TIDMLIT
RNS Number : 6496S
Litigation Capital Management Ltd
10 July 2020
10 July 2020
Litigation Capital Management Limited
(LCM or the Company)
Market Update
Litigation Capital Management Limited (AIM:LIT), a leading
alternate asset manager of disputes financing solutions, is pleased
to provide a market update for the period since announcement of its
HY20 results to 30 June 2020.
Highlights
-- Consistent performance reflected in 9-year portfolio ROIC of
134% and cumulative portfolio IRR of 78%
-- Accelerated growth in commitments from the LCM Global
Alternative Returns Fund (the "Fund") during the period. This
translates to an overall capital commitment of $106m or 47% of
US$150m since the Fund launch in March 2020, against an investment
target period of 24 months
-- Increased demand for funding with 522 applications (increase
of 25%) received during the financial year ended 30 June 2020
("FY20"). Consistent and disciplined project selection resulted in
3.5% of applications being converted into an active investment
-- Increased applications and investments in the quarter
reflecting the counter-cyclical nature of the industry
-- Total portfolio capital commitment of $143m comprises $95m of
direct investments alongside a further $48m of Fund co-investment
resulting in greater diversity of investments
-- COVID-19-related delays on court proceedings, particularly in
Australia, defers imminent conclusion on a small number of cases.
The Company expects this to impact revenue in the financial year
ended June 2020, albeit the effect on earnings is minimal which
reflects proportionate cost control. More recently, many litigation
and arbitration proceedings are being conducted virtually and the
UK, for example, has reported increases in Commercial Court
filings.
LCM operates two distinct business models: direct balance sheet
investments and asset management. Under those business models, LCM
pursues three investment strategies: single-case funding, corporate
portfolio funding and the acquisition of claims.
Direct Investments
LCM's direct investments fall into two categories:
-- Direct balance sheet investments 100% funded by LCM; and
-- Co-Investment funding alongside the Fund
LCM manages a direct investments portfolio with a current
capital commitment of $95m, which now comprises 23 separate
investments. Two of these are Corporate Portfolios, in which the
Company has made significant headway in terms of this strategy for
investments, achieving four resolutions in both its building and
construction portfolio and its aviation portfolio in FY20, with
both of those portfolios continuing to deliver strong metrics for
LCM.
Asset Management
Since closing its first third party Fund in March 2020, LCM has
committed 47% of the US$150m Fund across 17 projects. The 17
projects are well balanced across commercial litigation, insolvency
disputes, class actions and arbitration. This represents an
enhanced speed of commitment noting that the Fund allows a period
of 24 months to full commitment. This speed of committing to the
Fund results from a combination of LCM's unique origination
capabilities as well as the changing market conditions. LCM has
achieved this level of commitment without sacrificing quality by
strictly adhering to its high level of case selection - consistent
with historical track record of 3-5% of applications.
Global economic conditions and industry forecasts suggest there
will be a significant increase in insolvency events and LCM expects
to see an increase in applications. This is further supported by
the Company's long-standing and deep referral relationships which
are scaling the opportunities LCM is seeing in insolvency and
restructuring events.
There is now an almost evenly split portfolio between the APAC
region and EMEA on both direct investments and the Fund
portfolio.
Consistent Performance
Across the entire spectrum of investments, the Company has
reached a nine-year period in terms of evaluating its rolling
performance in which it has achieved a cumulative Return on
Invested Capital (ROIC) of 134%, including losses, and in the same
period has achieved a cumulative IRR of 78%, which highlights it is
delivering clear growth. This performance sits within a tight
parameter from period-to-period. It is a direct reflection of LCM's
disciplined project selection and robust risk management processes
and systems.
COVID-19
With employee and client health and wellbeing at the forefront
of LCM's priorities, its team moved swiftly and efficiently to
remote working across its Australia, London and Singapore offices
prior to the implementation of lockdown measures.
With regards to LCM's existing investments, the immediate effect
of COVID-19 has predominantly been felt in Australia where the
Company's longest-running and most advanced investments are
located. In relation to disputes which are approaching a final
adjudication, the Australian courts have struggled with effective
implementation of digital hearings, resulting in longer hearings as
courts and practitioners grapple with new technology.
As a result of these challenges the courts have faced, a small
number of Australian investments have now been pushed into the next
financial period. It is important to note that this does not result
in any lost revenue but rather defers the timing that LCM
recognises its revenue from one financial reporting period to the
next.
COVID-19 has led to the global financial markets experiencing
high volatility, and there is a strong correlation historically
that dispute levels rise during such periods of instability. As
outlined, LCM is already observing the levels of insolvency events
increase and corporates looking for alternatives to disputes
spending and is well-positioned to respond to the resulting
increase in applications accordingly.
Strategic Alliances
LCM's Strategic Alliance with an international law firm
delivered material opportunities in the period with over 10
applications received during FY20, including both single cases and
corporate portfolios.
LCM has initiated a second Strategic Alliance with an
international law firm which has already generated corporate
portfolio applications. That alliance has led to our largest ever
corporate portfolio application which is in its final stages of due
diligence and underwriting.
Board and management update
LCM is continuing to take steps to move its executive management
function to London, including the pending relocation of Patrick
Moloney as Chief Executive Officer, and further reinforced by the
appointment of London-based Mary Gangemi as Chief Financial Officer
in April 2020.
As announced on 2 July, Steve McLean, Non-Executive Director,
stepped down from the Board and LCM is at an advanced stage in
adding additional Non-Executive Directors to the Board.
Upon achieving the transition, the management functions,
including finance, will both be much closer to LCM's growth markets
and have significantly greater access to many existing equity
investors, as well as sources of new capital.
To access the June 2020 Market Update investor presentation,
please click here .
Patrick Moloney, CEO of LCM, commented : "I am pleased to report
that LCM has continued to deliver a consistent performance,
reflected in our nine-year portfolio ROIC of 134% and cumulative
portfolio IRR of 78%. We have achieved significant headway in both
our direct investments and asset management business with the
launch of the US$150m LCM Global Alternative Returns Fund in March,
providing the basis for continued growth. It is particularly
encouraging to have already deployed almost half of the capital
from the Fund across 17 projects in such a short period of time and
across a diverse range of disputes. In keeping with the
counter-cyclical nature of the industry, LCM has observed an
increased demand in fund applications and investments throughout
the final quarter, and we are well-placed to capitalise upon
further increases going forward. With court and arbitration
proceedings beginning to be run virtually, in line with new working
conditions, we are confident in opportunities in both established
and nascent markets that we operate in."
Enquiries
Litigation Capital Management c/o Alma PR
Patrick Moloney, Chief Executive
Officer
Canaccord (Nomad and Joint Tel: 020 7523 8000
Broker)
Bobbie Hilliam
Investec Bank plc (Joint Broker) Tel: 020 7597 5970
David Anderson
Alma PR Tel: 020 3405 0205
Justine James LCM@almapr.co.uk
Rebecca Sanders-Hewett
Susie Hudson
NOTES TO EDITORS
Litigation Capital Management (LCM) is a global provider of
disputes finance which operates two business models. The first is
direct investments made from LCM's permanent balance sheet capital
and the second is fund and/or asset management. Under those two
business models, LCM currently pursues three investment strategies:
Single-case funding, Corporate portfolio funding and Acquisitions
of claims. LCM generates its revenue from both its direct
investments and also performance fees through asset management.
LCM has an unparalleled track record, driven by effective
project selection, active project management 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
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