Manolete Partners (LSE:MANO) — Manolete Partners Plc Investor Presentation

0:02 Good afternoon, ladies and gentlemen, and welcome to the MANOLETE PARTNERS Investor Presentation. Throughout this presentation, investors will be in listen only mode. Questions are encouraged and can be submitted at any time via the Q and A tab situated on the right hand corner of your screen. Just type in your question in the box and press send. The company may not be in a position to answer every question it receives during the meeting itself. However, the company review all questions submitted today and publish responses where it is appropriate to do so. These will be available via your Investor Meet company dashboard, and we will email you to notify you

0:33 when they're ready for you to review. I'd also like to remind you that this presentation is being recorded. Before we begin, we would like to submit the following poll, and if you could And like hand over to Stephen Cooklin, CEO of MANOLETE PARTNERS. Good afternoon, Stephen. Good afternoon, and thanks indeed, Mark. Good afternoon, everyone. Thank you very much for giving up your time to join this presentation. Look forward to any questions later on. So going through the slide deck here, the important notice, of course. So I am Stephen Cookling, CEO of MANOLETE, also founder, chartered accountant, qualified back with, Koops and I brand back in 1991. This is the contents of what we'll be going through, particularly focusing on, the government's reaction to COVID nineteen tomorrow with the budget. It should be very interesting. I'll return to that topic in a in a few minutes.

1:33 But when I think of the world of investing and the world that the audience here are interested in, it's usually the kind of blue chip kind of money type world of grandmasters that one is dealing with. But the world of insolvency, I think, is a more darker corner of the corporate world. So here, I chose Francis Bacon, three figures at the base of the crucifix as in the as displayed in Take Britain. So, yes, insolvency, a much more challenging area, but I think as we've shown with our results, as you see on right here, we've tried to slice and dice our internal rates of returns in any every way imaginable.

2:20 So these range from 100 plus percent upwards over our twelve year existence. And these are, of course, cumulative returns on an annual basis, and those are impressive by anyone's standards. And I think the consistency of returns at that high level is, is what's attracted people to the MANOLETE model. So MANOLETE was established back in 2000, and 08/09. So some very clever barristers at South Square. QCs invited me into the idea of an insolvency financing litigation company. We we tested the model out for a couple of years in an LLP, then incorporated it in 2011 and listed in 2018.

3:14 And MANOLETE focuses exclusively on UK insolvency and insolvency related litigation investments. And one of the main attractions of that is is that we can purchase outright the claim. So we become the claimant company going forward, and that, therefore, gives us full control of the claim. We can make an offer to the other side. I had two calls actually from defendant directors today saying, they've they've got our preaction letter. Could we could we just have a sit down and and not spend money on lawyers, etcetera? And this is a kind of normal normal run of the mill for MANOLETE. Of course, if we were funding someone else's claim, we couldn't do that. It would be completely unlawful to do that.

4:02 And that's the world of the other litigation funders, if you like, whereas an insolvency, the big difference is you're in control of the claim. So that's 85% of the time that we are we are in control, purchased the claim. The other kind of 20% of the time we're funding, but we're funding in licensed and regulated insolvency practitioners, indeed UK insolvency practitioners who we dealt with time and time again. So we know these people very well. And again, I would argue that the more global litigation funders are usually dealing with funding a claimant on a one off basis, and it's this kind of repeat revenue referral stream that comes into MANOLETE from these insolvency practitioners and their lawyers that I think gives a very high quality to our revenue stream because it it repeats from the same kind of very trusted people.

5:03 Since the IPO, we have established pretty rapidly our UK in house network of very high caliber insolvency litigators. So these are lawyers, usually at partner level, up and down the country who were working with us on our cases as external solicitors, and we bought the cream of that crop into MANOLETE as full time employees. So in Scotland, the Northeast, Andrew leads specifically with Graham from Adelshaw, Goddard, Alison in the East from House Perceval, Neil from the South, several in London, of course, Midland, Southwestern Wales, and indeed Northwest. Dominic has been with us for for some time now.

5:48 So these these lawyers knew us very, very well indeed. We knew with them very well. And other than one who had to retire due to ill health a few months ago, we have a 100% retention rate, and they really do enjoy working with us because I think being in control, again, that word of the claims is really actually very exciting. Rather than just advising someone to do something, they are making the decisions, and that's really quite an exciting thing to to work on every day. That team is led by MANO HALTN, who's been with, me for the last six, seven years. And also on the board, we have, judge Stephen Baster, who until he, retired a few years ago, 2017, he was the most senior insolvency judge in The UK.

6:38 He he started as a consultant with MANOLETE in 2017 when he retired from the bench. And and then when he heard that we were doing a listing on the public markets, he asked me if he could join the board. And I think that's a very good due diligence point because if you think he spent most of his career, listening to directors who'd who'd done kind of very bad things in their companies to actually take that responsibility and fiduciary role. Of being a director of any company. You would have said it's quite a brave thing for for for a judge to do, but he asked me, could he join? And and and, he has been heavily involved, since that time. So MANOLETE's cases, again, I think this is the second big differentiating point to broader litigation funders, is because we focus on on on a very niche area of the market, it's a seven repeat type of cases that come through to us almost every single day. So we've invested in, 600, odd cases to date, and they range from just £20,000.

7:48 Those are done very, very quickly in a few weeks or months, single digit months to to much bigger claims of up to 7, £70,000,000, and and anywhere in between. As soon as I say in that pie chart, these are the seven deadly sins, as we call them, the kind of, misfeasance, misfeken actions that, directors commit when they see, the writing on the wall. They can see the company's gonna go bust, and they they they do, unlawful actions. So they may remove the whole of the business into a new code, what's called a Phoenix operation. An awful lot of that is going on as we speak. And that's fine as long as they they they the new code that they control pays a a fair and proper price for that business and those assets. Obviously, they're leaving all the creditors and all the debt behind in the old code.

8:43 So we see an awful lot of those kind of cases, transactions that are undervalued. They then prefer certain suppliers that they want to work within the new co or they prefer family members. So for example, their mother might have lent the founder of the company, the director, a £100,000 to start the business. And the director's only got a bit of money left in the company's bank account when it's about to go bust. He pays that money all to his mother. And the trouble is he's got to treat all creditors equally. That's the Insolvency Act 1986. It's all creditors have to be dealt with pari passu on an equal basis. And what a lot of you would have seen in the press and on the TV is that the amount of fraud going on and misfeasance going on due to these huge amounts of money the government has been pushing into SMEs up and down the country has been eye watering to quote the National Crime Agency, so we're expecting to be rather busy for the next few years.

9:51 There, just I mentioned the IRRs before. This is our track record of cases. So you can see the number of cases increasing rapidly at the very fast durations, so very few cases remaining from three two, three years ago. So our cases have completed within about eleven months on average. As you see on the right hand side of that, the returns are very, very consistent. It's not like one big mega case has carried lots of mediocre cases. This has been a very broad spread of very high return repeat cases from the same repeat referrers throughout The UK. And I remember when I was growing up as a financial professional in the 90s, everyone took a lot of notice of their private equity business model that was emerging and and anyone who was who was worth their salt was trying to get into private equity.

10:45 Very attractive returns. Typically, they'd have anywhere between ten, twenty, 30, quite large investments. It would take seven years to wait five to seven years to exit a fund. So ours, if you remember, just eleven months on average. And the returns were very attractive at 25% to 30% IRR, internal rate of return, whereas MANOLETE's internal rates of return there, can see, are in 100% to 100% and higher over the duration of our cases. So a very attractive market. The market opportunity, it's mainly corporate insolvency we deal with. I mentioned directors, but it also applies to bankruptcy. Some very wealthy people, who've taken on a lot of debt, maybe property related, seek to to move their assets about family members, friends, etcetera, and then declare bankrupt, wipe out all their assets and kind of take wipe out all their debts and then take their assets back a a year or two later.

11:48 So in a what we do applies in in that sphere as well. In a normal year, there would be 14 to 20,000 corporate insolvencies, say liquidations administrations in The UK, 40,000 bankruptcies. I remember someone saying to me once that of all those millions of companies that that are registered at Companies House, year in, year out, by far the, most common exit route, for any company isn't being sold to a trade buyer, isn't floating on the AI market. It's it's going bust. So although it's a niche that we operate in, it's it's a very big niche. A key theme, for later is that, the number of insolvencies is, is sharply down at the moment, all to do with COVID and the government's reaction to COVID. So that normal of seventeen thousand is down to about twelve thousand as we saw from the insolvency service just a few weeks ago.

12:50 And this was something we picked up in the interim results. Professor Peter Walton, a professor at law at University of Wolverhampton, he said in a normal year, there's about two thousand three hundred insolvency cases, see the light of day, and they generate around £750,000,000 of cash recoveries. So when you look at various ways of looking at MANOLETE's market share of that total of the insolvency litigation, it's about 9%. But the but our share of the funders in this market is about 67% of the funders. So the funders in total are only about 16% of the entire insolvency litigation financing market. So the question is who who's funding the rest? Well, that is actually lawyers and insurance companies working on a no win, no fee basis. So the liquidator would find a a local lawyer and say, Tim, look.

13:51 Don't charge me anything on this case. The company's gone fast. I've got nothing to pay you, of course. But if we do make a recovery, you can charge double the the going rate. And so on a good case, obviously, one would they would want that to go on for a long time so they could maximize their fees on that basis. But the Jackson reforms came in in 2016, and they made that old model much less attractive because the costs of those no window fees and and and insurance policies attached to that were 200% the size of the damages. So almost nothing was getting back to the creditors, whereas under MANOLETE's model, only, the costs are only about 10 to 12% of the recoveries.

14:36 Now this is actually very important because, as as we have on this slide, it says that the the the people being damaged by this are the the creditors of the of the business, and the creditors are people like HMRC, which is obviously funding our NHS, our schools, our social security system, that's who is losing out by such low levels of recoveries being made because too much was disappearing into the pockets of, the lawyers on there were no fee and the insurance companies who were doing these very, very expensive insurance policies attached to these no win, no fee cases. And this is why the jack Jackson reforms came in. So what's happening in the market is slowly that old way of doing things is reducing, and the MANOLETE way of doing things is increasing. So our market, obviously, in about 3% a few years ago, as I say, it's now closer to 10%.

15:37 But things take time to to to change when when one's coming through with with new models. So here you see on this slide that The UK as ranked by the World Bank is just fourteenth in the world for insolvency rankings, which are the main criterion for that is creditor recoveries. So you can see there that we're behind, countries like Slovenia, Puerto Rico, Iceland are better places to recover if you've lent to a bus company than The UK, which is a pretty parlous state of affairs, which is why what we're doing is so very important to The UK economy. As you'll see here, the Royal United Services Institute think tank said that fraud on the public purse had now reached epidemic levels, and that was even before, you add, petrol to the bonfire, of taxpayers' money with the huge pandemic loan schemes, the CBOLS coronavirus business interruption loans that the government's been been pushing through the door completely understandably, obviously, to to to manage the unemployment levels. Otherwise, things could have got really very, very desperate.

16:56 But, it doesn't mean to say that this money has been taken, rightfully. So the the government's used many measures to flatten the insolvency curve, bounce back loans, VAT deferral, rates relief, as I mentioned, the CBILS, etcetera, time to pay. And, it passed a piece of legislation called the Corporate Insolvency and Governance Act horridly, last year. The key measures were what they called the temporary measures, which is, to kind of freeze in suspension these these companies, thousands of companies that where their business model simply wasn't working. They simply had no revenue or very little revenue because of COVID.

17:45 The government made it impossible to to push a a winding up petition or a statutory demand for creditors to make them pay up. And that obviously has been the reason for main reason for the reduction in the number of insolvencies. Now these measures were meant to, have come to an end, in December 2020. But then as you'll all recall, lockdown two, came upon us very quickly in December, and those temporary measures were extended through to March, 2021. This is from the House of Commons, Library that confirms that. But, of course, what's happening is all the time, and this is why the timing of of today's presentation is interesting because tomorrow, we will have the budget where Rishi Sudhak will come clean using his words with the voters to tell them about the amount of debt that the government has taken on to fund all of these very noble and worthy and very important schemes, but clearly, The UK economy cannot, afford to keep this going forever.

18:57 So when these support mechanisms are withdrawn, whether in a phased way or in a cliff edge, I think they're gonna avoid a cliff edge, which is probably just as well because there would be, I think, hundreds of thousands of companies going bust if if these were just suddenly turned off at the end of March. So we we suspect there'll be some kind of phasing over the next two, three months, maybe tapering and down to around that end of June time, the June 21, when they're hoping all the the the restrictions will come to a by and large, an end. But as you can see there, once they are taken away, people like the Federation of Small Businesses are talking about 250,000 companies having to shut up shop.

19:44 The BBC had a story of 800,000 to a million. The London School of Economics, a similar number. And RSM interestingly saying that this sustained high level of insolvencies after initial spike will stay high for the next two or three years, which, again, I think our view is is is that that is a pretty good estimate at this stage of the game.

20:11 So how does this impact MANOLETE? Well, we've got what we call a a production funnel. So liquidations happen. There's usually a period of time when the insolvency practitioner will investigate where the monies have disappeared to, then they'll contact us contact us with the the facts of the matter and whether we want to buy or fund that action. And we tend to accept about 30 to 35 of those cases come through to us. We then fair value them while they're live cases, and we bought them. We're we're spending money on legal fees. It's the same seven cases that we we deal with every day of the week, and then they get plea completed with a in an average of a year, and our money is that we've put in is multiplied by almost three times in that period with a ninety percent success rate. And then roughly, over over twelve months, we'll be collecting in whatever's been agreed. The reason why people can't pay immediately is if you've settled a case and 98% of our cases settled, very few go to trial at all.

21:20 If you settle with the director for, let's say, £200,000, he might have £50,000 immediately available through his own assets or friends and family, but then he'll need a payment period of a number of months to pay the balance. Funnily enough, on the bigger cases where there's a big insurance company involved on the other side or a big corporate like Cobham, we had a quite a famous case, they're able to pay immediately. There was a very large case, £7,500,000, that we settled just after our interim results. We got the first 2,500,000 within a week, and all the rest of the monies, our share of it, will be paid within twelve months. So 5,000,000 within twelve months. So these are serious numbers even on on very big cases. So what happened, at the time of our interim results, November 10?

22:09 We flagged very clearly, this was the graph we used at the time, that number of inquiries because of the government's flattening of that insolvency curve, our inquiries were coming down. Therefore, the number of cases we were signing was coming down, and and this was very clearly flagged in in words and graphically to to shareholders and analysts. As I say, that was November 10. Everyone expected temporary measures to stop in December. They didn't. They got extended, as we we've discussed, to March, at least. And although our KPIs were very good in in December, January started slowly. And when we sat down on our board meeting on the January 26, we reforecast q four.

23:00 And although the business was very strongly profitable and a record cash generation coming out of it, it was clear we wouldn't be hitting the Peel Hunt forecast for the full year, which is why we made the profit warning that we wouldn't be hitting those forecasts of, I think, £14,000,000 EBIT. And we drafted an RNS, and our Nomad Peel Hunt told us to get that released immediately that afternoon so there wasn't a false market in the shares at any time.

23:31 Over the page, what I think a lot of people have missed from that announcement was how healthy the the underlying business was. Yes. We were we were missing the Peel Hunt forecast, but we had completed a 108 cases, which for in less than ten months, which was double the number for the previous entire year. The value of those settlements that that we'd achieved was almost £24,000,000 on a on a heavily discounted basis. The cash we'd received from old cases, remember, it's a bit like looking at the sun. When you look at the sun, that's what the sun looked like eight minutes ago. When you look at MANOLETE's balance sheet, the cash coming in is from the cases completed a year ago because it takes on average a year for the cash to arrive. So from those old cases, the cash was up 60% to 9,300,000.

24:28 Our overheads are only around 4,500,000, 5,000,000. So, that was very healthy indeed. And this, of course, is from the old 54 cases, not the 108 that we completed, and and had hardly received a penny on. So, as a view going forward, that's gonna be, very attractive from a cash generation side. The, bottom point there, in the last quarter, 5,300,000 of cash have been generated, which covered not only all the payments to the creditors, from our cases or the legal fees of those closed cases, but it also covered all the overheads of the business and the running costs of the 250 odd live cases that obviously hadn't generated any cash at all yet. So that was very impressive from a cash generation basis.

25:26 Page. So on the key deliverables, we were doing, exceptionally well. The trend has continued, on completed cases and cash generation. So 13 were completed up to the twenty sixth of January

25:46 this year with another £1,200,000 collected in the last twelve business days. This report's now a couple of weeks old. But the weakness in the numbers was gonna be, of course, because a lower number of new cases coming in. So the unrealized profits, the fair values were gonna be down on what they were forecast to be. So that was that was the main driver to to that. However, I think what's very important to appreciate is that, the business is still very, very busy. These 11 in house lawyers are working on two forty live cases in the first twelve days of February. We signed 10 new cases. And in fact, I can update that now. So for the end of February, we signed up 16 new cases, and we completed 16 cases.

26:39 I've put here on the slide just a flavor of of some of the cases that come in on a on a daily basis from multiple insolvency firms, all across different regions of The UK. You see there London, the Northeast, the Southwest, several from Scotland, the Northwest. That's the The UK wide network. There are the seven deadly sins, the claim type there, transactions undervalue, misfeasance, unlawful dividends, and then the headline values of the claims. So we've got 10,000,000, 4,000,000, 3,500,000, and then a bunch at 5 figure. These are all hundreds of thousands of pounds. So just on those 21 cases, there were headline claim values of £29,000,000. So this is what MANOLETE looks like when the government's artificially suppressing, insolvencies in The UK in a very, very dramatic way. It's still incredibly busy in our shop.

27:35 As far as the balance sheet and cash, very, very strong, as you would have surmised. So at the year end, so March 2020, we had drawn down GBP 8,000,000 of our GBP 20,000,000 revolving credit facility with HSBC. We've not drawn a penny more from that to to to this very day, so that's exactly the same position. So any idea that MANOLETE or any accusation that MANOLETE is somehow hemorrhaging cash is patently false. Because when you think of that record a 179 cases we've bought or funded and then the fact we're running 240 live cases, there's been a huge amount of volcanic cash generation, which has meant we haven't had to extend the revolving credit facility at all. We then run a whole number of forecast models on various scenarios, including what could be a tsunami of new cases coming through or a certainly an uplifted spike for the next two or three years. And there is no prospect whatsoever of us needing to raise any new equity for the business.

28:43 Really, we're looking now at a much more mature business than the one that we've floated two and a bit years ago that's generating an awful lot of cash organically, and we've got a lot of headroom in the RCF, another GBP 12,000,000 of the RCF.

29:00 What was quite interesting against the background of of all the the the government stepping on the on the economy And and and the background we've been through here on the January 19, quite out of the blue, I was contacted from by an investor group called Mithak. Some of you will will know Mithak. They're at the I believe the largest institutional shareholder of of Burford Capital now. So they they know our our sector very well. The the models, as everyone understands, are very, very different. Burford just fund cases will be on a, you know, big global basis, MANOLETE, we're buying most of our cases and just in The UK. And myth, I could explain that they were they were very attracted by by MANOLETE.

29:52 This was obviously before the profit warning and wanted to take a significant minority, but very passive long term investment in MANOLETE, and they had a target level they wanted to get to. So they either achieved that or they didn't make the investment at all. So most of it happened after the we we put the market update, the profit warning out on twenty sixth of of January. So they took the position of a number of cornerstone investors who'd done very well since the IPR one seven five p. I sold 2% of my stake to get them to their required level of investment. John Moulton, who's the other big shareholder of MANOLETE, has always been a very unwilling seller. He sees huge value in the business going forward, and, and that's how we got myth out to to where they needed to be. So what we'd swapped was, Cornerstone Investors who'd done a fantastic job for us, for a much more long term strategic investor in the business, which which was, we think, a a very good thing indeed.

30:57 The our brokers, Bill Hunt, understandably asked me to to sign up for a hard lock in for three months and then a softer lock in for another three months, which was absolutely fine, of course. But that shouldn't be interpreted at all of me selling any further shares, and I'd I'd stress that under the HSBC RCF, I can't go below 10%. So please don't read into that, but I'll be selling shares in in as soon as these lockups end after six months' time. The investment thesis, well, 2021 should have really been the fruition of all our hard work that had been put in the ground of MANOLETE and The UK network.

31:43 Very high level of realized profits, which will be clearly reported with all the huge number of 108 cases realized. I think we're up to about 29 now. Gross settlement values of, I think, £28,000,000, £29,000,000, which is just astronomical, so way above forecast for that. The cash delivery, very, very strong indeed, which we've touched on. Where the weakness is is the new case pipeline in the fair values, the unrealized profits is where the weakness is because of, wish you soon that kind of standing on our hose pipe of of insolvencies. Not completely. As you can see, we're we're very busy, but there's a great big bulge building out now behind Rishi, which he's probably gonna complain on tomorrow, that, economic reality, the distortion is gonna have to be corrected sooner or later in the economy.

32:37 So I think the questions that have been asked about MANOLETE in the past since the IPO about fair value accounting, will these turn into realized gains? Well, as you can see from the data I've I've presented today, well, a resounding yes to £28,000,000.29000000 pounds worth of completions this year, turning in those unrealized profits into realized profits and then into cash generation to repeat £5,100,000 cash in the last quarter alone covering all running costs, including two forty live cases, which is outstanding. The government understands, being made very clear that, they can't keep these support measures going, indefinitely.

33:25 We will hear tomorrow what the plan is. I doubt whether all the measures will be turned off immediately. As I say, my own guess, but it is just no more than a guess, is that there will be a tapering and maybe some specific support to certain sectors. It was good to see the arts sector and and a couple of other sectors being targeted for specific amounts of money by the government, which was which was great to see. We're obviously very busy. The number of new cases continues to do well. So as I said, there was 16 for for for for February, 17 in January, 14 in December, and 11 in November. So the trend, as you can see, is is creeping back up very nicely, but not at the levels pre, pre COVID, which were were were going up to twenty six cases in a month. So that's the kind of we're we're from 26 new case investments a month down to more like fourteen, fifteen, sixteen, seventeen, at the moment.

34:30 Picture of our friend, Rishi. So as he said in December, the, end of the pandemic, is starting to begin, which is fantastic with these amazing vaccines that have been produced, but the economic emergency, Rishi's worse Rishi's words has only just begun. And Rishi Sunak in parliament were on records that The UK was to suffer the worst economic decline for three hundred years. So it's a morbid conclusion for the economy as a whole and I think a lot of pain in many, many sectors. But the rather brutal truth of it, back to the Francis Bacon painting where I started, is that although this has slowed MANOLETE's progress in the short term, this very likely underwrites a very strong performance of the business in the medium to long term.

35:23 The recent weakness in the share price, which obviously is concerning for all of us on this call and maybe of interest to those nonshareholders, is that it brings MANOLETE much closer to its IPO price, which is $17.05. It's $2.80 today, but it's risen strongly in the last couple of weeks. And what one's buying is a business that is really three times larger than the company that was floated in December 2018. I take the numbers here in the boxes from the full year March 2019. So the number of new cases signed then was sixty one. For the first ten months of this year, a 179. In that, 2019 year, we completed 35 cases. As I stated earlier, we're up to 129 as of today, so almost four times bigger than the year we IPO ed. The aggregate settlement values are up almost 200%.

36:18 Number of in house lawyers have really driven the scale of the business up a 175%, number of live cases up a 187%. So as I say, there seems to be a slight disconnect between where people are or where the market is is it's got the the company and where the company has actually got to. Obviously, no one's got a crystal ball on what's gonna happen if there were to be, you know, the horror of one of these mutant strains that that really got hold and a new lockdown, new economic support measures, obviously, the the rough orders that we've encountered over the last few months would probably continue. We would argue that it cannot continue forever.

37:05 That really brings me to a close on my presentation. Thank you very much indeed. I'm very open to any questions. Hand back to Mark. That's brilliant, Stephen. Going to need to submit your questions using the Q and A tab situated on the right hand corner of the screen. But just while the company take a few moments to review those investor questions submitted already, I'd like to remind you that a 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. I'd also like to remind you that your feedback is important to the company. And immediately after the presentation has ended, you will be redirected for the opportunity to provide feedback in order that the company can better understand your views and expectations, and we would be very grateful if you could allocate just a little bit of time.

37:53 Stephen, I know I haven't given you a lot of time to review the Q and A. If I could just ask you to click on the Q and A tab. If I could ask you to start at the top and work your way through, if I could ask you to read out the questions, perhaps who they're from, and give an answer where it's appropriate, and then I'll pick up from you at the end. Super. So, Kieran thanks very much indeed, Kieran. So his question is, who do MANOLETE consider to be the major competition for them in the current space? Do you have a competitive verge on the competition? So it's a question, one I've been asked many, many times. The short answer is the competition from MANOLETE is the old model. It's a no win, no fee model. As I said when I was going through the market analysis, about 85% of the market is still done on the old way of doing things and no win, no fee, and 80 insurance where the costs are 200% the size of damages.

38:47 And it takes time to educate insolvency practitioners and their lawyers to move over to the MANOLETE way. When you look at them at 15%, which is controlled by the third party litigation funders, MANOLETE is a 67% market leader in that segment. The next highest was just 5%, which was Harbor litigation funding, which is an excellent outfit run by a lady called Susan Dunn. Susan does not operate. Harbor does not operate in our in our space. Harbour is very much, like Burford, focused on much larger ticket international global commercial litigation. There've been a number of firms that have tried to compete.

39:34 Rosenblatt most recently, with the Islero product. But if, those who follow this sector quite carefully, it appears that, Rosenblatt are aiming at the smaller commercial end of the market, kind of the Burford type and harbor litigation type end of the market, but the smaller value. So Burford Harbor, I believe, are kind of they wanna be putting $10.15, 20,000,000, dollars to work in cases normally. So there's there's smaller commercial cases where I believe, Rosenbatt's, litigation funding business is aimed at now much more than insolvency. They seem to be saying they're looking at later stage insolvency cases, which doesn't make any sense to us, to be honest. That's that's really the riskier end, so they might wanna look at that. The the other the other firm that who who did try and compete, was Ferguson litigation funding. The law firm, again, had set up its own, internal fund.

40:39 That started in April 2016 when the Jackson reforms, came through an insolvency. And to cut a long story short, as we listed in December 2018, Ferguson litigation funding liquidated itself, and all its people left, obviously, at exactly the same time, bizarrely. They are no more. Why is it so difficult to compete with MANOLETE? I think it really goes to this referral nature of our business. We've been in the market for many years. The people who work for MANOLETE are have been spent their entire career as insolvency litigation practitioners, lawyers, or or or liquidators in The UK, and they are tried and trusted people. They understand the unique challenges of of the sector we work in.

41:37 And we've worked with more than 200 plus firms, insolvency firms on a repeat basis. And when I say 200 accounting, for example, Begbie's is one even though we've worked with office about 15 different offices of Begbie's and always on repeat basis. So whenever we've worked with a liquidator or administrator, a trusted trust in bankruptcy, and we've backed a case, they've always come back with further cases. And I really don't think the other litigation funders can say that because they're they're dealing with a one off divorce case or a one off petition case. It just hasn't got that kind of high quality, repeat, referral nature to, to to to their markets. So, Kieran, thank you very much. I hope that answered your question. Moving on to Simon c. Thank you, Simon. What capacity do you have to take on new cases?

42:29 Is there a maximum number of cases you can manage at one time, and how do you scale this up? So, again, quite a common question. Thank you, Simon. So our, lawyers, we think, can cope with at any one time. Remember, they're not doing the legal work. There's always an external law firm, sometimes barristers involved, actually doing the day to day processing of the case. We are really supervising and and just taking the decisions on those cases because there are cases. So any one of them can manage around thirty, thirty five cases at any one time. As I said, we've got 11 lawyers, so that gets you up to about 300,350 capacity. We've got 240,250 live at the moment. So we've got got a nice buffer there to to to work into.

43:19 We've got a new lawyer coming on board in a couple of months' time in The Midlands, lady we've known for a very long time. Delighted she's accepted our offer. So that'll add another 30 and good coverage in The Midlands as well. So I think that gives us plenty of headroom. And the second part of question, how do scale it up? It's what it's again just accepting a new lawyer into the fold. And as I said, we we we are we're being asked by QCs downwards to join MANOLE on a very regular basis. So that's never been a critical constraint at all in in growing the company. Andrew c asks, maybe a similar question here. You mentioned previously in the household, I can manage up to 25,000 cases.

44:04 What does this figure increase to if you hire junior lawyers to support the current team, and what would you expect those junior lawyers per year to cost? Super question. So phase two of the regional network is under these very senior lawyers is to add those junior lawyers exactly as you're suggesting there, Andrew. And they would be doing the smaller ticket. So director loan accounts tend to be 50,000, £100,000, kinda cut their teeth on on those kind of cases. And I think their cost probably would be more like $6,070,000, whereas more senior lawyers are more like a 100,000 plus plus kind of $1,520,000 pound bonus a year. So that's kind of the rough scale of the of it.

44:55 Leo asked, do you receive interest or penalties for payment plans or delayed recoveries? Again, excellent question. So, Leo, we don't. So the reason why we've looked at this very closely, we would start to encroach into offering credit facilities to individuals, and that gets you into a whole area of the law that really we didn't want to get into on a regulatory and capital reporting standpoint. So we don't our returns are very, very high as you've seen on a very consistent basis. So we we thought if anything was it was maybe skimming it too close by charging a strong interest on top. What we what we do have and to enforce our our payment plans is, very importantly, a legally binding settlement agreement that the other party has signed up to. And this is why we really don't like going to trial because if you go to trial, then the the director loses. He's been told by a judge he's got to pay £500,000, a million pounds. The director hasn't agreed to that. In fact, he's fought tooth and nail not to pay that. Even if you get a papers paper in a judgment from a judge saying, MANOLETE whether you're gonna get it from the gentleman or the lady is another question altogether.

46:23 Whereas in our 98% settlements, we've sat down with them online or physically, and we've agreed and we've drafted up a a settlement agreement that is fair and manageable, for them. And, and that's why we've had such a good record of of, of recovering the amounts owed. If they breach that that, settlement agreement, they are in breach of contract. In twenty one days, of issuing us an immediate statutory demand, we can have bankruptcy proceedings, and they lose everything if that's the case. They lose their house. They lose they lose their business, their shareholder shareholdings. Pension can even be got into, and that's why they've settled with this in the first place. It's they want to protect those assets and carry on. So that's a very big weapon that that that we yield and a weapon that can be wielded very, very fast.

47:21 Abby asks how competitive is the process of winning new cases, and is there a preferred size of case you'd look to take on? Excellent questions. So competition. Now and again, there will be the the liquidator will tell us that there are there's one or two other funders looking at this. So there's a firm called Henderson Jones, A couple of very nice guys, quite young guys, been running a similar model to MANOLETE for about four, five years now. Please look at their accounts in Companies House. They're micro accounts. So they've not scaled the business. Maybe they don't want to scale the business. They've got some very good handful of relationships, I think, in in in particularly in London, and so they've got a kind of niche there. So now and again, Henderson and Jones and and MANOLETE will be bidding on the same kind of kind of case. Preferred size, well, the nice thing about the small cases is they tend to go very quickly at slightly lower returns. So, usually, we're we're we're we're getting about a 180% return on investment but in about four or five or six months, which in IRR terms is very, very high indeed when you when you analyze and utilize those numbers. The bigger cases take longer, more like eighteen months, twenty four months to complete, but we're talking millions of pounds. So I mentioned the £7,500,000 settlement in November.

48:48 Before that, we had a £15,000,000 settlement a month or two before our money multiples. So for each pound we put in, we got we got, I think, £23 back, which, again, is eye wateringly large, never seen before. You're talking kind of Google investment levels of return on these things. So, yeah, we we love those, but for very, very different reasons. So the money we put into both the upfront and then the legal fees on the £7,500,000 case, for example, were a £158,000. Our share of that £7,500,000 was about £2,000,000, so a fantastic return. On the £15,000,000 claim, we put in, I think, 250,000 of total costs and our share of the award of the settlement, sorry, was, I think, about £4,500,000.

49:38 So yeah. Just unheard of returns. Jason s asked, do you ever compete for deals, or or are you usually the sole bidder? The second bit of that question, we we answered the first, Jason. Thank you. But the second bit, usually, Jason, the sole bidder. So as I said, every liquidator administrative that's ever had a case financed by MANOLETE has been delighted with the outcome even if we've had to pack up and and go home because the the director's gone bankrupt and there's no assets, which is very rare, but, but it happens. We've given it a go. We've we've we've we've showed to his regulators. He's done a very good job by getting MANOLETE to finance that. But we're usually 90% plus of their time. You're getting very, very quick strong cash returns into these insolvency states for the creditors.

50:30 And so these are very, very busy people. What they what you tend to find is is is that, they have, you know, very, trusted relationships, and I would say MANOLETE now is ubiquitously the the trusted relationship in the in the insolvency sector. Andrew c asked just taking a swivel water. Quite a long question. Stephen, MANOLETE is 6% market share based on a number of claims. Well, cash realizations, MANOLETE is roughly 3% market share. Does achieving 10% market share necessitate that you successfully acquire a few very large insolvency cases per year? At what headline claim figures do you see? Yes. Interesting. So, yes, I think what what you'll notice with our numbers is that the average case size has been gradually increasing year after year as we get more and more bigger cases. A lot of people know that we quite normally at at the at the year end do a slide of what used to be our kind of five bigger biggest cases. Now our 10 biggest cases, and I think last time we did it, our 17 biggest cases, all because they're over a million pounds headline value.

51:42 So out of that 240 odd live cases at the moment, we're probably up to, I don't know, maybe 25, 30, particularly big cases. So the average is is is tending up. It won't tend up forever because the market doesn't look like that in The UK. So professor Walton, said that, yes, there are some there's a decent number of outlier cases. There's there's a kind of sine wave, if you like. And the peak of that sine curve is about a headline claim size of of £500,000 that gets settled, for about half that. And that's a good rule of thumb in our in our line of work is that you get about half the headline claim value would tend to be in a mediation, what you'd walk away with. Sometimes better.

52:27 We've been at mediations. We've got every single penny plus cost. Sometimes worse because they just haven't got the money or you're convinced they haven't got the money. You just want to take what's available, take your return, and move on. Where do you start bumping into, players like Harbour, Burford, Van Very, very, very, seldom. I can't remember a time ever in twelve years where we've can be competing against Harper, Berthold, or Van Nen on on any of our cases. It may be they were somewhere in the in the background. I don't know. So that that is my hand on our honest answer. I think where they're very active in our in our in the insolvency world is more the cross border insolvency. So these huge fraud cases in The Cayman Islands and in Antigua and, and in Switzerland, MANOLETE just don't touch that kind of claim.

53:18 And Burford's got a fantastic big enforcement team. So when they've got, judgment against a shady international fraudster in the Cayman Islands, they and then he moves all his assets to Switzerland and then to Australia. Burford have got the infrastructure to chase these people down. We haven't. We've got no desire to. It costs a huge amount of money. It's just a very, very different business model to Burford's. We're aiming at the, classically, the the the the director who's, phoenixed five or six companies, ripped off his creditors, ripped off the HMRC, not paid his tactics taxes, flipped his employees around, ripped off his pension fund. And, hey, presto. He's got a £10,000,000 house in Surrey and a nice bunch of buy to lets in in Dorset and in Devon with with no with no debt on them because he's he's he's he's extracted so much cash tax free from from all these companies.

54:16 That's the kind of typical person that that MANOLETE is after. Paul m asks, has the number of new cases being signed dropped by the same percentage as the drop in insolvencies? That's a very good question. So, Paul, the number of, the the answer is no. So the number of, insolvencies has gone down, I think, by about 40 odd percent. The number of new cases has increased in MANOLETE this year by I think I had it about 30% as of a day or two ago. So we're actually up year on year. The reason for the profit warning is that Pillhunt and Liberum were expecting us to keep on these kind of huge 100% increases in the number of cases. That obviously isn't gonna happen. We we warned on that in November, and when then we warned on that in in January.

55:05 So still increasing, still very, very busy. Cash coming in very, very strongly, but not those fair value of new cases at the moment. Will it all catch up once the government takes these supports away? Well, we would argue that's a very lousy thing to happen. Stuart b asks, hi, Steve. Thanks for the presentation. Can you comment at all on the reduction in holding bone Michael Ford? No. I'm glad someone asked. Thank you, Stuart. So Mike, very old friend. Him and I got divorced at pretty much the same time. We were both 40. So going back, fourteen, fifteen years, we shared a house together in Ealing. I set up MANOLETE. Mike chucked in some money at the time to when it was just an idea, a glint in my eye, and that's where he got his shareholding from. Mike had not sold other than the IPO, he'd not sold any shares. He's way past his his lock in period. I saw yesterday, I think the r and s came through on the email and then onto onto onto the stock exchange. I had no idea Mike had sold some shares, but he's never had anything to do with with the business.

56:08 Yes. He was director for a number of years, but purely as a kind of representing himself as a shareholder. He's never had an operational role in the company. So if, you know, it's it's a free world. He's he's he's collecting on on on the fantastic support he gave me and John Bolton, who hasn't sold the other than being forced to in the IPO. So that was the story behind Mike. Russell b. If insolvencies increase as per MANOLETE's prediction I don't think it's just us Russell's fairness. Think it's from the School of Economics, Federation of Small Business, BBC. I think everyone's predicting that they will increase. So MANOLETE's capacity to take on cases with the current team is in place, maximum number of cases capacities with the with the current team, Are there plans to put more lawyers in place for future growth? So absolutely. So as I mentioned, this lady joining in The Midlands in the next couple of weeks. The lady joining in Liverpool in, June, which we think probably will coincide in, in an increase around that time of, year.

57:15 And we will then watch very closely with that should give us capacity for about 400 cases a year by the time those two ladies have come onboard, and then we'll see how things go from there. As I said, Russell, there are there's never been any shortage of people knocking on the door wanting to join, MANOLOETE. So that's never been a critical constraint. Steven W, should the increase in cases happen as projected when government support measures are withdrawn, at what rate can MANOLETE expand its capacity? Again, I think we've answered that in all fairness, Steven. And, Chris, if I'm to you because you can have known what other questions come through. Ivan asked how is the MANOLETE gain on vintages tables translated to the income statement? So the MANOLETE gain on the on the vintages table is you've got the settlement monies. You've then take off costs. You then take off what the share going to the insolvent estate, the creditors, and that is MANOLETE's profit, its gain.

58:16 And that should, coincide very closely with the, realized profit in the accounts. But bear in mind that the vintages table is the year is based on the year that investment is made, whereas a profit and loss account will be the the the realized gain would be year that case is closed. So there'll be a temporal disconnect between the two, Ivan, that, probably is more for Einstein than than me. But the so just so you understand the two different basis of why those should be different. And we do update the vintages table every time we do it. If we've had to take a provision on a case or we've had to write off a small amount, we'll immediately reflect that in the vintages table. D h asked, hello. How much impact is new business start up at Rosenblatt impacting?

59:07 Well, Nicola Faulstein, their CEO, said they'd signed one case since they one insolvency case, so we've signed a 180. So I think that hopefully answers your question, Dee. And, they're they're not looking to buy insolvency cases anymore. That's my understanding of what Nicola has said. Hope I haven't got that wrong, but that's my understanding. They're they're looking at really funding commercial cases at the small end of Burford or doing much later stage insolvency cases. Ivan, Mark, as long as we're we're okay to carry on, maybe I'll do a couple more questions. When MANOLETE purchases the right to a case, if the case is won, how much does MANOLETE pay to the creditors and insolvent estate? So, again, super question.

59:54 Where it starts, Ivan, is so we get a settlement. Money comes in. We get our cost back first always, no matter whether we're purchasing or funding. Always get our money back first. Every funder will do that. And then the remainder, the the net gain is split usually $50.50 between the insolvent estate, the creditors, and MANOLETE. But as that as that net gain gets bigger, so almost bigger, the £7,500,000 case, the £15,000,000 case. So once you get into a million pounds, the shares of the creditors will increase to maybe 55, 45 or sixty, forty. Then if it goes up another million pounds, it might be 60, 40, then it might be $70.30. We tend to stop at around that that level. So if it even gets to 10,000,020 million, it's usually seventy, thirty split.

1:00:43 Maybe in one case, it's been $80.20 for but that's out of 600 plus cases. But the norm is about fifty fifty until you start getting into quite serious numbers. Douglas, g, I appreciate the sentiment and updating the market as soon as possible after the board meeting, but for the sake of an hour and a half yeah. Look, Doug, it's a great question. Why didn't you why didn't you do the RNS in the morning? Douglas, I understand. I thought that's what was meant to have I used to be an investment banker, but I followed the advice of of our nomad. I followed the advice of my chairman, and the advice we were given in our PR advisers was was to get the announcement out immediately because of the MAR rules, which is the the market abuse rules. We decided that we weren't gonna hit the the the the forecast at kind of midday.

1:01:37 We drafted the release, and they all those advisers around me and my colleagues around me said, you have to get out immediately. Otherwise, there's a false market. So I'm I'm I'm sorry. Those are the rules as as explained to to us as a board. David b, how will the expected future tsunami of case affect the no win, no fee model versus MANOLETE model? I don't think the tsunami is really gonna change it. I I think, David, the I think I think Stephen, based at the judge on our on our board, I think he summarized it best for me. He he he he started working with us in 2017. He started coming to the team meeting. So once every week, every couple of weeks, we get the entire team of lawyers. Now around a Zoom call, they all sit all you all used to come in physically and and sit around a very big table, and Steven used to to to to sit there listening to to to us going through every single live case.

1:02:34 Stephen then started coming to the odd mediation with, with either me or or some of my colleagues, understanding how how how we work things out with, with the defendants, obviously, at board meetings. And Stephen's view to me is that, looking at the results and the ethics of what we do, his view is that almost all insolvency litigation should be done this way is what he said to me. It's a very fair model. It's a very effective model. Slow justice is no justice. The the the time it takes for a CFA and an ATE model to get a result is on average about four years. The the the head of in Gately, London went on record at at a conference and said they they've got a huge amount of whip in there, about 10,000,000 of whip, and it takes them about four years to recover their whip, on on insolvency, no win, no fee. MANOLETE, as you've seen, is is is very much faster, and therefore, the costs are much lower.

1:03:34 And therefore, the amount going to the creditors, HMRC, the pension funds who have all lost out is much, much better. And that's important for The UK post Brexit and post post COVID. Quick question on cartel cases. Mark, I might hand back after you to you after this one. Yeah. Cartel cases, so that's a pretty good one to end with. Brilliant. Are you able to offer an update on cartel case specifically of current carrying value for them, but a general update would be appreciated. Sure. So what we said at the interim stage was we're now gonna be looking at these on an annual basis before it had been on a semiannual bay every six months because it was quite a new group of cases. So our perception of it was changing much much more rapidly. Now it's a lot more stable.

1:04:26 We've had a report by, our expert valuers, that came in, of those cases at the interim stage. So, that'll be central to the board's discussions at the year end. But what I would say is that the one area where we are at the affected by the slowdown in the courts is is actually the competition appeals tribunal has been slowed down heavily by the COVID impact. So not as much progress on the issued case, the Royal Mail's case, a number of other cases has hasn't progressed anywhere near as far, as as we were hoping. So it'll be muted, I would say, the any movement in the Fair Valley, if at all. I don't wanna prejudge the boards to deliberations if at all. Those are my personal personal views. It's not it's not been the kind of progress that we've seen in in years before.

1:05:27 What I would also add, and I said this at the I think at the year end, we are now gonna start getting close to issuing our claims on these cases. So I think we need to be very careful in the interest of shareholders that we stop talking quite so openly about the valuations of these because we don't want to communicate, obviously, to the paying defendants what we might be happy with. So please bear with us on that as we move to the kind of execution phase of that. I must say that was a tremendous, group of of questions, Mark, but probably in the interest of time, I should hand back to you. That's very kind. Thank you very much indeed, Stephen. As you say, think you've probably addressed most of the questions submitted by investors today. And of course, thank you to everybody for submitting those. And any questions, of course, we haven't got around to, seeing, we will obviously review those. And as I said earlier, publish the responses on the Investor Meet company website.

1:06:21 Stephen, I guess, just finally, if I could ask you for a few words to wrap up. I know feedback is particularly important to the company. And obviously, after this, we'll redirect investors to provide you with feedback. Sure. Well, again, thank you very much for your time. I think in summary, COVID and the government's reaction, completely understandable, very important for so many reasons in human terms. It's completely understandable. The impact on MANOLETE has been to slow us down. The huge rate of progress we were making every year, which is almost doubling our KPIs and financials year on year, That has slowed down. It's still, I think, impressive by anyone's standards. These restrictions cannot go on forever.

1:07:09 We will see tomorrow. We should get some signposts from from the government when when they will start easing those. And I think that underpins MANOLETE's, value, for the next three, four, five years because just like the Lehman Brothers crisis is still in court today with lots and lots of lawyers, what, twelve, thirteen years later working on that case, the effects of of the pandemic and the economic fallout of that will last for years and years and years. And as morbid as it is, MANOLETE will be a beneficiary of that because, sadly, directors would have abused an awful lot of of their position and their responsibility and legality of their position in these very testing times.

1:07:58 Again, thank you all very much indeed, and thank you for your support as well. That's great. Thank you very much indeed, Stephen. Could I please ask investors not to close this session as you'll now be re automatically redirected for the opportunity to provide feedback? If you access meeting via our website, then the feedback page will appear. If you access this meeting via the link sent to by email, you'll simply be asked to log back in to submit your feedback. We'd be very grateful if you could spend a few moments just to give the company your views and expectations. On behalf of, Steven and the management team at MANOLETE PARTNERS, I'd like to thank you for attending, this evening's presentation. That now concludes today's session. Good evening to you all, and thank you once again for your time.