Manolete Partners (LSE:MANO) — Interim Results November 2024

0:01 Good afternoon, and welcome to the MANOLETE PARTNERS PLC interim results 2024 investor presentation. Throughout the quarter presentation, investors will be in listen only mode. Questions are encouraged and can be submitted at any time using the q and a tab situated in the right corner of your screen. Just simply type in your questions and press send. The company may not be in a position to answer every question it receives in the meeting itself. However, the company can review all the questions submitted today and pop responses where it's appropriate to do so. Before we begin, I'd like to submit the following poll. And I'd now like to hand you to CEO, Steven Cooklin. Good afternoon to you, sir.

0:32 Good afternoon, Alexandra. Good afternoon. Ladies and gents, thanks very much indeed for joining us once again. Just to remind people, we we did one of these not so long ago, maybe six, eight weeks ago. Forget exactly when. Because our annual results were delayed because of the change in an auditor. We bought a very big case off the insolvency side of their firm. So we will keep it fairly light touch today just because this really is a a kind of update to to what we presented just a short while ago. So for those who don't know me, Stephen Cooklin, chartered accountant, chief executive, and founder of the company, previously chartered accountant, qualifying with Coopers and Mybrand.

1:18 That was the old name for at least part of PLC. And then spent around twenty years in corporate finance and then started this business in 2009. Mark, do want just a brief intro? Yep. Hi.

1:34 I've probably met most of you. Mark Taverner, chartered accountant as well. Most of my career, I spent at Deloitte in transaction services and corporate finance, and I've been with MANOLETE for the past five years. Sweet. Thanks, Mark. That's the agenda for today.

1:54 You'll have seen this slide, many of you before. Very brief recap. We're over UK's the leading insolvency specialist and solvency litigation financing company. The big difference between ourselves and and the other listed companies and and indeed private companies in this space is that because we only do insolvency cases, about literally 99% of the cases we do, we own. So we actually we are the claimant. We bought it off the insolvent company or the liquidator or the administrator. And and that gives us unique control over that case because it's literally our case.

2:43 It is MANOLETE. If if they ever go to trial, it literally says MANOETE PARTNERS PLC versus Joe Bloggs. So we can choose the lawyers. We can set out the the key strategic steps of the case. We can make a settlement offer to the other side. We can respond to one from men, and we can fix costs as we always do with our solicitors and manage the whole thing through. The and insolvency is the only area of of English law where you can do this. We have a long track record of sixteen years. We have purchased a 100 and 1,500 cases, near enough.

3:29 We've completed just over a thousand of those with aggregate settlements, about a £152,000,000 off from those thousand completed cases. We are by far the the market leader. I should stress, and people do do get slightly confused on this point. The the this is a new way of doing well, it was sixteen years ago, a new way of doing insolvency claims, the the MANOLETE method, this assignment purchase method. Most insolvency practice practitioners still use the old method that is far less effective called the no win, no fee method along with some ATE expensive ATE insurance that may or may not respond to to to any cost claim.

4:25 But the funded part of this industry has been growing every year. So it's it's around 25, 30% of of the whole, and MANOLETE is by far the biggest 67% market leader of that third party funded element of the whole. But just a just a reminder that the the the growth comes from not taking share of other litigation funders. The next closest to us has only got 4% market share. It's it's from transitioning from the old method of doing this to the new. Now the trouble is in professional services, accounts that see tax insolvency, It takes time for for people to change the way they do things, relationships, etcetera.

5:15 But I think everyone is is is pretty convinced that that this is the maximum amount then for for the for the creditors. Just I'm just hearing a bit of a jingle if if if others could could mute their their their their microphones. That'd be helpful. Consistently, high returns, we'll come on to that in a in a minute on the vintages table. I'll get into that into more detail. So this is the very upset insolvency service graph published on their website, which shows that before the COVID pandemic, there are around 1,500 companies going insolvent in The UK every month. As you can see, there was a very sharp dip when when COVID hit The UK, and that was for two reasons. Number one, the government of the time suspended for a two year period many of the insolvency laws, so it's very difficult for creditors to push companies into insolvency.

6:21 And, also, of course, the government threw a huge amount of liquidity at The UK business sector, about 500,000,000,000, and and therefore, very strong decrease in in in insolvencies. When those in April 2022, that was a very big inflection point because the laws got back to normal and the government stopped throwing all that money at The UK business community. And since that time, the as the board anticipated, the the level of insolvencies has persisted at very, very high much higher levels than it was before the pandemic. I think we're what gives us confidence that that, if that's the right word, that that the levels will persist yet further in into the future, into the foreseeable future is is that coming out of the pandemic, the the business owners, business directors were faced with, obviously, very high interest rates. They now don't seem to be likely to come down quite as fast as people thought they would do a couple of months ago.

7:33 Inflation, very high, still supplier issues, global conflict, Ukraine and Gaza. And then I think more recently, the labor government, early days in in their tactics, obviously, to lead us to to Sunni planes, but clearly to to to address the black hole that they they said they identified of of 22,000,000,000. One of the main levers they they pulled there was a was an increase in employers' national insurance contributions. And some businesses, obviously, employ employee heavy businesses are are that's going to add to their challenges. And yes. So so we think we think the high level of insolvency will continue. Now, actually, before I move on to this is really being driven the total here is being driven by the creditors' voluntary liquidation. So this tends to be the route taken by most small and medium sized companies. So it was really that driving the total.

8:38 The green line here is basically the a proxy for administrations. Now administrations are kind of blown up here on the next graph here in the pink line. So these are larger companies. Now it took a lot longer for these large companies to to to to be affected by in insolvency and going to administration process. Why? Because they're bigger. They've got bigger balance sheets, and they've got more financing options available to them. And so these larger cases have not, until very recently returned to their levels pre pandemic. And they've certainly not as you can see, they've not whereas the the the smaller cases really went flying past very quickly where they were pre pandemic, the administrations have are kind of struggling to just even reach the pandemic. And and that is a very important point because before COVID, these were normal at a more normalized level, the administrations, and MANOLETE was taking its its fair share of of big case rep referrals.

9:55 And what in a nutshell has happened since the pandemic is we're getting a much higher volume of cases, but slowly that the profile, including our fair share of bigger cases, is is is only slowly starting to come through. We'll revisit that point in a minute. But looking at our KPIs, really, a very similar shape, you'll notice, I hope, when you look at the market because we are such a lead the the market leader, the shape of that graph, the kind of up, down, and then very strongly up and continue continuing up is really very much reflected in our KPIs. Strong strongly up since the IPO, almost tripled the the size of the business, sharply down as COVID hit in our in our f y '21, and then a strong increase to above pandemic levels in in a in a big way. This this excludes those kind of hundred plus cases that were referred to us on the Barclays BBL pilot. Again, I'll I'll talk about that in more detail in in a few slides.

11:13 Similarly, exactly the same shape again. So we really are mirroring that market, which went through this extraordinary artificial suppression by the by the by the government, but for very understandable reasons. Yeah. There would be mass, mass unemployment and social unrest in The UK if if they hadn't done that. So there's no criticism of them at all.

11:36 One side point, one anomaly brief anomaly in the first quarter of of of this financial year, We only signed 44 signed cases in in the quarter. Happily, this bounced back very strongly to almost double that in quarter two, resulting in a perfectly strong outturn for the half year. And October was was actually sensational. It was thirty one cases in a single month, which is very high. So the reason for the q one weakness is is very simple. There's always no limit to what's called members voluntary liquidations that occur in our q one, which is the April to to June part of of of our trading year.

12:28 And these are these are not insolvent liquidations. These are actually solvent liquidations. And so what the shareholders are doing there is liquidating their company, distributing the assets to the shareholders rather than the creditors, and really for tax planning purposes. And the reason why this was very exacerbated this year of all years was because everyone started to see that and appreciate that a general election was in the offing. And they were looking at the opinion polls, and it was looking more likely and more likely that the Labour Party would get in and worries about capital gains tax and inheritance tax, etcetera, started to come to the poor of people's minds.

13:15 So if if there were any any owners of farms who sold their farm, El Paso or Farman or the assets onto their family in May, June. They they beat Retro Reeves to the bunch. The key asset test is, of course, delivery and cash. We'll look at cash in a second, which is really the high point of highlight of of this set of results. So we settled a new record, a 137 case completions. That was 18% higher than than than last year. Record gross settlements, another record for the company of 13,900,000, and that is really a very impressive 51% higher than the 9,200,000 this time last year. And that those settlement proceeds, the aggregate from all those a 137 cases that, the the defendants have agreed on a legally binding basis to pay MANOLETE PARTNERS, gives us obviously excellent visibility for, near term, very yet very, much more, cash income, to come through on top of the, the cash we've already had in in the first half because most of the cash we get paid on average, we receive within the twelve months of settling, completing the case.

14:42 Because we've got restrictions on the defendant's properties, etcetera, very good enforcement if if anyone tries to to wriggle out of what they signed up to, that that that that we can pretty much take to the bank. We have started to see now a cons more consistently improving average realized revenue per completed case. So get to our revenue number, you've got the volume of cases we complete, the one through seven, multiplied by the average settlement value of each of those one through seven cases. Now pre pandemic, this was at 200,000 per case because we had those bigger administration cases in the profile that we were that we were taking on.

15:30 And as I've been a pain to point out in the first few few lines, those administrations have only just started to come back to those levels. But, happily, if you look at the trend of this arc, as we call it, the the average realized revenue per case. We've gone up from 81 in the first half of last year. At the year end, we we we had that up to, I think, ninety ninety three, if MANOY serves, and then a 109 at at the the end of this half year. So that's all going in the right direction. I won't dwell too much on the the rest of it. It's very easy to read and just a a lift off from the results you would have seen. Let's move on to cash generation.

16:21 I think this really was the the the period where anyone with any doubts about our ability of our model to generate a very, very significant cash at a time when cash is is is, of course, very strange for for many people and many companies. It is certainly this half year. On a gross basis, so this is the total money that a vendor's playing paying over. We now have six periods a one could go go back earlier, where we have constantly increasing on a compounded basis by 39% the the gross cash coming into the company's coffers MANOLETE's coffers. So a huge jump there. Mark will drill down into the percentages in a minute, but from 8.7 to to 14,300,000 in six months is is highly, highly impressive of business that, you know, a few half years ago was at four point two and six point two.

17:19 And has only just come out of that COVID suppression. This is really quite remarkable, and I I would hope business would agree. On a net basis, so this is taking that gross cash and just what MANOLETE keeps of it, which is their its cost that it's laid out to complete these cases and its profit share, which is usually fifty fifth excuse me. I'm suffering with the gold. $50.50 with the the the insolvent company of what remains, and usually, there were a lot remains. Costs are usually around 20% of of of of what was the gross was. So what's again, great to see that is is that the cases organically are now generating very much larger amounts of cash, and that's cash that that that that is organic and and kept by us.

18:12 That then covered very strongly every single penny of running the company for the six months. So even after paying for salaries and marketing and properties and rental rates and all the rest of it, we still had an excess of 4,400,000, which was terrific. And that's a fourth year fourth half year in a row where that track record is has been proven. And as Mark will take you through in a minute, that then covered all the costs of running the the new cases and buying the new cases and and then paying down some of the the net debt to HSBC on the ass. Yes. A lot of you would have seen this before. It's called the vintages vintage table. Very grateful to our cousins in America, Berthold, who who started doing this.

19:03 And we we just thought, well, that's that's great disclosure. Before we listed, we said we'll we'll we'll definitely copy that. And and so the highlights from this, as as you will see, a lot of cases of this is really are whereas other litigation funds are are are backing very big cases that, obviously, they don't control. They're just funding someone else. So they take, I think, I've been told, five years on average to to complete, and then they've got to enforce, get their money back sorry, get get their proceeds back. We we we turn them around in in just a year to legally complete them, and then within one more year to get all the cash in. So that's why you'll see there are zero cases not completed in all of these years. If you look at any other litigation funder who chooses to disclose this information, certainly not all of them do, you will see a number of cases going back five, six, seven, eight, nine, ten years. There's only one left in from the 2020 vintage.

20:10 And even the other vintages are are very

20:12 high completion rates at ninety four percent, 90%, even 23, seventy five percent even last year. Almost half of them have been completed. And, here we see the, the the very large, tens of millions coming through every single year, ditto the gains. And then, ditto, the durations are very, very fast. The return on investments are very consistent, on average, a 115%. The money multiples, so for every pound we we put in, we get on average two times 2.2 times back, which is incredibly high in the investment game, and IRRs of a 130%. So that's what's called internal rates of return. When I was a little nipper in corporate finance, the the venture capital and private equity industry was just starting really in The UK in the in the late eighties, early nineties.

21:08 And what was seen to be a very, very good return for investors over a seven year period from start to finish of of of of investing in private equity and venture capital was a 30% internal rate of return. And what you're seeing for you here is a 130% delivered over many, many years on a highly consistent basis across over a thousand cases. Very quick update on the BBL pilot, the the bounce back loan pilot that we've been doing with Barclays very successfully. So this has really been paused, as I said, just in the presentation a couple of months ago, because of the general election.

21:54 We got to the stage where we'd we'd done we completed around half the pilot cases. The results were stunning. Barclays told us very clearly that, before, on all the other methods they used to try and get recoveries on the these, defaulted bounce back bounce back loans, and Barclays were the biggest distributor of them in The UK. Their recovery rate was was was less than 0.1% of the bounce back loan, which is horrendous because the bounce back loan is our money. That's tax back money. MANOLETEs, within within just a few short months was was 60% and upwards. And so it it was just proven that it works really rather well. And these bounce back loans were really in our our zone of expertise.

22:44 We didn't even use expert lawyers to do them. They were we just we just used the the capacity within our internal legal team. So everyone's super super impressed with that. We had meetings with very, very senior really very senior gatekeepers of in the civil service. They they were delighted. The election got called in the middle of those discussions. We were told that they were that we we would be recommended to to the new minister, whoever it was. What we know from MAN is is only external facts. We've we've not been had anyone contact us as yet. But what Rachel Reeves has made very plain, very clear, very rightly, she has said that this is a major target area for the new labor government.

23:39 This is our money. This is hospital's budgets. This is defense budgets, and this is stop the votes budgets out of out of the public purse, and and it's a lot of money. The £51,000,000,000 of bounce back loans, already the government has had to pay in guarantees to the banks £8,000,000,000, and it rises every quarter. And unless the government is seen to be taking very strong action, a very effective action, that default rate will get higher and higher. And with a black hole of 22,000,000,000 and 40,000,000,000 in cash insurance contributions, this is really material, actually. So what Rachel Rachel Reeves said in her budget, not to us, in in her budget speech, which I listened to very closely about halfway through, she said she's very close to the appointment of a COVID corruption commissioner,

24:37 and she expected to to announce that really pretty soon. And and I think we'll we'll find out then whether there will be a role for for MANOLETE depending on, obviously, how how the new labor government want to try and recover this money for us or whether, you know, they they won't be, and we we just can't tell until someone contacts us. Again, an update on the cartel cases is really very, very much the same explanation as as one we gave just a few short weeks ago. We are in negotiations with with with with several parties. The one is particularly well advanced.

25:22 That's I I can't remember if I said that last time, but I'm happy to say it now. But, of course, there there is there's nothing to say until there are concrete results on these. But we will we will be making an announcement as we as we as we complete this if and when we complete these on settlements. If we don't if we can't reach settlements with any of these defendants, they're they know they're liable to pay. That that liability has been fully established. It's just how much. There are then cases that are identical to us, the British Telecom and Mobile test cases, and and and the defense have paid millions millions of pounds of very high cost levels to BT and Mobile. So they are defending the indefensible and spending a lot of money doing that. So let let's see how they want to progress it.

26:19 I'm gonna hand hand over to Mark. Mark, I'll give you control of the slides as well, if that's okay. That's great. Thank you, Steven. So this is just a quick summary of the results for the six months to 09/30/2024. Just to pull out a few highlights, realized revenue, which which is actual case completions and revenue generated from those completed cases, was 15,000,000. That's 60% higher than the same period last year where where we had 9,400,000 of of realized revenue. Gross cash generation, again, this is cash both our and the IP share from completed cases this year and cases that are still paying us from previous years was 14,300,000.

27:04 That's 63% higher than the same period last year. And just to pull out one more, net debt was 11,900,000 at the end of September, and that compares favorably to the 12,000,000 at the same point last year. I'll talk about that a little bit more on a later slide. So just to drill down into the profit and loss,

27:30 gross revenue was 14,400,000. This increased by 28% on the same period in in the prior year. As most of you know, our revenue split into two components, realized revenue and unrealized revenue. Realized revenue is the 15,000,000 I I just previously mentioned that was generated from a 137 case completions at an average revenue per case of a £109,000. Last year's comparison was 9,400,000 across a 116 case completions, which was an average of 81,000. So obviously, a considerable step up there in average revenue per case. The unrealized element of our revenue was negative no 600,000. This is a result of removal of high lev high value of completions whilst the new cases signed weren't quite of a high enough value to fully replace those completions in this six month period.

28:27 So overall, our gross margin was 30%. If you look at realized gross margin only, it was 33%, which is unchanged on the prior year on on obviously, based on much higher volumes this year.

28:42 Continuing down the profit and loss, overheads were 3,700,000 for the six months, which is 9% higher than the first half of last year. This is obviously a function of increased staff costs mainly mainly annuals annual salary increases and a higher bad debt charge this year itself as a function of higher debtor balances due to high completions. So this all results in an EBIT profit of naught 700,000 for the six months and a p bit PBT loss of naught 200,000 following interest charges of £843,000.

29:19 Onto the balance sheet. No significant changes really on the balance sheet. Just to point out, a portion of the cartel cases the investment in the cartel cases has been moved from the long term investment in cases to the short term investment in cases balance. This is just really a a reflection of our the expected completion date of a proportion of that cartel investment. Trade receivables are higher higher this year as previously mentioned. 29,300,000 if you look at both long and short term trade receivables. This is just a factor, obviously, of the higher value of completions in the year. Debt today has remained consistent with prior year. Net debt was 11,900,000 as previously mentioned, and this consisted of drawn down debt of 12,500,000 and positive cash balances of naught 600,000.

30:12 Hence, we have 5,000,000 of our 17,500,000 facility, which is unutilized. Onto the cash flow. And the cash flow was a was a record cash generation for for this six month period. Gross cash receipts of 14.3. I'm I'm going down that right hand column there in the table. Gross cash receipts of 14,300,000. Once we pay away the IPs share, that leaves us with 7,600,000. Pay our overheads, primarily salaries and other professional fees, that leaves 4,500,000. Then all the cash that we've invested on live and new cases was 3,300,000. So that still gave us a positive cash of 1,200,000.

30:59 And we we use this cash generation plus existing balances to pay down some finance finance costs. So we repaid 1,250,000 of the HSBC loan in the six months and paid naught 750,000 of interest. So 2,000,000 of finance outflows in total.

31:19 Final slide for me. Just to recap on the HSBC funding status. So we've got a 17,500,000 facility with HSBC, of which 12,500,000 is drawn down. Hence, 5,000,000 is is unutilized. All covenants have been met since the realignment of covenant covenants with cash metrics in March 2024. So that's three quarters so far.

31:45 Loan refinancing exercise is due to commence in January, and this is well ahead of a June 2025 expiry of the HSBC loan. We're also speaking to a few other potential lenders, but at a very early kind of indicative indicative stage. So I will hand back to you, Steven.

32:13 Am I muted? No. You're okay. I can hear you. Great. Yeah. So just a a quick wrap up before we go to q and a. You guys are the leading specialist in solvency litigation finance company. It's a unique model because we buy the claims, and it is because of our ownership of the claims uniquely that we are able to drive much, much faster returns than in the funding model. This is not to say that it's better or worse in the funding model because they are almost different industries. And I think someone like Michael Fred, Chris Bover at Burford would would pretty endorse that comment. Significant expertise. You do need expertise and in in in this in this area that is highly specialist.

33:03 There have been one or two companies that have tried to compete and fallen very fallen very foul. A number of you will remember the Islero Lionfish efforts by Rosenblatt law firm PLC, which folded their their their efforts very quickly. Think they said they've got one insolvency case in in a year. So there's a real moat around the business. There's also a brilliant team within the business. We have nationwide coverage. We have our people thoughts on our on our on our payroll from Edinburgh down to Southampton, Leeds, Newcastle, Manchester, Liverpool, etcetera. The board, I think, made the right calls as a whole. This is me claiming currently or Mark as a as a whole. I think we've we've read the situation well because you'll remember we told you that we were investing in new people, new heads, marketing ahead of what we thought would be a sustained period of of high levels of insolvencies.

34:04 That certainly has been borne out, and, we we do see that that is likely to, continue in the foreseeable future. Mark and I and and Mina, our managing director, have decided to start adding new heads to the legal team and the business development team. It again, because now we're selling the time to make hay. The short durations are, again, the the shortest in the industry. I don't think anyone would would challenge that. We have clearly, particularly this half year, filled out the picture for cash generation, which is really the acid test for any company in any industry, I think very, very well. It's been growing very strongly and now really was was at highly impressive levels in just a mere six months of this trading year.

34:59 Very high operational leverage at this point that actually I was just having a look at some of the questions, but we'll come back to one of the questions too. With the the team we all had already already have in place and been working for us for a good couple of years now, able to to to to manage upwards of, you know, 520,530 cases. We've got five hundred and thirteen thirteen live at the moment. So there's there's excellent redundancy in the infrastructure that we've built. And and so any new cases, any increased size of cases, as I was at Penns to try and explain a few few minutes ago, will basically drop very, very quickly to the bottom line. There are no incremental costs.

35:49 As I said, we might return to that to one of questions. And we've clearly demonstrated over over a very long number of years and over, you know, over a thousand cases now, very high investment returns in terms of return on investment, return on rates of return, money multiples, etcetera. I will hand back briefly to Alessandro while we have a look at the questions.

36:13 Thank you. Perfect, Steve and Mark. Thank you very much for presentation. Ladies and gentlemen, please do continue to submit your questions and you can do so just by using the q and a tab, which is situated on the top right hand corner of your screen. But just while the company take a few moments to view the questions that have been submitted today, 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 dashboard. As you can see, we have received a number of questions throughout today's presentation. So if I could hand back to you just to read out those questions and give responses to what is appropriate to do so, I'll pick up from you both at the end. Super. This is a very long question, and and I I don't think I'm there's no need to read it out, to be honest. It's it's basically it's perfectly a decent question on the cartel cases, truck cartel cases that we it's we've stayed it for a long time already.

37:02 We're we're getting into settlement negotiations is the question just just laying it all out. How much longer would you keep it there before you secure a settlement? And and because, of course, the longer you leave it, the the less the settlement's worth, I suppose, in net present value terms. Although, you know, interest does does run on these cases even in settlements. 99 times out of a 100, we will we will secure in in lost time cost of money. So would we push it forward with by issuing the the claims and and unfreezing these? Now there are a number of factors at play here. I'm not going to go into any detail on this because it would be pure folly. This is live litigation.

37:57 This is live negotiation. For all we know, if you're shareholders of ours, then, you know, DAF, Mercedes, They could they could have the they're their own people, their lawyers listening to everyone else watching the the recording that this company does very well indeed. So I I'm just gonna make one generic statement is is that we've been doing this on thousands of cases for sixteen years now. We will we will use everything in our power to secure the maximum returns for our shareholders. And all all that you mentioned is being considered all the time. Alexandra, I'm gonna delete this if that's okay because I've got very muddled last time. Is it is that okay?

38:44 I'll remove the months you've answered them. No. Oh, fine. Okay. Is it possible to calculate this is one for you, actually, Mark. So I'll let you read it out. Yeah. Okay. Is it possible to calculate IRR on cash out, cash in rather than a settlement basis, please? I I mean, our our IRRs are calculated on an industry standard and also that, historically, we want to be consistent on on on how we we how we we calculate them. So for each completed case, it is based on internal returns, I. Cash spent and then cash recovered, if that's what the question is is getting at. But we always define our calculations, and I think we'll we'll we'll leave them as they are. Yes. And and I believe they're consistent across those companies that Yeah. As much as one can tell.

39:44 So the next one is is a very good question. I'm glad it's come up because the ever since litigation funding has has has caught the eye of the investment world, there have been lots of debates about how one applies accounting policies and standards and disclosure to all of the listed companies and rightly so. There was a huge, long debate and a great big Ferrari, of course, with the the fair value debate, and we had companies like management holding very hard to the cash accounting and then moving over to to the fair value accounting way that Burford and and MANOLETE were doing it. Omni Bridgeway in Australia, I think they're they're still on the on more on the cash accounting side, but I I could be wrong. I did they're not listed in London.

40:42 So what you've got in our p and l and our cash flows, most of the time, the investment team community will get very frustrated because companies will show very strong profits but very low cash flow. So it's called a cash conversion rate, I think, between profits and cash. And that's usually the head scratch. Oh, yeah. And profits are great, but, you know, it should make the cash prove, you know, the real proof of the pudding. MANOLE is the opposite, and I will explain why that is. So I'll do this very simply as I can. I don't mean that in in any way demeaning by saying that. It's it's it's actually quite complex accounting with analysts earlier today.

41:28 And when the analyst sent me an email straight after, he said he said that was very well explained. None of us had understood that, and it landed very strongly. So I'm I'm gonna give exactly the same to you, ladies and gents here. So so we have the opposite with with MANO. We we've got a very, very strong cash profit this year. You know? And this is why it's kind of frustrating that we can't, you know, just dispense with all the accounting and just just be like a like a post office, just, you know, cash in, cash cash out in in the money box because we would be showing after expenses and profit of of of close to £5,000,000 in cash, and that's fantastic. What what what what, sadly, people will see is the failings of of accountancy profession towards litigation funding.

42:22 And the trouble is in our profit and loss account, there's what I call as a joke, and I'm gonna explain myself in in a minute, Einstein's theory of relativity applied to accounting. And what I mean by that, if if you remember with Einstein, he was always talking about a train going that way, and then you've got a kid standing on the train. The the kid jumps up, but the train's going that way, and then the kid, you know, lands on the train a lot further down. That is, as I understand it, the theory of relativity in in is in basic terms that I can understand it. And that's really what's going on with our p and l, which makes it really very unsatisfactory. And, frankly, I think the speed thing, but we are what we are. So the let's just go two two two big two big buckets. So all of our revenues in this period were actually realized, but there wouldn't know the inverted negative unrealized fair value. So so that makes it simple.

43:20 So what are the realized revenues saying to you? The the record 15,000,000 realized revenues. Once it over across a 137 cases, what that tells the reader is that that's what the team, the MANOETE team, the legal team, finance team, the network team were doing about one and a half years ago. They were buying those cases around then. 32. You know, I think the the duration was fifty fifteen months, something like that, Mark. Yeah. Fifteen months. So and those cases have been completed within the six months of this first half of this financial year. Okay? And that's why they are realized revenues. But that's what we were doing two years ago. Well, a year and a half ago.

44:08 So that's a revenue line is two years out of date in broad terms. We won't well, we we won't receive all of that cash for another year. So even the cash flow hasn't got benefits there, let alone the profit and loss account. So that's revenue start with costs. Every single cost in the p and l account is net is h one cost of of this of this financial year. The salaries, the the the the marketing, the the the rent for the for for the few offices we have, even the interest we've paid HSBC, even in the cash flows, the repayments, they are they're now they're they're they're today numbers.

44:56 The revenue in the way speed of light that we work at and in Einstein Einstein in terms was you're looking at you know, if you look at the sun, that's how the sun looked eight minutes ago. It takes eight minutes for for for the light ray to hit and reckon in your eye. That's what the revenues do. So you're you're not matching your revenues with your current cost. In fact, let's put it another way. You're putting your old economic activity, the revenues, with your current costs, and that's the simple fact of it. And that's why the p and l just does not show a fair in my view. And, clearly, it landed with the really quite a big room of analysts that we spoke to this morning.

45:45 And and I think that is right. So that is what it is. And and it's a brilliant question. Someone else also asked a very sim in fact, this very next one, Peter D, which explains can you see this is it? Significant rising costs, which which have risen much more than revenues. Now sorry. Oh, actually, sorry. A little more than I did. Sorry. This is this is slightly actually, Mark, do you want to look at this? Because this is more revenues and cost of sales. Yeah. This is different because cost of sales recognize when a case is completed. So your your completed your realized revenues and your cost of sales do match at the same time. And if you look at realized revenues against cost of sales, the gross margin is unchanged from from the same period last year. I think where where where it's making you look as if it's higher is because you've probably taken total revenue, so you've deducted the the negative unrealized revenue. So it it gives the impression that the cost of sales are are higher proportion.

46:51 But if you just look at realized revenue versus cost of sales, you'll see that the realized gross margin is is is pretty much unchanged at about 33%. Excellent answer, Mark. I would add one thing again just to broaden in cash terms. All of the costs in cost of sales, we've paid because we pay as the case is progressing, and that started fifteen months ago. Yeah? So all of that in cash was a negative in our cash flow fifteen months ago. The realized revenues, we've probably only collected because we've got a year to collect those on average. Probably only collected, you know, a third, half of those. So, again, for us to report such strong net cash is a a really fantastic milestone and a very great achievement for this company.

47:40 James e, I'm feeling this might be a glove you used to go to university with. Please help us understand how you think about constructing your portfolio of cases based on prior experience. Let me say clear. The large cartel cases have been awful for cash flows. You wait till the money comes in. Well, the small players continue to dispatch amount of OpEx. Yeah. Yeah. It's I'm not. So you said, yeah, how are you gonna optimize your portfolio in in when you reflect on how the past has been? I think in in in all fairness, James, you've picked really on two of the outlier edges of our portfolio. We've invested in 1,000 round round numbers, 1,500 cases.

48:29 22 of those were cases, shouldn't we? The small there's the any bulk of smaller cases was our pilot, stress pilot, which is a test bed with Barclays Bank and her majesty's government on bounce back loans, which was very exciting for us because all you shareholders, including me, including Mark, would have spawned a completely new, enormous £8,000,000,000 recovery business for free compared to the point in time when you bought your shares because it wasn't an option. It was gonna be, or still might be, a completely new and sub subsidiary joint venture, an awful lot of work was had been done behind the scenes of the I I hope it comes to pass. But, James, in answer to your question, those really have two outliers.

49:31 The vast bulk, the 95% of of the other 1,500 cases are really very standard. You know, they're they're bigger, smaller, medium, you know, whatever, of the same seven deadly sins that we call them the wrongful trading, directors over accounts, blah blah blah. So I will move on. That's okay. Mark h, why are you seeing Barclays Bank for breach of fiduciary duty when you do it on bounce back. Yeah. I've seen quite a few people kind of coming up with crazy conspiracy conspiracy theories about this on on some of the message board. Look. Bounce back then with with Barclays. And yes, we we we've got we've got a straightforward insolvency claim that we bought from an insolvency company insolvency company via a liquidator administrator. I can't remember who in this case. And we think that company had a claim and the creditors have got a claim via us.

50:33 We'll pay for everything against Barclays Bank. The fact that we're doing the BBLs with them doesn't change our thinking at all. We we sued a very big audit firm and took £9,500,000 off them. They refer cases to us. That's even closer because but ongoing. So, no, I've always kept the board has always kept. John Moulton, my, you know, very strong strategic shareholder, we've always been very, very passionate about keeping MANOLETE completely market neutral to enable us to do exactly these kind of things. So with we want to go for that audit firm. There is no special relationship with this. We've had law firms, listed law firms even coming to sit down with me for hours and hours and hours and and trying to come up with a special product that we could brand x PLC law firm and MANOLETE. No.

51:30 No. No. No. No. We work with every law firm. We work with every IP. And that's and that's else in great stead. And the same applies to the people we go after. Barclays, no one gets special treatment. I remember very good album back in the day called no one is innocent by a punk group in the late seventies, and that's certainly what I hear. Peter D has another one. If cash generation is so strong, why is net debt only down by point one? Well, the f one went from the last half year, Peter. At the last most recent time, dear chap, it was 12.3 going down to 11.9. So that's 400,000. Thank you. Moving on. Alexei, Haven't BBLs submit is up? Definitely. Yes. Great point.

52:20 I should have mentioned that. Given the most profitable years of principles time, bill over to be under yeah. No. No. Alex, sorry. I I think I've answered the first one, so I won't read it out. Could you sell part or if you're into yeah. Again, I Alex, I don't know what you do, but you could have a future in in in finance. You wanna drop me an email? No. You're thinking very well. These are this kind of stuff that, you know, Burford and people are really pushing the edge of could you syndicate? And Burford can have done this. I mean, it's a massive hats out of them on some of the cases, and and that's very exciting. I and I'll I'll I'll I'll say we did look at doing that very early on. We've got an offer from for another funder.

53:07 But I've got, again, to maximize shareholders value, We didn't go down that route. And please please do recall that I am, I think, still the fourth biggest shareholder in in in this company. So I will always do what's good for me, which equals what's good for you. I think you'll be happy to hear I'm on my last question, our last question. So interest awarded on damages is well below the IRR that you generate on claims. Yeah. Fair enough. But I I I James, e, it's you're absolutely right. It is, but it's not as though we are we're only losing the differential in the interest asset, correct way of of explaining it, and and quite honestly, interest at the margin.

53:53 So yeah. Yeah. I I don't think it's a hugely material. Alexandra, I think I think we've we we we're finished with great there were excellent questions, by the way. Very good. Thank you. Thank you very much for answering the questions from investors. Of course, the company can review all the questions submitted today, and we will publish those responses out on the investment company platform. But just before redirecting investors to provide you with their feedback, which is particularly important to you both in the company, Steven, could I just ask you for a few closing comments? Sure. Cash is king. There's a there's a saying by the book, you know, that that revenues, you know, flat or whatever profit is is alright, but cash is king. Marvin's Alan Marvin or South Africa is his name. And we've delivered we've delivered. I had a lot of institutional shareholders send me along the way. Look. I've got the idea. Love the way you're building the the business. Somebody sent me I remember they put me a mic on chat. Lovely chat who runs it.

54:51 They sent me Christmas cards. Well, that's same in business, Steve. But but, of course, as COVID hit, we were about to break through with the catch numbers that all these really smart guys wanted as a final piece in the in the jigsaw. And now we've done it. It really killed me that we put back on the on the canvas with COVID for for two years and more, but now we've done it. And long may it continue. And I know it's been a very rocky ride with COVID and and and share profits and all this and muddy waters and all this kind of stuff. But for winning, we're we're on for a calmer a pass ahead, and I think those graphs, those cash graphs show, we're doing the right thing. The team is doing the right thing. Thank you very much indeed, all of you.

55:39 Stephen, Mark, thank you once again for updating investors today. Can I please ask investors not to close this session as you now be automatically redirected to provide your feedback in order that the management team can better understand your views and expectations? This will then take a few moments to complete, which I'm sure will be greatly valued by the company. On behalf of management team of MANOLETE PARTNERS PLC, we'd like to thank you for attending today's presentation, and good afternoon to you all.