Burford Capital Limited (LON:BUR) has announced its results for 2019. As previously indicated, these were lower than in the previous year. Revenue fell 17% from $430m in 2018 to $357m. Profit after tax, on Burford’s basis, declined 31% from $329m to $226m. As announced earlier, there will be no final dividend so only the interim dividend of ¢4.17 was paid for FY19. Unusually, Burford has also released a trading update for early 2020 alongside its main figures. Court results and arbitral awards have been obtained that would generate some healthy profits. Most notable is $200m in income ($300m in cash receipts) regarding which further legal review is unlikely.
- New presentation: Burford has always tried to be open about how it works, but this report overhauls its presentation. Additional information on commitments, fair-value accounting and returns should reassure investors and finally put to rest the hazy allegations that have been made against it.
- Balance sheet: Cash generation from operations was $518m, only slightly down from the $526m generated in 2018. With the new SWF arrangement in place, balance sheet deployments were much reduced at $465m, compared with $670m in 2018. Year-end cash was down $71m to $206m.
- Risks: The investment portfolio is highly diversified, both by number of claims and type. However, it retains some very large investments, which means revenue could be volatile, particularly in the smaller divisions. The Petersen case shows that this volatility is not simply a negative.
- Investment summary: Burford Capital has already demonstrated an impressive ability to deliver good returns in a growing market while investing its capital base. As the invested capital continues to grow, we would expect that the litigation investment business will continue to produce strong earnings growth.