Burford Capital Ltd (lon:bur)
Burford Capital – 2019 Annual Report

Financials

ItemCurrent PeriodPrevious Period
Year20192018
Period12 Months12 Months
Revenue$356m$420m
Earnings
Adjusted Earnings
EBITDA
Adjusted EBITDA
Statutory Profit$226m$328m
Adjusted Profit
Total Debt$700m
Net Debt

Commentary History
Commentary
Title: Burford Capital – 2019 Annual Report
Company: BUR - Burford Capital Ltd
Share Price Then: 478p
Author: Ian Smith
Date: Tue 28 Apr 2020
Comments: Burford have just released their 2019 full year update and this has sent the shares soaring.

The thing is that nothing seems to have changed!
So I don’t understand the surge as the arguments against the company that sent the shares plunging don’t seem to have changed.

The Petersen case, the one against the government of Argentina is brought out into the open and used as an argument for why we are doing well. It is true this case has turned out very well for the litigation part of the group,

success from our funding of the Petersen litigation, enabling us since 2015 to sell 38.75% of our interest in its outcome for cash proceeds of $236 million and our total deployment in Petersen remains below $20 million

This is staggering, how can any one complain?

But go back and look at the questions raised about the value of the sales and the purchaser when it was suggested that the purchaser was a fund managed by Burford and as far as I can see this has not been addressed. Burford also promotes this success as being part of the strategy and not a one off, but there doesn’t seem to be another example.

That success has had three impacts on our business.
First, we have been able to use the cash generated by the Petersen sales to finance the growth of our business.

The trouble here is that if the purchaser was at least in part a Burford managed fund over paying then this is sort of a transfer of funds from one part of the business to another.

Second, we have been able to rely on the cash profits provided by those sales during a period when our profitability would otherwise have been considerably lower while we wait for the higher volumes of business we have written recently to turn into cash profits

For a start-up business this remark would be completely reasonable but Burford are not a start up and have funded many cases that have been brought to a conclusion.

The third impact is an accounting one: We are required to account for our litigation assets at fair value. In traditional ongoing litigation, without any secondary sales to third parties, the accounting impact of fair value accounting is modest.

Again the trouble here is that if the purchaser was at least in part a Burford managed fund over paying then the value of their remaining share is overstated.

There is a still lot of trust us in the report and one really big measure, We are pursuing a dual listing in the US is still a work in progress partially blamed on COVID 19 slowing down the audit.
Interesting when talking about COVID 19 they say puts pressures on corporate legal departments and their law firms, conditions that increase demand for our capital and services.

This could be true or it could be that next year we see something like COVID 19 has dramatically affected our ability to bring cases to conclusion.

Whether the Petersen case ever pays out money has to be a debatable case the defendant is a government so it is a not just a question of who will the case but even if the defendant loses will it pay.

Burford are still investigating possible market manipulation for the 6&7 of August 2019 and I understand why they are interested, but to me this is now history.

So we seem to be back to the position we were in before the report was published, do you believe the company and the good times in terms of profitability are just around the corner or do you believe that the company has a massive amount of capital committed to legal cases that result in the company roughly breaking even?
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