Manolete Partners Share Discussion Threads

[bigbaggy] 13/9/2022 12:30

Well said JakNife. The thesis here really is not complicated:

1. Of course a case you last valued in March 2022 has more risk attached in Sept 2022, now that we have seen: Ukraine, inflation, fuel prices, supply chain issues, interest rates rising sharply, cost of living. Statement of the blindingly obvious I would have thought and of course Mano have done the right thing. Anyone not adjusting asset values between these two dates would be burying their head in the sand. Facts change = values change. We bet in play !

2. The much bigger plus out of all of this is to come, should be a very material increase in the volume of cases. That cannot be reflected in the accounts yet because they havent been contracted yet, of course. But with the recent sharp rise in UK insolvencies, the Bank of England's recession to come, the multi-billion pound bounce back loan opportunity: this company has every chance of delivering that.

As has been stated before: there is a systemic time lag in the insolvency process - a company goes into liquidation, an IP gets appointed, an IP does investigation work, an IP tries to resolve a claim with a director, failing resolution Mano are approached to finance the case. That ranges from weeks to years, case to case. My gut feel for an average would be around 6-12 months, with effects and lingering of covid I would tend towards the latter. But DYOR.

[cockerhoop] 13/9/2022 12:29

There was also a earlier exercise of writing down the fair value in the FY21 finals so appears to be an ongoing process.

[cockerhoop] 13/9/2022 08:00

Hi Maddox,

As an example in FY22, (excluding Cartel) the writedown of existing case values was 4 times the size of write-ups. This suggests to me the initial fair value write ups are pretty aggressive (or at least premature in the case timeline)

As Tradertrev says above the fact they're adjusting their fair value methodology suggests they accept they were aggressive.

If you compare to BUR (ex Peterson where they sold a chunk on the open market so are forced to value the case at mark to markets prices) MANO have a much higher fair value component to their assets. BUR generally write up the value of the cases late in the process, usually on a ruling etc. In contrast MANO appear to buy a case, immediately write it up to a fairly high % of estimated settlement.

This has the effect of pulling forwards profitability - hence 2019 fair value profits being written down in the recent announcement. Would the company have appeared as attractive if the 2019 pbt hadn't been elevated by the case in question?

[tradertrev] 12/9/2022 23:01

@Maddox, I'd base such a judgment on the fact that they just had to write down the value of the portfolio materially and had assumed a win in a court case, which can never be a sure thing.

[cockerhoop] 12/9/2022 10:39

I don't have an issue with fair value accounting per se, just believe that MANO's interpretation of the regulations is very aggressive.

[maddox] 12/9/2022 10:23

Very few of MANO's cases end up in court but when they do there is always the chance of a loss. It's a shame but the important thing is that this case has no bearing on the other large value cases they hold - primarily Truck Cartel cases - or on the overall business model.

There is a higher degree of complexity in this case than their normal 'seven deadly sins' so probably more difficulty to make a conclusive case.

On the case portfolio - they are clearly being far more prudent. This will chime with those that don't like the fair value accounting financial reporting regulations. I'm starting to see their viewpoint :-).

Despite these bumps in the road the investment proposition remains sound IMHO. The wave of insolvency business is yet to manifest itself in the figures and the Bounce Back Loan opportunity is yet to be revealed. The case enquiries are starting to tick-up so we may get a more positive update at the AGM on 21 Sept or 9 Nov earnings update.

Patience is a virtue it is said - for an investor it's an essential prerequisite.

[xpertgreeny] 11/9/2022 13:12

Think that’s right BigBaggy. A running commentary on one or two cases would be frankly misleading when the important picture is the portfolio performance and at the end of the day the cash.

[bigbaggy] 11/9/2022 11:50

Dose of practical reality needed I think. They complete something like 200 cases a year. Many much larger than this one. I recall they had a very big cash win of around £10m in April. Don’t think an RNS every business day would be particularly helpful. I think a wrap-up of the portfolio as a whole at each reporting period is the only sensible and manageable way to report performance. Which is what all the Litigation Funders seem to do.

[sallad3] 09/9/2022 20:53

Worth listening to the 14.00hrs 24 June presentation (just a few hours AFTER the Bolton Judgment) and particularly the last minutes where reference is made to first 10 weeks after year end.

I'm beginning to get very concerned about no disclosure of this until today.

Take a look at the 11 July MelloMOnday presentation on the link from the Mano website


Something isn't adding up.

Thoughts from anyone else?

[williamcooper104] 09/9/2022 10:49

Or rather how few cases make it to the courts and then actually lose

[williamcooper104] 09/9/2022 10:47

Good spot - given how many cases go to court there's a very good chance that's the case

[sallad3] 09/9/2022 10:43

Might be this case? [2022] EWHC 1597 (Ch) Bolton Poultry Products


Mano's original £75,000 investment described in full on page 5 of the 2020 progress report in the Companies House filings.


BUT judgment was handed down on 24 June - the day of the last Investor presentation - which is nearly 3 months ago.

Lawyers for the defendants were "thrilled".


Mano claimed £16m and having lost the main part of the claims paid out more in costs than small part of claim in which they succeeded.

Should this have been disclosed months ago as Price Sensitive?

I can't make the AGM on the 20th this year, for family reasons, but someone ought to be there and ask the questions.

[theborn] 09/9/2022 10:28

Brummie_git - thanks for your analysis. Helpful as always. FYI, my reading of the trading update is that the "interim" PBT is expected to be -£5m, not the full year as per your update. So, as a holder looking for any positive I can now, this may mean that FY PBT could be closer to £nil depending on second half performance (i.e. if in line with pre-covid, which second half of trading update suggests, then H2 could feasibly generate PBT of £5m+, so FY might come back broadly flat). BBL progress or a positive appeal on this case would add further to that.

[bigbaggy] 09/9/2022 10:28

1. They've had a rare material case go against them. They are appealing. This is the world of litigation.

2. Since the year end (March 2022) we have had: Ukraine, inflation, interest rate rises, supply chain issues - so they have trimmed I think 10% from their forecast settlement values. Sounds sensible to me.

3. Cash flowing in strongly, big debt repayment out of organic cash and looks like sharp rise in new cases coming through.

SP reaction looks like an invitation to me.

[williamcooper104] 09/9/2022 10:28

Yep could be lack of collateral behind claims or else just risk spreads blowing out But likely it's the auditors freaking out

[williamcooper104] 09/9/2022 10:24

A large part of the cash generation will be realisation of already booked profits - and they may well have increased overheads

[williamcooper104] 09/9/2022 10:18

What's happened is that they took a big loss and had to write down unrealised profits and then their auditors freaked out and beat them up

[theborn] 09/9/2022 10:05

I bought in yesterday afternoon so I'm extremely disappointed by this update.
The one off exception is in some way acceptable, they were going to have an adverse decision at some point. However, why this £2.3m write down instantly prompts a further £7m+ of write downs is inexcusable, particularly given Mano have come out on various occasions to aggressively defend their valuation poilcy whenever challenged.

I suspect the unexpected £2.3m negative decision (which to be clear may still win at appeal) has diluted the success percentages the auditors would look at. Therefore they are preempting the auditor response now by factoring in a lower success percentage across the entire portfolio (albeit you'd think this one off and not actually applicable across entire portfolio).

There is value in BBLs, but this is not concrete yet. Could do with H1 update providing more concrete progress and guidance on the revenue streams available on this to offset this major blow.

Disappointed but holding.

[gusrezo] 09/9/2022 09:49

Average investment per case is around 35,000, average profit around 53,000. Writing down 636,000 in a single case is a hugh blow for the company. The 2,3m impact in profits probably is due to the unrealized gains in the case. No compromise for liquidity or solvency, I think, but cash is king always even more when we talk about this kind of company.
And about the general valuation of the open cases, probably the properties of the defendants have lost value so Manolete thinks they're not going to get all the money they forecast.

[riverman77] 09/9/2022 09:27

Got out first thing this morning and also sold out of BUR (whose last set of results were really poor, and yet they continue to pay massive bonuses - knowing my luck they'll shortly announce a big win on their Peterson case, but prepared to miss out if so)
Now fully out of the litigation sector. Not saying they won't do well in time but feel like it will be a long wait, and in the meantime so many question marks and uncertainties, and this was the final straw.
In the current market there are so many attractive opportunities and I think the money can be better employed elsewhere, without the risk of waking up to something like this.
LIT look the best of the bunch right now and this would certainly be the one I would go for if I wanted exposure to the sector.

[kaos3] 09/9/2022 09:16

something is not ok to me (as I am not able to understand - it is me).

when one looks at cash, accounting (non adjusted) and published IRR rates - it is non consistent one with another. I understand a quater or half year outliers. But this non consistency is kind of becoming permanent.

And I am not alone. There was a litany about accounting methods on BBs. Only few say they get it. And when they start explaining most still do not get it 100%. So something clearly is out ot order. What?