GuruFocus -
- Consolidated Profit Before Tax: GBP29 million, an 86% increase from GBP15.6 million in the same period last year.
- Net Asset Value (NAV): Increased by GBP23.7 million to GBP252.9 million, a 10.3% increase over 6 months.
- Portfolio Valuation: GBP153 million, a 24% increase or GBP29.7 million in the period.
- Total Shareholder Return: 12.1% over the period, compared to 7.9% last year.
- Available Capital: GBP80.2 million, up from GBP4.3 million in July 2023.
- Dividend Per Share: 10.72p, a 92.8% increase from 5.56p at January 31, 2023.
- Loan Portfolio: GBP19.2 million, down from GBP28.9 million in January 2024.
- Average Interest Rate on Loans: 10.7%, up from 9.9% in July 2023.
- Cash Holdings: GBP80.2 million, up from GBP40.5 million in January 2024.
- Investment Income from Cash: GBP1.6 million over the six-month period.
- Equity Portfolio Value: GBP153.4 million, a 24% increase for the period.
- Aggregate Dividends Paid: GBP4 million over the six-month period.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- B.P. Marsh & Partners PLC reported a consolidated profit before tax of GBP29 million, an 86% increase compared to the same period last year.
- Net asset value (NAV) increased by GBP23.7 million to GBP252.9 million, marking a 10.3% increase over six months.
- The portfolio valuation rose by 24% to GBP153 million, demonstrating strong growth in investment valuations.
- The company has a significant amount of available capital, GBP80.2 million, up from GBP4.3 million in July 2023.
- Dividend per share increased by 92.8% to 10.72p, reflecting the company's commitment to shareholder returns.
- The increase in available capital was partly due to the disposal of Nexus, which may not be a sustainable source of cash flow.
- The loan portfolio decreased from GBP28.9 million in January 2024 to GBP19.2 million, indicating a reduction in loan activity.
- The average interest rate on loans increased to 10.7%, which could indicate higher borrowing costs for investee companies.
- The company's NAV compound annual growth rate (CAGR) has decreased over the years, from 15.5% in 2017 to 12.1% in 2024.
- There is a concern about the ability to find suitable investments for the large cash reserves, given the company's focus on early-stage investments.
A: Daniel Topping, Chief Investment Officer, explained that CEE Specialty came to B.P. Marsh through a former CEO of a portfolio company. The company was not interested in CEE's area, so the CEO approached B.P. Marsh. After due diligence, they found the team compelling and decided to invest, despite Central and Eastern Europe not being a typical investment area for them.
Q: Francesca, with your new appointment as CFO, are there any changes you plan to implement?
A: Francesca Chappell, Chief Financial Officer, stated that she has been with the company for a long time and has seen significant improvements in reporting. She currently has no plans to change the reporting structure but will keep it under review.
Q: How does B.P. Marsh structure its investments in terms of loan versus equity?
A: Daniel Topping explained that the structure depends on the stage of the company. For start-ups, they typically take a 20-40% equity stake and provide the rest of the funding through loans. For established companies, they negotiate terms that minimize equity dilution, as portfolio companies often prefer loans to maintain equity value.
Q: Can you share examples of minority protections you request from investee companies?
A: Daniel Topping mentioned that they have veto rights over certain corporate actions, such as deviations from the business plan, material acquisitions, and financing arrangements. They also appoint nonexecutive directors to the boards of their portfolio companies to ensure proper governance.
Q: How has the NAV CAGR changed over the years, and are opportunities reducing as the group grows?
A: Francesca Chappell noted that despite the NAV growing from GBP79.7 million in 2017 to GBP252.9 million in 2024, the compound NAV growth has increased from 11.4% to 12.2%. This growth reflects the strength of their investments and management team.
Q: How does B.P. Marsh plan to deploy its cash reserves, given its focus on early-stage investments?
A: Daniel Topping stated that their investment approach remains unchanged, focusing on three to five new investments annually, with an upper limit of GBP5 million per investment. They also plan to follow existing investments to benefit from their growth.
Q: Is there much competition from generalist private equity firms?
A: Daniel Topping believes B.P. Marsh's unique approach, focusing on startups and filling an equity gap in insurance distribution, sets them apart. They do not see direct competition from generalist private equity firms in their niche.
Q: Can you comment on Ardonagh's acquisition of PSC?
A: Daniel Topping confirmed the completion of the acquisition and expressed satisfaction with the partnership. He noted that B.P. Marsh intends to continue supporting Ardonagh as they did with PSC, emphasizing the importance of maintaining relationships with key people in the business.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.