Omni Bridgeway Limited (OBL) Earnings Call Transcript & Summary

Thank you for standing by, and welcome to the Omni Bridgeway Limited FY '26 Results. [Operator Instructions] I would now like to hand the conference over to Mr. Raymond van Hulst, Chief Executive Officer and Managing Director. Please go ahead.

Good morning, everyone, and welcome to [Audio Gap] '26 results presentation for the 12 months ended 30 June, 2026. My name is Raymond van Hulst, Managing Director and Chief Executive Officer. Joining me today are David Breeney, our Chief Financial Officer; Jeremy Sambrook, our General Counsel and Company Secretary; and Nathan Kandapper, our Head of Corporate Development and Investor Relations. Before we turn to the slides, let me share how I look back at this year. 2026 is a milestone year for Omni Bridgeway. It marks 40 years since the founding of our business and 25 years since our listing on the ASX. Very few alternative asset managers reach either milestone and fewer still become global leaders in their asset class. These anniversaries matter beyond the headline. In an industry that is consolidating around a small number of institutional grade platforms, a 4-decade track record built through multiple economic cycles, several generations of leadership and in the transparency of a listed environment is the single most difficult asset to replicate and no one else in legal finance can point to one. There's also something quite special in that, an Australian listed company with these origins standing as the global leader in an alternative asset class. While FY '25 was a year of transformation, FY '26 was a year of execution. At our Investor Day in 2024, we defined our strategy around capital-light asset management, cost coverage, deleveraging the balance sheet and cash conversion. Defining a strategy is the easier part of the work. Executing it matter by matter and decision by decision is materially harder. FY '26 was a year spent on that harder part. 12 months ago, we set out a clear set of targets for the year on operating expenditure, on fee income, on cost coverage and on capital formation. And I'm pleased to report that we have achieved or exceeded each of them. We also delivered record cash investment proceeds and record new commitments, and we reached our USD 1 billion capital raising target for Funds 4 and 5 Series 2 in what has been a difficult fundraising market for the entire alternatives industry globally. Legal investments have a 3- to 5-year investment cycle. Our funds have an 8- to 10-year cycle, and we've defined a multiyear strategy. In that context, little in our company or in our industry turns on a single quarter, a half or even a full financial year. What matters most are the patterns and trajectories across multiple periods. So while my focus today is on the annual results, I aim to put them in the context of those patterns throughout this briefing. While [Audio Gap] share, not every metric landed exactly where we projected. And I'll be open about where and why. But the underlying picture is one of consistent and disciplined execution of and progress towards the strategy we have laid out over the past 2 years, a capital-light asset management model, structurally higher cost coverage, steadily converting a maturing diversified portfolio into cash. In other words, a business progressing well towards a steady state as presented at our 2024 Investor Day and March 2026 OBL [Audio Gap] look at today's results. As a final note, before we turn to the slides, in March, we released an extensive analyst data pack to the market. And together with today's results presentation, we have released an updated version of that pack. In keeping with Omni Bridgeway's position across 40 years of pioneering this industry and 25 years on the ASX, it contains the most extensive analysis available of legal assets as an alternative asset class and the vintage analysis that reflects our long and unique track record. It has been well received by shareholders, fund investors, analysts and industry participants for the transparency it provides and understanding it adds. We aim to maintain and update it, and I will refer to certain sections of it throughout this briefing. So over the next 30 minutes or so, I will first cover the highlights from the year and the performance of our portfolio. David will then take you through the key elements of our financial results before I come back on our strategic update and our priorities for FY '27 and beyond, followed by Q&A. So let's move on to the highlights for the year. As I indicated, FY '26 has been a year of disciplined execution against the targets we set at the FY '25 results. Let me summarize that through the key numbers. Cash investment proceeds came in at $350.5 million, up 49% on FY '25 and a record for the company. New investment commitments ended at $712.2 million, up 38% on FY '25 and also a record. Cash OpEx was $67.1 million, which is 16% below our FY '26 budget of $80 million and 20% below FY '25. Fee income grew to $35.4 million, achieving our $35 million target for the year and up on FY '25. And cost coverage increased to 53%, up from 36% in FY '25, comfortably exceeding our FY '26 target. On capital formation, we reached an important milestone by achieving a USD 1 billion capital raising target for Funds 4 and 5 Series 2 with over USD 500 million added during FY '26. The documentation and final terms on those last subscriptions are now being wrapped up. We also raised a further $72.5 million in sidecar capital during the year, and we have a number of additional sidecar arrangements at advanced stages. I will spend more time later in this briefing on our capital formation success and its strategic and competitive relevance. When this stage of the capital formation is wrapped up now, we will have achieved a further major strategic milestone. There is one item where we did not land where we expected. And even though investment completions ended at record levels, OBL-only investment proceeds for the year came in below the range we had anticipated at 30 June. That was primarily a timing outcome rather than a [Audio Gap]of investments that are probabilistic models projected to convert to cash before the year-end did so early into FY '27, materially bridging that gap within several weeks of the balance sheet date. We cannot control duration of individual matters, but the defining characteristic of this asset class is that it is self-liquidating. Outcomes will happen and the investment proceeds will follow. This is a part of the investment life cycle I referred to in my introduction. These patterns play out over years, not from quarter-to-quarter. Looking ahead to FY '27, completion momentum is expected to continue, underpinned by an increasingly mature portfolio of assets, which provides a strong base for cash completions in the coming periods. AUM growth will continue to drive the increase in fee income, further supported by improving fee terms on new capital and commitments. Together with controlled OpEx, that is expected to keep us on track for our FY '28 cost coverage target of 70%. On the capital raising front, we expect further capital to be raised across multiple sidecar arrangements. And in terms of the opportunity set, the global industry consolidation is now clearly reflected across an increased pipeline and appropriate risk-adjusted pricing. Our focus will be on managing those opportunities while maintaining discipline around the parameters of our capital-light strategy and our cost coverage targets. Growth for the sake of growth is not the objective. With that, let's turn to the highlights on investment performance. We had 80 full and partial completions for the year, up from 60 in FY '25 with a multiple on invested capital or MOIC of 2.3x and 105% fair value conversion ratio. That ratio indicates how closely our fair value translates into cash proceeds, noting again that this should always be looked at on a portfolio level [Audio Gap]. The 2.3x MOIC compares to our life-to-date average of 2.4x across all vintages over multiple decades and economic cycles. It sits within the normal range of variation and both are excellent investment returns for this asset class. I would also note that the first completions after year-end came in at a MOIC of 5.7x as disclosed in our most recent quarterly update. IRR across all full and partial completions was 40%. There was also continued growth of the portfolio and assets under management with AUM now standing at $5.9 billion, up 12% since June 2025 and in line with our medium-term double-digit growth target. Our portfolio fair value grew to $3.8 billion with $725 million in OBL-only fair value, and we added $564.4 million in new fair value from $712.2 million of new commitments. As per my opening remarks, these investment metrics are the foundation of our business. They are what drives institutional capital to invest with us, drive our financial results, platform growth as well as operating efficiency going forward. Now moving to our business performance on Slide 7. David will cover our statutory accounts in detail in a few slides' time. Two points of context before he does. First, FY '25 included the Fund 9 transaction, which contributed over $300 million of secondary transaction proceeds and a similar quantum of fair value gains. FY '26 has no equivalent one-off item. So the step down in statutory headline from $416.8 million of net profit after tax to $45.9 million is expected, and the 2 years are not directly comparable. Second, FX has been a genuine feature of this result. I will come back to it on a later slide, but the short version is that the movement in the Australian dollar has produced a large non-cash translation effect on reported fair value and earnings. On a statutory IFRS basis, total income was $182.2 million, with net profit before tax of $48.2 million and net profit after tax of $45.9 million for the year, delivering earnings per share of $0.19. From an OBL-only perspective, total income was $116.5 million, fee income was $35.4 million and cash OpEx was $67.1 million. From a shareholder metric point of view, return on equity was 8% and total book value per share was $2.96, effectively flat on FY '25 but down 1%. That flat outcome is largely the currency translation effect I mentioned. This metric continues to highlight the discount to book value at which our shares currently trade. Let us now take a deeper look at how our portfolio progressed during the year on Slide 9. I won't spend too long on this slide as we provided many of the key points earlier, and this has been a key part of our quarterly reporting. However, we feel it continues to be important to provide a breakdown. Completion activity was at record levels with [Audio Gap] generating $350.5 million, of which $47.5 million was attributable to OBL-only. In addition, we received $6.6 million in cash carried interest, taking total OBL-only proceeds to $54.1 million. We separated carried interest out this year as it is becoming a more meaningful and recurring component of our OBL-only cash generation as the funds mature. Within the total, the 39 full completions delivered a 2.2x MOIC and 102% fair value conversion and the 41 partial completions, a 2.5x MOIC and 109% conversion. An overall fair value conversion of 105% across 80 completions is a strong outcome, and again, sufficiently close to 100% to confirm that our valuation framework is behaving as intended across the portfolio as a whole. The portfolio developments outlined in our recent quarterly portfolio updates were positive and will drive continued completion momentum into FY '27. Looking at our portfolio on a fair value basis, our portfolio continues to be very well balanced between the regions and the different investment types. This level of diversification within the legal finance asset class is unique to Omni Bridgeway and reflects our multi-strategy approach with specialized teams focused on specific legal sub-strategies based on global areas of law or based on jurisdictions. This diversification mitigates the risks associated with adverse regulatory, legal and economic events in any particular region or area of law. I continue to be pleased with our limited exposure to single large investments with the largest 10 investments representing only 15% of our commitments and 23% of the total fair value of our portfolio. This focus on diversification does not prevent us from investing in larger matters. Rather, we do so using sidecar Capital in addition to our own funds. Sidecar capital helps us mitigate concentration risk while still generating management fees, transaction fees and our performance fees, enhancing our return on capital and equity. This disciplined portfolio construction and diversification approach has been a major factor in our capital formation success. We've added Slide 11 this year because FX has been a material feature of the FY '26 result, and we want to provide some context on FX and its impact. Our portfolio is diversified by geography, and that creates exposure to different currencies. The chart on the left shows fair value by currency, which reflects the currency of entitlement of each investment in the portfolio. [Audio Gap] the currency of the legal claim itself. Three points follow from that. First, the entitlement currency is typically the same as the funding currency. So the money we put into the matter and the money we expect to recover from it are generally in the same currency, which provides a natural hedge at the investment level. Second, the majority of our entitlements are in U.S. dollars and the majority of our fund capital is also U.S. dollar-denominated. That provides a second natural hedge, this time between the assets and the capital that funds them. And third, and this is the most important one, we report in Australian dollars. So when U.S. dollar-denominated values are translated into Australian dollars for financial reporting purposes, movements in the exchange rate produce a non-cash accounting impact, but that has no immediate bearing on the underlying economics of the investments, the funds or on the cash investment proceeds. FY '26 saw sustained appreciation of the Australian dollar against each of our major exposure currencies, as shown on the right-hand side of the slide, with movements through the year of 4.6% against the U.S. dollar, 7.4% against the euro and 8.1% against the pound. The consequence is a significant non-cash negative translation effect in our reported numbers, which flows through the fair value movement and to the earnings. In quantum, that effect was a negative $317 million on total portfolio fair value for the year, of which $64 million related to OBL-only, figures I will come back to on Slides 13 and 14. To put it plainly, our investments have not become less valuable in the currencies in which they will be recovered and are funded, but the Australian dollar as a reporting currency has appreciated during the year. On Slide 12, we show the continued growth of the portfolio and platform, which is important as it drives further diversification and economies of scale. Firstly, looking at the right-hand side of the slide. The total portfolio fair value stands at $3.8 billion, having grown at an 18% compound annual rate since December 2023. This is net of new commitments, completions, material litigation events and the currency effect and represents the fair value of the group's gross investment portfolio. $3.8 billion, $725 billion is attributable to OBL-only, up from $669 million a year ago. We will discuss these in more detail on Slides 13 and 14. The left-hand side shows total commitments and deployments on active investments, now at compound annual growth rate of 17%. One methodology note on the left-hand chart, we've updated the basis to include conditional commitments in respective financial years so that this chart now aligns with the portfolio fair value chart alongside it. The detail of that change is in the footnotes. On to Slide 13. This slide and the next explain in our standard recurring format the movement in portfolio value during the year on a total basis and on an OBL-only basis. Overall, total portfolio fair value increased by $277 million for the year. Working across the chart, the portfolio increased from new commitments and from investment deployments during the period. The next fair value movement is driven by 3 main factors. First, the discount unwind, which reflects the passage of time as investments move closer to an expected completion. Second, material litigation events or MLEs, which had a non-cash negative impact of $333 million for the year and reflect the net effect of all positive and negative fair value developments. These involved 217 of our investments over the period, which in itself is indicative of a diversified portfolio. MLEs can be interim judgments or expert reports, but more often reflect timing changes or externally driven adjustments to budgets or claim values. This is approximately 9% of the portfolio value. It should be read alongside 105% fair value conversion ratio discussed earlier, which tells you that where matters did complete, they completed at or above our valuation. Correctly adjusting for MLEs along the way supports that outcome and the overall integrity of the fair value framework itself. Notwithstanding, it is somewhat more than we like to and are used to observing on a period-by-period basis. And finally, FX movements, which as I discussed on Slide 11, had a non-cash negative impact of $317 million in the year. The last bar reflects the investments and the associated fair value that completed during the year and have therefore fallen out of the portfolio. Slide 14 provides the identical overview, but from an OBL-only perspective. Overall, the OBL-only value of the portfolio increased by $56 million during the year from $669 million to $725 million. Within that, MLEs had a negative impact of $38 million and FX a negative impact of $64 million. By comparing Slides 13 and 14, it becomes clear that the OBL-only attribution rate for new commitments, deployments, MLEs and currency is not proportionate to the total. The attribution rate is driven by the co-investment and carried interest terms of the relevant funds and sidecar arrangements. It also means that the larger movements at the portfolio level translate into much smaller movements in the value attributable to OBL-only. I will now hand over [Audio Gap] results in more detail.

Good morning, and thank you, Raymond. This set of financial results delivers against the set of targets outlined at the beginning of the year and reaffirmed at the half. We are being rewarded as the book matures and the balance sheet is enjoying the benefits of prior debt repayments and notwithstanding the FX impact of the AUD strengthening against the USD, the book has grown. And overall, the balance sheet continues to show strength, whilst our fair value conversion ratio of 105% continues to reinforce our asset valuation. Turning to Page 16. Let's dive into the walk of the gross portfolio proceeds at the fund level, reconciling to the consolidated NPAT results. Portfolio investment proceeds reached $350.5 million, a 49% increase year-on-year. This is a record for the portfolio. Fee income of $35.4 million continues our year-on-year improvements to the fee base and fair value movements of $61.9 million drove net profit before tax to $48.2 million and a net profit after tax to $485.9 million. The fair value gains are, in fact, down from the half, driven by unrealized non-cash fair valuations, which unwound from the previous non-cash gains at the half. From a statutory perspective, the majority of Omni's litigation investments are now valued at fair value. These assets are continually assessed during the life cycle of the litigation case with our experienced valuation team updating their models. Therefore, developments and assumptions in cases can swing valuations positively and negatively in a period as new information emerges. These movements do not represent cash proceeds received in the period or the final success of our cases. A better metric for that comparison is our fair value conversion ratio. But these non-cash movements, however, do flow through to the underlying profit results. In addition, as Raymond earlier mentioned, it's important to take note here that the Fund 9 transaction in the second half of FY '25 has resulted in a non-like-for-like comparative period with Funds 2, 3 and 4 all deconsolidated for the FY '26 period and now accounted for at fair value. On Slide 17, the OBL-only fair value P&L is management's preferred view to show realized and unrealized income. It considers all OBL's investments at fair value, inclusive of Fund 6 and 8, which are held at cost and fully consolidated under IFRS. For FY '26, [Audio Gap] $49.4 million in EBIT with a realized EBIT [Audio Gap] an increase of $33.5 million on FY '25, driven by the successful investment completions, fee income increased and disciplined cost management. Our unrealized income was likewise positive at $27.9 million, reflecting value generation of new investments less non-cash movements in the book. We achieved a positive movement in the OBL portfolio year-on-year even after a negative FX movement of $64 million, which absent of the negative FX impact, would have resulted in an EBIT of approximately $114 million. The OBL-only cash P&L reflects the cash view of the P&L items for FY '26 and is a bridge to the cash position stated in the quarterly report issued at the end of July. When excluding non-recurring cash items and investment deployments for future book growth, OBL achieved a net cash generation of $22.4 million for the year. We have benefited from an increase in fee income, the removal of interest expense as a result of the Fund 9 transaction in late '25 in combination with reduced OpEx spend. OBL-only co-invest deployments reduced 35% year-on-year to $28.3 million, another cash flow benefit from the Fund 9 transaction. After those deployments and non-recurring items, total cash movement for the year was negative $15.6 million, reflecting deliberate reinvestment of cash generated into future value generation for shareholders. Cash OpEx in the year has reduced 20.2% during FY '26, a further improvement on the 6.2% we achieved in FY '25, all during an inflationary period, reflecting our disciplined cost management approach. Turning to the Page 19 -- Slide 19. We've made strides in our cost coverage and further improved our sharp focus on cost discipline. OBL-only cash OpEx was reduced to $67.1 million, beating our FY '26 target by 16%. This, however, will be the low point for cost decreases and inflationary rises should be expected, resulting in a target range of $72.5 million to $75 million for FY '27. Fee income grew to $35.4 million in FY '26, in line with our target of $35 million. As the book grows, opportunities with sidecar investments and improving fee terms, we anticipate fee income to be in the region of $40 million to $45 million for FY '27. Together, these lifted cost coverage to 53% for FY '26, up from 36% in FY '25. A result, we remain on track -- as a result, we remain on track to achieve 70% cost coverage by FY '28, a key milestone in our long-term efficiency strategy. Moving to Page 20. This chart provides a bridge of cash movements and our liquidity balance at the end of the full year. On an OBL-only basis, we have $125 million in cash receivables at the 30th of June. We received -- we revised our liquidity forward position at the half, and this is in line where we expect it to land, while an additional $33 million from agreed settlements that have largely been received within 6 weeks after the year-end largely bridge the gap to our 30th of June position. Looking at the next 12 months, the timing of proceeds is inherently a challenge in this industry. With a large enough book, proceeds become relatively more predictable, but can be skewed by small timings around period ends in completions of larger cases. As a result, using a probabilistic analysis to reflect a range of possible outcomes is our best method to outline OBL's forward-looking cash flow and liquidity, the assumptions of which are driven by 300-plus underlying matters that are live and dynamic. The midpoints of the FY '27 ranges on the previous slide imply management fees of around $42.5 million and platform expenses of circa $74 million. Using a Monte Carlo simulation to drive a P50 scenario, the expected cash flow for OBL-only from completions is potentially around $98 million with associated deployments in the scenario potentially at $40 million. The candlestick ends represent the range of different scenarios based on a P80, P20 or 60% confidence interval. Secondary sales are always a potential source of proceeds and are shown as an unfilled box, which could occur if the opportunity arises. We expect the portfolio to be on track to deliver positive free cash flows for the year ahead. With that, I'd like to hand back to Raymond.

Thank you, David. Before we move to Slide 23, some further comments from me on the Slide 21. The indicated probability range for investment proceeds is remarkably wide and seemingly with significant upside potential and uncertainty. That is the effect of a maturing portfolio with an increasing number of investments, which may complete in full or in part during FY '27. As indicated earlier, duration is uncertain and legal investments do not stick to annual cycle. It may complete late in the year or in the period after. In addition, and as reported earlier, there are several larger matters within that group and whether they complete in the current period versus the year after may have a major impact on the cash conversion in the year. That is all reflected in that increased range as demonstrated by the candlesticks, and that will drive the availability of excess capital and the opportunities within our capital allocation policy as defined last year. Now on to Slide 23. Let me start the strategic update with capital formation because that has been the standout of the year. In FY '26, we raised the equivalent of AUD 862 million in new third-party capital. Most significantly, we reached our USD 1 billion capital raising target for Funds 4 and 5 Series 2. In the fundraising environment that has been challenging for the entire alternatives industry and particularly difficult in legal finance, where it has been a major driver of consolidation, achieving a $1 billion target makes Omni Bridgeway the positive standout in our industry globally. For the Series 2, the commitments are split approximately 40%, 60% between Funds 4 and Fund 5, which better aligns the capital with our portfolio, our themes and the opportunity set by region, that is the U.S. and the rest of the world. That is also visible on Slide 10, which outlines the portfolio between the regions. In the process, we have secured commitments from several cornerstone global allocators, adding multiple new institutional investors as long-term capital partners. These are institutions that can and want to scale allocations in multiples of their first commitment through sidecars, through new funds and through new verticals. We believe this capital formation framework with these partners provides a structural advantage to OBL going forward. Additionally, sidecar funding continues to grow as a source of flexible capital for legal assets that sit outside the investment criteria or limits of our funds. It allows us to underwrite larger commitments within our framework of disciplined portfolio diversification and construction for our funds and without expanding our own balance sheet exposure. Cumulatively, capital commitments to our platform have grown at 30% compound annual rate since we transitioned from balance sheet to third-party capital. Slide 24 is largely self-explanatory, and I won't spend too much time on it now, but I will draw out 3 points. On market, legal finance continues to grow at double-digit rates globally. Adoption continues to increase and regulation in our relevant markets have settled into a balanced position. The capital products currently offered to the legal industry remain nascent and limited relative to the total addressable market. That gap is the opportunity. On industry, nearly 40 years after inception, we are in a clear period of consolidation. Capital is consolidating around skilled players with proprietary origination, general workout capability and a track record of underwriting discipline across multiple economic cycles. There are very few of those. Reduced competition supports further growth and incremental market share at appropriate risk-adjusted returns. And on Omni Bridgeway specifically, I would like to highlight one item that is new on this slide. We hold the largest and most diversified industry data set of completed investments anywhere in legal finance, including across jurisdictions where no comparable data exists. As AI tools become more capable, proprietary data of that kind becomes a durable underwriting advantage rather than just simply a record of the past. Slide 25 sets out where we are in executing our plan across 3 phases. As I said in my introduction, this is the plan we defined at our Investor Day, built around capital-light asset management, higher cost coverage, deleveraging and cash conversion, and FY '26 was another year of disciplined execution against it. Phase 1, the restructuring and transition phase is complete. We deleveraged the balance sheet, which involves repaying $250 million of debt in full, eliminating around $30 million of annual interest expense and moving OBL from net debt to net cash. We also settled the last legacy balance sheet liability of approximately $28 million, which closed that chapter. And we generated the cash needed for that from our portfolio. We improved cost coverage from [Audio Gap]. We transitioned to a capital-light asset management model, reducing OBL co-invest, aligning reporting with the asset management industry, implementing a fair value framework validated by a major third-party transaction as well as ongoing completions and rolling out the team carried interest program. And we executed successfully on capital formation, raising more than $1.6 billion in fund sidecar capital, adding Ares and other high-profile cornerstone investors as capital partners and securing strong capital availability through a period of economic transition and industry consolidation. Phase 2, execution, is in progress and FY '26 is the first year in which you can see it clearly in the numbers. We are capitalizing on improved market circumstances and an expanded opportunity set with record commitments of $712 million in FY '26 and pipeline and term sheets at elevated levels. We are seeing continued acceleration of cash completions with record investment proceeds of $351 million, up 49% on FY '25 and a strong start to FY '27. Importantly, this is not 1 strong year, but a sequence of years of rising completions as the vintage analysis on Slides 4 to 6 of the analyst data pack illustrates. And we remain on track for the 70% cost coverage target by FY '28, supported by growth in AUM. This indicates that we are tracking well against the steady-state model that we presented and discussed earlier. Phase 3, sustainable growth is at an early stage. That is growth through further expansion of existing strategies and markets, growth by expanding into new strategies and markets with growth enabled by increased capital availability and flexibility. Slide 26 sets out how we think about that. Our ambition is unchanged to be the world's leading alternative asset manager dedicated to legal finance and the most diversified and institutional platform for the primary origination, underwriting and management of legal assets and legal risk. Slide 26 shows the 2 directions in which we grow, all within OBL's defined market of legal assets and risk. The first is by growing within our existing strategies or also called portfolios, growing our business and market share in the geographies where we already operate in the areas of low where we already have dedicated teams and in the investment types we already specialize in. The second is by adding strategies. This can be through expansion into new geographies, into new areas of law and expansion in investment types, for example, structured finance solutions and legal insurance. Underneath both directions, still 3 structural tailwinds that we do not fully control, but we do benefit from. The continued underlying growth of the legal services industry, the continued increase in adoption of legal finance by that industry and the continued increase of our market share supported by the industry consolidation. The important qualifier is at the top of the slide. All of this growth is to be delivered within the parameters of our capital-light strategy, capital allocation policy and our increasing cost coverage. We have an opportunity set that is larger than our capital and our cost base, and we will be disciplined in the next few years in managing the opportunity set. And to conclude on Slide 27, our strategic projects and targets. I've already discussed our updated analyst data pack and the updated vintage analysis. And turning to our FY '27 strategic projects. They include continued acceleration of portfolio completions, i.e., a real focus on cash conversion of our portfolio and increase in market share in the key markets, capitalizing on industry consolidation, further expansion and diversification of sidecar capital arrangements of our legal asset investment strategies and our shareholder base and analyst coverage. Possible smaller strategic secondary market transactions, we always look at those whenever they're economically and strategically attractive and the continued balance sheet transition with the deconsolidation of Fund 6 and Fund 8 as possibilities. In terms of the tangible targets, we've set ourselves for FY '27 and beyond, listed on the right-hand side. Cash OpEx of $72.5 million to $75 million for FY '27, fee income of $40 million to $45 million for FY '27, 70% cost coverage from fee income by the end of FY '28 and double-digit annualized growth in AUM over the '26 to FY '28 period. 40 years after this company was founded and 25 years after it listed, Omni Bridgeway is debt-free, covering its operating costs from realized income, managing a record book with a materially lower cost base and holding a fully raised flagship fund program as a market leader in a growing but consolidating industry. That is a good place to be starting FY '27 from. Thank you for your attention. We will now move to Q&A.

[Operator Instructions] Your first question comes from David Fraser with MST Financial.

David, are you there?

Sorry, I lost the phone there. Before I ask a couple of questions about the result, I was just wondering if you could give us an update on a case that we've seen in the press with respect to Kleros winning against Tata Power. The press has speculated that the case is completed effectively and the potential win proceeds to Kleros is USD 640 million. I was just wondering if you could give us an idea of -- I presume that sits on Fund 5 Series 1, which will then obviously feed into Fund 9. But if you could just give us an update on that case.

Thanks, David. You're remarkably well informed. That's overnight news. Well, I've noted the press release. Certainly, we're pleased by that news. As I've said earlier, we never comment on single investments, certainly not if they're still live and it's very fresh, but it's positive news. And I think you should look at that news in the context of, I think what was it, Slide 21, the investment proceeds comments I made. This is possibly a good example of that uncertainty in proceeds during the year on an OBL-only basis, if it comes in the year, it looks to be a very good outcome. And if it jumps over the year, it will still be a good outcome, but it will be in the year after. But I can't -- as I said, it's overnight news and it's a single matter. We generally don't comment on those.

Okay. Getting back to the result. OpEx was down materially lower than your budget and then obviously it's forecast to go up a little bit next year. Is there anything that you can comment on, I guess, why the costs were down quite materially on budget and why they're going up next year? And what would be the outlook going forward on the cost base going forward?

Yes, thanks. So I think we were positively surprised ourselves. We might have been slightly more successful than we thought on some of the cost savings. But we shouldn't look at that 67 number as the ongoing number. Some cost savings are really one-offs that won't be repeated next year. Think of some significant leases that we've renegotiated with 6 months free lease. That won't happen in the next year. So what we've indicated is that 72.5 is more or less the target. And I think you should be thinking about it as the low-end going forward with inflation as the increase after that. We don't have any further cost saving measures available or have any intentions to make further cost savings. The opportunity set is what we're focused on now.

And then I guess a more specific question. A question on the after event costs that you had to pay. Have you finished paying all those cash costs yet?

Yes, we have.

Okay. And last one from me before I let someone else jump on the line. You're talking about the market consolidation. How do you -- what are you thinking about how that's going to benefit OBL growth-wise? And are you seeing any better pricing coming through because of that consolidation?

Yes, we do. So I think it comes in [Audio Gap] in 2 different ways. We see more. So the pure inflow is going up. And maybe where 3 years ago, there might have been a couple of parties putting a term sheet forward, 3 or 4. Today, we typically are competing with one other party or no other term sheet at all. And we've been facing what I would call false competition historically where sometimes matters were underpriced or risk was underpriced, and that's reflected in the consolidation. I mean you can do that for 4 years. But after a while, the investment returns will come through and you won't be able to raise further capital. So I think the market has now reset and everybody acknowledges what the appropriate pricing is for these risks, and we feel less pressure on that. So I think what we're seeing currently is a bigger inflow, more opportunities, and at the same time, less pressure or less competitive pressure on pricing and so better pricing all across.

The next question comes from the line of Peter Meichelboeck Select with Equities.

Can you hear me okay?

Yes, Peter, we can hear you.

Great. Look, I also had a question on the cost coverage. Obviously, you had that big jump from 36% to 53% this year with that large OpEx reduction. I mean I'm just looking at that midpoint of the guidance for both fees and costs next year that gets you to about 58% on my numbers. Why just -- so 53% to 58% if that were to occur at the midpoint. Just wondering why you're sort of confident around the 70% by the following year?

You've done the math fast on that. Very good. I think the range that you see there is 53% or 54% to 62%. That's a result of the double the guidance on both fee income and OpEx. My expectation is that we'll be at the high end of that range, depending on the fee income, that's where the uncertainty mostly sits. And based on the AUM or the fundraise that we've just completed, that gives us the comfort that with the fee terms and the increasing fee terms we see in market that we can continue the same trajectory into next year and getting to that 70%. So it's within the range. You can read a little bit of conservatism in there if you want to, but it's that same trajectory.

Right. Understood. Just given that you've said you've got no further sort of cost savings on the OpEx side. I mean if we look longer term, is there the potential to actually get to 100% cost coverage? Because I mean, I think if I sort of think of fund management businesses, it's not a realistic sort of target I guess. I mean like I said, now that OpEx is trending higher, is 100%, if you look far enough out, is that a realistic target do you think?

No, absolutely. I mean, in that sense, I think our trajectory is largely similar to that of the larger asset management platforms globally, which have also taken time to get to that 100%. The way to get there is growing the asset base and making sure that your fee terms [Audio Gap] The good thing we've seen over the last few years is that in the market reset, fee terms are -- have caught up and they are at the level where they should be. And AUM is growing. So if we continue to execute on what we've been doing over the last few years, that cost coverage will continue to increase. And so AUM will grow faster. Fee revenue will grow even faster with the cost. Our OpEx will level off and only grow with inflation. So that differential between the 2 growths and only the lower growth at the cost level, we'll see that cost coverage level continue to increase.

And I'll just add to that, Peter, that your comment that was comparing us to the more broader asset managers, we're actually the best cost coverage within legal finance itself. There's no other legal finance provider that's got a greater cost coverage than ourselves.

Right. And I just want to jump to Slide 31, which has got the 2 sort of Slide 16 and 17 sort of next to one another. If I'm looking at the investment proceeds number on Slide 16, the $350.5 million. And then if I go further down, there are some investments that they recognized, which I think are the $15 million, which I think is the non-fair value stuff.

That's correct.

Yes. And then there's the investment cost and amortization further down in the sort of minus $47.8 million. So I'm sort of looking at that and then I look across to the other side to the investment proceeds there of the $54.1 million, I'm just trying to -- just want to clarify, is that $54.1 million, on the left-hand side, is that a gross or a net number? Is it after all the litigation costs? Is it net or is it a gross number? Just trying to reconcile that.

That is cash proceeds that's received. So that is the gross number of cash that has come in the door on our assets at an OBL-only level. So not gross for the portfolio, but gross for OBL.

Right. And what would the sort of the net number for that $54 million be? Is that $54.1 million? Is that somewhere in the pack somewhere?

That's not in this deck because effectively, that would have been expenditure in the prior year.

I think, Peter, you're comparing a cash number with an accounting number. That's I think difficulty here.

Yes, okay. Because I thought that Slide 17 stuff that's replicated there on 31, I thought that was a P&L, but [Audio Gap] rather than the cash [Audio Gap]

[Audio Gap] and that's why it's the split between realized and unrealized. The $54.1 million that comes through realized actually is netted out in the unrealized portion.

Right. Okay.