Results don’t need to be appealed

Burford has announced its interim results for 1H’19 and has produced another excellent set of figures. After stripping out third-party interests, revenue was up 40% to $287m and earnings grew 36% to $225m. Litigation investment was again the star, with income also increasing 36% to $265m. While this saw some benefit from the recent Petersen transaction, there were strong results beyond that with the rest of the portfolio producing a first-half RoIC of 78%. These brought total recoveries to $1.16bn from 99 investments, with a cumulative RoIC of 98% (from 85% to 31 December 2018) and IRR of 32% (from 30%).

• New commitments: It was good to see a return to growth in commitments, with 36% growth to $751m in the half-year; 2018 had been relatively flat compared with 2017. Deployments had slower growth of 8%, affected by a $130m portfolio investment for which the entire deployment is deferred.
• Cash and capital: Cash generation from operations was $184m, although payment of receivables since 30 June would have lifted this by $126m. Deployments in the half were $198m. So, period-end cash of $171m, has risen to $297m now, slightly in excess of the $277m in place at 31 December 2018.
• Risks: The investment portfolio is highly diversified, with exposure to more than 1,100 claims. 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 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 expand, we would anticipate that the litigation investment business will continue to generate strong earnings growth.