Mercia Asset Management
PLC
("Mercia" or the "Group" or
the "Company")
Interim
results for the six months ended 30 September 2024
34% growth in EBITDA
underpins a 6% increase in the interim dividend
Mercia Asset Management PLC
(AIM: MERC), the regionally focused, specialist alternative
asset manager with over £1.8billion of assets under management
("AuM"), is pleased to announce its interim results for the six
months ended 30 September 2024.
Mark Payton, Chief Executive Officer of Mercia,
commented:
"Mercia has delivered another
strong first half performance with our higher funds under
management driving revenue and EBITDA growth. I am pleased to say
that none of the tax changes announced in the Government's Autumn
Budget, will curtail Mercia's growth ambitions."
|
|
|
Unaudited
30
September
2024
|
Unaudited
30
September
2023
|
Audited
31
March
2024
|
|
Statutory results
|
|
|
|
|
|
Revenue
|
£17.9m
|
£15.0m
|
£30.4m
|
|
|
Realised fair value gain on sale
of a direct investment
|
-
|
-
|
£4.5m
|
|
|
Unrealised fair value movement in
direct investments
|
£0.2m
|
£(1.6)m
|
£(17.3)m
|
|
|
Profit/(loss) before
taxation
|
£2.4m
|
£1.4m
|
£(8.2)m
|
|
|
Basic earnings/(loss) per
share
|
0.41p
|
0.30p
|
(1.71)p
|
|
|
|
|
|
|
|
|
Interim1/final dividend
per share
|
0.37p
|
0.35p
|
0.90p
|
|
|
|
|
|
|
|
|
Cash and cash
equivalents
|
£46.2m
|
£36.5m
|
£46.9m
|
|
|
Net assets
|
£187.4m
|
£202.4m
|
£189.2m
|
|
Alternative performance measures
|
|
|
|
|
|
AuM 2
|
£1,836.9m
|
£1,461.8m
|
£1,818.8m
|
|
|
EBITDA 3
|
£3.7m
|
£2.8m
|
£5.5m
|
|
|
Adjusted operating profit
4
|
£4.8m
|
£5.5m
|
£9.7m
|
|
|
Net assets per share
|
43.4p
|
45.3p
|
43.4p
|
|
|
|
|
|
|
1 The interim
dividend will be paid on 8 January 2025 to shareholders on the
register at the close of business on 6 December 2024.
2 AuM is defined
as the value of funds under management from which the Group earns
revenues, plus the Group's consolidated net assets.
3 EBITDA is
defined as operating profit/(loss), depreciation, realised fair
value gains/(losses) on the sale of direct investments, unrealised
fair value movement in direct investments, share-based payments
charge, amortisation of intangible assets and movement in fair
value of deferred consideration.
4 Adjusted
operating profit is defined as EBITDA plus net finance
income.
Managed fund movements
·
Third-party funds under management
("FuM")
increased by c.31% compared to the corresponding period end to
c.£1,650million (H1 2024: c.£1,260million; FY 2024:
c.£1,630million), with no redemptions
o Venture FuM of c.£952million (H1 2024: c.£660million; FY
2024: c.£913million)
§ £29.2million successfully raised by the three Northern
Venture Capital Trusts ("VCTs") in April 2024, in addition to
£1.2million of shareholder dividend reinvestment inflows
§ Final
dividends totalling £9.1million paid out by the three Northern VCTs
in addition to shares repurchased and cancelled totalling
£6.8million
§ £10.0million additional equity allocation under the Northern
Powerhouse Investment Fund I
§ Two
Enterprise Investment Scheme ("EIS") funds closed raising a total
of £16.3million
o Debt FuM of c.£672million (H1 2024 c.£552million; FY 2024:
c.£687million)
§ Frontier Development Capital's National Tooling Loan Fund
moved into its realisation phase
o Private equity FuM of c.£26million (H1 2024: c.£48million; FY
2024: c.£30million)
§ A
refinancing at Imail realised £6.4million back to fund
investors
Direct investment portfolio movements
·
Direct investment portfolio fair value of
£120.9million (H1 2024: £142.5million; FY 2024:
£116.9million)
·
£3.9million net invested into four portfolio
companies (H1 2024: £7.5million net invested into eight portfolio
companies)
·
£0.2million net fair value increase in the portfolio during the six
month period (H1 2024: £1.6million decrease)
Post-period end developments
·
Northern VCTs to launch a £36.0million fundraise
in January 2025, with shares allotted in the 2024/25 tax
year
·
Mercia's most recent EIS fundraise closed in
November 2024, raising a total of c.£4million
·
Cash proceeds totalling £0.6million received from
the realisation of the Group's direct investment in Artesian
Solutions, 11% higher than its carrying value as at 30 September
2024
This announcement contains
inside information for the purposes of Article 7 of the Market
Abuse Regulation (EU) 596/2014 which is part of UK law by virtue of
the European Union (Withdrawal) Act 2018. Upon publication of this
announcement, this inside information is now considered to be in
the public domain.
For further information, please contact:
|
Mercia Asset Management PLC
Mark Payton, Chief Executive
Officer
Martin Glanfield, Chief Financial
Officer
www.mercia.co.uk
|
+44
(0)330 223 1430
|
|
Canaccord Genuity Limited (NOMAD and Joint
Broker)
|
+44
(0)20 7523 8000
|
|
Simon Bridges, Emma
Gabriel
|
|
|
|
|
|
Singer Capital Markets (Joint Broker)
|
+44 (0)20
7496 3000
|
|
Charles Leigh-Pemberton
|
|
|
|
|
|
FTI Consulting
|
+44
(0)20 3727 1051
|
|
Tom Blackwell, Jenny
Boyd
|
|
|
|
mercia@fticonsulting.com
|
|
|
|
|
|
|
Investor presentation
Mercia will also provide a live
management presentation and Q&A via the Investor Meet Company
platform at 3.00pm today. Registration details for the online
investor presentation can be accessed via:
https://www.investormeetcompany.com/mercia-asset-management-plc/register
About Mercia Asset Management PLC
Mercia is a specialist alternative
asset manager focused on supporting regional SMEs to achieve their
growth aspirations. Mercia provides capital across its four asset
classes of venture, debt, private equity and proprietary capital:
the Group's 'Complete Connected Capital'.
The Group has a strong UK
footprint through its 11 regional offices, university partnerships
and extensive personal networks, providing it with access to
high-quality deal flow.
Mercia Asset Management PLC is
quoted on AIM with the EPIC "MERC".
Chief Executive Officer's review
Our 10-year journey - significant scale profitably
built
The original Mercia Fund
Management business was founded in Birmingham in 2010 following the
Global Financial Crisis, with a core belief that we could make a
material difference through deploying capital to the best
investment opportunities, irrespective of where they were located
in the UK.
Mercia Asset Management PLC was
admitted to trading on AIM in December 2014 (as Mercia Technologies
PLC), making this our tenth anniversary as a quoted company. With a
focus on growing our original hybrid model of making both direct
investments (using our own capital) and managing third-party funds
under management ("FuM"), our vision was to become the first choice
for investees, investors and employees. We are pleased to mark this
10-year milestone with the strong results we are reporting
today.
Our journey to date can be
summarised as:
|
Timeline
|
Third-party FuM
|
Total direct investment value
|
Average investment size
|
Six month deployment rate
|
Six month revenue
|
EBITDA
|
FTE
|
|
At IPO
|
c.£23m
|
c.£9m
|
c.£0.2m
|
c.£2m
|
c.£0.4m
|
£0
|
7
|
|
H1 FY25
|
c.£1.6bn
|
c.£121m
|
c.£1.5m
|
c.£100m
|
c.£18m
|
£3.7m
|
138
|
Over this 10-year journey, we have
invested over £1billion into c.800 businesses and projects,
returning over £700million back to our managed fund investors to
date. Over the same period, in respect of our direct investment
activity, we have invested c.£168million into 44 businesses
returning over £100million thus far. We have faced and overcome
many external challenges during this 10-year period including
Brexit, COVID, global conflicts, energy crisis, inflation, elevated
interest rates and sector-wide redemption calls. I am proud of what
Mercia has accomplished, because we have proven that our business
model is resilient and has been able to prosper, despite a
frequently turbulent economic/market backdrop. Being a diversified,
specialist alternative asset manager, focused on regional private
markets capital deployment, is serving us and our investors
well.
Today, operating under the trading
names of Mercia Ventures, Mercia Debt, Frontier Development Capital
and Mercia Private Equity, we are seen as a respected and
pro-active partner to those seeking investment, having also been
recognised on a national and regional basis including 'Top Investor
in Women-Powered Businesses' (JP Morgan and Beauhurst, 2024 Annual
Report), Insiders' 'Funder of the Year for the Midlands, Yorkshire,
North West, and North East', and from Sifted, who recently noted
Mercia to be the 'Most Active Investor' in Q3 across
Europe.
Making a positive impact through our investment
activities
Mercia is committed to investing
responsibly and striving for sustainable, financial growth. We
continue to be signatories of, and report against, the United
Nations Principles for Responsible Investing. We aim to make a
positive impact through the environmental and social contributions
that our investees can make, aligning the UN Sustainable
Development Goals with our own guiding principles, being:
sustainable economic growth, improving diversity, reducing
inequalities, boosting health and wellbeing for all.
In the first half of this
financial year, we strengthened this commitment by appointing a
dedicated ESG Manager to drive forward our sustainability agenda.
Mercia continues to offset 100% of our corporate carbon emissions
through Carbon Neutral Britain. We have also made commitments to
the Investing in Women Code and the Women in Finance Charter to
reinforce our beliefs, that a diverse and inclusive environment is
most conducive to the success of our business and our portfolio
companies, and we continue to improve the way in which we monitor
this.
As a leading domestic and
impactful investor across the UK, we seek opportunities that align
our vision with our core values of Trusted, Growth, Responsible,
Responsive and Connected, to demonstrate best-in-class ESG
stewardship.
'Mercia 27': Accelerating FuM growth and doubling
EBITDA
In July 2024, we set out our three
year strategy to divest c.70% of our direct investment portfolio by
value over the next three years, via orderly sale processes,
primarily to fund the accelerated scaling of our third-party FuM to
c.£3billion, whilst also doubling EBITDA. This we anticipate, will
be accomplished by growing our existing strategic assets and in
parallel, moving into the management of real assets. During the
period, we received new fund inflows totalling c.£57million and
post-period end a further c.£4million. In addition to the ongoing
funds being raised via the Enterprise Investment Scheme ("EIS") and
the three Northern Venture Capital Trusts ("VCTs") that we manage,
we also have a number of other fund opportunities under
consideration.
We are diversified by asset class,
investor type and fund structure , as shown below:
|
|
Private Venture
|
Private Debt
|
Private Equity
|
Intermediary Real Asset Finance
|
Balance Sheet (incl. direct investments)
|
Total
|
|
AuM:
|
£952m
|
£362m
|
£26m
|
£310m
|
£187m
|
£1.8bn
|
|
Asset type:
|
Equity as sole or syndicated
provider in businesses typically seeking <£30m.
Mercia will typically invest up to
£10m, but can invest >£20m.
|
Direct lending, secondaries,
leveraged loans.
Often sole provider, investing up
to £7.5m.
|
Growth equity looking at business
re-engineering to drive performance.
|
Midlands-focused on real estate
regeneration. Investing up to £20m as sole investor.
|
Nationally-focused on supporting
existing direct assets to sale, and investing in Mercia's managed
FuM as an LP.
|
|
|
National and regional impact:
|
Real economy and job
creation.
Creating resilience.
New business creation and
expansion.
|
Real economy and job
creation.
Creating resilience.
Business support and
expansion.
|
Real economy and job
creation.
Creating resilience.
Business expansion.
|
Infrastructure investment for
growth and job creation.
Expansion and
sustainability.
Brownfield remediation and
regeneration.
Housing, including
social/affordable.
|
Historically invested alongside
Mercia's third-party FuM in 'emerging stars'.
|
|
|
Unrestricted cash:
|
£420m
|
£108m
|
-
|
£89m
|
£46m
|
£663m
|
Building for growth
We believe that our future success
will be delivered from two key areas of our Group: 'Deal
Origination' and 'Sales and Distribution'. Over the remainder of
'Mercia 27', these will remain our key areas of focus, as we look
to broaden our managed funds into real assets, in parallel with
continued growth in our strategic assets under
management.
With our growth over the past 10
years, we benefit from the investment discipline exercised by our
diverse investment teams across our 11 offices, originating and
supporting many of the best opportunities across the UK. Whilst we
expect to welcome a limited number of new colleagues for the
remainder of this financial year, our focus now is on operational
efficiencies and updated systems, as we seek to leverage our
historic success with future opportunities, to deliver on our twin
'Mercia 27' goals.
Outlook
Mercia has delivered another
strong first half performance with our higher funds under
management driving revenue and EBITDA growth. I am pleased to say
that none of the tax changes announced in the Government's Autumn
Budget, will curtail Mercia's growth ambitions. Mercia's platform
is now benefiting from its increasing scale across our investment
strategies and investor client base. Our positive equity investing
and SME lending track records and reputation, together with our
human and financial capital, are combining to create a powerful and
growing ecosystem within the UK regions, that positions us for
long-term success, enabling us to proactively navigate through
market cycles.
Mercia, with its investment
discipline, debt-free cash position and sustainable, long-term
private capital deployment business model, has a stable AuM
position and a clear strategy through which to continue its growth
trajectory. As institutional funds look to impactful, domestic and
regional allocations, I remain confident that Mercia is well placed
to benefit from this capital transition.
Since our IPO 10 years ago,
Mercia's networks, liquidity and regional presence have grown
significantly, positioning us for another decade of growth with the
current opportunities that exist across the UK. My sincerest
gratitude goes to our investees, our investors, our team here at
Mercia and of course to our loyal shareholders, for your continued
support.
Dr Mark Payton
Chief Executive
Officer
Chief Investment Officer's review
Investment activity
During the six months to 30
September 2024, we invested c.£133million into 86 businesses across
our funds and balance sheet, including 46 new fund portfolio
companies. Compared to the corresponding period, AuM has increased
c.26% to c.£1.8billion with no redemptions and the Group had
c.£663million of liquidity at the end of the period to support
our future investment activities.
Assets under management
A total of c.£47million of
new capital was raised by our Enterprise Investment Schemes ("EIS")
and Northern Venture Capital Trusts ("VCT"), alongside an
additional £10.0million equity allocation to the Northern
Powerhouse Investment Fund I from the British Business Bank
("BBB"), during the period.
Valuations across managed funds
have remained largely flat, whilst c.£35million of distributions
were made to fund investors, including dividends paid to VCT
shareholders and the balance of the share buyback.
|
|
1 April
2024
|
Inflows
|
Transition to realisation
phase
|
Performance
|
Distributions
|
30
September
2024
|
Post-period
end
inflows
|
|
Asset class
|
£'m
|
£'m
|
£'m
|
£'m
|
£'m
|
£'m
|
£'m
|
|
Venture
|
913
|
57
|
-
|
1
|
(19)
|
952
|
4
|
|
|
Debt
|
687
|
-
|
(11)
|
2
|
(6)
|
672
|
-
|
|
|
Private equity
|
30
|
-
|
-
|
2
|
(6)
|
26
|
-
|
|
|
Total FuM
|
1,630
|
57
|
(11)
|
5
|
(31)
|
1,650
|
4
|
|
|
Proprietary capital
|
189
|
-
|
-
|
2
|
(4)
|
187
|
-
|
|
|
Total AuM
|
1,819
|
57
|
(11)
|
7
|
(35)
|
1,837
|
4
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liquidity
30
September
2024
|
Liquidity
31
March
2024
|
|
Asset class
|
£'m
|
£'m
|
|
Venture
|
420
|
404
|
|
Debt
|
197
|
262
|
|
Private equity
|
-
|
-
|
|
Total FuM
|
617
|
666
|
|
Proprietary capital
|
46
|
47
|
|
Total AuM
|
663
|
713
|
Investment realisations
In the six month period to 30
September 2024, our equity funds investors benefitted from 10 full
and partial equity realisations (H1 2024: 19). These totalled
c.£26million at a combined return of c.2x, and included a
£14.8million, 4.5x return on VCT asset Gentronix and a refinancing
at PE asset Imail realising £6.4million. A further £17.5million has
been realised since the period end, including £7.5million from the
sale of Smartgate Solutions Ltd (trading as Radar Healthcare), out
of our Northern Powerhouse Investment Fund I for an enterprise
value of £53.0million, returning a multiple of 4.1x. A direct
investment asset, Artesian Solutions, was sold in November 2024
realising £0.6million.
Third-party managed
funds
As at 30 September 2024, we were
managing c.£1.6billion of third-party funds across multiple
mandates (H1 2024: £1.3billion; FY 2024: £1.6billion). During the
period we invested c.£129million across our venture and debt asset
classes.
Across those funds we have
c.£617million of liquidity (H1 2024: c.£346million; FY 2024:
c.£666million), enabling us to both invest in new transactions and
fully support our existing portfolio companies.
|
Asset class
|
FuM
30
September
2024
£'m
|
Companies
in
portfolio
No.
|
Amount
invested
£'m
|
Company
exits
No.
|
|
Regional venture
|
469
|
90
|
23
|
3
|
|
EIS
|
106
|
83
|
12
|
2
|
|
VCT
|
377
|
58
|
18
|
4
|
|
Debt
|
673
|
295
|
76
|
32
|
|
Private equity
|
25
|
5
|
-
|
1
|
|
Totals
|
1,650
|
531
|
129
|
42
|
Managed funds' portfolios
Following the c.£360million of new
regional BBB fund mandates won earlier in this calendar year, we
have made an encouraging start, deploying c.£20million across 24
new businesses during the first half of this financial year from
these new funds.
Regional Venture
New deals from within the BBB
funds include a Harrogate based manufacturer of healthy 'free-from'
chilled and frozen ready meals led by female CEO Kirsty Henshaw and
WareHow, a Worksop based warehouse operator which promotes a one
stop ecommerce fulfilment solution for fashion retailers. Our
Northern VCTs have also been active, investing in consumer focused
ski breaks business Heidi and Deep Tech carbon capture technology
developer, Promethean.
Debt
In March 2024, Mercia Business
Loans was awarded the mandate by BBB to manage the new c.£54million
NPIF II Debt Fund, with a number of launch events subsequently
taking place across the region during the period. Lending activity
is in line with expectations and Mercia's Northern Debt Team
supported 25 businesses, lending a total of £9.5million.
During the period, Frontier
Development Capital ("FDC") deployed a significant £66.4million
from its diversified portfolio of funds. Its property team led the
way with £54.2million in funding, whilst the growth capital team
contributed £10.5million, demonstrating resilient market demand.
Against a backdrop of tightening mainstream lending criteria, FDC's
alternative debt offerings have emerged as increasingly attractive
financing solutions, particularly in the underserved commercial
property development sector. Whilst portfolio companies have faced
broader economic pressures, liquidity remains strong with no
current provision requirements. Market conditions proved notably
favourable for new property lending, with opportunistic developers
seeking funding for strategically acquired sites, whilst the new
BBB-backed c.£45million Midlands Engine Investment Fund II's
successful February launch, has generated consistent interest
across the West Midlands' SME landscape. Heightened lending
activity to support transactions was also driven by anticipated CGT
changes, cementing FDC's position as a crucial player in meeting
diverse market financing needs. FDC continues to be an excellent
addition to Mercia, as we approach the second anniversary of its
acquisition.
Private Equity
Our PE team oversaw a £6.4million
refinancing of Imail alongside continued growth at Shoppertainment,
Total Resources and UK Landscapes.
Proprietary capital
As at 30 September 2024, our
direct investment portfolio was fair valued
at £120.9million (H1 2024: £142.5million; FY
2024: £116.9million) with 21 companies in the portfolio (H1
2024: 22; FY 2024: 22). The top 10 direct investment holdings
represent c.£101million or c.83% of the total value of our
portfolio as at 30 September 2024.
We invested £3.9million
during the first six months (H1 2024: £7.5million), with our
investment efforts focused on supporting VirtTrade (trading as Avid
Games), Invincibles Studio, Eyoto and our limited partner
contributions, which were primarily into the new managed BBB
funds.
The table below lists Mercia's top
20 direct investments by fair value as at 30 September 2024,
including cash invested, fair value movements and the fully diluted
equity percentage held. It is pleasing to report our first direct
investment realisation following the evolution of our strategy,
with disposal proceeds of £0.6million received after the period end
in respect of Artesian Solutions Ltd.
|
|
Year of
first
direct
investment
|
Net
investment
value as
at
1 April
2024
£'000
|
Net
cash
invested
six
months to
30 September
2024
£'000
|
Fair
value
movement
six
months to
30
September
2024
£'000
|
Net
investment
value as
at
30
September
2024
£'000
|
Percentage
held as
at
30
September
2024
%
|
|
Voxpopme Ltd
|
2018
|
15,849
|
-
|
25
|
15,874
|
20.2
|
|
Netacea Group Ltd
|
2022
|
14,661
|
-
|
-
|
14,661
|
34.2
|
|
Warwick Acoustics Ltd
|
2014
|
11,934
|
-
|
-
|
11,934
|
35.8
|
|
VirtTrade Ltd *
|
2015
|
10,223
|
900
|
93
|
11,216
|
61.4
|
|
Medherant Ltd
|
2016
|
10,934
|
-
|
-
|
10,934
|
33.3
|
|
Invincibles Studio Ltd
|
2015
|
8,567
|
750
|
-
|
9,317
|
35.5
|
|
Eyoto Group Ltd
|
2017
|
7,142
|
1,500
|
-
|
8,642
|
24.7
|
|
Locate Bio Ltd
|
2018
|
7,837
|
-
|
-
|
7,837
|
19.6
|
|
Ton UK Ltd **
|
2015
|
6,609
|
-
|
-
|
6,609
|
40.4
|
|
Aonic Founder SCS
|
2023
|
3,784
|
-
|
-
|
3,784
|
0.0
|
|
Axis Spine Technologies
Ltd
|
2022
|
3,000
|
-
|
-
|
3,000
|
11.5
|
|
Tozaro Ltd
|
2020
|
2,734
|
-
|
-
|
2,734
|
11.2
|
|
Pimberly Ltd
|
2021
|
2,612
|
-
|
-
|
2,612
|
4.9
|
|
sureCore Ltd
|
2016
|
2,416
|
-
|
-
|
2,416
|
22.0
|
|
Forensic Analytics Ltd
|
2021
|
2,264
|
-
|
-
|
2,264
|
7.4
|
|
Nova Pangaea (Holdings)
Ltd
|
2022
|
2,250
|
-
|
-
|
2,250
|
0.0
|
|
MyHealthChecked PLC
|
2016
|
782
|
-
|
68
|
850
|
13.1
|
|
Uniphy Ltd
|
2022
|
727
|
-
|
-
|
727
|
3.9
|
|
Artesian Solutions Ltd
***
|
2023
|
539
|
-
|
-
|
539
|
0.8
|
|
Sherlock Biosciences
Inc
|
2023
|
340
|
-
|
(12)
|
328
|
0.3
|
|
Other direct
investments
|
n/a
|
1,657
|
736
|
11
|
2,404
|
n/a
|
|
Total
|
|
116,861
|
3,886
|
185
|
120,932
|
n/a
|
*
Trading as Avid Games
**
Trading as Intelligent
Positioning
*** Trading as
FullCircl
Continued investment discipline
across capital allocation and planning for further
realisations
This first half of the financial
year was relatively quiet for our direct asset portfolio. This is
to be expected, given that many of our businesses raised
substantial syndicated rounds in FY24 or are nearing cash flow
breakeven. The direct asset portfolio remains healthy overall and
we have ample liquidity to support it.
During the six month period, we
have concentrated on value-creating activities across the
portfolio. New c-suite executives have been recruited or identified
for eight of our direct investee companies, to support realisations
within the next two to three years. Additionally, we have worked
diligently to introduce appropriate advisers early, helping to
identify key growth areas that potential acquirers will find
attractive.
Global events over the past few
years, coupled with the resulting uncertainty has particularly
impacted sentiment towards technology growth businesses, reaching a
low point in December 2022. Data from 2023 and 2024 indicates that
technology company multiples, especially in Software/SaaS, have
started to tick upwards again. We are seeing entry multiples for
SaaS businesses holding up, though the overall market remains tight
for attracting new external investment, particularly in the Life
Science and Deep Tech sectors.
Our Software/SaaS businesses have
made significant strides in reducing the customer churn rates seen
across the industry in recent years, with particular progress
evident at Voxpopme and Intelligent Positioning, whilst Pimberly
and Forensic Analytics continue to grow their revenues. In Life
Sciences, Locate Bio and Medherant remain focused on advancing
their clinical trials and development programmes. Although
sentiment across the digital entertainment sectors is currently
subdued with some studios contracting, both VirtTrade and
Invincibles Studio have maintained stable revenues. They have both
been investing in new games that are set to launch in the coming
months, to support their future revenue growth.
Warwick Acoustics is progressing
towards the delivery of its first automotive contract for
production vehicles scheduled to launch in 2025. The company is
also advancing multiple proof-of-concept projects with other
automotive OEMs, and continues to grow sales of its multiple award
winning, high-quality headphones.
Through our efforts in 2024,
including syndicated funding rounds at Warwick Acoustics, Locate
Bio, and Tozaro (formerly MIP Discovery), together with the
progression of other investees towards breakeven, such as Voxpopme
and Intelligent Positioning, our portfolio has required relatively
low levels of financial support. During the second half of this
financial year we will see further capital deployment across a
number of direct investee companies, including Netacea Group and
Eyoto. However, total investment for this financial year as a whole
will be materially lower than last year, as the portfolio continues
to mature.
Summary
With c.£617million of managed fund
capital available for deployment, we continue to support the most
promising regional businesses across diverse sectors and founders,
whilst aiming to deliver robust investor returns in an impactful
way.
Our equity portfolios are well
diversified across sectors, largely unleveraged, and maintain
significant liquidity, with a number of investments structured to
provide downside protection. Our lending teams are also on the
front foot with capital to deploy and good levels of deal
flow.
Whilst inflation and interest
rates are trending in a favourable direction and political
uncertainty in the UK has lessened, there remains a generally lower
risk tolerance in both the business and funding communities,
particularly at the SME level. Whilst SMEs, including our portfolio
companies, still face a challenging environment, they are resilient
and continue to make solid progress.
As always, I would like to thank
all our dedicated staff for their efforts during the past six
months.
Julian
Viggars
Chief Investment Officer
Chief Financial Officer's review
Overall financial performance
With record fund inflows of
c.£562million during the year to 31 March 2024, revenues, EBITDA
and EBITDA margin all increased during the six months to 30
September 2024 compared with the corresponding prior period, as the
Group continues to profitably scale its business model.
Interim dividend
The continued growth and
operational cash generation of the Group has enabled Mercia's Board
to declare a c.6% increase in the interim dividend to 0.37
pence per share (H1 2024: 0.35 pence per share).
This interim dividend will be paid on 8 January 2025 to
shareholders on the register at close of business on 6 December
2024, with the total dividend payable
being £1,596,000 (H1 2024: £1,563,000).
Share buyback
The £5.0million share buyback
programme announced in November 2023, concluded during the period
on 29 May 2024, with a total of 15,706,088 shares bought back into
treasury at an average price of 31.8 pence per share.
Alternative performance measures ("APM")
The Directors believe that the
reporting of both EBITDA and adjusted operating profit assist in
providing insightful measures of operating performance for
businesses such as Mercia and are APMs of interest to both current
and potential shareholders.
EBITDA is defined as operating
profit/(loss) before depreciation, realised fair value gain on the
sale of direct investments, unrealised fair value movements in
direct investments, share-based payments charge, amortisation of
intangible assets and movement in fair value of deferred
consideration.
Adjusted operating profit is
defined as EBITDA plus net finance income.
Results reported on an APM basis
are denoted by ¹ throughout this review.
|
|
Unaudited
Six months
ended
30
September
2024
£'000
|
Unaudited
Six
months ended
30
September
2023
£'000
|
Audited
Year
ended
31
March
2024
£'000
|
|
Revenue
|
17,908
|
15,040
|
30,434
|
|
Administrative
expenses1
|
(14,192)
|
(12,266)
|
(24,897)
|
|
EBITDA1
|
3,716
|
2,774
|
5,537
|
|
Net finance income
|
1,102
|
2,690
|
4,160
|
|
Adjusted operating profit1
|
4,818
|
5,464
|
9,697
|
|
Depreciation
|
(302)
|
(236)
|
(489)
|
|
Net finance income
|
(1,102)
|
(2,690)
|
(4,160)
|
|
Realised fair value gain on sale
of a direct investment
|
-
|
-
|
4,450
|
|
Unrealised fair value movement in
direct investments
|
185
|
(1,619)
|
(17,338)
|
|
Share-based payments
charge
|
(478)
|
(509)
|
(1,002)
|
|
Amortisation of intangible
assets
|
(1,495)
|
(1,495)
|
(2,989)
|
|
Movement in fair value of deferred
consideration
|
(295)
|
(218)
|
(540)
|
|
Operating profit/(loss)
|
1,331
|
(1,303)
|
(12,371)
|
|
Net finance income
|
1,102
|
2,690
|
4,160
|
|
Profit/(loss) before taxation
|
2,433
|
1,387
|
(8,211)
|
|
Taxation
|
(657)
|
(38)
|
626
|
|
Profit/(loss) and total comprehensive
income/(expense)
|
1,776
|
1,349
|
(7,585)
|
A reconciliation of these results
prepared in accordance with International Financial Reporting
Standards ("IFRS") to those presented on an APM basis are as
follows:
|
|
|
|
|
|
Six months ended 30
September 2024
|
|
|
IFRS as
reported
£'000
|
Depreciation
£'000
|
APM
basis1
£'000
|
|
Administrative expenses
|
(14,494)
|
302
|
(14,192)
|
|
Depreciation
|
-
|
(302)
|
(302)
|
|
|
|
|
|
|
Six
months ended 30 September 2023
|
|
|
IFRS as
reported
£'000
|
Depreciation
£'000
|
APM
basis1
£'000
|
|
Administrative expenses
|
(12,502)
|
236
|
(12,266)
|
|
Depreciation
|
-
|
(236)
|
(236)
|
|
|
Year
ended 31 March 2024
|
|
|
IFRS as
reported
|
Depreciation
|
APM
basis1
|
|
|
£'000
|
£'000
|
£'000
|
|
Administrative expenses
|
(25,386)
|
489
|
(24,897)
|
|
Depreciation
|
-
|
(489)
|
(489)
|
Revenue
Revenue increased 19.1% to
£17,908,000 (H1 2024: £15,040,000) and comprised fund management
related fees, initial management fees from equity investment
rounds, arrangement fees from loans, investment director monitoring
fees, sundry business services income and VCT share offer related
fees.
Administrative expenses1
Administrative expenses, excluding
depreciation, increased 15.7% to £14,192,000 (H1 2024: £12,266,000)
and comprised predominantly staff-related, office, marketing,
professional adviser and VCT share offer related costs.
EBITDA
EBITDA increased 34.0% to
£3,716,000 (H1 2024: £2,774,000), equating to an EBITDA margin of
20.8% (H1 2024: 18.4%).
Net finance income
Total gross finance income of
£1,128,000 (H1 2024: £2,720,000) arose wholly from interest
receivable on cash deposits (as shown in note 8 of the summary
financial information). Finance costs of £26,000 (H1 2024: £30,000)
comprised interest payable on office leases and the Group's staff
electric car scheme.
Unrealised fair value movement in direct
investments
|
|
Unaudited
Six months
ended
30
September
2024
£'000
|
Unaudited
Six
months ended
30
September
2023
£'000
|
Audited
Year
ended
31
March
2024
£'000
|
|
Investment movements excluding cash invested and
realisations:
|
|
|
|
|
Unrealised gains on the
revaluation of direct investments
|
424
|
10,171
|
7,877
|
|
Unrealised losses on the
revaluation of direct investments
|
(239)
|
(11,790)
|
(25,215)
|
|
Net unrealised fair value movement
|
185
|
(1,619)
|
(17,338)
|
The net unrealised fair value
movement in direct investments resulted in a £185,000 increase (H1
2024: £1,619,000 decrease) and as at 30 September 2024, the fair
value of the Group's direct investment portfolio was £120,932,000
(H1 2024: £142,454,000).
Unrealised fair value gains arose
in three (H1 2024: eight) of the Group's direct investments. The
largest unrealised fair value gain was in respect of VirtTrade
Limited, which accounted for £93,000 of the total (H1 2024:
£4,450,000 unrealised fair value gain in respect of nDreams
Limited).
There were two (H1 2024: four)
unrealised fair value losses, the largest being £65,000 which arose
in respect of Impression Technologies Limited ("ITL") (H1 2024:
£8,909,000 unrealised fair value loss in ITL).
Share-based payments charge
The £478,000 non-cash charge (H1
2024: £509,000) arises from the total number of both issued and
vested share options held by employees throughout the Group,
ranging from 28 January 2020 to 30 September 2024.
Amortisation of intangible assets
The amortisation charge for the
period of £1,495,000 (H1 2024: £1,495,000) represents amortisation
of the acquired intangible assets of FDC and the VCT fund
management business.
Movement in fair value of deferred
consideration
The purchase price of FDC,
acquired in December 2022, included an element of contingent
deferred consideration which is subject to a number of targets
being met. An increase in the fair value of this contingent
deferred consideration during the six month period to 30 September
2024 has occurred, due to the increased probability of its
achievement and this has resulted in a charge to the income
statement of £295,000 (H1 2024: £218,000).
Taxation
The components of the Group's tax
charge are shown in note 9 of the summary financial information.
The overall tax charge for the period comprises a corporation tax
charge on taxable profits, partially offset by the continued
unwinding of the deferred tax liability in respect of the
intangible assets which arose on the acquisition of FDC and the VCT
fund management business.
Profit and total comprehensive income for the
period
The adjusted operating profit plus
the net unrealised fair value increase for the period, together
with other non-cash charges, have led to a consolidated total
comprehensive income of £1,776,000 (H1 2024: £1,349,000). This has
resulted in basic earnings per Ordinary share of 0.41 pence (H1
2024: 0.30 pence).
Summarised statement of financial position
|
|
Unaudited
As at
30
September
2024
£'000
|
Unaudited
As
at
30
September
2023
£'000
|
Audited
As
at
31
March
2024
£'000
|
|
Goodwill and intangible
assets
|
34,801
|
37,556
|
36,296
|
|
Direct investment
portfolio
|
120,932
|
142,454
|
116,861
|
|
Other non-current assets, trade
and other receivables
|
4,285
|
3,497
|
4,810
|
|
Cash and cash
equivalents
|
46,214
|
36,482
|
46,940
|
|
Total assets
|
206,232
|
219,989
|
204,907
|
|
Trade, other payables and lease
liabilities
|
(12,883)
|
(10,165)
|
(9,595)
|
|
Deferred consideration
|
(2,575)
|
(3,223)
|
(2,279)
|
|
Deferred taxation
|
(3,419)
|
(4,168)
|
(3,792)
|
|
Total liabilities
|
(18,877)
|
(17,556)
|
(15,666)
|
|
Net assets
|
187,355
|
202,433
|
189,241
|
|
Net assets per share (pence) *
|
43.4p
|
45.3p
|
43.4p
|
* 431,292,375
Ordinary shares, excluding those held in treasury,
has been used as the denominator for calculating net assets per
share as at 30 September 2024. 446,679,523 Ordinary shares has been
used as the denominator for calculating the comparative net assets
per share as at 30 September 2023. 436,319,815 Ordinary shares,
excluding those held in treasury, has been used as the denominator
for calculating the comparative net assets per share as at 31 March
2024.
Intangible assets
The Group's intangible assets
consist of goodwill and the intangible assets recognised on the
acquisition of FDC and the VCT fund management business.
Direct investment portfolio
During the period, Mercia's direct
investment portfolio increased from £116,861,000 as at 31 March
2024 (H1 2024: £136,550,000 as at 31 March 2023) to £120,932,000 as
at 30 September 2024 (H1 2024: £142,454,000 as at 30 September
2023), a 3.5% increase (H1 2024: 4.3% increase).
The Group invested £3,886,000 (H1
2024: £7,523,000 net; FY 2024: £19,626,000 net) into four existing
direct investments (H1 2024: seven existing and one new direct
investment; FY 2024: 11 existing direct investments), with the top
10 direct investments representing c.83% of the total direct
investment portfolio value (H1 2024: c.84%; FY 2024:
c.83%).
Cash and cash equivalents
At the period end, Mercia had cash
and cash equivalents totalling £46.2million (H1 2024: £36.5million;
FY 2024: £46.9million).
The Group continues to have
limited working capital needs due to the nature of its business and
during the period net cash generated from operating activities
totalled £4.2million (H1 2024: £3.5million; FY 2024:
£7.1million).
As at 30 September 2024, the
Group's cash and cash equivalents were spread across four leading
United Kingdom banks and a BlackRock Sterling money market fund,
earning an average overall yield of c.5%.
The summarised movements in the
Group's cash and cash equivalents during the period are shown
below.
|
|
Unaudited
Six months
ended
30
September
2024
£'000
|
Unaudited
Six
months ended
30
September
2023
£'000
|
Audited
Year
ended
31
March
2024
£'000
|
|
Opening cash and cash
equivalents
|
46,940
|
37,555
|
37,555
|
|
Net cash generated from operating
activities
|
4,157
|
3,533
|
7,084
|
|
Net cash (used in)/generated from
direct investment activities
|
(3,886)
|
(5,312)
|
9,360
|
|
Deferred consideration paid in
respect of the acquisition of FDC
|
-
|
-
|
(1,500)
|
|
Cash inflow from other investing
activities
|
1,030
|
646
|
1,991
|
|
Purchase of own shares into
treasury
|
(1,834)
|
-
|
(3,194)
|
|
Net cash used in financing
activities
|
(193)
|
(224)
|
(4,356)
|
|
Closing cash and cash equivalents
|
46,214
|
36,198
|
46,940
|
Outlook
The Group's first-half performance
continues to demonstrate Mercia's robust fundamentals with growth
in revenues, EBITDA and EBITDA margin. This continued growth,
alongside the cash generative nature of Mercia's fund management
activities, supports a c.6% increase in the interim dividend to
0.37 pence per share.
With significant liquidity and a
debt-free balance sheet, Mercia is well positioned for continuing
profitable progress during the second half of this financial
year.
Martin Glanfield
Chief Financial Officer
Summary Financial Information
Consolidated statement of comprehensive
income
For the six months ended 30
September 2024
|
|
Note
|
Unaudited
Six months
ended
30
September
2024
£'000
|
Unaudited
Six
months ended
30
September
2023
£'000
|
Audited
Year
ended
31
March
2024
£'000
|
|
Revenue
|
5
|
17,908
|
15,040
|
30,434
|
|
Administrative expenses
|
7
|
(14,494)
|
(12,502)
|
(25,386)
|
|
Realised fair value gain on sale
of a direct investment
|
6
|
-
|
-
|
4,450
|
|
Unrealised fair value movement in
direct investments
|
6
|
185
|
(1,619)
|
(17,338)
|
|
Share-based payments
charge
|
|
(478)
|
(509)
|
(1,002)
|
|
Amortisation of intangible
assets
|
|
(1,495)
|
(1,495)
|
(2,989)
|
|
Movement in fair value of deferred
consideration
|
|
(295)
|
(218)
|
(540)
|
|
Operating profit/(loss)
|
|
1,331
|
(1,303)
|
(12,371)
|
|
Finance income
|
8
|
1,128
|
2,720
|
4,216
|
|
Finance expense
|
|
(26)
|
(30)
|
(56)
|
|
Profit/(loss) before taxation
|
|
2,433
|
1,387
|
(8,211)
|
|
Taxation
|
9
|
(657)
|
(38)
|
626
|
|
Profit/(loss) and total comprehensive
income/(expense)
|
|
1,776
|
1,349
|
(7,585)
|
|
Basic earnings/(loss) per Ordinary share
(pence)
|
10
|
0.41
|
0.30
|
(1.71)
|
|
Diluted earnings/(loss) per Ordinary share
(pence)
|
10
|
0.40
|
0.30
|
(1.71)
|
All results derive from continuing
operations.
Consolidated statement of financial position
As at 30 September 2024
|
|
Note
|
Unaudited
As at
30
September
2024
£'000
|
Unaudited
As
at
30
September
2023
£'000
|
Audited
As
at
31
March
2024
£'000
|
|
Assets
|
|
|
|
|
|
Non-current assets
|
|
|
|
|
|
Goodwill
|
|
21,126
|
20,892
|
21,126
|
|
Intangible assets
|
|
13,675
|
16,664
|
15,170
|
|
Property, plant and
equipment
|
|
183
|
137
|
128
|
|
Right-of-use assets
|
|
871
|
790
|
711
|
|
Investments
|
12
|
120,932
|
142,454
|
116,861
|
|
Total non-current assets
|
|
156,787
|
180,937
|
153,996
|
|
Current assets
|
|
|
|
|
|
Trade and other
receivables
|
|
3,231
|
2,570
|
3,971
|
|
Short-term liquidity
investments
|
13
|
-
|
284
|
-
|
|
Cash and cash
equivalents
|
13
|
46,214
|
36,198
|
46,940
|
|
Total current assets
|
|
49,445
|
39,052
|
50,911
|
|
Total assets
|
|
206,232
|
219,989
|
204,907
|
|
Current liabilities
|
|
|
|
|
|
Trade and other
payables
|
|
(12,035)
|
(9,296)
|
(8,893)
|
|
Lease liabilities
|
|
(403)
|
(420)
|
(376)
|
|
Deferred consideration
|
14
|
(2,575)
|
(1,316)
|
(2,279)
|
|
Total current liabilities
|
|
(15,013)
|
(11,032)
|
(11,548)
|
|
Non-current liabilities
|
|
|
|
|
|
Lease liabilities
|
|
(445)
|
(449)
|
(326)
|
|
Deferred consideration
|
14
|
-
|
(1,907)
|
-
|
|
Deferred taxation
|
15
|
(3,419)
|
(4,168)
|
(3,792)
|
|
Total non-current liabilities
|
|
(3,864)
|
(6,524)
|
(4,118)
|
|
Total liabilities
|
|
(18,877)
|
(17,556)
|
(15,666)
|
|
Net assets
|
|
187,355
|
202,433
|
189,241
|
|
Equity
|
|
|
|
|
|
Issued share capital
|
16
|
4
|
4
|
4
|
|
Share premium
|
17
|
83,775
|
83,775
|
83,775
|
|
Treasury reserve
|
18
|
(4,925)
|
-
|
(3,188)
|
|
Other distributable
reserve
|
19
|
56,966
|
60,899
|
59,338
|
|
Retained earnings
|
|
45,532
|
52,690
|
43,756
|
|
Share-based payments
reserve
|
|
6,003
|
5,065
|
5,556
|
|
Total equity
|
|
187,355
|
202,433
|
189,241
|
The accompanying notes are an
integral part of these condensed consolidated interim financial
statements.
The condensed consolidated interim
financial statements of Mercia Asset Management PLC were approved
by the Board of Directors on 25 November 2024 and authorised for
issue. They were signed on its behalf by:
Dr Mark
Payton
Martin Glanfield
Chief Executive
Officer
Chief Financial Officer
Consolidated statement of cash flows
For the six months ended 30
September 2024
|
|
Note
|
Unaudited
Six months
ended
30
September
2024
£'000
|
Unaudited
Six
months ended
30
September
2023
£'000
|
Audited
Year
ended
31
March
2024
£'000
|
|
Cash flows from operating activities:
|
|
|
|
|
|
Operating profit/(loss)
|
|
1,331
|
(1,303)
|
(12,371)
|
|
Adjustments to reconcile operating (loss)/profit to net cash
generated from operating activities:
|
|
|
|
|
|
Depreciation of property, plant
and equipment
|
|
50
|
50
|
104
|
|
Depreciation of right-of-use
assets
|
|
252
|
186
|
385
|
|
Realised fair value gain on sale
of a direct investment
|
6
|
-
|
-
|
(4,450)
|
|
Unrealised fair value movement in
direct investments
|
6
|
(185)
|
1,619
|
17,338
|
|
Share-based payments
charge
|
|
478
|
509
|
1,002
|
|
Amortisation of intangible
assets
|
|
1,495
|
1,495
|
2,989
|
|
Movement in fair value of deferred
consideration
|
|
295
|
218
|
540
|
|
Working capital adjustments:
|
|
|
|
|
|
Decrease in trade and other
receivables
|
|
740
|
621
|
800
|
|
(Decrease)/increase in trade and
other payables
|
|
(461)
|
138
|
1,535
|
|
Cash generated from operating activities
|
|
3,995
|
3,533
|
7,872
|
|
Corporation tax
receipt/(payment)
|
|
162
|
-
|
(788)
|
|
Net cash generated from operating
activities
|
|
4,157
|
3,533
|
7,084
|
|
Cash flows from direct investment
activities:
|
|
|
|
|
|
Sale of direct
investments
|
12
|
-
|
269
|
26,696
|
|
Purchase of direct
investments
|
12
|
(3,886)
|
(7,523)
|
(19,926)
|
|
Investee company loan
repayments
|
12
|
-
|
-
|
300
|
|
Investee company loan interest and
redemption premium received
|
8
|
-
|
1,942
|
2,290
|
|
Net cash (used in)/generated from direct investment
activities
|
|
(3,886)
|
(5,312)
|
9,360
|
|
Cash flows from other investing activities:
|
|
|
|
|
|
Interest received from cash and
cash equivalents
|
|
1,135
|
711
|
1,813
|
|
Purchase of property, plant and
equipment
|
|
(105)
|
(65)
|
(110)
|
|
Deferred consideration paid in
respect of acquisitions
|
14
|
-
|
-
|
(1,500)
|
|
Decrease in short-term liquidity
investments
|
|
-
|
-
|
288
|
|
Net cash generated from other investing
activities
|
|
1,030
|
646
|
491
|
|
Net cash (used in)/generated from total investing
activities
|
|
(2,856)
|
(4,666)
|
9,851
|
|
Cash flows from financing activities:
|
|
|
|
|
|
Dividends paid
|
11
|
-
|
-
|
(3,928)
|
|
Purchase of own shares into
treasury
|
|
(1,834)
|
-
|
(3,194)
|
|
Proceeds received from the
exercise of employee share options
|
|
66
|
-
|
26
|
|
Interest paid
|
|
(26)
|
(30)
|
(56)
|
|
Payment of lease
liabilities
|
|
(233)
|
(194)
|
(398)
|
|
Net cash used in financing activities
|
|
(2,027)
|
(224)
|
(7,550)
|
|
Net (decrease)/increase in cash and cash
equivalents
|
|
(726)
|
(1,357)
|
9,385
|
|
Cash and cash equivalents at the
beginning of the period
|
|
46,940
|
37,555
|
37,555
|
|
Cash and cash equivalents at the end of the
period
|
13
|
46,214
|
36,198
|
46,940
|
Consolidated statement of changes in equity
For the six months ended 30
September 2024
|
|
Issued
|
|
|
Other
|
|
Share-based
|
|
|
|
share
|
Share
|
Treasury
|
distributable
|
Retained
|
payments
|
|
|
|
capital
|
premium
|
Reserve
|
reserve
|
earnings
|
reserve
|
Total
|
|
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
£'000
|
|
As at 1 April 2023
(audited)
|
4
|
83,744
|
-
|
63,266
|
51,341
|
4,566
|
202,921
|
|
Profit and total comprehensive
income for the period
|
-
|
-
|
-
|
-
|
1,349
|
-
|
1,349
|
|
Final dividend
|
-
|
-
|
-
|
(2,367)
|
-
|
-
|
(2,367)
|
|
Exercise of share
options
|
-
|
31
|
-
|
-
|
-
|
(10)
|
21
|
|
Share-based payments
charge
|
-
|
-
|
-
|
-
|
-
|
509
|
509
|
|
As at 30 September 2023
(unaudited)
|
4
|
83,775
|
-
|
60,899
|
52,690
|
5,065
|
202,433
|
|
Purchase of Ordinary shares into
treasury
|
-
|
-
|
(3,194)
|
-
|
-
|
-
|
(3,194)
|
|
Loss and total comprehensive
expense for the period
|
-
|
-
|
-
|
-
|
(8,934)
|
-
|
(8,934)
|
|
Exercise of share
options
|
-
|
-
|
6
|
-
|
-
|
(2)
|
4
|
|
Interim dividend
|
-
|
-
|
-
|
(1,561)
|
-
|
-
|
(1,561)
|
|
Share-based payments
charge
|
-
|
-
|
-
|
-
|
-
|
493
|
493
|
|
As at 31 March 2024 (audited)
|
4
|
83,775
|
(3,188)
|
59,338
|
43,756
|
5,556
|
189,241
|
|
Purchase of Ordinary shares into treasury
|
-
|
-
|
(1,834)
|
-
|
-
|
-
|
(1,834)
|
|
Profit and total comprehensive income for the
period
|
-
|
-
|
-
|
-
|
1,776
|
-
|
1,776
|
|
Final dividend
|
-
|
-
|
-
|
(2,372)
|
-
|
-
|
(2,372)
|
|
Exercise of share options
|
-
|
-
|
97
|
-
|
-
|
(31)
|
66
|
|
Share-based payments charge
|
-
|
-
|
-
|
-
|
-
|
478
|
478
|
|
As at 30 September 2024 (unaudited)
|
4
|
83,775
|
(4,925)
|
56,966
|
45,532
|
6,003
|
187,355
|
1. General information
Mercia Asset Management PLC
(the "Group", "Mercia") is
a public limited company, incorporated and domiciled in England,
United Kingdom, and registered in England and Wales with registered
number 09223445. Its Ordinary shares are admitted to trading on the
AIM market of the London Stock Exchange. The registered office
address is Mercia Asset Management PLC, Forward House, 17 High
Street, Henley-in-Arden, Warwickshire B95 5AA.
2. Basis of preparation
The financial information
presented in these condensed consolidated interim financial
statements constitutes the condensed consolidated financial
statements of Mercia Asset Management PLC and its subsidiaries for
the six months ended 30 September 2024. These condensed
consolidated interim financial statements should be read in
conjunction with the Group's Annual Report and consolidated
financial statements for the year ended 31 March 2024, which have
been prepared in accordance with international accounting standards
in conformity with the requirements of the Companies Act 2006,
International Financial Reporting Standards ("IFRS") and the
applicable legal requirements of the Companies Act 2006.
These condensed consolidated
interim financial statements and the comparative financial
information presented in these condensed consolidated interim
financial statements for the period ended 30 September 2024 do not
constitute full statutory accounts within the meaning of Section
434 of the Companies Act 2006. The Group's Annual Report and
consolidated financial statements for the year ended 31 March 2024
were approved by the Board on 1 July 2024 and have been delivered
to the Registrar of Companies. The Group's independent auditor's
report on those accounts was unqualified, did not contain an
emphasis of matter paragraph and did not contain any statement
under section 498 of the Companies Act 2006.
These condensed consolidated
interim financial statements have been prepared in accordance with
International Accounting Standard ("IAS") 34 Interim Financial
Reporting, as adopted for use in the UK.
No new or revised standards or
interpretations that have become effective during the period ended
30 September 2024 have had a material effect on the financial
statements of the Group.
Although not required by statute
or regulation, the financial information contained in these
condensed consolidated interim financial statements, which were
approved by the Board on 25 November 2024 and authorised for issue,
have been reviewed by the Group's independent auditor.
3. Going concern
Based on the Group's balance
sheet, including its liquidity position at the period end and its
forecast future operating and investment activities, the Directors
have a reasonable expectation that the Group has adequate financial
resources to manage business risks in the current economic
environment and continue in operational existence, for a period of
at least 12 months from the date of this announcement. Accordingly,
the Directors continue to adopt the going concern basis in
preparing these condensed consolidated interim financial
statements.
4. Material accounting policies
In the application of the Group's
accounting policies, the Directors are required to make judgements,
estimates and assumptions about the carrying amounts of assets and
liabilities that are not readily apparent from other sources. The
estimates and associated assumptions are based on historical
experience and other factors that are considered to be relevant.
Actual results may differ from these estimates. The estimates and
underlying assumptions are reviewed on an ongoing basis. Revisions
to accounting estimates are recognised in the period in which the
estimate is revised if the revision affects only that period, or in
the period of the revision and future periods, if the revision
affects both current and future periods.
The principal accounting policies
applied in the presentation of the condensed consolidated interim
financial statements of Mercia Asset Management PLC (the "Group",
"Mercia" or the "Company"), including the critical accounting
judgements made by the Directors and the key sources of estimation,
are consistent with those followed in the preparation of the
Group's Annual Report and consolidated financial statements for the
year ended 31 March 2024 and have been consistently applied
throughout the period ended 30 September 2024.
5. Segmental reporting
The Group's revenue and profits
are derived from its principal activity within the United
Kingdom.
IFRS 8 Operating Segments defines
operating segments as those activities of an entity about which
separate financial information is available and which are evaluated
by the Chief Operating Decision Maker to assess performance and
determine the allocation of resources. The Chief Operating Decision
Maker has been identified as the Board of Directors. The Directors
are of the opinion that under IFRS 8 Operating Segments the Group
has only one operating segment, being specialist alternative asset
management, because the results of the Group are monitored on a
Group-wide basis. The Board of Directors assesses the performance
of the operating segment using financial information which is
measured and presented in a consistent manner.
An analysis of the Group's revenue
is as follows:
|
|
Unaudited
Six months
ended
30
September
2024
£'000
|
Unaudited
Six
months ended
30
September
2023
£'000
|
Audited
Year
ended
31
March
2024
£'000
|
|
Fund management fees
|
12,362
|
9,958
|
19,214
|
|
Initial management fees
|
2,524
|
2,369
|
5,465
|
|
Portfolio directors'
fees
|
2,092
|
1,926
|
3,933
|
|
Other revenue
|
130
|
158
|
341
|
|
VCTs share offer fees
|
800
|
629
|
1,481
|
|
|
17,908
|
15,040
|
30,434
|
6. Realised fair value gain and unrealised fair value
movement in direct investments
|
|
Unaudited
Six months
ended
30
September
2024
£'000
|
Unaudited
Six
months ended
30
September
2023
£'000
|
Audited
Year
ended
31
March
2024
£'000
|
|
Realised fair value gain on sale
of a direct investment (note 12)
|
-
|
-
|
4,450
|
|
Net unrealised fair value
movements in direct investments (note 12)
|
185
|
(1,619)
|
(17,338)
|
|
|
185
|
(1,619)
|
(12,888)
|
7. Operating profit/(loss)
Operating profit/(loss) is stated
after charging:
|
|
Unaudited
Six months
ended
30
September
2024
£'000
|
Unaudited
Six
months ended
30
September
2023
£'000
|
Audited
Year
ended
31
March
2024
£'000
|
|
Staff costs
|
9,747
|
8,578
|
17,530
|
|
Other administrative expenses
(including VCT share offer costs)
|
4,747
|
3,924
|
7,856
|
|
Total administrative expenses
|
14,494
|
12,502
|
25,386
|
8. Finance income
Finance income is derived
from:
|
|
Unaudited
Six months
ended
30
September
2024
£'000
|
Unaudited
Six
months ended
30
September
2023
£'000
|
Audited
Year
ended
31
March
2024
£'000
|
|
Cash deposits
|
1,128
|
773
|
1,917
|
|
Short-term liquidity
investments
|
-
|
5
|
9
|
|
Investee company loans (interest
and redemption premium)
|
-
|
1,942
|
2,290
|
|
Total interest income
|
1,128
|
2,720
|
4,216
|
9. Taxation
|
|
Unaudited
Six months
ended
30
September
2024
£'000
|
Unaudited
Six
months ended
30
September
2023
£'000
|
Audited
Year
ended
31
March
2024
£'000
|
|
Current tax
|
|
|
|
|
UK corporation tax
|
(1,030)
|
(410)
|
(122)
|
|
Deferred tax
|
|
|
|
|
Origination and reversal of
temporary timing differences
|
373
|
372
|
748
|
|
Total tax (charge)/credit
|
(657)
|
(38)
|
626
|
The UK standard rate of
corporation tax is 25% (H1 2024: 25%). The deferred tax credit of
£373,000 (H1 2024: £372,000) represents the unwinding of the
deferred tax liabilities which arose in respect of the intangible
assets recognised on the acquisition of Frontier Development
Capital Limited and the VCT fund management business.
10. Earnings/(loss) per share
Basic earnings/(loss) per share is
calculated by dividing the profit/(loss) for the financial period
by the weighted average number of Ordinary shares in issue during
the period. Diluted earnings/(loss) per share is calculated by
dividing the profit/(loss) for the financial period by the weighted
average number of Ordinary shares outstanding and, when dilutive,
adjusted for the effect of all potentially dilutive shares,
including share options, on an as-if-converted basis. The potential
dilutive shares are included in diluted earnings/(loss) per share
calculations on a weighted average basis for the period. The
profit/(loss) and weighted average number of shares used in the
calculations are set out below:
|
|
Unaudited
Six months
ended
30
September
2024
|
Unaudited
Six
months ended
30
September
2023
|
Audited
Year
ended
31
March
2024
|
|
Profit/(loss) for the financial period
(£'000)
|
1,776
|
1,349
|
(7,585)
|
|
Basic weighted average number of
Ordinary shares ('000)
|
431,850
|
446,582
|
444,716
|
|
Basic earnings/(loss) per Ordinary share
(pence)
|
0.41
|
0.30
|
(1.71)
|
|
Diluted weighted average number of
Ordinary shares ('000)
|
445,310
|
454,800
|
444,716
|
|
Diluted earnings/(loss) per Ordinary share
(pence)
|
0.40
|
0.30
|
(1.71)
|
The calculation of basic and
diluted earnings per share is based on the following weighted
average number of Ordinary shares:
|
|
Unaudited
Six months
ended
30
September
2024
'000
|
Unaudited
Six
months ended
30
September
2023
'000
|
Audited
Year
ended
31
March
2024
'000
|
|
Weighted average number of shares
|
|
|
|
|
Basic
|
431,850
|
446,582
|
444,716
|
|
Dilutive impact of employee share
options
|
13,460
|
8,218
|
-
|
|
Diluted weighted average number of Ordinary
shares
|
445,310
|
454,800
|
444,716
|
The dilutive impact of employee
share options for the year ended 31 March 2024 has been excluded
from the weighted average number of diluted Ordinary shares, as
including them is anti-dilutive to diluted earnings per
share.
11. Dividends
An interim dividend for the year
ending 31 March 2025 of 0.37 pence per share, totalling £1,596,000,
has been declared after the reporting period end and as such, has
not been included as a liability in these condensed consolidated
financial statements, in accordance with IAS 10.
Details of the dividends declared
and paid in the comparative periods are set out in the Group's
consolidated financial statements for the year ended 31 March
2024.
12. Investments
The net change in the value of
investments for the period is an increase of £4,071,000 (H1 2024: increase of £5,904,000). The table
below reconciles the opening to closing value of investments for
both the current and comparative
periods.
|
|
Level 1
financial
assets
|
Level 3
financial
assets
|
Total financial
assets
|
|
|
£'000
|
£'000
|
£'000
|
|
As at 1 April 2023
(audited)
|
969
|
135,581
|
136,550
|
|
Investments made during the
period
|
-
|
7,523
|
7,523
|
|
Unrealised fair value gains on
investments
|
-
|
10,171
|
10,171
|
|
Unrealised fair value losses on
investments
|
(153)
|
(11,637)
|
(11,790)
|
|
As at 30 September 2023
(unaudited)
|
816
|
141,638
|
142,454
|
|
Investments made during the
period
|
-
|
12,403
|
12,403
|
|
Investee company loan
repayment
|
-
|
(300)
|
(300)
|
|
Disposal
|
-
|
(30,211)
|
(30,211)
|
|
Investment received as
consideration
|
-
|
3,784
|
3,784
|
|
Realised gain on sale of direct
investment
|
-
|
4,450
|
4,450
|
|
Unrealised fair value gains on
investments
|
-
|
(2,294)
|
(2,294)
|
|
Unrealised fair value losses on
investments
|
(34)
|
(13,391)
|
(13,425)
|
|
As at 31 March 2024 (audited)
|
782
|
116,079
|
116,861
|
|
Investments made during the period
|
-
|
3,886
|
3,886
|
|
Unrealised fair value gains on investments
|
68
|
356
|
424
|
|
Unrealised fair value losses on investments
|
-
|
(239)
|
(239)
|
|
As at 30 September 2024 (unaudited)
|
850
|
120,082
|
120,932
|
Investments held as part of the
Group's direct investment portfolio are carried at fair value in
accordance with IFRS 10 Investment Entity exemption.
The measurement basis for
determining the fair value of investments held at each period end
is as follows:
|
|
Unaudited
As at
30
September
2024
£'000
|
Unaudited
As
at
30
September
2023
£'000
|
Audited
As
at
31
March
2024
£'000
|
|
Listed investment
|
850
|
816
|
782
|
|
Initial fair value
|
6,900
|
3,140
|
6,912
|
|
Price of recent investment
round
|
64,100
|
55,401
|
79,847
|
|
Enterprise value
|
49,082
|
83,097
|
29,320
|
|
|
120,932
|
142,454
|
116,861
|
13. Cash, cash equivalents and short-term liquidity
investments
|
|
Unaudited
As at
30
September
2024
£'000
|
Unaudited
As
at
30
September
2023
£'000
|
Audited
As
at
31
March
2024
£'000
|
|
Total cash and cash equivalents
|
46,214
|
36,198
|
46,940
|
|
Total short-term liquidity investments
|
-
|
284
|
-
|
14. Deferred consideration
|
|
Unaudited
As at
30
September
2024
£'000
|
Unaudited
As
at
30
September
2023
£'000
|
Audited
As
at
31
March
2024
£'000
|
|
Payable within one year
|
2,575
|
1,316
|
2,279
|
|
Payable within two to five
years
|
-
|
1,907
|
-
|
|
|
2,575
|
3,223
|
2,279
|
Details of the deferred
consideration which arose on the acquisition of Frontier
Development Capital Limited in December 2022 are set out in the
Group's consolidated financial statements for the year ended
31 March 2024.
15. Deferred taxation
|
|
Unaudited
As at
30
September
2024
£'000
|
Unaudited
As
at
30
September
2023
£'000
|
Audited
As
at
31
March
2024
£'000
|
|
Deferred tax liability
|
3,419
|
4,168
|
3,792
|
Under IAS 12 Income Taxes,
provision is made for the deferred tax liability associated with
the recognition of intangible assets arising as part of the
acquisitions of Frontier Development Capital Limited and the VCT
fund management contracts.
As at 30 September 2024, the
deferred tax liability has been calculated using the tax rate of
25%.
16. Issued share capital
|
|
Unaudited
Six months
ended
30 September
2024
|
|
Unaudited
Six
months ended
30
September 2023
|
|
Audited
Year
ended
31 March
2024
|
|
|
Number
|
£'000
|
|
Number
|
£'000
|
|
Number
|
£'000
|
|
Allotted and fully paid
|
|
|
|
|
|
|
|
|
|
As at the beginning of the
period
|
446,679,523
|
4
|
|
446,581,202
|
4
|
|
446,581,202
|
4
|
|
Issue of share capital during the
period
|
-
|
-
|
|
98,321
|
-
|
|
98,321
|
-
|
|
As at the end of the period
|
446,679,523
|
4
|
|
446,679,523
|
4
|
|
446,679,523
|
4
|
|
|
|
|
|
|
|
|
|
|
|
During the period, 5,326,380
Ordinary shares were repurchased into a treasury reserve, see note
18. The outstanding Ordinary shares as at 30
September 2024, being 431,292,375, are entitled to one vote each and have equal rights as to
dividends. The Ordinary shares are not
redeemable.
17. Share premium
|
|
Unaudited
Six months
ended
30
September
2024
£'000
|
Unaudited
Six
months ended
30
September
2023
£'000
|
Audited
Year
ended
31
March
2024
£'000
|
|
As at the beginning of the
period
|
83,775
|
83,744
|
83,744
|
|
Premium arising on the issue of
Ordinary shares
|
-
|
31
|
31
|
|
As at the end of the period
|
83,775
|
83,775
|
83,775
|
18. Treasury reserve
|
|
Unaudited
30 September
2024
|
|
|
Unaudited
30
September 2023
|
|
Audited
31 March
2024
|
|
|
Number
|
£'000
|
|
|
Number
|
£'000
|
|
Number
|
£'000
|
|
As at the beginning of the
period
|
10,359,708
|
3,188
|
|
|
-
|
-
|
|
-
|
-
|
|
Purchase of own shares into
treasury
|
5,326,380
|
1,834
|
|
|
-
|
-
|
|
10,379,708
|
3,194
|
|
Satisfaction of employee share
options
|
(298,940)
|
(97)
|
|
|
-
|
-
|
|
(20,000)
|
(6)
|
|
As at the end of the period
|
15,387,148
|
4,925
|
|
|
-
|
-
|
|
10,359,708
|
3,188
|
19. Other distributable reserve
|
|
Unaudited
Six months
ended
30
September
2024
£'000
|
Unaudited
Six
months ended
30
September
2023
£'000
|
Audited
Year
ended
31
March
2024
£'000
|
|
As at the beginning of the
period
|
59,338
|
63,266
|
63,266
|
|
Dividends
|
(2,372)
|
(2,367)
|
(3,928)
|
|
As at the end of the period
|
56,966
|
60,899
|
59,338
|
20. Fair value measurements
The fair values of the Group's
financial assets and liabilities are considered a reasonable
approximation to the carrying values shown in the consolidated
statement of financial position. Subsequent to their initial
recognition at fair value, measurements of movements in fair values
of financial instruments are grouped into Levels 1 to 3, based on
the degree to which the fair value is observable. The fair value
hierarchy used is outlined in more detail in note 2 to these
consolidated financial statements.
The following table gives
information about how the fair values of these financial assets and
financial liabilities are determined and presents the Group's
assets measured at fair value as at 30 September 2024. There have
been no movements in financial assets or financial liabilities
between levels during the current or comparative periods. The table
in note 12 sets out the movement in the Level 1 and 3 financial
assets from the start to the end of the period.
|
|
Unaudited
As at
30
September
2024
£'000
|
Unaudited
As
at
30
September
2023
£'000
|
Audited
As
at
31
March
2024
£'000
|
|
Assets:
|
|
|
|
|
Financial assets at fair value through profit or loss -
direct investment portfolio
|
|
|
|
|
Level 1
|
850
|
816
|
782
|
|
Level 2
|
-
|
-
|
-
|
|
Level 3
|
120,082
|
141,638
|
116,079
|
|
|
120,932
|
142,454
|
116,861
|
|
|
|
|
Unaudited
As at
30
September
2024
£'000
|
Unaudited
As
at
30
September
2023
£'000
|
Audited
As
at
31
March
2024
£'000
|
|
Liabilities:
|
|
|
|
|
|
|
Financial liabilities at fair value through profit or loss -
deferred consideration
|
|
|
|
|
Level 1
|
|
|
-
|
-
|
-
|
|
Level 2
|
|
|
-
|
-
|
-
|
|
Level 3
|
|
|
2,575
|
3,223
|
2,279
|
|
|
|
|
2,575
|
3,223
|
2,279
|
The Directors consider that the
carrying amounts of financial assets and financial liabilities
recorded at amortised cost in the financial statements approximate
to their fair values.
Financial instruments in
Level 1
The Group had one direct
investment quoted on the AIM market of the London Stock Exchange,
MyHealthChecked PLC, which is valued using the closing bid price as
at 30 September 2024.
Financial instruments in
Level 3
If one or more of the significant
inputs required to fair value an instrument is not based on
observable market data, the instrument is included in Level 3.
Apart from the one investment classified in Level 1, all other
investments held in the Group's direct investment portfolio have
been classified in Level 3 of the fair value hierarchy and the
individual valuations for each of the companies have been arrived
at using appropriate valuation techniques.
The Group has adopted the
International Private Equity and Venture Capital Valuation
Guidelines for determining its valuation techniques, which specify
that the price of a recent investment represents one of a number of
inputs used to arrive at fair value and uses a single
classification for all Level 3 investments. Note 2 of the Group's
consolidated financial statements for the year ended 31 March 2024
provides further information on the Group's valuation methodology,
including a detailed explanation of the valuation techniques used
for Level 3 financial instruments.
A reconciliation of the movement
in Level 1 and 3 financial assets is disclosed in note
12.
INDEPENDENT REVIEW REPORT TO MERCIA ASSET MANAGEMENT
PLC
Conclusion
Based on our review, nothing has
come to our attention that causes us to believe that the condensed
set of financial statements in the half-yearly financial report for
the six months ended 30 September 2024 is not prepared, in all
material respects, in accordance with UK adopted International
Accounting Standard 34 and the London Stock Exchange AIM Rules for
Companies.
We have been engaged by the
Company to review the condensed set of financial statements in the
half-yearly financial report for the six months ended 30 September
2024 which comprises the consolidated statement of comprehensive
income, consolidated statement of financial position, consolidated
cash flow statement, consolidated statement of changes in equity
and notes to the condensed interim financial statements.
Basis for conclusion
We conducted our review in
accordance with Revised International Standard on Review
Engagements (UK) 2410, "Review of Interim Financial Information
Performed by the Independent Auditor of the Entity" ("ISRE (UK)
2410 (Revised)"). A review of interim financial information
consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures. A review is substantially less in scope than an
audit conducted in accordance with International Standards on
Auditing (UK) and consequently does not enable us to obtain
assurance that we would become aware of all significant matters
that might be identified in an audit. Accordingly, we do not
express an audit opinion.
As disclosed in note 2, the annual
financial statements of the group are prepared in accordance with
UK adopted International Accounting Standards. The condensed set of
financial statements included in this half-yearly financial report
has been prepared in accordance with UK adopted International
Accounting Standard 34, "Interim Financial Reporting".
Conclusions relating to going concern
Based on our review procedures,
which are less extensive than those performed in an audit as
described in the Basis for Conclusion section of this report,
nothing has come to our attention to suggest that the Directors
have inappropriately adopted the going concern basis of accounting
or that the Directors have identified material uncertainties
relating to going concern that are not appropriately
disclosed.
This conclusion is based on the
review procedures performed in accordance with ISRE (UK) 2410
(Revised), however future events or conditions may cause the Group
to cease to continue as a going concern.
Responsibilities of directors
The Directors are responsible for
preparing the half-yearly financial report in accordance with the
London Stock Exchange AIM Rules for Companies which require that
the half-yearly report be presented and prepared in a form
consistent with that which will be adopted in the Company's annual
accounts having regard to the accounting standards applicable to
such annual accounts.
In preparing the half-yearly
financial report, the Directors are responsible for assessing the
Company's ability to continue as a going concern, disclosing, as
applicable, matters related to going concern and using the going
concern basis of accounting unless the Directors either intend to
liquidate the company or to cease operations, or have no realistic
alternative but to do so.
Auditor's responsibilities for the review of the financial
information
In reviewing the half-yearly
report, we are responsible for expressing to the Company a
conclusion on the condensed set of financial statements in the
half-yearly financial report. Our conclusion, including our
Conclusions Relating to Going Concern, are based on procedures that
are less extensive than audit procedures, as described in the Basis
for Conclusion paragraph of this report.
Use of our report
Our report has been prepared in
accordance with the terms of our engagement to assist the Company
in meeting the requirements of the rules of the London Stock
Exchange AIM Rules for Companies and for no other purpose. No
person is entitled to rely on this report unless such a person is a
person entitled to rely upon this report by virtue of and for the
purpose of our terms of engagement or has been expressly authorised
to do so by our prior written consent. Save as above, we do not
accept responsibility for this report to any other person or for
any other purpose and we hereby expressly disclaim any and all such
liability.
BDO LLP
Chartered Accountants
London, UK
Date: 25 November 2024
BDO LLP is a limited liability
partnership registered in England and Wales (with registered number
OC305127).
Directors, secretary
and
advisers
Directors
Ian Roland Metcalfe
OBE
(Non-executive Chair)
Dr Mark Andrew
Payton
(Chief Executive Officer)
Martin James
Glanfield
(Chief Financial Officer)
Julian George
Viggars
(Chief Investment Officer)
Diane
Seymour-Williams
(Senior Independent Director)
Dr Jonathan David
Pell
(Non-executive Director)
Caroline Bayantai Plumb
OBE
(Non-executive Director)
|
Company secretary
|
Company registration number
|
|
Sarah-Louise Anne
Williams
|
09223445
|
|
|
|
|
Company website
|
Company registrar
|
|
www.mercia.co.uk
|
Equiniti Ltd
|
|
|
Highdown House
|
|
Registered office
|
Yeoman Way
|
|
Forward House
|
Worthing
|
|
17 High
Street
|
West Sussex BN99 3HH
|
|
Henley-in-Arden
|
|
|
Warwickshire B95 5AA
|
Solicitors
|
|
|
Gowling WLG (UK) LLP
|
|
Independent auditor
|
4 More London Riverside
|
|
BDO LLP
|
London SE1 2AU
|
|
55 Baker Street
|
|
|
Marylebone
|
Nominated adviser and joint broker
|
|
London W1U 7EU
|
Canaccord Genuity Ltd
|
|
|
88 Wood Street
|
|
Principal bankers
|
London EC2V 7QR
|
|
Barclays Bank PLC
|
|
|
One Snowhill
|
Joint broker
|
|
Snow Hill Queensway
|
Singer Capital Markets Advisory
LLP
|
|
Birmingham B4 6GN
|
1 Bartholomew Lane
|
|
|
London EC2N 2AX
|
|
Lloyds Bank plc
|
|
|
125 Colmore Row
|
Investor relations adviser
|
|
Birmingham B3 3SD
|
FTI Consulting Ltd
|
|
|
200 Aldersgate
|
|
|
London EC2A 4HD
|