Stock exchange: Warning over whether LCM will remain a going concern
An AIM-listed litigation funder that has lost seven of its last eight cases and recorded an £87m loss in its last financial year has entered into an “orderly run-off”.
Litigation Capital Management (LCM) said its existing portfolio of case investments would be managed to conclusion, no new investments would be made, and cash realised from the portfolio would go to repaying its debt facility from Northleaf Capital Partners before anything can go to shareholders.
However, there was a risk that the company would not be able to continue as a going concern in the future.
LCM – which originated in Australia but listed in London in 2018 – announced a strategic review a year ago after a string of case losses.
Its half-year results showed a big financial loss that has only got worse in the newly published full-year results for the year to 30 June.
LCM recorded a net loss from concluded investments of A$64m (£34m) and a loss after tax of A$166m (£87m), more than twice that in the previous year.
Investors were told: “The losses reported for FY26 are driven by investment performance, which has deteriorated sharply over the past two years.
“In FY26 that deterioration was compounded by concentration: a large amount of invested capital had been committed to a small number of cases, which were ultimately unsuccessful. eight investments concluded during the year, of which seven were losses and one was a win.
“A further two cases were lost at first instance during the year and are under appeal. These remain in the portfolio and have been written down to 50% of cost.”
One of the lost cases saw a hefty adverse costs award that was not insured, while in another the after-the-event insurance was not enough.
The company’s net liabilities were A$54m, as against net assets of A$114m on 30 June 2025.
The strategic review “concluded with no resulting transaction” and as a result LCM “moves into an orderly run-off”.
In the meantime, LCM last week agreed a long-term amendment to the Northleaf debt facility that increases it from US$100m (£76m) to US$125m and extends the maturity to 31 December 2030.
At 30 June 2026, LCM had 37 ongoing cases in which it has invested A$122m (£64m) and committed a further A$102m (£53m).
The interest margin has increased under the revised facility and the amount repayable is the higher of the outstanding principal plus capitalised interest and two times the principal drawn under the facility.
If the facility is repaid in full while case investments remain outstanding, Northleaf is entitled to 25% of the gross cash proceeds of those remaining investments
But LCM’s directors warned that the group’s ability to continue as a going concern was “materially dependent” upon satisfying or obtaining appropriate waivers of the conditions precedent to the amended facility, achieving forecast realisations from its investment portfolio and maintaining access to funding under the amended facility.
But as the timing and amount of investment realisations was “not wholly within the group’s control”, there was a risk that LCM would at some point be unable to continue as a going concern.
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