Manolete Partn. Regulatory News (MANO)

18 October 2023

Manolete Partners PLC

("Manolete" or the "Company")

Trading Update

Manolete Partners plc (AIM:MANO), the leading quoted UK insolvency litigation financing company, is pleased to provide the following update on trading for the six months ending 30 September 2023 ("H1 FY24").

Steven Cooklin, Chief Executive Officer, commented:

"In the first half of the year the business has continued its strong growth after emerging from the Government suppression of the insolvency sector during the Covid-19 period. The total number of our new case investments in the first half of our current trading year is 116% higher than the first half of last year, mirroring the substantial rise in UK insolvencies in the post-pandemic period.

"We have recently learned that Manolete's already exceptional results on the initial cases in the Barclays Bounce Back Loan ("BBL") Recovery Pilot has led to the British Business Bank giving approval to Barclays to extend the scale of the pilot. We have also received confirmation that another well-known bank is soon to start their own BBL Recovery programme with Manolete.

"As we continue to anticipate further sustained high levels of activity in the UK insolvency sector, we have added significantly to our in-house Legal and Net Worth Reporting teams with a number of high-quality new joiners."

1. New Case Investments

The following table provides an analysis of the Company's new case investments over the last 18 months trading, which shows the strong growth we are experiencing following the ending of the Covid insolvency suppression period:

H1 FY24 H2 FY23 H1 FY23

Non-BBL Case Investments 146 132 83

Barclays BBL Case Investments 33 48 0

Total New Case Investments 179 180 83

The total number of new case investments for H1 FY24 was 179, 116% higher than the 83 new case investments recorded for the comparative first six months of the previous financial year ("H1 FY23").

The H1 FY23 new case investments were detrimentally impacted as the Company had only just started to emerge from the temporary two-year suppression of the UK insolvency market imposed by the UK Government in response to the Covid-19 pandemic. Even after the insolvency laws returned to normal, from 1 April 2022, there was then a necessary seven-month hiatus as Insolvency Practitioners had to investigate and collate the evidence supporting potential claims, before being in position to present them to the Company for investment appraisal.

The second half of the previous financial year ("H2 FY23") displayed a sharply positive rebound: recording the Company's highest ever number of 180 new case investments, as the UK insolvency market began the return to normal operations.

That trend has continued into the first six months of the current trading year H1 FY24. On a trailing 12-month view (H2 FY23 plus H1 FY24) the Company has signed 359 new case investments. That equates to the Company signing approximately 1.4 new cases for every business day in that 12-month period, which far exceeds the Company's best pre-pandemic number of new case investments of 141 for the 12-months ended 31 March 2020 (0.5 new cases for every business day in that 12-month period).

The H2 FY23 level of new case investments of 180 included 48 cases from the BBL Recoveries pilot project that the Company is working on with Barclays Bank Plc (see separate section below for further developments on the Company's BBL recovery programmes). Excluding the Barclays BBL pilot cases, H2 FY23 therefore recorded an impressive 132 new case investments. In H1 FY24 the Company invested in a further 33 Barclays BBL cases. Therefore, excluding Barclays BBL pilot cases, for H1 FY24 the Company recorded 146 new case investments, an increase of 11% (H1 FY23: 132 cases).

2. Case Completions and Money Multiple

In H1 FY24, Manolete completed 116 cases, 22% higher than the 95 cases completed in H1 FY23. The total value of those 116 cases was £9.2m. The value of the 95 cases in H1 FY23 was £18.3m but, as previously reported, that included one exceptionally large case completion of £9.5m. Excluding that one exceptional case H1 FY23 was £8.8m.

The average duration (measured from the date that the Company signed the case to the date of legal completion) was 11.4 months (H1 FY23: 14.9 months). This signifies a return to the Company's long established case duration of around 12 months.

The Money Multiple for the 116 case completions in H1 FY24 was 2.3x (H1 FY23: 2.2x across 95 completed cases).

3. Average Case Completion Size

In reference to the case completion figures above the average size of the 116 case completions in H1 FY24 was £79.3k per case, which is 18% lower than the £96.8k per case completion in H1 FY23 (excluding the exceptional £9.5m completion in H1 FY23). This reflects the fact that the first wave of new cases emerging post-pandemic primarily relate to the high number of smaller UK companies that tend to take the Creditors Voluntary Liquidation ("CVLs") insolvency route. It is the high CVL numbers that have driven the current high growth of overall insolvencies in the UK post-pandemic. It is only in the last seven months that the UK insolvency market has seen any sustained recovery to pre-pandemic levels of Administration appointments, which is the usual insolvency route for larger company insolvencies. As the insolvency market develops through the current business cycle, the Directors anticipate a return to higher average case sizes, reflecting a greater mix of larger company insolvencies.

Another factor to note is the various BBL Recovery programmes that the Company is increasingly involved in. As these only started to impact the Company's performance metrics from January 2023, these have, so far, not had a material impact. The maximum BBL is £50,000 per case, so as the number of BBL cases increase, this is likely to have a more material impact on total average reported case size. BBL cases should not adversely impact reported Money Multiples and they tend to settle materially faster than the Company's long-term average case duration of c.12 months.

4. Gross Cash Recoveries

In H1 FY24, Manolete delivered (unaudited) gross cash recoveries from previously completed cases of £9.0m (H1 FY23: £15.7m) spread across 209 separate completed cases (H1 FY23: 160). Again, excluding the exceptional £9.5m from the comparative H1 FY23 figure, total gross cash received in H1 FY24 was 45% higher than the H1 FY23 figure of £6.2m (excluding the exceptional large case). The fact that in H1 FY24 £9.0m the gross cash receipts were spread over 209 separate cases is a core strength of the granularity of Manolete's business model.

5. PACCAR

Further to our announcement on 1 August 2023 regarding PACCAR Inc & Ors v Competition Appeal Tribunal & Ors, [2023] UKSC 28, the Company is pleased to report that the decision in PACCAR has had no adverse impact, necessitating only very minor amendments to the standard terms of our funding agreements. Funded Cases typically account for just 5% of Manolete's total case investments, the 95% majority of our case investments being Purchased Cases, where PACCAR has no relevance.

6. Building the Business Back to Full Year Profitability

Subject to auditor review of the interim accounts, the Directors believe that the Company will report profitability for H1 FY24 at marginally less than was reported for H2 FY23. This is primarily due to the reduction in average case sizes and after the investment in new staff and business development, as the Company builds capacity to meet the current, and anticipated, significantly higher business activity levels. Traditionally the second half of the trading year is the stronger for the business.

The auditor's review of the interim results for the six months ended 30 September 2023 is underway and the Company will inform the market of the interim results announcement date, in due course.

For further information please contact:

Manolete Partners

Steven Cooklin (Chief Executive Officer) via Instinctif Partners

Peel Hunt (NOMAD and Sole Broker) +44 (0)20 7418 8900

Paul Shackleton

Instinctif Partners +44 (0)20 7457 2020

Tim Linacre

Victoria Hayns