(Alliance News) - Burford Capital Ltd on Tuesday reported a decline in 2019 profit as capital provision income and insurance income fell sharply, but said the first quarter of 2020 has been strong.
Burford's shares were trading 27% higher at 514.85 pence in London in late morning trading.
The litigation finance company posted a USD225.5 million pretax profit for 2019, down 26% from the previous year's USD305.1 million profit, as total income dipped 14% to USD366.0 million from USD425.0 million.
The drop in total income included a 13% reduction in capital provision income to USD351.8 million from USD404.2 million, while insurance income slumped to just USD3.5 million from USD10.4 million.
As disclosed on April 2, Burford is not proposing a final 2019 dividend as it is looking to cut costs amid difficult markets.
Chief Executive Christopher Bogart said: "Against the measure of success of growing Burford's business and generating substantial free cash, Burford had a spectacular year, and 2020 is off to a terrific start. We are the market leader in a rapidly growing industry with high and uncorrelated returns, and we expect meaningful demand for our services in light of the current economic disruption. We have significant cash on hand in addition to our proven cash generating capacity and access to hundreds of millions of dollars of fund capital to boot. And much as we share the world's distress at our current health crisis, the reality is that we expect its aftermath to be a time of significant demand for our services and a moment when uncorrelated cash flows are especially attractive."
In the first four months of 2020, Burford said it "has obtained court results or arbitral awards that, if paid in full, would generate substantial income and cash receipts". This includes close to USD800 million of cash receipts and over USD450 million of balance sheet cash receipts, as well as over USD500 million of income.
"The expected cash receipts should provide a meaningful addition to Burford's already healthy cash liquidity to reinvest in new matters," said Burford.
On Covid-19 crisis, Burford said: "While the pandemic could well result in delays in the realisation of Burford's assets, those delays are timing rather than substantive and the risks to Burford's business are considerably less than many other companies, while also creating the likelihood of business opportunities going forward."
By Anna Farley; annafarley@alliancenews.com
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Burford Capital (BUR)