TIDMBPM
RNS Number : 8510B
B.P. Marsh & Partners PLC
13 October 2020
13th October 2020
B.P. Marsh & Partners Plc
("B.P. Marsh", "the Company" or "the Group")
Interim Results
B.P. Marsh & Partners Plc (AIM: BPM), the specialist
investor in early stage financial services businesses, announces
its unaudited Group interim results for the six months to 31 July
2020 (the "Period").
Highlights:
-- Net Asset Value at 31 July 2020 GBP142.6m (31 July 2019:
GBP130.0m; 31 January 2020: GBP136.9m)
-- Net Asset Value per share 396.2p (31 July 2019: 360.9p; 31 January 2020: 380.1p)
-- Total Shareholder return of 4.8 % for the Period including the dividend paid in July 2020
-- Group cash availability of GBP4.2m (including undrawn loan
facility of GBP3m) as at 31 July 2020
-- Current cash GBP2.6m (including GBP2.0m loan facility)
-- Consolidated profit after tax of GBP6.5m (31 July 2019: GBP5.6m; 31 January 2020: GBP12.5m)
-- One new investment; SAGE Program Underwriters Inc.
Commenting on the results, Brian Marsh OBE, Chairman, said:
"B.P. Marsh's diversified investment portfolio has shown its
resilience, delivering NAV growth despite the ongoing market
uncertainty. The outlook is positive for the rest of the year, in
no small part due to the hard work and dedication of our investee
companies and our own employees in the period."
Analyst briefing:
An analyst presentation, hosted by the Company, will be held on
Tuesday 13(th) October 2020 at 10:00 a.m. BST.
Please contact Tim Pearson at Tavistock Communications on
07983118502 or tim.pearson@tavistock.co.uk should any analyst wish
to attend.
Note
This announcement contains inside information for the purposes
of Article 7 of Regulation (EU) No 596/2014.
For further information, please visit www.bpmarsh.co.uk or
contact:
B.P. Marsh & Partners Plc
Brian Marsh OBE +44 (0)20 7233 3112
Panmure Gordon (UK) Limited
Atholl Tweedie / Charles Leigh-Pemberton
/ Ailsa MacMaster +44 (0)20 78862500
Tavistock bpmarsh@tavistock.co.uk
Jos Simson / Simon Hudson / Tim Pearson +44 (0)20 7920 3150
Notes to Editors:
B.P. Marsh's current portfolio contains eighteen companies. More
detailed descriptions of the portfolio can be found at
www.bpmarsh.co.uk .
Since formation over 25 years ago, the Company has assembled a
management team with considerable experience both in the financial
services sector and in managing private equity investments. Many of
the Directors have worked with each other in previous roles, and
all have worked with each other for approaching ten years.
Statement by the Chairman and Managing Director
We are pleased to present the unaudited Consolidated Financial
Statements of B.P. Marsh & Partners Plc for the six-month
period to 31 July 2020 (the "Period").
Results and Dividend
During the Period we have seen a 5.1% increase in the valuation
of the portfolio from GBP115.7m to GBP122.1m, which we are
encouraged by, considering the continuing uncertain backdrop of the
Covid-19 pandemic. Our portfolio continues to perform in line with
management expectations, and the Group aims to be able to deliver
Net Asset Value growth at the year end. Our Net Asset Value as at
31 July 2020 was GBP142.6m or 396.2p per share, up 4.2% over the
Period and 9.7% over the prior twelve months.
On 31 July 2020 the Company paid a dividend of 2.22p per share
to all shareholders on the Register as at 26 June 2020 and
continues to seek to balance rewarding loyalty to its shareholders
and retaining future investment capital in its considerations
regarding future dividend policy.
As at 31 July 2020 the Group had a cash balance of GBP1.2m
following the payment of the dividend, in addition to an undrawn
loan facility of GBP3m from Brian Marsh Enterprises Limited.
Share Buy-Backs
As has been stated previously, the Company has a strategy for
undertaking small market buy-backs of its shares at times when the
discount to Net Asset Value ("NAV"), based upon the most recently
announced NAV, is greater than 15%.
For the avoidance of doubt, notwithstanding that the discount to
NAV at which the Company's shares are currently trading is greater
than 15%, the Company notes that it is currently restricted in its
ability to buy back shares since, given that Brian Marsh, together
with persons acting in concert with Brian Marsh for the purposes of
the City Code on Takeovers and Mergers (the "City Code"), has an
interest in approximately 41.85% of the Company's voting rights,
any such purchase of shares would result in an obligation for Brian
Marsh to make a general offer for the Company in accordance with
Rule 9 of the City Code.
New Investment
In June, the Group announced that it had subscribed for a 30%
Cumulative Preferred Ordinary shareholding in SAGE Program
Underwriters, Inc ("SAGE"), an Oregon, US based provider of
specialist insurance products to niche industries, initially in the
inland delivery and field sport sectors. This continues our track
record of investing in experienced insurance professionals, in this
case the CEO of SAGE, Chuck Holdren.
Follow on Funding & Additional Investments
In October 2020, after the Period-end, the Group subscribed for
a further 15% stake in EC3 Brokers Group Limited ("EC3"), bringing
its shareholding to 35% in a GBP1.5m injection of further
capital.
This follow on funding, along with the refinancing of its bank
debt, allows EC3 to bolster its position in pursuing its strategy
notwithstanding the impact that Covid-19 has had on a significant
area of EC3's business, being event cancellation insurance.
The provision of this follow on funding, demonstrates the
Group's investment mantra, being to support its investee companies
over the long term.
The Group strongly believes that EC3 is well positioned to grow
in the future, with EC3 now beginning to see the benefit of a
number of new ventures undertaken over the past 12 months.
Investee Company Highlights
During the Period, XPT, the US based specialty lines
distribution company acquired LP Risk, Inc, the Managing General
Agency ("MGA") and surplus lines broker, based in Texas, US. In
addition, XPT's wholesale broker division, Western Security Surplus
acquired Houston Surplus Lines, an excess and surplus lines MGA.
This is a continuation of XPT's successful acquisition strategy
which we continue to support.
Also during the Period, Nexus, the London based MGA, announced
that its independent broking arm Xenia completed the acquisition of
the trade credit business of Howden UK Group Limited, one of the
largest independent trade insurance brokers in the UK.
Additionally, Nexus repaid a GBP2m Revolving Credit Facility to the
Group eight months earlier than the rescheduled repayment date of
31 December 2020.
Alongside this, we were pleased that Walsingham Motor Insurance
Limited ("Walsingham") and MB Prestige Holdings PTY Limited repaid
outstanding loans of GBP0.42m and AUD 0.56m (GBP0.30m) respectively
during the Period, ahead of their repayment schedule.
EC3 Brokers Group Limited won the Dubai International Financial
Centre (DIFC) Group Health Insurance Master Policy Scheme in June.
This will provide health insurance to employees of companies in the
DIFC, the leading international financial hub in the Middle East,
Africa and South Asia (MEASA) region.
We have been particularly pleased with the way in which our
investee companies have adapted to the Covid-19 crisis. For
example, Walsingham specialises in fleet insurance for public and
private taxi fleets and couriers in the UK, which was impacted by
Covid-19 and its restrictions. Foreseeing the impact of these
restrictions, it provided policyholders the flexibility to deliver
food and shopping as well as various NHS support work to be
undertaken without the need for policy extensions. This has kept
the business running in line with its original budgetary
expectations.
Financial Performance
Overall, the Group has delivered an excellent return for the
Period given the various challenges that it has faced due to
Covid-19. The Net Asset Value increased by GBP5.8m, versus a
GBP3.8m increase over the same period last year. At 31 July 2020,
the Net Asset Value of the Group was GBP142.6m, or 396.2p per share
which equates to an increase in Net Asset Value of 4.2% for the
Period (2019: 3.0%), or 4.8% (2019: 4.4%) including the dividend
paid.
The Net Asset Value of GBP142.6m at 31 July 2020 represented a
total increase in Net Asset Value of GBP113.4m since the Group was
originally formed in 1990 having adjusted for the original capital
investment of GBP2.5m, the GBP10.1m net proceeds raised on AIM in
2006 and the GBP16.6m 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 8.0% in Group
Net Asset Value after running costs, realisations, losses,
distributions and corporation tax since flotation and 11.6% since
1990.
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,
provision against loans receivable from investee companies and all
underlying treasury portfolio movement), this was achieved with a
pre-tax profit of GBP0.6m for the Period (H1 2019: GBP1.5m). The
reduction in underlying profit relates to the timing of receipt of
dividend income from investee companies. However, overall the
Group's current expectation is to achieve a similar level of
underlying profit for this financial year as it did for the year
ended 31 January 2020 (GBP0.8m).
Liquidity
Cash funds at 31 July 2020 were GBP1.2m (31 January 2020:
GBP0.8m), alongside a GBP3.0m loan facility with Brian Marsh
Enterprises Ltd, a company in which the Chairman, Mr. Brian Marsh,
is a director and sole shareholder. Total available cash, including
the loan facility, currently stands at GBP2.6m, following the EC3
investment.
Covid-19 Impact Assessment
The financial statements to 31 January 2020 did not include any
impact of Covid-19 as it was treated as a non-adjusting post
balance sheet event. However, the financial statements to 31 July
2020 have taken its impact into account.
Covid-19 has had an impact upon the financial performance of the
Group, with several of our investee companies being directly
affected. However, these companies have each taken steps to manage
the risks to their income and to their liquidity, securing
additional support and implementing cost reductions where
applicable to mitigate any reduction in income and profitability
accordingly. The majority are tracking their budgets as a result.
In addition, several investee companies have managed to exceed
expectations, delivering record results.
As a consequence, and notwithstanding the ongoing impact of
Covid-19 due to continued restrictions around the world, the Group
still managed to achieve Net Asset growth over the Period of 4.8%
including the dividend paid in July 2020, which demonstrates that
we have a diversified portfolio, both in terms of products and
geographically.
Whilst we cannot predict when restrictions may be fully lifted,
or the duration of Covid-19, the current performance of our
portfolio amidst this pandemic is encouraging. The Board continues
to monitor the key threats to the business closely.
We also continue to monitor Government advice regarding
Covid-19, as the health and safety of our staff and those of our
investee companies remains our main priority. We continue to
support them, as well as our partners during the continuing
pandemic.
Outlook
The Group remains well positioned to carry out new investments,
with a number of early stage opportunities in the pipeline, which
we hope will develop over the course of the rest of the year.
The Group continues to focus on investing in specialist SME
sectors in Financial Services, backed by experienced and capable
management teams, which will create long term growth and
consequential value.
Chief Investment Officer's Portfolio Update
Our portfolio of investments has performed well during this
financial period, with many of our Insurance Intermediary
investments delivering very good results.
This is a testament to the Group's investment mantra, and
carefully assembled portfolio. Whilst we specialise in Insurance
Intermediary businesses, our portfolio is well diversified across
multiple product areas, operating in various sectors, ensuring
resilience through times of economic or social disruption.
The Group also has a track record of investing in experienced
management teams, all of whom have proved adept at managing their
businesses against a very challenging economic background.
This has resulted in the portfolio as a whole increasing in
value over the six-month period by GBP5.7m to GBP142.6m, or
4.1%.
These valuations take into account the outbreak and impact of
the initial phases of Covid-19. During the pandemic, the Group has
focused on supporting our existing portfolio, closely analysing the
impact of Covid-19 on each of our investments through an
ever-changing environment.
The Group remains confident that its investment strategy and
sector focus will prove resilient during this period of disruption
and that Covid-19 will not have a negative impact on the portfolio
as a whole to a material degree.
New Investments
During the six-month period we made one new investment. In June
2020, the Group acquired a 30% shareholding in SAGE Program
Underwriters, Inc ("SAGE"), for an equity consideration of US$
250,000 (c. GBP203,000).
Sage was established in 2019 by CEO Chuck Holdren and is based
in Bend, Oregon, USA. Sage provides Workers Compensation insurance
to niche industries, including inland delivery and field sport
sectors.
Portfolio Update & Activity
NAV breakdown by portfolio company
The composition of B. P. Marsh's underlying portfolio company
exposure can be found here:
http://www.rns-pdf.londonstockexchange.com/rns/8510B_1-2020-10-12.pdf
The insurance intermediary investments in which the Group holds
interests are budgeting in the year to 31 December 2020 to produce,
in aggregate, insurance premium ("GWP") of approaching US$ 1.5bn
(c.GBP1.12bn), of which approximately US$581m (c.GBP450m is
attributable to insurance brokers and approximately US$865m
(c.GBP670m) is attributable to MGAs, as set out below:-
http://www.rns-pdf.londonstockexchange.com/rns/8510B_2-2020-10-12.pdf
Insurance Brokers
Investments:
GBP'000s
Broking Investments Jurisdiction % Shareholding Valuation Cost of % of Group
as at 31 as at 31 Investment Net Asset
July 2020 July 2020 Value
as at 31 July
2020
--------------------- -------------- --------------- ----------- ------------ ---------------
Asia Reinsurance
Brokers Pte
Limited Singapore 25.0% 706 1,551 0.5%
---------------------- --------------- --------------- ----------- ------------ ---------------
CBC UK Limited UK 43.7% 7,289 264 5.1%
---------------------- --------------- --------------- ----------- ------------ ---------------
EC3 Brokers
Limited UK 20.0% 4,659 5,000 3.2%
---------------------- --------------- --------------- ----------- ------------ ---------------
Lilley Plummer
Risks Limited UK 30.0% 1,726 1,000 1.2%
---------------------- --------------- --------------- ----------- ------------ ---------------
Mark Edward
Partners
LLC USA 30.0% 0 4,573 0%
---------------------- --------------- --------------- ----------- ------------ ---------------
Summa Insurance
Brokerage,
S. L Spain 77.3% 6,932 6,096 4.9%
---------------------- --------------- --------------- ----------- ------------ ---------------
Our Broking Investments are, in aggregate, budgeting to place
over GBP450m of insurance premium, producing over GBP37.0m of
commission income during 2020, accessing the specialty markets of,
inter alia, Lloyd's and London, North America, Asia Pacific and
Bermuda.
Underwriting Agencies / Managing General Agents ("MGAs")
Investments:
GBP'000s
MGA Investments Jurisdiction % Shareholding Valuation Cost of % of Group
as at 31 as at 31 Investment Net Asset
July 2020 July 2020 Value
as at 31
July 2020
Ag Guard
PTY Limited Australia 36.0% 1,421 1,428 1.0%
--------------- --------------- ----------- ------------
ATC Insurance
Solutions
PTY Limited Australia 20.0% 7,423 2,865 5.2%
--------------------- --------------- --------------- ----------- ------------ -----------
Criterion
Underwriting
Pte Limited Singapore 29.4% 0 50 0.0%
--------------------- --------------- --------------- ----------- ------------ -----------
The Fiducia
MGA Company
Limited UK 35.2% 2,222 228 1.6%
--------------------- --------------- --------------- ----------- ------------ -----------
MB Prestige
Holdings
PTY Limited Australia 40.0% 3,030 480 2.1%
--------------------- --------------- --------------- ----------- ------------ -----------
Nexus Underwriting
Management
Limited UK 18.0% 40,313 11,126 28.3%
--------------------- --------------- --------------- ----------- ------------ -----------
SAGE Program
Underwriters,
Inc USA 30.0% 190 203 0.1%
--------------------- --------------- --------------- ----------- ------------ -----------
Stewart
Specialty
Risk Underwriting
Limited Canada 30.0% 3,539 - 2.5%
--------------------- --------------- --------------- ----------- ------------ -----------
Sterling
Insurance
PTY Limited Australia 19.7% 2,684 1,945 1.9%
--------------------- --------------- --------------- ----------- ------------ -----------
Walsingham
Motor Insurance
Limited UK 40.5% 2,226 600 1.6%
--------------------- --------------- --------------- ----------- ------------ -----------
Walsingham
Holdings
Limited UK 20.0% 68 - 0.0%
--------------------- --------------- --------------- ----------- ------------ -----------
XPT Group
LLC USA 29.9% 12,713 7,330 8.9%
--------------------- --------------- --------------- ----------- ------------ -----------
Our MGA investments are, in aggregate, budgeting to produce GWP
of GBP670m in 2020, which represents GBP84.0m of commission income
in the year. The Group's MGA investments operate in excess of 30
product areas, on behalf of more than 50 insurers.
IFA Investment
Investment:
GBP'000s
Jurisdiction % Shareholding Valuation Cost of % of Group
as at 31 as at 31 Investment Net Asset
July 2020 July 2020 Value
as at 31 July
2020
LEBC Holdings
Limited UK 59.3% 25,000 12,374 17.5%
--------------- --------------- ----------- ------------
LEBC is presently the Group's only non-insurance related
investment, although we do continue to see investment opportunities
in the financial planning and advisory sector.
Portfolio Company Highlights:
Ag Guard PTY Limited ("Ag Guard")
( www.agguard.com.au )
In July 2019 the Group subscribed for a 36% holding in Ag Guard
PTY Limited, a Managing General Agency, which provides insurance to
the Agricultural Sector, based in Sydney, Australia.
Ag Guard continues to roll out its niche agricultural product
offering across Australia, with the business showing significant
traction since it was established.
Date of investment: July 2019
31 July 2020 valuation: GBP1,421,000
Equity stake: 36%
Asia Reinsurance Brokers Pte Limited ("ARB")
( www.arbrokers.asia )
In April 2016 the Group invested in Asia Reinsurance Brokers Pte
Limited, the Singapore headquartered independent specialist
reinsurance and insurance risk solutions provider. ARB was
established in 2008, following a management buy-out of the business
from AJ Gallagher, led by the CEO, Richard Austen.
Despite the Covid-19 pandemic, ARB continues to develop its
business portfolio under the direction of Richard Austen and its
Managing Director, William Pang.
Date of investment: April 2016
31 July 2020 valuation: GBP706,000
Equity stake: 25%
ATC Insurance Solutions PTY Limited ("ATC")
( www.atcis.com.au )
In July 2018, the Group invested in ATC, an Australia-based MGA
and Lloyd's Coverholder, specialising in Accident & Health,
Construction & Engineering, Trade Pack and Sports
insurance.
The Group acquired a 20% shareholding in ATC, which continues to
show strong growth and is one of the largest Lloyd's underwriting
agencies operating in Australia.
ATC finished its 2020 financial year 28% ahead of last year on
EBITDA, which demonstrates its resilience in a challenging
environment.
Since the Group's investment in ATC, Gross Written Premium has
grown from c. AU$ 60m, to budgeting Gross Written Premium of
approaching AU$ 100m in its current year to June 2021.
Since investment, the Group's valuation of ATC has increased by
AU$ 8.5m (c. GBP4.7m) to AU$ 13.5m (c. GBP7.4m), as at 31 July
2020.
ATC has also made a number of new hires to expand its product
offering in the Construction and Cyber sectors. This includes the
appointment of a new underwriter operating in the plant and
machinery space. In the Cyber space, ATC has hired a senior
underwriter who has a great depth of knowledge and experience in
the Australian cyber marketplace. With these appointments, ATC is
further developing its expertise in these key growth areas.
Date of investment: July 2018
31 July 2020 valuation: GBP7,423,000
Equity stake: 20%
CBC UK Limited ("CBC")
( www.cbcinsurance.co.uk )
Established in 1985, CBC is a Retail and Wholesale Lloyd's
Insurance Broker, offering a wide range of services to commercial
and personal clients as well as broking solutions to
intermediaries. The Group assisted in an MBO of CBC, allowing
Management to buy out a major shareholder.
CBC has recently hired a new team dedicated to International
Financial products. The team has collectively 145 years of
experience in this sector, both underwriting and broking, and is
headed up by Adrian Fox. Since they commenced their employment at
CBC, this team has made great strides in expanding CBC's
international footprint.
Date of investment: February 2017
31 July 2020 valuation: GBP7,289,000
Equity stake: 43.7%
Criterion Underwriting Pte Limited ("Criterion")
( www.criterionmga.com )
The Group helped to establish Criterion alongside its Partners
in Asiare Holdings (PTE) Limited and Asia Reinsurance Brokers (PTE)
Limited in July 2018. Criterion is a start-up Singapore-based
Managing General Agency providing specialist insurance products to
a variety of clients in the Cyber, Financial Lines and Marine
sectors in Far East Asia.
Date of investment: July 2018
31 July 2020 valuation: GBP0
Equity stake: 29.4%
EC3 Brokers Limited ("EC3")
( www.ec3brokers.com )
In December 2017, the Group invested in EC3, an independent
specialist Lloyd's broker and reinsurance broker. Founded by its
current Chief Executive Officer Danny Driscoll, who led a
management buyout to acquire EC3's then book of business from AJ
Gallagher in 2014, EC3 provides services to a wide array of clients
across a number of sectors, including construction, casualty,
entertainment and cyber & technology.
Date of investment: December 2017
31 July 2020 valuation: GBP4,569,000
Equity Stake: 20%
The Fiducia MGA Company Limited ("Fiducia")
( www.fiduciamga.co.uk )
Fiducia, founded in November 2016, is a UK Marine Cargo
Underwriting Agency, established by its CEO Gerry Sheehy. Fiducia
is a Lloyd's Coverholder which specialises in the provision of
insurance solutions across a number of Marine risks including,
Cargo, Transit Liability, Engineering and Terrorism Insurance.
Fiducia, having launched as a start-up MGA in November 2016,
with backing from the Group, continues to show strong growth and is
on track to secure Gross Written Premium in excess of GBP20m for
the current year.
Cumulatively, the Group has invested GBP228,000 in Fiducia for
its 35% shareholding. As at 31 July 2020, the Group's valuation of
Fiducia is GBP2.2m, an increase of GBP2.0m or 875%.
Fiducia has recently expanded its product offering with the
establishment of a Fine Art and Specie division.
Fiducia continues to seek out new underserved areas of the
marine market, working with brokers and insurance carriers to
develop products to support these areas. To this end, Fiducia
recently launched new products in the terrorism and marine
equipment arenas.
Date of investment: November 2016
31 July 2020 valuation: GBP2,222,000
Equity stake: 35.2%
LEBC Holdings Limited ("LEBC")
( www.lebc-group.com )
In April 2007 the Group invested in LEBC, an Independent
Financial Advisory company providing services to individuals,
corporates and partnerships, principally in employee benefits,
investment and life product areas.
Throughout Covid-19 LEBC's centralised investment proposition
has provided a degree of stability to clients' portfolios in a time
of extreme volatility. Additionally, private client advisors have
continued to provide quality advice to individuals faced with
unprecedented disruption to their lives. LEBC's corporate division
has provided additional support to corporate clients using the
furlough scheme and providing assistance in helping them manage
variable pay and pension calculations.
As previously announced, the Group was greatly saddened to
report on the death in September 2020 of LEBC's founder and Chief
Executive, Jack McVitie, who spearheaded LEBC's growth, which has
seen the business become one of the largest independently owned
national IFAs.
The Group is working closely with LEBC's longstanding and
continuing Management team, to continue the legacy that Jack
McVitie built.
Date of investment: April 2007
31 July 2020 valuation: GBP25,000,000
Equity stake: 59.3%
Lilley Plummer Risks Limited ("LPR")
( www.lprisks.co.uk )
In October 2019, the Group invested into Lilley Plummer Risks,
the newly formed specialist marine Lloyd's broker. Lilley Plummer
Risks was established by Stuart Lilley and Dan Plummer in 2019 and
provides products across the marine Insurance market.
Since investment LPR has made a number of new hires to bolster
its products provision in Marine, Terrorism and War risks.
LPR's core business performance has exceeded expectation since
investment, as have the new teams that have joined.
At investment, the Group took a 30% stake for a cash
consideration GBP1m. As at 31 July 2020, and given the strong
performance, the Group's valuation of its investment in LPR, for
the same shareholding, is GBP1.7m, an increase of GBP0.7m or
70%.
Date of investment: October 2019
31 July 2020 valuation: GBP1,726,000
Equity stake: 30%
Mark Edward Partners LLC ("MEP")
( www.markedwardpartners.com )
Founded in 2010 by Mark Freitas, its President & Chief
Executive Officer, MEP provides core insurance products in
Financial & Liability, Property & Casualty, Personal Lines,
Life Insurance, Cyber and Affinity Groups. MEP is a national U.S.
firm with licenses to operate in all 50 states and has offices in
New York, Palm Beach and Los Angeles.
Date of investment: October 2017
31 July 2020 valuation: GBP0
Equity stake: 30%
MB Prestige Holdings PTY Limited ("MB Group")
( www.mbinsurance.com.au )
In December 2013 the Group invested in MB Group, the parent
Company of MB Insurance Group PTY a Managing General Agent,
headquartered in Sydney, Australia. MB Group is recognised as a
market leader in respect of prestige motor vehicle insurance in all
mainland states of Australia.
Over the Period, MB Group has repaid in full its loan from the
Group, which was possible due to its solid and consistent
performance over the last three years and a healthy cash balance.
MB continues to show strong growth with Gross Written Premium up
10% on the previous year at the 6-month year to date position and
profitability up nearly 20% over the prior year position.
Date of investment: December 2013
31 July 2020 valuation: GBP3,030,000
Equity stake: 40%
Nexus Underwriting Management Limited ("Nexus")
( www.nexusunderwriting.com )
In 2014 the Group invested in Nexus, an independent specialty
Managing General Agency, founded in 2008. Through its operating
subsidiaries Nexus specialises in the provision of Directors &
Officers, Professional Indemnity, Financial Institutions, Accident
& Health, Trade Credit, Political Risks Insurance, Surety, Bond
and Latent Defect Insurance, both in the UK and
internationally.
In March 2020, Nexus established Xenia, uniting all elements of
Nexus's independent broking divisions, including Credit Risk
Solutions and Credit and Business Finance.
Xenia is among the largest independent specialist trade credit
and surety brokers in the UK, with a c. 20% market share of trade
credit insurance distribution.
Xenia have recently appointed a new member of its senior
Management Team, to lead its client services division. This will
enable Xenia to further develop its strong client relationships,
exceeding expectations for service and delivery as the group
continues its journey of successful growth.
The Nexus Managing General Agency business continues to remain
on track to hit its original budget expectation for the year ending
31 December 2020, notwithstanding the challenges that have been
posed by the Covid-19 pandemic.
In February 2020, Nexus was ranked at number 78 in the 11th
annual Sunday Times HSBC International Track 200, which ranks
Britain's mid-market private companies with the fastest-growing
international sales.
Date of investment: August 2014
31 July 2020 valuation: GBP40,313,000
Equity stake: 18.0%
SAGE Program Underwriters, Inc ("SAGE")
( www.sageuw.com )
Based in Bend, Oregon, SAGE provides specialist insurance
products to niche industries, initially in the inland delivery and
field sport sectors, established in 2019 by CEO Chuck Holdren. Mr.
Holdren has three decades of experience in the industry and has
prior experience of establishing and managing two national
underwriting agencies from start-up to successful trade sale.
Since investment, SAGE has performed in line with the Groups
expectations, and has strong growth potential going forward. Sage
has also made a number of new hires to bolster its product
offering, with the aim of becoming a 'one-stop-shop' for the inland
delivery and field sport sectors.
Date of Investment: June 2020
31 July 2020 Valuation: GBP190,000
Equity Stake: 30%
Stewart Specialty Risk Underwriting Ltd ("SSRU")
( www.ssru.ca )
A Canadian based Managing General Agent, providing insurance
solutions to a wide array of clients in the Construction,
Manufacturing, Onshore Energy, Public Entity and Transportation
sectors. SSRU was established by its CEO Stephen Stewart, who has
over 25 years' experience in the insurance industry having had
senior management roles at both Ironshore and Lombard in
Canada.
SSRU, based in Toronto, has secured a new Property offering. As
part of this new product it has announced the appointment of
Heather Jamieson as Vice President of its Property division.
SSRU has grown solidly since formation and was able to exceed
its 2020 annual revenue budget before the end of the second quarter
of the year.
The Group's nominal equity investment of GBP19 has now grown to
a value of GBP3.5m as at 31 July 2020.
Date of investment: January 2017
31 July 2020 valuation: GBP3,539,000
Equity stake: 30.0%
Sterling Insurance PTY Limited
( www.sterlinginsurance.com.au )
In June 2013, in a joint venture enterprise alongside Besso,
(Neutral Bay Investments Limited) the Group invested in Sterling
Insurance PTY Limited, an Australian specialist underwriting agency
offering a range of insurance solutions within the Liability
sector, specialising in niche markets including mining,
construction and demolition.
Sterling continues to report strong financial performance,
exceeding its EBITDA budget by c. 11% in the financial year to June
2020.
Date of investment: June 2013
31 July 2020 valuation: GBP2,684,000
Equity stake: 19.7%
Summa Insurance Brokerage, S. L.
( www.grupo-summa.com )
In January 2005 the Group provided finance to a Madrid-based
Spanish management team with the objective of acquiring and
consolidating regional insurance brokers in Spain. Through
acquisition Summa is able to achieve synergistic savings, economies
of scale and greater collective bargaining thereby increasing
overall value.
The performance of the business throughout 2020 had been
positive and Summa are expecting to outperform their 2019
results.
Date of investment: January 2005
31 July 2020 valuation: GBP6,932,000
Equity stake: 77.3%
Walsingham Motor Insurance Limited
( www.walsinghamunderwriting.com )
In December 2013 the Group invested in Walsingham Motor
Insurance Limited, a niche UK fleet motor Managing General Agency,
which commenced trading in July 2013. In 2015 the Group acquired a
further 10.5% equity, taking its current shareholding to 40.5%.
Walsingham's business was impacted by Covid-19 and the lockdown
restrictions, with the business believing that their taxi
portfolio, which represents c.50% of their book, would be subject
to mass cancellations, and the courier portfolio would see
increased vehicles and drivers. In light of this, Walsingham
recognised the need to allow taxi policyholders flexibility in
their work and allowed for food and shopping deliveries as well as
various NHS support work to be undertaken without the need for
policy extensions. This meant the retention of taxi fleets on the
portfolio, which are once again already approaching full
capacity.
Due to Walsingham's initiative and flexibility, as Covid-19
restrictions eased GWP has increased significantly such that the
initial Covid-19 reductions have now reversed, and the business is
back on its original budget. At the same time, due to reduced
traffic on the road this has resulted in significantly reduced
claims frequencies over the last four months.
Date of investment: December 2013
31 July 2020 valuation: GBP2,226,000
Equity stake: 40.5%
XPT Group LLC
( www.xptspecialty.com )
In June 2017 the Group backed the ex-Swett & Crawford CEO
Tom Ruggieri and a strong management team to develop a New
York-based wholesale insurance broking and underwriting agency
platform across the U.S. Specialty Insurance Sector.
In April 2020, XPT completed its sixth investment acquiring LP
Risk, Inc, the MGA and surplus lines Broker headquartered in
Houston, Texas. LP Risk specialises in transportation, hospitality,
contractors, marine, energy/oil & gas and manufacturing.
Additionally, In May 2020 Western Security Surplus ("WSS"), the
boutique wholesale broker division of XPT, announced the
acquisition of Houston Surplus Lines ("HSL"), which is an excess
and surplus lines Managing General Agent based in Houston, Texas.
This acquisition represented XPT's seventh investment.
W.E. Love & Associates, ("W.E. Love") launched a new
trucking program, named Platinum Trucking. This new program has
been created for primary truck liability insurance, where W.E. Love
have identified that the needs of the market are underserved. The
program complements other trucking-related programs written by W.E.
Love and is currently available in 20 US states, with the strategy
to expand coverage to all 50 US states.
As XPT continues to grow, both organically and via acquisition,
it has moved to bolster its Management Team through two senior
hires. This includes the hiring of a new Chief Financial Officer
and a new Executive Vice President and Director of Business
Operations. These hires demonstrate that XPT is building a
Management team to enter its next stage of growth.
Having acquired 7 businesses across the US, these appointments
enhance XPT's capabilities in consolidating and growing their
underlying business, and sourcing new acquisition
opportunities.
Date of investment: June 2017
31 July 2020 valuation: GBP12,713,000
Equity stake: 29.9%
Outlook
At the time of our results being announced, the world continues
to deal with the Covid-19 pandemic. It is likely that the next 12 -
24 months will be one of the most challenging times for all
businesses to produce a strong return.
As has been the case throughout the Covid-19 pandemic, the Group
will always prioritise the welfare of its staff and the staff at
all our portfolio companies. The Group has been impressed by the
manner in which our portfolio of investments have adapted to this
crisis and it is a testament to the teams we back.
The Group remain confident in our portfolio of investments and
the management teams we have backed. In light of this, the Group is
well set to continue to deliver excellent long-term growth to our
shareholders, notwithstanding the current difficulties caused by
Covid-19. Our diverse portfolio is well positioned to continue its
growth trajectory and we look forward to 2021 with cautious
confidence.
Whilst the Group has a robust balance sheet, and is under no
pressure to realise any of its current investments, there remains
strong demand from private equity to enter the financial services
and intermediated markets, and this of course produces exit
opportunities for our investee companies.
The Group has a strong pipeline of new investment opportunities,
within its sector specific niche model, focusing on off-market
deals through our own network of contacts. This continues to
provide us with promising investment opportunities at fair value
with significant growth prospects.
Interim Consolidated Financial Statements
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE PERIODED 31ST JULY 2020
Notes Unaudited Unaudited Audited
6 months to 6 months to Year to
31(st) July 31(st) July 31(st) January
2020 2019 2020
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
GAINS ON INVESTMENT
Provision against equity
investments
and loans - (36) (69)
Unrealised gains on equity
investment revaluation 4 5,922 4,077 11,570
------- ------- -------
5,922 4,041 11,501
INCOME
Dividends 835 1,879 2,787
Income from loans and
receivables 657 615 1,299
Fees receivable 642 600 1,108
------- ------- -------
2,134 3,094 5,194
-------- -------- -----------
OPERATING INCOME 8,056 7,135 16,695
Operating expenses (1,604) (1,706) (4,210)
OPERATING PROFIT 6,452 5,429 12,485
Financial income 1 14 16
Financial expenses (36) (38) (77)
Exchange movements 80 171 (152)
------- ------- -------
45 147 (213)
-------- -------- -----------
PROFIT ON ORDINARY ACTIVITIES
BEFORE TAXATION 6,497 5,576 12,272
Income taxes - 18 258
PROFIT ON ORDINARY ACTIVITIES
AFTER TAXATION ATTRIBUTABLE
TO EQUITY HOLDERS 6 GBP6,497 GBP5,594 GBP12,530
-------- -------- -----------
TOTAL COMPREHENSIVE INCOME
FOR THE PERIOD 6 GBP6,497 GBP5,594 GBP12,530
-------- -------- -----------
Earnings per share - basic
and diluted (pence) 3 18.1p 15.6p 34.9p
----------------------------- ----- ------- -------- ------- -------- ------- -----------
The result for the period is wholly attributable to continuing
activities.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31ST JULY 2020
(Company Number: 05674962)
Unaudited Unaudited Audited
31(st) July 31(st) July 31(st) January
Notes 2020 2019 2020
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
ASSETS
NON-CURRENT ASSETS
Property, plant and
equipment 137 150 151
Right-of-use asset 1,084 1,378 1,286
Investments - equity
portfolio 4 122,051 106,969 115,666
Investments - treasury
portfolio 5 - - -
Loans and receivables 16,483 16,339 16,211
------- ------- -------
139,755 124,836 133,314
CURRENT ASSETS
Trade and other receivables 3,370 5,626 5,017
Cash and cash equivalents 1,171 1,420 787
------- ------- -------
4,541 7,046 5,804
LIABILITIES
NON-CURRENT LIABILITIES
Lease liabilities (1,019) (1,289) (1,204)
Deferred tax liabilities 8 - - -
------- ------- -------
(1,019) (1,289) (1,204)
CURRENT LIABILITIES
Trade and other payables (486) (401) (876)
Lease liabilities (157) (163) (168)
Corporation tax provision - (48) -
------- ------- -------
(643) (612) (1,044)
NET ASSETS GBP142,634 GBP129,981 GBP136,870
---------- ---------- ----------
CAPITAL AND RESERVES
- EQUITY
Called up share capital 3,747 3,748 3,747
Share premium account 29,358 29,363 29,367
Fair value reserve 63,618 50,204 57,696
Reverse acquisition
reserve 393 393 393
Capital redemption reserve 7 6 7
Capital contribution
reserve 53 31 42
Retained earnings 45,458 46,236 45,618
SHAREHOLDERS' FUNDS
- EQUITY 6 GBP142,634 GBP129,981 GBP136,870
---------- ---------- ----------
Net Asset Value per
share (pence) 396.2p 360.9p 380.1p
The Interim Consolidated Financial Statements were approved by
the Board of Directors and authorised for issue on 12th October
2020
and signed on its behalf by:
J.S. Newman & D.J. Topping
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE PERIODED 31ST JULY 2020
Unaudited Unaudited Audited
31(st) 31(st)
31(st) July January
July 2020 2019 2020
GBP'000 GBP'000 GBP'000
Cash from / (used by) operating
activities
Income from loans to investees 657 615 1,299
Dividends 835 1,879 2,787
Fees received 642 600 1,108
Operating expenses (1,604) (1,706) (4,210)
Net corporation tax repaid 238 310 261
Purchase of equity investments
(Note 4) (463) (945) (2,551)
Net proceeds from sale of equity
investments - - 402
Net loan repayments from / (payments
to) investee companies 1,877 (4,711) (4,163)
Adjustment for non-cash share
incentive plan 65 70 121
(Increase) / decrease in receivables (655) (49) 58
Decrease in payables (390) (664) (189)
Depreciation and amortisation 105 105 215
--------
Net cash from / (used by) operating
activities 1,307 (4,496) (4,862)
---------- --------- --------
Net cash (used by) / from investing
activities
Purchase of property, plant
and equipment (2) (8) (26)
Net proceeds from sale of treasury
investments (Note 5) - 14 14
--------
Net cash (used by) / from investing
activities (2) 6 (12)
---------- --------- --------
Net cash used by financing activities
Financial income 1 14 16
Financial expenses (36) (38) (77)
Net decrease in lease liabilities (82) (79) (160)
Dividends paid (798) (1,712) (1,712)
Payments made to repurchase
company shares - (145) (243)
---------- --------- --------
Net cash used by financing activities (915) (1,960) (2,176)
---------- --------- --------
Change in cash and cash equivalents 390 (6,450) (7,050)
Cash and cash equivalents at
beginning of the period 787 7,855 7,855
Exchange movement (6) 15 (18)
Cash and cash equivalents at
end of period GBP1,171 GBP1,420 GBP787
---------- --------- --------
All differences between the amounts stated in the Consolidated
Statement of Cash Flows and the Consolidated Statement of
Comprehensive Income are attributed to non-cash movements.
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE PERIODED 31ST JULY 2020
Unaudited Unaudited Audited
6 months
6 months to to Year to
31(st) July 2020 31(st) July 2019 31(st) January 2020
GBP'000 GBP'000 GBP'000
Opening total equity 136,870 126,174 126,174
Comprehensive income for the period 6,497 5,594 12,530
Dividends paid (798) (1,712) (1,712)
Repurchase of company shares - (145) (243)
Share incentive plan 65 70 121
Total equity GBP142,634 GBP129,981 GBP136,870
---------------- ---------------- -------------------
Refer to Note 6 for detailed analysis of the changes in the
components of equity.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIODED 31ST JULY 2020
1. ACCOUNTING POLICIES
Basis of preparation of financial statements
These consolidated financial statements have been prepared in
accordance with International Financial Reporting Standards as
adopted for use by the European Union ("IFRS"), and in accordance
with the Companies Act 2006.
The consolidated financial statements are presented in sterling,
the functional currency of the Group, rounded to the nearest
thousand pounds (GBP'000) except where otherwise indicated.
The preparation of financial statements in conformity with IFRS
requires management to make judgments, estimates and assumptions
that affect the application of policies and reported amounts of
assets and liabilities, income and expenses. The estimates and
associated assumptions are based on historical experience and
various other factors that are believed to be reasonable in the
circumstances, the results of which form the basis of judgements
about the carrying amounts of assets and liabilities. Actual
results may differ from those amounts.
In the process of applying the Group's accounting policies,
management has made the following judgments, which have the most
significant effect on the amounts recognised in the financial
statements:
Assessment as an investment entity
Entities that meet the definition of an investment entity within
IFRS 10: Consolidated Financial Statements ("IFRS 10") are required
to account for their investments in controlled entities, as well as
investments in associates at fair value through profit or loss.
Subsidiaries that provide investment related services or engage in
permitted investment related activities with investees that relate
to the parent investment entity's investment activities continue to
be consolidated in the Group results. The criteria which define an
investment entity are currently as follows:
a) an entity that obtains funds from one or more investors for
the purpose of providing those investors with investment
services;
b) an entity that commits to its investors that its business
purpose is to invest funds solely for returns from capital
appreciation, investment income or both; and
c) an entity that measures and evaluates the performance of
substantially all of its investments on a fair value basis.
The Group's annual and interim consolidated financial statements
clearly state its objective of investing directly into portfolio
investments and providing investment management services to
investors for the purpose of generating returns in the form of
investment income and capital appreciation. The Group has always
reported its investment in portfolio investments at fair value. It
also produces reports for investors of the funds it manages and its
internal management report on a fair value basis. The exit strategy
for all investments held by the Group is assessed, initially, at
the time of the first investment and this is documented in the
investment paper submitted to the Board for approval.
The Board has also concluded that the Company meets the
additional characteristics of an investment entity, in that it has
more than one investment; the investments are predominantly in the
form of equities and similar securities; it has more than one
investor and its investors are not related parties. The Board has
concluded that B.P. Marsh & Partners Plc and its three trading
subsidiaries, B.P. Marsh & Company Limited, Marsh Insurance
Holdings Limited and B.P. Marsh (North America) Limited, which
provide investment related services on behalf of B.P. Marsh &
Partners Plc, all meet the definition of an investment entity.
These conclusions will be reassessed on an annual basis for changes
to any of these criteria or characteristics.
Application and significant judgments
When it is established that a parent company is an investment
entity, its subsidiaries are measured at fair value through profit
or loss. However, if an investment entity has subsidiaries that
provide services that relate to the investment entity's investment
activities, the exception to the Amendment of IFRS 10 is not
applicable as in this case, the parent investment entity still
consolidates the results of its subsidiaries. Therefore, the
results of B.P. Marsh & Company Limited, Marsh Insurance
Holdings Limited and B.P. Marsh (North America) Limited continue to
be consolidated into its Group financial statements for the
period.
The most significant estimates relate to the fair valuation of
the equity investment portfolio as detailed in Note 4 to the
Financial Statements. The valuation methodology for the investment
portfolio is detailed below. The estimates and underlying
assumptions are reviewed on an ongoing basis. Revisions to
accounting estimates are recognised in the period in which the
estimate is revised if the revision affects only that period or in
the period of the revision and future periods if the revision
affects both current and future periods.
The accounting policies set out below have been applied
consistently to all periods presented in these consolidated
financial statements.
These interim consolidated financial statements were approved by
the Board on 12th October 2020. They have not been audited nor
reviewed by the Group's Auditors, as is the case with the
comparatives to 31st July 2019, and do not constitute statutory
accounts within the meaning of section 434 of the Companies Act
2006.
The financial statements have been prepared using the accounting
policies and presentation that were applied in the audited
financial statements for the year ended 31st January 2020. Those
accounts, upon which the Group's Auditor issued an unqualified
opinion, have been filed with the Registrar of Companies and do not
contain a statement under section 498 (2) or (3) of the Companies
Act 2006.
Basis of consolidation
(i) Subsidiaries
Subsidiaries are entities controlled by the Group. Control, as
defined by IFRS 10, is achieved when the Group is exposed, or has
rights, to variable returns from its involvement with the investee
and has the ability to affect those returns through its power over
the investee. Specifically, the Group controls an investee if and
only if the Group has:
a) power over the investee (i.e. existing rights that give it
the current ability to direct the relevant activities of the
investee);
b) exposure, or rights, to variable returns from its involvement with the investee; and
c) the ability to use its power over the investee to affect its returns.
When the Group has less than a majority of the voting or similar
rights of an investee, the Group considers all relevant facts and
circumstances in assessing whether it has power over an investee,
including:
a) rights arising from other contractual arrangements; and
b) the Group's voting rights and potential voting rights.
The Group re-assesses whether or not it controls an investee if
facts and circumstances indicate that there are changes to one or
more of the elements of control.
B.P. Marsh & Partners Plc ("the Company"), an investment
entity, has three subsidiary investment entities, B.P. Marsh &
Company Limited, Marsh Insurance Holdings Limited and B.P. Marsh
(North America) Limited, that provide services that relate to the
Company's investment activities. The results of these three
subsidiaries, together with other subsidiaries (except for Summa
Insurance Brokerage, S.L. ("Summa") and LEBC Holdings Limited
("LEBC")), are consolidated into the Group consolidated financial
statements. The Group has taken advantage of the Amendment to IFRS
10 not to consolidate the results of Summa and LEBC. Instead the
investments in Summa and LEBC are valued at fair value through
profit or loss.
(ii) Associates
Associates are those entities in which the Group has significant
influence, but not control, over the financial and operating
policies. Investments that are held as part of the Group's
investment portfolio are carried in the Consolidated Statement of
Financial Position at fair value even though the Group may have
significant influence over those companies.
Business Combinations
The results of subsidiary undertakings are included in the
consolidated financial statements from the date that control
commences until the date that control ceases. Control exists where
the Group has the power to govern the financial and operating
policies of the entity so as to obtain benefits from its
activities. Accounting policies of the subsidiaries have been
changed where necessary to ensure consistency with the policies
adopted by the Group.
All business combinations are accounted for by using the
acquisition accounting method. This involves recognising
identifiable assets and liabilities of the acquired business at
fair value. Goodwill represents the excess of the fair value of the
purchase consideration for the interests in subsidiary undertakings
over the fair value to the Group of the net assets and any
contingent liabilities acquired.
Intra-group balances and any unrealised gains and losses or
income and expenses arising from intra-group transactions are
eliminated in preparing the consolidated financial statements.
Associates are those entities in which the Group has significant
influence, but not control, over the financial and operating
policies. Investments that are held as part of the Group's
investment portfolio are carried in the Consolidated Statement of
Financial Position at fair value even though the Group may have
significant influence over those companies. This treatment is
permitted by IAS 28: Investment in Associates ("IAS 28"), which
requires investments held by venture capital organisations to be
excluded from its scope where those investments are designated,
upon initial recognition, as at fair value through profit or loss
and accounted for in accordance with IAS 39: Financial Instruments
("IAS 39"), with changes in fair value recognised in the profit or
loss in the period of the change. The Group has no interests in
associates through which it carries on its business.
Employee services settled in equity instruments
The Group has entered into a joint share ownership plan ("JSOP")
with certain employees and directors. A fair value for the cash
settled share awards is measured at the date of grant. The Group
measured the fair value using the Expected Return Methodology which
was considered to be the most appropriate valuation technique to
value the awards.
The fair value of the award is recognised as an expense over the
vesting period on a straight-line basis. The level of vesting is
assumed to be 100% and will be reviewed annually and the charge is
adjusted to reflect actual or estimated levels of vesting with the
corresponding entry to capital contribution.
The Group has established an HMRC approved Share Incentive Plan
("SIP"). Ordinary shares in the Company previously repurchased and
held in Treasury by the Company have been transferred to The B.P.
Marsh SIP Trust ("the SIP Trust"), an employee share trust, in
order to be issued to eligible employees. In addition, new shares
were issued and allocated to the SIP Trust during the period.
Under the rules of the SIP, eligible employees can each be
granted up to GBP3,600 worth of ordinary shares ("Free Shares") by
the SIP Trust in each tax year. The number of shares granted is
dependent on the share price at the date of grant. In addition, all
eligible employees have been invited to take up the opportunity to
acquire up to GBP1,800 worth of ordinary shares ("Partnership
Shares") in each tax year and for every Partnership Share that an
employee acquires, the SIP Trust will offer two ordinary shares in
the Company ("Matching Shares") up to a total of GBP3,600 worth of
shares. The Free and Matching Shares are subject to a one year
forfeiture period, however the awards are not subject to any
vesting conditions, hence the related expenses are recognised when
the awards are made and are apportioned over the forfeiture
period.
The fair value of the services received is measured by reference
to the listed share price of the parent company's shares listed on
the AIM on the date of award of the free and matching shares to the
employee.
Investments - equity portfolio
All equity portfolio investments are designated as "fair value
through profit or loss" assets and are initially recognised at the
fair value of the consideration. They are measured at subsequent
reporting dates at fair value.
The Board conducts the valuations of equity portfolio
investments. In valuing equity portfolio investments the Board
applies guidelines issued by the International Private Equity and
Venture Capital Valuation Committee ("IPEVCV Guidelines"). The
following valuation methodologies have been used in reaching fair
value of equity portfolio investments, some of which are in early
stage companies:
a) at cost, unless there has been a significant round of new
equity finance in which case the investment is valued at the price
paid by an independent third party. Where subsequent events or
changes to circumstances indicate that an impairment may have
occurred, the carrying value is reduced to reflect the estimated
extent of impairment;
b) by reference to underlying funds under management;
c) by applying appropriate multiples to the earnings and
revenues and/or premiums of the investee company; or
d) by reference to expected future cash flow from the investment
where a realisation or flotation is imminent.
Both realised and unrealised gains and losses arising from
changes in fair value are taken to the Consolidated Statement of
Comprehensive Income for the period. In the Consolidated Statement
of Financial Position the unrealised gains and losses arising from
changes in fair value are shown within a "fair value reserve"
separate from retained earnings. Transaction costs on acquisition
or disposal of equity portfolio investments are expensed in the
Consolidated Statement of Comprehensive Income.
Equity portfolio investments are treated as 'Non-current Assets'
within the Consolidated Statement of Financial Position unless the
directors have committed to a plan to sell the investment and an
active programme to locate a buyer and complete the plan has been
initiated. Where such a commitment exists, and if the carrying
amount of the equity portfolio investment will be recovered
principally through a sale transaction rather than through
continuing use, the investment is classified as a 'Non-current
asset as held for sale' under 'Current Assets' within the
Consolidated Statement of Financial Position.
Income from equity portfolio investments
Income from equity portfolio investments comprises:
a) gross interest from loans, which is taken to the Consolidated
Statement of Comprehensive Income on an accruals basis;
b) dividends from equity investments are recognised in the
Consolidated Statement of Comprehensive Income when the
shareholders rights to receive payment have been established;
and
c) advisory fees from management services provided to investee
companies, which are recognised on an accruals basis in accordance
with the substance of the relevant investment advisory
agreement.
Investments - treasury portfolio
All treasury portfolio investments are designated as "fair value
through profit or loss" assets and are initially recognised at the
fair value of the consideration. They are measured at subsequent
reporting dates at fair market value as determined from the
valuation reports provided by the fund investment manager.
Both realised and unrealised gains and losses arising from
changes in fair market value are taken to the Consolidated
Statement of Comprehensive Income for the period. In the
Consolidated Statement of Financial Position the unrealised gains
and losses arising from changes in fair value are shown within the
retained earnings reserve as these investments are deemed as being
easily convertible into cash. Costs associated with the management
of these investments are expensed in the Consolidated Statement of
Comprehensive Income.
Income from treasury portfolio investments
Income from treasury portfolio investments comprises of
dividends receivable which are either directly reinvested into the
funds or received as cash.
Property, plant and equipment
Property, plant and equipment are stated at cost less
depreciation. Depreciation is provided at rates calculated to write
off the property, plant and equipment cost, less their estimated
residual value, over their expected useful lives on the following
bases:
Furniture & equipment - 5 years
Leasehold fixtures and fittings and other costs - over the life
of the lease
Right-of-use asset
IFRS 16 requires leases for use of office space to be recognised
as a lease liability, representing the present value of the
obligation to make lease payments, and a related right of use
("ROU") asset. The lease liability is calculated based on expected
future lease payments, discounted using the relevant incremental
borrowing rate. An incremental borrowing rate of 5% was used to
discount the future lease payments when measuring the lease
liability on adoption of IFRS 16.
The ROU asset is recognised at cost less accumulated
depreciation and impairment losses, with depreciation charged on a
straight-line basis over the life of the lease. In determining the
value of the ROU asset and lease liabilities, the Group considers
whether any leases contain lease extensions or termination options
that the Group is reasonably certain to exercise.
Foreign currencies
Monetary assets and liabilities denominated in foreign
currencies at the reporting period end are translated at the
exchange rate ruling at the reporting period end.
Transactions in foreign currencies are translated into sterling
at the rate ruling at the date of the transaction.
Exchange gains and losses are recognised in the Consolidated
Statement of Comprehensive Income.
Income taxes
The tax credit or expense represents the sum of the tax
currently recoverable or payable and any deferred tax. The tax
currently recoverable or payable is based on the estimated taxable
profit for the year. Taxable profit differs from net profit as
reported in the Consolidated Statement of Comprehensive Income
because it excludes items of income or expense that are taxable or
deductible in other years and it further excludes items that are
never taxable or deductible. The Group's receivable or liability
for current tax is calculated using tax rates that have been
enacted or substantively enacted by the date of the Consolidated
Statement of Financial Position.
Deferred tax is the tax expected to be payable or recoverable on
differences between the carrying amounts of assets and of
liabilities in the financial statements and the corresponding tax
bases used in the computation of taxable profit, and it is
accounted for using the liability method. Deferred tax liabilities
are generally recognised for all taxable temporary differences and
deferred tax assets are recognised to the extent that it is
probable that taxable profits will be available against which
deductible temporary differences can be utilised. Such assets and
liabilities are not recognised if the temporary differences arise
from goodwill or from the initial recognition (other than in a
business combination) of other assets and liabilities in a
transaction that affects neither the taxable profit nor the
accounting profit.
Deferred tax liabilities are recognised for taxable temporary
differences arising on investments in subsidiaries, except where
the Group is able to control the reversal of the temporary
difference and it is probable that the temporary difference will
not reverse in the foreseeable future.
The carrying amount of deferred tax assets is reviewed at each
date of the Consolidated Statement of Financial Position and
reduced to the extent that it is no longer probable that sufficient
taxable profits will be available to allow all or part of the asset
to be recovered.
Deferred tax is calculated at the tax rates that are expected to
apply in the period when the liability is settled or the asset
realised. Deferred tax is charged or credited to the Consolidated
Statement of Comprehensive Income, except when it relates to items
charged or credited directly to equity, in which case the deferred
tax is also dealt with in equity.
Deferred tax assets and liabilities are offset when there is a
legally enforceable right to set off current tax assets against
current tax liabilities and when they relate to income taxes levied
by the same taxation authority and the Group intends to settle its
current assets and liabilities on a net basis.
IFRIC 23 has been adopted and applied to the recognition and
measurement of uncertain tax provision during the period. However
it is noted that the adoption of IFRIC 23 has had no material
impact on the tax position as at the period end.
2. SEGMENTAL REPORTING
The Group operates in one business segment; the provision of
consultancy services to as well as making and trading investments
in financial services businesses.
Under IFRS 8: Operating Segments ("IFRS 8") the Group identifies
its reportable operating segments based on the geographical
location in which each of its investments is incorporated and
primarily operates. For management purposes, the Group is organised
and reports its performance by two geographic segments: UK and
Non-UK.
If material to the Group overall (where the segment revenues,
reported profit or loss or combined assets exceed the quantitative
thresholds prescribed by IFRS 8), the segment information is
reported separately.
The Group allocates revenues, expenses, assets and liabilities
to the operating segment where directly attributable to that
segment. All indirect items are apportioned based on the percentage
proportion of revenue that the operating segment contributes to the
total Group revenue (excluding any unrealised gains and losses on
the Group's current and non-current investments).
Each reportable segment derives its revenues from three main
sources from equity portfolio investments as described in further
detail in Note 1 under 'Income from equity portfolio investments'
and also from treasury portfolio investments as described in Note 1
under 'Income from treasury portfolio investments'.
All reportable segments derive their revenues entirely from
external clients and there are no inter-segment sales.
Geographic segment Geographic segment Group
1: 2:
UK Non-UK
Unaudited Unaudited Unaudited Unaudited Unaudited Unaudited
6 months 6 months 6 months 6 months 6 months 6 months
to 31(st) to 31(st) to 31(st) to 31(st) to 31(st) to 31(st)
July July July July July July
2020 2019 2020 2019 2020 2019
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Operating income 1,746 1,339 6,310 5,796 8,056 7,135
Operating expenses (892) (1,121) (712) (585) (1,604) (1,706)
Segment operating
profit 854 218 5,598 5,211 6,452 5,429
----------- ----------- ----------- ----------- ----------- -----------
Financial income 1 9 - 5 1 14
Financial expenses (20) (25) (16) (13) (36) (38)
Exchange movements 1 7 79 164 80 171
Profit before tax 836 209 5,661 5,367 6,497 5,576
Income taxes - 18 - - - 18
----------- ----------- ----------- ----------- ----------- -----------
Profit for the period GBP836 GBP227 GBP5,661 GBP5,367 GBP6,497 GBP5,594
=========== =========== =========== =========== =========== ===========
Included within the operating income reported above are the
following amounts requiring separate disclosure owing to the fact
that they are derived from a single investee company and the total
revenues attributable to that investee company are 10% or more of
the total realised income generated by the Group during the
period:
Total income % of total realised Reportable geographic
attributable operating income segment
to the investee
company
(GBP'000)
Unaudited Unaudited Unaudited Unaudited Unaudited Unaudited
6 months 6 months 6 months 6 months 6 months 6 months
to 31(st) to 31(st) to 31(st) to 31(st) to 31(st) to 31(st)
July July July July July July
2020 2019 2020 2019 2020 2019
Investee Company
Nexus Underwriting
Management Limited 406 403 19 13 1 1
XPT Group LLC 343 380 16 12 2 2
LEBC Holdings Limited 204 1,103 10 36 1 1
Geographic segment Geographic segment Group
1: 2:
UK Non-UK
Unaudited Unaudited Unaudited Unaudited Unaudited Unaudited
6 months 6 months 6 months 6 months 6 months 6 months
to 31(st) to 31(st) to 31(st) to 31(st) to 31(st) to 31(st)
July July July July July July
2020 2019 2020 2019 2020 2019
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Non-current assets
Property, plant and
equipment 94 109 43 41 137 150
Right-of-use asset 741 1,001 343 377 1,084 1,378
Investments - equity
portfolio 83,413 77,737 38,638 29,232 122,051 106,969
Loans and receivables 13,091 13,662 3,392 2,677 16,483 16,339
------------------ ------------------ ----------- ----------- ----------- -----------
97,339 92,509 42,416 32,327 139,755 124,836
------------------ ------------------ ----------- ----------- ----------- -----------
Current assets
Trade and other
receivables 2,008 4,233 1,362 1,393 3,370 5,626
Cash and cash equivalents 1,171 1,420 - - 1,171 1,420
3,179 5,653 1,362 1,393 4,541 7,046
------------------ ------------------ ----------- ----------- ----------- -----------
Total assets 100,518 98,162 43,778 33,720 144,296 131,882
------------------ ------------------ ----------- ----------- ----------- -----------
Non-current liabilities
Lease liabilities (696) (937) (323) (352) (1,019) (1,289)
------------------ ------------------ ----------- ----------- ----------- -----------
(696) (937) (323) (352) (1,019) (1,289)
------------------ ------------------ ----------- ----------- ----------- -----------
Current liabilities
Trade and other payables (475) (398) (11) (3) (486) (401)
Lease liabilities (107) (119) (50) (44) (157) (163)
Corporation tax provision - (48) - - - (48)
------------------ ------------------ ----------- ----------- ----------- -----------
(582) (565) (61) (47) (643) (612)
------------------ ------------------ ----------- ----------- ----------- -----------
Total liabilities (1,278) (1,502) (384) (399) (1,662) (1,901)
------------------ ------------------ ----------- ----------- ----------- -----------
Net assets GBP99,240 GBP96,660 GBP43,394 GBP33,321 GBP142,634 GBP129,981
================== ================== =========== =========== =========== ===========
Additions to property,
plant and equipment 1 6 1 2 2 8
Depreciation and
amortisation
of property, plant
and equipment (72) (76) (33) (29) (105) (105)
Impairment of investments
and loans - - - (36) - (36)
Cash flow arising
from:
Operating activities 1,001 (2,539) 306 (1,957) 1,307 (4,496)
Investing activities (2) 6 - - (2) 6
Financing activities (915) (1,960) - - (915) (1,960)
Change in cash and
cash equivalents 84 (4,493) 306 (1,957) 390 (6,450)
Geographic segment Geographic segment Group
1: 2:
UK Non-UK
Audited Audited Audited
31(st) January 31(st) January 31(st) January
2020 2020 2020
GBP'000 GBP'000 GBP'000
Operating income 7,019 9,676 16,695
Operating expenses (2,800) (1,410) (4,210)
------------------- ------------------- ---------------
Segment operating
profit 4,219 8,266 12,485
------------------- ------------------- ---------------
Financial income 11 5 16
Financial expenses (51) (26) (77)
Exchange movements (33) (119) (152)
Profit before tax 4,146 8,126 12,272
Income taxes 258 - 258
------------------- ------------------- ---------------
Profit for the year GBP4,404 GBP8,126 GBP12,530
=================== =================== ===============
Included within the operating income reported above are the
following amounts requiring separate disclosure owing to the fact
that they are derived from a single investee company and the total
revenues attributable to that investee company are 10% or more of
the total realised income generated by the Group during the
period:
Total income % of total realised Reportable geographic
attributable operating income segment
to the investee (excluding gains
company on investments)
(GBP'000)
Audited Audited Audited
31(st) January 31(st) January 31(st) January
2020 2020 2020
Investee Company
LEBC Holdings Limited 1,272 24 1
Nexus Underwriting
Management Limited 997 19 1
XPT Group LLC 673 13 2
Geographic segment Geographic segment Group
1: 2:
UK Non-UK
Audited Audited Audited
31(st) January 31(st) January 31(st) January
2020 2020 2020
GBP'000 GBP'000 GBP'000
Non-current assets
Property, plant and
equipment 108 43 151
Right-of-use asset 918 368 1,286
Investments - equity
portfolio 82,594 33,072 115,666
Investments - treasury
portfolio - - -
Loans and receivables 12,382 3,829 16,211
96,002 37,312 133,314
------------------- ------------------- ---------------
Current assets
Trade and other receivables 4,141 876 5,017
Cash and cash equivalents 787 - 787
4,928 876 5,804
------------------- ------------------- ---------------
Total assets 100,930 38,188 139,118
------------------- ------------------- ---------------
Non-current liabilities
Lease liabilities (860) (344) (1,204)
------------------- ------------------- ---------------
(860) (344) (1,204)
------------------- ------------------- ---------------
Current liabilities
Trade and other payables (873) (3) (876)
Lease liabilities (120) (48) (168)
(993) (51) (1,044)
------------------- ------------------- ---------------
Total liabilities (1,853) (395) (2,248)
------------------- ------------------- ---------------
Net assets GBP99,077 GBP37,793 GBP136,870
=================== =================== ===============
Geographic segment Geographic segment Group
1: 2:
UK Non-UK
Audited Audited Audited
31(st) January 31(st) January 31(st) January
2020 2020 2020
GBP'000 GBP'000 GBP'000
Additions to property,
plant and equipment 18 8 26
Depreciation and amortisation
of property, plant
and equipment (154) (61) (215)
Impairment of investments
and loans - (69) (69)
Cash flow arising
from:
Operating activities (2,861) (2,001) (4,862)
Investing activities (12) - (12)
Financing activities (2,176) - (2,176)
Change in cash and
cash equivalents (5,049) (2,001) (7,050)
As outlined previously, under IFRS 8 the Group reports its
operating segments (UK and Non-UK) and associated income, expenses,
assets and liabilities based upon the country of domicile of each
of its investee companies.
In addition to the segmental analysis disclosure reported above,
the Group has undertaken a further assessment of each of its
investee companies' underlying revenues, specifically focusing on
the geographical origin of this revenue. Geographical analysis of
each investee company's 2020 and 2019 revenue budgets was carried
out and, based upon this analysis, the directors have determined
that on a look-through basis, the Group's portfolio of investee
companies can also be analysed as follows:
Unaudited Unaudited Audited
31(st) July 31(st) July 31(st) January
2020 2019 2020
% % %
UK 47 50 43
Non-UK 53 50 57
----------- ----------- --------------
Total 100 100 100
=========== =========== ==============
3. EARNINGS PER SHARE FROM CONTINUING OPERATIONS ATTRIBUTABLE TO THE EQUITY SHAREHOLDERS
Unaudited Unaudited Audited
31(st) July 31(st) July 31(st) January
2020 2019 2020
GBP'000 GBP'000 GBP'000
Earnings
Earnings for the
period 6,497 5,594 12,530
Earnings for the
purposes
of basic and diluted
earnings
per share being total
comprehensive
income attributable
to equity
shareholders 6,497 5,594 12,530
----------------------------- ----------------------------- --------------------------
Earnings per share -
basic
and diluted 18.1p 15.6p 34.9p
----------------------------- ----------------------------- --------------------------
Number of shares Number Number Number
Weighted average
number of
ordinary shares for
the purposes
of basic earnings per
share 35,935,192 35,962,118 35,947,869
Number of dilutive Nil Nil
shares Nil
under option
Weighted average
number of
ordinary shares for
the purposes
of dilutive earnings
per
share 35,935,192 35,962,118 35,947,869
============================= ============================= ==========================
During the period no share repurchases were undertaken.
During the interim 6 months to 31st July 2019 the Company paid
GBP144,553 in order to repurchase 51,416 ordinary shares at an
average price of 281 pence per share. In the full year to 31st
January 2020 the Company paid GBP243,232 in order to repurchase
87,780 ordinary shares at an average price of 277 pence per share.
As a result, distributable reserves were reduced by GBP144,553
during the interim 6 months to 31st July 2019 and by GBP243,232 in
the full year to 31st January 2020.
Ordinary shares held by the Company in Treasury
Movement of ordinary shares Unaudited Unaudited Audited
held in Treasury:
31(st) July 31(st) July 31(st) January
2020 2019 2020
Number Number Number
Opening total ordinary
shares held in Treasury 85,058 28,573 28,573
Ordinary shares repurchased
into Treasury during the
period - 51,416 87,780
Ordinary shares transferred
to the B.P. Marsh SIP Trust
during the period (42,196) (19,218) (19,218)
Ordinary shares cancelled
during the period - - (12,077)
Total ordinary shares held
in Treasury at period end 42,862 60,771 85,058
============ ============ ===============
The Treasury shares do not have voting or dividend rights and
have therefore been excluded for the purposes of calculating
earnings per share.
The repurchase of the ordinary shares is borne from the Group's
commitment to reduce share price discount to net asset value. Its
policy has been throughout the period (and previously) to be able
to buy small parcels of shares when the share price is below a
fixed percentage of its published Net Asset Value and place them
into Treasury. The threshold was 20% until 11th October 2018 when
the Group announced an updated Share Buy-Back Policy confirming
that the threshold had been reduced from 20% to 15%.
Notwithstanding that at the date of this report the discount to Net
Asset Value at which the Company's shares are trading at is greater
than 15%, the Company is currently restricted in its ability to buy
back shares since given that the Chairman, Mr. Brian Marsh,
together with persons acting in concert with Mr. Marsh for the
purposes of the City Code on Takeovers and Mergers (the "City
Code"), has an interest in approximately 41.85% of the Company's
voting rights, any such purchase of shares would result in an
obligation for Mr. Marsh to make a general offer for the Company in
accordance with Rule 9 of the City Code.
The weighted average number of shares used for the purposes of
calculating the earnings per share, net asset value and net asset
value per share of the Group excludes the 1,461,302 shares held
under joint share ownership arrangements (Note 9) as these were
non-dilutive in the period to 31st July 2020, 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 the
first 281 pence per share (GBP4,106,259) on vesting for the same
reasons. On this basis the current net asset value per share is 396
pence for the Group. If the joint share ownership arrangements were
included, this would increase the Group's net asset value by
GBP4,106,259 and the net asset value per share would be 392
pence.
The net decrease to the weighted average number of ordinary
shares between the 2019 and 2020 interim periods is mainly
attributable to the share repurchases that took place over this
period as these ordinary shares were repurchased into Treasury and
are therefore are excluded from the weighted average number of
shares calculation.
The 42,196 ordinary shares transferred from Treasury to the SIP
Trust during the period (17,086 ordinary shares transferred in
April 2020 and 25,110 ordinary shares transferred in June 2020)
have been treated as re-issued for the purposes of calculating
earnings per share and have therefore offset the overall decrease
to the weighted average number of shares resulting from the share
repurchases between the 2019 and 2020 interim periods.
21,934 ordinary shares (comprising the 17,086 ordinary shares
transferred from Treasury to the SIP Trust in April 2020 together
with 4,848 of unallocated ordinary shares forfeited by departing
employees during both the current period and 12 months to 31st
January 2020) were allocated to the participating employees as Free
shares under the share incentive plan arrangement on 23rd April
2020 (Note 9).
A further 25,110 ordinary shares (transferred from Treasury to
the SIP Trust in June 2020) were allocated to the participating
employees as Matching and Partnership shares under the share
incentive plan arrangement on 26th June 2020 (Note 9).
4. NON-CURRENT INVESTMENTS - EQUITY PORTFOLIO
Group Investments
Unaudited Unaudited Audited
31(st) July 31(st) July 31(st) January
2020 2019 2020
Continuing Continuing Continuing
investments investments investments
GBP'000 GBP'000 GBP'000
At valuation
At 1(st) February 115,666 101,947 101,947
Additions 463 945 2,551
Disposals - - (402)
Movement in valuation 5,922 4,077 11,570
At period end GBP122,051 GBP106,969 GBP115,666
============ ============= ==============
At cost
At 1(st) February 57,970 55,819 55,819
Additions 463 945 2,551
Disposals - - (400)
At period end GBP58,433 GBP56,764 GBP57,970
============ ============= ==============
The principal additions relate to the following transactions in
the period:
On 5th March 2020 the Group acquired 50,000 ordinary shares
(5.5% equity stake) in Paladin Holdings Limited ("Paladin") from a
minority shareholder and exiting employee for consideration of
GBP260,000. These shares are being held by the Group under a call
option arrangement which Paladin can call at any time during the
next three years and buy-back from the Group at a fixed price of
GBP5.226 per share (GBP261,300). This acquisition increased the
Group's equity holding in Paladin from 38.2% as at 31st January
2020 to 43.7% at the time of investment. At 31st July 2020 the
Group's equity holding remained at 43.7%.
On 25th June 2020 the Group acquired a 30% cumulative preferred
equity stake in SAGE Program Underwriters, Inc ("SAGE"), a newly
established Oregon based provider of specialist insurance products
to niche industries, for consideration of $250,000
(GBP202,758).
The unquoted investee companies, which are registered in England
except Summa Insurance Brokerage, S.L. (Spain), MB Prestige
Holdings PTY Limited (Australia), Asia Reinsurance Brokers Pte
Limited (Singapore), Stewart Specialty Risk Underwriting Ltd
(Canada), XPT Group LLC (USA), Mark Edward Partners LLC (USA), ATC
Insurance Solutions PTY Limited (Australia), Criterion Underwriting
Pte Limited (Singapore), Agri Services Company PTY Limited
(Australia) and SAGE Program Underwriters Inc (USA) are as
follows:
% holding Date Aggregate Post tax
of share information capital profit/(loss)
and
Name of company Capital available reserves for the Principal activity
to year
GBP GBP
Agri Services Company 36.00 - - - Holding company
PTY Limited(1) for specialist
Australian agricultural
Managing General
Agency
Asia Reinsurance Brokers Specialist reinsurance
Pte Limited 25.00 31.05.19 2,159,593 (235,595) broker
% holding Date Aggregate Post tax
of share information capital profit/(loss)
and
Name of company Capital available reserves for the Principal activity
to year
GBP GBP
Specialist Australian
ATC Insurance Solutions Managing General
PTY Limited 20.00 30.06.19 3,194,781 1,616,147 Agency
Criterion Underwriting 29.40 - - - Specialist Singaporean
Pte Limited(1) Managing General
Agency
Investment holding
EC3 Brokers Group Limited 20.00 31.12.18 (842,743) (1,764,893) company
Independent financial
LEBC Holdings Limited 59.34 30.09.19 4,631,046 (357,774) advisor company
Lilley Plummer Risks 30.00 - - - Specialist Marine
Limited(1) broker
Specialist Australian
MB Prestige Holdings Motor Managing
PTY Limited 40.00 31.12.19 2,370,399 946,180 General Agency
Mark Edward Partners Specialty insurance
LLC 30.00 31.12.17 5,046,643 3,470,754 broker
Neutral Bay Investments Investment holding
Limited 49.90 31.03.19 4,039,229 218,014 company
Nexus Underwriting
Management Specialist Managing
Limited 18.00 31.12.19 24,002,045 2,055,681 General Agency
Investment holding
Paladin Holdings Limited 43.71 31.12.19 212,998 106,970 company
SAGE Program Underwriters 30.00 - - - Specialist Managing
Inc(1) General Agency
Specialist Canadian
Stewart Specialty Risk Casualty Underwriting
Underwriting Ltd 30.00 31.12.19 239,094 303,632 Agency
Consolidator
Summa Insurance Brokerage, of regional insurance
S.L. 77.25 31.12.19 7,638,345 (55,929) brokers
Specialist UK
Marine Cargo
The Fiducia MGA Company Underwriting
Limited 35.18 31.12.18 (2,128,168) (962,122) Agency
Walsingham Holdings Investment holding
Limited 20.00 30.09.19 1,496 516 company
Specialist
Walsingham Motor Insurance UK Motor Managing
Limited 40.50 30.09.19 (223,733) 690,294 General Agency
USA Specialty
lines insurance
distribution
XPT Group LLC 29.93 31.12.19 6,435,005 (4,102,293) company
(1) Agri Services Company PTY Limited, Criterion Underwriting
Pte Limited, Lilley Plummer Risks Limited and SAGE Program
Underwriters, Inc are all newly incorporated companies. Statutory
accounts are not available as these are not yet due.
The Group's 35% equity investments in Bastion Reinsurance
Brokerage (PTY) Limited and Bulwark Investment Holdings (PTY)
Limited and its 42.5% equity investment in Property and Liability
Underwriting Managers (PTY) Limited, all of which are based in
South Africa, have not been listed above as they were in the
process of being wound up as at 31st July 2020 and no recent
financial information is available.
The aggregate capital and reserves and profit/(loss) for the
year shown above are extracted from the relevant local GAAP
accounts of the investee companies.
5. NON-CURRENT INVESTMENTS - TREASURY PORTFOLIO
Group Unaudited Unaudited Audited
At valuation 31(st) July 31(st) July 31(st) January
2020 2019 2020
GBP'000 GBP'000 GBP'000
Market value at 1st February - 14 14
Additions at cost - - -
Disposals - (14) (14)
Change in value in the year - - -
--------------- ------------- ----------------
Market value at period end GBP - GBP - GBP -
=============== ============= ================
Investment fund split:
GAM London Limited - - -
Rathbone Investment Management
Limited - - -
--------------- ------------- ----------------
Total GBP - GBP - GBP -
=============== ============= ================
All the treasury portfolio was disposed of during the interim 6
months to 31st July 2019.
No investment management costs (interim 6 months to 31st July
2019: GBP22 and full year to 31st January 2020: GBP22) were charged
to the Consolidated Statement of Comprehensive Income during the
period.
6. RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
Share Reverse Capital Capital
Share premium Fair acquisition Redemption contribution Retained
value
capital account reserve reserve Reserve reserve Earnings Total
(GBP'000) (GBP'000) (GBP'000) (GBP'000) (GBP'000) (GBP'000) (GBP'000) (GBP'000)
At 1(st)
February
2020 3,747 29,367 57,696 393 7 42 45,618 136,870
Profit for
the
period - - 5,922 - - - 575 6,497
Dividends
paid - - - - - - (798) (798)
Share
Incentive
Plan
(Note 9) - (9) - - - 11 63 65
At 31(st) GBP3,747 GBP29,358 GBP63,618 GBP393 GBP7 GBP53 GBP45,458 GBP142,634
July
2020
========== ========== ========== ============ =========== ============= ========== ===========
7. LOAN AND EQUITY COMMITMENTS
On 1st April 2019 the Group entered into an agreement to provide
Nexus Underwriting Management Limited ("Nexus"), an investee
company, with a GBP2,000,000 revolving credit facility (in addition
to its existing fully drawn down loan facility of GBP4,000,000
provided by the Group during the year to 31st January 2018),
increasing Nexus' total aggregate loan facility to GBP6,000,000. As
at 31st January 2020 this revolving credit facility had been drawn
down in full. During the current period Nexus repaid its
GBP2,000,000 revolving credit facility in full, however the
facility can be reborrowed up until the final repayment date of
31st December 2020. As at 31st July 2020 GBP4,000,000 of loans were
outstanding, leaving a remaining undrawn facility of GBP2,000,000.
Any drawdown is subject to satisfying certain agreed criteria.
On 27th April 2020 the Group entered into an agreement to
provide LEBC Holdings Limited ("LEBC"), an investee company, with a
further loan facility of GBP1,000,000, of which GBP500,000 was
drawn down on 1st May 2020. This facility is in addition to an
existing GBP1,000,000 loan facility provided to LEBC during the
year to 31st January 2020 (which was fully drawn down during that
year), increasing LEBC's total aggregate loan facility to
GBP2,000,000. As at 31st July 2020 GBP1,500,000 of loans were
outstanding, leaving a remaining undrawn facility of GBP500,000.
Any drawdown is subject to satisfying certain agreed criteria.
On 22nd May 2020 the Group entered into an agreement to provide
Paladin Holdings Limited ("Paladin"), an investee company, with a
further loan facility of GBP500,000, of which GBP300,000 was drawn
down immediately. This facility is in addition to existing fully
drawn down loan facilities of GBP4,596.500 provided by the Group to
Paladin in previous periods and increased Paladin's total aggregate
loan facility to GBP5,096,500. As at 31st July 2020 GBP4,896,500 of
loans were outstanding, leaving a remaining undrawn facility of
GBP200,000. Any drawdown is subject to satisfying certain agreed
criteria.
On 26th June 2020 the Group entered into an agreement to provide
SAGE Program Underwriters, Inc, an investee company, with a loan
facility of USD 250,000. As at 31st July 2020 no loans had been
drawn down, leaving a remaining undrawn facility of USD 250,000.
Any drawdown is subject to satisfying certain agreed criteria.
8. DEFERRED TAX AND CONTINGENT LIABILITIES
The directors estimate that, under the current taxation rules
and the current investment profile, if the Group were to dispose of
all its investments at the amount stated in the Consolidated
Statement of Financial Position, no tax on capital gains (interim 6
months to 31st July 2019: GBPNil and full year to 31st January
2020: GBPNil) would become payable by the Group.
Finance (No.2) Act 2017 introduced significant changes to the
Substantial Shareholding Exemption ("SSE") rules in Taxation of
Chargeable Gains Act 1992 Sch. 7AC which applied to share disposals
on or after 1 April 2017. In general terms, the rule changes relax
the conditions for the Group to qualify for SSE on a share
disposal.
Having reviewed the Group's current investment portfolio, the
directors consider that the Group should benefit from this reform
to the SSE rules on all non-US investments and, as a result, the
directors anticipate that on a disposal of shares in the Group's
current non-US investments, so long as the shares have been held
for 12 months, they should qualify for SSE and no corporation tax
charge should arise on their disposal.
New tax legislation was introduced in the US in 2018 which taxes
at source gains on disposal of any foreign partnership interests in
US LLCs. As such, deferred tax will need to be assessed on any
potential net gains from the Group's investment interests in the
US.
Having assessed the current portfolio, the directors anticipate
that there should currently be no requirement to provide for
deferred tax in respect of unrealised gains on investments under
the current requirements of the IFRS as the US investments do not
currently show a net gain, and the non-US investments are expected
to benefit from the SSE rules. As such no deferred tax provision
has been made as at 31st July 2020. The requirement for a deferred
tax provision is subject to continual assessment of each investment
to test whether the SSE conditions continue to be met based upon
information that is available to the Group and that there is no
change to the accounting treatment in this regard under IFRS. It
should also be noted that, until the date of the actual disposal,
it will not be possible to ascertain if all the SSE conditions are
likely to have been met and, moreover, obtaining agreement of the
tax position with HM Revenue & Customs may possibly not be
forthcoming until several years after the end of a period of
accounts.
9. SHARE BASED PAYMENT ARRANGEMENTS
Joint Share Ownership Plan
During the year to 31st January 2019, B.P. Marsh & Partners
Plc entered into joint share ownership agreements ("JSOAs") with
certain employees and directors. The details of the arrangements
are described in the following table:
Nature of the arrangement Share appreciation rights (joint beneficial
ownership)
Date of grant 12th June 2018
---------------------------------------------------
Number of instruments granted 1,461,302
---------------------------------------------------
Exercise price (pence) N/A
---------------------------------------------------
Share price (market value)
at grant (pence) 281.00
---------------------------------------------------
Hurdle rate 3.75% p.a. (simple)
---------------------------------------------------
Vesting period (years) 3 years
---------------------------------------------------
Vesting conditions There are no performance conditions
other than the recipient remaining an
employee throughout the vesting period.
The awards vest after 3 years or earlier
resulting from either:
a) a change of control resulting from
a person, or persons acting together,
obtaining control of the Company either
(i) as a result of a making a Takeover
Offer; (ii) pursuant to court sanctioned
Scheme of Arrangement; or (iii) in consequence
of a Compulsory Acquisition); or
b) a person becoming bound or entitled
to acquire shares in the Company pursuant
to sections 974 to 991 of the Companies
Act 2006; or
c) a winding up.
If the employee is a bad leaver the
co-owner of the jointly-owned share
can buy out the employee's interest
for 0.01p
---------------------------------------------------
Expected volatility N/A
---------------------------------------------------
Risk free rate 1%
---------------------------------------------------
Expected dividends expressed
as a dividend yield 1.9%
---------------------------------------------------
Settlement Cash settled on sale of shares
---------------------------------------------------
% expected to vest (based
upon leavers) 100%
---------------------------------------------------
Number expected to vest 1,461,302
---------------------------------------------------
Valuation model Expected Return Methodology (ERM)
---------------------------------------------------
ERM value (pence) 36.00
---------------------------------------------------
Deduction for carry charge
(pence) 31.60
---------------------------------------------------
Fair value per granted instrument
(pence) 4.40
---------------------------------------------------
Charge for period ended 31st
July 2020 GBP10,677
---------------------------------------------------
On 12th June 2018 1,461,302 new 10p Ordinary shares in the
Company were issued and transferred into joint beneficial ownership
for 12 employees (4 of whom were directors) under the terms of
joint share ownership agreements. No consideration was paid by the
employees for their interests in the jointly-owned shares.
The new Ordinary shares have been issued into the name of RBC
cees Trustee Limited ("the Trustee") as trustee of the B.P. Marsh
Employees' Share Trust ("the Trust") at a subscription price of
GBP2.81, being the mid-market closing price on 12th June 2018.
The jointly-owned shares are beneficially owned by (i) each of
the 12 participating employees and (ii) the trustee of the Trust
upon and subject to the terms of the JSOAs entered into between the
participating employee, the Company and the Trustee.
Under the terms of the JSOAs, the employees and directors enjoy
the growth in value of the shares above a threshold price of
GBP2.81 per share (market value at the date of grant) plus an
annual carrying charge of 3.75% per annum (simple interest) to the
market value at the date of grant. The Trust retains the initial
market value of the jointly-owned shares plus the carrying
cost.
Alternatively, on vesting, the participant and the Trustee may
exchange their respective interests in the jointly-owned shares
such that each becomes the sole owner of a number of Ordinary
shares of equal value to their joint interests.
Participants will therefore receive value from the jointly-owned
shares only if and to the extent that the share value grows above
the initial market value plus the carrying cost.
The employees and directors received an interest in jointly
owned shares and a Joint Share Ownership Plan ("JSOP") is not an
option, however the convention for JSOPs is to treat them as if
they were options. The value of the employee's interest for
accounting purposes is calculated using the Expected Return
Methodology.
The risk-free rates are based on the yield on UK Government
Gilts of a term consistent with the assumed option life.
No jointly-owned shares were sold during the period, however
59,183 jointly-owned shares were forfeited on the departure of an
employee (interim 6 months to 31st July 2019: no jointly-owned
shares were forfeited and full year to 31st January 2020: 167,465
jointly-owned shares were forfeited on the departure of an
executive director). However, the number of jointly-owned shares
expected to vest has not been adjusted on the basis that these
shares may be redistributed to other employees of the Company. In
accordance with IFRS 2: Share-based Payment, the fair value of the
expected cost of the award (measured at the date of grant) has been
spread over the three-year vesting period.
There has been no movement during the period in terms of the
numbers of shares to be exercised.
Share Incentive Plan
During the year to 31st January 2017 the Group established an
HMRC approved Share Incentive Plan ("SIP").
During the period a total of 42,196 ordinary shares in the
Company, which were held in Treasury as at 31st January 2020 (6
months to 31st July 2019 and also 12 months to 31st January 2020,
19,218 ordinary shares in the Company, which were held in Treasury
as at 31st January 2019) were transferred to the B.P. Marsh SIP
Trust ("SIP Trust"). As a result, together with 4,848 of
unallocated ordinary shares forfeited by departing employees during
both the current period and 12 months to 31st January 2020, a total
of 47,044 ordinary shares in the Company were available for
allocation to the participants of the SIP (6 months to 31st July
2019 and also 12 months to 31st January 2020: 33,330 were available
for allocation).
On 23rd April 2020, a total of 11 eligible employees (including
3 executive directors of the Company) applied for the 2020-21 SIP
and were each granted 1,994 ordinary shares ("20-21 Free Shares"),
representing approximately GBP3,600 at the price of issue.
Additionally, on 26th June 2020, all eligible employees were
also invited to take up the opportunity to acquire up to GBP1,800
worth of ordinary shares ("Partnership Shares"). For every
Partnership Share that an employee acquired, the SIP Trust offered
two ordinary shares in the Company ("Matching Shares") up to a
total of GBP3,600 worth of shares. 10 of the 11 eligible employees
(including 3 executive directors of the Company) took up the offer
and acquired the full GBP1,800 worth of Partnership Shares (837
ordinary shares) and were therefore awarded 1,674 Matching
Shares.
The 20-21 Free and Matching Shares are subject to a 1 year
forfeiture period.
A total of 47,044 (6 months to 31st July 2019 and also 12 months
to 31st January 2020: 33,330) Free, Matching and Partnership Shares
were granted to the 11 (6 months to 31st July 2019 and also 12
months to 31st January 2020: 11) eligible employees during the
period, including 13,515 (6 months to 31st July 2019 and also 12
months to 31st January 2020: 12,120) granted to 3 (6 months to 31st
July 2019 and also 12 months to 31st January 2020: 4) executive
directors of the Company.
Following the resignation of an employee during the period, a
total of 3,808 (6 months to 31st July 2019: Nil and 12 months to
31st January 2020: 16,143) ordinary shares in the Company were
withdrawn from the SIP Trust and transferred into the direct
beneficial ownership of that employee.
As at 31st July 2020, and after adjusting for a total of 19,951
ordinary shares withdrawn from the SIP Trust by employees on
departure and 4,848 ordinary shares forfeited on departure (since
inception), a total of 201,812 Free, Matching and Partnership
Shares had been granted to 11 eligible employees under the SIP,
including 69,216 granted to 3 executive directors of the
Company.
GBP36,927 of the IFRS 2 charges (6 months to 31st July 2019:
GBP39,202 and 12 months to 31st January 2020: GBP79,054) associated
with the award of the SIP shares to the 11 (6 months to 31st July
2019 and also 12 months to 31st January 2020: 11) eligible
directors and employees of the Company have been recognised in the
Statement of Comprehensive Income as employment expenses.
The results of the SIP Trust have been fully consolidated within
these financial statements on the basis that the SIP Trust is
controlled by the Company.
-Ends-
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END
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