Mercia preliminary results FY2024 – CIO’s review

Powering forward

Assessing market dynamics

In our November 2023 interim report, I discussed prevailing market conditions and importantly, Mercia’s strategic response. I noted: “…we have advised our investees to remain focused on their strategies, bolstered by adequate cash reserves and our disciplined support, to concentrate on the controllable elements and run their businesses efficiently.” This focus has served our portfolios well throughout the year.

Dedicated long-term efforts from our talented equity and lending teams

In a year of market volatility and economic uncertainties, Mercia achieved a record organic increase in funds under management with fund inflows exceeding £0.5billion. This substantial growth in FuM, without any redemptions, underlines the trust that investors place in our financial stewardship and is testament to our teams’ sustained commitment, capital deployment and disciplined approach to adding value to our investees and the communities in which we operate.

1 April


Transition to realisation phase Inflows Performance Distributions 31 March



end inflows

Asset class £’m £’m £’m £’m £’m £’m £’m
Venture 630 (47) 365 (9) (26) 913 44
Debt 556 (65) 197 4 (5) 687
Private equity 48 (16) (2) 30
Total FuM 1,234 (128) 562 (5) (33) 1,630 44
Proprietary capital 203 (10) (4) 189
Total AuM 1,437 (128) 562 (15) (37) 1,819 44




31 March



31 March


Asset class £’m £’m
Venture 404 161
Debt 262 166
Private equity 13
Total FuM 666 340
Proprietary capital 47 38
Total AuM 713 378













Significant contributions from five new British Business Bank (“BBB”) mandates

A considerable proportion of this year’s FuM inflows came from existing strategic partnerships, principally with the BBB. This long-term collaboration resulted in £360.0million of new regional mandates, awarded in February and March 2024:

In February 2024:

  • Midlands Engine Investment Fund (“MEIF”) II – Equity ESEM: £83.0million allocated for investments in the East Midlands and South East Midlands;
  • MEIF II – Equity WM: £80.0million allocated for investments in the West Midlands; and
  • MEIF II – Debt WM: £44.0million allocated for lending in the West Midlands, managed by Frontier Development Capital Limited (“FDC”).

In March 2024:

  • Northern Powerhouse Investment Fund (“NPIF”) II – Equity YH: £100.0million allocated for investments in Yorkshire and the Humber; and
  • NPIF II – Debt YH: £53.0million allocated for lending in Yorkshire and the Humber.
Second generation BBB funds First generation BBB funds
Original fund size Mercia mandates awarded   Original fund size Mercia mandates awarded Final fund size Mercia mandate
Fund £’m £’m % £’m £’m % £’m £’m %
NPIF YH Equity   100 15.2% 57 14.3% 122 24.4%
NPIF YH Debt   53 8.0% 50 12.5% 92 18.4%
  660 153 23.2%   400 107 26.8% 500 214 42.8%
MEIF Equity POC   163 40.8% 23 9.2% 54 18.0%
MEIF Debt   44 11.0%
400 207 51.8% 250 23 9.2% 300 54 18.0%
Total 1,060 360 34.0% 650 130 20.0% 800 268 33.5%


As can be seen from the table above, Mercia has increased its initial share of the key Northern Powerhouse and Midlands Engine mandates from c.20% in 2017 via the previous mandate awards, to c.34% and in size from c.£130million to c.£360million. In the first generation NPIF YH and MEIF Proof of Concept (“POC”) mandates, Mercia’s mandate sizes more than doubled (c.£138million) during the funds’ five-year investment phase.

The new recent commitments have increased Mercia’s total mandates from the BBB to c.£0.5billion, net of the valuation methodology change (from mandate size to fund net asset value), now that the 2017 NPIF YH Equity and Debt and MEIF POC mandates have moved into their realisation phase.

Other fundraising successes

Our EIS and VCT teams also successfully raised substantial new funds. The Northern VCTs’ successful £60.0million fundraise was significant in the context of a more challenging fundraising environment. This fundraise underscores the trust Mercia has built in managing the Northern VCTs, which remain a vital catalyst for growth, empowering businesses to thrive across the UK, even in challenging times.

Our EIS team raised c.£14million during the financial year, growing market share against a much softer fundraising environment. Additionally, during the financial year we were awarded a further c.£16million in capital from the North East Venture Fund (“NEVF”).

Since 31 March 2024, c.£15million has been successfully raised by our EIS team, as well as shares totalling £29.2million in value being allotted by the Northern VCTs on 4 April 2024, as part of the second half of their £60.0million fundraise.

Achievements of Frontier Development Capital

FDC continued to perform in line with the Group’s expectations and has now achieved another of its two-year contingent deferred consideration targets, eight months early, with the addition of £100.0million in FuM via a new Brownfield Regeneration Fund for the West Midlands.

These new inflows have significantly increased our financial dry powder and at the year end, we had c.£713million (2023: c.£378million) of liquidity across all our funds and balance sheet, c.£157million (2023: c.£128million) of which sits within FDC’s debt funds.

Direct investments: current standing and market dynamics

The downward re-rating of listed technology companies which began in 2022 persisted into 2023, reducing appetite for venture investment from private market funds. This continued to impact valuations as new funding rounds became more challenging to close, with new money either ‘sitting on the fence’ or negotiating advantageous terms. The impact of this was particularly felt by those existing investors who were unable to follow their money. Mercia, largely protected by significant liquidity, has navigated these challenges by selectively supporting portfolio companies through co-investment from across our funds. This strategy was evidenced by the substantial capital raises completed by Warwick Acoustics Limited (“Warwick Acoustics”), Tozaro Limited (formerly MIP Discovery Limited) and Locate Bio Limited (“Locate Bio”) early in 2024, ensuring operational stability for each investee for approximately 24 months.

The table below lists Mercia’s top 20 investments by fair value as at 31 March 2024, including the net cash invested, realisation proceeds, realised gain, fair value movements and the fully diluted equity percentage held.

Year of


direct investment



value as at
1 April


Net cash


year to
31 March





year to
31 March



Realised gain

year to

31 March



Fair value


year to

31 March





value as at

31 March





held as at

31 March



Voxpopme Ltd 2018 11,015 861 3,973 15,849 20.4
Netacea Group Ltd 2022 11,693 2,696 272 14,661 34.2
Warwick Acoustics Ltd 2014 9,695 2,011 228 11,934 37.3
Medherant Ltd 2016 10,934 10,934 33.3
VirtTrade Ltd * 2015 10,082 2,080 (1,939) 10,223 61.4
Invincibles Studio Ltd 2015 8,697 (130) 8,567 35.5
Locate Bio Ltd 2018 4,858 2,500 479 7,837 20.1
Eyoto Group Ltd 2017 5,487 3,977 (2,322) 7,142 24.7
Ton UK Ltd ** 2015 5,382 746 481 6,609 40.4
Aonic Founder SCS 2023 3,784 3,784 0.0
Axis Spine Technologies Ltd 2022 3,000 3,000 9.4
Tozaro Ltd *** 2020 1,449 1,205 80 2,734 11.9
Pimberly Ltd 2021 1,375 1,237 2,612 4.9
sureCore Ltd 2016 2,417 (1) 2,416 22.0
Forensic Analytics Ltd 2021 1,750 514 2,264 7.4
Nova Pangaea (Holdings) Ltd 2022 2,250 2,250 0.0
MyHealthChecked PLC 2016 969 (187) 782 13.1
Uniphy Ltd 2022 550 40 137 727 3.9
Artesian Solutions Ltd 2023 63 476 539 0.8
Sherlock Biosciences Inc 2023 347 (7) 340 0.3
nDreams Ltd 2014 25,761 (30,211) 4,450 0.0
Impression Technologies Ltd 2015 15,260 3,298 (18,558) 65.1
Other direct investments n/a 3,579 149 (2,071) 1,657 n/a
Total 136,550 19,626 (26,427) 4,450 (17,338) 116,861 n/a


*       Trading as Avid Games

**    Trading as Intelligent Positioning

*** Formerly MIP Discovery Limited, prior to a change in registered name to Tozaro Limited in June 2024


As at 31 March 2024, the fair value of our direct investment portfolio was £116.9million (2023: £136.6million), with a net £19.6million invested during the year. As a whole, the year saw positive fair value movements of £7.9million across 10 assets offset by downward movements of £25.2million on eight assets, giving a net fair value decrease of £17.3million.

Significant upward movements in Voxpopme Limited, resulting from the structuring of April 2023’s funding round, and Pimberly Limited, alongside smaller uplifts in the software businesses Forensic Analytics Limited (“Forensic Analytics”) and Intelligent Positioning Limited, were offset principally by Impression Technologies, Eyoto Limited (“Eyoto”), VirtTrade Limited (“VirtTrade”) and Akamis Bio Limited (“Akamis Bio”).

Investment discipline, support and strategy

Having supported Impression Technologies for a decade in both our funds and balance sheet, at the end of May 2024 we made the very difficult decision to cease further material financial support. Mercia had reduced its direct investment carrying value for Impression Technologies at the time of its interim results, reflecting increased uncertainty following a sale process which did not ultimately succeed. Since that time, as announced, Impression Technologies had continued to explore options including further funding or a sale. Ultimately however, no successful new external funding or a sale of Impression Technologies was achieved. Mercia therefore reduced the full remaining carrying value of Impression Technologies.

Eyoto, in consultation with the US Food and Drug Administration (“FDA”) for its slit lamp product approval, now faces delays due to additional trials, so has shifted its focus to Europe where approval is already secured. Whilst we continue to provide financial and operational support, we have recognised this setback through a reduction in the carrying value of our investment. VirtTrade has experienced slower growth than planned in its CUE game, also reducing its enterprise value as industry multiples have stagnated. Akamis Bio, now included outside of the top 20, predominantly accounts for the remainder of the downward movement following an indicative funding round which significantly reduces the value of Mercia’s minority equity holding.

Cybersecurity firms like Forensic Analytics, which support UK police investigations and Netacea Limited, specialising in automated attack detection and mitigation, are making commercial progress as they adapt to and counter rising AI-related threats. Meanwhile, in the Life Sciences sector, promising developments continue. Medherant’s innovative testosterone patch for menopausal women is moving forward. The company has also signed a development partnership with Bayer. Locate Bio, benefiting from a £9.0million investment in early 2024, is showing success in its early clinical trials. Additionally, Warwick Acoustics has broken new ground, securing its first automotive contract for production in 2025 and is progressing multiple proof of concept projects with leading automotive OEMs.

In the year, we paused on adding new companies to our direct investment portfolio, whilst also ensuring that we retain capacity to continue supporting our existing portfolio companies on their journey to exit across the next three years.

Progress through strategic sales

The notable sale of nDreams in November 2023, having transacted at a 17.3% uplift to the 31 March 2023 carrying value, returned £26.4million of cash to the Group’s balance sheet. This transaction not only returned substantial cash but also allowed us to maintain a direct interest in the ongoing development of nDreams and the augmented reality (“AR”)/Virtual Reality (“VR”) market, with £3.8million of the £30.2million total consideration invested into the pan-European Aonic group. This sale was just one of the realisation events in the year that contributed to total realisation proceeds of c.£93million across our funds and balance sheet.

Investment overview – managed funds

During the year we invested c.£227million (2023: c.£144million) across the funds which we manage, into 155 businesses including 75 new companies.




Asset class


31 March





in portfolio










EIS 99 81 28 4
Regional venture 458 89 37 10
VCT 356 58 45 4
Debt 687 287 116 26
Private equity 30 5 1 2
Totals 1,630 520 227 46


Mercia Ventures

Strengthening our position as one of the UK’s most active investors

Mercia Ventures has reinforced its position as one of the leading venture capital firms in the UK. The basis of our success over the past year has been our ability to secure and expand the regional investment mandates from the BBB, additional NEVF funds plus new funds raised by our Northern VCTs and the EIS team. With record levels of capital raised by UK VCT and EIS managers in previous years, we noted that entry valuations in the pre-series A space remained competitive throughout the year. At Mercia, we leverage our predominantly regionally based investment staff to source new deals and maintain a competitive edge against other funders. Our network of over 1,000 successful NEDs and proven entrepreneurs provide good quality deal flow and critical insight, which is helpful in winning mandates in competitive situations.

Early-stage investment

Geographically positioned to secure top-tier, early-stage venture deals across the regions, the new BBB mandates permit a wide range of funding solutions that include ‘cash out’ components for high-growth businesses across the UK regions. These mandates provide a secure pool of capital for early-stage investments over the next five years across these regions. Our focus on both capital deployment and value creation enables us to attract businesses seeking a sustained partnership across multiple funding rounds. We aim to build a balanced portfolio for our investors that range from start-ups, including management breakouts such as Fourteen IP Limited and Secure Empty Property Limited, to businesses experiencing profitable growth phases, such as Azzure IT Limited. We also focus on generating returns for our EIS investors by investing in early and expansion-stage businesses like Sheffield-based Sitehop Limited and Liverpool-based Ulemco Limited, across the UK.

Our Early Stage Venture (“ESV”) team deployed c.£65million during the year, c.120% of target, highlighting an outstanding team effort given that it marks the first year of operations for ESV within Mercia Ventures. Furthermore, this was achieved in a year of transition with the ending of the five-year investment period of the first-generation BBB regional funds, and the beginning of the five-year investment period for the second-generation programme.

Scaleup investment

In companies seeking later-stage venture capital, we invested c.£45million on behalf of the Northern VCTs. Given the economic uncertainties, our team maintained a cautious approach to new investments, emphasising disciplined entry pricing. From a fundraising perspective, the Northern VCTs raised £60.0million, matching the largest fundraise ever by the Northern VCTs, with shares allotted in December 2023 and April 2024.

During the year, we also enhanced our investee partnership model, known as Nucleus, which focuses on four key areas; talent acquisition, specialist expertise introduction, growth partnership and expertise sharing across our portfolio. In doing so, our focus remains on portfolio performance and value creation. The successful Evotix Limited exit (£35.7million at a 4.6x return) by the Northern VCTs, demonstrates Mercia’s ability to foster significant returns on later-stage investments.


Mercia Debt

Supporting the UK’s small business community amidst economic shifts

The past 12 months have posed significant challenges for small businesses across the UK. Although the COVID pandemic has subsided, its lingering effects are still being felt, with many businesses grappling with high levels of debt, high interest rates and cost inflation.

Demand for growth capital has been subdued, with the majority of businesses focusing on internal challenges such as debt reduction, margin improvement and overhead cuts rather than on growth or acquisitions. Many funding requests are now to support cash flow or working capital as opposed to expansion projects. These challenges are further compounded as traditional lenders continue to consolidate their centralised models, including the closure by banks of high street branches and an increased aversion to SMEs and more generally, risk.

Mercia is very active in providing transactional debt such as for management buyouts and acquisitions. During the pandemic many of these transactions were paused, however in 2023 we experienced a strong inflow of new lending opportunities as a wave of pent-up deals finally came to market. More latterly, deal flow has returned to more ‘normal’ levels and although businesses remain focused on internal challenges, there will always be a level of exits driven by retiring shareholders or other events.

Mercia’s Debt funds have consistently filled the funding gap for viable businesses across the UK. During the last financial year, our response to market conditions and support for companies with strong financial controls and sustainable business models have solidified our position. Despite a challenging environment, our Northern Debt team completed 50 deals, a decrease from the 82 deals in 2023, with total lending down to £17.3million from £34.1million. This reduction not only reflects a reduced demand from SMEs but also a more cautious lending approach. It also coincides with the transition from NPIF to NPIF II at the end of December 2023.

Frontier Development Capital Limited

It has been a very successful year for FDC, achieving its highest revenue to date, driven by an experienced and talented leadership team.

The integration into Mercia has been highly successful, thanks to the cultural compatibility between the two organisations. FDC’s strengthened relationship with Mercia’s Northern Debt team has been advantageous in fostering mutual deal referrals. Similarly, Mercia’s track record and expertise has supported FDC in securing the MEIF II Debt WM mandate. FDC can already offer up to £7.5million in growth capital nationally and up to £20million in property finance across the West Midlands region through its existing mandates. Winning the new BBB mandate has added to that capability, with FDC now providing essential debt finance solutions ranging from £250,000 to £2.0million throughout the region.

During the year, FDC’s assets under management grew from c.£441million to over £540million. This excellent growth is a testament to FDC’s reputation and track record for delivering strong results for its fund investors.

Higher interest rates have presented a significant challenge for SMEs during the past 12 months; however, FDC’s property team have continued to support known, well capitalised and capable developers on both residential and commercial development transactions. Market and occupier confidence continues to improve and the team are in the process of raising additional new funds. The property portfolio remains in good shape, generating strong investor returns.

With the securing of both the MEIF II Debt West and NPIF II Y&H Debt mandates totalling £97.0million, Mercia can continue to deliver these key UK Government schemes across the regions. Our ability to act swiftly, leveraging both government-backed schemes and privately raised funds, positions us as a leading SME lender in the regional debt market. With a loan range that spans from £250,000 to £20million, we are optimistic for increased activity in the coming year.


Mercia PE

Pathways to growth

Mercia identifies high-quality small businesses by their ambitious, motivated management teams who possess a sense of ownership and responsibility. Building a successful small company demands unwavering focus and Mercia values the opportunity to align with such committed individuals.

Despite ongoing high interest rates leading to lower levels of gearing and an uncertain economic environment leading to lower deal volumes across the lower mid-market PE market, Mercia has remained proactive both in its existing EV Growth Fund II (“EVGII”) and FDC’s own growth fund. During the last year Mercia’s focus has been on improving performance within our portfolios. This approach was successfully demonstrated with two exits in the year – the 1.6x exit from ParkCloud Holdings Limited returning £7.2million and the 2.5x sale back to management of Winder Power Limited, returning £3.2million. These successful exits enabled one of our legacy funds to close with an overall 3x return on its portfolio.

As EVGII has now concluded its investment phase, the focus shifts towards collaborating with our portfolio companies to maximise value, with further cash returns anticipated in the near future.

Summary and look forward

Following our successful fundraising activities and realisations, Mercia now possesses over £660million of managed fund capital to deploy, setting a solid foundation for increased equity investment and lending activities in this new financial year. We’ve become a leading provider of capital across the UK, supporting innovative businesses with venture capital, debt and private equity.

Whilst I’m disappointed that we have fallen short in achieving the average £20.0million per annum profit before tax element of our ‘Mercia 20:20’ vision, this has been partly due to the uncertain macro-economic and subdued public and private markets environment we still find ourselves in. Our realisations over the past three years have however exceeded £0.4billion across our funds and balance sheet, a significant accomplishment. I reiterate that our portfolios are well run and contain many resilient and promising assets. I remain confident that we are positioned to deliver significant value over the medium term for both our fund investors and shareholders.

Looking ahead, two prominent themes are emerging in business funding. Investors, especially institutional ones, are increasingly seeking to generate not only robust financial returns but also meaningful societal impact. Concurrently, businesses are gravitating towards innovative, ‘hybrid’ funding models that offer the necessary flexibility, support and motivation to prosper. As Mercia grows, it will continue with its mission as a partner known for impactful and adaptable funding solutions.

I would like to thank all the team members of #OneMercia who played key roles in our record fundraising year. I am also pleased that all our equity investing and lending teams have such liquidity to be able to make new investments from our funds in the years to come, together with continuing to support existing ones where merited. Their efforts over many years have helped Mercia become the go-to investor for SMEs across the UK.


Julian Viggars

Chief Investment Officer