B.p Marsh Regulatory News (BPM)

9th June 2020

B.P. Marsh & Partners Plc 

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

Final Results for the Year to 31st January 2020

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 to 31 January 2020.

Highlights:

· Net Asset Value increased by £10.7m to £136.9m (31 January 2019: £126.2m), an 8.5% increase, net of Dividend

· Net Asset Value per share increased by 29.8p to 380.1p (31 January 2019: 350.3p)

· Total Shareholder return of 9.8% for the year including the Dividend paid in July 2019

· Net Asset Value average annual compound growth rate of 8.5% during the year, compares to an average of 8.1% per annum since flotation and 11.8% since 1990 (net of Dividends and the cash proceeds of Placings)

· Consolidated profit after tax of £12.5m (31 January 2019 restated: £12.4m). This constitutes an increase of 3.4% excluding one-off items of £0.4m

· Two new investments; Agri Services Company PTY Limited in Sydney and Lilley Plummer Risks Limited in London

· Dividend of 2.22p per share payable in July 2020 (2019: 4.76p)

Commenting on the results, Brian Marsh OBE, Chairman, said: "The Group is pleased to have continued to produce a good overall performance throughout the year despite the various challenges we faced."

Analyst briefing:

An analyst presentation, hosted by the Company, will be held on Tuesday 9th June 2020 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.

Note

This announcement contains inside information for the purposes of Article 7 of Regulation (EU) No 596/2014.

Notes to Editors: 

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

Since formation over 25 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. 

Joint Statement by the Chairman and Managing Director

We are pleased to present the audited Consolidated Financial Statement of B.P. Marsh & Partners Plc for the year ended 31 January 2020.

We concluded the year with an 8.5% increase in NAV (net of Dividend) and an increase in the equity value of the Portfolio of £11.6m to £115.7m. In addition to our loan book of £18.8m, we are pleased therefore to be able to report that our NAV stands at £136.9m or 380.1p per share, as at 31 January 2020.

For the year ended 31 January 2020, the Board are recommending a dividend of 2.22p per share to Shareholders. We have tried to balance the need to conserve cash to ensure that the Group can continue to prosper and develop in the undoubtedly difficult times to come, due to the consequences of the Covid-19 Pandemic, whilst also rewarding Shareholders for their continuing loyalty. We believe that we have struck this balance.

As at 31 January 2020, the Company had available cash of £3.8m, comprised of a free cash balance of £0.8m with access to a further £3.0m by way of a loan facility with Brian Marsh Enterprises Limited. As at 8 June 2020, the cash balance has been further bolstered by the repayment of a £2.0m Loan Facility from Nexus Underwriting Limited and stands at £1.8m after providing £1.0m of additional finance to the Portfolio. Total available cash, including the loan facility, stands at £4.0m net of the dividend payable in July 2020. The Group believes it is well positioned to be able to provide financial assistance to our Portfolio Companies, enabling them to continue to trade through the challenges posed by Covid-19.

Given the tumultuous times in which the world finds itself, we believe it might be useful at this time for the Group's investment strategy to be reiterated: the Group focuses on partnerships with dynamic and entrepreneurial management teams who need a Venture Capital Partner to support them in maintaining and building their businesses, and who have a long-term investment horizon. The Group's investment criteria are focused on the Financial Services Intermediary Sector with a particular interest and knowledge in Insurance Intermediaries. This means that companies with which the Group partners do not involve themselves in primary risk-taking activities.

Our Management Team works closely with those of the Group's Investee Companies and its philosophy is to devise mutually agreeable exit plans alongside management when the time comes, rather than imposing its own exit timetable and any pressures which would come with that. We have successfully cultivated a Portfolio of 17 investments which span four continents and six countries.

During the Year the Group completed two new Investments. In July 2019, the Group acquired a 36% shareholding in Agri Services Company PTY Limited in Sydney and in October 2019, a 30% shareholding in Lilley Plummer Risks Limited in London. Within the existing portfolio there have been some strong performers, with Nexus Underwriting Management Limited ("Nexus") and XPT Group LLC ("XPT") both reporting particularly encouraging results. During the year it was also announced that LEBC Group Limited, the trading subsidiary of the Company's Investment LEBC Holdings Limited ("LEBC"), had exited the Defined Benefit Transfer Advice space following consultation with the Financial Conduct Authority.

LEBC has taken a number of steps to reduce costs following this move and has undergone a restructuring, which continues to focus on its core business of providing Independent Financial Advice to its clients. We have confidence in our colleagues and the management team at LEBC. Further information on the performance of the Portfolio is included later in this report.

Since the year end, the Covid-19 Pandemic has come upon us all and we have been in close and constant communication with all of our Investee Companies to quantify what impact Covid-19 will have. Each of them has implemented its own 'Covid-19 Action Plan' and our Chief Investment Officer will provide additional details thereupon within his report. The Group continues to be on hand to assist any of our partners whenever necessary and possible.

We also believe it is important to report the steps we ourselves have taken to adapt to the pressures that Covid-19 has placed upon us. On 8 March 2020, before the Government ordered the countrywide lockdown, the Group made the decision to introduce remote working for every member of staff. This was carried out primarily to ensure the safety of our staff, but also to give ourselves time to resolve any teething problems that would emerge from this remote working before the Government officially shut down the country. This transition has been smooth and successful.

We are in regular communication with all staff members, in order to ensure that they continue to remain positive and fully active in these difficult times and we would want to thank them for their continued hard work during this period.

We are, of course, constantly monitoring the situation with regard to our return to the office. This will be predicated primarily on whether the safety of our staff can be maintained, alongside the government guidelines in force, but the Group remains fully operational in the meantime.

It is our belief that due to the diversity of our portfolio, which operates solely within the intermediary space, we are well positioned to manage through these unprecedented times. We have no doubt that there will be difficult hurdles ahead, but our spread of risk across the globe, and across many classes of business, should provide a natural hedge for the challenges to come.

We have managed our business satisfactorily during previous recessions and financial crises; we are confident that we can build on these experiences and that we are well prepared for what might lie ahead. Staff morale remains high, and we are pleased to be able to deliver a dividend at this time, as well as to provide reassurance to our Partners that we are well placed to be able to assist them through the challenges ahead.

Chief Investment Officer's Portfolio Update

The portfolio has performed well for the financial period, with our Insurance Intermediary investments showing good growth. Over the financial period the portfolio as a whole increased in value by £11.6m, to £115.7m, or 11.1%.

Whilst these valuations pre-date the outbreak and impact of Covid-19, as noted by the Chairman and the Managing Director, we believe the Company and the portfolio is well positioned to manage through these unprecedented times. The anticipated trading impact of Covid-19 will be factored into our interim results to 31 July 2020. The impact of the virus is being closely monitored and all investee companies have prepared response plans and proposed measures have been shared across the portfolio. At this juncture Covid-19 appears unlikely to negatively influence the portfolio as a whole in a material fashion, and we remain confident that our investment strategy and sector focus will prove resilient during this period of disruption.

New Investments

During the year we made two new investments. In July 2019, the Group acquired a 36% shareholding in Agri Services Company PTY Limited in Sydney, Australia and in October 2019, a 30% shareholding in Lilley Plummer Risks Limited ("Lilley Plummer").

Lilley Plummer is a newly formed specialist Marine Lloyd's broker, based in London. The Company acquired its stake in Lilley Plummer for a total cash consideration of £1.0m, in a mixture of Redeemable and Non-Redeemable Preference shares.

The experienced management team at Lilley Plummer is formed of Stuart Lilley and Dan Plummer. Prior to founding Lilley Plummer, Dan Plummer gained valuable experience across the marine market having held senior positions at CR Marine & Aviation SRL, Windsor Partners LLP and Howden Insurance Brokers Ltd. Stuart Lilley, prior to Lilley Plummer, held roles at International Risk Solutions, FP Marine and latterly Howden Insurance Brokers Ltd. The two individuals have over two decades of experience in the London and International Marine Market.

Agri Services Company PTY Limited is a holding company that owns Ag Guard PTY Ltd ("Ag Guard"), a specialist agricultural insurance underwriting agency based in Sydney. The Group subscribed for a 36% preferred equity stake for consideration of AU$2.6m.

Founded by Alex Cohn and Ben Ko, a strong management team with experience through the entire agricultural insurance value chain, Ag Guard arranges policies for and on behalf of Great Lakes Australia ("GLA"). GLA is a subsidiary of Münchener Rückversicherungs-Gesellschaft AG, part of Munich Re.

Portfolio Update & Activity

NAV breakdown by portfolio company

The composition of B. P. Marsh's underlying portfolio company exposure can be found here:

http://www.rns-pdf.londonstockexchange.com/rns/3221P_1-2020-6-8.pdf

The current portfolio is strongly weighted towards Insurance Intermediaries with all but one portfolio company, LEBC, operating in this industry. The Company has established itself as a leading investor in this sector with a solid track record. Whilst very much a targeted approach given the size and complexity of the insurance intermediary sector, it means the Company is exposed to a wide variety of specialist classes of business as investment opportunities.

In the Insurance Intermediary space, our investments are separated into two areas: Insurance Brokers and Underwriting Agencies ("MGAs").

As a Group, our insurance investments produce over US$1.0bn (£939.0m) of insurance premium ("GWP"), and a breakdown between broker and MGA can be found here:-

http://www.rns-pdf.londonstockexchange.com/rns/3221P_2-2020-6-8.pdf

Insurance Brokers 

Investments:

Much of the Group's growth has been underpinned by its successful track record of investing in specialist Insurance Brokers, both within the Lloyd's and London Market and internationally. The Group has a wide network of contacts within this space which continues to be an invaluable source of investment opportunities. Our significant experience and deep operational engagement has allowed the Group to unlock value across the portfolio.

Our Broking Investments placed over £400.0m of insurance premium, producing over £32.0m of commission income during 2019, accessing the specialty markets of, inter alia, Lloyd's and London, North America, Asia Pacific and Bermuda.

The majority of the Broking Investments in the portfolio are relatively recent, having occurred in the last five years, and we see strong opportunities for these investments to develop further as part of our long-term investment strategy. The Group's most recent significant disposals of its shareholdings in Hyperion Insurance Group Ltd and Besso Insurance Group Ltd, having held both for over 20 years and delivered IRRs in excess of 20%, underline the success of our long-term approach.

Underwriting Agencies / Managing General Agents ("MGAs")

Investments:

The Group has a long track-record of investing in Underwriting Agencies and deploys its expertise in identifying dynamic management teams in early start companies who also have the ability to attract the long-term support from insurance capacity providers on whose behalf these MGAs issue insurance premium.

Our MGAs produced GWP of over £538.0m and £62.0m of commission income during 2019. This was across 28 product areas and on behalf of over 50 insurers.

The Group's investee MGAs' ongoing focus on profitable underwriting has presented both a challenge and an opportunity. With recent access to insurer capital being restricted to profitable underwriting programmes, certain MGAs have struggled to obtain underwriting facilities; as such we were pleased to note that all our MGA investments were able to maintain the continued support of their insurer partners for 2019 and into 2020.

This means our MGAs are well placed to take advantage of any increased pricing of insurance premiums as a reaction to the incurred insurance losses that have recently been felt by the insurance sector.

IFA Investment

Investment:

LEBC is presently the Group's only non-insurance related investment, although we do continue to see investment opportunities in the financial planning and advisory sector, having previously successfully invested here, with both the IFA, Thomson Group Plc and discretionary fund manager, Principal Asset Management Ltd.

LEBC's performance during 2019 was impacted by the decision to exit the defined benefit transfer advisory area. However, this doesn't change our view that LEBC will continue to grow successfully in its field led by its management team. This team has guided LEBC through other previous challenges such as the Retail Distribution Review, and we anticipate that following the current restructuring LEBC will be well placed to succeed.

Portfolio Company Highlights

Nexus Underwriting Management Limited ("Nexus")

+ 27.6 pence 2020 NAV per share uplift

The Company originally invested in Nexus in 2014, acquiring a 5% stake for £1.5m. Our current shareholding is 17.6% which cost an aggregate £11.13m. Since our investment Nexus' value has grown from £31.0m to £228.0m. Over this period Nexus has increased its GWP from £50.0m to £325.0m, and its adjusted EBITDA from £2.3m to circa £15.0m. The performance of Nexus during this period confirmed our view that we backed a first-rate management team, capable of delivering exponential profitable growth, turning Nexus into the pre-eminent London based underwriting agency.

During 2019 Nexus made a further three acquisitions in trade credit (Credit & Business Finance Ltd), and financial lines (Capital Risks MGA Limited and Plus Risk Limited).

In November 2019, Nexus announced the launch of Nexus Specialty Inc. ("NSI") in the US, marking a significant step forward in their plan to grow, both through acquisition and organically, to become a leading specialty MGA in the territory. Following this announcement, in January 2020 NSI agreed a wide-ranging new underwriting agreement with A-rated insurer Crum & Forster that allows NSI to underwrite its market leading trade credit products on a fully admitted basis in the US across 45 states.

At 31 December 2019, Nexus has offices in nine countries, across three continents, underwriting a diverse insurance portfolio of products in excess of £325.0m GWP via an array of over 500,000 policies across 15 classes of business.

CBC UK Limited ("CBC")

+ 7.4 pence 2020 NAV per share uplift

CBC is a specialist Lloyd's broker providing both wholesale and retail broking solutions to its UK based clients. The Group acquired its shareholding in CBC, as part of a management led buy-out of its previous owner. As part of this buy-out the Group was once again able to partner with Andrew Wallas, who was appointed Chairman of CBC. Andrew's longstanding experience in the City encompasses his previous roles as Chief executive of Nelson Hurst and Marsh Ltd, CEO and Chairman of Glencairn Ltd and of Andrew Wallas and Marsh Ltd.

Following the Group's investment in 2017, the CBC Management team reversed a £0.1m post-tax loss into an immediate profit, and have grown EBITDA from £0.1m to a forecast £2.5m over the period of the Group's investment. They have also successfully started to attract teams from other broking houses with the recent addition of their International team hired from Price Forbes, allowing CBC to expand out of the UK market.

XPT Group LLC ("XPT")

+ 9.0 pence 2020 NAV per share uplift

Since investment in 2017, XPT, the specialty lines distribution company, has made numerous acquisitions, providing it with a footprint across the US with offices in North Carolina, Texas, California and New York. From a standing start in 2017, XPT is now forecasting annualised GWP of US$300.0m for the 2020 year.

In April 2019, the Group provided XPT with a US$2.0m Loan Facility. This sits alongside US$40m of aggregate funding from Madison Capital Funding LLC ("Madison"). Madison also acquired an equity interest in the business in September 2019 which valued XPT at an enterprise value of c.US$54.0m. Madison is backed by the financial strength and stability of New York Life Insurance Company and has US$10.6bn of assets under management, exclusively investing alongside private equity sponsors and other investors.

Subsequent to the end of the Group's 2020 financial year, XPT has acquired 100% of LP Risk, Inc ("LP Risk"), the Houston, Texas, headquartered MGA and surplus lines Broker, LP Risk also has offices in Dallas and San Antonio (Texas).

LP Risk specialises in transportation, hospitality, contractors, marine, energy/oil & gas and manufacturing. With 51 employees, it handles over 4,000 accounts a year on behalf of 350 retail agents and brokers in 18 States. Following the acquisition, LP Risk owner and CEO, Landon Parnell has remained with the business as the President of LP Risk and has become a member of XPT's Executive Committee.

It is expected that this acquisition will bolster XPT's foothold within its existing markets and add an experienced professional to XPT's Executive Committee. The transaction furthers XPT's strategy to develop a high-class specialty distribution platform across the US by acquiring niche, profitable businesses.

Stewart Specialty Risk Underwriting Ltd ("SSRU")

+ 5.0 pence 2020 NAV per share uplift

The Group backed SSRU as a start-up MGA in 2017, having been introduced to its CEO, Stephen Stewart, by contacts at what was Aon Benfield. Since its establishment SSRU has become a trusted insurance partner to the Canadian Property and Casualty sector concentrating on severity driven risk and often with international exposure.

The Group's nominal equity investment has now grown to a value of £2.5m since 2017.

Outlook

The Group believes the portfolio and the management teams within it are well set to continue to deliver excellent long-term growth to their shareholders.

There is continued demand from the wider private equity market for financial services and intermediated investments which provide exit opportunities for our portfolio companies.

On the other hand, the Group remains broadly insulated from this backdrop, due to its sector specific niche and sourcing model, which focuses on identifying off-market deals through a network of entrepreneurial business founders and managers, avoiding competitive processes.

Therefore, B. P. Marsh can find investment opportunities at a stage where valuations are fair and there is opportunity for significant growth.

Daniel Topping,

Chief Investment Officer

8th June 2020

Financial Review

Financial Performance Summary

The table below summarises the Group's financial results and key performance indicators for the year to 31 January 2020.

*Restated for IFRS 16 lease accounting

Overall, the Group delivered a solid return given the various challenges that it faced this year. The Net Asset Value increased by £10.7m, which matched the previous year's performance (2019: £10.7m). At 31 January 2020, the Net Asset Value of the Group was £136.9m, or 380.1p per share (2019: £126.2m, or 350.3p per share). This equates to an increase in Net Asset Value of 8.5% (2019: 10.0%) for the year.

The Net Asset Value of £136.9m at 31 January 2020 represented a total increase in Net Asset Value of £107.7m 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 8.1% in Group Net Asset Value after running costs, realisations, losses, distributions and corporation tax since flotation and 11.8% since 1990.

The results to 31 January 2020 do not reflect any Covid-19 impact. Further details on this are provided later in the report.

Investment Performance

The Group's investment portfolio movement during the year was as follows:

This equates to an increase in the portfolio valuation of 11.1% (2019: 16.1%). This result demonstrates the robustness and depth of the investment portfolio, notwithstanding the significant write down in valuation of one of the Group's largest investments (LEBC) during the year.

The Group invested £2.4m (2019: £8.7m) in two new investments during the year - Lilley Plummer Risks Ltd and Agri Services Company PTY Ltd. In addition, the Group provided £5.1m of loans (2019: £3.8m) as follow-on funding to four investee companies to enable them to make acquisitions, or to provide working capital for strategic hires and product development.

In addition, £1.0m of loan repayments were made to the Group by investee companies (2019: £1.8m). Since the year-end, the Group has received a further £2.1m in loan repayments.

Whilst the Group did not make any significant realisations during the year, it did make a partial realisation of its investment in Paladin Holdings Limited ("Paladin"), receiving proceeds of £0.4m. This disposal related to shares that the Group had been warehousing on behalf of Paladin which were held under a specific call option arrangement and the proceeds received were in line with the carrying value of these shares.

Operating Income

Net gains from investments were £11.5m, in line with the previous year (2019: £11.5m), based upon the revaluation of the investment portfolio at 31 January 2020.

Overall, income from investments increased by 12.2% to £5.2m (2019: £4.6m). Fees increased by 27.6% over the year to £1.1m (2019: £0.9m) reflecting the increased number of investments within the portfolio. The fees were also bolstered by several one-off transaction fees received. Income from loans increased by 20.5% to £1.3m over the year (2019: £1.1m) due to the provision of both new and further loan funding to the portfolio. Dividend income increased by 3.8% to £2.8m over the year (2019: £2.7m).

Operating Expenses

Operating expenses, including costs of making new investments, increased by 7.2% during the year to £4.2m (2019 restated*: £3.9m). This increase was largely due to several exceptional expenses which were included within the 2020 operating costs, including £0.3m of costs relating to a termination payment made to an executive director as well as £0.1m of costs incurred in making new investments which were expensed under IFRS. After excluding these atypical expenses, underlying operating expenses actually decreased by £0.1m (1.4%) over 2019.

Profit on Ordinary Activities

The consolidated profit on ordinary activities after taxation increased by 0.7% to £12.5m (2019 restated*: profit of £12.4m).

The Group's strategy is to cover expenses from the portfolio yield. On an underlying basis, including treasury returns, but excluding investment activity (e.g. unrealised gains on equity, provision against loans receivable from investee companies and all underlying treasury portfolio movement), this was achieved with a pre-tax profit of £0.8m for the year (2019: £0.7m).

Liquidity

Cash funds at 31 January 2020 were £0.8m (2019: £7.9m) as a result of continued investment into new opportunities and providing follow-on funding into the portfolio.

During the year, the Group secured 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. The loan facility provides the Group with further investment funds at an interest rate of the higher of either 4% or the UK 1-month LIBOR plus 3.25%, which are available to be drawn down until 29 July 2021.

At 31 January 2020 and at the date of this report the Group had not drawn down on these funds and has no borrowings (2019: £nil).

Since the year-end, the Group has received a further £2.1m in loan repayments. Total available cash, including the loan facility, currently stands at £4.0m net of the dividend payable in July 2020.

Dividend

The Group maintained its dividend payment at £1.7m (or 4.76p per share) during the year (2019: £1.7m or 4.76p per share). Total shareholder return for the year was therefore 9.8% (2019: 11.7%) including the dividend payment and the Net Asset Value increase.

Due to the current Covid-19 pandemic, the Group, having taken into consideration its available cash resources and liquidity, and the potential requirements from the investment portfolio, has agreed to declare a dividend of £0.8m (or 2.22p per share), payable on 31 July 2020 to those shareholders registered on 26th June 2020. This dividend represents a distribution of 100% of the underlying realised profits of the business for the year to 31 January 2020.

Covid-19 Impact Assessment

The financial statements to 31 January 2020 have not included any impact of Covid-19 on either the Group or on the valuations of its investment portfolio. This is because, at that time, although it had developed into a major risk in China, it had not established itself in the UK and the rest of the world and had not financially impacted upon either the Group or its investments. As such, it has been determined that Covid-19 is to be treated as a non-adjusting post balance sheet event.

The Group is exposed to the risks associated with Covid-19. Since the outbreak of the virus, the Board has been continually assessing its potential impact 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 those of the Group's investments is prioritised, whilst also ensuring the continuity of the Group's day to day operations through remote working arrangements.

The Board considers that the largest risk to the Group arising from Covid-19 is that of its underlying investment value and the effects that lockdown restrictions may have on the trading of its individual investee companies. Any negative impact on the trading of the Group's investee companies could cause liquidity issues for those companies, for example due to reduced income, delayed debtor receipts, or restrictions to funding. Furthermore, the Group's income could be potentially reduced if the profits of the investee companies are significantly impacted and cause a reduction to dividend distributions.

However, the Board considers that it has a strong portfolio of well-managed investee companies that are each taking steps to manage the risks to their income and to their liquidity, implementing cost reductions where necessary to mitigate any reduction in income and profitability accordingly.

The Group has also been monitoring its own income and cash collection. Lower dividend income is a risk in not only the current year, but also in the following year as investee companies manage their own liquidity through this pandemic. The Group has taken measures to mitigate this risk, immediately halting discretionary spending before the start of the UK's lockdown, and reviewing all costs going forwards in order to maintain an acceptable level of underlying profit and preserve working capital.

Whilst several of our investee companies have experienced reductions in income as a direct result of Covid-19, in contrast a number of investments are still performing at, or above budget for the year despite the lockdown which is testament to their durability and demonstrates that we have a diversified portfolio, both in terms of products and geographically.

It is too early to ascertain with any degree of certainty the full impact of the risks that Covid-19 is posing to the Group, as the duration of the pandemic, and thus restrictions, is currently unknown. The Board continues to monitor the key threats to the business closely.

The significant fall in the equity markets will undoubtedly put pressure on valuation multiples in the short-term, specifically for any portfolio company that has been directly exposed to the impact of Covid-19. However, the Group has sufficient cash resources, with the recent repayment of £2.0m in loan from Nexus, alongside the availability of a £3.0m loan facility, such that it does not need to realise investments at the current time just to create liquidity, and as such can look to the longer term when it is expected that multiples will return to their pre-Covid-19 levels.

The Board is confident that whilst the Covid-19 risk may have a short-term impact on the Group's overall profitability and growth, it does not consider there to be a risk to the Group's going concern assumption.

Jon Newman,

Group Director of Finance

8th June 2020

Portfolio Valuation

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

AG Guard PTY Limited (Agri Services Company PTY Limited)

(www.agguard.com.au)

In July 2019 the Group subscribed for a 36% stake in Agri Services Company PTY Limited, which in turn acquired 100% of the equity Ag Guard PTY Limited ("Ag Guard"). Ag Guard is a Managing General Agency, which provides insurance to the Agricultural Sector, based in Sydney, Australia.

Date of investment: July 2019

Equity stake: 36%

31 January 2020 valuation: £1,320,000

Asia Reinsurance Brokers Pte Limited

(www.arbrokers.asia)

In April 2016 the Group invested in Asia Reinsurance Brokers Pte Limited ("ARB"), the Singapore headquartered independent specialist reinsurance and insurance risk solutions provider. ARB was established in 2008, following a management buy-out of the business from AJ Gallagher, led by the CEO, Richard Austen.

Date of investment: April 2016

Equity stake: 25%

31 January 2020 valuation: £830,000

ATC Insurance Solutions PTY Limited

(www.atcis.com.au)

In July 2018 the Group invested in ATC, an Australian-based MGA and Lloyd's Coverholder, specialising in Accident & Health, Construction & Engineering, Trade Pack and Sports insurance.

Date of investment: July 2018

Equity stake: 20%

31 January 2020 valuation: £6,329,000

CBC UK Limited (Paladin Holdings Limited)

(www.cbcinsurance.co.uk)

Established in 1985, 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 assisted in an MBO of CBC allowing Management to buy out a major shareholder via parent company Paladin Holdings Limited.

Date of investment: February 2017

Equity stake: 38.2%

31 January 2020 valuation: £7,150,000

Criterion Underwriting Pte Limited

(www.criterionmga.com)

Group helped establish Criterion alongside its Partners in Asiare Holdings Pte Limited and Asia Reinsurance Brokers Pte Limited in July 2018. Criterion is a start-up Singapore-based Managing General Agency providing specialist insurance products to a variety of clients in the Cyber, Financial Lines and Marine sectors in Far East Asia.

Date of investment: July 2018

Equity stake: 29.4%

31 January 2020 valuation: £Nil

EC3 Brokers Limited

(www.ec3brokers.com)

In December 2017, the Group invested in EC3 Brokers Limited, an independent specialist Lloyd's broker and reinsurance broker, via a newly established NewCo, EC3 Brokers Group Limited. Founded by its current Chief Executive Officer Danny Driscoll, who led a management buyout to acquire EC3's then book of business from AJ Gallagher in 2014, EC3 provides services to a wide array of clients across a number of sectors, including construction, casualty, entertainment and cyber & technology.

Date of investment: December 2017

Equity Stake: 20%

31 January 2020 valuation: £5,288,000

The Fiducia MGA Company Limited

(www.fiduciamga.co.uk)

Fiducia is a recently established UK Marine Cargo Underwriting Agency, established by its CEO Gerry Sheehy. Fiducia is a 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 2020 valuation: £1,691,000

LEBC Holdings Limited

(www.lebc-group.com)

In April 2007 the Group invested in LEBC, an Independent Financial Advisory company providing services to individuals, corporates and partnerships, principally in employee benefits, investment and life product areas.

Date of investment: April 2007

Equity stake: 59.3%

31 January 2020 valuation: £25,000,000

Lilley Plummer Risks Limited

(www.lprisks.co.uk)

In October 2019, the Group invested into Lilley Plummer Risks, the newly formed specialist marine Lloyd's broker. Lilley Plummer Risks was established by Stuart Lilley and Dan Plummer in 2019, and provides products across the marine Insurance market.

Date of investment: October 2019

Equity stake: 30%

31 January 2020 valuation: £1,317,000

Mark Edward Partners LLC

(www.markedwardpartners.com)

Founded in 2010 by Mark Freitas, its President & Chief Executive Officer, Mark Edward Partners LLC ("MEP") provides core insurance products in Financial & Liability, Property & Casualty, Personal Lines, Life Insurance, Cyber and Affinity Groups. MEP is a national U.S. firm with licenses to operate in all 50 states and has offices in New York, Palm Beach and Los Angeles.

Date of investment: October 2017

Equity stake: 30%

31 January 2020 valuation: £0

MB Prestige Holdings PTY Limited

(www.mbinsurance.com.au)

In December 2013 the Group invested in MB Prestige Holdings PTY Ltd ("MB Group"), the parent Company of MB Insurance Group PTY a Managing General Agent, headquartered in Sydney, Australia. MB Group is recognised as a market leader in respect of prestige motor vehicle insurance in all mainland states of Australia.

Date of investment: December 2013

Equity stake: 40%

31 January 2020 valuation: £2,716,000

Nexus Underwriting Management Limited

(www.nexusunderwriting.com)

In 2014 the Group invested in Nexus Underwriting Management Limited ("Nexus"), an independent specialty Managing General Agency, founded in 2008. Through its operating subsidiaries Nexus specialises 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.

Date of investment: August 2014

Equity stake: 18.1%

31 January 2020 valuation: £40,045,000

Stewart Specialty Risk Underwriting Ltd

(www.ssru.ca)

A Canadian based Managing General Agent, providing insurance solutions to a wide array of clients in the Construction, Manufacturing, Onshore Energy, Public Entity and Transportation sectors. SSRU was established by its CEO Stephen Stewart, who has over 25 years' experience in the insurance industry having had senior management roles at both Ironshore and Lombard in Canada.

Date of investment: January 2017

Equity stake: 30%

31 January 2020 valuation: £2,534,000

Sterling Insurance PTY Limited (Neutral Bay Investments Limited)

(www.sterlinginsurance.com.au)

In June 2013, in a joint venture enterprise alongside Besso, (Neutral Bay Investments Limited) the Group invested in Sterling Insurance PTY Limited, an Australian specialist underwriting agency offering a range of insurance solutions within the Liability sector, specialising in niche markets including mining, construction and demolition.

Date of investment: June 2013

Equity stake: 19.7%

31 January 2020 valuation: £2,272,000

Summa Insurance Brokerage, S. L.

(www.grupo-summa.com)

In January 2005 the Group provided finance to a Madrid-based Spanish management team with the objective of acquiring and consolidating regional insurance brokers in Spain. Through acquisition Summa is able to achieve synergistic savings, economies of scale and greater collective bargaining thereby increasing overall value.

Date of investment: January 2005

Equity stake: 77.3%

31 January 2020 valuation: £6,120,000

Walsingham Motor Insurance Limited

(www.walsinghamunderwriting.com)

In December 2013 the Group invested in Walsingham Motor Insurance Limited, a niche UK fleet motor Managing General Agency, which commenced trading in July 2013. In 2015 the Group acquired a further 10.5% equity, taking the current shareholding to 40.5%.

Date of investment: December 2013

Equity stake: 40.5%

31 January 2020 valuation: £2,045,000

Walsingham Holdings Limited

(www.walsinghamunderwriting.com)

In May 2018, the Group acquired a 20% shareholding in Walsingham Holdings Limited, a previously dormant company, which in turn purchased an 11.7% equity holding in Walsingham Motor Insurance Limited from an exiting shareholder.

Date of investment: May 2018

Equity stake: 20%

31 January 2020 valuation: £58,000

XPT Group LLC

(www.xptspecialty.com)

In June 2017 the Group backed the ex-Swett & Crawford CEO Tom Ruggieri and a strong management team to develop a New York-based wholesale insurance broking and underwriting agency platform across the U.S. Specialty Insurance Sector.

Date of investment: June 2017

Equity stake: 32.1%

31 January 2020 valuation: £10,951,000

Consolidated Financial Statements

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED 31ST JANUARY 2020

*Restated for IFRS 16 (refer to Note 29)

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

CONSOLIDATED AND PARENT COMPANY STATEMENTS OF FINANCIAL POSITION

31ST JANUARY 2020

(Company Number: 05674962)

*Restated for IFRS 16 (refer to Note 29)

The Financial Statements were approved by the Board of Directors and authorised for issue on 8th June 2020

and signed on its behalf by:

J.S. Newman & D.J. Topping

CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED 31ST JANUARY 2020

*Restated for IFRS 16 (refer to Note 29)

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.

†The above cash and cash equivalents balance excludes treasury portfolio funds which are referred to in Note 13. Including treasury portfolio balances of £Nil, total available cash and treasury portfolio funds as at 31st January 2020 was £787k (as at 31st January 2019: £7,869k, including £14k of treasury portfolio funds).

PARENT COMPANY STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED 31ST JANUARY 2020

CONSOLIDATED AND PARENT COMPANY STATEMENTS OF CHANGES IN EQUITY

FOR THE YEAR ENDED 31ST JANUARY 2020

*Restated for IFRS 16 (refer to Note 29)

Refer to Note 20 for detailed analysis of the changes in the components of equity.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31ST JANUARY 2020

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 2020 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 International Financial Reporting Standards as adopted for use by the European Union ("IFRS"), and in accordance with the Companies Act 2006.

The consolidated financial statements 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 IFRS 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.

First time adoption of IFRS 16 Leases

On 1st February 2019, the Group adopted IFRS 16 Leases ("IFRS 16"), which replaces IAS 17 Leases ("IAS 17").

The only impact on the Group relates to leases for use of office space. These were previously classified as operating leases under IAS 17, with lease rentals charged to operating expenses on a straight-line basis over the lease term.

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.

The Group has applied the retrospective approach to IFRS 16 and details of the prior year adjustments are in Note 29.

New Accounting Standards

There are no new standards that have been issued, but are not yet effective for the year ended 31st January 2020, 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 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 £12,551,785, prior to a dividend distribution of £1,712,185 (2019: restated profit of £12,454,783 prior to a dividend distribution of £1,714,418).

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 is recognised as an expense over the vesting period on a straight-line basis. The level of vesting is assumed to be 100% and will be reviewed annually and the charge is adjusted to reflect actual or estimated levels of vesting with the corresponding entry to capital contribution.

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 a 'Non-current asset as 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.

Investments - treasury portfolio

All treasury 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 market value as determined from the valuation reports provided by the fund investment manager.

Both realised and unrealised gains and losses arising from changes in fair market 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 the retained earnings reserve as these investments are deemed as being easily convertible into cash. Costs associated with the management of these investments are expensed in the Consolidated Statement of Comprehensive Income.

Income from treasury portfolio investments

Income from treasury portfolio investments comprises of dividends receivable which are either directly reinvested into the funds or received as cash.

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

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.

IFRIC 23 has been adopted and applied to the recognition and measurement of uncertain tax provision during the year. However it is noted that the adoption of IFRIC 23 has had no material impact on the tax position as at the year end.

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.

*Restated for IFRS 16 (refer to Note 29)

Included within the operating income reported above are the following amounts requiring separate disclosure owing to the fact that they are derived from a single investee company and the total revenues attributable to that investee company are 10% or more of the total realised income generated by the Group during the period:

1There are no disclosures for Paladin Holdings 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 XPT Group LLC in the prior year as the income derived from this investee company did not exceed the 10% threshold prescribed by IFRS 8 in that year.

*Restated for IFRS 16 (refer to Note 29)

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 2020 and 2019 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:

*Restated for IFRS 16 (refer to Note 29)

5. STAFF COSTS

The average number of employees, including all directors (executive and non-executive), employed by the Group during the year was 17 (2019: 19); 6 of those are in a management role (2019: 6) and 11 of those are in a support role (2019: 13). All remuneration was paid by B.P. Marsh & Company Limited.

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 Note 24 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 24 for further details.

Charges of £79,054 (2019: £76,470) relating to the SIP and £21,413 (2019: £13,728) relating to the Joint Share Ownership Agreements are included within 'Other employment costs' above.

669,860 of the 1,461,302 shares, in respect of which joint interests were granted during the year to 31st January 2019, were issued to directors. Following the resignation of an executive director during the year, 167,465 jointly-owned shares were consequently forfeited. Refer to Note 24 for further details.

Of the total 33,330 (2019: 35,222) Free, Matching and Partnership Shares granted under the SIP during the year, 12,120 (2019: 12,808) were granted to directors of the Company.

Following the resignation of an executive director during the year, a total of 16,143 ordinary shares in the Company were withdrawn from the SIP Trust and transferred into the direct beneficial ownership of that director.

Of the £21,413 (2019: £13,728) charge relating to the Joint Share Ownership Plan and the £79,054 (2019: £76,470) charge relating to the SIP, £9,187 (2019: £6,293) and £28,747 (2019: £27,807) related to the directors respectively.

Refer to Note 24 for further details.

The highest paid director includes emoluments of £270,000 relating to a settlement paid upon leaving the Company. The highest paid director also owns 16,143 ordinary shares in the Company.

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, 4 directors (2019: 4) accrued benefits under these defined contribution pension schemes.

The key management personnel comprise of the directors.

In the current year a total dividend of £8,703 (2019: £6,961) was payable on the 182,831 (2019: 146,237) ordinary shares held by the B.P. Marsh SIP Trust ("SIP Trust").

No dividend was payable on the 1,461,302 (2019: 1,461,302) ordinary shares held by the B.P. Marsh Employees' Share Trust ("Share Trust") under the Joint Share Ownership Plan and on 46,504 ordinary shares held in Treasury which were unallocated at the dividend record date (2019: no shares held in Treasury at the dividend record date).

*Restated for IFRS 16 (refer to Note 29)

The tax assessed for the year is lower (2019: lower) than the standard rate of corporation tax in the UK. The differences are explained below:

*Restated for IFRS 16 (refer to Note 29)

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

*Restated for IFRS 16 (refer to Note 29)

During the year to 31st January 2019 the Company issued a total of 8,252,037 new ordinary shares.