02:00 Wed 19 Dec 2018
Manolete Partners - Interim Results
("Manolete" or the "Company")
Unaudited half-year results for the six months ended
Maiden results in line with expectations
Manolete (AIM:MANO), a leading
Financial highlights:
· Investment in cases up 75% to
· Revenue up 31% to
· Gross profit up 44% to
· EBIT up 52% to
· Profit after tax up 57% to
· Proforma earnings per share1 up 56% to
Operational highlights:
· Investment into 31 new cases during H1 FY19 (H1 FY18: 21)
· Ongoing delivery of realised returns: 12 case realisations in the period, generating gross proceeds of
· Average money multiple of 3.6 times for cases completed in H1 FY19
· Average case duration across the full portfolio of 173 completed cases is 11 months
· 65% increase in live cases: 76 in process as at
· Roll-out of regional network with in-house lawyers recruited in: North West, South West and Southern regions of the
· Exclusive 3-year sponsorship agreement signed this week with the ICAEW's Restructuring and
· Successful IPO on
· Significantly increased capital capability and financial covenant - extension of revolving credit facility with HSBC from
"We are delighted to announce our first set of interim results as a public company, following our AIM flotation earlier this month. This strong set of results is the latest milestone in our track record of delivering profitable growth, underpinned by our core ability to source and price complex legal risk. We achieved impressive double-digit growth in revenue and EBIT during the period, delivering continued outstanding investment returns yielding an average money multiple of 3.6x on completed cases.
"We look forward to working with many more insolvency practitioners and their lawyers, as we deploy the proceeds of the IPO, as well as the enhanced debt facility with HSBC, to accelerate our growth plans through financing more and larger insolvency cases, and to delivering stand-out returns for insolvency creditors and shareholders alike."
For further information please contact:
Manolete Partners
Steven Cooklin (Chief Executive Officer) via
Peel Hunt (NOMAD and Sole Broker) +44 (0)20 7418 8900
Guy Wiehahn
Adrian Haxby
Rishi Shah
Instinctif Partners +44 (0)20 7457 2020
Giles Stewart
Rachel Cashmore
Lewis Hill
1 On a proforma basis: calculated on the basis of the shares in issue after completion of the IPO
CHIEF EXECUTIVE OFFICER'S STATEMENT
Introduction
I am pleased to present our unaudited interim statements for the first half year to
Manolete is one of the leading players in the high growth insolvency litigation finance market, a market buoyed by favourable policy tailwinds. As these interim results clearly demonstrate, we performed strongly in the period, delivering outstanding returns and maintaining the pace of our investments into new cases that meet our stringent selection criteria. I am particularly pleased that we delivered on our profitability targets against the backdrop of our IPO preparations.
Performance
In the first half, revenues increased 31% to
Investments
Two key factors set us apart in the litigation finance market: first, our ability to deliver rapid case realisation times and secondly, our long track record of successfully completed cases. In the first half, we completed ten cases and made significant additional recoveries on two cases that had been completed in the previous year, resulting in gross settlement proceeds of
The fair value of our in-process case investments as at
We continue to seek to have 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 underscored by the strength of our case track record and facilitated by our enhanced capital position following the proceeds raised on float together with the extension of our facility with HSBC.
Strategy/Team
Our strategy is to increase the number and average size of our new case investments. We believe this will be achieved by building on, as well as expanding, the wide network of established Insolvency Practitioner and Insolvency Lawyer contacts throughout the UK.
With one eye on the opportunities provided by our position in the litigation finance market we began the process of significantly strengthening our team. In the first half, we added a new in-house solicitor expert in insolvency cases to help us review and process inbound opportunities, with a further one due to join in
We believe that an increased regional presence will strengthen our relationships with Insolvency Practitioners and legal firms, which will lead to an increased volume of enquiries. We are currently recruiting to extend our regional network and we believe that this in turn will lead to an increased market share.
Further underpinning our expansion strategy, this week we signed an exclusive three-year sponsorship contract, as the sole litigation funder sponsor for the
Board of Directors
We have made four new Board appointments, three of which occurred post the
Dividend
The current intention of the Board is to adopt a progressive dividend policy. The Company intends to pay a final dividend only for the full year ending
Outlook
Given the strength of our position in the specialist insolvency litigation market, our firmly established network of Insolvency Practitioners and our proven track record of delivering outstanding returns, we look forward to the second half and beyond with confidence and enthusiasm.
I would like to express my gratitude to my colleagues and business partners for all their hard work and 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
Revenue
The Company's revenue is split between realised and unrealised revenue, as follows:
|
H1 FY19 |
H1 FY18 |
|
£000s |
£000s |
Realised revenue |
4,262 |
3,647 |
Unrealised gains on investments in cases |
2,236 |
1,300 |
Total |
6,498 |
4,947 |
Realised revenue grew 17% year-on-year to
Unrealised gains on investments grew by 72% to
The mix of revenue has stayed broadly unchanged, with the majority being realised revenue. Realised revenue was 66% of total revenue, compared to 74% in the first half of FY 2018. The weighting towards realised revenue reflects our strategy of securing early settlements on many of our cases. It should be noted that predicting when cases will reach a successful conclusion is very difficult and accordingly the blend between realised and unrealised gains will change from year to year.
When a case is fully completed, revenue is then recognised as realised and previously unrealised gains on that case are reversed.
Cost of sales
Cost of sales comprises legal costs on realised cases, the initial payments made to
Gross profit
Gross profit grew 44% to
We analyse gross profit into the separate categories of funded and purchased cases. Our strategic preference is to purchase cases rather than to fund them. Generally, our Insolvency Practitioner clients, where possible, prefer the Company to purchase cases because this gives them and the Insolvent Estate fuller protection from any potential adverse costs. It also provides the Company with full operational control of the case through the litigation process. The first half gross profit analysis was skewed against this trend, principally due to the impact of three large funded cases, one of which was realised and the other two were unrealised.
|
H1 FY19 |
% |
H1 FY18 |
% |
|
£000s |
|
£000s |
|
Gross profit on funded cases |
1,972 |
44 |
363 |
12 |
Gross profit on purchased cases |
2,477 |
56 |
2,722 |
88 |
Total |
4,449 |
100 |
3,085 |
100 |
Administrative expenses
Administrative expenses increased 24% to
Statutory operating profit before non-recurring items (Earnings Before Interest and Tax)
Operating profit before non-recurring items grew by 53% to
The Company incurred preliminary costs of
Finance costs
Gross debt increased from
Profit after tax
Profit after tax has increased by 57% from
Investment in cases
The company was managing 76 live case investments as at
|
As at |
As at |
||
Funded |
17 |
22% |
21 |
46% |
Purchased |
59 |
78% |
25 |
54% |
Total |
76 |
100% |
46 |
100% |
The total investment in cases amounted to
Trade receivables and cash conversion
Trade and other receivables have increased by 27% from
Many of the realisations achieved are paid by the debtor promptly, especially where the debtor is a large company, an insurance company or a wealthy individual. In some cases, the debtor is dependent on selling assets to realise cash to pay the Court award or settlement and hence cash realisation can, in these instances, be delayed for some months. Where appropriate, the Company will secure its position by obtaining charging orders over the relevant assets. In smaller cases, the Company sometimes accepts payments on an instalment arrangement. Based on realised revenue and receivables as at
Borrowings and loans
The Company has been financed in the past by debt, equity and retained profits. Debt was principally provided by
Post balance sheet subsequent events
On
Patrick Lineen
Chief Financial Officer
Unaudited Statement of Comprehensive Income for the 6 months ended
|
Note
|
6 months ended Unaudited |
|
6 months ended Unaudited |
Year ended Audited |
|
|
£ |
|
£ |
£ |
|
|
|
|
|
|
Revenue |
3 |
6,498,090 |
|
4,947,038 |
10,630,264 |
Cost of sales |
|
(2,048,599) |
|
(1,861,343) |
(3,839,282) |
Gross profit |
|
4,449,491 |
|
3,085,695 |
6,790,982 |
|
|
|
|
|
|
Administrative expenses |
4 |
(1,177,836) |
|
(951,010) |
(2,719,769) |
Operating profit before non-recurring item |
|
3,271,655 |
|
2,134,685 |
4,071,213 |
|
|
|
|
|
|
Non-recurring item - IPO costs |
5 |
(20,527) |
|
- |
- |
|
|
|
|
|
|
Operating profit after non-recurring item |
|
3,251,128 |
|
2,134,685 |
4,071,213 |
|
|
|
|
|
|
Finance income |
6 |
384 |
|
148 |
1,515 |
Finance charges |
7 |
(219,172) |
|
(197,926) |
(379,542) |
|
|
|
|
|
|
Profit before tax |
|
3,032,340 |
|
1,936,907 |
3,693,186 |
|
|
|
|
|
|
Taxation |
|
(573,843) |
|
(371,024) |
(432,392) |
|
|
|
|
|
|
Profit and total comprehensive income for the period attributable to the equity owners of the company |
|
2,458,497 |
|
1,565,883 |
3,260,794 |
|
|
|
|
|
|
|
|
|
|
|
|
Proforma earnings per share |
10 |
5.6p |
|
3.6p |
7.5p |
Proforma fully diluted earnings per share 10 5.6p 3.6p 7.4p
The results reflected above relate to continuing activities.
Unaudited Statement of financial position as at
Company Number: 07660874 |
Note |
6 months ended Unaudited
|
6 months ended Unaudited
|
Year ended Audited
|
|
|
£ |
£ |
£ |
Assets |
|
|
|
|
Current assets |
|
|
|
|
Investments |
8 |
13,928,068 |
7,959,554 |
10,554,544 |
Trade and other receivables |
|
3,007,200 |
2,376,371 |
2,973,274 |
Cash and cash equivalents |
|
994,341 |
539,108 |
5,934,418 |
Total current assets |
|
17,929,609 |
10,875,033 |
19,462,236 |
|
|
|
|
|
Total assets |
|
17,929,609 |
10,875,033 |
19,462,236 |
|
|
|
|
|
|
|
|
|
|
Equity and liabilities |
|
|
|
|
Equity |
|
|
|
|
Share capital |
|
99,600 |
98,300 |
99,600 |
Share premium |
|
1,015,000 |
1,015,000 |
1,015,000 |
Retained earnings |
|
9,100,325 |
4,946,917 |
6,641,828 |
Total equity attributable to the equity owners of the company |
|
10,214,925 |
6,060,217 |
7,756,428 |
|
|
|
|
|
Non-current liabilities |
|
|
|
|
Borrowings and loans |
|
4,425,555 |
2,250,000 |
8,870,588 |
Total non-current liabilities |
|
4,425,555 |
2,250,000 |
8,870,588 |
|
|
|
|
|
Current liabilities |
|
|
|
|
Trade and other payables |
|
3,289,129 |
2,439,816 |
2,830,220 |
Deferred tax liability |
|
0 |
125,000 |
5,000 |
Total current liabilities |
|
3,289,129 |
2,564,816 |
2,835,220 |
|
|
|
|
|
Total liabilities |
|
7,714,684 |
4,814,816 |
11,705,808 |
|
|
|
|
|
Total equity and liabilities |
|
17,929,609 |
10,875,033 |
19,462,236 |
The interim statements were approved by the Board of Directors and authorised for issue on
Unaudited Statement of changes in equity as at
Attributable to the equity owners of the company
|
|
Share Premium
|
Retained Earnings
|
Total Equity
|
|
|
£ |
£ |
£ |
£ |
|
As at |
98,300 |
1,015,000 |
3,381,034 |
4,494,334 |
|
|
|
|
|
|
|
Profit and total comprehensive income for the period |
- |
- |
1,565,883 |
1,565,883 |
|
As at |
98,300 |
1,015,000 |
4,946,917 |
6,060,217 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
As at |
98,300 |
1,015,000 |
4,946,917 |
6,060,217 |
|
Comprehensive Income |
|
|
|
|
|
Profit and total comprehensive income for the period |
- |
- |
1,694,911 |
1,694,911 |
|
Transactions with owners |
|
|
|
|
|
Issue of ordinary shares |
1,300 |
- |
- |
1,300 |
|
As at |
99,600 |
1,015,000 |
6,641,828 |
7,756,428 |
|
|
|
|
|
|
|
As at |
99,600 |
1,015,000 |
6,641,828 |
7,756,428 |
|
Comprehensive Income |
|
|
|
|
|
Profit and total comprehensive income for the period |
- |
- |
2,458,497 |
2,458,497 |
|
As at |
99,600 |
1,015,000 |
9,100,325 |
10,214,925 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Unaudited Cash Flow Statement for the 6 months to
|
6 months ended Unaudited |
|
6 months ended Unaudited |
Year Ended Audited |
|
|
|
£ |
|
£ |
£ |
|
|
Cash flows from operating activities |
|
|
|
|
|
|
Profit before tax |
3,032,340 |
|
1,936,907 |
3,693,186 |
|
|
Adjustments for non-cash/non-operating items: |
|
|
|
|
|
|
Fair value movements |
(2,236,500) |
|
(1,300,010) |
(3,905,000) |
|
|
Legal costs and IP payments on realised cases |
485,746 |
|
799,696 |
1,374,967 |
|
|
Finance income |
(384) |
|
(148) |
(1,515) |
|
|
Finance expense |
219,172 |
|
197,926 |
379,542 |
|
|
Interest paid |
- |
|
- |
437,387 |
|
|
|
1,500,374 |
|
1,634,371 |
1,978,567 |
|
|
|
|
|
|
|
|
|
Changes in working capital: |
|
|
|
|
|
|
(Increase) in trade and other receivables |
(33,926) |
|
(793,363) |
(1,390,266) |
|
|
(Decrease)/increase in trade and other payables |
(119,934) |
|
(406,342) |
163,262 |
|
|
Cash flow generated from/(used in) operations |
1,346,514 |
|
434,666 |
751,563 |
|
|
Taxation received |
- |
|
221,405 |
225,586 |
|
|
Net cash generated from/(used in) operating activities |
1,346,514 |
|
656,071 |
977,149 |
|
|
|
|
|
|
|
|
|
Cash flows from investing activities |
|
|
|
|
|
|
Investment in cases |
(1,622,770) |
|
(754,274) |
(1,319,544) |
|
|
Interest received |
384 |
|
148 |
1,515 |
|
|
Net cash (used)/generated from investing activities |
(1,622,386) |
|
(754,126) |
(1,318,029) |
|
|
|
|
|
|
|
|
|
Cash flows from financing activities |
|
|
|
|
|
|
Issue of ordinary share capital |
- |
|
- |
1,300 |
|
|
Interest paid |
(219,172) |
|
(63,176) |
(816,929) |
|
|
Loans repaid |
(4,445,033) |
|
(800,000) |
(3,050,000) |
|
|
Loans received |
- |
|
- |
8,870,588 |
|
|
Repayment of directors' loans |
- |
|
- |
(230,000) |
|
|
Net cash (used)/generated from financing activities |
(4,664,205) |
|
(863,176) |
4,774,959 |
|
|
|
|
|
|
|
|
|
Net (decrease)/increase in cash and cash equivalents |
(4,940,077) |
|
(961,231) |
4,434,079 |
|
|
|
|
|
|
|
|
|
Cash and cash equivalents at the beginning of the period |
5,934,418 |
|
1,500,339 |
1,500,339 |
|
|
Cash and cash equivalents at the end of the period |
994,341 |
|
539,108 |
5,934,418 |
|
|
Unaudited notes to the financial statements for the six months ended
1 Company information
The principal activity of the Company is that of acquiring and funding insolvency litigation.
2 Accounting policies
(a) Basis of preparation
The consolidated 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
The published financial statements for the year ended
(b) Going concern
The financial statements relating to the Company have been prepared on the going concern basis.
After making appropriate enquiries, 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.
(c) Revenue recognition
Revenue comprises of fair value of investments and realised consideration. Realised consideration occurs when a case is settled or a Court judgement received. Provisions are made where potential difficulties are envisaged on the enforcement of Court judgements. Unrealised gains are recognised as cases appreciate in value and settlements draws near.
As revenue relates entirely to financing arrangements, revenue is recognised under the classification and measurement provisions of IFRS 9.
(d) Financial assets
Investments
Investments in cases are categorised at fair value through profit or 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 valuation of all investments over
Valuation of investments
Determining the value of purchased and funded litigation requires an estimation of the value of such assets upon acquisition and at the balance sheet date. The future income generation of such litigation is estimated from known information and the opinion of external senior specialist counsel. Valuations of each case, at the balance sheet date, are therefore arrived at by the Directors, considering counsel's assessment of the chances of a successful outcome, the state of progress of the matter through the legal system and the Directors' assessment of all other risks specific to the case.
3 Segmental reporting
During the six months ended
|
6 months ended Unaudited |
|
6 months ended Unaudited |
Year Ended 31 March 2018 Audited
|
|
£ |
|
£ |
£ |
|
|
|
|
|
|
|
|
|
|
Net realised gains on investments in cases |
4,261,590 |
|
3,647,028 |
6,725,264 |
Fair value movements (net of transfers to realisations) |
2,236,500 |
|
1,300,010 |
3,905,000 |
Revenue |
6,498,090 |
|
4,947,038 |
10,630,264 |
|
6 months ended Unaudited |
|
6 months ended Unaudited |
Year Ended 31 March 2018 Audited
|
|
£ |
|
£ |
£ |
|
|
|
|
|
Arising from |
|
|
|
|
Funded Cases |
1,982,105 |
|
1,128,743 |
2,744,403 |
Purchased Cases |
4,515,985 |
|
3,818,295 |
7,885,861 |
|
6,498,090 |
|
4,947,038 |
10,630,264 |
4 Analysis of expenses by nature
The breakdown by nature of administrative expenses is as follows:
|
6 months ended Unaudited |
|
6 months ended Unaudited |
Year Ended 31 March 2018 Audited
|
|
£ |
|
£ |
£ |
Staff Costs |
710,014 |
|
423,268 |
1,175,239 |
Office costs |
113,312 |
|
71,227 |
184,532 |
Other costs, inc. marketing costs and doubtful debt charges |
354,510 |
|
456,515 |
1,359,798 |
Total administrative expenses |
1,177,836 |
|
951,010 |
2,719,569 |
5 Non-recurring item-IPO costs
|
6 months ended Unaudited |
|
6 months ended Unaudited |
Year Ended 31 March 2018 Audited
|
|
|
£ |
|
£ |
£ |
|
IPO costs |
20,527 |
|
- |
- |
|
The Company's shares were admitted to trading on the Alternative Investment Market (AIM) on 14 December 2018 in an Initial Public Offering (see note 9). The Company incurred some preliminary costs in the first half of the financial year on this IPO.
6 Finance income
|
6 months ended 30 Sept 2018 Unaudited |
|
6 months ended 30 Sept 2017 Unaudited |
Year Ended 31 March 2018 Audited
|
|
|
£ |
|
£ |
£ |
|
|
|
|
|
|
|
Bank interest |
384 |
|
148 |
554 |
|
Other loan interest |
- |
|
- |
961 |
|
Total finance income |
384 |
|
148 |
1,515 |
|
|
|
|
|
|
|
7 Finance costs
|
6 months ended 30 Sept 2018 Unaudited |
|
6 months ended 30 Sept 2017 Unaudited |
Year Ended 31 March 2018 Audited |
|
£ |
|
£ |
£ |
|
|
|
|
|
Other loan interest |
- |
|
197,926 |
288,596 |
Bank loan interest |
133,005 |
|
- |
14,724 |
Amortisation of HSBC facility set-up costs |
86,167 |
|
- |
28,722 |
Bank loan charges |
- |
|
- |
47,500 |
|
|
|
|
|
|
219,172 |
|
197,926 |
379,542 |
8 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.
|
6 months ended 30 Sept 2018 Unaudited |
|
6 months ended 30 Sept 2017 Unaudited |
Year Ended 31 March 2018 Audited |
|
£ |
|
£ |
£ |
|
|
|
|
|
As at 1 April 2018 |
10,554,544 |
|
6,704,967 |
6,704,967 |
Additions |
1,622,770 |
|
754,274 |
1,336,628 |
Realisations |
(485,746) |
|
(799,697) |
(1,392,051) |
Fair value movement (net of transfers to realisations) |
2,236,500 |
|
1,300,010 |
3,905,000 |
As at 30 Sept 2018 |
13,928,068 |
|
7,959,554 |
10,554,544 |
9 Post balance sheet subsequent events
On 14 December 2018, the Company completed an Initial Public Offering and its shares were listed on the Alternative Investment Market. The Company's shares in issue were sub-divided and consolidated from 99,600 shares of £1 each to 34,285,711 shares of £0.004 each and the Company issued 9,285,714 new shares of £0.004 each. This amounts to 43,571,425 shares in total. The new shares were issued at £1.75 per share to investors, which raised c, £14.7m after expenses.
At the same date, the Company's bankers, HSBC, increased the Revolving Credit Facility, signed on 29 January 2018, from £10m to £20m for a new four-year term on broadly the same terms as the original facility.
10 Proforma earnings per share
|
6 months ended 30 Sept 2018 Unaudited |
6 months ended 30 Sept 2017 Unaudited |
12 months Ended 31 March 2018 Audited |
|
£ |
£ |
£ |
|
|
|
|
Profit and total comprehensive income for the period attributable to the equity owners of the company |
2,458,497 |
1,565,883 |
3,260,794 |
|
|
|
|
|
|
|
|
Shares in issue post-IPO (see note 9) |
43,571,425 |
43,571,425 |
43,571,425 |
|
|
|
|
Proforma earnings per share |
5.6p |
3.6p |
7.5p |
|
|
|
|
Fully diluted shares in issue post-IPO |
44,272,558 |
44,272,558 |
44,272,558 |
Proforma fully diluted earnings per share |
5.6p |
3.6p |
7.4p |
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