Mercia Asset Management PLC (AIM: MERC), the proactive, regionally focused, specialist asset manager is pleased to announce its interim results for the six months ended 30 September 2020.
Financial results
- Total assets under management (“AuM”) (which includes the Group’s consolidated net assets) increased by 78.0% compared to 30 September 2019 to c.£872million (H1 2020: c.£490million; FY 2020: c.£800million)
- Revenue increased 51.0% to £8.4million (H1 2020: £5.5million)
- Adjusted operating profit* £1.1million (H1 2020: £0.6million loss)
- Net fair value increase of £6.7million (H1 2020: £3.2million)
- Operating profit £8.0million (H1 2020: £2.1million)
- Profit after tax £8.2million (H1 2020: £2.1million)
- Earnings per share 1.87 pence (H1 2020: 0.69 pence)
- Maiden interim dividend of 0.1 pence per share (H1 2020: nil) payable on 30 December 2020 to shareholders on the register at close of business on 11 December 2020
- Unrestricted cash and short-term liquidity investments £24.9million (H1 2020: £17.8million; FY 2020: £30.2million) •
- Net assets £149.9million (H1 2020: £128.4million; FY 2020: £141.5million)
Managed fund developments
- Third-party funds under management (“FuM”) doubled compared to 30 September 2019 to c.£722million (H1 2020: c.£361million; FY 2020: c.£658million) contributing £7.8million in revenue (H1 2020: £4.9million)
- Venture FuM c.£552million (H1 2020: c.£210million; FY 2020: c.£476million)
- Private equity FuM c.£56million (H1 2020: c.£60million; FY 2020: c.£60million)
- Debt FuM c.£114million (H1 2020: £91million; FY 2020: c.£122million)
Direct investment portfolio developments
- £10.9million net invested into 14 portfolio companies during the period (H1 2020: £11.1million net invested into 16 portfolio companies), including one new direct investment into MIP Diagnostics
- Direct investment portfolio fair value £101.6million (H1 2020: £102.0million; FY 2020: £87.5million), up 16.2% in the six month period
- Sale of The Native Antigen Company in July 2020 realised total cash receipts during the period of £4.8million and a realised gain of £1.7million
COVID-19 update and post period end developments
- Priority for the Group has continued to be the safety and wellbeing of all employees, with remote working possible for all staff. Mental wellbeing is being closely monitored and antibody testing has been made available for all staff and close family members
- No Government financial support or delayed payment schemes have been accessed and no staff redundancies made
- Diane Seymour-Williams appointed as an additional Non-executive Director, bringing deep asset management experience
- Continuing commercial progress is being made by the majority of the direct portfolio including each of the top five direct investments by holding value
- As a CBILS accredited lender for the British Business Bank’s Northern Powerhouse Investment Fund, with a focus on Yorkshire and the Humber regions, the Group’s debt team have been actively supporting qualifying businesses
- Clear Review sold for £1.0million in cash, double Mercia’s direct investment
Mark Payton, Chief Executive Officer of Mercia, commented:
“These record results mark the halfway point in our three-year strategic plan to achieve adjusted operating profitability, expand the Group’s assets under management (“AuM”) to at least £1.0billion and to ‘evergreen’ Mercia’s balance sheet. I am pleased to say that strong progress has been made during the six month period under review. We have successfully built scale in our third-party fund management business and the fees this is generating are enabling us to deliver a sustainable adjusted operating profit, in turn underpinning our maiden interim dividend and the adoption of a progressive dividend policy.
Our total AuM have now increased to c.£872million, c.£722million of which is third-party funds under management, and we remain confident in achieving our target of £1.0billion in total AuM within the next 18 months.
I am also pleased with the positive steps we are making towards ‘evergreening’ our balance sheet. We delivered a profitable cash realisation during the period and another post period end. Furthermore, our direct investment portfolio is well financed and we have considerable remaining liquidity. In addition, it is encouraging that we have reported a strong net fair value increase, reversing some of the COVID-19 impact we reported in our full year 2020 results. We are increasingly optimistic about the potential of the companies within our direct investment portfolio, many of which are in sectors such as Life Sciences, Software and Digital Entertainment which are experiencing strong tailwinds.
Whilst this continuing period of uncertainty during the COVID-19 pandemic has adversely affected many UK businesses, the resilience of Mercia’s hybrid investment model, which connects third-party managed funds and direct investment activity via our proprietary capital, positions us favourably as we move into the next half year and thereafter.”
Read the full results here.
*Adjusted operating profit is defined as operating profit before realised gains on disposal of investments, fair value movements in investments, share-based payments charge, depreciation, amortisation of intangible assets and exceptional items. The reconciliation of adjusted operating profit to operating profit is included in the Chief Financial Officer’s review.