Value the Markets

Going long on insolvency as crippled UK businesses face dark days

An article published today by the market analysis publication Value the Markets predicts that, given the extremely difficult economic climate, “insolvency specialists will see a huge uptick in cases.”

The piece focusses on Manolete Partners and Begbies Traynor both of whom “are highly profitable and best placed to take advantage of this situation” and “they make for a solid long bid.”

On Manolete Partners Plc the article says;
“Manolete operate in a slightly different but no less profitable field to Begbies. Manolete does not just fund insolvency litigation, it buys 90% of its cases from insolvency firms so works on much better margins than its rivals. This allows it to minimise losses and restrict costs.

Changes to UK law in 2015 and 2016 are highly favourable to this model: insolvency is the only area of the law where claims can be bought by a third party.

The London firm topped a strong 2019 for publicly-listed legal companies, with its share price near tripling for a 270% return for canny investors.

It is certainly more profitable than Begbies and as such represents a better opportunity, producing a pre-tax profits of £5.94 million in the last set of full year results. It has a 67% market share of the third-party insolvency litigation sector in the UK, which means no other company comes remotely close.

CEO Steven Cooklin told the market at the start of April that the business was in a good place despite Covid. There have been some obvious delays to court proceedings because of social distancing but “very few of our cases go to court and we have been conducting mediations using video conferencing services”. A trading update showed a 131% increase in new cases, and gross revenues at £10.1 million for the full year.”