11 November 2021

MANOLETE PARTNERS PLC

("Manolete" or the "Company")

Half-year results for the six months ended 30 September 2021

Manolete (AIM:MANO), the leading UK-listed insolvency litigation financing company, today announces its unaudited results for the six months ended 30 September 2021.

Steven Cooklin, Chief Executive Officer, commented:

"These are resilient results, produced against a back-drop of an extraordinary market, and they demonstrate the strength of the Manolete business.

"Throughout the interim period to 30th September 2021 the UK insolvency market was artificially suppressed by unparalleled UK Temporary Government Measures. Despite the effect of the Government actions the business has continued to perform strongly, particularly in terms of case completions which were 23% higher than the comparable period last year and in line with management expectations.

"With the extraordinary Temporary Government Measures ended from 1 October the market is beginning to recover to pre-pandemic levels and we are seeing a sharp increase in both case enquires and signed cases. Manolete grew strongly up to the imposition of the Temporary Government Measures and with these measures now retired we expect that strong growth momentum to return."

The Interim Results (H1 FY22) are compared to the two most recent 6 month periods, H2 FY21 (31 March 2021) and H1 FY21 (30 September 2020) to enable the trend in performance to be understood.

Financial highlights:

·      Total revenues increased by 15% to £10.2m from H2 FY21 (£8.9m) and were 46% below H1 FY21 (£19.0m). H1 FY21 benefitted from an exceptionally large single case settlement of £9.3m (discounted gross revenue value) and was impacted to a much lower degree by the Covid-19 related Government Temporary Measures;

·      76% of revenues were from realised completed cases (H1 FY21: 71%)

·      Gross Profit increased by 38% to £5.4m from H2 FY21 (£3.9m) and was 43% below H1 FY21 (£9.5m). The decline compared to H1 FY21 was mainly due to reduced unrealised profits reflecting the decline in the number of new case investments which was suppressed due to the Covid-19 related Government Temporary Measures;

·      EBIT increased 273% to £3.2m from H2 FY21 and was 52% below H1 FY21 (£6.6m);

·      Cash generated from completed cases increased 3% to £4.3m (H1 FY21: £4.2m);

·      Despite the temporarily challenging environment, cash generated from previously completed cases exceeded the cash costs of operating the business (before investment in new cases);

·      Investment in cases has grown by 5% to £41.4m (30 September 2020: £39.3m);

·      Net assets of £41.2m. Net Debt was £10.3m consisting of a drawn down loan of £11.0m, offset by cash balances of £0.7m as at 30 September 2021;

·      £14m of HSBC Revolving Credit Facility remains available for utilisation, as at 30 September 2021;

·      Basic earnings per share declined 59% to 4.8 pence (H1 FY21: 11.8 pence); and

·      Interim dividend proposed of 0.39 pence per share (H1 FY21: 1.17p). The interim dividend to Ordinary Shareholders will be payable on 6 January 2022 to those shareholders who are on the register of members at 17 December 2021.

Operational and market highlights:

·      The interim results for the six months ended 30 September 2021 reflect the operations of the Company when the UK insolvency market was artificially suppressed by the unparalleled UK Government action to support business enacted in June 2020.

·      These Temporary Measures were largely ended, effective from 1 October 2021, as did a number of other business support schemes, including furlough.

·      Ongoing delivery of realised returns: 64 case realisations in H1 FY22 representing a 23% increase (52 case realisations in H1 FY21), generating gross proceeds of £7.9m, over an average duration of 11.5 months

·      Average money multiple of 2.6 times for the 64 cases completed in H1 FY22;

·      Average case duration across the full portfolio of 434 completed cases at 11.3 months;

·      New case investments declined by 39% to 78 (H1 FY21: 110) as a result of unprecedented Government support to the economy during the Covid-19 pandemic;

·      10% increase in live cases: 240 in process as at 30 September 2021 (238 as at 30 September 2020) (all excluding Cartel cases);

·      71% of live cases have been signed in the last 18 months. Only one case remains ongoing from the FY17 vintage and only two cases are outstanding from the FY18 vintage. 100% of earlier case vintages have been completed;

·      Our KPIs for September and October 2021 show strong signs of recovery:

·      The number of new case enquiries were 50 and 55 for those two months respectively, compared to a low of 31 for the month of March 2021 while the Temporary Measures were in force.

·      New signed cases for September and October were 15 and 18 respectively, compared to 10 in August 2021;

·      Cartel cases remain ongoing. In line with our strategy there has been little progress in the six months to 30 September 2021, however, we expect there will be considerable progress in the next six to twelve months. Management will reassess the investment fair value again at the year end.

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Chief Executive Officer's Statement

Introduction

I am pleased to present our unaudited statements for the half year to 30 September 2021.

Manolete is the leading UK quoted company in the insolvency litigation finance market, a market which plays an important role in returning funds to creditors, particularly HMRC.

Performance

As announced in our Trading Update last month, the interim results for the six months ended 30 September 2021 reflect the operations of the Company during a period of time when the UK insolvency market was artificially suppressed by the extraordinary UK Government action initiated in June 2020. The UK Government reacted to the Covid-19 pandemic by announcing a series of "Temporary Measures" contained in the Corporate Insolvency and Governance Act 2020 designed to suppress insolvencies and protect jobs. These measures largely ended, effective from 1 October 2021 as did a number of other business support schemes, including furlough.

Despite these unprecedented restrictions, the Company has performed well, particularly in terms of case completions which were 23% higher than the comparable period, and in line with the Board's expectations. The UK insolvency market continues to return to pre-pandemic levels of activity, particularly in the important Creditors Voluntary Liquidations segment of the market. There is always a time-lag between the appointment of an Office Holder and that Office Holder referring claims to Manolete, but our KPIs for September and October 2021 show strong signs of recovery. The number of new case enquiries were at 50 and 55 for those two months respectively, compared to a low of 31 for the month of March 2021. New signed cases for September and October were 15 and 18 respectively, compared to 10 in August 2021.

Vintages Table

This table highlights some of the key features of Manolete's model:

1.     Consistently high IRRs across 434 completed cases;

2.     Fast case completions, at an average of 11.3 months per case from the date of signing the investment agreement to the date that the case is legally completed. Cash tends to be collected, on average, over the following 12 months excluding the large case completion.

3.     Only one case remains open from the FY17 vintage and two cases from the FY18 vintage. All earlier cases are fully completed.

Case Vintages as at 30 September 2021

Strategy, Team and Outlook

Effective 1 October 2021, the UK Government ended its temporary extraordinary suppression of the UK insolvency market. We now expect the market to grow over the foreseeable period, as the economy realigns across many industry segments. The turnaround, restructuring and insolvency profession plays a critical role in resource reallocation following major economic turmoil events, such as Covid-19. Our KPIs in September and October, in terms of new case enquiries and new case investments, are already showing a strong recovery in activity levels, driven by the rise in Creditor Voluntary Liquidations recovering to pre-pandemic levels over each of the last four months. In the expectation of sustained higher operational activity, we are therefore increasing the number of new in-house lawyers, which is the key factor in increasing the business capacity of the Company. Two new experienced insolvency litigators are due to commence work in the new year. Further decisions will be made as the KPI data develops.

Dividend

An interim dividend of 0.39p per share is proposed for the six months to 30 September 2021 (H1 FY21: 1.17p per share)

Steven Cooklin

Chief Executive Officer

Chief Financial Officer's Review

I am pleased to give my review of the Company's unaudited results for the half year to 30 September 2021.

The financial results for the 6 months to 30 September 2021 (H1 FY22) represent a decline from the same period last year (H1 FY21) at which point the business remained largely unaffected by the Temporary Measures introduced through the Corporate Insolvency and Governance Act 2020. However, the results to 30 September 2021 demonstrate a strong recovery from the six months to 31 March 2021 (H2 FY21) with gross profit increasing 38% from £3.9m to £5.4m and operating profit rebounding from £0.9m to £3.2m, an increase of 273%.

Revenue decreased from £19.0m in H1 FY21 to £10.2m in the six months to 30 September 2021 (H1 FY22) which was primarily driven by the decrease in realised revenue.

The decline in realised revenue from £13.5m to £7.7m in H1 FY22 was as a result of the prior period benefiting from a large case completion with discounted proceeds of £9.3m. During H1 FY22 there have been no such significant one-off case completions, however, case completions grew by 23% to 64 in H1 FY22 (H1 FY21: 52) and on an adjusted basis excluding the large case completion, realised revenue increased from £4.2m to £7.7m, an increase of 67%.

Unrealised revenue declined to £2.5m compared with £5.4m in H1 FY21 due to the lower level of new cases signed during H1 FY22: 78 (H1 FY21: 110), this decline in new cases has previously been signalled by Management and has been caused by the Government's unprecedented support to the economy significantly reducing the number of corporate insolvencies. However, unrealised income has grown by 223% compared with the 6 months to 31 March 2021 (H2 FY21).

Gross profit declined from £9.5m in H1 FY21 to £5.4m in H1 FY22 due the fall in new case volumes and a fall in change in fair value on existing cases.

New case additions fell from 110 in H1 FY21 to 78 in H1 FY22 whilst the average unrealised revenue recognised on new cases during the period remained broadly stable at c.£70k which has driven a fall in new case additions from £8.2m to £5.6m, a 31% decline. This decline is largely due to the Temporary Measures introduced by the Government which has artificially suppressed the volume of insolvencies during the last 12 months.

Change in fair value on existing cases declined from a net £1.2m fair value uplift in H1 FY21 to a net fair value reduction of £0.4m in H1 FY22. We have continued to carefully monitor case valuations during the period and in reference to the wider economic conditions have adjusted case valuations where appropriate.

Gross margin increased to 53% which reflects an increase in realised gross profit margin to 38% (H1 FY21: 30%). The prior year comparative includes a significant case completion which was settled with a realised gross margin of 30% during H1 FY21.

Administrative expenses decreased by 23% to £2.3m in the six months to 30 September 2021 (H1 FY21: £2.9m) which is principally attributable to the decrease in bad debt charge.

The decrease in bad debt charge from £0.8m in H1 FY21 to £(36)k in H1 FY22 is due to the cautious approach adopted to provisioning by Management during FY21 as a result of the wider economic conditions. During H1 FY21 Management increased specific provisions against a small number of cases and reviewed and increased the expected credit loss provision. As a result of the approach adopted during FY21 there have been no significant write-off's during H1 FY22 combined with the writeback of a previously impaired receivable which settled in full during H1 FY22.

There were also savings in Professional fees and Marketing expenses in H1 FY22 compared to prior periods.

Operating profit before non-recurring items decreased by 52% to £3.2m in the first half (H1 FY21: £6.5m) with an operating profit margin of 31% (H1 FY21: 35%).

Finance costs increased to £554k in H1 FY22 (H1 FY21: £269k) due to the write off of the HSBC setup costs totalling £259k associated with the original HSBC loan facility agreed in 2018. Loan arrangement costs of £287k were incurred in respect of the new facility agreed and announced in June 2021 which have been capitalised in the balance sheet and will be amortised over the three year term of the facility.

Profit after tax decreased by 59% from £5.2m to £2.1m. The post-tax margin is 21% in H1 FY22 (H1 FY21: 27%)

An interim dividend of 0.39p per share is proposed for the six months to 30 September 2021 (H1 FY21: 1.17p per share)

The Company was managing 262 live case investments (including Cartel cases) as at 30 September 2021, compared to 237 live cases (including Cartel cases) as at 30 September 2020, an 11% increase. The total investment in cases amounted to £41.4m at 30 September 2021, a growth of 5% from the value as at 30 September 2020 of £39.3m (31 March 2021 value of £37.5m).

Investments in cases are shown at fair value, based on the Company's estimate of the likely future realised gross profit. Management, following discussion with the in-house legal team, on a case by case basis, amend the valuations of cases each month to accurately reflect management's view of fair value. In addition, at the interim and year end reporting periods, a sample of material valuations are corroborated with the external lawyers working on the case who provide updated legal opinions as to the current status of the case. The Company does not capitalise any of its internal costs, these are fully expensed to the Statement of Comprehensive income.

Trade and other receivables have increased by 47% to £22.0m at 30 September 2021 compared with £15.0m at 30 September 2020. As of the 1^st October 2021, the government restrictions have now largely been relaxed, which has allowed the business to begin enforcing sale and possession orders obtained during the pandemic to recover receivables on a number of our cases.

We continue to utilise our cash resources to invest in new and existing cases, with a cash investment of £2.9m in the six-month period, hence generating a cash outflow at the operating level. However, before investment in cases and corporation tax the Company was cash generative in the six months to 30 September 2021.

The Company has drawn down £11.0m of its £25.0m HSBC loan facility as at 30 September 2021 and continues to deploy loan capital to finance investment in cases. The Company held cash reserves of £0.7m as at 30^th September 2021 and had £14.0m available of the £25.0m HSBC facility. This facility and cash reserves will be used to fund the expected growth in case volumes following the relaxation of the Temporary Measures on 1 October 2021. The Company has complied with all of its financial covenants during the period. The Company drew down £3.0m of the available facility during H1 FY22 and a further £1.25m subsequent to the period end.

Mark Tavener

Chief Financial Officer

Unaudited Statement of Comprehensive Income for the period ended 30 September 2021

The above results were derived from continuing operations.

Unaudited Statement of Financial Position at 30 September 2021

The interim statements were approved by the Board of Directors and authorised for issue on 11 November 2021.

Unaudited Statement of Changes in Equity for the period ended 30 September 2021

Unaudited Statement of Cashflows for the period ended 30 September 2021

Unaudited notes to the financial statements for the period ended 30 September 2021

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 cases.

2    Accounting policies

(a)    Basis of preparation

The half-yearly financial statements do not constitute statutory accounts within the meaning of Section 434 of the Companies Act 2006.

The interim condensed financial statements for the six months ended 30 September 2021 have been prepared in accordance with IAS 34 Interim Financial Reporting. The interim condensed consolidated financial statements do not include all the information and disclosures required in the annual financial statements, and should be read in conjunction with the Company's annual financial statements as at 31 March 2021.

The statutory accounts for the year ended 31 March 2021 have been filed with the Registrar of Companies at Companies House. The auditor's report on the statutory accounts for the year ended 31 March 2021 was unqualified and did not contain any statements under Section 498 (2) or (3) of the Companies Act 2006.

The published financial statements for the year ended 31 March 2021 were prepared pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union.

(b)    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 interim financial statements.

Furthermore, the Board has continued to monitor the impact of Covid-19 on the business and the market and noted the withdrawal of temporary Government support and we continue to keep this matter under review. As our business operates in the insolvency market, any economic downturn is likely to lead to further insolvencies and related litigation cases. 

As evidence of this market view our trading for the six months to 30 September 2021 continues to be profitable. The Directors are of the opinion that the Company has adequate financial resources to continue in operation and meet its liabilities as they fall due, for the foreseeable future. Hence, the Directors believe it is appropriate to adopt the going concern basis in preparing the financial statements.

(c)    Revenue recognition

Revenue comprises two elements: the movement in fair value of investments and realised consideration.

Realised consideration occurs when a case is settled, or a Court judgement received. This is an agreed upon and documented figure.

Insolvency Voluntary Arrangement ("IVA") settlements, a formal debt solution used to pay back debts over a period of time, are recognised on a cash received basis due to the uncertainty of amounts recoverable from creditors.

The movement in the fair value of investments is recognised as Unrealised gains within Revenue. This is management's assessment of the increase or decrease in valuation of an open case, the inclusion of value for a new case and the removal of the fair value of a completed case. These valuations are estimated following the progress of a case towards completion and also reflect the judgement of the legal team working on the case (see Note 2.d. Significant Judgements and Estimates). Hence, unrealised revenue is the movement in the fair value of the investments in open cases over a period of time.

When a case is completed the carrying value is a deduction to unrealised income and the actual settlement value is recorded as realised revenue.

Revenue recognition differs between a purchased case, where full recognition of the settlement is recognised as revenue (including the insolvent estate's share) and a funded case where only the Company's share of a settlement is recognised as revenue. This differing treatment arises because the Company owns the rights to the purchased case.

As revenue relates entirely to financing arrangements, revenue is recognised under the classification and measurement provisions of IFRS 9.

(d)    Significant judgements and estimates

The preparation of the Company's interim financial statements under IFRS as pursuant to Regulation (EC) No 1606/2002 as it applies in the European Union 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.

The key stages that an individual case passes through typically includes: initial review on whether to make a purchase or funding offer, correspondence from the Company in-house lawyer, usually via externally retained solicitors, to the opposing party notifying them of the Company's assignment or funding of the claim, a fully particularised Letter Before Action and an invitation to without prejudice settlement meetings or mediation, if the opposing party does not respond then legal proceedings are issued. Further evidence may be gathered to support the claim. Eventually a court process may be entered into. The progress of a case feeds into the Directors' valuation of that case each month, as set out below. 

In accordance with IFRS 9 and IFRS 13, the Company is required to fair value open cases at the half year and year end reporting periods, at 30 September and 31 March each year. The Company undertakes the following steps:

·      On a weekly basis, the internal legal team report developments into the Investment Committee on a case by case basis in writing.

·      On a monthly basis, full team meetings then take place to review progress on a case-by-case basis over several hours The Directors adjust case fair values depending upon objective case developments, for instance: an offer to settle, mediation agreed, positive or negative legal advice. These adjustments to fair value may be an increase or decrease in value or no change required.

·      At reporting period ends, written assessment are obtained for a sample of open case investments from external solicitors or primary counsel working on the case on behalf of Manolete.

In all cases, a headline valuation is the starting point of a valuation from which a discount is applied to reflect legal advice obtained, strength of defendant's case, the likely amount a defendant might be able to pay to settle the case, progress of the case through the legal process and settlement offers.

Movements in fair value on investments in cases are included within revenue in the Statement of Comprehensive Income. Fair value gains or losses are unrealised until a final outcome or stage is reached. At 30 September 2021 there were 262 open cases, of these 202 had a valuation of less than £100k. These cases are not expected to have an individually material impact on the business when they are settled. The remaining 60 cases make up £29.4m 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:

Judgements

(i) The amount that cases are discounted to recognise cases being settled before they are taken to Court, based on the facts of each case and management's judgement of the likely outcome.

(ii) Litigation is inherently uncertain. The Company seeks to mitigate its risk by: rejecting the majority of cases referred to it because the merits of the claim are considered weak or the defendant is considered not to have sufficient net worth and seeking to settle cases as early as possible. Nevertheless, the risk and uncertainty can never be completely removed. The key inputs are: the headline claim value, the likely settlement value, the opposing party's ability to pay and the likely costs in achieving the judgement. These inputs are inter-related to an extent.

(iii) Excluding the large case completion in FY21, the Company does not consider there to be any significant concentration of risk within either trade or other receivables.

(iv) The Company accrues for future legal costs on the basis that cases will be settled before trial which is how the vast majority of the cases completed to date have been settled. When it becomes clear a case will progress all the way to trial the additional costs are accrued at this point on a case-by-case basis.

Estimates:

(i) All cases will be subject to the internal key stages and regular fair value review processes as described above. For the avoidance of doubt, the fair value review requires an estimate to be made by senior management based upon the facts and progress of the case and their experience. For a sample selected by Management and reviewed by the external auditors, an external opinion is requested from counsel or a solicitor who is working on the case which provides an independent description of the merits of the case.

These assessments include various assumptions that could change over time and lead to different assessments over the next 12 months.

(ii) Future legal costs have been estimated on the estimated time the case will take to complete, ranging between 3 to 24 months (excluding the Cartel cases) and whether it will go to Court. Future results could be materially impacted if these original estimates change either positively or negatively.

(iii) Recovery of debts is based on the Company's ability to recover assets owned by the counterparty. Prior to case acceptance, a net worth review of the defendant is undertaken to ensure that they own sufficient assets to support the claim value. Cases that are settled without going to Court agree a repayment schedule, whilst those that result in Court cases are less predictable in terms of full recovery.

(iv) The 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 in the financial statements, due to the vast amount of inputs and number of variables which are inherently specific to each case, 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 £41.4m of investments disclosed in the balance sheet. However, as an indication we note that a 10% increase/(decrease) in the fair value of our top 20 cases (including Cartel cases) would result in an increase/(decrease) in the fair value investment of +/- £2.2m.

Recoverability of trade receivables

The Company's business model involves the provision of services for credit. The Company normally receives payment for services it has provided once a claim has been pursued and settled or decided in Court. The average time from taking on a case to settlement is c.12 months although this can vary significantly from case to case. As part of the settlement agreement, the timing of payment of the award by the defendant to the Company is agreed, this is a legally binding document. Settlements can be received in full on the day of settlement or (at Management's discretion) paid in instalments over a defined settlement plan.

As such, Management applies a number of estimates and judgements in the recording of trade receivables, for example: in relation to default judgements Management assess the likely recoverability and do not necessarily recognise the full judgement; Management also assessed recoverability of receivables in light of the Covid pandemic and its impact on certain debtors to manage repayments; which further informed our expected credit loss.

The Company applies the simplified approach in providing for expected credit losses under IFRS 9 which allows the use of the lifetime expected credit loss provision for all trade receivables. In measuring the expected credit losses, trade receivables have been stratified by settlement type and days past due. Expected lifetime expected credit loss rates are based on the payment profiles of sales from January 2019 (post IPO). The Company attempts to assess the probability of credit losses but seeks to mitigate its credit risk by undertaking rigorous net worth checks before taking on a case. Occasionally, credit defaults do sometimes occur when counterparties default on an agreed settlement, payable by instalments.

There is a concentration risk in relation to the trade receivable of £9.6m in relation to the large case completion in FY21. Repayments to date have been made according to the agreed schedule. Based on Management's assessment of the receivable no provision has been recognised against this balance.

Recovery of receivables is closely monitored by Management and action, where appropriate, will be taken to pursue any overdue payments. The Company seeks to obtain charging orders over the property of trade receivables as security. The receivables' ageing 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 require

3  Segmental reporting

During the six months ended 30 September 2021, 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. Revenue 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.

Net realised gains on investments in cases represents realised revenue on completed cases.

Fair value movements includes the increase / (decrease) in fair value of open cases, the removal of the carrying fair value of realised cases (in the period when a case is completed and recognised as realised revenue) and the addition of the fair value of new cases.

4  Analysis of expenses by nature

Internal legal costs are included within administrative expenses whereas external legal costs are either capitalised as Investments for open cases or recognised as cost of sales on completed cases. The breakdown by nature of administrative expenses is as follows:

5  Finance income

6  Finance expense

7  Investments   

Investments represent the expected gross profit generated on the Company's ongoing portfolio of cases on settlement. This incorporates the expected settlement less the costs incurred to initially purchase the claim, costs incurred to date, expected future costs, and the share of net gain due to the Insolvency Practitioner. 

8  Analysis of fair value movements

9  Non-cash adjustments to cashflows generated from operations

10   Trade and other receivables

11 Trade and other payables

12 Earnings per share

The Basic Earnings Per Share is calculated by dividing the profit attributable to ordinary equity holders by the weighted average number of ordinary shares outstanding during the year. Diluted Earnings Per Share is calculated by dividing the profit after tax by the weighted average number of shares in issue during the year, adjusted for potentially dilutive share options. The following reflects the income and share data used in the earnings per share calculation: