REG - B.P. Marsh &Partners - Half-Year Results
17/10/2023 07:00
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RNS Number : 3026Q B.P. Marsh & Partners PLC 17 October 2023
17 October 2023
B.P. Marsh & Partners Plc
("B.P. Marsh", "the Company" or "the Group")
Half-Year Results
B.P. Marsh & Partners Plc (AIM: BPM), the specialist investor in early
stage financial services businesses, announces its unaudited Group Half-Year
Results for the six months to 31 July 2023 (the "Period").
Highlights:
· Net Asset Value at 31 July 2023 £203.5m (31 January 2023: £189.5m; 31
July 2022 £179.8m)
· Net Asset Value per share 567.3p (31 January 2023: 526.2p; 31 July
2022: 499.0p)
· Consolidated profit before tax of £15.6m for the Period (six months to
31 July 2022: £17.0m; year ending 31 January 2023: £27.6m)
· Total Shareholder return of 7.9% for the Period including the aggregate
dividends paid in February and July 2023 (13.7% for the 12 months since 31
July 2022, inclusive of the dividends paid in February and July 2023)
· Cash of £4.3m as at 31 July 2023
· Current cash of £51.0m, following receipt of the proceeds from the
sale of Kentro
Commenting on the results, Brian Marsh OBE, Chairman, said:
"I am pleased that we have delivered a strong set of results, both in terms of
increasing the value of the portfolio and investment realisations. This gives
the Company the ability to reinvest in a portfolio that is growing in value,
and source new investment opportunities, alongside returning value to
shareholders."
Analyst briefing:
An analyst presentation, hosted by the Company, will be held at 10:00am today.
Please contact Tim Pearson at Tavistock Communications on 07983118502 or
tim.pearson@tavistock (mailto:tim.pearson@tavistock) .co.uk should any analyst
wish to attend.
Investor presentation:
B.P. Marsh will also provide a presentation for all existing and potential
shareholders via the Investor Meet Company platform on 18 October 2023 at
11:00am.
Questions can be submitted pre-event via your Investor Meet Company dashboard
up until 9am the day before the meeting or at any time during the live
presentation.
Investors can sign up to Investor Meet Company for free and add to meet B.P.
Marsh via:
https://www.investormeetcompany.com/bp-marsh-partners-plc/register-investor
(https://www.investormeetcompany.com/bp-marsh-partners-plc/register-investor)
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
(http://www.bpmarsh.co.uk) or contact:
B.P. Marsh & Partners Plc +44 (0)20 7233 3112
Brian Marsh OBE / Alice Foulk
Panmure Gordon (UK) Limited +44 (0)20 78862500
Atholl Tweedie / Amrit Mahbubani / Stephen Jones / Ailsa MacMaster
Tavistock bpmarsh@tavistock.co.uk (mailto:bpmarsh@tavistock.co.uk)
Simon Hudson / Tim Pearson / Katie Hopkins +44 (0)20 7920 3150
Notes to Editors:
B.P. Marsh's current portfolio contains fourteen companies. More detailed
descriptions of the portfolio can be found at www.bpmarsh.co.uk
(http://www.bpmarsh.co.uk/) .
Since formation over 30 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 2023.
Half-Year Results
During the Period the Group's Net Asset Value ("NAV") has grown by £14.0m
from £189.5m (31 January 2023) to £203.5m which, together with the dividends
paid in February 2023 and July 2023, represents an increase of 7.9%. NAV per
share as at 31 July 2023 is 556.3p on a fully diluted basis, an increase of
39.4p from 31 January 2023.
As previously announced, the Group has completed two new investments during
the Period. These were into the London-based Managing General Agency, Verve
Risk Services Limited, and the newly incorporated holding company Pantheon
Specialty Limited (since changed to Pantheon Specialty Group Limited) that
concurrently acquired the Lloyd's Broker Denison And Partners Limited. The
Group is pleased to have partnered with such strong management teams and is
looking forward to watching these companies flourish.
The Group also announced the conditional sale of its shareholding in Kentro
Capital Limited ("Kentro") in May 2023 for £51.5m net of all costs. As
subsequently announced on 9 October 2023 all conditions were met and the Group
received £51.5m in proceeds.
We believe the successful sale of Kentro underpins B.P. Marsh's approach to
its valuation methodologies and demonstrates that our track record is both
reliable and reasonable. The sale of Kentro for £51.5m represents an IRR of
24% inclusive of income and fees and a money multiple on the equity investment
of 3.41x.
As the remainder of 2023 continues, the Group is in a strong position from a
cash and new business perspective to capitalise on opportunities both within
our current portfolio and outside of it. As supportive investors, we intend to
ensure that the capital requirement needs of our portfolio can be met to aid
further growth whilst also ensuring we are able to invest in attractive new
business opportunities which fit the Group's criteria.
With the receipt of the proceeds of sale from Kentro, the Board has declared a
special dividend of 2.78p per ordinary share to be paid on 24 November 2023 to
all shareholders on the Register as at 27 October 2023. The Group also reminds
its shareholders that the intention is to pay an aggregate dividend of £2.0m
in 2024, via an interim dividend of £1.0m around February 2024 and a final
dividend of £1.0m in July 2024 subject to Shareholder Approval, and to
replicate this for the subsequent two financial years.
The Board of B.P. Marsh intends to continue to strike a balance between
utilising sale proceeds for investment for long-term capital growth, whilst
providing shareholders with a meaningful ongoing return. The Board continues
to discuss its aim to return meaningful levels of capital to shareholders and
will provide more information in due course.
The Group remains acutely aware of the ongoing difficulties faced by the wider
economic environment. Given the fact that the Group remains debt free and has
a two-pronged investment approach of both equity and loan funding that has
been benchmarked against the base rate, we have managed to avoid being
adversely impacted by the increasing interest rates. The Group has
continuously monitored the impact of the rising cost of living on its
employees and intervened when it felt appropriate.
On 6 September 2023, the Board, on the recommendation of the Remuneration
Committee, adopted the B.P. Marsh & Partners plc 2023 Share Option Plan
("Option Plan"). It is the belief of the Chairman and Managing Director that
the current Team at B.P. Marsh is the best suited to take it into the next
stage of growth and proper incentivisation is key to retaining the talent
within the employee base, and further aligning employees' interests with those
of our shareholders. The Option Plan is a discretionary employee share plan
under which selected employees and executive directors may be granted options,
with a nil-cost, nominal value or market value exercise price, to acquire
shares in the Company if certain pre-determined conditions are satisfied. It
is envisaged that no options will be granted under the Option Plan which would
cause the number of shares to be issued under the Option Plan to exceed 4.5%
of the issued share capital of the Company. Further details of the Option
grants awarded under the Option Plan will be announced in due course.
The Group is pleased with its performance to 31 July 2023, demonstrating once
again the success of its track record and has positioned itself in a place to
be able to utilise the proceeds of sale from Kentro effectively.
Brian Marsh Alice Fouk
Chairman Managing Director
17 October 2023 17 October 2023
Chief Investment Officer's Portfolio Update, New Business and Outlook
As announced on 23 May 2023, the Group agreed to sell its 18.7% shareholding
in Kentro to Brown & Brown, Inc for £51.5m. The sale completed on 9
October 2023 at which point the Group received £51.5m in cash.
The investment and subsequent sale of Kentro illustrates the Group's
capability to source niche investment opportunities, back successful
management teams and successfully realise value for our shareholders. This
disposal delivered an Internal Rate of Return of 23.7% (inclusive of all
income and fees) and a money multiple on the equity investment of 3.41x.
In the six month period to 31 July 2023 the underlying portfolio continued to
perform well.
Over the Period, the valuation of the Group's equity portfolio has increased
by 8.6% adjusting for additions and disposals, with NAV increasing by 7.3%.
Over the past 12 months, the equity portfolio has increased by 16.1% adjusting
for additions and disposals, with NAV increasing by 13.2%.
The Group's cash balance of £51.0m will allow the Group to continue to:-
· identify businesses with strong management teams and good growth
potential;
· help fund, support, and develop these companies so they can deliver
on growth opportunities; and
· produce returns from investments made for our shareholders, via a
blend of ongoing equity growth of the portfolio and regular returns of capital
to shareholders via dividends.
The Group remains focussed on sourcing new business and has an active pipeline
of new business opportunities which are currently being considered.
In the period, the Group completed two new investments, as follows:-
· Verve Risk Services Limited ("Verve") - a London-based Managing
General Agency, which specialises in Professional and Management Liability
business for the insurance industry in the USA, Canada, Bermuda, Cayman
Islands and Barbados.
· Pantheon Specialty Limited ("Pantheon") - A London-based start-up
broker, led by Rob Dowman, a recognised leading London Market Casualty broker,
specialising in complex liability placements worldwide.
B.P. Marsh is well-known in the financial services (sub)sector in which it
specialises, with a focus on Insurance Brokers and Managing General Agencies.
The Group continues to focus on investing in niche SME sectors backed by
experienced and capable management teams, which will create long term growth
and consequential value.
The Group continues to monitor trends in the insurance market, specifically
when it comes to premium rates and M&A.
Across the global property and casualty market rates continue to rise,
although the pace is slowing. In the second quarter of 2023, across the whole
insurance industry, rates increased by 3%. Whilst this is the 23rd consecutive
quarter of rate increases, the increase is down from the peak of 22% in the
fourth quarter of 2020.
Rate increases were relatively consistent across all regions in which our
portfolio operates; rate increases were highest in property classes (+10% in
Q2 2023), more modest in casualty classes (+3% in Q2 2023) and declined across
financial and professional lines (-8% in Q2 2023).
Property rates were mainly driven by costs of reinsurance, strong capacity
demand, limited new entrants to the market and ongoing losses.
Overall, the Group does not anticipate the market returning to the pricing of
the last soft market in the short to medium term.
Turning to the insurance M&A market, whilst the number of transactions are
down from a recent peak in 2021, they are static with 2022 and there remains a
strong demand for specialty MGAs and brokers. Given the niche businesses in
which the Group invests, the business is well positioned to take advantage of
the current M&A market, both on the buy and sale side.
Portfolio Update
New Investments
Within the six month period to 31 July 2023, the Group completed on two
acquisitions:-
Pantheon Specialty Group Limited ("Pantheon")
+ 0.4 pence NAV per share change in the Period
In June 2023, B.P. Marsh subscribed for a 25% stake in Pantheon, a new holding
company established in partnership with Robert Dowman.
Robert Dowman has over 30 years of experience in the insurance industry,
starting his career in 1989 at the Lloyd's Broker Gallagher Plumer where he
spent six years before joining Jardine Insurance Brokers in 1995. Robert then
joined Besso's Casualty Division in 2000, becoming Managing Director of Besso
Global Casualty in 2007 and Joint CEO of Besso Group and Besso Limited in
2015.
With the support of B.P. Marsh, Robert Dowman wants to build a market leading
independent specialist broker across multiple markets.
Since investment, Robert Dowman has hired a number of key individuals. This
team is recognised as leading London Market Casualty brokers, specialising in
complex liability placements worldwide.
Pantheon provided B.P. Marsh with an excellent opportunity to invest in a
business with a well-established and highly experienced leadership team and
strong growth potential over the coming years.
In September 2023, post period end, the Company provided a loan facility of
£3.0m to Pantheon for working capital purposes.
Date of initial investment: June 2023
31 July 2023 valuation: £0.1m
Cost of Equity: £25
Equity stake: 25%
Verve Risk Services Limited ("Verve")
0.0 pence NAV per share change in the Period
In April 2023, the Group announced that it had acquired a 35% Cumulative
Preferred Ordinary shareholding in Verve, a London-based Managing General
Agency.
Verve specialises in Professional and Management Liability business for the
insurance industry in the USA, Canada, Bermuda, Cayman Islands and Barbados.
Since investment, Verve has performed well, outperforming its budget for the
months following the involvement of B.P. Marsh.
The Group looks forward to continuing its support for Verve and its Management
Team over the coming years, supporting the business to achieve its long term
ambitions and goals.
Date of initial investment: April 2023
31 July 2023 valuation: £0.44m
Cost of Equity: £0.4m
Equity stake: 35%
Follow-on Investments and Funding
CBC UK Limited ("CBC") / Paladin Holdings Limited ("Paladin")
+ 30.3 pence NAV per share change in the Period
Paladin, the holding company for CBC, the London based Lloyd's insurance
broker, continues to trade significantly ahead of budget in 2023.
At 31 July 2023 Paladin had achieved £7.5m of consolidated adjusted EBITDA
for seven months' trading against a full year budget of £5.5m, up 183% over
the prior year period (£2.7m).
The growth year-on-year has been achieved through a combination of new hires,
new product lines and organic growth.
From the time of our original investment, through to 31 July 2023, the Group's
valuation in CBC has risen significantly, with the Group's shareholding now
valued at £30.5m.
This represents an equity value uplift of £11.3m or 59% over the prior
valuation at 31 January 2023. Over the period from 31 July 2022, B.P. Marsh's
equity value in CBC has increased by £20.6m or 209%.
The Group has also provided Paladin / CBC with further funding, as follows:-
· In July 2023, the Group lent Paladin £1.5m which, together with its
own funds, enabled CBC to repay its £2.7m loan from Coutts & Co; and
· In August (post period end), the Group lent Paladin a further £0.8m.
This enabled Paladin to exercise a Call Option with the Group over 5.9% of
shares in Paladin which the Group owned. Once acquired, these shares were
cancelled.
Date of initial investment: February 2017
31 July 2023 valuation: £30.5m
Cost of Equity: £0.8m
Equity stake: 47.1%
NAV breakdown by portfolio company
The composition of B.P. Marsh's underlying investment portfolio can be found
here:
The Group's current investments are in the Insurance Intermediary sector, with
the exception of the independent financial adviser LEBC.
These insurance investments are budgeting to produce in the aggregate £1.75bn
of insurance premium during 2023 (2022: £1.32bn), and a breakdown between
brokers and MGAs can be found here:-
*The GWP figures shown are inclusive of Kentro's GWP numbers.
Insurance Brokers
Investments:
Brokers Date of Investment Jurisdiction Equity % at 31 July 2023 Cost of Investment Valuation at 31 July 2023 % of NAV at 31 July 2023 Internal rate of return to 31 July 2023 Current Multiple on Invested Capital
CBC Feb-17 UK 47.06% £803,500 £30,530,000 15.0% 42.72% 38.0x
Lilley Plummer Risks Oct-19 UK 30.00% £308,242 £8,861,000 4.4% 87.52% 28.75x
Pantheon Specialty Jun-23 UK 25.00% £25 £132,000 0.1% 747.70% (NA - over 1000x)
Asia Reinsurance Brokers Apr-16 Singapore 25.00% £1,551,084 £0 0.0% -21.74% -
The Group's Broking investments are budgeting to place over £868.0m of GWP
(*2022: £547.8m), producing over £76.0m (2022: £57.1m) of commission income
in 2023, accessing specialty markets around the world.
Underwriting Agencies / Managing General Agents ("MGAs")
Investments:
MGAs Date of Investment Jurisdiction Equity % at 31 July 2023 Cost of Investment Valuation at 31 July 2023 % of NAV at 31 July 2023 Internal rate of return to 31 July 2023 Current Multiple on Invested Capital
Kentro Aug-14 UK 18.70% £15,126,554 £51,522,000 25.3% 24.28% 3.41x
XPT Jun-17 USA 27.30% £10,138,626 £33,444,000 16.4% 30.62% 3.30x
ATC Jul-18 Australia 25.39% £3,345,229** £18,261,000 9.0% 39.45% 5.45x
SSRU Jan-17 Canada 30.00% £19 £11,870,000 5.8% 101.66% (NA - over 1000x)
Ag Guard Jul-19 Australia 41.00% £1,465,071 £5,390,000 2.6% 44.92% 3.68x
Fiducia Nov-16 UK 35.18% £227,909 £4,301,000 2.1% 23.84% 18.87x
Sterling Jun-13 Australia 19.70% £1,945,411 £3,527,000 1.7% 10.03% 1.81x
Sage Jun-20 USA 30.00% £202,758 £1,599,000 0.8% 98.71% 7.89x
Verve Apr-23 UK 35.00% £430,791 £431,000 0.2% 0.08% 1.0x
The Group's MGAs are budgeting to place c.£880.0m of GWP (*2022: £755.6m),
producing over £108.0m (2022: £94.1m) of commission income in 2022, across
over 30 product areas, on behalf of more than 50 insurers.
IFA Investment
Investment:
IFA Date of Investment Jurisdiction Equity % at 31 July 2023 Cost of Investment Valuation at 31 July 2023 % of NAV at 31 July 2023 Internal rate of return to 31 July 2023 Current Multiple on Invested Capital
LEBC Holdings Limited April-07 UK 59.34% £12,373,657 £15,947,000 7.8% 8.33% 1.29x
LEBC Holdings Limited ("LEBC") - London, United Kingdom
0.0 pence NAV per share change in the Period
LEBC has two wholly owned subsidiaries, Aspira Corporate Solutions Limited
("Aspira") and LEBC Group Limited ("LEBC Group")
Post period end, in August 2023, Aspira acquired the trading assets and
personnel of its sister company, LEBC Group.
This combination brings together the expertise of the two businesses under one
brand and will result in an enhanced service for both its individual and
corporate clients.
The combined entity will continue to provide pensions and investment advice to
more than 1,600 corporate entities and over 15,000 individuals with circa
£4bn of assets under advice.
This consolidation follows a Management-led restructuring process which has
had the full support of B.P. Marsh, being in the best interest of all LEBC
stakeholders.
The transfer of assets has received consent from the Financial Conduct
Authority, following extensive consultation.
Date of initial investment: April 2007
31 July 2023 valuation: £15.9m
Cost of Equity: £12.4m
Equity stake: 59.3%
Portfolio Company Highlights:
Lilley Plummer Risks Limited ("Lilley Plummer")
+ 5.0 pence NAV per share change in the Period
The performance of Lilley Plummer continues to be impressive, which is due to
the growth of its underlying marine portfolio and diversification into
different classes of business, including North American Property.
The strong performance of Lilley Plummer has allowed the business to return
£1.0m to the Group as follows:-
· The redemption of B.P. Marsh's £0.7m of Redeemable Shares; and
· The repayment of B.P. Marsh's £0.3m outstanding loan facility with
Lilley Plummer.
This redemption and repayment demonstrates Lilley Plummer's ability to
continually grow their business from a revenue and EBITDA standpoint, whilst
accumulating strong cash balances. EBITDA has grown from c.£412k in 2020, to
c.£1.95m in 2022, with this growth continuing into 2023.
Lilley Plummer's core Marine book has continued to perform well. The marine
insurance market on the whole has enjoyed a positive 2023 with premium income
increasing and insurer loss ratios tracking much lower than previous years.
The situation with Ukraine and Russia continues to create uncertainty with war
risk premiums remaining high.
Lilley Plummer's new North American Property team have also performed well
since joining the business, significantly outperforming both their revenue and
EBITDA budget.
Lilley Plummer remains actively looking at new opportunities, within and
outside of its core marine offering and the Group is confident regarding its
performance over the course of the current financial year and beyond.
Stewart Specialty Risk Underwriting Ltd ("SSRU")
+ 2.3 pence NAV per share change in the Period
Performance of the Group's Canadian investment, SSRU, remains strong:
· In SSRU's year to 31 December 2022, Gross Written Premium exceeded
CA$ 75m, with the budget of c. CA$ 83m for 2023;
· Given historic growth, the Group expect SSRU to surpass Gross Written
Premium of CA$ 100m in 2024; and
· EBITDA has more than doubled since 2020, from c. CA$ 3.5m to CA$
7.8m, with further growth expected into 2024.
SSRU is focusing on organic growth of existing, highly profitable business
lines, via the increased line sizes afforded by new capacity relationships.
SSRU also continue to pursue M&A opportunities, new business lines and
alternative sources of capacity.
Date of initial investment: January 2017
31 July 2023 valuation: £11.9m
Cost of Equity: £19
Equity stake: 30.0%
XPT Group LLC ("XPT Group")
- 1.8 pence NAV per share change in the Period
XPT Group's performance since its inception continues to be impressive, with
the business expecting to produce Gross Written Premium of c. US$ 700m in its
current financial year to 31 December 2023 (2022: US$ 500m).
XPT's two most recent acquisitions, Cal Inspection Bureau, a premier
underwriting survey and audit business, and Craig and Leicht, a Texas-based
wholesale agency, have both performed well since joining XPT in the first
quarter of 2023.
XPT Group continues to grow via its acquisition strategy, producer hires and
underlying organic growth.
The Group remains positive regarding the ongoing performance of XPT and its
next stage of growth over the years to come.
Date of investment: June 2017
31 July 2023 valuation: £33.4m
Cost of Equity: £10.1m
Equity stake: 27.3%
Dan Topping
Chief Investment Officer
17 October 2023
Group Finance Director Update
The Group's equity investment portfolio continued to increase in value, rising
by 8.6% to £185.8m (31 Jan 2023 £171.5m) adjusting for £0.8m of net
investment realisations. Overall, the NAV of the Group increased by £14.0m
(7.3%) to £203.5m, compared with an increase of £13.2m (7.9%) in the same
period in 2022. Including the dividends paid in February 2023 and July 2023 of
£1.0m in aggregate, this represented an overall return of 7.9% for the
Period.
The lower increase compared with the same period in 2022 was due to foreign
exchange movements.
The Group's results for the Period were impacted by the strengthening of Pound
Sterling in its overseas investments with an overall £3.8m decrease in NAV
attributed to foreign exchange movement, compared with a £5.8m gain in the
same period in 2022. Adjusting for this, the increase for the Period would
have been £17.8m (9.4%) compared with an increase of £7.4m (4.4%) in the
prior period.
Over the year to 31 July 2023 the NAV has increased by £23.7m or 13.2%.
Including the £1.0m aggregate dividend paid in February 2023 and July 2023
this represents an overall return of 13.7%.
The NAV of £203.5m at 31 July 2023 represents a total increase in NAV of
£174.3m since the Group was originally formed in 1990 having adjusted for the
original capital investment of £2.5m, the £10.1m net proceeds raised on AIM
in 2006 and the £16.6m 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 8.9% in Group NAV after running costs, realisations,
losses, distributions and corporation tax since flotation and 11.8% since
1990.
Income from the portfolio for the Period increased significantly from £2.5m
in H1 2022 to £4.0m. Dividend income was £0.6m higher due to strong
investment portfolio performance, whilst loan interest increased by £0.5m as
a result of new loans granted and higher interest rates charged due to UK base
rate increases. Fee income also increased by £0.3m due to one off transaction
and loan arrangement fees charged.
A significant proportion of the increase in operating expenses to £2.8m in
the Period from £2.1m in H1 2022 related to increased staff costs of £0.5m
in line with the Company's financial performance, together with increased
legal and professional fees of £0.2m in relation to the various new
investment and follow-on transactions (although these costs were covered by
one-off fees charged to the relevant investee company).
The Group's strategy is to cover expenses from the portfolio yield. On an
underlying basis, excluding investment activity (unrealised gains on equity
revaluation), this was achieved with a pre-tax profit of £0.8m for the Period
(H1 2022: £0.7m).
Current Assets - Investment assets held for sale
The balance of £52.3m at 31 July 2023 represents £51.5m for the investment
in Kentro which completed on 9 October 2023, and £0.8m for Paladin in
relation to shares held under an Option agreement which were exercised on 14
August 2023. At 31 January 2023 these amounts were included within Equity
Portfolio investments as non-current assets.
Loan Portfolio
In addition to the provision of equity to the investment portfolio, the Group
often provides loan financing either as part of the original investment
structure, or for follow-on funding to enable further growth through
acquisitions or working capital for recruitment and product development.
The loan portfolio increased by £6.3m during the Period to £17.8m at 31 July
2023 (31 July 2022: £9.2m, 31 January 2023: £11.5m). The Group provided
£8.2m in new loans - £4.9m to XPT, £2.0m to Paladin, £0.7m to Denison and
£0.6m to Verve. £1.6m was received in loan repayments - £0.8m from XPT,
£0.5m from Fiducia and £0.3m from Lilley Plummer. In addition there was a
£0.3m reduction due to foreign exchange movements.
Since 31 July 2023 the Group has provided £4.6m in further loans, including
£3.0m to Pantheon and £0.8m to Paladin, and the loan portfolio balance is
currently £22.4m.
Liquidity
As at the Period-end, the Group had total available cash and treasury funds of
£4.3m (31 Jan 2023: £12.1m). Between 31 January 2023 and 31 July 2023 the
Group provided loans to the investment portfolio of £8.2m, In addition, the
Group paid dividends totalling £1.0m and bought back £0.7m in shares.
During the Period the Group also received £0.7m of proceeds from the
redemption of preferred shares held in Lilley Plummer and £1.6m in loan
repayments.
Since 31 July 2023 the Group has provided a further £4.6m in loans as
follow-on funding into the existing portfolio and received £0.8m in net
realisations relating to shares in Paladin held by the Group under a call
option arrangement, which were bought back by Paladin.
On 9 October 2023 the Group completed the sale of its 18.7% shareholding in
Kentro for £51.5m. Post a loan granted on 9 October 2023 the Group's current
available cash is £51.0m.
The Group is debt free.
Diluted NAV per share
The NAV per share at 31 July 2023 is 567.3p (31 July 2022: 499.0p, 31 January
2023: 526.2p). As part of a long-term share incentive plan for certain
directors and employees of the Group, in June 2018 1,461,302 shares were
issued to an Employee Benefit Trust at 281 pence per share.
On 12 June 2021 (the "vesting date") the performance criteria were met for
1,206,888 of 1,443,147 shares held under joint share ownership arrangements
within the Employee Benefit Trust, after which the members of the scheme
became joint beneficial owners of the shares and became entitled to any gain
on sale of the shares in excess of 312.6 pence per share.
Whilst these shares remain within the Employee Benefit Trust, they do not have
voting or dividend rights. However, if the shares are sold in the future in
excess of 281 pence per share, the Group would be entitled to receive
£4,055,243 and these shares would become entitled to voting and dividend
rights and therefore would become dilutive. Overall, this would therefore
dilute the NAV per share as at 31 July 2023 to 556.3p (31 July 2022: 490.8p,
31 January 2023: 516.9p).
Jon Newman
Group Finance Director
17 October 2023
Investments
As at 31 July 2023 the Group's equity interests were as follows:
Ag Guard PTY Limited
(www.agguard.com.au (http://www.agguard.com.au/) )
Ag Guard is a Managing General Agency, which provides insurance to the
agricultural sector, based in Sydney, Australia. The Group holds its
investment through Ag Guard's Parent Company, Agri Services Company PTY
Limited.
Date of investment: July 2019
Equity stake: 41.0%
31 July 2023 valuation: £5,390,000
Asia Reinsurance Brokers (Pte) Limited
(www.arbrokers.asia)
ARB is an independent specialist reinsurance and insurance risk solutions
provider headquartered in Singapore.
Date of investment: April 2016
Equity stake: 25.0%
31 July 2023 valuation: £0
ATC Insurance Solutions PTY Limited
(www.atcis.com.au)
ATC is a Managing General Agency and Lloyd's Coverholder, specialising in
accident & health, construction & engineering, trade pack, motor and
sports insurance headquartered in Melbourne, Australia.
Date of investment: July 2018
Equity stake: 25.6%
31 July 2023 valuation: £18,261,000
CBC UK Limited
(www.cbcinsurance.co.uk)
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 holds its investment in CBC through CBC's parent
company, Paladin Holdings Limited.
Date of investment: February 2017
Equity stake: 41.2%
31 July 2023 valuation: £30,530,000
Criterion Underwriting (Pte) Limited
Criterion was established to provide specialist insurance products to a
variety of clients in the cyber, financial lines and marine sectors in Far
East Asia, based in Singapore.
Date of investment: July 2018
Equity stake: 29.4%
31 July 2023 valuation: £0
The Fiducia MGA Company Limited
(www.fiduciamga.co.uk)
Fiducia is a UK marine cargo Underwriting Agency and 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.
Date of investment: November 2016
Equity stake: 35.2%
31 July 2023 valuation: £4,301,000
LEBC Holdings Limited
(www.lebc-group.com)
LEBC is an Independent Financial Advisory company providing services to
individuals, corporates and partnerships, principally in employee benefits,
investment and life product areas.
Date of investment: April 2007
Equity stake: 59.3%
31 July 2023 valuation: £15,947,000
Lilley Plummer Risks Ltd
(www.lprisks.co.uk)
Lilley Plummer Risks is a specialist marine Lloyd's broker that provides
products across the marine insurance market. The Group holds its investment in
Lilley Plummer Risks through its holding company Lilley Plummer Holdings
Limited.
Date of investment: October 2019
Equity stake: 30.0%
31 July 2023 valuation: £8,861,000
Kentro Capital Limited
(www.kentrocapital.com)
Kentro is an independent Managing General Agency and Broker specialising 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 globally.
Date of investment: August 2014
Equity stake: 18.7%
31 July 2023 valuation: £51,522,000
Pantheon Specialty Group Limited
(www.pantheonspecialty.com)
Pantheon is a holding company established in partnership with Robert Dowman.
Pantheon acquired 100% of the share capital of the Lloyd's broker Denison and
Partners Limited. With the support of B.P Marsh, Robert Dowman is looking to
build a market leading independent specialist broker, across multiple markets.
Date of investment: June 2023
Equity stake: 25.0%
31 July 2023 valuation: £132,000
Sage Program Underwriters, Inc.
(www.sageuw.com)
Sage provides specialist insurance products to niche industries, initially in
the inland delivery and field sport sectors based in Bend, Oregon.
Date of Investment: June 2020
Equity Stake: 30.0%
31 July 2023 Valuation: £1,599,000
Stewart Specialty Risk Underwriting Ltd
(www.ssru.ca)
SSRU is a Managing General Agency, providing insurance solutions to a wide
array of clients in the construction, manufacturing, onshore energy, public
entity and transportation sectors based in Toronto, Canada.
Date of investment: January 2017
Equity stake: 30.0%
31 July 2023 valuation: £11,870,000
Sterling Insurance PTY Limited
(www.sterlinginsurance.com.au)
Sterling is a specialist Underwriting Agency offering a range of insurance
solutions within the Liability sector, specialising in niche markets including
mining, construction and demolition based in Sydney Australia. The Group holds
its investment in Sterling via a joint venture with Besso Insurance Group
Limited, Neutral Bay Investments Limited.
Date of investment: June 2013
Equity stake: 49.9%
31 July 2023 valuation: £3,527,000
Verve Risk Services Limited
Verve is a London based Managing General Agency specialising in Professional
and Management Liability for the insurance industry. Verve operates in the
USA, Canada, Bermuda, Cayman Islands and Barbados.
Date of investment: April 2023
Equity stake: 35.0%
31 July 2023 valuation: £431,000
XPT Group LLC
(www.xptspecialty.com)
XPT is a wholesale insurance broking and Underwriting Agency platform across
the U.S. Specialty Insurance Sector operating from many locations in the
United States of America.
Date of investment: June 2017
Equity stake: 27.3%
31 July 2023 valuation: £33,444,000
These investments have been valued in accordance with the accounting policies
on Investments set out in note 1 of the Half Year Consolidated Financial
Statements.
Forward-looking statements:
Certain statements in this announcement are forward-looking statements. In
some cases, these forward looking statements can be identified by the use of
forward looking terminology including the terms "anticipate", "believe",
"intend", "estimate", "expect", "may", "will", "seek", "continue", "aim",
"target", "projected", "plan", "goal", "achieve" and words of similar meaning
or in each case, their negative, or other variations or comparable
terminology. Forward-looking statements are based on current expectations and
assumptions and are subject to a number of known and unknown risks,
uncertainties and other important factors that could cause results or events
to differ materially from what is expressed or implied by those statements.
Many factors may cause actual results, performance or achievements of B.P.
Marsh to be materially different from any future results, performance or
achievements expressed or implied by the forward-looking statements. Important
factors that could cause actual results, performance or achievements of B.P.
Marsh to differ materially from the expectations of B.P. Marsh, include, among
other things, general business and economic conditions globally, industry
trends, competition, changes in government and changes in regulation and
policy, changes in its business strategy, political and economic uncertainty
and other factors. As such, undue reliance should not be placed on
forward-looking statements. Any forward-looking statement is based on
information available to B.P. Marsh as of the date of the statement. All
written or oral forward-looking statements attributable to B.P. Marsh are
qualified by this caution. Other than in accordance with legal and regulatory
obligations, B.P. Marsh undertakes no obligation to publicly update or revise
any forward-looking statement, whether as a result of new information, future
events or otherwise. Nothing in this announcement should be regarded as a
profit forecast.
Half Year Consolidated Financial Statements
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE PERIOD ENDED 31(ST) JULY 2023
Notes Unaudited Unaudited Audited
6months to 6 months to Year to
31(st) July 2023 31(st) July 2022 31(st) January 2023
£'000 £'000 £'000 £'000 £'000 £'000
GAINS ON INVESTMENT
Realised (losses) / gains on disposal of equity investments (net of costs) (41) 155 155
Release of provision made against equity investments and loans 12 7 30
Unrealised gains on equity investment revaluation 4 14,755 16,212 27,275
14,726 16,374 27,460
INCOME
Dividends 2,280 1,636 3,119
Income from loans and receivables 815 326 749
Fees receivable 860 580 1,051
3,955 2,542 4,919
OPERATING INCOME 18,681 18,916 32,379
Operating expenses (2,844) (2,066) (4,889)
OPERATING PROFIT 15,837 16,850 27,490
Financial income 95 77 130
Financial expenses (25) (42) (88)
Exchange movements (349) 122 58
(279) 157 100
PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION 15,558 17,007 27,590
Income taxes (6) (2,910) (3,747)
PROFIT ON ORDINARY ACTIVITIES AFTER TAXATION ATTRIBUTABLE TO EQUITY HOLDERS 7 £15,552 £14,097 £23,843
TOTAL COMPREHENSIVE INCOME FOR THE PERIOD 7 £15,552 £14,097 £23,843
Earnings per share - basic (pence) 3 43.3p 39.1p 66.2p
Earnings per share - diluted (pence) 3 41.6p 37.6p 63.6p
The result for the period is wholly attributable to continuing activities.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31(ST) JULY 2023
(Company Number: 05674962)
Unaudited Unaudited Audited
Notes 31(st) July 2023 31(st) July 2022 31(st) January 2023
£'000 £'000 £'000 £'000 £'000 £'000
ASSETS
NON-CURRENT ASSETS
Property, plant and equipment 72 90 79
Right-of-use asset 590 754 671
Investments - equity portfolio 4 133,489 160,398 171,461
Loans and receivables 13,741 4,149 8,120
147,892 165,391 180,331
CURRENT ASSETS
Investments - assets held for sale 52,326 - -
Investments - treasury portfolio 5 80 2,563 591
Trade and other receivables 6,415 6,719 5,283
Cash and cash equivalents 4,257 11,558 11,564
63,078 20,840 17,438
LIABILITIES
NON-CURRENT LIABILITIES
Lease liabilities (505) (684) (596)
Deferred tax liabilities 9 (5,604) (4,791) (5,631)
(6,109) (5,475) (6,227)
CURRENT LIABILITIES
Trade and other payables (1,226) (820) (1,830)
Lease liabilities (180) (171) (175)
(1,406) (991) (2,005)
NET ASSETS £203,455 £179,765 £189,537
CAPITAL AND RESERVES - EQUITY
Called up share capital 3,747 3,747 3,747
Share premium account 29,348 29,346 29,350
Fair value reserve 121,291 96,286 106,509
Reverse acquisition reserve 393 393 393
Capital redemption reserve 7 7 7
Capital contribution reserve 72 72 72
Retained earnings 48,597 49,914 49,459
SHAREHOLDERS' FUNDS - EQUITY 7 £203,455 £179,765 £189,537
Net Asset Value per share - undiluted (pence) 3 567.3p 499.0p 526.2p
Net Asset Value per share - diluted (pence) 3 556.3p 490.8p 516.9p
The Half Year Consolidated Financial Statements were approved by the Board of
Directors and authorised for issue on 16(th) October 2023
and signed on its behalf by:
B.P. Marsh & J.S. Newman
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE PERIOD ENDED 31(ST) JULY 2023
Unaudited Unaudited
Audited
31(st) July 2023 31(st) July 2022 31(st) January 2023
£'000 £'000 £'000
Cash (used by) / from operating activities
Income from loans to investee companies 815 326 749
Dividends 2,280 1,636 3,119
Fees received 860 580 1,051
Operating expenses (2,844) (2,066) (4,889)
Net corporation tax paid (33) (17) (14)
Purchase of equity investments (Note 4) (431) (2,941) (2,941)
Net proceeds from sale of equity investments 791 8,259 8,259
Net loan (payments to) / repayments from investee companies (6,592) 1,300 (1,039)
Adjustment for non-cash share incentive plan 58 62 104
Exchange movement (49) 40 (36)
(Increase) / decrease in receivables (447) 126 (35)
(Decrease) / increase in payables (603) (851) 160
Depreciation and amortisation 94 96 193
Net cash (used by) / from operating activities (6,101) 6,550 4,681
Net cash from / (used by) investing activities
Purchase of property, plant and equipment (7) (9) (11)
Purchase of treasury investments net of cash and cash equivalents (Note 5) - (2,506) (8,371)
Net proceeds from the sale of treasury investments net of cash and cash 600 - 7,867
equivalents (Note 5)
Net cash from / (used by) investing activities 593 (2,515) (515)
Net cash used by financing activities
Financial income - 2 2
Financial expenses (20) (23) (47)
Net decrease in lease liabilities (87) (83) (168)
Dividends paid (1,000) (1,001) (1,001)
Payments made to repurchase company shares (692) - (16)
Net cash used by financing activities (1,799) (1,105) (1,230)
Change in cash and cash equivalents (7,307) 2,930 2,936
Cash and cash equivalents at beginning of the period 11,564 8,628 8,628
Cash and cash equivalents at end of period £4,257 £11,558 £11,564
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 PERIOD ENDED 31(ST) JULY 2023
Unaudited Unaudited Audited
6 months to 6 months to Year to
31(st) July 2023 31(st) July 2022 31(st) January 2023
£'000 £'000 £'000
Opening total equity 189,537 166,607 166,607
Comprehensive income for the period 15,552 14,097 23,843
Dividends paid (1,000) (1,001) (1,001)
Repurchase of company shares (692) - (16)
Share incentive plan 58 62 104
Total equity £203,455 £179,765 £189,537
Refer to Note 7 for detailed analysis of the changes in the components of
equity.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 31(ST) JULY 2023
1. ACCOUNTING POLICIES
Basis of preparation of financial statements
These consolidated financial statements have been prepared in accordance with
UK-adopted international accounting standards, 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
(£'000) except where otherwise indicated.
The preparation of financial statements in conformity with UK-adopted
international accounting standards 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 half year 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 two trading subsidiaries, B.P. Marsh & Company 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 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 half year consolidated financial statements were approved by the Board
on 16(th) October 2023. They have not been audited nor reviewed by the Group's
Auditors, as is the case with the comparatives to 31(st) July 2022, 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 31(st) January 2023. 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 two
subsidiary investment entities, B.P. Marsh & Company Limited and B.P.
Marsh (North America) Limited, that provide services that relate to the
Company's investment activities. The results of these two subsidiaries,
together with other subsidiaries (except for 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 LEBC. Instead the investment in LEBC is 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.
On 12(th) June 2021 (the "vesting date") the performance criteria was met for
1,206,888 of 1,461,302 shares held under joint share ownership arrangements
within the Employee Benefit Trust, after which the members of the scheme
became joint beneficial owners of the shares and became entitled to any gain
on sale of the shares in excess of 312.6 pence per share. Whilst these shares
remain within the Employee Benefit Trust, they do not have voting or dividend
rights. However, if the shares are sold from the Employee Benefit Trust in the
future in excess of 281 pence per share, the Group would be entitled to
receive £4,106,259 in total. These shares would then, post-sale, have voting
and dividend rights attached, such that they would become fully dilutive for
the Group.
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.
Under the rules of the SIP, eligible employees can each be granted up to
£3,600 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 £1,800 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 £3,600 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 an 'Investments - Assets 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
recognised gains and losses arising from changes in fair value are shown
within the retained earnings 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 lessees to recognise 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 foreign
exchange 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.
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
realised and 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 1: Geographic segment 2: Group
UK Non-UK
Unaudited Unaudited Unaudited Unaudited Unaudited Unaudited
6 months to 31(st) July 6 months to 31(st) July 6 months to 31(st) July 6 months to 31(st) July 6 months to 31(st) July 6 months to 31(st) July
2023 2022 2023 2022 2023 2022
£'000 £'000 £'000 £'000 £'000 £'000
Operating income 15,432 (851) 3,249 19,767 18,681 18,916
Operating expenses (1,532) (1,019) (1,312) (1,047) (2,844) (2,066)
Segment operating profit / (loss) 13,900 (1,870) 1,937 18,720 15,837 16,850
Financial income 51 38 44 39 95 77
Financial expenses (13) (21) (12) (21) (25) (42)
Exchange movements (43) 32 (306) 90 (349) 122
Profit / (loss) before tax 13,895 (1,821) 1,663 18,828 15,558 17,007
Income taxes - - (6) (2,910) (6) (2,910)
Profit / (loss) for the period £13,895 £(1,821) £1,657 £15,918 £15,552 £14,097
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 and unrealised income generated
by the Group during the period:
Total net operating income attributable to the investee company % of total realised and unrealised operating income Reportable geographic segment
(£'000)
Unaudited Unaudited Unaudited Unaudited Unaudited Unaudited
6 months to 31(st) July 6 months to 31(st) July 6 months to 31(st) July 6 months to 31(st) July 6 months to 31(st) July 6 months to 31(st) July
2023 2022 2023 2022 2023 2022
Investee Company
Paladin Holdings Limited(1) 11,984 - 64 - 1 -
Lilley Plummer Holdings Limited(1) 2,072 - 11 - 1 -
XPT Group LLC(1) - 8,939 - 47 - 2
ATC Insurance Solutions PTY Limited(1) - 4,709 - 25 - 2
Stewart Specialty Risk Underwriting Limited(1) - 3,697 - 20 - 2
Agri Services Company PTY Limited(1) - 1,938 - 10 - 2
(1)There are no disclosures for XPT Group LLC, ATC Insurance Solutions PTY
Limited, Stewart Specialty Risk Underwriting Limited and Agri Services Company
PTY Limited in the current period as the income derived from these investee
companies did not exceed the 10% threshold prescribed by IFRS 8. There are
also no disclosures shown for Paladin Holdings Limited and Lilley Plummer
Holdings Limited in the prior period as the income derived from these investee
companies did not exceed the 10% threshold prescribed by IFRS 8 in that
period.
Geographic segment 1: Geographic segment 2: Group
UK Non-UK
Unaudited Unaudited Unaudited Unaudited Unaudited Unaudited
6 months to 31(st) July 6 months to 31(st) July 6 months to 31(st) July 6 months to 31(st) July 6 months to 31(st) July 6 months to 31(st) July
2023 2022 2023 2022 2023 2022
£'000 £'000 £'000 £'000 £'000 £'000
Non-current assets
Property, plant and equipment 43 51 29 39 72 90
Right-of-use asset 355 428 235 326 590 754
Investments - equity portfolio 59,398 91,180 74,091 69,218 133,489 160,398
Loans and receivables 8,291 2,469 5,450 1,680 13,741 4,149
68,087 94,128 79,805 71,263 147,892 165,391
Current assets
Investments - assets held for sale 52,326 - - - 52,326 -
Investments - treasury portfolio 80 2,563 - - 80 2,563
Trade and other receivables 5,077 6,187 1,338 532 6,415 6,719
Cash and cash equivalents 4,257 11,558 - - 4,257 11,558
61,740 20,308 1,338 532 63,078 20,840
Total assets 129,827 114,436 81,143 71,795 210,970 186,231
Non-current liabilities
Lease liabilities (304) (389) (201) (295) (505) (684)
Deferred tax liabilities - - (5,604) (4,791) (5,604) (4,791)
(304) (389) (5,805) (5,086) (6,109) (5,475)
Current liabilities
Trade and other payables (1,223) (727) (3) (93) (1,226) (820)
Lease liabilities (108) (97) (72) (74) (180) (171)
(1,331) (824) (75) (167) (1,406) (991)
Total liabilities (1,635) (1,213) (5,880) (5,253) (7,515) (6,466)
Net assets £128,192 £113,223 £75,263 £66,542 £203,455 £179,765
Additions to property, plant and equipment
3 5 4 4 7 9
Depreciation and amortisation of property, plant and equipment
(56) (55) (38) (41) (94) (96)
Release of provision against investments and loans
12 7 - - 12 7
Cash flow arising from:
Operating activities (6,638) (896) 537 7,446 (6,101) 6,550
Investing activities 593 (2,515) - - 593 (2,515)
Financing activities (1,799) (1,105) - - (1,799) (1,105)
Change in cash and cash equivalents
(7,844) (4,516) 537 7,446 (7,307) 2,930
Geographic segment 1: Geographic segment 2: Group
UK Non-UK
Audited Audited Audited
31(st) January 31(st) January 31(st) January
2023 2023 2023
£'000 £'000 £'000
Operating income 8,217 24,162 32,379
Operating expenses (2,759) (2,130) (4,889)
Segment operating profit 5,458 22,032 27,490
Financial income 73 57 130
Financial expenses (50) (38) (88)
Exchange movements 30 28 58
Profit before tax 5,511 22,079 27,590
Income taxes - (3,747) (3,747)
Profit for the year £5,511 £18,332 £23,843
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 and unrealised income generated
by the Group during the period:
Total net operating income attributable to the investee company % of total realised and unrealised operating income Reportable geographic segment
(£'000)
Audited Audited Audited
31(st) January 31(st) January 31(st) January
2023 2023 2023
Investee Company
XPT Group LLC 13,594 42 2
Paladin Holdings Limited 10,304 32 1
Lilley Plummer Holdings Limited 5,186 16 1
ATC Insurance Solutions PTY Limited 4,726 15 2
Stewart Specialty Risk Underwriting Limited 3,211 10 2
Geographic segment 1: Geographic segment 2: Group
UK Non-UK
Audited Audited Audited
31(st) January 31(st) January 31(st) January
2023 2023 2023
£'000 £'000 £'000
Non-current assets
Property, plant and equipment 45 34 79
Right-of-use asset 386 285 671
Investments - equity portfolio 98,704 72,757 171,461
Loans and receivables 5,712 2,408 8,120
104,847 75,484 180,331
Current assets
Investments - assets held for sale - - -
Investments - treasury portfolio 591 - 591
Trade and other receivables 4,777 506 5,283
Cash and cash equivalents 11,564 - 11,564
16,932 506 17,438
Total assets 121,779 75,990 197,769
Non-current liabilities
Lease liabilities (343) (253) (596)
Deferred tax liabilities - (5,631) (5,631)
(343) (5,884) (6,227)
Current liabilities
Trade and other payables (1,733) (97) (1,830)
Lease liabilities (101) (74) (175)
(1,834) (171) (2,005)
Total liabilities (2,177) (6,055) (8,232)
Net assets £119,602 £69,935 £189,537
Additions to property, plant and equipment 6 5 11
Depreciation and amortisation of property, plant and equipment (111) (82) (193)
Release of provision against investments and loans 30 - 30
Cash flow arising from:
Operating activities (1,812) 6,493 4,681
Investing activities (515) - (515)
Financing activities (1,230) - (1,230)
Change in cash and cash equivalents 6,493 2,936
(3,557)
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 2023 and 2022 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 2023 31(st) July 2022 31(st) January 2023
% % %
UK 36 38 37
Non-UK 64 62 63
Total 100 100 100
3. EARNINGS AND NET ASSET VALUE PER SHARE FROM CONTINUING
OPERATIONS ATTRIBUTABLE TO THE EQUITY SHAREHOLDERS
Unaudited Unaudited Audited
31(st) July 2023 31(st) July 2022 31(st) January 2023
£'000 £'000 £'000
Earnings
Earnings for the purposes of basic and diluted earnings per share being total 15,552 14,097 23,843
comprehensive income attributable to equity shareholders
Earnings per share - basic
43.3p 39.1p 66.2p
Earnings per share - diluted 41.6p 37.6p 63.6p
Number of shares Number Number Number
Weighted average number of ordinary shares for the purposes of basic earnings
per share
35,958,783 36,013,276 36,017,964
Number of dilutive shares under option 1,443,147 1,443,147
1,443,147
Weighted average number of ordinary shares for the purposes of dilutive
earnings per share
37,401,930 37,456,423 37,461,111
Unaudited Unaudited Audited
31(st) July 2023 31(st) July 2022 31(st) January 2023
£'000 £'000 £'000
Net Asset Value
Net Asset Value for the purposes of basic Net Asset Value per share being 203,455 179,765 189,537
total Net Asset Value attributable to equity shareholders
Net Asset Value for the purposes of diluted Net Asset Value per share being 207,510 183,871 193,643
total Net Asset Value attributable to equity shareholders
Net Asset Value per share - basic
567.3p 499.0p 526.2p
Net Asset Value per share - diluted 556.3p 490.8p 516.9p
Number of shares Number Number Number
Number of ordinary shares for the purposes of basic Net Asset Value per share
35,860,775 36,022,853 36,018,003
Number of dilutive shares under option 1,443,147 1,443,147
1,443,147
Number of ordinary shares for the purposes of dilutive Net Asset Value per
share
37,303,922 37,466,000 37,461,150
During the period the Company paid a total of £691,820, including commission,
in order to repurchase 190,008 ordinary shares at an average price of 363
pence per share (6 months to 31(st) July 2022: no share repurchases undertaken
and 12 months to 31(st) January 2023: the Company paid £16,191, including
commission, to repurchase 4,850 ordinary shares at an average price of 330
pence per share).
Ordinary shares held by the Company in Treasury
Movement of ordinary shares held in Treasury: Unaudited Unaudited Audited
31(st) July 2023 31(st) July 2022 31(st) January 2023
Number Number Number
Opening total ordinary shares held in Treasury 4,850 9,542 9,542
Ordinary shares repurchased into Treasury during the period 190,008 - 4,850
Ordinary shares transferred to the B.P. Marsh SIP Trust during the period (32,780) (9,542) (9,542)
Total ordinary shares held in Treasury at period end 162,078 - 4,850
The Treasury shares do not have voting or dividend rights and have therefore
been excluded for the purposes of calculating earnings per share and basic Net
Asset Value per share.
The repurchase of the ordinary shares is borne from the Group's commitment to
reduce share price discount to Net Asset Value. As outlined in the Group's
Share Buy-Back Policy announcement on 16(th) January 2023, its policy has been
throughout the period, subject to ordinary shares in the Company being
available to purchase, to be able to buy small parcels of shares (for up to a
maximum aggregate consideration of £1,000,000) at a price representing a
discount of at least 20% to the most recently announced Net Asset Value per
share and place them into Treasury. Prior to 16(th) January 2023, and in
accordance with its Share Buy-Back Policy announcement on 17(th) July 2019,
the Group's policy was to buy back shares when the share price was below 15%
of its published Net Asset Value.
On 12(th) June 2021 (the "vesting date") the performance criteria was met for
1,206,888 of 1,461,302 shares held under joint share ownership arrangements
(Note 10) within an Employee Benefit Trust, after which the members of the
scheme became joint beneficial owners of the shares and therefore became
entitled to any gain on sale of the shares in excess of 312.6 pence per share.
There were 254,414 shares where the performance criteria was not met on the
vesting date that had been forfeited by departing employees and which remained
unallocated within the Employee Benefit Trust as at 31(st) January 2022.
During the 6 months to 31(st) July 2022, 18,155 of the 254,414 unallocated
shares within the Employee Benefit Trust were transferred to the B.P. Marsh
SIP Trust ("SIP Trust") to be used as part of the 22-23 SIP awards made in
April 2022. Following this transfer and as at 31(st) July 2023 there were
1,443,147 shares held within the Employee Benefit Trust, of which there were
236,259 shares where the performance criteria was not met on the vesting date
and which remained unallocated. The Employee Benefit Trust remains the owner
of these unallocated shares.
The weighted average number of shares used for the purposes of calculating the
basic earnings per share, net asset value and net asset value per share of the
Group excludes the 1,443,147 shares currently held within the Employee Benefit
Trust as these shares do not have voting rights or dividend rights whilst they
are held within this Employee Benefit Trust. The Group net asset value has
also excluded the economic right the Group has to the first 281 pence per
share (£4,055,243) on the 1,443,147 shares held within the Employee Benefit
Trust for the same reasons. On this basis the current undiluted net asset
value per share is 567.3 pence for the Group. When the joint share ownership
arrangements are eventually exercised, although this would increase the number
of shares in issue entitled to voting and dividend rights, this would also
increase the Group's net asset value by £4,055,243. The diluted net asset
value per share is therefore 556.3 pence.
The diluted weighted average number of ordinary shares at 31st July 2023 has
been calculated by proportioning the 1,443,147 shares held under joint share
ownership arrangements from the vesting date over the period.
The decrease to the weighted average number of ordinary shares between the
2022 and 2023 half year periods is mainly attributable to the 190,008 ordinary
shares repurchased into Treasury during the period, offset by the 32,780
ordinary shares transferred from Treasury to the SIP Trust during the period
that have been treated as re-issued for the purposes of calculating earnings
per share.
32,780 ordinary shares (comprising 32,780 ordinary shares transferred from
Treasury to the SIP Trust in April 2023) were allocated to the participating
employees as Free, Matching and Partnership shares under the share incentive
plan arrangement on 14(th) April 2023 (Note 10).
4. NON-CURRENT INVESTMENTS - EQUITY PORTFOLIO
Group Investments Unaudited
31(st) July 2023
Continuing investments Current Assets - Investments held for sale Total
£'000 £'000 £'000
At valuation
At 1(st) February 171,461 - 171,461
Transfers between categories (52,326) 52,326 -
Additions 431 - 431
Disposals (832) - (832)
Unrealised gains in this period 14,755 - 14,755
At period end £133,489 £52,326 £185,815
At cost
At 1(st) February 59,321 - 59,321
Transfers between categories (12,927) 12,927 -
Additions 431 - 431
Disposals (832) - (832)
At period end £45,993 £12,927 £58,920
Unaudited
31(st) July 2022
Continuing investments Current Assets - Investments held for sale Total
£'000 £'000 £'000
At valuation
At 1(st) February 141,245 8,104 149,349
Additions 2,941 - 2,941
Disposals - (8,104) (8,104)
Unrealised gains in this period 16,212 - 16,212
At period end £160,398 £ - £160,398
At cost
At 1(st) February 56,380 6,096 62,476
Additions 2,941 - 2,941
Disposals - (6,096) (6,096)
At period end £59,321 £ - £59,321
Audited
31(st) January 2023
Continuing investments Current Assets - Investments held for sale Total
£'000 £'000 £'000
At valuation
At 1(st) February 2022 141,245 8,104 149,349
Transfers between categories - - -
Additions 2,941 - 2,941
Disposals - (8,104) (8,104)
Unrealised gains in this period 27,275 - 27,275
At 31(st) January 2023 £171,461 £ - £171,461
At cost
At 1(st) February 2022 56,380 6,096 62,476
Transfers between categories - - -
Additions 2,941 - 2,941
Disposals - (6,096) (6,096)
At 31(st) January 2023 £59,321 £ - £59,321
The additions relate to the following transactions in the period:
On 28(th) April 2023 the Group acquired a 35% cumulative preferred ordinary
equity stake in Verve Risk Services Limited ("Verve") for consideration of
£430,791. Verve is a London-based Managing General Agency which specialises
in Professional and Management Liability business for the insurance industry
in the USA, Canada Bermuda, Cayman Islands and Barbados. The Group also
provided Verve with a loan facility of £569,209 which was drawn down in full
on completion. The aggregate funding of £1,000,000 was utilised as part of a
management buy-out of Verve Risk Partners LLP, an underwriting cell within
Castel Underwriting Agencies Limited.
On 21(st) June 2023 the Group acquired a 25% cumulative preferred ordinary
equity stake in Pantheon Specialty Limited ("Pantheon") for consideration of
£25. Pantheon is a new holding company, established in Partnership with
Robert Dowman, a leading London Market Casualty broker specialising in the
larger, more complex liability placements across the world.
The disposals relate to the following transactions in the period:
On 19(th) June 2023 the Group received £700,000 in respect of the 700,000
redeemable preferred shares it held in Lilley Plummer Holdings Limited
("Lilley Plummer"), following their redemption by Lilley Plummer as part of a
capital restructure. As at 31(st) July 2023 the Group's equity holding in
Lilley Plummer was 30%, which remained unchanged following this redemption.
On 21(st) June 2023, and upon the establishment of Pantheon noted under the
additions above, Pantheon acquired a 100% shareholding in the existing Lloyd's
Broker, Denison and Partners Limited ("Denison and Partners"), including the
Group's entire 40% equity holding. No cash consideration was received by the
Group for the disposal, which represented a net loss of £132,000 (Note 6)
based upon the Group's carrying value of the investment of £132,000 as at
31(st) January 2023. However, as part of the transaction, the Group received a
40% equity holding in New Denison Limited ("New Denison"). New Denison was
incorporated on 20(th) June 2023 and is currently a dormant company until such
time that it receives its own regulatory approvals.
The amounts included under 'Current Assets - Investments held for sale' in
respect of the current period relate to two equity investment disposals that
have completed since 31(st) July 2023.
On 11(th) August 2023 Paladin Holdings Limited ("Paladin") exercised a Call
Option arrangement with the Group over 5.88% of shares in Paladin which the
Group held. The Group received £804,000, which was in line with the carrying
value of the shares included within the fair value of the Group's investment
of Paladin as at 31(st) July 2023 and represented an overall gain of £4,000
above the original cost of the shares of £800,000. Pursuant to the share
transfer, Paladin cancelled the shares and as a consequence of the transaction
the Group's shareholding in Paladin reduced from 47.06% to 43.75%. The
transaction was funded through the Group lending Paladin a further £804,000.
As at 31(st) July 2023 total loans to Paladin amounted to £5,096,500 and
following the aforementioned transaction stood at £5,900,500 at the date of
this report.
On 9(th) October 2023 the Group completed the disposal of its entire 18.7%
shareholding in Kentro Capital Limited ("Kentro"), pursuant to an agreement
dated 22(nd) May 2023 by which Brown & Brown, Inc ("Brown & Brown"),
one of the largest US-based insurance intermediaries, agreed to acquire the
entire issued share capital of Kentro. On completion, the Group received
proceeds of £51,522,000 (net of all transaction costs) which was in line with
the carrying value of the Group's investment in Kentro of £51,522,000 as at
31(st) January 2023 and represented an overall gain of £36,395,446 above the
cost of investment. As part of the agreement, on completion the Group provided
a loan facility of £524,254 to Brown & Brown Holdco UK Limited, alongside
other major selling shareholders, in respect of certain identified indemnities
under the Sale and Purchase Agreement. Whilst the loan capital could reduce
due to potential claims, at this time the Group expects full repayment.
The unquoted investee companies, which are registered in England except Asia
Reinsurance Brokers Pte Limited (Singapore), Stewart Specialty Risk
Underwriting Ltd (Canada), XPT Group 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 and profit/(loss)
Name of company Capital available to reserves for the year Principal activity
£ £
Agri Services Company PTY Limited 41.00 30.06.22 1,865,711 359,585 Holding company for specialist Australian agricultural Managing General Agency
Asia Reinsurance Brokers Pte Limited 25.00 31.05.22 1,936,111 (309,209) Specialist reinsurance broker
ATC Insurance Solutions PTY Limited 25.56 30.06.22 12,408,535 3,403,228 Specialist Australian Managing General Agency
Criterion Underwriting Pte Limited(1) 29.40 31.05.20 (445,842) (32,019) Specialist Singaporean Managing General Agency
EC3 Brokers Group Limited 35.00 31.12.20 (9,705,910) (6,757,003) Investment holding company
The Fiducia MGA Company Limited 35.18 31.12.22 (165,860) 772,640 Specialist UK Marine Cargo Underwriting Agency
Kentro Capital Limited 18.70 31.12.22 20,771,158 547,177 Specialist Managing General Agency
LEBC Holdings Limited 59.34 30.09.22 7,614,550 2,431,313 Independent financial advisor company
Lilley Plummer Holdings Limited 30.00 31.12.22 1,518,455 1,191,783 Specialist Marine broker
Neutral Bay Investments Limited 49.90 31.03.22 3,918,814 228,720 Investment holding company
New Denison Limited(2) 40.00 - - - Dormant company
Paladin Holdings Limited(3) 47.06 31.12.21 232,397 1,037,846 Investment holding company
Pantheon Specialty Limited(4) 25.00 - - - Holding company for specialist insurance broker
Sage Program Underwriters Inc(5) 30.00 - - - Specialist Managing General Agency
Stewart Specialty Risk Underwriting Limited 30.00 31.12.22 5,625,734 3,525,742 Specialist Canadian Casualty Underwriting Agency
Verve Risk Services Limited(6) 35.00 - - - Specialist Managing General Agency
XPT Group LLC 27.30 31.12.22 (15,816,546) (13,034,338) USA Specialty lines insurance distribution company
(1)Recent statutory financial information is not available for Criterion
Underwriting Pte Limited as the company is not currently trading.
(2)New Denison Limited is a newly incorporated company that is not currently
trading. Statutory accounts are not available as these are not yet due.
(3)The Group's 47.06% equity investment in Paladin Holdings Limited
("Paladin") includes 5.88% relating to shares held under option that can be
bought back and cancelled. Since 31(st) July 2023 this option has been fully
exercised by Paladin and the shares cancelled. Following the cancellation, the
Group's shareholding has reduced to 43.75%.
(4)Pantheon Specialty Limited is a newly incorporated company. Statutory
accounts are not available as these are not yet due. On 8(th) September 2023
Pantheon Specialty Limited changed its name to Pantheon Specialty Group
Limited.
(5)Sage Program Underwriters, Inc. is a newly incorporated company. Statutory
accounts are not available as these are not yet due.
(6)Verve Risk Services Limited is a newly incorporated company. Statutory
accounts are not available as these are not yet due.
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. CURRENT INVESTMENTS - TREASURY PORTFOLIO
Group Unaudited Unaudited Audited
At valuation 31(st) July 31(st) July 31(st) January 2023
2023 2022
£'000 £'000 £'000
Market value at 1(st) February 11,337 - -
Additions at cost 1,000 10,000 19,117
Disposals (10,006) - (7,867)
Change in value in the period 89 57 87
Market value at period end £2,420 £10,057 £11,337
Disclosed as:
Cash and cash equivalents 2,340 7,494 10,746
Investments - treasury portfolio 80 2,563 591
Total £2,420 £10,057 £11,337
Investment fund split:
GAM London Limited 12 5,000 3,045
Rathbone Investment Management Limited
2,408 5,057 8,292
Total £2,420 £10,057 £11,337
The treasury portfolio comprises of investment funds managed and valued by the
Group's investment managers, GAM London Limited and Rathbone Investment
Management Limited. All investments in securities are included at year end
market value.
The initial investment into the funds was made following the realisation of
the Group's investment in Summa Insurance Brokerage, S.L. during the prior
period.
The purpose of the funds is to hold (and grow) the Group's surplus cash until
such time that suitable investment opportunities arise.
The funds are risk bearing and therefore their value not only can increase,
but also has the potential to fall below the amount initially invested by the
Group. However, the performance of each fund is monitored on a regular basis
and the appropriate action is taken if there is a prolonged period of poor
performance.
As at 31(st) July 2023, of the total £2,419,764 held within the funds (as at
31(st) July 2022: £10,057,461 and as at 31(st) January 2023: £11,336,879),
only £79,992 (31(st) July 2022: £2,563,188 and 31(st) January 2023:
£590,897) was risk bearing, with the remaining funds of £2,339,772 (31(st)
July 2022: £7,494,273 and 31(st) January 2023: £10,745,982) being non-risk
interest bearing deposits.
Investment management costs of £5,667 (6 months to 31(st) July 2022: £18,031
and 12 months to 31(st) January 2023: £40,737) were charged to the
Consolidated Statement of Comprehensive Income during the period.
6. REALISED (LOSSES) / GAINS ON DISPOSAL OF EQUITY INVESTMENTS
The realised (losses) / gains on disposal of investments for the period
comprises of a net loss of £(40,689) (6 months to 31(st) July 2022 and 12
months to 31(st) January 2023: £155,121 net gains on disposal of
investments).
£132,000 of this net loss is in respect of the Group's disposal of its entire
40% equity investment in Denison and Partners Limited ("Denison and Partners")
for nil cash consideration, compared to the fair value of £132,000 at 1(st)
February 2023 (Note 4). There were no releases of previously unrealised
gains or losses to Retained Earnings from the Fair Value Reserve as a result
of the this disposal as the investment had been held at cost.
The above realised loss arising from the disposal of Denison and Partners has
been offset by a realised gain of £91,311 relating to an additional capital
distribution recognised during the period from the Group's former investment
in Summa Insurance Brokerage, S.L. ("Summa") which was sold during the year to
31(st) January 2022.
The amount included in realised gains on disposal of investments for the 6
months to 31(st) July 2022 and 12 months to 31(st) January 2023 comprised of a
net gain of £155,121.
£135,283 of this net gain related to an additional capital distribution
received during the 6 months to 31(st) July 2022 from the Group's former
investment in MB Prestige Holdings PTY Limited which was sold during the year
to 31(st) January 2022.
£19,838 of this net gain was in respect of the Group's disposal of its entire
77.25% investment in Summa for consideration of £8,123,838, compared to the
fair value of £8,104,000 at 1(st) February 2022. The disposal of Summa
resulted in a net release of previously unrealised gains to Retained Earnings
from the Fair Value Reserve of £2,007,857 in that period/year.
7. RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
Share Reverse Capital Capital
Share premium Fair value acquisition redemption contribution Retained
capital account reserve reserve reserve reserve earnings Total
(£'000) (£'000) (£'000) (£'000) (£'000) (£'000) (£'000) (£'000)
At 1(st) February 2023 3,747 29,350 106,509 393 7 72 49,459 189,537
Profit for the period - - 14,782 - - - 770 15,552
Dividends paid - - - - - - (1,000) (1,000)
Repurchase of Company shares (Note 3) - - - - - - (692) (692)
Share Incentive Plan - (2) - - - - 60 58
(Note 10)
At 31(st) July 2023 £3,747 £29,348 £121,291 £393 £7 £72 £48,597 £203,455
8. LOAN AND EQUITY COMMITMENTS
On 26(th) June 2020 the Group entered into an agreement to provide Sage
Program Underwriters, Inc. with a loan facility of USD 250,000. As at 31(st)
July 2023 USD 150,000 had been drawn down, leaving a remaining undrawn
facility of USD 100,000. Any drawdown is subject to satisfying certain agreed
criteria.
9. DEFERRED TAX AND CONTINGENT LIABILITIES
Group Unaudited Unaudited Audited
31(st) July 31(st) July 31(st) January 2023
2023 2022
£'000 £'000 £'000
At 1(st) February 5,631 1,898 1,898
Tax movement relating to investment revaluation for the period (27) 2,893 3,733
At period end £5,604 £4,791 £5,631
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 relaxed the conditions for the Group to qualify for
SSE on a share 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 limited liability
companies ("LLCs"). As such, deferred tax needs to be assessed on any
potential net gains from the Group's investment interests in US LLCs.
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 LLC investments. As a result, the directors anticipate that on a
disposal of shares in the Group's current non-US LLC investments, so long as
the shares have been held for 12 months they should qualify for SSE and no tax
charge should arise on their disposal.
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 UK-adopted
international accounting standards. 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.
Having assessed the current US portfolio, the directors anticipate that there
is a requirement to provide for deferred tax in respect of the recognised
gains on investments under the current requirements of UK-adopted
international accounting standards as the US LLC investments currently show a
net gain. As such, a provision of £5,604,000 has been made as at 31(st) July
2023 (6 months to 31(st) July 2022: £4,791,000 and full year to 31(st)
January 2023: £5,631,000).
The deferred tax provision of £5,604,000 as at 31(st) July 2023 has been
calculated based upon an assessment of the US tax liability arising from the
valuations of the Group's holdings within US LLCs at 31(st) July 2023, using
the US Federal rate of 21% together with US State Tax rates prevailing in the
states where the Group's US LLCs operate, which range between 0% and 12%.
Adjustments were then made based upon available allowances and taxable losses.
Given the complexity, the Group utilised the services of a specialist US tax
advisory firm.
The March 2021 Budget announced that the UK corporation tax would increase
from 19% to 25% (effective 1(st) April 2023) and Finance Bill 2021 was
considered substantively enacted in May 2021. This change in tax rate has had
no material impact on the Group financial statements for the period ended
31(st) July 2023 and for future periods as the directors do not consider there
is any deferred tax due at the period end in respect of its non-US LLC
investments due to the SSE rules.
10. SHARE BASED PAYMENT ARRANGEMENTS
Joint Share Ownership Plan
During the year to 31(st) January 2019, B.P. Marsh & Partners Plc entered
into joint share ownership agreements ("JSOAs") with certain employees and
directors.
On 12(th) June 2018 1,461,302 new 10p Ordinary shares in the Company were
issued and transferred into joint beneficial ownership for 12 employees
(including 4 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 Employee Benefit Trust") at a subscription price of 281 pence per share,
being the mid-market closing price on 12(th) June 2018. Following the
acquisition of the Trustee by JTC Plc on 10(th) December 2020, the Trustee has
since been rebranded to JTC Employer Solutions Trustee Limited.
The jointly-owned shares are beneficially owned by (i) each of the 9 currently
participating employees and (ii) the trustee of the Employee Benefit 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 are entitled to
receive on vesting the growth in value of the shares above a threshold price
of 281 pence 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 to the date of vesting. The Employee Benefit Trust retains
the carrying cost, with 281 pence per share due back to the Company.
Alternatively, on or after 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 to the date of vesting.
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.
On 12(th) June 2021 (the "vesting date") the performance criteria were met,
after which the members of the scheme became joint beneficial owners of the
shares and therefore became entitled to any gain on sale of the shares in
excess of 312.6 pence per share. Whilst these shares remain within the
Employee Benefit Trust, they do not have voting or dividend rights. However,
if the shares are sold from the Employee Benefit Trust in the future in excess
of 281 pence per share, the Group would be entitled to receive £4,055,243 in
total. These shares would then, post-sale, have voting and dividend rights
attached, such that they would become fully dilutive for the Group.
There were 254,414 shares where the performance criteria was not met on the
vesting date that had been forfeited by departing employees and which remained
unallocated within the Employee Benefit Trust as at 31(st) January 2022.
During the 6 months to 31(st) July 2022, 18,155 of the 254,414 unallocated
shares within the Employee Benefit Trust were transferred to the B.P. Marsh
SIP Trust ("SIP Trust") to be used as part of the 22-23 SIP awards made in
April 2022. Following this transfer and as at 31(st) July 2023 there were
1,443,147 shares held within the Employee Benefit Trust, of which there were
236,259 shares where the performance criteria was not met on the vesting date
and which remained unallocated. The Employee Benefit Trust remains the owner
of these unallocated shares.
Share Incentive Plan
During the year to 31(st) January 2017 the Group established an HMRC approved
Share Incentive Plan ("SIP").
During the period a total of 32,780 ordinary shares in the Company, of which
4,850 were held in Treasury as at 31(st) January 2023 and 27,930 were from
shares bought back into Treasury during the current period (6 months to 31(st)
July 2022 and also 12 months to 31(st) January 2023, 9,542 ordinary shares in
the Company, which were held in Treasury as at 31(st) January 2022), were
transferred to the B.P. Marsh SIP Trust ("SIP Trust"). As a result, a total of
32,780 ordinary shares in the Company were available for allocation to the
participants of the SIP (6 months to 31(st) July 2022 and also 12 months to
31(st) January 2023: 31,801 ordinary shares were available for allocation,
including 4,104 unallocated ordinary shares already held within the SIP Trust
as at 31(st) January 2022 and 18,155 unallocated ordinary shares transferred
from the Employee Benefit Trust to the SIP Trust in April 2022).
On 14(th) April 2023, a total of 11 eligible employees (including 3 executive
directors of the Company) applied for the 23-24 SIP and were each granted
1,192 ordinary shares ("23-24 Free Shares"), representing approximately
£3,600 at the price of issue.
Additionally, on the same date, all eligible employees were also invited to
take up the opportunity to acquire up to £1,800 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 £3,600 worth of shares. All 11 eligible employees (including
3 executive directors of the Company) took up the offer and acquired the full
£1,800 worth of Partnership Shares (596 ordinary shares) and were therefore
awarded 1,192 Matching Shares.
The 23-24 Free and Matching Shares are subject to a 1 year forfeiture period.
A total of 32,780 (6 months to 31(st) July 2022 and also 12 months to 31(st)
January 2023: 31,801) Free, Matching and Partnership Shares were granted to
the 11 (6 months to 31(st) July 2022 and also 12 months to 31(st) January
2023: 11) eligible employees during the period, including 8,940 (6 months to
31(st) July 2022 and also 12 months to 31(st) January 2023: 8,673) granted to
3 (6 months to 31(st) July 2022 and also 12 months to 31(st) January 2023: 3)
executive directors of the Company.
No ordinary shares were withdrawn from the SIP Trust during the period (6
months to 31(st) July 2022 and 12 months to 31(st) January 2023: No
withdrawals).
As at 31(st) July 2023, and after adjusting for a total of 19,951 ordinary
shares withdrawn from the SIP Trust by employees on departure and 6,842
ordinary shares forfeited on departure (since inception), a total of 295,609
Free, Matching and Partnership Shares had been granted to 11 eligible
employees under the SIP, including 96,192 granted to 3 executive directors of
the Company.
£38,427 of the IFRS 2 charges (6 months to 31(st) July 2022: £42,009 and 12
months to 31(st) January 2023: £84,714) associated with the award of the SIP
shares to the 11 (6 months to 31(st) July 2022 and also 12 months to 31(st)
January 2023: 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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