Burford Capital Limited · LSE:BUR
Burford Capital — FY2017 Earnings Presentation
34 slides from Burford Capital's earnings presentation, Mar 14, 2018
Slide 1: Investor Presentation 2017 Results
INVESTOR PRESENTATION 2017 RESULTS 14 MARCH 2018 This presentation is for the use of Burford’s public shareholders and is not an offering of any Burford private fund.
Slide 2: Third-party litigation funding is not only here to stay, but primed to expand
Third-party litigation funding is Legal disputes are not linked with not only here to stay, but primed stock market performance and to expand.” returns can easily outstrip other - The American Lawyer investment classes.” - Financial Times Investors apparently can’t get Burford is unquestionably the
Slide 3: Financial statement highlights
Financial statement highlights Our 2017 results were generated by 20 separate investments reporting net realised gains Unless otherwise specifically indicated, financial and operational data provided throughout this report is as at 31 December 2017 or for the 2017 fiscal year. Financial statement da
Slide 4: Investment portfolio highlights
Investment portfolio highlights Adding Burford’s investment funds, new investment commitments were $1.3 billion in 2017 and the investment portfolio stands at $2.4 billion We compute IRRs by treating our entire investment portfolio (or, when noted, a subset thereof) as one undifferentiated pool of c
Slide 5: Equity highlights
Equity highlights With a market cap of more than $3.2 billion, Burford generated a 103% TSR in 2017 • More than $3.2 billion market capitalisation (£2.4 billion) 37% • Total shareholder return: annualised TSR since 2009 IPO • Twelve months through December 2017: 103% • Since 2009 IPO: 1,250%; 37% an
Slide 6: Company overview
Company overview Burford is the largest direct investor AND the largest investment fund manager in the legal finance sector • Founded in 2009, Burford is a leading provider of finance to the legal market $3.3B invested in and available for • Burford has $3.3 billion of assets dedicated to legal and
Slide 7: Who we are
Who we are More than 90 people – litigators, bankers, and veterans of top law firms and corporations Christopher P. Bogart Jonathan T. Molot Aviva O. Will Elizabeth O’Connell, CFA Craig Arnott Emily Slater Chief Executive Officer Chief Investment Officer Senior Managing Director Chief Financial Offi
Slide 8: Burford's Core Business
Burford’s Core Business 8 “ “Burford Capital is the titan of litigation finance.” Bloomberg, 30 May 2017
Slide 9: What is litigation finance?
What is litigation finance? The supply of capital meeting market demand for financing the asset value of legal claims Burford helps commercial • Litigation finance is a form of specialty finance used by companies and law firms claimholders and defendants involved in commercial litigation manage lega
Slide 10: Litigation finance is an attractive investment
Litigation finance is an attractive investment Attractive absolute returns uncorrelated to traditional and alternative asset classes UNCORRELATED Return profile of each underlying investment is dependent on the operation of the adjudicative process and uncorrelated to economic conditions and markets
Slide 11: The litigation process and Burford's product offering
The litigation process and Burford’s product offering Burford can provide financing at any point throughout the litigation process COMMERCIAL LITIGATION PORTFOLIO & COMPLEX RISK MANAGEMENT FINANCE FINANCING Solutions to manage risk from appellate Burford is the world’s largest provider of Leader in
Slide 12: Use of litigation finance is growing
Use of litigation finance is growing Strong growth in reported use of litigation finance along with increasing importance INDUSTRY MEDIA COVERAGE GLOBAL INDUSTRY GROWTH • 2017 nearly equaled prior seven years combined • Expansion across many markets, • Jan/Feb 2018 already more than half 2017 volume
Slide 13: Burford's progressive investment process
Burford’s progressive investment process Dedicated teams guide process from initial sourcing through investment and monitoring 13
Slide 14: Large and widely diversified investment portfolio
Large and widely diversified investment portfolio Burford’s balance sheet portfolio of investments exceeds $1.5 billion; with fund investments the portfolio exceeds $2.4 billion • 877 claims underlie 82 ongoing investments in • Every defendant is under 5% of commitments more than 30 different states
Slide 15: Increasing evolution away from binary risk investments
Increasing evolution away from binary risk investments Trend towards multi-case portfolios and complex structures to reduce binary risk • Single case finance remains important to clients and we believe Burford leads the single case market • However, single case loss rates of 19% mean capital pricing
Slide 16: Record-breaking 2017 commitments lead to significant portfolio
Record-breaking 2017 commitments lead to significant portfolio Committed $1.3 billion in litigation investments in 2017, more than triple the $378 million committed in 2016 Upfront Ownership Binary Multiple Paths 2017 Balance 2017 Investment Capital Interest in Risk to Recovery Sheet Commitments Fun
Slide 17: Cash availability for commitments
Cash availability for commitments With $169 million of cash on hand at the beginning of the year and cash flow generation of $362 million in 2017, Burford had sufficient organic capital to meet all of its cash needs for operations and investment deployments in 2017 17
Slide 18: Concluded strong investment performance
Concluded strong investment performance Burford has a substantial track record of performance based on $773 million of concluded investments • $773 million of concluded investments have now produced 75% ROIC and 31% IRR • Return on equity jumped to 37% • Weighted average duration of the portfolio fe
Slide 19: Results by vintage show depth of performance
Results by vintage show depth of performance Since inception the investment portfolio has generated a cumulative 75% ROIC and 31% IRR • Performance of concluded investments illustrated by vintage • Burford has recovered $773 million on $443 million invested spread across 61 investments • Chart does
Slide 20: Fair value accounting: here to stay
Fair value accounting: here to stay Burford’s valuations are conservative and have historically been reliable • Significant majority of our investments are held at invested cost with no valuation change • Investment portfolio comprised of 64% cost and 36% unrealized gain • Portion of income from unr
Slide 21: Teinver: significant success in 2010 vintage
Teinver: significant success in 2010 vintage Successful arbitration award led to secondary market sale • Arbitration tribunal released decision on 21 July 2017 against Argentina for $324 million plus interest in connection with airline expropriation • Burford’s entitlement from the award is above $1
Slide 22: Secondary market transaction: Petersen claims
Secondary market transaction: Petersen claims Sold 25% interest for $106 million cash in an asset in which Burford has invested ~$18 million while retaining a 75% interest • In late 2016 and early 2017 Burford sold 10% of its interest in its entitlement from the Petersen claim for $40 million to a n
Slide 23: Investment management business
Investment management business 23 “ “It is doubtful the market has yet appreciated the benefits of the [Burford-Gerchen Keller] deal, in a market that can only continue to grow” The Times, 2 January 2017
Slide 24: Investment management business
Investment management business Availability of fund capital enabled Burford’s record-breaking 2017 growth • Burford is the largest investment manager in our sector; our AUM grew to $1.7 billion in 2017 • $13 million in management fee income earned in 2017 • New $500 million complex strategies fund r
Slide 25: Partners funds
Partners funds Traditional pre-settlement litigation finance funds P A R T N E R S I (In harvest mode) • $45.5m in investor commitments • $31.1m ultimately deployed in 17 investments • 13 resolved – 39% net IRR and 140% net ROIC • 2017: $1.3m performance fees; $0.2m management fees • One outstanding
Slide 26: Additional funds
Additional funds Specialty funds extend Burford’s reach POST SETTLEMENT • $296.1m in investor commitments at 31 Dec 2017 + sidecars • Fund provides client service and investor introduction to litigation finance space • 2017: $3.4m management fees • Returns are in the single digits and thus performan
Slide 27: Corporate matters
27 Corporate matters | Burford
Slide 28: Well-controlled operating expenses
Well-controlled operating expenses Operating costs to income ratio has steadily declined • Operating costs are expensed as incurred – they are not capitalized • Burford performs virtually all of our investment activities in-house and thus does not add significant external costs to our investment bal
Slide 29: Capitalizing the business for future growth
Capitalizing the business for future growth As Burford’s growth increases it will add investment fund capital to its successful use of public debt EFFICIENT FINANCING RECENT BOND ISSUE GREATER FLEXIBILITY Low-cost, long term debt is an Successfully Issued 4th listed bond: Investment fund capital off
Slide 30: Board of directors
Board of directors Robust corporate governance and independence • All directors are non- executive and all committees composed solely of independent directors • All directors attended every in-person full day quarterly meeting in 2017 • CEO and CIO attended all board meetings in full except for clos
Slide 31: Risk management & monitoring
Risk management & monitoring Multiple levels of risk oversight at the enterprise level and within business units PORTFOLIO RISK MANAGEMENT STRUCTURAL OVERSIGHT AT MULTIPLE LEVELS Burford approaches litigation as it would any other investable Investment Committee (Weekly) asset class, by examining at
Slide 32: Operational infrastructure
Operational infrastructure Firm-wide dedication to risk management, internal controls, and compliance INTERNAL CONTROLS EXTERNAL CONTROLS • Under the direction of the Chief Compliance Officer, Burford • Manager of third-party capital has been a registered maintains a comprehensive compliance program
Slide 33: Notice and disclaimer
Notice and disclaimer This presentation (“Presentation”) does not constitute or form part of, and should not be construed as, an issue for sale or subscription of, or solicitation of any offer or invitation to subscribe for, underwrite or otherwise acquire or dispose of any securities of Burford Cap
Slide 34: | Burford
| Burford