The highlights of the results are:
· Increase in the Equity Value of the Portfolio of 22.1% over the year
· Net Asset Value of £79.7m (31 January 2016: £70.8m), a 12.5% increase, net of Dividend
· Net Asset Value increase to 273p per share (31 January 2016: 243p)
· Total return to Shareholders in the year of 13.9% (2016: 13.7%)
· Consolidated profit after tax of £9.8m (31 January 2016: £8.7m)
· Average Net Asset Value annual compound growth rate of 11.4% since 1990
· Final Dividend of 3.76p per share declared (31 January 2016: 3.42p), a 9.9% increase
· Cash and treasury funds balance of £12.6m at year end
· Three new investments – ARB, Fiducia and SSRU
· Further investment into LEBC, Nexus and PLUM
· Three disposals – Hyperion, R&Q and Broucour
· Agreement reached on Besso and Trireme disposals (completion post Year End)
· Current uncommitted cash of £29.2m
“We have concluded a further year in which our Company has built on its past achievements. The portfolio businesses continue to perform well as we support them in their development, we have interesting new investment opportunities to complete and a much increased supply of cash”
Brian Marsh OBE, Chairman
For further information, please contact:
Redleaf Communications Email: bpmarsh@redleafpr.com
Emma Kane / David Ison Tel: 020 7382 4732
Chairman's Statement
I am pleased to present the audited Consolidated Financial Statements of B.P. Marsh & Partners PLC for the year ended 31 January 2017.
The financial year proved to be one of the most productive of our 27 year history, with three new investments, three disposals, two further investments in the existing portfolio and agreement reached on the sale of our investment in Besso. The value of the investment portfolio increased by 22.1% in the year and our Net Asset Value by 12.5%, demonstrating the momentum we have been building in recent years.
The results show the Group to be in a strong position, with robust profitability, a healthy cash balance and an attractive portfolio of growth investments. This puts us in a good position to continue to develop and deliver attractive returns over the long-term for our investors, with a Total Shareholder Return in the year of 13.9% and an average NAV compound annual growth rate of 11.4% since 1990.
During the year we agreed the disposal of our investment in Besso, which brought to a close two decades of partnership. We also completed our exit from Hyperion. These investments typify our investment approach at B.P. Marsh; long-term, patient development of early stage businesses in partnership with ambitious management teams. We view all of our investments as a true partnership and we supported, counselled and encouraged Besso and Hyperion through relationships of over twenty years. Our internal rate of return (IRR) on Besso was 21.9% since 1995 and on Hyperion was 25.6% since 1994, proving the effectiveness of our investment model.
We made three new investments during the year. The first was in an established reinsurance broker based in Singapore, Asia Reinsurance Brokers PTE Ltd. We also launched two start-up Managing General Agency businesses: Fiducia in Leeds, UK, and SSRU in Toronto, Canada. During the year, we disposed of non-core holdings in Randall & Quilter and Broucour.
In addition, we made further investments in the existing portfolio, in Nexus, LEBC and PLUM. All of these businesses are making significant headway in their sectors and we believe have exciting futures.
Subsequent to the year-end we have made an investment in CBC, an established Lloyd's Broker, completed the disposal of Besso, and also disposed of our investment in Trireme by sale back to our Texas-based partners, US Risk Insurance Group Inc.
To reflect the growth in our business and to enable us effectively to exploit our pipeline opportunities, the Board agreed in February 2017 that we would increase our initial investment limit from £3m to £5m. The Board will continue to strike a balance between rewarding shareholders by generating value through investing funds in opportunities that will deliver long-term capital growth and a sustainable ongoing dividend. The Final Dividend declared of 3.76p per share is an increase of 10% on the previous year and represents a yield of just under 2% (based on the Company's share price as at 5 June 2017). The Board is aiming at least to maintain this level in the coming two years.
The Company's share price increased by 35% from 1 February 2016 to year end, and there has been a narrowing in the discount to NAV at which the Company's shares trade in the same period. We maintain our efforts to close this gap and will continue our policy to make low volume share buy backs when the NAV discount reaches 25% and when trading restrictions allow.
We have now been in business for 27 years and over the last five years in particular have built upon our reputation for being the leading investor in our corner of the market. Our team is fully focused on bringing in new investments, tending to the portfolio and developing our network, whilst ensuring our story is more widely known in the broader investment community. I believe that our momentum is building and that our management team is well equipped to continue to drive the business forward.
Business Update
Summary of Developments in the Portfolio
During the financial year ended 31 January 2017 and in the ensuing months to date, the following developments have taken place within the Group and its portfolio:
New Investments
Asia Reinsurance Brokers PTE Ltd (“ARB”)
The Group extended its geographic spread when it invested in ARB, the Singapore-based specialist reinsurance broker on 21 April 2016, acquiring a 20% shareholding for a total consideration of SGD $2.40m.
ARB was established in 2008, following a management buy-out of the business from AJ Gallagher, led by the CEO, Richard Austen. The business has offices in Singapore, Malaysia, the Philippines and Indonesia.
The Group considered this an exciting opportunity to invest in a well-established, profitable business with an experienced management team and strong growth potential.
The Fiducia MGA Company Ltd (“Fiducia”)
On 23 November 2016, the Group subscribed for a 25% shareholding in Fiducia, for a consideration of £0.075m alongside a loan facility of £1.75m. Of this, £0.035m was drawn down on completion and the remainder is subject to Fiducia attaining agreed targets.
Fiducia is a start-up registered Lloyd's Coverholder specialising in Marine risks and based in Leeds, UK. The Founder and CEO, Gerry Sheehy, has over 30 years' insurance industry experience.
Stewart Specialty Risk Underwriting Ltd (“SSRU”)
The Group completed its investment into SSRU on 30 January 2017, subscribing for a 30% shareholding.
The investment represents a further geographic growth step for the Group, with this business based in Toronto, Canada. SSRU is a start-up Managing General Agency and, like Fiducia, was thinly capitalised. In addition to the equity, a loan facility of CAD $0.85m has been provided, with drawdown being subject to SSRU meeting certain conditions.
SSRU provides specialist insurance products to clients in the construction, manufacturing, onshore Energy and Transportation sectors. Its Founder and CEO, Stephen Stewart, has over 25 years of industry experience.
Disposals
Hyperion Insurance Group Ltd (“Hyperion”)
In July 2016 the Group realised its remaining 1.6% stake in Hyperion for £7.3m cash. As announced on the 5 January 2017, Hyperion repaid, in full, its remaining £6.04m loan at the end of January 2017, allowing these funds to be reinvested to grow the ongoing equity portfolio.
R&Q and Broucour
The Group streamlined its portfolio by disposing of two non-core investments. On 22 April 2016, the Group sold its 49% stake in The Broucour Group Ltd (“Broucour”) and on 4 May 2016, the Group sold its 1.32% stake in Randall & Quilter Investment Holdings Ltd (“R&Q”).