REG - Manolete Partners - Half Year Results
16/11/2023 07:00
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RNS Number : 6146T Manolete Partners PLC 16 November 2023
16 November 2023
MANOLETE PARTNERS PLC
("Manolete" or the "Company")
Half-year results for the six months ended 30 September 2023
Manolete (AIM:MANO), the leading UK-listed insolvency litigation financing
company, today announces its unaudited results for the six months ended 30
September 2023.
Steven Cooklin, Chief Executive Officer, commented:
"It is pleasing to report another six months of strong growth in the business.
A 21% increase in case completions and a 116% increase in new case investments
has translated into a 104% increase in total revenues and positive
profitability and EPS in the first half of the current trading year compared
to the 6 months ended 30 September 2022. The prior period was negatively
impacted by fair value write downs which were not repeated in H1 FY24.
"We ended the current half year reporting period with 417 live cases
in-progress, 58% higher than at the same time last year. Our in-house Legal
and Net Worth Reporting teams have been significantly expanded to address this
current and anticipated strong increase in our business activities.
"The exceptional results that our team has already delivered on the Barclays
Bounce Back Loan Pilot position us well to expand our work in this area, with
the prospect of further potential work with Barclays and the launch of a
separate pilot with another well-known bank".
Financial highlights:
· Total revenues increased by 104% to £11.2m from H1 FY23 (£5.5m)
as a result of both positive realised and unrealised revenue compared to a
significant fair value write down in the prior year comparative.
· Gross profit reported of £5.0m in this period, H1 FY24, compared
to a £(2.2)m gross loss in H1 FY23.The primary drivers were:
o positive realised and unrealised gross profit contributed in H1 FY24
whilst in the prior period, H1 FY23, was negatively affected by a write down
in unrealised revenue; and
o an increase in new cases signings (179 new cases H1 FY24, 83 H1 FY23).
· EBIT profit of £1.6m has been achieved compared to a loss of
£5.3m recorded in H1 FY23, a turnaround of £6.9m.
· Profit Before Tax was £0.9m compared to a Loss Before Tax of
£5.4m in H1 FY23.
· Gross cash generated from completed cases decreased 45% to £8.7m
(H1 FY23: £15.7m). However, as previously reported, the figure for H1 FY23
included an exceptionally large single case settlement of £9.5m. Excluding
that large case, H1 FY24 was 40% higher than the £6.2m generated in H1 FY23.
· Net assets as at 30 September 2023 were £39.8m (H1 FY23:
£37.8m). Net Debt was £12.0m consisting of borrowings of £12.9m, offset by
cash balances of £0.9m (H1 FY23: £9.4m consisting of a drawn down loan of
£9.8m, offset by cash balances of £0.4m).
· £12m of the £25m HSBC Revolving Credit Facility remains
available for utilisation, as at 30 September 2023 (H1 FY23, £15m
unutilised).
· Basic earnings per share improved to positive 1.4 pence (H1 FY23:
negative 10.2 pence).
· No interim dividend is proposed (H1 FY23: £nil).
Operational and market highlights:
· Ongoing delivery of realised returns: 116 case completions in H1
FY24 representing a 21% increase (95 case realisations in H1 FY23), generating
gross settlement proceeds of £9.2m (H1 FY23: £18.3m), over an average
duration of 11.5 months. As previously reported, H1 FY23 included an
exceptionally large single case return of £9.5m. Excluding that large case,
H1 FY24 gross settlement proceeds were 142% higher than the £3.8m generated
in H1 FY23.
· The average duration of the 116 case realisations in H1 FY24 was
11.5 months (H1 FY23: 14.9 months). This signifies a return to the Company's
long established case duration of around 12.7 months, which had expanded
temporarily due to the challenges presented by Covid.
· Average money multiple (gross proceeds less the Insolvent
Estate's share of the net returns, divided by the sum of the upfront payment
to the Insolvent Estate and total legal costs and other expenses of the claim)
of 2.3 times for the 116 cases completed in H1 FY24 (H1 FY23 2.2 times).
· Average case duration across the full lifetime portfolio of 803
completed cases as at 30 September 2023 was 12.7 months (H1 FY23: 13.3
months).
· New case investments increased by 116% to 179 (H1 FY23: 83 new
case investments) as the higher level of insolvencies in the economy
translated to higher new cases signed as well as the impact of the Barclays
Bounce Back Loan Pilot (BBLs).
· New case enquiries remained at elevated levels, increasing
marginally from 341 in H1 FY23 to 348 in H1 FY24.
· 58% increase in live cases: 417 in process as at 30 September
2023 (264 as at 30 September 2022) which includes 53 live BBLs.
· Excluding the Cartel cases, all vintages up to and including the
2019 vintage are now fully completed. Only seven cases remain open in the 2020
vintage. 76% of the Company's live cases have been signed in the last 18
months.
· The Bounce Back Loan ("BBL") pilot with Barclays Bank covering a
range of defaulted BBL cases continues to perform well. Starting in January
2023, the Company has now signed 80 Barclays BBL cases of which 27 have
already been completed. The results of Manolete's recoveries in the pilot
continue to be impressive, and the Company is engaging with Barclays to
potentially extend our work with them. The Company is hopeful to shortly
commence a separate BBL pilot with another well-known bank.
· The truck Cartel cases continue to progress well. Following a
positive judgment on the first test cases (Royal Mail and British Telecom),
several similar (non-Manolete) UK truck cartel cases have now reached
settlement. A marginal uplift to Manolete's fair value has been recorded in
this interim period due to a reduction of forecast future costs relating to
the smaller cases. A relatively minor appeal on the DAF/British Telecom case
is listed for hearing in the Court of Appeal next month. Once that has
concluded, the Board will be looking to move the Company's 22 truck related
cartel cases forward to resolution.
· In anticipation of further sustained high levels of activity in
the UK insolvency sector, we have added significantly to our in-house Legal
and Net Worth Reporting teams with several high-quality new joiners.
For further information, please contact:
Manolete Partners Plc via Instinctif Partners
Steven Cooklin (Chief Executive Officer)
Peel Hunt (NOMAD and Broker) +44 (0)20 7418 8900
Paul Shackleton
Instinctif Partners (Financial PR) +44 (0)7949 939237
Tim Linacre
Isadora Pegler
Chief Executive Officer's Statement
Introduction
I am pleased to present our unaudited statements for the half year to 30
September 2023.
Manolete is the leading UK quoted company in the insolvency litigation finance
market, a market which plays an important role in returning funds to
creditors, particularly HMRC.
Performance
Following an extended period of almost two years, while the UK Government took
action to temporarily supress UK insolvencies during the period of the Covid
pandemic, the insolvency market returned to largely normal operations from
April 2022. Since then, UK insolvencies in total, and Creditors Voluntary
Liquidations ("CVLs"), in particular, are now at levels not seen since the
2008 financial crisis. Larger company insolvencies, which typically enter an
insolvency process via Administration, are now also at least back to
pre-pandemic levels.
Liquidators and Administrators will always require some time to undertake the
necessary investigations into any insolvent company, before being in position
to present potential litigation claims to third party funders. Therefore, it
was not until the H2 FY23 period, that Manolete started to benefit from a
significant increase in the level of its business. That resulted in the strong
growth reported in that the second half of FY23. The financial results for H1
FY24 show a continuation of that strong growth across all KPIs of the Company,
as well as a significant 104% increase in revenues compared to H1 FY23 and a
return to profitability at the EBIT, pre-tax and post-tax levels compared to
losses on all of those three measures for H1 FY23.
The first wave of insolvencies after April 2022 was driven by the sharply
rising and sustained increase in CVLs. These generally represent smaller
companies and therefore, typically, smaller claim values. This has resulted in
an 18% lower average completion value per case in H1 FY24 (£79.3k per case)
compared to H1 FY23 (£96.8k per case) (excluding the exceptionally large
single case completion). It is only in the last seven months that the UK
insolvency market has seen any sustained recovery to pre-pandemic levels of
Administration appointments. As the insolvency market develops through the
current business cycle, the Directors anticipate a return to higher average
case sizes, reflecting a greater mix of larger company insolvencies.
Vintages Table
This table highlights some of the key features of Manolete's model:
1. Consistently high IRRs across 803 completed cases.
2. Fast case completions, at an average of 12.7 months per case (H1
FY23: 13.3 months per case) from the date of signing the investment agreement
to the date that the case is legally completed. Cash tends to be collected, on
average, over the following 12 months (H1 FY23 12 months).
3. All cases completed for the 2019 vintage and earlier.
4. Only seven of the 141 cases invested in 2020 remain open.
Case Vintages as at 30 September 2023
Case No. of No. % No Open case investments Closed case investments Total Total Total IP Manolete Duration completed cases ROI MoM IRR
investments
completed
completion
outstanding
invested
recovered
gain
share
gain
Vintage No No % total No £'000 £'000 £'000 £'000 £'000 £'000 £'000 Months % % %
2010 2010 3 3 100% 0 0 52 52 28 (24) 10 (35) 7.0m (67%) .3x 0%
2011 2011 0 0 - 0 0 0 0 0 0 0 0 0.0m 0% .0x 0%
2012 2012 8 8 100% 0 0 763 763 2,524 1,761 580 1,181 18.0m 155% 2.5x 258%
2013 2013 10 10 100% 0 0 174 174 780 606 316 290 7.1m 166% 2.7x 147%
2014 2014 42 42 100% 0 0 594 594 3,884 3,290 2,427 863 10.0m 145% 2.5x 455%
2015 2015 39 39 100% 0 0 1,404 1,404 7,029 5,625 3,290 2,335 12.8m 166% 2.7x 502%
2016 2016 36 36 100% 0 0 1,936 1,936 9,393 7,457 4,164 3,293 15.0m 170% 2.7x 180%
2017 2017 31 31 100% 0 0 1,446 1,446 4,469 3,023 1,905 1,118 14.1m 77% 1.8x 462%
2018 2018 29 29 100% 0 0 3,967 3,967 23,714 19,747 12,972 6,775 16.9m 171% 2.7x 71%
2019 2019 59 59 100% 0 0 2,745 2,745 14,855 12,110 7,528 4,582 17.4m 167% 2.7x 95%
2020 2020 141 134 95% 7 924 6,811 7,734 18,188 11,378 7,105 4,272 17.2m 63% 1.6x 80%
2021 2021 198 166 84% 32 1,442 7,216 8,658 22,855 15,639 8,444 7,195 13.8m 100% 2.0x 106%
2022 2022 159 121 76% 38 1,384 2,619 4,003 8,140 5,522 3,033 2,488 10.6m 95% 2.0x 223%
2023 2023 263 114 43% 149 1,837 1,453 3,290 8,078 6,626 3,341 3,286 5.6m 226% 3.3x 1994%
H1 2024 2024 179 11 6% 168 677 59 736 428 368 183 185 2.7m 312% 4.1x 2794%
Total (exc. Cartel cases) 1,197 803 67.1% 394 6,264 31,238 37,501 124,365 93,127 55,297 37,827 12.7m 121% 2.2x 131%
(i) The vintages table excludes 22 cartel cases and is net of deductions for
bad debt provisions (excluding ECL provisions).
(ii) Ongoing cases includes partial realisations.
(iii) The large case completion in FY21 is presented net of discounting.
(iv) IRR's are presented for vintages where there are 12 or more months of
historical cashflow information.
Strategy, Team and Outlook
The Company ended H1 FY24 with 417 live cases in-progress, a 58% increase over
the previous period-end. The Directors believe that given the challenging
prevalent economic environment, featuring high inflation, significantly higher
interest rates and far higher levels of UK insolvencies, this elevated level
of business activity is likely to continue for a significant period. To
accommodate this much higher level of current and anticipated future activity,
in the last 6 months, the Company has added two new expert in-house insolvency
litigators to its in-house Legal Team, bringing the Legal Team up to 17 in
total and added two further experienced staff to its Net Worth Report Team.
From January 2023, the Company started to take assignments of cases from the
specialist recovery work it is undertaking with Barclays Bank on a range of
defaulted Bounce Back Loans ("BBLs") issued by Barclays. By 30 September 2023,
the Company had taken on 80 BBL such cases from the Barclays BBL pilot and had
already completed 27 of those cases. The Company is now in discussion with
Barclays Bank regarding a potential extension of that programme. The Company
is also hopeful to soon commence a separate BBL pilot with another well-known
bank.
January 2023 also saw judgment handed down after the trials of the British
Telecom and Royal Mail Truck Cartel cases. The judgment supports the Net Book
Value of Manolete's truck cartel cases which is directly derived from the work
done by the Company's retained specialist cartel valuation firm, Fideres
Partners LLP. One of the defendants (DAF) has been granted permission to
appeal on one out of its five heads of appeal. The appeal is due to be heard
in the Court of Appeal next month. These initial test cases were then followed
by a several similar claims settling, although, as is usual, the terms of the
settlements are confidential. Currently the Company's 22 truck cartel claims
remain stayed but once the DAF appeal has been concluded the Board will be
looking to move all of the Company's truck cartel claims forward to a
resolution.
Dividend
No interim dividend is proposed for the six months to 30 September 2023.
Steven Cooklin
Chief Executive Officer
Chief Financial Officer's Review
I am pleased to give my review of the Company's unaudited results for the half
year to 30 September 2023.
Trading summary
6 months 6 months 6 months
ended 30 September ended 30 ended 31
2023 September March
2022 2023
Unaudited Unaudited Unaudited
£'000s £'000s £'000s
Revenue 11,230 5,514 15,240
Cost of sales (6,234) (7,701) (9,380)
Gross profit/(loss) 4,996 (2,187) 5,860
Administrative expenses (3,436) (3,071) (3,724)
Operating profit/(loss) 1,560 (5,258) 2,136
KPI's
Gross profit margin % 44% (40)% 38%
Operating profit margin % 14% (95)% 14%
New cases (#) 179 83 180
Completed cases (#) 116 95 98
Live cases at period end (#) 417 264 351
The financial results for the 6 months to 30 September 2023 (H1 FY24) report
an Operating profit of £1.6m (H1 FY23 £(5.3)m) which is a significant
improvement on the same period last year. In the prior year, as previously
reported in the H1 FY23 interim report and financial statements for the year
to 31 March 2023, there was a significant write down in fair values resulting
in an operating loss, which has not been required this period. In H2 FY23,
there was a strong recovery in trading performance that has been continued
into H1 FY24.
Operationally, the business performed strongly and completed 116 cases in the
6 month period to 30 September 2023 (95 cases, H1 FY23) and signed 179 new
cases (83 new cases, H1 FY23) and continues to realise cash proceeds from both
historic and current year completed cases.
Revenue
6 months 6 months 6 months
ended 30 September ended 30 ended 31
2023 September March
2022 2023
Unaudited Unaudited Unaudited
£'000s £'000s £'000s
Realised revenue 9,401 13,598 13,194
Unrealised revenue 1,829 (8,084) 2,045
Revenue 11,230 5,514 15,239
Mix %
Realised revenue 84% 247% 87%
Unrealised revenue 16% (147%) 13%
Revenue increased from £5.5m in H1 FY23 to £11.2m in H1 FY24, an increase of
104%, which was a result of more normalised trading conditions in H1 FY24
compared to difficult market conditions resulting in a fair value write down
in H1 FY23, hence the increase in unrealised revenue. We look at each realised
and unrealised revenue separately:
Realised revenue decreased from £13.6m H1 FY23 to £9.4m in H1 FY24, a
decrease of 31%. This was a result of a 'one-off' exceptionally large case
being settled in H1 FY23 (Manolete share of revenue of £4.9m) which was not
repeated in FY24. Case completions grew by 22% to 116 cases in H1 FY24 (H1
FY23: 95 cases) demonstrating a greater volume of case completions but lower
average case completion value. When compared to H2 FY23, realised revenue
decreased from £13.2m to £9.4m, H1 FY24, a result of lower average case
completion value (£155k per case in H2 FY23 compared to £81k).
Unrealised revenue increased to £1.8m H1 FY24 compared with £(8.1)m in H1
FY23. As previously mentioned, the prior year period included an increased
level of write-downs of existing live cases £(5.2)m which included a single
case fair value write down of £(2.3)m following an adverse decision at trial.
There were no such adverse trial decisions in FY24 or fair value write downs.
H1 FY24 represents a return to 'normal' in terms of a net positive unrealised
revenue figure.
Gross profit / (loss)
6 months 6 months 6 months
ended 30 September ended 30 ended 31
2023 September March
2022 2023
Unaudited Unaudited Unaudited
£'000s £'000s £'000s
Realised gross profit 3,167 5,897 3,812
Unrealised gross profit 1,829 (8,084) 2,048
Gross profit / (loss) 4,996 (2,187) 5,860
Margin %
Realised gross profit 34% 43% 29%
Unrealised gross profit 100% (100)% 100%
Gross profit margin % 44% (40)% 38%
Gross profit increased from £(2.2)m in H1 FY23 to £5.0m in H1 FY24,
primarily due to the positive contribution of newly signed cases in comparison
to the reduction in the fair value of cases in the prior year. Once again, we
should review realised and unrealised gross profit separately.
Realised gross profit decreased to £3.2m H1 FY24 (£5.9m H1 FY23), due to the
single large case completion in the prior year but partially offset by a
higher number of case completions. Realised gross profit margin decreased to
34% H1 FY24 from 43% H1 FY23.
Unrealised gross profit of £1.8m H1 FY24 is as previously discussed under
revenue above, a return to more 'normal' unrealised figures following a
reduction in the fair value of live cases in the prior year. When unrealised
revenue is compared to the six months to 31 March 2023, H2 FY23, lower value
cases on average have been signed in H1 FY24 resulting in a marginally lower
unrealised revenue, £1.8m versus £2.0m.
Administrative expenses
Administrative expenses increased by 9.7% to £3.4m in the six months to 30
September 2023 (H1 FY23: £3.1m) which is principally attributable to an
increase in staff costs by £328k, a result of both annual staff salary
increases and additional headcount as staff numbers are increased to be line
with increased volumes of cases.
Increases in marketing expenses (increased marketing activity) and
professional fees (inflation) were broadly offset by a decrease in bad debt
expenses in this period.
When compared to the 6 month period to 31 March 2023, Administration expenses
have decreased by £287k, a result of lower bad debt charges in this 6 month
period.
Statutory operating profit/(loss) Earnings Before Interest and Tax
Operating profit/(loss) increased to £1.6m in H1 FY24 (H1 FY23: £(5.3)m)
with an operating profit margin of 14% (H1 FY23: (95)%).
Finance costs
Finance costs increased to £647k in H1 FY24 (H1 FY23: £205k) as base rate
interest rates have significantly increased in the 6 month period to 30
September 2023, as well as our debt draw down increasing in the period.
Dividend
No interim dividend is proposed for FY24 (FY23 interim dividend, nil).
Investment in cases
The Company was managing 417 live case investments (including Cartel cases) as
at 30 September 2023, compared to 264 live cases (including Cartel cases) as
at 30 September 2022, a 58% increase. The total investment in cases amounted
to £39.4m at 30 September 2023, an increase of 9.1% from the value as at 30
September 2022 of £36.2m (31 March 2023 value of £36.5m).
Investments in cases are shown at fair value, based on the Company's estimate
of the likely future realised gross profit. Management, following discussion
with the in-house legal team, on a case by case basis, amend the valuations of
cases each month to accurately reflect management's view of fair value. In
addition, at the interim and year end reporting periods, a sample of material
valuations are corroborated with the external lawyers working on the case who
provide updated legal opinions as to the current status of the case. The
Company does not capitalise any of its internal costs, these are fully
expensed to the Statement of Comprehensive income.
Trade and other receivables
Trade and other receivables have increased marginally to £24.3m at 30
September 2023 compared with £22.3m at 30 September 2022. This amount is net
of provision for bad debts.
Operational cashflows
6 months 6 months 6 months
ended 30 September ended 30 ended 31
2023 September March
2022 2023
Unaudited Unaudited Unaudited
£'000s £'000s £'000s
Gross cash receipts 8,739 15,716 10,992
IP share & legal costs on completed cases (4,163) (8,084) (5,126)
Cashflows from completed cases 4,576 7,632 5,866
Overheads (3,112) (2,584) (2,974)
Net cash generated from operations before investment in cases and corporation 1,464 5,048 2,892
tax
Corporation tax - (354) -
Investment in cases (3,193) (2,803) (2,935)
Net cash (used in) / generated from operations (1,729) 1,891 (43)
Gross cash receipts of £8.7m in H1 FY24 (£15.7m H1 FY23) represents a
decrease in cash generation in comparison with H1 FY23. This is due to the
exceptionally single large case completion in the prior year for which cash of
£9.5m was collected within the same month. If the exceptional case is removed
from prior year cash generation figures, a prior year comparative of £6.2m is
a more understandable comparison to the current period, £8.7m cash
generation.
In the six months to 31 March 2023, there was also a net cash outflow a result
of the increased investment in new cases signed.
Cash generation was positive after payment of IP share and external legal
costs on those completed cases and after payment of overheads of £(3.1)m.
We continue to utilise both our cash resources and draw down of HSBC loan
facility to invest in new and existing cases, with a cash investment of £3.2m
(£2.8m H1 FY23) in the six-month period.
Debt financing
The Company has drawn down £13.0m (£9.8m H1 FY23) of its £25.0m HSBC loan
facility as at 30 September 2023 and continues to deploy loan capital to
finance investment in cases. During H1 FY24 the Company drew down a net £2.5m
of its HSBC loan facility (repaid £3.5m H1 FY23). The Company held cash
reserves of £0.9m as at 30(th) September 2023 and had £12.0m available of
the £25.0m HSBC facility (£15.0m available at 30(th) September 2022). This
facility and cash reserves will be used to fund the expected growth in case
volumes following the full relaxation of the Temporary Measures on 1 April
2022.
There has been a breach in the interest cover and leverage covenants for the
30(th) September 2023 quarter for which HSBC have signed a waiver. Management
are working with HSBC in order to put in place a long term covenant solution.
Mark Tavener
Chief Financial Officer
Unaudited Statement of Comprehensive Income for the period ended 30 September
2023
6 months ended 30 September 2023 6 months ended 30 September 2022 Year
ended 31 March
2023
Unaudited Unaudited Audited
Note £'000s £'000s £'000s
Revenue 3 11,230 5,514 20,753
Cost of sales (6,234) (7,701) (17,081)
Gross Profit / (Loss) 4,996 (2,187) 3,672
Administrative expenses 4 (3,436) (3,071) (6,793)
Operating Profit / (Loss) 1,560 (5,258) (3,121)
Finance income 7 2 7
Finance expense 5 (647) (205) (839)
Profit / (Loss) before tax 920 (5,461) (3,953)
Taxation (295) 1,020 829
Profit / (Loss) and total comprehensive income for the year attributable to 625 (4,441) (3,124)
the equity owners of the Company
Earnings per share attributable to equity owners of the Company
Basic (£ per share) 11 £0.01 £(0.10) £(0.07)
Diluted (£ per share) 11 £0.01 £(0.10) £(0.07)
The above results were derived from continuing operations.
Unaudited Statement of Financial Position at 30 September 2023
Company Number: 07660874 30 September 2023 Restated 30 September 2022 31 March 2023
Unaudited Unaudited Audited
Note £'000s £'000s £'000s
Non-current assets
Investments 6 13,530 13,198 13,389
Intangible assets - 2 -
Trade and other receivables 9 11,606 12,952 12,315
Deferred tax asset 137 104 267
Total non-current assets 25,273 26,256 25,971
Current assets
Investments 6 25,905 22,964 23,073
Trade and other receivables 9 12,700 9,366 12,063
Corporation tax asset 470 979 735
Cash and cash equivalents 949 359 636
Total current assets 40,024 33,668 36,507
Total assets 65,297 59,924 62,478
EQUITY AND LIABILITIES
Equity
Share capital 175 175 175
Share premium 157 157 157
Share based payment reserve 742 485 699
Special reserve - 5 -
Retained earnings 38,755 37,027 38,130
Total equity attributable to the equity owners of the company 39,829 37,849 39,161
Non-current liabilities
Trade and other payables 10 7,019 7,749 7,393
Borrowings 12,928 9,833 10,381
Total non-current liabilities 19,947 17,582 17,774
Current liabilities
Trade and other payables 10 5,521 4,493 5,543
Current tax liabilities - - -
Total current liabilities 5,521 4,493 5,543
Total liabilities 25,468 22,075 23,317
Total equity and liabilities 65,297 59,924 62,478
The interim statements were approved by the Board of Directors and authorised
for issue on 14 November 2023.
Unaudited Statement of Changes in Equity for the period ended 30 September
2023
Attributable to equity owners of the Company
Share Capital Share Premium Share based payment reserve Special Non-distributable reserve Retained Earnings Total Equity
£000s £000s £000s £000s £000s £000s
As at 1 April 2022 (unaudited) 175 142 429 5 41,468 42,219
Comprehensive Income
Profit and total comprehensive income - - - - (4,441) (4,441)
Transactions with owners
Share based payment expense - - 49 - - 49
Share based payments exercised 15 15
Deferred tax on share-based payments - - 7 - - 7
Dividends - - - - - -
As at 30 September 2022 (unaudited) 175 157 485 5 37,027 37,849
Comprehensive Income
Profit and total comprehensive income - - - - 1,317 1,317
Transactions with owners
Share based payment expense - - 101 - - 101
Share based payments exercised - - - - - -
Deferred tax on share-based payments - - 113 - - 113
Transfer in relation to creditors paid - - - (5) 5 -
Dividends - - - - (219) (219)
As at 31 March 2023 (audited) 175 157 699 - 38,130 39,161
Comprehensive Income
Profit and total comprehensive income - - - - 625 625
Transactions with owners
Share based payment expense - - 144 - - 144
Share based payments exercised - - - - - -
Deferred tax on share-based payments - - (101) - - (101)
Dividends - - - - - -
As at 30 September 2023 (unaudited) 175 157 742 - 38,755 39,829
Unaudited Statement of Cashflows for the period ended 30 September 2023
6 months ended 30 September 2023 6 months ended 30 September 2022 Year ended 31 March 2023
Unaudited Unaudited Audited
Note £'000s £'000s £'000s
Profit / (Loss) before tax 920 (5,461) (3,953)
Adjustments for other operating items:
Adjustments for non-cash items 8 4,895 12,723 15,554
Operating cashflows before movements in working capital 5,815 7,262 11,601
Changes in working capital:
Net increase / (decrease) in trade and other receivables 72 (2,044) (4,105)
Net (decrease) / increase in trade and other payables (531) (170) 512
Net cash generated from operations before corporation tax and investment in 5,356 5,048 8,008
cases
Corporation tax paid - (354) (353)
Investment in cases 6 (7,085) (2,803) (5,806)
Net cash (used in) / generated from operating activities (1,729) 1,891 1,849
Cash flows from investing activities
Finance income received 7 2 7
Net cash generated from investing activities 7 2 7
Cash flows from financing activities
Proceeds from borrowings 2,500 1,000 2,750
Repayments made on borrowings - (4,500) (5,750)
Dividends paid - - (219)
Interest paid (464) (193) (160)
Loan arrangement fees - - -
Lease repayment - (97) (97)
Net cash generated from / (used in) financing activities 2,036 (3,790) (3,476)
Net increase / (decrease) in cash and cash equivalents 313 (1,897) (1,620)
Cash and cash equivalents at the beginning of the year 636 2,256 2,256
Cash and cash equivalents at the end of the period 949 359 636
Unaudited notes to the financial statements for the period ended 30 September
2023
1 Company information
Manolete Partners PLC (the "Company") is a public company limited by shares
incorporated in England and Wales. The Company is domiciled in England and its
registered office is 2-4 Packhorse Road, Gerrards Cross, Buckinghamshire, SL9
7QE. The Company's ordinary shares are traded on the AIM Market.
The principal activity of the Company is that of acquiring and funding
insolvency litigation cases.
2 Accounting policies
(a) Basis of preparation
The half-yearly financial statements do not constitute statutory accounts
within the meaning of Section 434 of the Companies Act 2006.
The interim condensed financial statements for the six months ended 30
September 2023 have been prepared in accordance with IAS 34 Interim Financial
Reporting. The interim condensed consolidated financial statements do not
include all the information and disclosures required in the annual financial
statements, and should be read in conjunction with the Company's annual
financial statements as at 31 March 2023.
The statutory accounts for the year ended 31 March 2023 have been filed with
the Registrar of Companies at Companies House. The auditor's report on the
statutory accounts for the year ended 31 March 2023 was unqualified and did
not contain any statements under Section 498 (2) or (3) of the Companies Act
2006.
(b) Going concern
The interim financial statements relating to the Company have been prepared on
the going concern basis.
Whilst the Company breached its covenant tests in respect of Interest cover
and Leverage for the quarter to 30(th) September 2023, a covenant waiver had
been agreed at period end with HSBC and signed in respect of this breach.
Furthermore, the Company is in discussion with HSBC in relation to resetting
the covenants on the loan facility to reflect the current position and
requirements of the Company.
After making appropriate enquires, the Directors of the Company have a
reasonable expectation that the Company has adequate resources to continue in
operational existence for the foreseeable future and for at least one year
from the date of the signed interim financial statements. In reaching this
conclusion, the Directors have considered the position with respect to
covenant compliance, short-term cash forecast, the general environment with
respect to number of insolvencies in the UK economy and ongoing discussion
with HSBC respect to future covenant tests. We refer you to the 'Debt
financing' paragraph within the CFO statement. For these reasons, they
continue to adopt the going concern basis in preparing the Company's interim
financial statements.
(c) Revenue recognition
Revenue comprises two elements: the movement in fair value of investments and
realised consideration.
Realised consideration occurs when a case is settled, or a Court judgement
received. This is an agreed upon and documented figure.
The movement in the fair value of investments is recognised as Unrealised
gains within Revenue. This is management's assessment of the increase or
decrease in valuation of an open case, the inclusion of value for a new case
and the removal of the fair value of a completed case. These valuations are
estimated following the progress of a case towards completion and also reflect
the judgement of the legal team working on the case (see Note 2(d).
Significant Judgements and Estimates). Hence, unrealised revenue is the
movement in the fair value of the investments in open cases over a period of
time.
When a case is completed the carrying value is a deduction to unrealised
income and the actual settlement value is recorded as realised revenue.
Revenue recognition differs between a purchased case, where full recognition
of the settlement is recognised as revenue (including the insolvent estate's
share) and a funded case where only the Company's share of a settlement is
recognised as revenue. This differing treatment arises because the Company
owns the rights to the purchased case.
As revenue relates entirely to financing arrangements, revenue is recognised
under the classification and measurement provisions of IFRS 9.
(d) Significant judgements and estimates
The preparation of the Company's interim financial statements in accordance
with UK adopted International Accounting Standards requires the Directors to
make estimates and assumptions that affect the reported amounts of assets and
liabilities at the statement of financial position date, amounts reported for
revenues and expenses during the period, and the disclosure of contingent
liabilities at the reporting date. However, uncertainty about these
assumptions and estimates could result in outcomes that could require a
material adjustment to the carrying amount of the assets or liabilities
affected in the future.
Estimates and judgements are continually evaluated and are based on historical
experiences and other factors, including expectations of future events that
are believed to be reasonable under the circumstances.
The Company makes estimates and assumptions concerning the future. The
resulting accounting estimates will, by definition, seldom equal the related
actual results. The estimates and assumptions that have a significant risk of
causing a material adjustment to the carrying amounts of assets and
liabilities within the next financial year are detailed below.
Valuation of investments
Investments in cases are categorised as fair value through profit and loss.
Fair values are determined on the specifics of each investment and will
typically change upon an investment progressing through a key stage in the
litigation or arbitration process in a manner that, in the Directors' opinion,
would result in a third party being prepared to pay an amount different to the
original sum invested for the company's rights in connection with the
investment. Due to the nature of Manolete's business model, an unrealised fair
value gain will be recognised on initial investment in a case. Thereafter
positive material progression of an investment will give rise to an increase
in fair value and an adverse progression a decrease.
The key stages that an individual case passes through typically includes:
initial review carried out by in house legal team and presented to the
investment committee to decide whether to make a purchase or funding offer.
External solicitors are instructed and a letter before claim to include notice
of assignment or funding is sent to the opposing party. The opposing party is
invited to make payment or proposals for payment or to engage in ADR
(Alternative Dispute Resolution). In the absence of a satisfactory response
proceedings may be issued. The progress of a case feeds into the Directors'
valuation of that case each month, as set out below.
In accordance with IFRS 9 and IFRS 13, the Company is required to estimate the
fair value of open cases at the half year and year end reporting periods, at
30 September and 31 March each year. The Company undertakes the following
steps:
· On a monthly basis, a spreadsheet of each team member's
individual case valuations is provided to the internal lawyer for
confirmation. Following responses from the individual lawyers, the Directors
then adjust case fair values depending upon objective case developments, for
instance: an offer to settle, mediation agreed, positive or negative legal
advice. These adjustments to fair value may result in an increase or decrease
in value or no change required.
· At reporting period ends, written assessments are obtained for a
sample of open case investments from external solicitors or primary counsel
working on the case on behalf of Manolete.
In all cases, a headline valuation is the starting point of a valuation from
which a discount is applied to reflect legal advice obtained, strength of
defendant's case, the likely amount a defendant might be able to pay to settle
the case, progress of the case through the legal process and settlement
offers.
3 Segmental reporting
During the six months ended 30 September 2023, revenue was derived from cases
funded on behalf of the insolvent estate and cases purchased from the
insolvent estate, which are wholly undertaken within the UK. Where cases are
funded, upon conclusion, the Company has the right to its share of revenue;
whereas for purchased cases, it has the right to receive all revenue, from
which a payment to the insolvent estate is made. Revenue arising from funded
cases and purchased cases are considered one business segment and are
considered to be the one principal activity of the Company. All revenues
derive from continuing operations and are not seasonal in nature.
Net realised gains on investments in cases represents realised revenue on
completed cases.
Fair value movements include the increase / (decrease) in fair value of open
cases, the removal of the carrying fair value of realised cases (in the period
when a case is completed and recognised as realised revenue) and the addition
of the fair value of new cases.
6 months ended 30 September 2023 6 months ended 30 September 2022 Year
ended 31 March
2023
Unaudited Unaudited Audited
£'000s £'000s £'000s
Net realised gains on investments in cases 9,402 13,598 26,790
Fair value movements (net of transfers to realisations) 1,828 (8,084) (6,037)
Revenue 11,230 5,514 20,753
Arising from:
Purchased cases 12,034 5,399 15,321
Funded cases (804) 115 5,432
Revenue 11,230 5,514 20,753
4 Analysis of expenses by nature
Internal legal costs are included within administrative expenses whereas
external legal costs are either capitalised as Investments for open cases or
recognised as cost of sales on completed cases. The breakdown by nature of
administrative expenses is as follows:
6 months ended 30 September 2023 6 months ended 30 September 2022 Year
ended 31 March
2023
Unaudited Unaudited Audited
£'000s £'000s £'000s
Staff costs, including pension and healthcare 2,155 1,827 3,737
costs
Bad debts including expected credit losses 359 576 1,534
Professional fees 312 211 512
Marketing costs 232 169 344
Other costs, including office costs 378 288 666
Total administrative 3,436 3,071 6,793
expenses
5 Finance expense
6 months ended 30 September 2023 6 months ended 30 September 2022 Year
ended 31 March
2023
Unaudited Unaudited Audited
£'000s £'000s £'000s
Lease liability interest - 1 1
Interest on bank borrowings 548 103 251
Bank loan charges 99 101 587
Total finance costs 647 205 839
6 Investments
Investments represent the expected gross profit generated on the Company's
ongoing portfolio of cases on settlement. This incorporates the expected
settlement less the costs incurred to initially purchase the claim, costs
incurred to date, expected future costs, and the share of net gain due to the
Insolvency Practitioner.
6 months ended 30 September 2023 6 months ended 30 September 2022 Year
ended 31 March
2023
Unaudited Unaudited Audited
£'000s £'000s £'000s
Investments brought forward 36,462 45,718 45,718
Additions 7,085 2,803 5,806
Realisations (5,940) (4,275) (9,025)
Fair value movement (net of transfers to realisations) 1,828 (8,084) (6,037)
Total investments 39,435 36,162 36,462
Current 25,905 22,964 23,073
Non-current 13,530 13,198 13,389
Total investments 39,435 36,162 36,462
7 Analysis of fair value movements
6 months ended 30 September 2023 6 months ended 30 September 2022 Year
ended 31 March
2023
Unaudited Unaudited Audited
£'000s £'000s £'000s
New case investments 7,150 3,207 9,659
Increase in existing case fair value (exc. cartel cases) 506 367 134
Decrease in existing case fair value (exc. cartel cases) (2,794) (5,242) (2,519)
Case completions (3,175) (7,416) (14,503)
Increase in fair value attributable to Cartel cases 141 1,000 1,192
Fair value movement (net of transfers to realisations) 1,828 (8,084) (6,037)
8 Non-cash adjustments to cashflows generated from operations
6 months ended 30 September 2023 6 months ended 30 September 2022 Year
ended 32 March
2023
Unaudited Unaudited Audited
£'000s £'000s £'000s
Fair value movements (net of transfers to realisations) (1,828) 8,084 6,037
Legal costs on realised cases 5,939 4,275 9,024
Finance expense 647 205 236
Depreciation & amortisation - 96 99
Share based payments 144 65 260
Deferred tax - - (95)
Finance income (7) (2) (7)
Non-cash adjustments to cashflows generated from operations 4,895 12,723 15,554
9 Trade and other receivables
30 September 2023 Restated 30 September 2022 31 March
2023
Unaudited Unaudited Audited
£'000s £'000s £'000s
Amounts falling due in more than one year:
Trade 9,150 11,310 10,270
receivables
2,456 1,642 2,045
Contract asset
Trade and other receivables due in more than one year 11,606 12,952 12,315
Amounts falling due within one year:
Gross trade receivables 18,011 12,316 16,505
Less:
Specific provisions (2,873) (1,961) (2,881)
Allowance for expected credit loss (2,577) (1,199) (1,794)
Trade 12,561 9,156 11,830
receivables
Prepayments 139 210 233
Trade and other receivables due within a year 12,700 9,366 12,063
10 Trade and other payables
30 September 2023 Restated 30 September 2022 31 March
2023
Unaudited Unaudited Audited
£'000s £'000s £'000s
Amounts falling due in more than one year:
Accruals - direct costs 5,314 6,624 5,982
Contract liability 1,705 1,125 1,411
Total trade and other payables due in excess of one year 7,019 7,749 7,393
Amounts falling due within one year:
Trade payables 611 736 802
Accruals - direct costs 4,226 3,280 3,984
Other creditors 562 371 645
Other taxation and social security 122 106 112
Total trade and other payables due in one year 5,521 4,493 5,543
11 Earnings per share
The Basic Earnings Per Share is calculated by dividing the profit attributable
to ordinary equity holders by the weighted average number of ordinary shares
outstanding during the period. Diluted Earnings Per Share is calculated by
dividing the profit after tax by the weighted average number of shares in
issue during the period, adjusted for potentially dilutive share options. The
following reflects the income and share data used in the earnings per share
calculation:
6 months ended 30 September 2023 6 months ended 30 September 2022 Year
ended 31 March
2023
Unaudited Unaudited Audited
£'000s £'000s £'000s
Profit and total comprehensive income for the period attributable to the 625 (4,441) (3,255)
equity owners of the Company
Weighted average number of ordinary shares 43,761,305 43,746,459 43,756,351
Basic Earnings Per Share £0.01 £(0.10) £(0.07)
Diluted weighted average number of ordinary shares 45,975,328 45,218,368 45,442,219
Diluted Earnings Per Share £0.01 £(0.10) £(0.07)
12 Restatement of Statement of Financial Position
The contract asset and contract liability balances relate to the discount
unwinding on the present value of the receivable and accrued IP costs from the
large case that completed in FY21. Following a review of the contractual terms
of the contract asset and liability, the directors concluded that these
balances should have been presented as long term. The adjustments to the
Statement of Financial Position as at 30 September 2022 are shown below. This
had no impact upon the Statement of Comprehensive Income, Statement of Changes
in Equity or Statement of Cash Flows in the current or prior financial year.
Statement of Financial Position as at 30 September 2022
Previously reported at 30 September 2022 Adjustment As restated at 30 September 2022
£'000s £'000s £'000s
Non-current assets
Trade and other receivables 11,310 1,642 12,952
Current assets
Trade and other receivables 11,008 (1,642) 9,366
Non-current liabilities
Trade and other payables 6,624 1,125 7,749
Current liabilities
Trade and other payables 5,618 (1,125) 4,493
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