Trading and business update
11 April 2022
Manolete Partners Plc
("Manolete" or the "Company")
Trading and business update: EBIT below expectations despite strong cash generation and completion of a large case post year end. Notification of results date.
Manolete Partners Plc (AIM: MANO), the leading listed insolvency litigation financing firm in the UK, is expected to report its audited full financial statements for the year ended 31 March 2022 on 24 June 2022.
Steven Cooklin, CEO of Manolete commented:
"As previously announced, our business has faced challenging trading conditions caused mainly by the UK Government's temporary restrictions on insolvencies. These measures were largely ended on 1 October 2021, however, the final elements stayed in place until 31 March 2022. 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. As a result, our EBIT for the year of £5-6m is below market expectations."
"However, Manolete has 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 cashflow. The Company recorded record gross cash recoveries from completed cases of £15.6m for FY22, which is 28% higher than FY21 and more than double the cash recovered on completed cases in FY20. After payments to IPs and legal costs, Manolete's retained share of this cash is up 45% to £9.7m (FY21: £6.7m)."
"While the EBIT for the FY22 financial year is below market expectations, the external factors driving this are now at an end, and there is expected to be an insolvency 'catch up' effect over the next 12 months and beyond which will provide Manolete with significantly increased opportunities to take on strong cases for the benefit of its shareholders and the business and creditor communities. New case enquiries have rebounded sharply upwards in the last 4 weeks as IPs and lawyers returned to more normal working conditions following the challenges of Omicron."
"The Company is in good shape going into the new financial year. Over the last few days in April, Manolete completed one of its larger case investments for £9.5m, with all cash firmly expected to be received within the next 25 days. Manolete's retained share of that will be c.£5.6m and will reduce net debt to just £6.5m, which is sharply lower than the £10.3m net debt reported at 30 September 2021."
Subject to the audit, which is due to commence soon, the Board expects to announce audited financial statements for the year ended 31 March 2022 on 24 June 2022 and will include:
· EBIT of c. £5-6m, this is below the market expectations due to the Government's widespread measures used to suppress the UK insolvency market and the more recent disruptive impact of the Omicron variant on the sector's professionals. The Government measures ended completely on the last day of the Company's financial year FY22.
· Record gross cash recoveries from completed cases of £15.6m for FY22 which is 28% higher than the £12.2m recorded for FY21 and 105% higher than the £7.6m recorded for FY20. The £15.6m was collected across 183 separate, completed UK insolvency claims, highlighting the granularity and breadth of the Company's business model.
· Manolete's retained share of the £15.6m cash after payments to IPs and legal costs is £9.7m which is 45% higher than the £6.7m comparative for FY21 - showing how the business is evolving to deliver excellent cash returns for our shareholders.
· FY23 cash recoveries have started very strongly as well, with the £9.5m large case settlement in the early days of April, all the cash from that case will be received later this month. Total gross cash recoveries for the month of April 2022 should be in excess of £10m for that month alone.
· 159 new insolvency litigation cases were financed in FY22 (20% lower than FY21 due to the exceptional UK Government restrictions on the insolvency market), with slightly more cases signed in the second half of the financial year, marking an end to the decline in the semi-annual number of new case investments that the Company had experienced as a result of those restrictions. The temporary emergency measures enacted by the UK Government in response to the COVID-19 pandemic commenced in June 2020 with the majority of those measures ended in October 2021 and then the remainder ending on 31 March 2022.
· 139 litigation cases were completed in FY22, which is higher than the 135 cases completed in FY21 and 157% more than the 54 cases completed in FY20. This is strong testament to the operational excellence of the Manolete team against the widespread disruptions caused by COVID-19.
· Shortly after the year end of 31 March 2022, Manolete completed one of its larger case investments for £9.5m. Manolete's retained share of this cash will be c.£5.6m and all of the cash is expected to be received within the next 25 days. Manolete recorded a Money Multiple of 1.9x on this case and the Company's cash profit on it is £2.7m compared to an unrealised profit estimate of £3.3m - this was a rare funded case giving Manolete less control over case costs. Over 90% of the Company's cases are purchased, giving Manolete full control of case costs.
· Following receipt of the c.£5.6m later this month, the Company's net debt will materially reduce to approximately £6.5m, leaving the large majority of the Company's £25m Revolving Credit Facility with HSBC unutilised.
This announcement contains inside information for the purposes of Article 7 of the Market Abuse Regulation (EU) 596/2014 as it forms part of UK domestic law by virtue of the European Union (Withdrawal) Act 2018 ("MAR"), and is disclosed in accordance with the Company's obligations under Article 17 of MAR.
For further information, please contact:
Manolete Partners Plc via Instinctif Partners
Steven Cooklin (Chief Executive Officer)
Peel Hunt (NOMAD and Sole Broker) +44 (0)20 7418 8900
Instinctif Partners (Financial PR)
Tim Linacre +44 (0)7949 939237
 Total cash received from completed cases (whether directly by the IP on Funded Cases or by the Company on Purchased Cases) - therefore before deductions for the legal costs incurred on the case and before payments to the relevant Insolvent Estate.