One of the world’s biggest litigation funders took a big hit from Covid as profits tumbled in the first half of 2020. Burford Capital reported to the London Stock Exchange today that profit before tax was down 15% to £198m in the six months to 30 June. Turnover fell by 12% to £218m in the same period.
The coronavirus lockdown had a major impact on new business in the period with group-wide commitments down 74% to around £152m. The company said the litigation environment has ‘stabilised and pipeline is rebuilding’, with an expected surge in the volume of claims arising from the pandemic in the years to come.
Chief executive Christopher Bogart said: ‘In a world buffeted by Covid-19 and its ensuing consequences, while our team and operations have been largely unaffected, new business declined.
‘Looking ahead, we see significant opportunity as the sizeable investments we have made have begun to come to fruition and as the economic downturn causes a significant increase in disputes.’
The company has had a challenging 18 months following a report by activist short seller Muddy Waters, which alleged that investment data was misrepresenting returns on invested capital and rates of return. Burford said in response that its cash position and access to liquidity was ‘strong’ and its returns ‘robust’. It also revamped its governance structure.
Burford chairman Sir Peter Middleton said the company had passed the lockdown test ‘with flying colours’, significantly increasing cash and further strengthening liquidity.
Middleton added: ‘These outcomes do two things. First, they demonstrate the capacity of the portfolio to generate attractive cash profits. Second, they end any question about Burford being able to repeat the selection and management of outperforming matters.’
The company now plans to push on with listing on the New York Stock Exchange in addition to its listing on London’s junior Alternative Investment Market. Shares rose 6.7% to 666.8p today, more than double the nadir in mid-March and back to the highest level since January.