Litigation Cap. Mgmt - Interim results for the HY ended 31 December 2023
19/03/2024 07:00
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RNS Number : 3861H Litigation Capital Management Ltd 19 March 2024
19 March 2024
Litigation Capital Management Limited
("LCM" or the "Company")
Interim results for the half year ended 31 December 2023
Highlights
• Total realisations of A$28.4m, with concluded case investments generating a
3.3x multiple of cash invested
• Realisations include performance fees of A$10.2m on concluded cases as the
benefits of our fund management model are realised
• Total income from litigation assets of A$21.9m, an increase from A$10.1m in
HY23
• Net Profit after tax for the period of A$7.3m, compared to a loss of A$2.3m in
HY23
• Net assets of A$185.4m as at 31 Dec 23 with cases conservatively valued at
2.0x cash invested
· 50% increase in applications for funding reflecting countercyclical nature of
the business
• Total new commitments of A$90m added in the period
• Fund I which comprises US$150m of external capital is fully committed and Fund
II which comprises US$291m of external capital is 35% committed at 29 Feb 24
· A$3.36m(1) share buy backs to 15 March 2024, 1.7m shares
Outlook
· The Company is well positioned to take advantage of a sector that is rapidly
gaining traction amidst consolidation amongst competitors
· Expectation Fund II will be fully committed and Fund III launched within the
next 12 months
((1) converted at 1.94 GBP to AUD)
Commenting on the results, Patrick Moloney, CEO of Litigation Capital
Management, said: "These results demonstrate the opportunity that now presents
itself for LCM. Having built a strong foundation for its fund management
business, we are now seeing the benefits of it come to fruition. Fund I is
already delivering strong returns, and we expect to fully commit Fund II as
well as launch a new fund this year."
"At a time when demand for dispute finance is increasing, LCM is extremely
well placed to take advantage of this opportunity. This set of results
demonstrates that LCM has the knowledge and expertise to make sound investment
decisions and deliver for shareholders and fund investors alike."
LCM will be hosting a webinar for investors today at 11.00 a.m. The
presentation is open to all existing and potential shareholders. If you would
like to attend this presentation, please register using the following link:
https://www.investormeetcompany.com/litigation-capital-management-limited/register-investor
(https://www.investormeetcompany.com/litigation-capital-management-limited/register-investor)
A webinar presentation for analysts will take place at 9.30am. Analysts
wishing to attend should contact lcm@tavistock.co.uk
(mailto:lcm@tavistock.co.uk) to register.
The accompanying results presentation is available on LCM's website:
https://www.lcmfinance.com/investors/investor-presentations-results
(https://www.lcmfinance.com/investors/investor-presentations-results)
The Interim Financial Report is available at:
https://www.lcmfinance.com/investors/investor-presentations-results
(https://www.lcmfinance.com/investors/investor-presentations-results%20)
Enquiries
Litigation Capital Management c/o Tavistock PR
Patrick Moloney, Chief Executive Officer
Mary Gangemi, Chief Financial Officer
Canaccord (Nomad and Joint Broker) Tel: 020 7523 8000
Bobbie Hilliam
Investec Bank plc (Joint Broker) Tel: 020 7597 5970
David Anderson
Tavistock PR Tel: 020 7920 3150
Tim Pearson lcm@tavistock.co.uk
Katie Hopkins
Simon Hudson
NOTES TO EDITORS
Litigation Capital Management (LCM) is an alternative asset manager
specialising in disputes financing solutions internationally, which operates
two business models. The first is direct investments made from LCM's permanent
balance sheet capital and the second is third party fund management. Under
those two business models, LCM currently pursues three investment strategies:
Single-case funding, Portfolio funding and Acquisitions of claims. LCM
generates its revenue from both its direct investments and also performance
fees through asset management.
LCM has an unparalleled track record driven by disciplined project selection
and robust risk management.
Currently headquartered in Sydney, with offices in London, Singapore, Brisbane
and Melbourne, LCM listed on AIM in December 2018, trading under the ticker
LIT.
www.lcmfinance.com (http://www.lcmfinance.com)
Chief Executive's Statement
Progress on Fund management business
2023 was the year in which our funds management business bedded down and for
the first time showed the benefits, with Fund I investments generating cash
and outsized returns. This has continued into the first half of the 2024
financial year, with the settlement of an Australian class action, part of
Fund I, generating a ROIC after performance fees of 4.0 times. Following the
period end, as previously announced, LCM's investment related to a portfolio
of two separate construction related disputes in Fund I has had a successful
award, with the financial performance expected to be in line with our historic
performance metrics.
The success of this model is clear to see, underpinned by the same rigorous
underwriting process which LCM is known for and has developed, and we expect
to see further case settlements from Fund I in the second half of the year.
Following on from Fund I, we expect Fund II to be fully committed within the
next 12 months (commitments as at 31 December 2023 within Fund II: A$162m) and
have plans to launch a further fund as well.
The Funds Management Model enables LCM to leverage third party capital and
co-invest in a larger pool of diversified investments. Our co-investment in
cases aligns LCM's interests with third party investors and enhances returns
to LCM, through performance fees.
Building out this model has been one of our key goals, AUM has increased to
A$561m at the end of the period (FY23: A$484m), putting us on solid
foundations from which to expand and continue to deliver on this model to
provide sustainable growth.
Investment performance
The performance of the business, following LCM's best ever year on record in
FY 2023 remains strong. As we have reiterated previously, our investments do
not generate linear returns, so the performance of the business in any given
six or twelve month period may not accurately reflect the underlying
performance of the business. On a three-year basis (FY22-24), our returns
remain strong, with a rolling IRR of 67.4% and ROIC of 2.0 x. Recovery times
have lengthened from a historic average of 30 months over a 12.5 year period
to 40 over the most recent three-year period, however we are hopeful that
court delays as a result of the Covid pandemic, will continue to reduce.
Having moved to Fair Value accounting for FY23, investors can now get a
clearer idea of the value of the portfolio, having previously valued all
investments at cost. The value of all ongoing cases on our balance sheet was
A$213m as at 31 Dec 23, valuing the cases at 2.0x cash invested compared to
our long-term track record of achieving 2.8x cash invested. This demonstrates
that despite the change in accounting methodology, we will continue to be
prudent in our approach to valuation.
In the period, three cases concluded, generating A$28.4m of cash receipts for
LCM, inclusive of $10.2m of performance fees with further recoveries due in
H2. On these cases, a 3.3x multiple was achieved on A$8.7m cash invested.
Our underwriting team continue to see a strong pipeline of potential
investments, with 242 applications for funding in the period, an increase of
50% on H1 2023. From these cases, we have so far committed A$90m to five
cases, which again demonstrates our thorough due diligence and robust
underwriting practices.
Outlook
LCM is well positioned to take advantage of the growing demands for disputes
capital. Across our Asia, European and Australian operations, we have built
out highly qualified teams of litigation finance professionals who have
developed strong relationships in these markets. Across the globe, economic
uncertainty and rising insolvencies means there is the expectation of an
increase in disputes, which we believe will drive demand for LCM's capital.
Alongside this, LCM finds itself in an improved competitive position, due to
industry consolidation and in some cases contraction amongst existing
litigation financiers.
Post year end, the UK Government has tabled legislation to end the uncertainty
in litigation finance caused by the Supreme Court's ruling last July in
PACCAR, which is a positive development for the industry.
We announced in the FY23 results that the business was exploring a sterling
retail eligible bond listed on the ORB at the London Stock Exchange to
optimise cost of capital and allow us to take advantage of opportunities we
see in the market, as well as other alternative debt financing. These
discussions are at an advanced stage and an update will be provided in due
course.
Patrick Moloney
Chief Executive Officer
19 March 2024
Directors' Report
The Directors of Litigation Capital Management Limited (LCM) present their
report together with the half-year financial report of the consolidated entity
consisting of LCM and its subsidiaries (collectively LCM Group or the Group)
for the six month period ended 31 December 2023 and the auditors' review
report thereon.
1. Directors
The Directors of LCM at any time during or since the end of the financial
period are set out below:
Jonathan Moulds
Patrick Moloney
Dr David King
Gerhard Seebacher
Mary Gangemi
2. Company Secretary
Anna Sandham was appointed Company Secretary of LCM in September 2016. Anna is
an experienced company secretary and governance professional with over 20
years' experience in various large and small, public and private, listed and
unlisted companies. Anna has previously worked for companies including AMP
Financial Services, Westpac Banking Corporation, BT Financial Group and NRMA
Limited. Anna holds a Bachelor of Economics (University of Sydney), Graduate
Diploma of Applied Corporate Governance (Governance Institute of Australia)
and is a Chartered Secretary.
3. Principal activities
LCM is a global provider of disputes finance and risk management services.
LCM has an unparalleled track record, driven by effective project selection,
active project management and robust risk management. Headquartered in Sydney,
with offices in London, Singapore, Brisbane and Melbourne, LCM listed on AIM
in December 2018, trading under the ticker LIT.
4. Operating and financial review
Overview of the LCM Group
LCM is a company limited by shares and was incorporated on 9 October 2015. LCM
was admitted to trade on the Alternative Investment Market (AIM) of the London
Stock Exchange on 19 December 2018 under the ticker LIT. LCM was formerly
listed on the Australian Securities Exchange (ASX) between 13 December 2016
and 21 December 2018.
Its registered office and principal place of business is Level 12, The Chifley
Tower, 2 Chifley Square, Sydney NSW 2000, Australia.
Operations
LCM operates its business through a series of wholly owned subsidiaries. The
principal activity of those subsidiaries is the provision of litigation
finance and risk management associated with individual and portfolios of
disputes. LCM currently operates two business models. The first is direct
investments made from LCM's balance sheet capital. The second is funds
and/or asset management. Under those two business models, LCM currently
pursues three investment strategies. Those strategies are as follows:
Single‐case funding: The first and currently largest strategy, is
single‐case funding. That is, the investment in a single dispute. This
is a strategy that LCM has maintained since its inception (through its
predecessor company) 25 years ago. Currently, a large proportion of LCM's
investments are in single‐case investments.
Portfolio funding: The second strategy pursued by LCM is portfolio funding.
That is, the provision of a portfolio based funding solution to law firms,
insolvency practitioners or corporates. It involves the provision of a
financing solution and risk management tools for a bundle of separate
disputes. LCM's particular focus with respect to that strategy is the
provision of corporate portfolio financing.
Acquisitions of Claims: The third strategy, in its early stages of evolution,
is the investment in smaller disputes (typically insolvency‐based) through
the acquisition or assignment of the underlying cause of action. LCM generates
its revenue through acquiring a cause of action and pursuing a recovery or
award as principal.
Review of financial performance
The statutory profit for the Group after adjusting for income tax amounted to
$7,293,000 (31 December 2022: loss $2,266,000). Adjusted profit before tax is
$15,998,000 (31 December 2022: $1,324,000).
Cash on balance sheet was $87,701,000 as at 31 December 2023 (30 June 2023:
$104,457,000). Of this, $17,450,000 relates to third-party cash which is
restricted cash as it relates to balances held within the fund investment
vehicles which have been consolidated with the Group numbers (30 June 2023:
$21,484,000). Cash generated during the period from the resolution of
investments was $72,772,000 (31 December 2022: $19,615,000).
The Directors do not recommend a dividend in respect of the period ended 31
December 2023.
5. Matters subsequent to the end of the financial period
In the Directors' opinion, no matter or circumstance has arisen since the end
of the financial year, that has significantly affected, or may significantly
affect, the operations of the Group, the results of those operations, or the
state of affairs of the Group in future years.
6. Lead Auditor's independence declaration
The Auditor's independence declaration as required under section 307C of the
Corporations Act 2001 is included in LCM's financial statements.
7. Rounding of amounts
LCM is of a kind referred to the Australian Securities and Investments
Commission Corporations (Rounding in Financial/Directors' Reports) Instrument
2016/191, relating to 'rounding-off'. Amounts in this report have been rounded
off in accordance with that Instrument to the nearest thousand dollars, or in
certain cases, the nearest dollar.
Mr Jonathan Moulds
Chairman
19 March 2024
Consolidated statement of profit or loss and other comprehensive income
For the period ended 31 December 2023
Restated
31-Dec-23 31-Dec-22
Note $'000 $'000
Income
Gain on financial assets at fair value through profit or loss 4 52,429 18,479
Movement in financial liabilities related to third-party interests in 4 (30,546) (8,409)
consolidated entities
Total income from litigation assets 21,883 10,070
Other income - -
Interest income 421 5
Expenses
Employee benefits expense 6 (5,938) (4,759)
Depreciation expense 6 (80) (80)
Corporate expenses (1,960) (2,708)
Finance costs 6 (5,543) (3,876)
Fund administration expense 6 (1,474) (1,139)
Foreign currency gains/(losses) 1,625 (1,316)
Total expenses (13,369) (13,878)
Profit/(loss) before income tax expense 8,935 (3,803)
Analysed as:
Adjusted operating profit 15,998 1,324
Non-operating expenses 6 (1,520) (1,391)
Finance costs 6 (5,543) (3,736)
Profit/(loss) before income tax expense 8,935 (3,803)
Income tax expense 7 (1,642) 1,537
Profit/(loss) after income tax expense 7,293 (2,266)
Other comprehensive income
Items that may be subsequently reclassified to profit and loss:
Movement in foreign currency translation reserve (101) 310
Total comprehensive income for the period 7,192 (1,956)
Profit for the period is attributable to:
Owners of Litigation Capital Management Limited 7,293 (2,266)
7,293 (2,266)
Total comprehensive income for the period is attributable to:
Owners of Litigation Capital Management Limited 7,192 (1,956)
7,192 (1,956)
Cents Cents
Basic earnings per share 21 6.84 (2.13)
Diluted earnings per share 21 6.37 (2.13)
Where applicable, comparative information has been restated to reflect a
change in accounting for litigation funding agreements. Refer to Note 3.
The above Consolidated Statement of Profit or Loss and Other Comprehensive
Income should be read in conjunction with accompanying Notes to the Financial
Statements.
Consolidated statement of financial position
As at 31 December 2023
31-Dec-23 30-Jun-23
Note $'000 $'000
Assets
Cash and cash equivalents 8 87,701 104,457
Trade & other receivables 1,838 2,209
Due from resolution of financial assets 9 19,430 11,873
Financial assets at fair value through profit or loss 10 391,011 391,410
Contract costs 11 39,377 37,277
Property, plant and equipment 182 211
Intangible assets 333 356
Other assets 1,180 1,110
Total assets 541,051 548,903
Liabilities
Trade and other payables 12 5,390 7,535
Tax payable 7,770 7,769
Employee benefits 13 988 906
Borrowings 14 59,783 68,976
Financial liabilities related to third-party interests in consolidated 15 244,726 243,990
entities
Deferred tax liability 7 37,032 36,259
Total liabilities 355,689 365,435
Net assets 185,362 183,468
Equity
Issued Capital 16 69,674 69,674
Treasury shares 16 (796) -
Reserves 1,404 1,042
Retained Earnings 115,080 112,753
Parent interest 185,362 183,468
Total equity 185,362 183,468
Where applicable, comparative information has been restated to reflect a
change in accounting for litigation funding agreements. Refer to Note 3.
The above Consolidated Statement of Financial Position should be read in
conjunction with accompanying Notes to the Financial Statements
Consolidated statement of changes in equity
For the period ended 31 December 2023
Share based Foreign
Issued Treasury Retained payments currency Total
capital shares earnings reserve translation equity
Consolidated $'000 $'000 $'000 $'000 $'000 $'000
Balance at 1 July 2022 (restated) 69,674 - 81,268 1,573 (3,585) 148,929
Loss after income tax expense for the period - - (2,266) - - (2,266)
Other comprehensive income for the period - - - - 310 310
Total comprehensive income for the period - - (2,266) - 310 (1,956)
Equity Transactions:
Share-based payments (note 22) - - - 308 - 308
- - - 308 - 308
Balance at 31 December 2022 (restated) 69,674 - 79,002 1,881 (3,275) 147,281
Share based Foreign
Issued Treasury Retained payments currency Total
capital shares earnings reserve translation equity
Consolidated $'000 $'000 $'000 $'000 $'000 $'000
Balance at 1 July 2023 69,674 - 112,753 2,440 (1,398) 183,468
Profit after income tax expense for the period - - 7,293 - - 7,293
Other comprehensive income for the period - - - - (101) (101)
Total comprehensive income for the period - - 7,293 - (101) 7,193
Equity Transactions:
Share-based payments (note 22) - - - 463 - 463
Dividends paid (note 17) - - (4,966) - - (4,966)
Treasury shares acquired (note 16) - (796) - - - (796)
- (796) (4,966) 463 - (5,298)
Balance at 31 December 2023 69,674 (796) 115,080 2,903 (1,498) 185,362
Where applicable, comparative information has been restated to reflect a
change in accounting for litigation funding agreements. Refer to Note 3.
The above Consolidated Statement of Changes in Equity should be read in
conjunction with accompanying Notes to the Financial Statements.
Consolidated statement of cash flows
For the period ended 31 December 2023
Restated
31-Dec-23 31-Dec-22
Note $'000 $'000
Cash flows from operating activities
Profit/(loss) after income tax expense for the period 7,293 (2,266)
Adjustments for:
Gain on financial assets at fair value through profit or loss (21,586) (7,140)
Depreciation and amortisation of intangibles 80 80
Share-based payments 463 308
Finance costs reclassified to financing activities 5,543 3,904
Income tax expense 1,642 (1,537)
Exceptional items (144) (39)
Fund costs reclassified to financing activities 991 777
Other, including foreign exchange rate movements (1,122) (5,887)
Change in operating assets and liabilities:
Proceeds from resolution of financial assets 9 72,164 21,804
Decrease/(increase) in trade and other receivables 608 (2,189)
(Funding) of financial assets 10 (31,531) (50,099)
(Increase) in contract costs - litigation contracts (2,305) (2,938)
Decrease/(increase) in financial assets 780 432
(Decrease)/Increase in trade and other payables (2,145) 59
(Decrease)/Increase in employee benefits 81 (22)
Income Tax paid (868) -
(Increase) in other assets (161) 604
Net cash from/(used in) operating activities 29,785 (44,149)
Cash flows from investing activities
Payments for property, plant and equipment (13) (22)
Payments for intangibles (15) (34)
Refund/(payment) of security deposits 13 (12)
Net cash used in investing activities (15) (69)
Cash flows from financing activities
Payments for treasury shares (796) -
Dividends paid 17 (4,966) -
Repayments of borrowings 14 (8,139) (14,494)
Payments of finance costs (5,752) (3,482)
Payments of fund costs related to third-party interests (991) (777)
Contributions from third-party interests in consolidated entities 15 11,010 45,298
Distributions to third-party interests in consolidated entities 15 (35,717) -
Net cash (used in)/from financing activities (45,351) 26,545
Net increase/(decrease) in cash and cash equivalents (15,581) (17,673)
Cash and cash equivalents at the beginning of the period 104,457 49,964
Effects of exchange rate changes on cash and cash equivalents (1,175) 1,108
Cash and cash equivalents at the end of the period 8 87,701 33,399
Where applicable, comparative information has been restated to reflect a
change in accounting for litigation funding agreements. Refer to Note 3.
The above Consolidated Statement of Financial Position should be read in
conjunction with accompanying Notes to the Financial Statements
Notes to the financial statements
For the period ended 31 December 2023
Note 1 General Information
The financial statements cover Litigation Capital Management Limited (the
'Company') as a Group consisting of Litigation Capital Management Limited and
the entities it controlled at the end of, or during, the period (referred to
as the 'Group'). The financial statements are presented in Australian dollars,
which is Litigation Capital Management Limited's functional and presentation
currency.
Litigation Capital Management Limited was admitted onto the Alternative
Investment Market ('AIM') on 19 December 2018.
Litigation Capital Management Limited is a listed public company limited by
shares, incorporated and domiciled in Australia. Its registered office and
principal place of business is:
Level 12, The Chifley Tower
2 Chifley Square
Sydney NSW 2000
A description of the nature of the Group's operations and its principal
activities are included in the Directors' report, which is not part of the
financial statements.
The financial statements were authorised for issue, in accordance with a
resolution of Directors, on 19 March 2024. The Directors have the power to
amend and reissue the financial statements.
Note 2 Significant accounting policies
These consolidated financial statements are general purpose financial
statements for the interim reporting period ended 31 December 2023 and have
been prepared in accordance with the Corporations Act 2001 and Australian
Accounting Standard AASB 134 Interim Financial Reporting. Compliance with AASB
134 ensures compliance with International Financial Reporting Standard IAS 34
'Interim Financial Reporting'.
These interim financial statements do not include all the notes of the type
normally included in annual financial statements. Accordingly, these financial
statements are to be read in conjunction with the annual report for the year
ended 30 June 2023 and any public announcements made by the Company during the
interim reporting period.
Basis of preparation
The principal accounting policies adopted are consistent with those of the
previous financial year and corresponding interim reporting period, unless
otherwise stated.
New or amended Accounting Standards and Interpretations adopted
The consolidated entity has adopted all of the new or amended Accounting
Standards and Interpretations issued by the Australian Accounting Standards
Board ('AASB') that are mandatory for the current period.
Any new or amended Accounting Standards or Interpretations that are not yet
mandatory have not been early adopted.
Historical cost convention
The financial statements have been prepared under the historical cost
convention.
Critical accounting estimates
The critical accounting judgements, estimates and assumptions that have been
applied in the preparation of the interim consolidated financial statements
are consistent with those followed in the preparation of the Group's annual
report for the year ended 30 June 2023.
Operating segments
Operating segments are presented using the 'management approach', where the
information presented is on the same basis as the internal reports provided to
the Chief Operating Decision Makers ('CODM'). The CODM is responsible for the
allocation of resources to operating segments and assessing their performance.
Note 3 Restatement of comparative
As disclosed in the 30 June 2023 Annual Report, the Group reassessed its
classification of the funding of its litigation funding agreements, which
resulted in the majority of the Group's litigation funding assets now being
recognised under AASB 9. Under this change, litigation funding agreements and
third-party interest in consolidated entities are accounted for as financial
instruments under AASB 9 Financial Instruments.
As a result of implementing this accounting for litigation funding agreements
for relevant contracts, the Group has restated the Consolidated statement of
profit or loss and other comprehensive income for the period ended 31 December
2022 for comparative purposes.
The restatement of each of the affected financial statement line items for the
prior periods, as follows:
Impact on consolidated statement of profit and loss and other comprehensive
income (increase/(decrease) in profit)
31-Dec-23
$'000
Income
Litigation service revenue (4,699)
Litigation service expense 3,558
Net gains/(losses) on financial assets at fair value through profit or loss 18,479
Movement in financial liabilities related to third-party interests in (8,409)
consolidated entities
Total expenses (1,801)
Income tax expense (1,897)
Net impact on profit for the period 7,128
Attributable to:
Equity holders of the parent 7,128
Other comprehensive income 1,583
Net impact on total comprehensive income for the period 8,711
Impact on basic and diluted earnings per share (EPS) (increase/(decrease) in
EPS)
Earnings per share Cents
Basic, profit for the period attributable to ordinary equity holders of the 4.90
parent
Diluted, profit for the period attributable to ordinary equity holders of the 4.90
parent
Consolidated statement of cashflows
The change did not have a net impact on the Group's operating, investing and
financing cash flows but did require some change to components within each
cash flow class.
Note 4 Income
Restated
31-Dec-23 31-Dec-22
$'000 $'000
Realised gains on litigation assets 10,866 (34)
Realised performance fees 8,776 -
Fair value adjustment during the period, net of previously recognised 2,381 6,168
unrealised gains transferred to realised gains
Foreign exchange gains (437) 1,006
Total income from litigation assets attributable to LCM 21,586 7,140
Gain on financial assets related to third-party interests in consolidated 30,843 11,339
entities
52,429 18,479
Loss on financial liabilities related to third-party interests in consolidated (30,546) (8,409)
entities
Total income from litigation assets 21,883 10,070
Total income from litigation assets attributable to LCM represents realised
and unrealised gains that relate to LCM's funded proportion of litigation
contracts. The gain and loss related to third party interests in consolidated
entities represents realised and unrealised gains and losses that relate to
third party funded proportions from LCM controlled entities. Realised gains
relate to amounts where litigation risk has concluded and amounts are expected
to be received by LCM. Unrealised gains or losses relate to the fair value
movement of assets and liabilities associated with litigation contracts.
Note 5 Segment Information
The Group's operating segments are based on the internal reports that are
reviewed and used by the Board of Directors (who are identified as the Chief
Operating Decision Makers ('CODM')) in assessing performance and in
determining the allocation of resources.
The Directors have determined that there is one operating segment. The
information reported to the CODM is the consolidated results of the Group. The
segment result is as shown in the statement of profit or loss and other
comprehensive income. Refer to statement of financial position for assets and
liabilities.
Note 6 Profit before tax
Restated
31-Dec-23 31-Dec-22
$'000 $'000
Profit before income tax expense includes the following specific expenses:
Employee benefits expense
Salaries & wages 4,530 3,841
Directors' fees 228 196
Superannuation and pension 147 138
Share based payments expense 463 308
Other employee benefits & costs 570 276
5,938 4,759
Depreciation
Plant and equipment 42 20
Intangible assets 38 60
80 80
Interest on borrowings (note 14) 5,340 3,536
Finance costs of third-party interests - 140
Other finance costs 202 200
5,543 3,876
Fund administration expense
General administration expenses 483 289
Set-up expenses - 73
Placement fees 991 777
1,474 1,139
Fund administration expenses relates to costs associated with the setup and
administration of the LCM Global Alternative Returns Funds which are wholly
attributable to the third party interest in consolidated entities.
Leases
Short-term lease payments 451 379
Adjusted operating profit
Adjusted operating profit excludes non-operating expenses which includes items
which are considered unusual, non-cash or one-off in nature.
Non-operating expenses
Management have opted to separately present these items as it better reflects
the Groups underlying performance. Non-operating expenses includes the
following items:
Share based payments expense 463 308
Other transaction costs 15 38
Litigation fees - 225
Other expenses 51 42
Fund administration expenses 991 777
Total non-operating expenses 1,520 1,391
Note 7 Income tax expense
Restated
31-Dec-23 31-Dec-22
$'000 $'000
Numerical reconciliation of income tax expense and tax at the statutory rate
Profit before income tax expense 8,935 (3,803)
At the Group's statutory income tax rate of 25% (2022: 25%) 2,234 (951)
Tax effect amounts which are not deductible/(taxable) in calculating taxable
income:
Foreign tax rate adjustments (24) (33)
Share-based payments 116 77
Change in tax rate (684) (630)
Income tax expense / (benefit) 1,642 (1,537)
Statutory tax rate of 25% is applicable to Australian entities with aggregated
turnover below $50 million for the period ended 31 December 2023. The Group's
turnover is expected to be above the threshold of $50 million in the future
reporting periods which will attract a statutory tax rate of 30%. As a result,
recognition of deferred tax asset is made by applying a 30% statutory rate
instead of the lower 25% tax rate.
Note 8 Cash and cash equivalents
31-Dec-23 30-Jun-23
$'000 $'000
Cash at Bank 30,121 82,973
Investment securities held for liquidity purposes 40,130 -
Cash of third-party interests in consolidated entities 17,450 21,484
87,701 104,457
Cash of third-party interests in consolidated entities is restricted as it is
held within the fund investment vehicles on behalf of the third-party
investors in these vehicles. The cash is restricted to use cashflows in the
litigation funding assets made on their behalf and costs of administering the
fund.
Note 9 Due from resolution of financial assets
31-Dec-23 30-Jun-23
$'000 $'000
At start of period (as restated as at 1 July 2022) 11,873 24,340
Transfer from realisation of litigation funding assets 77,891 150,447
Proceeds from litigation funding assets (72,164) (192,623)
Foreign Exchange gain/(losses) 1,830 29,708
Balance as at end of period 19,430 11,873
Note 10 Litigation Funding assets at fair value through profit or loss
31-Dec-23 30-Jun-23
$'000 $'000
At start of period (as restated as at 1 July 2022) 391,410 296,980
Deployments 15,187 30,756
Deployments - third-party interests 16,345 58,293
Realisations of litigation funding assets (77,891) (150,447)
Income for the period 52,429 136,638
Foreign exchange gains/(losses) (6,469) 19,191
Balance as at end of period 391,011 391,410
Litigation funding assets at fair value through income statement 173,766 165,768
Litigation funding assets at fair value through income statement - third-party 217,245 225,642
interests
Total litigation funding assets 391,011 391,410
Litigation Funding assets are financial instruments that relate to the
provision of capital in connection with legal finance. The Group fund through
both direct investments as well as using third party funders via a Fund model.
The table above sets forth the changes in LFA assets at the beginning and end
of the relevant reporting periods.
Note 11 Contract costs - litigation contracts
31-Dec-23 30-Jun-23
$'000 $'000
Contract costs - litigation contracts 39,377 37,277
There are a small number of legacy investments which are still being recorded
under AASB 15 Revenue from Contract with Customers due to the timing the
contracts were entered into. These are expected to resolve in the short to
medium term.
Reconciliation of litigation contract costs
Reconciliation of the contract costs at the beginning and end of the current
period and previous financial year are set out below:
31-Dec-23 30-Jun-23
$'000 $'000
Balance at 1 July 37,277 31,783
Additions during the period 2,305 5,495
Realisations of contract assets (206) -
Balance as at end of period 39,377 37,277
The Group has recognised impairment losses of $nil (2022: $nil) in profit or
loss on contract costs for the period ended 31 December 2023.
Note 12 Trade and other payables
31-Dec-23 30-Jun-23
$'000 $'000
Trade payables 4,976 7,001
Other payables 414 534
5,390 7,535
Note 13 Employee benefits
31-Dec-23 30-Jun-23
$'000 $'000
Annual Leave 654 623
Long Service Leave 334 283
988 906
Note 14 Borrowings
31-Dec-23 30-Jun-23
$'000 $'000
Borrowings 59,783 68,976
59,783 68,976
Reconciliation of borrowings of third-party interests in consolidated 31-Dec-23 30-Jun-23
entities:
$'000 $'000
Balance 1 July - 14,494
Repayment of borrowings - (14,848)
Net accrued interest - (17)
Amortisation of borrowing costs - 34
Other non-cash items - 336
Balance as at end of period - -
Reconciliation of borrowings of LCM: 31-Dec-23 30-Jun-23
$'000 $'000
Balance 1 July 68,976 54,915
Proceeds from borrowings - 9,636
Repayment of borrowings (8,139) -
Payments for borrowing costs (58) (256)
Net accrued interest (713) -
Amortisation 764 2,441
Other non-cash items (1,047) 2,241
Balance as at end of period 59,783 68,976
On 22 February 2021, LCM entered into a credit facility with Northleaf Capital
Partners for an aggregate amount of US$50,000,000, AUD equivalent of
$75,017,517(1) (the "Facility"). The Facility carries interest together with a
profit participation, capped at 13% per annum. The Facility has an overall
term of four years and is secured against LCM's assets. As at 31 December
2023, LCM has nil outstanding utilisation. Borrowings have a maturity date of
February 2025.
LCM agreed to various debt covenants including a minimum effective net
tangible worth, borrowings as a percentage of effective net tangible worth,
minimum liquidity, a minimum consolidated EBIT and a minimum multiple of
invested capital on concluded contract assets over a specified period. There
have been no defaults or breaches related to the Facility during the year
ended 31 December 2023. Should LCM not satisfy any of these covenants, the
outstanding balance of the Facility may become due and payable.
LCM incurred costs in relation to arranging the Facility of $1,649,000 which
were reflected transactions costs and will be amortised over the 4 year term
of the borrowings. As at 31 December 2023, $622,000 of the loan arrangement
fees remained outstanding.
1 Converted at the functional currency spot rates of exchange at the reporting
date
Note 15 Financial liabilities related to third-party interests in consolidated
entities
31-Dec-23 30-Jun-23
$'000 $'000
Balance 1 July (243,990) (142,180)
Proceeds - capital contributions from Limited Partners (11,010) (74,980)
Payments - distributions to Limited Partners 35,717 94,373
Loss on financial liabilities related to third-party interests in consolidated (30,546) (111,953)
entities (note 4)
Other non-cash items, including foreign exchange gain/loss 5,104 (9,250)
Balance as at end of period (244,726) (243,990)
Note 16 Equity - issued capital
31-Dec-23 30-Jun-23 31-Dec-23 30-Jun-23
Shares Shares $'000 $'000
Ordinary shares - fully paid 106,445,388 106,613,927 69,674 69,674
Ordinary shares - under loan share plan 12,331,148 12,586,405 - -
118,776,536 119,200,332 69,674 69,674
Movements in ordinary share capital Date Shares $'000
Balance 30 June 2022 106,613,927 69,674
Balance 30 June 2023 106,613,927 69,674
Options exercised 31 October 2023 87,993 -
Options exercised 23 November 2023 167,264 -
Shares bought back during the period Various (423,796) -
31 December 2023 106,445,388 69,674
As announced on 5 October 2023, the Group commenced a share buyback programme
in respect of its ordinary shares up to a maximum consideration of A$10.0
million from the date of this announcement.
Movements in ordinary shares issued under loan share plan ('LSP'): Date Shares $'000
Balance 30 June 2022 12,586,405 -
Balance 30 June 2023 12,586,405 -
Options exercised 31 October 2023 (87,993) -
Options exercised 23 November 2023 (167,264) -
31 December 2023 12,331,148 -
Reconciliation of ordinary shares issued under LSP: 31-Dec-23 30-Jun-23
Total shares allocated under existing LSP arrangements with underlying LSP 7,890,408 7,890,408
shares (note 22)
Less shares allocated under existing LSP arrangements without underlying LSP (221,467) (221,467)
shares (note 22)
Shares held by LCM Employee Benefit Trust for future allocation under employee 4,917,464 4,917,464
share and option plans
Exercise of options during the period held by the LCM Employee Benefit Trust (255,257) -
12,331,148 12,586,405
Ordinary shares
Ordinary shares entitle the holder to participate in dividends and the
proceeds on the winding up of the Company in proportion to the number of and
amounts paid on the shares held. The fully paid ordinary shares have no par
value and the Company does not have a limited amount of authorised capital.
On a show of hands every member present at a meeting in person or by proxy
shall have one vote and upon a poll each share shall have one vote.
Ordinary shares - under loan share plan ('LSP')
The Company has an equity scheme pursuant to which certain employees may
access a LSP. The acquisition of shares under this LSP is fully funded by the
Company through the granting of a limited recourse loan. The shares under LSP
are restricted until the loan is repaid. The underlying options within the LSP
have been accounted for as a share-based payment. Refer to note 22 for further
details. When the loans are settled the shares are reclassified as fully paid
ordinary shares and the equity will increase by the amount of the loan repaid.
Ordinary shares - partly paid
As at 31 December 2023, there are currently 1,433,022 partly paid shares
issued at an issue price of $0.17 per share. No amount has been paid up and
the shares will become fully paid upon payment to the Company of $0.17 per
share. As per the terms of issue, the partly paid shares have no maturity date
and the amount is payable at the option of the holder.
Partly paid shares entitle the holder to participate in dividends and the
proceeds of the Company in proportion to the number of and amounts paid on the
shares held. The partly paid shares do not carry the right to participate in
new issues of securities. Partly paid shareholders are entitled to receive
notice of any meetings of shareholders. The partly paid shareholders are
entitled to vote in the same proportion as the amounts paid on the partly paid
shares bears to the total amount paid and payable.
Treasury shares
As at 31 December 2023, there were 423,796 treasury shares (December 2022:
nil). Treasury shares comprises shares bought back from shareholders which are
held by Canaccord on behalf of the Company and classified as treasury shares.
Capital risk management
The Group's objectives when managing capital is to safeguard its ability to
continue as a going concern, so that it can provide returns for shareholders
and benefits for other stakeholders and to maintain an optimum capital
structure to reduce the cost of capital.
Capital is regarded as total equity as recognised in the statement of
financial position.
In order to maintain or adjust the capital structure, the Group may adjust the
amount of dividends paid to shareholders, return capital to shareholders,
issue new shares or sell assets to reduce debt.
The capital risk management policy remains unchanged from the 30 June 2023
Annual Report.
Note 17 Equity - dividends
31-Dec-23 31-Dec-22
$'000 $'000
Final unfranked ordinary dividend (December 2023: 2.25 cents, December 2022: 4,966 -
nil)
Franking credits
The franking credits available to the Group as at 31 December 2023 are
estimated to be $338,000 (December 2022: $338,000).
Note 18 Fair value assessment
The fair value measurements used for all assets and liabilities held by the
Group listed below are level 3:
Assets 31-Dec-23 30-Jun-23
Litigation funding assets $'000 $'000
APAC 111,090 158,836
EMEA 279,923 232,574
Total Level 3 assets 391,014 391,410
Liabilities
Financial liabilities related to third-party interests in consolidated 244,726 243,990
entities
Total Level 3 liabilities 244,726 243,990
Refer note 10 for movements in level 3 assets. There were no transfers into or
out of level 3 during the period ended 31 December 2023.
Sensitivity of Level 3 Valuations
The Group's fair value policy provides for ranges of percentages to be applied
against the risk adjustment factor to more than 159 discrete objective
litigation events. The tables below set forth each of the key unobservable
inputs used to value the Group's LFA assets and the applicable ranges and
weighted average by relative fair value for such inputs.
31 December 2023
Item Valuation technique Unobservable Input Min Max
Litigation funding asset Discounted cash flow Discount rate 12.80% 12.80%
Duration (years) 0.08 5.01
Adjusted risk premium 0% 85%
Min Max ( )
Significant ruling or other objective event prior to trial court judgment 40% 80%
Trial court judgment or tribunal award 0% 85%
Appeal judgment 0% 85%
Settlement 70% 85%
Enforcement 75% 85%
Other 0% 45%
At each reporting period, the Group reviews the fair value of each litigation
funding asset in connection with the preparation of the consolidated financial
statements. A fair value of 10% higher or lower, while all other variables
remain constant, in financial assets at fair value through profit or loss
would have increased or decreased the Group's income and net assets by
$39,101,000 as at 31 December 2023 (30 June 2023: $39,141,000). Similarly, a
fair value of 10% higher or lower, while all other variables remain constant,
in financial liabilities at fair value through profit or loss would have
increased or decreased the Group's income and net assets by $24,473,000 as at
31 December 2023 (30 June 2023: $24,399,000).
Note 19 Contingent liabilities
The majority of the Group's funding agreements contain a contractual indemnity
from the Group to the funded party that the Group will pay adverse costs
awarded to the successful party in respect of costs incurred during the period
of funding, should the client's litigation be unsuccessful. The Group's
position is that for the majority of litigation projects which are subject to
funding, the Group enters insurance arrangements which lessen or eliminate the
impact of such awards and therefore any adverse costs order exposure.
Note 20 Third-party interests in consolidated entities
AASB 10 Consolidated Financial Statements requires the Group to consolidate
fund investment vehicles over which it has exposure to variable returns from
the fund investment vehicles. As a result, third party interests in relation
to the Funds have been consolidated in the financial statements.
As at 31 December 2023, the financial liability due to third-party interests
is $244,726,000 (June 2023: $243,990,000), recorded at fair value as
represented per Note 3. Amounts included in the consolidated statement of
financial position represent the fair value of the third-party interests in
the related financial assets and the amounts included in the consolidated
statement of profit or loss and other comprehensive income represent the
third-party share of any gain or loss during the period. Third-party interests
exclude the 25% co-investment made by Litigation Capital Management Limited
and its wholly owned subsidiaries ("LCM"). The third-party interests in the
Funds carry an entitlement to receive an 8% soft return hurdle. Upon
satisfaction of the third-party interests soft return hurdle, LCM is entitled
to performance fees as fund manager on the basis of a deal by deal waterfall.
The residual net cash flows are to be distributed 25% to LCM and 75% to the
third-party interests until a IRR of 20% is achieved by the third-party
interests, thereafter the net residual cash flows are distributed 35% to LCM
and 65% to the third-party interests.
The following tables reflect the impact of consolidating the results of the
Funds with the results for LCM to arrive at the totals reported in the
consolidated statement of profit or loss and other comprehensive income,
consolidated statement of financial position and consolidated statement of
cash flows. The Fund column in the table below presents the interests of
third-party investors comprising both the investment in the litigation funding
assets made on their behalf and costs of administering the funds. The LCM
column includes the 25% co-investment in these litigation contracts.
Restated
31 December 2023 31 December 2022
Consolidated Statement of Comprehensive Income LCM Fund Consolidated LCM Fund Consolidated
$'000 $'000 $'000 $'000 $'000 $'000
Income
Gain on financial assets at fair value through profit or loss 21,586 30,843 52,429 7,140 11,339 18,479
Movement in financial liabilities related to third-party interests in - (30,546) (30,546) - (8,409) (8,409)
consolidated entities
Total income from litigation assets 21,586 297 21,883 7,140 2,930 10,070
Interest income 331 91 421 5 - 5
Expenses
Employee benefits expense (5,938) - (5,938) (4,759) - (4,759)
Depreciation expense (80) - (80) (80) - (80)
Corporate expenses (1,960) - (1,960) (1,863) (845) (2,708)
Finance costs (5,543) - (5,543) (3,736) (140) (3,876)
Fund administration expense (991) (483) (1,474) (777) (362) (1,139)
Foreign currency gains/(losses) 1,530 95 1,625 267 (1,583) (1,316)
Total expenses (12,982) (388) (13,369) (10,948) (2,930) (13,878)
Profit/(loss) before income tax expense 8,935 - 8,935 (3,803) - (3,803)
Analysed as:
Adjusted operating profit 15,998 - 15,998 1,324 - 1,324
Non-operating expenses (1,520) - (1,520) (1,391) - (1,391)
Finance costs (5,543) - (5,543) (3,736) - (3,736)
Profit/(loss) before income tax expense 8,935 - 8,935 (3,803) - (3,803)
Income tax expense (1,642) - (1,642) 1,537 - 1,537
Profit/(loss) after income tax expense 7,293 - 7,293 (2,266) - (2,266)
Other comprehensive income for the period, net of tax (101) - (101) 310 310
Total comprehensive income for the period 7,192 - 7,192 (1,956) - (1,956)
31 December 2023 30 June 2023
Consolidated statement of financial position LCM Fund Consolidated LCM Fund Consolidated
$'000 $'000 $'000 $'000 $'000 $'000
Assets
Cash and cash equivalents 70,251 17,450 87,701 82,973 21,484 104,457
Trade & other receivables 1,838 - 1,838 2,209 - 2,209
Due from resolution of financial assets 7,520 11,909 19,430 11,873 - 11,873
Financial assets at fair value through profit or loss 173,766 217,245 391,011 165,768 225,642 391,410
Contract costs 39,377 - 39,377 37,277 - 37,277
Property, plant and equipment 182 - 182 211 - 211
Intangible assets 333 - 333 356 - 356
Other assets 1,180 - 1,180 1,032 78 1,110
Total assets 294,447 246,604 541,051 301,699 247,204 548,903
Liabilities
Trade and other payables 3,511 1,879 5,390 4,321 3,214 7,535
Tax payable 7,770 - 7,770 7,769 - 7,769
Employee Benefits 988 - 988 906 - 906
Borrowings 59,783 - 59,783 68,976 - 68,976
Third-party interests in consolidated entities - 244,726 244,726 - 243,990 243,990
Deferred tax liability 37,032 - 37,032 36,259 - 36,259
Total liabilities 109,085 246,604 355,689 118,231 247,204 365,435
Net assets 185,362 - 185,362 183,468 - 183,468
A financial liability at fair value through the income statement is recognised
in the parent entity in relation to the transactions entered into with certain
Fund structures to support the financing of LFAs. These arrangements fail the
derecognition principles in IFRS 9 and represents the net share of the overall
LFA at fair value apportioned to the Funds.
Restated
31 December 2023 31 December 2022
Consolidated Statement of Cash Flows LCM Fund Consolidated LCM Fund Consolidated
$'000 $'000 $'000 $'000 $'000 $'000
Cash flows from operating activities
Profit/(loss) after income tax expense for the period 7,293 - 7,293 (2,266) - (2,266)
Adjustments for:
Gain on financial assets at fair value through profit or loss (21,586) - (21,586) (7,140) - (7,140)
Depreciation and amortisation of intangibles 80 - 80 80 - 80
Share-based payments 463 - 463 308 - 308
Finance costs reclassified to financing activities 5,543 - 5,543 3,736 167 3,904
Income tax expense 1,642 - 1,642 (1,537) - (1,537)
Exceptional items (144) - (144) (39) - (39)
Fund costs reclassified to financing activities 991 - 991 777 - 777
Other, including foreign exchange rate movements (1,122) - (1,122) (842) (5,045) (5,887)
Change in operating assets and liabilities:
Proceeds from resolution of financial assets 33,214 38,950 72,164 20,082 1,722 21,804
Decrease/(increase) in trade and other receivables 608 - 608 (2,189) - (2,189)
(Funding) of financial assets (15,187) (16,345) (31,531) (18,520) (31,579) (50,099)
(Increase) in contract costs - litigation contracts (2,305) - (2,305) (2,938) - (2,938)
Decrease/(increase) in financial assets 780 - 780 432 - 432
(Decrease)/Increase in trade and other payables (809) (1,336) (2,145) 109 (50) 59
(Decrease)/Increase in employee benefits 81 - 81 (22) - (22)
Income Tax paid (868) - (868) - - -
(Increase) in other assets (161) - (161) 604 - 604
Net cash from/(used in) operating activities 8,515 21,270 29,785 (9,364) (34,785) (44,149)
Cash flows from investing activities
Payments for property, plant and equipment (13) - (13) (22) - (22)
Payments for intangibles (15) - (15) (34) - (34)
Refund/(payment) of security deposits 13 - 13 (12) - (12)
Net cash used in investing activities (15) - (15) (69) - (69)
Cash flows from financing activities
Payments for treasury shares (796) - (796) - - -
Dividends paid (4,966) - (4,966) - - -
Repayments of borrowings (8,139) - (8,139) - (14,494) (14,494)
Payments of finance costs (5,752) - (5,752) (3,350) (132) (3,482)
Payments of transaction costs related to third-party interests (991) - (991) (777) - (777)
Contributions from third-party interests in consolidated entities - 11,010 11,010 - 45,298 45,298
Distributions to third-party interests in consolidated entities - (35,717) (35,717) - - -
Net cash (used in)/from financing activities (20,644) (24,707) (45,351) (4,127) 30,672 26,545
Net increase/(decrease) in cash and cash equivalents (12,144) (3,437) (15,581) (13,560) (4,113) (17,673)
Cash and cash equivalents at the beginning of the period 82,973 21,484 104,457 29,253 20,711 49,964
Effects of exchange rate changes on cash and cash equivalents (578) (597) (1,175) 880 228 1,108
Cash and cash equivalents at the end of the period 70,251 17,450 87,701 16,573 16,826 33,399
Note 21 Earnings per share
31-Dec-23 31-Dec-22
$'000 $'000
Profit after income tax 7,293 (2,266)
Profit after income tax attributable to the owners of Litigation Capital 7,293 (2,266)
Management Limited
Number Number
Weighted average number of ordinary shares used in calculating basic earnings 106,606,481 106,613,927
per share
Adjustments for calculation of diluted earnings per share:
Amounts uncalled on partly paid shares 1,309,066 -
Options over ordinary shares 6,597,884 -
Weighted average number of ordinary shares used in calculating diluted 114,513,431 106,613,927
earnings per share
Cents Cents
Basic earnings per share 6.84 (2.13)
Diluted earnings per share 6.37 (2.13)
Dilutive potential shares which are contingently issuable are only included in
the calculation of diluted earnings per share where the conditions are met.
Note 22 Share-based payments
The share-based payment expense for the period was $463,000 (December 2022:
$308,000).
Loan Funded Share Plans ('LSP')
As detailed in note 16, the Group has an equity scheme pursuant to which
certain employees may access a LSP. The shares under LSP are issued at the
exercise price by granting a limited recourse loan. The LSP shares are
restricted until the loan is repaid. Options under this scheme can be granted
without an underlying LSP share until they have been exercised and on this
basis, do not form part of the Group's issued share capital. The underlying
options have been accounted for as a share-based payments. The options are
issued over a 1-3 year vesting period. Vesting conditions include satisfaction
of customary continuous employment with the Group and may include a share
price hurdle.
During the period the Group granted nil (December 2022: nil) shares under the
LSP.
Set out below are summaries of shares/options granted under the LSP:
December 2023
Grant date Expiry date Exercise Balance at the start of the period Granted Exercised Expired/ Balance at the end of the period
Price forfeited/
other
04/12/2017 04/12/2027 $0.60 2,000,000 2,000,000
31/08/2018 31/08/2028 $0.77 411,972 411,972
19/11/2018 25/11/2028 $0.47 1,595,058 1,595,058
03/12/2018 03/12/2028 $0.89 100,000 100,000
01/11/2019 01/11/2029 £0.7394 1,432,753 1,432,753
13/10/2020 13/10/2030 £0.6655 616,520 616,520
27/10/2021 27/10/2031 £1.06 1,512,638 1,512,638
27/10/2021 27/10/2031 £1.06 99,037 99,037 (1)
27/10/2021 27/10/2031 £1.14 122,430 122,430 (1)
7,890,408 - - - 7,890,408
1 Options granted without an underlying LSP share until exercised ie, do not
form part of the Group's issued share capital
Deferred Bonus Share Plan ('DBSP')
The Company has in place a DBSP. Options granted under the DBSP reflect past
performance and are in the form of nil cost options and will vest in three
equal tranches from the date of issue and are subject to continued employment
over the three year period.
In addition, the Options granted under the DBSP are subject to malus and
clawback provisions. In the event of a change of control of the Company,
unvested awards will vest to the extent determined by the Board, taking into
account the proportion of the period of time between grant and the normal
vesting date that has elapsed at the date of the relevant event.
During the period the Group granted 771,911 (December 2022: 1,132,692) options
under the DBSP.
Set out below are summaries of options granted under the DBSP:
December 23
Grant date Expiry date Exercise Balance at the start of the period Granted Exercised Expired/ Balance at the end of the period
Price forfeited/
other
07/10/2022 07/10/2032 $0.00 1,132,692 - (255,257) - 877,435
04/10/2023 04/10/2033 $0.00 - 771,911 - - 771,911
1,132,692 771,911 (255,257) - 1,649,346
Executive Long Term Incentive Plan ('LTIP')
The Company has in place an Executive LTIP. Options over ordinary shares in
the capital of the Company ("Ordinary Shares") are issued to recipients under
the LTIP plan. The options set out above have been granted under the LTIP in
the form of nil cost options and are subject to performance conditions which
require the growth of Funds under Management ('FuM') over a five year
performance period. The performance conditions associated with the options are
set out below:
(1) 50% vesting on reaching a minimum of FuM of US$750m; and
(2) 100% vesting on reaching FuM of US$1bn.
The vesting date of options granted is the later of:
(1) the third anniversary of the Grant Date;
(2) the satisfaction of the Performance Condition; or
(3) the date of any adjustment under the Plan rules of the Plan at the
Boards discretion.
Any awards made to the participants are subject to a five year holding period
from the grant date. In the event of a change of control of the Company,
unvested awards will vest to the extent determined by the Board, taking into
account the proportion of the period of time between grant and the normal
vesting date that has elapsed at the date of the relevant event and the extent
to which any performance condition has been satisfied at the date of the
relevant event.
During the period the Group granted nil (December 2022: 5,671,516) options
under the LTIP.
Set out below are summaries of shares/options granted under the LTIP:
December 2023
Grant date Expiry date Exercise Balance at the start of the period Granted Exercised Expired/ Balance at the end of the period
Price forfeited/
other
07/10/2022 07/10/2032 $0.0000 5,671,516 - - - 5,671,516
5,671,516 - - - 5,671,516
For the options under LSP granted during the current period, the valuation
model inputs used in the Black-Scholes pricing model to determine the fair
value at the grant date, are as follows:
Grant date Expiry dat(e ) Share price at grant date Exercise price Expected volatility Dividend yield Risk-free interest rate Fair value at grant date (1)
04/10/2023 04/10/2033 £0.98 £0.00 35.00% 1.10% 3.79% $1.820
1 AUD amount. GBP equivalent £0.952
The expected volatility reflects the assumption that the historical volatility
over a period similar to the life of the options is indicative of future
trends, which may not necessarily be the actual outcome.
Note 23 Events after the reporting period
In the Directors' opinion, no matter or circumstance has arisen since the end
of the financial year, that has significantly affected, or may significantly
affect, the operations of the Group, the results of those operations, or the
state of affairs of the Group in future years.
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