TIDMBPM
RNS Number : 9380K
B.P. Marsh & Partners PLC
02 September 2019
Date: 2 September 2019
On behalf of: B.P. Marsh & Partners Plc
B.P. Marsh & Partners Plc
("B.P. Marsh", the "Company" or the "Group")
Trading Update
B.P. Marsh, the specialist investor in early stage financial
services businesses, provides the market with an update on trading
for the six months ended 31 July 2019.
B.P. Marsh had anticipated that it would make this Trading
Update on 5 September 2019. However, in light of the Group's recent
share price performance and the announcement made regarding LEBC
Holdings Limited the Group believed it was sensible and prudent to
bring this trading update forward, to update shareholders on the
performance of the Company as a whole and to provide further
information regarding LEBC.
LEBC Holdings Limited ("LEBC")
The Group notes its recent announcement regarding its investee
company LEBC Holdings Limited, in which it holds a 59.3%
shareholding. LEBC Holdings Limited is the parent company of LEBC
Group Limited ("LEBC") the UK IFA business.
As part of its market-wide review of the defined benefit ("DB")
transfer market, the FCA has undertaken a review of LEBC focused on
the division of the business that provides DB pension transfer
advice.
Following this, LEBC has agreed voluntarily to cease the
provision of DB pension transfer advice and projects,
forthwith.
Advice in the DB transfer market represents c.20% of LEBC's
total revenue in the current year. The cessation of the provision
of advice in this area will have an impact on LEBC. However, LEBC,
excluding DB transfer business, is expecting to produce annual
revenue of c. GBP19m with the business still reporting an
acceptable underlying profit position.
In line with its successful long-term investment strategy, B.P.
Marsh will continue to support LEBC as it evolves its business,
which provides a range of financial solutions, for the benefit of
its customers, staff and shareholders. As reported this morning,
LEBC is working on a number of initiatives, some of which have
already been implemented. The Group will work closely with LEBC's
management team to return LEBC to the position it was in before the
FCA review.
Although the current situation will reduce LEBC's valuation in
the short term, B.P. Marsh has a diverse portfolio. The strong
performance delivered by a number of its investee companies in
recent months, as outlined below, means that the Board believes
that the Company will emerge in a satisfactory position under the
circumstances as regards its financial results for the six months
ended 31 July 2019. As at the last published valuation (being 31
January 2019, released on 11 June 2019), the Group valued its 59.3%
stake in LEBC at GBP35.5m.
Net Asset Value and Interim Results
The latest published Net Asset Value ("NAV") is GBP126.2m, or
350p per share, as at 31 January 2019. The NAV per share is
calculated based upon the total shares in issue of 37,478,077, and
then excluding 1,461,302 shares held in a management incentive
scheme as these shares are subject to performance criteria which
have not yet been met and are non-dilutive at this time.
Although the current situation will reduce LEBC's valuation in
the short term, B.P. Marsh has a diverse portfolio and the strong
performance delivered by a number of its investee companies in
recent months means that the Board believes that the Company will
emerge in a satisfactory position under the circumstances as
regards its financial results for the six months ended 31 July
2019.
The interim results to 31 July 2019 and the updated NAV will be
announced on Tuesday 15 October 2019.
Cash Balance
At 31 July 2019 the Group's cash balance was GBP1.4m. In light
of this, the Board explored short, medium and long term funding
options to improve the cash balances of the Company, in order to
take advantage of any new investment opportunities.
Having reviewed all the options available to the Group, and
given the market wide volatility, the Group entered into a GBP3m
loan facility, provided by Brian Marsh Enterprises Limited, a
company in which the Chairman, Brian Marsh, is a director and sole
shareholder.
The loan facility provides the Group with further investment
cash at an interest rate of the higher of 4% or the UK 1-month
LIBOR plus 3.25% and is available to be drawn down until July
2020.
The Board considers that these are commercially advantageous
terms, compared to other avenues of funding available.
Follow-on Investments and Funding
Nexus Underwriting Management Ltd ("Nexus")
In April 2019 the Group provided Nexus with a GBP2m revolving
credit facility, as part of Nexus' wider debt fundraising exercise
in order to undertake M&A activity.
In addition to the facility from the Company, Nexus has secured
an additional GBP14m loan facility from funds managed by HPS
Investment Partners, LLC ("HPS"). HPS is a leading global
investment firm.
The funding provided by both B.P. Marsh and HPS resulted in
Nexus securing a total of GBP16m in new loan facilities, in
addition to the GBP30m of loan funding secured from both B.P. Marsh
and HPS in July 2017.
Nexus has continued with its acquisition strategy during the
period. Most recently, on 30 July 2019 Nexus acquired Plus Risk
Limited ("PRL"), a London based Financial and Professional Lines
MGA.
PRL provides Management Liability and niche Professional
Indemnity Insurance. PRL was founded in 2017 and its underwriting
team is comprised of James Rasmussen and Neil Ede, who will
continue in the business post transaction. James Rasmussen and Neil
Ede will become shareholders in Nexus.
In April of this year Nexus acquired Credit & Business
Finance Limited ("CBF"), a specialist trade credit broker, and
Capital Risks MGA Limited ("Capital Risks"), a Warranty and
Indemnity MGA. The management shareholders of CBF and Capital Risks
became shareholders in Nexus as part of the acquisitions.
Following the acquisition of CBF, Nexus is now the leading
independent UK trade credit broker, fulfilling one of its strategic
goals and uniting the two biggest producers of 'new to market'
business, and will hold a market share in excess of 10% of the
estimated GBP350m Gross Written Premium for the UK trade credit
broking market.
Nexus are forecasting an adjusted EBITDA of c.GBP20m over the
next 12 months, which would represent an increase in EBITDA of 45%
compound per annum since B.P. Marsh's investment in August
2014.
Portfolio Update
UK
CBC UK Ltd ("CBC")
CBC, the London based Lloyd's broking business, continues to
demonstrate strong growth. EBITDA increased by 40% in 2018, and is
on target for increasing at the same rate in 2019. CBC continue to
strengthen its product offering with strategic hires, and have
recently hired an experienced Financial Products team.
EC3 Brokers Limited ("EC3")
In December 2017, the Group invested in EC3, an independent
specialist Lloyd's broker and reinsurance broker.
Since investment, EC3 has grown its top line revenue from c.
GBP9m to a budget of approaching GBP14m in the year to 30 December
2019, whilst also maintaining a good underlying profit margin.
Over the same period, B.P. Marsh has worked with EC3 to augment
its management function, and further develop its product offering
to deliver top and bottom-line growth.
The Fiducia MGA Company Limited
In November 2016, the Group invested in a UK Marine Cargo
Underwriting Agency, established by CEO Gerry Sheehy and based in
Leeds.
Fiducia is a registered Lloyd's Coverholder which specialises in
the provision of insurance solutions across a number of Marine
risks including, Cargo, Transit Liability, Engineering and
Terrorism Insurance
Since Fiducia commenced trading, it has grown from a start-up
position to producing in excess of GBP10m in Gross Written Premium
in the year ending 31 December 2019, across its specialist lines of
business.
Walsingham Motor Insurance Ltd ("Walsingham")
Walsingham, the London-based motor fleet MGA, continued its
strong progress in 2018 reporting GBP19.8m in premium and
generating EBITDA for the year of GBP0.6m. 2019 has seen further
strong growth, reporting GBP21.5m in premium in 10 months' trading
and EBITDA expected to be significantly ahead of 2018.
Canada
Stewart Specialty Risk Underwriting Ltd ("SSRU")
SSRU, the Toronto based provider of specialty insurance products
to a wide array of clients in the Construction, Manufacturing,
Onshore Energy, Public Entity and Transportation sectors, commenced
operations in February 2017.
Since the Group's investment, SSRU has increased its Gross
Written Premium from nil to a forecasted position of over CA$9m, in
the year ending 31 December 2019, whilst also producing profit and
dividend yield.
Spain
Summa Insurance Brokerage, S. L. ("Summa")
Summa is a regional consolidator of insurance brokers in Spain,
with 19 branches across Spain.
Whilst the Spanish insurance market continues to be a
challenging place in which to operate, Summa continues to deliver
c. EUR45m of annual premium and an annual adjusted EBITDA of over
EUR1.2m.
The Group was also pleased to note that Summa had achieved
Lloyd's coverholder status, which will bolster its product offering
going forward.
USA
XPT Group LLC ("XPT")
The Group invested into XPT in June 2017, the U.S. based
specialty lines insurance distribution company.
In July 2019, XPT' acquired Klein & Costa Insurance Services
("Klein & Costa"), an MGA and surplus lines broker located in
Santa Ana, California.
Established in 2001, Klein & Costa provides broking services
in the areas of Professional Liability and Speciality Lines, and as
an MGA it represents three carriers with broad delegated
underwriting authority.
Following the acquisition, Klein & Costa became part of
WSSIB, XPT's wholesaler and MGA based in Texas and California, and
began trading under the WSSIB name and provided WSSIB with entry
into a new location and introductions to Klein & Costa's retail
producers.
Since XPT commenced trading, it has grown from start-up to $165m
in Gross Written Premium and is approaching $3.9m of adjusted
EBITDA in the current financial year ending 31 December 2019.
XPT continues to have an active pipeline of new investment
opportunities and is in advanced discussions with a further
significant value accretive acquisition opportunity.
Australia
B.P. Marsh's existing investments in Australia [ATC Insurance
Solutions PTY Limited, Sterling Insurance PTY Limited and, MB
Prestige Holdings PTY Limited] continue to perform well in an
insurance market which although challenging from a performance
perspective, has presented these companies with growth
opportunities. As such premium income and profitability has
increased across the board.
On the one hand this is in response to a more positive insurance
market internationally, but it also underlines the intrinsic
quality of these companies and their management teams.
Additionally, the Group was pleased to note that all of the
Company's Australian MGAs were able to renew their underwriting
capacity support with Lloyd's and the international insurance
markets.
As regards the Company's newest investment, Ag Guard PTY Limited
, although a start-up, which will no doubt face initial challenges,
we believe that the management team we have backed, with our
investment support and underwriting support from Munich Re, has a
strong growth horizon looking to the future.
New Investment
Ag Guard PTY Limited ("Ag Guard")
On 15 July 2019 the Group invested in Ag Guard, based in Sydney
Australia.
The Group subscribed for a 36% equity stake for an initial cash
consideration of AU$1.47m (c.GBP823,000). Further consideration of
up to AU$1.13m (c.GBP628,000) may become payable, subject to
performance.
Founders Alex Cohn (Managing Director), Martin Birch (Technical
Director) and Ben Ko (Finance & Operations Director) have
considerable experience in the provision of general insurance
services in the Australian rural sector.
It is expected that the Group's investment in Ag Guard and the
backing of a strong and experienced management team will enable Ag
Guard to become a serious market player over the next five
years.
Dividend
In July 2019 the Group paid a dividend of GBP1.714m to
shareholders, equating to a dividend per share of 4.76p.
Directorate Change
On 23 August 2019, the Group announced that Camilla Kenyon will
be resigning her position as Executive Director, with effect from
31 August 2019.
Millie has worked with the Company since 2006. The Board is
grateful for her contribution as an Executive Director since
2011.
As part of Millie's departure from the Group, an internal
restructuring process was undertaken, with her role being divided
amongst the existing Management Team. The Investor Relations
function will sit with the Chairman and Managing Director, and New
Business will be assumed by the Investment Department.
New Business Opportunities and Outlook
In addition to making the investment in Ag Guard during the
Period to 31 July 2019, the Group continues to look at a number of
MGAs and Brokers both domestically and internationally, alongside a
number of interesting opportunities outside the insurance
space.
For further information:
B.P. Marsh & Partners Plc www.bpmarsh.co.uk
Brian Marsh OBE +44 (0)20 7233 3112
Nominated Adviser & Broker
Panmure Gordon (UK) Limited
Atholl Tweedie / Erik Anderson +44 (0)20 7886 2500
Notes to Editors:
About B.P. Marsh & Partners Plc
B.P. Marsh's current portfolio contains nineteen 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, with
over a decade of experience in the financial services sector. 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. Having spent two years at
an independent London accountancy practice, he joined the company
in 2007. He was appointed as a Director in 2011 and promoted to his
current role in 2015.
Dan is a standing member of the B.P. Marsh Investment and
Valuation Committees and currently serves as a Board Director
across the portfolio.
Jonathan Newman is a Chartered Management Accountant and is the
Group Director of Finance and has over 20 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 Nominee Director on the Boards
of three Investee Companies, and provides senior financial support
and advice to all companies within the Group's portfolio as well as
evaluating new investment opportunities.
- Ends -
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END
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