Final Results

B.P. Marsh & Partners PLC 06 June 2007 Date: 6th June 2007 On behalf of: B.P. Marsh & Partners Plc Embargoed until: 0700hrs B.P. Marsh & Partners Plc (B. P. Marsh or 'the Company') Final Results - 6 June 2007 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 31 January 2007. Chairman's Statement I am pleased to present the final audited results for B. P. Marsh & Partners Plc (the 'Group') and its consolidated statements for the year ended 31st January 2007, the first year since the Group's ordinary shares were admitted to trading on AIM on 2nd February 2006. Overview The AIM Admission was a significant landmark for the Group and raised proceeds of £10.1 million net of expenses through the placement of a total of 9.3 million ordinary shares (including just under 7.9 million new ordinary shares). This resulted in a total of 29.3 million ordinary shares in issue, and an initial market capitalisation of just over £41 million. During the year, the Group played a significant part in the re-financing of two of its largest investments, and has utilised 50% of the funds raised from its admission to AIM as follows: • The Group invested a further £1.7m in Besso Holdings Limited ('Besso'), a multi-niche Lloyd's insurance broking Group, to enable Besso to restructure its finances and further develop the business. The Group's investment included the capitalisation of a loan (£0.6m). In doing so, the Group maintained its shareholding in Besso at 24.7%. This shareholding was subsequently diluted to 23.55% following the implementation of an Executive Share Option Plan that was introduced to incentivise management; • The Group participated in an equity placing to raise £5.1m for Hyperion Insurance Group Limited ('Hyperion') to facilitate the further expansion of one of the United Kingdom's fastest growing independent insurance groups. The Group exercised its pre-emption rights and by capitalising part of a loan (£1.4m), maintained its shareholding in Hyperion at 27.9%; • The Group invested €1m in Summa Insurance Brokerage, S. L. a consolidator of regional insurance brokerages based in Spain, which made its first acquisition in March 2006. It also lent €0.4m of a €2m facility to fund further acquisitions; • The Group invested a further £0.1m in Principal Investment Holdings Limited, a predominately discretionary fund manager with both retail and institutional clients, in order to maintain its percentage equity; • The Group repaid in full the loan of £2.5m from Mr B P Marsh following its admission to AIM. The investments within the Group's portfolio made good, and in some cases very good, progress during the year. Hyperion Insurance Group for example increased revenues by 24% and operating profits by 37% for its year to 30th September 2006 and was listed as no. 32 in the Sunday Times Deloitte Buyout Track 100 league table. During the year we actively reviewed a number of prospective new investments. Four potential investments were brought to an advanced stage of negotiation and two of these, JMD Specialist Insurance Services Group Ltd and LEBC Holdings Limited were completed after the year-end. Financial Performance At 31st January 2007, the net asset value of the Group was £47.7m (2006 : £31.2m) before deferred tax. Including deferred tax the net asset value was £40.6m (2006 : £25.7m). Adjusting for the £10.1m net proceeds raised on flotation this equates to an increase in net asset value of 15.4% before deferred tax (2006 : 16.4%), or 13.2% after deferred tax (2006 : 16.3%). The net asset value of £47.7m at 31st January 2007 represented a total increase in net asset value of £35.1m since the Group was originally formed in 1990 excluding the £10.1m net proceeds raised on AIM and the original capital investment of £2.5m. The directors are satisfied that the Group has maintained an annual compound growth rate of 17% after running costs, realisations, losses and distributions but excluding deferred tax (15.5% including deferred tax) since 1990. Based upon the above figures the Group's net asset value per share as at 31st January 2007 was 163p excluding deferred tax (139p including deferred tax). The consolidated profit on ordinary activities before share based provision for the year was £242k (2006: £4k). The Group's investment portfolio movement during the year was as follows : 31st January Acquisitions Disposals Adjusted 31st January 31st January 2006 valuation at cost at cost 2006 valuation 2007 valuation £27,700,000 £3,969,233 £ Nil £31,669,233 £37,784,000 This equates to an uplift in the portfolio valuation of 19.3% before deferred tax (2006 : 20.4%). However, this assumes all acquisitions were made on the first day of the year and therefore the true rate of increase is greater. Post year-end investments The Group has managed to invest the final 50% of the funds raised on its admission to AIM following the year-end as follows: • The Group acquired a 25% shareholding in JMD Specialist Insurance Services Group Limited ('JMD') for £0.6m and has agreed to provide a further £0.25m in loans to further develop the business. 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 an initial consideration of £1.8m and a further deferred payment of £0.2m based upon their subsidiary company's audited results to 31st May 2007. 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 a further £5.5m rights issue for Hyperion Insurance Group Limited to further develop the business taking up its pro-rata share at £1.5m and thereby retaining its 27.89% shareholding; • The Group lent Summa Insurance Brokerage S.L. a further €1.6m, part of an agreed €2m loan facility, to fund further acquisitions of regional brokers in Spain. In addition the Group currently has committed to provide a further £0.6m of funding either through debt or deferred equity for its existing investments. After taking this into consideration, the Group currently has approx. £1.2m of cash available for further investments together with a £3m loan facility. Business Strategy The Group typically invests amounts of up to £2.5 million 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. People In September 2006, Ms Clare Ferguson who, inter alia, has been a partner in the law firm Taylor Wessing for many years, joined the Board as a non-executive director and was immediately co-opted on to the Remuneration Committee. We warmly welcomed her, 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. The directors consider that the Group remains unique in its investment sector and we continue to see a large number of relatively small investment opportunities with excellent management and spirited business plans. These represent a challenge, which the B P Marsh team relishes. Brian Marsh Chairman Investments As at 31st January 2007 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 2007 valuation: £90,000 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 2007 valuation: £12,113,000 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: 28.0% 31st January 2007 valuation: £390,000 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: 27.9% 31st January 2007 valuation: £11,999,000 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 2007 valuation: £427,000 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 2007 valuation: £4,452,000 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: 19.0% 31st January 2007 valuation: £7,202,000 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 2007 valuation: £61,000 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: 35.0% 31st January 2007 valuation: £1,050,000 The Group acquired equity interests in the following companies after 31st January 2007 : 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 2007 valuation: N/A LEBC Holdings Limited (www.lebc-group.com) In April 2007 the Group invested in LEBC, an Independent Financial Advisory company providing services to individuals, corporates and partnerships, principally in employee benefits, investment and life product areas. Date of investment: April 2007 Equity stake: 22.5% 31 January 2007 valuation: N/A Financial Statements CONSOLIDATED PROFIT AND LOSS ACCOUNT FOR THE YEAR ENDED 31ST JANUARY 2007 Notes 2007 2006 £ £ £ £ TURNOVER 1 749,313 940,606 Staff costs 3 1,495,441 1,506,799 Depreciation 9 4,154 5,697 Other operating charges 714,217 708,384 ------- ------- Operating costs (2,213,812) (2,220,880) Other operating income - fixed 1,278,049 986,958 asset investment income --------- --------- OPERATING LOSS (186,450) (293,316) Provision against - (232,023) investments and loans Profit on disposal of fixed 10 114,703 574,316 asset investments Interest 346,537 32,551 receivable and similar income Interest payable 2 (32,541) (78,014) and similar charges ------- ------- 428,699 296,830 --------- --------- PROFIT ON ORDINARY ACTIVITIES BEFORE SHARE 242,249 3,514 BASED PROVISION Share based 14,23 (222,028) - provision --------- --------- PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION 5 20,221 3,514 Taxation 6 - - ------ ----- PROFIT ON 14 20,221 3,514 ORDINARY ACTIVITIES ====== ===== AFTER TAXATION Earnings per 8 0.07p share - basic & ===== diluted The result for the year is wholly attributable to continuing activities. BALANCE SHEET 31ST JANUARY 2007 Group Company ----- ------- Notes 2007 2006 2007 2006 ----- ---- ---- ---- ---- £ £ £ £ FIXED ASSETS Tangible assets 9 4,939 8,136 - - Investments 10 37,784,000 27,700,000 37,833,532 - ---------- ---------- ---------- ------- 37,788,939 27,708,136 37,833,532 - ---------- ---------- ---------- ------- DEBTORS: due after more than 11 3,091,034 3,230,955 10,154,796 - one year --------- --------- ---------- ------- CURRENT ASSETS Debtors 11 1,056,121 3,413,415 - 1 Cash at bank and in hand 6,988,920 1,083,896 1,210 - --------- --------- ----- 8,045,041 4,497,311 1,210 1 CREDITORS - amounts falling due within one year 12 (1,209,328) (1,733,034) - - ---------- ---------- ---------- ------- NET CURRENT ASSETS 6,835,713 2,764,277 1,210 1 --------- --------- ----- ------- TOTAL ASSETS LESS CURRENT LIABILITIES 47,715,686 33,703,368 47,989,538 1 CREDITORS - amounts falling due after more than one year 12 - (2,500,000) - - --------- ---------- ----------- ------- £47,715,686 £31,203,368 £47,989,538 £ 1 =========== =========== =========== ======= CAPITAL AND RESERVES Called up share capital 13 2,928,614 2,519,553 2,928,614 1 Shares to be issued 14 222,028 - 222,028 - Share premium account 14 9,369,582 16,584 9,369,582 - Revaluation reserve 14 25,324,066 19,209,299 35,468,604 - Capital redemption reserve 14 - 10 - - Reverse acquisition reserve 14 393,253 - - - Profit and loss account 14 9,478,143 9,457,922 710 - --------- --------- ---------- ------- SHAREHOLDERS' FUNDS £47,715,686 £31,203,368 £47,989,538 £ 1 =========== =========== =========== ======= Approved by the Board on 4th June 2007 for release on 6th June 2007 and signed on its behalf by B.P. Marsh and J.S. Newman. CONSOLIDATED CASH FLOW STATEMENT FOR THE YEAR ENDED 31ST JANUARY 2007 Notes 2007 2006 ----- ---- ---- £ £ Cash outflow from operating activities 15 (454,664) (329,651) Returns on investment and servicing of finance 16 313,996 (45,463) Taxation - - Capital expenditure and financial investment 17 (1,609,611) (563,881) Equity dividends - (68,948) --------- --------- Cash outflow before financing (1,750,279) (1,007,943) Financing 18 7,655,303 1,500,000 --------- --------- Increase in cash in the year 19 £ 5,905,024 £ 492,057 =========== ========= Reconciliation of net cash flow to movement in net funds Increase in cash in the period 19 5,905,024 492,057 Cash inflow / (outflow) from change in funds 2,500,000 (1,500,000) --------- ---------- Movement in net funds in the period 8,405,024 (1,007,943) Opening net funds (1,748,418) (740,475) --------- ---------- Closing net funds 19 £ 6,656,606 £ (1,748,418) =========== ========== NOTES TO THE ACCOUNTS FOR THE YEAR ENDED 31ST JANUARY 2007 1. ACCOUNTING POLICIES Basis of preparation of financial statements The financial statements have been prepared under the historical cost convention modified to include the revaluation of investments and in accordance with applicable accounting standards. Basis of consolidation The Group financial statements consolidate the results and net assets of the company and all of its subsidiary undertakings. No profit and loss account is prepared for the company, as permitted by Section 230 of the Companies Act 1985. The company made a profit for the year of £710 (2006: £nil). 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 adopted reverse acquisition accounting as the basis of consolidation in order to give a true and fair view. In invoking the true and fair override, the directors note that reverse acquisition accounting is endorsed under International Financial Reporting Standard 3 and that the Urgent Issues Task Force (UITF) of the UK's Accounting Standards Board has considered the subject and concluded that there are instances where it is right and proper to invoke the true and fair override in such a way (UITF Information Sheet 17). 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 amortised in accordance with FRS 10. The directors believe that by adopting reverse acquisition accounting the consolidated profit and loss account 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. Turnover Turnover represents the amounts receivable, excluding value added tax, in respect of the provision of consultancy services which are recognised as that service is provided. All turnover is derived from the UK except for income derived from Summa Insurance Brokerage S.L. (Spain) and Oakbridge Insurance Services (USA), the details of which are disclosed in Note 25. Investments Investments are stated at fair value. The valuations of investments are conducted by the Board. 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 cashflows from the investment where a realisation or flotation is imminent. Realised surpluses or deficits on the disposal of investments are taken to the Profit & Loss account, unless they have already been taken to the Revaluation Reserve. Unrealised surpluses on the revaluation of investments are taken to the Revaluation Reserve. Permanent impairments in the value of investments are taken to the Profit & Loss account, except to the extent that they represent reversals of prior revaluations. All investments in portfolio companies are held as a means to benefit from increases in their marketable value and not as a medium through which the business of the company is carried out. Therefore in accordance with Financial Reporting Standard 9 'Associates and Joint Ventures', they are not accounted for as associates. Income from investments Income from investments comprises: a) gross interest from loan stock, which is taken to the profit and loss account on an accruals basis. b) dividends from shares, which are taken to the profit and loss account when received, except for fixed yield dividends, which are accounted for on an accruals basis provided that the investee company has sufficient distributable reserves and is able to make such distributions. Depreciation Provision for depreciation of tangible assets is made on the straight line basis at rates calculated to write off the cost of the assets, less their estimated residual values, over their expected working lives, which are considered to be: Furniture & equipment - 5 years Foreign currencies Monetary assets and liabilities denominated in foreign currencies are translated into sterling at rates of exchange ruling at the balance sheet date. Transactions in foreign currencies are translated into sterling at the rate ruling on the date of the transaction. Exchange gains and losses are recognised in the profit and loss account. Deferred taxation Full provision is made for deferred tax assets and liabilities arising from all timing differences between the recognition of gains and losses in the financial statements and recognition in the tax computation. Deferred tax is not provided on timing differences arising from the revaluation of fixed assets in the financial statements. A net deferred tax asset is recognised only if it can be regarded as more likely than not that there will be suitable taxable profits from which the future reversal of the underlying timing differences can be deducted. Deferred tax asset and liabilities are calculated at the tax rates expected to be effective at the time the timing differences are expected to reverse. 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 profit and loss account. 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 Instruments Financial instruments are recognised when the Group becomes party to the contract. They are initially measured at the transaction price. Loans and Debtors Loans and debtors are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They arise when the Group provides money, goods or services directly to a counterparty with no intention of trading the debtors. Loans and debtors included in trade and other debtors in the balance sheet are initially measured at original invoice amount and subsequently measured after deducting any provision for impairment. Borrowings and other financial liabilities These are measured initially at fair value or at original invoice amount and subsequently measured after deducting any provision for impairment. The Group does not hold or issue derivative financial instruments for trading purposes. 2. INTEREST PAYABLE AND SIMILAR CHARGES 2007 2006 ---- ---- £ £ Other interest 32,541 78,014 ====== ====== 3. STAFF COSTS The average number of employees, including directors, employed by the Group during the period was 19 (2006: 22). All remuneration was paid by B. P. Marsh & Company Limited. The related staff costs were: 2007 2006 ---- ---- £ £ Wages and salaries 1,251,421 1,271,889 Social security costs 150,401 153,669 Pension costs 93,619 81,241 ---------- ---------- £1,495,441 £1,506,799 ========== ========== In addition staff were paid £615,000 (2006: £120,000) out of the B. P. Marsh Employee Benefit Trust in the year. This cost is not reflected in the profit and loss account of B. P. Marsh & Company Limited in the current year as it is funded through prior year contributions. 4. DIRECTORS' EMOLUMENTS 2007 2006 ---- ---- The aggregate emoluments of the directors were: £ £ Management services 868,818 845,453 Fees 36,400 46,552 Pension contributions 53,850 50,075 ---------- ---------- £ 959,068 £ 942,080 ========= ========= Highest paid director Emoluments 120,724 255,019 Long term incentive payment 250,000 - Pension contribution 8,500 15,000 ---------- ---------- £ 379,224 £ 270,019 ========== ========== The highest paid director for the year includes a payment of £250,000 out of the B. P. Marsh Employee Benefit Trust. This cost is not reflected in the profit and loss account of B. P. Marsh & Company Limited in the current year as it is funded through prior year contributions. The company contributes into personal pension plans on behalf of certain employees and directors. Contributions payable are charged to the profit and loss account in the period to which they relate. During the period, 4 directors (2006: 4) accrued benefits under money purchase pension schemes. 5. PROFIT/(LOSS) ON ORDINARY ACTIVITIES BEFORE 2007 2006 ---- ---- TAXATION £ £ The profit/(loss) for the period is arrived at after charging: Depreciation of owned tangible fixed assets: 4,154 5,697 Auditors remuneration :- Audit fees (Company £16,000 (2006 £nil)) 36,000 32,650 Other services (Company £16,803 (2006 £nil)) 41,803 23,507 Exchange (gain) / loss (41,112) 8,595 Operating lease rentals of land and buildings 117,975 117,975 ========= ========= In addition the auditors were also paid £85,000 during the year (2006 £nil) 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. 6. TAXATION 2007 2006 ---- ---- £ £ The charge for tax comprises: UK corporation tax for the year £ - £ - =========== =========== Factors affecting the charge for the year Profit on ordinary activities before tax £ 20,221 £ 3,514 =========== =========== Tax at 30% on profit on ordinary activities 6,063 1,054 Effects of: Expenses not deductible for tax purposes 66,608 49,404 Non taxable income (167,447) (65, 274) Capital allowances in excess of depreciation (155) (8) Other effects: Unutilised tax losses carried forward 94,931 39,567 Utilisation of tax losses during the period - (472,374) Net chargeable gains - 550,995 Provisions against investments not allowable for tax - 46,800 Non-taxable income (dividends received) - (150,164) -------- ---------- Tax charge for the year £ - £ - ======== ========== 7. DIVIDENDS 2007 2006 ---- ---- £ £ Ordinary dividends Interim dividend paid on: 'A' Ordinary shares - 68,948 -------- --------- £ - £ 68,948 ======== ========= 8. PROFIT PER ORDINARY SHARE The calculation of profit per share is based on the following profits and numbers of shares: 2007 2007 Profit Per share £ p Profit Profit after taxation 20,221 0.07p ========= Number Shares Weighted average number of shares basic and diluted 29,286,143 =========== Due to the capital restructuring that occurred prior to the Group's admission onto AIM it has been considered that the use of 2006 comparative data would not prove meaningful. 9. TANGIBLE FIXED ASSETS Furniture & Equipment Group £ Cost At 1st February 2006 97,925 Additions 957 ------ At 31st January 2007 98,882 ------ Depreciation At 1st February 2006 89,789 Charge for the year 4,154 ------ At 31st January 2007 93,943 ------ Net book value At 31st January 2007 £ 4,939 ------- At 31st January 2006 £ 8,136 ------- 10. FIXED ASSET INVESTMENTS Group investments: ------------------ Total ----- £ At valuation At 1st February 2006 27,700,000 Additions 3,969,233 Movement in valuation 6,114,767 ----------- At 31st January 2007 £37,784,000 =========== At cost At 1st February 2006 8,490,701 Additions 3,969,233 ----------- At 31st January 2007 £12,459,934 =========== The Group received $681,000 (£381,709) as part of the funds withheld in escrow on the sale of Carpenter Moore Insurance Services Inc ('CMIS') in October 2005. Originally $484,000 of the Group's proceeds had been withheld to ensure that a minimum level of working capital was achieved. However, on completion of CMIS' audited accounts to 30th September 2005 there was a surplus which generated a further profit for the Group of £109,799 (2006: £183,346). Also included in profit on disposal of fixed asset investments is £4,904 (2006: £390,970) which relates to income received from investments written off in prior years and the reversal of an impairment provision. 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:- % Date Aggregate Post Tax holding Of share information capital and Profit/ (loss) Name of capital Available Reserves for the year Principal activity company to £ £ Berkeley Insurance 19.90 31.10.06 80,000 34,000 Insurance holding company (Holdings) Limited Besso Holdings 23.55 31.12.05 8,041,671 141,461 Investment holding Limited company HQB Partners Limited 28.00 31.12.06 304,570 302,484 Investor relations consultants Hyperion Insurance 27.89 30.09.06 11,318,000 2,946,000 Insurance holding company Group Limited Paterson Martin 22.50 31.12.06 504,113 110,016 Actuarial Limited insurance/ reinsurance consultants Portfolio Design Group 20.00 31.12.06 5,228,504 1,672,080 Fund managers of International traded endowment Limited policies Morex Commercial 20.00 31.07.06 (493,864) 788,943 Trading in Ltd secondary life policies Preferred 20.00 30.09.06 267,753 72,672 Fund management Asset company Management Ltd New Horizons Ltd 20.00 31.12.04 654 Nil Investment holding company (formerly Surrenda-Link Nominees Ltd) Principal Investment 19.00 31.12.06 5,394,000 1,435,000 Fund management company Holdings Limited Public Risk Management 44.00 31.12.06 (277,057) 3,943 Public sector risk management consultants Limited Summa Insurance Brokerage, S.L. 35.00 31.12.05 385,361 (126,648) Consolidator of regional insurance brokers 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 £200,000 which relates to the dividend paid out. Shares in Company investments: Group Undertakings £ At valuation At 1st February 2006 - Additions 2,364,928 Movement in valuation 35,468,604 ------------ At 31st January 2007 £37,833,532 ============ At cost At 1st February 2006 - Additions 2,364,928 ------------ At 31st January 2007 £ 2,364,928 ============ 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 Principal Name of company Capital 2007 2007 activity --------------- ------- ---- ---- -------- £ £ B.P. Marsh & 100 37,559,680 (135,220)Consulting Company Limited services and investment holding company Marsh Insurance 100 20,576,536 154,731 Investment Holdings Limited holding company B.P. Marsh & Co. Trustee 100 1,000 - Dormant Company Limited Marsh Development 100 1 - Dormant Capital Limited 11. DEBTORS Group Company ----- ------- 2007 2006 2007 2006 ---- ---- ---- ---- £ £ £ £ Due within one year Trade debtors 188,786 245,092 - - Loans to investee companies 250,000 2,510,000 - - Other debtors 410,222 302,388 - 1 Prepayments and accrued income 207,113 355,935 - - ----------- ----------- ------------ ------- £ 1,056,121 £ 3,413,415 £ - £ 1 =========== =========== ============ ======= Due after one year Loans to investee companies 3,091,034 2,805,000 10,154,796 - Other debtors - 425,955 - - ----------- ----------- ----------- ------- £ 3,091,034 £ 3,230,955 £10,154,796 £ - =========== =========== =========== ======= Included within trade debtors, £129,351 (2006: £186,317) is owed by the Group's participating interests. Of this total £nil (2006: £nil) is owed by the company's participating interests. On 23rd February 2006 £1,429,661 of the £1,500,000 loan owed within one year by Hyperion Insurance Group Limited was converted into 5,277 Ordinary shares of £1 each and 4,662 preferred cumulative shares of £1 each in Hyperion Insurance Group Limited. The remainder of the balance was repaid to the company. On 21st March 2006 the £600,000 loan owed within one year by Besso Holdings Limited was converted into 600,000 redeemable preference shares of £1 each. 12. CREDITORS Group Company 2007 2006 2007 2006 £ £ £ £ Due within one year Trade creditors 67,564 40,388 - - Corporation Tax 345,504 429,040 - - Other taxation & social security costs 63,368 58,639 - - Other loans 332,314 332,314 - - Other creditors 12 12 - - Accruals and deferred income 400,566 872,641 - - ----------- ----------- -------- ------- £ 1,209,328 £ 1,733,034 £ - £ - =========== =========== ======== ======= Group Company 2007 2006 2007 2006 £ £ £ £ Due after one year Other loans - 2,500,000 - - ------- --------- -------- ------- £ - £ 2,500,000 £ - £ - ======= =========== ======== ======= 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). The other loan due after one year in 2006 related to amounts lent to the company by Mr B.P. Marsh as part of a £3,000,000 facility, and was secured on the assets of the company. The loan accrued interest at a rate of 2% above the UK base rate, and was repayable in full by June 2009. Interest was payable on a quarterly basis. On 8th February 2006 the £2,500,000 loan drawn down was repaid in full following the Group's admission to AIM and this loan was replaced with a new £3,000,000 facility. This new facility is on the same interest and repayment terms but also has a charge of 1% p.a. on any undrawn amount. 13. CALLED UP SHARE CAPITAL 2007 2006 £ £ Authorised 50,000,000 Ordinary shares of 10p each (2006: 50,000,000) 5,000,000 5,000,000 ----------- ----------- £ 5,000,000 £ 5,000,000 =========== =========== Allotted, called up and fully paid 29,286,143 Ordinary shares of 10p each (2006: 10) 2,928,614 1 ----------- ----------- £ 2,928,614 £ 1 =========== =========== ISSUE OF SHARE CAPITAL On incorporation on 13th January 2006 50,000,000 10p Ordinary shares were authorised and 10 10p Ordinary shares were issued. On 1st February 2006 731 10p deferred shares of B.P. Marsh & Company Limited were issued. On 1st February 2006 21,428,990 10p Ordinary shares were issued. The total issued shares of 21,429,000 10p Ordinary shares were then used in a share-for-share exchange with B.P. Marsh & Company Limited (see Note 1) whereby the shareholders of B.P. Marsh & Company Limited became the shareholders of B.P. Marsh & Partners Plc. On 2nd February 2006 7,857,143 10p Ordinary shares were issued as the company admitted its shares for trading on the Alternative Investment Market ('AIM'). 14. RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS Group Shares Share Capital Reverse Profit Share to be premium Revaluation redemption acquisition and loss capital Issued Account reserve reserve reserve account Total £ £ £ £ £ £ £ £ At 1st February 2,519,553 - 16,584 19,209,299 10 - 9,457,922 31,203,368 2006 Profit for - - - - - - 20,221 20,221 the year Issue of 2,928,621 - 10,214,286 - - - - 13,142,907 shares Shares to - 222,028 - - - - - 222,028 be issued Acquisition (2,519,560) - (16,584) - (10) 393,253 - (2,142,901) of subsidiary undertaking Placement - - (844,704) - - - - (844,704) costs Surplus on - - - 6,114,767 - - - 6,114,767 revaluation of investments ---------- --------- ---------- ----------- ------- -------- ---------- ----------- At 31st January £2,928,614 £ 222,028 £9,369,582 £25,324,066 £ - £393,253 £9,478,143 £47,715,686 2007 ========== ========= ========== =========== ======= ======== ========== =========== Company Share Profit Share Shares to premium Revaluation and loss capital be issued account reserve account Total £ £ £ £ £ £ At 1st February 1 - - - - 1 2006 Profit for the - - - - 710 710 year Issue of 2,928,613 - 10,214,286 - - 1 3,142,899 shares Placement - - (844,704) - - (844,704) costs Shares to be issued (share - 222,028 - - - 222,028 based payments) Surplus on revaluation of - - - 35,468,604 - 35,468,604 investments ---------- -------- ---------- ----------- --------- ----------- At 31st January £2,928,614 £222,028 £9,369,582 £35,468,604 £ 710 £47,989,538 2007 ========== ======== ========== =========== ========= =========== 15. RECONCILIATION OF OPERATING LOSS TO NET CASH OUTFLOW FROM OPERATING ACTIVITIES 2007 2006 £ £ Operating loss (186,450) (293,316) Depreciation charges 4,154 5,697 Decrease/(increase) in trade debtors, prepayments and other debtors 212,735 (288,031) (Decrease)/increase in creditors (440,172) 238,069 Foreign exchange gain provision on profit on sale of investments (44,931) 7,930 and a reduction in foreign tax liability ----------- ----------- Net cash outflow from operating activities £ (454,664) £ (329,651) =========== =========== 16. RETURNS ON INVESTMENT AND SERVICING OF FINANCE 2007 2006 £ £ Interest received 346,537 32,551 Interest paid (32,541) (78,014) ---------- ---------- £ 313,996 £ (45,463) ========== ========== 17. CAPITAL EXPENDITURE AND FINANCIAL INVESTMENT 2007 2006 £ £ Purchase of tangible fixed assets (957) (3,770) Purchase of investments (3,969,233) (271,378) Proceeds on sale of investments 386,613 1,864,603 Repayment / (payment) of loans from / (to) investee companies 1,973,966 (2,153,336) ------------ ------------ £(1,609,611) £ (563,881) ============ =========== 18. FINANCING 2007 2006 £ £ Cash proceeds from share capital issue 11,000,007 - Placement costs (844,704) - Loan (repayments)/advances received in the period (2,500,000) 1,500,000 -------------- ----------- £ 7,655,303 £ 1,500,000 ============== =========== 19. ANALYSIS OF CHANGES IN NET FUNDS At 1st Cash At 31st February 2006 Flows January 2007 £ £ £ Cash at bank and in hand 1,083,896 5,905,024 6,988,920 ------------ ---------- --------- Debt due within one year (332,314) - (332,314) Debt due after one year (2,500,000) 2,500,000 - ------------ ----------- ----------- £(1,748,418) £ 8,405,024 £ 6,656,606 ============ =========== =========== 20. OPERATING LEASE COMMITMENT The group and company is committed to making the following annual payments under non-cancellable operating leases in the year to 31st January 2007:- 2007 2006 Land and Land and buildings buildings £ £ Operating leases which expire: Within two to five years £ 117,975 £ 117,975 ========= ========= 21. LOAN COMMITMENTS On 31st January 2005 the Group entered into an agreement to provide a loan facility of €1,500,000 to Summa Insurance Brokerage S.L, an associated company and a company incorporated in Spain. On 29th January 2007 this was increased to €2,000,000. As at 31st January 2007 €400,000 of this facility had been drawn down with the remainder being drawn down on 19th February 2007. On 15th April 2004 the Group entered into an agreement to provide a loan facility of £300,000 to Paterson Martin Limited, an associated company. On 22nd January 2007 £200,000 of this facility was drawn down. 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 2007 £80,000 of this facility had been drawn down. 22. CONTINGENT LIABILITIES The directors estimate that, if the Group were to dispose of all its investments at the amount stated in the Balance Sheet, £7,110,057 (2006: £5,490,909) of tax on capital gains would become payable by the Group at the current corporation tax rate of 30%. No account has been made of the proposal to reduce this rate to 28% from April 2008. Of this total contingent liability the directors estimate that the company's liability is £nil (2006: £nil). 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 £450,000 + Employers' National Insurance. £50,000 of this is currently funded through an Employee Benefit Trust. 23. SHARE BASED PAYMENT ARRANGEMENTS During the year ended 31 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 Share options Share appreciation rights granted to granted to advisors advisors 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 150.50 150.50 150.50 grant (pence) Vesting period 5 5 Units vest 10 days after results to 31/ (years) 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% 80% Number expected to vest 17,857 17,857 3,514,337 Fair value per granted instrument (pence) 41.90 41.20 23.50 Charge for year ending 31 January 2007 (£) £7,482 £7,357 £207,189 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. 878,583 share appreciation rights representing 20% of the available units were granted during the year but forfeited before 31st January 2007. 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. 24. 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 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 summarized in the director's report under 'Financial Risk Management'. The numerical disclosures in this note deal with financial assets and financial liabilities as defined in Financial Reporting Standard 13 'Derivatives and Other Financial Instruments' (FRS 13'). Certain financial assets such as investments in subsidiary undertakings are excluded from the scope of these disclosures. As permitted by FRS 13, short term debtors and creditors have been excluded from the disclosures, other than the currency disclosures. Interest Rate Profile The Group has cash balances of £6,988,920 (2006: £1,083,896), 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 3.7% p.a. and between 5.1% p.a. in the period (2006: ranged between 2.9 % p.a. and 4% 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 (2006: none). Financial liabilities The company had no borrowings during the period (2006: £2,500,000). Fair values All the financial assets and liabilities at 31 January 2007 were revalued where the directors consider they are materially different from their book values. 25. RELATED PARTY DISCLOSURES The following loans owed by the associated companies of the Company and its subsidiaries were outstanding at the year end: 2007 2006 £ £ Besso Holdings Ltd - 600,000 HQB Partners Ltd 80,000 80,000 Hyperion Insurance Group Ltd 2,350,000 3,850,000 Jump Group Ltd - 1,400,000 Paterson Martin Ltd 200,000 - Public Risk Management Ltd 445,500 375,000 Summa Insurance Brokerage S.L 265,534 - Income receivable, consisting of consultancy fees and interest on loans credited to the profit and loss account in respect of the associated companies of the Company and its subsidiaries for the year were as follows: 2007 2006 £ £ Berkeley (Insurance) Holdings Ltd 13,311 12,928 Besso Holdings Ltd 367,441 134,990 Carpenter Moore Group, inc. - 329,810 HQB Partners Limited 27,144 25,443 Hyperion Insurance Group Ltd 457,787 504,259 Jump Group Ltd 3,603 - Oakbridge Insurance Services LLC 41,735 - Paterson Martin Limited 42,254 43,614 Portfolio Design Group International Ltd 25,000 41,952 Principal Investment Holdings Ltd 52,296 51,033 Public Risk Management Ltd 57,493 55,355 Summa Insurance Brokerage S.L 76,069 54,777 In addition the Group made management charges to Marsh Christian Trust of £36,000 (2006: £46,000). Mr B.P. Marsh, the Chairman and majority shareholder of the Company, is also the Trustee and Settlor of Marsh Christian Trust. As at 31st January 2007 the Group owed £nil (2006: £2,500,000) to Mr B.P. Marsh, who is the Chairman and majority shareholder of the company. On 8th February 2006 the £2,500,000 loan drawn down was repaid in full following the Group's admission to AIM and this loan was replaced with a new £3,000,000 facility. This new facility is on the same interest and repayment terms but also has a charge of 1% p.a. on any undrawn amount. Interest (including any undrawn rate) paid to him during the period amounted to £32,541 (2006: £78,014). All the above transactions were conducted on an arms length basis. 26. DIRECTOR'S INTEREST IN CONTRACTS S.S. Clarke is entitled to a maximum of 20% of any gain, after deducting expenses and following the repayment of all loans, the 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 (2006: £nil). The valuations of these certain agreed investments of the company and its subsidiaries have been reduced by the respective entitlements to S.S. Clarke. 27. POST BALANCE SHEET EVENTS On 19th February 2007 the Group lent a further €1.6m (£1,082,764) to Summa Insurance Brokerage S.L. being the remainder of a €2m loan facility provided. For further information please see Note 21. On 5th March 2007 the Group acquired a 25% shareholding in JMD Specialist Insurance Services Group Limited for £600,000. In addition a £250,000 loan facility was provided, although this has not been drawn down to date. On 10th April 2007 the Group acquired a 22.5% shareholding in LEBC Holdings Limited for an initial consideration of £1,783,250 with a potential further payment of up to £182,250 based upon their subsidiary company's audited 31st May 2007 accounts. On 18th May 2007 the Group took up its pro-rata proportion of a £5.5m rights issue in Hyperion Insurance Group Limited at a cost of £1,546,144 and thereby retaining its 27.89% shareholding in the company. Notice The financial information set out above does not constitute B.P. Marsh & Partners Plc's statutory accounts for the year to 31 January 2007 but is derived from those accounts. The statutory accounts for the year to 31 January 2007 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 United Kingdom Generally Accepted Accounting Practice, of the state of the affairs of the company and the Group as at 31st January 2007 and the profit and cash flows 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 2007 for release on 6 June 2007. 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 Wednesday 6 June 2007 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 +44 (0)20 7730 2626 Nominated Adviser Nabarro Wells & Co. Limited David Nabarro/Marc Cramsie +44(0) 20 7710 7400 Redleaf Communications (PR to BP Marsh) Emma Kane/Tom Newman +44 (0)20 7822 0200 -ends- Notes to Editors: About B.P. Marsh & Partners Plc B.P. Marsh's current portfolio contains eleven companies. More detailed descriptions of the portfolio can be found at www.bpmarsh.co.uk. Over the past 17 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. Managing Director, Natasha Dunbar, has over 10 years' experience in the financial services industry. Having joined the Company in 1994 she was made managing director in March 2002. Natasha is responsible for the day to day running of all operational aspects of the business and works closely with Brian Marsh in defining the strategic development of the Company. 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 9 years' experience in the financial services industry. Jonathan advises investee companies through several non-executive board appointments and evaluates new investment opportunities. This information is provided by RNS The company news service from the London Stock Exchange

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