Interim Results For the period ending 31 July 2017 Dan Topping , Chief Investment Officer Camilla Kenyon , Director & Head of Investor Relations Jonathan Newman , Group Finance Director 17 October 2017 1
Overview 25+ Years strong Specialist Robust balance sheet Invested in 46 companies PE/VC investor in Financial Services intermediaries £22.0 million cash as at 31 July 2017 and realised 32 since 1990 Industry knowledge Up to £5m initial investment Long-term view Significant specialist experience and deep sector For minority equity positions (20-40%) Partnership approach to investment and mutually knowledge acquired across several decades agreed exit route, maximising value 2
2017 Summary Period Ending 31 July 2017 • As at 31 July 2017 – 14 investments in • Equity Portfolio increase of 24.6% portfolio with a NAV of £88.8m (31 July since 31 January 2017 ( 45.5% between • Dividend of 3.76p per share declared 2016 £73.8m ), with an average holding 31 July 2016 to 31 July 2017) for the year ended 31 January 2017 period of 3.4 years and paid in July 2017 • The Board intends to at least • Total Shareholder Return of 12.8% for period • £22.0m cash and treasury funds maintain a dividend of 3.76p per to 31 July 2017 ( 5.8% for the period to 31 July at 31 July 2017 share for the current and next 2016) financial year 250 230 210 The graph usually includes comparative data to the 190 FTSE AIM All Share and FTSE AIM Financials, however 170 following new restrictions 150 on how the data is used, it is no longer possible to 130 include these comparisons 110 90 70 50 01/02/2010 01/02/2011 01/02/2012 01/02/2013 01/02/2014 01/02/2015 01/02/2016 01/02/2017 Share Price Performance 31 January 2010 to 31 July 2017 3
Performance: Net Asset Value (NAV) 100 2.50 2.32 90 2.06 1.93 80 2.00 Year ended 1.47 70 Six months ended 1.40 Net Asset Value (£m) 1.36 1.42 60 1.50 Share Price (£) 1.25 50 0.93 40 1.00 30 20 0.50 79.68 40.61 44.17 55.46 58.92 62.97 70.81 73.85 88.80 * NB: The valuation at 10 31 January 2007 includes £10.1m net 0 0.00 proceeds raised on AIM 31 Jan 2007* 31-Jan-10 31-Jan-13 31-Jan-14 31-Jan-15 31-Jan-16 31-Jul-16 31-Jan-17 31-Jul-17 Net Asset Value (£m) Share Price (£) 4
Dividends The Group’s historic dividend payments are shown below. Total shareholder return in the period to 31 July 2017 is 12.8% • £1,200,000 £2.50 £1,100,000 £1,100,000 £1,100,000 £1,000,000 £2.06 £1,000,000 Paid £2.00 £800,000 £800,000 Intended £800,000 £1.47 £1.50 £1.40 Share Price £1.35 £1.25 £600,000 £0.95 £0.93 £1.00 £365,000 £400,000 £290,000 £290,000 £0.50 £200,000 £0 £0.00 Jan-11 Jan-12 Jan-13 Jan-14 Jan-15 Jan-16 Jan-17 Jan-18 Jan-19 Year ended Aggregate dividend £4,645,000 • It is the Board’s intention to continue to pay dividends when circumstances allow, and it aims to at least maintain 3.76p per share for the financial years to • 31.01.18 and 31.01.19 The Board aims to strike a balance between rewarding shareholders with a sustainable yield and investing cash to deliver long-term capital growth • 5
Investments Fair market Cost of equity Movement in Movement in value Year of initial investment Period to 31 July Period to 31 July Investment Sector Jurisdiction Equity investment 31 July 2017 (£’000) 2017 (£’000) 2017 (£’000) Summa Insurance Broking Spain 6,096 5,972 77.2% 2005 1,132 23.4% ARB Insurance Broking Singapore 1,268 1,340 20.0% 2016 (13) (1.0)% Bastion Insurance Broking South Africa 100 100 35.0% 2014 - - CBC Insurance Broking UK 4 693 35.0% 2017 690 19,700% XPT Insurance Group U.S. 4,790 4,551 35.0% 2017 (239) (5.0)% Nexus MGA UK 8,576 19,381 18.1% 2014 5,466 39.3% Sterling Australia 1,945 2,368 19.7% 2013 (10) (0.4)% MGA PLUM South Africa 1,220 510 42.5% 2015 (1,336) (72.4)% MGA MB Australia 480 1,655 40.0% 2013 70 4.4% MGA Walsingham UK 600 412 40.5% 2013 212 106.0% MGA Fiducia UK 75 75 25.0% 2016 - - MGA Bulwark South Africa - - 35.0% 2015 - - MGA SSRU Canada - - 30.0% 2017 - - MGA LEBC UK 12,225 25,925 60.9% 2007 5,729 28.4% IFA Total 37,379 62,982 11,701 MGA – Managing General Agent IFA – Independent Financial Adviser 6
Specific Activity New Investments in Period • Subscription for a 35% shareholding in XPT Group LLC • Acquisition of 35% of CBC UK Limited (“CBC”), in February 2017 via a thinly completed in June 2017, through its wholly owned subsidiary capitalised holding company, Paladin Holdings Limited company, B.P . Marsh (North America) Limited • Retail and Wholesale Lloyd's Insurance Broker, offering a wide range of services to commercial and personal clients, as well as broking solutions to • New York-based specialty lines insurance distribution company intermediaries • Plan to develop a wholesale insurance broking and underwriting • Initial consideration of £4m via equity and loans agency platform across the U.S. Specialty Insurance Sector • Year ending 31 December 2017, CBC forecasting revenue of £5.5m and • Initial investment of $6.0m via equity EBITDA of £0.6m • Management team led by Tom Ruggieri, ex-Swett & Crawford, • Andrew Wallas appointed as Chairman, with over 40 years of experience in Mark Smith, former president and CEO of Stewart Smith and the insurance industry Jeff Heath, the founder of the Heath Group • First acquisitions in the U.S. expected by the end of this year 7
Specific Activity within the Portfolio During the Period Acquired a further 17.84% in LEBC Holdings Limited in July 2017 for a total cash • consideration of £7.1m Following the purchase, shareholding in LEBC now at 60.88% , with the balance held by • Founder and CEO, Jack McVitie and LEBC Management Performance continues to be strong, boosted by investment in technology and success in • “LEBC is on an exciting growth targeting the at-retirement market trajectory, building on solid foundations. 30 September 2016 year-end results declaring a turnover of £15.4m and a trading profit of • £2.1m for the year “We are pleased to increase our shareholding and continue to work with management to grow the LEBC has adapted well following the FCA’s Retail Distribution Review, with turnover increasing • business, which we believe occupies a by 36% (from £11.3m ) and trading profit by 184% (from £0.74m ) since its introduction desirable position in the financial advisory market. ” LEBC announced on 3 October that its “bionic” advice service had passed the £1bn mark of • new clients’ assets invested. An increase of 100% in 9 months, with 37,000 clients using the Camilla Kenyon, service Director & LEBC Board Member 8
Specific Activity within the Portfolio During the Period Provision to Nexus of a £4m Loan Facility, as part of a wider debt fundraising exercise, to • undertake M&A activity Nexus secured £30m in loan facilities in total, with £26m provided via HPS Investment • Partners, the global investment firm Utilising these funds, alongside existing cash resources, Nexus has acquired Vectura • Underwriting, Equinox Global Limited and Zon Re Accident Reinsurance, with further M&A “B .P. Marsh is pleased to see this activity expected before the end of the year round of M&A activity concluded, having provided the Loan Facility, To date, Nexus have drawn down £18m of this £30m facility, £2m from the Group • alongside HPS Capital Partners, for these acquisitions to take place. Nexus’ pro forma EBITDA for 2017 would be c. £11m , including the three acquisitions noted • From a revenue and profitability above on a full year basis standpoint these acquisitions should prove to be transformational and we This performance represents a compound annual growth rate of approximately 62% in • look forward to integrating them into EBITDA since the Company’s original investment Nexus' existing business” Dan Topping, Chief Investment Officer & Nexus Board Member 9
Specific Activity New Investments Post Period • Acquisition of 30% of Mark Edward Partners LLC (“ MEP ”), completed in October 2017 • A specialty insurance broker offering a wide range of risk management services to both commercial and personal clients • Provides core insurance products in Financial & Liability, Property & Casualty, Personal Lines, Life Insurance, Cyber and Affinity Groups. Also has developed a number of unique product “We are delighted to be making this offerings investment in MEP, and I am looking forward to working alongside Mark • National U.S. firm with licenses to operate in all 50 states and offices in New York, Miami and Freitas and his Management Team to Los Angeles help them achieve their growth plan” • Founded in 2010 by Mark Freitas, its President & CEO, who has over 30 years of experience the insurance industry, having been President & Chief Operating Officer of Crystal & Dan Topping, Chief Investment Company Officer & B.P. Marsh Representative for MEP • The investment in MEP follows on from the investment in XPT in June 2017 and is pursuant to B.P . Marsh’s plan to increase its involvement in the U.S. insurance market 10 10
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