Burford Capital (BUR) earns a living by providing litigation finance for companies that have neither the money nor the time to pursue a course of civil redress. Operating predominantly in the US, Burford has consistently generated strong returns, thanks to a high level of due diligence before financing a case and a high success rate, as its interim figures show.
Operating profit increased by 56 per cent to $28.4m (£18.2m), which included Burford's largest recovery to date. This case generated $61m gross proceeds on a $25m investment, giving a return on invested capital of 144 per cent. To help build up a future revenue stream, Burford committed $81m to new investments in the first half; that is a third more than in the comparable period last financial year.
As expected, Burford's UK insurance book - which provides cover that pays for plaintiffs' costs when a case is lost - started to run down, as a result of complex legal reforms. However, the business will continue to deliver income because the Jackson reforms are not retroactive. So Burford has a large back book of cases that will not be affected by the new rules.
Analysts at RBC Capital Markets expect full-year adjusted pre-tax profits of $53.1m and EPS of 26¢ (from $57.1m and 0.26¢ in 2014).
| BURFORD CAPITAL (BUR) | ||||
|---|---|---|---|---|
| ORD PRICE: | 171p | MARKET VALUE: | £349m | |
| TOUCH: | 168-173p | 12-MONTH HIGH: | 181p | LOW: 118p |
| DIVIDEND YIELD: | 2.9% | PE RATIO: | 10 | |
| DISCOUNT TO NAV: | 12% | NET CASH: | $20.2m | |
| Half-year to 30 Jun | Net asset value (¢) | Pre-tax profit ($m) | Earnings per share (¢) | Dividend per share (¢) |
|---|---|---|---|---|
| 2014 | 173 | 12.4 | 5.69 | 1.74 |
| 2015 | 193 | 23.8 | 11.3 | 2.33 |
| % change | +12 | +92 | +99 | +34 |
Ex-div: 1 Oct Payment: 23 Oct £1=$1.557 | ||||
