REG - Burford Capital Ltd - Full Year Results 2021

Burford CapitalAnnouncement

29/03/2022 12:15

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RNS Number : 4070G  Burford Capital Limited  29 March 2022

29 March 2022

 

 

BURFORD CAPITAL REPORTS FULL YEAR 2021 RESULTS;

RECORD LEVELS OF BALANCE SHEET DEPLOYMENTS

 

Burford Capital Limited, the leading global finance and asset management firm
focused on law, today announces its financial results for the year ended
December 31, 2021.(1) The Burford Capital 2021 Annual Report, including
financial statements (the "2021 Annual Report"), is available at the following
link: http://www.rns-pdf.londonstockexchange.com/rns/4070G_1-2022-3-29.pdf
(http://www.rns-pdf.londonstockexchange.com/rns/4070G_1-2022-3-29.pdf) or at
Burford's website www.burfordcapital.com/shareholders
(http://www.burfordcapital.com/shareholders) . In addition, a new financial
data supplement, as well as Burford's inaugural Sustainability Report for
2021, are available on our website at the same URL.

 

Hugh Steven Wilson, Chairman of Burford Capital, commented:

 

"Burford turned in an excellent 2021. This may seem odd to say as we report
the first loss in our history, but that is a matter of timing. We wrote
significant new core legal finance business in 2021. Even in an era of slower
case progress, we generated significantly more cash than needed to cover all
of our expenses. Burford ended the year with substantial liquidity and strong
access to capital, and we recently announced our latest $360 million private
fund."

 

Christopher Bogart, Chief Executive Officer of Burford Capital, commented:

 

"We are delighted with our strong new business performance in 2021. To write
more than $1 billion of new commitments during a pandemic is a significant
achievement. We deployed more capital than ever before from our balance sheet
into assets with the potential to generate our highest returns and profits,
auguring favorably for future capital provision income. Though it was a slower
year for realized gains, contributing to our 2021 loss, there were few adverse
developments to cause either realized or unrealized losses and the portfolio
remains well positioned. The slow pace we are experiencing is a timing issue,
not one affecting our view of the ultimate realizable value of the portfolio
and its potential to create significant shareholder value, and no client has
discontinued a single matter due to these delays. We are optimistic about the
portfolio's future potential."

 

(1) All 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 2021
Annual Report.

 

 

2021 highlights

 

 New business

 •            Record-breaking new business(2), with Group-wide new commitments of $1.1
              billion (2020: $758 million) and deployments of $841 million (2020: $595
              million)
 o                                                      Burford-only capital provision-direct new commitments of $649 million (2020:
                                                        $335 million); the 2021 amount includes $63 million of new commitments
                                                        warehoused for our funds; excluding those warehoused deals, new commitments
                                                        were $586 million
 o                                                      Perhaps most significantly for potential future shareholder benefit,
                                                        Burford-only capital provision-direct deployments, representing our assets
                                                        capable of generating our highest balance sheet returns and profits, doubled
                                                        to $447 million (2020: $225 million)

 Portfolio and balance sheet

 •            Consolidated portfolio grew to $4.4 billion at December 31, 2021 (December 31,
              2020: $3.8 billion)
 o                                                      Group-wide portfolio grew to $5.1 billion (December 31, 2020: $4.5 billion),
                                                        driven by new business growth
 •            Cumulative return on invested capital from Burford-only capital
              provision-direct assets increased to 93% (December 31, 2020: 92%) with an IRR
              of 30% (December 31, 2020: 30%)
 •            Internal model update at December 31, 2021 suggests core legal finance
              portfolio excluding YPF-related assets could generate $3.8 billion in
              Burford-only realizations, $2.2 billion in realized gains and $400 million in
              asset management performance fee income (June 30, 2021: $3.4 billion in
              realizations, $2 billion in realized gains and $360 million in asset
              management performance fee income)(3)
 •            Burford-only liquidity of $315 million at year end (December 31, 2020: $336
              million)

 Income

 •            Total income of $152 million (2020: $359 million), including capital provision
              income of $128 million (2020: $340 million), reflecting slow case progress, in
              part due to Covid-linked disruption
 o                                                      Burford-only capital provision-direct net realized gains of $128 million
                                                        (2020: $180 million)
 o                                                      Burford-only capital provision-direct realized losses of $9 million
                                                        represented a loss rate of 0.8% (2020: $20 million; 2.2%)
 •            Income from operations of $6 million (2020: $239 million), with decrease from
              2020 due mainly to lower capital provision income and higher operating
              expenses, including legacy asset recovery charges
 •            Net loss attributable to ordinary shares of $72 million (2020: net income
              attributable to ordinary share of $165 million), within previously disclosed
              expected range of $70 million to $80 million
 o                                                      Net loss per diluted share of $0.33 (2020: net income per diluted share of
                                                        $0.75)

 Capital

 •            Total shareholders' equity attributable to Burford Capital of $1.6 billion at
              December 31, 2021 (December 31, 2020: $1.7 billion)
 o                                                      Burford-only total shareholders' equity of $7.08 per share at December 31,
                                                        2021 (December 31, 2020: $7.59 per share)
 o                                                      Total tangible shareholders' equity of $6.47 per share (December 31, 2020:
                                                        $6.98 per share)
 •            Declared final 2021 dividend of 6.25¢ per share payable on June 17, 2022,
              subject to shareholder approval at the annual general meeting to be held on
              May 18, 2022, to shareholders of record on May 27, 2022, with an ex-dividend
              date of May 26, 2022; total annual dividend of 12.5c per share

 (2) Burford-only new commitments for 2021 include approximately $63 million of
 interests in assets that were warehoused for our funds at December 31, 2021,
 including a $13 million asset warehoused for Burford Opportunity Fund C LP and
 a $50 million asset warehoused for Burford Advantage Master Fund LP (the
 "Advantage Fund"), which will be reflected as a capital provision-indirect
 asset post-transfer. New commitments reflect the allocation in place at
 December 31, 2021, and does not reflect the intended transfer to other funds,
 which occurred or is expected to occur in early 2022. Excluding the warehoused
 commitments, Burford-only new commitments in 2021 for capital provision-direct
 were $586 million. Of the $50 million new commitment warehoused for the
 Advantage Fund, the Burford-only portion of this capital provision-indirect
 asset is expected to be $8 million. Total Burford-only new commitments to
 capital provision assets in 2021, post-intended transfers, were $594 million.
 (3) Data based on calculations derived from our internal modeling of
 individual matters and our portfolio as a whole. This data is not a forecast
 of future results, and past performance is not a guide to future performance.
 The inherent volatility and unpredictability of legal finance assets precludes
 forecasting and limits the predictive nature of our internal modeling.
 Further, the inherent nature of probabilistic modeling is that actual results
 will differ from the modeled results, and such differences could be material.
 The data based on calculations derived from our internal modeling is for
 informational purposes only and is not intended to be a profit forecast or be
 relied upon as a guide to future performance. See sections titled
 "Forward-looking statements" and "Risk Factors" in our Annual Report on Form
 20-F for the year ended December 31, 2021 filed with the US Securities and
 Exchange Commission on March 29, 2022.

 

 

Financial summaries

 

The tables below set forth summaries of the consolidated and Burford-only
statements of comprehensive income and statements of financial position at and
for the years ended December 31, 2021 and 2020 and corresponding
reconciliations from consolidated to Burford-only financial results.

 

Consolidated statement of comprehensive income (US GAAP)

 

                                                        2021            2020
                                                        $'000           $'000

 Capital provision income                               127,549         340,103
 Asset management income                                14,396          15,106
 Services and other income                              10,213          3,912

 Total income                                            152,158        359,121

 Operating expenses                                     (145,823)       (120,580)

 Income from operations                                 6,335           238,541

 Finance costs and loss on debt buyback                  (60,296)       (39,048)
 Foreign currency transactions (losses)/gains           (5,482)         10,746

 (Loss)/income before income taxes                      (59,443)        210,239

 Benefit from (provision for) income taxes              3,015           (36,937)

 Net (loss)/income                                      (56,428)        173,302

 Net (loss)/income attributable to ordinary shares      (72,066)        165,115

 Net (loss)/income per share:
 Basic                                                  $(0.33)         $0.75
 Diluted                                                $(0.33)         $0.75

 

 

Burford-only statement of comprehensive income (non-GAAP)

 

                                                        2021                2020
                                                        $'000               $'000

 Capital provision income                               99,754              320,023
 Asset management income                                26,037              24,484
 Services and other income                              7,094               2,900

 Total income                                            132,885            347,407

 Operating expenses                                     (142,188)           (116,621)

 Income from operations                                 (9,303)             230,786

 Finance costs and loss on debt buyback                  (60,296)           (39,048)
 Foreign currency transactions (losses)/gains           (5,482)             10,314

 (Loss)/income before income taxes                      (75,081)            202,052

 Benefit from (provision for) income taxes              3,015               (36,937)

 Net (loss)/income                                      (72,066)            165,115

 Net (loss)/income attributable to ordinary shares      (72,066)            165,115

 Net (loss)/income per share:
 Basic                                                  $(0.33)             $0.75
 Diluted                                                $(0.33)             $0.75

 

 

Reconciliation of consolidated statement of comprehensive income to
Burford-only

 

 December 31, 2021 ($ in thousands)                    Consolidated GAAP  Strategic Value Fund  BOF-C     Colorado  Other    Burford-only

 Capital provision income                              127,549            (6,263)               (19,408)  3,307     (5,431)  99,754
 Asset management income                               14,396             1,843                 9,798     -         -        26,037
 Services and other income                             10,213             (1,091)               -         (3,331)   1,303    7,094

 Total income                                           152,158           (5,511)               (9,610)   (24)      (4,128)   132,885

 Operating expenses                                    (145,823)          3,703                 (111)     24        19       (142,188)

 Income from operations                                6,335              (1,808)               (9,721)   -         (4,109)  (9,303)

 Finance costs and loss on debt buyback                 (60,296)          -                     -         -         -         (60,296)
 Foreign currency transactions (losses)                (5,482)                                                               (5,482)

 (Loss)/income before income taxes                     (59,443)           (1,808)               (9,721)   -         (4,109)  (75,081)

 Benefit from (provision for) income taxes             3,015              -                     -         -         -        3,015

 Net (loss)/income after tax                           (56,428)           (1,808)               (9,721)   -         (4,109)  (72,066)

 Net income attributable to non-controlling interests  15,638             (1,808)               (9,721)   -         (4,109)  -

 Net (loss)/income attributable to ordinary shares     (72,066)           -                     -         -         -        (72,066)

 

 

Consolidated statement of financial position (US GAAP)

 

                                                                         2021             2020
                                                                         $'000            $'000

 Total assets                                                            3,524,706        3,118,013

 Total liabilities                                                       1,584,016        1,212,519

 Total shareholders' equity attributable to Burford Capital Limited       1,551,790       1,662,212

 Total shareholders' equity per share (BVPS)                             $7.08            $7.59
 Total shareholders' tangible equity per share (TBVPS)                   $6.47            $6.98

 Non-controlling interest in consolidated subsidiaries                   388,900          243,282

 Total shareholders' equity                                              1,940,690        1,905,494

 

 

Reconciliation of consolidated statement of financial position to Burford-only

 

 December 31, 2021 ($ in thousands)  Consolidated GAAP  Strategic Value Fund  BOF-C      Colorado   Other     Burford-only

 Total assets                         3,524,706         (15,985)              (329,140)  (383,165)  (60,000)   2,736,416

 Total liabilities                   1,584,016          (769)                 (4,001)    (383,165)  (11,455)  1,184,626

 Total shareholders' equity          1,940,690          (15,216)              (325,139)  -          (48,545)  1,551,790

 

 

Investor and Analyst Conference Call

 

Burford will host a conference call for investors and analysts at 10.00am EDT
/ 3.00pm BST / 4.00pm CEST on Tuesday, March 29, 2022.

 

Burford encourages investors and analysts to pre-register for dedicated audio
webcast access via:

https://www.investis-live.com/burfordcapital/622b6080f73bbc23003ae4d0/fwlql
(https://protect-us.mimecast.com/s/ewWACpYPvZskvXwiJkl3G?domain=investis-live.com)
.

 

The dial-in number for the results call is +1 646 664 1960 (US local) / +44
(0)20 3936 2999 (UK local) / +44 (0)20 3936 2999 (all other locations) and the
access code is 993105. To minimize the risk of delayed access, participants
who have not pre-registered are urged to dial into the results call by 9.45am
EDT / 2.45pm BST / 3.45pm CEST.

 

An accompanying full year 2021 results presentation for investors and analysts
will also be made available on the Burford Capital website:
http://www.burfordcapital.com/shareholders
(http://www.burfordcapital.com/shareholders) .

 

Following the results call, a replay facility will be available until Tuesday,
April 12, 2022, by dialling +1 845 709 8569 (US local) / +44 (0)20 3936 3001
(UK local) / +44 (0)20 3936 3001 (all other locations) and using the replay
access code 082722.

 

 

Definitions and use of non-GAAP financial measures and alternative performance
measures

 

As previously announced, commencing with our annual report for the year ended
December 31, 2021, we will report our financial results in accordance with US
GAAP. US GAAP requires us to present financial statements that consolidate
some of the limited partner interests in 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 and funding
configuration as:

 

 •            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, 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 funds owned by third parties and including 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 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 legal finance assets that we have originated
              directly (i.e., not through participation in a fund) from our balance sheet.
              We also include direct (i.e., not through participation in a fund) complex
              strategies assets in this category.
 •            Indirect, which includes our balance sheet's participations in one of our
              funds.

 

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
              investment cost appropriately. IRRs do not include unrealized gains.
 •            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
              invested 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 simply 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
              (statement of comprehensive income) or cumulatively (statement of financial
              position).
 •            YPF-related assets refers to our Petersen and Eton Park legal finance assets,
              which are two claims relating to Argentina's nationalization of YPF S.A., the
              Argentine energy company.

 

For additional information, including reconciliations of our non-GAAP
financial measures to the most directly comparable US GAAP measures, see our
Annual Report on the Form 20-F for the year ended December 31, 2021 filed with
the US Securities and Exchange Commission on March 29, 2022 and made available
on our website at www.burfordcapital.com/shareholders
(http://www.burfordcapital.com/shareholders) . Non-GAAP financial measures
should not be considered as a substitute for, or superior to, financial
measures calculated in accordance with US GAAP.

 

 

For further information, please contact:

 

 Burford Capital Limited
 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)

 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

 

 

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 principal offices in New York, London, Chicago, Washington, DC,
Singapore, Sydney and Hong Kong.

 

For more information, please visit www.burfordcapital.com
(http://www.burfordcapital.com) .

 

 

This communication shall not constitute an offer to sell or the solicitation
of an offer to buy any ordinary shares or other securities of Burford.

 

This release does not constitute an offer of any Burford fund. Burford Capital
Investment Management LLC, which acts as the fund manager of all Burford
funds, is registered as an investment adviser with the US Securities and
Exchange Commission. The information provided herein is for informational
purposes only. Past performance is not indicative of future results. The
information contained herein 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 the 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,
we and our representatives may from time to time make other oral or written
statements which are forward-looking statements, including in our periodic
reports that we file with, or furnish to, the US Securities and Exchange
Commission, other information sent to our 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. We
caution you that forward-looking statements are not guarantees of future
performance and are based on numerous assumptions, expectations, projections,
intentions and beliefs and that our actual results of operations, including
our financial position and liquidity, and the development of the industry in
which we operate, 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 we expect include those discussed under "Risk Factors" in our Annual
Report on Form 20-F filed with the US Securities and Exchange Commission on
March 29, 2022 and other reports or documents that we file with, or furnish
to, the US Securities and Exchange Commission from time to time. In addition,
even if our results of operations, including our financial position and
liquidity, and the development of the industry in which we operate are
consistent with the forward-looking statements contained in this announcement,
those results of operations or developments may not be indicative of results
or developments in subsequent periods.

 

Except as required by law, we undertake 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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