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

Good morning, ladies and gentlemen, and welcome to the B.P. Marsh & Partners PLC Half Year Results Investor Presentation. [Operator Instructions] Before we begin, I would just like to submit the following poll. And if you could 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. Good morning, everybody, and thank you for joining us. I'm Dan Topping, the Chief Investment Officer, and I'm joined by Francesca Chappell, our Chief Financial Officer. Today, we'll talk you through the group's interim results for the 6 months ended 31st July 2025. Firstly, I'd like to thank the entire team at B.P. Marsh and the Board to the rest of us. We delivered a strong set of results, thanking the team and also the wider portfolio. Without their performance, we wouldn't be here. So I just wanted to note our thanks to everybody involved in producing these results. It's been another busy and rewarding period for B.P. Marsh, a half year that shows both the resilience of our model and the steady contribution of our portfolio companies. Turning to Slide 2, the highlights. We'll start with the key numbers as at 31st July 2025. Net asset value rose to GBP 349.5 million, an increase of 7% over 6 months and 38% over the past 12. Profit before tax came in at GBP 32.1 million and available capital stood at GBP 52.6 million. Total shareholder return, combining net asset value uplift and dividends was 9.5%. We paid GBP 8 million in dividends over the period, equating to 21.64p per share. These figures represent strong consistent progress, perhaps less headline growing than last year's exceptional results, but in our world, boring and predictable is often the nicest compliment one can receive. Turning to Slide 3. Just to remind everyone of the way we operate. We're long-term minority investors, typically taking 20% to 40% stakes and holding them for an average of nearly 7 years. Our focus remains early-stage or specialist financial services businesses that fall below the radar of mainstream private equity, which we consider bridging the gap, providing growth capital and support where traditional funding is scarce. And we think our flexibility has allowed us to maintain the growth we've delivered in a patient and solid way. On to Slide 4, net asset value performance. The chart on this slide shows our NAV journey since 2005. It's a steady upward line, reflecting an average annual growth rate of around 11% over 20 years. We're now approaching GBP 350 million in NAV, up from just GBP 22 million in 2005. Not every year has been smooth sailing, of course, but the long-term trend speaks to the value of the patience and our partnership approach. At this stage, I'll be handing over to Francesca to talk through her slides on the financial performance.

Thank you, Dan. I'm pleased to be able to present a strong set of results for the period ended 31st of July 2025. NAV increased by GBP 23.1 million or 7.1% over the period and now stands at GBP 394.5 million. This is equivalent to 956.1p per share or 909.8p per share diluted and has grown by 7.4% over the 6-month period. The growth in NAV is largely driven by the rise in our equity portfolio, which has increased by GBP 30.8 million or 12.8% in the period, adjusting for additions and realizations. Our equity portfolio is now valued at GBP 271.5 million, while cash and other assets at GBP 78 million. Based on this, 77.7% of our NAV was attributable towards the equity portfolio, whilst 22.3% was cash and other assets. Profit before tax for the period was GBP 32.1 million, of which GBP 30.8 million related to unrealized gains arising on the investment portfolio. It remains the group's strategy to cover its recurring expenses for the portfolio yield and it achieved this during the 6-month period by delivering an underlying profit before tax of GBP 0.7 million. As at 31st of July, the group had available capital of GBP 52.6 million compared to GBP 74.1 million as of the 31st of January. As of the 21st of October, the group has available capital of GBP 36.5 million. Slide 6 further details the financial highlights for the year. The group is delighted to deliver a total shareholder return for the period ended 31st of July, of 9.5%, including GBP 8 million in aggregate dividends paid. The graph on this slide shows how the group has significantly outperformed the AIM All-Share and the AIM Financials. Slide 7 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 of the 31st of July, which stood at GBP 31.1 million. No provisions were made against our loans at 31st of July. Details of our loan book can be found in the appendices. The average interest rate for the year was approximately 9%, down from 10% as of the 31st of January. This decrease 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 period, we issued GBP 6 million in new loans and received loan repayments of GBP 0.2 million. On the right of the slide, you will see that at the end of the period, we held GBP 52.6 million in cash and treasury, which is a decrease from GBP 74.1 million as of the 31st of January. The main reasons for the decrease in cash since this period are the new investments made in iO Partners of GBP 10 million and Cameron Specialty of GBP 1.1 million, follow-on equity investment of GBP 5.5 million into Pantheon, net loans granted to the portfolio of GBP 5.8 million, dividends paid of GBP 8 million and share buybacks of GBP 1 million. There was a significant cash receipt received during the period being GBP 9.2 million of deferred consideration in respect of the group's investment in Paladin, which was sold in March 2024. Post 31st of July, GBP 5 million has been provided in loan funding, and we received GBP 0.1 million in loan repayments. Additionally, there have been 4 post-period equity investments totaling GBP 11.4 million, which have reduced cash further. The group continues to keep its cash diversified across various institutions in a mixture of short-term and instant access deposit accounts. The average interest rate received on the group's cash was 4.03%, which amounted to GBP 1.2 million of the investment income received during the period. Slide 8 reports the group's dividend since 2010. As at the 31st of July, the group has paid a total of GBP 24.7 million in dividends. During the period, a total of GBP 8 million in aggregate dividends was paid, amounting to 21.64p per share. The group believes that it's important to reward shareholders by dividend distributions following successful disposals. The graph on this slide highlights the key realizations made by the group and how value is returned to shareholders. As announced previously, it's the group's intention to pay dividends of GBP 5 million per annum in the years ending 31st of January 2027 and 2028. I will now hand over to Dan to talk through the rest of the presentation.

Thanks very much, Fran. Turning to Slide 9, the overview of our managing general agency portfolio, a long-standing area of strength for B.P. Marsh. Our MGA investments remain a major driver of value, both in terms of growth and diversification. As at the 31st of July, they represented around GBP 81.6 million of value, about 23% of the group's NAV built on a total cost of GBP 11.4 million. Across the portfolio, our MGA is expected to annualize around GBP 750 million of gross written premium, producing roughly GBP 88 million in commission income. These businesses span markets in Australia, the U.K., North America and Europe and range from more mature platforms like ATC and Stewart Specialty Risk Underwriting to newer entrants like Volt and Amiga Specialty. It's a segment where access to insured capital remains tight, which plays to our advantage. Our MGAs have built strong relationships with Lloyd's syndicates and other carriers. We like MGAs specifically because they combine specialist underwriting expertise with scalability and strong cash generation. On Slide 10, our broking investments, they also continue to perform strongly. As at period end, they represent around GBP 167 million of value built on a cost base of just under GBP 58 million. Collectively, these firms are budgeting to place nearly GBP 1 billion of premium in the insurance market in 2025, generating over GBP 80 million of brokerage income across the U.K., U.S. and Asia Pacific markets. The standout performer remains Pantheon Specialty, which we backed just over 2 years ago. We now value it at GBP 105 million, up from our GBP 27 million invested, reflecting both strong trading and the market's confidence in its leadership. In the U.S., XPT continues its disciplined acquisition strategy, now operating across more than 25 offices and managing over $1 billion in premium. Both Pantheon and XPT exemplify our investment approach, building meaningful platforms in partnership with ambitious management teams. We've also seen encouraging progress from SRT & Partners, our recent U.K. broking investment, and we just added one global broking post period, which we'll come to later. Turning to Slide 11, disposal during the period. We completed the sale of Sterling Insurance, one of our Australian MGA holdings, to ATC Insurance Solutions and other of our portfolio companies. We first invested in Sterling in 2013, committing around GBP 1.9 million for a 19.7% stake. ATC acquired 100% of Sterling for approximately GBP 33 million or about GBP 16 million paid in a mixture of cash and new equity in ATC. This transaction increased our holding in ATC from 25% to 27%, generating a profit on disposal of roughly GBP 1.2 million over the original investment amount at an IRR of 8.8%. It's a good example of how our flexible model allows us to structure deals that work for both sides. In this case, the integration creates a stronger combined business, while we retain exposure to future upside through our enlarged stake in ATC. Turning to Slide 12, new investments in the period and post period end. We made a number of investments both within the period and post period end, which in the aggregate amount to GBP 22.5 million of equity funding alongside GBP 4.5 million of loan funding. Dealing with Slide 13, iO, which is our noninsurance distribution holding completed in April 2025, we took approximate 8% stake for GBP 10 million alongside Janus Henderson as a co-investor. IO is building a buy-and-build platform in the alternative finance market, focusing on SME asset finance, an area which is generally underserved by traditional banks. We're attracted to this by an experienced management team with a strong track record and by the opportunity to help fill the lending gap to U.K. SMEs. It's early days, but iO has already completed 3 acquisitions. The valuation at period end remains at cost, which reflects prudence rather than a lack of progress. Next, Amiga Specialty, a new specialty underwriting platform founded in June 2025. We acquired a 49% stake for a nominal equity investment alongside a GBP 10 million loan facility to fund growth, which is still outstanding. They've drawn down a modest amount under that facility. Amiga strategy combines organic expansion with selective M&A across niche specialty classes, and they've already made significant key senior hires in both the underwriting and the operations segment of the business. Slide 15. Our third investment in period was Cameron Specialty. We invested GBP 1.1 million for a 27% stake and provided a loan facility of GBP 600,000. Cameron is a Lloyd's coverholder focusing on U.K. specialty property insurance. We backed the founder Tom Kirkland to expand into Europe and Ireland, a classic case really of partnering with proven underwriters looking to build their own platform. It's a modest first investment, but precisely the kind of opportunity that can scale into something significant over time. Now we can turn to investments post period end, starting with Slide 16. Gambit, we invested approximately GBP 1.39 million for an 8.33% stake. It's a new reinsurance vehicle supporting XPT's underwriting programs. It's fully collateralized and designed to give XPT greater operational and financial flexibility while also providing the investors at attractive risk-adjusted returns. I think it also demonstrates our willingness to back our existing management teams and adjacent ventures when there's a sound strategic rationale. On to Slide 17, XPT Producer Co. On the back of Gambit, we invested in Producer Co totaling GBP 2,600 for a 35% stake alongside up to GBP 9.4 million in loan funding. This new platform used to recruit and incubate new producers for XPT's growing U.S. wholesale broking network. The loan carries a minimum 10% interest rate. So it's both a growth driver for XPT and an income-generating asset for B.P. Marsh. Slide 18. Also in September, we backed Salus Capital Partners, a U.K.-based insurance intermediary specializing in professional indemnity. We took a 35% stake for a nominal amount alongside a GBP 2 million loan facility. Salus brings together 2 subsidiaries, Forte Professions, an insurance broker; and Scribe MGA, an underwriting agency, specialized in professional indemnity, starting in construction, surveying and accountancy. It's a strong management team with deep experience in professional lines, and we're looking forward to seeing them build a presence from Bristol, shortly London, across the U.K. generally thereafter. And Slide 19, finally, Oneglobal Broking in September, we invested GBP 10 million for a 10% stake. Oneglobal is a London-based international broker, majority owned by J.C. Flowers & Co. It operates across 15 offices globally, placing around GBP 50 million in brokerage for the 2025 financial year across marine, property, aviation, financial lines, energy and casualty. We think our support will further provide for their expansion, including the Bermudan acquisition and growth in Asia. It's a rare opportunity to partner with a top-tier management team in an existing business, but which the business shares our entrepreneurial DNA. So we look forward to taking the Oneglobal investment forward. Moving on from investments, Slide 20. It's worth turning briefly to the other side of the equation, the realization and deferred consideration profile from early disposals. While we've been active in deploying new capital, we continue to receive value from transactions completed in the previous years. First example is LEBC Holdings, where our initial investment dated back to 2007. LEBC sold its trading subsidiary, Aspira Corporate Solutions, to Titan Wealth last year, which allowed immediate repayment of our outstanding loans. Since then, we received approximately GBP 5.7 million in sale proceeds with a further GBP 9.8 million of deferred consideration expected over the next 2 years. That will take total proceeds to around GBP 15.5 million, a steady disciplined return from what was a long-term patient investment that wasn't without its challenges. Similarly, with CBC U.K., which we sold to SRG in March 2024, we've already received in the aggregate, GBP 54.7 million, which includes GBP 9.2 million of deferred payments. There's a further potential tranche of deferred consideration payable in 2026, subject to CBC meeting its EBITDA target for the preceding financial year. If those targets are achieved, our total proceeds could easily reach over GBP 60 million for this investment. Both of these examples demonstrate an important point about our model. When we realize an investment, the story doesn't necessarily end there. Deferred consideration structures often continue to deliver incremental value over time quietly, but materially. And it's a reminder that alongside new investments, we do have a reliable tail of incoming cash flows from historic deals, an important feature of our capital recycling discipline. Those inflows, together with our available capital mean we're well placed to fund the next stage of portfolio growth without stretching our balance sheet. Turning now to the portfolio as a whole on Slide 21. This slide shows the NAV composition as at 31 July 2025. Our 3 largest holdings, Pantheon, XPT and ATC together account for just under 60% of NAV giving the growth both focus and diversity. We also retained smaller but strategically valuable stakes across underwriting agencies, brokers and iO Partners in financial services. The portfolio value equates to about GBP 271 million with an additional GBP 31 million in loans supporting investee growth. As at 31st July 2025, we had 17 active investments, of which around half are MGAs and half are broker or related intermediaries. That balance between early-stage growth and mature cash-generative asset continues to underpin our stability. And in many respects, it's like managing an investment garden, a few large oaks providing shade, but plenty of younger shoots that keep things interesting. On to the larger portfolio companies. Starting with Pantheon, which remains our largest single holding and a clear success story in the portfolio. Since 2023, we've now invested GBP 27.3 million for a 39% stake and the valuation has now increased to GBP 105.5 million or equating to an IRR of approximately 268%. Pantheon began life as a London-based specialty lines broker focusing on global casualty. In just 2 years, it's expanded into professional risks, property, innovation and technology and delegated authority and now operates across multiple territories. Pantheon's headcount has grown from 3 at launch to approaching 45 that supported consistent growth in commission income and profitability. Pantheon also completed its first overseas acquisition, a 25% stake in Fraction Brokers Asia, a Hong Kong-based outfit, which broadens its reach geographically and product into digital assets and the Asian specialty market. Pantheon's trajectory reinforces the benefit of backing exceptional management early on and staying aligned as they scale. We continue to remain confident in its outlook. On to Slide 23, ATC, another core contributor. We invested in 2018 and hold a 27% stake valued at GBP 39.2 million, up from a cost of GBP 5.3 million, giving an IRR of over 40%. ATC is a multiline Lloyd's coverholder underwriting across many specialty lines. It's now the largest independent Lloyd's agency in Australia, working exclusively with Lloyd's syndicates. ATC's expected performance for the year to June 2026 was impressive with gross written premium exceeding AUD 300 million, revenue exceeding over AUD 50 million and EBITDA of around AUD 20 million. Its acquisition of Sterling, one of our former holdings, has broadened its footprint further and the new office in Perth extends its national presence. Slide 24, which deals with Stewart Specialty Risk Underwriting in Canada, a business we backed since 2017. We hold roughly a 28% stake with value at about GBP 22.9 million from a nominal investment, delivering an IRR of about 90%. SSRU is an underwriting agency focused on specialty property casualty lines, in particular, construction, manufacturing, onshore energy and public entity sectors. It's one of Canada's leading independent underwriting agencies with GWP budgeted to exceed CAD 100 million. And the growth has been driven by product expansion, notably the launch of the Primary Casualty division and by the recruitment of high-caliber underwriters. We think it's a textbook example of a disciplined organic growth supported by strong underwriting performance. And then finally, XPT Group in the U.S. on Slide 25, another cornerstone within the portfolio. We first invested in 2017 and now hold a 29.6% stake. Our cost to date is approximately GBP 18.8 million, which we value at about GBP 60.6 million, delivering an IRR of 28%. XPT has grown from a start-up aggregator into a substantial specialty lines distribution platform. It now operates across 26 offices, employs over 400 people and has completed 17 acquisitions since inception. And for the 2024 financial year, XPT wrote more than GBP 970 million in GWP and generated north of GBP 23 million in adjusted EBITDA. It's a strong example and continued example of our strategy of backing management teams capable of building scale through acquisition and integration. Recent initiatives such as Gambit Re and XPT Producer Co, both of which we supported post period, will help sustain that growth momentum. Taken together, Pantheon, ATC, SSRU and XPT represent the engine room of the portfolio, proven management teams, profitable trading and clear runway for further growth. They also provide the financial stability that allows us to pursue new opportunities at the earlier stage. In short, the combination of mature and developing holdings gives us the right mix of excitement and sleep at night. On to Slide 26, which details shareholder returns and buybacks. We continue to balance reinvestment with shareholder returns. A 9.5% return for the period, including NAV growth and dividend speaks to that balance. And during the half, we purchased approximately 145,000 shares for just over GBP 1 million, all focusing on maintaining and reducing the discount to NAV. On to Slide 27. As previously flagged, we did have one single shareholder, Ardonagh, via its acquisition of PSC, which accounted for just under 20% of the shareholder base in B.P. Marsh. They ultimately look to realize that due to return cash for their own growth strategy. And we're pleased to see institutional demand for these shares during the period, which I think reflects growing recognition of our long-term track record and consistent delivery. In May, roughly 10% of the share capital was placed at GBP 6.30 per share for approximately GBP 23 million. And then in August, Ardonagh/PSC completed the sale of its remaining 9.8% at GBP 6.50 a share for a further GBP 23.6 million. That process not only broadened our shareholder base, but also increased our free float significantly, which we think is a significant milestone for liquidity and index eligibility. We also took the opportunity to purchase 769,000 shares ourselves for around GBP 5 million, demonstrating our confidence in the long-term value of the group. We're pleased that Wellington Management Group became a new major shareholder, now owning around 8% of the company. The strength of demand and the quality of incoming institutions, we think, sent a clear signal that the market increasingly appreciates the durability of our model. The placing is a constructive step that allowed an orderly exit from an existing shareholder, improved liquidity and brought several high-quality long-term institutions into the register, exemplifying how we manage the business thoughtfully and with the future shareholder base in mind. Slide 28. The institutional support links neatly to this next point, our ongoing work to narrow the discount between our share price and NAV. At the end of July, the discount stood at around 24%, a significant improvement from over 60% back in 2009. We've made steady progress over the years through consistent NAV growth, regular dividends and measured share buybacks. Since adopting our dividend policy in 2010, we distributed 71p per share in total, which equates to over half of the flotation price. We see these dividends together with our NAV track record as key factors in supporting the share price and demonstrating capital discipline. We're realistic, of course, that the market will always apply some discount to a specialist investment company like ours. But our goal is to ensure that the market valuation more accurately reflects the intrinsic value of our portfolio. And if we can keep closing the gap without talking too loudly about it, so much the better. We think it's about steady, consistent delivery, growing NAV, maintaining liquidity and rewarding shareholders. That combination is what ultimately shifts sentiment over time. So whilst we can't control market mood, we can control execution, and that's where our focus remains. We'd like the share price and NAV to be on friendlier terms, but we are doing our best to play matchmakers in this situation. And Slide 29, summary and outlook. So to close, we'd like to bring the key points back together. This half year has been one of steady progress, a period defined not by one-off gains, but by consistent delivery across the portfolio and a disciplined use of capital. Our NAV rose to GBP 349.5 million, an increase of 7% over 6 months and 38% year-on-year. Profit before tax was GBP 32.1 million, and we ended the period with GBP 52.6 million in available capital. We paid GBP 8 million in dividends, equating to 21.6p per share and delivered a total shareholder return of 9.5%. We completed 3 new investments during the period and a further 4 post period end, continuing to broaden our reach across the insurance and financial services landscape. And we also completed the realization of Sterling insurance, strengthening ATC in the process and generating a healthy uplift in value. Our portfolio companies remain well capitalized and well led. They're budgeting for approximately GBP 1.7 billion of gross written premium in 2025, a testament to the resilience of their markets and the strength of their management teams. And with our liquidity position, we're well placed to continue supporting both follow-on funding and new opportunities. Strategically, our priorities remain the same, to identify and back strong management teams in specialist markets, to compound value over the long term and to maintain a disciplined balance between investment, liquidity and shareholder returns. We've been doing this for over 30 years. And while markets evolve, the underlying principle of partnership and patience haven't changed. If anything, patience seems to be the one skill that our investment approach rewards most as long as you can afford to practice it. Looking ahead, we see continued opportunity, particularly in the U.K. and international specialty insurance market, where entrepreneurial talent remains strong. We'll keep doing what's worked for us, investing carefully, supporting our partners and growing value for shareholders.

That's great, guys. If I may just jump back in there, thank you very much indeed for updating investors today. Could I please ask investors not to close this session as you will now be automatically redirected for the opportunity to provide your feedback in order 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 afternoon to you all.