Manolete Partners (LSE:MANO) — Investor Presentation

0:00 Good afternoon, and welcome to the MANOLETE PARTNERS PLC investor presentation. Throughout this recorded presentation, investors will be in listen only mode. Questions are encouraged and can be submitted anytime by the Q and A tab situated in the right hand 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 received during the meeting itself. However, the company will review all questions submitted today and publish responses where it is appropriate to do so. Before we begin, I'd like to submit the following poll. I'd now like to hand you over to Steven Cooklin, CEO. Good afternoon to you, sir. Good afternoon.

0:31 Thank you, and good afternoon to everyone on here. So speaking today, I'm Steven Cooklin, CEO, founder of the company. You'll be hearing later from Mark Tevra, our CFO.

0:46 Good review of the MANOLETE business model because it's a little bit different even from other litigation funders. So established in 2008, we we mainly buy claims rather than fund claims. And the focus is very much on the insolvency sector because that is where the only sector you you can buy claims from insolvent companies that can be run by administrators or liquidators, and we know all of them up and down The United Kingdom. What we then do once we've reviewed it and and passed through all our various checks, we pay an initial cash cash consideration upfront. We then pay the legal fees. We then get recovery.

1:34 We get back all those costs first, and then we split the remainder $50.50 with the consultant company. And then after the liquidators fees, legal fees that that the liquidator might have expended before we arrived on the scene, after they've been paid, then, of course, the creditors can be paid. The kind of claims we do are summarized here in the pie chart, and they're the same kind of claims day in, day out. So preferences where maybe a family member has been paid off before other creditors. You'll need to treat all creditors equally. So that's that's not allowed. Transaction undervalue. Sometimes the director owners of businesses will transfer the business out to a new new co a new company at, you know, a very low value and leave all the liabilities behind in the old co, the existing company.

2:35 So that's called transaction undervalue. Unlawful dividends if there aren't enough pretend profits within the business and they try to pay off their director's loan account with the dividend, that's unlawful. That's gotta be put back. So you can see a very broad spread all insolvency claims and insolvency legislation in The UK is is very good indeed. So in the last fourteen years, we've invested in over 1,200 of these claims and generated over a 124,000,000 of of settlements on a 100 803 cases. You then see in the bottom left the split between purchased and funded claims. So every other company listed and and most unlisted businesses, you'd have a 100% funded claims.

3:29 MANOLETE is very different, as I say, because we've been sold so you can buy them. So the completed cases, we had 91%, where we were in full control of it and owned the case and even 96% even higher in in of the new investments made this year. And the returns are very, very high. We'll come onto it more detail a bit later. But internal rates of return of over a 130%. When I was a corporate finance adviser looking at the private equity world, people thought their returns were very good, and they were at 25%. So three figure percentage returns is is really quite unusual. The value of the sector is very high. So there are around 2,000 cases per annum, which recover about £750,000,000 a year.

4:24 We we we either buy the company's claims or the liquidators claims, so that came through in 2015. The government saw what we were doing, wanted to widen the scope of what MANOLETE could do. And then the Jackson reforms came in in 2016 that made that old way, the no win, no fee way of running claims very unattractive for liquidators. So when you look at that pie chart, that used to be all blue. Everything used to be done using no window fee. If you'd looked at it seven years ago, maybe that yellow piece, the the third party funders, would have accounted for maybe 10%. It now accounts for about 20%. And of that 20%, MANOLETE is by far the biggest. So we are 67% of the of the that yellow slice, funding slice.

5:20 We have won the industry award five times. We are the only firm ranked in band one in the very highly thought of chambers died put together by the legal profession for three consecutive years with that only company there.

5:42 Then the main creditor who benefits from most of our work is actually us because it's HMRC. It's the public purse that's our taxes. Because directors, when the company's gonna go into liquidation, they will inevitably not pay their PAYE, not pay their VAT over. So HMRC tend to be the biggest creditor. Obviously, when we purchase a claim, we are on full control of it, and we can approach the other side to settle the claim. We can issue the claim through the courts. We can abort the claim if we don't like the look of it anymore. Whereas if you are funding someone else's claim, you can't do any of that. You would be interfering with the claim, and that would be unlawful.

6:29 So before COVID hit, there were about sixteen thousand UK corporate insolvencies. And as I said before, about 2,000 claims arose from those. Then COVID came, and the government changed the insolvency laws for a temporary period a couple of years, and said number of insolvencies went down to 11,000 because, of course, the company was trying to protect people from mass unemployment during COVID. Everything returned to normal in April 2022. And then after that, we were hit with high inflation, very high interest rates, high petrol prices, and, of course, war in The Middle East and Ukraine and a very challenging economic environment around the globe and particularly in The UK. And the number of UK insolvencies has now skyrocketed.

7:18 So as you see above, the norm was 16,000 PwC are estimating a record number of 25,000 this year. The previous record was in two thousand eight financial crisis, 24,000. And then people like Stephen Cork of Cork Gully think it might reach as high as twenty eight, thirty thousand. So whereas during COVID, we have a had a huge amount of headwinds extraordinarily stopping our progress, and now a lot of tailwinds are preparing us forward. And is this from the insolvency service itself. These are what's called creditors voluntary liquidations. It's most common way of directors bringing the companies into liquidation. As you see there, the green line shows when COVID hits in March 20, the number of liquidations went down very sharply and stayed down for a number of months and then has risen very, very exponentially higher and far higher than the level it was before COVID even started.

8:25 Pulling down into that a little bit, the CVLs, creditors, voluntary liquidations are by far the biggest bit of market. That's the dark blue on this chart. The other important element of this are the administrations, the yellow bits. These are the bigger companies and bigger companies. When I mean, when I say big, I mean, very big companies in terms of, Wilco and Paper Chase, you know, household names. They tend to go through the administration route. It has no difference to us at all. We can still buy the claims, fund the claims, and those but what's interesting is that the administrations, whether it's a creditors, voluntary liquidations, the smaller and medium sized companies have have gone way above where they were pre COVID. The bigger companies have only just got to the level of insolvency that they were experiencing pre COVID.

9:14 We expect that to now rise as the kind of knock on effect flows through The UK economy. So just a reminder of the shape of the graph there, if you just keep that in mind and then you look at our case inquiries, is very, very similar to that shape. So there we are. There's a COVID line again. We were when we floated the business, a 138 claims in six months, and we built that up, more than doubled the size of the business by the first half of financial year twenty one. And then, of course, when the market dropped for insolvencies because of the government action, our number of cases dropped naturally, but then it's recovered very strongly. And even more strongly in terms of signed cases, which is far more important because we reject 70% of the of the inquiries that come in.

10:06 So you can see on signed cases here, again, a very similar shape of the graph rising strongly until COVID, flatlining for four half years, very painful, and then a huge recovery in the last two half years that we've reported. You'll notice on one of those glasses have mentioned of the the bounce back loans. I'll talk in more detail in a second. But if I want to strip out the bounce back loans that we're doing with Barclays Bank, you'll see that in the blue there, the underlying business is even higher in this half year than than the most recent previous half year and a lot higher than the same period last year. Translating that into KPIs and and and financial statements. So we completed a 116 case cases in the last six months, which is huge.

11:03 Total settlement value of of £9,200,000, and the number of cases was 21% higher than this time last year. Last year included one case that had a value of £9,500,000 that when it was settled, it paid within three weeks that full amount of money. But that was an extraordinary single case. So when you remove that from last year's numbers in cash terms, the settlements have risen from a 3,800,000 to to 9,200,000, so huge underlying rise. Total gross revenues, very much stronger. I'll let Mark talk behind those in more detail in later slides.

11:49 And, again, very often in this analysis, we are stripping out that one large case case that we highlighted this time last year because it just distorts the trains too much. The average case durations, so those 116 cases were completed on average just eleven point four months. So it's in the world of litigation and law, that's incredibly fast.

12:14 The money multiples, so how how many times back our costs we get as a result was 2.3 times, which is very, very high and even better than our lifetime average of 2.2. The one factor that was lower is the average case completion size, and this really goes back to that CVL graph, the administration graph that I showed earlier. The first wave of insolvencies coming out of COVID have been the smaller to medium sized companies, which tends to be mean smaller and medium sized cases. And so there's obviously a bigger preponderance of those when you look at those statistics we went through earlier. As the administrations rise to a more normal mix, bigger claims will come through, and we expect our average case completion size to grow accordingly.

13:06 Cash has been very strong. Again, sound like a broken record. You really need to split out the 9,500,000 from last year. And when you do, you'll see that the cash has risen 40% on a kind of more like for like basis between this first half year and last half year. We had a very strong October. So beyond the reporting period, that 8.7 had grown to 11.1

13:30 on a cumulative basis. And that 11.1 is spread across 236 separate cases. So there's a lot of granularity here. So if for some reason on one or two cases, it would the the director doesn't pay or the company doesn't pay, it would have an immaterial impact on on our on our numbers. I mentioned before the bounce back loan pilot that we're doing with Barclays Bank. This has been in the papers quite a lot. So just a bit of background during the teeth of the COVID pandemic. You'll probably remember that the chancellor who now is prime minister, Rishi Sunak, launched the bounce back loan scheme aimed at small and medium sized businesses in The UK, about £50,000 up to £50,000 loan guaranteed 100 percent by the government. No personal guarantees from directors.

14:23 And this was pushed out super fast, £50,000,000,000 into UK businesses again to support them during pandemic. And what's happened since is that many of those companies have not repaid that money at all. And so the government announced last quarter that it had paid the banks out, almost bailed them out, 6,900,000,000 because the bank had lost money on those bounce back loans. And that was a whole deal that if the company doesn't pay it back, the government will pay every penny back to the banks. And of that £6,900,000,000, the government said 1,300,000,000 was suspected fraud. When you've got 50,050 thousand pound loans, that means 25,000 loans were fraudulent.

15:16 So Barclays had tried to get this money in before. They approached us, and and they went to use debt collecting agencies, and they told us on number of occasions that their recovery was 0.014% of the loans that came back, and that's why they came to us. So we started a pilot with them. We've taken on 81 cases starting in January, but then spread. We didn't get them all in January. They were spread a few every month, and they've been stunned by our returns. We've already completed 27 of them in an average of three point three months per case. And if the face value of those 27 was 1,600,000, we've got recoveries of 1,300,000.

16:04 So compared to that fraction of 1% that Barclays were recovering before, MANOETE's recoveries are 81%. Unsurprising ly, Barclays, who have potentially thousands of these even on their own books, they were the biggest provider of bounce back loans in The UK, have now extended the the pilot with MANOLETE. And we're delighted to say that another very well known bank is about to start a pilot with with MANOE. There are a lot of other discussions we're having with the cabinet office, with the British business bank, and with practically every single financial institution that was involved in this and to see how we can build upon this, but there's nothing more I'm allowed to say at the moment.

16:52 There's then the other kind of special area of our cases and unusual is is what we call the truck cartel cases.

17:03 So the background to this was that the European Commission found that the manufacturers of truck of trucks that weighed six tons and above had been price fixing in a cartel between the years 1997 and 2011, long period of time. And remember, interest rates were very high during that period.

17:30 So MANOLETE, in another way, purchased the claims of bust companies that would have had a claim if they were still around. Many other funders backed people like Royal Mail, the the Road Haulage Association, etcetera, to launch funded claims. We bought ours. So in January 2023, the first trials were announced and judgments handed down. And everyone knew that the defendant truck manufacturers are liable to pay. The big question was how much do they have to pay? So the judgment was handed down. We have an expert external valuation firm for these claims because they're not insolvency claims. They're competition law claims. So my team do not value these. Fidelis value these.

18:25 We had a beauty parade with lots of great companies, and Fidelis was a clear winner. And and then the numbers from the judgment is is what's passed through into our balance sheet valuation of these cases. On top of the damages that were awarded, very high levels of costs were awarded against the defendants. On Royal Mail, 70% of costs of £9,000,000. British Telecom, 75%. The norm is is about 60%. So this is getting very expensive for the defendants, and they know they are liable to pay. So unsurprisingly, once that judgment came through, the second wave of test cases ordered by the judge, so called rider claims, all settled. The third wave are also now all settling.

19:14 There is one very small fly in the ointment, which is that DAF, one of the biggest members of the group, appealed the BT enrollment judgment on five grounds. The judge allowed one ground he heard, which is taking place next month of December. The judge has made it very clear that this is very unlikely unlikely to have any impact at all on his judgment on on the truck cases, but has got wider interest in competition law, so it ought to be heard. But we want that to go

19:51 and be disposed off by the judge before we progress because we don't want the defendants using that as an excuse at all to reduce the value of MANOLETE's 22 claims. And once that is done and we expect it to be done in fairly short order, we will then really be round that final bend on these cases and looking very much down the home straight to conclude them either by way of a trial or by what's called ADR, alternative dispute resolution mediation. About 90% of our 97% of our claims end up in in settlement of the trial. So we'll see how that goes. But one way or another, we will be we look forward to a resolution on this, which is I've always avoided making any statements like that in the past.

20:42 I am now confident to make that statement. We've then got our circle vintage table that many of the quoted companies use. I won't keep lots of numbers on the screen. I'll just pick out the highlights. So what you'll see there is over a fourteen year trading period, the the returns are very consistent and very high. You see in the pink box there, the return on investment, a 121%, IRR of a 131%, which is which is very high, but very consistent. It's very granular as well. You know, one doesn't want to have too few eggs in the basket, so ours are spread across 803 completed cases. The durations, as I've said, are very short because we own the cases. We we contact the other side. We sit down, and we we we do a deal.

21:36 And very high level of completion. So when you look at the age of our remaining cases, well, everything up that we bought up until 2019, having started in 2008, has been completed fully. There's only a few left in in 2020. And when you look at the returns since we've listed on the stock market, it'd be well over £14,000,000. In fact, if we just dive back in just for a second, the total recovered here, 18,000,000, 22,000,000, fourteen, twenty three, very high numbers. And these these late finishes, obviously, have have had less cases time to complete yet. I will now hand over to my colleague, Mark Taverner, to talk through the financials. Thanks very much.

22:28 Thank you, Steven. I will now talk you through the financial results for the six months to 09/30/2023. We'll start with the trading performance. If you look at the column on the right hand side of the table, you'll see that we're reporting a gross profit of $5,000,000 and an operating profit of $1,600,000 for the period. And that represents a return to profitability compared to the same period of the previous year. Gross revenue of $11,200,000 has increased by 104% from H1 of previous year. If we look at each of the revenue categories in turn, so first, realized revenue. Realized revenue of $9,400,000 was driven by the completion of a record 116 completed cases, and this compares to 95 completed cases in H one of the previous year.

23:24 And you can see from the bar graph at the bottom of that slide a very nice upward trend in half year case completions. Moving on to unrealized revenue of 1,800,000. This has been generated by the signing principally of 179 new cases. Again, this compares to 83 new cases in h one of the previous year. Again, the bar chart in the bottom of the slide really demonstrates that step up. We step up in case volumes in the second half of last year, and you can see that's really been maintained into the first half of this year. And all of that activity has generated a gross margin of 44%, which is much more usual level of margins that we expect in the business.

24:18 Overhead expenses have increased by 9,400,000, driven by an increase of staff costs, a 5% annual salary increase, and an increase in headcount of five staff over the years. That's three lawyers and two support staff. And this is really building the team for the future increase in volumes and for the current level of case volumes that we're seeing. Net interest expenses have increased 640 k. This really is a result of the increase in base rates generally over the last year. And all of that resulted in a profit before tax of £900,000 I just want to drill down a little bit further into the movement in unrealized revenue because there are a lot of different postings that go go into this movement. So it's worth just understanding these postings.

25:17 So the the biggest impact is the valuation of new cases that that we apply a fair value to. So you can see in the six months to September 23, 7,100,000 was the value of new cases entered into during those six months. The next two lines, the increase and decrease in valuation of existing cases, are the the legal team adjusting the value of our over 400 live cases at each month end and over the lifetime of their cases. We then remove case completions through unrealized revenue, and the actual value of the completed case would be posted to realized revenue and any minor adjustments to the cartel case valuation.

26:03 So let's take a look at the balance sheet. Again, if we look at the right hand column, balance sheet as of the 09/30/2023. Many of you would have seen seen this before. Nothing significant has changed. Fair value investment in cases is split between long term, 13,500,000, and short term, 25,900,000. The long term entirely relates to the cartel cases that Stephen has outlined in his earlier slides. The short term is the rest of the portfolio. Similarly, trade receivables, we have some receivables that are over a longer term repayment arrangement, but the vast majority are short term and repayable within twelve months. We held cash at bank of just under £1,000,000.949000 at the year end, and we've drawn down on our debt just short of 13,000,000 of HSBC facility.

27:05 To have a look at the cash flow now for the six months September, again, the right hand side column there, you'll see gross cash receipts of 8,700,000 in the six months. And this was sufficient cash flow to repay the insolvency practitioner's share and to repay all the overheads in the business, leaving a positive cash flow at that point. We then draw down on our funding 2,500,000 during the six months, which helped us fund the significant increase in in new cases that were being signed and ongoing legal costs in live cases. And just analyzing the gross cash collection in half year chunks, What's quite interesting, and we need to adjust the h one FY '23 figure, but if you just look at the first six months of each year, 4,100,000 from h one FY '21 and 4,300,000 from FY '22.

28:17 FY '23, as Steve mentioned, we had an exceptionally one off large case that contributed cash of 9,400,000. If you deduct that from the fifteen point seven, that's 6,300,000 of of normal cash. So 4.1, 4.3, 6.3, and then 8.7 for this first half. So again, a very nice increasing trend in cash generation for the first half year. Typically, our cash generation in the second half year has always been stronger than the first half, and we expect that to be the case this year as well. Very quickly, just to touch on the aging of trade receivables. The vast majority of our trade receivables are not even due yet, 79%.

29:03 We agree payment settlements when we enter into settlement agreements with defendants. So typically, repayments are are phased over a number of weeks and months, and and that's what this reflects. And finally, just to recap on the the funding from the HSBC loan, we have a revolving credit facility of 25,000,000, of which we've drawn down 13,000,000. So 12,000,000 is is undrawn and available for use. The the expiry of that loan has been extended to June 2025. We have a further accordion of 10,000,000 available if required, and the cost of that facility is a maximum of 3.7% above Sonja, which is effectively the base rate.

29:57 So this this funding platform really gives us the the firepower to cope with existing volumes and another step up in in activity in in the coming future. We are in discussions with HSBC around our covenants. The the covenants have existed for pretty much unchanged for many years since the beginning of the loan when the company was a private company, and that they're not really in keeping with the size and stature of the company as a as a fast growing public company. And as as such, we're we're working with HSBC to get a more appropriate set of covenants in the near future. So, Steven, if I could hand back to you to conclude.

30:45 Before we Of So just to kind of wrap up. So after two years of extraordinary suppression during COVID of The UK insolvency sector, that all changed from April twenty two last year. It took about seven, eight months for that starting to feed through to us because, of course, liquidators administrators needed to investigate the company and present and pull together the claims before it came to us. But things have changed dramatically now. We have very positive tailwinds for for the business. We've continued to invest in the company. As as we've said, we've added significantly to our in house legal team, our in house net worth team that look at the financials ending of the of the, possible defendants on our cases. We certainly strengthened the relationships with our referrers during COVID and and beyond, all the many, many events that the insolvency restructuring industry used to put on pre COVID were all canceled, of course, during COVID.

31:53 They're all back on have been back on now for a good year, eighteen months, and that's very important. We we are a lead sponsor and always a a presenter at at these events, and they lead directly to to new cases, of course, and building relationships. The success with Barclays on the BBLs has certainly diversified the referral base and the whole BBL area. It's been very interesting to to watch that develop. The fact that the results now have come through so quickly and so strongly means that the Barclays relationship is extended. And as I said, a new bank is is about to engage with us on their own work plus a lot of other discussions outside of that.

32:42 Cartel cases, as I said, I'm I've I've been more open this year to be specific about where we are with these because we've we've now seen tangible results of the trials and the the settlements that have followed that. We as I said, we've still got this one element of the appeal to be heard next month, and then we'll be ready to force through a conclusion of those. How long that will take? I don't know. One can never know. But it would certainly move it on to a much more mature position as we speak now. And then finally, with high inflation and high interest rates, we touched on the fact that PLC have pointed to record insolvencies this year. We think those will persist for a reasonable period of time because so many companies, so many individuals were locked in at the much lower rates of of a few years ago, those all come off for renewal, and they'll all be clearly exposed to much higher interest rates, which will put a lot of pressure on those businesses.

33:58 That's it from us, and I'll hand back to our host. Perfect. Steve and Mark, thank you very much for your presentation. What I'll do now is I'll just turn your cameras back up for the q and a. Ladies and gentlemen, please do continue to submit your questions 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 for you those 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've received a number of questions throughout today's presentation. If I could just hand back to you just to read through the questions and give your response to it. It's appropriate to do so. I'll pick up from you both at the end. Certainly. So something from the top, when will the business start to generate positive cash flow and high rates of conversion from the reported profits into cash? So a couple of key things here. When you look back at Mark's cash flow slide that he was just touching on recently, you'll see that for the previous half year and the whole of financial year '23, the business did generate positive organic cash, not only to cover the running of the business, but to cover all its investments as well.

35:06 So we have done that. The direct conversion of reported profits into cash, I think, is more difficult because of one feature of all litigation funders. Burford have always accounted this way. We have as well. And Litigation Capital Management, I saw, had had announced recently. They're moving to our Burfords and our way of reporting, and that has an element of unrealized profits in it. And so those are the estimates of outcomes of cases, and that can be a very material figure, of course, in the in in the profit number. But the cash will not be matched to that until that case is completed and the defendants have paid. So I think two elements to that, and I hope that's that's clear.

35:55 The second question, slightly unusual, suggesting we we we look at tokenizing our claims using blockchain technology. I I I take the question on board, but I've got nothing sensitive comments on it at the moment, so forgive me. Then we've got a question. Please can you elaborate on the covenant breach and possible solution? Mark touched on this right at the end. So just to add a little bit more color, we've got the first RCF revolving credit facility with with HSBC towards the end of two thousand seventeen slash eighteen way before we'd even listed the company. And the covenants were set around that were were many were manyfold, they've remained exactly like that. In fact, one of them has got worse as as years gone by.

36:48 And we've now engaged a a debt advisory firm, very good one, to work with us and with HSBC as a complete relook at the covenant package that should be fewer covenants and much more flexible covenants because when they were first set up, MANOLETE was a company doing 30 cases a year. The the business is now doing close on to, what, two fifty, 300 cases a year with a much bigger working capital requirement. And so we will update the market for sure once those complete, but it they're progressing very well indeed. The final point I'd add is that having these meetings with HSBC and the advisers on on that process.

37:36 We've spoken at length about HSBC's very strong appetite to be refinancing and renewing a whole new RCF going forward, and and and that'll be a work in progress next year. Next question here. When would you expect the business to generate more cash, both pre and pro investments? So I think we've we've we've touched on that. I mean, what's clearly happening now having had a fallow period while the government locked down the insolvency sector, you saw in the new signed cases the huge rise in the number of cases. Clearly, there's a cash requirement to to run this, you know, enormously expanded portfolio. So that'll take time to work through, but the good news is when you look at our track record every year for fourteen years, we have delivered a money multiple on average of 2.2 times that investment coming back within a year to it takes us just a year to complete on an average a year to get the cash in. So it's a fantastic opportunity for this business now, and we we think it'll make very good returns for shareholders in cash and profits going forward.

38:50 Next question, perfectly valid. Which would you consider first, raising the HSBC revolving credit facility or issuing equity? Well, before any of that, Mark, and thank you for your question, organic cash, because as I've said, that is delivering millions of pounds that to to to pay for the running of the business. And even this half year has made a contribution to the new case investments as well. And there are 417 live cases today, which are completing all the time. One completed yesterday for £500,000 of which we get £300,000 in a few weeks time. This is going on the whole time or as the machine works its way around. So that that's our number one, and and and and that is delivering very well.

39:38 Beyond that, as Mark said, we've got a huge amount of headroom on the HSBC facility. We've utilized 12. We've got 13 left. We've then got the accordion on top of that if we were ever to be needed of another 10. And then, of course, as I said, HSBC would be looking to expand that in in future years. This is quite a long one. Let's have a look per your annual report. You entered into a more lenient agreements due to losses. Look back metric. Sorry. So current general report, you're you entered into a more lenient loan agreements due to losses in h one twenty three impacting twelve month look back metrics. This was to include the third September twenty three quarter. Is the subsequent September 3 breach different new?

40:25 No. Well, nothing's changed yet on the on the covenants. There was oh, I I know what you were what you're referring. Yes. There was a period coming out of COVID. You're absolutely right. That that that that temporarily reduced the hurdles on on on the covenants. You're absolutely right. So and those have gone away. That's right. Which is why, really, we're we're we're talking about our long term fix now. That's that's very well remembered. Then the question carries on. If yes, please, can you discuss your expectation process and time of resolution? I hope I have. Specifically, will there be a market announcement when this is resolved? Yes. I I I think they they they will and and there certainly should be. It's it's very important. Since September 3, has the company remained in breach of those requirements in place?

41:14 No. Well, it's tested once a quarter. So the next test date will be December. And we're hopeful that if not fully signed in in in in black ink by by Christmas that we'll be we'll be very close to to announcing something shortly thereafter. Thank you. Very good question. Alex said regarding half one twenty four and half one twenty three, case completions of a hundred and sixteen and ninety five, do this include BBLs? Yes. They do. Similarly, for new investments, hundred seventy nine, '83, and then '83 previous year, is all in the presentation. Remember that with the red the blue and the red, it's it's all analyzed out there, Alex.

42:03 Mark says in is the undrawn bank facility clearly adversely adversely affected by existing bank covenants on the present amount of net assets? Well, the the there's multiple covenants. And yeah. So as I said, we're in process of of review. When will the dividend be paid? I don't know. I can't forecast it. I think and we have two very different schools of thought amongst our investors. Some do like dividend being paid even when we were paying dividend. There was a whole other school saying, why on earth are you paying a dividend when you can invest that money and get 2.2 times the return? We're not here for a small yield. We're here for capital gains, so please get the our money to work.

42:51 So you can't please all the people all the time. Mark, think one for you. What net profit margin do you think will you will move back to post COVID, pre COVID? These were very high in 2019, 2020. Thank you. Very Yeah. I I think I think the gross margins of around kinda mid 40%, which is where where we have returned to now are are sustainable going forward. And I think that's the level the level we would look look to remain at. And in net terms sorry. I garbled that. So in net profit margin, Mark? So net, we're you know, we're high teens high teens to 20%.

43:42 Yeah. Yep. And it's very highly operationally geared business, of course, Lee, this for this question. As you add absolute pounds to the gross profit number, the the overheads below that line don't go up in line with that at all. It's it's a very fixed overhead structure. There won't be incremental steps of adding people, but not huge amounts. So I think the gearing effect of that will bring up the net profit pretty fast. Paul asks, are you able to offer any guidance for the next two, three year period re EBIT? Encouraging to see revenues back above pre COVID levels. Thank you. But are you expecting similar return to pre COVID EBIT slash net profit? We we can't make forecasts, Paul. Those are for our analyst and analysts. We've got quite a lot of people writing for us now.

44:36 And and that's usually after, you know, discussion with us. So I I point you in that direction. Robin says, how long will bounce back new cases last? What is the business model after? Okay. So biggest model after is is easy. That's as as we are. And and that's growing as you saw in that graphic of breaking down our number of cases. That's the the core business as I referred to it then is is is growing very fast. The bounce back loans, I've I've spoken at length on them. There is a very big opportunity there. We've just started on, you know, one pilot. We're extending that pilot thanks to fantastic results with another bank, and we would love more of the work.

45:22 We think the banks, British Business Bank, the government should be responding to our pilot results and and sending us a lot more, but there's a lot of very powerful groups involved, as I say, including the cabinet office and British business bank. So it's a work in progress, but it's very high up our agenda. I think we're getting towards the end. What are the main risks to the business in the next twelve months? Good question, Ben. Thank you. I think for the first time in quite a long while, it's been managing the growth. The number of cases, as you saw, has absolutely exploded, but we expected that to happen as we were bent over to to explain before when we saw the number of insolvencies rising so fast after COVID.

46:08 It was clear as the dominant market leader in the litigation funding sector of insolvency. That was gonna come through in our numbers. It has come through all the shapes of the graphs. The graphs are the same. So ahead of ahead of that hitting us, we we added significantly to their legal team and the net worth re reporting. We've got another lawyer joining in December who's exceptional for the London team. And as we look at KPIs coming through in inquiries, into signed cases, into completed cases, we will add to the team as needed. Fortunately, with the way the model works, we get good visibility because you can see the insolvency numbers, what they're doing today, and that'll guide you to the likely level of new business in seven or eight months time, whether it's down or up.

47:00 I suspect it'll be up over the next meet medium term. So that enables us to plan, to go out to the market to recruit. We lost no one from the business during during COVID or beyond. Everyone has stayed. Very experienced team, and then we've added some exceptional new joiners to the business as well. So although it's a although it's become a a war a concern factor worry factor is a wrong word. A concern factor, we just need to keep our eye on the ball and make sure that the business is is is anticipating the growth going forward. Perfect. Steve and Mark, thank you very much for that. I think you've addressed all those questions from investors. And, of course, the company can review all questions submitted today. We'll publish those responses on the investor meet company platform.

47:47 But just before redirecting investors to provide you with their feedback, I which know is particularly important to the company, Steven, could I just ask you for a few closing comments? Yes. We had a very tough time during COVID. I said at the time that I think COVID eventually will be a very big plus for this company, and it it is because it was the supply chain problems that have pushed inflation up. It was a huge amount of liquidity that was pumped into all economies, including Britain, that has pushed inflation up. That's pushed interest rates up, and that pushes record levels of insolvencies. And that clearly, although very bad and challenging for lots of people, capitalism works by reallocating assets to the better management teams, and we're part of that process.

48:40 And we're here to penalize the people who abuse that process. So when as I look ahead, as a whole executive and nonexecutive management team look ahead, it's it's almost a perfect storm for for the company, short, medium, and even inching into long term. So I'd like to thank everyone for their support of the company. It was a very rough ride. Thank you for sticking with us, and we hope that the brighter lands are now ahead of us. Thank you very much indeed. Steve and Mark, thank you once again for updating investors today. Could I please ask investors not to close the 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 only take a few moments to complete, but I'm sure it'll be greatly valued by the company. On behalf of the management team of MANOLETE PARTNERS PLC, we'd like to thank you for attending today's presentation, and good afternoon to you all.