Final Results

RNS Number : 0207W

B.P. Marsh & Partners PLC

05 June 2008

 



Date:                            5th June 2008

On behalf of:                B. P. Marsh & Partners Plc ('B. P. Marsh' or 'the Group')

Embargoed until:          0700hrs

B. P. Marsh & Partners Plc

Final Results

B. P. Marsh & Partners Plc (AIM: BPM), a niche venture capital provider to early stage financial services businesses, announces its audited Group final results for the year to 31st January 2008.

Chairman's Statement

I am pleased to present the final audited results for B. P. Marsh & Partners Plc (the 'Group'or B.P. Marsh) and its consolidated statements for the year ended 31st January 2008.

Overview

During the financial year ended 31st January 2008, the Group made the following investments:

• The Group acquired a 25% shareholding in JMD Specialist Insurance Services Group Limited ('JMD') for £0.6m and agreed to provide a further £0.25m in loans to develop the business further. JMD is an accelerated premium collection service based in the City of London and provides a unique approach to the acceleration of insurance cash flow as well as effective balance sheet management;

• The Group acquired a 22.5% shareholding in LEBC Holdings Limited ('LEBC') for a consideration of £2.07m. LEBC is an Independent Financial Advisor established in 2000 with 11 branches around the UK and 56 advisors which provides services to individuals, corporates and partnerships, principally in employee benefits, investment and life product areas;

• The Group participated in an additional £5.5m rights issue for Hyperion Insurance Group Limited to further develop the business, contributing its pro-rata share at £1.55m;

• The Group lent Summa Insurance Brokerage S.L. ('Summa'), a Madrid based consolidator of regional brokerages in Spain, a further €1.6m, part of an agreed €2m loan facility, to fund acquisitions of regional brokers. In addition, the Group agreed to invest a further €4m alongside €4m from a well respected private Spanish investor to facilitate the next stage of Summa's expansion. The Group's €4m of equity is expected to be invested in three tranches, with the first tranche invested just before the year end. B.P. Marsh also converted €1m of loans currently outstanding. As a result of this new investment, B.P. Marsh has increased its stake from 35% to 48.625%

Overall, the investments within the Group’s portfolio made steady progress during the year and performed in line with market expectations. Hyperion Insurance was listed as the 90^th in the Sunday Times Deloitte Buyout Track 100 league table and secured a major inward investment after the year-end, underpinning our investment valuation in that company.

 

During the year we actively reviewed a number of prospective new investments. Three potential investments were brought to an advanced stage of negotiation and two of these, Amberglobe Limited and Trillium Partners Limited were completed after the year-end.

 

The Group also received the final $0.9m of funds withheld in escrow from the sale of Carpenter Moore Insurance Services, Inc as expected.

 

Financial Performance

At 31st January 2008, the net asset value of the Group was £45.6m (2007: £40.6m) including a provision for deferred tax. This equates to an increase in net asset value of 12.3% (2007: 13.2%).

The Directors are satisfied that the Group delivered an annual compound growth rate of 15.2% in Group net asset value after running costs, realisations, losses, distributions and deferred tax since 1990.

Based upon the above figures, the Group's net asset value per share as at 31st January 2008 was 156p (2007: 139p).

The consolidated profit on ordinary activities after tax for the year was £4.8m (2007: £4.5m).

Post year-end investments

The Group has made two investments post the year-end as follows:

• The Group acquired a 35% shareholding in Amberglobe Limited ('Amberglobe') for £0.07m and has agreed to provide a further £0.25m in loans to further develop the business. Amberglobe is a business that acts as an agent for the sellers of SME businesses in the sub £3m price bracket, such as childcare centres, care homes, corner shops, restaurants, pubs and post offices;

• The Group acquired a 25% shareholding in Trillium Partners Limited ('Trillium') for an initial consideration of £0.5m and has agreed to provide a further £0.75m in loans to further develop the business. Trillium is an independent financial advisory firm serving the European Media and Information sector. Founded in 2004, Trillium has advised corporations, private equity firms and high net worth individuals in relation to a broad range of assignments including acquisitions, disposals, mergers and fund raisings.

Post year-end realisations

The Group exited its investment in Principal Investment Holdings following its acquisition by the Sanlam Group for £7.25m and also received a preferred dividend entitlement of £0.17m. The consideration for the Group's investment consisted of an immediate cash payment on completion in March 2008 of £5.8m, representing 80% of the total anticipated capital consideration. The remainder (£1.45m) will be paid on the second anniversary of the sale subject to the performance of the FTSE 100. This was the Group's first disposal since its flotation on AIM and I believe the price offers an excellent return for our investors, especially considering the recent turbulence in the financial markets. The valuation as at 31st January 2008 reflects the market position at that time, although over the course of the two year performance period we have no reason to suspect that the full £7.25m will not be attained, subject of course to the performance of the FTSE index.

Post year-end events

In March 2008, the Group welcomed 3i as an investment partner in Hyperion Insurance Group. 3i has made a £50m commitment to Hyperion which we welcome as a major step forward in Hyperion's continued growth and development. As a result of this transaction, the Group's shareholding decreased from 27.89% to approx. 20% and Hyperion repaid the £2.35m loan outstanding to the Group in full.

Business Strategy

The Group typically invests amounts of up to £2.5m and only takes minority equity positions, normally acquiring between 15% and 40% of an investee company's total equity. The Group requires its investee companies to adopt certain minority shareholder protections and appoints a Director to the relevant board. The Group's successful track record is based upon a number of factors that include, amongst other things, a robust investment process, the management's considerable experience of the financial services sector, and a flexible approach towards exit-strategies.

The Group currently has committed to provide a further £3.7m of funding for its existing investments. After taking this into consideration, the Group currently has approx. £5.0m of cash available for further investments.

People

In November 2007, Mr Robert King who as Group Company Secretary has overseen the development of the Group's compliance and legal function following flotation, joined the Board as an Executive Director. We warmly welcomed him, and I thank all the Directors and staff for their unstinting contributions towards the progress of the Group. In March 2007 we said farewell to Stephen Crowther, who had served as a Director since 1998, and with whom we will, in his continuing capacity as a Director of one of our investee companies, no doubt maintain a mutually helpful relationship.

Outlook

These are difficult times for any company investing in financial services businesses. However, having reviewed our area of focus, we remain positive about the field in which we operate. As will be seen, our investment portfolio has so far managed to escape being adversely affected by the US sub-prime market, the credit crunch or the consequential downturn in the UK and US economies in particular.

The Directors consider that the Group remains unique in its investment sector and we continue to see a large number of investment opportunities with good management and business plans. The Board is confident about the future prospects for the Group.

Brian Marsh OBE

4th June 2008

Investments

As at 31st January 2008 the Group's equity interests were as follows:

Berkeley (Insurance) Holdings Limited

(www.berkeleyinsurance.com)

In July 2002 the Group invested in Berkeley (Insurance) Holdings, a company that provides its clients with independent advice on the most suitable choice of insurance broker in specialist as well as mainstream insurance areas.

Date of investment: July 2002

Equity stake: 19.9%

31st January 2008 valuation: £nil

Besso Holdings 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. The company specialises in insurance broking for the North American wholesale market.

Date of investment: February 1995

Equity stake: 23.55%

31st January 2008 valuation: £8,236,000

HQB Partners Limited

(www.hqbpartners.com )

In January 2005 the Group made an investment in HQB Partners, a company which provides strategic transaction advice, proxy solicitation services, voting analysis and investor relations services.

Date of investment: January 2005

Equity stake: 27.72%

31st January 2008 valuation: £189,000

Hyperion Insurance Group Limited

(www.hyperiongrp.com)

The Group first invested in Hyperion Insurance Group in 1994. The Hyperion Insurance Group owns, amongst other things, an insurance broker specialising in directors' and officers' ('D&O') and professional indemnity ('PI') insurance. A subsidiary of Hyperion became a registered Lloyd's insurance broker. In 1998 Hyperion set up an insurance managing general agency specialising in developing D&O and PI business in Europe.

Date of investment: November 1994

Equity: 27.89%

31st January 2008 valuation: £20,447,000

JMD Specialist Insurance Services Group Limited

(www.jmd-sis.com)

 In March 2007 the Group invested in JMD, a provider of leading-edge services to the insurance industry. Their unique approach to measurable cash flow and profit enhancements adds value to Lloyd's syndicates, UK and international insurers and re-insurers.

Date of investment: March 2007

Equity stake: 25.0%

31 January 2008 valuation: £650,000

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: 22.5%

31 January 2008 valuation: £2,266,000

Paterson Martin Limited

(www.patersonmartin.com)

Paterson Martin was founded by a group of professionals from the actuarial, capital markets and reinsurance advisory sectors in conjunction with the Group. The company uses sophisticated modeling techniques to assess risk, with a view to providing counter-party risk transaction advice.

Date of investment: April 2004

Equity stake: 22.5%

31st January 2008 valuation: £113,000

Portfolio Design Group International Limited

(www.surrendalink.co.uk)

In March 1994 the Group invested in the Portfolio Design Group, a company which sells with-profits life endowment policies to large financial institutions. In 2002 the company diversified into investment management.

Date of investment: March 1994

Equity stake: 20.0%

31st January 2008 valuation: £8,050,000

Principal Investment Holdings Limited

(www.principalinvestment.co.uk)

In December 1999 the Group invested in Principal, a predominantly discretionary fund manager with both retail and institutional clients.

Date of investment: December 1999

Equity stake: 18.22%

31st January 2008 valuation: £6,711,000

Public Risk Management Limited

(www.publicriskmanagement.co.uk)

In September 2003 the Group assisted in establishing Public Risk Management, a company which specialises in the development and provision of risk management services, including processes and procedures, to the public sector.

Date of investment: September 2003

Equity stake: 44.0%

31st January 2008 valuation: £nil

Summa Insurance Brokerage, S. L.

(www.grupo-summa.com)

In January 2005 the Group provided finance to a Spanish management team with the objective of acquiring and consolidating regional insurance brokers in Spain.

Date of investment: January 2005

Equity stake: 48.63%

31st January 2008 valuation: £3,092,000

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

The Group acquired equity interests in the following companies after 31st January 2008:

Amberglobe Limited (trading as The Business Sales Centre)

(www.businesssalescentre.com)

In March 2008 the Group assisted in establishing The Business Sales Centre, a business sales platform that provides valuation and negotiation services for the sale of SME businesses in the sub £3m sector.

Date of investment: March 2008

Equity stake: 35.0%

31st January 2008 valuation: N/A

Trillium Partners Limited

In March 2008 the Group invested in Trillium, an independent financial advisory firm serving the European Media and Information sector. Founded in 2004, Trillium has advised corporations, private equity firms and high net worth individuals in relation to a broad range of assignments including acquisitions, disposals, mergers and fund raisings.

Date of investment: March 2008

Equity stake: 25.0%

31st January 2008 valuation: N/A

Consolidated Financial Statements

CONSOLIDATED INCOME STATEMENT

FOR THE YEAR ENDED 31ST JANUARY 2008

	Notes	2008		2007 Restated*
		£'000	£'000	£'000	£'000
GAINS ON INVESTMENTS	1
Realised gains on disposal of investments	11	153		115
Impairment of investments and loans	11,13	(488)		-
Unrealised gains on investment revaluation	11	5,052		6,369
			4,717		6,484
INCOME
Dividends	1	1,336		825
Income from loans and receivables	1	682		453
Fees receivable	1	715		749
			2,733		2,027
OPERATING INCOME	2		7,450		8,511
Operating expenses			(2,249)		(2,260)
OPERATING PROFIT			5,201		6,251
Financial income	4	183		347
Financial expenses	3	(30)		(33)
Carried interest provision	14	(508)		(253)
Exchange movements	7	180		45
			(175)		106
PROFIT ON ORDINARY ACTIVITIES			5,026		6,357
BEFORE SHARE BASED PROVISION
Share based provision	18,22		(175)		(222)
PROFIT ON ORDINARY ACTIVITIES
BEFORE TAXATION	7		4,851		6,135
Income tax	8		(21)		(1,619)
PROFIT ON ORDINARY ACTIVITIES AFTER TAXATION ATTRIBUTABLE TO EQUITY HOLDERS	18		£4,830		£4,516
Earnings per share - basic and diluted (pence)	9		0.16		0.15

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

*Restated for International Financial Reporting Standards (see note 26).

  CONSOLIDATED & COMPANY BALANCE SHEETS

31ST JANUARY 2008

		Group			Company
	Notes	2008	2007 Restated*		2008	2007 Restated*
		£'000	£'000		£'000	£'000
ASSETS
NON-CURRENT ASSETS
Office equipment, fixtures and fittings	10	3	5		-	-
Investments	11	49,754	38,834		35,852	30,724
Loans and receivables	12	771	3,091		10,155	10,155
		50,528	41,930		46,007	40,879
CURRENT ASSETS
Trade and other receivables	13	3,135	1,056		-	-
Cash and cash equivalents		1,701	6,989		1	1
TOTAL CURRENT ASSETS		4,836	8,045		1	1
TOTAL ASSETS		55,364	49,975		46,008	40,880
LIABILITIES
NON-CURRENT LIABILITIES
Carried interest provision	14	(1,558)	(1,050)		-	-
Deferred tax liabilities	15	(7,476)	(7,110)		-	-
TOTAL NON-CURRENT LIABILITES		(9,034)	(8,160)		-	-
CURRENT LIABILITIES
Trade and other payables	16	(719)	(1,209)		-	-
TOTAL CURRENT LIABILITES		(719)	(1,209)		-	-
TOTAL LIABILTIES		(9,753)	(9,369)		-	-
NET ASSETS		£45,611	£40,606		£46,008	£40,880
CAPITAL AND RESERVES - EQUITY
Called up share capital	17	2,929	2,929		2,929	2,929
Shares to be issued	18	397	222		397	222
Share premium account	18	9,370	9,370		9,370	9,370
Fair value reserve	18	22,392	18,214		33,311	28,358
Reverse acquisition reserve	18	393	393		-	-
Retained earnings	18	10,130	9,478		1	1
SHAREHOLDERS' FUNDS - EQUITY		£45,611	£40,606		£46,008	£40,880

*Restated for International Financial Reporting Standards (see note 26).

Approved and authorised for issue by the Board on 4th June 2008 and signed on its behalf by B.P. Marsh and J.S. Newman.

  CONSOLIDATED CASH FLOW STATEMENT

FOR THE YEAR ENDED 31ST JANUARY 2008

	Notes		2008		2007 Restated*
			£’000		£’000
Cash from / (used by) operating activities
Interest received on loans to investees			682		453
Dividends received			1,336		825
Fees received from investment activity			715		749
Operating expenses			(2,249)		(2,260)
(Increase) / decrease in receivables			(166)		213
Increase / (decrease) in payables			(145)		(434)
Depreciation	10		2		4
Net cash from / (used by) operating activities			175		(450)
Net cash from / (used by) investing activities
Purchase of property, plant and equipment			-		(1)
Purchase of investments	11		(6,011)		(3,969)
Proceeds from investments			524		387
Net cash from / (used by) investing activities			(5,487)		(3,584)
Net cash from / (used by) financing activities
Repayment of long-term borrowings			-		(2,500)
Proceeds from issue of shares			-		11,000
Placement costs			-		(845)
(Payments) / repayments of loans to / (from) investee companies			(166)		1,974
Financial income	4		183		347
Financial expenses	3		(30)		(33)
Net cash from / (used by) financing activities			(13)		9,943
Change in cash and cash equivalents			(5,325)		5,909
Cash and cash equivalents at beginning of the period			6,989		1,084
Exchange gain/(loss)			37		(4)
Cash and cash equivalents at end of period			1,701		6,989

*Restated for International Financial Reporting Standards (see note 26).

  STATEMENT OF CHANGES IN EQUITY

FOR THE YEAR ENDED 31ST JANUARY 2008

	Group		Company
FOR THE YEAR ENDED	2008	2007 Restated*	2008	2007 Restated*
	£'000	£'000	£'000	£'000
Opening total equity	40,606	25,712	40,880	-
Total recognised income and expense for period	4,830	4,516	4,953	28,359
Dividends	-	-	-	-
Issue of shares	-	13,143	-	13,143
Shares to be issued (share based payments)	175	222	175	222
Placement costs	-	(844)	-	(844)
Acquisition of subsidiary undertaking	-	(2,143)	-	-
TOTAL EQUITY	£45,611	£40,606	£46,008	£40,880

*Restated for International Financial Reporting Standards (see note 26).

NOTES TO THE ACCOUNTS

 

FOR THE YEAR ENDED 31ST JANUARY 2008

 

 

1.       ACCOUNTING POLICIES

 

          Basis of preparation of financial statements

 

         These financial statements have been prepared in accordance with International Financial Reporting Standards as adopted for use by the European Union (“IFRS”), International Financial Reporting Committee (“IFRIC”) interpretations and the Companies Act 1985 applicable to Companies reporting under IFRS. These are the first financial statements prepared under IFRS. The consolidated financial statements have been prepared under the historical cost convention as modified by the revaluations of financial assets and financial liabilities through the profit or loss.

 

         The preparation of financial statements in conformity with IFRS requires the use of certain critical accounting estimates particularly in relation to investment valuation. It also requires management to exercise its judgement in the process of applying the Group’s accounting policies.

 

IFRS Transition

 

         IFRS 1 permits companies adopting IFRS for the first time to take certain exemptions from the full requirements of IFRS  in the transition period. The annual report has been prepared on the basis of the following exemptions:

 

          IFRS 2 ‘Share based payment’ has been adopted from the transition date and is only applied to relevant equity instruments granted after 7th November 2002 which had not vested as at 1st January 2006;

 

         Under IAS 39 Financial Instruments: Recognition and Measurement (“IAS 39”), all equity instruments have been designated at the date of transition to be assets at fair value through profit or loss; and

 

A reconciliation of profit and total equity under UK GAAP and IFRS required by IFRS 1 and notes of the principal adjustments under IFRS are shown in note 26.

          Basis of consolidation

          The Group financial statements consolidate the results and net assets of the Company and all of its subsidiary undertakings. 

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 except as noted in the “reverse acquisition accounting” noted below. 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 balance sheet 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, with changes in fair value recognised in profit or loss in the period of the change. The Group has no interests in associates through which it carries on its business.

 

No income statement is prepared for the Company, as permitted by Section 230 of the Companies Act 1985. The Company made a profit for the year of £4,953k(2007 restated: £5,013k).

 

Reverse acquisition accounting

 

On 1st February 2006 B.P. Marsh & Partners Plc became the legal parent company of B.P. Marsh & Company Limited in a share-for-share exchange transaction. The former B.P. Marsh & Company Limited shareholders became the majority holders of the share capital of the enlarged group. Furthermore, the Company’s continuing operations and executive management were those of B.P. Marsh & Company Limited. Therefore the substance of the combination was that B.P. Marsh & Company Limited acquired B.P. Marsh & Partners Plc in a reverse acquisition.

 

Under the requirements of the Companies Act 1985, it would normally be necessary for the Company’s consolidated accounts to follow the legal form of the business combination. This would mean that the difference between the book value of the shares issued by B.P. Marsh & Partners Plc as consideration for the acquisition of B.P. Marsh & Company Limited and the share capital in B.P. Marsh & Company Limited be accounted for as goodwill. The directors have considered the substance of this transaction and conclude reverse acquisition accounting should be adopted as outlined in IFRS3 as the basis of consolidation in order to give a true and fair view. This compliance with IFRS requires departure from the Companies Act 1985 to follow legal form of the business combination. 

There are a number of effects on the consolidated financial statements of adopting reverse acquisition accounting. The principal effect of consolidating using reverse acquisition accounting is that no goodwill arose on consolidation. A merger reserve is created which reflects the difference between the book value of the shares issued by B.P. Marsh & Partners Plc as consideration for the acquisition of B.P. Marsh & Company Limited and the share capital in B.P. Marsh & Company Limited. Under normal acquisition accounting the goodwill arising on the investment by B.P. Marsh & Partners Plc in B.P. Marsh & Company Limited would be shown on the consolidated balance sheet and tested annually for impairment in accordance with IAS 38. The directors believe that by adopting reverse acquisition accounting the consolidated income statement more fairly reflects the actual trading results of the Group.

Employee services settled in equity instruments

The Group issued equity settled share-based awards to certain employees and advisors. A fair value for the equity settled share awards is measured at the date of grant. The Group measured the fair value using the valuation technique most appropriate to value each class of award, either the Black-Scholes or a Trinomial valuation method.

 

The fair value of each award is recognised as an expense over the vesting period on a straight-line basis, after allowing for an estimate of the share awards that will eventually vest. The level of vesting is reviewed annually; and the charge is adjusted to reflect actual or estimated levels of vesting with the corresponding entry to equity.

         

          Investments

 

          All 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 investments. In valuing investments the Board applies guidelines issued by the British Venture Capital Association (BVCA). The following valuation methodologies have been used in reaching fair value of investments, some of which are in early stage companies:

 

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

 

b)   by reference to underlying funds under management;

 

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

 

d)   by reference to expected future cashflow 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 income statement for the year. In the balance sheet 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 investments are expensed in the income statement.

 

          Income from investments

 

          Income from investments comprises:

 

a)    gross interest from loans, which is taken to the income on an accruals basis;

 

b)    dividends from equity investments are recognised in the income statement 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.

 

Carried Interest Provision

 

This represents the amount payable to an executive in the event of a particular investment being sold and is calculated on the fair value of that investment at the balance sheet date.

 

Depreciation

 

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

 

                                               Furniture & equipment - 5 years
                                                                                                                                                      

         Foreign currencies

 

         Monetary assets and liabilities denominated in foreign currencies at the balance sheet date are translated at the exchange rate ruling at the balance sheet date.

 

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

 

          Exchange gains and losses are recognised in the income statement.

 

          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 income statement 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 substantially enacted by the balance sheet date.

 

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 balance sheet 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 balance sheet date 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 income statement, 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.

 

          Pension costs

 

          The Company operates a defined contribution scheme for some of its employees. The contributions payable to the scheme during the period are charged to the income statement.

 

          Operating leases

 

          Rentals under operating leases are charged on a straight line basis over the lease term.

 

Benefits received and receivable as an incentive to sign an operating lease are recognised on a straight line basis over the period until the date the rent is expected to be adjusted to the prevailing market rate.

 

          Financial assets and liabilities

 

Financial instruments are recognised in the balance sheet when the Group becomes party to the contractual provisions of the instrument. De-recognition occurs when rights to cash flows from a financial asset expire, or when a liability is extinguished.

 

Loans and receivables

 

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for maturities greater than 12 months after the balance sheet date. These are classified as non-current assets. 

 

 

          Loans and Borrowings

All loans and borrowings are initially recognised at the fair value of the consideration received net of issue costs associated with the borrowings. After initial recognition, these are subsequently measured at amortised cost using the effective interest method, which is the rate that exactly discounts the estimated future cash flows through the expected life of the liabilities. Amortised cost is calculated by taking into account any issue costs and any discount or premium on settlement.

 

Trade and other receivables

 

Trade and other receivables in the balance sheet are initially measured at original invoice amount and subsequently measured after deducting any provision for impairment.

Cash and cash equivalents 

Cash and cash equivalents in the balance sheet comprise cash at bank and in hand and short-term deposits with an original maturity of three months or less. For the purposes of the cash flow statement, cash and cash equivalents comprise cash and short-term deposits as defined above and other short-term highly liquid investments that are readily convertible into cash and are subject to insignificant risk of changes in value, net of bank overdrafts.

 

Trade and other payables

 

Trade and other payables are stated based on the amounts which are considered to be payable in respect of goods or services received up to the balance sheet date.

 

          International Financial Reporting Standards in issue but not yet effective

At the date of authorisation of these consolidated financial statements, the International Accounting Standards Board (“IASB”) and International Financial Reporting Interpretations Committee (“IFRIC”) have issued the following standards and interpretations which are effective for annual accounting periods beginning on or after the stated effective date. These standards and interpretations are not effective for and have not been applied in the preparation of these consolidated financial statements:

·     IFRS 8: Operating Segments (effective as of 1st January 2009)

 

·     IAS 1: Presentation of Financial Statements (revised) (effective as of 1st January 2009)

 

·     IFRS 3: Business Combinations (revised) (effective as of 1st July 2009)

 

·     IAS 27: Consolidated and Separate Financial Statements (amended) (effective as of 1st July 2009)

 

·     IAS 23: Borrowing Costs (amended) (effective as of 1st January 2009)

 

·     IFRIC Interpretation 12: Service Concession Arrangements (effective as of 1st January 2008)

 

·     IFRIC Interpretation 13: Customer Loyalty Programmes (effective as of 1st July 2008)

 

·     IFRIC Interpretation 14: IAS 19 – The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their Interaction (effective as of 1st January 2008)

 

 

The directors do not anticipate that the adoption of these standards and interpretations will have a material impact on the Group’s financial statements in the period of initial adoption. However, the directors are aware that the application of IFRS 8 may significantly alter the amount and complexity of disclosure contained in the Group’s financial statements.

 

  2.    SEGMENTAL REPORTING

PRIMARY REPORTING SEGMENT - GEOGRAPHIC SEGMENTS

For management purposes, the Group is organised and reports its performance by two geographic segments: UK and Channel Islands and non-UK and Channel Islands.

	Geographic segment 1:  UK & Channel Islands		Geographic segment 2: Non-UK & Channel Islands		Group
	2008	2007	2008	2007	2008	2007
	£'000	£'000	£'000	£'000	£'000	£'000
Operating income	6,906	8,435	544	76	7,450	8,511
Operating expenses	(2,085)	(2,240)	(164)	(20)	(2,249)	(2,260)
Segment operating profit	4,821	6,195	380	56	5,201	6,251
Financial income	170	344	13	3	183	347
Financial expenses	(28)	(33)	(2)	-	(30)	(33)
Carried interest provision	(508)	(253)	-	-	(508)	(253)
Exchange movements	16	47	164	(2)	180	45
Share based provisions	(162)	(220)	(13)	(2)	(175)	(222)
Profit before tax	4,309	6,080	542	55	4,851	6,135
Income tax	142	(1,602)	(163)	(17)	(21)	(1,619)
Profit for the year	4,451	4,478	379	38	4,830	4,516

	2008	2007	2008	2007	2008	2007
	£'000	£'000	£'000	£'000	£'000	£'000
Non-current assets
Office equipment, fixtures and fittings	3	5	-	-	3	5
Investments	46,662	37,784	3,092	1,050	49,754	38,834
Loans and receivables	80	2,825	691	266	771	3,091
	46,745	40,614	3,783	1,316	50,528	41,930
Current assets
Trade and other receivables	3,127	1,042	8	14	3,135	1,056
Cash and cash equivalents	1,701	6,989	-	-	1,701	6,989
	4,828	8,031	8	14	4,836	8,045
Total assets	51,573	48,645	3,791	1,330	55,364	49,975
Non-current liabilities
Carried interest provision	(1,558)	(1,050)	-	-	(1,558)	(1,050)
Deferred tax liabilities	(7,405)	(7,110)	(71)	-	(7,476)	(7,110)
	(8,963)	(8,160)	(71)	-	(9,034)	(8,160)
Current liabilities
Trade and other payables	(719)	(1,209)	-	-	(719)	(1,209)
Total liabilities	(9,682)	(9,369)	(71)	-	(9,753)	(9,369)
Net assets	41,891	39,276	3,720	1,330	45,611	40,606

The Group operates in one business segment, provision of consultancy services and making and trading investments in financial services businesses.

 

3.       FINANCIAL EXPENSES	2008	2007
	£’000	£’000
Other interest	30	33

 

 

4.      FINANCIAL INCOME	2008	2007
	£’000	£’000
Bank interest	138	341
Other interest	45	6
	183	347

 

 

5.       STAFF COSTS

 

          The average number of employees, including directors, employed by the Group during the period was 17 (2007: 19). All remuneration was paid by B. P. Marsh & Company Limited.

 

The related staff costs were:	2008	2007
	£’000	£’000
Wages and salaries	1,098	1,251
Social security costs	131	150
Pension costs	61	94
	£1,290	£1,495

 

In addition staff were paid £nil (2007: £615,000) out of the B. P. Marsh Employee Benefit Trust in the year. This cost was not reflected in the income statement in 2007 as it was funded through prior year contributions.

 

 

6.      DIRECTORS' EMOLUMENTS
	2008	2007
The aggregate emoluments of the directors were:	£’000	£’000
Management services	820	869
Fees	65	36
Pension contributions	40	54
	£    925	£    959
Highest paid director
Emoluments	190	121
Long term incentive payment	-	250
Pension contribution	11	9
	£    201	£    380

 

The Company contributes into personal pension plans on behalf of certain employees and directors. Contributions payable are charged to the income statement in the period to which they relate.

 

During the period, 5 directors (2007: 4) accrued benefits under money purchase pension schemes.

 

 

 

7.        PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION	2008	2007
	£’000	£’000
The profit for the period is arrived at after charging / crediting:
Depreciation of owned tangible fixed assets:	2	4
Auditors remuneration :-
Audit fees for the Company	19	16
Other services:
-Audit of subsidiaries’ accounts	10	20
-Taxation	9	14
-Corporate finance transactions	10	-
-Other advisory	19	24
Exchange gain	(180)	(45)
Operating lease rentals of land and buildings	118	118

In addition the auditors were also paid £nil during the year (2007 : £85,000) with regard to services provided in placing the shares of the Company to the Alternative Investment Market. This cost was capitalised against the share premium account for the new shares issued.

 

 

 

8.       TAXATION	2008	2007 Restated*
	£’000	£’000
The charge for tax comprises:
UK corporation tax for the year	(345)	-
Deferred tax charge for the year (see note 15)	366	1,619
	21	1,619

Factors affecting the charge for the year

Profit on ordinary activities before tax	4,851	6,135
Tax at 30% on profit on ordinary activities	1,455	1,840
Effects of:
Expenses not deductible for tax purposes	262	67
Non taxable income	(1,542)	(2,002)
Other effects:
Unutilised tax losses carried forward	198	95
Provisions against investments not allowable for tax	28	-
Non-taxable income (dividends received)	(401)	-
Over provision from prior years	(345)	-
Corporate tax charge / (credit) for the year	(345)	-

*Restated for International Financial Reporting Standards (see note 26).

 

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

 

	2008   £’000	2007 Restated* £’000
Earnings
Earnings for the purpose of basic and diluted earnings per share being net profit attributable to equity shareholders	4,830	4,516
Earnings per share – basic and diluted	16p	15p
Number of shares	Number	Number
Weighted average number of ordinary shares for the purposes of basic earnings per share	29,286,143	29,286,143
Number of dilutive shares under option	Nil	Nil
Weighted average number of ordinary shares for the purposes of dilutive earnings per share	29,286,143	29,286,143

*Restated for International Financial Reporting Standards (see note 26).

 

10.       OFFICE EQUIPMENT, FIXTURES AND FITTINGS	Furniture &
	Equipment
Group	£’000
Cost
At 1st February 2007	99
Additions	-
At 31st January 2008	99
Depreciation
At 1st February 2007	94
Charge for the year	2
At 31st January 2008	96
Net book value
At 31st January 2008	£       3
At 31st January 2007	£        5

11.     NON-CURRENT INVESTMENTS
Group:		Shares in investee companies
		Total
		£’000
At valuation
At 1st February 2007 previously reported under UK GAAP		37,784
IFRS adjustment (see note 26)		1,050
At 1st February 2007 restated under IFRS		38,834
Additions		6,011
Disposals		(50)
Provisions		(93)
Unrealised gains in this period		5,052
At 31st January 2008		£49,754
At cost
At 1st February 2007		12,460
Additions		6,011
Disposals		(50)
Provisions		(93)
At 31st January 2008		£18,328

The Group received $0.9m (£0.5m) as part of the funds withheld in a warranties/indemnities escrow on the sale of Carpenter Moore Insurance Services Inc (“CMIS”) in October 2005. A provision of 15% ($0.1m) on this amount was included in the year to 31st January 2006, leaving a net amount withheld in escrow of $0.8m. However no claims were made under the terms of the escrow and the full amount was received, resulting in a profit on disposal of fixed assets for the Group of £0.05m.

 

The Group also received $0.2m (£0.1m) as part of the funds withheld in escrow on the sale of E-Risk Services LLC in October 2002. Full provision had been made in the accounts for the year to 31st January 2003 and therefore on receipt this resulted in a profit on disposal of fixed assets for the Group.

 

£93,238 (2007: £nil) of equity investments have been provided against where the directors consider that there may be a permanent diminution in value.

 

The investee companies, which are registered in England except Summa Insurance Brokerage S.L. (Spain), Preferred Asset Management Ltd (Jersey) and New Horizons Ltd (Isle of Man), 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
				£	£
Berkeley Insurance    (Holdings) Limited		19.90	31.10.06	80,000	34,000	Insurance holding company
	Besso Holdings Limited	23.55	31.12.07	8,977,109	130,998	Investment holding
						company
	HQB Partners Limited	28.00	31.12.07	260,431	(11,303)	Investor relations consultants
	Hyperion Insurance    Group Limited	27.89	30.09.07	17,272,000	2,371,000	Insurance holding company
	JMD Specialist Insurance    Services Group Limited	25.00	31.10.07	479,426	72,049	Insurance collection services company

	% holding		Date		Aggregate		Post tax
	of share		information		capital and		profit/(loss)
Name of company	capital		available to		reserves		for the year		Principal activity
					£		£
LEBC Holdings Limited		22.50		31.05.07		1,012,450		500,364		Independent financial advisor company
Paterson Martin Limited		22.50		31.12.06		504,113		110,016		Actuarial insurance/ reinsurance consultants
Portfolio Design Group		20.00		31.12.07		7,136,710		4,351,673		Fund managers of
International Limited										traded endowment
										policies
Morex Commercial Ltd		20.00		31.07.07		120,600		614,463		Trading in
										secondary life
										policies
Preferred Asset    Management Ltd		20.00		30.09.07		161,396		(84,340)		Fund management company
New Horizons Ltd    (formerly Surrenda-Link    Nominees Ltd)		20.00		31.12.04		654		Nil		Investment holding company
Principal Investment    Holdings Limited		18.22		31.12.07		5,726,000		1,590,000		Fund management company
Public Risk Management    Limited		44.00		31.12.06		(277,057)		3,943		Public sector risk management consultants
Summa Insurance Brokerage, S.L.		48.62		31.12.06		1,070,657		(91,157)		Consolidator of regional insurance brokers

 

The aggregate capital and reserves and profit for the year shown above is extracted from the relevant GAAP accounts of the investee companies.

Under FRS 25 the Paterson Martin Limited accounts have included the company’s 22.5% interest as a long-term creditor. As this is in reality an equity investment the aggregate capital and reserves shown have therefore been adjusted to include this as equity and therefore part of the total shareholders’ funds.

Under FRS 25 the HQB Consulting Limited accounts have included the company’s 28% interest as a long-term creditor. As this is in reality an equity investment the aggregate capital and reserves shown have therefore been adjusted to include this as equity and the profit has been adjusted by the dividend paid out.

 

Under FRS 25 the Hyperion Insurance Group Limited accounts have included their Preferred Ordinary Shares as a long-term creditor. As this is in reality equity the aggregate capital and reserves shown have therefore been increased by £4,125,000 to include this as equity and the profit has been increased by £246,000 which relates to the dividend paid out.

 

LEBC Holdings Limited do not prepare consolidated accounts. The figures shown include the aggregate capital and reserves of that company (£106,005) and 90% of its subsidiary company’s (LEBC Group Limited) aggregate capital and reserves (£1,007,161) and profit for the year (£555,960) as an estimate of the consolidated position.

 

In November 2007 the Group acquired a 20% equity holding in London Endowments Limited. No statutory financial information is available at this time.

	Shares in
Company:	group
	undertakings
	£’000
At valuation
At 1st February 2007 previously reported under UK GAAP	37,834
IFRS adjustment (see note 26)	(7,110)
At 1st February 2007 restated under IFRS	30,724
Additions	175
Unrealised gains in this period	4,953
At 31st January 2008	£     35,852
At cost
At 1st February 2007	2,365
Additions	175
At 31st January 2008	£       2,540

Shares in group undertakings

The details and results of group undertakings, which are registered in England are as follows: 

		Aggregate		Profit/(loss)
	%	capital and		for the
	Holding	reserves at		year to
	of share	31st January		31st January
Name of company	Capital	2008		2008	Principal activity
		£		£
B.P. Marsh &    Company Limited	100	42,931,375	169,618		Consulting services and investment holding company
Marsh Insurance    Holdings Limited	100	19,212,569	482,617		Investment holding company
B.P. Marsh & Co. Trustee    Company Limited	100	1,000	-		Dormant
Marsh Development    Capital Limited	100	1	-		Dormant

12.       LOANS AND RECEIVABLES – NON-CURRENT	Group			Company
	2008	2007		2008	2007
	£’000	£’000		£’000	£’000
Loans to investee companies	771	3,091		-	-
Amounts due from subsidiary undertakings	-	-		10,155	10,155
	£    771	£    3,091		£    10,155	£    10,155

See note 24 for terms of the loans.

13.        TRADE AND OTHER RECEIVABLES - CURRENT	Group			Company
	2008	2007		2008	2007
	£’000	£’000		£’000	£’000
Trade receivables	129	189		-	-
Loans to investee companies	2,550	250		-	-
Other receivables	11	410		-	-
Prepayments and accrued income	445	207		-	-
	£    3,135	£    1,056		£            -	£           -

 Included within net trade receivables, £110,420 (2007: £129,351) is owed by the Group's participating interests. Of this total £nil(2007: £nil) is owed by the Company's participating interests.

£394,875 (2007: £nil) of loans to investee companies have been provided against. These are amounts due to the Group under loan arrangements where the directors consider that there may be a permanent diminution in value.

See note 24 for terms of the loans.

14.      CARRIED INTEREST PROVISION	Group			Company
	2008	2007 Restated*		2008	2007
	£’000	£’000		£’000	£’000
Carried interest provision	1,558	1,050		-	-
	£    1,558	£    1,050		£                -	£                -

S.S. Clarke is entitled to a maximum of 20% of any gain, after deducting expenses and following the repayment of all loans, redemption of all preference shares, loan stock and equivalent finance provided by the Company, on the sale of certain agreed investments of the Company and its subsidiaries.

 

No amounts were paid under this contract during the year (2007: £nil).

 

In the accounts to 31st January 2007 the valuations of these certain agreed investments of the Company and its subsidiaries were reduced by the respective entitlements to S.S. Clarke. However, under IFRS a provision has now been included within the balance sheet with any period movements expensed through the income statement and thus the investments are now shown gross.

 

*Restated for International Financial Reporting Standards (see note 26).

15.    DEFERRED TAX LIABILITIES – NON- CURRENT			Group			Company
			£'000			£'000
At 1st February 2007 (restated - see note 26)			7,110			-
Charged to income statement			366			-
At 31st January 2008			£ 7,476			£ -

The directors estimate that, if the Group were to dispose of all its investments at the amount stated in the Balance Sheet, £7,476,000 (2007: £7,110,000) of tax on capital gains would become payable by the Group at a corporation tax rate of 28%.  

16.   TRADE AND OTHER PAYABLES CURRENT	Group			Company
	2008	2007		2008	2007
	£'000	£'000		£'000	£'000
Trade payables	56	68		-	-
Corporation tax	-	345		-	-
Other taxation & social security costs	30	63		-	-
Other loans	332	332		-	-
Accruals and deferred income	301	401		-	-
	£ 719	£ 1,209		£ -	£ -

The other loan due within one year is an amount which is unsecured, interest free and repayable on the finalisation of the liquidation of Whitmor Holdings Limited (formerly Glenvaal Dewar Rand Limited).

17.     CALLED UP SHARE CAPITAL	2008	2007
	£’000	£’000
Authorised
50,000,000 Ordinary shares of 10p each (2007: 50,000,000)	5,000	5,000
	£ 5,000	£ 5,000
Allotted, called up and fully paid
29,286,143 Ordinary shares of 10p each (2007: 29,286,143)	2,929	2,929
	£ 2,929	£ 2,929

18.    RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS

Group		Shares	Share	Fair	Reverse
	Share	to be	premium	value	acquisition	Retained
	capital	issued	account	reserve	reserve	earnings	Total
	£’000	£’000	£’000	£’000	£’000	£’000	£’000
At 1st February 2007 (note 26)	2,929	222	9,370	18,214	393	9,478	40,606
Profit for the year	-	-	-	4,178	-	652	4,830
Share based payments (note 22)	-	175	-	-	-	-	175
At 31st January 2008	£2,929	£397	£9,370	£22,392	£393	£10,130	£45,611

Company			Share
	Share	Shares to	premium	Fair value	Retained
	capital	be issued	account	reserve	earnings	Total
	£’000	£’000	£’000	£’000	£’000	£’000
At 1st February 2007	2,929	222	9,370	28,358	1	40,880
Profit for the year	-	-	-	4,953	-	4,953
Share based payments (note 22)	-	175	-	-	-	175
At 31st January 2008	£2,929	£397	£9,370	£33,311	£1	£46,008

19.     OPERATING LEASE COMMITMENT

 

The Group and Company was committed to making the following future aggregate minimum lease payments under non‑cancellable operating leases:

	2008	2007
	Land and	Land and
	buildings	buildings
	£’000	£’000
Earlier than one year	£   108	£       -
Later than one year	£       -	£   226

 

20.      LOAN COMMITMENTS

 

On 7th February 2005 the Group entered into an agreement to provide a loan facility of £140,000 to HQB Partners Limited, an associated company. As at 31st January 2008 £80,000 of this facility had been drawn down.

 

On 21st March 2007 the Group entered into an agreement to provide a loan facility of £250,000 to JMD Specialist Insurance Services Group Limited. As at 31st January 2008 none of this facility had been drawn down.

 

 

21.      CONTINGENT LIABILITIES

 

The Group has entered into long-term incentive arrangements with certain employees. Provided the employees remain in employment with the Group as at 1st November 2010 the Group has agreed to pay bonuses totaling £250,000 together with the Employers’ National Insurance due thereon. £50,000 of this is currently funded through an Employee Benefit Trust.

 

 

22.     SHARE BASED PAYMENT ARRANGEMENTS

 

          During the year ended 31st January 2007, B.P. Marsh & Partners Plc entered into a share-based payment arrangement with certain employees and advisors. The details of the arrangements are described in the following table:

 

Nature of the arrangement	Share options granted to advisors	Share options granted to advisors	Share appreciation rights
Date of grant	2 February 2006	9 February 2006	19 April 2006
Number or instruments granted	17,857	17,857	4,392,921
Exercise price (pence)	140.00	140.00	140.00
Share price at grant (pence)	150.50	150.50	150.50
Vesting period (years)	5	5	Units vest 10 days after results to 31/01/09 reported, i.e. approx 3 years
Vesting conditions	None	None	50% vest if IRR over exercise price exceeds 5% and 100% vest if IRR exceeds 8% after 3 years. Between 5% and 8% it is pro-rata.
Option Life (years)	5	5	3.34
Expected volatility	15%	15%	15%
Risk free rate	4.2%	4.15%	4.52%
Expected dividends expressed as a dividend yield	0%	0%	0%
Settlement	Shares	Shares	Shares
% expected to vest (based upon leavers)	100%	100%	60%
Number expected to vest	17,857	17,857	2,635,752
Fair value per granted instrument (pence)	41.90	41.20	23.50
Charge for year ending 31 January 2008 (£)	£nil	£nil	£175,563
Valuation model	Black-Scholes	Black-Scholes	Trinomial

The Company admitted its shares for trading on AIM on 2nd February 2006 and consequently, at the date of valuation of the options, little historical price data existed. As a consequence the volatilities of quoted companies that the directors considered to be the most comparable to the Group were used to determine the Group’s expected volatility over the life of the options.

 

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

 

No options were exercised during the year. 878,584 share appreciation rights representing 20% of the available units granted during the year to 31st January 2007 were forfeited before 31st January 2008. The expected number of units to vest has therefore been adjusted accordingly with no further expectation of forfeiture over the remaining life of the option.

 

 

23.     FINANCIAL INSTRUMENTS

 

The Group’s financial instruments comprise loans to participating interests, cash and liquid resources and various other items, such as trade debtors, trade creditors and other debtors and creditors. These arise directly from the Group’s operations.

 

          The Group has not entered into any derivatives transactions.

 

It is, and has been throughout the period under review, the Group’s policy that no trading in financial instruments shall be undertaken.

 

The main risks arising from the Group’s financial instruments are price risk, credit risk, liquidity risk, interest rate cash flow risk and currency risk. The Board reviews and agrees policies for managing each of these risks and they are summarised in the director’s report under “Financial Risk Management”.

         

          Interest Rate Profile

The Group has cash balances of £1,701k (2007: £6,989k), which are part of the financing arrangements of the Company. The cash balances comprise bank current accounts and deposits placed at investment rates of interest, which ranged between 4.5% p.a. and between 5.3% p.a. in the period (2007: ranged between 3.7 % p.a. and 5.1% p.a.). Maturity periods ranged between immediate access and 7 days (both years).

 

Currency hedging

During the period, the Group did not engage in any form of currency hedging transaction (2007: none).

 

Financial liabilities

The Company had no borrowings during the period (2007: none).

 

Fair values

All the financial assets and liabilities at 31 January 2008 were revalued where the directors consider they are materially different from their book values.

 

 

24.     RELATED PARTY DISCLOSURES

 

The following loans owed by the associated companies of the Company and its subsidiaries were outstanding at the year end:

 

	2008	2007
	£	£
HQB Partners Ltd	80,000	80,000
Hyperion Insurance Group Ltd	2,350,000	2,350,000
Paterson Martin Ltd	200,000	200,000
Public Risk Management Ltd	-	445,500
Summa Insurance Brokerage S.L	691,137	265,534

 

The loans are typically secured on the assets of the investee companies and an appropriate interest rate is charged based upon the risk profile of that company.

Income receivable, consisting of consultancy fees and interest on loans credited to the income statement in respect of the associated companies of the Company and its subsidiaries for the year were as follows:

 

	2008	2007
	£	£
Berkeley (Insurance) Holdings Ltd	13,809	13,311
Besso Holdings Ltd	158,594	367,441
HQB Partners Ltd	28,744	27,144
Hyperion Insurance Group Ltd	629,249	457,787
JMD Specialist Insurance Services Group Ltd	15,499	-
Jump Group Ltd	-	3,603
LEBC Group Ltd	15,743	-
Oakbridge Insurance Services LLC	40,669	41,735
Paterson Martin Limited	35,210	42,254
Portfolio Design Group International Ltd	36,917	25,000
Principal Investment Holdings Ltd	54,531	52,296
Public Risk Management Ltd	47,892	57,493
Summa Insurance Brokerage S.L	290,346	76,069

In addition the Group made management charges of £30,000 (2007: £36,000) and charitable donations of £5,000 (2007: £nil) to Marsh Christian Trust. Mr B.P. Marsh, the Chairman and majority shareholder of the Company, is also the Trustee and Settlor of Marsh Christian Trust.

Mr B.P. Marsh, who is the Chairman and majority shareholder of the Company, provided a £3,000,000 loan facility to the Company, secured on its assets. Any undrawn amount incurred a charge of 1%.

As at 31st January 2008 the Group owed £nil (2007: £nil) to Mr B.P. Marsh under this arrangement. Interest (including any undrawn rate) paid to him during the period amounted to £30,000 (2007: £32,541). On 30th April 2008 this loan facility was cancelled in full.

S.S. Clarke is entitled to a maximum of 20% of any gain, after deducting expenses and following the repayment of all loans, redemption of all preference shares, loan stock and equivalent finance provided by the Company, on the sale of certain agreed investments of the Company and its subsidiaries. The carried interest provided for at the year end was £1,558,000 (2007 restated: £1,050,000).

All the above transactions were conducted on an arms length basis.

 

25.     POST BALANCE SHEET EVENTS

 

On 10th March 2008 the Group acquired a 35% shareholding in Amberglobe Limited (trading as The Business Sales Centre) for £70,000. In addition, a £630,000 loan facility was provided, of which £250,000 has been drawn down to date.

 

On 14th March 2008 the Group sold its 18.22% equity investment in Principal Investment Holdings Limited to Sanlam, a South African insurance and financial services group. The Group’s consideration consisted of an initial capital payment of £5,797,225, representing 80% of the total anticipated capital consideration, with a further £1,449,307, representing 20%, being payable, subject to certain conditions relating to the performance of the FTSE 100 share index, in two years’ time.

 

On 19th March 2008 the Group acquired a 25% shareholding in Trillium Partners Limited for £500,000. In addition, a £750,000 loan facility was provided, although this has not been drawn down to date.

 

          On 2nd April 2008 Hyperion Insurance Group Limited repaid in full its £2,350,000 loan outstanding to the Group.

 

 

26.     TRANSITION TO INTERNATIONAL FINANCIAL REPORTING STANDARDS (IFRS)

         

          BP Marsh and Partners Plc reported under UK GAAP in its previously published financial statements for the year ended 31st January 2007. The analysis below shows a reconciliation of net assets and profit as reported under UK GAAP as at 31st January 2007 to the revised net assets and profits under IFRS as reported in these financial statements. In addition, there is a reconciliation of net assets under UK GAAP to IFRS at the transition date for the Group, being 1st February 2006. These, reconciliations have been provided for both the Group and the Company, although a reconciliation of equity for the Company at 31st January 2006 has been excluded as reporting under IFRS did not impact the figures at that date.

 

Group

 

Reconciliation of equity		Previous	Effect of	IFRS
at 31st January 2006		GAAP	transition to IFRS
		£’000	£’000	£’000
ASSETS
NON-CURRENT ASSETS
Office equipment, fixtures and fittings		8	-	8
Investments		27,700	797¹	28,497
Loans and receivables		3,231	-	3,231
		30,939	797	31,736
CURRENT ASSETS
Trade and other receivables		3,413	-	3,413
Cash and cash equivalents		1,084	-	1,084
		4,497	-	4,497
LIABILITIES
NON-CURRENT LIABILITIES
Loans and other payables		(2,500)	-	(2,500)
Carried interest provision		-	(797)¹	(797)
Deferred tax liabilities		-	(5,491)²	(5,491)
		(2,500)	(6,288)	(8,788)
CURRENT LIABILITIES
Trade and other payables		(1,733)	-	(1,733)
NET ASSETS		31,203	(5,491)	25,712
CAPITAL AND RESERVES - EQUITY
Called up share capital		2,520	-	2,520
Share premium		17	-	17
Shares to be issued		-	-	-
Fair value reserve		19,209	(5,491)²	13,718
Reverse acquisition reserve		-	-	-
Retained earnings		9,457	-	9,457
SHAREHOLDERS’ FUNDS - EQUITY		31,203	(5,491)	25,712

 

Group (continued)

 

Reconciliation of equity		Previous	Effect of	IFRS
at 31st January 2007		GAAP	transition to IFRS
		£’000	£’000	£’000
ASSETS
NON-CURRENT ASSETS
Office equipment, fixtures and fittings		5	-	5
Investments		37,784	1,050¹	38,834
Loans and receivables		3,091	-	3,091
		40,880	1,050	41,930
CURRENT ASSETS
Trade and other receivables		1,056	-	1,056
Cash and cash equivalents		6,989	-	6,989
		8,045	-	8,045
LIABILITIES
NON-CURRENT LIABILITIES
Loans and other payables		-	-	-
Carried interest provision		-	(1,050)¹	(1,050)
Deferred tax liabilities		-	(7,110)²	(7,110)
		-	(8,160)	(8,160)
CURRENT LIABILITIES
Trade and other payables		(1,209)	-	(1,209)
NET ASSETS		47,716	(7,110)	40,606
CAPITAL AND RESERVES - EQUITY
Called up share capital		2,929	-	2,929
Share premium		9,370	-	9,370
Shares to be issued		222	-	222
Fair value reserve		25,324	(7,110)²	18,214
Reverse acquisition reserve		393	-	393
Retained earnings		9,478	-	9,478
SHAREHOLDERS’ FUNDS - EQUITY		47,716	(7,110)	40,606

 

 

Group (continued)

 

Reconciliation of consolidated net profits
for the year ended 31st January 2007
			£’000
Profit under UK GAAP			20
Unrealised gains on investments			6,369
Stamp duty expenses			(1)
Carried interest provision			(253)
Deferred taxation			(1,619)
Profit under IFRS			4,516

 

Company

 

Reconciliation of equity		Previous	Effect of	IFRS
at 31st January 2007		GAAP	transition to IFRS
		£’000	£’000	£’000
ASSETS
NON-CURRENT ASSETS
Investments		37,834	(7,110)²	30,724
Loans and receivables		10,155	-	10,155
		47,989	(7,110)	40,879
CURRENT ASSETS
Trade and other receivables
Cash and cash equivalents		1	-	1
		1	-	1
LIABILITIES
CURRENT LIABILITIES
Trade and other payables		-	-	-
NET ASSETS		47,990	(7,110)	40,880
CAPITAL AND RESERVES - EQUITY
Called up share capital		2,929	-	2,929
Share premium		9,370	-	9,370
Shares to be issued		222	-	222
Fair value reserve		35,468	(7,110)²	28,358
Retained earnings		1	-	1
SHAREHOLDERS’ FUNDS - EQUITY		47,990	(7,110)	40,880

 

 

Company (continued)

 

Reconciliation of net profits
for the year ended 31st January 2007
			£’000
Profit under UK GAAP			1
Unrealised gains on investments			5,012
Profit under IFRS			5,013

 

Notes:

(1) Under IFRS a provision needs to be made for carried interest. Under UK GAAP this amount was offset against investments.

(2) Under IFRS a deferred tax liability is recorded in respect of assets held at fair value to reflect the tax realisable upon the eventual disposal of the asset, whereas under UK GAAP the potential tax payable is not recognised in the financial statements.

27.    ULTIMATE CONTROLLING PARTY 

The directors consider Brian Marsh to be the ultimate controlling party.

Notice

         The financial information set out above does not constitute B.P. Marsh & Partners Plc’s statutory accounts for the year to 31 January 2008 but is derived from those accounts. The statutory accounts for the year to 31 January 2008 have not yet been delivered to the Registrar of Companies. The auditors have reported on those accounts and have given the following opinion :-

 

•          the financial statements give a true and fair view, in accordance with IFRS as adopted by the European Union, of the state of the affair of the Company and the Group as at 31st January 2008 and the profit of the Group for the year then ended; and

•          the financial statements have been properly prepared in accordance with the Companies Act 1985.

Approval

The financial statements were approved by the Board of Directors on 4 June 2008 for release on 5 June 2008.

Analyst Briefing

An analyst briefing given by Brian Marsh OBE, Executive Chairman, Francis de Zulueta, Director of New Business Development and Jonathan

Newman, Finance Director,  will be held at 09:30 am on Thursday 5 June 2008 at Redleaf  Communications  Ltd, 9-13 St Andrew Street,

London EC4A 3AF.

For further information:

 

B.P. Marsh & Partners Plc                                                   www.bpmarsh.co.uk

Brian Marsh OBE                                                                     [phone]

 

Nominated Adviser

Nabarro Wells & Co. Limited

David Nabarro/Marc Cramsie                                                  [phone]

 

Redleaf Communications (PR to BP Marsh)

Emma Kane/Tom Newman                                                       [phone]

 

-ends-

 

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.

Over the past 18 years, 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.

Francis de Zulueta is the Company’s Development Director. With a wide-ranging knowledge of the financial services market, he seeks out, researches and evaluates potential new investments for B.P. Marsh. Following a 23-year broking career with Willis Faber and Aon, among others, he took an active interest in the mergers, acquisitions and venture capital business of Marsh McLennan.

Jonathan Newman is the Group Director of Finance and has over 10 years’ experience in the financial services industry. Jonathan advises investee companies through several non-executive board appointments and evaluates new investment opportunities.

Robert King is a Director and Group Company Secretary. He joined B.P. Marsh in May 2003 having started his career at PricewaterhouseCoopers. Since joining the Group he has taken on responsibility for the legal, compliance and secretarial functions and played a key role in the flotation of the Company.

 

END

 

 

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