Mercia interim results 2023 – Chief Investment Officer’s Review

Investment activity

During the six months to 30 September 2022, we invested c.£56million into 80 businesses across our funds and balance sheet. This included 34 companies new to Mercia’s third-party managed funds and one new direct investment portfolio company, Uniphy. At the end of the period, we had c.£296million of liquidity to support our future investment activity, including c.£56million on our balance sheet, putting us in a strong position as we move towards 2023. Overall, AuM increased c.2% to c.£979million, including positive direct investment net fair value movements of £5.6million.

We have started to reap the benefits of our expanding regional footprint with four new investments in the South West region, and see significant opportunity in this vibrant part of the UK. It is due to the scale of the opportunity here that we will soon be expanding our South West team to four full-time investment professionals, based in Bristol.

Investment realisations

During the six-month period to 30 September 2022, we benefitted from 14 full and partial equity exits (H1 2022: nine). These realised c.£25million at a combined return of 1.6x. The standout exit was C7 Health Limited (“C7”), which we sold in June to TAC Healthcare Limited (“TAC Healthcare”), generating a c.14x cost return for our earliest EIS investors and a c.9x cost return for subsequent fund investors. The overall blended cash-on-cash return was lower, as nine businesses were exited at either less than investment cost or were partial realisations. Within the management of venture portfolios, it is crucial to alleviate investment management time from underperforming assets. This discipline will continue as our portfolios mature and grow in size.

Proprietary capital

As at 30 September 2022, our direct investment portfolio was fair valued at £131.5million (H1 2022: £110.3million; FY 2022: £119.6million) with 22 active companies (H1 2022: 20; FY 2022: 21).

We invested £6.4million net into the direct investment portfolio in the first six months of the current financial year (H1 2022: £5.4million). A significant amount of time was spent evaluating our new deal pipeline, which resulted in a small initial investment into Uniphy, a Deep Tech business that can enable any surface to become a smart human-machine interface. Our efforts also saw us add two new direct investments shortly after the period end in October 2022, with Axis Spine, a Med Tech business delivering spinal implants, and Nova Pangaea, a Clean Tech business focused on creating biofuels and biochar to address some of the most pressing climate concerns of today. The investment into Axis Spine was part of a £10.0million series A round which included other Mercia funds, as well as continuing our strategy of bringing in specialist new syndicate partners, such as MedTex Ventures LLC from the USA, a specialist healthcare investor.

The table below lists Mercia’s top 20 investments by fair value as at 30 September 2022, including the net cash invested, realisation proceeds, fair value movements and the fully diluted equity percentage held.

Year of first direct investment Net investment value as at 1 April 2022


Net cash invested six months to 30 September 2022


Investment realisations six months to 30 September 2022


Fair value movement six months to 30 September 2022


Net investment value as at 30 September 2022


Percentage held as at 30 September 2022


nDreams Ltd 2014 25,761 25,761 33.2
Impression Technologies Ltd 2015 10,372 3,588 13,960 65.1
Netacea Ltd 2022 12,204 12,204 24.1
Voxpopme Ltd 2018 10,511 10,511 17.6
VirtTrade Ltd * 2015 5,387 450 4,003 9,840 40.6
Warwick Acoustics Ltd 2014 6,306 1,450 1,939 9,695 40.3
Medherant Ltd 2016 8,989 8,989 33.1
Invincibles Studio Ltd 2015 4,600 1,400 6,000 39.0
Ton UK Ltd ** 2015 6,074 (699) 5,375 29.9
Locate Bio Ltd 2018 4,858 4,858 18.1
Eyoto Group Ltd 2017 2,960 444 3,404 11.5
Sense Biodetection Ltd 2020 2,479 2,479 1.6
sureCore Ltd 2016 2,417 2,417 22.0
W2 Global Data Solutions Ltd 2018 2,500 200 (401) 2,299 16.3
Intechnica Holdings Ltd *** 2017 14,411 (12,204) 2,207 24.1
PsiOxus Therapeutics Ltd 2015 1,780 1,780 1.4
Forensic Analytics Ltd 2021 1,750 1,750 8.9
MyHealthChecked PLC 2016 1,632 102 1,734 13.1
MIP Discovery Ltd 2020 1,449 1,449 10.2
Edge Case Games Ltd 2015 2,300 (883) 1,417 18.7
Other direct investments n/a 3,022 271 (11) 134 3,416 n/a
Total 119,558 6,403 (11) 5,595 131,545 n/a


*       Trading as Avid Games

**   Trading as Intelligent Positioning

*** Formerly Intechnica Group Ltd prior to the demerger of Netacea Ltd


Direct investment portfolio highlights

The period under review saw net upward fair value movements of £5.6million, mainly driven by significant commercial progress at our two mobile games businesses, VirtTrade Limited (“VirtTrade”) and Invincibles Studio Limited (“Invincibles Studio”), in addition to continued progress made by Warwick Acoustics Limited (“Warwick Acoustics”). The significant fair value movement shown above on Intechnica Holdings Limited (“Intechnica”) follows the demerger into separate entities of the profitable Intechnica consultancy business and Netacea Limited (“Netacea”), the bot management business; however if taken together, the aggregate carrying value of the two businesses has not changed from that of the original Intechnica Group Limited as at 31 March 2022. The other small fair value uplift arose as a result of MyHealthChecked PLC’s share price increase from 1.6 pence as at 31 March 2022, to 1.7 pence as at 30 September 2022. These uplifts were balanced against falls at our lower growth software businesses, Intelligent Positioning Limited, W2 Global Data Solutions Limited, and digital games company Edge Case Games Limited as expected royalty receipts from Wargaming move further out into the future.

Our top 10 direct investment holdings represent c.82% of the value of our portfolio as at 30 September 2022. There has been positive progress across a number of our largest investments as summarised in the sectorial review below.

Digital Entertainment; c.33% by value of the portfolio

nDreams Limited (“nDreams”): 33.2% fully diluted direct investment

Farnborough-based nDreams achieved revenues of £5.6million for the year to 31 March 2022. Following the £20.0million investment from Aonic AB in March 2022, the company has significantly grown its workforce and capabilities. It now has four teams working across three studios on different projects, including a new remote team working on truly next-generation virtual reality (“VR”) gaming concepts including Ghostbusters VR with Sony Pictures and Meta. Its third-party publishing division continues to progress after the successful launch of Little Cities in early 2022.

Mercia first supported nDreams in 2014 via its managed funds. The company is highly regarded in the VR space as much for its technical capability in VR, following the launch of its Fracked game, as for its quality content and publishing success.

Invincibles Studio: 39.0% fully diluted direct investment stake with a further 7.6% fully diluted stake held by Mercia’s managed funds

North West-based mobile soccer management game developer Invincibles Studio continues to make steady progress. Its Soccer Manager 2023 game launch in late September 2022 has resulted in significant growth, with new users up c.80% and revenues up more than c.50%. Invincibles Studio has renewed its previously negotiated licences with FIFPro, the Scottish Premier League, Arsenal football club manager Mikel Arteta as the face of the game, and the social media rights to Inter Milan. It has also signed a worldwide licence with the Bundesliga and its players. Invincibles Studio has two new games in development which will be launched in 2023. The first will be Ultimate Soccer League, a new multiplayer game that will offer a differentiated experience from other football management games, in Spring 2023.

VirtTrade (trading as Avid Games): 40.6% fully diluted direct investment stake with a further 4.2% fully diluted stake held by Mercia’s managed funds

VirtTrade originally developed and operated a platform that enabled the rapid creation, distribution and sale of digital trading cards across white-label mobile applications. The business launched a mobile game using its own intellectual property called ‘CUE Cards’ (Cards, the Universe and Everything) in December 2019 and is now focused entirely on growing this game. VirtTrade has been able to scale significantly over the past year, and has grown monthly revenues five-fold, by focusing on the key metric of return on advertising spend.

Software; c.27% by value of the portfolio

Voxpopme Limited (“Voxpopme”): 17.6% fully diluted direct investment stake with a further 13.6% fully diluted stake held by Mercia’s managed funds

Voxpopme is a software business based in Birmingham and Colorado USA that provides video analytics software to firms in the market research, customer experience and, in the future, the recruitment and HR markets. Its primary business of video data analytics is proving disruptive to both the market research and customer experience markets, where it has launched products to date. Its annual recurring revenue (“ARR”) has now grown to $8.4million.

Netacea: 24.1% fully diluted direct investment stake with a further 26.5% fully diluted stake held by Mercia’s managed funds

Manchester-based Netacea has developed an enterprise server-side bot management solution that protects websites, mobile apps and APIs from automated threats, using an intelligent detection engine. The agentless technology focuses on understanding the traffic’s intent rather than just distinguishing between human and malicious bots. It is now a standalone entity with an ARR of c.£6million, having demerged from Intechnica, and is concentrating on scaling its sales and partnership business, both in the UK and in the USA.

Deep Technology (“Deep Tech”); c.20% by value of the portfolio

Impression Technologies Limited (“ITL”): 65.1% fully diluted direct investment stake with a further 0.9% fully diluted stake held by Mercia’s managed funds

ITL has been developing a proprietary aluminium lightweight technology, HFQ™, with its own pressing plant in Coventry, since 2016. Alongside its German licensee, Fischer, it recently showcased the world’s first example of an HFQ-formed high-strength aluminium structure using 100% recycled aluminium (having the potential to reduce embedded carbon by over 90%). In addition, ITL presented an innovative single-piece battery enclosure lid made from high-strength alloy. As an innovation that could offer reduced weight, part count and carbon intensity, HFQ captured the attention of a large number of engineers from established and emerging original equipment manufacturers (“OEMs”), with a focus on new electric vehicle and delivery van platforms.

Warwick Acoustics: 40.3% fully diluted direct investment stake with a further 1.3% fully diluted stake held by Mercia’s managed funds

Midlands-based Warwick Acoustics creates highly innovative audio products for both the automotive and the high-end personal and studio headphone market. The company raised a further £2.5million in the summer from new and existing shareholders to fund its next stage of development. Commercial traction continues with three ongoing projects at various stages with global automotive OEMs and with others under current negotiation.

Life Sciences; c.20% by value of the portfolio

Medherant Limited (“Medherant”): 33.1% fully diluted direct investment stake with a further 13.1% fully diluted stake held by Mercia’s managed funds

Midlands-based Medherant is a University of Warwick spinout commercialising a platform of proprietary patch adhesive for medical applications. It benefits from several external partnerships, and its internal development program is progressing well ahead of a potential late-2023 launch. In respect of its external partnerships, one has progressed through the first two evaluation hurdles, with the collaboration having been extended further. If successful, this would address a multi-billion-dollar market opportunity.

Locate Bio Limited (“Locate Bio”): 18.1% fully diluted direct investment stake with a further 24.6% fully diluted stake held by Mercia’s managed funds

Nottingham-based Locate Bio is developing a range of orthobiologics, including its lead bone graft solution which continues its large trials program as part of the US Food and Drug Administration approval process. Locate Bio’s products will be used by orthopaedic surgeons to accelerate the natural repair of bone and cartilage. Addressing a multi-billion-pound global market, Locate Bio currently has four products going through trials.

Assets under management

AuM increased by c.2% to c.£979million, with c.£54million of new capital raised by our retail EIS and Northern VCTs during the six-month period. Partially offsetting these AuM inflows were downward valuation movements in AIM quoted VCT portfolio companies, the largest being musicMagpie plc, in addition to distributions back to fund investors and dividends paid to VCT and Mercia shareholders.

AuM 1 April 2022 Investor inflows Performance Distributions AuM 30 September 2022 Post period end inflows
Asset class £’m £’m £’m £’m £’m £’m
Venture 592 54 (21) (14) 611 12
Private equity 48 (2) 46
Debt 118 (2) 116
Total FuM 758 54 (23) (16) 773 12
Proprietary capital 201 7 (2) 206
Total AuM 959 54 (16) (18) 979 12


Third-party managed funds

As at 30 September 2022, we were managing c.£773million of third-party funds (H1 2022: c.£762million; FY 2022: c.£758million). Across those funds we had c.£240million of liquidity (H1 2022: c.£232million; FY 2022: c.£236million), which enables us to fully support our portfolio companies and transact new deals in the future.

In April 2022, we added a further c.£45million of organic FuM following successful EIS and Northern VCT fundraises, and in September 2022, closed our Q3 2022 EIS Fund, raising c.£9million. Furthermore, post period end, we have received a further c.£12million allocation from the BBB in relation to our MEIF mandate.

During the six-month period ended 30 September 2022, we invested £49.1million across the multiple funds which we manage as follows:

Asset class FuM 30 September 2022


Companies in portfolio


Amount invested


Company exits


EIS 89  71 5.8 5
VCT 335 56 20.2 2
Regional venture 187 109 13.1 6
Private equity 46 9 0.3
Debt 116 179 9.7 16
Totals 773 424 49.1 29

Managed funds’ portfolios


The 13 full and partial exits returned £25.0million in the six months to 30 September 2022, at a combined return of 1.6x. The standout exit was C7, which we sold in June to TAC Healthcare, generating proceeds of £8.0million, equating to a return of c.14x cost for our earliest EIS investors and c.9x cost for subsequent fund investors. Our VCTs exited two investments; AIM-quoted Ideagen PLC, which has been held since its listing, generating a return of 5.9x cost, and Edtech business, Knowledgemotion Limited, which returned 1.7x cost.

Our third-party managed funds across all asset classes have exposure to various technology sectors, but do not typically invest in capital-intensive businesses or pre-IPO scale-ups hoping to list before reaching profitability and cash generation.

Private equity (“PE”)

The value of our PE funds declined marginally during the six months to 30 September 2022. Although Shoppertainment Limited and ParkVia Limited, previously exposed to COVID-19-related issues, returned to growth, supply chain headwinds and inflationary pressures continued to impact the portfolio.


Mercia’s Debt funds’ team saw an increase in activity during the period, supporting 33 businesses, lending a total of £9.7million. In August 2022, Mercia gained accreditation to deliver loans under phase three of the Government’s RLS, via its Northern Powerhouse Investment Fund debt mandate. Mercia’s vastly experienced Debt team continues to support profitable SMEs, mainly across the North of England.


Only six months ago, I finished my Chief Investment Officer’s review for the year to 31 March 2022, saying that we must not ignore the effects of inflation, ongoing supply chain issues and the uncertainty caused by military conflict. We are now seeing the effects of all of these, alongside additional political and mortgage rate instability, within our daily lives. This has meant that we find ourselves in quite remarkable times. In contrast, the past six months at Mercia have been relatively unremarkable; our experienced team has been well prepared and our investee companies have put their heads down and got on with what is in front of them. We continually review cash levels at our investees and believe that their management teams work best when they are not looking over their shoulders. We have ample cash on our balance sheet and liquidity within our third-party funds to continue to support the most promising investments over the next 12 months and beyond.

The beauty of our model at Mercia is that we can also provide significant non-financial support to our companies, with value enhancing input from our Head of Portfolio Resourcing, Lisa Ward, and her team. Within our network of over 1,000 experienced NEDs, chairs and operating partners, there are complementary skill sets that we can introduce to help our portfolio businesses grow or navigate speed bumps; in the first six months we have made 16 such additional appointments.

The first half of the financial year has yielded continued progress across our portfolio companies despite toughening conditions. As always, I would like to thank all our dedicated staff for their efforts during the past six months.

Read the full RNS here