3
September 2024
MANOLETE PARTNERS
PLC
("Manolete" or the "Company")
Audited results for the year
ended 31 March 2024
Strong
momentum continues with significant macro-economic tailwinds
supporting continued growth.
Manolete (AIM:MANO), the leading UK-listed insolvency
litigation financing company, today announces its audited results
for the year ended 31 March 2024.
Steven Cooklin, Chief Executive Officer,
commented:
"These annual results show
that Manolete has now recovered strongly from the UK Government's
suppression of the UK insolvency sector that prevailed during the
Covid period. The Company has returned to profitability and has
continued its track record of consistent operational cash
generation. That has been driven by a record number of 251 case
completions in FY24.
The trading results for
the new financial year, which commenced on 1 April 2024, clearly
show that this positive momentum has continued: year to date, new
case enquiries are running 22% ahead of FY24 and our in-house legal
team has already completed 116 cases with an aggregate value of
£11.8m (compared to this stage last year, where we had completed 93
cases for a total value of £6.3m). This is also reflected in our
gross cash receipts where we have already collected £10.3m in the
first five months of this financial year, compared to £8.7m for the
whole six-month, first half period of the previous financial
year.
"Widely reported,
challenging, multiple, macro-economic factors including: high
interest rates, persistent inflationary threats, stretched
Government balance sheets and global conflicts, provide strong
tailwinds and significant momentum for further growth. As the clear
market leader in the UK insolvency litigation finance sector, the
Company is exceptionally well positioned to take advantage of these
conditions".
Financial (statutory and non-statutory)
highlights:
·
Realised revenues on completed cases were £24.2m,
a decrease of 10% (FY23: £26.8m) although FY23 included an
exceptionally large, funded case completion of which £4.9m was
recorded in realised revenue (total settlement £9.5m). Adjusting
for that single exceptional case, FY24 realised revenues were 11%
higher than FY23.
· 92%
of total revenues represented by realised revenues on fully
completed cases (FY23: 129%).
· Increase in the valuation of the cartel cases contributed
£0.1m to gross profit in FY24 (FY23: £1.2m).
· EBIT
increased to £2.5m, which represented a positive change from an
EBIT loss of £3.1m in the prior year.
· Gross cash receipts from completed cases were £17.7m, a
decrease of 34% (FY23: £26.7m, however, FY23 included the same
one-off exceptionally large case completion, referred to above,
which delivered gross cash receipts of £9.5m. Excluding that case,
gross cash receipts rose by 3%).
· The
Company's retained share of gross cash receipts from completed
cases (after all legal costs and payments to Insolvent Estates) was
£10.8m, a decrease of 18% (FY23: £13.1m) but again, the only reason
for the decrease was the £9.5m exceptional case in FY23.
· Cash
generated from operations (after all completed case costs and all
overheads but before new case investments and taxation) was £5.0m
(FY23: £8.0m).
· As
at 31 March 2024, the Company had cash balances of £1.4m and
borrowings of £13.7m resulting in a net debt of £12.3m (FY23: £0.6m
and £10.5m, respectively and therefore a net debt of
£9.9m).
Operational highlights:
· A
record number of new case investments in UK insolvency cases, an
increase of 18%: 311 in FY24 (FY23: 263).
· A
record number of 251 cases were completed in FY24 (FY23: 193
cases), with an average duration per case of 13.2 months (FY23:
15.5 months), generating a Money Multiple of 1.9x (FY23: 1.9x) and
an IRR of 131% (FY23: 131%) (based on unaudited internal management
information).
· As
previously reported, following the ending in April 2022 of the
Covid-related emergency legislation to suppress UK insolvencies and
the withdrawal of very substantial financial support to UK
businesses by the previous Government, the number of UK
insolvencies have been at record high levels. The first wave of
these insolvencies has predominantly been the smaller and weaker
"zombie" companies. Only in recent months have the larger company
insolvencies, typically by way of Administration, returned to
levels seen before the Covid pandemic. This has resulted in record
high numbers of cases taken on by Manolete but the average case
size is smaller than had been the case, pre-pandemic. By way of
comparison: FY21 was the trading year that best reflects the
completion values of cases acquired and funded before the Covid-19
impact (this is because, on average, cases take around 12 months to
complete). In FY21, audited realised revenues were £24.4m from 135
cases: an average of £180k per case, which is close to double the
average for FY24 of £96k.
· ROI of 116%
and Money Multiple of 2.2x from 933 completed cases since inception
(based on unaudited internal management information).
· Average case duration across the full lifetime portfolio of
933 completed cases is 12.7 months
· 19%
increase in live cases: 418 in process as at 31 March 2024 (351 as
at 31 March 2023)
Current Trading
· The
first five months of FY25 have been buoyant:
o Highest ever number of new case enquiries year to date: 348
(FY24: 286).
o 103 new case investments, which is broadly tracking the
record 146 new case investments for the whole first six months of
FY24.
o 116 case completions at an aggregate value of £11.8m (FY24:
93 case completions at a total value of £6.3m).
o Gross cash receipts from previously completed cases is
£10.3m, compared to £8.7m for the whole first six months of
FY24.
o Net cash receipts (after all payments to insolvent estates
and all associated external legal costs) are £6.5m year to date for
FY25, compared to £4.6m for the whole first six months of
FY24.
Outlook
· Given that the number of corporate insolvencies in the UK
remain at record highs, the Company can look forward to a sustained
period of growth. A strong recovery in the number of larger case
investments signed in the second half of FY24 is also an
encouraging indicator of future business strength.
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:
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Manolete Partners
|
via Instinctif Partners
|
|
Steven Cooklin (Chief Executive
Officer)
|
|
|
|
|
|
Canaccord Genuity (NOMAD and Broker)
|
+44 (0)20 7523 8309
|
|
Emma Gabriel
|
|
|
|
|
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Instinctif Partners
|
manolete@instinctif.com
|
|
Hannah Scott
Tim Linacre
|
+44 (0)20 7457 2020
+44 (0)7949 939 237
|
Chairman's Statement
I am delighted to present my third
report as your Chairman.
Overview
I am pleased to report the Company
has delivered a strong performance with a record 311 new case
investments in the year to 31 March 2024 (FY23:
263).
One of Company's key priorities
has been growing the business through its expanding network of
Insolvency Practitioners and insolvency lawyers throughout the UK
and our results for the year are a strong reflection of that. The
results for FY24 show the Company has pulled away from the more
static market conditions for the insolvency sector following
Government's support measures during the Covid pandemic.
The Board agrees we have put that
difficult Covid backdrop behind us and the Company is now
demonstrating its potential for a marked improvement in
performance. Corporate insolvencies are very high, so as we return
to profit, the trends for the business give me and the Board
considerable optimism that the Company can take full advantage of
these attractive market conditions.
Financial results
Revenues for the year to 31 March
2024 increased by 27% to £26.3m (FY23: £20.7m) The Company has
reported an operating profit of £2.5m for FY24 compares to the
operating loss of £3.1m reported for FY23.
There were 251 case completions
(FY23: 193) which is a record for the Company. Those 251 cases
generated a realised revenue of £24.2m (FY23: £26.8m). In FY24,
Manolete delivered gross cash recoveries from completed cases of
£17.7m, (FY23: £26.7m but that included a one-off very large case
with a gross cash recovery of £9.5m. Adjusting for that, FY23 was
£17.2m). The £17.7m of cash generation was spread across 309
separate completed cases (FY23: 237). At the year-end Manolete had
418 live cases in progress (FY23: 351).
As at the year-end of 31 March
2024, the Company had cash balances of £1.5m, £13.7m drawn down on
its HSBC debt facility and therefore a net debt of £12.3m.
The existing covenants, which had not changed
significantly since 2018, were deemed no longer appropriate to the
Company. As a result, revised covenants were agreed that are cash
based rather than profit based and the total facility size of the
RCF with HSBC was reduced from £25m to £17.5m in March 2024.
Details are set out in the CFO's report.
Strategy
The Board supports the Legal and
Business Development teams in successfully driving up the numbers
of case enquiries which in turn leads to greater new case
investments and so increased revenue, profitability and cash
generation for the Company. This has long been the Company's
approach to the insolvency sector and increasing high quality case
enquiries remains its key measure. It has proven to be an effective
strategy with the Company achieving record case inquiries and
investments in FY24 with 733 new case enquiries, 6% ahead of last
year's (adjusted for bulk BBL referrals) figure of 692.
The Manolete Board's strategy is
to drive both elements of our revenues: higher volumes and higher
average case sizes.
Manolete is constantly seeking to
engage with new insolvency professionals to stimulate more business
opportunities. The Company is the only litigation funder to enjoy
long term strategic partnership agreements with: R3 (the insolvency
industry trade body); the Institute of Chartered Accountants in
England and Wales and the Insolvency Practitioners
Association.
Dividend
The Board has reviewed the
dividend policy and is recommending no dividend is awarded in
respect of this financial year (FY23: nil). The priority of the
Company is to retain cash reserves for investment in current and
future cases.
Corporate Governance
The Board of Directors is
committed to good corporate governance. We engender a culture of
mutual respect at all levels of the company and have established
Manolete as a highly trusted brand in the insolvency sector. The
Company has adopted the ten principles of the 2023 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 29 to 32.
The Audit Committee report on
pages 34 to 35 and the Remuneration Committee report on pages 36 to
38 describe the remits and approaches of those committees to fully
meeting 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, I would
like to mark our appreciation to a team of highly dedicated,
extremely collegiate and committed colleagues for their focus and
hard work during a successful year.
Board
The Board has seen no changes this
financial year. As Chairman, I am content the Board possesses the
necessary spread of proficiency and balance particularly in legal
and accounting expertise.
Outlook
The Company has enjoyed a
substantially improved business performance in FY24 and has
increased its personnel numbers to provide the Company with the
necessary high quality professionals to manage the much increased
workflow that we are now enjoying. Given that the number of
corporate insolvencies in the UK remains very high, the Company can
look forward to a sustained period of growth. A strong recovery in
the number of larger case investments signed in the second half of
FY24 is also an encouraging indicator of future business
strength.
Lord Leigh
Non-Executive Chairman
3 September 2024
CEO's Statement
The much-improved performance of
the Company that was seen in the second half of FY23 followed into
FY24 and those more buoyant trading conditions persisted throughout
the year. This clearly evidenced that the UK insolvency market was
rehabilitating from the temporary two-year suppression of
insolvencies that the Government had enacted during the Covid-19
pandemic (June 2020 - April 2022).
Following that challenging Covid
period, the insolvency market picture has now completely changed,
presenting Manolete with the most attractive trading conditions
since the business was formed in 2009. Significantly higher
prevalent interest rates, heightened concerns over geo-political
conflicts in Eastern Europe and the Middle East and the withdrawal
of the largescale financial supports provided by the Government to
UK businesses during the Covid-19 period, has resulted in the
highest level of UK insolvencies for 30 years. Insolvency Service
statistics from January 2024 show the number of Creditor Voluntary
Liquidations, the largest constituent part of the UK insolvency
market, in 2023 was at its highest level since 1960.
The following graph issued by the
Insolvency Service on 19 July 2024, clearly illustrates the impact
of these measures on the UK insolvency industry: the dramatic
reduction in all forms of company insolvencies as the Government
passed temporary emergency legislation in June 2020 was aimed at
suppressing insolvencies while the pandemic took hold. UK
insolvency laws did not return to normal until April 2022. Since
then, UK insolvencies have been materially higher than pre-pandemic
levels, for a sustained period.
There is a natural, and
unavoidable, time lag before the larger number of insolvencies
convert into higher numbers of Manolete case investments. This is
due the time required by the office holder (i.e. the Liquidator,
Administrator or Trustee in Bankruptcy) to investigate the affairs
of the insolvent entity before being in a position to assess and
refer cases on to Manolete for acquisition. The time lag can vary
considerably in length: some office holders may take just a matter
of days to refer cases, others, typically involving more complex
cases, can take several years. Following the return to normal
operation of UK insolvency laws in April 2022, the noticeable
rebound in new case enquiries into Manolete took around seven
months. Once a case enquiry comes into Manolete, if approved by the
Company's Investment Committee, it usually takes no more than a few
weeks to convert the enquiry into a signed case. Manolete approves
and converts around 29% of case enquiries into signed cases. It is
very rare that an office holder ever rejects an offer of investment
(usually an offer to buy the case via an assignment or, very
rarely, to fund the office holder to purse the claim).
This time lag can be seen clearly
feeding into the Company's Key Performance Indicators as described
below:
(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 FY23 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. However, the
H2 FY23 number is somewhat flattered by the inclusion of around 100
bulk case referrals from the Company's Bounce Back Loan ("BBL")
pilot with Barclays Bank (more on this below). Even excluding the
BBL pilot factor, it can be seen that the overall shape of the case
enquiries graph largely mirrors the shape of the UK Insolvencies
graph above, albeit with an approximate time delay of seven months.
Once Manolete had passed that seven month time lag, it can be seen
that the Company's levels of new case enquiries have, not only
recovered very strongly from the Government suppression during
Covid, they have consistently exceeded the high levels that were
being achieved in the months and years prior to the onset of the
pandemic.
(ii)
New Case Investments
As noted earlier, 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 is able to analyse and
present 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 interrogate the merits of the potential claims.
They are then usually able to report to the Company's Investment
Committee within an average of 7-10 days, with offers being sent to
office holders the next day. Office holders are usually in a
position to decide on our offer within a week or two.
Therefore, the new case
investments graph (see the second graph below), mirrors the shape
of both the UK insolvency graph and the new case enquiries graphs
presented above. However, the overall picture is somewhat distorted
by the fact that the Company signed the large majority of its 82
Barclays BBL pilot cases in H2 FY23 (48 Barclays BBL cases signed)
and H1 FY24 (32 Barclays BBL cases signed). Only two Barclays BBL
cases were signed in H2 FY24, as that onboarding and investment
stage in the BBL pilot was largely completed by the end of H1 FY24.
The second graph below excludes the Barclays BBL cases from all
figures and is therefore a clearer and better representation of the
underlying performance of Manolete "core business", outside of the
pilot project.
As with the earlier analysis of UK
insolvencies and Manolete's new case enquiries, the level of new
case investments has remained at elevated levels over the last 18
months of trading, materially ahead of the peak level achieved by
the Company prior to Covid-19 pandemic.
As a consequence of the above
positive tailwinds, the Company delivered a strong performance in
FY24:
· A
record number of new case enquiries (excluding the Barclays pilot),
with FY24 recording 733 enquiries compared to FY23's 692 adjusted
for bulk BBL referrals.
· Invested in a record number of 311 new UK insolvency claims,
an increase of 18% (FY23: 263).
· A
record number of 251 cases were completed, an increase of 30%
(FY23: 193).
· Total reported revenues for FY24 were £26.3m, 27% higher than
FY23 of £20.8m. With realised revenues contributing 92% of the FY24
total revenues.
· Realised revenues on completed cases were £24.2m, a decrease
of 10% (FY23: £26.8m) although FY23 included an exceptionally large
funded case completion of which £4.9m was recorded in realised
revenue (total settlement £9.5m). Adjusting for that single
exceptional case, FY24 realised revenues were 11% higher than
FY23.
· In
FY24, Manolete delivered gross cash recoveries (cash received on
completed cases before payments to insolvent estates and associated
legal costs) from completed cases of £17.7m, (FY23: £26.7m but that
included the previously mentioned one-off significantly large case
gross cash recovery of £9.5m. Adjusting for that single large case
recovery, FY23 was £17.2m). The £17.7m of cash generation was
spread across 309 separate completed cases (i.e. cases completed in
prior years as well as in the current financial year) (FY23: 237),
highlighting the attractive granularity of Manolete's business
model.
· Cash
generated from operations (after all completed case costs and all
overheads but before new case investments and taxation) was £5.0m
(FY23: £8.0m). Again, FY23 benefitted from the exceptional outsize
case, referred to earlier.
· FY24
saw the Company report a operating profit of £2.5m compared to a
rare operating loss of £3.1m in FY23.
· Increase in the valuation of the cartel cases contributed
£0.1m to gross profit in FY24 (FY23: £1.2m).
Cartel Cases
There have been more material and
positive developments relating to the Company's cartel cases in
recent months. Early in calendar year 2023, the judgments for the
large truck cartel cases relating to BT Group Plc and Royal Mail
Group Limited were handed down with significant damages and
interest being awarded to the Claimants. DAF then presented an
appeal against that decision. DAF's appeal of this judgment was
unanimously dismissed by all three Justices in the Court of Appeal
on 27 February 2024.
Manolete's cartel cases have been
issued in the Competition and Appeals Tribunal, and they are
currently stayed in that Court (which means they are effectively
paused by mutual agreement. This is usually to allow the parties to
engage in Alternative Dispute Resolution e.g. by way of mediation
or Without Prejudice meetings and/or offers and counter-offers, and
the like). Where settlements cannot be concluded, the stay is
terminated and progress to trial resumes.
UK Bounce Back Loans ("BBLs")
The Company has performed
exceptionally well on the BBL pilot that it is conducting for
Barclays Bank. A number of initiatives are under review that may
potentially expand the Company's work in this area.
Investment Returns
Our investment track record, by
vintage, continues to demonstrate outstanding results. 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 months after legal
completion.
Note: Vintage table above is
unaudited
The more mature vintages of FY18
to FY22 all have total case recoveries of over £10m per year and
IRRs ranging from 70% to 162%.
Industry Recognition
During the year, the Company was
named, for the fourth time in succession, as the only company in
the insolvency litigation funding sector 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
FY25 has started well, with new
case enquiries remaining at the elevated levels that were achieved
throughout FY24.
People and Stakeholders
I am always very grateful for the
skill and dedication of Manolete's exceptional team.
Steven Cooklin
Chief Executive Officer
3 September 2024
CFO's Statement
I am pleased to give my review of
the Company's results for the year to 31 March 2024.
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Financial overview:
|
31 March
2024
|
|
31 March
2023
|
YoY
|
|
Financial KPIs
|
£000s
|
|
£000s
|
%
|
|
Revenue
|
26,295
|
|
20,753
|
27%
|
|
Gross profit
|
10,145
|
|
3,672
|
176%
|
|
Gross margin %
|
38.6%
|
|
17.7%
|
|
|
Operating profit/(loss)
|
2,501
|
|
(3,121)
|
180%
|
|
Operating profit margin
%
|
10%
|
|
(15%)
|
|
|
Profit/(loss) after tax
|
933
|
|
(3,124)
|
130%
|
|
Investment valuation
|
40,196
|
|
36,462
|
10%
|
|
Non-financial KPIs
|
|
|
|
|
|
New cases
|
311
|
|
263
|
|
|
Completed cases*
|
251
|
|
193
|
|
|
Live cases at year end**
|
418
|
|
351
|
|
*including 7 partially completed cases (9 partial completions
FY23)
**including 22 cartel cases and 41 BBL cases in FY24 (22
cartel cases and 42 BBL cases in FY23)
|
Revenue
|
31 March
2024
|
|
31 March
2023
|
|
|
|
£000s
|
%
|
£000s
|
%
|
|
Realised revenue
|
24,183
|
92
|
26,790
|
129
|
|
Unrealised revenue
|
2,112
|
8
|
(6,037)
|
(29)
|
|
Revenue
|
26,295
|
|
20,753
|
|
|
|
31 March
2024
|
|
31 March
2023
|
YOY
|
|
|
£000s
|
|
£000s
|
%
|
|
Realised Gross Profit
|
8,032
|
|
9,798
|
(18)
|
|
Realised Gross Margin
|
33.2%
|
|
36.2%
|
|
Revenues can be classified into
realised revenue (actual completions) of £24.2m in FY24 (FY23:
£26.8m) and unrealised revenue (movements in valuations of new and
live cases) of £2.1m in FY24 (FY23: (£6.0m)).
Realised revenue decreased by 9.8%
to £24.2m (FY23: £26.8m) as in FY23, there was an unusually large
single case completion contributing revenue of £4.9m itself which
was exceptional in size and not expected to be repeated each year.
If this exceptionally large case is adjusted for, FY24 realised
revenue exceeds adjusted FY23 revenue by £2.3m, 11%. FY24
performance was driven by a record number of case completions of
251 (FY23: 193).
Unrealised revenue of £2.1m FY24
(FY23: (£6.0m)) was a welcome return to more 'normal' trading
conditions with new case valuations exceeding write downs and
completions. In the prior year, FY23, we undertook a number 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 at that time therefore a more conservative view of
case realisation values.
For comparison purposes, it should
be noted that in the prior year, unrealised revenue included a
£1.2m uplift in the cartel valuation whilst in FY24 the cartel case
valuation uplift was virtually unchanged, £0.1m uplift.
Gross profit of £10.1m in FY24
(FY23: £3.7m) compares favourably to FY23, an increase of 176% as
the prior year negative unrealised revenue had a significantly
negative impact on gross profit.
BBL pilot
During FY24, the Company signed a
further 34 Bounce back loan cases ("BBLs") from our previously
announced pilot project with Barclays Bank, bringing the total BBLs
signed to 82. There were 35 BBLs completed in FY24 in addition to
the 6 completed in FY23 hence live BBLs at year end numbered 41
cases (FY23: 42 live cases).
In FY24, 41 live BBLs had a
positive impact in the Profit and loss account with a valuation of
£475k (FY23: £495k) and completed BBL cases in FY24 have
contributed a realised gross profit to the Company of £381k in FY24
(FY23: £108k) (after deduction of initial purchase cost and
external cost and profit share).
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Administrative expenses
|
31 March
2024
|
|
31 March
2023
|
YoY
growth
|
|
|
£000s
|
|
£000s
|
%
|
|
Wages and salaries
|
4,482
|
|
3,737
|
20%
|
|
Bad debt expense
|
1,362
|
|
1,534
|
(11%)
|
|
Professional fees
|
669
|
|
512
|
31%
|
|
Marketing
|
365
|
|
344
|
6%
|
|
Other costs, including office
costs
|
766
|
|
666
|
15%
|
|
Administrative costs
|
7,644
|
|
6,793
|
13%
|
Administrative expenses increased
by 13% to £7.6m in FY24 (FY23: £6.8m). The
increase in administration expenses was primarily a result of an
increase in salary costs itself a factor of an annual 6% salary
increase for existing staff following annual salary reviews and a
headcount increase of six FTEs (of which two were in-house legal
team).
Bad debt expense decreased by 11%
to £1.4m (FY23: £1.5m) following a thorough review of receivables.
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.
Professional fee expenses of £0.7m
(FY23: £0.5m) have increased by 31% due to hiring of corporate
finance advisors for the covenant reset exercise, increased
recruitment fees whilst also consisting of mostly recurring items
such as audit, tax and PR services (all of which have increased in
line with inflation).
Marketing costs of £0.4m (FY23:
£0.3m) have increased as business development activities continue
to increase.
Other costs of £0.8m FY24 (FY23:
£0.7m), primarily relate to rental costs of office space in London,
Durham and Manchester as well as travelling and entertainment costs
which have increased with increased marketing efforts.
Operating profit
The Company reported an operating
profit of £2.5m in FY24 in comparison to an operating loss of £3.1m
in FY23.
Finance expense
Finance expense increased to £1.5m
FY24 (FY23: £0.8m) as a result of higher interest rates. The
Company paid a margin of 3.7% above SONIA. The Company also paid a
0.7% commitment fee on any unused facility with HSBC. As at 31
March 2024, £13.7m of the £17.5m HSBC facility
had been drawn down (FY23: £10.5m).
Profit after tax
Profit after tax of £0.9m was
recorded in FY24 (FY23: £3.1m loss). The post-tax margin has
increased from (15)% to 3.5%.
Earnings per share
As disclosed in Note 12, earnings
per share increased from (7.1) pence to 2.1 pence.
Balance sheet - Investment in Cases
The Company was managing 418 live
case investments as at 31 March 2024, compared to 351 live cases as
at 31 March 2023, a net increase of 67 cases, or 19%. The total
investment value of the 418 live cases amounted to £40.2m as at 31
March 2024 an increase of 10% (FY23: £36.5m). This increase in
Investment value of cases reflects the increase in new cases being
signed. The valuation includes the investment in the cartel cases
as at 31 March 2024 of £13.5m. That has been left materially
unchanged from £13.4m in FY23. Investment in cases is shown at fair
value, based on the Company's estimate of the future realised
profit.
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 and an
independent legal expert, 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.
|
Cash Flows
|
31 March
2024
|
31 March
2023
|
|
|
£000s
|
£000s
|
|
Gross cash receipts
|
17,730
|
26,708
|
|
IP share & legal costs on
completed cases
|
(6,900)
|
(13,608)
|
|
Cashflows from completed cases
|
10,830
|
13,100
|
|
Overheads
|
(5,865)
|
(5,092)
|
|
Net cash generated from operations before investment in cases
and corporation tax
|
4,965
|
8,008
|
|
Corporation tax
|
-
|
(353)
|
|
Net cash generated from operations after corporation tax and
before investment in new cases
|
4,965
|
7,655
|
|
Investment in cases
|
(6,355)
|
(5,806)
|
|
Net cash generated (used in)/ from
operations
|
(1,390)
|
1,849
|
|
|
|
|
|
% growth in case cash investments
|
9%
|
13%
|
Gross cash receipts
Gross cash receipts whilst still
strong at £17.7m in FY24 were lower than prior year (FY23: £26.7m)
by 34% due to the exceptionally large case in the prior year which
generated cash of £9.5m itself. Importantly, cash generated from
operations before investment in cases and corporation tax remains a
strong positive cash inflow of £5.0m in FY24 (FY23: £8.0m) which
has been reinvested in the portfolio.
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 (cash)
Excluding non-cash items
(including bad debt expense), spending incurred on overheads has
increased from £5.1m FY23 to £5.9m FY24 principally as result of an
increase in headcount, annual salary increases and
bonuses.
The Company has benefited from
brought forward tax losses and no corporation tax is expected to
become payable in respect of FY24.
Investment in cases
We have continued to invest in
existing and new cases with total capital of £5.8m deployed during
FY24 and was the same in FY23 which has been funded through cash
receipts from completed cases and draw down of the HSBC
loan.
Working Capital
Absorption of £1.8m into working
capital during FY24 is primarily due to increased trade
receivables. This increase in net trade receivables will generate
cash in FY25 and beyond. Debtor days on a basic basis increased to
491 in FY24 (FY23: 365) due to a large outstanding debtor in
relation to a single case of £1.7m and significant realised revenue
in the last month of the year, a significant proportion of which
was received in cash in the first month of the new FY25 trading
year.
|
|
31 March
2024
|
|
31 March
2023
|
|
Net working capital
|
£000s
|
|
£000s
|
|
Net working capital
|
17,956
|
|
16,115
|
|
Change in net working
capital
|
(1,841)
|
|
(5,957)
|
|
DSO (Days sales outstanding) basic
|
497
|
|
365
|
|
DSO countback
|
335
|
|
335
|
Debt Financing
As at 31 March 2024 the Company
had drawn down £13.7m (FY23: £10.5m) of its £17.5m HSBC loan
facility and has continued to deploy loan capital during the year
to finance investment in cases. The Company held cash reserves of
£1.5m as at 31 March 2024 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
September 2023 and 31 December 2023 as historical losses incurred
in FY23 were resulting in a breach of the leverage and interest
cover covenants.
Following this event, the Company
has agreed a number of amendments to the loan agreement with a new
set of covenants for the remaining period of the HSBC RCF to 30
June 2025 which are cashflow based metrics, with the complete
removal of the leverage covenant. The maximum loan has been reduced
to £17.5m from £25.0m and the interest charges are 4.7% margin
above SONIA. The amended agreement came into force before the 31
March 2024.
Mark Tavener
Chief Financial Officer
3 September 2024
Strategic Report
The Directors present their
strategic report for the year ended 31 March 2024.
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 22 to 23, we have set out
the principal risks which may present challenges in executing the
business model and delivering the strategy.
As the UK Insolvency market
continued to return to normal operation, business performance is
now consistently performing well and starting to mirror the
impressive growth and investment returns that the Company was
delivering prior to the Covid-19 pandemic period. Year-on-year
revenues increased by 27%, driven by an increase in unrealised
revenues offset by a decrease in realised revenue (see table
below). Operating profits improved by £5.6m to an operating profit
of £2.5m and net assets increased 3% to £40.5m. The second half of
FY24 saw a welcome return of larger claim opportunities, as the
business cycle evolves this trend is expected to
continue.
The number of employees was 29
(FY23: 25) at the end of the financial year, as demand has
increased significantly for our UK insolvency litigation financing
products over the last six months. 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 1,351 cases, with a
record 418 live, in-progress cases as at 31 March 2024.
|
|
Year Ended
31 March
2024
|
|
Year Ended
31 March
2023
|
% change
|
|
Financial KPIs
|
£000s
|
|
£000s
|
|
|
Realised revenue
|
24,183
|
|
26,790
|
(10%)
|
|
Unrealised revenue
|
2,112
|
|
(6,037)
|
(135%)
|
|
Total revenue
|
26,295
|
|
20,753
|
27%
|
|
Gross profit
|
10,145
|
|
3,672
|
176%
|
|
Operating profit/(loss)
|
2,501
|
|
(3,121)
|
(180%)
|
|
Profit/(loss) after tax
|
933
|
|
(3,124)
|
(123%)
|
|
Value of investments
|
40,196
|
|
36,462
|
10%
|
|
Non-financial KPIs
|
|
|
|
|
|
Number of lifetime signed
litigation investments
|
1,351
|
|
1,040
|
30%
|
|
Live cases at end of reporting
period
|
418
|
|
351
|
19%
|
|
New cases
|
311
|
|
263
|
18%
|
|
Completed cases
|
251
|
|
193
|
30%
|
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 20.
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
during the pandemic have now ended as have the wide-scale UK
economic support measures, which give us confidence in our future
prospects.
The Board has considered the Going
Concern status of the business in relation to the general wider
economic environment and has concluded that it is appropriate for
the accounts to be prepared on a going concern basis. Further
detail on the board's consideration of going concern is included on
page 50.
The board believes that the
business is now well-positioned to take advantage of the strong
tailwinds that have started to drive its resumed growth
trajectory.
The Company has made a good start
to FY25 and we look forward to a promising future.
Statement of Comprehensive
Income
|
|
|
31 March
2024
|
|
31 March
2023
|
|
|
Note
|
£'000s
|
|
£'000s
|
|
|
|
|
|
|
|
Revenue
|
4
|
26,295
|
|
20,753
|
|
|
|
|
|
|
|
Cost of sales
|
|
(16,150)
|
|
(17,081)
|
|
Gross profit
|
|
10,145
|
|
3,672
|
|
|
|
|
|
|
|
Administrative expenses
|
8
|
(7,644)
|
|
(6,793)
|
|
Operating profit/(loss)
|
6
|
2,501
|
|
(3,121)
|
|
|
|
|
|
|
|
Finance income
|
9
|
16
|
|
7
|
|
Finance expense
|
9
|
(1,479)
|
|
(839)
|
|
Profit/(Loss) before tax
|
|
1,038
|
|
(3,953)
|
|
|
|
|
|
|
|
Taxation
|
11
|
(105)
|
|
829
|
|
Profit/(Loss) and total comprehensive income for the year
attributable to the equity owners of the company
|
|
933
|
|
(3,124)
|
|
|
|
|
|
|
|
Earnings per share
|
|
|
|
|
|
|
|
|
|
|
|
Basic (pence per share)
|
12
|
2.11p
|
|
(7.14)p
|
|
Diluted (pence per
share)
|
12
|
2.07p
|
|
(7.14)p
|
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
2024
|
|
31 March
2023
Restated
|
|
|
Note
|
£'000s
|
|
£'000s
|
|
Non-current assets
|
|
|
|
|
|
Investments
|
13
|
11,293
|
|
14,983
|
|
Intangible assets
|
14
|
-
|
|
-
|
|
Trade and other
receivables
|
16
|
14,203
|
|
12,315
|
|
Deferred tax asset
|
19
|
938
|
|
267
|
|
Right-of-use asset
|
15
|
-
|
|
-
|
|
Total non-current
assets
|
|
26,434
|
|
27,565
|
|
Current assets
|
|
|
|
|
|
Investments
|
13
|
28,903
|
|
21,479
|
|
Trade and other
receivables
|
16
|
15,077
|
|
12,063
|
|
Corporation tax
receivable
|
11
|
-
|
|
735
|
|
Cash and cash
equivalents
|
17
|
1,452
|
|
636
|
|
Total current assets
|
|
45,432
|
|
34,913
|
|
|
|
|
|
|
|
Total assets
|
|
71,866
|
|
62,478
|
|
|
|
|
|
|
|
EQUITY AND LIABILITIES
|
|
|
|
|
|
Equity
|
|
|
|
|
|
Share capital
|
21
|
175
|
|
175
|
|
Share premium
|
22
|
157
|
|
157
|
|
Share based payment
reserve
|
22
|
1,076
|
|
699
|
|
Special reserve
|
22
|
-
|
|
-
|
|
Retained earnings
|
22
|
39,063
|
|
38,130
|
|
Total equity attributable to the
equity owners of the company
|
|
40,471
|
|
39,161
|
|
|
|
|
|
|
|
Non-current liabilities
|
|
|
|
|
|
Trade and other
payables
|
18
|
8,434
|
|
7,393
|
|
Borrowings
|
20
|
13,726
|
|
10,381
|
|
Total non-current
liabilities
|
|
22,160
|
|
17,774
|
|
|
|
|
|
|
|
Current liabilities
|
|
|
|
|
|
Trade and other
payables
|
18
|
9,235
|
|
5,543
|
|
Current tax liabilities
|
11
|
-
|
|
-
|
|
Lease liability
|
15/20
|
-
|
|
-
|
|
Total current
liabilities
|
|
9,235
|
|
5,543
|
|
Total liabilities
|
|
31,395
|
|
23,317
|
|
Total equity and liabilities
|
|
71,866
|
|
62,478
|
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 3
September 2024.
Steven Cooklin
Chief Executive Officer
Statement of Changes in
Equity
|
|
Share
capital
|
Share
premium
|
Share
based
payment
reserve
|
Special
reserve
|
Retained
earnings
|
Total
Equity*
|
|
|
£'000s
|
£'000s
|
£'000s
|
£'000s
|
£'000s
|
£'000s
|
|
|
|
|
|
|
|
|
|
As at 1 April 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
|
|
Comprehensive income
|
|
|
|
|
|
|
|
Profit for the year
|
-
|
-
|
-
|
-
|
933
|
933
|
|
Transactions with owners
|
|
|
|
|
|
|
|
Share based payment
expense
|
-
|
-
|
336
|
-
|
-
|
336
|
|
Deferred tax on share-based
payments
|
-
|
-
|
41
|
-
|
-
|
41
|
|
As at 31 March 2024
|
175
|
157
|
1,076
|
-
|
39,063
|
40,471
|
*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
2024
|
|
31 March
2023
|
|
|
Note
|
£'000s
|
|
£'000s
|
|
|
|
|
|
|
|
Profit/(Loss) before
tax
|
|
1,038
|
|
(3,953)
|
|
|
|
|
|
|
|
Adjustments for other operating items:
|
|
|
|
|
|
Adjustments for non-cash items:
|
26
|
4,420
|
|
15,554
|
|
Operating cashflows before movements in working
capital
|
|
5,458
|
|
11,601
|
|
|
|
|
|
|
|
Changes in working capital:
|
|
|
|
|
|
Net increase in trade and other
receivables
|
|
(4,901)
|
|
(4,105)
|
|
Net increase in trade and other
payables
|
|
4,408
|
|
512
|
|
Net cash generated from operations before corporation tax and
investments
|
|
4,965
|
|
8,008
|
|
|
|
|
|
|
|
Corporation tax paid
|
|
-
|
|
(353)
|
|
Investment in cases
|
13
|
(6,355)
|
|
(5,806)
|
|
Net cash generated (used in)/from operating
activities
|
|
(1,390)
|
|
1,849
|
|
|
|
|
|
|
|
Cash flows from investing
activities
|
|
|
|
|
|
|
|
|
|
|
|
Finance income received
|
9
|
16
|
|
7
|
|
Net cash generated from investing
activities
|
|
16
|
|
7
|
|
|
|
|
|
|
|
Cash flows from financing
activities
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds/(Repayments) from
borrowings
|
20
|
3,250
|
|
(3,000)
|
|
Dividends paid
|
10
|
-
|
|
(219)
|
|
Interest paid
|
|
(1,060)
|
|
(160)
|
|
Repayment of lease
liabilities
|
15
|
-
|
|
(97)
|
|
Net cash generated from/(used in) from financing
activities
|
|
2,190
|
|
(3,476)
|
|
|
|
|
|
|
|
Net increase/(decrease) in cash and cash
equivalents
|
|
816
|
|
(1,620)
|
|
|
|
|
|
|
|
Cash and cash equivalents at the
beginning of the year
|
|
636
|
|
2,256
|
|
Cash and cash equivalents at the end of the
year
|
|
1,452
|
|
636
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
The Company achieved an improved
performance in the year, reporting profit before tax of £1.0m, cash
generated from operations (before new investments) of £5.0m and net
current assets at 31 March 2024 of £36.2m.
The Board have prepared a detailed
base case cash projection for a period of 18 months from the date
of signing of these financial statements together with a downside
cash projection in which more unfavourable assumptions are
applied. These unfavourable assumptions include an elevated
credit loss rate and an assumed write down of one high value
case. The Board consider these circumstances to reflect a
plausible downside scenario.
As the HSBC RCF loan is due to
expire within the going concern review period, on 1 July 2025,
Management has sought assurances from HSBC that a renewal of the
facility will be available to the Company at the appropriate time
and this renewal process will begin in January 2025. HSBC have
supported and funded the business since prior to IPO. Whilst
any renewal is subject to formal discussions in 2025, the Board are
optimistic of the continued support of HSBC based on the
longstanding relationship and informal discussions. At the
date of signing the financial statements, the balance drawn on the
RCF is £12.5m.
During the year the Company
breached certain RCF covenants relating to interest cover and
leverage. In March 2024 the RCF covenant package was reset to
better align with the Company's business model. The Board
have considered the ability of the Company to comply with the
covenants during the going concern review period by reference to
the base case and downside case. In both cases the Company is
forecast to operate within the terms of the
covenants.
In addition, Management is
exploring Term Loan opportunities with new funders alongside the
existing HSBC RCF facility to provide additional growth funding and
has appointed a corporate finance firm to assist in this process.
Whilst no equity funding is being sought, it remains an option in
the future for the Company should additional growth funding be
required as the number of cases in the portfolio
increases.
These sources of finance, along
with a profitable forecast for trading and cash generation for the
next 18 months and with mitigating actions available to the
directors, if short-term cash was needed to be generated, has led
the Directors to conclude that it is appropriate to adopt the going
concern basis in preparing the financial
statements.
Whilst undertaking the going
concern review, the Directors considered the possible existence of
a material uncertainty but decided that no such uncertainty exists
given the historical level of funding support, post year end
trading and our long-term relationship with HSBC, in
particular.
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 ("£") except
where otherwise indicated.
2.4 New standards, amendments and
interpretations
New and amended IFRS Standards that are effective for the
current year:
During the current year, the
Company adopted all new and revised standards and interpretations
issued by the International Accounting Standards Board and the
International Financial Reporting Interpretations Committee and
that are endorsed by the UK that are effective for annual
accounting periods beginning on or after 1 January 2023. None
of them had a material impact on the financial
statements.
- Disclosure of Accounting Policies (Amendments to IAS 1 and
IFRS Practice Statement 2)
The amendments to IAS 1 require
companies to disclose their material accounting policy information
rather than their significant accounting policies. The amendments
to IFRS Practice Statement 2 provide guidance on how to apply the
concept of materiality to accounting policy disclosures.
- Definition of Accounting Estimates (Amendments to IAS
8)
The amendments clarify how
companies should distinguish changes in accounting policies from
changes in accounting estimates. That distinction is important
because changes in accounting estimates are applied prospectively
only to future transactions and other future events, but changes in
accounting policies are generally also applied retrospectively to
past transactions and other past events.
- Deferred Tax Relating to Assets and Liabilities arising from
a Single Transaction (Amendments to IAS 12)
IAS 12 specifies how a
company accounts for income tax, including deferred tax, which
represents tax payable or recoverable in the future. In specified
circumstances, companies are exempt from recognising deferred tax
when they recognise assets or liabilities for the first time. The
amendments clarify that the exemption does not apply and that
companies are required to recognise deferred tax on such
transactions.
New and revised IFRS Standards in issue but not yet
effective:
The following relevant IFRSs and
amendments have been issued by the IASB but are not effective until
a future period.
- IAS 1 Presentation of
Financial Statements (Amendments to Classification of
Liabilities as Current or Non-current) (Effective from the year
ending 31 March 2025)
The amendments clarify that
liabilities are classified as either current or non-current,
depending on the rights that exist at the end of the reporting
period. Classification is unaffected by the expectations of the
entity or events after the reporting date. The amendment also
clarifies what IAS 1 means when it refers to the 'settlement' of a
liability.
- IAS 1 Presentation of
Financial Statements (Amendment to Non-current liabilities
with covenants). (Effective from the year ending 31 March
2025)
The amendments improved the
information an entity provides when its right to defer settlement
of a liability for at least 12 months is subject to compliance with
covenants.
- On 9 April 2024 the IASB issued IFRS 18 'Presentation
and Disclosure in Financial Statements', which is expected to
be effective for Manolete for the year ending 31 March 2028,
subject to UK endorsement.
IFRS 18 sets out requirements for the
presentation and disclosure of information in general purpose
financial statements and replaces IAS 1 'Presentation of Financial
Statements'.
The Board are currently assessing
the impact of these new amendments on the company's financial
reporting for future periods. However, the board does not
expect any of the above to have a material impact on future
results.
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, net of
eliminations of the previously recorded fair value of completed
cases.
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 expenses also include costs associated with loan renewal
fees, covenant amendments and unutilised fees.
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 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 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 April 2022 to December 2023. 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.
The cartel cases are classified as
non-current investments, with the exception of those which have
entered into discussions, as they are long-term in nature where
settlement will involve a considerable level of analysis,
negotiation and legal process that is expected by Management to
exceed 12 months. All other cases are classified as current assets
as the Company policy is to reach a timely settlement on these
cases in order to re-cycle working capital and this is expected to
be within 12 months (although this can vary case to case and year
to year, the average age of settled cases in FY24 in 12.7
months).
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 in select cases. 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.
2.8 Financial assets
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). The
unwinding of contract assets is recognised within
revenue.
2.9 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 £25m 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 (covenant amendment) in March 2024 were expensed
to the Statement of Comprehensive Income in FY24.
These capitalised costs of £23,892
as at 31 March 2024 (31 March 2023: £119,426) have been netted off
against borrowings in the Statement of Financial Position.
Amendment fees of £62,500 were expensed to the Statement of
Comprehensive Income in March 2024.
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.
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. The
unwinding of contract liabilities is recognised within Cost of
Sales.
2.10 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.
2.11 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.
2.12 Share-based payments
Equity-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 Monte Carlo, Binomial or
Black Scholes pricing model which 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.
2.13 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 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. 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 directors' 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 418 open cases, of these 366 had a valuation of less than
£100k. These cases are not expected to have an individually
material impact on the business when they are settled. The
remaining 52 cases make up £24.8m 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: 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 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.
1.4 The Company classifies all
legal cases (non-cartel) as current assets as the intention and
expectation is to reach a settlement within 12 months. Cartel cases
are classified as non-current assets as the legal process for these
Competition Law cases is a longer-term process except where
settlement negotiations have commenced.
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 , 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 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 except for the cartel
cases which do assume a figure for both costs recovery and interest
charge. 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 are different from the assumptions could require a
material adjustment to the carrying amount of the £40.2m 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 (excluding cartel cases) would result in
an increase/(decrease) in the fair value investment of +/-
£0.9m.
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 as at 31 March 2024 was £15.1m (FY23
£15.0m).
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.12.7 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 completed cases from April 2022 to December
2023. 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 £7.2m 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.
Recoverability of deferred tax asset on utilised tax
losses
The Company has recognised a
deferred tax asset of £600k in respect of estimated unutilised
trading losses which are available to carry forward against future
taxable profits. In the prior year, no deferred tax asset was
recognised in respect of carried forward trading losses.
Management have considered whether, in their judgement, it is
probable (i.e. more likely than not) that sufficient taxable
profits will be generated such that an asset can be
recognised. During the year the Company reported a profit
before tax of £1.0m which represented a return to profit following
a loss before tax of £4.0m in the prior year. As described in
the Strategic Report, the Board consider that the performance in
FY24 reflects a recovery from the effects of temporary
Covid-related business support measures and therefore, having
considered the Company's projections used for going concern
assessments, that it is probable that taxable profits will be
available against which to utilise the full £2.4m of available
unutilised losses.
4. Segmental reporting
During the year ended 31 March
2024, revenue was derived from cases funded on behalf of the
insolvent estate and cases purchased from the insolvent estate,
which are mostly 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
2024
|
|
31 March
2023
|
|
|
£000s
|
|
£000s
|
|
Net realised gains on investments
in cases
|
24,183
|
|
26,790
|
|
Fair value movements (net of
transfers to realisations) - Note 13
|
2,112
|
|
(6,037)
|
|
|
26,295
|
|
20,753
|
Net realised gains on investments
includes £805k (FY23: £802k) in respect of the unwinding of a
discounted settlement receivable. See note 16 for further
detail.
|
|
31 March
2024
|
|
31 March
2023
|
|
|
£000s
|
|
£000s
|
|
Arising from:
|
|
|
|
|
Purchased cases
|
26,985
|
|
15,321
|
|
Funded cases
|
(690)
|
|
5,432
|
|
|
26,295
|
|
20,753
|
5. Directors and employees
Staff costs for the Company during
the year:
|
|
31 March
2024
|
|
31 March
2023
|
|
Staff costs (including directors):
|
£000s
|
|
£000s
|
|
Wages and salaries
|
3,562
|
|
3,031
|
|
Social security costs
|
436
|
|
429
|
|
Other pension costs and
benefits
|
484
|
|
277
|
|
Total staff costs
|
4,482
|
|
3,737
|
The average monthly number of
employees (including executive and non-executive directors)
employed by activity was:
|
|
31 March
2024
|
|
31 March
2023
|
|
|
No.
|
|
No.
|
|
Directors (executive and
non-executive)
|
6
|
|
6
|
|
Management and
administration
|
23
|
|
18
|
|
Average headcount
|
29
|
|
24
|
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:
|
Directors' emoluments:
|
31 March
2024
|
|
31 March
2023
|
|
|
£000s
|
|
£000s
|
|
Salaries and fees
|
1,524
|
|
1,404
|
|
Other pension costs and
benefits
|
30
|
|
16
|
|
|
1,554
|
|
1,420
|
Directors remuneration is detailed
in the Remuneration report. The number of directors to whom
retirement benefits accrued was 3 (FY23: 2). No options were
exercised by directors in FY24 (FY23: no directors exercised
options)
|
|
31 March
2024
|
|
31 March
2023
|
|
|
£000s
|
|
£000s
|
|
Highest paid director:
|
|
|
|
|
Salaries and fees
|
534
|
|
529
|
|
Other pension costs and
benefits
|
11
|
|
6
|
|
|
545
|
|
535
|
Management consider the directors to
be the key management personnel. The total share based payment
expense in the year attributable to the Board was £247k. (FY23:
£141k).
6. Operating profit
Is stated after
charging:
|
|
31 March
2024
|
|
31 March
2023
|
|
|
£000s
|
|
£000s
|
|
Bad debt expenses
|
1,362
|
|
1,534
|
|
Share based payments
|
336
|
|
150
|
|
Depreciation of right of use
asset
|
-
|
|
86
|
|
Amortisation of intangible
assets
|
-
|
|
13
|
7. Auditor remuneration
Amounts payable to RSM UK Audit LLP
in respect of the Interim audit and Gravita II LLP in respect of
the Year-end audit in respect of both audit and non-audit services
are set out below.
|
|
31 March
2024
|
|
31 March
2023
|
|
|
£000s
|
|
£000s
|
|
Fee payable to Company's auditor
and its associates for the statutory audit of the Company's
financial statements
|
122
|
|
110
|
|
Fees payable to Company's auditor
and its associates for other services:
|
|
|
|
|
Interim agreed upon procedures
(2024 and 2023: RSM UK Audit LLP)
|
11
|
|
11
|
|
Total
|
133
|
|
121
|
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
2024
|
|
31 March
2023
|
|
|
£000s
|
|
£000s
|
|
Staff costs, including pension and
healthcare
costs
|
4,482
|
|
3,737
|
|
Bad debts including expected
credit losses
|
1,362
|
|
1,534
|
|
Professional fees
|
669
|
|
512
|
|
Marketing costs
|
365
|
|
344
|
|
Other costs, including office
costs
|
766
|
|
666
|
|
Total administrative
expenses
|
7,644
|
|
6,793
|
9. Finance income and finance
expense
|
|
31 March
2024
|
|
31 March
2023
|
|
|
£000s
|
|
£000s
|
|
Bank interest
|
16
|
|
7
|
|
Total finance income
|
16
|
|
7
|
|
|
31 March
2024
|
|
31 March
2023
|
|
|
£000s
|
|
£000s
|
|
Lease liability
interest
|
-
|
|
1
|
|
Other loan interest
|
196
|
|
251
|
|
Bank loan charges
|
1,283
|
|
587
|
|
Total finance expense
|
1,479
|
|
839
|
10. Dividends
Dividends paid during the
financial year were as follows.
|
|
31 March
2024
|
|
31 March
2023
|
|
Declared during the year
|
£000s
|
|
£000s
|
|
Final dividend for the year ended
31 March 2023 of 0.0p per share, (October 2022: 0.5p)
|
-
|
|
-
|
|
Interim dividend for the year
ended 31 March 2024, of 0.0p per share (FY23: 0.0p)
|
-
|
|
-
|
|
Total dividends paid
|
-
|
|
-
|
|
|
|
|
|
|
Proposed after the end of year and not recognised as a
liability
|
|
|
|
|
Final dividend for the year ended
31 March 2024: 0.0p per share (31 March 2023: 0.0p per
share)
|
-
|
|
-
|
11. Taxation
|
|
31 March
2024
|
|
31 March
2023
|
|
Analysis of charge/(credit) in year
|
£000s
|
|
£000s
|
|
Current tax charge/(credit) on
profits/losses for the year
|
-
|
|
(735)
|
|
Adjustments in respect of prior
periods
|
735
|
|
(42)
|
|
Income tax
charge/(credit)
|
735
|
|
(777)
|
|
Deferred tax credit
|
(630)
|
|
(52)
|
|
Total tax
charge/(credit)
|
105
|
|
(829)
|
The tax (credit)/charge for the
year differs from the standard rate of corporation tax in the UK of
25%. (FY23: 19%). The differences are explained below.
|
|
31 March
2024
|
|
31 March
2023
|
|
|
£000s
|
|
£000s
|
|
Profit/(Loss) on ordinary
activities before tax
|
1,038
|
|
(3,953)
|
|
Profit/(Loss) on ordinary
activities multiplied by the rate of corporation tax in the UK as
above
|
259
|
|
(751)
|
|
Effects of:
|
|
|
|
|
Expenses not deductible
|
105
|
|
44
|
|
Other differences
|
-
|
|
(28)
|
|
Adjustments to current tax in
respect of previous periods
|
735
|
|
(42)
|
|
Deferred tax charged directly to
equity
|
41
|
|
120
|
|
Temporary differences not
recognised in the computation
|
(71)
|
|
(108)
|
|
Remeasurement of deferred tax for
change in tax rates
|
-
|
|
(64)
|
|
Brought forward losses utilised in
the year
|
(364)
|
|
-
|
|
Recognition of asset not
previously recognised
|
(600)
|
|
-
|
|
Total taxation
charge/(credit)
|
105
|
|
(829)
|
At 31 March 2024 the Company had
estimated unutilised losses to carry forward of £2.4m (FY23:
£3.9m). In light of the Company's return to profitability in FY24,
a deferred tax asset of £600k in respect of estimated tax losses of
£2.4m has been recognised (see Note 19.) In the prior year, a
potential deferred tax asset of £1.0m was not recognised due to the
loss reported in the year and the uncertainty of timing of future
profits. From 1 April 2023 the headline rate of UK
corporation tax increased to 25% and the deferred tax asset has
been measured by reference to this rate. Losses do not
expire
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
2024
|
|
31 March
2023
|
|
|
|
£000s
|
|
£000s
|
|
Profit/(Loss) for the period
attributable to equity holders of the Company
|
933
|
|
(3,124)
|
|
Weighted average number of
ordinary shares
|
44,135,972
|
|
43,756,351
|
|
Earnings per share
|
2.11p
|
|
(7.14)p
|
|
|
|
|
|
|
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
2024
|
31 March
2023
|
|
|
|
£000s
|
£000s
|
|
Profit/(Loss) for the period
attributable to equity holders of the Company
|
|
933
|
(3,124)
|
|
Diluted weighted average number of
ordinary shares
|
|
45,128,751
|
43,756,351
|
|
Diluted earnings per
share
|
|
2.07p
|
(7.14)p
|
Reconciliation of number of shares
and diluted shares at year end:
|
|
|
31 March
2024
|
31 March
2023
|
|
|
|
£000s
|
£000s
|
|
Weighted average number of shares
for Basic Earnings Per Share
|
|
43,761,305
|
43,756,351
|
|
Adjustments for calculation of
Diluted Earnings Per Share:
|
|
|
|
|
Options over ordinary
shares
|
|
1,366,751
|
-
|
|
Weighted average number of shares
for Diluted Earnings Per Share
|
|
45,128,056
|
43,736,351
|
The earnings per share is diluted
by options over ordinary shares, as detailed in note 23. In FY23,
there was no diluting factor due to share options as a loss after
tax was reported.
13. Investments (as restated)
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
2024
|
|
31 March
2023
|
|
|
£000s
|
|
£000s
|
|
As at 1 April 2023
|
36,462
|
|
45,718
|
|
Prepaid cost additions
|
6,355
|
|
5,806
|
|
Realised prepaid costs
|
(4,733)
|
|
(9,025)
|
|
Fair value movement (net of
transfers to realisations)
|
2,112
|
|
(6,037)
|
|
As at 31 March 2024
|
40,196
|
|
36,462
|
|
|
|
|
Restated
|
|
|
31 March
2024
|
|
31 March
2023
|
|
|
£000s
|
|
£000s
|
|
Current
|
28,903
|
|
21,479
|
|
Non-current
|
11,293
|
|
14,983
|
|
As at 31 March 2024
|
40,196
|
|
36,462
|
Prepaid and initial legal costs
relating to the cartel cases have been reclassified as non-current
investments consistent with the classification of the fair value of
these cartel cases in both FY24 and restated for FY23. A proportion
of cartel case investment has been disclosed as current investment
in FY24 as negotiations with the Truck manufacturer have
commenced.
Investment figures in FY23 have
been restated to include the external legal costs incurred on
cartel cases as a non-current asset (previously shown as a current
asset). As such, this resulted in £1,594k of legal costs in FY23
being removed from current investments and included within
non-current investments. Hence, current investments reduced from
£23.1m to £21.5m and non-current investments increased from £13.4m
to £15.0m. This is a reclassification only and has no impact on the
profit and loss, earnings per share or diluted earnings per
share.
Analysis of fair value movements
|
|
31 March
2024
|
|
31 March
2023
|
|
|
£000s
|
|
£000s
|
|
New case investments
|
12,325
|
|
9,659
|
|
Increase in existing case fair
value (excl. cartel cases)
|
488
|
|
134
|
|
Decrease in existing case fair
value (excl. cartel cases)
|
(3,982)
|
|
(2,519)
|
|
Case completions - transferred to
realisations
|
(6,811)
|
|
(14,503)
|
|
Increase in fair value of cartel
cases
|
92
|
|
1,192
|
|
Fair value movement (net of
transfers to realisations)
|
2,112
|
|
(6,037)
|
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
2024
|
|
31 March
2023
|
|
|
£000s
|
|
£000s
|
|
As at 1 April 2023
|
-
|
|
13
|
|
Amortisation charge
|
-
|
|
(13)
|
|
As at 31 March 2024
|
-
|
|
-
|
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 the Company has applied the short-term lease exemption
from capitalising the lease, along with other short term office
leases..
|
|
31 March
2024
|
|
31 March
2023
|
|
|
£000s
|
|
£000s
|
|
As at 1 April 2023
|
-
|
|
86
|
|
Depreciation
|
-
|
|
(86)
|
|
As at 31 March 2024
|
-
|
|
-
|
|
|
31 March
2024
|
|
31 March
2023
|
|
Lease liability
|
£000s
|
|
£000s
|
|
Current
|
-
|
|
-
|
|
Non-current
|
-
|
|
-
|
|
As at 31 March 2024
|
-
|
|
-
|
16.
Trade and other receivables
|
|
31 March
2024
|
|
31 March
2023
|
|
|
£000s
|
|
£000s
|
|
Amounts falling due in excess of one year:
|
|
|
|
|
Trade receivables
|
11,738
|
|
10,270
|
|
Contract asset
|
2,465
|
|
2,045
|
|
Total trade and other receivables
due in excess of one year
|
14,203
|
|
12,315
|
|
|
|
|
|
|
Amounts falling due within one year:
|
|
|
|
|
Gross trade receivables
|
21,203
|
|
16,505
|
|
Less:
|
|
|
|
|
Specific provisions
|
(4,507)
|
|
(2,881)
|
|
Allowance for expected credit
losses
|
(1,838)
|
|
(1,794)
|
|
Trade receivables
|
14,858
|
|
11,830
|
|
Prepayments
|
219
|
|
233
|
|
Total trade and other receivables
due within one year
|
15,077
|
|
12,063
|
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 which settled in FY21. Unwinding income
of £805k (2023: £802k) and unwinding expense of £578k (2023: £566k)
were recognised in the year in respect of this single large
case. No other receivables are discounted.
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
2024
|
|
31 March
2023
|
|
ECL Provision
|
£000s
|
|
£000s
|
|
At 1 April 2023
|
1,794
|
|
865
|
|
Increase in provisions for
impairment
|
44
|
|
929
|
|
As at 31 March 2024
|
1,838
|
|
1,794
|
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 April 2022 to December
2023.
17.
Cash and cash equivalents
|
|
31 March
2024
|
|
31 March
2023
|
|
|
£000s
|
|
£000s
|
|
Cash at bank and in
hand
|
1,452
|
|
636
|
All bank balances are denominated
in pounds sterling.
18.
Trade and other payables
|
|
31 March
2024
|
|
31 March
2023
|
|
|
£000s
|
|
£000s
|
|
Amounts falling due in excess of one year:
|
|
|
|
|
Accruals - direct costs
|
6,651
|
|
5,982
|
|
Contract liability
|
1,783
|
|
1,411
|
|
Total trade and other payables due
in excess of one year
|
8,434
|
|
7,393
|
|
|
|
|
|
|
Amounts falling due in one year:
|
|
|
|
|
Trade payables
|
1,325
|
|
802
|
|
Accruals - direct costs
|
6,714
|
|
3,984
|
|
Other creditors
|
1,058
|
|
645
|
|
Other taxation and social
security
|
138
|
|
112
|
|
Total trade and other payables due
within one year
|
9,235
|
|
5,543
|
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 except one large case
described below.
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 £8.4m shown as non-current, £3.9m 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 settled in FY21.
19.
Deferred tax asset
|
|
31 March
2024
|
|
31 March
2023
|
|
|
£000s
|
|
£000s
|
|
At 1 April 2023
|
267
|
|
95
|
|
Deferred tax charged in the income
statement for the period
|
630
|
|
292
|
|
Deferred tax included directly in
equity
|
41
|
|
(120)
|
|
At 31 March 2024
|
938
|
|
267
|
Deferred tax has been charged to
equity reserve where these movements in deferred tax assets relate
to releases and creation of share options.
Deferred tax assets are recognised
in respect of:
|
|
31 March
2024
|
|
31 March
2023
|
|
|
£000s
|
|
£000s
|
|
Unutilised losses carried
forward
|
600
|
|
-
|
|
Timing differences on share
options
|
336
|
|
266
|
|
Other items
|
2
|
|
1
|
|
Total
|
938
|
|
267
|
20.
Borrowings
|
|
31 March
2024
|
|
31 March
2023
|
|
|
£000s
|
|
£000s
|
|
Non-current
|
|
|
|
|
Bank loans
|
13,726
|
|
10,381
|
|
Total non-current
borrowings
|
13,726
|
|
10,381
|
|
|
|
|
|
|
Current
|
|
|
|
|
Lease liability
|
-
|
|
-
|
|
Total current
borrowings
|
-
|
|
-
|
Arrangement fees in relation to a
£25m loan facility set up with HSBC in June 2021 are capitalised
and amortised over the original length of the loan facility, a
period of three years. There is an option to extend for a further
year.
Gross borrowings are £13.7m as at
31 March 2024 (FY23: £10.5m) but are presented net of HSBC set-up
amortised costs of £24k above which are being amortised over 3
years. Maturity analysis of bank
loans is included in note 27.
The Company agreed on 22 June
2021, a new RCF for £25m 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.
In March 2024, the Company agreed
an amendment to the RCF to replace the suite of profit based
covenants with cash based covenants and to reduce the RCF loan to
£17.5m with the interest rate maximum increased to 4.7% 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.
During the year the original
leverage covenant and interest cover covenant breaches were waived
for the quarters, 30th June 2023, 30 September 2023 and
31 December 2024.
Reconciliation of liabilities arising from financing
activities:
|
|
1 April
2023
|
Cash flows
|
Non-cash
changes
|
31 March
2024
|
|
|
£000s
|
£000s
|
£000s
|
£000s
|
|
Bank borrowings
|
10,381
|
3,250
|
95
|
13,726
|
|
Total liabilities from financing
activities
|
10,381
|
3,250
|
95
|
13,726
|
|
|
1 April
2022
|
Cash flows
|
Non-cash
changes
|
31 March
2023
|
|
|
£000s
|
£000s
|
£000s
|
£000s
|
|
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
|
The Directors consider the
carrying value of all financial liabilities to be equivalent to
their fair value.
21.
Share capital
|
|
31 March
2024
|
|
31 March
2023
|
|
Allotted
and issued
|
No.
|
|
No.
|
|
Ordinary
shares of £0.004 each
|
43,761,305
|
|
43,761,305
|
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 capital
Includes the Company's nominal share
capital.
Share premium
Includes all premiums received on
issue of share capital in excess of nominal value.
Share based payment reserve
Includes amounts recognised for the
fair value of share options in issue in accordance with IFRS 2 plus
the equity element of associated deferred tax asset
movements.
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.
In addition to CSOP share options,
unapproved share options have also been granted which do not
qualify for the tax exempt criteria. These are separately detailed
below.
Year ended 31st March 2024
|
Grant date
|
Vesting
Date
|
Exercise price
|
Balance brought forward
|
Granted during the year
|
Exercised during the year
|
Lapsed/ forfeited
|
Balance carried forward
|
|
21/11/2019
|
21/11/2021
|
1.12
|
370,806
|
-
|
-
|
-
|
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
|
14,456
|
-
|
-
|
-
|
14,456
|
|
16/11/2022
|
16/11/2025
|
2.58
|
34,950
|
-
|
-
|
-
|
34,950
|
|
|
|
|
680,677
|
-
|
-
|
-
|
680,677
|
|
Exercisable at the end of the
year
|
-
|
-
|
-
|
-
|
-
|
|
Weighted average exercise
price
|
2.50
|
-
|
-
|
-
|
2.50
|
Year ended 31st March 2023
|
Grant date
|
Vesting
Date
|
Exercise
price
|
Balance brought forward
|
Granted during the year
|
Exercised during the year
|
Lapsed/ forfeited
|
Balance carried 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
|
|
|
|
|
|
|
|
|
|
Options outstanding as at 31 March
2024 are exercisable at prices ranging between £1.12 and £4.65
(FY23 £1.12 and £4.65) and the weighted average contractual life of
the options outstanding at the reporting date is 67 months (FY23:
79 months) as analysed in the table below:
|
|
Number of
share
options
|
Weighted average remaining
contractual life (months)
|
|
Exercise price range
|
FY24
|
FY23
|
FY24
|
FY23
|
|
£1.12 - £1.99
|
370,806
|
370,806
|
63
|
75
|
|
£2.00 - £3.99
|
34,950
|
34,950
|
68
|
80
|
|
£4.00 - £4.65
|
274,921
|
274,921
|
104
|
116
|
|
|
680,677
|
680,677
|
67
|
79
|
|
|
|
|
|
|
|
|
Number of
share
options
|
Average exercise price
£
|
|
|
FY24
|
FY23
|
FY24
|
FY23
|
|
CSOP Options
|
168,938
|
168,938
|
3.01
|
3.01
|
|
Unapproved Options
|
511,739
|
511,739
|
2.32
|
2.32
|
|
Total
|
680,677
|
680,677
|
2.50
|
2.50
|
|
|
|
|
|
|
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. There were no
CSOP share options granted during the year ended 31 March
2024.
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 if 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 £0.004p 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 31st March 2024
|
Grant date
|
Vesting Date
|
Exercise price
|
Balance brought forward
|
Granted during the year
|
Exercised during the year
|
Lapsed/ forfeited
|
Balance carried 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
|
|
29/07/2022
|
29/07/2025
|
0.004
|
349,800
|
-
|
-
|
-
|
349,800
|
|
29/07/2022
|
29/07/2023
|
0.004
|
16,054
|
-
|
-
|
-
|
16,054
|
|
18/07/2023
|
18/07/2026
|
0.004
|
-
|
475,587
|
-
|
-
|
475,587
|
|
|
|
|
1,098,327
|
475,587
|
-
|
-
|
1,573,914
|
|
Weighted average exercise
price
|
0.004
|
0.004
|
-
|
-
|
0.004
|
Year ended 31st March 2023
|
Grant date
|
Vesting Date
|
Exercise price
|
Balance brought forward
|
Granted during the year
|
Exercised during the year
|
Lapsed/ forfeited
|
Balance carried 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
|
No options were exercised during
the period and no options were modified. The weighted average
remaining contractual life of these options is 13.7 months (FY23:
20.6 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
Monte-Carlo and Binomial simulation pricing models. 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
2024 and 31 March 2023 based on the information at the date of
grant:
|
Grant date of award
|
Share price at grant date
|
Exercise price
|
Expected volatility
|
Dividend yield
|
Risk-free interest rate
|
Fair value at grant date
|
|
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
|
|
18/07/2023
|
2.08
|
0.004
|
46.5%
|
0%
|
4.77%
|
0.64
|
|
|
|
|
|
|
|
|
LTIP awards granted during the year
ended 31 March 2024 are subject to the Earnings Per Share
performance, Strategy performance and share price
conditions.
2
Year Share Scheme
In FY24, the Company introduced a 2
year share scheme for the employees of the organisation (excluding
Directors). Share options are awarded at the end of each financial
year, following approval by the Remuneration Committee, and based
on an individual's performance. These share options vest after 2
years of continued good performance in the Company. Once vested,
the options can be exercised until 10 years from the grant date.
The options are equity settled. The options were valued using a
Black Scholes model.
The following table summarises the
movements in 2 Year Share Scheme options during the
year:
Year ended 31st March 2024
|
Grant date
|
Vesting Date
|
Exercise price
|
Balance brought forward
|
Granted during the year
|
Exercised during the year
|
Lapsed/ forfeited
|
Balance carried forward
|
|
29/06/2023
|
29/06/2025
|
0.004
|
-
|
87,167
|
-
|
-
|
87,167
|
|
|
|
|
-
|
87,167
|
-
|
-
|
87,167
|
|
Weighted average exercise
price
|
-
|
0.004
|
-
|
-
|
0.004
|
24. Retirement benefits
The Company operates a defined
contribution pension scheme for all qualifying employees. During
the year, the Company charged £99,669 (FY23: £82,774) as employer's
pension contributions. The outstanding pension creditor as at 31
March 2024 was £8,227 (FY23: £5,339).
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
2024
|
|
31 March
2023
|
|
|
£000s
|
|
£000s
|
|
Trade
receivables
|
26,596
|
|
22,100
|
|
Contract
assets
|
2,465
|
|
2,045
|
|
Cash and
cash equivalents
|
1,452
|
|
636
|
|
Total
|
30,513
|
|
24,781
|
Financial assets measured at fair
value through profit or loss comprise of investments;
|
|
31 March
2024
|
|
31 March
2023
|
|
|
£000s
|
|
£000s
|
|
Investments
|
40,196
|
|
36,462
|
|
Total
|
40,196
|
|
36,462
|
Financial liabilities
Financial liabilities measured at
amortised cost comprise of trade and other payables, bank loans,
and lease liabilities, as follows:
|
|
31 March
2024
|
|
31 March
2023
|
|
|
£000s
|
|
£000s
|
|
Trade and
other payables
|
17,669
|
|
12,936
|
|
Bank
loans
|
13,726
|
|
10,381
|
|
Total
|
31,395
|
|
23,317
|
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 2024
|
Level 1
|
Level 2
|
Level 3
|
|
|
£000s
|
£000s
|
£000s
|
|
Investments
|
-
|
-
|
40,196
|
|
Total
|
-
|
-
|
40,196
|
|
31st March
2023
|
Level 1
|
Level 2
|
Level 3
|
|
|
£000s
|
£000s
|
£000s
|
|
Investments
|
-
|
-
|
36,462
|
|
Total
|
-
|
-
|
36,462
|
26.
Cashflow information
(A) Non-cash adjustments to cashflows generated from
operations
|
|
31 March
2024
|
|
31 March
2023
|
|
|
£000s
|
|
£000s
|
|
Fair value movements
|
(2,112)
|
|
6,037
|
|
Legal costs on realised
cases
|
4,733
|
|
9,024
|
|
Finance expense
|
1,479
|
|
236
|
|
Depreciation &
amortisation
|
-
|
|
99
|
|
Share based payments
|
336
|
|
260
|
|
Deferred tax
|
-
|
|
(95)
|
|
Finance income
|
(16)
|
|
(7)
|
|
Non-cash adjustments to cashflows generated from
operations
|
4,420
|
|
15,554
|
(B) Net debt
|
|
31 March
2024
|
|
31 March
2023
|
|
|
£000s
|
|
£000s
|
|
Cash and cash
equivalents
|
1,452
|
|
636
|
|
Borrowings - repayable after one
year
|
(13,726)
|
|
(10,381)
|
|
Net debt
|
(12,274)
|
|
(9,745)
|
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
2024
|
|
31 March
2023
|
|
|
Debt
|
Interest
|
|
Debt
|
Interest
|
|
|
£000s
|
Rate
|
|
£000s
|
Rate
|
|
Floating rate borrowings
|
|
|
|
|
|
|
Bank loans
|
13,750
|
SONIA
and Margin of 4.7%
|
|
10,500
|
LIBOR
and Margin of 3.7%
|
Sensitivity to variable interest rates
Interest charged on the bank loan
is a variable rate and is therefore sensitive to the movements in
UK interest rates. Whilst interest rates have increased over the
last 12 months it is now expected that UK interest rates will
decrease over the next 12 months. The Company has considered
interest rate hedges but has decided not to purchase such an
instrument due to the high cost involved.
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
2024
|
|
31 March
2023
|
|
|
£000s
|
|
£000s
|
|
Bank
loans
|
3,750
|
|
14,500
|
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.
Bank covenants (leverage and
interest cover) were breached during FY24 and waivers were agreed
on each occasion. As such, Management agreed with HSBC a revised
set of covenants in March 2024 that were cash based measures rather
than the previous profit based measures.
|
At 31 March 2024
|
Less than one
year
|
Between 1 and 2
years
|
Between 2 and 5
years
|
Greater than 5
years
|
Total contractual
cashflows
|
Carrying amount of
liabilities
|
|
|
£000s
|
£000s
|
£000s
|
£000s
|
£000s
|
£000s
|
|
Trade and
other payables
|
9,622
|
2,686
|
4,310
|
1,170
|
17,788
|
17,669
|
|
Bank
borrowings
|
-
|
13,750
|
-
|
-
|
13,750
|
13,726
|
|
Total
|
9,622
|
16,436
|
4,310
|
1,170
|
31,538
|
31,395
|
|
At 31 March 2023
|
Less than one
year
|
Between 1 and 2
years
|
Between 2 and 5
years
|
Greater than 5
years
|
Total contractual
cashflows
|
Carrying amount of
liabilities
|
|
|
£000s
|
£000s
|
£000s
|
£000s
|
£000s
|
£000s
|
|
Trade and
other payables
|
6,435
|
1,856
|
4,451
|
3,906
|
16,648
|
12,936
|
|
Bank
borrowings
|
-
|
-
|
10,500
|
-
|
10,500
|
10,381
|
|
Total
|
6,435
|
1,856
|
14,951
|
3,906
|
27,148
|
23,317
|
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 £13.75m of a HSBC loan facility (FY23: £10.5m), the
total facility is a £17.5m 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
2024 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
2024
|
|
31 March
2023
|
|
|
£000s
|
|
£000s
|
|
Trade
receivables
|
26,596
|
|
22,100
|
|
Contract
asset
|
2,465
|
|
2,045
|
|
Cash and
cash equivalents
|
1,452
|
|
636
|
|
Total
maximum exposure
|
30,513
|
|
24,781
|
No expected credit loss ("ECL")
provision is raised against bank balances or against the contract
asset as management consider credit risk in both cases to be
immaterial.
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 £7.2m 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 the Company's total gross trade receivables segmented
by settlement type.
|
|
31 March
2024
|
|
31 March
2023
|
|
|
£000s
|
|
£000s
|
|
Settlement agreements
|
23,805
|
|
18,850
|
|
Judgements
|
4,629
|
|
5,044
|
|
Specific
provisions
|
4,507
|
|
2,881
|
|
Gross
carrying amount
|
32,941
|
|
26,775
|
|
Loss
allowance
|
(6,345)
|
|
(4,675)
|
|
Trade
receivables carrying amount
|
26,596
|
|
22,100
|
Analysis of trade receivables
stratified by settlement type, is as follows:
|
Past due at 31 March 2024
|
Current
£000s
|
0-1
months
£000s
|
1-3 months
£000s
|
3-6 months
£000s
|
6-12 months
£000s
|
>12 months
£000s
|
Total
£000s
|
|
Gross receivables
|
|
|
|
|
|
|
|
|
Settlement agreements
|
21,150
|
230
|
247
|
995
|
1,551
|
1,360
|
25,533
|
|
Judgements
|
910
|
3
|
76
|
42
|
4
|
6,373
|
7,408
|
|
Total
|
22,060
|
233
|
323
|
1,037
|
1,556
|
7,733
|
32,941
|
|
Loss allowance
|
|
|
|
|
|
|
|
|
Settlement agreements -
ECL
|
(281)
|
(7)
|
(15)
|
(28)
|
(80)
|
(111)
|
(522)
|
|
Judgements - ECL
|
(19)
|
-
|
(5)
|
(6)
|
(1)
|
(1,286)
|
(1,317)
|
|
Settlement agreements - Specific
provisions
|
(391)
|
(12)
|
(23)
|
(31)
|
(91)
|
(1,178)
|
(1,726)
|
|
Judgements - Specific
provisions
|
-
|
-
|
-
|
-
|
-
|
(2,780)
|
(2,780)
|
|
Total
|
(691)
|
(19)
|
(43)
|
(65)
|
(172)
|
(5,355)
|
(6,345)
|
|
Expected loss rate %
|
|
|
|
|
|
|
|
|
Settlement agreements
|
2%
|
3%
|
7%
|
13%
|
23%
|
36%
|
4%
|
|
Judgements*
|
28%
|
32%
|
32%
|
32%
|
32%
|
34%
|
38%
|
|
Specific provisions
|
100%
|
100%
|
100%
|
100%
|
100%
|
100%
|
100%
|
|
Total
|
4%
|
4%
|
13%
|
16%
|
23%
|
34%
|
19%
|
*Expected
judgement loss rates are shown net of deductions where the Company
has secured charging orders over properties owned by the
debtors.
Expected credit loss ("ECL") rates
have been calculated with reference to past history of credit
losses within each ageing category. Management has sought to amend
the rates if there are known future macroeconomic events that may
alter those historical rates.
In respect of certain aged debtors,
the Company may hold restrictions on a defendant's property sales
and a charge over a defendant's property. Where significant assets
are held by a defendant the Company may choose to not fully write
down the exposure of an aged debtor.
Judgements are handed down by a
judge and are imposed on a defendant, the adversarial nature of the
arrangement results in these balances being more difficult to
collect, often requiring the forced sale of a defendant's asset
which can take time to achieve.
The Company fully writes off an aged
debtor when it believes that there are no prospects of
recovery.
Credit risk on cash and cash
equivalents is considered to be very low as the Company's banks
hold Fitch credit ratings of A or above.
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 £40.2m
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 (excluding Cartel cases) would result in an
increase/(decrease) in the fair value investment of +/-
£0.9m.
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 £nil were paid to the
directors during the year based on their individual shareholdings
disclosed in the Remuneration Committee report as
follows:
|
|
31 March 2024
£000s
|
31 March
2023
£000s
|
|
Steven Cooklin
|
-
|
34
|
|
Lord Howard Leigh
|
-
|
1
|
|
Mena Halton
|
-
|
1
|
|
Total dividends paid to the directors
|
-
|
36
|
29.
Ultimate controlling party
The Company has no ultimate
controlling party.