Interim Results
B.P. Marsh & Partners PLC
25 October 2006
Date: 25th October 2006
On behalf of: B.P. Marsh & Partners Plc
Embargoed until: 0700hrs
B.P. Marsh & Partners Plc
(B. P. Marsh or 'the Company')
Interim results - 25 October 2006
B.P. Marsh & Partners Plc (AIM: BPM), a niche venture capital provider to early
stage financial services businesses, today announces the unaudited group results
for six months ended 31 July 2006.
Chairman's Statement
I am pleased to present the interim results for B P Marsh & Partners Plc (the
'Group') and its consolidated statements for the period ended 31 July 2006, the
first since the Group's admission to AIM on 2 February 2006.
Overview
The period witnessed a significant landmark for the Group as it admitted its
shares to trading on AIM, raising proceeds of £10.1 million net of expenses
through the placement of a total of 9.3 million shares (including just under 7.9
million new shares). This resulted in a total of 29.3 million shares in issue,
and an initial market capitalisation of just over £41 million.
During the period, the Group played a significant part in the re-financing of
two of its largest investments, and has utilised 43% of the funds raised from
its admission to AIM as follows:
• The Group invested a further £1.7 million in Besso Holdings Limited
('Besso'), a multi-niche Lloyd's insurance broking group, to enable Besso to
reduce debt and further develop the business. The investment included the
capitalisation of a loan (£0.6 million). 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 capitalised part of a loan
(£1,429,661), which was due to be repaid by Hyperion and maintained its
shareholding in Hyperion at 27.9%.
• The Group invested €1 million (£685,777) in Summa Insurance Brokerage, S.
L., a consolidator of regional insurance brokerages based in Spain, which
made its first acquisition in March 2006.
• The Group repaid in full the loan of £2,500,000 from Mr. B. P. Marsh
following its admission to AIM.
The other investments within the Group's portfolio made good, in some cases very
good, progress during the period.
In addition, the Group has been actively reviewing a number of prospective new
investments. During the period, six potential investments have been brought to
an advanced stage of negotiation and it is hoped that one or more of these will
come to fruition by the end of the current financial year.
The Group typically invests amounts of up to £2.5 million and only takes
minority equity positions, normally acquiring between 15% and 45%of a target
company's total equity. The Group insists on its investee companies adopting
certain minority shareholder protections and appointing one of its directors 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.
Financial Performance
At 31 July 2006, the net asset value of the Group was £44.9m (2005: £28.9
million). As previously, this net asset value takes no account of deferred tax.
This represented an increase in net asset value of £32.3 million (plus £10.1 net
proceeds raised on AIM) over the original capital investment in 1990 of £2.5
million. The Directors are satisfied that the Group has during the six months
again maintained its average annual compound growth rate of 17% after running
costs, realisations, losses and distributions but excluding deferred tax.
Based upon the above figures the Group's net asset value per share as at 31 July
2006 was 153.2 pence (including the placing proceeds).
The consolidated pre-tax profit for the period was £92k (2005: £67k).
People
In September 2006, Ms Clare Ferguson who, inter alia, was a partner in the law
firm Taylor Wessing for 24 years, joined the Board as a non-executive and was
immediately co-opted onto the Remuneration Committee. We warmly welcome her, and
I thank all the Directors and staff for their unstinting contributions towards
the progress of the Group.
Outlook
The Group remained unique in its investment sector and we continue to see a
large number of relatively small enterprises with excellent management and
spirited business plans. These represent a challenge, which the BP Marsh team
relishes.
Brian Marsh OBE
Chairman
Investments
The Group has holdings in the following companies: -
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 July 2006 valuation: £92,000
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 July 2006 valuation: £8,821,000
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 July 2006 valuation: £214,000
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 specializing in
directors' and officers' ('D&O') and professional indemnity ('PI') insurance. A
subsidiary of Hyperion became a registered Lloyd's insurance broker. In 1998
Hyperion set up an insurance managing general agency specialising in developing
D&O and PI business in Europe.
Date of investment: November 1994
Equity: 27.89%
31st July 2006 valuation: £12,608,000
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 July 2006 valuation: £774,000
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 2006 valuation: £3,921,000
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: 19.76% (Reducing to 19.12% on conversion of preference shares)
31st July 2006 valuation: £7,240,000
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: 35.0%
31st July 2006 valuation: £127,000
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 July 2006 valuation: £1,050,000
Financial Statements
B.P. MARSH & PARTNERS PLC
CONSOLIDATED PROFIT AND LOSS ACCOUNT
FOR THE PERIOD ENDED 31ST JULY 2006
Audited
Unaudited Unaudited Year to
6 months to 6 months to 31 January
Notes 31 July 2006 31 July 2005 2006
----- -------------- -------------- -----------
£'000 £'000 £'000
TURNOVER 374 390 941
Staff costs (752) (509) (1,507)
Depreciation (2) (3) (6)
Other operating charges (426) (318) (708)
Operating costs (1,180) (830) (2,221)
Income from participating
interests 316 325 702
Income from other fixed asset
investments 318 236 285
Other operating income 634 561 987
OPERATING PROFIT/(LOSS) (172) 121 (293)
Provision against fixed asset
investments and other loans - (66) (232)
Profit on disposal of fixed asset
investments 114 34 574
Interest receivable and similar
income 167 11 33
Interest payable and similar
charges (17) (33) (78)
264 (54) 297
PROFIT ON ORDINARY
ACTIVITIES BEFORE TAXATION 92 67 4
Taxation - - -
PROFIT ON ORDINARY 92 67 4
ACTIVITIES AFTER TAXATION
Dividends - - (69)
RETAINED PROFIT/(LOSS) 92 67 (65)
FOR THE PERIOD
The result for the period is wholly attributable to continuing activities.
BALANCE SHEET
31ST JULY 2006
Audited
Unaudited Unaudited As at
As at As at 31 January
Notes 31 July 2006 31 July 2005 2006
----- -------------- ------------- -----------
£'000 £'000 £'000
FIXED ASSETS
Tangible assets 6 8 8
Investments 2 34,847 27,221 27,700
34,853 27,229 27,708
CURRENT ASSETS
Debtors 3,692 3,548 6,644
Cash at bank and in hand 7,424 438 1,084
11,116 3,986 7,728
CREDITORS - amounts falling
due within one year (1,102) (1,363) (1,733)
NET CURRENT ASSETS 10,014 2,623 5,995
TOTAL ASSETS LESS
CURRENT LIABILITIES 44,867 29,852 33,703
CREDITORS - amounts falling - (1,000) (2,500)
due after more than one year
44,867 28,852 31,203
CAPITAL AND RESERVES 3
Called up share capital 2,928 2,507 2,519
Share premium account 9,361 17 17
Shares to be issued 94 - -
Revaluation reserve 22,541 18,322 19,209
Reverse acquisitions reserve 393 - -
Profit and loss account 9,550 8,006 9,458
SHAREHOLDERS' FUNDS 44,867 28,852 31,203
CONSOLIDATED CASH FLOW STATEMENT
FOR THE PERIOD ENDED 31ST JULY 2006
Audited
Unaudited Unaudited Year to
6 months to 6 months to 31 January
31 July 2006 31 July 2005 2006
------------ -------------- --------------
£'000 £'000 £'000
Cash outflow from operating
activities (416) (53) (330)
Returns on investment and 149 (23) (45)
servicing of finance
Taxation - - -
Capital expenditure and financial
investment (1,039) (77) (564)
Equity dividends - - (69)
Cash outflow before financing (1,306) (154) (1,008)
Financing 7,646 - 1,500
Increase / (decrease) in cash in the
year 6,340 (154) 492
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE PERIOD ENDED 31ST JULY 2006
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 preparation of interim financial information
The financial information contained in this interim statement has not been
audited or reviewed by the Company's Auditors and does not constitute statutory
accounts within the meaning of section 240 of the Companies Act 1985. They have
been prepared using accounting policies applicable to the year ended 31 January
2006. Those accounts, upon which the Company's Auditors issued an unqualified
opinion, have been filed with the Registrar of Companies.
There have been no changes to any accounting policies, with the exception of the
introduction of a reverse acquisition reserve and share-based payments, which
are mentioned separately below.
The policy regarding the valuation of investments has been disclosed separately
for clarification. There has been no adjustment to this policy since 31 January
2006.
Reverse acquisition accounting
On 1 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 payments to certain employees and
advisors. A fair value for the equity settled share awards is measured at the
date of grant. The Group measured the fair value using the valuation technique
most appropriate to value each class of award, either the Black-Scholes or a
Trinomial valuation method.
The fair value of each award is recognised as an expense over the vesting period
on a straight-line basis, after allowing for an estimate of the share awards
that will eventually vest. The level of vesting is reviewed annually; and the
charge is adjusted to reflect actual or estimated levels of vesting with the
corresponding entry to equity.
Investments
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.
2. FIXED ASSET INVESTMENTS
Other
Investments
Participating other than
interests Loans Total
----------- ---------- -----
£'000 £'000 £'000
At valuation
At 1 February 2005 21,617 3,453 25,070
Additions 271 - 271
Disposals (92) - (92)
Impairment provision (16) - (16)
Revaluation 286 1,702 1,988
-------- --------- --------
At 31 July 2005 22,066 5,155 27,221
-------- --------- --------
Disposals (700) - (700)
Impairment provision - 292 292
Valuation released to
Profit & Loss account
on disposal (1,597) - (1,597)
Revaluation 1,081 1,403 2,484
-------- --------- --------
At 31 January 2006 20,850 6,850 27,700
-------- --------- --------
Additions 3,815 - 3,815
Revaluation 2,942 390 3,332
-------- --------- --------
At 31 July 2006 27,607 7,240 34,847
======== ========= ========
Other
Investments
Participating other than
interests Loans Total
------------- ----------- -----
£'000 £'000 £'000
At cost
At 1 February 2005 6,376 2,360 8,736
Additions 271 - 271
Disposals (92) - (92)
Impairment provision (16) - (16)
-------- --------- --------
At 31 July 2005 6,539 2,360 8,899
-------- --------- --------
Disposals (700) - (700)
Impairment provision - 292 292
-------- --------- --------
At 31 January 2006 5,839 2,652 8,491
-------- --------- --------
Additions 3,815 - 3,815
-------- --------- --------
At 31 July 2006 9,654 2,652 12,306
======== ========= ========
The fixed asset investments held by the Group are as follows: -
% holding Date Aggregate Post Tax
Of share information capital and Profit/(loss)
Name of Capital Available to Reserves for the year Principal activity
company --------- -------------- ---------- -------------- --------------------
£ £
Hyperion
Insurance 27.89 30.09.05 5,574,000 2,464,000 Insurance holding
Group Limited company
Public Risk
Management 35.00 31.12.05 (282,550) (36,778) Public sector risk
Limited management
consultants
Besso
Holdings 23.55 31.12.05 8,041,671 247,201 Investment holding
Limited company
Paterson
Martin 22.50 31.12.05 494,097 112,402 Actuarial insurance/
Limited reinsurance
consultants
Portfolio
Design Group 20.00 31.12.05 4,406,424 592,711 Fund managers of
International traded endowment
Limited policies
Morex
Commercial 20.00 31.07.05 (1,282,807) (20,567) Trading in
Ltd secondary life
policies
Preferred 20.00 30.09.04 (1,218) (43,222) Fund management
Asset company
Management
Ltd
Surrenda-Link
Nominees 20.00 31.12.04 654 Nil Investment holding
Ltd company
Berkeley
(Insurance)
Holdings Ltd 19.90 31.10.05 142,000 Nil Independent
Insurance Advisor
Principal
Investment
Holdings Ltd 19.76 31.12.05 3,727,000 800,000 Investment
management company
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.
The company has a 35% interest in shares of Summa Insurance Brokerage, S.L. as
at 31st July 2006. The company was incorporated in Spain on 23rd December 2004.
Their first period of accounts will be to 31st December 2005 and there are no
statutory figures available as yet.
3. RECONCILIATION OF MOVEMENTS IN SHAREHOLDER FUNDS
Share Shares Reverse Profit
Share premium to be Revaluation acquisition and loss
Capital Account issued Reserve Reserve account Total
--- --------- --------- -------- --------- --------- --------- -------
£'000 £'000 £'000 £'000 £'000 £'000 £'000
At 1 February
2005 2,507 17 - 16,359 - 7,939 26,822
Profit for
the period - - - - - 67 67
Realised
revaluation
deficit on
sale of
investments - - - (25) - - (25)
Surplus on
revaluation
on investments - - - 1,988 - - 1,988
At 31 July 2005 2,507 17 - 18,322 - 8,006 28,852
Loss for the
period - - - - - (64) (64)
Dividends
paid - - - - - (69) (69)
Bonus issue
of 'B' shares 6 - - - - (6) -
Bonus issue
of 'C' shares 6 - - - - (6) -
Valuation
released to
profit and
loss account
on disposal - - - (1,597) - 1,597 -
Surplus on
revaluation
of investments - - - 2,484 - - 2,484
At 31 January
2006 2,519 17 - 19,209 - 9,458 31,203
Profit for
the period - - - - - 92 92
Shares issued
less shares
redeemed 409 - - - - - 409
Share premium
on shares
issued less
shares
redeemed - 9,344 - - - - 9,344
Surplus on
revaluation
of investments - - - 3,332 - - 3,332
Shares to be
issued - - 94 - - - 94
Reserve
generated on
reverse
acquisition - - - - 393 - 393
At 31 July
2006 2,928 9,361 94 22,541 393 9,550 44,867
4. LOAN COMMITMENTS
On 31st January 2005 the company entered into an agreement to provide a loan
facility of €1,500,000 (€1,025,291) to Summa Insurance Brokerage S.L, an
associated company and a company incorporated in Spain. At 31st July 2006 the
loan facility had not been drawn on.
On 15th April 2004 the company entered into an agreement to provide a loan
facility of £300,000 to Paterson Martin Limited, an associated company. On 31st
July 2006 this loan had not been drawn on.
5. CONTINGENT LIABILITIES
The directors estimate that, if the group were to dispose of all its investments
at the amount stated in the Balance Sheet for each period, the following amounts
of tax on capital gains would become payable by the group:
As at As at As at
31 July 2006 31 July 2005 31 January 2006
£'000 £'000 £'000
Tax payable 6,448 5,215 5,491
======== ======== =========
The company has a contractual obligation to pay bonuses amounting to £450,000
plus Employer's National Insurance to certain employees provided that they
remain within the employment of the Company to October 2010.
6. SHARE BASED PAYMENT ARRANGEMENTS
During the period ended 31 July 2006, 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
granted to granted to appreciation
advisors advisors rights
Date of grant 2 February 2006 9 February 2006 19 April 2006
Number or
instruments
granted 17,857 17,857 4,392,921
Exercise price
(pence) 140.00 140.00 140.00
Share price at
grant (pence) 150.50 150.50 150.50
Vesting period
(years) 5 5 Units vest 10
days after
results to
31/01/09
reported, i.e.
approx 3 years
Vesting conditions None None 50% vest if IRR
over exercise
price exceeds
5% and 100%
vest if IRR
exceeds 8%
after 3 years
Settlement Shares Shares Shares
% expected to
vest (based
upon leavers) 100% 100% 85%
Number
expected to
vest 17,857 17,857 3,740,535
Fair value per
granted
instrument
(pence) 41.90 41.20 23.50
Charge for 6
months ending
31 July 2006
(£) 7,482 7,357 79,143
Valuation model Black-Scholes Black-Scholes Trinomial
No share options were exercised during the period.
Analyst Briefing
An analyst briefing given by Brian Marsh OBE, Executive Chairman and Jonathan
Newman, Group Finance Director, will be held at 09:30 am on Wednesday 25 October
2006 at Redleaf Communications Ltd, 9-13 St Andrew Street, London EC4A 3AF.
- ends -
For further information:
B.P. Marsh & Partners Plc www.bpmarsh.co.uk
Brian Marsh OBE +44 (0)20 7730 2626
Redleaf Communications (PR to BP Marsh)
Emma Kane +44 (0)20 7822 0200
Rob Bain +44 (0)20 7822 0200
Nabarro Wells & Co. Limited
David Nabarro +44 (0)20 7710 7400
Marc Cramsie +44 (0)20 7710 7400
Notes to Editors:
Additional information about BP Marsh and its management:
BP Marsh's current portfolio contains nine companies. More detailed descriptions
of the portfolio can be found at www.bpmarsh.co.uk.
Over the past 16.5 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 four years.
Prior to Brian Marsh's involvement in the Company, he spent many years in
insurance broking and underwriting in Lloyd's as well as the London and overseas
market. He has over 30 years' experience in building, buying and selling
financial services businesses, particularly in the insurance sector.
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.
Investment Director Stephen Crowther joined the Company in 1998. He has over 27
years' experience in the London insurance market, in both broking and
underwriting. He researches potential investments, advises investee businesses
and monitors their progress.
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 BP 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.
This information is provided by RNS
The company news service from the London Stock Exchange
Wednesday, 15th May 2024
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