REG - B.P. Marsh &Partners - Trading Statement

B.P. Marsh & PartnersAnnouncement

18/09/2023 07:00

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RNS Number : 6860M  B.P. Marsh & Partners PLC  18 September 2023

18 September 2023

 

B.P. Marsh & Partners Plc

("B.P. Marsh", the "Company" or the "Group")

 

Trading Update

 

B.P. Marsh & Partners Plc (AIM: BPM), the specialist venture capital
investor in early stage financial services businesses, is pleased to provide
the market with an update on trading for the Group's six month period ended 31
July 2023.

 

Highlights

 

 ·   Disposal of Kentro for £51.5m (subject to regulatory approvals)
 ·   New dividend and buy-back policy (subject to receipt of proceeds from sale of
     Kentro) will see c.25% of proceeds of Kentro sale to be returned to
     Shareholders
 ·   Group cash and treasury funds of £4.3m at 31 July 2023 (31 January 2023:
     £12.1m; 31 July 2022: £14.1m)
 ·   Current cash and treasury funds expected to increase to £52.2m following
     receipt of Kentro proceeds, 28% of 31 January 2023 Net Asset Value
 ·   New Investments - Verve Risk Services Limited and Pantheon Specialty Limited
 ·   Robust pipeline of new investments

 

Net Asset Value

 

One of the Group's key financial objectives is the delivery of long-term
growth in Net Asset Value. The Group increased Net Asset Value from £166.6m
to £189.5m in the year ending 31 January 2023 with the Group's equity
Portfolio increasing by £22.2m from £149.3m to £171.5m (adjusting for
additions and disposals) in the same period. The Group remains positive
regarding its ongoing performance and will be releasing its Interim Results
for the six months to 31 July 2023 on 17 October 2023.

 

Disposals

 

Kentro Capital Limited ("Kentro")

As announced on 23 May 2023, B.P. Marsh has agreed to dispose of its
shareholding in Kentro, the London-based insurance industry investment group,
pursuant to an agreement by which Brown & Brown, Inc. ("Brown &
Brown"), one of the largest US-based insurance intermediaries, has agreed to
acquire the entire issued share capital of Kentro.

 

Completion of the disposal is dependent on certain regulatory approvals and
completion mechanics and a further announcement will be made when all
conditions have been met.

 

Upon completion, the Group expects to receive £51.5m in cash (net of all
transaction costs). This is consistent with the Group's most recent £51.5m
valuation of the business as at 31 January 2023, underlining the Group's
approach and method to valuing our investments.

 

Dividend and Share Buy-Back

 

Dividend

As announced on 13 June 2023, the Group declared a final dividend for the year
to 31 January 2023 of 1.39p per share following an interim dividend of 1.39p
per share paid on 28 February 2023. The final dividend was paid on 31 July
2023.

 

Subject to the completion of, and receipt of sale proceeds from, the disposal
of the Company's holding in Kentro, the Group intends to pay a special
dividend of £1.0m. Further information regarding the proposed payment date
will be announced in due course.

 

It is also the intention that a new three-year dividend policy for the 2024,
2025 and 2026 financial years will be implemented from the proceeds of the
Kentro deal, with an aggregate of £2m per year being distributed.

 

Share Buy-Backs

On 16 January 2023, the Group announced that it would allocate £1.0m to the
purposes of an on-market Share Buy-Back programme. Since 16 January 2023, the
Company has purchased a total of 259,230 shares, of which there are 226,450
shares in Treasury. The Company currently has £0.04m remaining from the
£1.0m budget.

 

Subject to the receipt of the proceeds of sale of Kentro, the Group intends to
conduct a £6.0m Return of Capital. The specific mechanics of how this will be
achieved are still under consideration and will be announced in due course.

 

New Investment

 

Pantheon Specialty Limited ("Pantheon")

On 21 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.

 

In September 2023, the Company provided a loan facility of £3m to Pantheon
for working capital purposes.

 

With the support of B.P. Marsh, Robert Dowman intends to build a market
leading independent specialist broker across multiple markets.

 

Verve Risk Services Limited ("Verve")

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.

 

Other Investee Company Highlights

 

Lilley Plummer Risks Limited ("Lilley Plummer")

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
£1m 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 LPR.

 

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. Revenue has grown from circa £0.6m in
2020, to £5.0m in 2022, with this growth continuing into 2023. EBITDA
performance has been similarly impressive.

 

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.

 

CBC UK Limited ("CBC") / Paladin Holdings Limited ("Paladin")

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. The growth year-on-year has been achieved through a combination
of new hires, new product lines and organic growth.

 

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.

 

On 11 August 2023 Paladin exercised a Call Option with the Group over 5.9% of
shares in Paladin which the Group owned. Pursuant to the share transfer
Paladin intend to cancel the shares. As a consequence of this transaction the
Group's shareholding will reduce from 47.06% to 43.75%. This transaction was
funded through the Group lending Paladin a further £0.8m.

 

XPT Group LLC ("XPT Group")

XPT Group's performance since its inception continues to be impressive, with
the business expecting to produce Gross Written Premium of over 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.

 

LEBC Holdings Limited ("LEBC")

In August 2023, Aspira Corporate Solutions Limited ("Aspira") a wholly-owned
subsidiary of LEBC, acquired the trading assets and personnel of its sister
company, LEBC Group.

 

This consolidation follows a Management-led restructuring process which has
had the full support of the Group, being in the best interest of all LEBC
stakeholders.

 

The transfer of assets has received consent from the Financial Conduct
Authority ("FCA"), following extensive consultation.

 

This event required no review of the Group's current valuation of LEBC.

 

Liquidity and Loan Portfolio

 

Group cash and treasury funds were £4.3m at 31 July 2023 (31 January 2023:
£12.1m).

 

Between 31 January 2023 and 31 July 2023, the Group provided loans to the
investment portfolio of £8.2m, including £4.9m (US$6.0m) to XPT Group LLC,
£2.0m to Paladin Holdings Ltd ("Paladin"), £0.7m to Denison and Partners Ltd
and £0.6m to Verve Risk Services Ltd to support further organic growth or as
part of a new investment. In addition, the Group paid dividends totalling
£1.0m and bought back £0.7m in shares.

 

During the six-month period to 31 July 2023 the Group also received £0.7m of
proceeds from the redemption of preferred shares held in Lilley Plummer
Holdings Ltd and £1.6m in loan repayments and its loan portfolio balance was
£17.8m at 31 July 2023 (31 January 2023: £11.5m).

 

Since 31 July 2023 the Group has provided a further £4.1m 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. In addition, the Group
has bought back a further £0.2m in shares.

 

As announced on 23 May 2023, the Group has agreed to sell its 18.7%
shareholding in Kentro for £51.5m, subject to regulatory approvals. Net of
adjustments, this is expected to increase funds available to £52.2m prior to
any distributions.

 

The Group is debt free.

 

New Business Opportunities

 

The Group continues to see a high number of potential new business
opportunities and received 60 new business enquiries in the year which ended
on 31 January 2023. This was an increase from 48 enquiries in the preceding
year.

 

In the current financial year, the Group has received 42 new business
enquiries as at the end of July 2023, compared to 33 enquiries for the same
period in the preceding year.

 

In view of the Group's favourable cash position, subject to completion of the
Kentro disposal, it remains ready to take advantage of opportunities emanating
from the financial services industry generally, and the insurance market
specifically.

 

Continued M&A activity at the larger end of the insurance market generates
opportunities at the smaller end, many of which meet the Company's investment
criteria.

 

Current opportunities under consideration include (but are not limited to) the
following:-

 

 ·   A start-up Underwriting Agency, looking to specialise in underwriting Marine
     insurance;
 ·   An established European-based Aviation Broker; and
 ·   An established Lloyd's broker specialising in financial lines.

 

Insurance Market Outlook

 

The insurance industry continues to discuss rate increases across global
commercial lines of business.

 

The second quarter of 2023 resulted in an overall rate increase of 3% across
all global commercial lines (down from a 4% increase in the first quarter of
2023).

 

This increase represented the 23(rd) consecutive quarter of rate increases,
although rate increases are well below the peak, being 22% in the fourth
quarter of 2020.

 

Price increases across global property insurance were up 10% in the second
quarter of 2023, the same increase as in the first quarter of 2023. Casualty
insurance pricing increased by 3%, again the same as in the first quarter of
2023.

 

Conversely, pricing for financial and professional lines fell for the fourth
consecutive quarter, with average pricing falling by 8% during the second
quarter of 2023, compared to a 5% decline in first quarter of 2023.

 

In the UK, rates generally have increased over the past four quarters and the
Group does not anticipate the market returning to the pricing of the last soft
market in the short to medium term.

 

Interim Results

 

The Group expects to report the half year results for the year to 31 July 2023
on 17 October 2023 on which date it will hold a briefing for analysts and will
hold a presentation for investors and potential investors on the Investor Meet
Company platform.

 

For further information:

 

 B.P. Marsh & Partners Plc                           www.bpmarsh.co.uk (http://www.bpmarsh.co.uk/)
 Brian Marsh OBE                                     +44 (0)20 7233 3112

 Nominated Adviser & Broker

 Panmure Gordon
 Atholl Tweedie / Stephen Jones / Amrit Mahbubani /  +44 (0)20 7886 2500

 Ailsa MacMaster

 Financial PR & Investor Relations
 Tavistock                                           bpmarsh@tavistock.co.uk
 Simon Hudson / Tim Pearson                          +44 (0)20 7920 3150

 

Notes to Editors:

B.P. Marsh's current portfolio contains fifteen 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.

 

- Ends -

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