Amidst a significant rise in UK insolvencies, litigation funder Manolete reports its most favourable trading conditions in years, despite a notable share price decline.
The UK is seeing its highest level of insolvencies in three decades, driven by increased interest rates, geopolitical tensions, and the withdrawal of governmental financial support after the COVID-19 pandemic. Manolete, a litigation funding company, has labelled these conditions as the most advantageous since its inception in 2009, although its decision to forgo dividend payments has led to a nearly 10% drop in share price.
Steven Cooklin, Chief Executive, noted the transformation of the insolvency landscape, commenting on the surge of bankruptcies, particularly from smaller ‘zombie’ companies initially, with larger corporations now following suit. He stated that the number of UK creditor voluntary liquidations reached an unprecedented high in 2023, marking the most significant rise since 1960.
Despite the smaller average size of post-pandemic insolvency cases, Manolete experienced an 18% increase in new case investments over the past year, completing a record 251 cases—a 30% rise from the previous period. These cases generated a financial multiple of 1.9x with an internal rate of return of 131%, though realised revenues fell by 10% due to the absence of a previously large case.
Recent financial results underline that Manolete’s strategic decision to expand its network of insolvency practitioners and lawyers is bearing fruit. The company received 733 new case enquiries, converting approximately 29% to signed cases. In the current financial year, case inquiries have increased by 22%, with 116 cases completed so far, valued at £11.8 million compared to the previous year’s £6.3 million.
Chairman Lord Leigh emphasised the company’s priority of reinvesting cash reserves into current and future cases, rather than awarding dividends. This approach reflects an optimistic outlook for the company as corporate insolvencies remain high, creating ripe conditions for growth. However, share prices fell significantly throughout 2023, highlighting ongoing financial pressures.
In conclusion, while Manolete navigates a complex market landscape with declining share prices and increased insolvency opportunities, its cautious financial strategies and focus on expanding legal partnerships position it well for future growth and stability.
