Direct Investments

Mercia Technologies PLC delivers returns for both fund investors and shareholders during a strong 2016

Despite being a year of momentous political upheaval, 2016 saw Mercia Technologies PLC (“Mercia” or “the Group”) remain one of the most active investors in UK technology.

Throughout the year Mercia pursued its focused strategy as a leading investment partner to early-stage technology businesses, particularly those in the Midlands, the North of England and Scotland. It has expanded its regional presence, enhanced the prospects of its portfolio and has delivered several notable exits and IPOs across the Group.

In March, Mercia grew its presence in the North of England and materially increased its third party funds under management to more than £200.0million, following the acquisition of Enterprise Ventures (“EV”), one of the UK’s leading providers of early stage and growth finance. EV has a reputation of backing exciting businesses including a portfolio of 10 AIM quoted companies.

The acquisition significantly enlarged the size of Mercia, which now has six offices across the UK regions and Scotland, with more than 60 members of staff in its investment and support teams. The EV portfolio has increased the pipeline to the Group’s direct investment portfolio. In May, Mercia successfully executed against its strategy by making its first direct investment into a company emerging from the EV pipeline when it invested in Concepta, which was later admitted to AIM in July. This investment reinforced the strategic rationale behind the acquisition of EV, with Concepta’s share price rising from 7.5pence to 18.0pence post-flotation (as of 9 January 2017).

Across its third party funds, Mercia invested a total of £21.9million into 109 companies in 2016. During the year, a number of businesses within the managed funds’ portfolio achieved strong revenue growth, including IN-PART, a university and industry collaboration platform which now has over 70 institutions using its services to source and promote technology transfer worldwide.

As well as Concepta, the second notable IPO from the EV’s third party funds was Blue Prism. Since its flotation at the beginning of 2016, the share price has grown from 78pence at IPO to approximately £5.0 and some 60 times EV’s original fund investment cost.

Jonathan Diggines, Mercia Technologies’ Executive Director of Funds, said:

“Mercia’s third party funds have continued to thrive and grow during 2016. These funds contain more than 150 equity investments in SMEs throughout the UK regions, particularly outside the South East, many of which will play their part in driving the UK economy.”

2016 has also been a notable year for Mercia as a quoted company as it provides returns for shareholders through its direct investment portfolio. Warwickshire-based Allinea Software, which was a University of Warwick spinout and supported by Mercia since 2009, was sold in December, providing a cash return of 26x original investment cost for the managed fund and 21x original investment cost return for the original direct investment. Allinea was sold to ARM, the world's leading semiconductor IP company, which was its first acquisition since its own sale in July.

Other headlines from the direct investment portfolio include nDreams (which has partnered with Google), Warwick Audio Technologies (a University of Warwick spinout which appointed Gary Waters, former Vice President and General Manager of BOSE Corporation, as a Non-Executive Director) and Impression Technologies (a University of Birmingham and Imperial College spinout which launched the world’s first Hot Forming Quench “HFQ” pressing plant and is already producing aluminium parts for customers including Aston Martin). Medherant, another University of Warwick spinout, joined the direct investment portfolio during the year and is now developing a first-in-class patch delivery technology.

Mark Payton, CEO of Mercia Technologies PLC, said:

“2016 has been a key year as direct investments such as Concepta and Allinea are already demonstrating the true value of Mercia’s sustainable investment model. Mercia continues to support early-stage businesses from start-up through to exit, leveraging its strong regional presence including one of the largest networks of 18 university partners. We will maintain our highly focused strategy in 2017 positioning ourselves as a leading technology investor, providing patient investment to those technology businesses that require both capital and hands-on support to accelerate their growth from regional opportunities into global players.”