Burford Capital ((GB:BUR)) has held its Q1 earnings call. Read on for the main highlights of the call.
In the recent earnings call, Burford Capital conveyed a cautiously optimistic outlook, underscored by strong new business commitments and significant cash realizations. Despite facing challenges such as increased expenses and unresolved litigation, the company demonstrated robust performance in key areas, suggesting a healthy financial trajectory.
Record New Business Commitments
Burford Capital reported a remarkable surge in new business commitments, with definitive commitments tripling and deployments doubling compared to previous periods. This robust volume of new business underscores the company’s strong market position and its ability to secure substantial engagements.
Significant Increase in Realizations and Cash Generation
The company achieved a significant increase in realizations, reaching $163 million, which is a marked improvement over the first quarters of the past two years. This highlights Burford Capital’s strong cash generation capability, reinforcing its financial health and operational efficiency.
Substantial Revenue Growth
Burford Capital experienced substantial revenue growth, with a fivefold increase in capital provision income compared to the first quarter of the previous year. This impressive growth trajectory indicates the company’s effective strategies in capitalizing on market opportunities.
High IRR Achievement
A notable highlight was a $100 million investment that concluded with a 40% internal rate of return (IRR), despite a lower return on invested capital (ROIC). This demonstrates Burford Capital’s proficiency in efficient capital recycling and investment management.
Successful Asset Management Income Growth
Asset management income saw a significant rise, doubling to $14 million year over year, with $7 million realized in cash. This growth reflects the company’s successful strategies in managing and expanding its asset portfolio.
Unrealized Gains Were Fewer
The quarter saw fewer unrealized gains, but Burford Capital does not view this as a negative trend. The focus remains on long-term business performance and strategic growth rather than short-term fluctuations.
Increased Expenses
Expenses rose to $40 million during the quarter, driven in part by higher long-term incentive compensation and increased general and administrative expenses. While this presents a challenge, it also reflects the company’s investment in its workforce and operational capabilities.
Unresolved YPF Litigation
The YPF-related litigation remains unresolved, pending appeal. Although the IMF package requires Argentina to address its debts, the timing of the resolution remains uncertain, posing a potential risk to Burford Capital’s financial outcomes.
Forward-Looking Guidance
Looking ahead, Burford Capital anticipates continued growth across various metrics. The company reported robust new business volume, with definitive commitments and deployments significantly increasing. With $163 million in realizations and a strong liquidity position of $548 million in cash, the company is well-positioned for future business endeavors. Despite fewer unrealized gains, Burford Capital remains focused on long-term performance and strategic diversification across various dimensions.
In summary, Burford Capital’s earnings call reflected a cautiously optimistic sentiment, driven by strong new business commitments and cash realizations. While challenges such as increased expenses and unresolved litigation persist, the company’s robust performance in key areas and strategic focus on long-term growth position it well for future success.