Final Results

by B.P. Marsh | Jun 11, 2019 | Portfolio News

FINAL RESULTS FOR THE YEAR TO 31 JANUARY 2019

B.P. Marsh & Partners Plc (AIM: BPM), the specialist investor in early stage financial services businesses, announces its audited Group final results for the year to 31 January 2019.

The highlights of the results are:

• Net Asset Value of £126.2m (31 January 2018: £98.9m), a 10.0% increase, net of Dividend and £16.6m net cash raised through the Placing and Open Offer in July 2018
• Total Shareholder return of 11.7% for the year including the Dividend paid in July 2018
• Net Asset Value per share increased to 350p (31 January 2018: 339p)
• Net Asset Value average annual compound growth rate of 11.9% since 1990 (net of Dividends and Placing cash)
• Consolidated profit after tax of £12.5m (31 January 2018: £20.2m, or £10.8m excluding one-off items). Up 16% excluding one-off items
• Increase in the Equity Value of the portfolio of 16.1% to £101.9m (31 January 2018 £79.1m)
• Final Dividend of 4.76p per share declared (31 January 2018: 4.76p), payable in July 2019
• Cash and treasury funds balance of £7.9m at year end, of which £1.5m remains uncommitted
• New investment in Australia, ATC Insurance Solutions PTY Ltd
• Additional investments in Nexus and XPT and provision of follow-on funding to Nexus
• Continued strong opportunity pipeline
• Share price increase of c.11% in the year and c.113% over five years

“We are pleased to have produced a good overall performance in an uncertain macro environment, which is testament to our developing investment portfolio and the tenacity of our team.”

Brian Marsh OBE, Chairman

Note

This announcement contains inside information for the purposes of Article 7 of Regulation (EU) No 596/2014.

Chairman’s Statement

I am pleased to present the audited Consolidated Financial Statements of B.P. Marsh & Partners Plc for the year ended 31 January 2019.

We have concluded the year with a 10.0% increase in Net Asset Value (net of dividend and £16.6m net cash raised through the Placing and Open Offer in July 2018) during that period and an increase in the equity value of the portfolio from £79.1m to £101.9m, or 16.1% adjusting for acquisitions. Our Net Asset Value now stands at £126.2m or 350p per share.

There have been some excellent investee company performances within the portfolio both in the UK and overseas and across broking and Managing General Agents.

Nexus continues to grow strongly, driven by its determined management team and its ambition to achieve the Company’s strategy. Nexus has made several acquisitions during the year and we acquired a further interest in Nexus in October 2018, as well as providing them with loan funding in April 2019.

XPT meanwhile announced its latest acquisition in January 2019, alongside which we provided further funding of US $3.22m.

In the London insurance market both Walsingham and CBC are making good progress, whilst in Australia our most recent investment, ATC Insurance Solutions, has already proved itself to be a strong performer that we consider shows great promise.

As is customary in our business, there are always investee companies experiencing more difficult times in their territory or market. Our investee company in Singapore is accordingly undergoing some internal restructuring and one of our operations in the USA has not achieved its objectives.

In the UK, LEBC was affected by market turbulence from October onwards, driven by Brexit uncertainty. This has had a temporary impact, however our confidence in the business and its prospects remains unchanged.

During the year we completed a Placing that saw PSC Insurance Group, the Australian listed insurance intermediary investor, take a 19.8% shareholding in the Group. This relationship is progressing well and we view their investment as long-term and supportive. Meanwhile we continue to be interested in Australia as a territory for further potential investment.

The Placing and accompanying Open Offer raised £16.6m in cash for the Group and this is now nearly fully invested.

At the conclusion of the year, we have maintained our objective of consistent compound annual growth. This has been achieved despite the challenges provided by various political and market uncertainties and we are pleased in the period under review to have delivered a total shareholder return of 11.7%.

Business Update

Summary of Developments in the Portfolio

During and subsequent to the financial year ended 31 January 2019, the following developments have taken place:

New Investments – ATC Insurance Solutions PTY Limited (“ATC”)

On 10 July 2018 the Group announced an investment into the Australian based company ATC, taking a 20% equity stake for a total cash consideration of AUD $5.1m (£2.9m).

ATC is a Managing General Agency (“MGA”) which provides insurance underwriting services to a wide array of clients across a number of sectors, including Accident & Health, Construction & Engineering, Plant & Equipment and Sports Liability.

Chief Executive Officer, Chris Anderson and Director, Shane Sheppard established ATC as a Lloyd’s Coverholder in 2009. ATC is headquartered in Melbourne, with offices in Sydney and Brisbane, employing approximately 30 people.

Follow-on Investments

XPT Group LLC (“XPT”)

On 11 January 2019, the Group invested $3.22m into XPT by way of redeemable preference shares. XPT used these funds to acquire 100% of New York based MGA and Lloyd’s Coverholder, SVA Underwriting Services Inc (“SVA”).

SVA was founded in August 2013 by its President, Steven Vallejo. SVA specialises in Physical Damage and Cargo cover for the Trucking Insurance sector and will provide geographic expansion for XPT into the Northeast and Midwest.

Nexus Underwriting Management Ltd (“Nexus”)

On 29 October 2018 the Company purchased a further 1.9% in Nexus for cash consideration of £2.6m, taking our shareholding to 18.5%.

Portfolio Update

UK

Nexus Underwriting Management Ltd

In April 2019 the Group provided Nexus with a £2m revolving credit facility, as part of Nexus’ wider debt fundraising exercise in order to undertake M&A activity.

In addition to the facility from the Company, Nexus has secured an additional £14m loan facility from funds managed by HPS Investment Partners, LLC (“HPS”). HPS is a leading global investment firm.

The funding provided by both B.P. Marsh and HPS resulted in Nexus securing a total of £16m in additional loan facilities, alongside the £30m of funding secured from both B.P. Marsh and HPS in July 2017.

In April of this year, Nexus utilised a proportion of these funds to acquire Credit & Business Finance Limited (“CBF”), a specialist trade credit broker, and Capital Risks MGA Limited, a Warranty and Indemnity MGA.

Following the acquisition of CBF, Nexus is now the leading independent UK trade credit broker, fulfilling one of its strategic goals and uniting the two biggest producers of ‘new to market’ business, and will hold a share in excess of 10% of the estimated £350m Gross Written Premium for the UK trade credit broking market.

LEBC Holdings Ltd

LEBC was impacted by a combination of market volatility and Brexit uncertainty in Q4 2018 and announced in February 2019 that it would be postponing seeking a public listing due to market uncertainties.

Jack McVitie, the Chief Executive said: “We will secure a better result, should we continue to pursue an IPO, if we give the market time to normalise. LEBC has been built patiently through primarily organic growth over the last 19 years. In that time, we have seen many different market events and we know we will see many more in the future.“

Notwithstanding the difficult trading conditions LEBC continues to make progress in its key areas, including developing its digital offering, Hummingbird.

CBC UK Ltd

On 2 July 2018 CBC completed its first acquisition since the Group invested in 2017. CBC acquired 100% of Jersey based general insurance broker PBS Insurance Limited. In doing so, PBS Managing Director Si Aziz joined Paladin Holdings Limited (CBC’s parent company) as a shareholder.

CBC continues to demonstrate strong growth and for the year ended 31 December 2018 has reported draft audited revenue of £5.69m and Operating Profit of £0.95m. This is an increase of 5% in Revenue and 29% in Operating Profit over the prior year.

EC3 Brokers Limited (“EC3”)

Since the Group’s investment in December 2017, EC3 has continued to perform in line with expectations.

Walsingham Motor Insurance Ltd (“WMIL”)

WMIL continued to deliver good progress in the year ended 30 September 2018, reporting draft audited Total Income of £2.51m and Profit before Tax of £0.52m, up 11.3% over the prior year.

This growth has continued in 2019, with the business trading significantly ahead of expectations at the current time.

USA

XPT Group LLC (“XPT”)

On 18 January 2019 the Group announced that XPT, in which the Group owns a 35% shareholding, has acquired 100% of a New York City based MGA and Lloyd’s Coverholder, SVA Underwriting Services Inc (“SVA”).

As part of the acquisition, the Company agreed to provide XPT with further funding of $3.22m (£2.54m) by way of newly issued redeemable preference shares.

XPT’s acquisition of SVA is its third since it was established in June 2017, following Western Security Surplus Insurance Brokers, Inc. (“WSS”) in November 2017 and trucking specialist WE Love & Associates, Inc in January 2018.

XPT’s strategy is to develop a wholesale insurance broking and underwriting agency platform across the U.S. Specialty Insurance Sector. The acquisition of SVA continues to demonstrate that XPT can take advantage of the consolidation opportunities in the small-to-medium-sized wholesale space in the U.S. while adding operational expertise to organically grow the businesses at high rates.

Mark Edward Partners LLC (“MEP”)

MEP has found it difficult to make headway in recent months. Some of its specialist insurance products have been impacted by political changes and revenues have suffered as a result. The Group has taken its customary prudent approach to valuation and notes that, whilst this is a disappointing outcome, the business is still in operation and Management are making every effort to stabilise current trading.

Canada

Stewart Specialty Risk Underwriting Ltd (“SSRU”)

SSRU, the Toronto- 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$5.67m 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.

Australia

ATC Insurance Solutions PTY Limited

The Group’s third and most recent venture in Australia, ATC, has performed well since B.P. Marsh’s investment, in July 2018.

ATC continues to show strong growth, with gross written premium expected to grow by 25% year on year and underlying EBITDA expected to grow by 22% year on year.      

Dividend

The Board is pleased to declare a dividend of 4.76p per share, payable in July 2019, to be put to the Group’s shareholders at its Annual General Meeting.

The Board continues to strike a balance between investing cash into new opportunities for long-term capital growth and providing shareholders with a sustainable yield.

Share Buy-Backs

The Board has a stated policy, regularly reviewed, of undertaking low volume share buy-backs at times when the Group’s Share Price represents a 15% or greater discount to Net Asset Value. The Board considers this is a useful stabilising mechanism during periods of market or share price volatility.

During the year to 31 January 2019, the Company undertook a number of buy-backs purchasing an aggregate of 28,573 shares at an average price of 278p per share.

New Business Opportunities and Outlook

The Group received 64 new opportunities during the financial year. Of the 64, the majority were in the insurance sector, with 37 insurance intermediary enquiries, or 58%.

To compare with previous years, the Group received 77 proposals in 2018, 84 in 2017 and 71 in 2016.

The Board is pleased to receive a continuing flow of new investment enquiries commensurate with prior years and discussions are ongoing with a number of these proposals.

Australia continues to be a territory of interest to the Group, with three current investments and a significant shareholder based there.

Cash Balance

At 31 January 2019 the cash balance was £7.9m, with current uncommitted cash of £1.5m net of the dividend payable in July 2019. The Board notes the current level of uncommitted cash and has several options available to it in this respect.

Financial Performance

At 31st January 2019, the Net Asset Value of the Group was £126.2m, or 350p per share (2018: £98.9m, or 339p per share) including a provision for deferred tax where relevant. This equates to an increase in Net Asset Value of 10.0% (2018: 24.1%) for the year.

The Group increased its dividend payment to £1.7m (or 4.76p per share) during the year, as announced previously (2018: £1.1m or 3.76p per share).  Total Shareholder return for the year was therefore 11.7% (2018: 25.5%) including the dividend payment and the Net Asset Value increase.

The Group’s investment portfolio movement during the year was as follows:

This equates to an increase in the portfolio valuation of 16.1% (2018: 31.3%).

The Net Asset Value of £126.2m at 31st January 2019 represented a total increase in Net Asset Value of £97.0m since the Group was originally formed in 1990 having adjusted for the £10.1m net proceeds raised on AIM in 2006, the original capital investment of £2.5m and the £16.6m of net proceeds raised through the Share Placing and Open Offer in July 2018. The directors note that the Group has delivered an annual compound growth rate of 11.9% in Group net asset value after running costs, realisations, losses, distributions and corporation tax since 1990.

The consolidated profit on ordinary activities after taxation decreased by 38% to £12.5m (2018: profit of £20.2m) however, the 2018 consolidated profit on ordinary activities included two significant one-off items.  Firstly, an unrealised gain of £5.7m relating to the Group’s investment in LEBC Holdings Limited (“LEBC”) which arose on a change in valuation methodology.  Secondly, a write-back of deferred tax resulting from the changes to the Substantial Shareholding Exemption rules in 2017, which resulted in a net tax credit to the Consolidated Statement of Comprehensive Income of £3.7m.  Excluding these one-off items, the consolidated profit after taxation actually increased by £1.7m (16%) over 2018.

The consolidated profit on ordinary activities before taxation was £12.2m (2018: profit of £16.5m), of which £14.1m was derived from unrealised gains on revaluing the equity investment portfolio in line with current market conditions, a decrease of 22% on the previous year (2018: net unrealised gains of £18.1m).  As noted above, the unrealised gains in 2018 included £5.7m specifically relating to a change in valuation methodology for LEBC and if this were excluded as a one-off item, the true increase in the equity portfolio from unrealised gains was 14% over the year. 

The Group’s strategy is to cover expenses from the portfolio yield.  On an underlying basis, including treasury returns, but excluding investment activity (unrealised gains on equity, a provision against loans receivable from investee companies and all underlying treasury portfolio movement), this was achieved with a pre-tax profit of £0.7m for the year (2018: £0.7m).

The Group invested £8.7m during the year – £2.9m in new equity investments and £5.8m for follow-on equity financing to its existing portfolio.  In addition, the Group provided new loans for working capital to the portfolio of £3.8m.  Repayment of loans by the portfolio amounted to £1.8m in the year.  Cash funds (including treasury funds) at 31st January 2019 were £7.9m.

Overall, income from investments increased by 19.9% to £4.6m (2018: £3.9m).  Dividend income increased by 74.5% over the year due to the strengthening performance of the portfolio companies, whilst income from loans fell by 7.8%, which was largely the result of the portfolio repaying debt in accordance with agreed repayment schedules.  Fees were 24.8% lower mainly due to a number of one-off transaction fees received in 2018.

Whilst the Group did not realise any of its investments during the year, it was successful in raising £16.6m of net proceeds from a Share Placing and Open Offer which took place in July 2018.  The cash received from this fundraising enabled the Group to invest in a number of new and existing opportunities throughout the year.

Operating expenses, including costs of making new investments, decreased by 4.0% during the year to £4.0m (2018: £4.1m).  This decrease was largely due to several atypical expenses which were included within the 2018 operating costs, including £0.3m of enhanced bonuses awarded to directors and staff which were linked to the successful realisation of investments in that year as well as £0.2m of costs incurred in making new investments which were expensed under IFRS and £0.1m of one-off costs incurred in the prior year office move.  After excluding these atypical expenses, as well as an exceptional bad debt write-back of £0.1m from the 2018 operating costs, and after excluding £0.1m of atypical expenses incurred in 2019 relating to making new investments and the establishment of the Joint Share Ownership Plan, underlying operating expenses actually increased by £0.3m (7%) over 2018, in line with managing a growing portfolio.

Due to favourable market conditions, the Group’s treasury funds increased by 5.6% over the year (net of fund management charges) (2018: 4.1%), however the Group sold down the majority of its remaining treasury portfolio during the year to fund further investments.

Net Asset Value per share

In 2018 the Group entered into joint share ownership arrangements with certain employees and directors and issued 1,461,302 shares (3.9% of the current total issued shares) which were transferred into an Employee Benefit Trust. The employees and directors will only receive the growth in value of the shares above the market price of 281 pence per share on the date of issue, plus a 3.75% per annum carrying value after 3 years from the date of issue.

Although these shares are potentially dilutive, if the performance criteria are met then the Group would then receive the economic right to the first 281 pence per share, or £4.1m. The net asset value per share of the Group currently excludes these 1,461,302 shares as these were non-dilutive in the year to 31 January 2019, are subject to performance criteria that have not yet been achieved and are held within an Employee Benefit Trust.  The Group net asset value has therefore also excluded the economic right the Group has to £4.1m on vesting for the same reasons. On this basis the current net asset value per share is 350 pence for the Group. If the performance criteria for vesting is eventually met, the diluted net asset value per share based upon the current net asset value would be 348 pence.

Outlook

The Group has produced a good overall performance in the year. The Group’s strategy is to generate long-term value and the Board is confident in the Group’s ability to do so, notwithstanding short-term market uncertainties. 

Brian Marsh OBE, Chairman

10 June 2019

Trading Update

by B.P. Marsh | Feb 7, 2019 | Portfolio News

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.

Interim Results

by B.P. Marsh | Oct 16, 2018 | Portfolio News

B.P. Marsh & Partners Plc, the specialist investor in financial services intermediary businesses, announces its unaudited Group interim results for the six months to 31 July 2018 (the “Period”).

The financial highlights for the Period are:

• Net Asset Value (“NAV”) at 31 July 2018 of £120.1m (31 July 2017: £88.8m)
• NAV per share of 333p (31 Jan 2018: 339p, adjusted NAV post July 2018 Placing: 321p)
• 6.7% increase in the equity value of the portfolio in the Period
• Increased final dividend of 4.76p per share for the year to 31 January 2018 declared and paid in July 2018
• 6.4% total shareholder return in the period
• Intended dividend of at least 4.76p per share for the current year ending 31 January 2019
• Dividend covered 7 times by uncommitted cash as at 15 October 2018
• £16.6m cash raised (after costs) in Placing and Open Offer completed in July 2018
• Cash and treasury funds balance of £15.4m, of which £15.1m uncommitted at 31 July 2018
• As at 15 October 2018 uncommitted cash of £12.7m available for investment

The portfolio highlights for the Period are:

• New investment in ATC Insurance Solutions PTY Limited
• LEBC Holdings Limited’s acquisition of Aspira Corporate Solutions Limited completed
• Nexus Underwriting Management Limited acquisitions of two specialist MGAs

Brian Marsh, B.P. Marsh Chairman, commented,

“The performance of our portfolio of eighteen investments has been pleasing during the Period with the majority of our investments delivering strong returns. We expect this to continue for the remainder of the year.”

Chairman’s Statement

I am pleased to present the unaudited Consolidated Financial Statements of B.P. Marsh & Partners Plc for the six month period to 31 July 2018.

Our NAV has increased to £120.1m from £88.8m as at 31 July 2017 including £16.6m raised from the Placing and Open Offer in July 2018. This represents a NAV per share of 333p (31 Jan 2018: 339p; adjusted NAV post July 2018 Placing: 321p). The Group’s NAV performance during the Period is in line with the 11.9% annual compound growth in the NAV excluding all new funds raised since inception. Our unaudited profit after tax in the Period was £6.3m, compared to £10.2m in the six months to 31 July 2017. The comparable profit after tax number at our Interim results in 2017 included a significant unrealised gain on equity investment (£5.7m) relating to the revision of the Company’s valuation methodology for LEBC Holdings to reflect LEBC Holdings’s strong growth during that period.

Following the Placing and Open Offer the Company is entering a new phase of development, with a strategic investor, PSC Insurance Group taking a 19.6% shareholding. We continue to preside over a diverse portfolio with several strong performers and a healthy current uncommitted cash balance of £12.7m for future investment in the existing portfolio as well as new opportunities.

The Board is pleased to note the increase in NAV of 4.7% (excluding the proceeds raised from the Placing and Open Offer) and the 6.7% increase in the equity value of the portfolio during the Period.

Delivering returns to our shareholders continues to drive all that we do and I am pleased to report a 6.4% total shareholder return for the Period. We have already noted our intention to pay a dividend of 4.76p for the year ending 31 January 2019, subject to ongoing review and approval by the Board and Shareholders.

We continue to strike a balance between providing a dividend yield to investors and using available funds to invest in opportunities to generate long-term capital growth. We continue to see a healthy flow of new investment opportunities, with 32 received in the interim period and one completed, namely ATC Insurance Solutions of Melbourne, Australia. We are known for being patient in our consideration of new investments and we maintain this measured approach.

From a wider perspective, we continue to watch global political developments, including the UK’s exit from the European Union, with the reassurance that the geographic spread of the portfolio provides sufficient diversification to minimise any consequential impact.

Business Update

Summary of Developments in the Portfolio

New Investments

Investment in ATC Insurance Solutions (PTY) Limited (“ATC”)

On 10 July 2018 the Group announced an investment into the Australian based company ATC, taking a 20% equity stake for a total cash consideration of AUD $5.1m (£2.8m).

ATC is a Managing General Agency (“MGA”) which provides insurance underwriting services to a wide array of clients across a number of sectors, including Accident & Health, Construction & Engineering, Plant & Equipment and Sports Liability.

Chief Executive Officer, Chris Anderson and Director, Shane Sheppard established ATC as a Lloyd’s Coverholder in 2009. ATC is headquartered in Melbourne, with offices in Sydney and Brisbane, employing approximately 30 people.

For the year ended 30 June 2018 ATC reported Gross Written Premium of AUD $61m (2017: AUD $47m). The budget for the year ending 30 June 2019 demonstrates substantial year on year growth for ATC, with expected Gross Written Premium of circa AUD $76m.

Portfolio news

The Group’s portfolio businesses have continued to develop as anticipated during the Period. Specific instances or developments are noted below:

UK

LEBC Group Limited (“LEBC”)

LEBC announced strong half-year results for the six-month period to 31 March 2018, with revenue growth of 20% from £8.5m last year to £10.2m. Trading profit grew by 100% from £1.2m to £2.4m.

LEBC strengthened its senior management team in October 2018, with Derek Miles being appointed Managing Director of the corporate and private client division, supported by David Lloyd as head of private clients and Todd Rowlands leading the corporate proposition. Derek Miles was formerly Managing Director of Aspira, acquired by LEBC in December 2017, with formal completion occurring in February 2018. Three new senior management hires will also join the business.

In September 2018 LEBC was appointed as corporate pension partner for the Recruitment and Employment Confederation (the “REC”). The REC represents businesses through its corporate membership and individuals through the Institute of Recruitment Professionals. It has a partnership agreement with the Department for Work & Pensions to help get people into work.

LEBC has also stated that it is considering options for a potential shareholder liquidity event, alongside strategies to further accelerate growth.

Nexus Underwriting Management Limited (“Nexus”)

Nexus announced that it had completed the acquisitions of Huntington Underwriting Limited (“Huntington”) on 6 September 2018 and Altitude Risk Partners LLP (“Altitude”) on 7 September 2018.

Altitude is a specialist aviation MGA based in London, acquired by Nexus as an asset purchase from Castel Underwriting Agencies. Altitude has become a trading division of Nexus Underwriting Limited. Altitude underwrites a portfolio of seven lines of aerospace insurance across 130 territories and for the year ending 31 December 2018 is forecasting Gross Written Premium Income in excess of US$80m.

Huntington is a structured solutions MGA based in Malaysia’s Labuan International Business and Financial Centre. Huntington offers tailored, non-traditional (re)insurance programmes that manage the volatility in groups of risks, over several years, incorporating aggregate limits of liability and rewarding underwriting profitability.

As a result of these two transactions, the Nexus Group estimates that, for the year ending 31 December 2018, the business will write total Gross Written Premium of £275m across 14 specialty classes of business and generate annualised EBITDA of £13.8m. Nexus continues its M&A growth strategy, targeting three acquisitions per annum and has completed 12 acquisitions in total.

EC3 Brokers Limited (“EC3”)

Since the Group’s investment in December 2017, EC3 has continued to perform broadly in line with expectations.

Management continues to review a number of opportune personnel and team hires and M&A activity in order to deliver further growth.

CBC UK Limited (“CBC”)

On 2 July 2018 CBC completed the 100% acquisition of PBS Insurance Limited (“PBS”). PBS is a general insurance broker based in Jersey. As part of the transaction, Si Aziz, the Managing Director of PBS, subscribed for a shareholding in Paladin Holdings Limited, CBC’s parent company, in which B.P. Marsh has a c. 45% shareholding.

The transaction is an important development for CBC, being its first acquisition since the investment by B.P. Marsh in February 2017 and expanding the business into a new territory, with the resulting opportunities this should bring.

CBC’s audited accounts for the financial year ended 31 December 2017, the first year following the Management Buy-Out backed by the Group, report revenue of £5.4m and profit before tax of £0.7m (2016: £nil).

On 18 April 2018 the Group completed the purchase of an additional 10% stake in Paladin Holdings Limited (“Paladin”), CBC’s parent company, for £400,000 from a founding shareholder. It has been agreed between the Group and Paladin Management that these shares will be kept available for repurchase by Paladin at a fixed option price most likely to be utilised as part of a non-dilutive Management Incentive Scheme at any point in the next 12 months.

CBC is actively seeking individuals or teams that would complement the existing business, to further its growth ambitions.

Walsingham Motor Insurance Limited (“Walsingham”)

Walsingham, the London-based fleet MGA, continued its positive growth, reporting a 20% increase in revenues from £2.2m to £2.6m, and an increase in profit before tax from £0.1m to £0.5m in the year to 30 September 2017.

Garry Watson, Walsingham’s CEO, stated “The company continues to make excellent progress as we build on relationships with brokers, emphasising the benefits of using A rated paper.”

Europe

Summa Insurance Brokerage, S.L. (“Summa”)

The Group continues to work with Summa’s Management team to develop the business in a market which remains competitive, with rates continuing to soften.

Notwithstanding this, Summa remains in a strong position to take advantage of the fragmented insurance intermediary market in Spain and to assess all opportunities as and when they materialise.

Canada

Stewart Specialty Risk Underwriting Ltd (“SSRU”)

The Group’s investment in Canada, SSRU, an MGA which commenced writing business in April 2017, has performed well since launch and has reported strong year on year growth to date.

Australia

ATC Insurance Solutions (PTY) Limited, Sterling Insurance (PTY) Limited (“Sterling”) & MB Prestige Holdings (PTY) Limited (“MB Group”)

The Group’s three investments in Australia are all performing in line with or above the Group’s expectations at the current time.  

Since the Group’s investment in 2012, MB Group has continued to show strong growth year on year with 2017 being MB’s best year from a performance standpoint to date.

Sterling, in which the Group has held an investment since 2013, also reported a positive financial year to June 2018, exceeding its EBITDA budget by c. 42%.

Dividend

A final dividend of 4.76p per share was declared and paid in July 2018.

It is the Board’s intention to maintain a dividend of at least 4.76p per share for the current year ending 31 January 2019, subject to ongoing review and approval by the Board and the shareholders.

Share Buy-Back

The Group announced a change to its Share Buy-Back Policy on 11 October 2018, which states that Buy-Backs can be undertaken when the discount to NAV of the Group’s share price exceeds 15% (previously 20%). The change was agreed by the Board in recognition of the reduction made in the share price discount to NAV over the preceding six months.

The Group’s Share Buy-Back Committee meets periodically to decide if Buy-Back transactions should be undertaken, when the discount to Net Asset Value of the Group’s share price exceeds 15%. The suitability of the 15% threshold is regularly monitored by the Board. The Buy Backs are intended as a stabilising mechanism and have been particularly useful during periods of market instability.

During the period of six months to 31 July 2018 the Group undertook no Buy-Back transactions from the Market as the discount never breached the 20% threshold.

Business Strategy

The Group invests amounts of up to £5m in the first round of funding and takes minority equity positions in financial services intermediaries, normally acquiring between 20% and 40% of an investee company’s total equity. During the holding period, additional investment can lead to the Group having a majority holding, as is the case currently in LEBC and Summa. In these circumstances, day to day business operation remains with management, with the Group providing input, advice and assistance, as with all of its portfolio businesses.

The Group is comfortable with taking a long-term investment horizon with an average holding period post-float of 6.2 years, with our current portfolio being held on average for approximately 3.5 years. As ever, we do not invest in companies that are exposed to underwriting insolvency risk.

The Group requires its investee companies to adopt minority shareholder protections and appoint a director to its board.

Since 1990 the Group has generated an average NAV annual compound growth rate of 11.9% (excluding the £10.1m proceeds raised on flotation and £16.6m proceeds raised as part of the Placing & Open Offer completed in July 2018). Its successful track record can be attributed to a number of factors that include a robust investment process, management’s considerable sector experience and a flexible approach to exit.

Cash Balance

The Group has a current uncommitted cash balance of £12.7m available for new investment opportunities and for developing the existing portfolio.

Outlook and New Business Opportunities

During the six-month period the Group has seen a strong flow of new investment opportunities, both in the UK and internationally. Discussions are ongoing on a number of these.

During the Period the Group reviewed 32 opportunities, of which 41% were insurance intermediaries, 9% insuretech, 19% wealth management, 22% fintech and 9% fell outside the Group’s investment criteria. By way of comparison, during the interim period to 31 July 2017 the Group reviewed 38 new opportunities.

Brian Marsh OBE, Chairman

16 October 2018

Trading Update

by B.P. Marsh | Sep 5, 2018 | Portfolio News

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 six months ended 31 July 2018.

Highlights

• Placing and Open Offer completed
• PSC Insurance Group Limited a new 19.6% investor
• £17m cash raised (before costs)
• New investment in ATC Insurance Solutions PTY Limited
• Strong opportunity pipeline
• £14.5m net cash available

In July 2018 the Group completed a successful Placing and Open Offer, as a result of which a new investor, PSC Insurance Group Limited (“PSC”) (via its subsidiary PSC UK PTY Limited) became a 19.6% shareholder in the Company and delivered £17m in cash (before expenses) to the Company.

The completion of this transaction represents the beginning of a new phase of development for the Company, having passed the £100m market capitalisation level for the first time and re-ordered the shareholder base, with Brian Marsh’s holding having reduced to 44%, and with healthy cash reserves for developing the portfolio and for new opportunities. The Group is encouraged to have a new substantial shareholder that understands its business and with which there are possibilities for future joint working.

The Company’s investment portfolio is increasingly geographically diverse with strong performers and the pipeline continues to deliver sound investment opportunities. The management team is committed to growing the Company’s existing portfolio as well as continuing to invest in early stage financial services intermediary businesses with the aim of becoming the capital provider of choice for the sector and delivering value to the Company’s shareholders.

New Investment

Investment in ATC Insurance Solutions PTY Limited (“ATC”)

On 10 July 2018 the Group announced an investment into the Australian based company ATC, taking a 20% equity stake for a total cash consideration of AUD $5m (£2.8m).

ATC is a Managing General Agency which provides insurance underwriting services to a wide array of clients across a number of sectors, including Accident & Health, Construction & Engineering, Plant & Equipment and Sports Liability.

Chief Executive Officer, Chris Anderson and Director, Shane Sheppard established ATC as a Lloyd’s Coverholder in 2009. ATC is headquartered in Melbourne, with offices in Sydney and Brisbane, employing more than 30 people.

For the year ended 30 June 2017, ATC reported Gross Written Premium of AUD $47m. The budget for the year ending 30 June 2018 demonstrates substantial year on year growth for ATC, with expected Gross Written Premium of circa AUD $60m.

Portfolio Developments

Specific developments within the portfolio during the period are noted below:

CBC UK Limited (“CBC”)

On 2 July 2018 CBC completed the 100% acquisition of PBS Insurance Limited (“PBS”). PBS is a general insurance broker based in Jersey. As part of the transaction, Si Aziz, the Managing Director of PBS, subscribed for a shareholding in Paladin Holdings Limited, CBC’s parent company, in which B.P. Marsh holds a c. 45% shareholding.

The transaction is an important development for CBC, being its first acquisition since the investment by B.P. Marsh in February 2017 and expansion into a new territory with the resulting opportunities this should bring.

CBC’s audited accounts for the financial year ended 31 December 2017, the first year following the Management Buy-Out backed by the Group, report revenue of £5.4m and profit before tax of £0.7m, an increase in profit before tax over the previous year of £0.7m.  

CBC is actively seeking individuals or teams that would complement the existing business, to further its growth ambitions.

EC3 Brokers Limited (“EC3”)

Since the Group’s investment, in December 2017, EC3 has seen continued profitability.

Management are reviewing a number of opportune personnel and team hires and M&A activity in order to bring about substantial growth.  

LEBC Group Limited (“LEBC”)

LEBC announced strong half-year results for the six-month period to 31 March 2018, with revenue growth of 20.7% from £8.5m last year to £10.2m. Trading profit grew by 95.3% from £1.2m to £2.4m.

Demographic changes, with increasing numbers of people in retirement, coupled with Pensions Freedom legislation have ensured that LEBC has seen increased demand for its services, whilst the firm has invested in technology and a new operating model to increase the efficiency of its face-to-face advice.

LEBC has won several awards during the summer awards season, with LEBC winning the Best Pension Adviser category of the Corporate Adviser Awards on 3 July 2018, and LEBC’s the Retirement Adviser winning the Money Marketing Awards Best Retirement Adviser in June 2018 and Best Use of Technology by a Corporate Adviser at the Corporate Adviser Awards.

Nexus Underwriting Management Limited (“Nexus”)

Nexus has undertaken a number of acquisitions in the Group’s financial year to 31 January 2018, including Vectura Underwriting, Equinox Global, Zon Re Accident Reinsurance and Credit Risk Solutions.

Since the Company’s investment in 2014, Nexus has grown its Gross Written Premium from £56m in 2014 to £175m in 2017. In the same period, commission income has increased from £12.3m to £23.5m in 2017 and EBITDA has increased from £2.6m to £10m in 2017.

In April 2018, Nexus was ranked at number 91 in the 19th annual Sunday Times BDO Profit Track 100, a league table which ranks Britain’s 100 private companies with the fastest-growing profits over their latest three years.

Walsingham Motor Insurance Limited (“Walsingham”)

Walsingham, the London-based fleet MGA, continued its strong growth, reporting a 20% increase in revenues from £2.2m to £2.6m, and an increase in profit before tax from £0.1m to £0.5m in the year to 30 September 2017.

Garry Watson, Walsingham’s CEO, stated “The company continues to make excellent progress as we build on relationships with brokers, emphasising the benefits of using A rated paper.”

Sterling Insurance (PTY) Ltd (“Sterling”) & MB Prestige Holdings (PTY) Ltd (“MB”)

The Group’s two investments in Sydney, Australia, Sterling and MB, continue to perform in line or above the Group’s expectations at the current time.

Since the Group’s investment in 2012, MB has continued to show strong growth year on year with 2017 being MB’s best year from a performance standpoint to date.

Sterling, in which the Group has held an investment since 2013, also reported a strong financial year to June 2018, exceeding its EBITDA budget by c. 42%.

XPT Group LLC (“XPT”)

Since the Group’s investment in June 2017, XPT has made two acquisitions: Western Security Surplus Insurance Brokers Inc, a Texas-based wholesale broker and managing general agency, and W.E. Love & Associates Inc, a North Carolina based managing general agency.

XPT has been working towards bedding in these acquisitions and has a strong pipeline of further opportunities it is assessing currently.

Net Asset Value post-Placing and Open Offer

Following completion of the Placing and Open Offer on 9 July 2018, the Group notified the market on 23 July 2018 of its adjusted NAV of 321p per share.

This is based on the previously announced NAV as at 31 January 2018, plus the net funds raised from the recently announced Placing and Open Offer and the resultant enlarged Issued Share Capital. It is to be noted that this Issued Share Capital figure excludes the 1,461,302 shares held under the Joint Share Ownership Plan arrangements (announced on 13 June 2018) as these are currently non-dilutive. It also excludes any investment portfolio movement since 31 January 2018.

Share Buy-Backs

The Group reconfirmed its Share Buy-Back policy on 24 July 2018, following the authority conferred by the Company’s shareholders at the annual general meeting held on 18 July 2018.

The Group’s Share Buy-Back Committee meets periodically to decide if Buy-Back transactions should be undertaken when the discount to Net Asset Value of the Group’s share price exceeds 20%. The adjusted NAV of 321p, as above, will be used for this calculation. The suitability of the 20% threshold is regularly monitored by the Board.

The Group intends Buy-Backs to be used as a stabilising mechanism and this has been particularly useful during periods of market instability. During the period of six months to 31 July 2018 the Group undertook no Buy-Back transactions.

Dividend

The Board aims to find a balance between utilising cash to invest in the existing portfolio and new opportunities, with providing investors with a sustainable yield. It is the Board’s aspiration to continue to maintain a dividend of at least 4.76p per share for the year ending 31 January 2019, subject to ongoing review and approval by the Board and the Shareholders.

Director Appointments to the board of B.P. Marsh & Company Limited

The Board is pleased to announce the appointment of three of its current team to the board of its operating subsidiary B.P. Marsh & Company Limited. Oliver Bogue, Investment Director, and Abigail Barber, Investment Associate, of the Investment Department and Francesca Lowley, Group Management Accountant, of the Finance Department were appointed as Directors on 14 June 2018.

These appointments are in recognition of the increased responsibilities and influence Oliver, Abigail and Francesca have demonstrated to the Group. They have also each been appointed to the Company’s Investment Committee.

New Business Opportunities and Outlook

During the six-month period the Group has continued to see a strong flow of new investment opportunities, both in the UK and internationally, and discussions are ongoing on a number of these.

The Managing General Agency sub-sector continues to produce a strong pipeline of good potential opportunities, both in the UK and internationally.

On the wealth management side, the Group continues to be interested in businesses with ambitious and capable management teams, whether IFAs, fund managers or other intermediaries.

The investment portfolio now has geographic representation in the UK, Europe, U.S.A., Singapore, Australia, Canada and South Africa, which the Group believes represents a solid international framework and makes it well-positioned to take advantage of global economic growth. The Group anticipates no adverse consequences to its existing business from the withdrawal of the United Kingdom from the European Union

Cash Balance

The net cash available for investment after provision for tax and investment commitments currently stands at £14.5m.

Interim Results

The Group expects to report the results for the six months to 31 July 2018 on Tuesday 16 October 2018.

Proposed Placing & Open Offer & Notice of GM

by B.P. Marsh | Jun 12, 2018 | Portfolio News

B.P. Marsh & Partners Plc today announces a conditional placing of 6,169,194 new Ordinary Shares (the “New Placing Shares”) to a new investor in the Company (the “Investor” or “PSC”), an entity in the PSC Insurance Group (“PSC Group”), at a price of 252 pence each (the “Issue Price”) to raise gross proceeds of approximately £15.5 million for the Company (the “Placing”). Additionally, the Placing will also include the transfer by B.P. Marsh Management Limited (a company wholly owned by Brian Marsh, the Executive Chairman of the Group) of 1,166,310 Existing Ordinary Shares (the “Sale Shares”) to the Investor, who has also agreed to acquire the Sale Shares at the Issue Price.

In addition, in order to provide existing Shareholders with an opportunity to participate in the proposed issue of New Ordinary Shares, the Company is intending to launch an open offer to all Qualifying Shareholders (the “Open Offer”) to give them the opportunity to subscribe for an aggregate of up to 595,238 new Ordinary Shares (“Open Offer Shares”) to raise approximately £1.5 million (before expenses) for the Company, on the basis of 1 Open Offer Share for every 21 Existing Ordinary Shares held on the Record Date, at the Issue Price. Qualifying Shareholders subscribing for their full entitlement under the Open Offer may also request additional Open Offer Shares through an Excess Application Facility.

The Directors intend to use the net proceeds of the Placing and Open Offer received by the Company to grow the Company’s existing portfolio as well as to continue investing in early stage financial services intermediary businesses with the aim of becoming the capital provider of choice for the sector.

Click here for more information.

IMPORTANT NOTICE: Only view the Circular if you are eligible to take part in the Open Offer. The Circular is NOT to be viewed if you are currently a resident in the United States of America, Australia, Canada, Japan, the Republic of South Africa or any other jurisdiction in which viewing it would be unlawful to do so.

To view the Shareholder Circular please click here

Final Results

by B.P. Marsh | Jun 12, 2018 | Portfolio News

FINAL RESULTS FOR THE YEAR TO 31 JANUARY 2018

B.P. Marsh & Partners Plc (AIM: BPM), the niche venture capital provider to early stage financial services businesses, announces its audited Group final results for the year to 31 January 2018.

The highlights of the results are:

• Increase in the Equity Value of the Portfolio of 31.3% (£18.9m)
• Net Asset Value of £98.9m (31 January 2017: £79.7m), a 24.1% increase, net of Dividend
• Net Asset Value increased to 339p per share (31 January 2017: 273p)
• Total return to Shareholders in the year of 25.5% (2017: 13.9%)
• Consolidated profit after tax of £20.2m (31 January 2017: £9.8m)
• Average Net Asset Value annual compound growth rate of 12.0% since 1990
• Final Dividend of 4.76p per share declared (31 January 2017: 3.76p), a 27% increase
• Cash and treasury funds balance of £5.4m at year end
• Four new investments – two in Lloyd’s Brokers and two in the USA
• Two disposals – Besso and Trireme
• Further investment into LEBC of £7.1m
• Provision of follow-on funding to Nexus of £4m
• Current uncommitted cash of £0.5m

Click here for more information.