Litigation funder Burford Capital has brushed off a 15% fall in income in 2019 with the claim it had a ‘spectacular year’ in terms of growing its business and generating free cash.

The funder delivered an upbeat report on its 2019 financial results today despite the decline in revenue to $356.7m against a 24% decline in profit before tax to $239.7m.

It pointed to a range of more positive underlying metrics, including an increase in the value of its commitments to $1.6bn from $1.3bn in 2018, while the size of its portfolio jumped to $4.2bn. Return on capital now touches 93%, up from 85% in the previous year.

Chairman Sir Peter Middleton conceded it had been a “year of contrasts” in reference to a high-profile clash with US hedge fund Muddy Waters, which questioned its accounts reporting last August causing its share price to plummet.

The allegations triggered a bitter dispute with the hedge fund and related litigation with the London Stock Exchange over allegations by Burford of stock manipulation.

“Though our business fundamentals remained strong, investor confidence was dented, causing shareholders to urge changes to our governance,” said Middleton.

Chief executive Christopher Bogart added: "Against the measure of success of growing Burford's business and generating substantial free cash, Burford had a spectacular year, and 2020 is off to a terrific start.”

Bogart said Burford had restructured its board, including nominating new directors, appointed a new CFO, reorganised senior management and announced a plan to seek a dual share listing in the US.

“We are the market leader in a rapidly growing industry with high and uncorrelated returns, and we expect meaningful demand for our services in light of the current economic disruption,” he said.

Bogart said the funder had deployed more than $1bn to commercial litigation and arbitration matters, marking the third year in a row that it had done so.  

Portfolio funding by large corporate clients over a range of cases, accounted for more than two-thirds of capital deployed for case support, worth $2.5bn, with single-case funding being the next most prevalent type of support offered.

Looking to the future, Bogart said: “Before the Covid-19 crisis, several large corporates were coming to us to seek out legal finance not as a defensive financial mechanism, but more as a strategic tool they could use to enable growth in other areas of the business.

“We don’t expect this to change post-crisis, if anything we anticipate interest in legal finance from the corporate market to continue growing as legal finance is more widely known.” 

He said he expected to see rising levels of disputes centered on recent disruption to business ranging from contractual clashes where deals have gone wrong; policyholder insurance-related disputes over coverage issues; and bankruptcy and insolvency related claims.

In an update to investors at the start of April, Burford said it expected the current global crisis to "result in a significant increase in the volume of large dollar litigation and arbitration matters".

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