Third-party litigation funder Burford Capital Ltd. reported record financial results for the first half of 2019 on Thursday, with income climbing 40% to $287 million and profits rising 36% to $225 million after taxes.

The company grew at a faster rate than the first half of 2018, during which Burford’s income rose 17%, to $205.2 million.

Nonetheless, the publicly traded litigation financier’s shares dropped nearly 6% on the London Stock Exchange following the release of the numbers.

Burford chief executive officer Chris Bogart said the company’s performance actually exceeded analysts’ expectations, and attributed the drop to long-term investors taking the opportunity to cash out.

“Where we are—in a last-stage frothy market, with jittery investors—if you invested at the IPO 10 years ago, you’ve made 17 times your money,” he said. “There’s profit-taking that goes on after that.”

Bogart highlighted the growing demand for Burford’s capital, which was reflected in record new investment commitments of $751 million, up 36% from the first half of 2018.

“The legal industry, long a cash-only business, is starting to become a user of capital,” he told investors.

The numbers suggest that Burford is outpacing its rivals when it comes to investments. Bentham IMF, the second largest publicly traded litigation outfit, committed AUD $147 million, or $102.6 million, in its 2018 fiscal year, a figure Burford outpaced by over 7% in just the last six months.

Nonetheless, the company has been able to maintain high expectations for returns, even amid surging competition in the marketplace and its internal growth.

“We are not going to reduce return demands in response to competition,” Burford chief investment officer Jonathan Molot told investors. “There’s not a downward trajectory on returns associated with growth.”

The company reported demand for its core litigation finance capital, specifically, single claims and portfolios of matters, was up 48%.

Seventeen percent of the total $751 million invested came in one portfolio deal totaling $130 million. According to Burford, the arrangement took a year to structure and the company faced no competition from peers.

While the company opened a Singapore office in 2017, in conjunction with that jurisdiction’s legalization of third-party finance for arbitration, the country and other Asian markets have been slow to have an uptick in terms of direct utilization of capital, Molot told investors. But the increased presence on the region has instead fueled in-bound work.

“More Asian clients are using our capital in other jurisdictions, predominantly the U.S., than in Asia itself,” he said.

|

Read More

Burford Sells $100M Stake in Argentine Oil Case After SCOTUS Nixes Appeal