13 June 2022
B.P. Marsh & Partners Plc
("B.P. Marsh", "the Company" or "the Group")
Final Results for the Year to 31 January 2022
B.P. Marsh & Partners Plc (AIM: BPM), the specialist investor in early stage financial services businesses, announces its audited Group Final Results for the year ended 31 January 2022.
Highlights:
· Total Shareholder return of £17.6m for the year including the dividend paid in July 2021
· Net Asset Value increased by £16.7m to £166.6m (31 January 2021: £149.9m), an 11.1% increase
· Net Asset Value per share increased by 46.3p to 462.7p (31 January 2021: 416.4p)
· Consolidated profit after tax of £17.5m (31 January 2021: £13.7m)
· Equity portfolio valuation increase of 14.7% (2021: 10.9%)
· Three disposals during the year of Walsingham (£5.2m), MB (£3.6m) and Mark Edward Partners (£1.1m)
· A further disposal completed shortly after the Year End for Summa (£9.6m)
· Proposed dividend of 2.78p per share payable in July 2022 (2021: 2.44p)
Commenting on the results, Brian Marsh OBE, Chairman, said:
"The Group has delivered another strong set of results, against a difficult macro-economic environment, namely Covid-19. The Group continues to demonstrate the effectiveness of its investment criteria, and following a number of successful disposals, will be looking for more high-quality investment opportunities to bolster an already high performing portfolio."
"There remain headwinds for all businesses, particularly the conflict in Ukraine and the inflationary environment, but I remain confident that working closely with our portfolio companies we can continue our growth trajectory and deliver for our investors."
Analyst and investor briefing:
An analyst presentation, hosted by the Company, will be held on Monday 13 June 2022 at 10:00 a.m. BST.
Please contact Tim Pearson at Tavistock Communications on 07983118502 or tim.pearson@tavistock.co.uk should any analyst wish to attend.
B.P. Marsh & Partners Plc will also provide a live presentation for all existing and potential shareholders via the Investor Meet Company platform on 23rd June 2022 at 2:00pm BST.
Questions can be submitted pre-event via your Investor Meet Company dashboard up until 9am the day before the meeting or at any time during the live presentation.
Investors can sign up to Investor Meet Company for free and add to meet B.P. Marsh & Partners Plc via:
https://www.investormeetcompany.com/bp-marsh-partners-plc/register-investor
Investors who already follow B.P. Marsh & Partners Plc on the Investor Meet Company platform will automatically be invited.
Note
This announcement contains inside information for the purposes of Article 7 of Regulation (EU) No 596/2014 as it forms part of UK domestic law by virtue of the European Union (Withdrawal) Act 2018.
| For further information, please visit www.bpmarsh.co.uk or contact:
| |
| B.P. Marsh & Partners Plc Brian Marsh OBE / Alice Foulk
| +44 (0)20 7233 3112 |
| Panmure Gordon (UK) Limited Atholl Tweedie / Charles Leigh Pemberton / Ailsa MacMaster
| +44 (0)20 78862500 |
| Tavistock Simon Hudson / Tim Pearson | +44 (0)20 7920 3150 |
Notes to Editors:
B.P. Marsh's current portfolio contains fifteen companies. More detailed descriptions of the portfolio can be found at www.bpmarsh.co.uk.
Since formation over 30 years ago, the Company has assembled a management team with considerable experience both in the financial services sector and in managing private equity investments. Many of the directors have worked with each other in previous roles, and all have worked with each other for approaching ten years.
Statement by the Chairman and Managing Director
We are pleased to present the audited Consolidated Financial Statements of B.P. Marsh & Partners Plc for the year ended 31 January 2022 (the "Year End").
Results
For the year under review, the Group has achieved an increase in Net Asset Value ("NAV") (net of dividend) of 11.1% from £149.9m to £166.6m and an increase in the equity value of our portfolio of £18.3m (14.0%) from £131.0m to £149.3m.
This equates to an undiluted NAV per share of 462.7p (2021: 416.4p) or 455.6p on a fully diluted basis following the vesting of the shares in the Group's Joint Share Ownership Plan (2021: 416.4p).
The Group's cash balance as at 31 January 2022 stood at £8.6m, up from £0.7m the previous year, and as at the date of this announcement, has increased by a further £8.9m to stand at £17.5m.
The Portfolio
The year under review demonstrates our successful strategy, having realised three investments, each one either at or in excess of the most recently published valuation at 31 July 2021, and £4.1m or 75% greater than at 31 January 2021. The Group also agreed a fourth disposal that completed shortly after the Year End.
In a year that was still dominated by the Covid-19 Pandemic, we saw some great successes in the portfolio.
XPT Group LLC ("XPT"), based in New York, USA, has gone from strength to strength achieving Gross Written Premiums of c.US$400.0m in its year to 31 December 2021 (2020: US$280.0m). Additionally, on 1 June 2022, the Group agreed to invest a further $3.5m (c.£2.8m) in XPT through a mixture of redeemable shares and equity.
In the UK, Nexus Underwriting Management Limited ("Nexus"), successfully negotiated a £70m banking facility with Barings LLC ("Barings") and subsequently repaid the Company's £4m loan. The Company then reinvested this £4m by acquiring a further 100,000 shares in Nexus from a founding non-executive shareholder, which resulted in the Group's stake increasing to 19.18%, or 19.05% on a fully diluted basis.
Post-Year End, Nexus rebranded as Kentro Capital Limited ("Kentro") to better reflect its position in the market following an internal restructure. It continues to pursue its impressive growth trajectory in the UK and globally.
In a similar vein, Paladin Holdings Limited ("Paladin"), the holding company of CBC UK Limited ("CBC"), the Lloyd's insurance broker, secured a £3.0m loan facility with Coutts & Company following an introduction by the Group, and utilised part of this to repay £2.0m of the Company's £5.1m debt facility, whilst also investing in building out its product offering through the hiring of a number of teams.
As previously announced, ATC Insurance Solutions PTY Limited ("ATC"), based in Melbourne, Australia, successfully acquired another of our portfolio companies, MB Prestige Holdings PTY Limited ("MB") in August 2021. This acquisition, coupled with ATC's consistent growth across the business, means that it has become one of the largest independently owned Managing General Agencies in Australia.
More information on the portfolio is included under the Chief Investment Officer's Report.
We are proud of the results we have achieved in a year which faced challenging circumstances. This has been possible due to the assistance we have been able to offer our portfolio, and this reaffirms the success of our business model and track record.
Business environment
The business environment of the Group continues to be influenced by global issues that dominate all areas of life. The Group does not operate in isolation and is conscious of the impact issues like the conflict in Ukraine and the increasingly difficult environment posed by increasing inflation rates can have on its business. The Group has considered its exposure to the Global Sanctions placed on Russia and has agreed that its business remains largely unaffected.
As the world continues to open up after two years of restrictions due to Covid-19, the Group is taking advantage of being able to safely meet its partners in foreign jurisdictions. The Group has also enjoyed a return to face to face business operations, both internally and externally. Due to the 'people-focussed' dimension of our business this is something that the Group missed in 2020 and 2021 however we will be retaining elements of remote operations that continue to work well with our business practices. Our colleagues have returned to the office environment seamlessly and we thank them all for their hard work during the previous two years.
Dividend
As announced previously on 8 February 2022, the Board has recommended a dividend of 2.78p per share (£1.0m) for the financial year ending 31 January 2022 to be paid on 29 July 2022 to shareholders on the register as at the close of business on 1 July 2022 (the record date) and the corresponding ex-dividend date will be 2 July 2022, subject to Shareholder Approval at the Company's Annual General Meeting.
This represents an increase of 13.9% over the dividend of 2.44p per share (£0.9m) paid in July 2021 in respect of the prior year.
It is the Board's aspiration to maintain a dividend of at least 2.78p per share for the years ending 31 January 2023 and 31 January 2024, subject to ongoing review and approval by the Board and the Company's shareholders. In the event that the Group successfully realises further investments in the portfolio the level of dividend will be revisited by the Board.
Post Year End events
As mentioned above, the Group completed a new investment post Year End, in Denison and Partners Ltd ("Denison and Partners"), a start-up London-based Lloyd's insurance broker. Denison and Partners was established by Alasdair Ritchie and has a focus on delivering (re)insurance delegated authority solutions and services to Managing General Agencies, Coverholders and (re)insurers.
Furthermore, the sale of Summa Insurance Brokerage S.L. ("Summa"), in Spain, completed on 1 March 2022 and resulted in the Group receiving an aggregate £9.6m for its equity and loans.
Environmental, Social and Governance ("ESG")
The Group is committed to furthering the principles and sustainability goals characterised by what is collectively termed ESG. Whilst these values have always been held in the corporate consciousness, shortly before the Year End the Board established an ESG Committee to formalise its strategy in this ever more important area. The ESG Committee is chaired by Dan Topping, and has been tasked with developing the ESG strategy, its subsequent monitoring and implementation and to ensure that the Group continues to maintain high standards. The Group will formally report on its activities in each of its subsequent Reports.
Outlook
The strong cash position of the Group means it is well placed to take advantage of compelling new investment proposals as well as opportunities presenting themselves from the portfolio itself. We have developed an interesting pipeline of new investments and have already completed one investment post Year End, in Denison and Partners. As results have consistently borne out over a number of years, our successful investment strategy has consistently identified high quality investment opportunities to add to our portfolio. We expect to be able to make more successful investments in the remainder of the current year, both within the portfolio and via new business opportunities.
The Chief Investment Officer's report will include more information on our pipeline and areas of interest.
| Brian Marsh, OBE | Alice Foulk |
| Chairman | Managing Director |
| 10 June 2022 | 10 June 2022 |
Chief Investment Officer Statement
Portfolio Update and Outlook
The Group has performed well for the financial year to 31 January 2022, in respect of both the underlying performance of the portfolio and a number of successful disposals, which has significantly increased the Group's liquidity.
Over the financial year, the valuation of the Group's equity portfolio has increased by 14.7% adjusting for realisations, with NAV increasing by 11.1%. Over the last six months, the equity portfolio has increased by 10.2%, with NAV increasing by 7.5%.
During the second half of the financial year to 31 January 2022, we realised our holdings in Walsingham Motor Insurance Limited ("Walsingham") in the UK (net proceeds received: £5.2m including loan), MB in Australia (net proceeds received: £3.6m) and Mark Edward Partners LLC in the USA (net proceeds received: £1.1m). In addition we agreed to sell our holding in Summa in Spain which completed after the Year End (proceeds received: £9.6m including loan).
This has resulted in the Group's current cash balance of £17.5m.
The Group has a healthy pipeline of new business opportunities with a renewed focus on new business following the major shock of Covid-19. Our prudent approach over the past two years and focus on the existing portfolio now means that the Group has the ability to focus on seeking out new investment opportunities, something made easier by the removal of many travel restrictions and the return to more regular business practices globally. One such investment we have recently completed was the start up Lloyd's insurance broker, Denison and Partners.
The Group is well known to the sectors in which we invest and we continue to focus on niche opportunities backed by experienced and capable management teams. We are currently in detailed discussions with a number of new investment opportunities which, whilst there are no guarantees that these discussions will convert into investments, should enable the Group to secure a number of new high growth investments in the coming months.
Overall, the Directors are positive about the prospects for the Company throughout its current financial year to 31 January 2023.
Disposals
Summa Insurance Brokerage, S.L. (Post Year End)
· Sale date: Agreed - January 2022, Completed - March 2022
· Net equity proceeds received: €9.7m (£8.1m)
In March 2022, the Group sold its 77.25% holding in Summa to Acrisure España S.L., part of Acrisure LLC, the global financial services business.
The Group received cash proceeds of £9.6m in relation to the disposal, comprising of:
· £8.1m net of transaction costs, for its 77.25% shareholding in Summa (valued at £8.0m at 31 July 2021 and at £7.4m at 31 January 2021); and
· £1.5m being the Group's outstanding loan to Summa.
Walsingham Motor Insurance Limited
· Sale date: December 2021
· Net equity proceeds received: £4.9m
In December 2021, the Group sold its 40.5% stake in Walsingham to Humn.ai Limited ("Humn"), a London-based insurance provider producing real-time data-driven fleet insurance, for cash consideration of c.£4.7m.
The Group also received repayment of its c.£0.3m loan to Walsingham Holdings Limited ("Walsingham Holdings") and also received a further £0.2m in cash from its 20% shareholding in Walsingham Holdings post Year End, which results in total equity proceeds on disposal of £4.9m.
The sale of the Group's shareholding in Walsingham to Humn produced a 23% uplift over the last published valuation in July 2021 and represented an 8x money multiple and an Internal Rate of Return of 22% (inclusive of all income and fees).
This transaction is a good example of the Group's strategy of investing for the long term in start-up and early stage businesses with ambitious management teams, assisting in the growth of a business, before disposing of its stake at a beneficial time for all parties involved.
MB Prestige Holdings PTY Limited
· Sale date: August 2021
· Proceeds received: AU$6.8m (£3.6m) in Shares in ATC Insurance Solution PTY Limited)
In August 2021, the Group sold its 40% equity stake in MB for AU$6.8m (£3.6m) to ATC, in which the Group is also a shareholder.
The Group received newly issued shares in ATC in consideration for its stake, increasing its overall shareholding in ATC to 25.5% from 20%.
The acquisition by ATC valued 100% of MB at AU$17.0m (£9.0m), representing a c.20% uplift over the Group's published valuation of MB as at 31 January 2021.
This realisation represented an Internal Rate of Return of 29% since the Group's original investment in MB in 2013 (inclusive of all income and fees) and a money multiple of equity invested of almost 9x.
This transaction demonstrates the Group's bespoke and flexible approach to investing and realising investments within the financial services sector, in terms of both size and structure.
Mark Edward Partners LLC ("MEP")
· Sale date: November 2021
· Proceeds received: $1.5m (£1.1m)
In November 2021, the Group exited in full from its position in MEP, for a cash consideration of $1.5m (£1.1m).
The Board of B.P. Marsh was not aligned with the strategic direction of the business and therefore negotiated with Management an exit for $1.5m (£1.1m) for its aggregate position in MEP. Such a transaction removed uncertainty with MEP's ongoing valuation for B.P. Marsh and allowed the Management team of MEP to pursue their own strategy going forward. The Group had previously written off the value of this investment.
New Investments
Denison and Partners Ltd (Post Year End)
In March 2022, the Group acquired a 40% Cumulative Preferred Ordinary shareholding in Denison and Partners, providing aggregate funding of £0.8m, part of which was provided via a loan facility.
Established by Alasdair Ritchie, Denison and Partners is a start-up London-based Lloyd's insurance broker.
Denison and Partners will leverage its historic strong foundations and relationships in the Financial and Professional lines sector, primarily across the UK, US and Canada, to deliver (re)insurance delegated authority solutions and services to Managing General Agencies, Coverholders and (re)insurers.
Alasdair Ritchie has over 40 years of experience in the (re)insurance market having held a number of senior roles at Willis Group, now known as Willis Towers Watson (WTW), Marsh McLennan and most recently BMS Group, before establishing Denison and Partners.
Follow-on Investments and Funding
Kentro Capital Limited
Formerly Nexus Underwriting Management Limited
+ 17.7 pence NAV per share uplift in Year
In February 2022, Nexus announced that it will rebrand as Kentro. Nexus Underwriting Holdings Limited, the specialty MGA, and Xenia Broking Holdings Limited ("Xenia"), the leading credit insurance and surety distribution specialist, will operate as distinct, independent brands under the Kentro holding company.
In October 2021, the Group acquired a further 100,000 shares in Kentro for £4.0m from Ian Whistondale, a founding non-management shareholder. This was an opportunity to allow a founding shareholder to partially realise the value of their equity in Kentro, without the need to exit in full, whilst enabling B.P. Marsh to increase its shareholding in Kentro, to what is now 19.05% on a fully diluted basis.
Also in October 2021, Kentro secured a new £70.0m banking facility from Barings. Kentro used £50.0m of this facility to repay a £40.0m loan facility with HPS Investment Partners LLC and also a £4.0m loan from the Group. The remaining funds were made available to meet upcoming deferred consideration payments and for new acquisitions.
The Group first invested in Kentro in 2014, when the value of the business's Gross Written Premium was c. £55.0m. Kentro has since gown consistently and is now on track to further increase Gross Written Premium to approximately £450.0m in 2022. Over the period in which the Group has been invested in Kentro, it has completed 15 acquisitions and now operates in nine countries having built a successful and distinct brand as a leading independent insurance intermediary.
Date of initial investment: August 2014
31 January 2022 valuation: £51,460,000
Equity stake as at 31 January 2022: 19.05% (fully diluted)
XPT Group LLC
+ 15.7 pence NAV per share uplift in Year
Overall, the Group's investment in XPT continues on its strong growth trajectory. XPT achieved GWP of c.$400.0m in its financial year to 31 December 2021 and is on track to increase this number beyond $500.0m in its financial year to 31 December 2022, not taking into account new acquisitions that it may complete during this period.
During the course of the Group's financial year, XPT continued to make acquisitions, growing its established footprint in the West and East coasts, as well as growing its position in the Midwest with a diversified book of business.
The most recent acquisition undertaken by XPT was its ninth, being S&H Underwriters, Inc. ("S&H"), an MGA and surplus lines broker based in Barre, Vermont. S&H works with retail clients in Personal and Commercial Excess, Surplus and Speciality lines throughout New England and the Mid-Atlantic States.
This acquisition is a continuation of XPT's strategy of acquiring specialist wholesale brokers that place hard to insure risks through wholesale distribution channels.
Additionally, over the last 18 months, XPT has launched six new programs across various specialty sectors, providing insurance products in Agriculture, Bars & Taverns, Construction, Transportation and Management Liability. XPT have a strong pipeline of new insurance programs that are currently in development which will continue to see XPT grow exponentially.
On 1 June 2022 the Group agreed to invest a further $3.5m (£2.8m) in XPT. $2.8m is in redeemable shares and $0.7m in equity, increasing our shareholding in XPT from 28.18% to 29.15%, subject to approval from XPT's senior lender, Madison Capital. XPT will utilise the investment to repay $1.5m of loan funding from Madison Capital, and for upcoming deferred consideration payments.
Date of initial investment: June 2017
31 January 2022 valuation: £18,597,000
Equity stake as at 31 January 2022: 28.18%
Portfolio Update & Activity
NAV breakdown by portfolio company
The composition of B. P. Marsh's underlying portfolio companies can be found here:
http://www.rns-pdf.londonstockexchange.com/rns/5414O_1-2022-6-10.pdf
The Group's current investments are in the Insurance Intermediary sector, with the exception of the independent financial adviser LEBC.
Our current insurance investments are budgeting to produce in aggregate over £1.46bn of insurance premium during 2022, and a breakdown between brokers and MGAs can be found here:
http://www.rns-pdf.londonstockexchange.com/rns/5414O_2-2022-6-10.pdf
Insurance Brokers
Investments:
http://www.rns-pdf.londonstockexchange.com/rns/5414O_3-2022-6-10.pdf
The Group's Broking investments are budgeting to place over £703.0m of GWP, producing over £59.0m of commission income in 2022, accessing specialty markets around the world.
Underwriting Agencies / Managing General Agents ("MGAs")
Investments:
http://www.rns-pdf.londonstockexchange.com/rns/5414O_4-2022-6-10.pdf
The Group's MGAs are budgeting to place over £761.0m of GWP, producing over £74.0m of commission income in 2022, across over many specialist product areas, on behalf of more than 50 insurers.
IFA Investment
Investment
http://www.rns-pdf.londonstockexchange.com/rns/5414O_5-2022-6-10.pdf
LEBC Holdings Limited ("LEBC")
+ 0 pence NAV per share uplift in Period
B.P. Marsh has been a shareholder in LEBC, the Independent Financial Advisory company, since April 2007. (LEBC is currently the Group's only non-insurance related investment.)
In May 2022, Tavistock Investments Plc acquired 21% of LEBC from the McVitie Estate, following receipt of approval from the Financial Conduct Authority. The consideration paid by Tavistock was £10.0m, implying a 100% equity valuation for LEBC of £44.5m, underpinning the Company's own valuation of LEBC at 31 January 2022 of £25.0m for its 59% shareholding.
This transaction endorses B.P. Marsh's investment mantra of supporting our partners to secure an exit when needed, whilst also supporting our portfolio companies' underlying Management Teams, enabling them to take a business to the next stage in development.
For its year ending 30 September 2021, LEBC produced an adjusted EBITDA of £3.2m, which represented a considerable year on year performance swing of over £3m versus the prior year.
Throughout its current financial year to 30th September 2022 LEBC has built upon the previous year's performance, and the Group expects further year on year growth.
Portfolio Company Highlights
UK Investments
CBC UK Limited / Paladin Holdings Limited
+ 1.8 pence NAV per share uplift in Year
CBC, the London based Retail and Wholesale Lloyd's insurance broker, continues to perform well.
In their financial year to 31 December 2021, CBC produced an EBITDA of £2.2m, which represented a 35% year on year increase. This positive performance has continued into CBC's current financial year to 31 December 2022 and further growth is expected by the Group.
Within the Group's financial year, CBC secured £3.0m in financing facilities from Coutts & Company. As previously reported, this enabled CBC to repay £2.0m of debt provided by B.P. Marsh. The additional funds are being utilised for growth and within the year CBC have hired a number of new producers and teams.
This has included a Global Risk team, led by Mark Winston, who have been together for over 30 years. CBC also appointed Chris Tully to head up their Art & Private Clients division.
CBC continue to be in the market for new teams and producers and have an active pipeline of opportunities to bring about future growth, alongside their organic expectations.
Date of initial investment: February 2017
31 January 2022 valuation: £9,404,000
Cost of Equity: £803,000
Equity stake as at 31 January 2022: 47.06%
The Fiducia MGA Company Limited ("Fiducia")
+ 2.5 pence NAV per share uplift in Year
The strong growth of Fiducia, the Group's UK Marine Cargo Underwriting Agency based in Leeds, continues, with GWP now in excess of £20.0m over a 12 month period. As Fiducia continues on this growth trajectory, the Group are confident that GWP will exceed £25.0m in Fiducia's current financial year to 31 December.
The Group are pleased with Fiducia's performance since our investment and believe that the business will grow substantially over the coming years. As is customary with B. P. Marsh's MGA investments, Fiducia have in place robust underwriting controls which focus on the underlying profitability of their core book. This is beginning to bear fruit with Fiducia regularly being in receipt of material profit commission payments.
Date of initial investment: November 2016
Cost of Equity: £278,000
Equity stake as at 31 January 2022: 35.2%
31 January 2022 valuation: £4,228,000
North American Investments
Stewart Specialty Risk Underwriting Ltd ("SSRU")
+ 6.7 pence NAV per share uplift in Year
The Group invested in SSRU in 2017. Since then, SSRU, the Toronto-based independent underwriting agency and coverholder at Lloyd's, has grown significantly.
In its last financial year to 30 December 2021, SSRU hit the milestone of CAD$50.0m of GWP, and outperformed its revenue and EBITDA budget.
This strong performance has continued into 2022, and the Group are confident that SSRU will achieve over CA$70.0m of GWP in their current financial year.
Date of initial investment: January 2017
31 January 2022 valuation: £8,145,000
Cost of Equity: £19
Equity stake as at 31 January 2022: 30.00%
Australian Investments
Agri Services Company PTY Limited / Ag Guard PTY Limited ("Ag Guard")
+ 5.6 pence NAV per share uplift in Period
Ag Guard continues to perform well, producing significant year on year growth.
During the Year, Ag Guard entered into a new strategic partnership with Elders Insurance (Underwriting Agency) PTY Limited , owned by QBE Insurance Group Limited which has been transformational for Ag Guard with GWP expected to be above AU$40.0m in their year to 30 June 2022. This is in comparison to performance in Ag Guard's year to 30 June 2021 where it wrote GWP of AU$7.0m.
Date of initial investment: July 2019
31 January 2022 valuation: £3,562,000
Cost of Equity: £1,465,000
Equity stake as at 31 January 2022: 41.00%
B.P. Marsh's other investments in Australia (ATC and Sterling Insurance PTY Limited) continue to perform well with premium income and profitability increasing year on year across both entities.
Market Commentary
Discussions regarding rates across the insurance industry continue. Market consensus was that the size of rate increases would start to decline in Q4 2021 and into 2022, following several years of significant rate increases, although this is yet to come into fruition. Whilst most business plans projected low/mid single digit rate increases, in reality rates are increasing at a higher rate than this, especially in the specialty markets and generally at a higher level than inflation.
The effects of Covid-19 on our business and the underlying portfolio have been discussed and we remain of the view that the Group is well positioned to take advantage of opportunities emanating from the world 'returning to normal'.
As with the effects of Covid-19, the performance of the Group, its portfolio and the insurance industry itself will be affected by the conflict in Ukraine, increasing inflation and interest rates. The portfolio had limited exposure to the Russian market itself, however, some areas in which our portfolio operate have been affected given the sanctions imposed on Russia and the impact on foreign exchange markets.
Throughout the first quarter of 2022, a number of insurance companies have started to make provisions for losses related to the conflict in Ukraine, notwithstanding the continuing uncertainty regarding the overall size of such losses. This will continue throughout 2022 as the market's exposure becomes clearer. Projected insurance and reinsurance losses related to the conflict in Ukraine are expected to be significant, which may affect the profitability of the Lloyd's and London markets over the coming years.
Daniel Topping
Chief Investment Officer
10 June 2022
Finance Director Statement
Financial performance summary
The table below summarises the Group's financial results and key performance indicators for the year to 31 January 2022:
| | Year to/as at | | Year to/as at | |
| | 31st January |
| 31st January |
|
| | 2022 |
| 2021 |
|
| |
|
| |
|
| | | | | |
| Net asset value | £166.6m | | £149.9m | |
| Net asset value per share - undiluted | 462.7p | | 416.4p | |
| Net asset value per share - diluted | 455.6p | | 416.4p | |
| | | | | |
| Profit on ordinary activities before tax | £19.4m | | £13.7m | |
| Dividend per share paid | 2.44p | | 2.22p | |
| Total shareholder return (including dividends) | £17.6m | | £13.8m | |
| Total shareholder return on opening shareholders' funds | 11.7% | | 10.1% | |
| | | | | |
| Net cash from operating activities (net of equity investments, realisations and loans) | £1.5m | | £0.6m | |
| Equity cash investment for the year | £8.0m | | £2.4m | |
| Realisations (net of disposal costs) | £8.8m | | - | |
| Loans issued in the year | £0.3m | | £1.1m | |
| Loans repaid by investee companies in the year | £8.1m | | £2.9m | |
| Cash funds at end of year | £8.6m | | £0.7m | |
| Borrowing / Gearing | £Nil | | £1.0m | |
| | | | | |
The Group had a strong year, delivering an increase in the NAV of £16.7m (2021: £13.0m). At 31 January 2022 the NAV of the Group was £166.6m which equates to 462.7p per share undiluted (2021: £149.9m, or 416.4p per share). On a diluted basis this equates to 455.6p per share (2021: 416.4p per share). This equates to an increase in NAV of 11.1% (2021: 9.5%) for the year undiluted.
The NAV of £166.6m at 31 January 2022 represents a total increase in NAV of £137.4m since the Group was originally formed in 1990 having adjusted for the original capital investment of £2.5m, the £10.1m net proceeds raised on AIM in 2006 and the £16.6m of net proceeds raised through the Share Placing and Open Offer in July 2018. The Directors note that the Group has delivered an annual compound growth rate of 8.4% in Group NAV after running costs, realisations, losses, distributions and corporation tax since flotation and 11.6% since 1990.
Covid-19 and Ukraine conflict impact assessment
The financial statements to 31 January 2022 include the impact of Covid-19. Overall performance within the investment portfolio increased throughout the financial year as Covid-19 restrictions were reduced or withdrawn.
The financial statements to 31 January 2022 do not include any impact of the conflict in Ukraine. This is because the conflict was a specific, defined event which occurred on 24 February 2022, i.e. after the end of the reporting period, and the significant sanctions imposed by the international community were a direct response to that situation. As such it has been determined that this is to be treated as a non-adjusting post-balance sheet event.
Whilst there has been price inflation which has led to interest rate increases, and volatility within foreign exchange currency rates, certain investments within the Group's portfolio have seen premium rate increases and thus increased commission. Notwithstanding this, at the current time the Group does not consider the conflict in Ukraine to have had a material impact upon the Group.
Investment performance
The Group's investment portfolio movement during the year was as follows:
| 31st January 2021 valuation | Acquisitions at cost | Disposal proceeds | Adjusted 31st January 2021 valuation | 31st January 2022 valuation |
| £131.0m | £8.0m | £(8.8)m | £130.2m | £149.3m |
This equates to an increase in the portfolio valuation of 14.7% (2021: 10.9%).
The Group invested a total of £8.0m in equity in the portfolio during the year (2021: £2.4m). £4.0m was invested to acquire further shares in Kentro and £0.4m as part of deferred consideration to acquire shares in Paladin. £3.6m of the equity investment in the year related to the Group's sale of MB, which was used to acquire new shares in ATC and was a non-cash investment.
In addition, the Group provided £0.3m of loans (2021: £1.1m) as follow-on funding to two investee companies to provide working capital for strategic hires and product development.
There were £8.8m of investment realisations during the year (2021: £Nil). £4.9m was realised from the disposal of the Group's holdings in Walsingham and Walsingham Holdings (together the "Walsingham Group"), £3.6m from the sale of MB and £0.3m from the sale of shares in Paladin.
£8.1m of loan repayments were made to the Group by investee companies (2021: £2.9m) of which £4.0m was received from Kentro which was subsequently invested in further equity, £2.0m from Paladin and £1.1m from MEP, with the remainder from four other investee companies.
Operating income
Net gains from investments were £20.2m (2021: £12.9m), a 56.9% increase over the previous year. This included £2.9m in realised gains from the sale of the Group's interests in the Walsingham Group and £1.1m received in cash from a loan that was previously provided against in full. £16.2m related to the revaluation of the investment portfolio at 31 January 2022 (2021: £12.9m).
Overall, income from investments decreased by £0.4m, or 9.5% to £4.1m (2021: £4.5m). The reduction was primarily due to receiving lower interest income on loans made to the portfolio, which decreased by 14.1% to £1.1m (2021: £1.3m) which was due to a net £7.8m of loans being repaid. Whilst this led to reduced income, it significantly enhanced the Group's liquidity.
Operating expenses
Operating expenses increased by £1.2m, or 32.7% during the year to £4.8m (2021: £3.6m). This included £0.8m of one-off expenses compared to the prior year. Excluding these, expenses rose by 11.1% as lockdown restrictions eased and the Group commenced a return to normal operations.
Profit on ordinary activities
The consolidated profit on ordinary activities after taxation increased by 27.4% to £17.5m (2021: profit of £13.7m).
The Group's strategy is to cover expenses from the portfolio yield. On an underlying basis, including treasury returns and realised gains in cash, but excluding unrealised investment activity (unrealised gains on equity and provision against loans receivable from investee companies), this was achieved with a pre-tax profit of £3.2m for the year (2021: £0.9m).
Liquidity
Cash funds at 31 January 2022 were £8.6m (2021: £0.7m) and the Group was debt free (2021: £1.0m of loans borrowed). A net £7.8m of loans to the investment portfolio were repaid during the year (2021: £1.8m net repaid). These funds enabled the Group to repay the £1.0m loan, part of a £3.0m loan facility with Brian Marsh Enterprises Ltd, a company in which the Chairman, Mr. Brian Marsh, is a director and sole shareholder, and be debt free by the Year End. This loan facility ended on 29 January 2022.
Of note, since the year-end the sale of Summa completed whereby the Group received equity proceeds of £8.1m and the outstanding loan to Summa of £1.5m repaid, and the Group completed a new investment in Denison and Partners. Currently the Group has cash funds of £17.5m, or £14.7m net of the £2.8m follow-on investment into XPT expected to complete shortly.
Dividend
The Group paid a dividend of £0.9m (or 2.44p per share) during the year, an increase of 10% over the preceding year (2021: £0.8m or 2.22p per share). The dividend payment reflected the Group's requirement to strike a balance between the need to conserve cash to ensure that it could continue to prosper and develop during the Covid- 19 pandemic and beyond, whilst also rewarding Shareholders for their continuing loyalty, and the dividend represented a distribution of 100% of the underlying realised profits of the Group for the year to 31 January 2021. The Group has proposed a dividend of £1.0m (or 2.78p per share), and aspires to maintain the same level of distribution for the next two years, which in aggregate represents almost 100% of the underlying realised profits for the year to 31 January 2022.
Total shareholder return for the year was therefore 11.7% (2021: 10.1%) including the dividend payment and the NAV increase.
Diluted NAV per share
The NAV per share at 31 January 2022 is 462.7p (2021: 416.4p). A long-term share incentive plan for certain directors and employees of the Group matured on 12 June 2021, and 1,461,302 shares are held within an Employee Benefit Trust. Whilst they remain within the Trust they do not have voting or dividend rights. However, if the shares are sold in the future in excess of 281 pence per share (noting that the participants only benefit from a sale in excess of 312.6p per share), the Group would be entitled to receive £4,106,259 and these shares would then become entitled to voting and dividend rights and therefore these shares would become dilutive. Overall, this would therefore dilute the NAV per share as at 31 January 2022 to 455.6p.
Jonathan Newman
Group Finance Director
10 June 2022
Forward-looking statements:
Certain statements in this announcement are forward-looking statements. In some cases, these forward looking statements can be identified by the use of forward looking terminology including the terms "anticipate", "believe", "intend", "estimate", "expect", "may", "will", "seek", "continue", "aim", "target", "projected", "plan", "goal", "achieve" and words of similar meaning or in each case, their negative, or other variations or comparable terminology. Forward-looking statements are based on current expectations and assumptions and are subject to a number of known and unknown risks, uncertainties and other important factors that could cause results or events to differ materially from what is expressed or implied by those statements. Many factors may cause actual results, performance or achievements of B.P. Marsh to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Important factors that could cause actual results, performance or achievements of B.P. Marsh to differ materially from the expectations of B.P. Marsh, include, among other things, general business and economic conditions globally, industry trends, competition, changes in government and changes in regulation and policy, changes in its business strategy, political and economic uncertainty and other factors. As such, undue reliance should not be placed on forward-looking statements. Any forward-looking statement is based on information available to B.P. Marsh as of the date of the statement. All written or oral forward-looking statements attributable to B.P. Marsh are qualified by this caution. Other than in accordance with legal and regulatory obligations, B.P. Marsh undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise. Nothing in this announcement should be regarded as a profit forecast.
Investments
As at 31 January 2022 the Group's equity interests were as follows:
Ag Guard PTY Limited
Ag Guard is a Managing General Agency, which provides insurance to the agricultural sector, based in Sydney, Australia. The Group holds its investment through Ag Guard's Parent Company, Agri Services Company PTY Limited.
Date of investment: July 2019
Equity stake: 41%
31 January 2022 valuation: £3,562,000
Asia Reinsurance Brokers PTE Limited
(www.arbrokers.asia)
ARB is an independent specialist reinsurance and insurance risk solutions provider headquartered in Singapore.
Date of investment: April 2016
Equity stake: 25%
31 January 2022 valuation: £461,000
ATC Insurance Solutions PTY Limited
(www.atcis.com.au)
ATC is a Managing General Agency and Lloyd's Coverholder, specialising in accident & health, construction & engineering, trade pack, motor and sports insurance headquartered in Melbourne, Australia.
Date of investment: July 2018
Equity stake: 25.56%
31 January 2022 valuation: £12,940,000
CBC UK Limited
(www.cbcinsurance.co.uk)
CBC is a Retail and Wholesale Lloyd's Insurance Broker, offering a wide range of services to commercial and personal clients as well as broking solutions to intermediaries. The Group holds its investment in CBC through CBC's parent company, Paladin Holdings Limited.
Date of investment: February 2017
Equity stake: 47.1%
31 January 2022 valuation: £9,404,000
Criterion Underwriting Pte Limited
Criterion was established to provide specialist insurance products to a variety of clients in the cyber, financial lines and marine sectors in Far East Asia, based in Singapore.
Date of investment: July 2018
Equity stake: 29.4%
31 January 2022 valuation: £0
EC3 Brokers Limited
(www.ec3brokers.com)
EC3 is an independent specialist Lloyd's broker and reinsurance broker, that provides services to a wide array of clients across a number of sectors, including construction, casualty and cyber & technology. The Group holds its investment through EC3's Parent Company, EC3 Brokers Group Limited.
Date of investment: December 2017
Equity Stake: 35%
31 January 2022 valuation: £440,000
The Fiducia MGA Company Limited
(www.fiduciamga.co.uk)
Fiducia is a UK marine cargo Underwriting Agency and Lloyd's Coverholder which specialises in the provision of insurance solutions across a number of marine risks including, cargo, transit liability, engineering and terrorism Insurance.
Date of investment: November 2016
Equity stake: 35.2%
31 January 2022 valuation: £4,228,000
LEBC Holdings Limited
LEBC is 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: 59.3%
31 January 2022 valuation: £25,000,000
Lilley Plummer Risks Limited
(www.lprisks.co.uk)
Lilley Plummer Risks is a specialist marine Lloyd's broker that provides products across the marine insurance market. The Group holds its investment in Lilley Plummer Risks through its holding company Lilly Plummer Holdings Limited.
Date of investment: October 2019
Equity stake: 30%
31 January 2022 valuation: £2,629,000
Nexus Underwriting Management Limited
(www.nexusunderwriting.com)
Nexus is an independent Managing General Agency and Broker specialising in the provision of directors & officers, professional indemnity, financial institutions, accident & health, trade credit, political risks insurance, surety, bond and latent defect insurance, both in the UK and globally. In February 2022, after the Year in question ended, Nexus rebranded as Kentro Capital Limited.
Date of investment: August 2014
Equity stake: 19.3%
31 January 2022 valuation: £51,460,000
Sage Program Underwriters, Inc.
(www.sageuw.com)
Sage provides specialist insurance products to niche industries, initially in the inland delivery and field sport sectors based in Bend, Oregon.
Date of Investment: June 2020
Equity Stake: 30%
31 January 2022 Valuation: £1,550,000
Stewart Specialty Risk Underwriting Ltd
(www.ssru.ca)
SSRU is a Managing General Agency, providing insurance solutions to a wide array of clients in the construction, manufacturing, onshore energy, public entity and transportation sectors based in Toronto, Canada.
Date of investment: January 2017
Equity stake: 30%
31 January 2022 valuation: £8,145,000
Sterling Insurance PTY Limited
(www.sterlinginsurance.com.au)
Sterling is a specialist Underwriting Agency offering a range of insurance solutions within the Liability sector, specialising in niche markets including mining, construction and demolition based in Sydney Australia. The Group holds its investment in Sterling via a joint venture with Besso Insurance Group Limited, Neutral Bay Investments Limited.
Date of investment: June 2013
Equity stake: 19.7%
31 January 2022 valuation: £2,829,000
Summa Insurance Brokerage, S. L.
(www.grupo-summa.com)
Summa is a consolidator of regional insurance brokers in Spain.
Date of investment: January 2005
Equity stake: 77.3%
31 January 2022 valuation: £8,104,000
XPT Group LLC
(www.xptspecialty.com)
XPT is a wholesale insurance broking and Underwriting Agency platform across the U.S. Specialty Insurance Sector operating from many locations in the United States of America.
Date of investment: June 2017
Equity stake: 28.2%
31 January 2022 valuation: £18,597,000
These investments have been valued in accordance with the accounting policies on Investments set out in note 1 of the Consolidated Financial Statements.
Consolidated Financial Statements
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31ST JANUARY 2022
| | Notes | 2022 | 2021
| ||
| | | £'000 | £'000 | £'000 | £'000 |
|
| | | | | |
| GAINS ON INVESTMENTS | 1 | | | | |
| Realised gains on disposal of equity investments (net of costs) | 13 | 2,938 | | - | |
| Release of provision made against equity investments and loans | 14,15 | 1,117 | | 37 | |
| Unrealised gains on equity investment revaluation |
12 |
16,204 | |
12,877 | |
| | | | 20,259 | | 12,914 |
| INCOME | | | | | |
| Dividends | 1,24 | 1,903 | | 1,999 | |
| Income from loans and receivables | 1,24 | 1,092 | | 1,271 | |
| Fees receivable | 1,24 | 1,082 | | 1,234 | |
|
| | | 4,077 | | 4,504 |
|
| | | | | |
| OPERATING INCOME | 2 | | 24,336 | | 17,418 |
| | | | | | |
| Operating expenses | | (4,770) | | (3,595) | |
|
| 2 | | (4,770) | | (3,595) |
|
| | | | | |
| OPERATING PROFIT | | | 19,566 | | 13,823 |
| | | | | | |
| Financial income | 2,4 | - | | 3 | |
| Financial expenses | 2,3 | (78) | | (67) | |
| Exchange movements | 2,8 | (93) | | (24) | |
| | | | (171) | | (88) |
|
| | | | | |
| PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION | 8 |
| 19,395 |
| 13,735 |
| | | | | | |
| Income taxes | 9 | | (1,911) | | (14) |
|
| | | | | |
| PROFIT ON ORDINARY ACTIVITIES AFTER TAXATION ATTRIBUTABLE TO EQUITY HOLDERS |
19 | |
£17,484 | |
£13,721 |
| | | | | | |
| | | | | | |
| TOTAL COMPREHENSIVE INCOME FOR THE YEAR | 19 | |
£17,484 | |
£13,721 |
| | | | | | |
| | | | | | |
|
Earnings per share - basic (pence) |
10 | |
48.6p | |
38.2p |
| Earnings per share - diluted (pence) | 10 | | 47.3p | | 38.2p |
The result for the year is wholly attributable to continuing activities.
CONSOLIDATED AND PARENT COMPANY STATEMENTS OF FINANCIAL POSITION
31ST JANUARY 2022
(Company Number: 05674962)
| | | Group | | Company | ||
| | Notes | 2022 | 2021 | | 2022 | 2021 |
| | | £'000 | £'000 | | £'000 | £'000 |
| ASSETS | | | | | | |
|
| | | | | | |
| NON-CURRENT ASSETS | | | | | | |
| Property, plant and equipment | 11 | 96 | 123 | | - | - |
| Right-of-use asset | 20 | 836 | 1,001 | | - | - |
| Investments - equity portfolio | 12 | 141,245 | 130,951 | | 134,490 | 122,748 |
| Investments - subsidiaries | 12 | - | - | | 32,187 | 27,277 |
| Loans and receivables | 14 | 7,231 | 15,833 | | 4,106 | 4,058 |
|
| | 149,408 | 147,908 | | 170,783 | 154,083 |
| CURRENT ASSETS | | | | | | |
| Investments - Assets held for sale | 12 | 8,104 | - | | - | - |
| Trade and other receivables | 15 | 4,974 | 4,398 | | - | - |
| Cash and cash equivalents | | 8,628 | 709 | | 8 | 8 |
| TOTAL CURRENT ASSETS | | 21,706 | 5,107 | | 8 | 8 |
| TOTAL ASSETS | | 171,114 | 153,015 | | 170,791 | 154,091 |
|
| | | | | | |
| LIABILITIES | | | | | | |
| | | | | | | |
| NON-CURRENT LIABILITIES | | | | | | |
| Lease liabilities | 20 | (772) | (939) | | - | - |
| Deferred tax liabilities | 16 | (1,898) | - | | - | - |
| TOTAL NON-CURRENT LIABILITIES | | (2,670) | (939) | | - | - |
| | | | | | | |
| CURRENT LIABILITIES | | | | | | |
| Trade and other payables | 17 | (1,670) | (1,010) | | - | - |
| Lease liabilities | 20 | (167) | (159) | | - | - |
| Loans and other payables | 17 | - | (1,000) | | - | - |
| TOTAL CURRENT LIABILITIES | 17 | (1,837) | (2,169) | | - | - |
|
| | | | | | |
| TOTAL LIABILITIES | | (4,507) | (3,108) | | - | - |
|
| | | | | | |
| NET ASSETS | | £166,607 | £149,907 | | £170,791 | £154,091 |
|
| | | | | | |
| CAPITAL AND RESERVES - EQUITY | | | | | | |
| Called up share capital | 18 | 3,747 | 3,747 | | 3,747 | 3,747 |
| Share premium account | 19 | 29,342 | 29,349 | | 29,342 | 29,349 |
| Fair value reserve | 19 | 84,975 | 70,573 | | 132,347 | 120,605 |
| Reverse acquisition reserve | 19 | 393 | 393 | | - | - |
| Capital redemption reserve | 19 | 7 | 7 | | 7 | 7 |
| Capital contribution reserve | 19 | 72 | 64 | | - | - |
| Retained earnings | 19 | 48,071 | 45,774 | | 5,348 | 383 |
| SHAREHOLDERS' FUNDS - EQUITY |
19 |
£166,607 |
£149,907 | |
£170,791 |
£154,091 |
|
| | | | | | |
| Net asset value per share - undiluted (pence) | 10 | 462.7p | 416.4p | | 455.9p | 411.3p |
| Net asset value per share - diluted (pence) | 10 | 455.6p | 416.4p | | 455.9p | 411.3p |
The Financial Statements were approved by the Board of Directors and authorised for issue on 10th June 2022
and signed on its behalf by:
B.P. Marsh & J.S. Newman
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31ST JANUARY 2022
| | Notes | | 2022 | | 2021 |
| | | | £'000 | | £'000 |
| Cash from / (used by) operating activities | | | | | |
| Income from loans to investee companies | | | 1,092 | | 1,271 |
| Dividends | | | 1,903 | | 1,999 |
| Fees received | | | 1,082 | | 1,234 |
| Operating expenses | | | (4,770) | | (3,595) |
| Net corporation tax (paid) / repaid | | | (13) | | 234 |
| Purchase of equity investments | 12 | | (8,011) | | (2,408) |
| Net proceeds from sale of equity investments | 12,13 | | 8,755 | | - |
| Net repayment of loans from investee companies | | | 7,837 | | 1,796 |
| Adjustment for non-cash share incentive plan | | | 94 | | 114 |
| Exchange movement | | | (35) | | (81) |
| Decrease / (increase) in receivables | | | 1,248 | | (954) |
| Increase in payables | | | 660 | | 134 |
| Depreciation and amortisation | 11,20 | | 198 | | 205 |
| Net cash from / (used by) operating activities | | |
10,040 | |
(51) |
| | | | | | |
| Net cash used by investing activities | | | | | |
| Purchase of property, plant and equipment | 11 | | (6) | | (5) |
| Net cash used by investing activities | | |
(6) | |
(5) |
| | | | | | |
| Net cash used by financing activities | | | | | |
| (Repayment) / advances of borrowings | 17 | | (1,000) | | 1,000 |
| Financial income | 4 | | - | | 3 |
| Financial expenses | 3 | | (78) | | (67) |
| Net decrease in lease liabilities | 20 | | (159) | | (160) |
| Dividends paid | 7 | | (878) | | (798) |
| Net cash used by financing activities | | |
(2,115) | |
(22) |
| | | | | | |
| Change in cash and cash equivalents | | | 7,919 | | (78) |
| Cash and cash equivalents at beginning of the year | | |
709 | |
787 |
| | | | | | |
|
Cash and cash equivalents at end of year | | |
£8,628 | |
£709 |
|
| | | | | |
All differences between the amounts stated in the Consolidated Statement of Cash Flows and the Consolidated Statement of Comprehensive Income are attributed to non-cash movements.
PARENT COMPANY STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31ST JANUARY 2022
| | Notes | | 2022 | | 2021 |
| | | | £'000 | | £'000 |
| Cash from operating activities | | | | | |
| Dividends received from subsidiary undertakings | | | 5,750 | | 798 |
| Net cash from operating activities | | | 5,750 | | 798 |
| | | | | | |
| Net cash used by financing activities | | | | | |
|
(Increase) / decrease in amounts owed by group undertakings | | |
(4,910) | |
5 |
| Adjustment relating to non-cash items | | | 38 | | (5) |
| Dividends paid | 7 | | (878) | | (798) |
| Net cash used by financing activities | | | (5,750) | | (798) |
| | | | | | |
| Change in cash and cash equivalents | | | - | | - |
| Cash and cash equivalents at beginning of the year | | | 8 | | 8 |
| | | | | | |
|
Cash and cash equivalents at end of year | | |
£ 8 | |
£ 8 |
|
| | | | | |
CONSOLIDATED AND PARENT COMPANY STATEMENTS OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31ST JANUARY 2022
| | Group | Company | ||
|
| 2022 | 2021 | 2022 | 2021 |
| | £'000 | £'000 | £'000 | £'000 |
| | | | | |
| Opening total equity | 149,907 | 136,870 | 154,091 | 141,054 |
| Comprehensive income for the year | 17,484 | 13,721 | 17,492 | 13,743 |
| Dividends paid | (878) | (798) | (878) | (798) |
| Share incentive plan | 94 | 114 | 86 | 92 |
| TOTAL EQUITY | £166,607 | £149,907 | £170,791 | £154,091 |
Refer to Note 19 for detailed analysis of the changes in the components of equity.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31ST JANUARY 2022
1. ACCOUNTING POLICIES
B.P. Marsh & Partners Plc is a public limited company incorporated in England and Wales under the Companies Act 2006 and domiciled in the United Kingdom. The address of the Company's registered office is 5th Floor, 4 Matthew Parker Street, London SW1H 9NP. The consolidated financial statements for the year ended 31st January 2022 comprise the financial statements of the Parent Company and its consolidated subsidiaries (collectively "the Group").
Basis of preparation of financial statements
These consolidated financial statements have been prepared in accordance with UK-adopted international accounting standards, and in accordance with the Companies Act 2006.
The consolidated financial statements are presented in sterling, the functional currency of the Group, rounded to the nearest thousand pounds (£'000) except where otherwise indicated.
The preparation of financial statements in conformity with UK-adopted international accounting standards requires management to make judgments, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable in the circumstances, the results of which form the basis of judgements about the carrying amounts of assets and liabilities. Actual results may differ from those amounts.
In the process of applying the Group's accounting policies, management has made the following judgments, which have the most significant effect on the amounts recognised in the financial statements:
Assessment as an investment entity
Entities that meet the definition of an investment entity within IFRS 10: Consolidated Financial Statements ("IFRS 10") are required to account for their investments in controlled entities, as well as investments in associates at fair value through profit or loss. Subsidiaries that provide investment related services or engage in permitted investment related activities with investees that relate to the parent investment entity's investment activities continue to be consolidated in the Group results. The criteria which define an investment entity are currently as follows:
a) an entity that obtains funds from one or more investors for the purpose of providing those investors with investment services;
b) an entity that commits to its investors that its business purpose is to invest funds solely for returns from capital appreciation, investment income or both; and
c) an entity that measures and evaluates the performance of substantially all of its investments on a fair value basis.
The Group's annual and interim consolidated financial statements clearly state its objective of investing directly into portfolio investments and providing investment management services to investors for the purpose of generating returns in the form of investment income and capital appreciation. The Group has always reported its investment in portfolio investments at fair value. It also produces reports for investors of the funds it manages and its internal management report on a fair value basis. The exit strategy for all investments held by the Group is assessed, initially, at the time of the first investment and this is documented in the investment paper submitted to the Board for approval.
The Board has also concluded that the Company meets the additional characteristics of an investment entity, in that it has more than one investment; the investments are predominantly in the form of equities and similar securities; it has more than one investor and its investors are not related parties. The Board has concluded that B.P. Marsh & Partners Plc and its three trading subsidiaries, B.P. Marsh & Company Limited, Marsh Insurance Holdings Limited and B.P. Marsh (North America) Limited, which provide investment related services on behalf of B.P. Marsh & Partners Plc, all meet the definition of an investment entity. These conclusions will be reassessed on an annual basis for changes to any of these criteria or characteristics.
Application and significant judgments
When it is established that a parent company is an investment entity, its subsidiaries are measured at fair value through profit or loss. However, if an investment entity has subsidiaries that provide services that relate to the investment entity's investment activities, the exception to the Amendment of IFRS 10 is not applicable as in this case, the parent investment entity still consolidates the results of its subsidiaries. Therefore, the results of B.P. Marsh & Company Limited, Marsh Insurance Holdings Limited and B.P. Marsh (North America) Limited continue to be consolidated into its Group financial statements for the year.
The most significant estimates relate to the fair valuation of the equity investment portfolio as detailed in Note 12 to the Financial Statements. The valuation methodology for the investment portfolio is detailed below. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods.
The accounting policies set out below have been applied consistently to all periods presented in these consolidated financial statements.
New Accounting Standards
There are no new standards that have been issued, but are not yet effective for the year ended 31st January 2022, which might have a material impact on the Group's financial statements in future periods.
Basis of consolidation
(i) Subsidiaries
Subsidiaries are entities controlled by the Group. Control, as defined by IFRS 10, is achieved when the Group is exposed, or has rights, to variable returns from its involvement with the investee and has the ability to affect those returns through its power over the investee. Specifically, the Group controls an investee if and only if the Group has:
a) power over the investee (i.e. existing rights that give it the current ability to direct the relevant activities of the investee);
b) exposure, or rights, to variable returns from its involvement with the investee; and
c) the ability to use its power over the investee to affect its returns.
When the Group has less than a majority of the voting or similar rights of an investee, the Group considers all relevant facts and circumstances in assessing whether it has power over an investee, including:
a) rights arising from other contractual arrangements; and
b) the Group's voting rights and potential voting rights.
The Group re-assesses whether or not it controls an investee if facts and circumstances indicate that there are changes to one or more of the elements of control.
B.P. Marsh & Partners Plc ("the Company"), an investment entity, has three subsidiary investment entities, B.P. Marsh & Company Limited, Marsh Insurance Holdings Limited and B.P. Marsh (North America) Limited, that provide services that relate to the Company's investment activities. The results of these three subsidiaries, together with other subsidiaries (except for Summa Insurance Brokerage, S.L. ("Summa") and LEBC Holdings Limited ("LEBC")), are consolidated into the Group consolidated financial statements. The Group has taken advantage of the Amendment to IFRS 10 not to consolidate the results of Summa and LEBC. Instead, the investments in Summa and LEBC are valued at fair value through profit or loss.
(ii) Associates
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 Consolidated Statement of Financial Position at fair value even though the Group may have significant influence over those companies.
Business combinations
The results of subsidiary undertakings are included in the consolidated financial statements from the date that control commences until the date that control ceases. Control exists where the Group has the power to govern the financial and operating policies of the entity so as to obtain benefits from its activities. Accounting policies of the subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.
All business combinations are accounted for by using the acquisition accounting method. This involves recognising identifiable assets and liabilities of the acquired business at fair value. Goodwill represents the excess of the fair value of the purchase consideration for the interests in subsidiary undertakings over the fair value to the Group of the net assets and any contingent liabilities acquired. The one exception to the use of the acquisition accounting method was in 2006 when B.P. Marsh & Partners Plc became the legal parent company of B.P. Marsh & Company Limited in a share for share exchange transaction. This was accounted for as a reverse acquisition, such that no goodwill arose, and a merger reserve was created reflecting the difference between the book value of the shares issued by B.P. Marsh & Partners Plc as consideration for the acquisition of the share capital of B.P. Marsh & Company Limited. This compliance with IFRS 3: Business Combinations ("IFRS 3") also represented a departure from the Companies Act.
Intra-group balances and any unrealised gains and losses or income and expenses arising from intra-group transactions are eliminated in preparing the consolidated financial statements.
Associates are those entities in which the Group has significant influence, but not control, over the financial and operating policies. Investments that are held as part of the Group's investment portfolio are carried in the Consolidated Statement of Financial Position at fair value even though the Group may have significant influence over those companies. This treatment is permitted by IAS 28: Investment in Associates ("IAS 28"), which requires investments held by venture capital organisations to be excluded from its scope where those investments are designated, upon initial recognition, as at fair value through profit or loss and accounted for in accordance with IAS 39: Financial Instruments ("IAS 39"), with changes in fair value recognised in the profit or loss in the period of the change. The Group has no interests in associates through which it carries on its business.
No Statement of Comprehensive Income is prepared for the Company, as permitted by Section 408 of the Companies Act 2006. The Company made a profit for the year of £17,491,719, prior to a dividend distribution of £878,282 (2021: profit of £13,743,101 prior to a dividend distribution of £798,353).
Employee services settled in equity instruments
The Group has entered into a joint share ownership plan ("JSOP") with certain employees and directors. A fair value for the cash settled share awards is measured at the date of grant. The Group measured the fair value using the Expected Return Methodology which was considered to be the most appropriate valuation technique to value the awards.
The fair value of the award has been recognised as an expense over the vesting period on a straight-line basis. The level of vesting was assumed to be 100% and has been reviewed annually and the charge has been adjusted to reflect actual or estimated levels of vesting with the corresponding entry to capital contribution.
On 12th June 2021 (the "vesting date") the performance criteria were met, after which the members of the scheme became joint beneficial owners of the shares and therefore became entitled to any gain on sale of the shares in excess of 312.6 pence per share. Whilst these shares remain within the Employee Benefit Trust they do not have voting or dividend rights. However, if the shares are sold from the Employee Benefit Trust in the future in excess of 281 pence per share, the Group would be entitled to receive £4,106,259 in total. These shares would then, post-sale, have voting and dividend rights attached, such that they would become fully dilutive for the Group. Whilst 254,414 shares out of 1,461,302 held within the Employee Benefit Trust have been forfeited by departing employees, the trust remains the owner of these shares.
The Group has established an HMRC approved Share Incentive Plan ("SIP"). Ordinary shares in the Company, previously repurchased and held in Treasury by the Company, have been transferred to The B.P. Marsh SIP Trust ("the SIP Trust"), an employee share trust, in order to be issued to eligible employees. In addition, new shares were issued and allocated to the SIP Trust during the year.
Under the rules of the SIP, eligible employees can each be granted up to £3,600 worth of ordinary shares ("Free Shares") by the SIP Trust in each tax year. The number of shares granted is dependent on the share price at the date of grant. In addition, all eligible employees have been invited to take up the opportunity to acquire up to £1,800 worth of ordinary shares ("Partnership Shares") in each tax year and for every Partnership Share that an employee acquires, the SIP Trust will offer two ordinary shares in the Company ("Matching Shares") up to a total of £3,600 worth of shares. The Free and Matching Shares are subject to a one year forfeiture period, however the awards are not subject to any vesting conditions, hence the related expenses are recognised when the awards are made and are apportioned over the forfeiture period.
The fair value of the services received is measured by reference to the listed share price of the Parent Company's shares listed on the AIM on the date of award of the free and matching shares to the employee.
Investments - equity portfolio
All equity portfolio 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 equity portfolio investments. In valuing equity portfolio investments, the Board applies guidelines issued by the International Private Equity and Venture Capital Valuation Committee ("IPEVCV Guidelines"). The following valuation methodologies have been used in reaching the fair value of equity portfolio 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 and/or premiums of the investee company; or
d) by reference to expected future cash flow from the investment where a realisation or flotation is imminent.
Both realised and unrealised gains and losses arising from changes in fair value are taken to the Consolidated Statement of Comprehensive Income for the year. In the Consolidated Statement of Financial Position the unrealised gains and losses arising from changes in fair value are shown within a "fair value reserve" separate from retained earnings. Transaction costs on acquisition or disposal of equity portfolio investments are expensed in the Consolidated Statement of Comprehensive Income.
Equity portfolio investments are treated as 'Non-current Assets' within the Consolidated Statement of Financial Position unless the directors have committed to a plan to sell the investment and an active programme to locate a buyer and complete the plan has been initiated. Where such a commitment exists, and if the carrying amount of the equity portfolio investment will be recovered principally through a sale transaction rather than through continuing use, the investment is classified as an 'Investments - Assets held for sale' under 'Current Assets' within the Consolidated Statement of Financial Position.
Income from equity portfolio investments
Income from equity portfolio investments comprises:
a) gross interest from loans, which is taken to the Consolidated Statement of Comprehensive Income on an accruals basis;
b) dividends from equity investments are recognised in the Consolidated Statement of Comprehensive Income when the shareholders rights to receive payment have been established; and
c) advisory fees from management services provided to investee companies, which are recognised on an accruals basis in accordance with the substance of the relevant investment advisory agreement.
Property, plant and equipment
Property, plant and equipment are stated at cost less depreciation. Depreciation is provided at rates calculated to write off the property, plant and equipment cost less their estimated residual value, over their expected useful lives on the following bases:
Furniture & equipment - 5 years
Leasehold fixtures and fittings and other costs - over the life of the lease
Right-of-use asset
IFRS 16 requires lessees to recognise a lease liability, representing the present value of the obligation to make lease payments, and a related right of use ("ROU") asset. The lease liability is calculated based on expected future lease payments, discounted using the relevant incremental borrowing rate. An incremental borrowing rate of 5% was used to discount the future lease payments when measuring the lease liability on adoption of IFRS 16.
The ROU asset is recognised at cost less accumulated depreciation and impairment losses, with depreciation charged on a straight-line basis over the life of the lease. In determining the value of the ROU asset and lease liabilities, the Group considers whether any leases contain lease extensions or termination options that the Group is reasonably certain to exercise.
Foreign currencies
Monetary assets and liabilities denominated in foreign currencies at the reporting period end are translated at the exchange rate ruling at the reporting period end.
Transactions in foreign currencies are translated into sterling at the foreign exchange rate ruling at the date of the transaction.
Exchange gains and losses are recognised in the Consolidated Statement of Comprehensive Income.
Income taxes
The tax credit or expense represents the sum of the tax currently recoverable or payable and any deferred tax. The tax currently recoverable or payable is based on the estimated taxable profit for the year. Taxable profit differs from net profit as reported in the Consolidated Statement of Comprehensive Income because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Group's receivable or liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the date of the Consolidated Statement of Financial Position.
Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and of liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and it is accounted for using the liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary differences arise from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.
Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future.
The carrying amount of deferred tax assets is reviewed at each date of the Consolidated Statement of Financial Position and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.
Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset realised. Deferred tax is charged or credited to the Consolidated Statement of Comprehensive Income, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity.
Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current assets and liabilities on a net basis.
Pension costs
The Group operates a defined contribution scheme for some of its employees. The contributions payable to the scheme during the period are charged to the Consolidated Statement of Comprehensive Income.
Financial assets and liabilities
Financial instruments are recognised in the Consolidated Statement of Financial Position when the Group becomes party to the contractual provisions of the instrument. De-recognition occurs when rights to cash flows from a financial asset expire, or when a liability is extinguished.
Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for maturities greater than 12 months after the reporting period which are classified as non-current assets. They are stated at their cost less impairment losses.
Loans and borrowings
All loans and borrowings are initially recognised at the fair value of the consideration received net of issue costs associated with the borrowings. After initial recognition, these are subsequently measured at
amortised cost using the effective interest method, which is the rate that exactly discounts the estimated future cash flows through the expected life of the liabilities. Amortised cost is calculated by taking into account any issue costs and any discount or premium on settlement.
Trade and other receivables
Trade and other receivables in the Consolidated Statement of Financial Position are initially measured at original invoice amount and subsequently measured after deducting any provision for impairment.
Cash and cash equivalents
Cash and cash equivalents in the Consolidated Statement of Financial Position comprise cash at bank and in hand and short-term deposits with an original maturity of three months or less. For the purposes of the Consolidated Statement of Cash Flows, cash and cash equivalents comprise cash and short-term deposits as defined above and other short-term highly liquid investments that are readily convertible into cash and are subject to insignificant risk of changes in value, net of bank overdrafts.
Trade and other payables
Trade and other payables are stated based on the amounts which are considered to be payable in respect of goods or services received up to the date of the Consolidated Statement of Financial Position.
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.
Under IFRS 8: Operating Segments ("IFRS 8") 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 Non-UK.
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), 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 realised and unrealised gains and losses on the Group's current and non-current investments).
Each reportable segment derives its revenues from three main sources from equity portfolio investments as described in further detail in Note 1 under 'Income from equity portfolio investments' and also from treasury portfolio investments as described in Note 1 under 'Income from treasury portfolio investments'.
All reportable segments derive their revenues entirely from external clients and there are no inter-segment sales.
|
| Geographic segment 1: UK | Geographic segment 2: Non-UK | Group | |||
| | | | | | | |
| | 2022 | 2021 | 2022 | 2021 | 2022 | 2021 |
| | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 |
|
| | | | | | |
| Operating income | 6,844 | 6,892 | 17,492 | 10,526 | 24,336 | 17,418 |
| Operating expenses | (2,242) | (2,122) | (2,528) | (1,473) | (4,770) | (3,595) |
|
Segment operating profit |
4,602 |
4,770 |
14,964 |
9,053 |
19,566 |
13,823 |
|
| | | | | | |
| Financial income | - | 2 | - | 1 | - | 3 |
| Financial expenses | (37) | (40) | (41) | (27) | (78) | (67) |
| Exchange movements | (40) | (57) | (53) | 33 | (93) | (24) |
| | | | | | | |
| Profit before tax | 4,525 | 4,675 | 14,870 | 9,060 | 19,395 | 13,735 |
| Income taxes | - | - | (1,911) | (14) | (1,911) | (14) |
| Profit for the year | £4,525 | £4,675 | £12,959 | £9,046 | £17,484 | £13,721 |
Included within the operating income reported above are the following amounts requiring separate disclosure owing to the fact that they are derived from a single investee company and the total revenues attributable to that investee company are 10% or more of the total realised and unrealised income generated by the Group during the period:
|
Investee Company | Total net operating income attributable to the investee company £'000 |
% of total realised and unrealised operating income |
Reportable geographic segment | |||
| | | | | | | |
| | 2022 | 2021 | 2022 | 2021 | 2022 | 2021 |
| Kentro Capital Limited | 7,755 | 1,755 | 32 | 10 | 1 | 1 |
| XPT Group LLC | 6,342 | 2,497 | 26 | 14 | 2 | 2 |
| Stewart Specialty Risk Underwriting Limited | 2,758 | 3,227 | 11 | 19 | 2 | 2 |
| ATC Insurance Solutions PTY Limited1 | 2,604 | - | 11 | - | 2 | - |
| Walsingham Motor Insurance Limited1 | 2,529 | - | 10 | - | 1 | - |
| The Fiducia MGA Company Limited1 | - | 1,824 | - | 10 | - | 1 |
1There are no disclosures for The Fiducia MGA Company Limited in the current year as the income derived from this investee company did not exceed the 10% threshold prescribed by IFRS 8. There are also no disclosures shown for ATC Insurance Solutions PTY Limited and Walsingham Motor Insurance Limited in the prior year as the income derived from these investee companies did not exceed the 10% threshold prescribed by IFRS 8 in that year.
| | Geographic segment 1: UK | Geographic segment 2: Non-UK | Group | |||||||||
| | 2022 | 2021 | 2022 | 2021 | 2022 | 2021 | ||||||
| | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | ||||||
| Non-current assets | | | | | | |
| |||||
| Property, plant and equipment | 65 | 84 | 31 | 39 | 96 | 123 | ||||||
| Right-of-use asset | 567 | 680 | 269 | 321 | 836 | 1,001 | ||||||
| Investments - equity portfolio | 93,161 | 88,959 | 48,084 | 41,992 | 141,245 | 130,951 | ||||||
| Loans and receivables | 5,633 | 12,776 | 1,598 | 3,057 | 7,231 | 15,833 | ||||||
|
| 99,426 | 102,499 | 49,982 | 45,409 | 149,408 | 147,908 | ||||||
| Current assets | | | | | | | ||||||
| Investments - Assets held for sale | - | - | 8,104 | - | 8,104 | - | ||||||
| Trade and other receivables | 2,770 | 2,528 | 2,204 | 1,870 | 4,974 | 4,398 | ||||||
| Cash and cash equivalents | 8,628 | 709 | - | - | 8,628 | 709 | ||||||
|
| 11,398 | 3,237 | 10,308 | 1,870 | 21,706 | 5,107 | ||||||
|
| | | | | | | ||||||
| Total assets | 110,824 | 105,736 | 60,290 | 47,279 | 171,114 | 153,015 | ||||||
|
| | | | | | | ||||||
| Non-current liabilities | | | | | | | ||||||
| Lease liabilities | (523) | (638) | (249) | (301) | (772) | (939) | ||||||
| Deferred tax liabilities | - | - | (1,898) | - | (1,898) | - | ||||||
| | (523) | (638) | (2,147) | (301) | (2,670) | (939) | ||||||
| Current liabilities | | | | | | | ||||||
| Trade and other payables | (1,667) | (1,007) | (3) | (3) | (1,670) | (1,010) | ||||||
| Lease liabilities | (113) | (108) | (54) | (51) | (167) | (159) | ||||||
| Loans and other payables | - | (1,000) | | | - | (1,000) | ||||||
|
| (1,780) | (2,115) | (57) | (54) | (1,837) | (2,169) | ||||||
|
| | | | | | | ||||||
| Total liabilities | (2,303) | (2,753) | (2,204) | (355) | (4,507) | (3,108) | ||||||
| | | | | | | | ||||||
| Net assets | £108,521 | £102,983 | £58,086 | £46,924 | £166,607 | £149,907 | ||||||
|
Additions to property, plant and equipment |
4 |
3 |
2 |
2 |
6 |
5 | ||||||
|
Depreciation and amortisation of property, plant and equipment |
(134) |
(138) |
(64) |
(66) |
(198) |
(204) | ||||||
| | | | | | | | ||||||
| Release of provision against investments and loans | -
| 37
| 1,117 | - | 1,117 | 37 | ||||||
| | | | | | | | ||||||
| Cash flow arising from: | | | | | | | ||||||
| | | | | | | | ||||||
| Operating activities | 8,178 | (4) | 1,862 | (47) | 10,040 | (51) | ||||||
| Investing activities | (6) | (5) | - | - | (6) | (5) | ||||||
| Financing activities | (2,115) | (22) | - | - | (2,115) | (22) | ||||||
| Change in cash and cash equivalents |
6,057 |
(31) |
1,862 |
(47) |
7,919 |
(78) | ||||||
As outlined previously, under IFRS 8 the Group reports its operating segments (UK and Non-UK) and associated income, expenses, assets and liabilities based upon the country of domicile of each of its investee companies.
In addition to the segmental analysis disclosure reported above, the Group has undertaken a further assessment of each of its investee companies' underlying revenues, specifically focusing on the geographical origin of this revenue. Geographical analysis of each investee company's 2022 and 2021 revenue budgets was carried out and, based upon this analysis, the directors have determined that on a look-through basis, the Group's portfolio of investee companies can also be analysed as follows:
| |
2022 |
2021 |
| | % | % |
| | | |
| UK | 41 | 42 |
| Non-UK | 59 | 58 |
| Total | 100 | 100 |
| | | |
| 3. FINANCIAL EXPENSES | 2022 | 2021 |
| | £'000 | £'000 |
| | | |
| Interest costs on loans and other payables (Note 17) | 23 | 4 |
| Interest costs on lease liability (Note 20) | 55 | 63 |
| | £ 78 | £ 67 |
| | | |
| 4. FINANCIAL INCOME | 2022 | 2021 |
| | £'000 | £'000 |
| | | |
| Bank and similar interest | - | 3 |
| | £ - | £ 3 |
| | | |
5. STAFF COSTS
The average number of employees, including all directors (executive and non-executive), employed by the Group during the year was 16 (2021: 16); 6 of those are in a management role (2021: 6) and 10 of those are in a support role (2021: 10). All remuneration was paid by B.P. Marsh & Company Limited.
| The related staff costs were: | 2022 | 2021 |
| | £'000 | £'000 |
| | | |
| Wages and salaries | 2,992 | 2,083 |
| Social security costs | 418 | 300 |
| Pension costs | 148 | 129 |
| Other employment costs (Note 23) | 76 | 96 |
| | £3,634 | £2,608 |
| | | |
During the year to 31st January 2017 the Group established a Share Incentive Plan ("SIP") under which certain eligible directors and employees were granted Ordinary shares in the Company. These shares are being held on behalf of these directors and employees within the B.P. Marsh SIP Trust. Refer to Note 23 for further details.
During the year to 31st January 2019, Joint Share Ownership Agreements were also entered into between certain directors and employees and the Company. Refer to Note 23 for further details.
Charges of £68,070 (2021: £74,467) relating to the SIP and £7,685 (2021: £21,472) relating to the Joint Share Ownership Agreements are included within 'Other employment costs' above.
6. DIRECTORS' EMOLUMENTS
| | 2022 | 2021 |
| The aggregate emoluments of the directors were: | £'000 | £'000 |
| | | |
| Management services - remuneration | 1,717 | 1,228 |
| Fees | 23 | 20 |
| Pension contributions - remuneration | 63 | 62 |
| | £ 1,803 | £ 1,310 |
502,395 of the 1,461,302 shares, in respect of which joint interests were granted during the year to 31st January 2019, were issued to current directors. Refer to Note 23 for further details.
Of the total 31,210 (2021: 47,044) Free, Matching and Partnership Shares granted under the SIP during the year, 9,363 (2021: 13,515) were granted to directors of the Company.
Of the £7,685 (2021: £21,472) charge relating to the Joint Share Ownership Plan and the £68,070 (2021: £74,467) charge relating to the SIP, £2,643 (2021: £7,382) and £20,421 (2020: £20,309) related to the directors respectively.
Refer to Note 23 for further details.
|
| 2022 | 2021 |
| | £'000 | £'000 |
| Highest paid director | | |
| Emoluments | 486 | 327 |
| Pension contribution | 24 | 23 |
| | £ 510 | £ 350 |
The Company contributes into defined contribution pension schemes on behalf of certain employees and directors. Contributions payable are charged to the Consolidated Statement of Comprehensive Income in the period to which they relate.
During the year, 3 directors (2021: 3) accrued benefits under these defined contribution pension schemes.
The key management personnel comprise only the directors.
| 7. DIVIDENDS | 2022 | 2021 |
| | £'000 | £'000 |
| Ordinary dividends | | |
| | | |
| Dividend paid: | | |
| | | |
| 2.44 pence each on 35,995,156 Ordinary shares (2021: 2.22 pence each on 35,961,836 Ordinary shares) | 878 | 798 |
| | | |
| | £ 878 | £ 798 |
| | | |
In the current year a total dividend of £5,752 (2021: £4,519) was payable on the 235,719 (2021: 203,573) ordinary shares held by the B.P. Marsh SIP Trust ("SIP Trust").
No dividend was payable on the 1,461,302 (2021: 1,461,302) ordinary shares held by the B.P. Marsh Employees' Share Trust ("Share Trust") under the Joint Share Ownership Plan and on 9,542 ordinary shares held in Treasury which were unallocated at the dividend record date (2021: 42,862).
| 8. PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION | 2022 | 2021 |
| | £'000 | £'000 |
| The profit for the year is arrived at after charging: | | |
| | | |
| Depreciation and amortisation of property, plant & equipment, and right-of-use asset |
198 |
204 |
| Auditor's remuneration :- | | |
| Audit fees for the Company | 31 | 28 |
| Other services: | | |
| -Audit of subsidiaries' accounts | 17 | 17 |
| -Taxation | 14 | 11 |
| -Other advisory | 36 | 8 |
| Exchange loss | 93 | 24 |
| 9. INCOME TAX EXPENSE | 2022 | 2021 |
| | £'000 | £'000 |
| Current tax: | | |
| Current tax on profits for the year | 13 | 5 |
| Adjustments in respect of prior years | - | 9 |
| | | |
| Total current tax | 13 | 14 |
| | | |
| Deferred tax (Note 16): | | |
| Origination and reversal of temporary differences | 1,898 | - |
| | | |
| Total deferred tax | 1,898 | - |
| | | |
| Total income taxes charged in the Consolidated Statement of Comprehensive Income |
£ 1,911 |
£ 14 |
The tax assessed for the year is lower (2021: lower) than the standard rate of corporation tax in the UK. The differences are explained below:
|
| 2022 | 2021 |
|
| £'000 | £'000 |
|
| | |
| Profit before tax | 19,395 | 13,735 |
| | | |
| Profit on ordinary activities at the standard rate of corporation tax in the UK of 19.00% (2021: 19.00%) | 3,685 | 2,610 |
| Tax effects of: | | |
| Expenses not deductible for tax purposes | 22 | 29 |
| Withholding tax suffered at source on overseas income | 13 | 14 |
| Non-taxable capital gains on disposal of investments | (518) | - |
| Other effects: | | |
| Non-taxable income (dividends received) | (362) | (380) |
| Non-taxable income (unrealised gains on equity portfolio revaluation) | (1,181) | (2,447) |
| Management expenses unutilised | 252 | 188 |
| | | |
| Total income taxes charged in the Consolidated Statement of Comprehensive Income |
£ 1,911 |
£ 14 |
There are no factors which may affect future tax charges.
10. EARNINGS PER SHARE FROM CONTINUING OPERATIONS ATTRIBUTABLE TO THE EQUITY SHAREHOLDERS AND NET ASSET VALUE PER SHARE
| | 2022 £'000 | 2021 £'000 |
| Earnings | | |
| Earnings for the purpose of basic and diluted earnings per share being total comprehensive income attributable to equity shareholders |
17,484 |
13,721 |
| | | |
| Earnings per share - basic | 48.6p | 38.2p |
| Earnings per share - diluted | 47.3p | 38.2p |
| |
|
|
| Number of shares | Number | Number |
| Weighted average number of ordinary shares for the purposes of basic earnings per share |
35,988,766 |
35,948,587 |
| | | |
| Number of dilutive shares under option | 1,461,302 | Nil |
| | | |
| Weighted average number of ordinary shares for the purposes of dilutive earnings per share |
36,925,601 |
35,948,587 |
No share repurchases were undertaken during both the current and prior year.
Ordinary shares held by the Company in Treasury
| Movement of ordinary shares held in Treasury: | | |
| | 2022 | 2021 |
| | Number | Number |
| | | |
| Opening total ordinary shares held in Treasury at 1st February | 42,862 | 85,058 |
| | | |
| Ordinary shares transferred to the B.P. Marsh SIP Trust during the year | (33,320) | (42,196) |
| | | |
| Total ordinary shares held in Treasury at 31st January | 9,542 | 42,862 |
| | | |
The Treasury shares do not have voting or dividend rights and have therefore been excluded for the purposes of calculating earnings per share.
On 12th June 2021 (the "vesting date") the performance criteria were met for 1,206,888 of 1,461,302 shares held under joint share ownership arrangements (Note 23) within an Employee Benefit Trust, after which the members of the scheme became joint beneficial owners of the shares and therefore became entitled to any gain on sale of the shares in excess of 312.6 pence per share. There were 254,414 shares where the performance criteria were not met on the vesting date that remain unallocated within the Employee Benefit Trust.
The weighted average number of shares used for the purposes of calculating the basic earnings per share, net asset value and net asset value per share of the Group excludes the 1,461,302 shares held within the Employee Benefit Trust as these shares do not have voting rights or dividend rights whilst they are held within this trust. The Group net asset value has therefore also excluded the economic right the Group has to the first 281 pence per share (£4,106,259) on vesting for the same reasons. On this basis the current undiluted net asset value per share is 462.7 pence for the Group. When the joint share ownership arrangements are eventually exercised, although this would increase the number of shares in issue entitled to voting and dividend rights, this would also increase the Group's net asset value by £4,106,259. The diluted net asset value per share is therefore 455.6 pence.
The diluted weighted average number of ordinary shares at 31st January 2022 has been calculated by proportioning the 1,461,302 shares held under joint share ownership arrangements from the vesting date over the year.
The increase to the weighted average number of ordinary shares between 2021 and 2022 is mainly attributable to the inclusion of the 33,320 ordinary shares transferred from Treasury to the SIP Trust during the year that have been treated as re-issued for the purposes of calculating earnings per share.
13,330 ordinary shares (comprising 11,336 of the 33,320 ordinary shares transferred from Treasury to the SIP Trust in April 2021 together with 1,994 of unallocated ordinary shares forfeited by a departing employee during the year to 31st January 2021) were allocated to the participating employees as Free shares under the share incentive plan arrangement on 12th April 2021 (Note 23).
A further 17,880 ordinary shares (also part of the 33,320 ordinary shares transferred from Treasury to the SIP Trust in April 2021) were allocated to the participating employees as Matching and Partnership shares under the share incentive plan arrangement on 21st June 2021 (Note 23).
11. PROPERTY, PLANT AND EQUIPMENT
| |
Furniture and Equipment £'000 | Leasehold Fixtures and Fittings and Others £'000 |
Total £'000 |
| | | | |
| Group | | | |
| | | | |
| Cost | | | |
| At 1st February 2020 | 137 | 152 | 289 |
| Additions | 5 | - | 5 |
| Disposals | (5) | - | (5) |
| At 31st January 2021 | 137 | 152 | 289 |
| | | | |
| At 1st February 2021 | 137 | 152 | 289 |
| Additions | 6 | - | 6 |
| Disposals | (1) | - | (1) |
| At 31st January 2022 | 142 | 152 | 294 |
| | | | |
| Depreciation |
|
|
|
| At 1st February 2020 | 89 | 49 | 138 |
| Eliminated on disposal | (5) | - | (5) |
| Charge for the year | 18 | 15 | 33 |
| At 31st January 2021 | 102 | 64 | 166 |
| | | | |
| At 1st February 2021 | 102 | 64 | 166 |
| Eliminated on disposal | (1) | - | (1) |
| Charge for the year | 18 | 15 | 33 |
| At 31st January 2022 | 119 | 79 | 198 |
| | | | |
| Net book value |
|
|
|
| At 31st January 2022 | £ 23 | £ 73 | £ 96 |
| At 31st January 2021 | £ 35 | £ 88 | £ 123 |
| At 31st January 2020 | £ 48 | £ 103 | £ 151 |
12. INVESTMENTS - EQUITY PORTFOLIO
| Group | Shares in investee companies | ||
| | Continuing investments | Current Assets - Investments held for sale
| Total |
| | £'000 | £'000 | £'000 |
| At valuation | | | |
| | | | |
| At 1st February 2020 | 115,666 | - | 115,666 |
| Additions | 2,408 | - | 2,408 |
| Disposals | - | - | - |
| Provisions | - | - | - |
| Unrealised gains in this period | 12,877 | - | 12,877 |
| At 31st January 2021 | £ 130,951 | £ - | £ 130,951 |
| | | | |
| At 1st February 2021 | 130,951 | - | 130,951 |
| Transfers between categories | (7,435) | 7,435 | - |
| Additions | 8,011 | - | 8,011 |
| Disposals | (5,817) | - | (5,817) |
| Provisions | - | - | - |
| Unrealised gains in this period | 15,535 | 669 | 16,204 |
| At 31st January 2022 | £ 141,245 | £ 8,104 | £ 149,349 |
|
| | | |
| At cost | | | |
| | | | |
| At 1st February 2020 | 57,970 | - | 57,970 |
| Additions | 2,408 | - | 2,408 |
| Disposals | - | - | - |
| Provisions | - | - | - |
| At 31st January 2021 | £ 60,378 | £ - | £ 60,378 |
|
| | | |
| At 1st February 2021 | 60,378 | - | 60,378 |
| Transfers between categories | (6,096) | 6,096 | - |
| Additions | 8,011 | - | 8,011 |
| Disposals | (5,913) | - | (5,913) |
| Provisions | - | - | - |
| At 31st January 2022 | £ 56,380 | £ 6,096 | £ 62,476 |
The additions relate to the following transactions in the year:
The Group paid £200,000 on 8th March 2021 and on 8th September 2021 in relation to deferred consideration due to a former minority shareholder in Paladin Holdings Limited ("Paladin"). The payments represented the second and final tranches of consideration due in respect of 250,000 ordinary shares in Paladin acquired from the minority shareholder in August 2020 for initial consideration of £400,000. These shares are being held by the Group under a call option arrangement which Paladin can call at any time up to 24th August 2026 and buy back from the Group for £804,000. These shares were originally acquired as 50,000 ordinary shares, however the Group's holding increased to 250,000 ordinary shares by way of a 5:1 share restructure which Paladin undertook on 15th April 2021. As at 31st January 2022 total consideration paid by the Group in respect of these shares amounted to £800,000, with no further consideration payable.
On 31st August 2021, and as outlined under the disposal transactions below, as part of the transaction whereby ATC Insurance Solutions PTY Limited ("ATC") acquired 100% of MB Prestige Holdings PTY Limited ("MB"), including the Group's entire 40% equity stake in MB, AUD 6,800,008 (£3,611,071) of the consideration received from the disposal of the Group's equity investment in MB was in the form of newly issued shares in ATC. Following the effective reinvestment of the non-cash proceeds from the sale of MB, the Group's equity investment in ATC increased from 20% to 25.56%.
On 8th October 2021 the Group acquired a further 100,000 ordinary shares (2.49% equity stake) in Kentro Capital Limited ("Kentro") from a founding non-management shareholder for consideration of £4,000,000. This increased the Group's fully diluted equity investment in Kentro to 19.18% at the time of investment. As at 31st January 2022 the Group's shareholding in Kentro was 19.34% (19.05% diluted).
The disposals relate to the following transactions in the year:
On 12th May 2021 the Group received an Option Notice in relation to 25,000 of its 250,000 ordinary shares in Paladin which were being held by the Group under a three-year call option arrangement that Paladin could call at any time. These shares were previously acquired in March 2020 as 50,000 ordinary shares from a minority shareholder and exiting employee for a total cost of £260,000, however following the 5:1 share restructure in April 2021 noted above, the Group's holding increased to 250,000 ordinary shares. The terms of the call option arrangement allowed Paladin to buy-back the 250,000 shares from the Group at a fixed price of £1.0452 per share (£261,300). On 24th May 2021, pursuant to the Option Notice being served, the Group received £26,130 as consideration for the part disposal of 25,000 shares, after which the shares were cancelled. On 17th June 2021 a further Option Notice was received in relation to the remaining 225,000 shares held under the aforementioned call option arrangement and on 1st July 2021 the Group received £235,170 as consideration for these shares, after which the shares were cancelled by Paladin. Following the exercise of the call option and the subsequent cancellation of the shares, the Group's equity holding in Paladin decreased from 49.16% as at 31st January 2021 to 47.06% as at 31st January 2022.
On 31st August 2021 ATC acquired 100% of MB (both being investee companies of the Group) for total consideration of AUD 17,000,000. As part of this transaction the Group sold its entire 40% stake in MB for consideration of AUD 6,800,008 (£3,611,071), for which the Group received newly issued shares in ATC. The Group also received £18,602 in cash, representing the working capital adjustment payable following the completion accounts being finalised. Total consideration for the sale therefore amounted to £3,629,673. This represented a realised gain of £392,673 (Note 13) above the Group's carrying value of MB as at 31st January 2021 of £3,237,000 and an overall gain of £3,149,967 above the cost of investment.
On 16th November 2021 the Group agreed to sell its entire 30% existing ownership interest and outstanding debt in Mark Edward Partners LLC ("MEP") to MEP's founder member, and majority shareholder, Mark Freitas for consideration of USD 1,500,000 (£1,116,603). During the year to 31st January 2019 the Group's USD 6,000,000 (£4,572,822) equity investment in MEP together with USD 2,600,000 (£2,045,032) of loans outstanding were fully provided against within the Group's Consolidated Statement of Financial Position. As per the sale agreement, the consideration for the disposal has been attributed to the outstanding loan of USD 2,600,000 and has therefore been treated as a loan repayment and reflected within the Consolidated Statement of Comprehensive Income as a release of provision. However, the original cost of investment of £4,572,822 has been included in the above table within the disposals at cost and the associated transfer of unrealised losses to realised losses has been reflected within the Statement of Changes in Equity (Note 19) under 'Net transfers on disposal of investments' as a transfer from the Fair Value Reserve to Retained Earnings.
On 21st December 2021 the Group sold its entire 40.5% equity holding in Walsingham Motor Insurance Limited ("WMIL") for consideration of £4,654,117. WMIL was acquired by Humn.ai Limited ("Humn"), a London-based insurance provider producing real-time data-driven fleet insurance. The Group also disposed of its 20% equity holding in Walsingham Holdings Limited ("WHL"), which was liquidated as part of the transaction and resulted in further cash proceeds of £209,893 payable to the Group post year end. The Group also received full repayment of its outstanding loan with WHL of £285,975 on completion. Total equity consideration receivable (including deferred amounts due) for the combined disposals of WMIL and WHL therefore amounted to £4,864,010. This represented a realised gain of £2,544,010 (Note 13) above the Group's combined carrying value of WMIL and WHL as at 31st January 2021 of £2,320,000 and an overall gain of £4,263,710 above the cost of investment. Since 31st January 2022 the Group has received the deferred consideration amounts due in respect of its disposals of WMIL and WHL amounting to £215,983 (£6,089 in respect of WMIL and £209,893 in respect of WHL), which were included within 'Trade and other receivables' within the Consolidated Statement of Financial Position as at 31st January 2022 (refer to Note 15).
The unquoted investee companies, which are registered in England except Summa Insurance Brokerage, S.L. (Spain), Asia Reinsurance Brokers Pte Limited (Singapore), Stewart Specialty Risk Underwriting Ltd (Canada), XPT Group LLC (USA), ATC Insurance Solutions PTY Limited (Australia), Criterion Underwriting Pte Limited (Singapore), Agri Services Company PTY Limited (Australia) and Sage Program Underwriters, Inc. (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 |
| | | | £ | £ | |
| | | | | | |
| Agri Services Company PTY Limited | 41.00 | 30.06.20 | 1,446,314 | (9,356) | Holding Company for specialist Australian agricultural Managing General Agency |
| | | | | | |
| Asia Reinsurance Brokers Pte Limited | 25.00 | 31.05.21 | 2,208,110 | 173,422 | Specialist reinsurance broker |
| | | | | | |
| ATC Insurance Solutions PTY Limited | 25.56 | 30.06.21 | 5,238,361 | 2,158,688 | Specialist Australian Managing General Agency |
| | | | | | |
| Criterion Underwriting Pte Limited1 | 29.40 | - | - | - | Specialist Singaporean Managing General Agency |
| | | | | | |
| EC3 Brokers Group Limited | 35.00 | 31.12.20 | (9,705,910) | (6,757,003) | Investment holding company |
| | | | | | |
| The Fiducia MGA Company Limited | 35.18 | 31.12.20 | (1,481,102) | 55,518 | Specialist UK Marine Cargo Underwriting Agency |
| | | | | | |
| Kentro Capital Limited3 | 19.34 | 31.12.20 | 22,185,426 | (2,791,028) | Specialist Managing General Agency |
| | | | | | |
| LEBC Holdings Limited | 59.34 | 30.09.21 | 5,183,237 | 992,579 | Independent financial advisor company |
| | | | | | |
| Lilley Plummer Holdings Limited2 | 30.00 | - | - | - | Specialist Marine broker |
| | | | | | |
| Neutral Bay Investments Limited | 49.90 | 31.03.21 | 3,952,778 | 236,567 | Investment holding company |
| | | | | | |
| Paladin Holdings Limited4 | 47.06 | 31.12.20 | 96,641 | 374,939 | Investment holding company |
| | | | | | |
| Sage Program Underwriters, Inc.5 | 30.00 | - | - | - | Specialist Managing General Agency |
| | | | | | |
| Stewart Specialty Risk Underwriting Limited | 30.00 | 31.12.20 | 1,627,086 | 1,512,722 | Specialist Canadian Casualty Underwriting Agency |
| | | | | | |
| Summa Insurance Brokerage, S.L. | 77.25 | 31.12.20 | 8,229,763 | (46,385) | Consolidator of Spanish regional insurance brokers |
| | | | | | |
| XPT Group LLC | 28.18 | 31.12.21 | (3,919,412) | (6,927,053) | USA Specialty lines insurance distribution company |
| | | | | | |
1Statutory financial information is not available for Criterion Underwriting Pte Limited as the company is not currently trading.
2On 28th July 2021 the Group's 30% investment in Lilley Plummer Risks Limited was rolled up into a newly incorporated holding company, Lilley Plummer Holdings Limited, via a share-for-share exchange. On 10th September 2021 the Group's 30% investment in LPR Insurance Brokers Limited was also rolled up into Lilley Plummer Holdings Limited through a share-for-share exchange. It is expected that the results of both Lilley Plummer Risks Limited and LPR Insurance Brokers Limited will be presented within the consolidated statutory accounts of Lilley Plummer Holdings Limited when these become due.
3On 22nd February 2022, as part of a rebranding exercise, Nexus Underwriting Management Limited rebranded and changed its name to Kentro Capital Limited (Note 25).
4The Group's 47.06% equity investment in Paladin Holdings Limited includes 5.88% relating to shares held under option that can be bought back and cancelled. The Group envisages that this shareholding will reduce over time as the options are exercised.
5Sage Program Underwriters, Inc. is a newly incorporated company. Statutory accounts are not available as these are not yet due.
The Group's 35% equity investments in Bastion Reinsurance Brokerage (PTY) Limited and Bulwark Investment Holdings (PTY) Limited and its 42.5% equity investment in Property and Liability Underwriting Managers (PTY) Limited, all of which are based in South Africa, have not been listed above as they were in the process of being wound up as at 31st January 2022 and no recent financial information is available.
The aggregate capital and reserves and profit/(loss) for the year shown above are extracted from the relevant local GAAP accounts of the investee companies.
| | Shares in |
| Company | group |
| | undertakings |
| | £'000 |
| At valuation | |
| | |
| At 1st February 2020 | 109,804 |
| Additions | - |
| Unrealised gains in this period | 12,944 |
| At 31st January 2021 | £ 122,748 |
|
| |
| At 1st February 2021 | 122,748 |
| Additions | - |
| Unrealised gains in this period | 11,742 |
| At 31st January 2022 | £ 134,490 |
|
| |
| At cost | |
| | |
| At 1st February 2020 | 2,143 |
| Additions | - |
| At 31st January 2021 | £ 2,143 |
| | |
| At 1st February 2021 | 2,143 |
| Additions | - |
| At 31st January 2022 | £ 2,143 |
| | |
Shares in group undertakings
All group undertakings are registered in England and Wales. The details and results of group undertakings held throughout the year, which are extracted from the UK-adopted international accounting standards accounts of B.P. Marsh & Company Limited, Marsh Insurance Holdings Limited, B.P. Marsh Asset Management Limited, B.P. Marsh (North America) Limited and the UK GAAP accounts for the other companies, are as follows:
| | | Aggregate | Profit/(loss) | | |
| | % | capital and | for the | | |
| | Holding | reserves at | year to | | |
| | of share | 31st January | 31st January | | |
| Name of company | Capital | 2022 | 2022 | Principal activity | |
| | | £ | £ | | |
| | | | | | |
| B.P. Marsh & Company Limited | 100 | 166,603,313 | 17,484,033 | Consulting services and investment holding company | |
| | | | | | |
| Marsh Insurance Holdings Limited | 100 | 6,099,974 | - | Investment holding company - dormant | |
| | | | | | |
| B.P. Marsh Asset Management Limited | 100 | 1 | - | Dormant | |
| | | | | | |
| B.P. Marsh (North America) Limited* | 100 | 5,829,536 | 5,395,569 | Investment holding company | |
| | | | | | |
| B.P. Marsh & Co. Trustee Company Limited | 100 | 1,000 | - | Dormant | |
| | | | | | |
| Marsh Development Capital Limited | 100 | 1 | - | Dormant | |
| | | | | | |
| Bastion London Limited | 100 | 1 | - | Dormant | |
| | | | | | |
| XPT London Limited | 100 | 2 | - | Dormant | |
| | | | | | |
*At the year end B.P. Marsh (North America) Limited held a 100% economic interest in RHS Midco I LLC, a US registered entity incorporated during the year to 31st January 2018 for the purpose of holding the Group's equity investment in XPT Group LLC. In addition, at the year end B.P. Marsh (North America) Limited also held a 100% economic interest in B.P. Marsh US LLC, a US registered entity, which was incorporated during the year to 31st January 2018. There were no profit or loss transactions in either of these two US registered entities during the current or prior year.
In addition, the Group also controls the B.P. Marsh SIP Trust and the B.P. Marsh Employees' Share Trust (Note 23).
Loans to the subsidiaries of £32,187,221 (2021: £27,277,332) are treated as capital contributions.
13. REALISED GAINS ON DISPOSAL OF EQUITY INVESTMENTS
The realised gains on disposal of investments comprises of a net gain of £2,937,985.
£1,300 of this net gain is in respect of the Group's disposal of 250,000 ordinary shares (c.5.5% at the time of divestment) in Paladin Holdings Limited ("Paladin") which were held under a call option arrangement, for consideration of £261,300, compared to the fair value of £260,000 at 1st February 2021.
£392,673 of this net gain is in respect of the Group's disposal of its entire 40% investment in MB Prestige Holdings PTY Limited ("MB") at its carrying value of £3,237,000 for consideration of £3,629,673.
£2,407,119 of this net gain is in respect of the Group's disposal of its entire 40.5% investment in Walsingham Motor Insurance Limited ("WMIL") for consideration of £4,654,119, compared to the fair value of £2,247,000 at 1st February 2021.
£136,893 of this net gain is in respect of the capital distribution from liquidating the Group's 20% investment in Walsingham Holdings Limited ("WHL") for consideration of £209,893, compared to the fair value of £73,000 at 1st February 2021.
In aggregate, the above disposals resulted in a net release of previously unrealised gains to Retained Earnings from the Fair Value Reserve of £4,476,991.
The disposal of the Group's entire 30% investment in Mark Edward Partners LLC ("MEP") did not generate any realised gains or losses on disposal as this investment had been fully provided against during the year to 31st January 2019. However, the disposal did result in a net release of unrealised losses to Retained Earnings from the Fair Value Reserve of £4,572,822 (representing the original cost of investment).
The above releases of fair value resulted in a net transfer of £95,831 from the Fair Value Reserve to the Retained Earnings Reserve.
Refer to Note 12 for further details relating to the above disposals.
There were no realised gains on disposal of investments in the prior year.
14. LOANS AND RECEIVABLES - NON-CURRENT
| | Group | | Company | ||
| | 2022 | 2021 | | 2022 | 2021 |
| | £'000 | £'000 | | £'000 | £'000 |
| | | | | | |
| Loans to investee companies (Note 24) | 7,231 | 15,833 | | - | - |
| Amounts owed by group undertakings | - | - | | 4,106 | 4,058 |
| | | | | | |
| | £ 7,231 | £ 15,833 | | £ 4,106 | £ 4,058 |
The amounts owed to the Company by group undertakings are interest free and repayable on demand.
See Note 15 for the provisions against loans to investee companies and Note 24 for terms of the loans.
15. TRADE AND OTHER RECEIVABLES - CURRENT
| | Group | | Company | ||
| | 2022 | 2021 | | 2022 | 2021 |
| | £'000 | £'000 | | £'000 | £'000 |
| | | | | | |
| Trade receivables | 356 | 848 | | - | - |
| Less provision for impairment of receivables |
- |
- | |
- |
- |
| | 356 | 848 | | - | - |
| Loans to investee companies (Note 24) | 3,135 | 1,273 | | - | - |
| Corporation tax repayable | - | - | | - | - |
| Other receivables (Note 12) | 218 | 38 | | - | - |
| Prepayments and accrued income | 1,265 | 2,239 | | - | - |
| | | | | | |
| | £ 4,974 | £ 4,398 | | £ - | £ - |
| | | | | | |
No provisions were made against loans to investee companies in the current or prior year. A provision of £1,116,603 previously made against a loan was released during the year due to a repayment being received (2021: a provision of £37,278 was released). The total provision as at 31st January 2022 was therefore £3,631,756 (2021: £4,748,359).
Included within net trade receivables is a gross amount of £293,450 (2021: £762,233) owed by the Group's participating interests. No provision for bad debts has been made in either the current or prior year.
Trade receivables are provided for based on estimated irrecoverable amounts from the fees and interest charged to investee companies, determined by the Group's management based on prior experience and their assessment of the current economic environment.
Movement in the allowance for doubtful debts:
|
| Group | | Company | ||
| | 2022 | 2021 | | 2022 | 2021 |
| | £'000 | £'000 | | £'000 | £'000 |
| | | | | | |
| Balance at 1st February | - | - | | - | - |
|
Decrease in allowance recognised in the Statement of Comprehensive Income |
- |
- | |
- |
- |
| | | | | | |
| Balance at 31st January | £ - | £ - | | £ - | £ - |
| | | | | | |
In determining the recoverability of a trade receivable, the Group considers any change in the credit quality of the trade receivable from the date credit was initially granted up to the reporting date.
The Group's net trade receivable balance includes debtors with a carrying amount of £355,677 (2021: £847,621), of which £215,436 (2021: £520,320) of debtors are past due at the reporting date for which the Group has not made a provision as all amounts have subsequently been received since the year-end. The Group does not hold any collateral over these balances other than over £16,712 (2021: £229,712) included within the net trade receivables balance relating to loan interest due from investee companies which is secured on the assets of the investee company.
Ageing of past due but not impaired:
|
| Group | | Company | ||
| | 2022 | 2021 | | 2022 | 2021 |
| | £'000 | £'000 | | £'000 | £'000 |
| | | | | | |
| Not past due | 140 | 327 | | - | - |
| Past due: 0 - 30 days | 15 | 242 | | - | - |
| Past due: 31 - 60 days | - | 4 | | - | - |
| Past due: more than 60 days | 201 | 275 | | - | - |
| | | | | | |
| | £ 356 | £ 848 | | £ - | £ - |
| | | | | | |
See Note 24 for terms of the loans and Note 22 for further credit risk information.
16. DEFERRED TAX LIABILITIES / (ASSETS) - NON-CURRENT
|
| | Group | | Company |
|
| | £'000 | | £'000 |
| | | | | |
| At 1st February 2020 | | - | | - |
| Tax movement relating to investment revaluation for the year (Note 9) | | - | | - |
| | | | | |
| At 31st January 2021 | | £ - | | £ - |
| | | | | |
| At 1st February 2021 | | - | | - |
| Tax movement relating to investment revaluation for the year (Note 9) | | 1,898 | | - |
| | | | | |
| At 31st January 2022 | | £ 1,898 | | £ - |
| | | | | |
The directors estimate that, under the current taxation rules and the current investment profile, if the Group were to dispose of all its investments at the amount stated in the Consolidated Statement of Financial Position, £1,898,000 tax on capital gains (2021: £Nil) would become payable by the Group.
Finance (No.2) Act 2017 introduced significant changes to the Substantial Shareholding Exemption ("SSE") rules in Taxation of Chargeable Gains Act 1992 Sch. 7AC which applied to share disposals on or after 1 April 2017. In general terms, the rule changes relax the conditions for the Group to qualify for SSE on a share disposal.
Having reviewed the Group's current investment portfolio, the directors consider that the Group should benefit from this reform to the SSE rules on all non-US investments. As a result, the directors anticipate that on a disposal of shares in the Group's current non-US investments, so long as the shares have been held for 12 months they should qualify for SSE and no tax charge should arise on their disposal.
New tax legislation was introduced in the US in 2018 which taxes at source gains on disposal of any foreign partnership interests in US limited liability companies ("LLCs"). As such, deferred tax will need to be assessed on any potential net gains from the Group's investment interests in the US.
Having assessed the current portfolio, the directors anticipate that there is a requirement to provide for deferred tax in respect of the unrealised gains on investments under the current requirements of UK-adopted international accounting standards as the US investments currently show a net gain. As such, a provision of £1,898,000 has been made as at 31st January 2022.
The deferred tax provision of £1,898,000 as at 31st January 2022 has been calculated based upon an assessment of the US tax liability arising from the valuations of the Group's holdings within US LLCs at 31st January 2022, using the US Federal rate of 21% together with US State Tax rates prevailing in the states where the Group's US LLCs operate, which range between 0% and 10%. Adjustments were then made based upon available allowances and taxable losses. Given the complexity, the Group utilised the services of a specialist US tax advisory firm.
The requirement for a deferred tax provision is subject to continual assessment of each investment to test whether the SSE conditions continue to be met based upon information that is available to the Group and that there is no change to the accounting treatment in this regard under UK-adopted international accounting standards. It should also be noted that, until the date of the actual disposal, it will not be possible to ascertain if all the SSE conditions are likely to have been met and, moreover, obtaining agreement of the tax position with HM Revenue & Customs may possibly not be forthcoming until several years after the end of a period of accounts.
The March 2021 Budget announced that the UK corporation tax would increase from 19% to 25% (effective 1st April 2023) and Finance Bill 2021 was considered substantively enacted in May 2021. This change in tax rate has had no material impact on the Group financial statements for the year ended 31st January 2022 as the directors do not consider there is any deferred tax due at the year end in respect of its non-US investments due to the SSE rules.
17. CURRENT LIABILITIES
| | Group | | Company | |||
| | 2022 | 2021 | | 2022 | 2021 |
|
| | £'000 | £'000 | | £'000 | £'000 |
|
| Trade and other payables | | | | | |
|
| Trade payables | 116 | 152 | | - | - |
|
| Other taxation & social security costs | 205 | 85 | | - | - |
|
| Accruals and deferred income | 1,265 | 765 | | - | - |
|
| Amounts owed to participating interests | 84 | 8 | | - | - |
|
| Lease liabilities (Note 20) | 167 | 159 | | - | - |
|
| | | | | | |
|
| | 1,837 | 1,169 | | - | - |
|
| | | | | | |
|
| Loans and other payables | - | 1,000 | | - | - |
|
| | | | | | |
|
| | £ 1,837 | £ 2,169 | | £ - | £ - |
|
| | | | | | |
|
The loans and other payables as at 31st January 2021 of £1,000,000 related to amounts drawn down from the Group's £3,000,000 loan facility with Brian Marsh Enterprises Limited ("BME"), a company in which the Chairman, Brian Marsh, is a director and sole shareholder. This amount was fully repaid during the current year on 29th November 2021 and the loan facility ended on 29th January 2022.
The loan facility provided the Group with further liquidity at an interest rate of the higher of 4% or the UK 1-month LIBOR plus 3.25% (capped at 10%). During the prior year, BME agreed to an interest free period from 2nd October 2020 until 1st April 2021 subject to a fee of £20,000 being paid by the Group to BME in the current year.
All of the above liabilities are measured at amortised cost.
18. CALLED UP SHARE CAPITAL
| | 2022 | 2021 |
| | £'000 | £'000 |
| Allotted, called up and fully paid | | |
| 37,466,000 Ordinary shares of 10p each (2020: 37,466,000) | 3,747 | 3,747 |
| | | |
| | £ 3,747 | £ 3,747 |
During the year no share repurchases were undertaken.
As at 31st January 2022 a total of 9,542 ordinary shares were held by the Company in Treasury (31st January 2021: 42,862 ordinary shares were held by the Company in Treasury).
The Treasury shares do not have voting or dividend rights and have therefore been excluded for the purposes of calculating earnings per share.
19. STATEMENT OF CHANGES IN EQUITY
|
Group | |
Share | |
Reverse |
Capital |
Capital | | |
| | Share | premium | Fair value | acquisition | redemption | contribution | Retained | |
| | capital | account | reserve | reserve | reserve | reserve | earnings | Total |
| | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 |
|
At 1st February 2020 | 3,747 | 29,367 | 57,696 | 393 | 7 | 42 | 45,618 | 136,870 |
| | | | | | | | | |
| Comprehensive income for the year | - | - | 12,877 | - | - | - | 844 | 13,721 |
| | | | | | | | | |
| Dividends paid (Note 7) | - | - | - | - | - | - | (798) | (798) |
| | | | | | | | | |
| Share based payment arrangements | - | (18) | - | - | - | 22 | 110 | 114 |
| | | | | | | | | |
|
At 31st January 2021 | £3,747 | £29,349 | £70,573 | £393 | £7 | £64 | £45,774 | £149,907 |
|
At 1st February 2021 | 3,747 | 29,349 | 70,573 | 393 | 7 | 64 | 45,774 | 149,907 |
| | | | | | | | | |
| Comprehensive income for the year | - | - | 14,306 | - | - | - | 3,178 | 17,484 |
| | | | | | | | | |
| Net transfers on disposal of investments (Note 13) | - | - | 96 | - | - | - | (96) | - |
| | | | | | | | | |
| Dividends paid (Note 7) | - | - | - | - | - | - | (878) | (878) |
| | | | | | | | | |
| Share based payment arrangements | - | (7) | - | - | - | 8 | 93 | 94 |
| | | | | | | | | |
|
At 31st January 2022 | £3,747 | £29,342 | £84,975 | £393 | £7 | £72 | £48,071 | £166,607 |
| | | | | | | | | |
| Company | | Share | | Capital | Capital | | |
| | Share | premium | Fair value | redemption | contribution | Retained | |
| | capital | account | reserve | reserve | reserve | earnings | Total |
| | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 |
| | | | | | | | |
|
At 1st February 2020 | 3,747 | 29,367 | 107,661 | 7 | - | 272 | 141,054 |
| | | | | | | | |
|
Comprehensive income for the year | - | - | 12,944 | - | - | 799 | 13,743 |
| | | | | | | | |
| Dividends paid (Note 7) | - | - | - | - | - | (798) | (798) |
| | | | | | | | |
| Share based payment arrangements | - | (18) | - | - | - | 110 | 92 |
| | | | | | | | |
|
At 31st January 2021 | £3,747 | £29,349 | £120,605 | £7 | £ - | £383 | £154,091
|
| | | | | | | | |
|
At 1st February 2021 | 3,747 | 29,349 | 120,605 | 7 | - | 383 | 154,091 |
| | | | | | | | |
|
Comprehensive income for the year | - | - | 11,742 | - | - | 5,750 | 17,492 |
| | | | | | | | |
| Dividends paid (Note 7) | - | - | - | - | - | (878) | (878) |
| | | | | | | | |
| Share based payment arrangements | - | (7) | - | - | - | 93 | 86 |
| | | | | | | | |
|
At 31st January 2022 | £3,747 | £29,342 | £132,347 | £7 | £ - | £5,348 | £170,791
|
| | | | | | | | |
20. LEASES
Group
The Group has applied IFRS 16: Leases ("IFRS 16") using the retrospective approach. The Group has one lease, that of its main office premises. Information about this lease, for which the Group is a lessee, is presented below.
Right-of-use asset
|
| | Land and Buildings |
|
| | £'000 |
| | | |
| At 1st February 2020 | | 1,286 |
| Modification of lease adjustment1 | | (114) |
| Depreciation charge | | (171) |
| | | |
| At 31st January 2021 | | £ 1,001 |
| | | |
| At 1st February 2021 | | 1,001 |
| Depreciation charge | | (165) |
| | | |
| At 31st January 2022 | | £ 836 |
| | | |
Lease liabilities
The Group was committed to making the following future aggregate minimum payments under its leases:
| | 2022 | 2021 |
| | Land and | Land and |
| | Buildings | Buildings |
|
| £'000 | £'000 |
| Maturity analysis - contractual undiscounted cash flows: | | |
| | | |
| Earlier than one year | 214 | 214 |
| Between two and five years | 856 | 856 |
| More than five years | 16 | 230 |
| | £ 1,086 | £ 1,300 |
| | | |
| Lease liabilities included in Consolidated Statement of Financial Position | | |
| at 31st January: | £ 939 | £ 1,098 |
| | | |
| Maturity analysis: | | |
| Current liabilities (Note 17) | 167 | 159 |
| Non-current liabilities | 772 | 939 |
| | £ 939 | £ 1,098 |
| | | |
1During the prior year to 31st January 2021, the Group negotiated a rent free period on its office lease from 24th June 2020 to 23rd January 2021. The present value of the lease payments was recalculated and a modification of lease adjustment of £113,915 was applied to both the right-of-use asset and the lease liability balances brought forward.
| Amounts recognised in profit or loss (Group): | 2022 | 2021 |
| | £'000 | £'000 |
| | | |
| Interest on lease liabilities (Note 3) | £ 55 | £ 63 |
| Amounts recognised in the Consolidated Statement of Cash Flows: | 2022 | 2021 |
| | £'000 | £'000 |
| | | |
| Total cash outflow for leases | £ (214) | £ (223) |
| | | |
Company
There are no right-of-use assets or associated lease liabilities recognised in the Company's Statement of Financial Position.
21. LOAN AND EQUITY COMMITMENTS
On 26th June 2020 the Group entered into an agreement to provide Sage Program Underwriters, Inc. with a loan facility of USD 250,000. As at 31st January 2022 USD 150,000 had been drawn down, leaving a remaining undrawn facility of USD 100,000. Any drawdown is subject to satisfying certain agreed criteria.
On 20th September 2021 the Group entered into an agreement to provide Lilley Plummer Holdings Limited with a loan facility of £300,000. As at 31st January 2022 £200,000 had been drawn down, leaving a remaining undrawn facility of £100,000.
Please refer to Note 25 for details of equity payments made together with loan facilities offered and amounts drawn down after the year end.
22. FINANCIAL INSTRUMENTS
The Group's financial instruments comprise loans to participating interests, cash and liquid resources and various other items, such as trade debtors, trade creditors, other debtors and creditors and loans. These arise directly from the Group's operations.
It is, and has been throughout the period under review, the Group's policy that no trading in financial instruments shall be undertaken unless there are economic reasons for doing so, as determined by the directors.
The main risks arising from the Group's financial instruments are price risk, credit risk, liquidity risk, interest rate risk, currency risk, new investment risk, concentration risk, political risk, Covid-19 risk and Ukraine conflict risk. The Board reviews and agrees policies for managing each of these risks and they are summarised in the Group Strategic Report under "Financial Risk Management".
Interest rate profile
The Group has cash balances of £8,628,000 (2021: £709,000), which are part of the financing arrangements of the Group. The cash balances comprise bank current accounts and deposits placed at investment rates of interest, which ranged up to 0.01% p.a. in the period (2021: deposit rates of interest ranged up to 0.6% p.a.). During the period all cash balances were held in immediate access accounts or on short-term deposit of up to 14 days (2021: all cash balances were held in immediate access accounts).
Currency hedging
During the year the Group engaged in five currency hedging transactions ranging from €910,000 to €1,165,000 and USD 1,000,000 (2021: two currency hedging transactions amounting to €1,300,000 and USD 1,000,000) to mitigate the exchange rate risk for certain foreign currency receivables. These were settled before the year end. A net loss of £7,750 (2021: net loss of £57,011) relating to these hedging transactions was recognised under Exchange Movements within the Consolidated Statement of Comprehensive Income when the transactions were settled. As at the year end the Group had one currency hedging transaction amounting to USD 1,075,000 which was entered into on 28th January 2022. The fair values of these hedges are not materially different to the transaction costs.
Financial liabilities
The Company had no borrowings as at 31st January 2022 (2021: £1,000,000). The balance as at 31st January 2021 had been drawn down from the Company's agreed £3,000,000 loan facility provided by Brian Marsh Enterprises Limited, a company in which the Chairman, Brian Marsh, is a director and sole shareholder, which was entered into on 29th July 2019 and was repaid in full during the current year on 29th November 2021 (Note 17). The loan facility provided the Group with further liquidity at an interest rate of the higher of 4% or the UK 1-month LIBOR plus 3.25% (capped at 10%) and was available until its expiry on 29th January 2022.
Fair values
The Group has adopted the amendment to IFRS 7 for financial instruments which are measured at fair value at the reporting date. This requires disclosure of fair value measurements by level of the following fair value measurement hierarchy:
· Level 1: Quoted prices unadjusted in active markets for identical assets or liabilities;
· Level 2: Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, observed either directly as prices or indirectly from prices; and
· Level 3: Inputs for the asset or liability that are not based on observable market data.
Unquoted equity instruments are measured in accordance with the IPEVCV Guidelines with reference to the most appropriate information available at the time of measurement. Further information regarding the valuation of unquoted equity instruments can be found in the section 'Investments - equity portfolio' under the Accounting Policies (Note 1).
The following presents the classification of the financial instruments at fair value into the valuation hierarchy at 31st January 2022:
| | | Level 1 | Level 2 | Level 3 | Total |
| | | £'000 | £'000 | £'000 | £'000 |
| Assets | | | | | |
| | | | | | |
| Equity portfolio investments designated as "fair value through profit or loss" assets | | - | - | 149,349 | 149,349 |
| | | | | | |
| | | | | | |
| | | - | - | £ 149,349 | £ 149,349 |
The Group's classification of the financial instruments at fair value into the valuation hierarchy at 31st January 2021 are presented as follows:
| | | Level 1 | Level 2 | Level 3 | Total |
| | | £'000 | £'000 | £'000 | £'000 |
| Assets | | | | | |
| | | | | | |
| Equity portfolio investments designated as "fair value through profit or loss" assets | | - | - | 130,951 | 130,951 |
| | | | | | |
| | | | | | |
| | | - | - | £ 130,951 | £ 130,951 |
Level 3 inputs are sensitive to assumptions made when ascertaining fair value. Setting the valuation policy is the responsibility of the Valuations Committee, which is then reviewed by the Board. The policy is to value investments within the portfolio at fair value by applying a consistent approach and ensuring that the valuation methodology is compliant with the IPEVCV Guidelines. Valuations of the investment portfolio of the Group are performed twice a year, and the half-year valuations are subjected to the same level of scrutiny and approach as the audited final year accounts by the Valuations Committee.
Of assets held at 31st January 2022 classified as Level 3, 72% by value (2021: 79%) were valued using a multiple of earnings and 28% (2021: 21%) were valued using alternative valuation methodologies.
Valuation multiple - the valuation multiple is the main assumption applied to a multiple of earnings based valuation. The multiple is derived from comparable listed companies or relevant market transaction multiples. Companies in the same industry and geography and, where possible, with a similar business model and profile are selected and then adjusted for factors including size, growth potential and relative performance. A discount is applied or a reduced multiple used to reflect that the investment being valued is unquoted. The multiple is then applied to the earnings, which may be adjusted to eliminate one-off revenues or costs to better reflect the ongoing position, or to adjust for any minority interests. The resulting value is the enterprise value of the investment, after which certain adjustments are made to calculate the equity value. These adjustments may include debt, working capital requirements, regulatory capital requirements, deferred consideration payable, or anything that could be dilutive which is quantifiable. The Group's investment valuation is then derived from this based upon its shareholding.
The weighted average post discount EBITDA earnings multiple used (based on the valuations derived) when valuing the portfolio at 31st January 2022 was 14.4x (2021: 13.6x). The weighted average post discount Price/Earnings multiple used (based on the valuations derived) when valuing the portfolio at 31st January 2022 was 19.2x (2021: 16.9x).
If the multiple used to value each unquoted investment valued on an earnings basis as at 31st January 2022 moved by 10%, this would have an impact on the investment portfolio of £11.0m (2021: £9.8m) or 7.3% (2021: 7.5%).
Alternative valuation methodologies - there are a number of alternative investment valuation methodologies used by the Group, for reasons for specific types of investment. These may include valuing on the basis of an imminent sale where a price has been agreed but the transaction has not yet completed, using a discounted cash flow model, at cost, using specific industry metrics which are common to that industry and comparable market transactions have occurred, and a multiple of revenues where the investments are not yet profitable.
At 31st January 2022 the proportion of the investment portfolio that was valued using these techniques were: 22% using industry metric (2021: 19%), 1% using revenues (2021: 1%), 5% at agreed sale value (2021: none) and none at cost (2021: 1%).
If the value of all the investments valued under alternative methodologies moved by 10%, this would have an impact on the investment portfolio of £3.6m (2021: £2.5m) or 2% (2021: 2%).
23. SHARE BASED PAYMENT ARRANGEMENTS
Joint Share Ownership Plan
During the year to 31st January 2019, B.P. Marsh & Partners Plc entered into joint share ownership agreements ("JSOAs") with certain employees and directors. The details of the arrangements are described in the following table:
| Nature of the arrangement | Share appreciation rights (joint beneficial ownership)
|
| Date of grant | 12th June 2018 |
| Number of instruments granted | 1,461,302 |
| Exercise price (pence) | N/A |
| Share price (market value) at grant (pence) |
281.00 |
| Hurdle rate | 3.75% p.a. (simple) |
| Vesting period (years) | 3 years |
| Vesting conditions | There are no performance conditions other than the recipient remaining an employee throughout the vesting period. The awards vest after 3 years or earlier resulting from either:
a) a change of control resulting from a person, or persons acting together, obtaining control of the Company either (i) as a result of a making a Takeover Offer; (ii) pursuant to a court sanctioned Scheme of Arrangement; or (iii) in consequence of a Compulsory Acquisition); or
b) a person becoming bound or entitled to acquire shares in the Company pursuant to sections 974 to 991 of the Companies Act 2006; or
c) a winding up.
If the employee is a bad leaver the co-owner of the jointly-owned share can buy out the employee's interest for 0.01p |
| Expected volatility | N/A |
| Risk free rate | 1% |
| Expected dividends expressed as a dividend yield | 1.9% |
| Settlement | Cash settled on sale of shares |
| % expected to vest (based upon leavers) | 100% |
| Number expected to vest | 1,461,302 |
| Valuation model | Expected Return Methodology (ERM) |
| ERM value (pence) | 36.00 |
| Deduction for carry charge (pence) | 31.60 |
| Fair value per granted instrument (pence) | 4.40 |
| Charge for year ended 31st January 2022 | £7,685 |
On 12th June 2018 1,461,302 new 10p Ordinary shares in the Company were issued and transferred into joint beneficial ownership for 12 employees (including 4 directors) under the terms of joint share ownership agreements. No consideration was paid by the employees for their interests in the jointly-owned shares.
The new Ordinary shares have been issued into the name of RBC cees Trustee Limited ("the Trustee") as trustee of the B.P. Marsh Employees' Share Trust ("the Share Trust") at a subscription price of 281 pence per share, being the mid-market closing price on 12th June 2018. Following the acquisition of the Trustee by JTC Plc on 10th December 2020, the Trustee has since been rebranded to JTC Employer Solutions Trustee Limited.
The jointly-owned shares are beneficially owned by (i) each of the 9 currently participating employees and (ii) the trustee of the Employee Benefit Trust upon and subject to the terms of the JSOAs entered into between the participating employee, the Company and the Trustee.
Under the terms of the JSOAs, the employees and directors are entitled to receive on vesting the growth in value of the shares above a threshold price of 281 pence per share (market value at the date of grant) plus an annual carrying charge of 3.75% per annum (simple interest) to the market value at the date of grant to the date of vesting. The Employee Benefit Trust retains the carrying cost, with 281 pence per share due back to the Company.
Alternatively, on vesting, the participant and the Trustee may exchange their respective interests in the jointly-owned shares such that each becomes the sole owner of a number of Ordinary shares of equal value to their joint interests.
Participants will therefore receive value from the jointly-owned shares only if and to the extent that the share value grows above the initial market value plus the carrying cost to the date of vesting.
The employees and directors received an interest in jointly owned shares and a Joint Share Ownership Plan ("JSOP") is not an option, however the convention for JSOPs is to treat them as if they were options. The value of the employee's interest for accounting purposes is calculated using the Expected Return Methodology.
The risk-free rates are based on the yield on UK Government Gilts of a term consistent with the assumed option life.
On 12th June 2021 (the "vesting date") the performance criteria were met, after which the members of the scheme became joint beneficial owners of the shares and therefore became entitled to any gain on sale of the shares in excess of 312.6 pence per share. Whilst these shares remain within the Employee Benefit Trust, they do not have voting or dividend rights. However, if the shares are sold from the Employee Benefit Trust in the future in excess of 281 pence per share, the Group would be entitled to receive £4,106,259 in total. These shares would then, post-sale, have voting and dividend rights attached, such that they would become fully dilutive for the Group. Whilst 254,414 shares out of 1,461,302 held within the Employee Benefit Trust have been forfeited by departing employees, the trust remains the owner of these shares.
Share Incentive Plan
During the year to 31st January 2017 the Group established an HMRC approved Share Incentive Plan ("SIP").
During the year a total of 33,320 ordinary shares in the Company, which were held in Treasury as at 31st January 2021 (2021: 42,196 ordinary shares in the Company, which were held in Treasury as at 31st January 2020) were transferred to the B.P. Marsh SIP Trust ("SIP Trust"). As a result, together with 1,994 of unallocated ordinary shares forfeited by departing employees during the prior year, a total of 35,314 ordinary shares in the Company were available for allocation to the participants of the SIP (2021: 47,044 ordinary shares were available for allocation, including 4,848 ordinary shares forfeited by departing employees).
On 12th April 2021, a total of 10 eligible employees (including 3 executive directors of the Company) applied for the 2021-22 SIP and were each granted 1,333 ordinary shares ("21-22 Free Shares"), representing approximately £3,600 at the price of issue.
Additionally, on 21st June 2021, all eligible employees were also invited to take up the opportunity to acquire up to £1,800 worth of ordinary shares ("Partnership Shares"). For every Partnership Share that an employee acquired, the SIP Trust offered two ordinary shares in the Company ("Matching Shares") up to a total of £3,600 worth of shares. All 10 eligible employees (including 3 executive directors of the Company) took up the offer and acquired the full £1,800 worth of Partnership Shares (596 ordinary shares) and were therefore awarded 1,192 Matching Shares.
The 21-22 Free and Matching Shares are subject to a 1 year forfeiture period.
A total of 31,210 (2021: 47,044) Free, Matching and Partnership Shares were granted to the 10 (2021: 11) eligible employees during the year, including 9,363 (2021: 13,515) granted to 3 (2021: 3) executive directors of the Company.
No ordinary shares were withdrawn from the SIP Trust during the year (2021: 3,808 ordinary shares in the Company were withdrawn from the SIP Trust and transferred into the direct beneficial ownership of a departing employee).
£68,070 of the IFRS 2 charges (2021: £74,467) associated with the award of the SIP shares to 10 (2021: 11) eligible directors and employees of the Company has been recognised in the Statement of Comprehensive Income as employment expenses (Note 5).
As at 31st January 2022, and after adjusting for a total of 19,951 ordinary shares withdrawn from the SIP Trust by employees on departure and 6,842 ordinary shares forfeited on departure (since inception), a total of 231,028 Free, Matching and Partnership Shares had been granted to 10 eligible employees under the SIP, including 78,579 granted to 3 executive directors of the Company.
The results of the SIP Trust have been fully consolidated within these financial statements on the basis that the SIP Trust is effectively controlled by the Company.
24. RELATED PARTY DISCLOSURES
The following loans owed by the investee companies (including their subsidiaries and other related entities) of the Company and its subsidiaries were outstanding at the year end:
| | 2022 | 2021 |
| | £ | £ |
| | | |
| Bastion Reinsurance Brokerage (PTY) Limited | 425,831 | 425,831 |
| Bulwark Investment Holdings (PTY) Limited | 665,000 | 665,000 |
| The Fiducia MGA Company Limited | 2,449,000 | 2,545,000 |
| Kentro Capital Limited | - | 4,000,000 |
| LEBC Holdings Limited | 1,500,000 | 1,500,000 |
| Lilley Plummer Holdings Limited | 200,000 | - |
| Paladin Holdings Limited | 3,096,500 | 5,096,500 |
| Property and Liability Underwriting Managers (PTY) Limited |
1,450,778 |
1,450,778 |
| Walsingham Holdings Limited | - | 285,975 |
| | | |
| | € | € |
| | | |
| Summa Insurance Brokerage, S.L. | 1,820,070 | 2,329,761 |
| | | |
| | CAD | CAD |
| | | |
| Stewart Specialty Risk Underwriting Limited | - | 300,000 |
| | | |
| | USD | USD |
| | | |
| Mark Edward Partners LLC | - | 2,600,000 |
| XPT Group LLC | 2,000,000 | 2,000,000 |
| Sage Program Underwriters, Inc. | 150,000 | - |
| | | |
| | SGD | SGD |
| | | |
| Criterion Underwriting Pte Limited | 120,000 | 120,000 |
The loans are typically secured on the assets of the investee companies and an appropriate interest rate is charged based upon the risk profile of that company.
Income receivable, consisting of consultancy fees, interest on loans and dividends recognised in the Consolidated Statement of Comprehensive Income in respect of the investee companies (including their subsidiaries and other related entities) of the Company and its subsidiaries for the year were as follows:
|
| 2022 | 2021 |
| | £ | £ |
| | | |
| Agri Services Company PTY Limited | 125,133 | 135,873 |
| Asia Reinsurance Brokers Pte Limited | 123,177 | 145,243 |
| ATC Insurance Solutions PTY Limited | 121,362 | 174,486 |
| Criterion Underwriting Pte Limited | - | - |
| EC3 Brokers Group Limited | (881,318) | 327,754 |
| The Fiducia MGA Company Limited | 203,465 | 201,641 |
| Kentro Capital Limited | 1,201,425 | 894,156 |
| LEBC Holdings Limited | 479,851 | 421,767 |
| Lilley Plummer Holdings Limited | 116,736 | 115,336 |
| MB Prestige Holdings PTY Limited | 702,778 | 282,057 |
| Neutral Bay Investments Limited | 119,597 | 132,080 |
| Paladin Holdings Limited | 550,570 | 538,168 |
| Sage Program Underwriters, Inc. | 39,544 | 61,142 |
| Stewart Specialty Risk Underwriting Limited | 283,771 | 90,326 |
| Summa Insurance Brokerage, S.L. | 152,274 | 188,583 |
| Walsingham Holdings Limited | 20,308 | 23,920 |
| Walsingham Motor Insurance Limited | 121,906 | 98,589 |
| XPT Group LLC | 557,099 | 636,019 |
| | | |
In addition, the Group made management charges of £34,000 (2021: £31,000) to the Marsh Christian Trust ("the Trust"), a grant making charitable Trust, of which Brian Marsh, the Executive Chairman and a significant shareholder of the Company, is also the Trustee and Settlor.
The Group also made management charges of £5,000 (2021: £5,800) to Brian Marsh Enterprises Limited ("BME"). Brian Marsh, the Chairman and a significant shareholder of the Company is also the Chairman and majority shareholder of BME.
On 3rd August 2021 Brian Marsh gifted 205,660 ordinary shares in the Company to the Marsh Christian Trust for £Nil consideration, taking the total number of shares held by the Trust in the Company to 1,477,660 at that time. As at 31st January 2022 and at the date of this report, the Trust's holding in the Company remained at 1,477,660 shares.
On 13th May 2021, the Group repaid £550,000 of its £1,000,000 outstanding loan to BME. On 29th November 2021 the Group repaid the remaining £450,000 outstanding. On 29th January 2022 the loan facility ended.
The original loan facility of £3,000,000 provided the Group with further liquidity at an interest rate of the higher of 4% or the UK 1-month LIBOR plus 3.25% (capped at 10%) and was available to be drawn down until, and repayable by, 29th January 2022, after which the facility ended. BME agreed to an interest free period from 2nd October 2020 until 1st April 2021 subject to a fee of £20,000 being payable by the Group to BME on 2nd April 2021.
All the above transactions were conducted on an arms-length basis.
Of the total dividend payments made during the year of £878,282, £389,060 was paid to the directors or parties related to them (2021: total dividend payments of £798,353, of which £353,596 was paid to the directors or parties related to them).
25. EVENTS AFTER THE REPORTING DATE
On 22nd February 2022 Nexus Underwriting Management Limited, an investee company, changed its name to Kentro Capital Limited as part of a re-branding exercise.
On 1st March 2022 the Group sold its entire 77.25% stake in Summa Insurance Brokerage, S.L. ("Summa") to Acrisure España S.L. ("Acrisure"), part of Acrisure LLC, for consideration of €9,700,737 (£8,104,208), net of transaction costs. The consideration received was in line with the carrying value of the Group's investment in Summa of £8,104,000 as at 31st January 2022 and represented an overall gain of £2,008,065 above the cost of investment. Outstanding loans of €1,820,070 (£1,520,526) were also repaid in full on completion.
On 23rd March 2022 the Group acquired a 40% cumulative preferred equity stake in Denison and Partners Limited ("Denison and Partners") for consideration of £132,000. Denison and Partners is a start-up London-based Lloyds Insurance Broker with a focus on delivering (re)insurance delegated authority solutions and services to Managing General Agencies, Coverholders and (Re)insurers. The Group also provided Denison and Partners with a loan facility of £670,000 on completion, which is expected to be drawn down in tranches in line with their business plan. At the date of this report no amounts have been drawn down from the agreed loan facility.
On 11th May 2022 Lilley Plummer Holdings Limited drew down the remaining £100,000 of its £300,000 loan facility agreed by the Group in September 2021. As at 31st January 2022 £200,000 was outstanding.
On 1st June 2022 the Group agreed to invest, through its wholly-owned subsidiary company B.P. Marsh (North America) Limited, a further USD 3,500,000 (c.£2,800,000) in XPT Group LLC ("XPT"), subject to approval from XPT's senior lender Madison Capital. USD 2,780,000 will be used to subscribe for a further 2,780 redeemable preference shares in XPT. The remaining USD 780,000 will be used to acquire a further 0.97% equity stake in XPT. The funding provided will allow XPT to repay an existing revolving credit facility and satisfy certain deferred consideration payments due. On completion, the total amount invested by the Group in redeemable preference shares will increase from USD 3,220,000 as at 31st January 2022 to USD 6,000,000 and the Group's equity investment in XPT will also increase from 28.18% as at 31st January 2022 to 29.15%.
26. FINANCIAL RISK MANAGEMENT
This note explains the Group's exposure to financial risks and how these risks could affect the Group's future financial performance. Current year profit and loss information has been included where relevant to add further context.
The Group's operations expose it to a variety of financial risks. The Group manages the risk to limit the adverse effects on the financial performance of the Group by monitoring those risks and acting accordingly.
The monitoring of the financial risk management is the responsibility of the Board. The policies of the Board of directors are implemented by the Group's various internal departments under specific guidelines.
The Group is a selective investor and each investment is subject to an individual risk assessment through an investment approval process. The Group's Investment Committee is part of the overall risk management framework. The risk management processes of the Company are aligned with those of the Group and both the Group and the Company share the same financial risks.
Price risk
The Group is exposed to private equity securities price risk as it invests in unquoted companies. The Group manages the risk by ensuring that a director of the Group is appointed to the board of each investee company. In this capacity, the appointed director can advise the Group's Board of the investee companies' activities and prompt action can be taken to protect the value of the investment. Monthly management reports are required to be prepared by investee companies for the review of the appointed director and for reporting to the Group Board.
A 10% change in the fair value of those investments would have the following direct impact on the Consolidated Statement of Comprehensive Income:
| | Group | | Company | ||
| | 2022 | 2021 | | 2022 | 2021 |
| | £'000 | £'000 | | £'000 | £'000 |
|
| | | | | |
| Fair value of investments - equity portfolio |
149,349 |
130,951 | |
134,490 |
122,748 |
| | | | | | |
| Impact of a 10% change in fair value on Consolidated Statement of Comprehensive Income |
14,935
|
13,095
| |
13,449 |
12,275 |
| | | | | | |
Credit risk
The Group is subject to credit risk on its unquoted investments, cash and deposits. The maximum exposure is the amount stated in the Consolidated Statement of Financial Position.
The credit quality of unquoted investments, which are held at fair value and include debt and equity elements, is based on the financial performance of the individual portfolio companies. The credit risk relating to these assets is based on their enterprise value and is reflected through fair value movements.
The Group is exposed to the risk of default on the loans it has made available to investee companies. The loans rank in preference to the equity shareholding and the majority are secured by a charge over the assets of the investment. The Group manages the risk by ensuring that there is a director of the Group appointed to the board of each of its investee companies. In this capacity, the appointed director can advise the Group's board of investee companies' activities and prompt action can be taken to protect the value of the loan, such that the directors believe the credit risk to the Group is adequately managed. When a loan is assessed to be likely to be in default then the Group will review the probability of recoverability, and if necessary, make a provision for any amount considered irrecoverable.
The Group's cash is held with a variety of different counterparties with 100% (2021: 100%) held on demand with A rated institutions.
Liquidity risk
The Group invests in unquoted early stage companies. The timing of the realisation of these investments can be difficult to estimate. The directors assess and review the Group's liquidity position and funding requirements on a regular basis and this is an agenda item for its Board meetings. A key objective is to ensure that the income from the portfolio covers operating expenses such that funds available for investment are not used for working capital. The Group regularly reviews the cash flow forecast to ensure that it has the ability to meet commitments as they fall due and to manage its working capital. The Board considers that the Group has sufficient liquidity to manage current commitments.
As at 31st January 2022 the Group had no borrowings (31st January 2021: £1,000,000).
Interest rate risk
Interest rate risk arises from changes in the interest receivable on cash and deposits, on loans issued to investment companies and on certain preferred dividend mechanisms linked to an interest rate. In addition, the risk arises on any borrowings with a variable interest rate. At 31st January 2022, the Group did not have any interest bearing liabilities but did have interest bearing assets. The majority of loans provided by the Group are subject to a minimum interest rate to protect the Group from a period of low interest rates, and also a hurdle rate linked to the UK Base Rate.
An increase of 100 basis points, based upon the Group's closing balance sheet position of its interest bearing assets, excluding any future contractual loan repayments and loan balances provided against at the year end, over a 12-month period, would lead to an approximate increase in total comprehensive income of £108,000 for the Group (2021: £157,000 increase).
Currency risk
The Group currently has substantial exposure to foreign investment and derives income outside the UK. As such some of the Group's income and assets are subject to movement in foreign currencies which will affect the Consolidated Statement of Comprehensive Income in accordance with the Group's accounting policy. The Board monitors the movements and manages the risk accordingly.
At 31st January 2022, 64% of the Group's net assets were sterling denominated (2021: 70%). The Group's general policy remains not to hedge its foreign currency denominated investment portfolio.
The Group's net assets in Euro, US Dollar, Australian Dollar and all other currencies combined are shown in the table below. The sensitivity analysis has been undertaken based upon the sensitivity of the Group's net assets to movements in foreign currency exchange rates, assuming a 10% movement in exchange rates against sterling. The sensitivity of the Company to foreign exchange risk is not materially different from the Group.
|
As at 31st January 2022 |
Sterling |
Euro | Australian dollar |
US dollar |
Other |
Total |
| | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 |
| | | | | | | |
| Net assets | 107,300 | 9,625 | 19,331 | 21,745 | 8,606 | 166,607 |
| | | | | | | |
| Sensitivity analysis | | | | | | |
| Assuming a 10% movement of exchange rates against sterling | | | | | | |
| Impact on net assets | N/A | (875) | (1,757) | (1,905) | (782) | (5,319) |
| | | | | | | |
|
As at 31st January 2021 |
Sterling |
Euro | Australian dollar |
US dollar |
Other |
Total |
| | £'000 | £'000 | £'000 | £'000 | £'000 | £'000 |
| | | | | | | |
| Net assets | 104,236 | 9,491 | 14,322 | 15,471 | 6,387 | 149,907 |
| | | | | | | |
| Sensitivity analysis | | | | | | |
| Assuming a 10% movement of exchange rates against sterling | | | | | | |
| Impact on net assets | N/A | (769) | (1,302) | (1,341) | (581) | (3,993) |
| | | | | | | |
New investment risk
An inherent risk of realising an investment is the loss of a performing asset and a potential lack of suitable new investments to replace the lost income and capital growth. Prior to reinvestment, returns on cash can be significantly lower, which may reduce underlying profitability on a short-term basis until funds are reinvested. The Group has an active Investment Department which continues to receive a strong pipeline of new investment opportunities. In addition, there is often potential for further investment within the Group's existing portfolio.
Concentration risk
Although the Group only invests in financial service businesses, and specifically insurance intermediaries, the Group has a wealth of experience in this specific sector. It seeks to manage concentration risk by making investments across a variety of geographic areas, development stages of business and classes of product. Quantitative data regarding the concentration risk of the portfolio across geographies can be found in the Segmental Reporting analysis in Note 2.
Political risk
As a UK domiciled business, the Group is exposed to the risks associated with the UK's decision to leave the European Union ("Brexit"). The Board is continually assessing the impact of Brexit on the Group and its underlying investments, however the direct impact on the Group's investment portfolio is not expected to be material. It remains the Group's intention to continue to invest into the international financial services market. As outlined under 'Currency risk' above, the Group continues to monitor the movements in its foreign currency denominated income and assets and manages this risk accordingly.
Covid-19 risk
The Group is exposed to the risks associated with the global coronavirus pandemic ("Covid-19"). Since the outbreak of the virus, the Board has been continually assessing the potential impact of Covid-19 on the Group and its underlying investments. The Group has taken all the steps that it can to ensure that the health and safety of its staff, their families and the Group's associates is prioritised, whilst also ensuring the continuity of the Group's day to day operations through remote working arrangements. Since early 2022 our employees have returned to working in the office on a near full-time basis.
Ukraine conflict risk
The Group is exposed to the risks associated with the conflict in Ukraine, which intensified on 24th February 2022. Since then, the Board has been continually assessing the potential impact of the intensifying military action and associated significant economic sanctions imposed by the international community, and the potential impact on the Group and its underlying investments. Whilst the Group does not have any direct investment in the affected region, the impact on the wider global economy and associated disruption to capital markets, foreign exchange volatility, price inflation and supply chain issues could affect both the Group's operations and those of its investment portfolio, which could, in turn, impact the future performance of the Group.
27. ULTIMATE CONTROLLING PARTY
The directors consider there to be no ultimate controlling party.
Notice
The financial information set out above does not constitute B.P. Marsh & Partners Plc's statutory accounts for the year to 31 January 2022 but is derived from those accounts. The statutory accounts for the year to 31 January 2022 have not yet been delivered to the Registrar of Companies. The auditors have reported on those accounts and have given the following opinion:-
· the financial statements give a true and fair view of the state of the Group's and of the Parent Company's affairs as at 31 January 2022 and of the Group's profit for the year then ended;
· the Group financial statements have been properly prepared in accordance with UK-adopted international accounting standards;
· the Parent Company financial statements have been properly prepared in accordance with UK-adopted international accounting standards; and
· the financial statements have been prepared in accordance with the requirements of the Companies Act 2006.
Approval
The financial statements were approved by the Board of Directors on 10 June 2022 for their release on 13 June 2022.
-Ends-
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