Burford Capital reports 'best year ever' for portfolio performance

Litigation finance company Burford Capital reported the best year in its history for portfolio performance on Wednesday, with group-wide capital provision-direct asset realisations up 72% to $608m (£443.22m).

The AIM-traded firm said it also recorded its highest-ever Burford-only capital provision net realised gains, which rose 42% to $182m.

It also reported large realised gains in its managed funds, with group-wide capital provision-direct income reaching a record $508m, with the board noting that managed fund realised gains provided the basis for “significant” future performance fees.

Cash generation was described as “robust” for the year ended 31 December, with $1bn in cash receipts group-wide, and $519m Burford-only.

The company said its balance sheet liquidity at year-end was a record $336m of cash and cash management assets - 63% higher than in 2019, after $254m of receivables from 30 June was collected as cash in the second half.

Burford’s portfolio continued to grow, to $4.5bn at year-end from $4.2bn a year earlier, for a five-year compound annual growth rate of 52%, despite the impact of Covid-19 on originations, “significant” 2020 realisations, and the downsizing of its capital provision-indirect portfolio.

Balance sheet net assets grew 11% to $1.7bn.

Returns from realised assets in the Burford-only capital provision-direct portfolio were described by the board as “attractive”, with a cumulative return on invested capital of 92%, up from 88% year-on-year, and an internal rate of return of 30%, down fro 31%, recognised on an aggregate $1.6bn of asset recoveries since the company’s inception in 2009.

The board confirmed the restoration of the dividend to its pre-pandemic level of 12.5 US cents per share, with a full dividend to be paid in June despite the firm not paying an interim dividend in December, subject to shareholder approval.

“2020 was historic for both the scale of the global economic downturn as well as Burford's record $337m of realizations on its balance sheet from its core litigation finance portfolio,” said chairman Sir Peter Middleton.

“Additionally, the board continued to implement its plan to evolve Burford's corporate governance, appointing three highly skilled independent non-executive directors, including our first female board member.

“In October, we successfully added a New York Stock Exchange listing to the pre-existing London Stock Exchange quotation of our shares and bonds.”

Middleton noted that on his retirement at the 2021 annual general meeting, Steve Wilson would become chairman, in line with the company's plan.

Burford reported consolidated total income of $357m, up from $366m in the prior year, with Burford-only total income slipping to $353m from $357m, which the directors noted was just 1% lower despite the impact of the coronavirus pandemic.

Excluding income from assets related to the controversially-nationalised Argentinian national oil company YPF, the company said Burford-only total income was up 110%, with operating profit rising 226%.

Operating profit came in at $249m, down from $265m, which the board said reflected “modestly higher” general operating expenses consistent with its ongoing growth strategy, as well as the current expenses of managing funds where performance fees should be earned in the future, and NYSE-listing and other equity-related costs.

Burford’s profit after tax fell to $172m from $212m, which was impacted by a book tax charge of $37m, though cash taxes were only $11m.

The tenure of the chief executive and chief information officers was extended to 31 December 2024 during the year, with no increase in compensation.

Burford said the two officers also committed to buy more than $2m in total of additional stock with their 2020 bonus, bringing their personal investment in Burford to more than $14m over the last two years.

“For the first time, Burford crossed the half-billion-dollar mark for group-wide income, generating record amounts of realised gains,” said chief executive officer Christopher Bogart.

“We brought in more cash from case successes than ever before, amounting to $1bn group-wide, and we ended the year with more cash on hand and liquidity than we have ever had.”

Bogart said that cumulatively, Burford’s return on invested capital since inception of 92% was at its highest ever year-end level, on $1.6bn of recoveries.

“Our portfolio of ongoing matters is larger than at any point in our history, and we have succeeded in growing it at a five-year compound annual rate exceeding 50 %.

“We look to the remainder of 2021 with excitement.”

At 1343 GMT, shares in Burford Capital were down 0.92% at 591p.