TIDMBPM
RNS Number : 8393P
B.P. Marsh & Partners PLC
15 October 2019
Date: 15 October 2019
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 specialist investor in
financial services intermediary businesses, announces its unaudited
Group interim results for the six months to 31 July 2019 (the
"Period").
The financial highlights for the Period are:
-- Net Asset Value ("NAV") at 31 July 2019 of GBP130.0m (31 July
2018 restated*: GBP120.0m; 31 January 2019 restated*:
GBP126.2m)
-- NAV per share of 361p (31 July 2018: 333p; 31 January 2019: 350p)
-- 4.0% increase in the equity value of the portfolio in the Period
-- Profit after tax of GBP5.6m
-- Final dividend of 4.76p per share for the year to 31 January
2019 declared and paid in July 2019
-- Cash balance of GBP1.4m as at 31 July 2019
-- Loan facility of GBP3.0m available to use for investment
The key developments for the Period are:
-- LEBC Holdings Limited valuation impacted by withdrawal from
Defined Benefit transfer market. Management actions are
underway
-- XPT Group LLC, based in New York City, completed a fourth
acquisition in the Period and, post Period-end, successfully raised
$40.0m in aggregate in funding and acquired its fifth business
-- Nexus Underwriting Management Limited secured an additional
GBP16.0m in new loan facilities and completed the acquisitions of a
specialist Trade Credit Broker and a London-based Financial and
Professional Lines Managing General Agency
-- New investment in Ag Guard PTY Limited of Sydney, Australia
Brian Marsh, B.P. Marsh Chairman, commented,
"B.P. Marsh has continued its long track record of delivering
NAV growth from its diverse portfolio of investments, despite
specific challenges. As a leading specialist investor in global
financial services intermediaries and with 50% of our investment
portfolio revenues emanating from outside of the UK, the outlook
for the rest of the financial year is positive."
Analyst Briefing
An analyst presentation, hosted by the Company, will be held on
Tuesday 15 October 2019 at 10:00 a.m. at the offices of B.P. Marsh
& Partners Plc, 4 Matthew Parker Street, SW1H 9NP.
Please contact Adam Lloyd at Newgate Communications on 020 3655
6880 or BPMarsh@newgatecomms.com if you wish to attend.
For further information:
B.P. Marsh & Partners Plc www.bpmarsh.co.uk
Brian Marsh OBE / Sinead O'Haire +44 (0)20 7233 3112
Nominated Adviser & Broker
Panmure Gordon
Atholl Tweedie / Erik Anderson / Charles Leigh-Pemberton / Ailsa
MacMaster +44 (0)20 7886 2500
Financial PR
Newgate Communications Limited
Emma Kane / Adam Lloyd +44 (0)20 7382 4732
Note: This announcement contains inside information for the
purposes of Article 7 of Regulation (EU) No 596/2014.
* Please note that these Interim results reflect the adoption of
IFRS 16: Leases, which has had the impact of increasing the Group's
assets by GBP1.4m and increasing the Group's liabilities by GBP1.5m
through the recognition of a right-of-use asset and an associated
lease liability in relation to the Group's operating lease on its
office premises. There has been negligible overall impact on the
Group's Net Asset Value, however the prior period comparatives have
had to be restated accordingly.
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 2019.
On 2 September 2019, LEBC Group Limited voluntarily ceased the
provision of Defined Benefit pension transfer advice pursuant to a
market-wide review by the FCA. As a consequence of this, the Group
has reduced the valuation of its holding in LEBC to GBP23.9m.
However due to strong performance elsewhere within the portfolio,
the Group is still aiming to conclude the year in a satisfactory
position in terms of Net Asset Value. Our Net Asset Value as at 31
July 2019 was GBP130.0m or 361p per share, up 3% over the Period,
notwithstanding the revaluation of LEBC.
During the Period, our partners in New York City, XPT, acquired
Klein & Costa Insurance Services, a Managing General Agency and
surplus lines broker located in California. XPT continues to have a
promising pipeline of new investment opportunities, and we look
forward to supporting its growth.
Nexus has continued with its successful acquisition strategy
over the Period. In April 2019, it acquired Credit & Business
Finance Limited, a specialist trade credit broker, and Capital
Risks MGA Limited, a Warranty and Indemnity Managing General
Agency. Nexus is now the leading independent UK trade credit
broker. Most recently, in July 2019, Nexus acquired Plus Risk
Limited, a London based Financial and Professional Lines Managing
General Agency.
We were very pleased to complete a new acquisition over the
Period. In July 2019, the Group subscribed for a 36% equity stake
in Ag Guard Pty Limited ("Ag Guard"), which provides insurance
solutions for the Australian agriculture sector, with insurance
capacity provided by Munich Re.
The Group's Australian investments continue to perform well,
with ATC being a star performer, achieving significant EBITDA
growth.
Walsingham has seen strong growth throughout the Period, with
its results exceeding expectations.
The Group has experienced a healthy flow of new investment
opportunities, with 42 received over the Period, compared to 32
received over the period to 31 July 2018. We continue to look at a
number of domestic and international opportunities.
Currently, 50% of our investee companies' revenue emanates from
the UK, and 50% emanates from overseas.
Since incorporation, we have achieved an average annual compound
growth in Net Asset Value of 11.7%, excluding any new funds
raised.
Cash Balance
At 31 July 2019 the Group's cash balance was GBP1.4m. During the
Period, the Group entered into a GBP3.0m 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
funds at an interest rate of the higher of either 4% or the UK
1-month LIBOR plus 3.25%, which are available to be drawn down
until July 2020.
The Board considers that these are commercially advantageous
terms, compared to other avenues of funding available.
Business Update
Summary of Developments in the Portfolio
New Investments
Ag Guard PTY Limited ("Ag Guard")
On 12 July 2019 the Group invested in Ag Guard, based in Sydney
Australia.
The Group subscribed for a 36% equity stake in Agri Services
Company PTY Limited, which in turn acquired 100% of Ag Guard, 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, with the
backing of a strong and experienced management team, will enable Ag
Guard to become a serious market player over the next five
years.
Portfolio news
UK
LEBC Group Limited ("LEBC")
The Group notes its recent announcement regarding its investee
company LEBC Holdings Limited released on 2 September 2019, in
which it holds a 59.3% shareholding. LEBC Holdings Limited is the
parent company of LEBC Group Limited, the UK IFA business.
Pursuant to the FCA's market-wide review of the defined benefit
("DB") transfer market, LEBC agreed to voluntarily cease the
provision of DB pension transfer advice and projects, with effect
from 2 September 2019.
Advice in the DB transfer market represents c.20% of LEBC's
total revenue in its current year. As such, the cessation of the
provision of advice in this area has impacted LEBC as can be seen
by the Group's reduction in valuation of its equity of LEBC to
GBP23.9m. However, LEBC, excluding DB transfer business, is still
expected to produce annual revenue of c. GBP19.0m alongside an
acceptable underlying profit position.
In line with its successful long-term investment strategy, the
Group 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. LEBC has implemented a
significant restructuring and is working on a number of
initiatives, some of which have already been implemented, including
its bionic advice offering. The Group will work closely with LEBC's
management team to return LEBC to the position it was in before the
withdrawal from the DB market, and have recently assisted in the
recruitment of a new Chairman to the holding company Board.
Since the Company invested in LEBC in April 2007, the current
valuation represents a 1.9x money multiple.
Nexus Underwriting Management Limited ("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, bringing the total loan
funding from the Company to GBP6.0m.
In addition to the facility from the Company, Nexus secured an
additional GBP14.0m loan facility from funds managed by HPS
Investment Partners, LLC ("HPS"), a leading global investment
firm.
The funding provided by both B.P. Marsh and HPS has resulted in
Nexus securing a total of GBP46.0m of loan funding, including the
GBP30.0m of loan funding secured from both B.P. Marsh and HPS in
July 2017.
Nexus is forecasting an adjusted EBITDA of c.GBP20m over the
next 12 months, which would represent a compound annual increase in
EBITDA of 45% since B.P. Marsh's investment in August 2014.
During the Period, Nexus completed 3 acquisitions; Credit &
Business Finance Limited ("CBF"), a specialist trade credit broker,
Capital Risks MGA Limited ("Capital Risks"), a Warranty and
Indemnity MGA, and Plus Risk Limited ("PBL"), a Financial and
Professional Lines MGA.
Following the acquisition of CBF, Nexus became the leading
independent UK trade credit broker, fulfilling one of its strategic
goals as well as uniting the two biggest producers of 'new to
market' business.
As part of the acquisitions, key management from the new
acquisitions became shareholders in Nexus. The new acquisitions
have increased Nexus' forecast revenue by GBP2.83m and EBITDA by
GBP1.39m. The Group recognises the recent growth in Nexus, which
has been reflected in the Company's valuation for its holding in
Nexus increasing from GBP30.12m to GBP40.3m.
Nexus were pleased to announce the appointment of Andrew Moss,
as non-executive Chairman. Andrew spent five years as Group CEO of
Aviva Plc, and prior to this he held senior positions within
Lloyd's of London. He was most recently Chairman of Parker
Fitzgerald, a London Based management consultancy firm, where he
helped steer their recent acquisition by Accenture to its
successful outcome.
The Company welcomed this appointment pursuant to Nexus' avowed
goal of achieving GBP20m of annualized EBITDA by the 2020 financial
year, which will well position it as the pre-eminent London Market
specialty MGA and strategically manoeuvre Nexus to review its next
stage of development.
CBC UK Limited ("CBC")
CBC, the London-based Lloyd's broking business has increased its
EBITDA by 40% in 2018, and is on target for increasing at the same
rate in 2019.
CBC continues to strengthen its product offering with strategic
hires and has recently hired an experienced Financial Products
team. During the Period, the Group provided a GBP0.5m loan to
support CBC in these endeavours.
The Fiducia MGA Company Limited ("Fiducia")
In November 2016, the Group invested in Fiducia, a UK Marine
Cargo Underwriting Agency, established by CEO Gerry Sheehy, 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.
During the Period, the Group invested GBP0.12m in Fiducia, being
its pro-rata share of a GBP0.35m fundraising, with the remainder
being provided by its CEO and founder, Gerry Sheehy.
Since Fiducia commenced trading, it has grown from a start-up
position to producing in excess of estimated GBP10m forecast Net
Written Premium in the year ending 31 December 2019, across its
specialist lines of business.
EC3 Brokers Limited ("EC3")
In December 2017, the Group invested in EC3, an independent
specialist Lloyd's broker and reinsurance broker.
Since investment, EC3 is expected to grow its top line revenue
from c. GBP9m to a budgeted target of approaching GBP14m in the
year to 31 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 both top and bottom-line growth.
Walsingham Motor Insurance Limited ("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
steady growth, reporting GBP21.5m in premium in 10 months' trading
with EBITDA expected to be c.60% ahead of 2018.
USA
XPT Group LLC ("XPT")
The Group invested into XPT, the U.S. based specialty lines
insurance distribution company, in June 2017.
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
Western Security Surplus Insurance Brokers ("WSSIB"), XPT's
wholesaler and MGA based in Texas and California, and began trading
under the WSSIB name. This acquisition 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
$165.0m in Gross Written Premium and is approaching $3.9m of
adjusted EBITDA in its current financial year ending 31 December
2019.
Following the Period-end, XPT successfully secured $40m, in
aggregate, of funding from Madison Capital Funding LLC ("Madison
Capital"). As part of the transaction, Madison Capital took an
equity interest in XPT Group LLC.
XPT has secured loan funding of $18.0m to refinance its current
debt facility, and an additional $22.0m to support future growth.
The financing with Madison Capital provides XPT with an opportunity
to enter the next phase of its development and continue to seek
strategic acquisitions in the North American insurance market.
As part of the fund raising, Madison Capital invested $2.0m and
took an equity holding in XPT which values XPT at an enterprise
value of $54.0m. This is approximately 10% greater than the Group's
31 July 2019 valuation.
In tandem with the fundraising, XPT completed the acquisition of
Sierra Specialty Insurance Services, Inc ("Sierra"). Sierra is an
MGA and wholesale broker based in Fresno, California, and
specialises in the provision of insurance to independent retail
agents. Sierra represents XPT's fifth acquisition of an established
business.
Australia
ATC Insurance Solutions (PTY) Limited
Sterling Insurance (PTY) Limited
MB Prestige Holdings (PTY) Limited
Ag Guard (PTY) Limited
B.P. Marsh's existing investments in Australia continue to
perform well in a challenging insurance market, with premium income
and profitability increasing across the board.
This is in response to a more positive insurance market
internationally, and 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 successfully renewed their underwriting
capacity support with Lloyd's and the international insurance
markets.
ATC Insurance Solutions (PTY) Limited ("ATC") saw strong growth
throughout the Period, reporting a significant increase of Gross
Written Premium from AUD 61.0m in 2018 to AUD 84.0m in 2019.
The Company's newest investment, Ag Guard, is a start-up which
will no doubt face initial challenges, however 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.
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 grown its Gross Written
Premium from nil to a forecast position of over CA$9.0m in the year
ending 31 December 2019, and achieving a profit and dividend
yield.
Europe
Summa Insurance Brokerage, S.L. ("Summa")
Summa is a regional consolidator of insurance brokers with 16
branches across Spain.
Whilst the Spanish insurance market continues to be a
challenging place in which to operate, Summa continues to deliver
c. EUR45.0m of annual premium and an annual adjusted EBITDA of over
EUR1.2m.
The Group is also pleased to note that Summa has recently
achieved Lloyd's Coverholder status, which will bolster its product
offering going forward.
Dividend
In July 2019 the Group paid a dividend of GBP1.7m to
shareholders, equating to a dividend per share of 4.76p. The Board
continues to strike a balance between investing cash into new
opportunities for long-term capital growth and providing
shareholders with a yield. This was the final dividend from an
agreed three-year distribution following the successful realisation
of Besso in February 2017. The Board is committed to paying further
dividends funded by the proceeds of future portfolio
realisations.
Share Buy-Backs
The Group has a share buy-back policy, as announced on 17 July
2019, that enables it to buy back shares when the Company's share
price is more than 15% below the Company's most recently published
Net Asset Value, within the permitted constraints of the Market
Abuse Regulation.
The Board remains of the view that the authority to undertake
low volume buy-backs of shares, when regulatory restrictions allow,
is an important stabilising mechanism in times of market or share
price volatility. During the Period, the buy-backs were conducted
with the backdrop of market turbulence and the Board believes that
these transactions had a stabilising effect on the Company's share
price.
During the six-month period to 31 July 2019 a number of
buy-backs were undertaken, amounting to 51,416 shares, at an
average price of GBP2.81 per share, which are being held in
Treasury.
Directorate Changes
On 23 August 2019, the Group announced that Camilla Kenyon would
be resigning her position as Executive Director, with effect from
31 August 2019.
Millie had 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, Managing Director and Company
Secretary, and New Business responsibilities will be assumed by the
Investment Department.
On 2(nd) October 2019, the Group announced that Campbell
Scoones, aged 72, resigned as a Non-Executive Director of the
Company. Campbell also resigned from his role on the Remuneration
Committee. The Nominations Committee will be considering candidates
for Campbell's replacement.
Business Strategy
The Group invests amounts of up to GBP5m in the first round of
funding and takes minority equity positions in financial services
intermediaries, normally acquiring between 20% and 40% of an
investee company's total equity. During the holding period,
additional investment can lead to the Group having a majority
holding, as is the case currently in LEBC and Summa. In these
circumstances, day to day business operation remains with
management, with the Group providing input, advice and assistance,
as with all of its portfolio businesses.
The Group makes long-term investments with an average holding
period post-float of 6.4 years, with our current portfolio being
held on average for approximately 4.3 years. As ever, we do not
invest in companies that accept Insurance Underwriting risk.
The Group requires its investee companies to adopt minority
shareholder protections and to appoint a nominee director to its
board.
Since 1990 the Group has generated an average NAV annual
compound growth rate of 11.7% (excluding the GBP10.1m proceeds
raised on flotation and GBP16.6m proceeds raised as part of the
Placing & Open Offer completed in July 2018). 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.
Outlook and New Business Opportunities
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 Insurance Brokers both domestically and internationally,
alongside several interesting opportunities outside the insurance
space.
36% of enquiries received by the Company emanated
internationally, and 64% of enquires received by the Company were
domestic.
The Group has produced a satisfactory overall performance in the
Period. The Group's strategy is to generate long-term value and the
Board is confident in the Group's ability to do so, notwithstanding
short-term market uncertainties.
Brian Marsh OBE, Chairman
14 October 2019
Investments
As at 31 July 2019 the Group's equity interests were as
follows:
AG Guard PTY Limited
(www.agguard.com.au)
In July 2019 the Group subscribed for a 36% stake in Agri
Services Company PTY Limited, which in turn acquired 100% of the
equity in Ag Guard PTY Limited ("Ag Guard"). Ag Guard is a Managing
General Agency, which provides insurance to the Agricultural
Sector, based in Sydney, Australia.
Date of investment: July 2019
Equity stake: 36%
31 July 2019 valuation: GBP827,000
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: 25%
31 July 2019 valuation: GBP692,000
ATC Insurance Solutions PTY Limited
(www.atcis.com.au)
In July 2018, the Group invested in ATC, an Australian-based MGA
and Lloyd's Coverholder, specialising in Accident & Health,
Construction & Engineering, Trade Pack and Sports
insurance.
Date of investment: July 2018
Equity stake: 20%
31 July 2019 valuation: GBP7,157,000
CBC UK Limited
(www.cbcinsurance.co.uk)
Established in 1985, CBC is a Retail and Wholesale Lloyd's
Insurance Broker, offering a wide range of services to commercial
and personal clients as well as broking solutions to
intermediaries. The Group assisted in an MBO of CBC allowing
Management to buy out a major shareholder via parent company
Paladin Holdings Limited.
Date of investment: February 2017
Equity stake: 44.3%
31 July 2019 valuation: GBP4,907,000
Criterion Underwriting Pte Limited
The Group helped establish Criterion alongside its Partners in
Asiare Holdings (PTE) Limited and Asia Reinsurance Brokers (PTE)
Limited in July 2018. Criterion is a start-up Singapore-based
Managing General Agency providing specialist insurance products to
a variety of clients in the Cyber, Financial Lines and Marine
sectors in Far East Asia.
Date of investment: July 2018
Equity stake: 29.4%
31 July 2019 valuation: GBP0
EC3 Brokers Limited
(www.ec3brokers.com)
In December 2017, the Group invested in EC3 Brokers Limited, an
independent specialist Lloyd's broker and reinsurance broker, via a
newly established NewCo, EC3 Brokers Group Limited. Founded by its
current Chief Executive Officer Danny Driscoll, who led a
management buyout to acquire EC3's then book of business from AJ
Gallagher in 2014, EC3 provides services to a wide array of clients
across a number of sectors, including construction, casualty,
entertainment and cyber & technology.
Date of investment: December 2017
Equity Stake: 20%
31 July 2019 valuation: GBP5,911,000
The Fiducia MGA Company Limited
(www.fiduciamga.co.uk)
Fiducia, founded in November 2016, is a UK Marine Cargo
Underwriting Agency, established by its CEO Gerry Sheehy. Fiducia
is a Lloyd's Coverholder which specialises in the provision of
insurance solutions across a number of Marine risks including,
Cargo, Transit Liability, Engineering and Terrorism Insurance.
Date of investment: November 2016
Equity stake: 35.2%
31 July 2019 valuation: GBP926,000
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: 59.3%
31 July 2019 valuation: GBP23,859,000
Mark Edward Partners LLC
(www.markedwardpartners.com)
Founded in 2010 by Mark Freitas, its President & Chief
Executive Officer, Mark Edward Partners LLC ("MEP") provides core
insurance products in Financial & Liability, Property &
Casualty, Personal Lines, Life Insurance, Cyber and Affinity
Groups. MEP is a national U.S. firm with licenses to operate in all
50 states and has offices in New York, Palm Beach and Los
Angeles.
Date of investment: October 2017
Equity stake: 30%
31 July 2019 valuation: GBP0
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 2019 valuation: GBP2,568,000
Nexus Underwriting Management Limited
(www.nexusunderwriting.com)
In 2014 the Group invested in Nexus Underwriting Management
Limited ("Nexus"), an independent specialty Managing General
Agency, founded in 2008. Through its operating subsidiaries Nexus
specialises in the provision of Directors & Officers,
Professional Indemnity, Financial Institutions, Accident &
Health, Trade Credit, Political Risks Insurance, Surety, Bond and
Latent Defect Insurance, both in the UK and globally.
Date of investment: August 2014
Equity stake: 17.8%
31 July 2019 valuation: GBP40,295,000
Stewart Specialty Risk Underwriting Ltd
(www.ssru.ca)
A Canadian based Managing General Agent, providing insurance
solutions to a wide array of clients in the Construction,
Manufacturing, Onshore Energy, Public Entity and Transportation
sectors. SSRU was established by its CEO Stephen Stewart, who has
over 25 years' experience in the insurance industry having had
senior management roles at both Ironshore and Lombard in
Canada.
Date of investment: January 2017
Equity stake: 30%
31 July 2019 valuation: GBP1,103,000
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 2019 valuation: GBP2,493,000
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: 77.3%
31 July 2019 valuation: GBP4,443,000
Walsingham Motor Insurance Limited
(www.walsinghamunderwriting.com)
In December 2013 the Group invested in Walsingham Motor
Insurance Limited, a niche UK fleet motor Managing General Agency,
which commenced trading in July 2013. In 2015 the Group acquired a
further 10.5% equity, taking the current shareholding to 40.5%.
Date of investment: December 2013
Equity stake: 40.5%
31 July 2019 valuation: GBP1,839,000
XPT Group LLC
(www.xptspecialty.com)
In June 2017 the Group backed the ex-Swett & Crawford CEO
Tom Ruggieri and a strong management team to develop a New
York-based wholesale insurance broking and underwriting agency
platform across the U.S. Specialty Insurance Sector.
Date of investment: June 2017
Equity stake: 35%
31 July 2019 valuation: GBP9,949,000
These investments have been valued in accordance with the
accounting policies on Investments set out in note 1 of the
Consolidated Financial Statements.
Consolidated Financial Statements
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE PERIODED 31ST JULY 2019
Notes Unaudited Unaudited Audited
6 months to 6 months to Year to
31(st) July 31(st) July 31(st) January
2019 2018 2019
Restated* Restated*
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
GAINS ON INVESTMENT
Provision against equity
investments
and loans (36) - (2,595)
Unrealised gains on equity
investment revaluation 4 4,077 5,540 14,106
------- ------- -------
4,041 5,540 11,511
INCOME
Dividends 1,879 1,585 2,684
Income from loans and
receivables 615 539 1,079
Fees receivable 600 572 868
------- ------- -------
3,094 2,696 4,631
-------- -------- -----------
OPERATING INCOME 7,135 8,236 16,142
Operating expenses (1,706) (1,956) (3,928)
OPERATING PROFIT 5,429 6,280 12,214
Financial income 14 66 108
Financial expenses (38) (46) (88)
Exchange movements 171 27 (25)
------- ------- -------
147 47 (5)
-------- -------- -----------
PROFIT ON ORDINARY ACTIVITIES
BEFORE TAXATION 5,576 6,327 12,209
Income taxes 18 (79) 232
PROFIT ON ORDINARY ACTIVITIES
AFTER TAXATION ATTRIBUTABLE
TO EQUITY HOLDERS 6 GBP5,594 GBP6,248 GBP12,441
-------- -------- -----------
TOTAL COMPREHENSIVE INCOME
FOR THE PERIOD 6 GBP5,594 GBP6,248 GBP12,441
-------- -------- -----------
Earnings per share - basic
and diluted (pence) 3 15.6p 20.8p 37.6p
----------------------------- ----- ------- -------- ------- -------- ------- -----------
*Restated for IFRS 16 (Refer to Note 10)
The result for the period is wholly attributable to continuing
activities.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 31ST JULY 2019
Unaudited Unaudited Audited
31(st) July 31(st) July 31(st) January
Notes 2019 2018 2019
Restated* Restated*
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
ASSETS
NON-CURRENT ASSETS
Property, plant and
equipment 150 158 158
Right-of-use asset 1,378 1,560 1,468
Investments - equity
portfolio 4 106,969 88,291 101,947
Investments - treasury
portfolio 5 - 4 14
Loans and receivables 16,339 14,753 14,509
------- ------- -------
124,836 104,766 118,096
CURRENT ASSETS
Trade and other receivables 5,626 2,412 2,867
Cash and cash equivalents 1,420 15,350 7,855
------- ------- -------
7,046 17,762 10,722
LIABILITIES
NON-CURRENT LIABILITIES
Lease liabilities (1,289) (1,453) (1,372)
Deferred tax liabilities 8 - - -
------- ------- -------
(1,289) (1,453) (1,372)
CURRENT LIABILITIES
Trade and other payables (401) (825) (1,064)
Lease liabilities (163) (156) (160)
Corporation tax provision (48) (61) (48)
------- ------- -------
(612) (1,042) (1,272)
NET ASSETS GBP129,981 GBP120,033 GBP126,174
---------- ---------- ----------
CAPITAL AND RESERVES
- EQUITY
Called up share capital 3,748 3,599 3,748
Share premium account 29,363 25,327 29,358
Fair value reserve 50,204 37,562 46,128
Reverse acquisition
reserve 393 393 393
Capital redemption reserve 6 6 6
Capital contribution
reserve 31 10 21
Retained earnings 46,236 53,136 46,520
SHAREHOLDERS' FUNDS
- EQUITY 6 GBP129,981 GBP120,033 GBP126,174
---------- ---------- ----------
Net Asset Value per
share (pence) 361p 333p 350p
*Restated for IFRS 16 (Refer to Note 10)
The Interim Consolidated Financial Statements were approved by
the Board of Directors and authorised for issue on 14th October
2019
and signed on its behalf by:
B.P. Marsh & J.S. Newman
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE PERIODED 31ST JULY 2019
Unaudited Unaudited Audited
31(st) 31(st)
31(st) July January
July 2019 2018 2019
Restated* Restated*
GBP'000 GBP'000 GBP'000
Cash used by operating activities
Income from loans to investees 615 539 1,079
Dividends 1,879 1,585 2,684
Fees received 600 572 868
Operating expenses (1,706) (1,956) (3,928)
Net corporation tax repaid /
(paid) 310 (1,168) (1,170)
Purchase of equity investments
(Note 4) (945) (3,629) (8,719)
Net proceeds from sale of equity
investments - - -
Net loan (payments to) / repayments
from investee companies (4,711) 234 (1,953)
Adjustment for non-cash share
incentive plan 70 69 104
Increase in receivables (49) (573) (954)
Decrease in payables (664) (647) (406)
Depreciation and amortization 105 103 211
---------
Net cash used by operating activities (4,496) (4,871) (12,184)
---------- --------- ---------
Net cash from investing activities
Purchase of property, plant
and equipment (8) (5) (20)
Purchase of treasury investments
(Note 5) - (27) (27)
Net proceeds from sale of treasury
investments (Note 5) 14 2,834 2,828
---------
Net cash from investing activities 6 2,802 2,781
---------- --------- ---------
Net cash (used by) / from financing
activities
Financial income 14 7 45
Financial expenses (38) (42) (84)
Net decrease in lease liabilities (79) (75) (152)
Dividends paid (1,712) (1,714) (1,714)
Net proceeds on issue of company
shares - 16,597 16,589
Payments made to repurchase
company shares (145) - (79)
---------- --------- ---------
Net cash (used by) / from financing
activities (1,960) 14,773 14,605
---------- --------- ---------
Change in cash and cash equivalents (6,450) 12,704 5,202
Cash and cash equivalents at
beginning of the period 7,855 2,648 2,648
Exchange movement 15 (2) 5
Cash and cash equivalents at
end of period GBP1,420 GBP15,350 GBP7,855
---------- --------- ---------
*Restated for IFRS 16 (Refer to Note 10)
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 GBPNil, total available cash and treasury
portfolio funds as at 31st July 2019 was GBP1,420k (as at 31st July
2018: GBP15,354k, including GBP4k of treasury portfolio funds and
as at 31st January 2019: GBP7,869k, including GBP14k of treasury
portfolio funds).
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE PERIODED 31ST JULY 2019
Unaudited Unaudited Audited
6 months
6 months to to Year to
31(st) July 2019 31(st) July 2018 31(st) January 2019
Restated* Restated*
GBP'000 GBP'000 GBP'000
Opening total equity 126,174 98,833 98,833
Comprehensive income for the period 5,594 6,248 12,441
Dividends paid (1,712) (1,714) (1,714)
Repurchase of company shares (145) - (79)
Share incentive plan 70 69 104
New shares issued (net funds raised) - 16,597 16,589
Total equity GBP129,981 GBP120,033 GBP126,174
---------------- ---------------- -------------------
*Restated for IFRS 16 (Refer to Note 10)
Refer to Note 6 for detailed analysis of the changes in the
components of equity.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIODED 31ST JULY 2019
1. ACCOUNTING POLICIES
Basis of preparation of financial statements
These consolidated financial statements have been prepared in
accordance with International Financial Reporting Standards as
adopted for use by the European Union ("IFRS"), and in accordance
with the Companies Act 2006.
The consolidated financial statements are presented in sterling,
the functional currency of the Group, rounded to the nearest
thousand pounds (GBP'000) except where otherwise indicated.
The preparation of financial statements in conformity with IFRS
requires management to make judgments, estimates and assumptions
that affect the application of policies and reported amounts of
assets and liabilities, income and expenses. The estimates and
associated assumptions are based on historical experience and
various other factors that are believed to be reasonable in the
circumstances, the results of which form the basis of judgements
about the carrying amounts of assets and liabilities. Actual
results may differ from those amounts.
In the process of applying the Group's accounting policies,
management has made the following judgments, which have the most
significant effect on the amounts recognised in the financial
statements:
Assessment as an investment entity
Entities that meet the definition of an investment entity within
IFRS 10: Consolidated Financial Statements ("IFRS 10") are required
to account for their investments in controlled entities, as well as
investments in associates at fair value through profit or loss.
Subsidiaries that provide investment related services or engage in
permitted investment related activities with investees that relate
to the parent investment entity's investment activities continue to
be consolidated in the Group results. The criteria which define an
investment entity are currently as follows:
a) an entity that obtains funds from one or more investors for
the purpose of providing those investors with investment
services;
b) an entity that commits to its investors that its business
purpose is to invest funds solely for returns from capital
appreciation, investment income or both; and
c) an entity that measures and evaluates the performance of
substantially all of its investments on a fair value basis.
The Group's annual and interim consolidated financial statements
clearly state its objective of investing directly into portfolio
investments and providing investment management services to
investors for the purpose of generating returns in the form of
investment income and capital appreciation. The Group has always
reported its investment in portfolio investments at fair value. It
also produces reports for investors of the funds it manages and its
internal management report on a fair value basis. The exit strategy
for all investments held by the Group is assessed, initially, at
the time of the first investment and this is documented in the
investment paper submitted to the Board for approval.
The Board has also concluded that the Company meets the
additional characteristics of an investment entity, in that it has
more than one investment; the investments are predominantly in the
form of equities and similar securities; it has more than one
investor and its investors are not related parties. The Board has
concluded that B.P. Marsh & Partners Plc and its three trading
subsidiaries, B.P. Marsh & Company Limited, Marsh Insurance
Holdings Limited and B.P. Marsh (North America) Limited, which
provide investment related services on behalf of B.P. Marsh &
Partners Plc, all meet the definition of an investment entity.
These conclusions will be reassessed on an annual basis for changes
to any of these criteria or characteristics.
Application and significant judgments
When it is established that a parent company is an investment
entity, its subsidiaries are measured at fair value through profit
or loss. However, if an investment entity has subsidiaries that
provide services that relate to the investment entity's investment
activities, the exception to the Amendment of IFRS 10 is not
applicable as in this case, the parent investment entity still
consolidates the results of its subsidiaries. Therefore, the
results of B.P. Marsh & Company Limited, Marsh Insurance
Holdings Limited and B.P. Marsh (North America) Limited continue to
be consolidated into its Group financial statements for the
period.
The most significant estimates relate to the fair valuation of
the equity investment portfolio as detailed in Note 4 to the
Financial Statements. The valuation methodology for the investment
portfolio is detailed below. The estimates and underlying
assumptions are reviewed on an ongoing basis. Revisions to
accounting estimates are recognised in the period in which the
estimate is revised if the revision affects only that period or in
the period of the revision and future periods if the revision
affects both current and future periods.
The accounting policies set out below have been applied
consistently to all periods presented in these consolidated
financial statements.
These interim consolidated financial statements were approved by
the Board on 14th October 2019. They have not been audited nor
reviewed by the Group's Auditors, as is the case with the
comparatives to 31st July 2018, 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 2019. Those
accounts, upon which the Group's Auditor issued an unqualified
opinion, have been filed with the Registrar of Companies and do not
contain a statement under section 498 (2) or (3) of the Companies
Act 2006.
First time adoption of IFRS 16: Leases
IFRS 16: Leases ("IFRS 16") was introduced on 13th January 2016
and replaces IAS 17: Leases ("IAS 17"). This standard became
effective for all accounting periods beginning on or after 1st
January 2019 (with early adoption permitted) and has therefore been
adopted within these interim consolidated financial statements for
the first time, including restatement of all comparative period
information, where applicable.
IFRS 16 requires all operating leases in excess of one year,
where the Group is the lessee, to be included in the Group's
Statement of Financial Position and recognised as a right-of-use
asset and a related lease liability representing the obligation to
make lease payments. The right-of-use asset is being amortised on a
straight-line basis, with the lease liability being amortised using
the effective interest method.
Please refer to Note 10 which sets out the prior period
adjustments necessary on transition from IAS 17 to IFRS 16 and its
impact upon the Group's consolidated financial statements.
Basis of consolidation
(i) Subsidiaries
Subsidiaries are entities controlled by the Group. Control, as
defined by IFRS 10, is achieved when the Group is exposed, or has
rights, to variable returns from its involvement with the investee
and has the ability to affect those returns through its power over
the investee. Specifically, the Group controls an investee if and
only if the Group has:
a) power over the investee (i.e. existing rights that give it
the current ability to direct the relevant activities of the
investee);
b) exposure, or rights, to variable returns from its involvement with the investee; and
c) the ability to use its power over the investee to affect its returns.
When the Group has less than a majority of the voting or similar
rights of an investee, the Group considers all relevant facts and
circumstances in assessing whether it has power over an investee,
including:
a) rights arising from other contractual arrangements; and
b) the Group's voting rights and potential voting rights.
The Group re-assesses whether or not it controls an investee if
facts and circumstances indicate that there are changes to one or
more of the elements of control.
B.P. Marsh & Partners Plc ("the Company"), an investment
entity, has three subsidiary investment entities, B.P. Marsh &
Company Limited, Marsh Insurance Holdings Limited and B.P. Marsh
(North America) Limited, that provide services that relate to the
Company's investment activities. The results of these three
subsidiaries, together with other subsidiaries (except for Summa
Insurance Brokerage, S.L. ("Summa") and LEBC Holdings Limited
("LEBC")), are consolidated into the Group consolidated financial
statements. The Group has taken advantage of the Amendment to IFRS
10 not to consolidate the results of Summa and LEBC. Instead the
investments in Summa and LEBC are valued at fair value through
profit or loss.
(ii) Associates
Associates are those entities in which the Group has significant
influence, but not control, over the financial and operating
policies. Investments that are held as part of the Group's
investment portfolio are carried in the Consolidated Statement of
Financial Position at fair value even though the Group may have
significant influence over those companies.
Business Combinations
The results of subsidiary undertakings are included in the
consolidated financial statements from the date that control
commences until the date that control ceases. Control exists where
the Group has the power to govern the financial and operating
policies of the entity so as to obtain benefits from its
activities. Accounting policies of the subsidiaries have been
changed where necessary to ensure consistency with the policies
adopted by the Group.
All business combinations are accounted for by using the
acquisition accounting method. This involves recognising
identifiable assets and liabilities of the acquired business at
fair value. Goodwill represents the excess of the fair value of the
purchase consideration for the interests in subsidiary undertakings
over the fair value to the Group of the net assets and any
contingent liabilities acquired.
Intra-group balances and any unrealised gains and losses or
income and expenses arising from intra-group transactions are
eliminated in preparing the consolidated financial statements.
Associates are those entities in which the Group has significant
influence, but not control, over the financial and operating
policies. Investments that are held as part of the Group's
investment portfolio are carried in the Consolidated Statement of
Financial Position at fair value even though the Group may have
significant influence over those companies. This treatment is
permitted by IAS 28: Investment in Associates ("IAS 28"), which
requires investments held by venture capital organisations to be
excluded from its scope where those investments are designated,
upon initial recognition, as at fair value through profit or loss
and accounted for in accordance with IAS 39: Financial Instruments
("IAS 39"), with changes in fair value recognised in the profit or
loss in the period of the change. The Group has no interests in
associates through which it carries on its business.
Employee services settled in equity instruments
The Group has entered into a joint share ownership plan ("JSOP")
with certain employees and directors. A fair value for the cash
settled share awards is measured at the date of grant. The Group
measured the fair value using the Expected Return Methodology which
was considered to be the most appropriate valuation technique to
value the awards.
The fair value of the award is recognised as an expense over the
vesting period on a straight-line basis. The level of vesting is
assumed to be 100% and will be reviewed annually and the charge is
adjusted to reflect actual or estimated levels of vesting with the
corresponding entry to capital contribution.
The Group has established an HMRC approved Share Incentive Plan
("SIP"). Ordinary shares in the Company previously repurchased and
held in Treasury by the Company have been transferred to The B.P.
Marsh SIP Trust ("the SIP Trust"), an employee share trust, in
order to be issued to eligible employees. In addition, new shares
were issued and allocated to the SIP Trust during the period.
Under the rules of the SIP, eligible employees can each be
granted up to GBP3,600 worth of ordinary shares ("Free Shares") by
the SIP Trust in each tax year. The number of shares granted is
dependent on the share price at the date of grant. In addition, all
eligible employees have been invited to take up the opportunity to
acquire up to GBP1,800 worth of ordinary shares ("Partnership
Shares") in each tax year and for every Partnership Share that an
employee acquires, the SIP Trust will offer two ordinary shares in
the Company ("Matching Shares") up to a total of GBP3,600 worth of
shares. The Free and Matching Shares are subject to a one year
forfeiture period, however the awards are not subject to any
vesting conditions, hence the related expenses are recognised when
the awards are made and are apportioned over the forfeiture
period.
The fair value of the services received is measured by reference
to the listed share price of the parent company's shares listed on
the AIM on the date of award of the free and matching shares to the
employee.
Investments - equity portfolio
All equity portfolio investments are designated as "fair value
through profit or loss" assets and are initially recognised at the
fair value of the consideration. They are measured at subsequent
reporting dates at fair value.
The Board conducts the valuations of equity portfolio
investments. In valuing equity portfolio investments the Board
applies guidelines issued by the International Private Equity and
Venture Capital Valuation Committee ("IPEVCV Guidelines"). The
following valuation methodologies have been used in reaching fair
value of equity portfolio investments, some of which are in early
stage companies:
a) at cost, unless there has been a significant round of new
equity finance in which case the investment is valued at the price
paid by an independent third party. Where subsequent events or
changes to circumstances indicate that an impairment may have
occurred, the carrying value is reduced to reflect the estimated
extent of impairment;
b) by reference to underlying funds under management;
c) by applying appropriate multiples to the earnings and
revenues and/or premiums of the investee company; or
d) by reference to expected future cash flow from the investment
where a realisation or flotation is imminent.
Both realised and unrealised gains and losses arising from
changes in fair value are taken to the Consolidated Statement of
Comprehensive Income for the period. In the Consolidated Statement
of Financial Position the unrealised gains and losses arising from
changes in fair value are shown within a "fair value reserve"
separate from retained earnings. Transaction costs on acquisition
or disposal of equity portfolio investments are expensed in the
Consolidated Statement of Comprehensive Income.
Equity portfolio investments are treated as 'Non-current Assets'
within the Consolidated Statement of Financial Position unless the
directors have committed to a plan to sell the investment and an
active programme to locate a buyer and complete the plan has been
initiated. Where such a commitment exists, and if the carrying
amount of the equity portfolio investment will be recovered
principally through a sale transaction rather than through
continuing use, the investment is classified as a 'Non-current
asset as held for sale' under 'Current Assets' within the
Consolidated Statement of Financial Position.
Income from equity portfolio investments
Income from equity portfolio investments comprises:
a) gross interest from loans, which is taken to the Consolidated
Statement of Comprehensive Income on an accruals basis;
b) dividends from equity investments are recognised in the
Consolidated Statement of Comprehensive Income when the
shareholders rights to receive payment have been established;
and
c) advisory fees from management services provided to investee
companies, which are recognised on an accruals basis in accordance
with the substance of the relevant investment advisory
agreement.
Investments - treasury portfolio
All treasury portfolio investments are designated as "fair value
through profit or loss" assets and are initially recognised at the
fair value of the consideration. They are measured at subsequent
reporting dates at fair market value as determined from the
valuation reports provided by the fund investment manager.
Both realised and unrealised gains and losses arising from
changes in fair market value are taken to the Consolidated
Statement of Comprehensive Income for the period. In the
Consolidated Statement of Financial Position the unrealised gains
and losses arising from changes in fair value are shown within the
retained earnings reserve as these investments are deemed as being
easily convertible into cash. Costs associated with the management
of these investments are expensed in the Consolidated Statement of
Comprehensive Income.
Income from treasury portfolio investments
Income from treasury portfolio investments comprises of
dividends receivable which are either directly reinvested into the
funds or received as cash.
Property, plant and equipment
Property, plant and equipment are stated at cost less
depreciation. Depreciation is provided at rates calculated to write
off the property, plant and equipment cost, less their estimated
residual value, over their expected useful lives on the following
bases:
Furniture & equipment - 5 years
Leasehold fixtures and fittings and other costs - over the life
of the lease
Right-of-use assets
Right-of-use assets are stated at cost which comprises the
amount at which the lease liability is measured initially, plus any
lease payments made to the lessor before the commencement date,
less any lease incentives received, plus any initial indirect
costs, less depreciation and any impairment. Depreciation is
provided at rates calculated to write off the right-of-use asset's
present value over the life of the lease on a straight-line
basis.
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.
Income taxes
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 period. 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.
2. SEGMENTAL REPORTING
The Group operates in one business segment; the provision of
consultancy services to as well as making and trading investments
in financial services businesses.
Under IFRS 8: Operating Segments ("IFRS 8") the Group identifies
its reportable operating segments based on the geographical
location in which each of its investments is incorporated and
primarily operates. For management purposes, the Group is organised
and reports its performance by two geographic segments: UK and
Non-UK.
If material to the Group overall (where the segment revenues,
reported profit or loss or combined assets exceed the quantitative
thresholds prescribed by IFRS 8), the segment information is
reported separately.
The Group allocates revenues, expenses, assets and liabilities
to the operating segment where directly attributable to that
segment. All indirect items are apportioned based on the percentage
proportion of revenue that the operating segment contributes to the
total Group revenue (excluding any unrealised gains and losses on
the Group's current and non-current investments).
Each reportable segment derives its revenues from three main
sources from equity portfolio investments as described in further
detail in Note 1 under 'Income from equity portfolio investments'
and also from treasury portfolio investments as described in Note 1
under 'Income from treasury portfolio investments'.
All reportable segments derive their revenues entirely from
external clients and there are no inter-segment sales.
Geographic segment Geographic segment Group
1: 2:
UK Non-UK
Unaudited Unaudited Unaudited Unaudited Unaudited Unaudited
6 months 6 months 6 months 6 months 6 months 6 months
to 31(st) to 31(st) to 31(st) to 31(st) to 31(st) to 31(st)
July July July July July July
2019 2018 2019 2018 2019 2018
Restated* Restated* Restated*
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Operating income 1,339 7,238 5,796 998 7,135 8,236
Operating expenses (1,121) (1,349) (585) (607) (1,706) (1,956)
Segment operating
profit 218 5,889 5,211 391 5,429 6,280
----------- ----------- ----------- ----------- ----------- -----------
Financial income 9 46 5 20 14 66
Financial expenses (25) (32) (13) (14) (38) (46)
Exchange movements 7 (1) 164 28 171 27
Profit before tax 209 5,902 5,367 425 5,576 6,327
Income taxes 18 (79) - - 18 (79)
----------- ----------- ----------- ----------- ----------- -----------
Profit for the period GBP227 GBP5,823 GBP5,367 GBP425 GBP5,594 GBP6,248
=========== =========== =========== =========== =========== ===========
Included within the operating income reported above are the
following amounts requiring separate disclosure owing to the fact
that they are derived from a single investee company and the total
revenues attributable to that investee company are 10% or more of
the total realised income generated by the Group during the
period:
Total income % of total realised Reportable geographic
attributable operating income segment
to the investee
company
(GBP'000)
Unaudited Unaudited Unaudited Unaudited Unaudited Unaudited
6 months 6 months 6 months 6 months 6 months 6 months
to 31(st) to 31(st) to 31(st) to 31(st) to 31(st) to 31(st)
July July July July July July
2019 2018 2019 2018 2019 2018
Investee Company
LEBC Holdings Limited 1,103 930 36 35 1 1
Nexus Underwriting
Management Limited 403 313 13 12 1 1
XPT Group LLC(1) 380 - 12 - 2 -
Paladin Holdings Limited(1) - 285 - 11 - 1
(1) There are no disclosures shown for Paladin Holdings Limited
in the current period and for XPT Group LLC in the comparative 6
months to 31st July 2018 and full year to 31st January 2019 as the
income derived from these investee companies did not exceed the 10%
threshold prescribed by IFRS 8.
*Restated for IFRS 16 (Refer to Note 10)
Geographic segment Geographic segment Group
1: 2:
UK Non-UK
Unaudited Unaudited Unaudited Unaudited Unaudited Unaudited
6 months 6 months 6 months 6 months 6 months 6 months
to 31(st) to 31(st) to 31(st) to 31(st) to 31(st) to 31(st)
July July July July July July
2019 2018 2019 2018 2019 2018
Restated* Restated* Restated*
GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000
Non-current assets
Property, plant and
equipment 109 121 41 37 150 158
Right-of-use asset 1,001 1,195 377 365 1,378 1,560
Investments - equity
portfolio 77,737 67,658 29,232 20,633 106,969 88,291
Investments - treasury
portfolio - 4 - - - 4
Loans and receivables 13,662 11,838 2,677 2,915 16,339 14,753
------------------ ----------- ----------- ----------- ----------- -----------
92,509 80,816 32,327 23,950 124,836 104,766
------------------ ----------- ----------- ----------- ----------- -----------
Current assets
Trade and other receivables 4,233 976 1,393 1,436 5,626 2,412
Cash and cash equivalents 1,420 15,350 - - 1,420 15,350
5,653 16,326 1,393 1,436 7,046 17,762
------------------ ----------- ----------- ----------- ----------- -----------
Total assets 98,162 97,142 33,720 25,386 131,882 122,528
------------------ ----------- ----------- ----------- ----------- -----------
Non-current liabilities
Lease liabilities (937) (1,113) (352) (340) (1,289) (1,453)
------------------ ----------- ----------- ----------- ----------- -----------
(937) (1,113) (352) (340) (1,289) (1,453)
------------------ ----------- ----------- ----------- ----------- -----------
Current liabilities
Trade and other payables (398) (825) (3) - (401) (825)
Lease liabilities (119) (120) (44) (36) (163) (156)
Corporation tax provision (48) (61) - - (48) (61)
------------------ ----------- ----------- ----------- ----------- -----------
(565) (1,006) (47) (36) (612) (1,042)
------------------ ----------- ----------- ----------- ----------- -----------
Total liabilities (1,502) (2,119) (399) (376) (1,901) (2,495)
------------------ ----------- ----------- ----------- ----------- -----------
Net assets GBP96,660 GBP95,023 GBP33,321 GBP25,010 GBP129,981 GBP120,033
================== =========== =========== =========== =========== ===========
Additions to property,
plant and equipment 6 4 2 1 8 5
Depreciation and amortisation
of property, plant
and equipment (76) (79) (29) (24) (105) (103)
Impairment of investments
and loans - - (36) - (36) -
Cash flow arising
from:
Operating activities (2,539) (1,194) (1,957) (3,677) (4,496) (4,871)
Investing activities 6 2,802 - - 6 2,802
Financing activities (1,960) 14,773 - - (1,960) 14,773
Change in cash and
cash equivalents (4,493) 16,381 (1,957) (3,677) (6,450) 12,704
Geographic segment Geographic segment Group
1: 2:
UK Non-UK
Audited Audited Audited
31(st) January 31(st) January 31(st) January
2019 2019 2019
Restated* Restated* Restated*
GBP'000 GBP'000 GBP'000
Operating income 16,882 (740) 16,142
Operating expenses (2,886) (1,042) (3,928)
------------------- ------------------- ---------------
Segment operating
profit 13,996 (1,782) 12,214
------------------- ------------------- ---------------
Financial income 79 29 108
Financial expenses (65) (23) (88)
Exchange movements 8 (33) (25)
Profit before tax 14,018 (1,809) 12,209
Income taxes 232 - 232
------------------- ------------------- ---------------
Profit for the year GBP14,250 GBP(1,809) GBP12,441
=================== =================== ===============
*Restated for IFRS 16 (Refer to Note 10)
Included within the operating income reported above are the
following amounts requiring separate disclosure owing to the fact
that they are derived from a single investee company and the total
revenues attributable to that investee company are 10% or more of
the total realised income generated by the Group during the
period:
Total income % of total realised Reportable geographic
attributable operating income segment
to the investee (excluding gains
company on investments)
(GBP'000)
Audited Audited Audited
31(st) January 31(st) January 31(st) January
2019 2019 2019
Investee Company
LEBC Holdings Limited 1,464 32 1
Nexus Underwriting
Management Limited 788 17 1
Paladin Holdings Limited 449 10 1
Geographic segment Geographic segment Group
1: 2:
UK Non-UK
Audited Audited Audited
31(st) January 31(st) January 31(st) January
2019 2019 2019
Restated* Restated* Restated*
GBP'000 GBP'000 GBP'000
Non-current assets
Property, plant and
equipment 121 37 158
Right-of-use asset 1,128 340 1,468
Investments - equity
portfolio 78,309 23,638 101,947
Investments - treasury
portfolio 14 - 14
Loans and receivables 11,856 2,653 14,509
91,428 26,668 118,096
------------------- ------------------- ---------------
Current assets
Trade and other receivables 1,575 1,292 2,867
Cash and cash equivalents 7,855 - 7,855
9,430 1,292 10,722
------------------- ------------------- ---------------
Total assets 100,858 27,960 128,818
------------------- ------------------- ---------------
Non-current liabilities
Lease liabilities (1,054) (318) (1,372)
------------------- ------------------- ---------------
(1,054) (318) (1,372)
------------------- ------------------- ---------------
Current liabilities
Trade and other payables (1,061) (3) (1,064)
Lease liabilities (123) (37) (160)
Corporation tax provision (48) - (48)
------------------- ------------------- ---------------
(1,232) (40) (1,272)
------------------- ------------------- ---------------
Total liabilities (2,286) (358) (2,644)
------------------- ------------------- ---------------
Net assets GBP98,572 GBP27,602 GBP126,174
=================== =================== ===============
Additions to property,
plant and equipment 15 5 20
Depreciation and amortisation
of property, plant
and equipment (162) (49) (211)
Impairment of investments
and loans - (2,595) (2,595)
Cash flow arising
from:
Operating activities (3,746) (8,438) (12,184)
Investing activities 2,781 - 2,781
Financing activities 14,605 - 14,605
Change in cash and
cash equivalents 13,640 (8,438) 5,202
*Restated for IFRS 16 (Refer to Note 10)
As outlined previously, under IFRS 8 the Group reports its
operating segments (UK and Non-UK) and associated income, expenses,
assets and liabilities based upon the country of domicile of each
of its investee companies.
In addition to the segmental analysis disclosure reported above,
the Group has undertaken a further assessment of each of its
investee companies' underlying revenues, specifically focusing on
the geographical origin of this revenue. Geographical analysis of
each investee company's 2019 and 2018 revenue budgets was carried
out and, based upon this analysis, the directors have determined
that on a look-through basis, the Group's portfolio of investee
companies can also be analysed as follows:
Unaudited Unaudited Audited
31(st) July 31(st) July 31(st) January
2019 2018 2019
% % %
UK 50 48 51
Non-UK 50 52 49
----------- ----------- --------------
Total 100 100 100
=========== =========== ==============
3. EARNINGS PER SHARE FROM CONTINUING OPERATIONS ATTRIBUTABLE TO THE EQUITY SHAREHOLDERS
Unaudited Unaudited Audited
31(st) July 31(st) July 31(st) January
2019 2018 2019
Restated* Restated*
GBP'000 GBP'000 GBP'000
Earnings
Earnings for the
period 5,594 6,248 12,441
Earnings for the
purposes
of basic and diluted
earnings
per share being total
comprehensive
income attributable
to equity
shareholders 5,594 6,248 12,441
----------------------------- ----------------------------- --------------------------
Earnings per share -
basic
and diluted 15.6p 20.8p 37.6p
----------------------------- ----------------------------- --------------------------
Number of shares Number Number Number
Weighted average
number of
ordinary shares for
the purposes
of basic earnings per
share 35,962,118 30,077,669 33,065,228
Number of dilutive Nil Nil
shares Nil
under option
Weighted average
number of
ordinary shares for
the purposes
of dilutive earnings
per
share 35,962,118 30,077,669 33,065,228
============================= ============================= ==========================
*Restated for IFRS 16 (Refer to Note 10)
During the 6 months to 31st July 2018 and the 12 months to 31st
January 2019 the Company issued a total of 8,252,037 new ordinary
shares.
On 12th June 2018 the Company made a Placing Announcement to the
market outlining details of a proposed placing of 6,169,194 new
ordinary shares (the "Placing") to a new investor, an entity within
the PSC Insurance Group ("PSC Group"), at a price of 252 pence per
share ("Issue Price"). In addition, in order to provide existing
shareholders with an opportunity to participate in the issue of new
ordinary shares, the Company launched an open offer (the "Open
Offer") to all qualifying shareholders to subscribe for an
aggregate of up to 595,238 new ordinary shares at the Issue Price
(on the basis of 1 open offer share for every 21 existing ordinary
shares held). All new open offer shares were fully subscribed
for.
In addition, during those periods, 1,461,302 new ordinary shares
of 10 pence each were issued and allotted as part of a new joint
share ownership plan ("2018 JSOP"), representing 5.00% of the
existing issued share capital at the time the awards were made.
This was to provide eligible employees of the Group with a joint
beneficial ownership in and opportunity to benefit from any
possible appreciation in the value of ordinary shares in the
Company subject to a hurdle rate. The new ordinary shares were
issued in the name of RBC cees Trustee Limited ("RBC") as trustee
of the B.P. Marsh Employees' Share Trust ("Share Trust") at a
subscription price of 281 pence, being the mid-market closing price
on 12th June 2018. The ordinary shares issued to the Share Trust
were partly paid for via a loan from the Company to RBC to cover
the subscription cost of the aggregate nominal value of the shares,
amounting to GBP146,130. Refer to Note 10 for further details of
the joint share ownership plan.
26,303 new ordinary shares, representing 0.09% of the existing
issued share capital at that time, were also issued and allotted to
the participants of the Company's Share Incentive Plan ("SIP").
Refer to Note 9 for further details.
Both the 1,461,302 and the 26,303 new ordinary shares issued
respectively for the purposes of the 2018 JSOP and the SIP were
admitted to trading on AIM on 19th June 2018.
On 5th July 2018, at a General Meeting of the Company, all
resolutions set out in a Circular dated 13th June 2018 outlining
the conditions of the Placing and Open Offer were duly passed.
Both the Placing and the Open Offer raised total gross proceeds
of GBP17,046,369 (net proceeds of GBP16,580,674 after costs) and
6,764,432 new ordinary shares were admitted to trading on AIM on
9th July 2018.
Following admission of the aforementioned new ordinary shares,
the Company's issued share capital increased from 29,226,040 as at
31st January 2018 to 37,478,077 as at 31st July 2018.
The weighted average number of ordinary shares at 31st July 2018
was calculated by proportioning the Placing and Open Offer shares
over the period.
During the period the Company paid GBP144,553 in order to
repurchase 51,416 ordinary shares at an average price of 281 pence
per share. During the interim 6 months to 31st July 2018 no share
repurchases were made and in the full year to 31st January 2019 the
Company paid GBP79,310 in order to repurchase 28,573 ordinary
shares at an average price of 278 pence per share. Distributable
reserves were reduced by GBP144,553 as a result during the period
(full year to 31st January 2019: distributable reserves were
reduced by GBP79,310).
Ordinary shares held by the Company in Treasury
Movement of ordinary shares Unaudited Unaudited Audited
held in Treasury:
31(st) July 31(st) July 31(st) January
2019 2018 2019
Number Number Number
Opening total ordinary
shares held in Treasury 28,573 21,009 21,009
Ordinary shares repurchased
into Treasury during the
period 51,416 - 28,573
Ordinary shares transferred
to the B.P. Marsh SIP Trust
during the period (19,218) (21,009) (21,009)
Total ordinary shares held
in Treasury at period end 60,771 - 28,573
============ ============ ===============
The Treasury shares do not have voting or dividend rights and
have therefore been excluded for the purposes of calculating
earnings per share.
The repurchase of the ordinary shares is borne from the Group's
commitment to reduce share price discount to net asset value. Its
policy has been throughout the period (and previously) to be able
to buy small parcels of shares when the share price is below a
fixed percentage of its published Net Asset Value and place them
into Treasury. During the interim 6 months to 31st July 2018 this
threshold was 20%. During the full year to 31st January 2019 the
threshold was 20% until 11th October 2018 when the Group announced
an updated Share Buy-Back Policy confirming that the threshold had
been reduced from 20% to 15%.
The weighted average number of shares used for the purposes of
calculating the earnings per share, net asset value and net asset
value per share of the Group excludes the 1,461,302 shares held
under joint share ownership arrangements (Note 9) as these were
non-dilutive in the period to 31st July 2019, are subject to
performance criteria that have not yet been achieved and are held
within an Employee Benefit Trust. The Group net asset value has
therefore also excluded the economic right the Group has to the
first 281 pence per share (GBP4,106,259) on vesting for the same
reasons. On this basis the current net asset value per share is 361
pence for the Group. If the joint share ownership arrangements were
included, this would increase the Group's net asset value by
GBP4,106,259 and the net asset value per share would be 358
pence.
The increase to the weighted average number of ordinary shares
between the 2018 and 2019 interim periods is mainly attributable to
the increased weighting of the new ordinary shares that were issued
from the Placing and Open Offer which occurred towards the end of
the 6 month interim period to 31st July 2018.
The 19,218 ordinary shares transferred from Treasury to the SIP
Trust in June 2019 have been treated as re-issued for the purposes
of calculating earnings per share and have therefore also
contributed to the increase to the weighted average number of
shares in the current period.
33,330 ordinary shares (comprising the 19,218 ordinary shares
transferred from Treasury to the SIP Trust during the period
together with 14,112 of unallocated ordinary shares acquired by the
SIP Trust as part of the new issue of shares by the Company during
the interim period to 31st July 2018) were allocated to the
participating employees as Free, Matching and Partnership shares
under the share incentive plan arrangement in June 2019 (Note
9).
4. NON-CURRENT INVESTMENTS - EQUITY PORTFOLIO
Group Investments
Unaudited Unaudited Audited
31(st) July 31(st) July 31(st) January
2019 2018 2019
Continuing Continuing Continuing
investments investments investments
GBP'000 GBP'000 GBP'000
At valuation
At 1(st) February 101,947 79,122 79,122
Additions 945 3,629 8,719
Disposals - - -
Movement in valuation 4,077 5,540 14,106
At period end GBP106,969 GBP88,291 GBP101,947
================ ================ ==============
At cost
At 1(st) February 55,819 47,100 47,100
Additions 945 3,629 8,719
Disposals - - -
At period end GBP56,764 GBP50,729 GBP55,819
================ ================ ==============
The principal additions relate to the following transactions in
the period:
On 26th April 2019 the Group agreed, as part of a rights issue
in conjunction with its fellow shareholder Gerry Sheehy, to provide
further funding of GBP122,909 to The Fiducia MGA Company Limited
("Fiducia") as part of a total fundraising of GBP350,802. The Group
subscribed for a further 48 A ordinary shares in Fiducia which
represented its proportional pre-emption rights. As at 31st January
2019 the Group's holding in Fiducia was 35% and following the
rights issue this increased to 35.18%.
On 12th July 2019 the Group acquired a 36% stake in Agri
Services Company PTY Limited ("Agri Services") for an initial
consideration of AUD 1,470,000 (GBP822,516). Agri Services is the
holding company for Ag Guard PTY Limited, which provides insurance
solutions for the Australian agricultural sector. Further
consideration of up to AUD 1,130,000 (c.GBP636,000) may become
payable subject to agreed conditions.
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), Asia Reinsurance Brokers Pte
Limited (Singapore), Stewart Specialty Risk Underwriting Ltd
(Canada), XPT Group LLC (USA), Mark Edward Partners LLC (USA), ATC
Insurance Solutions PTY Limited (Australia), Criterion Underwriting
Pte Limited (Singapore) and Agri Services Company PTY Limited
(Australia) are as follows:
% holding Date Aggregate Post tax
of share information capital profit/(loss)
and
Name of company Capital available reserves for the Principal activity
to year
GBP GBP
Agri Services Company 36.00 - - - Holding company
PTY Limited(1) for specialist
Australian agricultural
Managing General
Agency
Asia Reinsurance Brokers Specialist reinsurance
Pte Limited 25.00 31.12.17 2,377,299 (227,666) broker
Specialist Australian
ATC Insurance Solutions Managing General
PTY Limited 20.00 30.06.18 1,690,468 1,065,772 Agency
Bastion Reinsurance
Brokerage (PTY) Limited 35.00 31.12.17 (618,839) (292,069) Reinsurance broker
Holding company
Bulwark Investment for South African
Holdings Managing General
(PTY) Limited 35.00 31.12.16 (466,434) (354,827) Agents
Criterion Underwriting 29.40 - - - Specialist Singaporean
Pte Limited(1) Managing General
Agency
Investment holding
EC3 Brokers Group Limited 20.00 31.12.17 893,851 (7,695) company
Independent financial
LEBC Holdings Limited 59.34 30.09.18 7,423,355 3,560,187 advisor company
Specialist Australian
MB Prestige Holdings Motor Managing
PTY Limited 40.00 31.12.18 1,884,343 630,641 General Agency
Mark Edward Partners Specialty insurance
LLC 30.00 31.12.17 5,046,643 3,470,754 broker
Neutral Bay Investments Investment holding
Limited 49.90 31.03.18 4,014,882 86,330 company
Nexus Underwriting
Management Specialist Managing
Limited 17.77 31.12.18 20,973,929 1,568,016 General Agency
Investment holding
Paladin Holdings Limited 44.33 31.12.18 105,677 242,277 company
Specialist South
Property and Liability African Property
Underwriting Managers Managing General
(PTY) Limited 42.50 31.12.17 (306,965) (255,986) Agency
Specialist Canadian
Stewart Specialty Risk Casualty Underwriting
Underwriting Ltd 30.00 31.12.18 (58,072) 35,352 Agency
Consolidator
Summa Insurance Brokerage, of regional insurance
S.L. 77.25 31.12.18 8,382,512 (369,155) brokers
Specialist UK
Marine Cargo
The Fiducia MGA Company Underwriting
Limited 35.18 31.12.18 (2,128,168) (962,122) Agency
Walsingham Holdings Investment holding
Limited 20.00 30.09.18 980 (520) company
Specialist
Walsingham Motor Insurance UK Motor Managing
Limited 40.50 30.09.18 (914,027) 414,950 General Agency
USA Specialty
lines insurance
distribution
XPT Group LLC 35.00 31.12.17 4,538,143 (1,495,402) company
(1) Criterion Underwriting Pte Limited and Agri Services Company
PTY Limited are both newly incorporated companies. Statutory
accounts are not available as these are not yet due.
The aggregate capital and reserves and profit/(loss) for the
year shown above are extracted from the relevant local GAAP
accounts of the investee companies.
5. NON-CURRENT INVESTMENTS - TREASURY PORTFOLIO
Group Unaudited Unaudited Audited
At valuation 31(st) July 31(st) July 31(st) January
2019 2018 2019
GBP'000 GBP'000 GBP'000
Market value at 1st February 14 2,756 2,756
Additions at cost - 27 27
Disposals (14) (2,834) (2,828)
Change in value in the year - 55 59
------------- ------------- ----------------
Market value at period end GBP - GBP 4 GBP 14
============= ============= ================
Investment fund split:
GAM London Limited - 2 2
Rathbone Investment Management
Limited - 2 12
------------- ------------- ----------------
Total GBP - GBP 4 GBP 14
============= ============= ================
The treasury portfolio comprises of investment funds managed and
valued by the Group's investment managers, GAM London Limited and
Rathbone Investment Management Limited. All investments in
securities are included at year end market value.
The 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 GBP22 (interim 6 months to 31st
July 2018: GBP4,065 and full year to 31st January 2019: GBP4,125)
were charged to the Consolidated Statement of Comprehensive Income
during the period.
6. RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS
Share Reverse Capital Capital
Share premium Fair acquisition Redemption contribution Retained
value
capital account reserve reserve Reserve reserve Earnings* Total
(GBP'000) (GBP'000) (GBP'000) (GBP'000) (GBP'000) (GBP'000) (GBP'000) (GBP'000)
At 31(st)
January
2019
(Restated*) 3,748 29,358 46,128 393 6 21 46,520 126,174
Profit for
the
period - - 4,077 - - - 1,517 5,594
Dividends
paid - - - - - - (1,712) (1,712)
Repurchase of
Company
shares
(Note 3) - - - - - - (145) (145)
Share
Incentive
Plan
(Note 9) - 5 - - - 10 55 70
At 31(st) GBP3,748 GBP29,363 GBP50,205 GBP393 GBP6 GBP31 GBP46,235 GBP129,981
July
2019
========== ========== ========== ============ =========== ============= ========== ===========
*Restated for IFRS 16 (Refer to Note 10)
7. LOAN AND EQUITY COMMITMENTS
On 27th January 2017 the Group entered into an agreement to
provide a loan facility of CAD 850,000 (subject to certain
conditions) to Stewart Specialty Risk Underwriting Ltd ("SSRU"), an
investee company. As at 31st July 2019 CAD 450,000 (GBP279,868) of
this facility had been drawn down, leaving a remaining undrawn
facility of CAD 400,000.
8. DEFERRED TAX AND CONTINGENT LIABILITIES
The directors estimate that, under the current taxation rules
and the current investment profile, if the Group were to dispose of
all its investments at the amount stated in the Consolidated
Statement of Financial Position, no tax on capital gains (interim 6
months to 31st July 2018: GBPNil and full year to 31st January
2019: GBPNil) would become payable by the Group.
Finance (No.2) Act 2017 introduced significant changes to the
Substantial Shareholding Exemption ("SSE") rules in Taxation of
Chargeable Gains Act 1992 Sch. 7AC which applied to share disposals
on or after 1 April 2017. In general terms, the rule changes relax
the conditions for the Group to qualify for SSE on a share
disposal.
Having reviewed the Group's current investment portfolio, the
directors consider that the Group should benefit from this reform
to the SSE rules on all non-US investments and, as a result, the
directors anticipate that on a disposal of shares in the Group's
current non-US investments, so long as the shares have been held
for 12 months, they should qualify for SSE and no corporation tax
charge should arise on their disposal.
New tax legislation was introduced in the US in 2018 which taxes
at source gains on disposal of any foreign partnership interests in
US LLCs. As such, deferred tax will need to be assessed on any
potential net gains from the Group's investment interests in the
US.
Having assessed the current portfolio, the directors anticipate
that there should currently be no requirement to provide for
deferred tax in respect of unrealised gains on investments under
the current requirements of the IFRS as the US investments do not
currently show a net gain, and the non-US investments are expected
to benefit from the SSE rules. As such no deferred tax provision
has been made as at 31st July 2019. The requirement for a deferred
tax provision is subject to continual assessment of each investment
to test whether the SSE conditions continue to be met based upon
information that is available to the Group and that there is no
change to the accounting treatment in this regard under IFRS. It
should also be noted that, until the date of the actual disposal,
it will not be possible to ascertain if all the SSE conditions are
likely to have been met and, moreover, obtaining agreement of the
tax position with HM Revenue & Customs may possibly not be
forthcoming until several years after the end of a period of
accounts.
9. SHARE BASED PAYMENT ARRANGEMENTS
Joint Share Ownership Plan
During the year to 31st January 2019, B.P. Marsh & Partners
Plc entered into joint share ownership agreements ("JSOAs") with
certain employees and directors. The details of the arrangements
are described in the following table:
Nature of the arrangement Share appreciation rights (joint beneficial
ownership)
Date of grant 12th June 2018
---------------------------------------------------
Number of instruments granted 1,461,302
---------------------------------------------------
Exercise price (pence) N/A
---------------------------------------------------
Share price (market value)
at grant (pence) 281.00
---------------------------------------------------
Hurdle rate 3.75% p.a. (simple)
---------------------------------------------------
Vesting period (years) 3 years
---------------------------------------------------
Vesting conditions There are no performance conditions
other than the recipient remaining an
employee throughout the vesting period.
The awards vest after 3 years or earlier
resulting from either:
a) a change of control resulting from
a person, or persons acting together,
obtaining control of the Company either
(i) as a result of a making a Takeover
Offer; (ii) pursuant to court sanctioned
Scheme of Arrangement; or (iii) in consequence
of a Compulsory Acquisition); or
b) a person becoming bound or entitled
to acquire shares in the Company pursuant
to sections 974 to 991 of the Companies
Act 2006; or
c) a winding up.
If the employee is a bad leaver the
co-owner of the jointly-owned share
can buy out the employee's interest
for 0.01p
---------------------------------------------------
Expected volatility N/A
---------------------------------------------------
Risk free rate 1%
---------------------------------------------------
Expected dividends expressed
as a dividend yield 1.9%
---------------------------------------------------
Settlement Cash settled on sale of shares
---------------------------------------------------
% expected to vest (based
upon leavers) 100%
---------------------------------------------------
Number expected to vest 1,461,302
---------------------------------------------------
Valuation model Expected Return Methodology (ERM)
---------------------------------------------------
ERM value (pence) 36.00
---------------------------------------------------
Deduction for carry charge
(pence) 31.60
---------------------------------------------------
Fair value per granted instrument
(pence) 4.40
---------------------------------------------------
Charge for period ended 31st
July 2019 GBP10,618
---------------------------------------------------
On 12th June 2018 1,461,302 new 10p Ordinary shares in the
Company were issued and transferred into joint beneficial ownership
for 12 employees (4 of whom 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.
The new Ordinary shares have been issued into the name of RBC
cees Trustee Limited ("the Trustee") as trustee of the B.P. Marsh
Employees' Share Trust ("the Trust") at a subscription price of
GBP2.81, being the mid-market closing price on 12th June 2018.
The jointly-owned shares are beneficially owned by (i) each of
the 12 participating employees and (ii) the trustee of the Trust
upon and subject to the terms of the JSOAs entered into between the
participating employee, the Company and the Trustee.
Under the terms of the JSOAs, the employees and directors enjoy
the growth in value of the shares above a threshold price of
GBP2.81 per share (market value at the date of grant) plus an
annual carrying charge of 3.75% per annum (simple interest) to the
market value at the date of grant. The Trust retains the initial
market value of the jointly-owned shares plus the carrying
cost.
Alternatively, on vesting, the participant and the Trustee may
exchange their respective interests in the jointly-owned shares
such that each becomes the sole owner of a number of Ordinary
shares of equal value to their joint interests.
Participants will therefore receive value from the jointly-owned
shares only if and to the extent that the share value grows above
the initial market value plus the carrying cost.
The employees and directors received an interest in jointly
owned shares and a Joint Share Ownership Plan ("JSOP") is not an
option, however the convention for JSOPs is to treat them as if
they were options. The value of the employee's interest for
accounting purposes is calculated using the Expected Return
Methodology.
The risk-free rates are based on the yield on UK Government
Gilts of a term consistent with the assumed option life.
No jointly-owned shares were sold 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.
There has been no movement during the period in terms of the
numbers of shares to be exercised.
Share Incentive Plan
During the year to 31st January 2017 the Group established an
HMRC approved Share Incentive Plan ("SIP").
During the period a total of 19,218 ordinary shares in the
Company, which were held in Treasury as at 31st January 2019 (6
months to 31st July 2018 and also 12 months to 31st January 2019:
21,009 ordinary shares in the Company, which were either
repurchased during those periods or held in Treasury as at 31st
January 2018) were transferred to the B.P. Marsh SIP Trust ("SIP
Trust"). As a result, together with 14,112 unallocated shares
issued to the SIP Trust during the interim period to 31st July 2018
and full year to 31st January 2019, a total of 33,330 ordinary
shares in the Company were available for allocation to the
participants of the SIP (6 months to 31st July 2018 and also 12
months to 31st January 2019: 47,312 ordinary shares were available
for allocation).
On 13th June 2019, a total of 11 eligible employees (including 4
executive directors of the Company) applied for the 2019-20 SIP and
were each granted 1,212 ordinary shares ("19-20 Free Shares"),
representing approximately GBP3,600 at the price of issue.
Additionally, on 13th June 2019, all eligible employees were
also invited to take up the opportunity to acquire up to GBP1,800
worth of ordinary shares ("Partnership Shares"). For every
Partnership Share that an employee acquired, the SIP Trust offered
two ordinary shares in the Company ("Matching Shares") up to a
total of GBP3,600 worth of shares. All 11 eligible employees
(including 4 executive directors of the Company) took up the offer
and acquired the full GBP1,800 worth of Partnership Shares (606
ordinary shares) and were therefore awarded 1,212 Matching
Shares.
The 19-20 Free and Matching Shares are subject to a 1 year
forfeiture period.
A total of 33,330 (6 months to 31st July 2018 and also 12 months
to 31st January 2019: 35,222) Free, Matching and Partnership Shares
were granted to the 11 (6 months to 31st July 2018 and also 12
months to 31st January 2019: 11) eligible employees during the
period, including 12,120 (6 months to 31st July 2018 and also 12
months to 31st January 2019: 12,808) granted to 4 executive
directors of the Company.
As at 31st July 2019 a total of 179,567 Free, Matching and
Partnership Shares had been granted to 11 eligible employees under
the SIP, including 74,268 granted to 4 executive directors of the
Company.
GBP39,202 of the IFRS 2 charges (6 months to 31st July 2018:
GBP37,921 and 12 months to 31st January 2019: GBP76,470) associated
with the award of the SIP shares to the 11 (6 months to 31st July
2018 and also 12 months to 31st January 2019: 11) eligible
directors and employees of the Company have been recognised in the
Statement of Comprehensive Income as employment expenses.
The results of the SIP Trust have been fully consolidated within
these financial statements on the basis that the SIP Trust is
controlled by the Company.
10. PRIOR PERIOD RESTATEMENT
As detailed in Note 1 to the financial statements, IFRS 16:
Leases ("IFRS 16") was adopted for the first time in this
period.
The primary changes to the Group's Statement of Comprehensive
Income within these interim consolidated financial statements are
as follows:
a) The Group is no longer recognising rental costs associated
with the operating lease on its office premises within its
operating expenses. Instead, these rental costs are recognised as
an effective repayment of the lease liability included within the
Consolidated Statement of Financial Position.
b) The Group is now recognising an amortisation charge on the
right-of-use asset which is included within its operating expenses
in the Consolidated Statement of Comprehensive Income.
c) The Group is now recognising an interest charge calculated on
the lease liability which is included under Financial Expenses
within the Consolidated Statement of Comprehensive Income.
The prior period adjustments necessary for the adoption of the
new IFRS 16 are detailed below:
Reconciliation of equity
at 31st January 2018
Consolidated
Statement Restated
of Financial Consolidated
Position Effect of Statement
as previously transition of Financial
reported to IFRS 16 Position
GBP'000 GBP'000 GBP'000
ASSETS
NON-CURRENT ASSETS
Property, plant and equipment 167 - 167
Right-of-use asset - 1,650 1,650
Investments - equity portfolio 79,122 - 79,122
Investments - treasury portfolio 2,756 - 2,756
Loans and receivables 14,421 - 14,421
Deferred tax asset 32 - 32
-------------- ----------- -------------
96,498 1,650 98,148
CURRENT ASSETS
Trade and other receivables 2,393 - 2,393
Cash and cash equivalents 2,648 - 2,648
-------------- ----------- -------------
5,041 - 5,041
LIABILITIES
NON-CURRENT LIABILITIES
Lease liabilities - (1,532) (1,532)
-------------- ----------- -------------
- (1,532) (1,532)
CURRENT LIABILITIES
Trade and other payables (1,472) - (1,472)
Lease liabilities - (152) (152)
Corporation tax provision (1,200) - (1,200)
-------------- ----------- -------------
(2,672) (152) (2,824)
NET ASSETS GBP98,867 GBP(34) GBP98,833
-------------- ----------- -------------
CAPITAL AND RESERVES - EQUITY
Called up share capital 2,923 - 2,923
Share premium account 9,398 - 9,398
Fair value reserve 32,022 - 32,022
Reverse acquisition reserve 393 - 393
Capital redemption reserve 6 - 6
Capital contribution reserve 7 - 7
Retained earnings 54,118 (34) 54,084
SHAREHOLDERS' FUNDS - EQUITY GBP98,867 GBP(34) GBP98,833
-------------- ----------- -------------
Reconciliation of equity
at 31st July 2018
Consolidated
Statement Restated
of Financial Consolidated
Position Effect of Statement
as previously transition of Financial
reported to IFRS 16 Position
GBP'000 GBP'000 GBP'000
ASSETS
NON-CURRENT ASSETS
Property, plant and equipment 158 - 158
Right-of-use asset - 1,560 1,560
Investments - equity portfolio 88,291 - 88,291
Investments - treasury portfolio 4 - 4
Loans and receivables 14,753 - 14,753
-------------- ----------- -------------
103,206 1,560 104,766
CURRENT ASSETS
Trade and other receivables 2,412 - 2,412
Cash and cash equivalents 15,350 - 15,350
-------------- ----------- -------------
17,762 - 17,762
LIABILITIES
NON-CURRENT LIABILITIES
Lease liabilities - (1,453) (1,453)
-------------- ----------- -------------
- (1,453) (1,453)
CURRENT LIABILITIES
Trade and other payables (825) - (825)
Lease liabilities - (156) (156)
Corporation tax provision (61) - (61)
-------------- ----------- -------------
(886) (156) (1,042)
NET ASSETS GBP120,082 GBP(49) GBP120,033
-------------- ----------- -------------
CAPITAL AND RESERVES - EQUITY
Called up share capital 3,599 - 3,599
Share premium account 25,327 - 25,327
Fair value reserve 37,562 - 37,562
Reverse acquisition reserve 393 - 393
Capital redemption reserve 6 - 6
Capital contribution reserve 10 - 10
Retained earnings 53,185 (49) 53,136
SHAREHOLDERS' FUNDS - EQUITY GBP120,082 GBP(49) GBP120,033
-------------- ----------- -------------
Reconciliation of equity
at 31st January 2019
Consolidated
Statement Restated
of Financial Consolidated
Position Effect of Statement
as previously transition of Financial
reported to IFRS 16 Position
GBP'000 GBP'000 GBP'000
ASSETS
NON-CURRENT ASSETS
Property, plant and equipment 158 - 158
Right-of-use asset - 1,468 1,468
Investments - equity portfolio 101,947 - 101,947
Investments - treasury portfolio 14 - 14
Loans and receivables 14,509 - 14,509
-----------
116,628 1,468 118,096
CURRENT ASSETS
Trade and other receivables 2,867 - 2,867
Cash and cash equivalents 7,855 - 7,855
-------------- ----------- -------------
10,722 - 10,722
LIABILITIES
NON-CURRENT LIABILITIES
Lease liabilities - (1,372) (1,372)
-------------- ----------- -------------
- (1,372) (1,372)
CURRENT LIABILITIES
Trade and other payables (1,064) - (1,064)
Lease liabilities - (160) (160)
Corporation tax provision (48) - (48)
-------------- ----------- -------------
(1,112) (160) (1,272)
NET ASSETS GBP126,238 GBP(64) GBP126,174
-------------- ----------- -------------
CAPITAL AND RESERVES - EQUITY
Called up share capital 3,748 - 3,748
Share premium account 29,358 - 29,358
Fair value reserve 46,128 - 46,128
Reverse acquisition reserve 393 - 393
Capital redemption reserve 6 - 6
Capital contribution reserve 21 - 21
Retained earnings 46,584 (64) 46,520
SHAREHOLDERS' FUNDS - EQUITY GBP126,238 GBP(64) GBP126,174
-------------- ----------- -------------
Reconciliation of net profits
for the 6 months ended 31st July 2018
GBP'000 GBP'000
Total Comprehensive Income as previously reported 6,263
Removal of operating lease costs relating to office
premises 117
Amortisation charge relating to right-of-use asset (90)
Interest charge relating to lease liability (42)
-------
(15)
Restated Total Comprehensive Income GBP6,248
========
Reconciliation of net profits
for the year ended 31st January 2019
GBP'000 GBP'000
Total Comprehensive Income as previously reported 12,471
Removal of operating lease costs relating to office
premises 236
Amortisation charge relating to right-of-use asset (182)
Interest charge relating to lease liability (84)
-------
(30)
Restated Total Comprehensive Income GBP12,441
=========
Reconciliation of movement in retained earnings reserve
GBP'000
Adjustment to opening retained earnings as at 31st January
2018 (34)
Adjustment to retained earnings in respect of the year ended
31st January 2019 (30)
Total retained earnings reserve adjustment as at 31st January GBP(64)
2019
=======
Notes to Editors:
About B.P. Marsh & Partners Plc
B.P. Marsh's current portfolio contains sixteen 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 -
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR QZLFFKBFZFBF
(END) Dow Jones Newswires
October 15, 2019 02:00 ET (06:00 GMT)
B.p. Marsh & Partners (LSE:BPM)
Historical Stock Chart
From Apr 2024 to May 2024
B.p. Marsh & Partners (LSE:BPM)
Historical Stock Chart
From May 2023 to May 2024