Litigation Capital Management Ltd · LSE:LIT
Litigation Capital Management — H1 FY2024 Earnings Presentation
40 slides from Litigation Capital Management's earnings presentation, March 2024
Slide 1: Half-Year Results Presentation, Six Months Ended 31 December 2023
HALF-YEAR RESULTS PRESENTATION SIX MONTHS ENDED 31 DECEMBER 2023 LITIGATION CAPITAL MANAGEMENT LIMITED ACN 608 667 509 1
Slide 2: Presenters
PRESENTERS 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 Offic
Slide 3: HALF-YEAR RESULTS PRESENTATION SIX MONTHS ENDED 31 DECEMBER 2023
HALF-YEAR RESULTS PRESENTATION SIX MONTHS ENDED 31 DECEMBER 2023 3
Slide 4: We are a leading disputes financier
WE ARE A LEADING DISPUTES FINANCIER… 25-YEAR VAST TRACK RECORD INDUSTRY LEADING UNDERPENETRATED RETURNS MARKET 93% WIN 180% ROIC >US$700BN RATIO FROM A$368M OF LAW FIRM REVENUES CASH REALISATIONS GLOBALLY WITH <1% FROM C . 270 (BASED ON 12.5 YEAR LITIGATION FINANCE TRACK RECORD) INVESTMENTS PENETRAT
Slide 5: Operating in vast and growing markets
…OPERATING IN VAST AND GROWING MARKETS… U K L E G A L S E R V I C E S S E C T O R A U S T R A L I A N L E G A L S E R V I C E S S E C T O R 40 40 REVENUE // A$BILLION REVENUE // £BILLION 30 30 20 20 10 10 0 0 2017 2018 2019 2020 2021 2022 2023 2024 2017 2018 2019 2020 2021 2022 2023 2024 FORECAST ED
Slide 6: With less than 1% market penetration
…WITH LESS THAN 1% MARKET PENETRATION. NEW COMMITMENTS // US LITIGATION FINANCE INDUSTRY 4. NEW COMMITMENTS // 3. $3.2BN US$BILLION $2.8BN 2. $2.5BN 1. 0. 2020 2021 2022 SOURCE // WESTFLEET ADVISORS IN 2022, THE US LITIGATION FINANCE INDUSTRY COMMITTED TO FUND C.350 COMMERCIAL DISPUTES WORTH US$3.2B
Slide 7: What makes us different?
WHAT MAKES US DIFFERENT? 1 // INSIGHT 2 // CAPITAL 3 // NETWORK After 25 years in the At a time when the growth The best cases are only market, we have the most in scale and scope of global visible and accessible to the evolved investment process disputes is unprecedented, brightest and best- in the
Slide 8: Why invest in disputes?
WHY INVEST IN DISPUTES? COUNTERCYCLICAL UNCORRELATED ASYMMETRICAL Sustained investment Historically dispute levels rise The potential for high returns performance across economic during periods of instability and far outweighs the downside cycles and conditions, with the level of insolvency events r
Slide 9: Why invest in disputes? Profit and MOIC per investment
WHY INVEST IN DISPUTES? PROFIT PER 10.00 MOIC (X) PER 30.0 INVESTMENT 1 INVESTMENT 1,2 9.00 25.0 8.00 7.00 20.0 6.00 A$ MILLIONS 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 1 // Presented in ascending value order, not chronological order based on 12.5 year track record 2 // Inve
Slide 10: Dual sources of capital, dual sources of revenue
DUAL SOURCES OF CAPITAL, DUAL SOURCES OF REVENUE 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 REV
Slide 11: H1 FY24 asset management delivering enhanced returns
H1 FY24 // ASSET MANAGEMENT DELIVERING ENHANCED RETURNS REVENUE FROM REVENUE FROM LCM DIRECT PERFORMANCE TOTAL INVESTMENT FEES A$12.4m A$76.8m Invested 3.6 MOIC 17% // OF A$44.8M 117% IRR 1 A$32.0M 2.6 MOIC TOTAL REVENUE COMMITTED 6.2X MOIC 184% IRR 1 // calculated using cashflows converted to AUD o
Slide 12: Returns generated, 12.5 year historical
RETURNS GENERATED // 12.5 YEAR HISTORICAL A DJUDICA TE D WIN S TOTAL A$21.9m is attributable to A$119.0M 5.4X MOIC adjudication and win in an REALISATIONS 147% IRR 1 average of 32 months A$181m Commitments LOSSE S A$368m A$12.8m net is attributable A$5.2M Realisations to losses and take and RECOVERE
Slide 13: Three year running performance
THREE YEAR RUNNING PERFORMANCE 1 360.00% 47.50 3.31 3.09 3.03 300.00% 42.00 2.66 41 2.49 2.44 2.39 240.00% 37 36.50 180.00% 33 32 31 31 31.00 28 120.00% 82.6% 71.1% 76.2% 65.6% 65.1% 67.4% 59.1% 25.50 60.00% 0.00% 20.00 FY16-18 FY17-19 FY18-20 FY19-21 FY20-22 FY21-23 FY 22-24 Rolling IRR Rolling MoI
Slide 14: Driving shareholder value
DRIVING SHAREHOLDER VALUE CONSOLIDATED NEW COMMITMENTS // A$M 1 CAPITAL INVESTED // A$M 2 LCM 3RD PARTY 561 1 // DENOTES TOTAL 484 AS S ETS UNDER 414 MANAGEMENT INCLUS IV E 336 83 124 121 OF THIRD PARTY INTERES TS 46 AND CONDITIONAL INV ES TMENTS S UBJECT TO FINAL DUE DILIGENCE 88 98 104 107 2 // CA
Slide 15: HALF-YEAR RESULTS PRESENTATION SIX MONTHS ENDED 31 DECEMBER 2023
HALF-YEAR RESULTS PRESENTATION SIX MONTHS ENDED 31 DECEMBER 2023 15
Slide 16: H1 FY24 portfolio progress
H1 FY24 // PORTFOLIO PROGRESS CONCLUDED INVESTMENTS NEW INVESTMENTS ONGOING INVESTMENTS • Three investments concluded • 242 applications for • 53 ongoing investments (including the five new in the period generating funding in the period (up investments) as at 31 Dec 2023 A$28.4m of cash receipts for
Slide 17: H1 FY24 financial highlights
H1 FY24 // FINANCIAL HIGHLIGHTS (A$)* HY 2024 HY 2023 Change % Realisations from concluded investments $18.2m $3.0m 506% Performance fees from concluded investments $10.2m $0.0m - Total realisations $28.4m $3.0m 846% Realised gross profit $19.6m ($0.03m) - Unrealised FV gains $1.9m $7.2m (74%) Total
Slide 18: H1 FY24 summary balance sheet
H1 FY24 // SUMMARY BALANCE SHEET (A$)* HY 2024 FY 2023 Cash $70.3m $83.0m Investments at FV $173.8m $165.8m Investments held at cost $39.4m $37.3m Other assets $11.0m $15.6m Total Assets $294.5m $301.7m Borrowings $59.8m $69.0m Tax payable $7.8m $7.8m Deferred tax liability $37.0m $36.3m Other payab
Slide 19: Value of ongoing investments
VALUE OF ONGOING INVESTMENTS WE ADOPT A CONSERVATIVE APPROACH TO VALUING THE ONGOING INVESTMENTS ON OUR BALANCE SHEET • The total cumulative cash invested into ongoing cases was A$107m as at 31 Dec 2023 comprising 49 investments held at a Fair Value of A$173.8m and four investments held at a cost of
Slide 20: HY24 cash movements exclusive of third-party fund
HY24 CASH MOVEMENTS EXCLUSIVE OF THIRD-PARTY FUND (A$M) 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 CASH GENERATED CAPITAL DEPLOYED OPEX + TAX REPAYMENT OF FINANCE COSTS DIVIDENDS PAID SHARE BUYBACK OTHER CASH BALANCE AT THE BEGINNING OF FROM LITIGATIO
Slide 21: HALF-YEAR RESULTS PRESENTATION SIX MONTHS ENDED 31 DECEMBER 2023
HALF-YEAR RESULTS PRESENTATION SIX MONTHS ENDED 31 DECEMBER 2023 21
Slide 22: The outlook
THE OUTLOOK 1 // Continued uncertainty in global markets driving demand for disputes capital 2 // Well positioned in an improved competitive landscape following industry consolidation 3 // Expectation that Fund II will be fully committed and launch of Fund III in the next 12 months 4 // Advanced dis
Slide 23: The opportunity: the legal market is vast
THE OPPORTUNITY The legal market is vast and offers an exceptional long-term growth opportunity for litigation finance… US$700billion OF LEGAL REVENUES GLOBALLY 200,000+ lawyers WITHIN OUR EXISTING MARKETS 1 million+ lawyers IN THE UNITED STATES Less than 1% penetration OF LITIGATION FINANCE HALF-YE
Slide 24: The opportunity: we can unlock this for investors
THE OPPORTUNITY We can unlock this opportunity for investors… 25 years OF EXPERIENCE A win ratio of 93% FROM CIRCA 270 INVESTMENTS FUNDED 180% ROIC INDUSTRY LEADING RETURNS ON INVESTED CAPITAL 3P Funds Model TO SIGNIFICANTLY ENHANCE OUR FUTURE RETURNS HALF-YEAR RESULTS PRESENTATION SIX MONTHS ENDED
Slide 25: HALF-YEAR RESULTS PRESENTATION SIX MONTHS ENDED 31 DECEMBER 2023
HALF-YEAR RESULTS PRESENTATION SIX MONTHS ENDED 31 DECEMBER 2023 25
Slide 26: HALF-YEAR RESULTS PRESENTATION SIX MONTHS ENDED 31 DECEMBER 2023
HALF-YEAR RESULTS PRESENTATION SIX MONTHS ENDED 31 DECEMBER 2023 26
Slide 27: Current portfolio of direct investments
CURRENT PORTFOLIO OF DIRECT INVESTMENTS BALANCES AS AT Portfolio by industry Portfolio by industry Portfolio by region Portfolio by individual 29 FEBRUARY 2024 sector sector (estimated A$ capital capital commitment¹ (estimated A$ capital (number of projects) commitment)¹ (estimated A$) (A$ MILLIONS)
Slide 28: LCM Global Alternatives Return Fund I
HIGHTLIGHTS LCM GLOBAL ALTERNATIVES RETURN FUND I BALANCES AS AT Portfolio by industry Portfolio by industry sector Portfolio by geography 29 FEBRUARY 2024 (estimated A$ capital sector (estimated A$ capital (A$ MILLIONS) (number of investments) commitment) 2 commitment) 2 $221 MILLION EXTERNAL AUM 2
Slide 29: LCM Global Alternatives Return Fund II
HIGHTLIGHTS LCM GLOBAL ALTERNATIVES RETURN FUND II BALANCES AS AT Portfolio by industry Portfolio by industry Portfolio by geography sector sector (estimated A$ capital 29 FEBRUARY 2024 (estimated A$ capital (number of investments) commitment) 2 (A$ MILLIONS) commitment) 2 $428 MILLION EXTERNAL AUM
Slide 30: Portfolio maturity
HIGHTLIGHTS PORTFOLIO MATURITY A$M AS AT 31 DECEMBER 2023 PORTFOLIO BY CAPITAL COMMITTED & PORTFOLIO BY CAPITAL DEPLOYED & MATURITY1 (A$M) MATURITY1 (A$M) AUM A$561M A$227M DEPLOYED/ A$334M TO DEPLOY 115M 91M 17M 81M 94M 79M 0 24M 77M 0 9M 2M 23M 41M 59M 65M 47M 52M 51M 17M 6M 57M 32M 10M 9 22M 26M
Slide 31: Realised revenue, gross profit and adjusted profit
HIGHTLIGHTS LCM GLOBAL ALTERNATIVES RETURN FUND II 90,000 Realised revenue Realised gross profit 67,500 Adjusted profit 45,000 CAGR 25% - REVENUE CAGR 26% - GROSS 22,500 PROFITS CAGR 32% - ADJUSTED PROFITS '- 2019 2020 2021 2022 2023 HY 2024 Performance on a realised basis exclusive of FV gains and
Slide 32: How we generate returns
HIGHTLIGHTS HOW WE GENERATE RETURNS LCM Fund A$* Revenue from direct investments Revenue from performance fees Invested capital 25 75 Apply historical performance 2.82 x MOIC 71 212 Gross profit 46 137 Performance fee @ 25% on profit 34 (34) Gross profit 80 103 Implied MOIC 4.2 x 2.4 x * Based on 12
Slide 33: H1 FY24 performance
HIGHTLIGHTS H1 FY24 PERFORMANCE 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$430m5 (1.89x MOIC) Five n
Slide 34: Consolidated income statement
HIGHTLIGHTS CONSOLIDATED INCOME STATEMENT // P/E 31/12/23 Consolidated Consolidated • Net gains on financial assets at fair LCM only Fund HY24 LCM only Fund HY23 value through profit and loss A$m A$m A$m A$m A$m A$m increased by 183% to $52.4m and total income from litigation assets up 119% inclusiv
Slide 35: Adjusted profit and EBITDA reconciliation
HIGHTLIGHTS ADJUSTED PROFIT & EBITDA RECONCILIATION // P/E 31/12/23 • Non operating costs include expenses which are considered unusual, non-cash or one-off in Consolidated Consolidated nature LCM only Fund HY24 LCM only Fund HY23 A$m A$m A$m A$m A$m A$m Statutory profit/(loss) after tax 7.3 - 7.3 (
Slide 36: Consolidated statement of financial position
HIGHTLIGHTS CONSOLIDATED STATEMENT OF FINANCIAL POSITION // P/E 31/12/23 Consolidated Consolidated • Financial assets at Fair value remained in line with the prior period LCM only Fund HY24 LCM only Fund FY23 as a result of FV movements being A$m A$m A$m A$m A$m A$m offset by realisation reversals.
Slide 37: Consolidated statement of cashflows
HIGHTLIGHTS CONSOLIDATED STATEMENT OF CASHFLOWS // P/E 31/12/23 Consolidated Consolidated • Cash generated from the resolution LCM only Fund HY24 LCM only Fund HY23 of matters during the period was A$m A$m A$m A$m A$m A$m $33.8m exclusive of third party Cash flows from operating activities funds Pro
Slide 38: Glossary
HIGHTLIGHTS GLOSSARY Capital commitment means the total estimated budget of an investment Capital invested means funds invested into a the current portfolio of investments during the relevant period Co-investment means LCM's direct investment into the matters funded together with the Funds, generall
Slide 39: Important notices and disclaimer
IMPORTANT NOTICES AND 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 REPUBLI
Slide 40: Contact information
CONTACT INFORMATION SYDNEY BRISBANE LEVEL 12, THE CHIFLEY TOWER LEVEL 38, 2 CHIFLEY SQUARE, 711 EAGLE STREET, SYDNEY NSW 2000 BRISBANE QLD 4000 T +61 2 8098 1390 T +61 7 3218 7359 LONDON BRIDGE HOUSE MELBOURNE 181 QUEEN VICTORIA STREET LEVEL 50, LONDON EC4V 4EG 120 COLLINS STREET T +44 203 955 5260
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