Thank you for standing by, and welcome to the Omni Bridgeway Limited FY 'twenty one Results Conference Call. All participants are in a listen only mode. There will be a presentation followed by a question and answer I would now like to hand the conference over to Mr. Andrew Sacre, Managing Director, CEO and Chief Strategy Officer. Please go ahead.
Thanks, Ian. Good morning. My name is Andrew Saker. I'm the Managing Director and CEO of Omni Freightway. Welcome to our results call for the year ended 30 June 2021.
Joining me today is Stuart Mitchell, our Group CFO Jeremy Sandbrook, our Group G. C. And Company Secretary and Mel Bouthier, our Head of Investor Relations. Turning to Slide 4, highlights. I'm pleased to present the full year results, which reflects the benefits of our diversification strategy.
We've achieved a record income of $286,000,000 derived from footfall full completion and 24 partial completions from a variety of pre- and post judgment investments around the world. This reflects a significant second half SKU due to strong case completions During the Q4, which has derived approximately 75% of the recognized investment income in FY 'twenty one. A further $135,000,000 to $270,000,000 of income may be recognized in future periods And relate to substantially completed investments with conditional settlements or judgments on appeal. The result also reflects a $120,000,000 impairment expense in the first half. But for the impairment of 2 material investments, WestGen on the balance sheet since 2011 and other and one other, a Fund IV investment where our direct Our IFRS results would much more closely match our cash outcome.
During the year, we received a record 1727 funding applications, increased our funding commitment by 32% And grew our estimated portfolio value for EPV to $20,100,000,000 The implied embedded value of debt portfolio now stands at $2,800,000,000 of potential income that may be realized in future years. At the end of the financial year, we had a significant pool of liquid assets in the form of cash and receivables of almost $360,000,000 Available to meet our operational requirements, deployment into investment commitments and to support our corporate initiatives. The ongoing impact of COVID-nineteen pandemic on economic, business and social conditions has been particularly challenging. The demands of managing our business through the pandemic are significant, but despite these challenges, we've remained focused, adapted our approach And when necessary, we executed on strategic priorities. Whilst our diversified model provides some resilience to the impact of created court delays in our U.
S. Market. We continue to closely monitor our operations and our teams. We are focused on the safety and well-being of our people alongside delivering upon our priorities for portfolio growth and Investment Management. I would like to take this opportunity to thank the team for delivering an outstanding result that will create future value for both our private equity partners and our public equity holders.
Turning to Slide 5. Achievements in the period relate to material growth in all key metrics. The investment carrying value, BPD, and annual commitment We've each delivered a compound annual growth of more than 35% over the last 5 years. To grow our pool of investment As we continue to pursue diversification of risk, additions to EPB in our funds exceeded deductions, completions and losses. Our EPV grew by 27% this financial year alone with increased activity in the near market, Adding $1,100,000,000 of EPV to our pipeline.
This financial year, we invested a record $413,000,000 Into investments as we pursue our diversification strategy, funded from private equity funds and our co invested contribution from our balance sheet resources. We will continue to focus in a disciplined way on executing our strategy In FY 'sixteen, we commenced a 5 year business plan, which set out our intention for the future, Pursuing a strategy to mitigate our risks through diversification. The nature of the underlying assets, Litigation risk, exposure to balance sheet to binary outcomes from individual investments. The appropriate response to binary risk is diversification Achieved through portfolio approach to investment. It is the central thesis to mended your portfolios as it is in ours.
We achieved every target of this business plan, culminating in the merger with Omni and Bridgeway in November 2019. We have expanded our jurisdictional footprint with new resources, most recently in Spain and New Zealand and established a diversified portfolio With more than 300 investments, our EPV growth has grown through increased annual commitments, It's in 95% of our target for FY 'twenty one. In FY 'twenty two, we had a commitment target of approximately $520,000,000 with around $330,000,000 in deployments, of which Opioid's contribution It's approximately $65,000,000 We've maintained a consistent team headcount in FY 'twenty one Whilst expanding our asset base and improving our operating efficiencies, our funding strategy has evolved over Time to diversify investment risk from initially investing on our own balance sheet to now bringing in third party capital Whilst maintaining a meaningful minority stake in each of our funds, we currently have $2,400,000,000 in funds under management And are on track to reach our $5,000,000,000 FUM target by FY 'twenty five. OBL has life to date invested capital of $1,200,000,000 across balance sheet and fund level investments, With most investments now sitting within our funds, we anticipate completing the harvest of our balance sheet investment by FY 'twenty four And thereafter continue to invest only via fund vehicles, both in existing and new structures.
Turning to our financial results. Key financial outcomes for FY 'twenty one include the earnings before provisions for impairments $88,300,000 which was a significant increase over the half year result of a loss of $57,300,000 Before provision for impairments. This reflected numerous second half completions that generated income of $228,000,000 This contrasts to the few number of completions in the same task that rose partially from the slowdown in U. S. Court activity caused by COVID-nineteen.
The statutory loss for the period was $19,000,000 arising primarily from 2 non cash adjustments With the impairments from WestGen and the Fund 4 Investment, FX Movement and 2 losses in our consolidated Fund 2.3. Our operational cash expenses were relatively flat on a year on year basis as we had expected. Most significantly, we reached important milestones in relation to 2 material balance sheet investments There are over 8 years in duration, both appeals for which are anticipated to be finalized in FY 'twenty two. Wythemo is the most significant outcome of EnCase in our history. And whilst the duration is longer than what is initially contemplated, The result today, plus what may be achieved in the future will potentially result in a significant MOIC of between 5x and 9x.
An impairment was provided for WestGen together with an impairment for Fund IV, which together with the provision for adverse costs Total approximately $120,000,000 Both matters are being prepared for appeal, which are expected to be heard in FY 'twenty two. Our legal advice on prospects on both appeals remain positive. Our European operations continue to make material to our future income generation capacity with new commitments exceeding budget by 80%, Triggering the payment for the variable deferred equity consideration charge. The thesis behind the merger of IMF Benton and Bridgeway That the whole is greater than the sum of the parts is borne out in the number of co investments that have been generated between our various fund That would have otherwise been unlikely to proceed without the extension of our skills and experience. We have now committed to 8 co funded investments with an aggregate NPV of $686,000,000 We continue to see changes or proposed changes to the regulatory landscape in our key markets, in particular in Australia, the U.
S. And Europe. Regulation introduced in Australia has created a hurdle for foreign funding, which has increased the opportunity for domestic funders, including On the Bridgeway, we now have 6 Australian class actions launched as managed investment schemes with another 6 In various stages of due diligence or approval. In Australia, we've now also seen an amendment Continuous disclosure in this leading and effective conduct was passed in the Senate. In our view, it will have no material effect on our business As the typical shareholder class action that we fund require more than strict liability and involve a fault element.
Further information relating to regulatory reforms can be found in the entry to this presentation. Turning to Slide 9 and our IFRS results for FY 'twenty one. As you will note, investment income generated during the year Funded matters and purchase claims was $272,000,000 reflecting a degree of consistency of income generated from our activities Other items of note relevant to the profit and loss statement include an increase in management and performance fee income from the prior year. Recurring income generated from management fees will continue to grow as deployments continue to increase. Impairment charges, as we previously discussed, These expenses are non cash items that may be reversed in subsequent periods if development negative development associated with the investment reverses.
And finally, fair value adjustments, which have reversed from the prior year as a function of the debt rate in the share price. From a balance sheet perspective, items of note include a 7% increase in cash and receivables at 30 June on a year on year basis The net assets which remain constant at around $760,000,000 reflecting the growth in other assets offsetting the provision for impairment. If the impairments are reversed as a consequence of successful appeal, the net asset position will reflect a growth of $120,000,000 Which would result in a pro form a 15.6% increase year on year. Turning to Slide Tim, as we've noticed in previous years, the IFRS accounts do not reflect the true performance of the company. While some of our peers may choose to account for assets on a fair value basis, we've avoided doing so unless required under the PPA standards.
By adjusting our IFRS accounts to 2 key items, income that could not be bought to account for impairments that were required to be bought to account, Our results for this financial year would have shown a profit after tax of over $160,000,000 In FY 'twenty one, we achieved a normalized cash generation from operations of $193,000,000 which continues to trend from FY 'twenty. A significant misanalysis is the increase in contribution from the Fund VI Investor for operating costs. As explained last year, this is a time difference between periods. Management fee associated with is equal to the agreed budget for overheads for running the European operations and largely offset all operating costs. This year's receivables balance increased as a result of the recognition of the Wivenhoe settlement income, of which $30,000,000 The $95,000,000 has already been received.
Net operating cash expenditure, which I'll expand on further in this presentation, decreased 9.7% from 30 June 2020. Turning to Slide 11. Overall, the normalized operational cash expenditures have remained relatively flat from FY 'twenty to FY 'twenty one Despite the 27% growth in NPV, employee costs increased by 14%, It lastly relates to non cash costs associated with the Altek plan. The ability to engage and retain our most valuable asset, our human It's critical to our overall performance. We prudently manage our employee costs with a focus on ensuring that sufficient resources Are in place to deliver growth and achieve our long term objectives.
We anticipate efficiency benefits as our income base increases relative Costs with gains achieved from greater leverage of our investment team. Now operational efficiencies continue to improve. A few years ago, net operational expenditure as a proportion of investments was 26% and has now improved to 12%. We are seeking to move to a more capital light model and should be able to do so as our recurring management fee income increases Turning to Slide 12. We have a strong capital position of $360,000,000 in cash and receivables, We support our corporate initiatives to finance our operating costs and to make anticipated contribution to funds Through prudent capital management, we also have the potential to repay debt, Pay dividend and buyback shares subject to prevailing market conditions and appropriate financial metrics.
In FY 'twenty two, we will look to refinance our debt, for which there is a window from January to December 2022 to do so. In addition, We will look to establish a revolving credit facility to reduce our overall cost of capital. Turning to portfolio performance. Our portfolio EPD is balanced by region And diversified by investment type and funding source. The balanced geographic footprint enables us to respond to developments and external risks, Such as competition or adverse regulatory intervention.
Whilst we continue to be an opportunistic investor, whereby we will invest in legal risks We did source from 3rd parties or identified internally. We do so with a focus on diversifying our portfolio, both geographically and by investment type. 68% of our investments are now located in Northern Hemisphere. Given the size of the respective legal markets in our U. S.
Growth strategy, we anticipate this pricing will increase. Global class actions now represent only 25 percent of our book, including investments in Australian class actions as well as multi party methods in Canada is focused into other areas of legal risk, and we anticipate that enforcement investment will be a growth area over the next several years. No new balance sheet investments have been made since the commencement of our funds management business in 2017. As such, Currently, only 4% of EBITDA is from investments made on our own balance sheet outside of the fund structures. Turning to Slide 15.
Our performance this year reflects solid growth and progress across the global portfolio Despite the COVID-nineteen related delays primarily in the U. S, in Fund 1, several completions occurred in the last Quarter that we had anticipated for FY 'twenty two, which enabled us to accelerate payment as a priority obligation to our investor. We are exploring other options to accelerate distributions, including secondary market trades and refinancing. Lines 2, 3 and 4 have had early wins in the portfolio and as such, we do not expect IRRs that have been achieved to date to be sustained. As the portfolio matures, we anticipate the returns will normalize and revert to the mean.
Duration is one of the risks over which we have Term by the court and the desire of defendants to settle. In Fund 5, our lower IRR Reflects the method that completed within a few months of investment, while generating a rate of 28% if you don't have an ARR of 5%. In Fund 6, we've seen a reasonably consistent number of completions compared to last financial year with a stable IRR outcome. For Fund 7, our investments into the excitement has been affected by COVID, which resulted in few investment opportunities preventing themselves for consideration. We do anticipate that the IFC relationship will generate some compelling short term opportunities for consideration.
In the last 12 months, on balance sheet investments have decreased to 13 investments with an EPV of approximately $840,000,000 of 30 June 2021. This reduction demonstrates the balance sheet runoff as we continue our transition to the fund management model, Whereby investments are funded through dedicated investment vehicles with global co investors and joint venture structures. Following the developments on key investments, Wivenholm and WetGen, our balance sheet is now less exposed to concentration risk. Slides 16, 17, 18 contain several analyses to assist with your understanding of the anticipated future returns from our funds. Our 1st generation funds have considerable potential to return capital and distribute preferred returns to NCI Investors, Distribute capital and fees to OBL and provide material profit split to both OBL and NCI investors.
For Fund 1, we anticipate a number of FY 'twenty two completions, which should enable OBL to receive a distribution of capital and potential profit distribution in FY 'twenty three. Subject to underlying assumptions, OBL should commence receiving cash Distributions for Funds 2.3 in FY 'twenty two. Our 2nd generation funds have significant additional capacity available To make new investments to generate substantial returns to both OBL and fund investors. Based on the example investment return, OBL contributes 20% of the invested capital and receives approximately 34% of the investment income, including a 2% management fee on the investing capital deployed. We acknowledge that the return profile of Fund 6 is difficult to model given the bearing We can advise that historically around 25% of the proceeds from completed investments Has been attributed to IBA.
This is an overall average that does vary by investing time. Turning now to strategy on Slide 20. You have heard today about The measurable progress we have made in executing our strategy to leverage our diversified model to improve our portfolio and to grow returns. Importantly, our transition to funds management model will support our progression to achieve a more balanced portfolio allocation over the next 5 years and to reach Our aspirational goal is to increase funds under management to $5,000,000,000 with $1,000,000,000 of new annual commitments by FY 'twenty five. We have achieved a number of key milestones in FY 'twenty one, including We now have on the ground resources in Madrid and Auckland and seem to establish opportunities in those markets.
We've launched our wet hand strategy initially on a fly in, fly out basis as we continue to explore opportunity We continue to explore opportunities for further expansion in Canada and the U. S. We have expanded our product to include our claims monetization strategy. We now have 14 purchased claims in our portfolio. We're looking into secondary market transactions to improve our liquidity and funds and possible M and A opportunities.
We've identified the following key goals for FY 'twenty two to include the launch of our Ag fund in the announced €300,000,000 focused on the global enforcement strategy, over $520,000,000 for new commitments, Refinancing of our debt facility, which should provide us with greater flexibility for our home management business and to execute our U. S. Strategic plans. Turning to Slide 21. The U.
S. Represents the largest legal market in the world and as such, Our greatest opportunity is for further growth and penetrations. This is the primary reason why we relocated to New York in April of this year. Despite the challenges presented by COVID-nineteen, we achieved 60% of our commitment target for FY 'twenty one. We have doubled our FY 'twenty two commitment target in the U.
S. To AUD 225,000,000 We will achieve this through a revised strategy that includes expanding our headcount of investment managers in our suite of investment products To include law firm funding, monetization of claims and enforcement investments, expanding our geographic footprint in the market, Continuing to improve our efficiency ratios, including gains and due diligence and funds committed per investment manager, We'll employ risk management tools such as portfolio insurance products and explore secondary market opportunities to improve the liquidity of our investments. These changes will occur over the next 24 months, but will leave a longer imprint on our view of investing into legal risk In this region and potentially around the world, we're excited about what this market has to offer and how we can best leverage We will continue to focus in a disciplined way on executing our strategy to underpin future growth, both in the U. S. And the rest of the globe.
Fundamentally, what differentiates us is our experience, our track record of success and unmatched reach and origination framework. We see great opportunities ahead for the business. I would now like to open the call for questions. Thank you.
Thank Your first question comes from Michael Peete from Goldman Sachs. Please go ahead.
Hi, Andrew. Thanks for the detail there. Just first question, just on funding agreements and the outlook. I'm just interested in sort of what you're seeing in terms of opportunities out there versus The competition that's out there, are you seeing any change in any funding agreements? The quality of the cases and opportunities that you're looking at, is it It's diversifying a bit, but is there any sort of significant changes that you're noticing in the industry?
Nothing of great consequence, Michael, in that respect. We're certainly seeing a broader range of opportunities In different markets around the world. And because of that, we get to see, obviously, a variety of quality of those investments. Our selection standards haven't changed and our conversion rate remains around that 2% level. And as a consequence, the quality of our portfolios is being maintained.
Could you just give us
a bit of an update on By maybe by the larger jurisdictions in terms of what sort of pickup you're seeing, if any, in terms of as economies are opening up In terms of the mediation process and court dates, are you seeing you've been able to see court dates sort of locked in or are they still sliding a bit in terms of the process that you're going through?
In the U. S, we're seeing court data being locked in for both This first half of this financial year as well as the second half of the financial year, as a consequence, We're now starting to receive phone calls about settlements and mediation processes, and that has accelerated Found views about what might complete this year. That's largely as a consequence of The jury system in the States, which has enabled the courts to set dates. There is still a backlog, so we're not going to see a mad rush. Criminal cases are being dealt with first here in the States And then several cases will be dealt with, but dates are starting to be locked in and as a consequence, there has been a tangible shift In views about mediation and settlement.
In Europe, things have continued pretty much as business as usual. We hadn't actually seen too much interruption as a consequence of COVID on court date. What we had seen There's some reluctance for people to negotiate settlement and That seems to have slightly changed and we are starting to see an uptick in opportunities to settle. Australia and Asia weren't greatly affected. The court system largely continued to operate in Australia unaffected by COVID, new process and procedures were put in place, but nothing really of great consequence.
In Asia, we largely Majority of our investments relate to arbitration investments, and arbitrations proceeded on the virtual platform And abated by interactions from COVID.
Just a final one from me. The U. S. Strategy there with the 20 to 50 people headcount increase.
Could you give us a sense
of what the annualized cost of that might be? And obviously, Seems like it might annualize into 2023. And just also, if there was a loss of Westgem and the Fund IV impairment cases that What would be the cash outflow from those 2 if you actually lost those cases?
Sure. So there are 2 questions in there. The first was down with the costs. We've estimated the additional costs For the new hires, it's going to be around $10,000,000 And what we have is reallocated resources from other regions, Particularly from Australia, where you saved about $6,000,000 or $7,000,000 in expenses this year. So we're not going to see a material change in our OIBDA costs.
The other thing I think is important To remember in relation to investment managers is, whilst there is a cost associated with them, they fit their profit centers. The average investment manager at a cost of a few $100,000 a year should Within a year, become a profit center and generate investments that has the potential to return profits of about $8,400,000 So each investment in a human asset is actually creation of future revenue. In terms of the cash costs for Western and the Fund IV investment, The Fund IV investment, there's no additional cost. It's a U. S.
Matter and therefore there's no cash implications, the investment is being made And so there's no additional outflow. With respect to WestGen, it has been fully provided for. There will be, obviously, a write off for the investment, which is a non cash item. There will be an insured portion that's contributed For asset costs and there will be an uninsured portion, which will have a cash cost. I think the estimate currently is about $7,500,000 to $9,000,000 for that as a cash cost.
Right. Thanks, Andrew.
Thanks, Paul.
Your next question comes from Jason Palmer from Taylor Collison. Please go ahead.
Yes, thanks. Good morning, Andrew and Stuart. How are you?
Yes, very good. Thanks.
No worries. Just by the way, well done on the presentation. It's a real improvement in particular the funds Slides which should have gone through the accounting returns, so that's really well done. Just had a question in respect of the cash On hand, on the balance sheet and the receivables on hand on the balance sheet, I can see in the segment notes under corporate, there's About $100,000,000 of cash and cash equivalents and these receivables about $110,000,000 And I presume within those receivables of $110,000,000 the lion's share of that is Half of Wivenhoe, are you able to sort of talk through what the expectations are around actual cash settlement of that half portion of Wivenhoe?
Yes, sure. So Jason, we've already received $30,000,000 of That's receivable. And the other portion will flow once the distribution Settlement, it's called a settlement distribution scheme, has been executed for distributions to clients. And that largely depends on The assessment process for losses, and that can take anywhere from 6 months to 18 months Depending on how complex that is, there may be interim distributions and such and we'll get interim distributions along It's not going to be a short process.
Okay. Thanks for that. Is it All dependent on the remaining contested portion of Wivenhoe? No. Right, Right.
So sometime over the next 6 to 18 months that outstanding collection of somewhere between $80,000,000 to $90,000,000 will come through to the business Plus, whenever there's a result on the other portion, there will be somewhere between 6 8 months after that for that other portion to come through the business.
Well, the vacancy settlement distribution scheme and the assessment of damages will be done in the first process. I wouldn't The second process will be as prolonged. You only need to assess the damages once and then the distributions will occur. It's just how much Cash gets disputed. So if there was a subsequent settlement or an award in relation to that other 50 The Q2 portion, that one has to go through the same type of prolonged assessment process.
So that would be a much shorter period.
Okay. Thank you for that. And in respect of the U. S, I can't help notice The underperformance of that region relative to the rest of the world, and I appreciate you've moved over there and You're trying more investment behind that. Could you maybe talk to we haven't talked to sort of how you believe You what level of conviction you have around actually doubling the commitments in the next 12 months?
Very high, conviction. That's for the purposes of ramping up the investment in the region. The opportunities were constrained largely because of COVID. There was a lack of appetite for New litigation being commenced. People figured without court dates, what was the point in spending money on litigation at this stage?
Legal cases don't go stale for a number of years due to limitations issues. So what we Anticipated that there's probably a backlog of litigation claims that has been held over, waiting for A little ray of sunshine to poke through with the reopening of the court system. So we've got very high Very strong views about our ability to hit that target.
Your next question comes from Alex Zhao from Kabuto Management. Please go ahead.
Hey, Andrew. Thanks all for giving the great presentation and good job on the new information provided on the Fund. I have a question regarding Mike, and non IFRS analysis. So my question is, number 1, on the Net cash generation slide on the right. Is the company's cash invested for cases included in the Cash burn or somewhere in that line or not.
Because the way I look at it is that Although the reported earnings were negative in fiscal 'twenty one, but for fiscal 'twenty and 'twenty one, The company has had 2 years in a row of very strong positive net cash generation. So I wanted to make sure If the investments of new cases were included in the net cash generation number or not?
No, that's before the investments into cases for the year. So the $231,000,000 and the $192,000,000 is before Investments have been made into the fund structures. Our average investment of funds for this year, for example, It's anticipated to be about $65,000,000 It was slightly lower last year as a consequence of the lower commitment level. Right. No, the calculation before the cash invested into new methods.
Got it. So those numbers are before new case investments?
Correct.
And one last question, which is more a broader picture. So I understand the IFRS number may now do Omni Bridgeway, Justice, because of like you mentioned in the slides, the more The different requirements on recognizing income and also recognizing impairment. But I guess, Where should we draw the line in terms of assessing the real underlying cash earning power of Omni It seems that if we're using the net cash generation number that was before Case Invested, We were using the reported earnings, obviously, that were negative. So directionally, where should we draw the line to assess kind of the true cash earning power Amit, Josh Way.
Sure. So the P and L doesn't include cash that's invested into new investments either Because they're capitalized into the balance sheet, so they're not expensed through the P and L. So there's a degree There's volatility between both the interest and the non interest in the sense. But From a cash a pure cash generation perspective, you would look towards the non interest number And deduct off the amount that we've invested into new cases. And given that that's all on a consolidated basis, That would include all of those investments that we've made into the new method that year.
I see. So for kind of cash basis valuation, I should look at kind of the 190 $3,000,000 and minus kind of the cash outlet that you will have every year for K-two?
Correct. Yes.
And just to confirm, I think you mentioned that before on WestGen. So for some cases where even though you take a Relatively big impairment cost because of historical cost that you have invested. Like for a lot of cases or almost all the cases, you are the Plenty. So even if you lost the case, the most you will lose would just be the attorney fees up to that point. So It is not like if there's a case that you lost, you're going to face a big cash only.
Is that the right way to think about it?
That's the correct way to look at it now Because of the investments that we make in the U. S. Where there's no cost shipping, we don't have an adverse cost exposure. And for Fund 5, we have that AT and T rapid policy that protects us against a large portion To all intents and purposes, almost all of the Agro's cost exposure. But there is a risk that there will be some Uninsured portion, but that will be met by the fund.
And therefore, if there is an uninsured portion That would be net on the eightytwenty basis, so investors to balance sheet exposures.
Your next question comes from Piotr Michael Bilic from Select Equities. Please go ahead.
Hi, Andrew. Thanks for your time. I've got 3 questions. My first question is in relation to operating costs. When I look at the total cash costs, including the capitalized expenses at the corporate level, they're now running at $80,000,000 or $90,000,000 per annum of which $60,000,000 to $70,000,000 is employee related, of which I assume the majority is for the Team of investment managers, legal counsel and other staff who are spending, I suppose, virtually their entire time managing specific cases.
So my question is, what proportion of the wages for this investment team is specifically allocated to individual cases and hence would appear in the Litigation cost line for those individual cases as opposed to the proportion of the total wages bill that's carried at the corporate level? Because it appears to me that virtually all of it's at Corporate level, which I suppose means that the company has got a large corporate cost center in that sense for a company that's of its size and Also at the same time, sort of arguably artificially boosting the net returns at the case level. So I'm just hoping to understand how the costs are allocated.
I'm not sure I quite follow the question, but if I understand it, I don't think the 80 to 90 number is right. I'm not sure about the split between front office and back office. The total expenses for wages is in Slide 11, you'll see that Employee benefits expense, dollars 57,000 the capitalized portion, dollars 9,700,000 So the total The addition of those 2, that $68,000,000 I think the rough Split between front office and back office is probably fifty-fifty. I think if you got that We looked at it as being more weighted towards fund offers generally because they're higher per employee cost, But I couldn't give you the precise figures.
Right. So do any of those costs actually appear In the litigation cost lines for the cases themselves?
No, they don't. They only appear the only cost that Capitalized by the costs associated with the relevant investment management team that are working on that Specific
investment. Okay. I'd also ask, Given that you've already got plans in place over the next couple of years, over the next few years to effectively double, How should we be thinking about the cost base? Should we be expecting that sort of employee related costs in particular to double over that time as well?
No. I think as I explained, we had an increase in employee costs Of about 14%, the majority of which related to LTIP. So from a cash perspective, it was relatively flat. And during that period, we saw a 27% increase in NPV. So there's not a direct 1 to 1 relationship between expenses and increasing NPV.
And that's largely because of the operational efficiencies that you can get through gearing and leveraging of your staff. You increased the average investment per investment manager, so you don't necessarily have to keep adding investment managers to grow. There's no doubt to get to a significantly higher sum. We will probably need to add some additional people,
Just my second question. I know that the company likes to sort of focus now on EPV and IEV. But my question the second question is relating to return on capital. If we go back to the start of IMF in early 2000. So returns in the Australian cases were very high, averaging nearly 200% ROIC.
But since then ROICs in Australia have been Fairly consistent long term decline, whilst we would believe that the terms in the U. S. Have been consistently So I'm just wondering, firstly, do you expect ROICs in both the U. S. And the rest of the world to improve from where they've been averaging over the Over the last say 3 years.
And if so, what specifically do you think is going to change what specifically is going to change to drive that improvement? And also given the size of the cost base that you've got, what's Sorry, Keith,
to jump in. There's a lot of other people on the call and lots of other questions to answer. So let me just deal with the VoIP question. As I said to you last year, The answer is, we're not reporting on, so I can't comment on it. What we do report on is The APB, from which you can calculate the embedded value.
Thanks.
Your next question comes from Kevin Ong from Amatil Capital. Please go ahead.
Good morning, Andrew. This is Kevin. Two questions for me. First one, the intending launch of Fund A, can you just speak to the opportunities that you're seeing within the Boston Sorry, Kevin, the lines have been crackly at my end. Did you say Fund 8 Any opportunity?
Yes. Correct. So, yes, there
now as the funding launches eminent, can you just speak to the opportunities that you're seeing William and Boston, do you think? Sure. No problem. So, SUNDAY is a dedicated strategy towards Enforcement Opportunities, but it's really a follow on fund to fund 6. Fund 6 is in its capacity And as a consequence, we need to get a follow on fund to create additional capacity for that strategy.
The enforcement opportunities are global in nature. So we see investment opportunities where, for example, A plaintiff has got a judgment or an award saying here in the U. S. That is against a German defendant that's got assets in Singapore. And so we will apply our Global Network to identify the opportunities to enforce and recover those assets.
And what we have seen over the past 18 months Since our merger with the Omni Bridgeway European team, there's an increase in those types of opportunities. And that's for matters that have some merit risk as well as some that have pure enforcement risk. And it's a growing area. It's one we're looking to expand here into the U. S.
And establish a tenant here to deal with those opportunities here. Got it. Okay. And second question quickly. With the cash distributions coming through from the 1st gen funds Starting right around the corner.
Frank, just get your plans around capital allocation? So as we identified in the presentation, I think there's a number of opportunities for us, Which include dealing with debt, potential dividend distributions as well as potential buybacks. We're also looking at financing our ongoing operations and growing commitments to the funds. So there's plenty of ways to use it In productive way as well as rewarding shareholders for their support. So, all those plans are on the table, Ken.
Your next question comes from Gavin Allen from U. S. Hartleys. Please go ahead.
Andrew, it's Stuart Mill. Hi, thanks for that. I thought that was good. Just a quick one for me. Seems to me that one of the challenges that we've seen over the last sort of 18 months or so in relation to COVID and other associated challenges, we've seen Outcomes not always matched the previously articulated EPV time, which is seen EPV push right and we understand that.
I mean, you've essentially answered this, but in the interest Completion, do you see enough has opened up to start to expect that relationship to sort of tighten up, meaning outcomes Whenever they might be in 'twenty two might be able to match the EPV timings we're currently contemplating?
Just wondering. Yes. Gavin, it's a good question. It's always our biggest challenge. Duration The one area that we had the least control and it's largely driven by the availability of courts And the desire of the tendons to settle.
So we don't control it. We don't have a great deal of influence over it. The EPV estimates The best that we get based on our expectations. So putting that aside, that's a negative way of responding on a positive side, we do actually think that the Estimates that we've now given are reasonably conservative. In fact, we were conservative in our last Quarter to the point where we were actually wrong and we had to accelerate a couple of completions that occurred in FY 'twenty one That we've actually expected to finish in FY 'twenty two.
So, look, We continue to see slippage both forward and backwards and we updated on a quarterly basis to try to keep the market properly informed on those movements.
Very good. Thanks, Andrew. I'd like to slide 16 and 17 too by the way. That's all for me. Thanks.
Terrific. Thank you, Dan.
There is no further time for questions. I'll now hand back to Andrew for closing remarks.
Well, look, thanks very much, everyone, for your time and attention. Hopefully, we've answered all the relevant questions. If you've got any follow-up questions, please don't hesitate to reach out. Thank you once again and look forward to speaking with you again.
That does conclude our conference for today. Thank you for participating. You may now disconnect.