- Firm posts solid full year and positive outlook
- Group transitioning to asset management model
- Demand for litigation finance is counter-cyclical
Shares in international dispute financing firm Litigation Capital Management (LIT:AIM) fell 3.7% following the release of full year results for the year ended 30 June.
Shares in the group have fallen by 32% over the last six months.
Gross profit increased by 18% to A$ 30.9 million, while adjusted operating profit rose by 27% year on year to A$ 20 million and adjusted profit before tax increased by 6% year on year to A$ 15.3 million.
Adjusted diluted earnings per share moved ahead by 8% to A$ 0.10 but the firm didn't declare a dividend.
LITIGATION FINANCE A GROWTH DRIVER
While financial markets have experienced high volatility in the last couple of year, the demand for litigation finance has been steadily growing over the last decade.
Historically, dispute levels rise during periods of instability and the level of insolvency events increase as companies look for alternative ways of financing their legal cases.
Not only is there a steady increase in established markets, but new geographies and jurisdictions are opening up to litigation finance.
Given the experience it has in the sector coupled with its growing capital base and low penetration rates in its markets, LCM is well positioned to take advantage of that trend.
MOVING TO AN ASSET MANGEMENT MODEL
The group is shifting its focus from investing its own balance sheet capital to an asset management model.
This involves using third party capital to generate the profits in its asset management business, in the same way that Burford Capital (BUR:AIM) raises funds to invest in cases.
This change in approach is reflected in the decline in own capital invested from A$88 million to A$66 million.
‘Reflecting on the past year navigating the impacts of Covid-related restrictions, I am delighted with the growth achieved and particularly with the significant progress in our asset management business and total assets under management now at A$452mln’, said LCM chief executive Patrick Moloney.
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