Interim Results

RNS Number : 7613M
B.P. Marsh & Partners PLC
18 October 2016
 

 

 

 

 

Date:                          18 October 2016

On behalf of:               B.P. Marsh & Partners Plc

Embargoed until:         0700hrs

B.P. Marsh & Partners Plc

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

Interim Results

 

B.P. Marsh & Partners Plc, the niche venture capital provider to high growth businesses, announces its unaudited Group interim results for the six months to 31 July 2016 (the "Period").

 

The financial highlights for the Period are:

 

·     Net Asset Value ("NAV") up 4.3% to £73.8m

·     NAV per share up to 253p (31 Jan 2016: 243p, 31 July 2015: 225p)

·     5.8% total shareholder return (including Dividend of 3.42p per share paid July 2016)

·     Profit after tax up 19.5% to £4.0m (31 July 2015: £3.4m)

·     Current uncommitted cash balance of £7.9m

·     Dividend of 3.76p per share recommended for year to 31 January 2017

 

Chairman's Statement

 

I am pleased to present the unaudited Consolidated Financial Statements of B.P. Marsh & Partners Plc for the six month period to 31 July 2016.

 

In the midst of various uncertainties, including the result of the EU Referendum and global economic concerns, the Company and its portfolio of investments continue to perform in line with our expectations. The results for the Period illustrate our continuing progress and development.

 

The six months have resulted in an increase of 8.7% in the Equity value of the Portfolio.

 

The Group has increased its NAV to £73.8m (253p per share), with an average annual compound NAV growth rate of 11.3% achieved since 1990.

 

During the Period we continued our geographic expansion, with the completion of a new investment in Asia Reinsurance Brokers, headquartered in Singapore and with five offices throughout the region.

 

Our South African investments, from small beginnings, are starting to grow and we were pleased to acquire an additional 22% in PLUM, the Johannesburg-based Managing General Agent ("MGA") on 5 October 2016.

 

Also within the existing portfolio we purchased an additional 8% of the share capital of LEBC Holdings Limited ("LEBC"), taking our total holding to 43%. The Group considers LEBC to be a company at an exciting stage of development, in an increasingly active market.

 

Besso Insurance Group Limited ("Besso") continues its strong performance and to build on its market position.

 

The Group has a healthy cash balance of £7.9m available to invest and is in advanced discussions on several new opportunities that fall within our heartland of interest in Financial Services. We continue to look at ways to expand geographically, whilst following our principle of doing so in territories with a robust regulatory environment and where we see good opportunities for development by offering a partnership to businesses that would benefit from an experienced London-based investor.

 

We have been taking steps in recent years to reduce the discount to Net Asset Value that we have historically traded at and it is gratifying to note this has now reduced to around 20% at the time of writing, having been as much as 45% in 2012.

 

The Board has continued to try to strike a balance between utilising cash to invest in its existing portfolio and new opportunities and providing investors with a modest but meaningful yield. Following the realisation of the Group's remaining 1.6% stake in Hyperion and receipt of £7.3m cash in July, the Board recommended a dividend of 3.76p per share for the year ending 31 January 2017, with the aspiration to at least maintain this in the following two years.

 

Business Update

 

Summary of Developments in the Portfolio

 

New Investments

 

Investment in Asia Reinsurance Brokers Pte Limited ("ARB")

 

On 21 April 2016 the Group acquired a 20% shareholding in ARB, the Singapore-headquartered independent specialist reinsurance and insurance risk solutions provider, for a total consideration of SGD $2.4m.

 

The Group may increase its shareholding in ARB to 25% for an additional cash consideration of up to SGD $0.5m. The consideration paid by the Group for such an additional shareholding would be dependent on the performance of ARB in its financial year ending 31 December 2017.

 

ARB was established in 2008, following a management buy-out of the business from AJ Gallagher, led by the CEO, Richard Austen. ARB specialises in the provision of long-term reinsurance and insurance solutions to a wide range of insurance and reinsurance companies throughout Asia and has offices across the region, including in Malaysia, the Philippines and Indonesia.

 

The Group considered this an opportunity to invest in a well-established and profitable business with an experienced and respected management team and strong growth potential. The investment will be used to build on ARB's position in the Asian market and to assist them in their growth ambitions.

 

Increased Holdings

 

LEBC Holdings Limited ("LEBC")

 

The Group purchased a further 8.03% stake in LEBC Holdings Limited ("LEBC") for an aggregate consideration of approximately £1.91m in June 2016, increasing its shareholding to 42.63%.

 

B.P. Marsh first invested in LEBC, the independent financial advisory company, in April 2007, taking a 22.5% stake, increased by way of a follow-on investment to a 34.9% stake in January 2014. During the nine years of B.P. Marsh's investment, LEBC has grown from revenues of £8.06m (for the year ending 31 May 2007) to revenues of £15.0m (for the year ending 30 September 2015) and extended its network of branches across the UK from 11 to 15.

 

LEBC is currently developing a "bionic" advice proposition combining technology with human involvement, which aims to enable advisers to work more efficiently in giving advice using intelligent systems for fact-finding and report writing.

 

Bastion Reinsurance Brokerage (PTY) Limited ("Bastion Re")

Property and Liability Underwriting Managers (PTY) Limited ("PLUM")

Bulwark Investment Holdings (PTY) Limited ("Bulwark")

 

The Group originally invested in PLUM in July 2015 for an initial consideration of £0.3m. It was agreed that the total consideration paid would increase by a further £0.3m subject to PLUM achieving EBITDA of ZAR 8.3m (c. £0.43m) over the first year of the Group's investment.

 

These targets were met by PLUM and a further consideration of £0.3m has been paid in line with the investment agreement.

 

On 5 October 2016, the Group took the opportunity to acquire an additional 22.5% in PLUM from an exiting shareholder, for cash consideration of £0.61m. This increases the Groups' total shareholding in PLUM to 42.5% for a total cash acquisition price of £1.31m.

 

The Group's other South African investments, Bastion Re and Bulwark, continue to gain significant traction within their market and are performing in line with the Group's expectations.

 

Disposals

 

The Broucour Group Limited ("Broucour")

 

On 22 April 2016 the Group sold its 49% stake in Broucour to the Founder and Managing Director Mr. Rupert Cattell for consideration of up to £0.34m, which equates to the Company's most recent published valuation. The outstanding loan (£0.3m) will likewise be repaid in full. 

 

Randall & Quilter Investment Holdings Limited ("R&Q")

 

On 4 May 2016 the Group sold its 1.32% stake in R&Q to Brian Marsh Enterprises Limited for consideration of £1.02m, resulting in a realised gain for the Company of £0.25m, a 25% increase to the year-end valuation of £0.77m. The Board took the view that the realised funds would be better utilised in an opportunity to which the Group could add value. Brian Marsh Enterprises Limited is owned by Brian Marsh, Chairman and majority shareholder of the Company.

 

Portfolio news

 

Nexus Underwriting Management Limited ("Nexus")

 

Nexus is one of the largest independent specialty MGAs in the London Market with a forecast Premium Income in excess of £110m for 2016, an increase from £56m in 2014 when the Company first invested.

 

Acquisition of Hong Kong-based marine MGA Beacon

 

On 5 July 2016 Nexus acquired 100% of the shareholding in the Hong Kong domiciled marine Managing General Agent, Beacon Underwriters Limited ("Beacon"), which marked its first overseas acquisition and the third acquisition within the last 12 months. The acquisition of Beacon augments Nexus' footprint in Asia, subsequent to the opening of Nexus Underwriting Asia (HK) in 2015.

 

Beacon was established in 2009 as a Lloyd's coverholder to write marine business for the Asian and Middle Eastern markets. Beacon's Managing Director, Dr Ravi Schroff, has over 30 years of experience as an insurance underwriter.

 

Nexus EBA opens branch in Ireland

 

Nexus EBA, part of Nexus, announced on 13 July 2016 that it has established a branch in Ireland, headed up by Stephen Comerford, Senior Business Development Manager and Deputy Underwriter for Surety Insurance.

 

Besso Insurance Group Limited ("Besso")

Besso, one of the top 20 independent Lloyd's brokers, has continued to perform well in the current market place and has recently announced its results for the 2015 financial year.

 

Besso revenues have increased by 16% to £37.6m (£32.3m in 2014), with EBITDA increasing by 15% to £4.17m (£3.62m in 2014), in the 12 months to 31 December 2015.

 

Besso undertook a debt refinancing exercise with Clydesdale Bank during 2015, to support its continued growth strategy. A proportion of the funding from Clydesdale has been used to repay our longstanding Loan Notes, which has reduced Besso's interest payments overall by 15%.

 

In regard to the 2016 financial year, Besso has seen strong results in the first six months, continuing the encouraging trend over 2015.

 

Pursuant to a previously agreed option arrangement, on 8 September 2016 Besso purchased and cancelled 6.57% of the Company's shareholding in Besso for consideration of £1.58m. This buy-back accordingly reduced the Group's Besso shareholding from 42.02% to 37.94%.

 

As announced on 26 July 2016, the Group confirms that the Board of Besso and its shareholders have engaged Canaccord Genuity to carry out a strategic review for Besso. This review is at a stage whereby discussions are underway with potentially interested parties with a view to sale of, or investment in Besso. B.P. Marsh has been an active party in these discussions. There can be no certainty that these discussions may lead to the Company disposing of its interest in Besso's shares.

 

Summa Insurance Brokerage, S.L. ("Summa")

 

Throughout the period, Summa's agricultural division continues to grow strongly, however, continuous softening rates within the general insurance market has had an impact on the overall Group's valuation. In addition Summa has continued to successfully refinance a number of its banking arrangements with Spanish banking institutions, placing Summa in a strong position to continue its growth, both organically and through M&A opportunities.

 

Meanwhile, forecasts for the Spanish economy show that growth in 2016 is likely to be above 2.6%, making it presently one of the fastest growing economies in the Euro Zone.

 

The Board continues to believe that Summa is well positioned in Spain's stabilising market and looks forward to working with the management team to develop the business. Additionally, the Group continues to work with Summa to develop their interaction with the Lloyd's and London Insurance Market.

 

Trireme Insurance Group Limited ("Trireme")

 

U.S. Risk Insurance Group, Inc. ("U.S. Risk"), the Dallas-based leading international specialty lines underwriting manager and wholesale broker and the Group's partner in the Trireme investment announced on 13 July 2016 that it had entered into a definitive agreement for a significant transaction and partnership with Kohlberg & Company, L.L.C. ("Kohlberg"), a leading private equity firm specialising in middle market investing.

 

Through its $1.6bn private equity fund, Kohlberg Investors VII, L.P., Kohlberg has made a significant equity investment in U.S. Risk and will reserve substantial additional equity capital to support growth initiatives. This will position U.S. Risk for accelerated growth and an enhanced value proposition for current and future customers and partners.

 

U.S. Risk holds 70% of the Trireme Group, alongside the Group's 30%. Trireme is the holding company for Lloyd's broker investments Oxford Insurance Brokers Limited and James Hampden International Insurance Brokers Limited, as well as the overseas Managing General Agencies Abraxas and Antarah, based in Zurich and Dubai respectively.

 

Hyperion Insurance Group Limited ("Hyperion")

 

On 4 July 2016 the Group received £7.31m from the realisation of its final 1.6% stake in Hyperion.

 

Dividend

 

The Board has recommended a dividend of 3.76 pence per share (£1.1m) for the financial year ending 31 January 2017, in recognition of the steady growth and consolidation of the investment portfolio.

 

This represents an increase of 10% over the dividend of 3.42p per share (£1m) paid in respect of the financial year ended 31 January 2016.  

 

The Board strikes a balance between utilising cash to invest in the existing portfolio and new opportunities with providing investors with a healthy but sustainable yield. It is the Board's aspiration to maintain a dividend of at least 3.76p per share for the years ending 31 January 2018 and 31 January 2019, subject to ongoing review and approval by the Board and the Shareholders.

 

Share Buy-Back

 

The Group undertook a low volume share buy-back on 27 June 2016, when it purchased 5,726 ordinary shares of 10 pence each in the Company ("Ordinary Shares") at a price of 153.78 pence per Ordinary Share. These shares are being held in Treasury.

 

The Board believes that these low volume buy-backs are a helpful stabilising mechanism during periods of market volatility and were particularly useful following the EU Referendum decision.

 

Business Strategy

 

The Group typically invests amounts of up to £3.5m and only takes minority equity positions in Financial Services intermediaries, normally acquiring between 15% and 45% of an investee company's total equity. Based on our current portfolio, the average investment has been held for approximately 8 years.

 

The Group usually requires its investee companies to adopt certain minority shareholder protections and appoint a director to its board.

 

Since 1990 the Group has generated an average NAV annual compound growth rate of 11.3%. Its successful track record can be attributed to a number of factors that include a robust investment process, management's considerable sector experience and a flexible approach to exit.

 

Cash Balance

 

The Group has an uncommitted cash balance of £7.9m available for new investment opportunities and for developing the existing portfolio.

 

Outlook and New Business Opportunities

 

The Group is in discussions with a number of potential investment opportunities, both in the UK and overseas. Overseas investments would fall within the Group's strategy to focus on geographic areas where the Group sees sufficient opportunity for business development in partnership with a London-based investor, coupled with a suitably developed regulatory and compliance environment.

 

During the Period the Group reviewed 45 opportunities, of which 69% were insurance-related, 7% wealth management, 18% fintech and platforms and 7% other financial services opportunities (recruitment, consultancies, etc). By way of comparison, during the full year to 31 January 2016 the Group reviewed 71 new enquiries.

 

The current economic outlook presents a mixed picture and the Group is prepared for continuing turbulence as the implications of the EU Referendum decision, concerns about the health of European banks and the forthcoming American elections impact upon the global economy.

 

It remains the Group's intention to continue to invest into the international financial services market, specifically in insurance intermediaries but more generally across the sector, a policy which historically has had little or no direct impact from the UK's membership of the European Union. Due to the global nature of many of its investee companies, approximately 64% of the portfolio's revenue stream originates from overseas, meaning that the Group is protected from sterling weakness. This, combined with the Group's lack of external debt and its strong current and future cash balances, means that it is fully poised to pursue and capitalise upon its tried and trusted investment approach.

 

"We remain focused on our proven, long-term approach to investment as we enter the second half and look forward to updating shareholders at the full year results."

 

Brian Marsh OBE, Chairman

17 October 2016

 

The information contained within this announcement is deemed to constitute inside information as stipulated under the Market Abuse Regulations (EU) No. 596/2014. Upon the publication of this announcement, this inside information is now considered to be in the public domain.

 

Investments

 

As at 31 July 2016 the Group's equity interests were as follows:

 

Asia Reinsurance Brokers Pte Limited

(www.arbrokers.asia)

In April 2016 the Group invested in Asia Reinsurance Brokers Pte Limited ("ARB"), the Singapore headquartered independent specialist reinsurance and insurance risk solutions provider. ARB was established in 2008, following a management buy-out of the business from AJ Gallagher, led by the CEO, Richard Austen.

Date of investment: April 2016

Equity stake: 20%

31 July 2016 valuation: £1,345,000

 

Bastion Reinsurance Brokerage (PTY) Limited

(www.bastionre.co.za)

In December 2014 the Group invested in Bastion Reinsurance Brokerage (PTY) Limited ("Bastion"), a start-up Reinsurance Broker based in South Africa. Established in May 2013 by its CEO and Chairman, Bastion specialises in the provision of reinsurance solutions over a number of complex issues, engaged by various insurance companies and managing general agents.

Date of investment: December 2014

Equity stake: 35%

31 July 2016 valuation: £100,000

 

Besso Insurance Group Limited

(www.besso.co.uk)

In February 1995 the Group assisted a specialist team departing from insurance broker Jardine Lloyd Thompson Group in establishing Besso Holdings Limited. The company specialises in insurance broking for the North American wholesale market and changed its name to Besso Insurance Group Limited ("Besso") in June 2011.

Date of investment: February 1995

Equity stake: 42.02%*

31 July 2016 valuation: £21,698,000

 

* This includes 6.57% that was being held by the Group on behalf of Besso.  Subsequent to the Period end, Besso invoked a share purchase transaction to buy back and cancel these shares, as such the 6.57% were stated at cost within the valuation and the Group's current shareholding is 37.94%.

 

Bulwark Investment Holdings (PTY) Limited

In April 2015 the Group, alongside its existing South African Partners, established a new venture, Bulwark Investment Holdings (PTY) Limited ("Bulwark"), a South African based holding company which establishes Managing General Agents in South Africa. To date Bulwark has established two new Managing General Agents: Preferred Liability Underwriting Managers (PTY) Limited and Mid-Market Risk Acceptances (PTY) Limited.

Date of investment: April 2015

Equity stake: 35%

31 July 2016 valuation: N/A

 

LEBC Holdings Limited

(www.lebc-group.com)

In April 2007 the Group invested in LEBC, an Independent Financial Advisory company providing services to individuals, corporates and partnerships, principally in employee benefits, investment and life product areas.

Date of investment: April 2007

Equity stake: 42.63%

31 July 2016 valuation: £11,522,000

 

MB Prestige Holdings PTY Limited

(www.mbinsurance.com.au)

In December 2013 the Group invested in MB Prestige Holdings PTY Ltd ("MB Group"), the parent Company of MB Insurance Group PTY a Managing General Agent, headquartered in Sydney, Australia. MB Group is recognised as a market leader in respect of prestige motor vehicle insurance in all mainland states of Australia.

Date of investment: December 2013

Equity stake: 40%

31 July 2016 valuation: £1,746,000

 

Nexus Underwriting Management Limited

(www.nexusunderwriting.com)

In August 2014 the Group invested in Nexus Underwriting Management Limited ("Nexus"), an independent specialty Managing General Agency, founded in 2008. Through its two operating subsidiaries, Nexus Underwriting Limited and Nexus CIFS Limited, Nexus specialises in Directors & Officers, Professional Indemnity, Financial Institutions, Accident & Health and Trade Credit Insurance.

Date of investment: August 2014

Equity stake: 11.94%

31 July 2016 valuation: £6,952,000

 

Property & Liability Underwriting Managers (PTY) Limited

(www.plumsa.co.za)

In June 2015 the Group completed an investment in Property And Liability Underwriting Managers (PTY) Limited ("PLUM"), a Managing General Agent based in Johannesburg, South Africa. PLUM specialises in large corporate property insurance risks in South Africa and is supported by both domestic South African insurance capacity and A-rated international reinsurance capacity.

Date of investment: June 2015

Equity stake: 20%

31 July 2016 valuation: £950,000

 

Sterling Insurance PTY Limited

(www.sterlinginsurance.com.au)

In June 2013, in a joint venture enterprise alongside Besso, (Neutral Bay Investments Limited) the Group invested in Sterling Insurance PTY Limited, an Australian specialist underwriting agency offering a range of insurance solutions within the Liability sector, specialising in niche markets including mining, construction and demolition.

Date of investment: June 2013

Equity stake: 19.7%

31 July 2016 valuation: £2,332,000

 

Summa Insurance Brokerage, S. L.

(www.grupo-summa.com)

In January 2005 the Group provided finance to a Madrid-based Spanish management team with the objective of acquiring and consolidating regional insurance brokers in Spain. Through acquisition Summa is able to achieve synergistic savings, economies of scale and greater collective bargaining thereby increasing overall value.

Date of investment: January 2005

Equity stake: 77.25%

31 July 2016 valuation: £3,735,000

 

Trireme Insurance Group Limited

(www.oxfordinsurancebrokers.co.uk)

(www.jhinternational.co.uk)

(www.abrax.ch)

In July 2010 the Group completed an investment in Trireme Insurance Group Limited (formerly known as US Risk (UK) Ltd), the parent company of Oxford Insurance Brokers Ltd and James Hampden International Insurance Brokers Ltd, London-based Lloyd's specialist international reinsurance and insurance intermediaries. Trireme Insurance Group Limited is also the parent company of Abraxas Insurance AG, a Swiss-based underwriting agency specialising in Directors & Officers Liability Insurance, Professional Liability Insurance, Insurance for Financial Institutions, Medical malpractice Insurance, Property Insurance and Event Insurance.

Date of investment: July 2010

Equity stake: 29.94%

31 July 2016 valuation: £2,529,000

 

Walsingham Motor Insurance Limited

(www.walsinghamunderwriting.com)

In December 2013 the Group invested in Walsingham Motor Insurance Limited ("WMIL"), a niche UK Motor Managing General Agency. WMIL was established in August 2012 and commenced trading in July 2013. In 2015 the Group acquired a further 10.5% equity, taking the current shareholding to 40.5%, and subsequently WMIL launched a £15m fleet facility with capacity from New India.

Date of investment: December 2013

Equity stake: 40.5%

31 July 2016 valuation: £200,000

 

These investments have been valued in accordance with the accounting policies on Investments set out in note 1 of the Consolidated Financial Statements.

 

Interim Consolidated Financial Statements

 

 

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

 

FOR THE PERIOD ENDED 31ST JULY 2016

 

 

Notes

Unaudited


Unaudited


Audited

 



6 months to


6 months to


Year to

 



31st July 2016


31st July 2015


31st January 2016

 



£'000

£'000


£'000

£'000


£'000

£'000

GAINS ON INVESTMENT










Realised gains on disposal of equity investments

(net of costs)

6

248



-



6


Unrealised gains on equity investment revaluation

4

4,003



3,778



10,269





4,251



3,778



10,275

INCOME










Dividends


381



273



639


Income from loans and receivables


676



821



1,619


Fees receivable


308



266



541





1,365



1,360



2,799

INCOME NET OF GAINS ON EQUITY INVESTMENT



5,616



5,138



13,074











Operating expenses



(1,169)



(947)



(2,354)











OPERATING PROFIT



4,447



4,191



10,720











Financial income


251



189



18


Financial expenses

5

(7)



(20)



(31)


Exchange movements


151



(219)



(12)





395



(50)



(25)

PROFIT ON ORDINARY ACTIVITIES BEFORE SHARE BASED PROVISION



4,842



4,141



10,695











Share based payment provision

10


(1)



(1)



(2)











PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION



4,841



4,140



10,693











Income tax expense

9


(827)



(782)



(1,993)











PROFIT ON ORDINARY ACTIVITIES AFTER TAXATION ATTRIBUTABLE TO EQUITY HOLDERS

7


£4,014



£3,358



£8,700











Earnings per share - basic and diluted (pence)

3


13.8p



11.5p



29.8p






 

 

The result for the period is wholly attributable to continuing activities.

 

 

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

 

AS AT 31ST JULY 2016

 

 


Unaudited


Unaudited


Audited


Notes

31st July 2016


31st July 2015


31st January 2016



£'000

£'000


£'000

£'000


£'000

£'000

ASSETS




















NON-CURRENT ASSETS










Property, plant and equipment


12



15



15


Investments - equity portfolio

4

53,109



44,585



54,051


Investments - treasury portfolio

5

5,114



3,545



3,482


Loans and receivables


15,159



13,634



14,660





73,394



61,779



72,208











CURRENT ASSETS










Trade and other receivables


2,807



6,085



3,054


Cash and cash equivalents


4,537



2,421



1,814





7,344



8,506



4,868

LIABILITIES




















NON-CURRENT LIABILITIES










Corporation tax provision


(1,136)



(60)



-


Deferred tax liabilities

9

(5,131)



(4,384)



(5,625)





(6,267)



(4,444)



(5,625)











CURRENT LIABILITIES










Trade and other payables


(442)



(252)



(588)


Corporation tax provision


(184)



(62)



(51)





(626)



(314)



(639)











NET ASSETS



£73,845



£65,527



£70,812





















CAPITAL AND RESERVES -










EQUITY




















Called up share capital



2,923



2,923



2,923

Share premium account



9,374



9,370



9,370

Fair value reserve



20,482



17,112



22,524

Reverse acquisition reserve



393



393



393

Capital redemption reserve



6



6



6

Capital contribution reserve



4



2



3

Retained earnings



40,663



35,721



35,593











SHAREHOLDERS' FUNDS - EQUITY

7


£73,845



£65,527



£70,812











Net asset value per share (pence)



253p



225p



243p

 

The Interim Consolidated Financial Statements were approved by the Board of Directors and authorised for issue on 17th October 2016

and signed on its behalf by:

 

 

 

 

 

B.P. Marsh & J.S. Newman

 

CONSOLIDATED STATEMENT OF CASH FLOWS

 

FOR THE PERIOD ENDED 31ST JULY 2016

 

 

 


Unaudited


Unaudited


 

Audited

 



31st July 2016


31st July 2015


31st January  2016

 



£'000


£'000


£'000

 

Cash (used by) / from operating activities







 

Income from loans to investees


676


821


1,619

 

Dividends


381


273


639

 

Fees received from investment activity


308


266


541

 

Operating expenses


(1,169)


(947)


(2,354)

 

Adjustment for non-cash share incentive plan costs


28


-


-

 

Increase in receivables


(321)


(37)


(189)

 

(Decrease) / increase in payables


(147)


(193)


142

 

Corporation tax paid in respect of prior year profits


(37)


-


(56)

 

Depreciation


3


3


7

 

Net cash (used by) / from operating activities


(278)


186


349

 








 

Net cash from investing activities







 

Purchase of property, plant and equipment


(1)


(1)


(4)

 

Purchase of equity investments (Note 4)


(3,479)


(2,160)


(5,209)

 

Purchase of treasury investments (Note 5)


(6,553)


(1,004)


(3,084)

 

Net proceeds from sale of equity investments (Note 4)


8,672


-


80

 

Corporation tax repaid on equity investment disposal


-


201


201

 

Net repayments of loans from investee companies


207


535


2,905

 

Net proceeds from sale of treasury investments (Note 5)


5,162


3,943


5,902

 

Net cash from investing activities


4,008


1,514


791

 








 

Net cash used by financing activities







Financial income


3


4


6

 

Financial expenses


-


-


-

 

Dividends paid


(1,000)


(802)


(802)

 

Payments made to repurchase company shares


(9)


-


(57)

 

Net cash used by financing activities


(1,006)


(798)


(853)

 








 

Change in cash and cash equivalents


2,724


902


287

 

Cash and cash equivalents at beginning of the period


1,814


1,531


1,531

 

Exchange movement*


(1)


(12)


(4)

 








 

Cash and cash equivalents at end of period†


£4,537


£2,421


£1,814

 





 

 

*All differences between the amounts stated in the Consolidated Statement of Cash Flows and the Consolidated Statement of Comprehensive Income are attributed to non-cash movements.

 

†The above cash and cash equivalents balance excludes treasury portfolio funds which are referred to in Note 5.  Including treasury portfolio balances of £5,114k, total available cash and treasury portfolio funds as at 31st July 2016 was £9,651k (as at 31st July 2015: £5,966k, including £3,545k of treasury portfolio funds and as at 31st January 2016: £5,296k, including £3,482k of treasury portfolio funds).

 

 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

 

FOR THE PERIOD ENDED 31ST JULY 2016

 

 

 

 


Unaudited

Unaudited

Audited



6 months to

6 months to

Year to



31st July 2016

31st July 2015

31st January 2016



£'000

£'000

£'000






Opening total equity


70,812

62,971

62,971

Profit for the period


4,014

3,358

8,700

Dividends paid


(1,000)

(802)

(802)

Repurchase of company shares


(9)

-

(57)

Share incentive plan


28

-

-

Total equity


£73,845

£65,527

£70,812

 

Refer to Note 7 for detailed analysis of the changes in the components of equity.

 

 

 

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

 

FOR THE PERIOD ENDED 31ST JULY 2016

 

 

1.      ACCOUNTING POLICIES

 

Basis of preparation of financial statements

 

 

 

Assessment as an investment entity

 

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.

 

 

 

Application and significant judgments

 

 

Basis of consolidation

 

 

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.

 

 

a)   rights arising from other contractual arrangements; and

b)   the Group's voting rights and potential voting rights.

 

 

 

 

Business Combinations

 

 

 

Employee services settled in equity instruments

 

Investments - equity portfolio

 

 

 

a)   at cost, unless there has been a significant round of new equity finance in which case the investment is valued at the price paid by an independent third party. Where subsequent events or changes to circumstances indicate that an impairment may have occurred, the carrying value is reduced to reflect the estimated extent of impairment;

b)   by reference to underlying funds under management;

c)   by applying appropriate multiples to the earnings and revenues of the investee company; or

d)   by reference to expected future cash flow from the investment where a realisation or flotation is imminent.

 

Both realised and unrealised gains and losses arising from changes in fair value are taken to the Consolidated Statement of Comprehensive Income for the period.  In the Consolidated Statement of Financial Position the unrealised gains and losses arising from changes in fair value are shown within a "fair value reserve" separate from retained earnings.  Transaction costs on acquisition or disposal of equity portfolio investments are expensed in the Consolidated Statement of Comprehensive Income.

 

Income from equity portfolio investments

 

 

a)   gross interest from loans, which is taken to the Consolidated Statement of Comprehensive Income on an accruals basis;

 

b)   dividends from equity investments are recognised in the Consolidated Statement of Comprehensive Income when the shareholders rights to receive payment have been established; and

 

c)   advisory fees from management services provided to investee companies, which are recognised on an accruals basis in accordance with the substance of the relevant investment advisory agreement.

 

Investments - treasury portfolio

 

All treasury portfolio investments are designated as "fair value through profit or loss" assets and are initially recognised at the fair value of the consideration.  They are measured at subsequent reporting dates at fair market value as determined from the valuation reports provided by the fund investment manager.

 

Both realised and unrealised gains and losses arising from changes in fair market value are taken to the Consolidated Statement of Comprehensive Income for the period.  In the Consolidated Statement of Financial Position the unrealised gains and losses arising from changes in fair value are shown within the retained earnings reserve as these investments are deemed as being easily convertible into cash.  Costs associated with the management of these investments are expensed in the Consolidated Statement of Comprehensive Income.

 

Income from treasury portfolio investments

 

Income from treasury portfolio investments comprises of dividends receivable which are either directly reinvested into the funds or received as cash. 

 

Property, plant and equipment

 

Property, plant and equipment are stated at cost less depreciation.  Depreciation is provided at rates calculated to write off the property, plant and equipment cost, less their estimated residual value, over their expected useful lives on the following bases:

 

     Furniture & equipment - 5 years

     Leasehold fixtures and fittings - over the life of the lease

 

Foreign currencies

 

Monetary assets and liabilities denominated in foreign currencies at the reporting period are translated at the exchange rate ruling at the reporting period.

 

Transactions in foreign currencies are translated into sterling at the rate ruling at the date of the transaction.

 

Exchange gains and losses are recognised in the Consolidated Statement of Comprehensive Income.

 

Taxation

 

The tax expense represents the sum of the tax currently payable and any deferred tax. The tax currently payable is based on the estimated taxable profit for the year. Taxable profit differs from net profit as reported in the Consolidated Statement of Comprehensive Income because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Group's liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the date of the Consolidated Statement of Financial Position.

 

Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and of liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and it is accounted for using the liability method.  Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised.  Such assets and liabilities are not recognised if the temporary differences arise from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.

 

Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future.

 

The carrying amount of deferred tax assets is reviewed at each date of the Consolidated Statement of Financial Position and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

 

Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset realised.  Deferred tax is charged or credited to the Consolidated Statement of Comprehensive Income, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity.

 

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current assets and liabilities on a net basis.

 

Bonus provision

 

There is no contractual obligation on the Group to pay bonuses to employees and as such no provision has been made in the operating expenses within the Consolidated Statement of Comprehensive Income for the period to 31st July 2016 (as was also the case with the interims to 31st July 2015).

 

 

2.       SEGMENTAL REPORTING

 

The Group operates in one business segment; the provision of consultancy services to as well as making and trading investments in financial services businesses.

 

The Group identifies its reportable operating segments based on the geographical location in which each of its investments is incorporated and primarily operates.  For management purposes, the Group is organised and reports its performance by two geographic segments: UK and Non-UK.  The UK segment includes the Channel Islands.

 

If material to the Group overall (where the segment revenues, reported profit or loss or combined assets exceed the quantitative thresholds prescribed by IFRS 8: Operating Segments ("IFRS 8")), the segment information is reported separately. 

 

The Group allocates revenues, expenses, assets and liabilities to the operating segment where directly attributable to that segment.  All indirect items are apportioned based on the percentage proportion of revenue that the operating segment contributes to the total Group revenue (excluding any unrealised gains and losses on the Group's non-current investments).

 

Each reportable segment derives its revenues from three main sources from equity portfolio investments as described in further detail in Note 1 under 'Income from equity portfolio investments' and also from treasury portfolio investments as described in Note 1 under 'Income from treasury portfolio investments'.

 

All reportable segments derive their revenues entirely from external clients and there are no inter-segment sales.

 

Geographic segment 1:

UK

Geographic segment 2:

Non-UK

Group









Unaudited

Unaudited

Unaudited

Unaudited

Unaudited

Unaudited


6 months to 31st July

6 months to 31st July

6 months to 31st July

6 months to 31st July

6 months to 31st July

6 months to 31st July


2016

2015

2016

2015

2016

2015


£'000

£'000

£'000

£'000

£'000

£'000

Income net of losses on investment

4,669

5,821

947

(683)

5,616

5,138

Operating expenses

(825)

(701)

(344)

(246)

(1,169)

(947)

Segment operating profit / (loss)

3,844

5,120

603

(929)

4,447

4,191








Financial income

177

140

74

49

251

189

Financial expenses

(5)

(15)

(2)

(5)

(7)

(20)

Exchange movements

1

(10)

150

(209)

151

(219)

Share based payment provision

(1)

(1)

-

-

(1)

(1)

Profit / (loss) before tax

4,016

5,234

825

(1,094)

4,841

4,140

Income tax expense

(662)

(1,001)

(165)

219

(827)

(782)

Profit / (loss) for the period

£3,354

£4,233

£660

£(875)

£4,014

£3,358

 

Included within the operating income reported above are the following amounts requiring separate disclosure owing to the fact that they are derived from a single investee company and the total revenues attributable to that investee company are 10% or more of the total realised income generated by the Group during the period:

 

Total income attributable to the investee company

(£'000)

% of total realised operating income

Reportable geographic segment









Unaudited

Unaudited

Unaudited

Unaudited

Unaudited

Unaudited


6 months to 31st July

6 months to 31st July

6 months to 31st July

6 months to 31st July

6 months to 31st July

6 months to 31st July


2016

2015

2016

2015

2016

2015

Investee Company







LEBC Holdings Limited

329

216

24

16

1

1

Besso Insurance Group Limited

305

331

22

24

1

1

Hyperion Insurance Group Limited

225

225

16

17

1

1

Trireme Insurance Group Limited

197

204

14

15

1&2

1&2

 

 

Geographic segment 1:

UK

Geographic segment 2:

Non-UK

Group









Unaudited

Unaudited

Unaudited

Unaudited

Unaudited

Unaudited


6 months to 31st July

6 months to 31st July

6 months to 31st July

6 months to 31st July

6 months to 31st July

6 months to 31st July


2016

2015

2016

2015

2016

2015


£'000

£'000

£'000

£'000

£'000

£'000








Non-current assets







Property, plant and equipment

10

13

2

2

12

15

Investments - equity portfolio

42,901

37,281

10,208

7,304

53,109

44,585

Investments - treasury portfolio

5,114

3,545

-

-

5,114

3,545

Loans and receivables

11,423

10,384

3,736

3,250

15,159

13,634


59,448

51,223

13,946

10,556

73,394

61,779

Current assets







Trade and other receivables

2,262

5,615

545

470

2,807

6,085

Cash and cash equivalents

4,537

2,421

-

-

4,537

2,421

Deferred tax assets

-

-

-

207

-

207


6,799

8,036

545

677

7,344

8,713








Total assets

66,247

59,259

14,491

11,233

80,738

70,492

Non-current liabilities







Corporation tax provision

(1,136)

(60)

-

-

(1,136)

(60)

Deferred tax liabilities

(5,022)

(4,591)

(109)

-

(5,131)

(4,591)


(6,158)

(4,651)

(109)

-

(6,267)

(4,651)

Current liabilities







Trade and other payables

(442)

(252)

-

-

(442)

(252)

Corporation tax provision

(184)

(62)

-

-

(184)

(62)


(626)

(314)

-

-

(626)

(314)








Total liabilities

(6,784)

(4,965)

(109)

-

(6,893)

(4,965)








Net assets

£54,294

£14,382

£11,233

£73,845

£65,527








 

 

Geographic segment 1:

UK

Geographic segment 2:

Non-UK

Group









Unaudited

Unaudited

Unaudited

Unaudited

Unaudited

Unaudited


6 months to 31st July

6 months to 31st July

6 months to 31st July

6 months to 31st July

6 months to 31st July

6 months to 31st July


2016

2015

2016

2015

2016

2015


£'000

£'000

£'000

£'000

£'000

£'000















Additions to property, plant and equipment

 

1

 

1

 

-

 

-

 

1

 

1








Depreciation of property, plant and equipment

 

2

 

2

 

1

 

1

 

3

 

3















Cash flow arising from:







Operating activities

(272)

134

(6)

52

(278)

186

Investing activities

5,762

2,122

(1,754)

(608)

4,008

1,514

Financing activities

(1,006)

(798)

-

-

(1,006)

(798)

Change in cash and cash equivalents

 

4,484

 

1,458

 

(1,760)

 

(556)

 

2,724

 

902








 

Geographic segment 1:

UK

Geographic segment 2:

Non-UK

Group






Audited

Audited

Audited


31st January

31st January

31st January


2016

2016

2016


£'000

£'000

£'000





Operating income

12,588

486

13,074

Operating expenses

(1,740)

(614)

(2,354)

Segment operating profit / (loss)

10,848

(128)

10,720





Financial income

13

5

18

Financial expenses

(23)

(8)

(31)

Exchange movements

(6)

(6)

(12)

Share based payment provision

(2)

-

(2)

Profit / (loss) before tax

10,830

(137)

10,693

Income tax

(2,020)

27

(1,993)

Profit / (loss) for the year

£8,810

£(110)

£8,700

 

Included within the operating income reported above are the following amounts requiring separate disclosure owing to the fact that they are derived from a single investee company and the total revenues attributable to that investee company are 10% or more of the total realised income generated by the Group during the period:

 

Total income attributable to the investee company

(£'000)

% of total realised operating income

Reportable geographic segment






Audited

Audited

Audited


31st January

31st January

31st January


2016

2016

2016

Investee Company




Besso Insurance Group Limited

609

22

1

Hyperion Insurance Group Limited

453

16

1

Trireme Insurance Group Limited

407

15

1&2

LEBC Holdings Limited

351

13

1

 

 

Geographic segment 1:

UK

Geographic segment 2:

Non-UK

Group






Audited

Audited

Audited


31st January

31st January

31st January


2016

2016

2016


£'000

£'000

£'000

Non-current assets




Property, plant and equipment

13

2

15

Investments - equity portfolio

45,956

8,095

54,051

Investments - treasury portfolio

3,482

-

3,482

Loans and receivables

11,129

3,531

14,660


60,580

11,628

72,208

Current assets




Trade and other receivables

2,705

349

3,054

Cash and cash equivalents

1,814

-

1,814

Deferred tax assets

-

49

49


4,519

398

4,917





Total assets

65,099

12,026

77,125

Non-current liabilities




Deferred tax liabilities

(5,674)

-

(5,674)


(5,674)

-

(5,674)

Current liabilities




Trade and other payables

(588)

-

(588)

Corporation tax provision

(51)

-

(51)


(639)

-

(639)





Total liabilities

(6,313)

-

(6,313)





Net assets

£58,786

£12,026

£70,812

 




Additions to property, plant and equipment

3

1

4





Depreciation of property, plant and equipment

6

1

7









Cash flow arising from:




Operating activities

366

(17)

349

Investing activities

1,283

(492)

791

Financing activities

(853)

-

(853)

Change in cash and cash equivalents

796

(509)

287

 

 

3.       EARNINGS PER SHARE FROM CONTINUING OPERATIONS ATTRIBUTABLE TO THE EQUITY SHAREHOLDERS

 


Unaudited


Unaudited


Audited



31st July 2016


31st July 2015


31st January 2016



£'000


£'000


£'000

Earnings







Earnings for the period


4,014


3,358


8,700

Earnings for the purposes of basic and diluted earnings per share being net profit attributable to equity shareholders


4,014


3,358


 

 

8,700

Earnings per share - basic and diluted


 

 

13.8p


 

 

11.5p


 

 

29.8p








Number of shares


Number


Number


Number

Weighted average number of ordinary shares for the purposes of basic earnings per share


 

 

29,152,684


 

 

29,167,000


 

 

29,165,774








Number of dilutive shares under option


                           Nil


                           Nil


                       

Nil








Weighted average number of ordinary shares for the purposes of dilutive earnings per share


 

 

29,152,684


 

 

29,167,000


 

 

29,165,774

 

 

During the period the Company paid a total of £8,805 (interim 6 months to 31st July 2015: Nil and full year to 31st January 2016: £56,414) in order to repurchase 5,726 (interim 6 months to 31st July 2015: Nil and full year to 31st January 2016: 38,612) ordinary shares at an average price of 154 pence per share (interim 6 months to 31st July 2015: Nil and full year to 31st January 2016: 146 pence per share).

 

Distributable reserves have been reduced by £8,805 as a result (interim 6 months to 31st July 2015: no reduction and full year to 31st January 2016: reduction of £56,414).

                                                                                                                                                      

          Ordinary shares held by the Company in Treasury

 

Movement of ordinary shares held in Treasury:

Unaudited

Unaudited

Audited


31st July 2016

31st July 2015

31st January 2016


Number

Number

Number





Opening total ordinary shares held in Treasury

97,652

59,040

59,040





Ordinary shares repurchased into Treasury during the period

5,726

-

38,612





Ordinary shares transferred to The B.P. Marsh SIP Trust during the period

(97,652)

-

-





Total ordinary shares held in Treasury at period end

5,726

59,040

97,652





 

The Treasury shares do not have voting or dividend rights and have therefore been excluded for the purposes of calculating earnings per share.

 

 

4.       NON-CURRENT INVESTMENTS - EQUITY PORTFOLIO

 

Group Investments


Unaudited


Unaudited


Audited



31st July 2016


31st July 2015


31st January 2016



£'000


£'000


£'000








At valuation







At 1st February


54,051


38,647


38,647

Additions


3,479


2,160


5,209

Disposals


(8,424)


-


(74)

Movement in valuation


4,003


3,778


10,269








At period end


£53,109


£44,585


£54,051








At cost







At 1st February


25,951


20,816


20,816

Additions


3,479


2,160


5,209

Disposals


(1,926)


-


(74)








At period end


£27,504


£22,976


£25,951








 

The principal additions relate to the following transactions in the period:

 

On 20th April 2016 the Group acquired a 20% shareholding in Asia Reinsurance Brokers Pte Limited ("ARB"), a Singapore headquartered independent specialist reinsurance and insurance risk solutions provider, for a total consideration of SGD 2,398,424 (£1,268,336).  The Group may increase its shareholding in ARB to 25% for an additional cash consideration of SGD 500,000 dependent on the performance of ARB in its financial year ending 31st December 2017.

 

On 14th June 2016 the Group acquired a further 8.03% equity stake in LEBC Holdings Limited ("LEBC") for a total consideration of £1,911,120.  The acquisition increased the Group's equity stake in LEBC to 42.63% as at 31st July 2016.



 

During the period, Property and Liability Underwriting Managers (PTY) Limited ("PLUM") achieved its target earnings before interest, tax, depreciation and amortisation ("EBITDA") of ZAR 8,299,927 over the first year of the Group's investment.  This EBITDA target had been agreed upon at initial investment in June 2015 and provided for further consideration of £300,000 to become payable in order to maintain the Group's equity stake in PLUM at 20%.  On 9th June 2016 the Group paid £150,000 of this consideration and as at 31st July 2016 the Group had also committed to paying the remaining £150,000, bringing the total consideration payable to £606,463 as at 31st July 2016.

 

The principal disposals relate to the following transactions in the period:

 

On 15th April 2016 the Group sold its entire 49% stake in The Broucour Group Limited ("Broucour") to the founder and managing director, Mr Rupert Cattell, for consideration of up to £341,000, which equates to the Group's 31st January 2016 valuation of its investment in Broucour (Note 6).  The outstanding loan (£329,834 at the date of sale and £304,835 as at 31st July 2016) will be repaid in full in instalments.

 

On 4th May 2016 the Group sold its entire 1.32% stake (948,830 ordinary shares) in Randall & Quilter Investment Holdings Limited ("R&Q") to Brian Marsh Enterprises Limited, a company owned by Mr B.P. Marsh, the Chairman and majority shareholder of the Company.  The total consideration of £1,019,992 represents a realised gain of £246,992 on the investment when compared to the carrying value of £773,000 as at 31st January 2016 (Note 6).

 

On 30th June 2016 the Group sold its remaining 1.6% equity stake in Hyperion Insurance Group Limited ("Hyperion") for consideration of £7,310,576.  This consideration represents a realised gain of £576 when compared to the carrying value of £7,310,000 as at 31st January 2016 (Note 6).  The Group retains a loan investment in Hyperion and as at 31st July 2016 the balance of this loan amounted to £6,037,361 (repayable on 3rd October 2017).

 

The unquoted investee companies, which are registered in England except Summa Insurance Brokerage, S.L. (Spain), MB Prestige Holdings PTY Limited (Australia), Bastion Reinsurance Brokerage (PTY) Limited (South Africa), Bulwark Investment Holdings (PTY) Limited (South Africa), Property and Liability Underwriting Managers (PTY) Limited (South Africa) and Asia Reinsurance Brokers Pte Limited (Singapore) are as follows:

 

 


% holding

Date

Aggregate

Post tax


 


of share

information

capital and

profit/(loss)


 

Name of company

capital

available to

reserves

for the year

Principal activity

 




£

£








Asia Reinsurance Brokers Pte Limited

20.00

31.12.15

1,772,106

220,331

Specialist reinsurance broker







Bastion Reinsurance Brokerage (PTY) Limited

35.00

31.12.15

(263,528)

(289,315)

Reinsurance broker







 

Besso Insurance Group Limited

 35.45*

   6.57*

31.12.15

4,737,544

265,114

Insurance intermediary

 







 

Bulwark Investment Holdings (PTY) Limited

35.00

31.12.15

(82,040)

(82,084)

Holding company for South African Managing General Agents

 







 

LEBC Holdings Limited

42.63

30.09.15

1,171,692

1,359,232

Independent financial advisor company

 







 

MB Prestige Holdings PTY Limited

40.00

31.12.15

1,021,966

315,107

Specialist Australian Motor Managing General Agency

 







 

Neutral Bay Investments Limited

49.90

31.03.15

3,905,577

190,163

Investment holding company

 







 

Nexus Underwriting Management Limited

11.94

31.12.15

7,975,270

1,687,050

Specialist Managing General Agency

 







 

 

% holding

Date

Aggregate

Post tax



of share

information

capital and

profit/(loss)


Name of company

capital

available to

reserves

for the year

Principal activity




£

£








Property and Liability Underwriting Managers (PTY) Limited

20.00

31.12.15

(181,225)

(152,042)

Specialist South African Property Managing General Agency







Summa Insurance Brokerage, S.L.

77.25

31.12.14

8,358,239

84,660

Consolidator of regional insurance brokers







Trireme Insurance Group Limited

29.94

31.12.15

(22,105)

(566,961)

Holding company for insurance intermediaries







Walsingham Motor Insurance Limited†

40.50

30.09.15

(1,470,124)

(586,214)

Specialist
UK Motor Managing General Agency







 

*The Group's economic participation in Besso Insurance Group Limited ("Besso") as at 31st January 2016 was 37.94%.  An additional 7.03% acquired and held by the Group during the year to 31st January 2016 on behalf of Besso was a capped participation and was stated within the Group's valuation of Besso at cost (£1,581,147).  Besso issued 7.03% (pre-dilution) of new shares to its management team in April 2016.  This diluted the Group's economic participation in Besso to 35.45% and 6.57% (total 42.02%) as at 31st July 2016.  In September 2016 Besso acquired the 6.57% shares from the Group at cost, and immediately cancelled them, such that the current holding has returned to 37.94%.

 

†By virtue of its interest in Walsingham Motor Insurance Limited, the Group also has a 50% equity holding in Walsingham Holdings Limited, a company incorporated in the year to 31st January 2016, for £1 consideration and which remains dormant at 31st July 2016.

 

The aggregate capital and reserves and profit/(loss) for the year shown above are extracted from the relevant local GAAP accounts of the investee companies.

 

 

5.       NON-CURRENT INVESTMENTS - TREASURY PORTFOLIO

 

Group


Unaudited


Unaudited


Audited

At valuation


31st July

2016


31st July

2015


31st January 2016



£'000


£'000


£'000








Market value at 1st February


3,482


6,319


6,319

Additions at cost


6,553


1,004


3,084

Disposals


(5,162)


(3,943)


(5,902)

Change in value in the year


241


165


(19)

 

Market value at period end


 

£5,114


 

£3,545


 

£3,482








Investment fund split:














GAM London Limited


5,114


2,942


3,377

Banque Heritage SA


-


603


105

 

Total


 

£5,114


 

£3,545


 

£3,482








 

The treasury portfolio comprises of investment funds managed and valued by the Group's investment manager, GAM London Limited (and also previously Banque Heritage SA until July 2016).  All investments in securities are included at year end market value.

 

The initial investment into the funds was made following the partial realisation of the Group's investment in Hyperion Insurance Group Limited in the year to 31st January 2014.

 

The purpose of the funds is to hold (and grow) the Group's surplus cash until such time that suitable investment opportunities arise. 

 

The funds are risk bearing and therefore their value not only can increase, but also has the potential to fall below the amount initially invested by the Group.  However, the performance of each fund is monitored on a regular basis and the appropriate action is taken if there is a prolonged period of poor performance.

 

Investment management costs of £7,246 (interim 6 months to 31st July 2015: £20,190 and full year to 31st January 2016: £31,257) were charged to the Consolidated Statement of Comprehensive Income during the period.

 

 

6.       REALISED GAINS ON DISPOSAL OF INVESTMENTS (NET OF COSTS)

 

The realised gains on disposal of investments comprises of a net gain of £247,568.  £246,992 of this net gain is in respect of the Group's disposal of its entire 1.32% investment in Randall & Quilter Investment Holdings Limited ("R&Q") at its carrying value of £773,000 for a consideration of £1,019,992.  The remaining net gain of £576 is in respect of the Group's disposal of its remaining 1.6% investment in Hyperion Insurance Group Limited ("Hyperion") at its carrying value of £7,310,000 for a consideration of £7,310,576 (see Note 4 for further details of these disposals).

 

In addition, during the period the Group disposed of its investment in The Broucour Group Limited ("Broucour") at its carrying value of £341,000 (Note 4). As a result of this disposal being made at carrying value, no gain or loss was included in the Consolidated Statement of Comprehensive Income for the period.

 

In aggregate, the above disposals resulted in a net release to Retained Earnings from the Fair Value Reserve of £5,304,225, comprising of a £6,605,942 release of fair value which has been reduced by tax payable on disposal of £1,301,717 (see Note 7).

 

The amount included in realised gains on disposal of investments for the 6 months to 31st July 2015 was £Nil and for the 12 months to 31st January 2016 was £6,141.  The realised gains on disposal of investments for the 12 months to 31st January 2016 were in respect of capital distributions made by R&Q.

 

 

7.       RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS

 











Share


Reverse

Capital

Capital




Share

premium

Fair value

acquisition

redemption

contribution

Retained



capital

account

reserve

reserve

reserve

reserve

earnings

Total


(£'000)

(£'000)

(£'000)

(£'000)

(£'000)

(£'000)

(£'000)

(£'000)










At 31st January 2016

2,923

9,370

22,524

393

6

3

35,593

70,812










Profit for the period

-

-

3,262

-

-

-

752

4,014










Net transfers on sale of investments

-

-

(5,304)

-

-

-

5,304

-










Dividends paid

-

-

-

-

-

-

 (1,000)

(1,000)










Repurchase of Company shares

-

-

-

-

-

-

(9)

(9)










Share based payments (Note 10)

-

-

-

-

-

1

(1)

-










Share Incentive Plan

-

4

-

-

-

-

24

28










At 31st July 2016

£2,923

£9,374

£20,482

£393

£6

£4

£40,663

£73,845










 

 

8.       LOAN AND EQUITY COMMITMENTS

 

On 22nd July 2010 (as varied on 8th August 2012, 29th May 2014 and 23rd September 2014) the Group entered into an agreement to provide a loan facility of £2,419,515 to Trireme Insurance Group Limited ("Trireme"), an investee company.  As at 31st July 2016 the total loan drawn down amounted to £2,155,113, leaving a remaining undrawn facility of £24,402.

 

On 15th April 2015 the Group entered into an agreement to provide a loan facility of £500,000 to Bulwark Investment Holdings (PTY) Limited, an investee company.  During the period this facility was increased to £600,000 and as at 31st July 2016 £585,000 of this facility had been drawn down, leaving a remaining undrawn facility of £15,000.  Since 31st July 2016 this facility has been increased by a further £65,000 to £665,000 and at the date of this report a total of £615,000 has been drawn down, leaving a remaining undrawn facility of £50,000.

 

 

9.       DEFERRED TAX AND CONTINGENT LIABILITIES

 

The Directors estimate that, if the Group were to dispose of all its investments at the amount stated in the Consolidated Statement of Financial Position, £5,131,000 (interim 6 months to 31st July 2015: £4,384,000 and full year to 31st January 2016: £5,625,000) of tax on capital gains would become payable by the Group at the current corporation tax rate of 20%.  This amount is fully provided for in the financial statements.

 

As at 31st July 2016 the enacted tax rate was 19% from April 2017.  If 19% is used to calculate the deferred tax liability it would be reduced by some £257,000.

 

 

10.     SHARE BASED PAYMENT ARRANGEMENTS

 

During the year to 31st January 2015, B.P. Marsh & Partners Plc entered into joint share ownership agreements ("the Agreements") with certain employees and directors.  The details of the arrangements are described in the following table:

 

Nature of the arrangement

Share appreciation rights (joint beneficial ownership)

 

 

Date of grant

6th November 2014

Number of instruments granted

1,421,130

Exercise price (pence)

140.00

Share price (market value) at grant (pence)

 

138.00

Hurdle rate

3.5% p.a. (simple)

Vesting period (years)

3 years

Vesting conditions

There are no performance conditions other than the recipient remaining an employee throughout the vesting period.  The awards vest after 3 years or earlier resulting from either:

 

a)   a change of control resulting from a person, other than a member of the Company, obtaining control of the Company either (i) as a result of a making a Takeover Offer; (ii) pursuant to a Scheme of Arrangement; or (iii) in consequence of a Compulsory Acquisition); or

 

b)   a person becoming bound or entitled to acquire shares in the Company pursuant to sections 974 to 991 of the Companies Act 2006; or

 

c)   a winding up.

 

If the employee is a bad leaver the co-owner of the jointly-owned share can buy out the employee's interest for 1p

Expected volatility

20%

Risk free rate

1%

 

 

Nature of the arrangement

Share appreciation rights (joint beneficial ownership)

 

 

Expected dividends expressed as a dividend yield

2%

Settlement

Cash settled on sale of shares

% expected to vest (based upon leavers)

85%

Number expected to vest

1,207,960

Valuation model

Black-Scholes

Black-Scholes value (pence)

15.00

Deduction for carry charge (pence)

14.50

Fair value per granted instrument (pence)

0.50

Charge for period ended 31st July 2016

£1,007

 

On 6th November 2014 1,421,130 10p Ordinary shares in the Company were transferred into joint beneficial ownership for 6 employees (4 of whom are directors) under the terms of joint share ownership agreements.  No consideration was paid by the employees for their interests in the jointly-owned shares.

 

Under the terms of the Agreements, the employees and directors enjoy the growth in value of the shares above a threshold price of £1.40 per share plus an annual carrying charge of 3.5% per annum (simple interest) to the market value at the date of grant (£1.38 per share).

 

The employees and directors received an interest in jointly owned shares and a Joint Share Ownership Plan ("JSOP") is not an option, however the convention for JSOPs is to treat them as if they were options.  The value of the employee's interest for accounting purposes is calculated using option pricing theory (Black-Scholes Mathematics).

 

The risk free rates are based on the yield on UK Government Gilts of a term consistent with the assumed option life.

 

No jointly-owned shares were sold or forfeited during the period.  The number of jointly-owned shares expected to vest has therefore not been adjusted.  In accordance with IFRS 2: Share-based Payment, the fair value of the expected cost of the award (measured at the date of grant) has been spread over the three year vesting period.

 

 

Analyst Briefing

 

An analyst presentation, hosted by the Executive Directors, will be held on Tuesday 18 June 2016 at 10:00 a.m. at the offices of B.P. Marsh & Partners Plc, 2nd Floor, 36 Broadway, London SW1H 0BH.

 

Please contact David Ison at Redleaf Communications on 020 7382 4732 or bpmarsh@redleafpr.com if you wish to attend.

 

 - Ends -

For further information:

 

B.P. Marsh & Partners Plc

www.bpmarsh.co.uk

Brian Marsh OBE / Camilla Kenyon

+44 (0)20 7233 3112

 

Nominated Adviser & Broker

Panmure Gordon


Adam James / Charles Leigh-Pemberton / Atholl Tweedie

+44 (0)20 7886 2500

 

Financial PR

Redleaf Communications

 

 

bpmarsh@redleafpr.com

Emma Kane / David Ison

+44 (0)20 7382 4732

 

Notes to Editors:

 

About B.P. Marsh & Partners Plc

B.P. Marsh's current portfolio contains twelve companies. More detailed descriptions of the portfolio can be found at www.bpmarsh.co.uk.

 

Since formation over 25 years ago, the Company has assembled a management team with considerable experience both in the financial services sector and in managing private equity investments. Many of the directors have worked with each other in previous roles, and all have worked with each other for at least five years.

 

Prior to Brian Marsh's involvement in the Company, he spent many years in insurance broking and underwriting in Lloyd's as well as the London and overseas market. He has over 30 years' experience in building, buying and selling financial services businesses, particularly in the insurance sector.

 

Alice Foulk joined B.P. Marsh in September 2011 having started her career at a leading Life Assurance company. In 2014 she took over as Executive Assistant to the Chairman, running the Chairman's Office and established herself as a central part of the management team.

 

In February 2015 she was appointed as a Director of B.P. Marsh and a member of the Investment Committee. In January 2016 Alice was appointed Managing Director of B.P. Marsh.

 

In her position as Managing Director, Alice is responsible for the overall performance of the Company and monitoring the Company's overall progress towards achieving the objectives and goals of the Company, as set by the Board.

 

Dan Topping is the Chief Investment Officer of B. P. Marsh, having been appointed as a Director in 2011. He joined the Company in February 2007, following two years at an independent London accountancy practice. Dan is the Senior Executive with overall responsibility for the portfolio and investment strategy of B.P. Marsh.

 

Dan graduated from the University of Durham in 2005 and is a member of the Securities and Investment Institute and the Institute of Chartered Secretaries and Administrators.

 

Dan is a standing member of the B.P. Marsh Investment and Valuation Committees and currently serves as a Board Director across the portfolio.

 

Camilla Kenyon was appointed as Head of Investor Relations at B.P. Marsh in February 2009, having four years' prior experience with the Company. She was appointed to the main board in 2011.  Camilla is Chair of the New Business Committee evaluating new investment opportunities. She has a number of nominee directorships over two investee companies and is a standing member of the Investment Committee. She is a Member of the Investor Relations Society.

 

Jonathan Newman is a Chartered Management Accountant and is the Group Director of Finance and has over 19 years' experience in the financial services industry. Jon graduated from the University of Sheffield with an honours degree in Business Studies and joined the Group in November 1999, following two years at Euler Trade Indemnity and two years at a Chartered Accountants. Jon is a Member of the Chartered Global Management Accountants, the Chartered Management Accountants and the Chartered Institute of Securities and Investment.

 

Jon was appointed a Director of B.P. Marsh & Company Limited in September 2001, and Group Finance Director in December 2003 and was instrumental in the admission of the Group to AIM in February 2006. Jon is a member of the B.P. Marsh Investment and Valuation Committees and currently serves as a Board Director for Walsingham Motor Insurance Limited, and provides senior financial support and advice to all companies within the Group's portfolio as well as evaluating new investment opportunities.

 

 -ends-


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