thanks for your Update especially regarding Manolete! Finally it looks better, I guess I underestimated the time lag letting Covid restrictions behind them. :)
I followed the Earnings Call and read the Annual Report 2024 and I got one piece which I really did not like which I wanted to discuss.
The value per new signed cases is barely moving up from 37K (in 2023) to 40K GBP (see Earnings Call on Sep 4, 2024, https://www.youtube.com/watch?v=xv1XzuZ_aLE the slide with Performance KPIs at 27:00) and in my opinion this will bring Revenue massively further down (>50% !!) if old cases are settled. I fear this small case values will drag for years to come.
I know they said “the Company saw the return of investments in larger cases. In the first half of FY24, the Company signed only nine cases where the headline value of the claims were each over £1m, whereas in the second half of FY24, the Company signed 20, £1m plus size cases” but the pace is obviously very slow. In terms of case valuation 418 live cases amounted to £40.2m (which is ca 100K per case) I guess the cartel cases are the “beautification” and could be a “bridge” until cases grow bigger.
What do you think of that?
There are two more points where I have some understanding issues, maybe you know something about it?
a. Do you have an idea what they concretely mean with this statement: “Facilitate market transition from old Conditional Fee Agreements to a more efficient Manolete litigation financing model.” (see AR2024 Page 10)
b. Where can I retrace in the financials (or notes) of AR2024 the “Total invested” sum of 2,797K GBP from Vintage Table?
It is confusing because there are also “New case investment” numbers like 12,325K (see Page 61, Note 13) or “Investment in cases” 6,355K (see Cash Flow Statement on Page 51) stated.
Thank you for your comment Max, I will try to answer the best I can.
"I fear this small case values will drag for years to come."
I doubt so, largers firms insolvencies are growing fast.
"but the pace is obviously very slow. In terms of case valuation 418 live cases amounted to £40.2m (which is ca 100K per case) I guess the cartel cases are the “beautification” and could be a “bridge” until cases grow bigger."
I believe Bounce Back Cases on the Barclays Bounce Back Pilot is a short term suppression on the average. Once those are dealth with we should see the avg revenue per case grow.
A) (Conditional Fee Agreements: lawyers running cases on no win/no fee) continues to be replaced by the model of Manolete
B) Neither could I, I have contacted management to see if they can find it. Either way, its a non accounting item, so Im guessing it will not appear in the financials
Good point with Bounce Back Loan cases bringing avg value of cases down. The thing is they are not that many. During FY24, the Company signed 34 BBLs and should have now ca 35-40 BBL live. Between 04-2024 and 08-2024 they signed only 1 (one !) case because they have to wait for the strategy of the soon appointed „Covid Corruption Commissioner“ from Labour party.
In worse case it needs maybe a bit more time to get (on avg) the high value cases back, so I am somehow relaxed alltogether. :)
Great as always Alberto! Off-topic question: do you have any interesting book recommendations that have shaped your way of investing? Thank you very much.
enhorabuena por tu trayectoria, por escribir estos post y por hacer lo tan bien y muchas gracias por compartirlo y que podamos aprender.
He leído tus análisis de Manolete Partners y me ha resultado muy interesante la empresa y conocida ya que soy inversor de Burford capital desde hace algunos años y el modelo de negocio aunque no sea exactamente el igual pero si es en el sector de las finanzas legales.
Después de leer el último informe de noviembre de Manolete me he llevado decepción por los resultados aunque es claro el aumento de empresas que entran en insolvencia y quiebra, los costes se le disparan, no hablo de los de administración, si no los costes de ventas, si un mayor volumen de casos, produce un mayor volumen de gastos pero no se traduce en mayores márgenes, los que realmente ganan dinero son los abogados y no los accionistas de Manolete, sabes a que es debido este gran aumento?
Las ventas unrealized han sido negativas y ellos dicen que es porque el numero de nuevos casos no ha sido mayor que el numero de casos que han terminado, sabes porque no ha podido reinvertir en mayor numero de casos en este H125?
I really enjoyed reading your write up on Manolete Partners. I had a couple questions after looking into this a bit.
It looks like at the end of FY 24 they were valuing open cases at 40.2 million pounds which is a little bit higher than the enterprise value for the business. Based on 418 open cases this would be a little over 96k pounds per claim which was consistent with their average revenue per claim in FY 24. But considering FY 24 was likely primarily smaller cases which only make up 38% of their 40.2 million pound valuation and didn't include any of their 22 cartel cases which are around a third of the open case value or seemingly many larger cases as these are only recently coming into their pipeline, shouldn't the average fair market value per claim on their books be higher?
Also, they are clear that completed cases include those reaching a settlement or judgement as well as the rare times they go to trial and lose. They are also clear that they have some level of bad debt/collection issues which is higher for judgements than settlements. But do they provide any information on what percent of cases they have material collection issue for (after taking into account whatever collateral they hold)?
Seems their new cases signed for the 1st 5 months of FY 25 (116 in total or 247 run rate for full year) is declining from the FY 24 number (excluding BBL). Their enquiries are still going up so is this just a short term timing issue or something deeper?
Putting aside the cartel and BBL cases, they used to have no open cases as the completed cases matched the newly signed cases each year. As they get further away from the suspension and time lag following that do you expect the excess open cases to be completed over the next few years?
Alberto, another thing...
something that is missing in your study, is about CAPITAL ALLOCATION.
They have 30M in Cash&ShInv. Too huge!! if they continue well performing, what they are going to do with all the cash??
- Increase dividends? (very tipical in UK, but not the most interesting for investors...)
- Reduce debt (ok, but is not worring the debt situation)
- Reduce shares (sounds good!!)
- Or maybe M&A??? it's possible to M&A in this industry in UK? (or in Austalia/USA...)
What do you thing about M&A?
Many thanks!
Its mostly investments in cases, no issues with capital allocation there. They may get taken over by Burford, albeit its unlikely
Hi Alberto,
what % represents MANO in your portfolio?
Many thanks for your great job!!
20% more or less
Great as always !
Congratulations !
Thank you Raquel
Hello Alberto,
thanks for your Update especially regarding Manolete! Finally it looks better, I guess I underestimated the time lag letting Covid restrictions behind them. :)
I followed the Earnings Call and read the Annual Report 2024 and I got one piece which I really did not like which I wanted to discuss.
The value per new signed cases is barely moving up from 37K (in 2023) to 40K GBP (see Earnings Call on Sep 4, 2024, https://www.youtube.com/watch?v=xv1XzuZ_aLE the slide with Performance KPIs at 27:00) and in my opinion this will bring Revenue massively further down (>50% !!) if old cases are settled. I fear this small case values will drag for years to come.
I know they said “the Company saw the return of investments in larger cases. In the first half of FY24, the Company signed only nine cases where the headline value of the claims were each over £1m, whereas in the second half of FY24, the Company signed 20, £1m plus size cases” but the pace is obviously very slow. In terms of case valuation 418 live cases amounted to £40.2m (which is ca 100K per case) I guess the cartel cases are the “beautification” and could be a “bridge” until cases grow bigger.
What do you think of that?
There are two more points where I have some understanding issues, maybe you know something about it?
a. Do you have an idea what they concretely mean with this statement: “Facilitate market transition from old Conditional Fee Agreements to a more efficient Manolete litigation financing model.” (see AR2024 Page 10)
b. Where can I retrace in the financials (or notes) of AR2024 the “Total invested” sum of 2,797K GBP from Vintage Table?
It is confusing because there are also “New case investment” numbers like 12,325K (see Page 61, Note 13) or “Investment in cases” 6,355K (see Cash Flow Statement on Page 51) stated.
Have a great day and thanks for you fine work!
Thank you for your comment Max, I will try to answer the best I can.
"I fear this small case values will drag for years to come."
I doubt so, largers firms insolvencies are growing fast.
"but the pace is obviously very slow. In terms of case valuation 418 live cases amounted to £40.2m (which is ca 100K per case) I guess the cartel cases are the “beautification” and could be a “bridge” until cases grow bigger."
I believe Bounce Back Cases on the Barclays Bounce Back Pilot is a short term suppression on the average. Once those are dealth with we should see the avg revenue per case grow.
A) (Conditional Fee Agreements: lawyers running cases on no win/no fee) continues to be replaced by the model of Manolete
B) Neither could I, I have contacted management to see if they can find it. Either way, its a non accounting item, so Im guessing it will not appear in the financials
Thanks for your opinion, makes sense to me.
Good point with Bounce Back Loan cases bringing avg value of cases down. The thing is they are not that many. During FY24, the Company signed 34 BBLs and should have now ca 35-40 BBL live. Between 04-2024 and 08-2024 they signed only 1 (one !) case because they have to wait for the strategy of the soon appointed „Covid Corruption Commissioner“ from Labour party.
In worse case it needs maybe a bit more time to get (on avg) the high value cases back, so I am somehow relaxed alltogether. :)
Gracias por la actualización de Amrk, por desgracia no para de subir. He aprovechado la caída para entrar en Manolete.
Gracias David
Very clearly written, great stuff!
Thank you Jimmy! Its great to see you in the comment section
Yo he aprovechado para doblar mi posicion en Manolete ayer aun gran precio. Gracias por descubrir esta empresa para mi!! Un abrazo Alberto.
Gracias a ti! Un abrazo
Great as always Alberto! Off-topic question: do you have any interesting book recommendations that have shaped your way of investing? Thank you very much.
Yes! You can find a post about that in the group chat. Let me know if you can’t find it
Hola Alberto,
enhorabuena por tu trayectoria, por escribir estos post y por hacer lo tan bien y muchas gracias por compartirlo y que podamos aprender.
He leído tus análisis de Manolete Partners y me ha resultado muy interesante la empresa y conocida ya que soy inversor de Burford capital desde hace algunos años y el modelo de negocio aunque no sea exactamente el igual pero si es en el sector de las finanzas legales.
Después de leer el último informe de noviembre de Manolete me he llevado decepción por los resultados aunque es claro el aumento de empresas que entran en insolvencia y quiebra, los costes se le disparan, no hablo de los de administración, si no los costes de ventas, si un mayor volumen de casos, produce un mayor volumen de gastos pero no se traduce en mayores márgenes, los que realmente ganan dinero son los abogados y no los accionistas de Manolete, sabes a que es debido este gran aumento?
Las ventas unrealized han sido negativas y ellos dicen que es porque el numero de nuevos casos no ha sido mayor que el numero de casos que han terminado, sabes porque no ha podido reinvertir en mayor numero de casos en este H125?
muchas gracias
Hi Alberto,
I really enjoyed reading your write up on Manolete Partners. I had a couple questions after looking into this a bit.
It looks like at the end of FY 24 they were valuing open cases at 40.2 million pounds which is a little bit higher than the enterprise value for the business. Based on 418 open cases this would be a little over 96k pounds per claim which was consistent with their average revenue per claim in FY 24. But considering FY 24 was likely primarily smaller cases which only make up 38% of their 40.2 million pound valuation and didn't include any of their 22 cartel cases which are around a third of the open case value or seemingly many larger cases as these are only recently coming into their pipeline, shouldn't the average fair market value per claim on their books be higher?
Also, they are clear that completed cases include those reaching a settlement or judgement as well as the rare times they go to trial and lose. They are also clear that they have some level of bad debt/collection issues which is higher for judgements than settlements. But do they provide any information on what percent of cases they have material collection issue for (after taking into account whatever collateral they hold)?
Seems their new cases signed for the 1st 5 months of FY 25 (116 in total or 247 run rate for full year) is declining from the FY 24 number (excluding BBL). Their enquiries are still going up so is this just a short term timing issue or something deeper?
Putting aside the cartel and BBL cases, they used to have no open cases as the completed cases matched the newly signed cases each year. As they get further away from the suspension and time lag following that do you expect the excess open cases to be completed over the next few years?
Thanks!
Jordan