Manolete Partners plc (LON:MANO), the UK’s leading listed insolvency litigation financing company, has announced its audited results for the year ended 31 March 2020.
Steven Cooklin, Chief Executive Officer, commented: “We have delivered another set of strong financial and operating results, with impressive double-digit growth in revenue and EBIT during the period. We continue to deliver outstanding investment returns, yielding an average Money Multiple of 2.7x and ROI of 174% on 257 completed cases since inception.
“Despite the large expansion of the infrastructure overhead required for the rapid expansion of the business in FY20, Company net cash receipts from completed cases (after all payments to Insolvency Practitioners and lawyers’ fees on those cases) exceeded all Company overhead costs. We are currently running a record 201 live cases and foresee no requirement for any further material increase in overhead costs, so the outlook for cash generation is very positive.
“Despite the challenges of COVID-19, the activity levels within the business are at record levels, highlighted by the 47 new case investments (124% more than the same period last year) and 23 case completions (up from four in the same period last year) that the team has transacted in the first quarter of FY21. New case enquiries are also at all-time record levels, running at around double the rate we had this time last year. We entered FY21 with £8.4m of gross cash, a positive net cash balance and £12m of our HSBC Revolving Credit Facility unutilised. All these factors firmly underpin our confidence in the current and future trading performance of the business.
“With the widely reported economic disruption likely to ensue, we expect new case enquiries to increase over the foreseeable future and we will continue working to deliver outstanding returns to both insolvent estates and investors.”
Financial (statutory and non-statutory) highlights:
· Revenue increased by 36% to £18.7m (FY19: £13.8m)
· Gross profit up 43% to £14.4m (FY19: £10.1m)
· EBIT pre-exceptionals increased by 36% to £9.8m (FY19: £7.2m)
· Profit before tax (before exceptional IPO costs of £882K in FY19) up 40% to £9.5m (FY19: £6.8m)
· Profit after tax (adjusted for exceptionals) increased by 38% to £7.6m (FY19: £5.5m)
· Diluted earnings per share up 70% to 17 pence (FY19: 10 pence)
· Proposed final dividend of 3.0 pence per share, 100% increase on FY19 final dividend of 1.49p
· Investment in cases up 78% to £32.4m (FY19: £18.2m)
· Cash generation: cash receipts from completed cases exceeded all completed case legal costs, all payments to Insolvency Practitioners on completed cases and all Company overheads in FY20
· Operating cashflows before movements in working capital pre new investments (non-statutory layout) increased to £1.2m in FY20 (FY19: £0.7m) hence cash inflows from completed cases exceeded payments to lawyers and IPs incurred on those cases and all overhead payments
· Gross cash of £8.4m and borrowings of £7.5m as at 31 March 2020 and £12m borrowings available on Revolving Credit Facility with HSBC
Operational highlights:
· 139% increase in new core investments in UK insolvency cases: 141 in FY20 (FY19: 59), excluding two Cartel Cases in FY19
· Ongoing delivery of realised returns: 54 case realisations in FY20 (on average one case realisation per week) with an average duration on those 54 cases of 11 months, generating a 10% increase in gross proceeds to £10.2m (FY19: 35 case realisations generating gross proceeds of £9.3m of Company cash income)
· ROI of 173% and Money Multiple of 2.7x from 257 completed cases since inception
· 33 cases already completed in the FY20 vintage at a Money Multiple of 4.6x
· Average case duration across the full portfolio of 257 completed cases is 12 months
· 81% increase in live cases: 152 in process as at 31 March 2020 (84 as at 31 March 2019)
· Over 200 live cases currently in process
· Roll-out of regional network completed with in-house lawyers recruited in: North West, South West & Wales, Eastern, North East, Midlands, London, Southern and Scottish regions of the UK
· New case enquiries at all-time record levels
· 47 new case investments made and 23 cases already completed in FY21 to date
A copy of the annual report and accounts will be available on the Company’s website shortly and will be posted to shareholders in due course.
Manolete Partners has today appointed Liberum Capital Limited as joint broker to the Company.
Chairman’s Statement
Overview
I am pleased to report that the Company has seen excellent growth over the past year with 141 new case investments in the year to 31 March 2020.
The Company’s results reflect the strength, resilience and capabilities of the business, as it continues to increase the number and average size of new case investments through its expanding network of Insolvency Practitioners and Insolvency Lawyers throughout the UK.
Financial results
The business achieved impressive growth in the year ended 31 March 2020, with revenues increasing by 36% to £18.7 million (FY19: £13.8m) and Profit before Tax growing by 61% to £9.5 million (FY19: £5.9m).
The Company has achieved this growth through its regional network of in-house lawyers, the successful deployment of the funds raised through the HSBC credit facility and the IPO, the Company’s increased public profile following the IPO and the continued hard work of the team.
Strategy
We remain focused on strengthening the profile of Manolete, as we continue to increase the number and average size of cases within our insolvency litigation investment portfolio.
An important component to our strategy is to build upon our ever-growing network of established Insolvency Practitioner and Insolvency Lawyer contacts throughout the UK. We have been strengthening the team, and now have 11 high quality in-house lawyers in different regions across the UK. As a result, we have seen a significant increase in the volume of enquires.
Dividend
The Board has adopted a progressive dividend policy based on a pay-out ratio of 20% of profit after tax, with one third being paid as an interim dividend and two thirds as a final dividend. For the year to 31 March 2020 the Board is proposing a final dividend of 3.00p per share. Subject to the approval of Shareholders at the Annual General Meeting on 22 September 2020, the dividend to Ordinary Shareholders will be payable on 30 September to those shareholders who are on the register of members at 11 September 2020.
Corporate Governance
The Board of Directors is committed to good corporate governance. The Company has adopted the ten principles of the 2018 Version of the Corporate Governance Code as set out by the Quoted Companies Alliance. Our arrangements are further described in our Corporate Governance Statement on pages 24 to 28. During the year the Board undertook its first formal board evaluation exercise.
The Audit Committee report on pages 29 to 30 and the Remuneration Committee report on pages 31 to 34 describe the remits and approaches of those committees to fulfilling their governance responsibilities. A statement on corporate governance is also provided on our website (https://investors.manolete-partners.com/company-information/corporate-governance).
People
On behalf of the Board and Shareholders I would like to thank our staff for their commitment and hard work during the year.
Board
On 1 October 2019 we announced that Patrick Lineen decided to retire on 27 November 2019 and the Board are grateful to Patrick for assisting us through the IPO process. We are delighted to welcome Mark Tavener to the Manolete Board as Chief Financial Officer, who joined the Company and the Board on 7 October 2019.
Outlook
Despite COVID-19, activity levels in April, May and June 2020 have remained strong with new case referrals of 186 compared to last year’s total of 98. The team are currently running a record 200 live cases. We are confident that our portfolio of cases will provide attractive returns for shareholders. Overall, the business is very well-positioned in the insolvency litigation financing market for long-term profitable growth.
Peter Bertram
Non-Executive Chairman
