Litigation Capital Management hails ‘transformational’ year as realised income hits A$181m

Sydney-based litigation funder sees move into third-party asset management business pay off

AIM-listed litigation funder Litigation Capital Management (LCM) has reported record results for the year ending 30 June 2023. 

The Sydney-based company said realised income for the year compared to revenue as previously disclosed in the prior year was A$181m – A$84m of which was attributable to the shareholders of LCM (FY22 A$47m), an increase of 285% on a consolidated basis and 78% attributable to LCM. 

Meantime, adjusted operating profit of A$54m was in line with the prior year, with basic earnings per share of 29.5 cents (FY22 32.7 cents). 

Chairman Jonathan Moulds said the year had been “transformational” for LCM as it started to realise the benefits of the asset management business model and “the successful execution of our strategy to grow a third-party fund management business”.

He added that the resolution of a number of its Fund I investments has translated into enhanced organic cash generation, allowing the company to scale the business through further investment into its Fund II.

The results meant that the company, which has offices in London and Singapore as well as across Australia, ended the period with A$104.5m of cash (A$83m attributable to LCM) compared with FY22 A$50.0m of which A$29m was attributable to LCM. 

Off the back of the performance LCM declared a final dividend of 2.25p per share, which will be paid to shareholders in October. 

“As the year progressed, we began to see courts and tribunals in jurisdictions across the globe begin to tackle the case backlogs associated with Covid-19, which has seen more cases settle, a trend we hope to see continue and accelerate during the next 12 months,” Moulds said. “As ever, the timing of resolutions of disputes is out of our hands, but we will continue to provide market updates to investors in a timely manner and when it is possible to do so.” 

The company said it had also transitioned to fair value accounting, which it said would provide greater transparency with respect to the underlying value of its portfolio of investments, now valued at A$428m. 

LCM’s total funds under management stand at A$0.66bn. Its assets under management (AuM) were A$484m at 30 June 2023 with further commitments in the company’s Fund II bringing its AuM to A$553m at 31 August 2023. Overall capital commitments were up significantly on the same prior year period at A$176m. 

LCM also announced that it intends to begin a A$10m share buyback programme covering an aggregate contract term of roughly 12 months. 

It added that off the back of its improved financial position over the past two years it was exploring a sterling retail eligible bond listed on the ORB at the London Stock Exchange. 

“The company expects to announce a fixed income roadshow in due course. Proceeds raised from the retail bond will optimise our cost of capital and allow us to take advantage of opportunities we see in the market,” LCM said in a statement. 

Commenting on the results, LCM’s CEO, Patrick Moloney, said: “Our fund management strategy is delivering third party capital for investment. Our referral network in Europe and APAC is delivering the high-quality investment opportunities that will underpin our generation of value and cash to Fund investors and LCM shareholders. 

“As we continue to grow, increased activity levels will not need to be matched with proportionate increases in overall costs and this in turn means greater profitability and cash generation. This is a critical differentiator for LCM.”

Last week, rival litigation funder Burford Capital announced that it had had its strongest half year yet in the six months ended 30 June 2023, with net income attributable to shareholders of nearly $240m and tangible book value per share growth of 12%. 

The company is also due a major windfall after supporting two claimants – Peterson Energia Investors and Eton Park Management Capital – in a case in the US that saw Argentina ordered to pay approximately $16bn over the 2012 expropriation of YPF, an oil and gas company that was renationalised. 

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