Litigation Capital Management (LSE:LIT) — Results for the full year ended 30 June 2025

0:01 Good afternoon, ladies and gentlemen, and welcome to LITIGATION CAPITAL MANAGEMENT LIMITED full year results investor presentation. Throughout this recorded presentation, investors will be in listen only mode. Questions are encouraged. They can be submitted at any time via the q and a tab that's just situated on the right hand corner of your screen. Please just simply type in your questions and press send. The company may not be in a position to answer every question it receives during the meeting itself. However, the company can review all questions submitted today, and we'll publish our responses where it's appropriate to do so on the investor meet company platform. Before we begin, we would just like to

0:33 submit the following poll. And if you could give that your kind attention, I'm sure the company would be most grateful. And I would now like to hand you over to the team from LITIGATION CAPITAL MANAGEMENT. Patrick, good afternoon, sir. Good afternoon, and welcome everybody to LCM's full year results for the period ending 06/30/2025. My name is Patrick Maloney. I'm the CEO. I'm joined by David Collins, our CFO. And I think the way we will deal with this presentation is we will move relatively swiftly through the presentation section because we are cognizant of the fact that there's probably quite a few questions that investors have, and we will endeavor to canvas as many of those questions as we can.

1:21 And I wanna start off by recognizing that it has been a disappointing period for LCM. We've had unprecedented losses of investments or cases that we have been invested in during the twelve month period ending June 30 and indeed beyond that period. As investors know, LCM has enjoyed a very strong track record in terms of investing in disputes, and we will touch upon what that track record looks like at the fourteen year mark. Post period end, we've moved to terminate our investment in the Gladstone class action, And this is really the first step in terms of LCM focusing more closely upon active case management and really managing these investments with much closer attention, bigger than what we have done in the past.

2:23 The adverse outcomes obviously has a financial impact upon LCM's balance sheet and not only its performance. If we if we look back across those resolutions, the unsuccessful investments that we've made, I think the the part of LCM's business which is managing these investments very closely requires some immediate attention, and that is something that we are very focused on moving forward. So we really have consolidated LCM's resources. We'll touch upon the fact that we have downsized our team so that we can very much focus upon managing the existing portfolio through to a profitable conclusion without any distraction relating to entering into new investments and or canvassing the market and seeking to identify new investment opportunities.

3:29 In terms of lessons learned, I I think the largest one of those lessons is to focus upon actively managing these investments through to their conclusion. Secondly, we're really looking at the balance of the portfolio and ensuring that it's not attended with concentration risk, and we're seeking to move more quickly in respect of rectifying those investments either through co funding or exiting those investments where they're kind of feeling out of balance. Restoring active case management will involve me in particular having a far greater and more hands on approach towards scrutinizing the progression of these investments through the court system or the arbitral process.

4:25 We're gonna move much more quickly in terms of identifying issues in respect of those and seeking to to rectify those before we get to a position where we have to exit those investments. We're we're also going back and re diligencing those investments that we've recently entered into to make sure that they really do continue to stack up against our criteria as they move through the process. In terms of

5:00 our financial repositioning, David will go into much more detail in respect of that, but we are very much focused upon managing the existing investments through the conclusion. In terms of operational efficiency, as I touched upon, we have moved to really focus the team that we have moving forward towards management. And those members of our team who were focused really more on origination and business development have moved on to other opportunities. In terms of focus going forward, it is very much a focus upon the management of these opportunities. And in the immediate term, we're looking at a number of strategic options.

5:50 As we've announced more recently into the market, we have engaged Luminous Partners to assist us in respect of identifying opportunities. This was an endeavor that we had embarked upon much earlier in the year, but we were hampered by the investigation which was undertaken in Dubai in relation to both LCM and myself personally. In recent days, that investigation has come through to a conclusion, and any allegations that were made against LCM were dismissed entirely, including the ones made against myself. And that has really positioned us now that we can properly look at strategic alternatives together with LIMITIS.

6:38 If I look at our long term track record over the last fourteen years, this really does highlight what a an unusual pattern of performance that we have seen in the last twelve months. So if we look at all of the investments that we have concluded in the last fourteen years, the metrics are there, and they really are still showing pretty healthy and strong returns. I'll now move to the financials. Okay. Good afternoon, everybody. So I'm sure there's gonna be lots of questions, so I will try to canter through the financials. I'm starting on slide nine.

7:25 So we've done this in in the past, just set out a summary of the investment activity in the period cause that then informs the p and l balance sheet and cash flow. So in summary on the left, so 12 investments concluded in the period, that was six wins and six losses. In aggregate, that was cumulative multiple of invested capital of 1.8 times on those realizations, and that generated 50,000,000 Australian dollars of revenue for LCM. That result excludes three cases which lost and are under appeal. We have taken a new accounting approach to how we deal with cases that have lost at first instance and are under appeal. I'll come on to that in the p and l to talk you through, but there's write downs related to those those three cases.

8:13 In the middle, new investments. So we we added 13 new investments in the period with total commitments of 79,000,000 Australian dollars. That's obviously down a lot on the prior year. It's a consequence of the losses that we experienced in the second half meant we became much more focused on reducing balance sheet strain and therefore we wrote less new business. On the right hand side, so the balance sheet at the end of the period, so we've got 53 ongoing investments. 11 of those are funded by our balance sheet and of those 11, there's three big ones. The others are relatively small and the other 42 investments are co funded by either fund one or fund two. So if we move on to the p and l, so at the top, those 12 conclusions are what produced the net realized gain of 22,200,000 Australian dollars, which you can see on the fourth line down. So the revenue, that 50,000,000 is the sum of the top two.

9:15 And if you divide by the cash invested into the cases, the 27.5, that's what gives you the 1.8 x, and that produces 22,200,000 of net realized gains in the period. Underneath that, in the next section down, we've got a large negative fair value movement of a 100,000,000 Australian dollars, and that's in three components. So the first component is minus 49,000,000. So when cases conclude, we remove the fair value asset that's on the balance sheet and replace it with the realized gain at the top of the p and l. One point to note is that 49 is bigger than the 22.2 because those cases that concluded were being held at 2.8 times cash invested prior to conclusion.

10:03 They but they realized at 1.8 times, which is a a loss from a fair value perspective. The reason for the for that outcome is just we had much more losses than LCM has historically. So the business was still priced to deliver three x, four x type returns Mhmm. But the larger number of losses resulted in that larger larger negative. So the the that that 49,000,000 is the the first negative component. And just note that number will always be negative because it's simply us removing the fair value asset and then replacing that with the actual results on the cases. The next line down is the the fair value write down on cases that lost and are under appeal. Now there's three of those cases and two of them are captured in here.

10:50 I'll come back to the third one a little bit later on. But that 44,500,000, so you can break that down into two components. First of all, is sort of what we used to do previously, which is where we would write them down to cost. So 29,000,000 of that 44,500,000 relates to what we would have done if we just held them at cost. Because we've had a number of these losses, we've decided to take a new approach. So we're now holding cases that lost and are under appeal within a range of 50 to 60% of cost. And so that extra piece, writing it down below cost, is around 15,000,000. So that's the sort of two components, if you like, of the 44.5. Then the final component of the minus a 100 is the net fair value movement on all other cases.

11:38 And again, in light of the adverse performance that we've experienced, we've taken another look at the fair value model and we've set it up to be more conservative, particularly from an expected profit and duration perspective to reflect our recent experience. And the net impact of that is a minus, 6,000,000 Australian dollars impact. So in aggregate, that produces a 100,000,000 net fair value movement adverse. Underneath that you've got the litigation service revenue line. So some of you might remember that we account for almost all of our cases using fair value accounting, but there's three now left which aren't accounted for under fair value accounting and the result of those cases is captured in this line.

12:25 So the minus 5.5, this is that third case that lost and is under appeal and that impact there is the we've moved that one to 60% of cost and so that's what that negative 5.5 is. In the prior period, the positive 9.2 was one of those cases concluded successfully and generated a 9,200,000 gain. So that's what you see there. And and for those of you looking at our results from last year, we previously used to show that line within the net realized gains but we've separated it out this time. Other income of 1.4 that's just fund management costs that we've been reimbursed. So that produces a total loss of 82,000,000 Australian dollars.

13:14 Operating expenses in the year, so they come in at 18,000,000 versus 19,000,000 last year. Now we entered f y twenty five on a run rate of around 20,000,000 Australian dollars per year. In light of the adverse case outcomes, we've taken action to reduce that cost base. So we've reduced it to about half as the annual run rate and so you will see the benefit of that flow through into f y twenty six. One of the, you know, one of the options that we're considering is moving to, you know, sort of a pure runoff model. And if we are to do that, we will reduce the opex even further, potentially halve it again. Again and that that would be the scenario where we're focused on managing the investments to realize value for share for shareholders.

14:03 And in that scenario, when we're not pursuing growth, we can, you know, significantly reduce the OpEx. Underneath that, you've got an FX gain of 5,600,000, so that relates to the weakening US dollar. About half of our loan is outstanding in US dollars and so the weakening of the dollar over the period has produced a gain for us. Reading down, so operating loss in the period of $94,000,000. Underneath that you've got the finance costs. The the lower finance costs compared to the prior period simply reflects the lower interest rate that we negotiated back in December of last year. I think the average loan balance over the period was around the same as the prior year and so it's just that lower interest rate with the benefit of that which is flowing through.

14:48 All of that produces a loss before tax of around 100,000,000 and post tax it's around 73,000,000 Australian dollars. So if we move to the balance sheet, so cash you can see declined meaningfully in the period. That's because we as I'll show you on the cash flow statement, we are putting a lot of cash out into case funding, paying OpEx, paying our interest. But because we didn't have, you know, the sort of wins that we would have hoped for, the the cash proceeds coming in, you know, failed to meet our expectations, frankly. And so if you take the cash and the borrowings line, which you can see in the total liabilities section, that the sum of those two produces net debt at the end of the period of around 69,000,000 Australian dollars.

15:37 Just for everyone's information, if we take that net debt position today, it's around 80,000,000 Australian dollars. Again, if we move down the the balance sheet, so debtors, there's essentially two components in in those debtors. The big one is the the case against Poland, which I'm sure we'll have questions on. So that's the that's the vast majority of the of the debtor balance. Investments at fair value. So we've got 53 ongoing investments. 50 of them are valued using fair value accounting. And as I described earlier on, we've we've moved the fair value accounting to be more conservative. You'll see at the bottom of the page we're now valuing those cases at 1.3 x.

16:22 That's a big drop versus the 2.4 x and there's a number of reasons for that. First of all, it's the realizations. So remember those cases that realized in the period were valued at 2.8 x. And then you've also got, I guess, a lot of our cases now, the outstanding cases moving forward are very young and we tend to hold those cases at one times cash invested until there's evidence of real progress being made in each of those individual investments. So that's the investments at fair value. Then you have investments held at cost. So there's three of those cases there which are held at cost. Remember one of them is one of the cases that lost under appeal and so that's been marked down. Probably worth flagging the Gladstone Ports case that we mentioned as a loss, highlighted as a loss post period end.

17:14 So that is in that balance there at 29,400,000 Australian dollars. Just note that the the total write off on Gladstone was 30.8 because we incurred an extra 1,400,000 post period step forward. Oh, sorry. It should be on the balance sheet. Yeah. Yes. So so covered there the the assets, deferred tax. So we've spoken about borrowings and the net debt. The deferred tax, you'll see liability, you'll see that's came down a lot. That's largely because of the significant reduction in the investments at fair value. So when we hold fair value expected profit against investments, we also hold on the liability side the expected tax. And just to be clear, says deferred tax liability and tax payable.

18:02 Unsurprisingly given that we've had a large loss, there is no outstanding tax payable as things stand today. All of that produces net assets in the period of a 114,000,000 Australian dollars. That's around 50p per share. And then if if I was to update that for the Gladstone loss, that would fall to around 41p per share. I think some of you may be interested in also with the case that we've announced earlier today, which I'm sure we will also talk about. If we were to adjust for that, net assets per share is probably going to be in the 25 to 30p per share range. Just move on to the cash flow statement on slide 12.

18:48 So again you can see the decline in the cash that I spoke about on the balance sheet from 53,000,000 at the beginning of the year to 8.9 at the end of the year. You can see that is as a consequence of the cash generated from concluded investments being down compared to the prior year, but then also as we've scaled the business, a lot of cash was put into case investments, the 59.8 during the period. You'll also see operating expenses and net finance costs. There is very marginal differences between those two lines in the cash flow statement versus the p and l. For the operating expenses, the those differences relate to primarily share based payments and reimbursement of fund management expenses which are captured in the other income line in the p and l.

19:36 And the difference for the finance costs versus the p and l is simply the p and l captures accrued interest. Underneath that, you'll see the cost of the 8,000,000 Australian dollars for the dividend that was declared at the end of last year that was paid this year plus the completion of the share buyback. And then we've drawn down somewhat more on the facility in the year. So all of that again produces, call it 69,000,000 Australian dollars of net debt at the end of the period which is around 80,000,000 today. Just move on to the next slide. So this is the slide last time around six months ago I showed a slide as a sort of pie chart highlighting the concentration risk that is within the LCM portfolio.

20:23 This is the same information but shown in tabular form, and you can see how much of our 153,000,000 6,000,000 Australian dollars of invested capital is concentrated among a small number of cases, largely legacy cases that are more than five years old. And frankly the reason why our results have been so poor this year is because many of those large investments have been unsuccessful. And indeed the case that we announced earlier today after the results release is the one that's shown as number three on the table. Now many of the initiatives that Patrick mentioned earlier on are to ensure that the risk of having these large concentrated positions in perhaps challenged investments. You know, we want to make sure that that risk is mitigated in the future.

21:13 Slide 14. So this is a slide that we've used in the past to sort of show the progress of the book over the last few years. Given that our focus is now on managing existing investments, essentially runoff, and we aim to use the proceeds of successful investments to pay down the debt, you know, we expect new commitments in the near term to be modest and that should then flow through with committed capital and the invested capital also trending downwards over time.

21:42 So I'll finish there and hand back to Patrick. So just before we move to outlook, I want to touch upon two things. First of all, the case that we announced, during the course of this morning, here, which was the handing down of a decision by the high court here in London, known in our investment portfolios, Transworld.

22:07 Now that that is the outcome or the unsuccessful outcome for our funded party, came as a surprise to us. And it came as a surprise to us particularly in circumstances where we had put an enormous amount of focus in undertaking a really rigorous due diligence process of this particular investment as it came up for its hearing. It was heard earlier this year because of the nature of the business and the and the losses that we had sustained to that point, we wanted to ensure that we had given this particular investment as much independent review as we possibly could. And, you know, some of the some of the things that we did in respect of that claim as it went through hearing was to ensure that we got independent,

22:59 advice from a KC here in the London market, in relation to the evidence as the evidence was actually served in advance of the hearing. Secondly, as we approached the hearing, we got that independent KC to review the submissions that were made on each party, the outline of submissions as they went into the hearing, and then as the hearing progressed, how that was progressing. And all of those indications were that we would succeed in respect of this investment and that we had a very, very strong claim that we were pursuing through the courts.

23:35 As a consequence, this has come as a shock to us. The decision was handed down at approximately 10:30AM this morning. So, you know, we've had an opportunity to, you know, review that in a very cursory way before we attended this presentation. I think our reaction to that based upon the decision itself, and in particular, the rigor with which we have diligence that in recent times coming up to the hearing,

24:01 would indicate to us that it's very likely that we would support appealing that decision. So I think that's where we stand in respect to that. No doubt we will get some specific questions which we'd be happy to answer as we move forward. The other the other issue that I wanted to touch on and perhaps a little bit more detail is, you know, what the consequences were for LCM when we were investigated in Dubai.

24:32 Now, we've been completely exonerated from any wrongdoing in respect of that, and that investigation is now being brought to an end. But if we think of the timeline in respect of that, we we learned about that investigation many, many months after it had commenced in Dubai. We learned about it through the press in in about May of this year, and we scrambled and worked very hard to try and get our heads around precisely what investigation was being undertaken

25:03 and how LCM and indeed myself personally interacted with that. And, you know, after going through that process and coming to the conclusion that we always thought would be the outcome, which was we were completely exonerated, It really highlighted to me the inadequacies of the process that was undertaken. And there's you know, we could talk for quite a long time about that. But what I wanted to really focus upon is the impact that had in respect of LCM and and the existence of that inquiry, how that hampered us in in advancing strategic options at a very much earlier time. So one example of that really is that we were we had engaged to participate in a strategic review of LCM and its options as far back as May, but really couldn't advance that any further because we were facing this investigation, and that hampered any ability that we had to really think about, you know, mergers, acquisitions, and or sale trade sales. So that really has the the the existence of that inquiry and the manner in which that inquiry was undertaken by the Dubai authorities has really represented and caused, you know, an erosion of value and loss in respect of LCM and its share price.

26:23 And, you know, that that was brought to a conclusion yesterday, so it's still very fresh whilst we were anticipating that that would be the outcome. What we want to explore now is whether we have any redress in respect of that and the manner in which that investigation was undertaken with respect to LCM, and whether that's actionable in any sort of meaningful way where we could actually recover some of the lost value that was that we suffered and LCM shareholders suffered as a consequence of that investigation. So moving on now to looking forward, we're really moving into a period we have been in a period of introspection, really looking at LCM, looking at the way we're managing our book, and making any changes to that. So we're really moving into a period now where we are wholly focused upon managing our existing investments through to a to a profitable outcome.

27:22 Secondly, we've made an announcement we have engaged Luminous to assist us with respect to strategic options. We now have the ability to engage properly in respect to that and engage properly with the market, having had the Dubai investigation conclude

27:39 yesterday. Any of the options that we are considering together with LIMITED will be benchmarked against a runoff of the existing portfolio and the existing book. We are very much focused now on reducing our debt. So, you know, our main focus in the immediate term is bringing investments through to a conclusion and applying the proceeds of that in in reduction of our debt. We have

28:09 engaged with our capital provider for a period now of sort of three or a bit more than three months. So we very much got ahead of the position that we find ourselves in today. We have a good ongoing working relationship with our capital provider. Capital provider has indicated to us that they are going to provide us with as much support as they can, over the next twelve months. So we're very much, working with them in a very productive way. So just to close in respect to that, we're very much dedicated towards, restoring shareholder value and really, delivering to shareholders, you know, the the benefit of, you know,

28:54 a closely managed portfolio of assets. And so I think at this point, we're going to move on to questions. I suspect that there'll be a number of those. The two that I can see which have come up already in respect to these are questions in or around the Green X award and where that might be up to and timing in respect of that. So that's the first two questions. So I think we updated the market in or about March earlier this year. We indicated to the market that we thought that there was a process ahead of us of about eighteen months

29:32 during which time there would be challenges to that award. Those challenges will be brought in two separate courts and both under separate regimes. So there has been there's a challenge brought before the Singapore courts, and there's a and there's a challenge brought between the London courts. And investors will recollect that we actually got two awards here based upon the same fact pattern, one in relation to the the Australia Poland investment treaty and the other one in relation to the energy charter. They both, for very similar amounts, LCM's recovery would engage against either of those, either one of those two awards is sufficient to pay LCMR. And just in terms of an update, I think we are still pretty confident that the time scale of eighteen months, is an accurate one.

30:25 So where they're up to now, we have had a first hearing in respect of, the challenge, which has been brought in Singapore. We're

30:33 awaiting a, judgment in respect of that challenge, and we would expect that first, judgment to be delivered probably sometime in the next quarter. Under Singapore law and in that jurisdiction, there's a second right for an appeal, and we would expect that to move pretty quickly and move through to not only hearing, but an award early next year. So we're still sort of within that time frame that we expected it would take in respect of the challenge which is being brought in the London market, or the London courts, it's moving much slower. So there's a hearing date allocated in respect of that for October of next year, and then we would expect a period where the court would consider its position to deliver judgment.

31:21 So very much, we can see the efficiencies of the Singapore court, and it's very much more likely that we'll we'll reach a position where we can commence enforcement action against Poland in respect of the award, which is being challenged in Singapore before we get even the first judgment from, the London courts. I would just add to that. So the key thing here is that we have two awards, one under the energy charter treaty, one under the Australia Poland bilateral investment treaty. There's lots of statistics on the success of set aside proceedings. And whichever set you look at, these are these, you know, set aside proceedings over the last few decades. The success rate of those tends to be in the single digit percentages.

32:08 So if you think about it, Poland's got to win too. So therefore that is implying, you know, a single digit percentage multiplied by a single digit percentage is less than 1%. So that would imply it's really hard for them to win both of those set aside proceedings and overturn the award. And also remember the prime minister of Poland, Donald Tusk, is on the record publicly essentially saying we're gonna have to pay this claim. He said he made a statement around October

32:36 of last year after that claim the award was was announced. You know, he was on the record saying that the Polish people will males, they have to pay this. So we feel we feel pretty good about that. It's just it's a matter of now proceeding through the set asides and, then moving to enforcement, you know, if if we need to.

32:59 The next question that we can see here is a question which relates to, support from our capital provider and was the expression of support given prior to the judgment, which was delivered at about 10:30AM this morning London time. The answer is no. That was obviously not known over the past three months when we'll be discussing these things.

33:21 I would not expect that to change things. And and the reason I say that is that if you think about the capital facility that we have, it's an asset backed land, and the asset is the portfolio of investments and disputes that we have. If you think about the nature of those assets, they require maintenance. They require continued support and continued capital investment. Otherwise, they don't have a value. So not only do we have a good relationship with our capital provider, but we're very much working together, to, you know, create, value out of these investments. So I'll do the next one. So how so how much is the balance sheet value of the three lost cases under appeal?

34:10 I think the capital invested into those three is around 45,000,000 Australian dollars. Now as I said, we're now holding those in a range of 50 to 60%, so you can sort of work that out. It's gonna be between, you know, twenty two point five million Australian dollars, you know, and and a smidge higher. So it's sort of in that range. Effectively, we've taken, call it, $2,025,000,000 20 to 25,000,000 Australian dollar write down, versus cost on those cases.

34:43 Next question really relates to the suitability of LCM's business on the public markets and, you know, are we giving consideration to, you know, whether LCM should be taken private? What I can say in answer to that is, you know, we are looking and the board is looking at a full range of opportunities, and we are seeking advice with respect to those, and they run the full gambit from, you know, really going into a mode of debt reduction until we've paid our debt off, and then thinking about where we move from there right through to another end, which is, you know, a merger, an acquisition, a trade sale, and or go private. And we're not in a position to, you know we're we're at the commencement or partway through that process now.

35:35 But what I can say is that we are benchmarking any of these options really against what we see as the intrinsic value, or the rundown value in relation to the existing portfolio. So we've then got two questions on today's judgment, some feedback about the judgment and then I think can you another question asking for a bit more detail. So you can see as per the r and s that we invested call it £16,000,000 into that case. Had it been successful, I think you're all aware of the sorts of multiples,

36:15 that we generate on successful investments. So the green x case is one example where we're on a six x multiple. Had that case been successful, we would have been talking about that sort of value, five six x type multiple of the capital invested. So there was considerable value in that case.

36:39 Importantly for LCM, you can see we funded 10,000,000 and the fund funded 6,000,000, so that would have meant even more value for LCM's balance sheet. We are just now reviewing the judgment. It came out around between 10:30 and 11AM this morning. So we've got to go through through that in detail, and we will update you on what our plans are for appealing. My first read is that there's definitely aspects that that that are there that we can pursue. So we'll come back to you with more detail on that in in due course. I mean, as I mentioned before, we've done an enormous and really rigorous diligence in respect to this, and that was not a diligence at the beginning, but a continuous process. As I mentioned, you know, it really did come as a surprise to us that we weren't successful because all of the independent, views that were given to us, and sought by us as we progressed through that hearing, were very positive.

37:43 So there's another question saying, has the company breached debt covenants? Does management expect the company can access new debt financing or will equity injections be required?

37:54 What concrete steps is management taking to restore the company's status as a going concern? So let me step through those. So you'll see in the annual report that we've secured covenant waivers from our lender through to thirtieth of December of this year. So we have not yet breached our debt covenants. But the reality is, you know, there's a reason why you go and get those waivers. So, you know, we are the lender has been supportive to date. Obviously, they, I think we've put in the annual report their current intention is to support us for the next twelve months as we complete the strategic review, but obviously they they have the right to change their mind at any point in time. So we'll be working with the lender closely over the coming weeks and months.

38:41 Does the does measurement expect new debt financing or will equity injections be required? So we are looking at strategic options that that could include, you know, refinancing as part of that and also, you know, equity injection injections. I wouldn't take that off the table at this stage. Clearly, you've all seen that the results that we've we've published and all options need to be need to be kept on the table. In terms of the concrete steps that management is taking to restore the company's status as a going concern, so again, we're looking at those strategic transactions, we're also doing, I think, the right internal things, significantly reducing the OpEx. And also, those are the options that we will look at as well in terms of reducing future balance sheet strain.

39:31 The next question, is, you know, do we have are we in a position where we can, revert back to to the previous, accounting standard? David will be able to answer this with more authority than me. A couple of observations that I would make is all of the listed peers apply the same accounting standard. I think, you know, it's really a question of not, you know, a matter of choice, but it is what is the the appropriate standard to be applying to a business like this. Yes. So I'll I'll answer this question very honestly. So the decision to move to fair value accounting was taken before I joined the company. My view is LCM had the high ground previously by not using fair value accounting.

40:20 Anyway, so we're now on fair value accounting and it's probably difficult to go back. But I would say if you look in the balance sheet, we highlighted on that slide that cases are valued at 1.3 times cash invested. Most of that fair value uplift relates to the case that we announced as a loss at first instance today. So if you take that out, essentially most of the other cases are now being valued at or around cost in aggregate. That in part reflects the fact that the remaining cases are relatively young and so they're not that not that far progressed. But essentially, we've by setting the thing up more conservatively, you know, we're now close to where the fair value is similar to the cash invested.

41:05 So that sort of uncertainty if you like and that perhaps that premium, which is which may be somewhat at risk, has essentially been been taken out. So I think what we've done on the fair value positions it much more conservatively for shareholders. The next question relates to adverse cost risk and cover by IT insurance. And the question is, you know, what does that mean? So I'll try and explain that as simply as I can. In most of the jurisdictions in which we invest in disputes, the successful party is entitled to what's called a cost order, which is a way that they can recover a portion of the legal fees that they had incurred in defending the claim that was funded by our funded party.

41:52 Now that risk is something that we typically lay off through a policy of the ATE insurance, which is after the event insurance. And most of the cases that we would fund would be the adverse cost risk would be covered by ATE insurance. Yep. So next question is around, would shareholder value be best realized by runoff, by being part of a larger litigation finance company, or by refocusing on the business. Look, I would just say clearly where we are, all options remain on the table and so, you know, we will look we've got various discussions underway, but we would look at essentially all options. The next question says, given the current win loss ratio, does management see two x MOIC as sufficient to cover losses, operating costs, and overhead, or is the target to increase the average MOIC closer to three x?

42:50 What I would say there is the business is priced exactly the same as it's been priced probably for the last ten, fifteen, twenty, fifteen years in that a lot of our business, if it's successful, we will win three x, four x, five x plus. The problem has just been the losses. It's you know, the business is there and it's priced appropriately. I mean, if you look at the the wins, the cumulative wins in the period so we said six wins, six losses and in aggregate they produced a 1.8 x average results. Those six wins I think delivered an average Mohic of over five x. So again, if you win and the business all of the in force business, it's priced for those higher multiples. The problem has just been this run of losses.

43:41 So, you know, I would say that the key thing is just getting that win ratio back. You know, we don't think that what we've experienced over the last six months is now reflective of what the rest of the book is gonna is gonna play out. In reality, over the last six to nine months, we've had a lot of these legacy cases which have came through and, you know, my sort of view is relative newcomer to this sector is that when you have these sort of legacy investments, they're they're often problematic. You've had to put more capital into them for a reason. Now a lot of those have sort of washed through. We are appealing some of them, but a lot of that wood has been chopped effectively. If you look at the concentration risk slide, you'll see that we're moving towards a point where there is less concentration.

44:29 We're not fully there yet. There's a few more to go. But but hopefully, that sort of gives you a feel in responding to that question. Next question is, you know, what does the future of LCM look like? And I think really the answer to that needs to be broken down. You know, in the in the near term, it's very much a a focus upon, you know, very focused management of these particular investments and reducing debt. And then if we look at the a little bit further out beyond that, really, the future of LCM will depend upon all of the consideration that board is giving to the strategic review. So, you know, we ought to be in a in a position where when we conclude that review, we'll be able to come back and share some of those determinations, you know, with equity participants.

45:26 So we've got a couple of questions from Michael. I in the short term, cash insolvency will be vital. What is short and medium term cash flow forecast taking into account revised cost base and cash realization measures? So the hardest thing in this business is predicting cash flow because it's entirely based on we only get cash in when we win. Right? So we don't have management fees or anything like that that other investment managers have. We only get cash in when cases conclude successfully. So we can look at our expectation of case conclusions and I can't you know, we have had significant, conclusions over the last six to nine months. It's just that the results have gone the wrong way. You know, in terms of answering the question, I think the key thing is having continued lender support because of the the the difficulty of forecasting when the next case may win, and it's very common in this sector for judgments and so on to be delayed.

46:27 So I think the the the best way I can answer that question is to say, look, we're being very proactive with the lender. We've been encouraged by the support that they've provided us today. And we're trying to move to a model which will work for them, lean runoff, if the strategic options fall away, but also work for our shareholders. So so so that is the plan. And hopefully, Michael, that also answers your second question on describing runoff. So, hopefully, I've addressed that one as well. There's another question just in relation to timing of GreenX. I think we've dealt with that. You know, I I think as we've said, we are still looking at at a a time horizon with respect to that of eighteen months from March, and I think we're sort of tracking, in relation to that.

47:14 So there's there's other debt covenants questions. Again, I think we've answered that. Why no separate announcement of the Dubai outcome? So that one came in yesterday, which was the thirtieth, that the everything had been basically dismissed, and we understand the verdict there was really quite scathing. Yeah. Because it came in so late, we've just included it in the in the, the results released this morning rather than issuing a separate r and s. Okay. So there's a question on why LUMINUS an Australian firm rather than a recognized European specialist adviser.

48:03 I I think in the first instance, we need to recognize the fact that we are an Australian public company. So, you know, we are subject to, Australian corporations law regulation. So it's natural for us to, seek an adviser who's very familiar with transactions in the Australian in the Australian market and pursuant to our Australian, Corporations Act. Now there's no doubt depending upon the nature of a transaction that we might do, it would involve us seeking advice probably here in the London market. So I don't think we've combined ourselves to Luminous in Australia, but I think it's it's important that we recognize the fact that we would be subject to Australian law. So will the board consider reducing directors' rent in order to reduce OpEx?

48:59 I think yes. It's a reality. So we've sort of indicated, you know, we think we were one of the more lean funders coming into this with our 20,000,000 Australian dollars annual OpEx at the beginning of the year. If you think about what we're saying, that's potentially falling to call it 5,000,000. So we we are being, you know, very disciplined to try and reduce costs for shareholders. And if that means compensation for directors being reduced, then, yeah, that's absolutely on the table. The next one is, do we have visibility on the balance sheet you'll take between terminating existing cases and continuing to fund? I think that's something that we are continuing to look at. We're continuing to monitor.

49:48 At this point, we do not feel we're in a situation where we need to cease to fund or terminate funding in respect of any claims which we see as viable, but that is something that we are, you know, talking to our capital provider about. It's something that we're considering, at all times. So there's a question for Max on what are your thoughts on the timing of the 88,000,000 Australian dollars due from the resolution of investments? So, Max, that's in the consolidated balance sheet. So what I've put up the slides, those are the LCM only balance sheet. We do we're required because we've got external funds. We're required to consolidate the external funds into the the consolidated balance sheet that you find in our financial statements.

50:38 That that 88,000,000, if we put it onto an LCM only basis, the LCM share of that is 30, of which the vast majority of it is that that Green X data. And I think Patrick spoke earlier on around our expected timings in terms of the the Singapore set aside proceedings and then the London set aside proceedings. So, hopefully, we've answered that one. The next question is is a delisting part of the options that are being considered, so take private. I think we've touched upon this before in respect of the strategic review that we are undertaking. I think all options are on the table and we are measuring all of those options, like, you know, against the benchmark of, you know, what do we see as the value of the portfolio, the intrinsic value of the portfolio on a runoff basis.

51:26 And there's a question from Albert around the NAV. So as of June 30, NAV per share was 50 p. He's saying you announced a loss of 15 p, and then today a loss of 25 p. So how do we reconcile with estimated NAV of 25 to 30p? I think it's just tax, Albert, is the difference. The the the tax losses will reduce the, the gross impact. What's next? So we're we're seeing a lot of questions, which I think we've already sort of answered. Question from Edward on the LPs.

52:14 So do you think that LPs to fund one and fund two will pay their cash commitments when called upon to do so? Sure. Absolutely. We'll be and we'll be engaging with our LPs, you know, post these results coming out. The the performance for LPs has been considerably better, unfortunately, than it has been for shareholders and that's largely because shareholders have borne the old balance sheet cases where we've had a few issues and then also much more concentration risk. And that's been mitigated for LPs because for LPs, there's a limit such that we can't invest more than 5% of their capital into any one case. So the if you look at the performance of fund one, even in light of recent outcomes, still stacks up pretty well. I think we we we believe we can deliver to fund one LPs even in light of recent losses, something like a 1.5 x return, is in line with what was the initial objective of the fund when the fund was first launched in 2020.

53:18 So it's it's very important for us to manage all of our key external stakeholder relationships, and we'll be engaging proactively with LPs, you know, in the coming weeks. But, you know, we have good relationships there, so we expect that they will, you know, absolutely continue to meet their commitments. Next question relates to a fund three and, you know, what are our thoughts around a fund three. As equity investors will be aware, you know, coming up to sort of June of this year, we were positioning ourselves to do a first close in risk in respect of fund three. We had done a number of road shows in respect of that, and we were positioning to do that.

54:06 What the reason why we were unable to affect the first close in relation to that was not through lack of demand. It was really the intervention of the Dubai investigation, which made it very, very difficult, if not impossible, under those circumstances to really do any sort of close or any capital until until that was until that was finally resolved. That was resolved late yesterday. Now I think, you know, as we have said, we are wholly focused upon, you know, close and focused management of the existing portfolio and paying down debt. And once we, you know, achieve and strike a sensible balance, we will then consider whether fund three is the appropriate way to move forward, and it will obviously bear upon the strategic analysis that we're undertaking.

55:03 So there's a question from n w. What is the rundown value as of today that you are benchmarking every option against? I would say that we're, you know, we're not gonna put a number out there. We have a view internally, but, you know, our performance over the last six months has been rubbish, and I don't think anybody would really put much value on a number if we put it out there. The key thing for LCM is to get back to actually doing what it used to do in the thirteen years prior to twelve months ago. So rather than put a number out there, if if it's okay, we're gonna focus on, you know, hopefully converting existing investments into wins and sort of getting getting our credibility back with investors that way. Next question is around, you know, what LCM's entitlements are in respect of the GreenX slash Poland award.

55:56 As we know, we were sort of working towards positioning ourselves to enforce those favorable awards. There's two aspects to that. Obviously, there's a a fund component to that, and then there's an LCM, component of that award. And the question is, you know, does this give your capital provider some comfort? Undoubtedly, that is the case. Yes. So all of these questions, I think we've answered. I think we're sort of coming up to the to the to the one hour mark as well. So I I think what we will do is endeavor to respond to to as many of these as we can afterwards, but I think we're kinda running short on time now.

56:49 I mean, just a last question from Stuart be very generous. Thank you, Stuart. You've had a tough run of luck. What positives within the business are perhaps not visible on first glance at the results? I would the the the judgment that we announced today, which is trash the share price, we are gonna review that overnight and you will hear more from us on that. That's all I would say. There's potentially a lot of value on that and there's there's one key aspect of that judgment which we have been totally surprised by. But a lot of the other aspects of that judgment which relate to the potential value had we been successful, We clear the hurdles on those. So I would just say you you will you can expect to hear more from us once you've had the full chance to digest that judgment and also run through with the lawyers what the best strategy may be from here.

57:46 Patrick, David, if I may just jump back in at this point. And thank you very much indeed for addressing all of those questions that came in for investors this afternoon. And, of course, it will give you back all of the questions that came in just for you to review after the presentation, and we'll publish those response on the platform where it's appropriate. But, Patrick, perhaps before really now, just looking to redirect those on the call to provide you with their feedback, which I know is particularly important to yourself and the company. If I could please just ask you for a few closing comments just to wrap up with, that'd be great. Look. I I would say to investors that, LCM and our team are very much focused upon, you know, realizing as much value as we possibly can from the existing, investments and paying down debt as quickly as we can, and at the same time, sort of, you know, undertaking a strategic review so that we can sort of look forward and what the optimum business model is for us into the future.

58:39 Perfect. Patrick, David, thank you once again for updating investors this afternoon. Could I please ask investors not to close this session as you'll now be automatically redirected for the opportunity to provide your feedback in order that the management team can really better understand your views and expectations. This will only take a few moments to complete, but I'm sure it'll be greatly valued by the company. On behalf of the management team of LITIGATION CAPITAL MANAGEMENT LIMITED, we would like to thank you for attending today's presentation. That now concludes today's session. So good afternoon to you all.