Litigation Capital Management Ltd · LSE:LIT
Litigation Capital Management — FY2018 Earnings Presentation
28 slides from Litigation Capital Management's earnings presentation, Aug 20, 2018
Slide 1: 2018 Full Year Results Presentation
Litigation Capital Management Ltd 2018 Full Year Results Presentation 20 August 2018 Patrick Moloney Chief Executive Officer
Slide 2: Important Information
Important Information No recommendation, offer, invitation or advice This presentation contains general information about the activities of Litigation Capital Any forward-looking statements, including projections, guidance on future revenues, Management Limited (LCA) which is current as at 20 August
Slide 3: Results Highlights
Results Highlights Robust performance in FY18 is the result of the methodology employed by LCM over past 3-5 years, including rigorous due diligence, active management of investments and continuity of the team. FY18 FY17 Change Project completions drive record results Profit/(loss) before tax $12.0m
Slide 4: Financial Results
Financial Results EXPERIENCE COUNTS
Slide 5: Litigation Project Completions drive record results
Litigation Project Completions drive record results FY18 FY17 Change Strong increase in revenue by 754% to $29.2m driven by the Completion of 5 Litigation Projects funded directly by LCM Gross Revenue $29.2m $3.4m 754% Litigation Investments Cash increased by 640% to $13.8m from $1.9m in $13.2m $1.2
Slide 6: Accounting Tax
Accounting Tax LCM’s reported income tax expense wholly comprises movements in deferred taxes which primarily relates to the derecognition of tax losses from prior years. FY18 FY17 Tax losses are recognised in the deferred tax Statutory Annual Report ($m) ($m) asset by LCM only if it is probable tha
Slide 7: Building Balance Sheet Strength
Building Balance Sheet Strength Cash as at 30 June Total Total Capital Deployed Capital Litigation Investments Lition Investments Net Assets ($ in millions) on Litigation ($ in millions) Capitalised ($ in ll ($ in millions) Investments ($ in millions) 25.4 ($ in millions) 16.7 14.6 13.9 13.8 12.5 7.
Slide 8: Completion of Litigation Projects drives cash flow
Completion of Litigation Projects drives cash flow Cash generation Cash used in Litigation Cash used in Operating ($ in millions) 27.1 Investments activities ($ in millions) ($ in millions) 11.3 8.1 3.4 4.2 4.2 3.7 3.3 2.7 1.6 0.6 1 2015 2016 2017 2018 2015 2016 2017 2018 2015 2016 2017 2018 $27.1m
Slide 9: Organic Cash Generation
Organic Cash Generation With $27.1 million of cash generated by the completion of Litigation Projects in 2018, LCM organically generated capital which permitted the growth and expansion of the business and permitted the repayment of all borrowings Cash flows for Litigation Investments Cash flows
Slide 10: Litigation Project Portfolio & Pipeline
Litigation Project Portfolio & Pipeline 10
Slide 11: Strong Project Portfolio for FY19 and FY20
Strong Project Portfolio for FY19 and FY20 Forecast Project Completion Gross Claim Size ($ in millions by reference to Gross as at 30 June Claim Size) ($ in millions) IFPA IFPA LCM - Conditional LCM - Conditional LCM - Unconditional LCM - Unconditional 55 55 330 330 1139 1139 55 169 736 663 476 167
Slide 12: Diversity and Enhanced Origination
Diversity and Enhanced Origination Total Applications Applications by Type in 2018 125 20 28 Class Actions - 22.4% 98 Commercial - 42.4% 24 International Arbitration - 19.2% Insolvency - 16% 53 FY17 FY18 Total applications increased by 27.6% to 125 applications, compared with 98 applications in FY17
Slide 13: Litigation Project Pipeline to drive future growth
Litigation Project Pipeline to drive future growth Pipeline Progression (number of projects) Pipeline by Type (number of projects) 125 1 3 7 Class Actions - 25.9%¹ 2 Commercial - 51.9% International Arbitration - 27 7.4% 6 Insolvency - 11.1% Total Pipeline Conditional 14 Corporate Portfolio - 3.7% a
Slide 14: Investment Portfolio Diversification
Investment Portfolio Diversification Current Commitments for FY19 Project Type by Gross Claim Size for FY19 3% 12% 19% Class Actions - $5.1m Class Actions - $559m 54% 34% Commercial - $3.3m Commercial - $136m 78% Insolvency - $1.2m Insolvency - $23m Class Actions are currently a considerable proport
Slide 15: Update on Investments
Update on Investments New Litigation Projects Diversified Portfolio Growth Areas Of these 12 new Litigation Projects: • 3 are insolvency cases • 5 are class actions • First funding agreement to fund 12 new funding agreements • 2 are commercial cases an international arbitration executed since 1 July
Slide 16: Growth Strategy & Outlook
Growth Strategy & Outlook EXPERIENCE COUNTS
Slide 17: Growth Strategy
Growth Strategy Target Litigation Projects which meet Funding Criteria and deliver a balanced portfolio Balanced portfolio in terms of size, funding structure, area of law and geographical region. Litigation finance to sophisticated corporates (including by portfolio funding). This Funding for Corpo
Slide 18: International Expansion - Framework
International Expansion - Framework As foreshadowed in LCM’s previous company announcement, consideration of international expansion opportunities will: Leverage proven core capabilities in origination and due diligence Allow diversification of our investment portfolio Support further growth plans a
Slide 19: International Expansion – UK Opportunity
International Expansion – UK Opportunity LCM is receiving an increased number of applications for internationally based projects. A significant number of these are in the UK. LCM’s initial response was to retain a Queens Council in the United Kingdom such that we had an experienced source of advice
Slide 20: Risk Management
Risk Management Strict case selection process has underpinned a strong average ROIC of 138% since 2012. 1. Preliminary due diligence by the investment manager 2. Investment committee review 3. Board review and approval 4. Conditional financing agreement 5. Additional due diligence 6. Unconditional f
Slide 21: Industry Regulation
Industry Regulation Two independent inquiries this year into Litigation Funding and Class Actions Victorian Law Reform Commission Inquiry was in favour of the regulation of litigation funders The Australian Law Reform Commission Inquiry recommendations will not be known until December 2018 but are l
Slide 22: Outlook
Outlook Capital Management During Q1 FY18, LCM entered into a facility which provided $4m of debt capital, which was repaid in full during the year from organically generated revenue LCM is engaged in discussions and negotiations with a number of capital providers for additional capital Range of sou
Slide 23: Appendix 1 – Industry & Company Overview
Appendix 1 – Industry & Company Overview 23 23
Slide 24: Industry Overview
Industry Overview What is litigation financing? Litigation financing involves the financing of third parties’ legal claims in exchange for receiving a share of amounts recovered from those claims Litigation financing started in Australia in the 1990s as financing for liquidators of insolvent compani
Slide 25: Overview of LCM
Overview of LCM Our Strengths Background Established player with Established in 1998 and listed on the ASX in December 2016 (ASX: LCA) recognised capability and LCM was one of the pioneers in litigation financing, which was first developed in Australia network LCM has an established network fo
Slide 26: Revenue Model
Revenue Model How does LCM generate its income? LCM’s income is generated from the successful financing and management of Litigation Projects LCM’s income model is reflected in each litigation financing agreement it enters into with its clients. A typical litigation financing agreement provides for
Slide 27: Board of Directors
Board of Directors Dr David King - Non-Executive Chairman Appointed as a Director of LCM on 9 October 2015 (i.e. on incorporation) and was appointed as a Director of LCM Litigation in February 2014 Was a founder and non-executive director of Sapex Ltd, Gas2Grid Ltd and Eastern Star Gas Ltd. Da
Slide 28: Contact Details
Contact Details Patrick Moloney Litigation Capital Management Limited Chief Executive Officer E: [email protected] P: +61 2 8098 1390 Litigation Capital Management Limited Suite 12.06, Level 12 The Chifley Tower 2 Chifley Square Sydney NSW 2000 www.lcmfinance.com 28 28
Litigation Capital Management — FY2018 Earnings Presentation on 6ix