Manolete Partners (LSE:MANO) — Full Year Results 2022

0:00 Good afternoon, ladies and gentlemen, and welcome to the MANOLETE PARTNERS Full Year Results Investor Presentation. The Simply type in your questions and press send. The company may not be in a position to answer every question it receives during the meeting itself. However, company will review all questions submitted today and publish responses where it's appropriate to do so. Before we begin, we would like to submit the following poll, and I'm sure the company would be most grateful for your participation. And I'd now like to hand over to Stephen Cooklin, CEO. Good afternoon. Good afternoon. Thanks very much indeed. Good afternoon to everyone on the call. Thank you so much to so many of you for joining us. I have with me today our CFO, Mark Taverner.

0:49 Mark, could you just introduce yourself?

0:52 Yes. Hello, everyone. My name is Mark Taverner. I'm a chartered accountant. I've spent most of my career with Deloitte in the city working on within the corporate finance arena, and I've been with MANOLETE for the last three years. Thank you. Super. Thanks, Mark. So turning to the next slide, just to remind people who are new to the company. We focus pretty much exclusively

1:25 attraction of insolvency claims, the claims in bust companies and bankrupt individuals, is you can almost always buy that case off the liquidator or off the administrator. You can't buy it off the trustee in bankruptcy. Maybe we can change the law on that in due course. But most of the far the majority of our claims are corporate claims. So you'll see at the bottom of that slide of the new investments done in this last financial year, 93% of them were duly purchased and just a small ramp of 7% were on a funded model. And the benefits of owning the claim is, of course, you have complete control. You can choose the timing of when you issue the letter for action, whether you want to offer mediation, attend mediation, make all the decisions at a mediation, and then whether to issue a claim through the courts, etcetera. So absolute full control, which is really, I think, a key differentiator between MANOLETE and all other public and almost all private third party funders.

2:35 But the addressable market is large in The UK alone. Professor Peter Walton has done several reports now, most of which were done for the trade body R3. We financed the latest one just for him to update his numbers. And that pointed to an addressable market of about GBP 1,500,000,000 a year in insolvency claims, of which about half that is recovered. Litigation funding, which is where we sit in that pie, accounts for about 20%. About three, four years ago, it's more like 10%. So the share of the funders is going up. And MANOLETE share of that funded share is 67%. So we're by far the market leader in this sector.

3:21 The next largest to us has just got a 2% share of that funded segment. So we're a pretty dominant position. The final point there is there were two very important legal changes that really expanded our opportunity in 2015. There was a Small Business Enterprise and Employment Act, which enabled us to buy not only the insolvent companies claims, for example, an unlawful dividend or, an overdrawn director's loan account. We were also now able from that date to buy insolvency practitioners claims which arise on the insolvency event. So, for example, a liquidator can go back six months and two years to raise new claims, to claw back transactions back for the benefit of creditors. So that was very favorable to us that we could buy those, not just fund those and take control of them. The other point was in 2016, the Jackson reforms applied to insolvency cases. They had applied to all other areas of the law in 2013.

4:28 It was applied to insolvency in 2016. And that made the incumbent majority method of of financing these claims, but it's no win, no fee CFA route allied with after the defense insurance very unattractive because from that moment on, any doubled up legal costs, any AT premiums had to be paid out of the damages recovered from the defendants. And the cost of those tended to be 200% the size of the damages. So it made a mockery really of the entire Insolvency Act because, of course, all the money just disappeared to the lawyers and the insurance companies, not to the creditors. MANOLETE's historic and current, and I'm sure future cost ratio did damages.

5:16 It's just 15% of the damages recovered. So it really was a very big breakthrough for our model. And there you can see the effects of the model in our so called vintages table, which tracks all seven fifty five cases that we backed, completed five zero five. And you'll see that the large majority of those cohorts of cases have been completed or have got literally one case left in them for the more recent years. And the returns you'll see have really jumped since the IPO in 2018. So they used to be around $4,000,000 $7,000,000 They're now up to $14,000,000 a year very consistently. 2021 last year, which is starting to mature, 57% completed, already $11,000,000 So when the other half completes, that should be obviously significantly higher than that.

6:09 And those are done in a very short period of time. Certainly, in the world of litigation, the average is just twelve months across all those five zero five cases, which is really unheard of in the legal world. And that is because we own the claim. We force resolution. We sit down with directors. We can we can end the pain for them and just say, look, if you can agree on a reasonable settlement with us today, that's it. Full and final settlement, and and you can crack on with your with your business life, and and we can move on with our other cases. And the returns are the best that I personally have seen in in the financial industry. I maybe put Bitcoin aside for a minute, which has somewhat high beta. But I remember when I was graduating in accountancy, the private equity industry spoke with great pride, rightly so, with 30% compound returns over, you know, seven year gestation period of a venture capital portfolio. But you look at MANOLACE returns year in, year out IRRs of well over 100%, which is just tremendous.

7:15 The next slide really just picks up the highlights that I've been talking through. We then look at the performance for financial year 2022, so ended March this year. And these really were, I would say, a historic anathema. During the last two years, we've had to operate in an extraordinary, almost wartime legislative conditions of the government legislating to suppress insolvencies in response to the COVID pandemic. So very understandably, the government wants to protect jobs, livelihoods. So they made it very, very difficult to make companies insolvent. So despite that, our realized revenues, if you were to strip off a one off very large case that we delivered last year, were actually marginally slightly ahead if you did that on a more like for like basis.

8:08 And certainly, in terms of the number of completed cases, they were even better than last year. And operating within a pandemic, I really take my head off to the team for producing those results. There you can see the split of realized and unrealized revenue. Good to see a very large portion always of realized revenue. As the book rebuilds now with more new cases, that will probably be more balanced to fifty-fifty because, of course, they'll be unrealized at least for a year while we're executing those, but we should then swing back to this kind of profile. And what was very interesting when Mark and I were analyzing the numbers is that the number of cases completed accelerated actually really very fast in the second half of the financial year, which is when really the whole of The UK was under the full grip of COVID operationally, and we increased the number of case completions by sixty seven percent. You can imagine the mediations and settlement meetings we were at with the directors and lawyers on the other side could have easily pointed to COVID reasons not to engage, not to settle, but they didn't. We forced the ball over the line and into the back of the net time and time again.

9:28 And that really translates into cash, not just from last year, but prior years as well, completed cases, cash coming through from those. So that really was the highlight for us this year, the very strong cash generation of the business.

9:41 The gross cash increased by 28% to a record 15,500,000 After you deduct the creditor's share and the legal costs, they increased by 31% to GBP 8,900,000.

9:57 So you can see the cash profile here. As we've always said, once we've completed the case, on average, there is about a twelve month payment period, mainly from the smaller cases. We had a very large settlement post year end of GBP 9,500,000 that was paid in less than three weeks in full. There was a case that we settled just last week for £700,000, and the payment plan on that is is just six weeks. And until they pay, there are restrictions that we have on their residential properties. And if they miss any payments, we stack demand. We then issue for bankruptcy. And sadly, if they still don't pay, we take a charge and move on their house and sell their house. Over the page, again, an interesting feature of the two halves of the year. The second half of the year saw 7172% of the cash received. So you'll see in, for example, October, over GBP 2,000,000 of cash coming into our accounts of cases, 3,500,000 December and then two again in February and March. So very, very strong cash engine being driven, not just by business use cases, as I say, the latency of prior year cases as well. And then the first ten weeks of the new financial year, we bought in GBP 12,500,000.

11:19 That was obviously the big GBP 9,500,000, but also another £3,000,000 from 109 separate granular cases. Looking cash, operating statements. This is the way I kind of look at things. I get rather confused nowadays with the statutory presentation of cash. So from a kind of businessman's perspective, if we look at FY 'twenty two, we bought in, as I said before, dollars 15,500,000. We paid out of that to the creditors, 5,800,000. 800,000 in legal costs that leaves a MANOLETE profit, if you like, of $8,900,000 Overheads cash overheads, 4,500,000 and then corporation tax, 800,000. So that was a net inflow.

12:04 The only thing missing is our investment in new cases, which obviously deliver these very strong returns. So that was 400% up on last year on a like for like cash basis. Attached on the government restrictions on the insolvency market, most of those came away reverted back to normal on the 10/01/2021. The remainder came away in March 2022. I think importantly, at the same time, was withdrawn and various other supports for rent and rates and what have you were also withdrawn. So we were getting back to a normal world, but having had numbers suppressed, of course, in terms of insolvency.

12:49 And then graphically, this is from the insolvency service. This data, they announce, their numbers every month, usually around mid month. Worth worth having a look is it is a very good early indicator of where our numbers will go. So you can see there in June 2020, the legislation was passed in an immediate sharp dive in the number of insolvencies of all types.

13:15 And then they slowly started to lift as people started to realize that the government would overturn these. They said they were going to several locations. And then finally, they did. In October 2021, the temporary measures started being lifted. And around that time, the number of insolvencies in The UK started reaching the same level as they were pre pandemic in overall terms. And certainly, CVLs, which is where we get most of our cases from, had even surpassed the pre pandemic levels before. And as you could see, the trajectory on the number of insolvencies is almost a vertical line in the last month as the full support measures were withdrawn.

14:01 And that clearly for MANOLETE, certainly not other parts of the economy, very sadly. But for MANOLETE, that really is a dramatic trajectory for our business in a very positive way.

14:13 And that starts to reflect now in our numbers. So there's always a time lag between an insolvency happening and then that turning into a case inquiry on this slide. So you can see where we peaked and how it dropped after the law change came through and how it's coming back strongly now. And I've added this next graph, which encapsulates the current quarter.

14:39 So you can see Q1 FY twenty twenty three, the numbers just to date. So we're missing ten days or so of the data for that last quarter. But the line of trajectory of the new case inquiries is rising strongly. The one interruption was Omicron, which just hampered the IPs and the lawyers referring cases in the last quarter of the year.

15:08 And then as we move down the life cycle of a case, this reflects into signed cases from MANOLETE. So there, you see a very strong increase in the years before sorry, leading on from IPO to the lockdown. The business increased something like 400% in those kind of two years, but then, of course, slowed down dramatically in response to the legislative change, but is now starting to move upwards again. And in fact, having had just seven cases signed up in April 2020, as the Omicron blew its now foul in our market, That jumped to 17 in May, and we're already at 17 in June. So that's getting back to pre pandemic levels for MANOLETE now as well, not just the market.

15:59 Our record number of cases in a month was twenty six. So we're going to start nibbling away at that before too long. So looking forward, well, no one has a crystal ball in this crazy world that we all live in at the moment with wars and COVID, etcetera. But I think across the board, almost all respected third party commentators on the market are predicting an elevated and elongated rise in the number of U. K. Insolvencies. And certainly, when you look at strikes, you look at inflation, you look at interest rates increasing in The U. S. A. And also in Europe and The U. K, I think we can all agree it only points to an elevated level of insolvency activity over the foreseeable future.

16:48 On cartel cases, we've kept the valuation of these cases unchanged for the last two years as COVID slowed down the Competition and Appeals Tribunal Court. That's all back on now. BT and Royal Mail, the two leading cases are currently being tried in the courts. The judge has stayed all other claims, which means he's put them in the freezer because he's suggesting once he makes his judgment on the level of overcharge and whether that should be reduced for any pass on, etcetera, what the interest should be should be, there should be a strong read across to, the many other similar claims, including R-twenty two claims that one can apply. And I think he's rather hoping that some sensible commercial settlement discussions will start at that stage. So we're expecting the trial to last nine weeks. We expect the judgment to come out within two or three months after that.

17:44 And that's when it will be fairly ripe territory for some grown up conversations to be had. We will certainly be issuing our claims. We now got everything ready for that, and things start to get very interesting there. The QC who's been advising us throughout this, a specialist from Moncton Chambers, one of the leading chambers for competition law, had previously advised us to well, the

18:11 focus had been on the two biggest MANOLE claims, which are CityLink and COMET. What he did advise us is that we should issue on all 22 claims. There was no reason why not, having seen the particulars of claims from BT and Royal Mail. So that's what we've done. So clearly, the valuation now reflects the 22 claims rather than just the two that we had before.

18:37 Close to wrapping up. So two additions to the board. I'll start with Andy at the bottom because this was previously announced, long standing partner at PLC, has joined us our Chair of Audit Committee, and he's built a very strong relationship with Mark, very quickly, which I'm delighted about. The new one that starts tomorrow is our long serving Head of Legal, Mina Halton, Phil and Mina Halton joins the Board

19:02 of MANOLETE. Mina has been with us for eight years. She's worked on literally hundreds of cases and delivered very strong returns for our shareholders. Delighted for her to join our Board. I'm going to hand over to Mark to control the slides. Great. Thank you very much, Stephen. So I'll run you through the financial statements. So as Stephen has already alluded to, in overall terms, FY 'twenty two was a challenging environment because of the unprecedented level of government support and delaying insolvencies. So with that background, we signed 159

19:39 new cases during the year, which was down on the previous year where we signed 198 new cases. We did, however, complete a record number of cases, 139 case completions compared to 135 in the previous year, which has really driven our cash generation you'll see in later slides. So looking at the profit and loss. We recorded gross revenue of GBP 20,400,000 in the year compared to £27,800,000 in the previous year. The prior year was boosted by a one off large case that completed at £9,300,000 So if you normalize for this case, you have a prior year realized revenue of GBP 15,100,000 prior year against GBP 15,200,000 this year, which is a more understandable comparison given the number of case completions.

20:36 Our unrealized revenue relates to the increase of our valuations on our ongoing cases, and the GBP 5,200,000 almost entirely relates to the uplift in our cartel the valuation of our cartel case as Stephen previously mentioned.

20:54 Our valuation now relates to all 22 of the cartel cases that we hold. This resulted in a gross margin of 51%, which compares favorably to last year's 48%. Overhead costs decreased by GBP 900,000 in the year compared to last year as we continue to manage costs carefully during the year. This all resulted in an EBIT of GBP 5,300,000 for the year compared to 7,400,000 in the previous year. If I could just draw your attention to the revenue composition in the bottom left hand side, This shows our realized revenue, so actual case completions versus unrealized, which is an amendment to valuation of ongoing cases.

21:39 So the vast proportion higher proportion of revenue relating to actual completions. So I'll just go on to the balance sheet on the next slide. So we've continued to build our portfolio of cases during FY 2022. And you'll see the investments balance where we hold the fair value of the live cases has increased during the year. So investment in cases, both noncurrent and current, was GBP 45,700,000 at the end of March twenty two compared to GBP 37,500,000 in the previous year. So the current balance relates to GBP $2.74 live cases compared to GBP $2.45 live cases in the previous year.

22:26 As I previously mentioned, the cartel cases is the long term investment, the GBP 12,200,000 figure that you see there. We hold trade receivables, both short term and long term, of GBP 20,500,000 at the year end compared to 18,400,000 in the previous year, so a small increase over the year. We held cash of GBP 2,200,000 at the year end, and our debt drawback down on our HSBC loan was GBP 13,500,000, which gave us 11,500,000 of unutilized core core facility. Post the year end, we have repaid 4,500,000 of the loan. As Steven mentioned, there was a large case that completed in in April, which gave us cash resources. So the the drawn down portion of HSBC loan as of today is 9,000,000.

23:19 Turning to the cash flow. So gross cash receipts in the year were GBP 15,500,000 compared to GBP 12,200,000 in the previous year. That's an increase of 28%, driven by both completions during the year and payment schedules of of prior year completions. We typically, on the smaller cases, agree scheduled payments for the defendant. So the the cash flow is is over a number of months. Cash flow from completed cases after payments to our insolvency practitioners and payments of legal fees, still a very healthy positive 8,900,000. Our overheads have increased slightly in the year, 4,500,000 compared to GBP 4,000,000 of the previous year.

24:09 And we've continued to invest in new cases and the existing portfolio, 6,500,000 was invested in cash during the year compared to GBP 5,900,000 in the previous year. Corporation tax payments were slightly lower due to the lower level of profits, and I've already mentioned the HSBC loan. Just looking at our aging of trade receivables balance, it's an area where we've had some interest in the past. I've cut the data in two ways. The aging by the settlement date of the agreement, which shows that 55% of debt is related to settlements that have been reached in the last six months, so very, very current. And then the second graph, the lower graph, aging by the due date. So this is taking into account the agreed phasing of the payments. And as you can see, the vast majority of our trade receivables are not are not yet due.

25:07 So that's quite a healthy profile there. Just to look at the cash collection. Again, just making this point that cash comes in gradually over a period of time. This graph shows for each month in the prior year of the realized revenue, what proportion of the cash have we already collected as at the year end?

25:30 So the dark proportion of the bar chart shows the proportion of cash received, and the lighter pink proportion of the bar graph shows the portion still to be collected, and that proportion will all come in really over the next twelve months. And the final slide, just to give an update on our HSBC loan. So as of June 2021, we extended our facility with HSBC to 25,000,000 for the core facility. Plus, we've got an additional uncommitted accordion facility for a further 10,000,000 if ever required. Our interest cost is a maximum of 2.9% above Sonja, which is the sterling overnight index average rate.

26:18 And as of this week, we've also just taken out a one year extension to the facility, So it now runs to June 2025. So that means we're well positioned to take advantage of the upcoming increase in insolvencies. Great. That's all for me. Back to you, Stephen. That's great. That's actually the end of the presentation. So if I hand back to our host just on the Q and A. That's great. Stephen, Mark, thank you very much indeed for updating investors this afternoon. Ladies and gentlemen, please do continue to submit your questions using the Q and A tab situated on the right hand corner of your screen. Just while Stephen and Mark take a few moments to review those questions submitted already, I'd like to remind you that recording of this presentation along with a copy of the slides and the published Q and A can be accessed via your Investor Meet company dashboard.

27:08 Steve and Mark, as you know, you received a number of questions ahead of today's event, and you've received quite a considerable number of questions throughout your presentation. So firstly, thank you to all of those investors for your engagement this afternoon. But perhaps if I may, Stephen and Mark, if I could hand back to you and to read out the questions, where appropriate, give a response, and I'll pick up from you at the end. Stephen, so just looking at the questions, Mark, I think I'm going to give you the first one from Robert. He said, why was there a 3,000,000 write down of cases in progress versus 1,000,000 in the prior year? I don't know whether that is just a movement out of unrealized and to realize or whether it's actually write downs as such. Mark, can you shed any light on that? Yes. So that's a combination of completions. So we take completions out of the investment out of the unrealized revenue category and put it into realized and and also so we have been cautious with our valuations.

28:06 So we whenever we think a case isn't progressing as well as we might have thought, we immediately write the case down slightly in terms of its valuation. So we're constantly kind of reviewing the valuation of the cases, And we have a kind of all company meeting every month then to check those valuations and go through on a case by case basis. Yes. And I think as the to answer the kind of indirect kind of element of that question, Robert, I think as the portfolio grows bigger and bigger, both in terms of transfers into completed cases and also conservative adjustments to any valuations because that's the way we like it to be.

28:53 There will there will always be cautious movements in that sector, but I wouldn't think of anything untoward. And I certainly can't I was recommending my brains as I was reading the question if there was any one, two or five cases that alarmed us and if that's just not the case. So I hope that's helpful. The next question is interesting one. Andrew asks, I realize you can't make detailed forecasts, but when do you expect to be running cash flow positive, including investments in new cases, I. E, when do you expect to be free cash flow positive? It's a fantastic question, Andrew. There are times during the year where we are hitting that. Mark's just mentioned that very recently, we have paid down, I think Mark said GBP 4,500,000 of our HSBC facility.

29:41 So obviously, that was excess cash above what we're investing at the moment. So that hopefully gives a small current data point. However, on a more consistent long term basis, I think it's a tricky question because I think having had insolvency cases suppressed so heavily by the government for the last two years, we are now looking at an environment of very, very large opportunity for MANOI, where it would be remiss of us not to invest heavily in high quality, high return cases. So I must say as a as the CEO, that will be my priority to harvest those opportunities now rather than looking to kind of, minimize investments to maximize shareholder distribution.

30:31 I think the thesis that we are running on is that now is a great time to be buying record numbers of cases to harvest 2.5 times those investments looking at historic rates in due course on those. And when I say in due course, that's usually one or two years down the track, which isn't long in the world of litigation. So I hope that's a helpful answer, but I can't be more precise about that. I think the other thing that could lead to a positive but more a one off outcome there is the completion of the cartel cases, whether that's calendar 2022, with that calendar 2023. That, if all goes to plan there, should deliver a one off outsized amount of cash, and we will have to look at how best to maximize shareholder return of that money when we see it in our account.

31:30 Moving on to the next one. Matthew R asked, what part does M and A play in your strategy moving forward? Excellent question. As I mentioned on the market shares, you've got the whole of the market, which is still dominated by the old and uneconomic way of this no win, no fee. It's still 80% of the use. But as we educate the market, the share of the funded slice moves up from 10% a few years ago to now 20%. Our mission is to transfer all of that market onto, frankly, the MANOLETE way of doing things. And the judge who sat on our board for the last three and a half years, Stephen Baster, when he and I sat down and discussed the the model in his early days, he's considered view having been the most senior insolvency judge in The UK for about seventeen years, his view was that all insolvency litigation should be done using our method.

32:26 So that's the mission. So the point of this to M and A is that our next largest competitor only has 2% of the funded sector of our market. So it really doesn't make any sense for us to tie up capital or shares in acquiring really rather marginal competitors in our market. There is so much organic growth to go for and that's what our money is spent on. We added two new very clever heads to our legal team in January and February this year. There will likely be more additions made later this year, but really very much an organic strategy moving forward. Robert asks, whilst you anticipated more cases due to the effect of COVID, do you now anticipate even further cases due to the effect of inflation distressing companies further ahead?

33:22 Well, do. And really, it's not directly inflation. It's, I think, interest rates. We've had a whole army of zombie companies that many accountants and lawyers have pointed to and politicians have pointed to suppressing the efficiency of The UK economy for the past ten, twelve, fifteen years. And these a zombie is a company that can only pay its interest. It can't ever pay its capital on its its balance sheet. So by interest rates going up, it's very likely it will tip a lot of these zombie companies, into liquidation. Frankly, I think that's a positive thing. These companies are not growth companies. They're not employing lots of new people. They're not paying lots of tax. So I think those assets being distributed to the stronger operators in their segments is the best thing for The UK.

34:16 David B, who I suspect I know, asked the carrying value of the cartel cases has increased substantially. Correct. Please can you explain the re rating assumptions? I hope I got that on the slide, David. So it's really two points in summary. Number one, having had these cases on our books for four years now and an awful lot of work done and over £1,000,000 spent on developing these cases, We are now reaching what could well be the end game with Royal Mail and BT trials now well underway. So that's point number one, and that has only started recently. Point number two is, the legal opinion from the QC and our solicitors that we should issue on all of our claims. We took a very, conservative view in the past and just pinned everything on our two biggest cases, CityLink and Comet.

35:06 Their view is that we the data we have and the claims we have in the other 20 companies, we should now issue on. And so obviously, evaluation is attributed to those. Mark, I suspect the next one is for you. So David M, revenues for the year just ended were 92 percent higher than they were in the full year to March 2018 of $10,600,000 However, latest profits are only 12% higher than they were back then, 3,200,000. The EBIT margin appears to have fallen steadily over the years. What do you expect the EBIT margin to be in the future, David Martin, long term holdup? Mark? Great. Thank you. I'm impressed that you've compared it back to 2018. There's no particular we don't foresee margins falling.

35:57 Expect them to hold very much around the levels that we're at. Back in 2018, there were so there were really so few cases that margins could fluctuate depending on one or two large cases, whereas in the last two years, it's been much more of a portfolio effect where you've got hundreds of cases. So the margins are evening out now around the 50% in terms of gross margin. So I think we've got a lot more stable environment than we had back then. Great. And certainly, in all the modeling you did with HSBC for the extension mark, I don't think we ever saw in the in the various scenarios any material decline in in gross margin coming out of That's right. That's right. Yeah. Yeah.

36:48 Yes. Moving on to the next one, David B. On a steady state basis, repeat steady state basis, what would you envisage the realized to unrealized split to revenue be? So again, a super question. I'm expecting having had last two years, very high level of realized to unrealized, I'm expecting as we now go into a period of many more case investment opportunities over the next year to eighteen months to two years. I expect that to be much more balanced over the short term. Medium term and then into steady state, as David's question asks, I think the natural steady state for MANLEY will be something like 75% to 80% of realized and 25% to 20% unrealized.

37:34 And there is not a huge amount of science to that answer. It's just what feels right as Mark was as I was I was pondering that question, Mark, while Mark was answering the other one. Don't Mark, I don't know what your feeling is this Yeah. No. I I think that's I think that's spot on. Obviously, as we grow, the unrealized proportion increases. Yeah. Exactly. So yeah. And I I imagine going going forward, we're gonna see the unrealized element grow again as as as number of cases increases. Yes. Agreed. Agreed. David b, again, how many litigation lawyers are employed and total staff numbers? So I believe we're up to 13 litigation lawyers in house. Total staff numbers, I think we're up to 24, Mark, if I've got that right. Yes. Yeah. Including the board, I think. Yes. Including the board.

38:27 Yes. Paul S, have MANO ever had any interest from large legal firms or other entities with regards to acquisition? As a shareholder, I'm looking to establish what long term goal is for MANO in terms of longevity valuation. Right. Let's get the takeover panel on the line. No, we haven't. If we had or we were in any discussions, I I you would see you would have seen an r and s about it. And, Paul, I do we're keeping giving these teachings by our by our nomad, of course, every year on on anything like this. So I won't dwell on this too long because it it it would be market and price sensitive. Please don't read anything untoward or, you know, unusually interested in that comment. It's it's just it's something that we shouldn't talk about.

39:17 James E, debt one for you, think, Mark. Debt is linked to Sonia, short term variable. In the inflationary environment in which we find ourselves, rates are climbing fast. Would it be preferable to lock in a fixed term rate to hedge against rate risk? Good question. I've been talking to HSBC about hedges actually. At the moment, we're happy with the Sonia rate. We are watching it carefully. HSBC have been very supportive of the business, and I'm sure they'll continue to be if we want to change into a kind of different interest rate arrangement. Agreed. Agreed. And it's very difficult, crystal ball.

40:04 Some people are thinking that this inflation will peak relatively soon. Others think it's more embedded into the system. So I think, as Mark says, a very close watching brief on that and what's best for the company, of course. Paul S. Asks, what is Methak's long term aim to the company? Are they in for the long term? Or do they have a valuation time horizon to begin selling down? Well, I'm delighted someone's asked me this. So in the conversations I've had with MITAC who have struck me as very intelligent operators and people probably know they've got a large position in at least one other litigation, a quality of litigation funder. They have told me that they are a very, very long term shareholder in the business.

40:52 And that really is the long and the short of it. There is no target price which they would trigger them. There's no target valuation. They're not looking us to be in some roll up with their other investments. Nothing of the sort. So I hope that helps there, Paul. Paul asked another question. How How big is the opportunity on working with HMRC, Fortunate Bounce Back Loan Claims, other government schemes abused during the COVID? Well, this really is the golden question, Paul. You win the prize. It is the big question. There are hundreds of thousands of bounce back loans out there already in default, many of which were raised fraudulently. And the value of those is around GBP 10,000,000,000.

41:40 Lord Agnew, the business minister, resigned on the back of this calamity, him saying that the banks didn't do enough to check that these were valid claims for these schemes. MANOLAY has already been collecting and completing and collecting the cash in on bounce back loans within the insolvent companies just in the normal course. There are now emerging opportunities for very high volume application of our model to this market. I can't say more than that at the moment. I'd say watch this space, but all sorts of fantastic opportunities. It kind of goes back to the answer actually to the when are you going to start having free cash flow after investment. Think because we're looking at these kind of opportunities, we just think in shareholder interest, it'd be right to deploy that cash into what could be very attractive pool of claims.

42:34 Rich, and I think towards the end, so James E, if the TAM is total addressable market is $1,500,000,000 the MANOLETE way, as opposed to no win, no fee, accounts for 20%. And MANOLETE is 67% of the business. That should reconcile to $200,000,000 I can't look at that. Okay. Yes, I worked the numbers this way as well, James. What it says on that slide, although the address book, the headline claim is accounted for 1,500,000,000 If look at the next sentence on the slide, it says that the what's actually recovered, which is the most important thing, is about half that amount. So that takes you to $750,000,000 If you then 20%, yes.

43:22 20% is a more current figure. I think if you flex that to I think when Walton did his report, please do, it's all online, please refer to I think he's got us the group of us at more like 15% of which MANOLETE is 65%. And I think that gets you close ish to our gross revenue numbers. And what you need to be careful there is to inflate up the funded cases because we only recognize our profit share in our revenue, not the gross recovery. So you've got to be careful you're dealing apples with apples there, James. Have a go at the numbers. If you can't get near and I remember our analyst at Pillhunt, we had all sorts of hair tearing up when Peter Alton was putting this together. We finally got comfortable with it. Please do drop me an email and we'll take you through our logic in a bit more detail.

44:11 Finally, Lionel says, what is the staffing capacity to handle additional and increasing cash flow? Great question. What would be the trigger for a share price re rate based on the growing cash flow that will come to that one second. So staffing capacity, as I said, 13 in house lawyers. They should all be capable of managing about 30 to 40 cases at any one time. We've currently got live at about two seventy five cases. So our capacity is more like 400. So for the next increase in volume that comes that is coming through as we speak, as you saw from the slides, there is no increase in overhead costs needed to manage that. That. Beyond 400 live cases, which would put us in a profit realm that we've never been before, much higher than pre pandemic because we were running at about, I think, 150 to 100 live cases at that time, and we're talking 400 live cases. So we would be in a very, very strong profit position at that stage if we reach if and when we reach that capacity. That's when we would start adding people. On the bounce back loan side, if we start seeing a high volume of the smaller value claims, which we believe we can make very good margins on, we will be staffing that up completely separately.

45:28 We have a completely separate in house plan for that. I'd like to keep that obviously between ourselves because that's rather proprietary. But yeah, to scale that business, it's a much lower cost legal brains going into that. One final one has just jumped in. Oh, sorry. I missed out what will trigger the share price rerate based on the growing caseload. Lionel, I don't know. I'm not in the market. I'm not in the minds of the analysts. I don't know what KPIs we're going have to hit for them to start increasing ratings of MANOLETE, and I'm sure you're a much better public market investor than I am. James E, finally, on this once a lifetime opportunity in place of MANOLETE on the back of the forthcoming title wave from this, obviously, means that the years of future growth can be brought forward.

46:18 Do you have the capacity and resource human and capital to capitalize on this opportunity to the full? Well, I hope I've answered the human resource capacity. On the finance side, yes, I do. Mark and I have spent a lot of time with auditors in terms of working capital and HSBC in terms of financial firepower. And under all our stretch scenarios, including very high volume uptick over the next twelve to twenty four months, we are well within our organic as well as our debt facilities and covenants, of course, critically. And I would just point you to the very high organic cash generation this last financial year and the fact in the first ten weeks of this financial year, we brought in more money than for the entirety of the FY 2020 year. So FY 2021 year, think it was a good one check myself.

47:16 So yes, the model is throwing off a lot of cash in and of itself. I add to that Mark's point about repaying a very large chunk of debt just very recently. So hopefully, that has covered all the questions. As ever, I think people understand our style, that we are contactable at any time. And those of you who do contact us, you usually get a response within twenty four hours. So the line is always open. I'll hand back to our host. That's great. Mark, Stephen, thank you very much indeed for updating investors this afternoon. Ladies and gentlemen, please do not close the session as we will now automatically redirect you for the opportunity to provide your feedback to so the company can better understand your views and expectations.

48:02 This will take a few moments to complete, but I'm sure will be highly valued and welcomed by the company. If I may, Steve and I, unless there's any further comments, I will then close the session unless you have, any other further comments. No. I I think we've covered a lot of ground with some super questions. So thank you very much indeed. Okay. That's perfect. Thank you once again, Stephen and Mark for your time. And as I said, ladies and gentlemen, we'll now redirect you for the opportunity to provide your feedback. On behalf of the management team of MANOLETE PARTNERS PLC, we'd like to thank you for attending today's presentation. That now concludes today's session. And thank you, and good afternoon to you all.