Mercia preliminary results FY2024 – CEO’s review

Powering growth


The year to 31 March 2024 was characterised by market volatility, high inflation and high interest rates driving up the costs of doing business, alongside geopolitical uncertainty and a thankfully short-lived recession. It is therefore pleasing to have come through these universal headwinds with record organic growth in our assets under management, driven by Mercia’s diversified and differentiated approach to making a positive impact for our investors and investees.

Since our IPO in 2014, Mercia has naturally evolved into a specialist alternative asset manager, focusing on impactful investing throughout the UK, sourced via our established local relationships, extensive non-executive director (“NED”) and entrepreneurial networks, and one of the UK’s largest venture capital and SME lending footprints across our 11 offices. Our capital is long term in nature and not subject to redemptions, enabling us to both equity invest and lend capital consistently through market cycles. Our retail capital is raised exclusively via EIS and VCTs – tax-efficient structures designed to mitigate the market challenges of low levels of capital availability in early-stage venture investment. We predominantly manage public sector capital on behalf of the British Business Bank, to help business owners access funding outside of London. Additionally, our institutional capital is mainly raised from regional pension funds which aim to support regional businesses from their impact allocations. Where others have faced challenges, we have delivered commercial returns that meet the specific impact requirements of our fund investors. This successful strategy and resulting capital returns have been the primary drivers behind this year’s significant organic inflows.


For our financial year to 31 March 2024, we achieved revenues of £30.4million (2023: £25.9million) and EBITDA of £5.5million (2023: £5.2million). We closed the financial year with £46.9million (2023: £37.8million) cash on hand, no debt and assets under management of c.£1.8billion (2023: c.£1.4billion), up c.27% overall, exclusively driven by organic growth in the year. As at 31 March 2024, we had completed c.64% of the £5.0million share buyback and are pleased to recommend a proposed final dividend of 0.55 pence per share (2023: 0.53 pence per share) which, if approved by shareholders, will take the full-year dividend to 0.90 pence per share, a year-on-year increase of c.5%.

In December 2022, we welcomed FDC into our Group. The company continues to perform well, securing their first BBB fund mandate in February 2024, being the £44.0million Midlands Engine Investment Fund II debt mandate for the West Midlands. The acquisition of FDC has also marked the beginning of our deliberate shift towards adjacent asset classes to venture capital.

Mercia’s direct investment portfolio was fair valued at £116.9million as at 31 March 2024 (2023: £136.6million), with the highlight during the year being the sale of nDreams Limited for £30.2million in total, with £26.4million in cash returned back to the balance sheet and a £4.5million realised gain. The overall results were impacted, however, by the post-year end decision to cease further material funding for Impression Technologies Limited and we therefore fully impaired our investment fair value as at 31 March 2024. This was an extremely tough decision to make as we have supported the business since 2014 via our funds and since 2015 from our balance sheet, because its novel HFQ® technology works and it had a cornerstone customer. Ultimately however, after 10 years of investment support, its licensing revenue model was unable to reach critical mass and profitability. Two separate sale processes either side of last Christmas both generated firm interest in the business, but ultimately no sale transaction occurred.

‘Mercia 20:20’ outturn

This financial year also brings to an end our three-year ‘Mercia 20:20’ strategic plan, with AuM growing over the period by c.94%, driven by £415.0million of acquired third-party FuM with the purchase of FDC in December 2022, and c.£464million via organic growth.

‘Mercia 20:20’ focused on both sides of our hybrid investment model, firstly seeking ambitious growth in total AuM of 20% on average per annum from c.£940million to a three-year target of c.£1.6billion and secondly, delivering three-year cumulative profit before tax (“PBT”) of £60.0million. Despite the tough economic and new fund-raising backdrop, we managed to grow AuM to c.£1.8billion, beating that three-year target. We did not reach the cumulative PBT target of £60.0million, predominantly due to fewer upward fair value movements, the full impairment of our investment in Impression Technologies and fewer profitable realisations from the direct investment portfolio and instead delivered £21.6million, although cash realisations during the three-year period did total c.£47million.

During the year as a regionally focused investor, we invested c.£247million (2023: c.£165million) from our third-party funds and balance sheet, with over 90% allocated outside of London. During the same period, we generated c.£93million of returns across both equity and debt asset classes. Over the ‘Mercia 20:20’ period, we realised returns of c.£0.4billion. There has been a consistent theme throughout this three-year period; over 90% of the capital invested, the portfolio companies managed and the returns generated (both equity and debt) were spread widely across the UK, excluding London.

New investment focus and impact

In our interim results announcement in November 2023, I said that we would take a more cautionary approach to direct investing from our balance sheet capital and reflecting this caution, we would pause adding new companies to our direct investment portfolio.

Following Mercia’s interim results announcement, we conducted an in-depth review to determine our next three-year strategy, in conjunction with support from external advisers. Consistent with our Board’s own conclusions, all advisers were firmly aligned with management’s belief that Mercia’s next phase should focus on growing our profitable FuM, with cash proceeds from direct investment portfolio exits being used to wholly/partly fund inorganic FuM growth, instead of investing into any new direct investments. Existing direct investments will continue to be fully supported in line with our current approach.

We now transition to ‘Mercia 27: 100% growth’. Over the next three years as Mercia continues its natural evolution (and subject to shareholders approving our proposed new investment approach as set out in Ian Metcalfe’s Chair statement), we will seek to drive AuM to in excess of £3.0billion whilst doubling EBITDA, focused on building value for shareholders and our other key stakeholders as a growing and sustainable, specialist alternative asset manager. During this new three-year period, we will focus on investing in our people and platforms to build a scalable, efficient and sustainable long-term Group.

Mercia has come a long way since it was established in 2010, starting with three employees, one office and c.£12million in third-party FuM. Today, we have built a leading national specialist, alternative asset management operation characterised by strong organic inflows, robust funds’ performance, the high quality of our team and our ability to source a significant number of interesting investments that, over time, lead to investment returns that meet our fund investors’ expectations.

Mercia’s ‘capital-light’ investment philosophy was designed to minimise risks throughout the investment journey – from sourcing to capital return. For example, Mercia Ventures, which represents c.50% of Mercia’s AuM, focuses on building diverse investment portfolios by sector, geographic location, business stage and by utilising our proprietary value-creation support. As most of Mercia’s venture investments yield returns through trade sales ranging from £10.0million to £200.0million, we predominantly target young businesses with relatively modest capital needs. This focus ensures that even if syndicate venture capital availability decreases, as is currently the case, we can continue to support viable businesses using our own substantial funds.

Talent and culture

Our #OneMercia team has grown this year alongside the increase in our third-party FuM, with average staff numbers across the year increasing to 138 (2023: 116). This measured expansion reflects our commitment to investing in top-quality equity investment and lending talent, as well as operational support expertise. Direct share and share option ownership is widespread throughout Mercia, directly aligning the interests of employees and the Board with shareholders. According to a recent internal staff survey, 89% of staff would recommend Mercia as a great place to work. We remain committed to enhancing diversity, equity and inclusion throughout the Group, undertaking specific steps to achieve this goal through our participation in the Women in Finance Charter and the Investing in Women Code.


Subject to shareholder approval at our Annual General Meeting in September 2024, the next three years sets Mercia on an evolutionary path towards becoming a leading UK specialist alternative asset manager, focused on impactful capital deployment of third-party FuM in our target markets. I have always firmly believed that our long-term success depends on diversification and cash returns, rather than unrealised fair value movements. Having returned c.£0.4billion across all of our asset classes during ‘Mercia 20:20’, we have demonstrated our ability to both source and exit well – generating cash returns for our fund investors and shareholders. It is this cash-on-cash performance that has enabled Mercia to achieve record organic inflows during the financial year.

We believe that the ambitious goal of 100% EBITDA growth over the next three years, whilst making continued progress with our progressive dividend policy, provides a clear framework for shareholder value creation. The world faces continued volatility driven by political change, geopolitical challenges and caution across both public and private markets. Amidst this, initiatives such as the Mansion House Compact and an increasing focus by investors on domestic deployment, coupled with our continued investment performance as a specialist alternative asset manager, puts Mercia in a strong position as investors shift capital allocations toward impact investing and private markets.

Our differentiation is one of being close to deal origination, made possible by our physical presence near to or in all major areas of the UK through our 11 offices. On tracking our own performance returns, we see no difference in the level and quality of returns comparing our portfolio companies in London to our broader portfolio across the UK’s regions. As we advance our journey to scale, we will harness our local knowledge and presence to expand into adjacent asset classes and sustain our resilient financial performance.

Mercia’s alignment with our fund investors’ core values and beliefs, delivered by our exceptional team of talented individuals developed over our 14-year history, affirms our proven formula of investment returns and FuM growth. We are committed to providing impactful capital and support based on meritocracy, not geography.

Dr Mark Payton
Chief Executive Officer