Cooklin: Market picture has completely changed
Listed insolvency litigation funder Manolete said it was enjoying “the most attractive trading conditions” since the business was formed in 2009 as it announced strong financial results.
However, its share price dropped by nearly 10%, which may reflect the decision not to pay a dividend.
Chief executive Steven Cooklin said that, since the “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”.
He explained: “Significantly higher prevalent interest rates, heightened concerns over geo-political conflicts in Eastern Europe and the Middle East and the withdrawal of the large-scale 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.”
However, the first wave of insolvencies after the withdrawal of Covid support has “predominantly been the smaller and weaker ‘zombie’ companies”, and 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.”
The results for the year to 31 March 2024 confirmed the trading update issued in May, with 311 new case investments, an increase of 18%.
Manolete completed a record 251 cases, 30% more than in the previous year, with an average duration per case falling by more than two months to 13.2 months. They generated a money multiple of 1.9x and internal rate of return of 131%.
Realised revenues on completed cases were £24m, a 10% fall compared to the previous year because that included one exceptionally large case. Without it, realised revenues were 11% higher.
It received 733 new case enquiries in the year, a 6% rise, and generally converts around 29% of enquiries into signed cases.
Manolete usually buys cases via assignment but will on occasion fund the insolvency practitioner to purse the claim. “It is very rare that an office holder ever rejects an offer of investment,” the company said.
The first five months of the current financial year have been “buoyant”, with new case enquiries running 22% ahead of the previous year and its in-house legal team already completing 116 cases with an aggregate value of £11.8m, compared to 93 cases worth £6.3m at the same stage last year.
Chairman Lord Leigh said: “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…
“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.”
However, the board decided not to award a dividend. “The priority of the company is to retain cash reserves for investment in current and future cases,” Lord Leigh said.
Manolete’s share price ended 2023 39% down from the start at 155p, and fell as low as 110p in March. It was down nearly 10% to 131p yesterday.
Leave a Comment