Final Results

13 June 2023

B.P. Marsh & Partners Plc

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

Final Results for the Year to 31 January 2023

B.P. Marsh & Partners Plc (AIM: BPM), the specialist private equity investor in early stage financial services businesses, announces its audited Group Final Results for the year ended 31 January 2023.

Highlights:

· Total Shareholder return of £23.9m (14.4%) for the year including the dividend paid in July 2022

· Net Asset Value has increased by £22.9m to £189.5m (31 January 2022: £166.6m), a 13.8% increase

· Net Asset Value per share increased by 63.5p to 526.2p* (31 January 2022: 462.7p)

· Post year end disposal of Kentro for £51.5m (subject to regulatory approval)

· New dividend and buy-back policy will see 25% of proceeds of Kentro sale to be returned to Shareholders

· Robust pipeline of new investments

· Consolidated profit before tax of £27.6m (31 January 2022: £19.4m)

· Equity portfolio valuation increase of 19.1% (2022: 14.7%)

· Completion of Summa realisation during the year (£9.6m including Loan)

· Interim Dividend paid on 28 February 2023 of 1.39p per share and proposed Final Dividend of 1.39p per share payable in July 2023 (2022: 2.78p total)

\* The diluted Net Asset Value per share is 516.8p including shares held within an Employee Benefit Trust which have met certain performance criteria (31 January 2022: 455.6p).

Commenting on the results, Brian Marsh OBE, Chairman, said:

"The sale of our interest in Kentro, post year-end, for an expected £51.5 million validates both the strength of our long-term business model and our valuation methodology - producing a multiple on the equity investment at an exit price precisely in line with our valuation. This exit has enabled the Board to put in place a three-year strategy to return £13m to shareholders.

"The c.14% increase in NAV (net of dividend) reported in these results demonstrates the strength of our business model which focuses on difficult to replicate opportunities, principally in the growing insurance intermediary markets globally. I look forward to reporting further progress for the current financial year, subject as always to the absence of major macro-economic shocks."

Analyst and investor briefing:

There will be an analyst call today at 10:00am BST. Any analysts wishing to join the call should register to receive an invitation by emailing [email protected] if they have not already done so.

The Company will also provide a live presentation for all existing and potential shareholders via the Investor Meet Company platform on 15 June 2023 at 11:00am BST.

Questions can be submitted pre-event via your Investor Meet Company dashboard up until 09:00am BST the day before the meeting or at any time during the live presentation. Investors can sign up to Investor Meet Company for free and add to meet B.P. Marsh & Partners Plc via:

https://www.investormeetcompany.com/bp-marsh-partners-plc/register-investor.

Investors who already follow B.P. Marsh & Partners Plc on the Investor Meet Company platform will automatically be invited.

Note

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

Notes to Editors:

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

Since formation over 30 years ago, the Company has assembled a management team with considerable experience both in the financial services sector and in managing private equity investments. Many of the directors have worked with each other in previous roles, and all have worked with each other for over ten years.

For further information:

Statement by the Chairman and Managing Director

We are pleased to present the audited Consolidated Financial Statements of B.P. Marsh & Partners Plc for the year ended 31 January 2023.

Results

For the year under review, the Group has achieved an increase in Net Asset Value ("NAV") (net of dividend) of 13.8% from £166.6m to £189.5m and an increase in the equity value of our portfolio of £22.2m (19.1% increase adjusting for additions and disposals) from £149.3m to £171.5m.

This equates to an undiluted Net Asset Value per share of 526.2p (2022: 462.7p) or 516.8p on a fully diluted basis following the vesting of the shares in the Group's Joint Share Ownership Plan (2022: 455.6p).

The Group's cash and treasury balance as at 31 January 2023 stood at £12.1m, an increase of £3.5m over the previous year, and as at the date of this announcement, is £5.2m due to further investment activity post year end.

Dividend

The Group paid an interim Dividend on 28 February 2023 of 1.39p per share. The Group wanted to reward its shareholder base by paying the dividend in two instalments with the balance being paid in July 2023. The Group is recommending a final dividend of 1.39p per share to be paid on 28 July 2023 to all shareholders on the register on 30 June 2023, with the ex-dividend date being 29 June 2023. This final dividend will be subject to Shareholder Approval at the Group's Annual General Meeting to be held on 26 July 2023.

Post year-end Disposal

As announced on 23 May 2023, B.P. Marsh agreed the sale of its 18.7% shareholding in Kentro, the London-based insurance industry investment group, pursuant to an agreement by which Brown & Brown, Inc. ("Brown & Brown"), one of the largest US-based insurance intermediaries, has agreed to acquire the entire issued share capital of Kentro.

Completion will be subject to, inter alia, the FCA's approval of change of control. Upon completion, the Group expects to receive £51.5m in cash (net of all transaction costs), which is consistent with the Group's £51.5m valuation of the business, underlining our approach to investment valuation.

The Group is pleased once more to be able to demonstrate its successful track record of investing in strong solid management teams and taking a cooperative approach to the relationships that drive successful outcomes. More information on Kentro can be found in the Chief Investment Officer's report.

New Dividend and Share buy-back Policy

Following the expected receipt of £51.5m from the sale of Kentro, the Group will seek a healthy balance between returning cash to shareholders and reserving sufficient funds to be able to continue its proven strategy of making successful investments.

As announced on 6 June 2023, once the sale of Kentro has completed and funds have been received, the Group intends to declare a three-year dividend policy for 2024, 2025 and 2026, whereby its aspiration will be to distribute an aggregate cash dividend of £2m each year for the three years. These will be payable in two equal instalments in February and July of each year commencing February 2024, subject to Shareholder Approval at the Company's Annual General Meeting each year. In addition, the Group intends a special dividend of £1.0m in the aggregate to be paid upon receipt of the proceeds of sale, with further information regarding the proposed payment date to be announced in due course.

Additionally, the Group plans to commit a further £6.0m to share buy-backs, with more information to follow in due course with regard to mechanics and how best to deliver this.

The above represents up to £13m being returned to shareholders via both Dividends and Share Buy-Backs over the next three years.

As announced on 16 January 2023, the Group allocated £1.0m for the purposes of conducting Share buy-backs. These buy-backs are being conducted within the limits as approved by the Shareholders at the Group's Annual General Meeting held on 25 July 2022 and the Market Abuse Regulation. Since 16 January 2023, the Group has bought back [103] shares, for an average of [318]p per share, a total aggregate of [£0.3m] of the £1.0m allocated for this purpose. The Group continues to believe that the existing Share buy-back programme remains an appropriate means of achieving the Group's objective of reducing the discount to NAV and enhancing long term shareholder value.

Per our announcement on 6 June 2023 the Group remains of the view that offering a mixture of dividend and share buy-back transactions is the most effective way of rewarding and returning value to its shareholders.

Portfolio

During the year the Group provided an additional US$3.5m (£2.8m) to XPT Group LLC ("XPT") through a mixture of redeemable shares and equity to support XPT's ongoing and steep growth trajectory. The Group has also lent more modest amounts to Lilley Plummer Holdings Limited and LEBC Holdings Limited, to assist their respective corporate aspirations and to support working capital requirements.

Throughout the year under review, the Group's Portfolio saw continued growth in key Companies, XPT and Lilley Plummer Risks Limited. The Group's largest US Investment, XPT, has continued its impressive States-wide expansion year on year. XPT produced over US$400.0m of Gross Written Premium for the year to 31 December 2022. Further details of the Portfolio's performance is included in the Chief Investment Officer's report.

Post Year-end activity

Post Year-end, the Group provided further loan funding of US$6.0m to XPT which was utilised to acquire Cal Inspection Bureau Inc ("CAL"). CAL is a California-based physical inspection company that carries out surveys and inspections of sites, on behalf of insurers and insurance intermediaries and is XPT's thirteenth acquisition.

In February 2023, the Group provided a £2.0m loan facility to Paladin Holdings Limited, the holding company of CBC UK Limited ("CBC") to establish a new London Market Property Managing General Agency.

On 28 April 2023, the Group completed a new investment into Verve Risk Services Limited ("Verve"). The Group acquired a 35% holding in the London-based Managing General Agency. Verve specialises in Professional and Management Liability business for the insurance industry in the USA, Canada, Bermuda, Cayman Islands and Barbados.

Business Overview

The Group is pleased with the strong set of results it is able to announce for the year. The year under review is hoped to be the final year where the Covid-19 Pandemic has had a material impact on the global market. Unfortunately, the conflict in Ukraine and the Cost-of-Living crisis has arisen in its place.

The Group has taken steps to mitigate the full effect of the Cost-of-Living crisis on its staff members where possible and is grateful for the continued efforts of all its staff. The war in Ukraine continues to dominate the global economy and the Group is currently satisfied that ongoing sanctions against Russia and its allies do not have a material impact on the Group's business.

Outlook

The Group believes that these results demonstrate the strength of our business model which focuses on early-stage investment in the insurance intermediary market. This market continues to generate attractive opportunities for B.P. Marsh and our leading position within it means that we get first look at many such opportunities.

The recently announced sale of our interest in Kentro provides a compelling example of the returns that can be realised from investing early and supporting our investee companies over the longer term. The Group will finalise what we consider to be the most efficient route to action our announced strategy to allocate an additional £6.0m to share buy-backs and the timing of the dividend payments we have announced for the next three years.

B.P. Marsh will continue to work on producing sustained growth for the coming months and years ahead while at the same time delivering attractive returns for our shareholders.

Chief Investment Officer Statement

Portfolio Update and Outlook

The Group has performed well for the financial year to 31 January 2023, with the underlying portfolio continuing to adapt well to the ongoing economic challenges facing the UK and the rest of the world.

Over the financial year, the valuation of the Group's equity portfolio has increased by 19.1% adjusting for realisations, with NAV increasing by 13.8%.

The Group's mantra of working closely with the Management Teams of our respective investee companies continues to contribute to long-term growth.

Post year end, the Group announced the disposal of its entire 18.7% shareholding in Kentro Capital Limited ("Kentro"), which is expected to deliver £51.5m of cash once regulatory approval has been received.

The Group's current cash balance is £5.2m, and when the funds from the Kentro sale have been received, the Group's liquidity will increase accordingly.

The receipt of these funds does not alter B.P. Marsh's long term strategic goals, which remain to:-

· identify businesses with strong management teams and good growth potential; and

· help fund, support, and develop these companies so they can deliver on growth opportunities

Over the course of B.P. Marsh's 33-year history, this strategy has been to the long term benefit of our shareholders. As such, the Group is committed to reinvesting part of the Kentro sale proceeds in both its existing portfolio and in new ventures, as well as provide an appropriate shareholder return strategy.

The Group remains focussed on sourcing new business and has an active pipeline of new business opportunities which are currently being considered. We continue to see a high number of potential new business opportunities, having received 60 new business enquiries in the year to 31 January 2023, increasing from 48 received enquiries in the preceding year.

Post year end, on 28 April 2023 the Group announced its investment in Verve Risk Services Limited ("Verve"), a London-based Managing General Agency, which specialises in Professional and Management Liability business for the insurance industry in the USA, Canada, Bermuda, Cayman Islands and Barbados.

Current opportunities under consideration include (but are not limited to) the following:

· a start-up MGA/underwriting agency, looking to specialise in underwriting marine lines;

· an established broker, that specialises in insurance for High Net Worth clients and Fine Art & Specie lines; and

· a specialist Lloyd's start up broker.

In view of the Group's favourable cash position, we remain prepared to take advantage of opportunities emanating from the financial services industry generally and the insurance market specifically.

Disposals

Kentro Capital Limited ("Kentro") (Post Year End)

As previously announced, the Group has agreed to dispose of its shareholding in Kentro, the London-based insurance industry investment group, to Brown & Brown Inc, one of the largest US based insurance intermediaries following a strategic process run with Morgan Stanley. Completion of the transaction will be subject to FCA approval being granted.

The Transaction

Upon completion, the Group is expected to receive £51.5m in cash (net of all transaction costs), which is consistent with the Group's valuation of the business, providing a validation of our approach to investment valuation. Subject to adjustments at completion, this would increase the Group's current funds available to approximately £56.2m (after transaction costs and tax), prior to any distributions to shareholders.

The investment and subsequent sale of the Group's holding in Kentro is another example of B.P. Marsh's successful strategy of investing for the long term, in start-up and early stage businesses with ambitious management teams. This allows the Group to work with management to help them grow their business, before disposing of its stake at a beneficial time for management and B.P. Marsh.

This disposal is expected to deliver an Internal Rate of Return of c.25% (inclusive of all income and fees) and a money multiple on the Equity Investment of 3.41x.

Background to the Investment

B.P. Marsh originally invested in Kentro (then known as Nexus Underwriting Management Limited) in August 2014, with an initial equity investment of £1.5m for a 5% shareholding.

B.P. Marsh has overseen Kentro's growth through a longstanding partnership and the further provision of £13.6m of capital, increasing its shareholding to 18.7%, becoming Kentro's largest single investor. This investment, alongside bank financing, allowed Kentro to commence its acquisitive growth strategy, via both Nexus Underwriting Limited ("Nexus"), the underwriting (or "MGA") arm, and Xenia Broking Group ("Xenia"), the broking arm.

Since B.P. Marsh's first investment, Kentro has made 23 acquisitions, growing from Gross Written Premium of c.£55m in its year ending 31 December 2014 to now over £500m.

With B.P. Marsh's support, the underwriting arm, Nexus, underwrites across a diversified portfolio of 20 risk classes, through a network of over 800 retail broker partners in nine countries. Xenia is one of the largest retail trade credit brokers in the UK, with over 1,500 policyholders ranging from large corporates to SME customers. The collective Kentro team is composed of more than 350 insurance professionals operating from offices in the UK, US, Europe, Asia and Dubai.

New Investments

Denison and Partners Limited ("Denison and Partners") - London, United Kingdom

As previously announced in March 2022, the Group acquired a 40% Cumulative Preferred Ordinary shareholding in Denison and Partners, providing funding of up to £0.8m, via equity and debt.

Denison and Partners is a start-up London-based Lloyd's Insurance Broker, established by Alasdair Ritchie, with a focus on delivering (re)insurance delegated authority solutions and services to Managing General Agencies, Coverholders and (re)insurers.

Date of initial investment: March 2022

31 January 2023 valuation: £0.1m

Cost of Equity: £0.1m

Equity stake: 40.0%

Verve Risk Services Limited ("Verve") (Post year end) - London, United Kingdom

Post Year End, the Group announced that it had acquired a 35% Cumulative Preferred Ordinary shareholding in Verve Risk Services Limited ("Verve"), a London-based Managing General Agency.

Verve specialises in Professional and Management Liability business for the insurance industry in the USA, Canada, Bermuda, Cayman Islands and Barbados.

B.P. Marsh has provided £1m of funding via a mixture of equity and a loan facility, which was drawn down in full upon completion as part of a management buyout.

Established in 2016 by Scott Simmons and Alan Lambert, Verve Risk Partners LLP had been an underwriting cell within Castel Underwriting Agencies Limited ("Castel"). Following the exclusive support from B.P. Marsh, Verve has completed a buyout from Castel, with Management owning the remaining 65% of Verve.

Date of initial investment: April 2023

31 January 2023 valuation: N/A

Cost of Equity: £0.4m

Equity stake: 35%

Follow-on Investments and Funding

CBC UK Limited / Paladin Holdings Limited - London, United Kingdom

+ 26.1 pence NAV per share uplift in Year

CBC, the London based Retail and Wholesale Lloyd's insurance broker, continues to perform strongly. In CBC's last financial year to 31 December 2022, CBC achieved an EBITDA of £3.8m, representing a 73% year on year increase.

The Group remains confident that CBC will continue this growth trajectory and will exceed its budget of £5.5m of EBITDA in its current financial year to 31 December 2023.

In February 2023, B.P. Marsh provided a £2m loan facility, of which £0.5m was drawn down immediately to fund the build-out of Alchemy Underwriting Limited. Alchemy Underwriting Limited is a new London-market property MGA in which Paladin, the holding company of CBC, has a 22.5% shareholding.

Date of initial investment: February 2017

31 January 2023 valuation: £19.2m

Cost of Equity: £0.8m

Equity stake as at 31 January 2023: 47.06%

XPT Group LLC ("XPT") - New York, USA

+ 24.0 pence NAV per share uplift in Year

The Group's investment in XPT, the specialty lines insurance distribution company, continues to perform well, with the business on track to produce Gross Written Premium of over US$700m in its financial year to 31 December 2023 (2022: US$400m). The Group expects XPT to continue its strong growth, both via its continued acquisition strategy and underlying organic growth.

As previously announced, over the Group's financial year to 31st January 2023, the Group provided XPT with further funds of US$3.5m.

This was provided via:-

· Redeemable shares - US$2.8m (£2.2m); and

· Equity - US$0.7m (£0.6m).

Post year-end, the Group lent XPT a further US$6.0m (£4.9m), via a short term US$2.0m Revolving Loan facility and a US$4.0m Term Loan. These facilities were drawn down in full by XPT on completion.

Utilising these funds, alongside its existing resources and bank financing, XPT completed on a number of acquisitions, as per its M&A strategy.

This included the following acquisitions:-

· Insurance Brokers, Inc. ("IBI")

In February 2022, XPT acquired IBI, the wholesale insurance broker and general agency, based in Indiana, USA, which offers a broad range of personal, commercial, and E&S insurance products.

IBI was founded in 1974 and is now led by Glen Pomeroy offering specialty insurance throughout the Midwest and surrounding states. IBI will become part of XPT Specialty's Binding and Small Commercial Brokerage division headed by Kyle Stevens.

· Cal Inspection Bureau Inc ("CAL")

In February 2023, XPT acquired CAL, a California based physical inspection company that carries out surveys and inspections of sites on behalf of insurers and insurance intermediaries. CAL was established in 1988 by its founder and president Emil Moskowitz, who has joined XPT as part of the acquisition.

CAL is widely regarded as the premier underwriting survey and audit business on the west coast of the USA, working with almost every MGA and wholesale broker in their territory. With CAL as part of Platinum, (XPT's specialist MGA focused on niche product areas, including specific programmes in trucking liability and a Bars and Taverns programme, amongst others) the goal is for CAL to become the premier underwriting survey and audit business throughout the USA.

CAL is a natural adjunct to XPTs current wholesale channel business model, with XPT now being able to offer physical inspection services alongside other third-party claims adjusting administrator offerings.

· Craig & Leicht Inc ("C&L")

In February 2023, XPT also acquired C&L, the Texas-based wholesale agency with experience in a wide variety of industries, specialising in contractors, retail, and landlord risks.

C&L specialise in very niche market segments of the industries they support and have intuitive knowledge of high-risk and unusual businesses with a reputation for providing out-of-the-box solutions with a keen eye for gaps in coverage.

The unique and varied manner in which C&L transacts business has resulted in impressive growth, allowing them to reach beyond their Texas roots and earn recognition that transcends state borders.

The acquisition of C&L is XPT's 14th acquisition since formation.

Date of initial investment: June 2017

31 January 2023 valuation: £34.1m

Cost of Equity: £10.1m

Equity stake: 28.54%  

Portfolio Update & Activity

NAV breakdown by portfolio company

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

The Group's current investments are in the Insurance Intermediary sector, with the exception of the independent financial adviser LEBC.

Our current insurance investments are budgeting to produce in aggregate over £1.64bn of insurance premium during 2023 (2022: £1.32bn), and a breakdown between brokers and MGAs can be found here:

Insurance Brokers

Investments:

* Inclusive of fees, loan interest and dividend income, and based on valuation at 31 January 2023

The Group's Broking investments are budgeting to place over £742m of GWP (2022: £567m), producing over £75m of brokerage income in 2023 (2022: £59m), accessing specialty markets around the world.

Underwriting Agencies / Managing General Agents ("MGAs")

Investments:

* Inclusive of fees, loan interest and dividend income, and based on valuation at 31 January 2023

**Post year-end investment

The Group's MGAs are budgeting to place over £900m of GWP (2022: £785m), producing over £109m of commission income in 2023 (2022: £95m), across over many specialist product areas, on behalf of more than 50 insurers.

IFA Investment

Investment

* Inclusive of fees, loan interest and dividend income, and based on valuation at 31 January 2023

LEBC Holdings Limited ("LEBC") - London, United Kingdom

- 24.2 pence NAV per share reduction in Year

For LEBC's year ending 30 September 2022, LEBC produced an adjusted EBITDA of £3.2m.

B.P. Marsh continue to support LEBC through a period of restructuring, which has continued over the course of 2023.

Whilst this restructuring process has taking longer to implement then expected, in the long run it will deliver a more efficient and effective business.

LEBC has seen strong growth in its corporate advice arm, which continues to grow year on year. However, the continued restructuring has impacted the Group's valuation of LEBC.

Date of initial investment: April 2007

31 January 2023 valuation: £15.9m

Cost of Equity: £12.4m

Equity stake: 59.3%

Other Portfolio Company Highlights

United Kingdom

Lilley Plummer Risks Limited / Lilley Plummer Holdings Limited ("LPR") - London, United Kingdom

+ 13.5 pence NAV per share uplift in Year

The Group remains pleased with the continued success of LPR since its inception in late 2019.

Since that time, LPR has grown its underlying marine portfolio and has also expanded into new product lines in new geographic locations taking advantage of market conditions. This has included a number of niche and diverse areas, for example Political Violence, Terrorism and North American P&C insurance.

In LPR's year ending 31 December 2022, LPR achieved revenue of c.£5.0m and EBITDA of c.£2.0m. LPR continues to grow substantially and is on track to deliver considerable year on year growth in respect of revenue and EBITDA.

This performance is due to strong organic growth (with LPR growing its client base and winning new business), LPR continuing to respond to the demand for coverage in war-stricken locations and the performance of new teams across new business lines.

LPR remain actively looking at new opportunities, within and outside of its core marine offering and the Group is confident regarding its performance over the course of the current financial year and beyond.

Date of initial investment: October 2019

31 January 2023 valuation: £7.7m

Cost of Equity: £1.0m

Equity stake as at 31 January 2023: 30%

North America

Stewart Specialty Risk Underwriting Ltd ("SSRU")

+ 7.6 pence NAV per share uplift in Year

Performance of the Group's Canadian investment, SSRU, remains a highlight:

· In SSRU's year to 31 December 2022, Gross Written Premium exceeded CA$75m, representing an over 50% uplift on prior year results; and

· A similar trend was seen in EBITDA, with SSRU achieving over CA$7m in 2022, a 51% increase over the prior year.

Growth continues to be achieved via organic growth across its existing commercial casualty and property book and makes SSRU one of Canada's largest MGAs.

Date of initial investment: January 2017

31 January 2023 valuation: £11.0m

Cost of Equity: £19

Equity stake as at 31 January 2023: 30.00%

Australia

Agri Services Company PTY Limited ("Agri Services")

+ 5.2 pence NAV per share uplift in Year

The performance of Agri Services, one of the Group's Australian investments, remains strong.

Since the Group's initial investment into Agri Services in July 2019, the company has undergone considerable growth:

· Gross Written Premium has increased from c.AU$5m in 2019 to over AU$40m in 2022

· EBITDA, in the same time frame, has seen an increase from c.AU$0.3m to over AU$1.1m

Such impressive growth has continued into 2023.

Date of initial investment: July 2019

31 January 2023 valuation: £5.5m

Cost of Equity: £1.5m

Equity stake as at 31 January 2023: 41.00%

B.P. Marsh's other investments in Australia (ATC and Sterling Insurance PTY Limited) continue to perform well with premium income and profitability increasing year on year across both entities.

Market Commentary

The insurance industry continues to discuss rate increases across global commercial lines of business. The first quarter of 2023 resulted in an overall rate increase of 4% across all global commercial lines. This increase represented the 22nd consecutive quarter of rate increases, although rate increases are well below the peak, being 22% in the fourth quarter of 2020.

In the UK rates have increased by 25% over the past four quarters, this compares to 22% in the US and 23% in Europe.

Rate increases were highest across property lines, which has been primarily driven by continued restrictions in capacity due to constrained risk appetite in areas with high CAT (Catastrophe) Risk exposure.

Financial and Professional lines have seen a small reduction in rates over the first quarter of 2023. This deceleration, with a particular focus on the D&O market, is prominently due to new capacity providers entering the market and the relative low levels of IPO activity.

Given that most of our portfolio companies provide risk solutions in specialty markets, we have seen rates increasing at a higher rate than average and generally at a higher level than inflation.

Overall, the Group does not anticipate the market returning to the pricing of the last soft market in the short to medium term.

Daniel Topping

Chief Investment Officer

12 June 2023

Finance Director Statement

Financial performance summary

The table below summarises the Group's financial results and key performance indicators for the year to 31 January 2023:

The Group had a strong year, delivering an increase in the NAV of £22.9m (2022: £16.7m). At 31 January 2023 the NAV of the Group was £189.5m which equates to 526.2p per share undiluted (2022: £166.6m, or 462.7p per share). On a diluted basis this equates to 516.8p per share (2022: 455.6p per share). This equates to an increase in NAV of 13.8% (2022: 11.1%) for the year undiluted.

The NAV of £189.5m at 31 January 2023 represents a total increase in NAV of £160.3m 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 8.7% in Group NAV after running costs, realisations, losses, distributions and corporation tax since flotation and 11.7% since 1990.

Investment performance

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

This equates to an increase in the portfolio valuation of 19.1% (2022: 14.7%).

The Group invested a total of £2.9m in equity in the portfolio during the year (2022: £8.0m). This mainly related to a follow-on investment of £2.8m in XPT in June 2022.

In addition, the Group provided £3.0m of loans (2022: £0.3m) during the year. £1.5m was provided to LEBC to fund an acquisition, together with £0.7m to Agri Services, £0.5m to Denison and £0.3m to LPH as working capital to further develop the business.

There were £8.2m of investment realisations during the year (2022: £8.8m). £8.1m was realised from the disposal of the Group's holding in Summa Insurance Brokerage S.L. ("Summa") which completed in March 2022, together with additional consideration received from the sale of MB of £0.1m (sold in September 2021).

£2.0m of loan repayments were received by the Group from investee companies (2022: £8.1m) of which £1.5m was received from Summa repaying their outstanding loan in full on disposal, together with £0.2m from Fiducia and £0.2m from LPH and £0.1m from others.

Operating income

Net gains from investments were £27.5m (2022: £20.3m), a 35.5% increase over the previous year. This included £0.2m in realised gains from the sale of the Group's interests (2022: £2.9m in realised gains and £1.1m in loan repayments where the loan had previously been provided against in full). £27.3m related to the revaluation of the investment portfolio at 31 January 2023 (2022: £16.2m).

Overall, income from investments increased by £0.8m, or 20.7% to £4.9m (2022: £4.1m). The increase was primarily due to receiving significantly greater dividend income demonstrating the strong underlying performance within the portfolio.

Operating expenses

Operating expenses increased by £0.1m, or 2.5% during the year to £4.9m (2022: £4.8m). Expenses continued to be closely managed to minimise the impact of inflation.

Profit on ordinary activities

The consolidated profit on ordinary activities before taxation increased by £8.2m, or 42.3% to £27.6m (2022: £19.4m).

The consolidated profit on ordinary activities after taxation increased by £6.4m, or 36.4% to £23.8m (2022: £17.5m).

The Group's strategy is to cover expenses from the portfolio yield. On an underlying basis, including treasury returns and realised gains in cash, but excluding unrealised investment activity (unrealised gains on equity and provision against loans receivable from investee companies), this was achieved with a pre-tax profit of £0.3m for the year (2022: £3.2m). The prior year included £2.9m of realised gains on disposal of investments.

Liquidity

Cash and treasury funds at 31 January 2023 were £12.1m (2022: £8.6m).

Since the year-end the Group completed a new investment in Verve for £1.0m in a combination of equity and debt, and has provided net £4.6m in loans as follow-on funding into the existing portfolio, notably £4.9m to XPT (of which £0.8m has since been repaid) and £0.5m to CBC. In addition, the Group paid a dividend of £0.5m in February 2023 and has bought back £0.3m in shares. Currently the Group has cash funds of £5.2m adjusting for working capital.

As announced on 23 May 2023, the Group has agreed to sell its 18.7% shareholding in Kentro for £51.5m, subject to regulatory approval. Net of adjustments, this is expected to increase funds available to £55.2m, prior to any distributions.

Dividend

The Group paid a dividend of £1.0m (or 2.78p per share) during the year, an increase of 11% over the preceding year (2022: £0.9m or 2.44p per share). The dividend payment reflected the Group's strategy to strike a balance between investing in new opportunities alongside the existing portfolio, whilst also rewarding Shareholders for their continuing loyalty. As announced previously, the Group proposed a dividend of £1.0m (or 2.78p per share) in respect of the year to 31 January 2023, of which £0.5m was paid in February 2023 and £0.5m is payable in July 2023 subject to shareholder approval.

Total shareholder return for the year was therefore 14.4% (2022: 11.7%) including the dividend payment in July 2022 and the NAV increase.

Diluted NAV per share

The NAV per share at 31 January 2023 is 526.2p (2022: 462.7p). A long-term share incentive plan for certain directors and employees of the Group matured on 12 June 2021, with 1,461,302 shares being held within an Employee Benefit Trust. Whilst they remain within the Trust they do not have voting or dividend rights. However, if the shares are sold in the future in excess of 281 pence per share (noting that the participants only benefit from a sale in excess of 312.6p per share), the Group would be entitled to receive £4,106,259 and these shares would then become entitled to voting and dividend rights and therefore these shares would become dilutive. Overall, this would therefore dilute the NAV per share as at 31 January 2023 to 516.8p (2022: 455.6p).

Jonathan Newman

Group Finance Director

12 June 2023

Forward-looking statements:

Certain statements in this announcement are forward-looking statements. In some cases, these forward looking statements can be identified by the use of forward looking terminology including the terms "anticipate", "believe", "intend", "estimate", "expect", "may", "will", "seek", "continue", "aim", "target", "projected", "plan", "goal", "achieve" and words of similar meaning or in each case, their negative, or other variations or comparable terminology. Forward-looking statements are based on current expectations and assumptions and are subject to a number of known and unknown risks, uncertainties and other important factors that could cause results or events to differ materially from what is expressed or implied by those statements. Many factors may cause actual results, performance or achievements of B.P. Marsh to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. Important factors that could cause actual results, performance or achievements of B.P. Marsh to differ materially from the expectations of B.P. Marsh, include, among other things, general business and economic conditions globally, industry trends, competition, changes in government and changes in regulation and policy, changes in its business strategy, political and economic uncertainty and other factors. As such, undue reliance should not be placed on forward-looking statements. Any forward-looking statement is based on information available to B.P. Marsh as of the date of the statement. All written or oral forward-looking statements attributable to B.P. Marsh are qualified by this caution. Other than in accordance with legal and regulatory obligations, B.P. Marsh undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise. Nothing in this announcement should be regarded as a profit forecast.

Investments

As at 31 January 2023 the Group's equity interests were as follows:

Ag Guard PTY Limited

(www.agguard.com.au)

Ag Guard is a Managing General Agency, which provides insurance to the agricultural sector, based in Sydney, Australia. The Group holds its investment through Ag Guard's Parent Company, Agri Services Company PTY Limited.

Date of investment: July 2019

Equity stake: 41.0%

31 January 2023 valuation: £5,494,000

Asia Reinsurance Brokers (Pte) Limited

(www.arbrokers.asia)

ARB is an independent specialist reinsurance and insurance risk solutions provider headquartered in Singapore. 

Date of investment: April 2016

Equity stake: 25.0%

31 January 2023 valuation: £0

ATC Insurance Solutions PTY Limited

(www.atcis.com.au)

ATC is a Managing General Agency and Lloyd's Coverholder, specialising in accident & health, construction & engineering, trade pack, motor and sports insurance headquartered in Melbourne, Australia.

Date of investment: July 2018

Equity stake: 25.6%

31 January 2023 valuation: £17,049,000

CBC UK Limited

(www.cbcinsurance.co.uk)

CBC is a Retail and Wholesale Lloyd's Insurance Broker, offering a wide range of services to commercial and personal clients as well as broking solutions to intermediaries. The Group holds its investment in CBC through CBC's parent company, Paladin Holdings Limited.

Date of investment: February 2017

Equity stake: 47.1%

31 January 2023 valuation: £19,180,000

Criterion Underwriting (Pte) Limited

Criterion was established to provide specialist insurance products to a variety of clients in the cyber, financial lines and marine sectors in Far East Asia, based in Singapore.

Date of investment: July 2018

Equity stake: 29.4%

31 January 2023 valuation: £0

Denison and Partners Limited

(www.denisonpartners.com)

Denison and Partners is a start-up London-based Lloyd's Insurance Broker delivering (re)insurance delegated authority solutions and services to MGA's, Coverholders and (re)insurers.

Date of investment: March 2022

Equity stake: 40%

31 January 2023 valuation: £132,000

The Fiducia MGA Company Limited

(www.fiduciamga.co.uk)

Fiducia is a UK marine cargo Underwriting Agency and Lloyd's Coverholder which specialises in the provision of insurance solutions across a number of marine risks including, cargo, transit liability, engineering and terrorism Insurance.

Date of investment: November 2016

Equity stake: 35.2%

31 January 2023 valuation: £4,223,000

LEBC Holdings Limited

(www.lebc-group.com)

LEBC is an Independent Financial Advisory company providing services to individuals, corporates and partnerships, principally in employee benefits, investment and life product areas.

Date of investment: April 2007

Equity stake: 59.3%

31 January 2023 valuation: £15,947,000

Lilley Plummer Risks Limited

(www.lprisks.co.uk)

Lilley Plummer Risks is a specialist marine Lloyd's broker that provides products across the marine insurance market. The Group holds its investment in Lilley Plummer Risks through its holding company Lilley Plummer Holdings Limited.

Date of investment: October 2019

Equity stake: 30.0%

31 January 2023 valuation: £7,700,000

Kentro Capital Limited

(www.kentrocapital.com)

Kentro is an independent Managing General Agency and Broker specialising in the provision of directors & officers, professional indemnity, financial institutions, accident & health, trade credit, political risks insurance, surety, bond and latent defect insurance, both in the UK and globally.

Date of investment: August 2014

Equity stake: 19.0%

31 January 2023 valuation: £51,522,000

Sage Program Underwriters, Inc.

(www.sageuw.com)

Sage provides specialist insurance products to niche industries, initially in the inland delivery and field sport sectors based in Bend, Oregon.

Date of Investment: June 2020

Equity Stake: 30.0%

31 January 2023 Valuation: £1,630,000

Stewart Specialty Risk Underwriting Ltd

(www.ssru.ca)

SSRU is a Managing General Agency, providing insurance solutions to a wide array of clients in the construction, manufacturing, onshore energy, public entity and transportation sectors based in Toronto, Canada.

Date of investment: January 2017

Equity stake: 30.0%

31 January 2023 valuation: £11,000,000

Sterling Insurance PTY Limited

(www.sterlinginsurance.com.au)

Sterling is a specialist Underwriting Agency offering a range of insurance solutions within the Liability sector, specialising in niche markets including mining, construction and demolition based in Sydney Australia. The Group holds its investment in Sterling via a joint venture with Besso Insurance Group Limited, Neutral Bay Investments Limited.

Date of investment: June 2013

Equity stake: 19.7%

31 January 2023 valuation: £3,441,000

XPT Group LLC

(www.xptspecialty.com)

XPT is a wholesale insurance broking and Underwriting Agency platform across the U.S. Specialty Insurance Sector operating from many locations in the United States of America.

Date of investment: June 2017

Equity stake: 28.5%

31 January 2023 valuation: £34,143,000

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

Consolidated Financial Statements

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

FOR THE YEAR ENDED 31ST JANUARY 2023

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

CONSOLIDATED AND PARENT COMPANY STATEMENTS OF FINANCIAL POSITION

31ST JANUARY 2023

(Company Number: 05674962)

The Financial Statements were approved by the Board of Directors and authorised for issue on 12th June 2023

and signed on its behalf by:

B.P. Marsh & J.S. Newman

CONSOLIDATED STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED 31ST JANUARY 2023

All differences between the amounts stated in the Consolidated Statement of Cash Flows and the Consolidated Statement of Comprehensive Income are attributed to non-cash movements.

PARENT COMPANY STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED 31ST JANUARY 2023

CONSOLIDATED AND PARENT COMPANY STATEMENTS OF CHANGES IN EQUITY

FOR THE YEAR ENDED 31ST JANUARY 2023

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 2023

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 2023 comprise the financial statements of the Parent Company and its consolidated subsidiaries (collectively "the Group").

Basis of preparation of financial statements

These consolidated financial statements have been prepared in accordance with UK-adopted international accounting standards, and in accordance with the Companies Act 2006.

The consolidated financial statements are presented in sterling, the functional currency of the Group, rounded to the nearest thousand pounds (£'000) except where otherwise indicated.

The preparation of financial statements in conformity with UK-adopted international accounting standards requires management to make judgments, estimates and assumptions that affect the application of policies and reported amounts of assets and liabilities, income and expenses. The estimates and associated assumptions are based on historical experience and various other factors that are believed to be reasonable in the circumstances, the results of which form the basis of judgements about the carrying amounts of assets and liabilities. Actual results may differ from those amounts. 

In the process of applying the Group's accounting policies, management has made the following judgments, which have the most significant effect on the amounts recognised in the financial statements:

Assessment as an investment entity

Entities that meet the definition of an investment entity within IFRS 10: Consolidated Financial Statements ("IFRS 10") are required to account for their investments in controlled entities, as well as investments in associates at fair value through profit or loss. Subsidiaries that provide investment related services or engage in permitted investment related activities with investees that relate to the parent investment entity's investment activities continue to be consolidated in the Group results. The criteria which define an investment entity are currently as follows:

a) an entity that obtains funds from one or more investors for the purpose of providing those investors with investment services;

b) an entity that commits to its investors that its business purpose is to invest funds solely for returns from capital appreciation, investment income or both; and

c) an entity that measures and evaluates the performance of substantially all of its investments on a fair value basis.

The Group's annual and interim consolidated financial statements clearly state its objective of investing directly into portfolio investments and providing investment management services to investors for the purpose of generating returns in the form of investment income and capital appreciation. The Group has always reported its investment in portfolio investments at fair value. It also produces reports for investors of the funds it manages and its internal management report on a fair value basis. The exit strategy for all investments held by the Group is assessed, initially, at the time of the first investment and this is documented in the investment paper submitted to the Board for approval.

The Board has also concluded that the Company meets the additional characteristics of an investment entity, in that it has more than one investment; the investments are predominantly in the form of equities and similar securities; it has more than one investor and its investors are not related parties. The Board has concluded that B.P. Marsh & Partners Plc and its three trading subsidiaries, B.P. Marsh & Company Limited, Marsh Insurance Holdings Limited and B.P. Marsh (North America) Limited, which provide investment related services on behalf of B.P. Marsh & Partners Plc, all meet the definition of an investment entity. These conclusions will be reassessed on an annual basis for changes to any of these criteria or characteristics.

Application and significant judgments

When it is established that a parent company is an investment entity, its subsidiaries are measured at fair value through profit or loss. However, if an investment entity has subsidiaries that provide services that relate to the investment entity's investment activities, the exception to the Amendment of IFRS 10 is not applicable as in this case, the parent investment entity still consolidates the results of its subsidiaries. Therefore, the results of B.P. Marsh & Company Limited, Marsh Insurance Holdings Limited and B.P. Marsh (North America) Limited continue to be consolidated into its Group financial statements for the year.

The most significant estimates relate to the fair valuation of the equity investment portfolio as detailed in Note 12 to the Financial Statements. The valuation methodology for the investment portfolio is detailed below. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods.

The accounting policies set out below have been applied consistently to all periods presented in these consolidated financial statements.

New Accounting Standards

There are no new standards that have been issued, but are not yet effective for the year ended 31st January 2023, 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 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 LEBC. Instead, the investment in LEBC is valued at fair value through profit or loss.

(ii) Associates

Associates are those entities in which the Group has significant influence, but not control, over the financial and operating policies. Investments that are held as part of the Group's investment portfolio are carried in the Consolidated Statement of Financial Position at fair value even though the Group may have significant influence over those companies.

Business combinations

The results of subsidiary undertakings are included in the consolidated financial statements from the date that control commences until the date that control ceases. Control exists where the Group has the power to govern the financial and operating policies of the entity so as to obtain benefits from its activities. Accounting policies of the subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.

All business combinations are accounted for by using the acquisition accounting method. This involves recognising identifiable assets and liabilities of the acquired business at fair value. Goodwill represents the excess of the fair value of the purchase consideration for the interests in subsidiary undertakings over the fair value to the Group of the net assets and any contingent liabilities acquired. The one exception to the use of the acquisition accounting method was in 2006 when B.P. Marsh & Partners Plc became the legal parent company of B.P. Marsh & Company Limited in a share for share exchange transaction. This was accounted for as a reverse acquisition, such that no goodwill arose, and a merger reserve was created reflecting the difference between the book value of the shares issued by B.P. Marsh & Partners Plc as consideration for the acquisition of the share capital of B.P. Marsh & Company Limited. This compliance with IFRS 3: Business Combinations ("IFRS 3") also represented a departure from the Companies Act.

Intra-group balances and any unrealised gains and losses or income and expenses arising from intra-group transactions are eliminated in preparing the consolidated financial statements.

Associates are those entities in which the Group has significant influence, but not control, over the financial and operating policies. Investments that are held as part of the Group's investment portfolio are carried in the Consolidated Statement of Financial Position at fair value even though the Group may have significant influence over those companies. This treatment is permitted by IAS 28: Investment in Associates ("IAS 28"), which requires investments held by venture capital organisations to be excluded from its scope where those investments are designated, upon initial recognition, as at fair value through profit or loss and accounted for in accordance with IAS 39: Financial Instruments ("IAS 39"), with changes in fair value recognised in the profit or loss in the period of the change. The Group has no interests in associates through which it carries on its business.

No Statement of Comprehensive Income is prepared for the Company, as permitted by Section 408 of the Companies Act 2006. The Company made a profit for the year of £23,843,539, prior to a dividend distribution of £1,001,435 (2022: profit of £17,491,719 prior to a dividend distribution of £878,282).

Employee services settled in equity instruments

The Group has entered into a joint share ownership plan ("JSOP") with certain employees and directors.

On 12th June 2021 (the "vesting date") the performance criteria was met for 1,206,888 of 1,461,302 shares held under joint share ownership arrangements within the Employee Benefit Trust, after which the members of the scheme became joint beneficial owners of the shares and became entitled to any gain on sale of the shares in excess of 312.6 pence per share. Whilst these shares remain within the Employee Benefit Trust, they do not have voting or dividend rights. However, if the shares are sold from the Employee Benefit Trust in the future in excess of 281 pence per share, the Group would be entitled to receive £4,106,259 in total. These shares would then, post-sale, have voting and dividend rights attached, such that they would become fully dilutive for the Group.

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.

Under the rules of the SIP, eligible employees can each be granted up to £3,600 worth of ordinary shares ("Free Shares") by the SIP Trust in each tax year. The number of shares granted is dependent on the share price at the date of grant. In addition, all eligible employees have been invited to take up the opportunity to acquire up to £1,800 worth of ordinary shares ("Partnership Shares") in each tax year and for every Partnership Share that an employee acquires, the SIP Trust will offer two ordinary shares in the Company ("Matching Shares") up to a total of £3,600 worth of shares. The Free and Matching Shares are subject to a one year forfeiture period, however the awards are not subject to any vesting conditions, hence the related expenses are recognised when the awards are made and are apportioned over the forfeiture period.

The fair value of the services received is measured by reference to the listed share price of the Parent Company's shares listed on the AIM on the date of award of the free and matching shares to the employee.

Investments - equity portfolio

All equity portfolio investments are designated as "fair value through profit or loss" assets and are initially recognised at the fair value of the consideration. They are measured at subsequent reporting dates at fair value.

The Board conducts the valuations of equity portfolio investments. In valuing equity portfolio investments, the Board applies guidelines issued by the International Private Equity and Venture Capital Valuation Committee ("IPEVCV Guidelines"). The following valuation methodologies have been used in reaching the fair value of equity portfolio investments, some of which are in early stage companies:

a) at cost, unless there has been a significant round of new equity finance in which case the investment is valued at the price paid by an independent third party. Where subsequent events or changes to circumstances indicate that an impairment may have occurred, the carrying value is reduced to reflect the estimated extent of impairment;

b) by reference to underlying funds under management;

c) by applying appropriate multiples to the earnings and revenues and/or premiums of the investee company; or

d) by reference to expected future cash flow from the investment where a realisation or flotation is imminent.

Both realised and unrealised gains and losses arising from changes in fair value are taken to the Consolidated Statement of Comprehensive Income for the year. In the Consolidated Statement of Financial Position the unrealised gains and losses arising from changes in fair value are shown within a "fair value reserve" separate from retained earnings. Transaction costs on acquisition or disposal of equity portfolio investments are expensed in the Consolidated Statement of Comprehensive Income.

Equity portfolio investments are treated as 'Non-current Assets' within the Consolidated Statement of Financial Position unless the directors have committed to a plan to sell the investment and an active programme to locate a buyer and complete the plan has been initiated. Where such a commitment exists, and if the carrying amount of the equity portfolio investment will be recovered principally through a sale transaction rather than through continuing use, the investment is classified as an 'Investments - Assets held for sale' under 'Current Assets' within the Consolidated Statement of Financial Position.

Income from equity portfolio investments

Income from equity portfolio investments comprises:

a) gross interest from loans, which is taken to the Consolidated Statement of Comprehensive Income on an accruals basis;

b) dividends from equity investments are recognised in the Consolidated Statement of Comprehensive Income when the shareholders rights to receive payment have been established; and

c) advisory fees from management services provided to investee companies, which are recognised on an accruals basis in accordance with the substance of the relevant investment advisory agreement.

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 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 lessees to recognise a lease liability, representing the present value of the obligation to make lease payments, and a related right of use ("ROU") asset. The lease liability is calculated based on expected future lease payments, discounted using the relevant incremental borrowing rate. An incremental borrowing rate of 5% was used to discount the future lease payments when measuring the lease liability on adoption of IFRS 16.

The ROU asset is recognised at cost less accumulated depreciation and impairment losses, with depreciation charged on a straight-line basis over the life of the lease. In determining the value of the ROU asset and lease liabilities, the Group considers whether any leases contain lease extensions or termination options that the Group is reasonably certain to exercise.

Foreign currencies

Monetary assets and liabilities denominated in foreign currencies at the reporting period end are translated at the exchange rate ruling at the reporting period end.

Transactions in foreign currencies are translated into sterling at the foreign exchange rate ruling at the date of the transaction.

Exchange gains and losses are recognised in the Consolidated Statement of Comprehensive Income.

Income taxes

The tax credit or expense represents the sum of the tax currently recoverable or payable and any deferred tax. The tax currently recoverable or payable is based on the estimated taxable profit for the year. Taxable profit differs from net profit as reported in the Consolidated Statement of Comprehensive Income because it excludes items of income or expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Group's receivable or liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the date of the Consolidated Statement of Financial Position.

Deferred tax is the tax expected to be payable or recoverable on differences between the carrying amounts of assets and of liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and it is accounted for using the liability method. Deferred tax liabilities are generally recognised for all taxable temporary differences and deferred tax assets are recognised to the extent that it is probable that taxable profits will be available against which deductible temporary differences can be utilised. Such assets and liabilities are not recognised if the temporary differences arise from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit.

Deferred tax liabilities are recognised for taxable temporary differences arising on investments in subsidiaries, except where the Group is able to control the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future.

The carrying amount of deferred tax assets is reviewed at each date of the Consolidated Statement of Financial Position and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered.

Deferred tax is calculated at the tax rates that are expected to apply in the period when the liability is settled or the asset realised. Deferred tax is charged or credited to the Consolidated Statement of Comprehensive Income, except when it relates to items charged or credited directly to equity, in which case the deferred tax is also dealt with in equity.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the Group intends to settle its current assets and liabilities on a net basis.

Pension costs

The Group operates a defined contribution scheme for some of its employees. The contributions payable to the scheme during the period are charged to the Consolidated Statement of Comprehensive Income.

Financial assets and liabilities

Financial instruments are recognised in the Consolidated Statement of Financial Position when the Group becomes party to the contractual provisions of the instrument. De-recognition occurs when rights to cash flows from a financial asset expire, or when a liability is extinguished.

Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market. They are included in current assets, except for maturities greater than 12 months after the reporting period which are classified as non-current assets. They are stated at their cost less impairment losses.

Loans and borrowings

All loans and borrowings are initially recognised at the fair value of the consideration received net of issue costs associated with the borrowings. After initial recognition, these are subsequently measured at

amortised cost using the effective interest method, which is the rate that exactly discounts the estimated future cash flows through the expected life of the liabilities. Amortised cost is calculated by taking into account any issue costs and any discount or premium on settlement.

Trade and other receivables

Trade and other receivables in the Consolidated Statement of Financial Position are initially measured at original invoice amount and subsequently measured after deducting any provision for impairment.

Cash and cash equivalents

Cash and cash equivalents in the Consolidated Statement of Financial Position comprise cash at bank and in hand and short-term deposits with an original maturity of three months or less. For the purposes of the Consolidated Statement of Cash Flows, cash and cash equivalents comprise cash and short-term deposits as defined above and other short-term highly liquid investments that are readily convertible into cash and are subject to insignificant risk of changes in value, net of bank overdrafts.

Trade and other payables

Trade and other payables are stated based on the amounts which are considered to be payable in respect of goods or services received up to the date of the Consolidated Statement of Financial Position.

2. SEGMENTAL REPORTING

The Group operates in one business segment, provision of consultancy services to, as well as making and trading investments in, financial services businesses.

Under IFRS 8: Operating Segments ("IFRS 8") the Group identifies its reportable operating segments based on the geographical location in which each of its investments is incorporated and primarily operates. For management purposes, the Group is organised and reports its performance by two geographic segments: UK and Non-UK.

If material to the Group overall (where the segment revenues, reported profit or loss or combined assets exceed the quantitative thresholds prescribed by IFRS 8), the segment information is reported separately.

The Group allocates revenues, expenses, assets and liabilities to the operating segment where directly attributable to that segment. All indirect items are apportioned based on the percentage proportion of revenue that the operating segment contributes to the total Group revenue (excluding any realised and unrealised gains and losses on the Group's current and non-current investments).

Each reportable segment derives its revenues from three main sources from equity portfolio investments as described in further detail in Note 1 under 'Income from equity portfolio investments' and also from treasury portfolio investments as described in Note 1 under 'Income from treasury portfolio investments'.

All reportable segments derive their revenues entirely from external clients and there are no inter-segment sales.

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

1There are no disclosures for Kentro Capital Limited and Walsingham Motor Insurance Limited ("Walsingham") in the current year as the income derived from these investee companies either did not exceed the 10% threshold prescribed by IFRS 8, or, in the case of Walsingham, had been sold prior to the start of the current year. There is also no disclosure shown for Paladin Holdings Limited and Lilley Plummer Holdings Limited in the prior year as the income derived from these investee companies did not exceed the 10% threshold prescribed by IFRS 8 in that year.

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 2023 and 2022 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: