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

Good morning, ladies and gentlemen, and welcome to the B.P. Marsh & Partners PLC Full Year Results Investor Presentation. [Operator Instructions] The company may not be in a position to answer every question received during the meeting itself; however, company can review all questions submitted today, and we'll publish those responses where it's appropriate to do so on the Investor Meet Company platform. Before we begin, we would like to submit the following poll. And if you'd give that your kind attention, I'm sure the company would be most grateful. And I would now like to hand you over to the executive management team from B.P. Marsh & Partners PLC, Dan. Good morning, sir.

Good morning. Thanks for the introduction. Good morning, all. I'm pleased to welcome you to the B.P. Marsh full year results to 31st January 2025 presentation. Alongside me in presenting these results is our Group CFO, Francesca Chappell. As I think you all know, B.P. Marsh is a specialist investor in early-stage financial services businesses with a strong track record and focus on the insurance distribution sector. For those that are slightly new to it, we provide further details on this on Slide 2, which hopefully sets out our unique position and approach. Leaving on this slide, but turning to 2025 financial year, as an overarching comment, we're obviously delighted with this tremendous set of results. And whilst we focus on the 2025 financial year in these results, as you will note from Slide 3, they've been built on the back of decades of huge effort and no little amount of skill from the current and past team alongside current and past portfolio companies, and it's a testament to the B.P. Marsh approach of focused investing in a long-term and partly manner. At this point, I'd like to thank all the members of the B.P. Marsh team and the wider portfolio for their efforts in allowing us to achieve these results. Fran will talk through in more detail the financial dimensions of these results, although clearly, we're thrilled to have delivered a 42% increase in net asset value year-on-year, going up from GBP 250 million to just over GBP 326 million. This increase has meant that the company has delivered a profit before tax of GBP 104 million for the year compared to GBP 43 million for the prior year. This strong underlying performance alongside continued profitable realizations meant that we further bolstered the dividend income to shareholders for the '25 financial year to just under 11p per share versus 5.5p per share for the '24 financial year, and our current financial year having seen continued strong returns to shareholders via dividends with a further 21.6p per share being paid or to be paid over the course of this year, all of the above delivering a strong total shareholder return for the financial year 2025. And as mentioned, Fran will go into more detail during her part of the presentation. Turning to the strong year-on-year performance. Slide 4 provides a bridge to set out the growth. Our 3 largest investments by value have all been strong contributors to the growth, Pantheon in particular, which I'll come on to. XPT in the U.S. and ATC in Australia have again delivered strong underlying shareholder growth, GBP 14.5 million and GBP 12.3 million, respectively. This is coupled with good growth from the wider portfolio, which in general are smaller acorns at the moment, but we do have a sense that these will flourish as portfolio investments in the coming years continue to support NAV growth. Alongside portfolio growth, we saw good returns from profitable disposals emanating from Lilley Plummer Risk and CVC. Moving on to slide backwards to Pantheon on Slide 5. Clearly, this has been a standout performer for the '25 financial year. And as you'll note, in just over a 2-year period, Pantheon has experienced significant growth across all key metrics. Whilst it is an outlier in terms of IRR expectations, it does typify the B.P. Marsh approach in terms of a pure-play start-up with a bespoke investment structure, organizational support in terms of getting the business to market as seamlessly as possible and ongoing funding in this instance, for a partial realization, allowing management to take some chips off the table and focus on growing the business given significant inbound interest in the first 18 months. We were able to do this at mutually fair valuation increments of first 25% for GBP 25, the next 7% for GBP 7 million and then the most recent 5% for GBP 12.5 million. It's important to note that there's been a level of third-party valuations regarding this, which has more than validated these numbers in our opinion. It's a tremendous achievement by the team at Pantheon to have already delivered the return they have in this short space of time. Whilst we wouldn't want them to feel in any way pressured to buy us to continue growing at such a leg, it does appear that market conditions within the Lloyd's broking sector are proving very beneficial for Pantheon. On the wider subject of general insurance broker market, due to wider consolidation, there are dearth of independent small- to medium-sized brokers that can provide clients with an alternative to those presented by larger PE-backed consolidated group that continue to buy and be bought, which has impacted continuity of service, which is ultimately important to the buyer of this insurance. Given this, Pantheon has provided a compelling client proposition as an independent management control business with a long-term trajectory. This has also been attractive to other brokers who might like to join Pantheon in the market in terms of buying into Pantheon and ultimately, joining them, and this is clearly illustrated by the increasing headcount of Pantheon. All the above taken in the round would suggest to me that Pantheon has a great opportunity to carry on growing, positioning itself as the preeminent mid-market Lloyd's broker filling a significant hole, which to us could ultimately lead to significant shareholder returns over the coming years. It's also important to note that like with the majority of our portfolio, Pantheon is a yield dividend paying investment from a real cash perspective. Clearly, from a valuation perspective, the market tends to focus on adjusted EBITDA as a starting point for assessing value. However, where a company can outperform its peer group is its ability to generate real cash, and this is certainly the case when it came to our disposals of Lilley Plummer Risks, CBC and Kentro. Given the jump in valuation, I'm happy to take questions on Pantheon at the end of the presentation. But at this stage, I'd like to hand over to Francesca to talk through the financials.

Thank you, Dan. I am pleased to be able to present the results for the financial year ended the 31st of January 2025, with the group having an excellent year. NAV increased by GBP 97.2 million or 42.4% in the year and now stands at an all-time high of GBP 326.4 million. This is equivalent to 890p per share or 847.3p per share diluted. The growth in NAV is primarily driven by the rise in our equity portfolio, which increased by GBP 102 million or 83.5% in the year, adjusting for realizations and additions. Our equity portfolio is now valued at GBP 224.1 million. As of the 31st of January 2025, 68.7% of our NAV was attributable to our equity portfolio, whilst 31.3% was cash and other assets. Profit before tax for the year was GBP 104.7 million. Of this, GBP 90.2 million was attributable to unrealized gains in the equity portfolio. Underlying profit before tax was up significantly on the prior financial year, being GBP 9 million. It remains the group's strategy to cover its recurring expenses from the portfolio yield. However, this year, due to 2 realizations made above carrying value, the group delivered a higher level of underlying profit before tax. As of the 31st of January 2025, the group had available capital of GBP 74.1 million. As at the 10th of June, the group has available capital of GBP 65.2 million. The main reasons for the decrease in capital post year-end is the new investment in IO Partners of GBP 10 million dividends paid of GBP 5.5 million and loans granted of GBP 1.8 million. This is marginally offset by a GBP 9.2 million deferred consideration payment received on the group's sale of its investment in Paladin. Slide 7 further details the financial highlights for the year. The group is delighted to deliver a total shareholder return for the year ended 31st of January 2025 of 44.2%, including GBP 4 million aggregate dividends paid. NAV per share increased by 41.5% over the year to 890p per share. For the year to 31st of January 2024, the uplift in NAV per share was 19.5%. The graph on this slide shows how the group has significantly outperformed the AIM all share and AIM financials. Slide 8 reports the distribution of our loan portfolio and treasury funds. On the left of the slide, you will find a breakdown of our loan book as at the 31st of January 2025, which stood at GBP 25.6 million and was a GBP 35.3 million decrease from GBP 28.9 million as at the 31st of January 2024. No provisions were made against our loans at 31st of January 2025. Details of our loan book can be found in the appendices. The average interest rate for the year was approximately 10%, up from 9.7% as of the 31st of January 2024. This increase was due to many of our loans being linked to the Bank of England base rate. The middle of the slide shows that during the year, we issued GBP 11.2 million new loans and received loan repayments of GBP 14.7 million. Post year-end, GBP 1.8 million has been provided in loan funding, and we have received GBP 0.1 million in loan repayments. On the right of the slide, you will see that at the end of the year, we held GBP 74.1 million in cash and treasury, up from GBP 40.5 million in January 2024. The increase in cash over the period was due to the disposal of Paladin in March 2024, for which the group received equity proceeds of GBP 44 million and the disposal of Lilley Plummer Risks for which the group received equity proceeds of GBP 21.7 million in October 2024. The group continues to keep its cash diversified across various wealth management institutions in a mixture of short-term and instant access deposit accounts. The average interest rate received on the group's cash was 4.4%, which amounted to GBP 3.1 million of investment income during the year. Slide 9 reports the group's dividend since 2010. As at the 31st of January 2025, the group have paid a total of GBP 16.8 million in dividends. During the financial year, a total of GBP 4 million in aggregate dividends was paid, amounting to 10.72p per share. Post year-end, the group has already paid GBP 5.5 million in aggregate dividends, including a special dividend of GBP 3 million, which was paid on the 30th of May, following receipt of a GBP 9.2 million deferred consideration payment received on the sale of the group's investment in Paladin. The group continues to believe it is important to reward shareholders via dividend distributions following successful disposals. The graph on this slide highlights the key realizations made by the group and how value was returned to shareholders. The group is proposing to pay a final dividend of GBP 2.5 million on the 25th of July and will therefore have distributed a total of GBP 8 million for the year ended 31st of January 2026, which equals 21.64p per share. As announced previously, it's the group's intention to pay dividends of GBP 5 million per annum in the years ending the 31st of January 2027 and 2028. I will now hand back over to Dan to talk through the rest of this presentation.

Thanks, Fran. Going forward in the presentation, looking at the new investments in the -- in general terms, we typically target about 3 new investments per annum alongside 1 or 2 disposals subject to satisfactory returns. And as such, 2025 was consistent with the same. The new investments in our target area of interest are set out on Slide 10, all but one of these investments were start-ups. Talking to the non-start-up CEE Specialty on Slide 11. This is a Central European underwriting agency. Whilst not a start-up, this form part of another PE investors fund that come to an end and was controlled by the PE investor. The PE investor was looking to exit this investment, which management didn't necessarily agree and saw better opportunities going forward. As such, we saw this as an opportunity to partner with a strong management team and provide them with the opportunity to take control of their company with the shareholder structure swinging from 75-25 to 56-44 in their favor. We've previously done this successfully in Australia with our investment in MB, which was in a similar situation. Whilst new from a jurisdictional standpoint, CEE operates in 2 areas well known to us, marine insurance and financial lines insurance. So we do see this as an opportunity to work with the team and grow this business significantly. Turning to the other 3 investments completed in the year, all 3 were start-ups in the insurance sector, presenting credible plans with strong management. On the agency side, Devonshire and Volt have performed strongly in their first year of operation, exceeding their plans, and we see strong future potential upside there. Volt, in particular, has performed well. It will likely end the 2025 year -- calendar year producing just shy of GBP 50 million of gross written premium in a highly specialist area being energy production, renewable and nonrenewable with strong capacity support. And this is a tremendous achievement for the first-rate management team that we've back there, and we do see strong potential for this to grow going forward. And SRT, our broking investment has completed 2 acquisitions in the U.K. retail insurance and asset finance broking areas and continues to execute well on the plan we back to investment. Obviously, the details of these investments are on Slides 11 through 14. Turning to realizations during the year. This is dealt with on Slide 15 in terms of Lilley Plummer Risk and CBC or Holdco with Paladin, both very strong returns and testament to the respective management teams in what was achieved. We enjoyed the partnership and see this as a validation of our investment approach. Turning to Slide 16. This provides highlights of recent realizations from the portfolio and the aggregate returns versus the amount invested. We're obviously incredibly proud of our achievements here and also have strong conviction that the current portfolio and the new business pipeline should present us with an ongoing stream of opportunities to develop -- to deliver meaningful investment returns to our shareholders. Turning away from the insurance investments from within the portfolio and moving to Slide 17, which provides an update on LEBC. As you will know, we are starting to see cash returns being distributed to the shareholders of LEBC, which we're delighted with given the ups and downs associated with this investment. Over the period since divestiture, we took a very cautious approach in terms of valuation of potential deferred consideration payments. That being said and having worked with the management team at LEBC and the acquirer, Titan Wealth, we've now seen a further cash return in addition to the loan repayments we received at completion. Alongside this GBP 5.9 million receipt, there's a further minimum of circa GBP 10 million that the group is due to receive over the next 2 years. This was previously attached to performance criteria. However, we've successfully negotiated that this be removed and guaranteed by the acquirer of Titan, which gives us a significant degree of further comfort as regards to the recoverability of this, further improving the return on this investment. Whilst not the success story of CBC or LPR, I do feel that we couldn't have achieved this positive outcome if it wasn't for our long-term approach, allowing us to trade through challenges and preserve shareholder value for a successful return. Maintaining focus on the noninsurance aspects of B.P. Marsh, Slide 18 details our recent post year-end investment in iO Partners, a business that specializes in the provision and origination of alternative commercial finance, stepping into a gap created by the change in lending appetite of the major banks to quite a disparate sector in terms of operating businesses, which we see an opportunity for meaningful consolidation to build a market-leading player in terms of scale and expertise. As noted in this slide, this is in partnership with the co-CEO of Titan Wealth, who introduced it to us and is also a shareholder in iO. Whilst not in insurance, it is in a specialist area of financial services and the partnership approach we have taken with management and our co-shareholder, Janus Henderson, does mean we've deployed our skill set in a new investment that provides considerable upside potential to the group. Obviously, I've looked at this investment coupled with the deferred consideration rejig at LEBC. Moving to the wider portfolio, Slide 19. As you can see and as flagged earlier, the larger investments have contributed in a meaningful way to the NAV increase as they should. That being said, it's important for me to highlight that we feel there is meaningful opportunities within the remainder of the portfolio, many of which are recent investments, and we feel they will start to contribute not insignificantly to NAV growth going forward. The portfolio is broken down in greater detail in the appendix, and I'm happy to deal with any specific questions on this at the end of the presentation. Turning to the larger investments, ATC and XPT. Slide 20 deals with ATC. And as you will have noted, post year-end, ATC acquired our other portfolio company in Australia, Sterling based in Sydney. This is the second roll-up of a B.P. Marsh portfolio company in Australia by ATC. And we feel this strategy has delivered well for us. ATC is now the largest independent underwriting agency in Australia with continuing growth across all key metrics. We've been delighted with its performance, and this is underlined by our decision to reinvest the sale proceeds from Sterling into ATC, increasing our shareholding from 25% to 27%. Turning to Slide 21; again, strong growth by XPT, which has now built a significant insurance platform across the U.S. market via an effective buy-and-build strategy, which is now being meaningfully bolstered by a targeted hiring strategy. The excess and surplus lines insurance market in the U.S. in which XPT operates has grown significantly over recent years, and this trajectory is expected to continue. And as such, we see continued good upside from XPT. They've built a first-rate operational team across the wholesale and underwriting agency sector in the states, and we continue to be happy to hold this position. Slide 22 details our efforts to return value to shareholders either by NAV performance or via dividend and share buyback. We feel we're laser-focused on long-term shareholder returns and feel our strategy has delivered here. This will always be our focus in terms of the investment decisions we make now and going forward. Financial years '25 and '26 have and will see meaningful returns via dividend. And whilst we don't have a hard and fast dividend policy, we continue to look at this to make sure we reward and return value to shareholders by a sensible dividend mechanism supported by the underlying performance of the portfolio. Alongside this, we have also initiated a larger share buyback program that was approved at the recent EGM. This provides us with further flexibility as regards to shareholder return management. Slide 23, further detail -- provide further details as regards to the recent secondary placing for approximately 10% of B.P. Marsh shares. The seller Ardonagh acquired their position in B.P. Marsh by their purchase of PSC, an Australian broking group that were a long-time shareholder in B.P. Marsh. We were pleased to provide Ardonagh with liquidity from what I'm sure they consider a noncore asset that emanated from their purchase that allowed them to focus on their core and deliver welcome cash to their balance sheet. At the same time, we were delighted to welcome Wellington as a shareholder, taking just over 5% shareholding in the group. As noted in the RNS announcement, Ardonagh is subject to a 60-day lockout in terms of selling further shares. This is something we're aware of and are in dialogue with both Panmure and Singer as our broker. Slide 24 hopefully demonstrates that the efforts we've made in terms of performance and shareholder returns has had a materially positive impact on reducing the gap between our NAV and market cap. Whilst NAV performance is something that we are directly responsible for, ensuring we also try and actively engage as much as possible, ensuring the gap between NAV and market cap accurately reflects our position, and that's a key focus of ours. In drawing this presentation to a close, Slide 25 hopefully summarizes what we've achieved. It's been another successful year for the portfolio and B.P. Marsh company. Clearly, we're delighted with what we've achieved and what it signifies in terms of the ability to continue to execute on a strategy that delivers significant shareholder returns. I'll close by thanking the entire team from bottom to top in what we achieved in 2025 and the portfolio for their partnership. That being said, and without making forward-looking statements, we're hugely optimistic looking ahead towards the next 12 to 36 months in terms of what more can be done. Whilst wider macro conditions remain challenging and the insurance market could be seen as a state of flux, we absolutely believe we are well set to continue to steward B.P. Marsh going forward to continue to deliver significant shareholder returns. Our modus operandi remains the same being continue to identify businesses with strong management teams and good growth potential, help fund, support and develop these companies so they can deliver on their growth opportunities and produce returns from our investments for our shareholders by an ongoing blend of equity growth in the portfolio and regular returns of capital to the shareholders. We believe the results for the year continue to justify this approach. Given the strong cash position, our current portfolio and the strong pipeline of new business opportunities, we believe that the group is in a positive position moving forward. It's a tremendously exciting time for the team here at B.P. Marsh and as Chief Investment Officer, I share this optimism. Given the promising opportunities ahead, we believe these will have a positive impact on the company's performance, share price and ultimately, shareholder returns, which is a long-term measure of success for us as a listed company. At this juncture, I conclude the presentation and welcome any questions.

Perfect, guys. That's great. If I may just jump back in here. Thank you very much indeed for your presentation this morning. [Operator Instructions] But just while the team take a few moments to review those questions that have been submitted already, I'd just like to remind you that a recording of this presentation along with a copy of the slides and the published Q&A can be accessed via your investor dashboard. Guys, as you can see there, we have received a number of questions throughout your presentation this morning and thank you to all of those on the call for taking the time to submit their questions. But Katie, at this point, if I may hand over to you to chair the Q&A with the team. And if I pick up from you at the end, that would be great. Thank you.

Thank you very much, Jake. Thank you, Fran and Dan, for your presentation there. A couple of questions from investors. So the first one is, does PSC intend to dispose of its remaining holdings in B.P. Marsh?

Look, I think the PSC has been acquired by Ardonagh, highly leveraged consolidated PE consolidated in the insurance market. We aren't something that they would usually acquire. We were by virtue of them buying PSC. They've clearly already disposed of half that shareholding that they had in B.P. Marsh. We welcomed Wellington, the U.S. fund management business onto the register, which we're delighted to. There is still just under 10% holding from Ardonagh/PSC. Given it's noncore, I would imagine that, that would be something over the short to medium term, they would look at, acknowledging that they are in a lockout period at the moment. And certainly, cash to their balance sheet would be very beneficial. So again, we don't speak on behalf of Ardonagh or PSC, but we plan for every eventuality.

Great. And the second question is scale. The scale of buybacks is very small. Can this be increased?

I think at the most recent EGM, we've got current authority to buy up to GBP 2 million worth of shares, but then the EGM granted authority to buy back up to 10%. Therefore, it's something we do have an eye on, and we'll continue to review it to act in the best interest of the company in the long term, best interest of the shareholders. So yes, it's something we are focused on, as you can see, the direction of travel, but it's something that we'll manage in a sensible way.

Great. Thank you, Dan. That's all the questions. So I'll hand back to you, Jake.

Perfect, guys. Thank you very much indeed for being set for the time then addressing those questions that came in. Of course, if there are any further questions that do come through, we'll make these available to you immediately after the presentation has ended just for you to review. But Dan, perhaps before really just looking to redirect those on the call to provide you with their feedback, which I know is particularly important to yourself and the company. If I could please just ask you for a few closing comments just to wrap up with, that would be great.

Yes, Jake, thanks very much. And thanks, everybody, for taking the time to listen to us. Clearly, we're delighted with the performance of the 2025 financial year. But as I said in my opening statements, it's a function of the decades that we've put in to building B.P. Marsh to be in a position to deliver these results. And I think we're comfortable in our ability to continue on this trajectory going forward. So it's great. Thanks for the team. Thanks for the partnership with the portfolio companies, and thanks for everybody's time. So all feedback, welcome. And if there are any subsequent questions post this presentation, by all means, please do let us know, and we'll come back to you.

Perfect, Dan. That's great. And thank you once again for updating investors this morning. Could I please ask investors 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 really better understand your views and expectations. This will only take a few moments to complete, but I'm sure it will be greatly valued by the company. On behalf of the management team of B.P. Marsh & Partners PLC, we would like to thank you for attending today's presentation. That now concludes today's session. So good morning.