B.p Marsh Regulatory News (BPM)

13th October 2020

B.P. Marsh & Partners Plc 

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

Interim Results

B.P. Marsh & Partners Plc (AIM: BPM), the specialist investor in early stage financial services businesses, announces its unaudited Group interim results for the six months to 31 July 2020 (the "Period").

Highlights:

· Net Asset Value at 31 July 2020 £142.6m (31 July 2019: £130.0m; 31 January 2020: £136.9m)

· Net Asset Value per share 396.2p (31 July 2019: 360.9p; 31 January 2020: 380.1p)

· Total Shareholder return of 4.8% for the Period including the dividend paid in July 2020

· Group cash availability of £4.2m (including undrawn loan facility of £3m) as at 31 July 2020

· Current cash £2.6m (including £2.0m loan facility)

· Consolidated profit after tax of £6.5m (31 July 2019: £5.6m; 31 January 2020: £12.5m)

· One new investment; SAGE Program Underwriters Inc.

Commenting on the results, Brian Marsh OBE, Chairman, said: "B.P. Marsh's diversified investment portfolio has shown its resilience, delivering NAV growth despite the ongoing market uncertainty. The outlook is positive for the rest of the year, in no small part due to the hard work and dedication of our investee companies and our own employees in the period."

Analyst briefing:

An analyst presentation, hosted by the Company, will be held on Tuesday 13th October 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 eighteen 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. 

Statement by the Chairman and Managing Director

We are pleased to present the unaudited Consolidated Financial Statements of B.P. Marsh & Partners Plc for the six-month period to 31 July 2020 (the "Period").

Results and Dividend

During the Period we have seen a 5.1% increase in the valuation of the portfolio from £115.7m to £122.1m, which we are encouraged by, considering the continuing uncertain backdrop of the Covid-19 pandemic. Our portfolio continues to perform in line with management expectations, and the Group aims to be able to deliver Net Asset Value growth at the year end. Our Net Asset Value as at 31 July 2020 was £142.6m or 396.2p per share, up 4.2% over the Period and 9.7% over the prior twelve months.

On 31 July 2020 the Company paid a dividend of 2.22p per share to all shareholders on the Register as at 26 June 2020 and continues to seek to balance rewarding loyalty to its shareholders and retaining future investment capital in its considerations regarding future dividend policy.

As at 31 July 2020 the Group had a cash balance of £1.2m following the payment of the dividend, in addition to an undrawn loan facility of £3m from Brian Marsh Enterprises Limited.

Share Buy-Backs

As has been stated previously, the Company has a strategy for undertaking small market buy-backs of its shares at times when the discount to Net Asset Value ("NAV"), based upon the most recently announced NAV, is greater than 15%.

For the avoidance of doubt, notwithstanding that the discount to NAV at which the Company's shares are currently trading is greater than 15%, the Company notes that it is currently restricted in its ability to buy back shares since, given that Brian Marsh, together with persons acting in concert with Brian Marsh for the purposes of the City Code on Takeovers and Mergers (the "City Code"), has an interest in approximately 41.85% of the Company's voting rights, any such purchase of shares would result in an obligation for Brian Marsh to make a general offer for the Company in accordance with Rule 9 of the City Code.

New Investment

In June, the Group announced that it had subscribed for a 30% Cumulative Preferred Ordinary shareholding in SAGE Program Underwriters, Inc ("SAGE"), an Oregon, US based provider of specialist insurance products to niche industries, initially in the inland delivery and field sport sectors. This continues our track record of investing in experienced insurance professionals, in this case the CEO of SAGE, Chuck Holdren.

Follow on Funding & Additional Investments

In October 2020, after the Period-end, the Group subscribed for a further 15% stake in EC3 Brokers Group Limited ("EC3"), bringing its shareholding to 35% in a £1.5m injection of further capital. 

This follow on funding, along with the refinancing of its bank debt, allows EC3 to bolster its position in pursuing its strategy notwithstanding the impact that Covid-19 has had on a significant area of EC3's business, being event cancellation insurance. 

The provision of this follow on funding, demonstrates the Group's investment mantra, being to support its investee companies over the long term.

The Group strongly believes that EC3 is well positioned to grow in the future, with EC3 now beginning to see the benefit of a number of new ventures undertaken over the past 12 months.

Investee Company Highlights

During the Period, XPT, the US based specialty lines distribution company acquired LP Risk, Inc, the Managing General Agency ("MGA") and surplus lines broker, based in Texas, US. In addition, XPT's wholesale broker division, Western Security Surplus acquired Houston Surplus Lines, an excess and surplus lines MGA. This is a continuation of XPT's successful acquisition strategy which we continue to support.

Also during the Period, Nexus, the London based MGA, announced that its independent broking arm Xenia completed the acquisition of the trade credit business of Howden UK Group Limited, one of the largest independent trade insurance brokers in the UK. Additionally, Nexus repaid a £2m Revolving Credit Facility to the Group eight months earlier than the rescheduled repayment date of 31 December 2020.

Alongside this, we were pleased that Walsingham Motor Insurance Limited ("Walsingham") and MB Prestige Holdings PTY Limited repaid outstanding loans of £0.42m and AUD 0.56m (£0.30m) respectively during the Period, ahead of their repayment schedule.

EC3 Brokers Group Limited won the Dubai International Financial Centre (DIFC) Group Health Insurance Master Policy Scheme in June. This will provide health insurance to employees of companies in the DIFC, the leading international financial hub in the Middle East, Africa and South Asia (MEASA) region.

We have been particularly pleased with the way in which our investee companies have adapted to the Covid-19 crisis. For example, Walsingham specialises in fleet insurance for public and private taxi fleets and couriers in the UK, which was impacted by Covid-19 and its restrictions. Foreseeing the impact of these restrictions, it provided policyholders the flexibility to deliver food and shopping as well as various NHS support work to be undertaken without the need for policy extensions. This has kept the business running in line with its original budgetary expectations.

Financial Performance

Overall, the Group has delivered an excellent return for the Period given the various challenges that it has faced due to Covid-19. The Net Asset Value increased by £5.8m, versus a £3.8m increase over the same period last year. At 31 July 2020, the Net Asset Value of the Group was £142.6m, or 396.2p per share which equates to an increase in Net Asset Value of 4.2% for the Period (2019: 3.0%), or 4.8% (2019: 4.4%) including the dividend paid.

The Net Asset Value of £142.6m at 31 July 2020 represented a total increase in Net Asset Value of £113.4m 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 8.0% in Group Net Asset Value after running costs, realisations, losses, distributions and corporation tax since flotation and 11.6% since 1990.

The Group's strategy is to cover expenses from the portfolio yield. On an underlying basis, including treasury returns, but excluding investment activity (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 £0.6m for the Period (H1 2019: £1.5m). The reduction in underlying profit relates to the timing of receipt of dividend income from investee companies. However, overall the Group's current expectation is to achieve a similar level of underlying profit for this financial year as it did for the year ended 31 January 2020 (£0.8m).

Liquidity

Cash funds at 31 July 2020 were £1.2m (31 January 2020: £0.8m), alongside 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. Total available cash, including the loan facility, currently stands at £2.6m, following the EC3 investment.

Covid-19 Impact Assessment

The financial statements to 31 January 2020 did not include any impact of Covid-19 as it was treated as a non-adjusting post balance sheet event. However, the financial statements to 31 July 2020 have taken its impact into account.

Covid-19 has had an impact upon the financial performance of the Group, with several of our investee companies being directly affected. However, these companies have each taken steps to manage the risks to their income and to their liquidity, securing additional support and implementing cost reductions where applicable to mitigate any reduction in income and profitability accordingly. The majority are tracking their budgets as a result. In addition, several investee companies have managed to exceed expectations, delivering record results.

As a consequence, and notwithstanding the ongoing impact of Covid-19 due to continued restrictions around the world, the Group still managed to achieve Net Asset growth over the Period of 4.8% including the dividend paid in July 2020, which demonstrates that we have a diversified portfolio, both in terms of products and geographically.

Whilst we cannot predict when restrictions may be fully lifted, or the duration of Covid-19, the current performance of our portfolio amidst this pandemic is encouraging. The Board continues to monitor the key threats to the business closely.

We also continue to monitor Government advice regarding Covid-19, as the health and safety of our staff and those of our investee companies remains our main priority. We continue to support them, as well as our partners during the continuing pandemic.

Outlook

The Group remains well positioned to carry out new investments, with a number of early stage opportunities in the pipeline, which we hope will develop over the course of the rest of the year.

The Group continues to focus on investing in specialist SME sectors in Financial Services, backed by experienced and capable management teams, which will create long term growth and consequential value.

Chief Investment Officer's Portfolio Update

Our portfolio of investments has performed well during this financial period, with many of our Insurance Intermediary investments delivering very good results.

This is a testament to the Group's investment mantra, and carefully assembled portfolio. Whilst we specialise in Insurance Intermediary businesses, our portfolio is well diversified across multiple product areas, operating in various sectors, ensuring resilience through times of economic or social disruption.

The Group also has a track record of investing in experienced management teams, all of whom have proved adept at managing their businesses against a very challenging economic background. 

This has resulted in the portfolio as a whole increasing in value over the six-month period by £5.7m to £142.6m, or 4.1%.

These valuations take into account the outbreak and impact of the initial phases of Covid-19. During the pandemic, the Group has focused on supporting our existing portfolio, closely analysing the impact of Covid-19 on each of our investments through an ever-changing environment.

The Group remains confident that its investment strategy and sector focus will prove resilient during this period of disruption and that Covid-19 will not have a negative impact on the portfolio as a whole to a material degree.

New Investments

During the six-month period we made one new investment. In June 2020, the Group acquired a 30% shareholding in SAGE Program Underwriters, Inc ("SAGE"), for an equity consideration of US$ 250,000 (c. £203,000).

Sage was established in 2019 by CEO Chuck Holdren and is based in Bend, Oregon, USA. Sage provides Workers Compensation insurance to niche industries, including inland delivery and field sport sectors.

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/8510B_1-2020-10-12.pdf

The insurance intermediary investments in which the Group holds interests are budgeting in the year to 31 December 2020 to produce, in aggregate, insurance premium ("GWP") of approaching US$ 1.5bn (c.£1.12bn), of which approximately US$581m (c.£450m is attributable to insurance brokers and approximately US$865m (c.£670m) is attributable to MGAs, as set out below:-

http://www.rns-pdf.londonstockexchange.com/rns/8510B_2-2020-10-12.pdf

Insurance Brokers 

Investments:

Our Broking Investments are, in aggregate, budgeting to place over £450m of insurance premium, producing over £37.0m of commission income during 2020, accessing the specialty markets of, inter alia, Lloyd's and London, North America, Asia Pacific and Bermuda.

Underwriting Agencies / Managing General Agents ("MGAs")

Investments:

Our MGA investments are, in aggregate, budgeting to produce GWP of £670m in 2020, which represents £84.0m of commission income in the year. The Group's MGA investments operate in excess of 30 product areas, on behalf of more than 50 insurers.

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.

Portfolio Company Highlights:

Ag Guard PTY Limited ("Ag Guard")

(www.agguard.com.au)

In July 2019 the Group subscribed for a 36% holding in Ag Guard PTY Limited, a Managing General Agency, which provides insurance to the Agricultural Sector, based in Sydney, Australia.

Ag Guard continues to roll out its niche agricultural product offering across Australia, with the business showing significant traction since it was established.

Date of investment: July 2019

31 July 2020 valuation: £1,421,000

Equity stake: 36%

Asia Reinsurance Brokers Pte Limited ("ARB")

(www.arbrokers.asia)

In April 2016 the Group invested in Asia Reinsurance Brokers Pte Limited, 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.

Despite the Covid-19 pandemic, ARB continues to develop its business portfolio under the direction of Richard Austen and its Managing Director, William Pang. 

Date of investment: April 2016

31 July 2020 valuation: £706,000

Equity stake: 25%

ATC Insurance Solutions PTY Limited ("ATC")

(www.atcis.com.au)

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

The Group acquired a 20% shareholding in ATC, which continues to show strong growth and is one of the largest Lloyd's underwriting agencies operating in Australia.

ATC finished its 2020 financial year 28% ahead of last year on EBITDA, which demonstrates its resilience in a challenging environment.

Since the Group's investment in ATC, Gross Written Premium has grown from c. AU$ 60m, to budgeting Gross Written Premium of approaching AU$ 100m in its current year to June 2021.

Since investment, the Group's valuation of ATC has increased by AU$ 8.5m (c. £4.7m) to AU$ 13.5m (c. £7.4m), as at 31 July 2020.

ATC has also made a number of new hires to expand its product offering in the Construction and Cyber sectors. This includes the appointment of a new underwriter operating in the plant and machinery space. In the Cyber space, ATC has hired a senior underwriter who has a great depth of knowledge and experience in the Australian cyber marketplace. With these appointments, ATC is further developing its expertise in these key growth areas.

Date of investment: July 2018

31 July 2020 valuation: £7,423,000

Equity stake: 20%

CBC UK Limited ("CBC")

(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. 

CBC has recently hired a new team dedicated to International Financial products. The team has collectively 145 years of experience in this sector, both underwriting and broking, and is headed up by Adrian Fox. Since they commenced their employment at CBC, this team has made great strides in expanding CBC's international footprint.

Date of investment: February 2017

31 July 2020 valuation: £7,289,000

Equity stake: 43.7%

Criterion Underwriting Pte Limited ("Criterion")

(www.criterionmga.com)

The Group helped to 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

31 July 2020 valuation: £0

Equity stake: 29.4%

EC3 Brokers Limited ("EC3")

(www.ec3brokers.com)

In December 2017, the Group invested in EC3, an independent specialist Lloyd's broker and reinsurance broker. 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

31 July 2020 valuation: £4,569,000

Equity Stake: 20%

The Fiducia MGA Company Limited ("Fiducia")

(www.fiduciamga.co.uk)

Fiducia, founded in November 2016, is a 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.

Fiducia, having launched as a start-up MGA in November 2016, with backing from the Group, continues to show strong growth and is on track to secure Gross Written Premium in excess of £20m for the current year.

Cumulatively, the Group has invested £228,000 in Fiducia for its 35% shareholding. As at 31 July 2020, the Group's valuation of Fiducia is £2.2m, an increase of £2.0m or 875%.

Fiducia has recently expanded its product offering with the establishment of a Fine Art and Specie division. 

Fiducia continues to seek out new underserved areas of the marine market, working with brokers and insurance carriers to develop products to support these areas. To this end, Fiducia recently launched new products in the terrorism and marine equipment arenas. 

Date of investment: November 2016

31 July 2020 valuation: £2,222,000

Equity stake: 35.2%

LEBC Holdings Limited ("LEBC")

(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.

Throughout Covid-19 LEBC's centralised investment proposition has provided a degree of stability to clients' portfolios in a time of extreme volatility. Additionally, private client advisors have continued to provide quality advice to individuals faced with unprecedented disruption to their lives. LEBC's corporate division has provided additional support to corporate clients using the furlough scheme and providing assistance in helping them manage variable pay and pension calculations.

As previously announced, the Group was greatly saddened to report on the death in September 2020 of LEBC's founder and Chief Executive, Jack McVitie, who spearheaded LEBC's growth, which has seen the business become one of the largest independently owned national IFAs.

The Group is working closely with LEBC's longstanding and continuing Management team, to continue the legacy that Jack McVitie built.

Date of investment: April 2007

31 July 2020 valuation: £25,000,000

Equity stake: 59.3%

Lilley Plummer Risks Limited ("LPR")

(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. 

Since investment LPR has made a number of new hires to bolster its products provision in Marine, Terrorism and War risks. 

LPR's core business performance has exceeded expectation since investment, as have the new teams that have joined. 

At investment, the Group took a 30% stake for a cash consideration £1m. As at 31 July 2020, and given the strong performance, the Group's valuation of its investment in LPR, for the same shareholding, is £1.7m, an increase of £0.7m or 70%.

Date of investment: October 2019 

31 July 2020 valuation: £1,726,000 

Equity stake: 30% 

Mark Edward Partners LLC ("MEP")

(www.markedwardpartners.com)

Founded in 2010 by Mark Freitas, its President & Chief Executive Officer, 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

31 July 2020 valuation: £0

Equity stake: 30%

MB Prestige Holdings PTY Limited ("MB Group")

(www.mbinsurance.com.au)

In December 2013 the Group invested in 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.

Over the Period, MB Group has repaid in full its loan from the Group, which was possible due to its solid and consistent performance over the last three years and a healthy cash balance. MB continues to show strong growth with Gross Written Premium up 10% on the previous year at the 6-month year to date position and profitability up nearly 20% over the prior year position.

Date of investment: December 2013

31 July 2020 valuation: £3,030,000

Equity stake: 40%

Nexus Underwriting Management Limited ("Nexus")

(www.nexusunderwriting.com)

In 2014 the Group invested in 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 internationally. 

In March 2020, Nexus established Xenia, uniting all elements of Nexus's independent broking divisions, including Credit Risk Solutions and Credit and Business Finance.

Xenia is among the largest independent specialist trade credit and surety brokers in the UK, with a c. 20% market share of trade credit insurance distribution.

Xenia have recently appointed a new member of its senior Management Team, to lead its client services division. This will enable Xenia to further develop its strong client relationships, exceeding expectations for service and delivery as the group continues its journey of successful growth.

The Nexus Managing General Agency business continues to remain on track to hit its original budget expectation for the year ending 31 December 2020, notwithstanding the challenges that have been posed by the Covid-19 pandemic.

In February 2020, Nexus was ranked at number 78 in the 11th annual Sunday Times HSBC International Track 200, which ranks Britain's mid-market private companies with the fastest-growing international sales.

Date of investment: August 2014

31 July 2020 valuation: £40,313,000

Equity stake: 18.0%

SAGE Program Underwriters, Inc ("SAGE")

(www.sageuw.com)

Based in Bend, Oregon, SAGE provides specialist insurance products to niche industries, initially in the inland delivery and field sport sectors, established in 2019 by CEO Chuck Holdren. Mr. Holdren has three decades of experience in the industry and has prior experience of establishing and managing two national underwriting agencies from start-up to successful trade sale.

Since investment, SAGE has performed in line with the Groups expectations, and has strong growth potential going forward. Sage has also made a number of new hires to bolster its product offering, with the aim of becoming a 'one-stop-shop' for the inland delivery and field sport sectors.

Date of Investment: June 2020

31 July 2020 Valuation: £190,000

Equity Stake: 30%

Stewart Specialty Risk Underwriting Ltd ("SSRU")

(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.

SSRU, based in Toronto, has secured a new Property offering. As part of this new product it has announced the appointment of Heather Jamieson as Vice President of its Property division.

SSRU has grown solidly since formation and was able to exceed its 2020 annual revenue budget before the end of the second quarter of the year.

The Group's nominal equity investment of £19 has now grown to a value of £3.5m as at 31 July 2020.

Date of investment: January 2017

31 July 2020 valuation: £3,539,000

Equity stake: 30.0%

Sterling Insurance PTY 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.

Sterling continues to report strong financial performance, exceeding its EBITDA budget by c. 11% in the financial year to June 2020.

Date of investment: June 2013

31 July 2020 valuation: £2,684,000

Equity stake: 19.7%

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.

The performance of the business throughout 2020 had been positive and Summa are expecting to outperform their 2019 results. 

Date of investment: January 2005

31 July 2020 valuation: £6,932,000

Equity stake: 77.3%

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 its current shareholding to 40.5%.

Walsingham's business was impacted by Covid-19 and the lockdown restrictions, with the business believing that their taxi portfolio, which represents c.50% of their book, would be subject to mass cancellations, and the courier portfolio would see increased vehicles and drivers. In light of this, Walsingham recognised the need to allow taxi policyholders flexibility in their work and allowed for food and shopping deliveries as well as various NHS support work to be undertaken without the need for policy extensions. This meant the retention of taxi fleets on the portfolio, which are once again already approaching full capacity.

Due to Walsingham's initiative and flexibility, as Covid-19 restrictions eased GWP has increased significantly such that the initial Covid-19 reductions have now reversed, and the business is back on its original budget. At the same time, due to reduced traffic on the road this has resulted in significantly reduced claims frequencies over the last four months.

Date of investment: December 2013

31 July 2020 valuation: £2,226,000

Equity stake: 40.5%

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.

In April 2020, XPT completed its sixth investment acquiring LP Risk, Inc, the MGA and surplus lines Broker headquartered in Houston, Texas. LP Risk specialises in transportation, hospitality, contractors, marine, energy/oil & gas and manufacturing.

Additionally, In May 2020 Western Security Surplus ("WSS"), the boutique wholesale broker division of XPT, announced the acquisition of Houston Surplus Lines ("HSL"), which is an excess and surplus lines Managing General Agent based in Houston, Texas. This acquisition represented XPT's seventh investment.

W.E. Love & Associates, ("W.E. Love") launched a new trucking program, named Platinum Trucking. This new program has been created for primary truck liability insurance, where W.E. Love have identified that the needs of the market are underserved. The program complements other trucking-related programs written by W.E. Love and is currently available in 20 US states, with the strategy to expand coverage to all 50 US states. 

As XPT continues to grow, both organically and via acquisition, it has moved to bolster its Management Team through two senior hires. This includes the hiring of a new Chief Financial Officer and a new Executive Vice President and Director of Business Operations. These hires demonstrate that XPT is building a Management team to enter its next stage of growth.

Having acquired 7 businesses across the US, these appointments enhance XPT's capabilities in consolidating and growing their underlying business, and sourcing new acquisition opportunities.

Date of investment: June 2017

31 July 2020 valuation: £12,713,000

Equity stake: 29.9%

Outlook

At the time of our results being announced, the world continues to deal with the Covid-19 pandemic. It is likely that the next 12 - 24 months will be one of the most challenging times for all businesses to produce a strong return.

As has been the case throughout the Covid-19 pandemic, the Group will always prioritise the welfare of its staff and the staff at all our portfolio companies. The Group has been impressed by the manner in which our portfolio of investments have adapted to this crisis and it is a testament to the teams we back.

The Group remain confident in our portfolio of investments and the management teams we have backed. In light of this, the Group is well set to continue to deliver excellent long-term growth to our shareholders, notwithstanding the current difficulties caused by Covid-19. Our diverse portfolio is well positioned to continue its growth trajectory and we look forward to 2021 with cautious confidence.

Whilst the Group has a robust balance sheet, and is under no pressure to realise any of its current investments, there remains strong demand from private equity to enter the financial services and intermediated markets, and this of course produces exit opportunities for our investee companies.

The Group has a strong pipeline of new investment opportunities, within its sector specific niche model, focusing on off-market deals through our own network of contacts. This continues to provide us with promising investment opportunities at fair value with significant growth prospects.

Interim Consolidated Financial Statements

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE PERIOD ENDED 31ST JULY 2020

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

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

AS AT 31ST JULY 2020

(Company Number: 05674962)

The Interim Consolidated Financial Statements were approved by the Board of Directors and authorised for issue on 12th October 2020

and signed on its behalf by:

J.S. Newman & D.J. Topping

CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE PERIOD ENDED 31ST JULY 2020

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.

CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

FOR THE PERIOD ENDED 31ST JULY 2020

Refer to Note 6 for detailed analysis of the changes in the components of equity.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

FOR THE PERIOD ENDED 31ST JULY 2020

1. ACCOUNTING POLICIES

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 period.

The most significant estimates relate to the fair valuation of the equity investment portfolio as detailed in Note 4 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.

These interim consolidated financial statements were approved by the Board on 12th October 2020. They have not been audited nor reviewed by the Group's Auditors, as is the case with the comparatives to 31st July 2019, and do not constitute statutory accounts within the meaning of section 434 of the Companies Act 2006.

The financial statements have been prepared using the accounting policies and presentation that were applied in the audited financial statements for the year ended 31st January 2020. Those accounts, upon which the Group's Auditor issued an unqualified opinion, have been filed with the Registrar of Companies and do not contain a statement under section 498 (2) or (3) of the Companies Act 2006.

Basis of consolidation

(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.

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.

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 period.

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 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 period. 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 period. 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

Right-of-use asset

IFRS 16 requires leases for use of office space to be recognised as 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 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 period. However it is noted that the adoption of IFRIC 23 has had no material impact on the tax position as at the period end.

2. SEGMENTAL REPORTING

The Group operates in one business segment; the 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 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.

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:

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:

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:

3. EARNINGS PER SHARE FROM CONTINUING OPERATIONS ATTRIBUTABLE TO THE EQUITY SHAREHOLDERS