Manolete Partners litigation funder likely to lose £5m after shock court defeat
A listed litigation financier has admitted that it could lose as much as £5m this year after a shock High Court defeat in one of its biggest investments.
In a trading update published on Friday, Manolete Partners plc said this ‘rare adverse decision’ on one of its larger cases had caused the company to write down the full value in its forthcoming results.
The costs already paid out on this case come to more than £630,000, but the company is preparing for a £2.3m reduction in pre-tax profits for the six months ending 30 September, just from this one case.
The announcement to the London stock exchange immediately wiped 15% off the price of shares as they dropped to 214p. Their 2022 peak, in June, was 329p.
Steven Cooklin, chief executive, said: ‘The board and our legal advisers were surprised and disappointed by the very rare adverse initial judgment that we received on one of our larger cases, a case that we originally signed up in 2019.
For the first time in our 13-year history, we have applied for permission to appeal that decision to the Court of Appeal. We have taken a cautious stance by reducing the carrying value of that case to zero until we know the final outcome of the appeal process.’
The company said it will take a ‘more prudent view’ of the company’s 280 ongoing litigation case investments, given the issues facing the UK economy.
It expects to announce a pre-tax loss of around £5m in the full year interim results, the large majority of which will be due to the adjustment of unrealised revenues and unrealised profits.
Despite this, the trading update said the business continues to operate well and pointed out that gross cash generation from completed cases in the first five months of the trading year is a record £15m.
This compares to £15.6m gross cash generation for the entire 12 months for the year ended 31 March 2022.
The return to normal after a two-year suppression of insolvencies by the government during lockdown has started to have an effect, with new case enquiries up 24% this year.
Cooklin added: ‘While we have taken a deliberately prudent view on the latest valuation of the portfolio of our 280 in-process cases, we note that our key forward-looking performance indicator of ‘new case enquiries’ is now showing strong signs of recovery. I am optimistic that the second half of this financial year and beyond will see much improved trading results.’