Mercia Asset Management PLC (AIM: MERC), the proactive, regionally focused specialist asset manager with c.£940million of assets under management (“AuM”) is pleased to announce its preliminary results for the year ended 31 March 2021.
Financial results
• Total AuM1 increased by 17.5% to c.£940million (2020: c.£800million)
• Revenue2 increased 50.5% to £19.2million (2020: £12.7million)
• Adjusted operating profit3 £3.3million (2020: £0.5million)
• Net performance fees £3.8million (2020: £nil)
• Realised gains £20.3million (2020: £nil)
• Net fair value increase of £10.1million (2020: £15.8million decrease)
• Operating profit £34.0million (2020: £17.8million loss)
• Profit after taxation £34.5million (2020: £17.5million loss)
• Earnings per share 7.83 pence (2020: loss per share 5.11 pence)
• Proposed final dividend of 0.3 pence per share (2020: nil)
• Unrestricted cash and short-term liquidity investments £54.7million (2020: £30.2million)
• Net assets £176.0million (2020: £141.5million)
• Net assets per share 40.0 pence (2020: 32.1 pence)
1 Including the Group’s consolidated net assets
2 Excluding performance fees
3 Adjusted operating profit is defined as operating profit before performance fees net of variable compensation, realised gains on disposal of investments, fair value movements in investments, share-based payments charge, depreciation, amortisation of intangible assets, movement in fair value of deferred consideration and exceptional items. The reconciliation of adjusted operating profit to operating profit is included in the Chief Financial Officer’s review.
Managed fund developments
• Third-party funds under management (“FuM”) increased by 16.1% to c.£764million (2020: c.£658million) contributing £18.2million in revenue (2020: £11.7million)
• Venture FuM c.£600million (2020: c.£476million)
o Net performance fees totalling £3.8million receivable, following portfolio exits and significant net asset value (“NAV”) increases across the EIS funds and Northern VCTs
• Private equity FuM c.£54million (2020: c.£60million)
• Debt FuM c.£110million (2020: c.£122million)
o CBILS accredited lender for the British Business Bank’s Northern Powerhouse Investment Fund, with a focus on supporting regional businesses throughout Yorkshire and the Humber
Direct investment portfolio developments
• Direct investment portfolio fair value of £96.2million (2020: £87.5million), up 10% notwithstanding four investment realisations completed in the year
• £15.4million net invested into 19 portfolio companies (2020: £15.7million net invested into 18 portfolio companies), including new direct investments into Sense Biodetection and MIP Diagnostics
• Sale of The Native Antigen Company in July 2020 realised total cash receipts of £5.2million and a realised gain of £1.8million
• Sale of Clear Review in October 2020 generated total cash receipts of £1.0million and a realised gain of £0.5million
• Key strategic objective completed with the sale of Oxford Genetics in March 2021. Total cash proceeds of £30.7m ‘evergreens’ the Group’s balance sheet whilst crystallising a realised gain of £18.0million, a 5x return on Mercia’s original direct investment cost of £6.1million and a 51% internal rate of return (“IRR”)
Post year end developments
• Proprietary capital invested of £0.5million in Medherant and £0.3million in Eyoto post year end
• Continuing commercial progress is being made by the majority of the direct portfolio, including each of the top five direct investments by holding value
Mark Payton, Chief Executive Officer of Mercia, commented:
“In the twelve months to 31 March 2021 Mercia performed strongly. Our venture capital activities – both managed funds and held directly – had their strongest year so far, our debt team completed a record number of transactions and our private equity portfolio has returned to growth.
The Group is now strongly cash generative with adjusted operating profits supporting our progressive dividend policy. This, coupled with the robust performance of our direct investment portfolio, has taken NAV per share to 40.0 pence and the interim and proposed final dividends for the year to 0.4 pence per share in total.
Mercia’s hybrid ‘funds first’ regional investment model, combined with our local presence and excellent team, is now delivering in a sustainable manner. As is often the case, this success has been many years in the making and I would like to thank all those that have supported us as we have grown to become the leading provider of connected capital and support to thriving regional businesses. It’s a great pleasure and privilege to work with all of them.”