Member Info for ggplyr

Agreed Hazrat, last year was a trading update early December saying everything is in line with expectations. Prior year had a fair bit more detail. I don't see why there wouldn't be one even if its just "in line with expectations"

@Shareshearcher.
Unfortunately bad debt provision or any other provision can only be an estimate given its about events that haven't happened, and so determined by management. IFRS9 has attempted to make this clearer and more comparable. I agree its complex though.

No problem Meg.
Sorry, not entirely sure what your question is on the next bit so apologies if I have got the wrong end of the stick.
What the accounts are showing, is in the non performing debt is £7.3m (£1.467m/20%). and that the company believe they will recover 80% of this debt. The debts wouldn’t be ‘terminated’ at this stage, just overdue and being actively chased up. The 20% ECL provision is based on past experiences and future predictions decided by management (so debatable) but subject to auditor’s approval.
In terms of never actually writing off a debt, you effectively do hang around for a potential payment by other means, this is why a company makes a provision. It would be wrong to fully write off say 100 debts of 50k each because they are over 90 days old when you know through debt collection practises you expect to collect 80% of the debts. But if you know you won’t recover it at all, e.g. no security against the debt and the debtee is bankrupt then this is when it should be fully written off.
An auditor would get the aging of the debt and looking considerably closer to something a year old say and it would be down the company to prove whether they were ever going to recover it.
Slight side note – where you say “bad debt should be taken at the point of termination and taken from the provision pot - thus taking an immediate hit in the P&L”.
If you were to take from the provision pot then its already been recognized as a hit in the P&L- the accounting treatment would be- If you have provided 20% for a debt of 100k then 20k is already in the provision pot (and already hit the P&L). If you write off the debt fully then 80% is recognized in the P&L at that point in time. The remaining 20% is a balance sheet adjustment only reducing the trade receivable and the provision.

Apologies, I was looking too quickly... I said…
“So year on year total non-performing debt has reduced considerably from 7.3m to 3.5m. Which is a good sign.”
This is the wrong way round, it has increased from 3.5m to 7.3m which is not good.

This was touched on in an in an email I sent to the CFO a few days ago. James' Reponse was :
"...Secondly, at this particular year end, there were a handful of reasonably chunky deals that were in this non-performing pot due to being over 90 days old. However,  we either had particularly strong realisable security over them that we were very confident we’d get them back so they didn’t need provided for, or we had actually recovered them shortly after the year end and so, again, we felt didn’t need providing for given we knew with certainty they were coming back in. This is what brought the coverage down from c25% to just over 20%. This reflects, as you mention, the look forward aspect of the provisioning. If you know things are improving or worsening this should be factored into the provisioning rates you ultimately use as it’s a best estimate of what will transpire."

Meg, looked into your query more.
Firstly, adoption of IFRS9 hasn’t caused the provision to fall from 1,235k to 660k, the 660k in 2018 is a restated figure so that you can compare like for like in the 2019 set of accounts.
The provision for non performing debt has gone up by £671k (i.e. 1467-796), while total provisions has gone up by 193k (i.e. 2,414-2,221). I agree this does beg the question as to why.
The non performing debt has an ECL rate of 20%, and a credit loss provision of 1,467k – this implies 7.3m of debt falls into the non performing bucket (i.e. 1,467k/20%). Whereas the prior year this figure is 3.5m (i.e. 796k/23%).
So year on year total non-performing debt has reduced considerably from 7.3m to 3.5m. Which is a good sign. This figure is not one that can be easily manipulated or subject to accounting estimates. It’s a very simple audit check to get the aged receivables and see what is over 90 days old.
The performing debt is a little more complicated. With rounding’s the stated ECL rate of 1% can be anything from 0.5%- 1.5% which is a huge difference.
The sum of current and non-current trade receivables figure is pretty much constant from 2018 to 2019 at £122m (note 17).
The CLP rate can actually be worked more precisely, I make it 0.6% in 2019 and 1.1% in 2018. This is where my analysis can’t go much further as to why this has fallen. Id still suspect it’s a change in the product mix. When the individual stats for each company in 1Pm are filed with companies house I’ll be able to take a closer look (They have 9 months to do so after there year end so likely to be a few months)

As1983, Prior year will have been restated so it's comparable so this doesn't explain Meg's query.

Email the CFO to ask? He's been very good at getting back to me. Although i used my one question the other day so don't want to overload him with just questions from me!
It will be something to do with change mix of loan types Id presume.
I've asked a couple of questions of the CFO and always been happy with the reply.

Still not sure what is trying to be added up.... I'm interested in Megpricing & shareshearcher calcs....

Can you reference exactly what you are trying to add up/reconcile please.

What do people think about the share buy backs? They aren't sitting on huge amounts of cash so this would be financed by increasing loans? Also confirms no more acquisitions on the horizon I assume.

@ Hazat re: "That big enough for u GG?"

Not really, it represents 2.6% of Mr Russell's holding. I take your point on the CFO's personal financial position though.
Don't get me wrong, its good that directors are buying, but I just don't think the buys are big enough to expect people to make people take note.

(apologies for the delayed reply)

They weren't exactly huge buys. It would be more of a vote of confidence if the CFO bought 10 times the amount he did.

It think its just a very difficult company to value, revenue is based on estimates of success of cases that take a long time to resolve, the earnings are going to be very volatile for this reason.

Its a good message that the directors are buying in at these levels though as they will have a lot more info than us. But on the flip side if I were MW I wouldn't pick a fight with a company with lots of law contacts and was highly likely to fight back unless I was confident I was going to win or had some thing on them for sure.

Why 4%?
Lets say you had $18.75 and someone offered to pay you $0.75 cents forever for your investment of $18.75. At 4% its a break even proposition assuming its risk free. If someone offered to pay you $1 instead of $0.75 then great, you are in the money for this risk free investment. But Burford isn't risk free, no share is, so I don't understand how you can value a share like this.
For a DCF you might look at a 10 or 15 year timescale and forecast the earnings and discount at an appropriate rate (which would be higher than 4%), but the $18.75 is calculated based on historic EPS and over an indefinite timescale.

I've bought and now sold yet I'm hanging around.
Shorting Specialist targets Litigation Funding firm. Litigation fund strikes back. Shorting Specialist retorts. Its like EastEnders only better. Personally I think why take on a litigation firm unless you know you believe what you are saying is true and defendable...

Jab, yes definitely will be reported as exceptional/non-underlying charges. But yes its affects earnings per share regardless of whether its in exceptional or not.

HeresHopin, it doesn't impact anything in this case but I found this which says its 3 months not 12. (see number 18)

https://uk.practicallaw.thomsonreuters.com/Document/Id4af19d11cb511e38578f7ccc38dcbee/View/FullText.html?transitionType=CategoryPageItem&contextData=%28sc.Default%29&navId=2FEDE744FCF34153485BC5C4FADCF5FF&comp=pluk#co_anchor_a490979

Why do you think it is a closed period? This is what I found about when directors can trade which doesn't imply it is closed currently. https://www.pinsentmasons.com/out-law/guides/the-model-code-on-share-dealing

HH- no probs, I'm with you now.

HH said : "The net debt added from the NMW element and associated has obviously gone in one year's figures even though it actually relates to 6 years previously, so should be a one-off."

NWM hasn't impacted net debt at the balance sheet date shown in the 2018 annual report. Agreed that It will be a one off amount for 6 years but isn't within the current 63m of net debt reported. Page 36 of the annual report shows a water-flow diagram of 2017 net debt to 2018 net debt only 6.7m paid for exceptionals (most of which wont be NWM if any).