TIDMBPM
RNS Number : 2620Y
B.P. Marsh & Partners PLC
08 September 2020
8th September 2020
B.P. Marsh & Partners Plc
("B.P. Marsh", the "Company" or the "Group")
Trading Update
B.P. Marsh, the niche venture capital provider to early stage
financial services businesses, is pleased to provide the market
with an update on trading for the six months ended 31 July 2020
(the "Period").
Covid-19
Our highest priority remains the health and safety of our staff,
alongside supporting our partners throughout these unprecedented
times. We have been impressed by the skilled dedication and
competence demonstrated by all of our staff in overcoming any
inconvenience caused by working from home during the Covid-19
pandemic.
Dividend
On 31 July 2020 the Company paid a dividend of 2.22p per share
to all shareholders on the Register as at 26 June 2020 and
continues to seek to balance rewarding loyalty to its shareholders
and retaining future investment capital in its considerations
regarding future dividend policy.
Cash Balance and Loan Facility
As at 31st July 2020 the Group had a cash balance of GBP1.2m in
addition to an undrawn loan facility of GBP3m from Brian Marsh
Enterprises Ltd.
New Business Opportunities and Outlook
The 6-month interim period closed with a total of 22 new
opportunities having been presented to the Group, compared to 49
over the same period last year. Of the 22, the majority were in the
insurance sector. Whilst this is a decrease to the same stage last
year, this is to be expected given the challenges that were created
throughout the period, due to Covid-19.
The Group remains well positioned to carry out new investments,
with a number of early stage opportunities in the pipeline, which
should continue to develop over the course of the year.
The Group continues to focus on investing in niche SME sectors
backed by experienced and capable management teams, which will
create long term growth and consequential value.
Portfolio Update
New Investment
Investment in Sage Program Underwriters, Inc ("Sage")
On 29 June 2020, the Group announced an investment into the
American based company Sage, subscribing to a 30% Cumulative
Preferred Ordinary shareholding for an equity consideration of
$250,000 (c. GBP203,000).
Based in Bend, Oregon, USA, and established in 2019 by CEO Chuck
Holdren, Sage provides specialist insurance products to niche
industries, initially in the inland delivery and field sport
sectors.
The investment in Sage enabled the Group to back an experienced
leader to utilise his skills to build out an innovative, fast
growing and profitable MGA, as well as to expand the Group's
footprint in the United States.
Sage recently launched its new Worker's Compensation program for
the ground delivery industry nationwide, with strong results so
far. Sage will also be launching a commercial auto program, which
will complement this. The already established field sports Worker's
Compensation program continues to do very well with new business
and an over 97% renewal retention to date.
Portfolio Developments
Specific developments within the portfolio during the Period are
noted below:
Nexus Underwriting Management Limited ("Nexus")
During the Period, Nexus has expanded its Trade Credit Broking
arm, having acquired a Trade Credit broking portfolio from Howden
UK Group Limited in March 2020, in addition to the previously
acquired businesses, Credit Risk Solutions in October 2017 and
Credit and Business Finance in April 2019.
Nexus has now combined all of its Trade Credit broking
operations under one brand, Xenia Broking Group ("Xenia"). The
unified teams will magnify their impact on the specialist trade
credit and surety market, delivering both greater scope and focus
to their clients.
It is now a leading, and among the largest, specialist trade
credit and surety broker in the UK, with circa 20% market share of
trade credit insurance distribution. The business will develop its
specialist focus by maintaining its consistently strong organic
growth (approximately 15% per annum) and by acquisition, and will
be targeting a growth rate of over 30% per annum.
The Nexus Managing General Agency business also continues to
remain on track to hit its original budget expectation for the year
ending 31 December 2020, notwithstanding the challenges that have
been posed by the Covid-19 pandemic.
In February 2020, Nexus was ranked at number 78 in the 11(th)
annual Sunday Times HSBC International Track 200, which ranks
Britain's mid-market private companies with the fastest-growing
international sales.
LEBC Group Limited ("LEBC")
As previously announced, LEBC Group Limited, the trading
subsidiary of LEBC, has gone through a period of restructuring
following its voluntary decision to exit the Defined Benefit
Transfer Advice space, following consultation with the Financial
Conduct Authority and changes in advice requirements.
LEBC's centralised investment proposition has provided a degree
of stability to clients' portfolios in this time of extreme market
volatility. LEBC's private client advisers have also continued to
provide quality advice to individuals faced with unprecedented
disruption to their lives.
This comes alongside LEBC's corporate division providing
additional support to clients using the furlough scheme and helping
them manage variable pension and pay calculations, so that
employees' retirement plans stay on track.
Additionally, LEBC continues to roll out its digital bionic
advice services and app, transforming access to advice, which is
central to the future growth in the IFA sector.
We remain confident in the LEBC management team and have offered
our full support through its current challenges. B.P. Marsh
believes that LEBC is well positioned to perform successfully in
its area of expertise.
XPT Group LLC ("XPT")
Since the Group's investment in June 2017, XPT has acquired
seven businesses across the United States and has grown from a
standing start to forecasting over $300m of Gross Written Premium
and approximately $7m EBITDA for the year ending 31st December
2020.
In May 2020 Western Security Surplus ("WSS"), the boutique
wholesale broker division of XPT, announced the acquisition of
Houston Surplus Lines ("HSL"), which is an excess and surplus lines
Managing General Agent based in Houston, Texas. Founded in 1994,
HSL has long-standing binding authority contracts with some of the
very best A-rated surplus lines carriers, along with a solid list
of brokerage markets for the harder to place risks.
Additionally, over the Period, XPT's subsidiary, W.E. Love &
Associates has launched a new trucking program, named Platinum
Trucking, alongside Watford Insurance Company, a New Jersey
domiciled admitted carrier with A- rated paper. This new program
has been created for primary truck liability insurance, where W.E.
Love have identified that the needs of the market are
underserved.
Australian investments:
Agri Services PTY Ltd ("Agri Services"), ATC Insurance Solutions
PTY Ltd ("ATC"), MB Prestige Holdings PTY Ltd ("MB") & Sterling
Insurance PTY Ltd ("Sterling")
These four Group investments based in Australia continue to
perform in line with or above our expectations at the current
time.
Since our investment in Agri Services in July 2019, it has
increased its offering, following finalisation of a Farm Pack
binding authority agreement with Great Lakes Australia (a
subsidiary of Munich Re). The Farm Pack product was their final
target in the initial stages of their business plan and has
expanded their offering, opening the Company to the Australia-wide
Agricultural market.
ATC has continued to show strong growth. Notwithstanding the
challenges due to the Covid-19 pandemic, ATC finished its 2020
financial year with EBITDA 15% ahead of the previous year,
demonstrating the resilience of this business in a challenging
environment.
Over the Period, MB repaid in full its loan from the Group,
which was possible due to its solid and consistent performance over
the last three years and a healthy cash balance. MB continues to
show strong growth with Gross Written Premium up 10% on the
previous year at the 6-month year to date position and
profitability up nearly 20% over the prior year position.
Sterling, in which the Group has held an investment since 2013,
also reported a strong financial year to June 2020, exceeding its
EBITDA budget by c. 20%.
Lloyd's Broking investments:
CBC UK Limited ("CBC"), EC3 Brokers Limited ("EC3") and Lilley
Plummer Risks Limited ("Lilley Plummer")
CBC continues to bolster its production side, having hired a new
team dedicated to International Financial products. The team has
collectively 145 years of experience in the international products
sector, both underwriting and broking, and is headed up by Adrian
Fox. Since they commenced their employment at CBC, this team has
made great strides in expanding CBC's international footprint.
In August 2019, EC3 established a new US Property wholesale
division, with the appointments of Matthew Jeffery as Managing
Director and Daniel and David Jeffery as Divisional Directors.
These three brothers have significant experience placing large
complex risks into Lloyd's and the international reinsurance
markets, with a focus on North American and international
property.
In March 2020, EC3 announced the establishment of an
international financial and professional lines division and
appointed David Purdy as Divisional Director, reporting into James
Murphy.
EC3's Dubai office is also looking to expand significantly,
having recently partnered with the Dubai International Financial
Centre Authority (DIFCA) to establish a group health scheme that
facilitates the development of a cost-effective insurance programme
for registered companies operating within the Dubai International
Financial Centre (DIFC). The scheme is the first of its kind to be
developed in Dubai's International Financial Centre and will be
available to over 2,400 active registered firms within the DIFC,
providing health insurance to over 25,000 employees.
Our latest Lloyd's broking investment is Lilley Plummer, which
the Group completed in October 2019. Lilley Plummer is a newly
formed specialist marine Lloyd's Broker, which launched following
an investment of start-up capital from the Group of GBP1m. Since
investment, Lilley Plummer has successfully carried out its
business plan, having made a number of new appointments in Marine,
Terrorism and War risks. Lilley Plummer remains on track to meet
its full year budget projections.
The Fiducia MGA Company Limited ("Fiducia")
Fiducia, having launched as a start-up MGA in November 2016,
with backing from the Group, continues to show strong growth and is
on track to secure Gross Written Premium in excess of GBP20m for
the current year.
Binding authorities across all areas of the business are running
satisfactorily and income levels up to the end of July are slightly
ahead of 2020 forecasts.
Fiducia continue to implement their business plan, in sourcing
new underserved areas of the market, and through the relationships
with their placing brokers and insurance carriers, developing new
products to support these areas. They have recently launched a new
terrorism product to this end, and are also in the process of
launching a marine equipment product. Additionally, Fiducia
continue with their development strategy of identifying those
brokers with which they wish to partner, having in excess of 400
producing brokers supplying them with business.
Stewart Specialty Risk Underwriting Ltd ("SSRU")
SSRU continues to exceed expectations, having exceeded Gross
Written Premium and revenue plans by a substantial margin in each
successive year since the company began writing business in 2017.
Due to its unique "anywhere/any time" working structure and robust
IT systems, SSRU was immediately able to pivot to a completely
remote working model at the onset of the Covid-19 pandemic. This
gave SSRU a significant competitive advantage in the market where
it trades and, combined with the tailwinds of a continued hardening
market and superior trading relationships, the company was able to
exceed its 2020 annual revenue budget before the end of the second
quarter of the year.
Walsingham Motor Insurance Limited ("Walsingham")
Walsingham has grown from a start-up to now writing over GBP26m
in Gross Written Premium.
Over the Period, Walsingham have diversified their offering to
adapt to the new needs that arose from the Covid-19 pandemic.
Having previously written only taxi fleets, they amended their
coverage to support food and shopping deliveries, as well as
various NHS support work to be undertaken without the need for
policy extensions.
Notwithstanding a number of cancellations that were experienced
in the initial weeks of the UK lockdown, due to Walsingham's
innovative and flexible approach, as restrictions eased, Gross
Written Premium has increased significantly, such that the initial
Covid-19 reductions have now reversed, and the business is back on
track to meet its full year budget. At the same time, due to
reduced traffic on the road this has resulted in significantly
reduced claims frequencies over the Period. As a result, Walsingham
were able to repay their loan to the Company in full, ahead of
schedule.
The Group believes that its portfolio and the management teams
within it are well set to continue to deliver excellent long-term
growth and are currently trading in line with these
expectations.
Share Buy-Backs
As has been stated previously, the Company has a strategy for
undertaking small market buy-backs of its shares at times when the
discount to Net Asset Value ("NAV"), based upon the most recently
announced NAV, is greater than 15%.
For the avoidance of doubt, notwithstanding that the discount to
NAV at which the Company's shares are currently trading is greater
than 15%, the Company notes that it is currently restricted in its
ability to buy back shares since, given that Brian Marsh, together
with persons acting in concert with Brian Marsh for the purposes of
the City Code on Takeovers and Mergers (the "City Code"), has an
interest in approximately 41.85% of the Company's voting rights,
any such purchase of shares would result in an obligation for Brian
Marsh to make a general offer for the Company in accordance with
Rule 9 of the City Code.
The Company is aware that it may seek approval for an exemption
to this requirement, however at the current time the Board feels it
prudent to prioritise its cash resources in other areas of the
business.
Interim Results
The Group expects to report the results for the six months to 31
July 2020 on Tuesday 13 October 2020.
For further information:
B.P. Marsh & Partners Plc www.bpmarsh.co.uk
Brian Marsh OBE +44 (0)20 7233 3112
Nominated Adviser & Broker
Panmure Gordon
Atholl Tweedie / Charles Leigh-Pemberton
/ Ailsa MacMaster +44 (0)20 7886 2500
Financial PR & Investor Relations bpmarsh@tavistock.co.uk
Tavistock
Simon Hudson / Tim Pearson +44 (0)20 7920 3150
Notes to Editors:
B.P. Marsh's current portfolio contains eighteen 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 approaching ten years.
- Ends -
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