Tuesday 10 September 2019 3:43 pm

Litigation Capital Management bosses say Burford woes will not dampen sector

The management of litigation funder Litigation Capital Management (LCM) said today that the negativity around fellow funder Burford Capital would not dampen the sector, as they announced their debut London results to the stock market.

Last month Aim-listed Burford was savaged in an attack by shortseller Muddy Waters which criticised its governance and its use of fair value accounting – where unrealised gains are included on its balance sheet – wiping 40 per cent off its market capitalisation in a day.

Burford pushed back against the claims, but did replace its chief financial officer – who was the wife of the chief executive – and commit to a secondary listing in the US or on the main market in London.

Read more: Burford left reeling as shortseller takes aim at business

LCM’s executive vice chairman Nick Rowles-Davies said: “Is the concern or the cloud that hangs over Burford going to affect the sector? Bad news stories always hang around for a little bit of time but in the long term that won’t have any effect and the trend globally is an increase in litigation finance.”

LCM listed in London on Aim in December after delisting from the ASX in Australia.

Today it said statutory profit before tax for the year ended 30 June had fallen 15 per cent to AU$10.1m (£5.6m), blaming costs related to its listing and investment in new operations.

Shares fell 7.2 per cent to 80p today.

LCM established a London office and also launched offices in Hong Kong and Singapore during the financial year.

Read more: Listed litigation funders scramble to avoid Burford contagion

LCM, unlike Burford, uses a cash-based accounting policy, only including revenue on its books when it is received.

Chief executive Patrick Moloney said: “If you look at our financial performance, its actual realised performance. There is no fair value component to our revenue line, no component of our revenue line which is yet to be earned.”

Rowles-Davies said: “Burford’s issues are specific to them. Even Muddy Waters say that. They say they are not looking at the sector, they are looking at Burford.”

Revenue grew 17 per cent to AU$34.7m and cash deployed on litigation investments increased 90 per cent to AU$27.8m.