Burford Capital has experienced its best ever results for the half year ended the 30th June 2017 with profit during the time exceeding record profits for full year 2016. Income at the firm increased by 130 per cent to $175.5 million compared with the first half of 2016 at $76.2 million, driven by a 148 per cent increase in investment income to $161.6 million - $65.3 million in the first half of 2016. There was also a 151 per cent increase in operating profit to half-year record of $155 million up from $61.7 million for the same period last year and a 170 per cent increase in profit after tax to $142.7 million compared with $52.8 million. The result saw an interim dividend of 3.05 cent up from last year’s first half of 2.67 cent declared - an increase of 14 per cent over last year’s interim dividend - payable in mid November 2017.

Strong demand for capital

Strong demand for Burford’s capital saw record new commitments to investments of $488 million (comprising $226 million from the balance sheet and $262 million from investment funds), $289 million of which already deployed. The company’s record investment performance was underpinned by 11 investments, including the largest cash generation from a single investment in the company’s history, the sale of 25 per cent of its ongoing Petersen investment.

Cash generation

Cash generation of $173.7 million from investments on the balance sheet exceeded every previous half-year period. The company also enjoyed an oversubscribed retail bond offering, raising £175 million at a five per cent coupon. Burford’s new investment management business closed its largest investment fund ever raised in the sector, at $500 million, to invest in complex strategies. Sir Peter Middleton, chairman of Burford, commented:  ‘In just under eight years, Burford has grown from an £80 million start up to become the clear industry leader.  In six months, we have committed almost half a billion dollars to new investments.  We look forward to continuing to develop our core business while supporting all our clients with a broad range of financial solutions.’

Rising client demand

Christopher Bogart, Chief Executive Officer of Burford, added:  ‘Burford has had an exceedingly active first half. Our continued strong growth has been driven by rising client demand as well as our ongoing investment in broadening our product offering and pioneering new markets.  As the industry advances, we continue to innovate legal cost and risk management techniques while delivering strong investment returns for shareholders.’

Arbitration success

The company also recently announced a favourable decision in an arbitration, a claim by Teinver S.A. and others against Argentina in connection with Argentina’s expropriation of two airlines. The arbitration tribunal ruled against Argentina, requiring it to pay $324,254,807 in damages plus pre- and post-award interest which are yet to be computed. Burford’s entitlement from the award is dependent on a number of other variables which are not yet known precisely but estimated to be in the range of $140 million and subject to an ongoing and compounding interest entitlement.

Avenues of challenge

Burford’s current investment is approximately $13 million and carried on the balance sheet at a value of approximately $30 million. However, the favourable decision does not necessarily mean that the amount will actually be paid in full, or at all as there are various avenues for challenge to the decision -  the entire decision could later be overturned by an adjudicatory body with higher authority and result in a loss for Burford. Moreover,  negotiations, settlement discussions and discounting could reduce the figures provided above, all out of Burford's control as it is not involved in such discussions as it is a third party to the actual litigation.

Investment vintage

Mr Bogart commented: 'We are very pleased with this result and are gratified to see justice done for Teinver and its stakeholders.  Without Burford’s capital, it is doubtful that this kind of recovery could have been obtained for the claimants. This investment is from our 2010 vintage and proves out what we have said to investors over time: that it is premature to judge any investment vintage until it is entirely complete.'

Cartel claimant financing package

The litigation funder also recently put together a financing package to support claimants represented by Hausfeld in pursuing damages claims in England arising from the 19 July 2016 European Commission Trucks Cartel decision.The Commission imposed record-breaking € 2.9 billion fines against five leading truck manufacturers, Daimler, Volvo/Renault, Iveco, MAN and DAF which, it concluded, had coordinated the pricing of trucks over a 14-year period between 1997 and 2011, the timing of the introduction of low-emission technologies and the passing on to customers of the costs for emissions technologies. A further truck manufacturer, Scania, remains under investigation.