Manolete Partners ends year with earnings below expectations

Insolvency litigation financier Manolete Partners said in a trading update on Monday that it expected to report EBIT of between £5m and £6m for the financial year just ended.

The AIM-traded firm said that was below market expectations, due to the government's “widespread measures” which suppressed the UK insolvency market, and the more recent disruptive impact of the Omicron variant on the sector's professionals.

Manolete said the measures ended completely on the last day of its financial year ended 31 March.

It said it was anticipating record gross cash recoveries from completed cases of £15.6m - 28% higher year-on-year, and 105% higher than the 2020 financial year.

The £15.6m was collected across 183 separate, completed UK insolvency claims, highlighting the “granularity and breadth” of the company's business model.

Manolete said its retained share of the £15.6m cash after payments to IPs and legal costs was £9.7m, which was 45% higher year-on-year.

It said 2023 cash recoveries had started “very strongly”, with a £9.5m large case settlement in early April, and all cash from that case set to be received later in the month.

Total gross cash recoveries for April were set to be more than £10m.

A total of 159 new insolvency litigation cases were financed in the 2022 financial year, which was 20% lower year-on-year, with “slightly more” cases signed in the second half marking an end to the decline in the semi-annual number of new case investments experienced through the pandemic.

The temporary emergency measures enacted by the UK government began in June 2020, with the majority of the measures ending in October last year and the remainder being lifted on 31 March.

A total of 139 litigation cases were completed in the year, which was higher than the 135 cases completed in the 2021 financial year, and 157% more than the 54 completed in 2020.

“As previously announced, our business has faced challenging trading conditions caused mainly by the UK government's temporary restrictions on insolvencies,” said chief executive officer Steven Cooklin.

“These measures were largely ended on 1 October, however the final elements stayed in place until 31 March.

“The impact of the final elements of these measures has had a greater-than-expected effect as, allied to the Omicron-related operational disruptions that impacted many professionals in our sector, the number of new case enquiries did not increase at the rate expected in the final quarter of our financial year.”

However, Cooklin said Manolete had a “strong financial year” in other respects.

“The impact of Omicron and the final elements of the temporary measures has impacted new case enquiries, causing unrealised revenue, and therefore group EBIT, to be lower than expected.

“However, the company has been able to continue working well on its existing cases driving realised revenue and cash flow.”

Steven Cooklin said that, while EBIT was below market expectations, given the external factors behind that had ended, it expected an insolvency “catch-up” effect over the next 12 months and beyond.

“New case enquiries have rebounded sharply upwards in the last four weeks as IPs and lawyers returned to more normal working conditions following the challenges of Omicron.”

Manolete said it would report its statements for the year ended 31 March on 24 June.

At 1322 BST, shares in Manolete Partners were down 1.98% at 223p.