17 September 2024
Litigation Capital Management
Limited
("LCM" or the
"Company")
Full year audited results for
the year ended 30 June 2024
Highlights
•
|
Net realised gains of A$32.2m
(FY23: A$51.5m), with concluded case investments generating a 2.4x
multiple of cash invested (MOIC)
|
•
|
Total income of A$44.7m (FY23:
A$67.7m)
|
•
|
Profit after tax for the period
of A$12.7m (FY23: A$31.5m)
|
•
|
Dividend of 1.25p (FY23:
2.25p)
|
•
|
Net assets
of A$188.9m (FY23: A$183.5m) with cases conservatively
valued at 1.9x cash invested
|
·
|
Book value per share of 94.4 pence
(FY23: 90.3 pence)
|
•
|
Total new commitments
of A$279m added in the period (FY23: A$176m)
|
•
|
Fund I which
comprises US$150m of external capital is fully committed
and Fund II which comprises US$291m of external capital
is 58% committed
|
·
|
Share buyback program is 70%
complete and remains ongoing
|
Strategic Update
·
|
The Company is continuing its
transition to asset management. Fund III marketing to commence
towards the end of 2024 calendar year
|
·
|
Preparing a disciplined and staged
entry into the US market.
|
·
|
Acquired the intellectual property
of a cutting edge legal finance Big Data/AI platform. Application
of this technology to form part of US market entry and drive
enhanced origination and investment diligence more broadly across
the Company
|
Commenting on the results, Patrick Moloney, CEO
of Litigation Capital Management,
said: "We are pleased to have extended our
industry-leading track record with successful case outcomes over
the past 12 months driving our 13-year investment performance to an
impressive 2.9x multiple of invested capital. Our transition from
balance sheet funder to high return asset manager is progressing
well, and we are looking forward to engaging with our LP investor
base as we commence marketing for Fund III.
"With our London operations firmly established, having
generated realisations of over £100m at a MOIC exceeding 3x, we are
now strategically preparing for a disciplined and staged entry into
the US market. As part of this strategic initiative, we've recently
acquired the IP of a leading legal finance Big Data/AI platform. We
see substantial opportunities to leverage this technology across
our business in an asset class that is ideally suited for such
innovation."
Analyst and investor presentation
There will be a analyst call today
at 10:00 am BST. Analysts wishing to attend should contact
lcm@tavistock.co.uk
to register.
The Company will also be hosting a
live presentation for all existing and potential shareholders via
the Investor Meet Company at 11:00 am today. If you would like to
attend this presentation, please register using the following
link:
https://www.investormeetcompany.com/litigation-capital-management-limited/register-investor
The presentation is open to all
existing and potential shareholders. Investors who already follow
LCM on the Investor Meet Company platform will automatically be
invited. Questions can be submitted pre-event via your Investor
Meet Company dashboard up until 9:00 am today or at any time during
the event.
Enquiries
Litigation Capital Management
|
c/o Tavistock
|
Patrick Moloney, Chief Executive
Officer
David Collins, Chief Financial
Officer
|
|
|
|
Canaccord (Nomad and Joint Broker)
|
Tel: 020 7523 8000
|
Bobbie Hilliam
Andrew Potts
|
|
|
|
Investec Bank plc (Joint Broker)
|
Tel: 020 7597 5970
|
David Anderson
|
|
|
|
Tavistock (PR and IR)
|
Tel: 020 7920 3150
|
Simon Hudson
Katie Hopkins
|
lcm@tavistock.co.uk
|
|
|
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 income 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
Chairman's Statement
Dear Shareholders,
As I reflect on another year of
strategic progress, I am pleased to report that Litigation Capital
Management (LCM) has continued to execute its long-term vision with
resilience and agility, despite the challenges presented by the
broader macroeconomic environment. Our ability to navigate these
challenges while continuing to deliver solid results underscores
the strength of our diversified approach and the commitment of our
team.
One of our core objectives over the
past few years has been our transition towards an asset management
model. I am pleased to report that we continue to make significant
strides in this direction. To date, we have raised over US$440m of
third party capital from a number of high quality limited partners
across two funds. As we approach the end of this calendar year, we
will begin marketing for Fund III and with all investors from Fund
I participating in Fund II, we hope to secure a high level of
investor continuity once again. We are partnering with some of the
highest quality limited partners and those investors view our
relationship as being for the long-term potentially across multiple
funds. If we are able to continue delivering strong performance and
they continue to support us in future fund raises then I believe
the long-term benefits for shareholders could be
substantial.
In line with our growth strategy, we
are now preparing to expand into the United States, by far the
largest legal finance market in the world. This represents a major
step for LCM and presents a significant growth opportunity. The US
legal finance market, which is still in a relatively early phase of
development, offers us the potential to tap into a market estimated
to be worth billions of dollars.
Our expansion into the US will be
conducted with the same disciplined approach that has served us so
well in our existing markets. Indeed, with our London office now
well established and on a firm footing, we feel that the time is
now right to enter the US. As we have done in our existing
territories, we will seek to establish strategic partnerships with
leading law firms and attorneys and we will continue to focus on
high-quality cases that align with our risk management and return
expectations.
As we look to the future, we are
also making investments in cutting-edge technologies as we believe
that legal finance is perfectly suited for the application of Big
Data and artificial intelligence (AI) strategies. We have recently
acquired the intellectual property of one of the pioneering
platforms in this space in legal finance and we are working with
the founder who built the business over a 5 year period. We aim to
be an early mover in this space and see a number of opportunities
including enhancing our origination capabilities, better assessing
risk, improving case selection, and bolstering the efficiency of
our operations. These investments are not just a step toward
modernization-they represent a strategic edge in a competitive
asset class.
This year also saw an important
transition in our leadership team. Mary Gangemi has stepped down
from her role as Chief Financial Officer and from the Board of
Directors. On behalf of the Board, I would like to thank Mary for
her contributions to LCM during her tenure and we wish her every
success in her future endeavours.
In line with our commitment to
ensuring continuity in leadership and strengthening our executive
team, we announced the appointment of David Collins as our new
Chief Financial Officer. David brings a wealth of experience in
both finance and capital markets, and we are confident that his
experience will be invaluable as we continue to execute our
strategic plans. David's appointment marks an important step in
ensuring LCM is well-prepared for the next phase of its
development, including our expansion into new markets and our
ongoing technological advancements.
As we head into the next financial
year, I am confident that LCM is well-positioned to continue its
growth trajectory. Our focus on becoming a leading asset manager in
the litigation finance space, our expansion into the US market, and
our investments in advanced technology will drive sustainable
growth and enhance shareholder value.
The Board is pleased to declare a
final dividend to shareholders for the financial year ending 30
June 2024 of 1.25p per share. The dividend will be paid on 4
December 2024 to shareholders on the register on 1 November 2024,
being the record date. The ordinary shares will be marked
ex-dividend on 31 October 2024.
I would like to take this
opportunity to thank our dedicated team, whose expertise and
commitment continue to drive our success. I would also like to
extend my gratitude to our shareholders for their continued support
and trust in our vision.
We look forward to updating you on
our progress throughout the coming year.
Jonathan Moulds
Non-Executive Chairman
CEO
Statement
Over the past year, we have made
significant strides in our strategic transformation from a
capital-intensive balance sheet litigation funder to a
capital-light asset manager. Our disciplined investment approach
continues to deliver strong results, with cases concluding during
the period generating a 2.4x multiple of invested capital (MOIC),
closely aligned with our long-term average of 2.9x. Additionally,
we have delivered record levels of new commitments in the period,
and our two flagship investment funds have delivered robust
performance to date for our fund investors.
Looking ahead, the long-term
potential of our strategy to create meaningful shareholder value is
clear. Investment management businesses that generate high returns
on investment and earn significant performance fees rank among some
of the most profitable businesses globally. We are attracting the
same sophisticated limited partners (LPs) who have fuelled the huge
successes of private equity, venture capital, and other alternative
asset classes.
Our performance thus far for LPs has
been outstanding, with Fund I investors realising a net IRR of 60%
to date after all costs and performance fees paid to LCM (US$29m to
date, including those relating to the recent case conclusion post
period end). This level of performance aligns with our long-term
track record and firmly positions us in the top tier of alternative
investment managers, where a net IRR exceeding 20% is typically
considered exceptional. I am confident that if we continue to scale
effectively and consistently meet or surpass the expectations of
our LPs, the potential value creation for our shareholders could be
significant.
Our management team is fully aligned
with this vision with substantial personal shareholdings in the
company. I hold a 9% stake, our Chairman, Jonathan Moulds, who
joined in 2019, has independently acquired a 4.5% stake, and
collectively, our small team of 25 owns approximately 17% of the
company. This level of ownership underscores our confidence in
LCM's future and aligns our interests closely with those of our
shareholders.
As we move forward, I am focused on
three strategic priorities:
1. Successfully
completing our transition to asset management;
2. Entering the US
market in a disciplined manner;
3. Implementing Big
Data / AI strategies to enhance our origination and underwriting
capabilities.
Transition to Asset Management
Since March 2020, we have raised
over US$440 million of external capital across two funds: US$150
million in the LCM Global Alternative Returns Fund (Fund I); and
US$290 million in the LCM Global Alternative Returns Fund II (Fund
II).
For Fund I, we have successfully
committed US$150 million across 26 cases, co-investing alongside
our balance sheet on a 75:25 basis. As at the end of June 2024, six
of these cases have concluded, all with positive outcomes,
generating a 2.5x net MOIC for our investors and a net IRR of 60%
after costs and fees. This strong performance enabled us to return
around 70% of investors' capital as at 30 June 2024 while
approximately three quarters of their investments remain
active.
Fund II was launched in the second
half of 2022 with all Fund I investors participating alongside new
investors. To date, Fund II has committed capital to 33 matters,
continuing our 75:25 co-investment model. As at the end of June
2024, the fund was 58% committed and 7% deployed with no cases
concluded to date.
We plan to commence marketing for
Fund III towards the end of this calendar year and are aiming to
secure a high level of investor continuity from our prior funds as
we build long-term, enduring relationships with our high quality LP
investor base.
As our business has scaled,
operating expenses as a percentage of committed capital have
declined from 7.8% five years ago to 2.6% in the current period, a
trajectory we expect to continue, ultimately falling to around 2%.
This transition demonstrates our shift to a sustainable asset
management model.
Entering the US Market
Since moving to London three years
ago, my focus has been on establishing our presence in the UK
market in a disciplined manner. Drawing on our extensive experience
in Australia - the world's oldest litigation funding market - we
have successfully demonstrated that our model can be effectively
applied in other common law jurisdictions.
The performance of our London office
has been particularly encouraging, with over £100 million (cAUD200
million) in proceeds realised for LCM at a MOIC of over 3x
inclusive of losses. Additionally, we have made good progress in
Singapore with one of our larger wins in the period being
originated in that office. While there is still much work to be
done, both our UK and Singapore operations are now firmly
established in their respective markets.
Our expansion beyond Australia has
enabled us to scale, positioning the business to capitalize on the
long-term potential offered by our transition to an asset
management model. With this growth trajectory in mind, I believe
the time is right to enter the US market - by far the largest
disputes market in the world, exceeding the size of the next
largest market (the UK) by more than tenfold. We have already made
a few opportunistic investments in the US from our London office
and we have similarly explored and made investments in the Canadian
market.
The US market is highly attractive
for several reasons. Firstly, its sheer scale. US law firms
generate over US$700 billion in revenues, with 20 to 30 per cent of
those revenues estimated to come from disputes (litigation and
arbitration). Secondly, US lawyers are accustomed to managing risk,
with contingency fees - where lawyers forego part of their fees in
exchange for a share of the proceeds from successful outcomes -
being a widespread practice. This creates significant opportunities
for litigation funders to establish long-term financing
relationships with US law firms, enabling meaningful capital
deployment on attractive terms. Lastly, the US is a data-rich
environment, providing fertile ground for the application of Big
Data and artificial intelligence strategies in a legal market ripe
for such innovation.
There is a small number of legal
finance businesses that have been successful in the US and we
believe that a market of this magnitude has room for several more
successful players. As one of the oldest and most respected
litigation funders globally, LCM is well-positioned to establish
itself as a leading name in this dynamic market.
Implementing Big Data and AI strategies
In line with our strategic
objectives, we have recently completed the acquisition of the
intellectual property of a leading technology platform specializing
in legal analytics. This acquisition, secured for a modest
investment, provides us with a powerful tool to leverage Big Data
and artificial intelligence strategies to significantly enhance
both our origination and underwriting processes.
By integrating this technology into
our operations, we aim to sharpen our ability to assess legal
disputes more accurately and efficiently, thereby improving our
decision-making and risk assessment capabilities. This technology
will allow us to better identify promising investment opportunities
and streamline the underwriting process, ensuring that we can scale
our business in a more data-driven and systematic
manner.
This acquisition also aligns
perfectly with our broader strategy to differentiate ourselves in
the US market-a highly data-rich environment. By deploying
cutting-edge AI and data analytics, we aim to position LCM in a
differentiated way, setting ourselves apart from traditional peers.
Our ability to harness these technological advancements will not
only enhance our core operations but also establish us as a
forward-thinking player in the evolving landscape of legal
finance.
Looking ahead, we plan to integrate
this technology across our global operations, ensuring that our
expansion is supported by the most sophisticated tools available.
By doing so, we are positioning ourselves at the intersection of
legal finance and technology, which we believe will be key to our
long-term growth and success.
Well-Financed for Long Term Growth
We are close to finalizing a new
debt facility that will be of increased size and lower cost
compared to our existing facility. We will provide a full update to
the market when this refinancing has completed.
As communicated with our interim
results, we had been exploring the retail eligible bond market in
London as a potential source of debt financing. We believe that the
retail bond market will be attractive to LCM in the longer term but
the prevailing market conditions earlier in our financial year
would have required LCM to lock in long-term debt at high interest
rates. Having already seen a number of central banks begin to cut
interest rates we think the decision to pursue an alternative
refinancing was the right thing to do.
Market Developments
Litigation finance gained mainstream
attention over the past year, particularly in light of the scandal
involving the sub-postmasters of the Royal Mail in the UK. This
case highlighted the critical role that litigation finance plays in
providing access to justice for plaintiffs who might otherwise lack
the resources to pursue their claims.
Although we did not fund the Royal
Mail case, we have numerous examples, both historical and current,
where we have stood up for individuals and smaller entities in
their pursuit of justice.
The main trend that we have seen in
the UK over the last twelve months is the rising number of
collective actions being filed in the Competition Appeal Tribunal
(CAT). We have invested in a small number of these cases which
carry large budgets and seek extensive damages. The market for
group claims in the UK is still in its infancy but we expect our
experience from the well-developed Australian market positions us
well to understand how procedures in the CAT may play out over
time.
In Australia, the market for class
actions remains healthy and competitive. LCM's close relationships
with key law firms as well as its own ability to originate claims
means that the strong pipeline of claims for funding is likely to
continue.
As well as class actions, in
Australia LCM is financing insolvency claims and commercial
claims. The insolvency claims we have funded continue to be
smaller but generate healthy returns and we expect that with
tightened economic conditions we will see some larger insolvency
claims in the coming years.
We are also seeing increasing
interest for the funding of insolvency claims both in Singapore and
Hong Kong and have positioned our team in Singapore to take
advantage of this opportunity.
LCM funds a broad range of
commercial claims across the APAC region and there are no
restrictions on the types of claim we are able to fund. A
particular trend we have noticed in recent times is claims on trade
credit insurance made by trade credit providers whose finance
facilities were defaulted on by commodities traders following the
disruption to supply chains during and following the
pandemic. LCM is currently funding four of these claims in the
Australian courts and considering the financing of others in
Singapore.
Dividend
The Board has declared a final
dividend of 1.25p per share for the financial year ending 30 June
2024 (FY23: 2.25p). The Board will continue to balance the
opportunities for reinvesting in growth alongside returning capital
to shareholders.
Share Buyback Programme
On 5 October 2023, the Company
announced a share buyback programme in respect of its ordinary
shares up to a maximum consideration of A$10.0 million from
the date of the announcement (the "Share Buyback Programme"). The
purpose of the Share Buyback Programme was to reduce the share
capital of the Company in order to return value to
shareholders.
To date the Company has purchased
3,681,369 ordinary shares, representing approximately 3.18 per
cent. of the total share capital.
The directors intend to continue
with the share buy back programme until the maximum consideration,
as set out in the 5 October 2023 announced, has been utilised.
Accordingly LCM intends to enter into a further irrevocable
non-discretionary instruction with Canaccord Genuity Limited
("Canaccord") on 17 September 2024 in relation to the purchase by
Canaccord, acting as principal during the period commencing on 17
September 2024 and ending upon the publication of the interim
unaudited results of the Company for the six months ended December
2024, of Ordinary Shares for an aggregate consideration (excluding
expenses) of no greater than A$10.0 million (including those
Ordinary Shares purchased between 5 October 2023 and 17 September
2024) and the simultaneous on-sale of such Ordinary Shares by
Canaccord to LCM, where they will be held in treasury. Canaccord
will make its trading decisions concerning the timing of the
purchases of Ordinary Shares independently of, and uninfluenced by,
the Company.
The Share Buyback Programme will be
conducted within certain pre-set parameters, and in accordance with
Chapter 12 of the UK Listing Rules and the provisions of
the Market Abuse Regulation 596/2014/EU as amended by the Market
Abuse (Amendment) (EU Exit) Regulations 2019 ("UK MAR") and
the Commission Delegated Regulation 2016/1052/EU as amended by
Technical Standards (Market Abuse Regulation) (EU Exit) Instrument
2019 which both form part of the law of the United
Kingdom by virtue of the European Union (Withdrawal) Act
2018. Notwithstanding the average daily volume restrictions
set out in Article 3(3) (b) of the Commission Delegated Regulation
(EU) 2016/1052, the Company may make purchases in excess of these
volume restrictions, subject to prevailing market conditions and
liquidity.
Outlook
Looking ahead, we see a significant
long-term growth opportunity in the vast and still underpenetrated
global legal finance market. As we continue to expand our presence,
we remain focused on three key strategic priorities:
1. Transitioning to an
Asset Management Model: This shift will enable us to scale our
operations and enhance revenue streams, providing a stable
foundation for future growth.
2. Entering the US
Market: The US legal disputes market, being the largest globally,
offers tremendous potential. We are confident that our unique
positioning and established expertise will allow us to capitalize
on this opportunity.
3. Leveraging Data and
AI to Enhance Origination and Underwriting: By integrating
cutting-edge technology into our processes, we aim to sharpen our
competitive edge, enabling more efficient identification and
evaluation of investment opportunities.
With these priorities in place, we
are confident in our ability to drive sustainable long-term value
creation for our shareholders, ensuring that we remain at the
forefront of the legal finance industry.
Patrick Moloney
Chief Executive Officer
Financial Review
Profit and Loss - LCM only (A$m)
|
FY 2024
|
FY 2023
|
Concluded investments - Proceeds on
LCM capital
|
$43.3m
|
$59.6m
|
Concluded investments - Performance
fees on 3P capital
|
$12.7m
|
$24.6m
|
Concluded investments - LCM capital
invested ("Cost"
|
($23.8m)
|
($32.7m)
|
Net
realised gains from concluded investments
|
$32.2m
|
$51.5m
|
Fair value movement:
|
|
|
Fair value write-off on concluded
investments
|
($30.9m)
|
($37.4m)
|
Net fair value uplift to ongoing
investments
|
$43.4m
|
$53.6m
|
Net
fair value movement
|
$12.5m
|
$16.2m
|
Total income
|
$44.7m
|
$67.7m
|
Operating expenses
|
($19.0m)
|
($15.7m)
|
FX gains/losses
|
$0.5m
|
($1.2m)
|
Operating profit
|
$26.3m
|
$50.8m
|
Finance costs
|
($10.2m)
|
($8.1m)
|
Profit before tax
|
$16.1m
|
$42.7m
|
Tax
|
($3.3m)
|
($11.3m)
|
Net
income
|
$12.7m
|
$31.4m
|
|
|
|
Basic EPS (cents)
|
12.01
|
29.53
|
Diluted EPS (cents)
|
11.33
|
28.33
|
|
|
|
|
|
2024 Financial Performance
LCM extended its track record of
successfully investing in uncorrelated litigation finance assets
during the 2024 financial year. Our investments concluding in the
period generated a 2.4x multiple of invested capital (MOIC) to LCM,
consistent with our long-term track record of 2.7x.
These concluded investments
generated net realised gains to LCM of A$32.2 million. These gains
are composed of A$19.5 million of profits on investing our own
capital (FY23: A$26.9 million) and A$12.7 million from performance
fees (FY23: A$24.6 million) earned on third party
capital.
Our strategic shift towards an asset
management model is beginning to yield significant benefits, as
evidenced by the strong performance fees generated in both the
current and prior year. We expect this trend to continue, with the
majority of our current portfolio (45 out of a total of 58) now
comprising cases funded through the asset management model. We have
raised two funds to date with total external funds under management
of US$441 million. Both funds feature performance fees of 25% of
profits on third-party capital above an 8% hurdle rate, increasing
to 35% of profits exceeding a 20% return.
The net realised gains from
concluded investments of A$32.2 million was primarily driven by
four successful investments, offset by one loss at trial. The four
successful investments generated a combined gross profit of A$42.7
million, reflecting an aggregate MOIC of 4.7x. The loss at trial
resulted in a realised loss of A$8.4 million.
Of the four successful investments,
two were funded via our asset management model, contributing A$12.7
million in performance fees. The net internal rate of return (IRR)
after performance fees to fund investors on these concluded cases
was 46%.
The case that lost at trial was
fully funded by our balance sheet. Following a thorough review of
our investment decision in relation to this case, we are confident
that the original decision was sound. However, as with any
investment business, not all investments will succeed. Our
long-term track record underscores the robustness of our investment
decision-making process, and we remain optimistic about our future
successes.
The relatively small number of
concluded cases driving our 2024 financial result is consistent
with prior years. For instance, in both 2023 and 2022, three case
conclusions in each period accounted for the vast majority of gross
profit. As we continue to grow and fully transition to the asset
management model, we expect the variability in our gross
profitability to gradually diminish over time. Until then,
year-on-year comparisons may be less meaningful, as outcomes will
largely depend on the timing and size of case conclusions. Our
primary focus remains on extending our long-term track record of
successful investments.
While our business operates on a
cashflow basis, our financial statements are presented on a fair
value basis, providing investors with insight into the potential
value of our ongoing investments, which would otherwise be reported
at the value of the cash invested. Given the unique nature of our
investments and lack of a well-developed secondary market, they
cannot be marked to market. We therefore fair value these assets
using a bottom-up case-by-case approach that builds value based on
observable milestones achieved, consistent with the approach taken
by our sector peers.
When a case investment concludes the
realised gain in the P&L is calculated as the gross proceeds
due from that investment (including performance fees) minus the
cash that LCM invested. At the same time, the fair value asset
related to that investment is removed from our balance
sheet.
For cases concluded in the 2024
financial year, the achieved MOIC of 2.4x capital invested closely
matched the fair value of 2.3x held for those same assets prior to
their conclusion. As a result, the fair value write-off of the
concluded cases of A$30.9 million was similar to the total realised
gain of A$32.2 million. In the prior period, a MOIC of 2.6x was
achieved on concluded cases compared to a fair value of 2.1x,
resulting in a realised gain that comfortably exceeded the fair
value write-off.
The net fair value uplift to ongoing
cases during the period was A$43.4 million (FY23: A$53.6 million),
with ongoing cases on our balance sheet valued at 1.9x the
cumulative cash invested as of the end of the period (FY23:
1.8x).
The combination of the fair value
write-off on concluded investments and the fair value uplift to
ongoing investments gives the net fair value impact on the P&L
of A$12.5 million in FY24, which is comparable to the prior year
(FY23: A$16.2 million).
Total income for the period was
A$44.7 million, a decrease from the previous period (FY23: A$67.7
million), primarily due to the larger size of case conclusions in
the 2023 financial year, which was LCM's most successful period to
date.
Operating expenses increased to
A$19.0 million, up from A$15.7 million in the prior year. The
increase is mainly attributable to the expansion of our team as we
seek to enhance our origination capabilities across key
markets.
Operating profit for the period was
A$26.3 million, down from A$50.8 million in the previous year,
reflecting the lower gross profit on concluded case investments
compared to the prior period, as outlined above.
Finance costs rose to A$10.2 million
(FY23: A$8.1 million), due to the higher interest rate environment.
We are well advanced in negotiations to refinance our debt facility
and are aiming to lower the interest rate from the 13.0% rate on
the existing facility.
Profit before tax for the period was
A$16.1 million (FY23: A$42.7 million) with a tax charge of A$3.3
million (FY23: A$11.3 million). Going forward, we expect an
effective tax rate of 27.5%, being the average of the UK (25%) and
Australian (30%) corporation tax rates.
The Board has declared a final
dividend of 1.25p per share for the financial year ending 30 June
2024 (FY23: 2.25p). The Board will continue to balance the
opportunities for reinvesting in growth alongside returning capital
to shareholders. The dividend will be paid on 4 December 2024 to
shareholders on the register on 1 November 2024, being the record
date. The ordinary shares will be marked ex-dividend on 31 October
2024.
Balance sheet - LCM only (A$m)
|
FY 2024
|
FY 2023
|
Cash
|
$53.0m
|
$83.0m
|
Debtors
|
$15.0m
|
$13.9m
|
Investments at fair
value
|
$202.9m
|
$165.8m
|
Investments held at
cost
|
$42.1m
|
$37.3m
|
Other assets
|
$1.5m
|
$1.7m
|
Total assets
|
$314.4m
|
$301.7m
|
Borrowings
|
($61.9m)
|
($69.0m)
|
Tax payable
|
($0.9m)
|
($7.8m)
|
Deferred tax
liability
|
($43.6m)
|
($36.3m)
|
Other creditors
|
($19.1m)
|
($5.2m)
|
Total liabilities
|
($125.5m)
|
($118.2m)
|
Net assets
|
$188.9m
|
$183.5m
|
|
|
|
NAV per share (pence) -
Basic
|
94.4
|
90.3
|
NAV per share (pence) -
Diluted
|
89.0
|
86.6
|
As of 30 June 2024, LCM was actively
invested in 58 ongoing cases (FY23: 53) with a total balance sheet
value of A$245.0 million (FY23: A$203.1 million). This valuation
includes A$42.1 million related to three investments (FY23: A$37.3
million for four investments) that are held at cost for historic
accounting reasons, and A$202.9 million (FY23: A$165.8 million)
attributed to 55 investments (FY23: 49) that are held at fair
value.
As previously noted, at the period
end our case investments are held at an aggregate value of 1.9x the
cumulative LCM cash invested into those same cases, a modest
increase from the 1.8x multiple at the end of the prior period.
This represents a discount compared to our realised long-term track
record of 2.7x, reflecting our conservative approach to fair
value.
It's also worth noting that our
long-term track record of 2.7x would translate to a MOIC over 4.0x
for LCM under the asset management model. This reflects the model's
lower capital intensity and high potential for performance fees,
further underscoring the conservative nature of our fair value
methodology.
Our cash balance at the period end
stood at A$53.0 million (FY23: A$83.0 million), reflecting a robust
liquidity position. When offset against borrowings of A$61.9
million (FY23: A$69.0 million) this results in a net debt position
of A$8.9 million (FY23: net cash of A$14 million).
Debtors, which comprises amounts
receivable from successful investments stood at A$15.0 million
(FY23: A$13.9 million). Since the period end, A$11.6 million of
this balance has been collected in cash.
Beyond our borrowings, deferred tax
of A$43.6 million (FY23: A$36.3 million) is the largest liability
on our balance sheet. A$29.6 million of this balance relates to
deferred tax on the fair value of our investments and A$16.6
million relates to deductible funding on litigation assets. This
tax is unrealised and will only become payable upon the successful
conclusion of the related cases.
Other assets primarily comprises
prepayments and security deposits for leases.
Net assets increased modestly over
the 2024 financial year. The net income of A$14.7 million generated
during the period was partially offset by the FY23 dividend payment
of A$5.0 million and the cost of shares repurchased of A$5.4
million. The A$10million share buyback program announced with our
2023 financial year results remains ongoing and is expected to
complete during the 2025 financial year.
Reflecting the reduced number of
shares following the partial completion of the share buyback, net
assets per share increased to 94.4p (FY23: 90.3p).
Cash Flow - LCM only (A$m)
|
FY 2024
|
FY 2023
|
Opening cash
balance
|
$83.0m
|
$29.3m
|
Cash generated from concluded
investments
|
$56.7m
|
$96.8m
|
Cash invested into ongoing
cases (case funding)
|
($39.7m)
|
($36.3m)
|
Operating expenses
|
($17.0m)
|
($12.1m)
|
Net finance costs
paid
|
($9.0m)
|
($6.0m)
|
Dividend and share
buyback
|
($10.4m)
|
-
|
Debt repayment
|
($8.1m)
|
$9.6m
|
Other
|
($2.5m)
|
$1.7m
|
Closing cash balance
|
$53.0m
|
$83.0m
|
|
|
|
Net debt
|
$8.9m
|
($14.0m)
|
During the period, cash generated
from concluded investments in the period amounted to A$56.7 million
(FY23: A$96.8 million), inclusive of A$12.7 million in performance
fees (FY23: A$24.6 million).
The cash invested in case funding in
the period totalled A$39.7 million (FY23: A$36.3 million), spread
across 65 investments, of which 58 remained ongoing at the period
end.
Operating expenses increased to
A$14.8 million (FY23: A$10.3 million) primarily due to the
expansion of the origination team, as previously
outlined.
Net finance costs paid rose to A$9.0
million (FY23: A$6.0 million) driven by the higher interest rate
environment.
Tax paid was A$2.8 million (FY23:
A$0.0 million) relating to UK tax paid on successful case
conclusions in the prior financial year.
In our 2024 financial year, we
returned A$10.4 million of capital to shareholders with A$5.0
million distributed as dividends and A$5.4 million through the
share buyback program.
We repaid A$8.1 million of our
borrowings during the year (FY23: A$9.6 million increase in
borrowings) to reduce interest costs, reflecting our robust
liquidity position.
At the end of the financial period,
we held A$53.0 million in cash (FY23: A$83.0 million) and had a net
debt position of A$8.9 million (FY23: A$14.0 million net
cash).
New
commitments
New commitments during the period
rose significantly to A$279.0m (FY23: A$176.3m) reflecting our
strategic focus on scaling the business. A substantial portion of
this growth was driven by our London office, where we have invested
in a select number of large group claims that are being pursued
through the Competition Appeal Tribunal.
Committed and Invested Capital
As of the end of the period, LCM was
actively invested in 58 ongoing case investments. Among these, 13
were cases fully funded by our balance sheet (of which three cases
comprise the majority of the invested capital, while 45 were
co-funded through our asset management model, where LCM typically
funds 25% of the investment cost.
Committed capital, which represent
LCM's share of total commitments across all active cases net of
conclusions and terminations, increased to A$725.0 million at the
period end (FY23: A$484.0 million). Of this amount, A$281.0 million
has already been deployed.
Asset management
Since 2020, we have been
transitioning our business model from solely funding investments
through our own balance sheet to operating as an asset manager. In
this capacity, we raise third party capital and invest in new cases
with the funding typically split 25% from our own balance sheet and
75% from our limited partners (LPs) invested in our funds. This
model not only reduces capital demands on LCM but also provides the
potential to earn substantial performance fees, ranging from 25% to
35% of the gross profits generated for our LPs above a minimum
hurdle level.
To date, we have successfully raised
USD441 million in external funds across two funds: Fund 1 (USD150
million) and Fund II (USD291 million).
Fund I has invested in 26 case
investments and was fully committed and 71% deployed as of 30 June
2024. Six of these 26 cases had concluded by that date, all with
successful outcomes, generating gross proceeds of USD101.9 million
on LP capital of USD29.7 million. After accounting for performance
fees of USD24.9 million paid to LCM, LP investors have achieved a
2.5x MOIC and a net IRR of 60%.
Fund II has invested into 33 case
investments to date, and as of 30 June 2024, it was 58% committed
and 7% deployed. The investments in Fund II are performing in line
with our expectations. None of these investments have yet
concluded.
We anticipate commencing marketing
efforts for Fund III towards the end of this calendar
year.
Post period end
Shortly after the period end, we had
a successful conclusion in relation to a bilateral investment
treaty claim that was funded 25% by LCM and 75% by Fund I
investors. A total of A$5.9 million was invested in the case
generating revenue of A$29.6 million, equivalent to a 5.0x MOIC on
a global basis. LCM's return was further amplified through
performance fees of A$6.1 million, resulting in a total return of
A$13.5 million from a A$1.5 million investment - a pleasing 9.5x
MOIC for LCM shareholders.
We are well advanced on refinancing
our debt facility with the objective of increasing the size and
lowering the cost. We will provide an update to the market at the
appropriate time.
Key
Performance Indicators
We have changed our Key Performance
Indicators this year to better reflect what management is focused
on as we drive the business.
The updated KPIs are chosen to
reflect our focus on growing committed capital (new commitments in
the period and cumulative committed capital at the period end);
growing invested capital (invested capital in the period and
cumulative invested capital at the period end); and delivering
strong investment performance via our cumulative long-term MOIC.
Furthermore, given the importance of our transition to the asset
management model, external funds under management remains a
KPI.
Consolidated statement of profit or loss and other
comprehensive income
For
the period ended 30 June 2024
|
|
Consolidated
|
|
|
2024
|
2023
|
|
Note
|
$'000
|
$'000
|
|
|
|
|
Income
|
|
|
|
Gain on financial assets at
fair value through profit or loss
|
5
|
86,926
|
184,735
|
Movement in financial
liabilities related to third-party interests in consolidated
entities
|
5
|
(48,382)
|
(111,953)
|
Litigation service
revenue
|
5
|
12,443
|
-
|
Total income
|
|
50,987
|
72,782
|
|
|
|
|
Litigation service
expense
|
(3,236)
|
-
|
Gross profit
|
|
47,752
|
72,782
|
|
|
|
|
|
|
|
|
Expenses
|
|
|
|
Employee benefits
expense
|
6
|
(11,471)
|
(9,474)
|
Depreciation
expense
|
6
|
(145)
|
(166)
|
Corporate expenses
|
(5,171)
|
(4,220)
|
Fund administration
expense
|
6
|
(3,400)
|
(3,010)
|
Foreign currency
gains/(losses)
|
(1,432)
|
(5,081)
|
Total operating
expenses
|
(21,619)
|
(21,951)
|
Operating profit
|
|
26,133
|
50,831
|
Finance costs
|
6
|
(10,083)
|
(8,090)
|
Profit before income tax expense
|
16,050
|
42,741
|
Income tax expense
|
7
|
(3,335)
|
(11,256)
|
Profit after income tax expense
|
12,715
|
31,485
|
|
|
|
|
Other comprehensive income
|
|
|
Items that may be subsequently
reclassified to profit and loss:
|
|
Movement in foreign currency
translation reserve
|
2,013
|
2,187
|
Total comprehensive income for the period
|
14,728
|
33,672
|
|
|
|
|
Profit for the period is
attributable to:
|
|
Owners of Litigation Capital
Management Limited
|
12,715
|
31,485
|
|
|
12,715
|
31,485
|
|
|
|
|
Total comprehensive income for the
period is attributable to:
|
|
Owners of Litigation Capital
Management Limited
|
14,728
|
33,672
|
|
|
14,728
|
33,672
|
|
|
|
|
|
|
|
|
|
|
Cents
|
Cents
|
|
|
|
|
Basic earnings per share
|
8
|
12.01
|
29.53
|
Diluted earnings per
share
|
8
|
11.33
|
28.33
|
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
For
the period ended 30 June 2024
|
|
30-Jun-24
|
30-Jun-23
|
|
Note
|
$'000
|
$'000
|
|
|
|
|
Assets
|
|
|
|
Cash and cash equivalents
|
10
|
68,113
|
104,457
|
Trade receivables
|
11
|
10,986
|
2,063
|
Due from resolution of financial
assets
|
12
|
3,980
|
11,873
|
Contract costs
|
13
|
42,072
|
37,277
|
Financial assets at fair value
through profit or loss
|
14
|
465,213
|
391,410
|
Property, plant and
equipment
|
157
|
211
|
Intangible assets
|
|
305
|
356
|
Other assets
|
|
977
|
1,256
|
Total assets
|
|
591,803
|
548,903
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
Trade and other payables
|
15
|
30,376
|
7,535
|
Tax payable
|
|
883
|
7,769
|
Employee benefits
|
|
1,112
|
906
|
Borrowings
|
16
|
61,917
|
68,976
|
Financial liabilities related to
third-party interests in consolidated entities
|
17
|
264,950
|
243,990
|
Deferred tax liability
|
7
|
43,624
|
36,259
|
Total liabilities
|
|
402,862
|
365,435
|
Net
assets
|
|
188,941
|
183,468
|
|
|
|
|
Equity
|
|
|
|
Issued capital
|
18
|
69,674
|
69,674
|
Treasury shares
|
18
|
(5,396)
|
-
|
Reserves
|
|
4,171
|
1,042
|
Retained earnings
|
|
120,492
|
112,753
|
Parent interest
|
|
188,941
|
183,468
|
Total equity
|
|
188,941
|
183,468
|
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 30 June 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 2022 (restated)
|
69,674
|
-
|
81,268
|
1,573
|
(3,585)
|
148,930
|
|
|
|
|
|
|
|
Profit after income tax expense for
the period
|
-
|
-
|
31,485
|
-
|
-
|
31,485
|
Other comprehensive income for the
period
|
-
|
-
|
-
|
-
|
2,187
|
2,187
|
Total comprehensive income for the period
|
-
|
-
|
31,485
|
-
|
2,187
|
33,672
|
|
|
|
|
|
|
|
Equity Transactions:
|
|
|
|
|
|
|
Share-based payments (note
29)
|
-
|
-
|
-
|
867
|
-
|
867
|
|
|
|
-
|
867
|
-
|
867
|
|
|
|
|
|
|
|
Balance at 30 June 2023
|
69,674
|
-
|
112,753
|
2,440
|
(1,398)
|
183,468
|
|
|
|
|
|
|
|
|
|
|
|
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)
|
183,469
|
|
|
|
|
|
|
|
Profit after income tax expense for
the period
|
-
|
-
|
12,715
|
-
|
-
|
12,715
|
Other comprehensive income for the
period
|
-
|
-
|
-
|
-
|
2,013
|
2,013
|
Total comprehensive income for the period
|
-
|
-
|
12,715
|
-
|
2,013
|
14,728
|
|
|
|
|
|
|
|
Equity Transactions:
|
|
|
|
|
|
|
Share-based payments (note
29)
|
-
|
-
|
-
|
1,116
|
-
|
1,116
|
Dividends paid (note 20)
|
-
|
-
|
(4,976)
|
-
|
-
|
(4,976)
|
Treasury shares acquired (note
18)
|
-
|
(5,396)
|
-
|
-
|
-
|
(5,396)
|
|
|
|
|
|
|
|
|
-
|
(5,396)
|
(4,976)
|
1,116
|
-
|
(9,256)
|
|
|
|
|
|
|
|
Balance at 30 June 2024
|
69,674
|
(5,396)
|
120,492
|
3,556
|
615
|
188,941
|
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 30 June 2024
|
|
Consolidated
|
|
|
2024
|
2023
|
|
Note
|
$'000
|
$'000
|
|
|
|
|
Cash flows from operating activities
|
|
Proceeds from litigation
contracts
|
116,636
|
192,563
|
Payments for litigation
contracts
|
(78,265)
|
(94,543)
|
Payments to suppliers and
employees
|
(16,337)
|
(13,434)
|
Income tax paid
|
|
(2,830)
|
-
|
Net
cash from operating activities
|
9
|
19,203
|
84,587
|
|
|
|
|
Cash flows from investing activities
|
|
Payments for property, plant and
equipment
|
(31)
|
(90)
|
Payments for intangibles
|
(9)
|
(57)
|
Refund/(payment) of security
deposits
|
8
|
(51)
|
Net
cash used in investing activities
|
(31)
|
(198)
|
|
|
|
|
Cash flows from financing activities
|
|
Payments for treasury
shares
|
18
|
(5,396)
|
-
|
Dividends paid
|
20
|
(4,976)
|
-
|
Proceeds from borrowings
|
16
|
-
|
9,636
|
Repayments of borrowings
|
16
|
(8,139)
|
(14,848)
|
Payments of finance costs
|
(8,960)
|
(6,171)
|
Payments of placement fees related
to third-party interests
|
(2,206)
|
(1,832)
|
Contributions from third-party
interests in consolidated entities
|
17
|
30,505
|
74,980
|
Distributions to third-party
interests in consolidated entities
|
17
|
(56,407)
|
(94,373)
|
Net
cash (used in) financing activities
|
(55,578)
|
(32,608)
|
|
|
|
|
Net
increase/(decrease) in cash and cash equivalents
|
(36,405)
|
51,781
|
Cash and cash equivalents at the
beginning of the period
|
104,457
|
49,964
|
Effects of exchange rate changes on
cash and cash equivalents
|
61
|
2,712
|
Cash and cash equivalents at the end of the
period
|
10
|
68,113
|
104,457
|
1 The Group changed its cash flow presentation from indirect
method to direct method to be in line with market practice and in
accordance with how management from the Group reviews the cashflows
of operations. The comparative information for the year ended 30
June 2023 has been restated to reflect the change in the cash flow
presentation.
The above Consolidated Statement of Cash Flows should be read
in conjunction with accompanying Notes to the Financial
Statements.
Notes to the financial statements
30
June 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 year (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 17 September 2024. The Directors have the power to amend and
reissue the financial statements.
Basis of preparation
The Financial Report:
·
|
has been prepared in accordance with
the Australian Accounting Standards adopted by the Australian
Accounting Standards Board (AASB) and International Financial
Reporting Standards (IFRSs) as issued by the International
Accounting Standards Board (IASB);
|
·
|
has been prepared in accordance with
the requirements of the Corporations Act 2001 (Cth);
|
·
|
is presented in Australian dollars,
which is the Group's functional and presentation currency, with all
values rounded to the nearest thousand dollars, or in certain cases
to the nearest dollar, in accordance with ASIC Corporations
Instrument 2016/191 unless otherwise indicated;
|
·
|
includes foreign currency
transactions that are translated into the functional currency,
using the exchange rates prevailing at the date of the Financial
Report;
|
·
|
has been prepared on a going concern
basis using a historical cost basis, except for certain assets and
liabilities measured at fair value;
|
·
|
presents assets and liabilities on
the face of the Balance Sheets in decreasing order of
liquidity;
|
·
|
where required, presents restated
comparative information for consistency with the current year's
presentation in the Financial Report; and
|
·
|
contains accounting policies that
have been consistently applied to all periods presented, unless
otherwise stated.
|
Principles of consolidation
The consolidated financial
statements incorporate the assets and liabilities of all
subsidiaries of Litigation Capital Management Limited ('Company' or
'parent entity') as at 30 June 2024 and the results of all
subsidiaries for the year then ended. Litigation Capital Management
Limited and its subsidiaries together are referred to in these
financial statements as the 'Group'.
The Group includes fund investment
vehicles over which the Group has the right to direct the relevant
activities of the fund under contractual arrangements and has
exposure to variable returns from the fund investment vehicles. See
note 4.
Subsidiaries are all those entities
over which the Group has control. The Group controls an entity when
the Group is exposed to, or has rights to, variable returns from
its involvement with the entity and has the ability to affect those
returns through its power to direct the activities of the entity.
Subsidiaries are fully consolidated from the date on which control
is transferred to the Group. They are de-consolidated from the date
that control ceases.
Intercompany transactions, balances
and unrealised gains on transactions between entities in the Group
are eliminated. Unrealised losses are also eliminated unless the
transaction provides evidence of the impairment of the asset
transferred. Accounting policies of subsidiaries have been changed
where necessary to ensure consistency with the policies adopted by
the Group.
Note 2. Material accounting policies
New
and amended accounting standards and interpretations adopted during
the year
The accounting policies adopted are
consistent with those followed in the preparation of the Group's
annual consolidated financial statements for the year ended 30 June
2023.
The Group has applied the Amendments
to IAS 1, IFRS Practice Statement 2 - Disclosure of Accounting
Policies for the first time for its annual reporting period
commencing 1 July 2023. The amendment did not have any impact on
the amounts recognised in prior periods and are not expected to
significantly affect the current or future periods.
New
and amended accounting standards and interpretations issued but not
yet effective
The new and amended standards and
interpretations that are issued, but not yet effective, up to the
date of issuance of the Group's financial statements that the Group
reasonably expects will have an impact on its disclosures,
financial position or performance when applied at a future date,
are disclosed below.
·
|
Amendment to IFRS 9 and IFRS 7 -
Classification and Measurement of Financial Instruments.
|
·
|
IFRS 18 Presentation and Disclosure
in Financial Statements.
|
·
|
IFRS 19 Subsidiaries without Public
Accountability: Disclosures.
|
·
|
IFRS S1, 'General requirements for
disclosure of sustainability-related financial
information.
|
The Group intends to adopt these new
and amended standards and interpretations, if applicable, when they
become effective. The Group has not listed other standards and
interpretations which are issued but not yet effective, as they are
not expected to impact the Group.
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.
Foreign currency translation
The financial statements are
presented in Australian dollars, which is Litigation Capital
Management Limited's functional and presentation
currency.
Foreign currency transactions
Foreign currency transactions are
translated into the entity's functional currency using the exchange
rates prevailing at the dates of the transactions. Foreign exchange
gains and losses resulting from the settlement of such transactions
and from the translation at financial year-end exchange rates of
monetary assets and liabilities denominated in foreign currencies
are recognised in profit or loss.
Foreign operations
The assets and liabilities of
foreign operations are translated into Australian dollars using the
exchange rates at the reporting date. The revenues and expenses of
foreign operations are translated into Australian dollars using the
average exchange rates, which approximate the rates at the dates of
the transactions, for the period. All resulting foreign exchange
differences are recognised in other comprehensive income through
the foreign currency reserve in equity.
The foreign currency reserve is
recognised in profit or loss when the foreign operation or net
investment is disposed of.
Fair value measurement
The Group measures its financial
instruments such as litigation funding agreements and financial
liabilities related to third-party interests at fair value at each
balance sheet date.
When an asset or liability,
financial or non-financial, is measured at fair value for
recognition or disclosure purposes, the fair value is based on the
price that would be received to sell an asset or paid to transfer a
liability in an orderly transaction between market participants at
the measurement date; and assumes that the transaction will take
place either: in the principal market; or in the absence of a
principal market, in the most advantageous market.
Fair value is measured using the
assumptions that market participants would use when pricing the
asset or liability, assuming they act in their economic best
interests. For non-financial assets, the fair value measurement is
based on its highest and best use. Valuation techniques that are
appropriate in the circumstances and for which sufficient data are
available to measure fair value, are used, maximising the use of
relevant observable inputs and minimising the use of unobservable
inputs.
The Group uses valuation techniques
that are appropriate in the circumstances and for which sufficient
data is available to measure fair value, maximising the use of
relevant observable inputs and minimising the use of unobservable
inputs.
All assets and liabilities for which
fair value is measured or disclosed in the financial statements are
categorised within the fair value hierarchy, described as follows,
based on the lowest level input that is significant to the fair
value measurement as a whole:
·
|
Level 1 - Quoted (unadjusted) market
prices in active markets for identical assets or
liabilities
|
·
|
Level 2 - Valuation techniques for
which the lowest level input that is significant to the fair value
measurement is directly or indirectly observable
|
·
|
Level 3 - Valuation techniques for
which the lowest level input that is significant to the fair value
measurement is unobservable
|
For assets and liabilities that are
recognised in the financial statements at fair value on a recurring
basis, the Group determines whether transfers have occurred between
levels in the hierarchy by re-assessing categorisation (based on
the lowest level input that is significant to the fair value
measurement as a whole) at the end of each reporting period.
The Group's Executive Leadership
Committee determines the policies and procedures for fair value
measurement, including the litigation funding agreements. The
Committee is comprised of the Chief Executive Officer, Chief
Financial Officer and Head of Investments or equivalent.
The level of involvement of external
valuers or specialist valuation experts is determined annually by
the Committee after discussion with and approval by the Company's
Audit Committee. Selection criteria include market knowledge,
reputation, independence and whether professional standards are
maintained.
At each reporting date, the
Committee analyses the movements in the values of assets and
liabilities which are required to be remeasured or re-assessed as
per the Group's accounting policies. For this analysis, the
Committee verifies the major inputs applied in the latest valuation
by agreeing the information in the valuation computation to
contracts and other relevant documents.
The Committee also compares the
change in the fair value of each asset and liability with any
relevant external sources to determine whether the change is
reasonable.
Fair-value related disclosures for
financial instruments and non-financial assets that are measured at
fair value or where fair values are disclosed, are summarised in
the following notes:
·
|
Disclosures for valuation methods,
significant estimates and assumptions Note 22
|
·
|
Quantitative disclosures of fair
value measurement hierarchy Note 22
|
·
|
Financial instruments Note
21
|
Revenue recognition
The Group recognises revenue as
follows:
Revenue from contracts with customers
Revenue is recognised at an amount
that reflects the consideration to which the Group is expected to
be entitled in exchange for transferring services to a customer.
For each contract with a customer, the Group: identifies the
contract with a customer; identifies the performance obligations in
the contract; determines the transaction price which takes into
account estimates of variable consideration and the time value of
money; allocates the transaction price to the separate performance
obligations on the basis of the relative stand-alone selling price
of each distinct service to be delivered; and recognises revenue
when or as each performance obligation is satisfied in a manner
that depicts the transfer to the customer of the services
promised.
Variable consideration within the
transaction price, if any, reflects the variability of potential
outcomes in awards or settlements of the litigation and any other
contingent events. Such estimates are determined using either the
'expected value' or 'most likely amount' method. The measurement of
variable consideration is subject to a constraining principle
whereby revenue will only be recognised to the extent that it is
highly probable that a significant reversal in the amount of
cumulative revenue recognised will not occur. The measurement
constraint continues until the uncertainty associated with the
variable consideration is subsequently resolved. Amounts received
that are subject to the constraining principle are recognised as a
refund liability.
Litigation service revenue
The performance of a litigation
service contract by the Group entails the management and
progression of the litigation project during which costs are
incurred by the Group over the life of the litigation
project.
As consideration for providing
litigation management services and financing of litigation
projects, the Group receives either a percentage of the gross
proceeds of any award or settlement of the litigation, or a
multiple of capital deployed, and is reimbursed for all invested
capital.
Revenue, which includes amounts in
excess of costs incurred and the reimbursement for all invested
capital, is not recognised as revenue until the successful
completion of the litigation project ie, complete satisfaction of
the performance obligation, which is generally at the point in time
when a judgment has been awarded or on an agreed settlement between
the parties to the litigation, and therefore when the outcome is
considered highly probable. On this basis, revenue is not
recognised over time and instead recognised at the point in time
when the Group satisfies the performance obligation. Costs include
only external costs of funding the litigation, such as solicitors'
fees, counsels' fees and experts' fees.
The terms and duration of each
settlement or judgment varies by litigation project. Payment terms
are not defined by the Group's litigation contracts however upon
successful completion of a litigation project, being the
satisfaction of the single performance obligation, funds are
generally paid into trust within 28 days. The funds will remain in
trust until the distribution amounts have been determined and
agreed by the relevant parties, after which payment will be
received by the Group.
Income tax
The income tax expense or benefit
for the period is the tax payable on that period's taxable income
based on the applicable income tax rate for each jurisdiction,
adjusted by the changes in deferred tax assets and liabilities
attributable to temporary differences, unused tax losses and the
adjustment recognised for prior periods, where
applicable.
Deferred tax assets and liabilities
are recognised for temporary differences at the tax rates expected
to be applied when the assets are recovered or liabilities are
settled, based on those tax rates that are enacted or substantively
enacted, except for:
·
|
When the deferred income tax asset
or liability arises from the initial recognition of goodwill or an
asset or liability in a transaction that is not a business
combination and that, at the time of the transaction, affects
neither the accounting nor taxable profits; or
|
·
|
When the taxable temporary
difference is associated with interests in subsidiaries, associates
or joint ventures, and the timing of the reversal can be controlled
and it is probable that the temporary difference will not reverse
in the foreseeable future.
|
Deferred tax assets are recognised
for deductible temporary differences and unused tax losses only if
it is probable that future taxable amounts will be available to
utilise those temporary differences and losses.
The carrying amount of recognised
and unrecognised deferred tax assets are reviewed at each reporting
date. Deferred tax assets recognised are reduced to the extent that
it is no longer probable that future taxable profits will be
available for the carrying amount to be recovered. Previously
unrecognised deferred tax assets are recognised to the extent that
it is probable that there are future taxable profits available to
recover the asset.
Deferred tax assets and liabilities
are offset only where there is a legally enforceable right to
offset current tax assets against current tax liabilities and
deferred tax assets against deferred tax liabilities; and they
relate to the same taxable authority on either the same taxable
entity or different taxable entities which intend to settle
simultaneously.
Litigation Capital Management
Limited (the 'head entity') and its wholly-owned Australian
subsidiaries have formed an income tax consolidated group under the
tax consolidation regime. The head entity and each subsidiary in
the tax consolidated group continue to account for their own
current and deferred tax amounts. The tax consolidated group has
applied the 'separate taxpayer within group' approach in
determining the appropriate amount of taxes to allocate to members
of the tax consolidated group.
In addition to its own current and
deferred tax amounts, the head entity also recognises the current
tax liabilities (or assets) and the deferred tax assets arising
from unused tax losses and unused tax credits assumed from each
subsidiary in the tax consolidated group.
Assets or liabilities arising under
tax funding agreements with the tax consolidated entities are
recognised as amounts receivable from or payable to other entities
in the tax consolidated group. The tax funding arrangement ensures
that the intercompany charge equals the current tax liability or
benefit of each tax consolidated group member, resulting in neither
a contribution by the head entity to the subsidiaries nor a
distribution by the subsidiaries to the head entity.
Cash and cash equivalents
Cash and cash equivalents includes
cash on hand, deposits held at call with financial institutions,
other short-term, highly liquid investments with original
maturities of three months or less that are readily convertible to
known amounts of cash and which are subject to an insignificant
risk of changes in value.
Trade and other receivables
Trade receivables are initially
recognised at fair value and subsequently measured at amortised
cost using the effective interest method, less any allowance for
expected credit losses. Trade receivables generally do not have a
specifically defined time frame for settlement, additionally, when
the receivable is due from part of the portfolio of litigation
projects, the settlement of the receivable is generally made upon
an additional resolution of another litigation project within the
portfolio which also may not be within a specifically defined time
frame.
The Group has applied the simplified
approach to measuring expected credit losses for trade receivables
and contract assets, which uses a lifetime expected loss allowance.
To measure the expected credit losses, trade receivables have been
grouped based on days overdue.
Due
from resolution of financial assets
Amounts due from the settlement of
financial assets relate to the realisation of litigation funding
assets that have been successfully concluded and where there is no
longer any litigation risk remaining and represent the expected
cash flow to be received by the Group. The settlement terms and
timing of realisations vary by litigation funding asset. The
majority of settlement balances are received shortly after the
period end in which the litigation funding asset has concluded, and
all settlement balances are generally expected to be received
within 12 months after completion.
Contract costs
Contract costs are recognised as an
asset when the Group incurs costs in fulfilling a contract and when
all the following are met: (i) the costs relate directly to the
contract; (ii) the costs generate or enhance resources of the Group
that will be used to satisfy future performance obligations; and
(iii) the costs are expected to be recovered. Contract costs are
financial assets for impairment purposes. Refer to the Group's
revenue recognition policy for further information.
Financial assets at fair value through profit or
loss
Financial assets are recognised at
fair value through profit or loss and are fair valued using an
income approach. Financial assets at fair value through profit or
loss are carried in the statement of financial position at fair
value with net changes in fair value recognised in the statement of
profit or loss. This category includes the Group's litigation
funding assets. The litigation funding assets are primarily
derecognised when the underlying litigation resolves and transfers
to Due from resolution of financial assets.
Financial assets are derecognised
when the contractual rights to the cash flows expire or when the
asset, along with the associated risks and rewards of ownership,
are substantially transferred to another entity.
Financial liabilities related to third-party interests in
consolidated entities
Non-controlling interests where the
Group does not own 100% of a consolidated entity are recorded as
financial liabilities related to third-party interests in
consolidated entities. Financial liabilities related to third-party
interests in consolidated entities are initially recognised at the
fair value. Gains or losses on liabilities held at fair value
through profit or loss are recognised in the statement of profit or
loss as 'Movement in financial liabilities related to third-party
interests in consolidated entities'. They are subsequently measured
at fair value using an income approach. Amounts included in the
consolidated statement of financial position represent the net
asset value of the third-parties' interests. These amounts have
been elected to be measured at fair value to reduce the accounting
mismatch between the related financial asset measured at fair value
through profit or loss.
Financial liabilities are
derecognised when the obligation to settle through cash flows has
expired or been transferred.
Impairment of non-financial assets
Non-financial assets are reviewed
for impairment at each reporting date and whenever events or
changes in circumstances indicate that the carrying amount may not
be recoverable. An impairment loss is recognised for the amount by
which the asset's carrying amount exceeds its recoverable
amount.
Recoverable amount is the higher of
an asset's fair value less costs of disposal and value-in-use. The
value-in-use is the present value of the estimated future cash
flows relating to the asset using a pre-tax discount rate specific
to the asset or cash-generating unit to which the asset belongs.
Assets that do not have independent cash flows are grouped together
to form a cash-generating unit.
Trade and other payables
These amounts represent liabilities
for goods and services provided to the Group prior to the end of
the financial year and which are unpaid. Due to their short-term
nature they are measured at amortised cost and are not discounted.
The amounts are unsecured and are usually paid within 30 days of
recognition.
Borrowings
Borrowings are initially recognised
at fair value net of transaction costs incurred. Subsequent to
initial recognition, borrowings are stated at amortised
cost.
Net
finance costs
Net finance costs comprise interest
income from the investment of excess funds in short-term, highly
liquid investments, and interest expense and borrowing costs
related to the borrowing of funds.
Employee benefits
Short-term employee benefits
Liabilities for wages and salaries,
including non-monetary benefits, annual leave and long service
leave expected to be settled wholly within 12 months of the
reporting date are measured at the amounts expected to be paid when
the liabilities are settled.
Other long-term employee benefits
The liability for annual leave and
long service leave not expected to be settled within 12 months of
the reporting date are measured at the present value of expected
future payments to be made in respect of services provided by
employees up to the reporting date. Consideration is given to
expected future wage and salary levels, experience of employee
departures and periods of service. Expected future payments are
discounted using market yields at the reporting date on high
quality corporate bonds with terms to maturity and currency that
match, as closely as possible, the estimated future cash
outflows.
Defined contribution superannuation expense
Contributions to defined
contribution superannuation plans are expensed in the period in
which they are incurred.
Share-based payments
Equity-settled share-based
compensation benefits are provided to employees.
Equity-settled transactions are
awards of shares, or options over shares, that are provided to
employees in exchange for the rendering of services.
The cost of equity-settled
transactions are measured at fair value on grant date. Fair value
is determined using either the Monte Carlo or Black-Scholes option
pricing model that takes into account the exercise price, the term
of the option, the impact of dilution, the share price at grant
date and expected price volatility of the underlying share, the
expected dividend yield and the risk free interest rate for the
term of the option, together with non-vesting conditions that do
not determine whether the Group receives the services that entitle
the employees to receive payment. No account is taken of any other
vesting conditions.
The cost of equity-settled
transactions are recognised as an expense with a corresponding
increase in equity over the vesting period. The cumulative charge
to profit or loss is calculated based on the grant date fair value
of the award, the best estimate of the number of awards that are
likely to vest and the expired portion of the vesting period. The
amount recognised in profit or loss for the period is the
cumulative amount calculated at each reporting date less amounts
already recognised in previous periods.
Market conditions are taken into
consideration in determining fair value. Therefore any awards
subject to market conditions are considered to vest irrespective of
whether or not that market condition has been met, provided all
other conditions are satisfied.
If equity-settled awards are
modified, as a minimum an expense is recognised as if the
modification has not been made. An additional expense is
recognised, over the remaining vesting period, for any modification
that increases the total fair value of the share-based compensation
benefit as at the date of modification.
If the non-vesting condition is
within the control of the Group or employee, the failure to satisfy
the condition is treated as a cancellation. If the condition is not
within the control of the Group or employee and is not satisfied
during the vesting period, any remaining expense for the award is
recognised over the remaining vesting period, unless the award is
forfeited.
If equity-settled awards are
cancelled, it is treated as if it has vested on the date of
cancellation, and any remaining expense is recognised immediately.
If a new replacement award is substituted for the cancelled award,
the cancelled and new award is treated as if they were a
modification.
Issued capital
Ordinary shares are classified as
equity. Incremental costs directly attributable to the issue of new
shares or options are shown in equity as a deduction, net of tax,
from the proceeds.
Treasury shares
Where Group purchase shares in the
listed Company, the consideration paid is deducted from issued
capital and the shares are treated as treasury shares until they
are subsequently sold, reissued or cancelled. Where such shares are
sold or reissued, any consideration received is included in
shareholders' equity.
Dividends
Dividends are recognised when
declared during the financial year and no longer at the discretion
of the Company.
Earnings per share
Basic earnings per share
Basic earnings per share is
calculated by dividing the profit attributable to the owners of
Litigation Capital Management Limited, excluding any costs of
servicing equity other than ordinary shares, by the weighted
average number of ordinary shares outstanding during the financial
year, adjusted for bonus elements in ordinary shares issued during
the financial year.
Diluted earnings per share
Diluted earnings per share adjusts
the figures used in the determination of basic earnings per share
to take into account the after income tax effect of interest and
other financing costs associated with dilutive potential ordinary
shares and the weighted average number of shares assumed to have
been issued for no consideration in relation to dilutive potential
ordinary shares.
Note 3. Critical accounting judgements, estimates and
assumptions
The preparation of the financial
statements requires management to make judgements, estimates and
assumptions that affect the reported amounts in the financial
statements. Management continually evaluates its judgements and
estimates in relation to assets, liabilities, contingent
liabilities, revenue and expenses. Management bases its judgements,
estimates and assumptions on historical experience and on other
various factors, including expectations of future events,
management believes to be reasonable under the circumstances. The
resulting accounting judgements and estimates will seldom equal the
related actual results. The judgements, estimates and assumptions
that have a significant risk of causing a material adjustment to
the carrying amounts of assets and liabilities (refer to the
respective notes) within the next financial year are discussed
below.
Key judgements
Consolidation of entities in which the Group holds less than
100% of interests
The Group has assessed the entities
in which it has an interest to determine whether or not control
exists and the entity is, therefore, consolidated into the Group
(refer note 4). Where the Group does not own 100% of interests, the
Group makes judgements to determine whether to consolidate the
entity in question by applying the factors set forth in AASB 10,
including but not limited to the Group's equity and economic
ownership interest, the economic structures in use in the entity,
the level of control the Group has over the entity through the
entity's structure or any relevant contractual agreements, and the
rights of other investors.
Significant estimates and
assumptions
Net gains/(losses) on financial assets & liabilities at
fair value through profit or loss
The Group carries its financial
assets and liabilities at fair value, with changes in fair value
being recognised in the statement of profit or loss. A valuation
methodology based on an income approach
The fair values of these financial
assets and liabilities cannot be measured based on quoted prices in
active markets, and as a result a fair value methodology is
utilised. The measurement valuation technique includes a discounted
cash flow (DCF) model based on the Group's estimated, risk adjusted
future cash flows. The adopted discount rate reflects the funding
cost of deploying capital, and is intended to capture the time
value of money and market factors such as interest rates and
foreign exchange rates.
The fair value framework
incorporates assumptions, including the discount rate, the timing
and amount of expected cash inflows and additional funding, and a
risk-adjustment factor reflecting the inherent uncertainty in the
cash flows due to litigation risk, which is dependent on observable
case progression and milestones.
The inputs to these models are taken
from observable markets where possible, but where this is not
feasible, a degree of judgement is required in establishing fair
values. Judgements include considerations of inputs such as case
progress, credit risk and volatility. Changes in assumptions
relating to these factors could affect the reported fair value of
financial instruments.
The key assumptions used to
determine the fair value of the litigation funding agreements,
financial liabilities related to third-party interests in
consolidated entities and sensitivity analyses are provided in note
22.
Note 4. 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 I & II
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.
Effective from 1 July 2023, the
Group has revised its internal segment reporting structure,
resulting in a change from one reportable segment to two reportable
segments. This change aims to provide more relevant and transparent
information to stakeholders. This change aligns with the way the
Group's chief operating decision maker reviews financial
performance. The comparative information for the year ended 30 June
2023 has been restated to reflect the new segment reporting
structure however was also presented in note 26 of the FY23 Annual
Report.
Consolidated Statement of Comprehensive
Income
|
2024
|
2023
|
|
Consolidated
|
Fund
|
LCM
|
Consolidated
|
Fund
|
LCM
|
|
$'000
|
$'000
|
$'000
|
$'000
|
$'000
|
$'000
|
Income
|
|
|
|
|
|
|
Gain on financial assets at fair
value through profit or loss
|
86,926
|
51,416
|
35,511
|
184,735
|
117,051
|
67,684
|
Movement in financial liabilities
related to third-party interests in consolidated
entities
|
(48,382)
|
(48,382)
|
-
|
(111,953)
|
(111,953)
|
-
|
Litigation service
revenue
|
12,443
|
-
|
12,443
|
-
|
-
|
-
|
Total income from litigation assets
|
50,987
|
3,033
|
47,954
|
72,782
|
5,098
|
67,684
|
|
|
|
|
|
|
|
Litigation service
expense
|
(3,236)
|
-
|
(3,236)
|
-
|
-
|
-
|
Gross profit
|
47,752
|
3,033
|
44,718
|
72,782
|
5,098
|
67,684
|
|
|
|
|
|
|
|
Expenses
|
|
|
|
|
|
|
Employee benefits expense
|
(11,471)
|
-
|
(11,471)
|
(9,474)
|
-
|
(9,474)
|
Depreciation expense
|
(145)
|
-
|
(145)
|
(166)
|
-
|
(166)
|
Corporate expenses
|
(5,171)
|
-
|
(5,171)
|
(4,220)
|
-
|
(4,220)
|
Fund administration
expense
|
(3,400)
|
(1,220)
|
(2,180)
|
(3,010)
|
(1,178)
|
(1,832)
|
Foreign currency
gains/(losses)
|
(1,432)
|
(1,968)
|
537
|
(5,081)
|
(3,905)
|
(1,176)
|
Total operating expenses
|
(21,619)
|
(3,189)
|
(18,430)
|
(21,951)
|
(5,083)
|
(16,868)
|
Operating profit
|
26,133
|
(155)
|
26,288
|
50,831
|
15
|
50,816
|
Finance costs
|
(10,083)
|
155
|
(10,238)
|
(8,090)
|
(15)
|
(8,075)
|
Profit before income tax expense
|
16,050
|
-
|
16,050
|
42,741
|
-
|
42,741
|
Income tax expense
|
(3,335)
|
-
|
(3,335)
|
(11,256)
|
-
|
(11,256)
|
Profit after income tax expense
|
12,715
|
-
|
12,715
|
31,485
|
-
|
31,485
|
|
|
|
|
|
|
|
Other comprehensive income for the
period, net of tax
|
2,013
|
-
|
2,013
|
2,187
|
-
|
2,187
|
Total comprehensive income for the period
|
14,728
|
-
|
14,728
|
33,672
|
-
|
33,672
|
Consolidated statement of financial position
|
2024
|
2023
|
|
Consolidated
|
Fund
|
LCM
|
Consolidated
|
Fund
|
LCM
|
|
$'000
|
$'000
|
$'000
|
$'000
|
$'000
|
$'000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
Cash and cash equivalents
|
68,113
|
15,089
|
53,024
|
104,457
|
21,484
|
82,973
|
Trade & other
receivables
|
10,986
|
-
|
10,986
|
2,063
|
-
|
2,063
|
Due from resolution of financial
assets
|
3,980
|
-
|
3,980
|
11,873
|
-
|
11,873
|
Contract costs
|
42,072
|
-
|
42,072
|
37,277
|
-
|
37,277
|
Financial assets at fair value
through profit or loss
|
465,213
|
262,300
|
202,913
|
391,410
|
225,642
|
165,768
|
Property, plant and
equipment
|
157
|
-
|
157
|
211
|
-
|
211
|
Intangible assets
|
305
|
-
|
305
|
356
|
-
|
356
|
Other assets
|
977
|
(22)
|
999
|
1,256
|
78
|
1,178
|
Total assets
|
591,803
|
277,367
|
314,436
|
548,903
|
247,204
|
301,699
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
Trade and other payables
|
30,376
|
12,417
|
17,959
|
7,535
|
3,214
|
4,321
|
Tax payable
|
883
|
-
|
883
|
7,769
|
-
|
7,769
|
Employee Benefits
|
1,112
|
-
|
1,112
|
906
|
-
|
906
|
Borrowings
|
61,917
|
-
|
61,917
|
68,976
|
-
|
68,976
|
Third-party interests in
consolidated entities
|
264,950
|
264,950
|
-
|
243,990
|
243,990
|
-
|
Deferred tax liability
|
43,624
|
-
|
43,624
|
36,259
|
-
|
36,259
|
Total liabilities
|
402,862
|
277,367
|
125,494
|
365,435
|
247,204
|
118,231
|
Net
assets
|
188,941
|
-
|
188,941
|
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.
Consolidated Statement of Cash Flows
|
2024
|
2023
|
|
Consolidated
|
Fund
|
LCM
|
Consolidated
|
Fund
|
LCM
|
|
$'000
|
$'000
|
$'000
|
$'000
|
$'000
|
$'000
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from litigation
contracts
|
116,636
|
59,864
|
56,771
|
192,563
|
95,807
|
96,756
|
Payments for litigation
contracts
|
(78,265)
|
(38,572)
|
(39,693)
|
(94,543)
|
(58,293)
|
(36,251)
|
Payments to suppliers and
employees
|
(16,337)
|
(1,572)
|
(14,765)
|
(13,434)
|
(3,049)
|
(10,385)
|
Income tax paid
|
(2,830)
|
-
|
(2,830)
|
-
|
-
|
-
|
Net
cash from/(used in) operating activities
|
19,203
|
19,720
|
(517)
|
84,587
|
34,465
|
50,121
|
|
-
|
|
|
|
|
|
Cash flows from investing activities
|
-
|
|
|
|
|
|
Payments for property, plant and
equipment
|
(31)
|
-
|
(31)
|
(90)
|
-
|
(90)
|
Payments for intangibles
|
(9)
|
-
|
(9)
|
(57)
|
-
|
(57)
|
Refund/(payment) of security
deposits
|
8
|
-
|
8
|
(51)
|
-
|
(51)
|
Net
cash used in investing activities
|
(31)
|
-
|
(31)
|
(198)
|
-
|
(198)
|
|
|
|
|
|
|
|
Cash flows from financing activities
|
|
|
|
|
|
|
Payments for treasury
shares
|
(5,396)
|
-
|
(5,396)
|
-
|
-
|
-
|
Dividends paid
|
(4,976)
|
-
|
(4,976)
|
-
|
-
|
-
|
Proceeds from borrowings
|
-
|
-
|
-
|
9,636
|
|
9,636
|
Repayments of borrowings
|
(8,139)
|
-
|
(8,139)
|
(14,848)
|
(14,848)
|
-
|
Payments of finance costs
|
(8,960)
|
-
|
(8,960)
|
(6,171)
|
(132)
|
(6,039)
|
Payments of placement fees related
to third-party interests
|
(2,206)
|
-
|
(2,206)
|
(1,832)
|
-
|
(1,832)
|
Contributions from third-party
interests in consolidated entities
|
30,505
|
30,505
|
-
|
74,980
|
74,980
|
-
|
Distributions to third-party
interests in consolidated entities
|
(56,407)
|
(56,407)
|
-
|
(94,373)
|
(94,373)
|
-
|
Net
cash (used in)/from financing activities
|
(55,578)
|
(25,901)
|
(29,677)
|
(32,608)
|
(34,372)
|
1,766
|
|
|
|
|
|
|
|
Net
increase/(decrease) in cash and cash equivalents
|
(36,405)
|
(6,181)
|
(30,224)
|
51,781
|
92
|
51,689
|
Cash and cash equivalents at the
beginning of the period
|
104,457
|
21,484
|
82,973
|
49,964
|
20,711
|
29,253
|
Effects of exchange rate changes on
cash and cash equivalents
|
61
|
(214)
|
275
|
2,712
|
681
|
2,031
|
Cash and cash equivalents at the end of the
period
|
68,113
|
15,089
|
53,024
|
104,457
|
21,484
|
82,973
|
Note
5. Income
|
Consolidated
|
|
2024
|
2023
|
|
$'000
|
$'000
|
Fair value through profit and loss
|
|
|
Realised gains on litigation
assets
|
10,299
|
26,879
|
Realised performance fees
|
12,735
|
24,598
|
Fair value adjustment during the
period, net of previously recognised unrealised gains transferred
to realised gains
|
11,600
|
11,134
|
Foreign exchange gains
|
877
|
5,073
|
Total income from litigation assets
attributable to LCM
|
35,511
|
67,684
|
Gain on financial assets related to
third-party interests in consolidated entities
|
51,416
|
117,051
|
|
86,928
|
184,735
|
Loss on financial liabilities
related to third-party interests in consolidated
entities
|
(48,382)
|
(111,953)
|
Total income from litigation
assets
|
38,544
|
72,782
|
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.
Litigation service revenue
Litigation service revenue
|
Consolidated
|
|
2024
|
2023
|
|
$'000
|
$'000
|
Major service lines
|
|
|
Revenue attributable to
LCM
|
12,443
|
-
|
Attributable to third party
interests
|
-
|
-
|
|
12,443
|
-
|
|
|
|
Geographical regions
|
|
|
Australia
|
12,443
|
-
|
|
12,443
|
-
|
Litigation service revenue relates
to an individual litigation asset which resolved during the period
and had a contract duration of more than 4
years.
Note
6. Profit before tax
|
Consolidated
|
|
2024
|
2023
|
|
$'000
|
$'000
|
|
|
|
Profit before income tax expense
includes the following specific expenses:
|
|
|
|
|
|
Employee benefits expense
|
|
|
Salaries & wages
|
8,513
|
7,337
|
Non-Executive directors'
fees
|
457
|
393
|
Superannuation and
pension
|
311
|
287
|
Share based payments
expense
|
1,116
|
867
|
Other employee benefits &
costs
|
1,074
|
590
|
|
11,471
|
9,474
|
|
|
|
Depreciation
|
|
|
Plant and equipment
|
84
|
63
|
Intangible assets
|
60
|
103
|
|
145
|
166
|
Net finance costs
|
|
|
Net interest on
borrowings
|
9,017
|
7,511
|
Net finance costs of third-party
interests
|
(155)
|
144
|
Other finance costs
|
1,221
|
435
|
|
10,083
|
8,090
|
|
|
|
Fund administration expense
|
|
|
General administration
expenses
|
1,220
|
970
|
Set-up expenses
|
-
|
209
|
Placement fees
|
2,180
|
1,831
|
|
3,400
|
3,010
|
|
|
|
Leases
|
|
|
Short-term lease payments
|
906
|
777
|
Note 7. Income tax expense
|
Consolidated
|
|
2024
|
2023
|
|
$'000
|
$'000
|
Numerical reconciliation of
income tax expense and tax at the statutory rate
|
|
|
Profit before income tax
expense
|
16,050
|
42,741
|
|
|
|
At the Group's statutory income tax
rate of 30% (2023: 25%)
|
4,815
|
10,685
|
|
|
|
Tax effect amounts which are not
deductible/(taxable) in calculating taxable income:
|
|
|
Foreign tax rate
adjustments
|
(2,385)
|
(1,718)
|
Share-based payments
|
335
|
217
|
Other assessable income
|
139
|
143
|
Other non-deductible
expenses
|
215
|
-
|
Unrealised foreign
exchange
|
-
|
-
|
Change in tax rate
|
-
|
1,929
|
Adjustment in respect of income and
deferred tax of previous years
|
217
|
-
|
Income tax expense /
(benefit)
|
3,335
|
11,256
|
|
Consolidated
|
|
2024
|
2023
|
|
$'000
|
$'000
|
|
|
|
Current tax
|
(4,030)
|
7,701
|
Deferred tax
|
7,365
|
3,555
|
Income tax expense /
(benefit)
|
3,335
|
11,256
|
|
|
|
|
|
|
|
Consolidated
|
|
2024
|
2023
|
|
$'000
|
$'000
|
Deferred tax
asset/(liability)
|
|
|
Deferred tax asset/(liability)
comprises temporary differences attributable to:
|
|
|
|
|
|
Tax losses
|
-
|
14,197
|
Employee benefits
|
302
|
273
|
Accrued expenses
|
172
|
929
|
Expenditure deductible for income
tax over time
|
1,706
|
-
|
Share based payments
|
464
|
-
|
Deductible funding on contract costs
and financial assets
|
(16,634)
|
(23,374)
|
Fair value adjustments to financial
assets
|
(29,634)
|
(28,284)
|
Deferred tax
asset/(liability)
|
(43,624)
|
(36,259)
|
|
|
|
Movements:
|
|
|
Opening balance
|
(36,259)
|
(32,704)
|
Charged to profit or loss
|
(7,365)
|
(3,555)
|
Closing balance
|
(43,624)
|
(36,259)
|
Note 8. Earnings per share
|
2024
|
2023
|
|
$'000
|
$'000
|
|
|
|
Profit after income tax
|
12,715
|
31,485
|
Profit after income tax attributable
to the owners of Litigation Capital Management Limited
|
12,715
|
31,485
|
|
|
|
|
Number
|
Number
|
Weighted average number of ordinary
shares used in calculating basic earnings per
share1
|
105,849,093
|
106,613,927
|
Adjustments for calculation of
diluted earnings per share:
|
|
|
Amounts uncalled on partly paid
shares
|
1,301,770
|
1,252,018
|
Options over ordinary
shares
|
5,103,344
|
3,257,392
|
Weighted average number of ordinary
shares used in calculating diluted earnings per share
|
112,254,207
|
111,123,337
|
|
|
|
1 Weighted average number of ordinary shares on issue during the
year, excludes treasury shares held
|
|
|
|
|
Cents
|
Cents
|
Basic earnings per share
|
12.01
|
29.53
|
Diluted earnings per
share
|
11.33
|
28.33
|
Dilutive potential shares which are
contingently issuable are only included in the calculation of
diluted earnings per share where the conditions are met.
Note 9. Reconciliation of cash flows
Reconciliation of profit after
income tax to net cash from operating activities:
|
|
|
|
2024
|
2023
|
|
$'000
|
$'000
|
Profit after income tax expense for
the period
|
12,715
|
31,485
|
|
|
|
Adjustments for:
|
|
|
Fair value adjustments to financial
liabilities related to third party interests
|
48,382
|
111,953
|
Finance costs reclassified to
financing activities
|
10,083
|
8,090
|
Fund costs reclassified to
financing activities
|
2,180
|
1,851
|
Depreciation and amortisation of
intangibles
|
145
|
166
|
Share-based payments
|
1,116
|
867
|
Other, including foreign exchange
rate movements
|
407
|
11,527
|
|
|
|
Change in operating assets and
liabilities:
|
|
|
Decrease/(increase) in trade and
other receivables
|
(8,923)
|
89
|
Decrease/(increase) in due from
resolution of financial assets
|
7,893
|
12,468
|
Decrease/(increase) in financial
assets
|
(73,803)
|
(94,430)
|
Decrease/(increase) in contract
costs
|
(4,795)
|
(5,495)
|
(Increase) in other
assets
|
279
|
84
|
(Decrease)/Increase in trade and
other payables
|
22,841
|
(5,307)
|
(Decrease)/Increase in employee
benefits
|
206
|
(21)
|
Increase in deferred tax assets and
liabilities
|
7,365
|
3,555
|
Increase in income tax
payable
|
(6,886)
|
7,704
|
Net
cash from operating activities
|
19,203
|
84,587
|
Disclosure of borrowings
Refer to note 16.
Changes in liabilities related to third party interests in
consolidated entities
Refer to note 17.
Note 10. Cash and cash equivalents
|
Consolidated
|
|
2024
|
2023
|
|
$'000
|
$'000
|
Cash at Bank
|
22,963
|
82,973
|
Investment securities held for
liquidity purposes
|
30,061
|
-
|
Cash of third-party interests in
consolidated entities
|
15,089
|
21,484
|
|
68,113
|
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 11. Trade receivables
|
Consolidated
|
|
2024
|
2023
|
|
$'000
|
$'000
|
|
|
|
Due from litigation
service
|
10,986
|
2,063
|
|
10,986
|
2,063
|
The significant increase in trade
receivables in the period was mainly due to the resolution of one
litigation asset which was received immediately after the period on
1 July 2024.
As at 30 June 2024, trade
receivables are expected to be settled within 12 months after the
Balance Sheet date.
Allowance for expected credit
losses
The Group has recognised a loss of
$nil (2023: $nil) in profit or loss in respect of the expected
credit losses for the year ended 30 June 2024.
Note 12. Due from resolution of financial
assets
|
2024
|
2023
|
|
$'000
|
$'000
|
|
|
|
At
start of period (as restated as at 1 July 2022)
|
11,873
|
24,340
|
Transfer from realisation of
litigation funding assets (including Foreign Exchange
gain)
|
104,400
|
180,155
|
Proceeds from litigation funding
assets
|
(112,990)
|
(192,623)
|
Other income
|
697
|
-
|
Balance as at end of period
|
3,980
|
11,873
|
From 1 July 2023, management has
changed their analysis of the transfer from the realisation of
litigation funding assets to account for realisation including
foreign currency gains. This change has been reflected in the 30
June 2024 disclosure, and the 30 June 2023 comparative has been
updated for consistency. This change is a disclosure change only
and has not changed the total balance at the end of the
period.
As at 30 June 2024, amounts due from
resolution of financial assets are expected to be settled within 12
months after the Balance Sheet date.
Note 13. Contract costs - litigation
contracts
|
2024
|
2023
|
|
$'000
|
$'000
|
|
|
|
Contract costs - litigation
contracts
|
42,072
|
37,277
|
There are a small number of legacy
investments which are still being recorded under AASB 15 Revenue
from Contracts 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:
|
2024
|
2023
|
|
$'000
|
$'000
|
Balance at 1 July
|
37,277
|
31,783
|
Additions during the
period
|
8,030
|
5,495
|
Realisations of contract
assets
|
(3,236)
|
-
|
Balance as at end of
period
|
42,072
|
37,277
|
The Group has recognised impairment
losses of $nil (2023: $nil) in profit or loss on contract costs for
the period ended 30 June 2024.
Note 14. Litigation funding assets at fair value through
profit or loss
|
2024
|
2023
|
|
$'000
|
$'000
|
|
|
|
At
start of period (as restated as at 1 July 2022)
|
391,410
|
296,980
|
Deployments
|
45,301
|
30,756
|
Deployments - third-party
interests
|
45,975
|
59,094
|
Realisations of litigation funding
assets (including foreign exchange (losses)/gains)
|
(104,400)
|
(180,155)
|
Income for the period
|
86,926
|
184,735
|
Balance as at end of period
|
465,213
|
391,410
|
|
|
|
Litigation funding assets at fair
value through income statement
|
202,913
|
165,768
|
Litigation funding assets at fair
value through income statement - third-party interests
|
262,300
|
225,642
|
Total litigation funding assets
|
465,213
|
391,410
|
Effective from 1 July 2023,
management has adopted a new approach to the realisation of
litigation funding assets and the recognition of foreign exchange
gains. Consequently, the comparative note disclosure for the period
ended 30 June 2023 has been restated to rectify the allocated
amounts to certain line items. This restatement has affected the
disclosure of certain line items from the prior year's note,
including income for the period. It is important to note that the
overall balance at the end of the prior period remains
unchanged.
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 capital via a fund
management model. The table above sets forth the changes in
litigation funding assets at the beginning and end of the relevant
reporting periods.
Note 15. Trade and other payables
|
2024
|
2023
|
|
$'000
|
$'000
|
Trade payables
|
29,789
|
7,001
|
Other payables
|
587
|
534
|
|
30,376
|
7,535
|
Refer to note 21 for further
information on financial instruments.
Note 16. Borrowings
|
2024
|
2023
|
|
$'000
|
$'000
|
|
|
|
Borrowings
|
61,917
|
68,976
|
|
61,917
|
68,976
|
Reconciliation of borrowings of
third-party interests in consolidated entities:
|
2024
|
2023
|
|
$'000
|
$'000
|
|
|
|
Balance 1 July
|
-
|
14,494
|
Proceeds from
borrowings
|
-
|
-
|
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:
|
2024
|
2023
|
|
$'000
|
$'000
|
|
|
|
Balance 1 July
|
68,976
|
54,915
|
Proceeds from
borrowings
|
-
|
9,636
|
Repayment of
borrowings
|
(8,139)
|
-
|
Payments for borrowing
costs
|
(819)
|
(256)
|
Net accrued
interest
|
648
|
1,943
|
Amortisation
|
1,221
|
399
|
Other non-cash
items
|
29
|
2,339
|
Balance as at end of
period
|
61,917
|
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
$74,704,9161 (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 30 June 2024, 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 30 June 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 $1,649,000 which were reflected
transactions costs and will be amortised over the 4 year term of
the borrowings. As at 30 June 2024, $422,000 of these loan
arrangement fees remained outstanding.
1 Converted at the
functional currency spot rates of exchange at the reporting
date
Note 17.
Financial liabilities related to third-party interests in
consolidated entities
|
2024
|
2023
|
|
$'000
|
$'000
|
|
|
|
Balance 1 July
|
243,990
|
142,180
|
Proceeds - capital
contributions from Limited Partners
|
30,505
|
74,980
|
Payments - distributions to
Limited Partners
|
(56,407)
|
(94,373)
|
Movement on financial
liabilities related to third-party interests in consolidated
entities (note 5)
|
48,382
|
111,953
|
Other non-cash items,
including foreign exchange gain/loss
|
(1,521)
|
9,250
|
Balance as at end of
period
|
264,950
|
243,990
|
Note 18. Equity - issued capital
|
2024
|
2023
|
2024
|
2023
|
|
Shares
|
Shares
|
$'000
|
$'000
|
|
|
|
|
|
Ordinary shares - fully
paid
|
104,118,534
|
106,613,927
|
69,674
|
69,674
|
Ordinary shares - loan share plan
and Employee Benefit Trust
|
12,331,148
|
12,586,405
|
-
|
-
|
|
116,449,682
|
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
(treasury shares)
|
|
Various
|
(2,750,650)
|
-
|
|
|
30 June
2024
|
104,118,534
|
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') and held by Employee Benefit Trust:
|
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)
|
-
|
LSP expired
|
30 June
2024
|
(388,800)
|
-
|
LSP shares allocated to
LCM
|
30 June
2024
|
388,800
|
-
|
|
30 June
2024
|
12,331,148
|
-
|
Reconciliation of ordinary shares issued under
LSP:
|
2024
|
2023
|
Total shares allocated under
existing LSP arrangements with underlying LSP shares (note 29)
|
7,501,608
|
7,890,408
|
Less shares allocated under existing
LSP arrangements without underlying LSP shares (note 29)
|
(221,467)
|
(221,467)
|
Shares held by LCM Employee Benefit
Trust for future allocation under employee share and option
plans
|
4,917,464
|
4,917,464
|
Exercise of options during the
period held by the LCM Employee Benefit Trust
|
(255,257)
|
-
|
Shares held by LCM for future
allocation under employee share and option plans
|
388,800
|
-
|
|
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 29 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. That benefit comprised 4,917,464 shares of
which 4,662,207 remain unallocated as at 30 June 2024 (2023:
4,917,464).
Ordinary shares - partly paid
As at 30 June 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 30 June 2024, there were
2,750,650 treasury shares (2023: nil) which has resulted in
$5,396,000 being deducted from equity (2023: nil). Treasury shares
comprises shares bought back from shareholders which are held by
Canaccord on behalf of LCM 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 19. Equity - reserves
Movements in reserves
Movements in each class of reserve
during the current and previous financial year are set out
below:
Consolidated
|
Share based
|
Foreign
|
Total
|
|
payments
|
currency
|
reserves
|
|
reserve
|
translation
|
|
|
$'000
|
$'000
|
$'000
|
Balance at 1 July 2022
|
1,573
|
(3,585)
|
(2,012)
|
Movements in reserves during the
period
|
867
|
2,187
|
3,054
|
Balance at 30 June 2023
|
2,440
|
(1,398)
|
1,042
|
Movements in reserves during the
period
|
1,116
|
2,013
|
3,129
|
Balance at 30 June 2024
|
3,556
|
615
|
4,171
|
Share-based payments reserve
The reserve is used to recognise the
value of equity benefits provided to employees and Directors as
part of their remuneration, and other parties as part of their
compensation for services.
Foreign currency translation reserve
This reserve is used to record
differences on the translation of the assets and liabilities of
foreign operations.
Note 20. Equity - dividends
|
2024
|
2023
|
|
$'000
|
$'000
|
Final unfranked ordinary dividend
paid (2024: 2.25 cents, 2023: nil)
|
4,976
|
-
|
The Directors declare a dividend for
the year ended 30 June 2024 of 1.25 pence per ordinary share, to be
paid on 4 December 2024 to eligible shareholders on the register as
at 1 November 2024. The ordinary shares will be marked ex-dividend
on 31 October 2024. The financial effect of dividends declared
after the reporting date is not reflected in the 30 June 2024
financial statements and will be recognised in subsequent financial
reports.
Franking credits
The franking credits available to
the Group as at 30 June 2024 are $338,000 (2023:
$338,000).
Note 21. Financial instruments
Financial risk management
objectives
The Group's activities expose it to
a variety of financial risks: market risk (including foreign
currency risk, price risk and interest rate risk), credit risk and
liquidity risk. The Group's overall risk management program focuses
on the unpredictability of financial markets and seeks to minimise
potential adverse effects on the financial performance of the
Group. The Group uses different methods to measure different types
of risk to which it is exposed. These methods include sensitivity
analysis in the case of interest rate, foreign exchange and other
price risks and ageing analysis for credit risk.
Risk management is carried out by
senior finance executives ('finance') under policies approved by
the Board of Directors ('the Board'). These policies include
identification and analysis of the risk exposure of the Group and
appropriate procedures, controls and risk limits. Finance
identifies, evaluates and hedges financial risks within the Group's
operating units. Finance reports to the Board on a monthly
basis.
Financial instruments of the Group
is comprised of litigation funding assets classified as financial
assets at FVTPL and financial liabilities at FVTPL related to third
party interests with the remaining financial instruments held at
amortised cost.
Market risk
Foreign currency risk
The carrying amount of the Group's
foreign currency denominated financial assets and financial
liabilities at the reporting date were as follows:
|
Assets
|
Liabilities
|
Assets
|
Liabilities
|
|
2024
|
2024
|
2023
|
2023
|
Consolidated
|
$'000
|
$'000
|
$'000
|
$'000
|
|
|
|
|
|
US dollars
|
178,625
|
(314,768)
|
203,912
|
(314,923)
|
Pound Sterling
|
267,971
|
(16,500)
|
173,064
|
(2,542)
|
Singapore Dollars
|
2,346
|
(16)
|
-
|
-
|
United Arab Emirates
Dirham
|
2
|
(4)
|
5,614
|
(744)
|
Hong Kong dollars
|
-
|
-
|
28,087
|
-
|
Other
|
4
|
-
|
490
|
(1)
|
|
448,947
|
(331,288)
|
411,167
|
(318,210)
|
The Group had net assets denominated
in foreign currencies of $117,659,000 (assets of $448,947,000 less
liabilities of $331,288,000) as at 30 June
2024 (2023: net assets $92,956,000). Based on this
exposure, had the Australian dollars weakened or strengthened by
10% against these foreign currencies with all other variables held
constant, the Group's profit before tax for the year would have
increased and decreased respectively by $11,766,000 (2023:
$9,296,000). The percentage change is the expected overall
volatility of the significant currencies, which is based on
management's assessment of reasonable possible fluctuations taking
into consideration movements over the last 12 months. The actual
realised foreign exchange loss for the year ended 30 June 2024 was
$2,934,000 (2023: loss of 2,892,000). The movement in the foreign
currency translation reserve for the year ended 30 June 2024 was a
gain of $2,013,000 (2023: gain $2,187,000).
Foreign exchange risk arises mainly
from litigation funding assets and borrowings which are denominated
in a currency that is not the functional currency in which they are
measured. The risk is monitored using sensitivity analysis and cash
flow forecasting. The Group's contract cost assets are not hedged
as those currency positions are considered to be long term in
nature.
Interest rate risk
Aside from the litigation funding
agreements at fair value, the Group's main interest rate risk
arises from interest on cash at bank.
An official increase/decrease in
interest rates of 50 (2023: 50) basis points would have a
favourable/adverse effect on profit before tax of $341,000 (2023:
$522,000) per annum. The percentage change is based on the expected
volatility of interest rates using market data and analysts
forecasts.
Credit risk
Credit risk refers to the risk that
on becoming contractually entitled to a settlement or award a
defendant will default on its contractual obligation to pay
resulting in financial loss to the Group. The Group assesses the
defendants in the matters funded by the Group prior to entering
into any agreement to provide funding and continues this assessment
during the course of funding. Whenever possible the Group ensures
that security for settlements sums is provided, or the settlements
funds are placed into solicitors' trust accounts. However, the
Group's continual monitoring of the defendants' financial capacity
mitigates this risk.
The maximum credit risk exposure
represented by cash, cash equivalents, trade and other receivables,
due from resolution of financial assets and financial assets at
fair value through profit or loss is specified in the consolidated
statements of financial position. The exposure for financial assets
held at amortised cost is the carrying amount, net of any
provisions for impairment of those assets, which includes cash,
cash equivalents and trade and other receivables. The Group does
not hold any collateral.
To mitigate credit risk on cash and
cash equivalents, the Group holds cash with Australian and American
financial institutions with at least an AA- credit
rating.
The Group applies the simplified
approach to recognise impairment on settlement and receivable
balances based on the lifetime expected credit loss at each
reporting date. The Group reviews the lifetime expected credit loss
rate based on historical collection performance, the specific
provisions of any settlement agreement, assessments of
recoverability during the due diligence process and a
forward-looking assessment of macro-economic factors however note
that the Group's operations are generally uncorrelated to market
conditions and therefore has little to no impact on the
recoverability of the Group's financial assets.
For trade receivables and due from
resolution of financial assets, at every reporting date, the Group
evaluates whether the trade receivables and due from resolution of
financial assets is considered to have low credit risk using all
reasonable and supportable information that is available without
undue cost or effort. In making that evaluation, the Group
reassesses indicators of changes in credit quality of their
counterparties. In addition, the Group considers that there has
been a significant increase in credit risk when contractual
payments are more than 90 days past due or if sufficient indicators
exist that the debtor is unlikely to pay. Refer to note 11 and 12
for the respective notes on these items. Generally, trade
receivables are written off when there is no reasonable expectation
of recovery. Indicators of this include the failure of a debtor to
engage in a repayment plan, no active enforcement activity and a
failure to make contractual payments for a period greater than 1
year.
In addition, the fair value of
Litigation Funding Assets (LFA's) is measured using valuation
techniques including the discounted cash flow (DCF) model. The
inputs to these models are taken from observable markets where
possible, but where this is not feasible, a degree of judgement is
required in establishing fair values. Judgements include
considerations of inputs such as liquidity risk, credit risk and
volatility. Changes in assumptions relating to these factors could
affect the reported fair value of financial instruments, including
credit risk, refer to note 22.
Liquidity
risk
Vigilant liquidity risk management
requires the Group to maintain sufficient liquid assets (mainly
cash and cash equivalents) to be able to pay debts as and when they
become due and payable.
The Group manages liquidity risk by
maintaining adequate cash reserves and by continuously monitoring
actual and forecast cash flows and matching the maturity profiles
of financial assets and liabilities.
Remaining contractual maturities
The maturity profile of the Group's
financial liabilities based on contractual maturity on an
undiscounted basis are:
|
Less than
1 year
|
Between 1
and 5 years
|
Over 5
years
|
No
contractual maturity date
|
Total
|
Consolidated - 2024
|
$'000
|
$'000
|
$'000
|
$'000
|
$'000
|
|
|
|
|
|
|
Financial liabilities
|
|
|
|
|
|
|
|
|
|
|
|
Trade payables
|
29,752
|
-
|
-
|
-
|
29,752
|
Other payables
|
624
|
-
|
-
|
-
|
624
|
Borrowings
|
68,200
|
-
|
-
|
-
|
68,200
|
Third-party interest in consolidated
entities
|
-
|
-
|
-
|
264,950
|
264,950
|
Total non-derivatives
|
98,576
|
-
|
-
|
264,950
|
363,526
|
|
|
|
|
|
|
|
|
|
|
Less than
1 year
|
Between 1
and 5 years
|
Over 5
years
|
No
contractual maturity date
|
Total
|
Consolidated - 2023
|
$'000
|
$'000
|
$'000
|
$'000
|
$'000
|
|
|
|
|
|
|
Financial liabilities
|
|
|
|
|
|
|
|
|
|
|
|
Trade payables
|
7,001
|
-
|
-
|
-
|
7,001
|
Other payables
|
241
|
-
|
-
|
-
|
241
|
Borrowings
|
9,320
|
75,988
|
|
-
|
85,309
|
Third-party interest in consolidated
entities
|
-
|
-
|
-
|
243,990
|
243,990
|
Total non-derivatives
|
16,562
|
75,988
|
-
|
243,990
|
336,541
|
Note 22. Fair value measurements
The fair value measurements used for
all assets and liabilities held by the Group listed below are level
3:
Assets
|
2024
|
2023
|
Litigation funding assets
|
$'000
|
$'000
|
APAC
|
111,662
|
158,836
|
EMEA
|
353,551
|
232,574
|
Total Level 3 assets
|
465,213
|
391,410
|
|
|
|
Liabilities
|
|
|
Financial liabilities related to
third-party interests in consolidated entities
|
264,950
|
243,990
|
Total Level 3 liabilities
|
264,950
|
243,990
|
Refer note
14 for movements in level 3 assets and note 17 for movements in
level 3 liabilities. There were no transfers into or out of level 3
during the period ended 30 June 2024.
As at 30 June 2024, the financial
liability due to third-party interests is $264,950,000 (2023:
$243,990,000), recorded at fair value as represented in note 17.
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, see note 4.
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.
The Group implemented a new
valuation methodology for LFA assets during the year ended 30 June
2023. LFA assets are fair valued using an income approach which is
the technique adopted for LFA Assets. Under the income approach,
future cash flows associated with; cash out flows, including
investments and deployments, and cash inflows such as settlements
or resolutions, are converted to a single current (discounted)
amount, reflecting current market expectations about those future
amounts. That is, the amount that could reasonably be expected to
be paid to acquire the asset at that point in time. In developing
our framework we also looked to Industry peers for alignment in
methodology, the benefit being that adopting a similar methodology
provides a level of comparability. Similar to industry peers, the
framework developed applied probabilities based on observable
milestones for each investment within the portfolio as well as
making informed assumptions around inputs such as discount rates,
timing and risk factors, all of which are considered Level 3
inputs. In cases where cash flows are denominated in a foreign
currency, forecasts are developed in the applicable foreign
currency and translated to AUD dollars.
A Discounted Cash Flow approach is
then applied to each underlying investment on an individual basis
to arrive at a net present value of the future expected cash
flows.
The cash flow forecast is updated
each reporting period, based on the best available information on
progress of the underlying matter at the time. These objective
events could include, among others:
-
|
Stage of the investment
|
-
|
ongoing developments
|
-
|
progress
|
-
|
recovery or sovereign
risk
|
-
|
legal team expertise
|
-
|
other factors impacting the expected
outcome
|
Each reporting period, the updated
risk-adjusted cash flow forecast is then discounted at the then
current discount rate to measure fair value. The discount rate
includes an applicable risk-free rate and credit spread to
incorporate both market and idiosyncratic asset-class
risk.
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.
30
June 2024
|
|
|
|
|
|
Item
|
Valuation technique
|
Unobservable Input
|
Min
|
Max
|
Weighted
Ave
|
|
Litigation funding asset
|
Discounted cash flow
|
Discount rate
|
12.80%
|
12.80%
|
12.80%
|
|
|
|
Duration
|
0.75
|
7.08
|
4.57
|
|
|
|
Adjusted risk premium
|
0%
|
85%
|
17%
|
|
|
|
|
|
|
|
|
|
|
Adjusted risk premium - case
milestone:
|
Min1
|
Max1
|
Weighted
Ave
|
% of
portfolio2
|
|
|
Pre-commencement & commenced
|
0%
|
20%
|
29%
|
48%
|
|
|
Pleadings
|
5%
|
35%
|
20%
|
12%
|
|
|
Discovery
& evidence
|
20%
|
40%
|
25%
|
9%
|
|
|
Significant ruling or other objective event prior to trial
court judgment
|
25%
|
80%
|
47%
|
7%
|
|
|
Settlement
|
70%
|
85%
|
80%
|
1%
|
|
|
Trial court judgment or tribunal award
|
0%
|
85%
|
63%
|
9%
|
|
|
Appeal judgment
|
0%
|
85%
|
3%
|
12%
|
|
|
Enforcement
|
75%
|
85%
|
83%
|
3%
|
30
June 2023
|
|
|
|
|
|
Item
|
Valuation technique
|
Unobservable Input
|
Min
|
Max
|
Weighted
Ave
|
|
Litigation funding asset
|
Discounted cash flow
|
Discount rate
|
12.80%
|
12.80%
|
12.80%
|
|
|
|
Duration
|
0.67
|
5.83
|
4.10
|
|
|
|
Adjusted risk premium
|
0%
|
85%
|
18%
|
|
|
|
|
|
|
|
|
|
|
Adjusted risk premium - case
milestone:
|
Min1
|
Max1
|
Weighted
Ave
|
% of
portfolio2
|
|
|
Pre-commencement & commenced
|
0%
|
20%
|
0%
|
46%
|
|
|
Pleadings
|
5%
|
35%
|
10%
|
3%
|
|
|
Discovery
& evidence
|
20%
|
40%
|
21%
|
15%
|
|
|
Significant ruling or other objective event prior to trial
court judgment
|
25%
|
80%
|
48%
|
21%
|
|
|
Settlement
|
70%
|
85%
|
70%
|
3%
|
|
|
Trial court judgment or tribunal award
|
0%
|
85%
|
80%
|
1%
|
|
|
Appeal judgment
|
0%
|
85%
|
7%
|
9%
|
|
|
Enforcement
|
75%
|
85%
|
76%
|
1%
|
1 Minimum and maximum within each cohort represent the actual
adjusted risk premiums applied in the period
2 Percentage of portfolio represents the percentage of the book
within the cohort
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 $46,521,000 as at 30 June 2024 (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
$26,495,000 as at 30 June 2024 (30 June 2023:
$24,399,000).
At 30 June 2024, should discount
rates been 50 bps or 100 bps higher or lower than the actual
discount rate used in the fair value estimation, while all other
variables remained constant, consolidated income and net assets
would have increased and decreased by the following
amounts:
|
2024
|
2023
|
Hypothetical Change
|
$'000
|
$'000
|
100bps lower interest
rates
|
5,441
|
2,182
|
50bps lower interest
rates
|
2,743
|
1,084
|
100bps higher interest
rates
|
(5,440)
|
(2,126)
|
50bps higher interest
rates
|
(2,736)
|
(1,070)
|
Reasonably possible alternative
assumptions
The determination of fair value for
litigation funding assets involves significant judgements and
estimates. While the potential range of outcomes for the assets is
wide, the Group's fair value estimation is its best assessment of
the current fair value of each asset, as applicable. Such estimate
is inherently subjective, being based largely on an assessment of
how individual events have changed the possible outcomes of the
asset, as applicable, and their relative probabilities and hence
the extent to which the fair value has altered. The aggregate of
the fair values selected falls within a wide range of reasonably
possible estimates. In the Group's opinion, there is no useful
alternative valuation that would better quantify the market risk
inherent in the portfolio and there are no inputs or variables to
which the values of the assets are correlated other than interest
rates which impact the discount rates applied.
Note 23. Key management personnel
disclosures
Compensation
The aggregate compensation made to
Directors and other members of key management personnel of the
Group is set out below:
|
Consolidated
|
|
2024
|
2023
|
|
$
|
$
|
|
|
|
Short-term employee
benefits
|
2,844,106
|
2,188,144
|
Post-employment benefits
|
67,584
|
59,611
|
Long-term benefits
|
28,975
|
13,145
|
Share-based payments
|
408,583
|
375,014
|
|
3,349,249
|
2,635,914
|
Details of the remuneration of key
management personnel of the Group are set out in the following
tables.
|
Cash salaries and
fees
|
Bonus
|
Benefits
|
Accrued
leave
|
Superannuation/
Pension
|
Long service
leave
|
Share-based
payments
|
Total
|
2024
|
$
|
$
|
$
|
$
|
$
|
$
|
$
|
$
|
Non-executive Directors
|
|
|
|
|
|
|
|
Dr David King
|
111,458
|
-
|
-
|
-
|
12,302
|
-
|
-
|
123,760
|
Jonathan Moulds
|
214,255
|
-
|
-
|
-
|
-
|
-
|
-
|
214,255
|
Gerhard Seebacher
|
127,377
|
-
|
-
|
-
|
-
|
-
|
-
|
127,377
|
|
453,091
|
-
|
-
|
-
|
12,302
|
-
|
-
|
465,393
|
|
|
|
|
|
|
|
|
|
Executive directors & other executives
|
Patrick Moloney
|
1,316,062
|
183,783
|
114,754
|
36,864
|
-
|
28,975
|
199,145
|
1,879,583
|
David Collins1
|
22,921
|
-
|
-
|
-
|
-
|
-
|
-
|
22,921
|
Mary Gangemi2
|
552,818
|
163,814
|
-
|
-
|
55,282
|
-
|
209,438
|
981,352
|
|
1,891,800
|
347,597
|
114,754
|
36,864
|
55,282
|
28,975
|
408,583
|
2,883,856
|
|
2,344,891
|
347,597
|
114,754
|
36,864
|
67,584
|
28,975
|
408,583
|
3,349,249
|
1 David Collins appointed as Chief Financial Officer on 18 June
2024 on a base salary of £350,000 (AUD equivalent $672,000). Refer
note 26 for details on amounts paid to Greatham Advisors Limited, a
related entity of David Collins, for Investor Relation services
prior to David becoming an employee. David Collins has not been
appointed as a Director as at 30 June 2024.
2 Stepped down as Chief Financial Officer 18 June 2024 and
resigned as Director 5 September 2024
|
Cash salaries and
fees
|
Bonus
|
Benefits
|
Accrued
leave
|
Superannuation
|
Long service
leave
|
Share-based
payments
|
Total
|
2023
|
$
|
$
|
$
|
$
|
$
|
$
|
$
|
$
|
|
|
|
|
|
|
|
|
|
Non-executive Directors
|
|
|
|
|
|
|
|
|
Dr David King
|
100,000
|
-
|
-
|
-
|
10,500
|
-
|
-
|
110,500
|
Jonathan Moulds
|
178,586
|
-
|
-
|
-
|
-
|
-
|
-
|
178,586
|
Gerhard Seebacher
|
111,356
|
-
|
-
|
-
|
-
|
-
|
-
|
111,356
|
|
389,943
|
-
|
-
|
-
|
10,500
|
-
|
-
|
400,443
|
|
|
|
|
|
|
|
|
|
Executive Directors
|
|
|
|
|
|
|
|
|
Patrick Moloney
|
1,071,517
|
118,249
|
5,709
|
(29,023)
|
-
|
13,145
|
252,293
|
1,431,891
|
Mary Gangemi
|
491,112
|
140,637
|
-
|
-
|
49,111
|
-
|
122,721
|
803,581
|
|
1,562,629
|
258,886
|
5,709
|
(29,023)
|
49,111
|
13,145
|
375,014
|
2,235,472
|
|
1,952,572
|
258,886
|
5,709
|
(29,023)
|
59,611
|
13,145
|
375,014
|
2,635,914
|
Directors' share options
The details of options over ordinary
shares in the Company held during the financial year by each
Director is set out below:
Name of the Director
|
Grant date
|
Expiry date
|
Exercise price
|
Balance at the start of the year
|
Granted
|
Exercised
|
Expired / forfeited / other
|
Balance at the end of the year
|
|
|
|
|
|
|
|
|
|
Patrick
Moloney2
|
19/11/2018
|
25/11/2028
|
$0.47
|
1,595,058
|
-
|
-
|
-
|
1,595,058
|
Patrick
Moloney2
|
04/12/2017
|
04/12/2027
|
$0.60
|
1,000,000
|
-
|
-
|
-
|
1,000,000
|
Patrick
Moloney2
|
04/12/2017
|
04/12/2027
|
$0.60
|
1,000,000
|
-
|
-
|
-
|
1,000,000
|
Patrick
Moloney2
|
01/11/2019
|
01/11/2029
|
£0.7394
|
1,166,400
|
-
|
-
|
(388,800)
|
777,600
|
Patrick
Moloney2
|
13/10/2020
|
13/10/2030
|
£0.6655
|
291,597
|
-
|
-
|
-
|
291,597
|
Patrick
Moloney2
|
27/10/2021
|
27/10/2031
|
£1.06
|
279,232
|
-
|
-
|
-
|
279,232
|
Patrick Moloney
1,2
|
27/10/2021
|
27/10/2031
|
£1.06
|
900,000
|
-
|
-
|
-
|
900,000
|
Mary Gangemi2
|
27/10/2021
|
27/10/2031
|
£1.06
|
93,585
|
-
|
-
|
-
|
93,585
|
Mary Gangemi2
|
27/10/2021
|
27/10/2031
|
£1.14
|
26,315
|
-
|
-
|
-
|
26,315
|
Patrick
Moloney2
|
07/10/2022
|
07/10/2032
|
£0.00
|
169,276
|
-
|
-
|
-
|
169,276
|
Patrick
Moloney2
|
07/10/2022
|
07/10/2032
|
£0.00
|
3,303,796
|
-
|
-
|
-
|
3,303,796
|
Mary Gangemi2
|
07/10/2022
|
07/10/2032
|
£0.00
|
201,325
|
-
|
(67,108)
|
-
|
134,217
|
Mary Gangemi2
|
07/10/2022
|
07/10/2032
|
£0.00
|
1,266,455
|
-
|
-
|
-
|
1,266,455
|
Patrick
Moloney2
|
04/10/2023
|
04/10/2033
|
£0.00
|
-
|
167,043
|
-
|
-
|
167,043
|
Mary Gangemi2
|
04/10/2023
|
04/10/2033
|
£0.00
|
-
|
148,893
|
-
|
-
|
148,893
|
|
|
|
|
11,293,039
|
315,936
|
(67,108)
|
(388,800)
|
11,153,067
|
1 On 27 October 2021, Patrick Moloney exercised 900,000 unlisted
options at an exercise price of A$1.00 which were granted under the
Employee share option scheme. Upon exercise, the Group issued
900,000 new ordinary shares in the capital of the Group to Patrick
Moloney which have been granted under the Loan Share Plan with the
sole purpose to fund the exercise price of the 900,000 unlisted
options
2 Outstanding share options as disclosed in note 29.
Directors' interests
The number of shares in the Company held at the end of the financial year by
each Director is set out below:
|
|
30 June
2024
|
30 June
2023
|
Name of the Director
|
Description of shares
|
Number
|
Number
|
|
|
|
|
Jonathan Moulds
|
Fully paid ordinary
shares
|
5,250,000
|
5,250,000
|
Dr David King
|
Fully paid ordinary
shares
|
1,951,484
|
1,951,484
|
Patrick Moloney
|
Fully paid ordinary
shares
|
4,204,813
|
4,204,813
|
Patrick Moloney
|
Unlisted partly paid
shares
|
1,433,022
|
1,433,022
|
Gerhard Seebacher
|
N/A
|
-
|
-
|
Mary Gangemi
|
Fully paid ordinary
shares
|
64,348
|
27,500
|
1 Unlisted partly paid shares in the Company were issued at a
price of $0.17 per share, wholly unpaid and will convert to a share
upon payment to the Company of $0.17 per share. Further details
provided in note 18 to the financial statements.
No changes took place in the
interest of the directors between 30 June 2024 and 17 September
2024.
Note 24. Remuneration of auditors
During the financial year the
following fees were paid or payable for services provided by BDO
Audit Pty Ltd, the auditor of the Company, and its network
firms:
|
Consolidated
|
|
2024
|
2023
|
|
$
|
$
|
Audit Services - BDO Audit Pty Ltd
|
|
Audit or review of financial
report
|
253,727
|
149,700
|
|
253,727
|
149,700
|
|
|
|
Audit Services - Firms related to BDO Audit Pty
Ltd
|
|
Audit of statutory report of
controlled entities
|
186,721
|
124,113
|
|
186,721
|
124,113
|
|
|
|
Audit Services - Unrelated Firms
|
|
Audit of statutory report of
controlled entities
|
64,625
|
27,904
|
|
64,625
|
27,904
|
Note 25. 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 26. Related party transactions
The following transactions occurred
with related parties:
|
Consolidated
|
|
2024
|
2023
|
|
$
|
$
|
|
|
|
Consulting fees paid to
Greatham Advisors Limited - a related entity of David
Collins
|
47,957
|
-
|
|
47,957
|
-
|
David Collins is a shareholder and
director of Greatham Advisors Limited, which carries out Investor
Relations services. The services provided by Greatham Advisors
Limited ceased once David Collins became an employee of the Group
on 18 June 2024. As at 30 June 2024 there were no amounts owing to
Greatham Advisors Limited (2023: $nil).
Note 27. Parent entity information
Set out below is the supplementary
information about the parent entity, Litigation Capital Management
Limited.
|
Consolidated
|
|
|
2024
|
2023
|
|
Statement of profit or loss and other comprehensive
income
|
$'000
|
$'000
|
|
|
|
|
|
Profit/(loss) after income
tax
|
50,491
|
943
|
|
|
|
Total comprehensive
income
|
50,491
|
943
|
|
|
|
Statement of financial position
|
|
|
|
|
|
|
Total assets
|
103,055
|
70,274
|
|
|
|
Total liabilities
|
(20,390)
|
-
|
|
|
|
Equity
|
|
|
Issued capital
|
64,278
|
69,674
|
Share based payments
reserve
|
3,556
|
2,440
|
Retained earnings
|
14,831
|
(1,840)
|
|
|
|
Total equity
|
82,665
|
70,274
|
|
|
|
|
|
|
|
|
Guarantees entered into by the parent entity in relation to
the debts of its subsidiaries
Litigation Capital Management
Limited (as holding entity), LCM Operations Pty Ltd, LCM Litigation
Fund Pty Ltd, LCM Corporate Services Pty Ltd, LCM Recoveries Pty
Ltd, LCM Funding Pty Ltd, LCM Singapore Pty Ltd, LCM Funding SG Pty
Ltd and LCM Group Holdings Pty Ltd are parties to a deed of cross
guarantee under which each company guarantees the debts of the
others. The specified subsidiaries represent a 'closed group' for
the purposes of the guarantee, and as there are no other parties to
the Deed that are controlled by the Group, they also represent the
'extended closed group'.
Contingent liabilities
The parent entity had no contingent
liabilities as at 30 June 2024 and 30 June 2023.
Capital commitments - Property, plant and
equipment
The parent entity had no capital
commitments for property, plant and equipment as at 30 June 2024
and 30 June 2023.
Material accounting policies
The accounting policies of the
parent entity are consistent with those of the Group, as disclosed
in note 2, except for the following:
·
|
Investments in subsidiaries are
accounted for at cost, less any impairment, in the parent
entity;
|
·
|
Dividends received from subsidiaries
are recognised as other income by the parent entity and its receipt
may be an indicator of an impairment of the investment.
|
Note 28. Interests in subsidiaries
The consolidated financial
statements incorporate the assets, liabilities and results of the
following subsidiaries in accordance with the accounting policy
described in note 2:
|
Principal place of business / Country of incorporation
Country of incorporation
|
Ownership
Interest
|
|
2024
|
2023
|
|
Name
|
%
|
%
|
|
LCM Litigation Fund Pty
Ltd
|
Australia
|
100%
|
100%
|
|
LCM Operations Pty Ltd
|
Australia
|
100%
|
100%
|
|
LCM Corporate Services Pty
Ltd
|
Australia
|
100%
|
100%
|
|
LCM Singapore Pty Ltd
|
Australia
|
100%
|
100%
|
|
LCM Recoveries Pty Ltd
|
Australia
|
100%
|
100%
|
|
LCM Advisory Limited
|
Australia
|
100%
|
100%
|
|
LCM Funding Pty Ltd
|
Australia
|
100%
|
100%
|
|
LCM Funding SG Pty Ltd
|
Australia
|
100%
|
100%
|
|
LCM Corporate Services Pte.
Ltd.
|
Singapore
|
100%
|
100%
|
|
LCM Operations UK Limited
|
United Kingdom
|
100%
|
100%
|
|
LCM Corporate Services UK
Limited
|
United Kingdom
|
100%
|
100%
|
|
LCM Recoveries UK Limited
|
United Kingdom
|
100%
|
100%
|
|
LCM Funding UK Limited
|
United Kingdom
|
100%
|
100%
|
|
LCM Group Holdings Pty
Ltd
|
Australia
|
100%
|
100%
|
|
|
|
|
|
|
LCM
Global Alternative Returns Fund
|
|
|
|
LCM Global Alternative Returns Fund
GP Limited
|
Jersey
|
100%
|
100%
|
|
LCM Global Alternative Returns Fund
(Special Partner) LP
|
Jersey
|
100%
|
100%
|
|
|
|
|
|
|
LCM
Global Alternative Returns Fund II
|
|
|
|
LCM Global Alternative Returns Fund
II GP Limited
|
Jersey
|
100%
|
100%
|
|
LCM Global Alternative Returns Fund
II (Special Partner) LP
|
Jersey
|
100%
|
100%
|
|
|
|
|
|
|
|
|
Note 29. Share-based payments
The share-based payment expense for
the period was $1,116,000 (2023: $867,000).
Loan Funded Share Plans ('LSP')
As detailed in note 18, 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 (2023: nil) shares under the LSP.
Set out below are summaries of
shares/options granted under the LSP:
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
|
1,432,753
|
|
|
(388,800)
|
1,043,953
|
|
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
|
|
|
|
99,0371
|
|
27/10/2021
|
27/10/2031
|
£1.14
|
122,430
|
|
|
|
122,4301
|
|
|
|
|
7,890,408
|
-
|
-
|
(388,800)
|
7,501,608
|
|
|
|
|
|
|
|
|
|
|
1Options granted without an underlying LSP share until
exercised ie, do not form part of the Group's issued share
capital
|
|
Weighted average exercise
price
|
$1.049
|
$0.000
|
$0.000
|
$1.420
|
$1.089
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2023
|
|
|
|
|
|
|
|
|
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
|
1,432,753
|
|
|
|
1,432,753
|
|
01/11/2019
|
01/11/2029
|
£0.7730
|
66,137
|
|
|
(66,137)
|
-
|
|
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
|
269,044
|
|
|
(170,007)
|
99,0371
|
|
27/10/2021
|
27/10/2031
|
£1.14
|
130,807
|
|
|
(8,377)
|
122,4301
|
|
|
|
|
8,134,929
|
-
|
-
|
(244,521)
|
7,890,408
|
|
|
|
|
|
|
|
|
|
|
Weighted average exercise
price
|
$1.059
|
$0.000
|
$0.000
|
$1.386
|
$1.049
|
|
|
|
|
|
|
|
|
|
|
1Options granted without an underlying LSP share until
exercised ie, do not form part of the Group's issued share
capital
|
|
There were 7,201,260 options vested
and exercisable as at 30 June 2024 (2023: 6,869,211).
The weighted average remaining
contractual life of options under LSP outstanding at the end of the
financial year was 0.892 years (2023: 1.01 years).
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 (2023: 1,132,692) options under the DBSP.
Set out below are summaries of
options granted under the DBSP:
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
|
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
|
|
|
|
|
|
|
|
|
Weighted average exercise
price
|
$0.000
|
$0.000
|
$0.000
|
$0.000
|
$0.000
|
|
|
|
|
|
|
|
|
2023
|
|
|
|
|
|
|
|
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
|
$1.1816
|
-
|
1,132,692
|
-
|
-
|
1,132,692
|
|
|
|
-
|
1,132,692
|
-
|
-
|
1,132,692
|
|
|
|
|
|
|
|
|
Weighted average exercise
price
|
$0.000
|
$0.000
|
$0.000
|
$0.000
|
$0.000
|
There were 377,564 options vested
and of these 255,257 exercised as at 30 June 2024 (2023: nil).
The weighted average remaining
contractual life of options under DBSP outstanding at the end of
the financial year was 0.814 years (2023: 1.265 years).
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 (2023: 5,671,516) options under the LTIP.
Set out below are summaries of
shares/options granted under the LTIP:
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
|
|
|
|
|
|
|
|
|
Weighted average exercise
price
|
$0.000
|
$0.000
|
$0.000
|
$0.000
|
$0.000
|
|
|
|
|
|
|
|
|
2023
|
|
|
|
|
|
|
|
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
|
|
|
|
|
|
|
|
|
Weighted average exercise
price
|
$0.000
|
$0.000
|
$0.000
|
$0.000
|
$0.000
|
There were nil LTIP's vested and
exercisable as at 30 June 2024 (2023: nil).
The weighted average remaining
contractual life of options under DBSP outstanding at the end of
the financial year was 1.263 years (2023: 2.266 years).
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
date1
|
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 30. Events after the reporting period
On 17 July 2024, LCM announced the
resolution of a single case investment which forms part of LCM's
managed Global Alternative Returns Fund ('Fund I') and was funded
directly from LCM's balance sheet (25%) and Fund I Investors (75%).
As announced, the investment generated realisations for LCM of at
least AUD$12.5 million, including performance fees, compared to
LCM's invested capital of AUD$1.5 million, representing a MOIC of
8.3x.
Of the resolutions which concluded
close to period end which were disclosed as outstanding receivables
as at 30 June 2024, AUD$11.6 million was received throughout July
2024.
Consolidated entity disclosure statement
For the year ended 30 June 2024
Name
|
Type of
entity
|
Trustee, partner, or
participant in joint venture
|
% of share capital
held
|
Country of
incorporation
|
Australian resident or
foreign resident (for tax purposes)
|
Foreign tax jurisdiction of
foreign residents
|
|
|
|
|
|
|
|
Litigation Capital Management
Limited
|
Body
corporate
|
n/a
|
n/a
|
Australia
|
Australia
|
n/a
|
LCM Litigation Fund Pty
Ltd
|
Body
corporate
|
n/a
|
100%
|
Australia
|
Australia
|
n/a
|
LCM Operations Pty Ltd
|
Body
corporate
|
n/a
|
100%
|
Australia
|
Australia
|
n/a
|
LCM Corporate Services Pty
Ltd
|
Body
corporate
|
n/a
|
100%
|
Australia
|
Australia
|
n/a
|
LCM Singapore Pty Ltd
|
Body
corporate
|
n/a
|
100%
|
Australia
|
Australia
|
n/a
|
LCM Recoveries Pty Ltd
|
Body
corporate
|
n/a
|
100%
|
Australia
|
Australia
|
n/a
|
LCM Advisory Limited
|
Body
corporate
|
n/a
|
100%
|
Australia
|
Australia
|
n/a
|
LCM Funding Pty Ltd
|
Body
corporate
|
Trustee1
|
100%
|
Australia
|
Australia
|
n/a
|
LCM Funding SG Pty Ltd
|
Body
corporate
|
Trustee1
|
100%
|
Australia
|
Australia
|
n/a
|
LCM Corporate Services Pte.
Ltd.
|
Body
corporate
|
n/a
|
100%
|
Singapore
|
Australia
|
n/a
|
LCM Group Holdings Pty
Ltd
|
Body
corporate
|
n/a
|
100%
|
Australia
|
Australia
|
n/a
|
LCM Operations UK Limited
|
Body
corporate
|
n/a
|
100%
|
United
Kingdom
|
Foreign
|
United
Kingdom
|
LCM Corporate Services UK
Limited
|
Body
corporate
|
n/a
|
100%
|
United
Kingdom
|
Foreign
|
United
Kingdom
|
LCM Recoveries UK Limited
|
Body
corporate
|
n/a
|
100%
|
United
Kingdom
|
Foreign
|
United
Kingdom
|
LCM Funding UK Limited
|
Body
corporate
|
Trustee1
|
100%
|
United
Kingdom
|
Foreign
|
United
Kingdom
|
LCM Global Alternative Returns Fund
LP
|
Partnership
|
n/a
|
n/a
|
Jersey
|
Foreign
|
n/a2
|
LCM Global Alternative Returns
Feeder Fund LP
|
Partnership
|
n/a
|
n/a
|
Jersey
|
Foreign
|
n/a2
|
LCM Global Alternative Returns Fund
GP Limited
|
Body
corporate
|
Partner
|
100%
|
Jersey
|
Foreign
|
Jersey
|
LCM Global Alternative Returns Fund
(Special Partner) LP
|
Partnership
|
Partner
|
n/a
|
Jersey
|
Foreign
|
Jersey
|
LCM Global Alternative Returns Fund
II LP
|
Partnership
|
n/a
|
n/a
|
Jersey
|
Foreign
|
n/a2
|
LCM Global Alternative Returns
Feeder Fund II LP
|
Partnership
|
n/a
|
n/a
|
Jersey
|
Foreign
|
n/a2
|
LCM Global Alternative Returns Fund
II Holding 1 LP
|
Partnership
|
n/a
|
n/a
|
Jersey
|
Foreign
|
n/a2
|
LCM Global Alternative Returns Fund
II Holding 2 LP
|
Partnership
|
n/a
|
n/a
|
Jersey
|
Foreign
|
n/a2
|
LCM Global Alternative Returns Fund
II GP Limited
|
Body
corporate
|
Partner
|
100%
|
Jersey
|
Foreign
|
Jersey
|
LCM Global Alternative Returns Fund
II (Special Partner) LP
|
Partnership
|
Partner
|
n/a
|
Jersey
|
Foreign
|
Jersey
|
1 A trustee relationship is established through a Nominee
Agreement, where the entity (the nominee) and the relevant Fund
agree that the nominee will hold the Fund's investment on its
behalf.
2 Limited Partners in the Funds are tax transparent and, as a
result, are not considered tax residents of any particular
jurisdiction
DIRECTORS DECLARATION
In the directors'
opinion:
·
the attached financial statements and notes comply
with the Corporations Act 2001, Australian Accounting Standards and
other mandatory professional reporting requirements;
·
the attached financial statements and notes comply
with International Financial Reporting Standards as issued by the
International Accounting Standards Board as described in note 2 to
the financial statements;
·
the attached financial statements and notes give a
true and fair view of the consolidated entity's financial position
as at 30 June 2024 and of its performance for the period ended on
that date;
·
there are reasonable grounds to believe that the
company will be able to pay its debts as and when they become due
and payable; and
·
the consolidated entity disclosure statement is
true and correct.
Signed in accordance with a
resolution of directors.
On behalf of the
directors
Director
Dated this 17 day of September 2024
-end-