Litigation Capital Management Ltd · LSE:LIT
Litigation Capital Management — H1 2024 Earnings Presentation
40 slides from Litigation Capital Management's earnings presentation, Mar 19, 2024
Slide 1: Half-Year Results Presentation, Six Months Ended 31 December 2023
HALF-YEAR RESULTS PRESENTATION SIX MONTHS ENDED 31 DECEMBER 2023 L I T IGATION CA P I TAL MA N A GEMENT L I MI TED 1
Slide 2: Patrick Moloney and Mary Gangemi
Patrick Moloney CHIEF EXECUTIVE OFFICER Patrick Moloney is a veteran of the disputes funding industry with over 20 years’ experience in the space. Patrick has been a Director of LCM since 2003 and the Chief Executive Officer of the group since December 2013 based out of LCM’s London Office. He is re
Slide 3: Half-Year Results Presentation
HALF-YEAR RESULTS PRESENTATION SIX MONTHS ENDED 31 DECEMBER 2023 3
Slide 4: 93% win ratio, 180% ROIC, 25-year track record
25-YE AR VAST TRACK RE CORD I NDUSTRY L E ADI NG RE TURNS UNDE RP E NETRATED MARKE T 9 3 % W IN 1 8 0 % ROIC > US $ 7 00BN RAT IO FROM A$368M OF L AW FI RM RE VE NUES G L OBAL L Y CASH RE AL I SATI O NS WI TH <1% L I TI G ATI ON FI NANCE FROM C . 270 (BASED ON 12.5 YEAR I NVE STME NTS TRACK RECORD)
Slide 5: UK law firm litigation revenues growth
40 40 30 30 20 20 10 10 0 0 2017 2018 2019 2020 2021 2022 2023 2024 2017 2018 2019 2020 2021 2022 2023 2024 FOREC ASTED FOREC ASTED SOU R CES // STA TISTICA 2 0 2 4 , IB ISW OR LD , P R OSP ER A N T THE UK LITIGATION 50 PUBLISHED BY THE LAWYER SHOWS THE TOP 50 UK LAW FIRMS HAVE GROWN THEIR LITIGATIO
Slide 6: US litigation finance industry commitments
4. 3. $3.2BN $2.8BN 2. $2.5BN 1. 0. 2020 2021 2022 SO UR CE / / W E STFLEET A DV I SO RS IN 2022, THE US LITIGATION FINANCE INDUSTRY COMMITTED TO FUND C.350 COMMERCIAL DISPUTES WORTH US$3.2BN. THIS COMPARES TO MILLIONS OF CIVIL CASES FILED ANNUALLY AND HUNDREDS OF BILLIONS OF DOLLARS SPENT ON LITIGA
Slide 7: Insight, Capital, Network
1 // INSIGHT 2 // CAPITAL 3 // NETWORK After 25 years in the market, At a time when the growth in The best cases are only visible we have the most evolved scale and scope of global and accessible to the brightest investment process in the disputes is unprecedented, we and best-connected people in in
Slide 8: Countercyclical, Uncorrelated, Asymmetrical
COUNTERCYCLICAL UNCORRELATED ASYMMETRICAL Historically dispute levels rise Sustained investment performance The potential for high returns far during periods of instability and across economic cycles and outweighs the downside risk the level of insolvency events conditions, with resistance to usual
Slide 9: Profit and MOIC per investment
P R OF I T P ER I NV ES TM ENT 1 10.00 M OI C ( X ) P ER 30.0 I NV ES TM ENT 1 , 2 9.00 25.0 8.00 7.00 20.0 6.00 A $ M ILLION S 15.0 5.00 4.00 10.0 3.00 2.00 5.0 1.00 0.0 0.00 -1.00 -5.0 -10.0 HALF-YEAR RESULTS PRESENTATION SIX MONTHS ENDED 31 DECEMBER 2023 9
Slide 10: 2x Funds, A$650M
2X FUNDS // A$650M BALANCE SHEET CAPITAL DIRECT INVESTMENTS THIRD PARTY CAPITAL A$107M INVESTED BALANCE SHEET CAPITAL A$230M COMMITTED BALANCE SHEET CAPITAL FUNDS MANAGEMENT A$121M INVESTED THIRD PARTY CAPITAL A$331M1 COMMITTED THIRD PARTY CAPITAL REVENUE Our invested capital together with all profi
Slide 11: Revenue from direct investment and performance fees
REVENUE FROM LCM REVENUE FROM DIRECT INVESTMENT PERFORMANCE FEES TOTAL A$12.4 m A $76. 8m 17% // OF A$44.8M A$32.0M COMMITTED 6. 2X M OI C 184% I R R HALF-YEAR RESULTS PRESENTATION SIX MONTHS ENDED 31 DECEMBER 2023 11
Slide 12: Realisations: adjudicated wins, losses, settlements
ADJUDICATED WINS TOTAL A$21. 9m i s attr i butabl e to A$119. 0M adjudi cati on and wi n i n an REALI SATI ONS aver age of 3 2 m onths A$181m LOSSES A$368m A$12. 8m net i s attr i butabl e to A$5. 2M l osses and take and aver age of REC OVERED 44 m onths A$130m SETTLEMENTS A$244. 0M A$90. 5m i s att
Slide 13: Rolling IRR, MoIC and time to recovery
360.00% 47.50 3.31 3.09 3.03 300.00% 42.00 2.66 41 2.49 2.44 2.39 240.00% 37 36.50 180.00% 33 32 31 31 31.00 28 120.00% 82.6% 71.1% 76.2% 65.6% 65.1% 67.4% 59.1% 25.50 60.00% 0.00% 20.00 FY16-18 FY17-19 FY18-20 FY19-21 FY20-22 FY21-23 FY 22-24 Rolling IRR Rolling MoIC Time to recovery (months) HALF-
Slide 14: New commitments, capital invested, cash and net assets per share
CO N SO LIDATED N E W CO MMI T MENTS / / A $M 1 CA P ITA L I N VESTED / / A $M 2 LCM 3RD PARTY 1 // DENOTES TOTAL ASSETS UNDER MANAGEMENT INCLUSIVE OF TH IRD PARTY INTERESTS AND C ONDITIONAL INVESTMENTS 83 124 121 46 SUBJ EC T TO FINAL DUE DILIGENC E 2 // C APITAL INVESTED SH OWN IS C UMULATIVE AS A
Slide 15: Half-Year Results Presentation
HALF-YEAR RESULTS PRESENTATION SIX MONTHS ENDED 31 DECEMBER 2023 15
Slide 16: Concluded, new and ongoing investments
C ON C L U D ED I N V ES TM EN TS N EW I N V ES TM EN TS ON G OI N G I N V ES TM EN TS • • • • Commitment A$230m1 A$168 A$162 • Invested in period A$17.5m A$11m A$5m Total invested in A$107m A$105m A$16m ongoing portfolio HALF-YEAR RESULTS PRESENTATION SIX MONTHS ENDED 31 DECEMBER 2023 16
Slide 17: HY 2024 vs HY 2023
HY 2024 HY 2023 Change % HALF-YEAR RESULTS PRESENTATION SIX MONTHS ENDED 31 DECEMBER 2023 17
Slide 18: HY 2024 vs FY 2023
HY 2024 FY 2023 HALF-YEAR RESULTS PRESENTATION SIX MONTHS ENDED 31 DECEMBER 2023 18
Slide 19: Conservative approach to valuing ongoing investments
WE ADOP T A C ONSERVATIVE AP P ROAC H TO VALUING THE ONGOING INVESTMENTS ON OUR BALANC E SHEET • A$107m A$173.8m A$39.4m • • • A$213m • HALF-YEAR RESULTS PRESENTATION SIX MONTHS ENDED 31 DECEMBER 2023 19
Slide 20: Cash bridge
33. 8 ( 17. 5) THREE RESOLUTIONS ( 8. 8) ( 8. 1) 83. 0 ( 5. 8) ( 5. 0) ( 0. 8) ( 0. 5) 70. 3 CASH BALANCE AT THE CASH GENERATED FROM CAPITAL DEPLOYED IN OPEX + TAX REPAYMENT OF FINANCE COSTS DIVIDENDS PAID SHARE BUYBACK OTHER CASH BALANCE AT THE BEGINNING OF THE LITIGATION LITIGATION BORROWINGS END
Slide 21: Half-Year Results Presentation
HALF-YEAR RESULTS PRESENTATION SIX MONTHS ENDED 31 DECEMBER 2023 21
Slide 22: Outlook and key drivers
1 // Continued uncertainty in global markets driving demand for disputes capital 3 // Expectation that Fund II will be fully committed and launch of Fund III in the next 12 months 5 // Positive developments in the UK to resolve uncertainty caused by the Supreme Court judgment HALF-YEAR RESULTS PRESE
Slide 23: US$700 billion market, less than 1% penetration
US$700billion 200,000+ lawyers 1 million+ lawyers Less than 1% penetration HALF-YEAR RESULTS PRESENTATION SIX MONTHS ENDED 31 DECEMBER 2023 23
Slide 24: 25 years, 93% win ratio, 180% ROIC
25 years A win ratio of 93% 180% ROIC 3P Funds Model HALF-YEAR RESULTS PRESENTATION SIX MONTHS ENDED 31 DECEMBER 2023 24
Slide 25: Appendix
HALF-YEAR RESULTS PRESENTATION SIX MONTHS ENDED 31 DECEMBER 2023 25
Slide 26: HALF-YEAR RESULTS PRESENTATION SIX MONTHS ENDED 31 DECEMBER 2023
HALF-YEAR RESULTS PRESENTATION SIX MONTHS ENDED 31 DECEMBER 2023 26
Slide 27: Portfolio by industry sector and region
Portfolio by industry Portfolio by industry Portfolio by region Portfolio by individual sector sector (estimated A$ capital capital commitment¹ (estimated A$ capital (number of projects) commitment)¹ (estimated A$) commitment)¹ 13% 8 1% 14 4% 36% 3 3% 4 48% 7% 52% $95 2 11 25% 11% 11 3 Class Action
Slide 28: Portfolio by industry sector and geography
Portfolio by industry sector Portfolio by industry sector (estimated A$ capital (number of investments) Portfolio by geography commitment) 2 (estimated A$ capital commitment) 2 24% 8% 2% 7 6 6% 35% 6% 4% 3 55% 24% 5% 6 2 19% 5% 1%6% 1 1 Class Action - $77m Class Action - 23% UK - $123m Commercial -
Slide 29: Portfolio by industry sector and geography
Portfolio by industry sector Portfolio by industry sector Portfolio by geography (estimated A$ capital (number of investments) (estimated A$ capital commitment) 2 commitment) 2 10% 2% 1 1 5% 23% 10% 11% 6 3 50% 11% 35% 3 43% 4 Class Action - $34m Class Action - 33% Commercial - $16m Commercial - 22%
Slide 30: Portfolio by capital committed and deployed & maturity
PORTFOLIO BY CAPITAL COMMITTED & MATURITY1 PORTFOLIO BY CAPITAL DEPLOYED & MATURITY1 (A$M) (A$M) 115M 91M 17M 81M 94M 79M 0 24M 77M 0 9M 2M 23M 41M 59M 65M 47M 52M 51M 17M 6M 57M 32M 10M 9 22M 26M 13 8 13 10 12M 11M 2M 0 - 12 months 13 - 24 months 25 - 36 months 37 - 48 months 49 + months 0 - 12 mon
Slide 31: Realised revenue, gross profit and adjusted profit
90,000 Realised revenue Realised gross profit 67,500 Adjusted profit 45,000 22,500 '- 2019 2020 2021 2022 2023 HY 2024 31
Slide 32: Revenue from direct investments and performance fees
LCM Fund A$* Revenue from direct investments Revenue from performance fees 32
Slide 33: Half-year highlights
Adjusted profit before tax A$16.0m1 Two realisations generating revenue of A$78.1m of which A$28.4m attributable to LCM Assets under management A$561m by 31 December 2023, A$548m at 29 Feb 242 Cumulative capital invested A$228m with a FV of A$430m5 (1.89x MOIC) Five new commitments3 contributing A$9
Slide 34: Income statement
Consolidated Consolidated • LCM only Fund HY24 LCM only Fund HY23 A$m A$m A$m A$m A$m A$m Gains on financial assets at fair value through profit or loss 21.6 30.8 52.4 7.1 11.4 18.5 Movement in financial liabilities related to third-party - (30.5) (30.5) - (8.4) (8.4) • interests in consolidated ent
Slide 35: EBITDA and EBITDAe reconciliation
• Consolidated Consolidated LCM only Fund HY24 LCM only Fund HY23 A$m A$m A$m A$m A$m A$m Statutory profit/(loss) after tax 7.3 - 7.3 (2.3) - (2.3) • Add: Depreciation & amortization 0.1 - 0.1 0.1 - 0.1 Finance costs 5.5 - 5.5 3.7 0.1 3.8 Tax expense 1.6 - 1.6 (1.5) - (1.5) EBITDA 14.5 - 14.5 - 0.1
Slide 36: Balance sheet
Consolidated Consolidated • LCM only Fund HY24 LCM only Fund FY23 A$m A$m A$m A$m A$m A$m Assets Cash and cash equivalents 70.3 17.4 87.7 83.0 21.5 104.5 Trade and other receivables 1.8 - 1.8 2.2 - 2.2 Due from resolution of financial assets 7.5 11.9 19.4 11.9 - 11.9 Financial assets at fair value t
Slide 37: Cash flow statement
Consolidated Consolidated • LCM only Fund HY24 LCM only Fund HY23 A$m A$m A$m A$m A$m A$m Cash flows from operating activities • Profit/(loss) after income tax expense for the period 7.3 - 7.3 (2.3) - (2.3) Adjustments for: Fair value adjustments to financial assets (21.6) - (21.6) (7.1) - (7.1) Fin
Slide 38: Glossary
GLOSSARY Capital commitment Capital invested Co-investment Completed Direct balance sheet investments Intemal Rate of Return (IRR) Fundie, "the funds" or "the third-party funds" Litigation Project or Litigation Investment Multiple on invested capital (MOIC) Net Capital Returned Opex Peak Invested Ca
Slide 39: Disclaimer
NOT FOR PUBLICATION, DISTRIBUTION OR RELEASE, DIRECTLY OR INDIRECTLY, IN OR INTO THE UNITED STATES OF AMERICA (INCLUDING ITS TERRITORIES AND DEPENDENCIES, ANY STATE OF THE UNITED STATES AND THE DISTRICT OF COLUMBIA), CANADA, AUSTRALIA, NEW ZEALAND, JAPAN, THE REPUBLIC OF SOUTH AFRICA, THE REPUBLIC O
Slide 40: Offices
SYDNE Y BRI SBANE L O ND O N ME L BOURNE SI NG AP O R E L I T IGATION CA P I TAL MA N A GEMENT L I MI TED 40
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