Final Results

RNS Number : 1930G
B.P. Marsh & Partners PLC
04 June 2013
 



Date:                    4th June 2013

On behalf of:         B. P. Marsh & Partners Plc ("the Company" 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 2013.

 

The highlights of the results are:

 

¡  Net asset value up 10.6% to £55.5m (2012: £50.1m)

¡  Net asset value per share of 190p (2012: 171p)

¡  Share price trading at 32.1% discount to Net Asset Value (as at 3rd June 2013) (2012: 48.2%)

¡  Consolidated profit after tax up 55.7% to £5.7m (2012: £3.6m)

¡  Annual compound growth rate of 11.9% achieved since formation

¡  £3.7m of realised gains delivered on sale of investments

¡  £1.8m of cash available at year-end, plus a further £4.3m Directors' loan facility available; a total of £6.1m. £4m available for new investments excluding commitments to existing investments

¡  Sale agreed for 80% of the Company's shareholding in Hyperion Insurance Group Limited, subject to regulatory consent. Sale price reflected in Hyperion valuation at year-end, which drove 55.7% uplift in profit over 2012

¡  Net Cash to be received of £20.0m (post-tax and loans) post-completion of the Hyperion sale. Directors' loan facility to be repaid and cancelled upon receipt

Chairman's Statement

 

I am pleased to present the audited Consolidated Financial Statements of B. P. Marsh & Partners Plc for the year ended 31st January 2013.

 

In this, our 23rd year of operations, I am pleased to be able to report that we have again been able to increase our NAV by 10.6%, as more particularly set out below.

 

Our eight investee companies, large and small, are all in good heart and facing the opportunities and challenges of 2013 with confidence and enthusiasm.

 

Whilst we expect major developments and changes to take place in our portfolio over the coming months, we have every confidence in the future of our business, which continues to enjoy much diversity and a truly global reach.

 

Agreement has been reached for a sale of 80% of our shareholding in Hyperion Insurance Group Ltd, however this is still subject to regulatory consent. We are not in the habit of setting out plans until we know with a degree of certainty what will prevail.



 

Business Update

 

Financial Performance

 

At 31st January 2013, the net asset value of the Group was £55.5m (2012: £50.1m), after making allowance for deferred corporation tax, an increase of 10.6%. This equates to a net asset value of 190p per ordinary share as at 31st January 2013 (2012: 171p).

 

The Group has therefore achieved an annual compound growth rate of 11.9% after running costs, realisations, losses and distributions and having made an appropriate allowance for deferred corporation tax since the Group's establishment in 1990 (excluding £10.1m raised on flotation).

 

Reflecting investment portfolio movement, including the unrealised increase on revaluation of the portfolio, the consolidated profit on ordinary activities after tax for the year was £5.7m (2012: profit of £3.6m), an increase of 55.7%. However, excluding portfolio movement the Group made a pre-tax profit of £0.06m (2012: profit of £0.11m). The Group aims each year to at least break even on an underlying basis, before taking into account any portfolio movement.

 

£3.7m of gains were realised on the sale of investments during the year, as set out below. Due to the value of these investments being included at sale price within the 31st January 2012 portfolio valuation, no profit was shown directly within the Consolidated Statement of Comprehensive Income as the uplift in valuation had been previously reflected as unrealised gains in previous years. On sale the £3.7m realised gains were therefore transferred from the fair value reserve to retained earnings within the Consolidated Statement of Financial Position.

 

The Board believes that the Group's prospects remain good, despite the continued difficult outlook for the global economy. The Directors continue to explore all opportunities for realisations and development within the portfolio.

 

Summary of Developments in the Portfolio

 

During the financial year ended 31st January 2013, the following developments took place within the Group and its portfolio:

 

·    Hyperion Insurance Group Limited ("Hyperion")

 

Partial disposal of shares to Murofo Investments SL ("Murofo")

In May 2012 the Group sold 2.75% of its 18.94% shareholding in Hyperion to a fellow investor, Murofo, for a total consideration of £4.54m, or the equivalent of £3.80 per share.

 

This sale resulted in the Group realising what was its overall equity investment in Hyperion, (£4.35m over 17 years) whilst allowing it to continue with a significant shareholding and the prospect of further growth. This sale delivered £3.7m in profit for the Group.

 

In July 2012 Hyperion completed the acquisition of Windsor Limited, an international insurance and reinsurance Lloyd's broking group. As a result of this acquisition, the Group's shareholding was diluted from 16.19% to 13.97%.

 

·    Besso Insurance Group Limited ("Besso")

 

Acquisition of further 6.71% shareholding

On 1st November 2012 the Group increased its shareholding by 6.71% for a cash consideration of £0.78m. The Group's equity interest in Besso increased from 30% to 36.71% as a result (with economic rights over 36.48%).

 

This further investment was made alongside a consortium of American investors, who are well-known to Besso's business, who acquired 5.85% of Besso for a cash consideration of £0.70m.

 

Subsequent to the above, Besso had a positive 2012 financial year and is in the final stages of negotiations to complete several value accretive acquisitions. The Group, having worked alongside Besso's management team in reviewing these investments, is of the opinion that these would be positive additions to Besso.

 

·    LEBC Holdings Limited ("LEBC")

 

LEBC Group Limited ("LEBC Group"), the trading subsidiary of LEBC, has announced a significant turnaround in its financial performance, which sees the national IFA and employee benefits consultancy secure a year-on-year turnaround in profit before tax of £1.1m (FY2012 profit of £0.5m versus FY2011 loss of £0.6m), on a turnover of £10.2m, for the year ended 30th September 2012.

 

The Edinburgh-headquartered firm, which has 13 branches throughout the United Kingdom, has also reported a positive start to the new year, with strong revenue and profit growth.

 

·    Summa Insurance Brokerage SL ("Summa")

 

Despite the economic environment in Spain, Summa grew revenue in 2012 and maintained a satisfactory profit margin, which is in stark comparison to many other insurance operations in the Spanish market.

 

The Group has been working alongside Summa's Management team to develop their interaction with the Lloyd's and London Market, and has made various introductions to augment Summa's service offering to their clients.

 

The Group has also assisted Summa in the sourcing and recruitment of a new Chief Financial Officer so as to further improve the infrastructure for growth within this investment.

 

Notwithstanding the above, 2013 is likely to be a challenging year for Summa and the Board have reflected continued uncertainty surrounding the Spanish economy within its valuation of the business.

 

·    The Broucour Group Limited ("Broucour")

 

By 31st January 2013 Turner Butler Limited, a specialist SME business sales agency and a subsidiary of Broucour reached £0.5m revenue in just six months trading since its acquisition for £0.4m on 27th July 2012, over double its budgeted target. This acquisition was funded by loan financing provided by the Group. As a result of this performance the first loan repayment of £0.05m was made in March 2013, over two months ahead of schedule.

 

Post Balance Sheet Events

 

·    Hyperion - Partial disposal of shares to General Atlantic 

 

On 27th March 2013, the Group reached agreement with General Atlantic to sell 80% of its shareholding in Hyperion (11.04% of Hyperion's issued share capital) alongside 3i, at £5.20 per share. Due to its size in relation to the remainder of the portfolio, this transaction was put before the Company's shareholders at a General Meeting on 16th April 2013 where it was duly approved, and completion is now conditional upon regulatory approvals being granted in Spain, Singapore and Texas, USA. Completion of this transaction will see the Company in receipt of £29.2m pre-tax, and represents an effective uplift of £4.3m upon the Company's 31st July 2012 valuation.

 

The Group will continue to hold a 2.76% shareholding in Hyperion, which will be held under a Call Option with General Atlantic, who will be able to purchase the shares at £5.20 for a period of three years, or when Hyperion undertakes an Initial Public Offering, whichever is the sooner. In addition, the Company will no longer benefit from its previous minority protections or a nominee director on the Hyperion Board due to its reduced shareholding. 

 

One of the terms of the transaction was that the Company provide an ongoing £6m loan to enable Hyperion to refinance a majority of the existing shareholder debt, and this has been agreed at an interest rate of 7.5% (increasing if the Bank of England Base rate increases beyond 2.5%) for a minimum term of 12 months.

 

Due to the sale price being agreed and significant due diligence having been carried out prior to the year-end, the valuation of Hyperion as at 31st January 2013 is reflective of this offer.

 

·    LEBC

 

The Group can confirm that LEBC (the holding company for LEBC Group) has completed the acquisition of Sesame Bankhall Group's remaining 10% stake in LEBC Group, which Sesame has held since its initial investment in LEBC Group in 2000. LEBC Group is now a 100% subsidiary of LEBC.

 

The Group is also happy to announce that LEBC Group won the award for Best Retirement Advisor at the Money Marketing Financial Services Awards 2013. This is a fine vindication of the service offering provided by LEBC.

 

Directors' Loan

 

The Group repaid the £1.25m drawn down on the £4.325m Directors' Loan facility upon receipt of funds from the sale of Hyperion shares to Murofo, such that at the year-end no amounts were due. Since 31st January 2013 £2.08m of Directors' loans were used to fund a draw down by US Risk (UK) of its loan facility and a new acquisition for Besso, and a further £2.25m has been drawn down to fund a new investment opportunity due to complete shortly. The facility will be repaid in full following completion of the Hyperion disposal to General Atlantic and the facility will thereafter be cancelled.

 

Business Strategy

 

The Group typically invests amounts of up to £2.5m and only takes minority equity positions, 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 9 years. The Group requires its investee companies to adopt certain minority shareholder protections and appoints a director to its 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.

 

At the year end, the Group had £1.79m in cash, plus a further £4.325m Directors' loan facility available. Of the £6.1m, £4.0m is available for new investment opportunities after providing for commitments to loan funding for existing investments.

 

Board Composition

 

The Board appointed Natasha Dunbar as an executive director in February 2013, in order to reflect her increased involvement in the company and the executive duties that she had taken on. Natasha served as Managing Director of the Company between 2002 and 2008, following which she was appointed as a non-executive director.

 

Pursuant to the above transfer of duties the Board felt that an additional non-executive director would assist to rebalance the Board, and duly invited Campbell Scoones to join the Board as a non-executive director and member of the Remuneration Committee with effect from 19th April 2013.

 

Investment Opportunities

 

The Group continued to receive a strong inflow of opportunities in the year ended 31st January 2013 and believes that this trend will continue. The New Business Department gave its detailed consideration to a number of these; including propositions from within the insurance intermediary and wealth management sectors. The Group is currently in the final stages of completing a new investment and hopes to make an announcement regarding this within the next week. The Board will continue to pursue opportunities in the best interests of the Group's shareholders.

 

The Group's investment strategy remains unchanged; to take minority positions in profitable businesses with strong management teams and good growth potential. The Directors consider that the Group remains unique in its investment sector and we continue to see a sufficient number of investment opportunities with good management and business plans that would fit with our tried and tested business strategy.

 

Brian Marsh OBE

4th June 2013

 

 

Investments

 

As at 31st January 2013 the Group's equity interests were as follows:

 

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 in June 2011.

Date of investment: February 1995

Equity stake: 36.5%

31st January 2013 valuation: £5,223,000

 

The Broucour Group Limited

(www.amberglobe.co.uk)

In March 2008 the Group assisted in establishing Amberglobe, a business sales platform that provides valuation and negotiation services for the sale of SME businesses in the sub £3m sector. In July 2012 Broucour was formed as a new holding company for Amberglobe, and the Group financed the acquisition of Turner Butler.

Date of investment: March 2008

Equity stake: 49.0%

31st January 2013 valuation: £173,000

 

Hyperion Insurance Group Limited

(www.hyperiongrp.com)

The Group first invested in Hyperion in 1994. Hyperion 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: 13.8%

31st January 2013 valuation: £35,456,000



 

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: 21.9%

31st January 2013 valuation: £3,460,000

 

Paterson Squared, LLC

(www.paterson2.com)

Paterson Squared 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 modelling 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 2013 valuation: £0

 

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 2013 valuation: £1,721,000

 

Randall & Quilter Investment Holdings plc

(www.rqih.com)

Randall & Quilter Investment Holdings is an AIM listed run-off management service provider and acquirer of solvent insurance companies in run-off. The Group invested in Randall & Quilter in January 2010, the result of a share exchange with the Group's shareholding in JMD Specialist Insurance Services Group Limited, which Randall & Quilter have now wholly acquired.

Date of investment: January 2010

Equity stake: 1.35%

31st January 2013 valuation: £785,000

 

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 2013 valuation: £3,486,000

 

US Risk (UK) Limited

(www.oxfordinsurancebrokers.co.uk)

(jhinternational.co.uk)

In July 2010 the Group completed its investment in US Risk (UK), the parent company of Oxford Insurance Brokers Limited, a London-based Lloyd's insurance and reinsurance broker and James Hampden International Brokers Ltd, a specialist international reinsurance and insurance broking company.

Date of investment: July 2010

Equity stake: 29.3%

31st January 2013 valuation: £2,407,000

 

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

Consolidated Financial Statements

 

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

 

FOR THE YEAR ENDED 31ST JANUARY 2013

 

 


Notes

2013

2012



£'000

£'000

£'000

£'000







GAINS ON INVESTMENTS

1





Realised gains / (losses) on disposal of investments

 

1,13

 

5


 

(20)


Impairment of investments and loans

15

-


(339)


Unrealised gains on investment revaluation

12

6,130


4,592


Carried interest provision

2,17

5


32





6,140


4,265

INCOME






Dividends

1,26

301


661


Income from loans and receivables

1,26

929


859


Fees receivable

1,26

855


594





2,085


2,114

OPERATING INCOME

2


8,225


6,379







Operating expenses

2


(2,007)


(1,817)







OPERATING PROFIT



6,218


4,562







Financial income

2,4

5


-


Financial expenses

2,3

(65)


(104)


Exchange movements

2,8

37


(51)





(23)


(155)







PROFIT ON ORDINARY ACTIVITIES BEFORE EXCEPTIONAL ITEMS

 

 


 

6,195


4,407







Exceptional item

5,6


-


(30)







PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION

 

8


 

6,195


 

4,377







Taxation

9


(518)


(732)







PROFIT ON ORDINARY ACTIVITIES AFTER TAXATION ATTRIBUTABLE TO EQUITY HOLDERS

 

 

21


 

 

£5,677


 

 

£3,645































 

Earnings per share - basic and diluted (pence)

 

10


 

19.4p


 

12.4p







 

 

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

 



 

CONSOLIDATED AND COMPANY STATEMENTS OF FINANCIAL POSITION

 

31ST JANUARY 2013

 



Group



Company










Notes

2013

2012


2013

2012



£'000

£'000


£'000

£'000

ASSETS














NON-CURRENT ASSETS














Property, plant and equipment

11

7

14


-

-

Investments

12

52,711

50,624


45,299

39,965

Loans and receivables

14

8,587

5,983


10,155

10,155



61,305

56,621


55,454

50,120

CURRENT ASSETS














Trade and other receivables

15

1,174

2,093


-

-

Cash and cash equivalents


1,787

666


1

1

TOTAL CURRENT ASSETS


2,961

2,759


1

1

TOTAL ASSETS


64,266

59,380


55,455

50,121








LIABILITIES














NON-CURRENT LIABILITIES







Loans and other payables

16

(100)

(1,250)


-

-

Carried interest provision

17

(294)

(299)


-

-

Deferred tax liabilities

18

(7,933)

(7,415)


-

-

TOTAL NON-CURRENT LIABILITIES


 

(8,327)

 

(8,964)


 

-

 

-








CURRENT LIABILITIES







Trade and other payables

19

(484)

(295)


-

-








TOTAL CURRENT LIABILITIES


(484)

(295)


-

-








TOTAL LIABILITIES


(8,811)

(9,259)


-

-

NET ASSETS


£55,455

£50,121


£55,455

£50,121















CAPITAL AND RESERVES - EQUITY














Called up share capital

20

2,923

2,929


2,923

2,929

Share premium account

21

9,370

9,370


9,370

9,370

Fair value reserve

21

26,348

24,656


43,155

37,821

Reverse acquisition reserve

21

393

393


-

-

Capital redemption reserve

21

6

-


6

-

Retained earnings

21

16,415

12,773


1

1

SHAREHOLDERS' FUNDS - EQUITY

 

21

 

£55,455

 

£50,121


 

£55,455

 

£50,121

 

The Financial Statements were approved by the Board of Directors and authorised for issue on 3rd June 2013

and signed on its behalf by:

 

 

 

B.P. Marsh & J.S. Newman



 

CONSOLIDATED STATEMENT OF CASH FLOWS

 

FOR THE YEAR ENDED 31ST JANUARY 2013

 

 


Notes


2013


2012




£'000


£'000







Cash from operating activities






Income from loans to investees



929


859

Dividends



301


661

Fees received from investment activity



855


594

Operating expenses



(2,007)


(1,817)

Exceptional item - termination payment



-


(30)

Increase in receivables



(361)


(95)

Increase in payables



287


20

Depreciation

11


8


23

Net cash from operating activities



 

12


 

215







Net cash from / (used by) investing activities






Purchase of property, plant and equipment

11


(1)


(4)

Purchase of investments

12


(822)


(735)

Proceeds from investments

12


4,870


51

Net cash from / (used by) investing activities



 

4,047


 

(688)







Net cash (used by) / from financing activities






(Repayment) / advances of borrowings

16


(1,250)


1,250

Net payments of loans to investee companies



(1,276)


(515)

Financial income

4


5


-

Financial expenses

3


(65)


(104)

Dividends paid

7


(293)


-

Payments made to repurchase Company shares

21


(50)


-

Net cash (used by) / from financing activities



 

(2,929)


 

631







Change in cash and cash equivalents



1,130


158

Cash and cash equivalents at beginning of the period



 

666


 

515

Exchange movement



(9)*


(7)*







 

Cash and cash equivalents at end of period



 

£ 1,787


 

£  666







 

*The exchange movement as noted in the Consolidated Statement of Comprehensive Income is a gain of £37k (2012: loss of £51k).  The exchange movement in the Consolidated Statement of Cash Flows excludes an exchange gain of £46k (2012: loss of £44k) relating to the revaluation of a loan denominated in Euros as this is a non-cash movement.

 

COMPANY STATEMENT OF CASH FLOWS

 

No Company Statement of Cash Flows has been prepared as there has been no cash flow movement in the Company during the current and previous period, other than dividends received from B. P. Marsh & Company Limited ("BPMCL"), a subsidiary company, which were settled via an intercompany adjustment.  The ordinary dividend payment to the Company's members and the share repurchase during the year was physically made by BPMCL and reflected in the Company through an intercompany adjustment.  Accordingly the Company's "cash and cash equivalents" balance as at 31st January 2013 is £1k (2012: £1k).

 

 



 

CONSOLIDATED AND COMPANY STATEMENTS OF CHANGES IN EQUITY

 

FOR THE YEAR ENDED 31ST JANUARY 2013

 

 

 


Group

Company


2013

2012

2013

2012







£'000

£'000

£'000

£'000






Opening total equity

50,121

46,476

50,121

46,476

Total recognised income and expense for period

5,677

3,645

5,677

3,645

Dividends paid

(293)

-

(293)

-

Repurchase of Company shares

(50)

-

(50)

-

TOTAL EQUITY

£55,455

£50,121

£55,455

£50,121

 

 

Refer to Note 21 for detailed analysis of the changes in the components of equity.

 

 

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

 

FOR THE YEAR ENDED 31ST JANUARY 2013

 

 

1.       ACCOUNTING POLICIES

 

Basis of preparation of financial statements

 

These consolidated financial statements have been prepared in accordance with International Financial Reporting Standards as adopted for use by the European Union ("IFRS"), and in accordance with the Companies Act 2006.

 

The consolidated financial statements have been prepared under the historical cost convention as modified by the revaluation of certain financial assets and financial liabilities through profit and 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.

 

New standards effective during the year

 

None of the new standards, interpretations or amendments, which are effective for the first time in these consolidated financial statements, has had a material impact on these consolidated financial statements.

 

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. 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.  The one exception to the use of the acquisition accounting method was in 2006 when B.P. Marsh & Partners Plc became the legal parent company of B.P. Marsh & Company Limited in a share for share exchange transaction.  This was accounted for as a reverse acquisition, such that no goodwill arose, and a merger reserve was created reflecting the difference between the book value of the shares issued by B.P. Marsh & Partners Plc as consideration for the acquisition of the share capital of B.P. Marsh & Company Limited.  This compliance with IFRS 3 also represented a departure from the Companies Act.

 

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 operatingpolicies. Investments that are held as part of the Group's investment portfolio are carried in the Consolidated Statement of Financial Position at fair value even though the Group may have significant influence over those companies.  This treatment is permitted by IAS 28 Investment in Associates ("IAS 28"), which requires investments held by venture capital organisations to be excluded from its scope where those investments are designated, upon initial recognition, as at fair value through profit or loss and accounted for in accordance with IAS 39, with changes in fair value recognised in the profit or loss in the period of the change. The Group has no interests in associates through which it carries on its business.

 

No Statement of Comprehensive Income is prepared for the Company, as permitted by Section 408 of the Companies Act 2006.  The Company made a profit for the year of £5,676,742, prior to a dividend distribution of £292,861 (2012: profit of £3,644,959).

 

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 International Private Equity and Venture Capital Valuation ("IPEVCV") Committee.  The following valuation methodologies have been used in reaching the 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 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 year.  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 investments are expensed in the Consolidated Statement of Comprehensive Income.

 

Income from investments

 

Income from investments comprises:

 

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

 

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

 

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

 

Carried interest provision

 

This represents the amount payable to a director in the event of a particular investment being sold and is calculated on the fair value of that investment at the end of each reporting period.

 

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 foreign exchange 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.

 

Pension costs

 

The Group operates a defined contribution scheme for some of its employees.  The contributions payable to the scheme during the period are charged to the Consolidated Statement of Comprehensive Income.

 

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 Consolidated Statement of Financial Position 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 reporting period which 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 Consolidated Statement of Financial Position 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 Consolidated Statement of Financial Position 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 Consolidated Statement of Cash Flows, 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 date of the Consolidated Statement of Financial Position.

 

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, which are effective for annual accounting periods beginning on or after the stated effective date. 

  

 


Effective for periods
beginning on or after

IAS 1 - Presentation of items of Other Comprehensive Income (Amendment)

1st July 2012



IFRS 7 - Financial Instruments: Disclosures (Amendments)

1st January 2013



IFRS 13 - Fair Value Measurement

1st January 2013



IFRS 10, 11 & 12 and IAS 27 & 28 - Investment Entities (Amendments)

1st January 2014



IFRS 9 - Financial Instruments

1st January 2015



 

 

The Group is currently assessing the impact of IFRS 10 "Investment Entities (Amendments)".  All other standards and interpretations are not expected to have a material impact on the consolidated financial statements.

 

As the Group prepares its financial statements in accordance with IFRS as adopted by the European Union, the application of new standards and interpretations will be subject to their having been endorsed for use in the EU via the EU Endorsement mechanism.  In the majority of cases this will result in an effective date consistent with that given in the original standard or interpretation but the need for endorsement restricts the Group's discretion to early adopt standards.

 

2.       SEGMENTAL REPORTING

 

The Group operates in one business segment, 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 & Channel Islands and Non-UK & 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.  These are described in further detail in Note 1 under 'Income from investments'.

 

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

 


Geographic segment 1:

UK & Channel Islands

Geographic segment 2:

Non-UK & Channel Islands

Group









2013

2012

2013

2012

2013

2012


£'000

£'000

£'000

£'000

£'000

£'000








Operating income / (loss)

9,180

6,076

(955)

303

8,225

6,379

Operating expenses

(1,558)

(1,307)

(449)

(510)

(2,007)

(1,817)

Segment operating profit / (loss)

7,622

4,769

(1,404)

(207)

6,218

4,562








Financial income

4

-

1

-

5

-

Financial expenses

(51)

(75)

(14)

(29)

(65)

(104)

Exchange movements

(9)

(8)

46

(43)

37

(51)

Exceptional items

-

(30)

-

-

-

(30)








Profit / (loss) before tax

7,566

4,656

(1,371)

(279)

6,195

4,377

Income tax

(834)

(805)

316

73

(518)

(732)

Profit / (loss) for the year

£   6,732

£   3,851

£  (1,055)

£   (206)

£   5,677  

£   3,645  

 

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:

 

 

 

 

Investee Company

Total income attributable to the investee company

£'000

 

 

% of total realised operating income

 

 

Reportable geographic segment









2013

2012

2013

2012

2013

2012

Besso Insurance Group Limited

724

550

35

26

1

1

Hyperion Insurance Group Limited

590

599

28

28

1

1

Summa Insurance Brokerage, S.L.

312

425

15

20

2

2

U.S. Risk (UK) Limited

210

209

10

10

1&2

1&2

 



 

 


Geographic segment 1:

UK & Channel Islands

Geographic segment 2:

Non-UK & Channel Islands

Group


2013

2012

2013

2012

2013

2012


£'000

£'000

£'000

£'000

£'000

£'000

Non-current assets







Property, plant and equipment

7

13

-

1

7

14

Investments

49,225

45,717

3,486

4,907

52,711

50,624

Loans and receivables

6,899

4,833

1,688

1,150

8,587

5,983


56,131

50,563

5,174

6,058

61,305

56,621

Current assets







Trade and other receivables

970

1,404

204

689

1,174

2,093

Cash and cash equivalents

1,787

666

-

-

1,787

666

Deferred tax assets

-

-

327

50

327

50


2,757

2,070

531

739

3,288

2,809








Total assets

58,888

52,633

5,705

6,797

64,593

59,430

Non-current liabilities







Loans and other payables

(100)

(1,250)

-

-

(100)

(1,250)

Carried interest provision

(294)

(299)

-

-

(294)

(299)

Deferred tax liabilities

(8,260)

(7,465)

-

-

(8,260)

(7,465)


(8,654)

(9,014)

-

-

(8,654)

(9,014)

Current liabilities







Trade and other payables

(484)

(295)

-

-

(484)

(295)

Total liabilities

(9,138)

(9,309)

-

-

(9,138)

(9,309)








Net assets

£49,750  

£43,324

£5,705

£6,797

£55,455 

£50,121

 

Additions to property, plant and equipment

 

1

 

4

 

-

 

-

 

1

 

4

 

Depreciation of property, plant and equipment

 

7

 

21

 

1

 

2

 

8

 

23

 

Impairment of investments and loans

 

-

 

239

 

-

 

100

 

-

 

339








Cash flow arising from:














Operating activities

(29)

304

41

(89)

12

215

Investing activities

4,047

(688)

-

-

4,047

(688)

Financing activities

(2,899)

936

(30)

(305)

(2,929)

631

Change in cash and cash equivalents

 

1,119

 

552

 

11

 

(394)

 

1,130

 

158

 

 

3.       FINANCIAL EXPENSES

2013

2012


£'000

£'000




Other interest (Note 16)

£      65  

£     104

 

 

4.       FINANCIAL INCOME

2013

2012


£'000

£'000




Bank interest

£       5

£       -

 

  

 

5.       STAFF COSTS

 

The average number of employees, including all directors (executive and non-executive), employed by the Group during the year was 16 (2012: 16). All remuneration was paid by B. P. Marsh & Company Limited.

 

The related staff costs were:

2013

2012


£'000

£'000




Wages and salaries

1,219

1,055

Social security costs

153

125

Pension costs

43

37


£1,415

£1,217

 

Included within the prior year wages and salaries total above was a one-off compensation payment of £30,000 made to a director who left the Group during the year (see Note 6 below).  This was included in the Consolidated Statement of Comprehensive Income as an exceptional item.  No such payment was made to any of the employees in the current year.

 

 

6.       DIRECTORS' EMOLUMENTS




2013

2012

The aggregate emoluments of the directors were:

£'000

£'000




Management services - remuneration

883

794

Fees

43

36

Pension contributions - remuneration

26

24


£    952

£    854

 

In addition to the above, Mr S. S. Clarke has an entitlement to a gain based on a carried interest, as outlined in Note 17.

 

Included within the prior year management services total above was a one-off compensation payment of £30,000 made to a director who left the Group during that year.  This was included in the Consolidated Statement of Comprehensive Income as an exceptional item.  No such payment was made to any of the directors in the current year.

 

 


2013

2012


£'000

£'000

Highest paid director



Emoluments

175

191

Long term incentive payments

250

-

Pension contribution

13

-


£    438

£    191

 

The Company contributes into its defined contribution pension scheme on behalf of certain employees and directors.  Contributions payable are charged to the Consolidated Statement of Comprehensive Income in the period to which they relate.

 

During the period, 3 directors (2012: 4) accrued benefits under the defined contribution pension scheme.

 

 

7.       DIVIDENDS

2013

2012


£'000

£'000

Ordinary dividends






Final dividend paid:






1 pence each on 29,286,143 Ordinary shares

293

-





£        293                     

£           -




 



 

8.       PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION

 

2013

 

2012


£'000

£'000

The profit for the period is arrived at after charging / (crediting):






Depreciation of owned tangible fixed assets

8

23

Auditors remuneration :-



      Audit fees for the Company

23

21

      Other services:



-Audit of subsidiaries' accounts

9

7

-Taxation

8

10

-Other advisory

22

30

Exchange (gain) / loss

(37)

51

Operating lease rentals of land and buildings

84

112

 

 

9.       TAXATION

2013

2012


£'000

£'000

The charge for tax comprises:






UK corporation tax charge for the year

-

-

Deferred tax charge for the year (Note 18)

518

732





£      518

£      732




Factors affecting the charge for the year

Profit on ordinary activities before tax

6,195

4,377



Tax at 24.33% on profit on ordinary activities (2012: 26.32%)

1,507

1,152

Effects of:



Expenses not deductible for tax purposes

25

20

Non taxable net unrealised gains

(1,493)

(1,217)

Capital gains on disposal of investments

953

5

Other effects:



Management expenses (utilised)/carried forward

(919)

214

Non-taxable income (dividends received)

(73)

(174)




Corporate tax charge for the year

£         -

£         -

 

There are no factors which may affect future tax charges except as set out in Note 18.

 

 

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

 


2013

 

£'000

2012

 

£'000

Earnings



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

 

5,677

 

3,645




Earnings per share - basic and diluted

19.4p

12.4p




Number of shares

Number

Number

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

 

29,258,072

 

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

 

29,258,072

 

29,286,143

 



 

 

In August 2012 the Company repurchased 56,143 ordinary shares at a price of 89 pence per ordinary share.  These shares were immediately cancelled upon purchase, resulting in a reduction in the number of ordinary shares in issue from 29,286,143 to 29,230,000.

 

 

11.     PROPERTY, PLANT AND EQUIPMENT

 

Furniture & Equipment

£'000

Leasehold Fixtures & Fittings

£'000

 

 

Total

£'000

Group








Cost




At 1st February 2011

63

51

114

Additions

4

-

4

Disposals

-

-

-

At 31st January 2012

67

51

118





At 1st February 2012

67

51

118

Additions

1

-

1

Disposals

(10)

-

(10)

At 31st January 2013

58

51

109





Depreciation




At 1st February 2011

44

37

81

Eliminated on disposal

-

-

-

Charge for the year

9

14

23

At 31st January 2012

53

51

104





At 1st February 2012

53

51

104

Eliminated on disposal

(10)

-

(10)

Charge for the year

8

-

8

At 31st January 2013

51

51

102





Net book value




At 31st January 2013

£         7

£         -

£         7      

At 31st January 2012

£       14

£         -

£       14

At 31st January 2011

£       19

£      14

£       33

 



 

 

12.     NON-CURRENT INVESTMENTS






Group


Shares in investee companies



Total



£'000

At valuation






At 1st February 2011


47,143

Additions


735

Disposals


(1,846)

Provisions


-

Unrealised gains in this period


4,592

At 31st January 2012


£50,624




At 1st February 2012


50,624

Additions


822

Disposals


(4,865)

Provisions


-

Unrealised gains in this period


6,130

At 31st January 2013


£52,711




At cost






At 1st February 2011


19,375

Additions


735

Disposals


(1,846)

Provisions


-

At 31st January 2012


£18,264




At 1st February 2012


18,264

Additions


822

Disposals


(1,117)

Provisions


-

At 31st January 2013


£17,969

 

The principal addition in the year relates to the acquisition on 1st November 2012 of a further 6.71% shareholding in Besso Insurance Group Limited for £775,000.

 

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

 

On 16th March 2012 the Group made a partial disposal of 4.02% of its then total 34.02% equity interest in Besso Insurance Group Limited ("Besso") with a carrying value of £279,000 for consideration of £278,698. The partial disposal was made from an 11.29% equity interest in Besso originally acquired on 31st March 2011 by B. P. Marsh & Company Limited, a wholly owned subsidiary of the Company, which at the time increased the Group's overall holding from 22.73% to 34.02%. The 4.02% disposal represented the proportion of shares which were available for buy-back by Besso following the exercise of a Call Option agreement (entered into on 26th May 2011) for subsequent issue to management under a share incentive scheme. As a result of the Call Option being exercised, and the further 6.71% acquired on 1st November 2012 (noted above), the Group's overall holding in Besso as at 31st January 2013 was 36.71%.

 

On 17th May 2012 the Group made a disposal of 2.75% of its then total 18.94% equity interest in Hyperion Insurance Group Limited ("Hyperion"). 1,193,500 shares (from a total holding of 8,222,900 shares) were sold to an existing Hyperion shareholder and co-investor, Murofo Investments S.L., for a cash consideration of £4,535,330. Following a major acquisition by Hyperion on 3rd July 2012 which was part funded by the issue of new shares, as at 31st January 2013 the Group's overall holding in Hyperion stood at 13.84%. 
 

Group (continued)

 

The unquoted investee companies, which are registered in England except Summa Insurance Brokerage S. L. (Spain), Preferred Asset Management Limited (Jersey), Close Horizons Limited (Isle of Man) and Paterson Squared, LLC (USA), 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




£

£








Amberglobe Limited

49.00

30.04.12

(789,729)

(50,789)

Business sales platform







Besso Insurance Group Limited

36.71

31.12.12

6,383,049

14,163

Investment holding

company







Hyperion Insurance

   Group Limited

13.84

30.09.12

37,940,000

20,572,000

Insurance holding company







 

LEBC Holdings Limited

21.95

30.09.12

619,910

360,006

Independent financial advisor company







Portfolio Design Group  International Limited

20.00

31.12.12

6,442,713

(398,801)

Fund managers of traded endowment policies







Morex Commercial Limited

20.00

31.12.12

446,923

44,255

Trading in secondary life policies







Preferred Asset

   Management Limited

20.00

30.09.12

368,720

139,813

Fund management company







Close Horizons Limited

  

20.00

31.12.12

1,442,900

153,939

Investment holding company







 

Paterson Squared, LLC

22.50

31.12.10

364,411

279,575

Independent reinsurance transaction consultants

 







 

Summa Insurance Brokerage, S. L.

48.625

31.12.11

9,968,299

1,097,805

Consolidator of regional insurance brokers

 







 

U.S. Risk (UK) Limited

29.28

31.12.12

1,879,733

(965,017)

Holding company for insurance intermediaries

 

 

In addition, as at 31st January 2013 the Group held 1.35% of the share capital of Randall & Quilter Investment Holdings Plc ("R&Q"). R&Q is an AIM listed company. During the current year R&Q made two 'return of value' distributions totalling £55,442 to shareholders through the issue and subsequent cancellation of new shares.  The Group elected to receive these distributions (£32,731 in June 2012 and £22,711 in November 2012) as 'capital' receipts rather than the dividend (income) alternative.  The Group has treated these distributions as disposal proceeds and reduced the cost base of this investment accordingly, resulting in a £4,501 realised gain on disposal of investment (see Note 13) which is reflected in the Consolidated Statement of Comprehensive Income for the year.   

 

On 27th July 2012 the Company's wholly owned subsidiary B. P. Marsh & Company Limited entered into a Share Exchange Agreement with The Broucour Group Limited ("the Broucour Group") in respect of its 49% equity investment in Amberglobe Limited ("Amberglobe").  On this date the Broucour Group acquired the entire issued share capital of Amberglobe (£200,000 divided into £130,000 ordinary shares and £70,000 preference shares of £1 each, of which the Group, through its subsidiary undertaking, owned £98,000 divided into £28,000 ordinary shares and £70,000 preference shares).  The Broucour Group was incorporated in July 2012 as a holding company to facilitate the acquisition of the assets of Turner Butler Limited ("Turner Butler").  The Group assisted in this acquisition by providing the Broucour Group with a £600,000 loan facility to fund the acquisition cost and associated working capital requirements which was drawn down in full on 27th July 2012.  As a result of this transaction, the Group's original investment in Amberglobe is now held in the Broucour Group, with Amberglobe now a wholly owned subsidiary of the Broucour Group.

 

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 except for those of Hyperion Insurance Group Limited which are prepared under IFRS.

 

 


Shares in

Company

group


undertakings


£'000

At valuation




At 1st February 2011

36,320

Additions

-

Unrealised gains in this period

3,645

At 31st January 2012

 £     39,965



At 1st February 2012

39,965

Additions

-

Unrealised gains in this period

5,334

At 31st January 2013

 £     45,299



At cost




At 1st February 2011

2,143

Additions

-

At 31st January 2012

 £       2,143



At 1st February 2012

2,143

Additions

-

At 31st January 2013

 £       2,143



 

Shares in group undertakings

All group undertakings are registered in England and Wales.  The details and results of group undertakings, which are extracted from the UK GAAP accounts of these companies, 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

2013

2013

Principal activity



£

£







B.P. Marsh &

   Company Limited

100

53,232,062

4,519

Consulting services and investment holding company






Marsh Insurance

   Holdings Limited

100

11,082,299

54,836

Investment

holding company






B.P. Marsh Asset Management

   Limited

100

1,000

-

Dormant






B.P. Marsh & Co. Trustee

   Company Limited

100

1,000

-

Dormant






Marsh Development

   Capital Limited

100

1

-

Dormant

 

 

13.     REALISED GAINS / (LOSSES) ON DISPOSAL OF INVESTMENTS

 

The realised gains on disposal of investments comprises of a gain of £4,501 in respect of capital distributions made by R&Q in the year (see Note 12).  The amount included in realised losses on disposal of investments for the year ended 31st January 2012 was £20,740 which was also in respect of capital distributions made by R&Q.

 

In addition, during the year the Group also disposed of part of its investment in Hyperion Insurance Group Limited ("Hyperion") at its carrying value of £4,535,000.  The Group also disposed of shares held under an option agreement in Besso Insurance Group Limited ("Besso") with a carrying value of £279,000 for consideration of £278,698 (see Note 12 for further details).  As a result of these disposals being made at carrying value, no material gain or loss was included in the Consolidated Statement of Comprehensive Income in the current year.

 

The above Hyperion and Besso disposals did, however, result in a release to Retained Earnings from the Fair Value Reserve of £3,748,321 (see Note 21).

 

 

14.        LOANS AND RECEIVABLES - NON-CURRENT

Group


Company


2013

2012


2013

2012


£'000

£'000


£'000

£'000







Trade receivables

127

-


-

-

Loans to investee companies (Note 26)

 8,460

 5,983


 -

 -

Amounts due from subsidiary undertakings

 

-

 

-


 

10,155

 

10,155


£   8,587

£    5,983


£    10,155

£    10,155

 

Included within trade receivables is £127,214 (2012: £Nil) owed by the Group's participating interests. 

 

See Note 26 for terms of the loans.

 

 

15.     TRADE AND OTHER RECEIVABLES - CURRENT

 

 


Group


Company


2013

2012


2013

2012


£'000

£'000


£'000

£'000







Trade receivables

363

388


-

-

Less provision for impairment of receivables

 

-

 

(123)


 

-

 

-


363

265


-

-

Loans to investee companies (Note 26)

261

1,415


-

-

Other receivables

11

7


-

-

Prepayments and accrued income

539

406


-

-








£    1,174

£    2,093


£           -

£           -







 

Included within trade receivables is £332,394 (2012: £244,952) owed by the Group's participating interests. 

 

Trade receivables are provided for based on estimated irrecoverable amounts from the fees and interest charged to investee companies, determined by the Group's management based on prior experience and their assessment of the current economic environment.

 

Movement in the allowance for doubtful debts:

 


Group


Company


2013

2012


2013

2012


£'000

£'000


£'000

£'000







Balance at 1st February

123

68


-

-

 

(Utilisation of) / increase in provision in the period

 

 

(123)

 

 

55


 

 

-

 

 

-







Balance at 31st January

£        -       

£    123


£           -

£           -







 

In determining the recoverability of a trade receivable, the Group considers any change in the credit quality of the trade receivable from the date credit was initially granted up to the reporting date. 

 

The Group's net trade receivable balance (current and non-current) includes debtors with a carrying amount of £490,046 (2012: £263,552) which are past due at the reporting date for which the Group has not provided as there has not been a significant change in credit quality and the amounts are still considered recoverable.  The Group does not hold any collateral over these balances.

 

Ageing of past due but not impaired:


Group


Company


2013

2012


2013

2012


£'000

£'000


£'000

£'000







0 - 30 days

238

63


-

-

31 - 60 days

83

65


-

-

61 - 90 days

45

12


-

-

More than 90 days

124

123


-

-








£ 490

£    263


£           -

£           -







 

In the current year there were no provisions made against loans to investee companies (2012: £339,000).  The total provision against loans relating to Fixed Asset Investments as at 31st January 2013 stands at £785,000 (2012: £785,000).

 

See Note 26 for terms of the loans and Note 25 for further credit risk information.

 

 

16.     LOANS AND OTHER PAYABLES

 

During the year, the Group repaid £1,250,000 of a loan facility totalling £4,325,000, which certain directors and companies controlled by the directors, or other related parties, agreed to provide to the Group during the year to 31st January 2011.  The loan facility is secured on the assets of the Company, accrues interest at a rate of UK Base Rate + 4% (subject to a minimum of 6.5%), and is repayable in full by 9th June 2013.  As at 31st January 2013 none of this facility remained drawn down (as at 31st January 2012: £1,250,000 drawn down).

 

Interest on this loan facility of £64,760 (2012: £103,524) was charged to the Consolidated Statement of Comprehensive Income for the current year (Note 3). 

 

In addition, during the year the Group received an upfront payment of £300,000 in respect of a three year loan arrangement fee from Besso Insurance Group Limited ("Besso").  As at 31st January 2013 £100,000 of this fee was included in the Consolidated Statement of Financial Position under 'Non-current liabilities' as long-term deferred income. The remaining portion of the fee is included within the Consolidated Statement of Financial Position under 'Current liabilities' or has already been credited to the Consolidated Statement of Comprehensive Income as fees receivable.  The receipt of this upfront fee had no cash impact for the Group as it was funded through an increase to a loan facility provided to Besso in March 2012.

 

 

17.      CARRIED INTEREST PROVISION

Group


Company


2013

2012


2013

 

2012


£'000

£'000


£'000

£'000







 Carried interest provision

294

299


-

           -








£    294

£    299


£           -

£           -







 

This carried interest provision represents S. S. Clarke's entitlement 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 (2012: £Nil).

 

 

18.    DEFERRED TAX LIABILITIES - NON- CURRENT



Group



Company



£'000



£'000







At 1st February 2011


6,683



-

Charged to Statement of Comprehensive Income


 

732



 

-







At 31st January 2012


£    7,415



£           -







At 1st February 2012


7,415



-

Charged to Statement of Comprehensive Income


 

518



 

-







At 31st January 2013


£    7,933



£           -







 

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, £7,933,000 (2012: £7,415,000) of tax on capital gains would become payable by the Group at a corporation tax rate of 23% (2012: 26%).

 

The Government recently announced a further 2% reduction in the corporation tax rate from 23% to 21% with effect from 1 April 2014, which is expected to be legislated in the Finance Bill 2013.

 

As the 21% rate was not substantively enacted at the year end and is not effective until 1st April 2014 at the earliest, this rate has not been used in calculating the deferred tax liabilities arising from the unrealised gains on the revaluation of the Group's investments.

 

 

19.    TRADE AND OTHER PAYABLES - CURRENT

Group


Company


2013

2012


2013

2012


£'000

£'000


£'000

£'000







Trade payables

30

37


    -

-

Other taxation & social security costs

31

45


-

-

Accruals and deferred income

423

213


-

-








£    484

£    295


£           -

£           -

 

 

20.     CALLED UP SHARE CAPITAL

2013

2012


£'000

£'000

Allotted, called up and fully paid



29,230,000 Ordinary shares of 10p each (2012: 29,286,143)

2,923

       2,929





£  2,923

£  2,929

 

In August 2012 the Company repurchased 56,143 ordinary shares at a price of 89 pence per ordinary share.  These shares were immediately cancelled upon purchase, resulting in a reduction in the number of ordinary shares in issue from 29,286,143 to 29,230,000.

 

 

21.     RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS

 

 

Group


Share


Reverse

Capital




Share

premium

Fair value

acquisition

redemption

Retained



capital

account

reserve

reserve

reserve

earnings

Total


£'000

£'000

£'000

£'000

£'000

£'000

£'000









At 1st February 2011

 

2,929

 

9,370

 

20,883

 

393

 

-

 

12,901

 

46,476









Profit for

the year

 

-

 

-

 

3,773

 

-

 

-

 

(128)

 

3,645









At 31st January 2012

 

£2,929

 

£9,370

 

£24,656

 

£   393

 

£      -

 

£12,773

 

£50,121

 

 

At 1st February 2012

 

2,929

 

9,370

 

24,656

 

 

393

 

-

 

12,773

 

50,121









Profit for

the year

 

-

 

-

 

5,440

 

-

 

-

 

237

 

5,677









Transfers on sale of investments (Note 13)

 

 

 

-

 

 

 

-

 

 

 

(3,748)

 

 

 

-

 

 

 

-

 

 

 

3,748

 

 

 

-









Dividends

Paid

(Note 7)

 

-

 

-

 

-

 

-

 

-

 

(293)

 

(293)









Share repurchase (Note 20)

 

 

(6)

 

 

-

 

 

-

 

 

-

 

 

6

 

 

(50)

 

 

(50)









At 31st January 2013

 

£2,923

 

£9,370

 

£26,348

 

£   393

 

£     6

 

£16,415

 

£55,455

 

 

 

Company


Share


Capital




Share

premium

Fair value

redemption

Retained



capital

account

reserve

reserve

earnings

Total


£'000

£'000

£'000

£'000

£'000

£'000








At 1st February 2011

2,929

9,370

34,176

-

    1 

    46,476 








Profit for the year

-

-

3,645

-

-

3,645








At 31st January 2012

£2,929

£9,370

£37,821

£   -

£   1 

£50,121 

 

At 1st February 2012

2,929

9,370

37,821

-

    1 

    50,121 








Profit for the year

-

-

5,334


343

5,677








Dividends paid (Note 7)

-

-

-


(293)

(293)








Share repurchase (Note 20)

(6)

-

-

6

(50)

(50)








At 31st January 2013

£2,923

£9,370

£43,155

£   6

£   1 

£55,455

 



 

 

22.     OPERATING LEASE COMMITMENTS

 

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


2013

2012


Land and

Land and


buildings

buildings


£'000

£'000




Earlier than one year

     £    84

£   84

Between two and five years

£  244

£ 329

 

 

23.      LOAN AND EQUITY COMMITMENTS

 

On 10th March 2008 the Group entered into an agreement to provide a loan facility of £630,000 to Amberglobe Limited, a subsidiary undertaking of The Broucour Group Limited, an investee company.  An additional loan facility of £65,000 was agreed on 30th November 2009 increasing the total facility to £695,000.  As at 31st January 2013 £685,000 of this facility had been drawn down.

 

On 22nd July 2010 the Group entered into an agreement to provide a loan facility of £1,950,000 to US Risk (UK) Limited, an investee company.  As at 31st January 2013 none of this facility had been drawn down.

 

Refer to Note 27 for details of a loan funding commitment entered into in respect of Hyperion Insurance Group Limited after the balance sheet date.

 

 

24.      CONTINGENT LIABILITIES

 

The Group has entered into long-term incentive arrangements with certain employees and directors.  Provided they remain in employment with the Group as at specified dates in the future, the Group has agreed to pay bonuses totalling £135,000 together with the Employers' National Insurance due thereon.  £75,000, £30,000 and £30,000 are due to be paid on 1st October 2013, 15th May 2015 and 15th May 2016 respectively.  No amount has been included in these financial statements as the performance conditions relating to these incentives had not been met at the year end.

 

 

25.     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, other debtors and creditors and loans.  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 Group Report of the Directors under "Financial Risk Management".

 

Interest rate profile

The Group has cash balances of £1,787,000 (2012: £666,000), which are part of the financing arrangements of the Group.  The cash balances comprise bank current accounts and deposits placed at investment rates of interest, which ranged up to 0.3% p.a. in the period (2012: deposit rates of interest ranged up to 0.1% p.a.).  During the period maturity periods ranged between immediate access and 1 month (2012: all cash balances were held in immediate access accounts).

 

Currency hedging

During the period, the Group did not engage in any form of currency hedging transaction (2012: None).

 

Financial liabilities

The Company had no borrowings as at 31st January 2013 (2012: £1,250,000).  Please refer to Note 16 for further details.

 

Fair values

The Group has adopted the amendment to IFRS 7 for financial instruments which are measured at fair value at the reporting date. This requires disclosure of fair value measurements by level of the following fair value measurement hierarchy:

 

· Level 1: Quoted prices unadjusted in active markets for identical assets or liabilities;

· Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, observed either directly as prices or indirectly from prices; and

· Level 3: Inputs for the asset or liability that are not based on observable market data.

 

The following table presents the Group's assets and liabilities that are measured at fair value at 31st January 2013:

 



Level 1

Level 2

Level 3

Total



£'000

£'000

£'000

£'000

Assets












Investments designated as "fair value through profit or loss" assets


785

-

51,926

52,711









£785

-

£51,926

£52,711

 

The Group's assets and liabilities that are measured at fair value at 31st January 2012 are presented in the following table:

 



Level 1

Level 2

Level 3

Total



£'000

£'000

£'000

£'000

Assets












Investments designated as "fair value through profit or loss" assets


658

-

49,966

50,624









£658

-

£49,966

£50,624

 

 

26.     RELATED PARTY DISCLOSURES

 

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

 


2013

2012


£

£




The Broucour Group Ltd

1,285,000

685,000

Besso Insurance Group Ltd

3,678,698

2,940,000

Hyperion Insurance Group Ltd

2,754,392

2,846,642

Paterson Squared, LLC

100,000

100,000








Summa Insurance Brokerage, S. L.

1,971,879

1,942,678

 

 

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.

 

During the year, the Group repaid part of an agreed £4,325,000 loan facility with certain directors, companies controlled by the directors, or other related parties (the "Lenders"), including Brian Marsh Enterprises Limited (£425,000 of a total £3,500,000 facility drawn down as at 31st January 2012 repaid in full during the year), Ms J. K. N. Dunbar (total facility of £500,000 drawn down as at 31st January 2012 repaid in full during the year), Mr P. J. Mortlock (total facility of £250,000 drawn down as at 31st January 2012 repaid in full during the year) and Mrs M. Newman (total facility of £75,000 drawn down as at 31st January 2012 repaid in full during the year) which was secured on the assets of the Company. 

 

The loan accrued interest at a rate of UK Base Rate + 4%, subject to a minimum of 6.5%, and was repayable in full by 9th June 2013. Interest was payable on a quarterly basis. This rolling facility bears a charge of 1% p.a. on any undrawn amount. As at 31st January 2013 none of this facility remained drawn down (as at 31st January 2012: £1,250,000).

 

Mr B. P. Marsh, the Chairman and majority shareholder of the Company is also the Chairman and majority shareholder of Brian Marsh Enterprises Limited.  Ms J. K. N. Dunbar (a director and shareholder of the Company) and Ms C. S. Kenyon (a director of the Company) are also directors and minority shareholders of Brian Marsh Enterprises Limited.

 

Income receivable, consisting of consultancy fees, interest on loans and dividends recognised in the Consolidated Statement of Comprehensive Income in respect of the associated companies of the Company and its subsidiaries for the year were as follows:

 


2013

2012


£

£




The Broucour Group Limited

30,855

46,668

Besso Insurance Group Limited

723,581

549,666

HQB Partners Limited

-

7,575

Hyperion Insurance Group Limited

589,843

599,364

LEBC Group Limited

102,249

129,892

Paterson Squared, LLC

959

15,575

Portfolio Design Group International Limited

66,000

82,000

Summa Insurance Brokerage, S. L.

311,733

424,519

U.S. Risk (UK) Limited and related entities

209,531

208,508




 

In addition, the Group made management charges of £35,000 (2012: £35,000) 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. 

 

The Group also made management charges of £15,000 (2012: £15,000) to Brian Marsh Enterprises Limited. 

 

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 £294,000 (2012: £299,000).

 

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

 

Of the total dividend payments made during the year of £292,861, £187,334 was paid to the directors and/or parties related to them (2012: £Nil).

 

 

27.     POST BALANCE SHEET EVENTS

 

On 1st March 2013 the Group subscribed for a further £50,000 of 14% loan stock in Besso Insurance Group Limited ("Besso").  The loan stock is in addition to the £2,700,000 already held by the Group as at 31st January 2013, bringing the total 14% loan stock held to £2,750,000 as at the date of this report.

 

On 21st March 2013 the Group utilised £875,000 of the Directors' Loan Facility (see Note 16) in order to ensure that sufficient funds are available to pursue the various new business opportunities that it is currently investigating.  On 25th March 2013 the Group utilised a further £1,200,000 of this facility in order to fund a reciprocal loan draw down request from U.S. Risk (UK) Limited (noted below).  On 31st May 2013 the Group utilised the remaining £2,250,000 of the facility to finance a new investment which is expected to complete within a week of signing these consolidated financial statements, therefore as at the date of this report the £4,325,000 facility had been drawn down in full.

 

On 27th March 2013 the Group announced that, subject to FCA and other overseas regulatory approval, it had agreed to sell 5,623,520 shares (from a total holding of 7,029,400 shares) in Hyperion Insurance Group Limited ("Hyperion") to the global growth equity firm General Atlantic for a cash consideration of £29,242,304 (£5.20 per A Ordinary share).  On completion the Group will retain a 2.76% stake in Hyperion subject to a Call Option arrangement which will allow General Atlantic to purchase the Group's remaining stake of 1,405,880 A Ordinary shares of Hyperion at £5.20 per share.  The Call Option will expire and fall away upon the third anniversary of completion or upon Hyperion undertaking an Initial Public Offering ("IPO"), whichever is the earlier.  The Share Purchase Agreement includes an anti-embarrassment provision which provides that if Hyperion undertakes an IPO within twelve months of completion, at a price at or in excess of £6.25 per A Ordinary share, there will be an additional amount payable to the Group, up to a maximum of £0.30 per A Ordinary share.

 

As part of the above agreement, and subject to banking consent, the Group has also agreed to provide circa £6,100,000 in loan funding to Hyperion at an interest rate of Bank of England Base rate plus 5% (minimum 7.5%) for a minimum term of 12 months to refinance existing shareholder loans (including £2,754,392 that the Group has already provided to Hyperion).  The loan will be repayable on an IPO or a change of control of Hyperion or 3rd October 2017, whichever is the earlier, but following the first anniversary of this facility Hyperion will be able to pre-pay prior to these events on the giving of one months' notice.

 

On 2nd April 2013 the Group provided £1,200,000 of an agreed £1,950,000 loan facility to U.S. Risk (UK) Limited to fund the continued expansion of the business.

 

On 13th May 2013, following the £25,000,000 placing of new shares by Randall & Quilter Investment Holdings plc ("R&Q") being approved by its shareholders and the shares being admitted to the market, the Group subscribed to its pro-rata proportion at 120p per share (total consideration of £337,022), maintaining its 1.35% shareholding.

 

On 29th May 2013, the Group provided Besso with a loan facility of £747,000, of which it drew down on £265,000, to enable it to finance a new acquisition.  Together with £2,750,000 of 14% loan stock and other loans of £978,698, total loans amounted to £3,993,698 at the reporting date.

 

 

28.     ULTIMATE CONTROLLING PARTY

 

The directors consider Mr B. P. 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 31st January 2013 but is derived from those accounts. The statutory accounts for the year to 31st January 2013 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 of the state of the Group's and of the Company's affairs as at 31st January 2013 and of the Group's profit for the year then ended;

 

·      the Group's financial statements have been properly prepared in accordance with IFRSs as adopted by the EU;

 

·      the Company financial statements have been properly prepared in accordance with IFRSs as adopted by the EU and as applied in accordance with the provisions of the Companies Act 2006; and

 

·      the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.

 

Approval

 

The financial statements were approved by the Board of Directors on 3rd June 2013 for their release on 4th June 2013.

 

Analyst Briefing

 

An analyst briefing, hosted by Brian Marsh OBE, Chairman, Jonathan Newman, Finance Director, and Daniel Topping, Director will be held at 10:00 a.m., on 4th June 2013 at B. P. Marsh & Partners Plc, 2nd Floor, 36 Broadway, London SW1H 0BH.

 

Please contact Redleaf Polhill on 020 7382 4747 or bpmarsh@redleafpr.com if you wish to attend.

 

 

For further information:

 

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

Brian Marsh OBE                                                                             +44 (0)20 7233 3112

 

Nominated Adviser & Broker

Panmure Gordon

Hugh Morgan / Fred Walsh                                                              +44 (0)20 7886 2500

 

PR Adviser                           

Redleaf Polhill                                                                                  bpmarsh@redleafpr.com

Emma Kane                                                                                        +44 (0)20 7382 4747

 

Notes to Editors:

 

About B.P. Marsh & Partners Plc

 

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

 

Since formation over 20 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 four 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.

 

Jonathan Newman is a Chartered Management Accountant and is the Group Director of Finance and has over 15 years' experience in the financial services industry. Jonathan advises investee companies through three non-executive board appointments and evaluates new investment opportunities.

 

Daniel Topping is a Member of the Chartered Institute of Securities and Investment (MCSI) and an Associate of the Institute of Chartered Secretaries and Administrators (ACIS), having graduated from the University of Durham in 2005. Dan joined B.P. Marsh in February 2007 having started his career at an accountancy firm. In 2011 he was appointed as a director of B.P. Marsh and currently has a number of non-executive appointments over four investee companies and evaluates new investment opportunities.

 

Camilla Kenyon was appointed as Head of Investor Relations at B.P. Marsh in February 2009, having four years' prior experience with the Company. Camilla holds two non-executive appointments, is Chair of the New Business Committee and is a Member of the Investor Relations Society.

 

Natasha Dunbar has over 18 years' experience in the financial services industry. Having joined the Company in 1994 she was made managing director in March 2002, subsequently becoming a non-executive director of the Company in 2008, a position she held for five years. Natasha was reappointed as a Director in February 2013 and holds non-executive appointments at three of the Group's investee companies.

 

- ends -


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