B.P. Marsh & Partners Plc
(“B.P. Marsh”, the “Company” or the “Group”)
Trading Update
Chairman's Update
Introduction
B.P. Marsh, the specialist venture capital provider to early stage financial services businesses, is pleased to provide the market with an update on trading for the six months ended 31 July 2021 (the “Period”).
Covid-19
This Period has seen the United Kingdom emerge from the latest set of Lockdown restrictions, during which time our priority continued to be the safety of our staff, partners and other stakeholders. We successfully carried out our first live broadcast Annual General Meeting and we have continued to embrace the benefits and efficiencies that the repercussions of the pandemic have brought, alongside, of course, having to deal with the difficulties, from time to time. The Company has assisted its portfolio companies where required in light of the pandemic.
Dividend
On 30 July 2021 the Company made a distribution of 2.44p per share or £0.9m (2020: 2.22p per share or £0.8m) to all shareholders on the Register as at 25 June 2021. We always strive to reward our shareholders for their loyalty within the means of the Company whilst trying to preserve capital and available investment funds. The Board considers that it has struck the right balance by agreeing to a distribution of 100% of its underlying realised profits for the year to 31 January 2021. The aggregate amount of this distribution increased by 10% on the previous year in line with increased profitability. In the event of successful cash realisations, the Company will consider increasing dividends accordingly.
Cash Balance and Loan Facility
As at 31 July 2021 the Group had a cash balance of £1.1m in addition to a loan facility of £3m from Brian Marsh Enterprises Ltd (“BME”), a company of which the Chairman, Mr. Brian Marsh, is a director and sole shareholder. £1.0m of this facility had been drawn down at 31 July 2021.
Currently the Group has total funds available for investment of £3.7m in cash and remaining loan facility, an increase of £0.6m since the financial year end due to loan repayments and income received from the investment portfolio.
Chief Investment Officer's Portfolio Update
During the Period the Group has continued to prove resilient to the ongoing challenges posed by the Covid-19 Pandemic.
Our portfolio has performed well during the Period, and we expect this to continue through the Group's current financial year, to 31 January 2022.
Over the Period, the Group has continued to focus on our existing portfolio, working closely with our respective Management teams to ensure the on-going stability of our investments.
The Group is now placing greater emphasis on assisting our portfolio to take advantage of opportunities that are emanating as the world's economy recovers. Additionally, the Group continues to seek new business opportunities and remains optimistic that we will continue to secure scalable investments backed by capable and experienced management teams.
Turning to the insurance market itself, the Group's insurance intermediary investments continue to see rate increases across the sectors in which they operate. Whilst there are signs that rates in short tail lines of business are levelling out, rate increases continue to be strong where lines of business are exposed to long tail risk.
For insurers, rate adequacy remains a key focus, with the underlying profitability of Lloyd's and company markets being a central consideration. Whilst the Group's portfolio itself does not involve direct balance sheet exposure, our Managing General Agency (“MGA”) investments effectively borrow capacity from insurers. Therefore, they are particularly mindful of the importance of writing business that is profitable for their insurance partners.
New Business Opportunities and Outlook
The 6-month interim period closed with a total of 31 new investment opportunities having been presented to the Group, compared to 22 over the same period last year.
The Group remains well positioned to carry out new investments, with a number of early-stage opportunities in the pipeline, which should continue to develop over the course of the year.
Disposal – Post Period End
MB Prestige Holdings PTY Limited (“MB”)
ATC Insurance Solutions PTY Limited (“ATC”) acquired 100% of MB for a consideration of AU$17m (c. £9m) on 31 August 2021, with consideration being paid in a combination of cash and equity in ATC. The cash proportion of the transaction was financed out of ATC's cash reserves.
B.P. Marsh sold its 40% equity stake in MB for AU$6.8m (c. £3.57m), for which the Group received newly issued shares in ATC.
The Group previously had a 20% shareholding in ATC, which increased to 25.5% following ATC's acquisition of MB.
As at 31 January 2021, B.P. Marsh valued its 40% shareholding in MB at AU$5.7m (c. £3.2m). Therefore, this transaction represents a circa 20% uplift over the Group's latest published valuation of MB.
Additionally, it represented an Internal Rate of Return of 29% since the Group's original investment in MB in 2013 (inclusive of all income and fees) and a money multiple of equity invested of almost 9 times.
This takeover has valued ATC at AU$76m (c.£40m), resulting in a post transaction valuation for both businesses of AU$93m (c.£49m). This implies an increase of AU$5.8m (c.£3m) over the Group's combined valuations of ATC and MB, as at 31 January 2021.
Daniel McNamara, the current Managing Director of MB, also received shares in ATC as consideration for his 7.5% shareholding in MB. He joined the management team at ATC, whilst also remaining Managing Director of MB.
Chris Anderson, ATC's CEO, stated:-
“MB are highly respected in the prestige motor insurance space. MB's underwriting and financial performance has been very strong for many years. ATC are delighted with the acquisition and working with Daniel McNamara and his team.”
Daniel McNamara, Managing Director of MB, stated:-
“MB are excited to be joining the ATC Group and look forward to working with Chris Anderson and his team into the future. We've been fortunate to have enjoyed a productive working relationship with B.P. Marsh through its long-term shareholding in MB and are pleased to be able to continue that relationship as part of the ATC Group.”