AIM-listed insolvency litigation finance firm Manolete (MANO:AIM), named after a famous bullfighter from Cordoba, delivered an impressive set of half-year results with a higher number of investments in new cases in the six months to the end of September than in the whole of the prior year.
Revenues for the first six months were up 15% to £7.5m while gross profits were up 50% to £6.6m. A total of 18 cases were completed or 'realised' in the period, up from 12 a year ago, generating £2.4m of gross proceeds. Despite this strong performance however, profit-taking sent the shares down 3.5% to 492p.
The average ‘money multiple’ on cases was 2.9 times invested capital in the first half. Put another way, return on invested capital was 193%, a level which is almost unheard of in any other business. Moreover, cases are closing within 11 months on average meaning Manolete’s returns on investment - and therefore cash flows - are more predictable than many other firms’.
Chief executive Steven Cooklin said he expects the record number of cases bought in the first half ‘to translate into higher levels of realised profits and significant new cash generation over the next six to twelve months’.
SMART MOVE
One of the key differentiating factors between Manolete and other litigation funding firms is that where possible Manolete purchases the entire claim from the claimant - which it refers to as an ‘investment’.
By owning the case, rather than just putting up the funding, Manolete can not only dictate the speed at which it proceeds but it is also uniquely positioned to dictate terms to the other party or parties and negotiate a settlement.
Another key differentiator, which Steven Cooklin refers to as ‘possibly the best business decision’ he ever made, is its investment over the last year or so in a regional network of ‘in-house’ insolvency lawyers.
Many of these new hires have made an immediate contribution by introducing new cases shortly after joining the firm. As a result, 90% of the 144 cases which are ‘live’ today were signed in the last 18 months.
A third differentiator relates to assumptions of fair value. In any case where the expected return is over £100,000, Manolete submits itself to external scrutiny by having the case independently reviewed so that it can’t be accused of ‘marking its own homework’.
As its newly-appointed chief finance officer Mark Taverner says, Manolete’s ‘extensive track record of rapidly converting unrealised into realised gains speaks to the robustness and accuracy of this important process’.
