Preliminary results for the year ended 31 March 2020

14th July, 2020

Mercia Asset Management PLC (AIM: MERC), the proactive, regionally focused specialist asset manager, is pleased to announce its preliminary results for the year ended 31 March 2020.

 

Profitable trading achieved ahead of plan, driven by AuM growth

 

Financial results

  • Assets under management increased by 58% to c.£800million (2019: c.£507million)
  • Revenue increased 19.4% to £12.7million (2019: £10.7million)
  • Net revenues £0.1million (2019: £1.4million net expenses)
  • Net fair value decrease of £15.8million – near term COVID-19 impact (2019: £3.9million increase)
  • Operating loss before exceptional items £17.1million (2019: £2.0million profit)
  • Loss after tax for the financial year £17.5million (2019: £2.6million profit)
  • Loss per share 5.11 pence (2019: 0.86 pence earnings)
  • Unrestricted cash and short-term liquidity investments £30.2million (2019: £29.8million)
  • Net assets £141.5million (2019: £126.1million)
  • Net assets per share 32.1 pence (2019: 41.6 pence)

 

Managed fund developments

  • Third-party funds under management (“FuM”) increased to c.£658million (2019: c.£381million) contributing £11.7million in revenue
  • FuM increase largely reflects the acquisition of NVM VCT fund management business that added c.£250million in managed funds
  • Venture FuM c.£476million (2019: c.£224million)
  • Private equity FuM c.£60million (2019: c.£61million)
  • Debt FuM c.£122million (2019: c.£96million)

Direct investment portfolio developments

  • £17.5million gross invested into 18 portfolio companies during the year including one new direct investment, One Touch Apps t/a Clear Review
  • Direct investment portfolio £87.5million (2019: £87.7million)
  • Notwithstanding COVID-19 impact, continuing underlying commercial progress made by a number of portfolio companies including nDreams, which continues to be the Group’s largest direct investment

COVID-19 update

  • Priority of the Group continues to be the safety and wellbeing of all employees, with the business transitioning successfully to remote working without any adverse operational impact
  • All portfolio companies risk assessed and tailored support provided where deemed appropriate, with a focus on maintaining long term value potential
  • Unrestricted liquidity of c.£290million to invest across FuM portfolios in addition to £30.2million of balance sheet unrestricted cash and short-term liquidity investments

Post year end FuM progress

  • £38.2million in new capital raised by NVM VCTs
  • Additional £54.3million allocation by British Business Bank from Northern Powerhouse Investment Fund (“NPIF”) to existing Mercia managed mandates
  • Group accredited to deliver its NPIF debt mandate under the Coronavirus Business Interruption Loan Scheme (“CBILS”)

Post year end direct investment progress

  • Successful sale of The Native Antigen Company anticipated to realise an 8.4x return and a 65% IRR
  • 11 Future Fund applications, significantly increasing the liquidity of the companies within the direct investment portfolio, alongside continued focus on expanding our co-investor base
  • New direct investment, MIP Diagnostics, which is developing a highly scalable synthetic antibody platform technology

Mark Payton, Chief Executive Officer of Mercia, commented:

“I am pleased to say that, in many ways, 2019 was a year of significant progress for Mercia as we achieved our goal of trading profitably a year earlier than planned, and significantly increased the scale of our fund management business, both key parts of our three-year strategic plan. A significant driver of this was the acquisition of the three Northern VCT fund management contracts, which helped increase our assets under management (“AuM”) by c.58% to c.£800million, alongside bringing additional recurring revenues and a talented VCT investment team.

“Inevitably, the impact of the COVID-19 pandemic, and the near-term domestic and global economic shock, has negatively affected the holding values of a number of our investee companies, especially within certain sectors such as engineering. Notwithstanding the current reduction in asset price linked fund management revenues, Mercia has begun the new financial year trading profitably, which we expect to continue. During the COVID-19 pandemic, our focus continues to be on the health and safety of our people and ensuring our investee companies have robust cash positions. I am proud of the way we have responded as a business, which has enabled our investment teams to focus fully on supporting our portfolio. We also remain confident in the long-term potential of our direct investment portfolio, which has relatively modest capital needs. We expect the value of this maturing portfolio to accelerate post the COVID-19 pandemic.

“Looking ahead, I believe that Mercia is well placed to build on 2019’s strategic progress and position as a leading and trusted provider of regional capital. The growth of our fund management business means we have over £290million of available liquidity which, in addition to the c.£30million of liquidity on our balance sheet, gives us considerable investment capacity to support both our existing portfolio and take advantage of new opportunities at anticipated lower entry prices.”

Analyst briefing

Due to restrictions resulting from COVID-19, a meeting for analysts will be held virtually at 9.30am today, 14 July 2020. Analysts wishing to attend this event can register via email at mercia@fticonsulting.com. An audio webcast of this briefing will subsequently be available later in the day via Mercia’s web site.

Mercia’s 2020 preliminary results and a copy of the analyst presentation will also be available today on the Group’s website under the IR section accessible here.

 

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