Member Info for Forensic505

We had a thinly veiled profits warning a few months ago and we see why:

Profits down 20%
EPS down 42%

But the real shocker: $28m cash outflow on operating activities....they will never generate enough from Performance Fees to cover that level of losses. This model doesn’t work with such a thin balance sheet. Will new investors pump in rescue cash? I very much doubt it....only got a small position on this but no position to soon follow

GLA

ST clearly didnt watch the management presentation yesterday.

To their great credit they were very transparent: the lit funding business was to be financed by Convex fees. Those simply havent come through (no surprise - terrible timing to buy a corp finance business but they couldnt have know of course). They paid £15m for Convex (ouch !) and £6m was due to be paid yesterday but target missed. Convex salaries slashed. Re-setting deferred earnout to keep them interested. So the lit funding business doesnt work now. If they run up more capital commitments there, they are in serious danger of running out of cash as they are already well into their limited Revolving Credit Facility.

ST is smart but he is still working for a living for good reason....

I took my medicine and sold yesterday. I just wish they had stuck to be lawyers - they are very good at that. GLA.

Crucial move. Terrific.

Poor results. Gutted. Why have the board messed up a perfectly nice little law firm by buying cash hungry corporate finance and litigation funding businesses ? Eating into their bank facility fast. Will run out of cash. Time to take my medicine. Game over here. GLA.

Absolutely stunning !

I agree ffcmember. Like everyone else I was sorely tempted to sell at 590+ but if I had it would be guaranteed to be 670p right now ! :-) Like you I believe Cool Hand Luke will win the day here. Best of luck to all.

Libero,

Your "conflict" point is excellent. Thank you.

Libero,

As you state below, very rightly, this whole two months approach is rather darn confusing ! Can we simply annualise the two month profit ? We just dont know how representative those two months are (they could have been unusually good or mediocre). Difficult....I will need a lie down first before I decide on your question !! :-)

My gut feel is that FRP will be on a very good run. Government is suppressing insolvencies using furlough and bounce back etc so I expect FRP to get more busy once those measures are withdrawn. 2021 should be very busy and 2022 possibly more so.

As I mentioned below, I think my fundamental concern though is this tension between the old LLP (where the partners took all the profit and cash every year) and now its a PLC and they have to share that with external shareholders. FRP is the old Vantis Plc and we know how that ended - yikes !! I think (most) the listed Law Firms also face the same difficult tension....its a huge cultural gear change moving from Partnership to PLC.

Maybe I was being thick but when I read the prospectus the financials seemed to stop before deductions to partners, so I couldnt see the bottom line profit for external shareholders. Without that transparency I couldnt invest. Today is the first time we see profits after deductions for partners payments....

Separate but related point: now we see the full numbers it seems to me the partners pay has been reduced (slightly) to report a desired profit number. Maybe it is more scientific than that but that is how it appeared to me.

I think Begbies has always struggled with this tension between a traditional LLP Partnership Structure and a new PLC status. Sadly I think the same might be playing out here.

I could be completely barking up the wrong tree and dyor as ever. Just my honest observations.

In theory both should do very well.

Come on Burford - you can break through it !!!??

Martin - Liberum have released an excellent in-depth note today focused on: 2016-2020 actual cash conversion to realised revenues of 112%. Ranges from low of 96% to high of 126%. Long overdue analysis! Obviously unrealised revenues increasing as Mano is more than doubling the number of new investments every year (139% in FY20). Buy recommendation and Target Price of 710p.

Completely understood Peter.

Best wishes

Peter - this Share Prophets outfit responded to Mano’s rebuttal yesterday. Having seen Mano’s response, their second statement is nothing like the first. It is very short and (with a bit of face saving language) largely agrees with Mano in most areas. The cash conversion profile is exactly what one would expect of a business in this sector. Their main gripe is with the PR agency. Again something of a deflection tactic perhaps. The spat is over.

Comprehensive. They turned it into a platform to explain how good the business model is.

Thanks for that crucial update :-)

Must confess, I didnt think they would ever get round to filing for the USA listing. Fair play. This could be the start of a journey to a significant recovery here. Interesting.

Agreed but good to see the conservative accounting. They had this at a fair value mark of just £395,000 on a claim (with their track record) of £7m+. There will be some costs wrote off to add of course but this looks to have been sensibly managed. Have read the judgement: the bloke they were going after had lost £10m of taxpayers money on a basket case business idea....Fair play Mano.

Completely agreed.

The Litigation Funding thesis is very much intact. BUR need to get past their own negative sentiment: need good results and sensible conservative accounting.

Takes a clattering everytime management speak ! They need to recall the Golden Rule: under promise, over deliver. They seem to be stuck on the opposite.

BCL looks poor strategic move. Investing in one of their clients is bound to unsettle all others, especially in the cut throat legal world. But they seem to have loaned BCL money a year ago according to Companies House, maybe BCL couldn’t repay so they converted to equity.