Manolete Partners Share Discussion Threads

[sallad3] 16/7/2021 11:40

bigbaggy

Any thoughts on the matters in Note 20 to the accounts?

Bad debts look pretty grim, and its all recent.

The sudden increase in the leverage ratios from the old facility of 2:1 to 2.75:1 at end September then back to 2:1 by March 2022 is worthy of questions at the AGM and probably explains the unexpected and troubling slashing of the dividend.

[bigbaggy] 16/7/2021 10:12

Insolvency Service June 21 stats just released this morning. CVLs (where MANO gets the vast majority of its cases) up 100% on June 20 at 1,116 companies. And that is with the Government insolvency restrictions in place. These stats are even 11% higher than the pre-pandemic June 19 number. This is the leading forward indicator for this business. Consistent with Company's messaging last month.

[xpertgreeny] 09/7/2021 17:21

Also some succinct analysis in Vox Market videocast from earlier today. FF to 17m 45s.

[bigbaggy] 07/7/2021 11:36

Good write up on MANO in the AIM Journal here. They focus in on the cash before working capital increasing to £9m in this latest year from £440k the year before, which is a point well made. Effectively strips out all the unrealised gains, so this is an interesting metric.

www.hubinvest.com/142Jul2021.pdf

[simplethesis] 06/7/2021 17:45

Hello. You're a clever man and you know the history and the business model. The company gives case vintages. I like that the business has a lot of control of the cases, they almost always settle before court, and this area, insolvency litigation, is much more "cookie cutter" than the huge range of cases other third-party litigation funders deal with. It seems likely to me that volumes will rise, the company will hire more regional lawyers, and eventually this will be perceived as a growth business with good returns. But not yet.

[chucko1] 06/7/2021 17:30

Useful in indicating the relevant CVL commentary, but to what extent does/should an investor believe this translates into dependable revenue.

[simplethesis] 06/7/2021 13:36

This shows the CVLs coming back up, as the company said had been the case in the last couple of months. Paragraph 3.1:

[maddox] 06/7/2021 10:12

Mr Market is badly myopic and focusses on short-term factors and is unable to perceive the long-term outlook. MANO's revenue has evidently been hit by the drop-off in insolvencies caused by the Govt's Covid business support measures. But these are temporary influences masking a colossal growing financial stress for very many businesses. Obviously there will be direct Covid and Brexit casualties, but additionally there will be firms that fail as they attempt to expand in the expected post Covid exuberance.

These themes are being picked up in the news media - FT: 'Businesses face crunch time as Covid support fades'


Guardian: 'Rishi Sunak rejects calls by businesses for furlough extension'

In addition to this there are reports that there has been a significant amount of fraud involving the support schemes:

City a.m.: 'HMRC launches 13,000 investigations into potential Covid support scheme fraud'

Whilst much of this will have been perpetrated by unidentified fraudsters much will be by business owners that just took the cash with no intention of paying it back.

The prospects for an escalation in insolvency numbers are obvious - and yet Mr Market is certainly not pricing this into MANO's numbers. It'll take a while for the insolvency numbers to reflect the post-Covid crunch - presenting a very attractive opportunity for the long-sighted investor.

Regards Maddox

[jimtech] 02/7/2021 10:53

Agree. I bought more this week. No brainer IMHO.

[bigbaggy] 02/7/2021 10:12

Completely agree Nobby. On all my analytic metrics the Mano business is 3-4x the size it was at IPO in 2018, but the share price is just 28% up. That is just plain wrong.

Then, as you say, this has to be the best positioned company out there for the next 3-5 years of corporate dislocation. The Government has put a very effective sticky plaster over the worst recession for 300 years. Very soon that plaster is coming off....

[nobbygnome] 02/7/2021 09:51

I have heard Manolete present a number of times including last night and have always been impressed. I have traded in and out a couple of times in the past very successfully. However, now is the time to build a position for the medium term, which I started this morning. As the economy unlocks and insolvencies soar, MANO are going to do exceptionally well. The projections he showed last night show they are massively undervalued for this stage of the cycle IMHO.

[bogman1] 01/7/2021 18:56

Added 8700 today. Sold out of Frp. Confident this can outpace it

[maddox] 29/6/2021 15:10

The more important point johnwig is that those other firms don't compete directly in MANO's sub-sector of the litigation market.

[scubadiverr] 29/6/2021 10:36

If you followed the company, never mind were a holder, you'd know that they are only involved in insolvency financing - they aren't involved in the wider litigation funding space, so it's not really representative is it?Maybe sign in to another alias and attempt to troll from another angle?

[johnwig] 29/6/2021 10:13

A little bit selective, Maddox? In the very Chambers document that you link to there is a further section "UK-wide Litigation Funding Rankings" MANO is in the FIFTH band there.

[maddox] 29/6/2021 10:06

Great to see that MANO are highly ranked as a band 1 firm by Chambers and Partners for its UK-wide Litigation Funding Insolvency category. This gives credibility to Manolete being THE not A UK leading insolvency litigation financing company. A very nice position to be in.



What are the Chambers Rankings?
Bands 1-6
Law firms and individual lawyers are ranked in bands from 1 (highest)-6 (lowest) and being ranked in any band is a significant achievement. The qualities on which rankings are assessed include:

Technical legal ability
Professional conduct
Client service
Commercial astuteness
Diligence
Commitment
Other qualities most valued by the client (for further description of these please see methodology above)

[johnwig] 29/6/2021 10:03

Matters of governance have had a profound effect within this sector. It makes some people quite uncomfortable. Whether there is a dividend, per se, is currently unimportant.

[cockerhoop] 29/6/2021 09:37

Agree, absolutely daft to increase borrowing to fund chunky dividends. Given the cash outflow each year they really shouldn't pay a dividend at all.

[maddox] 29/6/2021 09:32

Hi sallad,

Yes well it's difficult to please everyone and if you came onboard for income then I can understand your annoyance.

MANO are generating plenty of cash from case settlements, to recycle into new case investments, and a substantially increased debt facility to draw upon to fund future growth. When market demand returns hopefully all this capacity will be required.

Regards Maddox

[jimtech] 29/6/2021 09:27

Think the dividend comments I picked up on were from the ShareSoc presentation earlier this year.

[johnwig] 29/6/2021 09:21

Sallad3. Thank you for your post. It perturbs me deeply. I have a small investment in MANO which I shall sell later today.

[sallad3] 29/6/2021 09:03

JimTech

That doesn't fit with the statements he made in the RNS in Nov '20 (see below) If his sale and the Mithaq deal involved a change in dividend policy it had to be announced. If the Board had changed the policy ahead of the results announcement, it had to be announced.

One of the problems seems to be that these shares are so tightly held by a few insiders that there is a clear and present danger that they "might forget" the needs of others. As I mentioned filing accounts before they have even been put to shareholders is a no-no and rather symptomatic of that sort of thinking.

I think there might be more to this than meets the eye. The HSBC charge document is silent on covenenants because that doesn't include financial obligations of the borrower. [EDIT forgot to include the only publicly available HSBC restrictive covenant is "NB: HSBC RCF bars SC from going below 10%" given on 17 Feb 21 after Mithaq approach on 19 Jan]

I also have concerns that creditors are finally waking upto the fact that the creditors are always significantly worse off with a Mano deal than if the liquidator brought the proceedings himself. Liquidators and their solicitors have only two interests in assignment - collecting their fees and avoiding personal liability for an adverse costs order. Mano's 50% (after all legals etc) is now shown in some filings at companies house as giving creditors less than 25% of any eventual gain and in some cases NIL dividend. If someone steps up and prices ATE insurance properly then creditors will always be better off not assigning to Mano.

Interesting times - but slashing the dividend seems very odd after a year with such a wide difference between realised and unrealised gains. Need to re-invest all cash flows when borrowing costs are <3 over SONIA? Doesn't fly.



Nov '20
Dividend

The current intention of the Board is to adopt a progressive dividend policy. As outlined in our Admission Document, the Company intends to pay an interim dividend for the half year ending 30 September 2020 equal to a third of last year’s dividend. Dividends will take into account the progressive nature of the dividend policy, distributable reserves and other applicable law and the trading performance of the business.

The interim dividend to Ordinary Shareholders will be payable on 17 December 2020 to those shareholders who are on the register of members at 27 November 2020.

[jimtech] 28/6/2021 22:30

I do recall Cooklin saying a few months ago that with Premier Miton out there was less pressure for dividends. Remember noting that dividend policy could well change.

[sallad3] 28/6/2021 22:08

Maddox

Thanks. I don't buy the explanation.

No-one changes the dividend policy announced less than 3 years ago without prior notice - in this case not a word was said even in the results announcement. The Premier Miton bit simply can't be the case as it would have required disclosure in the AIM circular which stated quite the opposite.

It's also "odd/unusual/wrong" for accounts to be filed at Companies House before the shareholders have even had a chance to vote on them at the AGM as happened last year.

Some serious questions for the forthcoming AGM.

[maddox] 28/6/2021 13:50

On dividends Steve Cooklin said that he'd had many investors, large and small, say that they'd prefer to see it re-invested, and they have thus taken the opportunity to re-base it to 1p. He thought that the discipline of paying a dividend is a good one so the intention is to continue to pay one albeit a nominal amount.

I agree with this policy - I like to see a dividend paid, but I'm primarily looking for capital growth not income at this stage of their development.

Regards Maddox

NB. Premier Miton was a key stone investor for the IPO and had invested from an income fund - hence MANO committed to pay a dividend based on a percentage of earnings. PM sold their stake so releasing MANO from the commitment.