REG - Burford Capital Ltd - Annual results for year ended December 31, 2022
16/05/2023 12:00
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RNS Number : 5710Z Burford Capital Limited 16 May 2023
16 May 2023
BURFORD CAPITAL REPORTS FULL YEAR 2022 FINANCIAL RESULTS;
PROFITABLE GROWTH AND UPDATE ON FAIR VALUE ACCOUNTING
Burford Capital Limited ("Burford"), the leading global finance and asset
management firm focused on law, today announces its audited financial results
for the year ended December 31, 2022 ("FY22").(1) The Burford Capital 2022
Annual Report, including financial statements (the "2022 Annual Report"), is
available at
http://www.rns-pdf.londonstockexchange.com/rns/5710Z_1-2023-5-16.pdf
(http://www.rns-pdf.londonstockexchange.com/rns/5710Z_1-2023-5-16.pdf) and
on the Burford Capital website at http://investors.burfordcapital.com
(http://investors.burfordcapital.com) .
Christopher Bogart, Chief Executive Officer of Burford Capital, commented:
"The pace of case progress in our portfolio quickened in 2022, resulting in a
meaningful improvement in our financial results. Earnings per share more than
doubled, driven by a 47% increase in total revenues, including 64% growth in
capital provision income. Moreover, we deployed a record $457 million on a
Burford-only basis into new capital provision-direct assets, historically our
most profitable, and generated robust Burford-only cash receipts of $328
million.
"Court activity has continued to work through the backlog caused by the
Covid-19 pandemic, and we are seeing a high level of portfolio activity in
2023, with 28 case milestones already having occurred and 61 more expected
through the remainder of the year.
"We believe our portfolio is at a turning point, with a potential increase in
our realization rate as more of our capital provision assets resolve. We
expect to continue to see strong demand for our capital from tighter financial
conditions and an unfolding economic downturn.
"We believe that our revised approach to determine the fair value of our
capital provision assets under US GAAP represents a defining milestone in the
evolution of the accounting for our asset class, and we expect it to become
the industry standard. As we expected, the application of the revised fair
value policy has resulted in a moderate increase in the carrying value of our
capital provision assets."
(1) All FY22 figures in this announcement are audited and presented on a
consolidated basis in accordance with the generally accepted accounting
principles in the United States ("US GAAP"), unless otherwise stated.
Definitions, reconciliations and information additional to those set forth in
this announcement are available on the Burford Capital website and in the 2022
Annual Report (as defined above). In addition, figures in this announcement
for the year ended December 31, 2021 have been restated as a result of
applying our revised approach to determine the fair value of our capital
provision assets retroactively to the prior three years of our annual
financial statements prepared in accordance with US GAAP. See "Revised Fair
Value Methodology" section of this announcement and "Explanatory note" in the
2022 Annual Report for additional information with respect to the restatement
of our financial statements.
FY22 highlights
New business
Total Group-wide new business
• New commitments of $1.2 billion, up 5% year on year (2021: $1.1 billion(1))
• Deployments of $928 million, up 10% year on year (2021: $842 million)
Burford-only capital provision-direct assets, representing assets capable of
generating highest profits for our equity shareholders
• Record new commitments of $726 million, up 22% year on year (2021: $595
million(1))
• Record deployments of $457 million, up 2% year on year (2021: $447 million)
Portfolio and liquidity
• Group-wide portfolio grew to $6.1 billion at December 31, 2022 (December 31,
2021: $5.3 billion), driven by new commitments, deployments and fair value
adjustments
• Cumulative ROIC since inception from Burford-only capital provision-direct
assets of 88% (December 31, 2021: 93%); IRR of 29% (December 31, 2021: 30%)
• Significant external capital raising activity in 2022 with more than $1
billion raised
o $360 million via Rule 144A/Regulation S private placement of 6.875% senior
notes due 2030
o $300 million from limited partners for new lower risk legal finance fund, the
Burford Advantage Fund
o $350 million from limited partners for new post-settlement fund, Burford
Alternative Income Fund II
• Burford-only cash receipts in 2022 of $328 million, up 17% year on year (2021:
$281 million)
• Burford-only cash and cash equivalents and marketable securities of $210
million at December 31, 2022 (December 31, 2021: $315 million)
o Expect majority of consolidated $117 million due from settlement of capital
provision assets at December 31, 2022 to be collected in cash in 2023 (2021:
$86 million, of which 58% was collected in cash in 2022)
Income
• Total revenues of $319 million (2021: $217 million) included capital provision
income of $319 million (2021: $195 million), up 47% year on year, reflecting a
higher level of case activity and portfolio progression, as Covid-19
pandemic-related disruption started to ease
• Burford-only capital provision-direct realizations of $350 million (2021: $264
million) and realized gains of $133 million (2021: $128 million, reflecting an
outsized global antitrust portfolio transaction in 2021)
o Positive development indicated at 1H 2022 in outsized 2021 transaction
generated a partial realization in 2H 2022 of $258 million Group-wide and $161
million Burford-only
• Burford-only capital provision-direct realized loss rate in 2022 of only 1.0%
of average portfolio at cost (2021: 0.8%), largely consistent year on year and
likely reflective of slow court processes
• Operating income of $195 million (2021: $69 million), with significant year on
year growth arising from higher capital provision income and lower operating
expenses due primarily to an outsized incentive compensation expense in 2021
related to a legacy asset recovery charge
• Net income attributable to Burford Capital Limited shareholders of $31 million
represented a $59 million improvement over the prior year (2021: net loss
attributable to Burford Capital Limited shareholders of $29 million)
o Net income per ordinary and diluted share of $0.14 (2021: net loss per
ordinary and diluted share of $0.13)
Capital
• Total shareholders' equity attributable to Burford Capital Limited at December
31, 2022 was $1,743 million (December 31, 2021: $1,696 million)
o Total shareholders' equity attributable to Burford Capital Limited of $7.97
per ordinary share at December 31, 2022 (December 31, 2021: $7.74 per share)
o Tangible book value attributable to Burford Capital Limited (non-GAAP) of
$7.36 per ordinary share at December 31, 2022 (December 31, 2021: $7.13 per
share)
• As previously announced, declared interim dividend of 6.25¢ per ordinary
share payable on June 16, 2023 to shareholders of record on May 26, 2023, with
an ex-dividend date of May 25, 2023
(1) Burford-only new commitments for 2021 of $595 million are shown net of the
warehousing activity as discussed in the 2022 Annual Report.
Revised Fair Value Methodology
Following comments from and engagement with the staff of the US Securities and
Exchange Commission (the "SEC"), we have, in consultation with our independent
auditor, revised our approach to fair value accounting for our capital
provision assets in consideration of Accounting Standards Codification Topic
820-Fair Value Measurement ("ASC 820").
As a result of this work, our capital provision assets are fair valued using
an income approach. The income approach estimates fair value based on our
estimated, risk-adjusted future cash flows, using a discount rate to reflect
the funding risk of deploying capital for funding capital provision assets.
The income approach requires management to make a series of assumptions, such
as discount rate, the timing and amount of both expected cash inflows and
additional fundings, and a risk-adjustment factor reflecting the uncertainty
inherent in the cash flows primarily driven by litigation risk, which changes
as a result of observable litigation events. These assumptions are considered
Level 3 inputs.
A cash flow forecast is developed for each capital provision asset based on
the anticipated capital commitments, damages or settlement estimates, and our
contractual entitlement. Capital provision assets are recorded at initial fair
value, which is equivalent to the initial transaction price for a given
capital provision asset, based on an assessment that it is an arm's length
transaction between independent third parties and an orderly transaction
between market participants. Using the cash flow forecast and a discount rate,
an appropriate risk adjustment factor is calculated to be applied to the
forecast cash inflows to calibrate the valuation model to the initial
transaction price. Each reporting period, the cash flow forecast is updated
based on the best available information on damages or settlement estimates and
it is determined whether there has been an objective event in the underlying
litigation process, which would change the litigation risk and thus the
risk-adjustment factor associated with the capital provision asset. Each
reporting period, the updated risk-adjusted cash flow forecast is then
discounted at the then current discount rate to measure fair value.
In a small number of instances, we have the benefit of a secondary sale of a
portion of an asset or liability. When this occurs, the market evidence is
factored into the valuation process to maximize the use of relevant observable
inputs. Secondary sales are evaluated for relevance, including whether such
transactions are orderly, and weight is attributed to the market price
accordingly, which may include calibrating the valuation model to observed
market price.
In addition to applying this revised valuation approach to our FY22
consolidated financial statements, we have applied it retroactively to the
prior three years of our consolidated financial statements. Management and the
audit committee concluded on May 2, 2023 that our consolidated financial
statements for the years ended December 31, 2021, 2020 and 2019 and the six
months ended June 30, 2022 should be restated to correct a material
understatement of capital provision assets and capital provision income given
the application of the revised valuation approach; definitionally, any such
restatement is considered to be for the correction of a material error. The
restated consolidated financial statements for the years ended December 31,
2021, 2020 and 2019 are included in the 2022 Annual Report, and we intend to
present our restated condensed consolidated financial statements for the six
months ended June 30, 2022 when we issue our condensed consolidated financial
statements for the three and six months ending June 30, 2023.
At the date of this announcement, we have open comment letters from the staff
of the SEC with respect to its review of our annual report on Form 20-F for
the year ended December 31, 2021 (the "2021 Annual Report") relating to, among
other things, our approach to fair value accounting for our capital provision
assets in consideration of ASC 820. Although the SEC comment letters will
remain open and will not be formally resolved until the SEC staff has had an
opportunity to review the 2022 Annual Report, we believe that the 2022 Annual
Report addresses the SEC comments in all material respects.
Internal Control Over Financial Reporting
The SEC rules require a public company to complete a comprehensive evaluation
of its internal control over financial reporting and to maintain disclosure
controls and procedures.
Under the auditing standards promulgated by the Public Company Accounting
Oversight Board, a restatement of financial statements is by definition
evidence of a material weakness in internal controls. As a result, Burford has
no alternative but to conclude that, due to the material weaknesses in
Burford's internal control over financial reporting, Burford's internal
control over financial reporting and Burford's disclosure controls and
procedures were not effective at each of December 31, 2022 and 2021.
During the year ended December 31, 2021 and as disclosed in the 2021 Annual
Report, our management identified and disclosed material weaknesses in our
internal control over financial reporting relating to each of (i) the
preparation of evidence to demonstrate completeness and accuracy of
information prepared by the entity ("IPE") and (ii) management review controls
("MRC"). To remediate the material weaknesses relating to IPE and MRC, our
management, in consultation with the Audit Committee, implemented a
remediation plan to strengthen our internal control over financial reporting.
The remediation measures relating to IPE and MRC have been fully implemented
at December 31, 2022, and the operational effectiveness of our internal
control over financial reporting with respect to these material weaknesses has
been validated through testing. Based on these measures and the testing and
evaluation of the effectiveness of our internal control over financial
reporting, our management concluded that the material weaknesses relating to
IPE and MRC have been remediated at December 31, 2022.
YPF-Related Assets Subsequent Event
On March 31, 2023, the United States District Court for the Southern District
of New York (the "Court") issued its opinion and order in connection with the
summary judgment motions filed by the parties (the "Ruling") in the Petersen
and Eton Park cases against the Republic of Argentina and YPF. In summary, the
Court decided that (i) Argentina was liable to Petersen and Eton Park for
failing to make a tender offer for their YPF shares in 2012; (ii) YPF was not
liable for failing to enforce its bylaws against Argentina; (iii) the various
arguments Argentina had made to try to reduce its damages liability from the
straightforward application of the formula in the bylaws were unavailing; and
(iv) a hearing is needed to resolve two factual issues to enable the
computation of damages.
The Ruling was a complete win against Argentina with respect to liability,
with the quantum of damages yet to be determined, and a loss against YPF. The
estimated impact of the Ruling on the fair value of the YPF-related capital
provision assets at March 31, 2023 is an approximate increase of $285 million
on a consolidated basis, approximately $100 million relating to third-party
interests and approximately $185 million on a Burford-only basis. At December
31, 2022, the $1,233 million of consolidated carrying value for the
YPF-related assets comprised $1,171 million of unrealized gain and $62 million
of deployed cost (December 31, 2021: $1,231 million of carrying value). On a
Burford-only basis, carrying value at December 31, 2022 was $823 million and
comprised $768 million of unrealized gain and $55 million of deployed cost
(December 31, 2021: $821 million of carrying value).
1Q23 Results
Burford has previously announced its intention to begin quarterly reporting
commencing with the three months ended March 31, 2023 ("1Q23"). Financial
results for 1Q23 are expected to be announced in the first half of June 2023.
Investor and Analyst Conference Call
Burford will hold a conference call for investors and analysts at 8.30am EDT /
1.30pm BST on Tuesday, May 16, 2023. The dial-in number for the conference
call is +1 646 664-1960 (USA) / +44 (0)20 3936 2999 (UK) / +44 (0)20 3936 2999
(all other locations) and the access code is 867191. To minimize the risk of
delayed access, participants are urged to dial into the conference call by
8.10am EDT / 1.10pm BST.
A live webcast of the call will also be available at
https://www.investis-live.com/burfordcapital/644b751569b6910d00728042/osld
(https://www.investis-live.com/burfordcapital/644b751569b6910d00728042/osld) ,
and pre-registration at that link is encouraged.
An accompanying 2022 full year results presentation for investors and analysts
will also be made available on the Burford Capital website prior to the
conference call at http://investors.burfordcapital.com
(http://investors.burfordcapital.com) .
Following the conference call, a replay facility for this event will be
available until Tuesday, May 30, 2023 by dialing +1 845 709-8569 (USA) / +44
(0)20 3936 3001 (UK) / +44 (0)20 3936 3001 (all other locations) and using the
replay access code 512960. A replay facility will also be accessible through
the webcast at
https://www.investis-live.com/burfordcapital/644b751569b6910d00728042/osld
(https://www.investis-live.com/burfordcapital/644b751569b6910d00728042/osld) .
For further information, please contact:
Burford Capital Limited
For investor and analyst inquiries:
Robert Bailhache, Head of Investor Relations, EMEA and Asia - email +44 (0)20 3530 2023
(mailto:rbailhache@burfordcapital.com)
Jim Ballan, Head of Investor Relations, Americas - email +1 (646) 793 9176
(mailto:JBallan@burfordcapital.com)
For press inquiries:
David Helfenbein, Vice President, Public Relations - email +1 (212) 235 6824
(mailto:dhelfenbein@burfordcapital.com)
Numis Securities Limited - NOMAD and Joint Broker +44 (0)20 7260 1000
Giles Rolls
Charlie Farquhar
Jefferies International Limited - Joint Broker +44 (0)20 7029 8000
Graham Davidson
Tony White
Berenberg - Joint Broker +44 (0)20 3207 7800
Toby Flaux
James Thompson
Arnav Kapoor
About Burford Capital
Burford Capital is the leading global finance and asset management firm
focused on law. Its businesses include litigation finance
(https://www.burfordcapital.com/) and risk management, asset recovery and a
wide range of legal finance and advisory activities. Burford is publicly
traded on the New York Stock Exchange (NYSE: BUR) and the London Stock
Exchange (LSE: BUR), and it works with companies and law firms around the
world from its offices in New York, London, Chicago, Washington, DC,
Singapore, Dubai, Sydney and Hong Kong.
For more information, please visit www.burfordcapital.com
(http://www.burfordcapital.com) .
Summary Financial Statements, Restatements and Reconciliations
The tables below set forth summaries of the condensed consolidated and
Burford-only statements of operations for the year ended December 31, 2022 and
restatements of operations for the year ended December 31, 2021, the condensed
consolidated and Burford-only statements of financial position at December 31,
2022 and restatements of financial position at December 31, 2021 and
corresponding reconciliations from consolidated to Burford-only financial
results.
Summary condensed consolidated statement and restatement of operations
For the Years Ended December 31,
($ in thousands) 2022 2021
(as restated)
Capital provision income 319,108 194,554
Asset management income 9,116 14,396
Services and other income (8,997) 8,380
Total revenues 319,227 217,330
Total operating expenses 124,272 148,746
Operating income 194,955 68,584
Finance costs and loss on debt extinguishment 78,264 60,296
Foreign currency transactions (gains)/losses 7,674 5,499
Income/(loss) before income taxes 109,017 2,789
(Provision for)/benefit from income taxes (11,558) (9,727)
Net income/(loss) 97,459 (6,938)
Net income/(loss) attributable to Burford Capital Limited shareholders 30,506 (28,751)
Net income/(loss) attributable to Burford Capital Limited per ordinary share:
Basic $0.14 ($0.13)
Diluted $0.14 ($0.13)
Summary Burford-only statement and restatement of operations
For the Years Ended December 31,
($ in thousands) 2022 2021
(as restated)
Capital provision income 202,878 156,043
Asset management income 56,080 28,745
Services and other income (8,353) 7,094
Total revenues 250,605 191,882
Operating income/(loss) 127,909 46,771
Net income/(loss) 30,506 (28,751)
Net income/(loss) per share:
Basic $0.14 ($0.13)
Diluted $0.14 ($0.13)
Reconciliation of summary condensed consolidated statement and restatement of
operations to summary Burford-only statement and restatement of operations
For the year ended December 31, 2022
Elimination of third-party interests
Strategic Advantage
($ in thousands) Consolidated Value Fund BOF-C Colorado Fund Other Burford-only
Capital provision income 319,108 3,709 (112,370) 661 (1,417) (6,813) 202,878
Asset management income 9,116 312 46,652 - - - 56,080
Services and other income (8,997) 184 (3) (693) - 1,156 (8,353)
Total revenues 319,227 4,205 (65,721) (32) (1,417) (5,657) 250,605
Operating income 194,955 5,200 (65,857) - (919) (5,470) 127,909
Net income/(loss) 97,459 5,200 (65,857) - (919) (5,377) 30,506
(as restated)
For the year ended December 31, 2021
Elimination of third-party interests
Strategic
($ in thousands) Consolidated Value Fund BOF-C Colorado Other Burford-only
Capital provision income 194,554 (6,263) (26,125) 193 (6,316) 156,043
Asset management income 14,396 1,843 12,506 - - 28,745
Services income 8,380 (1,091) - (217) 22 7,094
Total revenues 217,330 (5,511) (13,619) (24) (6,294) 191,882
Operating income 68,584 (1,808) (13,730) - (6,275) 46,771
Net loss (6,938) (1,808) (13,730) - (6,275) (28,751)
Summary condensed consolidated statement and restatement of financial position
At
($ in thousands) December 31, 2022 December 31, 2021
(as restated)
Total assets 4,288,359 3,741,504
Total liabilities 1,901,289 1,633,487
Total Burford Capital Limited equity 1,742,584 1,695,872
Non-controlling interests 644,486 412,145
Total shareholders' equity 2,387,070 2,108,017
Basic ordinary shares outstanding 218,581,877 219,049,877
Total shareholders' equity attributable to Burford Capital Limited per basic 7.97 7.74
ordinary share
Total shareholders' equity per basic ordinary share 10.92 9.62
Reconciliation of summary condensed consolidated statement and restatement of
financial position to summary Burford-only statement and restatement of
financial position
At December 31, 2022
Elimination of third-party interests
Strategic Advantage
($ in thousands) Consolidated Value Fund BOF-C Colorado Fund Other Burford-only
Total assets 4,288,359 (2,779) (477,590) (409,249) (103,523) (76,792) 3,218,426
Total liabilities 1,901,289 (228) (4,234) (409,249) (120) (11,616) 1,475,842
Total shareholders' equity 2,387,070 (2,551) (473,356) - (103,403) (65,176) 1,742,584
(as restated)
At December 31, 2021
Elimination of third-party interests
Strategic
($ in thousands) Consolidated Value Fund BOF-C Colorado Other Burford-only
Total assets 3,741,504 (15,985) (342,210) (409,936) (69,410) 2,903,963
Total liabilities 1,633,487 (769) (4,001) (409,936) (10,690) 1,208,091
Total shareholders' equity 2,108,017 (15,216) (338,209) - (58,720) 1,695,872
Reconciliation of components of deployments from a consolidated basis to a
Group-wide basis
For the year ended December 31, 2022
Eliminations and
($ in thousands) Consolidated adjustments Burford-only Other funds BOF-C Group-wide
Capital provision-direct 605,402 (148,296) 457,106 30,574 147,976 635,656
Capital provision-indirect 121,896 (101,573) 20,323 101,158 - 121,481
Post-settlement - - - 170,689 - 170,689
Total new deployments 727,298 (249,869) 477,429 302,421 147,976 927,826
For the year ended December 31, 2021
Eliminations and
($ in thousands) Consolidated adjustments Burford-only Other funds BOF-C Group-wide
Capital provision-direct 672,931 (225,674) 447,257 143,621 138,447 729,325
Capital provision-indirect - 914 914 ((1)) - - 914
Post-settlement - - - 111,713 - 111,713
Total new deployments 672,931 (224,760) 448,171 255,334 138,447 841,952
1. Represents capital calls for expenses rather than cash
deployed into assets.
Reconciliation of consolidated proceeds from capital provision assets to
Burford-only cash receipts
For the year ended December 31,
($ in thousands) 2022 2021
(as restated)
Consolidated proceeds from capital provision assets 387,786 396,415
Less: Elimination of third-party interests (81,857) (139,826)
Burford-only total proceeds from capital provision assets 305,929 256,589
Burford-only proceeds from capital provision-direct assets 295,636 231,413
Burford-only proceeds from capital provision-indirect assets 10,293 25,176
Burford-only total proceeds from capital provision assets 305,929 256,589
Consolidated asset management income 9,116 14,396
Plus: Eliminated income from funds 46,964 14,349
Burford-only asset management income 56,080 28,745
Less: Non-cash adjustments (41,321) (10,246)
Burford-only proceeds from asset management income 14,759 18,499
Burford-only proceeds from marketable security interest and dividends 3,585 2,625
Burford-only proceeds from asset recovery fee for services 734 2,386
Burford-only proceeds from insurance receipts 2,979 1,367
Burford-only proceeds from asset management and other services 22,057 24,877
Cash receipts 327,986 281,466
Reconciliation of consolidated to Burford-only cash and cash equivalents and
marketable securities
At December 31,
2022 2021
Elimination of Elimination of
third-party third-party
($ in thousands) Consolidated interests Burford-only Consolidated interests Burford-only
Cash and cash equivalents 107,658 (33,979) 73,679 180,255 (40,577) 139,678
Marketable securities 136,358 - 136,358 175,336 - 175,336
Total cash and cash equivalents and marketable securities 244,016 (33,979) 210,037 355,591 (40,577) 315,014
Reconciliation of consolidated to Burford-only realizations
For the year ended December 31, 2022 For the year ended December 31, 2021
Eliminations and Eliminations and
($ in thousands) Consolidated adjustments Burford-only Consolidated adjustments Burford-only
Capital provision-direct 402,196 (51,987) 350,209 374,126 (109,974) 264,152
Capital provision-indirect 24,538 (14,216) 10,322 81,022 (45,990) 35,032
Post-settlement - - - - - -
Total realizations 426,734 (66,203) 360,531 455,148 (155,964) 299,184
Reconciliation of consolidated to Burford-only realized gains
For the year ended December 31, 2022 For the year ended December 31, 2021
Eliminations and Eliminations and
($ in thousands) Consolidated adjustments Burford-only Consolidated adjustments Burford-only
Realized gains 158,933 (25,576) 133,357 137,247 (8,818) 128,429
Reconciliation of consolidated to Burford-only and Group-wide partial
realization related to development in global antitrust portfolio matter
For the six months ended December 31, 2022
Elimination of
third-party
($ in millions) Consolidated interests Burford-only Other funds BOF-C Group-wide
Realizations 189 (28) 161 69 28 258
Reconciliation of tangible book value attributable to Burford Capital Limited
per ordinary share
The tables below set forth the reconciliations of tangible book value
attributable to Burford Capital Limited per ordinary share to total Burford
Capital Limited equity, the most comparable measure calculated in accordance
with US GAAP, at December 31, 2022 and December 31, 2021.
At December 31,
($ in thousands, except share data) 2022 2021
(as restated)
Total Burford Capital Limited equity 1,742,584 1,695,872
Less: Goodwill (133,912) (134,019)
Tangible book value attributable to Burford Capital Limited 1,608,672 1,561,853
Basic ordinary shares outstanding 218,581,877 219,049,877
Tangible book value attributable to Burford Capital Limited per ordinary share 7.36 7.13
Definitions and Use of Non-GAAP Financial Measures and Alternative Performance
Measures
Burford reports its financial results in accordance with US GAAP. US GAAP
requires us to present financial statements that consolidate some of the
limited partner interests in private funds we manage as well as assets held on
our balance sheet where we have a partner or minority investor. We therefore
refer to various presentations of our financial results as follows:
• Consolidated refers to assets, liabilities and activities that include those
third-party interests, partially owned subsidiaries and special purpose
vehicles that we are required to consolidate under US GAAP. At the date of
this announcement, the major entities where there is also a third-party
partner in, or owner of, those entities include BCIM Strategic Value Master
Fund, LP, Burford Opportunity Fund C LP, Burford Advantage Master Fund LP,
Colorado Investments Limited ("Colorado") and several other entities in which
Burford holds investments where there is also a third-party partner in, or
owner of, those entities.
• Burford-only refers to assets, liabilities and activities that pertain only to
Burford on a proprietary basis, excluding any third-party interests and the
portions of jointly owned entities owned by others.
• Group-wide refers to the totality of assets managed by Burford, including
those portions of the private funds owned by third parties and including
private funds that are not consolidated into Burford's consolidated financial
statements. Group-wide is therefore the sum of Burford-only and
non-controlling interests in consolidated and non-consolidated private funds.
Group-wide does not include third-party interests in capital provision assets,
the economics of which have been sold to those third parties, that do not meet
the criteria to be recognized as a sale under US GAAP. This includes the
third-party interests in Colorado and other capital provision asset
subparticipations.
We subdivide our capital provision assets into two categories:
• Direct, which includes all of our capital provision assets that we have
originated directly (i.e., not through participation in a private fund) from
our balance sheet. We also include direct (i.e., not through participation in
a private fund) complex strategies assets in this category.
• Indirect, which includes our balance sheet's participations in two of our
private funds (i.e., BCIM Strategic Value Master Fund, LP and Burford
Advantage Master Fund LP).
We also use certain unaudited alternative performance measures, including:
• Internal Rate of Return ("IRR") is a discount rate that makes the net present
value of a series of cash flows equal to zero and is expressed as a percentage
figure. We compute IRR on concluded (including partially concluded) legal
finance assets by treating that entire portfolio (or, when noted, a subset
thereof) as one undifferentiated pool of capital and measuring actual and, if
necessary, estimated inflows and outflows from that pool, allocating costs
appropriately. IRRs do not include unrealized gains or losses.
• Return on invested capital ("ROIC") from a concluded asset is the absolute
amount of realizations from such asset in excess of the amount of expenditure
incurred in funding such asset divided by the amount of expenditure incurred,
expressed as a percentage figure. ROIC is a measure of our ability to generate
absolute returns on our assets. Some industry participants express returns on
a multiple of invested capital ("MOIC") instead of a ROIC basis. MOIC includes
the return of capital and, therefore, is 1x higher than ROIC. In other words,
70% ROIC is the same as 1.70x MOIC.
Other unaudited alternative performance measures and terms we use include:
• Commitment is the amount of financing we agree to provide for a legal finance
asset. Commitments can be definitive (requiring us to provide funding on a
schedule or, more often, when certain expenses are incurred) or discretionary
(allowing us to provide funding after reviewing and approving a future
matter). Unless otherwise indicated, commitments include deployed cost and
undrawn commitments.
• Deployment refers to the funding provided for an asset, which adds to our
deployed cost in such asset.
• Deployed cost is the amount of funding we have provided for an asset at the
applicable point in time.
• Realization: A legal finance asset is realized when the asset is concluded
(i.e., when litigation risk has been resolved). A realization will result in
us receiving cash or, occasionally, non-cash assets or recognizing a due from
settlement receivable, reflecting what we are owed on the asset.
• Realized gain / loss reflects the total amount of gain or loss generated by a
legal finance asset when it is realized, calculated as realized proceeds less
deployed cost, without regard for any previously recognized fair value
adjustment.
• Unrealized gain / loss represents the fair value of our assets over or under
their funded cost, as determined in accordance with the requirements of the
applicable US GAAP standards, for the relevant financial reporting period
(consolidated statement of operations) or cumulatively (consolidated statement
of financial position).
• YPF-related assets refers to our Petersen and Eton Park legal finance assets,
which are two claims relating to Republic of Argentina's nationalization of
YPF S.A., the Argentine energy company.
We also use certain non-GAAP financial measures, including:
• Cash receipts provide a measure of the cash that our capital provision and
other assets generate during a given period as well as cash from certain other
fees and income. In particular, cash receipts represent the cash generated
from capital provision and other assets, including cash proceeds from realized
or concluded assets and any related hedging assets, plus cash received for
asset management fees, services and/or other income, before any deployments
into funding existing or new assets. Cash receipts are a non-GAAP financial
measure and should not be considered in isolation from, as a substitute for,
or superior to, financial measures calculated in accordance with US GAAP. The
most directly comparable US GAAP measure is proceeds from capital provision
assets as set forth in our consolidated statements of cash flows. We believe
that cash receipts are an important measure of our operating and financial
performance and are useful to management and investors when assessing the
performance of our Burford-only capital provision assets.
• Tangible book value attributable to Burford Capital Limited is calculated by
subtracting intangible assets (such as goodwill) from total Burford Capital
Limited equity. Tangible book value attributable to Burford Capital Limited
per ordinary share is calculated by dividing tangible book value attributable
to Burford Capital Limited by the total number of outstanding ordinary shares.
Each of tangible book value attributable to Burford Capital Limited and
tangible book value attributable to Burford Capital Limited per ordinary share
is a non-GAAP financial measure and should not be considered in isolation
from, as a substitute for, or superior to, financial measures calculated in
accordance with US GAAP. The most directly comparable US GAAP measure is total
Burford Capital Limited equity as set forth in our consolidated statements of
financial position. We believe that tangible book value attributable to
Burford Capital Limited per ordinary share is an important measure of our
financial condition and is useful to management and investors when assessing
capital adequacy and our ability to generate earnings on tangible equity
invested by our shareholders.
For additional information, including reconciliations of our non-GAAP
financial measures to the most directly comparable US GAAP measures and
reconciliations of our alternative performance measures, see the 2022 Annual
Report filed with the SEC on May 16, 2023 and made available on our website at
http://investors.burfordcapital.com (http://investors.burfordcapital.com) .
Non-GAAP financial measures should not be considered in isolation from, as a
substitute for, or superior to, financial measures calculated in accordance
with US GAAP.
This announcement does not constitute an offer to sell or the solicitation of
an offer to buy any ordinary shares or other securities of Burford.
This announcement does not constitute an offer of any Burford private fund.
Burford Capital Investment Management LLC, which acts as the fund manager of
all Burford private funds, is registered as an investment adviser with the
US Securities and Exchange Commission. The information provided in this
announcement is for informational purposes only. Past performance is not
indicative of future results. The information contained in this announcement
is not, and should not be construed as, an offer to sell or the solicitation
of an offer to buy any securities (including, without limitation, interests or
shares in any of Burford private funds). Any such offer or solicitation may be
made only by means of a final confidential private placement memorandum and
other offering documents.
Forward-looking statements
This announcement contains "forward-looking statements" within the meaning of
Section 21E of the US Securities Exchange Act of 1934, as amended, regarding
assumptions, expectations, projections, intentions and beliefs about future
events. These statements are intended as "forward-looking statements". In some
cases, predictive, future-tense or forward-looking words such as "aim",
"anticipate", "believe", "continue", "could", "estimate", "expect",
"forecast", "guidance", "intend", "may", "plan", "potential", "predict",
"projected", "should" or "will" or the negative of such terms or other
comparable terminology are intended to identify forward-looking statements,
but are not the exclusive means of identifying such statements. In addition,
Burford and its representatives may from time to time make other oral or
written statements which are forward-looking statements, including in its
periodic reports that Burford files with, or furnishes to, the US Securities
and Exchange Commission, other information made available to Burford's
security holders and other written materials. By their nature, forward-looking
statements involve known and unknown risks, uncertainties and other factors
because they relate to events and depend on circumstances that may or may not
occur in the future. Burford cautions you that forward-looking statements are
not guarantees of future performance and are based on numerous assumptions,
expectations, projections, intentions and beliefs and that Burford's actual
results of operations, including its financial position and liquidity, and the
development of the industry in which it operates, may differ materially from
(and be more negative than) those made in, or suggested by, the
forward-looking statements contained in this announcement. Significant factors
that may cause actual results to differ from those Burford expects include,
among others, those discussed under "Risk Factors" in Burford's annual report
on Form 20-F for the year ended December 31, 2022 filed with the
US Securities and Exchange Commission on May 16, 2023 and other reports or
documents that Burford files with, or furnishes to, the US Securities and
Exchange Commission from time to time. In addition, even if Burford's results
of operations, including its financial position and liquidity, and the
development of the industry in which it operates are consistent with the
forward-looking statements contained in this announcement, those results of
operations or developments may not be indicative of results of operations or
developments in subsequent periods.
Except as required by law, Burford undertakes no obligation to update or
revise the forward-looking statements contained in this announcement, whether
as a result of new information, future events or otherwise.
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