Litigation Capital Management profit drops but strategic plan remains on track

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Litigation Capital Management (LCM) has reported a sharp drop in profit but stressed that its transition towards asset management was progressing to plan.

The firm’s pretax profit in the 2024 financial year to 30 June 2024 dropped to AUD16.1m (£8.2m), down from AUD42.7m (£21.8m) last year.

This was due to lower net realised gains from concluded investments, which fell to AUD32.2m (£16.5m) from AUD51.5m (£26.4m) last year.

Concluded case investments generated 2.4x of cash invested, LCM noted, a little below the long-term average of 2.9x. Its dividend was cut to 1.25p this year, down from 2.25p last year.

LCM is an alternative asset manager specialising in dispute financing solutions. It earns money through direct investments off its balance sheet and third-party fund management.

The firm is attempting to move from being a capital-intensive balance sheet litigation funder to a capital-light asset manager.

The firm noted that only a relatively small number of cases were driving its financial results, which made them fairly volatile. It expects less variability as it transitions towards asset management.

“Until then, year-on-year comparisons may be less meaningful, as outcomes will largely depend on the timing and size of case conclusions,” it said.

LCM is also preparing a “disciplined and staged entry” into the US market, 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,” it said.

Boss Patrick Moloney said: “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,” he added.