TIDMBUR
RNS Number : 4295P
Burford Capital Limited
17 February 2021
17 February 2021
BURFORD CAPITAL PROVIDES 2020 BUSINESS UPDATE AND REINSTATES
FULL DIVID
Burford Capital Limited, the leading global finance and asset
management firm focused on law, today released a business update on
its 2020 activities. All figures in this disclosure are unaudited.
Certain definitions are provided below; additional definitions,
reconciliations and information are set out in Burford's 2020
Interim Report, which is available on our website at the following
address: www.burfordcapital.com/shareholders . As previously
disclosed, Burford will announce full preliminary results for the
year ended December 31, 2020 on March 24, 2021 at 08.00am EDT /
12.00pm GMT / 1.00pm CET.
Introduction (1)
Burford had the best year in its history for portfolio
performance, generating record levels of realized gain and more
cash from successes than ever before. Burford ended the year with
its highest-ever levels of cash liquidity, and its portfolio of
ongoing matters is larger than it has ever been. Burford's
concluded case ROIC rose to its highest year-end level in our
history. New business, which suffered from the effects of the
pandemic in 1H 2020, snapped back in 2H 2020. Notably, Burford's
YPF-related assets (comprising the Petersen and Eton Park claims)
did not contribute to earnings in 2020, for the first time in five
years.
Burford's Group-wide total income crossed the
half-billion-dollar mark in 2020 for the first time in our history,
driven by significant asset realizations during the year. As our
managed funds participated in a sizeable share of these
realizations (which should generate performance fees for Burford in
future years), Burford's consolidated and balance sheet-only total
income was largely flat in 2020 compared to 2019. Profit after tax
was down given modestly higher operating expenses and higher than
normal book tax charges.
Burford suspended its dividend in early 2020 due to uncertainty
around the pandemic, but given the year's performance and Burford's
strong liquidity position, the Board will recommend that
shareholders approve at the Annual General Meeting a full
resumption of the dividend at its previous annual level of 12.5 US
cents per share, with a record date in June 2021. Although Burford
did not pay an interim dividend in December 2020, we will
nonetheless recommend payment of the entire full year dividend of
12.5 US cents per share in June 2021.
Christopher Bogart, CEO, Burford Capital, commented:
"2020 was another year of strong performance for Burford. We
achieved record amounts of asset realizations from core litigation
finance, which generated more realized gains and cash proceeds from
case successes than ever before, driving our cumulative concluded
case ROIC to an all-time year-end high of 92%. With cash on
Burford's balance sheet of $336 million at the end of 2020, we are
in a strong position to fund the additional future growth we
anticipate. We look to the remainder of 2021 with excitement."
Portfolio activity and returns
Burford saw strong performance in its capital provision-direct
business - its traditional, core legal finance business:
-- Group-wide realizations of $608 million, up 72% (2019: $354 million)
-- Balance sheet realizations of $336 million, up 47% (2019: $228 million)
Those realizations translated into record-breaking realized
gains in the capital provision-direct business:
-- Group-wide realized gains of $361 million, up 103% (2019: $178 million)
-- Balance sheet realized gains of $179 million, up 48% (2019: $121 million)
Burford's successes pushed its concluded case ROIC since
inception to its highest-ever year-end level at 92% at December 31,
2020 (2019: 88%) on $1.6 billion of cumulative realizations.
Burford's 2020 realizations were lumpy, consistent with past
experience, with an active first half and a slow second half. Even
without a global pandemic, such volatility is to be expected from
individual litigation matters and thus our portfolio. It is,
therefore, difficult to identify the impact of the pandemic on
realizations during 2H 2020. It is also difficult to predict the
timing and impact of the post-pandemic environment on realizations
as delayed cases may resolve alongside undisrupted matters or may
be pushed out broadly across our capital provision assets. As the
financing we provide often compensates Burford for the extension of
a case's duration, delay can give rise to increased income in
successful recoveries where a time-based return component
exists.
Burford also generated $223 million in Group-wide realizations
in 2020 from its capital provision-indirect portfolio, of which
$173 million were for the balance sheet.
Burford closed the year with the largest Group-wide portfolio in
its history: $4.6 billion, up 8% (2019: $4.2 billion), representing
a 53% CAGR over the last five years.
Cash generation and liquidity (Burford balance sheet only)
Almost all of our realizations turned into cash during 2020: the
capital provision-direct business generated $325 million of cash
proceeds, up 55% (2019: $210 million). The capital
provision-indirect portfolio also produced $173 million in cash
proceeds as Burford focused on accelerating resolutions in that
portfolio in light of the pandemic, contributing to total cash
receipts of $519 million. A substantial portion of the $281 million
of due from settlement receivables at June 30, 2020 paid in cash
during 2H 2020, such that due from settlement receivables at
December 31, 2020 were only $30 million.
Thus, Burford ended the year with a record-breaking level of
liquidity: $336 million of cash and cash management assets, up 63%
(2019: $206 million).
New business
We believe that new commitments were negatively affected by the
pandemic in the first half of 2020. However, activity rebounded in
the second half of 2020 to return to levels consistent with the
second half of 2019, but not sufficiently to offset the slower
first half.
-- Group-wide new capital provision-direct commitments were $570
million in 2020, down 40% (2019: $955 million)
o 2H 2020: $454 million, down only 7% (2H 2019: $490
million)
-- Balance sheet new capital provision-direct commitments were
$336 million in 2020, down 37% (2019: $530 million)
o 2H 2020: $279 million, down only 2% (2H 2019: $285
million)
Burford did not make any new commitments to the capital
provision-indirect portfolio in 2020, consistent with our
previously disclosed approach.
New deployments fell sharply in the first half of 2020 as courts
closed and litigation matters (and therefore spending on those
matters) slowed. Activity resumed in 2H 2020 and thus we saw
significantly higher deployment levels than in 1H 2020, although
activity remained below historical levels (and below 2H 2019 when
we experienced an unusually high level of initial deployments on
new commitments).
-- Group-wide capital provision-direct deployments were $368
million in 2020, down 27% (2019: $501 million)
o 2H 2020: $247 million, up 104% from 1H 2020 ($121 million),
though down 26% from 2H 2019 ($335 million)
-- Balance sheet capital provision-direct deployments were $225
million in 2020, down 16% (2019: $269 million)
o 2H 2020: $158 million, up 136% from 1H 2020 ($67 million),
though down 16% from 2H 2019 ($188 million)
Income statement metrics
Burford is in the process of preparing its 2020 financial
statements, which also are subject to audit; thus, the figures
below are preliminary and subject to adjustment. As a reminder,
Burford prepares its financial statements on a consolidated basis,
which includes the results of certain funds and other entities we
are required to consolidate. These consolidated results are
different than both our Group-wide results (which include all of
our non-consolidated funds as well) and Burford-only results, which
exclude the consolidated funds.
Burford's overall portfolio performance was very strong on a
cash basis; indeed, Group-wide total income exceeded $500 million
for the first time. However, the structure of some of our
investment funds means that the Burford balance sheet does not
receive or recognize performance fees related to the fund portion
of those successes until some future date given the funds'
"European" performance fee structure. Moreover, 2020 was the first
year in five years where Burford's total income did not include any
unrealized gain from the YPF-related assets.
Thus, we expect to report the following results for 2020:
-- Total income: $345-355 million on a consolidated basis (2019:
$366 million), $340-350 million Burford-only (2019: $357
million)
o Excluding income from YPF-related assets, which accounted for
over half of 2019's total, 2020 total income rose by $170-$180
million, or by 95-101%, on a consolidated basis and by $175-$185
million, or by 104-109%, on a Burford-only basis.
-- Operating profit (consolidated and unadjusted Burford-only):
$240-250 million (2019: $265 million)
o Operating profit was affected by modestly higher general
operating expenses consistent with Burford's ongoing growth
strategy, current expenses related to managing assets in funds
where the related performance fees will occur in the future and
expenses related to Burford's New York Stock Exchange listing and
other equity-related matters
-- Profit after tax (consolidated and unadjusted Burford-only):
$160-170 million (2019: $212 million)
o Profit after tax was impacted by a large book tax charge, as
discussed in our interim report that does not reflect the much
lower level of cash taxes actually paid
Covid-19 pandemic
Burford's business has been disrupted considerably less by the
pandemic than might have been feared a year ago. To be sure, we saw
slowdowns in new business during the first half of 2020, but then a
rebound during the second half of the year. Courts and arbitral
tribunals have adjusted their processes, although jury trials
remain largely suspended. Doubtless we will see some elongation of
the lives of some matters, but we have not seen any matters
discontinue nor have any parties become insolvent. Our team has
adjusted to remote work without much effort. We will not be
entirely back to normal until people can safely gather in groups
indoors, but we have certainly weathered this terrible time much
better than many - and the future likely includes an uptick in
disputes and, therefore, financing opportunities for Burford.
Definitions and use of alternative performance measures
We report our financial results under International Financial
Reporting Standards ("IFRS"). IFRS requires us to present
financials that consolidate some of the limited partner interests
in funds we manage as well as assets held by our balance sheet
where we have a partner or minority investor. We therefore refer to
various presentations of our financial results as:
-- Consolidated refers to assets, liabilities and activities
that include those third-party interests, partially owned
subsidiaries and special purpose vehicles that we are required to
consolidate under IFRS accounting. This presentation conforms to
the presentation of Burford on a consolidated basis in our
financials. The major entities consolidated into Burford include
the Strategic Value Fund, BOF-C (our arrangement with a Sovereign
Wealth Fund) and several entities in which Burford holds
investments where there is also a third-party partner in or owner
of those entities. Note that in our financial statements, our
consolidated presentation is referred to as Group.
-- Burford-only, Burford standalone, Burford balance sheet only,
"balance sheet" or similar terms refers to assets, liabilities and
activities that pertain only to Burford itself, excluding any
third-party interests and the portions of jointly owned entities
owned by others.
-- Group-wide refers to Burford and its managed funds taken
together, including those portions of the funds owned by third
parties and including funds that are not consolidated into
Burford's consolidated financials. In addition to the consolidated
funds, Group-wide includes the Partners funds (our first three core
litigation finance funds), Burford Opportunity Fund and Burford
Alternative Income Fund and its predecessor.
We refer to our capital provision assets in two categories:
-- Direct, which includes all our legal finance assets
(including those generated by asset recovery and legal risk
management activities) that we have made directly (i.e., not
through participation in a fund) from our balance sheet. We also
include direct (not through a fund) complex strategies assets in
this category.
-- Indirect, which includes our balance sheet's participations
in one of our funds. Currently, this category is comprised entirely
of our position in the Burford Strategic Value Fund.
We also use certain Alternative Performance Measures ("APMs"),
which are not presented in accordance with IFRS, to measure the
performance of certain of our assets including:
-- Return on invested capital (ROIC) means the absolute amount
of realizations from a concluded asset divided by the amount of
expenditure incurred in funding that asset, expressed as a
percentage figure. In this release, when we refer to our concluded
case ROIC, we are referring to the ROIC on concluded and partially
concluded capital provision direct assets on Burford's balance
sheet since the inception of the company until the current
date.
-- Compound annual growth rate (CAGR) is the annual rate of
return that would be required for a sum to grow from its beginning
balance to its end balance, assuming reinvestment at the end of
each year.
Our business activities include:
-- Legal finance, which includes our traditional core litigation
finance activities in which we are providing clients with financing
against the future value of legal claims. It also encompasses our
asset recovery and legal risk management activities, which often
are provided to the same clients.
-- Complex strategies encompasses our activities providing
capital as a principal in legal-related assets, often securities,
loans and other financial assets where a significant portion of the
expected return arises from the outcome of legal or regulatory
activity. Most of our complex strategies activities over the past
several years have been conducted through our Strategic Value
Fund.
-- Post-settlement finance includes our financing of
legal-related assets in situations where litigation has been
resolved, such as financing of settlements and law firm
receivables.
-- Asset management includes our activities administering the
funds we manage for third-party investors.
Other terms we use include:
-- Cash receipts provide a measure of the cash that Burford's
business generates during a given year. In particular, cash
receipts represent the cash generated from operations, including
cash proceeds from realized assets, before any deployments into
funding existing or new assets. Cash receipts are calculated as the
cash proceeds from our capital provision assets, including cash
proceeds from related hedging assets, plus cash income from asset
management fees, services and other income.
-- Commitment is the amount of financing we agree to provide for
a legal finance asset. Commitments can be definitive (requiring us
to provide funding on a schedule, or more often, when certain
expenses are incurred) or discretionary (only requiring us to
provide funding after reviewing and approving a future matter).
Unless otherwise indicated, commitments include deployed cost and
undrawn commitments.
-- Deployment refers to the funding provided for an asset, which
adds to Burford's invested cost in that asset. We use the term
interchangeably with addition.
-- Deployed cost is the amount of funding we have provided for
an asset as of the applicable point in time.
-- Liquidity refers to the amount of cash and cash management assets on our balance sheet.
-- Portfolio refers to the total amount of our capital provision
and post-settlement assets, valued at deployed cost plus any fair
value adjustments and any undrawn commitments.
-- Realization: A legal finance asset is realized when the asset
is concluded (when litigation risk has been resolved). A
realization will result in Burford receiving cash or, occasionally,
some other asset or recognizing a due from settlement receivable,
reflecting what Burford is owed on the asset. We use the term
interchangeably with recovery.
-- Realized gain/loss refers to the total amount of gain or loss
generated by a legal finance asset when it is realized, calculated
simply as realized proceeds less deployed funds, without regard for
any previously recognized fair value adjustment.
-- Unadjusted Burford-only refers to Burford-only income metrics
without adjustment, as presented in prior years, to exclude the
impact of intangible amortization and certain other expenses.
-- YPF-related assets refers to our Petersen and Eton Park legal
finance assets, which are two claims relating to Argentina's
nationalization of YPF, the Argentine energy company.
[1] This introduction is qualified and expanded upon by the
specific sections that follow.
For further information, please contact:
Burford Capital Limited
Jim Kilman, Chief Financial Officer +1 917 985 9840
Robert Bailhache, Head of Investor Relations,
EMEA and Asia +44 (0)20 3530
rbailhache@burfordcapital.com 2023
Jim Ballan, Head of Investor Relations, Americas +1 (646) 793
jballan@burfordcapital.com 9176
Numis Securities Limited - NOMAD and Joint +44 (0)20 7260
Broker 1000
Huw Jeremy (NOMAD)
Charlie Farquhar / Jonathan Abbott (Joint Broker)
+44 (0)20 7029
Jefferies International Limited - Joint Broker 8000
Graham Davidson
Tony White
About Burford Capital
Burford Capital is the leading global finance and asset
management firm focused on law. Its businesses include litigation
finance and risk management , asset recovery and a wide range of
legal finance and advisory activities. Burford is publicly traded
on the New York Stock Exchange (NYSE: BUR) and the London Stock
Exchange (LSE: BUR), and it works with law firms and clients around
the world from its principal offices in New York, London, Chicago,
Washington, Singapore and Sydney.
For more information, please visit www.burfordcapital.com .
This communication shall not constitute an offer to sell or the
solicitation of an offer to buy any ordinary shares or other
securities of Burford.
This release does not constitute an offer of any Burford fund.
Burford Capital Investment Management LLC ("BCIM"), which acts as
the fund manager of all Burford funds, is registered as an
investment adviser with the U.S. Securities and Exchange
Commission. The information provided herein is for informational
purposes only. Past performance is not indicative of future
results. The information contained herein is not, and should not be
construed as, an offer to sell or the solicitation of an offer to
buy any securities (including, without limitation, interests or
shares in the funds). Any such offer or solicitation may be made
only by means of a final confidential Private Placement Memorandum
and other offering documents.
Forward-looking statements
This announcement contains "forward-looking statements" within
the meaning of Section 21E of the US Securities Exchange Act of
1934 regarding assumptions, expectations, projections, intentions
and beliefs about future events. These statements are intended as
"forward-looking statements". In some cases, predictive,
future-tense or forward-looking words such as "aim", "anticipate",
"believe", "continue", "could", "estimate", "expect", "forecast",
"guidance", "intend", "may", "plan", "potential", "predict",
"projected", "should" or "will" or the negative of such terms or
other comparable terminology are intended to identify
forward-looking statements, but are not the exclusive means of
identifying such statements. In addition, we and our
representatives may from time to time make other oral or written
statements which are forward-looking statements, including in our
periodic reports that we file with the US Securities and Exchange
Commission, other information sent to our security holders, and
other written materials. By their nature, forward-looking
statements involve known and unknown risks, uncertainties and other
factors because they relate to events and depend on circumstances
that may or may not occur in the future. We caution you that
forward-looking statements are not guarantees of future performance
and are based on numerous assumptions and that our actual results
of operations, including our financial condition and liquidity and
the development of the industry in which we operate, may differ
materially from (and be more negative than) those made in, or
suggested by, the forward-looking statements contained in this
report. Significant factors that may cause actual results to differ
from those we expect include those discussed in "Item 3, Key
Information - D. Risk Factors" in our registration statement on
Form 20-F filed with the US Securities and Exchange Commission on
September 11, 2020. In addition, even if our results of operations,
including our financial condition and liquidity and the development
of the industry in which we operate, are consistent with the
forward-looking statements contained in this report, those results
or developments may not be indicative of results or developments in
subsequent periods.
Except as required by law, we undertake no obligation to update
or revise the forward-looking statements contained in this report,
whether as a result of new information, future events, a change in
our views or expectations or otherwise.
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END
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