One of the country’s most prominent group litigation firms has racked up net debts of more than £500m, with the auditors of its last set of accounts flagging a ‘material uncertainty’ over whether the business can continue as a going concern, Gazette analysis can reveal.
Newly published accounts for PGMBM, trading as Pogust Goodhead, also reveal that the company advanced sole director Tom Goodhead an interest-free sum of £4.24m which has since been written off. The figures, for the calendar year 2022, were published this week, 18 months late. The financial statements for 2023 were due last September but have yet to be filed.
A spokesperson for the firm said: 'Our business is built on the strength of our case portolio, not traditional financial cycles. Our growing portfolio of high-value litigation assets provides a strong foundation for long-term revenue generation. Investor confidence in our legal claims portfolio continues to grow.'
The late filing was due to the complexities of finalising accounts for a 'sophisticated financial structure'. The firm continues to work on its 2023 accounts 'which will be filed in due course'.
Since its foundation in 2018 SRA-regulated Pogust Goodhead has led some of the highest-profile litigation matters of recent years. These include the Volkswagen diesel emissions claim and the Mariana dam case on behalf of more than 620,000 Brazilian claimants, in which a four-month hearing concluded last month.
In 2022, the group posted record turnover of £53m, largely based on an out-of-court-settlement reached in the Volkswagen case. But the group racked up an operating loss of £51m, rising to £292m at the pre-tax level to reflect the 'fair value of financial liabilities'. As of the end of 2022, total assets came to £7.5m but the company owed £522m within a year. Short-term debt had almost doubled in 12 months. The firm said 'short-term operating losses are expected as we invest in cases that generate substantial future returns'.
In October 2023 lender Gramercy Funds Management agreed a secured loan with Pogust Goodhead for £450m – which the firm claims is the largest of its kind involving a UK law firm. According to Companies House records, PGMBM has seven outstanding charges from two named lenders.
In notes to the 2022 accounts, PGMBM says the reported net liabilities reflect an ‘accounting mismatch’ between revenue recognition and loan obligations, and that if true future revenues were accounted for, then liabilities would be ‘significantly lower’. While loans are classified as due within a year because of potential repayments linked to case settlements, all borrowings have 'long-stop' dates of three to five years.
The company said investor confidence remains ‘steadfast’. But in his independent auditor’s report, signed off only last week, Geoff Wightwick of MHA stated that the group requires additional funding to meet liabilities that fall in the next 12 months.
‘Whilst negotiations for such additional funding are ongoing, at the time of approval of these financial statements no formal agreement for such facilities has been reached,’ said Wightwick. ‘These events or conditions… indicate that a material uncertainty exists that may cast significant doubt on the group’s and the company’s ability to continue as a going concern.’
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'Group litigation operates on long-term timelines as does our funding,' the firm's spokesperson said. 'Our next round of funding is being finalised with an existing funder based on their continuing confidence in our cases. Given all the support already shown, we expect the funding to be completed in line with our expectations.'
In February 2022, the company acquired PGMBM Law Ltd for £5.6m. That entity had directors, Tom Goodhead and a company secretary, Alicia Alinia, Pogust Goodhead's chief operating officer. This was a 'strategic move that enhances our ability to successfully settle high-profile cases,' the spokesperson said.
Pogust Goodhead employed 192 people at the end of 2022, including 131 fee-earners. Directors' remuneration was stated as £231,018. However the penultimate note to the accounts shows that the company advanced a total of £4.24m to Goodhead – a sum that was largely unpaid by the end of the financial year. The balance due was unsecured, interest free and repayable on demand. After the reporting date, the debt was waived.
Asked about this payment, a spokesperson said: 'The transactions reported in the accounts are just reflective of the UK companies and do not provide the full picture. They do not reflect the level of immense support that has been provided by the shareholder to the group over the years.'
Goodhead, who is also chief executive and global managing partner, is an Oxford PPE graduate who took a master’s degree at Cambridge. He subsequently qualified as a barrister, graduating from City University, London and the University of Law. He co-founded Pogust Goodhead in 2018. The firm claims on its website to have work in progress worth more than $5bn.
Employees were told last year that between 40 and 50 jobs were likely to be lost in London, with a similar number to be let go in Brazil, amounting to about 100 mainly call centre staff.
'Pogust Goodhead remains well-funded, with strong investor backing and a valuable case portfolio driving long-term returns,' the spokesperson said. 'As we progress major litigation, we remain confident in our ability to deliver justice and generate substantial future revenues.'
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