Manolete Partners Plc (MANO) Earnings Call Transcript
June 26, 2025
Earnings Call Speaker Segments
Good afternoon, and welcome to the Manolete Partners plc Full Year Results Investor Presentation. [Operator Instructions] Before we begin, I would like to submit the following poll. And I would now like to hand you over to CEO, Steven Cooklin. Good afternoon to you, sir.
Good afternoon, Alex. Thank you very much indeed. Welcome, everyone. I know it's a very busy time for results season at the moment. So really very grateful for the 80-plus people that have joined us today. That's magnificent. Those who haven't met me before, Steven Cooklin, I founded the business in 2008. originally qualified as an ACA chartered accountant with Coopers and Lybrand back in 1991. That seems like a very long time ago. I then spent 20 years in corporate finance, various big and small investment banks. And then I started this business, as I said, in 2008. And I'm joined today by Rachel Lindley -- Lindley-Janes, sorry, Interim Head of Finance. Rachel, do you want to introduce yourself?
Hi, I'm Rachel Lindley-Janes. I've been with Manolete for about 4 years now, previously as Associate Director of Finance. Before that, I've worked in PLCs, U.S. owner-managed and owner-managed businesses, and I qualified in audit with Grant Thornton.
Wonderful. Thanks, Rachel. You'll hear more from Rachel a little bit later. I will jump straight in. So I know a lot of you will know about Manolete, so I will go through the background for those who don't, but I'll do it at a fair clip. We are in the sector of litigation funding, litigation finance. There is one big difference between Manolete and our listed peer group and in fact, our private peer group is that we buy the claims. And so we are the claimant that gives us full control over cost budgets, settlements, whether to issue proceedings, whether to appeal proceedings, everything. It's our asset, if you like. And it's only in the world of insolvency that one can own a claim that you weren't originally involved in. So that's our kind of unique spot, and that's really why we have stayed within insolvency only because we do like the control dynamics. So we've been around for 16 years now, invested in over 1,600 U.K. insolvency claims and completed a very high percentage of those, 1,200, generating case settlements of GBP 166 million. As you'll see a little bit later, the returns on our investments, they're very granular, as you can see, over hundreds of cases are very consistently high. The U.K. insolvency market. So this is going back to the year 2000 and up to the current date. This is from the insolvency service who publish these stats every month. So in normal times, there are around 1,200 company insolvencies every month. You see the spike there in 2008, 2009. That, of course, was a great financial crash, Lehman Brothers, et cetera, huge spike. Then it settled down as you move into the teens, 2015, et cetera, to back to, again, 1,200. It then drops off very, very sharply in March, April 2020, which was when COVID hit globally and of course, in the U.K. And what the government did at the time was pass emergency legislation to protect mass unemployment, frankly, by suspending many of the key insolvency laws and regulations. And that lasted for a good 2 years. And of course, government had also put a huge amount of liquidity into the U.K. economy during that COVID period, again, to keep people afloat. So it's about GBP 700 billion got injected into U.K. corporate space. Once we reach April '22, COVID is over, the insolvency laws return to normal and the government completely turns off the tap of this free money, very cheap money going into the market. And the number of company insolvencies rise very, very sharply, driven principally by creditors voluntary liquidations, which is really better described as the owner managers of the company saying that's enough. We need to liquidate the company now. And that typically -- although it's very much the biggest part of the total insolvency market, these are the smaller and medium-sized companies. When it comes to the larger companies, they tend to go through an administration process. So you can see in the yellow on this chart, administrations also went through a record low level during COVID. They have recovered now to pre-COVID levels, but nowhere near as sharply as the creditors voluntary liquidations. The leaders in this market are the very, very brilliant firm called FRP. They're also listed by name. They are by far the leaders in administrations. And they reported, I think it's about 9 months a year ago that the number of administration appointments was down about 50%. I'm sure they've recovered strongly since then. But as you can see, there's been quite a lag of these larger companies coming back into our insolvency market. The reason for that is that larger companies have bigger balance sheets, bigger options to raise equity, bigger options to restructure debt. And therefore, it was a weaker smaller companies that fell over first. When you look at the insolvency litigation market, the pie chart here, that represents a market value annually of about GBP 500 million to GBP 750 million of litigation claims. If you go back 16 years before we arrived on the scene, that would have all been blue. It would have all been law firms acting on a no win, no fee for the insolvency practitioner. So the way that worked was that while the case was going on, the law firm would not charge any cost to the IP. But if any recovery was made, they would charge double in broad terms. We then came to market with our model. And as you can see, the litigation finance piece of the pie is now up to 20%, 25%. And of that, Manolete of the yellow piece of the pie, Manolete is by far the dominant #1 company at 67% of the yellow segment. The market opportunity is to turn all of the blue yellow. We listed in December 2018. What we did primarily with the IPO proceeds was to build our own in-house regional network covering everywhere from Edinburgh in the North to Bristol to Manchester to Leeds to Newcastle, Cambridge and then down to Exeter and Brighton. And this has been absolutely key. These are partner-level employees joining us from law firms where they've been practicing for often years and years and years, even decades. And they were tended to be the go-to person in Exeter or the go-to person in the Midlands. And now they're for us. And so when they join us, they have amazing contacts to bring to the party. The mix of cases, again, I think this is what differentiates us again from our peer group is it's really the same 7 case types day in, day out, month in, month out. They're listed there. And as you can see at the table at the bottom, 99% of the cases that we purchased -- that we invested in, in this current -- FY '25, 99% were purchased and just 1% were funded. Now the reason for the small residue of funded cases, they will almost certainly be personal bankruptcy cases. So we can't buy those, at least not yet. So we fund those, but the purchase cases, the 281 are corporate cases. Very briefly, how does insolvency happen? Company gets declared insolvent by the directors or the creditors at petitions have it wound up, for example, HMRC, you haven't paid your taxes for 2 years. We've had enough. We want to appoint a liquidator and a court appoints the liquidator. But it could be that the CVLs, as we saw earlier, it's usually the directors appointing the liquidators. And you see they will do that hoping that the liquidators will not give them a hard time on any claims against the directors. Happily, in the U.K., we have an outstanding and very ethical insolvency practitioner industry, and they do a fine, fine job. So an IP gets appointed one way or the other. But the thing is there's no money usually left in the coffers in the bank account whatsoever. And the IP, the insolvency practitioner is acting usually with personal liability. So when it comes to litigation and most of these IPs are not lawyers, there's a huge amount of risk that they're taking if they proceed with litigation. So having since 16 years ago, the opportunity to assign the case to us, sell it to us for us to then give them complete coverage on any risk, but then share the net proceeds roughly 50-50 is a dream come true for the IPs. And in fact, when I first started this back in 2008, many said to me, where have you been we needed you 30 years ago. So we then purchase a claim. We then drive every single stage of the claim. We are setting the fees at every single stage. The strategy is all ours. Shall we issue the claim? Shall we offer settlement to the other side? When the other side bank us an offer, do we take it? Don't we take it? What do we count our offer? That's all in our hands. And it's only an insolvency where you can do that. In the funder's world, solicitation, capital management, et cetera, the funder cannot make those decisions at all. If they try to interfere, it becomes unenforceable. So as I say, it's only an insolvency that you get around those problems. When new case inquiries come through to us, we turn around pretty quickly, either as accept or reject, we reject about 71% of cases that come through, not usually because of the merit of the case that actually we don't think the defendants have the means to pay anything. But we do accept about 30%. And when you look at the insolvency -- look at the litigation funding industry across the board, they tend to accept only 3% or 4% of the cases that come in. So our model is rather more efficient because it's the same type of cases repeating and repeating. If we were above certain LCM, we would also have a 96% rejection rate because you're moving from Argentina one day to Australia the next day to Poland the day after. And I think that's much more difficult than repeat cases in the U.K. jurisdiction. The cases tend to get settled within about a year on average. And if anyone's been through a legal case themselves before, personally, I'm divorced, it took about 2 or 3 years for that process to end, and it wasn't particularly disputed. So the law takes a long time usually. But in our world, it's fast, very, very fast and a year on average. Why? Because we own the claim, we approach the other side. We said, let's sit down. You don't want to pay legal fees in court nor do we let's sit down and do a deal before this all gets out of hand. And then typically, on average, we get paid the cash once you've legally completed it within about a year. Tends to be the bigger cases have got deeper pockets in insurance company behind them or very wealthy former investor managers, owner managers, and they can pay very quickly. It's actually the smaller cases where you've just got to give them time to pay because they've lost their company. Their lives are a bit all over the place. They've got a job now, and they'll need 6, 9, 12 months to pay. If they don't pay, we've got to charge over their house, got restrictions over their family residency, and we will collect on that if necessary. Happily, we are [indiscernible] of it, happy to do that. So if you remember the shape of the market curve, if I just very quickly go back here, where just in the last 1/3 of it, you've got normal, normal, normal, then it dips down because of COVID and then increases rapidly thereafter, much higher COVID. That's exactly what the same shape as our case referrals here. So when we listed the 138 cases, we've built the business up very quickly to 334 case referrals by H1 FY '21. Then COVID hit us, so a big decline in number of cases. That lasted 2 years. And since then, we have risen much higher numbers of cases than pre-COVID. And that's exactly reflected in our signed cases because we're rejecting 70%, 30% gets signed. I'd focus more on the right-hand side because that -- that graph excludes what could be a one-off factor of the Barclays bounce back loans. I'll come on to that in a minute. And completions are, again, very predictable on an average of about a year. On the left-hand side, you'll see that actually even during the COVID period, the in-house legal team was still collecting very, very well indeed. And that generates on the right-hand side, realized revenues from cases, which has been very strong indeed, and this year has been an all-time record. So the volumes have increased pretty much exponentially since we returned from COVID. What has been a very different story is the average size of completed cases because as I said earlier, it's the smaller cases post-COVID -- smaller companies, sorry, post-COVID that went first, the weakest die first. So most of our completions since the COVID period have been feeding off the smaller and medium-sized cases. So although the volume has been very much higher, leading to record realized revenues, the average per case has been about half of what it was when the market was normal pre-COVID. So when you look at that FY '19, the average per case that we were collecting was GBP 200,000. The average of the last couple of years has been half that. And this presents a massive opportunity for Manolete. And it's really just a natural evolution. As the market gets back to where it was pre-COVID, where administrations are back to normal levels, bigger liquidations are back to normal levels. But automatically, the case sizes that come into us will become bigger on average. So what should happen over the next 1, 2, 3, 4 years is that we will trend nicely back up to the pre-COVID norm of around GBP 200,000. And that will drop pretty directly to the bottom line profit because there won't be an incremental increase in costs at all. Rachel will pick up on that in a minute. Cash has been very much the headline of this year's results. There has been a 45% increase in our cash collections in this last financial year, which is really quite stunning when you think those were the cases that we were picking up towards the end of COVID. So that really is quite miraculous. The net cash, as Rachel will go through, has covered every single expense in the company, overheads, new case investments, interest, tax, leaving a surplus to reduce our net debt, but I won't steal Rachel's thunder on that. We'll come to that in a minute. Here's our, what we call our vintage table. Berth had started this, and we thought that's a jolly good idea. So we've copied them for many, many years now. So you'll see there 1,600 cases invested in and 75% completed. And you'll notice that all these years, all the way up to 2019, there are 0 cases outstanding. If you look at any other funder private or public, they will have cases going back for 5, 6, 7, 8, 9, 10 years. Not Manolete, we own the cases, we control it. And the returns are summarized here. Brief word on 2 specialist kind of subareas. One is the Barclays bounceback loan pilot. So this is where during COVID, the government offered small businesses a guaranteed bank loan. So the government guaranteed the repayment of that loan for up to GBP 50,000, most were GBP 50,000. And in at the start of COVID, the government guaranteed GBP 50 billion of these bounce back loans to small businesses. Unfortunately, there was a huge amount of fraud because it was self-certified by the companies, which was really asking the punishment. And so an awful lot of that has been written off. So already GBP 10.5 billion has gone from the government to the banks who lend the money under the government guarantee. And that's a huge amount of money when you think of the defense budget or the NHS or the education budget. So the banks have really been under pressure from the government to get the money back. So we were approached a couple of years ago by Barclays Bank, completely out of the blue, and they gave us a pilot scheme of around 100 cases to do. They told us that before they turn to us, their recovery rate on these fraudulent loans was less than a fraction of 1% using debt recovery firms or lawyers on no win, no fee, less than 0.1%. Our recovery rate in a nutshell was about 50%, which was absolutely shocking to them in a very, very nice way. So Barclays were over the moon. They told the British Business Bank. They told the Treasury just before the election last year. We met with all these people presented to them, and we were told in no uncertain terms that this our method would be recommended to whoever the next government will be on the 4th of July last year, obviously the Labour Party won. Tom Hayhoe was then appointed the Counter Fraud Commissioner by Rachel Reeves in December. Baroness Hallett is conducting a very thorough COVID-19 inquiry ongoing. But unfortunately, no one since the election has come to us. And the article here that we've summarized was in The Times yesterday, government dangerously flat-footed about recovering COVID fraud. And it's worth reading because the in-house, the civil servant efforts that they've used to try to recover money has just not worked. It's been [indiscernible] poor actually. So we will -- on the back of The Times article yesterday, we will be approaching ourselves, the government to remind them of what we have to offer. Brief on cartel cases, Background here, there were price fixing cartel proven to have operated between 1998 and 2011 by the manufacturers of 6-tonne weight of trucks throughout Europe. So companies like Renault, DAF, Daimler, blah, blah, blah, were all colluding on price fixing. And the first trial, the first wave, as they call it, went to trial in January 2023. BT and Royal Mail, obviously, they buy lease a lot of trucks. So they had a fantastic claim identical to ours and the judge awarded them the 5% overcharge and a very high cost recovery as well. Usually in our game, you're lucky to get 50%, 60% of your cost if you go to trial, but Royal Mail got 70% of its cost back and BT got 75% of their cost back. The second trial window, which we're hoping Manolete will be included in, has now been set down for September next year. And so that is the end game in sight for these defendants. They know that they have to pay. The only question is how much. And clearly, the first wave judgment was 5% of the amount you spent on trucks, plus interest as well, of course, which is over such a long period, a very large amount of money. So as we sit today, we've applied to go into the second wave. And so we are forging ahead with those 22 cases that we've purchased. And just so people know, we're talking big headline case numbers. People like Comet, they went bust. Manolete have bought all of Comet's claims for all the trucks that they bought over that capitalized period. CityLink, the delivery firm, we bought all of their trucks as well. Obviously, delivery firm uses an awful lot of trucks. So it's very, very different to all our core business, which is why we segregate them out because what we've done here is we didn't want to lead from the front as we always do because of the huge expense of these test cases. So we are piggybacking very much at the end of these cases because otherwise, it would cost us 5, 6, 7x as much. The end game is in sight September next year. And so unless we are given offers by the defendants to settle the cases and many, many settlements are taking place as we speak, then we will go into trial. Happily, I'm now going to hand over to Rachel, our Head of Finance.
Thank you, Steven. So I'm going to talk through some financial highlights, and then we will go through them in a bit more detail on the following slides. Total revenue for the year was up 16% to GBP 30.5 million, 97% of which was made up of realized revenue. That's the revenue from completed cases. That was up 22% year-on-year. This meant a 3% increase in our gross profit to GBP 10.4 million from GBP 10.1 million. Overheads stayed vaguely in line with where they were last year at GBP 7.5 million, showing that we are capable of monitoring and capturing these nicely for the business. We generated an EBIT of GBP 3 million, again, up on last year, 19% up due to these high number of comp and completions and control of our overheads. As Steven has already mentioned, the big story for us at the moment is the cash generation, which is exceptionally strong at GBP 15.2 million net cash from completed cases. And this has allowed us to reduce our net debt in the year from GBP 12.3 million to GBP 11.1 million. Next one, please. As mentioned, total revenue of GBP 30.5 million, which is shown in the graph of its -- how it is made up. 97%, as mentioned, is realized revenue with 3% being from unrealized revenue. This is the revenue -- the unrealized revenue is our movement on fair value applied cases, less the movement of the fair value to realized revenue once the case completes. Gross margin fell from 25% to 34%. This is due to an increase in legal spend, which is mainly inflationary purposes and the IP share of completions. Because our average case numbers have been smaller, IPs get... [Technical Difficulty]
Sorry, Rachel, you have frozen...
And GBP 2 million case roughly stay in line. As the average case completion increases, we expect our gross profit to improve in line with this. Overheads stayed in line with prior year, which, as mentioned, is due to our cost controls. We have a very good in-house legal team and good finance team, which keep on top of these regularly. The increase in EBIT is generated from strong completions in the year from -- which is -- and the positive unrealized revenue, which meant to a profit before tax of GBP 1...
Sorry, Rachel, we have just lost your audio there for a second. I'm just going to turn down your camera. Rachel, can I just check that you can hear me?
Yes, I can hear you.
Perfect. So we had -- we did just lose your audio there for a second. So I'm just going to keep your camera down. And Steven, I'll do the same now. Please continue.
Thank you, Alex. If we can go to next slide, please, Steven. So we've got -- on our balance sheet, we've got an increased value of our investments from GBP 40.2 million to GBP 41.4 million despite our live case numbers staying in line with last year. This represents an increase in the larger cases now starting to flow through. As Steven mentioned earlier, we're getting better value cases, which is then generating a higher asset for the company. Trade receivables increased from GBP 29.3 million to GBP 31.6 million. This has been generated through the strong level of case completions during the year, and I'll go into detail on trade receivables a little bit later on. is GBP 12.5 million compared to GBP 13.75 million last year. Due to our strong cash generated this year, we have been able to repay GBP 1.25 million of our RCF facility. And this has led, as mentioned, to a drawdown to a decrease in our net debt from GBP 12.3 million to GBP 11.1 million. So strong cash flow receipts of GBP 25.6 million. FY '23 for comparison include the singular completion with a gross receipt of GBP 9.5 million. If this was removed from FY '23 as a singular large cash receipt, cash receipts for FY '23 would have been GBP 17.2 million. This is important because I feel that it shows the increase in the gross receipts from the business and how we are performing overall on cash. Net cash from completed cases was at GBP 15.2 million. This has allowed us to organically fund all new case investments in the year, pay all our overheads and to repay some of our RCF facility. Trade receivables. So 59% of our trade receivables at the 31st of March 2025 were not due. This is due to the Manolete model. We are not like normal businesses with 30-day payment terms. A lot of our settlements are -- can be over several months. So as Steven said, normally 12 months is the average that we try to obtain cash settlements for. This helps to show that there is cash generation for the future years ahead in that 59% that is not due at the year-end. The small tail of overdue balances mainly relates to judgment cases. Judgment cases vary from our settled cases as the settled cases the defendant has agreed to pay a certain amount over a certain amount of time, while judgment is enforced upon the defendant. With these judgment cases, it is a bit more long-winded in collecting the funds. And this is -- we go about trying to collect these by doing things like obtaining charging orders over property, which can take a while to come out and therefore, they pay. And then with that, I will hand you back to Steven to talk about our current trading.
Wonderful. Thank you, Rachel. Alex, can I just check -- you can hear me?
We can hear you very clearly, Steven.
Wonderful. So important slide here, actually, current trading. So we've had a very strong start to the current financial year. So we've almost done a full quarter. We've already signed up 56 new investments in that quarter, which is 27% more than the same quarter last year. Again, year-to-date, of those new investments, 5 have had headline values in excess of GBP 1 million, which is what we refer to as the larger cases compared to 3 this time last year. The referrals remain very buoyant at record high levels. We're bringing in more lawyers into the legal team. Every new lawyer who joins Manolete can handle about 30, 35 cases once they're up to speed. So this will take us from 15 in-house lawyers to 18 by the time we get to September. The strategy has just not changed at all. We are after U.K. insolvency cases, high volume, but also increasingly higher value. The investment case in summary, we are the #1 in our sector. Unlike our peers, we buy the case, we control it completely, which is why they complete very fast. And for investors, obviously, that is incredibly important. We have significant expertise and nationwide coverage. We now have at Manolete, the largest group of in-house insolvency lawyers than any other company or partnership in the U.K. So we've got a bigger dedicated insolvency legal team than even the huge American/U.K.European law firms dedicated to insolvency. The market drivers for our business model are clearly very strong. Indeed, you cannot avoid hearing on a daily basis, the pain of interest rates, the cost of living crisis, taxes going up for companies. And this, while it's very, very difficult for the solvent world, clearly, it drives more insolvencies. So we are the clearing house, if you like, and solvency is a clearing house of capitalism, it's very good for us. The durations are remarkably short in the Mandalay model, again, because we own the cases. So in the world of law, 13.8 months on average to complete a case is nothing short of miraculous. They're usually on for years and years. I listened to the presentation by the date head of -- one of the heads of their insolvency business a few years ago. And using the old no win, no fee, and this gentleman said that it takes them about 5 years to collect any cash on what they're hugely built up with. As you've seen from what Rachel said, what I think is very interesting is the high operational leverage in the business. So even though we hit record numbers of cases, we hit a record realized revenue completed cases and record cash, the overheads went down, and that's because we're very much in control. We -- as we said this time last year, we had invested in new people ahead of this big spike in insolvencies. We fully expected that to happen, and that's why the operating costs are so low. If we then spike up again to -- sorry, to 400, 500 cases a year, we already have the capacity now to handle that on the people who are in the company. If we're going to go beyond that, let's say, something happens on the BDLs or something, we can scale that up very, very quickly. And the lawyers work for us. In private practice, they were partners. But actually, it's nothing like what these -- what you'll read in the papers, these new kids coming out of university being paid GBP 0.25 million at some massive London firm, a partner level remuneration is about GBP 100,000 in insolvency and the bonus will be maybe GBP 5,000 to GBP 10 -- so it's not just the wonderful work that they do with us, it's also very competitively remunerated. So we never have any problems ever hiring people. And then finally, what people can, I hope see now over years and years and years now that we've reported, our returns are very, very consistent. An IRR, which is the kind of acid test for any business of 130%. Well, I remember when I was a bad carrier back in corporate finance in the early '90s for PwC and Hill Samuel Investment Bank, we advised a lot of private equity and venture capital firms. And their rates of return per annum on a good investment would be about 20% to 25%. Manolete, 130%, I think, is unparalleled in my knowledge of the financial services industry. and long may that continue, of course. Alex, I'm going to hand back to you for Q&A.
Yes, of course. Thank you very much, Steven and Rachel, for your presentation this afternoon. [Operator Instructions] I would like to remind you that a recording of this presentation, along with a copy of the slides and the published Q&A can be accessed via investor dashboard. And Steven and Rachel, you can see we have received a number of pre-submitted questions as well as live questions. And Steven, if I may now hand back to kindly ask you to read out the questions where appropriate to do so, and I'll pick up from you at the end. Thank you.
Thank you, Alex. So I won't read the full question out because it's rather long, but let me try and summarize it. It's in relation to the cartel claims. As I said in the presentation, our strategy on these is the diametric opposite to our normal cases. So whereas our normal cases, we're pushing to get them settled very, very fast indeed, we're doing the opposite on these cartel claims. Why? Because we knew from past experience that these would be very high-cost cases to run. So we have piggybacked the really big companies and the really big law firms that they are using to fight the case of British Telecom, Royal Mail, the Road Haulage Association. They are at the cutting edge of these claims, identical claims to ours. They're spending millions and millions and millions. Our spend in the last year was GBP 300,000. So we think it's a very smart way to have operated these. And now the, the end is in sight September next year, if not settled before. So the question here was, how do you assess the firm's asset management performance with respect to the cartel claims? Well, please wait for the returns to come in. We cannot talk about the returns until they are done. This is highly commercially sensitive. I would just say watch this space. The second element of the question, BT and Royal Mail settled. Well, they didn't settle. They went to trial my end. So to your question, is it a mistake not to issue proceedings earlier? I've tried to explain it would have cost to us and our shareholders millions and millions and indeed, HSBC. Then the final element of this question, specifically, now that your hearing is being delayed by 12 months to 2026, are there serious efforts underway to settle? And again, this is incredibly commercially sensitive. So I'm afraid this is one area we're going to have to pass on talking about any prospective settlements. Moving on to the next question. strategic issue in relation to the share price. I suspect this is by the same person. So your former CFO, Mark Tavener suggested we can't control the share price. And the question says he was mistaken. Currently, you have headroom on your revolving credit facility. So what this is suggesting with the current low in the share price, should we not use our headroom on our RCF to buy back shares? And the short answer is this is a slightly naive question because, of course, in the revolving credit facility, HSBC have control over what we can use their money for. And clearly, buying back equity of the stock market is not allowed. So nice, easy answer. Next question, rather shorter company insolvencies in the U.K. have remained high relative to historic levels. At such levels, Manolete is clocking 1.6 PBT. How do you see profits to evolve in the coming years if it is expected to grow, what will be driving growth in profits? Very good question. So we've seen the volume come back in a very strong way. What we're now starting to see is the value, the size of the cases coming back. So even if the volume is even less than it was this last year, we fully expect the average value to trend up to close to what it was to its pre-COVID norm, which is GBP 200,000 per case, and that would effectively double our profits through the same effort in the same cost base. So it's a brilliant question. Thank you. The next one, a question about performance metrics around the ARRCC. So 2 questions, right? When do you expect the ARRCC to return to GBP 200,000 range? I haven't got a crystal ball. It is -- I've put in the presentation, if you look at the ARRCC slide, and I'll just read out the quote that I added because it's no point me saying, it will come back. What I do quote is what the insolvency service themselves said in their last report literally 2 days ago, I'll just read that out if I may. So they said the number of administrations in May -- so the bigger company cases in May 2025 was 28% higher than April '25 and 12% higher than May last year. In 2024, the number of administrations increased by 2% from 2023 and was slightly higher than annual total seen in 2015, 2019. Then the final sentence, numbers of administrations have continued to increase since 2022 from an 18-year annual low seen during the COVID pandemic. So those are the words of the government's insolvency service, they say it better than I can. As I say, it's in the slide, if you want to hear that, read that back again. The second part of the question, why do you continue to highlight record case numbers positive when reality, fewer large cases will be far more valuable with the greatest respect, this is a slightly naive question. Number one, the returns on the smaller cases are phenomenal. When you look at the IRRs, that's not just from 1 or 2 huge cases. That's from the whole panoply of granular hundreds of cases that we execute. And what's very important on this is if you're working, let's just randomly say the [indiscernible] office in Leeds and you're buying a director's loan account case of GBP 100,000, you're buying that and then you're buying a transaction undervalued for GBP 50,000, you're creating a very, very good level of engagement with that IP, you're delivering results to him, you're paying for that case upfront, and you're recovering money very, very well for him to then charge his own fees, her own fees. So when that same [indiscernible] IP in Leeds gets the GBP 5 million claim, the GBP 20 million claim, the GBP 30 million claim, Manolete is in a fantastic front-of-mind position for those big cases. So I hope that answers that. Next question, Manolete represents 70% of the third-party funders. So this means Manolete hasn't got a big room to grow. Again, people get this wrong every year. As I say, if you go back to the slide with the pie chart, yes, we're 67% of the yellow bit, but the yellow bit is just 20% of the whole. We're going after the whole. There's a former judge on our Board, Dr. Stephen Baister, he was the most senior insolvency judge for 17 years before he retired a few years ago. Once Stephen got his -- he's on our Board, as I say, once he got his head around our model, Stephen said to all of the Board members, well, it's obvious, isn't it? This is how all insolvency litigation should be done ethically and economically, correct. Next question, I think, is something new question. So Tom was appointed Corruption Commissioner actually in December to recruit GBP 7.6 billion. Initially, I expect to huge benefit from this placement with another load of new litigation. sadly, it hasn't happened. Absolutely right. In reality, isn't Hayhoe's job, it works one day for a 12-month contract that produced little end results or I'm being too pessimistic. Whoever has written this, I just don't know. We just don't know. As I've said, we had some really, really good meetings in June last year, days before the general election with really senior gatekeeper civil servants, BBB and others, and they were very positive. Unfortunately, we haven't been called yet, but I'm hoping that articles like the one yesterday in The Times that I highlighted during the presentation will encourage the government to reach out again. But as I say, we -- on the back of that Times article yesterday, we will be writing to the rev ministers ourselves. I won't read out the joke, but it's a decent joke. Q1, number of -- sorry, next question. Q1, number of employees doubled since 2020, but results do not reflect added value. Why? The size of the cases, the COVID, a suspension of our market for 2 years and the fact that the larger cases haven't come through. It says what are we as a Board going to do about restoring meaningful profits. Hopefully, I've explained that with the large cases and certainly the much higher volume of cases that we were seeing beforehand and the new additions to the team, of course. James E here. In your report published today, you said the competition's appeal window. So this is Times, secured positions. Yes, Right. So the question is, is it a formality that Manolete will be in the second wave? No, it isn't it. This is a very good question, James. Thank you. It isn't a formality. You have to apply. And for some reason, the defendants may object, there might have to be a hearing and then you're in the hands of a judge. Do I care? Is it that crucial for 2026 that we're in that second wave, if not the third wave, of course, after that? No, it isn't. Because first wave went completely against defendants. It was appealed by, I think, DAF in the Court of Appeal that failed completely the appeal. They appealed on, I think, at least 5 heads of terms, DAF. The Court of Appeal only allowed one of those to be heard, and they failed completely on that appeal. So even if Manolete is not in that second wave, when the second wave trial comes around, it supports the 5% overchrarge. It supports the interest claim back. It supports the very high level of cost reimbursement. These finance directors and shareholders and boards of these big companies, surely to goodness will see sense in putting an end to their own massive legal spend on defending the indefensible. Counting along. Why is it taking so long to get back to pre-COVID levels of average case sizes, slightly repetition. So I would hope I've answered that with the administrations coming back, that the piece that I read out from the insolvency service. James again, return on capital -- sorry, your return on capital is far higher than cost of capital. Why pay down the RCF instead why pay down instead of reinvesting in new claims? James, it's a balancing act between the 2. It's kind of flavor of the month in the city to be lowly geared. And then when things are booming, it's flavor of the month in the city to be highly geared. So we're trying to strike a sensible balance for the company, sensible balance for shareholders and of course, a sensible balance in our relationship with HSBC, which has been ongoing since 2017. They've been a fantastic partner to us all the way through. I'll take a few more scrolling down. Alex says, would you agree the business has failed to sustain high margin? So again, this is back to the case sizes. So let's just go through this, what Rachel said. If your average case size now is -- you're settling at GBP 100,000. So let's say, we bought that case for GBP 5,000. Let's say, out of GP 100, there's then GBP 80,000 left to split 50-50 with the IP. So the margin on that for Mandalay is only 400 on our investments of GBP 100,000. Now with the bigger cases coming through, let's say we settle one at GBP 3 million. Yes, the cost might be more, maybe GBP 200,000 would be typical estimate for that kind of thing. But Manolete then is taking a huge absolute number out of that claim as are the creditors. We are absolutely aligned -- so when they win more, we win more. There's a bigger cases coming through now. Don't read my words, read the insolvency services words, that should restore the margin very healthily back to where we were before. Last 2 or 3, if I may, Alex. Patrick, Note 25 of today's finals highlights GBP 595,000 paid Cavendish Corporate Finance for consultancy services, provide more color. Well, that's a very, very fair question. Thank you, Patrick. So we hope it's back to HSBC really. We've used Cavendish to source our debt financing ever since 2017. And they procured HSBC back then as a private company, that was before we IPO-ed. So that was a GBP 10 million RCF then. That RCF has increased and increased. We then on this most recent period, we asked Cavendish to do a much wider market testing on what we could get in the market. HSBC still came out as the most favorable, but Cavendish were kind of on risk because of that. We had to pay a higher fee, but we got a much better deal out of HSBC than we did for the previous last year with HSBC. So that comfortably covered the consultancy fee with Cavendish. But thank you for asking us. It's important. Last couple of questions. Do you plan on changing your accounting system to a more tax-friendly one? I don't understand what that means. I'll move on to the next one. Would the entry of new competitors paying lower prices for cases lower your ROI, Giro, yes, theoretically, but we've had people trying to compete with us. The most famous was just a few years ago, Rosenblatt Group plc listed on AIM. They set up a subsidiary to do litigation finance. They set up a product in that team called ISLERO. Now Manolete, the name, he's the name of the most famous bullfighter that's ever lived. Islero was the name of the bull who finally got the better of Manolete and killed him. So they named their product after the Manolete killer, Islero. But when it came to performing in the ring, things were rather different. After a year in business as a plc with plenty of money behind them, they had signed 1 insolvency claim, 1. Last year, we signed 290. They gave up having put a huge amount of effort into the chair practice. The business finally got sold off and they're not insolvency cases, I hasten to add on non-insolvency cases. Their first 3 results came through, and I think the aggregate losses of all 3 lost cases was over GBP 11 million. So Islero was a great -- people always used to ask me, exactly your excellent question, will competitors come in. It might look simple on the outside, but you've got to have a fabulous legal and finance team on your side to really execute the detail of the work we do. Finally, what will be the trigger for the share price to re-rate given all the positive KPIs in today's results announcement? Lionel, thank you. I think it's a very good question. I don't know is the answer. I've been disappointed. I mean, we listed at GBP 1.75. The business is manifold higher than that. Yes, the profits haven't gone back to where they were pre-COVID, but I think we've shown today that they are tracking very much back to that level, and I would hope beyond. Much better than pre-COVID is the cash underpinning of those results now. The GBP 25.6 million of gross, the GBP 15.2 million of net cash that we retain, and this is literally cash in our bank account. Our overheads about GBP 5 million, GBP 6 million, out of GBP 15 million, you get to GBP 9 million. Invest in new cases, GBP 7 2 million left over, pay down debt. So as this volume comes through, as the cases get bigger, we are out of the woods, I believe, now. And I hope that the markets will catch up with that in due course. But thank you all very much indeed, really excellent questions. Alex, back to you, please.
That's great, Steven. Thank you for addressing all those questions from investors today. And of course, the company can review questions submitted today, and we will publish those responses on the [indiscernible] Company platform. But Steven, before I redirect investors to provide you with their feedback, which are most particularly important to the company, could I please just ask you for a few closing comments to wrap up?
Yes. So very briefly, we had a very, very tough time during COVID, worse than I expected because I thought it'd be over much quicker. The government took the time, Johnson was saying it will be over in 3 months, we got a vaccine. that the insolvency laws will be put back where they were within a couple of months. It lasted for 2 years. Now that's not criticism of the previous government at all. It was the first time in 100 years that we've had a global pandemic. But we came out the other end of that. And I think from every perspective, numbers of cases, numbers of referrals, cash, we have shown how resilient this team has been. And we are now getting the dividend of COVID, which is a huge public debt, high interest rates and therefore, a lot of insolvencies. And when you look back at the last peak of insolvencies, the great financial crash from 2008, 2009 Lehman Brothers, those Lehman cases are still going through the courts today. So the litigation fallout from this challenging times this time around, spiking cases will reverberate for years. Thank you all very much again, and we look forward to your continued support. Thank you.
Thank you very much, Steven and Rachel, for updating investors today. Could I please ask investors not to close this session as you will now be automatically redirected to provide your feedback in order that the Board can better understand your views and expectations. This will only take a few moments to complete, and I'm sure will be greatly valued by the company. On behalf of the management team of Manolete Partners plc, we would like to thank you for attending today's presentation, and good afternoon to you all.
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