RNS Number : 0233B
Litigation Capital Management Ltd
18 March 2025
18 March 2025
Litigation Capital Management Limited
("LCM" or the "Company")
Interim results for the half year ended 31 December 2024
Highlights
•
Seven realisations in period generating A$51m of revenue
•
Net realised gains of A$37.4m (HY24: A$19.6m), with concluded investments generating a 3.67x multiple of cash invested (MOIC)
•
Total income of A$4.7m (HY24: A$21.6m) due to A$32m negative fair value movement driven by fair value write-offs on concluded investments
•
Loss after tax for the period of A$8.4m (HY24: profit A$7.3m)
•
Net assets of A$181.8m (HY24: A$188.9m)
·
Book value per share of 86.3 pence (FY24: 94.4 pence)
·
Total new commitments of A$34m added in the period (HY24: A$90m)
Outlook
·
Fund management momentum accelerating, with Fund III on track for launch before 30 June 2025
·
New commitments expected to rebound in the second half of FY25.
Commenting on the results, Patrick Moloney, CEO of Litigation Capital Management, said: "The first half of the year reflected the inherent volatility of litigation finance. While we secured significant wins in two arbitration cases, we also faced setbacks with two class action losses at trial, which are now subject to appeal. Our transition to a fund management model continues to gain momentum, and as we scale, we expect to reduce financial unpredictability. We remain disciplined in capital allocation, focused on generating strong long-term returns for our investors and shareholders.
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
A webinar presentation for analysts will take place at 9.30am. Analysts wishing to attend should contact client-lcm@cavendish.com to register.
The accompanying results presentation is available on LCM's website:
https://www.lcmfinance.com/investors/investor-presentations-results
The Interim Financial Report is available at:
https://www.lcmfinance.com/investors/investor-presentations-results
Enquiries
Litigation Capital Management
Patrick Moloney, Chief Executive Officer David Collins, Chief Financial Officer
Cavendish (Nomad and Joint Broker)
Tel: 020 7523 8000
Jonny Franklin-Adams, Isaac Hooper and Rory Sale (Corporate Finance) Tim Redfern and Jamie Anderson (Corporate Broking)
Canaccord Genuity (Joint Broker)
Tel: 020 7597 5970
Bobbie Hilliam
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
Chief Executive's Statement
The first half of our 2025 financial year has been particularly volatile, which is not uncommon in the litigation finance asset class. On the positive side, we secured significant wins in two investment treaty arbitration cases, where US$15 million of capital-deployed from both LCM's balance sheet and Fund I-generated awards exceeding US$400 million. LCM's share of these awards, across both capital sources, is approaching US$90 million, underscoring the exceptional returns we can deliver for our clients, fund investors, and shareholders. However, we also experienced setbacks, with two Australian class action investments losing at trial (both will be appealed). LCM has invested A$38m of its own capital into these cases to date and we expect any further investment to take these cases to appeal will be relatively modest.
Our business is at an inflection point. Since embarking on our transition to a fund management model in 2020, we have made significant progress. Fund I (US$150 million) recently marked its fifth anniversary, delivering excellent performance. A comparison against the US private equity asset class, based on Cambridge Associates' extensive research, places Fund I in the top 5% of 2020 vintage funds across all key metrics. Fund II (US$291 million) has now closed to new commitments, with several cases in due diligence expected to bring it to 75-85% commitment.
Marketing for Fund III is progressing strongly. We have received excellent engagement from both existing and new investors and expect to complete the first close in Q2 2025.
As we scale and continue our transition towards a pure fund management model, we see a clear opportunity to enhance our economic profile. Over time, we expect to limit downside exposure to individual case outcomes while maintaining substantial upside through performance fees on co-funded investments. However, our financial results still exhibit volatility, largely due to legacy balance sheet investments. As these cases resolve, our risk profile will improve, reducing financial unpredictability.
New commitments in the first half were below historical levels, reflecting a temporary shortage of high-quality opportunities rather than any structural issue. While we saw strong deal flow, we remained disciplined-quality remains paramount. We expect commitments to rebound in the second half, particularly as market dynamics continue to shift in our favour. Many competitors in our core markets are facing challenges in raising capital, with some believed to be in de facto run-off, potentially increasing deal flow for LCM over time.
During the period, we successfully refinanced our debt facility, securing a larger facility at a lower interest rate and on improved terms. Our cost of debt is now below 10%, with the benefit of reduced interest costs already evident in our financials.
Strategically, we have made meaningful progress on two key initiatives-expanding into the US legal finance market and integrating AI-driven technologies into our underwriting and origination processes. The AI technology we acquired six months ago is now fully embedded in our investment process for treaty arbitration cases-an area where we are establishing a strong track record in contrast to many peers who have struggled with these complex, high-value claims. In the second half of the year, we will pilot AI-driven origination strategies. While we do not expect immediate results from these pilot tests, we are confident that AI will play an increasingly important role in the long-term success of our business.
While the first half of the year presented challenges, particularly in individual case outcomes, our long-term investment model remains robust. Our disciplined capital allocation and growing fund management platform positions us to generate sustainable value for both shareholders and fund investors.
Patrick Moloney
Chief Executive Officer
18 March 2025
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 2024 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
David Collins (appointed 6 December 2024)
Gerhard Seebacher (resigned 15 January 2025)
Mary Gangemi (resigned 5 September 2024)
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 loss for the Group after adjusting for income tax amounted to $8,353,000 (31 December 2023: profit $7,293,000). Operating loss before tax is $7,952,000 (31 December 2023: profit $14,057,000).
Cash on balance sheet was $30,585,000 as at 31 December 2024 (30 June 2024: $68,113,000). Of this, $15,717,000 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 2024: $15,089,000). Cash generated during the period from the resolution of investments was $56,402,000 (31 December 2023: $71,272,000).
The Directors do not recommend a dividend in respect of the period ended 31 December 2024.
5. Matters subsequent to the end of the financial period
On 21 February 2025, the Group announced that the Federal Court of Australia had ruled against its funded party, Quintis Limited. While the claim was unsuccessful, the Group is reviewing the judgment and considering an appeal, which must be filed within 28 days of final orders being made.
On 11 March 2025, the Group announced that an appeal has been filed in relation to the class action funded by the Group on behalf of Queensland electricity users against Stanwell Corporation Ltd and CS Energy Ltd. This follows the first instance judgment, which ruled against LCM's funded party, as announced on 4 December 2024.
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
18 March 2025
Consolidated statement of profit or loss and other comprehensive income
For the period ended 31 December 2024
31-Dec-24
31-Dec-23
Note
$'000
$'000
Income
Gain on financial assets at fair value through profit or loss
4
25,790
52,429
Movement in financial liabilities related to third-party interests in consolidated entities
4
(18,382)
(30,546)
Total income
7,408
21,883
Expenses
Employee benefits expense
5
(6,688)
(5,938)
Depreciation expense
5
(47)
(80)
Corporate expenses
(2,577)
(1,960)
Fund administration expense
5
(1,313)
(1,474)
Foreign currency gains/(losses)
(4,735)
1,625
Total operating expenses
(15,360)
(7,826)
Operating (loss)/profit
(7,952)
14,057
Finance costs
5
(3,710)
(5,122)
(Loss)/profit before income tax expense
(11,662)
8,935
Income tax benefit/(expense)
3,309
(1,642)
(Loss)/profit after income tax expense
(8,353)
7,293
Other comprehensive income
Items that may be subsequently reclassified to profit and loss:
Movement in foreign currency translation reserve
8,620
(101)
Total comprehensive income for the period
267
7,192
(Loss)/profit for the period is attributable to:
Owners of Litigation Capital Management Limited
(8,353)
7,293
(8,353)
7,293
Total comprehensive income for the period is attributable to:
Owners of Litigation Capital Management Limited
267
7,192
267
7,192
Cents
Cents
Basic earnings per share
7
(8.09)
6.84
Diluted earnings per share
7
(8.09)
6.37
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 2024
31-Dec-24
30-Jun-24
Note
$'000
$'000
Assets
Cash and cash equivalents
8
30,585
68,113
Trade receivables
1,786
10,986
Due from resolution of financial assets
10
105,198
3,980
Contract costs
11
47,396
42,072
Financial assets at fair value through profit or loss
12
420,264
465,213
Property, plant and equipment
144
157
Intangible assets
453
305
Other assets
839
977
Total assets
606,665
591,803
Liabilities
Trade and other payables
13
11,755
30,376
Tax payable
5,833
883
Employee benefits
1,382
1,112
Borrowings
14
54,851
61,917
Financial liabilities related to third-party interests in consolidated entities
15
314,982
264,950
Deferred tax liability
36,062
43,624
Total liabilities
424,865
402,862
Net assets
181,800
188,941
Equity
Issued Capital
16
58,960
69,674
Treasury shares
16
-
(5,396)
Reserves
13,381
4,171
Retained Earnings
109,459
120,492
Parent interest
181,800
188,941
Total equity
181,800
188,941
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 2024
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
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 2024
69,674
(5,396)
120,492
3,556
615
188,941
Loss after income tax expense for the period
-
-
(8,353)
-
-
(8,353)
Other comprehensive income for the period
-
-
-
-
8,620
8,620
Total comprehensive income for the period
-
-
(8,353)
-
8,620
267
Equity Transactions:
Share-based payments (note 22)
-
-
-
590
-
590
Dividends paid (note 17)
-
-
(2,680)
-
-
(2,680)
Treasury shares acquired (note 16)
-
(4,458)
-
-
-
(4,458)
Cancellation of treasury shares (note 16)
(9,854)
9,854
-
-
-
-
LSPs exercised and purchased by EBT (note 16)
(860)
-
-
-
-
(860)
(10,714)
5,396
(2,680)
590
-
(7,407)
Balance at 31 December 2024
58,960
-
109,459
4,146
9,235
181,800
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 2024
31-Dec-24
31-Dec-23
Note
$'000
$'000
Cash flows from operating activities
Proceeds from litigation contracts
56,402
71,272
Payments for litigation contracts
(78,310)
(33,083)
Payments to suppliers and employees
(10,152)
(8,099)
Income tax paid
(28)
(723)
Net cash (used in)/from operating activities
(32,088)
29,367
Cash flows from investing activities
Payments for property, plant and equipment
(3)
(13)
Payments for intangibles
(179)
(15)
Refund/(payment) of security deposits
(1)
13
Net cash (used in) investing activities
(182)
(15)
Cash flows from financing activities
Payments for treasury and loan shares
16
(5,318)
(796)
Dividends paid
(2,607)
(4,966)
Repayments of borrowings
14
(11,358)
(8,139)
Payments of finance costs
(3,186)
(5,426)
Payments of placement fees related to third-party interests
(835)
(991)
Contributions from third-party interests in consolidated entities
15
40,626
11,010
Distributions to third-party interests in consolidated entities
15
24,572
(35,717)
Net cash (used in) financing activities
(7,250)
(45,026)
Net increase/(decrease) in cash and cash equivalents
(39,519)
(15,673)
Cash and cash equivalents at the beginning of the period
68,113
104,457
Effects of exchange rate changes on cash and cash equivalents
1,991
(1,084)
Cash and cash equivalents at the end of the period
8
30,585
87,701
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 2024
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 18 March 2025. 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 2024 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 2024.
Note 3 Segment information
For management purposes, the Group is organised into two operating segments comprising the operations of Litigation Capital Management Limited and its wholly owned subsidiaries ("LCM") and the Group's fund structures ("Fund").
LCM
The LCM column includes the 25% co-investment in the Funds, Balance Sheet investments (ie, 100% investment by LCM) and corporate operations.
Fund 1 & 2
This comprises LCM Global Alternative Returns Fund and LCM Global Alternative Returns Fund II and their entities as disclosed in note 25. 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. The Fund column includes the 75% co-investment in the litigation funding assets and costs of administering the funds.
Intersegment revenue
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 net residual 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.
31 December 2024
31 December 2023
Consolidated Statement of Comprehensive Income
Consolidated
Fund
LCM
Consolidated
Fund
LCM
$'000
$'000
$'000
$'000
$'000
$'000
Income
Gain on financial assets at fair value through profit or loss
25,790
21,111
4,679
52,429
30,843
21,586
Movement in financial liabilities related to third-party interests in consolidated entities
(18,382)
(18,382)
-
(30,546)
(30,546)
-
Total income
7,408
2,729
4,679
21,883
298
21,586
Expenses
Employee benefits expense
(6,688)
-
(6,688)
(5,938)
-
(5,938)
Depreciation expense
(47)
-
(47)
(80)
-
(80)
Corporate expenses
(2,577)
-
(2,577)
(1,960)
-
(1,960)
Fund administration expense
(1,313)
(478)
(835)
(1,474)
(483)
(991)
Foreign currency gains/(losses)
(4,735)
(2,251)
(2,484)
1,625
95
1,530
Total operating expenses
(15,360)
(2,729)
(12,632)
(7,826)
(388)
(7,439)
Operating (loss)/profit
(7,952)
-
(7,952)
14,057
(91)
14,147
Finance costs
(3,710)
-
(3,710)
(5,122)
91
(5,213)
(Loss)/profit before income tax expense
(11,662)
-
(11,662)
8,935
-
8,934
Income tax benefit/(expense)
3,309
-
3,309
(1,642)
-
(1,642)
(Loss)/profit after income tax expense
(8,353)
-
(8,353)
7,293
-
7,293
Other comprehensive income for the period, net of tax
8,620
-
8,620
(101)
(101)
Total comprehensive income for the period
267
-
267
7,192
-
7,192
31 December 2024
30 June 2024
Consolidated statement of financial position
Consolidated
Fund
LCM
Consolidated
Fund
LCM
$'000
$'000
$'000
$'000
$'000
$'000
Assets
Cash and cash equivalents
30,585
15,717
14,868
68,113
15,089
53,024
Trade & other receivables
1,786
-
1,786
10,986
-
10,986
Due from resolution of financial assets
105,198
69,776
35,422
3,980
-
3,980
Contract costs
47,396
-
47,396
42,072
-
42,072
Financial assets at fair value through profit or loss
420,264
235,448
184,816
465,213
262,300
202,913
Property, plant and equipment
144
-
144
157
-
157
Intangible assets
453
-
453
305
-
305
Other assets
839
(859)
1,698
977
(22)
999
Total assets
606,665
320,081
286,582
591,803
277,367
314,436
Liabilities
Trade and other payables
11,755
5,100
6,655
30,379
12,417
17,959
Tax payable
5,833
-
5,833
883
-
883
Employee Benefits
1,382
-
1,382
1,112
-
1,112
Borrowings
54,851
-
54,851
61,917
-
61,917
Third-party interests in consolidated entities
314,982
314,982
-
264,950
264,950
-
Deferred tax liability
36,062
-
36,062
43,624
-
43,624
Total liabilities
424,865
320,081
104,783
402,862
277,367
125,494
Net assets
181,800
-
181,800
188,941
-
188,941
31 December 2024
31 December 2023
Consolidated Statement of Cash Flows
Consolidated
Fund
LCM
Consolidated
Fund
LCM
$'000
$'000
$'000
$'000
$'000
$'000
Cash flows from operating activities
Proceeds from litigation contracts
56,402
27,176
29,227
71,272
38,950
32,322
Payments for litigation contracts
(78,310)
(42,938)
(35,372)
(33,083)
(16,345)
(16,739)
Payments to suppliers and employees
(10,152)
(573)
(9,579)
(8,099)
(1,427)
(6,672)
Income tax paid
(28)
-
(28)
(723)
-
(723)
Net cash (used in)/from operating activities
(32,088)
(16,335)
(15,752)
29,367
21,179
8,188
Cash flows from investing activities
Payments for property, plant and equipment
(3)
-
(3)
(13)
-
(13)
Payments for intangibles
(179)
-
(179)
(15)
-
(15)
Refund/(payment) of security deposits
(1)
-
(1)
13
-
13
Net cash (used in) investing activities
(182)
-
(182)
(15)
-
(15)
Cash flows from financing activities
Payments for treasury and loan shares
(5,318)
-
(5,318)
(796)
-
(796)
Dividends paid
(2,607)
-
(2,607)
(4,966)
-
(4,966)
Repayments of borrowings
(11,358)
-
(11,358)
(8,139)
-
(8,139)
Payments of finance costs
(3,186)
-
(3,186)
(5,426)
-
(5,426)
Payments of transaction costs related to third-party interests
(835)
-
(835)
(991)
-
(991)
Contributions from third-party interests in consolidated entities
40,626
40,626
-
11,010
11,010
-
Distributions to third-party interests in consolidated entities
(24,572)
(24,572)
-
(35,717)
(35,717)
-
Net cash (used in) financing activities
(7,250)
16,054
(23,304)
(45,026)
(24,707)
(20,318)
Net increase/(decrease) in cash and cash equivalents
(39,519)
(281)
(39,238)
(15,673)
(3,528)
(12,145)
Cash and cash equivalents at the beginning of the period
68,113
15,089
53,024
104,457
21,484
82,973
Effects of exchange rate changes on cash and cash equivalents
1,991
909
1,082
(1,084)
(506)
(578)
Cash and cash equivalents at the end of the period
30,585
15,717
14,868
87,701
17,450
70,250
Note 4 Income
31-Dec-24
31-Dec-23
Fair value through profit and loss
$'000
$'000
Realised gains on litigation assets
18,500
10,866
Realised performance fees
18,929
8,776
Fair value adjustment during the period, net of previously recognised unrealised gains transferred to realised gains
(33,534)
2,381
Foreign exchange gains
783
(437)
Total income from litigation assets attributable to LCM
4,679
21,586
Gain on financial assets related to third-party interests in consolidated entities
21,111
30,843
25,789
52,429
Loss on financial liabilities related to third-party interests in consolidated entities
(18,382)
(30,546)
Total income from litigation assets
7,408
21,883
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 Profit before tax
31-Dec-24
31-Dec-23
$'000
$'000
Profit before income tax expense includes the following specific expenses:
Employee benefits expense
Salaries & wages
5,074
4,530
Directors' fees
239
228
Superannuation and pension
156
147
Share based payments expense
495
463
Other employee benefits & costs
725
570
6,688
5,938
Depreciation
Plant and equipment
16
42
Intangible assets
31
38
47
80
Interest on borrowings (note 14)
3,257
4,919
Other finance costs
453
202
3,710
5,122
Fund administration expense
General administration expenses
478
483
Placement fees
835
991
1,313
1,474
Leases
Short-term lease payments
462
451
Note 6 Income tax expense
31-Dec-24
31-Dec-23
$'000
$'000
Numerical reconciliation of income tax expense and tax at the statutory rate
Profit before income tax expense
(11,662)
8,935
At the Group's statutory income tax rate of 30% (2023: 25%)
(3,499)
2,234
Tax effect amounts which are not deductible/(taxable) in calculating taxable income:
Foreign tax rate adjustments
819
(24)
Share-based payments
76
116
Other non-deductible expenses
368
-
Change in tax rate
-
(684)
Utilisation of carried forward tax losses
(1,073)
-
Income tax expense / (benefit)
(3,309)
1,642
Note 7 Earnings per share
31-Dec-24
31-Dec-23
$'000
$'000
(Loss)/profit after income tax
(8,353)
7,293
(Loss)/profit after income tax attributable to the owners of Litigation Capital Management Limited
(8,353)
7,293
Number
Number
Weighted average number of ordinary shares used in calculating basic earnings per share
103,190,317
106,606,481
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 earnings per share
103,190,317
114,513,431
Cents
Cents
Basic (loss)/earnings per share
(8.09)
6.84
Diluted (loss)/earnings per share
(8.09)
6.37
Dilutive potential shares which are contingently issuable are only included in the calculation of diluted earnings per share where the conditions are met.
Note 8 Cash and cash equivalents
31-Dec-24
30-Jun-24
$'000
$'000
Cash at Bank
14,868
22,963
Investment securities held for liquidity purposes
-
30,061
Cash of third-party interests in consolidated entities
15,717
15,089
30,585
68,113
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 10 Due from resolution of financial assets
31-Dec-24
30-Jun-24
$'000
$'000
At start of period (1 July)
3,980
11,873
Transfer from realisation of litigation funding assets
149,243
101,943
Proceeds from litigation funding assets
(46,882)
(112,990)
Other income
-
697
Foreign Exchange (loss)/gain
(1,143)
2,457
Balance as at end of period
105,198
3,980
As at 31 December 2024, amounts due from resolution of financial assets are expected to be settled within 12 months after the Balance Sheet date.
Note 11 Contract costs - litigation contracts
31-Dec-24
30-Jun-24
$'000
$'000
Contract costs - litigation contracts
47,396
42,072
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-24
30-Jun-24
$'000
$'000
Balance at 1 July
42,072
37,277
Additions during the period
5,324
8,030
Realisations of contract assets
-
(3,236)
Balance as at end of period
47,396
42,072
The Group has recognised impairment losses of $nil (2024: $nil) in profit or loss on contract costs for the period ended 31 December 2024.
Note 12 Litigation Funding assets at fair value through profit or loss
31-Dec-24
30-Jun-24
$'000
$'000
At start of period (as at 1 July)
465,213
391,410
Deployments
19,920
45,301
Deployments - third-party interests
35,537
47,818
Realisations of litigation funding assets
(149,243)
(101,943)
Income for the period
25,790
86,926
Foreign exchange gains/(losses)
23,046
(4,300)
Balance as at end of period
420,264
465,213
Litigation funding assets at fair value through income statement
184,819
202,913
Litigation funding assets at fair value through income statement - third-party interests
235,448
262,300
Total litigation funding assets
420,264
465,213
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 13 Trade and other payables
31-Dec-24
30-Jun-24
$'000
$'000
Trade payables
11,546
29,789
Other payables
209
587
11,755
30,376
Note 14 Borrowings
31-Dec-24
30-Jun-24
$'000
$'000
Borrowings
54,851
61,917
54,851
61,917
Reconciliation of borrowings of LCM:
31-Dec-24
30-Jun-24
$'000
$'000
Balance 1 July
61,917
68,976
Repayment of borrowings
(12,864)
(8,139)
Payments for borrowing costs
(683)
(819)
Net accrued interest
743
648
Amortisation
453
1,221
Other non-cash items
5,285
29
Balance as at end of period
54,851
61,917
On 2 December 2024, LCM refinanced its credit facility with Northleaf Capital Partners for an initial amount of US$75,000,000, AUD equivalent of $120,157,0691 (the "Facility"), with a potential to upsize by a further US$75,000,000 (total US$150,000,000, AUD equivalent $240,314,0001). The Facility carries interest set at the relevant bank rate plus 5.25%. The Facility has an overall term of four years and is secured against LCM's assets. As at 31 December 2024, LCM's outstanding utilisation amounted to US$30,000,000 on the initial credit facility, an AUD equivalent of $48,063,0001.
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 period ended 31 December 2024. 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 $667,000 which were reflected transactions costs and will be amortised over the 4 year term of the borrowings. As at 31 December 2024, $652,000 of these 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-24
30-Jun-24
$'000
$'000
Balance 1 July
264,950
243,990
Proceeds - capital contributions from Limited Partners
40,626
30,505
Payments - distributions to Limited Partners
(24,572)
(56,407)
Loss on financial liabilities related to third-party interests in consolidated entities
18,382
48,382
Other non-cash items, including foreign exchange gain/loss
15,596
(1,521)
Balance as at end of period
314,982
264,950
Note 16 Equity - issued capital
31-Dec-24
30-Jun-24
31-Dec-24
30-Jun-24
Shares
Shares
$'000
$'000
Ordinary shares - fully paid
102,690,913
104,118,534
59,820
69,674
Ordinary shares - under loan share plan
11,590,384
12,331,148
(860)
-
114,281,297
116,449,682
58,960
69,674
31-Dec-24
30-Jun-24
Movements in ordinary share capital
Shares
$'000
Shares
$'000
Balance at 1 July
104,118,534
69,674
106,613,927
69,674
Options exercised
740,764
-
255,257
-
Share Buy-Back Programme (treasury shares)
(2,168,385)
-
(2,750,650)
-
Treasury shares cancelled
-
(9,854)
-
-
Balance at period end
102,690,913
59,820
104,118,534
69,674
The Group's share buyback programme which commenced on 5 October 2023, completed on 8 November 2024.
Movements in ordinary shares issued under loan share plan ('LSP') and held by Employee Benefit Trust:
31-Dec-24
30-Jun-24
Shares
$'000
Shares
$'000
Balance at 1 July
12,331,148
-
12,586,405
-
Options exercised
(740,764)
-
(255,257)
-
LSPs exercised
(784,519)
-
-
-
LSPs purchased by EBT
784,519
(860)
-
-
Balance at period end
11,590,384
(860)
12,331,148
-
Reconciliation of ordinary shares issued under LSP:
31-Dec-24
30-Jun-24
Total shares allocated under existing LSP arrangements with underlying LSP shares (note 20)
6,642,872
7,501,608
Less shares allocated under existing LSP arrangements without underlying LSP shares (note 20)
(221,467)
(221,467)
Shares held by LCM Employee Benefit Trust for future allocation under employee share and option plans
5,168,979
5,051,007
11,590,384
12,331,148
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 - held by Employee Benefit Trust
The Employee Benefit Trust ('EBT') holds performance related shareholdings awarded to former executive which did not vest. The Trust holds 5,168,979 shares which remain unallocated as at 31 December 2024 (June 2024: 5,051,007).
Ordinary shares - partly paid
As at 31 December 2024, 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 2024, there were nil treasury shares (June 2024: 2,750,650) which has resulted in nil being deducted from equity (June 2024: $5,396,000). Treasury shares comprised shares bought back from shareholders which were held by Canaccord on behalf of LCM and classified as treasury shares. All treasury shares were cancelled in November 2024.
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 2024 Annual Report.
Note 17 Equity - dividends
Franking credits
The franking credits available to the Group as at 31 December 2024 are $5,000 (June 2024: $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-24
30-Jun-24
Litigation funding assets
$'000
$'000
APAC
106,289
111,662
EMEA
313,974
353,551
Total Level 3 assets
420,264
465,213
Liabilities
Financial liabilities related to third-party interests in consolidated entities
314,982
264,950
Total Level 3 liabilities
314,982
264,950
Refer note 12 for movements in level 3 assets and note 15 for movements in level 3 liabilities. There were no transfers into or out of level 3 during the period ended 31 December 2024.
As at 31 December 2024, the financial liability due to third-party interests is $314,982,000 (June 2024: $264,950,000), recorded at fair value as represented in note 15. 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.
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 2024
Item
Valuation technique
Unobservable Input
Min
Max
Weighted average
Litigation funding asset
Discounted cash flow
Discount rate
9.80%
10.80%
10.40%
Duration (years)
1.75
7.58
4.78
Adjusted risk premium
0%
85%
17%
Adjusted risk premium - case milestone
Min
Max
Weighted average
% of portfolio1
Pre-commencement & commenced
0%
20%
5%
56%
Pleadings
5%
35%
11%
4%
Discovery & evidence
20%
40%
36%
8%
Significant ruling or other objective event prior to trial court judgment
25%
80%
46%
18%
Settlement
70%
85%
0%
0%
Trial court judgment or tribunal award
0%
85%
21%
9%
Appeal judgment
0%
85%
0%
4%
Enforcement
75%
85%
84%
2%
1 Percentage of portfolio represents the percentage of the book within the cohort
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 into insurance arrangements which lessen or eliminate the impact of such awards and therefore any adverse costs order exposure.
Note 20 Share-based payments
The share-based payment expense for the period was $590,000 (December 2023: $463,000).
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 (June 2024: nil) shares under the LSP.
Set out below are summaries of shares/options granted under the LSP:
31 December 2024
Grant date
Expiry date
Exercise Price
Balance at the start of the period
Granted
Exercised
Expired/ forfeited/ other
Balance at the end of the period
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
1,043,953
(125,259)
918,694
13/10/2020
13/10/2030
£0.6655
616,520
(158,296)
458,224
27/10/2021
27/10/2031
£1.06
1,512,638
(163,209)
1,349,429
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
7,501,608
-
(858,736)
-
6,642,872
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 532,235 (June 2024: 771,911) options under the DBSP.
Set out below are summaries of options granted under the DBSP:
31 December 2024
Grant date
Expiry date
Exercise Price
Balance at the start of the period
Granted
Exercised
Expired/ forfeited/ other
Balance at the end of the period
07/10/2022
07/10/2032
$0.00
877,435
-
(442,468)
-
434,967
04/10/2023
04/10/2033
$0.00
771,911
-
(224,079)
-
547,832
04/10/2024
04/10/2034
$0.00
-
532,235
-
-
532,235
1,649,346
532,235
(666,547)
-
1,515,034
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 (June 2024: nil) options under the LTIP.
Set out below are summaries of shares/options granted under the LTIP:
31 December 2024
Grant date
Expiry date
Exercise Price
Balance at the start of the period
Granted
Exercised
Expired/ forfeited/ other
Balance at the end of the period
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 date
Share price at grant date
Exercise price
Expected volatility
Dividend yield
Risk-free interest rate
Fair value at grant date
04/10/2024
04/10/2034
£0.98
£0.00
35.00%
1.10%
4.30%
£0.9478
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 21 Events after the reporting period
On 21 February 2025, the Group announced that the Federal Court of Australia had ruled against its funded party, Quintis Limited. While the claim was unsuccessful, the Group is reviewing the judgment and considering an appeal, which must be filed within 28 days of final orders being made.
On 11 March 2025, the Group announced that an appeal has been filed in relation to the class action funded by the Group on behalf of Queensland electricity users against Stanwell Corporation Ltd and CS Energy Ltd. This follows the first instance judgment, which ruled against LCM's funded party, as announced on 4 December 2024.
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