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 the FY 2026 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 four-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 is also something quite special in that, an Australian-listed company with these origins standing as the global leader in an alternative asset class. Where FY 2025 was a year of transformation, FY 2026 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 2026 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. I am 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 $1 billion capital raising target for Funds 4 and 5 Series II, in what has been a difficult fundraising market for the entire alternatives industry globally. Legal investments have a three to five-year investment cycle. Our funds have an 8- 10 year cycle, and we have defined a multi-year 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.
While my focus today is on the annual results, I aim to put them in the context of those patterns throughout this briefing. While not every metric landed exactly where we projected, and I will 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 two 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 the steady state as presented at our 2024 Investor Day and March 2026 OBL. With that, let's 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. 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 2027 and beyond, followed by Q&A. Let's move on to the highlights for the year. As I indicated, FY 2026 has been a year of disciplined execution against the targets we set at the FY 2025 results. Let me summarize that through the key numbers. Cash investment proceeds came in at AUD 315.5 million, up 49% on FY 2025 and a record for the company. New investment commitments ended at AUD 712.2 million, up 38% on FY 2025, and also a record. Cash OpEx was AUD 67.1 million, which is 16% below our FY 2026 budget of AUD 80 million and 20% below FY 2025. Fee income grew to AUD 35.4 million, achieving our AUD 35 million target for the year, and up on FY 2025.
Cost coverage increased to 53%, up from 36% in FY 2025, comfortably exceeding our FY 2026 target. On capital formation, we reached an important milestone by achieving a US$1 billion capital raising target for Funds 4 and 5, Series II, with over US$500 million added during FY 2026. The documentation on final terms on those last subscriptions are now being wrapped up. We also raised a further AUD 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 3Q. That was primarily a timing outcome rather than a of investments that our probabilistic models predicted to convert to cash before the year-end did so early into FY 2027, materially bridging that gap within several weeks of the balance sheet date. We cannot control the duration of individual matters, but a 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 2027, 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 2028 cost coverage target of 70%. On the capital raising front, we expect further capital to be raised across multiple sidecar arrangements. 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 2025, 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 they should always be looked at on a portfolio level. A 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 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 AUD 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 AUD 3.8 billion, with AUD 725 million in OBL-only fair value, and we added AUD 564.4 million in new fair value from AUD 712.2 million of new commitments. As per my opening remarks, these investment metrics are the foundation of our business. They are what drive 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 seven. David will cover our statutory accounts in detail in a few slides' time. Two points of context before he does.
First, FY 2025 included the Fund 9 transaction, which contributed over AUD 300 million of secondary transaction proceeds and a similar quantum of fair value gains. FY 2026 has no equivalent one-off item, so the step-down in statutory headline from AUD 416.8 million of net profit after tax to AUD 45.9 million is expected, and the two 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 AUD 182.2 million, with net profit before tax of AUD 48.2 million and net profit after tax of AUD 45.9 million for the year, delivering earnings per share of AUD 0.19. From an OBL-only perspective, total income was AUD 116.5 million.
Fee income was AUD 35.4 million and cash OpEx was AUD 67.1 million. From a shareholder metric point of view, return on equity was 8%. The total book value per share was AUD 2.96, effectively flat on FY 2025 at down 1%. That flat outcome is largely the currency translation effect I mentioned. This metric continues to highlight 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 nine. I will not 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 80 full and partial generating AUD 350.5 million, of which AUD 47.5 million was attributable to OBL- only.
In addition, we received AUD 6.6 million in cash carried interest, taking total OBL-only proceeds to AUD 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 2027. 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 have added slide 11 this year because FX has been a material feature of the FY 2026 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, 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 a 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. 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 that has no immediate bearing on the underlying economics of the investments, the funds, or on the cash investment proceeds. FY 2026 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 AUD 317 million on total portfolio fair value for the year, of which AUD 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 AUD 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. AUD 3.8 billion, AUD 725 million is attributable to OBL- only, up from AUD 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 have updated the basis to include conditional commitments in the respective financial years, so that this chart now aligns with the portfolio for 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 AUD 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 three 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 AUD 333 million for the year, which reflect a 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 claimed values.
This is approximately 9% of the portfolio value and should be read alongside the 105% fair value conversion ratio discussed earlier, which tells you that where matters did complete, they completed at or above our valuation. Directly 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. Finally, FX movements, which as I discussed on slide 11, had a non-cash negative impact of AUD 317 million [audio distortion] 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 AUD 56 million during the year, from AUD 669 million- AUD 725 million.
Within that, MLEs had a negative impact of AUD 38 million and FX a negative impact of AUD 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 off [audio distortion] 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 repayment, and notwithstanding the FX impact of the AUD strengthening against the USD, the book has grown. Overall, the balance sheet continues to show strength. Whilst our fair value conversion ratio of 105% continues to reinforce our asset valuation. Into page 16, let's dive into the walk for the gross portfolio proceeds at the fund level, reconciling to the consolidated NPAT results. Portfolio investment proceeds reached AUD 350.5 million, a 49% increase year-on-year. This is a record for the portfolio. Fee income at AUD 35.4 million continues our year-on-year improvement to the fee base.
Fair value movements of AUD 61.9 million drove net profit before tax to AUD 48.2 million, and the net profit after tax to AUD 45.9 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 Bridgeway's litigation investments are now valued at fair value. These assets are continually assessed during the life cycle of a 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. These non-cash movements, however, do flow through to the underlying profit result.
In addition, as Raymond earlier mentioned, it is important to take note here that the Fund 9 transaction in the second half of FY 2025 has resulted in a non-like-for-like comparative period with Funds 2, 3, and 4 all deconsolidated for the FY 2026 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 2026, OBL had AUD 49.4 million in EBIT with a realized EBIT of [audio distortion] an increase of AUD 33.5 million on FY 2025. Driven by the successful investment completions, fee income increased, and disciplined cost management. Our unrealized income was likewise positive at AUD 27.9 million, reflecting the 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 AUD 64 million, which absent of the negative FX impact, would have resulted in an EBIT of approximately AUD 114 million. The OBL- only cash P&L reflects the cash view of the P&L items for FY 2026 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 AUD 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 2025, in combination with reduced OpEx spend. OBL- only co-invest deployments reduced 35% year-on-year to AUD 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 AUD 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 2026. A further improvement on the 6.2% we achieved in FY 2025, all during an inflationary period, reflecting our disciplined cost management approach. Turning to page 19, slide 19, we have made strides in our cost coverage and further improved our sharp focus on cost discipline. OBL- only cash OpEx was reduced to AUD 67.1 million, beating our FY 2026 target by 16%. This however, will be the low point for the cost decreases and inflationary rises should be expected, resulting in a target range of AUD 72.5 million-AUD 75 million for FY 2027. Fee income grew to AUD 35.4 million in FY 2026, in line with our target of AUD 35 million.
As the book grows, opportunities with sidecar investments and improving fee terms, we anticipate fee income to be in the region of AUD 40 million- AUD 45 million for FY 2027. Together, these lifted cost coverage to 53% for FY 2026, up from 36% in FY 2025. As a result, we remain on track to achieve 70% cost coverage by FY 2028, 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 AUD 125 million in cash receivables at the 30th of June.
We revised our liquidity forward position at the half, and this is in line where we expected to land, while an additional AUD 33 million from agreed settlements that have largely been received within six weeks after the year end, largely bridged the gap to our 30th of June position. Looking at the last 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+ underlying matters that are live and dynamic.
The midpoints of the FY 2027 ranges on the previous slide imply management fees of around AUD 42.5 million and platform expenses of AUD 74 million. Using a Monte Carlo simulation to derive a P50 scenario, the expected cash flow to OBL- only from completions is potentially around AUD 98 million. With associated deployments in this scenario potentially at AUD 40 million. The candlestick ends represent the range of different scenarios based on a P80, 20% 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 2027. As indicated earlier, duration is uncertain and legal investments do not stick to annual cycles. They 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 2026, we raised the equivalent of AUD 862 million in new third-party capital. Most significantly, we reached our US$1 billion capital raising target for Funds 4 and 5, Series II. In a 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 II, 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 opportunities 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 three points. On market, legal finance continues to grow at double-digit rates globally. Adoption continues to increase and regulation in our relevant markets are 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, genuine 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. 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 three 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. FY 2026 was another year of disciplined execution against it. Phase one, the restructuring and transition phase is complete. We deleveraged the balance sheet, which involves repaying AUD 250 million of debt in full, eliminating around AUD 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 AUD 28 million, which closes that chapter. We generated the cash needed for that from our portfolio. We improved cost coverage from 7% to 23%.
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. We executed successfully on capital formation, raising more than AUD 1.6 billion in fund sidecar capital, adding Ares Management and other high-profile cornerstone investors as capital partners and securing strong capital availability through a period of economic transition and industry consolidation. Phase two, execution is in progress, and FY 2026 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 AUD 712 million in FY 2026, and pipeline and term sheets at elevated levels.
We are seeing continued acceleration of cash completions with record investment proceeds of AUD 351 million, up 49% on FY 2025, and a strong start to FY 2027. Importantly, this is not one strong year, but a sequence of years of rising completions, as the vintage analysis in slides four to six of the analyst data pack illustrates. We remain on track for the 70% cost coverage target by FY 2028, supported by growth in AUM. This indicates that we are tracking well against the steady state model that we presented and discussed earlier. Phase three, sustainable growth is at an early stage. That is growth through the further expansion of existing strategies and markets, growth by expanding into new strategies and markets, and 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 two 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 law 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.
They need both directions to see three 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 for a capitalized strategy, capital allocation policy, and our increase in cost coverage. We have an opportunity set that is larger than our capital and our cost base, and we will be disciplined the next few years in managing the opportunity set. To conclude on slide 27, our strategic projects and targets. I have already discussed our updated analyst data pack and the updated vintage analysis.
Turning to our FY 2027 strategic projects, they include continued acceleration of portfolio completions, i.e., a real focus on cash conversion of our portfolio, and increasing 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 are economically and strategically attractive. A continued balance sheet transition, with the deconsolidation of Fund 6 and Fund 8 as possibilities. In terms of the tangible targets we have set ourselves for FY 2027 and beyond, they are listed on the right-hand side. Cash OpEx of AUD 72.5 million- AUD 75 million for FY 2027. Fee income of AUD 40 million- AUD 45 million for FY 2027.
70% cost coverage from fee income by the end of FY 2028, and double-digit annualized growth in AUM over the 2026 to FY 2028 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 2027 from. Thank you for your attention. We will now move to Q&A.
Thank you. If you wish to ask a question, please press star one on your telephone and wait for your name to be announced. If you wish to cancel your request, please press star two. If you are on a speaker phone, please pick up your handset to ask a question. Your first question comes from David Fraser with MST Financial.
David, are you there?
Oh, fuck's sake.
Oh, David, your line is a little.
Hey, mate. I think you are on the line.
Sorry. I lost the phone there. Before I ask a couple of questions about the result, I was just wondering if you would give us an update on a case that we have 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 or proceeds to Kleros is $640 million. I was just wondering if you could give us an idea of, I presume it sits in Fund 5, Series I, which will then obviously feed into Fund 9, but if you could just give us an update on that case.
Thanks, David. You are remarkably well-informed. That is overnight news. I have noted the press release. Certainly, we are pleased by that news. As I have said earlier, we never comment on single investments. Certainly not if they are still live and it is very fresh, but it is positive news. 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. If it jumps over the year, it will still be a good outcome. It will be in the year after. But I cannot, as I said, it is overnight news and it is a single matter. We generally do not comment on those.
Okay. Thank you. Getting back to the result. OpEx was down materially lower than your budget. It is obviously forecast to go up a wee 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 are going up next year and, what would be the outlook going forward, on a cost base going forward?
Yeah, thanks. 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 should not look at that 67 number as the ongoing number. Some cost savings are truly one-off that will not be repeated next year. Think of some significant leases that we have renegotiated with six months free lease. That will not happen in the next year. What we have indicated is that 72.5 is more or less the target. I think you should be thinking about it as the low end, going forward with inflation, as the increase after that. We do not have any further cost-saving measures available or have any intentions to make further cost savings. The opportunity set is what we are focused on now.
Okay. Then, I guess a more specific question, and Westgem, the after-event costs that you had to pay, have you finished paying all those cash costs yet?
Yes, we have.
Okay. Last one from me before I let someone else jump on the line. You are talking about the market consolidation. What are you thinking about how that is going to benefit OBL growth-wise, and are you seeing any better pricing coming through because of that consolidation?
Yes, we do. I think it comes in two different ways. We see more, so the pure inflow is going up. Maybe where three years ago, there might have been a couple of parties putting a term sheet forward, three or four. Today, we typically are competing with one other party or no other term sheet at all. We have been facing what I would call false competition historically, where sometimes matters were underpriced or risk was underpriced, and that is reflected in the consolidation. I mean, you can do that for four years, but after a while, the investment returns will come through and you will not be able to raise further capital. I think the market has now reset and everybody acknowledges what the appropriate pricing is for these risks. We feel less pressure on that.
I think what we are 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.
Good. Thank you. I will jump off, let someone else ask some questions.
Okay. Thank you.
The next question comes from the line of Peter Meichelboeck with Select Equities. Please go ahead.
Hi, guys. Can you hear me okay?
Yeah, Peter. We can hear you.
Yeah, 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 am just looking at that midpoint of the guidance for both fees and costs next year. That gets you to about 58% on my numbers. So 53% to 58%, if that were to occur at the midpoint. Just wondering why you are still confident around the 70% by the following year.
You have done the math fast on that. Very good. I think the range that you see there is 53% or 54% to 62%. That is the result of the double, the guidance on both fee income and OpEx. My expectation is that we will be at the high end of that range, depending on the fee income. That is where the uncertainty mostly sits. Based on the AUM or the fundraise that we have 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 is within the range. You can read a little bit of conservatism in there if you want to. But it is that same trajectory.
Right. Yep. Understood. Just given that you've said you've got no further cost savings on the OpEx side, if we look longer term, is there the potential to actually get to 100% cost coverage? Because I think if I think of fund management businesses, it's not an unrealistic target, I guess. Like I said, now that OpEx is trending higher, is 100%, if you look far enough out, a realistic target, do you think?
No, absolutely. 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. The good thing we've seen over the last few years is that in the market reset, fee terms have caught up, and they are at the level where they should be. AUM is growing. If we continue to execute on what we've been doing over the last few years, that cost coverage will continue to increase. 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 two growths and only the lower growth at the cost level, we'll see that cost coverage level continue to increase.
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. I just wanted to jump to slide 31, which has got the two, slide 16 and 17 next to one another. If I am looking at the investment proceeds number on slide 16 of AUD 350.5 million, and then if I go further down, there are some investments that they recognize, which I think are the AUD 15 million, which I think is the non-fair value stuff.
That is correct.
Yeah. Then there is the investment cost and amortization further down, and the minus the AUD 47.8 million. So if I am looking at that, and then I look across to the other side to the investment proceeds there of the AUD 54.1 million, I just want to clarify, is that AUD 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 is 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. What would the net number for that AUD 54 million be? Is that AUD 54.1 million, is that somewhere in the pack somewhere?
That is not in this deck because effectively that would have been expenditure in a prior year.
I think, Peter, you are comparing a cash number with an accounting number. That is I think the difficulty here.
Oh, right. Okay. Yeah. Okay, because I thought that slide 17- stuff that is replicated there on 31, I thought that was a P&L bit. Rather than the cash, but-
Oh, that is why it is the split between realized and unrealized.
Right. Okay.
The AUD 54.1 million that comes through realized actually is netted out in the unrealized portion.
Right. Okay.
It is a true look-through, and exactly why we back it out in the unrealized side. It does not actually hit the P&L. It is cash one side, both sides of balance sheet. Effectively one side cash, one side financial asset.
Right. Okay. Look, just the last one from me at this point. And apologies if you have actually sort of covered it in your presentation. But in terms of dividends and where are you thinking around that now in terms of dividends going forward, both the approach as well as a sort of a timeframe, et cetera?
Yeah, I think that this is back on what was slide 20, 21. The when is always the big question in our industry, and the most difficult one. It depends on when a large matter is complete or when our book completes. As our book is maturing, we feel increasingly comfortable that we will be generating significant cash from it. But will that be, in which quarter that will be or when exactly that will happen, we do not know. If it happens, it happens. That is the reality of legal finance. What we have done at the FY 2025 results is we outlined in quite some detail the capital allocation policy. So at what levels do we start to distribute? And also we will decide at such moment, taking the tax situation into account and franking credits, et cetera, how a distribution will be made, whether that is dividend or in any other possible way.
It is probably exactly as triggered by David's question. If matters like that complete a few in a year, we will be in a position to do that. But when exactly that happens, I really cannot say.
Great. Thank you.
Thanks, Peter.
The next question comes from the line of Martin Byers with Moelis. Please go ahead.
Morning, guys. Just with respect to commitments and fair value. Looks like in FY 2026, you had AUD 712 million of new commitments, but it only created AUD 560 odd million of fair value. Can you just help us explain that a little bit better, given the historical relationship has been closer to one on one, please?
Yes, good question. This is actually quite interesting. With the diversification into other types of investments, so more credit and structured finance, what we're seeing is that the opportunity set has more cases that have shorter durations, and have lower risk associated with it because they're cross-collateralized portfolios, et cetera. If they're shorter duration and somewhat lower risk, then the fair value associated with it will be lower as well. But the benefit it has is that given that we're in a new fund series, if it completes early, it'll allow us to recycle that. What we're increasingly seeing is that we more or less have two buckets of types of investments, the historical classic single case investments, where we still focus on that one to one range.
Then more the structured legal investments or structured finance legal investments, where we have shorter durations, more of a portfolio type approach, higher velocity but therefore also somewhat lower fair value. We're starting to see that in the Series II already. We start to see quite a few matters that have completed or are completing earlier than we've seen in the Series I. That number, the two numbers you mentioned, the AUD 712 million and the AUD 560 million, I believe, that is the blended average of those two types of investments. I don't exclude that in future we'll be separating that out more to make that clearer. A good point.
Just thinking about capital allocation. You've mentioned a lot of the opportunities that you're seeing into new geographies and strategies, et cetera. How are you thinking about that capital allocation versus potential capital return to shareholders given where the current share price is?
Oh, I'm clearly with the shareholders. I'm a significant shareholder myself, and I think as I've indicated, the capital allocation policy is pretty straight. It says when we will distribute, and the growth is to be realized within a framework of capital light. If we expand somewhere, it's from the start rather than start at very low cost coverage and grow into that. So, cost coverage and capital light, and therefore preserving capital so that we can do the agenda.
Okay. Thanks, Raymond.
The next question comes from the line of Mark Southwell-Keely with Select Equities. Please go ahead.
Hi there. Can you hear me, guys?
Hi Mark .
Yeah, loud and clear.
Firstly, congratulations on the tenure of the company in terms of its corporate life and the ASX listing.
Thank you.
Yeah. Thank you for taking a second question from our firm. I really appreciate that. Can I just ask just a quick sort of revision if that's okay? Because I do find it a little difficult, in terms of the complexity of the accounts. Trying to follow and track and just see if you wouldn't mind a quick revision, just in terms of the Fund 1 sale and transaction. Following that transaction, has OBL received any further cash? If so, how much? Also, how much capital is still at work with respect to the entity that still exists pursuant to that transaction?
The Fund 1 sits in a gross fair value of the portfolio, and it sits in the OBL only fair value in there. What we don't do, because funds that are in harvest will have often only single cases or a few cases attached to them. Linking particular cash amounts to funds will indicate how we value cases, and that's very commercially sensitive information. We don't separate out how much is allocated to either a fund or a case. We can't do that. That also covers for or applies to the Fund 1 transaction, but it's part of what sits in the OBL- only gross book and in the OBL gross book and in the OBL- only part of the book. I'm sorry I can't give you more detail on that.
Just in terms of has OBL actually received any further cash following the transaction between then and now?
I honestly don't know the exact answer to that. I know there are cases in there that have been successful. I don't know what the exact split is on that, so I can't give you that answer right now.
Okay. Thank you.
Thanks, Mark.
The next question comes from the line of David Fraser with MST Financial. Please go ahead.
Guys, sorry, just one more question. Series II, Fund 4 and 5, you have completed the capital raise now, so that is great. I was just wondering how many commitments have you made from the new Series II, and how much capital has been allocated? And then, I guess, how much has been deployed? And is the pickup in deployments forecast for 2027 a reflection of the fact that you will be deploying 20% of an investment rather than through Fund 9, which was significantly smaller?
I refer to the analyst fact, slide 17. That will give you some insight into that. But I think the more important part is the second leg of your question. The answer to that is no. A significant part of that AUD 712 million is sidecar capital, where the OBL balance sheet exposure or co-investment will be zero. What we typically see is that on those deals, the fund will be cornerstones the investment, taking a AUD 10 million investment into, let us say, AUD 50 million or AUD 75 million overall investment, and then the remainder comes from sidecar capital. Our co-invest would then be limited to that AUD 10 million piece with all the remaining capital at 0% co-invest coming from sidecar capital. You certainly cannot apply the 20% co-invest to that. It is very materially lower than that.
Okay, great. Thanks, Raymond.
The next question comes from Kevin Ong with Amitell Capital. Please go ahead.
Hey. Hi, Raymond. Kevin here. You spoke about consolidation in the industry, and I am thinking this improves both the LFA side of terms, but it also improves the fund terms that you get with your LPs. If I look at slide 16, management fees, for example, you can see how the 2% of management fee in the past used to be on active deployments, now it is on active commitments. Just wondering, do you see these terms changing looking forward, given the industry consolidation? Thanks.
Thanks, Kevin. I think yes. What we are seeing is the consolidation is driven by two things. I think there was generally, in certain pockets of the market, too much capital chasing a limited set of deals. That is where the competition part falls away. I think the larger allocators that have been allocating to this industry, they like the assets, they like how that works, but they also acknowledge that in order to do this strategy well, you need a sustainable platform. This is a strategy that is not based on deployments, but is based on commitments. So if you pay fees on deployments, you essentially incentivize people to deploy. Pushing money out of the door and legal finance is not necessarily the best recipe to get the best returns.
Basing a management fee over commitments rather than deployments gives the right incentive and ensures that the platforms are long-term sustainable. I think that is part of the learning that has taken place over the last decade, I guess, in the industry, and makes that the larger allocators are supportive of that. Does that address your question?
Do you see it changing any further, given consolidation?
I hope so. It is certainly something that we will be trying to do. I think that is always, and I will tread into sensitive territory here, there is always the commercial tension between allocators who would like to pay as low as possible fees and platforms that want to get higher fees and get platform coverage. My personal view is that a platform should be sustainable and get very close or at that 100% level. I do not think it is healthy for a platform to be just profitable on management fees. But it is also not healthy for a platform to be structurally significantly below 100% cost coverage. I think there is general agreement among the informed parties in the market that that is the equilibrium we are going to.
Got it. Okay, one final follow-up on this question. If you assume that the current fee structure stays, you are confident of getting to your 70% target, so you do not need any changes in the fee structure to get there. Is that right?
No, that is right. I think the last time we agreed a fee structure on deployed was back in 2016 or 2017. Ever since, we have not done that. With the new structures in place and with the AUM growth, the consolidation that we see within the industry, that all is tracking towards achieving that 100% cost coverage over time, at the current fee levels.
Got it. Thank you.
Thank you. There are no further questions at this time. I will now hand back to Mr. van Hulst for closing remarks.
Well, thank you all for sitting through this with us. We have taken quite a bit of time. Hopefully we have answered all of your questions. If there are any follow-up questions, then please do not hesitate to reach out. With that, we will now end the call. Thank you everyone.
Thank you.
That does conclude our conference for today. Thank you for participating. You may now disconnect.