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Burford Capital warns of lower 2019 profit
3rd Feb 2020 11:50
(Sharecast News) - Burford Capital warned on Monday that 2019 profit would be lower than the previous year as it closed fewer cases.
The AIM-listed litigation funder, which was hit late last year by a short-selling attack from US research firm Muddy Waters, said net realised gains would be down by around $20m to $30m compared to 2018. In addition, net unrealised gains will decline by about $50m to $70m, it said.
As a result, income and profit for 2019 will be lower than the previous year.
Net realised gains are what Burford gets from concluded legal cases.
Burford highlighted its policy to manage litigation outcomes for "optimal shareholder value" rather than to its financial year end.
"This approach has already been vindicated with January 2020 seeing litigation successes that would trigger unrealised gains and, if ultimately affirmed and paid, would generate more than $150 million in profits across the group and more than $100 million in balance sheet profits from a single month's activity.
"Had January's events occurred in December, Burford's 2019 results would have been materially higher as Burford would have been obliged to take a meaningful portion of those future expected profits into income immediately," it explained.
The company said new commitments rose 24% on the year in 2019 to a record $1.6bn, with core litigation finance commitments up 30% to $854m. Cash proceeds increased 23% to $997m, including $500m in proceeds to the balance sheet.
Burford said it deployed $1.1bn to investments in the year and achieved the lowest level of balance sheet investment losses in its history.
At 1150 GMT, the shares were up 5.5% at 665.50p.
The AIM-listed litigation funder, which was hit late last year by a short-selling attack from US research firm Muddy Waters, said net realised gains would be down by around $20m to $30m compared to 2018. In addition, net unrealised gains will decline by about $50m to $70m, it said.
As a result, income and profit for 2019 will be lower than the previous year.
Net realised gains are what Burford gets from concluded legal cases.
Burford highlighted its policy to manage litigation outcomes for "optimal shareholder value" rather than to its financial year end.
"This approach has already been vindicated with January 2020 seeing litigation successes that would trigger unrealised gains and, if ultimately affirmed and paid, would generate more than $150 million in profits across the group and more than $100 million in balance sheet profits from a single month's activity.
"Had January's events occurred in December, Burford's 2019 results would have been materially higher as Burford would have been obliged to take a meaningful portion of those future expected profits into income immediately," it explained.
The company said new commitments rose 24% on the year in 2019 to a record $1.6bn, with core litigation finance commitments up 30% to $854m. Cash proceeds increased 23% to $997m, including $500m in proceeds to the balance sheet.
Burford said it deployed $1.1bn to investments in the year and achieved the lowest level of balance sheet investment losses in its history.
At 1150 GMT, the shares were up 5.5% at 665.50p.