A 'tidal wave of litigation around the world' helped litigation funder Burford Capital (BUR:AIM) deliver a 17.5% return on book value in 2015.

And the opportunities keep on coming according to Burford's management team: total capital committed to litigation investments stood at $420 million (£296 million) early in 2016, compared to $266 million a year earlier.

Shares in the Guernsey-headquartered outfit headed by corporate law big-hitter Chris Bogart are up 6.5% 235p on the back of full year results published today.

The stock is up 65% over the last year.

'There is a tidal wave of litigation across the globe,' Burford's management says in its annual report.

'Brazil alone has around 100 million pending litigation cases. It is impossible to arrive at a reliable number in the United States.'

Underlining Burford's ability to churn out returns uncorrelated to wider economic performance, book value increased from $383 million (£270 million) to $434 million over 2015 and Burford also paid dividends totaling $15.5 million.

Returns to British investors are higher still because of a depreciation in sterling against the dollar over the year.

With a market value of £486 million, Burford trades at around 1.6 times book value.

Some analysts argue that as the business matures it should start to be valued relative to earnings rather than book value.

As Burford's portfolio grows, it becomes more diversified and potentially year-to-year profit volatility will reduce.

Net income in 2015 was $68.2 million, up from $46.6 million a year earlier, for earnings per share of 31.5 cents (2014: 22.2 cents).

A key risk at Burford is the illiquid nature of the assets in which it invests. While it has recovered all of its investment commitments in 2009 at an annualised rate of return totalling 33%, it has still recovered only 63% of the investments made in 2010 and 63% of those committed to in 2011.

Investment realisations in 2015 were an impressive $134 million, around 50% of its total portfolio size at the start of the year.

Burford is involved in a number of high profile litigation cases and earlier this year said it provided funding to German legal firm Hausfield, funds which may be used to pursue potential claims against Volkswagen (VOW:FRA) in the wake of the emissions scandal.

'We are delighted to record income of over $100 million (£71 million) for the first time, a milestone reflecting continued strong growth in the diversifying worldwide litigation financing market, as well as our ongoing flexibility in meeting our clients’ needs,' says Bogart.

'We see further opportunities to grow, while sustaining underwriting discipline and targeting attractive risk-adjusted returns.'


Issue Date: 23 Mar 2016