B.P. Marsh & Partners PLC (BPM) Earnings Call Transcript & Summary

Good afternoon, and welcome to the B.P. Marsh & Partners Plc Annual General Meeting. [Operator Instructions] The company may not be in a position to answer every question it receives during the meeting itself, however, all questions will be reviewed with responses published on the Investor Meet Company platform where it's appropriate to do so. I'd now like to hand you over to Group Finance Director, Jon Newman. Good afternoon, sir.

Good afternoon. I'd like to extend a warm welcome to all our shareholders and visitors to B.P. Marsh & Partners Plc Annual General Meeting 2022. Especially, I'd like to welcome all of our shareholders who are viewing the meeting electronically as well as those present in person today. I'm Jon Newman, the Group Finance Director, and I'm the Chair of this meeting. It's now just after 12 noon, and I declare the meeting formally open. I can confirm that we have a quorum, and I, therefore, declare the meeting open as [ set ]. Practicalities. Just a few things before turning to the formal part of the meeting, I'd just like to mention a few housekeeping points for those visitors and attending in person that fire exits located just out the door to the right at the end of the corridor. We do not expect there to be any fire alarm tests during the meeting. Please, can you make sure those in attendance here that your phones are off or switched to silent mode. I'm pleased to inform you that the meeting here today is being recorded and live streamed to shareholders and other stakeholders who cannot be present, can view it on the company's website and on the company's profile on Investor Meet Company in due course. By way of reminder, shareholders who are viewing the AGM online, who will not be participating in the voting of resolutions, will hopefully have submitted their votes by proxy in advance of the meeting. I would like to introduce Dan Topping, our Chief Investment Officer. I would also like to introduce off camera, Sinead O'Haire, our Company Secretary. So ladies and gentlemen, I would now like to start the formal proceedings of this Annual General Meeting. The notice of the Annual General Meeting, together with the explanatory notes, was posted to shareholders on the 1st of July 2022. Accordingly, the requisite notice of the meeting has been given. I propose, therefore, that with your consent, the notice of the meeting should be taken as read. Is that all agreed? [Voting]

Thank you. Voting procedures. To accurately reflect the views of shareholders of the company, voting today will be done by way of a poll on each of the resolutions put to the meeting. This is seen as best practice as it gives all shareholders the opportunity to participate in the decision-making of the company and have their votes recorded in proportion to the number of shares that they hold. I'm appointing Equiniti Group, the company's registrar, to act as scrutineers. A summary of each resolution will be shown on the screen together with breakdown of proxy votes we've received thus far before I put each resolution to the vote. As it will take some time to complete the poll procedure, the final results of the voting, including the proxy votes on each of the resolutions, will be announced through our regulatory information service and published on our website as soon as reasonably practical. You have 3 options for each resolution. You can vote for the proposed resolution, against the proposed resolution or you may withhold your vote. A vote withheld is not a vote in law and will not be counted in the calculation of the proportion of the votes for or against the resolution. Will you please complete your poll card by ticking the appropriate box next to the relevant resolution depending on how you wish to cast your vote. Once all votes have been taken on the resolutions, please would you sign the poll card and hand your completed card to Sinead O'Haire. Should you require any further assistance, our registrars or Sinead O'Haire will be happy to assist you. With your permission, ladies and gentlemen, I should like to proceed by dealing with the formal business of the meeting at the outset before moving on to any questions, unless anyone has any questions specifically relating to the resolution, in which case, you can [indiscernible] now. Otherwise, we would deal with them in due course. Does anyone have any specific questions? Okay. So resolutions. We will now proceed to vote on the resolutions which I will formally propose to the meeting. The full text of each of the resolutions is set out in the notice of the meeting and a copy of which you will have already received. Resolutions 1 through to 8 are proposed as ordinary resolutions and require a simple majority to be passed. Resolutions 9 and 10 are proposed as special resolutions which, to be passed, require a majority of 75% voting in favor of the resolution. So resolution 1. The first resolution is to receive and adopt the annual report and accounts for the year ended 31st of January 2022. I now propose that the annual report and accounts for the year ended 31st of January 2022 be received and adopted, together with the report of the directors and the report of the auditors. You will see on the screen, we have had 15,945,089 votes in favor and 50 votes against. As I explained to those attending today, please could you tick the appropriate box in the poll cards to vote for the resolution or against the resolution or you may withhold your votes. These instructions apply to all the resolutions, and therefore, these instructions won't be repeated. Thank you. [Voting]

So I now declare the poll closed. And the provisional results are shown on the slide and the formal results will be declared after the meeting. Resolution 2. The second resolution is to approve the report of the Remuneration Committee. I now propose to receive and approve the report of the Remuneration Committee set out on Pages 34 to 37 of the company's report and accounts for the financial year ended 31st of January 2022. As you can see on the slide, there were 15,933,539 proxy votes in favor, 1,018 votes against. [Voting]

I now declare the poll closed. Resolution 3. The third item on the agenda is to approve the final dividend of 2.78p per ordinary share, as recommended by the directors. If approved, the recommended final dividend will be payable on 29th of July 2022 to all shareholders on the registered members to the close of business on the record date of 1st July 2022. I, therefore, propose to approve the final dividend 2.78p per ordinary share. As you can see on screen, there were 15,946,057 votes in favor on the proxy votes. [Voting]

And therefore, if everyone has now voted, I declare the poll closed. Resolution 4. The fourth item on the agenda is the reappointment of myself as a director of the company, and accordingly, I'll hand over to my colleague, Dan Topping, to propose this resolution.

I propose to reelect Mr. Jonathan Newman as a director of the company. [Voting]

I declare the poll closed. Jon, back to you.

Thank you. Still here. Good. Resolution 5. The fifth item on the agenda is the reappointment of Mr. Pankaj Lakhani, who's a director of the company, and I therefore propose to reelect Mr. Pankaj Lakhani as director of the company. As you can see on screen, there were 15,945,039 votes in favor and 100 votes against. [Voting]

I now declare the poll closed. Resolution 6. The sixth item on the agenda is to reappoint Rawlinson & Hunter Audit LLP until the conclusion of the next general meeting before which the accounts are made. I, therefore, propose to reappoint Rawlinson & Hunter Audit LLP as auditors of the company until the conclusion of the next general meeting before which accounts are made. As you can see on the slide, there were 15,943,268 proxy votes in favor, 1,871 votes against. [Voting]

I now declare the poll closed. Resolution 6 -- sorry, 7, apologies. The seventh item on the agenda is to authorize the directors of the company to determine the remuneration of the auditors of the company. I, therefore, propose to authorize the directors to determine the remuneration of Rawlinson & Hunter Audit LLP. Will you please vote now? [Voting]

I can confirm, as per the proxy votes, 15,945,089 votes were in favor, and 50 votes against. [Voting]

I will now declare the poll closed. Turning to Resolution 8. The eighth item on the agenda is the granting of authority to allow the company to allot ordinary shares or grant rights to subscribe for or to convert any security into shares in the company up to a nominal value of GBP 1,248,548.60. I, therefore, propose to authorize the directors pursuant to and in accordance with Section 551 of the Companies Act 2006, otherwise known as the Act, to allot ordinary shares or grant rights to subscribe for or to convert any security into shares in the company up to a nominal amount of GBP 1,248,548.60. As you can see on the screen, we've had 15,945,089 votes cost in favor and the proxy votes of 50 cast against. [Voting]

I declare the poll closed. Resolution 9. The ninth item on the agenda is the granting of authority to allow the company to allot equity securities wholly for cash pursuant to the authority given in Resolution 8, which is proposed as a special resolution. I, therefore, propose to authorize and empower the directors, subject to the passing of Resolution 8 above, in accordance with the Companies Act to allot equity securities either in connection with a preemptive offer, or if not, up to an aggregate nominal amount of GBP 187,330 disregarding preemption rights, such power to expire at the conclusion of the next Annual General Meeting of the company or on 31st of July 2023, whichever is earlier. Would you please vote now? [Voting]

I can confirm, we have 15,921,106 proxy votes in favor, and 23,446 votes against. I now declare the poll closed. Resolution 10. The tenth item on the agenda is the granting of authority to allow the company to buy back up to 3,746,600 of the company shares which is proposed as a special resolution. I, therefore, propose to authorize the company to make market purchases of ordinary shares in the company in such manner and on such terms as the directors of the company may from time to time determine. And where such shares are held as treasury shares, the company may use them for the purposes set out in Sections 727, 729 of the Act, including for the purpose of employee share schemes, provided that: A, the maximum number of ordinary shares hereby authorized to be purchased is 3,746,600; b, the minimum purchase price exclusive of the expenses which may be paid for any ordinary share, 10p being the nominal value of an ordinary share; and c, the maximum purchase price should not be more than the higher 5% above the average range of middle market quotations for an ordinary share for the 5 business days immediately preceding the day on which the ordinary share is purchased and the amount stipulated by Article 5(1) of the Buyback and Stabilization Regulation 2003; and d, this authority shall expire on the conclusion of the next Annual General Meeting of the company following the passing of this resolution, or if earlier, at the close of business on 31st of July 2023. I can confirm, as you can see on the screen, there were 15,941,432 proxy votes in favor and 125 votes against. Please vote now. [Voting]

And I now declare the poll closed. And now we move on to the Q&As.

Questions will be moderated before being sent to me as the Chair. This is to avoid repetition and to ensure the smooth running of the meeting. If multiple questions on the same topic are received, I may choose to provide a single answer to address member queries on the same topic. Before asking your question, please give your name, state whether you are a shareholder, proxy or corporate representative. If you are a proxy or corporate representative, please state your name and the name of the shareholder you are representing. First, we'll deal with those questions submitted in advance and then invite questions from the floor. If I could hand back there.

Yes. Pre-submitted question 1. In the auditor's report, number one risk. Detail as well as assurance are given that valuations are professionally based and in line with common practice. The valuation of 19.2x price to earnings appears at the high end of the range, and that it has followed the market value for similar businesses. This does not appear to mitigate the risk of the market as a whole, been over -- or has the market as a whole been overvalued? Is the discount varied according to the business cycle or not? Are any adjustments made to the calculation if say it become clear after the 31st of January and before completion of the report that valuations had started to fall?

Okay. Should I start on this one and then I will pass over to Dan. So specifically in relation to the investment valuations, this one is -- so we value our investment portfolio on a range of different metrics based upon what might be, if it's currently stage, we might valuate costs, or if there's been a recent major investment, we might mark it against stacks, or using common multiples within the industry, which we are fairly well rehearsed and familiar. And in specific items in relation to this, it is typical to use where there are a number of quoted investments within that area. And this is specifically linked to an average of what are considered to be comparable businesses from what they are based on the current -- or they were at 31st of January 2022. So they go up and down as the markets do, you say. But in addition to that, we will take a business when we're looking at it, and we will consider whether or not we want to apply a discount to that. And we also look at specifically any kind of potentially dilutive. There might be contingent liabilities. There might be different consideration. There might be option schemes. They might come in and so that we will also apply that and so we come out and take liabilities into account on the balance sheet to come up with an equity valuation. In specific comment regarding in this end, in 1 area, the markets have come down since, but that wouldn't affect our value where should we actually value this specific investment significantly lower. We just took a view. It was not fairly similar to a recent transaction that has actually passed where somebody come in and acquired a meaningful stake of almost 21% of the business for cash and is in line with that. In terms of what happens afterwards, well, if it's anything that significantly affect our overall valuation, we would have a duty if we felt that it affected the portfolio to make a regulatory announcement. In this specific instance, we don't believe that it's had a -- the fact that the markets have dropped since 31st of January in this area, which is specifically in IFAs, we don't believe that's had an impact on our valuation because we were valuing it significantly below what the markets were anyway and in line with a recent cash transaction. I hope that answers that question. Do you want to add anything to that?

No. That's a very comprehensive answer, Jon.

We have no further questions at this time, unless there's any more from the room.

Okay. So we've got no further specific questions in advance. We did do a presentation with IMC only a few weeks ago where we had a number of questions that were answered. That's all available on the IMC website. Obviously, if anyone online at the moment has any questions, please feel free to ask them.

Yes. Tell me when to start.

Well, if we wait for any more [indiscernible] that. So please, could you state your name and to your question.

Right. My name is [ Brad Bentley ], I'm a shareholder. I have quite a specific question to do with the notes in the annual report. So on one, you have note #13 on Page 88, which gives a lot of detail regarding financial [indiscernible] investments. And then earlier to that, on Page 79, there is note 1, which, of course, is the accounting regulations, and it gives information about the income in particular investments, but it doesn't give any details because IFRS 8 says you don't have to give any details if the -- if the income of that investment is less 10% of the whole. So our best question would be, would your sales be prepared to change that to say 5% given the detail that we are working [indiscernible]?

If I can refer you to the related party disclosures note on Page 102, note 24, we actually provide specific detail following the income from all of our investing companies [indiscernible].

Okay. Final question. Obviously, with regard to the largest investment, which has changed from Nexus to Kentro, is there a point where you think the investment is now too large for yourselves? Or you're just intending to keep going?

I think we look at all of our investments from the perspective of do management want us still involved in that investment regardless of size or direction and certainly with regard to Kentro. At this moment in time, it is the largest on our balance sheet with our external -- access to external capital, looking at our balance sheet to say how can you support that growth. But the reality of the situation came that they've also got access to debt financial bearings and international asset manager that provides them with all the access to funds that they would want. So at this stage, clearly, it's a big asset on our balance sheet, it's one of our biggest investment, biggest ever investment, but a really good, strong performing investment. So at this stage, it's a hold as long as it continues to perform, deliver income and growth. We've got no reason to sell it at this stage. That's not to say that it might be sold in the near future. It could be sold 5 or 10 years' time. That's the flexibility that's afforded by B.P. Marsh. And certainly, from a management standpoint, they certainly are still involved in the business to provide guidance and oversight which over the last 8 or so years just trying to find our investment to transform that business.

Okay. [ Dan Volger ], a shareholder. There are 2 investments in Singapore which appear to have very little value. Is that an issue to do with the actual market in Singapore or the individual companies?

Probably. I think the Singapore market, the underwriting agency is problematic in terms of regulation, in terms of whether they're [ MAS marginal company ] in Singapore actually want underwriting agencies, but it's a modest investment for us. So I would say that's more a governmental issue and on the Asia Reinsurance Brokers. It's a combination of factors. It hasn't performed as we've expect. Work of management trying to mitigate the downside. We've also taken a very conservative approach to valuation of that investment filing, putting and taking action as quickly as we can to make sure there's no real body shocks in terms of how to valuate down. So we have done that. But it is a challenge. The rest of the portfolio, by and large, are doing great, but there will always be 2 laggards, I would say, ARB falls into that category.

The only thing I would add to that is we -- it is a risk we do, but -- and they're always sort of disappointments. And the key thing is our long-term compound growth is, therefore, to see and that's inclusive of everything. And yes, we have [ disappointments that give you ] if we move on. It would be highly unusual to not happen. I will probably be a bit concerned if everything was always sort of [indiscernible] all of the time. But it's all about making sure how you act. And there have been -- I think key point is several even of our most successful investments have had moments when things weren't always going right. And our approach, how we approach with our investments, our flexibility, our sort of long-term view enables us to be able to take time for the patience and help them out to achieve the best results for all concerned.

Thank you.

Okay. So unless there are any further questions, there were no questions come through online, in which case, I'd like to say a warm thank you to everyone attending online and a big thank you to everyone attending in person. Just to reiterate, we did do a full presentation on the 7th of July, that is on the IMC website. That's also available on YouTube. If you search B.P. Marsh & Partners Plc full year results 2022, that will come up there. And also, we have some presentations on our website. If you have any questions, pursuant after the meeting that you would like, by all means, [ message domain ] and Brian Marsh's way to point saying that he's not present here today. If anyone wants to go and get touch with him, his door is always open and he'll be happy to [ do with invest that way. ] So by which time, I'd like to thank everyone for their attendance. We will tally up all of the votes, and we will be releasing that in due course after the meeting. Thank you, everybody, and goodbye.

Jon, that's great. And thank you very much indeed for taking the time to update those online today. Could I please ask attendees online not to close this session as you'll now be automatically redirected for the opportunity to provide your feedback in order that the management team can better understand your views and expectations. It's going to take a few moments to complete, and I'm sure will be greatly valued by the company. On behalf of the Board of B.P. Marsh & Partners Plc, we would like to thank you for attending today's Annual General Meeting. That now concludes today's session. So good afternoon to you all.