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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| Manolete Partners Plc | LSE:MANO | London | Ordinary Share | GB00BYWQCY12 | ORD 0.4P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 2.50 | 1.79% | 142.50 | 140.00 | 145.00 | 142.50 | 142.50 | 142.50 | 0.00 | 08:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Legal Services | 20.75M | -3.12M | -0.0714 | -19.61 | 61.27M |
From Apr 2019 to Apr 2024
TIDMMANO
RNS Number : 7468E
Manolete Partners PLC
10 November 2020
10 November 2020
MANOLETE PARTNERS PLC
("Manolete" or the "Company")
Unaudited half-year results for the six months ended 30 September 2020
Manolete (AIM:MANO), the leading UK-listed insolvency litigation financing company , tod ay announces its unaudited results for the six months ended 30 September 2020.
Financial highlights:
-- Revenue growth of 153% to GBP19.0m (H1 FY20: GBP7.5m); -- Gross profit up 44% to GBP9.5m (H1 FY20: GBP6.6m); -- Gross profits on realised cases up 440% to GBP4.0m (H1 FY20: GBP0.9m); -- EBIT up 47% to GBP6.6m (H1 FY20: GBP4.5m); -- Profit before tax up 49% to GBP6.4m (H1 FY20: GBP4.3m); -- Profit after tax up 49% to GBP5.2m (H1 FY20: GBP3.5m); -- Basic earnings per share up 49% to 11.8 pence (H1 FY20: 7.9 pence); -- Cash generated from completed cases up 45% to GBP4.2m (H1 FY20: GBP2.9m);
-- Investment in cases has grown by 55% to GBP39.3m since 30 September 2019 (H1 FY20: GBP25.4m);
-- Net assets of GBP38.7m and net debt of GBP5.4m consisting of drawn down loan of GBP8.0m net of cash balances of GBP2.6m as at 30 September 2020;
-- GBP12m of HSBC Revolving Credit Facility available for utilisation, as at 30 September 2020; and
-- Interim dividend proposed of 1.17 pence per share, 134% higher than 0.5 pence per share paid for H1FY20
Operational highlights:
-- During H1 FY21, the number of new case investments rose by 69% to 110 (H1 FY20: 65) and was close to the total 141 new invested cases for the full twelve months of FY20;
-- Ongoing delivery of realised returns: 52 case realisations in the period representing a 189% increase (18 case realisations in H1 FY20), generating discounted gross proceeds of GBP13.5m, a 611% increase (H1 FY20: GBP1.9m), over an average duration of 11.5 months;
-- Large GBP15m case completion in September 2020 of which GBP4.7m is payable in cash to Manolete representing a profit of c.GBP4.4m. Discounting for future cashflows GBP9.3m has been recognised in revenue and GBP2.8m as gross profit;
-- Average money multiple of 3.1 times for cases completed in H1 FY21;
-- High level of forthcoming potential case completions, with 40 live cases scheduled over the coming weeks and months for Alternative Dispute Resolution (mediations and formal without prejudice settlement meetings) or currently the subject of settlement offers and negotiations;
-- Average case duration across the full portfolio of 305 completed cases remains constant at c.11 months;
-- 98% increase in live cases: 214 in process as at 30 September 2020 (108 as at 30 September 2019). 219 live cases currently as at 20 October 2020 (all excluding Cartel cases);
-- 91% of live cases have been signed in the last 18 months. Only one case remains ongoing from the FY17 vintage and only two cases are outstanding from the FY18 vintage. 100% of earlier case vintages have been completed; and
-- The Cartel cases continue to progress as planned, no uplift to their fair value has been made in this interim period, but this will be re-assessed at year end
Steven Cooklin, Chief Executive Officer, commented:
"These half year results evidence the strong progress we have made in the last six months. We completed 52 cases in the six-month period - that means we were completing on average two insolvency claims every single week of the six-month reporting period. That rate of execution is impressive: it is almost three-times as many cases completed than the first six months of last year and close to the 54 cases completed for the whole of the previous full financial year.
"The pipeline of new cases also continues to grow at a strong rate in the first six months. We made 110 new case investments that meet our stringent selection criteria in the first half of this financial year, 69% more than the same period last year. The Board is keeping a close watch on the effects of Covid-19 as well as the Government economic support measures and the impact these two opposing factors may have on the level of corporate insolvencies and personal bankruptcies in the short and longer term.
"We have achieved impressive triple-digit growth in revenues, and strong double-digit growth in gross profit and EBIT during the period, delivering continued outstanding investment returns yielding an average money multiple of 3.1 times (H1 FY20: 2.9 times) on the 52 completed cases (H1 FY20: 18 completed cases) with an average duration of 11.5 months (H1 FY20: 11.4 months).
"This strong momentum has continued into the second half of the year with total case completions already up to 62 as at 31 October 2020 and there are another 40 live cases scheduled for Alternative Dispute Resolution or currently the subject of serious settlement offer negotiations. Alongside favourable macro-economic trends, this granular data underpins our excitement at the prospects for the second half of the year and beyond.
"This performance reflects Manolete's core strengths: market-leading position; operating in a specialist sector where Manolete can buy almost all cases (Manolete is not a mere passive "funder"); significant first-mover advantage and deeply embedded relationships with all key stakeholders in the Turnaround, Restructuring and Insolvency community, nurtured over our 11-year operating history."
For further information please contact:
Manolete Partners:
Steven Cooklin (Chief Executive Officer) via Instinctif Partners Peel Hunt (NOMAD and Joint Broker) +44 (0)20 7418 8900
James Britton
Rishi Shah
Duncan Littlejohns
Liberum (Joint Broker) +44 (0)20 3100 2000
Richard Crawley
James Greenwood
Instinctif Partners (Financial PR) +44 (0)7837 674600
Tim Linacre
Lewis Hill
Chief Executive Officer's Statement
Introduction
I am pleased to present our unaudited statements for the half year to 30 September 2020.
Manolete is the leading UK quoted company in the high growth insolvency litigation finance market, a market buoyed by favourable legislative and macro-economic tailwinds, and which plays an important role in returning funds to creditors, particularly HMRC. As these interim results clearly demonstrate, we performed strongly in the first six-month period of FY21: 52 case completions was 189% higher than the comparative period last year. We made 110 new case investments, that meet our stringent selection criteria, an increase of 69% compared to the first six months of last year (H1 FY20: 65 new case investments).
Performance
In the first half, gross profits increased 44% to GBP9.5m (H1 FY20: GBP6.6m), reflecting the record number of case completions, a record number of new case investments and the benefits of short duration case returns. Operating profit increased 47% to GBP6.6m (H1 FY20: GBP4.5m). Our business is strongly profitable: we recorded pre-tax profits of GBP6.4m, compared to GBP4.3m in H1 FY20, an increase of 49%.
Investments
Two key factors set Manolete apart in the litigation finance market: first, our ability to deliver rapid case realisation times and second, the volume of realised successful completed cases. In the first half, we completed 52 cases, resulting in discounted gross settlement proceeds of GBP13.7m (H1 FY20: GBP2.4m) with gross profit on realised cases of GBP4.0m (H1 FY20: GBP0.9m). The average money multiple on these 52 cases (H1 FY20: 18 completed cases) was 3.1x (H1 FY20: 2.9x). Money multiple is defined as the Company's gain on a case plus the amount recovered in respect of its legal costs and initial payment to the Insolvent Estate, divided by the amount of those legal costs and the initial payment to the Insolvent Estate.
The fair value of our in-process case investments as at 30 September 2020 increased 55% to GBP39.3m (30 September 2019: GBP25.4m; 31 March 2020: GBP32.4m), reflecting in the main, the continued attractive case investment opportunities provided by our long-established UK-wide network of Insolvency Practitioners and insolvency lawyers who refer cases into us on a daily basis. We invested GBP3.3m in legal and investment costs on live cases in the first half, compared to GBP2.1m in the first half of the previous year.
We continue to seek a balanced case portfolio by both size and type of case. In recent periods, we have looked to move up the value chain and accept a larger proportion of higher return, higher value case investments. This strategy is well supported by the strength of our case track record and facilitated by our enhanced capital position, following the proceeds raised on the flotation in December 2018 together with the extension of our Revolving Credit Facility with HSBC.
Vintages Table
This table highlights some of the key features of Manolete's model:
1. The fast durations of our cases (average 11 months): it is the short durations and the repeat case types (all our cases are UK insolvency and insolvency-related claims) that make the case outcomes capable of accurate estimation. Allied to the fact that Manolete owns outright the large majority of its cases (rather than acting as a funder of third-party claims with no control over the key decisions relating to those claims), this drives conversion of unrealised profits into realised profits in a consistently short timeframe.
2. High Return on Investment (ROI, calculated as Manolete profit divided by investment in case) and Money multiple (MoM, calculated as Manolete profit plus Investment in case divided by Investment in case) (long-term average 177% and 2.77x, respectively): these levels have been delivered on a consistent basis for each of the last 9.5 years and across a large and diverse number of cases.
3. Only one case remains open from the FY17 vintage and two cases from the FY18 vintage. All earlier cases are fully completed. In contrast to our listed peer group, the age of Manolete's unrealised case portfolio is short, with 91% of live cases commencing in the last 18 months.
Case Vintages as at 20(th) October 2020
Hot Features
Premium
No. Open Closed Duration
of No. % No case case Total Total Total IP Manolete completed
FY investments completed completion outstanding investments investments invested recovered gain share gain cases ROI MoM
Vint No No % total No GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 Months % %
======= ============ ========== =========== ============ ============ ============ ========= ========== ======== ======== ========= ========== ====== ======
2010 3 3 100% 0 - 52 52 28 (24) 10 (35) 7.0m (67%) .33x
======= ============ ========== =========== ============ ============ ============ ========= ========== ======== ======== ========= ========== ====== ======
2011 0 0 0% 0 - - - - - - - 0.0m 0% .00x
======= ============ ========== =========== ============ ============ ============ ========= ========== ======== ======== ========= ========== ====== ======
2012 8 8 100% 0 - 763 763 2,524 1,761 580 1,181 18.0m 155% 2.55x
======= ============ ========== =========== ============ ============ ============ ========= ========== ======== ======== ========= ========== ====== ======
2013 10 10 100% 0 - 174 174 780 606 316 290 7.1m 166% 2.66x
======= ============ ========== =========== ============ ============ ============ ========= ========== ======== ======== ========= ========== ====== ======
2014 42 42 100% 0 - 594 594 3,884 3,290 2,427 863 10.0m 145% 2.45x
======= ============ ========== =========== ============ ============ ============ ========= ========== ======== ======== ========= ========== ====== ======
2015 39 39 100% 0 - 1,404 1,404 7,029 5,625 3,290 2,336 12.8m 166% 2.66x
======= ============ ========== =========== ============ ============ ============ ========= ========== ======== ======== ========= ========== ====== ======
2016 36 36 100% 0 - 1,908 1,908 9,309 7,401 4,123 3,278 15.0m 172% 2.72x
======= ============ ========== =========== ============ ============ ============ ========= ========== ======== ======== ========= ========== ====== ======
2017 31 30 97% 1 286 1,086 1,372 4,393 3,307 1,951 1,356 12.2m 125% 2.25x
======= ============ ========== =========== ============ ============ ============ ========= ========== ======== ======== ========= ========== ====== ======
2018 29 27 93% 2 1,142 1,535 2,676 13,988 12,453 8,678 3,776 14.0m 246% 3.46x
======= ============ ========== =========== ============ ============ ============ ========= ========== ======== ======== ========= ========== ====== ======
2019 59 43 73% 16 843 985 1,828 3,726 2,740 1,278 1,462 11.6m 148% 2.48x
======= ============ ========== =========== ============ ============ ============ ========= ========== ======== ======== ========= ========== ====== ======
2020 141 55 39% 86 2,080 1,479 3,559 8,845 7,367 3,957 3,410 8.0m 231% 3.31x
======= ============ ========== =========== ============ ============ ============ ========= ========== ======== ======== ========= ========== ====== ======
2021 126 12 10% 114 1,067 180 1,247 469 288 172 116 3.7m 64% 1.64x
======= ============ ========== =========== ============ ============ ============ ========= ========== ======== ======== ========= ========== ====== ======
Total 524 305 58% 219 5,418 10,160 15,578 54,973 44,813 26,781 18,032 11.2m 177% 2.77x
======= ============ ========== =========== ============ ============ ============ ========= ========== ======== ======== ========= ========== ====== ======
Note: The vintages table excludes the 22 cartel cases
and is net of deductions for bad debt provisions (excluding
ECL provisions)
Strategy/Team
Our strategy is to increase the number and average size of our new case investments and to complete these cases on the most optimal terms. Returns benefit our shareholders as well as the creditors of those numerous insolvent estates. We believe this will be achieved by building on, as well as expanding, the wide network of our long-established Insolvency Practitioner and Insolvency Lawyer contacts throughout the UK.
At IPO, we promised to build out the then nascent regional network of our in-house lawyers nationwide. That network is now well-established and operating with great effectiveness. We are also adding selectively to certain particularly active areas.
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.
Impact of Covid-19
During the current Covid-19 pandemic, both our regional and London staff have operated remotely and continue to conduct mediations and meetings with external solicitors and Insolvency Practitioners via online platforms, this has allowed our business to continue without material interruption.
Outlook
The business has adjusted and traded very well through the unique challenges of 2020. The level of Government support in response to the Covid-19 pandemic has resulted in a short-term sharp reduction in the number of corporate insolvencies and bankruptcies. While we anticipate this trend will reverse in the medium term, the Board will continue to closely monitor the evolving situation and the impact on anticipated levels of litigation finance enquiries in and beyond the near term.
I would like to express my gratitude to my colleagues for all their exceptional work and the tremendous support they have given to the Company.
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 first half year to 30 September 2020, which show strong growth compared to the first half of the previous year.
Revenue
Revenue in H1 FY21 has increased by 153% to GBP19.0m in comparison to H1 FY20 (GBP7.5m). This growth in revenue has been driven by an increase in realised income due to the completion of 52 cases in the six month period, including a significant case generating realised revenue alone of GBP9.3m (discounted).
The Company's revenue is split between realised and unrealised revenue. When a case is fully completed, revenue is then recognised as realised and previously unrealised gains on that case are reversed.
Unrealised revenue was broadly unchanged at GBP5.4m in H1 FY21, compared to the first half of FY20 of GBP5.6m. This reflects the development of existing case investments, the realisation of completed cases and the increase in new case investments in the period.
At 52 case completions, the number of case realisations was up 189% in H1 FY21. These generated realised revenues of GBP13.5m (H1 FY20: GBP1.9m). This reflects the higher rate of case completions which was signalled in earlier financial reports.
Accounting standards require a value judgment to be made on cases in respect of their unrealised revenue. Analysis of fair value movements shows Manolete's fair value estimates are close to or slightly below final realisations. A sample of 36 cases, chosen for their significant carrying value or significant increase in value over the 6 month period to 30 September are independently reviewed. Our proven extensive track record of rapidly converting unrealised into realised gains speaks to the robustness and accuracy of this important process.
H1 FY21 Realisations
There were 52 cases settled in H1 FY21 with case settlement values of between GBP9.3m (discounted) at the largest to GBP10,000 and an average settlement value of GBP263,206. The money multiple has averaged 3.1x with a return on capital employed of 164% on average and an average case duration of 11.5 months.
Large case completion
A significant case completed within the 6-month accounting period, at a commercial settlement of GBP15.0m generating a Manolete profit of GBP4.4m. HMRC was the main creditor on this case. The agreed schedule of payments is set over a period of time and as in accordance with IFRS 9 we have discounted the future cashflows at an appropriate discount rate resulting in recognition in our Interim accounts of GBP9.3m revenue and Manolete profit of GBP2.8m from this case. This represents a ROI of 1592% before discounting and 1019% after discounting.
Our trade receivable in relation to this case is GBP8.9m after we apply our ECL (general provision) to the discounted revenue figure and there is also an accrual of GBP6.2m held in relation to payment of the insolvent estate's share (dependent upon the Company receiving funds), hence a net receivable of GBP2.7m as at 30 September 2020.
The schedule of gross payments and receipts is set out below:
GBP'000 FY21 FY22 FY23 FY24 FY25 FY26 FY27 FY28 FY29 FY30 FY31 ==================== ==== ===== ===== ======= ======= ======= ======= ======= ======= ======= ======== Gross receipts 164 1,000 150 1,150 1,857 1,857 1,857 1,857 1,857 1,857 1,393 Gross IP payments - (479) (17) (701) (1,207) (1,297) (1,393) (1,393) (1,393) (1,393) (1,045) -------------------- ---- ----- ----- ------- ------- ------- ------- ------- ------- ------- -------- Gross Manolete share 164 521 133 449 650 560 464 464 464 464 348 -------------------- ---- ----- ----- ------- ------- ------- ------- ------- ------- ------- -------- Cumulative gross receipts 164 1,164 1,314 2,464 4,322 6,179 8,036 9,893 11,750 13,607 15,000 Cumulative gross payments - (479) (495) (1,197) (2,404) (3,701) (5,094) (6,487) (7,880) (9,272) (10,317) -------------------- ---- ----- ----- ------- ------- ------- ------- ------- ------- ------- -------- Cumulative Manolete share 164 686 819 1,268 1,918 2,478 2,942 3,406 3,871 4,335 4,683 -------------------- ---- ----- ----- ------- ------- ------- ------- ------- ------- ------- --------
* excludes initial IP payment and legal costs.
Cost of sales
Cost of sales comprise legal costs on realised cases and payments to Insolvent Estates on successful realisations (the Insolvent Estate's share of the realisation) of purchased cases.
Gross profit
Gross profit grew 44% to GBP9.5m (H1 FY20: GBP6.6m). Gross profit margin decreased to 50% (H1 FY20: 89%) a reflection of the lower proportion of unrealised revenue in the period.
We analyse gross profit into the separate categories of funded and purchased cases. Our strategic preference is to purchase cases rather than fund them. Generally, our Insolvency Practitioner clients, where possible, prefer the Company to purchase cases as this gives them and the Insolvent Estate complete protection from any potential adverse costs. It also provides the Company with full operational control of the case through the litigation process.
GBP'000 H1 FY21 H1 FY20
Funded cases 767 8% 2,179 33%
Purchased cases 8,714 92% 4,453 67%
----- ---- ----- ----
Gross profit 9,481 100% 6,632 100%
----- ---- ----- ----
Administrative expenses
Administrative expenses increased 32% to GBP2.9m in the first half (H1 FY20: GBP2.2m). Staff costs (due to the roll out of our UK-wide in-house legal team network) and applying our bad debt provisioning policy across a larger trade receivables balance are the principal drivers of the increase in administrative expenses. The recruitment of in-house lawyers regionally across the UK is mostly complete, taking place over FY20, and hence now at close to full cost.
Statutory operating profit before non-recurring items (Earnings Before Interest and Tax)
Operating profit before non-recurring items grew by 47% to GBP6.6m in the first half (H1 FY20: GBP4.5m) with an operating profit margin of 35% (H1 FY20 60%). This reflects the higher proportion of realised revenue with their associated cost over unrealised revenue where associated legal costs are capitalised on the balance sheet.
Finance costs
These costs comprise: the interest cost on the drawn down portion of the HSBC loan, charged at 1.75% plus LIBOR, the amortisation charge of the costs of setting up the GBP20m HSBC borrowing facility of GBP0.1m, which are being amortised over the four year life of the facility; and commitment fees of GBP0.1m on the unutilised portion of the GBP20m facility, levied at the rate of 0.7%.
Profit after tax
Profit after tax has increased by 49% from GBP3.5m to GBP5.2m. The post-tax margin is 27% in H1 FY21 (H1 FY20: 46%) reflecting the higher level of realised profits and the associated accounting treatment as noted above.
Dividend
An interim dividend is proposed equal to a third of the previous financial year's dividend, consistent with our Admission Document.
Investment in cases
The Company was managing 237 live case investments (including Cartel cases) as at 30 September 2020, compared to 131 live cases (including Cartel cases) as at 30 September 2019, a 63% increase. The split between Purchased and Funded cases at these dates is as follows:
Live cases (by number) 30 September 2020 30 September 2019
Funded cases 36 15% 29 22%
Purchased cases 201 85% 102 78%
-------- --------- -------- ---------
Total live case investments 237 100% 131 100%
-------- --------- -------- ---------
The total investment in cases amounted to GBP39.3m at 30 September 2020, growth of 55% from the value as at 30 September 2019 of GBP25.4m (31 March 2020 value of GBP32.4m). Investment in cases is shown at costs incurred plus valuation. Live cases are shown at fair value, based on the Company's estimate of the likely future realised gross profit. Any material valuations are corroborated with the external lawyers working on the case who provide updated legal opinions as at the year-end and the half year-end. The Company does not capitalise any of its internal costs, these are fully expensed to the Profit and Loss as incurred. The average value per case as at 30 September 2020 was GBP172k, compared to GBP202k as at 30 September 2019.
Trade receivables and cash conversion
Trade and other receivables have increased by 266% from GBP4.1m to GBP15.0m due primarily to the completion of 52 cases including one significant case for a Net Present Value discounted revenue and trade receivable of GBP9.3m. Included in other receivables is a secured loan to an administrator of GBP0.5m; this loan is for two years and is at an attractive rate of interest and due to be repaid in July 2021 including accrued interest. The loan is secured by a senior charge on land which has been independently valued at well in excess of the loan.
We have increased the level of our expected credit loss (ECL) provision to 4% (from 2%) which is applied to all trade receivables that have not been specifically provided against. This increase has generated an additional P&L charge of GBP0.3m during H1 FY21.
Borrowings and loans
The Company has drawn down GBP8.0m of its GBP20.0m HSBC loan facility at an interest rate of 1.75% plus LIBOR. The Company intends to continue to use this finance to invest in new cases.
Cash flow statement - Corporation tax
We continue to utilise our cash resources to invest in new cases, with a cash investment of GBP3.3m in the six month period, hence generating a cash outflow at the operating level.
In the half year to 30 September 2020, a corporation tax payment of GBP1.0m and year-end dividend payment relating to FY20 of GBP1.3m were also paid out.
A summary of our cashflow or H1 FY21 in comparison to H1 FY20 is presented below:
6 months 6 months
H1 FY21 H1 FY20
GBP'000 GBP'000
Net opening cash 8,371 9,692
Operating cashflow for
the year 3,106 (768)
Investment in new cases (3,343) (2,124)
--------- ---------
Net cash outflow after
operating and investments (237) (2,892)
Working capital (3,135) (413)
Dividends and interest
payments (1,353) (657)
Corporation tax (966) (2,504)
Other cash items (87) (107)
Borrowings - -
Net cashflow movement
in period (5,778) (6,572)
--------- ---------
Net closing cash balance
as at 30 September 2,593 3,120
Mark Tavener
Chief Financial Officer
Unaudited Statement of Comprehensive Income for the period ended 30 September 2020
Year
6 months 6 months ended
ended 30 ended 30 31
September September March
2020 2019 2020
Note Unaudited Unaudited Audited
GBP000s GBP000s GBP000s
Revenue 3 18,964 7,480 18,682
Cost of sales (9,483) (848) (4.292)
Gross profit 9,481 6,632 14,390
Administrative expenses 4 (2,930) (2,159) (4,586)
Operating profit 6,551 4,473 9,804
Finance income 5 76 33 89
Finance costs 6 (269) (215) (437)
Profit before tax 6,358 4,291 9,456
Taxation (1,208) (837) (1,841)
Profit and total comprehensive income for the period attributable to the equity
owners of
the Company 5,150 3,454 7,615
========== ========== ========
Basic earnings per share 11 11.8p 7.9p 17.5p
Diluted earnings per share 11 11.6p 7.8p 17.2p
========== ========== ========
The above results were derived from continuing operations.
Unaudited Statement of Financial Position as at 30 September 2020
Restated 31 March
30 September 2020 30 September 2019 2020
Company Number: 07660874 Note Unaudited Unaudited Audited
GBP000s GBP000s GBP000s
Non-current assets
Investments 7 7,136 6,305 7,136
Intangible assets 46 63 56
Deferred tax asset 118 111 157
Trade receivables 9 9,871 - 443
-------------------- ------------------- ---------
Total non-current assets 17,171 6,479 7,792
-------------------- ------------------- ---------
Current assets
Investments 7 32,169 19,098 25,279
Stock - 497 -
Trade and other receivables 9 5,123 4,096 5,454
Right of use assets 161 - 221
Cash and cash equivalents 2,593 3,120 8,371
-------------------- ------------------- ---------
Total current assets 40,046 26,811 39,325
-------------------- ------------------- ---------
Total assets 57,217 33,290 47,117
==================== =================== =========
Equity and liabilities
Equity
Share capital 174 174 174
Share premium 4 4 4
Share based payments reserve 207 160 226
Special reserve 905 905 905
Retained earnings 37,456 29,670 33,613
-------------------- ------------------- ---------
Total equity attributable to the equity owners of the
Company 38,746 30,913 34,922
-------------------- ------------------- ---------
Non-current liabilities
Borrowings and loans 7,612 - 7,526
Trade and other payables 10 6,520 - 213
Total non-current liabilities 14,132 - 7,739
-------------------- ------------------- ---------
Current liabilities
Trade and other payables 10 4,185 2,377 4,235
Lease liabilities 154 - 221
Total current liabilities 4,339 2,377 4,456
-------------------- ------------------- ---------
Total liabilities 18,471 2,377 12,195
-------------------- ------------------- ---------
Total equity and liabilities 57,217 33,290 47,117
==================== =================== =========
The interim statements were approved by the Board of Directors and authorised for issue on 09 November 2020.
Unaudited Statement of Changes in Equity for the period ended September 2020
Share
based Special
Share Share payment Non-distributable Retained Total
Capital Premium reserve reserve Earnings Equity
GBP000s GBP000s GBP000s GBP000s GBP000s GBP000s
As at 1 April 2019 (audited) 174 4 67 3,157 24,613 28,015
Comprehensive Income
Profit and total comprehensive
income for the period - - - - 3,454 3,454
Transactions with owners
Share based payment expense - - 28 - - 28
Deferred tax on share-based
payments - - 65 - - 65
Dividend - - - - (649) (649)
Release of Special Reserve - - - (2,252) 2,252 -
As at 30 September 2019
(unaudited) 174 4 160 905 29,670 30,913
--------- --------- --------- ------------------- ---------- --------
As at 1 October 2019
(unaudited) 174 4 160 905 29,670 30,913
Comprehensive Income
Profit and total comprehensive
income - - 4,161 4,161
Transactions with owners
Share based payment expense - - 20 - - 20
Deferred tax on share-based
payments - - 46 - - 46
Dividend - - - (218) (218)
As at 31 March 2020 (audited) 174 4 226 905 33,613 34,922
--------- --------- --------- ------------------- ---------- --------
As at 1 April 2020 (unaudited) 174 4 226 905 33,613 34,922
Comprehensive Income
Profit and total comprehensive
income - - - - 5,150 5,150
Transactions with owners
Share based payment expense - - 37 - - 37
Deferred tax on share-based
payments - - (56) - - (56)
Dividend - - - - (1,307) (1,307)
As at 30 September 2020
(unaudited) 174 4 207 905 37,456 38,746
========= ========= ========= =================== ========== ========
Unaudited Statement of Cashflows for the period ended 30 September 2020
Restated
6 months ended 6 months ended Year Ended 31 Mar
30 Sept 2020 30 Sept 2019 2020
Unaudited Unaudited Audited
GBP000s GBP000s GBP000s
Cash flows from operating activities
Profit before tax 6,358 4,291 9,456
Adjustments for other operating items:
Sale / (purchase) of property - - 493
Investment in cases (3,343) (2,124) (4,098)
Issue of borrowings - - (500)
Adjustments for non-cash/non-operating items:
Fair value movements (5,441) (5,576) (10,900)
Legal costs and IP payments on realised cases 1,894 494 1,599
Finance income (76) (33) (89)
Finance costs 269 215 445
Depreciation 55 - -
Amortisation 11 - -
Deferred tax movement - (65) -
Equity settled share-based payment transactions 36 (93) (63)
(237) (2,892) (3,657)
Changes in working capital:
(Increase) in trade and other receivables (8,997) (319) (1,620)
Increase / (decrease) in trade and other payables 5,863 (94) 433
Cash flow used in operations (3,371) (3,305) (4,844)
Taxation paid (966) (2,504) (3,431)
Net cash used in operating activities (4,337) (5,809) (8,275)
Cash flows from investing activities
Purchase and refurbishment of property - (50) -
Purchase of intangible assets - (57) (50)
Interest received 6 33 35
----------------- ----------------- ------------------
Net cash (used)/generated from investing activities 6 (74) (15)
----------------- ----------------- ------------------
Cash flows from financing activities
Proceeds from borrowings - 8,000
Repayment of obligations under finance leases (88) - -
Interest paid (52) (41) (164)
Dividend paid (1,307) (649) (867)
Net cash (used)/generated from financing activities (1,447) (690) 6,969
----------------- ----------------- ------------------
Net decrease in cash and cash equivalents (5,778) (6,572) (1,321)
Cash and cash equivalents at the beginning of the period 8,371 9,692 9,692
================= ================= ==================
Cash and cash equivalents at the end of the period 2,593 3,120 8,371
================= ================= ==================
Unaudited notes to the financial statements for the period ended 30 September 2020
1 Company information
Manolete Partners PLC (the "Company") is a public company 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 principal activity of the Company is that of acquiring and funding insolvency litigation.
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 statutory accounts for the year ended 31 March 2020 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 2020 was unqualified and did not contain any statements under Section 498 (2) or (3) of the Companies Act 2006.
The published financial statements for the year ended 31 March 2020 were prepared in accordance with International Financial Reporting Standards as adapted for use in the EU ("IFRS").
(b) Going concern
The financial statements relating to the Company has been prepared on the going concern basis.
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 financial statements. For these reasons, they continue to adopt the going concern basis in preparing the Company's financial statements.
Furthermore, the Board has discussed the impact of Covid-19 on the business and its market. It continues to keep this matter under review. As our business operates in the insolvency market, any economic downturn is likely to lead to further insolvencies and related litigation cases. On an operational basis, the business has been able to fully function remotely with our in-house lawyers meeting online with IPs and external lawyers and continuing to progress cases. The Courts continue to function at first remotely but increasingly in person.
As evidence of this market view our trading for the 6 months to 30 September 2020 continues to be robust, the Directors are of the opinion that the Company has adequate financial resources to continue in operation and meet its liabilities as they fall due, for the foreseeable future. Hence, the Directors believe it is appropriate to adopt the going concern basis in preparing the 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. 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.
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 financial statements under IFRS as endorsed by the EU 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 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. 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 Director's valuation of that case each month, as set out below.
In accordance with IFRS 9 and IFRS 13, the Company is required to Fair Value 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 weekly basis, the internal legal team report developments into the Investment Committee on a case by case basis in writing. Full team meetings then take place on a fortnightly basis to review progress on all live cases, on a case-by-case basis over several hours.
-- 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 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 2020, the revenue was derived from cases funded on behalf of the insolvent estate and cases purchased from the insolvent estate. 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 are 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 includes 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.
Year Ended
6 months ended 6 months ended 31 March
30 Sept 2020 30 Sept 2019 2020
Unaudited Unaudited Audited
GBP000s GBP000s GBP000s
Net realised gains on investments in cases 13,523 1,904 7,782
Fair value movements (net of transfers to realisations) 5,441 5,576 10,900
Revenue 18,964 7,480 18,682
=============== =============== ===========
Year Ended
6 months ended 6 months ended 31 March
30 Sept 2020 30 Sept 2019 2020
Unaudited Unaudited Audited
GBP000s GBP000s GBP000s
Arising from:
Funded cases 1,045 2,421 5,347
Purchased cases 17,919 5,059 13,335
Total cases 18,964 7,480 18,682
=============== =============== ===========
4 Analysis of expenses by nature
The breakdown by nature of administrative expenses is as follows:
Year Ended
6 months ended 6 months ended 31 March
30 Sept 2020 30 Sept 2019 2020
Unaudited Unaudited Audited
GBP000s GBP000s GBP000s
Staff Costs, including pension and healthcare costs 1,544 1,135 2,573
Office costs 94 142 201
Other costs, including marketing costs and expected credit losses 1,292 882 1,812
Total administrative expenses 2,930 2,159 4,586
=============== =============== ===========
5 Finance income
Year Ended
6 months ended 6 months ended 31 March
30 Sept 2020 30 Sept 2019 2020
Unaudited Unaudited Audited
GBP000s GBP000s GBP000s
Bank interest 6 33 39
Other loan interest 70 - 50
Total finance income 76 33 89
=============== =============== ===========
6 Finance costs
Year Ended
6 months ended 6 months ended 31 March
30 Sept 2020 30 Sept 2019 2020
Unaudited Unaudited Audited
GBP000s GBP000s GBP000s
Other loan interest 28 50 57
Bank loan interest 33 - 57
Amortisation of HSBC facility set-up costs 86 86 172
Bank loan charges 122 79 151
Total finance costs 269 215 437
=============== =============== ===========
7 Investments
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.
Any change in value is taken to other reserves as an unrealised gain or loss.
31 March
30 Sept 2020 30 Sept 2019 2020
Unaudited Unaudited Audited
GBP000s GBP000s GBP000s
As at 1 April 2020 32,415 18,197 18,197
Additions 3,343 2,124 4,917
Realisations (1,894) (494) (1,599)
Fair value movement (net of transfers to realisations) see Note 8 5,441 5,576 10,900
As at 30 Sept 2020 39,305 25,403 32,415
------------- ------------- ---------
8 Analysis of fair value movements
Year Ended
6 months ended 6 months ended 31 March
30 Sept 2020 30 Sept 2019 2020
Unaudited Unaudited Audited
GBP000s GBP000s GBP000s
Net realised gains on investments in cases 13,523 1,904 7,782
Fair value movements (net of transfers to realisations) 5,441 5,576 10,900
Revenue 18,964 7,480 18,682
=============== =============== ===========
6 months 6 months
ended ended Year Ended
30 Sept 30 Sept 31 March
2020 2019 2020
Unaudited Unaudited Audited
GBP000s GBP000s GBP000s
Valuation of new cases in the
period 8,154 3,540 8,581
Increase in valuation of existing
cases 2,158 2,770 3,729
Movement in cartel cases - 1,171 2,003
Decrease in valuation of existing
cases (921) (796) (1,412)
Reversal of valuation on realised
cases (3,950) (1,109) (2,001)
Total fair value movements 5,441 5,576 10,900
----------- ----------- -----------
9 Trade and other receivables
30 Sept 30 Sept 31 March
2020 2019 2020
Unaudited Unaudited Audited
GBP000s GBP000s GBP000s
Amounts falling due in more than
one year:
Trade receivables 9,871 - 443
----------- ----------- ---------
Amounts falling due within one
year:
Trade receivables 4,365 2,857 4,774
Other receivables 716 1,239 500
Prepayments - - 180
Loan receivable 42 - -
Trade and other receivables 5,123 4,096 5,454
----------- ----------- ---------
10 Trade and other payables
30 Sept 30 Sept 31 March
2020 2019 2020
Unaudited Unaudited Audited
GBP000s GBP000s GBP000s
Amounts falling due in more than
one year:
Accruals and other creditors 6,520 - 213
----------- ----------- ---------
Amounts falling due within one
year:
Other taxation and social security 88 154 80
Corporation tax payable 1,265 878 1,006
Accruals and other creditors 2,804 1,345 3,149
Loan payable 28 - -
Trade and other payables 4,185 2,377 4,235
----------- ----------- ---------
11 Earnings per share
Year Ended
6 months ended 6 months ended 31 March
30 Sept 2020 30 Sept 2019 2020
Unaudited Unaudited Audited
GBP000s GBP000s GBP000s
Profit and total comprehensive income for the period attributable to
the equity owners of
the Company 5,150 3,454 7,615
Shares in issue 43,571,925 43,571,425 43,571,925
Proforma earnings per share 11.8p 7.9p 17.5p
=============== =============== ===========
Fully diluted shares in issue 44,341,581 44,272,558 44,318,539
=============== =============== ===========
Proforma fully diluted earnings per share 11.6p 7.8p 17.2p
=============== =============== ===========
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END
IR FLFETLSLAIII
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November 10, 2020 02:00 ET (07:00 GMT)
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