 Level 2 Level 3
£000s £000s £000s
Investments - - 40,196
Total - - 40,196
31st March 2023 Level 1 Level 2 Level 3
£000s £000s £000s
Investments - - 36,462
Total - - 36,462
26. Cashflow information
(A) Non-cash adjustments to cashflows generated from operations
31 March 31 March
2024 2023
£000s £000s
Fair value movements (2,112) 6,037
Legal costs on realised cases 4,733 9,024
Finance expense 1,479 236
Depreciation & amortisation - 99
Share based payments 336 260
Deferred tax - (95)
Finance income (16) (7)
Non-cash adjustments to cashflows generated from operations 4,420 15,554
(B) Net debt
31 March 31 March
2024 2023
£000s £000s
Cash and cash equivalents 1,452 636
Borrowings - repayable after one year (13,726) (10,381)
Net debt (12,274) (9,745)
27. Financial instruments - risk management
The Company's activities expose it to a variety of financial risks: market
risk (including cash flow interest rate risk), investment risk, liquidity risk
and credit risk. Risk management is carried out by the Board of Directors. The
Company uses financial instruments to provide flexibility regarding its
working capital requirements and to enable it to manage specific financial
risks to which it is exposed.
The Company finances its operations through a mixture of equity finance, bank
debt, cash and liquid resources and various items such as trade receivables
and trade payables which arise directly from the Company's operations.
Interest rate risk
Interest rate risk is the risk that the fair value of future cash flows
associated with the instrument will fluctuate due to changes in market
interest rates. Interest bearing assets including cash and cash equivalents
are short-term liquid assets. It is the Company's policy to settle trade
payables within the credit terms allowed and the Company does therefore not
incur interest on overdue balances. No sensitivity analysis has been
prepared as the impact on the financial statements would not be significant.
The interest rate profile of the Company's borrowings is shown below:
31 March 31 March
2024 2023
Debt Interest Debt Interest
£000s Rate £000s Rate
Floating rate borrowings
Bank loans 13,750 SONIA and Margin of 4.7% 10,500 LIBOR and Margin of 3.7%
Sensitivity to variable interest rates
Interest charged on the bank loan is a variable rate and is therefore
sensitive to the movements in UK interest rates. Whilst interest rates have
increased over the last 12 months it is now expected that UK interest rates
will decrease over the next 12 months. The Company has considered interest
rate hedges but has decided not to purchase such an instrument due to the high
cost involved.
Liquidity risk
The Company seeks to maintain sufficient cash balances. Management reviews
cash flow forecasts on a regular basis to determine whether the Company has
sufficient cash reserves to meet future working capital requirements and to
take advantage of business opportunities.
Unused borrowing facilities at the reporting date:
31 March 2024 31 March 2023
£000s £000s
Bank loans 3,750 14,500
The following table details the Company's remaining contractual maturity for
the Company's non-derivative financial liabilities with agreed maturity
periods. The table is presented based on the undiscounted cashflows of the
financial liabilities based on the earliest date on which the Company can be
required to pay which may differ from the carrying liabilities at the
reporting date.
Bank covenants (leverage and interest cover) were breached during FY24 and
waivers were agreed on each occasion. As such, Management agreed with HSBC a
revised set of covenants in March 2024 that were cash based measures rather
than the previous profit based measures.
At 31 March 2024 Less than one year Between 1 and 2 years Between 2 and 5 years Greater than 5 years Total contractual cashflows Carrying amount of liabilities
£000s £000s £000s £000s £000s £000s
Trade and other payables 9,622 2,686 4,310 1,170 17,788 17,669
Bank borrowings - 13,750 - - 13,750 13,726
Total 9,622 16,436 4,310 1,170 31,538 31,395
At 31 March 2023 Less than one year Between 1 and 2 years Between 2 and 5 years Greater than 5 years Total contractual cashflows Carrying amount of liabilities
£000s £000s £000s £000s £000s £000s
Trade and other payables 6,435 1,856 4,451 3,906 16,648 12,936
Bank borrowings - - 10,500 - 10,500 10,381
Total 6,435 1,856 14,951 3,906 27,148 23,317
Capital risk management
The Company is both equity and debt funded, and these two elements combine to
make up the capital structure of the business. Equity comprises share capital,
share premium and retained earnings and is equal to the amount shown as
'Equity' in the balance sheet. Debt comprises bank loans which are set out in
further detail above and in note 20. The Company initially raised funds
through an IPO in December 2018 and has drawn down £13.75m of a HSBC loan
facility (FY23: £10.5m), the total facility is a £17.5m revolving credit
facility with HSBC.
The Company's current objectives when maintaining capital are to:
· Safeguard the Company's ability to operate as a going concern so
that it can continue to pursue its growth plans.
· Provide a reasonable expectation of future returns to
shareholders.
· Maintain adequate financial flexibility to preserve its ability
to meet financial obligations, both current and long term.
The Company sets the amount of capital it requires in proportion to risk. The
Company manages its capital structure and adjusts it in the light of changes
in economic conditions and the risk characteristics of underlying assets. In
order to maintain or adjust the capital structure, the Company may issue new
shares or sell assets to reduce debt.
During the year ended 31 March 2024 the Company's strategy remained unchanged.
Credit risk and impairment
Credit risk refers to the risk that a counterparty will default on its
contractual obligations resulting in financial loss to the Company. The
maximum exposure to credit risk is the carrying value of its financial assets
recognised at the reporting date, as summarised below:
31 March 2024 31 March 2023
£000s £000s
Trade receivables 26,596 22,100
Contract asset 2,465 2,045
Cash and cash equivalents 1,452 636
Total maximum exposure 30,513 24,781
No expected credit loss ("ECL") provision is raised against bank balances or
against the contract asset as management consider credit risk in both cases to
be immaterial.
The Company applies the simplified approach in providing for expected credit
losses under IFRS 9 which allows the use of the lifetime expected credit loss
provision for all trade receivables. In measuring the expected credit losses,
trade receivables have been stratified by settlement type and days past due.
Expected lifetime credit loss rates are based on the payment profiles of sales
from January 2019 (post IPO).
The Company attempts to assess the probability of credit losses but seeks to
mitigate its credit risk by undertaking rigorous net worth checks before
taking on a new case. Occasionally, credit defaults do occur when
counterparties default on an agreed settlement, payable by instalments.
There is a concentration risk in relation to the trade receivable of £7.2m in
relation to a single case which completed in FY21. Repayments to date have
been made according to the agreed schedule. Excluding this balance, the
Company does not consider any concentration of risk within either trade or
other receivables to be significant. The Company seeks to obtain charging
orders over the property of trade receivables as security where possible. The
receivables' ageing analysis is also evaluated on a regular basis for
potential doubtful debts. It is the Directors' opinion that no further
provision for doubtful debts is required.
The following table contains an analysis of the Company's total gross trade
receivables segmented by settlement type.
31 March 2024 31 March 2023
£000s £000s
Settlement agreements 23,805 18,850
Judgements 4,629 5,044
Specific provisions 4,507 2,881
Gross carrying amount 32,941 26,775
Loss allowance (6,345) (4,675)
Trade receivables carrying amount 26,596 22,100
Analysis of trade receivables stratified by settlement type, is as follows:
Past due at 31 March 2024 Current 0-1 1-3 months 3-6 months 6-12 months >12 months Total
£000s months £000s £000s £000s £000s £000s
£000s
Gross receivables
Settlement agreements 21,150 230 247 995 1,551 1,360 25,533
Judgements 910 3 76 42 4 6,373 7,408
Total 22,060 233 323 1,037 1,556 7,733 32,941
Loss allowance
Settlement agreements - ECL (281) (7) (15) (28) (80) (111) (522)
Judgements - ECL (19) - (5) (6) (1) (1,286) (1,317)
Settlement agreements - Specific provisions (391) (12) (23) (31) (91) (1,178) (1,726)
Judgements - Specific provisions - - - - - (2,780) (2,780)
Total (691) (19) (43) (65) (172) (5,355) (6,345)
Expected loss rate %
Settlement agreements 2% 3% 7% 13% 23% 36% 4%
Judgements* 28% 32% 32% 32% 32% 34% 38%
Specific provisions 100% 100% 100% 100% 100% 100% 100%
Total 4% 4% 13% 16% 23% 34% 19%
*Expected judgement loss rates are shown net of deductions where the Company
has secured charging orders over properties owned by the debtors.
Expected credit loss ("ECL") rates have been calculated with reference to past
history of credit losses within each ageing category. Management has sought to
amend the rates if there are known future macroeconomic events that may alter
those historical rates.
In respect of certain aged debtors, the Company may hold restrictions on a
defendant's property sales and a charge over a defendant's property. Where
significant assets are held by a defendant the Company may choose to not fully
write down the exposure of an aged debtor.
Judgements are handed down by a judge and are imposed on a defendant, the
adversarial nature of the arrangement results in these balances being more
difficult to collect, often requiring the forced sale of a defendant's asset
which can take time to achieve.
The Company fully writes off an aged debtor when it believes that there are no
prospects of recovery.
Credit risk on cash and cash equivalents is considered to be very low as the
Company's banks hold Fitch credit ratings of A or above.
Investment risk
Investment risk refers to the risk that the Company's case investments may
increase or decrease in value.
Sensitivity analysis has not been included in the financial statements, due to
the vast amount of inputs and number of variables which are inherently
specific to each case, making it impossible to provide meaningful data. Whilst
the Board considered the methodologies and assumptions adopted in the
valuation are supportable, reasonable and robust, because of the inherent
uncertainty of valuation, it is reasonably possible, on the basis of existing
knowledge that outcomes within the next financial year that are different from
the assumptions could require a material adjustment to the carrying amount of
the £40.2m of investments disclosed in the balance sheet. However, as an
indication we note that a 10% increase/(decrease) in the fair value or our top
20 cases (excluding Cartel cases) would result in an increase/(decrease) in
the fair value investment of +/- £0.9m.
Currency risk
The Company is not exposed to any currency risk at present.
28. Related party transactions
Director and key management remuneration is disclosed in Note 5.
Dividends of £nil were paid to the directors during the year based on their
individual shareholdings disclosed in the Remuneration Committee report as
follows:
31 March 2024 31 March 2023
£000s £000s
Steven Cooklin - 34
Lord Howard Leigh - 1
Mena Halton - 1
Total dividends paid to the directors - 36
29. Ultimate controlling party
The Company has no ultimate controlling party.
This information is provided by RNS, the news service of the London Stock Exchange. RNS is approved by the Financial Conduct Authority to act as a Primary Information Provider in the United Kingdom. Terms and conditions relating to the use and distribution of this information may apply. For further information, please contact
rns@lseg.com (mailto:rns@lseg.com)
or visit
www.rns.com (http://www.rns.com/)
.
RNS may use your IP address to confirm compliance with the terms and conditions, to analyse how you engage with the information contained in this communication, and to share such analysis on an anonymised basis with others as part of our commercial services. For further information about how RNS and the London Stock Exchange use the personal data you provide us, please see our
Privacy Policy (https://www.lseg.com/privacy-and-cookie-policy)
. END FR KLLFBZKLLBBZRecent news on Manolete Partners
See all newsREG - Manolete Partners - Block Listing Six Monthly Return
AnnouncementREG - Manolete Partners - Trading Update
AnnouncementREG - Manolete Partners - Directorate Change
AnnouncementREG - Manolete Partners - New Revolving Credit Facility with HSBC Bank
AnnouncementREG - Manolete Partners - Update on Cartel Claims
Announcement