Source www.trendwatch.co.uk 1 September 2004

January 14 2005 is a date that will soon be engraved on the hearts of anyone managing or owning any insurance company, large or small. On that day, almost all general insurance companies, including insurance brokers, will be regulated by the FSA.

Trendwatch publications is, of course, also regulated by the FSA. As a media business, compliance with the massive FSA rule book is considerably less onerous than it is for business that hold client money for investment or insurance purposes. Even so, grappling with the FSA can be like mud wrestling a multi-headed hydra.

To give one small examplee, we recently found out that, to add letters Ltd after ourname )no other changes to the business whatsoever) requires the completion of between 50 and 60 pages of forms and the preparation of much other supporting documentation. The FSA will not even deign to look at it unless it is accompanied by a cheque for 1,500. If everything then seems to be in order, the FSA undertakes to deal with the matter within 6 months.

If, in our infinte naivete, we had failed to realise this palava was a legal requirement, the MOther of All Parliaments has decreed that we would be committing a criminal offence, and liable to be detained at Her Majesty's pleasure at a house of correction and her learned judge's choosing.

This is what the FSA regards as'light touch' regulation which minimises disruption and cost ot businesses.

Now imagine how tricky things can get if you attempt something really complicated such as taking on a member of staff.

The FSA estimates that it already has about 10,000 in the mortgage and general insurance field by the short and curlies. It estimates that at least another 10,000 business will be dragged kicking and screaming into the brave new world of 'light touch' regulation. Around 2,500 insurance brokers will be lightly touched by the FSA on January 14.

But, as everything in life, one mans Kafkaesque nightmare is another man's business opportunity. Which brings us to Broker Network Holdings (BNH)

BNH floated on AIM as recently as May this year (raising 2m in the process), so most investors will know little about it, if indeed they've heard of it atall. We're recommending it because we feel that burgeoning profitability will soon make it a lot better known.

As the name suggests, BNH exists to build a network of independent insurance brokers, all operating within the BNH framework. This follows a path wellbeaten by IFA's, accountants and dentists. BNH is the longest established player in its field and believes that it has a stronghead-start, and a great deal more credibility than other 'me too' imitators.

The system works like this: as an independent insurance broker, you undertake to pay 95 a month to BNH. You also undertake to pass all your insurance business premiums through BNH. BNH places the insurance business with the giants such as AXA, Norwich Union, Royal and Sun Alliance and Cornhill. The members receive enhanced commission from the insurance companies because of the preferential status granted to BNH. Since BNH deals with the placing of the insurance, this greatly reduces the credit risk of the individual members.

BNH takes 1.5% of the premiums from its members and, in return, provides members with a number of valuable support services, including access to Lloyds of London, centralised back-office IT support, marketing assistance, access to e-commerce, staff training and development, business management and monitoring... and FSA compleance support.

BNH is also prepared to purchase broking firms outright where the opportunity presents itself. There are believed to be a large number of small owner-managed brokers where the owner is approaching retirement. For many of them selling theri business to BNH, typically for around 0.3m, rather than grappling with the FSA, is probably an attractive option. So far BNH has acquired 9 such brokers.

Since it was founded in 1994, it has absorbed 133 brokers into its network and plans to acquire about 90 more over the next 5 years. Out of the estimated 19bn paid in insurance premiums in the UK every year, an est 80% is handled by insurance brokers. Most of this goes to through the big brokers, but about 3bn a year (typically commercial rather than personal business) is processed by the 2,500 small so-called 'community brokers' that form the BNH network.

hat represents the extent of BNH's market pond.

At time of floatation, BNH est that no more than 12% of its target broker had aligned itself with any particular network. Clearly there's plenty of scope for growth.

The company is already profitable. Its last full year results were published in July and showed a profit for the principle trading subsidiary - the PLC holding company had not yet been created - of a record 0.77m up rom 0.70m. 27 new members were taken on.

Brewin Dolphin reckons it will make 1.77m this year, rocketing to nearly 3m in 2005-06. If these estimates are correct, it puts BNH on a forward p/e of 6, which is extremely low for the sector, especiallyfor a company whose profits are growing at such a rapid rate

BUY

Good luck all, lets see what the day ahead brings...

Seem good to me... going in the right direction!!!

I did think about selling before the results but have decided to hang on in there .Another acquisition and i`m sure there is plenty more to come from this share in the future
DB66

Another 2 doughboy....

The results were fantastic imho and plenty of growth to come...

Excellent set of results well done bnh...

Totally agree, I am very happy about the prospects and how bullish ceo was/is.

The new director is very well respected in the industry my sources confirm....

Legend,

Remember post 113, SP to touch 1.50 on 14 July. Oh well, we'll let you off this time unless you have J Lo's bottom and seek regional coverage! LOL!

I'm sure this will touch 1.50 but not sure when or even this year! Good company, good results but very illiquid. If this stock is difficult to buy, then many potential investors will be put off and place their funds elsewhere - I think this is the main reason the SP has not really moved since the latest positive RNS.

Good luck to all investors.

Thanks ramu..

I'ts good to see sp held up well without collapsing after a few sells. House broker has just issued a buy note... and increased forecasts to 2.3m...

Are you still in??

Also, all the press has been positive... take a look at the following article taken from the Yorkshire Post:

One year after listing and Broker Network sees profits soar
Ros Snowdon
Deputy City Editor
BROKER NETWORK, the company that acts as an umbrella network for small insurance brokers, celebrated its first year as a listed company with a sizeable increase in profits yesterday.
The Harrogate-based company has around 140 small high street insurance brokers, known as members, which specialise in commercial insurance for small businesses.
On top of providing the umbrella network, the group also has a scheme to buy up brokers who want an exit and run them for greater profits.
The group now has 14 brokers following the acquisition of a further three companies since the year end on April 30. These include the group's biggest acquisition to date following the purchase of Fraser Tennant Holdings for 2.85m earlier this month
The group expects to make around 10 acquisitions this year and the plan is to build up to 90 businesses over a six-year period.
Yesterday Broker Network's chief executive Grant Ellis said annual pre-tax profits had risen by 73 per cent to 1.3m on the back of a 63 per cent increase in turnover to 7.6m.
Mr Ellis said there were enormous opportunities for the group as only 10 per cent of the 4,500 brokers in the UK belong to a network. Broker Network is the largest umbrella group its closest rival has around 70 firms.
"The concept of networks has become a lot more accepted," said Mr Ellis. "Two years ago many brokers thought they could manage on their own, but now these companies are signing up."
The change in attitude has come about because ten years ago the top 250 brokers accounted for only 25 per cent of the market.
They now account for nearly two thirds of it which means that smaller brokers have come to feel like second-class citizens, hence the need to belong to a bigger network.
The group said that the acquisition earlier this month of Fraser Tennant, based in Stirling, will give it an important entry into Scotland.
A lot of small brokers merely run their businesses in order to take home a decent salary, in other words they only do as much as they need to do to support their way of life.
Once bought by Broker Network, overheads can be cut back and profits increased.
Fraser Tennant is the largest acquisition to date and is roughly five times bigger than the group's second largest acquisition.
13 July 2005

FT did a good write up too...

Legend,

Not sold a single one yet but if cashflow does not improve.....

Can you post the FT article? Thanks.

Hi ramu....

Not the best rns but have just spoke to Buchanan the pr co for BNH on 01943 883983 and have reassured that nothing to worry about.

They are very bullish and were 'surprised' to see the reaction it has had on such fantastic results...

Watch what happens over the next month ;-)

P.S. What's up with the cashflow??!!

Hi ramu....

Not the best rns but have just spoke to Buchanan the pr co for BNH on 01943 883983 and have reassured that nothing to worry about.

They are very bullish and were 'surprised' to see the reaction it has had on such fantastic results...

Watch what happens over the next month ;-)

P.S. What's up with the cashflow??!!

Down again! Can't BNH take a leaf from ASOS on investor relations? About time they changed their PR company and persuade market makers to reduce the spread and make this share more tradeable. Many loss making companies with nothing going for them except hype have grown considerably this year but BNH are down on the back of excellent results!

The value of my investment in BNH has gone down since I bought the shares recently. What is happening here?
I don't wish to be a wet blanket..it is in my own interest that the price should go upwards!

Did you get my email john??
buyers still around...

Hello Legend good to see you back on the board ,i thought you had deserted us.
Even though we have had a small rise today i am little surprised at the poor performance of SP given results and acquisitions made.
I have total confidence in the long term prospects of BNH but it is a little disappointing when you could have sold for a small profit and got back in again .
DB66

Hi, glad to see your still holding doughboy... i am off to the agm tomorrow. Will let you know what is said (if anything)

Plenty of buying interest....

Spoke to Grant Ellis for about half an hour. I HAVE NEVER BEEN AS OPTIMISTIC AS I AM NOW.

He is a very down to earth person and openly admits that running a plc is new to him, but i have absolutely no doubt of his ability to run the company. He is a very smart cookie and knows exactly what he is doing. When a person can look you in the eye and tell you that he isn't/won't be losing sleep about the company he is running, you feel much more at ease about the company you have invested your money in.

The Fraser Tennant acquisition is well worth its money... the broker network name is now well known in scotland and has generated plenty of interest from scottish brokers to contact bnh leading to potentially more members.

I spoke to buchanan initially about the 'sale of shares' and its impact onthe depressed share price. They were keen to introduce me to grant ellis to tell him what people thought. He was on holiday at the time of the announcement and when he came back he thought that it looked quite bad so it was him that initiated the rns to reassure shareholders.

The buyers over the past few days have been institutional. I would predict that this would continue ;-)

I would predict more newsflow over the next few months!!!

if i had more money i would add, I don't so I will hold the ones i have got!!

P.S. Upbeat trading statement

Keep Smiling

Thanks for the information legend,given the statements made today and your conversation with Grant Ellis i think we can all sleep well with this one.
The only way is up (i hope)
db66

Totally agree, don't think i have ever seen such thing as a dead cert in all my life (short as it is)