Burford Capital

Outstanding results provide more positive evidence

16 Mar 2018 / Corporate research

Burford has produced another stunning set of results for 2017. Revenue grew 109% to $341.2m, with 20 investments providing realised gains. Profit after tax grew 129% to $249.3m, with the underlying figure up 132% to $264.8m. RoE was a very impressive 37%. The aggregate RoIC has grown to 75%, with total resolutions since Burford’s inception now $773m. Equally as impressive is the continued acceleration in the pace of investment, with $698m of new commitments in the year. It is clear that Burford is not just delivering today, but its continuing investment should ensure that it can continue to deliver in the future too.

  • Dividend: A final dividend of 7.95¢ was announced, bringing the total for the year up to 11.0¢. This is a 20% increase on 2016. Burford continues to balance the desire of some shareholders to have an income against its ability to deploy capital and deliver outstanding returns.
  • Continued expansion: As well as continuing to invest in its core business, Burford is expanding its other operations. It has set up a new insurance operation for large adverse claim costs, for which it is in the process of seeking authorisation. We expect a raising for a new fund to begin at some point too.
  • Valuation: We have raised our forecasts significantly, with our underlying 2019E EPS increasing by 78% to $1.41. Even after a large price move on the day of the results, the prospective P/E for 2019 is now 13.7x, which compares favourably with other companies with a similar growth profile.
  • Risks: The investment portfolio is still diversified, with exposure to over 800 claims, but it retains some very large investments, which means revenue may be volatile. As the company matures, we would expect that to decrease, but not to disappear. The Teinver case shows that this volatility is not simply a negative.
  • Investment summary: Burford keeps demonstrating an impressive ability to deliver very good returns in a growing market while investing its capital base. As the invested capital continues to grow, the litigation investment business should continue to produce strong medium-term earnings growth.