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| Share Name | Share Symbol | Market | Type | Share ISIN | Share Description |
|---|---|---|---|---|---|
| B.p. Marsh & Partners Plc | LSE:BPM | London | Ordinary Share | GB00B0XLRJ79 | ORD 10P |
| Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
|---|---|---|---|---|---|---|---|---|---|---|
| 0.00 | 0.00% | 494.00 | 488.00 | 500.00 | 494.00 | 494.00 | 494.00 | 2,299 | 01:00:00 |
| Industry Sector | Turnover | Profit | EPS - Basic | PE Ratio | Market Cap |
|---|---|---|---|---|---|
| Trust,ex Ed,religious,charty | 32.57M | 23.84M | 0.6408 | 7.71 | 183.82M |
TIDMBPM
RNS Number : 7613M
B.P. Marsh & Partners PLC
18 October 2016
Date: 18 October 2016 On behalf of: B.P. Marsh & Partners Plc Embargoed until: 0700hrs
B.P. Marsh & Partners Plc
("B.P. Marsh", the "Company" or the "Group")
Interim Results
B.P. Marsh & Partners Plc, the niche venture capital provider to high growth businesses, announces its unaudited Group interim results for the six months to 31 July 2016 (the "Period").
The financial highlights for the Period are:
Hot Features
Premium
-- Net Asset Value ("NAV") up 4.3% to GBP73.8m
-- NAV per share up to 253p (31 Jan 2016: 243p, 31 July 2015: 225p)
-- 5.8% total shareholder return (including Dividend of 3.42p per share paid July 2016)
-- Profit after tax up 19.5% to GBP4.0m (31 July 2015: GBP3.4m)
-- Current uncommitted cash balance of GBP7.9m
-- Dividend of 3.76p per share recommended for year to 31 January 2017
Chairman's Statement
I am pleased to present the unaudited Consolidated Financial Statements of B.P. Marsh & Partners Plc for the six month period to 31 July 2016.
In the midst of various uncertainties, including the result of the EU Referendum and global economic concerns, the Company and its portfolio of investments continue to perform in line with our expectations. The results for the Period illustrate our continuing progress and development.
The six months have resulted in an increase of 8.7% in the Equity value of the Portfolio.
The Group has increased its NAV to GBP73.8m (253p per share), with an average annual compound NAV growth rate of 11.3% achieved since 1990.
During the Period we continued our geographic expansion, with the completion of a new investment in Asia Reinsurance Brokers, headquartered in Singapore and with five offices throughout the region.
Our South African investments, from small beginnings, are starting to grow and we were pleased to acquire an additional 22% in PLUM, the Johannesburg-based Managing General Agent ("MGA") on 5 October 2016.
Also within the existing portfolio we purchased an additional 8% of the share capital of LEBC Holdings Limited ("LEBC"), taking our total holding to 43%. The Group considers LEBC to be a company at an exciting stage of development, in an increasingly active market.
Besso Insurance Group Limited ("Besso") continues its strong performance and to build on its market position.
The Group has a healthy cash balance of GBP7.9m available to invest and is in advanced discussions on several new opportunities that fall within our heartland of interest in Financial Services. We continue to look at ways to expand geographically, whilst following our principle of doing so in territories with a robust regulatory environment and where we see good opportunities for development by offering a partnership to businesses that would benefit from an experienced London-based investor.
We have been taking steps in recent years to reduce the discount to Net Asset Value that we have historically traded at and it is gratifying to note this has now reduced to around 20% at the time of writing, having been as much as 45% in 2012.
The Board has continued to try to strike a balance between utilising cash to invest in its existing portfolio and new opportunities and providing investors with a modest but meaningful yield. Following the realisation of the Group's remaining 1.6% stake in Hyperion and receipt of GBP7.3m cash in July, the Board recommended a dividend of 3.76p per share for the year ending 31 January 2017, with the aspiration to at least maintain this in the following two years.
Business Update
Summary of Developments in the Portfolio
New Investments
Investment in Asia Reinsurance Brokers Pte Limited ("ARB")
On 21 April 2016 the Group acquired a 20% shareholding in ARB, the Singapore-headquartered independent specialist reinsurance and insurance risk solutions provider, for a total consideration of SGD $2.4m.
The Group may increase its shareholding in ARB to 25% for an additional cash consideration of up to SGD $0.5m. The consideration paid by the Group for such an additional shareholding would be dependent on the performance of ARB in its financial year ending 31 December 2017.
ARB was established in 2008, following a management buy-out of the business from AJ Gallagher, led by the CEO, Richard Austen. ARB specialises in the provision of long-term reinsurance and insurance solutions to a wide range of insurance and reinsurance companies throughout Asia and has offices across the region, including in Malaysia, the Philippines and Indonesia.
The Group considered this an opportunity to invest in a well-established and profitable business with an experienced and respected management team and strong growth potential. The investment will be used to build on ARB's position in the Asian market and to assist them in their growth ambitions.
Increased Holdings
LEBC Holdings Limited ("LEBC")
The Group purchased a further 8.03% stake in LEBC Holdings Limited ("LEBC") for an aggregate consideration of approximately GBP1.91m in June 2016, increasing its shareholding to 42.63%.
B.P. Marsh first invested in LEBC, the independent financial advisory company, in April 2007, taking a 22.5% stake, increased by way of a follow-on investment to a 34.9% stake in January 2014. During the nine years of B.P. Marsh's investment, LEBC has grown from revenues of GBP8.06m (for the year ending 31 May 2007) to revenues of GBP15.0m (for the year ending 30 September 2015) and extended its network of branches across the UK from 11 to 15.
LEBC is currently developing a "bionic" advice proposition combining technology with human involvement, which aims to enable advisers to work more efficiently in giving advice using intelligent systems for fact-finding and report writing.
Bastion Reinsurance Brokerage (PTY) Limited ("Bastion Re")
Property and Liability Underwriting Managers (PTY) Limited ("PLUM")
Bulwark Investment Holdings (PTY) Limited ("Bulwark")
The Group originally invested in PLUM in July 2015 for an initial consideration of GBP0.3m. It was agreed that the total consideration paid would increase by a further GBP0.3m subject to PLUM achieving EBITDA of ZAR 8.3m (c. GBP0.43m) over the first year of the Group's investment.
These targets were met by PLUM and a further consideration of GBP0.3m has been paid in line with the investment agreement.
On 5 October 2016, the Group took the opportunity to acquire an additional 22.5% in PLUM from an exiting shareholder, for cash consideration of GBP0.61m. This increases the Groups' total shareholding in PLUM to 42.5% for a total cash acquisition price of GBP1.31m.
The Group's other South African investments, Bastion Re and Bulwark, continue to gain significant traction within their market and are performing in line with the Group's expectations.
Disposals
The Broucour Group Limited ("Broucour")
On 22 April 2016 the Group sold its 49% stake in Broucour to the Founder and Managing Director Mr. Rupert Cattell for consideration of up to GBP0.34m, which equates to the Company's most recent published valuation. The outstanding loan (GBP0.3m) will likewise be repaid in full.
Randall & Quilter Investment Holdings Limited ("R&Q")
On 4 May 2016 the Group sold its 1.32% stake in R&Q to Brian Marsh Enterprises Limited for consideration of GBP1.02m, resulting in a realised gain for the Company of GBP0.25m, a 25% increase to the year-end valuation of GBP0.77m. The Board took the view that the realised funds would be better utilised in an opportunity to which the Group could add value. Brian Marsh Enterprises Limited is owned by Brian Marsh, Chairman and majority shareholder of the Company.
Portfolio news
Nexus Underwriting Management Limited ("Nexus")
Nexus is one of the largest independent specialty MGAs in the London Market with a forecast Premium Income in excess of GBP110m for 2016, an increase from GBP56m in 2014 when the Company first invested.
Acquisition of Hong Kong-based marine MGA Beacon
On 5 July 2016 Nexus acquired 100% of the shareholding in the Hong Kong domiciled marine Managing General Agent, Beacon Underwriters Limited ("Beacon"), which marked its first overseas acquisition and the third acquisition within the last 12 months. The acquisition of Beacon augments Nexus' footprint in Asia, subsequent to the opening of Nexus Underwriting Asia (HK) in 2015.
Beacon was established in 2009 as a Lloyd's coverholder to write marine business for the Asian and Middle Eastern markets. Beacon's Managing Director, Dr Ravi Schroff, has over 30 years of experience as an insurance underwriter.
Nexus EBA opens branch in Ireland
Nexus EBA, part of Nexus, announced on 13 July 2016 that it has established a branch in Ireland, headed up by Stephen Comerford, Senior Business Development Manager and Deputy Underwriter for Surety Insurance.
Besso Insurance Group Limited ("Besso")
Besso, one of the top 20 independent Lloyd's brokers, has continued to perform well in the current market place and has recently announced its results for the 2015 financial year.
Besso revenues have increased by 16% to GBP37.6m (GBP32.3m in 2014), with EBITDA increasing by 15% to GBP4.17m (GBP3.62m in 2014), in the 12 months to 31 December 2015.
Besso undertook a debt refinancing exercise with Clydesdale Bank during 2015, to support its continued growth strategy. A proportion of the funding from Clydesdale has been used to repay our longstanding Loan Notes, which has reduced Besso's interest payments overall by 15%.
In regard to the 2016 financial year, Besso has seen strong results in the first six months, continuing the encouraging trend over 2015.
Pursuant to a previously agreed option arrangement, on 8 September 2016 Besso purchased and cancelled 6.57% of the Company's shareholding in Besso for consideration of GBP1.58m. This buy-back accordingly reduced the Group's Besso shareholding from 42.02% to 37.94%.
As announced on 26 July 2016, the Group confirms that the Board of Besso and its shareholders have engaged Canaccord Genuity to carry out a strategic review for Besso. This review is at a stage whereby discussions are underway with potentially interested parties with a view to sale of, or investment in Besso. B.P. Marsh has been an active party in these discussions. There can be no certainty that these discussions may lead to the Company disposing of its interest in Besso's shares.
Summa Insurance Brokerage, S.L. ("Summa")
Throughout the period, Summa's agricultural division continues to grow strongly, however, continuous softening rates within the general insurance market has had an impact on the overall Group's valuation. In addition Summa has continued to successfully refinance a number of its banking arrangements with Spanish banking institutions, placing Summa in a strong position to continue its growth, both organically and through M&A opportunities.
Meanwhile, forecasts for the Spanish economy show that growth in 2016 is likely to be above 2.6%, making it presently one of the fastest growing economies in the Euro Zone.
The Board continues to believe that Summa is well positioned in Spain's stabilising market and looks forward to working with the management team to develop the business. Additionally, the Group continues to work with Summa to develop their interaction with the Lloyd's and London Insurance Market.
Trireme Insurance Group Limited ("Trireme")
U.S. Risk Insurance Group, Inc. ("U.S. Risk"), the Dallas-based leading international specialty lines underwriting manager and wholesale broker and the Group's partner in the Trireme investment announced on 13 July 2016 that it had entered into a definitive agreement for a significant transaction and partnership with Kohlberg & Company, L.L.C. ("Kohlberg"), a leading private equity firm specialising in middle market investing.
Through its $1.6bn private equity fund, Kohlberg Investors VII, L.P., Kohlberg has made a significant equity investment in U.S. Risk and will reserve substantial additional equity capital to support growth initiatives. This will position U.S. Risk for accelerated growth and an enhanced value proposition for current and future customers and partners.
U.S. Risk holds 70% of the Trireme Group, alongside the Group's 30%. Trireme is the holding company for Lloyd's broker investments Oxford Insurance Brokers Limited and James Hampden International Insurance Brokers Limited, as well as the overseas Managing General Agencies Abraxas and Antarah, based in Zurich and Dubai respectively.
Hyperion Insurance Group Limited ("Hyperion")
On 4 July 2016 the Group received GBP7.31m from the realisation of its final 1.6% stake in Hyperion.
Dividend
The Board has recommended a dividend of 3.76 pence per share (GBP1.1m) for the financial year ending 31 January 2017, in recognition of the steady growth and consolidation of the investment portfolio.
This represents an increase of 10% over the dividend of 3.42p per share (GBP1m) paid in respect of the financial year ended 31 January 2016.
The Board strikes a balance between utilising cash to invest in the existing portfolio and new opportunities with providing investors with a healthy but sustainable yield. It is the Board's aspiration to maintain a dividend of at least 3.76p per share for the years ending 31 January 2018 and 31 January 2019, subject to ongoing review and approval by the Board and the Shareholders.
Share Buy-Back
The Group undertook a low volume share buy-back on 27 June 2016, when it purchased 5,726 ordinary shares of 10 pence each in the Company ("Ordinary Shares") at a price of 153.78 pence per Ordinary Share. These shares are being held in Treasury.
The Board believes that these low volume buy-backs are a helpful stabilising mechanism during periods of market volatility and were particularly useful following the EU Referendum decision.
Business Strategy
The Group typically invests amounts of up to GBP3.5m and only takes minority equity positions in Financial Services intermediaries, normally acquiring between 15% and 45% of an investee company's total equity. Based on our current portfolio, the average investment has been held for approximately 8 years.
The Group usually requires its investee companies to adopt certain minority shareholder protections and appoint a director to its board.
Since 1990 the Group has generated an average NAV annual compound growth rate of 11.3%. Its successful track record can be attributed to a number of factors that include a robust investment process, management's considerable sector experience and a flexible approach to exit.
Cash Balance
The Group has an uncommitted cash balance of GBP7.9m available for new investment opportunities and for developing the existing portfolio.
Outlook and New Business Opportunities
The Group is in discussions with a number of potential investment opportunities, both in the UK and overseas. Overseas investments would fall within the Group's strategy to focus on geographic areas where the Group sees sufficient opportunity for business development in partnership with a London-based investor, coupled with a suitably developed regulatory and compliance environment.
During the Period the Group reviewed 45 opportunities, of which 69% were insurance-related, 7% wealth management, 18% fintech and platforms and 7% other financial services opportunities (recruitment, consultancies, etc). By way of comparison, during the full year to 31 January 2016 the Group reviewed 71 new enquiries.
The current economic outlook presents a mixed picture and the Group is prepared for continuing turbulence as the implications of the EU Referendum decision, concerns about the health of European banks and the forthcoming American elections impact upon the global economy.
It remains the Group's intention to continue to invest into the international financial services market, specifically in insurance intermediaries but more generally across the sector, a policy which historically has had little or no direct impact from the UK's membership of the European Union. Due to the global nature of many of its investee companies, approximately 64% of the portfolio's revenue stream originates from overseas, meaning that the Group is protected from sterling weakness. This, combined with the Group's lack of external debt and its strong current and future cash balances, means that it is fully poised to pursue and capitalise upon its tried and trusted investment approach.
"We remain focused on our proven, long-term approach to investment as we enter the second half and look forward to updating shareholders at the full year results."
Brian Marsh OBE, Chairman
17 October 2016
The information contained within this announcement is deemed to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014. Upon the publication of this announcement, this inside information is now considered to be in the public domain.
Investments
As at 31 July 2016 the Group's equity interests were as follows:
Asia Reinsurance Brokers Pte Limited
(www.arbrokers.asia)
In April 2016 the Group invested in Asia Reinsurance Brokers Pte Limited ("ARB"), the Singapore headquartered independent specialist reinsurance and insurance risk solutions provider. ARB was established in 2008, following a management buy-out of the business from AJ Gallagher, led by the CEO, Richard Austen.
Date of investment: April 2016
Equity stake: 20%
31 July 2016 valuation: GBP1,345,000
Bastion Reinsurance Brokerage (PTY) Limited
(www.bastionre.co.za)
In December 2014 the Group invested in Bastion Reinsurance Brokerage (PTY) Limited ("Bastion"), a start-up Reinsurance Broker based in South Africa. Established in May 2013 by its CEO and Chairman, Bastion specialises in the provision of reinsurance solutions over a number of complex issues, engaged by various insurance companies and managing general agents.
Date of investment: December 2014
Equity stake: 35%
31 July 2016 valuation: GBP100,000
Besso Insurance Group Limited
(www.besso.co.uk)
In February 1995 the Group assisted a specialist team departing from insurance broker Jardine Lloyd Thompson Group in establishing Besso Holdings Limited. The company specialises in insurance broking for the North American wholesale market and changed its name to Besso Insurance Group Limited ("Besso") in June 2011.
Date of investment: February 1995
Equity stake: 42.02%*
31 July 2016 valuation: GBP21,698,000
* This includes 6.57% that was being held by the Group on behalf of Besso. Subsequent to the Period end, Besso invoked a share purchase transaction to buy back and cancel these shares, as such the 6.57% were stated at cost within the valuation and the Group's current shareholding is 37.94%.
Bulwark Investment Holdings (PTY) Limited
In April 2015 the Group, alongside its existing South African Partners, established a new venture, Bulwark Investment Holdings (PTY) Limited ("Bulwark"), a South African based holding company which establishes Managing General Agents in South Africa. To date Bulwark has established two new Managing General Agents: Preferred Liability Underwriting Managers (PTY) Limited and Mid-Market Risk Acceptances (PTY) Limited.
Date of investment: April 2015
Equity stake: 35%
31 July 2016 valuation: N/A
LEBC Holdings Limited
(www.lebc-group.com)
In April 2007 the Group invested in LEBC, an Independent Financial Advisory company providing services to individuals, corporates and partnerships, principally in employee benefits, investment and life product areas.
Date of investment: April 2007
Equity stake: 42.63%
31 July 2016 valuation: GBP11,522,000
MB Prestige Holdings PTY Limited
(www.mbinsurance.com.au)
In December 2013 the Group invested in MB Prestige Holdings PTY Ltd ("MB Group"), the parent Company of MB Insurance Group PTY a Managing General Agent, headquartered in Sydney, Australia. MB Group is recognised as a market leader in respect of prestige motor vehicle insurance in all mainland states of Australia.
Date of investment: December 2013
Equity stake: 40%
31 July 2016 valuation: GBP1,746,000
Nexus Underwriting Management Limited
(www.nexusunderwriting.com)
In August 2014 the Group invested in Nexus Underwriting Management Limited ("Nexus"), an independent specialty Managing General Agency, founded in 2008. Through its two operating subsidiaries, Nexus Underwriting Limited and Nexus CIFS Limited, Nexus specialises in Directors & Officers, Professional Indemnity, Financial Institutions, Accident & Health and Trade Credit Insurance.
Date of investment: August 2014
Equity stake: 11.94%
31 July 2016 valuation: GBP6,952,000
Property & Liability Underwriting Managers (PTY) Limited
(www.plumsa.co.za)
In June 2015 the Group completed an investment in Property And Liability Underwriting Managers (PTY) Limited ("PLUM"), a Managing General Agent based in Johannesburg, South Africa. PLUM specialises in large corporate property insurance risks in South Africa and is supported by both domestic South African insurance capacity and A-rated international reinsurance capacity.
Date of investment: June 2015
Equity stake: 20%
31 July 2016 valuation: GBP950,000
Sterling Insurance PTY Limited
(www.sterlinginsurance.com.au)
In June 2013, in a joint venture enterprise alongside Besso, (Neutral Bay Investments Limited) the Group invested in Sterling Insurance PTY Limited, an Australian specialist underwriting agency offering a range of insurance solutions within the Liability sector, specialising in niche markets including mining, construction and demolition.
Date of investment: June 2013
Equity stake: 19.7%
31 July 2016 valuation: GBP2,332,000
Summa Insurance Brokerage, S. L.
(www.grupo-summa.com)
In January 2005 the Group provided finance to a Madrid-based Spanish management team with the objective of acquiring and consolidating regional insurance brokers in Spain. Through acquisition Summa is able to achieve synergistic savings, economies of scale and greater collective bargaining thereby increasing overall value.
Date of investment: January 2005
Equity stake: 77.25%
31 July 2016 valuation: GBP3,735,000
Trireme Insurance Group Limited
(www.oxfordinsurancebrokers.co.uk)
(www.jhinternational.co.uk)
(www.abrax.ch)
In July 2010 the Group completed an investment in Trireme Insurance Group Limited (formerly known as US Risk (UK) Ltd), the parent company of Oxford Insurance Brokers Ltd and James Hampden International Insurance Brokers Ltd, London-based Lloyd's specialist international reinsurance and insurance intermediaries. Trireme Insurance Group Limited is also the parent company of Abraxas Insurance AG, a Swiss-based underwriting agency specialising in Directors & Officers Liability Insurance, Professional Liability Insurance, Insurance for Financial Institutions, Medical malpractice Insurance, Property Insurance and Event Insurance.
Date of investment: July 2010
Equity stake: 29.94%
31 July 2016 valuation: GBP2,529,000
Walsingham Motor Insurance Limited
(www.walsinghamunderwriting.com)
In December 2013 the Group invested in Walsingham Motor Insurance Limited ("WMIL"), a niche UK Motor Managing General Agency. WMIL was established in August 2012 and commenced trading in July 2013. In 2015 the Group acquired a further 10.5% equity, taking the current shareholding to 40.5%, and subsequently WMIL launched a GBP15m fleet facility with capacity from New India.
Date of investment: December 2013
Equity stake: 40.5%
31 July 2016 valuation: GBP200,000
These investments have been valued in accordance with the accounting policies on Investments set out in note 1 of the Consolidated Financial Statements.
Interim Consolidated Financial Statements
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE PERIODED 31ST JULY 2016
Notes Unaudited Unaudited Audited
6 months 6 months
to to Year to
31(st)
31(st) 31(st) January
July 2016 July 2015 2016
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
GAINS ON
INVESTMENT
Realised gains on
disposal
of equity
investments
(net of costs) 6 248 - 6
Unrealised gains
on
equity
investment
revaluation 4 4,003 3,778 10,269
------- ------- --------
4,251 3,778 10,275
INCOME
Dividends 381 273 639
Income from loans
and
receivables 676 821 1,619
Fees receivable 308 266 541
------- ------- --------
1,365 1,360 2,799
-------- -------- --------
INCOME NET OF
GAINS
ON EQUITY
INVESTMENT 5,616 5,138 13,074
Operating
expenses (1,169) (947) (2,354)
OPERATING PROFIT 4,447 4,191 10,720
Financial income 251 189 18
Financial
expenses 5 (7) (20) (31)
Exchange
movements 151 (219) (12)
------- ------- --------
395 (50) (25)
-------- -------- --------
PROFIT ON
ORDINARY
ACTIVITIES
BEFORE SHARE
BASED PROVISION 4,842 4,141 10,695
Share based
payment
provision 10 (1) (1) (2)
PROFIT ON
ORDINARY
ACTIVITIES
BEFORE TAXATION 4,841 4,140 10,693
Income tax
expense 9 (827) (782) (1,993)
PROFIT ON
ORDINARY
ACTIVITIES
AFTER TAXATION
ATTRIBUTABLE
TO EQUITY HOLDERS 7 GBP4,014 GBP3,358 GBP8,700
-------- -------- --------
Earnings per
share -
basic and
diluted (pence) 3 13.8p 11.5p 29.8p
----------------- ----- ------- -------- ------- -------- -------- --------
The result for the period is wholly attributable to continuing activities.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31ST JULY 2016
Unaudited Unaudited Audited
31(st) July 31(st) 31(st) January
Notes 2016 July 2015 2016
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
ASSETS
NON-CURRENT ASSETS
Property, plant
and equipment 12 15 15
Investments - equity
portfolio 4 53,109 44,585 54,051
Investments - treasury
portfolio 5 5,114 3,545 3,482
Loans and receivables 15,159 13,634 14,660
------- ------- -------
73,394 61,779 72,208
CURRENT ASSETS
Trade and other
receivables 2,807 6,085 3,054
Cash and cash equivalents 4,537 2,421 1,814
------- ------- -------
7,344 8,506 4,868
LIABILITIES
NON-CURRENT LIABILITIES
Corporation tax
provision (1,136) (60) -
Deferred tax liabilities 9 (5,131) (4,384) (5,625)
------- ------- -------
(6,267) (4,444) (5,625)
CURRENT LIABILITIES
Trade and other
payables (442) (252) (588)
Corporation tax
provision (184) (62) (51)
------- ------- -------
(626) (314) (639)
NET ASSETS GBP73,845 GBP65,527 GBP70,812
--------- --------- ---------
CAPITAL AND RESERVES
-
EQUITY
Called up share
capital 2,923 2,923 2,923
Share premium account 9,374 9,370 9,370
Fair value reserve 20,482 17,112 22,524
Reverse acquisition
reserve 393 393 393
Capital redemption
reserve 6 6 6
Capital contribution
reserve 4 2 3
Retained earnings 40,663 35,721 35,593
SHAREHOLDERS' FUNDS
- EQUITY 7 GBP73,845 GBP65,527 GBP70,812
--------- --------- ---------
Net asset value
per share (pence) 253p 225p 243p
The Interim Consolidated Financial Statements were approved by the Board of Directors and authorised for issue on 17th October 2016
and signed on its behalf by:
B.P. Marsh & J.S. Newman
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE PERIODED 31ST JULY 2016
Unaudited Unaudited Audited
31(st) 31(st) 31(st)
July July January
2016 2015 2016
GBP'000 GBP'000 GBP'000
Cash (used by) / from
operating activities
Income from loans to
investees 676 821 1,619
Dividends 381 273 639
Fees received from investment
activity 308 266 541
Operating expenses (1,169) (947) (2,354)
Adjustment for non-cash
share incentive plan
costs 28 - -
Increase in receivables (321) (37) (189)
(Decrease) / increase
in payables (147) (193) 142
Corporation tax paid
in respect of prior year
profits (37) - (56)
Depreciation 3 3 7
--------
Net cash (used by) /
from operating activities (278) 186 349
--------- --------- --------
Net cash from investing
activities
Purchase of property,
plant and equipment (1) (1) (4)
Purchase of equity investments
(Note 4) (3,479) (2,160) (5,209)
Purchase of treasury
investments (Note 5) (6,553) (1,004) (3,084)
Net proceeds from sale
of equity investments
(Note 4) 8,672 - 80
Corporation tax repaid
on equity investment
disposal - 201 201
Net repayments of loans
from investee companies 207 535 2,905
Net proceeds from sale
of treasury investments
(Note 5) 5,162 3,943 5,902
--------
Net cash from investing
activities 4,008 1,514 791
--------- --------- --------
Net cash used by financing
activities
Financial income 3 4 6
Financial expenses - - -
Dividends paid (1,000) (802) (802)
Payments made to repurchase
company shares (9) - (57)
--------- --------- --------
Net cash used by financing
activities (1,006) (798) (853)
--------- --------- --------
Change in cash and cash
equivalents 2,724 902 287
Cash and cash equivalents
at beginning of the period 1,814 1,531 1,531
Exchange movement* (1) (12) (4)
Cash and cash equivalents
at end of period GBP4,537 GBP2,421 GBP1,814
--------- --------- --------
*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.
The above cash and cash equivalents balance excludes treasury portfolio funds which are referred to in Note 5. Including treasury portfolio balances of GBP5,114k, total available cash and treasury portfolio funds as at 31st July 2016 was GBP9,651k (as at 31st July 2015: GBP5,966k, including GBP3,545k of treasury portfolio funds and as at 31st January 2016: GBP5,296k, including GBP3,482k of treasury portfolio funds).
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE PERIODED 31ST JULY 2016
Unaudited Unaudited Audited
6 months 6 months
to to Year to
31(st) July 2016 31(st) July 2015 31(st) January 2016
GBP'000 GBP'000 GBP'000
Opening total equity 70,812 62,971 62,971
Profit for the period 4,014 3,358 8,700
Dividends paid (1,000) (802) (802)
Repurchase of company shares (9) - (57)
Share incentive plan 28 - -
---------------- ---------------- -------------------
Total equity GBP73,845 GBP65,527 GBP70,812
---------------- ---------------- -------------------
Refer to Note 7 for detailed analysis of the changes in the components of equity.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIODED 31ST JULY 2016
1. ACCOUNTING POLICIES
Basis of preparation of financial statements
These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards as adopted for use by the European Union ("IFRS"), and in accordance with the Companies Act 2006.
The consolidated financial statements are presented in sterling, the functional currency of the Group, rounded to the nearest thousand pounds (GBP'000) except where otherwise indicated.
The preparation of financial statements in conformity with IFRS requires management to make judgments, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. In the process of applying the Group's accounting policies, management has made the following judgments, which have the most significant effect on the amounts recognised in the financial statements:
Assessment as an investment entity
Entities that meet the definition of an investment entity within IFRS 10: Consolidated Financial Statements ("IFRS 10") are required to account for their investments in controlled entities, as well as investments in associates at fair value through profit or loss. Subsidiaries that provide investment related services or engage in permitted investment related activities with investees that relate to the parent investment entity's investment activities continue to be consolidated in the Group results. The criteria which define an investment entity are currently as follows:
a) an entity that obtains funds from one or more investors for the purpose of providing those investors with investment services;
b) an entity that commits to its investors that its business purpose is to invest funds solely for returns from capital appreciation, investment income or both; and
c) an entity that measures and evaluates the performance of substantially all of its investments on a fair value basis.
The Group's annual and interim consolidated financial statements clearly state its objective of investing directly into portfolio investments and providing investment management services to investors for the purpose of generating returns in the form of investment income and capital appreciation. The Group has always reported its investment in portfolio investments at fair value. It also produces reports for investors of the funds it manages and its internal management report on a fair value basis. The exit strategy for all investments held by the Group is assessed, initially, at the time of the first investment and this is documented in the investment paper submitted to the Board for approval.
The Board has also concluded that the Company meets the additional characteristics of an investment entity, in that it has more than one investment; the investments are predominantly in the form of equities and similar securities; it has more than one investor and its investors are not related parties. The Board has concluded that B.P. Marsh & Partners Plc and its two subsidiaries, B.P. Marsh & Company Limited and Marsh Insurance Holdings 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, 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 Marsh Insurance Holdings Limited continued 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. The valuation methodology for the investment portfolio is detailed below. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods.
The accounting policies set out below have been applied consistently to all periods presented in these consolidated financial statements.
These interim consolidated financial statements were approved by the Board on 17th October 2016. They have not been audited nor reviewed by the Group's Auditors, as is the case with the comparatives to 31st July 2015, and do not constitute statutory accounts within the meaning of section 434 of the Companies Act 2006.
The financial statements have been prepared using the accounting policies and presentation that were applied in the audited financial statements for the year ended 31st January 2016. Those accounts, upon which the Group's Auditors 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
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 Marsh Insurance Holdings Limited, that provide services that relate to the Company's investment activities. The results of these two subsidiaries are consolidated into the Group consolidated financial statements. Summa Insurance Brokerage, S.L. ("Summa") is also a subsidiary of B.P. Marsh & Company Limited. The Group has taken advantage of the Amendment to IFRS 10 not to consolidate the results of Summa. Instead the investments in Summa are valued at fair value through profit or loss.
The Company has control over an employee share trust, The B.P. Marsh SIP Trust. The results of this employee share trust are not consolidated in these interim financial statements on the basis of their immateriality.
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 issued cash settled share-based awards to certain employees. A fair value for the cash settled share awards is measured at the date of grant. The Group measured the fair value using the Black-Scholes method which was considered to be the most appropriate valuation technique to value the awards.
The fair value of the award is recognised as an expense over the vesting period on a straight-line basis, after allowing for an estimate of the share awards that will eventually vest. The level of vesting is reviewed annually and the charge is adjusted to reflect actual or estimated levels of vesting with the corresponding entry to capital contribution.
During the period the Group also established an HMRC sanctioned 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 GBP3,600 worth of ordinary shares ("Free Shares") by the SIP Trust in each tax year. The number of shares granted is dependent on the share price at the date of grant. In addition, all eligible employees have been invited to take up the opportunity to acquire up to GBP1,800 worth of ordinary shares ("Partnership Shares") in each tax year and for every Partnership Share that an employee acquires, the SIP Trust will offer two ordinary shares in the Company ("Matching Shares") up to a total of GBP3,600 worth of shares. The Free and Matching Shares are subject to a one year forfeiture period, however the awards are not subject to any vesting conditions, hence the related expenses are recognised when the awards are made and are apportioned over the forfeiture period.
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 ("IPEVCV") Committee. 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 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.
Income from equity portfolio investments
Income from equity portfolio investments comprises:
a) gross interest from loans, which is taken to the Consolidated Statement of Comprehensive Income on an accruals basis;
b) dividends from equity investments are recognised in the Consolidated Statement of Comprehensive Income when the shareholders rights to receive payment have been established; and
c) advisory fees from management services provided to investee companies, which are recognised on an accruals basis in accordance with the substance of the relevant investment advisory agreement.
Investments - treasury portfolio
All treasury portfolio investments are designated as "fair value through profit or loss" assets and are initially recognised at the fair value of the consideration. They are measured at subsequent reporting dates at fair market value as determined from the valuation reports provided by the fund investment manager.
Both realised and unrealised gains and losses arising from changes in fair market value are taken to the Consolidated Statement of Comprehensive Income for the period. In the Consolidated Statement of Financial Position the unrealised gains and losses arising from changes in fair value are shown within the retained earnings reserve as these investments are deemed as being easily convertible into cash. Costs associated with the management of these investments are expensed in the Consolidated Statement of Comprehensive Income.
Income from treasury portfolio investments
Income from treasury portfolio investments comprises of dividends receivable which are either directly reinvested into the funds or received as cash.
Property, plant and equipment
Property, plant and equipment are stated at cost less depreciation. Depreciation is provided at rates calculated to write off the property, plant and equipment cost, less their estimated residual value, over their expected useful lives on the following bases:
Furniture & equipment - 5 years
Leasehold fixtures and fittings - over the life of the lease
Foreign currencies
Monetary assets and liabilities denominated in foreign currencies at the reporting period are translated at the exchange rate ruling at the reporting period.
Transactions in foreign currencies are translated into sterling at the rate ruling at the date of the transaction.
Exchange gains and losses are recognised in the Consolidated Statement of Comprehensive Income.
Taxation
The tax expense represents the sum of the tax currently payable and any deferred tax. The tax currently 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 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.
Bonus provision
There is no contractual obligation on the Group to pay bonuses to employees and as such no provision has been made in the operating expenses within the Consolidated Statement of Comprehensive Income for the period to 31st July 2016 (as was also the case with the interims to 31st July 2015).
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.
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. The UK segment includes the Channel Islands.
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: Operating Segments ("IFRS 8")), the segment information is reported separately.
The Group allocates revenues, expenses, assets and liabilities to the operating segment where directly attributable to that segment. All indirect items are apportioned based on the percentage proportion of revenue that the operating segment contributes to the total Group revenue (excluding any unrealised gains and losses on the Group's 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 Geographic Group
segment 1: segment 2:
UK Non-UK
Unaudited Unaudited Unaudited Unaudited Unaudited Unaudited
6 months 6 months 6 months 6 months 6 months 6 months
to 31(st) to 31(st) to 31(st) to 31(st) to 31(st) to 31(st)
July July July July July July
2016 2015 2016 2015 2016 2015
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Income net of
losses on investment 4,669 5,821 947 (683) 5,616 5,138
Operating expenses (825) (701) (344) (246) (1,169) (947)
Segment operating
profit / (loss) 3,844 5,120 603 (929) 4,447 4,191
----------- ----------- ----------- ----------- ----------- -----------
Financial income 177 140 74 49 251 189
Financial expenses (5) (15) (2) (5) (7) (20)
Exchange movements 1 (10) 150 (209) 151 (219)
Share based payment
provision (1) (1) - - (1) (1)
Profit / (loss)
before tax 4,016 5,234 825 (1,094) 4,841 4,140
Income tax expense (662) (1,001) (165) 219 (827) (782)
----------- ----------- ----------- ----------- ----------- -----------
Profit / (loss)
for the period GBP3,354 GBP4,233 GBP660 GBP(875) GBP4,014 GBP3,358
=========== =========== =========== =========== =========== ===========
Included within the operating income reported above are the following amounts requiring separate disclosure owing to the fact that they are derived from a single investee company and the total revenues attributable to that investee company are 10% or more of the total realised income generated by the Group during the period:
Total income % of total Reportable
attributable realised operating geographic
to the investee income segment
company
(GBP'000)
Unaudited Unaudited Unaudited Unaudited Unaudited Unaudited
6 months 6 months 6 months 6 months 6 months 6 months
to 31(st) to 31(st) to 31(st) to 31(st) to 31(st) to 31(st)
July July July July July July
2016 2015 2016 2015 2016 2015
Investee Company
LEBC Holdings
Limited 329 216 24 16 1 1
Besso Insurance
Group Limited 305 331 22 24 1 1
Hyperion Insurance
Group Limited 225 225 16 17 1 1
Trireme Insurance
Group Limited 197 204 14 15 1&2 1&2
Geographic Geographic Group
segment 1: segment 2:
UK Non-UK
Unaudited Unaudited Unaudited Unaudited Unaudited Unaudited
6 months 6 months 6 months 6 months 6 months 6 months
to 31(st) to 31(st) to 31(st) to 31(st) to 31(st) to 31(st)
July July July July July July
2016 2015 2016 2015 2016 2015
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Non-current assets
Property, plant
and equipment 10 13 2 2 12 15
Investments -
equity portfolio 42,901 37,281 10,208 7,304 53,109 44,585
Investments -
treasury portfolio 5,114 3,545 - - 5,114 3,545
Loans and receivables 11,423 10,384 3,736 3,250 15,159 13,634
----------- ----------- ----------- ----------- ----------- -----------
59,448 51,223 13,946 10,556 73,394 61,779
----------- ----------- ----------- ----------- ----------- -----------
Current assets
Trade and other
receivables 2,262 5,615 545 470 2,807 6,085
Cash and cash
equivalents 4,537 2,421 - - 4,537 2,421
Deferred tax
assets - - - 207 - 207
----------- ----------- ----------- ----------- ----------- -----------
6,799 8,036 545 677 7,344 8,713
----------- ----------- ----------- ----------- ----------- -----------
Total assets 66,247 59,259 14,491 11,233 80,738 70,492
----------- ----------- ----------- ----------- ----------- -----------
Non-current liabilities
Corporation tax
provision (1,136) (60) - - (1,136) (60)
Deferred tax
liabilities (5,022) (4,591) (109) - (5,131) (4,591)
----------- ----------- ----------- ----------- ----------- -----------
(6,158) (4,651) (109) - (6,267) (4,651)
----------- ----------- ----------- ----------- ----------- -----------
Current liabilities
Trade and other
payables (442) (252) - - (442) (252)
Corporation tax
provision (184) (62) - - (184) (62)
----------- ----------- ----------- ----------- ----------- -----------
(626) (314) - - (626) (314)
----------- ----------- ----------- ----------- ----------- -----------
Total liabilities (6,784) (4,965) (109) - (6,893) (4,965)
----------- ----------- ----------- ----------- ----------- -----------
Net assets GBP59,463 GBP54,294 GBP14,382 GBP11,233 GBP73,845 GBP65,527
=========== =========== =========== =========== =========== ===========
Geographic Geographic Group
segment 1: segment 2:
UK Non-UK
Unaudited Unaudited Unaudited Unaudited Unaudited Unaudited
6 months 6 months 6 months 6 months 6 months 6 months
to 31(st) to 31(st) to 31(st) to 31(st) to 31(st) to 31(st)
July July July July July July
2016 2015 2016 2015 2016 2015
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Additions to
property, plant
and equipment 1 1 - - 1 1
Depreciation
of property,
plant and equipment 2 2 1 1 3 3
Cash flow arising
from:
Operating activities (272) 134 (6) 52 (278) 186
Investing activities 5,762 2,122 (1,754) (608) 4,008 1,514
Financing activities (1,006) (798) - - (1,006) (798)
Change in cash
and cash equivalents 4,484 1,458 (1,760) (556) 2,724 902
Geographic Geographic Group
segment 1: segment 2:
UK Non-UK
Audited Audited Audited
31(st) January 31(st) January 31(st) January
2016 2016 2016
GBP'000 GBP'000 GBP'000
Operating income 12,588 486 13,074
Operating expenses (1,740) (614) (2,354)
--------------- --------------- ---------------
Segment operating
profit / (loss) 10,848 (128) 10,720
--------------- --------------- ---------------
Financial income 13 5 18
Financial expenses (23) (8) (31)
Exchange movements (6) (6) (12)
Share based payment
provision (2) - (2)
Profit / (loss)
before tax 10,830 (137) 10,693
Income tax (2,020) 27 (1,993)
--------------- --------------- ---------------
Profit / (loss)
for the year GBP8,810 GBP(110) GBP8,700
=============== =============== ===============
Included within the operating income reported above are the following amounts requiring separate disclosure owing to the fact that they are derived from a single investee company and the total revenues attributable to that investee company are 10% or more of the total realised income generated by the Group during the period:
Total income % of total Reportable
attributable realised operating geographic
to the investee income segment
company
(GBP'000)
Audited Audited Audited
31(st) January 31(st) January 31(st) January
2016 2016 2016
Investee Company
Besso Insurance
Group Limited 609 22 1
Hyperion Insurance
Group Limited 453 16 1
Trireme Insurance
Group Limited 407 15 1&2
LEBC Holdings
Limited 351 13 1
Geographic Geographic Group
segment 1: segment 2:
UK Non-UK
Audited Audited Audited
31(st) January 31(st) January 31(st) January
2016 2016 2016
GBP'000 GBP'000 GBP'000
Non-current assets
Property, plant
and equipment 13 2 15
Investments -
equity portfolio 45,956 8,095 54,051
Investments -
treasury portfolio 3,482 - 3,482
Loans and receivables 11,129 3,531 14,660
--------------- --------------- ---------------
60,580 11,628 72,208
--------------- --------------- ---------------
Current assets
Trade and other
receivables 2,705 349 3,054
Cash and cash
equivalents 1,814 - 1,814
Deferred tax assets - 49 49
--------------- --------------- ---------------
4,519 398 4,917
--------------- --------------- ---------------
Total assets 65,099 12,026 77,125
--------------- --------------- ---------------
Non-current liabilities
Deferred tax liabilities (5,674) - (5,674)
--------------- --------------- ---------------
(5,674) - (5,674)
--------------- --------------- ---------------
Current liabilities
Trade and other
payables (588) - (588)
Corporation tax
provision (51) - (51)
--------------- --------------- ---------------
(639) - (639)
--------------- --------------- ---------------
Total liabilities (6,313) - (6,313)
--------------- --------------- ---------------
Net assets GBP58,786 GBP12,026 GBP70,812
=============== =============== ===============
Additions to
property, plant
and equipment 3 1 4
Depreciation
of property,
plant and equipment 6 1 7
Cash flow arising
from:
Operating activities 366 (17) 349
Investing activities 1,283 (492) 791
Financing activities (853) - (853)
Change in cash
and cash equivalents 796 (509) 287
3. EARNINGS PER SHARE FROM CONTINUING OPERATIONS ATTRIBUTABLE TO THE EQUITY SHAREHOLDERS
Unaudited Unaudited Audited
31(st) July 31(st) July 31(st) January
2016 2015 2016
GBP'000 GBP'000 GBP'000
Earnings
Earnings for the
period 4,014 3,358 8,700
Earnings for the
purposes
of basic and diluted
earnings per share
being net profit
attributable
to equity
shareholders 4,014 3,358 8,700
----------------------------- ----------------------------- --------------------------
Earnings per share
- basic and diluted 13.8p 11.5p 29.8p
----------------------------- ----------------------------- --------------------------
Number of shares Number Number Number
Weighted average
number
of ordinary shares
for the purposes of
basic earnings per
share 29,152,684 29,167,000 29,165,774
Number of dilutive Nil Nil
shares under option Nil
Weighted average
number
of ordinary shares
for the purposes of
dilutive earnings
per share 29,152,684 29,167,000 29,165,774
============================= ============================= ==========================
During the period the Company paid a total of GBP8,805 (interim 6 months to 31st July 2015: Nil and full year to 31st January 2016: GBP56,414) in order to repurchase 5,726 (interim 6 months to 31st July 2015: Nil and full year to 31st January 2016: 38,612) ordinary shares at an average price of 154 pence per share (interim 6 months to 31st July 2015: Nil and full year to 31st January 2016: 146 pence per share).
Distributable reserves have been reduced by GBP8,805 as a result (interim 6 months to 31st July 2015: no reduction and full year to 31st January 2016: reduction of GBP56,414).
Ordinary shares held by the Company in Treasury
Movement of ordinary Unaudited Unaudited Audited
shares held in Treasury:
31(st) July 31(st) July 31(st) January
2016 2015 2016
Number Number Number
Opening total ordinary
shares held in Treasury 97,652 59,040 59,040
Ordinary shares repurchased
into Treasury during
the period 5,726 - 38,612
Ordinary shares transferred
to The B.P. Marsh
SIP Trust during
the period (97,652) - -
Total ordinary shares
held in Treasury
at period end 5,726 59,040 97,652
============ ============ ===============
The Treasury shares do not have voting or dividend rights and have therefore been excluded for the purposes of calculating earnings per share.
4. NON-CURRENT INVESTMENTS - EQUITY PORTFOLIO
Group Investments Unaudited Unaudited Audited
31(st) July 31(st) July 31(st) January
2016 2015 2016
GBP'000 GBP'000 GBP'000
At valuation
At 1(st) February 54,051 38,647 38,647
Additions 3,479 2,160 5,209
Disposals (8,424) - (74)
Movement in valuation 4,003 3,778 10,269
At period end GBP53,109 GBP44,585 GBP54,051
=========== =========== ==============
At cost
At 1(st) February 25,951 20,816 20,816
Additions 3,479 2,160 5,209
Disposals (1,926) - (74)
At period end GBP27,504 GBP22,976 GBP25,951
=========== =========== ==============
The principal additions relate to the following transactions in the period:
On 20th April 2016 the Group acquired a 20% shareholding in Asia Reinsurance Brokers Pte Limited ("ARB"), a Singapore headquartered independent specialist reinsurance and insurance risk solutions provider, for a total consideration of SGD 2,398,424 (GBP1,268,336). The Group may increase its shareholding in ARB to 25% for an additional cash consideration of SGD 500,000 dependent on the performance of ARB in its financial year ending 31st December 2017.
On 14th June 2016 the Group acquired a further 8.03% equity stake in LEBC Holdings Limited ("LEBC") for a total consideration of GBP1,911,120. The acquisition increased the Group's equity stake in LEBC to 42.63% as at 31st July 2016.
During the period, Property and Liability Underwriting Managers (PTY) Limited ("PLUM") achieved its target earnings before interest, tax, depreciation and amortisation ("EBITDA") of ZAR 8,299,927 over the first year of the Group's investment. This EBITDA target had been agreed upon at initial investment in June 2015 and provided for further consideration of GBP300,000 to become payable in order to maintain the Group's equity stake in PLUM at 20%. On 9th June 2016 the Group paid GBP150,000 of this consideration and as at 31st July 2016 the Group had also committed to paying the remaining GBP150,000, bringing the total consideration payable to GBP606,463 as at 31st July 2016.
The principal disposals relate to the following transactions in the period:
On 15th April 2016 the Group sold its entire 49% stake in The Broucour Group Limited ("Broucour") to the founder and managing director, Mr Rupert Cattell, for consideration of up to GBP341,000, which equates to the Group's 31st January 2016 valuation of its investment in Broucour (Note 6). The outstanding loan (GBP329,834 at the date of sale and GBP304,835 as at 31st July 2016) will be repaid in full in instalments.
On 4th May 2016 the Group sold its entire 1.32% stake (948,830 ordinary shares) in Randall & Quilter Investment Holdings Limited ("R&Q") to Brian Marsh Enterprises Limited, a company owned by Mr B.P. Marsh, the Chairman and majority shareholder of the Company. The total consideration of GBP1,019,992 represents a realised gain of GBP246,992 on the investment when compared to the carrying value of GBP773,000 as at 31st January 2016 (Note 6).
On 30th June 2016 the Group sold its remaining 1.6% equity stake in Hyperion Insurance Group Limited ("Hyperion") for consideration of GBP7,310,576. This consideration represents a realised gain of GBP576 when compared to the carrying value of GBP7,310,000 as at 31st January 2016 (Note 6). The Group retains a loan investment in Hyperion and as at 31st July 2016 the balance of this loan amounted to GBP6,037,361 (repayable on 3rd October 2017).
The unquoted investee companies, which are registered in England except Summa Insurance Brokerage, S.L. (Spain), MB Prestige Holdings PTY Limited (Australia), Bastion Reinsurance Brokerage (PTY) Limited (South Africa), Bulwark Investment Holdings (PTY) Limited (South Africa), Property and Liability Underwriting Managers (PTY) Limited (South Africa) and Asia Reinsurance Brokers Pte Limited (Singapore) are as follows:
% holding Date Aggregate Post
tax
of share information capital profit/(loss)
and
Name of company capital available reserves for the Principal
to year activity
GBP GBP
Specialist
Asia Reinsurance reinsurance
Brokers Pte Limited 20.00 31.12.15 1,772,106 220,331 broker
Bastion Reinsurance
Brokerage (PTY) Reinsurance
Limited 35.00 31.12.15 (263,528) (289,315) broker
Besso Insurance 35.45* Insurance
Group Limited 6.57* 31.12.15 4,737,544 265,114 intermediary
Holding company
Bulwark Investment for South
Holdings (PTY) African Managing
Limited 35.00 31.12.15 (82,040) (82,084) General Agents
Independent
financial
LEBC Holdings Limited 42.63 30.09.15 1,171,692 1,359,232 advisor company
Specialist
Australian
MB Prestige Holdings Motor Managing
PTY Limited 40.00 31.12.15 1,021,966 315,107 General Agency
Neutral Bay Investments Investment
Limited 49.90 31.03.15 3,905,577 190,163 holding company
Specialist
Nexus Underwriting Managing
Management Limited 11.94 31.12.15 7,975,270 1,687,050 General Agency
% holding Date Aggregate Post
tax
of share information capital profit/(loss)
and
Name of company capital available reserves for the Principal
to year activity
GBP GBP
Specialist
South African
Property and Liability Property
Underwriting Managers Managing
(PTY) Limited 20.00 31.12.15 (181,225) (152,042) General Agency
Consolidator
of regional
Summa Insurance insurance
Brokerage, S.L. 77.25 31.12.14 8,358,239 84,660 brokers
Holding company
Trireme Insurance for insurance
Group Limited 29.94 31.12.15 (22,105) (566,961) intermediaries
Specialist
UK Motor
Walsingham Motor Managing
Insurance Limited 40.50 30.09.15 (1,470,124) (586,214) General Agency
*The Group's economic participation in Besso Insurance Group Limited ("Besso") as at 31st January 2016 was 37.94%. An additional 7.03% acquired and held by the Group during the year to 31st January 2016 on behalf of Besso was a capped participation and was stated within the Group's valuation of Besso at cost (GBP1,581,147). Besso issued 7.03% (pre-dilution) of new shares to its management team in April 2016. This diluted the Group's economic participation in Besso to 35.45% and 6.57% (total 42.02%) as at 31st July 2016. In September 2016 Besso acquired the 6.57% shares from the Group at cost, and immediately cancelled them, such that the current holding has returned to 37.94%.
By virtue of its interest in Walsingham Motor Insurance Limited, the Group also has a 50% equity holding in Walsingham Holdings Limited, a company incorporated in the year to 31st January 2016, for GBP1 consideration and which remains dormant at 31st July 2016.
The aggregate capital and reserves and profit/(loss) for the year shown above are extracted from the relevant local GAAP accounts of the investee companies.
5. NON-CURRENT INVESTMENTS - TREASURY PORTFOLIO
Group Unaudited Unaudited Audited
At valuation 31(st) July 31(st) 31(st) January
2016 July 2016
2015
GBP'000 GBP'000 GBP'000
Market value at 1st
February 3,482 6,319 6,319
Additions at cost 6,553 1,004 3,084
Disposals (5,162) (3,943) (5,902)
Change in value in
the year 241 165 (19)
------------ ----------- ---------------
Market value at period GBP5,114 GBP3,545 GBP3,482
end
============ =========== ===============
Investment fund split:
GAM London Limited 5,114 2,942 3,377
Banque Heritage SA - 603 105
------------ ----------- ---------------
Total GBP5,114 GBP3,545 GBP3,482
============ =========== ===============
The treasury portfolio comprises of investment funds managed and valued by the Group's investment manager, GAM London Limited (and also previously Banque Heritage SA until July 2016). All investments in securities are included at year end market value.
The initial investment into the funds was made following the partial realisation of the Group's investment in Hyperion Insurance Group Limited in the year to 31st January 2014.
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.
Investment management costs of GBP7,246 (interim 6 months to 31st July 2015: GBP20,190 and full year to 31st January 2016: GBP31,257) were charged to the Consolidated Statement of Comprehensive Income during the period.
6. REALISED GAINS ON DISPOSAL OF INVESTMENTS (NET OF COSTS)
The realised gains on disposal of investments comprises of a net gain of GBP247,568. GBP246,992 of this net gain is in respect of the Group's disposal of its entire 1.32% investment in Randall & Quilter Investment Holdings Limited ("R&Q") at its carrying value of GBP773,000 for a consideration of GBP1,019,992. The remaining net gain of GBP576 is in respect of the Group's disposal of its remaining 1.6% investment in Hyperion Insurance Group Limited ("Hyperion") at its carrying value of GBP7,310,000 for a consideration of GBP7,310,576 (see Note 4 for further details of these disposals).
In addition, during the period the Group disposed of its investment in The Broucour Group Limited ("Broucour") at its carrying value of GBP341,000 (Note 4). As a result of this disposal being made at carrying value, no gain or loss was included in the Consolidated Statement of Comprehensive Income for the period.
In aggregate, the above disposals resulted in a net release to Retained Earnings from the Fair Value Reserve of GBP5,304,225, comprising of a GBP6,605,942 release of fair value which has been reduced by tax payable on disposal of GBP1,301,717 (see Note 7).
The amount included in realised gains on disposal of investments for the 6 months to 31st July 2015 was GBPNil and for the 12 months to 31st January 2016 was GBP6,141. The realised gains on disposal of investments for the 12 months to 31st January 2016 were in respect of capital distributions made by R&Q.
7. RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
Share Reverse Capital Capital
Share premium Fair acquisition redemption contribution Retained
value
capital account reserve reserve reserve reserve earnings Total
(GBP'000) (GBP'000) (GBP'000) (GBP'000) (GBP'000) (GBP'000) (GBP'000) (GBP'000)
At 31(st)
January 2016 2,923 9,370 22,524 393 6 3 35,593 70,812
Profit for
the period - - 3,262 - - - 752 4,014
Net transfers
on sale of
investments - - (5,304) - - - 5,304 -
Dividends
paid - - - - - - (1,000) (1,000)
Repurchase
of Company
shares - - - - - - (9) (9)
Share based
payments
(Note 10) - - - - - 1 (1) -
Share
Incentive
Plan - 4 - - - - 24 28
At 31(st) GBP2,923 GBP9,374 GBP20,482 GBP393 GBP6 GBP4 GBP40,663 GBP73,845
July 2016
========== ========== ========== ============ =========== ============= ========== ==========
8. LOAN AND EQUITY COMMITMENTS
On 22nd July 2010 (as varied on 8th August 2012, 29th May 2014 and 23rd September 2014) the Group entered into an agreement to provide a loan facility of GBP2,419,515 to Trireme Insurance Group Limited ("Trireme"), an investee company. As at 31st July 2016 the total loan drawn down amounted to GBP2,155,113, leaving a remaining undrawn facility of GBP24,402.
On 15th April 2015 the Group entered into an agreement to provide a loan facility of GBP500,000 to Bulwark Investment Holdings (PTY) Limited, an investee company. During the period this facility was increased to GBP600,000 and as at 31st July 2016 GBP585,000 of this facility had been drawn down, leaving a remaining undrawn facility of GBP15,000. Since 31st July 2016 this facility has been increased by a further GBP65,000 to GBP665,000 and at the date of this report a total of GBP615,000 has been drawn down, leaving a remaining undrawn facility of GBP50,000.
9. DEFERRED TAX AND CONTINGENT LIABILITIES
The Directors estimate that, if the Group were to dispose of all its investments at the amount stated in the Consolidated Statement of Financial Position, GBP5,131,000 (interim 6 months to 31st July 2015: GBP4,384,000 and full year to 31st January 2016: GBP5,625,000) of tax on capital gains would become payable by the Group at the current corporation tax rate of 20%. This amount is fully provided for in the financial statements.
As at 31st July 2016 the enacted tax rate was 19% from April 2017. If 19% is used to calculate the deferred tax liability it would be reduced by some GBP257,000.
10. SHARE BASED PAYMENT ARRANGEMENTS
During the year to 31st January 2015, B.P. Marsh & Partners Plc entered into joint share ownership agreements ("the Agreements") with certain employees and directors. The details of the arrangements are described in the following table:
Nature of the arrangement Share appreciation rights (joint
beneficial ownership)
--------------------------- -----------------------------------------
Date of grant 6th November 2014
--------------------------- -----------------------------------------
Number of instruments
granted 1,421,130
--------------------------- -----------------------------------------
Exercise price (pence) 140.00
--------------------------- -----------------------------------------
Share price (market
value) at grant (pence) 138.00
--------------------------- -----------------------------------------
Hurdle rate 3.5% p.a. (simple)
--------------------------- -----------------------------------------
Vesting period (years) 3 years
--------------------------- -----------------------------------------
Vesting conditions There are no performance conditions
other than the recipient remaining
an employee throughout the
vesting period. The awards
vest after 3 years or earlier
resulting from either:
a) a change of control resulting
from a person, other than a
member of the Company, obtaining
control of the Company either
(i) as a result of a making
a Takeover Offer; (ii) pursuant
to a Scheme of Arrangement;
or (iii) in consequence of
a Compulsory Acquisition);
or
b) a person becoming bound
or entitled to acquire shares
in the Company pursuant to
sections 974 to 991 of the
Companies Act 2006; or
c) a winding up.
If the employee is a bad leaver
the co-owner of the jointly-owned
share can buy out the employee's
interest for 1p
--------------------------- -----------------------------------------
Expected volatility 20%
--------------------------- -----------------------------------------
Risk free rate 1%
--------------------------- -----------------------------------------
Nature of the arrangement Share appreciation rights (joint
beneficial ownership)
--------------------------- ---------------------------------
Expected dividends
expressed as a dividend
yield 2%
--------------------------- ---------------------------------
Settlement Cash settled on sale of shares
--------------------------- ---------------------------------
% expected to vest
(based upon leavers) 85%
--------------------------- ---------------------------------
Number expected to
vest 1,207,960
--------------------------- ---------------------------------
Valuation model Black-Scholes
--------------------------- ---------------------------------
Black-Scholes value
(pence) 15.00
--------------------------- ---------------------------------
Deduction for carry
charge (pence) 14.50
--------------------------- ---------------------------------
Fair value per granted
instrument (pence) 0.50
--------------------------- ---------------------------------
Charge for period ended
31st July 2016 GBP1,007
--------------------------- ---------------------------------
On 6th November 2014 1,421,130 10p Ordinary shares in the Company were transferred into joint beneficial ownership for 6 employees (4 of whom are directors) under the terms of joint share ownership agreements. No consideration was paid by the employees for their interests in the jointly-owned shares.
Under the terms of the Agreements, the employees and directors enjoy the growth in value of the shares above a threshold price of GBP1.40 per share plus an annual carrying charge of 3.5% per annum (simple interest) to the market value at the date of grant (GBP1.38 per share).
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 option pricing theory (Black-Scholes Mathematics).
The risk free rates are based on the yield on UK Government Gilts of a term consistent with the assumed option life.
No jointly-owned shares were sold or forfeited during the period. The number of jointly-owned shares expected to vest has therefore not been adjusted. In accordance with IFRS 2: Share-based Payment, the fair value of the expected cost of the award (measured at the date of grant) has been spread over the three year vesting period.
Analyst Briefing
An analyst presentation, hosted by the Executive Directors, will be held on Tuesday 18 June 2016 at 10:00 a.m. at the offices of B.P. Marsh & Partners Plc, 2nd Floor, 36 Broadway, London SW1H 0BH.
Please contact David Ison at Redleaf Communications on 020 7382 4732 or bpmarsh@redleafpr.com if you wish to attend.
- Ends -
For further information:
B.P. Marsh & Partners www.bpmarsh.co.uk Plc Brian Marsh OBE / Camilla Kenyon +44 (0)20 7233 3112 Nominated Adviser & Broker Panmure Gordon Adam James / Charles Leigh-Pemberton / Atholl Tweedie +44 (0)20 7886 2500 Financial PR Redleaf Communications bpmarsh@redleafpr.com Emma Kane / David Ison +44 (0)20 7382 4732
Notes to Editors:
About B.P. Marsh & Partners Plc
B.P. Marsh's current portfolio contains twelve companies. More detailed descriptions of the portfolio can be found at www.bpmarsh.co.uk.
Since formation over 25 years ago, the Company has assembled a management team with considerable experience both in the financial services sector and in managing private equity investments. Many of the directors have worked with each other in previous roles, and all have worked with each other for at least five years.
Prior to Brian Marsh's involvement in the Company, he spent many years in insurance broking and underwriting in Lloyd's as well as the London and overseas market. He has over 30 years' experience in building, buying and selling financial services businesses, particularly in the insurance sector.
Alice Foulk joined B.P. Marsh in September 2011 having started her career at a leading Life Assurance company. In 2014 she took over as Executive Assistant to the Chairman, running the Chairman's Office and established herself as a central part of the management team.
In February 2015 she was appointed as a Director of B.P. Marsh and a member of the Investment Committee. In January 2016 Alice was appointed Managing Director of B.P. Marsh.
In her position as Managing Director, Alice is responsible for the overall performance of the Company and monitoring the Company's overall progress towards achieving the objectives and goals of the Company, as set by the Board.
Dan Topping is the Chief Investment Officer of B. P. Marsh, having been appointed as a Director in 2011. He joined the Company in February 2007, following two years at an independent London accountancy practice. Dan is the Senior Executive with overall responsibility for the portfolio and investment strategy of B.P. Marsh.
Dan graduated from the University of Durham in 2005 and is a member of the Securities and Investment Institute and the Institute of Chartered Secretaries and Administrators.
Dan is a standing member of the B.P. Marsh Investment and Valuation Committees and currently serves as a Board Director across the portfolio.
Camilla Kenyon was appointed as Head of Investor Relations at B.P. Marsh in February 2009, having four years' prior experience with the Company. She was appointed to the main board in 2011. Camilla is Chair of the New Business Committee evaluating new investment opportunities. She has a number of nominee directorships over two investee companies and is a standing member of the Investment Committee. She is a Member of the Investor Relations Society.
Jonathan Newman is a Chartered Management Accountant and is the Group Director of Finance and has over 19 years' experience in the financial services industry. Jon graduated from the University of Sheffield with an honours degree in Business Studies and joined the Group in November 1999, following two years at Euler Trade Indemnity and two years at a Chartered Accountants. Jon is a Member of the Chartered Global Management Accountants, the Chartered Management Accountants and the Chartered Institute of Securities and Investment.
Jon was appointed a Director of B.P. Marsh & Company Limited in September 2001, and Group Finance Director in December 2003 and was instrumental in the admission of the Group to AIM in February 2006. Jon is a member of the B.P. Marsh Investment and Valuation Committees and currently serves as a Board Director for Walsingham Motor Insurance Limited, and provides senior financial support and advice to all companies within the Group's portfolio as well as evaluating new investment opportunities.
-ends-
This information is provided by RNS
The company news service from the London Stock Exchange
END
IR VDLFFQBFLFBV
(END) Dow Jones Newswires
October 18, 2016 02:00 ET (06:00 GMT)
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