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Insolvency litigation financing firm Manolete partners PLC's (LON: MANO) shares plunged on Tuesday as it said new case enquiries had begun to slow sharply due to the UK government's economic support measures.
Manolete shares fell to lows 185p on the news and closed the day at 198p, down 33.05%.
While the company saw record case completions and record completed case cash inflows during Q3, it has also seen a low level of new case investment caused by government measures designed to support businesses impacted by the coronavirus pandemic.
The measures are planned to continue through to April 2021 with Manolete expecting a continued negative impact on its business.
In the third quarter of the company's current financial year ending March 31st 2021, the UK based business completed 43 insolvency litigation claims, bringing the total number for the nine months to December 31st 2020, to 95 completed cases with a further 13 completed cases added since that date.
Manolete said the 95 completed cases generated a gross total settlement value of £23.9 million during those nine months, exceeding board expectations.
Gross cash collected from the completed cases in the nine months increased 60% to a record £9.3 million and gross cash collected after payments to insolvent agents, and legal fees increased 60% of £4.8 million.
The company said it expects realised profits above expectations, but realised profits will be significantly below market expectations with the firm, therefore, predicted to be overall marginally EBIT profitable in H2.
Over the long term, and as the UK government support for businesses begins to be phased out, corporate insolvencies will more than likely rise, providing Manolete with strong growth prospects for the foreseeable future.
“As we highlighted in our recent interim results, the emergency UK Government actions in response to the pandemic have led to a dramatic decrease in the number of UK insolvencies,” said Steven Cooklin, Manolete CEO.
“As a consequence, we have a temporary distortion in our new cases and therefore bottom-line profits, though an excellent performance in terms of case completions and strong cash generation,” added Cooklin.
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