TIDMMANO
RNS Number : 5053D
Manolete Partners PLC
22 June 2023
22 June 2023
MANOLETE PARTNERS PLC
("Manolete" or the "Company")
Audited results for the year ended 31 March 2023
Manolete (AIM:MANO), th e leading UK-listed insolvency
litigation financing company, today announces its audited results
for the year ended 31 March 2023.
Steven Cooklin, Chief Executive Officer, commented:
"The annual results for FY23 mask a picture of two very
different six-month periods for the Company: the first half of the
trading year was subdued, as the Company had only just begun to
emerge from the ending, in April 2022, of the temporary suspension
of certain important insolvency laws that the UK Government had
instigated in June 2020 in response to the COVID-19 pandemic. While
normal insolvency laws resumed at the start of the financial year,
there is always a natural time lag between insolvencies commencing
and the associated litigation claims being referred to Manolete, as
Liquidators and Administrators need time to conduct their
regulatory investigations before they can assemble cases for
consideration by us. The second half saw a strong resumption of the
growth that the Company had exhibited prior to the pandemic, as the
UK Insolvency Market returned to normal operations with a strong
recovery in cases being referred to us.
Given the fact that we enjoyed only the latter six months of
more "normal" trading, the results are highly commendable given the
loss made in H1 and recovery in H2. We had a record number of 798
new case enquiries and a record number of 263 new case investments;
gross cash receipts from completed cases were at a record level of
GBP26.7m and a new record was also set with 193 cases being legally
completed in the 12-month period. We ended the year with another
record number of 351 live cases in progress and the Company
returning to profitability in the second half.
These positive KPIs have continued into the current FY24 - with
signed cases for the first two months of FY24 being 154% higher
than the first two trading months of the FY23. Consequently, we
have added, and continue to add, to our expert in-house legal and
financial analyst teams to address the increased level of demand
for our insolvency litigation solutions. With prevalent headwinds
of inflation and significantly higher interest rates facing the UK
economy, the Company is well set for continued growth over the
foreseeable future".
Financial (statutory and non-statutory) highlights:
-- Realised revenues on completed cases were GBP26.8m, an
increase of 76% (FY22: GBP15.2m) although FY23 contained an
exceptionally large funded case completion of which GBP4.9m was
recorded in realised revenue (total settlement GBP9.5m).
-- 129% of total revenues represented by realised revenues on
fully completed cases (FY22: 77%) offset by negative unrealised
revenues.
-- Increase in the valuation of the cartel cases contributed
GBP1.2m to gross profit in FY23 (FY22: GBP5.1m).
-- EBIT reduced by 159% to a loss of GBP(3.1)m (FY22: GBP5.3m) a
result of pressure on valuations in H1 FY23 on existing cases and a
single rare larger case loss at trial.
-- The Company made a loss before tax of GBP(4.0)m (FY22: GBP4.5m profit).
-- Gross cash receipts from completed cases were GBP26.7m, an
increase of 72% (FY22: GBP15.5m).
-- The Company's retained share of gross cash receipts from
completed cases (after all legal costs and payments to Insolvent
Estates) was GBP13.1m, an increase of 47% (FY22: GBP8.9m).
-- Cash generated from operations (after all completed case
costs and all overheads but before new case investments and
taxation) was GBP8.0m (FY22: GBP4.4m).
-- Gross cash of GBP0.6m and borrowings of GBP10.5m (FY22:
GBP2.2m and GBP13.5m) as at 31 March 2023 and GBP14.5m unutilised
funds available on the Revolving Credit Facility with HSBC.
-- Final dividend of nil per share.
Operational highlights:
-- New case investments in UK insolvency cases, an increase of 65%: 263 in FY23 (FY22: 159).
-- Based on unaudited internal management information: ROI of
125% and Money Multiple of 2.2x from 689 completed cases since
inception
-- Based on unaudited internal management information: 193 cases
were completed in FY23 (FY22: 139 cases), with an average duration
per case of 15.5 months (FY22: 13.2 months), generating a Money
Multiple of 1.9x (FY22: 1.87) and an IRR of 131% (FY22: 132%)
-- Average case duration across the full portfolio of 689 completed cases is 12.8 months
-- 29% increase in live cases: 351 in process as at 31 March 2023 (272 as at 31 March 2022)
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.
For further information please contact:
Manolete Partners via Instinctif Partners
Steven Cooklin (Chief Executive
Officer)
Peel Hunt (NOMAD and Broker) +44 (0)20 7418 8900
Paul Shackleton
Instinctif Partners +44 (0)78 3767 4600
Tim Linacre manolete@instinctif.com
Victoria Hayns
Chairman's Statement
I am delighted to present my second report as your Chairman.
Overview
I am pleased to report the Company has delivered a performance
that generated growth in the second half of the year, following a
first half of the year which remained subdued. Despite this second
half performance, the business recorded a loss for the year as a
whole.
In terms of new business generated, 263 new case investments
were signed in the year to 31 March 2023 which represents a new
record number (FY22:159).
Financial results
Revenues for the year to 31 March 2023 increased by 2% to
GBP20.8m (FY22: GBP20.4m) and Loss before Tax was (GBP4.0m)
compared to a Profit before Tax of GBP4.5m in the prior year. The
loss was largely the result of fair value write downs in H1 FY23,
including a large case loss at trial.
There were 193 case completions (FY22: 139) which is a record
for the company. Completed cases generated gross cash receipts of
GBP26.7m (FY22: GBP15.5m) and contributed to a growth in
receivables balances to GBP24.4m (FY22: GBP20.3m). Gross profit of
GBP3.7m (FY22: GBP10.4m) was generated by profits on realised cases
of GBP9.7m (FY22: GBP5.2m) and unrealised gross loss of (GBP6.0m)
(FY22: gross profit of GBP5.2m).
We have drawn down a total of GBP10.5m (FY22: GBP13.5m) of our
GBP25m Banking Facility with HSBC to support the growth of the
business. This Revolving Credit Facility is until 1 July 2025 with
a GBP10m accordion. Details are set out in the CFO's report.
Strategy
We remain focused on strengthening the profile of Manolete, and
an important component to our strategy is to continue to build upon
our network of established Insolvency Practitioner and insolvency
lawyer contacts throughout the UK.
The Covid pandemic resulted in the UK Government enacting the
Corporate Insolvency and Governance Act 2020 ("temporary measures")
to protect employment and businesses which led to a fall in
corporate insolvencies. Whilst the pandemic is now behind us, the
tail of these measures continued to impact the business in H1 FY23.
In H2 FY23, we have expanded the business to take advantage of the
increasing number of corporate insolvencies, now that the
pandemic-era Government support measures have come to an end.
Dividend
The Board has reviewed the dividend policy and no final dividend
is recommended.
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 33 to 37.
The Audit Committee report on pages 39 to 40 and the
Remuneration Committee report on pages 41 to 43 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 team, which is comprised of highly dedicated, extremely
knowledgeable and focused staff, for their commitment and hard work
during a very demanding year. My particular thanks to Steven
Cooklin for providing strong leadership to the team.
Board
The Board represents a balanced mix of individuals who have now
had a year together in the current Board structure and are working
effectively for the benefit of the Company. I was pleased to
welcome Mena Halton onto the Board earlier in the year, as Managing
Director, to provide greater legal expertise from the executive
team.
I note that following the disappointing trial result of a single
large case in H1 FY23, the Board now reviews all cases that could
potentially go forward to trial, in order to provide guidance in
this area.
Outlook
Following a strong H2 FY23, we look forward to a period of
growth in FY24 reflecting the increasing number of corporate
insolvencies in the UK. The Company is preparing for growth with
the recruitment of additional legal staff and support staff to
allow this opportunity to be seized.
I also note the exciting opportunity with respect to the Bounce
Back Loans (BBLs) pilot with Barclays Bank plc which will evolve
during the coming year.
Lord Leigh
Non-Executive Chairman
21 June 2023
CEO's Statement
FY23 painted a picture of two highly contrasting half years. The
first half of the trading year was, as expected, subdued. Following
a temporary material suppression of UK insolvency laws during the
Covid-19 pandemic, the UK Government returned the laws
substantially back to their pre-pandemic status on 1 April 2023
(coincidentally, the start of the Company's FY23 trading year). As
can be seen from the graph below, insolvency activity rose in
anticipation of a return to normal insolvency laws and then
increased above pre-pandemic levels. However, as the Board has
explained, there is always a time-lag (of approximately seven
months) between insolvency numbers and cases being referred to the
Company: this is because Liquidators and Administrators require
this period to properly investigate claims, before being able to
present claims to the Company.
The following graph issued by the Insolvency Service on 28 April
2023, clearly illustrates the impact of these measures on the UK
insolvency industry.
This time lag can be seen clearly feeding into the Company's Key
Performance Indicators:
(i) Manolete New Case Enquiries
The graph below shows a slowly recovering level of new case
enquiries in H1 FY23 as UK insolvency numbers rose. Then, having
got past the seven-month time lag for claim investigations to
occur, H2 showed a strong increase in the level of new enquiries,
giving the Company a record level of new case enquiries for that
latter six-month period.
(ii) New Case Investments
The time lag between new case enquiries coming into the Company
and those qualifying cases being signed up as new case investments
is very much shorter. Our Net Worth Reporting team are able to
analyse the financial assessment of the proposed defendants on a
claim within a few days. If the Net Worth Report is positive, our
in-house legal team are then usually able to report to the
Company's Investment Committee within 7-10 days, with offers being
sent to office holders (Liquidators or Administrators) the next
day. Office holders are usually in a position to decide on our
offer within a week or so.
Therefore, the new case investments graph below, quickly starts
to mirror the shape of the new case enquiries:
This shows the stark contrast in trading between H1 FY23 and H2
FY23. As all cases have to be given a value the impact on the
financial performance of the Company is clear: a challenging first
half, followed by a sharply improved second half of FY23.
Despite the Company operating under subdued trading conditions
for the first half and the loss for the full year, the Company
performed well over the year as a whole in many key areas compared
to FY22. Thanks to the strong second half trading:
-- Invested in record number of 263 new UK insolvency claims, an increase of 65% (FY22: 159).
-- A record number of 193 cases were completed, an increase of 39% (FY22: 139).
-- Realised revenues on completed cases were GBP26.8m, an
increase of 76% (FY22: GBP15.2m) although FY23 contained an
exceptionally large funded case completion of which GBP4.9m was
recorded in realised revenue (total settlement GBP9.5m) - our
second largest ever completed case and one where all the cash was
received within just a few weeks of completing the case.
-- Gross cash receipts from completed cases were GBP26.7m, an
increase of 72% (FY22: GBP15.5m).
-- The Company's retained share of gross cash receipts from
completed cases (after all legal costs and payments to Insolvent
Estates) was GBP13.1m, an increase of 47% (FY22: GBP8.9m).
-- Cash generated from operations (after all completed case
costs and all overheads but before new case investments and
taxation) was GBP8.0m (FY22: GBP4.4m).
-- EBIT reduced by 159% to a loss of (GBP3.1m) (FY22: profit of
GBP5.3m) a result of the H1 loss caused by the subdued H1 trading
environment, a review of case valuations on existing cases
precipitated by the worsening UK economic environment and a rare
adverse opinion on a large case.
-- Increase in the valuation of the cartel cases contributed
GBP1.2m to gross profit in FY23 (FY22: GBP5.1m).
The Company had net debt of GBP9.7m as at 31 March 2023 in
comparison to GBP11.1m in FY22. The Company has a GBP35m funding
package with HSBC on attractive terms: a Revolving Credit Facility
("RCF") of GBP25m over an initial three-year period to 1 July 2024,
which was extended by 1 year to 1 July 2025 in July 2022. The RCF
also offers the Company an additional approved but uncommitted
GBP10m accordion, if ever required. Management would require
approval from HSBC before gaining access to these additional funds.
The interest rate is a maximum 3.7% over SONIA. During the period,
management has amended the existing loan facility with HSBC to
provide more lenient covenants.
Overall, for FY23, 129% of total revenues (FY22: 75%) of
GBP20.7m (FY22: GBP20.4m) and 264% of total gross profit (FY22:
50%) of GBP3.7m (FY22: GBP10.4m) were from realised completed
cases. 74% of total revenues derived from purchased cases (FY22:
93%) and 26% from funded cases (FY22: 7%) - the large GBP9.5m case
(GBP4.9m of which was Manolete's share) referred to earlier was a
rare funded case. It is the Company's ability to purchase (and
therefore fully control) its legal claims that fundamentally
distinguishes it from almost all other litigation funding
companies. Of the 263 new cases signed in FY23, 93% were purchased
cases and 7% were funded cases. This is in line with the Company's
expectations of a continuing greater acceptance of the Company's
core business model in the insolvency industry.
Cash Generation
Cash generation was very strong throughout FY23. Overall gross
cash receipts rose 72% to a record GBP26.7m for FY23. It should be
noted that 83% of those cash receipts came from cases completed in
FY23 whereas 11% derived from cases that completed in FY22 and the
balance of 6% coming from earlier case investment vintages. The
GBP26.7m of cash generated derived from 235 separate cases (FY22:
GBP15.5m from 183 historic cases), which highlights the wide
diversity and granularity of the Company's cash income.
For the first time in our history the Company generated positive
net cash income after all operating, investment, taxation and
interest costs but excluding net borrowing movements: FY23: GBP1.4m
(FY22: net cash outflow (GBP3.2m)).
Cartel Cases
There have been material developments relating to the Company's
cartel cases in recent months. Early in this calendar year 2023,
the judgments for the large truck cartel cases relating to British
Telecom Plc and Royal Mail Plc (the "first wave") were handed down
with significant damages and interest being awarded to the
Claimants. The two key important aspects of the judgments were that
the overcharge was assessed at 5% and the discount for pass on was
rejected. Interest was awarded on a simple basis at base rate plus
2%. Our external expert cartel case valuation advisers, Fideres,
accordingly updated their valuations of the Company's 22 similar
truck cartel claims and this supported the net book carrying value
of those cases as at 31 March 2023.
The "second wave" of truck cartel cases settled soon after the
judgments on the first wave. Terms were not made public but the
fact that the defendants are clearly willing to engage in
settlement discussions on some significant claims is a further
encouragement. The third wave of trials is awaited, and we are
currently reviewing the litigation strategy on our group of 22
truck cartel cases, which are currently stayed, with our expert
legal advisers.
UK Bounce Back Loans ("BBLs")
As previously reported, we have been working closely with
Barclays Bank Plc and also assisted in the reporting to the British
Business Bank, in designing an effective way to recover loans made
under the UK Government's Bounce Back Loan initiative. This
initiative provided around GBP47bn of Government guaranteed loans
to c. 1.6 million UK businesses in the early months of the Covid-19
pandemic in 2020. Most loans were for GBP50k to UK SMEs. While the
majority of these loans were used for proper business purposes, a
significant minority of loans were misappropriated by the
owner-managers of those businesses ("misappropriated BBLs"). Those
misappropriated BBLs have not been repaid, at a potentially
significant cost to the UK taxpayer.
Having recovered minimal amounts using other traditional debt
recovery methods, towards the end of 2022, Barclays initiated a
pilot scheme of 119 misappropriated BBLs, putting those companies
into a Compulsory Liquidation process. Some Directors of those
target companies did settle directly with Barclays at the start of
this process but the large majority were put into compulsory
liquidation. In FY23, 48 of these cases were assigned to Manolete
(starting in January 2023) and a further 20 have been assigned to
the Company in FY24 as at 31 May 2023. The returns from the
Manolete cases have been outstanding and often achieved within a
matter of a few weeks, with almost all settlements (8 cases have
closed at 31 May 2023) with Directors at the full value of the
BBL.
The Company has commenced discussions with a number of other
financial institutions with the possibility that they may follow
with their own pilot schemes. Others are likely to wait until the
full, or a larger number of, outcomes can be seen from the Barclays
pilot. Manolete has retained the services of Lord Agnew, Minister
of State at the Cabinet Office and Her Majesty's Treasury from 2020
to 2022 with responsibility for counter fraud, to advise the
Company on its strategy in this area.
Investment Returns
Our investment track record, by vintage, continues to
demonstrate outstanding results. All vintages, up to and including
FY19, have been completed. FY20 cases are now 91% complete, FY21
80% complete and well over half of the FY22 cases are legally
completed. Manolete's model is characterised by short case
durations, high ROIs (Return on Investment), exceptional Money
Multiples and IRRs. The Company calculates case duration from the
date we sign the investment agreement to the date the case is
legally concluded. On average, cash collection takes around 12.8
months after legal completion.
Case No. of No. % No Open case Closed case Total Total Total IP Manolete Duration ROI MoM IRR
investments completed completion outstanding investments investments invested recovered gain share gain completed
cases
Vintage No No % total No GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 Months % % %
--------- ------------ ---------- ----------- ------------ ------------ ------------ --------- ---------- -------- -------- --------- ---------- ------ ----- ------
2010 3 3 100% 0 0 52 52 28 (24) 10 (34) 7.0m (65%) .3x 0%
2011 0 0 - 0 0 0 0 0 0 0 0 0.0m 0% .0x 0%
2012 8 8 100% 0 0 763 763 2,524 1,761 580 1,181 18.0m 155% 2.5x 258%
2013 10 10 100% 0 0 174 174 780 606 316 290 7.1m 166% 2.7x 147%
2014 42 42 100% 0 0 594 594 3,884 3,290 2,427 863 10.0m 145% 2.5x 455%
2015 39 39 100% 0 0 1,404 1,404 7,029 5,625 3,290 2,335 12.8m 166% 2.7x 502%
2016 36 36 100% 0 0 1,936 1,936 9,393 7,457 4,164 3,293 15.0m 170% 2.7x 180%
2017 31 31 100% 0 0 1,446 1,446 4,469 3,023 1,905 1,118 14.1m 77% 1.8x 462%
2018 29 29 100% 0 0 3,960 3,960 23,714 19,754 12,972 6,782 16.9m 171% 2.7x 70%
2019 59 59 100% 0 0 2,737 2,737 14,855 12,118 7,530 4,588 17.4m 168% 2.7x 99%
2020 141 129 91% 12 1,010 6,279 7,289 16,737 10,458 6,599 3,859 16.1m 61% 1.6x 98%
2021 198 158 80% 40 1,470 6,900 8,370 22,540 15,640 8,367 7,273 12.9m 105% 2.1x 142%
2022 159 101 64% 58 1,523 1,793 3,316 6,788 4,995 2,356 2,639 9.0m 147% 2.5x 321%
2023 263 44 17% 219 1,556 555 2,111 3,366 2,810 1,397 1,413 4.1m 254% 3.5x 6288%
Total
(exc.
Cartel
cases) 1,018 689 67.7% 329 5,560 28,593 34,151 116,106 87,513 51,913 35,600 12.8m 125% 2.2x 131%
(i) The vintages table excludes 22 cartel cases and is net of
deductions for bad debt provisions (excluding ECL provisions).
(ii) Ongoing cases includes partial realisations.
(iii) The large case completion in FY21 is presented net of
discounting.
(iv) IRR's are presented for vintages where there are 12 or more
months of historical cashflow information.
Note: Vintage table above is unaudited
The more mature vintages of FY18, FY19, FY20 and FY21 all have
total case recoveries of well over GBP10m per year and IRRs ranging
from 70% to 142%. Recoveries for cases that commenced in FY22 total
GBP6.8m with an IRR of 321%.
Industry Recognition
During the year, the Company was named, for the second time, as
the only company in the insolvency litigation funding section to be
ranked in Band 1 of the legal industry's prestigious Chambers
Guide. The Band 1 ranking is a great testament to the tremendous
work of all the Company's employees.
Current Trading
FY24 has started very well, in the same vein as H2 FY23. It is
noticeable that the headline claim values of new case enquiries
coming into the Company are starting to increase, as the challenges
in the UK economy spread from SMEs to larger enterprises. We have
recently added to both our in-house legal team and our Net Worth
Report team, to address the increased demand we are seeing across
all regions.
People and Stakeholders
I am hugely indebted to our outstanding staff. The multiple
awards we have received in the Insolvency, Legal and Financial
sectors are a direct reflection of their excellence. The in-house
Legal and Net Worth teams have been skilfully built-out by Mena
Halton. Reflecting her important role in running these teams
day-to-day, which constitute the core engine of the Company, Mena
was appointed to the Board as Managing Director in June 2022.
Our professional relationships, built over the last 13 years,
with hundreds of Insolvency Practitioners, expert external
insolvency solicitors and barristers, R3, the Insolvency
Practitioners Association, the ICAEW, the Insolvency Service and
HMRC are fundamental to the success and growth of the Company.
These were pivotal to us achieving the tremendous milestone of
1,000 lifetime signed UK insolvency cases in February of this year.
Although there is still much to do.
Steven Cooklin
Chief Executive Officer
21 June 2023
CFO's Statement
I am pleased to give my review of the Company's audited results
for the year to 31 March 2023..
Financial overview: 31 March 2023 31 March 2022 YoY
Financial KPIs GBP000s GBP000s %
-------------------------- -------------- -------------- -------
Revenue 20,753 20,443 2%
Gross profit 3,672 10,381 (65%)
Gross margin % 17.7% 50.8%
EBIT (3,121) 5,304 (159%)
EBIT % (15%) 26%
(Loss)/Profit after tax (3,124) 3,678 (185%)
Investment valuation 36,462 45,718 (20%)
Non-financial KPIs
-------------------------- -------------- -------------- -------
New cases 263 159
Completed cases* 193 139
Live cases at year end** 351 272
*including 9 partially completed cases (7 partial completions
FY22)
**including 22 cartel cases and 42 BBL cases in FY23 (22 cartel
cases and zero BBL cases in FY22)
Revenue 31 March 2023 31 March 2022
GBP000s % GBP000s %
-------------------- -------------- ----- -------------- ---
Realised revenue 26,790 129 15,243 75
Unrealised revenue (6,037) (29) 5,200 25
Revenue 20,753 20,443
==================== ============== ===== ============== ===
31 March 2023 31 March 2022 YOY
GBP000s GBP000s %
----------------------- -------------- -------------- ----
Realised Gross Profit 9,798 5,182 89
Realised Gross Margin 36.2% 34.0%
Revenues can be classified into realised revenue (actual
completions) of GBP26.8m in FY23 (FY22: GBP15.2m) and unrealised
revenue (valuations of new and live cases) GBP(6.0)m FY23 (FY22:
GBP5.2m).
Realised revenue increased by 76% to GBP26.8m (FY22: GBP15.2m)
mainly driven by the significant increase in the number of case
completions in FY23 which included a single significant case
completion contributing revenue of GBP4.9m itself. The Company
recorded a record number of case completions in FY23 of 193 (FY22:
139).
Unrealised revenue of GBP(6.0)m FY23 (FY22: GBP5.2m) was partly
a result of write down of fair values of live cases during the
first half of the year, as reported at our Interim Results for
September 2022 as well as the high level of completions which are
removed from unrealised and recorded as realised revenue. The write
down in fair value of cases was a one-off exercise that reflected
the harsher economic climate and resulting likely outcomes of
cases.
For comparison purposes, it should be noted that the prior year,
unrealised revenue included a GBP5.1m uplift in the cartel
valuation whilst in FY23 there was only an uplift of GBP1.2m.
Gross profit H1 v H2
30 September 2022 - H1 31 March 2023 - H2
Total FY23
GBP000s GBP000s GBP000s
------------------------------------- ------------------------- --------------------- -------------
Realised revenue 13,596 13,194 26,790
Unrealised revenue (8,082) 2,045 (6,037)
------------------------------------- ------------------------- --------------------- -------------
Total revenue 5,514 15,239 20,753
Other costs, including office costs (7,701) (9,380) (17,081)
Gross profit (2,187) 5,859 3.672
===================================== ========================= ===================== =============
Non-financial KPIs
------------------------------------- ------------------------- --------------------- -------------
New cases 83 180 263
Completed cases* 95 98 193
Live cases at end of period** 264 351 351
*including 9 partially completed cases (7 partial completions
FY22)
**including 22 cartel cases and 42 BBL cases in FY23 (22 cartel
cases and zero BBL cases in FY22)
Revenue of GBP20.8m FY23 represented growth of 2% year on year
whilst gross profit decreased by 65% to GBP3.7m (FY22 GBP10.4m). To
understand the FY23 results, it is necessary both to review the
difference in H2 v H1 performance, as growth in case numbers
increased in H2 FY23 and to acknowledge the impact of a single
large case, which was lost at trial.
There was a significant upturn in volumes and financial
performance in H2 FY23 as compared to H1 FY23. A gross profit of
GBP5.9m was recorded in H2 FY23 compared to a loss of (GBP2.2m) in
H1 FY23.
In H1 FY23 lower volumes of new cases as a result of the drag
effect of the covid restrictions continued to impact the business.
However this was no longer the case in H2 FY23 when higher
insolvencies across the economy resulted in higher new case numbers
reaching the business.
Impact of single large case lost at trial
Very few cases proceed to trial each year and in FY23, a large
case was found against us and our appeal was dismissed. This result
had the following impact on our trading results in FY23 (of which
GBP2.3m was taken to the Statement of comprehensive income in H1
and GBP0.5m in H2).
GBP000s
----------------------- --------
Initial consideration (75)
Legal costs (915)
Fair value write down (1,800)
----------------------- --------
Total (2,790)
----------------------- --------
Whilst from time to time, we will lose cases at trial, we do not
expect such a large case loss to be repeated. If we add back the
large case lost at trial, see below for proforma results.
31 March 2023 31 March 2023
Impact on financials Reported Adjusted
GBP000s GBP000s
------------------------------------- ----------------- ---------------- --------------
Revenue 20,753 22,553
Gross profit 3,672 6,462
Gross margin 17.7% 28.7%
EBIT (3,121) (331)
Administrative expenses
31 March 2023 31 March 2022 YoY
growth
GBP000s GBP000s %
-------------------------------------- ---------------- ---------------- --------------
Wages and salaries 3,737 3,519 6%
Bad debt expense 1,534 321 378%
Professional fees 512 479 7%
Marketing 344 222 55%
Other costs, including office costs 666 536 24%
Administrative costs 6,793 5,077 34%
====================================== ================ ================ ==============
Administrative expenses increased by 34% to GBP6.8m in FY23
(FY22: GBP5.0m). The increase in administration expenses was
primarily a result of an increase in bad debt expense to GBP1.5m
(FY22: GBP0.3m) following a thorough review of receivables given
the current economic environment. The bad debt expense primarily
relates to a small number of debtors who have either entered into
bankruptcy or whose assets have been hidden overseas as well as an
increase in the ECL provision.
Salaries increased by 6% per annum consistent with annual salary
reviews. Professional fee expenses of GBP0.5m (FY22: GBP0.5m) have
been well managed and consist of mostly recurring items such as
audit, tax and PR services.
Marketing costs of GBP0.3m (FY22: GBP0.2m) have increased since
FY22 as expected following an increase in business development
activities as Covid-19 restrictions have been removed. Other costs
have increased due to a short-term lease on our London offices
which had previously been accounted for as a Right of Use asset
under IFRS 16.
Operating loss (Earnings Before Interest and Tax)
The Company reported an operating loss of GBP(3.1)m in
comparison to an operating profit of GBP5.3m in FY22, a decrease of
159%.
Finance costs
The Company extended the length of its debt facility with HSBC
in July 2022 from 1 July 2024 to 1 July 2025 to facilitate the
expected growth of its case load in the future. The Company pays a
0.7% commitment fee on any unused facility with HSBC. As at 31
March 2023, GBP10.5m of the GBP25m HSBC facility has been drawn
down (FY22: GBP13.5m).
The Company also entered into an amended loan agreement in March
2023 with more lenient covenant tests for the following three
quarter ends, which would allow the period of losses in H1 FY23 to
be excluded from the leverage covenant calculation (which includes
a 12 months look-back in its EBTIDA figure).
BBL pilot
As at 31(st) March 2023, the Company has signed 48 Bounce back
loan cases (BBLs), of which 6 have already completed. The 42 live
BBL cases have had a positive impact on the Profit and loss account
via valuation of GBP495k and the six completed BBL cases have
contributed a realised gross profit to the Company of GBP108k in
FY23 (after deduction of initial purchase cost and external cost
and profit share) i.e. an average profit per BBL case for Manolete
of GBP18k.
Loss after tax
Loss after tax of (GBP3.1m) was recorded in FY23 (FY22: GBP3.7m
profit). The post-tax margin has decreased from 18% to (15)%.
Earnings per share
As disclosed in Note 12, earnings per share decreased by 188%
from 8.0 pence to (7.0) pence.
Balance sheet restatement
During the year we restated the contract asset / liability that
related to the large case settlement that completed in FY21.
Following a review of the contractual terms of the contract asset
and liability, the directors concluded that these balances should
have been presented as long term. The adjustments to the Statement
of Financial Position as at 31 March 2021 and 31 March 2022 are
shown in Note 30.
Balance sheet - Investment in Cases
The Company was managing 351 live case investments as at 31
March 2023, compared to 272 live cases as at 31 March 2022, a net
increase of 79 cases, or 29%. The total investment in cases
amounted to GBP36.5m as at 31 March 2023 a decrease of 20% (FY22:
GBP45.7m). This reduction in Investment value of cases was due to a
one-off exercise in H1 FY23 to reduce the valuation of open cases
to reflect the economic realities of settlements being reached as
well as a number of larger cases settling during the year. The
valuation includes the investment in the cartel cases as at 31
March 2023 of GBP13.4m, an increase of GBP1.2m from GBP12.2m in
FY22. Investment in cases is shown at fair value, based on the
Company's estimate of the likely future realised gross profit, plus
costs incurred.
Management, following discussion on a case-by-case basis with
the in-house legal team, amend valuations of cases each month end
to accurately reflect management's view of fair value. In addition,
at the interim and final reporting periods, a sample of material
valuations are corroborated with the external lawyers working on
the case, who provide updated legal opinions as to the current
status of the case. The Company does not capitalise any of its
internal costs, such as salaries, these are fully expensed to the
Statement of Comprehensive Income as incurred.
Cashflow 31 March 2023 31 March 2022
GBP000s GBP000s
-------------------------------------------------------------------------------------- -------------- --------------
Gross cash receipts 26,708 15,549
IP share & legal costs on completed cases (13,608) (6,632)
Cashflows from completed cases 13,100 8,917
Overheads (5,092) (4,499)
-------------------------------------------------------------------------------------- -------------- --------------
Net cash generated from operations before investment in cases and corporation tax 8,008 4,418
Corporation tax (354) (833)
-------------------------------------------------------------------------------------- -------------- --------------
Net cash generated from operations after corporation tax and before investment in new
cases 7,654 3,585
Investment in cases (5,806) (6,470)
-------------------------------------------------------------------------------------- -------------- --------------
Net cash generated from/(used in) operations 1,848 (2,885)
-------------------------------------------------------------------------------------- -------------- --------------
% growth in case cash investments (13%) 10%
-------------------------------------------------------------------------------------- -------------- --------------
Gross cash receipts
Gross cash receipts increased strongly year on year, to GBP26.7m
in FY23 (FY22: GBP15.5m) by 72% and importantly, cash generated
from operations before investment in cases and corporation tax has
increased from a cash inflow of GBP4.4m in FY22 to a cash inflow of
GBP8.0m in FY23 which has been partly reinvested in the portfolio
and partly utilised for repayment of debt balances. Furthermore,
net cash generated prior to investment in cases (new and existing)
was GBP7.7m FY23 compared to GBP3.6m FY22. The increase in cash
generation at this level demonstrates the business has become
self-funding in case investments. Cash receipts are being generated
both from payment schedules of prior year completions as well as
from current year case completions.
The graph below shows the growth in gross cash generation
(including both IP share and Manolete share of cash receipts) year
on year. As the business matures, its ability to generate cash and
ultimately be self-funding is a key characteristic.
Overheads & Corporation Tax
Excluding non-cash items (including bad debt expense), spending
incurred on overheads has increased from GBP4.5m FY22 to GBP5.1m
FY23 principally as result of an increase in headcount, annual
salary increases and bonuses.
As corporation tax is paid on unrealised as well as realised
profits, the Company effectively pre-pays an element of its
corporation tax liability. In FY23, the Company generated
unrealised losses of GBP(6.0)m (FY22: GBP5.2m) which has helped
contribute to the year end tax receivable position.
Investment in cases
We have continued to invest in existing and new cases with total
capital of GBP5.8m deployed during FY23 compared with GBP6.5m in
FY22 which has been funded through cash receipts from completed
cases.
Working Capital
Absorption of GBP5.9m into working capital during FY23 is
primarily due to increased trade receivables, itself a factor of
increased realised revenues. This increase in net trade receivables
will generate cash in FY24 and beyond. Debtor days on a countback
basis stayed static at 335 in FY23 (FY22: 335).
31 March 2023 31 March 2022
Net working capital GBP000s GBP000s
------------------------------------ -------------- --------------
Net working capital 16,115 10,158
Change in net working capital (5,957) (1,950)
------------------------------------ -------------- --------------
DSO (Days sales outstanding) basic 365 507
DSO countback 335 335
------------------------------------ -------------- --------------
Debt Financing
The Company has drawn down GBP10.5m (FY22: GBP13.5m) of its
GBP25m HSBC loan facility and has continued to deploy loan capital
during the year to finance investment in cases. Hence a repayment
of GBP3.0m in the HSBC loan compared to 31 March 2022. The Company
held cash reserves of GBP0.6m as at 31 March 2023 which are
available to deploy on new case investment.
The Company agreed a waiver with HSBC in respect of the leverage
covenant for the quarters ending 30 June 2022, 30 September 2022
and 31 December 2022 as losses incurred in H1 FY23 were resulting
in a breach of the leverage covenant. Following this event, the
Company has agreed an amendment to the loan agreement with a
revised leverage covenant for the three quarters ending 31 March
2023, 30 June 2023 and 30 September 2023 to avoid any short-term
breach of the leverage covenant due to the count back nature of the
calculation (calculation amended to exclude the period of EBIT
losses in H1).
Mark Tavener
Chief Financial Officer
21 June 2023
Strategic Report
The Directors present their strategic report for the year ended
31 March 2023.
Strategy and Business Model
The Company's strategy for growth and its business model are
described in detail on the Company's website,
www.manolete-partners.com and at the start of this report .
On pages 25 to 26, we have set out the principal risks which may
present challenges in executing the business model and delivering
the strategy.
As the UK Government's extraordinary temporary measures to
materially reduce the number of insolvencies and bankruptcies
during the Covid-19 pandemic were concluded at the end of the prior
financial year, elements of the financial statements for the year
ended 31 March 2023 represent a satisfactory out-turn for the
business. Year-on-year revenues increased by 2%, driven by an
increase in realised revenues offset by a decrease in unrealised
revenue (see table below). Operating profits declined by 159% to an
operating loss of (GBP3.1m) and net assets decreased 8% to
GBP39.2m. The loss is largely attributable to the first half of
FY23 (EBIT loss of GBP5,3m for H1 FY23), whereas the business
rebounded strongly in H2 FY23 with a positive EBIT contribution of
GBP2.2m.
The number of employees was 25 (FY22: 22) at the end of the
financial year. As demand has increased significantly for our UK
insolvency litigation financing products over the last six months
and is likely to remain so, we are selectively adding to our expert
in-house legal and Net Worth Report teams. Despite recruitment
challenges in some areas of the UK, the Company is not experiencing
any problems attracting new recruits.
The business has grown significantly following the difficult
trading conditions of the previous two years. At the financial
year-end the cumulative number of signed litigation investments has
grown to 1,040 cases, with a record 351 live, in-progress cases at
as 31 March 2023.
Year Ended Year Ended
31 March 2023 31 March 2022 % change
Financial KPIs GBP000s GBP000s
-------------------------------------------------- --------------- --------------- ---------
Realised revenue 26,790 15,243 76%
Unrealised revenue (6,037) 5,200 (216%)
-------------------------------------------------- --------------- --------------- ---------
Total revenue 20,753 20,443 2%
Gross profit 3,672 10,381 (65%)
Operating (loss)/profit (3,121) 5,304 (159%)
(Loss)/profit after tax (3,124) 3,678 (185%)
Value of investments 36,462 45,718 (20%)
Non-financial KPIs
-------------------------------------------------- --------------- --------------- ---------
Number of lifetime signed litigation investments 1,040 777 34%
Live cases at end of reporting period 351 272 29%
New cases 263 159 65%
Completed cases 193 139 39%
-------------------------------------------------- --------------- --------------- ---------
The movements in key performance indicators is analysed in the
Report of the Chief Executive Officer on pages 12 to 16 and the
Report of the Chief Financial Officer on pages 17 to 22.
Outlook and Current Trading
We are confident we have invested in a portfolio of cases that
will produce attractive returns for the Company. The Government
measures to suppress UK insolvencies have now ended as have the
wider UK economic support measures, which give us confidence in our
future prospects. Many respected market commentators are predicting
a sustained period of elevated insolvency figures in the UK.
The Board has considered the Going Concern status of the
business both in relation to Covid-19 and the general wider
economic environment and has concluded that it is appropriate for
the accounts to be prepared on a going concern basis. The GBP25m
RCF plus GBP10m accordion on attractive terms with HSBC provides
the Company with substantial finance going forward. Further detail
on the board's consideration of going concern is included on page
53.
We believe the business is very well-positioned to consolidate
its leading position in the insolvency litigation financing market.
Since the start of the 2023 calendar year, the Company has added
additional members to its in-house legal team, in anticipation of
continuing increase in the level of new case enquiries.
The Company has made a good start to FY24 and we look forward to
a promising future.
On behalf of the Board:
Steven Cooklin
Chief Executive Officer
21 June 2023
Statement of Comprehensive Income
31 March 31 March
2023 2022
Note GBP'000s GBP'000s
-------------------------------------------------------------------------------------- ----- ---------- ---------
Revenue 4 20,753 20,443
Cost of sales (17,081) (10,062)
-------------------------------------------------------------------------------------- ----- ---------- ---------
Gross profit 3,672 10,381
Administrative expenses 8 (6,793) (5,077)
-------------------------------------------------------------------------------------- ----- ---------- ---------
Operating (loss)/profit 6 (3,121) 5,304
Finance income 9 7 -
Finance expense 9 (839) (796)
(Loss)/Profit before tax (3,953) 4,508
Taxation 11 829 (830)
(Loss)/Profit and total comprehensive income for the year attributable to the equity
owners
of the company (3,124) 3,678
====================================================================================== ===== ========== =========
Earnings per share
Basic (pence per share) 12 (GBP0.07) GBP0.08
Diluted (pence per share) 12 (GBP0.07) GBP0.08
-------------------------------------------------------------------------------------- ----- ---------- ---------
The above results were derived from continuing operations.
The notes at the end of this announcement form part of these
financial statements.
Statement of financial position
Company Number: 07660874 31 March 31 March
2023 2022
- restated
Note GBP'000s GBP'000s
---------------------------------- ------ --------- ------------
Non-current assets
Investments 13 13,389 12,198
Intangible assets 14 - 13
Trade and other receivables 16 12,315 12,331
Deferred tax asset 19 267 95
Right-of-use asset 15 - 86
---------------------------------- ------ --------- ------------
Total non-current assets 25,971 24,723
Current assets
Investments 13 23,073 33,520
Trade and other receivables 16 12,063 7,944
Corporation tax receivable 11 735 -
---------------------------------- ------ --------- ------------
Cash and cash equivalents 17 636 2,256
---------------------------------- ------ --------- ------------
Total current assets 36,507 43,720
---------------------------------- ------ --------- ------------
Total assets 62,478 68,443
EQUITY AND LIABILITIES
Equity
Share capital 21 175 175
Share premium 22 157 142
Share based payment reserve 22 699 429
Special reserve 22 - 5
---------------------------------- ------ --------- ------------
Retained earnings 22 38,130 41,468
---------------------------------- ------ --------- ------------
Total equity attributable to the
equity owners of the company 39,161 42,219
Non-current liabilities
Trade and other payables 18 7,393 7,699
Borrowings 20 10,381 13,285
---------------------------------- ------ --------- ------------
Total non-current liabilities 17,774 20,984
---------------------------------- ------ --------- ------------
Current liabilities
Trade and other payables 18 5,543 4,748
Current tax liabilities 11 - 396
Lease liability 15/20 - 96
Total current liabilities 5,543 5,240
---------------------------------- ------ --------- ------------
Total liabilities 23,317 26,224
---------------------------------- ------ --------- ------------
Total equity and liabilities 62,478 68,443
---------------------------------- ------ --------- ------------
The notes at the end of this announcement form part of these
financial statements.
The financial statements were approved by the Board of Directors
and authorised for issue on 21 June 2023.
Steven Cooklin
Chief Executive Officer
Statement of Changes in Equity
Share
Share Share based Special Retained Total
Capital Premium reserve reserve Earnings Equity*
GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s GBP'000s
----------------------------- --------- --------- --------- --------- ---------- ---------
As at 1 April 2021 174 4 349 178 38,223 38,928
Comprehensive income
Profit for the year - - - - 3,678 3,678
----------------------------- --------- --------- --------- --------- ---------- ---------
Transactions with owners
Dividends - - - - (606) (606)
Transfer in relation
to creditors paid - - - (173) 173 -
Share based payment expense - - 169 - - 169
Share options exercised 1 138 (138) - - 1
Deferred tax on share-based
payments - - 49 - - 49
As at 31 March 2022 175 142 429 5 41,468 42,219
Comprehensive income
Loss for the year - - - - (3,124) (3,124)
----------------------------- --------- --------- --------- --------- ---------- ---------
Transactions with owners
Dividends - - - - (219) (219)
Transfer in relation
to creditors paid - - - (5) 5 -
Share based payment expense - - 150 - - 150
Share options exercised - 15 - - - 15
Deferred tax on share-based
payments - - 120 - - 120
As at 31 March 2023 175 157 699 - 38,130 39,161
----------------------------- --------- --------- --------- --------- ---------- ---------
*attributable to the equity owners of the Company.
The notes at the end of this announcement form part of these
financial statements.
Statement of Cash Flows
31 March 31 March
2023 2022
Note GBP'000s GBP'000s
--------------------------------------------------------------------------- ----- --------- ---------
(Loss)/profit before tax (3,953) 4,508
Adjustments for other operating items:
Adjustments for non-cash items: 26 15,554 (444)
Operating cashflows before movements in working capital 11,601 4,064
Changes in working capital:
Net increase in trade and other receivables (4,105) (1,926)
Net increase in trade and other payables 512 2,280
--------------------------------------------------------------------------- ----- --------- ---------
Net cash generated from operations before corporation tax and investments 8,008 4,418
Corporation tax paid (353) (833)
Investment in cases 13 (5,806) (6,470)
--------------------------------------------------------------------------- ----- --------- ---------
Net cash generated from/(used in) operating activities 1,849 (2,885)
--------------------------------------------------------------------------- ----- --------- ---------
Cash flows from investing activities
Finance income received 9 7 -
--------------------------------------------------------------------------- ----- --------- ---------
Net cash generated from investing activities 7 -
--------------------------------------------------------------------------- ----- --------- ---------
Cash flows from financing activities
(Repayments)/Proceeds from borrowings 20 (3,000) 5,500
Dividends paid 10 (219) (606)
Interest paid (160) (703)
Repayment of lease liabilities 15 (97) (194)
Net cash (used in)/generated from financing activities (3,476) 3,997
--------------------------------------------------------------------------- ----- --------- ---------
Net (decrease)/increase in cash and cash equivalents (1,620) 1,112
Cash and cash equivalents at the beginning of the year 2,256 1,144
--------------------------------------------------------------------------- ----- --------- ---------
Cash and cash equivalents at the end of the year 636 2,256
=========================================================================== ===== ========= =========
The notes at the end of this announcement form part of these
financial statements.
Notes forming part of the Financial Statements
1. Company information
Manolete Partners PLC (the "Company") is a public company
limited by shares incorporated in England and Wales. The Company is
domiciled in England and its registered office is 2-4 Packhorse
Road, Gerrards Cross, Buckinghamshire, SL9 7QE. The Company's
ordinary shares are traded on the AIM Market.
The principal activity of the Company is that of acquiring and
funding insolvency litigation cases.
2. Summary of significant accounting policies
The principal accounting policies applied in the preparation of
these financial statements are set out below. The policies have
been consistently applied to all the years presented, unless
otherwise stated.
2.1 Basis of preparation
The financial statements have been properly prepared in
accordance with UK adopted International Accounting Standards and
in conformity with the requirements of the Companies Act 2006.
Under company law the directors must not approve the financial
statements unless they are satisfied that they give a true and fair
view of the state of affairs the Company and of the profit or loss
of the Company for that period.
Measurement bases
The financial statements have been prepared under the historical
cost convention. Historical cost is generally based on the fair
value of the consideration given in exchange for assets.
The preparation of the financial statements in compliance with
UK adopted International Accounting Standards requires the use of
certain critical accounting estimates and management judgements in
applying the accounting policies. The significant estimates and
judgements that have been made and their effect is disclosed in
note 3.
2.2 Going concern
Given current trading levels, in particular new cases volumes
being signed with a steady flow of completions along with the
general level of insolvencies in the economy as a whole, 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.
Management has updated its forecasts for the business with
particular focus on the next 12 - 18 months and based on current
trading levels and the existing HSBC debt financing, the Directors
are of the opinion that the Company has adequate financial
resources to continue in operation and meet its liabilities as they
fall due, for the foreseeable future. In addition, more lenient
covenants have been agreed with HSBC for the three quarters, 31
March 2023, 30 June 2023 and 30 September 2023. Hence, the
Directors believe it is appropriate to adopt the going concern
basis in preparing the financial statements.
For these reasons, they continue to adopt the going concern
basis in preparing the Company's financial statements.
2.3 Functional and presentation currency
The financial information is presented in the functional
currency, pounds sterling ("GBP") except where otherwise
indicated.
2.4 New standards, amendments and interpretations
New and amended IFRS Standards that are effective for the
current year:
-- Amendments to IFRS 3 Reference to the Conceptual Framework
Amendments to IAS 16 Property, Plant and Equipment-Proceeds before
Intended Use
-- Amendments to IAS 37 Onerous Contracts - Cost of Fulfilling a
Contract Annual Improvements to IFRS Standards 2018-2020 Cycle
-- Amendments to IFRS 1 First-time Adoption of International
Financial Reporting Standards, IFRS 9 Financial Instruments, IFRS
16 Leases, and IAS 41 Agriculture
New and revised IFRS Standards in issue but not yet
effective:
At the date of authorisation of these financial statements, the
Group has not applied the following new and revised IFRS Standards
that have been issued but are not yet effective:
-- Amendments to IAS 12 Clarification of accounting for deferred tax on transactions
The directors do not expect that the adoption of the Standards
listed above will have a material impact on the financial
statements of the Group in future periods.
2.4 Revenue recognition
Revenue comprises two elements: the movement in fair value of
investments and realised consideration.
Realised consideration occurs when a case is settled or a Court
judgement received. This is an agreed upon and documented
figure.
The movement in the fair value of investments is recognised as
unrealised gains within revenue. This is Management's assessment of
the increase or decrease in valuation of an open case, the
inclusion of value for a new case and the removal of the fair value
of a completed case. These valuations are estimated following the
progress of a case towards completion and also reflect the
judgement of the legal team working on the case (see Note 3.
Significant Judgements and Estimates). Hence, unrealised revenue is
the movement in the fair value of the investments in open cases
over a period of time.
When a case is completed the carrying value is a deduction to
unrealised income and the actual settlement value is recorded as
realised revenue.
Revenue recognition differs between a purchased case, where full
recognition of the settlement is recognised as revenue (including
the insolvent estate's share) and a funded case where only the
company's share of a settlement is recognised as revenue. This
differing treatment arises because the Company owns the rights to
the purchased case.
As revenue relates entirely to financing arrangements, revenue
is recognised under the classification and measurement provisions
of IFRS 9.
2.5 Finance expense and income
Finance expense
Finance expense comprises interest on bank loans and other
interest payable. Interest on bank loans and other interest is
charged to the Statement of Comprehensive Income over the term of
the debt using the effective interest rate method so that the
amount charged is at a constant rate on the carrying amount. Issue
costs are initially recognised as a reduction in the proceeds of
the associated capital instrument.
Finance income
Finance income comprises interest receivable on funds invested
and other interest receivable. Interest income is recognised in
profit or loss as it accrues using the effective interest
method.
2.6 Employee benefits: Pension obligations
The Company operates a defined contribution plan. A defined
contribution plan is a pension plan under which the Company pays
fixed contributions into a separate entity. The Company has no
legal or constructive obligations to pay further contributions if
the fund does not hold sufficient assets to pay all employees the
benefits relating to employee service in the current and prior
periods.
The Company has no further payment obligations once the
contributions have been paid. The contributions are recognised as
employee benefit expense when they are due. Prepaid contributions
are recognised as an asset to the extent that a cash refund or a
reduction in the future payments is available.
2.7 Intangible assets
Intangible assets are measured at cost and are amortised on a
straight-line basis over their estimated finite useful lives.
Amortisation is charged within administrative expenses in the
Statement of Comprehensive Income so as to write off the cost of
assets over their estimated useful lives, on the following
basis:
Website development costs: 33.3% of cost.
2.8 Financial assets
Classification
The Company classifies its financial assets at amortised cost or
fair value through profit or loss. Financial assets do not comprise
prepayments. Management determines the classification of its
financial assets at initial recognition.
Financial assets at amortised cost
The Company's financial assets held at amortised cost comprise
trade and other receivables and cash in the Statement of Financial
Position.
These assets are non-derivative financial assets with fixed or
determinable payments that are not quoted in an active market. They
arise principally through the provision of goods and services to
customers (e.g. trade receivables), but also incorporate other
types of contractual monetary assets. They are initially recognised
at fair value plus transaction costs that are directly attributable
to their acquisition or issue and are subsequently carried at
amortised cost using the effective interest method, less provision
for impairment.
Impairment of financial assets
Impairment provisions are recognised when there is objective
evidence (such as significant financial difficulties on the part of
the counterparty or default or significant delay in payment) that
the Company will be unable to collect all of the amounts due under
the terms receivable, the amount of such a provision being the
difference between the net carrying amount and the present value of
the future expected cash flows associated with the impaired
asset.
Impairment provisions for trade receivables are recognised
specifically against receivables where Management have identified
default or delays to payment in addition to the simplified approach
within IFRS 9 using lifetime expected credit losses. The Company
applies the simplified approach in providing for expected credit
losses under IFRS 9 which allows the use of the lifetime expected
credit loss provision for all trade receivables. In measuring the
expected credit losses, trade receivables have been stratified by
settlement type and days past due. Expected lifetime credit loss
rates are based on payment profiles of completed cases from January
2019 (post IPO). For trade receivables which are reported net, such
provisions are recorded in a separate provision account with the
loss being recognised within administrative expenses in the
Statement of Comprehensive Income. On confirmation that the trade
receivables will not be collectable, the gross carrying value of
the asset is written off against the associated provision.
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. Management identifies and selects a number of material
case valuations for external opinion. As such at any year-end, the
valuation of a sample of material investments was underpinned by an
external legal opinion, which supports the Directors'
valuation.
Valuation of investments
Determining the value of purchased and funded litigation
requires an estimation of the value of such assets upon acquisition
and at each reporting date. The future income generation of such
litigation is estimated from known information and the opinion of
external senior specialist counsel and solicitors. Valuations of
each case, at the balance sheet date, are therefore arrived at by
the Directors, considering counsel's, or external lawyer'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.
Contract assets are initially recognised in respect of earned
interest revenue earned on completed cases but where the settlement
will be paid to the Company over a significant period of time (i.e
there is a significant financing component implicit in the
transaction).
2.10 Financial liabilities
The Company classifies its financial liabilities in the category
of financial liabilities at amortised cost. All financial
liabilities are recognised in the statement of financial position
when the Company becomes a party to the contractual provision of
the instrument. Trade and other payables and borrowings are
included in this category.
Borrowings
Borrowings are recognised initially at fair value, net of
transaction costs incurred. Borrowings are subsequently carried at
amortised cost; any difference between the proceeds (net of
transaction costs) and the redemption value is recognised in the
income statement over the period of the borrowings using the
effective interest method.
Borrowings are de-recognised from the balance sheet when the
obligation specified in the contract is discharged, is cancelled or
expires. The difference between the carrying amount of a financial
liability that has been extinguished or transferred to another
party and the consideration paid, including any non-cash assets
transferred or liabilities assumed, is recognised in profit or loss
as other operating income or finance costs.
Borrowings are classified as current liabilities unless the
Company has an unconditional right to defer settlement of the
liability for at least 12 months after the reporting period.
Whilst the original arrangement fees in relation to a GBP25m
loan facility with HSBC set up in June 2021 were capitalised and
amortised over the length of the agreement, initially 3 years. Fees
in relation to an amendment of the loan agreement in March 2023
were expensed to the Statement of Comprehensive Income in FY23.
These capitalised costs of GBP119,426 as at 31 March 2023 (31
March 2022: GBP215,959) have been netted off against borrowings in
the Statement of Financial Position. Amendment fees of GBP62,500
were expensed to the Statement of Comprehensive Income in March
2023.
Trade and other payables
Trade and other payables are initially recognised at fair value
and subsequently measured at amortised cost. Accounts payable are
classified as current liabilities if payment is due within one year
or less. If not, they are presented as non-current liabilities.
Lease liabilities
A lease liability is recognised at the commencement date of a
lease. The lease liability is initially recognised at the present
value of the lease payments to be made over the term of the lease,
discounted using the interest rate implicit in the lease or, if
that rate cannot be readily determined, the Company's incremental
borrowing rate. Lease payments comprise of fixed payments less any
lease incentives received.
Lease liabilities are measured at amortised cost using the
effective interest method. The carrying amounts are remeasured if
there is a change in the following: future lease payments arising
from a change in an index or a rate used; residual guarantee; lease
term; certainty of a purchase option and termination penalties.
When a lease liability is remeasured, an adjustment is made to the
corresponding right-of use asset, or to profit or loss if the
carrying amount of the right-of-use asset is fully written
down.
Contract liabilities
Contract liabilities represent the Company's obligation to
transfer goods or services to a customer and are recognised when a
customer pays consideration, or when the Company recognises a
receivable to reflect its unconditional right to consideration
(whichever is earlier) before the consolidated entity has
transferred the goods or services to the customer.
2.11 Provisions
A provision is recognised in the balance sheet when the Company
has a present legal or constructive obligation as a result of a
past event, and it is probable that an outflow of economic benefits
will be required to settle the obligation. If the effect is
material, provisions are determined by discounting the expected
future cash flows at a pre-tax rate that reflects current market
assessments of the time value of money and, when appropriate, the
risks specific to the liability. The increase in the provision due
to the passage of time is recognised in finance costs.
2.12 Share capital
Ordinary shares are classified as equity. There is one class of
ordinary share in issue, as detailed in note 21. Incremental costs
directly attributable to the issue of new shares are shown in share
premium as a deduction from the proceeds, net of tax.
2.13 Income tax
Income tax for the years presented comprises current and
deferred tax. Income tax is recognised in profit or loss except to
the extent that it relates to items recognised directly in equity,
in which case it is recognised in equity
Deferred income tax is recognised on temporary differences
arising between the tax bases of assets and liabilities and their
carrying amounts.
Temporary differences are not recognised if they arise from a)
the initial recognition of goodwill, and b) for the initial
recognition of other assets or liabilities in a transaction other
than a business combination that at the time of the transaction
affects neither accounting nor taxable profit or loss. The amount
of deferred tax provided is based on the expected manner of
realisation or settlement of the carrying amount of assets and
liabilities, using tax rates enacted or substantively enacted at
the balance sheet date.
Deferred income tax assets and liabilities are offset when there
is a legally enforceable right to offset current tax assets against
current tax liabilities and when the deferred income taxes assets
and liabilities relate to income taxes levied by the same taxation
authority on either the taxable entity or different taxable
entities where there is an intention to settle the balances on a
net basis.
2.14 Right-of-use-assets
A right-of-use asset is recognised at the commencement date of a
lease. The right-of-use asset is measured at cost, which comprises
the initial amount of the lease liability, adjusted for, as
applicable, any lease payments made at or before the commencement
date , net of any lease incentives received, any initial direct
costs incurred, and, except where included in the cost of
inventories, an estimate of costs expected to be incurred for
dismantling and removing the underlying asset, and restoring the
site or asset.
Right-of-use assets are depreciated on a straight-line basis
over the unexpired period of the lease or the estimated useful life
of the asset, whichever is the shorter. Right-of use assets are
subject to impairment or adjusted for any remeasurement of lease
liabilities. Depreciation is charged to administrative expenses in
the Statement of Comprehensive Income.
2.15 Share-based payments
Equity-settled and cash-settled share-based compensation
benefits are provided to employees.
Equity-settled transactions are awards of shares, or options
over shares, that are provided to employees in exchange for the
rendering of services.
The cost of equity-settled transactions are measured at fair
value on grant date. Fair value is independently determined using
the Black-Scholes option pricing model that takes into account the
exercise price, the term of the option, the impact of dilution, the
share price at grant date and expected price volatility of the
underlying share, the expected dividend yield and the risk free
interest rate for the term of the option, together with non-vesting
conditions that do not determine whether the consolidated entity
receives the services that entitle the employees to receive
payment. No account is taken of any other vesting conditions.
The cost of equity-settled transactions are recognised as an
expense with a corresponding increase in equity over the vesting
period. The cumulative charge to profit or loss is calculated based
on the grant date fair value of the award, the best estimate of the
number of awards that are likely to vest and the expired portion of
the vesting period. The amount recognised in profit or loss for the
period is the cumulative amount calculated at each reporting date
less amounts already recognised in previous periods.
2.16 Earnings per share
Basic earnings per share
Basic earnings per share is calculated by dividing the profit
attributable to the owners of the Company, excluding any costs of
servicing equity other than ordinary shares, by the weighted
average number of ordinary shares outstanding during the financial
year.
Diluted earnings per share
Diluted earnings per share adjusts the figures used in the
determination of basic earnings per share to take into account the
after income tax effect of interest and other financing costs
associated with dilutive potential ordinary shares and the weighted
average number of shares assumed to have been issued for no
consideration in relation to dilutive potential ordinary
shares.
2.17 Dividends
Dividends are recognised when declared during the financial
year.
3. Significant judgements and estimates
The preparation of the Company's financial statements under UK
adopted International Accounting Standards requires the directors
to make estimates and assumptions that affect the reported amounts
of assets and liabilities at the statement of financial position
date, amounts reported for revenues and expenses during the year,
and the disclosure of contingent liabilities, at the reporting
date. However, uncertainty about these assumptions and estimates
could result in outcomes that could require a material adjustment
to the carrying amount of the assets or liability affected in the
future.
Estimates and judgements are continually evaluated and are based
on historical experiences and other factors, including expectations
of future events that are believed to be reasonable under the
circumstances.
The Company makes estimates and assumptions concerning the
future. The resulting accounting estimates will, by definition,
seldom equal the related actual results. The estimates and
assumptions that have a significant risk of causing a material
adjustment to the carrying amounts of assets and liabilities within
the next financial year are detailed below.
Valuation of investments
Investments in cases are categorised as fair value through the
Statement of Comprehensive Income. 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. Due to the nature of Manolete's
business model, an unrealised fair value gain will be recognised on
initial investment in a case. Thereafter, positive material
progression of an investment will give rise to an increase in fair
value and an adverse progression a decrease.
The key stages that an individual case passes through typically
includes: initial review on whether to make a purchase or funding
offer, correspondence from the Company in-house lawyer, usually via
externally retained solicitors, to the opposing party notifying
them of the Company's assignment or funding of the claim, a fully
particularised Letter Before Action and an invitation to without
prejudice settlement meetings or mediation, if the opposing party
does not respond then legal proceedings are issued. Further
evidence may be gathered to support the claim. Eventually a court
process may be entered into. The progress of a case feeds into the
Director's valuation of that case each month, as set out below.
In accordance with IFRS 9 and IFRS 13, the Company is required
to recognise live case investments at fair value at the half year
and year end reporting periods, at 30 September and 31 March each
year.
The Company undertakes the following steps:
-- On a weekly basis, the internal legal team report
developments into the Investment Committee on a case-by-case basis
in writing. Full reviews then take place on a monthly basis to
review progress on all live cases, on a case-by-case basis.
-- On a monthly basis, the directors adjust case fair values
depending upon objective case developments, for instance: an offer
to settle, mediation agreed, positive or negative legal advice.
These adjustments to fair value may be an increase or decrease in
value or no change required;
-- At reporting period ends, a sample of open case investments
for which written assessments are obtained from external solicitors
or primary counsel working on the case on behalf of the
Company.
In all cases, a headline valuation is the starting point of a
valuation from which a discount is applied to reflect legal advice
obtained, strength of defendant's case, the likely amount a
defendant might be able to pay to settle the case, progress of the
case through the legal process and settlement offers.
Movements in fair value on investments in cases are included
within revenue in the Statement of Comprehensive Income. Fair value
gains or losses are unrealised until a final outcome or stage is
reached. At the year-end there were 351 open cases, of these 300
had a valuation of less than GBP100k. These cases are not expected
to have an individually material impact on the business when they
are settled. The remaining 51 cases make up GBP23.9m of the
Investments and are material to the business, the significant
judgements and estimates in their valuations at the balance sheet
date were as follows:
1. Judgements:
1.1 The amount that cases are discounted to recognise cases
being settled before they are taken to Court, based on the facts of
each case and management's judgement of the likely outcome.
1.2 Litigation is inherently uncertain. The Company seeks to
mitigate its risk by: rejecting the majority of cases referred to
it because the merits of the claim are considered weak or the
defendant is considered not to have sufficient net worth and
seeking to settle cases as early as possible. Nevertheless, the
risk and uncertainty can never be completely removed. The key
inputs are: the headline claim value, the likely settlement value,
the opposing party's ability to pay and the likely costs in
achieving judgement. These inputs are inter-related to an
extent.
1.3 Excluding the large case completion in FY21, the Company
does not consider there to be any significant concentration risk
within trade receivables.
1.4 The Company accrues for future legal costs on the basis that
cases will be settled before trial which is how the vast majority
of cases completed to date have been settled. When it becomes clear
a case will progress all the way to trial then the additional costs
are accrued at this point on a case-by-case basis.
2. Estimates:
2.1 All cases will be subject to the internal key stages and
regular fair value review processes as described above. For the
avoidance of doubt, the fair value review requires an estimate to
be made by senior management based upon the facts and progress of
the case and their experience. For a sample selected by Management
and confirmed by the external auditors, an external opinion is
requested from counsel or a solicitor who is working on the case
which provides an independent description of the merits of the
case.
These assessments include various assumptions that could change
over time and lead to different assessments over the next 12
months.
2.2 Future legal costs have been estimated on the estimated time
the case will take to complete, ranging between 3 to 24 months
(excluding the Cartel cases) and whether it will go to Court.
Future results could be materially impacted if these original
estimates change either positively or negatively.
2.3 Recovery of debts is based on the Company's ability to
recover assets owned by the counterparty. Prior to case acceptance,
a net worth review of the defendant is undertaken to assess whether
they own sufficient assets to support the claim value. Cases that
are settled without going to Court typically recover in full,
whilst those that result in Court cases are less predictable in
terms of full recovery.
2.4 The valuations assume that there is no recovery for interest
and costs. If cases go to Court and result in a judgement in the
Company's favour, it is likely that the Company will be awarded
interest and costs.
Sensitivity analysis has not been included in the financial
statements, due to the vast amount of inputs and number of
variables which are inherently specific to each case, making it
impossible to provide meaningful data. Whilst the Board considers
the methodologies and assumptions adopted in the valuation are
supportable, reasonable and robust, because of the inherent
uncertainty of valuation, it is reasonably possible, on the basis
of existing knowledge, that outcomes within the next financial year
that are different from the assumptions could require a material
adjustment to the carrying amount of the GBP36.5m of investments
disclosed in the balance sheet (Note 13). However, as an indication
we note that a 10% increase/(decrease) in the fair value of our top
20 cases would result in an increase/(decrease) in the fair value
investment of +/- GBP1.9m.
Approach to cartel case valuation:
Following publication of the ruling in respect of an EU
Competition test case (the "BT / Royal Mail" case) we requested
that our independent expert valuation firm apply the assumptions
contained within the test case ruling to the valuation of
Manolete's 22 cartel cases. Following the ruling and the receipt of
further case data, the directors consider that additional
discounting, or the use of a "tier based" system is no longer
required and the year-end valuation therefore represents Manolete's
percentage ownership of the overall case valuation. The cartel case
carrying valuation of GBP13.4m, an increase of GBP1.2m from the
prior year, is set out in Note 13 to the accounts.
Recoverability of trade receivables
The Company's business model involves the provision of services
for credit. The Company normally receives payment for services it
has provided once a claim has been pursued and settled or decided
in Court. The average time from taking on a case to settlement is
c.12.8 months although this can vary significantly from case to
case. As part of the settlement agreement, the timing of payment of
the award by the defendant to the Company is agreed and this is a
legally binding document. Settlements can be received in full on
the day of settlement or (at Management's discretion) paid in
instalments over a defined settlement plan.
As such, Management applies a number of estimates and judgements
in the recording of trade receivables, for example: in relation to
default judgements Management assess the likely recoverability and
do not necessarily recognise the full judgement.
The Company applies the simplified approach in providing for
expected credit losses under IFRS 9 which allows the use of the
lifetime expected credit loss provision for all trade receivables.
In measuring the expected credit losses, trade receivables have
been stratified by settlement type and days past due. Expected
lifetime expected credit loss rates are based on the payment
profiles of sales from January 2019 (post IPO). The Company
attempts to assess the probability of credit losses but seeks to
mitigate its credit risk by undertaking rigorous net worth checks
before taking on a case. Occasionally credit defaults do occur when
counterparties default on an agreed settlement payable by
instalments. There is a concentration risk in relation to the trade
receivable of GBP7.8m which relates to a large case completion in
FY21. Repayments to date have been made according to the agreed
schedule. Based on Management's assessment of the receivable no
provision has been recognised against this balance.
Recovery of receivables is closely monitored by Management and
action, where appropriate, will be taken to pursue any overdue
payments. The Company seeks to obtain charging orders over the
property of trade receivables as security where possible. The
receivables' ageing analysis is also evaluated on a regular basis
for potential doubtful debts. Where potential doubtful debts are
identified specific bad debt provisions are held against these. It
is the Directors' opinion that no further provision for doubtful
debts is required. Please see note 16 of the accounts.
4. Segmental reporting
During the year ended 31 March 2023, revenue was derived from
cases funded on behalf of the insolvent estate and cases purchased
from the insolvent estate, which are wholly undertaken within the
UK. Where cases are funded, upon conclusion, the Company has the
right to its share of revenue; whereas for purchased cases, it has
the right to receive all revenue, from which a payment to the
insolvent estate is made. Revenues arising from funded cases and
purchased cases are considered one business segment and are
considered to be the one principal activity of the Company. All
revenues derive from continuing operations and are not seasonal in
nature.
Net realised gains on investments in cases represents realised
revenue on completed cases.
Fair value movements include the increase / (decrease) in fair
value of open cases, the removal of the carrying fair value of
realised cases (in the period when a case is completed and
recognised as realised revenue) and the addition of the fair value
of new cases.
31 March 2023 31 March 2022
GBP000s GBP000s
------------------------------------------------------------------- -------------- --------------
Net realised gains on investments in cases 26,790 15,243
Fair value movements (net of transfers to realisations) - Note 13 (6,037) 5,200
------------------------------------------------------------------- -------------- --------------
20,753 20,443
=================================================================== ============== ==============
31 March 31 March
2023 2022
GBP000s GBP000s
----------------- --------- ---------
Arising from:
Purchased cases 15,321 18,955
Funded cases 5,432 1,488
20,753 20,443
================= ========= =========
5. Directors and employees
Staff costs for the Company during the year:
31 March 2023 31 March 2022
Staff costs (including directors): GBP000s GBP000s
------------------------------------ -------------- --------------
Wages and salaries 3,031 2,814
Social security costs 429 390
Other pension costs and benefits 277 314
------------------------------------ -------------- --------------
Total staff costs 3,737 3,518
==================================== ============== ==============
The average monthly number of employees (including executive and
non-executive directors) employed by activity was:
31 March 31 March
2023 2022
No. No.
----------------------------------------- --------- ---------
Directors (executive and non-executive) 6 5
Management and administration 18 17
----------------------------------------- --------- ---------
Average headcount 24 22
========================================= ========= =========
The aggregate amount charged in the accounts for key management
personnel (including employer's National Insurance contributions),
being the directors of the company, were as follows:
31 March 31 March 2022
Directors' emoluments: 2023
GBP000s GBP000s
---------------------------------- --------- --------------
Salaries and fees 1,404 1,042
Other pension costs and benefits 16 16
---------------------------------- --------- --------------
1,420 1,058
================================== ========= ==============
Directors remuneration is detailed in the Remuneration
report.
31 March 31 March 2022
2023
GBP000s GBP000s
---------------------------------- --------- --------------
Highest paid director:
Salaries and fees 529 514
Other pension costs and benefits 6 7
---------------------------------- --------- --------------
535 521
================================== ========= ==============
Management consider the directors to be the key management
personnel.
6. Operating profit
Is stated after charging:
31 March 31 March
2023 2022
GBP000s GBP000s
------------------------------------ --------- ---------
Bad debt expenses 1,534 321
Share based payments 150 169
Depreciation of right of use asset 86 171
Amortisation of intangible assets 13 22
==================================== ========= =========
7. Auditor remuneration
Amounts payable to RSM UK Audit LLP and its related entities in
respect of both audit and non-audit services are set out below.
31 March 2023 31 March 2022
GBP000s GBP000s
------------------------------------------------------------------------------------ -------------- --------------
Fee payable to Company's auditor and its associates for the statutory audit of the
Company's
financial statements 110 80
Fees payable to Company's auditor and its associates for other services:
Interim agreed upon procedures 11 10
Total 121 90
==================================================================================== ============== ==============
8. Analysis of expenses by nature
Internal legal costs are included within administrative expenses
whereas external legal costs are either capitalised as Investments
for open cases or recognised as cost of sales on completed
cases.
The breakdown by nature of administrative expenses is as
follows:
31 March 2023 31 March 2022
GBP000s GBP000s
Staff costs, including pension and healthcare costs 3,737 3,519
Bad debts including expected credit losses 1,534 321
Professional fees 512 479
Marketing costs 344 222
Other costs, including office costs 666 536
----------------------------------------------------- -------------- --------------
Total administrative expenses 6,793 5,077
===================================================== ============== ==============
9. Finance income and finance expense
31 March 2023 31 March 2022
GBP000s GBP000s
--------------------- -------------- --------------
Bank interest 7 -
Total finance income 7 -
===================== ============== ==============
31 March 2023 31 March 2022
GBP000s GBP000s
-------------------------- -------------- --------------
Lease liability interest 1 6
Other loan interest 251 142
Bank loan charges 587 648
Total finance expense 839 796
========================== ============== ==============
10. Dividends
Dividends paid during the financial year were as follows.
31 March 2023 31 March 2022
Declared during the year GBP000s GBP000s
------------------------------------------------------------------------------------ -------------- --------------
Final dividend for the year ended 31 March 2022 of 0.5p per share, paid in October
2022 (October
2021: 1.00p) 219 436
Interim dividend for the year ended 31 March 2023, of 0.0p per share (December
2021: 0.39p) - 170
------------------------------------------------------------------------------------ -------------- --------------
Total dividends paid during FY23 219 606
==================================================================================== ============== ==============
Proposed after the end of year and not recognised as a liability
------------------------------------------------------------------------------------ -------------- --------------
Final dividend for the year ended 31 March 2023: 0.0p per share (31 March 2022:
0.5p per share) - 219
==================================================================================== ============== ==============
11. Taxation
31 March 2023 31 March 2022
Analysis of (credit)/charge in year GBP000s GBP000s
Current tax (credit)/charge on losses/profits for the year (735) 850
Adjustments in respect of prior periods (42) 2
------------------------------------------------------------ -------------- --------------
Income tax (credit)/charge (777) 852
Deferred tax (52) (22)
------------------------------------------------------------ -------------- --------------
Total tax (credit)/charge (829) 830
============================================================ ============== ==============
The tax (credit)/charge for the year differs from the standard
rate of corporation tax in the UK of 19%. (2022: 19%). The
differences are explained below.
31 March 2023 31 March 2022
GBP000s GBP000s
------------------------------------------------------------------------------------ -------------- --------------
(Loss)/Profit on ordinary activities before tax (3,953) 4,508
------------------------------------------------------------------------------------ -------------- --------------
(Loss)/Profit on ordinary activities multiplied by the rate of corporation tax in
the UK as
above (751) 857
Effects of:
Expenses not deductible 44 39
Other differences (28) (45)
Adjustments to current tax in respect of previous periods (42) 2
Deferred tax charged directly to equity 120 (49)
Temporary differences not recognised in the computation (108) 26
Remeasurement of deferred tax for change in tax rates (64) -
------------------------------------------------------------------------------------ -------------- --------------
Total taxation (credit)/charge (829) 830
==================================================================================== ============== ==============
12. Earnings per share
The basic earnings per share is calculated by dividing the
profit/(loss) attributable to ordinary equity holders by the
weighted average number of ordinary shares outstanding during the
year. Diluted earnings per share is calculated by dividing the
profit/(loss) after tax by the weighted average number of shares in
issue during the year, adjusted for potentially dilutive share
options.
The following reflects the income and share data used in the
earnings per share calculation:
31 March 31 March 2022
2023
GBP000s GBP000s
---------------------------------------------------------------------------- ----------- ----------------
(Loss)/Profit for the period attributable to equity holders of the Company (3,255) 3,678
Weighted average number of ordinary shares 43,756,351 43,601,037
---------------------------------------------------------------------------- ----------- ----------------
Earnings per share (0.07) 0.08
============================================================================ =========== ================
Basic Earnings Per Share is based on the profit for the year
attributable to the equity holders of the Company dividend by the
weighted average number of ordinary shares during the period.
31 March 31 March 2022
2023
GBP000s GBP000s
---------------------------------------------------------------------------- ----------- --------------
(Loss)/Profit for the period attributable to equity holders of the Company (3,255) 3,678
Diluted weighted average number of ordinary shares 45,442,219 44,907,949
---------------------------------------------------------------------------- ----------- --------------
Diluted earnings per share (0.07) 0.08
============================================================================ =========== ==============
Reconciliation of number of shares and diluted shares at year
end:
31 March 31 March 2022
2023
GBP000s GBP000s
------------------------------------------------------------------ ----------- --------------
Weighted average number of shares for Basic Earnings Per Share 43,756,351 43,601,037
Adjustments for calculation of Diluted Earnings Per Share:
Options over ordinary shares 1,685,868 1,306,912
------------------------------------------------------------------ ----------- --------------
Weighted average number of shares for Diluted Earnings Per Share 45,442,219 44,907,949
================================================================== =========== ==============
The earnings per share is diluted by options over ordinary
shares, as detailed in note 23.
13. Investments
Non-current investments and 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 (see Note 3 on accounting
estimates).
31 March 2023 31 March 2022
GBP000s GBP000s
-------------------------------------------------------- -------------- --------------
As at 1 April 2022 45,718 37,508
Prepaid cost additions 5,806 6,470
Realised prepaid costs (9,025) (3,460)
Fair value movement (net of transfers to realisations) (6,037) 5,200
-------------------------------------------------------- -------------- --------------
As at 31 March 2023 36,462 45,718
======================================================== ============== ==============
31 March 2023 31 March 2022
GBP000s GBP000s
--------------------- -------------- --------------
Current 23,073 33,520
Non-current 13,389 12,198
--------------------- -------------- --------------
As at 31 March 2023 36,462 45,718
===================== ============== ==============
Analysis of fair value movements
31 March 2023 31 March 2022
GBP000s GBP000s
----------------------------------------------------------- -------------- --------------
New case investments 9,659 7,370
Increase in existing case fair value (excl. cartel cases) 134 956
Decrease in existing case fair value (excl. cartel cases) (2,519) (3,693)
Case completions - transferred to realisations (14,503) (4,539)
Increase in fair value of cartel cases 1,192 5,106
----------------------------------------------------------- -------------- --------------
Fair value movement (net of transfers to realisations) (6,037) 5,200
=========================================================== ============== ==============
14. Intangible assets
Intangible assets comprised the costs of developing the
Company's website. The website developments costs are amortised
over the useful life of the website, which is estimated to be three
years.
Website development costs 31 March 2023 31 March 2022
GBP000s GBP000s
As at 1 April 2022 13 35
Amortisation charge (13) (22)
--------------------------- -------------- --------------
As at 31 March 2023 - 13
=========================== ============== ==============
15. Right of use asset
The Company held one lease, an office property lease for 21
Gloucester Place, London which expired in September 2022. The new
lease relating to this office is short term and therefore not
covered under IFRS 16.
31 March 2023 31 March 2022
GBP000s GBP000s
--------------------- -------------- --------------
As at 1 April 2022 86 257
Depreciation (86) (171)
As at 31 March 2023 - 86
===================== ============== ==============
Current - 86
As at 31 March 2023 - 86
===================== ============== ==============
31 March 2023 31 March 2022
Lease liability GBP000s GBP000s
--------------------- --------------- --------------
Current - 96
Non-current - -
As at 31 March 2023 - 96
===================== ================ ==============
The incremental borrowing rate used in the calculation of the
lease liability was 3% (FY22: 3%). The maturity analysis of the
finance lease liability is included in note 27.
Amounts recognised in the Statement of Comprehensive Income 31 March 2023 31 March 2022
GBP000s GBP000s
------------------------------------------------------------- -------------- --------------
Total interest expense 1 6
Amounts recognised in the Statement of Cashflows 31 March 2023 31 March 2022
GBP000s GBP000s
-------------------------------------------------- -------------- --------------
Total cash outflow (97) (194)
16. Trade and other receivables
31 March 2023 31 March 2022 - restated
GBP000s GBP000s
Amounts falling due in excess of one year:
Trade receivables 10,270 11,086
Contract asset 2,045 1,245
------------------------------------------------------------- -------------- -------------------------
Total trade and other receivables due in excess of one year 12,315 12,331
------------------------------------------------------------- -------------- -------------------------
Amounts falling due within one year:
Gross trade receivables 16,505 10,096
Less:
Specific provisions (2,881) (1,464)
Allowance for expected credit losses (1,794) (865)
------------------------------------------------------------- -------------- -------------------------
Trade receivables 11,830 7,767
------------------------------------------------------------- -------------- -------------------------
Prepayments 233 177
Total trade and other receivables due within one year 12,063 7,944
======================================================= ======= ======
Trade receivables are amounts due from settled cases in the
ordinary course of business. Trade receivables are recognised
initially at the amount of consideration that is unconditional,
unless they contain significant financing components, when they are
recognised at fair value. The Company holds the trade receivables
with the objective of collecting the contractual cash flows and
therefore measures them subsequently at amortised cost using the
effective interest method. Ageing of the expected credit loss
allowance us included in note 27.
The contract asset relates to the unwinding of the discounting
applied to the present value of the settlement of a large case in
FY21. See note 30 for more information regarding the restatement of
31 March 2022.
No impairment provision has been recognised in respect of
contract assets as there is no past history of impairment losses
and future losses are not anticipated.
Movements in the allowance for expected credit losses (ECL) are
as follows:
31 March 2023 31 March 2022
ECL Provision GBP000s GBP000s
--------------------------------------- -------------- --------------
At 1 April 2022 865 560
Increase in provisions for impairment 929 305
As at 31 March 2023 1,794 865
======================================= ============== ==============
The Company applies the simplified approach in providing for
expected credit losses under IFRS 9 which allows the use of the
lifetime expected credit loss provision for all trade receivables.
In measuring the expected credit losses, trade receivables have
been stratified by settlement type and days past due. Expected
lifetime credit loss rates are based on the payment profiles of
completions from January 2019 (post IPO).
17. Cash and cash equivalents
31 March 2023 31 March 2022
GBP000s GBP000s
-------------------------- -------------- --------------
Cash at bank and in hand 636 2,256
========================== ============== ==============
All bank balances are denominated in pounds sterling.
18. Trade and other payables
31 March 2023 31 March
2022 - restated
GBP000s GBP000s
---------------------------------------------------------- -------------- -----------------
Amounts falling due in excess of one year:
Accruals - direct costs 5,982 6,853
Contract liability 1,411 846
---------------------------------------------------------- -------------- -----------------
Total trade and other payables due in excess of one year 7,393 7,699
---------------------------------------------------------- -------------- -----------------
Amounts falling due in one year:
Trade payables 802 734
Accruals - direct costs 3,984 3,273
Other creditors 645 622
Other taxation and social security 112 119
Total trade and other payables due within one year 5,543 4,748
========================================================== ============== =================
18. Trade and other payables
Trade payables are unsecured and are usually paid within 30 days
of recognition. The carrying value of trade and other payables
approximates their fair value, as the impact of discounting is not
significant.
Accruals - direct costs relate primarily to accrued amounts due
to Insolvency Practitioners on the Company's completed cases and
accrued legal costs of completed cases. Of the GBP6.6m shown as
non-current, GBP5.6m relates to the amounts payable to the
Insolvency Practitioner due in more than one year in respect of the
large case completion in FY21.
The contract liability relates to the unwinding of the
discounting applied to the present value of amounts payable to the
insolvency practitioner following the settlement of a large case in
FY21. See note 30 for more information regarding the restatement of
31 March 2022.
19. Deferred tax asset
31 March 31 March
2023 2022
GBP000s GBP000s
---------------------------------------------- --------- ---------
At 1 April 2022 95 121
Deferred tax charged in the income statement
for the period 292 23
Deferred tax included directly in equity (120) (49)
---------------------------------------------- --------- ---------
At 31 March 2023 267 95
============================================== ========= =========
Deferred tax has been charged to equity reserve because these
movements in deferred tax assets relate to releases and creation of
share options.
20. Borrowings
31 March 2023 31 March 2022
GBP000s GBP000s
------------------------------ -------------- --------------
Non-current
Bank loans 10,381 13,285
Total non-current borrowings 10,381 13,285
------------------------------ -------------- --------------
Current
Lease liability - 96
------------------------------ -------------- --------------
Total current borrowings - 96
============================== ============== ==============
Arrangement fees in relation to a GBP25m loan facility set up
with HSBC in June 2021 are capitalised and amortised over the
length of the loan facility, period of three years. There is an
option to extend for a further year.
Gross borrowings are GBP10.5m as at 31 March 2023 (FY22:
GBP13.5m) but are presented net of HSBC set-up amortised costs of
GBP119k above which are being amortised over 3 years. M aturity
analysis of bank loans is included in note 27.
The Company agreed on 22 June 2021, a new RCF for GBP25m over an
initial three-year period to 1 July 2024, with an option to extend
by a further year. In July 2022 the Company chose to take the
extension to 1 July 2025. The new RCF also offers the Company an
additional approved but uncommitted GBP10m accordion, if ever
required. The interest rate is a maximum 3.7% over SONIA. Under
terms of the agreement, Steven Cooklin is required to maintain a
minimum shareholding of 5% of the issued share capital of the
Company and is subject to a change in control clause such that no
investor may hold more than 30 percent of the voting rights of the
Company.
The Company agreed a waiver with HSBC in respect of the leverage
covenant for the quarters ending 30th June 2022, 30th September
2022 and 31st December 2022. Following this event, the Company has
agreed an amendment to the loan agreement with a revised leverage
covenant for the three quarters (ending 31st March 2023, 30th June
2023 and 30th September 2023) to avoid any short-term breach of the
leverage covenant due to the count back nature of the calculation
(calculation amended to exclude the period of EBIT losses in H1). A
condition of this amendment is that no dividend should be paid in
respect of FY23 year end. This restriction is lifted in FY24 if the
Company is trading profitably.
Reconciliation of liabilities arising from financing
activities:
1 April Non-cash 31 March
2022 Cash flows changes 2023
GBP000s GBP000s GBP000s GBP000s
Bank borrowings 13,285 (3,000) 96 10,381
Lease liabilities 96 (97) 1 -
--------------------------------- -------- ----------- ---------- ---------
Total liabilities from financing
activities 13,381 (3,097) 97 10,381
================================= ======== =========== ========== =========
1 April Non-cash 31 March
2021 Cash flows changes 2022
GBP000s GBP000s GBP000s GBP000s
Bank borrowings 7,698 5,500 87 13,285
Lease liabilities 285 (194) 5 96
--------------------------------- -------- ----------- ---------- ---------
Total liabilities from financing
activities 7,983 5,306 92 13,381
================================= ======== =========== ========== =========
The Directors consider the carrying value of all financial
liabilities to be equivalent to their fair value.
Commitments in relation to leases are payable as follows:
31 March 31 March
2023 2022
GBP000s GBP000s
------------------------ ---------- ---------
Within one year - 97
Total - 97
------------------------ ----------- ---------
Future finance charges - (1)
------------------------ ----------- ---------
Total lease liability - 96
======================== =========== =========
21. Share capital
31 March 31 March
2023 2022
Allotted and issued No. No.
---------------------------------- ----------- -----------
Ordinary shares of GBP0.004 each 43,761,305 43,694,740
Voting rights
The holders of ordinary shares are entitled to one voting right
per share.
Dividends
The holders of ordinary shares are entitled to dividends out of
the profits of the Company available for distribution.
22. Reserves
Share premium
Includes all current and prior year premiums received on issue
of share capital.
Share based payment reserve
Includes amounts recognised for the fair value of share options
granted in accordance with IFRS 2.
Special non-distributable reserve
A special non-distributable reserve was created in FY19 to
ensure there was sufficient reserves held within the Company to
satisfy creditors at the time of a conversion of share premium to
distributable reserves to allow a dividend to be paid in FY19. The
balance on this reserve was reduced to nil in FY23.
Retained earnings
Includes all current and prior periods retained profits and
losses .
23. Share options
The Company operates a number of share-based payment schemes as
follows:
CSOP Share Scheme
The Board has adopted the Manolete Partners Share Option Plan
(CSOP) to enable conditional share awards to be granted, which may
be subject to achievement of performance criteria and the awards
are exercisable between three and ten years following their grant.
There are no cash-settlement alternatives and the awards are
therefore accounted for under IFRS 2 as equity settled share-base
payments.
Year ended 31(st) March 2023
Grant Vesting Exercise Balance Granted Exercised Lapsed/ Balance
date Date price brought during during forfeited carried
forward the year the year forward
21/11/2019 21/11/2021 1.12 384,038 - (13,232) - 370,806
08/07/2019 08/07/2022 4.45 50,557 - - - 50,557
29/11/2019 29/11/2022 4.65 16,127 - - - 16,127
09/12/2019 09/12/2022 4.30 193,781 - - - 193,781
27/07/2020 27/07/2023 4.15 21,684 - - (7,228) 14,456
16/11/2022 16/11/2025 2.58 - 34,950 - - 34,950
666,187 34,950 (13,232) (7,228) 680,677
------------------------- --------- --------- ---------- ---------- ----------- ---------
Exercisable at the end - - - - -
of the year
------------------------------------- --------- ---------- ---------- ----------- ---------
Weighted average exercise
price 2.48 2.58 1.12 4.15 2.50
------------------------------------- --------- ---------- ---------- ----------- ---------
Year ended 31(st) March 2022
Grant Vesting Exercise Balance Granted Exercised Lapsed/ Balance
date Date price brought during during forfeited carried
forward the year the year forward
21/11/2019 21/11/2021 1.12 507,352 - (123,314) - 384,038
08/07/2019 08/07/2022 4.45 50,557 - - - 50,557
29/11/2019 29/11/2022 4.65 16,127 - - - 16,127
09/12/2019 09/12/2022 4.30 193,781 - - - 193,781
27/07/2020 27/07/2023 4.15 21,684 - - - 21,684
15/03/2021 15/03/2024 2.70 11,111 - - (11,111) -
-------------- -------------- --------- --------- ---------- ---------- ----------- ---------
800,612 - (123,314) (11,111) 666,187
----------------------------- --------- --------- ---------- ---------- ----------- ---------
Exercisable at the end - - - - -
of the year
----------------------------------------- --------- ---------- ---------- ----------- ---------
Weighted average exercise
price 2.45 - 1.12 2.70 2.48
----------------------------------------- --------- ---------- ---------- ----------- ---------
Options outstanding at 31 March 2023 are exercisable at prices
ranging between GBP1.12 and GBP4.65 (FY22 GBP1.12 and GBP4.65) and
the weighted average contractual life of the options outstanding at
the reporting date is 17 months (FY22: 7.6 months) as analysed in
the table below:
Number of Weighted average
share options remaining contractual
life (months)
Exercise price range FY23 FY22 FY23 FY22
GBP1.12 - GBP1.99 370,806 384,038 - -
GBP2.00 - GBP3.99 34,950 - 31 -
GBP4.00 - GBP4.65 274,921 282,149 3 7.6
680,677 666,187 17 7.6
--------------------- ------- ------- ----------- -----------
Number of Average exercise
share options price GBP
FY23 FY22 FY23 FY22
CSOP Options 168,938 141,216 3.01 3.18
Unapproved Options 511,739 524,971 2.32 2.29
Total 680,677 666,187 2.50 2.48
------------------- ------- ------- -------- --------
Fair value calculations
The fair value of the CSOP share options plans are calculated at
the date of the grant using the Black-Scholes option pricing model.
Expected volatility was determined by calculating the historical
volatility of the Company's share price over an appropriate period.
The following table presents the inputs used in the option pricing
model for the share options granted in the year ended 31 March 2023
based on information at the date of grant.
Grant Share price Exercise Expected Dividend Risk-free Fair value
date of at grant price volatility yield interest at grant
award date rate date
------------ ------------ --------- ------------ --------- ---------- -----------
16/11/2022 2.52 2.58 32% 0% 1.87% 0.92
------------ ------------ --------- ------------ --------- ---------- -----------
No performance conditions were included in the fair value
calculations for CSOP awards granted during the year.
Long-term incentive plan
In FY21 the Company introduced an equity-settled long-term
incentive plan (LTIP) scheme for the executive directors and other
senior executives. Performance is measured at the end of the
three-year performance period. If the required minimum Earnings Per
Share (EPS) performance conditions have been satisfied, 25% of the
shares will vest, increasing to 100% of shares if the maximum EPS
target is achieved. Straight-line vesting will apply of performance
falls between two points. FY23 LTIP scheme is split evenly over
three performance conditions; EPS, Strategy performance and Share
Price. Options awarded will expire ten years from the date of grant
and are issued at the nominal value of the Company's share capital
pf GBP0.004p but the Company's remuneration committee may waive the
requirement at their discretion.
The following table summarises the movements in LTIP options
during the year:
Year ended 31(st) March 2023
Grant Expiry Exercise Balance Granted Exercised Lapsed/ Balance
date Date price brought during during forfeited carried
forward the year the year forward
30/09/2020 30/03/2022 0.004 53,333 - - - 53,333
30/09/2020 30/09/2023 0.004 321,334 - - - 321,334
02/12/2021 02/12/2024 0.004 357,806 - - - 357,806
02/12/2021 30/03/2022 0.004 53,333 - (53,333) - -
29/07/2022 29/07/2025 0.004 - 349,800* - - 349,800
29/07/2022 29/07/2023 0.004 - 16,054* - - 16,054
------------ ------------ --------- --------- ---------- ---------- ----------- ----------
785,806 365,854 (53,333) - 1,098,327
------------------------- --------- --------- ---------- ---------- ----------- ----------
Weighted average exercise
price 0.004 0.004 0.004 - 0.004
------------------------------------- --------- ---------- ---------- ----------- ----------
Year ended 31(st) March 2022
Grant Expiry Exercise Balance Granted Exercised Lapsed/ Balance
date Date price brought during during forfeited carried
forward the year the year forward
30/09/2020 30/03/2022 0.004 53,333 - - - 53,333
30/09/2020 30/09/2023 0.004 321,334 - - - 321,334
02/12/2021 02/12/2024 0.004 - 357,806* - 357,806
02/12/2021 30/03/2022 0.004 - 53,333* - - 53,333
------------ ------------ --------- --------- ---------- ---------- ----------- ---------
374,667 411,139 - - 785,806
------------------------- --------- --------- ---------- ---------- ----------- ---------
Weighted average exercise
price 0.004 0.004 - - 0.004
------------------------------------- --------- ---------- ---------- ----------- ---------
* The LTIP amounts above are the maximum potential conditional
share awards that may vest subject to the performance measures.
53,333 options were exercised during the period and no options
were modified. The weighted average remaining contractual life of
these options is 20.6 months (FY22: 22.8 months). No LTIP options
were in issue prior to the 1 April 2020.
Fair value calculations
The fair value of the LTIP share options plans are calculated at
the date of the grant using the Black-Scholes option pricing model.
Expected volatility was determined by calculating the historical
volatility of the Company's share price over an appropriate period.
The following table presents the inputs used in the option pricing
model for the share options granted in the years ended 31 March
2023 and 31 March 2022 based on the information at the date of
grant:
Grant Share Exercise Expected Dividend Risk-free Fair value
date of price at price volatility yield interest at grant
award grant date rate date
------------ ------------ --------- ------------ --------- ---------- -----------
02/12/2021 2.55 0.004 56.3% 0% 0.82% 2.55
02/12/2021 2.55 0.004 33.6% 0% 0.82% 2.55
29/07/2022 2.78 0.004 52.3% 0% 1.87% 2.34
29/07/2022 2.78 0.004 31.7% 0% 1.87% 2.34
------------ ------------ --------- ------------ --------- ---------- -----------
LTIP awards granted during the year ended 31 March 2023 are
subject to the Earnings Per Share performance, Strategy performance
and share price conditions.
24. Retirement benefits
The Company operates a defined contribution pension scheme for
all qualifying employees. During the year, the Company charged
GBP82,774 (FY22: GBP78,824) as employer's pension contributions.
The outstanding pension creditor as at 31 March 2023 was GBP5,339
(FY22: GBP4,933).
25. Financial instruments - classification and measurement
Financial assets
Financial assets measured at amortised cost comprise trade
receivables, contract assets and cash, as follows:
31 March 2023 31 March 2022
GBP000s GBP000s
Trade receivables 22,100 18,853
Contract assets 2,045 1,245
Cash and cash equivalents 636 2,256
--------------------------- -------------- --------------
Total 24,781 22,354
=========================== ============== ==============
Financial assets measured at fair value through profit or loss
comprise of investments;
31 March 2023 31 March 2022
GBP000s GBP000s
Investments 36,462 45,718
------------- -------------- --------------
Total 36,462 45,718
============= ============== ==============
Financial liabilities
Financial liabilities measured at amortised cost comprise of
trade and other payables, bank loans, and lease liabilities, as
follows:
31 March 31 March
2023 2022
GBP000s GBP000s
Trade and other payables 12,936 12,447
Bank loans 10,381 13,285
Lease liabilities - 96
Total 23,317 25,828
========================== ========= =========
Fair value
The fair value of investments is determined as set out in the
accounting policies in Note 2. The fair value hierarchy of
financial instruments measured at fair value is provided below:
31st March 2023 Level 1 Level 2 Level 3
GBP000s GBP000s GBP000s
------------------ --------- --------- --------
Investments - - 36,462
------------------ --------- --------- --------
Total - - 36,462
================== ========= ========= ========
31st March 2022 Level 1 Level 2 Level 3
GBP000s GBP000s GBP000s
------------------ --------- --------- --------
Investments - - 45,718
------------------ --------- --------- --------
Total - - 45,718
================== ========= ========= ========
26. Cashflow information
(A) Non-cash adjustments to cashflows generated from
operations
31 March 31 March
2023 2022
GBP000s GBP000s
----------------------------------------------------------------------- --------- ---------
Fair value movements 6,037 (5,200)
Legal costs on realised cases 9,024 3,460
Finance expense 236 796
Depreciation & amortisation 99 193
Share based payments 260 218
Deferred tax (95) 89
Finance income (7) -
Non-cash adjustments to cashflows generated from/(used in) operations 15,554 (444)
======================================================================= ========= =========
(B) Net debt reconciliation
31 March 31 March
2023 2022
GBP000s GBP000s
--------------------------------------- --------- ---------
Cash and cash equivalents 636 2,256
Borrowings - repayable after one year (10,381) (13,285)
--------------------------------------- --------- ---------
Net debt excluding leases (9,745) (11,029)
--------------------------------------- --------- ---------
Current lease liability - (96)
Net debt including leases (9,745) (11,125)
======================================= ========= =========
27. Financial instruments - risk management
The Company's activities expose it to a variety of financial
risks: market risk (including cash flow interest rate risk),
investment risk, liquidity risk and credit risk. Risk management is
carried out by the Board of Directors. The Company uses financial
instruments to provide flexibility regarding its working capital
requirements and to enable it to manage specific financial risks to
which it is exposed.
The Company finances its operations through a mixture of equity
finance, bank debt, cash and liquid resources and various items
such as trade receivables and trade payables which arise directly
from the Company's operations.
Interest rate risk
Interest rate risk is the risk that the fair value of future
cash flows associated with the instrument will fluctuate due to
changes in market interest rates. Interest bearing assets including
cash and cash equivalents are short-term liquid assets. It is the
Company's policy to settle trade payables within the credit terms
allowed and the Company does therefore not incur interest on
overdue balances. No sensitivity analysis has been prepared as the
impact on the financial statements would not be significant.
The interest rate profile of the Company's borrowings is shown
below:
31 March 31 March
2023 2022
Debt Interest Debt Interest
GBP000s Rate GBP000s Rate
-------------------------- -------- ------------------------- -------- -------------------------
Floating rate borrowings
Bank loans 10,500 SONIA and Margin of 3.7% 13,500 LIBOR and Margin of 2.9%
========================== ======== ========================= ======== =========================
Liquidity risk
The Company seeks to maintain sufficient cash balances.
Management reviews cash flow forecasts on a regular basis to
determine whether the Company has sufficient cash reserves to meet
future working capital requirements and to take advantage of
business opportunities.
Unused borrowing facilities at the reporting date:
31 March 2023 31 March 2022
GBP000s GBP000s
Bank loans 14,500 11,500
The following table details the Company's remaining contractual
maturity for the Company's non-derivative financial liabilities
with agreed maturity periods. The table is presented based on the
undiscounted cashflows of the financial liabilities based on the
earliest date on which the Company can be required to pay which may
differ from the carrying liabilities at the reporting date.
Total Carrying
At 31 March Less than one Between 1 and Between 2 and Greater than 5 contractual amount of
2023 year 2 years 5 years years cashflows liabilities
GBP000s GBP000s GBP000s GBP000s GBP000s GBP000s
Trade and other
payables 6,435 1,856 4,451 3,906 16,648 12,936
Bank borrowings - - 10,500 - 10,500 10,381
Lease - - - - - -
liabilities
Total 6,435 1,856 14,951 3,906 27,148 23,317
================ =============== =============== =============== =============== =============== ===============
Total Carrying
At 31 March Less than one Between 1 and Between 2 and Greater than 5 contractual amount of
2022 year 2 years 5 years years cashflows liabilities
GBP000s GBP000s GBP000s GBP000s GBP000s GBP000s
Trade and other
payables 4,925 1,382 4,289 5,223 15,819 12,447
Bank borrowings - - 13,500 - 13,500 13,285
Lease
liabilities 97 - - - 97 96
Total 5,022 1,382 17,789 5,223 29,416 25,828
================ =============== =============== =============== =============== =============== ===============
The contractual maturity classifications of trade and other
payables have been restated in respect of FY2022 following a review
of the contractual terms of a specific liability, as reported
further in Note 30.
In addition, the classification of the bank borrowings figure of
GBP13.5m has been restated in respect of FY2022 to correctly
reflect the terms of repayment in place as at 31 March 2022
Capital risk management
The Company is both equity and debt funded, and these two
elements combine to make up the capital structure of the business.
Equity comprises share capital, share premium and retained earnings
and is equal to the amount shown as 'Equity' in the balance sheet.
Debt comprises bank loans which are set out in further detail above
and in note 20. The Company initially raised funds through an IPO
in December 2018 and has drawn down GBP10.5m of a HSBC loan
facility (FY22: GBP13.5m), the total facility is a GBP25m revolving
credit facility with HSBC.
The Company's current objectives when maintaining capital are
to:
-- Safeguard the Company's ability to operate as a going concern
so that it can continue to pursue its growth plans.
-- Provide a reasonable expectation of future returns to shareholders.
-- Maintain adequate financial flexibility to preserve its
ability to meet financial obligations, both current and long
term.
The Company sets the amount of capital it requires in proportion
to risk. The Company manages its capital structure and adjusts it
in the light of changes in economic conditions and the risk
characteristics of underlying assets. In order to maintain or
adjust the capital structure, the Company may issue new shares or
sell assets to reduce debt.
During the year ended 31 March 2023 the Company's strategy
remained unchanged.
Credit risk and impairment
Credit risk refers to the risk that a counterparty will default
on its contractual obligations resulting in financial loss to the
Company. The maximum exposure to credit risk is the carrying value
of its financial assets recognised at the reporting date, as
summarised below:
31 March 2023 31 March 2022
GBP000s GBP000s
Trade and other receivables 24,378 20,275
Total 24,378 20,275
============================= ============== ==============
The Company applies the simplified approach in providing for
expected credit losses under IFRS 9 which allows the use of the
lifetime expected credit loss provision for all trade receivables.
In measuring the expected credit losses, trade receivables have
been stratified by settlement type and days past due. Expected
lifetime credit loss rates are based on the payment profiles of
sales from January 2019 (post IPO).
The Company attempts to assess the probability of credit losses
but seeks to mitigate its credit risk by undertaking rigorous net
worth checks before taking on a new case. Occasionally, credit
defaults do occur when counterparties default on an agreed
settlement, payable by instalments.
There is a concentration risk in relation to the trade
receivable of GBP7.8m in relation to a single case which completed
in FY21. Repayments to date have been made according to the agreed
schedule. Excluding this balance, the Company does not consider any
concentration of risk within either trade or other receivables to
be significant. The Company seeks to obtain charging orders over
the property of trade receivables as security where possible. The
receivables' ageing analysis is also evaluated on a regular basis
for potential doubtful debts. It is the Directors' opinion that no
further provision for doubtful debts is required.
The following table contains an analysis of our total gross
trade receivables segmented by settlement type.
31 March 2023 31 March 2022
GBP000s GBP000s
Settlement agreements 18,850 15,717
Judgements 5,044 4,001
Specific provisions 2,881 1,464
Gross carrying amount after specific provisions 26,775 21,182
Loss allowance (4,675) (2,329)
Trade receivables carrying amount 22,100 18,853
================================================= ============== ==============
Analysis of trade receivables stratified by settlement type, is
as follows:
Past due at Current 0-1 1-3 3-6 6-12 >12 months Total
31 March 2023 GBP000s months months months months GBP000s GBP000s
GBP000s GBP000s GBP000s GBP000s
------------------- --------- --------- --------- --------- --------- ----------- ---------
Gross receivables
Settlement
agreements 17,578 55 716 593 138 552 19,632
Judgements 659 2 - 1,609 619 4,254 7,143
Total 18,237 57 716 2,202 757 4,806 26,775
------------------- --------- --------- --------- --------- --------- ----------- ---------
Loss allowance
---------------- ------ ---- ------ ------ ------
Settlement
agreements
- ECL (163) (5) (125) (276) (78) (180) (827)
Judgements
- ECL (68) (1) - (352) (172) (374) (967)
Settlement
agreements
- Specific
provisions (87) (2) (280) (7) (33) (373) (782)
Judgements
- Specific
provisions - - - (154) (100) (1,845) (2,099)
---------------- ------ ---- ------ ------ ------
Total (318) (8) (405) (789) (383) (2,772) (4,675)
---------------- ------ ---- ------ ------ ------
Expected loss
rate %
--------------------- ----- ----- ----- ----- ----- -----
Settlement
agreements 2% 10% 29% 47% 75% 95% 4%
Judgements* 12% 28% 33% 34% 35% 64% 14%
Specific provisions 100% 100% 100% 100% 100% 100% 100%
--------------------- ----- ----- ----- ----- ----- -----
Total 2% 14% 57% 36% 51% 58% 17%
--------------------- ----- ----- ----- ----- ----- -----
* Expected judgement loss rates are shown net of deductions
where the Company has secured charging orders over properties owned
by the debtors.
Credit risk on cash and cash equivalents is considered to be
very low as the counterparties are all substantial banks with high
credit ratings.
Investment risk
Investment risk refers to the risk that the Company's case
investments may increase or decrease in value.
Sensitivity analysis has not been included in the financial
statements, due to the vast amount of inputs and number of
variables which are inherently specific to each case, making it
impossible to provide meaningful data. Whilst the Board considered
the methodologies and assumptions adopted in the valuation are
supportable, reasonable and robust, because of the inherent
uncertainty of valuation, it is reasonably possible, on the basis
of existing knowledge that outcomes within the next financial year
that are different from the assumptions could require a material
adjustment to the carrying amount of the GBP36.5m of investments
disclosed in the balance sheet. However, as an indication we note
that a 10% increase/(decrease) in the fair value or our top 20
cases (including Cartel cases) would result in an
increase/(decrease) in the fair value investment of +/-
GBP1.9m.
Currency risk
The Company is not exposed to any currency risk at present.
28 . Related party transactions
Director and key management remuneration is disclosed in Note
5.
Dividends of GBP36,251 were paid to the directors during the
year based on their individual shareholdings disclosed in the
Remuneration Committee report as follows:
31 March 31 March
2023 2022
GBP000s GBP000s
Steven Cooklin 34 95
Mark Tavener - -
Lord Howard Leigh 1 1
Mena Halton 1 -
Stephen Baister - 0.5
Total dividends paid to the directors 36 97
29. Ultimate controlling party
The Company has no ultimate controlling party.
30. Restatement of Statement of Financial position
The contract asset and contract liability balances relate to the
discount unwinding on the present value of the receivable and
accrued IP costs from the large case that completed in FY21.
Following a review of the contractual terms of the contract balance
and contract liability, the directors concluded that these balances
should have been presented as long term. The adjustments to the
Statement of Financial Position as at 31 March 2021 and 31 March
2022 are shown below. This had no impact upon the Statement of
Comprehensive Income, Statement of Changes in Equity or Statement
of Cash Flows in the current or prior financial year.
Statement of Financial Position as at 31 March 2022
Previously reported at 31 March 2022 Adjustment As restated at 31 March 2022
GBP000s GBP000s GBP000s
Non-current assets
Trade and other receivables 11,086 1,245 12,331
Current assets
Trade and other receivables 9,189 (1,245) 7,944
Non-current liabilities
Trade and other payables 6,853 846 7,699
Current liabilities
Trade and other payables 5,594 (846) 4,748
Statement of Financial Position as at 31 March 2021
Previously reported at 31 March 2021 Adjustment As restated at 31 March 2021
GBP000s GBP000s GBP000s
Non-current assets
Trade and other receivables 10,660 431 11,091
Current assets
Trade and other receivables 7,688 (431) 7,257
Non-current liabilities
Trade and other payables 6,602 291 6,893
Current liabilities
Trade and other payables 3,565 (291) 3,274
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END
FR QFLFLXQLEBBD
(END) Dow Jones Newswires
June 22, 2023 02:00 ET (06:00 GMT)
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