A specialist litigation funder says that record levels of insolvencies are likely to start reversing last year’s losses. In a trading update to the London Stock Exchange, Manolete Partners said business has continued to ‘rebound strongly’ since its post-Covid struggles.

The company reported a before tax loss of £5.5m for the first half of 2022/23 but says it achieved five consecutive months of profitability to the end of February. The half-year losses will be reduced by a ‘positive’ contribution from the second six months of trading, with the board expecting overall profits to ‘recover strongly’ for 2024 and beyond.

Steven Cooklin, chief executive, said: ‘We are delighted with the way that the company has driven the resurgence in its business after the two-year artificial suppression of the UK insolvency sector, brought about by the UK government’s reaction to the Covid-19 pandemic.

‘The UK is now experiencing record high levels of insolvencies and that is directly leading to the company’s impressive operating performance. With the persistent macro headwinds of inflation and significantly higher interest rates, the board expects these favourable trading conditions to persist for the foreseeable future.’

But Manolete also revealed that the Court of Appeal had dismissed its challenge to a case which was lost last year. The company said this was one of the ‘very few’ it had lost at trial in its 13-year history. The full write-off of the value of this case had already been accounted in the first half of 2022/23. The final costs (including adverse costs) consequent to the appeal of around £750k will now be written off in the current half-year period and ‘a line drawn under the matter’.

The government reported at the start of this year that 22,109 company insolvencies were registered in 2022, the highest number since 2009 and 57% up on 2021. The number of creditor voluntary liquidations was the highest since records began in 1960.

For Manolete, which markets itself as the leading quoted UK insolvency litigation funder, this is proving to be a bountiful market. The company has already invested in 246 cases in the current financial year, compared with 159 for the whole of last year. 

After all of the business’s running costs (principally salaries and overheads), as at the end of February 2023 the company had generated £8.7m of net cash, representing a 179% increase compared to the comparable 11 months in 2021/22.

Manolete is also working on a pilot with Barclays to assist in the recovery of bounce back loans that appear to have been misappropriated by company directors. Of the 119 companies involved, 45 cases have been assigned to Manolete.

 

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