Well known litigation funder Burford Capital has restored its dividend policy to pre-covid levels, following what it calls a ‘record’ year for its portfolio.
According to Burford's latest accounts for the year ended 31 December 2020, the group saw asset realisations reach $608m, up 72% on the previous year. Across the whole group, cash receipts increased to $1bn, with $519m generated by Burford-only. The funder describes the result as ‘robust’.
Dividend Restored To Pre-pandemic Level
Operating profit dipped by 6% to $249m, however, reflecting ‘modestly higher general operating expenses’ together with the cost of managing funds where performance fees are expected to be earned in the future. Profit after tax fell from $212m in 2019 to $172m.
The funder has now restored its dividend to its pre-pandemic level of 12.5c per share. Subject to shareholder approval, a full dividend will be paid in June, despite the fact that an interim dividend was not paid in December 2020.
Burford's dividend cover of 23.3 for 2019 and 6.27 for 2020 suggests they are retaining significant earnings for re-investment in future funding.
Sir Peter Middleton, chairman, said:
“2020 was historic for both the scale of the global economic downturn as well as Burford’s record $337 million of realizations on its balance sheet from its core litigation finance portfolio”.
‘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. On my retirement at our 2021 AGM, Steve Wilson will become chairman, in line with the company’s plan.’
Christopher Bogart, Chief Executive Officer of Burford, added:
“For the first time, Burford crossed the half-billion-dollar mark for Group-wide income, generating record amounts of realized gains. We brought in more cash from case successes than ever before, amounting to $1 billion Group-wide, and we ended the year with more cash on hand and liquidity than we have ever had. Cumulatively, our return on invested capital since inception of 92% is at its highest ever year-end level on $1.6 billion 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.”
In October, Burford reported that Covid-19 had hit profits in the first half of 2020, with profit before tax down 15% to £198m. Turnover fell by 12% to £218m in the same period.
The first lockdown also had a major impact on new business in the first half of 2020, with group-wide commitments down 74% to around £152m. However, the company said the litigation environment has ‘stabilised and pipeline is rebuilding’, with an expected surge in the volume of claims arising from the pandemic in the years to come.
Highlights
• Best year in Burford’s history for portfolio performance: Significant acceleration of asset recoveries, with Group-wide capital provision-direct asset realizations up 72% to $608 million (2019: $354 million) o Highest-ever Burford-only capital provision net realized gains, up 42% to $182 million o Large realized gains in Burford’s managed funds, with Group-wide capital provision-direct income reaching a record $508 million – managed fund realized gains provide the base for significant future performance fees
• Robust cash generation: $1 billion in cash receipts Group-wide and $519 million Burford-only o Record balance sheet liquidity at year-end, with $336 million of cash and cash management assets, up 63% (2019: $206 million) o $254 million of receivables from June 30, 2020 were collected as cash in 2H 2020
• Portfolio continued to grow, to $4.5 billion (2019: $4.2 billion) for 5-year CAGR of 52%, despite pandemic impact on originations, significant 2020 realizations and downsizing of capital provision-indirect portfolio o Balance sheet net assets up 11% to $1.7 billion
• Attractive returns from realized assets in Burford-only capital provision-direct portfolio o Cumulative ROIC of 92% (2019: 88%) and IRR of 30% (2019: 31%) recognized on an aggregate $1.6 billion of asset recoveries since Burford’s inception in 2009
• Dividend restored to its pre-pandemic level of 12.5c per share; full dividend to be paid in June 2021 despite not paying an interim dividend in December 2020, subject to shareholder approval
• Consolidated total income of $357 million (2019: $366 million) o Burford-only total income of $353 million (2019: $357 million), only 1% lower despite the pandemic
Burford shares rose 1% to 602p on the announcement, but are still well below their peak of nearly 2,000p.
The writer is a shareholder and bondholder of Burford Capital.