Litigation Capital Management Limited (LIT) Earnings Call Transcript & Summary

Good afternoon, ladies and gentlemen, and welcome to the Litigation Capital Management Limited Full Year Results Investor Presentation. [Operator Instructions] Before we begin, we would just like to 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 30 June 2025. My name is Patrick Moloney. 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 canvass as many of those questions as we can. And I want to 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 invested in during the 12-month period ending 30 June 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 14-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 retention bigger than what we have done in the past. The adverse outcomes obviously has a financial impact upon LCM's balance sheet and not only its performance. If we look back across those resolutions, the unsuccessful investments that we've made, I think 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. In terms of lessons learned, 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 when they're kind of feeling out of balance. Restoring active case management will involve me, in particular, having a far greater and hand -- far greater and more hands-on approach towards scrutinizing the progression of these investments through the court system or the arbitral process. We're going to move much more quickly in terms of identifying issues in respect of those and seeking to rectify those before we get to a position where we have to exit those investments. 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 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 to 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. As we've announced more recently into the market, we have engaged Luminis Partners to assist us in respect of identifying opportunities. This was an endeavor that we have 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 Luminis. If I look at our long-term track record over the last 14 years, this really does highlight what -- an unusual pattern of performance that we have seen in the last 12 months. So if we look at all of the investments that we have concluded in the last 14 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 going to be lots of questions, so I will try to canter through the financials, starting on Slide 9. So we've done this in the past, just set out a summary of the investment activity in the period because that then informs the P&L balance sheet and cash flow. So in summary, on the left, so 12 investments concluded in the period. That was 6 wins and 6 losses. In aggregate, that was a cumulative multiple of invested capital of 1.8x on those realizations, and that generated AUD 50 million of revenue for LCM. That result excludes 3 cases, which lost in our 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&L to talk you through, but there's write-downs related to those 3 cases. In the middle, new investments, so we added 13 new investments in the period with total commitments of AUD 79 million. 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 3 big ones. The others are relatively small. And the other 42 investments are co-funded by either Fund I or Fund II. So if we move on to the P&L, so at the top, those 12 conclusions are what produced the net realized gain of AUD 22.2 million, which you can see on the fourth line down. So the revenue, that $50 million is the sum of the top 2. And if you divide by the cash invested into the cases, the $27.5 million, that's what gives you the 1.8x, and that produces $22.2 million of net realized gains in the period. Underneath that, in the next section down, we've got a large negative fair value movement over AUD 100 million, and that's in 3 components. So the first component is minus AUD 49 million. 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&L. One point to note is that AUD 49 million is bigger than the AUD 22.2 million because those cases that concluded were being held at 2.8x cash invested prior to conclusion, but they realized at 1.8x, which is a loss from a fair value perspective. The reason for that outcome is just we had much more losses than LCM has historically. So the business was still priced to deliver 3x, 4x type returns, but the large number of losses resulted in that larger negative. So that $49 million is 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 fair value write-down on cases that lost and are under appeal. Now there's 3 of those cases, and 2 of them are captured in here. I'll come back to the third one a little bit later on. But that $44.5 million, so you can break that down into 2 components: first of all, sort of what we used to do previously, which is where we would write them down to cost. So $29 million of that $44.5 million 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 million. So that's the sort of 2 components, if you like, of the $44.5 million. Then the final component of the minus $100 million is the net fair value movement on all other cases. 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 AUD 6 million impact. So in aggregate, that produces $100 million 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 3 now left, which aren't accounted for under fair value accounting, and the results of those cases is captured in this line. So the minus $5.5 million, this is that third case that lost and is under appeal, and that impact there is the -- we've moved that 1 to 60% of cost. And so that's what that negative $5.5 million is. In the prior period, the positive $9.2 million was 1 of those cases concluded successfully and generated a $9.2 million gain. So that's what you see there. 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 million, that's just fund management costs that we've been reimbursed. So that produces a total loss of AUD 82 million. Operating expenses in the year, so they come in at $18 million versus $19 million last year. Now we entered FY '25 on a run rate of around AUD 20 million 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 FY '26. One of the options that we're considering is moving to 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 would be the scenario where we're focused on managing the investments to realize value for shareholders. And in that scenario, when we're not pursuing growth, we can significantly reduce the OpEx. Underneath that, you've got an FX gain of $5.6 million, so that relates to the weakening U.S. dollar. About half of our loan is outstanding in U.S. 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 million. Underneath that, you've got the finance costs. 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, the benefit of that, which is flowing through. All of that produces a loss before tax of around $100 million, and posttax, it's around AUD 73 million. So if you move to the balance sheet, so cash, you can see, declined meaningfully in the period. That's because, as I'll show you on the cash flow statement, we were putting a lot of cash out into case funding, paying OpEx, paying our interest. But because we didn't have the sort of wins that we would have hoped for, the cash proceeds coming in 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 put -- the sum of those 2 produces net debt at the end of the period of around AUD 69 million. Just for everyone's information, if we take that net debt position today, it's around AUD 80 million. Again, if we move down the balance sheet, so debtors, there's essentially 2 components in those debtors. The big one is the case against Poland, which I'm sure we'll have questions on. So that's the vast majority 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 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 1.3x. That's a big drop versus the 2.4x, 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 2.8x. 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 1x 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 3 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, so that is in that balance there at AUD 29.4 million. Just note that the total write-off on Gladstone was $30.8 million because we incurred an extra $1.4 million post period end.

[ That ] forward.

Sorry, one should be on the balance sheet, yes. Yes. So covered there, 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 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, that says deferred tax liability and tax payable. 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 AUD 114 million. That's around 50p per share. And then 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 25p to 30p per share range. Just move on to the cash flow statement on Slide 12. So again, you can see the decline in the cash that I spoke about on the balance sheet from $53 million at the beginning of the year to $8.9 million 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 million during the period. You'll also see operating expenses and net finance costs. There is very marginal differences between those 2 lines in the cash flow statement versus the P&L. For the operating expenses, 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&L. And the difference for the finance costs versus the P&L is simply the P&L captures accrued interest. Underneath that, you'll see the cost of the AUD 8 million 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, AUD 69 million of net debt at the end of the period, which is around $80 million today. Just move on to the next slide. So this is the slide last time around 6 months ago, I showed a slide, there's a sort of pie chart highlighting the concentration risk that is within the LCM portfolio. This isn't the same information but shown in tabular form, and you can see how much of our AUD 153.6 million of invested capital is concentrated among a small number of cases, largely legacy cases that are more than 5 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 1 that shows #3 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. We want to make sure that, that risk is mitigated in the future. 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, 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. So I'll finish there and hand back to Patrick.

So just before we move to outlook, I want to touch upon 2 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 portfolio as [ Trans World ], now 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 have 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 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 some of the things that we did in respect of that claim as it went through hearing was to ensure that we've got independent 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 approach 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 were -- we would succeed in respect of this investment and that we had a very, very strong claim that we were pursuing through the courts. As a consequence, this has come as a shock to us. The decision was handed down at approximately 10:30 a.m. this morning. So we've had an opportunity to 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 diligenced that in recent times coming up to the hearing 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'll be happy to answer as we move forward. The other issue that I wanted to touch on in perhaps a little bit more detail is what the consequences were for LCM when we were investigated in Dubai. 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 time line in respect of that, we learned about that investigation many, many months after we had commenced in Dubai. We learned about it through the press 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 and how LCM and indeed myself personally interacted with that. And 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 -- 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 the existence of that inquiry, how that hampered us been advancing strategic options that are very much early at the 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 mergers, acquisitions and/or sale, trade sales. So that really has -- the existence of that inquiry and the manner in which that inquiry was undertaken by the Dubai authorities has really represented and caused an erosion of value and loss in respect of LCM and its share price. And 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 profitable outcome. Secondly, we've made an announcement, we have engaged Luminis to assist us with respect to strategic options. We now have the ability to engage properly in respect of that and engage properly with the market having had the Dubai investigation conclude yesterday. Any of the options that we are considering together with Luminis 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 our main focus in the immediate term is bringing investments through to a conclusion and applying the proceeds of that in reduction of our debt. We have engaged with our capital provider for a period now of sort of 3 or a bit more than 3 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. Our capital provider has indicated to us that they are going to provide us with as much support as they can over the next 12 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 the benefit of 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 will be a number of those. The 2 that I can see, which have come up already in respect to this, are questions in or around the GreenX award and where that might be up to and timing in respect of that. So those are the first 2 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 18 months, during which time there will be challenges to that award. Those challenges will be brought in 2 separate courts and both under separate regimes. So there has been -- there's a challenge brought before the Singapore courts, and there's a challenge brought between the London courts. And investors will recollect that we actually got 2 awards here based upon the same fact pattern, 1 in relation to the Australia-Poland investment treaty and the other 1 in relation to the Energy Charter. They both are for very similar amounts. LCM's recovery would engage against either of those. Either 1 of those 2 awards is sufficient to pay LCMR. Just in terms of an update, I think we are still pretty confident that the time scale of 18 months is an accurate 1. 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 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 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 to the challenge, which is being brought in the London market -- or the London Court, that'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 will consider its position delivery judgment. So very much, we can see the efficiencies of the Singapore court, and it's very much more likely that we will reach a position where we can commence enforcement action against Poland in respect of the award, which has been challenged in Singapore before we get even the first judgment from the London court.

I would just add to that. So the key thing here is that we have 2 awards: 1 under the Energy Charter Treaty, 1 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 set-aside proceedings over the last few decades. The success rate of those tends to be in the single-digit percentages. So if you think about it, Poland has got to win 2, so therefore, that is implying a single-digit percentage multiplied by 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 going to have to pay this claim. So he made a statement around October of last year after that claim, the award was announced. He was on the record saying the Polish people will -- may ultimately have to pay this. So 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 if we need to.

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 10:30 a.m. this morning London time. The answer is no. That was obviously not known over the past 3 months when we'll be discussing these things. I would not expect that to change things. 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. And 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 create value out of these investments.

So I'll do the next one. So how much is the balance sheet value of the 3 lost cases under appeal? I think the capital invested into those 3 is around AUD 45 million. 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 going to be between AUD 22.5 million and a smidge higher. So it's sort of in that range. Effectively, we've taken, call it, AUD 20 million, AUD 25 million -- AUD 20 million to AUD 25 million write-down versus cost on those cases.

Next question really relates to the suitability of LCM's business on the public markets and are we giving consideration to whether LCM should be taken private. What I can say in answer to that is 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 gamut from 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 a merger and acquisition, a trade sale and/or a go private. Now we're not in a position to -- we're at the commencement or halfway through that process now, 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 2 questions on today's judgment, so feedback about the judgment and then I think can -- another question asking for a bit more detail. So you can see as per the RNS that we invested, call it, GBP 16 million into that case. Had it been successful -- I think you're all aware of the sort of multiples that we generate on successful investments. So the GreenX case is 1 example where we're on a 6x multiple. Had that case been successful, we would have been talking about that sort of value, 5, 6x type multiple of the capital invested. So there was considerable value in that case. Importantly for LCM, you can see we funded GBP 10 million and the fund funded GBP 6 million. 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 11 a.m. this morning. So we've got to go 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 are there that we can pursue, so we'll come back to you with more detail on that 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, 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 progress through that hearing were very positive.

So there's another question saying, has the company bridged debt covenants. Does management expect the company can access new debt financing? Or will equity injections be required? 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 30 of December of this year. So we have not yet reached our debt covenants. But the reality is there's a reason why you go and get those waivers. So we are -- the lender has been supportive to date. Obviously, they -- I think we put in the annual report that current intention is to support us for the next 12 months as we complete the strategic review, but obviously, 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. Does management expect new debt financing or will equity injections be required? So we are looking at strategic options that could include refinancing as part of that. And also equity injections, I wouldn't take that off the table at this stage. Clearly, you've all seen the results that we've published, and all options 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, but 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.

the next question is do we have -- are we in a position where we can revert back to the previous accounting standard. And David will be able to answer this in more authority than me. There are a couple of observations that I would make, is all of the listed peers apply the same accounting standard. I think it's really a question of not a matter of choice, but it is what is the appropriate standard to be applying to a business like this.

Yes. So 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. Anyway, so we're now on fair value accounting. 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 1.3x 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 far progressed. But essentially, we've -- by setting the thing up more conservatively, we're now close to where the fair value is similar to the cash invested. So that sort of uncertainty, if you like, and that perhaps that premium, which is -- which may be somewhat at risk has essentially 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 ATE insurance. And the question is 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. Now that risk is something that we typically lay off through a policy of 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.

Yes. 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. Okay. I would just say, clearly, where we are, all options remain on the table. And so 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 2x MOIC as sufficient to cover losses, operating costs and overhead or is the target to increase the average MOIC closer to 3x. What I would say there is the business is priced exactly the same as it's been priced probably for the last 10, 15 years in that a lot of our business, if it's successful, we will win 3x, 4x, 5x plus. The problem has just been the losses. It's -- the business is there, and it's priced appropriately. I mean if you look at the wins, the cumulative wins in the period, so we said 6 wins, 6 losses, and in aggregate, they produced a 1.8x average result. Those 6 wins, I think, delivered an average MOIC of over 5x. So again, if you win and the -- all of the in-force business, it's priced for those higher multiples. The problem has just been this run of losses. So I would say the key thing is just getting that win ratio back. We don't think that what we've experienced over the last 6 months is now reflective of what the rest of the book is going to play out. In reality, over the last 6 to 9 months, we've had a lot of these legacy cases, which have -- came through. And my sort of view as relative newcomer to this sector is that when you have these sort of legacy investments, 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. We're not fully there yet. There's a few more to go, but hopefully, that sort of gives you a feel in responding to that question.

Next question is what does the future of LCM look like. And I think, really the answer that needs to be broken down. In the near term, it's very much a focus upon a very focused management of these particular investments and reducing debt. And then if we look 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 we ought to be in a position where, when we conclude that review, we'll be able to come back and share some of those determinations with equity participants.

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 we have had significant conclusions over the last 6 to 9 months. It's just that the results have gone the wrong way. In terms of answering the question, I think the key thing is having continued lender support because of 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. So I think 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 to date. 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 that is the plan, and hopefully, [ Michael ], that also answers your second question on describing runoff. So I hope I have addressed that one as well.

There's another question just in relation to timing of GreenX. I think we've dealt with that. I think as we've said, we are still looking at a time horizon with respect to that of 18 months from March. And I think we're sort of tracking in relation to that.

So 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 30th, but the -- everything had been basically dismissed, and we understand the verdict there was really quite scathing. Yes, it -- because it came in so late, we've just included it in the results released this morning rather than issuing a separate RNS. Okay. So there's a question on why Luminis, an Australian firm, rather than a recognized European specialist adviser.

I think in the first instance, we need to recognize the fact that we are an Australian public company, so 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 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 Luminis in Australia, but I think it's important that we recognize the fact that we would be subject to Australian law.

So will the Board consider reducing directors rem in order to reduce OpEx? I think, yes, it's a reality. So we've sort of indicated we think we were 1 of the more lean funders coming into this with our AUD 20 million annual OpEx at the beginning of the year. When you think about what we're saying, that's potentially falling to, call it, $5 million. So we are being very disciplined to try and reduce costs for shareholders. And if that means compensation for directors being reduced, then, yes, it'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. At this point, we do not feel we're in a situation where we need to seek to fund or terminate funding in respect of any claims, which we see as viable, but that is something that we are talking to our capital provider about. It's something that we're considering at all times.

So there's a question from [ Max ] on what are your thoughts on the timing of the AUD 88 million due from the resolution of investments. So [ Max ], that's in the consolidated balance sheet. So what I've put up the slide, 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 consolidated balance sheet that you find in our financial statements. That $88 million, if we put it on to an LCM-only basis, the LCM share of that is $30 million, of which the vast majority of it is that GreenX debtor. And I think Patrick spoke earlier on around our expected timings in terms of the Singapore set-aside proceedings and then the London set-aside proceeding. 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 against the benchmark of what do we see as the value of the portfolio, the intrinsic value of the portfolio on a runoff basis.

And there's a question from [ Albert ] around the NAV. So as of 30th of June, NAV per share was 50p. He's saying you announced a loss of 15p and then today, a loss of 25p. So how do we reconcile with estimated NAV of 25p to 30p? I think it's just tax, [ Albert ], is the difference. So the tax losses will reduce the gross impact. Next. So we're seeing a lot of questions, which I think we've already sort of answered. Question from [ Edward ] on the LPs. So do you think that LPs to Fund I and Fund II will pay their cash commitments when called upon to do so? Sure. Absolutely. And we'll be engaging with our LPs post these results coming out. 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 1 case. So the -- if you look at the performance of Fund I, even in light of recent outcomes, it still stacks up pretty well. I think we believe we can deliver to Fund I LPs even in light of recent losses, something like a 1.5x return, which is in line with what was the initial objective of the fund when the fund was first launched in 2020. So it's very important for us to manage all of our key external stakeholder relationships, and we'll be engaging proactively with LPs in the coming weeks. But we have good relationships there, so we expect that they will absolutely continue to meet their commitments.

Next question relates to a Fund III and what are our thoughts around the Fund III. As equity investors would be aware, coming up to sort of June of this year, we're positioning ourselves to do a first close in respect to Fund III. We had done a number of roadshows in respect of that, and we were positioning to do that. What -- the reason why we were unable to affect the first closing 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 that was finally resolved. That was resolved late yesterday. I think as we have said, we are wholly focused upon close and focused management of the existing portfolio and paying down debt. And once we achieve and strike a sensible balance, we will then consider whether Fund III is the appropriate way to move forward. And we'll obviously bear upon the strategic analysis that we're undertaking.

So there's a question from [ NW ]. What is the rundown value as of today that you are benchmarking every option against? I would say that we're not going to put a number out there. We have a view internally, but our performance over the last 6 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 do what it used to do in the 13 years prior to 12 months ago. So rather than putting a number out there, if it's okay, we're going to focus on hopefully converting existing investments into wins and sort of getting our credibility back with investors that way.

Next question is around what LCM's entitlements are in respect of the GreenX/Poland award. As we know, we were sort of working towards positioning ourselves to enforce those favorable awards. There's 2 aspects to that. Obviously, there's a fund component of that. And then there's an LCM component of that award. And the question is does this give your capital provider some comfort. Undoubtedly, that is the case, yes.

So a lot of these questions, I think, we've answered.

I think we're sort of coming up to the 1-hour mark as well. So I think what we will do is endeavor to respond to as many of these as we can afterwards, but I think we're kind of running short on time now.

I mean just last question from [ Stuart B. ]. 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 judgment that we announced today, which has crashed the share price, we are going to 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 one key aspect of that judgment, which we've 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 cleared the hurdles on those. So I would just say you will -- you can expect to hear more from us once we've had the full chance to digest that judgment and also run through with the lawyers what the best strategy may be from here.

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 from investors this afternoon. And of course, we will give you back all of the questions that came in just for you to review after the presentation, and we'll publish those responses 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 would be great.

Look, I would say to investors that LCM and our team are very much focused upon 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 undertaking a strategic review so that we can sort of look forward and what the optimum business model is for us into the future.

Perfect. Patrick, David, thank you once again for updating investors this afternoon. Can 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 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.