TIDMMANO
RNS Number : 5688D
Manolete Partners PLC
27 June 2019
27 June 2019
MANOLETE PARTNERS PLC
("Manolete" or the "Company")
Audited results for the year ended 31 March 2019
Maiden annual results ahead of expectations
Manolete (AIM:MANO), the UK's leading insolvency litigation
financing company, today announces its audited results for the year
ended 31 March 2019.
Financial (statutory and non-statutory) highlights:
-- Revenue up 30% to GBP13.8m (FY18: GBP10.6m)
-- Gross profit up 49% to GBP10.1m (FY18: GBP6.8m)
-- EBIT pre-exceptionals up 77% to GBP7.2m (FY18: GBP4.1m)
-- Profit before tax(before exceptional IPO costs) up 85% to GBP6.8m(FY18:GBP3.7m)
-- Profit after tax (adjusted for exceptionals) up 70% to GBP5.5m (FY18: GBP3.3m)
-- Proforma earnings per share (adjusted for exceptionals)(1) up
70% to 13 pence (FY18: 8 pence)
-- Maiden proposed final dividend of 1.49 pence per share
-- Investment in cases up 72% to GBP18.2m (FY18: GBP10.6m)
-- Case gross cash inflow of GBP8.8m up 48% in FY19 (FY18: GBP5.9m)
-- Cash balances of GBP9.7m, no debt
Operational highlights:
-- 103% increase in new core UK insolvency cases: 59 in FY19
(FY18: 29), excluding Cartel Cases
-- In total, 61 new case investments in FY19 (FY18: 49), representing a 24% increase
-- Ongoing delivery of realised returns: 35 case realisations in
FY19, generating gross proceeds of GBP9.3m (FY 18: 33 case
realisations generating GBP9.0m of gross proceeds)
-- Continued increase in average size of realised case
completions: realised gross profits grew by 20% to GBP3.5m in FY19
(FY18: GBP2.9m)
-- ROI for all case completions since inception of 180%
-- Average money multiple of 2.8 times for all cases completed since inception
-- Average case duration across the full portfolio of 195 completed cases is 11.6 months
-- 47% increase in live cases: 84 in process as at 31 March 2019 (57 as at 31 March 2018)
-- Roll-out of regional network with in-house lawyers recruited
in: North West, South West & Wales, Eastern, North East,
Scottish and Southern regions of the UK
-- New case enquiries at all-time record levels for the four months ending 31 May 2019
-- At the time of writing, 44 new case investments made since
IPO in December 2018 (averaging c. 7.3 new case investments per
month)
-- At the time of writing, 19 cases completed since IPO
(averaging over 3 case completions per month)
-- Currently 99 live cases ongoing
-- Successful IPO on London Stock Exchange's AIM market raising net proceeds of GBP14.6m
-- Significantly increased capital capability and financial
covenant - extension of revolving credit facility with HSBC from
GBP10m to GBP20m at a maximum rate of LIBOR plus 2.75% plus
GBP14.6m net IPO proceeds
-- Three key strategic partnership agreements signed: exclusive
three-year sponsorship contract with the Institute of Chartered
Accountants in England and Wales (Restructuring and Insolvency
Community); Key Strategic Partner of R3 (the insolvency industry's
trade body); three year sponsorship deal with the Insolvency
Practitioners Association.
A copy of the annual report and accounts will be available on
the Company's website today and will be posted to shareholders in
due course.
Steven Cooklin, Chief Executive, commented:
"We are delighted to announce our first set of annual results as
a public company, following our AIM flotation in December 2018.
This strong set of results is the latest milestone in our track
record of delivering profitable growth, underpinned by our core
ability to source, analyse and price complex legal risk. We
achieved impressive double-digit growth in revenue and EBIT during
the period, delivering continued outstanding investment returns
yielding an average money multiple of 2.8x and ROI of 180% on
completed cases since inception. The activity levels within the
business are at record levels, highlighted by the 44 new case
investments that the team has made since the IPO. This firmly
underpins our confidence in the current and future trading
performance of the business.
"We look forward to working with many more Insolvency
Practitioners and their lawyers, as we deploy the proceeds of the
IPO, as well as the enhanced debt facility with HSBC, to accelerate
our growth plans through financing more and larger insolvency
cases, and to delivering continued stand-out returns for insolvency
creditors and shareholders alike."
For further information please contact:
Manolete Partners
Steven Cooklin (Chief Executive Officer) via Instinctif Partners
Peel Hunt (NOMAD and Sole Broker) +44 (0)20 7418 8900
Guy Wiehahn
Adrian Haxby
Rishi Shah
Instinctif Partners +44 (0)20 7457 2020
Tim Linacre
Catherine Wickman
Lewis Hill
Katie Bairsto
(1) On a proforma basis: calculated on the basis of the shares
in issue after completion of the IPO. The only exceptional item is
the cost of the IPO on the AIM Market of GBP882,000.
Chairman's Statement
For the Year Ended 31 March 2019
Overview
I am pleased to report that the Company has made excellent
progress over the past year, both pre- and post-admission to AIM.
When I became Chairman at the time of the Initial Public Offering
in late 2018, we set out plans to capitalise on our first mover
advantage and established track record, in order to accelerate the
Company's growth, primarily through investing in more cases and
expanding our UK regional network.
The Company's results reflect the strength, resilience and
capabilities of the business, as it continues to increase the
number and average size of new case investments through its
expanding network of Insolvency Practitioners and Insolvency
Lawyers throughout the UK.
Financial results
The business achieved impressive growth in the year ended 31
March 2019, with revenues increasing by 30% to GBP13.8 million
(FY18: GBP10.6m) and profit before tax growing by 61% to GBP5.9
million (FY18: GBP3.7m)
The Company has achieved this growth through: the recruitment of
additional high quality in-house lawyers, the successful deployment
of the funds raised through the HSBC credit facility and the IPO,
and continued hard work of the team.
Strategy
We remain focused on strengthening the profile of Manolete, as
we continue to increase the number and average size of cases within
our insolvency litigation investment portfolio.
An important component to our strategy is to build upon our
ever-growing network of established Insolvency Practitioner and
Insolvency Lawyer contacts throughout the UK. Over the past year,
we have made considerable advancements in strengthening the UK
team, with the appointment of six high quality in-house lawyers in
different regions across the UK. We believe that, with an enhanced
status as one of the UK's leading specialist insolvency litigation
finance companies, combined with an increased regional presence, we
will be able to strengthen our relationships with Insolvency
Practitioners and legal firms, which will lead to an increased
volume of enquiries.
Further powering our growth strategy, this year we signed an
exclusive three-year sponsorship contract with the Institute of
Chartered Accountants in England and Wales (Restructuring and
Insolvency Community), became a Key Strategic Partner of R3 (the
leading trade association for the UK's insolvency, restructuring,
advisory, and turnaround professionals) and agreed a three year
sponsorship deal with the Insolvency Practitioners Association.
These sponsorship deals are an integral part of our carefully
planned marketing strategy. They give the Company a very high
profile with the insolvency community in their technical
conferences and networking events and ensure that the Manolete name
and its business model are well recognised.
Dividend
The Board has adopted a progressive dividend policy based on a
pay-out ratio of 20% of profit after tax, with one third being paid
as an interim dividend and two thirds as a final dividend. For the
year to 31 March 2019, the Board is proposing a final dividend of
1.49p per share. Subject to the approval of Shareholders at the
Annual General Meeting on 20 September 2019, the dividend to
Ordinary Shareholders is payable on 30 September 2019 to those
shareholders who are on the register of members at 13 September
2019. No interim dividend was paid for the part of the financial
year before the IPO.
The Annual General Meeting will be held at 10.30am on 20
September 2019 and we look forward to meeting Shareholders, should
they wish to attend.
Corporate Governance
The Board of Directors is committed to good corporate
governance. The Company has adopted the ten principles of the 2018
Version of the Corporate Governance Code as set out by the Quoted
Companies Alliance. Our arrangements are further described in our
Corporate Governance Statement in our Annual Report.
The Audit Committee report and the Remuneration Committee report
in our Annual Report describe the remits and approaches of those
committees to fulfilling their governance responsibilities. A
statement on corporate governance is also provided on our website
(https://investors.manolete-partners.com/company-information/corporate-governance).
People
Manolete's committed and highly-skilled staff are fundamental to
its success, and on behalf of the Board and the Shareholders, I
would like to thank all of our staff for their continued
dedication.
Outlook
We are confident that we have invested in a portfolio of cases
that will produce attractive returns for the Company. We are seeing
a strong stream of new cases, which gives us confidence in our
future prospects.
We believe that the business is very well-positioned to
consolidate its leadership position in the insolvency litigation
financing market. We raised GBP16.25m (before costs) at the IPO and
we are successfully deploying these funds to grow our case-load of
investments. We believe that the IPO has raised our profile
significantly in our marketplace, and we are building an
outstanding team of in-house lawyers to strengthen our regional
network, as promised at the IPO.
The Company has made a strong start to 2019 and we look forward
to a promising future.
Peter Bertram
Non-Executive Chairman
26 June 2019
Chief Executive Officer's Report
For the Year Ended 31 March 2019
I am pleased to report on a significant year of growth and
delivery to Shareholders for the financial year ended 31 March
2019.
IPO on AIM
In December 2018, we completed a successful listing on the AIM
market of the London Stock Exchange. The benefits of the IPO, in
terms of public profile, strength of balance sheet and cash
resources have emerged rapidly. In the final quarter of FY19,
Manolete invested in 21 new cases, averaging seven new case
investments per month. New case enquiries for the months of
February to May 2019 were at all-time record levels. With free cash
on the balance sheet at 31 March 2019 of GBP9.7m (FY18:GBP5.9m), no
debt, and our unutilised GBP20m four-year Revolving Credit Facility
with HSBC, Manolete is a highly credible financial partner to the
Insolvency Practitioners (IPs), solicitor firms and barristers that
provide us with case opportunities and a large proportion of repeat
business.
Our status as a well-capitalised public company has also greatly
assisted our ability to attract new legal talent to the Company.
The plan announced at the time of the IPO to build out a regional
network of locally-based, high-calibre, in-house insolvency lawyers
has already been largely completed with only one of the seven
regions across England, Scotland and Wales yet to be filled. The
North West region was already active at the time of the IPO and
since then, we have added highly experienced insolvency litigators
in Scotland, the North East, the East of England, South West &
Wales and the South of England.
The significantly increased financial and human resources now
available to the Company have just recently come on board and we
look forward to the long-term benefits that these will bring to the
Company and our Shareholders, as we grow the business and take
advantage of the opportunities available.
Strong operating and financial performance
Manolete has delivered another positive operating and financial
performance this financial year. Operating profit increased by 77%
to GBP7.2m (FY18: GBP4.1m), which was driven by several key
factors.
Core new case investments increased by over 100% to 59 in FY19
(FY18: 29), excluding the group of 20 Competition Cartel cases
("Cartel Cases") that we purchased in FY18 (two further Cartel
Cases were purchased in FY19).
The total number of new case investments (including the Cartel
Cases) increased by 24% to a record number of 61 in FY19. Manolete
has invested in new cases at a rate of more than one new case per
week throughout FY19. At present, this rate has increased to 1.5
new cases invested in per week, taking us to a current total of 300
signed investments (201 of which have been completed - three of
which are partially completed).
In FY19, completed cases recovered a gross total GBP8.8m in cash
(FY18: GBP5.9m) before payments into Insolvent Estates,
representing a 48% increase.
New case completions in FY19 were also at a high level,
resulting in a 20% increase in gross profit from realised cases -
35 completed cases in FY19 generating GBP3.5m of gross profit
(FY18: GBP2.9m from 33 completed cases). This means that Manolete
was completing a case every 1.5 weeks throughout the year, which
highlights the impressive speed of completion under our bespoke
insolvency litigation finance model.
The average gross profit per completed case was GBP99k for FY19
(FY18: GBP82k). The 20% increase in gross profit per case reflects
the continued rise in the average size per case.
The Cartel Cases continue to progress well. Our external legal
team has completed their Phase One work and is now working to
complete fully particularised claims over the next phase of work,
with a view to issuing the claims within the next nine to 12
months. 20 of the 22 Cartel Cases were purchased for a nominal
GBP5,000 per case together with a 50/50 profit share agreement. Two
particularly large cases were purchased for GBP100,000 and
GBP125,000 respectively, but in both of these cases, Manolete has a
90% profit share on the claims. Some of the smaller claims are
likely to be uneconomic to take forward into the next phase and
will be culled with low level costs on those cases provided
against.
The overall Cartel Cases opportunity remains highly attractive.
To reflect our increased confidence in the final outcome of these
cases as a group of claims, as at 31 March 2019, we have increased
our carrying value of the cases to a combined GBP5m (FY18: GBP4m).
The final outcome on the Cartel Cases is hoped to be a multiple of
the carrying value, but there is still much work to do to bring
these cases to final fruition.
Investment returns
Our investment track record, by vintage, continues to deliver
outstanding results. All vintages up to and including FY16 have
been completed and FY17 is already at an 87% completion rate. FY18
contains most of the Cartel Cases and will therefore have a longer
completion duration than usual. Manolete's model is characterised
by short case durations, high ROIs, exceptional money multiples and
very high IRRs.
Financial Number of Number %ge Number Total Total Total IP Manolete Duration Return on Money IRR % Valuation Average
year investments completed completion outstanding invested recovered gain share gain in months investment %** Multiple ** of live value
to date GBP000's** GBP000's ** GBP000's on ** cases per
GBP000's ** ** completed GBP000s Case
cases** GBP000s
2010 3 3 100 0 52 28 (24) 11 (35) 7 (67) 0.3 0 0 0
------------ ---------- ----------- ------------ --------- ----------- --------- ------- --------- ---------- --------------- --------- ------ ---------- --------
2011 0 0 100 0 0 0 0 0 0 0 0 0 0 0 0
------------ ---------- ----------- ------------ --------- ----------- --------- ------- --------- ---------- --------------- --------- ------ ---------- --------
2012 8 8 100 0 763 2,524 1,761 580 1,181 18 156 2.6 236 1,027 171
------------ ---------- ----------- ------------ --------- ----------- --------- ------- --------- ---------- --------------- --------- ------ ---------- --------
2013 10 10 100 0 174 780 606 316 290 7 167 2.7 281 1,084 181
------------ ---------- ----------- ------------ --------- ----------- --------- ------- --------- ---------- --------------- --------- ------ ---------- --------
2014 42 42 100 0 594 3,884 3,290 2,427 863 10 147 2.5 424 1,685 60
------------ ---------- ----------- ------------ --------- ----------- --------- ------- --------- ---------- --------------- --------- ------ ---------- --------
2015 39 39 100 0 1,404 7,648 6,244 3,290 2,954 13 211 3.1 526 1,934 60
------------ ---------- ----------- ------------ --------- ----------- --------- ------- --------- ---------- --------------- --------- ------ ---------- --------
2016 36 36 100 0 1,833 9,418 7,585 4,368 3,217 15 176 2.8 175 2,707 73
------------ ---------- ----------- ------------ --------- ----------- --------- ------- --------- ---------- --------------- --------- ------ ---------- --------
2017 31 27 87 4 1,097 3,755 2,917 1,679 1,238 10 148 2.5 652 6,705 131
------------ ---------- ----------- ------------ --------- ----------- --------- ------- --------- ---------- --------------- --------- ------ ---------- --------
2018 49 19 39 30 1,860 3,371 3,041 2,090 951 8 288 3.9 1409 10,555 185
------------ ---------- ----------- ------------ --------- ----------- --------- ------- --------- ---------- --------------- --------- ------ ---------- --------
2019 61 17* 28 44 849*** 1,739* 1,434* 745 689* 6 226* 3.3* 236* 18,197 217
------------ ---------- ----------- ------------ --------- ----------- --------- ------- --------- ---------- --------------- --------- ------ ---------- --------
279 201 72 78 8,626 33,147 26,854 15,506 11,348 11 180 2.8 394
------------ ---------- ----------- ------------ --------- ----------- --------- ------- --------- ---------- --------------- --------- ------ ---------- --------
*includes cases completed since the year-end
** only refers to completed cases
*** this vintage is still young and therefore the investment
figures are comparatively low
The number of completed cases in 2019 includes three partially
completed cases.
Given the record level of new case investments, particularly
since the IPO, the level of unrealised profit is naturally higher
than usual this year. However, it is our expectation that the
current cohort of live cases in our portfolio will perform equally
well compared to recent past performance indicated in the table
above.
The law changes in October 2015 (Small Business Enterprise and
Employment Act 2015) and April 2016 (the date the Jackson Reforms
applied to insolvency litigation) radically opened up the
insolvency litigation financing sector and significantly increased
the appeal of Manolete's model. We believe the model is now
increasingly perceived to be the most advantageous solution for
helping IPs maximise returns to creditors. Consequently, in the
last 18 months, we have seen a marked improvement in the number,
size and quality of new case enquiries coming into the Company.
This has been a continuing trend which underpins the increasingly
high quality of our portfolio (84 live cases as at 31 March
2019).
People and stakeholders
I am enormously grateful to our in-house legal team for their
pivotal role in delivering another outstanding performance over the
last 12 months. The IPO process, in the challenging market
conditions that prevailed towards the end of 2018, was a
significant distraction for management, including our Head of
Legal, Mena Halton, who nonetheless, kept the business moving
forward at a rapid pace. By the end of May 2019, we had doubled the
size of the legal team with some exceptional new hires and I
believe that the platform is well-positioned to manage the
continuing growth of our business.
I would also like to record my thanks to the many IPs and
solicitors who refer cases to us. Over 60% of invested cases are
from the same IP firms, and it is this recurring referral network
that is the core engine of the Manolete business which has been
built over the last 10 years. Every IP who has ever worked on a
live case with Manolete has always come back to us with further
case opportunities, which is testament to the bespoke insolvency
litigation financing model we have adopted, the quality of our
people and our expertise in financing cases.
IPs carry a heavy responsibility in the UK economy; they are
entrusted to recover funds (often in very challenging
circumstances) for creditors of failed businesses. Particularly
against the backdrop of the issues surrounding Brexit and various
other significant global financial challenges, an effective
recovery and insolvency industry plays a vital role in maintaining
the UK as a premier business destination. We are honoured to play
our role in supporting them.
I am pleased that we are delivering on the plans set out during
our IPO, as we accelerate our growth through investing in more
claims, accepting higher value cases and developing our UK regional
network.
Steven Cooklin
Chief Executive Officer
26 June 2019
Chief Financial Officer's Report
For the Year Ended 31 March 2019
I am pleased to give my review of the Company's audited results
for the year to 31 March 2019.
Revenue
The Company's total revenues have increased significantly by 30%
to GBP13.8m (FY18: GBP10.6m).Revenue is split between realised and
unrealised revenue, as follows:
FY19 FY18
GBP000s GBP000s
Realised revenue 7,148 6,725
Unrealised gains on investments
in cases 6,624 3,905
-------- --------
Total 13,772 10,630
-------- --------
Realised revenue grew 6% year-on-year to GBP7.1m (FY18:
GBP6.7m). We have seen a good level of realisations, with 35 cases
completing (of which two partially closed) in the year.
With a record number of new case investments, particularly in
the months since the IPO, unrealised gains on investments grew by
70% to GBP6.6m (FY18: GBP3.9m). This reflects both the development
of existing case investments and the increase in new case
investments in the year. The Company raised GBP14.6m (net of
expenses) from its IPO in December 2018 and is successfully
deploying this cash to acquire new cases, whilst not relaxing the
rigour of our investment appraisal process.
New cases increased by 24% to 61 in FY19 (FY18: 49 new cases)
and of those invested in during the year, 27 have been taken on
since the IPO. Excluding the Cartel Cases, the increase in new case
investments in FY19 was over 100%, which more accurately reflects
the development of the Company's core UK insolvency litigation
financing business. Investment in cases on the balance sheet
increased by 72% to GBP18.2m in FY19. Only GBP1m of the increase is
accounted for by the encouraging progress on the Cartel Cases. As
at 31 March 2019, there were 84 live cases in progress, a 47%
increase (FY18: 57 live cases in process). At the time of writing
we currently have 98 live cases in progress.
The majority of revenue was realised revenue. Realised revenue
was 52% of total revenue (FY18: 63%). The weighting towards
realised revenue reflects our strategy of securing early
settlements on many of our cases. The proportion of realised
revenue is lower this year due to the very high level of new
investment activity, particularly since the IPO in December 2018
(27 new cases were taken on between the IPO and the FY19 year-end).
We are delighted with the current portfolio of live cases and
expect them to perform in line with our historic investment return
levels. Although the normal caveat for litigation funding applies -
it is naturally very difficult to predict when cases will reach a
successful conclusion and accordingly the blend between realised
and unrealised gains will change from year to year. However, our
model has consistently delivered strong and fast investment returns
over many years and we have every expectation that this will remain
to be the case. The one exception is the Cartel Cases. They are
unique in our portfolio and will take longer to realise but the
potential returns are highly attractive.
In the majority of cases (excluding Cartel Cases) this year's
unrealised revenue becomes next year's realised revenue, as our
average case duration is circa 12 months. When a case is fully
completed, revenue is then recognised as realised and previously
unrealised gains on that case are reversed.
It should be noted that the full recovery on a purchased case is
recognised in revenue (the share going to the insolvent estate is a
cost of sale). However, on funded cases, only the Company's share
of the proceeds plus our cost recovery is counted as revenue. The
insolvent estate's share of a recovery on a funded case does not
feature in our accounts.
The following table illustrates the growth in cases being
purchased by the Company, rather than funded:
Totals Purchased Purchased Funded Funded
Number % Number %
FY18 49 41 87 8 13
FY19 61 55 90 6 10
As can be seen above, the proportion of our new cases purchased
has increased from 87% in FY18 to 90% in FY19.
Cost of sales
Cost of sales comprises: legal costs on realised cases, the
initial payments made to insolvent estates on our realised case
investments (both purchased and funded) and payments to insolvent
estates on successful realisations of purchased cases. Cost of
sales excludes payments made directly to the insolvent estates on
completed funded cases.
Gross profit
Gross profit grew by 49% to GBP10.1m (FY18: GBP6.8m). Our gross
profit margin increased to 73% (FY18: 64%). The growth in gross
profit reflects the movement towards larger cases, in both realised
and unrealised gains. It also reflects the increased number of live
cases in the Company's investment portfolio.
Movement in gross profit split between gross profit on realised
cases and on unrealised cases is as follows:
FY19 FY18
GBP000s GBP000s
Gross profit on realised
cases 3,463 2,886
Gross profit on unrealised
cases 6,623 3,905
-------- --------
Total 10,086 6,791
-------- --------
The table above shows, realised gross profits grew by 20% from
FY18 to FY19, whilst unrealised gross profits grew by 70%.
We analyse gross profit into the separate categories of funded
and purchased cases. Our strategic preference is to purchase cases
rather than fund them. Generally, our Insolvency Practitioner
clients, where possible, prefer the Company to purchase cases as
this gives them and the insolvent estate fuller protection from any
potential adverse costs. It also provides the Company with full
operational control of the case through the litigation process. The
gross profit analysis in the year was skewed against this trend,
principally due to the impact of seven large funded cases, four of
which were realised and the other three were unrealised.
FY19 % FY18 %
GBP000s GBP000s
Gross profit on funded
cases 3,606 36 860 13
Gross profit on purchased
cases 6,480 64 5,931 87
-------- --------
Total 10,086 100 6,791 100
-------- --------
Administrative expenses
Administrative expenses, including PLC costs, increased by 6% to
GBP2.9m (FY18: GBP2.7m) and fell as a proportion of gross revenue
from 26% to 21%. In FY18, the administrative expenses increased
because the Company adopted a conservative provisioning approach to
a few overdue debts. In FY19, the Company has decided that it has
sufficient provisions against overdue debts and that no further
material provisions are necessary and it hopes a proportion of
these provisions will ultimately be released, when recoveries are
made.
The reduction in administrative expenses caused by the
non-recurrence of significant bad debt provisions was offset by
increases in staff costs, as the Company recruited more in-house
lawyers to service increased activity. Staff numbers have increased
from seven as at 31 March 2018 to twelve as at 31 March 2019, as
the Company rolled out its promised regionalisation programme,
which we believe will lead to a significant increase in enquiries
and new cases. The Company is also incurring PLC-related costs
following its admission to AIM in December 2018. Our marketing
costs have increased as we have expanded our business development
activities since the IPO, in order to increase our market share and
secure a greater level of enquiries. As noted in the CEO's Report,
we have acquired valuable sponsorship rights with the three key
industry regulators and trade associations: The Institute of
Chartered Accountants in England and Wales, R3 (the insolvency
practitioners' professional association) and the Insolvency
Practitioners Association.
Statutory operating profit before non-recurring items (Earnings
Before Interest and Tax)
Operating profit before non-recurring items (principally being
only the costs of the IPO on AIM) grew by 77% to GBP7.2m (FY18:
GBP4.1m) with the operating margin improving to 52% (FY18: 38%).
Operating profit after non-recurring items was GBP6.3m, which was a
55% increase on FY18 operating profit. Operating profit margin
after non-recurring items was 46% (FY18: 38%).
The Company incurred costs of GBP1.6m in connection with its IPO
on AIM, where trading began on 14 December 2018 and GBP0.9m of
these have been shown as non-recurring items; the balance of IPO
costs of GBP0.7m were charged against the share premium
account.
Finance costs
Following the receipt of net IPO proceeds of GBP14.6m in
December 2018, all debt has been repaid, although the Company
agreed a GBP20m debt facility with HSBC in December 2018 to
facilitate the growth of its case load in the future. The Company
pays a 0.7% commitment fee on any unused facility with HSBC. As at
31 March 2019, the GBP20m HSBC facility was completely undrawn.
During the year, the Company incurred GBP0.4m of finance costs
(FY18: GBP0.4m). Loan interest amounted to GBP0.2m (FY18: GBP0.3m)
and the remaining costs of GBP0.2m (FY18: GBP0.0m) comprised the
amortisation charges of the costs of setting up the facility. The
unamortised costs of GBP0.6m in the balance sheet are being
amortised over the four-year life of the facility
Profit before tax
Profit before tax has increased by 61% to GBP5.9m (FY18:
GBP3.7m). The Company's pre-tax profit margin has increased from
35% to 43%.
Taxation
The Company's effective tax rate is 21.4%, as most of the IPO
costs are not expected to be tax deductible. FY18's tax rate was
quite low at 12%, because of the utilisation of tax losses brought
forward and the release of deferred tax provisions. From FY20
onwards, the effective tax rate is likely to approximate to the
current corporation tax rate, as the Company has relatively small
amounts of disallowable expenses. The Company will discharge its
corporation tax liabilities over the next few months.
Profit after tax
Profit after tax has increased by 43% to GBP4.7m (FY18:
GBP3.3m). The post-tax margin has increased from 31% to 34%.
Earnings per share
The earnings per share figures in the Statement of Comprehensive
Income are not directly comparable to the prior year because the
Company's number of shares in issue increased from 1,015,000 to
43,571,425 after the IPO. The earnings figures are also impacted by
the non-recurring costs of the IPO of GBP0.9m. After adjusting for
these two factors, proforma earnings per share increased by 70%
from 7.5 pence to 12.7 pence.
Investment in cases
The Company was managing 84 live case investments as at 31 March
2019, compared to 57 live cases as at 31 March 2018. The split
between Purchased and Funded cases at these dates is as
follows:
As at 31 March 2019 As at 31 March 2018
Funded 13 15% 16 28%
Purchased 71 85% 41 72%
-------- --------
Total 84 100% 57 100%
-------- --------
The total investment in cases amounted to GBP18.2m in FY19, an
increase of 72% (FY18: GBP10.6m). Investment in cases are shown at
fair value, based on the Company's estimate of the likely future
realised gross profit, plus costs incurred. Case valuations are
reviewed on a monthly basis but are only updated when there are
developments in the case. Case valuations can be reviewed
downwards, as well as upwards. Any material valuations (greater
than GBP0.1m per individual case) are corroborated with the
external lawyers working on the case, who provide updated legal
opinions as at the year-end and the half year-end. The Company does
not capitalise any of its internal costs, these are fully expensed
to the Statement of Comprehensive Income as incurred.
Trade receivables, stock and cash conversion
Trade and other receivables have risen to GBP3.8m (FY18:
GBP3.0m). However, the majority (GBP0.6m) of this increase arises
from the re-classification of the costs of setting up the HSBC
facility. In FY18, these costs(GBP0.6m) were set off the GBP9.5m
debt owed to HSBC. As at 31 March 2019, the Company was debt-free
and so has transferred the unamortised portion of these costs into
trade and other receivables.
Turning to trade receivables, many of the realisations achieved
are paid by the debtor promptly, especially where the debtor is a
large company, an insurance company or a wealthy individual.
However, in some cases, the debtor is dependent on selling assets
to realise cash or pay the award or settlement and hence cash
realisation can be delayed for some months. Where appropriate, the
Company will secure its position by obtaining charging orders over
the relevant assets. In smaller cases, the Company sometimes
accepts payments on an instalment arrangement. However, the Company
monitors outstanding debtors very closely. Based on realised
revenue and receivables as at 31 March 2019, the Company is
converting debtors into cash in 152 days, compared to 159 days as
at 31 March 2018.
In addition, the Company estimates that, out of the larger,
non-current debts, 82% of the debtor balance is covered by charges
over property, related liabilities to the insolvent estates or bad
debt provisions
On one funded case, we successfully supported a Trustee in
Bankruptcy in obtaining a Court order that resulted in a valuable
London property being returned into the bankrupt's estate. As the
Trustee in Bankruptcy was under pressure to distribute this value
to the creditors, Manolete obtained an independent, third-party
valuation of the property and acquired it for cash at that value.
Once remedial work has been completed, we will seek to sell the
property during the current financial year. This property is
currently shown on the balance sheet as stock, whilst the
refurbishment work is being undertaken.
The Company also monitors case cash realisations very closely;
this includes cash received directly by the insolvent estate of
funded cases. Annual case cash realisations have grown
significantly over the last five years from GBP1.2m in FY15 to
GBP6m in FY18 and up to GBP8.8m in FY19. In the month of March 2019
alone for example, the Company received GBP935,000 in cash mainly
from two case realisations(after deducting all payments due to
insolvent estates).
Borrowings and loans
The Company has been financed in the past by debt and retained
profits. However, the Company is now debt free. The net proceeds
from the IPO of GBP14.6m were received in December 2018. The
Company used GBP5m of these proceeds to pay off the debt owed to
HSBC. The Company now has cash reserves of GBP9.7m as at 31 March
2019. It also has an unused facility of GBP20m with HSBC (all of
the facility is currently undrawn) and this facility and the cash
reserves will be used to finance the growth of the case portfolio
over the next few years.
Patrick Lineen
Chief Financial Officer
26 June 2019
The Directors present their strategic report for the year ended
31 March 2019.
Strategy and Business Model
The Company's strategy for growth and its business model are
described in detail in the Annual Report. On page 13-14, we have
set out the principal risks which may present challenges in
executing the business model and delivering the strategy,
The financial statements for the year ended 31 March 2019
represent a very satisfactory out-turn for the business.
Year-on-year Operating Profit before non-recurring items and tax
and interest grew 77% to GBP7.2m and net assets grew 261% to
GBP28m, following our successful IPO.
The number of employees was 12 at the end of the financial
year.
The business continues to grow apace, at the financial year-end
the cumulative number of signed litigation investments has grown to
279 cases. Out of 84 live cases at the financial year-end, 71 of
these are purchased cases. In the month following the year ended 31
March 2019, the Company experienced a period of very high activity
with case completions resulting in over GBP0.6m of case
settlements.
Key Performance Indicators
Year Year % change
Ended Ended
31 March 2019 31 March 2018
GBP000s GBP000s
--------------------------------------------- --------------- --------------- ---------
Revenue 13,772 10,630 30%
Gross profit 10,087 6,791 49%
Operating profit before non-recurring items 7,212 4,071 77%
Profit after tax 4,664 3,261 43%
Value of investments 18,197 10,555 72%
--------------------------------------------- --------------- --------------- ---------
Year Ended Year Ended
31 March 2019 31 March 2018
No. No.
----------------------------------------- --------------- --------------- ------
Number of signed litigation investments 279 218 28%
Live cases 84 57 47%
Purchased cases 71 41 73%
Funded cases 13 16 (19%)
----------------------------------------- --------------- --------------- ------
The improvement in key performance indicators is analysed in the
Report of the Chief Executive Officer and the Report of the Chief
Financial Officer.
Principal risks and uncertainties
The Board is responsible for developing a comprehensive risk
framework and a system of internal controls. We have identified the
following as the principal risks and uncertainties the Company
faces.
Principal Activity Principal Risk Impact Mitigation
------------------- ------------------------------- ------------------------------- -------------------------------
Market Risk Inability to continually and The Company may be exposed to The Company focuses on
successfully attract, select adverse cost liabilities if well-established case
and pursue investments in the investments underperform selection screening
UK against procedures, rigorous internal
insolvency litigation market. expectations. and external cost controls,
and close attention to the
adequacy of liquidity in the
business
to comfortably support our
case cost profile at all
times.
------------------- ------------------------------- ------------------------------- -------------------------------
Staff Risk Over-reliance on key staff and If key staff become Key man life insurance on the
inability to recruit new unavailable, poor operational CEO. More delegation to key
high-quality staff. decisions could be made. If staff. Comprehensive and
the right calibre vigorous
of new staff cannot be recruitment procedures.
recruited, expansion could be
limited.
------------------- ------------------------------- ------------------------------- -------------------------------
Litigation Risk Unexpected Court decisions in Cases could be lost or Press for early settlement
cases proceeding to full recoveries could be worse than through mediation and without
trial. anticipated. Adverse legal prejudice settlement
costs (the negotiations.
defendant's costs) would Early abort of cases where
become payable by the Company unexpected, adverse evidence
if the claim has been issued. emerges. On purchased cases
(the large
majority of the Company's
cases) we can abort the case
if prospects deteriorate. On
funded
cases we can terminate
funding.
Legal Costs Risk Legal costs can turn out to be Case recoveries are poorer Press for early settlement
more expensive than than expected. through mediation and without
anticipated. prejudice settlement
negotiations.
Agree fixed fees with external
lawyers for each stage of
litigation.
------------------- ------------------------------- ------------------------------- -------------------------------
Recovery Risk It may be difficult to collect The Company will suffer from Rigorous net worth checks on
agreed settlements or bad debts defendants before cases are
judgements accepted. Securing charging
orders
over defendants' properties
------------------- ------------------------------- ------------------------------- -------------------------------
Case Risk Case defects emerge during the The Company will suffer Rigorous legal review before
litigation process abortive legal and investment cases are accepted and close
costs and adverse costs supervision of live cases by
(paying the experienced
defendant's legal costs) and competent in-house
lawyers. On purchased cases
(the large majority of the
Company's cases)
we can abort the case if
prospects deteriorate. On
funded cases we can terminate
funding.
------------------- ------------------------------- ------------------------------- -------------------------------
Relationship Risk Relationships with key sources The rate of enquiries referred Active marketing and engaging
of enquiries may not be to the Company may slow down with insolvency practitioners
maintained (including and solicitors and creditor
important creditors groups
such as banks and HMRC) including HMRC
------------------- ------------------------------- ------------------------------- -------------------------------
Funding Risk The growth of our business The ability of the Company to Following our IPO, we have a
out-strips the capital we have accept new cases is limited strong capital position and
available to fund cases have additional capacity
through
our HSBC facility
------------------- ------------------------------- ------------------------------- -------------------------------
Outlook and current trading
We are confident we have invested in a portfolio of cases that
will produce attractive returns for the Company. We are seeing
strong growth in new case enquiries, which give us confidence in
our future prospects. Four cases have been completed since the year
end and the current number of live cases is 98 compared to 84 at
the FY 19 year-end. Furthermore, the average size per case
continues to rise
We believe that the business is very well-positioned to
consolidate its leadership position in the insolvency litigation
financing market. We raised GBP14.6m (net of expenses) at the IPO
and we are successfully deploying these funds to grow our case-load
of investments. We believe that the IPO has raised our profile
significantly in our marketplace, and we are building an
outstanding team of in-house lawyers to strengthen our regional
network, as promised at the IPO.
The Company has made a strong start to 2019 and we look forward
to a promising future.
On behalf of the Board:
Steven Cooklin
Chief Executive Officer
26 June 2019
Statement of Comprehensive Income
For the year ended 31 March 2019
31 March 31 March 2018
Note 2019 GBP000s
GBP000s
----------------------------------------------------------------------------- ------- ----------- ---------------
Revenue 4 13,772 10,630
Cost of sales (3,686) (3,839)
----------------------------------------------------------------------------- ------- ----------- ---------------
Gross profit 10,086 6,791
Administrative expenses 8 (2,874) (2,720)
----------------------------------------------------------------------------- ------- ----------- ---------------
Operating profit 6 7,212 4,071
Exceptional costs-IPO (882) -
Operating profit post-exceptionals 6,330 4,071
Finance income 9 1 2
Finance expense 9 (393) (380)
Profit before tax 5,938 3,693
Taxation 10 (1,274) (432)
Profit and total comprehensive income for the year attributable to the
equity owners of the
company 4,664 3,261
============================================================================= ======= =========== ===============
Earnings per share
Basic (pence per share) 11 GBP0.32 GBP35.25
Diluted (pence per share) 11 GBP0.31 GBP35.25
----------------------------------------------------------------------------- ------- ----------- ---------------
The above results were derived from continuing operations.
Statement of Financial Position
As at 31 March 2019
31 March 31 March
Company Number: 07660874 2019 2018
Note GBP000s GBP000s
---------------------------------- ----- --------- -----------
Non-current assets
Intangible assets 13 6 -
Deferred tax asset 18 46 -
---------------------------------- ----- --------- -----------
Total non-current assets 52 -
Current assets
Investments 12 18,197 10,555
Stock 14 447 -
Trade and other receivables 15 3,777 2,973
Cash and cash equivalents 16 9,692 5,934
---------------------------------- ----- --------- -----------
Total current assets 32,113 19,462
---------------------------------- ----- --------- -----------
Total assets 32,165 19,462
================================== ===== ========= ===========
EQUITY AND LIABILITIES
Equity
Share capital 20 174 100
Share premium 21 4 1,015
Share based payment reserve 21 67 -
Special reserve 21 3,157
Retained earnings 21 24,613 6,642
---------------------------------- ----- --------- -----------
Total equity attributable to the
equity owners of the company 28,015 7,757
---------------------------------- ----- --------- -----------
Non-current liabilities
Borrowings 19 - 8,870
---------------------------------- ----- --------- -----------
Total non-current liabilities - 8.870
---------------------------------- ----- --------- -----------
Current liabilities
Trade and other payables 17 4,150 2,830
Borrowings 19 - -
Deferred tax liability 18 - 5
---------------------------------- ----- --------- -----------
Total current liabilities 4,150 2,835
---------------------------------- ----- --------- -----------
Total liabilities 4,150 11,705
---------------------------------- ----- --------- -----------
Total equity and liabilities 32,165 19,462
---------------------------------- ----- --------- -----------
The financial statements were approved by the Board of Directors
and authorised for issue on 26 June 2019.
Steven Cooklin
Chief Executive Officer
Statement of Changes in Equity
For the year ended 31 March 2019
Share Share Share Special Retained Total
Capital Premium based Non- distributable Earnings Equity
payment reserve Attributable
reserve to the
equity
owners
of the
company
Note GBP000s GBP000s GBP000s GBP000s GBP000s
----------------------------- ----- --------- --------- ---------- -------------------- -------------- --------
As at 1 April 2017 99 1,015 - - 3,381 4,495
Comprehensive income
Profit for the year - - - - 3,261 3,261
----------------------------- ----- --------- --------- ---------- -------------------- -------------- --------
Transactions with owners
Issue of ordinary shares 1 - - - - 1
----------------------------- ----- --------- --------- ---------- -------------------- -------------- --------
As at 31 March 2018 100 1,015 - - 6,642 7,757
Profit for the year - - - - 4,664 4,664
----------------------------- ----- --------- --------- ---------- -------------------- -------------- --------
Transactions with owners
Issue of ordinary shares 20 74 16,213 - - (37) 16,250
Transaction costs of
share issue - (723) - - - (723)
Reduction of share
premium account 21 - (16,501) - 3,157 13,344 -
Share based payment
expense 21 - - 21 - - 21
Deferred tax on share-based
payments 21 - - 46 - - 46
----------------------------- ----- --------- --------- ---------- -------------------- -------------- --------
As at 31 March 2019 174 4 67 3,157 24,613 28,015
============================= ===== ========= ========= ========== ==================== ============== ========
Statement of Cash Flows
For the year ended 31 March 2019
31 March 31 March
2019 2018
GBP000s GBP000s
---------------------------------------------- --------- ---------
Cash flows from operating activities
Profit before tax 5,938 3,693
Adjustments for non-cash/non-operating
items:
Fair value movements (6,624) (3,905)
Finance income (1) (2)
Legal costs on realised cases 1,387 1,375
Finance expense 393 380
Share option reserve (21) -
Interest paid - 437
---------------------------------------------- --------- ---------
Operating cashflows before movements in
working capital 1,072 1,978
Changes in working capital:
(Increase) in trade and other receivables (157) (1,390)
Increase in trade and other payables 40 163
---------------------------------------------- --------- ---------
Cash generated from operations 955 751
Income taxes refunded - 226
---------------------------------------------- --------- ---------
Net cash generated in operating activities 955 977
---------------------------------------------- --------- ---------
Cash flows from investing activities
Investment in cases (2,405) (1,320)
Purchase of property (447) -
Purchase of intangible assets (6)
Finance income received 1 2
---------------------------------------------- --------- ---------
Net cash (used)/generated in/from investing
activities (2,857) (1,318)
---------------------------------------------- --------- ---------
Cash flows from financing activities
Proceeds from issue of ordinary shares(net
of expenses) 15,569 1
Proceeds from borrowings - 8,871
Repayment of borrowings (9,500) (3,050)
Payment of borrowing facility set up costs (189) -
Repayment of directors' loans - (230)
Interest paid (220) (817)
Net cash generated from financing activities 5,660 4,775
---------------------------------------------- --------- ---------
Net increase in cash and cash equivalents 3,758 4,434
Cash and cash equivalents at the beginning
of the year 5,934 1,500
---------------------------------------------- --------- ---------
Cash and cash equivalents at the end of
the year 9,692 5,934
============================================== ========= =========
Notes forming part of the Financial Statements
For the year ended 31 March 2019
1. Company information
Manolete Partners PLC (the "Company") is a public company
limited by shares incorporated in England and Wales. The Company is
domiciled in England and its registered office is 2-4 Packhorse
Road, Gerrards Cross, Buckinghamshire, SL9 7QE. The Company's
ordinary shares are traded on the AIM Market.
The principal activity of the Company is that of acquiring and
funding insolvency litigation.
2. Summary of significant accounting policies
The principal accounting policies applied in the preparation of
these financial statements are set out below. The policies have
been consistently applied to all the years presented, unless
otherwise stated.
2.1 Basis of preparation
The above audited financial information does not constitute
statutory financial statements as defined in section 434 of the
Companies Act 2006. The above figures for the period ended 31 March
2019 have been extracted from the Company's financial statements
which have been reported on by the Company's auditors and received
an audit opinion which was unqualified. The Company's statutory
financial statements for the year ended 31 March 2018 have been
lodged with the Registrar of Companies. These financial statements
received an audit report which was unqualified and did not include
any reference to matters to which the auditors drew attention by
way of emphasis without qualifying their report or a statement
under section 498(2) or section 498(3) of the Companies Act 2006.
The financial statements for the year ended 31 March 2019 will be
dispatched to the shareholders and filed with the Registrar of
Companies. The preliminary announcement was approved by the Board
and authorised for issue on 26 June 2019.
Measurement bases
The financial statements have been prepared under the historical
cost convention. Historical cost is generally based on the fair
value of the consideration given in exchange for assets.
The preparation of the financial statements in compliance with
adopted IFRS requires the use of certain critical accounting
estimates and management judgements in applying the accounting
policies. The significant estimates and judgements that have been
made and their effect is disclosed in note 3.
2.2 Going concern
After making appropriate enquires, the Directors of the Company
have a reasonable expectation that the Company has adequate
resources to continue in operational existence for the foreseeable
future and for at least one year from the date of the signed
financial statements. For these reasons, they continue to adopt the
going concern basis in preparing the Company's financial
statements.
2.3 Functional and presentation currency
The financial information is presented in the functional
currency, pounds sterling ("GBP") except where otherwise
indicated.
2.4 New standards, amendments and interpretations
The Company early adopted IFRS 9 'Financial Instruments' and
IFRS 15 'Revenue from Contracts with Customers' on 1 April 2015 in
the historical financial information presented in the Company's
admission document on admission to AIM and these standards did not
have a material effect on the financial statements of the Company
in the period of initial application. Therefore, these standards
have not been first time adopted in the current period.
The adoption of the following amendments in the current year
have not had a material impact on the Company's financial
statements:
EU effective
date - periods
beginning on
or after
IFRS 2 Share-based Payment: Amendment in relation 1 January 2018
to the classification and measurement of share-based
payment transactions
----------------
Certain other new standards and interpretations have been issued
but are not expected to have a material impact on the Company's
annual report and accounts.
New and revised IFRS Standards in issue but not yet
effective
At the date of authorisation of these financial statements, The
Company has not applied the following new and revised IFRS
Standards that have been issued but are not yet effective.
IFRS 16 'Leases'
The IASB has published IFRS 16 'Leases', completing its
long-running project on lease accounting. The new Standard, which
is effective for accounting periods beginning on or after 1 January
2019, requires lessees to account for leases 'on-balance sheet' by
recognising a 'right-of-use' asset and a lease liability. The date
of initial application of IFRS 16 for the Company will be 1 April
2019. It will affect most companies that report under IFRS and are
involved in leasing and will have a substantial impact on the
annual report and accounts of lessees of property and high value
equipment. This standard has been endorsed by the European
Union.
The Company's management has carried out an impact review of the
implementation of IFRS 16 and has decided it will apply the
modified retrospective adoption method in IFRS 16, and, therefore,
will only recognise leases on the balance sheet as at 1 April 2019.
In addition, it has decided to measure right-of-use assets by
reference to the measurement of the lease liability on that date.
This will ensure there is no immediate impact to net assets on that
date.
At 31 March 2019 operating lease commitments amounted to
GBP483,000 (see note 23). Assuming the Company's lease commitments
remain at this level, the effect of discounting those commitments
is anticipated to result in right-of-use assets and lease
liabilities of approximately GBP312,000 being recognised on 1 April
2019. However, further work still needs to be carried out to
determine whether and when extension and termination options are
likely to be exercised, which may result in the actual liability
recognised being higher than this.
Instead of recognising an operating expense for its operating
lease payments, the Company will instead recognise interest on its
lease liabilities and amortisation on its right-of-use assets. This
will increase reported EBITDA by the amount of its current
operating lease cost, which for the year ended 31 March 2019 was
approximately GBP194,000.
IFRIC 23 'Uncertainty over Income Tax Positions'
IFRIC 23, "Uncertainty over Income Tax Positions", clarifies how
to recognise and measure current and deferred income tax assets and
liabilities when there is uncertainty over income tax
treatments.
The Company does not expect any other standards issued by the
IASB, but not yet effective, to have a material impact on the
Company.
The following is a list of other new and amended standards
which, at the time of writing, had been issued by the IASB but
which are effective in future periods. The amount of quantitative
and qualitative detail to be given about each of the standards
will, much like the amount of detail to be given about IFRS 16,
depend on each entity's own circumstances.
-- Amendments to IFRS 9 Prepayment Features with Negative
Compensation (effective 1 January 2019)
-- Amendments to IAS 28: Long-term Interests in Associates and
Joint Ventures (effective 1 January 2019)
-- Annual Improvements to IFRSs 2015-2017 Cycle (IFRS 3 Business Combinations and IFRS
joint Arrangements, IAS 12 Income Taxes, and IAS 23 Borrowing
Costs) (effective 1 January 2019)
-- IFRS 17 Insurance Contracts (effective 1 January 2021)
2.5 Revenue recognition
Revenue comprises fair value of investments and realised
consideration. Realised consideration occurs when a case is
settled, or a Court judgement received. Unrealised gains are
recognised as cases appreciate in value.
As revenue relates entirely to financing arrangements, revenue
is recognised under the classification and measurement provisions
of IFRS 9.
2.6 Net finance expense
Finance expense
Finance expense comprises interest on bank loans and other
interest payable. Interest on bank loans and other interest is
charged to the statement of comprehensive income over the term of
the debt using the effective interest rate method so that the
amount charged is at a constant rate on the carrying amount. Issue
costs are initially recognised as a reduction in the proceeds of
the associated capital instrument.
Finance income
Finance income comprises interest receivable on funds invested
and other interest receivable. Interest income is recognised in
profit or loss as it accrues using the effective interest
method.
2.7 Employee benefits: Pension obligations
The Company operates a defined contribution plan. A defined
contribution plan is a pension plan under which the Company pays
fixed contributions into a separate entity. The Company has no
legal or constructive obligations to pay further contributions if
the fund does not hold sufficient assets to pay all employees the
benefits relating to employee service in the current and prior
periods.
The Company has no further payment obligations once the
contributions have been paid. The contributions are recognised as
employee benefit expense when they are due. Prepaid contributions
are recognised as an asset to the extent that a cash refund or a
reduction in the future payments is available.
2.8 Intangible assets
Intangible assets are measured at cost and are amortised on a
straight-line basis over their estimated useful lives. Amortisation
is charged within administrative expenses in the statement of
comprehensive income so as to write off the cost of assets over
their estimated useful lives, on the following basis:
Website development costs: 33.3% of cost, once the website development is complete
2.9 Stock
Stock is held at the lower of cost or net realisable value.
2.10 Financial assets
Classification
The Company classifies its financial assets at amortised cost or
fair value through profit or loss. Financial assets do not comprise
prepayments. Management determines the classification of its
financial assets at initial recognition.
Amortised costs
The Company's financial assets held at amortised cost comprise
trade and other receivables and cash and cash equivalents in the
statement of financial position.
These assets are non-derivative financial assets with fixed or
determinable payments that are not quoted in an active market. They
arise principally through the provision of goods and services to
customers (e.g. trade receivables), but also incorporate other
types of contractual monetary asset. They are initially recognised
at fair value plus transaction costs that are directly attributable
to their acquisition or issue and are subsequently carried at
amortised cost using the effective interest method, less provision
for impairment.
Impairment of financial assets
Impairment provisions are recognised when there is objective
evidence (such as significant financial difficulties on the part of
the counterparty or default or significant delay in payment) that
the Company will be unable to collect all of the amounts due under
the terms receivable, the amount of such a provision being the
difference between the net carrying amount and the present value of
the future expected cash flows associated with the impaired
asset.
Impairment provisions for trade receivables are recognised based
on the simplified approach within IFRS 9 using lifetime expected
credit losses. During this process the probability of the
non-payment of the trade receivables is assessed. This probability
is then multiplied by the amount of the expected loss arising from
default to determine the lifetime expected credit loss for the
trade receivables. For trade receivables which are reported net,
such provisions are recorded in a separate provision account with
the loss being recognised within administrative expenses in the
statement of comprehensive income. On confirmation that the trade
receivable will not be collectable, the gross carrying value of the
asset is written off against the associated provision.
Investments
Investments in cases are categorised at fair value through
profit or loss. Fair values are determined on the specifics of each
investment and will typically change upon an investment progressing
through a key stage in the litigation or arbitration process in a
manner that, in the Directors' opinion, would result in a third
party being prepared to pay an amount different to the original sum
invested for the company's rights in connection with the
investment. Positive material progression of an investment will
give rise to an increase in fair value and an adverse progression a
decrease. The valuation of all investments over GBP100,000 each is
underpinned by an external legal opinion, which confirms the
Directors' valuation.
Valuation of investments
Determining the value of purchased and funded litigation
requires an estimation of the value of such assets upon acquisition
and at the balance sheet date. The future income generation of such
litigation is estimated from known information and the opinion of
external senior specialist counsel and solicitors. Valuations of
each case, at the balance sheet date, are therefore arrived at by
the Directors, considering counsel's, or external lawyer's,
assessment of the chances of a successful outcome, the state of
progress of the matter through the legal system and the Directors'
assessment of all other risks specific to the case.
2.11 Financial Liabilities
The Company classifies its financial liabilities in the category
of financial liabilities at amortised cost. All financial
liabilities are recognised in the statement of financial position
when the Company becomes a party to the contractual provision of
the instrument. Trade and other payables and borrowings are
included in this category.
Borrowings
Borrowings are recognised initially at fair value, net of
transaction costs incurred. Borrowings are subsequently carried at
amortised cost; any difference between the proceeds (net of
transaction costs) and the redemption value is recognised in the
income statement over the period of the borrowings using the
effective interest method.
Borrowings are de-recognised from the balance sheet when the
obligation specified in the contract is discharged, is cancelled or
expires. The difference between the carrying amount of a financial
liability that has been extinguished or transferred to another
party and the consideration paid, including any non-cash assets
transferred or liabilities assumed, is recognised in profit or loss
as other operating income or finance costs.
Borrowings are classified as current liabilities unless the
Company has an unconditional right to defer settlement of the
liability for at least 12 months after the reporting period.
Trade and other payables
Trade and other payables are initially recognised at fair value
and subsequently measured at amortised cost. Accounts payable are
classified as current liabilities if payment is due within one year
or less. If not, they are presented as non-current liabilities.
2.12 Provisions
A provision is recognised in the balance sheet when the Company
has a present legal or constructive obligation as a result of a
past event, and it is probable that an outflow of economic benefits
will be required to settle the obligation. If the effect is
material, provisions are determined by discounting the expected
future cash flows at a pre-tax rate that reflects current market
assessments of the time value of money and, when appropriate, the
risks specific to the liability. The increase in the provision due
to the passage of time is recognised in finance costs.
2.13 Share capital
Ordinary shares are classified as equity. There is one class of
ordinary share in issue, as detailed in note 20. Incremental costs
directly attributable to the issue of new shares are shown in share
premium as a deduction from the proceeds, net of tax.
2. 14 Leases
Leases are classified as finance leases whenever the terms of
the lease transfer substantially all the risks and rewards of
ownership to the lessee. All other leases are classified as
operating leases.
Assets held under finance leases are recognised as assets of the
Company at their fair value or, if lower, at the present value of
the minimum lease payments, each determined at the inception of the
lease. The corresponding liability to the lessor is included in the
balance sheet as a finance lease obligation. Lease payments are
apportioned between finance expenses and reduction of the lease
obligation in order to achieve a constant rate of interest on the
remaining balance of the liability. Finance expenses are recognised
immediately in profit or loss, unless they are directly
attributable to qualifying assets, in which case they are
capitalised in accordance with the Company's general policy on
borrowing costs (see below). Contingent rentals are recognised as
expenses in the periods in which they are incurred.
Leases in which a significant portion of the risks and rewards
of ownership are retained by the lessor are classified as operating
leases. The costs associated with operating leases are taken to the
income statement on an accruals basis over the period of the
lease.
2.15 Income tax
Income tax for the years presented comprises current and
deferred tax. Income tax is recognised in profit or loss except to
the extent that it relates to items recognised directly in equity,
in which case it is recognised in equity
Deferred income tax is recognised on temporary differences
arsing between the tax bases of assets and liabilities and their
carrying amounts.
The following temporary differences are not recognised if they
arise from a) the initial recognition of goodwill, and b) for the
initial recognition of other assets or liabilities in a transaction
other than a business combination that at the time of the
transaction affects neither accounting nor taxable profit or loss.
The amount of deferred tax provided is based on the expected manner
of realisation or settlement of the carrying amount of assets and
liabilities, using tax rates enacted or substantively enacted at
the balance sheet date.
Deferred income tax assets and liabilities are offset when there
is a legally enforceable right to offset current tax assets against
current tax liabilities and when the deferred income taxes assets
and liabilities relate to income taxes levied by the same taxation
authority on either the taxable entity or different taxable
entities where there is an intention to settle the balances on a
net basis.
2.16 Share-based payments
Where share options are awarded to directors or employees, the
fair value of the options at the date of grant is charged to the
statement of comprehensive income over the vesting period.
Non-market vesting conditions are considered by adjusting the
number of equity instruments expected to vest at each balance sheet
date so that, ultimately, the cumulative amount recognised over the
vesting period is based on the number of options that eventually
vest. Market vesting conditions are factored into the fair value of
the options granted. The cumulative expense is not adjusted for
failure to achieve a market vesting condition.
2.17 Exceptional items
Exceptional items are disclosed separately in the financial
statements where it is necessary to do so to provide further
understanding of the financial performance of the Company. They are
items that are material, either because of their size or their
nature, or that are non-recurring, and are presented within the
line items to which they best relate.
3. Significant judgments and estimates
The preparation of the Company's financial statements under IFRS
as endorsed by the EU requires the Directors to make estimates and
assumptions that affect the reported amounts of assets and
liabilities at the statement of financial position date, amounts
reported for revenues and expenses during the year, and the
disclosure of contingent liabilities, at the reporting date.
However, uncertainty about these assumptions and estimates could
result in outcomes that could require a material adjustment to the
carrying amount of the assets or liability affected in the
future.
Estimates and judgements are continually evaluated and are based
on historical experiences and other factors, including expectations
of future events that are believed to be reasonable under the
circumstances.
The Company makes estimates and assumptions concerning the
future. The resulting accounting estimates will, by definition,
seldom equal the related actual results. The estimates and
assumptions that have a significant risk of causing a material
adjustment to the carrying amounts of assets and liabilities within
the next financial year are detailed below.
Valuation of investments
Investments in cases are categorised as fair value through
profit and loss. Fair values are determined on the specifics of
each investment and will typically change upon an investment
progressing through a key stage in the litigation or arbitration
process in a manner that, in the Directors' opinion, would result
in a third party being prepared to pay an amount different to the
original sum invested for the company's rights in connection with
the investment. Positive material progression of an investment will
give rise to an increase in fair value and an adverse progression a
decrease.
Case valuations are reviewed on a monthly basis. Valuations are
changed when there have been significant developments in a
case.
Movements in fair value on investments in cases are included
within income in the Statement of Comprehensive Income. Fair value
gains or losses are unrealised until a final outcome or stage is
reached.
At the year-end there were 84 open cases, of these 64 had a
valuation of less than GBP100k and individually are not expected
realise more than GBP95,000 each. These cases are not expected to
have an individually material impact on the business when they are
settled. The remaining 20 cases make up GBP16.6m of the Investments
and are material to the business, the significant judgements and
estimates in their valuations at the balance sheet date were as
follows:
1. Judgements:
1.1 The amount that cases are discounted to recognise cases
being settled before they are taken to Court ranges between 35
-50%, based on the fact of each case and management's judgment of
the likely outcome
2. Estimates:
2.1 The fair value of the case is based on the opinion of
Counsel or the external solicitor dealing with the case, for all
cases over GBP100k; these assessments include various assumptions
that could change over time and lead to different assessments over
the next 12 months.
2.2 Future legal costs have been estimated on the likely time
the case will take to complete, ranging between 6 to 18
months(excluding the Cartel cases) and whether it will go to Court,
ranging between zero and 10% probability. Future results could be
materially impacted if these original estimates change either
positively or negatively.
2.3 Recovery of debts is based on the Company's ability to
recover assets owned by the counterparty. Cases that are settled
without going to Court almost always recover in full, whilst those
that result in Court cases are less predictable in terms of full
recovery but the directors would expect to recover between 95% and
100%.
2.4 The above valuations assume that there is no recovery for
interest and costs. If cases go to Court and result in a judgement
in the Company's favour, it is likely that the Company will be
awarded interest and costs.
Sensitivity analysis has not been included, due to the vast
amount of inputs and number of variables, making it impossible to
provide meaningful data. Whilst the Board considers the
methodologies and assumptions adopted in the valuation are
supportable, reasonable and robust, because of the inherent
uncertainty of valuation, it is reasonably possible, on the basis
of existing knowledge, that outcomes within the next financial year
that are different from the assumptions could require a material
adjustment to the carrying amount of the GBP18.2m of investments
disclosed in the balance sheet.
Recoverability of accrued income
Manolete's business model involves the provision of services on
credit. The Company normally receives payment for services it has
provided once a claim has been pursued and settled or decided in
Court. This normal course of business can lead to a lengthy period
before payment is received. Whilst the Company provides for
irrecoverable receivables and undertakes measures to limit the
length of time for payment to be received, if the settlement timing
increases in the industry it will add to the pressure on the
Company's working capital. With working capital tied up in unpaid
cases, the Company may find itself limited to the extent it can
pursue its growth strategy. Further, an increased length in
settlement terms is likely to increase the risk of irrecoverable
debts.
4. Segmental reporting
During the year ended 31 March 2019, the revenue was derived
from cases funded on behalf of the insolvent estate and cases
purchased from the insolvent estate, which are wholly undertaken
within the UK. Where cases are funded, upon conclusion, the Company
has the right to its share of revenue; whereas for purchased cases,
it has the right to receive all revenue, from which a payment to
the insolvent estate is made. Revenues arising from funded cases
and purchased cases are considered one business segment and are
considered to be the one principal activity of the Company. All
revenues derive from continuing operations and are not seasonal in
nature.
31 March 2019 31 March 2018
GBP000s GBP000s
--------------------------------------------------------- -------------- --------------
Net realised gains on investments in cases 7,148 6,725
Fair value movements (net of transfers to realisations) 6,624 3,905
--------------------------------------------------------- -------------- --------------
13,772 10,630
========================================================= ============== ==============
31 March 31 March
2019 2018
GBP000s GBP000s
----------------- --------- ---------
Arising from:
Funded cases 4,612 2,744
Purchased cases 9,160 7,886
----------------- --------- ---------
13,772 10,630
================= ========= =========
5. Directors and employees
Staff costs for the Company during the year:
31 March 2019 31 March 2018
GBP000s GBP000s
------------------------------------ -------------- --------------
Staff costs (including directors):
Wages and salaries 1,537 1,025
Social security costs 169 132
Other pension costs 50 19
------------------------------------ -------------- --------------
1,756 1,176
==================================== ============== ==============
Average monthly number of people (including executive and
non-executive directors) employed by activity:
31 March 2019 31 March 2018
No. No.
------------------------------- -------------- --------------
Directors 3 1
Management and administration 9 6
------------------------------- -------------- --------------
12 7
=============================== ============== ==============
Directors' emoluments:
31 March 31 March 2018
2019
GBP000s GBP000s
---------------------------------- --------- -------------------
Directors' emoluments:
Salaries and fees 581 654
Other pension costs and benefits 13 5
Share option costs 7 -
---------------------------------- --------- -------------------
601 659
================================== ========= ===================
31 March 2019 31 March 2018
GBP000s GBP000s
---------------------------------- -------------- --------------
Highest paid director:
Salaries and fees 350 473
Other pension costs and benefits 10 5
---------------------------------- -------------- --------------
360 478
================================== ============== ==============
Management consider the directors to be the key management
personnel.
6. Operating profit
Is stated after charging:
31 March 2019 31 March 2018
GBP000s GBP000s
----------------------- -------------- --------------
Operating lease costs 194 112
======================= ============== ==============
7. Auditor remuneration
31 March 2019 31 March 2018
GBP000s GBP000s
------------------------------------------------------------------------------------ -------------- --------------
Fee payable to Company's auditor and its associates for the audit of financial
statements 71 28
Fees payable to Company's auditor and its associates for other services: -
------------------------------------------------------------------------------------ -------------- --------------
Corporate finance services 168 -
------------------------------------------------------------------------------------ -------------- --------------
Other taxation services 41 -
------------------------------------------------------------------------------------ -------------- --------------
Total 209 -
==================================================================================== ============== ==============
Details of the Company's use of the Auditors for non-audit
services, the reasons why the Auditors were used rather than
another supplier and how the Auditors' independence and objectivity
was safeguarded are set out in the Audit Committee Report in the
Annual Report.
8. Analysis of expenses by nature
The breakdown by nature of administrative expenses is as
follows:
31 March 2019 31 March 2018
GBP000s GBP000s
Staff Costs 1,756 1,176
Office costs 243 184
Other costs, including marketing costs and expected credit losses 875 1,360
------------------------------------------------------------------- -------------- --------------
Total administrative expenses 2,874 2,720
=================================================================== ============== ==============
9. Finance income and finance expense
31 March 2019 31 March 2018
GBP000s GBP000s
---------------------- -------------- --------------
Bank interest 1 1
Other loan interest - 1
---------------------- -------------- --------------
Total finance income 1 2
====================== ============== ==============
31 March 2019 31 March 2018
GBP000s GBP000s
----------------------- -------------- --------------
Bank loan interest 179 15
Other loan interest - 289
Bank loan charges 172 29
Other loan charges 42 47
----------------------- -------------- --------------
Total finance expense 393 380
======================= ============== ==============
10. Taxation
31 March 2019 31 March 2018
GBP000s GBP000s
-------------------------------------------- -------------- --------------
Analysis of charge in year
Current tax charge on profits for the year 1,279 557
Adjustments in respect of prior periods - (5)
-------------------------------------------- -------------- --------------
Income tax credit 1,279 552
Deferred tax (5) (120)
-------------------------------------------- -------------- --------------
Total tax charge 1,274 432
============================================ ============== ==============
The standard rate of corporation tax in the UK changed from 20
per cent. to 19 per cent. with effect from 1 April 2017.
In September 2016, the UK Government passed legislation that
resulted in the substantively enacted tax rates in the UK being 17
per cent. from 1 April 2020. This has had a subsequent effect on
the Company deferred tax asset being recognised.
The tax charge for the year differs from the standard rate of
corporation tax in the UK of 19%. (2018: 19%). The differences are
explained below.
31 March 2019 31 March 2018
GBP000s GBP000s
------------------------------------------------------------------------------------ -------------- --------------
Profit on ordinary activities before tax 5,938 3,693
------------------------------------------------------------------------------------ -------------- --------------
Profit on ordinary activities multiplied by the rate of corporation tax in the UK
as above 1,128 702
Effects of:
Expenses not deductible 151 5
Adjustments to tax credit in respect of prior years - (4)
Utilisation of tax losses - (151)
Provision for deferred tax release (5) (120)
------------------------------------------------------------------------------------ -------------- --------------
Total taxation charge 1,274 432
==================================================================================== ============== ==============
11. Earnings per share
The earnings per share has been calculated using the profit for
the year and the weighted average number of ordinary shares
entitled to dividend rights which were outstanding during the year,
as follows:
31 March 2019 31 March 2018
GBP000s GBP000s
--------------------------------------------------------------------- -------------- --------------
Profit for the period attributable to equity holders of the Company 4,664 3,261
Weighted average number of ordinary shares 14,585,475 92,500
--------------------------------------------------------------------- -------------- --------------
Earnings per share 0.32 35.25
===================================================================== ============== ==============
31 March 2019 31 March 2018
GBP000s GBP000s
--------------------------------------------------------------------- -------------- --------------
Profit for the period attributable to equity holders of the Company 4,664 3,261
Diluted weighted average number of ordinary shares 14,819,186 92,500
--------------------------------------------------------------------- -------------- --------------
Diluted earnings per share 0.31 35.25
===================================================================== ============== ==============
Opening number of shares 92,500 92,500
Shares issued during the year 43,478,925 -
------------------------------- ----------- -------
Closing number of shares 43,571,425 92,500
=============================== =========== =======
The earnings per share is diluted by options over ordinary
shares, as detailed in note 22.
12. Investments
Current asset investments comprise the costs incurred in
bringing funded and purchased cases to the position that they have
reached at the balance sheet date. In addition, where an event has
occurred that causes the Directors to revalue the amount invested,
a fair value adjustment is made by the Directors based on Counsel's
and the Directors' opinion, which can either be positive or
negative.
Any change in value is taken to other reserves as an unrealised
gain or loss.
2019 2018
GBP000s GBP000s
-------------------------------------------------------- -------- --------
As at 1 April 2018 10,555 6,705
Additions 2,405 1,337
Realisations (1,387) (1,392)
Fair value movement (net of transfers to realisations) 6,624 3,905
-------------------------------------------------------- -------- --------
As at 31 March 2019 18,197 10,555
======================================================== ======== ========
13. Intangible assets
Intangible assets comprise the costs of developing the Company's
website. The website developments costs, when complete, will be
amortised over the useful life of the website, which is estimated
to be three years.
2019 2018
GBP000s GBP000s
Website development costs
-------------------------- -------- --------
As at 1 April 2018
Additions 6 -
Amortisation charge - -
As at 31 March 2019 6 -
-------------------------- -------- --------
14. Stock
The Company has purchased a house for re-sale in London,
following the settlement of case in unusual circumstances. The
house is being refurbished for a modest amount and will then be put
up for sale.
2019 2018
GBP000s GBP000s
-------------------- -------- --------
As at 1 April 2018 - -
Additions 447 -
Realisations - -
As at 31 March 2019 447 -
==================== ======== ========
15. Trade and other receivables
31 March 2019 31 March 2018
GBP000s GBP000s
-------------------------------------- -------------- --------------
Amounts falling due within one year:
Other receivables - 23
Prepayments 799 15
Trade debtors 2,978 2,935
-------------------------------------- -------------- --------------
3,777 2,973
====================================== ============== ==============
It is the Company's policy to assess receivables for
recoverability based on historical data available to management in
addition to forward looking information utilising management's
knowledge. The Directors consider that the carrying amount of trade
and other receivables is approximately equal to their value.
Included within prepayments are the costs of setting up the HSBC
facility, which are being amortised over the remaining life of the
facility, which terminates on 30 November 2022. As at 31/3/18,
these costs were set off the amounts owed to HSBC. The unamortised
balance includes GBP217,000 of HSBC arrangement fees.
16. Cash and cash equivalents
31 March 2019 31 March 2018
GBP000s GBP000s
-------------------------- -------------- --------------
Cash at bank and in hand 9,692 5,934
-------------------------- -------------- --------------
9,692 5,934
========================== ============== ==============
All bank balances are denominated in pounds sterling.
17. Trade and other payables
31 March 2019 31 March 2018
GBP000s GBP000s
------------------------------------ -------------- --------------
Amounts falling due in one year:
Other taxation and social security 66 32
Corporation tax payable 2,557 1,278
Accruals and other creditors 1,527 1,520
4,150 2,830
==================================== ============== ==============
18. Deferred tax liabilities/(asset)
2019 2018
GBP000s GBP000s
-------------------------- -------- --------
At 1 April 2018 5 125
Released during the year (5) (120)
Asset created (46) -
-------------------------- -------- --------
At 31 March 2019 (46) 5
========================== ======== ========
The income from the deferred tax asset created has been credited
to an equity reserve.
19. Borrowings
31 March 2019 31 March 2018
GBP000s GBP000s
------------------ --------------- --------------
Non-current
Bank loans - 8,870
- 8.870
================ ================= ==============
Current
Bank loans - -
------------------ --------------- --------------
Total borrowings - 8,870
================== ================ ==============
Reconciliation of liabilities arising from financing
activities
1 April Non-cash 31 March
2017 Cash flows changes 2018
GBP000s GBP000s GBP000s GBP000s
Bank borrowings - 9,500 (630) 8,870
Other loans 3,050 (3,050) - -
---------------------------------- -------- ----------- ---------- ---------
Total liabilities from financing
activities 3,050 6,450 (630) 8,870
================================== ======== =========== ========== =========
1 April Non-cash 31 March
2018 Cash flows changes 2019
GBP000s GBP000s GBP000s GBP000s
Bank borrowings 8,870 (9,500) 630 -
Other loans - - - -
---------------------------------- -------- ----------- ---------- ---------
Total liabilities from financing
activities 8,870 (9,500) 630 -
================================== ======== =========== ========== =========
The Directors consider the carrying value of all financial
liabilities to be equivalent to their fair value.
The GBP20,000,000 credit facility was provided on the 30
November 2018 by HSBC Bank plc. The Company granted a fixed and
floating charge over all of its assets in favour of HSBC Bank plc.
The facility term is four years. The interest rate is LIBOR plus a
maximum margin of 2.75%, depending on the Company's financial
performance against agreed covenants. The arrangement fees for this
facility are included within set up costs within prepayments.
20. Share capital
31 March 31 March
2019 2018
No. No.
------------------------------------------------- ----------- ---------
Allotted and issued
Ordinary shares of GBP0.004 each(FY18-GBP1) 43,571,425 92,500
Allotted, called up and fully paid
'A' Ordinary shares of GBP0.004 each(FY18-GBP1) - 7,100
------------------------------------------------- ----------- ---------
During the year ended 31 March 2019, the Company sub-divided and
then consolidated its existing GBP1 shares into shares of GBP0.004.
It also converted the 'A' shares into ordinary shares at a rate of
90%, in order to create one class of shares. It then issued
9,563,211 bonus shares of GBP0.004 to existing shareholders. It
then issued 9,285,714 ordinary shares for GBP0.004 per share in an
Initial Public Offering (IPO). The Company received total cash
proceeds of GBP16,250,000 for these IPO shares, before
expenses.
Voting rights
The holders of ordinary shares are entitled to one voting right
per share.
Dividends
The holders of ordinary shares are entitled to dividends out of
the profits of the Company available for distribution.
21. Reserves
Share premium
Includes all current and prior year premiums received on issue
of share capital, as follows:
2019 2018
GBP000s GBP000s
---------------------------------------- --------- --------
As at 1 April 2018 1,015 1,015
Proceeds from share issues 16,213 -
Transaction costs of share issue (723) -
Conversion into distributable reserves (16,501) -
As at 31 March 2019 4 1,015
======================================== ========= ========
Following its IPO on the AIM Market in December, the Company
applied to the Courts for most of its share premium account to be
converted into distributable reserves. The Court approved this
application in February. The Court stipulated that a special
non-distributable reserve of GBP3,157,000 be created, equivalent to
the unpaid creditors at the time of the application, and that the
Company maintain this reserve as non-distributable until all these
creditors are paid. The Company has complied with these
directions.
Special, non-distributable reserve
As mentioned above, a special, non-distributable reserve of
GBP3,157,000 was created, in compliance with the directions of the
Court, following the conversion of the share premium account into
distributable reserves in February 2019. The amount of the reserve
is equivalent to the unpaid creditors at the date of the Court
application of 31 December 2018. This reserve will be reviewed on a
regular basis and, as creditors are paid, equivalent amounts will
be transferred to distributable reserves.
Share based payment reserve
Includes amounts recognised for the fair value of share options
granted in accordance with IFRS 2.
Retained earnings
Includes all current and prior periods retained profits and
losses.
22. Share options
The Company adopted the Manolete Partners Plc Company Share
Option Plan on the 21 November 2018, details of which are as
follows
The Company generally considers the Black-Scholes method to
value share options when issued.
Details for the share options granted, exercised, lapsed and
outstanding at the end of each year are as follows:
Number of share Weighted average
options exercise price
No. GBP
Outstanding at beginning of year - -
Granted during the year 701,133 1.12
Forfeited/lapsed during the year - -
Exercised during the year - -
--------------------------------- --------------- ----------------
Outstanding at end of the year 701,133 1.12
--------------------------------- --------------- ----------------
Exercisable at end of the year - -
================================= =============== ================
The weighted average contractual life of the options outstanding
at the reporting date is 2 years and 9 months.
Exercise prices of share options outstanding at the end of the
period:
Number of share Exercise price
options GBP
No.
CSOP Options 105,696 1.12
Unapproved Options 595,437 1.12
The fair values of the options granted during the year were
calculated using the Black Scholes model, with the following
assumptions:
Risk free interest
rate 1%
Expected volatility 33%
Expected dividend
yield 1%
Life of the option 3 years
Weighted average share GBP2.20
price
----------------------- -------
23. Commitments and contingences
Capital commitments
There were no capital commitments at 31 March 2019.
Operating lease commitments
The Company has one leased property and two leased pieces of
equipment under non-cancellable operating lease agreements.
The future aggregate minimum lease payments under
non-cancellable operating leases are as follows:
31 March 31 March
2019 2018
GBP000s GBP000s
----------------------------------------- --------- --------------------
Within 1 year 190 167
Later than 1 year and less than 5 years 293 284
After 5 years - -
----------------------------------------- --------- --------------------
483 451
========================================= ========= ====================
The operating lease commitment for the rental of the property is
calculated on a straight-line basis over the length of the
lease.
24. Retirement benefits
The Company operates a defined contribution pension scheme for
all qualifying employees. During the year, the Company charged GBP
30,000 (FY18-GBP14,000) as employer's pension contributions. The
outstanding pension creditor as at 31 March 2019 was
GBP5,000(FY18-GBP2,000).
25. Financial instruments - classification and measurement
Financial assets
Financial assets measured at amortised cost comprise other
receivables, trade debtors and cash, as follows:
31 March 2019 31 March 2018
GBP000s GBP000s
Other receivables 0 24
Trade debtors 2,977 2,935
Cash at bank 9,692 5,934
------------------- -------------- --------------
12,669 8,893
=================== ============== ==============
Financial assets measured at fair value through profit or loss
comprise of investments;
31 March 2019 31 March 2018
GBP000s GBP000s
Investments 18,197 10,555
-------------- -------------- --------------
18,197 10.555
============== ============== ==============
Financial liabilities
Financial liabilities measured at amortised cost comprise
accruals and other creditors and bank loans, as follows:
31 March 2019 31 March
2018
GBP000s GBP000s
Accruals and other creditors 1,527 1,519
Bank loans - 8,870
1,527 10,389
============================== ============== =========
The fair value of investments is determined as set out in the
accounting policies in Note 2.
The fair value hierarchy of financial instruments measured at
fair value is provided below:
Fair value hierarchy
31 March 2019
Level 1 Level 2 Level 3
GBP000s GBP000s GBP000s
------------- --------- --------- --------
Investments - - 18,197
------------- --------- --------- --------
31 March 2018
Level 1 Level 2 Level 3
GBP000s GBP000s GBP000s
-------------- --------- --------- --------
Investments - - 10,555
-------------- --------- --------- --------
- - 10,555
============== ========= ========= ========
26. Financial instruments - risk management
The Company's activities expose it to a variety of financial
risks: market risk (including cash flow interest rate risk),
investment risk, liquidity risk and credit risk. Risk management is
carried out by the Board of Directors. The Company uses financial
instruments to provide flexibility regarding its working capital
requirements and to enable it to manage specific financial risks to
which it is exposed.
The Company finances its operations through a mixture of equity
finance, cash and liquid resources and various items such as trade
debtors and trade creditors which arise directly from the Company's
operations.
Interest rate risk
Interest rate risk is the risk that the fair value of future
cash flows associated with the instrument will fluctuate due to
changes in market interest rates. Interest bearing assets including
cash and cash equivalents are short-term liquid assets. It is the
Company's policy to settle trade payables within the credit terms
allowed and the Company does therefore not incur interest on
overdue balances. No sensitivity analysis has been prepared as the
impact on the financial statements would not be significant.
The interest rate profile of the Company's borrowings is shown
below:
31 March 31 March
2019 2018
Debt Interest Debt Interest
GBP Rate GBP000s Rate
------------------------- ----- --------- ------------ -----------------
Floating rate borrowings
Bank loans - N/A 8,870 LIBOR and Margin
========================= ===== ========= ============ =================
Liquidity risk
The Company seeks to maintain sufficient cash balances.
Management reviews cash flow forecasts on a regular basis to
determine whether the Company has enough cash reserves to meet
future working capital requirements and to take advantage of
business opportunities.
A maturity analysis of the Company's borrowings is shown
below:
31 March 2019 31 March 2018
GBP000s GBP000s
Less than one year - -
One to two years - 8,870
Two to five years - -
-------------------- --------------- -------------------
- 8,870
================ =================== ===================
Capital risk management
The Company is both equity and debt funded, and these two
elements combine to make up the capital structure of the business.
Equity comprises share capital, share premium and retained earnings
and is equal to the amount shown as 'Equity' in the balance sheet.
Debt comprises bank loans which are set out in further detail above
and in note 20. Since raising funds through an IPO in December
2018, the Company currently has no debt but does have a GBP20m
revolving credit facility with HSBC.
The Company's current objectives when maintaining capital are
to:
-- Safeguard the Company's ability as a going concern so that it
can continue to pursue its growth plans.
-- Provide a reasonable expectation of future returns to shareholders.
-- Maintain adequate financial flexibility to preserve its
ability to meet financial obligations, both current and long
term.
The Company sets the amount of capital it requires in proportion
to risk. The Company manages its capital structure and adjusts it
in the light of changes in economic conditions and the risk
characteristics of underlying assets. In order to maintain or
adjust the capital structure, the Company may issue new shares or
sell assets to reduce debt.
During the year ended 31 March 2019 the Company's strategy
remained unchanged.
Credit risk and impairment
Credit risk refers to the risk that a counterparty will default
on its contractual obligations resulting in financial loss to the
Company. The maximum exposure to credit risk is the carrying value
of its financial receivables, trade and other receivables and cash
and cash equivalents, as disclosed in the notes. The Company
attempts to assess the probability of credit losses but seeks to
minimise its credit risk by undertaking rigorous net worth checks
before taking on a case. Credit defaults do not occur very often
but occasionally counterparties may default on an agreed
settlement, which involves payment by instalments.
The Company does not consider that there is any concentration of
risk within either trade or other receivables. The Company seeks to
obtain charging orders over the property of trade receivables. The
receivables' age analysis is also evaluated on a regular basis for
potential doubtful debts. It is the Directors' opinion that no
further provision for doubtful debts is required.
Credit risk on cash and cash equivalents is considered to be
very low as the counterparties are all substantial banks with high
credit ratings.
Currency risk
The Company is not exposed to any currency risk at present.
27 Related party transactions
None.
28. Ultimate controlling party
The Company has no ultimate controlling party.
29. Post balance sheet events
None.
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
FR LLFFTRVIRFIA
(END) Dow Jones Newswires
June 27, 2019 02:00 ET (06:00 GMT)
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