B.P. Marsh & Partners Plc
(“B.P. Marsh”, the “Company” or the “Group”)
Trading Update
B.P. Marsh, the niche venture capital provider to early stage financial services businesses, is pleased to provide the market with an update on trading for the Group’s financial year ended 31 January 2019.
Highlights
- Placing and Open Offer completed in July, raising £17m cash for the Company (before costs)
- PSC Insurance Group became a new 19.6% investor
- New investment in ATC Insurance Solutions of Melbourne
- Additional investment of £2.5m in Nexus
- LEBC announced strong results for the year to 30 September 2018
- Third acquisition by XPT and provision of additional funding
- Dividend of 4.76p for the year to 31 January 2019, payable in July 2019
- £7.9m cash balance at 31 January 2019, of which £6.6m uncommitted pre-dividend
The Group was pleased to complete a successful Placing and Open Offer in July, bringing a significant new shareholder to the Company’s register in PSC Insurance Group, an Australian listed insurance group.
A new investment was made in ATC Insurance Solutions, an Australian-based business, bringing the total number of the Group’s Australian investments to three, all of which are performing strongly.
Overall, we are pleased with the progress of the portfolio. Whilst there are a couple of investments that we are monitoring closely, the majority continue to increase revenue and profits and have developed well.
As global and domestic political events unfold, we wait for resolution on this whilst continuing to deliver a sustainable dividend and steady growth.
New Investment
ATC Insurance Solutions PTY Ltd (“ATC”)
On 10 July 2018, the Group, acquired a 20% equity stake in ATC Insurance Solutions for a total cash consideration of AUS$5m (£2.8m).
ATC is a Managing General Agency, based in Melbourne, which provides insurance services to a wide array of clients across a number of sectors, including Accident & Health, Construction & Engineering, Plant & Equipment and Sports Liability.
Follow-on Investments and Funding
Nexus Underwriting Management Ltd (“Nexus”)
On 30 October 2018 the Group acquired a further 1.9% in Nexus for a cash consideration of £2.5m, taking the Group’s aggregate shareholding to 18.5%. The transaction price was in line with B.P. Marsh’s valuation of Nexus as at 31 July 2018.
XPT Group LLC (“XPT”)
XPT, in which the Group owns a 35% shareholding, announced on 18 January 2019 that it had acquired 100% of a New York City based Managing General Agency and Lloyd’s Coverholder, SVA Underwriting Services Inc (“SVA”).
XPT, itself also headquartered in New York City, has additional operations in North Carolina and Texas. XPT achieved GWP of $77m in 2018.
SVA was founded in August 2013 by its President, Steven Vallejo. SVA specialises in Physical Damage and Cargo cover for the Trucking Insurance sector in the U.S. and will provide geographic expansion for XPT into the Northeast and Midwest.
As part of the acquisition, the Company agreed to provide XPT with further funding of $3.22m (c. £2.54m) by way of newly issued redeemable preference shares.
XPT’s strategy is to develop a wholesale insurance broking and underwriting agency platforms across the U.S. Specialty Insurance Sector and this acquisition is the third since it was established with funding from the Group in 2017.
Portfolio Update
CBC UK Ltd (“CBC”)
CBC continues to demonstrate strong growth and for the year ended 31 December 2018 has reported unaudited revenue of £5.89m and EBITDA of £1.26m. This is an increase of 7.7% in Revenue and 50% in EBITDA over the prior year.
CBC has made a number of hires to provide additional depth to its offering in both broking and underwriting, including a Professional Indemnity team and a new underwriter for Bell Underwriting, the Managing General Agency division.
In July 2018 CBC completed its first acquisition since investment by the Group in 2017, acquiring PBS, a specialist insurance broker in Jersey, further strengthening its position in the market.
LEBC Holdings Ltd (“LEBC”)
LEBC Group Ltd, the trading subsidiary of LEBC, reported another record year in the period to 30 September 2018.
During the year revenue grew 13.1% to £20.5m (2017: £18m) and trading profit grew 43% to £4.3m (2017: £3.0m). These figures do not include Aspira, the acquisition that LEBC completed in January 2018.
This is the tenth year of profit growth for LEBC, driven by organic growth in both the ‘Foundation’ and ‘The Retirement Adviser’ divisions of LEBC.
LEBC continues to consider options for a potential shareholder liquidity event, alongside strategies to further accelerate growth, whilst taking account of the current political climate.
Nexus Underwriting Management Ltd (“Nexus”)
Nexus has undertaken a number of acquisitions in the Group’s financial year to 31 January 2019 including Huntingdon Underwriting, Altitude Risk Partners and Hiscox Flying Global.
The Nexus Group estimates that, for the year ending 31 December 2018, the business will write total Gross Written Premium of £240m across 15 specialty classes of business and EBITDA of £13.1m. Nexus continues its M&A growth strategy, targeting three acquisitions per annum and has completed 13 acquisitions in total.
Stewart Specialty Risk Underwriting Ltd (“SSRU”)
SSRU, the Toronto, Canada based provider of specialty insurance products to a wide array of clients in the Construction, Manufacturing, Onshore Energy, Public Entity and Transportation sectors, commenced operations in February 2017.
For the year ended 31 December 2018 SSRU wrote Gross Written Premium of CAD$5.6m and is primed to enter its next stage of growth.
This growth will come via the continued organic development of its existing product offerings and expansion into new lines of business. Additionally, SSRU continues to explore M&A opportunities as they arise.
Walsingham Motor Insurance Ltd (“Walsingham”)
Walsingham, the London-based motor fleet MGA, continued its strong progress in 2018 writing £19.8m in premium and generating estimated EBITDA for the year of £0.6m.
Dividend
As previously announced, the dividend for the financial year ending 31 January 2019 will be 4.76p per share (£1.7m in aggregate), payable in July 2019.
The Board continues to strike a balance between investing cash into new opportunities for long-term capital growth and providing shareholders with a meaningful and sustainable yield.
Net Asset Value and Full Year Results
The latest published net asset value (“NAV”) is £120.1m, or 333p per share, as at 31 July 2018. The NAV per share is calculated based upon the total shares in issue of 37,478,077, and then excluding 1,461,302 shares held in a management incentive scheme as these shares are subject to performance criteria which have not yet been met and are non-dilutive at this time.
The full year results to 31 January 2019 and the updated net asset value will be announced on Tuesday 11 June 2019.
Share Buy-Backs
The Group has a share buy-back policy that enables it to buy back shares when the Company’s share price is more than 15% below the Company’s most recently published Net Asset Value, within the permitted constraints of the Market Abuse Regulation.
The Board remains of the view that the authority to undertake low volume buy-backs of shares is an important stabilising mechanism in times of market or share price volatility.
The share buy-back policy has been implemented in recent periods of market volatility and in aggregate, between 1 October 2018 and 31January 2019, the Group bought back 28,573 shares which are being held in Treasury.
New Business Opportunities and Outlook
The financial year closed with a total of 64 new opportunities having been presented to the Group during the year, in comparison with 77 and 84 in preceding years. Of the 64, the majority were in the insurance sector, with 37 insurance intermediary enquiries, or 58%.
The Group notes the reduction in the number of new enquiries received and attributes this to uncertainties in recent months surrounding Brexit and other geo-political pressures. The Board does not view this as a lasting cause for concern, however, and anticipates deal volumes to pick up once there is more clarity on the domestic political situation.
One new investment was made during the year, in Australia, bringing the total number of Group investee companies in Australia to three. The Group continues to view Australia as a territory that presents good growth investment opportunities, which combined with the presence of PSC Insurance Group as a recent cornerstone investor, contributes to a sustained interest in this geographic area.
Cash Balance
At 31 January 2019 the Group’s cash balance was £7.9m, with £6.6m uncommitted pre-dividend.
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