Litigation Capital Management (LIT) H1 2025 earnings summary

Executive summary

• Seven investments concluded, generating AUD 51 million (A$51m) in revenue at a 3.7x MOIC, driven by major arbitration wins including Indiana Resources (8.4x MOIC) and GreenX Metals (9.5x MOIC), with a 13.5-year track record at 2.4x MOIC.

• Transition to a fund management model is progressing, with Fund One ranked in the top 5% of its vintage, Fund Two nearing full commitment, and Fund Three marketing underway with first close expected in Q2 2025.

• Proprietary AI and data platform fully integrated into underwriting and origination, enhancing treaty claims and arbitration investment processes.

• Setbacks included two major class action trial losses (Quintis and Queensland Electricity), both under appeal with strong prospects and modest further investment expected.

• Debt facility refinanced to US$75m (up to US$150m potential), with interest rate reduced below 10%.

Financial highlights

• Net realised gains of AUD 37.4 million from seven case conclusions, offset by a negative net fair value movement of AUD 32 million, resulting in total income of AUD 4.7 million and a net loss after tax of AUD 8.3 million.

• Operating expenses were AUD 10 million, with finance costs declining to AUD 3.6 million and foreign exchange losses of AUD 2.5 million.

• Net assets at period end were AUD 181.8 million (GBP 0.87 per share), with book value per share at 86.3p.

• Cash on balance sheet was AUD 30.6 million, with AUD 15.7 million restricted for third-party fund vehicles.

• Net debt increased to AUD 40 million after share buybacks, dividends, and debt repayment.

Outlook and guidance

• Fund Three launch targeted before 30 June 2025, with strong investor feedback and first close expected in Q2 2025, similar in size to Fund Two (~AUD 300 million).

• New commitments anticipated to rebound in H2 FY25 as market dynamics shift and competitors face capital raising challenges.

• No short-term profit guidance due to unpredictability of litigation timelines, but future cash flow potential estimated at up to AUD 500 million if current performance is maintained.

• Ongoing focus on disciplined underwriting and productivity, with OpEx expected to double in the second half.

• Scaling fund management model expected to reduce financial unpredictability and enhance long-term returns.