Half Yearly Report

RNS Number : 1302V

B.P. Marsh & Partners PLC

28 October 2010

 



B.P. Marsh & Partners Plc

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

Interim Results

B. P. Marsh & Partners Plc (AIM: BPM), a niche venture capital provider to early stage financial services businesses, announces its unaudited Group results for the six months ended 31 July 2010.

Chairman's Statement

Introduction

I am pleased to present the interim results for B.P. Marsh & Partners Plc ("B.P. Marsh" or the "Group") and its consolidated statements for the six-month period ended 31 July 2010 (the "Period").

It has been another good six months for our Group, despite the continued turbulence of the global economy.

Highlights

During the first six months of the year the Company's Net Asset Value grew to £44.9m at 31 July 2010, from £44.2m at 31 January 2010, an increase of 1.6% and 2.3% before dividends. At 31 July 2009 our Net Asset Value stood at £42.7m, so we have achieved an increase of £2.2m, or 5%, or £2.5m and 5.9% before dividends, over the past 12 months.

At 31 July 2010 the Group's unaudited accounts showed a consolidated profit before tax of £1.384m, a satisfactory turnaround from a loss before tax of £1.76m for the six months to 31 July 2009 and profit before tax of £0.06m for the year to 31 January 2010.

The NAV per share at the period end was 153p, an increase of 7p, or 5%, from 146p at 31 July 2009, so the shares were trading at a discount of 45% to NAV to the closing price of 84.5p on 27 October 2010.

During the period we completed a new investment in US Risk (UK) Ltd, the holding company for Oxford Insurance Brokers Ltd, a Lloyd's insurance and reinsurance broker.

Having paid a maiden dividend on 30 July 2010, of 1p per share for the previous full year, it remains the Board's ambition to continue dividend payments in the future.

New investment - US Risk (UK) Ltd

We completed an investment in US Risk (UK) Ltd ("US Risk"), the parent company of Oxford Insurance Brokers, a London-based Lloyd's insurance and reinsurance broker, on 22 July 2010. We acquired a 30% stake in US Risk for a cash consideration of £1.39m together with an agreement to provide additional funding of up to £1.95m, subject to conditions. The equity investment was funded from existing cash resources.

We saw this as an excellent investment opportunity, falling within the heartland of our skills and experiences, with a compelling business plan, good management and strong investment partners. The majority shareholder in US Risk is US Risk Inc, a Dallas-based insurance intermediary focusing on wholesale brokerage and speciality insurance products that is one of the largest in the US, with eleven domestic and international branches.

The shareholders are very supportive of management's growth targets for US Risk and Oxford Insurance Brokers and are working with them to achieve their ambitions. Our investment will be used to further diversify core areas of business; Professional Indemnity, North American property and specialty lines, special risk and reinsurance and to develop new areas and territories.

Portfolio Update

Hyperion Insurance Group Ltd ("Hyperion")

Hyperion Insurance Group, in which the Group has a 19.5% stake, continues to grow at an impressive rate, with revenue growth of just under 34% and an EBITDA margin of 13% in the year to 30 September 2009. Revenues are targeted to increase by at least 27% in the year to 30 September 2010. Hyperion has again been nominated in the IMAS Top 50 Brokers list as one of the fastest growing insurance broking companies in the UK.

Since 31 July 2010, Hyperion Broking Group has announced  that it has agreed to acquire Singapore's Accette Insurance Group, subject to contract and regulatory approval. The acquisition will give Hyperion a strong footing in Asia, with Accette trading with offices in Hong Kong, Indonesia, Malaysia, the Philippines, Thailand as well as Singapore, where Hyperion has recently secured a reinsurance licence. The acquisition continues Hyperion's penetration into the Asian market.

In October 2009 Hyperion acquired Hendricks, the biggest independent specialist D&O and commercial expenses broker in Germany. The acquisition has performed according to plan and continues to build on its market share in Germany, which currently stands at over 10%.

Besso Holdings Ltd ("Besso")

Over the first six months of the 2010 financial year Besso Holdings Ltd has developed an in-house underwriting agency, Gladstone Underwriting Agency Ltd. The focus of this agency will be SME commercial liability insurance. The underwriting director is Vanessa Lampard, previously a liability underwriter at Ace Underwriting Group. Management at Besso are confident that this venture will further add to their service offering and boost Besso's position in this sector.

Besso has further expanded its international reach with the establishment of offices in Hong Kong and Turkey, as well as developing business relationships in Qatar. Management believe that, in circumstances where insurance premium rates continue to soften in the North American market, these developments will diversify Besso's income stream and enable them to look beyond their primary focus on North American wholesale business.

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 six years. 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 a robust investment process, management experience of the sector and a flexible approach towards exit strategies.

 

Directors' Loan

As previously announced, during the period the Group secured a loan facility of £4.32m from several of its Directors, on favourable terms. The line of credit is intended to enable the Group to take advantage of further investment opportunities as and when they arise. The Directors are confident in the Group's future prospects and believe that their willingness to provide their own funds in this way demonstrates this confidence.

 

Market Overview and Investment Opportunities

 

- Insurance market

The market continues to struggle with soft rates, demonstrated by the fall in Lloyd's interim profit before tax to £628m at 30 June 2010, from £1,322m the previous year. Recent months have seen a renewal of M&A interest in the insurance sector, with an increase in private equity interest as demonstrated by the Apollo Management and CVC Capital £850m bid for Brit Insurance. More large and small scale M&A activity is generally expected.

In our sector niche, the repeal of the Lloyd's Act (in part) allowing Brokers to own managing agents has meant that we continue to see a number of start-up managing agent proposals, with the tendency to be for specialised positioning in particular lines of business. Continued consolidation amongst the big three (AON, Willis and Marsh) also provides opportunities for our investee companies to take advantage of individuals and teams of people who might not wish to work for one of the larger firms.

- Solvency II

The impending demands of Solvency II, the EU solvency regime required of insurers and re-insurers, is expected to impact primarily on insurance companies, in which the Group does not invest, but we expect it to generate M&A activity amongst those syndicates considered by Solvency II to be under-capitalised.

- Retail Distribution Review

The RDR, the FSA's undertaking to secure better customer outcomes, comes into effect in 2012. It introduces a new set of rules to the market for retail investment products and affects IFAs, stockbrokers and investment managers. Changes to fee structures and capitalisation requirements for advisory firms and increased levels of qualifications required by advisors are leading to movement within the industry and, consequently, investment opportunities.

There has been some speculation as to how much the IFA sector will contract due to the RDR, but we consider the sector to be responding well to the demands of the new regulations. We hope this will continue to bring good investment opportunities our way.

We remain cautious on the economy in general and recognise that conditions remain challenging for many of our investee companies but we are well placed to address any concerns.

Shareholders

We are committed to increasing shareholder value and, following our maiden dividend declaration, it is the Directors ambition to maintain dividend payments and to deliver sustainable shareholder returns that reflect performance. Our investment portfolio is demonstrating its potential for growth and we believe this will continue, creating additional value for our shareholders. We have an experienced team working to achieve this growth, whilst continuing to develop both potential exit strategies and new investment opportunities.

Outlook

We intend to continue to grow the value of our current portfolio at a sustainable but challenging rate, whilst considering new investment opportunities according to our investment criteria. Current market conditions and approaching regulatory changes continue to produce a steady flow of investment opportunities.

We intend to update the market on trading again after our next period end of 31 January 2011.

Brian Marsh OBE

Chairman

27th October 2010

Investments

As at 31st July 2010 the Group's equity interests were as follows:

Amberglobe Limited

(www.amberglobe.co.uk)

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

Date of investment: March 2008

Equity stake: 49.0%

31st July 2010 valuation: £98,000

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: 22.73%

31st July 2010 valuation: £5,668,000

HQB Partners Limited

(www.hqbpartners.com )

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

Date of investment: January 2005

Equity stake: 27.72%

31st July 2010 valuation: £27,000

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: 19.5%

31st July 2010 valuation: £27,095,000

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: 21.95%

31st July 2010 valuation: £2,559,000

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 July 2010 valuation: £228,000

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 July 2010 valuation: £1,935,000

Randall & Quilter Investment Holdings plc

(www.rqih.com)

Randall & Quilter Investment Holdings plc 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: 1.23%

31st July 2010 valuation: £648,600

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 July 2010 valuation: £5,708,000

US Risk (UK) Limited

(www.oxfordinsurancebrokers.co.uk)

In July of this year the Group completed its investment in US Risk (UK) Limited, the parent company of Oxford Insurance Brokers Limited, a London-based Lloyd's insurance and reinsurance broker.

Date of investment: July 2010

Equity stake: 30%

31st July 2010 valuation: £1,611,000

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 PERIOD ENDED 31ST JULY 2010

Notes Unaudited Unaudited Audited 6 months to 6 months to Year to 31st July 2010 31st July 2009 31st January 2010 £'000 £'000 £'000 £'000 £'000 £'000 GAINS/ (LOSSES) ON INVESTMENT Realised gains on disposal of investments 5 347 - 99 Impairment of Investments and Loans (223) (800) (652) Unrealised gains/ (losses) on investment revaluation 4 1,396 (1,388) 23 1,520 (2,188) (530) INCOME Dividends 198 140 328 Income from loans and receivables 280 169 474 Fees receivable 394 406 910 872 715 1,712 INCOME NET OF GAINS / (LOSSES) ON INVESTMENT 2,392 (1,473) 1,182 Operating expenses (967) (678) (1,562) OPERATING INCOME / (LOSS) 1,425 (2,151) (380) Financial income 3 21 25 Financial expenses (6) - Carried interest provision 9 (11) 413 412 Exchange movements (30) (38) - (44) 396 437 PROFIT / (LOSS) ON ORDINARY ACTIVITIES BEFORE TAXATION 1,381 (1,755) 57 Income tax 8 (388) 525 230 PROFIT / (LOSS) ON ORDINARY ACTIVITIES AFTER TAXATION ATTRIBUTABLE TO EQUITY HOLDERS £993 £(1,230) £287 Earnings/ (loss) per share  - basic and diluted (pence) 3 3.4p (4.2)p 1.0p The result for the period is wholly attributable to continuing activities.

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS AT 31ST JULY 2010

		Unaudited			Unaudited			Audited
	Notes	31st July 2010			31st July 2009			31st January 2010
		£'000	£'000		£'000	£'000		£'000	£'000
ASSETS
NON-CURRENT ASSETS
Property, plant and equipment		36			61			49
Investments	4	45,578			39,781			42,745
Loans and receivables		4,475			4,899			4,613
			50,089			44,741			47,407
CURRENT ASSETS
Trade and other receivables		1,412			647			1,085
Cash and cash equivalents		562			4,078			2,972
			1,974			4,725			4,057
LIABILITIES
NON-CURRENT LIABILITIES
Carried interest provision	9	(335)			(323)			(324)
Deferred tax liabilities	8	(6,656)			(5,974)			(6,268)
			(6,991)			(6,297)			(6,592)
CURRENT LIABILITIES
Trade and other payables		(201)			(515)			(701)
			(201)			(515)			(701)
NET ASSETS			£44,871			£42,654			£44,171
CAPITAL AND RESERVES -
EQUITY
Called up share capital			2,929			2,929			2,929
Share premium account			9,370			9,370			9,370
Fair value reserve			19,202			16,941			18,057
Reverse acquisition reserve			393			393			393
Retained earnings			12,977			13,021			13,422
SHAREHOLDERS' FUNDS - EQUITY	6		£44,871			£42,654			£44,171

The Interim Consolidated Financial Statements were approved by the Board of Directors on 27th October 2010

and signed on its behalf by B.P. Marsh & J.S. Newman

CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE PERIOD ENDED 31ST JULY 2010

Unaudited Unaudited Audited 31st July 2010 31st July 2009 31st January 2010 £'000 £'000 £'000 Cash (used by) / from operating activities Income from loans to investees 280 169 474 Dividends 198 140 328 Fees received from investment activity 394 406 910 Operating expenses (967) (678) (1,562) (Increase) / Decrease in receivables (162) 80 38 (Decrease) / Increase in payables (168) (184) 2 Depreciation 14 11 23 Net cash (used by) / from operating activities  (411)  (56) 213 Net cash (used by) / from investing activities Purchase of investments (1,437) - (2,005) Proceeds from investments 15 4 703 Net cash (used by) / from investing activities  (1,422) 4  (1,302) Net cash (used by) / from financing activities (Payments) / repayments of loans (to) / from investee companies (284) (3,225) (3,325) Financial income 3 21 25 Financial expenses (6) - - Dividends paid (293) - - Net cash (used by) / from financing activities  (580)  (3,204)  (3,300) Change in cash and cash equivalents (2,413) (3,256) (4,389) Cash and cash equivalents at beginning of the period 2,972 7,341 7,341 Exchange gain / (loss) * 3 (7) 20 Cash and cash equivalents at end of period £562 £4,078 £2,972

*The exchange gain/ (loss) as noted in the Consolidated Statement of Comprehensive Income is £(30)k (6 months to 31st July 2009: £(38)k & 12 months to 31st January 2010: £nil  The exchange loss in the Consolidated Statement of Cash Flows excludes an exchange loss of £(33)k (6 months to 31st July 2009: £(31)k & 12 months to 31st January 2010: £(20)k) relating to the revaluation of a loan denominated in Euros as this is a non-cash movement. 

 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE PERIOD ENDED 31ST JULY 2010

		Unaudited	Unaudited	Audited
		6 months to	6 months to	Year to
		31st July 2010	31st July 2009	31st January 2010
		£'000	£'000	£'000
Opening total equity		44,171	43,884	43,884
Total recognised income and (expense) for period		993	(1,230)	287
Dividends paid		(293)	-	-
Total equity		£44,871	£42,654	£44,171

1.       ACCOUNTING POLICIES

          Basis of preparation of financial statements

          These financial statements have been prepared in accordance with International Financial Reporting Standards as adopted for use by the European Union ("IFRS"), including standards and interpretations issued by the International Accounting Standards Board.  The consolidated financial statements have been prepared under the historical cost convention as modified by the revaluation of financial assets and financial liabilities through the profit or loss.

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

          These interim consolidated financial statements were approved by the Board on 27th October 2010.  They have not been audited nor reviewed by the Group's Auditors, as is the case with the comparatives to 31st July 2009, and do not constitute statutory accounts within the meaning of section 434 of the Companies Act 2006.

          The financial statements have been prepared using the accounting policies and presentation that were applied in the audited financial statements for the year ended 31st January 2010.  Those accounts, upon which the Group's Auditors issued an unqualified opinion, have been filed with the Registrar of Companies and do not contain a statement under section 498 (2) or (3) of the Companies Act 2006.

          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. 

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.

Intra-group balances and any recognised gains and losses or income and expenses arising from intra-group transactions are eliminated in preparing the consolidated financial statements.

Associates are those entities in which the Group has significant influence, but not control, over the financial and operating policies. Investments that are held as part of the Group's investment portfolio are carried in the 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 profit or loss in the period of the change. The Group has no interests in associates through which it carries on its business.

          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"). 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 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 Statement of Comprehensive Income for the period.  In the 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 Statement of Comprehensive Income.

          Income from investments

          Income from investments comprises:

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

b)   dividends from equity investments are recognised in the 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 reporting period.

Tangible fixed assets

          Tangible fixed assets are stated at cost less 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

                   Leasehold fixtures and fittings - over the life of the lease 

          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 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 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 substantially enacted by the reporting period.

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 reporting period 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 Statement of Comprehensive Income, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity.

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

Bonus provision

There is no contractual obligation on the Group to pay bonuses to employees and as such no provision has been made in the operating expenses within the Statement of Comprehensive Income for the period to 31st July 2010 (as was also the case with the interims to 31st July 2009). However, the consolidated Statement of Comprehensive Income to 31st January 2010 does include such provision where discretionary awards were made for the year-end.

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. These standards have not been applied early in the preparation of these consolidated financial statements:

·     IFRS 9: Financial Instruments (effective as of 1^st January 2013)

·     IAS 24: Related party disclosures (effective as of 1^st January 2011)

·     IFRIC14: Defined benefit plans (effective as of 1^st January 2011)

·     IFRIC 19: Extinguishing financial liabilities with equity instruments (effective as of 1^st July 2010)

Other standards, amendments and interpretations have been issued but are not yet effective, and are not expected to be relevant to the Group's operations. These are not referred to above.

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 and Channel Islands and Non-UK and 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.

2.           SEGMENTAL REPORTING (continued)

	Geographic segment 1: UK & Channel Islands		Geographic segment 2: Non-UK & Channel Islands		Group
	Unaudited	Unaudited	Unaudited	Unaudited	Unaudited	Unaudited
	6 months to 31st July	6 months to 31st July	6 months to 31st July	6 months to 31st July	6 months to 31st July	6 months to 31st July
	2010	2009	2010	2009	2010	2009
	£'000	£'000	£'000	£'000	£'000	£'000
Income net of losses on investment	2,405	(1,629)	(13)	156	2,392	(1,473)
Operating expenses	(735)	(530)	(232)	(148)	(967)	(678)
Segment operating profit/ (loss)	1,670	(2,159)	(245)	8	1,425	(2,151)
Financial income	2	16	1	5	3	21
Financial expenses	(6)	-	-	-	(6)	-
Carried interest provision	(11)	413	-	-	(11)	413
Exchange movements	3	(7)	(33)	(31)	(30)	(38)
Profit / (loss) before tax	1,658	(1,737)	(277)	(18)	1,381	(1,755)
Income tax	(310)	520	(78)	5	(388)	525
Profit/ (loss) for the period	£1,348	£(1,217)	£(355)	£(13)	£993	£(1,230)

Non-current assets
Property, plant and equipment	32	54	4	7	36	61
Investments	39,642	35,011	5,936	4,770	45,578	39,781
Loans and receivables	3,187	3,610	1,288	1,289	4,475	4,899
	42,861	38,675	7,228	6,066	50,089	44,741
Current assets
Trade and other receivables	1,107	246	305	401	1,412	647
Cash and cash equivalents	562	4,078	-	-	562	4,078
	1,669	4,324	305	401	1,974	4,725
Total assets	44,530	42,999	7,533	6,467	52,063	49,466
Non-current liabilities
Carried interest provision	(335)	(323)	-	-	(335)	(323)
Deferred tax liabilities	(6,594)	(5,974)	(62)	-	(6,656)	(5,974)
	(6,929)	(6,297)	(62)	-	(6,991)	(6,297)
Current liabilities
Trade and other payables	(201)	(515)	-	-	(201)	(515)
Total liabilities	(7,130)	(6,812)	(62)	-	(7,192)	(6,812)
Net assets	£37,400	£36,187	£7,471	£6,467	£44,871	£42,654

2.         SEGMENTAL REPORTING (continued)

	Geographic segment 1: UK & Channel Islands		Geographic segment 2: Non-UK & Channel Islands		Group
	Unaudited	Unaudited	Unaudited	Unaudited	Unaudited	Unaudited
	31st July	31st July	31st July	31st July	31st July	31st July
	2010	2009	2010	2009	2010	2009
	£'000	£'000	£'000	£'000	£'000	£'000
Additions to property, plant and equipment	-	-	-	-	-	-
Depreciation of property, plant and equipment	13	10	1	1	14	11

	Geographic segment 1: UK & Channel Islands	Geographic segment 2: Non-UK & Channel Islands	Group
	Audited	Audited	Audited
	31st January	31st January	31st January
	2010	2010	2010
	£'000	£'000	£'000
Income net of losses on investment	574	608	1,182
Operating expenses	(1,270)	(292)	(1,562)
Segment operating (loss) / profit	(696)	316	(380)
Financial income	20	5	25
Financial expenses	-	-	-
Carried interest provision	412	-	412
Exchange movements	(5)	5	-
Exceptional items	-	-	-
(Loss) / profit before tax	(269)	326	57
Income tax	321	(91)	230
Profit for the year	£52	£235	£287

Non-current assets
Property, plant and equipment	42	7	49
Investments	36,484	6,261	42,745
Loans and receivables	4,155	458	4,613
	40,681	6,726	47,407
Current assets
Trade and other receivables	329	756	1,085
Cash and cash equivalents	2,972	-	2,972
	3,301	756	4,057
Total assets	43,982	7,482	51,464
Non-current liabilities
Carried interest provision	(324)	-	(324)
Deferred tax liabilities	(6,187)	(81)	(6,268)
	(6,511)	(81)	(6,592)
Current liabilities
Trade and other payables	(701)	-	(701)
Total liabilities	(7,212)	(81)	(7,293)
Net assets	£36,770	£7,401	£44,171

Additions to property, plant and equipment	-	-	-
Depreciation of property, plant and equipment	20	3	23
Impairment of investments and loans	652	-	652

3.       EARNINGS/ (LOSS) PER SHARE FROM CONTINUING OPERATIONS ATTRIBUTABLE TO THE EQUITY SHAREHOLDERS

		Unaudited		Unaudited		Audited
		31st July 2010		31st July 2009		31st January 2010
		£'000		£'000		£'000
Earnings/(loss)
Earnings/(loss) for the period		993		(1,230)		287
Earnings/(loss) for the purposes of basic and diluted earnings per share being net earnings/(loss) attributable to equity shareholders		993		(1,230)		287
Earnings/(loss) per share - basic and diluted		3.4p		(4.2)p		1.0p
Number of shares		Number		Number		Number
Weighted average number of ordinary shares for the purposes of basic earnings per share		29,286,143		29,286,143		29,286,143
Number of dilutive shares under option		Nil		Nil		Nil
Weighted average number of ordinary shares for the purposes of dilutive earnings per share		29,286,143		29,286,143		29,286,143

4.       NON-CURRENT INVESTMENTS

Group Investments		Unaudited		Unaudited		Audited
		31st July 2010		31st July 2009		31st January 2010
		£'000		£'000		£'000
At valuation
At 1st February		42,745		41,673		41,673
Additions		1,437		-		2,005
Disposals		-		(4)		(604)
Movement in valuation / provisions		1,396		(1,888)		(329)
At period end		£45,578		£39,781		£42,745
At cost
At 1st February		17,948		17,043		17,043
Additions		1,437		-		2,005
Disposals		-		-		(600)
Provisions		-		(500)		(500)
At period end		£19,385		£16,543		£17,948

The principal addition relates to the acquisition on 22 July 2010 of 30% equity holding in US Risks (UK) limited for £1,396,417.

4.       NON-CURRENT INVESTMENTS (continued)

The investee companies, which are registered in England except Summa Insurance Brokerage S.L. (Spain), Preferred Asset Management Ltd (Jersey), New Horizons Ltd (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	30.04.10	(650,932)	(288,358)	Business sales platform
	Besso Holdings Limited	22.73	31.12.09	9,605,838	8,961	Holding company for insurance intermediaries
	HQB Partners Limited	27.72	31.12.09	121,922	(44,135)	Investor relations consultants
	Hyperion Insurance    Group Limited	19.50	30.09.09	38,541,000	814,000	Holding company for insurance intermediaries
	LEBC Holdings Limited	21.95	30.09.09	709,565	56,061	Independent financial advisor company
	Portfolio Design Group   International Limited	20.00	31.12.09	7,827,121	(1,356,340)	Fund managers of traded endowment policies
	Morex Commercial Limited	20.00	31.12.09	367,254	28,824	Trading in secondary life policies
	Preferred Asset    Management Limited	20.00	30.09.09	816,451	368,135	Fund management company
	New Horizons Limited    (formerly Surrenda-Link    Nominees Limited)	20.00	31.12.08	1,595,863	66,732	Investment holding company
	Summa Insurance Brokerage, S.L.	48.625	31.12.08	6,648,228	367,899	Consolidator of regional insurance brokers
	US Risks (UK) Limited	30.00	31.12.09	1,654,073	556,716	Holding company for insurance intermediaries

In addition, as a result of the disposal of the Company's interest in JMD Specialist Insurance Services Group Limited in the year to 31^st January 2010, the Company acquired an investment of £698,750 in respect of 650,000 ordinary shares in Randall & Quilter Investment Holdings Plc ("R&Q"), which represents 1.16% of the share capital of R&Q. In June 2010 the Group acquired 40,000 additional ordinary shares in R&Q, which increased the holding to 1.23% of the share capital of R&Q. R&Q is listed on the AIM Market.

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

Under FRS 25 the HQB Consulting Limited accounts have included the Group's 27.72% 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.

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

In September 2008 the Group acquired a 22.5% equity holding in Paterson Squared, LLC (a US company).  As the company was only incorporated in September 2008, no statutory financial information is available at this time.

5.       REALISED GAINS ON DISPOSAL INVESTMENTS

The realised gains on disposal of investments include the dividends (in specie) from Whitmar Holdings Ltd ("Whitmar") of £332,314 which was effected in 1998 and confirmed during the current period following the finalisation of the liquidation of Whitmar. This dividend settled the amount of loan advances to the Company by Whitmar.

6.       RECONCILIATION OF MOVEMENTS IN SHAREHOLDERS' FUNDS

		Share		Capital	Profit
	Share	premium	Revaluation	redemption	and loss
	capital	account	reserve	reserve	account	Total
	(£'000)	(£'000)	(£'000)	(£'000)	(£'000)	(£'000)
At 31st January 2010	2,929	9,370	18,057	393	13,422	44,171
Profit for the year	-	-	1,145	-	(152)	993
Dividends paid	-	-	-	-	(293)	(293)
At 31st July 2010	£2,929	£9,370	£19,202	£393	£ 12,977	£44,871

7.       LOAN COMMITMENTS

On 7th February 2005 the Group entered into an agreement to provide a loan facility of £140,000 to HQB Partners Limited, an associated company. As at 31st July 2010, this facility has been drawn down in full.

On 10th March 2008 the Group entered into an agreement to provide a loan facility of £630,000 to Amberglobe Limited, an associated company.  On 31st December 2009 the Group entered into an agreement to provide an additional loan facility of £65,000 to Amberglobe Limited, increasing the totally facility to £695,000.  As at 31st July 2010 £670,000 of this facility had been drawn down.

On 1st April 2009 the Group entered into an agreement to provide a loan facility of £400,000 to LEBC Group Limited, an associated company.  As at 31st July 2010 none of this facility had been drawn down.

On 2nd June 2009 the Group provided a £2,460,000 loan to Hyperion Insurance Group Limited ("Hyperion"), which was drawn down in full.  On the same date the Group entered into a further agreement with Hyperion to subscribe for €900,000 in loan notes to fund an acquisition, being part of a €4,500,000 loan note issue alongside other shareholders.  As at 31st July 2010, this facility has been drawn down in full.

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

8.       DEFERRED TAX AND CONTINGENT LIABILITIES

The Directors estimate that, if the Group were to dispose of all its investments at the amount stated in the Statement of Financial Position, £6.6m (interim 6 months to 31st July 2009: £6m  & full year to 31st January 2010: £6.3m) of tax on capital gains would become payable by the Group at the current corporation tax rate of 28%.  This amount is fully provided for in the financial statements.

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 £450,000 together with the Employers' National Insurance due thereon.  £50,000, £50,000, £100,000 and £250,000 are due to be paid on 1st October 2010, 6th April 2011, 1st October 2011 and 1st October 2012 respectively. 

No amount has been included in these financial statements as the performance conditions relating to these incentives had not been met at the time of the reporting period.

9.       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. The total provision in respect of this contract amounted to £335,000 at the period end.

No amounts were paid under this contract during the year (2009: £nil).

Analyst Briefing

An analyst briefing given by Brian Marsh OBE, Executive Chairman, Jonathan Newman, Finance Director and Robert King, Director and Group Company Secretary will be held at 10:00 a.m. on Thursday 28 October 2010 at B.P. Marsh's office at 2^nd Floor, 36 Broadway, London SW1H 0BH.

- Ends -

For further information:

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

Brian Marsh OBE                                                                    [phone]

Nominated Adviser & Broker

Arbuthnot Securities

Nick Tulloch / Ben Wells                                                          [phone]

Redleaf Communications (PR to BP Marsh)                              [e-mail]

Emma Kane / Alicia Jennings / Jos Bieneman                             [phone]

Notes to Editors:

About B.P. Marsh & Partners Plc

B.P. Marsh's current portfolio contains 10 companies. More detailed descriptions of the portfolio can be found at www.bpmarsh.co.uk.

Over the past 20 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 seven 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 the Group Director of Finance and has over 13 years' experience in the financial services industry. Jonathan advises investee companies through several non-executive board appointments and evaluates new investment opportunities.

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

 

END

 

 

IR PGGCPUUPUGMM